<PAGE>
- --------------------------------------------------------------------------------
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 29, 1998
KSL RECREATION GROUP, INC.
(Exact name of Registrant as specified in its charter)
Commission File Number 333-31025
Delaware 33-0747103
-------- ----------
(State or other jurisdiction of (IRS Employer ID Number)
incorporation or organization)
56-140 PGA Boulevard
La Quinta, California 92253
---------------------------------------- -----
(Address of principal executive offices) (Zip Code)
760/564-1088
------------
(Registrant's telephone number, including area code)
N/A
---
(Former name, address and fiscal year, if changed since last report)
Page 1 of 35 pages
Exhibit Index is on Page 3
<PAGE>
2. ACQUISITION OR DISPOSITION OF ASSETS
On December 29, 1998, KSL Recreation Group, Inc. (the "Company"), through
KSL Grand Wailea Resort, Inc., an indirect wholly-owned subsidiary of the
Company that was incorporated in Delaware on November 19, 1998 ("KSL Resort"),
acquired substantially all of the assets and certain liabilities of The Grand
Wailea Resort Hotel & Spa, a resort hotel and spa located in Maui, Hawaii,
pursuant to an agreement of purchase and sale between International Hotel
Acquisitions, LLC, a Delaware limited liability company, ("Seller"), and KSL
Recreation Corporation, parent of the Company ("Parent") dated November 5, 1998,
as amended ("Agreement"). The Parent, by unanimous consent of the Board of
Directors, approved and assigned the Agreement and all rights, title, interest
and obligations thereunder to KSL Resort on December 10, 1998. There is no
relationship between the Seller and the Company, nor with any associates or
affiliates of the Company.
The Property is situated on approximately forty acres on the southwest
shore on the island of Maui and features 781 luxury hotel rooms and guest
suites, six restaurants, twenty-two banquet and meeting rooms totaling 81,000
square feet, expansive water feature and pool facilities, a wedding chapel, and
a complete 50,000 square foot European-style spa and fitness center. The Grand
Wailea Resort was opened in 1991 at an estimated development cost of
approximately $700 million.
The purchase price of the Property, including the real property,
improvements, and personal property, was approximately $375 million
(exclusive of closing costs), of which $100 million was paid in cash and $275
million was paid through assumption of a loan from Norwest Bank of Minnesota
National Association ("the Loan"). The acquisition was accounted for using
the purchase method of accounting.
The Loan is due and payable on November 11, 2002 and bears interest at a
floating rate per annum equal to the sum of LIBOR plus 275 basis points. It is
secured by the assets owned by KSL Resort. It is not guaranteed by the Company
or any other subsidiary of the Company.
In connection with the transaction, the Company received an equity
contribution from the Parent of $110 million. Such amount was used to fund the
acquisition at closing ($100 million) and fund closing costs and provide working
capital ($10 million).
KSL Resort has been designated an "Unrestricted Subsidiary" as such term is
defined in (a) the Credit Agreement among the Company, various financial
institutions, Donaldson, Lufkin & Jenrette Securities Corporation, The Bank of
Nova Scotia and BancAmerica Securities, Inc. dated April 30, 1997 and (b) the
Indenture Agreement, dated April 30, 1997, relating to $125 million of 10.25%
Senior Subordinated Notes of the Company due 2007.
The Company intends to continue to operate the Property as a resort hotel
and spa.
7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
Listed below are the financial statements, pro forma financial information
and exhibits, if any, filed as part of this report:
(a)(1) Financial statements of Grand Wailea Resort Hotel and Spa for the period
January 1, 1998 to June 14, 1998, and the Years Ended December 31, 1997
and 1996, and independent auditors' report.
(2) Financial statements of International Hotel Acquisitions, LLC, for the
period June 15, 1998 (Date of Inception) to December 28, 1998, and
independent auditors' report.
2
<PAGE>
(b)(1) Unaudited historical and pro forma condensed consolidated statement
of operations for the fiscal year ended October 31, 1998.
(2) Unaudited historical and pro forma condensed consolidated balance
sheet as of October 31, 1998.
<TABLE>
<CAPTION>
Exhibits
- --------
<S> <C>
10.1* Agreement of Purchase and Sale and Joint Escrow Instructions between
International Hotel Acquisitions, LLC and KSL Recreation Corporation
dated November 5, 1998.
10.2* First Amendment to Agreement for Purchase and Sale and Joint Escrow
Instructions between International Hotel Acquistions, LLC and KSL
Recreation Corporation dated November 12, 1998.
10.3* Assignment of Agreement of Purchase and Sale between KSL Recreation
Corporation and KSL Grand Wailea Resort, Inc. dated December 10, 1998.
10.4* Second Amendment to Agreement for Purchase and Sale and Joint Escrow
Instructions between International Hotel Acquisitions, LLC and KSL
Grand Wailea Resort, Inc., dated December 23, 1998.
10.5** Amended and Restated Loan Agreement dated as of October 28,1998 by and
between Credit Suisse First Boston Mortgage Capital LLC and
International Hotel Acquisitions, LLC.
10.6** Assumption of and Amendment to Amended and Restated Loan Agreement,
Amended and Restated Mortgage, Security Agreement, Assignment of Leases
and Fixture Filing, Amended and Restated Mortgage Note and Other Loan
Documents between International Hotel Acquisitions, LLC, KSL Grand
Wailea Resort, Inc., and Norwest Bank Minnesota, National Association.
10.7** Third Amendment to the Tax Sharing Agreement, dated November 1, 1998 by
and among KSL Recreation Corporation, KSL Recreation Group, Inc., KSL
Land Holdings, Inc., KSL Desert Resorts, Inc., Las Casitas Corporation,
KSL Real Estate Company, KSL Travel, Inc., Casitas Plaza Corporation,
KSL Golf Holdings, Inc., KSL Fairways Golf Corporation, KSL
Fairways/Virginia Corporation, KSL Florida Holdings, Inc., KSL Hotel
Corp., KSL Silver Properties, KSL Florida Development Corp., KSL
Georgia Holdings, Inc., KSL Lake Lanier, Inc., KSL Land Corporation,
KSL Citrus Properties, Inc., KSL Development Corporation, KSL Land II
Corporation, KSL Land III Corporation, KSL Land IV Corporation, Landaq,
Inc., KSL Grand Traverse Holdings, Inc., KSL Grand Traverse Realty,
Inc., KSL Grand Traverse Resort, Inc., KSL Water Works, Inc., KSL
Hawaii Holdings I, Inc., KSL Hawaii Holdings II, Inc., KSL Hawaii
Holdings III, Inc. KSL Hawaii Holdings IV, Inc. KSL Hawaii Holdings V,
Inc., KSL Grand Wailea Hospitality Corporation and KSL Grand Wailea
Resort, Inc.
</TABLE>
*Previously filed.
** Filed herewith
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
KSL RECREATION GROUP, INC.
By: /s/ JOHN K. SAER, JR.
--------------------------
John K. Saer, Jr.
Vice President, Chief Financial
Officer and Treasurer
Date: March 16, 1999
4
<PAGE>
UNAUDITED HISTORICAL AND PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma statement of operations and balance
sheet (collectively, the Pro Forma Financial Statements) have been derived
through the application of pro forma adjustments to the Company's historical
consolidated financial statements. The Pro Forma Financial Statements have been
prepared to reflect the Grand Wailea acquisition.
The unaudited pro forma statement of operations for the year ended
October 31, 1998 gives effect to the Grand Wailea acquisition as if such
acquisition had occurred at the beginning of the period presented. The
unaudited pro forma balance sheet as of October 31, 1998 gives effect to the
Grand Wailea acquisition as if such transaction had occurred on October 31,
1998.
The Pro Forma Financial Statements do not purport to present the actual
results of operations or financial position that would have occurred had the
acquisition occurred on the dates specified, nor do they purport to be
indicative of the results of operations or financial condition the Company
may achieve in the future. No effect has been given for operating or
synergistic benefits that may be realized through a combination of the
entities. The Pro Forma Financial Statements are based on certain assumptions
and adjustments described in the notes hereto and should be read in
conjunction therewith.
The Pro Forma Financial Statements should be read in conjunction with
the information included in this report on Form 8-K and the historical
consolidated financial statements of the Company and notes thereto contained in
the Company's Form 10-K for the year ended October 31, 1998.
5
<PAGE>
KSL RECREATION GROUP, INC.
UNAUDITED HISTORICAL AND PRO FORMA
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31,1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
INTERNATIONAL
COMPANY HOTEL ACQUISITIONS GRAND WAILEA PRO FORMA
HISTORICAL JUNE 15, 1998 RESORT HOTEL AND SPA ADJUSTMENTS
YEAR ENDED TO DECEMBER JANUARY 1, 1998 TO INCREASE PRO FORMA
OCTOBER 31, 1998 28, 1998 (A) JUNE 14, 1998 (B) (DECREASE) COMPANY
---------------- ------------- ------------------ ------------ -------
<S> <C> <C> <C> <C> <C>
REVENUES $ 296,270 $ 44,744 $ 46,957 $ - $ 387,971
EXPENSES 256,157 42,028 45,005 (7,181)(C) 331,928
(3,038)(D)
(1,043)(E)
----------- ----------- ------------ ----------- -----------
INCOME FROM
OPERATIONS 40,113 2,716 1,952 11,262 56,043
OTHER INCOME
(EXPENSE), net (33,125) (11,573) 216 (9,956)(F) (54,438)
----------- ----------- ------------ ----------- -----------
INCOME (LOSS) BEFORE
MINORITY INTEREST
AND INCOME TAXES 6,988 (8,857) 2,168 1,306 1,605
MINORITY INTERESTS IN
LOSS OF SUBSIDIARY 129 - - - 129
----------- ----------- ------------ ----------- -----------
INCOME (LOSS) BEFORE
INCOME TAXES 7,117 (8,857) 2,168 1,306 1,734
INCOME TAX EXPENSE
(BENEFIT) (6,997) - - - (6,997)
----------- ----------- ------------ ----------- -----------
NET INCOME (LOSS) $ 14,114 $ (8,857) $ 2,168 $ 1,306 $ 8,731
----------- ----------- ------------ ----------- -----------
----------- ----------- ------------ ----------- -----------
BASIC AND DILUTED
EARNINGS (LOSS)
PER SHARE $ 14,114 $ (8,857) $ 2,168 $ 1,306 $ 8,731
----------- ----------- ------------ ----------- -----------
----------- ----------- ------------ ----------- -----------
WEIGHTED AVERAGE
NUMBER OF SHARES 1,000 1,000 1,000 1,000 1,000
</TABLE>
See accompanying notes to unaudited historical
and pro forma condensed consolidated
financial statements.
6
<PAGE>
KSL RECREATION GROUP, INC.
UNAUDITED HISTORICAL AND PRO FORMA CONDENSED CONSOLIDATED
BALANCE SHEET AS OF OCTOBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
INTERNATIONAL
COMPANY HOTEL PRO FORMA
HISTORICAL ACQUISITIONS ADJUSTMENTS
AT OCTOBER AT DECEMBER INCREASE PRO FORMA
31, 1998 28, 1998 (DECREASE) (G) COMPANY
--------- ---------- -------------- -------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 5,248 $ 2,962 $ 4,283 (H) $ 12,493
Restricted cash 1,743 6,521 -- 8,264
Trade receivables, net of allowance for
doubtful receivables 21,276 3,559 -- 24,835
Inventories 10,085 1,725 -- 11,810
Current portion of notes receivable 2,387 -- -- 2,387
Prepaid expenses and other current assets 5,235 1,960 (1,882)(I) 5,313
--------- --------- -------- -----------
TOTAL CURRENT ASSETS 45,974 16,727 2,401 65,102
REAL ESTATE UNDER DEVELOPMENT 7,184 -- -- 7,184
PROPERTY AND EQUIPMENT, net of accumulated
depreciation 508,812 303,202 540(J) 812,554
NOTE RECEIVABLE FROM AFFILIATE 23,450 -- -- 23,450
NOTES RECEIVABLE, less current portion 5,389 -- -- 5,389
RESTRICTED CASH, less current portion 91 8,314 -- 8,405
EXCESS OF COST OVER NET ASSETS OF
ACQUIRED ENTITIES, net of accumulated
amortization 112,521 41,517 29,647(J) 183,685
OTHER ASSETS, net 34,172 -- 2,607(J) 36,779
--------- --------- -------- -----------
$ 737,593 $ 369,760 $ 35,195 $ 1,142,548
--------- --------- -------- -----------
--------- --------- -------- -----------
</TABLE>
See accompanying notes to unaudited historical
and pro forma condensed consolidated
financial statements.
7
<PAGE>
KSL RECREATION GROUP, INC.
UNAUDITED HISTORICAL AND PRO FORMA CONDENSED CONSOLIDATED
BALANCE SHEET AS OF OCTOBER 31, 1998 (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
INTERNATIONAL
COMPANY HOTEL PRO FORMA
HISTORICAL ACQUISITIONS ADJUSTMENTS
AT OCTOBER AT DECEMBER INCREASE PRO FORMA
31, 1998 28, 1998 (DECREASE) (G) COMPANY
--------- ---------- -------------- -------
<S> <C> <C> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 9,615 $ 2,660 $ -- $ 12,275
Accrued liabilities 20,504 1,662 (1,662)(I) 20,504
Accrued interest payable 945 1,825 -- 2,770
Current portion of long-term debt 1,044 -- -- 1,044
Current portion of obligations under
capital leases 2,802 64 -- 2,866
Deferred income, customer deposits and other 8,878 6,790 -- 15,668
--------- --------- --------- -----------
TOTAL CURRENT LIABILITIES 43,788 13,001 (1,662) 55,127
LONG-TERM DEBT, less current portion 403,950 357,000 (82,000)(K) 678,950
OBLIGATIONS UNDER CAPITAL LEASES,
less current portion 34,416 302 34,718
OTHER LIABILITIES 1,414 -- -- 1,414
MEMBER DEPOSITS 63,024 8,314 -- 71,338
DEFERRED INCOME TAXES 8,578 -- -- 8,578
MINORITY INTERESTS IN EQUITY OF SUBSIDIARY 118 -- -- 118
STOCKHOLDER'S EQUITY:
Common stock, $.01 par value, 1,000 shares
authorized and outstanding --
Additional paid-in capital 197,535 -- 110,000(L) 307,535
Accumulated deficit (15,230) (8,857) 8,857(M) (15,230)
--------- --------- --------- -----------
Total stockholder's equity 182,305 (8,857) 118,857 292,305
--------- --------- --------- -----------
$ 737,593 $ 369,760 $ 35,195 $ 1,142,548
--------- --------- --------- -----------
--------- --------- --------- -----------
</TABLE>
See accompanying notes to unaudited historical
and pro forma condensed consolidated
financial statements.
8
<PAGE>
KSL RECREATION GROUP, INC.
NOTES TO UNAUDITED HISTORICAL AND PRO FORMA
CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(A) Reflects the results of operations of International Hotel Acquisitions,
LLC (which acquired Grand Wailea Resort Hotel and Spa on June 15, 1998)
(IHA) for the period from June 15, 1998 (date of inception) to
December 28, 1998.
(B) Reflects the results of operations of the Grand Wailea Resort Hotel
and Spa (which was acquired by IHA on June 15, 1998) (GWR) for the period
from January 1, 1998 to June 14, 1998. The Company does not believe that
such amounts, combined with IHA's statement of operations for the period
from June 15, 1998 to December 28, 1998, would have been materially
different had the results of operations for the periods presented been
adjusted to reflect the results of operations consistent with the
Company's fiscal period.
(C) Reflects the net results of a decrease in depreciation expense of $8,788
and an increase in amortization of excess cost over net assets of
acquired entities of $1,607 assuming the Grand Wailea acquisition by
the Company (and the resulting purchase price allocation) occurred as
of the first day of the period presented.
(D) Reflects the elimination of management fees paid by IHA and GWR to
affiliates.
(E) Reflects the elimination of expenses associated with an operating
lease and housing subsidy which were discontinued effective with
the Grand Wailea acquisition by the Company.
(F) Reflects the assumed additional interest expense that would have been
incurred had the acquisition by the Company occurred as of the first
day of the period. Amount includes additional interest expense of
$21,313 based upon assumed debt of $275,000 at 7.75%, net of the
elimination of net interest expense of $11,357 recorded by IHA during
the period presented.
(G) Represents the net effect of the purchase of the Grand Wailea Resort &
Spa by the Company as if the acquisition had occurred on October 31, 1998
under the purchase method of accounting. The purchase price and related
acquisition costs were allocated based upon the fair market value of the
acquired assets. Excess of cost over fair value of the net assets
acquired is recorded in goodwill.
(H) Reflects the assumed additional cash resulting from the cash used for
the Grand Wailea acquisition, net of cash acquired and cash received
from the contribution of capital by the Parent of $110,000 as if the
acquisition had occurred as of October 31, 1998.
(I) Reflects the elimination of amounts included in the balance sheet of
IHA not acquired by the Company.
(J) Reflects the net results of the elimination of IHA's balance, if any, as
of December 28, 1998 and the capitalization of the asset acquired by the
Company (see note (G)).
(K) Reflects the net results of the elimination of IHA's long-term debt of
$357,000 and the recording of the Company's $275,000 long-term debt as if
the acquisition had occurred as of October 31, 1998.
(L) Reflects the contribution of capital by the Parent of $110,000 as if the
acquisition had occurred as of October 31, 1998.
(M) Reflects the elimination of the accumulated deficit of IHA.
9
<PAGE>
GRAND WAILEA RESORT
HOTEL AND SPA
FINANCIAL STATEMENTS FOR THE
PERIOD FROM JANUARY 1, 1998 TO
JUNE 14, 1998, AND THE YEARS ENDED
DECEMBER 31, 1997, AND 1996, AND
INDEPENDENT AUDITORS' REPORT
10
<PAGE>
INDEPENDENT AUDITORS' REPORT
KSL Grand Wailea Resort, Inc.:
We have audited the accompanying balance sheets of Grand Wailea Resort Hotel and
Spa (the Company) as of June 14, 1998 and December 31, 1997, and the related
statements of operations, capital, and cash flows for the period from January 1,
1998 to June 14, 1998, and the years ended December 31, 1997 and 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Grand Wailea Resort Hotel and
Spa as of June 14, 1998 and December 31, 1997, and the results of its operations
and its cash flows for the period from January 1, 1998 to June 14, 1998, and the
years ended December 31, 1997 and 1996, in conformity with generally accepted
accounting principles.
As discussed in Note 1 to the financial statements, the Company sold
substantially all its assets and certain liabilities in June 1998.
As more fully described in Note 1, the Company was part of Grand Wailea Company
(GWC) (a Hawaii limited partnership) and had no separate legal status or
existence during the periods presented. The Company had various transactions
with GWC, including various expense allocations, that are material in amount.
The financial statements of the Company have been prepared from separate records
maintained by the Company, as well as from the records of GWC, and may not be
indicative of the conditions that would have existed if the Company had operated
as an independent entity.
DELOITTE & TOUCHE LLP
Costa Mesa, California
March 12, 1999
11
<PAGE>
GRAND WAILEA RESORT HOTEL AND SPA
STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM JANUARY 1, 1998 TO JUNE 14, 1998,
AND THE YEARS ENDED DECEMBER 31, 1997 AND 1996
- --------------------------------------------------------------------------------
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE FOR THE YEAR ENDED
PERIOD FROM DECEMBER 31,
JANUARY 1, 1998 ----------------------
TO JUNE 14, 1998 1997 1996
<S> <C> <C> <C>
REVENUES:
Rooms $ 26,353 $ 52,285 $ 53,063
Food and beverage 14,101 27,074 27,512
Spa 3,059 5,722 5,718
Other 3,444 6,682 5,910
-------- -------- --------
Total revenues 46,957 91,763 92,203
EXPENSES:
Payroll and benefits 16,698 33,190 34,822
Other expenses 12,772 27,462 31,098
Depreciation 13,964 27,695 27,503
Management fees (Note 5) 1,571 3,073 3,143
-------- -------- --------
Total operating expenses 45,005 91,420 96,566
-------- -------- --------
INCOME (LOSS) FROM OPERATIONS 1,952 343 (4,363)
INTEREST INCOME 216 381 479
-------- -------- --------
NET INCOME (LOSS) $ 2,168 $ 724 $ (3,884)
-------- -------- --------
-------- -------- --------
</TABLE>
See independent auditors' report and accompanying notes
to financial statements.
12
<PAGE>
BALANCE SHEETS
AS OF JUNE 14, 1998 AND DECEMBER 31, 1997
- --------------------------------------------------------------------------------
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 14, DECEMBER 31,
1998 1997
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ -- $ 3,002
Restricted cash -- 3,882
Trade receivables, net of allowance for doubtful receivables of
$29 and $34, respectively 6,948 4,545
Inventories (Note 3) 674 629
Workers' compensation fund deposit (Note 1) 835 1,202
Prepaid expenses and other current assets 281 551
-------- --------
Total current assets 8,738 13,811
PROPERTY AND EQUIPMENT, net (Note 4) 367,243 380,304
CASH HELD IN TRUST AND OTHER 9,147 8,501
-------- --------
$385,128 $402,616
-------- --------
-------- --------
LIABILITIES AND CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 1,455 $ 1,487
Accrued liabilities 4,632 4,404
Customer deposits 5,464 6,233
-------- --------
Total current liabilities 11,551 12,124
MEMBER DEPOSITS 9,142 8,496
COMMITMENTS AND CONTINGENCIES (Notes 5, 6, and 7)
CAPITAL (Note 2) 364,435 381,996
-------- --------
$385,128 $402,616
-------- --------
-------- --------
</TABLE>
See independent auditors' report and accompanying notes
to financial statements.
13
<PAGE>
STATEMENTS OF CAPITAL
FOR THE PERIOD FROM JANUARY 1, 1998 TO JUNE 14, 1998,
AND THE YEARS ENDED DECEMBER 31, 1997 AND 1996
- --------------------------------------------------------------------------------
(IN THOUSANDS)
<TABLE>
<S> <C>
BALANCE, January 1, 1996 $ 435,871
Net change arising from intercompany transactions (Note 2) (21,183)
Net loss (3,884)
---------
BALANCE, December 31, 1996 410,804
Net change arising from intercompany transactions (Note 2) (29,532)
Net income 724
---------
BALANCE, December 31, 1997 381,996
Net change arising from intercompany transactions (Note 2) (19,729)
Net income 2,168
---------
BALANCE, June 14, 1998 $ 364,435
---------
---------
</TABLE>
See independent auditors' report and accompanying notes
to financial statements.
14
<PAGE>
STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 1, 1998 TO JUNE 14, 1998,
AND THE YEARS ENDED DECEMBER 31, 1997 AND 1996
- --------------------------------------------------------------------------------
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM FOR THE YEAR ENDED
JANUARY 1, 1998 DECEMBER 31,
TO JUNE 14, -----------------------
1998 1997 1996
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 2,168 $ 724 $ (3,884)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 13,964 27,695 27,503
Changes in operating assets and liabilities:
Restricted cash 3,882 2,947 (2,246)
Trade receivables (2,403) (600) 2,557
Inventories (45) 144 176
Workers' compensation fund deposit 367 (16) (300)
Prepaid expenses and other current assets 270 333 (352)
Cash held in trust and other assets (646) (218) (7,118)
Accounts payable (32) (787) (60)
Accrued liabilities 228 (507) (238)
Customer deposits (769) (612) 1,393
Member deposits 646 220 7,305
-------- -------- --------
Net cash provided by operating activities 17,630 29,323 24,736
CASH FLOWS FROM INVESTING ACTIVITY -
Purchases of property and equipment (903) (2,327) (291)
CASH FLOWS FROM FINANCING ACTIVITY -
Net changes arising from intercompany transactions (19,729) (29,532) (21,183)
-------- -------- --------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (3,002) (2,536) 3,262
CASH AND CASH EQUIVALENTS, beginning of period 3,002 5,538 2,276
-------- -------- --------
CASH AND CASH EQUIVALENTS, end of period $ - $ 3,002 $ 5,538
-------- -------- --------
-------- -------- --------
</TABLE>
See independent auditors' report and accompanying notes
to financial statements.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM JANUARY 1, 1998 TO JUNE 14, 1998,
AND THE YEARS ENDED DECEMBER 31, 1997 AND 1996
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - Grand Wailea Resort Hotel and Spa (the Company) is engaged
in the operation and management of the Grand Wailea Resort Hotel and Spa
(the Resort), a 781-room luxury hotel in Wailea, Maui, State of Hawaii. The
resort features banquet and meeting rooms, restaurants, an expansive water
feature, pool facilities, a wedding chapel and a European-style spa and
fitness center.
The Company was part of Grand Wailea Company (GWC), a Hawaii limited
partnership, which was formed in March 1987. GWC and its affiliates
developed, constructed and operated the Resort through June 14, 1998.
GWC was in default with certain terms of its long-term debt agreement as of
June 14, 1998. Effective June 15, 1998, GWC's long-term debt, including
related accrued interest and loan fees payable, was sold by the respective
lenders to an unrelated third party. Also, effective June 15, 1998, GWC and
the unrelated third party entered into agreements whereby all debt was
discharged and the deed to the Resort tendered in lieu of foreclosure. As a
result of the deed in lieu of foreclosure agreement, the assets and certain
liabilities of the Company were acquired, effective June 15, 1998, by
International Hotel Acquisitions, LLC (IHA), an unrelated third party, for
approximately $357,000. The accompanying financial statements of the
Company do not reflect the financial position or results of operations of
IHA for any period presented nor any impact to GWC resulting from this
transaction (Note 2).
BASIS OF PRESENTATION - In the normal course of business, the operations of
the Company had various transactions with GWC that were material in amount.
The accompanying financial statements of the Company have been prepared
from the separate records maintained by the Company and GWC. The financial
statements also reflect the impact of key assumptions regarding the
allocation of certain expense items to the Company and certain balance
sheet accounts where separate records were not maintained. The net change
arising from intercompany transactions between GWC and the Company are
included in the accompanying statements of capital (Note 2). The
accompanying financial statements of the operations of the Company may not
necessarily be indicative of the conditions that would have existed if the
operations of the Company had operated as an independent entity.
CASH EQUIVALENTS - The Company considers all highly-liquid investments with
original maturities of three months or less to be cash equivalents.
RESTRICTED CASH - Certain cash balances are restricted primarily to uses
for capital and related expenditures under agreements entered into by GWC
and third parties.
INVENTORIES - Inventories are stated primarily at the lower of cost,
determined on the first-in, first-out method, or market.
16
<PAGE>
PROPERTY AND EQUIPMENT - Property and equipment is recorded at cost.
Depreciation is computed using the straight-line method over the estimated
useful lives of the related assets. Generally, the estimated useful lives
are 15 to 40 years for buildings and improvements and 3 to 10 years for
furniture, fixtures and equipment. Improvements are capitalized while
maintenance and repairs are charged to expense as incurred.
LONG-LIVED ASSETS - Management reviews real estate and other long-lived
assets for possible impairment whenever events or circumstances indicate
the carrying amount of an asset may not be recoverable. If there is an
indication of impairment, management prepares an estimate of future cash
flows (undiscounted and without interest charges) expected to result from
the use of the asset and its eventual disposition. If these cash flows are
less than the carrying amount of the asset, an impairment loss is
recognized to write down the asset to its estimated fair value. The fair
value is estimated at the present value of future cash flows discounted at
a rate commensurate with management's estimate of the business risks. Real
estate assets, if any, for which management has committed to a plan to
dispose of the assets, whether by sale or abandonment, are reported at the
lower of carrying amount or fair value less cost to sell. Preparation of
estimated expected future cash flows is inherently subjective and is based
on management's best estimate of assumptions concerning expected future
conditions. No impairment of any long-lived assets was recognized during
any period presented.
MEMBER DEPOSITS - Member deposits represent the required deposits for
certain membership plans which entitle the member to the usage of various
facilities and services at discounted rates. Member deposits are
refundable, without interest, under certain criteria and circumstances. The
member deposit amount collected is deposited into an interest-bearing trust
account, maintained by a third party, and included in cash held in trust in
the accompanying balance sheets.
INCOME TAXES - No provision or credit for federal and state income taxes
has been included in the accompanying financial statements since payment or
benefit of such taxes is included in the income tax returns of the
individual partners of GWC.
REVENUE RECOGNITION - Revenues are recognized at the time of sale or
rendering of service.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amounts of cash and cash
equivalents, trade receivables, other receivables, accounts payable and
accrued liabilities approximate their fair values because of the short
maturity of these financial instruments.
Member deposits represent liabilities with no defined maturities and are
payable on demand, subject to certain conditions and, accordingly,
approximate fair value.
17
<PAGE>
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles necessarily requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting periods. Actual
results could differ from these estimates.
The Company is insured under a paid loss program for workers' compensation
liability and is insured under an alternate program for medical insurance
liability. Under the programs, the ultimate premiums are computed based on
actual claims experience for the policy year, with minimum and maximum
levels determined under the program. Estimated workers' compensation and
medical insurance reserves, which aggregate approximately $1,672 and $1,734
as of June 14, 1998 and December 31, 1997, respectively, are included in
accrued liabilities in the accompanying balance sheets. In connection with
the workers' compensation agreement, the Company maintains a loss fund and
collateral deposit supporting the costs and other estimated unpaid claims.
The workers' compensation fund deposit is included in current assets in the
accompanying balance sheets.
ACCOUNTING PRONOUNCEMENTS - During 1997, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting Standards (SFAS)
No. 130, REPORTING COMPREHENSIVE INCOME, which established standards for
the reporting and displaying of comprehensive income. Comprehensive income
is defined as all changes in a company's net assets except changes
resulting from transactions with shareholders. It differs from net income
in that certain items currently recorded to equity would be a part of
comprehensive income. Comprehensive income must be reported in a financial
statement with the cumulative total presented as a component of equity.
This statement is effective for fiscal years beginning after December 15,
1997. Adoption of SFAS No. 130 for the period ended June 14, 1998 had no
impact on the Company's financial statements.
In June 1998 the FASB issued SFAS No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES, which is effective for fiscal periods
beginning after June 15, 1999. This statement establishes accounting and
reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging
activities. It requires that an entity recognizes all derivatives as either
assets or liabilities in the statement of financial position and measure
those instruments at fair value. The Company believes that adoption of SFAS
No. 133 will not have a material impact on the Company's financial
statements.
2. ASSUMPTIONS RELATED TO THE FINANCIAL STATEMENTS OF THE COMPANY
The accompanying financial statements as of June 14, 1998 and December 31,
1997, and for the period from January 1, 1998 to June 14, 1998, and the
years ended December 31, 1997 and 1996, reflect the assets, liabilities,
revenues and expenses that were directly related to the continuing
operations of the Company.
18
<PAGE>
GWC's historical cost basis of the assets and liabilities has been carried
over to the Company. In cases involving liabilities and expenses not
specifically identifiable to the Company, certain allocations were made to
reflect the ongoing operations of the Company. These allocations were
based on a variety of factors which management believes provide a reliable
basis for the accompanying financial statements and include the following:
- Cash on hand and cash in bank accounts maintained by the Resort are
included as part of these historical financial statements. No other
cash balances of GWC are recorded as part of these financial
statements.
- Capital balances include the aggregate effect of intercompany
transactions as of the balance sheet date, including (i) the aggregate
intercompany allocations of costs and expenses incurred by the Company
and paid by GWC, (ii) cash generated by the Company and collected by
GWC, and (iii) the aggregate results of Company operations. Capital
balances arising from intercompany transactions also include all
amounts, such as workers' compensation expenses that are legal
obligations of GWC, but have been charged to the Company.
- The Company bears no expense related to long-term debt, which risk is
retained by GWC. Accordingly, the Company's financial statements
include only liabilities for which it continues to be responsible.
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
JUNE 14, DECEMBER 31,
1998 1997
<S> <C> <C>
Merchandise $ 127 $ 129
Food and beverage 311 182
China, silver, glassware, and linen 192 263
Supplies and other 44 55
----- -----
$ 674 $ 629
----- -----
----- -----
</TABLE>
19
<PAGE>
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
JUNE 14, DECEMBER 31,
1998 1997
<S> <C> <C>
Land and land improvements $ 43,448 $ 43,448
Buildings 384,488 384,488
Furniture, fixtures and equipment 128,250 127,347
--------- ---------
556,186 555,283
Less accumulated depreciation (188,943) (174,979)
--------- ---------
Property and equipment, net $ 367,243 $ 380,304
--------- ---------
--------- ---------
</TABLE>
The Company's assets are part of the collateral to the approximately
$500,000 long-term debt of GWC (Note 1).
5. RELATED-PARTY TRANSACTIONS
In 1995, the Company entered into a distribution agreement with an
affiliate of a general partner of GWC whereby the Company agreed to
purchase a minimum of 60% of its purchasing requirements for certain
products specified in the agreement. The terms of the agreement define the
purchase price of the specified products. The agreement also provides for a
monthly fee of $40, plus 5% of purchases in excess of $300. Fees incurred
for the period from January 1, 1998 to June 14, 1998, and the years ended
December 31, 1997 and 1996, approximated $221, $480, and $490,
respectively. The agreement was terminated on June 15, 1998.
The Company is committed to pay a pro rata share of any deficiency in
employees' housing rental income to an affiliate of a general partner of
GWC. The affiliate owns and operates apartments for which the Company also
pays a subsidy to the affiliate for each apartment occupied by Company
employees. The Company incurred fees of approximately $218, $460, and $350,
for the period from January 1, 1998 to June 14, 1998, and the years ended
December 31, 1997 and 1996, respectively.
The Company records management fee expense related to separate agreements
with affiliates of a general partner of GWC. Management fees are generally
based on 3.5% of net sales, as defined in the agreement, except for
revenues of certain food and beverage operations for which management fees
are based on 3.5% of gross monthly revenues, as defined in the agreement.
20
<PAGE>
6. LEASES
The Company leases a parcel of land adjacent to the Resort and certain art
work from an affiliate under operating lease agreements. The lease
agreements expire in November 2001 and August 2011, respectively. The lease
rent is adjusted annually to reflect estimated fair market value. Total
rent expense under these leases approximated $289, $630, and $630, for the
period from January 1, 1998 to June 14, 1998, and the years ended December
31, 1997 and 1996, respectively.
Future minimum annual rental commitments under these and other operating
leases as of June 14, 1998 are as follows:
<TABLE>
<S> <C>
Years ended June 14:
1999 $ 657
2000 630
2001 630
2002 549
2003 480
Thereafter 3,940
------
$6,886
------
------
</TABLE>
The Company leases commercial space at the Resort to various parties under
operating leases expiring through 2003. Future minimum rental commitments
to be received under noncancelable operating leases are as follows:
<TABLE>
<S> <C>
Years ended June 14:
1999 $1,070
2000 1,114
2001 1,080
2002 498
2003 129
------
$3,891
------
------
</TABLE>
The future minimum rental commitments do not include contingent rents
that may be received on the basis of a percentage of the tenant's gross
sales. The Company recorded rental income of approximately $685, $1,367,
and $1,361 for the period from January 1, 1998 to June 14, 1998, and the
years ended December 31, 1997 and 1996, respectively.
21
<PAGE>
7. COMMITMENTS AND CONTINGENCIES
The Company is a party to various litigation matters which are incidental
to its business. Although the results of the litigation cannot be predicted
with certainty, management believes that the final outcome of such matters
will not have a material adverse effect on the Company's financial
statements.
8. SUBSEQUENT EVENTS
On December 29, 1998, IHA sold substantially all its assets and certain
liabilities, including the assets and certain liabilities related to the
Resort, to a wholly-owned subsidiary of KSL Recreation Group, Inc. for
approximately $375,000.
* * * * * *
22
<PAGE>
INTERNATIONAL HOTEL
ACQUISITIONS, LLC
FINANCIAL STATEMENTS FOR THE
PERIOD FROM JUNE 15, 1998
(DATE OF INCEPTION) TO
DECEMBER 28, 1998, AND
INDEPENDENT AUDITORS' REPORT
23
<PAGE>
INDEPENDENT AUDITORS' REPORT
KSL Grand Wailea Resort, Inc.:
We have audited the accompanying balance sheet of International Hotel
Acquisitions, LLC (a Delaware limited liability company) (the Company) as of
December 28, 1998, and the related statements of operations, owners' deficit,
and cash flows for the period from June 15, 1998 (date of inception) to December
28, 1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of International Hotel
Acquisitions, LLC as of December 28, 1998, and the results of its operations and
its cash flows for the period from June 15, 1998 (date of inception) to December
28, 1998 in conformity with generally accepted accounting principles.
As discussed in Note 7 to the financial statements, the Company sold
substantially all its assets and certain liabilities on December 29, 1998.
DELOITTE & TOUCHE LLP
Costa Mesa, California
March 12, 1999
24
<PAGE>
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JUNE 15, 1998 (DATE OF INCEPTION) TO DECEMBER 28, 1998
- --------------------------------------------------------------------------------
(IN THOUSANDS)
<TABLE>
<S> <C>
REVENUES:
Rooms $ 27,806
Food and beverage 10,594
Spa 3,176
Other 3,168
--------
Total revenues 44,744
EXPENSES:
Payroll and benefits 17,419
Other expenses 14,248
Depreciation and amortization 8,894
Management fees (Note 5) 1,467
--------
Total operating expenses 42,028
--------
INCOME FROM OPERATIONS 2,716
OTHER INCOME (EXPENSE):
Interest income 289
Interest expense (11,862)
--------
Other expense, net (11,573)
--------
NET LOSS $ (8,857)
--------
--------
</TABLE>
See accompanying notes to financial statements.
25
<PAGE>
BALANCE SHEET
AS OF DECEMBER 28, 1998
- --------------------------------------------------------------------------------
(IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,962
Restricted cash 6,521
Trade receivables, net of allowance for doubtful receivables of $91 3,559
Inventories (Note 2) 1,725
Prepaid expenses and other current assets 1,960
--------
Total current assets 16,727
PROPERTY AND EQUIPMENT, net (Notes 3, 4, and 7) 303,202
EXCESS OF COST OVER NET ASSETS OF ACQUIRED
BUSINESS, net of accumulated amortization of $1,575 41,517
CASH HELD IN TRUST 8,314
--------
$369,760
--------
--------
</TABLE>
See accompanying notes to financial statements.
26
<PAGE>
BALANCE SHEET
AS OF DECEMBER 28, 1998 (CONTINUED)
- --------------------------------------------------------------------------------
(IN THOUSANDS)
<TABLE>
<S> <C>
LIABILITIES AND OWNERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 2,660
Accrued liabilities 1,662
Accrued interest payable 1,825
Customer deposits and other 6,854
---------
Total current liabilities 13,001
LONG-TERM DEBT (Note 4) 357,000
OBLIGATIONS UNDER CAPITAL LEASES, less current
portion of $64 (Note 5) 302
MEMBER DEPOSITS 8,314
COMMITMENTS AND CONTINGENCIES (Notes 5, 6, and 7)
OWNERS' DEFICIT (8,857)
---------
$ 369,760
---------
---------
</TABLE>
See accompanying notes to financial statements.
27
<PAGE>
STATEMENT OF OWNERS' DEFICIT
FOR THE PERIOD FROM JUNE 15, 1998 (DATE OF INCEPTION) TO DECEMBER 28, 1998
- --------------------------------------------------------------------------------
(IN THOUSANDS)
<TABLE>
<CAPTION>
HOTEL SC IHA
OPERATIONS, CORP.
INC (LLC) TOTAL
<S> <C> <C> <C>
BALANCE, June 15, 1998 $ - $ - $ -
Net loss (7,086) (1,771) (8,857)
------- ------- -------
BALANCE, December 28, 1998 $(7,086) $(1,771) $(8,857)
------- ------- -------
------- ------- -------
</TABLE>
See accompanying notes to financial statements.
28
<PAGE>
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JUNE 15, 1998 (DATE OF INCEPTION) TO DECEMBER 28, 1998
- --------------------------------------------------------------------------------
(IN THOUSANDS)
<TABLE>
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C>
Net loss $ (8,857)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 8,894
Changes in operating assets and liabilities, net of effects from acquisition
of business:
Restricted cash (6,521)
Trade receivables (3,099)
Inventories (112)
Prepaid expenses and other current assets 142
Cash held in trust 828
Accounts payable 2,351
Accrued liabilities (415)
Accrued interest payable 1,825
Customer deposits and other 1,341
Member deposits (828)
--------
Net cash used in operating activities (4,451)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of business (349,085)
Purchases of property and equipment (502)
--------
Net cash used in investing activities (349,587)
CASH FLOWS FROM FINANCING ACTIVITY -
Proceeds from debt issuance 357,000
--------
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,962
CASH AND CASH EQUIVALENTS, beginning of period --
--------
CASH AND CASH EQUIVALENTS, end of period $ 2,962
--------
--------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 10,037
--------
--------
NONCASH INVESTING AND FINANCING ACTIVITIES -
Obligations under capital leases $ 366
--------
--------
</TABLE>
See accompanying notes to financial statements.
29
<PAGE>
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM JUNE 15, 1998 (DATE OF INCEPTION) TO DECEMBER 28, 1998
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
International Hotel Acquisitions, LLC (a Delaware limited liability
company) (the Company) was formed to acquire and operate the Grand Wailea
Resort Hotel and Spa (the Resort). The Resort is a 781-room luxury hotel
located in Wailea, Maui, State of Hawaii. The Resort features banquet and
meeting rooms, restaurants, an expansive water feature, pool facilities, a
wedding chapel, and a European-style spa and fitness center.
The owners of the Company and their respective interests are as follows:
<TABLE>
<S> <C>
Hotel Operations, Inc. 80%
SC IHA Corp., LLC 20%
</TABLE>
In June 1998, Grand Wailea Company (GWC), an unaffiliated party, was in
default with certain terms of its long-term debt agreement. Effective June
15, 1998, GWC's long-term debt, including related accrued interest and loan
fees payable, were sold by the respective lenders. GWC also entered into
agreements whereby all debt was discharged and the deed to the Resort
tendered in lieu of foreclosure. As a result of the deed in lieu of
foreclosure agreement, the Company acquired the assets and certain
liabilities of the Resort on June 15, 1998, for approximately $357,000,
including closing costs, which amount was financed under a mortgage
obligation.
The acquisition has been accounted for as a purchase and the results of
operations of the Resort have been included in the accompanying financial
statements since the date of acquisition. The cost of the acquisition has
been allocated based on independent appraisals and analyses prepared by
management. The excess of the purchase price over the fair value of the
acquired business (goodwill) of approximately $43,092 has been capitalized
and is being amortized on a straight-line basis over 15 years.
CASH EQUIVALENTS - The Company considers all highly-liquid investments with
original maturities of three months or less to be cash equivalents.
