Securities and Exchange Commission
Washington, D.C. 20549
Form 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1997
OR
Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission File Number: 0-14374
ATLANTA MARRIOTT MARQUIS II LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Delaware 52-1427553
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10400 Fernwood Road
Bethesda, Maryland 20817
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 301-380-2070
Securities registered pursuant to Section 12(b) of the Act:
Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days: Yes No.__. The Partnership became subject to Section 13
reporting November 10, 1997.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ] (Not Applicable)
Documents Incorporated by Reference
None
TABLE OF CONTENTS
PAGE NO.
PART I
Item 1. Business.....................................................3
Item 2. Property.....................................................8
Item 3. Legal Proceedings............................................9
Item 4. Submission of Matters to a Vote of Security Holders.........10
PART II
Item 5. Market For The Partnership's Limited Partnership Units
and Related Security Holder Matters.........................10
Item 6. Selected Financial Data.....................................12
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................13
Item 8. Financial Statements and Supplementary Data.................16
Item 9. Changes In and Disagreements With Accountants on Accounting
and Financial Disclosure....................................31
PART III
Item 10. Directors and Executive Officers............................31
Item 11. Management Remuneration and Transactions....................32
Item 12. Security Ownership of Certain Beneficial Owners
and Management.......................................33
Item 13. Certain Relationships and Related Transactions..............33
PART IV
Item 14. Exhibits, Supplemental Financial Statement Schedules
and Reports on Form 8-K.....................................36
PART I
ITEM 1. BUSINESS
FORWARD-LOOKING STATEMENTS
Certain matters discussed herein are forward-looking statements within the
meaning of the Private Litigation Reform Act of 1995 and as such may involve
known and unknown risks, uncertainties, and other factors which may cause the
actual results, performance or achievements of the Partnership to be different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Although the Partnership, believes the
expectations reflected in such forward-looking statements are based upon
reasonable assumptions, it can give no assurance that its expectations will be
attained. The Partnership undertakes no obligation to publicly release the
result of any revisions to these forward-looking statements that may be made to
reflect any future events or circumstances.
Description and Organization of the Partnership
Atlanta Marriott Marquis Limited Partnership ("AMMLP"), a Delaware limited
partnership, was formed on May 28, 1985 (the "Closing Date") (i) to acquire an
80% general partnership interest in the Ivy Street Hotel Limited Partnership
("Ivy"), a partnership between John C. Portman, Jr. ("Portman") and Host
Marriott Corporation ("Host Marriott") that was formed to develop, own and
operate the 1,671 room Atlanta Marriott Marquis Hotel (the "Hotel"), and (ii)
purchase from Ivy the parcel of land (the "Land") on which the Hotel is located.
The sole general partner of the AMMLP, with a 1% interest, was Marriott Marquis
Corporation, a wholly-owned subsidiary of Host Marriott.
On the Closing Date, 530 Class A limited partnership interests of $100,000
per Unit were sold in a private placement. The General Partner made a capital
contribution of $536,000 on May 28, 1985 for its 1% general partnership
interest. In addition, the General Partner acquired a Class B limited
partnership interest without making any additional capital contribution.
AMMLP purchased its 80% general partnership interest in Ivy from Host
Marriott for a total price of $28.8 million. AMMLP also acquired the Land from
Ivy for $10 million in a separate transaction. AMMLP subsequently leased the
Land to Ivy under a 99-year lease with rentals based primarily on Hotel sales.
On July 9, 1997, Atlanta Marriott Marquis II Limited Partnership (the
"Partnership") was formed in anticipation of the merger discussed below. The
general partner of the Partnership is Marriott Marquis Corporation (the "General
Partner"). Prior to December 31, 1997, the Partnership did not engage in any
active business and was organized solely to succeed AMMLP's interest in Ivy. The
Partnership, and AMMLP before it, is the managing general partner of Ivy.
On December 31, 1997, AMMLP merged with and into the Partnership pursuant
to an agreement and plan of merger (the "Merger"). The requisite number of AMMLP
limited partners approved the Merger in accordance with the applicable
provisions of the partnership agreement and the Delaware Revised Uniform Limited
Partnership Act.
In conjunction with the Merger and the refinancing of the mortgage debt,
the following transactions occurred:
AMMLP was merged with and into the Partnership. With the Merger, the
separate existence of AMMLP ceased and AMMLP limited partnership units ("Units")
were converted on a one-for-one basis into Class A limited partnership new units
("New Units"). AMMLP limited partners who held fractional interests in Units
received the same interest in the New Units.
On December 31, 1997, the General Partner made an initial capital
contribution of $6 million to the Partnership. On January 30, 1998 the General
Partner contributed an additional $69 million. In return for such additional
capital contributions, the General Partner received a new Class B limited
partnership interest in the Partnership entitling the General Partner to a 13.5%
cumulative, compounding annual preferred return and priority return of such
capital. The General Partner also surrendered its then existing Class B interest
on distributions.
The Partnership Class A limited partners will receive an annual return of
5% on their initial investment in AMMLP, ratably with a 5% return to the General
Partner on its initial investment in AMMLP, after payment of the preferred
return on the Class B interest. To the extent unpaid in any year, such return
will accumulate and compound and be payable from sale or refinancing proceeds.
The General Partner caused the Partnership to contribute the Land to a
subsidiary of Ivy, in return for a credit to the Partnership's capital account
of $26.5 million (represented by a Class C limited partnership interest in Ivy)
and a 10% cumulative, compounding annual preferred return and a priority return.
The General Partner also caused the Partnership to reinvest the capital
contributions received from the General Partner in Ivy (represented by a Class B
partnership interest in Ivy) for a 13.5% cumulative, compounding annual
preferred return and priority return of such capital.
To facilitate the refinancing of Ivy's mortgage debt, the Hotel and the
Land were conveyed to a special purpose, bankruptcy remote entity, HMA Realty
Limited Partnership ("HMA"). The sole general partner of HMA, with a 1%
interest, is HMA-GP, Inc., a wholly-owned subsidiary of Ivy. The sole limited
partner, with a 99% interest, is Ivy. Accordingly, the new mortgage debt
agreements were entered into by HMA.
HMA obtained new 12-year first mortgage financing of $164 million (the "New
Mortgage Debt") which, together with $35 million from the additional $69 million
capital contributed by the General Partner, were used to pay the maturing
Mortgage Debt on the New Maturity Date. The New Mortgage Debt is nonrecourse to
HMA, bears interest at a fixed rate of 7.4% and will require monthly payments of
principal and interest calculated to fully amortize the loan over 25 years
resulting in annual debt service of $14.1 million for 1998 and $14.4 million
annually until the end of the 12-year term.
Host Marriott waived its existing right to priority repayment of the $20.1
million in prior non-interest bearing Interest Guarantee advances to Ivy and
restructured such advances as a loan with a 15 year term (interest only for the
first five years) bearing interest at a rate of 9% per annum (the "Term Loan").
Payments are due monthly in arrears from cash available after payment of debt
service on the New Mortgage Debt. Upon a sale of the Hotel, the Term Loan will
accelerate and become due and payable.
The outstanding amount of the Interest Guarantee of $10.4 million and
related interest was repaid to Host Marriott.
The $30 million Principal Guarantee provided by Host Marriott was
eliminated.
The Partnership distributed funds to Class A limited partners of
approximately $5,000 per New Unit. This distribution represented the excess of
the Partnership's reserve after payment of a majority of the transaction costs
related to the Mortgage Debt refinancing.
As part of the refinancing, HMA was required to establish certain reserves
which are held by an agent of the lender including:
$3.6 million debt service reserve--This reserve is equal to three months of
debt service.
$10.1 million deferred maintenance and capital expenditure reserve--This
reserve will be expended for capital expenditures for repairs to the facade of
the Hotel as well as various renewals and replacements and site improvements.
$7.5 million rooms refurbishment reserve--This reserve will be expended to
refurbish the remaining 711 rooms and 16 suites at the Hotel which have not
already been refurbished.
$1.3 million tax and insurance reserve--This reserve will be used to pay
real estate tax and insurance premiums for the Hotel.
In addition, HMA advanced an additional $2,639,000 to the Manager for
working capital needs and used the remaining cash to pay transaction costs
associated with the refinancing.
AMMLP's partnership agreement was amended (the "AMMLP-II Partnership
Agreement") as a result of the Merger to incorporate the following revisions:
(i) a revised provision regarding a sale of the Hotel to permit the Partnership
to sell the Hotel to an unaffiliated third party without the consent of the
limited partners; (ii) a revised provision limiting the voting rights of the
General Partner and its affiliates to permit the General Partner and its
affiliates to have full voting rights with respect to all New Units currently
held by or acquired by the General Partner and its affiliates; (iii)
extinguishment of the original Class B limited partner interest held by the
General Partner and replacement of it with a new Class B interest which is
entitled to a 13.5% cumulative, compounded annual return; (iv) addition of a
mechanism that allows the Class B limited partner to contribute up to an
additional $20 million should the Hotel require additional funding (such
contribution would also be entitled to the 13.5% return discussed above); (v) a
revised right of removal of the General Partner clause so that an affirmative
vote of 66 2/3% would be needed to effect a removal of the General Partner and;
(vi) revisions to the provisions for allocations and distributions (see Item 8
"Financial Statements and Supplementary Data" below). As a result of the
approval of the Merger, the AMMLP-II Partnership Agreement became effective
December 31, 1997.
The Hotel is operated as part of the Marriott International, Inc. ("MII")
full-service hotel system and is managed by MII (the "Manager") under a
long-term management agreement. The Hotel has the right to use the Marriott name
pursuant to the management agreement and, if this management agreement is
terminated, the Partnership will lose the right for all purposes. To facilitate
the refinancing effective January 3, 1998, a new management agreement was
entered into by HMA and the Manager. The new management agreement expires July
1, 2010 and is renewable at the Manager's option for five additional 10-year
terms. Pursuant to the new management agreement no incentive management fees are
payable to the Manager with respect to the first $29.7 million of operating
profit (the "Owner's Priority"). Thereafter, the Manager will receive 20% of the
profit in excess of the Owner's Priority. See Item 13, "Certain Relationships
and Related Transactions."
The Partnership is and AMMLP before it was engaged solely in the business
of owning an interest in the Hotel and the underlying Land and, therefore, is
engaged in one industry segment. The principal offices of the Partnership are
and AMMLP before were located at 10400 Fernwood Road, Bethesda, Maryland 20817.
The Hotel is among the premier hotels in its market and caters primarily to
the group/convention and association business segment. The Partnership has no
plans to acquire any new properties or sell its existing interest in the Hotel.
See "Competition" below and Item 2, "Property."
Historically, AMMLP's financing needs have been funded through loan
agreements with independent financial institutions. See "Mortgage Debt
Financing" below.
Material Contracts
Hotel Management Agreement
Ivy originally entered into a long-term hotel management agreement (the
"Management Agreement") with the Manager to manage the Hotel as part of the MII
full-service hotel system. The Management Agreement had an initial term expiring
in 2010. Ivy or the Manager had the option to renew the Management Agreement for
five additional 10-year terms. The Manager was entitled to compensation for its
services in the form of a base management fee equal to 3% of gross sales. In
addition, the Manager was entitled to an incentive management fee equal to 50%
of assumed net cash flow of the Hotel, as defined.
To facilitate the refinancing effective January 3, 1998, a new management
agreement (the "New Management Agreement") was entered into by HMA and the
Manager. The New Management Agreement expires July 1, 2010 and is renewable at
the Manager's option for five additional 10-year terms. Pursuant to the terms of
the New Management Agreement, no incentive management fees are payable to the
Manager with respect to the first $29.7 million of operating profit (the
"Owner's Priority"). Thereafter, the Manager will receive 20% of the profit in
excess of such Owner's Priority. The amount of the Owner's Priority will not be
reduced but may be increased to take into account additional capital
contributions by the General Partner or its affiliates. As part of the New
Management Agreement, all accrued incentive management fees amounting to $4.5
million were waived by the Manager and the Partnership's accrued liability was
written off to income in 1998. The New Management Agreement continues to provide
that the Manager be paid a base management fee equal to 3% of gross sales.
For additional information, see Item 13, "Certain Relationships and Related
Transactions."
Competition
Downtown Atlanta has a unique market condition in that transient demand
parallels group demand. A large percentage of business transient is actually
convention attendees making reservations outside group blocks. As a result of
this, Atlanta has not experienced the demand increases associated with the
lodging industry overall. Rooms supply growth in the luxury and upscale segments
has been and is forecasted to be limited. While there has been significant
growth in the budget and mid-priced hotel segment in the Atlanta suburbs, these
additions are not expected to have a significant impact on the Hotel's revenues
as these hotels target a significantly different market segment. In 1997, the
Atlanta properties generally reported decreased results due to higher activity
in 1996 related to the Summer Olympics and the impact of the additional supply
added to the suburban areas.
The inclusion of the Hotel within the nationwide MII full-service hotel
system provides advantages of name recognition, centralized reservations and
advertising, system-wide marketing and promotion, centralized purchasing and
training and support services. Additional competitive information is set forth
in Item 2, "Property," with respect to the Hotel.
Conflicts of Interest
Because Host Marriott and its affiliates own and/or operate hotels other
than the Hotel owned by the Partnership, potential conflicts of interest exist.
With respect to these potential conflicts of interest, Host Marriott and its
affiliates retain a free right to compete with the Hotel, including the right to
develop or acquire competing hotels now and in the future, in addition to those
existing hotels which may compete directly or indirectly.
Under Delaware law, the General Partner has unlimited liability for
obligations of the Partnership, unless those obligations are, by contract,
without recourse to the partners thereof. Since the General Partner is entitled
to manage and control the business and operations of the Partnership, and
because certain actions taken by the General Partner or the Partnership could
expose the General Partner or its parent, Host Marriott, to liability that is
not shared by the limited partners (for example, tort liability or environmental
liability), this control could lead to a conflict of interest.
Policies with Respect to Conflicts of Interest
It is the policy of the General Partner that the Partnership's relationship
with the General Partner, any of its affiliates or persons employed by the
General Partner are conducted on terms which are fair to the Partnership and
which are commercially reasonable. Agreements and relationships involving the
General Partner or its affiliates and the Partnership are on terms consistent
with the terms on which the General Partner or its affiliates have dealt with
unrelated partners.
The Partnership Agreement and the AMMLP-II Partnership Agreement provide
that agreements, contracts or arrangements between the Partnership and the
General Partner or any of its affiliates, other than arrangements for rendering
legal, tax, accounting, financial, engineering, and procurement services to the
Partnership by the General Partner or its affiliates, will be on commercially
reasonable terms and will be subject to the following conditions:
(a) the General Partner or any affiliate must be actively engaged in the
business of rendering such services or selling or leasing such goods,
independently of its dealings with the Partnership and as an ordinary ongoing
business or must enter into and engage in such business with Marriott system
hotels or hotel owners generally and not exclusively with the Partnership;
(b) any such agreement, contract or arrangement must be fair to the
Partnership, and reflect commercially reasonable terms and shall be embodied in
a written contract which precisely describes the subject matter thereof and all
compensation to be paid therefor;
(c) no rebates or give-ups may be received by the General Partner or any
affiliate, nor may the General Partner or any affiliate participate in any
reciprocal business arrangements which would have the effect of circumventing
any of the provisions of the Partnership Agreement;
(d) no such agreement, contract or arrangement as to which the limited
partners had previously given approval may be amended in such manner as to
increase the fees or other compensation payable to the General Partner or any
affiliate or to decrease the responsibilities or duties of the General Partner
or any affiliate in the absence of the consent of the limited partners holding a
majority of the New Units (excluding those New Units held by the General Partner
or certain of its affiliates); and
(e) any such agreement, contract or arrangement which relates to or secures
any funds advanced or loaned to the Partnership by the General Partner or any
affiliate must reflect commercially reasonable terms.
Employees
Neither the General Partner nor the Partnership has any employees. Host
Marriott provides the services of certain employees (including the General
Partner's executive officers) of Host Marriott to the Partnership and the
General Partner. The Partnership and the General Partner anticipate that each of
the executive officers of the General Partner will generally devote a sufficient
portion of his or her time to the business of the Partnership. However, each of
such executive officers also will devote a significant portion of his or her
time to the business of Host Marriott and its other affiliates. No officer or
director of the General Partner or employee of Host Marriott devotes a
significant percentage of time to Partnership matters. To the extent that any
officer, director or employee does devote time to the Partnership, the General
Partner or Host Marriott, as applicable, is entitled to reimbursement for the
cost of providing such services. See Item 11, "Management Remuneration and
Transactions," for information regarding payments made to Host Marriott or its
subsidiaries for the cost of providing administrative services to the
Partnership. The Hotel is staffed by employees of the Manager.
ITEM 2. PROPERTY
The Hotel
Location
The Atlanta Marriott Marquis is a full-service Marriott hotel. It is
located on approximately 3.6 acres of land in the heart of downtown Atlanta. The
Hotel is in the Peachtree Center area of Atlanta's central business district and
occupies most of the block that is bordered by Baker Street to the north,
Courtland Street to the east, Harris Street to the south, and Peachtree Center
Avenue to the west. The Hotel is located within walking distance of Atlanta's
convention facilities, as well as restaurants, lounges, a gift shop and several
retail shops.
Description
The Hotel opened on July 1, 1985. The 1,671 room Hotel includes 72 suites
and contains over 122,000 square feet of meeting and exhibition space and five
restaurants and lounges. Recreational facilities include a complimentary health
club, an indoor/outdoor swimming pool, hydro-therapy pool, sundeck, steam room
and sauna, a rub-down area and a game room. The Hotel features a spectacular
50-story atrium that soars to an enormous rooftop skylight.
Capital Improvements
In 1997, the Hotel completed a $7.0 million refurbishment of approximately
half its guest rooms which included the replacement of the carpeting,
bedspreads, upholstery, drapes and other similar items ("Softgoods") and also
the dressers, chairs, beds and other furniture ("Casegoods"). The refurbishment
of the remaining 711 rooms and 16 suites will begin in mid-1998. This portion of
the refurbishment will be funded from a reserve which was established by the
Partnership with the lender on the New Maturity Date. Also in 1997 the facade
repair project was started, which entails a repair of the entire facade of the
building. The project is expected to cost $9.0 million and will be funded by the
Partnership from a reserve which was also established with the lender on the New
Maturity Date. The project is expected to be completed by mid-1999.
Competition
The primary competition for the Hotel comes from the following four
first-class hotels in downtown Atlanta: (i) the 1,278 room Hyatt Regency Atlanta
Hotel, (ii) the 1,222 room Atlanta Hilton & Towers Hotel, (iii) the 1,068 room
Westin Peachtree Plaza Hotel and (iv) the 747 room Radisson Hotel Atlanta.
These four competitors contain an aggregate of approximately 4,315 rooms
and approximately 332,000 square feet of meeting space. Hotel management has
formed an alliance with the Westin, Hyatt and Hilton (the "Atlanta Alliance").
The Atlanta Alliance is a formal arrangement among the four hotels to present a
meeting alternative to customers' groups that are too large for a single hotel
but too small for the Georgia World Congress Center, Atlanta's convention
center.
In addition, other hotels in the Atlanta area compete with the Hotel;
however, these differ from the Atlanta Marquis Hotel in terms of size, room
rates, facilities, amenities and services offered, market orientation and/or
location. As a major convention facility, the Hotel also competes with similar
facilities throughout the country.
No new full-service hotels opened in the Atlanta market in 1997 and none
are expected to open in 1998. However, during 1997, 38 new limited service
hotels opened thus adding 3,422 new rooms to the market and approximately 13
more properties containing a total of 1,498 rooms are expected to open in 1998
in the Atlanta suburbs. These additions are not expected to have a significant
impact on the Hotel's revenues as these hotels target a significantly different
market segment. In 1997, the Atlanta properties generally reported decreased
results due to higher activity in 1996 related to the Summer Olympics and the
impact of additional supply added to the suburban areas. In 1988, construction
began on a 320 room Doubletree Guest Suites hotel which is expected to open in
mid-1999.
ITEM 3. LEGAL PROCEEDINGS
The Partnership and the Partnership Hotel are involved in routine
litigation and administrative proceedings arising in the ordinary course of
business, some of which are expected to be covered by liability insurance and
which collectively are not expected to have a material adverse effect on the
business, financial conditions or results of operations of the Partnership.
Certain of the Partnership's limited partners have filed two lawsuits in
connection with the merger. On December 12, 1997, an action entitled Hiram and
Ruth Sturm v. Marriott Marquis Corporation, Bruce F. Stemerman, Robert E.
Parsons and Christopher G. Townsend and Atlanta Marriott Marquis Limited
Partnership, (Case No. 97-CV-3706), was filed as a purported class action with
the United States District Court for the Northern District of Georgia. The
defendants are the General Partner, Host Marriott and the directors of the
General Partner. The plaintiffs have brought direct and derivative claims
alleging: (i) violations of the Exchange Act and rules and regulations
promulgated thereunder; (ii) violations of the Securities Act of 1933 and rules
and regulations promulgated thereunder; (iii) breach of fiduciary duties; and
(iv) breach of the AMMLP partnership agreement. The plaintiffs are seeking,
inter alia, equitable relief, compensatory damages, punitive damages and costs.
On January 5, 1998 an action entitled Howard H. Poorvu v. Marriott Marquis
Corporation, Bruce F. Stemerman, Robert E. Parsons, Jr. and Christopher G.
Townsend and Atlanta Marriott Marquis Limited Partnership and Atlanta Marriott
Marquis II Limited Partnership, (Civil Action No. 16095-NC), was filed as a
purported class action with the Court of Chancery of the State of Delaware in
and for New Castle County. The plaintiffs brought direct and derivative claims
alleging: (i) breach of fiduciary duty; (ii) breach of the AMMLP partnership
agreement; and (iii) breach of an implied covenant of good faith and fair
dealing. The plaintiff is seeking, inter alia, equitable relief, compensatory
damages, costs and the appointment of a receiver to assume control of the
Partnership.
The defendants believe that the allegations asserted in the lawsuits are
without merit and intend to vigorously defend against such claims.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On November 10, 1997, the General Partner initiated a Consent Solicitation
Statement/Prospectus (the "Consent Solicitation") asking the Class A limited
partners of AMMLP to approve the Merger of AMMLP with and into the Partnership.
The Merger was part of a series of transactions intended to facilitate a
refinancing of the approximately $199 million Mortgage Debt encumbering the
Hotel. See Item 1, "Description of the Partnership" above.
A majority of the limited partner units voted in favor of the Merger.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP UNITS
AND RELATED SECURITY HOLDER MATTERS
Transfers of New Units are limited to the first day of a fiscal quarter,
and are subject to approval by the General Partner and certain other
restrictions. As of December 31, 1997, there were 755 holders of record of the
530 New Units.
In accordance with Sections 4.06 and 4.09 of the Partnership Agreement,
cash available for distribution was distributed to the partners as follows:
(i) beginning in 1991, and continuing until the Class A limited partners
and the General Partner have received cumulative distributions of sale proceeds,
refinancing proceeds or proceeds from the sale of the Land other than in
connection with the sale of the Hotel equal to their capital contributions, 1%
to the General Partner, 80% to the Class A limited partners and 19% to the Class
B limited partner; provided, however, that if the distributions made pursuant to
this clause (ii) are not sufficient in any Fiscal Year to provide the General
Partner and the Class A limited partners with an amount of cash available for
distribution equal to an annual noncumulative 10% return on their capital
contribution, the distribution to the Class B limited partner shall be reduced
to the extent necessary to provide the General Partner and the Class A limited
partners with such an amount; and
(ii) thereafter, 1% to the General Partner, 65% to the Class A limited
partners and 34% to the Class B limited partner.
Cash available for distribution meant, with respect to any fiscal period,
the revenues of the Partnership from all sources during such fiscal period less
(i) all cash expenditures of the Partnership during such fiscal period,
including, without limitation, debt service, and any investor services fees, and
(ii) such reserves as may be determined by the General Partner, in its sole
discretion, to be necessary to provide for the foreseeable needs of the
Partnership, but shall not include sale proceeds, refinancing proceeds or the
sale of the Land other than in connection with the sale of the Hotel.
Since inception, AMMLP and the Partnership distributed a total of
$18,777,286 from operations (consisting primarily of ground rent paid by Ivy to
the Partnership) as follows: $161,414 to the General Partner and $18,615,872 to
the Class A limited partners ($35,124 per limited partner New Unit). This amount
includes the February 1998 distribution discussed below. In addition, as a
result of the guarantees furnished by Host Marriott (formerly Marriott
Corporation) in connection with the 1990 refinancing, income tax regulations
issued since the formation of the AMMLP require certain tax deductions
previously allocable to the limited partners to be allocated instead to the
General Partner. AMMLP has distributed a total of $4,570,720 ($8,624 per limited
partner Unit) including a May 1997 distribution of $150,520 ($284 per limited
partner Unit) from funds contributed by the General Partner. These contributions
were intended to compensate the limited partners for lost value as a result of
this reallocation of tax losses.
On February 9, 1998, the Partnership made a cash distribution to the Class
A limited partners of $2,648,562 ($5,000 per New Unit). This distribution
represents the excess of the General Partner reserve after payment of a majority
of the transaction costs related to the Mortgage Debt refinancing. This was a
one-time distribution and future distributions, if any, are expected to be
funded by operations.
On October 31, 1995, AMMLP made an interim distribution solely from ground
rent paid to the Partnership of $1,664,950 as follows: $16,650 to the General
Partner and $1,648,300 to the limited partners ($3,110 per Unit). On April 15,
1996, AMMLP made a final distribution solely from 1995 ground rent paid to AMMLP
of $814,810 as follows: $8,150 to the General Partner and $806,660 to the
limited partners ($1,522 per Unit).
On December 31, 1997, AMMLP's partnership agreement was amended (the
"AMMLP-II Partnership Agreement") as a result of the Merger. In accordance with
Section 4.02 of the AMMLP-II Partnership Agreement, cash available for
distribution will be distributed for each fiscal year, not less than annually,
to the partners as follows:
(i) to the General Partner, until the General Partner has received a 13.5%
cumulative compounded annual return on its Class B invested capital,
(ii) to the Class A limited partners, until the Class A limited partners
have received an annual return of 5%, on their initial invested capital in AMMLP
ratably with a 5% return to the General Partner on its initial investment in
AMMLP, and
(iii) thereafter, in proportion to total invested capital through
completion of the Restructuring Transactions or approximately 41% to limited
partners and 59% to the General Partner.
Sale proceeds or refinancing proceeds shall be distributed as soon as
practicable following their receipt by the Partnership in such amounts as the
General Partner shall determine. Capital proceeds shall be distributed as
follows:
(i) to the General Partner, until the General Partner has received a 13.5%
cumulative compounded annual return on its Class B invested capital,
(ii) to the Class A limited partners, until the Class A limited partners
have received an annual return of 5%, on their initial invested capital in AMMLP
ratably with a 5% return to the General Partner on its initial investment in
AMMLP,
(iii) to the General Partner, until its Class B invested capital of up to
$75 million has been fully returned, taking into account all distributions to
such Partners following the effective date of the Restructuring Transactions
(other than the approximately $5,000 per New Unit distributed as part of the
Restructuring Transactions),
(iv) to the General Partner and Class A limited partners until they have
received a cumulative, compounded return on their original invested capital of
5% per annum from the effective date of the Restructuring Transactions),
(v) to the General Partner and Class A limited partners, until such
partners' original invested capital of $536,000 and $53,000,000, respectively,
has been fully returned, and
(vi) thereafter, in proportion to total invested capital through completion
of the Restructuring Transactions or approximately 41% to limited partners and
59% to the General Partner.
Pursuant to the terms of the AMMLP-II Partnership Agreement, the definition
of cash available for distribution remains consistent with the Partnership
Agreement definition. The Partnership expects to make future cash distributions
no less than annually.
No distributions of sale proceeds, refinancing proceeds or proceeds from
the sale of the Land have been made since inception.
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data presents historical operating
information for AMMLP and the Partnership for each of the five years ended
December 31, 1997 (in thousands, except per Unit amounts):
<TABLE>
<S> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993
----------- ----------- ----------- ---------- -------
Hotel revenues*............................$ 36,471 $ 38,654 $ 34,831 $ 32,201 $ 29,563
=========== =========== =========== ========== ==========
Net (loss) income..........................$ (569) $ 2,543 $ (413) $ (3,073) $ (5,935)
=========== =========== =========== ========== ==========
Net (loss) income per limited partner
Unit (530 Units)........................$ (1,062) $ 4,751 $ (772) $ (5,740) $ (11,087)
=========== =========== =========== ========== ==========
Total assets...............................$ 194,376 $ 181,508 $ 175,963 $ 179,821 $ 186,138
=========== =========== =========== ========== ==========
Total liabilities..........................$ 246,484 $ 239,047 $ 235,226 $ 236,324 $ 237,679
=========== =========== =========== ========== ==========
Cash distributions per limited partner
Unit (530 Units)........................$ 5,000 $ -- $ 4,632 $ 3,353 $ 3,235
=========== =========== =========== ========== ==========
Payment due to Reallocation of Tax
Losses (530 Units) .....................$ -- $ 284 $ -- $ -- $ 844
=========== =========== =========== ========== ==========
</TABLE>
* Hotel revenues represent house profit of the Hotel since substantially
all of the operating decisions related to the generation of house profit of the
Hotel rest with the Manager. House profit reflects Hotel operating results and
represents gross Hotel sales less property-level expenses, excluding
depreciation and amortization, base and incentive management fees, property
taxes, equipment rent and certain other costs, which are disclosed separately in
the consolidated statement of operations.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
CAPITAL RESOURCES AND LIQUIDITY
AMMLP's financing needs have been historically funded through loan
agreements with independent financial institutions. As a result of the
successful refinancing of the Partnership's Mortgage Debt, the General Partner
believes that the Partnership will have sufficient capital resources and
liquidity to conduct its operations in the ordinary course of business.
The Merger
On December 31, 1997 limited partners holding a majority of the limited
partner Units in AMMLP consented to the Merger of AMMLP with and into the
Partnership. The Merger was part of a series of transactions. See Item 1,
"Business" for discussion of the Merger.
Mortgage Debt
On February 2, 1998, the mortgage debt was successfully refinanced with a
third party lender. The Partnership's debt now consists of a $164 million
mortgage loan which bears interest at a fixed rate of 7.4% for a 12-year term.
The mortgage loan requires payments of principal and interest based upon a
25-year amortization schedule. See Item 1, "Business" for discussion of the
refinancing.
Principal Sources and Uses of Cash
AMMLP's and the Partnership's principal source of cash is cash from Hotel
operations. Its principal uses of cash are to pay debt service on AMMLP's and
the Partnership's mortgage debt, to make guarantee repayments, to fund the
property improvement fund and to make distributions to the partners.
Additionally, in 1997 the Partnership received cash by drawing upon the Interest
Guarantee and through an equity infusion by the General Partner. Additionally,
in 1997 the Partnership utilized cash to pay financing costs incurred in
connection with the refinancing of the Partnership's mortgage debt.
Total cash provided from operations was $21.6 million, $9.9 million and
$10.1 million for the years ended December 31, 1997, 1996 and 1995,
respectively. The Partnership did not pay the interest payment of the Mortgage
Debt which was due on January 10, 1998 until January 9, 1998. In both 1996 and
1995, the majority of the January interest payment was paid in December of the
preceding year. This difference in the timing of the interest payments accounts
for the difference in the total cash provided from operations.
Cash used in investing activities was $4.4 million, $4.5 million and $3.7
million for the years ended December 31, 1997, 1996 and 1995, respectively.
Contributions to the property improvement fund for the years ended December 31,
1997, 1996, and 1995, were $3.9 million, $4.1 million, and $3.3 million,
respectively. Property and equipment additions increased in 1997 due to
increased expenditures at the Hotel associated with the first half of the rooms
refurbishment completed in 1997.
Cash used in financing activities was $1.3 million, $1.0 million and $5.8
million for the years ended December 31, 1997, 1996 and 1995, respectively. In
1997, the Partnership drew $10.4 million pursuant to the Interest Guarantee and
received $6 million of the $75 million total equity infusion from the General
Partner. The Partnership paid $10.9 million, $20.4 million and $20.4 million of
interest on the mortgage debt for the years ended December 31, 1997, 1996 and
1995, respectively. On the Maturity Date, the Partnership was required to pay
$17.6 million representing the Deferred Interest on the Mortgage Debt. No
guarantee repayments to Host Marriott were made in 1997 and 1996. The
Partnership made a guarantee repayment of $3.5 million in 1995. No distributions
to partners were made in 1997 as all cash flow was being reserved in
anticipation of the Mortgage Debt maturity. Distributions to partners were
$819,000 in 1996 and $2.3 million in 1995. Subsequent to year end, the
Partnership made a cash distribution to the Class A limited partners of
$2,648,562 ($5,000 per New Unit).
AMMLP and the Partnership are required to maintain the Hotel in good repair
and condition. Pursuant to the Management Agreement and the New Management
Agreement, AMMLP and the Partnership are required to make annual contributions
to a property improvement fund to provide for the replacement of furniture,
fixtures and equipment. Annual contributions to the fund equaled 4% of gross
Hotel sales through June 1995 and are 5% thereafter. Per terms of the New
Management Agreement, contributions to the property improvement fund will remain
at 5%.
The General Partner believes that cash from Hotel operations and the
reserves established in conjunction with the refinancing will continue to meet
the short and long-term operational needs of the Partnership. In addition, the
General Partner believes the property improvement fund and the capital reserves
established in conjunction with the refinancing will be adequate for the future
capital repairs and replacement needs of the Hotel.
RESULTS OF OPERATIONS
Hotel revenues represent house profit of the Hotel since substantially all
of the operating decisions related to the generation of house profit of the
Hotel rest with the Manager. House profit reflects Hotel operating results and
represents gross Hotel sales less property-level expenses, excluding
depreciation and amortization, base and incentive management fees, property
taxes, equipment rent and certain other costs, which are disclosed separately in
the consolidated statement of operations.
1997 Compared to 1996:
Partnership revenues for 1997 decreased 6% to $36.5 million from $38.7
million in 1996. The decrease in revenues is primarily due to a 2% decrease in
REVPAR or revenue per available room. REVPAR decreased due to a 3% decrease in
average room rate to approximately $127 partially offset by a 1.2 percentage
point increase in average occupancy to the low-70's. These results are primarily
due to the impact of the 1996 summer Olympic Games. In 1996, the Hotel was able
to drive up the average room rate throughout the year as room rates throughout
the Atlanta market were high. Occupancy levels, however, were more directly tied
to the timing of the Olympic Games. While occupancy levels were high during the
course of the Olympic Games, there was a significant decline in demand in the
months immediately prior to and subsequent to the Olympic Games.
No new full-service hotels opened in the Atlanta market in 1997 and none
are expected to open in 1998. However, during 1997, 38 new limited service
hotels opened thus adding 3,422 new rooms and 13 more properties containing a
total of 1,498 rooms are expected to open in 1998 in the Atlanta suburbs. These
additions did not have and are not expected to have a significant impact on the
Hotel's revenues as these hotels target a significantly different market
segment. Construction has been started on a 320-room Doubletree guest suite
hotel which is expected to open in mid-1999. The number of city-wide conventions
is expected to be down only slightly, however, roomnights associated with these
conventions are expected to be down by 80,000. The Hotel's strategy to mitigate
the impact of this will be to continue to focus on customer service, to work
closely with the Atlanta Convention and Visitors Bureau to generate short term
business for 1998 and to put into effect the marketing plan developed with the
other Atlanta Marriott products targeting leisure weekend and summer customers.
Interest Expense: In 1997, interest expense increased $2.9 million to $25.4
million primarily due to a 2.0 percentage point increase in the interest rate
charged on the mortgage debt for the period from the Maturity Date through the
New Maturity Date coupled with financing costs of $900,000 incurred in
connection with the extension of the maturity date of the Mortgage Debt.
Incentive Management Fees. In 1997, $1.2 million of incentive management
fees were earned as compared to $2.0 million earned in 1996. The decrease in
incentive management fees earned was the result of decreased Hotel operating
results.
Net Income (Loss). In 1997, the Partnership had a net loss of $569,000, a
decrease of $3.0 million over 1996's net income of $2.5 million. This decrease
was primarily due to lower Hotel revenues and an increase in the Partnership's
interest expense, partially offset by a decrease in incentive management fees.
1996 Compared to 1995:
Partnership revenues for 1996 increased 11% to $38.7 million from $34.8
million in 1995. The increase in revenues is the result of a 9% increase in
REVPAR. REVPAR increased due to a 14% increase in average room rate to
approximately $130 partially offset by a 3.7 percentage point decrease in
average occupancy to the high-60's. These changes in average room rate and
average occupancy are primarily due to the impact on the city of the 17-day
Centennial Olympic Games. The increase in average room rate was due to an
increase in room rates throughout the Atlanta market. The decline in average
occupancy was due to a decline in city-wide demand for the months prior to and
immediately after the Olympics. During the Olympic Games, the Hotel hosted the
"Olympic Family" which was comprised of the International Olympic Committee, the
Atlanta Committee for the Olympic Games and federations from each of the
participating countries.
Depreciation. Depreciation decreased $1.1 million, or 16%, in 1996 when
compared to 1995 due to a portion of the Hotel's furniture and equipment
becoming fully depreciated in 1995.
Incentive Management Fees. In 1996, $2.0 million of incentive management
fees were earned as compared to $1.0 million earned in 1995. The increase in
incentive management fees earned was the result of improved Hotel operating
results resulting in certain cash flow priorities having been met.
Equipment Rent and Other: Equipment rent and other increased $460,000 due
to the inclusion of a property tax credit in 1995 results which did not occur in
1996.
Net Income (Loss). In 1996, the Partnership had a net income of $2.5
million, an increase of $2.9 million over 1995's net loss of $400,000. This
increase was primarily due to higher Hotel revenues.
Inflation
The rate of inflation has been relatively low and accordingly, has not had
a significant impact on the Partnership's operating results. However, the
Hotel's room rates and occupancy levels are sensitive to inflation. the Manager
is generally able to pass through increased costs to customers through higher
room rates.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index Page
Report of Independent Public Accountants............................. 17
Consolidated Statement of Operations................................. 18
Consolidated Balance Sheet........................................... 19
Consolidated Statement of Changes in Partners' Deficit............... 20
Consolidated Statement of Cash Flows................................. 21
Notes to Consolidated Financial Statements........................... 22
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE PARTNERS OF ATLANTA MARRIOTT MARQUIS II LIMITED PARTNERSHIP:
We have audited the accompanying consolidated balance sheet of Atlanta
Marriott Marquis II Limited Partnership (a Delaware limited partnership) and Ivy
Street Hotel Limited Partnership, its majority-owned subsidiary partnership, as
of December 31, 1997 and 1996, and the related consolidated statements of
operations, changes in partners' deficit and cash flows for each of the three
years in the period ended December 31, 1997. These financial statements and the
schedule referred to below are the responsibility of the General Partner's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Atlanta
Marriott Marquis II Limited Partnership and subsidiary as of December 31, 1997
and 1996, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1997 in conformity with
generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index at Item
14(a)(2) is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Washington, D.C.
March 11, 1998
CONSOLIDATED STATEMENT OF OPERATIONS
Atlanta Marriott Marquis II Limited Partnership and Subsidiary
For the Years Ended December 31, 1997, 1996 and 1995
(in thousands, except per Unit amounts)
<TABLE>
<S> <C> <C> <C>
1997 1996 1995
---------- ---------- --------
REVENUES
Hotel (Note 3)..............................................................$ 36,471 $ 38,654 $ 34,831
Interest income............................................................. 887 651 529
---------- ---------- -----------
37,358 39,305 35,360
---------- ---------- -----------
OPERATING COSTS AND EXPENSES
Interest.................................................................... 25,389 22,890 22,712
Depreciation................................................................ 5,250 5,525 6,608
Property taxes.............................................................. 2,754 2,858 2,692
Base management fee......................................................... 2,562 2,654 2,435
Incentive management fee.................................................... 1,167 2,018 969
Equipment rent and other.................................................... 805 817 357
---------- ---------- -----------
37,927 36,762 35,773
---------- ---------- -----------
NET (LOSS) INCOME..............................................................$ (569) $ 2,543 $ (413)
========== ========== ===========
ALLOCATION OF NET (LOSS) INCOME
General Partner.............................................................$ (6) $ 25 $ (4)
Limited Partners............................................................ (563) 2,518 (409)
---------- ---------- -----------
$ (569) $ 2,543 $ (413)
========== ========== ===========
NET (LOSS) INCOME PER LIMITED PARTNER UNIT
(530 Units).................................................................$ (1,062) $ 4,751 $ (772)
========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
CONSOLIDATED BALANCE SHEET
Atlanta Marriott Marquis II Limited Partnership and Subsidiary
December 31, 1997 and 1996
(in thousands)
<TABLE>
<S> <C> <C>
1997 1996
----------- --------
ASSETS
Property and equipment, net...............................................................$ 165,372 $ 162,111
Due from Marriott International, Inc...................................................... 4,425 6,390
Property improvement fund................................................................. 2,756 6,864
Deferred financing costs, net of accumulated amortization................................. 321 542
Cash and cash equivalents................................................................. 21,502 5,601
----------- -----------
$ 194,376 $ 181,508
=========== ===========
LIABILITIES AND PARTNERS' DEFICIT
LIABILITIES
Mortgage debt..........................................................................$ 199,019 $ 215,574
Due to Host Marriott under Original Debt Service Guarantee
and Commitment and Interest Guarantee............................................. 30,524 20,134
Due to Marriott International, Inc..................................................... 4,198 3,030
Accounts payable and accrued expenses.................................................. 12,743 309
----------- -----------
Total Liabilities.................................................................... 246,484 239,047
----------- -----------
PARTNERS' DEFICIT
General Partner
Capital contributions................................................................ 536 536
Capital distributions................................................................ (165) (165)
Cumulative net losses................................................................ (891) (885)
----------- -----------
(520) (514)
------------ -----------
Class A Limited Partners
Capital contributions, net of offering costs of $6,430............................... 46,570 46,570
Capital distributions................................................................ (15,982) (15,982)
Cumulative net losses................................................................ (88,176) (87,613)
----------- -----------
(57,588) (57,025)
Class B Limited Partner
Capital contribution................................................................. 6,000 --
----------- -----------
6,000 --
Total Partners' Deficit.............................................................. (52,108) (57,539)
----------- -----------
$ 194,376 $ 181,508
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
CONSOLIDATED STATEMENT OF
CHANGES IN PARTNERS' DEFICIT
Atlanta Marriott Marquis II Limited Partnership and Subsidiary
For the Years Ended December 31, 1997, 1996 and 1995
(in thousands)
<TABLE>
<S> <C> <C> <C> <C>
Class A Class B
General Limited Limited
Partner Partners Partner Total
Balance, December 31, 1994...........................$ (504) $ (55,999) $ -- $ (56,503)
Capital distributions............................ (23) (2,324) -- (2,347)
Net loss.......................................... (4) (409) -- (413)
------------- ------------- ------------- -------------
Balance, December 31, 1995........................... (531) (58,732) -- (59,263)
Capital distributions............................. (8) (811) -- (819)
Net income........................................ 25 2,518 -- 2,543
------------- ------------- ------------- -------------
Balance, December 31, 1996........................... (514) (57,025) -- (57,539)
Capital contributions............................. -- -- 6,000 6,000
Net loss.......................................... (6) (563) -- (569)
------------- ------------- ------------- -------------
Balance, December 31, 1997...........................$ (520) $ (57,588) $ 6,000 $ (52,108)
============== ============= ============= ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
Atlanta Marriott Marquis II Limited Partnership and Subsidiary
For the Years Ended December 31, 1997, 1996 and 1995
(in thousands)
<TABLE>
<S> <C> <C> <C>
1997 1996 1995
---------- ---------- --------
OPERATING ACTIVITIES
Net (loss) income.............................................................$ (569) $ 2,543 $ (413)
Noncash items:
Depreciation ............................................................. 5,250 5,525 6,608
Deferred interest......................................................... 1,035 1,831 1,654
Amortization of financing costs as interest............................... 325 621 619
(Gain) loss on disposition of assets...................................... -- (1) 64
Changes in operating accounts:
Accounts payable and accrued expenses..................................... 12,434 24 (178)
Due from Marriott International, Inc...................................... 1,965 (2,616) 782
Due to Marriott International, Inc........................................ 1,168 1,966 926
---------- ---------- -----------
Cash provided by operating activities.................................. 21,608 9,893 10,062
---------- ---------- -----------
INVESTING ACTIVITIES
Additions to property and equipment, net...................................... (8,511) (3,444) (2,643)
Change in property improvement fund........................................... 4,108 (1,039) (1,097)
---------- ---------- -----------
Cash used in investing activities...................................... (4,403) (4,483) (3,740)
---------- ---------- -----------
FINANCING ACTIVITIES
Advances under Original Debt Service Guarantee
and Commitment and Interest Guarantee.................................. 10,390 -- --
Payment of deferred interest on mortgage debt................................. (17,590) -- --
Capital contributions from General Partner for Class B Limited
Partnership Interest...................................................... 6,000 -- --
Payment of deferred financing costs .......................................... (104) -- --
Capital distributions......................................................... -- (819) (2,347)
Repayments under Original Debt Service Guarantee
and Commitment and Interest Guarantee..................................... -- -- (3,500)
---------- ---------- ------------
Cash used in financing activities...................................... (1,304) (819) (5,847)
---------- ---------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS........................................... 15,901 4,591 475
CASH AND CASH EQUIVALENTS at beginning of year................................... 5,601 1,010 535
---------- ---------- -----------
CASH AND CASH EQUIVALENTS at end of year.........................................$ 21,502 $ 5,601 $ 1,010
========== ========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for mortgage interest...............................................$ 28,470 $ 20,438 $ 20,438
========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Atlanta Marriott Marquis II Limited Partnership and Subsidiary
December 31, 1997 and 1996
NOTE 1. BUSINESS
Description of the Partnership
Atlanta Marriott Marquis Limited Partnership ("AMMLP"), a Delaware limited
partnership, was formed on May 28, 1985 (the "Closing Date"), to (i) acquire an
80% general partnership interest in the Ivy Street Hotel Limited Partnership
("Ivy"), a partnership between John C. Portman, Jr. ("Portman") and Host
Marriott Corporation ("Host Marriott") that was formed to develop, own and
operate the 1,671 room Atlanta Marriott Marquis Hotel (the "Hotel"), and (ii)
purchase from Ivy the parcel of land (the "Land") on which the Hotel is located.
The sole general partner of the Partnership, with a 1% interest, is Marriott
Marquis Corporation (the "General Partner"), a wholly-owned subsidiary of Host
Marriott. Marriott International, Inc. serves as the manager of the Hotel (the
"Manager").
On the Closing Date, 530 Class A limited partnership interests of $100,000
per Unit ("Unit") were sold in a private placement. The General Partner made a
capital contribution of $536,000 on May 28, 1985 for its 1% general partnership
interest. In addition, the General Partner acquired a Class B limited
partnership interest without making any additional capital contribution.
The Partnership purchased its 80% general partnership interest in Ivy from
Host Marriott for a total price of $28.8 million. The Partnership also acquired
the Land from Ivy for $10 million in a separate transaction. The Partnership
subsequently leased the Land to Ivy under a 99-year lease with rentals based
primarily on Hotel sales.
On July 9, 1997, Atlanta Marriott Marquis II Limited Partnership (the
"Partnership") was formed in anticipation of the merger discussed below. The
general partner of the Partnership is also Marriott Marquis Corporation. Prior
to December 31, 1997, the Partnership did not engage in any active business and
was organized solely to succeed AMMLP's interest in Ivy. Effective December 31,
1997, the Partnership succeeded AMMLP as the managing general partner of Ivy.
On December 31, 1997, AMMLP merged with and into the Partnership (the
"Merger"). The Merger of AMMLP and AMMLP-II was treated as a reorganization of
affiliated entities and AMMLP's basis in its assets and liabilities were carried
over. In conjunction with the Merger, the following transactions occurred:
AMMLP was merged with and into the Partnership. With the Merger, the
separate existence of AMMLP ceased and AMMLP limited partner units ("Units")
were converted on a one-for-one basis into Partnership Class A limited
partnership units ("New Units"). AMMLP limited partners who held fractional
interests in Units received the same interest in New Units.
On December 31, 1997, the General Partner made an initial capital
contribution of $6 million to the Partnership. Subsequent to year end, on
January 30, 1998, the General Partner contributed an additional $69 million. In
return for such additional capital contributions, the General Partner received a
new Class B limited partnership interest in the Partnership entitling the
General Partner to a 13.5% cumulative, compounding annual preferred return and
priority return of such capital. The General Partner also surrendered its then
existing Class B interest on distributions.
The Partnership Class A limited partners will receive an annual return of
5% on their initial investment in AMMLP, ratably with a 5% return to the General
Partner on its initial investment in AMMLP, after payment of the preferred
return on the Class B interest. To the extent unpaid in any year, such return
will accumulate and compound and be payable from sale or refinancing proceeds.
AMMLP's partnership agreement was amended (the "AMMLP-II Partnership
Agreement") as a result of the Merger to incorporate the following revisions:
(i) a revised provision regarding a sale of the Hotel to permit the Partnership
to sell the Hotel to an unaffiliated third party without the consent of the
limited partners; (ii) a revised provision limiting the voting rights of the
General Partner and its affiliates to permit the General Partner and its
affiliates to have full voting rights with respect to all New Units currently
held by or acquired by the General Partner and its affiliates; (iii)
extinguishment of the original Class B limited partner interest held by the
General Partner and replacement of it with a new Class B interest which is
entitled to a 13.5% cumulative, compounded annual return; (iv) addition of a
mechanism that allows the Class B limited partner to contribute up to an
additional $20 million should the Hotel require additional funding (such
contribution would also be entitled to the 13.5% return discussed above); (v) a
revision of the right of removal of the General Partner clause so that an
affirmative vote of 66 2/3% would be needed to effect a removal of the General
Partner and; (v) revised provisions for allocations and distributions (see Note
9). As a result of the approval of the Merger, the AMMLP-II Partnership
Agreement became effective December 31, 1997.