RESTRICTED CASH - Certain cash balances are restricted primarily to uses
for debt service, capital expenditures, real estate taxes, and insurance
payments. The funds are maintained in interest-bearing accounts by a third
party.
INVENTORIES - Inventories are stated primarily at the lower of cost,
determined on the first-in, first-out method, or market.
PROPERTY AND EQUIPMENT - Property and equipment is recorded at cost.
Depreciation is computed using the straight-line method over the estimated
useful lives of the related assets. Generally, the estimated useful lives
are 15 to 40 years for buildings and improvements and 3 to 10 years for
furniture, fixtures and equipment.
30
<PAGE>
Improvements are capitalized while maintenance and repairs are charged
to expense as incurred. Assets under capital leases are amortized using
the straight-line method over the shorter of the lease term or estimated
useful lives of the assets. Depreciation of assets under capital leases
is included in depreciation and amortization expense in the accompanying
statement of operations.
LONG-LIVED ASSETS - Management reviews real estate and other long-lived
assets, including certain identifiable intangibles, for possible impairment
whenever events or circumstances indicate the carrying amount of an asset
may not be recoverable. If there is an indication of impairment, management
prepares an estimate of future cash flows (undiscounted and without
interest charges) expected to result from the use of the asset and its
eventual disposition. If these cash flows are less than the carrying amount
of the asset, an impairment loss is recognized to write down the asset to
its estimated fair value. The fair value is estimated at the present value
of future cash flows discounted at a rate commensurate with management's
estimate of the business risks. Real estate assets, if any, for which
management has committed to a plan to dispose of the assets, whether by
sale or abandonment, are reported at the lower of carrying amount or fair
value less cost to sell. Preparation of estimated expected future cash
flows is inherently subjective and is based on management's best estimate
of assumptions concerning expected future conditions. No impairment of any
long-lived assets was recognized during the period.
EXCESS OF COST OVER NET ASSETS OF ACQUIRED BUSINESS - The excess of the
cost over the fair value of acquired business (goodwill) is capitalized and
amortized on a straight-line basis over 15 years. Amortization expense
related to goodwill was approximately $1,575 for the period ended December
28, 1998. The Company periodically evaluates the recoverability of goodwill
by comparing the carrying value of goodwill to undiscounted estimated
future cash flows from related operations.
MEMBER DEPOSITS - Member deposits represent the required deposits for
certain membership plans which entitle the member to the usage of various
facilities and services at discounted rates. Member deposits are
refundable, without interest, under certain criteria and circumstances. The
member deposit amounts collected are deposited in an interest-bearing trust
account, maintained by a third party, and included in cash held in trust in
the accompanying balance sheet. Under the terms of the membership
agreement, interest income earned on trust cash balances accrues to the
benefit of the Company.
INCOME TAXES - As a limited liability company, the Company is subject only
to a Hawaii minimum franchise tax and minor fees based on gross revenues;
such taxes and fees were not material during the period. The income tax
effects of the Company's activities are recognized in the tax returns of
the individual owners.
REVENUE RECOGNITION - Revenues are recognized at the time of sale or
rendering of service.
31
<PAGE>
FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amounts of cash and cash
equivalents, trade receivables, other receivables, accounts payable and
accrued liabilities approximate their fair values because of the short
maturity of these financial instruments. Based on the borrowing rates
currently available to the Company for debt with similar terms and
maturities, the fair value of notes payable and obligations under capital
leases approximate the carrying value of these liabilities.
Member deposits represent liabilities with no defined maturities and are
payable on demand, subject to certain conditions and, accordingly,
approximate fair value.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles necessarily requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting periods. Actual
results could differ from these estimates.
ACCOUNTING PRONOUNCEMENTS - In June 1997, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Acounting Standards
(SFAS) No. 130, REPORTING COMPREHENSIVE INCOME, which is effective for
annual periods beginning after December 15, 1997. This statement
requires that all items that are required to be recognized under
accounting standards as comprehensive income be reported in a financial
statement that is displayed with the same prominence as other items
reported in a financial statement. The adoption of SFAS No. 130 did not
have a material impact on the Company's financial statements. Net loss,
as included in the acompanying statement of operations, equals
comprehensive loss as the Company does not have any other items of
comprehensive income for the period ended December 28, 1998.
In June 1998, the FASB issued SFAS No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES, which is effective for fiscal
periods beginning after June 15, 1999. This statement establishes
accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts, and for
hedging activities. It requires that an entity recognizes all
derivatives as either assets or liabilities in the statement of
financial positions and measure those instruments at fair value.
2. INVENTORIES
Inventories consist of the following at December 28, 1998:
<TABLE>
<S> <C>
Merchandise $ 138
Food and beverage 333
China, silver, glassware, and linen 1,200
Supplies and other 54
------
$1,725
------
------
</TABLE>
32
<PAGE>
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 28, 1998:
<TABLE>
<S> <C>
Land and land improvements $ 29,000
Buildings 234,500
Furniture, fixtures and equipment 47,021
--------
310,521
Less accumulated depreciation (7,319)
--------
Property and equipment, net $303,202
--------
--------
</TABLE>
4. LONG-TERM DEBT
Long-term debt consists of the following at December 28, 1998:
<TABLE>
<S> <C>
First mortgage note payable to bank collateralized by the assets of the Resort,
interest only payable monthly at LIBOR plus 2.75% (8.31% at
December 28, 1998). The note matures in November 2002. $275,000
Second subordinated mortgage note payable to bank collateralized by the assets
of the Resort, interest only payable monthly at LIBOR plus 8.50% (14.06% at
December 28, 1998). The note matures in November 2002.
25,000
Third subordinated mortgage note payable to bank collateralized by the assets of
the Resort, interest only payable monthly at LIBOR (5.56% at December 28,
1998). The note matures in November 2002.
57,000
--------
Total long-term debt $357,000
--------
--------
</TABLE>
The mortgage note payable was originally one note for $357,000, with
interest payable at LIBOR only, from Credit Suisse First Boston Mortgage
Capital, LLC, (CSFBMC) an affiliate of an owner. On October 28, 1998, the
original agreement was amended into the three notes described above.
However, the parties agreed that while the first and second mortgage notes
were held by CSFBMC, interest would accrue at LIBOR only. Effective
November 11, 1998, the first mortgage note was no longer
33
<PAGE>
held by CSFBMC and the Company began incurring the additional 2.75%
interest rate. The first mortgage note payable is subject to a prepayment
penalty based on a yield maintenance calculation if paid prior to November
2001.
In October 1998, the Company entered into an interest rate cap agreement
with a third party whereby the interest rate incurred by the Company on
its long-term debt would not exceed 8.5%. In the event the base interest
rate (LIBOR) pursuant to the terms of the long-term debt exceeds 8.5%,
the third party would pay the interest amount in excess of 8.5%. The
agreement expires in November 2000.
In connection with the December 29, 1998 transaction (Note 7), the first
mortgage note was assumed by the buyer and the remaining notes were paid in
full from the sale proceeds.
5. LEASES AND OTHER AGREEMENTS
Upon acquisition of the Resort, the Company entered into a one-year
operating lease with GWC for certain artwork located at the Resort. Total
rent expense under this lease agreement approximated $245 for the period
ended December 28, 1998. In addition, the Company received an option to buy
the artwork for approximately $5,000, which option was exercised
simultaneously with the December 29, 1998, transaction (Note 7).
In December 1998, the Company entered into a lease agreement for
certain computer equipment of approximately $366 that is classified as a
capital lease. The terms of the agreement require minimum payments of
approximately $8 per month through December 2003. As of December 28,
1998, future minimum lease payments of approximately $96, $96, $96, $96
and $69 (which includes approximately $87 in aggregate interest) are
payable in 1999, 2000, 2001 2002 and 2003, respectively.
The Company leases commercial space at the Resort to various parties under
operating leases expiring through 2003. Future minimum rental commitments
to be received under noncancelable operating leases are as follows:
<TABLE>
<S> <C>
Year ending December 31:
1999 $1,135
2000 1,101
2001 875
2002 219
2003 29
------
$3,359
------
------
</TABLE>
Future minimum rental commitments do not include contingent rents that
may be received on the basis of a percentage of the tenant's gross sales.
The Company recorded rental income of approximately $658 during the period
ended December 28, 1998.
34
<PAGE>
Pursuant to a management agreement with GWC, the Company records management
fee expense based on 2.5% of gross receipts (excluding weddings revenue),
as defined in the agreement, and 15% of wedding revenues, as defined in the
agreement.
Pursuant to a separate asset management agreement with a third party, the
Company also records management fee expense of $20 per month and reimburses
the third party for certain expenses. The agreement also provides for a fee
payable to the third party upon sale of the Resort based on .05% of the
sales price.
6. COMMITMENTS AND CONTINGENCIES
The Company is a party to various litigation matters which are incidental
to its business. Although the results of the litigation cannot be predicted
with certainty, management believes that the final outcome of such matters
will not have a material adverse effect on the Company's financial
statements.
7. SUBSEQUENT EVENTS
On December 29, 1998, the Company sold substantially all its assets,
including the artwork of approximately $5,000 (Note 5), and certain
liabilities of the Resort, to a wholly-owned subsidiary of KSL
Recreation Group, Inc. for approximately $375,000.
* * * * * *
35
<PAGE>
AMENDED AND RESTATED
LOAN AGREEMENT
Dated as of October 28, 1998
By and Between
CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC
AND
INTERNATIONAL HOTEL ACQUISITIONS, LLC
LOCATION OF PROPERTY:
Honuala, District of Makawao
Island and County of Maui, State of Hawaii
<PAGE>
- i -
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
Section 1 PARTICULAR TERMS; DEFINITIONS......................................1
Section 2 THE LOAN..........................................................17
2.1 Intentionally Omitted...........................................17
2.2 Loan Term.......................................................17
2.3 Interest Rate...................................................17
2.3.1 Rate During Term................................................17
2.3.2 Calculation of Interest.........................................17
2.4 Payments........................................................17
2.4.1 Interest........................................................17
2.4.2 Repayment of Outstanding Principal Balance......................17
2.4.3 General.........................................................17
2.5 Funding Losses; Change in Law, Etc..............................18
2.6 Prepayment......................................................20
2.7 Default Interest; Late Charge...................................21
2.8 Excess Interest.................................................21
2.9 Loan Taxes......................................................22
2.10 Servicing.......................................................24
2.11 Loan Term Reduction.............................................24
Section 3 CERTAIN REPRESENTATIONS AND WARRANTIES OF BORROWER................24
3.1 Borrower Organization...........................................24
3.2 Borrower Address................................................25
3.3 Borrower's Organizational Documents.............................25
3.4 Member's Organizational Documents...............................25
3.5 Hotel Uses......................................................25
3.6 No Condemnation.................................................25
3.7 No Casualty.....................................................25
3.8 Purchase Options................................................26
3.9 Litigation......................................................26
3.10 No Conflict with Law or Agreements..............................26
3.11 Personal Property...............................................26
3.12 Leases..........................................................26
3.13 Environmental...................................................27
3.14 Financial Statements............................................28
<PAGE>
3.15 No Insolvency...................................................28
3.16 Fraudulent Conveyance...........................................28
3.17 Broker..........................................................29
3.18 Fiscal Year.....................................................29
3.19 No Other Financing..............................................29
3.20 ERISA...........................................................29
3.21 FIRPTA..........................................................29
3.22 PUHCA...........................................................30
3.23 No Margin Stock.................................................30
3.24 Investment Company Act..........................................30
3.25 Taxes...........................................................30
3.26 Full and Accurate Disclosure....................................30
3.27 Contracts.......................................................30
Section 4 CERTAIN COVENANTS OF BORROWER.....................................31
4.1 Payment and Performance of Obligations..........................31
4.2 Transfers.......................................................31
4.3 Liens...........................................................32
4.4 Indebtedness....................................................32
4.5 Compliance with Restrictive Covenants, Etc......................33
4.6 Leases..........................................................34
4.7 Delivery of Notices.............................................36
4.8 ERISA...........................................................37
4.9 Agreements with Affiliates......................................38
4.10 After Acquired Property.........................................38
4.11 Books and Records...............................................38
4.12 Delivery of Estoppel Certificates...............................38
4.13 Management, Etc.................................................39
4.13.1 Management......................................................39
<PAGE>
4.13.2 Management Termination..........................................40
4.14 Financial Statements; Audit Rights..............................40
4.14.1 Statements to be Delivered......................................40
4.14.2 Time for Delivery...............................................41
4.15 Maintenance of Non-Taxable Status...............................41
4.16 Lender's Attorneys' Fees and Expenses...........................41
4.17 Environmental...................................................42
4.18 Report Updates..................................................43
4.19 Lender Access to Premises.......................................44
4.20 Delivery of Documents Regarding Ownership.......................44
4.21 Use of Premises.................................................44
4.22 Insurance.......................................................45
4.23 Contracts.......................................................45
4.24 Intentionally Omitted...........................................45
4.25 Intentionally Omitted...........................................45
4.26 Franchise Provisions............................................45
4.27 Interest Rate Cap Agreement.....................................45
4.27.1 Purchase and Maintenance of Interest Rate Cap...................45
4.27.2 Transfer or Release of Interest Rate Cap Agreement
Upon Permitted Assumption of Loan..............................46
Section 5 EVENTS OF DEFAULT.................................................46
5.1 Events of Default; Defaults.....................................46
5.1.1 Non-Payment.....................................................46
5.1.2 Affirmative Covenants...........................................46
5.1.3 Negative Covenants..............................................46
5.1.4 Representations.................................................47
5.1.5 Other Loan Documents............................................47
5.1.6 Intentionally Omitted...........................................47
5.1.7 Reserves; Deposits..............................................47
<PAGE>
5.1.8 Transfers.......................................................47
5.1.9 Liens...........................................................47
5.1.10 Involuntary Bankruptcy, Etc.....................................47
5.1.11 Voluntary Bankruptcy, Etc.......................................47
5.1.12 Intentionally Omitted...........................................48
5.1.13 Intentionally Omitted...........................................48
5.1.14 ERISA...........................................................48
5.1.15 Intentionally Omitted...........................................48
5.1.16 Other Conditions for Acceleration...............................48
5.1.17 Misapplication of Receipts......................................48
5.2 Rights upon Event of Default....................................48
5.3 Waiver of Stay, Extension and Moratorium Laws, Appraisal and
Valuation, Redemption and Marshalling..........................49
5.4 Preferences.....................................................50
Section 6 GENERAL PROVISIONS................................................50
6.1 Rights Cumulative; Waivers......................................50
6.2 Lender's Action for its Own Protection Only.....................51
6.3 No Third Party Beneficiaries....................................52
6.4 Payment of Expenses, Etc........................................52
6.4.1 Payment of Expenses.............................................52
6.4.2 Advances Secured................................................53
6.5 Indemnification.................................................53
6.6 Notices.........................................................55
6.7 No Oral Modification............................................56
6.8 Assignment by Lender............................................57
6.8.1 Assignment......................................................57
6.8.2 Participations..................................................57
6.8.3 Assignment and Acceptance.......................................57
6.8.4 Other Business..................................................57
<PAGE>
6.8.5 Privity of Contract.............................................58
6.8.6 Availability of Records.........................................58
6.9 Severability....................................................58
6.10 No Assignment by Borrower.......................................58
6.11 Governing Law...................................................58
6.12 Successors and/or Assigns.......................................58
6.13 Entire Agreement................................................59
6.14 Liability.......................................................59
6.15 Counterparts; Headings..........................................59
6.16 Time of the Essence.............................................59
6.17 Consents........................................................59
6.18 No Partnership..................................................60
6.19 Waiver of Jury Trial............................................60
6.20 Limited Recourse................................................60
6.21 Intentionally Omitted...........................................62
6.22 Jurisdiction, Venue, Service of Process.........................62
6.23 Intentionally Omitted...........................................62
6.24 Rule of Construction............................................62
6.25 Further Assurances..............................................63
6.26 Recitals........................................................64
6.27 Sale of Loan and Securitization.................................64
6.27.1 Rating Agency Requirements......................................64
6.27.2 Securitization Indemnification..................................65
6.28 Amendment and Restatement of Original Loan Agreement............67
Section 7 SPECIAL PROVISIONS................................................67
7.1 Tax and Insurance Escrow........................................67
7.1.1 Tax and Insurance Deposits......................................67
7.1.2 Payment of Taxes and Insurance Premiums.........................67
7.1.3 Application upon Event of Default...............................68
<PAGE>
7.1.4 Reliance........................................................68
7.1.5 Borrower's Obligations..........................................68
7.1.6 No Third Party Beneficiary......................................68
7.2 Mortgage Subaccounts............................................69
7.2.1 FF&E Reserve Subaccount.........................................69
7.3 Intentionally Omitted...........................................70
7.4 Application of Receipts.........................................70
7.4.1 Deposits into Clearing Account..................................70
7.4.2 Application of Receipts.........................................70
7.4.3 Quarterly DCR Tests..............................................72
Section 8 SINGLE PURPOSE ENTITY/SEPARATENESS................................72
8.1 Representations, Warranties and Covenants.......................72
Section 9 REFINANCING THE LOAN; LOAN ASSUMPTION.............................75
9.1 Intentionally Omitted...........................................75
9.2 Intentionally Omitted...........................................75
9.3 Assumption of Loan..............................................75
9.3.1 General Conditions to All Assumptions...........................71
9.3.2 Conditions Upon Second Assumption...............................76
9.3.3 Loan to Value and DCR...........................................77
9.3.4 Termination of Right to Loan Term Reduction.....................77
</TABLE>
<PAGE>
AMENDED AND RESTATED LOAN AGREEMENT
THIS AMENDED AND RESTATED LOAN AGREEMENT (as amended from time to time in
accordance with the terms hereof and in effect, this "Agreement"), entered into
as of October 28, 1998, by and between CREDIT SUISSE FIRST BOSTON MORTGAGE
CAPITAL LLC, a Delaware limited liability company having an address at 11
Madison Avenue, New York, New York 10010, its successors and/or assigns
("Lender"), and INTERNATIONAL HOTEL ACQUISITIONS, LLC, a Delaware limited
liability company having an address at c/o Hotel Operations Inc., 11 Madison
Avenue, New York, New York 11010 ("Borrower").
W I T N E S S E T H:
WHEREAS, Borrower is the owner of the fee estate in a certain tract of land
known as the "Grand Wailea Hotel" in Honuala, District of Makawao, Island and
County of Maui, State of Hawaii, as more particularly described in Schedule A
annexed hereto (the "Land"), and the building and other improvements located
thereon (collectively, the "Improvements");
WHEREAS, on or about June 15, 1998, Lender made a loan to Borrower in the
original principal amount of Three Hundred Fifty Seven Million Dollars
($357,000,000) (the "Original Loan") pursuant to the terms and conditions of
that certain Assumption Agreement and Consolidated, Amended and Restated Loan
Agreement (the "Original Loan Agreement") and the other "Loan Documents" (as
defined in the Original Loan Agreement, and herein collectively referred to as
the "Original Loan Documents"), the proceeds of which Original Loan were used by
Borrower to acquire the Land and the Improvements; and
WHEREAS, Borrower and Lender have agreed to reduce the portion of the
Original Loan secured by the "Mortgage" (as defined in the Original Loan
Agreement) to Two Hundred Seventy Five Million Dollars ($275,000,000) (as
reduced, the "Loan") and to amend and restate in their entirety the Original
Loan Agreement and the other Original Loan Documents as herein provided and as
provided in the "Loan Documents" (as defined below), with the remainder of the
Original Loan to be evidenced by the "Mezzanine Loan Documents" (as defined
below);
NOW, THEREFORE, in consideration of the above premises and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Lender and Borrower hereby agree as follows:
Section 1
PARTICULAR TERMS; DEFINITIONS
For all purposes of this Agreement, the following terms shall have the
respective meanings hereinafter specified, such definitions to be applicable
equally to the singular and plural forms of such terms:
"ACM" shall mean asbestos-containing materials.
"Affiliate" shall mean, with respect to a specified Person, (i) a Person
who, directly or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with, the specified Person, (ii) any
Person who is an officer, director, partner, manager, employee, or trustee of,
or serves in a similar capacity with respect to, the specified Person or of
which the specified Person is an officer, partner, manager or trustee, or with
respect to which the specified Person serves in a similar capacity, (iii) any
Person who, directly or indirectly, has an Ownership Interest in the specified
Person, (iv) any Person in which the specified Person has an Ownership Interest,
(v) the spouse, issue, or parent of the specified Person, and (vi) any Person
which would constitute an Affiliate of any such Person described in clauses (i)
through (v) above.
"Affirmative Covenant" shall mean a promise or covenant by any Person to
perform, act, suffer, permit or consent to.
"Agreement" shall have the meaning ascribed to such term in the
introductory paragraph hereof.
<PAGE>
"Annualized Net Operating Income" means the difference between (i) the sum
of all Receipts generated during the twelve (12) full calendar months
immediately preceding any Determination Date (including any calendar month
ending on a Determination Date) less (ii) all Expenses paid during the twelve
(12) full calendar months immediately preceding such Determination Date
(including any calendar month ending on a Determination Date).
"Approved Accountant" shall mean such independent certified public
accountant of nationally recognized standing selected by the Person required to
deliver the applicable Financial Statements and other reports specified herein,
which Approved Accountant shall be approved by Lender.
"Approved Budget" shall have the meaning ascribed to such term in Section
4.14.1(d) hereof.
"Approved Contracts" shall mean the Contracts listed on Schedule B annexed
hereto and any other Contract entered into after the date hereof in accordance
with Section 4.23 hereof.
"Approved Leases" shall mean the Leases set forth on Schedule C annexed
hereto and all Leases entered into after the date of this Agreement in
accordance with Section 4.6 hereof.
"Assignees" shall have the meaning ascribed to such term in Section 6.8.1
hereof.
"Assignment of Leases and Rents" shall mean that certain Amended and
Restated Assignment of Leases and Rents, dated as of the date hereof, made by
Borrower in favor of Lender, relating to the Loan, as the same may hereafter be
amended or modified from time to time.
"Bankruptcy Code" shall mean Title 11 of the United States Code, 11 U.S.C.
ss.ss.101 et seq., as amended.
"Base Rate" shall mean the rate per annum equal to the sum of the Interest
Rate Spread plus the then applicable Treasury Rate during the period prior to
and including the Scheduled Maturity Date.
"Best knowledge" or "knowledge" shall mean, for the purpose of this
Agreement and the other Loan Documents, the actual knowledge of the Person in
question. If any entity with respect to which this term would be applicable is a
corporation, knowledge of such entity shall refer to actual knowledge of its
officers or directors. If any such entity is a partnership, knowledge of such
entity shall refer to actual knowledge of each of its partners who participates
in the management of such partnership (directly or indirectly). If any such
entity is a limited liability company, knowledge of such entity shall refer to
actual knowledge of its sole member or managing member(s), as applicable.
"Borrower" shall have the meaning ascribed to such term in the introductory
paragraph hereof.
"Buyer" shall have the meaning ascribed to such term in Section 9.3 hereof.
"Capital Adequacy Events" shall have the meaning ascribed to such term in
Section 2.5(d) hereof.
<PAGE>
"Cash Collateral Account" shall have the meaning ascribed to such term in
the Cash Management Agreement.
"Cash Management Agreement" shall mean that certain Amended and Restated
Cash Management Agreement, dated as of the date hereof, between Borrower and
Lender, as the same may be amended or modified from time to time.
"CERCLA" shall mean the Comprehensive Environmental Response, Compensation
and Liability Act (42 U.S.C. ss. 9601, et seq.), as the same may be amended from
time to time.
"Certificates" means the securities issued in connection with a
Securitization of the Loan.
"Claim" shall have the meaning ascribed to such term in Section 6.5(b)
hereof.
"Clearing Account" shall have the meaning ascribed to such term in the Cash
Management Agreement.
"Closing Date" shall mean the time of execution and delivery of this
Agreement by Borrower to Lender.
"Collateral" shall mean all collateral pledged to Lender in respect of the
Loan hereunder or under any of the other Loan Documents.
"Collection Period" shall have the meaning ascribed to such term in the
Cash Management Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"Contract" shall mean (i) any management, brokerage or leasing agreement or
(ii) any cleaning, maintenance, service or other contract or agreement of any
kind (other than Leases) of a material nature (materiality for these purposes to
include contracts in excess of Ten Thousand Dollars ($10,000) or which extend
beyond one year (unless cancelable on thirty (30) days or less notice)), in
either case relating to the ownership, leasing, management, use, operation,
maintenance, repair or restoration of the Premises, whether written or oral.
"Control" (and the correlative terms "controlled by" and "controlling")
shall mean, with respect to a specified Person, the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through ownership of voting securities or
partnership or other ownership interests, by contract or otherwise; provided,
however, that, without limiting the generality of the foregoing, (i) any Person
(including family members of such Person) which owns, directly or indirectly,
securities representing twenty percent (20%) or more of the value or ordinary
voting power of a corporation or twenty percent (20%) or more of the partnership
or membership or other Ownership Interests (based upon value or vote) of any
other Person is deemed to control such corporation or other Person, (ii) a
general partner shall always be deemed to control any partnership of which it is
a general partner, and (iii) a manager or member-manager of a limited liability
company shall always be deemed to control any limited liability company of which
it is a manager or member-manager, as the case may be.
<PAGE>
"DCR" shall mean the ratio of (i) Annualized Net Operating Income as of any
Determination Date to (ii) the payments of interest that would be due and
payable on the Outstanding Principal Balance as of such Determination Date and
for the following twelve (12) month period, assuming a monthly constant payment
of interest based on the LIBOR Interest Rate in effect as of the date of such
calculation.
"DCR Lock Box Event" shall have the meaning set forth in Section 7.4.2(b)
hereof.
"DCR Lock Box Threshold" shall have the meaning set forth in Section
7.4.2(b) hereof.
"Default" shall have the meaning ascribed to such term in Section 5.1
hereof.
"Default Rate" shall have the meaning ascribed to such term in Section 2.7
hereof. In no event shall the Default Rate exceed the maximum interest rate
permitted under applicable law.
"Deposit Bank" shall have the meaning ascribed to such term in the Cash
Management Agreement.
"Designated Officer" shall mean (i) if Borrower is a corporation, the chief
financial officer of such corporation or such other officer of such corporation
as is fully familiar with the financial affairs of Borrower and is approved by
Lender, (ii) if Borrower is a partnership, such officer of Borrower's managing
general partner as satisfies the first sentence of this definition, or (iii) if
Borrower is a limited liability company, such officer of Borrower's sole member
or managing member, as applicable, as satisfies the first sentence of this
definition.
"Designee" shall have the meaning ascribed to such term in Section 6.23
hereof.
"Determination Date" shall mean each date as of which a determination of
DCR is required to be made pursuant to Sections 7.4.3 or 9.3.3 hereof.
"Disbursement Instructions" shall have the meaning ascribed to such term in
the Cash Management Agreement.
"Disbursement Period" shall mean a period of thirty (30) calendar days.
"Disclosure Document" shall have the meaning ascribed to such term in
Section 6.27.2 hereof.
"Discount Amount" shall mean, with respect to any prepayment of the Loan,
the amount equal to the product of (i) the principal amount of such prepayment,
(ii) the Interest Rate Spread, and (iii) a fraction, the numerator of which
shall equal the actual number of days from and including the date of such
prepayment through but excluding the Yield Maintenance Termination Date, and the
denominator of which is 360.
"Disqualified Person" shall have the meaning ascribed to such term in
Section 3.20 hereof.
"Dollar" or "$" shall mean lawful money of the United States of America.
<PAGE>
"Domestic Business Day" shall mean any day except a Saturday, Sunday or
other day on which commercial banks are required or permitted by law to close in
New York City.
"Engineering Consultant" shall mean Wimberly Allison Tong & Goo.
"Engineer's Report" shall mean the report prepared by the Engineering
Consultant.
"Environmental Consultant" shall mean Dames & Moore.
"Environmental Costs" shall mean "Indemnified Costs" as such term is
defined in the Environmental Indemnification Agreement.
"Environmental Indemnification Agreement" shall mean that certain Amended
and Restated Environmental Indemnification Agreement, dated as of the date
hereof, made by Borrower to Lender, as the same may hereafter be amended or
modified from time to time.
"Environmental Laws" shall mean CERCLA; The Resource Conservation and
Recovery Act, 42 U.S.C. ss. 6901, et seq.; The Hazardous Substances
Transportation Act, 49 U.S.C. ss. 5101, et seq.; The Emergency Planning &
Community Right-to-Know Act of 1986, 42 U.S.C. ss. 11001, et seq.; The Toxic
Substances Control Act, 15 U.S.C. ss. 2601 et seq.; The Clean Air Act, 42 U.S.C.
ss. 7401 et seq.; The Clean Water Act, 33 U.S.C. ss. 1251 et seq.; The Safe
Drinking Water Act, 42 U.S.C. ss. 201 et seq.; as any of the foregoing may be
amended from time to time; and any other federal, state and local laws or
regulations, codes, statutes, orders, decrees, guidance documents, judgments or
injunctions, now or hereafter issued, promulgated, amended, approved or entered
thereunder, relating to pollution, contamination, community right to know
notification, clean up or protection of the environment, or pertaining to
health, industrial hygiene or safety, including, without limitation, laws
relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals or industrial, toxic or hazardous substances
or wastes into the environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata, buildings or
facilities) or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of pollutants,
contaminants, chemicals or industrial, toxic or hazardous substances or wastes.
"Environmental Matter" shall mean any matter arising out of, relating to,
or resulting from pollution, contamination or protection of the environment
(including natural resources), and any matters relating to emission, discharge,
release or threatened release, of Hazardous Substances into the air (indoor and
outdoor), surface water, groundwater, soil, land surface or subsurface,
buildings or facilities or otherwise arising out of, relating to, or resulting
from the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, handling, release or threatened release of Hazardous
Substances in violation of any Environmental Law.
"Environmental Report" shall mean the Phase I and Phase II environmental
reports prepared by the Environmental Consultant.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, and the regulations promulgated thereunder from time to time.
<PAGE>
"Eurodollar Business Day" shall mean any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London, England.
"Event of Default" shall have the meaning ascribed to such term in Section
5.1 hereof.
"Excess Interest" shall have the meaning ascribed to such term in Section
2.8 hereof.
"Exchange Act" shall have the meaning ascribed to such term in Section
6.27.2 hereof.
"Excluded Revenue Items" shall have the meaning ascribed to such term in
the definition of "Receipts" set forth below.
"Expenses" shall mean all actual and customary operating expenses and all
other unanticipated or non-recurring expenses by Borrower or (if and to the
extent pursuant to the Management Agreement) Manager for or in connection with
the ownership, use, management, operation or disposition of the Premises (as
adjusted by Lender to reflect, inter alia, timing of the payment of expenses and
such other factors as Lender shall reasonably determine to be relevant),
including, without limitation (i) recurring expenses (e.g. capital or
non-capital improvements, fixtures, furnishings and/or equipment replacements,
and such others as determined by Lender), but excluding any of the same to the
extent paid for out of any of the Mortgage Subaccounts or paid from equity of
the Borrower (whether as new equity contributed by the equity holders of the
Borrower or from the Remaining Receipts retained by the Borrower pursuant to
Section 7.4), (ii) Taxes (whether paid directly by Borrower or escrowed with
Lender in accordance with Section 7.1 hereof), (iii) Insurance Premiums (whether
paid directly by Borrower or escrowed with Lender in accordance with Section 7.1
hereof), (iv) management fees due under the Management Agreement (whether paid
or not) in an amount not to exceed four percent (4.0%) of Receipts, (v) the FF&E
Reserve Payments, and (vi) general, administrative and legal expenses incurred
in connection with any of the foregoing.
"FF&E Payment Date" shall have the meaning ascribed to such term in Section
7.2.1 hereof.
"FF&E Replacements" shall have the meaning ascribed to such term in Section
7.2.1 hereof.
"FF&E Reserve Payment" shall have the meaning ascribed to such term in
Section 7.2.1 hereof.
"FF&E Reserve Subaccount" shall have the meaning ascribed to such term in
the Cash Management Agreement.
"FF&E Reserve Payment Credit" shall have the meaning ascribed to such term
in Section 7.2.1 hereof.
"Financial Statements" shall mean the financial statements and other
documentation required to be delivered pursuant to Section 4.14 hereof.
"First Boston" shall have the meaning ascribed to such term in Section
6.27.2 hereof.
<PAGE>
"First Boston Group" shall have the meaning ascribed to such term in
Section 6.27.2 hereof.
"First Mezzanine Lender" shall have the meaning set forth in Schedule D
hereof.
"Funding Losses" shall have the meaning ascribed to such term in Section
2.5(a) hereof.
"Funding Party" shall mean any bank or other entity, if any, which is
indirectly or directly funding Lender with respect to the Loan, in whole or in
part, including, without limitation, any direct or indirect assignee of, or
participant in, the Loan.
"Governmental Authority" shall mean the United States, the State of Hawaii,
the City where the Land is located, and any political subdivision of any of the
foregoing, and any agency, department, commission, board, court, bureau or
instrumentality of any of them.
"Hazardous Substances" shall mean asbestos, ACM, PCBs, urea-formaldehyde
and urea-formaldehyde foam insulation, nuclear fuel or waste, petroleum products
and any hazardous waste, toxic substance, related components, related
constituents, pollutant or contaminant, including, without limitation, any
substance defined or treated as a "hazardous substance", "extremely hazardous
substance" or "toxic substance" (or comparable term) in any applicable
Environmental Law and any other material.
"Improvements" shall have the meaning ascribed to such term in the Recitals
hereof.
"Indebtedness" shall mean any and all liabilities and obligations owing by
any Person to any Person, including principal, interest, charges, fees,
reimbursements and expenses, however evidenced, whether as principal, surety,
endorser, guarantor or otherwise, direct or indirect, absolute or contingent,
joint or several, due or not due, primary or secondary, liquidated or
unliquidated, secured or unsecured, original, renewed or extended, (i) in
respect of any borrowed money (whether by loans, the issuance and sale of debt
securities or the sale of any property to another Person subject to an
understanding, agreement, contract or otherwise to repurchase such property) or
for the deferred purchase price of any property or services (other than trade
accounts payable, or accrued expenses, that are or would be incurred in the
ordinary course of business of such Person ("Trade Payables") and payable within
ninety (90) days), (ii) as lessee under any leases which shall have been or
should be, in accordance with generally accepted accounting principles, recorded
as capital leases, (iii) under direct or indirect guarantees and obligations
(contingent or otherwise) to purchase or otherwise acquire, or otherwise assure
any creditor against loss in respect of the obligations of others, (iv) in
respect of letters of credit or similar instruments issued or accepted by banks
and other financial institutions for the account of such indebted Person, or (v)
in respect of unfunded vested benefits under plans covered by ERISA or any
similar liabilities to, for the benefit of, or on behalf of, any employees of
such indebted Person.
"Indemnified Parties" shall mean each of Lender, the Affiliates of Lender
and the Participants and their respective successors, assigns, partners,
members, shareholders, officers, directors, employees, agents and attorneys.
<PAGE>
"Insolvent" shall mean (i) the inability of a Person to pay its debts as
they become due and/or (ii) the fair value of such Person's debts is greater
than the fair value of such Person's assets.
"Insurance Premiums" shall have the meaning ascribed to such term in
Section 7.1 hereof.
"Interest Accrual Period" shall mean, with respect to any Payment Date, the
period commencing on the eleventh (11th) day of the preceding calendar month and
terminating on the tenth (10th) day of the calendar month in which such Payment
Date occurs; provided, however, that no Interest Accrual Period shall end later
than the Maturity Date (other than for purposes of calculating interest at the
Default Rate), and the initial Interest Accrual Period shall commence on the
date of this Agreement and shall end on November 10, 1998.
"Interest Rate Cap Pledge" shall mean that certain Pledge and Security
Agreement executed by Borrower, as pledgor, in favor of Lender, as pledgee, of
even date herewith, providing for, among other things, the collateral pledge of
the Interest Rate Cap Agreement referred to in Section 4.27 below.
"Interest Rate Spread" shall mean, (i) if Borrower makes the election
provided for in Section 2.11 hereof when and as required therein, two hundred
fifty (250) basis points; and (ii) under all other circumstances, two hundred
seventy-five (275) basis points.
"Land" shall have the meaning ascribed to such term in the Recitals hereof.
"Law Change" shall have the meaning ascribed to such term in Section 2.9(c)
hereof.
"Lease" shall mean any lease now or hereafter on or affecting the Premises,
or any part thereof, whether written or oral, and all licenses and other
agreements for the use and/or occupancy of the Premises, or any part thereof, as
the same shall have been or shall hereafter be amended.
"Legal Requirement" shall mean any law, statute, ordinance, order, rule,
regulation, decree or other requirement of a Governmental Authority, and all
conditions of any Permit.
"Lender" shall have the meaning ascribed to such term in the introductory
paragraph hereof.
"Lender's Counsel" shall mean Cox, Castle & Nicholson LLP, located in Los
Angeles, California, and any other law firm acting as counsel to Lender.
"Lender's Counsel Fees" shall mean all reasonable fees and disbursements of
Lender's Counsel.
"Liabilities" shall have the meaning ascribed to such term in Section
6.27.2 hereof.
"LIBOR" shall mean, with respect to any Interest Accrual Period, the rate
per annum (rounded upwards, if necessary, to the nearest one-sixteenth (1/16th)
of one percent (1%)) reported, with respect to the initial Interest Accrual
Period, at 11:00 a.m. London time on the date of this Agreement (or if such date
is not a Eurodollar Business Day, the immediately preceding Eurodollar Business
Day), and thereafter, at 11:00 a.m. London time on the date three (3) Eurodollar
<PAGE>
Business Days after the tenth (10th) day of the calendar month in which such
Interest Accrual Period commences (such date, the "LIBOR Determination Date"),
on Dow Jones Telerate Service Page 3750 (British Bankers Association Settlement
Rate) as the non-reserve adjusted London Interbank Offered Rate for U.S. dollar
deposits having a thirty (30) day term and in an amount of $1,000,000 or more
(or on such other page as may replace said Page 3750 on that service or such
other service or services as may be nominated by the British Bankers Association
for the purpose of displaying such rate, all as determined by Lender in its sole
but good faith discretion). In the event that (i) more than one such LIBOR is
provided, the average of such rates shall apply, or (ii) no such LIBOR is
published, then LIBOR shall be determined from such comparable financial
reporting company as Lender in its sole but good faith discretion shall
determine. LIBOR for any Interest Accrual Period shall be adjusted from time to
time by increasing the rate thereof to compensate Lender and any Funding Party
for any aggregate reserve requirements (including, without limitation, all
basic, supplemental, marginal and other reserve requirements and taking into
account any transitional adjustments or other scheduled changes in reserve
requirements during any Interest Accrual Period) which are required to be
maintained by Lender or such Funding Party with respect to "Eurocurrency
Liabilities" (as presently defined in Regulation D of the Board of Governors of
the Federal Reserve System) of the same term under Regulation D, or any other
regulations of a Governmental Authority having jurisdiction over Lender or such
Funding Party of similar effect.
"LIBOR Determination Date" shall have the meaning ascribed to such term in
the definition of "LIBOR" above.
"LIBOR Interest Rate" shall have the meaning ascribed to such terms in
Section 2.3 hereof.
"Liens" shall have the meaning ascribed to such term in Section 4.3 hereof.
"Loan" shall have the meaning ascribed to such term in the Recitals hereof.
"Loan Amount" shall mean Two Hundred Seventy Five Million Dollars
($275,000,000).
"Loan Documents" shall mean this Agreement, the Note, the Mortgage, the
Assignment of Leases and Rents, the Environmental Indemnification Agreement, the
Cash Management Agreement, the Manager Assignment and Subordination, the
Interest Rate Cap Pledge and any other document or agreement now or hereafter
executed by Borrower or any other Person for the benefit of Lender securing,
evidencing or otherwise relating to the Loan.
"Loan Taxes" shall have the meaning ascribed to such term in Section 2.9(a)
hereof.
"Loan Term Reduction" shall have the meaning ascribed to such term in
Section 2.11 hereof.
"Lock Out Date" shall have the meaning ascribed to such term in Section 2.6
hereof.
"Major Decision" shall mean any decision of or on behalf of Borrower to:
(i) engage in any business or activity other than as set forth in Borrower's
Organizational Documents in effect as of the Closing Date; (ii) incur any
Indebtedness (other than the Mezzanine Indebtedness) or assume or guaranty any
<PAGE>
Indebtedness of any other Person, other than in connection with any business or
activity as set forth in Borrower's Organizational Documents in effect as of the
Closing Date; (iii) voluntarily dissolve or liquidate, in whole or in part; (iv)
consolidate or merge with or into any other Person or convey or transfer its
properties and assets substantially as an entirety to any other Person other
than as set forth in Borrower's Organizational Documents in effect as of the
Closing Date; (v) commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in
effect, including, but not limited to, the Bankruptcy Code, or seek the
appointment of a trustee, receiver, liquidator, custodian, examiner or other
similar official of it or any substantial part of its property, or consent to
any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against it, or
make a general assignment for the benefit of creditors, or fail generally to pay
its debts as they become due, or take any action to authorize any of the
foregoing; or (vi) amend Borrower's Organizational Documents.
"Major Lease" shall mean any Lease described on Schedule C annexed hereto,
which is marked with an asterisk, and any other Lease which either (i) is with
an Affiliate of Borrower or (ii) when taken together with all Leases, if any, to
Affiliates of the tenant thereunder demises in excess of 10,000 square feet of
the net rentable square feet in the Improvements. For purposes of this
definition only, in determining the net rentable square footage demised under
any Lease, all space in the Improvements which may in the future be demised to
the tenant under such Lease by reason of such tenant exercising any right or
option contained in such Lease shall be included in the calculation of the
square footage demised under such Lease.
"Management Agreement" shall mean that certain Incentive Hotel Operating
Agreement dated as of June 15, 1998, between Borrower and Grand Wailea Company,
for the management of the Premises, as the same may be amended or modified in
accordance with the terms hereof and any replacement thereof entered into in
accordance with the terms of this Agreement.
"Manager" shall have the meaning ascribed to such term in Section 4.13.1(a)
hereof. The Manager on the date hereof is Grand Wailea Company.
"Manager Assignment and Subordination" shall have the meaning ascribed to
such term in Section 4.13.1(b) hereof.
"Material Adverse Effect" shall mean a material adverse effect on (i) the
property, business, operations, financial condition, prospects or liabilities of
any Significant Party, (ii) the ability of any Significant Party to perform its
material obligations under any of the Loan Documents, including, without
limitation, the timely payment of principal of or interest on the Loan or other
amounts payable in connection therewith by any Significant Party liable
therefor, (iii) the validity or enforceability of any of the Loan Documents by
or against any Significant Party, (iv) the rights and remedies of Lender under
any of the Loan Documents, or (v) without limiting the foregoing, the Premises
or any use or occupancy thereof and/or the Collateral and the priority of the
Liens thereon in favor of Lender.