Partnership Allocations and Distributions
Ivy generally allocates operating income, gains and losses, deductions and
cash available for distribution 80% to the Partnership and 20% to Portman.
However, the first $1 million plus 5% of annual gross room sales of annual cash
available for distribution from Ivy was paid to AMMLP unless Ivy exercised its
option to repurchase the Land.
During 1990, AMMLP determined that the probability of collecting the
minority interest receivable from Portman was remote. Thus, AMMLP wrote off this
receivable which totaled $3,542,000 and began recording 100% of the losses of
Ivy. In future years, if AMMLP-II records income, 100% of the income will be
allocated to AMMLP-II until such excess income allocated to AMMLP-II equals the
excess losses previously recorded by AMMLP. Thereafter, any income would be
allocated 80% to AMMLP-II and 20% to Portman. As of December 31, 1997 and 1996,
excess losses recognized by AMMLP and the Partnership were $621,000 and $50,000,
respectively. AMMLP net losses, as defined, were generally allocated as follows:
(i) beginning in 1991 and continuing until the Class A limited partners and
the General Partner had received sale or refinancing proceeds ("Capital
Receipts") equal to their total cumulative capital contributions ("Original
Capital"), 1% to the General Partner, 80% to the Class A limited partners and
19% to the Class B limited partner; and
(ii) thereafter, 1% to the General Partner, 65% to the Class A Limited
Partners and 34% to the Class B Limited Partner.
These allocations could have been subject to certain special allocations of
net profit or net loss to the General Partner required by Federal income tax
regulations.
Cash Available for Distribution, as defined, generally was distributed as
follows:
(i) beginning in 1991, and continuing until the Class A Limited Partners
and the General Partner had received distributions of Capital Receipts equal to
their Original Capital, 1% to the General Partner, 80% to the Class A Limited
Partners and 19% to the Class B Limited Partner; and
(ii) thereafter, 1% to the General Partner, 65% to the Class A Limited
Partners and 34% to the Class B Limited Partner. However, until the General
Partner and the Class A Limited Partners had received a return of their Original
Capital through distributions of Capital Receipts, the Class B Limited Partner
will subordinate its cash distributions to an annual non-cumulative 10% return
on Original Capital to the General Partner and the Class A Limited Partners.
Net profits, as defined, generally were allocated in the same ratio as Cash
Available for Distribution. Excess net profits were then to be applied to offset
prior net losses in excess of the partners' remaining invested capital.
Notwithstanding the above allocations, the Partnership Agreement provided for
specific allocation to the partners of gain realized and proceeds received by
the Partnership upon sale, condemnation or other disposition of the Hotel or
assets of the Partnership. In addition, the Partnership Agreement provided for
specific allocations of any excess refinancing or land sale proceeds. As
discussed above, on December 31, 1997, the Partnership executed the AMMLP-II
Partnership Agreement which provides for a change in the above allocations (see
Note 9).
For financial reporting purposes, profits and losses are allocated among
the partners based upon their stated interests in cash available for
distribution.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The Partnership's records are maintained on the accrual basis of
accounting, and its fiscal year coincides with the calendar year. The
Partnership's financial statements consolidate the financial statements of Ivy,
its majority-owned subsidiary partnership. All material intercompany
transactions, including the land lease between the Partnership and Ivy described
in Note 8, have been eliminated. All assets and liabilities of AMMLP have been
carried over to the Partnership at their historical basis.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Revenues and Expenses
Hotel revenues represent house profit of the Hotel since substantially all
of the operating decisions related to the generation of house profit of the
Hotel rests with the Manager. House profit reflects Hotel operating results and
represents gross Hotel sales less property-level expenses, excluding
depreciation and amortization, base and incentive management fees, property
taxes, equipment rent and certain other costs, which are disclosed separately in
the accompanying consolidated statement of operations.
On November 20, 1997, the Emerging Issues Task Force ("EITF") of the
Financial Accounting Standards Board reached a consensus on EITF 97-2
"Application of FASB Statement No. 94 and APB Opinion No. 16 to Physician
Practice Management Entities and Certain Other Entities with Contractual
Management Arrangements." EITF 97-2 addresses the circumstances in which a
management entity may include the revenues and expenses of a managed entity in
its financial statements.
The Partnership is assessing the impact of EITF 97-2 on its policy of
excluding property-level revenues and operating expenses of the Hotel from its
statements of operations (see Note 3). If the Partnership concludes that EITF
97-2 should be applied to the Hotel, it would include operating results of this
managed operation in its financial statements. Application of EITF 97-2 to
financial statements as of and for the year ended December 31, 1997 would have
increased both revenues and operating expenses by approximately $48,926,000 and
would have had no impact on net loss.
Property and Equipment
Property and equipment is recorded at cost which includes interest, rent
and real estate taxes incurred during development. Depreciation is computed
using the straight-line method over the following estimated useful lives of the
assets:
Building and improvements 50 years
Furniture and equipment 3 to 20 years
All land, property and equipment is pledged as security for the mortgage
debt described in Note 6.
The Partnership assesses impairment of its real estate property based on
whether estimated undiscounted future cash flows for the property will be less
than its net book value. If the property is impaired, its basis is adjusted to
fair market value.
Deferred Financing Costs
Financing costs incurred in connection with obtaining the mortgage debt
have been deferred and are being amortized using the straight-line method, which
approximates the effective interest rate method, over three to ten years. A
portion of the deferred financing costs totaling $4,249,000 were fully amortized
as of July 10, 1997. Additional financing costs of $104,000 were incurred in
1997 in connection with the refinancing of the Partnership's mortgage debt.
Accumulated amortization of the deferred financing costs totaled $4,413,000 and
$4,090,000 at December 31, 1997 and 1996, respectively. This amount includes
amortization of deferred financing costs for both Ivy and the Partnership. Of
the total, the Partnership has accumulated amortization of $164,000 and $151,000
at December 31, 1997 and 1996, respectively.
Cash and Cash Equivalents
The Partnership considers all highly liquid investments with a maturity of
three months or less at date of purchase to be cash equivalents.
Income Taxes
Provision for Federal and state income taxes has not been made in the
accompanying financial statements since the Partnership does not pay income
taxes but rather allocates its profits and losses to the individual partners.
There are significant differences between the net income/loss reported in these
financial statements and the net income/loss determined for income tax purposes.
These differences are due primarily to the use, for tax purposes, of accelerated
depreciation methods and shorter depreciable lives for the assets, the timing of
the recognition of incentive management fee expense and the treatment of the
minority interest receivable. As a result of these differences, the (deficit) /
excess of the tax basis in net Partnership liabilities and the net liabilities
reported in the accompanying financial statements is $(90,642,000) and
$72,111,000 as of December 31, 1997 and 1996, respectively. The Partnership was
stepped up to fair market value on 12/31/97 when the General Partner made an
initial capital contribution of $6.0M to the Partnership for a Class B Limited
Partnership interest in the Partnership which was created by merging AMMLP into
the Partnership during 1997.
Statement of Financial Accounting Standards
In 1996, AMMLP adopted Statement of Financial Accounting Standards ("SFAS")
No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." Adoption of SFAS No. 121 did not have an effect on
its financial statements.
NOTE 3. HOTEL REVENUES
Revenues consist of Hotel operating results for the three years ended
December 31 (in thousands):
<TABLE>
<S> <C> <C> <C>
1997 1996 1995
----------- ------------ -------
HOTEL SALES
Rooms.................................................................$ 54,102 $ 56,115 $ 50,515
Food and beverage..................................................... 25,821 25,968 25,379
Other................................................................. 5,474 6,381 5,277
----------- ------------ -----------
85,397 88,464 81,171
----------- ------------ -----------
HOTEL EXPENSES
Departmental direct costs
Rooms............................................................. 11,485 11,508 10,821
Food and beverage................................................. 17,776 18,003 17,289
Other hotel operating expenses........................................ 19,665 20,299 18,230
----------- ------------ -----------
48,926 49,810 46,340
----------- ------------ -----------
HOTEL REVENUES............................................................$ 36,471 $ 38,654 $ 34,831
=========== ============ ===========
</TABLE>
NOTE 4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following as of December 31 (in
thousands):
<TABLE>
<S> <C> <C>
1997 1996
----------- -------
Leased land acquisition costs and land.....................................$ 12,617 $ 12,617
Building and improvements.................................................. 182,629 182,597
Furniture and equipment.................................................... 42,621 34,142
----------- -----------
237,867 229,356
Less accumulated depreciation.............................................. (72,495) (67,245)
----------- -----------
$ 165,372 $ 162,111
=========== ===========
</TABLE>
For financial reporting purposes the Land is carried at its historical
purchase cost of $10 million as required by generally accepted accounting
principles.
NOTE 5. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of financial instruments are shown below. The
fair values of financial instruments not included in this table are estimated to
be equal to their carrying amounts (in thousands):
<TABLE>
<S> <C> <C> <C> <C>
As of December 31, 1997 As of December 31, 1996
------------------------------- ---------------------------
Estimated Estimated
Carrying Fair Carrying Fair
Amount Value Amount Value
Mortgage debt $ 199,019 $ 199,019 $ 215,574 $ 215,574
Due to Host Marriott under Original Debt
Service Guarantee and Commitment and
Interest Guarantee $ 30,524 $ 30,524 $ 20,134 $ 14,300
Incentive management fees due to
Marriott International, Inc. $ 4,155 $ -- $ 2,987 $ --
</TABLE>
The 1997 and 1996 estimated fair value of the mortgage debt is stated at
its carrying value as it was repaid on February 2, 1998. The amounts held in Due
to Host Marriott under original debt service and commitment consist of the
interest guarantee in the amount of $10,390,000 and the original debt service
commitment in the amount of $20,134,000. The estimated fair value of the
interest guarantee is the carrying value as it was also repaid on February 2,
1998. The estimated fair value of the original debt service commitment is its
carrying value as the obligation earns interest at 9% as of February 2, 1998.
The estimated fair value of incentive management fees due to MII is zero. As
part of the new management agreement effective January 3, 1998, all accrued
incentive management fees were waived by the Manager and the Partnership's
accrued liability was written off to income in 1998.
NOTE 6. MORTGAGE DEBT
As of December 31, 1996, the AMMLP's mortgage debt consisted of a total of
$215,574,000 in nonrecourse mortgage notes (the "Mortgage Debt"). Through July
10, 1997 (the "Maturity Date"), interest accrued on the Mortgage Debt at a fixed
rate of 10.3%. Interest only was payable semiannually in arrears. The cash
payment rate was 10.17%. The difference between the cash payment rate and the
accrual rate (the "Deferred Interest") was added to the balance of the Mortgage
Debt. The cumulative Deferred Interest added to the Mortgage Debt balance
amounted to $17.6 million and $16.5 million at July 10, 1997 and December 31,
1996, respectively. On the Maturity Date, the Mortgage Debt matured, at which
time AMMLP and Ivy entered into a letter agreement (the "Letter Agreement") with
the lender which effectively extended the maturity of the Mortgage Debt until
February 2, 1998 (the "New Maturity Date"). On the Maturity Date, AMMLP and Ivy
were required to pay $17.6 million representing the Deferred Interest on the
Mortgage Debt in addition to the scheduled interest payment of $10.1 million. As
a result, the Mortgage Debt balance outstanding was reduced to $199,019,000.
The payment of Deferred Interest was funded from $7.2 million of Ivy cash
reserves established by the General Partner in anticipation of the Mortgage Debt
maturity and $10.4 million drawn pursuant to the Host Marriott interest
guarantee (the "Interest Guarantee"). Host Marriott had agreed to advance up to
$50 million to cover interest and principal shortfalls. Had cash flow from
operations been insufficient to fully fund interest due, $20 million was
available under the Interest Guarantee through the Maturity Date. The remaining
$30 million was available under the Principal Guarantee. Prior to the payment of
Deferred Interest in the amount of $10.4 million on the Maturity Date, there
were no amounts outstanding under either the Principal Guarantee or the Interest
Guarantee. In conjunction with the extension, Host Marriott reaffirmed its
obligations pursuant to these guarantees through the New Maturity Date. The
Principal Guarantee was available in case of a sale, refinancing or acceleration
of the principal amount of the underlying notes resulting from an Event of
Default, as defined. To the extent the Interest Guarantee was not used, it
became available as a Principal Guarantee.
During the term of the Letter Agreement, the Mortgage Debt continued to be
nonrecourse, and accrued interest at 12.3% with interest payments due on January
10 and February 2, 1998. Additionally, all funds remitted by the Manager during
the term of the extension were held for the benefit of the lender. In
conjunction with the Letter Agreement, Ivy paid an extension fee of $500,000 as
well as approximately $410,000 representing costs and expenses related to the
transaction.
Host Marriott had guaranteed up to $33 million of the original debt (the
"Original Debt Service Guarantee" and the "Commitment") under which Host
Marriott was obligated to make certain required debt service payments and
restore any cash flow deficits to the extent that Partnership cash flow, as
defined, was insufficient. Pursuant to the terms of the Mortgage Debt, the
Commitment was modified to fund only certain furniture, fixtures and equipment
expenditures and ground rent shortfalls. Any interest, principal or guarantee
loans made at a time when the Commitment was not fully funded reduced, dollar
for dollar, but not below zero, the remaining unfunded amount of the Commitment.
Advances under the Principal Guarantee, Interest Guarantee and Original Debt
Service Guarantee and Commitment up to cumulative fundings of $33 million did
not bear interest. Amounts advanced in excess of $33 million accrued interest at
1% over the prime rate. As of December 31, 1997, cumulative fundings equaled
$41.6 million, exceeding the $33 million by $8.6 million. The excess fundings
accrued interest until they were repaid subsequent to year-end. Total accrued
interest on the cumulative advances for the period from the Maturity Date
through December 31, 1997 equaled $398,000. As of December 31, 1997 and 1996,
Ivy had $20.1 million due to Host Marriott under the Commitment.
On March 24, 1994, the note holders of the Mortgage Debt voted to accept
the Manager as a back-up guarantor and on December 21, 1994, the agreement was
finalized. The Manager, as back-up guarantor, was required to perform the
obligations under the guarantees in the event that Host Marriott failed to do
so. In conjunction with the extension, the Manager reaffirmed its obligations
pursuant to these guarantees through the New Maturity Date.
Subsequent to year-end, the Mortgage Debt was refinanced (see Note 9).
NOTE 7. HOTEL MANAGEMENT AGREEMENT
Ivy entered into a hotel management agreement (the "Management Agreement")
with the Manager to manage the Hotel for a term of 25 years, renewable at Ivy's
or the Manager's option for five additional 10-year terms. The Manager was
entitled to compensation for its services in the form of a base management fee
equal to 3% of gross sales. Base management fees paid in 1997, 1996 and 1995
were $2,562,000, $2,654,000 and $2,435,000, respectively.
In addition, the Manager earned an incentive management fee equal to 50% of
assumed net cash flow of the Hotel, as defined. However, once total cumulative
incentive management fees reached an amount equal to or greater than 20% of
total cumulative Hotel profit, as defined, the Manager earned an incentive
management fee equal to the average of (i) 50% of assumed net cash flow and (ii)
20% of Hotel profit. The incentive management fee was paid out of cash flow
available for incentive management fees, as defined, and was subordinated to the
Mortgage Debt, guarantee repayments and rent under the Land lease. Any incentive
management fees earned but not paid were deferred without interest and paid out
of the first cash flow available for the incentive management fee. During 1997
and 1996, $1,167,000 and $2,018,000, respectively, in incentive management fees
had been earned. Through December 31, 1997, no incentive management fees had
ever been paid. Deferred incentive management fees as of December 31, 1997 and
1996 were $4,154,000 and $2,987,000, respectively, and are included in Due to
Marriott International, Inc. in the accompanying consolidated balance sheet.
Subsequent to year-end, a new management agreement was entered into. As part of
this new agreement, all accrued incentive management fees were waived by the
Manager (see Note 9) and the Partnership's accrued liability was written off in
1998 (see Note 9).
Pursuant to the terms of the Management Agreement, the Manager is required
to furnish the Hotel with certain services ("Chain Services") which are
generally provided on a central or regional basis to all domestic full-service
hotels managed, owned or leased by the Manager or its subsidiaries. Chain
Services include central training, advertising and promotion, a national
reservation system, computerized payroll and accounting services and such
additional services as needed which may be more efficiently performed on a
centralized basis. Costs and expenses incurred in providing such services are
allocated among all hotels in the Manager's full-service hotel system. In
addition, the Hotel also participates in the Manager's Marriott Rewards Program
("MRP"). This program succeeded the Honored Guest Awards Program. The cost of
this program is charged to all hotels in the Manager's hotel system. The total
amount of Chain Services and MRP costs allocated to the Hotel were $1,968,000 in
1997, $2,685,000 in 1996 and $2,431,000 in 1995.
Pursuant to the terms of the Management Agreement, the Partnership is
required to provide the Manager with working capital and supplies to meet the
operating needs of the Hotel. The Manager converts cash advanced by the
Partnership into other forms of working capital consisting primarily of
operating cash, inventories, and trade receivables and payables which are
maintained and controlled by the Manager. Upon termination of the Management
Agreement, the working capital and supplies will be returned to the Partnership.
As of December 31, 1997 and 1996, $3,077,000 has been advanced to the Manager
for working capital and supplies which is included in Due from Marriott
International, Inc. in the accompanying consolidated balance sheet. The supplies
advanced to the Manager are recorded at their estimated net realizable value. At
December 31, 1997 and 1996, accumulated amortization related to the revaluation
of these supplies totaled $177,000. Subsequent to year-end, an additional
$2,639,000 was advanced to the Manager for working capital needs at the Hotel
(see Note 9).
The Partnership is required to maintain the Hotel in good repair and
condition. Pursuant to the Agreement, annual contributions to a property
improvement fund provide for the replacement of furniture, fixtures and
equipment. Annual contributions to the fund equaled 4% of gross Hotel sales
through June 1995 and 5% thereafter. Total contributions to the property
improvement fund for the years ended December 31, 1997, 1996, and 1995 were
$3,929,000, $4,122,000 and $3,302,000, respectively.
NOTE 8. LAND LEASE
On the Closing Date, AMMLP acquired the Land on which the Hotel is located
from Ivy for $10 million. AMMLP has leased the Land to Ivy for a period of 99
years. Annual rent was equal to 5% of annual gross room sales from the Hotel.
Ivy had an option to repurchase the Land at any time through 1999. Through 1995,
the option price was $25 million and for the ensuing four years the option price
will be adjusted for changes in the Consumer Price Index. At December 31, 1997
and 1996, the option price was $26,500,000 and $25,825,000, respectively. Total
rentals under the lease, which were eliminated in consolidation, were $2,705,000
in 1997, $2,806,000 in 1996 and $2,526,000 in 1995.
Subsequent to year-end, the Land lease was terminated (see Note 9) because
the Land was contributed to a subsidiary of Ivy.
NOTE 9. SUBSEQUENT EVENTS
Bankruptcy Remote Entity
To facilitate the refinancing of AMMLP's Mortgage Debt, on January 29, 1998
the Hotel and the Land were conveyed to a special purpose, bankruptcy remote
entity, HMA Realty Limited Partnership ("HMA"). The sole general partner of HMA
with a 1% interest, is HMA-GP, Inc., a wholly-owned subsidiary of Ivy. The sole
limited partner, with a 99% interest, is Ivy.
Mortgage Debt
On the New Maturity Date, the following transactions occurred:
HMA obtained new 12-year first mortgage financing of $164 million (the "New
Mortgage Debt") which, together with $35 million from the additional $69 million
capital contributed by the General Partner were used to pay the maturing
Mortgage Debt. The New Mortgage Debt is nonrecourse to HMA, bears interest at a
fixed rate of 7.4% and will require monthly payments of principal and interest
calculated to fully amortize the loan over 25 years resulting in annual debt
service of $14.1 million for 1998 and $14.4 million annually until the end of
the 12-year term.
Host Marriott waived its existing right to priority repayment of the $20.1
million in prior non-interest bearing Interest Guarantee advances to Ivy and
restructured such advances as a loan with a 15 year term (interest only for the
first five years) bearing interest at a rate of 9% per annum (the "Term Loan").
Payments are due monthly in arrears from cash available after payment of debt
service on the New Mortgage Debt. Upon a sale of the Hotel, the Term Loan will
accelerate and become due and payable.
The outstanding amount of the Interest Guarantee of $10.4 million and
related interest was repaid to Host Marriott.
The $30 million Principal Guarantee provided by Host Marriott was
eliminated.
The Partnership distributed funds to Class A limited partners of
approximately $5,000 per New Unit. This distribution represented the excess of
the Partnership's reserve after payment of a majority of the transaction costs
related to the Mortgage Debt refinancing.
As part of the refinancing, HMA was required to establish certain reserves
which are held by an agent of the lender including:
$3.6 million debt service reserve--This reserve is equal to three months of
debt service.
$10.1 million deferred maintenance and capital expenditure reserve--This
reserve will be expended for capital expenditures for repairs to the facade of
the Hotel as well as various renewals and replacements and site improvements.
$7.5 million rooms refurbishment reserve--This reserve will be expended to
refurbish the remaining 711 rooms and 16 suites at the Hotel which have not
already been refurbished.
$1.3 million tax and insurance reserve--This reserve will be used to pay
real estate tax and insurance premiums for the Hotel.
In addition, HMA advanced an additional $2,639,000 to the Manager for
working capital needs and used the remaining cash to pay transaction costs
associated with the refinancing.
New Management Agreement
To facilitate the refinancing effective January 3, 1998, a new management
agreement (the "New Management Agreement") was entered into by HMA and the
Manager. The New Agreement expires on July 1, 2010 and is renewable at the
Manager's option for five additional 10-year terms. Pursuant to the terms of the
New Management Agreement, no incentive management fees are payable to the
Manager with respect to the first $29.7 million of operating profit (the
"Owner's Priority"). Thereafter, the Manager will receive 20% of the profit in
excess of such Owner's Priority. The amount of the Owner's Priority will not be
reduced but may be increased to take into account additional capital
contributions by the General Partner or its affiliates. As part of the New
Management Agreement, all accrued incentive management fees amounting to $4.5
million were waived by the Manager and the Partnership's accrued liability was
written off in 1998.
Land Lease
As part of the Merger transactions, the Partnership contributed the Land to
a subsidiary of Ivy. This transaction terminated the Land lease and resulted in
cessation of Land lease payments from Ivy to the Partnership. The Partnership
received a credit to its capital account in Ivy of $26.5 million in
consideration of the Land contribution. For financial reporting purposes the
Land will continue to be carried at its historical purchase cost of $10 million
as required by generally accepted accounting principles.
New Partnership Agreement
AMMLP's partnership agreement was amended (the "AMMLP-II Partnership
Agreement") as a result of the Merger to incorporate the following revisions:
(i) a revised provision regarding a sale of the Hotel to permit the
Partnership to sell the Hotel to an unaffiliated third party without the consent
of the limited partners;
(ii) a revised provision limiting the voting rights of the General Partner
and its affiliates to permit the General Partner and its affiliates to have full
voting rights with respect to all New Units currently held by or acquired by the
General Partner and its affiliates;
(iii) extinguishment of the original Class B limited partner interest held
by the General Partner and replacement of it with a new Class B interest which
is entitled to a 13.5% cumulative, compounded annual return;
(iv) addition of a mechanism that allows the Class B limited partner to
contribute up to an additional $20 million should the Hotel require additional
funding (such contribution would also be entitled to the 13.5% return discussed
above);
(v) a revised right of removal of the General Partner clause so that an
affirmative vote of 66 2/3% would be needed to effect a removal of the General
Partner and;
(vi) a revision of AMMLP's allocations and distributions such that
Partnership cash available for distribution is generally allocated as follows:
(a) to the General Partner, until the General Partner has received a 13.5%
cumulative compounded annual return on its Class B invested capital,
(b) to the General Partner and Class A limited partners, until the General
Partner and the Class A limited partners have received a non-cumulative,
non-compounded annual return of 5% on their initial investment in AMMLP-II, and
(c) thereafter, in proportion to total invested capital through completion
of the Restructuring Transactions of approximately 41% to limited partners and
59% to the General Partner; and
(vii) a revision of AMMLP's allocations and distributions such that
Partnership sale or refinancing proceeds are generally allocated as follows:
(a) to the General Partner, until the General Partner has received a 13.5%
cumulative compounded annual return on its Class B invested capital,
(b) to the General Partner and Class A limited partners, until the General
Partner and the Class A limited partners have received a non-cumulative,
non-compounded annual return of 5% on their initial investment in AMMLP-II,
(c) to the General Partner, until its Class B invested capital of up to $75
million has been fully returned, taking into account all distributions to such
Partners following the effective date of the Restructuring Transactions (other
than the approximately $5,000 per New Unit distributed as part of the
Restructuring Transactions),
(d) to the General Partner and Class A limited partners until they have
received a cumulative, compounded return on their original invested capital of
5% per annum from the effective date of the Restructuring Transactions,
(e) to the General Partner and Class A limited partners, until such
partners' original invested capital of $536,000 and $53,000,000, respectively,
has been fully returned, and
(f) thereafter, in proportion to total invested capital through completion
of the Restructuring Transactions of approximately 41% to limited partners and
59% to the General Partner.
As a result of the approval of the Merger, the AMMLP-II Partnership
Agreement became effective December 31, 1997.
Ivy Partnership Agreement
In conjunction with the Merger transactions, the Ivy partnership agreement
was amended to incorporate the following revisions: (i) provide that the $75
million contributed by the General Partner of the Partnership to Ivy will be
entitled to receive an annual preferred return equal to 13.5% compounding to the
extent unpaid; (ii) provide that the Land, after contribution by the Partnership
to Ivy at an agreed upon value of $26.5 million, will be entitled to receive an
annual compounding preferred return equal to 10%, after payment of the 13.5%
return described above; and (iii) allows the Partnership the unilateral right,
as managing general partner of Ivy, to make most major decisions on behalf of
Ivy, including, without limitation, the sale or other disposition of the Hotel,
except where such disposition is to a party related to Host Marriott or an
affiliate of Host Marriott.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The Partnership has no directors or officers. The business policy making
functions of the Partnership are carried out through the directors and executive
officers of Marriott Marquis Corporation, the General Partner, who are listed
below:
<TABLE>
<S> <C> <C>
Age at
Name Current Position December 31, 1997
- ------------------------------- ----------------------------------------------------- --------------------
Bruce F. Stemerman President and Director 42
Robert E. Parsons, Jr. Director 42
Christopher G. Townsend Vice President, Director and Secretary 50
Patricia K. Brady Vice President and Chief Accounting Officer 36
Bruce D. Wardinski Treasurer 37
</TABLE>
Business Experience
Mr. Stemerman joined Host Marriott Corporation in 1989 as
Director--Partnership Services. He was promoted to Vice President--Lodging
Partnerships in 1994 and became Senior Vice President--Asset Management in 1996.
Prior to joining Host Marriott, Mr. Stemerman spent ten years with Price
Waterhouse. He also serves as a director and an officer of numerous Host
Marriott subsidiaries.
Mr. Parsons joined Host Marriott's Corporate Financial Planning staff in
1981, was made Director-Project Finance of Host Marriott's Treasury Department
in 1984, and in 1986 he was made Vice President-Project Finance of Host
Marriott's Treasury Department. He was made Assistant Treasurer of Host Marriott
in 1988. Mr. Parsons was named Senior Vice President and Treasurer of Host
Marriott in 1993. He was named Executive Vice President and Chief Financial
Officer of Host Marriott in October 1995. Mr. Parsons also serves as a director
and an officer of numerous Host Marriott subsidiaries.
Mr. Townsend joined Host Marriott's Law Department in 1982 as a Senior
Attorney. In 1984, Mr. Townsend was made Assistant Secretary of Host Marriott
and in 1986 was made Assistant General Counsel. In 1993, he was made Senior Vice
President, Corporate Secretary and Deputy General Counsel of Host Marriott. In
January 1997, Mr. Townsend was named General Counsel of Host Marriott. He also
serves as a director and an officer of numerous Host Marriott subsidiaries.
Ms. Brady joined Host Marriott in 1989 as Assistant Manager--Partnership
Services. She was promoted to Manager in 1990 and to Director--Asset Management
in June 1996. Ms. Brady also serves as an officer of numerous Host Marriott
subsidiaries.
Mr. Wardinski joined Host Marriott in 1987 as a Senior Financial Analyst of
Financial Planning & Analysis, and was named Manager in June 1988. He was
appointed Director, Financial Planning & Analysis in 1989, Director of Project
Finance in January 1990, Senior Director of Project Finance in June 1993, Vice
President, Project Finance in June 1994, and Senior Vice President of
International Development in October 1995. In June 1996, Mr. Wardinski was named
Senior Vice President and Treasurer of Host Marriott. He also serves as an
officer of numerous Host Marriott subsidiaries.
ITEM 11. MANAGEMENT REMUNERATION AND TRANSACTIONS
As noted in Item 10 above, the Partnership has no directors or officers nor
does it have any employees. Under the Partnership Agreement, however, the
General Partner has the exclusive right to conduct the business and affairs of
the Partnership subject only to the management agreement described in Items 1
and 13. The General Partner is required to devote to the Partnership such time
as may be necessary for the proper performance of its duties, but the officers
and the directors of the General Partner are not required to devote their full
time to the performance of such duties. No officer or director of the General
Partner or employee of Host Marriott devotes a significant percentage of time to
Partnership matters. To the extent that any officer or director does devote time
to the Partnership, the General Partner is entitled to reimbursement for the
cost of providing such services. Any such costs may include a charge for
overhead, but without a profit to the General Partner. For the fiscal years
ending December 31, 1997, 1996 and 1995, administrative expenses reimbursed to
the General Partner totaled $196,000, $65,000 and $84,000, respectively for the
cost of providing all administrative and other services as General Partner. For
information regarding all payments made by the Partnership to Host Marriott and
subsidiaries, see Item 13 "Certain Relationships and Related Transactions."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
As of December 31, 1997, no person owned of record, or to the Partnership's
knowledge owned beneficially, more than 5% of the total number of Units. The
General Partner owns a total of 1.5 Units representing a 0.3% limited
partnership interest in AMMLP and a Class B limited partnership interest
representing a 19% - 34% limited partnership interest in AMMLP. Subsequent to
year-end, as a result of the Merger of AMMLP into the Partnership, the General
Partner owns a total of 1.5 New Units representing a 0.3% limited partnership
interest in the Partnership and a new Class B limited partnership interest
representing 58.4% limited partnership interest in the Partnership.
There are no Units owned by the executive officers and directors of the
General Partner, as a group.
The officers and directors of MII, as a group, own a total of 2.5 Units
representing a 0.5% limited partnership interest in the Partnership.
There are no Units owned by individuals who are directors of both the
General Partner and MII.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Hotel Management Agreement
Management Agreement
Ivy entered into a hotel management agreement (the "Management Agreement")
with the Manager to manage the Hotel for a term of 25 years, renewable at Ivy's
or the Manager's option for five additional 10-year terms. The Manager was
entitled to compensation for its services in the form of a base management fee
equal to 3% of gross sales. Base management fees paid in 1997, 1996 and 1995
were $2,562,000, $2,654,000 and $2,435,000, respectively.
In addition, the Manager could earn an incentive management fee equal to
50% of assumed net cash flow of the Hotel, as defined. However, once total
cumulative incentive management fees reached an amount equal to or greater than
20% of total cumulative Hotel profit, as defined, the Manager could earn an
incentive management fee equal to the average of (i) 50% of assumed net cash
flow and (ii) 20% of Hotel profit. The incentive management fee was paid out of
cash flow available for incentive management fee, as defined, and was
subordinated to the Mortgage Debt, guarantee repayments and rent under the Land
lease. Any incentive management fees earned but not paid were deferred without
interest and paid out of the first cash flow available for the incentive
management fee. During 1997 and 1996, $1,167,000 and $2,018,000, respectively,
in incentive management fees have been earned. Through December 31, 1997, no
incentive management fees were paid. Deferred incentive management fees for the
years ended December 31, 1997 and 1996 were $4,154,000 and $2,987,000,
respectively, and are included in Due to Marriott International, Inc. in the
accompanying consolidated balance sheet. Subsequent to year-end, a new
management agreement was entered into. As part of this new agreement, all
accrued incentive management fees were waived by the Manager and the
Partnership's accrued liability was written off (see "New Management Agreement"
below).
Pursuant to the terms of the Management Agreement, the Manager is required
to furnish the Hotel with certain services ("Chain Services") which are
generally provided on a central or regional basis to all domestic full-service
hotels managed, owned or leased by the Manager or its subsidiaries. Chain
Services include central training, advertising and promotion, a national
reservation system, computerized payroll and accounting services and such
additional services as needed which may be more efficiently performed on a
centralized basis. Costs and expenses incurred in providing such services are
allocated among all hotels in the Manager's full-service hotel system. In
addition, the Hotel also participates in the Manager's Marriott Rewards Program
("MRP"). This program succeeded the Honored Guest Awards Program. The cost of
this program is charged to all hotels in the Manager's hotel system. The total
amount of Chain Services and MRP costs allocated to the Hotel were $1,968,000 in
1997, $2,685,000 in 1996 and $2,431,000 in 1995.
Pursuant to the terms of the Management Agreement, the Partnership is
required to provide the Manager with working capital and supplies to meet the
operating needs of the Hotel. The Manager converts cash advanced by the
Partnership into other forms of working capital consisting primarily of
operating cash, inventories, and trade receivables and payables which are
maintained and controlled by the Manager. Upon termination of the Management
Agreement, the working capital and supplies will be returned to the Partnership.
As of December 31, 1997 and 1996, $3,077,000 had been advanced to the Manager
for working capital and supplies which is included in Due from Marriott
International, Inc. in the accompanying consolidated balance sheet. The supplies
advanced to the Manager are recorded at their estimated net realizable value. At
December 31, 1997 and 1996, accumulated amortization related to the revaluation
of these supplies totaled $177,000. Subsequent to year-end, an additional
$2,639,000 was advanced to the Manager for working capital needs at the Hotel.
The Partnership is required to maintain the Hotel in good repair and
condition. Pursuant to the Management Agreement, annual contributions to a
property improvement fund provide for the replacement of furniture, fixtures and
equipment. Annual contributions to the fund equaled 4% of gross Hotel sales
through June 1995 and are 5% thereafter. Total contributions to the property
improvement fund for the years ended December 31, 1997, 1996, and 1995 were
$3,929,000, $4,122,000 and $3,302,000, respectively.
New Management Agreement
To facilitate the refinancing effective January 3, 1998, a new management
agreement (the "New Management Agreement") was entered into by HMA and the
Manager. The New Management Agreement expires July 1, 2010 and is renewable at
the Manager's option for five additional 10-year terms. Pursuant to the terms of
the New Management Agreement no incentive management fees are payable to the
Manager with respect to the first $29.7 million of operating profit (the
"Owner's Priority"). Thereafter, the Manager will receive 20% of the profit in
excess of such Owner's Priority. The amount of the Owner's Priority will not be
reduced but may be increased to take into account additional capital
contributions by the General Partner or its affiliates. As part of the New
Management Agreement, all accrued incentive management fees amounting to $4.5
million were waived by the Manager and the Partnership's accrued liability was
written off to income in 1998.
Land Lease
On the Closing Date, AMMLP acquired the Land on which the Hotel is located
from Ivy for $10 million. AMMLP has leased the Land to Ivy for a period of 99
years. Annual rent was equal to 5% of annual gross room sales from the Hotel.
Ivy had an option to repurchase the Land at any time through 1999. Through 1995,
the option price was $25 million and for the ensuing four years the option price
will be adjusted for changes in the Consumer Price Index. At December 31, 1997
and 1996, the option price was $26,500,000 and $25,825,000, respectively. Total
rentals under the lease, eliminated in consolidation, $2,705,000 in 1997,
$2,806,000 in 1996 and $2,526,000 in 1995.
As part of the Merger transactions, the Partnership contributed the Land to
a subsidiary of Ivy. This transaction terminated the Land lease and resulted in
the cessation of Land lease payments from Ivy to the Partnership. The
Partnership received a credit to its capital account in Ivy of $26.5 million in
consideration of the Land contribution.
Payments to Host Marriott, MII and their Subsidiaries
The following table sets forth amounts paid by the Partnership to Host
Marriott, MII and their subsidiaries for the years ended December 31, 1997, 1996
and 1995 (in thousands):
<TABLE>
<S> <C> <C> <C>
1997 1996 1995
----------- ------------ -----------
Payments to Host Marriott and subsidiaries:
Administrative expenses...............................................$ 196 $ 65 $ 84
Cash distributions.................................................... -- 10 30
----------- ------------ -----------
$ 196 $ 75 $ 114
=========== ============ ===========
Payments to MII and subsidiaries:
Base management fee...................................................$ 2,562 $ 2,654 $ 2,435
Chain Services and MRP costs.......................................... 1,968 2,685 2,431
----------- ------------ -----------
$ 4,530 $ 5,339 $ 4,866
=========== ============ ===========
</TABLE>
PART IV
ITEM 14. EXHIBITS, SUPPLEMENTAL FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a) List of Documents Filed as Part of This Report
(1) Financial Statements
All financial statements of the registrant as set forth under Item 8 of
this Report on Form 10-K.
(2) Financial Statement Schedules
The following financial information is filed herewith on the pages
indicated.
III. Real Estate and Accumulated Depreciation
All other schedules are omitted because they are not applicable or the
required information is included in the consolidated financial statements or
notes thereto.
(3) Exhibits
3.a Amended and Restated Agreement of Limited Partnership of Atlanta
Marriott Marquis II Limited Partnership dated as of December 31, 1998.
3.b HMA Realty Limited Partnership Limited Partnership Agreement by and
between HMA-GP, Inc. and Ivy Street Hotel Limited Partnership dated as of
January 29, 1998.
3.c Fourth Restated Agreement of Limited Partnership of Ivy Street Hotel by
and between (i) Atlanta Marriott Marquis II Limited Partnership and Portman
Marquis Corp. and (ii) John C. Portman, Jr., Hopewell Group, Ltd., and Hopeport,
Ltd. dated as of January 29, 1998.
*10.1 Secured Note made by Ivy Street Hotel Limited Partnership to
Marriott/Portman Finance Corporation dated as of July 10, 1990 for $199,000,000
*10.2 Deed to Secure Debt, Security Agreement and Assignment of Leases and
Rents from Ivy Street Hotel Limited Partnership and Atlanta Marriott Marquis
Limited Partnership, as Grantors to Marriott/Portman Finance Corporation, as
Grantee dated as of July 10, 1990
*10.3 Principal Guaranty by and between Host Marriott Corporation (formerly
Marriott Corporation), as Guarantor, Marriott/Portman Finance Corporation, as
Issuer, and Nations Bank of Georgia, National Association (formerly known as The
Citizens and Southern National Bank), as Collateral Trustee, Senior Trustee and
Subordinated Trustee, dated as of July 10, 1990.
*10.4 Interest/Principal Guaranty by and between Host Marriott Corporation
(formerly Marriott Corporation), as Guarantor, Marriott/Portman Finance
Corporation, as Issuer, and Nations Bank of Georgia, National Association
(formerly known as The Citizens and Southern National Bank), as Collateral
Trustee, Senior Trustee and Subordinated Trustee, dated as of July 10, 1990.
*10.5 First Amendment to Restated and Amended Hotel Management Agreement
dated as of July 10, 1990.
*10.6 Management Agreement between Ivy Street Hotel Limited Partnership and
Marriott Hotels, Inc. dated May 10, 1985 (incorporated by reference to Exhibit
10.a to Form 10 dated March 31, 1986)
*10.7 Land Purchase Agreement between Ivy Street Hotel Limited Partnership,
Seller and Atlanta Marriott Marquis Limited Partnership, Purchaser dated as of
May 28, 1985 (incorporated by reference to Exhibit 2.b to Form 10 filed March
31, 1986)
10.8 Atlanta Marriott Marquis Hotel Ground Lease between Atlanta Marriott
Marquis Limited Partnership, Landlord and Ivy Street Hotel Limited Partnership,
Tenant dated as of May 28, 1985 (incorporated by reference to Exhibit 10.b to
Form 10 filed March 31, 1986)
10.9 Amended and Restated Management Agreement between HMA Realty Limited
Partnership and New Marriott MI, Inc. dated as of January 3, 1998.
10.10 Modification, Subordination and Non-disturbance Agreement, Estoppel,
Assignment and Consent Management Agreement between HMA Realty Limited
Partnership and New Marriott MI, Inc. dated as of January 3, 1998.
10.11 Loan Agreement Between HMA Realty Limited Partnership and Nomura
Asset Capital Corporation dated as of January 30, 1998.
10.12 Secured Promissory Note A made by HMA Realty Limited Partnership to
Nomura Asset Capital Corporation dated as of January 30, 1998.
10.13 Secured Promissory Note B made by HMA Realty Limited Partnership to
Nomura Asset Capital Corporation dated as of January 30, 1998.
10.14 Deed to Secure Debt, Assignment of Leases and Security Agreement made
by HMA Realty Limited Partnership to Nomura Asset Capital Corporation dated as
of January 30, 1998.
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
A report on Form 8-K was filed on December 31, 1997.
* Incorporated by reference to the same numbered exhibit in the
Partnership's Annual Report on Form 10-K for the fiscal year ended December 31,
1996 which was filed on November 10, 1997.
ATLANTA MARRIOTT MARQUIS LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
Gross Amount at December 31, 1997
(in thousands)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Costs
Subsequent
Buildings & Costs Buildings & Accumulated
Encumbrances Land Improvements Capitalized Land Improvements Total Depreciation
Atlanta
Marriott Marquis
Atlanta, GA $199,019 $12,565 $177,852 $4,829 $12,617 $182,629 $195,246 $43,007
Date of
Completion of Date Depreciation
Construction Acquired Life
1985 1985 50 years
</TABLE>
<TABLE>
<S> <C> <C> <C>
1995 1996 1997
(in thousands)
Notes:
(a) Reconciliation of Real Estate:
Balance at beginning of year..........................................$ 194,117 $ 194,423 $ 195,214
Capital expenditures............................................... 306 815 124
Dispositions and other............................................. -- (24) (92)
---------- ------------ -----------
Balance at end of year................................................$ 194,423 $ 195,214 $ 195,246
========== ============ ===========
(b) Reconciliation of Accumulated Depreciation:
Balance at beginning of year..........................................$ 32,518 $ 36,258 $ 39,982
Depreciation and amortization...................................... 3,740 3,748 3,573
Dispositions and other ............................................ -- (24) (548)
---------- ------------ -----------
Balance at end of year................................................$ 36,258 $ 39,982 $ 43,007
========== ============ ===========
(c) The aggregate cost of land, buildings and improvements for Federal
income tax purposes was approximately $155,841 at December 31, 1997.
(d) The Hotel is pledged as collateral for the Partnership's mortgage debt
of $199 million as of December 31, 1997.
</TABLE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Form 10-K to be signed
on its behalf by the undersigned, thereunto duly authorized, on
________________, 1998.
ATLANTA MARRIOTT MARQUIS LIMITED PARTNERSHIP
By: MARRIOTT MARQUIS CORPORATION
General Partner
By: /s/ Patricia K. Brady
Patricia K. Brady
Vice President and Chief
Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on ___________, 1997.
Signature Title
MARRIOTT MARQUIS CORPORATION
/s/ Bruce F. Stemerman
Bruce F. Stemerman President and Director
/s/ Christopher G. Townsend
Christopher G. Townsend Vice President, Director
and Secretary
/s/ Bruce D. Wardinski
Bruce D. Wardinski Treasurer
SIGNATURE
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Form 10-K to be signed
on its behalf by the undersigned, thereunto duly authorized, on
____________________, 1998.
ATLANTA MARRIOTT MARQUIS LIMITED PARTNERSHIP
By: MARRIOTT MARQUIS CORPORATION
General Partner
By: /s/ Patricia K. Brady
Patricia K. Brady
Vice President and Chief
Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on __________, 1997.
Signature Title
MARRIOTT MARQUIS CORPORATION
/s/ Bruce F. Stemerman President and Director
Bruce F. Stemerman
/s/ Christopher G. Townsend Vice President, Director
Christopher G. Townsend and Secretary
/s/ Bruce D. Wardinski Treasurer
Bruce D. Wardinski
EXHIBIT 3.a.
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
ATLANTA MARRIOTT MARQUIS II LIMITED PARTNERSHIP
This Amended and Restated Agreement of Limited Partnership dated as of the
31st day of December, 1997, is made and entered into by and among Marriott
Marquis Corporation, a Delaware corporation, as general partner (the "General
Partner") and Class B Limited Partner, and those persons who were Class A
Limited Partners of the Original Partnership (defined below) as of the date of
the Merger (defined below).
WHEREAS, Atlanta Marriott Marquis Limited Partnership (the "Original
Partnership") was formed pursuant to a Certificate and Agreement of Limited
Partnership filed with the Secretary of State of Delaware on April 29, 1985. A
Restated Certificate and Agreement of Limited Partnership was filed with the
Secretary of State of Delaware on May 28, 1985;
WHEREAS, on October 10, 1985, the General Partner, Christopher G. Townsend,
as initial limited partner, and the Class A Limited Partners who purchased units
of limited partnership interest (the "Units") in the Original Partnership in the
private placement effected pursuant to a private placement memorandum dated May
10, 1985, (the "Private Placement Memorandum") entered into the Original
Partnership Agreement (defined below);
WHEREAS, the Partnership (defined below) was formed pursuant to a
Certificate of Limited Partnership filed with the Secretary of State of Delaware
on July 9, 1997, and the General Partner and Christopher G. Townsend, as initial
limited partner (the "Withdrawing Partner"), entered into a Limited Partnership
Agreement for the Partnership dated as of July 9, 1997 (the "Original AMMLP-II
Agreement");
WHEREAS, a statutory merger (the "Merger") of the Original Partnership with
and into the Partnership was approved by the requisite vote of Partners pursuant
to Section 17-211 of the Act (defined below);
WHEREAS, the General Partner has agreed to make certain capital
contributions to the Partnership in consideration of the receipt of the Class B
Limited Partner Interest, as more fully described herein;
WHEREAS, the parties to this Agreement wish to set forth the terms and
conditions upon which the Partnership shall conduct its operations;
NOW, THEREFORE, in consideration of the mutual agreements made herein, the
parties hereby agree to continue the Partnership as follows:
ARTICLE ONE - DEFINED TERMS
1.01 The defined terms used in this Agreement shall, unless the context
otherwise requires, have the respective meanings specified in this Section 1.01.
"Accounting Period" means the four-week accounting period having the same
beginning and ending dates as the four-week accounting periods of the General
Partner, except that an Accounting Period may occasionally contain an additional
number of days when necessary to conform the Partnership's and the General
Partner's accounting system to the calendar.
"Act" means the Delaware Revised Uniform Limited Partnership Act, as the
same may be amended from time to time.
"Adjusted Basis" means the basis for determining gain or loss for Federal
income tax purposes from the sale or other disposition of property, as defined
in Section 1011 of the Code.
"Adjusted Capital Account Deficit" means with respect to any Partner, the
deficit balance, if any, in the Partner's Capital Account as of the end of the
relevant Fiscal Year, after giving effect to the following adjustments:
(i) credit to such Capital Account any amounts that the Partner is
obligated to restore pursuant to any provision of this Agreement or pursuant to
Section 1.704-1(b)(ii)(c) of the Treasury Regulations, or is deemed obligated to
restore pursuant to the penultimate sentences of sections 1.704-2(g)(1) and
1.704-2(i)(5) of the Treasury Regulations; and
(ii) debit to such Capital Account the items described in Sections
1.704-1(b)(2)(ii)(d)(4), (5), and (6) of the Treasury Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Treasury
Regulations and shall be interpreted consistently therewith.
"Affiliate" or "Affiliated Person" means, when used with reference to a
specified Person, (i) any Person that directly or indirectly through one or more
intermediaries controls or is controlled by or is under common control with the
specified Person, (ii) any Person that is an officer of, partner in 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 or trustee, or with respect to
which the specified Person serves in a similar capacity, (iii) any Person that,
directly or indirectly, is the beneficial owner of ten percent (10%) or more of
any class of equity securities of the specified Person or of which the specified
Person is directly or indirectly the owner of ten percent (10%) or more of any
class of equity securities, and (iv) any relative or spouse of the specified
Person who makes his or her home with that of the specified Person. Affiliate or
Affiliated Person of the Partnership or the General Partner does not include a
Person who is a Partner of, or in a partnership or joint venture with the
Partnership or any other Affiliated Person if such Person is not otherwise an
Affiliate or Affiliated Person of the Partnership or the General Partner.
Notwithstanding the foregoing, no corporation whose common stock is listed on a
national securities exchange or authorized for inclusion on the NASDAQ national
market, or any subsidiary thereof, shall be an "affiliate" of the General
Partner or any Affiliate thereof unless a Person (or Persons if such Persons
would be treated as part of the same group for purposes of Section 13(d) or
13(g) of the Securities Exchange Act of 1934) directly or indirectly owns twenty
percent (20%) or more of the outstanding common stock of the General Partner and
such other corporation.
"Agreement" means this Amended and Restated Agreement of Limited
Partnership, as originally executed and as hereafter amended or modified from
time to time.
"Capital Account" means, with respect to a Partner, such Partner's total
Capital Contribution, increased or decreased as provided for in this Agreement.
As a result of the Merger, the Capital Account in the Partnership of each
Partner who was a partner in the Original Partnership shall be the same
immediately prior to the restatement described in Section 3.04(C) as it was in
the Original Partnership at the time of the Merger. The Capital Account of the
Withdrawing Partner shall be zero ($0).
"Capital Contribution" means, with respect to any Partner, the total amount
of money contributed to the Partnership or the Original Partnership by such
Partner.
"Capital Proceeds" means Sale Proceeds and/or Refinancing Proceeds.
"Cash Available for Distribution" means, with respect to any fiscal period,
the revenues of the Partnership from all sources during such fiscal period less
(i) all cash expenditures of the Partnership during such fiscal period,
including, without limitation, debt service, and any partnership administrative
expenses, and (ii) such reserves as may be determined by the General Partner, in
its sole discretion, to be necessary to provide for the foreseeable needs of the
Partnership, but shall not include Capital Contributions or Capital Proceeds.
"Class A Limited Partner" means any Person admitted to the Partnership
pursuant to the Merger who or which was a Class A Limited Partner of the
Original Partnership, or any Person who, at the time of reference thereto, is a
Class A Limited Partner.
"Class B Limited Partner" means Marriott Marquis Corporation, or any Person
who, at the time of reference thereto, is a Class B Limited Partner.
"Class A Preferred Return" means the second priority return of 5% per annum
to be paid to the Class A Limited Partners in respect of their Invested Capital,
which Class A Preferred Return, to the extent not paid in any Fiscal Year, shall
be paid out of Capital Proceeds in accordance with Section 4.02(B)(4). The Class
A Preferred Return shall rank pari passu with the General Partner Preferred
Return.
"Class B Preferred Return" means the first priority return of 13.5% per
annum to be paid to the Class B Limited Partner in respect of its Invested
Capital, which Class B Preferred Return, to the extent not paid in any Fiscal
Year, shall accrue and compound at the annual rate of 13.5%.
"Code" means the Internal Revenue Code of 1986, as amended (or any
corresponding provision or provisions of succeeding law).
"Consent" means either (a) the consent given by vote at a meeting called
and held in accordance with the provisions of Section 10.01, or (b) a prior
written consent required or permitted to be given pursuant to this Agreement or
the act granting such consent, as the context may require.
"Depreciation" means for each Fiscal Year or other period, an amount equal
to the depreciation, amortization, or other cost recovery deduction allowable
with respect to an asset for such year or other period, except that if the Gross
Asset Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such year or other period, Depreciation shall be an
amount which bears the same ratio to such beginning Gross Asset Value as the
federal income tax depreciation, amortization, or other cost recovery deduction
for such year or other period bears to such beginning adjusted tax basis;
provided, however, that if the federal income tax depreciation, amortization, or
other cost recovery deduction for such year is zero, Depreciation shall be
determined with reference to such beginning Gross Asset Value using any
reasonable method selected by the General Partner.
"Extraordinary Profits" means any net taxable gain, as reflected on the
Partnership's federal income tax return, attributable to a transaction which
generates Capital Proceeds.
"Fiscal Quarter" means, for the respective fiscal periods in any year, (i)
the period beginning on January 1, and having the same ending date as the
General Partner's 12 week fiscal first quarter, (ii) the same period of time as
the General Partner's second fiscal quarter, (iii) the same period of time as
the General Partner's third fiscal quarter, and (iv) the period from the end of
the General Partner's third fiscal quarter through December 31 in such Fiscal
Year.
"Fiscal Year" means the fiscal year of the Partnership as established in
Section 9.02.
"General Partner" means Marriott Marquis Corporation, a Delaware
corporation and a wholly owned (direct or indirect) subsidiary of Host, and its
successors or permitted assigns.
"General Partner Preferred Return" means the second priority return of 5%
per annum to be paid to the General Partner in respect of its Invested Capital,
which General Partner Preferred Return, to the extent not paid in any Fiscal
Year, shall be paid out of Capital Proceeds in accordance with Section
4.02(B)(4). The General Partner Preferred Return shall rank pari passu with the
Class A Preferred Return.
"Gross Asset Value" means, with respect to any asset, the asset's Adjusted
Basis, except as follows:
(i) the initial Gross Asset Value of any asset contributed by a Partner to
the Partnership shall be the gross fair market value of such asset, as
reasonably determined by the General Partner.
(ii) the Gross Asset Values of all Partnership's assets shall be adjusted
to equal their respective gross fair market values immediately prior to the
following times: (a) the acquisition of an additional interest in the
Partnership by any new or existing Partner in exchange for more than a de
minimis Capital Contribution; (b) the distribution by the Partnership to a
Partner of more than a de minimis amount of Partnership property as
consideration for an Interest in the Partnership; and (c) the liquidation of the
Partnership or a Partner's Interest in the Partnership. The determination of
fair market values will be made by the General Partner in its reasonable
discretion. No adjustment shall be made if the General Partner determines that
an adjustment is not required in order to reflect the relative economic
interests of the Partners. If the Gross Asset Value of an asset has been
determined or adjusted pursuant to Clause (i) or (ii) of this definition, such
Gross Asset Value shall thereafter be adjusted by the Depreciation taken into
account with respect to such asset for purposes of computing Profits and Losses.
The Gross Asset Value of an asset distributed by the Partnership to a Partner
shall equal the fair market value of such asset at the time of such
distribution.
"Host" means Host Marriott Corporation, a Delaware corporation.
"Hotel" means the Atlanta Marriott Marquis Hotel in Atlanta, Georgia,
including, without limitation, the Land which the Partnership is contributing to
the Hotel Partnership in accordance with the Hotel Partnership Agreement.
"Hotel Partnership" means the Ivy Street Hotel Limited Partnership, a
Georgia limited partnership.
"Hotel Partnership Agreement" means the Third Restated Agreement of Limited
Partnership of Ivy Street Hotel Limited Partnership, as the same may be amended
from time to time.
"Hotel Partnership Debt" means any indebtedness for borrowed money incurred
by the Hotel Partnership.
"Interest" means the entire interest of a Partner in the Partnership at any
particular time, including the right of such Partner to any and all benefits to
which a Partner may be entitled as provided in this Agreement, together with the
obligations of such Partner to comply with all the terms and provisions of this
Agreement. For purposes of voting, a Partner's Interest in the Partnership shall
be such Partner's Percentage Interest.
"Invested Capital" means the excess, if any, of paid in Capital
Contributions of a Partner (whether the same have been made to the Partnership
or to the Original Partnership and attributed to the Partnership by reason of
the Merger) over any distributions to such Partner of Capital Proceeds pursuant
to Section 4.02(B)(3) in the case of the Class B Limited Partner and Section
4.02(B)(5) in the case of the General Partner and the Class A Limited Partners.
"Investor List" means that list, required by Section 6112 of the Code,
identifying Persons to whom Interests in the Original Partnership were sold,
such Persons' addresses and taxpayer identification numbers, the dates on which
the Interests were acquired and the name and tax shelter registration number of
the Partnership, and such other information as may be required by Treasury
Regulations to be included therein.
"IRS" means the Internal Revenue Service.
"Land" means all of the land on which the Atlanta Marriott Marquis Hotel is
located, principally that tract or parcel of land being Land Lot 51 of the 14th
District of Fulton County, Georgia, as legally described in Exhibit 1 attached
hereto.
"Limited Partner" means any limited partner of the Partnership (whether the
Class A Limited Partners, the Class B Limited Partner or a Substituted Limited
Partner).
"Majority in Interest" means, with respect to any specified class of
Limited Partner, more than fifty percent (50%) of the Percentage Interest within
such class; provided, if no class of Limited Partner is specified, the term
shall mean more than fifty percent (50%) of the Percentage Interest of all of
the Limited Partners in the Partnership.
"Manager" means any Person who may from time to time act as manager of the
Hotel; as of the date of this Agreement, the Manager is Marriott International,
Inc., a Delaware corporation.
"Management Agreement" means the management agreement entered into between
the Hotel Partnership and the Manager as such agreement may be modified or
amended in accordance with its terms.
"Merger" means the partnership merger transaction pursuant to which the
Original Partnership merged with and into the Partnership such that the
Partnership is the resulting entity for Delaware state law purposes, but the
Original Partnership is the continuing entity for purposes of Federal income tax
law.
"Mortgage Debt" means any loan provided to the Hotel Partnership which is
secured by the Hotel and the Land as collateral.
"Nomura Refinancing" means the refinancing of the first mortgage secured as
of the date of this Agreement by the Hotel, in the aggregate principal amount of
One Hundred Ninety-Nine Million Dollars ($199,000,000), which the Hotel
Partnership intends to refinance.
"Nonrecourse Deductions" has the meaning set forth in Treasury Regulations
Sections 1.704-2(b)(1) and (c). The amount of Nonrecourse Deductions for a
Fiscal Year equals the excess, if any, of the net increase, if any, in the
amount of Partnership Minimum Gain during that Fiscal Year over the aggregate
amount of any distributions during that Fiscal Year of proceeds of a Nonrecourse
Liability that are allocable to an increase in Partnership Minimum Gain,
determined according to the provisions of Treasury Regulations Section
1.704-2(c).
"Nonrecourse Liability" has the meaning set forth in Treasury Regulations
Section 1.752-1(a)(2).
"Notification" means a written notice, containing the information required
by this Agreement to be communicated to any Person, sent by registered,
certified or regular mail to such Person at the last known address of such
Person; provided, however, that any communication containing such information
sent to such Person and actually received by such Person shall constitute
Notification for all purposes of this Agreement.
"Original AMMLP-II Agreement" means the Limited Partnership Agreement of
the Partnership entered into by the General Partner and the Withdrawing Partner
as of July 9, 1997.
"Original Partnership" means Atlanta Marriott Marquis Limited Partnership,
the predecessor to the partnership merged with and into the Partnership in the
Merger.
"Original Partnership Agreement" means the Amended and Restated Agreement
of Limited Partnership of the Original Partnership dated as of May 28, 1995.
"Partner Minimum Gain" means an amount, with respect to each Partner
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if
such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Treasury Regulations Section 1.704-2(i).
"Partner Nonrecourse Debt" has the meaning set forth in Treasury
Regulations Section 1.704-2(b)(4).
"Partner Nonrecourse Deductions" has the meaning set forth in Treasury
Regulations Section 1.704-2(i). The amount of Partner Nonrecourse Deductions
with respect to a Partner Nonrecourse Debt for a Fiscal Year equals the excess,
if any, of the net increase, if any, in the amount of Partner Minimum Gain
attributable to such Partner Nonrecourse Debt during that Fiscal Year over the
aggregate amount of any distributions during that Fiscal Year to the Partner
that bears the economic risk of loss for such Partner Nonrecourse Debt to the
extent such distributions are from the proceeds of such Partner Nonrecourse Debt
and are allocable to an increase in Partner Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Treasury Regulations
Section 1.704-2(i)(2).
"Partners" means, collectively, the Limited Partners as constituted from
time to time and the General Partner.
"Partnership" means Atlanta Marriott Marquis II Limited Partnership, the
limited partnership formed under the Act and continued pursuant to this
Agreement by the parties hereto, as said Partnership may from time to time be
constituted.
"Partnerships" means, collectively, the Partnership, the Hotel Partnership
and any entity established to own the Property for financing purposes.
"Partnership Debt" means any indebtedness for borrowed money incurred by
the Partnership.
"Partnership Merger Agreement" means that certain merger agreement having
an effective date of even date herewith between the Original Partnership and the
Partnership, pursuant to which the Merger has occurred, and pursuant to which
the partners of the Original Partnership as of the date hereof have become
Partners of the Partnership.
"Partnership Minimum Gain" has the meaning set forth in Treasury
Regulations Sections 1.704-2(b)(2) and (d).
"Percentage Interest" means, as to any Partner, subject to the matters
discussed in Section 4.02(C) hereof, such Partner's Interest in the Partnership
expressed as a percentage of all of the Interests owned by Partners within a
particular class of Interests or the entirety of the Partnership, as the case
may be. The Percentage Interest of the General Partner shall be determined by
dividing the Capital Contributions made by the General Partner pursuant to the
Original Partnership Agreement by the aggregate Capital Contributions made to
the Partnership and the Original Partnership. The Percentage Interest of any
Class A Limited Partner shall be determined by (i) dividing the Capital
Contributions made by the Class A Limited Partners in the aggregate pursuant to
the Original Partnership Agreement by the aggregate Capital Contributions made
to the Partnership and the Original Partnership, (ii) establishing a percentage
per Unit (based on the $100,000 per Unit paid) and multiplying that percentage
by the number of Units owned by such Class A Limited Partner. The Percentage
Interest of the Class B Limited Partner shall be determined by dividing the
Capital Contributions made by the Class B Limited Partner pursuant to Section
3.04(B) by the aggregate Capital Contributions made to the Partnership and the
Original Partnership.
"Person" means any individual, partnership, limited liability company,
corporation, trust or other legal entity.
"Profits and Losses" means for each Fiscal Year or other period, an amount
equal to the Partnership's taxable income or loss for such year or period,
determined in accordance with Code Section 703(a) (for this purpose, all items
of income, gain, loss, or deduction required to be stated separately pursuant to
Code Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:
(A) Any income of the Partnership that is exempt from federal income tax
and not otherwise taken into account in computing Profits or Losses pursuant to
this definition shall be added to such taxable income or loss;
(B) Any expenditures of the Partnership described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Treasury Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into
account in computing Profits or Losses pursuant to this definition shall be
subtracted from such taxable income or loss;
(C) In the event the Gross Asset Value of any Partnership asset is adjusted
pursuant to (B) or (C) of the definition of Gross Asset Value, the amount of
such adjustment shall be taken into account as gain or loss from the disposition
of such asset for purposes of computing Profits or Losses;
(D) Gain or loss resulting from any disposition of Partnership assets with
respect to which gain or loss is recognized for federal income purposes shall be
computed by reference to the Gross Asset Value of the property disposed of,
notwithstanding that the adjusted tax basis of such property differs from its
Gross Asset Value;
(E) In lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account Depreciation for such Fiscal Year or other period,
computed in accordance with the definition of Depreciation; and
(F) Notwithstanding any other provisions of this definition, any items
which are specially allocated pursuant to Section 4.01(D) hereof shall not be
taken into account in computing Profits or Losses.
"Project" means the Land and the Hotel, taken together.
"Refinancing" means any refinancing or borrowing (including sale and
leasebacks on which no taxable gain is recognized for Federal income tax
purposes) by either of the Partnerships, the proceeds of which are applied to
the repayment of previously incurred debt of either of the Partnerships, or
borrowed for distributions to the partners of either of the Partnerships. The
term "Refinancing" shall include the Nomura Refinancing.
"Refinancing Proceeds" means the net proceeds from any Refinancing.
"Sale Proceeds" means (a) any proceeds received by the Partnership from (i)
the sale or other disposition of all or a portion of the entire general
partnership interest of the Partnership in the Hotel Partnership or (ii) the
liquidation of the Partnership's property in connection with a dissolution of
the Partnership (in excess of the outstanding indebtedness and other liabilities
of the Partnership) and (b) any proceeds (i) received by the Hotel Partnership
from (A) the exchange, condemnation, eminent domain taking, casualty, sale or
other disposition of the Hotel or all or substantially all of the Hotel
Partnership's assets or (B) the liquidation of the Hotel Partnership's property
following a dissolution of the Hotel Partnership and (ii) distributed to the
Partnership.
"Substituted Limited Partner" means any person admitted to the Partnership
as a Class A Limited Partner or Class B Limited Partner pursuant to the
provisions of Section 7.02.
"Substituted Class A Limited Partner" means any Person admitted to the
Partnership as a Class A Limited Partner pursuant to the provisions of Section
7.02.
"Substituted Class B Limited Partner" means any Person admitted to the
Partnership as a Class B Limited Partner pursuant to Section 7.02.
"Tax Matters Partner" means the General Partner.
"Treasury Regulations" means the income tax regulations promulgated by the
Department of the Treasury.
"Unit" means the Interest of a Class A Limited Partner represented by a
Capital Contribution of $100,000.
"Withdrawing Partner" means Christopher G. Townsend, who was the sole
Limited Partner of the Partnership prior to the Merger.
ARTICLE TWO - FORMATION, NAME, PLACE OF BUSINESS, PURPOSE AND TERM
2.01 Continuation. The parties do hereby continue the Partnership pursuant
to the provisions of the Act.
2.02 Name and Offices. The name of the Partnership shall be Atlanta
Marriott Marquis II Limited Partnership. The principal offices of the
Partnership shall be located at 10400 Fernwood Road, Bethesda, Maryland 20817 or
at such other place or places as the General Partner may from time to time
determine. The registered office of the Partnership in the State of Delaware
shall be in the City of Wilmington, County of New Castle, and the registered
agent in charge thereof shall be Corporation Service Company, 1013 Centre Road,
Wilmington, Delaware 19805.
2.03 Purpose. The purpose of the Partnership is, without limitation, to (i)
acquire and own a general partnership interest in the Hotel Partnership, and
(ii) to engage in any other activities related or incidental thereto as more
fully set forth in Section 5.01 hereof.
2.04 Term. The term of the Partnership shall continue in full force and
effect from the date of the filing of the original Certificate of Limited
Partnership until December 31, 2085, or until dissolution prior thereto pursuant
to the provisions of Article Eight.
2.05 Agent for Service of Process. The agent for service of process of the
Partnership shall be Corporation Service Company, 1013 Centre Road, Wilmington,
Delaware 19805.
ARTICLE THREE - PARTNERS AND CAPITAL
3.01 General Partner. The General Partner of the Partnership shall be
Marriott Marquis Corporation, a Delaware corporation and wholly owned subsidiary
of Host, having its principal executive offices at 10400 Fernwood Road,
Bethesda, Maryland 20817.
3.02 Limited Partners.
(A) The names and addresses of the Class A Limited Partners, the amount of
their agreed upon Capital Contributions and the number of Units held by them are
set forth in Schedule I of this Agreement.
(B) The Class B Limited Partner is Marriott Marquis Corporation, a Delaware
corporation.
(C) Simultaneously with the execution hereof, the Withdrawing Partner shall
withdraw from the Partnership.
3.03 Capital Contributions by General Partner.
The General Partner has made Capital Contributions to the Original
Partnership and, therefore, to the Partnership, in the amount of Five Hundred
Thirty-Six Thousand Dollars ($536,000).
3.04 Capital Contributions by Class A and Class B Limited Partners;
Adjustment of Capital Accounts.
(A) For all purposes of this Agreement, the aggregate Capital Contribution
of each Class A Limited Partner to the Original Partnership as credited to their
respective Capital Accounts is acknowledged to be One Hundred Thousand Dollars
($100,000) per Unit. As a result of the Merger, the Capital Contribution of each
Class A Limited Partner to the Partnership shall similarly be equal to One
Hundred Thousand Dollars ($100,000) per Unit. Each such Class A Limited Partner
shall be credited with a Capital Account equal to such Class A Limited Partner's
capital account in the Original Partnership immediately prior to the Merger.
(B) The Class B Limited Partner, in its capacity as Class B Limited
Partner, made no Capital Contribution to the Original Partnership. The Class B
Limited Partner will make Capital Contributions sufficient to enable the
Partnership to provide the Hotel Partnership with funds necessary to (i)
undertake repair of the facade of the Hotel; (ii) undertake refurbishment of the
rooms in the Hotel; (iii) provide working capital reserves for the Hotel; (iv)
upon consummation of the Nomura Refinancing, provide funds necessary to satisfy
any shortfall in repayment of the Mortgage Debt existing as of the date of such
Nomura Refinancing; (v) satisfy any shortfall in the payments made to Limited
Partners on account of the lease of the Land by the Original Partnership to the
Hotel Partnership; (vi) provide for any reserves deemed necessary or reasonably
necessary in connection with the Nomura Refinancing; and (vii) pay all
transaction costs associated with the formation of the Partnership, the
Partnership Merger, the Nomura Refinancing and any other transactions attendant
thereto. The Class B Limited Partner shall make the Capital Contributions
described in (i) through (iv) above solely to the extent the Partnership's
capital needs exceed available capital of the Partnership and the Hotel
Partnership. The maximum Capital Contribution the Class B Limited Partner shall
be obligated to make under this Section 3.04(B) shall be Seventy-Five Million
Dollars ($75,000,000). The Class B Limited Partner shall make the Capital
Contributions under this Section 3.04(B) as and when needed by the Partnership
and the Hotel Partnership. Immediately after the Merger, the Class B Limited
Partner shall contribute the first Six Million Dollars ($6,000,000) of such
aggregate Capital Contribution, which the Partnership shall, in turn, contribute
to the Hotel Partnership to commence the facade repair, the renovation of rooms,
pay certain transaction costs incurred by the Partnership and the Hotel
Partnership, and provide working capital for the Hotel Partnership.
(C) In connection with the additional Capital Contribution of Six Million
Dollars ($6,000,000) referenced in Section 3.04(B), the Capital Accounts of the
Partners shall be adjusted as provided in Treasury Regulations Section
1.704-1(b)(2)(iv)(f) as set forth in Exhibit 2 hereto.
3.05 Partnership Capital. The Capital Contribution of each Partner shall be
credited to each such Partner's Capital Account. Each Partner's Capital Account
shall be credited for (i) the amount of such Partner's Capital Contributions,
and (ii) the amount of Profits allocated to such Partner under this Agreement,
and such Capital Account shall be debited for (i) the Gross Asset Value of any
asset distributed to such Partner, and (ii) the amount of Losses allocated to
such Partner under this Agreement. The foregoing is intended to comply with
Treasury Regulations Section 1.704-1(b)(2)(iv). Any transferee of a Partner's
Interest shall succeed to that transferor's Capital Account.
3.06 Liability of the Limited Partners. No Limited Partner shall be liable
for the debts, liabilities, contracts or any other obligations of the
Partnership. Limited Partners shall not be required to lend any funds to the
Partnership or, after their Capital Contributions have been paid, to make any
further Capital Contributions to the Partnership or to repay to the Partnership,
any Partner or to any creditor of the Partnership any portion or all of any
negative balance of a Limited Partner's Capital Account.
3.07 Voluntary Additional Financing.
(A) Capital Contributions. Upon the request of the General Partner, the
Class B Limited Partner may (but shall not be required to) make additional
Capital Contributions in the amount of any required additional funds. In the
event additional Capital Contributions are so made, such Capital Contributions
shall be made on the same terms and conditions as the initial Class B Limited
Partner Capital Contribution, and such additional Capital Contribution shall be
entitled to receive the Class B Preferred Return. The foregoing notwithstanding,
the aggregate amount which may be advanced under this Section 3.07(A) without
the Consent of a Majority in Interest, shall be Twenty Million Dollars
($20,000,000), and any Capital Contributions made pursuant to this Section
3.07(A) shall not affect the Partners' respective Percentage Interests in the
Partnership.
(B) Loans. The General Partner may (but shall not be required to) make
loans to the Partnership in the amount of any required additional funds. In the
event any loans are so made, such loans shall be made on terms and conditions,
including interest rate and amortization (if any) which the General Partner
reasonably determines are then prevailing in the marketplace for similar loans
taking into account the nature and historical performance of the Project.
ARTICLE FOUR - ALLOCATIONS OF PROFITS AND LOSSES AND DISTRIBUTIONS
4.01 Allocation of Profit and Loss. The income, profits, gains, losses,
deductions and credits of the Partnership shall be determined in accordance with
the capital accounting rules and principles established by Code Sections 702 and
704 and the regulations thereunder and, to the extent not inconsistent
therewith, in accordance with generally accepted accounting principles, and
shall be allocated each Fiscal Year as follows and in the following order of
priority:
(A) After giving effect to the special allocations set forth in Section
4.01(D) hereof, Profits (other than Extraordinary Profits) for any Fiscal Year
shall be allocated as follows:
(1) First, in any Fiscal Year in which the Partnership has Cash Available
for Distribution pursuant to Section 4.02(A), Profits shall be allocated first
among the Partners to the extent of and in proportion to the Cash Available for
Distribution that is distributed to them pursuant to Section 4.02(A);
(2) Second, Profits in excess of those allocated pursuant to Section
4.01(A), if any, shall be allocated to the Partners based on their negative
Capital Account balances (taking into account for this purpose the Capital
Contributions made pursuant to this Agreement but not taking into account the
revaluation of Capital Accounts pursuant to Section 3.04(C) hereof), pro rata in
accordance with such negative Capital Account balances, until such negative
Capital Accounts have been eliminated; and
(3) The balance of Partnership Profits, if any, shall be allocated to the
Partners in proportion to their Percentage Interests.
(B) After giving effect to the allocations set forth in Section 4.01(A) and
the special allocations set forth in Section 4.01(D) hereof, Extraordinary
Profits for any Fiscal Year shall be allocated as follows:
(1) First, to all Partners whose Capital Accounts have a negative balance
(taking into account for this purpose the Capital Contributions made pursuant to
this Agreement but not taking into account the revaluation of Capital Accounts
pursuant to Section 3.04(C) hereof), pro rata in accordance with such negative
Capital Accounts, until such negative Capital Accounts have been eliminated; and
(2) Thereafter, in the same manner and in accordance with the priority of
distribution as Capital Proceeds are to be distributed to the Partners in
accordance with Section 4.02(B) hereof.
(C) After giving effect to the special allocations set forth in Section
4.01(D) hereof, Losses for any Fiscal Year shall be allocated as set forth in
Section 4.01(C)(1) hereof, subject to the limitation in Section 4.01(C)(2)
hereof.
(1) Losses for any Fiscal Year shall be allocated in the following order of
priority:
(a) First, one hundred percent (100%) to the Partners in proportion to and
to the extent of their positive Capital Accounts until all Capital Accounts have
been reduced to zero; and
(b) The balance, if any, to the Partners in proportion to their Percentage
Interests.
(2) The Losses allocated pursuant to Section 4.01(C)(1) hereof shall not
exceed the maximum amount of Losses that can be so allocated without causing any
Limited Partner to have an Adjusted Capital Account Deficit at the end of any
Fiscal Year. In the event some but not all of the Limited Partners would have
Adjusted Capital Account Deficits as a consequence of an allocation of Losses
pursuant to Section 4.01(C)(1) hereof but for this Section 4.01(C)(2), the
limitation set forth in this Section 4.01(C)(2) shall be applied on a Limited
Partner by Limited Partner basis so as to allocate the maximum permissible
Losses to each Limited Partner under Treasury Regulations Section
1.704-1(b)(2)(ii)(d). All Losses in excess of the limitations set forth in this
Section 4.01(C)(2) shall be allocated to the General Partner.
(D) Special Allocations. The following special allocations shall be made in
the following order:
(1) Minimum Gain Chargeback. Notwithstanding any other provision of the
foregoing Sections 4.01(A), (B) or (C), if there is a net decrease in
Partnership Minimum Gain during any Fiscal Year, then, to the extent required by
Treasury Regulations Section 1.704-2(f), each Partner shall be specially
allocated items of Partnership income and gain for such year (and, if necessary,
subsequent years) in an amount equal to such Partner's share of the net decrease
in Partnership Minimum Gain, determined in accordance with Treasury Regulations
Section 1.704-2(g)(2). The items to be so allocated shall be determined in
accordance with Treasury Regulations Sections 1.704-2(f)(6) and 1.704-2(j). This
Section 4.01(D)(1) is intended to comply with the minimum gain chargeback
requirement in Treasury Regulations Section 1.704-2(f) and shall be interpreted
consistently therewith.
(2) Partner Minimum Gain Chargeback. Notwithstanding any other provision of
Sections 4.01(A)-(F) hereof except Section 4.01(D)(1), if there is a net
decrease in Partner Minimum Gain attributable to a Partner Nonrecourse Debt
during any Fiscal Year, then, to the extent required by Treasury Regulations
Section 1.704-2(i)(4), each Partner who has a share of the Partner Minimum Gain
attributable to such Partner Nonrecourse Debt, determined in accordance with
Treasury Regulations Section 1.704-2(i)(5), shall be specially allocated items
of Partnership income and gain for such year (and, if necessary, subsequent
years) in an amount equal to such Partner's share of the net decrease in Partner
Minimum Gain attributable to such Partner Nonrecourse Debt, determined in
accordance with Treasury Regulations Section 1.704-2(i)(4). The items to be so
allocated shall be determined in accordance with Treasury Regulations Sections
1.704-2(i)(4) and 1.704-2(j). This Section 4.01(D)(2) is intended to comply with
the minimum gain chargeback requirement in Treasury Regulations Section
1.704-2(i)(4) and shall be interpreted consistently therewith.
(3) Qualified Income Offset. In the event any Limited Partner unexpectedly
receives any adjustments, allocations, or distributions described in Treasury
Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Partnership
income and gain (consisting of a pro rata portion of each item of Partnership
income, including gross income, and gain for such year) shall be specially
allocated to such Partner in an amount and manner sufficient to eliminate, to
the extent required by the Treasury Regulations, the Adjusted Capital Account
Deficit of such Partner as quickly as possible, provided that an allocation
pursuant to this Section 4.01(D)(3) shall be made if and only to the extent that
such Partner would have an Adjusted Capital Account Deficit after all other
allocations provided for in Sections 4.01(A)-(F) hereof have been tentatively
made as if this Section 4.01(D)(3) were not in the Agreement.
(4) Gross Income Allocation. In the event any Limited Partner has a deficit
Capital Account at the end of any Fiscal Year that is in excess of the sum of
(i) the amount such Partner is obligated to restore, and (ii) the amount such
Partner is deemed to be obligated to restore pursuant to the penultimate
sentences of Treasury Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), such
Partner shall be specially allocated items of Partnership income and gain
(consisting of a pro rata portion of each item of Partnership income, including
gross income, and gain for such year) in the amount of such excess as quickly as
possible, provided that an allocation pursuant to this Section 4.01(D)(4) shall
be made if and only to the extent that such Partner would have a deficit Capital
Account in excess of such sum after all other allocations provided for in
Sections 4.01(A)-(F) hereof have been tentatively made as if Section 4.01(D)(3)
and this Section 4.01(D)(4) were not in the Agreement.
(5) Nonrecourse Deductions. Nonrecourse Deductions for any Fiscal Year or
other period shall be specially allocated to the Partners in proportion to their
Percentage Interests.
(6) Partner Nonrecourse Deductions. Any Partner Nonrecourse Deductions for
any Fiscal Year or other period shall be specially allocated to the Partner who
bears the economic risk of loss with respect to the Partner Nonrecourse Debt to
which such Partner Nonrecourse Deductions are attributable in accordance with
Treasury Regulations Section 1.704-2(i)(1).
(7) Section 754 Adjustment. To the extent an adjustment to the adjusted tax
basis of any Partnership Asset pursuant to Code Section 734(b) or Code Section
743(b) is required, pursuant to Treasury Regulations Section
1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts,
the amount of such adjustment to the Capital Accounts shall be treated as an
item of gain (if the adjustment increases the basis of the asset) or loss (if
the adjustment decreases such basis), and such gain or loss shall be specially
allocated to the Partners in a manner consistent with the manner in which their
Capital Accounts are required to be adjusted pursuant to such Treasury
Regulations Section.
(E) Other Allocation Rules.
(1) For purposes of determining the Profits, Losses or any other items
allocable to any period, Profits, Losses and any such other items shall be
determined on a daily, monthly, or other basis, as determined by the General
Partner using any permissible method under Code Section 706 and the Treasury
Regulations thereunder.
(2) Except as otherwise provided in this Agreement, all items of
Partnership income, gain, loss, deduction and any other allocations not
otherwise provided for shall be divided among the Partners in the same
proportions as they share Profits and Losses, as the case may be, for the year.
(3) The Partners are aware of the income tax consequences of the
allocations made by Sections 4.01(A)-(F) hereof and hereby agree to be bound by
the provisions of Sections 4.01(A)-(F) hereof in reporting their shares of
Partnership income and loss for income tax purposes.
(4) Solely for purposes of determining a Partner's proportionate share of
the "excess nonrecourse liabilities" of the Partnership within the meaning of
Treasury Regulations Section 1.752-3(a)(3), the Partners' interests in
Partnership profits shall be equal to their Percentage Interests.
(F) Tax Allocations: Code Section 704(c).
(1) In accordance with Code Section 704(c) and the Treasury Regulations
thereunder, income, gain, loss and deduction with respect to any property
contributed to the capital of the Partnership shall, solely for tax purposes, be
allocated among the Partners so as to take account of any variation between the
adjusted basis of such property to the Partnership for federal income tax
purposes and its initial Gross Asset Value (computed in accordance with the
definition herein).
(2) In the event the Gross Asset Value of any Partnership Asset is
adjusted, subsequent allocations of income, gain, loss and deduction with
respect to such asset shall take account of any variation between the adjusted
basis of such asset for federal income tax purposes and its Gross Asset Value in
the same manner as under Code Section 704(c) and the Treasury Regulations
thereunder.
(3) Any elections or other decisions relating to such allocations shall be
made by the General Partner in any manner that reasonably reflects the purpose
and intention of this Agreement. Allocations pursuant to this Section 4.01(F)
are solely for purposes of federal, state and local taxes and shall not affect,
or in any way be taken into account in computing, any Partner's Capital Account
or share of Profits, Losses, other items, or distributions pursuant to any
provision of this Agreement.
(4) Consistent with this Section 4.01(F), in connection with the
restatement of the Partners' Capital Accounts pursuant to Section 3.04(C), the
Partners' shares of depreciation, depletion, amortization, and gain or loss, as
computed for federal income tax purposes, with respect to the Project, shall be
determined so as to take into account the variation between the adjusted tax
basis of the Project and the Gross Asset Value of the Project using the
principles of Code Section 704(c) as required by Treasury Regulations Sections
1.704-1(b)(2)(iv)(f)(4) and 1.704-1(b)(4)(i).
(G) It is the intent of the Partners that each Partner's distributive share
of income, gain, loss, deduction, or credit (or item thereof) shall be allocated
in accordance with this Article Four to the fullest extent permitted by and in a
manner intended to comply with Section 704(b) of the Code. Such compliance shall
include compliance with the provisions of the Treasury Regulations dealing with
"qualified income offsets" and "minimum gain chargebacks." Moreover, in
conjunction with the "book-up" set forth in Section 3.04(C) hereof, "Section
704(c) principles" shall apply to the amount of the "book-up" of the Partners.
Recognizing the complexity of the allocations contained in this Article Four, in
order to preserve and protect the allocations provided for in this Article Four,
and to attempt to comply with the Treasury Regulations, the General Partner,
upon obtaining the advice of counsel to the Partnership, is authorized and
directed to allocate income, gain, loss, deduction or credit (or item thereof)
arising in any year (the "New Allocation") differently than otherwise provided
for in this Article Four if, and to the extent that, the allocations under this
Article Four would not fully conform with Section 704(b) of the Code, but only
so long as no Limited Partner is materially affected thereby. Any New Allocation
made pursuant to this Section 4.01(G) shall be deemed to be a complete
substitute for any allocation otherwise provided for in this Article Four, and
no amendment of the Partnership Agreement or approval of any Partner shall be
required. The General Partner shall use its best efforts to cause the New
Allocation to resemble in all material respects and to the maximum extent
possible the allocations contained in the Partnership Agreement as originally
adopted; the General Partner, however, makes no warranties in this regard. No
New Allocation, and no choice by the General Partner among possible alternative
New Allocations, shall give rise to any claim or cause of action by any Partner
against any party, including but not limited to, the General Partner, the
Partnership's counsel or accountants, or any Person related thereto.
(H) The Partners intend that the allocation provisions of this Article Four
(as applied with respect to allocations of book items) shall produce final
Capital Account balances of the Partners that would permit liquidating
distributions, if such distributions were made in accordance with final Capital
Account balances (instead of being made in the order of priorities set forth in
Section 4.02(B)), to be made (after unpaid loans and interest thereon, including
those owed to Partners, have been paid) in a manner identical to the order of
priorities set forth in Section 4.02(B). To the extent that the allocation
provisions of this Article Four would fail to produce such final Capital Account
balances, (i) such allocation provisions shall be amended by the Partners if and
to the extent necessary to produce such result and (ii) Profits and Losses of
the Partnership for prior open years (or items of gross income, loss and
deduction of the Partnership for such years, as computed for book purposes)
shall be reallocated among the Partners to the extent it is not possible to
achieve such result with allocations of items of income (including gross
income), loss and deduction (as computed for book purposes) for the current year
and succeeding years, as reasonably determined by the General Partner. This
Section 4.01(H) shall control notwithstanding any reallocation or adjustment of
taxable income, taxable loss, or items thereof (as computed for book or tax
purposes) by the IRS.
4.02 Distributions.
(A) Cash Available for Distribution. The Partnership shall make
distributions of Cash Available for Distribution not less frequently than
annually and in such amounts as the General Partner shall determine. Cash
Available for Distribution shall be distributed as follows:
(1) First, to the Class B Limited Partner, until the Class B Limited
Partner has received an amount equal to its then accrued but unpaid Class B
Preferred Return;
(2) Next, on a pari passu basis and pro rata to their Invested Capital, to
the General Partner and the Class A Limited Partners, until the General Partner
and the Class A Limited Partners have received an amount equal to the General
Partner Preferred Return and the Class A Preferred Return, respectively, for the
Fiscal Year with respect to which such distribution is made; and
(3) Thereafter, to the Partners in accordance with their respective
Percentage Interests.
(B) Capital Proceeds. Capital Proceeds shall be distributed as soon as
practicable following their receipt by the Partnership, in such amounts as the
General Partner shall determine. Capital Proceeds shall be distributed as
follows:
(1) First, to the Class B Limited Partner, until the Class B Limited
Partner has received an amount equal to its then accrued but unpaid Class B
Preferred Return;
(2) Next, on a pari passu basis, to the General Partner and the Class A
Limited Partners, until the General Partner and the Class A Limited Partners
have received an amount equal to the General Partner Preferred Return and the
Class A Preferred Return, respectively, for the Fiscal Year with respect to
which such distribution is made;
(3) Next, to the Class B Limited Partner until the Class B Limited
Partner's Invested Capital has been reduced to zero;
(4) Next, on a pari passu basis and pro rata to their Invested Capital, to
the General Partner and to the Class A Limited Partners until the General
Partner and the Class A Limited Partners have received an amount equal to a
cumulative five percent (5%) annual return on their Invested Capital from the
effective date of this Agreement to the date of computation, compounded to the
extent unpaid in any previous Fiscal Year, less any prior distributions to the
General Partner and the Class A Limited Partners pursuant to Section 4.02(A)(2),
4.02(A)(3), 4.02(B)(2), and this Section 4.02(B)(4) from and after the effective
date of this Agreement. For purposes of this Section 4.02(B)(4), the special
distribution made in connection with the Merger of Five Thousand Dollars
($5,000) per Unit shall not be taken into account;
(5) Next, on a pari passu basis and pro rata to their Invested Capital, to
the General Partner and to the Class A Limited Partners in accordance with their
respective amounts of Invested Capital, until the General Partner's and the
Class A Limited Partners' Invested Capital have each been reduced to zero; and
(6) Thereafter, to the Partners in accordance with their respective
Percentage Interests.
(C) Determination of Percentage Interests. For purposes of determining the
respective Percentage Interests of the General Partner, the Class A Limited
Partners and the Class B Limited Partner for purposes of Sections 4.02(A)(3) and
4.02(B)(6), all Capital Contributions by the Class B Limited Partner pursuant to
Section 3.04(B) shall be included in the computation; however, no Capital
Contributions made by the Class B Limited Partner pursuant to Section 3.07(A)
shall be included in the computation. The return of the Partners' Invested
Capital, pursuant to Sections 4.02(B)(3) and 4.02(B)(5) shall have no effect on
the Limited Partners' Percentage Interests.
(D) Additional Borrowings. To the extent the General Partner deems it
appropriate, distributions under this Section 4.02 may be made out of borrowings
made by the Partnership specifically for the purpose of making such
distributions.
4.03 Allocation Among Class A Limited Partners. Any Profits or Losses for
any Fiscal Year allocable to the Class A Limited Partners under Section 4.01
shall be allocated among the Class A Limited Partners pro rata in accordance
with the number of Units owned by each as of the end of such Fiscal Year,
provided that if any Unit is assigned during the Fiscal Year in accordance with
this Agreement, the Profits or Losses that are so allocable to such Unit shall
be allocated between the assignor and assignee of such Unit according to the
number of Fiscal Quarters in such Fiscal Year each owned such Unit.
4.04 Section 754 Adjustments. Appropriate adjustments shall be made in the
allocations to Limited Partners under this Article Four in order to reflect
adjustments in the basis of Partnership property permitted pursuant to any
election under Section 754 of the Code. The Partnership will make the basis
adjustments and calculate depreciation deductions in accordance with such
adjustments only for those transferee Limited Partners who supply information to
the Partnership that enables the Partnership to determine when, and at what
price, such transferee Limited Partners acquired Units. In the case of a
transferee Limited Partner who does not supply such information to the
Partnership, the Partnership will attempt to supply such Limited Partner with
reasonably available information that will permit such Limited Partner to make
the required basis adjustment calculation and to determine the depreciation
deduction accordingly.
4.05 Distribution Upon Liquidation.
(A) Notwithstanding anything to the contrary in this Agreement, upon the
liquidation of the Partnership, the assets of the Partnership shall be
distributed first to the Partners with positive Capital Accounts (after giving
effect to all contributions, distributions, allocations and other Capital
Account adjustments for all taxable years, including the year during which such
liquidation occurs) in the same proportion which such Partner's positive balance
bears to the aggregate of all such positive balances and thereafter in
accordance with Section 4.02(B) hereof. If any assets of the Partnership are to
be distributed in kind, such assets shall be distributed on the basis of the
fair market value thereof (without taking Section 7701(g) of the Code into
account) and any Partner entitled to any interest in such assets shall receive
such interest therein as a tenant-in-common with all other Partners so entitled.
The fair market value of such assets shall be determined by an independent
appraiser to be selected by the General Partner. Upon liquidation of a Partner's
Interest in the Partnership, such Partner shall be entitled to receive the
positive balance in its Capital Account as determined after taking into account
all Capital Account adjustments for the taxable year in which such liquidation
occurs.
(B) If there is a termination of the Partnership under Section 708(b)(1)(B)
of the Code, the assets of the Partnership shall be deemed distributed in kind
and the principles of Section 4.05(A) hereof shall apply as if the assets were
actually distributed in kind.
4.06 Restoration of Capital Accounts. If any Partner has a deficit balance
in its Capital Account (after giving effect to all contributions, distributions
and allocations for all taxable years, including the year during which such
liquidation occurs), such Partner shall have no obligation to make any
contribution to the capital of the Partnership with respect to such deficit, and
such deficit shall not be considered a debt owed to the Partnership or any other
Person for any purpose whatsoever.
ARTICLE FIVE - RIGHTS, POWERS AND DUTIES OF THE GENERAL PARTNER
5.01 Authority of the General Partner to Manage the Partnership.
(A) Subject to the Consent of the Class A Limited Partners where required
by this Agreement, the General Partner shall have the exclusive right and power
to conduct the business and affairs of the Partnership and to do all things
necessary to carry on the business of the Partnership, and is hereby authorized
to take any action of any kind and to do anything and everything it deems
necessary in accordance with the provisions of this Agreement and applicable
law. Except as expressly provided herein, the authority of the General Partner
to conduct the business of the Partnership shall be exercised only by the
General Partner.
(B) No Limited Partner shall participate in or have any control whatsoever
over the Partnership's business or have any authority or right to act for or
bind the Partnership. The Limited Partners hereby Consent to the exercise by the
General Partner of the powers conferred on it by this Agreement.
(C) Except to the extent otherwise provided herein, the General Partner,
for and in the name and on behalf of the Partnerships, is hereby authorized to:
(1) execute any and all agreements, contracts, documents, certifications
and instruments necessary or convenient in connection with the development,
financing, management, maintenance and operation of either of the Partnerships'
properties and assets except as otherwise expressly limited by this Agreement;
(2) borrow money from itself or others (including Affiliates of the General
Partner) and issue evidences of indebtedness necessary, convenient or incidental
to the accomplishment of the purposes of the Partnerships and to secure the same
by mortgage, pledge or other lien on the assets of the Partnerships only with
respect to the following: (a) any amounts advanced by the General Partner or an
Affiliate of the General Partner (which amounts may not be secured) or any other
lender to enable the Partnerships to satisfy any of their obligations arising in
the normal course of their business or to make payments of principal, interest,
premium or penalty on any debt of the Partnerships, (b) any indebtedness of the
Partnership to the Hotel Partnership, (c) the Mortgage Debt, (d) any
indebtedness incurred to refinance (and thereafter further refinance as often as
shall be necessary) the unamortized portion of any of the foregoing from time to
time outstanding, including, without limitation, the Nomura Refinancing, and (e)
indebtedness incurred by the Partnerships for the purpose of making
distributions to Partners (whether in payment of the Class A Preferred Return,
the Class B Preferred Return, in repayment of the Partners' Capital
Contributions, or otherwise);
(3) prepay in whole or in part, refinance (to the extent permitted by
clause (C)(2) above), recast, modify or extend any mortgage debt affecting or
encumbering any of the Partnerships' property and in connection therewith to
execute any extensions, consolidations, modifications or renewals of mortgages
on any assets of the Partnerships;
(4) on behalf of either of the Partnerships deal with, or otherwise engage
in business with, or provide services to and receive compensation therefor from,
any Person who has provided or may in the future provide any services, lend
money or sell property to or purchase property from the General Partner or any
Affiliate of the General Partner. No such dealing, engaging in business or
providing of services may involve any direct or indirect payment by the
Partnerships of any rebate or any reciprocal arrangement for the purpose of
circumventing any restriction set forth herein upon dealings with the General
Partner or any Affiliate of the General Partner. The General Partner may on
behalf of either of the Partnerships enter into agreements to employ agents,
attorneys, accountants, engineers, appraisers, or other consultants or
contractors who may be Affiliates of the General Partner and may enter into
agreements to employ Affiliates of the General Partner to provide further or
additional services to the Partnerships; provided that any employment of such
Persons is on terms not less favorable to the Partnerships than those offered by
persons who are not Affiliates of the General Partner for comparable services;
(5) transfer, sell, assign, pledge or otherwise dispose of all or any
portion of the Partnership's interest in the Hotel Partnership or Consent to a
sale of the Hotel by the Hotel Partnership.
(6) engage in any kind of activity and perform and carry out contracts of
any kind necessary to, or in connection with, or incidental to the
accomplishment of the purposes of the respective Partnerships, as may be
lawfully carried on or performed by a partnership under the laws of the State of
Delaware or Georgia, as the case may be, and in each state where the
Partnerships have formed, have qualified or do business;
(D) Any Person dealing with the Partnership or the General Partner may rely
upon a certificate signed by the Secretary or Assistant Secretary of the General
Partner, thereunto duly authorized, as to:
(1) the identity of the General Partner or any Limited Partner;
(2) the existence or non-existence of any fact or facts which constitute a
condition precedent to the acts by the General Partner or in any other manner
germane to the affairs of the Partnership;
(3) the Persons who are authorized to execute and deliver any instrument or
document of the Partnership; and
(4) any act or failure to act by the Partnership or as to any other matter
whatsoever involving the Partnership or any Partner.
(E) Any agreements, contracts and arrangements between either of the
Partnerships and the General Partner or any of their Affiliates except for
rendering legal, tax, accounting and engineering services by employees of the
General Partner and Affiliates of the General Partner shall be subject to the
following additional conditions:
(1) the General Partner or any such Affiliate must be actively engaged in
the business of rendering such services or selling or leasing such goods,
independently of its dealings with the Partnerships and as an ordinary ongoing
business or must enter into and engage in such business with Marriott system
hotels or hotel owners generally and not exclusively with the Partnerships;
(2) such agreements, contracts or arrangements must be fair to the
Partnerships and reflect commercially reasonable terms and shall be embodied in
a written contract which precisely describes the subject matter thereof and all
compensation to be paid therefor,
(3) no rebates or give-ups may be received by the General Partner or any
such Affiliate, nor may the General Partner or any such Affiliate participate in
any reciprocal business arrangements which would have the effect of
circumventing any of the provisions of this Agreement or the Hotel Partnership
Agreement;
(4) no such agreement, contract or arrangement as to which the Class A
Limited Partners had previously given approval may be amended in such manner as
to increase the fees or other compensation payable to the General Partner or any
such Affiliate or to decrease the responsibilities or duties of the General
Partner or any such Affiliate in the absence of the Consent contemplated by
Section 5.02(B)(3); and
(5) any such agreement, contract or arrangement which relates to or secures
any funds advanced or loaned to either of the Partnerships by the General
Partner or any such Affiliate must reflect commercially reasonable terms.
(F) Section 5.01(E) notwithstanding, the Class B Limited Partner or other
Affiliate of the General Partner, may make additional loans to the Partnership
or Capital Contributions in accordance with Sections 3.07(A) and 3.07(B),
regardless of whether or not the Class B Limited Partner or such other Affiliate
of the General Partner is otherwise engaged in the business of lending money or
providing equity financing.
5.02 Restrictions on Authority of the General Partner.
(A) Without the Consent of all the Limited Partners, the General Partner
shall not have authority on behalf of the Partnership or the Hotel Partnership
to:
(1) do any willful act in contravention of this Agreement or the Hotel
Partnership Agreement;
(2) do any willful act which would make it impossible to carry on the
ordinary business of either of the Partnerships (provided this provision shall
not preclude a sale of the Hotel by the Hotel Partnership if such sale would
otherwise be permitted);
(3) confess a judgment against either of the Partnerships;
(4) convert property of either of the Partnerships to its own use, or
assign any rights in specific property of either of the Partnerships for other
than a purpose of the respective Partnership;
(5) except as a result of a merger of the General Partner with Host or an
Affiliate of Host, admit any other Person as a General Partner or withdraw as a
General Partner; or
(6) knowingly perform any act that would subject any Limited Partner to
liability as a general partner in any jurisdiction or any other liability except
as provided for herein or under the Act.