"Maturity Date" shall mean the day which is the earlier to occur of (i) the
Scheduled Maturity Date, or (ii) the date on which payment of the Loan shall
have been accelerated pursuant to the terms of this Agreement.
<PAGE>
"Member" shall mean IHA Holdings LLC, a Delaware limited liability company.
"Mezzanine Indebtedness" shall mean indebtedness described on Schedule D
hereof.
"Mezzanine Indebtedness Loan Documents" shall mean the loan documents
executed in connection with the Mezzanine Indebtedness.
"Mortgage" shall mean that certain Amended and Restated Mortgage, Security
Agreement, Assignment of Leases and Fixture Filing, dated as of the date hereof,
made by Borrower in favor of Lender, as the same may hereafter be amended,
modified, increased, consolidated or extended from time to time.
"Mortgage Subaccounts" shall have the meaning ascribed to such term in the
Cash Management Agreement.
"Negative Covenant" shall mean a promise or covenant by any Person to not
act, perform, suffer, permit or consent to.
"Note" shall mean that certain Amended and Restated Mortgage Note, dated
the date hereof, made by Borrower to Lender, in the original principal amount of
Two Hundred Seventy-Five Million Dollars ($275,000,000), as the same may
hereafter be amended, modified, extended or substituted from time to time.
"Notices" shall have the meaning ascribed to such term in Section 6.6
hereof.
"Obligated Party" shall have the meaning ascribed to such term in Section
5.2(a) hereof.
"Obligations" shall mean Borrower's obligation to pay the principal,
interest and any other sums payable to Lender in respect of the Loan hereunder
and/or under the Note, the Mortgage or any of the other Loan Documents, and to
perform and observe all of the terms, covenants and provisions of each of the
Loan Documents.
"Officer's Certificate" shall mean a certificate delivered to Lender and
signed by the President or a Vice President of Borrower (or if, at any time,
Borrower shall be a partnership or limited liability company, by such an officer
of a general partner, sole member or managing member, as the case may be, of
Borrower, or if such general partner or member is a limited liability company,
by such an officer of such general partner or member, as the case may be). Any
Officer's Certificate shall be based on the actual knowledge, upon due inquiry,
of the officer executing the same and shall contain a statement by such officer
that (i) in the ordinary course of the performance of his duties he would
normally obtain knowledge of, or (ii) he has made such inquiry as in his
judgment is reasonably sufficient to obtain knowledge of, the existence of any
condition or event necessary to make the statement(s) otherwise set forth in
such Officer's Certificate.
"Organizational Documents" shall mean, with respect to any Person who is
not a natural person, the certificate or articles of incorporation, memorandum
of association, articles of association, trust agreement, by-laws, partnership
agreement, limited partnership agreement, certificate of partnership or limited
partnership, limited liability company articles of organization, limited
liability company operating agreement or any other organizational document, and
all shareholder agreements, voting trusts and similar arrangements with respect
<PAGE>
to its stock, partnership interests, membership interests or other equity
interests.
"Outstanding Principal Balance" shall mean, as of any date, the outstanding
principal balance of the Loan.
"Ownership Interest" shall mean, with respect to any Person, ownership of
the right to profits and losses of, and/or the right to exercise voting power to
elect directors, managers, operators or other management of, or otherwise to
affect the direction of management, policies or affairs of, such Person, whether
through ownership of securities or partnership, membership or other interests
therein, by contract or otherwise.
"Ownership Period" shall have the meaning ascribed to such term in the
definition of "Annualized Net Operating Income" set forth above.
"Participants" shall have the meaning ascribed to such term in Section
6.8.2 hereof.
"Party In Interest" shall have the meaning ascribed to such term in Section
3.20 hereof.
"Payment Date" shall mean November 11, 1998 and the eleventh (11th) day of
each month thereafter during the Term.
"PCBs" shall mean polychlorinated biphenyls.
"Permit" shall mean all approvals, consents, registrations, franchises,
permits, licenses (including, without limitation liquor licenses), variances,
certificates of occupancy and other authorizations with regard to zoning,
landmark, ecological, environmental, air quality, subdivision, planning,
building or land use required by any Governmental Authority for the
construction, lawful occupancy and operation of the Improvements and the actual
and contemplated uses thereof.
"Permitted Encumbrances" shall mean the encumbrances listed on Schedule B
of the Title Policy.
"Person" shall mean any individual, partnership, corporation (including a
business trust), limited liability company, joint stock company, estate, trust,
unincorporated association, joint venture or other entity or a government or an
agency or political subdivision thereof.
"Premises" shall mean the Land, the Improvements and all personal property
and other items described in the granting clauses of the Mortgage, and any other
property owned and/or leased by Borrower and used or usable in the operation of
the Improvements.
"Prohibited Transaction" shall mean a prohibited transaction as described
under Section 406 of ERISA or Section 4975 of the Code which is not the subject
of a statutory exemption under Section 408(b) of ERISA or an administrative
exemption granted pursuant to Section 408(a) of ERISA.
"Provided Information" shall have the meaning ascribed to such term in
Section 6.27.1 hereof.
"Quarterly DCR Test" shall have the meaning ascribed to such term in
<PAGE>
Section 7.4.3 hereof.
"Rating Agencies" shall mean (i) any nationally-recognized statistical
rating organizations that provide a rating on any of the Certificates on the
date of issuance of such Certificates, or (ii) prior to the issuance of the
Certificates, Standard & Poor's Rating Group, a division of The McGraw-Hill
Corporation, and any other nationally-recognized statistical rating organization
that has been designated by Lender in its sole discretion.
"Receipts" shall mean all receipts, revenues, income (including service
charges), fees, payments and proceeds of sales of every kind received by or on
behalf of Borrower, directly or indirectly, from operating the Premises for that
period, and services rendered to, and rentals, percentage rentals and other
fees, payments and charges received from, tenants, sub-tenants, licensees,
concessionaires and occupants of commercial, hotel, public and retail space
located in or at the Premises, calculated on a cash basis, whether in cash or on
credit, including, without limitation, revenues from the rental of rooms, guest
suites, conference and banquet rooms, food and beverage facilities, telephone
services, laundry, vending, television and parking at the Premises, the fair
market value of any barter transaction, and other fees and charges resulting
from the operations of the Premises by or on behalf of Borrower in the ordinary
course of business (including without limitation all deposits that are paid to
Borrower by Persons becoming members (collectively, the "Members") of the
Borrower's resident advisors program and/or special advisors program, or any
successor refundable membership program to either thereof (collectively,
"Membership Deposits")), and proceeds, if any, from business interruption or
other loss of income insurance (net of the costs of collection thereof) and also
including any proceeds received by Borrower in respect of the Interest Rate Cap;
provided, however, that Receipts shall not include: (i) non-recurring income and
non-Premises related income (as determined by Lender in its reasonable
discretion); (ii) security deposits received from any tenant unless and until
the same are applied to rent or any other of such tenant's obligations in
accordance with the terms of such tenant's Lease; (iii) any loan proceeds or
proceeds of capital or equity contributions received by Borrower; (iv)
gratuities or service charges or other similar receipts which are to be paid
over to Premises employees or persons occupying similar positions for performing
similar duties; (v) proceeds of insurance or other money or credits received in
settlement for loss, theft or damage to property relating to or used in or at
the Premises; (vi) excise taxes, sales taxes, use taxes, bed taxes, admission
taxes, tourist taxes, gross receipts taxes, value added taxes, entertainment
taxes, or other taxes or similar charges payable to any Governmental Authority;
(vii) credit or refunds to guests and patrons, if the transaction originally was
included in Receipts; (viii) condemnation awards; (ix) proceeds from the sale of
furniture, fixtures and/or equipment no longer required for the operation of the
Premises; and (x) Membership Deposits that are deposited into a segregated trust
account for the benefit of the Members (the revenue exclusions in the preceding
clauses (i) through (x), collectively, the "Excluded Revenue Items").
"Related Party" shall have the meaning ascribed to such term in Section
6.20 hereof.
"Remaining Receipts" shall have the meaning ascribed to such term in
Section 7.4.2(a) or Section 7.4.2(b) hereof.
"Rent Roll" shall mean a rent roll for the Premises supplied to Lender, in
such form as Lender shall reasonably request. The Rent Roll must indicate
whether any tenant is in arrears in the payment of rent or expense reimbursement
<PAGE>
obligations under its Lease, and the duration and amount of any such arrears.
"Required Records" shall have the meaning ascribed to such term in Section
6.27.2 hereof.
"Retained Receipts" shall have the meaning ascribed to such term in Section
7.4.2(b) hereof.
"RICO" shall have the meaning ascribed to such term in Section 6.20 hereof.
"Sale" shall have the meaning ascribed to such term in Section 9.3 hereof.
"Sale Loan-to-Value Ratio" shall mean, as of the date of a sale, the ratio,
expressed as a percentage, of (i) the Outstanding Principal Balance, all accrued
and unpaid interest thereon and all other obligations of Borrower to Lender, to
(ii) the sale price of the Premises in connection with any Sale.
"Sale Notice" shall have the meaning ascribed to such term in Section 9.3
hereof.
"Scheduled Maturity Date" shall mean (subject to adjustment pursuant to
Section 2.11 below) November 11, 2002.
"Secondary Market Transaction" shall have the meaning ascribed to such term
in Section 6.27.1 hereof.
"Second Mezzanine Lender" shall have the meaning set forth in Schedule D
hereto.
"Securities" shall have the meaning ascribed to such term in Section 6.27.1
hereof.
"Securities Act" shall have the meaning ascribed to such term in Section
6.27.2 hereof.
"Securitization" shall have the meaning ascribed to such term in Section
6.27.1 hereof.
"Servicer" shall have the meaning ascribed to such term in Section 2.10
hereof.
"Servicing Fee" shall have the meaning ascribed to such term in Section
2.10 hereof.
"Significant Party" shall mean each of Borrower and Member.
"Survey" shall mean that survey of the Land, dated December 14, 1992, last
revised April 17, 1998, prepared by Alden S. Kajioka, Licensed Land Surveyor
Certificate No. 6605-LS, with Controlpoint Surveying and Engineering, Inc.
"Tax and Insurance Deposits" shall have the meaning ascribed to such term
in Section 7.1.1 hereof.
"Tax and Insurance Escrow Subaccount" shall have the meaning ascribed to
such term in the Cash Management Agreement.
"Taxes" shall have the meaning ascribed to such term in the Mortgage.
<PAGE>
"Term" shall mean the period commencing on the date hereof and ending on
the date on which the entire Outstanding Principal Balance and all other sums
that shall be due and payable to Lender hereunder and under any of the other
Loan Documents shall be paid in full to Lender.
"Title Insurer" shall mean First American Title Insurance Company.
"Title Policy" shall mean that certain title insurance policy, dated as of
June 15, 1998, issued by the Title Insurer to Lender under Policy No. CW1566563
in the amount of the Loan (including all endorsements thereto).
"Trade Payables" shall have the meaning ascribed to such term in the
definition of "Indebtedness" set forth above.
"Transfer" shall have the meaning ascribed to such term in Section 4.2(a)
hereof.
"Transfer Agreement" shall mean that certain Deed in Lieu Agreement dated
as of May 15, 1998, by and between Grand Wailea Company and the Borrower.
"Treasury Note" shall have the meaning ascribed thereto in the definition
of "Treasury Rate" set forth below.
"Treasury Rate" shall mean, with respect to any Interest Accrual Period,
the rate per annum (rounded upwards, if necessary, to the nearest one-sixteenth
(1/16th) of one percent (1%)) reported, with respect to the initial Interest
Accrual Period, at 11:00 a.m. New York time on the date of this Agreement (or if
such date is not a Domestic Business Day, the immediately preceding Domestic
Business Day), and during any Interest Accrual Period thereafter, at 11:00 a.m.
New York time on the date on the date three (3) Domestic Business Days after the
tenth (10th) day of the calendar month in which such Interest Accrual Period,
equal to the then current yield to maturity, on an annual equivalent bond basis
(recalculated to a three hundred sixty (360) day year basis), of a U.S. Treasury
bill, note or bond selected by Lender (a "Treasury Note") that is then actively
trading in the secondary market and maturing one year following the date of such
determination; provided, however, that if such a Treasury Note is not then
outstanding, the Treasury Rate shall be the per annum rate as of each applicable
determination date, equal to the current yield to maturity, on an annual
equivalent bond basis (recalculated to a three hundred sixty (360) day year
basis), of a Treasury Note that Lender shall, in each case in its reasonable
discretion, determine as being appropriate to determine the Treasury Rate. If
two or more issues of such Treasury Notes mature on the same day, then Lender
shall in its reasonable discretion select one such issue for purposes of
determining the Treasury Rate.
"Uniform Commercial Code" shall mean the Uniform Commercial Code of the
State of Hawaii, Hawaii Revised Statutes, Chapter 490.
"U.S. Person" shall mean any Person that is (i) a citizen or resident of
the United States, (ii) a corporation, partnership or other entity created or
organized under the laws of the United States or any state thereof or (iii) any
estate or trust that is subject to United States federal income taxation,
regardless of the source of its income.
"Underwriter Group" shall have the meaning ascribed to such term in Section
6.27.2 hereof.
<PAGE>
"Working Capital Reserve" shall mean the working capital reserve maintained
by Borrower and utilized by the Management Company pursuant to the terms and
conditions of the Management Agreement.
"Yield Maintenance Termination Date" shall have the meaning ascribed to
such term in Section 2.6(c) hereof.
Section 2
THE LOAN
2.1 Intentionally Omitted.
2.2 Loan Term. The Loan shall mature on the Maturity Date, at which time
the entire Loan shall be due and payable.
2.3 Interest Rate.
2.3.1 Rate During Term.Subject to the further provisions of this
Agreement, including, without limitation, Sections 2.5, 2.7 and 2.11
hereof, the Outstanding Principal Balance evidenced by the Note shall bear
interest throughout the Term at a floating rate per annum equal to the sum
of LIBOR plus the Interest Rate Spread for any Interest Accrual Period. The
interest rate referred to in the preceding sentence, as it relates to the
Note, is referred to herein as the "LIBOR Interest Rate."
2.3.2 Calculation of Interest. All interest payable hereunder shall be
computed on the basis of a 360-day year for the actual number of days
elapsed. In computing the number of days during which interest accrues, the
day on which funds are initially advanced shall be included regardless of
the time of day such advance is made, and the day on which funds are repaid
shall, subject to Section 2.4.3 hereof, be excluded.
2.4 Payments.
2.4.1 Interest. Prior to the Maturity Date, interest accruing under
the Note during each Interest Accrual Period shall be payable by Borrower
monthly in arrears on each Payment Date.
2.4.2 Repayment of Outstanding Principal Balance. The entire
Outstanding Principal Balance evidenced by the Note together with all
accrued and unpaid interest thereon and all other amounts payable hereunder
or under any of the other Loan Documents, shall, to the extent not sooner
paid pursuant to the terms of the Note and the other Loan Documents, be due
and payable in full on the Maturity Date.
2.4.3 General. All sums payable to Lender hereunder shall be payable,
without setoff, deduction or counterclaim, in immediately available funds,
no later than 12:00 P.M. New York City time on the date when due by wire
transfer to the following account: LaSalle National Bank, Chicago, Illinois
60603, ABA No.: 071000505, Account Number: 677952707, Account Name:
International Hotel Acquisitions, LLC, or to such other account or address
as Lender may from time to time designate in a written notice to Borrower.
Payments received by Lender in immediately available funds on any day after
12:00 P.M. New York City time shall be treated for all purposes of the Loan
as having been paid and received by Lender on the next Domestic Business
Day. Notwithstanding anything to the contrary contained herein, when any
payment is due hereunder or under any of the other Loan Documents on a day
which is not a Domestic Business Day, such payment shall be made on the
next succeeding Domestic Business Day.
<PAGE>
2.5 Funding Losses; Change in Law, Etc.
(a) Borrower hereby agrees to pay to Lender any amount necessary to
compensate Lender and any Funding Party for any losses or costs (including,
without limitation, the costs of breaking any "LIBOR" contract, if
applicable, or funding losses determined on the basis of Lender's or such
Funding Party's reinvestment rate and the interest rate thereon)
(collectively, "Funding Losses") sustained by Lender or any Funding Party:
(i) if the Loan, or any portion hereof, is repaid for any reason whatsoever
on any date other than a Payment Date (including, without limitation, from
condemnation or insurance proceeds); and/or (ii) upon the conversion of the
interest rate on the Loan to the Base Rate in accordance with Section
2.5(b) hereof. Payment of Funding Losses hereunder shall be in addition to
any obligation to pay a prepayment premium under Section 2.6 hereof in
circumstances where such prepayment premium would be due and owing.
(b) If Lender determines (which determination shall be conclusive and
binding upon Borrower, absent manifest error) (i) that Dollar deposits in
an amount approximately equal to the then Outstanding Principal Balance are
not generally available at such time in the London Interbank Market for
deposits in Eurodollars, (ii) that reasonable means do not exist for
ascertaining LIBOR, or (iii) that the LIBOR Interest Rate would be in
excess of the maximum interest rate which Borrower may by law pay, then, in
any such event, Lender shall so notify Borrower and, as of the date of such
notification with respect to an event described in clause (iii) above, or
as of the expiration of the applicable Interest Accrual Period with respect
to an event described in clause (i) or (ii) above, interest shall accrue at
the Base Rate until such time as the situations described above are no
longer in effect, or as otherwise provided herein.
(c) If the introduction of, or any change in, any law, regulation or
treaty, or in the interpretation thereof by any governmental authority
charged with the administration or interpretation thereof, shall make it
unlawful for Lender or any Funding Party to maintain either LIBOR Interest
Rate with respect to the Loan, or any portion thereof, or to fund the Loan,
or any portion thereof, in Eurodollars in the London Interbank Market,
then, (i) the Loan (or such portion of the Loan) shall thereafter bear
interest at the Base Rate (unless the Default Rate shall be applicable),
and (ii) Borrower shall pay to Lender the amount of Funding Losses (if any)
incurred in connection with such conversion. The accrual of interest at the
Base Rate shall continue until such Payment Date, if any, as the situation
described in this Section 2.5(c) is no longer in effect.
(d) If Lender or a Funding Party, as the case may be, shall have
determined that the applicability of any law, rule, regulation or guideline
adopted pursuant to or arising out of the July 1988 report of the Basle
Committee on Banking Regulations and Supervisory Practices entitled
"International Convergence of Capital Measurement and Capital Standards",
or the adoption of any other law, rule, regulation or guideline (including,
but not limited to, any United States law, rule, regulation or guideline)
regarding capital adequacy, or any change becoming effective in any of the
foregoing or in the enforcement or interpretation or administration of any
<PAGE>
of the foregoing by any court or any domestic or foreign governmental
authority, central bank or comparable agency charged with the enforcement
or interpretation or administration thereof, or compliance by Lender or its
holding company or such Funding Party or its holding company, as the case
may be, with any request or directive regarding capital adequacy (whether
or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of materially reducing the
rate of return on the capital of Lender, Lender's holding company, such
Funding Party or such Funding Party's holding company, as the case may be,
to a level below that which Lender or its holding company or the Funding
Party or its holding company, as the case may be, could have achieved but
for such applicability, adoption, change or compliance (taking into
consideration Lender's or its holding company's or such Funding Party's or
its holding company's, as the case may be, policies with respect to capital
adequacy) (the foregoing being hereinafter referred to as "Capital Adequacy
Events"), then, upon demand by Lender, Borrower shall pay to Lender, from
time to time, such additional amount or amounts as will compensate Lender
or such Funding Party for any such reduction suffered.
(e) Any amount payable by Borrower under Section 2.5(a) or 2.5(d)
hereof shall be paid to Lender within five (5) days of receipt by Borrower
of a certificate signed by an officer of Lender setting forth the amount
due and the basis for the determination of such amount, which statement
shall be made in good faith by Lender and shall be conclusive and binding
upon Borrower, absent manifest error. Failure on the part of Lender to
demand payment from Borrower for any such amount attributable to any
particular period shall not constitute a waiver of Lender's right to demand
payment of such amount for any subsequent or prior period. Lender shall use
reasonable efforts to deliver to Borrower prompt notice of any event
described in Sections 2.5(a) or 2.5(d) hereof and of the amount to be paid
under this Section 2.5 as a result thereof; provided, however, any failure
by Lender to so notify Borrower shall not affect Borrower's obligation to
make the payments to be made under this Section 2.5 as a result thereof.
All amounts which may become due and payable by Borrower in accordance with
the provisions of this Section 2.5 shall constitute additional interest
hereunder and shall be secured by the Mortgage and the other Loan
Documents.
(f) If Lender or any Funding Party requests compensation for any
losses or costs to be reimbursed pursuant to any one or more of the
provisions of Section 2.5(d) hereof, or if any event occurs as described in
Sections 2.5(b) or 2.5(c) hereof which would cause the Note no longer to
bear interest at the LIBOR Interest Rate then, upon request of Borrower,
Lender or such Funding Party shall use reasonable efforts, in a manner
consistent with such institution's practice in connection with loans like
the Loan, to designate a different lending office for funding or booking
the Loan or to assign its rights and obligations under this Agreement to
another of its offices, branches or Affiliates if such designation or
assignment, in Lender's sole but good faith judgment, (i) would eliminate,
mitigate or reduce amounts payable by Borrower in connection with Funding
Losses or Capital Adequacy Events or, with respect to an event described in
Sections 2.5(b) or 2.5(c) hereof, would allow the Loan to continue to bear
interest at the LIBOR Interest Rate without additional cost to Lender, and
(ii) would not be otherwise prejudicial to Lender. Borrower hereby agrees
to pay all reasonably incurred costs and expenses incurred by Lender or any
Funding Party in connection with any such designation or assignment.
<PAGE>
2.6 Prepayment.
(a) Borrower expressly waives any right to prepay the Loan, in whole
or in part, except as hereinafter provided.
(b) Notwithstanding anything herein or in any other Loan Documents to
the contrary, except as the result of an acceleration of the Scheduled
Maturity Date or if expressly required or permitted under any Loan
Document, including as a result of any of the prepayment events specified
in the last sentence of Section 2.6(d) hereof, Borrower may not voluntarily
prepay the Loan, in whole or in part, prior to May 11, 2000 (the "Lock Out
Date").
(c) Provided that no Event of Default shall have occurred and be
continuing, Borrower may, at any time subsequent to the Lock Out Date,
elect to prepay the Loan, in whole or in part, on any Payment Date,
provided, in either case, and with respect to any prepayment (i) Borrower
has given Lender written notice of such prepayment not more than thirty
(30) days and not less than fifteen (15) days prior to the date of such
prepayment, (ii) such prepayment is accompanied by all interest accrued on
the amount so prepaid and all other fees and other sums due hereunder and
under the other Loan Documents, if any, including, without limitation, any
amounts due under Section 2.5 hereof up to and including the date of
prepayment, and (iii) if such prepayment occurs prior to November 11, 2001
(the "Yield Maintenance Termination Date") such prepayment also shall be
accompanied by the Prepayment Fee. For purposes hereof, the "Prepayment
Fee" shall be an amount equal to the present value of the Discount Amount,
discounted at a rate per annum equal to LIBOR (as in effect for the
Interest Accrual Period in which such prepayment shall occur). In the event
that any Prepayment Fee is due hereunder, Lender shall deliver to Borrower
a statement setting forth the amount and determination of the Prepayment
Fee. Lender shall not be obligated or required to have actually reinvested
the prepaid principal balance at LIBOR or otherwise as a condition to
receiving the Prepayment Fee.
(d) The Prepayment Fee shall be due, to the extent permitted by
applicable law, under any and all circumstances where all or any portion of
the Loan is paid prior to the Yield Maintenance Termination Date, whether
such prepayment is involuntary or a voluntary payment in full prior to a
scheduled foreclosure under the Mortgage, to the extent such prepayment
results from Lender's exercise of its rights upon Borrower's default and
acceleration of the Scheduled Maturity Date (irrespective of whether
foreclosure proceedings have been commenced), and shall be in addition to
any other fees or sums due hereunder or under any of the other Loan
Documents. No tender of a prepayment with respect to which a Prepayment Fee
is due shall be effective unless such prepayment is accompanied by the
Prepayment Fee.
(e) Notwithstanding anything herein or in any other Loan Document to
the contrary, Borrower may not voluntarily make any prepayment of the Loan,
whether in whole or in part, during the period between the day following
any Payment Date and the day following the next succeeding LIBOR
Determination Date immediately following such Payment Date. If any
mandatory prepayment (whether in connection with the application of
insurance proceeds or condemnation awards pursuant to the Mortgage, or
otherwise) shall be received during any such period, the applicable LIBOR
Interest Rate shall be the LIBOR Interest Rate as determined for the
<PAGE>
Interest Accrual Period immediately preceding the date of any such
mandatory prepayment.
2.6 Default Interest; Late Charge.
(a) If any payment of principal, interest or other sum payable
hereunder, or under any of the other Loan Documents, is not paid when due,
or all principal, interest and all other amounts due hereunder and under
the other Loan Documents are not paid in full on the Maturity Date (or such
earlier date as the same may become due, whether by acceleration or
otherwise)), such principal amount, interest or other sum shall bear
interest at a rate per annum equal to three percent (3%) in excess over the
LIBOR Interest Rate (or, if at such time Lender shall have notified
Borrower that reasonable means do not exist for ascertaining LIBOR as
provided in clause (iii) of Section 2.5(b) hereof or the Base Rate is
otherwise being employed by Lender, three percent (3%) in excess of the
Base Rate) (the "Default Rate"), which Default Rate shall apply from the
date such amount was due until the date such amount is indefeasibly paid to
Lender. Without limiting the foregoing, upon the occurrence of, and during
the continuance of, an Event of Default hereunder, the entire principal
balance of the Loan shall bear interest at the Default Rate. Interest at
the Default Rate shall be paid immediately upon demand, which demand may be
made as frequently as Lender shall elect.
(b) If any installment of interest or principal (other than a payment
of principal upon the Maturity Date or acceleration) when due, or if any
other amount payable hereunder or under any other Loan Document is not paid
when due, Borrower shall pay to Lender a late charge of three percent (3%)
of the amount so overdue in order to defray part of the expense incident to
handling such delinquent payment or payments. Such late charge shall be
immediately due and payable without notice or demand by Lender. Such late
charge shall be in addition to, and separate from, any increase in interest
due hereunder as a result of calculation of interest due hereunder at the
Default Rate. Acceptance by Lender of any late charge or interest at the
Default Rate shall not be deemed a waiver of any of Lender's rights
hereunder or under the other Loan Documents with respect to such late
payment. Such late charge shall be in addition to, and separate from, any
increase in interest due hereunder as a result of calculation of interest
due hereunder at the Default Rate.
2.8 Excess Interest.
It is agreed that, notwithstanding any provision to the contrary in this
Agreement, the Note, the Mortgage or any of the other Loan Documents, no such
provision shall require the payment or permit the collection of any amount
("Excess Interest") in excess of the maximum amount of interest permitted by law
to be charged for the use or detention, or the forbearance in the collection, of
all or any portion of the indebtedness evidenced by the Note. If any Excess
Interest is provided for, or is adjudicated to be provided for, in the Note,
this Agreement or any of the other Loan Documents, then in such event:
(a) the provisions of this Section 2.8 shall govern and control;
(b) neither Borrower nor any of the other Persons required to pay any
amounts with respect to the Loan shall be obligated to pay any Excess
Interest;
<PAGE>
(c) any Excess Interest that Lender may have received hereunder shall,
at the option of Lender, (i) be applied as a credit against the then
Outstanding Principal Balance (without payment of prepayment premium) due
hereunder, accrued and unpaid interest thereon not to exceed the maximum
amount permitted by law, or both, (ii) be refunded to the payor thereof, or
(iii) any combination of the foregoing;
(d) the applicable interest rate or rates shall be automatically
subject to reduction to the maximum lawful rate and this Agreement, the
Note, the Mortgage and the other Loan Documents shall be deemed to have
been, and shall be, reformed and modified to reflect such reduction in such
interest rate or rates; and
(e) neither Borrower nor any of the other Persons required to pay any
amounts with respect to the Loan shall have any action or remedy against
Lender for any damages whatsoever, or any defense to enforcement of this
Agreement, the Note, the Mortgage or any of the other Loan Documents,
arising out of the payment or collection of any Excess Interest.
2.9 Loan Taxes.
(a) Any and all payments by Borrower to Lender hereunder and under the
other Loan Documents shall, provided that Lender complies with the
requirements of Section 2.9(c) hereof, be made free and clear of, and
without deduction for, any and all present or future taxes, levies,
imposts, deductions, charges, withholdings or liabilities with respect
thereto, except for the following, for which Borrower shall not be
responsible: (i) taxes imposed on or measured by Lender's net income or net
receipts; or (ii) franchise taxes imposed on Lender by the jurisdiction in
which (A) Lender is organized, (B) Lender is "doing business" (unless such
determination of "doing business" is made solely as a result of Lender's
interest in the Loan and the security therefor), or (C) Lender's applicable
lending office is located (all such taxes, levies, imposts, deductions,
charges or withholdings and liabilities (except those described in the
foregoing clauses (i) and (ii)) being hereinafter referred to as "Loan
Taxes"). If Borrower shall be required by law to deduct or withhold any
Loan Taxes from or in respect of any sum payable hereunder or under any
other Loan Document, then (1) any such sum payable hereunder or under any
other Loan Document shall be increased as may be necessary so that after
making all required deductions or withholdings (including deductions
applicable to additional sums payable under this Section 2.9), Lender
receives an amount equal to the sum it would have received had no such
deductions or withholdings (including deductions applicable to additional
sums payable under this Section 2.9) been made, (2) Borrower shall make
such deductions or withholdings, and (3) Borrower shall pay the full amount
deducted or withheld to the relevant taxing authority in accordance with
applicable law. Borrower will indemnify Lender for the full amount of any
Loan Taxes (including, without limitation, any Loan Taxes (as well as taxes
described in clauses (i) and (ii) of the second preceding sentence) imposed
by any jurisdiction on any amounts payable under this Section 2.9) paid or
payable by Lender and any liability (including, without limitation,
penalties, interest and expenses) arising therefrom or with respect
thereto, but only to the extent such Loan Taxes were correctly or legally
asserted. A certificate as to the amount of such payment or liability
delivered to Borrower by Lender in good faith shall be conclusive absent
manifest error. The agreements and obligations of Borrower contained in
this Section 2.9 shall survive the payment in full of principal and
<PAGE>
interest under this Agreement and the Note.
(b) Within thirty (30) days after the date of any payment of Loan
Taxes withheld by Borrower in respect of any payment to Lender, Borrower
will furnish to Lender the original or a certified copy of a receipt or
other evidence satisfactory to Lender evidencing payment thereof.
(c) If Lender is a U.S. Person (other than the lender originally named
herein), Lender shall deliver to Borrower, upon request, a Form W-9 (unless
it establishes to the reasonable satisfaction of Borrower that it is
otherwise eligible for an exemption from backup withholding tax or other
withholding tax). If Lender is not a U.S. Person, Lender shall deliver to
Borrower, upon request, a Form W-8 and either (i) a Form 1001 which
indicates a 0% rate of tax or (ii) a Form 4224. If Lender is not a U.S.
Person, Lender further undertakes to deliver to Borrower additional Forms
W-8, 1001, 4224 (or any successor forms) or other manner of certification,
as the case may be, (A) on or before the date that any such form expires or
becomes obsolete, (B) after the occurrence of any event requiring a change
in the most recent form previously delivered by it to Borrower, and (C)
such extensions or renewals thereof as may reasonably be requested by
Borrower, certifying that Lender is entitled to receive payments hereunder
without deduction or withholding of any Loan Taxes. However, in the event
that any change in law, rule, regulation, treaty or directive, or in the
interpretation or application thereof (a "Law Change"), has occurred prior
to the date on which any delivery pursuant to the preceding sentence would
otherwise be required which renders such form inapplicable, or which would
prevent Lender from duly completing and delivering any such form, or if
such Law Change results in Lender being unable to deliver a Form W-9 (or
other satisfactory evidence that it is otherwise eligible for an exemption
from backup withholding tax or other withholding tax), Lender shall not be
obligated to deliver such forms but shall, promptly following such Law
Change, but in any event prior to the time the next payment hereunder is
due following such Law Change, advise Borrower in writing whether it is
capable of receiving payments without any deduction or withholding of Loan
Taxes. In the event of such Law Change, Borrower shall have the obligation
to make Lender whole and to "gross-up" under Section 2.9(a) hereof, despite
the failure by Lender to deliver such forms.
(d) If Lender receives a refund in respect of Loan Taxes paid by
Borrower, it shall promptly pay such refund, together with any other
amounts paid by Borrower pursuant to Section 2.9(a) hereof in connection
with such refunded Loan Taxes, to Borrower; provided, however, that
Borrower agrees to promptly return such refund to Lender if it receives
notice from Lender that it is required to repay such refund. Nothing
contained herein shall be construed to require Lender to seek any refund
and Lender shall have no obligation to Borrower to do so.
(e) All amounts payable under this Section 2.9 shall constitute
additional interest hereunder and shall be secured by the Mortgage and the
other Loan Documents. The provisions of this Section 2.9 shall survive any
payment or prepayment of the Loan and any foreclosure or satisfaction of
the Mortgage.
(f) Any reference under this Section 2.9 to "Lender" shall be deemed
to include any Participant and any Assignees.
2.10 Servicing. The Loan shall be serviced by an insured financial servicer
<PAGE>
selected by Lender in its sole discretion (the "Servicer"). Lender may change
the Servicer from time to time without the consent of Borrower, on notice to
Borrower. Borrower expressly acknowledges and agrees that the Servicer's fees
for servicing the Loan (the "Servicing Fee"), which shall in no event exceed one
eighth of one percent (.125%) per annum on the Outstanding Principal Balance,
shall be payable by Borrower and shall constitute a portion of the Obligations.
2.11 Loan Term Reduction. Borrower shall have the right, to be exercised by
Borrower delivering written notice to Lender on or before March 31, 1999, to
reduce the term of the this Loan to three (3) years (the "Loan Term Reduction").
If Borrower elects to make the Loan Term Reduction, and notwithstanding any
other term herein or in the other Loan Documents to the contrary, the following
terms shall apply and shall supercede all such contrary terms: (a) the Interest
Rate Spread shall be two hundred fifty (250) basis points; (b) the Scheduled
Maturity Date shall be November 11, 2001; (c) the Lock Out Date shall be
November 11, 1999; and (d) the Yield Maintenance Termination Date shall be
November 11, 2000.
Section 3
CERTAIN REPRESENTATIONS AND WARRANTIES OF BORROWER
As an inducement to Lender to enter into this Agreement and to make the
Loan, Borrower hereby represents and warrants as follows, which representations
and warranties shall be true and correct as of the date hereof and which shall
survive the Closing Date hereunder and shall remain true and correct until all
of the Obligations are repaid in full:
3.1 Borrower Organization. Borrower is a duly formed limited liability
company under the laws of the State of Delaware, validly existing and in good
standing under the laws of the State of Delaware, and has full power and
authority to execute and deliver to Lender this Agreement and all other Loan
Documents to which it is a party, and to own and operate the Premises and
perform the obligations and carry out the duties imposed upon Borrower by this
Agreement and the other Loan Documents. All Loan Documents to be executed by
Borrower have been duly authorized, approved, executed and delivered by all
necessary parties and constitute the legal, valid and binding obligations of
Borrower, enforceable against Borrower in accordance with their respective
terms. Borrower is authorized to do business in the State of Hawaii and is not
required by applicable law to be authorized to do business in any other
jurisdiction. The only member in Borrower is Member. The structural chart of
Borrower set forth on Schedule F annexed hereto is true, complete and correct in
all respects. No Person other than those Persons shown on Schedule F annexed
hereto has any Ownership Interest in, or right to control, directly or
indirectly, Borrower.
3.2 Borrower Address. Borrower's principal place of business is at the
address first set forth above, and shall not be changed during the Term without
giving Lender at least thirty (30) days' prior notice thereof. Borrower uses no
trade name, and has not and will not do any business under any name other than
its actual name set forth herein.
3.3 Borrower's Organizational Documents. A true and complete copy of
Borrower's Organizational Documents have been furnished to Lender. Borrower's
Organiza-tional Documents constitute the entire agreement among the members in
Borrower and are binding upon and enforceable against all of such members in
accordance with their respective terms. There are no other agreements, oral or
<PAGE>
written, among any of the members in Borrower relating to Borrower. No party is
in default of its obligations under Borrower's Organizational Documents and no
condition exists which, with the giving of notice and/or the passage of time,
would constitute a default under Borrower's Organizational Documents.
3.4 Member's Organizational Documents. A true and complete copy of Member's
Organizational Documents have been furnished to Lender. Member's Organizational
Docu-ments constitute the entire agreement relating to Member among the members
in Member and are binding upon and enforceable against all of such members in
accordance with their respective terms. No party is in default of its
obligations under Member's Organizational Documents and no condition exists
which, with the giving of notice and/or the passage of time, would constitute a
default under Member's Organizational Documents.
3.5 Hotel Uses. The Premises consists solely of a hotel and related
operations and is used for no other purpose.
3.6 No Condemnation. To the Borrower's knowledge, other than the obligation
to convey the "Parking Parcels" (as defined in and pursuant to the Transfer
Agreement) to the County of Maui, there does not exist any actual, proposed or
threatened exercise of the power of eminent domain or other taking by any
governmental or quasi-governmental body or agency, of all or any portion of the
Premises, or any interest therein, or any right of access thereto.
3.7 No Casualty. To the Borrower's knowledge, the Improvements have
suffered no material casualty or damage which has not been fully repaired and
the cost thereof fully paid.
3.8 Purchase Options. To the Borrower's knowledge, other than the
obligation to convey the Parking Parcels to the County of Maui, neither the
Premises nor any part thereof are subject to any purchase options or other
similar rights in favor of third parties.
3.9 Litigation. To the Borrower's knowledge, except as set forth in
Schedule E attached hereto, there are no actions, suits, proceedings,
arbitrations, tenant disputes, labor disputes or governmental investigations
pending or threatened against or affecting Borrower or the Premises, which, if
successful, could have a Material Adverse Effect. Neither Borrower nor Member is
operating under, or is subject to, any order, writ, injunction, decree or demand
of any court or any Governmental Authority. No actions, suits, proceedings or
arbitrations are pending or, to the Borrower's knowledge, threatened against
Borrower or Member which involve claims, damages or sums of money not covered
(including all applicable deductibles) by insurance.
3.10 No Conflict with Law or Agreements. To the Borrower's knowledge, the
execution and delivery of this Agreement and the other Loan Documents, and the
performance and consummation of the transactions contemplated hereby and
thereby, on the part of Borrower, and fulfillment of the terms of the Loan
Documents by Borrower, (a) do not and will not conflict with, violate, or
constitute a default (or a condition or event which, after notice or lapse of
time or both, would constitute such a default) under any provision of any
Organizational Document or any contractual obligation of Borrower, or any Legal
Requirement or any court decree or order applicable to the Premises, Borrower,
and (b) will not result in, or require, the creation or imposition of any lien
or encumbrance on, or conveyance of, any of Borrower's properties pursuant to
any contractual obligation, and (c) do not require the consent or approval of
any Governmental Authority or other Person, except for consents and approvals
<PAGE>
already obtained.
3.11 Personal Property. To the Borrower's knowledge, all equipment and
other personal property necessary for (or otherwise actually used in connection
with) the proper and efficient operation and maintenance of the Premises, the
actual and contemplated uses of the Premises and/or Borrower's compliance with
its obligations under the Leases, are owned or leased by Borrower and constitute
part of the Premises subject to the Mortgage and located thereat, other than (a)
any such equipment which is owned by a utility company, or (b) any such
equipment and personal property which is owned by tenants of the Premises and
utilized solely by such tenant.
3.12 Leases.
(a) Borrower has not entered into any Lease which continues in
existence, and is not bound by any such Lease, other than the Approved
Leases.
(b) Rent has not been collected by Borrower under any of the Leases
more than one (1) month in advance of the due date. Except as disclosed on
the Rent Roll, the term of each Lease has commenced and the tenant has
commenced the full payment of rent under such Lease without the tenant
thereunder being entitled to any abatement thereof. To the Borrower's
knowledge, and except as disclosed on the Rent Roll, (i) the landlord is
not required to perform any tenant work or pay any work allowances under
any Lease, (ii) all security and other escrow deposits made under any Lease
are being, and have been held, in accordance with all Legal Requirements
and the terms of such Lease, and (iii) no tenant under a Lease has any
right of expansion, extension, cancellation or any other option pursuant to
such Leases, and no tenant has any right of set off or reduction against
rent.
(c) To the Borrower's knowledge, each of the Leases is in full force
and effect and there are no monetary or other material defaults by Borrower
thereunder, and, except as set forth on the Rent Roll, there are no
monetary or other material defaults by any tenant thereunder. None of
Borrower, and to the Borrower's knowledge, Manager or any other Person
acting on Borrower's or Manager's behalf, has given or received any notice
of default under any of the Leases that remains uncured or in dispute, and
Borrower is not intending to deliver such a notice of default within the
thirty (30) days following the date hereof.
(d) To the Borrower's knowledge, the Rent Roll for the Premises and
the list of security deposits made by tenants at the Premises which have
not been applied (including accrued interest thereon) delivered to Lender
are true, correct and complete in all material respects.
(e) No tenant under any Lease (or any sublease) is an Affiliate of
Borrower, except as may be disclosed otherwise on Schedule C annexed
hereto.
(f) There are no brokerage fees or commissions due and payable in
connection with the leasing of space at the Premises, except as has been
disclosed to Lender in the Leases, the Rent Roll or otherwise in writing,
and no such fees or commissions will become due and payable in the future
in connection with the Leases, including by reason of any extension of such
Lease or expansion of the space leased thereunder, except as has previously
<PAGE>
been disclosed to Lender in the Leases, the Rent Roll or otherwise in
writing.