(B) Without the Consent of a Majority in Interest of the Class A Limited
Partners, the General Partner shall not have the authority on behalf of either
the Partnership or the Hotel Partnership to:
(1) have either Partnership acquire interests in other partnerships or
hotel properties in addition to the Partnership's general partnership interest
in the Hotel Partnership;
(2) sell or otherwise dispose of or consent to the sale or disposition of
all or substantially all of the assets of either of the Partnerships if it is
proposed that the Partnership or the Hotel Partnership sell such assets to Host
or any Affiliate of Host; in such case, the following procedures shall be
followed: (a) the General Partner shall first give notice of the proposed sale
to the Class A Limited Partners who shall thereafter have thirty (30) days
within which to select a nationally recognized appraiser having the approval of
the holders of a Majority in Interest of the Class A Limited Partners, (b) the
appraiser selected under clause (a) of this proviso shall have thirty (30) days
from the date of selection to prepare and submit to the General Partner an
appraisal of the fair market value of the Hotel, (c) the purchaser shall submit
to the General Partner an appraisal of the fair market value of the Hotel such
appraisal to be submitted within the time limit provided by clause (b) of this
proviso in the case of the appraisal to be submitted by the appraiser selected
by the Class A Limited Partners, and (d) the General Partner shall thereafter
make formal request for the required Consent and in connection therewith shall
submit to the Class A Limited Partners the two appraisals contemplated by
clauses (b) and (c) of this proviso; provided further, however, that if the
Class A Limited Partners do not select an appraiser as contemplated by clause
(a) of this proviso or if such appraiser does not supply an appraisal within the
time period required by clause (b) of this proviso, the General Partner will not
request Consent to the sale of the Hotel to any Affiliate of Host unless such
request is accompanied by three appraisals as to market value of the Hotel, one
such appraisal to be prepared by an appraiser selected by the purchaser and the
other two appraisals to be prepared by appraisers selected by the first such
appraiser, the cost of all such appraisals to be borne by the purchaser;
provided further, however, that nothing contained in this Section 5.02(B)(2)
shall be construed to require any Consent in connection with a transfer of the
Land and/or the Hotel to a bankruptcy remote entity wholly-owned by the Hotel
Partnership, as contemplated in Section 6.01(C) of the Hotel Partnership
Agreement.
(3) effect any amendment to any agreement, contract or arrangement with the
General Partner or any Affiliate of the General Partner which reduces the
responsibilities or duties of the General Partner, or any of its Affiliates or
which increases the compensation payable to the General Partner, or any of its
Affiliates, to a level where such compensation is above the then-prevailing
market rate, or which adversely affects the rights of the Class A Limited
Partners, or vote the Partnership's general partnership interest in the Hotel
Partnership in favor of any amendment to any agreement, contract or arrangement
with any general partner of the Hotel Partnership or any of its Affiliates which
reduces the responsibilities or duties of such general partner or which
increases the compensation payable to such general partner or any of its
Affiliates to a level where such compensation is above the then-prevailing
market rate, or which adversely affects the rights of the Partnership as a
general partner of the Hotel Partnership;
(4) take any action or fail to take any action which would result in the
Partnership withdrawing as a partner of the Hotel Partnership; or
(5) except as permitted in the Hotel Partnership Agreement, make any
election to continue, discontinue or dissolve the Hotel Partnership (provided
this provision shall not preclude a sale of the Hotel by the Hotel Partnership
if such sale would otherwise be permitted).
5.03 Duties and Obligations of the General Partner.
(A) The General Partner shall take all action which may be necessary or
appropriate for the development, maintenance, preservation and operation of the
properties and assets of either of the Partnerships in accordance with the
provisions of this Agreement and applicable laws and regulations (it being
understood and agreed, however, that the direct performance of day-to-day
management services for the Hotel and other properties of the Hotel Partnership
is not an obligation of the General Partner as general partner of the
Partnership).
(B) Without first obtaining the Consent of a Majority in Interest of the
Class A Limited Partners, the General Partner shall not (i) directly or through
a subsidiary engage in any business other than that of acting as general partner
of the Partnership, (ii) merge or consolidate with another corporation except
Host or a wholly owned direct or indirect subsidiary of Host, (iii) dissolve, or
(iv) borrow any funds or become liable for any obligations of third parties
except to the extent that any such borrowings or liabilities are directly
related to meeting the financial needs of the Partnership.
(C) The General Partner shall devote to the Partnership such time as may be
necessary for the proper performance of its duties hereunder, but the officers
and directors of the General Partner shall not be required to devote their full
time to the performance of duties of the General Partner.
(D) The General Partner shall take such action as may be necessary or
appropriate in order to form or qualify the Partnership under the laws of any
jurisdiction in which the Partnership is doing business or owns property or in
which such formation or qualification is necessary in order to protect the
limited liability of the Limited Partners or in order to continue in effect such
formation or qualification. The General Partner shall file or cause to be filed
for recordation in the office of the appropriate authorities of the State of
Delaware, and in the proper office or offices in each other jurisdiction in
which the Partnership is formed or qualified, such certificates (including
limited partnership and fictitious name certificates) and other documents as are
required by the applicable statutes, rules or regulations of any such
jurisdiction or as are required to reflect the identity of the Partners and the
amounts of their respective Capital Contributions.
(E) The General Partner shall at all times conduct its affairs and the
affairs of the Partnership and all of its Affiliates in such a manner that
neither the Partnership nor any Partner nor any Affiliate of any Partner will
have any personal liability on any Partnership Debt. The General Partner shall
use all commercially reasonable efforts, in the conduct of the Partnership's
business, to put all suppliers and other Persons with whom the Partnership does
business on notice that the Limited Partners are not liable for Partnership
obligations.
(F) The General Partner shall prepare or cause to be prepared and shall
file on or before the due date (or any extension thereof) any Federal, state or
local tax returns required to be filed by the Partnership. The General Partner
shall cause the Partnership to pay from Partnership funds any taxes payable by
the Partnership.
(G) The General Partner shall be under a fiduciary duty to conduct the
affairs of the Partnership in accordance with the terms of this Agreement and in
a manner consistent with the purposes set forth in Section 2.03. The General
Partner shall be under a fiduciary duty to conduct the affairs of the
Partnership and the Hotel Partnership in the best interests of the Partnership.
(H) The General Partner shall use all commercially reasonable efforts to
assure that the Partnership shall not be deemed an investment company as such
term is defined in the Investment Company Act of 1940.
5.04 Compensation of General Partner. The General Partner shall not in such
capacity receive any salary, fees, profits or distributions except for such
allocations to which it may be entitled under Article Four or Article Eight.
Notwithstanding the foregoing, however, the Partnership shall reimburse the
General Partner for the cost of providing any administrative or other services
required or contemplated by this Agreement.
5.05 Other Business of Partners. Any General or Limited Partner may engage
independently or with others in other business ventures of every nature and
description. Nothing in this Agreement shall be deemed to prohibit any Affiliate
of the General Partner from dealing, or otherwise engaging in business with
Persons transacting business with the Partnership or the Hotel Partnership or
from providing services relating to the purchase, sale, financing, management,
development or operation of hotels, motels, restaurants or other food and
lodging facilities and receiving compensation therefor. Neither the Partnership
or the Hotel Partnership nor any Partner shall have any right by virtue of this
Agreement or the partnership relationship created hereby in or to such other
ventures or activities or to the income or proceeds derived therefrom, and the
pursuit of such ventures, even if competitive with the business of the
Partnership, shall not be deemed wrongful or improper. Neither the General
Partner nor any Affiliate of the General Partner shall be obligated to present
any particular opportunity to the Partnership even if such opportunity is of a
character which, if presented to the Partnership or the Hotel Partnership, could
be taken by the Partnership or the Hotel Partnership, and any Affiliate of the
General Partner shall have the right to take for its own account (individually
or as a trustee, partner or fiduciary) or to recommend to others any such
particular opportunity.
5.06 Limitation on Liability of General Partner; Indemnification.
(A) The General Partner shall not be liable to the Partnership or any
Limited Partner because any taxing authority disallows or adjusts any deductions
or credits in the Partnership income tax return. The General Partner shall not
be liable for the return of the Capital Contributions of the Class A Limited
Partners or for any portion thereof, it being expressly understood that any
return of capital shall be made solely from the assets of the Partnership; nor
shall the General Partner be required to pay to the Partnership or to any
Limited Partner any deficit in the Capital Account of any Partner upon
dissolution or otherwise.
(B) The General Partner shall have no liability, responsibility or
accountability in damages or otherwise to any other Partner or to the
Partnership for, and the Partnership agrees to indemnify, pay, protect and hold
harmless the General Partner (on the demand of and to the satisfaction of the
General Partner and to the extent permitted by law) from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
proceedings, costs, expenses and disbursements of any kind or nature whatsoever
(including, without limitation, all costs and expenses of defense, appeal and
settlement of any and all suits, actions or proceedings threatened or instituted
against the General Partner or the Partnership and all costs of investigations
in connection therewith) which may be imposed on, incurred by, or asserted
against the General Partner or the Partnership in any way relating to or arising
out of, or alleged to relate to or arise out of, any action or inaction on the
part of the Partnership, or on the part of the General Partner as the General
Partner of the Partnership including any action or inaction in connection with
the General Partner acting as Tax Matters Partner under Section 5.07; provided,
that the General Partner shall be liable, responsible and accountable, and the
Partnership shall not be liable to the General Partner for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
proceedings, costs, expenses or disbursements (including, without limitation,
all costs and expenses of defense, appeal and settlement of any and all suits,
actions or proceedings threatened or instituted against the General Partner or
the Partnership and all costs of investigation in connection therewith) which a
court of competent jurisdiction shall have determined resulted primarily from
the General Partner's own fraud, gross negligence, willful misconduct or other
breach of fiduciary duty to the Partnership or any partner of the Partnership.
The satisfaction of the obligations of the Partnership under this Section 5.06
shall be from and limited to the assets of the Partnership and no Limited
Partner shall have any personal liability on account thereof. The provisions of
this indemnification shall also extend to the officers, directors, employees or
shareholders of the General Partner for any action taken by them on behalf of
the General Partner pursuant to this Agreement.
(C) Except as specifically provided in this Agreement, the General Partner
shall have no liability or responsibility to make loans, advances or additional
Capital Contributions to the Partnership except as may be required as a matter
of law.
5.07 Designation of Tax Matters Partner.
(A) The General Partner shall act as the Tax Matters Partner of the
Partnership, as provided in Treasury Regulations pursuant to Section 6231 of the
Code and as the "Designated Person" for purposes of maintaining the Investor
List. Each Partner hereby consents to such designation and agrees to execute,
certify, acknowledge, deliver, swear to, file and record at the appropriate
public offices such documents as may be deemed necessary or appropriate to
evidence such consent.
(B) To the extent and in the manner provided by applicable Code sections
and Treasury Regulations thereunder, the Tax Matters Partner shall furnish the
name, address, profits interest and taxpayer identification number of each
Partner to the IRS.
(C) To the extent and in the manner provided by applicable Code sections
and Treasury Regulations thereunder, the Tax Matters Partner shall inform each
Partner of administrative or judicial proceedings for the adjustment of
Partnership items required to be taken into account by a Partner for income tax
purposes (such administrative proceedings being referred to as a "tax audit" and
such judicial proceedings being referred to as "judicial review").
(D) The Tax Matters Partner is authorized, but not required:
(1) to enter into any settlement with the IRS with respect to any tax audit
or judicial review, and in the settlement agreement the Tax Matters Partner may
expressly state that such agreement shall bind all Partners except that such
settlement agreement shall not bind any Partner who (within the time prescribed
pursuant to the Code and Treasury Regulations thereunder) files a statement with
the IRS providing that the Tax Matters Partner shall not have the authority to
enter into a settlement agreement on behalf of such Partner;
(2) in the event that a notice of a final administrative adjustment at the
Partnership level of any item required to be taken into account by a Partner for
tax purposes (a "final adjustment") is mailed to the Tax Matters Partner, to
seek judicial review of such final adjustment, including the filing of a
petition for readjustment with the Tax Court or the United States Claims Court,
or the filing of a complaint for refund with the District Court of the United
States for the district in which the Partnership's principal place of business
is located;
(3) to intervene in any action brought by any other Partner for judicial
review of a final adjustment;
(4) to file a request for an administrative adjustment with the IRS at any
time and, if any part of such request is not allowed by the IRS to file an
appropriate pleading (petition or complaint) for judicial review with respect to
such request;
(5) to enter into an agreement with the IRS to extend the period for
assessing any tax which is attributable to any item required to be taken into
account by a Partner for tax purposes, or an item affected by such item; and
(6) to take any other action on behalf of the Partners or the Partnership
in connection with any tax audit or judicial review proceeding to the extent
permitted by applicable law or regulations.
(E) The Partnership shall indemnify and reimburse the Tax Matters Partner
for all expenses, including legal and accounting fees (as such
fees are incurred), claims, liabilities, losses and damages incurred in
connection with any tax audit or judicial review proceeding with respect to the
tax liability of the Partners, and the payment of all such expenses shall be
made before the distribution of Cash Available for Distribution. Neither the
General Partner nor any of its Affiliates nor other person shall be obligated to
provide funds for such purpose.
The taking of any action and the incurring of any expense by the Tax
Matters Partner in connection with any such proceeding, except to the extent
required by law, is a matter in the sole discretion of the Tax Matters Partner
and the provisions on limitations of liability of the General Partner and
indemnification set forth in Section 5.06 of this Agreement shall be fully
applicable to the Tax Matters Partner in its capacity as such.
ARTICLE SIX - WITHDRAWAL OR REMOVAL OF GENERAL PARTNER
6.01 Limitation on Voluntary Withdrawal. Except as permitted in Section
5.02(A), the General Partner shall not retire or withdraw voluntarily from the
Partnership or sell, transfer or assign its entire Interest or any portion
thereof.
6.02 Bankruptcy or Dissolution of the General Partner.
(A) In the event of the bankruptcy or dissolution of the General Partner,
the General Partner shall immediately cease to be the General Partner and its
Interest shall convert to that of a Limited Partner without voting rights;
provided, however, that such termination shall not affect any rights or
liabilities of the General Partner which matured prior to such event, or the
value, if any, at the time of such event of the Interest of the General Partner.
(B) Except as provided in Section 6.04, in the event of such bankruptcy or
dissolution of the General Partner, the Partnership shall be dissolved.
6.03 Liability of Withdrawn General Partner. If the General Partner shall
cease to be General Partner of the Partnership, it shall be and remain liable
for all obligations and liabilities incurred by it as General Partner prior to
the time such withdrawal shall have become effective, but it shall be free of
any obligation or liability incurred on account of the activities of the
Partnership from and after the time such withdrawal shall have become effective.
6.04 Removal of General Partner. In the event of the removal of the General
Partner pursuant to Section 10.02, the removed General Partner's Interest as
General Partner in the Partnership shall become a limited partnership interest
but without any voting or consensual rights which other Limited Partners may
have.
6.05 Substitute General Partner. If the General Partner withdraws,
dissolves, becomes bankrupt or is removed pursuant to Section 10.02, it shall
promptly notify the Limited Partners and the Limited Partners may elect by vote
of a Majority in Interest of the Class A Limited Partners within 90 days of such
withdrawal, removal, dissolution or bankruptcy to continue the Partnership and
appoint a substitute general partner.
ARTICLE SEVEN - ASSIGNABILITY OF UNITS
7.01 Restrictions on Assignments. After the admission to the Partnership of
the Limited Partners, no Limited Partner shall have the right to assign any
Interest except with the consent of the General Partner, the giving or
withholding of which is exclusively within the discretion of the General
Partner, and provided further that:
(A) No assignment of any Interest may be made other than on the first day
of a Fiscal Quarter.
(B) No assignment of any Interest may be made if the assignment is pursuant
to a sale or exchange of the Interest and if the Interest sought to be assigned,
when added to the total of all other Interests assigned within a period of 12
consecutive months prior thereto, would, in the opinion of legal counsel for the
Partnership, result in the Partnership being deemed to have been terminated
within the meaning of Section 708 of the Code. The General Partner shall give
Notification to all Limited Partners in the event that sales or exchanges should
be suspended for such reason. Any deferred sales or exchanges shall be made (in
chronological order to the extent practicable) as of the first day of a Fiscal
Quarter after the end of any such 12-month period, subject to the provisions of
this Article Seven.
(C) The General Partner may require that any assignment of an Interest in
the Partnership be made only if the assignor or assignee provides an opinion of
counsel that such assignment would not require filing of a registration
statement under the Securities Act of 1933 or would otherwise not be in
violation of any applicable Federal or state securities or Blue Sky laws
(including any investment suitability standards).
(D) No purported assignment by a Class A Limited Partner of any Unit after
which the assignor or the assignee would hold a fraction of a Unit (other than a
one-half Unit) will be permitted or recognized (except for assignments by gift,
inheritance or family dissolution or assignments to Affiliates of the assignor).
(E) No assignment of any Interest may be made if, in the opinion of legal
counsel to the Partnership, it would result in the Hotel Partnership not being
able to obtain or continue in effect any license permitting the service or sale
of alcoholic beverages in the Hotel.
(F) (1) No transfer, assignment or negotiation on any date of an Interest
may be made to any Person if, in the opinion of legal counsel for the
Partnership, it would result in the Partnership being treated as an association
taxable as a corporation based on a failure to qualify for at least one of the
safe harbors within the meaning of Section 7704 of the Code.
(2) No assignment of any Interest may be made to any Person unless such
Person agrees in writing that such Person will not, directly or indirectly,
create for the Units, or facilitate the trading of Units on, a "secondary market
(or the substantial equivalent thereof)," within the meaning of Section 7704 of
the Code.
(3) The General Partner may prohibit transfers of Units for the remainder
of a taxable year, notwithstanding that any such transfer would not in itself
violate any restrictions on transfers contained in this Section 7.01, if the
General Partner, in good faith and based upon the advice of counsel to the
Partnership, determines that such action is necessary or advisable in order to
protect the Partnership from possible failure to meet at least one of the safe
harbors under Section 7704 of the Code. No purported transfer or assignment
shall be of any effect unless all of the foregoing conditions have been
satisfied.
7.02 Assignees and Substituted Limited Partners.
(A) If a Limited Partner dies, the executor, administrator or trustee, or,
if such Partner is adjudicated incompetent or insane, the committee, guardian or
conservator, or, if such Partner becomes bankrupt, the trustee or receiver of
the estate, shall have all the rights of a Limited Partner for the purpose of
settling or managing the estate and such power as the deceased, incompetent or
bankrupt Limited Partner possessed to assign all or any part of the Units and to
join with the assignee thereof in satisfying conditions precedent to such
assignee becoming a Substituted Limited Partner. The death, dissolution,
adjudication of incompetence or bankruptcy of a Limited Partner shall not
dissolve the Partnership.
(B) The Partnership need not recognize for any purpose any assignment of
all or any Interest unless there shall have been filed with the Partnership a
duly executed and acknowledged counterpart of the instrument making such
assignment signed by both the assignor and the assignee and such instrument
evidences the written acceptance by the assignee of all of the terms and
provisions of this Agreement and represents that such assignment was made in
accordance with all applicable laws and regulations (including investment
suitability requirements).
(C) Limited Partners who shall assign all their Interests shall cease to be
Limited Partners of the Partnership except that unless and until Substituted
Limited Partners are admitted in their stead, such assigning Limited Partners
shall retain the statutory rights of assignors of limited partnership interests
under the Act.
(D) Any Person who is an assignee of all or any of the Interests of a
Limited Partner and who has satisfied the requirements of Section 7.01 and
Section 7.02(B) shall become a Substituted Limited Partner when such Person
shall have satisfied the conditions of Section 11.02(A) and shall have paid all
reasonable legal fees and filing costs in connection with the substitution as a
Limited Partner; provided, however, that the substitution of any assignee of an
Interest as a Substituted Limited Partner shall be subject to the consent of the
General Partner, which consent may be granted or withheld in its sole
discretion.
(E) Any Person who is the assignee of all or any of the Interest of a
Limited Partner, but who does not become a Substituted Limited Partner and
desires to make a further assignment of any such Interests, shall be subject to
all the provisions of this Article Seven to the same extent and in the same
manner as any Limited Partner desiring to make an assignment of the Interests.
(F) There shall be no restrictions on the assignments of Interests except
as provided in Article Six or this Article Seven.
ARTICLE EIGHT - DISSOLUTION AND LIQUIDATION OF THE PARTNERSHIP
8.01 Events Causing Dissolution.
(A) The Partnership shall be dissolved upon the happening of any of the
following events:
(1) the bankruptcy of the Partnership;
(2) the withdrawal, dissolution or bankruptcy of the General Partner,
except upon the election of a substitute general partner pursuant to Section
6.04;
(3) the sale or other disposition of all or substantially all of the
property of the Partnership;
(4) the happening of any other event causing the dissolution of the
Partnership under the Act; or
(5) the expiration of the term of the Partnership.
Dissolution of the Partnership shall be effective on the day on which the
event occurs giving rise to the dissolution. The Partnership's certificate of
limited partnership shall be cancelled upon the dissolution and completion of
winding up of the Partnership. The Partnership shall not terminate until the
assets of the Partnership shall have been liquidated as provided in Section
8.02. Notwithstanding the dissolution of the Partnership, prior to the
termination of the Partnership, as aforesaid, the business of the Partnership
and the affairs of the Partners as such, shall continue to be governed by this
Agreement.
(B) Partners shall look solely to the assets of the Partnership for all
distributions with respect to the Partnership and their Capital Contribution
thereto, and shall have no recourse therefor (upon dissolution or otherwise)
against the General Partner or any other Limited Partner.
8.02 Liquidation.Liquidation.
(A) Upon dissolution of the Partnership, the General Partner shall
liquidate the assets of the Partnership and the proceeds of such liquidation
shall be applied and distributed in the following order of priority:
(1) to the payments of Partnership Debt and all other liabilities of the
Partnership owing to third parties;
(2) to the payment of any loans or advances that may have been made by any
of the Partners to the Partnership;
(3) to the payment of the expenses of the liquidation; and
(4) thereafter, in accordance with Section 4.05(A) hereof.
(B) Notwithstanding the foregoing, in the event the General Partner shall
determine that an immediate sale of all or part of the Partnership assets would
cause undue loss to the Partners, the General Partner, in order to avoid such
loss, may, after having given Notification to all the Limited Partners, to the
extent not then prohibited by the Act, either defer liquidation of and withhold
from distribution for a reasonable time any assets of the Partnership except
those necessary to satisfy the Partnership's debts and obligations, or
distribute the assets of the Partnership in kind.
(C) If any assets of the Partnership are to be distributed in kind, such
assets shall be distributed on the basis of the fair market value thereof, and
any Partner entitled to any interest in such assets shall receive such interest
therein as a tenant-in-common with all other Partners so entitled. The fair
market value of such assets shall be determined by an independent appraiser to
be selected by random number from a list of three qualified appraisers obtained
by the General Partner from the American Institute of Real Estate Appraisers.
(D) The General Partner shall cause the cancellation of the Partnership's
certificate of limited partnership in accordance with the Act, and shall cause
the liquidation and distribution of all the Partnership's assets.
ARTICLE NINE - BOOKS AND RECORDS, ACCOUNTING, REPORTS, TAX ELECTIONS
9.01 Books and Records. The books and records of the Partnership shall be
maintained at the principal office of the Partnership and shall be available for
examination at such location by any Partner or such Partner's duly authorized
representatives at any and all reasonable times. Any Partner, upon paying the
costs of collating, duplication and mailing, shall be entitled, upon written
application to the General Partner, to a copy of the list of the names and
addresses of the Class A Limited Partners and the number of Units owned by each
of them and the name and address of the Class B Limited Partner(s) for any valid
purpose.
9.02 Accounting and Fiscal Year. The books of the Partnership will be kept
on the accrual basis of accounting and such method of accounting may be changed
by the General Partner with the Consent of a Majority in Interest of the Class A
Limited Partners. The Partnership will report its operations for tax purposes on
the accrual method. The Fiscal Year of the Partnership shall end December 31 in
each year.
9.03 Bank Accounts and Investments. The bank accounts of the Partnership
shall be maintained in such banking institutions as the General Partner shall
determine, and withdrawals shall be made only in the regular course of
Partnership business on such signature or signatures as the General Partner may
determine. All deposits and other funds not needed in the operation of the
business or not yet invested may be invested in U.S. government securities,
securities issued or guaranteed by U.S. government agencies, securities issued
or guaranteed by states or municipalities, certificates of deposit and time or
demand deposits in commercial banks, bankers' acceptances, savings and loan
association deposits or deposits in members of the Federal Home Loan Bank
System. The funds of the Partnership shall not be commingled with the funds of
any other Person.
9.04 Reports. The General Partner shall deliver to each Partner the
following:
(A) As soon as practicable but in no event later than 75 days after the end
of each Fiscal Year of the Partnership, such information as shall be necessary
for the preparation by such Partner of a Federal income tax return, and state
income or other tax returns with regard to the jurisdiction in which the Hotel
is located. Such information shall include computation of the distributions to
such Partner and the allocation to such Partner of the Profits or Losses, as the
case may be, the gain or loss recognized by the Partnership on the sale of the
Hotel or other Partnerships' properties during such Fiscal Year;
(B) Within one hundred twenty (120) days after the end of each Fiscal Year
of the Partnership, a statement prepared by the General Partner on an accrual
basis in accordance with generally accepted accounting principles, which
statement is to be audited and certified by a firm of independent public
accountants selected by the General Partner, setting forth its opinion as to the
items in clauses (i) and (ii) below, which statement shall set forth the
following (or in lieu of the following, the General Partner shall cause the
Partnership's annual report on Form 10-K under the Securities Exchange Act of
1934 to be distributed to the Partners):
(1) a statement of assets, liabilities and Partners' capital, a statement
of income and expenses on an accrual basis, a statement of cash flow, and a
statement of changes in Partners' capital, all such statements to be on a
consolidated basis;
(2) the balances in the Capital Accounts of the Class A Limited Partners in
the aggregate and of the General Partner and Class B Limited Partner;
(3) a report (which need not be audited) summarizing the fees, commissions,
compensation and other remuneration and reimbursed expenses paid by the
Partnerships for such Fiscal Year to the General Partner or any Affiliate of the
General Partner and the general partners of the Hotel Partnership or any
Affiliate of such general partners and the services performed; and
(4) an estimate of the Profits or Losses per Unit for the current Fiscal
Year.
(C) Within seventy-five (75) days after the end of each of the first three
Fiscal Quarters of each Fiscal Year of the Partnership, the General Partner
shall send to each Person who was a Limited Partner at any time during the
Fiscal Quarter then ended (i) a balance sheet (which need not be audited) and
(ii) a profit and loss statement (which need not be audited) and any other
pertinent information regarding the Partnership and its activities during the
period covered by the report as required by Form 10-Q under the Securities
Exchange Act of 1934 (or in lieu thereof, the General Partner shall cause the
Partnership's quarterly report on Form 10-Q under the Securities Exchange Act,
if one is filed, to be distributed to the Partners).
(D) Concurrent with the report sent pursuant to Section 9.04(C) for the
third Fiscal Quarter of each Fiscal Year, the Partners will be furnished an
estimate of Profits or Losses per Unit for the remainder of such Fiscal Year and
for such Fiscal Year as a whole.
(E) The General Partner may prepare and deliver to the Limited Partners
from time to time in its sole discretion during each Fiscal Year, in connection
with cash distributions, unaudited statements showing the results of operations
of the Partnerships to the date of such statement.
(F) The General Partner shall prepare and file such registration
statements, annual reports, quarterly reports, current reports, proxy statements
and other documents, if any, as may be required under the Securities Exchange
Act of 1934 and the rules and regulations of the Securities and Exchange
Commission thereunder.
9.05 Tax Depreciation and Elections.
(A) With respect to all depreciable assets of the Partnership, the General
Partner may, in its sole discretion, elect to use such depreciation method for
Federal tax purposes as it deems appropriate.
(B) The General Partner shall be permitted in any Fiscal Year to make an
election under Section 754 of the Code and such other tax elections as it may
from time to time deem necessary or appropriate.
9.06 Interim Closing of the Books. There shall be an interim closing of the
books of account of the Partnership (i) at any time a taxable year of the
Partnership ends pursuant to the Code and (ii) at such other times as the
General Partner shall determine are required by good accounting practice or may
be appropriate under the circumstances.
ARTICLE TEN - MEETINGS AND VOTING RIGHTS OF LIMITED PARTNERS
10.01 Meetings.
(A) Meetings of the Limited Partners for any purpose may be called by the
General Partner and shall be called by the General Partner upon receipt of a
request in writing signed by holders of ten percent (10%) or more of the Units
owned by the Class A Limited Partners. Notification of any such meeting shall be
sent to the Limited Partners within ten business days after receipt of such a
request. Such request or any notification from the General Partner shall state
the purpose of the proposed meeting (if known) and the matters proposed to be
acted upon thereat (if known). Such meeting may be held at the principal office
of the Partnership or at such other location within the United States as the
General Partner may deem appropriate or desirable. In addition, the General
Partner may, and, upon receipt of a request in writing signed by holders of
twenty-five percent (25%) or more of the Units owned by the Class A Limited
Partners, the General Partner shall submit any matter (upon which the Class A
Limited Partners are entitled to act) to the Class A Limited Partners for a vote
by written Consent without a meeting.
(B) Notification of any such meeting shall be given not less than ten (10)
days nor more than sixty (60) days before the date of the meeting, to the
Limited Partners at their record addresses, or at such other address which they
may have furnished in writing to the General Partner. Such Notification shall be
in writing, and shall state the place, date, hour and purpose (if known) of the
meeting, and shall indicate that it is being issued at or by the direction of
the Partner or Partners calling the meeting. If a meeting is adjourned to
another time or place, and if any announcement of the adjournment of time or
place is made at the meeting, it shall not be necessary to give Notification of
the adjourned meeting. The presence in person or by proxy of holders of a
Majority in Interest of the Class A Limited Partners shall constitute a quorum
at all meetings of the Limited Partners; provided, however, that if there be no
such quorum, holders of a Majority in Interest of the Class A Limited Partners
so present or so represented may adjourn the meeting from time to time without
further notice, until a quorum shall have been obtained. No Notification of the
time, place or purpose of any meeting of Limited Partners need be given to any
Limited Partner who attends in person or is represented by proxy (except when a
Limited Partner attends a meeting for the express purpose of objecting at the
beginning of the meeting to the transaction of any business on the ground that
the meeting is not lawfully called or convened), or to any Limited Partner
entitled to such notice who, in a writing executed and filed with the records of
the meeting, either before or after the time thereof, waives such Notification.
(C) For the purpose of determining the Class A Limited Partners entitled to
vote at any meeting of the Partnership or any adjournment thereof, the General
Partner or the Class A Limited Partners requesting such meeting may fix, in
advance, a date as the record date for any such determination of Class A Limited
Partners. Such date shall be not more than sixty (60) days nor less than ten
(10) days before any such meeting.
(D) The Class A Limited Partners may authorize any Person to act for them
by proxy in all matters in which a Limited Partner is entitled to participate,
whether by waiving notice of any meeting, or voting or participating at a
meeting. Every proxy must be signed by the Class A Limited Partner granting such
proxy or such Partner's attorney-in-fact. No proxy shall be valid beyond the
period permitted by law. Every proxy shall be revocable at the pleasure of the
Class A Limited Partner executing it.
(E) At each meeting of Limited Partners, the General Partner shall appoint
such officers and adopt such rules for the conduct of such meeting as the
General Partner shall deem appropriate.
(F) As and to the extent that the Securities Exchange Act of 1934 is
applicable to the procedural rules governing any meeting of Limited Partners
(including any proxies or proxy statement related thereto), the provisions of
such Act shall take precedence over any provision of this Section 10.01 which
may be inconsistent therewith.
10.02 Special Voting Rights of Class A Limited Partners. To the extent not
inconsistent with applicable law, in the event that the General Partner has
breached its obligations under Section 5.03 hereof, or has committed and not,
within a reasonable period of time, remedied any act of fraud, bad faith, gross
negligence or breach of fiduciary duty in carrying out its duties as the general
partner, by the affirmative vote of Class A Limited Partners owning at least
sixty-six and two-thirds percent (66.67%) of the Percentage Interests of the
Class A Limited Partners, the General Partner may be removed from its position
as General Partner; provided, that a new General Partner is elected within 90
days following the effective date of such removal. A new General Partner may be
elected in the manner set forth in Section 6.05.
ARTICLE ELEVEN - MISCELLANEOUS PROVISIONS
11.01 Appointment of General Partner as Attorney-in-Fact.
(A) Each Limited Partner, including each Substituted Limited Partner,
irrevocably constitutes and appoints the General Partner as true and lawful
attorney-in-fact with full power and authority in such Limited Partner's name,
place and stead to execute, acknowledge, deliver, swear to, file and record at
the appropriate public offices such documents as may be necessary or appropriate
to carry out the provisions of this Agreement, including but not limited to:
(1) all certificates and other instruments (including counterparts of this
Agreement), and any amendment thereof, which the General Partner deems
appropriate to form, qualify or continue the Partnership as a limited
partnership (or a partnership in which the Limited Partners will have limited
liability comparable to that provided by the Act) in the jurisdictions in which
the Partnership may conduct business or in which such formation, qualification
or continuation is, in the opinion of the General Partner, necessary or
desirable to protect the limited liability of the Limited Partners;
(2) all amendments to this Agreement adopted in accordance with the terms
hereof and all instruments which the General Partner deems appropriate to
reflect a change or modification of the Agreement in accordance with the terms
hereof; and
(3) all conveyances and other instruments which the General Partner deems
appropriate to reflect the dissolution and termination of the Partnership.
(B) The appointment by all Limited Partners of the General Partner as
attorney-in-fact shall be deemed to be a power coupled with an interest, in
recognition of the fact that each of the Partners under this Agreement will be
relying upon the power of the General Partner to act as contemplated by this
Agreement in any filing and other action by it on behalf of the Partnership, and
shall survive the bankruptcy, death, adjudication of incompetence or insanity,
or dissolution of any Person hereby giving such power and the transfer or
assignment of all or any part of the Units or Interest of such Person; provided,
however, that in the event of the transfer by a Limited Partner of all of such
Limited Partner's Interests, the foregoing power of attorney of a transferor
Limited Partner shall survive such transfer only until such time as the
transferee shall have been admitted to the Partnership as a Substituted Limited
Partner and all required documents and instruments shall have been duly
executed, filed and recorded to effect such substitution.
11.02 Amendments.
(A) Each Limited Partner, Substituted Limited Partner and any successor
General Partner shall become a signatory hereof by signing such number of
counterpart signature pages to this Agreement and such other instrument or
instruments, and in such manner, as the General Partner shall determine. By so
signing, each Limited Partner, Substituted Limited Partner or successor General
Partner, as the case may be, shall be deemed to have adopted, and to have agreed
to be bound by all the provisions of, this Agreement subject to the provisions
of Section 7.02(D).
(B) In addition to the amendments otherwise authorized herein, amendments
may be made to this Agreement from time to time by the General Partner with the
Consent of the holders of a Majority in Interest of the Class A Limited Partners
provided, however, that without the Consent of all the Partners, this Agreement
may not be amended so as to (i) convert the Interest of a Limited Partner into a
general partner's interest; (ii) modify the limited liability of a Limited
Partner; (iii) permit the General Partner to take any action prohibited by
Article Five; (iv) cause the Partnership to be taxed for Federal income tax
purposes as an association taxable as a corporation; or (v) effect any amendment
or modification to this Section 11.02(B).
(C) In addition to the amendments otherwise authorized herein, the
Partnership may agree to amendments to the Hotel Partnership Agreement from time
to time; provided, however, without the consent of a Majority in Interest of the
Class A Limited Partners, the Partnership will not consent to an amendment of
the Hotel Partnership Agreement so as to (i) dilute the interest of the
Partnership in the Hotel Partnership in taxable profits, taxable losses, gains
or loss (other than as required by the Code or Treasury Regulations), sale,
condemnation, casualty or refinancing proceeds as a result of the admission of
the General Partner or an Affiliate of the General Partner into the Hotel
Partnership; (ii) cause the Hotel Partnership to be taxed for Federal income tax
purposes as an association taxable as a corporation; or (iii) effect any
amendment or modification to this Section 11.02(C).
(D) If this Agreement shall be amended as a result of adding or
substituting a Limited Partner, the amendment to this Agreement shall be signed
by the General Partner and by the Person to be substituted or added and, if a
Limited Partner is to be substituted, by the assigning Limited Partner. If this
Agreement shall be amended to reflect the withdrawal or removal of the General
Partner when the business of the Partnership is being continued, such amendment
shall be signed by the withdrawing General Partner (and the General Partner
hereby so agrees) and by the successor General Partner.
(E) In making any amendments, there shall be prepared and filed for
recordation by the General Partner such documents and certificates as shall be
required to be prepared and filed under the Act and under the laws of the other
jurisdictions under the laws of which the Partnership is then formed or
qualified, not less frequently, in the case of a substitution of a Limited
Partner, than once each calendar quarter.
11.03 Binding Provisions. The covenants and agreements contained herein
shall be binding upon, and inure to the benefit of, the heirs, executors,
administrators, personal representatives, successors and assigns of the
respective parties hereto.
11.04 Applicable Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Delaware.
11.05 Counterparts. This Agreement may be executed in several counterparts,
all of which together shall constitute one agreement binding on all parties
hereto, notwithstanding that all the parties have not signed the same
counterpart.
11.06 Separability of Provisions. Each provision of this Agreement shall be
considered separable and if for any reason any provision or provisions hereof
are determined to be invalid and contrary to any existing or future law, such
invalidity shall not impair the operation of or affect those portions of this
Agreement which are valid.
11.07 Article and Section Titles. Article and section titles are for
descriptive purposes only and shall not control or alter the meaning of this
Agreement as set forth in the text.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed as of the date first above written.
GENERAL PARTNER:
MARRIOTT MARQUIS CORPORATION
By: /s/ Earla L. Stowe
Earla L. Stowe, Vice President
WITHDRAWING PARTNER:
/s/ Christopher G. Townsend
Christopher G. Townsend
CLASS A LIMITED PARTNERS:
MARRIOTT MARQUIS CORPORATION
as Attorney-in-Fact for the
Class A Limited Partners listed
on the attached Schedule 1
By: /s/ Earla L. Stowe
Earla L. Stowe, Vice President
CLASS B LIMITED PARTNER:
MARRIOTT MARQUIS CORPORATION
By: /s/ Earla L. Stowe
Earla L. Stowe, Vice President
Exhibit 1
Description of Land
ALL THAT TRACT or parcel of land lying and being in Land Lot 51 of the
14th District of Fulton County, Georgia, containing 3.58 acres, same being more
particularly described as follows:
TO FIND THE TRUE POINT OF BEGINNING, begin at a drill hole set which
marks the intersection of the northerly Right-of-Way Line of Harris Street
(Sixty (60') foot Right-of-Way) with the easterly Right-of-Way Line of Peachtree
Center Avenue (Sixty (60') foot Right-of-Way); thence traveling along the
northerly Right-of-Way Line of said Harris Street south 89 degrees 10 minutes 36
seconds east a distance of 207.07 feet to a drill hole set on said Right-of-Way
Line which drill hole set is the TRUE POINT OF BEGINNING; from the TRUE POINT OF
BEGINNING as thus established leaving said Right-of-Way Line and traveling north
00 degrees 49 minutes 24 seconds east a distance of 112.72 feet to a point;
thence traveling north 89 degrees 10 minutes 36 seconds west a distance of
206.60 feet to a nail set on the easterly Right-of-Way Line of said Peachtree
Center Avenue; thence traveling along said Right-of-Way Line north 01 degrees 03
minutes 48 seconds east a distance of 177.30 feet to a drill hole set on said
Right-of-Way Line; thence leaving said Right-of-Way Line and traveling south 89
degrees 10 minutes 36 seconds east a distance of 205.92 feet to a point; thence
traveling north 00 degrees 49 minutes 24 seconds east a distance of 113.30 feet
to a nail set on the southerly Right-of-Way Line of Baker Street (Sixty (60')
foot Right-of-Way); thence traveling along said Right-of-Way Line south 89
degrees 19 minutes 51 seconds east a distance of 296.41 feet to a drill hole set
on said Right-of-Way Line at its intersection with the westerly Right-of-Way
Line of Courtland Street (Seventy (70') foot Right-of-Way); thence traveling
along the westerly Right-of-Way Line of said Courtland Street south 01 degrees
03 minutes 16 seconds west a distance of 404.12 feet to a drill hole set on said
Right-of-Way Line at its intersection with the northerly Right-of-Way Line of
said Harris Street; thence traveling along the northerly Right-of-Way Line of
said Harris Street north 89 degrees 10 minutes 36 seconds west a distance of
294.84 feet to a drill hole set on said Right-of-Way Line, which drill hole set
marks the TRUE POINT OF BEGINNING.
The above described property being shown on that certain Survey
entitled "ALTA/ACSM Land Title Survey for Atlanta Marriott Marquis Limited
Partnership, Ivy Street Hotel Limited Partnership, Marriott/Portman Finance
Corporation, The Citizens and Southern National Bank & Ticor Title Insurance
Company of California", prepared by Planners and Engineers Collaborative,
bearing the seal of Robert Lee White, Georgia Registered Land Surveyor No.
2080, dated January 5, 1990.
TOGETHER WITH the following two (2) easement parcels, on the terms and
subject to the conditions set forth with respect thereto in, to and under that
certain Declaration of Easements and Restrictions dated on September 1, 1982 and
recorded at Deed Book 8291, Page 40, Fulton County, Georgia Records; as amended
by First Amendment to Declaration of Easements and Restrictions, dated as of
August 4, 1983, recorded at Deed Book 8657, Page 385, aforesaid Records:
EASEMENT PARCELS
(MARQUIS TWO TOWER)
All that tract or parcel of land lying and being in the City of
Atlanta, in Land Lot 51 of the 14th District of Fulton County, Georgia, and
being more particularly described as follows:
BEGINNING at the point formed by the intersection of the east
right-of-way line of Peachtree Center Avenue (formerly known as Ivy Street) (as
presently located) with the south right-of-way line of Baker Street (as
presently located; run thence south 89 degrees, 19 minutes, 51 seconds east, as
measured along the south right-of-way line of Baker Street (as presently
located), a distance of 205.44 feet to a point; run thence south 00 degrees, 49
minutes, 24 seconds west, a distance of 113.30 feet to a point; run thence north
89 degrees, 10 minutes, 36 seconds west, a distance of 205.92 feet to a point
lying on the east right-of-way line of Peachtree Center Avenue (formerly known
as Ivy Street) (as presently located); run thence north 01 degrees, 03 minutes,
49 seconds east, as measured along the east right-of-way line of Peachtree
Center Avenue (formerly known as Ivy Street) (as presently located) a distance
of 112.75 feet to a point formed by the intersection of the south right-of-way
line of Baker Street (as presently located) with the east right-of-way line of
Peachtree Center Avenue (formerly known as Ivy Street) (as presently located)
and the POINT OF BEGINNING; being property shown on the plat of survey, to which
reference is made for all purposes, prepared for P.C. Towers, L.P., a Georgia
limited partnership, by Planners and Engineers Collaborative, bearing the
certification of Robert L. White, Georgia Registered Land Surveyor, number 2080,
dated July 20, 1988, last revised September 9, 1988.
(MARQUIS ONE TOWER)
All that tract or parcel of land lying and being in the City of
Atlanta, in Land Lot 51, of the 14th District, of Fulton County, Georgia, and
being more particularly described as follows:
BEGINNING at the point formed by the intersection of the east
right-of-way line of Peachtree Center Avenue (formerly known as Ivy Street) (as
presently located) with the north right-of-way line of Harris Street (as
presently located); run thence north 01 degrees, 03 minutes, 49 seconds east, as
measured along the east right-of-way line of Peachtree Center Avenue (formerly
known as Ivy Street) (an presently located), a distance of 112.72 feet to a
point; run thence south 89 degrees, 10 minutes, 36 seconds east, a distance of
206.60 feet to a point; run thence south 00 degrees, 49 minutes, 24 seconds
west, a distance of 112.72 feet to a point located on the north right-of-way
line of Harris Street (as presently located); run thence north 89 degrees, 10
minutes, 36 seconds west, as measured along the north right-of-way line of
Harris Street (as presently located), a distance of 207.07 feet to a point
formed by the intersection of the east right-of-way line of Peachtree Center
Avenue (formerly known as Ivy Street) (as presently located) with the north
right-of-way line of Harris Street (as presently located) and the POINT OF
BEGINNING; being property shown on the plat of survey, to which reference is
made for all purposes, prepared for P.C. Towers, L.P., a Georgia limited
partnership, by Planners and Engineers Collaborative, bearing the certification
of Robert L. White, Georgia Registered Land Surveyor, number 2080, dated July
20, 1988, last revised September 9, 1988.
Exhibit 2
Capital Accounts after Revaluation
TABLE OF CONTENTS
ARTICLE ONE - DEFINED TERMS....................................................1
ARTICLE TWO - FORMATION, NAME, PLACE OF BUSINESS, PURPOSE AND TERM........... 9
Continuation........................................................ 9
Name and Offices.................................................... 9
Purpose. 9
Term. 9
Agent for Service of Process........................................ 9
ARTICLE THREE - PARTNERS AND CAPITAL......................................... 9
General Partner..................................................... 9
Limited Partners.................................................... 9
Capital Contributions by General Partner............................ 10
Capital Contributions by Class A and Class B Limited Partners;
Adjustment of Capital Accounts................................ 10
Partnership Capital................................................. 11
Liability of the Limited Partners................................... 11
Voluntary Additional Financing...................................... 11
ARTICLE FOUR - ALLOCATIONS OF PROFITS AND LOSSES AND DISTRIBUTIONS........... 11
Allocation of Profit and Loss....................................... 11
Distributions....................................................... 16
Allocation Among Class A Limited Partners........................... 17
Section 754 Adjustments............................................. 17
Distribution Upon Liquidation....................................... 17
Restoration of Capital Accounts..................................... 18
ARTICLE FIVE - RIGHTS, POWERS AND DUTIES OF THE GENERAL PARTNER.............. 18
Authority of the General Partner to Manage the Partnership.......... 18
Restrictions on Authority of the General Partner.................... 20
Duties and Obligations of the General Partner....................... 22
Compensation of General Partner..................................... 23
Other Business of Partners.......................................... 23
Limitation on Liability of General Partner; Indemnification......... 23
Designation of Tax Matters Partner.................................. 24
ARTICLE SIX - WITHDRAWAL OR REMOVAL OF GENERAL PARTNER....................... 25
Limitation on Voluntary Withdrawal.................................. 25
Bankruptcy or Dissolution of the General Partner.................... 25
Liability of Withdrawn General Partner.............................. 26
Removal of General Partner.......................................... 26
Substitute General Partner.......................................... 26
ARTICLE SEVEN - ASSIGNABILITY OF UNITS....................................... 26
Restrictions on Assignments......................................... 26
Assignees and Substituted Limited Partners.......................... 27
ARTICLE EIGHT - DISSOLUTION AND LIQUIDATION OF THE PARTNERSHIP............... 28
Events Causing Dissolution.......................................... 28
Liquidation......................................................... 29
ARTICLE NINE - BOOKS AND RECORDS, ACCOUNTING, REPORTS, TAX ELECTIONS......... 29
Books and Records................................................... 29
Accounting and Fiscal Year.......................................... 29
Bank Accounts and Investments....................................... 30
Reports. 30
Tax Depreciation and Elections...................................... 31
Interim Closing of the Books........................................ 31
ARTICLE TEN - MEETINGS AND VOTING RIGHTS OF LIMITED PARTNERS................. 31
Meetings............................................................ 31
Special Voting Rights of Class A Limited Partners................... 32
ARTICLE ELEVEN - MISCELLANEOUS PROVISIONS.................................... 33
Appointment of General Partner as Attorney-in-Fact.................. 33
Amendments.......................................................... 33
Binding Provisions.................................................. 34
Applicable Law...................................................... 34
Counterparts........................................................ 34
Separability of Provisions.......................................... 34
Article and Section Titles.......................................... 34
EXHIBIT 3.B.
HMA REALTY LIMITED PARTNERSHIP
LIMITED PARTNERSHIP AGREEMENT
TABLE OF CONTENTS
ARTICLE I - FORMATION........................................................ 1
ARTICLE II - INTERPRETIVE PROVISIONS......................................... 1
ARTICLE III - BUSINESS PURPOSE............................................... 6
ARTICLE IV - CAPITAL ........................................................ 7
ARTICLE V - ALLOCATIONS AND DISTRIBUTIONS.................................... 7
ARTICLE VI - PARTNERSHIP MANAGEMENT.......................................... 9
ARTICLE VII - ACCOUNTING AND REPORTS......................................... 16
ARTICLE VIII - TRANSFER OF PARTNERSHIP INTERESTS............................. 17
ARTICLE IX - DISSOLUTION AND LIQUIDATION..................................... 18
ARTICLE X - AMENDMENTS ...................................................... 20
ARTICLE XI - MISCELLANEOUS PROVISIONS........................................ 20
HMA REALTY LIMITED PARTNERSHIP
LIMITED PARTNERSHIP AGREEMENT
THIS LIMITED PARTNERSHIP AGREEMENT (the "Agreement") is made as of the 29th
day of January, 1998 by and between HMA-GP, Inc., a Delaware corporation
("General Partner"), and Ivy Street Hotel Limited Partnership, a Georgia limited
partnership ("Limited Partner").
RECITALS:
A........The parties hereto hereby form HMA Realty Limited Partnership (the
"Partnership") as a Delaware limited partnership for the purposes hereinafter
set forth.
B........The parties hereto desire to enter into this Agreement in order to
govern the affairs of the Partnership and set forth their rights, obligations
and understandings with respect to the Partnership.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I - FORMATION
1.01.....Formation. The Partners hereby form the Partnership as a limited
partnership under the Act. The General Partner shall take all action required by
law to perfect and maintain the Partnership as a limited partnership under the
Act and under the laws of all other jurisdictions in which the Partnership may
elect to conduct business. The General Partner shall promptly take all steps
necessary to register the Partnership under applicable assumed or fictitious
name statutes or similar laws. The Partners further agree and obligate
themselves to execute, acknowledge and cause to be filed for record, in the
place or places and manner prescribed by law, the Certificate or this Agreement
as may be required, either by the Act, by the laws of a jurisdiction in which
the Partnership transacts business or by this Agreement, to comply with the
requirements of law for the formation, continuation, preservation and operation
of the Partnership as a limited partnership under the Act or under the laws of
such other jurisdiction(s) in which the Partnership transacts business.