3.13 Environmental. To the Borrower's knowledge, except as may be actually
disclosed in the Environmental Report or otherwise disclosed to Lender in
writing,
(a) no Hazardous Substances are currently located, stored or used at
the Premises, except with respect to such Hazardous Substances which are
(i) customarily located, stored or used in hotels similar to the Premises,
or (ii) unique and necessary to a tenant's business located in the
Premises, provided that such Hazardous Substances described in clause
(a)(i) or (a)(ii) are at all times stored, located and used in compliance
with all Environmental Laws;
(b) no Hazardous Substances have been discharged, released or emitted,
upon or from the Premises into the environment, which would subject the
Borrower of the Premises to any damages, penalties or liabilities under any
applicable Environmental Laws;
(c) the Premises have not ever been used as or for a mine, a landfill,
a dump or other disposal facility, or a gasoline service station;
(d) no underground storage tank is now located on or in the Premises
or, if previously located therein, each such tank has been removed
therefrom in compliance with all applicable Environmental Laws and any
clean-up of the surrounding soil in connection therewith has been
completed;
(e) no asbestos, ACM, materials containing urea-formaldehyde, or
transformers, capacitors, ballasts or other equipment that contain PCBs are
located about the Premises;
(f) the Premises have never been used by Borrower, as a permanent or
temporary treatment, storage or disposal site for any Hazardous Substance;
(g) (i) no notice of any violation or any alleged violation of any
Environmental Law has been issued or given by any Governmental Authority,
and (ii) there is not now any investigation or report involving the
Premises by any Governmental Authority or agency which in any way relates
to Hazardous Substances;
(h) no Person has given any notice of or asserted any claim, cause of
action, penalty, cost or demand for payment or compensation, allegedly
resulting from any activity or event described in clauses (a)-(g) above;
(i) there are not now any actions, suits, proceedings or damage
settlements relating in any way to Hazardous Substances in, upon, under,
over or from the Premises;
(j) no notification of a Release (as such term is defined in 42 U.S.C.
ss. 9601(22)) of any Hazardous Substances has been filed by or on behalf of
Borrower through authorized employees or agents and the Premises are not
listed on the United States Environmental Protection Agency's List of
Hazardous Waste Sites or any other list of Hazardous Substance sites
maintained by any federal, state or local Governmental Authority;
<PAGE>
(k) there are no environmental liens on the Premises and no
governmental actions have been taken or are in process which could subject
the Premises to such liens; and
(l) Borrower has not transported or arranged for the transportation of
any Hazardous Substances to any location which is listed or proposed for
listing under CERCLA or on any similar state list or which is the subject
of federal, state or local enforcement actions or other.
3.14 Financial Statements. All financial statements of Borrower heretofore
delivered to Lender in connection with the Loan are true and correct in all
material respects and fairly present the financial condition of the subjects
thereof as of the respective dates thereof, and no material adverse change has
occurred in the financial condition reflected therein, or the operations or
business of, such Persons since the respective dates of the most recent
financial statements delivered to Lender. The financial statements heretofore
delivered have been prepared in accordance with the procedures and accounting
principles and standards required by Section 4.14 hereof.
3.15 No Insolvency. Borrower is not Insolvent and will not be rendered
Insolvent by the execution of this Agreement, the Note or any other Loan
Documents, or by the consummation of the transactions contemplated hereby or
thereby.
3.16 Fraudulent Conveyance. Borrower (a) has not entered into the
transactions contemplated by this Agreement or any other Loan Document with the
actual intent to hinder, delay, or defraud any creditor, and (b) has received
reasonably equivalent value in exchange for its obligations under the Note, this
Agreement and the other Loan Documents. Giving effect to the transactions
contemplated by the Loan Documents, the fair salable value of Borrower's assets
exceeds, and will, immediately following the execution and delivery of the Loan
Documents and the advance of the Loan proceeds thereunder, exceed, Borrower's
total probable liabilities, including, without limitation, the maximum amount of
its subordinated, unliquidated, disputed and/or contingent liabilities.
Borrower's assets do not, and, immediately following the execution and delivery
of the Loan Documents and the advance of the Loan proceeds thereunder, will not,
constitute unreasonably small capital to carry out its business as conducted or
as proposed to be conducted. Borrower does not intend to, and does not believe
that it will, incur debts and liabilities (including, without limitation,
contingent liabilities and other commitments) beyond its ability to pay such
debts and liabilities as they mature (taking into account the timing and amounts
to be payable on or in respect of obligations of Borrower).
3.17 Broker. No broker or consultant has been retained by Borrower or any
Affiliate of Borrower in connection with the Loan or the Loan Documents.
Borrower will indemnify, defend and hold the Indemnified Parties harmless from
and against all loss, cost, liability and expense arising from the claims of all
brokers and consultants relating to the Loan and/or the Premises with whom
Borrower, any Affiliate of Borrower or any employee or agent of Borrower has
dealt, including, without limitation, sales, mortgage or leasing brokers or
consultants.
3.18 Fiscal Year. Each fiscal year of Borrower commences on January 1.
3.19 No Other Financing. Other than the Mezzanine Indebtedness, Borrower
has not borrowed any funds which have not heretofore been repaid in full, except
for the Loan.
<PAGE>
3.20 ERISA.
(a) To the Borrower's knowledge, the execution, delivery and
performance of this Agreement, the Mortgage and the other Loan Documents do
not constitute a Prohibited Transaction, assuming solely for this purpose
that Lender is a party in interest as defined in Section 3(14) of ERISA
("Party In Interest") or a disqualified person as defined in Section
4975(e)(2) of the Code ("Disqualified Person") with respect to an employee
benefit plan, if any, which has directly invested in Borrower.
(b) To the Borrower's knowledge, (i) Borrower has made, and shall
continue to make, all required contributions to all employee benefit plans,
if any, within the time periods required by the applicable provisions of
ERISA and any other federal or state law, and Borrower has no knowledge of
any material liability which has been incurred by Borrower which remains
unsatisfied for any taxes or penalties with respect to any employee benefit
plan or any multi-employer plan, and (ii) each such plan has been
administered in compliance with its terms and the applicable provisions of
ERISA and any other federal or state law.
3.21 FIRPTA. Borrower is not a "foreign person" within the meaning of
Sections 1445 or 7701 of the Code.
3.22 PUHCA. Borrower is not a "holding company" or a "subsidiary company"
of a "holding company" or an "affiliate" of either a "holding company" or a
"subsidiary company", all as defined in the Public Utility Holding Company Act
of 1935, as amended.
3.23 No Margin Stock. None of the proceeds of the Loan will be used by
Borrower for the purpose of purchasing or carrying "margin stock" within the
meaning of Regulation G, T, U or X issued by the Board of Governors of the
Federal Reserve System, as at any time amended, and Borrower agrees to execute
all instruments which may be necessary from time to time, if any, to comply with
all the requirements of Regulation U of the Federal Reserve System, as at any
time amended.
3.24 Investment Company Act. Borrower is not (a) an "investment company" or
a company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or (b) subject to any other United
States federal or state law or regulation which purports to restrict or regulate
its ability to borrow money.
3.25 Taxes. Borrower has filed all federal, state and local tax returns
required to be filed prior to the date hereof and has paid all taxes, charges
and assessments shown to be due from Borrower on such tax returns. All Taxes due
and owing in respect of, and affecting, the Premises have been paid. There are
no pending, or to Borrower's best knowledge, proposed special or other
assessments for public improvements or otherwise affecting the Premises.
3.26 Full and Accurate Disclosure. To the Borrower's knowledge, no
statement of fact made by Borrower in this Agreement or in any of the other Loan
Documents contains any untrue statement of a material fact or omits to state any
material fact necessary to make statements contained herein or therein not
misleading. To the Borrower's knowledge, there is no material fact which has not
been disclosed to Lender which adversely affects, nor as far as Borrower can
foresee, might adversely affect, the Premises or the business, operations or
<PAGE>
condition (financial or otherwise) of Borrower, other than with regard to market
risk inherent in projecting future operations.
3.27 Contracts.
(a) Borrower has not entered into, and is not bound by, any material
Contract which continues in existence, except the Approved Contracts.
(b) To the Borrower's knowledge, each of the Contracts is in full
force and effect, there are no monetary or other material defaults by
Borrower thereunder and, there are no monetary or other material defaults
thereunder by any other party thereto. None of Borrower, or to the
Borrower's knowledge, Manager or any other Person acting on Borrower's or
Manager's behalf, has given or received any notice of default under any of
the Contracts that remains uncured or in dispute.
(c) Borrower has delivered true, correct and complete copies of the
Contracts in Borrower's possession (including all amendments and
supplements thereto) to Lender.
(d) All fees and other compensation for services previously performed
under the Management Agreement have been paid in full.
Section 4
CERTAIN COVENANTS OF BORROWER
Borrower hereby covenants and agrees with Lender as follows:
4.1 Payment and Performance of Obligations. Borrower shall pay and
otherwise perform the Obligations in accordance with the terms of the Loan
Documents.
4.2 Transfers.
(a) Other than in connection with an assumption of the Loan when and
as provided in Section 9.3 hereof or in connection with the Mezzanine
Indebtedness, Borrower will not, directly or indirectly, sell, assign,
convey, pledge, hypothecate, encumber or otherwise transfer (each of the
foregoing constituting a "Transfer") the Premises or any part thereof, or
any interest therein, or suffer, consent to or permit the foregoing,
without, in each instance, the prior written consent of Lender. Borrower
will not permit any owner (directly or indirectly) of a legal or beneficial
interest in Borrower (including, without limitation, any owner, (directly
or indirectly) of a legal or beneficial ownership interest in Member) to
Transfer such interest, whether by transfer of stock, assignment of
partnership interest or other transfer of legal or beneficial interest in
Borrower or in any direct or indirect owner thereof, or otherwise permit
any new or additional legal or beneficial ownership interests in Borrower
or any direct or indirect owner to be issued, including, without
limitation, by admission of new managing members or general partners,
without, in each instance, the prior written consent of Lender.
(b) To the extent that Lender elects to consent to any Transfer as to
which its consent is required hereunder, Lender shall be entitled to
condition its consent on such matters as Lender may elect, in its sole
discretion, including, without limitation, execution of instruments of
<PAGE>
assignment and assumption with respect to the Loan Documents and the
Collateral, delivery of Officer's Certificates and affidavits and
indemnities, including an affidavit and indemnification regarding Code
Sections 1445 and 7701, agreements restricting actions which may or may not
be taken by any transferee or its owners or restrictions in any such
Person's Organizational Documents with respect thereto, additional or
replacement security for the Loan, restrictions as to the use of any
consideration paid for such Transfer, and opinions, including opinions
regarding the assumptions of obligations hereunder, substantive
consolidation and such other matters as Lender may request. Within ten (10)
days after the closing of any Transfer, whether or not such Transfer
required Lender's consent, if (i) the Premises or any part thereof or any
interest therein, or (ii) any direct or indirect ownership interests in
Borrower, is transferred, Borrower will provide Lender with a copy of the
deed or other instrument of Transfer to the transferee. Borrower will
promptly after request therefor provide Lender with such other information
and documentation with respect to such Transfer as Lender shall reasonably
request, including, without limitation, information as to ownership of such
transferee.
(c) Upon the occurrence of any Transfer, the provisions of this
Section 4.2 shall continue to apply to the transferee as if it were the
transferor hereunder, and any consent by Lender permitting a transaction
otherwise prohibited under this Section 4.2, or any right of Borrower or
any other Person to Transfer without such consent, shall not constitute a
consent to or waiver of any right, remedy or power of Lender to withhold
its consent on a subsequent occasion to a transaction not otherwise
permitted by the provisions of this Section 4.2. Notwithstanding the giving
of any consent hereunder by Lender, Borrower shall not engage in any
Prohibited Transaction.
(d) Notwithstanding the provisions of this Section 4.2, "Obsolete
Collateral" (as such term is defined in the Mortgage) may be sold or
otherwise disposed of, provided, however, that either (i) such Obsolete
Collateral has been or is contemporaneously being replaced by Collateral
(as such term is defined in the Mortgage) of at least equal value and
utility which is subject to the Lien of the Mortgage with the same priority
as with respect to the Obsolete Collateral, or (ii) such Obsolete
Collateral may be removed without adversely affecting the maintenance,
safety and operations at the Premises.
4.3 Liens. Other than in connection with the Mezzanine Indebtedness,
Borrower shall not create, suffer or permit to exist any mortgage, pledge, lien,
security interest (including, without limitation, a purchase money security
interest), encumbrance, charge, attachment, levy, distraint or other judicial
process (collectively, "Liens") on, of or against, or otherwise affecting, all
or any portion of the Premises (including, without limitation, fixtures and
other personal property), or any other property of Borrower (whether tangible or
intangible and now owned or hereafter acquired) in favor of any Person other
than Lender, without the prior written consent of Lender (which consent may be
withheld in Lender's sole but reasonable discretion) in each instance, other
than the Permitted Encumbrances.
4.4 Indebtedness.
(a) Borrower shall not without Lender's prior written consent, create,
incur or assume any Indebtedness, except for (i) the Loan and the Mezzanine
<PAGE>
Indebtedness, (ii) Trade Payables in connection with the operation of the
Premises payable within ninety (90) days, which shall in no event exceed at
any one time Five Hundred Thousand Dollars ($500,000) (or such greater sum
as shall be included in any Approved Budget), (iii) Indebtedness evidenced
by capital lease agreements which are secured solely by the assets financed
thereby, but in no event shall all of such capital leases, in the
aggregate, exceed at any time Two Million Dollars ($2,000,000), and (iv)
Indebtedness relating to the Borrower's obligation to repay Membership
Deposits that are included within the definition of Receipts. Each month,
together with the other financial statements required to be furnished
hereunder, Borrower shall furnish Lender a Certification detailing the
Indebtedness then outstanding, including the number of days (in increments
of 30 days) that each Trade Payable of Borrower has been outstanding.
Borrower shall not create, incur or assume any other Indebtedness, if doing
so would cause Borrower to be in violation of Section 8.1(h) hereof, or any
other provision of this Agreement or the other Loan Documents applicable
thereto.
(b) Notwithstanding that any Trade Payables incurred with respect to
the Premises are otherwise permitted hereunder, Borrower shall (subject to
the terms of the next sentence) pay any portion of such Trade Payables
which becomes due and payable within sixty (60) days following the date on
which each such amount is due and payable. Except with respect to the Loan
and the Mezzanine Indebtedness, nothing contained in this Section 4.4 shall
be deemed to require Borrower to pay any amount, so long as Borrower is in
good faith, and by proper legal proceedings, diligently contesting the
validity, amount or application thereof, provided, however, that in each
case, at the time of the commencement of any such action or proceeding, and
during the pendency of such action or proceeding (i) adequate reserves with
respect thereto are maintained on the books of Borrower in accordance with
generally accepted accounting procedures (as determined by the Approved
Accountant), (ii) such contest operates to suspend collection or
enforcement, as the case may be, of the contested amount and such contest
is maintained and prosecuted continuously and with diligence, and (iii)
Borrower shall deliver to Lender cash in an amount equal to one hundred
twenty-five percent (125%) of the amounts being contested which exceed One
Hundred Thousand Dollars ($100,000) in the aggregate and any estimated
additional interest, charge or penalty arising from such contest. Any cash
so delivered shall constitute additional security for the Loan. Any such
cash shall be held and invested in the same manner and subject to the same
general terms as amounts deposited in the Cash Collateral Account under the
Cash Management Agreement and, upon the occurrence of an Event of Default,
Lender may apply such monies in the same manner as other monies held in the
Cash Collateral Account. Borrower shall execute such instruments as Lender
shall require to evidence Lender's perfected first priority security
interest therein and to effectuate the provisions hereof. If, prior to the
occurrence of an Event of Default, Borrower shall provide evidence
satisfactory to Lender, in its reasonable judgment, that Borrower has paid
the disputed amount, or otherwise settled the same and paid any amount to
be paid under such settlement, or that Borrower has received a final
unappealable judgment in its favor that it need not pay any disputed
amount, together with an Officer's Certificate confirming the foregoing,
then Lender shall return any cash deposited with Lender with respect to
such disputed amount. If Borrower ceases to contest continuously and with
due diligence any contest described above, or fails to provide Lender with
evidence satisfactory to Lender that it is doing so within ten (10) days
after Lender's request, or if there shall be a final judgment against
<PAGE>
Borrower with respect thereto, then Lender may apply all or any portion of
the cash to pay such disputed amount and Lender shall have no liability to
Borrower for any determination made by Lender, in good faith, that it is
entitled to do so or as to the amount to then be paid with respect to such
disputed amount, whether or not that determination is found to be accurate.
4.5 Compliance with Restrictive Covenants, Etc.
(a) Borrower will timely comply in all material respects with the
terms of all Easements, restrictive covenants and all other Permitted
Encumbrances. Borrower shall take such further actions as Lender may
reasonably request from time to time with respect to such Easements,
restrictive covenants or Permitted Encumbrances.
(b) Borrower shall observe and comply with any conditions and
requirements necessary to preserve and extend any and all rights,
privileges, franchises and concessions that are applicable to the Premises,
the use and occupancy thereof, or the business conducted thereat, and will
timely comply in all material respects with all regulations, rules,
ordinances, statutes, orders and decrees of any Governmental Authority or
court applicable to it and/or the Premises or any part thereof.
4.6 Leases.
(a) Except as permitted in this Section 4.6, Borrower will not enter
into, modify, amend, consent to the cancellation or surrender of (except to
the extent such cancellation or surrender is by the tenant thereunder
pursuant to a pre-existing right to do so under a Lease) or terminate any
Lease, whether now existing or hereafter entered into, without the prior
written consent of Lender, which may be granted or withheld in Lender's
sole but reasonable discretion, provided, however, that (i) the tenant
under the Lease in question is not an Affiliate of Borrower, (ii) such
transaction is entered into on arms length terms (without consideration of
any other relationship Borrower or any Affiliate of Borrower may have with
the tenant or any Affiliate of such tenant), and (iii) the fair market
value of the Premises and the ability of Borrower to make all payments
under the Loan Documents is not adversely affected thereby.
(b) Borrower will timely comply with all material terms and conditions
on its part to be performed under each Lease. Borrower shall neither do nor
neglect to do, nor permit to be done, anything which may cause the
termination of any Lease, other than due to the default of the tenant(s)
under such Lease. Borrower shall not collect any rent or other payment
under any Lease more than one month in advance of the due date thereof.
Borrower will use its best efforts to require the performance of all of the
obligations of tenants and other Persons bound by the Leases and to enforce
the Leases, subject, however, to the limitation on termination described in
this Section 4.6.
(c) Borrower may, without Lender's prior written consent, enter into
any Lease which will not be a Major Lease when such Lease comes into
effect, provided that each of the following conditions is satisfied: (i)
the rent and other material business terms of such Lease are on market
terms for similarly situated properties; (ii) such Lease does not contain
any options to purchase or other rights with respect to the ownership of
the Premises; (iii) such Lease does not contain any restrictions on the
landlord's rights to lease remaining portions of the Premises, except that
<PAGE>
such Lease may contain options to lease additional space in the Premises on
then existing market terms; (iv) such Lease does not contain any options
for the tenant thereunder to terminate such Lease, other than in the event
of a material casualty or condemnation or other events on market terms; (v)
such Lease does not contain any extraordinary landlord obligations
(including obligations which an unaffiliated landlord would have difficulty
performing); (vi) such Lease is entered into on the standard form of Lease
which Lender has previously approved, with such changes therein as are
necessitated by the then prevalent market terms or such other non-material
changes thereto as a proposed tenant may request and Borrower is willing to
agree to; (vii) such Lease is entered into on arms length terms, without
consideration of any relationship Borrower or any Affiliate of Borrower may
otherwise have with the tenant thereunder or any Affiliate thereof; and
(ix) the Lease shall contain each of the provisions required by this
Section 4.6.
(d) Borrower may, without Lender's prior written consent, modify or
amend any Lease which is not a Major Lease, provided that either (i) such
modification or amendment is required to be entered into pursuant to the
terms of such Lease, or (ii) each of the following conditions is satisfied:
(A) such amendment or modification is entered into on an arms-length basis
without consideration of any relationship of Borrower or any Affiliate of
Borrower with the tenant thereunder or any Affiliate thereof; (B) such
Lease would not be a Major Lease and would, after such amendment or
modification, satisfy the conditions set forth in clauses (ii), (iii),
(iv), (v), (vi), (vii) and (ix) of Subsection 4.6(c) hereof, to as great an
extent as it did prior to such amendment or modification; (C) to the extent
that any additional space is demised pursuant to such amendment or
modification, with respect thereto, such amendment or modification
satisfies the provisions of this Section 4.6; (D) such amendment or
modification does not reduce the rent paid under the Lease; and (E) such
amendment or modification does not otherwise have a material adverse effect
on the fair market value of the Premises or the Lien of the Mortgage on the
Premises. Borrower may, without the prior written consent of Lender,
terminate any Lease which is not a Major Lease in its good faith exercise
of its remedies under such Lease, or at law or in equity, by reason of a
material monetary default having continued under such Lease for at least
thirty (30) days after notice to the tenant thereof. Without first
obtaining Lender's prior written consent, Borrower shall not consent to any
assignment or subletting of any Lease unless the consent of Borrower may
not be withheld under such circumstances under the terms of the applicable
Lease, except that Borrower may, without Lender's prior written consent,
consent to any assignment or subletting which does not release the
liability of any Person then liable thereunder as tenant, guarantor or
otherwise (1) if such assignment or subletting is of a Lease which is not a
Major Lease, or (2) is for a sublease under a Major Lease, which, if
Borrower had entered into such sublease directly, would not constitute a
Major Lease.
(e) Each Lease executed by Borrower after the date hereof shall
provide for (i) automatic subordination of such Lease to the Liens of the
Mortgage and the Assignment of Leases and Rents, (ii) attornment by the
tenant or licensee thereunder to Lender promptly after the giving by Lender
of a notice to such tenant requiring such attornment, (iii) the tenant or
licensee thereunder to give a notice to Lender of each material default by
the landlord or licensor thereunder, simultaneously with the giving of
notice of such default to such landlord or licensor, (iv) Lender to have
<PAGE>
the right, but not the obligation, to cure any default by the landlord or
licensor thereunder after the expiration of the landlord's or licensor's
cure period, if any, and (v) execution and delivery (not more than ten (10)
days after a request therefor) of an estoppel certificate satisfactory to
Lender. Without limiting the foregoing, each Lease shall also provide that
Lender (or any other successor to the landlord or licensor acquiring the
Premises by foreclosure, deed in lieu of foreclosure or otherwise in
connection with the enforcement of the Loan Documents) shall not be: (A)
liable for any previous act or omission of the landlord or licensor under
such Lease; (B) subject to any credit, demand, claim, counterclaim, offset
or defense which theretofore accrued to such tenant or licensee against the
landlord or licensor; (C) unless consented to by Lender or permitted
without Lender's consent under this Section 4.6, bound by any previous
modification of such Lease, or by any previous prepayment of more than one
month's fixed rent or additional rent; (D) bound by any covenant or
obligation of the landlord or licensor to perform, undertake or complete
any work in the leased space of the Premises or to prepare it for
occupancy; (E) required to account for any security deposit of the tenant
or licensee other than any security deposit actually delivered to Lender by
Borrower; (F) bound by any obligation to make any payment to such tenant or
licensee or grant any credits, except for services, repairs, maintenance
and restoration provided for under the Lease to be performed by landlord or
licensor after the date of such attornment; and (G) responsible for any
monies owing by the landlord or licensor to such tenant or licensee. Lender
shall, upon request, execute and exchange with any tenant under a Major
Lease or any other Lease of office space at the Premises demising one full
floor or more of office space, a non-disturbance, subordination and
attornment agreement in such form as Lender shall approve in its sole and
absolute discretion, provided, however, that Borrower shall deliver with
such request an Officer's Certificate stating that such Lease was entered
into in accordance with the terms of this Section 4.6 and any other
provisions of the Loan Documents applicable thereto. All reasonable out of
pocket costs and expenses of Lender (including, without limitation,
attorneys' fees and disbursements) in connection with Lender's review of
any Lease and the negotiation, preparation, execution and delivery of any
non-disturbance agreement shall be paid by Borrower within five (5) days
after request therefor by Lender. Prior to seeking Lender's consent to any
Lease, Borrower shall deliver to Lender a copy of such Lease, blacklined to
show the changes from the standard form of Lease previously approved by
Lender.
(f) All security deposits of tenants, whether held in cash or any
other form, shall not be commingled with any other funds of Borrower and,
if cash, shall be deposited by Borrower at such commercial or savings bank
or banks as may be reasonably satisfactory to Lender. Any bond or other
instrument which Borrower is permitted to hold in lieu of cash security
deposits under any applicable legal requirements (i) shall be maintained in
full force and effect in the full amount of such deposits unless replaced
by cash deposits as herein above described, (ii) shall be issued by an
institution reasonably satisfactory to Lender, (iii) shall, if permitted
pursuant to any legal requirements, name Lender as payee or mortgagee
thereunder (or at Lender's option, be fully assignable to Lender), and (iv)
shall in all respects comply with any applicable Legal Requirements and
otherwise be satisfactory to Lender. Borrower shall, upon request, provide
Lender with evidence satisfactory to Lender of Borrower's compliance with
the foregoing. Following the occurrence and during the continuance of any
Event of Default, upon Lender's demand, Borrower shall turn over to Lender
<PAGE>
the security deposits (and any interest theretofore earned thereon) with
respect to all or any portion of the Premises, to be held by Lender subject
to the terms of the Leases. If Borrower is entitled to retain a security
deposit, then such amount shall be transferred by Borrower into the
Clearing Account.
(g) Notwithstanding anything to the contrary herein contained or
contained in any other Loan Document, Borrower shall have the right to
terminate, amend or modify (i) any existing Leases in connection with the
transfer of the liquor licenses relating to the Premises to the Borrower or
an entity affiliated with the Borrower, and (ii) any Lease with Grand
Wailea Company or any of its affiliates upon a termination of Grand Wailea
Company as the Manager.
4.7 Delivery of Notices. Borrower will promptly, but in no event later than
five (5) days after Borrower becomes aware of any of the following events,
furnish a written notice to Lender (together with the applicable correspondence
and papers relating thereto) specifying the nature and period of existence of
such condition or event and, with respect to events described in clause (a)
below, what action Borrower is taking or proposes to take with respect thereto
(compliance with the provisions of this Section 4.7 shall not be deemed or
construed to constitute a waiver of or consent to any Default or Event of
Default of which Borrower has given Lender notice pursuant to this Section 4.7):
(a) any Default hereunder or under any of the other Loan Documents, or
any Event of Default;
(b) (i) any receipt or delivery by Borrower of a notice of default or
termination, (ii) any proposed action with respect to any default, or (iii)
any failure by any person or entity to perform any material obligation,
maintain any material representation or warranty or satisfy any material
condition, in each instance, (1) in connection with any Lease, the
Management Agreement, any Contract, any Easement, any recorded instrument
or any Permit and (2) if likely to result in a Material Adverse Effect;
(c) the filing of any action, suit or proceeding against or affecting
Borrower or the Premises that, if adversely determined, could singly or
collectively (i) impair the validity or enforceability of this Agreement or
any of the other Loan Documents or otherwise have a Material Adverse
Effect, or (ii) result in a Lien on any portion of the Premises; and/or
(d) any notice received from any Governmental Authority asserting a
violation of any material Legal Requirement and any correspondence to or
from Borrower with respect thereto.
Without limiting the generality of the foregoing, Borrower will
transmit to Lender, immediately upon receipt thereof, any communication
(addressed to Borrower or any Affiliate of Borrower) which relates to
matters which could result in a Material Adverse Effect on the Premises or
the financial condition of Borrower, and will promptly respond fully to any
inquiry of Lender made with respect thereto.
4.8 ERISA. In addition to the prohibitions set forth in Section 4.2 hereof,
and not in limitation thereof, Borrower shall not Transfer or hypothecate its
interest or rights in this Agreement or in the Premises, or attempt to do any of
the foregoing or suffer any of the foregoing, nor shall any Person owning a
direct or indirect interest in Borrower Transfer any of its rights or interest
<PAGE>
(direct or indirect) in Borrower, attempt to do any of the foregoing or suffer
any of the foregoing, nor shall Borrower or any Person owning a direct or
indirect interest in Borrower take, without limitation, any action or fail to
take any action, if, in any such case, doing so would (i) cause the Loan or the
exercise of any of Lender's rights in connection therewith to constitute a
Prohibited Transaction (unless Borrower furnishes a legal opinion reasonably
satisfactory to Lender that the same is exempt from the Prohibited Transaction
provisions of ERISA and the Code or otherwise does not constitute a Prohibited
Transaction), assuming solely for this purpose that Lender is a Party In
Interest or a Disqualified Person with respect to an employee benefit plan, if
any, which has directly or indirectly invested in Borrower or Member, or (ii)
otherwise result in Lender being deemed in violation of any applicable
provisions of ERISA with respect to the Loan. Borrower and Member shall take
such steps as are necessary to assure that each of them (and their respective
shareholders, partners and members) does not commit any act, or fail to commit
any act, the occurrence of which or the failure of which to occur would cause
the Loan to be a Prohibited Transaction.
If the provisions of this Section 4.8 are violated, Borrower agrees, at its
own cost and expense, to take such steps as Lender shall reasonably request to
prevent the occurrence of a Prohibited Transaction or to correct the occurrence
of a Prohibited Transaction. Borrower agrees to indemnify, defend and hold the
Indemnified Parties free and harmless from and against all loss, costs
(including attorney's fees and expenses), taxes, penalties, damages and expenses
any Indemnified Party may suffer by reason of the investigation, defense and
settlement of claims based upon a breach of the foregoing provisions. The
provisions of Section 6.5 hereof shall apply to such indemnification. The
foregoing indemnification shall survive repayment of the Loan.
4.9 Agreements with Affiliates. Borrower shall not enter into any contract,
agreement or other arrangement with any Affiliate of Borrower without Lender's
prior written consent, which consent shall not be unreasonably withheld provided
such contract or agreement provides for market rates which would be charged by
third parties which are not Affiliates in respect of the goods and/or services
provided thereunder. If requested by Lender, such contract or agreement shall
provide Lender the right to terminate it upon Lender's (or its designee's)
acquisition of the Premises through foreclosure, a deed-in-lieu of foreclosure,
Uniform Commercial Code sale or otherwise.
4.10 After Acquired Property. Borrower will grant to Lender a first lien
security interest in and to all equipment and other personal property owned by
Borrower, whether or not used in the construction, maintenance and/or operation
of the Improvements, immediately upon acquisition of same or any part of same.
4.11 Books and Records. Borrower shall keep and maintain at all times at
its principal office complete, true and accurate books of account and records
reflecting the results of its operations. Borrower shall permit Lender, its
agents, consultants and representatives, upon reasonable notice (which may be
given orally or in writing) and at reasonable times, to examine and audit the
books and records of Borrower and make copies thereof, at Borrower's expense.
Borrower shall cause the Manager and its Affiliates to make all records relating
to the Premises available to Lender and shall cause the Manager to cooperate
with any examination, audit or other inquiry (including causing the personnel
responsible for the Premises to be available to respond to inquiries).
4.12 Delivery of Estoppel Certificates. Borrower shall, from time to time,
within thirty (30) days after written request from Lender, furnish to Lender or
<PAGE>
such other party (or parties as may be requested by Lender) a written
certificate setting forth the unpaid principal of and interest due on the Note
and any other sums evidenced or secured by the Mortgage, and/or the other Loan
Documents, stating the date through which interest has been paid, and stating
whether or not any offsets, defenses or counterclaims exist with respect to the
Loan Documents. If requested, such certificate will also attach true and correct
copies of any Loan Documents and state such other information as Lender shall
require. Upon request of Lender, Borrower shall cause Manager within thirty (30)
days after such request to furnish Lender or such other party or parties as
Lender may request, a written certificate certifying as to such matters as
Lender may reasonably request. Borrower shall use all reasonable efforts to
deliver to Lender upon request, which may be made from time to time, tenant
estoppel certificates from each commercial tenant at the Premises in form and
substance reasonably satisfactory to Lender.
4.13 Management, Etc.
4.13.1 Management.
(a) The Premises are at all times to be managed on Borrower's behalf
in a competent and professional manner appropriate for hotels similar to
the Premises by a prominent professional managing agent ("Manager"). Prior
to engaging such Manager or executing a Management Agreement, such Manager
and Management Agreement shall be subject to approval by Lender in its
reasonable discretion, it being understood that Grand Wailea Company is
hereby approved by Lender as the current Manager for the building and the
agreement in existence on the date hereof with Manager is approved as the
Management Agreement.
(b) Lender hereby pre-approves the entities set forth on Schedule D
hereto as replacement Managers to the Grand Wailea Company (the
"Pre-approved Replacement Managers"), and hereby agrees that Borrower shall
have the one time right to terminate the Grand Wailea Company as Manager
and replace it with any Pre-Approved Replacement Manager without the need
to obtain any consent from Lender. Notwithstanding the foregoing (i) any
new Manager, including a Pre-approved Replacement Manager, shall be
required to execute an assignment and subordination agreement in the form
attached hereto as Schedule G, and (ii) upon the appointment of a
Pre-Approved Replacement Manager, any successor Managers there-after shall
be subject to the prior approval of the Lender, which shall not be
unrea-son-ably with-held.
(c) Borrower represents it has delivered to Lender a true, correct and
complete copy of the Management Agreement, which Management Agreement is
hereby approved by Lender, subject to the terms of the assignment and
subordination between Lender, Borrower and Manager executed in connection
with the Original Loan (the "Manager Assignment and Subordination");
provided, however, that the terms and conditions of any subsequent
Management Agreement between Manager and Borrower, or any amendment or
modification of any Management Agreement between Manager and Borrower, and
any compensation of Manager with respect to its services performed at or in
connection with the Premises (other than an extension of the existing
Management Agreement for compensation which is no greater, a modification
of the existing Management Agreement (including with respect to
compensation to be paid to the Manager or rent to be paid by the Manager)
in connection with the transfer of the liquor licenses relating to the
Premises to the Borrower or an entity affiliated with the Borrower, and on
<PAGE>
terms and conditions no less favorable to Borrower, than those contained in
the existing Management Agreement) are subject to approval by Lender in its
sole and absolute discretion.
4.13.2 Management Termination. In the event that there shall have
occurred and be continuing an Event of Default, then, upon Lender's
request, Borrower shall be required to promptly replace the present Manager
with a managing agent approved by Lender in its sole discretion. 4.14
Financial Statements; Audit Rights.
4.14.1 Statements to be Delivered. Until the Loan is repaid in full,
Borrower shall cause the following financial statements and documentation
to be delivered at the time and in the form and manner referenced below:
(a) audited statements of financial position (balance sheet) of
Borrower as of the close of each fiscal year of Borrower during the Term,
and of Receipts, Expenses and retained earnings, changes in financial
position and cash flows for such fiscal year, which statements shall be
duly certified by the Designated Officer to fairly represent the financial
condition of Borrower as of the date thereof and to have been prepared in
accordance with generally accepted accounting principles and accompanied by
an opinion of the Approved Accountant (which opinion shall be unqualified
and shall not contain any "statement of emphasis") to the effect that such
financial statements present fairly, in all material respects, the
financial condition of Borrower as of the end of the fiscal year being
reported on and that the results of the operations and cash flows for said
year are in conformity with generally accepted accounting principles,
consistently applied, and that the examination of the Approved Accountant
in connection with such financial statements has been conducted in
accordance with generally accepted auditing standards and included such
tests of the accounting records and such other auditing procedures as the
Approved Accountant deemed necessary in the circumstances;
(b) an unaudited quarterly balance sheet of Borrower, a statement of
profits and losses and a calculation of net cash flows for the applicable
quarter, including Receipts and Expenses and occupancy and daily rate
statistics, such quarterly financial statements to be certified by a
Designated Officer to fairly represent the financial condition of Borrower
as of the date thereof and to have been prepared in accordance with
generally accepted accounting principles;
(c) a monthly operating statement showing all Receipts, Expenses and
net cash flow for the applicable calendar month, year-to-date results and
variances from the same month in the prior calendar year and from the
Approved Budget, and such other matters as Lender shall reasonably require,
which monthly operating statements shall be certified by a Designated
Officer to be true, correct and complete in all material respects and shall
be prepared on a cash basis;
(d) not later than each December 1 during the Term, Borrower shall
submit to Lender a detailed budget for the Premises covering the calendar
year commencing on the following January 1, each of which budgets shall be
subject to Lender's approval (provided that Borrower shall have the option
to submit to Lender a revised budget not later than June 30 of each year
during the Term to adjust such budget on the basis of the actual results of
Borrower to such point in such calendar year)(each such budget when so
approved, is referred to as an "Approved Budget") until Lender shall
<PAGE>
approve a new budget, the Approved Budget from the prior year shall remain
in effect;
(e) the annual Form 1065 (with accompanying schedules K-1) (or any
substitute therefor) prepared by Borrower;
(f) a schedule of all accounts payable at the end of each calendar
quarter, certified by a Designated Officer to be true, correct and complete
in all material respects; and
(g) such other reports and information which Lender reasonably
requires certified by a Designated Officer to be true, correct and complete
in all material respects.
4.14.2 Time for Delivery. The statements referred to in paragraph (a)
of Section 4.14.1 hereof shall be delivered to Lender within one hundred
twenty (120) days after the last day of each fiscal year of Borrower. The
statements referred to in paragraphs (b) and (f) of Section 4.14.1 hereof
shall be delivered to Lender within sixty (60) days after the last day of
each calendar quarter. The reports referred to in paragraph (c) of Section
4.14.1 hereof shall be delivered to Lender within twenty five (25) days
after the last day of each calendar month. Notwithstanding anything to the
contrary, the information required under paragraph (g) of Section 4.14.1
hereof shall be delivered to Lender simultaneously with delivery to the
partners/members of Borrower but in no event later than one hundred twenty
(120) days after the last day of each fiscal year of Borrower. All
Financial Statements shall be in form and substance satisfactory to Lender.
4.15 Maintenance of Non-Taxable Status. Borrower will maintain its status
of being taxed as a partnership for the purposes of federal, state and local
income taxes.
4.16 Lender's Attorneys' Fees and Expenses. Borrower shall appear in and
defend any action or proceeding purporting to affect the security of the
Mortgage or the security interests granted under any of the other Loan
Documents, or the rights and powers of Lender under any of the Loan Documents,
and Borrower (in addition to Lender's attorneys' fees and expenses to be paid by
Borrower otherwise pursuant to this Agreement or the other Loan Documents) shall
pay all of Lender's attorneys' fees and expenses in connection with the
enforcement of this Agreement and the other Loan Documents and the collection of
all amounts payable hereunder and thereunder. In case of any Default under this
Agreement or any of the other Loan Documents, or if any action or proceeding is
commenced in which it becomes necessary to defend or uphold the Lien or priority
of the Mortgage or the other Loan Documents, or which adversely affects Lender's
interests in the Premises or any part thereof, including, but not limited to,
eminent domain, or proceedings of any nature affecting the Premises or involving
the bankruptcy, insolvency, arrangement, reorganization or other form of debtor
relief with respect to Borrower or any other Significant Party or relating to a
decedent, then Lender may, but without obligation to do so, and without
releasing Borrower or any other Significant Party from any obligation hereunder
or under the other Loan Documents, make such appearances, disburse such
reasonable sums and take such action as Lender deems necessary or appropriate to
protect Lender's interest in the Premises. All costs incurred by Lender,
including attorneys' fees and disbursements, in taking any action described
above shall be paid by Borrower within thirty (30) days of written demand,
together with interest thereon at the Default Rate from the date paid by Lender
through the date of repayment by Borrower if not paid within such thirty (30)
<PAGE>
day period, and the same shall be deemed to constitute protective advances
evidenced by the Note and secured by the Mortgage and the other Loan Documents.
In addition to, and without limiting the generality of, the foregoing, if, at
any time hereafter, Lender employs counsel to protect, collect, lease, sell,
take possession of, foreclose upon or liquidate all or any part of the Premises,
or to attempt to enforce any security interest or Lien in all or on any part of
the Premises, or to enforce any rights of Lender or any of Borrower's
obligations hereunder or under any of the other Loan Documents, or any
obligations of any other Person which may be obligated to Lender by virtue of
this Agreement or any other agreement, instrument or document heretofore or
hereafter delivered to Lender by or for the benefit of Borrower, then, in any
such event, all of the attorneys' fees and expenses arising from such services,
and all expenses, costs and charges relating thereto, shall be paid by Borrower
within thirty (30) days of demand, together with interest thereon at the Default
Rate from the date paid by Lender through the date of repayment by Borrower if
not paid within such thirty (30) day period, and the same shall be deemed to
constitute protective advances evidenced by the Note and secured by the Mortgage
and the other Loan Documents.
4.17 Environmental.
(a) Except as may already be located on the Premises and as disclosed
to Lender in the Environmental Report or other written materials delivered
to Lender, Borrower shall not (and it shall not permit any tenant,
subtenant, contractor, agent or manager to) locate, produce, use, store,
treat, transport, incorporate, discharge, emit, release, deposit or dispose
of any Hazardous Substance in, upon, under, at, over or from the Premises,
except that Borrower (and its tenants, subtenants, manager, contractors or
agents) may store, locate and use on the Premises Hazardous Substances
which are (a) customarily located, stored or used in hotels similar to the
Premises, or (b) unique to a tenant's business located in the Premises,
provided that such Hazardous Substances described in clauses (a) or (b)
above are at all times stored, located and used in compliance with all
Environmental Laws. Except as may already be located on the Premises and as
disclosed to Lender in the Environmental Report or other written materials
delivered to Lender, Borrower shall not permit any Hazardous Substances to
be located, produced, used, stored, treated, transported, incorporated,
discharged, emitted, released, deposited, disposed of or to escape in,
upon, under, over or from the Premises in violation of any Environmental
Law, and shall comply with all Environmental Laws which are applicable to
the Premises. Borrower shall not engage in any conduct in connection with
the Premises that may subject Borrower to Environmental Costs or contribute
to or aggravate a release of Hazardous Substances. In addition to the
foregoing restrictions, Borrower agrees that no asbestos, ACM, materials
containing urea-formaldehyde, or transformers, capacitors, ballasts or
other equipment that contain PCBs are, or will at any time be, located
about the Premises.
(b) Borrower shall, promptly within the time permitted by
Environmental Laws, initiate and diligently pursue to completion, any and
all remedial action required pursuant to any Environmental Laws in response
to the presence of any Hazardous Substances at, on, under or about, or
emanating from, the Premises, and shall take such remedial action as is
required to minimize any impairment of Lender's Lien on, and security
interest in, the Premises. If Borrower undertakes any remedial action with
respect to any Hazardous Substance about the Premises, Borrower shall
conduct and complete such remedial action in compliance with all applicable
<PAGE>
Environmental Laws. If any Hazardous Substance is removed or caused to be
removed from the Premises by Borrower, the generator number assigned by the
Environmental Protection Agency to such Hazardous Substance shall not be in
the name of Lender, and Borrower shall assume any and all liability for
such removed Hazardous Substance.
(c) Upon becoming aware thereof, Borrower shall give written notice to
Lender of: (i) any proceeding or inquiry by any Governmental Authority with
respect to the presence of any Hazardous Substance on the Premises or the
migration thereof from or to other property; (ii) all claims made or
threatened by any third party against Borrower or the Premises relating to
any loss or injury resulting from any Hazardous Substance; (iii) the
storage, production, release, discharge or disposal of any Hazardous
Substances on the Premises other than in accordance with all applicable
Environmental Laws; and/or (iv) Borrower's discovery of any occurrence or
condition on any real property adjoining or in the vicinity of the Premises
that could cause the Premises or any part thereof to be subject to any
restrictions on the ownership, occupancy, transferability or use of the
Premises under any Environmental Law or to be otherwise subject to any
restrictions on the ownership, occupancy, transferability or use of the
Premises under any Environmental Law.
(d) Borrower shall keep Lender apprised of the status of, and any
material developments in, any governmental investigation relating to
Environmental Matters at or about the Premises, any and all enforcement,
clean-up, removal or other governmental or regulatory actions instituted,
completed or threatened pursuant to any Environmental Law with respect to
the Premises and any other claims, actions or proceedings with respect to
the Premises relating to Environmental Matters. Borrower shall provide
Lender with copies of all communications with all Governmental Authorities
relating to Hazardous Substances Claims. Without Lender's prior written
consent, Borrower shall not enter into any settlement agreement, consent
decree or other compromise with respect to any such governmental
investigation or action, or other claim, action or proceeding relating to
Hazardous Substances which Borrower does not have the funds available to
pay or which may adversely affect Lender's Lien on, or the value of, the
Premises.
(e) The foregoing rights and remedies contained in this Section 4.17
are cumulative with, and in addition to, any rights and remedies Lender may
have against Borrower or any other Significant Party under the other terms
and provisions of this Agreement, under any other Loan Document or under
any Environmental Law, including, without limitation, CERCLA.
4.18 Report Updates. Lender reserves the right at any time during the Term
to conduct or require Borrower to conduct, at Borrower's expense, such
environmental inspections, audits and tests as Lender shall deem reasonably
necessary or advisable from time to time utilizing a company acceptable to
Lender; provided, however, that Borrower shall not be required to pay for such
environmental inspections, audits and tests so long as:
(a) no Event of Default exists under this Agreement or any other Loan
Document;
(b) Lender has reason to believe, in Lender's sole but good faith
judgment, that there has been a release or a threatened release of
Hazardous Substances at the Premises or that Borrower or the Premises is in
<PAGE>
violation of any applicable Environmental Law;
(c) such inspections, audits and tests are not being obtained in
satisfaction of the provisions of Section 6.27 hereof; and
(d) such inspection, audit or test has not been recommended in any
other audit, inspection, test or consultants report previously conducted
with respect to the Premises. In the event that any environmental site
assessment report prepared for the Premises recommends that an operations
and maintenance plan be implemented for any Hazardous Substance, including,
without limitation, asbestos, Borrower shall cause such operations and
maintenance plan to be prepared and implemented at Borrower's expense upon
request of Lender and in accordance with the recommendation.
Lender shall have the right from time to time throughout the Term to
order additional engineering reports with respect to the Premises. Such
additional engineering reports shall be paid for by Borrower in accordance
with Section 6.4 hereof; provided, however, that Borrower shall not be
required to pay for such additional engineering reports unless (i) an Event
of Default has occurred, (ii) any such additional engineering report is
being obtained pursuant to Section 6.27 hereof, (iii) any such additional
engineering report is required by applicable Legal Requirements to be
obtained, or (iv) in Lender's sole but good faith judgment, a material
adverse change in the condition of the Premises has occurred.
Lender shall not be liable for any action or inaction by Borrower with
respect to any remedial or other response activity in connection with any
Hazardous Substance or any repair or replacement recommended in any
engineering report, notwithstanding any review or approval of Borrower's
method of remediation or repair or replacement, as applicable, or any
response by Lender.
4.19 Lender Access to Premises. Borrower will permit Lender and its agents,
consultants or representatives, to enter upon the Premises on reasonable written
notice at reasonable times to inspect the Improvements. Lender or its agents,
consultants or representatives as part of any inspection may take soil, air,
water, building material and other samples, subject to the rights of tenants
under Leases.
4.20 Delivery of Documents Regarding Ownership. Borrower will deliver to
Lender, on demand made therefor by Lender, copies of all documents which
evidence Borrower's title in or to any materials, fixtures or articles
incorporated in the Improvements or subject to the Lien of any of the Loan
Documents.
4.21 Use of Premises. Unless required by applicable law, Borrower shall not
permit changes in the use of any part of the Premises from the use existing on
the date hereof. Borrower shall not initiate or acquiesce in a change in the
plat of subdivision or zoning classification of the Premises without Lender's
prior written consent.
4.22 Insurance. Borrower shall at all times maintain all Insurance Policies
required to be obtained and maintained by Borrower pursuant to the terms of the
Mortgage.
4.23 Contracts. Except as provided in this Section, Borrower shall not
enter into any Contract without the prior written consent of Lender, which
<PAGE>
consent shall not be unreasonably withheld; provided, that Borrower may enter
into contracts without Lender's consent so long as such contracts are (a)
cancelable on thirty (30) days' notice without payment of any termination or
cancellation fee, (b) on market terms, and (c) with a third party which is
unaffiliated with the Borrower.
4.24 Intentionally Omitted.
4.25 Intentionally Omitted.
4.26 Franchise Provisions. Borrower shall obtain the approval of Lender,
which approval shall not be unreasonably withheld or delayed by Lender, before
entering into any license agreement (the "License Agreement") with any Licensor
(hereafter defined), providing for the operation of the Premises. Borrower shall
deliver to Lender any such License Agreement for Lender's review and approval,
which approval shall not be unreasonably withheld, conditioned or delayed.
4.27 Interest Rate Cap Agreement.
4.27.1 Purchase and Maintenance of Interest Rate Cap. Within sixty
(60) days after the date hereof, Borrower will deliver to Lender a fully
executed interest rate cap agreement, in form and substance and with such
financial institution having a claims paying ability by the Rating Agencies
of "A" or higher and shall be otherwise acceptable to Lender in its
reasonable discretion, in a notational amount equal to the Loan Amount,
insuring against the risk that LIBOR shall at any time during the term of
the Loan exceed a per annum rate of eight and one half percent (8.50%) (the
"Interest Rate Cap Agreement"). Borrower shall maintain the Interest Rate
Cap Agreement, or such supplement or replacement thereto as is approved by
Lender in its reasonable discretion, throughout the entire term of the
Loan, and Borrower shall not materially amend, modify or terminate the
Interest Rate Cap Agreement without the prior written consent of Lender.
4.27.2 Transfer or Release of Interest Rate Cap Agreement upon
Permitted Assumption of Loan. In connection with a Sale and assumption of
the Loan as permitted in Section 9.3 hereof, Borrower shall be permitted to
transfer the Interest Rate Cap Agreement to the applicable Buyer. If
Borrower elects not to so transfer the Interest Rate Cap Agreement, so long
as the Buyer obtains a new interest rate cap agreement meeting the
requirements of Section 4.27.1 hereof and pledges such new interest rate
cap agreement to Lender pursuant to a pledge and security agreement in the
form and substance of the Interest Rate Cap Pledge, Lender agrees to
release the Interest Rate Cap Agreement from the lien of the Interest Rate
Cap Pledge.
Section 5
EVENTS OF DEFAULT
5.1 Events of Default; Defaults. The term "Default" as used herein shall
mean any one or more of the events set forth below prior to the expiration of
the applicable notice or grace period, if any. The term "Event of Default",
wherever used in this Agreement, shall mean any one or more of the events set
forth below after the expiration of the applicable notice or grace period, if
any.
5.1.1 Non-Payment. Failure by Borrower to pay: (a) any periodic
<PAGE>
installment of interest or principal when the same shall become due and
payable hereunder or under the Note, in each case, when the same shall
become due and payable; (b) the outstanding principal balance of the Note,
together with the interest accrued thereon and all other sums which may
then be owed by Borrower to Lender, at maturity or upon prepayment of the
Note in full; and (c) any other sums to be paid by Borrower hereunder or
under any other Loan Documents within ten (10) days following the date on
which Lender gives Borrower written notice of such failure.
5.1.2 Affirmative Covenants. Failure by Borrower or any other Person
to duly keep, perform and observe in any material respect any Affirmative
Covenant or agreement in this Agreement, the Note, the Mortgage or any
other Loan Document (unless same constitutes a Default under any other
clause of this Section 5.1 or any other Loan Document, in which case, the
grace or cure period, if any, set forth in such other clause shall govern)
within sixty (60) days after Lender gives Borrower written notice of such
failure; provided, however, that in the event such failure is not
susceptible of cure within such sixty (60) day period, it shall not be an
Event of Default hereunder if such failure is curable, Borrower commences
to cure such failure within such sixty (60) day period, and Borrower
diligently prosecutes such cure to completion.
5.1.3 Negative Covenants. If Borrower or any other Person shall breach
or otherwise not comply with any Negative Covenant set forth herein or in
any other Loan Document (unless same constitutes a Default under any other
clause of this Section 5.1 or any other Loan Document, in which case, the
grace or cure period, if any, set forth in such other clause shall govern)
and such Default shall continue for sixty (60) days after written notice
thereof by Lender to Borrower, provided that no such notice and grace shall
be required with respect to a knowing, intentional and willful breach of a
Negative Covenant; provided, however, that in the event such failure is not
susceptible of cure within such sixty (60) day period, it shall not be an
Event of Default hereunder if such failure is curable, Borrower commences
to cure such failure within such sixty (60) day period, and Borrower
diligently prosecutes such cure to completion.
5.1.4 Representations. If, at any time, any representation, warranty
or certification made by Borrower in this Agreement, the Note or any other
Loan Document, or in any document delivered pursuant to any Loan Document
shall be (a) untrue, incorrect or misleading in any material respect when
made and (b) shall have a Material Adverse Effect.
5.1.5 Other Loan Documents. If an "Event of Default" shall occur under
the Mortgage or any other Loan Document.
5.1.6 Intentionally Omitted.
5.1.7 Reserves; Deposits. If Borrower or Manager fails to deposit any
Receipts into the Clearing Account within the time period provided herein
or in the Cash Management Agreement.
5.1.8 Transfers. If, in violation of Section 4.2 hereof, (a) the
Premises or any part thereof is Transferred, or (b) any direct or indirect
legal or beneficial interest in Borrower is Transferred.
5.1.9 Lien. If, in violation of Section 4.3 hereof, the Premises or
any part thereof is mortgaged or any other Lien is voluntarily placed
<PAGE>
thereon by Borrower and not removed within sixty (60) days of receipt of
written notice from Lender to so remove such Lien.
5.1.10 Involuntary Bankruptcy, Etc. The entry by a court of (a) a
decree or order for relief in respect of Borrower in an involuntary case or
proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law; or (b) a decree or order adjudging any
Borrower a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of or in
respect of any Borrower under any applicable federal or state bankruptcy,
insolvency, reorganization or other similar law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official of any Borrower or of any substantial part of the property of any
Borrower, or ordering the winding up or liquidation of the affairs of any
Borrower, and the continuance of any such decree or order for relief or any
such other decree or order unstayed and in effect for a period of ninety
(90) days.
5.1.11 Voluntary Bankruptcy, Etc. (a) The commencement by any Borrower
of a voluntary case or proceeding under any applicable federal or state
bankruptcy, insolvency, reorganization or other similar law, or of any
other case or proceeding, to be adjudicated a bankrupt or insolvent; (b)
the consent by any Significant Party (i) to the entry of a decree or order
for relief in respect of Borrower or such Significant Party in an
involuntary case or proceeding under any applicable federal or state
bankruptcy, insolvency, reorganization or other similar law, or (ii) to the
commencement of any bankruptcy or insolvency case or proceeding against
Borrower or such other Significant Party; (c) the filing by any Significant
Party of a petition or answer or consent seeking reorganization or relief
under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law; (d) the consent by any Significant
Party to the filing of such petition or to the appointment of or taking
possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or similar official of any Significant Party, or of any
substantial part of any property of any Significant Party; (e) the making
by any Significant Party of an assignment for the benefit of creditors; or
(f) the admission by any in writing of its inability to pay its debts
generally as they become due.
5.1.12 Intentionally Omitted.
5.1.13 Intentionally Omitted.
5.1.14 ERISA.If Borrower shall breach any of the provisions of Section
4.8 hereof.
5.1.15 Intentionally Omitted.
5.1.16 Other Conditions for Acceleration. The occurrence of any
conditions set forth herein or in the Note, the Mortgage or any other Loan
Document permitting Lender to accelerate the Loan.
5.1.17 Misapplication of Receipts. If Borrower shall (i) apply any
monies delivered to Borrower pursuant to Section 8 of the Cash Management
Agreement (or the Disbursement Instructions effectuating the same) other
than to pay amounts permitted to be paid with such funds pursuant to the
provisions of Section 8 of the Cash Management Agreement, and such breach
<PAGE>
shall continue for three (3) Domestic Business Days following written
notice thereof; provided, however, that no such notice and grace shall be
required with respect to an intentional breach of such provision; or (ii)
fail to pay to Lender any amounts required to be paid to Lender pursuant to
Section 8 of the Cash Management Agreement at the time such payment is to
be made to Lender thereunder.
5.2 Rights upon Event of Default. Upon the occurrence and during the
continuance of any Event of Default, Lender shall, in addition to all other
remedies conferred upon Lender at law or in equity or by the terms of the Note,
the Mortgage and the other Loan Documents, have the right, but not the
obligation, to pursue any one or more of the following remedies, concurrently or
successively, it being the intent hereof that all such remedies shall be
cumulative and that no such remedy shall be to the exclusion of any other:
(a) take any action which, in Lender's sole judgment, is necessary or
appropriate to effect observance and performance of the covenants,
agreements and obligations (under this Agreement and the other Loan
Documents) of Borrower or any other Person providing Collateral pursuant
to, or obligated to perform any of the terms and provisions of, this
Agreement or the other Loan Documents (each, an "Obligated Party");
(b) declare the Note to be immediately due and payable;
(c) use and apply any monies deposited in or credited to, as the case
may be, the Clearing Account, the Cash Collateral Account (or any Mortgage
Subaccount established thereunder) or any other monies deposited by
Borrower with Lender, regardless of the purpose for which the same were
deposited, to cure any Default or Event of Default, or to apply such monies
on account of any indebtedness under this Agreement or any of the other
Loan Documents which is due and owing to Lender, or to operate the
Premises, or for any other purposes described herein or in any other Loan
Document;
(d) take such actions as Lender shall deem necessary to realize upon
any or all of the Collateral, including, without limitation, the
institution of foreclosure actions and/or Uniform Commercial Code sales;
(e) institute an action, suit or proceeding at law or in equity for
the specific performance of any covenant, condition or agreement contained
herein or in the Mortgage, the Note or any other Loan Document, or in aid
of the execution of any power granted hereunder or for the enforcement of
any other appropriate legal or equitable remedy; and/or
(f) setoff against the obligations to Lender of Borrower or any other
Obligated Party, any sum owed by Lender or any Affiliate of Lender in any
capacity to Borrower or such other Obligated Party, or any property of any
of them in the possession of Lender or any Affiliate of Lender.
5.3 Waiver of Stay, Extension and Moratorium Laws, Appraisal and Valuation,
Redemption and Marshalling.
(a) Borrower shall not at any time insist upon, or plead, or in any
manner whatever claim or take any benefit or advantage of any stay or
extension or moratorium law, any exemption from execution or sale of any of
the Collateral, or any part of any thereof, wherever enacted, which may
affect the covenants and terms of performance of the Loan Documents, nor
<PAGE>
claim, take or insist upon any benefit or advantage of any law now or
hereafter in force providing for the valuation or appraisal of any of the
Collateral, or any part of any thereof, prior to any sale or sales thereof
which may be made pursuant to any provision of any Loan Document, or
pursuant to the decree, judgment or order of any court of competent
jurisdiction; nor, after any such sale or sales, claim or exercise any
right under any statute to redeem the property so sold, or any part
thereof, and Borrower hereby expressly waives all benefit or advantage of
any such law or laws, and covenants not to hinder, delay or impede the
execution of any power herein granted or delegated to Lender, but to suffer
and permit the execution of every power as though no such law or laws had
been made or enacted. Borrower, for itself and all who may claim under it,
waives, to the extent that it lawfully may, all right to have the Premises
marshalled upon any foreclosure.
(b) In the event that any bankruptcy or insolvency proceeding under
any federal, state or local law is filed by or against Borrower or any of
its assignees or designees at any time prior to full satisfaction of the
Loan, Lender shall, to the extent permitted by law, be absolutely and
unconditionally entitled to relief from any automatic stay imposed with
respect to Borrower or its assignees or designees and/or the Premises by
the filing of such bankruptcy or insolvency proceeding, including, but not
limited to, the stay imposed by section 362(a) of the Bankruptcy Code, 11
U.S.C. ss. 362(a), effective as of any such filing, without further action
by Lender or order of any court, and Lender shall be authorized to exercise
all of its rights and remedies with respect to the Premises, including, but
not limited to, commencing a foreclosure action, seeking the appointment of
a receiver therein and selling the Premises therein, and Borrower hereby
irrevocably consents to the foregoing. Without limiting the previous
sentence, Borrower hereby irrevocably consents to, shall not oppose or
contest, and shall not request or cause any creditors' committee or any
party in interest to oppose or contest, any application for relief from the
automatic stay or for "adequate protection," as that term is defined in the
Bankruptcy Code, which may be filed by Lender in any future bankruptcy or
insolvency proceeding with respect to Borrower and/or the Premises. No
other action, inaction or agreement by Lender in any future bankruptcy or
insolvency proceeding shall be deemed to be a waiver of the rights given to
Lender hereby.
5.4 Preferences. Lender shall have no obligation to marshal any assets in
favor of Borrower or any other party or against or in payment of the Loan. To
the extent Borrower makes a payment to Lender, which payment or the proceeds or
any part thereof are subsequently invalidated, declared to be fraudulent,
preferential or avoidable, set aside or required to be repaid to a trustee,
receiver or any other party having requisite authority under any bankruptcy law,
state or federal law, common law or equitable cause, then, to the extent of such
payment or proceeds received, the obligation hereunder or part thereof intended
to be satisfied shall be revived and continue in full force and effect, as if
such payment or proceeds had not been received.
Section 6
GENERAL PROVISIONS
6.1 Rights Cumulative; Waivers.
(a) Each right, power and remedy conferred upon Lender herein or in
<PAGE>
any of the other Loan Documents is cumulative and in addition to every
other right, power or remedy, express or implied, now or hereafter provided
by law or in equity, and each and every right, power and remedy herein set
forth or otherwise so existing may be exercised, concurrently or
independently, from time to time as often and in such order as may be
deemed expedient to Lender. The exercise of one right, power or remedy
shall not be a waiver of the right to exercise at the same time or
thereafter any other right, power or remedy; and no delay or omission of
Lender in the exercise of any right, power or remedy accruing hereunder or
arising otherwise shall impair any such right, power or remedy, or be
construed to be a waiver of any Default or acquiescence therein.
Enumeration of special rights or powers herein, in the Mortgage or in the
other Loan Documents shall not be construed to limit any grant of general
rights or powers herein, in the Mortgage or in the other Loan Documents or
to limit Lender's exercise of any and all rights granted under the laws of
the State of New York, the state where the Premises are located or the
United States of America. No act of Lender shall be construed as an
election to proceed under any provision herein or in any other Loan
Document to the exclusion of any other provision herein or in any other
Loan Document. Except as otherwise specifically required herein, notice of
the exercise of any right, remedy or power granted to Lender by this
Agreement or any other Loan Document is not required to be given. Lender
shall be entitled to enforce payment of the Loan and any other amount
payable under the Loan Documents, and performance of this Agreement and the
other Loan Documents, and to exercise all rights and remedies under this
Agreement or the other Loan Documents or otherwise at law or in equity,
notwithstanding that some or all of the indebtedness secured thereby may
now or hereafter be otherwise secured, whether by mortgage, security
agreement, pledge, lien, assignment or otherwise. Neither the acceptance of
this Agreement nor its enforcement shall prejudice or in any manner affect
Lender's right to realize upon or enforce any other security now or
hereafter held by Lender, it being agreed that Lender shall be entitled to
enforce this Agreement, the Mortgage and any other security now or
hereafter held by Lender hereunder, under any of the other Loan Documents
or otherwise, in such order and manner as Lender may determine in its
absolute discretion.
(b) Lender may, by written notice to Borrower, at any time and from
time to time, waive in whole or in part, and absolutely or conditionally,
any Default or Event of Default hereunder. Any such waiver shall be subject
to such conditions or limitations as shall be specified in any such notice.
In the case of any such waiver, the rights of Borrower shall be otherwise
unaffected, and any Default or Event of Default so waived shall be deemed
to be cured and not continuing only to the extent, and only on the
conditions or limitations, set forth in such waiver, but no such waiver
shall extend to any subsequent or other Default or Event of Default, or
impair any right, remedy or power consequent thereupon.
6.2 Lender's Action for its Own Protection Only. The authority herein
conferred upon Lender, and any action taken by Lender, to inspect the Premises,
to review and/or approve all documents and instruments submitted to Lender, or
otherwise, will be exercised and taken by Lender and by Lender's employees,
agents, consultants or representatives for their own protection only and may not
be relied upon by Borrower or any other party for any purposes whatever; and
neither Lender nor Lender's employees, agents, consultants or representatives
shall be deemed to have assumed any responsibility to Borrower or any other
party with respect to any such action herein or under any of the other Loan
<PAGE>
Documents authorized to be taken by Lender or Lender's employees, agents and
representatives. Any review, investigation or inspection conducted by Lender,
any architect, engineer or other consultant retained by Lender, or any agent or
representative of Lender, in order to verify independently Borrower's
satisfaction of the covenants, agreements and obligations of Borrower under this
Agreement or any of the other Loan Documents, or the validity of any
representations and warranties made by Borrower or any other party (regardless
of whether or not the party conducting such review, investigation or inspection
should have discovered that any of such conditions precedent were not satisfied
or that any such covenants, agreements or obligations were not performed or that
any such representations or warranties were not true) shall not affect (or
constitute, except as may specifically be provided in this Agreement or in the
other Loan Documents to the contrary, a waiver by Lender of) (i) any
representations and warranties under this Agreement or the other Loan Documents
or Lender's reliance thereon, or (ii) Lender's reliance upon any certifications
of Borrower or any other party in connection with the Loan, or any other facts,
information or reports furnished to Lender by Borrower or any other party in
connection with the Loan. Lender neither undertakes nor assumes any
responsibility or duty to Borrower to select, review, inspect, supervise, pass
judgment upon or inform Borrower of any matter in connection with the Premises,
and Borrower shall rely entirely upon its own judgment with respect to such
matters, and any review, inspection, supervision, exercise of judgment or supply
of information to Borrower by Lender in connection with such matters is for the
protection of Lender only and neither Borrower nor any third party is entitled
to rely thereon.
6.3 No Third Party Beneficiaries. All conditions to the obligations of
Lender hereunder and under the other Loan Documents are imposed solely and
exclusively for the benefit of Lender and its Assignees and Participants, if
any, and its or their successors and assigns, and no other Person (other than
Servicer) shall have standing to require satisfaction of such conditions in
accordance with their terms, or be entitled to assume that Lender will refuse to
advance proceeds of the Loan or refuse to agree or consent to any matter in the
absence of strict compliance with any or all thereof, and no other Person (other
than Servicer) shall, under any circumstances, be deemed to be the beneficiary
of such conditions, any or all of which may be freely waived in whole or in part
by Lender at any time if, in its sole discretion, it deems it advisable to do
so, it being further understood that Lender and its Assignees and Participants,
if any, and its or their successors and assigns, shall have no obligation to see
to it that the Improvements or any other work required or contemplated hereby or
by the other Loan Documents are properly and/or timely completed.
6.4 Payment of Expenses, Etc.
6.4.1 Payment of Expenses. Borrower will, on the Closing Date and at
all times thereafter, pay all costs and fees incurred by Lender in
connection with the preparation, negotiation, consummation, execution,
administration, repayment, collection and enforcement of the Loan, the Loan
Documents and any approval, consent, amendment, modification or waiver
related thereto. Without limiting the generality of the foregoing, Borrower
will pay:
(a) all Lender's Counsel Fees in connection with the foregoing;
(b) all taxes and recording fees and expenses, including, without
limitation, stamp and/or mortgage taxes and transfer taxes, if any;
<PAGE>
(c) all fees and out-of-pocket expenses incurred by Lender, including
all expenses of Lender and its respective agents and representatives, in
connection with any Default or Event of Default hereunder, under the Note
or under any other Loan Document or the collection or enforcement thereof;
(d) subject to Sections 4.18 and 6.27 hereof, all fees and expenses of
any environmental, engineering, appraisal, construction, insurance or other
consultants retained by Lender in connection with the Loan or the
administration, enforcement or collection thereof; and (e) all brokers'
fees and commissions relative to the Loan, the Premises and/or any lease or
purchase contract affecting same.
Without limiting the generality of the foregoing, to the extent that
Lender, after the Closing Date, deems it necessary to employ counsel and/or
any other consultant for whatever purpose relative to the Loan or Lender's
interest in the Premises, including, without limitation, all future
amendments, supplements, notices, recordings, approvals, consents and
waivers with respect to the Loan Documents (or any proposal by Borrower
therefor), whether or not consummated, the adjustment and collection of any
and all insurance proceeds with respect to any insurance coverage required
hereunder, or obtaining any and all awards in connection with any
condemnation, the fees and expenses of such counsel and/or consultants
shall be borne by Borrower. Any fees and expenses referred to in this
Section 6.4 which are incurred by Lender are to be paid by Borrower within
five (5) days after demand is made by Lender therefor. Borrower hereby
agrees to indemnify, defend and hold Lender harmless from and against any
loss, cost (including attorneys' fees) or damage whatsoever incurred by
Lender as a result of Borrower's failure to pay any cost or expense
contemplated hereby. The provisions of this Section 6.4.1 are not intended
to limit any other obligation of Borrower or any other Obligated Party to
pay fees and expenses of Lender or other Persons contained herein or in any
other Loan Document.
6.4.2 Advances Secured. All costs and expenses incurred and payments
made by Lender under this Agreement or any of the other Loan Documents from
time to time, which are to be paid or reimbursed by Borrower as described
herein or in any of the other Loan Documents shall, as and when advanced or
incurred by Lender, constitute protective advances evidenced by the Note
and secured by the Mortgage and the other Loan Documents to the same extent
and with the same effect as if the terms and provisions of this Agreement
were set forth therein, whether or not the principal balance of the Note
plus such protective advances shall exceed the face amount of the Note. If
Borrower shall fail to reimburse or pay to Lender the amount of such
protective advances by the applicable due date therefor, interest at the
Default Rate applicable under the Note shall accrue on such protective
advances from the date such protective advances were made by Lender to and
including the date that such protective advances are reimbursed or paid to
Lender in full, together with all such accrued interest thereon.
6.5 Indemnification.
(a) In addition to any other indemnifications provided herein or in
the other Loan Documents, Borrower shall protect, defend, indemnify and
save harmless the Indemnified Parties from and against all liabilities,
obligations, claims, demands, damages, penalties, causes of action, losses,
fines, costs, expenses (including, without limitation, attorneys' fees and
<PAGE>
disbursements) and Environmental Costs, imposed upon or incurred by or
asserted against any Indemnified Party (other than by reason of such
Indemnified Party's gross negligence or willful misconduct, provided that
such gross negligence or willful misconduct is determined to have occurred
by a final and unappealable decision of a court of competent jurisdiction)
by reason of Lender's ownership or holding of the Mortgage, this Agreement,
the other Loan Documents and the Collateral. Any amounts payable to any
Indemnified Party by reason of the application of this Section 6.5 shall
become immediately due and payable within thirty (30) days of demand, and
shall bear interest at the Default Rate under the Note from the date loss
or damage is sustained by any Indemnified Party until paid if not paid
within such thirty (30) day period. The obligations and liabilities of
Borrower under this Section 6.5 shall survive any termination, satisfaction
or assignment of this Agreement and the exercise by Lender of any of its
rights or remedies hereunder, including, but not limited to, the
acquisition of the Premises by foreclosure or a conveyance in lieu of
foreclosure.
(b) In case any claim, action or proceeding (a "Claim") is brought
against any Indemnified Party in respect of which indemnification may be
sought by such Indemnified Party pursuant to this Section 6.5, such
Indemnified Party shall give notice thereof to Borrower, provided, however,
that the failure of such Indemnified Party to so notify Borrower shall not
limit or affect such Indemnified Party's rights to be indemnified pursuant
to this Section 6.5, except to the extent such delay shall materially and
adversely prejudice Borrower's defense of such Claim. Upon receipt of such
notice of Claim, Borrower shall, at its sole cost and expense, diligently
defend any such Claim with counsel reasonably satisfactory to such
Indemnified Party (it being understood that counsel selected by Borrower's
insurance carrier shall be deemed to be acceptable to such Indemnified
Party, provided that such insurer is an acceptable insurer under this
Agreement and the other Loan Documents or otherwise was accepted by Lender
as an insurer), which counsel may, without limiting the rights of
Indemnified Party pursuant to the next succeeding sentence, also represent
Borrower in such Claim. In the alternative, the Indemnified Parties may
elect to conduct their own defense through counsel of their own choosing,
and at the expense of Borrower, if (i) the Indemnified Parties reasonably
determine that the conduct of its defense by Borrower presents a conflict
or potential conflict between Borrower and Lender that would make separate
representation advisable or otherwise could be prejudicial to its
interests, (ii) Borrower refuses to defend or (iii) Borrower (or, if
applicable, its insurance carrier) shall have failed, in Lender's
reasonable judgment, to diligently defend the Claim. Except as provided in
the preceding sentence, Borrower shall not be responsible for the fees of
counsel for any Indemnified Party incurred in connection with the
indemnification contained in this Section 6.5. Borrower may settle any
Claim against Indemnified Parties without such Indemnified Parties'
consent, provided that (i) such settlement is without any liability, cost
or expense whatsoever to such Indemnified Parties, (ii) the settlement does
not include or require any admission of liability or culpability by such
Indemnified Parties under any Legal Requirement, whether criminal or civil
in nature, and (iii) Borrower obtains an effective written release of
liability for such Indemnified Parties from the party to the Claim with
whom such settlement is being made, which release must be reasonably
acceptable to such Indemnified Parties, and a dismissal with prejudice with
respect to all claims made by the party with whom such settlement is being
made, with respect to any pending legal action against such Indemnified
<PAGE>
Parties in connection with such Claim. If the Indemnified Parties are
conducting their own defense as provided above, Borrower shall be
responsible for any good faith settlement of such Claim entered into by
such Indemnified Parties, and such Indemnified Parties shall not be
required to obtain Borrower's consent to any such settlement. Nothing
contained herein shall be construed as requiring any Indemnified Parties to
expend funds or incur costs to defend any Claim in connection with the
matters for which such Indemnified Parties are entitled to indemnification
pursuant to this Section 6.5.
6.6 Notices. Any notice, report, demand or other instrument authorized or
required to be given or furnished ("Notices") shall be in writing and shall be
given as follows: (a) by hand delivery; (b) by deposit in the United States mail
as first class certified mail, return receipt requested, postage paid; (c) by
overnight nationwide commercial courier service; or (d) by telecopy transmission
with a confirmation copy to be delivered by duplicate notice in accordance with
any of clauses (a) through (c) above, in each case, to the party intended to
receive the same at the following address(es):
Lender: Credit Suisse First Boston Mortgage
Capital LLC
Principal Transactions
11 Madison Avenue
New York, New York 10010
Attention: Asset Manager
Re: Loan to International Hotel Acquisitions,
LLC/Lance Graber and Blair West
Telecopier: (212) 325-8164
with a copy to: Credit Suisse First Boston Mortgage
Capital LLC
Legal & Compliance Department
11 Madison Avenue
New York, New York 10010
Attention: Colleen Graham, Esq.
Re: Loan to International Hotel Acquisitions,
LLC/Lance Graber and Blair West
Telecopier: (212) 325-8220
and Pacific Life Insurance Company
700 Newport Center Drive
Newport Beach, California 92660
Attention: Wendy Balden
Re: Loan to International Hotel Acquisitions, LLC
Telecopier: (949) 760-4356
or any successor Servicer of the Loan
and Cox, Castle & Nicholson LLP
2049 Century Park East, 28th Floor
Los Angeles, California 90067
Attention: Gregory J. Karns, Esq.
Telecopier: (310) 277-7889
Borrower: International Hotel Acquisitions, LLC
c/o Credit Suisse First Boston Mortgage
Capital LLC
<PAGE>
Principal Transactions
11 Madison Avenue
New York, New York 10010
Attention: Asset Management
Re: Loan to International Hotel Acquisitions,
LLC/Lance Graber and Blair West
Telecopier: (212) 325-8164
with a copy to: International Hotel Acquisitions, LLC
c/o Secured Capital Corp
11150 Santa Monica Boulevard, Suite 1400
Los Angeles, California 90025
Attention: Mr. D. Michael Van Konyenburg
and Mark S. Kuskin
Telcopier: (310) 477-3436
with a copy to: O'Melveny & Meyers
400 South Hope Street, 15th Floor
Los Angeles, California 90071
Attention: Mitchell B. Menzer, Esq.
Telecopier: (213) 669-6407
Any party may change the address to which any such Notice is to be
delivered, by furnishing ten (10) days written notice of such change to the
other parties in accordance with the provisions of this Section 6.6. Notices
shall be deemed to have been given on the date they are actually received;
provided, however, that the inability to deliver Notices because of a changed
address of which no Notice was given, or rejection or refusal to accept any
Notice offered for delivery shall be deemed to be receipt of the Notice as of
the date of such inability to deliver or rejection or refusal to accept
delivery. Notice for either party may be given by its respective counsel.
Additionally, notice from Lender may also be given by Servicer.
6.7 No Oral Modification. Borrower recognizes that, in general, borrowers
who experience difficulties in honoring their loan obligations, in an effort to
inhibit or impede lenders from exercising the rights and remedies available to
lenders pursuant to mortgages, notes, loan agreements or other instruments
evidencing or affecting loan transactions, frequently present in court the
argument, often without merit, that some loan officer or administrator of lender
made an oral modification or made some statement which could be interpreted as
an extension or modification or amendment of one or more debt instruments and
that the borrower relied to its detriment upon such "oral modification of the
loan document." For that reason, and in order to protect Lender from such
allegations in connection with the transaction contemplated by this Agreement,
Borrower acknowledges that this Agreement, the Mortgage, the Note and the other
Loan Documents and all instruments referred to in any of them can be extended,
modified or amended only in a writing executed by Lender and Borrower and that
none of the rights or benefits of Lender can be waived permanently except in a
written document executed by Lender. Borrower further acknowledges Borrower's
understanding that no officer or administrator of Lender has the power or the
authority from Lender to make an oral extension or modification or amendment of
any such instrument or agreement on behalf of Lender.
6.8 Assignment by Lender.
6.8.1 Assignment. Lender may assign (and thereafter, at any time and
from time to time, repurchase) all or a portion of its rights and
<PAGE>
obligations under this Agreement and the other Loan Documents to one or
more Persons ("Assignees"; the term "Assignee" or "Assignees" shall, unless
otherwise expressly indicated, include Lender) and, with respect to any
Assignee, be released from its rights and obligations as Lender in respect
of such portion of the Loan, this Agreement and the other Loan Documents.
6.8.2 Participations. Lender and each of the other Assignees may sell
participations in the Loan to one or more Persons (collectively, the
"Participants"). In order to assist Lender in any sales of interests in the
Loan, Borrower agrees for itself, and agrees to cause Member and the
Manager, to reasonably cooperate with Lender in connection with any efforts
by Lender to obtain one or more Assignees or Participants, to provide
additional information and to execute and deliver such further documents,
instruments or agreements, in each case, as Lender or any Assignee or
Participant may reasonably require.
6.8.3 Assignment and Acceptance. From and after the effective date of
any assignment to an Assignee, (a) such Assignee shall be a party hereto
and to each of the other Loan Documents to the extent of the applicable
percentage or percentages assigned to such Assignee and, except as
otherwise specified herein, shall succeed to the rights and obligations of
Lender hereunder in respect of such applicable percentage or percentages,
and (b) Lender shall relinquish its rights and be released from its
obligations hereunder and under the Loan Documents to the extent of such
applicable percentage or percentages. The liabilities of Lender and each of
the other Assignees shall be separate and not joint and several. Neither
Lender nor any Assignee shall be responsible for the obligations of any
other Assignee.
6.8.4 Other Business. Lender, each Assignee and each Participant and
their respective Affiliates may accept deposits from, lend money to, act as
trustee under indentures of, and generally engage in any kind of business
with, Borrower, any Affiliate of Borrower, any of Borrower's subsidiaries
and any Person who may do business with or own interests in or securities
of Borrower or any such Affiliate or subsidiary, without any duty to
account therefor to each other.
6.8.5 Privity of Contract. This Agreement is being entered into by
Lender individually and as agent for all present and future Assignees, and
privity of contract is hereby created among Lender, all present and future
Assignees and Borrower.
6.8.6 Availability of Records. Borrower acknowledges and agrees that
Lender may provide to any Assignees or prospective Assignees, and that
Lender and each of the Assignees may provide to any Participants or
prospective Participants, originals or copies of this Agreement, all other
Loan Documents and all other documents, instruments, certificates,
opinions, insurance policies, letters of credit, reports, requisitions and
other materials and information of every nature or description, and may
communicate all oral information, at any time submitted by or on behalf of
Borrower, Member, the Manager, any other Significant Party or any Affiliate
of any of the foregoing.
6.9 Severability. In the event that any of the covenants, agreements, terms
or provisions contained in the Note, this Agreement, the Mortgage or any other
Loan Document shall be invalid, illegal or unenforceable in any respect, the
validity of the remaining covenants, agreements, terms or provisions contained
<PAGE>
herein or in the Note, the Mortgage or any other Loan Document shall be in no
way affected, prejudiced or diminished thereby.
6.10 No Assignment by Borrower. Other than as provided in Article 9 below,
Borrower shall not assign or transfer any of its rights hereunder without the
prior written consent of Lender. Any assignment made without Lender's prior
written consent shall be null and void.
6.11 Governing Law. The place of negotiation, execution and delivery of
this Agreement is the State of New York. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York,
except that the provisions of the laws of the State of Hawaii shall be
applicable to the creation, perfection and enforcement of the Liens created by
the Mortgage and the Assignment of Leases and Rents. It is the intent of the
parties hereto that the provisions of Section 5-1401 of the General Obligations
Law of the State of New York apply to this Agreement.
6.12 Successors and/or Assigns. Subject to the restrictions on transfer and
assignment contained in this Agreement and the other Loan Documents, whenever in
this Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the permitted successors and/or assigns of such party, and
this Agreement shall inure to the benefit of and shall be binding on the parties
hereto and the successors and/or assigns of such party.
6.13 Entire Agreement. This Agreement and the other Loan Documents,
including all annexes, schedules and exhibits hereto and all other documents
furnished to Lender in connection with this Agreement and/or the Loan,
constitutes the entire agreement between the parties hereto with respect to the
subject matter hereof and thereof and shall supersede and take the place of any
other instruments purporting to be an agreement of the parties hereto relating
to the transactions contemplated hereby, including, without limitation, any
letter of intent or loan commitment letter.
6.14 Liability. If Borrower consists of more than one Person, the
obligations and liabilities of each such Person hereunder and under the other
Loan Documents shall be joint and several.
6.15 Counterparts; Headings. This Agreement may be executed in
counterparts, each of which shall constitute an original, and all of which, when
taken together, shall constitute but one instrument. The captions and headings
of the various sections of this Agreement are for purposes of reference only and
are not to be construed as confining or limiting in any way the scope or intent
of the provisions hereof. Whenever the context requires or permits, the singular
shall include the plural, the plural shall include the singular, and the
masculine, feminine and neuter shall be freely interchangeable.
6.16 Time of the Essence. Time is of the essence as to Borrower's
obligations under this Agreement and the other Loan Documents.
6.17 Consents. Any consent or approval by Lender in any single instance
shall not be deemed or construed to be Lender's consent or approval in any like
matter arising at a subsequent date. Any consent or approval requested of and
granted by Lender pursuant hereto or to any of the other Loan Documents shall be
narrowly construed to be applicable only to Borrower and to the matter
identified in such consent or approval and no third party shall claim any
benefit by reason thereof. Wherever this Agreement, the Mortgage, the Cash
Management Agreement or any other Loan Document refers to the consent or
<PAGE>
approval of Lender, or provides that any document or Person will be satisfactory
or acceptable to Lender or words of similar import, (a) such consent or approval
may be given or withheld by Lender, and such document or Person must be
satisfactory or acceptable to Lender, in its reasonable discretion, unless
otherwise expressly provided herein or therein, and (b) such consent or approval
shall not be effective unless given in writing. Wherever this Agreement, the
Mortgage, the Cash Management Agreement or any other Loan Document refers to the
provision of documents or other items being as Lender may require, provides for
the selection by Lender of any person to provide reports or other items
hereunder or thereunder or for the selection by Lender of any means of
determining any matter, or otherwise refers to terms and conditions hereof or
thereof being as Lender deems appropriate, any such requirement, selection or
determination of appropriateness shall be made by Lender in its reasonable
discretion, unless expressly provided otherwise herein or therein. The foregoing
provisions are intended to be effective whether or not the applicable provision
hereof or of any other Loan Document specifies that the applicable consent,
approval or other matter is to be determined by Lender in its "reasonable
discretion" or words of similar import.
6.18 No Partnership. Nothing contained in this Agreement or the other Loan
Documents shall be deemed to create an equity investment in Borrower or the
Premises on the part of Lender or a joint venture or partnership between Lender
and Borrower, it being the intent of the parties hereto that only the
relationship of lender and borrower shall exist with respect to the Premises.
Borrower agrees that it shall report this transaction for income tax purposes,
and file all related tax returns, in a manner consistent with the form of this
transaction as a loan.
6.19 Waiver of Jury Trial. EACH OF BORROWER AND LENDER HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY AND ALL RIGHTS IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS AGREEMENT, THE MORTGAGE, THE CASH MANAGEMENT AGREEMENT OR
ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN), OR ACTIONS OF BORROWER, MEMBER OR LENDER RELATING
TO THE LOAN AND/OR THE LENDING RELATIONSHIP WHICH IS THE SUBJECT OF THIS
AGREEMENT. THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER ENTERING INTO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS.