1.02.....Name. The name of the Partnership shall be HMA Realty Limited
Partnership.
1.03.....Place of Business; Registered Agent. The principal office and
place of business of the Partnership shall be 10400 Fernwood Road, Bethesda,
Maryland 20817-1109, or at such other place as the General Partner may from time
to time designate. The name and post office address of the Partnership's
registered agent in the State of Delaware shall be The Prentice-Hall Corporation
System, Inc., 1013 Centre Road, Wilmington, Delaware 19805. The General Partner
may change the registered agent of the Partnership as it may from time to time
determine.
ARTICLE II - INTERPRETIVE PROVISIONS
2.01.....Certain Definitions. The following terms have the definitions
hereinafter indicated whenever used in this Agreement with initial capital
letters:
.........Act: The Delaware Revised Uniform Limited Partnership Act, as the
same may be amended and in
effect from time to time.
.........Affiliate: With respect to any referenced Person, any Person
directly or indirectly controlling, controlled by, or under direct common
control with the Person in question. As used herein, "control" shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract, or otherwise.
.........Agreement: This Limited Partnership Agreement and Exhibits 1 and 2
attached hereto, as the same may be amended and in effect from time to time.
.........Bankrupt(cy): Either (i) the initiation by a referenced Person of
a proceeding, or initiation of any proceeding against a referenced Person which
has not been vacated, discharged or bonded within thirty (30) days of
initiation, under a federal, state or local bankruptcy or insolvency law, (ii)
an assignment by a referenced Person for the benefit of creditors, (iii) the
inability of a referenced Person to pay his debts as they become due, or (iv)
the agreement by a referenced Person to appointment of a receiver or trustee for
all or a substantial part of his property, or court appointment of such receiver
or trustee which is not suspended or terminated within thirty (30) days after
appointment.
.........Capital Contribution: The total amount of money and the fair
market value (as agreed upon by the Partners in accordance with this Agreement)
of other property contributed by each Partner to the Partnership pursuant to the
terms of this Agreement, including the Capital Contribution made by a
predecessor holder(s) of the Interest of such Partner, unless the context
requires otherwise.
.........Capital Proceeds: The net proceeds received by the Partnership
from, or attributable to, (i) any financing obtained by the Partnership after
payment of the then-outstanding principal balance and accrued but unpaid
interest on liabilities of the Partnership then payable pursuant to the terms
thereof from the proceeds of such financing; (ii) the sale or condemnation
(other than a temporary taking) of all or substantially all of any Property or
the Partnership's interest therein after payment of the then-outstanding
principal balance and accrued but unpaid interest on liabilities of the
Partnership then payable pursuant to the terms thereof; (iii) the receipt of
title or fire and extended coverage insurance; and (iv) any reserves previously
set aside from Capital Proceeds or Capital Contributions which are deemed
available for distribution by the General Partner.
.........Certificate: The Partnership's Certificate of Limited Partnership,
as amended from time to time, as required by the Act.
.........Consent: Either the written consent of a Person or the affirmative
vote of such Person at a meeting duly called and held pursuant to this
Agreement, as the case may be, to do the act or thing for which the consent is
required or solicited, or the act of granting such consent, as the context may
require. Except as expressly provided otherwise in this Agreement, reference to
a requirement for the "Consent" of a Partner shall require the commercially
reasonable judgment of such Partner in light of the facts and circumstances,
rather than the unfettered discretionary decision of such Partner.
.........Fiscal Year: The calendar year or such other twelve (12)-month
period designated by the General Partner.
.........General Partner: HMA-GP, Inc., a Delaware corporation, and its
successor(s) who or which become Successor General Partner(s) in accordance with
the terms of this Agreement.
.........Gross Asset Value: With respect to any asset, the asset's adjusted
basis for federal income tax purposes, except as follows:
.........(A) The initial Gross Asset Value of any asset contributed by a
Partner to the Partnership shall be the value of such asset, as agreed to by the
contributing Partner and the Partnership.
.........(B) The Gross Asset Values of all Partnership Assets shall be
adjusted to equal their respective gross fair market values, as determined by
the General Partner, as of the following times: (1) the acquisition of an
additional interest in the Partnership by any new or existing Partner in
exchange for more than a de minimis Capital Contribution; (2) the distribution
by the Partnership to a Partner of more than a de minimis amount of Partnership
Assets as consideration for an interest in the Partnership; and (3) the
liquidation of the Partnership within the meaning of treasury regulations
("Regulations") Section 1.704-1(b)(2)(ii)(g); provided, however, that the
adjustments pursuant to clauses (1) and (2) above shall be made only if the
General Partner reasonably determines that such adjustments are necessary or
appropriate to reflect the relative economic interests of the Partners in the
Partnership.
.........(C) The Gross Asset Value of any Partnership Asset distributed to
any Partner shall be the gross fair market value of such asset on the date of
distribution; and
.........(D) The Gross Asset Values of Partnership Assets shall be
increased (or decreased) to reflect any adjustments to the adjusted basis of
such assets pursuant to Section 734(b) of the Internal Code of 1986 ("Code") or
Code Section 743(b), but only to the extent that such adjustments are taken into
account in determining capital accounts pursuant to Regulations Section
1.704-1(b)(2)(iv)(m); provided, however, that Gross Asset Values shall not be
adjusted pursuant to this (D) to the extent the General Partner determines that
an adjustment pursuant to (B) above is necessary or appropriate in connection
with a transaction that would otherwise result in an adjustment pursuant to this
(D).
.........If the Gross Asset Value of an asset has been determined or
adjusted pursuant to (A), (B), or (D) above, such Gross Asset Value shall
thereafter be adjusted by the depreciation taken into account with respect to
such asset for purposes of computing Partnership profits and losses.
.........Hotel: The Atlanta Marriott Marquis, a hotel owned by the
Partnership containing 1,674 guest rooms, meeting/banquet facilities,
restaurants and related amenities, located in Atlanta, Fulton County, Georgia
and comprising a portion of the Property.
.........Hotel Management Agreement: That certain Management Agreement
between the Limited Partner and the Hotel Operator executed as of January 3,
1998, providing for the day-to-day operation of the Hotel, which Management
Agreement is being assigned by the Limited Partner to the Partnership, as the
same may be hereafter amended from time-to-time.
.........Hotel Operator: New Marriott MI, Inc., a Delaware corporation, or
its successor or assignee as permitted under the Hotel Management Agreement, or
any other Person who shall at any time act as the operator of the Hotel pursuant
to an agreement with the Partnership.
.........IRS: The Internal Revenue Service, an agency of the United States
government.
.........Limited Partner: Ivy Street Hotel Limited Partnership, a Georgia
limited partnership, and its successor(s) who or which become Substituted
Limited Partner(s) in accordance with the terms of this Agreement.
.........Loan: That certain loan to the Partnership from Nomura Asset
Capital Corporation or an affiliate thereof in the original principal amount of
$164,000,000.00, as secured by, among other things, the Property.
.........Loan Documents: Any and all evidence, documents, instruments and
agreements executed in connection with the Loan, which wholly or partially
evidence, secure or guarantee payment of the Loan.
.........Net Capital Contributions: As to any Partner on any day, the
Partner's Capital Contributions adjusted as follows:
.........A. Increased by the amount of any Partnership liabilities which,
in connection with distributions pursuant to the terms hereof, are assumed by
such Partner or are secured by any Partnership Asset distributed to such
Partner, and
.........B. Reduced by the amount of cash and the Gross Asset Value of any
Partnership Asset distributed to such Partner pursuant to Section 5.03 hereof
and the amount of any liabilities of such Partner assumed by the Partnership or
which are secured by any property contributed by such Partner to the
Partnership.
.........In the event any interest in the Partnership is transferred in
accordance with the terms of this Agreement, the transferee shall succeed to the
adjusted Capital Contribution of the transferor to the extent it relates to the
transferred interest in the Partnership.
.........Net Cash Flow: With respect to any Fiscal Year or other accounting
period designated by the General Partner, all cash receipts earned from the
business operations of the Partnership and any other funds deemed available for
distribution by the General Partner, including any amounts previously set aside
as reserves or escrows, less (i) expenses and expenditures payable therefrom
including, without limitation, operating expenses, taxes, insurance premiums,
advances and loans, and (ii) any reserves deemed reasonably necessary by the
General Partner.
.........Net Profits and Net Losses: The taxable income or loss, as the
case may be, for a period (or from a transaction) as determined in accordance
with Code Section 703(a) (for this purpose, all items of income, gain, loss, or
deduction required to be separately stated pursuant to Code Section 703(a)(1)
shall be included in taxable income or loss).
.........Nonrecourse Liability: The meaning set forth in Regulations
Section 1.752-1(a)(2).
.........Notice: A writing containing the information required by this
Agreement to be communicated to a Person and personally delivered to such Person
or sent by (i) registered or certified mail, postage prepaid, return receipt
requested, (ii) facsimile transmission with answer back confirmation, or (iii)
nationally recognized overnight courier service to such Person at the last known
address of such Person as shown on the books of the Partnership, the date of
personal delivery, or of the certification receipt, as the case may be, being
deemed the date of such Notice; provided, however, that any written
communication containing such information actually received by a Person shall
constitute Notice for all purposes of this Agreement. Notice may also validly be
made by facsimile transmission to any Person and the date of such facsimile
transmission shall constitute the effective date of such Notice.
.........Partner(s): The General Partner and the Limited Partner, and such
other Persons who become Partners pursuant to the terms of this Agreement.
.........Partnership: The Delaware limited partnership referred to herein
as HMA Realty Limited Partnership, as such partnership may from time to time be
constituted.
.........Partnership Assets: At any particular time, any interests, rights,
assets or property (tangible or intangible, choate or inchoate, fixed or
contingent) held or owned by the Partnership.
.........Partnership Interest or Interest: A Partner's Percentage of
Partnership Interest, right to distributions under Article V hereof, and any
other rights which such Partner has in the Partnership.
.........Percentage of Partnership Interest: As to any Partner, the
percentage in the Partnership shown opposite the name of such Partner on Exhibit
1 attached hereto, as the same may be adjusted from time to time in accordance
with this Agreement.
.........Person: Any individual, partnership, corporation, trust or other
entity.
.........Portman: John C. Portman, Jr., a Georgia resident and a limited
partner of the Limited Partner.
.........Priority Return: As to any Limited Partner, as of any time of
determination, an amount equal to a cumulative compounded return on the Net
Capital Contributions of such Partner from the date hereof to the date of such
determination at a rate of ten percent (10%) per annum, which Priority Return
shall accrue and be compounded on a daily basis.
.........Property: Collectively, all of the real property described on
Exhibit 2 to this Agreement, together with, in each instance, all of the
buildings, improvements and fixtures thereon, and the Partnership's interest in
and to all easements, rights of way, hereditaments and appurtenances, leases,
rents, security deposits, licenses and privileges and other tangibles and
intangibles of like nature belonging to or enuring to the benefit of the owner
of the property and used in the operation thereof.
.........Substituted Limited Partner: That Person or those Persons admitted
to the Partnership as substitute Limited Partner(s), in accordance with the
provisions of this Agreement. A Substituted Limited Partner, upon its admission
as such, shall succeed to the rights, privileges and liabilities of its
predecessor in interest as a Limited Partner.
.........Successor General Partner: Any Person who is admitted to the
Partnership as an additional or substitute General Partner pursuant to Article
VIII. A Successor General Partner, upon its admission as such, shall succeed to
the rights, privileges and liabilities of its predecessor in interest as a
General Partner.
.........Tax Matters Partner: The General Partner, or such other Partner
who becomes Tax Matters Partner pursuant to the terms of this Agreement.
2.02.....Rules of Construction. The following rules of construction shall
apply to this Agreement:
.........(A) All section headings in this Agreement are for the convenience
of reference only and are not intended to qualify the meaning of any section.
.........(B) All personal pronouns used in this Agreement, whether used in
the masculine, feminine or neuter gender, shall include all other genders, the
singular shall include the plural, and vice versa, as the context may require.
.........(C) Each provision of this Agreement shall be considered severable
from the rest, and if any provision of this Agreement or its application to any
Person or circumstances shall be held invalid and contrary to any existing or
future law or unenforceable to any extent, the remainder of this Agreement and
the application of any other provision to any Person or circumstances shall not
be affected thereby and shall be interpreted and enforced to the greatest extent
permitted by law so as to give effect to the original intent of the parties
hereto.
.........(D) Unless otherwise specifically and expressly limited in the
context, any reference herein to a decision, determination, act, action,
exercise of a right, power or privilege, or other procedure by the General
Partner shall mean and refer to the decision, determination, act, action,
exercise or other procedure by the General Partner in its sole and absolute
discretion. Notwithstanding the foregoing, such discretion shall reflect the
commercially reasonable judgment of the General Partner in light of the facts
and circumstances, rather than the unfettered discretionary decision of the
General Partner.
ARTICLE III - BUSINESS PURPOSE
3.01.....Business. The purposes of the Partnership shall be, subject to the
limitations set forth in this Agreement, solely to acquire, own, hold, improve,
develop, operate, manage, lease, maintain, finance, refinance, mortgage, dispose
of and otherwise deal directly with the Property, and to engage in any other
lawful act or activity necessary, convenient, incidental or appropriate to the
foregoing.
3.02.....Authorized Activities. In carrying out the purposes of the
Partnership, but subject to all other provisions, prohibitions and limitations
of this Agreement, the Partnership is authorized to engage in any kind of lawful
activity, and perform and carry out contracts of any kind, necessary or
advisable in connection with the accomplishment of the purposes and business of
the Partnership.
ARTICLE IV - CAPITAL
4.01.....Capital Contributions.
.........(A) Simultaneously with its execution of this Agreement, each
Partner shall contribute to the capital of the Partnership that amount of cash
and/or other property determined by the General Partner to be the appropriate
amount to be contributed by such Partner on account of the acquisition of its
Interest as further set forth opposite such Partner's name on the books and
records of the Partnership.
.........(B) After the Capital Contributions referred to in Section 4.01(A)
have been made, on the tenth business day after written notification from the
General Partner, the Partners shall have the option, but shall not be required,
to contribute additional amounts to the Partnership, either as loans or as
additional Capital Contributions, in such relative amounts as the General
Partner shall determine in its sole discretion.
.........(C) Except as set forth in this Section 4.01, no Partner shall be
obligated to contribute or loan any funds to the Partnership.
4.02.....No Third Party Beneficiaries. The foregoing provisions of this
Article IV are not intended to be for the benefit of any Person (other than a
Partner in its capacity as a Partner) to whom any debts, liabilities or
obligations are owed by (or who otherwise has any claim against) the Partnership
or any of the Partners; and no such Person shall obtain any right under any such
foregoing provision against the Partnership or any of the Partners by reason of
any debt, liability or obligation (or otherwise).
4.03.....Return of Capital Contributions. Except as otherwise specifically
provided in this Agreement, (i) no Partner shall have any right to withdraw or
reduce its Capital Contributions, or to demand and receive property other than
cash from the Partnership in return for its Capital Contributions, (ii) no
Partner shall have any priority over any other Partners as to the return of its
Capital Contributions and (iii) any return of Capital Contributions to the
Partners shall be made solely from Partnership Assets, and no Partner shall be
personally liable for any such return.
4.04 Refinancing. The General Partner covenants that in connection with any
refinancing of the Property, it will use commercially reasonable efforts to
obtain replacement financing which constitutes a Nonrecourse Liability, in an
amount equal to or greater than the financing being replaced.
ARTICLE V - ALLOCATIONS AND DISTRIBUTIONS
5.01.....Allocation of Items.
.........(A) All Net Profits, Net Losses, deductions, credits and
allowances for any Fiscal Year shall be allocated to the Partners in proportion
to their respective Percentages of Partnership Interest.
.........(B) Notwithstanding the provisions of Section 5.01(A) above, any
Net Profit or Net Loss shall be allocated among the Partners as follows:
......... (1) As to Net Profits (and to the extent necessary to achieve the
Capital Account balances intended under clauses first and second below, items of
gross income): first, such Net Profits shall be allocated among the Partners in
proportion to their negative Capital Account balances (if any), as of the end of
the Fiscal Year in question, after giving effect to all other allocations made
under this Agreement with respect to such year and all distributions made during
such year, until such Capital Account balances shall have a zero balance;
second, the balance of any such Net Profits shall be allocated among the
Partners to the extent that they would receive cash and/or property as a result
of the disposition of all or substantially all of the Partnership Assets after
the end of such year in excess of the amount of their positive Capital Accounts
before any allocations are made pursuant to this Section 5.01(B)(1); and third,
the balance of any such Net Profits shall be allocated among the Partners in
proportion to their respective Partnership Interests.
......... (2) As to Net Losses: first, an amount of Net Losses equal to the
aggregate positive balances (if any) in the Capital Accounts of all Partners
having positive Capital Account balances, as of the end of the Fiscal Year in
question, after giving effect to all other allocations made under this Agreement
with respect to such year and all distributions made during such year, and any
cash and/or property from the disposition anticipated to be distributed after
the end of such year, shall be allocated to such Partners in proportion to their
positive Capital Account balances until such Capital Accounts shall have zero
balances; and thereafter, the balance of any Net Losses shall be allocated among
the Partners in proportion to their respective Partnership Interests.
5.02.....Distributions of Net Cash Flow.
.........(A) The General Partner shall distribute quarterly an amount equal
to the Net Cash Flow generated by the Partnership during such quarter, as
follows:
......... (1) First, 100% to the Limited Partners, until the Limited
Partners have received an amount equal to their then accrued but unpaid Priority
Return; and
......... (2) Thereafter, the balance to the Partners, pro rata in
accordance with their respective Percentage of Partnership Interests.
.........(B) Distributions of Net Cash Flow shall be made to the Partners
of record on the record date established by the General Partner for the
distribution, without regard to the length of time the record holder has been
such.
5.03 Distributions of Capital Proceeds..03 Distributions of Capital
Proceeds. Capital Proceeds will be distributed as soon as practicable following
their receipt by the Partnership, as follows:
.........(A) First, 100% to the Limited Partners, until the Limited
Partners have received an amount equal to their then accrued but unpaid Priority
Return; and
.........(B) Thereafter, 100% to the Partners, in proportion to their Net
Capital Contributions, until their Net Capital Contributions are reduced to
zero; and
.........(C) Thereafter, the balance to the Partners, pro rata in
accordance with their respective Percentage of Partnership Interests.
ARTICLE VI - PARTNERSHIP MANAGEMENT
6.01.....Management and Control of Partnership Business. Except as
otherwise expressly provided or limited by the provisions of this Agreement, the
General Partner shall have full, exclusive and complete discretion to manage and
control the business and affairs of the Partnership, to make all decisions
affecting the business and affairs of the Partnership, and to take all such
action as it deems necessary or appropriate to accomplish the purposes of the
Partnership as set forth herein. The General Partner shall use reasonable
efforts to carry out the purposes of the Partnership and shall devote to the
management of the business and affairs of the Partnership such time as the
General Partner, in its reasonable discretion, shall deem to be reasonably
required for the operation thereof. Except as otherwise expressly set forth in
this Agreement, the Limited Partner shall not have any authority, right or power
to bind the Partnership, or to manage or control, or to participate in the
management or control of, the business and affairs of the Partnership in any
manner whatsoever.
6.02.....Special Purpose Partner.
.........(A) So long as the Loan shall be outstanding, the Partnership
shall have at all times at least one General Partner that is a special-purpose
entity (the "Special-Purpose Partner"), owning at least a one (1%) percent
Interest in the Partnership. In the event that the Special-Purpose Partner is a
limited liability company or partnership, it shall have an operating agreement
or partnership agreement, as applicable, containing provisions substantially
similar to those contained in Sections 3.01, 6.02, 6.03, 6.08(D), 8.03(B), 9.01,
9.02 and 11.02 of this Agreement, and to the extent same relate to the foregoing
Sections, to those contained in Section 2.01. In the event that the
Special-Purpose Partner is a corporation, it shall have organizational documents
substantially similar to those of the General Partner.
.........(B) Upon the dissociation or withdrawal of the Special-Purpose
Partner from the Partnership or the bankruptcy, insolvency or liquidation of the
Special-Purpose Partner, the Partnership shall immediately appoint a new
Special-Purpose Partner, and shall cause to be delivered to the holder of the
Loan a non-consolidation opinion acceptable to said holder and to any applicable
rating agency, concerning, as applicable, the Partnership, the new
Special-Purpose Partner and its owners.
6.03.....Restrictive Covenants; Unanimous Consent.
.........(A) Notwithstanding anything in this Agreement to the contrary, so
long as the Loan is outstanding, the Partnership shall not do any of the
following:
......... (1) Dissolve or liquidate, consolidate or merge with or into any
other entity, or convey, sell or transfer all or substantially all of the assets
of the Partnership;
......... (2) Engage in any business or activity except as permitted in
this Agreement; or
......... (3) Incur any indebtedness other than (a) the Loan, or debt
incurred to refinance the Loan, (b) subject to the terms of the Loan Documents,
trade payables incurred in the ordinary course of its business or otherwise
relating to the ownership and operation of the Property, or (c) debt otherwise
permitted under the Loan Documents.
.........(B) Notwithstanding anything to the contrary contained in this
Agreement, so long as the Loan is outstanding, the Partnership shall not amend
or modify this Section 6.03 or Sections 3.01, 6.02, 6.08(D), 8.03(B), 9.01, 9.02
or 11.02 of this Agreement, and to the extent same relate to the foregoing
Sections, Section 2.01 of this Agreement, without the prior written consent of
the holder of the Loan and confirmation from each of the applicable rating
agencies that such amendment would not result in the disqualification,
withdrawal or downgrade of any securities rating applicable to the loans
evidenced by the Loan Documents.
.........(C) Subject to Section 6.03(A), notwithstanding anything in this
Agreement to the contrary, the unanimous Consent of the Partners, which shall
include the consent of the "Independent Director" (as defined in the Loan
Documents) of the General Partner, shall be required to cause the Partnership to
take any of the following actions:
......... (1) File a bankruptcy or insolvency petition or otherwise
institute proceedings under any existing or future law relating to bankruptcy,
insolvency, reorganization or relief of debtors on behalf of the Partnership;
......... (2) Consent to the institution of bankruptcy or insolvency
proceedings against the Partnership under any existing or future law relating to
bankruptcy, insolvency, reorganization or relief of debtors;
......... (3) Dissolve or liquidate, consolidate or merge with or into any
other entity, or convey, sell or transfer all or substantially all of the assets
of the Partnership, except as permitted under the Loan Documents;
......... (4) Engage in any business or activity except as permitted in
this Agreement;
......... (5) Incur any indebtedness other than (A) the Loan, or debt
incurred to refinance the Loan, (B) subject to the terms of the Loan Documents,
trade payables incurred in the ordinary course of its business or otherwise
relating to the ownership and operation of the Property, or (C) debt otherwise
permitted under the Loan Documents; or
......... (6) Amend, change or modify this Agreement.
.........(D) Subject to Section 6.03(A), notwithstanding anything in this
Agreement to the contrary, the unanimous Consent of the Partners shall be
required to cause the Partnership to take any of the following actions:
......... (1) Sell and convey, or contract to sell and convey, all or any
part of the property, real or personal, owned by the Partnership;
......... (2) Execute leases or subleases or modify leases or subleases of
any real property, or any part thereof or interest therein, owned by the
Partnership, or any amendment thereto or modification thereof, and terminate any
such leases or subleases and accept the surrender of the property so leased or
subleased upon the expiration or earlier termination of such leases or
subleases;
......... (3) Borrow money and, as security therefor, mortgage or otherwise
encumber all or any Partnership Asset, enter into sale/leaseback financing
transactions and make, deliver and execute any commercial paper and sign, seal,
deliver and otherwise execute any note, mortgage, deed to secure debt, security
agreement, assignment of receivables or other collateral assignments, bond,
financing statement guaranty, rental agreement, lease, contract to sell, deed or
such other instrument of conveyance, road deed, right-of-way deed, quit-claim
deed or easement, or exercise any purchase option, concerning the Property or
other Partnership Asset;
......... (4) Prepay in whole or in part, refinance, recast, increase,
modify, consolidate or extend any mortgages, deeds to secure debt or other
encumbrances which may affect any Partnership Asset, and in connection therewith
execute or cause to be executed, for and on behalf of the Partnership, any
extensions, renewals, consolidations or modifications of such mortgages, deeds
to secure debt or other encumbrances;
......... (5) Commence, terminate, defend or settle any litigation,
arbitration, claim or other dispute involving the business or assets of the
Partnership;
......... (6) Amend the Hotel Management Agreement; or
......... (7) With respect to the coordination of the operation and
management of the Hotel by the Hotel Operator, to approve (i) the annual
operating projection, (ii) the advertising and marketing program, (iii) the
repairs and equipment budget, and (iv) the annual estimate of the cost of major
capital improvements (all to be prepared initially by the Hotel Operator).
6.04.....No Management by Limited Partner. The Limited Partner, in it
capacity as a limited partner, shall not take part in the day-to-day management,
operation or control of the business and affairs of the Partnership nor have any
authority, right or power to act for or on behalf of or to bind the Partnership
or transact any business in the name of the Partnership. The Limited Partner
shall have no rights other than those specifically provided herein or granted by
law where consistent with a valid provision hereof.
6.05.....Limitations on Partners.
.........(A) No Partner shall have any authority to perform (i) any act in
violation of any applicable law or regulation thereunder, (ii) any act
prohibited by Section 6.03(A) or (iii) any act without any Consent or
ratification which is required to be Consented to or ratified by the General
Partner pursuant to the terms of this Agreement.
.........(B) No action shall be taken by a Partner if it would change the
Partnership to an association taxable as a corporation for federal income tax
purposes. A determination of whether such action will have the above described
effect shall be based upon a declaratory judgment or similar relief obtained
from a court of competent jurisdiction, a favorable ruling from the IRS or the
receipt of an opinion of counsel.
6.06.....Business with Affiliates. The General Partner, in its discretion,
may cause the Partnership to transact business with any Partner or any Affiliate
for goods or services reasonably required in the conduct of the Partnership's
business; provided that any such transaction shall be effected by an enforceable
agreement and only on terms competitive with those that may be obtained in the
marketplace from unaffiliated Persons.
6.07.....No Compensation; Reimbursement of Expenses. Except as otherwise
set forth in this Agreement, the General Partner shall not be paid any direct
salary or other compensation for serving in such capacity. Except as otherwise
set forth in this Agreement, the General Partner shall be fully and entirely
reimbursed by the Partnership for any and all reasonable costs and expenses
(other than overhead) incurred in connection with the formation of the
Partnership and the management and supervision of the Partnership business. With
respect to any such reimbursement, the General Partner shall present the
Partnership with such invoices or allocations as are necessary to substantiate
such costs and expenses.
6.08.....Liability for Acts and Omissions.
.........(A) The General Partner shall not be liable, responsible or
accountable in damages or otherwise to the Partnership or any of the other
Partners for any act or omission performed or omitted in good faith on behalf of
the Partnership and in a manner reasonably believed to be within the scope of
the authority granted by this Agreement and in the best interests of the
Partnership, but shall be so liable, responsible or accountable for fraud, gross
negligence, willful misconduct or any breach of its fiduciary duty with respect
to such acts or omissions.
.........(B) The Partnership shall indemnify the General Partner (to the
extent of available assets, but without the requirement that any Partner make
additional Capital Contributions for this purpose) against any loss or damage
incurred by the General Partner by reason of any act or omission performed or
omitted by the General Partner (or its employees or agents) in good faith on
behalf of the Partnership and in a manner reasonably believed by the General
Partner to be within the scope of the authority granted to it by this Agreement
and in the best interests of the Partnership (but not, in any event, any loss or
damage incurred by reason of fraud, gross negligence, willful misconduct or
breach of any of their fiduciary duty with respect to such act or omission).
.........(C) The General Partner shall indemnify and hold harmless the
Partnership and the Partners against any damage or loss incurred by the
Partnership or Partners by reason of its fraud, gross negligence, intentional
misconduct or breach of fiduciary duty with respect to the Partnership.
.........(D) Notwithstanding the foregoing, any and all obligations of the
Partnership to indemnify its Partners shall be fully subordinated to the Loan
and, as long as the Loan is outstanding, shall not constitute a claim against
the Partnership.
6.09.....Additional Partnership Limitations. Notwithstanding anything to
the contrary in this Agreement:
(A) At least one General Partner of the Partnership will be a
special-purpose entity having no less than one director that is an Independent
Director.
(B) The Partners of the Partnership and the directors and stockholders of
the General Partner will hold all regular meetings appropriate to authorize
partnership action. Complete minutes of all meetings will be kept by the General
Partner.
(C) The Partnership will have sufficient officers and personnel to run its
business and operations.
(D) Decisions with respect to the Partnership's business and daily
operations will be independently made by the Partnership and its General Partner
in accordance with the provisions of this Agreement and will not be dictated by
the Limited Partner or any Affiliate of the Limited Partner. All business
transactions entered into by the Partnership with any of its Affiliates that are
permitted will be on terms that are not more or less favorable to the
Partnership than terms and conditions available at the time to the Partnership
for comparable transactions with unaffiliated Persons.
(E) The Partnership will act solely in its own name and through its General
Partner and its authorized officers and agents. No Affiliates of the Partnership
will be appointed agent of the Partnership except on terms that are not more
favorable to such Affiliates than terms and conditions available at the time to
such Affiliates for comparable transactions with unaffiliated Persons.
(F) The Partnership will directly manage its own liabilities, including
paying its own payroll and operating expenses. In the event employees of the
Partnership participate in pension, insurance and other benefit plans of the
Limited Partner or any Affiliate thereof, the Partnership will on a current
basis reimburse the Limited Partner or such Affiliate, as the case may be, for
the Partnership's pro rata share of the costs thereof.
(G) The Partnership will prepare and maintain its own separate, full and
complete books, records and financial statements. The Partnership's annual
financial statements will comply with generally accepted accounting principles.
(H) Neither the Limited Partner nor any Affiliate thereof will guarantee
debts of the Partnership and the Partnership will not guarantee debts of the
Limited Partner or any Affiliate thereof.
(I) The Partnership will not acquire obligations of, or make loans or
advances to, the Limited Partner or any Affiliate thereof.
(J) The Partnership will not commingle any of its money or other assets
with the money or assets of the Limited Partner or any Affiliate thereof.
(K) The Partnership will maintain separate bank accounts in its own name.
(L) Investments will be made by the Partnership directly or by agents
engaged and paid by the Partnership. Investments will be carried by the
Partnership in its own name.
(M) If the Partnership is included within the Limited Partner's or any
Affiliate of the Limited Partner's consolidated financial statements, the
existence of the Partnership and the ownership of its assets will be disclosed
in a footnote.
(N) The Limited Partner will not perform any of the Partnership's duties or
obligations, lend money to, or borrow money from the Partnership or transact any
business or enter into any transaction with the Partnership except, in each
case, pursuant to binding and enforceable written agreements, the terms of
which, on the whole, are arm's length and commercially reasonable.
(O) The Limited Partner will not (i) except by way of capital contribution
in connection with its acquisition of its Interests in the Partnership relative
to the organization and formation of the Partnership, advance or contribute
property to the Partnership or (ii) accept or cause to be made, any transfer or
distribution of the Partnership's assets to the Limited Partner in respect of
its Interest in the Partnership, except as may be pursuant to duly authorized
and legal actions of the Partnership.
6.10 Right of First Negotiation.Right of First Negotiation.
(A) The Partnership intends that Portman shall be a third party beneficiary
of this Section 6.10. The Partnership hereby grants to Portman a first right of
negotiation with respect to any sale of the Hotel proposed by the General
Partner (a "Proposed Sale"). In the event of a Proposed Sale, the General
Partner shall give Notice to Portman setting forth a detailed description of the
Proposed Sale (a "Sale Notice"). The Sale Notice shall include the proposed
price and all other material terms and conditions proposed by the General
Partner. Portman shall have a period of thirty (30) days following his receipt
of a Sale Notice within which to elect to enter into negotiations with the
General Partner regarding the Proposed Sale (the "Evaluation Period"), which
election must be in writing and given by Portman to the General Partner prior to
the expiration of such Evaluation Period. If Portman makes such election, the
General Partner and Portman shall thereafter use bona-fide, good faith and best
efforts to close such transaction within one hundred twenty (120) days
thereafter (the "Closing Period"), recognizing that time is of the essence.
Notwithstanding the foregoing, Portman and the General Partner shall use
bona-fide, good faith and best efforts to reach a binding agreement (subject to
a financing contingency and any other contingencies mutually agreed to by the
parties (the "Contingencies")) pursuant to which Portman shall post a
forfeitable (except as may be provided in the Contingencies) deposit ("Required
Deposit") equal to at least one and one-half percent (1.5%) of the proposed
price set forth in the Sale Notice within sixty (60) days (the "Deposit Period")
from Portman's election to enter into negotiations.
(B) If (i) Portman does not elect to enter into negotiations with the
General Partner within the Evaluation Period, (ii) Portman fails to post the
Required Deposit with the Partnership within the Deposit Period, or (iii)
Portman elects to enter into negotiations with the General Partner within the
Evaluation Period, the Required Deposit is posted within the Deposit Period but
the transaction is not closed within such Closing Period for any reason other
than the failure of the Partnership to perform, then the Partnership shall be
free, for a period of one (1) year following the last day of such Evaluation
Period, Deposit Period or Closing Period, as the case may be (the "Free Sale
Period"), to enter into a binding agreement to close the transaction described
in the Sale Notice with any other person at a price that is not less than
ninety-two percent (92%) of the price contained in the Sale Notice (a "Third
Party Agreement"). Closing under any such Third Party Agreement must occur
within fourteen (14) months following the last day of such Evaluation Period,
Deposit Period or Closing Period, as the case may be (the "Third Party Closing
Period"). If (i) the Partnership does not enter into a Third Party Agreement
within the Free Sale Period and the Partnership still wishes to sell the Hotel,
or (ii) the Partnership enters into a Third Party Agreement within the Free Sale
Period, but fails to close under such agreement within the Third Party Closing
Period, and the Partnership still wishes to sell the Hotel, or (iii) within the
Free Sale Period the Partnership wishes to sell the Hotel for a price less than
ninety-two percent (92%) of the price contained in the Sale Notice, then the
Partnership must again submit a Sale Notice to Portman as provided in this
Section 6.10 and Portman shall have all the rights provided for in this Section
6.10 except that in the case of the situation described in clause (iii)
immediately above, the Evaluation Period shall be for ten (10) days rather than
thirty (30) days.
ARTICLE VII - ACCOUNTING AND REPORTS
7.01 Books and Records. The General Partner shall maintain at the office of
the Partnership full and accurate books of the Partnership showing all receipts
and expenditures, assets and liabilities, profits and losses, names and current
addresses of Partners, and all other records necessary for recording the
Partnership's business and affairs. The books and records of the Partnership
shall be maintained separately from those of any other Person. All Partners and
their duly authorized representatives shall have the right to inspect and copy
any or all of the Partnership's books and records, including books and records
necessary to enable a Partner to defend any tax audit or related proceeding,
during reasonable times and upon reasonable Notice to the General Partner, and
shall have, on demand, true and full information of all matters affecting the
Partnership.
7.02 Books and Records; Tax Matters.
(A) The books and records of the Partnership shall be kept on the accrual
basis or such other accounting method selected by the General Partner. The
accounts of the Partnership shall be analyzed by the Partnership's accountants
in the reasonable discretion of the General Partner, and any statements
resulting from any such analysis shall be provided to the Limited Partner as
soon as practicable after receipt thereof by the General Partner.
(B) The Tax Matters Partner shall be required to prepare or cause to be
prepared all tax returns required of the Partnership at the Partnership's
expense. The Tax Matters Partner may be changed with the Consent of the General
Partner and the Limited Partner.
(C) If the Partnership incurs any costs related to any tax audit,
declaration of any tax deficiency or any administrative proceeding or litigation
involving any Partnership tax matter, the Partnership shall use all available
Net Cash Flow for such purpose, but no Partner shall be required to advance or
contribute funds to the Partnership for such purpose, except to the extent
provided in Article IV.
7.03 Reports and Notices. In addition to any statements provided pursuant
to Section 7.02(A), the General Partner shall be required to provide all
Partners with the following reports no later than the dates indicated or as soon
thereafter as circumstances permit:
(A) By March 31, IRS Form 1065 and Schedule K-l, or similar forms as may be
required by the IRS, stating each Partner's allocable share of income, gain,
loss, deduction or credit for the prior Fiscal Year.
(B) By May 31, a balance sheet and the related statements of income, cash
flow, Partners' capital and changes in financial position.
7.04 Partnership Funds. The General Partner shall have responsibility for
the safekeeping and use of all funds and assets of the Partnership, whether or
not in its direct or indirect possession or control. The funds of the
Partnership shall not be commingled with the funds of any other Person (other
than computerized checking accounts, centralized management accounts or other
similar accounts) and the General Partner shall not be permitted to employ such
funds in any manner except for the benefit of the Partnership. All funds of the
Partnership not otherwise invested shall be deposited in one of more accounts
maintained in such banking institutions as the General Partner shall determine,
and withdrawals shall be made only in the regular course of Partnership business
on such signatures as the General Partner may from time to time determine. The
Partnership shall maintain its assets in such a manner that it is not costly or
difficult to segregate, identify or ascertain such assets.
ARTICLE VIII - TRANSFER OF PARTNERSHIP INTERESTS
8.01 Transfer by General Partner. The General Partner may not voluntarily
withdraw from the Partnership or transfer any portion of its Partnership
Interest.
8.02 Obligations of a Prior General Partner. In the event of the
involuntary withdrawal of the General Partner, such General Partner shall remain
liable for all obligations and liabilities (other than Partnership liabilities
payable solely from Partnership Assets) incurred by it as General Partner before
the effective date of such event. However, the withdrawn General Partner shall
be free of, and held harmless by, the Partnership against any obligation or
liability incurred on account of the activities of the Partnership from and
after the effective date of such event, except as provided in this Agreement.
8.03 Additional General Partners.
(A) Subject to Section 8.03(B) below, a Person may be admitted to the
Partnership as a Successor General Partner only if the following conditions are
satisfied:
(1) The admission of such Person shall have been Consented to by the
Limited Partner;
(2) The Person shall have accepted and agreed to be bound by all the terms
and provisions of this Agreement, by executing a counterpart thereof and such
other documents or instruments as may be required or appropriate in order to
effect the admission of such Person as a General Partner; and
(3) An amendment to the Certificate evidencing the admission of such Person
as a General Partner shall have been filed for recordation as required by the
Act.
(B) So long as the Loan remains outstanding and unsatisfied, no Person may
be admitted to the Partnership as a Successor General Partner unless following
such admission the Partnership is in compliance with Section 6.02 above.
8.04 Restrictions on Transfer by Limited Partners.
(A) The Limited Partner may not sell, assign, transfer, dispose of, pledge,
hypothecate or otherwise encumber its Partnership Interest without the prior
Consent of the General Partner, and any such act in violation hereof shall be of
no effect and shall not be binding on the Partnership. Anything contained herein
to the contrary notwithstanding, the Limited Partner may not sell, assign,
transfer, encumber or otherwise dispose of its Partnership Interest if such
disposition would (i) cause the Partnership to be treated as an association
taxable as a corporation (rather than a partnership) for federal income tax
purposes; (ii) violate the provisions of any federal or state securities laws;
or (iii) violate the terms of (or result in a default or acceleration under) any
law, rule, regulation, agreement or commitment binding on the Partnership.
(B) Subject to the provisions of Section 8.04(A), an assignee or successor
of the whole or any portion of the Limited Partner's Partnership Interest
pursuant to Section 8.04(A) shall become a Substituted Limited Partner upon the
satisfaction of the following conditions:
(1) The assignor and assignee file a Notice or other evidence of transfer
and such other information reasonably required by the General Partner,
including, without limitation, names, addresses and telephone numbers of the
assignor and assignee;
(2) The assignee executes, adopts and acknowledges this Agreement, or a
counterpart hereto, and such other documents as may be reasonably requested by
the General Partner, including without limitation, all documents necessary to
comply with applicable tax and/or securities rules and regulations;
(3) The assignor or assignee pays all costs and fees incurred or charged by
the Partnership to effect the transfer and substitution; and
(4) The admission of such Substituted Limited Partner shall have been
Consented to, in writing, by the General Partner.
(C) If an assignee of a Limited Partner pursuant to Section 8.04(A) does
not become a Substituted Limited Partner pursuant to Section 8.04(B), the
assignee shall not have any rights to require any information on account of the
Partnership's business, to inspect the Partnership's books, to participate in
the management or operation of the Partnership, or to vote or otherwise take
part in the affairs of the Partnership.
ARTICLE IX - DISSOLUTION AND LIQUIDATION
9.01 Term and Dissolution. The Partnership shall continue until December
31, 2085, or until dissolution occurs prior to that date for any one of the
following reasons:
(A) At any time when the Loan shall no longer be outstanding, an election
to dissolve the Partnership is made in writing by all Partners;
(B) Subject to Section 6.03 the sale, exchange or other disposition of all
or substantially all of the Partnership Assets; or
(C) At any time when the Loan shall no longer be outstanding, an event of
withdrawal of a General Partner, unless this Agreement expressly permits the
continuation of the Partnership thereafter.
Notwithstanding anything to the contrary in this Agreement, the Partnership
shall not dissolve prior to December 31, 2085 so long as at least one General
Partner or Successor General Partner of the Partnership remains solvent.
9.02 Effect of Bankruptcy, Death or Adjudication of Incompetency of a
Limited Partner. The Bankruptcy, death, dissolution, dissociation from the
Partnership, liquidation, termination or adjudication of incompetency of a
Limited Partner shall not cause the termination or dissolution of the
Partnership and the business of the Partnership shall continue. Upon any such
occurrence, the trustee, receiver, executor, administrator, committee, guardian
or conservator of such Limited Partner shall have all of the rights of such
Limited Partner for the purpose of settling or managing its estate or property,
subject to satisfying the conditions precedent set forth in Section 8.04(B)
above. The transfer by such trustee, receiver, executor, administrator,
committee, guardian or conservator of any Partnership Interest shall be subject
to all of the restrictions hereunder to which such transfer would have been
subject if such transfer had been made by such Bankrupt, deceased, dissolved,
liquidated, terminated or incompetent Limited Partner.
9.03 Liquidation of Partnership Assets.
(A) In the event of dissolution and final termination of the Partnership, a
full accounting of the assets and liabilities shall be taken, and the assets
shall be liquidated, with the residual cash therefrom distributed in accordance
with the provisions of Section 5.03 by the later of (i) the last day of the
Fiscal Year in which the termination occurs or (ii) ninety (90) days after the
date on which the termination occurs.
(B) The General Partner shall file all certificates and notices of the
dissolution of the Partnership required by law. The General Partner shall
proceed without any unnecessary delay to sell and otherwise liquidate the
Partnership Assets; provided, however, that if the General Partner shall
determine that an immediate sale of part or all of the Partnership Assets would
cause undue loss to the Partners, the General Partner may defer the liquidation
except (i) to the extent provided by the Act, (ii) as required by Section
9.03(A) or (iii) as may be necessary to satisfy the debts and liabilities of the
Partnership to Persons other than the Partners. Upon the complete liquidation
and distribution of the Partnership Assets, the Partners shall cease to be
Partners of the Partnership, and the General Partner shall execute, acknowledge
and cause to be filed any and all certificates and notices required by law to
terminate the Partnership.
(C) Upon the dissolution of the Partnership pursuant to Section 9.01, the
General Partner shall cause to be prepared, and shall furnish to each Partner, a
statement setting forth the assets and liabilities of the Partnership. Promptly
following the complete liquidation and distribution of the Partnership Assets,
the General Partner shall furnish to each Partner a statement showing the manner
in which the Partnership Assets were liquidated and distributed.
ARTICLE X - AMENDMENTS
10.01 Amendment Procedure. Subject to Section 6.03(B) and Section 6.03(C),
amendments to this Agreement may be proposed by any Partner. A proposed
amendment will be adopted and effective only if it receives the unanimous
Consent of the Partners. Within ten (10) days of the making of any proposal to
amend this Agreement, the General Partner shall give the Limited Partner Notice
of such proposal (along with the text of the proposed amendment and a statement
of its purposes).
ARTICLE XI - MISCELLANEOUS PROVISIONS
11.01 Title to Partnership Property. All property owned by the Partnership,
whether real or personal, tangible or intangible, shall be deemed to be owned by
the Partnership as an entity, and no Partner, individually, shall have any
ownership interest in any Partnership property. Each Partner's Partnership
Interest shall be personal property for all purposes.
11.02 Separate Identity/Operations. The Partnership shall:
(A) Maintain books and records separate from any other Person;
(B) Maintain its accounts separate from any other Person;
(C) Not commingle its assets or funds with those of any other Person;
(D) Conduct its own business in its own name;
(E) Maintain separate financial statements;
(F) Pay its own liabilities out of its own funds;
(G) Observe all partnership formalities;
(H) Maintain an arm's-length relationship with its Affiliates and enter
into transactions with its Affiliates only on commercially reasonable terms;
(I) Pay the salaries of its own employees and maintain a sufficient number
of employees in light of its contemplated business operations;
(J) Not guarantee or become obligated for the debts of any other Person or
hold out its credit as being available to satisfy the obligations of others;
(K) Not acquire obligations or securities of its partners, members or
shareholders;
(L) Allocate fairly and reasonably any overhead for shared office space;
(M) Use separate stationary, invoices, and checks;
(N) Not pledge its assets for the benefit of any other Person or make loans
or advances to any Person;
(O) Hold itself out as a separate entity and not identify itself as a
division of any other Person;
(P) Correct any known misunderstanding regarding its separate identity;
(Q) Maintain adequate capital in light of its contemplated business
operations; and
(R) File its tax returns separate from those of any other entity and not
file a consolidated federal income tax return with any other corporation.
11.03 Other Activities. Except as expressly provided otherwise in this
Agreement, any Partner may engage in, or possess an interest in, other business
ventures of every nature and description, independently or with others,
including, without limitation, real estate business ventures, whether or not
such other enterprises shall be in competition with any activities of the
Partnership; and neither the Partnership nor the other Partners shall have any
right by virtue of this Agreement in and to such independent ventures or to the
income or profits derived therefrom.
11.04 Applicable Law. This Agreement, and the application or interpretation
thereof, shall be governed exclusively by its terms and by the laws of the State
of Delaware.
11.05 Binding Agreement. This Agreement shall be binding upon the parties
hereto, their heirs, executors, personal representatives, successors and
assigns.
11.06 Counterparts and Effectiveness. This Agreement may be executed in
several counterparts, each of which shall be treated as originals for all
purposes, and all of which shall constitute one agreement, binding on all of the
parties hereto, notwithstanding that all the parties are not signatory to the
original or the same counterpart. Any such counterpart shall be admissible into
evidence as an original hereof against the Person who executed it. The execution
and delivery of this Agreement by facsimile shall be sufficient for all purposes
hereof and shall be binding upon any Person who so executes.
11.07 Entire Agreement. This Agreement (and Exhibits 1 and 2 hereto)
contains the entire understanding between the parties hereto and supersedes all
prior written or oral agreements among them respecting the within subject
matter, unless otherwise provided herein. There are no representations,
agreements, arrangements or understandings, oral or written, between the
Partners hereto relating to the subject matter of this Partnership Agreement
which are not fully expressed herein and in said Exhibits 1 and 2.
IN WITNESS WHEREOF, this Agreement has been executed as of the day and year
first above written.
General Partner:
HMA-GP, Inc.
By: /s/ P. K. Brady
Limited Partner:
Ivy Street Hotel Limited Partnership
By: Atlanta Marriott Marquis II Limited
Partnership, Its General Partner
By: Marriott Marquis Corporation
Its General Partner
By: /s/ P. K. Brady
HMA REALTY LIMITED PARTNERSHIP
EXHIBIT 1 TO
LIMITED PARTNERSHIP AGREEMENT
Schedule of Partners
Percentage of
General Partner: Partnership Interest
HMA-GP, Inc. 1.00%
10400 Fernwood Road
Bethesda, Maryland 20817
Limited Partner:
Ivy Street Hotel Limited Partnership 99.00%
10400 Fernwood Road
Bethesda, Maryland 20817
HMA REALTY LIMITED PARTNERSHIP
EXHIBIT 2 TO
LIMITED PARTNERSHIP AGREEMENT
Description of Property
ALL THAT TRACT or parcel of land lying and being in Land Lot 51 of the
14th District of Fulton County, Georgia, containing 3.58 acres, same being more
particularly described as follows:
TO FIND THE TRUE POINT OF BEGINNING, begin at a drill hole set which
marks the intersection of the northerly Right-of-Way Line of Harris Street
(Sixty (60') foot Right-of-Way) with the easterly Right-of-Way Line of Peachtree
Center Avenue (Sixty (60') foot Right-of-Way); thence traveling along the
northerly Right-of-Way Line of said Harris Street south 89 degrees 10 minutes 36
seconds east a distance of 207.07 feet to a drill hole set on said Right-of-Way
Line which drill hole set is the TRUE POINT OF BEGINNING; from the TRUE POINT OF
BEGINNING as thus established leaving said Right-of-Way Line and traveling north
00 degrees 49 minutes 24 seconds east a distance of 112.72 feet to a point;
thence traveling north 89 degrees 10 minutes 36 seconds west a distance of
206.60 feet to a nail set on the easterly Right-of-Way Line of said Peachtree
Center Avenue; thence traveling along said Right-of-Way Line north 01 degrees 03
minutes 48 seconds east a distance of 177.30 feet to a drill hole set on said
Right-of-Way Line; thence leaving said Right-of-Way Line and traveling south 89
degrees 10 minutes 36 seconds east a distance of 205.92 feet to a point; thence
traveling north 00 degrees 49 minutes 24 seconds east a distance of 113.30 feet
to a nail set on the southerly Right-of-Way Line of Baker Street (Sixty (60')
foot Right-of-Way); thence traveling along said Right-of-Way Line south 89
degrees 19 minutes 51 seconds east a distance of 296.41 feet to a drill hole set
on said Right-of-Way Line at its intersection with the westerly Right-of-Way
Line of Courtland Street (Seventy (70') foot Right-of-Way); thence traveling
along the westerly Right-of-Way Line of said Courtland Street south 01 degrees
03 minutes 16 seconds west a distance of 404.12 feet to a drill hole set on said
Right-of-Way Line at its intersection with the northerly Right-of-Way Line of
said Harris Street; thence traveling along the northerly Right-of-Way Line of
said Harris Street north 89 degrees 10 minutes 36 seconds west a distance of
294.84 feet to a drill hole set on said Right-of-Way Line, which drill hole set
marks the TRUE POINT OF BEGINNING.