6.20 Limited Recourse. Notwithstanding anything to the contrary contained
in this Agreement or in any of the other Loan Documents, and except as provided
otherwise in this Section 6.20, neither Borrower nor any direct or indirect
member, shareholder, partner, principal, Affiliate, employee, officer, director,
agent or representative of Borrower (each, a "Related Party") shall have any
personal liability for (a) the payment of any sum of money which is or may be
payable hereunder or under the Note or any other Loan Document, including but
not limited to the repayment of the Loan, or (b) the performance or discharge of
any covenants, obligations or undertakings of Borrower hereunder or under any
Loan Document, and no monetary or deficiency judgment shall be sought or
enforced against Borrower or any Related Party with respect thereto; provided,
however, that a judgment may be sought against Borrower or any Related Party to
enforce the rights of Lender in, to or against the Premises, including the
Receipts and any other Collateral, and Lender shall have full recourse to and
the right to proceed against the Premises, the Receipts and any other
Collateral. Notwithstanding the foregoing, nothing contained herein shall impair
the validity of the Obligations or in any way affect or impair the Lien of the
Mortgage, or the right of Lender to enforce any and all rights and remedies
under and by virtue of the Note, this Agreement and/or any other Loan Document
<PAGE>
(limited, however, as expressly provided otherwise above), including, without
limitation, naming Borrower as a party defendant in any foreclosure action, or
limit Lender from pursuing or seeking to enforce the rights of Lender against
any third parties, including any guarantor, indemnitor or surety under any
guaranty or indemnity delivered in connection with this Agreement, the Note or
any other Loan Document or otherwise in connection with the Loan. Additionally,
the provisions of this Section 6.20 shall not relieve Borrower from any personal
liability for, and Borrower shall be fully liable for each of the following (all
of which are referred to herein as the "Recourse Carve Out Liabilities"): (i)
the full recourse obligation to pay the Obligations upon the occurrence of any
event set forth in clause (M) below, and (ii) any liabilities, costs, losses
(including without limitation any reduction in value of the Premises or any
other Collateral, or the loss of any such Collateral or Lender's security
interest therein), damages, expenses (including, without limitation, reasonable
attorneys' fees and disbursements and court costs, if any), or claims suffered
or incurred by Lender (or any Indemnified Party) by reason of or in connection
with the occurrence of any event set forth in any of clauses (A) through (M)
below: (A) any fraud or breach of trust by Borrower or any Related Party,
including by reason of any claim under the Racketeer Influenced and Corrupt
Organizations Act ("RICO"); (B) the misapplication of any insurance proceeds or
condemnation awards; (C) the failure of Borrower or any Related Party to direct
or pay Receipts received by Borrower or any Related Party to the Clearing
Account or the Cash Collateral Account; (D) the misapplication by Borrower or
any Related Party (or at any such Person's direction) of monies held in or paid
out from any account (including any reserve or escrow) maintained under this
Agreement, the Cash Management Agreement or any of the other Loan Documents,
including without limitation monies paid to Borrower pursuant to Section 8 of
the Cash Management Agreement and the related Disbursement Instructions; (E) any
and all tenant security deposits held by or on behalf of Borrower not being
properly applied, returned to tenants when due or delivered to Lender, any
receiver or any Person purchasing the Premises at a foreclosure sale upon the
taking of possession of the Premises by Lender, such receiver or other Person as
provided herein; (F) a breach by Borrower of any of the covenants contained in
Sections 4.2 or 4.8 hereof; (G) intentional removal or destruction of a material
portion of the Premises or any intentional waste of a material portion of the
Premises by Borrower or a Related Party; (H) any Legal Requirement (including
RICO) mandating the forfeiture by Borrower of the Premises, or any material
portion thereof, because of the conduct or purported conduct of criminal
activity by Borrower or any Related Party in connection therewith; (I) any
material misrepresentation, miscertification or breach of warranty by Borrower
with respect to any representation, warranty or certification contained in this
Agreement or any other Loan Document or in any document executed in connection
therewith, pursuant to any of the Loan Documents or otherwise to induce Lender
to make the Loan, or any advance thereof, or to release monies from any account
held by Lender (including any reserve or escrow) or to take any other action
with respect to any of the Collateral; (J) a breach of any of the provisions of
Article 8 hereof (if and to the extent a substantive consolidation of Borrower
and another Person occurs as a result thereof); (K) any damage or destruction of
the Premises or any material part thereof due to fire or other casualty to the
extent not covered by insurance required under the Mortgage, but only to the
extent the same would have been covered by insurance if Borrower had obtained
and maintained the insurance coverage required under the Mortgage; (L) the
amount of any Lien voluntarily placed on the Premises by Borrower (or any
predecessor-owner of the Premises which is an Affiliate of Borrower) which is
prior to the Lien of the Mortgage; or (M) (1) Borrower or Managing Member filing
a voluntary petition under the Bankruptcy Code or any other federal or state
bankruptcy or insolvency law, or (2) any Related Party filing or joining in the
<PAGE>
filing of an involuntary petition against Borrower or Managing Member under the
Bankruptcy Code or any other federal or state bankruptcy or insolvency law, or
(3) Borrower or Managing Member filing an answer consenting to or acquiescing in
any involuntary petition filed against it or against Borrower or Managing Member
by any other Person under the Bankruptcy Code or any other federal or state
bankruptcy or insolvency law, or (4) any Related Party consenting to or
acquiescing in or joining in an application for the appointment of a custodian,
receiver, trustee or examiner for Borrower or Managing Member or any portion of
the Collateral, or (5) Borrower or Managing Member making an assignment for the
benefit of creditors, or admitting its insolvency or inability to pay its debts
as they become due. Nothing contained herein is intended to limit obligations
and liabilities under any guaranty any indemnity agreement, including, without
limitation, the Environmental Indemnification Agreement, executed by Borrower
for the benefit of Lender
6.21 Intentionally Omitted.
6.22 Jurisdiction, Venue, Service of Process. ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT, THE MORTGAGE OR ANY OTHER LOAN
DOCUMENT SHALL BE BROUGHT, AT LENDER'S OPTION, IN THE COURTS OF THE STATE OF NEW
YORK, NEW YORK COUNTY OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN
DISTRICT OF NEW YORK. BORROWER HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE
AFORESAID COURTS. BORROWER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF
ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING
OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO BORROWER
AT ITS ADDRESS FOR NOTICES PURSUANT TO SECTION 6.6 HEREOF. BORROWER HEREBY
IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR
IN CONNECTION WITH THIS AGREEMENT, THE MORTGAGE OR ANY OTHER LOAN DOCUMENT
BROUGHT IN THE COURTS REFERRED TO ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES
AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
NOTHING CONTAINED HEREIN SHALL AFFECT THE RIGHT OF LENDER TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED AGAINST BORROWER IN ANY OTHER JURISDICTION.
6.23 Intentionally Omitted.
6.24 Rule of Construction. This Agreement and the other Loan Documents
shall not be construed more strictly against one party than against the other
merely by virtue of the fact that it may have been prepared by counsel for one
of the parties, it being recognized that both Lender and Borrower have
contributed substantially and materially to the preparation of this Agreement
and the other Loan Documents.
6.25 Further Assurances.
(a) Borrower will, at its sole cost and expense, do, execute,
acknowledge and deliver or cause to be done, executed, acknowledged and
delivered all such further acts, conveyances, notes, mortgages,
assignments, security agreements, financing statements and assurances as
Lender shall from time to time require or deem advisable (i) to carry into
effect the purposes of this Agreement and the other Loan Documents, (ii)
for the better assuring, conveying, mortgaging, assigning and confirming
unto Lender of all property and rights mortgaged, granted, bargained,
alienated, confirmed, pledged, hypothecated, conveyed or assigned by this
<PAGE>
Agreement or any of the other Loan Documents or property intended now or
hereafter to be, or which Borrower may be or may hereafter become bound to
convey or assign to Lender, (iii) for facilitating the placement of the
Loan in a Securitization as described in Section 6.27 hereof, (iv) for the
perfection of any Lien or security interest granted herein or in the other
Loan Documents, and (v) for the better assuring and confirming of all of
Lender's rights, powers and remedies hereunder and under the other Loan
Documents. Borrower, on demand, will execute and deliver, and hereby
authorizes Lender to execute in the name of Borrower or without the
signature of Borrower to the extent Lender may lawfully do so, one or more
financing statements, chattel mortgages or other instruments, to evidence
more effectively the security interest of Lender in the Premises and the
other Collateral.
(b) Borrower forthwith upon the execution and delivery of this
Agreement and thereafter, from time to time, will cause the Mortgage and
any security instrument creating a Lien or security interest or evidencing
the Lien of the Mortgage and the other applicable Loan Documents upon the
Premises or other property and each instrument of further assurance to be
filed, registered or recorded in such manner and in such places as may be
required by any present or future Legal Requirement in order to publish
notice of and fully to protect the Lien or security interest of, and the
priority of, each of the Mortgage and the other Loan Documents upon, and
the interest of Lender in, the Premises or other applicable property.
Borrower will pay all filing, registration or recording fees, and all
expenses incident to the foregoing and all taxes, duties, assessments and
charges of any Governmental Authority arising out of or in connection with
the execution and delivery of the Mortgage, any other security instrument,
any instrument of further assurance or any other Loan Document. Upon
Lender's request, Borrower shall, from time to time, furnish Lender with
evidence reasonably satisfactory to Lender that such property is free of
Liens and security interests (except as permitted hereunder), including
searches of applicable public records.
(c) Upon any failure by Borrower to do so, Lender may make, execute,
record, file, re-record or refile any and all such mortgages, instruments,
certificates and documents for and in the name of Borrower, and Borrower
hereby irrevocably appoints (which appointment is coupled with an interest
and with full power of substitution) Lender the agent and attorney-in-fact
of Borrower to do so, and Borrower shall reimburse Lender, on demand, for
all costs and expenses (including attorneys' fees) incurred by Lender in
connection therewith. Upon foreclosure, the appointment of a receiver or
any other relevant action, Borrower will, at the cost of Borrower and
without expense to Lender, cooperate fully and completely to effect the
assignment or transfer of any Permit, agreement or any other right
necessary or useful to the operation of the Premises and shall deliver to
Lender all books and records relating to the Premises.
6.26 Recitals. The Recitals set forth at the beginning of this Agreement
are hereby incorporated into the substantive provisions of this Agreement.
6.27 Sale of Loan and Securitization.
6.27.1 Rating Agency Requirements. At the request of the holder of the
Loan and, to the extent not already required to be provided by Borrower
under this Agreement, Borrower shall use reasonable efforts to satisfy the
market standards to which the holder of the Loan customarily adheres or
<PAGE>
which may be reasonably required in the marketplace or by the Rating
Agencies in connection with the sale of the Loan or a participation therein
or the first successful securitization (such sale and/or securitization,
the "Secondary Market Transaction" or "Securitization") of rated single or
multi-class securities (the "Securities") secured by or evidencing
ownership interests in the Loan, including, without limitation, to:
(a) (i) provide such financial and other information with respect to
the Premises, Borrower and the Manager, (ii) provide budgets relating to
the Premises, (iii) perform or permit or cause to be performed or permitted
such site inspection, appraisals, market studies, environmental reviews and
reports (Phase I's and, if appropriate, Phase II's), engineering reports
and other due diligence investigations of the Premises, as may be
reasonably requested by the holder of the Loan or the Rating Agencies or as
may be necessary or appropriate in connection with the Secondary Market
Transaction and (iii) make such representations and warranties as of the
closing date of the Secondary Market Transaction with respect to the
Premises, Borrower, and the Loan Documents as are customarily provided in
securitization transactions and as may be reasonably requested by the
holder of the Loan or the Rating Agencies and consistent with the facts
covered by such representations and warranties as they exist on the date
thereof, including the representations and warranties made in the Loan
Documents (collectively, the "Provided Information"), together, if
customary, with appropriate verification and/or consents of the Provided
Information through letters of auditors or opinions of counsel of
independent attorneys acceptable to Lender and the Rating Agencies;
(b) at Borrower's expense, cause counsel to render opinions, which may
be relied upon by the holder of the Loan, the Rating Agencies and their
respective counsel, agents and representatives, as to non-consolidation,
fraudulent conveyance, and true sale or any other opinion customary in
securitization transactions with respect to the Premises and Borrower and
its affiliates, which counsel and opinions shall be reasonably satisfactory
to the holder of the Loan and the Rating Agencies; and
(c) execute such amendments to the Loan Documents and Borrower and/or
Member's Organizational Documents, enter into a lockbox or similar
arrangement with respect to the Receipts and establish and fund such
reserve funds (including, without limitation, reserve funds for deferred
maintenance and capital improvements) as may be requested by the holder of
the Loan or the Rating Agencies or otherwise to effect the Secondary Market
Transaction; provided, however, that Borrower shall not be required to
modify or amend any Loan Document if such modification or amendment would
(i) change the interest rate, the stated maturity or the amortization of
principal set forth in the Note, or (ii) modify or amend any other material
economic term of the Loan.
All reasonable third party costs and expenses incurred by Lender in
connection with Borrower's complying with requests made under this Section
6.27 shall be paid by Lender. In the event that the provisions of this
Agreement or any Loan Documents require the receipt of written confirmation
from each Rating Agency with respect to the ratings on the Securities, or,
in accordance with the terms of the transaction documents relating to a
Secondary Market Transaction, such a rating confirmation is required in
order for the consent of Lender to be given, Lender shall pay all of the
costs and expenses of Lender, Servicer and each Rating Agency in connection
therewith, and, if applicable, shall pay any fees imposed by any Rating
<PAGE>
Agency as a condition to the delivery of such confirmation.
6.27.2 Securitization Indemnification.
(a) Borrower understands that certain of the Provided Information and
the financial information required to be delivered by Borrower hereunder
(the "Required Records") may be included in disclosure documents in
connection with the Secondary Market Transaction, including, without
limitation, a prospectus, prospectus supplement or private placement
memorandum (each, a "Disclosure Document") and may also be included in
filings with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), or the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"), or
provided or made available to investors or prospective investors in the
Securities, the Rating Agencies, and service providers relating to the
Secondary Market Transaction. In the event that the Disclosure Document is
required to be revised prior to the sale of all Securities, Borrower will
cooperate with the holder of the Loan in updating the Disclosure Document
by providing all current information necessary to keep the Disclosure
Document accurate and complete in all material respects.
(b) Borrower agrees to provide in connection with each of (i) a
preliminary and a private placement memorandum or (ii) a preliminary and
final prospectus or prospectus supplement, as applicable, an
indemnification certificate (A) indemnifying Lender (and for purposes of
this Section 6.27, Lender hereunder shall include its officers and
directors), the affiliate of Credit Suisse First Boston Corporation ("First
Boston") that has filed the registration statement relating to the
securitization (the "Registration Statement"), each of its directors, each
of its officers who have signed the Registration Statement and each person
or entity who controls the affiliate within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act (collectively, the
"First Boston Group"), and First Boston, each of its directors and each
person who controls First Boston within the meaning of Section 15 of the
Securities Act and Section 20 of the Exchange Act (collectively, the
"Underwriter Group") for any losses, claims, damages or liabilities (the
"Liabilities") to which Lender, the First Boston Group or the Underwriter
Group may become subject insofar as the Liabilities arise out of or are
based upon any untrue statement or alleged untrue statement of any material
fact contained in the Provided Information or Required Records or upon the
omission or alleged omission to state in the Provided Information or
Required Records a material fact required to be stated in the Provided
Information or Required Records in order to make the statements in the
Provided Information or Required Records, in light of the circumstances
under which they were made not misleading and (B) reimbursing Lender, the
First Boston Group or the Underwriter Group for any legal or other expenses
reasonably incurred by Lender, the First Boston Group or the Underwriter
Group in connection with defending or investigating the Liabilities.
(c) Promptly after receipt by an indemnified party under this Section
6.27.2 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying
party under this Section 6.27.2, notify the indemnifying party in writing
of the commencement thereof, but the omission to so notify the indemnifying
<PAGE>
party will not relieve the indemnifying party from any liability which the
indemnifying party may have to any indemnified party hereunder except to
the extent that failure to notify causes prejudice to the indemnifying
party. In the event that any action is brought against any indemnified
party, and it notifies the indemnifying party of the commencement thereof,
the indemnifying party will be entitled, jointly with any other
indemnifying party, to participate therein and, to the extent that it (or
they) may elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party,
to assume the defense thereof with counsel satisfactory to such indemnified
party; provided, however, if the defendants in any such action include both
the indemnified party and the indemnifying party and the indemnified party
shall have reasonably concluded that there are any legal defenses available
to it and/or other indemnified parties that are different from or
additional to those available to the indemnifying party, the indemnified
party or parties shall have the right to select separate counsel to assert
such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. The indemnifying
party shall not be liable for the expenses of more than one separate
counsel unless an indemnified party shall have reasonably concluded that
there may be legal defenses available to it that are different from or
additional to those available to another indemnified party.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in Section
6.27.2(b) or (c) is for any reason held to be unenforceable by an
indemnified party in respect of any losses, claims, damages or liabilities
(or action in respect thereof) referred to therein which would otherwise be
indemnifiable under Section 6.27.2(b) or (c), the indemnifying party shall
contribute to the amount paid or payable by the indemnified party as a
result of such losses, claims, damages or liabilities (or action in respect
thereof); provided, however, that no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. In determining the amount of
contribution to which the respective parties are entitled, the following
factors shall be considered: (i) First Boston's and Borrower's relative
knowledge and access to information concerning the matter with respect to
which claim was asserted; (ii) the opportunity to correct and prevent any
statement or omission; and (iii) any other equitable considerations
appropriate in the circumstances. Lender and Borrower hereby agree that it
would not be equitable if the amount of such contribution were determined
by pro rata or per capita allocation.
(e) The liabilities and obligations of both Borrower and Lender under
this Section 6.27 shall survive the termination of this Agreement and the
satisfaction and discharge of the Debt.
6.28 Amendment and Restatement of Original Loan Agreement. This Amended and
Restated Loan Agreement amends and restates the Original Loan Agreement and
supercedes the Original Loan Agreement in its entirety.
Section 7
SPECIAL PROVISIONS
7.1 Tax and Insurance Escrow. In order to assure the payment of Taxes and
premiums with respect to all insurance coverage required pursuant to Section 8
of the Mortgage (collectively, "Insurance Premiums") as and when the same shall
become due and payable, the following provisions shall apply:
<PAGE>
7.1.1 Tax and Insurance Deposits. As of the date hereof, $597,578.79
of the Original Loan proceeds have been advanced to Borrower and currently
are on deposited with Lender for deposit into the Tax and Insurance Escrow
Subaccount (and shall constitute part of the Outstanding Principal Balance)
and shall be pledged to Lender as additional Collateral, all as more
particularly described in the Cash Management Agreement. Thereafter, on
each Payment Date, Borrower shall pay to Lender, in immediately available
funds for deposit into the Tax and Insurance Escrow Subaccount, an amount
equal to one-twelfth (1/12) of the Taxes and Insurance Premiums to become
due during the period commencing on the first day of the first month
following such Payment Date and ending twelve (12) months following such
first day. In all cases there must be paid hereunder, to be deposited and
held in the Tax and Insurance Escrow Subaccount, an amount sufficient to
pay such Taxes and Insurance Premiums, one month prior to the date when
they are due and payable. The amounts of all of the foregoing deposits with
respect to Taxes and Insurance Premiums together with all interest accruing
thereon from time to time, being (herein collectively called "Tax and
Insurance Deposits") shall be determined by Lender based on actual
invoices, or if such invoices are not available, based on one hundred
percent (100%) of the cost of the prior year's Taxes and Insurance
Premiums. Borrower shall promptly, upon the demand of Lender, make
additional Tax and Insurance Deposits as Lender may from time to time
require due to (i) failure of Borrower to make Tax and Insurance Deposits
in previous months, (ii) underestimation of the amounts of Taxes and/or
Insurance Premiums, (iii) the particular due dates and amounts of Taxes
and/or Insurance Premiums, or (iv) application of the Tax and Insurance
Deposits pursuant to this Agreement. All Tax and Insurance Deposits shall
be held by Lender in the Tax and Insurance Escrow Subaccount and invested
and applied as provided in the Cash Management Agreement.
7.1.2 Payment of Taxes and Insurance Premiums. Provided that no Event
of Default has then occurred and is continuing, Lender will, out of the
funds in the Tax and Insurance Escrow Subaccount (provided such funds are
sufficient for such purpose), upon the presentation to Lender by Borrower
of the bills therefor, pay the Taxes and Insurance Premiums or will, upon
the presentation of official receipted bills therefor, reimburse Borrower
for such payments made by Borrower. If the total funds on deposit in the
Tax and Insurance Escrow Subaccount shall not be sufficient to pay all of
the Taxes and Insurance Premiums when the same shall become due, then
Borrower shall pay to Lender on demand the amount necessary to make up the
deficiency. Lender shall be entitled, without request of Borrower, but,
prior to an Event of Default upon two (2) Domestic Business Days notice to
Borrower, to apply any funds in the Tax and Insurance Escrow Subaccount to
the payment of any Taxes (other than any Taxes which Borrower has notified
Lender that it is contesting and such contest is then permitted under the
Mortgage) and Insurance Premiums which have become due and have not yet
been paid. Borrower and Lender acknowledge and agree that Borrower shall
not be in default under the Mortgage for failure to pay Taxes or Insurance
Premiums, if such failure arises by reason of Lender's failure to comply
with its agreement contained in this Section 7.1.2.
7.1.3 Application upon Event of Default. Upon the occurrence and
during the continuance of an Event of Default, Lender may, at its option,
without being required to do so, apply any Tax and Insurance Deposits on
hand to pay Taxes or Insurance Premiums or to pay principal, interest and
other amounts payable to Lender hereunder or under the other Loan
<PAGE>
Documents, all in such order and manner as Lender, in its sole discretion,
may elect. When the principal and interest under the Note and all
prepayment premiums, if any, in connection therewith and all other
Obligations have been fully and properly paid, any remaining Tax and
Insurance Deposits shall be returned to Borrower.
7.1.4 Reliance. Lender shall be absolutely entitled to rely on any
statements of any Governmental Authority with respect to Taxes and any
statement of Borrower's insurance carrier or its agent with respect to
Insurance Premiums.
7.1.5 Borrower's Obligations. Borrower and Lender acknowledge that
Borrower shall not be in Default hereunder in its obligation to make the
Tax and Insurance Deposit on any Payment Date, to the extent funds are
available to make such deposit from monies deposited in the Cash Collateral
Account during the applicable Collection Period after applying such funds
to any item with a higher priority than such application to the Tax and
Insurance Escrow Subaccount in accordance with the terms of Section 7.4.2
hereof and of the Cash Management Agreement. Any transfer of funds from the
Cash Collateral Account to the Tax and Insurance Escrow Subaccount shall
satisfy Borrower's obligation hereunder to make the corresponding Tax and
Insurance Deposit, to the extent of the funds so transferred.
7.1.6 No Third Party Beneficiary. No provision of this Agreement, the
Mortgage or any other Loan Document shall be construed as creating in any
party other than Borrower and Lender (and Servicer), any rights in and to
the Tax and Insurance Deposits or any rights to have the Tax and Insurance
Deposits applied to payment of Taxes and Insurance Premiums. Lender shall
have no obligation or duty to any third party to collect or apply Tax and
Insurance Deposits.
7.2 Mortgage Subaccounts.
7.2.1 FF&E Reserve Subaccount. On each Payment Date, commencing on
January 10, 1999 (each, an "FF&E Payment Date"), Borrower shall pay to
Lender the FF&E Reserve Payment to be used in connection with the repair
and replacement of the furniture, fixtures and equipment at or in or used
in the operation of the Premises (the "FF&E Replacements"). Each FF&E
Reserve Payment shall be deposited in the Cash Collateral Account for
credit to the FF&E Reserve Subaccount and shall be pledged to Lender as
additional Collateral, all as more particularly described in the Cash
Management Agreement (all such FF&E Reserve Payments on deposit in the FF&E
Reserve Subaccount, together with interest accruing thereon from time to
time, being referred to herein as the "FF&E Reserve Funds"). For purposes
hereof, the "FF&E Reserve Payment" due on each FF&E Payment Date shall mean
an amount equal to four percent (4%) of the Receipts (which for the
purposes of this Section 7.2.1, shall include all Excluded Revenue Items)
generated by the Premises during the second calendar month preceding each
FF&E Payment Date prior to the Scheduled Maturity Date.
(a) Notwithstanding the foregoing, if Borrower shall expend any sums
from its own funds, and not out of the FF&E Reserve Subaccount, in respect
of any FF&E Replacement which shall have been approved by Lender in
accordance with any Approved Budget, Borrower shall receive a credit (the
"FF&E Reserve Payment Credit") to be applied against the FF&E Reserve
Payments due on the next succeeding FF&E Payment Date, provided (a)
Borrower shall have given Lender not less than ten (10) Domestic Business
<PAGE>
Days written notice that it intends to claim such credit and the proposed
amount thereof, b) no Event of Default shall have occurred and be
continuing hereunder, and (c) Lender shall, at its option, have inspected
and approved the Replacement and the amount of the FF&E Reserve Payment
Credit claimed by Borrower (and in connection therewith Borrower shall
provide Lender with such documents as Lender shall request to verify the
cost and completion of such Replacements). Unless and until Lender shall
have notified Borrower in writing that it has approved the FF&E Reserve
Payment Credit in accordance with the terms of this Section 7.2.1, Borrower
shall continue to make FF&E Reserve Payments on each FF&E Payment Date. On
the Maturity Date or on such earlier date as there shall occur an Event of
Default, any monies on deposit in the FF&E Reserve Subaccount shall, at the
option of Lender, be applied against the outstanding Obligations
(b) So long as no Event of Default shall have occurred and be
continuing hereunder, Borrower shall be entitled on any Payment Date to
disbursement of the FF&E Reserve Funds, subject to Borrower's satisfaction
of the following conditions: (i) to the extent the applicable FF&E
Replacement is not included within the then applicable Approved Budget,
Borrower shall give Lender and Servicer not less than thirty (30) days
notice of Borrower's request to incur the FF&E Replacement and Lender shall
have approved the requested FF&E Replacement (as approved, an "Approved
FF&E Replacement Expenditure"), which approval shall not be unreasonably
withheld, conditioned or delayed; and (ii) Borrower shall have given
Servicer not less than fifteen (15) days notice of the request for a
disbursement of the FF&E Reserves on account of an Approved FF&E
Expenditure.
7.3 Intentionally Omitted.
7.4 Application of Receipts.
7.4.1 Deposits into Clearing Account. All Receipts from the Premises
shall be deposited into the Clearing Account, for credit to the Cash
Collateral Account in accordance with the terms of the Cash Management
Agreement. The terms, covenants and conditions of the Cash Management
Agreement are hereby incorporated herein by reference. Following the
occurrence of a Event of Default, the provisions of this Section 7.4.1
shall be and remain in effect notwithstanding the curing of such Event of
Default.
7.4.2 Application of Receipts.
(a) Unless and until the occurrence of a Event of Default or a DCR
Lock Box Event, but only for so long as Grand Wailea Company is the
Manager, Borrower shall on each Payment Date apply all Receipts (which, for
purposes of this Section 7.4.2, shall include the sum of all Excluded
Revenue Items) received by or on behalf of Borrower during the previous
calendar month in the following order of priority:
(i) first, to Lender, in payment of the Tax and Insurance
Deposits due on such date;
(ii) second, to Borrower, for the payment of Expenses in
accordance with the applicable Approved Budget (other than (A) Taxes
and Insurance Premiums to be paid for out of the Tax and Insurance
Escrow Subaccount, and (B) Expenses to be paid for out of the FF&E
<PAGE>
Subaccount or Working Capital Reserve), or such other Expenses as
shall have been approved by Lender, provided, however, that Lender
hereby consents to (1) variances of the Approved Budget of up to ten
percent (10%) in the aggregate and up to the lesser of ten percent
(10%) or Fifty Thousand Dollars ($50,000) on a per line item basis,
and (2) Borrower's utilization of any cost savings of any line item to
the extent Borrower incurs a variance with respect to a second line
item in excess of the lesser of ten percent (10%) or Fifty Thousand
Dollars ($50,000);
(iii) third, to the Working Capital Reserve until the amount on
deposit therein is equal to One Million Five Hundred Thousand Dollars
($1,500,000);
(iv) fourth, to Lender, in payment of (x) the interest then due
and payable pursuant to Section 2.4 hereof, and then (y) the Servicing
Fee then due and payable pursuant to Section 2.10 hereof, and then (z)
any other amount payable on such date to Lender or Servicer pursuant
to this Agreement or any of the other Loan Documents including,
without limitation, pursuant to Section 2.5 hereof;
(v) fifth, to Lender, in payment of the FF&E Reserve Payment, if
any, due on such date in accordance with Section 7.2.1 hereof;
(vi) sixth, to the First Mezzanine Lender;
(vii)seventh, to the Second Mezzanine Lender (such Receipts as
remain after application of Receipts in accordance with items (i)
through (iv) above and this item (vii), the "Remaining Receipts"); and
(viii) finally, subject to Section 7.4.2(c) hereof, to Borrower, any
Receipts which remain after application to items (i) through (vii) as
set forth above, to be used by Borrower for any purpose determined by
Borrower and not otherwise prohibited hereunder.
(b) Upon termination of Grand Wailea Company as the Manager, but only
so long as there is no Event of Default or a DCR Lock Box Event, Borrower
shall on each Payment Date apply all Receipts (which, for purposes of this
Section 7.4.2, shall include the sum of all Excluded Revenue Items)
received by or on behalf of Borrower during the previous calendar month in
the following order of priority:
(i) first, to Lender, in payment of the Tax and Insurance
Deposits due on such date;
(ii) second, to Lender, in payment of (x) the interest then due
and payable pursuant to Section 2.4 hereof, and then (y) the Servicing
Fee then due and payable pursuant to Section 2.10 hereof, and then (z)
any other amount payable on such date to Lender or Servicer pursuant
to this Agreement or any of the other Loan Documents including,
without limitation, pursuant to Section 2.5 hereof;
(iii) third, to Borrower, for the payment of Expenses in
accordance with the applicable Approved Budget (other than (A) Taxes
and Insurance Premiums to be paid for out of the Tax and Insurance
Escrow Subaccount, and (B) Expenses to be paid for out of the FF&E
Subaccount), or such other Expenses as shall have been approved by
Lender, provided, however, that Lender hereby consents to (1)
<PAGE>
variances in the Approved Budget of up to ten percent (10%) in the
aggregate and up to the lesser of ten percent (10%) or Fifty Thousand
Dollars ($50,000) on a per line item basis, and (2) Borrower's
utilization of any cost savings of any line item to the extent
Borrower incurs a variance with respect to a second line item in
excess of the lesser of ten percent (10%) or Fifty Thousand Dollars
($50,000);
(iv) fourth, to Lender, in payment of the FF&E Reserve Payment,
if any, due on such date in accordance with Section 7.2.1 hereof;
(v) fifth, to the First Mezzanine Lender;
(vi) sixth, to the Second Mezzanine Lender (such Receipts as
remain after application of Receipts in accordance with items (i)
through (iv) above and this item
(vii), the "Remaining Receipts"); and (vii) finally, subject to
Section 7.4.2(c) hereof, to Borrower, any Receipts which remain after
application to items (i) through (vi) as set forth above, to be used
by Borrower for any purpose determined by Borrower and not otherwise
prohibited hereunder.
(c) Notwithstanding anything to the contrary contained herein, but
subject to the provisions of Section 7.4.2(d) hereof, in the event that
there shall occur a DCR Lock Box Event, thereafter unless and until (i) the
DCR Lock Box Threshold shall be achieved as determined by any subsequent
Quarterly DCR Test or (ii) the Borrower reduces the principal balance of
the Loan such that, upon such reduction, the DCR is restored to a level of
at least 1.10:1, the Servicer, in accordance with the terms of the Cash
Management Agreement, shall continue to apply Receipts in accordance with
Section 7.4.2(a) or 7.4.2(b), as applicable, hereof, except that all
Remaining Receipts shall be retained by the Servicer in the Cash Collateral
Account until the DCR Lock Box Threshold is achieved as determined by any
subsequent Quarterly DCR Test (any such Receipts so retained, the "Retained
Receipts"). In the event that any subsequent Quarterly DCR Test shall
determine that the DCR Lock Box Threshold has been achieved, and no Event
of Default shall have occurred and be continuing, promptly thereafter all
Retained Receipts shall be disbursed to Borrower in accordance with the
terms of the Cash Management Agreement. The provisions of this Section
7.4.2(c) shall be and remain in effect during any calendar quarter
following a Quarterly DCR Test which determines that the DCR Lock Box
Threshold has not been achieved. For purposes hereof, a "DCR Lock Box
Event" shall be deemed to have occurred if, commencing as of the first
Quarterly DCR Test measured after January 1, 2000, Lender shall determine
that the DCR is less than 1.05:1 (a DCR of 1.05:1 being referred to herein
as the "DCR Lock Box Threshold") and Lender shall have given written notice
thereof to Borrower.
(d) Notwithstanding anything to the contrary contained herein, upon
the occurrence and during the continuance of an Event of Default, Servicer
shall apply Receipts in any manner permitted under the Cash Management
Agreement, including, without limitation, applying any portion of Receipts
to all or any portion of the outstanding Obligations, and in no event shall
Borrower be entitled to receive any of the Remaining Receipts.
(e) Lender and Borrower hereby acknowledge and agree that Borrower
<PAGE>
shall remain liable for the payment of all amounts due under clauses (i),
(ii) and (iii) of Section 7.4.2(a) or 7.4.2(b), as applicable, hereof
whether or not sufficient Receipts exist to satisfy the same.
7.4.3 Quarterly DCR Tests.In order to ascertain whether or not the DCR
Lock Box Threshold has been achieved, Lender shall determine the DCR as of
the last day of each calendar quarter throughout the Term (each, a
"Quarterly DCR Test"), after January 1, 2000, each of which Quarterly DCR
Tests and the determinations made with respect thereto shall be in Lender's
sole but reasonable judgment and shall be absolute and binding absent
manifest error. Each Quarterly DCR Test shall be based upon the information
delivered to Lender in accordance with Section 4.14 hereof, together with
any other evidence which Lender may reasonably require to substantiate or
explain the calculation of Annualized Net Operating Income.
Section 8.
SINGLE PURPOSE ENTITY/SEPARATENESS
8.1 Representations, Warranties and Covenants. Borrower represents,
warrants and covenants as of the date hereof and until such time as the Loan and
all other amounts payable under any of the Loan Documents are paid in full,
that:
(a) Borrower shall not enter into any transaction of acquisition,
merger, consolidation or amalgamation, or liquidate, wind up or dissolve
itself (or suffer any liquidation or dissolution), create any subsidiaries,
or acquire by purchase or otherwise all or substantially all the business
or assets of, or stock or other evidences of beneficial ownership of, or
make any investment in, any Person, or make any material change in its
present method of conducting business or amend the terms of their
respective Organizational Documents;
(b) Borrower is not contemplating either the filing of a petition by
Borrower under any state or federal bankruptcy or insolvency laws or the
liquidation of all or a major portion of Borrower's assets or property, and
Borrower has no knowledge of any Person contemplating the filing of any
such petition against it;
(c) Except in connection with the Mezzanine Indebtedness, Borrower
has not guaranteed or otherwise hold out its credit as being
available to satisfy obligations of any other Person;
(d) Borrower was organized for the sole purpose of owning, managing
and operating the Premises and activities ancillary thereto;
(e) Borrower has not, and will not, engage in any business unrelated
to the ownership, management and operation of the Premises and activities
ancillary thereto and will conduct and operate its business as presently
conducted and operated;
(f) Borrower will not enter into any contract or agreement with any
member, partner, principal, shareholder or Affiliate of Borrower, except
upon terms and conditions that are intrinsically fair and substantially
similar to those that would be available on an arms-length basis with
unrelated third parties;
<PAGE>
(g) in addition to any limitations with respect thereto contained in
Section 4.4 hereof, Borrower has not incurred, and will not incur, any
Indebtedness or material liabilities, secured or unsecured, direct or
contingent (including guaranteeing any obligation), other than the
Indebtedness and the Mezzanine Indebtedness permitted under Section 4.4
hereof; provided, however, that no such Indebtedness or liabilities (other
than the Loan and the Mezzanine Indebtedness) may be secured (senior,
subordinate or pari passu) by the Premises or any portion thereof, except
as expressly permitted in said Section 4.4 hereof;
(h) Borrower has not made, nor will it make, any loans or advances to
any third party (including any Affiliate of Borrower) and will not pledge
its assets for the benefit of any third party (including any Affiliate of
Borrower);
(i) Borrower is and will be solvent and will pay its debts and
liabilities (including employment and overhead expenses) from its own
assets as the same shall become due;
(j) Borrower will maintain its own separate books and records and bank
accounts, in each case which are and will be separate and apart from those
of any other Person;
(k) Borrower will be, and at all times will hold itself out to the
public as, a legal entity separate and distinct from any other entity
(including any Affiliate thereof), shall maintain and utilize separate
stationery, invoices and checks, shall otherwise conduct its business and
own its assets in its own name, and shall correct any known
misunderstanding regarding its separate identity;
(l) Borrower has and will maintain separate financial statements and
will file its own tax returns;
(m) Borrower will maintain adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character and in light
of its contemplated business operations;
(n) Borrower will seek not the dissolution or winding up, in whole or
in part, of Borrower;
(o) Borrower will not commingle its funds or other assets with those
of any Affiliate or other Person;
(p) Borrower has and will maintain its assets in such a manner that it
is not costly or difficult to segregate, ascertain or identify its
individual assets from those of any Affiliate or any other Person;
(q) Borrower has and will maintain a reasonable number of employees in
light of its contemplated business operations and shall pay the salaries of
its employees, and will not do any act which would make it impossible to
carry on the ordinary business of Borrower;
(r) Borrower will not file or consent to the filing of a petition for
bankruptcy, reorganization, assignment for the benefit of creditors or
similar proceeding under any federal or state bankruptcy, insolvency,
reorganization or other similar law with respect to Borrower, without the
<PAGE>
unanimous consent of its members;
(s) the sole assets of Borrower are, and for the Term shall be, (i)
the fee interest in the Premises, (ii) such assets as are otherwise
acquired in connection with the use, operation, maintenance, repair or
management of the Premises, and (iii)cash and accounts receivable;
(t) Borrower has and will observe all partnership formalities, limited
liability company formalities or corporate formalities, as applicable;
(u) Borrower has not and will not acquire the obligations or
securities of any of their partners, members or shareholders, as
applicable;
(v) Borrower shall allocate fairly and reasonably any overhead for any
office space which such entity shares with any other entity; and
(w) Borrower will at all times comply, with each of the
representations, warranties, and covenants contained in this Article 8.
Section 9
REFINANCING THE LOAN; LOAN ASSUMPTION
9.1 Intentionally Omitted.
9.2 Intentionally Omitted.
9.3 Assumption of Loan.
9.3.1General Conditions to All Assumptions.Notwithstanding anything to
the contrary contained herein, during the Term Lender shall permit Borrower
to sell and convey the Premises in its entirety (hereinafter, a "Sale") to
any Person and in connection therewith allow the proposed transferee of the
Premises ("Buyer") to assume this Loan provided that each of the following
terms and conditions are satisfied for each such Sale:
(a) no Event of Default has occurred and is then continuing. In this
regard, Lender agrees to provide and deliver to Borrower, within two (2)
business days after written request by Borrower, a statement, duly
acknowledged and certified, setting forth (i) the original principal
balance of the Loan, (ii) the then unpaid principal balance of the Loan,
(iii)all accrued but unpaid interest and any other sums then due and owing
in connection with the Loan, (iv) the applicable LIBOR Interest Rate, (v)
that there exists under the Loan Documents (A) no monetary Events of
Default and (B) to the best of the Lender's knowledge, no other Events of
Default or events, but for the passage of time or giving of notice, that
could constitute an Event of Default (or setting forth such Events of
Default or events);
(b) Borrower pays Lender, concurrently with the closing of such Sale,
a non-refundable assumption fee in an amount equal to all out-of-pocket
costs and expenses, including without limitation attorneys' fees, incurred
by Lender in connection with such Sale;
(c) Borrower gives Lender written notice (a "Sale Notice") of the
terms of such prospective Sale not less than fifteen (15), nor more than
<PAGE>
sixty (60) days, before the date on which such Sale is scheduled to close;
(d) the Buyer assumes and agrees to pay the Obligations and, prior to
or concurrently with the closing of such Sale, and the Buyer (i) executes,
without any cost or expense to Lender, such documents and agreements as
Lender shall reasonably require to evidence and effectuate said assumption,
in form and substance satisfactory to Lender in its sole and absolute
discretion, including without limitation an assumption agreement in the
form of Schedule I, and (ii) delivers such legal opinions as Lender may
require including without limitation an opinion as to the substantive
non-consolidation of the assets of the Buyer and any other Person in any
bankruptcy proceeding against the Buyer, any Affiliate of the Buyer and/or
any other Person;
(e) Borrower and the Buyer execute, without any cost or expense to
Lender, new financing statements or financing statement amendments, a new
interest rate cap agreement and a new pledge and security agreement
thereafter (if the Interest Rate Cap Agreement is not being assigned to the
Buyer) and any additional documents reasonably requested by Lender
including without limitation such amendments to this Agreement, the Note
and/or the Mortgage as are necessary to conform such documents to the
organizational structure of the Buyer;
(f) Borrower or Buyer delivers to Lender, without any cost or expense
to Lender, such endorsements to the Title Policy, hazard insurance
endorsements or certificates and other similar materials as Lender may deem
necessary at the time of such Sale, all in form and substance satisfactory
to Lender, including without limitation an endorsement or endorsements to
the Title Policy insuring the Lien of the Mortgage, extending the effective
date of such policy to the date of execution and delivery (or, if later, of
recording) of the assumption agreement referenced above in subparagraph (d)
of this Section 9.3, with no additional exceptions added to such policy and
insuring that fee simple title to the Premises is vested in the Buyer;
(g) Borrower executes and delivers to Lender a release of Lender and
its officers, directors, employees and agents, from all claims and
liability relating to the transactions evidenced by the Loan Documents
through and including the date of the closing of such Sale, which release
shall be in form and substance satisfactory to Lender;
(h) the Buyer is a single purpose, bankruptcy remote entity which has
(i) two Independent Directors if the Buyer is a single member limited
liability company or (ii) one Independent Director in all other
circumstances, and in either event whose organizational structure is
otherwise acceptable to Lender in its sole discretion;
(i) the representations and warranties on the part of Borrower
contained in Section 8.1 hereof are true and correct as if made by the
Buyer on the date of the Sale, and the Buyer delivers to Lender a
certificate to such effect;
(j) Lender receives copies of all consents, licenses and approvals, if
any, required in connection with such assignment and assumption; and
(k) Lender receives recommendations in writing from the Rating
Agencies that such Sale and the concurrent assumption of the Loan will not
<PAGE>
result in a re-qualification, reduction or withdrawal of any rating
initially assigned or to be assigned in connection with any Securitization.