The above described property being shown on that certain Survey
entitled "ALTA/ACSM Land Title Survey for Atlanta Marriott Marquis Limited
Partnership, Ivy Street Hotel Limited Partnership, Marriott/Portman Finance
Corporation, The Citizens and Southern National Bank & Ticor Title Insurance
Company of California", prepared by Planners and Engineers Collaborative,
bearing the seal of Robert Lee White, Georgia Registered Land Surveyor No.
2080, dated January 5, 1990.
TOGETHER WITH the following two (2) easement parcels, on the terms and
subject to the conditions set forth with respect thereto in, to and under that
certain Declaration of Easements and Restrictions dated on September 1, 1982 and
recorded at Deed Book 8291, Page 40, Fulton County, Georgia Records; as amended
by First Amendment to Declaration of Easements and Restrictions, dated as of
August 4, 1983, recorded at Deed Book 8657, Page 385, aforesaid Records:
EASEMENT PARCELS
(MARQUIS TWO TOWER)
All that tract or parcel of land lying and being in the City of
Atlanta, in Land Lot 51 of the 14th District of Fulton County, Georgia, and
being more particularly described as follows:
BEGINNING at the point formed by the intersection of the east
right-of-way line of Peachtree Center Avenue (formerly known as Ivy Street) (as
presently located) with the south right-of-way line of Baker Street (as
presently located; run thence south 89 degrees, 19 minutes, 51 seconds east, as
measured along the south right-of-way line of Baker Street (as presently
located), a distance of 205.44 feet to a point; run thence south 00 degrees, 49
minutes, 24 seconds west, a distance of 113.30 feet to a point; run thence north
89 degrees, 10 minutes, 36 seconds west, a distance of 205.92 feet to a point
lying on the east right-of-way line of Peachtree Center Avenue (formerly known
as Ivy Street) (as presently located); run thence north 01 degrees, 03 minutes,
49 seconds east, as measured along the east right-of-way line of Peachtree
Center Avenue (formerly known as Ivy Street) (as presently located) a distance
of 112.75 feet to a point formed by the intersection of the south right-of-way
line of Baker Street (as presently located) with the east right-of-way line of
Peachtree Center Avenue (formerly known as Ivy Street) (as presently located)
and the POINT OF BEGINNING; being property shown on the plat of survey, to which
reference is made for all purposes, prepared for P.C. Towers, L.P., a Georgia
limited partnership, by Planners and Engineers Collaborative, bearing the
certification of Robert L. White, Georgia Registered Land Surveyor, number 2080,
dated July 20, 1988, last revised September 9, 1988.
(MARQUIS ONE TOWER)
All that tract or parcel of land lying and being in the City of
Atlanta, in Land Lot 51, of the 14th District, of Fulton County, Georgia, and
being more particularly described as follows:
BEGINNING at the point formed by the intersection of the east
right-of-way line of Peachtree Center Avenue (formerly known as Ivy Street) (as
presently located) with the north right-of-way line of Harris Street (as
presently located); run thence north 01 degrees, 03 minutes, 49 seconds east, as
measured along the east right-of-way line of Peachtree Center Avenue (formerly
known as Ivy Street) (an presently located), a distance of 112.72 feet to a
point; run thence south 89 degrees, 10 minutes, 36 seconds east, a distance of
206.60 feet to a point; run thence south 00 degrees, 49 minutes, 24 seconds
west, a distance of 112.72 feet to a point located on the north right-of-way
line of Harris Street (as presently located); run thence north 89 degrees, 10
minutes, 36 seconds west, as measured along the north right-of-way line of
Harris Street (as presently located), a distance of 207.07 feet to a point
formed by the intersection of the east right-of-way line of Peachtree Center
Avenue (formerly known as Ivy Street) (as presently located) with the north
right-of-way line of Harris Street (as presently located) and the POINT OF
BEGINNING; being property shown on the plat of survey, to which reference is
made for all purposes, prepared for P.C. Towers, L.P., a Georgia limited
partnership, by Planners and Engineers Collaborative, bearing the certification
of Robert L. White, Georgia Registered Land Surveyor, number 2080, dated July
20, 1988, last revised September 9, 1988.
UNANIMOUS WRITTEN CONSENT OF THE DIRECTORS
OF HMA-GP, INC. WITHOUT
A MEETING PURSUANT TO SECTION 141(f) OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
WHEREAS, HMA-GP, Inc., a Delaware corporation (the "Corporation") is the
general partner of HMA Realty Limited Partnership, a Delaware limited
partnership ("Borrower"); and
WHEREAS, Ivy Street Hotel Limited Partnership, a Georgia limited
partnership ("Ivy"), owns a 99% limited partnership interest of the Borrower,
and the Corporation owns a 1% general partnership interest in the Borrower; and
WHEREAS, the Borrower owns or will own the real property and improvements
known as the Atlanta Marriott Marquis Hotel (the "Hotel"); and
WHEREAS, the Borrower has obtained a commitment from Nomura Asset Capital
Corporation ("Nomura") to provide approximately $164 million in mortgage loan
financing to the Borrower (the "Mortgage Loan").
NOW, THEREFORE, pursuant to Section 141(f) of the General Corporation Law
of the State of Delaware, the undersigned, being all of the directors of the
Corporation, do hereby adopt the resolutions set forth on Exhibit A attached
hereto.
IN WITNESS WHEREOF, the undersigned have executed this consent on
January 28, 1998.
/s/ Bruce F. Stemerman
Bruce F. Stemerman, Director
/s/ Christopher G. Townsend
Christopher G. Townsend, Director
/s/ Robert E. Parsons
Robert E. Parsons, Jr., Director
/s/ Mark A. Ferrucci
Mark A. Ferrucci, Director
EXHIBIT A
RESOLVED, that the execution, delivery and performance by the Corporation
of all of the documents listed on Appendix A attached hereto (collectively, the
"Loan Documents"), with such changes as the officer or officers executing the
same shall approve, and each of the documents specifically referred to therein,
is deemed to be in the best interests of the Corporation and is hereby approved;
and
RESOLVED, that the proper officers of the Corporation, or any one of them,
be, and are hereby authorized, directed and empowered, in the name of the
Corporation, for itself and/or in its capacity as General Partner of the
Partnership, to enter into, execute and deliver any and all documents in
connection with the Loan, including without limitation, the Loan Documents,
deposit agreements; cash management agreements; assignments of leases and rents
and assignments thereof; UCC financing statements; operations and maintenance
agreements; escrow and disbursement letters or instructions; assignments of
every kind and description; settlement statements; consents and acknowledgments;
certificates and certifications; and all such other documents, instruments or
certificates of every kind and description as may be necessary or desirable in
connection with the matters hereby authorized; and
RESOLVED, that the proper officers of the Corporation be, and each of them
hereby is, authorized and empowered to execute and deliver all such further
instruments and documents in the name and on behalf of the Corporation, under
its corporate seal or otherwise, and to take all such other actions, and to pay
all such expenses, as shall in their judgment by necessary, proper or advisable
in order to carry out fully the intent and accomplish the purposes of these
resolutions; and
RESOLVED, that the proper officers of the Corporation be, and each of them
hereby is, authorized and empowered to take such steps, to make such payments,
to execute such letters, certificates, agreements, papers or instruments and to
do or cause to be done such other acts and things as in the judgment of such
officer may be necessary or desirable or appropriate to carry out the terms and
provisions of the agreements, instruments, certificates and other documents
executed and delivered by the Corporation in accordance with the foregoing
resolutions and otherwise to carry out the intent and purposes of the foregoing
resolutions and to consummate the transactions therein contemplated; and
RESOLVED, that all of the acts of the officers, agents or employees of the
Corporation, for and on behalf of the Corporation, in connection with the
transactions described or referred to in these resolutions, whether heretofore
or hereafter done or performed, which are in conformity with the intent and
purposes of these resolutions and the agreements and instruments referred to
herein, shall be, and the same hereby are, ratified, confirmed and approved in
all respects.
RESOLVED, that the proper officers of the Corporation for purposes of these
Resolutions are the President, any Vice President, the Treasurer, the Secretary
and any Assistant Secretary of the Corporation.
RESOLVED, that the execution of this Waiver of Notice and Unanimous Written
Consent and delivery thereof by facsimile shall be sufficient for all purposes
and shall be binding upon any party who so executes.
APPENDIX A
1. Loan Agreement ("Loan Agreement") by and between HMA Realty Limited
Partnership (the "Corporation") and Nomura Asset Capital Corporation ("Lender").
2. Secured Promissory Note in the approximate original principal amount of
$164,000,000 made by the Corporation in favor of Lender ("Secured Note").
3. Deed to Secure Debt, Assignment of Leases, Security Agreement and
Fixture Filing made by the Corporation in favor of Lender ("Deed to Secure
Debt").
4. Assignment of Leases. Rents and Profits by the Corporation to Lender
with reference to the Hotel ("Assignment of Leases").
5. Security Agreement by and between the Corporation and Lender ("Security
Agreement").
6. Collateral Account Agreement by and between the Corporation and Lender
("Collateral Account Agreement").
7. Collateral Assignment of Documents and Property Rights by and between
the Corporation and Lender ("Collateral Assignment").
8. Environmental Indemnity Agreement made by the Corporation for the
benefit of Lender ("Environmental Indemnity").
9. Modification, Subordination and Non-Disturbance Agreement, Estoppel,
Assignment and Consent by and among New Marriott MI, Inc., the Corporation and
Lender ("SNDA").
10. UCC-1 Financing Statement (collectively the "Financing Statements")
between the Corporation, as debtor and Lender, as secured party.
EXHIBIT 3.c.
FOURTH RESTATED AGREEMENT
OF
LIMITED PARTNERSHIP
OF
IVY STREET HOTEL LIMITED PARTNERSHIP
THIS LIMITED PARTNERSHIP AGREEMENT (the "Agreement") is made as of the
29th day of January, 1998 by and between (i) Atlanta Marriott Marquis II Limited
Partnership, a Delaware limited partnership ("AMMLP" or the "Managing General
Partner"); and Portman Marquis Corp., a Georgia corporation (the "Special
General Partner") (collectively, the "General Partners"), and (ii) John C.
Portman, Jr., a Georgia resident ("Portman"), Hopewell Group, Ltd., a Georgia
limited partnership ("Hopewell"), and Hopeport, Ltd., a Georgia limited
partnership ("Hopeport"), (collectively, the "Limited Partners"); the General
Partners and Limited Partners being hereinafter sometimes referred to,
collectively, as the "Partners."
RECITALS:
R-1. Marriott Corporation ("Marriott") and Portman, as both general
partners and limited partners, formed Ivy Street Hotel Limited Partnership (the
"Partnership") as a Georgia limited partnership organized and existing pursuant
to that certain Agreement of Limited Partnership (the "Original Partnership
Agreement") dated July 31, 1982, a certificate (the "Certificate") whereof is
recorded in Limited Partnership Book 242, beginning at page 196, Records of
Fulton County, Georgia.
R-2. By subsequent amendments to the Original Partnership Agreement and
said Certificate, (i) both Hopewell and Hopeport were admitted to the
Partnership as limited partners by virtue of assignments from Portman; (ii)
Marriott's interest as a limited partner in the Partnership was converted to a
general partner interest; and (iii) Atlanta Marriott Marquis Limited Partnership
("AMMLP Predecessor"), a Delaware limited partnership, was admitted to the
Partnership as a general partner by virtue of assignment and sale from Marriott
of its entire interest in the Partnership.
R-3. The Original Partnership Agreement was wholly restated and
superseded by that certain Restated Agreement and Certificate of Limited
Partnership (the "Restated Partnership Agreement") dated May 28, 1985, and
recorded in Limited Partnership Book 402, beginning at page 435, Records of
Fulton County, Georgia.
R-4. The Restated Partnership Agreement was wholly restated and
superseded by that certain Second Restated Agreement of Limited Partnership
dated July 10, 1990 (the "Second Restated Partnership Agreement").
R-5. By subsequent amendments to the Second Restated Partnership
Agreement, Portman Holdings, L.P., a Georgia limited partnership ("Portman
Holdings") was admitted to the Partnership as a Limited Partner by virtue of an
assignment from Portman.
R-6. The Interest of Portman Holdings was transferred to Portman,
effective August 20, 1996, and the parties have heretofore executed that certain
Third Restated Agreement of Limited Partnership dated as of December 31, 1997
("Third Restated Partnership Agreement") to reflect the re-admission of Portman
as a Limited Partner and the withdrawal from the Partnership of Portman
Holdings.
R-7. Immediately prior to the execution of the Third Restated
Partnership Agreement, Portman and AMMLP Predecessor constituted all of the
general partners of the Partnership, and Portman, Hopewell and Hopeport
constituted all of the limited partners of the Partnership.
R-8. Simultaneously with the execution and delivery of the Third
Restated Partnership Agreement; (i) Portman transferred his Interest as a
General Partner to the Special General Partner, which is wholly owned by
Portman; (ii) AMMLP Predecessor merged with and into AMMLP and AMMLP succeeded
to the Interest of AMMLP Predecessor as a General Partner of the Partnership;
and (iii) AMMLP became the Managing General Partner and Portman Marquis Corp.
became the Special General Partner.
R-9. In connection with the formation of BRE (as hereinafter defined)
and the refinancing of the Hotel (hereinafter defined), the parties hereto
desire to enter into this Agreement in order to (i) continue the Partnership;
(ii) restate and supersede the Third Restated Partnership Agreement in the
entirety; (iii) govern the affairs of the Partnership; and (iv) set forth their
rights, obligations and understandings with respect to the Partnership and BRE.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto, intending to be legally bound hereby, agree as
follows:
ARTICLE I - CONTINUATION
1.01 Continuation. The Partners hereby confirm the continuation of the
Partnership as a limited partnership under the Act. The Managing General Partner
shall take all action required by law to perfect and maintain the Partnership as
a limited partnership under the Act and under the laws of all other
jurisdictions in which the Partnership may elect to conduct business. The
Partners further agree and obligate themselves to execute, acknowledge, and
cause to be filed for record, in the place or places and manner prescribed by
law, any amendments to the Certificate or this Agreement as may be required,
either by the Act, by the laws of a jurisdiction in which the Partnership
transacts business, or by this Agreement, to comply with the requirements of law
for the continuation, preservation and operation of the Partnership as a limited
partnership under the Act or under the laws of such other jurisdiction(s) in
which the Partnership transacts business.
1.02 Name. The name of the Partnership is Ivy Street Hotel Limited
Partnership.
1.03 Place of Business; Registered Agent. The principal office of the
Partnership is located at 10400 Fernwood Road, Bethesda, Maryland 20817-1109, or
at such other place as the Managing General Partner may from time to time
designate. The Partnership's registered agent for service of process is
Corporation Service Company whose address is 100 Peachtree Street, Atlanta,
Fulton County, Georgia 30303. The Managing General Partner may change the
registered agent of the Partnership as it may from time to time determine.
ARTICLE II - INTERPRETIVE PROVISIONS
2.01 Certain Definitions. The following terms have the definitions
hereinafter indicated whenever used in this Agreement with initial capital
letters:
Act: The Georgia Revised Uniform Limited Partnership Act, as the same may
be amended and in effect from time to time.
Affiliate: With respect to any referenced Person: (i) such Person or a
member of his immediate family, (ii) any Person who directly or indirectly owns,
controls or holds the power to vote ten percent (10%) or more of the outstanding
voting securities or membership interests of the Person in question; (iii) any
Person ten percent (10%) or more of whose outstanding securities or membership
interests are directly or indirectly owned, controlled by, or held with power to
vote by the Person in question; (iv) any Person directly or indirectly
controlling, controlled by, or under direct common control with the Person in
question; (v) if the Person in question is a corporation or limited liability
company, any executive officer, director or manager of such Person or of any
corporation directly or indirectly controlling such Person; and (vi) if the
Person in question is a partnership, any general partner of the partnership or
any limited partner owning or controlling ten percent (10%) or more of either
the capital or profits interest in such partnership. As used herein, "control"
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person, whether through
the ownership of voting securities, by contract, or otherwise. For purposes of
this definition, a publicly-traded entity (such as Marriott International, Inc.)
will not be deemed an affiliate of a Partner or any of its Affiliates (as herein
defined) unless a Person or group of Persons directly or indirectly owns twenty
percent (20%) or more of the outstanding common stock of both such Partner (or
its Affiliates) and such publicly-traded entity.
Agreement: This Fourth Restated Agreement of Limited Partnership and
Exhibits 1 through 3 attached hereto, as the same may be amended and in effect
from time to time.
AMMLP: Atlanta Marriott Marquis II Limited Partnership, a Delaware limited
partnership and the Managing General Partner of the Partnership.
Bankruptcy: Either (i) a referenced Person's making an assignment for the
benefit of creditors generally; (ii) the filing by a referenced Person of a
voluntary petition in bankruptcy; (iii) a referenced Person's being adjudged
insolvent or having entered against him an order for relief in any bankruptcy or
insolvency proceeding; (iv) the filing by a referenced Person of an answer
seeking any reorganization, composition, readjustment, liquidation, dissolution
or similar relief under any law or regulation; (v) the filing by a referenced
Person of an answer or other pleading admitting or failing to contest the
material allegations of a petition filed against him in any proceeding of
reorganization, composition, readjustment, liquidation, dissolution or similar
relief under any statute, law or regulation; or (vi) a referenced Person's
seeking, consenting to, or acquiescing in appointment of a trustee, receiver or
liquidator for all or substantially all of his property (or court appointment of
such trustee, receiver or liquidator).
BRE: The entity described in Section 6.01(C) of this Agreement.
Capital Account: For each Partner, the separate account established with
regard to such Partner on the books of the Partnership, which account shall be
credited for (i) the amount of such Partner's Capital Contributions, and (ii)
the amount of Profits allocated to such Partner under Exhibit 2 hereof, and
which shall be debited for (i) the Gross Asset Value of any asset distributed to
such Partner, and (ii) the amount of Losses allocated to such Partner under
Exhibit 2 hereof. The foregoing definition is intended to comply with Treasury
Regulations Section 1.704-1(b)(2)(iv). Any transferee of a Partner's Interest
transferred in accordance with this Agreement shall succeed to that transferor's
Capital Account.
Capital Contribution: The total amount of money or the fair market value
(as agreed upon by the Partners in accordance with this Agreement) of other
property contributed by each Partner to the Partnership pursuant to the terms of
this Agreement, including the Capital Contribution made by a predecessor
holder(s) of the Interest of such Partner, unless the context requires
otherwise.
Capital Proceeds: The net proceeds received by the Partnership from, or
attributable to, (i) any financing obtained by the Partnership after payment of
the then-outstanding principal balance and accrued but unpaid interest on
liabilities of the Partnership then payable from the proceeds of such financing;
(ii) the sale or condemnation (other than a temporary taking) of all or
substantially all of the Project after payment of the then-outstanding principal
balance and accrued but unpaid interest on liabilities of the Partnership then
payable pursuant to the terms thereof; (iii) the receipt of title or fire and
extended coverage insurance; and (iv) any reserves previously set aside from
Capital Proceeds or Capital Contributions which are deemed available for
distribution by the Managing General Partner. In the event the Project is
transferred to BRE and the Partnership thereafter receives a distribution,
directly or indirectly, from BRE on account of any event of a nature or of a
kind hereinabove described in clauses (i)-(iv), such distribution shall be
deemed to be Capital Proceeds for the purposes of this Agreement.
Cash Flow: With respect to any Fiscal Year or other accounting period
designated by the Managing General Partner, the sum of all cash receipts of the
Partnership other than Capital Proceeds or Capital Contributions.
Certificate: The Partnership's Certificate of Limited Partnership, as
amended from time to time and in effect, as required by the Act.
Class A Capital: The Capital Contributions of Portman and AMMLP (or their
respective predecessors in interest) referred to in Sections 4.01 and 4.02(A)
hereof.
Class B Capital: The capital contributed from time to time to the
Partnership by the Managing General Partner pursuant to Section 4.03 hereof.
Class C Capital: The Capital Account credit given to the Managing General
Partner in exchange for the contribution of the Land pursuant to Section 4.02(B)
hereof.
Class B Preferred Return: Commencing from the respective dates of
contribution of the Class B Capital an annual, cumulative return of thirteen and
one-half percent (13.5%) per annum on the Unreturned Class B Capital, as the
same may vary from time to time. To the extent unpaid in any Fiscal Year, the
Class B Preferred Return shall compound at the rate of thirteen and one-half
percent (13.5%) per annum.
Class C Preferred Return: Commencing with the date of the contribution of
the Land to the Partnership an annual, cumulative return of ten percent (10%)
per annum on the Unreturned Class C Capital, as the same may vary from time to
time. To the extent unpaid in any Fiscal Year, the Class C Preferred Return
shall compound at the rate of ten percent (10%) per annum.
Code: The Internal Revenue Code of 1986, as amended from time to time, and
all published rules, rulings and regulations thereunder.
Consent: Either the written consent of a Person or the affirmative vote of
such Person at a meeting duly called and held pursuant to this Agreement, as the
case may be, to do the act or thing for which the consent is required or
solicited, or the act of granting such consent, as the context may require.
First Mortgage: Certain mortgage financing evidenced by a secured note of
the Partnership in the original principal amount of One Hundred Ninety-Nine
Million Dollars ($199,000,000), which financing was obtained by the Partnership
from Marriott/Portman Finance Corporation pursuant to notes issued by
Marriott/Portman Finance Corporation in accordance with that certain indenture
entered into on or about July 10, 1990, among Marriott/Portman Finance
Corporation, Marriott and The Citizens and Southern National Bank, as collateral
trustee.
Fiscal Year: The calendar year or such other twelve (12)-month period
designated by the Managing General Partner.
General Partner(s): The Managing General Partner and the Special General
Partner.
Host: Host Marriott Corporation, a Delaware corporation, an Affiliate of
the Managing General Partner and the successor in interest to Marriott under
various undertakings made by Marriott to the Partnership.
Host Advance: The loan made to the Partnership by Host described in Section
4.04(A) of this Agreement.
Hotel: The Atlanta Marriott Marquis, a hotel owned by the Partnership
containing 1,674 guest rooms, meeting/banquet facilities, restaurants and
related amenities, located in Atlanta, Fulton County, Georgia.
Hotel Management Agreement: That certain Hotel Management Agreement entered
into between the Partnership and the Hotel Operator dated as of January 3, 1998,
as the same may be hereafter further amended, providing for the day-to-day
operation of the Hotel.
Hotel Operator: New Marriott MI, Inc., a Delaware corporation, or its
successor or assignee as permitted under the Hotel Management Agreement, or any
other Person who shall at any time act as the operator of the Hotel pursuant to
an agreement with the Partnership.
Hotel Policy Committee: The committee referred to in Section 6.07 hereof.
Indemnified Parties: The Persons referred to in Section 6.06 hereof.
IRS: The Internal Revenue Service, an agency of the United States
government.
Land: The approximately 3.6-acre tract of land in Atlanta, Fulton County,
Georgia on which the Hotel is situated, more particularly described in Exhibit 3
hereto, which Land will be contributed by AMMLP to the Partnership in exchange
for the Class C Capital.
Limited Partner(s): Those Persons indicated as Limited Partners on Exhibit
1 hereto, and their respective successor(s) who or which become Substituted
Limited Partner(s) in accordance with the terms of this Agreement.
Managing General Partner: AMMLP and its successor(s) who or which become
Successor Managing General Partner(s) in accordance with the terms of this
Agreement.
Net Cash Flow: Cash Flow and any other funds (other than Capital Proceeds)
deemed available for distribution by the Managing General Partner, including any
amounts previously set aside as reserves or escrows from Cash Flow, less (i)
expenses and expenditures payable therefrom including, without limitation,
operating expenses, taxes, insurance premiums, and repayment of advances and
loans, including repayment of the Host Advance in accordance with the terms of
the note evidencing such loan, and (ii) any reserves deemed reasonably necessary
by the Managing General Partner.
Notice: A writing given by any Partner to any other Partner or Partners
pursuant to this Agreement personally delivered to such Partner or sent by (i)
registered or certified mail, postage prepaid, return receipt requested, (ii)
facsimile transmission with answer back confirmation, or (iii) nationally
recognized overnight courier service to such Partner at the last known address
of such Partner as shown on the books of the Partnership, the date of personal
delivery, or of the certification receipt, as the case may be, being deemed the
date of such Notice; provided, however, that any written communication actually
received by a Partner shall constitute Notice for all purposes of this
Agreement. Partner(s): The General Partner(s) and the Limited Partner(s), and
such other Persons who become Partners pursuant to the terms of this Agreement.
Partner Loans: The loans referred to in Section 4.06 hereof.
Partnership: The Georgia limited partnership referred to herein as Ivy
Street Hotel Limited Partnership, as such partnership may from time to time be
constituted.
Partnership Assets: At any particular time, the Project, any direct or
indirect interest in BRE, and all other rights, assets or property (tangible or
intangible, choate or inchoate, fixed or contingent) held or owned by the
Partnership.
Partnership Interest or Interest: The ownership interest of a Partner in
the Partnership at any particular time, including the rights of such Partner to
any and all benefits to which such Partner may be entitled as provided in this
Agreement and in the Act, including such Partner's Percentage of Partnership
Interest, right to distributions under Article V hereof, and any other rights
which such Partner has in the Partnership, together with and subject to the
obligation of such Partner to comply with all the terms and conditions of this
Agreement.
Percentage of Partnership Interest or Percentage Interest: As to any
Partner, the percentage in the Partnership shown opposite the name of such
Partner on Exhibit 1 attached hereto, as the same may be adjusted from time to
time in accordance with this Agreement.
Person: Any individual, partnership, corporation, limited liability
company, trust or other entity.
Portman: John C. Portman, Jr., a Georgia resident and a Limited Partner of
the Partnership.
Portman Approved Transferees: (i) Portman's estate, (ii) any lineal
relative, sibling, stepchild or spouse of Portman (or trusts for the benefit of
any thereof or partnerships comprised either of any thereof or of trusts for the
benefit of any thereof), (iii) business associates of Portman (or partnerships
comprised thereof) actively engaged (as of the date of formation of the
Partnership or as of the date such associate becomes a direct or indirect
Partner) in the business of an Affiliate of Portman, and (iv) any Person
controlled, directly or indirectly, by Portman.
Portman Partners: All Partners from time to time owning any portion of the
Partnership Interests owned on the date hereof by the Special General Partner
and the Limited Partners, together with any other Partner from time to time who
is an Affiliate of Portman.
Prime or Prime Rate: The prime rate as the same may be published and
modified from time to time in The Wall Street Journal. If at any time there is
more than one such published prime rate, the average of the range of the prime
rates shall be used.
Project: Collectively, the Land and the Hotel.
Representatives: Those Persons referred to in Section 6.07 hereof.
Special General Partner: Portman Marquis Corp.
Substituted Limited Partner: That Person or those Persons admitted to the
Partnership as substitute Limited Partner(s), in accordance with the provisions
of this Agreement. A Substituted Limited Partner, upon his or its admission as
such, shall succeed to the rights, privileges and liabilities of his or its
predecessor in interest with respect to the Interest transferred.
Successor General Partner: Any Person who is admitted to the Partnership as
an additional or substitute General Partner pursuant to Article VIII. A
Successor General Partner, upon his or its admission as such, shall succeed to
the rights, privileges and liabilities of his or its predecessor in interest as
a General Partner with respect to the Interest transferred.
Successor Managing General Partner: Any Person who is admitted to the
Partnership as a substitute Managing General Partner pursuant to Section 8.03(B)
hereof.
Tax Matters Partner: The Managing General Partner, or such other Partner
who becomes Tax Matters Partner pursuant to the terms of this Agreement.
Treasury Regulations: The income tax regulations promulgated under the
Code, as such regulations are in effect on the date hereof.
Unreturned Class B Capital: The total Class B Capital less all
distributions pursuant to Section 5.02(B)(3) of this Agreement.
Unreturned Class C Capital: The total Class C Capital less all
distributions pursuant to Section 5.02(B)(4) of this Agreement.
2.02 Rules of Construction.Rules of Construction. The following rules of
construction shall apply to this Agreement:
(A) All section headings in this Agreement are for the convenience of
reference only and are not intended to qualify the meaning of any section.
(B) All personal pronouns used in this Agreement, whether used in the
masculine, feminine or neuter gender, shall include all other genders, the
singular shall include the plural, and vice versa, as the context may require.
(C) Each provision of this Agreement shall be considered severable from the
rest, and if any provision of this Agreement or its application to any Person or
circumstances shall be held invalid and contrary to any existing or future law
or unenforceable to any extent, the remainder of this Agreement and the
application of any other provision to any Person or circumstances shall not be
affected thereby and shall be interpreted and enforced to the greatest extent
permitted by law so as to give effect to the original intent of the parties
hereto.
ARTICLE III - BUSINESS PURPOSE
3.01 Business and Purpose. The business and purpose of the Partnership are
to own, promote, market, operate and finance the Project, or to own, directly or
indirectly, interests in any partnership, corporation, limited liability company
or other entity owning the Project.
3.02 Authorized Activities. In carrying out the purposes of the
Partnership, but subject to all other provisions of this Agreement, the
Partnership is authorized to engage in any kind of lawful activity, and perform
and carry out contracts of any kind, necessary or advisable in connection with
the accomplishment of the purposes and business of the Partnership.
ARTICLE IV - CAPITAL; HOST ADVANCE
4.01 Capital Contributions of Portman. On or about the date of the
formation of the Partnership, Portman contributed or caused to be contributed to
the capital of the Partnership fee simple title to the Land, together with all
of Portman's right, title and interest in and to all assets, tangible and
intangible, real, personal or mixed, used or intended to be used solely in
connection with the Project. For purposes of this Agreement, the net value of
such initial capital contribution (that is, the value after deduction of the
then existing mortgage liabilities in favor of Crocker National Bank and
Marriott, respectively, subject to which the transfer to the Partnership was
made) is agreed by the Partners to be Two Million Five Hundred Thousand Dollars
($2,500,000) (i.e., Three Million Dollars ($3,000,000) less a special Five
Hundred Thousand Dollars ($500,000) distribution referenced in Section 8.3 of
the Restated Partnership Agreement) and shall constitute the portion of the
Class A Capital attributable to the Portman Partners. Portman represents and
warrants that each of the assets contributed to the Partnership which are
referred to in this Section 4.01 was freely assignable by or on behalf of
Portman, or if assignable only with the consent of a third party, such consent
was obtained prior to the assignment.
4.02 Capital Contributions of AMMLP.
(A) Simultaneously with the making of the capital contributions referred to
in Section 4.01, AMMLP's predecessor in interest contributed to the capital of
the Partnership the sum of Twelve Million Dollars ($12,000,000). In addition, on
or about May 28, 1985, AMMLP's predecessor in interest contributed to the
capital of the Partnership the sum of Fifteen Million Five Hundred Thousand
Dollars ($15,500,000), a total of Twenty-Seven Million Five Hundred Thousand
Dollars ($27,500,000) which shall constitute the portion of the Class A Capital
attributable to AMMLP.
(B) Simultaneously with the refinancing of the First Mortgage, (i) AMMLP
shall contribute to the capital of the Partnership AMMLP's interest in the Land;
(ii) the ground lease to which the Land is subject shall terminate; and (iii)
AMMLP shall be credited with a Capital Contribution of Twenty-Six Million Five
Hundred Thousand Dollars ($26,500,000), which shall constitute Class C Capital.
The parties acknowledge that in order to reduce potential transfer and
recordation taxes, the Land may be transferred directly to a BRE as provided in
Section 6.01(C) of this Agreement.
4.03 Class B Capital. Simultaneously with the execution and delivery of the
Third Restated Partnership Agreement, AMMLP contributed to the capital of the
Partnership Six Million Dollars ($6,000,000) which capital is intended to permit
the Partnership to repair the facade of the Hotel, to engage in a program of
room repair and refurbishment, and for Partnership working capital. In addition,
except as the Special General Partner may otherwise Consent, AMMLP shall
contribute up to an additional Sixty-Nine Million Dollars ($69,000,000), but in
no event less than Sixty Million Dollars ($60,000,000), to the capital of the
Partnership in order to permit a refinancing of the First Mortgage, the
completion of the repair of the facade of the Hotel and the program of room
repair and refurbishment and to pay or reimburse the payment of transactional
costs and accrued land rent. In connection with the first additional Capital
Contribution referenced in this Section 4.03, the Capital Accounts of the
Partners shall be adjusted as provided in Treasury Regulations Section
1.704-1(b)(2)(iv)(f) and the Gross Asset Value of each asset shall be adjusted
as set forth in Exhibit 2 hereto. In connection with the second additional
Capital Contribution and refinancing referenced in this Section 4.03, Host shall
be repaid any amounts it is owed as a result of advances under the "Marriott
Guaranties" (as such term is defined in the "Marriott Commitment" which is
itself defined in the Second Restated Partnership Agreement).
4.04 Host Advance.
(A) As of the date of the Third Restated Partnership Agreement, Host had
advanced an aggregate of Twenty Million One Hundred Thirty-Four Thousand Dollars
($20,134,000) ("Host Advance") to the Partnership pursuant to the "Marriott
Commitment" as "Marriott Loans" (as such terms are defined in the Second
Restated Partnership Agreement), in addition to the advances referenced in the
last sentence of Section 4.03 above. Such Host Advance is evidenced by a
promissory note, dated the date of the Third Restated Partnership Agreement,
with a fifteen (15) year term bearing interest at the rate of nine percent (9%)
per annum. Such note provides for interest only during the first five (5) years
of its term and then is fully amortizing, on a constant payment basis over the
remaining ten (10) years of its term. Said note shall be due and payable in full
upon sale of the Project or the disposition of the Project by BRE (other than a
transfer of the Project to the Partnership or an Affiliate thereof) or the
Partnership's interest in BRE (other than in connection with a transfer of the
Project to the Partnership or an Affiliate thereof). Such Host Advance shall be
repaid solely from Partnership Cash Flow and Capital Proceeds which would be
available for distribution to the Partners but for the obligation to first repay
the Host Advance. The interest rate and amortization schedule for the Host
Advance may be changed, and voluntary prepayments may be made, only with the
Consent of the Special General Partner.
(B) In consideration of AMMLP's agreement to provide the Class B Capital,
each Partner hereby agrees as follows:
(i) Host, AMMLP, its or their Affiliates and/or predecessor(s) in interest
shall have no further obligation to loan or advance funds under the Marriott
Commitment or to make any Marriott Loan and are released from any guarantee or
undertaking which runs to the benefit of the Partnership or the Partners (except
as expressly set forth in this Agreement).
(ii) Each of the Portman Partners (and the predecessor(s) in interest of
each of the foregoing Persons) shall execute and deliver to the Managing General
Partner (or its designee) such other and further documents as the Managing
General Partner, in its discretion, shall deem reasonably necessary to evidence
the termination of the funding obligations under the Marriott Commitment and the
Marriott Loans and the release from any such guarantee.
(iii) Nothing in this Section 4.04(B) shall (x) alter the obligations of
the parties to the Hotel Management Agreement (including any guarantee thereof
by Marriott International, Inc.) or (y) alter the obligations of Host or AMMLP
to the Portman parties pursuant to that certain Escrow and Indemnification
Agreement dated as of July 23, 1997.
4.05 No Other Obligations to Contribute. Except as set forth in the
foregoing Sections 4.02(B) and 4.03, no Partner shall be obligated to contribute
or loan any funds to the Partnership.
4.06 Partner Loans. The Managing General Partner, or any other Partner, may
(but shall not be required to) loan to the Partnership funds in the amount of
any required additional funds (as determined by the Managing General Partner),
which loans (the "Partner Loans") shall bear interest at a commercially
reasonable rate unless such loan is expected to be repaid within two (2) years
from the time it is made, or is for a term of two (2) years or less, in which
case such loan shall bear interest at the Prime Rate plus one percent (1%) per
annum. Such Partner Loans shall be repaid to the Partner(s) making such Partner
Loans, with interest as aforesaid, prior to any distribution of Net Cash Flow or
Capital Proceeds to any Partner but shall not be secured by any Partnership
Assets.
4.07 Voluntary Additional Contributions. The Managing General Partner may
(but shall not be required to) request additional Capital Contributions from the
Partners in the amount of any required additional funds (as determined by the
Managing General Partner). In the event additional Capital Contributions are
requested, each Partner shall have the right (but not the obligation) to make
additional Capital Contributions equal to such Partner's pro rata portion (based
on such Partner's Percentage of Partnership Interest in relation to the
Percentage of Partnership Interest of all Partners who wish to contribute
pursuant to this Section 4.07) of the requested funds. Any Notice requesting
additional Capital Contributions shall specify the terms and conditions,
including priority of repayment and preferred returns, upon which such
additional Capital Contributions will be made.
4.08 No Third Party Beneficiaries. The foregoing provisions of this Article
IV are not intended to be for the benefit of any Person (other than a Partner in
his or its capacity as a Partner) to whom any debts, liabilities or obligations
are owed by (or who otherwise has any claim against) the Partnership or any of
the Partners; and no such Person shall obtain any right under any such foregoing
provision against the Partnership or any of the Partners by reason of any debt,
liability or obligation (or otherwise).
4.09 Capital Accounts. The Partnership shall establish and maintain a
separate Capital Account for each Partner in accordance with Code Section 704
and Treasury Regulations ss. 1.704-1. Any reference in this Agreement to the
Capital Account of a Partner shall be deemed to refer to such Capital Account as
the same may be credited or debited from time to time in accordance with the
Code, the Treasury Regulations and this Agreement.
4.10 Return of Capital Accounts. Except as otherwise specifically provided
in this Agreement, (i) no Partner shall have any right to withdraw or reduce his
or its Capital Contributions, or to demand and receive property other than cash
from the Partnership in return for his or its Capital Contributions; (ii) no
Partner shall have any priority over any other Partners as to the return of his
or its Capital Contributions; (iii) any return of Capital Contributions or
Capital Accounts to the Partners shall be solely from the Partnership Assets,
and no Partner shall be personally liable for any such return; and (iv) no
interest shall accrue or be payable to any Partner by reason of his or its
Capital Contribution or Capital Account.
4.11 Contingent Adjustments on Sale or RefinancingAdjustments on Sale or
Refinancing.
(A) Notwithstanding any other provision of this Agreement to the contrary,
if, without the Consent of the Special General Partner (or, if the Special
General Partner has ceased to be a General Partner, without the Consent of the
Portman Partners), the Managing General Partner causes the Partnership to (or,
in the event the Project is transferred to BRE pursuant to Section 6.01(C),
Consent to) (i) sell the Project prior to June 30, 2010, (ii) refinance the
First Mortgage in a manner that results, at the time of closing of such
financing, in the Project being subject to less than One Hundred Fifty Million
Dollars ($150,000,000) of Nonrecourse Liability (as defined in Exhibit 2 hereto)
or (iii) refinance the Project without satisfying Section 4.11(E)below (the
"Gain Event"), then the Partnership shall (x) distribute an amount of cash
determined pursuant to Section 4.11(C) (the "Adjustment Amount") to each of the
Portman Partners to compensate the Portman Partners for the acceleration of
Federal and Georgia income taxes attributable to the Gain Event and that would
not otherwise have been incurred by the Portman Partners as a result of the Gain
Event occurring prior to June 30, 2010, and (y) allocate an amount of taxable
income and/or gain from sale or refinancing of the Project equal to the
Adjustment Amount to the Portman Partners.
(B) If a Gain Event is contemplated by the Partnership or BRE, the Managing
General Partner, with the Consent of the Special General Partner, which Consent
shall not be unreasonably withheld, conditioned or delayed, shall select a
qualified independent expert (the "Expert"), the fees and expenses of which
shall be paid by the Partnership, to determine the Adjustment Amount for each
Portman Partner in accordance with Paragraph (C) of this Section 4.11.
(C) The Adjustment Amount for each Portman Partner shall be equal to the
excess, if any, of the Current Tax Cost for each Portman Partner (as defined in
Section 4.11(C)(i)) over the Projected Tax Cost for each Portman Partner (as
defined in Section 4.11(C)(ii)).
(i) The Current Tax Cost for any Portman Partner with respect to any Gain
Event shall mean the amount determined by subtracting the Capital Proceeds
distributable to such Partner as a result of the occurrence of the Gain Event
(determined without regard to this Section 4.11) or which have previously been
distributed to such Portman Partner or his or its predecessor in interest from
the excess of (x) the aggregate of the Federal and Georgia income taxes that
would be incurred by such Partner for the taxable year which includes the Gain
Event, taking into account the distributive share of income or gain that would
be allocated to such Partner, or gain that would be recognized by such Partner,
as a result of the Gain Event (determined without regard to this Section 4.11),
over (y) the aggregate of the Federal and Georgia income taxes that would be
incurred by such Partner for the taxable year which includes the Gain Event if
the Gain Event did not occur. In determining the Current Tax Cost, the Expert
shall take into account the actual Capital Account of each such Partner and such
Partner's actual tax basis in its Partnership Interest, computed without regard
to any election that may have been in effect under Code Section 754, but shall
assume that each Portman Partner would have incurred Federal and Georgia income
tax at the highest marginal rate applicable to individuals under relevant
Federal and Georgia income tax statutes in effect as of the date of the Gain
Event, and that such Partner has no net losses, loss carryforwards, deferred
deductions or similar items that would reduce the effective rate of tax
applicable to such Portman Partner's distributive share of income or gain.
(ii) The Projected Tax Cost for any Portman Partner shall mean the present
value as of the date of the Gain Event of the Current Tax Cost of such Portman
Partner assuming such Current Tax Cost were incurred on June 30, 2010 and a
discount rate equal to the "applicable federal rate" under Code Section 1274(d)
that would apply with respect to a debt instrument issued in a sale or exchange
on the date of the Gain Event having a maturity corresponding most closely to
the period of time from the date of the Gain Event to June 30, 2010.
(D) Any Adjustment Amount shall be payable solely from Capital Proceeds
otherwise distributable to AMMLP and/or from Capital Contributions by AMMLP.
(E) The Managing General Partner covenants that in connection with any
refinancing of the Project by the Partnership other than a refinancing of the
First Mortgage, it will use commercially reasonable efforts to obtain (or to
cause BRE to obtain) replacement financing, which constitutes a Nonrecourse
Liability (as defined in Exhibit 2 hereto), in an amount equal to or greater
than the financing being replaced.
ARTICLE V - ALLOCATIONS AND DISTRIBUTIONS
5.01 General. For purposes of maintaining Capital Accounts, the profits of
the Partnership shall be shared, and the losses of the Partnership shall be
borne, by the Partners as provided in Exhibit 2 hereto.
5.02 Distributions.
(A) Net Cash Flow. The Partnership shall make distributions of Net Cash
Flow not less frequently than annually and in such amounts as the Managing
General Partner shall determine. Net Cash Flow shall be distributed as follows:
(1) First, to the Partner(s) entitled to the Class B Preferred Return,
until such Partner(s) have received an amount equal to their then accrued but
unpaid Class B Preferred Return; and
(2) Next, to the Partner(s) entitled to the Class C Preferred Return, until
such Partner(s) have received an amount equal to their then accrued but unpaid
Class C Preferred Return; and
(3) Thereafter, to the Partners based upon their respective Percentage of
Partnership Interest.
(B) Capital Proceeds. Capital Proceeds shall be distributed as soon as
practicable following their receipt by the Partnership, in such amounts as the
Managing General Partner shall determine. Capital Proceeds shall be distributed
as follows:
(1) First, to the Partner(s) entitled to the Class B Preferred Return,
until such Partner(s) have received an amount equal to their then accrued but
unpaid Class B Preferred Return;
(2) Next, to the Partner(s) entitled to the Class C Preferred Return, until
such Partner(s) have received an amount equal to their then accrued but unpaid
Class C Preferred Return;
(3) Next, to the Partner(s) who contributed the Class B Capital until the
Unreturned Class B Capital has been reduced to zero;
(4) Next, to the Partner(s) who contributed the Class C Capital until the
Unreturned Class C Capital has been reduced to zero;
(5) Thereafter, to the Partners based upon their respective Percentage of
Partnership Interest.
5.03 Limited Liability. For bookkeeping purposes, the Profits of the
Partnership shall be shared, and the Losses of the Partnership shall be borne,
by the Partners as provided in Exhibit 2 hereof; provided, however, that except
as expressly provided in this Agreement, no Partner (solely by reason of being a
Partner of the Partnership) shall be personally liable for losses, costs,
expenses, debts, liabilities or obligations of the Partnership in excess of his
or its Capital Contributions and other undertakings required herein. The
foregoing shall not affect any liability a Partner may incur if such Partner
undertakes additional obligations to the Partnership, the Partners or third
parties in a capacity other than as a Partner.
5.04 Distribution Upon Liquidation.
(A) Notwithstanding anything to the contrary in this Agreement, upon the
liquidation of the Partnership, the Partnership Assets shall be distributed
first to the Partners with positive Capital Accounts (after giving effect to all
contributions, distributions, allocations and other Capital Account adjustments
for all taxable years, including the year during which such liquidation occurs)
in the same proportion which such Partner's positive balance bears to the
aggregate of all such positive balances and thereafter in accordance with
Section 5.02(B) hereof. If any Partnership Assets are to be distributed in kind,
such assets shall be distributed on the basis of the fair market value thereof
(without taking Section 7701(g) of the Code into account) and any Partner
entitled to any interest in such assets shall receive such interest therein as a
tenant-in-common with all other Partners so entitled. The fair market value of
such assets shall be determined by an independent appraiser to be selected by
the Managing General Partner. Upon liquidation of a Partner's Interest in the
Partnership, such Partner shall be entitled to receive the positive balance in
its Capital Account as determined after taking into account all Capital Account
adjustments for the taxable year in which such liquidation occurs.
(B) If there is a termination of the Partnership under Section 708(b)(1)(B)
of the Code, to the extent and in the manner provided by the Treasury
Regulations, the Partnership Assets shall be deemed distributed in kind and the
principles of Section 5.04(A) hereof shall apply as if the assets were actually
distributed in kind.
5.05 Restoration of Capital Accounts.Restoration of Capital Accounts. If
any Partner has a deficit balance in its Capital Account (after giving effect to
all contributions, distributions and allocations for all taxable years,
including the year during which such liquidation occurs), such Partner shall
have no obligation to make any contribution to the capital of the Partnership
with respect to such deficit, and such deficit shall not be considered a debt
owed to the Partnership or any other Person for any purpose whatsoever.
ARTICLE VI - PARTNERSHIP MANAGEMENT
6.01 Management and Control of Partnership Business.
(A) Except as otherwise expressly provided or limited by the provisions of
this Agreement, the Managing General Partner shall have full, exclusive and
complete discretion to manage and control the business and affairs of the
Partnership, to make all decisions affecting the business and affairs of the
Partnership, and to take all such action as it deems necessary or appropriate to
accomplish the purposes of the Partnership as set forth herein. The Managing
General Partner shall use reasonable efforts to carry out the purposes of the
Partnership and shall devote to the management of the business and affairs of
the Partnership such time as the Managing General Partner, in its reasonable
discretion, shall deem to be reasonably required for the operation thereof.
Except as otherwise expressly set forth in this Agreement, no Partner shall have
any authority, right or power to bind the Partnership, or to manage or control,
or to participate in the management or control of, the business and affairs of
the Partnership in any manner whatsoever. Such management shall in every respect
be the full and complete responsibility of the Managing General Partner alone
except as herein provided.
(B) Except as otherwise expressly provided or limited by the provisions of
this Agreement, the Managing General Partner shall possess and may enjoy and
exercise all of the rights and powers and perform all acts (i) that are
expressly provided herein and (ii) that a partner in a partnership without
limited partners may perform under the laws of the State of Georgia, including,
but not limited to, the right and power to do each of the following acts on
behalf of the Partnership:
(1) Sell and convey, or contract to sell and convey, all or any part of the
property, real or personal, owned by the Partnership;
(2) Execute leases or subleases or modify leases or subleases of any real
property, or any part thereof or interest therein, owned by the Partnership, or
any amendment thereto or modification thereof, and terminate any such leases or
subleases and accept the surrender of the property so leased or subleased upon
the expiration or earlier termination of such leases or subleases;
(3) Borrow money and, as security therefor, mortgage or otherwise encumber
all or any Partnership Asset, enter into sale/leaseback financing transactions
and make, deliver and execute any commercial paper and sign, seal, deliver and
otherwise execute any note, mortgage, deed to secure debt, security agreement,
assignment of receivables or other collateral assignments, bond, financing
statement guaranty, rental agreement, lease, contract to sell, deed or such
other instrument of conveyance, road deed, right-of-way deed, quit-claim deed or
easement, or exercise any purchase option, concerning the Project or other
Partnership Asset; provided, however, that no recourse obligations as to the
Special General Partner (other than trade debt arising from operation of the
Project) shall be created without the Consent of Special General Partner, which
Consent shall also be required in connection with the Consent by the Partnership
to any such action by BRE that would create any such recourse obligation;
(4) Except as otherwise provided in Section 4.04 and Section 4.06, prepay
in whole or in part, refinance, recast, increase, modify, consolidate or extend
any mortgages, deeds to secure debt or other encumbrances which may affect any
Partnership Asset, and in connection therewith execute or cause to be executed,
for and on behalf of the Partnership, any extensions, renewals, consolidations
or modifications of such mortgages, deeds to secure debt or other encumbrances;
(5) Execute any and all other instruments to carry out the intention and
purpose of this Agreement;
(6) Commence, terminate, defend or settle any litigation, arbitration,
claim or other dispute involving the business or assets of the Partnership;
(7) Take any action on behalf of the Partnership that this Agreement
requires or permits the Managing General Partner or the Partnership to take; and
(8) Grant or waive the requirement for the Consent of the Partnership with
respect to any matters with respect to which the Consent of the Partnership is
required under the partnership agreement of BRE.
(C) The Partners acknowledge that in order to permit a financing or
refinancing of the Project (including a refinancing of the First Mortgage), the
Managing General Partner is authorized to cause the Partnership to convey the
Project to a bankruptcy remote entity ("BRE") wholly owned, directly or
indirectly, by the Partnership to the extent use of a bankruptcy remote entity
is required in order to obtain any such financing or refinancing, but only so
long as such conveyance does not operate to terminate the Partnership for income
tax purposes. In this regard, in the event that the Managing General Partner
shall elect to convey the Project to BRE, the Managing General Partner shall
contribute the Project, subject to the First Mortgage, together with so much of
the cash contributed or committed to the Partnership on account of the Class B
Capital, pursuant to Section 4.03 above, as remains after repayment of amounts
owed to Host under the "Marriott Guaranties" described in Section 4.03 above and
amounts disbursed prior to such contribution of the Project to BRE to repair the
facade of the Hotel and to engage in a program of room repair and refurbishment,
for the acquisition of any indirect interest in BRE and for Partnership working
capital (the "BRE Cash Capital"). Such contribution of the Project and the BRE
Cash Capital shall represent the Partnership's capital contribution to BRE in
return for the Partnership's direct ownership interest in BRE. Further, the
Partnership is authorized to invest such additional Partnership cash as may be
required to acquire any indirect ownership interest in BRE as may be
appropriate, depending on the ownership structure of BRE. For example, in the
event that BRE shall be a limited partnership, the Partnership shall contribute
the Project and the BRE Cash Capital in exchange for a 99% limited partnership
interest in BRE, and may disburse additional cash towards the acquisition of all
the stock of the corporate general partner of BRE. The Partners further
acknowledge that BRE shall be a separate legal entity, and shall run its affairs
totally separate and independent from the affairs of the Partnership or any of
the Partners, and will be governed by and otherwise operated wholly in
accordance with its own organizational documents.
(D) (1) It is the intention of the parties that except as provided in
Sections 4.04, 4.11(B), 6.01(D)(2), 6.01(D)(3), 6.07, 9.01(A), and 10.01 hereof,
the Special General Partner shall have no voting or Consent rights. To the
extent that the Special General Partner is determined, as a matter of law or
contract, to possess voting or Consent rights (other than as provided in
Sections 4.04, 4.11(B), 6.01(B)(3), 6.01(D)(2), 6.01(D)(3), 6.07, 9.01(A), and
10.01), then on any matter on which the Partners or General Partners are
required to vote, all such Partners or General Partners shall vote as a class
and the vote of a majority in Percentage Interest of such class shall control.
(2) Notwithstanding Sections 6.01(A) and (B) above, the Consent of the
Special General Partner shall be required for a sale of all or substantially all
of the Partnership Assets, or to grant (or waive the requirement for) the
Consent of the Partnership to a sale of the Project by BRE, to Host or any of
its Affiliates or Marriott International, Inc., a Delaware corporation, or any
of its Affiliates.
(3) Notwithstanding Sections 6.01(A) and (B) above, the Consent of the
Special General Partner shall be required for any material change in the
economic terms of the Hotel Management Agreement, including, in the event that
the Project has been transferred to BRE, to grant the consent of the Partnership
to BRE to make such a change.
6.02 No Management by Limited Partners. No Limited Partner, in his or its
capacity as a limited partner, shall take part in the day-to-day management,
operation or control of the business and affairs of the Partnership nor have any
authority, right or power to act for or on behalf of or to bind the Partnership
or transact any business in the name of the Partnership. The Limited Partners
shall have no rights other than those specifically provided herein or granted by
law where consistent with a valid provision hereof. To the extent that the
Limited Partners are determined, as a matter of law or contract, to possess
voting or Consent rights then on any matter on which the Limited Partners are
required or permitted to vote, all such Limited Partners shall vote as a class
and the vote of a majority in Percentage Interest of such class shall control.
6.03 Limitations on Partners. No Partner shall have any authority to
perform (i) any act in violation of any applicable law or regulation thereunder,
or (ii) any act without any Consent or ratification which is required to be
Consented to or ratified by any other Partner or Partners pursuant to the terms
of this Agreement.
6.04 Business with Affiliates. Except as otherwise expressly provided in
this Agreement, the Managing General Partner, in its discretion, may cause the
Partnership to transact business with any Partner or any Affiliate of any
Partner for goods or services reasonably required in the conduct of the
Partnership's business; provided that any such transaction shall be effected
only on terms competitive with those that may be obtained in the marketplace
from Persons who are not Affiliates of the Managing General Partner.
6.05 No Compensation; Reimbursement of Expenses. The Managing General
Partner shall not be paid any direct salary or other compensation for serving in
such capacity. Except as otherwise set forth in this Agreement, the Managing
General Partner shall be fully and entirely reimbursed by the Partnership for
any and all reasonable costs and expenses (other than overhead) incurred in
connection with the continuation of the Partnership pursuant to this Agreement
and the management and supervision of the Partnership business. With respect to
any such reimbursement, the Managing General Partner shall present the
Partnership with such invoices or allocations as are necessary to substantiate
such costs and expenses.
6.06 Liability for Acts and Omissions.
(A) The General Partners, and their officers, directors, employees and
agents (together, the "Indemnified Parties"), shall not be liable, responsible
or accountable in damages or otherwise to the Partnership or any of the Partners
for any act or omission performed or omitted in good faith on behalf of the
Partnership which the General Partners or any Indemnified Party reasonably
believed to be within the scope of the authority granted by this Agreement and
in the best interests of the Partnership, provided such act or omission is in
good faith and with such care as an ordinarily prudent person in a like position
would use under similar circumstances. The General Partners and the Indemnified
Parties shall nevertheless be liable, responsible or accountable for actual
fraud, gross negligence or intentional misconduct.
(B) The Partnership shall indemnify and make advances for expenses to the
General Partners and the Indemnified Parties to the fullest extent permitted
under Section 14-9-108 of the Act (to the extent of available assets, but
without the requirement that any Partner make additional Capital Contributions
for this purpose) against any loss or damage incurred by the General Partners or
the Indemnified Parties by reason of any act or omission performed or omitted by
the General Partners or any Indemnified Party which is consistent with the first
sentence of Section 6.06(A) above.
(C) Each of the General Partners shall indemnify and hold harmless the
Partnership and the Partners against any damage or loss incurred by the
Partnership or Partners by reason of its actual fraud, gross negligence or
intentional misconduct.
6.07 Hotel Policy Committee.
(A) The Hotel Policy Committee shall represent the Partnership in
coordinating the ownership of the Hotel with its operation and management by the
Hotel Operator pursuant to the Hotel Management Agreement or in exercising or
waiving any consent rights that the Partnership may have with respect to such
matters pursuant to the terms and conditions of BRE's partnership agreement;
provided, however, the Hotel Policy Committee's scope of operational authority
shall be limited to review and approval of (i) the annual operating projection,
(ii) the advertising and marketing program, (iii) the repairs and equipment
budget, and (iv) the annual estimate of the cost of major capital improvements
(all to be prepared initially by the Hotel Operator). The Hotel Policy Committee
shall be the Partnership's authorized representative to make decisions or take
other appropriate action on the Partnership's behalf where the same is provided
for in the Hotel Management Agreement. The Managing General Partner and Special
General Partner each shall appoint a member ("Representative") to serve on the
Hotel Policy Committee. Such appointment shall be effective until revoked by the
appointing Partner or until the resignation, death or incapacity to serve of
such Representative, whereon such appointing Partner shall promptly appoint a
replacement Representative. Either the Managing General Partner or Special
General Partner may designate any Affiliate as its agent for the purpose of
appointing its respective Representative. The Managing General Partner and
Special General Partner may each change its Representative at any time upon
Notice to the other. The Representatives shall have the authority to act for and
bind the respective Partners by whom they were appointed in accordance with the
provisions of this Agreement. The rights of the Special General Partner set
forth in this Section 6.07 shall, if the Special General Partner shall no longer
be a General Partner, expire.
(B) The Hotel Policy Committee shall hold periodic meetings not less
frequently than annually, and may hold special meetings upon not less than three
(3) calendar days' Notice from one Representative to the other Representative.
Such meetings shall be held in Atlanta, Georgia, in Bethesda, Maryland, or in
any other city agreeable to all Representatives, as set forth in such Notice.
Such Notice shall specify the matters to be considered by the Hotel Policy
Committee and the location of said meeting; provided, however, that the Hotel
Policy Committee may adopt any other procedures with respect to the convening of
Hotel Policy Committee meetings at any time during the term of this Agreement.
(C) (1) An action shall be adopted by the Hotel Policy Committee only upon
the unanimous vote of all the Representatives. Except as provided in Section
6.07(C)(2), if a vote of the Hotel Policy Committee shall not be unanimous, the
vote of the Representative appointed by the Managing General Partner shall
prevail.
(2) Notwithstanding Section 6.07(C)(1) above, if, at a time when the Hotel
Operator is an Affiliate of (or is) Host, a vote of the Hotel Policy Committee
shall not be unanimous, the Representatives shall submit the issue in question
to the General Partners for resolution. The General Partners shall direct their
Representatives how to vote on such issue and the Hotel Policy Committee shall
promptly reconvene to take another vote on such issue, which vote shall also be
unanimous for any Approval or Consent. If a deadlock remains, then either
General Partner may submit the matter for arbitration as provided in Section
20.11 of the Hotel Management Agreement (except that such arbitration shall be
conducted between the General Partners and the Hotel Operator shall not be a
party thereto).
(D) In the event it is inconvenient at any time to schedule an actual
meeting of the Hotel Policy Committee, then the Representatives may confer by
telephone to approve any proposed action; however, no such approval shall be
effective for purposes of this Agreement until and unless memorialized in a
writing signed by all Representatives.
(E) Any action required or permitted hereunder to be taken at a meeting of
the Hotel Policy Committee may be taken without a meeting if written consent,
setting forth the action so taken, shall be signed by all Representatives. For
all purposes of this Agreement (including, without limitation, any action by the
Hotel Policy Committee) either General Partner may act directly upon any matter,
without acting through the Representative appointed by such party, and such
direct action shall be effective as if taken by the Representative appointed by
such party.
6.08 Right of First Negotiation.
(A) The Partnership hereby grants to Portman a first right of negotiation
with respect to any sale of the Hotel proposed by the Managing General Partner
(a "Proposed Sale"). In the event of a Proposed Sale, the Managing General
Partner shall give Notice to Portman setting forth a detailed description of the
Proposed Sale (a "Sale Notice"). The Sale Notice shall include the proposed
price and all other material terms and conditions proposed by the Managing
General Partner. Portman shall have a period of thirty (30) days following his
receipt of a Sale Notice within which to elect to enter into negotiations with
the Managing General Partner regarding the Proposed Sale (the "Evaluation
Period"), which election must be in writing and given by Portman to the Managing
General Partner prior to the expiration of such Evaluation Period. If Portman
makes such election, the Managing General Partner and Portman shall thereafter
use bona-fide, good faith and best efforts to close such transaction within one
hundred twenty (120) days thereafter (the "Closing Period"), recognizing that
time is of the essence. Notwithstanding the foregoing, Portman and the Managing
General Partner shall use bona-fide, good faith and best efforts to reach a
binding agreement (subject to a financing contingency and any other
contingencies mutually agreed to by the parties (the "Contingencies")) pursuant
to which Portman shall post a forfeitable (except as may be provided in the
Contingencies) deposit ("Required Deposit") equal to at least one and one-half
percent (1.5%) of the proposed price set forth in the Sale Notice within sixty
(60) days (the "Deposit Period") from Portman's election to enter into
negotiations.
(B) If (i) Portman does not elect to enter into negotiations with the
Managing General Partner within the Evaluation Period, (ii) Portman fails to
post the Required Deposit with the Partnership within the Deposit Period, or
(iii) Portman elects to enter into negotiations with the Managing General
Partner within the Evaluation Period, the Required Deposit is posted within the
Deposit Period but the transaction is not closed within such Closing Period for
any reason other than the failure of the Partnership to perform, then the
Partnership shall be free, for a period of one (1) year following the last day
of such Evaluation Period, Deposit Period or Closing Period, as the case may be
(the "Free Sale Period"), to enter into a binding agreement to close the
transaction described in the Sale Notice with any other person at a price that
is not less than ninety-two percent (92%) of the price contained in the Sale
Notice (a "Third Party Agreement"). Closing under any such Third Party Agreement
must occur within fourteen (14) months following the last day of such Evaluation
Period, Deposit Period or Closing Period, as the case may be (the "Third Party
Closing Period"). If (i) the Partnership does not enter into a Third Party
Agreement within the Free Sale Period and the Partnership still wishes to sell
the Hotel, or (ii) the Partnership enters into a Third Party Agreement within
the Free Sale Period, but fails to close under such agreement within the Third
Party Closing Period, and the Partnership still wishes to sell the Hotel, or
(iii) within the Free Sale Period the Partnership wishes to sell the Hotel for a
price less than ninety-two percent (92%) of the price contained in the Sale
Notice, then the Partnership must again submit a Sale Notice to Portman as
provided in this Section 6.08 and Portman shall have all the rights provided for
in this Section 6.08 except that in the case of the situation described in
clause (iii) immediately above, the Evaluation Period shall be for ten (10) days
rather than thirty (30) days.
6.09 Separate Identity/Operations. The Partnership shall:
(A) Maintain books and records separate from any other Person;
(B) Maintain its accounts separate from any other Person;
(C) Not commingle its assets or funds with those of any other Person;
(D) Conduct its own business in its own name;
(E) Maintain separate financial statements;
(F) Pay its own liabilities out of its own funds;
(G) Observe all partnership formalities;
(H) Maintain an arm's-length relationship with its Affiliates and enter
into transactions with its Affiliates only on commercially reasonable terms;
(I) Pay the salaries of its own employees and maintain a sufficient number
of employees in light of its contemplated business operations;
(J) Not guarantee or become obligated for the debts of any other Person or
hold out its credit as being available to satisfy the obligations of others;
(K) Not acquire obligations or securities of its partners, members or
shareholders;
(L) Allocate fairly and reasonably any overhead for shared office space;
(M) Use separate stationary, invoices, and checks;
(N) Not pledge its assets for the benefit of any other Person or make loans
or advances to any Person;
(O) Hold itself out as a separate entity and not identify
itself as a division of any other Person;
(P) Correct any known misunderstanding regarding its separate identity;
(Q) Maintain adequate capital in light of its contemplated business
operations; and
(R) File its tax returns separate from those of any other entity and not
file a consolidated federal income tax return with any other entity.
6.10 Additional Partnership Limitations. Notwithstanding anything to the
contrary in this Agreement:
(A) The Partnership will have sufficient officers and personnel to run its
business and operations.
(B) Decisions with respect to the Partnership's business and daily
operations will be independently made by the Partnership and its General
Partners in accordance with the provisions of this Agreement and, except as
expressly provided in this Agreement, will not be dictated by any Limited
Partner or any Affiliate of any Limited Partner. All business transactions
entered into by the Partnership with any of its Affiliates that are permitted
will be on terms that are not less favorable to the Partnership than terms and
conditions available at the time to the Partnership for comparable transactions
with unaffiliated persons.
(C) The Partnership will act solely in its own name and through its
Managing General Partner and its authorized officers and agents. No Affiliates
of the Partnership will be appointed agent of the Partnership except on terms
that are not more or less favorable to such Affiliates than terms and conditions
available at the time to such Affiliates for comparable transactions with
unaffiliated persons.
(D) The Partnership will directly manage its own liabilities, including
paying its own payroll and operating expenses. In the event employees of the
Partnership participate in pension, insurance and other benefit plans of any
Partner or any Affiliate thereof, the Partnership will on a current basis
reimburse such Partner or such Affiliate, as the case may be, for the
Partnership's pro rata share of the costs thereof.
(E) The Partnership will prepare and maintain its own separate, full and
complete books, records and financial statements. The Partnership's annual
financial statements will comply with generally accepted accounting principles.
(F) No Limited Partner nor any Affiliate thereof will guarantee debts of
the Partnership and the Partnership will not guarantee debts of any Partner or
any Affiliate thereof.
(G) The Partnership will not acquire obligations of, or make loans or
advances to, any Partner or any Affiliate thereof.
(H) The Partnership will not commingle any of its money or other assets
with the money or assets of any Partner or any Affiliate thereof.
(I) The Partnership will maintain separate bank accounts in its own name.
(J) Investments will be made by the Partnership directly or by agents
engaged and paid by the Partnership. Investments will be carried by the
Partnership in its own name.
(K) If the Partnership is included within any Partner's or any Affiliate of
any Partner's consolidated financial statements, the existence of the
Partnership and the ownership of its assets will be disclosed in a footnote.
(L) No Partner will perform any of the Partnership's duties or obligations,
lend money to, or borrow money from the Partnership or transact any business or
enter into any transaction with the Partnership except, in each case, pursuant
to binding and enforceable written agreements, the terms of which, on the whole,
are arm's length and commercially reasonable.
(M) No Partner will (i) except by way of capital contribution in connection
with its acquisition of its interests in the Partnership relative to the
organization and formation of the Partnership, advance or contribute property to
the Partnership or (ii) accept or cause to be made, any transfer or distribution
of the Partnership's assets to any Limited Partner in respect of its ownership
interest in the Partnership, except as may be pursuant to duly authorized and
legal actions of the Partnership.
ARTICLE VII - ACCOUNTING AND REPORTS
7.01 Books and Records. The Managing General Partner shall maintain at the
office of the Partnership full and accurate books of the Partnership showing all
receipts and expenditures, assets and liabilities, profits and losses, names and
current addresses of Partners, and all other records necessary for recording the
Partnership's business and affairs. All Partners and their duly authorized
representatives shall have the right to inspect and copy any or all of the
Partnership's books and records including, without limitation, books and records
necessary to enable a Partner to defend any tax audit or related proceeding,
during reasonable hours upon three (3) business days Notice to the Managing
General Partner, and shall have, on demand, true and full information of all
matters affecting the Partnership.
7.02 Books and Records; Tax Matters.
(A) The books and records of the Partnership shall be kept on the accrual
basis or such other accounting method selected by the Managing General Partner.
The accounts of the Partnership shall be analyzed by the Partnership's
accountants in the reasonable discretion of the Managing General Partner, and
any statements resulting from any such analysis shall be provided to each
Partner as soon as practicable after receipt thereof by the Managing General
Partner.
(B) The Tax Matters Partner shall be required to prepare or cause to be
prepared all tax returns required of the Partnership at the Partnership's
expense. The Tax Matters Partner may be changed with the Consent of the Managing
General Partner.
(C) If the Partnership incurs any costs related to any tax audit,
declaration of any tax deficiency or any administrative proceeding or litigation
involving any Partnership tax matter, the Partnership shall use all available
Cash Flow and/or Capital Proceeds for such purpose, but no Partner shall be
required to advance or contribute funds to the Partnership for such purpose.
7.03 Reports and Notices. In addition to any statements provided pursuant
to Section 7.02(A), the Managing General Partner shall be required to provide
all Partners with the following reports no later than the dates indicated or as
soon thereafter as circumstances permit:
(A) By March 31, IRS Form 1065 and Schedule K-l, or similar forms as may be
required by the IRS, stating each Partner's allocable share of income, gain,
loss, deduction or credit for the prior Fiscal Year.
(B) By May 31, a balance sheet and the related statements of income, cash
flow, Partners' capital and changes in financial position, audited by the
Partnership's independent certified public accountant.
7.04 Partnership Funds. The Managing General Partner shall have
responsibility for the safekeeping and use of all funds and assets of the
Partnership, whether or not in its direct or indirect possession or control. The
funds of the Partnership shall not be commingled with the funds of any other
Person (other than computerized checking accounts, centralized management
accounts or other similar accounts) and the Managing General Partner shall not
be permitted to employ such funds in any manner except for the benefit of the
Partnership. All funds of the Partnership not otherwise invested shall be
deposited in one or more accounts maintained in such banking institutions as the
Managing General Partner shall determine, and withdrawals shall be made only in
the regular course of Partnership business on such signatures as the Managing
General Partner may from time to time determine.
ARTICLE VIII - TRANSFER OF PARTNERSHIP INTERESTS
8.01 Transfer by General Partners. The General Partners may not voluntarily
withdraw from the Partnership. A General Partner may transfer any portion of its
or his Partnership Interest only in accordance with Section 8.03 hereof.
Notwithstanding the foregoing, the Special General Partner may withdraw as a
General Partner of the Partnership at any time without the Consent of any other
Partner.
8.02 Obligations of a Prior General Partner. In the event of the
involuntary withdrawal of a General Partner, he or it shall remain liable for
all obligations and liabilities (other than Partnership liabilities payable
solely from Partnership Assets) incurred by him or it as General Partner before
the effective date of such event. However, the withdrawn General Partner shall
be free of and held harmless by the Partnership against any obligation or
liability incurred on account of the activities of the Partnership from and
after the effective date of such event, except as provided in this Agreement.
8.03 Additional or Successor General Partners.
(A) A Person may be admitted to the Partnership as a Successor General
Partner only if the following conditions are satisfied:
(1) The admission of such Person shall have been Consented to by a majority
in Percentage Interest of the Partners;
(2) The Person shall have accepted and agreed to be bound by all the terms
and provisions of this Agreement, by executing a counterpart thereof and such
other documents or instruments as may be required or appropriate in order to
effect the admission of such Person as a General Partner; and
(3) An amendment to the Certificate evidencing the admission of such Person
as a General Partner shall have been filed for recordation as required by the
Act.
(B) In the event of the withdrawal of the Managing General Partner as a
General Partner, its Interest shall automatically be converted to that of a
Limited Partner, and the Partners (including such withdrawn former Managing
General Partner) owning a majority of the Percentage Interests shall elect a
Successor Managing General Partner.
(C) In the event of the withdrawal of the Special General Partner as a
General Partner, or in the event the Special General Partner ceases to be wholly
owned by Portman, its Interest shall automatically be converted to that of a
Limited Partner and all voting or Consent rights of the Special General Partner
shall terminate.
8.04 Restrictions on Transfer by Limited Partners.
(A) Except as otherwise provided in this Section 8.04(A), no Limited
Partner may sell, assign, transfer or otherwise dispose of or pledge,
hypothecate or otherwise encumber his or its Partnership Interest without the
prior Consent of the Managing General Partner, and any such act in violation
hereof shall be of no effect and shall not be binding on the Partnership.
Anything contained herein to the contrary notwithstanding, no Limited Partner
may sell, assign, transfer, encumber or otherwise dispose of his or its
Partnership Interest if such disposition would (i) cause the Partnership to be
treated as an association taxable as a corporation (rather than a partnership)
for federal income tax purposes; (ii) violate the provisions of any federal or
state securities laws; or (iii) violate the terms of (or result in a default or
acceleration under) any law, rule, regulation, agreement or commitment binding
on the Partnership; provided, however, that each Limited Partner shall have the
right from time to time to assign or otherwise transfer, without the Consent of
the Managing General Partner, all or any part of his or its Partnership Interest
(i) to his spouse or to any of his children who have reached majority, (ii) to
trusts for any of his issue, (iii) to Portman, (iv) to any Portman Approved
Transferees, or (v) to other Limited Partners; provided further, however, that
notwithstanding the foregoing, no Interest owned by a Limited Partner shall be
sold or exchanged and no purported sale or exchange shall be effective (except a
disposition by gift, including assignment to a successor in interest, bequest or
inheritance, or the liquidation of a Partnership Interest), if such sale or
exchange would result in a termination of the Partnership for Federal income tax
purposes or would constitute a violation of the registration provisions of the
Securities Act of 1933, as amended, or any applicable state securities or real
estate syndication law. Unless done in full compliance with the terms and
conditions of this Section, any assignment or other transfer of all or any
portion of an Interest owned by a Limited Partner shall be null and void.
(B) Subject to the provisions of Section 8.04(A), an assignee or successor
of the whole or any portion of a Limited Partner's Partnership Interest pursuant
to Section 8.04(A) shall become a Substituted Limited Partner upon the
satisfaction of the following conditions:
(1) The assignor and assignee file a Notice or other evidence of transfer
and such other information reasonably required by the Managing General Partner,
including, without limitation, names, addresses and telephone numbers of the
assignor and assignee;
(2) The assignee executes, adopts and acknowledges this Agreement, or a
counterpart hereto, and such other documents as may be reasonably requested by
the Managing General Partner, including without limitation, all documents
necessary to comply with applicable tax and/or securities rules and regulations;
(3) The assignor or assignee pays all reasonable costs and fees incurred by
the Partnership to effect the transfer and substitution; and
(4) If the Consent of the Managing General Partner to such transfer is
required pursuant to Section 8.04(A), then the admission of such Substituted
Limited Partner shall have been Consented to, in writing, by the Managing
General Partner.
(C) If an assignee of a Limited Partner pursuant to Section 8.04(A) does
not become a Substituted Limited Partner pursuant to Section 8.04(B), the
assignee shall not have any rights to require any information on account of the
Partnership's business, to inspect the Partnership's books, to participate in
the management or operation of the Partnership, or to vote or otherwise take
part in the affairs of the Partnership.
ARTICLE IX - DISSOLUTION AND LIQUIDATION
9.01 Term and Dissolution. The Partnership commenced as of September 24,
1982, and shall continue until December 31, 2085, or until dissolution occurs
prior to that date for any one of the following reasons:
(A) An election to dissolve the Partnership is made in writing by all
Partners; or
(B) The sale, exchange or other disposition of all or substantially all of
the Partnership Assets; or
(C) Withdrawal of a General Partner, unless at the time of the withdrawal
there remains at least one (1) other General Partner, in which case the business
of the Partnership shall be carried on by such remaining General Partner(s); or
(D) Any other event causing dissolution of the Partnership under the Act.
9.02 Liquidation of Partnership Assets.
(A) In the event of dissolution and final termination of the Partnership, a
full accounting of the assets and liabilities shall be taken, and the assets
shall be liquidated, with the residual cash therefrom distributed in accordance
with the provisions of Section 5.04 by the later of (i) the last day of the
Fiscal Year in which the termination occurs or (ii) ninety (90) days after the
date on which the termination occurs.
(B) The Managing General Partner shall file all certificates and notices of
the dissolution of the Partnership required by law. The Managing General Partner
shall proceed without any unnecessary delay to sell and otherwise liquidate the
Partnership Assets; provided, however, that if the Managing General Partner
shall determine that an immediate sale of part or all of the Partnership Assets
would cause undue loss to the Partners, the Managing General Partner may defer
the liquidation except (i) to the extent provided by the Act, (ii) as required
by Section 9.02(A) or (iii) as may be necessary to satisfy the debts and
liabilities of the Partnership to Persons other than the Partners. Upon the
complete liquidation and distribution of the Partnership Assets, the Partners
shall cease to be Partners of the Partnership, and the Managing General Partner
shall execute, acknowledge and cause to be filed any and all certificates and
notices required by law to terminate the Partnership.
(C) Upon the dissolution of the Partnership pursuant to Section 9.01, the
Managing General Partner shall cause to be prepared by the Partnership's
independent certified public accountants, and shall furnish to each Partner, a
statement setting forth the assets and liabilities of the Partnership. Promptly
following the complete liquidation and distribution of the Partnership Assets,
the Managing General Partner shall furnish to each Partner a statement showing
the manner in which the Partnership Assets were liquidated and distributed.
ARTICLE X - AMENDMENTS
10.01 Amendment Procedure. Amendments to this Agreement may be proposed by
any Partner, and if proposed by a Limited Partner, such Partner shall send
Notice thereof to the Managing General Partner. A proposed amendment will be
adopted and effective only if it receives the Consent of all Partners. Within
ten (10) days of the making of any proposal to amend this Agreement, the
Managing General Partner shall give the Partners Notice of such proposal (along
with the text of the proposed amendment and a statement of its purposes).
ARTICLE XI - MISCELLANEOUS PROVISIONS
11.01 Title to Property. All property owned by the Partnership, whether
real or personal, tangible or intangible, shall be deemed to be owned by the
Partnership as an entity, and no Partner, individually, shall have any ownership
of such property. The Partnership may hold any of its assets in its own name or
in the name of its nominee, which nominee may be one or more individuals,
corporations, partnerships, trusts or other entities.
11.02 Other Activities. Except as expressly provided otherwise in this
Agreement, any Partner may engage in, or possess an interest in, other business
ventures of every nature and description, independently or with others,
including, without limitation, real estate business ventures, whether or not
such other enterprises shall be in competition with any activities of the
Partnership; and neither the Partnership nor the other Partners shall have any
right by virtue of this Agreement in and to such independent ventures or to the
income or profits derived therefrom.
11.03 Applicable Law. This Agreement, and the application or interpretation
thereof, shall be governed exclusively by its terms and by the laws of the State
of Georgia.
11.04 Binding Agreement. This Agreement shall be binding upon the parties
hereto, their heirs, executors, personal representatives, successors and
assigns.
11.05 Counterparts and Effectiveness. This Agreement may be executed in
several counterparts, which shall be treated as originals for all purposes, and
all so executed shall constitute one agreement, binding on all of the parties
hereto, notwithstanding that all the parties are not signatory to the original
or the same counterpart. Any such counterpart shall be admissible into evidence
as an original hereof against the Person who executed it. The execution and
delivery of this Agreement by facsimile shall be sufficient for all purposes
hereof and shall be binding upon any Person who so executes.
11.06 Entire Agreement. This Agreement (and the Exhibits hereto) contains
the entire understanding between the parties hereto and supersedes all prior
written or oral agreements among them respecting the within subject matter,
unless otherwise provided herein. There are no representations, agreements,
arrangements or understandings, oral or written, between the Partners hereto
relating to the subject matter of this Agreement which are not fully expressed
herein and in said Exhibits.
(signature page follows)
IN WITNESS WHEREOF, this Agreement has been executed under seal as of the
day and year first above written.
Managing General Partner:
Atlanta Marriott Marquis II Limited Partnership
By: Marriott Marquis Corporation,
Its General Partner
By:/s/ P.K. Brady
Name: Patricia K. Brady
Title: Vice President
Special General Partner:
Portman Marquis Corp.
By: /s/ John C. Portman, Jr.
John C. Portman, Jr., President
Limited Partners:
/s/ John C. Portman, Jr.
(Seal)
John C. Portman, Jr.
Hopewell Group, Ltd.
By: /s/ John C. Portman, Jr.
(Seal)
John C. Portman, Jr., General Partner
Hopeport, Ltd.
By: /s/ John C. Portman, Jr.
(Seal)
John C. Portman, III, General Partner
FOURTH RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
IVY STREET HOTEL LIMITED PARTNERSHIP
EXHIBIT 1
SCHEDULE OF PARTNERS
Percentage of
General Partners: Partnership Interest
Atlanta Marriott Marquis II Limited Partnership 80.00%
10400 Fernwood Road
Bethesda, Maryland 20058
Portman Marquis Corp. 0.10%
c/o Portman Holdings, L.P.
Suite 4600
303 Peachtree Street, N.E.
Atlanta, Georgia 30308
Limited Partners:
John C. Portman, Jr. 9.80%
c/o Portman Holdings, L.P.
Suite 4600
303 Peachtree Street, N.E.
Atlanta, Georgia 30308
Hopewell Group, Ltd. 5.10%
c/o Portman Holdings, L.P.
Suite 4600
303 Peachtree Street, N.E.
Atlanta, Georgia 30308
Hopeport, Ltd. 5.00%
c/o Portman Holdings, L.P.
Suite 4600
303 Peachtree Street, N.E.
Atlanta, Georgia 30308
FOURTH RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
IVY STREET HOTEL LIMITED PARTNERSHIP
EXHIBIT 2
ALLOCATION PROVISIONS
1. Definitions. The following terms shall have the meaning ascribed to them
for purposes of this Exhibit 2.
Adjusted Capital Account Deficit: With respect to any Partner, the deficit
balance, if any, in such Partner's Capital Account as of the end of the relevant
Fiscal Year, after giving effect to the following adjustments:
(A) Credit to such Capital Account any amounts which such Partner is
obligated to restore or is deemed to be obligated to restore pursuant to the
penultimate sentences of Regulations Section 1.704-2(g)(1) and 1.704-2(i)(5);
and
(B) Debit to such Capital Account the items described in Regulations
Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall
be interpreted consistently therewith.
Depreciation: For each Fiscal Year or other period, an amount equal to the
depreciation, amortization, or other cost recovery deduction allowable with
respect to an asset for such year or other period, except that if the Gross
Asset Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such year or other period, Depreciation shall be an
amount which bears the same ratio to such beginning Gross Asset Value as the
federal income tax depreciation, amortization, or other cost recovery deduction
for such year or other period bears to such beginning adjusted tax basis;
provided, however, that if the federal income tax depreciation, amortization, or
other cost recovery deduction for such year is zero, Depreciation shall be
determined consistent with the requirements of the Code and the Treasury
Regulations.
Gross Asset Value: With respect to any asset, the asset's adjusted basis
for federal income tax purposes, except as follows:
(i) the initial Gross Asset Value of any asset contributed by a Partner to
the Partnership shall be the gross fair market value of such asset at the time
of such contribution, as reasonably determined by the Managing General Partner,
unless a specific value is provided herein.
(ii) the Gross Asset Values of all Partnership Assets may, in the Managing
General Partner's discretion, and shall, when required by Section 4.03 of the
Partnership Agreement be adjusted to equal their respective gross fair market
values immediately prior to the following times: (a) the acquisition of an
additional interest in the Partnership by any new or existing Partner in
exchange for more than a de minimis Capital Contribution; (b) the distribution
by the Partnership to a Partner of more than a de minimis amount of Partnership
property as consideration for an Interest in the Partnership; and (c) the
liquidation of the Partnership or a Partner's Interest in the Partnership. The
determination of fair market values will be made by the Managing General Partner
in its reasonable discretion. Except as required by Section 4.03, no adjustment
shall be made if the Managing General Partner determines that an adjustment is
not required in order to reflect the relative economic interests of the
Partners. If the Gross Asset Value of an asset has been determined or adjusted
pursuant to Clause (i) or (ii) of this definition, such Gross Asset Value shall
thereafter be adjusted by the Depreciation taken into account with respect to
such asset for purposes of computing Profits and Losses. The Gross Asset Value
of an asset distributed by the Partnership to a Partner shall equal the fair
market value of such asset at the time of such distribution.
Nonrecourse Deductions: The meaning set forth in Regulations Sections
1.704-2(b)(1) and (c). Nonrecourse Liability: The meaning set forth in
Regulations Section 1.752-1(a)(2).
Partner Minimum Gain: An amount, with respect to each Partner Nonrecourse
Debt, equal to the Partnership Minimum Gain that would result if such Partner
Nonrecourse Debt were treated as a Nonrecourse Liability, determined in
accordance with Regulations Section 1.704-2(i).
Partner Nonrecourse Debt: The meaning set forth in Regulations Section
1.704-2(b)(4).
Partner Nonrecourse Deductions: The meaning set forth in Regulations
Section 1.704-2(i).
Partnership Minimum Gain: The meaning set forth in Regulations Sections
1.704-2(b)(2) and (d).
Profits and Losses: For each Fiscal Year or other period, an amount equal
to the Partnership's taxable income or loss for such year or period, determined
in accordance with Code Section 703(a) (for this purpose, all items of income,
gain, loss, or deduction required to be stated separately pursuant to Code
Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:
(A) Any income of the Partnership that is exempt from federal income tax
and not otherwise taken into account in computing Profits or Losses pursuant to
this definition shall be added to such taxable income or loss;
(B) Any expenditures of the Partnership described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account
in computing Profits or Losses pursuant to this definition shall be subtracted
from such taxable income or loss;
(C) In the event the Gross Asset Value of any Partnership Asset is adjusted
pursuant to (B) or (C) of the definition of Gross Asset Value, the amount of
such adjustment shall be taken into account as gain or loss from the disposition
of such asset for purposes of computing Profits or Losses;
(D) Gain or loss resulting from any disposition of Partnership Assets with
respect to which gain or loss is recognized for federal income purposes shall be
computed by reference to the Gross Asset Value of the property disposed of,
notwithstanding that the adjusted tax basis of such property differs from its
Gross Asset Value;
(E) In lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account Depreciation for such Fiscal Year or other period,
computed in accordance with the definition of Depreciation; and
(F) Notwithstanding any other provisions of this definition, any items
which are specially allocated pursuant to Section 2(C) hereof shall not be taken
into account in computing Profits or Losses.
2. Allocation of Profit and Loss. The income, profits, gains, losses,
deductions and credits of the Partnership shall be determined in accordance with
the capital accounting rules and principles established by Code Sections 702 and
704 and the regulations thereunder and, to the extent not inconsistent
therewith, in accordance with generally accepted tax accounting principles, and
shall be allocated each Fiscal Year as follows and in the following order of
priority:
(A) After giving effect to the special allocations set forth in Section
2(C), Profits for any Fiscal Year shall be allocated as follows:
(1) First, one hundred percent (100%) to the General Partners to the extent
of the excess, if any, of (i) the cumulative Losses allocated the General
Partners pursuant to Section (B)(2) hereof for all prior Fiscal Years, over (ii)
the cumulative Profits allocated to the General Partners pursuant to this
Section (A)(1) for all prior Fiscal Years;
(2) Second, one hundred percent (100%) to the Partners, in proportion to
and to the extent of the excess, if any, of (i) the cumulative Losses allocated
to each Partner pursuant to Section (B)(1)(c) hereof for all prior Fiscal Years,
over (ii) the cumulative Profits allocated to each Partner pursuant to this
Section (A)(2) for all prior Fiscal Years;
(3) Third, one hundred percent (100%) to the Partners, in proportion to and
to the extent of the excess, if any, of (i) the cumulative Losses allocated to
each Partner pursuant to Section (B)(1)(b) hereof for all prior Fiscal Years,
over (ii) the cumulative Profits allocated to each Partner pursuant to this
Section (A)(3) for all prior Fiscal Years;
(4) Fourth, one hundred percent (100%) to the Managing General Partner to
the extent of the excess, if any, of (i) the cumulative Class B Preferred Return
of such Partner accrued for the current and all prior Fiscal Years, over (ii)
the cumulative Profits allocated to such Partner pursuant to this Section (A)(4)
for all prior Fiscal Years;
(5) Fifth, one hundred percent (100%) to the Managing General Partner, in
proportion to and to the extent of the excess, if any, of (i) the cumulative
Class C Preferred Return accrued for the current and all prior Fiscal Years,
over (ii) the cumulative Profits allocated to such Partner pursuant to this
Section (A)(5) for all prior Fiscal Years; and
(6) The balance, if any, to the Partners in proportion to their respective
Percentage Interests in the Partnership.
(B) After giving effect to the special allocations set forth in Section (C)
hereof, Losses for any Fiscal Year shall be allocated as set forth in Section
(B)(1) hereof, subject to the limitation in Section (B)(2) hereof.
(1) Losses for any Fiscal Year shall be allocated in the following order of
priority:
(a) First, one hundred percent (100%) to the Partners in proportion to and
to the extent of the excess, if any, of (y) the cumulative Profits allocated to
each such Partner pursuant to Section (A)(6) hereof for all prior Fiscal Years,
over (z) the cumulative Losses allocated to such Partner pursuant to this
Section (B)(1)(a) for all prior Fiscal Years;
(b) Second, one hundred percent (100%) to the Partners in proportion to and
to the extent of their positive Capital Accounts until all Capital Accounts have
been reduced to zero; and
(c) The balance, if any, to the Partners in proportion to their Percentages
of Partnership Interest.
(2) The Losses allocated pursuant to Section (B)(1) hereof shall not exceed
the maximum amount of Losses that can be so allocated without causing any
Limited Partner to have an Adjusted Capital Account Deficit at the end of any
Fiscal Year. In the event some but not all of the Limited Partners would have
Adjusted Capital Account Deficits as a consequence of an allocation of Losses
pursuant to Section (B)(1) hereof but for this Section (B)(2), the limitation
set forth in this (B)(2) shall be applied on a Limited Partner by Limited
Partner basis so as to allocate the maximum permissible Losses to each Limited
Partner under Regulations Section 1.704-1(b)(2)(ii)(d). All Losses in excess of
the limitations set forth in this Section (B)(2) shall be allocated to the
General Partners in proportion to their respective Percentage of Partnership
Interest.
(C) Special Allocations. The following special allocations shall be made in
the following order:
(1) Minimum Gain Chargeback. Notwithstanding any other provision of the
foregoing Sections 2(A) and (B), if there is a net decrease in Partnership
Minimum Gain during any Fiscal Year, then, to the extent required by Regulations
Section 1.704-2(f), each Partner shall be specially allocated items of
Partnership income and gain for such year (and, if necessary, subsequent years)
in an amount equal to such Partner's share of the net decrease in Partnership
Minimum Gain, determined in accordance with Regulations Section 1.704-2(g)(2).
The items to be so allocated shall be determined in accordance with Regulations
Sections 1.704-2(f)(6) and 1.704-2(j). This Section 2(C)(1) is intended to
comply with the minimum gain chargeback requirement in Regulations Section
1.704-2(f) and shall be interpreted consistently therewith.
(2) Partner Minimum Gain Chargeback. Notwithstanding any other provision of
Sections 2(A)-(F) hereof except Section 2(C)(1), if there is a net decrease in
Partner Minimum Gain attributable to a Partner Nonrecourse Debt during any
Fiscal Year, then, to the extent required by Regulations Section 1.704-2(i)(4),
each Partner who has a share of the Partner Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(5), shall be specially allocated items of Partnership income and gain
for such year (and, if necessary, subsequent years) in an amount equal to such
Partner's share of the net decrease in Partner Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(4). The items to be so allocated shall be determined in accordance
with Regulations Sections 1.704-2(i)(4) and 1.704-2(j). This Section 2(C)(2) is
intended to comply with the minimum gain chargeback requirement in Regulations
Section 1.704-2(i)(4) and shall be interpreted consistently therewith.
(3) Qualified Income Offset. In the event any Limited Partner unexpectedly
receives any adjustments, allocations, or distributions described in Regulations
Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Partnership income and
gain (consisting of a pro rata portion of each item of Partnership income,
including gross income, and gain for such year) shall be specially allocated to
such Partner in an amount and manner sufficient to eliminate, to the extent
required by the Regulations, the Adjusted Capital Account Deficit of such
Partner as quickly as possible, provided that an allocation pursuant to this
Section 2(C)(3) shall be made if and only to the extent that such Partner would
have an Adjusted Capital Account Deficit after all other allocations provided
for in Sections 2(A)-(F) hereof have been tentatively made as if this Section
2(C)(3) were not in the Agreement.
(4) Gross Income Allocation. In the event any Limited Partner has a deficit
Capital Account at the end of any Fiscal Year that is in excess of the sum of
(i) the amount such Partner is obligated to restore, and (ii) the amount such
Partner is deemed to be obligated to restore pursuant to the penultimate
sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), such Partner
shall be specially allocated items of Partnership income and gain (consisting of
a pro rata portion of each item of Partnership income, including gross income,
and gain for such year) in the amount of such excess as quickly as possible,
provided that an allocation pursuant to this Section 2(C)(4) shall be made if
and only to the extent that such Partner would have a deficit Capital Account in
excess of such sum after all other allocations provided for in Sections 2(A)-(F)
hereof have been tentatively made as if Section 2(C)(3) and this Section 2(C)(4)
were not in the Agreement.
(5) Nonrecourse Deductions. Nonrecourse Deductions for any Fiscal Year or
other period shall be specially allocated to the Partners in proportion to their
Percentages of Partnership Interest.
(6) Partner Nonrecourse Deductions. Any Partner Nonrecourse Deductions for
any Fiscal Year or other period shall be specially allocated to the Partner who
bears the economic risk of loss with respect to the Partner Nonrecourse Debt to
which such Partner Nonrecourse Deductions are attributable in accordance with
Regulations Section 1.704-2(i)(1).
(7) Section 754 Adjustment. To the extent an adjustment to the adjusted tax
basis of any Partnership Asset pursuant to Code Section 734(b) or Code Section
743(b) is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m), to be
taken into account in determining Capital Accounts, the amount of such
adjustment to the Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis), and such gain or loss shall be specially allocated to the
Partners in a manner consistent with the manner in which their Capital Accounts
are required to be adjusted pursuant to such Regulations Section.
(D) Other Allocation Rules.
(1) For purposes of determining the Profits, Losses or any other items
allocable to any period, Profits, Losses and any such other items shall be
determined on a daily, monthly, or other basis, as determined by the Managing
General Partner using any permissible method under Code Section 706 and the
Regulations thereunder.
(2) Except as otherwise provided in this Agreement, all items of
Partnership income, gain, loss, deduction and any other allocations not
otherwise provided for shall be divided among the Partners in the same
proportions as they share Profits and Losses, as the case may be, for the year.
(3) The Partners are aware of the income tax consequences of the
allocations made by Sections 2(A)-(F) hereof and hereby agree to be bound by the
provisions of Sections 2(A)-(F) hereof in reporting their shares of Partnership
income and loss for income tax purposes.
(4) Solely for purposes of determining a Partner's proportionate share of
the "excess nonrecourse liabilities" of the Partnership within the meaning of
Regulations Section 1.752-3(a)(3), the Partners' interests in Partnership
profits shall be equal to their Percentages of Partnership Interest.
(E) Tax Allocations: Code Section 704(c).
(1) In accordance with Code Section 704(c) and the Regulations thereunder,
income, gain, loss and deduction with respect to any property contributed to the
capital of the Partnership shall, solely for tax purposes, be allocated among
the Partners so as to take account of any variation between the adjusted basis
of such property to the Partnership for federal income tax purposes and its
initial Gross Asset Value (computed in accordance with the definition herein)
using the traditional method without curative allocations as set forth in
Regulations Section 1.704-3(b), unless otherwise Consented to by all Partners.
(2) In the event the Gross Asset Value of any Partnership Asset is
adjusted, subsequent allocations of income, gain, loss and deduction with
respect to such asset shall take account of any variation between the adjusted
basis of such asset for federal income tax purposes and its Gross Asset Value in
the same manner as specified in Section 2(E)(1) above.
(3) Allocations pursuant to this Section 2(E) are solely for purposes of
federal, state and local taxes and shall not affect, or in any way be taken into
account in computing, any Partner's Capital Account or share of Profits, Losses,
other items, or distributions pursuant to any provision of this Agreement.
(4) Consistent with this Section 2(E), in connection with the restatement
of the Partners' Capital Accounts pursuant to Section 4.03, the Partners' shares
of Depreciation, depletion, amortization, and gain or loss, as computed for
federal income tax purposes, with respect to the Project, shall be determined so
as to take into account the variation between the adjusted tax basis of the
Project and the Gross Asset Value of the Project using the principles of Code
Section 704(c) as required by Treasury Regulations Sections
1.704-1(b)(2)(iv)(f)(4) and 1.704-1(b)(4)(i).
(F) It is the intent of the Partners that each Partner's distributive share
of income, gain, loss, deduction, or credit (or item thereof) shall be allocated
in accordance with this Exhibit 2 to the fullest extent permitted by and in a
manner intended to comply with Section 704(b) of the Code. Such compliance shall
include compliance with the provisions of the Treasury Regulations dealing with
"qualified income offsets" and "minimum gain chargebacks." Moreover, in
conjunction with the "book-up" set forth in Section 4.03 hereof, "Section 704(c)
principles" shall apply to the amount of the "book-up" of the Partners.
Recognizing the complexity of the allocations contained in this Exhibit 2, in
order to preserve and protect the allocations provided for in this Exhibit 2,
and to attempt to comply with the Treasury Regulations, the Managing General
Partner, upon obtaining the advice of counsel to the Partnership, is authorized
and directed to allocate income, gain, loss, deduction or credit (or item
thereof) arising in any year (the "New Allocation") differently than otherwise
provided for in this Exhibit 2 if, and to the extent that, the allocations under
this Exhibit 2 would not fully conform with Section 704(b) of the Code, but only
so long as no Limited Partner is materially affected thereby. Any New Allocation
made pursuant to this Section (F) shall be deemed to be a complete substitute
for any allocation otherwise provided for in this Exhibit 2, and no amendment of
the Partnership Agreement or approval of any Partner shall be required. The
Managing General Partner shall use its best efforts to cause the New Allocation
to resemble in all material respects and to the maximum extent possible the
allocations contained in the Partnership Agreement as originally adopted.
(G) Notwithstanding the Managing General Partner's best efforts in this
regard, by their execution of this Agreement, all Partners acknowledge that the
Managing General Partner may not be able to achieve a New Allocation which
resembles in all material respects the intended allocation hereunder, and that
the New Allocation may have a material adverse effect on one or more Partners.