Notwithstanding anything to the contrary in the foregoing conditions,
Lender hereby approves the entities set forth in Schedule H in connection
with the first Sale.
9.3.2 Conditions Upon Second Assumption. After the first Sale (but not
in connection with the first Sale), the following additional conditions
must be satisfied in connection with any assumption of the Loan:
(a) Borrower also shall pay to Lender (in addition to the amount set
forth in Section 9.3(b)) an additional nonrefundable assumption fee in an
amount equal to one percent (1%) of the then Outstanding Principal Balance;
and
(b) In connection with delivery of the Sale Notice, Buyer shall
deliver to Lender all such information concerning the Buyer as Lender would
require in evaluating an initial extension of credit to such Buyer as a
borrower. Lender shall have no right to approve or disapprove the proposed
Buyer in connection the first Sale of the Premises, but Lender shall have
the right to approve or disapprove any subsequent proposed Buyer. In
determining whether to give or withhold its approval of the proposed Buyer,
Lender shall consider the Buyer's experience and track record in owning and
operating facilities similar to the Premises, the Buyer's financial
strength, net worth and credit history, the Buyer's general business
standing and the Buyer's relationships and experience with contractors,
vendors, tenants, lenders and other business entities; provided, however,
that, notwithstanding Lender's agreement to consider the foregoing factors
in determining whether to give or withhold such approval, such approval
shall be given or withheld based on what Lender determines to be
commercially reasonable in Lender's sole discretion and, if given, may be
given subject to such conditions as Lender may deem appropriate.
9.3.3 Loan to Value and DCR. If the first Sale or any subsequent Sale
occurs more than six (6) months after the date hereof, the following
additional conditions shall apply:
(a) The Sale Loan-to-Value Ratio shall not exceed eighty percent
(80%); and
(b) The DCR as determined by Lender upon and as of the date of its
receipt of the Sale Notice) is not less than 1:25.1.
9.3.4 Termination of Right to Loan Term Reduction. If Borrower has not
previously elected to make the Loan Term Reduction pursuant to Section 2.11
hereof, the right to make the Loan Term Reduction election shall terminate
upon the first Sale, and neither Buyer nor any subsequent buyer, or
permitted successor or assign of either of them, shall have any right to
make the Loan Term Reduction election in Section 2.11 hereof.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, each of Borrower and Lender has executed and delivered
this Agreement or caused its duly authorized representative to execute and
deliver the same as of the date first above written.
LENDER: CREDIT SUISSE FIRST BOSTON
MORTGAGE CAPITAL LLC, a Delaware limited liability company
By /s/ Allan Baum
----------------------------------
Name Allan Baum
Authorized Signatory
BORROWER: INTERNATIONAL HOTEL ACQUISITIONS, LLC, a Delaware limited
liability company
By /s/ Lance J. Graber
----------------------------------
Name Lance J. Graber
Its Vice President
<PAGE>
31067/733220v11
SCHEDULE A
Description of Land
-------------------
All of those certain parcels of land situate at Honuaula, District of Makawao,
Island and County of Maui, State of Hawaii, described as follows:
LOTS: 463-A, area 36.603 acres;
463-C, area 0.297 acre; and
463-D, area 0.003 acre, more or less, as shown on Map 72,
filed with Land Court Application No. 1804 of Matson
Navigation Company.
AS TO LOT 463-A ONLY:
EXCEPTING any portion of the above described property lying
below the line of high water, said line of high water being
defined by Sections 205A-41 to 205A-43.6 of the Hawaii Revised
Statutes, as amended, and also excepting any artificial
accretions to said property waterward of said high water line.
Being all of the land described in and covered by Transfer Certificate of Title
No. 511,711 Issued To: International Hotel Acquisitions, LLC, a Delaware limited
liability company
(Deed dated June 15, 1998, recorded as Land Court Document No. 2463683.)
<PAGE>
SCHEDULE B
Assumed Contracts
-----------------
1. Concession Agreement dated May 5, 1995, by and between Grand Wailea Company
and Budget Rent A Car Systems, Inc.
2. Concession Agreement dated September 4, 1991 by and between Grand Wailea
Company and American Express Travel Related Services Company, Inc., as
amended by instrument dated ______________, 1996 (executed on or about
October 3, 1996).
3. Standard Concession Lease Agreement dated June 16, 1997, by and between
Grand Wailea Company, as Landlord, and Ki'i Gallery, Inc. as Tenant.
4. Standard Concession Lease Agreement (undated), by and between Grand Hyatt
Wailea, as Landlord, and Richter's of Hawaii, as Tenant, as amended by
written notice dated May 22, 1996, from Tenant to Landlord of exercise of
option to extend lease term.
5. Standard Concession Lease Agreement (undated), by and between Grand Hyatt
Wailea, as Landlord, and Senses Joint Venture, as Tenant, as assigned by
Tenant to W H Smith Hotel Stores Inc. pursuant to Assignment of Lease dated
November 27, 1991, and as amended by First Amendment to Lease dated
November 27, 1991 by and between Grand Hyatt Wailea, as Landlord, and W. H.
Smith Hotel Stores, Inc.
6. Standard Concession Lease Agreement dated November 24, 1997, by and between
Grand Wailea Resort Hotel and Spa, as Landlord, and Maui Clothing Company,
Inc., as Tenant.
7. Standard Concession Lease Agreement (undated) by and between Grand Wailea
Resort Hotel and Spa, as Landlord, and Noa Noa Kona, Inc., as Tenant.
8. Standard Concession Lease Agreement dated April 24, 1991, by and between
Grand Hyatt Wailea, as Landlord, and Sandal Tree Limited, as Tenant.
9. Standard Concession Lease Agreement dated August 30, 1996, by and between
Grand Wailea Company, as Landlord, and Lorenzi of Italy, as Tenant.
10. Standard Concession Lease Agreement dated February 27, 1996, by and between
TSA Management Company, as Landlord, and J. Chong, Inc., dba Tropicana I,
as Tenant.
11. Standard Concession Lease Agreement dated April 30, 1997, by and between
Grand Wailea Company, as Landlord, and Lahaina Printsellers, Ltd., as
Tenant.
<PAGE>
12. Standard Concession Lease Agreement (undated), by and between Grand Hyatt
Wailea, as Landlord, and Edward D. Sultan Co., Ltd., as Tenant (HF Wichman
Lease), as amended by written notice dated August 2, 1996, from Tenant to
Landlord of exercise of option to extend lease term.
13. Standard Concession Lease Agreement (undated), by and between Grand Hyatt
Wailea, as Landlord, and W. H. Smith Hotel Stores, Inc., as Tenant (Men's
Shop).
14. Standard Concession Lease Agreement dated September 10, 1991, by and
between Grand Wailea Company, as Landlord, and Resort Medical Services,
Ltd., as Tenant.
15. Concession Agreement with Wrap-A-Rainbow, Inc., dated November 4, 1996.
16. Service Agreement dated January 12, 1998, by effective as of January 15,
1998, by and between Grand Wailea Resort, Hotel and Spa, and Authentic
Concepts Inc.
17. Service Agreement dated January 12, 1998, but effective as of January 12,
1998, by and between Grand Wailea Resort, Hotel and Spa, and Lafferty
Watersports, Inc.
18. Service Agreement dated January 15, 1998, but effective as of January 15,
1998, by and between Grand Wailea Resort, Hotel and Spa, and Rainbow
Aquatics.
19. Service Agreement dated January 19, 1998, but effective as of January 19,
1998, by and between Grand Wailea Resort, Hotel and Spa, and Rochelle
Salzer Artworks.
20. Concession Agreement dated March 26, 1998 by and between Grand Wailea
Company, as Landlord, and JTB Hawaii, Inc., as Tenant.
21. Service Contracts (See attached Exhibit 1).
22. Other Existing Employment Agreements (See attached Exhibit 1).
23. Computer Up-grade Contracts (See attached Exhibit 1).
24. Incentive Compensation Agreement dated and agreed March 9, 1998 by and
between Grand Wailea Resort, Hotel & Spa and Mark Malone.
25. Incentive Compensation Agreement dated and agreed January 20, 1998 by and
between Grand Wailea Resort, Hotel & Spa and Brian Haruguchi.
26. Incentive Compensation Agreement dated and agreed March 2, 1998 by and
between Grand Wailea Resort, Hotel & Spa and Lance Gilliland.
27. Concession Agreement dated December 15, 1997, by and between TSA Management
Company, Ltd., and The Business Center LLC, together with amendment dated
April 13, 1998 by and among Solidrock L.L.C., TSA Management Company, Ltd.,
and Grand Wailea Company.
28. Standard Concession Sublease Agreement dated January 1, 1993, by and
between TSA Management, Inc., and Double Check Photo Systems, Inc.,
together with Guaranty dated February 4, 1998 by Pierre Crevolin, letter
<PAGE>
dated April 17, 1998 addressed to Mr. Pierre Crevolin from Eileen Maniaci
regarding "Lease Renewal", and Extension of Lease letter addressed to TSA
Management Company, Ltd.
29. Standard Concession Lease Agreement dated February 27, 1996, by and between
TSA Management Company, Limited, as Landlord, and J. Chong, Inc., dba
Tropicana I, as Tenant (for 423 square feet formerly occupied by Lahaina
Print Sellers).
<PAGE>
EXHIBIT 1
---------
Service Contracts
1. Mitsubishi Elevators & Escalators (Service Agreement dated August 1, 1993)
by and between Grand Wailea Resort, Hotel and Spa and MEC Elecator Company,
together with Vertical Transportation Maintenance Agreement (undated) by
and between MEC Elevator Company and Grand Wailea Resort, Hotel & Spa.
2. New Hermes Incorporated (Extended Warranty Agreement dated July 21, 1995)
by and between Grand Wailea Resort, Hotel & Spa, as buyer, and New Hermes,
Incorporated Service and Customer Support.
3. NEC Business Communication systems (West), Inc. (Maintenance Service
Agreement NEC Business Communications Systems (Hawaii) dated November 21,
1996, by and between NEC Business Communication Systems (Hawaii), a
division of NEC Business Communication System (West), Inc., and Grand
Wailea Co., together with letter dated October 23, 1997 from NEC indicating
the automatic renewal of the NEAXA 2400 TELEPHONE switch, letter dated
November 18, 1997 offering to add the Centigram Voicemail system to fill
parts and labor telephone switch maintenance agreement.
4. Hawaii Sound Systems, Inc. (Agreement dated October 24, 1994 accepted by
Grand Wailea Resort).
5. Hewlett Packard (Agreement for Support Service Package Summary, Customer
Contract Information for Support Services, Support Service Summary,
Hardware Products Supported, Agreement Summary of Charges for Support
Services, dated February 18, 1998).
6. Johnson Controls (Renewal of Service Agreement - Metasys, JC 85/40 letter
dated July 23, 1996 accepted by Brian Haraguchi on August 7, 1996).
7. JRS International, Inc. (Service Agreement dated October 1, 1993, but
effective October 1, 1993, by and between Grand Wailea Resort, Hotel and
Spa and JRS International, Inc.
8. MGM Services, Inc. (Service Agreement dated November 8, 1994, but effective
January 1, 1995, by and between Grand Wailea Resort, Hotel and Spa and MGM
Services, Inc.
9. Maui Audio Center (Service Agreement dated August 1, 1993, but effective
August 1, 1993, by and between Grand Wailea Resort, Hotel and Spa and Maui
Audio Center.
<PAGE>
10. NALCO Chemical Company (Service Agreement dated May 23, 1994, but effective
as of June 1, 1994, by and between Grand Wailea Resort, Hotel and Spa, and
NALCO Chemical Company.
11. GASCO, Inc. (Service Agreement dated April 20, 1994, but effective April
15, 1994, by and between Grand Wailea Resort, Hotel and Spa, and GASCO,
Inc.
12. Restaurant Environmental Services, Inc. (Service Agreement dated August 11,
1997, but effective as of August 11, 1997, by and between Grand Wailea
Resort, Hotel and Spa, and Restaurant Environmental Services Inc.
13. Servidyne Systems, Inc. (Service Agreement dated July 20, 1993, but
effective as of August 1, 1993, by and between Grand Wailea Resort, Hotel
and Spa, and Servidyne Systems, Inc.
14. TCI of Hawaii, Inc. (Cable Television Bulk Billing Agreement - Hotel-Owner
Installed, dated January 1, 1997 by TCI of Hawaii, Inc. dated January 1,
1997 by and between TCI of Hawaii, Inc., as Operator, and Grand Wailea
Resort, as Owner.
15. Simplex (Service Agreement dated July 10, 1997, but effective July 1, 1997,
by and between Grand Wailea Resort, Hotel and Spa, and Simplex.
16. Uniquest The Solution Source (Purchase and Software License Agreement
Hospitality Division entered into on or about May 1993, by and between
UNIQUEST, Inc. and Grand Wailea Resort Hotel & Spa.
17. Valley Isle Pest Control, Inc. (Service Agreement dated August 18, 1993,
but effective September 1, 1993, by and between Grand Wailea Resort, Hotel
and Spa and Valley Isle Pest Control, Inc.
18. SESAC (SESAC, Inc. Hotel, Motel & Resort Performance License dated
September 25, 1996, between SESAC, Inc. and Grand Wailea Company, dba:
Grand Wailea Resort, Hotel & Spa).
19. LodgeNet (LodgeNet Guest Pay Agreement (undated) by and between LodgeNet
Entertainment Corporation and Grand Wailea Resort, Hotel & Spa, and
Addendum attached thereto), executed on or about May 23, 1996.
20. AT&T (AT&T Commission Agreement Renewal Agreement entered into June 16,
1995, between AT&T Communications, Inc. acting on behalf of the Interstate
Division of AT&T Corp. and the AT&T Communications interexchange companies,
and Grand Wailea Resort, together with AT&T Commission Agreement Bonus
Addendum entered into June 16, 1995, and Letter of Authorization.
21. Audio Visual Headquarters (Agreement for Audio Visual Equipment and
Services, entered into on March 1, 1997, by and between Audiovisual
Headquarters Corporation, and Grand Wailea Resort Hotel & Spa.
22. BHP Petroleum - Gas Express (Letter regarding Commercial Fleet charge
cards).
23. EPS Electronic Processing Source, Inc. (Merchant Processing Agreement
entered by and among First USA Merchant Services, Inc., Electronic
<PAGE>
Processing Source, Inc. and Grand Wailea Company, dba Grand Wailea Resort,
Hotel & Spa, executed on May 24, 1993).
24. Murad, Inc. (Murad, Inc. Charter Club Membership Agreement agreed by Grand
Wailea Resort & Spa).
Other Existing Employment Agreements
1. Gregory Koestering (Employment Agreement dated May _____, 1995, by and
between The Grand Wailea Company, and Gregory Koestering).
2. Hiroki Hayashi (Employment Agreement dated July 22, 1995, by and between
The Grand Wailea Company, and Hiroki Hayashi).
3. Stacey Hiramoto (Employment Agreement dated October 24, 1995, by and
between The Grand Wailea Company, and Stacey Hiramoto).
4. John Rust (Employment Agreement dated November 1, 1995, by and between
Grand Wailea Company, and John Rust).
5. Pete Enriques (Employment Agreement dated November 1, 1995, by and between
Grand Wailea Company, and Pete Enriques).
6. Mark Feldman (Employment Agreement dated Nocember 1, 1995, by and between
Grand Wailea Company, and Mark Feldman).
Computer Up-grade Contracts
1. Agreement dated October 23, 1997, by and between Grand Wailea Company and
International Business Machines Corporation, to provide
connectivity/networking.
2. Agreement dated November 21, 1997, by and between Grand Wailea Company and
International Business Machines Corporation, for desktop computer network
implementation.
3. Intellectual Property License and Support Agreement dated , by and between
Micros Systems, Inc., and Grand Wailea Company.
Fidelio Agreements
1. GTE Leasing Corporation Flex Lease Agreement dated September 8, 1998,
between International Hotel Acquisitions, LLC ("IHA") and GTE Leasing
Corporation.
2. GTE Leasing Corporation Flex Lease Agreement dated September __, 1998,
between IHA and Pacific Computer Associates.
3. Intellectual Property License and Support Agreement between IHA and MICROS
Systems, Inc.
4. Hardware Sales Agreement between IHA and MICROS Systems, Inc.
<PAGE>
SCHEDULE C
Leases
------
See Attached.
<PAGE>
Project Chapel
Grand Wailea
Maui, Hawaii
Retail Leases
-------------
Tenant Name: Budget Rent-A-Car
Original Effective Date: 01/09/95
Original Term Length: 5 years
Original Term Date: 01/08/00
Extention (Y/N): N
Extention Term: NAP
SqFt. Rented: NAV
Base Rent per Sq.Ft.: $1,000.00
Percentage Rent: 7.5%
(Rent = Greater of the Base
Illegible)
Gross/Net: Net
Expense Information: ---
Other:
Miscellaneous:
<PAGE>
Project Chapel
Grand Wailea
Maui, Hawaii
Retail Leases
-------------
Tenant Name: American Express
Original Effective Date: 09/04/91
Original Term Length: 5 years
Original Term Date: 09/03/96
Extention (Y/N): Y
Extention Term: 3 years
SqFt. Rented: 148
Base Rent per Sq.Ft.: $17.57
Percentage Rent: (5%-8%) See Below
(Rent = Greater of the Base Illegible)
Gross/Net: Net
Expense Information: Reimburse Utilities & Telephone
Other: ---
Miscellaneous: % Rent Schedule:
<TABLE>
<CAPTION>
Monthly Gross Sales % Rent
------------------- ------
<S> <C>
$0 - 74,999.99 5.0%
$75,000-124,999.99 7.0%
$125,000 8.0%
</TABLE>
<PAGE>
Project Chapel
Grand Wailea
Maui, Hawaii
Retail Leases
-------------
Tenant Name: Ki'i Gallery
Original Effective Date: 06/16/97
Original Term Length: 5 years
Original Term Date: 06/15/02
Extention (Y/N): N
Extention Term: NAP
SqFt. Rented: 250
Base Rent per Sq.Ft.: $7.50
Percentage Rent: 12.0% (Rent = Greater of the Base Illegible)
Gross/Net: Net
Expense Information: Reimburse Landlord for Utilities, Insurance
& Construction
Other:
Miscellaneous:
<PAGE>
Project Chapel
Grand Wailea
Maui, Hawaii
Retail Leases
-------------
Tenant Name: Richter's of Hawaii
Original Effective Date: 9/4/91 (Unclear)
Original Term Length: 5 years
Original Term Date: 09/03/96
Extention (Y/N): Y
Extention Term: 5 years
SqFt. Rented: 533
Base Rent per Sq.Ft.: $10.01 plus CPI adj. for Yr'98
Percentage Rent: None (Rent = Greater of the Base Illegible)
Gross/Net: Net
Expense Information: Reimburse Landlord for Utilities, Insurance
& Construction
Other: CPI Adjustment for Current Rental Rate?
Miscellaneous: Rent Schedule:
<TABLE>
<CAPTION>
Term Begin Term End Monthly Rent
---------- -------- ------------
<S> <C> <C>
Sep 96 Sep 97 $5,333
Sep 97 Sep 98 $5,333
Sep 98 Sep 99 $5,866
Sep 99 Sep 00 $6,389
Sep 00 Sep 01 $6,932
</TABLE>
<PAGE>
Project Chapel
Grand Wailea
Maui, Hawaii
Retail Leases
-------------
Tenant Name: WH Smith
Original Effective Date: 9/4/91 (Unclear)
Original Term Length: 10 years
Original Term Date: 09/03/00
Extention (Y/N): N
Extention Term: NAP
Sq Ft. Rented: 2,600
Base Rent per Sq.Ft.: 13% of 90% of '96 Sales
Percentage Rent: 13.0%(Rent = Greater of the Base Illegible)
Gross/Net: Net
Expense Information: Reimburse Landlord for Utilities, Insurance
& Construction
Other: Assignment of lease from Senses Joint
Venture to WH Smith in 11/27/91
Miscellaneous:
<PAGE>
Project Chapel
Grand Wailea
Maui, Hawaii
Retail Leases
-------------
Tenant Name: Noa Noa
Original Effective Date: 03/03/92
Original Term Length: 5 years
Original Term Date: 03/02/97
Extention (Y/N): N
Extention Term: 5 years
Sq Ft. Rented: 2,160 (possibly more)
Base Rent per Sq.Ft.: 80% of the rent paid in fifth yr
Percentage Rent: 9.0%(Rent = Greater of the Base Illegible)
Gross/Net: Net
Expense Information: Reimburse Landlord for Utilities, Insurance
& Construction
Other: Noa Noa Subleased the space from the Master Lessee
in 3/1/97. The master lease was canceled by Painted
Lady Inc. on Jan. l, 1998. Noa Noa assumed the
master lease.
Miscellaneous:
<PAGE>
Project Chapel
Grand Wailea
Maui, Hawaii
Retail Leases
-------------
Tenant Name: Cruise (Maui Clothing Co.)
Original Effective Date: 11/24/97
Original Term Length: 5 years
Original Term Date: 11/23/02
Extention (Y/N): N
Extention Term: NAP
SqFt. Rented: 1,220
Base Rent per Sq.Ft.: $6.00
Percentage Rent: 12.0% (Rent = Greater of the Base Illegible)
Gross/Net: Net
Expense Information: Reimburse Landlord for Utilities, Insurance &
Construction
Other: Recapture clause (4.5): If total rent is less than
110% of Min. Rent, lease can be terminated unless
tenant pays 120% of the Min. Rent.
Miscellaneous:
<PAGE>
Project Chapel
Grand Wailea
Maui, Hawaii
Retail Leases
-------------
Tenant Name: Sandal Tree
Original Effective Date: 04/24/91
Original Term Length: 5 years
Original Term Date: 04/23/96
Extention (Y/N): Y
Extention Term: 5 years
Sq. Ft. Rented: 1,000
Base Rent per Sq.Ft.: $7.50
Percentage Rent: 12.0% (Rent = Greater of the Base Illegible)
Gross/Net: Net
Expense Information: Reimburse Landlord for Utilities, Insurance &
Construction
Other: Recapture clause (4.5): If total rent is less than
125% of Min. Rent, lease can be terminated unless
tenant pays 150% of the Min. Rent.
Miscellaneous:
<PAGE>
Project Chapel
Grand Wailea
Maui, Hawaii
Retail Leases
-------------
Tenant Name: Tropicana
Original Effective Date: 09/09/92
Original Term Length: 5 years
Original Term Date: 09/08/97
Extention (Y/N): Y
Extention Term: 5 years
SqFt. Rented: 423
Base Rent per Sq.Ft.: $6.25
Percentage Rent: 12.0% (Rent = Greater of the Base Illegible)
Gross/Net: Net
Expense Information: Reimburse Landlord for Utilities, Insurance &
Construction
Other: Recapture clause (4.5): If total rent is less than
120% of Min. Rent, lease can be terminated unless
tenant pays 150% of the Min. Rent (See Amendment
dated 1/1/95)
Miscellaneous:
<PAGE>
Project Chapel
Grand Wailea
Maui, Hawaii
Retail Leases
-------------
Tenant Name: Lahaina Printsellers
Original Effective Date: 04/08/93
Original Term Length: 5 years
Original Term Date: 04/07/98
Extention (Y/N): Y
Extention Term: 4 years (Ending 3/31/02)
Sq. Ft. Rented: 423
Base Rent per Sq.Ft.: $6.00
Percentage Rent: 12.0% (Rent = Greater of the Base Illegible)
Gross/Net: Net
Expense Information: Reimburse Landlord for Utilities, Insurance
& Constructions
Other: Recapture clause (4.5): If total rent is less than
120% of Min. Rent, lease can be terminated, unless
tenant pays 150% of the Min. Rent.
Miscellaneous:
<PAGE>
Project Chapel
Grand Wailea
Maui, Hawaii
Retail Leases
-------------
Tenant Name: HF Wichman
Original Effective Date: 08/28/91
Original Term Length: 5 years
Original Term Date: 08/27/96
Extention (Y/N): Y
Extention Term: 5 years
Sq. Ft. Rented: 658
Base Rent per Sq.Ft.: $/.50
Percentage Rent: i) 12.0% for Items over $10,000
(Rent = Greater of the Base
ii) 10.0% for Items under $10,000 Illegible)
Gross/Net: Net
Expense Information: Reimburse Landlord for Utilities, Insurance
& Construction
Other:
Miscellaneous:
<PAGE>
Project Chapel
Grand Wailea
Maui, Hawaii
Retail Leases
-------------
Tenant Name: WH Smith (Men's Shop)
Original Effective Date: 9/4/91 (Unclear)
Original Term Length: 5 years
Original Term Date: 09/03/06
Extention (Y/N): N
Extention Term: NAP
SqFt. Rented: 744
Base Rent per Sq.Ft.: Unknown (See Note)
Percentage Rent: 12.0% (Rent = Greater of the Base Illegible)
Gross/Net: Net
Expense Information: Reimburse Landlord for Utilities, Insurance
& Construction
Other:
Miscellaneous:
NOTE: Floral Gallery (TSA Kula, 700 sqft), Napua Gallery (TSA
Napua, 3,100 sqft) & TSA Mgmt (2 spaces, 2,200 sqft total)
are paying $1.00 annual rent each for their leases.
WH Smith (Men's Shop) - The rental rate for year 6 to year
10 is not stated in the contract (article 4.1). Yr 5 Rent =
$3720 per month. ($5.00/sqft)
<PAGE>
Project Chapel
Grand Wailea
Maui, Hawaii
Retail Leases
-------------
Tenant Name: Resort Medical Services
Original Effective Date: 09/10/91
Original Term Length: 10 years
Original Term Date: 09/09/01
Extention (Y/N): N
Extention Term: NAP
Sq. Ft. Rented: 1,250
Base Rent per Sq.Ft.: $2.00
Percentage Rent: 7.0% (Rent = Greater of the Base Rent = Sum of
the Base & % Illegible)
Gross/Net: Net
Expense Information: Reimburse Landlord for Utilities, Insurance
& Construction
Other:
Miscellaneous:
<PAGE>
Project Chapel
Grand Wailea
Maui, Hawaii
Retail Leases
-------------
Tenant Name: Grand Wailea Wedding
Original Effective Date: 05/01/94
Original Term Length: 10 years
Original Term Date: 04/30/04
Extention (Y/N): N
Extention Term: NAP
SqFt. Rented: Seaside Chapel
Base Rent per Sq.Ft.: NAP
Percentage Rent: 15.0% (Rent = Greater of the Base Illegible)
Gross/Net: Net
Expense Information: Utilities & Insurance paid by Lessee
Other:
Miscellaneous:
<PAGE>
Project Chapel
Grand Wailea
Maui, Hawaii
Retail Leases
-------------
Tenant Name: Wrap-A-Window
Original Effective Date: 11/04/96
Original Term Length: None
Original Term Date: 30 days notice to cancel for both
Extention (Y/N): N
Extention Term: NAP
SqFt. Rented: Poolside
Base Rent per Sq.Ft.: NAP
Percentage Rent: 60.0% (Rent = Greater of the Base Illegible)
Gross/Net: Net
Expense Information:
Other:
Miscellaneous:
<PAGE>
Project Chapel
Grand Wailea
Maui, Hawaii
Retail Leases
-------------
Tenant Name: Authentic Concept
Original Effective Date: 01/15/96
Original Term Length: None
Original Term Date: 30 days notice to cancel for both
Extention (Y/N): N
Extention Term: NAP
SqFt. Rented: NAV
Base Rent per Sq.Ft.: NAP
Percentage Rent: 60.0% (Rent = Greater of the Base Illegible)
Gross/Net: Net
Expense Information:
Other:
Miscellaneous:
<PAGE>
Project Chapel
Grand Wailea
Maui, Hawaii
Retail Leases
-------------
Tenant Name: Lafferty Watersports
Original Effective Date: 01/12/96
Original Term Length: None
Original Term Date: 30 days notice to cancel for both
Extention (Y/N): N
Extention Term: NAP
SqFt. Rented: NAV
Base Rent per Sq.Ft.: NAP
Percentage Rent: 75.0% (Rent = Greater of the Base Illegible)
Gross/Net: Net
Expense Information:
Other:
Miscellaneous:
<PAGE>
Project Chapel
Grand Wailea
Maui, Hawaii
Retail Leases
-------------
Tenant Name: Rainbow Aquatics
Original Effective Date: 01/15/96
Original Term Length: None
Original Term Date: 30 days notice to cancel for both
Extention (Y/N): N
Extention Term: NAP
SqFt. Rented: NAV
Base Rent per Sq.Ft.: NAP
Percentage Rent: 75.0% (Rent = Greater of the Base Illegible)
Gross/Net: Net
Expense Information:
Other:
Miscellaneous:
<PAGE>
Project Chapel
Grand Wailea
Maui, Hawaii
Retail Leases
-------------
Tenant Name: Rochelle Selzer Artworks
Original Effective Date: 01/19/96
Original Term Length: None
Original Term Date: 30 days notice to cancel for both
Extention (Y/N): N
Extention Term: NAP
SqFt. Rented: NAV
Base Rent per Sq.Ft.: NAP
Percentage Rent: 75.0% (Rent = Greater of the Base Illegible)
Gross/Net: .........Net
Expense Information:
Other:
Miscellaneous:
<PAGE>
SCHEDULE D
----------
List of Pre-Approved Replacement Managers
Inter-Continental Hotels & Resorts
Canadian Pacific Hotels
Fairmont Hotel Management Company
Grossman Company Properties
Hilton Hotels Corporation
KSL Recreation Corporation
Destination Hotels & Resorts
Ritz Carlton Hotel Company
Starwood Hotels & Resorts Worldwide, Inc.
<PAGE>
SCHEDULE E
----------
Litigation
See Attached.
<PAGE>
KNOWN LITIGATION
1. Hyatt Litigation. See Section 3.8 of the Settlement Agreement
2. Employee Claims. See Schedule 2 to Exhibit 10.1 (Agreement of Purchase and
Sale and Joint Escrow Instructions between International Hotel
Acquisitions, LLC and KSL Recreation Corporation dated November 5, 1998) of
Form 8-K filed on January 13, 1999.
3. Other Claims. See Schedule 2 to Exhibit 10.1 (Agreement of Purchase and
Sale and Joint Escrow Instructions between International Hotel
Acquisitions, LLC and KSL Recreation Corporation dated November 5, 1998) of
Form 8-K filed on January 13, 1999.
4. Other Matters. See Schedule 2 to Exhibit 10.1 (Agreement of Purchase and
Sale and Joint Escrow Instructions between International Hotel
Acquisitions, LLC and KSL Recreation Corporation dated November 5, 1998) of
Form 8-K filed on January 13, 1999.
<PAGE>
SCHEDULE F
----------
Structural Chart of Borrower
Borrower: International Hotel Acquisitions, LLC, a Delaware limited
liability company
Sole Member: IHA Holdings LLC, a Delaware limited liability company
Members of IHA: Hotel Operations, Inc., a Delaware corporation
SC IHA LLC, a Delaware limited liability company
<PAGE>
SCHEDULE G
----------
Form of Assignment and Subordination of Management Agreement
<PAGE>
COLLATERAL ASSIGNMENT AND
SUBORDINATION OF MANAGEMENT AGREEMENT
THIS COLLATERAL ASSIGNMENT AND SUBORDINATION OF MANAGEMENT AGREEMENT (this
"Assignment") is made as of this _________ day of _____, _______ by and among
___________, a ___________, having an address at ______________("Owner"), CREDIT
SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, a Delaware limited liability company,
having an address at 11 Madison Avenue, New York, New York 10010 (together with
its successors and assigns, "Lender"), and _______________, a __________, having
an address at _____________________("Manager").
RECITALS
A. Owner is the owner of the real property commonly known as ________ and
located at _____________________ (the "Premises").
B. Manager is the current managing agent of the Premises pursuant to a
certain Management Agreement dated __________ between ____________ and
____________ (as from time to time amended in accordance with the terms thereof
and hereof, collectively, the "Management Agreement").
C. Owner has requested that Lender make a loan (the "Loan") to Owner in the
principal sum of [$_________] (the "Loan Amount") to be used by Owner, among
other things, to refinance the existing indebtedness encumbering the Premises
and to perform improvements and repairs thereto.
D. The Loan will be (i) advanced pursuant to the terms of a certain Loan
Agreement dated as of the date hereof between Lender and Owner (as the same may
<PAGE>
hereafter be consolidated, extended, modified, amended, amended and/or restated
from time to time, the "Loan Agreement"; all capitalized terms used herein and
not otherwise defined shall have the meanings ascribed to such terms in the Loan
Agreement), (ii) evidenced by a certain Mortgage Note dated the date hereof in
the amount of [$______________] given by Owner in favor of Lender (as the same
may hereafter be consolidated, extended, modified, amended, amended and/or
restated from time to time, the "Note"), and (iii) secured by, inter alia, a
certain Mortgage and Security Agreement dated as of the date hereof from Owner
to Lender (as the same may hereafter be consolidated, extended, modified,
amended, amended and/or restated from time to time, the "Mortgage"), encumbering
the Premises and other property (the Loan Agreement, the Note, the Mortgage and
all other documents evidencing, securing and/or otherwise related to the Loan,
collectively, the "Loan Documents").
E. Lender has required that as a condition to making the Loan, Owner and
Manager (i) assign to Lender all of Owner's right, title and interest in and to
(a) the Management Agreement and (b) any and all other agreements that Owner may
now or hereafter enter into with Manager and/or any other subsequent manager
("Subsequent Manager") relating to the management of all or any portion of the
Premises (each, an "Agreement", and together with the Management Agreement,
collectively, the "Agreements"); (ii) subordinate, to the extent herein
provided, their respective right, title and interest in and to the Management
Agreement and any other Agreement, to repayment of the Loan; and (iii) agree to
the terms, covenants and conditions contained herein.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby covenant and agree as
follows:
Section 1 Representations and Warranties. Owner hereby represents and
warrants to Lender that (i) as of the date hereof, the only agreements affecting
the management of the Premises is the Management Agreement which constitutes the
full agreement between Owner and Manager and there are no amendments thereto,
(ii) the Management Agreement is in full force and effect, (iii) neither Owner
nor Manager is in default under the Management Agreement, and no event has
occurred which, with the giving of notice and/or the passage of time would
constitute a default thereunder, (iv) Owner shall not enter into any other
agreement for the management of the Premises, except in compliance with the
terms hereof and the terms of the Loan Agreement, and (v) Owner, but for this
Assignment and the other Loan Documents, has not transferred, assigned or
encumbered, and will not transfer, assign or encumber, in whole or in part, the
Agreements or any of Owner's rights or interests thereunder.
Section 2 Assignment. Subject to the terms and conditions hereof, to
further secure Owner's obligations under the Loan Documents, Owner hereby
grants, transfers and assigns to Lender all of Owner's right, title and interest
in, to and under the Management Agreement and any other Agreement, together with
all right, power and authority of Owner to alter, modify or change the terms of
the Management Agreement or any other Agreement or to surrender, cancel or
terminate the same, and Manager consents to such assignment pursuant to and in
accordance with the agreements set forth herein.
Section 3 Owner's Covenants.Owner hereby covenants and agrees as follows:
3.1.1 Owner, at its sole cost and expense, shall faithfully perform
every obligation under the Agreements by Owner to be performed; shall
<PAGE>
enforce or secure the performance of every obligation of the Management
Agreement by Manager to be performed and every obligation of any other
Agreement by Manager or Subsequent Manager to be performed; and shall not
terminate, modify or alter in any way the terms of the Agreements or waive
or release Manager or Subsequent Manager thereunder from the obligations by
said Manager or Subsequent Manager to be performed and any exercise on the
part of Owner of any such right without the prior written consent of Lender
shall constitute an Event of Default entitling Lender to declare the
Obligations immediately due and payable.
3.1.2 At Owner's sole cost and expense, Owner shall appear in and
defend any action or proceeding connected with any of the Agreements and
shall pay all necessary costs and expenses of Lender, including attorneys'
fees, in any such action or proceeding in which Lender may appear.
3.1.3 That should Owner fail to make any payment or do any act as
herein provided and such failure shall continue for ten (10) days after
such payment is due or such act is required, then Lender, but without
obligation to do, and without notice to or demand on Owner, and without
releasing Owner from any obligation hereof, may make or do the same.
3.1.4 Owner shall pay immediately upon demand all sums expended by
Lender under the authority hereof, together with interest thereon at the
rate provided in the Note with respect to interest on the Loan.
3.1.5 So long as there shall be no Event of Default, Owner shall have
the license to perform under and receive performance under the Management
Agreement and any other Agreement.
3.1.6 Lender shall not be obligated to perform or discharge, nor does
it hereby undertake to perform or discharge, any obligation, duty or
liability under any of the Agreements, or under or by reason of this
Assignment, and Owner shall and does hereby indemnify and hold Lender
harmless against and from any and all liability, loss or damage which
Lender may or might incur under any of the Agreements or under or by reason
of this Assignment and of and from any and all claims and demands
whatsoever which may be asserted against it by reason of any alleged
obligations or undertakings on its part to perform or discharge any of the
terms, covenants or agreements contained in any of the Agreements, except
as a result of or in connection with the gross negligence or willful
misconduct of Lender. Should Lender incur any such liability, loss or
damage under any of the Agreements or under or by reason of this
Assignment, or in the defense of any such claims or demands, except as a
result of or in connection with the gross negligence or willful misconduct
of Lender, the amount thereof, including costs, expenses and attorneys'
fees, shall be secured by the Mortgage, and Owner shall reimburse Lender
therefor immediately upon demand, and upon the failure of Owner to do so,
Lender may, upon thirty (30) days notice to Owner, if the amounts properly
due and owing to Lender have not been paid, declare the Obligations to be
immediately due and payable.
Section 4 No Limitations. Owner and Manager agree that (i) nothing in this
Assignment shall be construed to limit or restrict in any way the rights and
powers granted in the Cash Management Agreement, Mortgage and/or any of the
other Loan Documents to Lender, and (ii) an action to foreclose may be
commenced, notwithstanding that Owner continues in possession of the property,
both real and personal, herein referred to, and continues to collect the rents,
<PAGE>
issues and profits thereof.
Section 5 Lender's Right to Terminate. Owner agrees that any future
Agreement hereafter entered into with Manager or any Subsequent Manager shall
contain (a) a provision whereby Manager or such other Subsequent Manager
acknowledges that Lender has the right to immediately terminate such Agreement
upon the occurrence of an Event of Default, and (b) a provision that Manager's
or such Subsequent Manager's entire right, title and interest in, under and to
such Agreement and any portion of the profits or issues from the Premises shall
at all times be subordinate to the lien of the Mortgage. Owner shall, within
five (5) days of execution thereof, provide Lender with a true and correct copy
of any Agreement entered into between Owner and Manager or any Subsequent
Manager.
Section 6 Notice by Lender. A notice in writing by Lender to Manager or any
Subsequent Manager under the Management Agreement or any other Agreement
advising it that an Event of Default exists and requesting that all future
performance under such Management Agreement or Agreement be made to Lender (or
its agent), shall be construed by Manager or any Subsequent Manager as
conclusive authority to Manager or any Subsequent Manager that such performance
is to be made to Lender (or its agent) and Manager and Subsequent Manager under
such Agreements shall be fully protected in making such performance to Lender;
and Owner hereby irrevocably constitutes and appoints Lender the
attorney-in-fact and agent of Owner for the purpose of endorsing the consent of
Owner on any such notice. The foregoing power is coupled with an interest and
shall survive the liquidation, bankruptcy or insolvency of Owner.
Section 7 Notice by Owner. Upon any default by Manager or a Subsequent
Manager under any of the Agreements, Owner shall immediately provide Lender with
notice in writing of such default and Lender shall have the right (but not the
obligation) to determine, in its sole discretion, which remedies, whether
available under the Agreements or under applicable law, to pursue against
Manager.
Section 8 Modification of Management Agreement. Owner and/or Manager shall
not modify or amend, in any respect, or terminate, the Management Agreement or
any other Agreement without Lender's prior written consent.
Section 9 Attornment by Manager. Manager hereby agrees that in the event of
notification to Manager by Lender that Lender has acquired possession of the
Premises or obtained the appointment of a receiver for same, Manager shall, at
Lender's request, attorn to Lender as owner thereunder; provided, however, that
in no event shall Lender be liable for, or be obligated to cure, any default of
Owner occurring prior to the date of such notification.
Section 10 Notice by Manager. In the event of a default by Owner under the
terms of the Management Agreement, Manager shall give written notice of such
default to Lender and Lender shall have the right, but not the obligation, to
cure such default within forty-five (45) days after receipt of such notice,
during which time Manager shall have no right to terminate the Management
Agreement.
Section 11 Subordination. Manager hereby subordinates any and all right,
title and interest it may now or in the future have in the Management Agreement
and/or to receive payment of any fees set forth therein (the "Management Fee")
to the lien of the Mortgage and the repayment in full of all indebtedness
evidenced by the Note and the Loan Agreement, including, without limitation,
<PAGE>
payment of principal and interest under the Note; provided, however, that until
the occurrence of an Event of Default, Owner shall be entitled to pay, and
Manager shall be entitled to receive, a Management Fee not to exceed _______
(___) percent of the Receipts from the Premises paid in accordance with the
terms of the Management Agreement.
Section 12 Management Fee. Manager hereby agrees that notwithstanding any
provision to the contrary set forth herein or in the Management Agreement,
Manager shall not receive any Management Fee in excess of ________ (___) percent
of the Receipts from the Premises at any time.
Section 13 Termination. Lender shall have the right to immediately
terminate the Management Agreement, with or without cause in the event there
shall have occurred an Event of Default. Any exercise of this right shall be
without liability to Lender for payment of any fees, charges or otherwise,
notwithstanding any provisions in the Management Agreement or any other
agreement to the contrary. After any such termination, Lender shall have the
right to replace Manager with a Subsequent Manager selected by Lender in its
sole discretion.
Section 14 Exculpation. This Assignment and Owner's liability hereunder
shall be limited pursuant to the provisions of Section [6.20] of the Loan
Agreement, which provisions are incorporated herein by reference.
Section 15 Governing Law. This Assignment shall be governed by and
construed and enforced in accordance with the laws of the State of New York. It
is the intent of the parties hereto that the provisions of Section 5-1401 of the
General Obligations Law of the State of New York shall apply to this Assignment.
Section 16 No Waiver. Owner and Manager recognize that, in general,
borrowers, guarantors or obligors who experience difficulties in honoring their
loan obligations, in an effort to inhibit or impede lenders from exercising the
rights and remedies available to lenders pursuant to mortgages, notes, loan
agreements or other instruments evidencing or affecting loan transactions,
frequently present in court the argument, often without merit, that some loan
officer or administrator of the lender made an oral modification or made some
statement which could be interpreted as an extension or modification or
amendment to one or more debt instruments and that the borrower relied to its
detriment upon the "oral modification of the loan document". For that reason,
and in order to protect Lender from these allegations in connection with the
transaction contemplated by this Assignment, Owner and Manager acknowledge that
this Assignment can be extended, modified or amended only in writing executed by
Lender, and that none of the rights or benefits of Lender can be waived
permanently except in a written document executed by Lender. Lender's rights,
powers, privileges and remedies under or in connection with this Assignment are
cumulative and not exclusive and shall not be waived, precluded or limited by
any failure or delay in the exercise thereof or by the parties exercise thereof
or by any course of dealing between Manager and/or Owner and Lender. No notice
to or demand on either Manager or Owner in any case shall entitle either Manager
or Owner to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the right of Lender to any other or
further action in any circumstances without notice or demand.
Section 17 Counterparts. This Assignment and any amendments, waivers,
consents or supplements hereto or in connection herewith may be executed,
including by transmission of facsimile, in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
<PAGE>
executed and delivered shall be deemed an original, but all of such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document. In the event this Assignment or any amendment, waiver, consent or
supplement shall have been executed by transmission of facsimile, any party may
request that the parties thereto execute original documents for record purposes,
but no failure of any party to do so shall invalidate or in any other way affect
the validity of such document. This Assignment shall become effective upon the
execution of a counterpart hereof by each of the parties hereto and receipt by
the parties of written or telephonic notification of such execution and
authorization of delivery thereof.
Section 18 Descriptive Headings; Recitals. The descriptive headings used in
this Assignment are for convenience only and shall not be deemed to affect the
meaning or construction of any provision hereof. The Recitals set forth at the
beginning of this Assignment are hereby incorporated into the substantive
provisions of this Assignment.
Section 19 Notices. Any notice, report, demand or other instrument
authorized or required to be given or furnished hereunder shall be given in
conformity with the terms and conditions of the Loan Agreement and to the
parties hereto at the addresses set forth above.
Section 20 Benefit of Agreement. This Assignment shall be binding upon each
party hereto and its successors and assigns, and shall inure to the benefit of
Owner, Lender, and Manager and their respective successors and/or assigns,
except the rights and remedies of Owner, Lender, and Manager under this
Assignment shall not inure to the benefit of (i) any purchaser of the Property
at a foreclosure sale, (ii) any Person taking title to the Property by deed in
lieu of foreclosure or (iii) any successor or assign of any Person described in
clauses (i) and (ii) above, except that Owner's, Lender's, and Manager's rights
shall inure to the benefit of the parties described in clauses (i), (ii) and
(iii) hereof if such parties are Lender (including, for these purposes, its
successors and assigns as holder of the Loan Documents), any beneficiaries of
any Loan Pool, and any Participant's or any of Lender's (or such successors,
assigns, beneficiaries or Participant's) Affiliates or nominees.
Section 21 Cash Management. Manager hereby agrees that, notwithstanding any
provision to the contrary set forth herein or in the Management Agreement, (i)
Manager shall comply, to the extent applicable, with the provisions of the Loan
Agreement and the Cash Management Agreement, final copies of which Manager
acknowledges receiving, and (ii) in the event of a conflict between the terms
hereof and/or of the Management Agreement, on the one hand, and the terms of the
Loan Agreement and/or the Cash Management Agreement, on the other hand, the
terms of the Loan Agreement and/or the Cash Management Agreement shall govern.
Section 22 Inconsistencies. In the event of any inconsistency between the
terms and conditions hereof and the terms of the Management Agreement, the terms
and conditions set forth herein shall govern.
Section 23 Waiver of Jury Trial. OWNER AND MANAGER AND BY ACCEPTANCE HEREOF
LENDER, HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY AND ALL
RIGHTS ANY SUCH PERSON MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED ON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS ASSIGNMENT OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR
ACTIONS OF OWNER OR MANAGER OR LENDER RELATING TO THE LOAN, AND THE LENDING
<PAGE>
RELATIONSHIP WHICH IS THE SUBJECT OF THIS ASSIGN-MENT. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR LENDER ACCEPTING THIS ASSIGNMENT.
Section 24 Severability. In the event that any of the covenants,
agreements, terms or provisions contained herein shall be invalid, illegal or
unenforceable in any respect, the validity of the remaining covenants,
agreements, terms and provisions contained herein shall be in no way affected,
prejudiced or disturbed thereby.
Section 25 Further Assurances. At any time, and from time to time, upon
Lender's request, Owner and Manager shall make, execute and deliver, or cause to
be made, executed and delivered, to Lender and, where appropriate, shall cause
to be recorded or filed, and from time to time thereafter to be re-recorded and
refiled, at such time and in such offices and places as shall be deemed
desirable by Lender as Lender may consider necessary or desirable in order to
effectuate, or to continue and preserve the obligations of Owner and Manager
under this Assignment, such documents and/or instruments as Lender may request.
Upon any failure by either Owner or Manager to do so, Lender may make, execute,
record, file, re-record or refile any and all such documents and/or instruments
for and in the name of either Owner or Manager, and Owner and Manager hereby
irrevocably appoints (which appointment is coupled with an interest with full
power of substitution) Lender the agent and attorney-in-fact of either Owner or
Manager to do so; and Owner and Manager shall reimburse Lender, on demand, for
all costs and expenses (including attorneys' fees and expenses) incurred by
Lender in connection therewith.
Section 26 Jurisdiction, Venue, Service of Process. ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS ASSIGNMENT SHALL BE BROUGHT, AT LENDER'S OPTION,
IN THE COURTS OF THE STATE OF NEW YORK, NEW YORK COUNTY OR OF THE UNITED STATES
OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK. MANAGER AND OWNER HEREBY
ACCEPT FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY,
THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. MANAGER AND OWNER
IRREVOCABLY CONSENT TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THEM AT THEIR RESPECTIVE
ADDRESSES AS SET FORTH ABOVE. MANAGER AND OWNER HEREBY IRREVOCABLY WAIVE ANY
OBJECTION WHICH EACH MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF
THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS
ASSIGNMENT BROUGHT IN THE COURTS REFERRED TO ABOVE AND EACH HEREBY FURTHER
IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY
SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. NOTHING CONTAINED HEREIN SHALL AFFECT THE RIGHT OF LENDER TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST EITHER THE MANAGER OR OWNER IN ANY
OTHER JURISDICTION.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed and delivered
this Assignment or has caused the same to be executed and delivered by its duly
authorized representative as of the date first above written.
OWNER:
-----------------------------------------
a
-----------------------------------------
By:
-----------------------------------------
Name:
-----------------------------------------
Title:
-----------------------------------------
LENDER: CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC,
-----------------------------------------
a Delaware limited liability company
-----------------------------------------
By:
-----------------------------------------
Name:
-----------------------------------------
Authorized Signatory
-----------------------------------------
MANAGER:
-----------------------------------------
a
-----------------------------------------
By:
-----------------------------------------
Name:
-----------------------------------------
Title:
-----------------------------------------
<PAGE>
SCHEDULE H
----------
List of Pre-Approved Buyers
Bass PLC
Canadian Pacific Hotels
Fairmont Hotel Management Company
Grossman Company Properties
Hilton Hotels Corporation
KSL Recreation Corporation
Lowe Enterprises, Inc.
Ritz Carlton Hotel Company
Starwood Hotels & Resorts Trust
<PAGE>
SCHEDULE I
----------
Form of Assumption Agreement
<PAGE>
ASSUMPTION OF AND AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT,
AMENDED AND RESTATED MORTGAGE, SECURITY AGREEMENT,
ASSIGNMENT OF LEASES AND FIXTURE FILING,
AMENDED AND RESTATED MORTGAGE NOTE AND OTHER LOAN DOCUMENTS
THIS ASSUMPTION OF AND AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT,
AMENDED AND RESTATED MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND
FIXTURE FILING, AMENDED AND RESTATED MORTGAGE NOTE AND OTHER LOAN DOCUMENTS
(this "Assumption Agreement") is made as of December 29, 1998, by and among
INTERNATIONAL HOTEL ACQUISITIONS, LLC, a Delaware limited liability company (the
"Original Borrower"), KSL GRAND WAILEA RESORT, INC., a Delaware corporation (the
"Borrower"), and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, having an address
at 3 New York Plaza, 15th Floor, New York, New York 10004, its successors and/or
assigns (the "Lender").
RECITALS
A. Original Borrower is the owner of the fee estate in a certain tract of
land in Honuala, District of Makano, Island and County of Maui, State of Hawaii,
upon which the "Grand Wailea Hotel" is located and as more particularly
described in Exhibit A annexed hereto (the "Property"), and the building and
other improvements located thereon (collectively, the "Improvements", and
collectively with the Property, the "Premises").
B. Credit Suisse First Boston Mortgage Capital LLC ("Original Lender")
previously made a loan to Original Borrower in the original principal amount of
Three Hundred Fifty Seven Million Dollars ($357,000,000) (the "Original Loan")
pursuant to the terms and conditions of that certain Assumption Agreement and
Consolidated, Amended and Restated Loan Agreement dated as of June 15, 1998 (the
"Original Loan Agreement") and the other "Loan Documents" (as defined in the
Original Loan Agreement, and herein collectively referred to as the "Original
Loan Documents"), the proceeds of which Original Loan were used by Borrower to
acquire the Land and the Improvements.
C. Thereafter, Original Borrower and Original Lender agreed to reduce the
portion of the Original Loan secured by the "Mortgage" (as defined in the
Original Loan Agreement) to Two Hundred Seventy Five Million Dollars
($275,000,000) (as reduced, the "Loan") and to amend and restate in their
entirety the Original Loan Agreement and the other Original Loan Documents as
<PAGE>
provided in that certain Amended and Restated Loan Agreement dated as of October
28, 1998, by and between Original Borrower and Original Lender (the "Loan
Agreement") and in the "Loan Documents" (as defined in the Loan Agreement), with
the remainder of the Original Loan to be evidenced by the "Mezzanine Loan
Documents" (as defined in the Loan Agreement). In connection therewith, Original
Lender and Original Borrower executed that certain Amended and Restated
Mortgage, Security Agreement, Assignment of Leases and Fixture Filing dated as
of October 28, 1998, encumbering the Property and recorded on November 9, 1998
as Land Court Document Number 2498556 in the Office of the Assistant Registrar
of the Land Court for the State of Hawaii (the "Mortgage").
D. Pursuant to Section 9.3 of the Loan Agreement, Original Lender agreed
that Original Borrower had the right to sell and convey the Premises in its
entirety to any Person, and in connection therewith to allow the proposed
transferee of the Premises to assume the Loan so long as, among other conditions
set forth in Section 9.3 of the Loan Agreement, such proposed transferee is
either an entity listed on Schedule H to the Loan Agreement and/or is approved
by the "Rating Agencies" (as defined in the Loan Agreement).
E. Pursuant to that certain Pooling and Servicing Agreement dated as of
November 20, 1998, Lender acquired all of Original Lender's rights under the
Original Loan Documents.
F. Original Borrower now desires to transfer and convey the Premises to
Borrower, and in this regard all of the conditions to such transfer and
conveyance set forth in Section 9.3 of the Loan Agreement have been satisfied.
G. Lender hereby agrees to the transfer of the Premises to the Borrower and
the assumption by the Borrower of the Original Borrower's obligations under the
Loan Documents, pursuant to the conditions herein provided.
H. Regardless of the date of execution of this Assumption Agreement, the
effective date hereof shall be upon the recordation of this Assumption Agreement
and the deed transferring title of the Premises to Borrower.
I. All capitalized terms used herein and not otherwise defined herein shall
have the meanings ascribed to such terms in the Loan Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the above premises and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Lender, Original Borrower and Borrower hereby agree as follows:
1. Assumption of Interest and Liability. Effective upon the acquisition of
Original Borrower's title and interest in and to the Premises, Original Borrower
hereby assigns, transfers and conveys, and Borrower hereby assumes all duties,
obligations and liabilities under and agrees to be bound by all of the terms and
provisions contained in the Loan Documents to the fullest extent as if Borrower
were the original borrower thereunder. Borrower acknowledges that nothing in
this Assumption Agreement shall affect the priority of the lien or interest of
the Loan Documents on the Premises. Borrower hereby regrants to Lender a
security interest in and to (a) the collateral described in the granting clause
of the Mortgage in full accordance with the provisions of the Mortgage, (b) the
Cash Collateral, and (c) the Interest Rate Cap Pledge.
2. Borrower's Representations and Warranties. Borrower represents and
<PAGE>
warrants to Lender as of the latter of the date hereof or the date of transfer
of title to the Premises from Original Borrower to Borrower, that:
(a) neither Borrower nor any general partner or managing member of
Borrower, if any, nor any parent, subsidiary or sister corporation or other
Affiliate of Borrower (individually and collectively referred to herein as
"Debtor") has made an assignment of all or substantially all of its assets
for benefit of its creditors;
(b) Borrower has not dissolved or liquidated (or suffered any
liquidation or dissolution) or amended the terms of its Organizational
Documents;
(c) no application or petition has been filed for the appointment of a
custodian, trustee, receiver or agent to take possession of any property of
Debtor;
(d) Borrower has not incurred any indebtedness or material
liabilities, secured or unsecured, direct or contingent (including
guaranteeing any obligation), other than (i) the Loan and the other
obligations of Borrower to Lender contained in the Loan Documents, and (ii)
trade payables or accrued expenses incurred in the ordinary course of
business of operating the Premises; no indebtedness or liabilities (other
than debt described in clause (i) above) is or will be secured (senior,
subordinate or pari passu) by the Premises;
(e) Debtor is not "insolvent" as that term is defined in Section
101(31) of the "Bankruptcy Code" (Title 11 of the United States Code; 11
U.S.C. ss.ss.101, et seq.) and is paying its debts and liabilities
(including employment and overhead expenses) from its own assets as the
same become due;
(f) Debtor has not filed and is not contemplating filing a petition
with the bankruptcy court under the Bankruptcy Code, or commenced any
proceeding relating to Debtor under any bankruptcy or reorganization
statute or under any arrangement, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction;
(g) no petition or application of the type described in subparagraphs
(c) and (f) above, and no proceeding of the type described in subparagraph
(f), has been filed or commenced against Debtor, in which (i) Debtor by any
act has indicated or intends to indicate its approval thereof, consent
thereto, or acquiescence therein, (ii) an order has been or is expected to
be entered appointing any such custodian, trustee, receiver or agent,
adjudicating Debtor bankrupt or insolvent, or approving such petition or
application in any such proceeding, (iii) the bankruptcy court has ordered
or is expected to order relief against Debtor under the Bankruptcy Code, or
(iv) such petition or application was not dismissed within thirty (30) days
of such filing or commencement;
(h) Borrower has not made any loans or advances to any third party
(including any Debtor) and has not pledged its assets for the benefit of
any third party (including any Debtor);
(i) Borrower has not guaranteed or otherwise held out its credit as
being available to satisfy obligations of any other Debtor or other Person;
<PAGE>
(j) Debtor maintains adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character and in light
of its contemplated business operations;
(k) Borrower was organized for the sole purpose of owning, managing
and operating the Premises and activities ancillary thereto;
(l) compliance by Borrower with the provisions of the Loan Documents
does not (1) violate or result in any breach of any of the terms,
conditions or provisions of, (2) constitute a default under or (3) result
in the creation of any lien, charge or encumbrance on any of Borrower's
property or assets, contrary to the terms of (i) the Borrower's formation
documents (e.g., Articles of Organization), (ii) any indenture, mortgage,
deed of trust or other agreement or instrument or (iii) any order of any
court or administrative agency entered in any proceeding to which Borrower
was or is a party or to which Borrower may be subject, or by which Borrower
was or is or may be bound;
(m) Borrower maintains its own separate books and records and bank
accounts in each case which are separate and apart from those of any other
Person;
(n) Borrower has and maintains separate financial statements;
(o) Borrower holds itself out to the public as a legal entity separate
and distinct from any other entity (including any Affiliate thereof) and
maintains and utilizes separate stationery, invoices and checks, conducts
its business and owns its assets in its own name and corrects any known
misunderstanding regarding its separate identity;
(p) Borrower has not sought its own dissolution or winding up, either
in whole or in part;
(q) Borrower has not commingled its funds and other assets with those
of any other Debtor or other Person;
(r) Borrower has maintained and is maintaining its assets in such a
manner that it is not costly or difficult to segregate, ascertain or
identify its individual assets from those of any other Debtor or any other
Person;
(s) Borrower has and is maintaining a reasonable number of employees
in light of its contemplated business operations and is not doing any act
which would make it impossible to carry on its ordinary business;
(t) the sole assets of Borrower are (i) the fee interest in the
Premises, (ii) such assets as are otherwise acquired in connection with the
use, operation, maintenance, repair or management of the Premises, and
(iii) cash and accounts receivable;
(u) Borrower has and is observing all corporate formalities;
(v) Borrower has not acquired the obligations or securities of any of
its "shareholders";
(w) Borrower has and is allocating fairly and reasonably any overhead
for any office space which it shares with any other entity; and
<PAGE>
(x) Borrower has read, understood, approved and accepted all the terms
and provisions of the Loan Documents.
3. Release of Liability. Effective upon Borrower's acquisition of Original
Borrower's title and interest in and to the Premises and assumption of the Loan
and the Loan Documents, Original Borrower shall be released from any liability
under the Loan Documents.
4. Release and Waiver of Liability of Lender. In consideration of the
mutual agreements herein contained, the receipt and adequacy of which are hereby
acknowledged expressly by Original Borrower on behalf of itself and its
attorneys, successors, assigns, and any and all of them (collectively,
"Releasors"), Original Borrower hereby fully, finally and forever releases and
discharges Lender any and all of its officers, directors, agents, servants,
employees, attorneys, successors and assigns, and any and all of them
(collectively, "Releasees"), jointly and severally, from any and all claims,
demands, controversies, actions, causes of action, obligations, liabilities,
costs, expenses, attorneys' fees and damages of whatsoever character, nature and
kind, at law or in equity, which Releasors, or any of them, may have against the
Releasees, or any of them, arising from, related to or in connection with in any
way to the Loan Documents (individually and collectively, the "Released
Liabilities"). It is the intention of the parties hereto that the foregoing
release shall be effective as a bar to all Released Liabilities, past and
present, known and unknown, suspected and unsuspected arising from or in any way
related to any act or omission occurring or commencing prior to the date hereof,
including, without limitation, any act or omission, or series of similar or
related acts or omissions, commencing prior to the date hereof and continuing
after the date hereof.
5. Transfers of Property or Interests in Borrower. Subject to the terms and
conditions hereof, Lender hereby consents to the transfer of the Premises to and
assumption of the Loan by Borrower, and agrees that such transfer shall not be
an "Event of Default" under the Loan Documents. Notwithstanding the foregoing,
Lender's consent to the transfer of title to the Premises to Borrower shall not
be deemed to be a waiver of the right of Lender to approve further transfers or
encumbrances of the Premises or interests in Borrower, and Borrower hereby
agrees that it shall be an "Event of Default" under the Mortgage if any such
transfer or encumbrance occurs without the prior written consent of Lender.
6. Fees. All reasonable fees and expenses incurred by Lender in connection
with the transaction contemplated hereby, including but not limited to
reasonable attorneys' fees and costs, shall be paid by Borrower.
7. Continuing Security and Protection. Borrower and Lender agree that the
Assignment of Leases continues to protect, and the remainder of the Loan
Documents continue to secure, the full performance of each and every obligation
of the Note. This Assumption does not constitute the creation of a new debt or
the extinguishment of the debt evidenced by the Note, nor will it in any way
affect or impair the lien of the Loan Documents. Borrower agrees that the lien
of the Mortgage continues to be in full force and effect, and other than to the
extent provided herein, unaffected and unimpaired by this Assumption or by the
transfer of the Premises from Original Borrower to Borrower, and that said lien
shall so continue in first priority until the debt evidenced by the Note is
fully discharged.
8. Amendment to Loan Documents; Reaffirmation. In order to reflect that the
<PAGE>
Borrower is assuming the Loan pursuant to the terms of Section 9.3 of the Loan
Agreement (which, among other things, requires the Borrower to at all times
maintain one independent director), and that Original Borrower is satisfying the
"Mezzanine Indebtedness" (as defined in the Loan Agreement) in connection with
the Borrower's acquisition of the Premises and assumption of the Loan, the
parties hereby agree to the following changes to the Loan Documents: (a) The
definitions of "First Mezzanine Lender", "Mezzanine Indebtedness", "Mezzanine
Indebtedness Loan Documents", and "Second Mezzanine Lender" set forth in the
Loan Agreement hereby are deleted in its entirety, and all references to the
"First Mezzanine Lender", "Mezzanine Indebtedness", "Mezzanine Indebtedness Loan
Documents", and "Second Mezzanine Lender" in the Loan Agreement and the other
Loan Documents hereby are omitted; (b) The definitions of the "Junior
Mortgages", the "Second Mortgage" and the "Third Mortgage" set forth in the
Mortgage hereby are deleted in their entirety, and all references to the "Junior
Mortgages", the "Second Mortgage" and the "Third Mortgage" in the Mortgage and
the other Loan Documents hereby are omitted; (c) All references in the Loan
Documents to the "Borrower" shall be to the Borrower as herein defined; (d)
Section 8(w) is renumbered as Section 8(x) and the following text is added to
Section 8, as new item (w): "(w) Borrower has, and at all times will maintain
one independent director; and"; and (e) All references to any of the Loan
Documents in any of the other Loan Documents shall be deemed to apply to such
Loan Document as herein amended.
Except as specifically set forth herein, each of the terms, conditions,
representations and warranties of the Note and the other Loan Documents
(including without limitation the Mortgage, the Assignment of Leases and Rents,
and the Environmental Indemnification Agreement (as such terms are defined in
the Loan Agreement)) shall remain unmodified and in full force and effect, and
hereby are expressly reaffirmed by Borrower (with time remaining of the essence
thereunder and hereunder). Without limiting the foregoing, Borrower expressly
acknowledges and agrees that Borrower shall have no right to consent, create,
incur or assume any Indebtedness other than the Loan and as otherwise permitted
in Sections 4.4(a)(ii) through 4.4(a)(iv) of the Loan Agreement, nor shall
Borrower consent, create, incur or assume any Indebtedness in violation of
Section 8.1(h) of the Loan Agreement or of any other provision of the Loan
Documents (as herein amended).
9. Indemnity and Hold Harmless. Borrower hereby agrees to indemnify, defend
and hold Lender harmless from and against, and on demand shall reimburse Lender
for, any and all loss, liability, damage, expense, or cost, including without
limitation reasonable attorneys' fees and costs, arising out of or incurred in
connection with the transactions contemplated by this Assumption Agreement or
any suit, action, proceeding or demand resulting therefrom. In addition to the
foregoing, Borrower shall pay all reasonable attorneys' fees incurred by Lender
in any post-judgment proceedings to enforce any judgment in connection with this
Assumption Agreement. This provision is separate and several and shall survive
the merger of this provision into any judgment
10. Notice. For purposes of compliance with any notice provisions in the
Loan Documents, all notices to Borrower shall be sent to the following
addresses:
KSL Grand Wailea Resort, Inc.
c/o KSL Recreation Corporation
56-140 PGA Boulevard
La Quinta, California 92253
Attention: John Saer
<PAGE>
Telecopy: (760) 564-4880
and all notices to the Lender shall be sent to the following addresses:
Norwest Bank Minnesota, National Association,
as Trustee in trust for Holders of CSFB Mortgage Securities Corp.,
Commercial Mortgage Pass-Through Certificates, Series 1998-FL1
C/o Pacific Life Insurance Company700 Newport Center Drive
Newport Beach, California 92660
Attention: Michelle A. Stickles, Vice President
Telecopy: (949) 760-4356
11. Rule of Construction. This Assumption Agreement and the other Loan
Documents shall not be construed more strictly against one party than against
the other, merely by virtue of the fact that it may have been prepared by
counsel for one of the parties, it being recognized that both Lender and
Borrower have contributed substantially and materially to the preparation of
this Assumption Agreement and the other Loan Documents.
12. No Oral Modification. This Assumption Agreement, the Loan Agreement,
the Mortgage, the Note and the other Loan Documents and all instruments referred
to in any of them can be extended, modified or amended only in writing executed
by Lender and Borrower and that none of the rights or benefits of Lender can be
waived permanently except in a written document executed by Lender. Borrower
further acknowledges Borrower's understanding that no officer or administrator
of Lender has the power or the authority from Lender to make an oral extension
or modification or amendment of any such instrument or agreement on behalf of
Lender. Borrower acknowledges that except for this Assumption Agreement there
have been no amendments or modifications to the Note, the Loan Agreement or the
other Loan Documents.
13. Severability. In the event that any of the covenants, agreements, terms
or provisions contained in this Assumption Agreement or in any Loan Document
shall be invalid, illegal or unenforceable in any respect, the validity of the
remaining covenants, agreements, terms or provisions contained herein or in such
Loan Document(s) shall be in no way affected, prejudiced or disbursed thereby.
14. Governing Law. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK.
15. Jury Trial. EACH OF BORROWER AND LENDER HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVE ANY AND ALL RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER, OR IN CONNECTION
WITH, THIS ASSUMPTION AGREEMENT, THE LOAN AGREEMENT, THE MORTGAGE, THE CASH
MANAGEMENT AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF
BORROWER OR LENDER RELATING TO THE LOAN AND/OR THE LENDING RELATIONSHIP WHICH IS
THE SUBJECT OF THIS ASSUMPTION AGREEMENT AND THE LOAN DOCUMENTS. THIS PROVISION
IS A MATERIAL INDUCEMENT FOR LENDER ENTERING INTO THIS ASSUMPTION AGREEMENT AND
THE LOAN DOCUMENTS.
16. Jurisdiction, Venue, Service of Process. ANY LEGAL ACTION OR PROCEEDING
WITH RESPECT TO THIS ASSUMPTION AGREEMENT, THE LOAN AGREEMENT, THE MORTGAGE OR
ANY OTHER LOAN DOCUMENT SHALL BE BROUGHT, AT LENDER'S OPTION, IN THE COURTS OF
THE STATE OF NEW YORK, NEW YORK COUNTY OR OF THE UNITED STATES OF AMERICA FOR
THE SOUTHERN DISTRICT OF NEW YORK. BORROWER HEREBY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE
<PAGE>
JURISDICTION OF THE AFORESAID COURTS. BORROWER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO BORROWER AT ITS ADDRESS FOR NOTICES PURSUANT TO SECTION 10
HEREOF. BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR
PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS ASSUMPTION AGREEMENT, THE
LOAN AGREEMENT, THE MORTGAGE OR ANY OTHER LOAN DOCUMENT BROUGHT IN THE COURTS
REFERRED TO ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD
OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING CONTAINED HEREIN
SHALL AFFECT THE RIGHT OF LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST BORROWER IN
ANY OTHER JURISDICTION.
17. Successors and Assigns. This Assumption Agreement shall inure to the
benefit of, and shall be binding upon, the assigns, successors in interest,
personal representatives, estates, heirs, and legatees of each of the parties to
this Assumption Agreement.
18. Time of the Essence. Time is of the essence as to Borrower's
obligations under this Assumption Agreement and the Loan Documents.
19. Entire Agreement. This Assumption Agreement and the Loan Documents,
including all annexes, schedules and exhibits hereto and all other documents
furnished to Lender in connection with this Assumption Agreement, constitutes
the entire agreement between the parties hereto with respect to the subject
matter hereof and thereof and shall supersede and take the place of any other
instruments purporting to be an agreement of the parties hereto relating to the
transactions contemplated hereby.
20. Counterparts; Headings. This Assumption Agreement may be executed in
counterparts, each of which shall constitute an original, and which, when taken
together, shall constitute but one instrument. The captions and headings of the
various sections of this Assumption Agreement are for purposes of reference only
and are not to be construed as confining or limiting in any way the scope or
intent of the provisions hereof. Whenever the context requires or permits, the
singular shall include the plural, the plural shall include the singular, and
the masculine, feminine and neuter shall be freely interchangeable.
IN WITNESS WHEREOF, the parties hereto have executed this Assumption
Agreement as of the date first above written.
ORIGINAL BORROWER: INTERNATIONAL HOTEL ACQUISITIONS, LLC, a Delaware
limited liability company
By /s/ Lance J. Graber
------------------------------------
Name Lance Graber
Its Vice President
BORROWER: KSL GRAND WAILEA RESORT, INC., a Delaware corporation
<PAGE>
By /s/ John K. Saer, Jr.
------------------------------------
Name John K. Saer, Jr.
Its Vice President
[SIGNATURES CONTINUED NEXT PAGE]
LENDER: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee
under the Pooling and Servicing Agreement dated November 20,
1998, for the Credit Suisse First Boston Mortgage Securities
Corp., Commercial Mortgage Pass-Through Certificates, Series
1998-FL2
By PACIFIC LIFE INSURANCE COMPANY, as Servicer for
Norwest Bank Minnesota
By /s/ C. S. Dillion
------------------------------
Name C. S. Dillion
Its Vice President
By Janine C. Stallings
------------------------------
Name Janine C. Stallings
Its Assistant Secretary
EXHIBIT "A"
-----------
Legal Description
All of those certain parcels of land situate at Honuaula, District of Makawao,
Island and County of Maui, State of Hawaii, described as follows:
LOTS: 463-A, area 36.603 acres;
463-C, area 0.297 acres; and
<PAGE>
463-D, area 0.003 acre, more or less, as shown on Map 72,
filed with Land Court Application No. 1804 of Matson of Navigation Company.
AS TO LOT 463-A ONLY;
EXCEPTING any portion of the above described property lying
below the line of high water, said line of high water being
defined by Sections 205A-41 to 205A-43.6 of the Hawaii Revised
Statutes, as amended, and also excepting any artificial
accretions to said property waterward of said water line.
Being all of the land described in and covered by Transfer Certificate of Title
No. 523,769 Issued to: KSL Grand Wailea Resort, Inc., a Delaware corporation
<PAGE>
THIRD AMENDMENT TO THE
TAX SHARING AGREEMENT
This Third Amendment ("Third Amendment") to the Tax Sharing Agreement is
made and entered into this 1st day of November, 1998 to have the respective
effective dates as set forth herein.
WHEREAS, the Tax Sharing Agreement was entered into by and between KSL
Recreation Corporation, a California corporation ("REC") and each of the
entities described on Schedule A annexed thereto (the "Signator Corporations")
dated April 30, 1997, to be effective November 1, 1996 (the "Agreement"), and as
amended, such amendment to be effective the date of incorporation of KSL
Recreation Group, Inc., March 14, 1997 (the "First Amendment"), and as amended,
such amendment to be effective November 1, 1997 (the "Second Amendment");
WHEREAS, the Parent, as defined in the Agreement, desires to amend and/or
supplement certain Schedules to the Agreement as set forth herein; and
WHEREAS, the Parent desires to amend certain provisions of the Agreement as
set forth herein;
NOW THEREFORE, in consideration of the promises and conditions set forth
herein, the parties agree to amend the Agreement as follows:
1. The capitalized terms contained in this Third Amendment shall have the same
meaning as that set forth in the Agreement.
2. Pursuant to Section 2.5 Future Members of the Agreement, a new Subgroup of
the REC Group shall be designed as the Restricted Grand Wailea Subgroup and
shall include the following corporations: KSL Hawaii Holdings I, Inc., KSL
Hawaii Holdings II, Inc., KSL Hawaii Holdings III, Inc., KSL Hawaii
Holdings IV, Inc., KSL Hawaii Holdings V, Inc., and KSL Grand Wailea
Hospitality Corporation, and said corporations shall be deemed Members of
the REC Group and Signator Corporations under the Agreement effective the
<PAGE>
date of incorporation of each such corporation. KSL Hawaii Holdings I, Inc.
will be designated as the Subgroup Agent for the Restricted Grand Wailea
Subgroup.
3. Pursuant to Section 2.5 of the Agreement, a new Subgroup of the REC Group
shall be designated as the Unrestricted Grand Wailea Subgroup and shall
consist of KSL Grand Wailea Resort, Inc. and said corporation shall be
deemed a Member of the REC Group and Signator Corporations under the
Agreement effective the date of incorporation of such corporation.
4. Pursuant to Section 2.5 of the Agreement, KSL Florida Development Corp.
shall be added as a Member of the REC Group and Florida Subgroup, and a
Signator Corporation under the Agreement effective with the incorporation
of such corporation.
5. Pursuant to Section 2.5 of the Agreement, KSL Fairways/Virginia Corporation
shall be added as a Member of the REC Group and Fairways Subgroup, and a
Signator Corporation under the Agreement effective with the incorporation
of such corporation.
6. Income and franchise taxes of the REC Group shall not be applicable to new
Members and/or Subgroups for periods preceding their stated effective dates
as Members and/or Subgroups and Signator Corporations under the Agreement.
7. Pursuant to the First Amendment, the Restricted Grand Wailea Subgroup shall
also be added to and deemed Members of the Bond Subgroup effective as of
the earliest incorporation date of such corporations and, as such, will be
treated as a single Subgroup along with KSL Recreation Group, Inc., and the
Landmark, Fairways, Florida, Georgia and Grand Traverse Subgroups,
comprising the Bond Subgroup.
8. Pursuant to the Agreement, First Amendment, Second Amendment and the
changes and additions described herein this Third Amendment, revised
schedules (the "Schedules") to the Agreement are attached hereto as Exhibit
A and shall replace the schedules to the Agreement in their entirety.
9. Exhibit II to the Agreement has been revised and is attached hereto as
Exhibit II to this Second Amendment and shall replace Exhibit II to the
Agreement in its entirety.
10. All other terms, covenants and conditions set forth in the Agreement, the
First Amendment, and the Second Amendment shall be and remain in full force
and effect. In the event of any conflict between the provisions of this
Third Amendment and the provisions of the Agreement and/or the First
Amendment and/or Second Amendment, the provisions of this Third Amendment
shall control.
IN WITNESS WHEREOF, the parties hereto have executed this Third Amendment
to become effective as of the respective dates set forth herein.
KSL Recreation Corporation
KSL Recreation Group, Inc.
KSL Land Holdings, Inc.
KSL Desert Resorts, Inc.
Las Casitas Corporation
KSL Real Estate Company
<PAGE>
KSL Travel, Inc.
Casitas Plaza Corporation
KSL Golf Holdings, Inc.
KSL Fairways Golf Corporation
KSL Fairways/Virginia Corporation
KSL Florida Holdings, Inc.
KSL Hotel Corp.
KSL Silver Properties, Inc.
KSL Florida Development Corp.
KSL Georgia Holdings, Inc.
KSL Lake Lanier, Inc.
KSL Grand Traverse Holdings, Inc.
KSL Grand Traverse Land, Inc.
KSL Grand Traverse Realty, Inc.
KSL Grand Traverse Resort, Inc.
KSL Water Works, Inc.
KSL Hawaii Holdings I, Inc.
KSL Hawaii Holdings II, Inc.
KSL Hawaii Holdings III, Inc.
KSL Hawaii Holdings IV, Inc.
KSL Hawaii Holdings V, Inc.
KSL Grand Wailea Hospitality Corporation
KSL Grand Wailea Resort, Inc.
KSL Land Corporation
KSL Citrus Properties, Inc.
KSL Development Corporation
KSL Land II Corporation
KSL Land III Corporation
KSL Land IV Corporation
Landaq, Inc.
Delaware corporations
By: /s/John K. Saer, Jr.
---------------------------------------
Name: John K. Saer, Jr.
Title: Vice President
EXHIBIT A
(Attached)
SCHEDULE A
SIGNATOR CORPORATIONS
KSL Recreation Corporation
KSL Recreation Group, Inc.
KSL Land Holdings, Inc. (formerly Xochimilco Properties, Inc.)
KSL Desert Resorts, Inc.
Las Casitas Corporation (formerly KSL Vacation Resorts, Inc.)
KSL Real Estate Company (formerly Wild West Desert Properties, Inc.)
KSL Travel, Inc.
Casitas Plaza Corporation
<PAGE>
KSL Golf Holdings, Inc.
KSL Fairways Golf Corporation
KSL Fairways/Virginia Corporation
KSL Florida Holdings, Inc.
KSL Hotel Corp.
KSL Silver Properties, Inc.
KSL Florida Development Corp.
KSL Georgia Holdings, Inc.
KSL Lake Lanier, Inc.
KSL Land Corporation
KSL Citrus Properties, Inc.
KSL Development Corporation
KSL Land II Corporation
KSL Land III Corporation
KSL Land IV Corporation
Landaq, Inc.
KSL Grand Traverse Holdings, Inc.
KSL Grand Traverse Land, Inc.
KSL Grand Traverse Realty, Inc.
KSL Grand Traverse Resort, Inc.
KSL Water Works, Inc.
KSL Hawaii Holdings I, Inc.
KSL Hawaii Holdings II, Inc.
KSL Hawaii Holdings III, Inc.
KSL Hawaii Holdings IV, Inc.
KSL Hawaii Holdings V, Inc.
KSL Grand Wailea Hospitality Corporation
KSL Grand Wailea Resort, Inc.
SCHEDULE B
REC GROUP MEMBERS
KSL Recreation Corporation
KSL Land Holdings, Inc. (formerly Xochimilco Properties, Inc.)
KSL Recreation Group, Inc.
KSL Desert Resorts, Inc.
Las Casitas Corporation (formerly KSL Vacation Resorts, Inc.)
KSL Real Estate Company (formerly Wild West Desert Properties, Inc.)
KSL Travel Inc.
Casitas Plaza Corporation
KSL Golf Holdings, Inc.
KSL Fairways Golf Corporation
KSL Fairways/Virginia Corporation
KSL Florida Holdings, Inc.
KSL Hotel Corp.
KSL Silver Properties, Inc.
KSL Florida Development Corp.
KSL Georgia Holdings, Inc.
KSL Lake Lanier, Inc.
KSL Grand Traverse Holdings, Inc.
KSL Grand Traverse Land, Inc.
KSL Grand Traverse Realty, Inc.
KSL Grand Traverse Resort, Inc.
KSL Water Works, Inc.
KSL Hawaii Holdings I, Inc.
<PAGE>
KSL Hawaii Holdings II, Inc.
KSL Hawaii Holdings III, Inc.
KSL Hawaii Holdings IV, Inc.
KSL Hawaii Holdings V, Inc.
KSL Grand Wailea Hospitality Corporation
KSL Grand Wailea Resort, Inc.
SCHEDULE C
LAND GROUP MEMBERS
KSL Land Corporation
KSL Citrus Properties, Inc.
KSL Development Corporation
KSL Land II Corporation
KSL Land III Corporation
KSL Land IV Corporation
Landaq, Inc. (formerly KSL Casitas Corporation)
SCHEDULE D
DESERT RESORTS SUBGROUP
(formerly Landmark Subgroup)
KSL Desert Resorts, Inc. (formerly KSL Landmark Corporation)
Las Casitas Corporation (formerly KSL Vacation Resorts, Inc.)
KSL Real Estate Company (formerly Wild West Desert Properties, Inc.)
KSL Travel, Inc.
Casitas Plaza Corporation
SCHEDULE E
FLORIDA SUBGROUP
KSL Florida Holdings, Inc.
KSL Hotel Corp.
KSL Silver Properties, Inc.
KSL Florida Development Corp.
SCHEDULE F
FAIRWAYS SUBGROUP
KSL Golf Holdings, Inc.
KSL Fairways Golf Corporation
KSL Fairways/Virginia Corporation
SCHEDULE G
GEORGIA SUBGROUP
KSL Georgia Holdings, Inc.
<PAGE>
KSL Lake Lanier, Inc.
SCHEDULE H
LAND HOLDINGS SUBGROUP
(formerly Xochimilco Subgroup)
KSL Land Holdings, Inc. (formerly Xochimilco Properties, Inc.)
SCHEDULE I
BOND SUBGROUP
KSL Recreation Group, Inc.
Desert Resorts Subgroup
Fairways Subgroup
Florida Subgroup
Georgia Subgroup
Grand Traverse Subgroup
Restricted Grand Wailea Subgroup
SCHEDULE J
GRAND TRAVERSE SUBGROUP
KSL Grand Traverse Holdings, Inc.
KSL Grand Traverse Land, Inc.
KSL Grand Traverse Realty, Inc.
KSL Grand Traverse Resort, Inc.
KSL Water Works, Inc.
SCHEDULE K
RESTRICTED GRAND WAILEA SUBGROUP
KSL Hawaii Holdings I, Inc.
KSL Hawaii Holdings II, Inc.
KSL Hawaii Holdings III, Inc.
KSL Hawaii Holdings IV, Inc.
KSL Hawaii Holdings V, Inc.
KSL Grand Wailea Hospitality Corporation
SCHEDULE L
UNRESTICTED GRAND WAILEA SUBGROUP
KSL Grand Wailea Resort, Inc.
<PAGE>
EXHIBIT II
ILLUSTRATION OF THE CALCULATION REQUIRED PURSUANT TO PARAGRAPH 4.2(a)
(After Effective Date of the Third Amendment)
<TABLE>
<CAPTION>
UNRESTRICTED LAND
BOND GRAND WAILEA HOLDINGS
ENTITY SUBGROUP REC SUBGROUP SUBGROUP TOTAL
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
KSL Recreation, Inc. 150,000
Unrestricted Grand Wailea Subgroup 200,000
Desert Resorts Subgroup (158,000)
Florida Subgroup 75,000
Restricted Grand Wailea Subgroup 80,000
Fairways Subgroup 4,000
Grand Traverse Subgroup 12,500
Georgia Subgroup 276,500
KSL Recreation Group, Inc. 10,000
Land Holdings Subgroup (800,000)
-------- -------- -------- -------- --------
Taxable Income/(Loss) 300,000 150,000 200,000 (800,000) (150,000)
Federal Tax Rate 34% 34% 34% 34% 34%
-------- -------- -------- -------- --------
Tax Affect of Income/(Loss) 102,000 51,000 68,000 (272,000) (51,000)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Allocation of Loss
to Subgroups** (300,000) (150,000) (200,000) (150,000) (800,000)
Income/(Loss) as if Subgroups
Filed Separate Tax Returns 300,000 150,000 200,000 (800,000) (150,000)
-------- -------- -------- -------- --------
Difference in Allocation Resulting
<PAGE>
from Consolidated Tax Return 300,000 150,000 200,000 650,000 (150,000)
Federal Tax Rate 34% 34% 34% 34% 34%
-------- -------- -------- -------- --------
Tax on Difference 102,000 51,000 68,000 221,000 (51,000)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Intercompany Receivable/Payable (102,000) (51,000) (68,000) 221,000 0
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