FOURTH RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
IVY STREET HOTEL LIMITED PARTNERSHIP
EXHIBIT 3
DESCRIPTION OF LAND
ALL THAT TRACT or parcel of land lying and being in Land Lot 51 of the
14th District of Fulton County, Georgia, containing 3.58 acres, same being more
particularly described as follows:
TO FIND THE TRUE POINT OF BEGINNING, begin at a drill hole set which
marks the intersection of the northerly Right-of-Way Line of Harris Street
(Sixty (60') foot Right-of-Way) with the easterly Right-of-Way Line of Peachtree
Center Avenue (Sixty (60') foot Right-of-Way); thence traveling along the
northerly Right-of-Way Line of said Harris Street south 89 degrees 10 minutes 36
seconds east a distance of 207.07 feet to a drill hole set on said Right-of-Way
Line which drill hole set is the TRUE POINT OF BEGINNING; from the TRUE POINT OF
BEGINNING as thus established leaving said Right-of-Way Line and traveling north
00 degrees 49 minutes 24 seconds east a distance of 112.72 feet to a point;
thence traveling north 89 degrees 10 minutes 36 seconds west a distance of
206.60 feet to a nail set on the easterly Right-of-Way Line of said Peachtree
Center Avenue; thence traveling along said Right-of-Way Line north 01 degrees 03
minutes 48 seconds east a distance of 177.30 feet to a drill hole set on said
Right-of-Way Line; thence leaving said Right-of-Way Line and traveling south 89
degrees 10 minutes 36 seconds east a distance of 205.92 feet to a point; thence
traveling north 00 degrees 49 minutes 24 seconds east a distance of 113.30 feet
to a nail set on the southerly Right-of-Way Line of Baker Street (Sixty (60')
foot Right-of-Way); thence traveling along said Right-of-Way Line south 89
degrees 19 minutes 51 seconds east a distance of 296.41 feet to a drill hole set
on said Right-of-Way Line at its intersection with the westerly Right-of-Way
Line of Courtland Street (Seventy (70') foot Right-of-Way); thence traveling
along the westerly Right-of-Way Line of said Courtland Street south 01 degrees
03 minutes 16 seconds west a distance of 404.12 feet to a drill hole set on said
Right-of-Way Line at its intersection with the northerly Right-of-Way Line of
said Harris Street; thence traveling along the northerly Right-of-Way Line of
said Harris Street north 89 degrees 10 minutes 36 seconds west a distance of
294.84 feet to a drill hole set on said Right-of-Way Line, which drill hole set
marks the TRUE POINT OF BEGINNING.
The above described property being shown on that certain Survey
entitled "ALTA/ACSM Land Title Survey for Atlanta Marriott Marquis Limited
Partnership, Ivy Street Hotel Limited Partnership, Marriott/Portman Finance
Corporation, The Citizens and Southern National Bank & Ticor Title Insurance
Company of California", prepared by Planners and Engineers Collaborative,
bearing the seal of Robert Lee White, Georgia Registered Land Surveyor No.
2080, dated January 5, 1990.
TOGETHER WITH the following two (2) easement parcels, on the terms and
subject to the conditions set forth with respect thereto in, to and under that
certain Declaration of Easements and Restrictions dated on September 1, 1982 and
recorded at Deed Book 8291, Page 40, Fulton County, Georgia Records; as amended
by First Amendment to Declaration of Easements and Restrictions, dated as of
August 4, 1983, recorded at Deed Book 8657, Page 385, aforesaid Records:
EASEMENT PARCELS
(MARQUIS TWO TOWER)
All that tract or parcel of land lying and being in the City of
Atlanta, in Land Lot 51 of the 14th District of Fulton County, Georgia, and
being more particularly described as follows:
BEGINNING at the point formed by the intersection of the east
right-of-way line of Peachtree Center Avenue (formerly known as Ivy Street) (as
presently located) with the south right-of-way line of Baker Street (as
presently located; run thence south 89 degrees, 19 minutes, 51 seconds east, as
measured along the south right-of-way line of Baker Street (as presently
located), a distance of 205.44 feet to a point; run thence south 00 degrees, 49
minutes, 24 seconds west, a distance of 113.30 feet to a point; run thence north
89 degrees, 10 minutes, 36 seconds west, a distance of 205.92 feet to a point
lying on the east right-of-way line of Peachtree Center Avenue (formerly known
as Ivy Street) (as presently located); run thence north 01 degrees, 03 minutes,
49 seconds east, as measured along the east right-of-way line of Peachtree
Center Avenue (formerly known as Ivy Street) (as presently located) a distance
of 112.75 feet to a point formed by the intersection of the south right-of-way
line of Baker Street (as presently located) with the east right-of-way line of
Peachtree Center Avenue (formerly known as Ivy Street) (as presently located)
and the POINT OF BEGINNING; being property shown on the plat of survey, to which
reference is made for all purposes, prepared for P.C. Towers, L.P., a Georgia
limited partnership, by Planners and Engineers Collaborative, bearing the
certification of Robert L. White, Georgia Registered Land Surveyor, number 2080,
dated July 20, 1988, last revised September 9, 1988.
(MARQUIS ONE TOWER)
All that tract or parcel of land lying and being in the City of
Atlanta, in Land Lot 51, of the 14th District, of Fulton County, Georgia, and
being more particularly described as follows:
BEGINNING at the point formed by the intersection of the east
right-of-way line of Peachtree Center Avenue (formerly known as Ivy Street) (as
presently located) with the north right-of-way line of Harris Street (as
presently located); run thence north 01 degrees, 03 minutes, 49 seconds east, as
measured along the east right-of-way line of Peachtree Center Avenue (formerly
known as Ivy Street) (an presently located), a distance of 112.72 feet to a
point; run thence south 89 degrees, 10 minutes, 36 seconds east, a distance of
206.60 feet to a point; run thence south 00 degrees, 49 minutes, 24 seconds
west, a distance of 112.72 feet to a point located on the north right-of-way
line of Harris Street (as presently located); run thence north 89 degrees, 10
minutes, 36 seconds west, as measured along the north right-of-way line of
Harris Street (as presently located), a distance of 207.07 feet to a point
formed by the intersection of the east right-of-way line of Peachtree Center
Avenue (formerly known as Ivy Street) (as presently located) with the north
right-of-way line of Harris Street (as presently located) and the POINT OF
BEGINNING; being property shown on the plat of survey, to which reference is
made for all purposes, prepared for P.C. Towers, L.P., a Georgia limited
partnership, by Planners and Engineers Collaborative, bearing the certification
of Robert L. White, Georgia Registered Land Surveyor, number 2080, dated July
20, 1988, last revised September 9, 1988.
FOURTH RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
IVY STREET HOTEL LIMITED PARTNERSHIP
TABLE OF CONTENTS
ARTICLE I - CONTINUATION...................................................- 2 -
Continuation......................................................- 2 -
Name. - 2 -
Place of Business; Registered Agent...............................- 2 -
ARTICLE II - INTERPRETIVE PROVISIONS.......................................- 2 -
Certain Definitions...............................................- 2 -
Rules of Construction.............................................- 8 -
ARTICLE III - BUSINESS PURPOSE.............................................- 8 -
Business and Purpose..............................................- 8 -
Authorized Activities.............................................- 8 -
ARTICLE IV - CAPITAL; HOST ADVANCE ........................................- 8 -
Capital Contributions of Portman..................................- 8 -
Capital Contributions of AMMLP....................................- 8 -
Class B Capital...................................................- 9 -
Host Advance......................................................- 9 -
No Other Obligations to Contribute...............................- 10 -
Partner Loans....................................................- 10 -
Voluntary Additional Contributions...............................- 10 -
No Third Party Beneficiaries.....................................- 10 -
Capital Accounts.................................................- 10 -
Return of Capital Accounts.......................................- 11 -
Contingent Adjustments on Sale or Refinancing....................- 11 -
ARTICLE V - ALLOCATIONS AND DISTRIBUTIONS.................................- 12 -
Limited Liability................................................- 13 -
Distribution Upon Liquidation....................................- 13 -
Restoration of Capital Accounts..................................- 14 -
ARTICLE VI - PARTNERSHIP MANAGEMENT.......................................- 14 -
Management and Control of Partnership Business...................- 14 -
No Management by Limited Partners................................- 16 -
Limitations on Partners..........................................- 16 -
Business with Affiliates.........................................- 16 -
No Compensation; Reimbursement of Expenses.......................- 16 -
Liability for Acts and Omissions.................................- 17 -
Hotel Policy Committee...........................................- 17 -
Right of First Negotiation.......................................- 18 -
Separate Identity/Operations.....................................- 19 -
Additional Partnership Limitations. .............................- 20 -
Books and Records................................................- 21 -
Books and Records; Tax Matters...................................- 22 -
Reports and Notices..............................................- 22 -
Partnership Funds................................................- 22 -
ARTICLE VIII - TRANSFER OF PARTNERSHIP INTERESTS..........................- 22 -
Transfer by General Partners.....................................- 22 -
Obligations of a Prior General Partner...........................- 23 -
Additional or Successor General Partners.........................- 23 -
Restrictions on Transfer by Limited Partners.....................- 23 -
ARTICLE IX - DISSOLUTION AND LIQUIDATION..................................- 24 -
Term and Dissolution.............................................- 24 -
Liquidation of Partnership Assets................................- 25 -
ARTICLE X - AMENDMENTS ...................................................- 25 -
Amendment Procedure..............................................- 25 -
ARTICLE XI - MISCELLANEOUS PROVISIONS.....................................- 25 -
Title to Property................................................- 25 -
Other Activities.................................................- 26 -
Applicable Law...................................................- 26 -
Binding Agreement................................................- 26 -
Counterparts and Effectiveness...................................- 26 -
Entire Agreement.................................................- 26 -
Exhibit 1 Schedule of Partners
Exhibit 2 Allocation Provisions
Exhibit 3 Description of the Land
EXHIBIT 10.9
AMENDED AND RESTATED
HOTEL MANAGEMENT AGREEMENT
This Amended and Restated Management Agreement ("Agreement") is executed as
of the 3rd day of January, 1998 ("Effective Date"), by HMA REALTY LIMITED
PARTNERSHIP ("Owner"), a Georgia limited partnership, with a mailing address at
10400 Fernwood Road, Bethesda, Maryland 20817 and NEW MARRIOTT MI, INC.
("Management Company"), a Delaware corporation, with a mailing address at 10400
Fernwood Road, Bethesda, Maryland 20817.
R E C I T A L S :
A. Owner is the owner of the Hotel (as defined and more fully described in
Section 1.01) which is located as set forth on Exhibit "A" hereto; and
B. Owner and Management Company (as successor in interest to Marriott
Hotels, Inc.) are parties to the certain Management Agreement ("Prior Management
Agreement") dated as of May 28, 1985 for managing and operating the Hotel; and
C. The parties wish to amend and restate the Prior Management Agreement as
of the Effective Date.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITION OF TERMS
1.01 Definition of Terms
The following terms when used in this Agreement shall have the meanings
indicated:
"Accounting Period" shall mean each of the four (4) week accounting periods
which are used in Management Company's accounting system, except that an
Accounting Period may occasionally contain five (5) weeks when necessary to
conform Management Company's accounting system to the calendar.
"Accounting Period Statement" shall have the meaning set forth in Section
5.02.
"Additional Invested Capital" shall mean the cumulative total, as of any
given date during the Term subsequent to the Effective Date, of the following:
(i) any contribution made by Owner pursuant to Section 7.01 B (provided that
Owner=s Investment shall be decreased by any return to Owner of excess Working
Capital pursuant to Section 7.01 C); (ii) any expenditures made by Owner,
pursuant to Section 8.03, and any expenditures by Owner pursuant to Section
20.10 C; (iii) any contributions by Owner to the FF&E Reserve (beyond the
funding described in Section 8.02 B), other than those contributions which are
reimbursed to Owner under Section 8.02 E; and (iv) any payments by Owner with
regard to special assessments or impact fees, pursuant to Section 13.01 B(2) or
(3).
"Adjusted Owner's Investment" shall mean the amount, as of any given date
(the "Adjustment Date") during the Term, of Owner's Investment, after adjustment
thereof as follows: each separate expenditure by Owner which comprises Owner's
Investment shall be adjusted for inflation by using an amount equal to
seventy-five percent (75%) of the percentage change in the GDP Deflator between
the date of each such separate expenditure and the date in question.
"Adjustment Date" shall have the meaning set forth in the definition of
"Adjusted Owner's Investment".
"Affiliate" shall mean any individual or entity directly or indirectly
through one or more intermediaries, controlling, controlled by or under common
control with a party. The term "control," as used in the immediately preceding
sentence, means, with respect to a corporation, the right to exercise, directly
or indirectly, fifty percent (50%) or more of the voting rights attributable to
the shares of the controlled corporation, and, with respect to an entity that is
not a corporation, the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of the controlled
entity.
"Agreement" shall have the meaning set forth in the Preamble.
"Annual Operating Budget" shall have the meaning set forth in Section 9.03.
"Annual Operating Statement" shall have the meaning set forth in Section
9.01.
"Architect" means Owner=s architect for the Hotel, John Portman &
Associates, a sole proprietorship of Portman.
"Available Cash Flow" shall mean an amount, with respect to each Fiscal
Year or portion thereof, equal to the excess (if any) of the Operating Profit
for such Fiscal Year over the applicable Owner's Priority.
"Base Management Fee" shall mean an amount equal to three percent (3%) of
Gross Revenues, which shall be paid to Management Company as compensation (in
addition to the Incentive Management Fee) for the services performed pursuant to
this Agreement.
"Building Estimate" shall have the meaning set forth in Section 8.03 A.
"Capital Expenditures" shall have the meaning set forth in Section 8.03 A.
"Capitalization Multiple" shall mean the number ten (10).
"Case Goods" shall mean furniture and furnishings used in the Hotel,
including, without limitation: chairs, beds, chests, headboards, desks, lamps,
tables, television sets, mirrors, pictures, wall decorations and similar items.
"CC&R's" shall have the meaning set forth in Section 2.05.
"Central Office Services" shall mean certain services which are provided to
the Hotel by personnel who are employees of Management Company or one of its
Affiliates and who are not normally located at the Hotel, including the
following: executive supervision; planning and policy making; corporate finance;
corporate personnel and employee relations; in-house legal services; trademark
protection relating to Proprietary Marks which are used generally by the
Marriott chain; certain product research and development; and the services of
Management Company's technical and operational experts making routine periodic
inspection and consultation visits to the Hotel (but not the services of the
personnel of the Architecture and Construction Division of Management Company
(or any of its Affiliates) providing architectural, technical or procurement
services for the Hotel, the costs and expenses of which shall be paid pursuant
to paragraph 6 of the definition of Operating Profit). Any service which is
defined as being included within the term "Chain Services" shall not also be
included within "Central Office Services". The Central Office Services which are
provided to the Hotel shall be generally consistent with those Central Office
Services which are provided to other comparable full-service hotels within the
Marriott Hotel System.
"Chain Services" shall have the meaning set forth in Section 11.03.
"Coverage Ratio" shall mean the number one and three-tenths (1.3).
"Cure Notice" shall have the meaning set forth in Section 4.03 B.
"Cure Period" shall have the meaning set forth in Section 4.03 B.
"Deductions" shall have the meaning set forth in the definition of
Operating Profit.
"Default" shall have the meaning set forth in Section 16.01.
"Effective Date" shall have the meaning set forth in the Preamble.
"Employee Claims" shall mean any and all claims (including all fines,
judgments, penalties, costs, Litigation and/or arbitration expenses, attorneys'
fees and expenses, and costs of settlement with respect to any such claim) by
any employee or employees of Management Company against Owner or Management
Company with respect to the employment at the Hotel of such employee or
employees. "Employee Claims" shall include, without limitation, the following:
(i) claims which are eventually resolved by arbitration, by Litigation or by
settlement; (ii) claims which also involve allegations that any applicable
employment-related contracts affecting the employees at the Hotel have been
breached; and (iii) claims which involve allegations that one or more of the
Employment Laws has been violated; provided, however, that "Employee Claims"
shall not include claims for worker compensation benefits (which shall be
governed by Article XII hereof) or for unemployment benefits.
"Employment Laws" shall mean any federal, state or local law (including the
common law), statute, ordinance, rule, regulation, order or directive with
respect to employment, conditions of employment, benefits, compensation, or
termination of employment that currently exists or may exist at any time during
the Term of this Agreement, including, but not limited to, Title VII of the
Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Workers
Adjustment and Retraining Act, the Occupational Safety and Health Act, the
Immigration Reform and Control Act of 1986, the Polygraph Protection Act of 1988
and the Americans With Disabilities Act of 1990.
"Environmental Laws" shall mean any federal, state or local law, rule or
regulation (both present and future) dealing with the use, generation,
treatment, storage, disposal or abatement of Hazardous Materials, including, but
not limited to, (i) the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. Section 9601 et seq., as amended, and (ii) the
regulations promulgated thereunder, from time to time.
"Event of Default" shall have the meaning set forth in Section 16.02.
"Existing CC&R's" shall have the meaning set forth in Section 2.05 A.
"Existing Mortgages" shall mean the Mortgages (if any) which are listed on
Exhibit "E", but, for purposes of this Agreement, shall not include any
amendments or modifications thereof after the Effective Date.
"Extension Threshold" shall mean, with respect to the most recent three (3)
full Fiscal Years prior to the date in question, a dollar amount equal to ten
and seventy-five hundredths percent (10.75%) of the average balance of the
Adjusted Owner's Investment during such period of time.
"FF&E" shall mean furniture, furnishings, fixtures, Soft Goods, Case Goods,
signage and equipment at the Hotel (including, without limitation, facsimile
machines, communication systems, audio-visual equipment, and all computer and
other equipment needed for the reservation system and the property management
system, and all other electronic systems needed for the Hotel, from time to
time, as well as similar systems based on other technologies which may be
developed in the future.
"FF&E Estimate" shall have the meaning set forth in Section 8.02 C.
"FF&E Reserve" shall have the meaning set forth in Section 8.02 A.
"First Notice" shall have the meaning set forth in Section 6.02.
"Fiscal Year" shall mean Management Company's Fiscal Year which now ends at
midnight on the Friday closest to December 31 in each calendar year; the new
Fiscal Year begins on the Saturday immediately following said Friday. Any
partial Fiscal Year between the Effective Date and the commencement of the first
full Fiscal Year, and any partial Fiscal Year between the end of the last full
Fiscal Year and the Termination of this Agreement, shall constitute a separate
Fiscal Year. If Management Company's Fiscal Year is changed in the future,
appropriate adjustment to this Agreement's reporting and accounting procedures
shall be made; provided, however, that no such change or adjustment shall alter
the Term of this Agreement, or in any way reduce the distributions of Operating
Profit or other payments due to Owner hereunder, or otherwise significantly and
adversely affect Owner's rights or obligations under this Agreement.
"Fixed Asset Supplies" shall mean supply items included within "Property
and Equipment" under the Uniform System of Accounts, including linen, china,
glassware, silver, uniforms, and similar items.
"Force Majeure" shall mean acts of God, acts of war, civil disturbance,
governmental action (including the revocation or refusal to grant licenses or
permits, where such revocation or refusal is not due to the fault of the party
whose performance is to be excused for reasons of Force Majeure), strikes, fire,
unavoidable casualties or any other causes beyond the reasonable control of
either party (excluding, however, (i) lack of financing, or (ii) general
economic and/or market factors).
"Foreclosure" shall mean any exercise of the remedies available to a
Holder, upon a default under the Secured Loan held by such Holder, which results
in a transfer of title to or possession of the Hotel. The term "Foreclosure"
shall include, without limitation, any one or more of the following events, if
they occur in connection with a default under a Secured Loan: (i) a transfer by
judicial foreclosure; (ii) a transfer by deed in lieu of foreclosure; (iii) the
appointment by a court of a receiver to assume possession of the Hotel; (iv) a
transfer of either ownership or control of the Owner, by exercise of a stock
pledge or otherwise; (v) if title to the Hotel is held by a tenant under a
ground lease, an assignment of the tenant's interest in such ground lease; or
(vi) any similar judicial or non-judicial exercise of the remedies held by the
Holder.
"Foreclosure Date" shall mean the date on which title to or possession of
the Hotel is transferred by means of a Foreclosure.
"Future CC&R's" shall have the meaning set forth in Section 2.05 B.
"GDP Deflator" shall mean the "Gross Domestic Product Implicit Price
Deflator" issued from time to time by the United States Bureau of Economic
Analysis of the Department of Commerce, or if the aforesaid GDP Deflator is not
at such time so prepared and published, any comparable index selected by Owner
and reasonably satisfactory to Management Company (a "Substitute Index") then
prepared and published by an agency of the Government of the United States,
appropriately adjusted for changes in the manner in which such index is prepared
and/or year upon which such index is based. Any dispute regarding the selection
of the Substitute Index or the adjustments to be made thereto shall be settled
by arbitration in accordance with Section 20.13. Except as otherwise expressly
stated herein, whenever a number or amount is required to be "adjusted by the
GDP Deflator", or similar terminology, such adjustment shall be equal to the
percentage increase or decrease (except that, for purposes of this Agreement,
the GDP Deflator shall not be decreased below its level as of the Effective
Date) in the GDP Deflator which is issued for the month in which such adjustment
is to be made (or, if the GDP Deflator for such month is not yet publicly
available, the GDP Deflator for the most recent month for which the GDP Deflator
is publicly available) as compared to the GDP Deflator which was issued for the
month in which the Effective Date occurred.
"Gross Revenues" shall mean all revenues and receipts of every kind derived
from operating the Hotel and parts thereof, including, but not limited to:
income (from both cash and credit transactions), before commissions and
discounts for prompt or cash payments, from rental of rooms, stores, offices,
meeting, exhibit or sales space of every kind; license, lease and concession
fees and rentals (not including gross receipts of licensees, lessees and
concessionaires); income from vending machines; health club membership fees;
food and beverage sales; sales of merchandise (other than proceeds from the sale
of FF&E no longer necessary to the operation of the Hotel, which shall be
deposited in the FF&E Reserve as set forth in Section 8.02 D hereof); service
charges, to the extent not distributed to the employees at the Hotel as, or in
lieu of, gratuities; and proceeds, if any, from business interruption or other
loss of income insurance; provided, however, that Gross Revenues shall not
include the following: gratuities to Hotel employees; federal, state or
municipal excise, sales, use or similar taxes collected directly from patrons or
guests or included as part of the sales price of any goods or services;
insurance proceeds (other than proceeds from business interruption or other loss
of income insurance); condemnation proceeds (other than for a temporary taking);
any proceeds from any Sale of the Hotel or from the refinancing of any debt
encumbering the Hotel; proceeds from the disposition of FF&E no longer necessary
for the operation of the Hotel; interest which accrues on amounts deposited in
either the FF&E Reserve or any escrow accounts which are established in
accordance with Section 13.01 C; or Cure Payments.
"Hazardous Materials" shall mean any substance or material containing one
or more of any of the following: "hazardous material", "hazardous waste",
"hazardous substance", "regulated substance", "petroleum", "pollutant",
"contaminant", or "asbestos", as such terms are defined in any applicable
Environmental Law, in such concentration(s) or amount(s) as may impose clean-up,
removal, monitoring or other responsibility under any applicable Environmental
Law, or which may present a significant risk of harm to guests, invitees or
employees of the Hotel.
"Holder" shall mean any holder, from time to time, of any Secured Loan.
"Hotel" shall mean that certain hotel currently known as the Atlanta
Marriott Marquis Hotel located in Atlanta, Georgia, containing approximately
1,674 guestrooms which Owner owns at the location specified in Exhibit "A"; and
shall include as appropriate to the context (i) the Site, and (ii) the
improvements built thereon, and (iii) all FF&E, Fixed Asset Supplies and
Inventories installed therein now or hereafter.
"Hotel Retention" shall have the meaning set forth in Section 12.03 hereof.
"Impositions" shall mean all real estate and personal property taxes,
levies, assessments and similar charges (other than those which are specifically
excluded pursuant to Section 13.01 B) including, without limitation, the
following: all water, sewer or similar fees, rates, charges, excises or levies;
license fees; permit fees; inspection fees and other authorization fees and
other governmental charges of any kind or nature whatsoever, whether general or
special, ordinary or extraordinary, foreseen or unforeseen, or hereinafter
levied or assessed of every character (including all interest and penalties
thereon), which at any time during or in respect of the Term of this Agreement
may be assessed, levied, confirmed or imposed on Owner with respect to the Hotel
or otherwise in respect of or be a lien upon the Hotel. Impositions shall not
include any income or franchise taxes payable by Owner or Management Company.
Impositions shall include any taxes, levies, assessments and similar charges
which may be enacted by the applicable governmental authority in lieu of, or in
complete or partial substitution for, Impositions.
"Incentive Management Fee" shall mean the payments which shall be made to
Management Company, as compensation (in addition to the Base Management Fee) to
Management Company for its services under this Agreement, in the amount of
twenty percent (20%) of the Available Cash Flow in each Fiscal Year (or portion
thereof).
"Initial Term" shall have the meaning set forth in Section 4.01.
"Intellectual Property" shall mean: (i) all Software; and (ii) all manuals,
brochures and directives issued by Management Company to its employees at the
Hotel regarding the procedures and techniques to be used in operating the Hotel.
"Interest Rate" shall mean an annual rate of interest equal to the Prime
Rate (as adjusted from time to time) plus three hundred (300) basis points;
provided, however, that in no event shall the Interest Rate exceed the maximum
rate which is permitted under applicable Legal Requirements.
"Inventories" shall mean "Inventories" as defined in the Uniform System of
Accounts, such as provisions in storerooms, refrigerators, pantries and
kitchens; beverages in wine cellars and bars; other merchandise intended for
sale; fuel; mechanical supplies; stationery; and other expensed supplies and
similar items.
"Legal Requirement" shall mean any federal, state or local law, code, rule,
ordinance, regulation or order of any governmental authority or agency having
jurisdiction over the business or operation of the Hotel or the matters which
are the subject of this Agreement, including, without limitation, the following:
(i) any building, zoning or use laws, ordinances, regulations or orders; and
(ii) Environmental Laws.
"License" shall mean any license, permit, decree, act, order, authorization
or other approval or instrument which is necessary in order to operate the Hotel
in accordance with Legal Requirements and pursuant to the Marriott Standards and
otherwise in accordance with this Agreement.
"Litigation" shall mean: (i) any cause of action commenced in a federal,
state or local court; or (ii) any claim brought before an administrative agency
or body (for example, without limitation, employment discrimination claims).
"Management Analysis Report" shall mean a narrative report on the state of
business and affairs of the Hotel, prepared on an annual basis by Management
Company and delivered to Owner at the time of the delivery of the Annual
Operating Statement, which shall include a narrative description regarding the
preceding Fiscal Year, of: (i) the Hotel's operating performance, including
significant variations from the Annual Operating Budget; (ii) an analysis of any
significant variation of the actual average daily rate and occupancy from what
was set forth in the Annual Operating Budget; (iii) a review of the competitive
hotel market; (iv) a description of any significant promotional or other
marketing programs in which the Hotel participated, which were not included as
part of the Annual Operating Budget for the preceding Fiscal Year; and (v) such
other supplementary information as Owner or Management Company shall reasonably
deem necessary to an understanding of the operation of the Hotel.
"Management Company" shall have the meaning set forth in the Preamble.
"Management Fees" shall mean the Base Management Fee plus the Incentive
Management Fee.
"Marriott" shall mean Marriott International, Inc., a Delaware corporation
having an address at 10400 Fernwood Road, Bethesda, Maryland 20817.
"Marriott Hotel System" shall mean the full-service hotel system managed by
Marriott (or one or more of its Affiliates) which is, as of the Effective Date,
operated under the trade name "Marriott Hotels, Resorts and Suites".
"Marriott Standards" shall mean both the operational standards (for
example, staffing, amenities offered to guests, advertising, etc.) and the
physical standards (for example, the quality, condition, utility and age of the
FF&E, etc.) of comparable full-service hotels in the Marriott Hotel System, as
such operational and physical standards may fluctuate from time to time
(provided, however, that the Marriott Standards shall in no event be lower than
the operational and physical standards, as of the date in question, of
comparable "quality segment" (as such term was being used as of the Effective
Date) full-service hotels in other full-service hotel systems).
"Mortgage" shall mean any security instrument which encumbers the Site
and/or the Hotel, including, without limitation, mortgages, deeds of trust,
security deeds and similar instruments.
"NGS" shall have the meaning set forth in subsection 8.02D.
"Non-Disturbance Agreement" shall mean an agreement, in recordable form in
the jurisdiction in which the Hotel is located, executed and delivered by a
Holder (which agreement shall by its terms be binding upon all assignees of such
Holder and upon all Subsequent Owners), for the benefit of Management Company,
pursuant to which, in the event such Holder (or its assignee) or any Subsequent
Owner comes into possession of or acquires title to the Hotel either at or
following a Foreclosure, such Holder (and its assignees) and all Subsequent
Owners shall (x) recognize Management Company's rights under this Agreement, and
(y) shall not name Management Company as a party in any Foreclosure action or
proceeding, and (z) shall not disturb Management Company in its right to
continue to manage the Hotel pursuant to this Agreement; provided, however, that
at such time, (i) this Agreement has not expired or otherwise been earlier
terminated in accordance with its terms, and (ii) there are no outstanding
Events of Default by Management Company, and (iii) no material event has
occurred and no material condition exists which, after notice or the passage of
time or both, would entitle Owner to terminate this Agreement (excluding events
which would constitute an Event of Default, which are to be governed exclusively
by clause (ii) hereof).
"Opening Date" shall mean July 1, 1985.
"Operating Accounts" shall have the meaning set forth in Section 9.02.
"Operating Loss" shall mean a negative Operating Profit.
"Operating Profit" shall mean the excess of Gross Revenues over the
following deductions ("Deductions") incurred by Management Company in operating
the Hotel:
1. The cost of sales including salaries, wages, employee benefits, Employee
Claims (except to the extent specifically set forth to the contrary in Section
14.01 C or D), payroll taxes and other costs related to Hotel employees;
2. Departmental expenses; administrative and general expenses; the cost of
Hotel advertising and business promotion; the cost of heat, light, power and
water; and the cost of routine repairs, maintenance and minor alterations which
are treated as Deductions under Section 8.01;
3. The cost of Inventories and Fixed Asset Supplies consumed in the
operation of the Hotel;
4. A reasonable reserve for uncollectible accounts receivable as determined
by Management Company;
5. All reasonable costs and fees of independent professionals or other
third parties who are retained by Management Company to perform services
required or permitted hereunder; provided that Management Company will notify
Owner at least thirty (30) days in advance of any proposed expenditure under
this paragraph 5 which is in excess of Fifty Thousand Dollars ($50,000) (to be
adjusted by the GDP Deflator) and which was not specifically identified in the
Annual Operating Budget, and Management Company shall consider in good faith any
comments which Owner may have with respect to such proposed expenditure; and
provided, further, that if such expenditure involves immediately-needed repair
work to the Hotel or if immediate action is otherwise required, the
above-described requirement regarding thirty (30) days' prior notice shall be
modified to require whatever notice period is reasonable under the
circumstances;
6. The reasonable cost and expense of technical consultants and operational
experts who are employees of Management Company or one of its Affiliates, and
who perform specialized services in connection with non-routine Hotel work;
provided, however, that the costs and expenses so incurred shall only be
Deductions to the extent such costs and expenses are reasonable and
competitively priced, as compared to similar work done by outside consultants or
experts; and provided, further, that Management Company will notify Owner at
least thirty (30) days in advance of any proposed expenditure under this
paragraph 6 which is in excess of Fifty Thousand Dollars ($50,000) (to be
adjusted by the GDP Deflator) and which was not specifically identified in the
Annual Operating Budget, and Management Company shall consider in good faith any
comments which Owner may have with respect to such proposed expenditure; and
provided, further, that if such expenditure involves immediately-needed repair
work to the Hotel or if immediate action is otherwise required, the
above-described requirement regarding thirty (30) days' prior notice shall be
modified to require whatever notice period is reasonable under the
circumstances;
7. The Base Management Fee (unless, and to the extent that, Management
Company has elected to waive its Base Management Fee in accordance with Section
4.03 B);
8. The Hotel's pro rata share of costs and expenses incurred by Management
Company (or its Affiliates) in providing Chain Services;
9. The Hotel's pro rata share of costs and expenses incurred in connection
with sales, advertising and/or promotional programs developed for or within the
Marriott Hotel System, such as (without limitation) the Marriott Rewards
Program, where such costs and expenses are not deducted as either departmental
expenses under paragraph 2 above or as Chain Services under paragraph 8 above;
10. Insurance costs and expenses as provided in Section 12.04 B;
11. License fees and taxes, if any, payable by or assessed against
Management Company related to this Agreement or to Management Company's
operation of the Hotel (exclusive of Management Company's income taxes or
franchise taxes) and all Impositions assessed against the Hotel;
12. Amounts which are transferred into the FF&E Reserve in accordance with
the provisions of Section 8.02;
13. Lease payments pursuant to leases of Telephones and Miscellaneous
Equipment;
14. The reimbursement to Owner of the amount of any Owner Deductions; and
15. Such other costs and expenses incurred by Management Company or its
Affiliates (not including the costs and expenses of providing the Central Office
Services) as are specifically provided for elsewhere in this Agreement or are
otherwise reasonably necessary for the proper and efficient operation of the
Hotel (including, without limitation, the costs and expenses of all functions
described in Section 2.03, to the extent such costs and expenses are not already
treated as Deductions elsewhere in this definition of Operating Profit, unless,
and to the extent that, any such costs and expenses are specifically stated not
to be Deductions under any provision of this Agreement).
The term "Deductions" shall not include debt service payments pursuant to
any Secured Loan, which shall be paid by Owner from its own funds, and not from
Gross Revenues nor from the FF&E Reserve. In no event shall the costs or
expenses of providing the Central Office Services be treated as Deductions, or
otherwise be reimbursed out of Gross Revenues; it being the intent of the
parties that all such costs and expenses are to be paid by Management Company
(or its Affiliates) from its own funds.
"Owner" shall have the meaning set forth in the Preamble. Subject to
compliance with Articles XVIII and XIX of this Agreement, the term "Owner" shall
include all successors and assigns of the entity identified as the "Owner" in
the Preamble.
"Owner Deductions" shall mean amounts paid by Owner with respect to: (i)
premiums for the insurance policies described in Section 12.05; (ii) reasonable
costs of any negotiations or Litigation with respect to any contest of
Impositions, as described in Section 13.01 A; or (iii) fees and expenses of
technical consultants and operational experts which are retained by Owner, with
the approval of Management Company, to give advice with respect to the operation
of the Hotel. The amount of any Owner Deductions paid by Owner shall be
reimbursed to Owner (as a Deduction) in the Fiscal Year in which they were paid.
"Owner's Distribution" shall mean, with respect to each Fiscal Year or
portion thereof during the Term, Operating Profit less any Incentive Management
Fee due to Management Company.
"Owner=s Implied Initial Cost" shall mean two hundred seventy-six million
dollars ($276,000,000).
"Owner's Investment" shall mean as of any given point in time during the
Term, the sum total of: (i) the Owners Implied Initial Cost; plus (ii) any
Additional Invested Capital expended by Owner subsequent to the Effective Date;
provided that each expenditure of Additional Invested Capital shall be added to
the Owner's Investment (with respect to the Fiscal Year or Fiscal Years during
which such expenditure(s) occurred) on a pro rata basis, beginning with the
first full Accounting Period after such expenditures occurred, and thereafter
over the remainder of the current Fiscal Year.
"Owner's Priority" shall mean, with respect to each Fiscal Year (prorated
for any partial Fiscal Years) during the Term of this Agreement, a dollar amount
equal to ten and seventy five hundredths percent (10.75%) of Owner=s Investment
for the Fiscal Year. As of the Effective Date, the Owner=s Priority is
twenty-nine million six hundred seventy thousand dollars ($29,670,000).
"Performance Termination Threshold" shall mean, with respect to each full
Fiscal Year during the Term of this Agreement, a dollar amount equal to eight
percent (8%) of Owner's Investment.
"Portman" means John C. Portman, Jr.
"Portman Properties" means Portman d/b/a Portman Properties, a sole
proprietorship.
"Post-Foreclosure Decision Date" shall have the meaning set forth in
Section 6.06.
"Prime Rate" shall mean the "prime rate" as published in the "Money Rates"
section of The Wall Street Journal; however, if such rate is, at any time during
the Term, no longer so published, the term "Prime Rate" shall mean the average
of the prime interest rates which are announced, from time to time, by the three
(3) largest banks (by assets) headquartered in the United States which publish a
"prime rate."
"Prior Management Agreement" shall have the meaning set forth in Recital B.
"Proprietary Marks" shall mean all trademarks, trade names, symbols, logos,
slogans, designs, insignia, emblems, devices, service marks and distinctive
designs of buildings and signs, or combinations thereof, which are used to
identify hotels in the Marriott Hotel System. The term "Proprietary Marks" shall
also include all trade names, trademarks, symbols, logos, designs, etc. which
are used in connection with the operation of the Hotel during the Term (such as,
without limitation, the names of the restaurants and lounges). The term
"Proprietary Marks" shall include all present and future Proprietary Marks,
whether they are now or hereafter owned by Management Company or one of its
Affiliates, and whether or not they are registered under the laws of the United
States or any other country. The names "Marriott", "Marriott Hotels" and
"Marriott Resorts", and any of the foregoing used in conjunction with other
words or names, are examples of Proprietary Marks. Notwithstanding the
foregoing, those trade names, trademarks, symbols, logos, designs, etc., which
are specifically set forth on Exhibit "F" hereto shall be deemed to be
"Proprietary Marks" only for so long as this Agreement is in effect, and such
Proprietary Marks shall revert to the exclusive control of Owner as of the date
of Termination.
"Proprietary Signage" shall mean any signage used in connection with the
Hotel (including both interior and exterior signage, and including billboards
and other signage not located on the Site) which contains one or more
Proprietary Marks; any signage which contains the word "Marriott" shall
automatically be deemed to be Proprietary Signage.
"Prospectus" shall have the meaning set forth in Section 20.05.
"Qualified Lender" shall mean any Holder, from time to time, of any
Qualified Loan with respect to which Management Company has received a written
notice (pursuant to Section 20.09 of this Agreement) stating: (i) the name and
address of such Holder; and (ii) that such Holder is a "Qualified Lender"
pursuant to the terms of this Agreement.
"Qualified Loan" shall mean any Secured Loan in which the initial principal
amount, as of the date such Secured Loan is incurred, when added to the current
principal balance of all existing Secured Loans as of that date, is less than or
equal to the greater of the following:
(i) Seventy percent (70%) of Owner's Investment; or
(ii) the result obtained by (a) dividing the Operating Profit for the
thirteen (13) most recent full Accounting Periods by the Coverage Ratio; then,
(b) multiplying the result of clause (a) by the Capitalization Multiple; or
(iii) the existing balance of any Secured Loans encumbering the Hotel
immediately prior to the date of the incurrence of such Qualified Loan, plus
commercially reasonable Transaction Costs associated with such refinancing up to
an amount equal to four percent (4%) of the principal amount of such Qualified
Loan.
In addition, regardless of whether or not the above test set forth in
clauses (i), (ii) and (iii) is satisfied, (a) the existing (as of the Effective
Date) balance of any Secured Loan which is secured by an Existing Mortgage shall
be deemed to be a "Qualified Loan"; and (b) any Secured Loan which is secured by
a Mortgage and with respect to which Management Company, in it sole discretion,
shall have given its written approval shall be deemed to be a "Qualified Loan"
(provided that an approval by Management Company that a given Secured Loan shall
be deemed to be a Qualified Loan hereunder shall only apply to the specific
hotel or hotels which are described in such approval, and shall not be deemed to
be an approval with respect to other hotels, regardless of whether such Secured
Loan by its terms permits the substitution or addition of such other hotels as
security for such Secured Loan).
"Renewal Term" shall have the meaning set forth in Section 4.01 A.
"Required Capital Expenditures" shall have the meaning set forth in Section
8.03 A.
"Revenue Data Publication" shall mean Smith=s STAR Report, a monthly
publication distributed by Smith Travel Research, Inc. of Gallatin, Tennessee,
or an alternative source, reasonably satisfactory to both parties, of data
regarding the Revenue Per Room of hotels in the general trade area of the Hotel.
The "competitive set" for the Hotel shall be determined (with periodic
adjustments) by Management Company, subject to Owner=s approval (such approval
not to be unreasonably withheld). If such Smith=s STAR Report is discontinued in
the future, or ceases (in the reasonable opinion of either Owner or Management
Company) to be a satisfactory source of data regarding the Revenue Per Room of
various hotels in the general trade area of the Hotel, Management Company shall
select an alternative source, subject to Owner=s approval (such approval not to
be unreasonably withheld). If the parties fail to agree on either such
competitive set or such alternative source, as the case may be, within a
reasonable period of time, the matter shall be resolved by arbitration pursuant
to Section 20.13.
"Revenue Index" shall mean that fraction which is equal to (a) the Revenue
Per Room for the Hotel, divided by (b) the average Revenue Per Room for the
hotels in the Hotel=s competitive set (including the Hotel), as set forth in the
Revenue Data Publication. Appropriate adjustments shall be made in the event of
a major renovation of the Hotel.
"Revenue Index Threshold" shall mean the fraction equal to ninety-five (95)
divided by one hundred (100), or .95 as a decimal. However, if the entry of a
new hotel into the Hotel=s competitive set (or the removal of a hotel from such
competitive set) causes significant variations in the Revenue Index which do not
reflect the Hotel=s true position in the relevant market, appropriate
adjustments shall be made to the Revenue Index Threshold by mutual consent of
Owner and Management Company (neither such consent to be unreasonably withheld).
"Revenue Per Room" shall mean (i) the term "revenue per room" as defined by
the Revenue Data Publication; or (ii) if the Revenue Data Publication is no
longer being used (as more particularly set forth in the definition of "Revenue
Data Publication"), the aggregate gross room revenues of the hotel in question
for a given period of time divided by the total room nights for such period. If
clause (ii) of the preceding sentence is being used, a "room" shall be a hotel
guestroom which is keyed as a single unit, and shall include rooms which are
temporarily unavailable due to (i) maintenance, or (ii) ongoing renovation work.
"ROI Capital Expenditures" shall mean such Capital Expenditures as are
required, in Management Company=s reasonable judgment, to keep the Hotel in a
competitive, efficient and economical operating condition (which Management
Company shall substantiate by demonstrating a reasonable return on the proposed
investment to be made by Owner), in accordance with the Marriott Standards;
provided that the term "ROI Capital Expenditures" shall in no event include
expenditures which are within the definition of Required Capital Expenditures.
"Sale of the Hotel" shall mean any sale, assignment, transfer or other
disposition, for value or otherwise, voluntary or involuntary, of Owner's title
to the Hotel or the Site (either fee or leasehold title, as the case may be),
but shall not include a collateral assignment intended to provide security for a
loan. For purposes of this Agreement, a "Sale of the Hotel" shall also include a
lease (or sublease) of the entire Hotel or Site. The phrase "Sale of the Hotel"
shall also include any sale, transfer, or other disposition, for value or
otherwise, in a single transaction or a series of related transactions, of the
controlling interest in Owner. If Owner is a corporation, the phrase
"controlling interest" shall mean the right to exercise, directly or indirectly,
fifty percent (50%) or more of the voting rights attributable to the shares of
Owner (through ownership of such shares or by contract). If Owner is not a
corporation, the phrase "controlling interest" shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of Owner. Notwithstanding the foregoing, the term "Sale
of the Hotel" shall not include any sale, assignment, transfer or other
disposition of the Hotel or the Site by Owner to an Affiliate of Owner.
"Sale/Leaseback Transaction" shall have the meaning set forth in Section
6.09.
"Second Notice" shall have the meaning set forth in Section 6.02.
"Secured Loan" shall mean and include (a) any indebtedness secured by a
Mortgage encumbering the Hotel or all or any part of Owner's interest therein;
and (b) all amendments, modifications, supplements and extensions of any such
Mortgage.
"Secured Loan Acceleration" shall mean the acceleration of the indebtedness
incurred pursuant to any Secured Loan, as a result of a default under the terms
and conditions of such Secured Loan.
"Seller" shall have the meaning set forth in Section 6.09.
"Settlement Threshold Amount" shall mean the greater of (i) One Hundred
Thousand Dollars ($100,000) (as adjusted by the GDP Deflator); or (ii) a dollar
amount (to be re-determined whenever reasonably necessary) equal to the highest
amount paid in a representative sampling of Employee Claims which have been
settled within the preceding twelve (12) months, where each of such settlements
can be reasonably characterized as being (i) within the normal course of
business at the Hotel, and (ii) within the range of similar settlements at other
hotels comparable to the Hotel. Any dispute between the parties as to the
appropriate amount under clause (ii) of the preceding sentence shall be
submitted to arbitration under Section 20.13.
"Site" shall mean the parcel or parcels of land described in Exhibit "A"
attached hereto.
"Soft Goods" shall mean all fabric, textile and flexible plastic products
(not including items which are classified as "Fixed Asset Supplies" under the
Uniform System of Accounts) which are used in furnishing the Hotel, including,
without limitation: carpeting, drapes, bedspreads, wall and floor coverings,
mats, shower curtains and similar items.
"Software" shall mean all computer software and accompanying documentation
(including all future upgrades, enhancements, additions, substitutions and
modifications thereof), other than computer software which is commercially
available, which are used by Management Company in connection with the property
management system, the reservation system and all future electronic systems
developed by Management Company for use in the Hotel.
"Subsequent Owner" shall mean any individual or entity which acquires title
to or possession of the Hotel at or through a Foreclosure.
"Telephones and Miscellaneous Equipment" shall mean the following equipment
used in the Hotel and all ancillary equipment: (i) telephones; (ii)
miscellaneous office equipment such as copiers, postage meters, etc.; (iii)
television sets; and (iv) audio-visual equipment.
"Term" shall mean the Initial Term plus all Renewal Terms.
"Termination" shall mean the expiration or sooner cessation of this
Agreement.
"Transaction Costs" shall mean, with respect to the incurring of any
Secured Loan, all normal transaction costs (to the extent actually incurred)
including, without limitation, the following: state and local transfer taxes;
escrow fees; recording costs; Mortgage recording taxes; costs of any survey;
reasonable fees of the Holder's outside attorneys and accountants; appraisal
fees; title insurance premiums; financing costs (including "points"); reasonable
attorneys' fees of Owner in connection with such Secured Loan; environmental
inspection, testing and reporting fees; and brokerage commissions (provided that
no such brokerage commissions shall be recognized as "Transaction Costs"
hereunder if they are made to a person or entity affiliated with Owner, to the
extent (if any) that such payments exceed the normal customary amounts).
"Uniform System of Accounts" shall mean the Uniform System of Accounts for
Hotels, Eighth Revised Edition, 1986, as published by the Hotel Association of
New York City, Inc.
"Working Capital" shall mean assets which are used in the day-to-day
operation of the Hotel's business, including, without limitation, amounts kept
in petty cash funds, amounts deposited in operating bank accounts, receivables,
prepaid expenses and funds expended to purchase Inventories, less accounts
payable and accrued current liabilities.
END OF ARTICLE I
ARTICLE II
APPOINTMENT OF MANAGEMENT COMPANY
2.01 Appointment
Owner hereby appoints and employs Management Company as an independent
contractor and will appoint no other entity or person to supervise, direct and
control the management and operation of the Hotel for the Term provided in
Article IV. Management Company accepts said appointment and agrees to manage the
Hotel during the Term of this Agreement in accordance with the terms and
conditions hereinafter set forth. The performance of all activities by
Management Company hereunder shall be for the account of Owner.
2.02 Delegation of Authority
Except as otherwise specifically set forth in this Agreement, Hotel
operations shall be under the exclusive supervision and control of Management
Company which, except as otherwise specifically provided in this Agreement,
shall be responsible for the proper and efficient operation of the Hotel.
Management Company shall have discretion and control, free from interference,
interruption or disturbance, but in all respects subject to the provisions of
this Agreement, in all matters relating to management and operation of the
Hotel, including, without limitation, the following: charges for rooms and
commercial space; credit policies; food and beverage services; employment
policies; granting of leases, licenses and concessions for shops and agencies
within the Hotel (provided that the term of any such lease, license or
concession shall not exceed the Term of this Agreement; and provided further
that Owner's consent shall be required prior to the execution by Management
Company of any such lease, license or concession which (i) has a term of more
than five (5) years, or (ii) involves more than one thousand (1,000) square feet
of space within the Hotel); receipt, holding and disbursement of funds;
maintenance of bank accounts; procurement of Inventories, supplies and services;
promotion and publicity; and, generally, all activities necessary for operation
of the Hotel.
2.03 Operational Standards
In accordance with the Marriott Standards and the other terms of this
Agreement, Management Company shall, in connection with the Hotel, perform each
of the following functions (provided that in all cases, except as otherwise
specifically set forth in this Agreement, the costs and expenses of performing
such functions shall be Deductions):
A. Obtain and keep in full force and effect, either in its own name on
behalf of Owner or in Owner's name, as may be required by the Legal
Requirements, any and all Licenses necessary for the operation of the Hotel, to
the extent the same is within the control of Management Company (or, if same is
not within the control of Management Company, Management Company shall use all
due diligence and reasonable efforts to obtain and keep same in full force and
effect).
B. Recruit, employ, supervise, direct and (when appropriate) discharge all
of the employees at the Hotel.
C. Establish and revise, as necessary, administrative policies and
procedures, including policies and procedures for the control of revenue and
expenditures, for the purchasing of supplies and services, for the control of
credit, and for the scheduling of maintenance, and verify that the foregoing
procedures are operating in a sound manner.
D. Plan, execute, and supervise repairs and maintenance at the Hotel.
E. Procure (on behalf of Owner) all Fixed Asset Supplies and Inventories.
F. Maintain the Operating Accounts.
G. Prepare and deliver Accounting Period Statements, Annual Operating
Statements, Annual Operating Budgets, Building Estimates, FF&E Estimates, and
such other budgets and reports as are required by this Agreement.
H. Establish prices, rates and charges for services provided in the Hotel,
including room rates. I. On behalf of Owner, negotiate and enter into leases,
concessions and licenses for shops and other facilities within the Hotel;
provided, however, that notwithstanding any provision in this Agreement to the
contrary, Management Company shall not enter into any leases, licenses or
concessions for shops or other facilities or agencies at the Hotel for any
"non-hotel use" (which shall be defined as any use which is not ultimately for
the benefit of the hotel guest; permitting third parties to install cellular
telephone and/or other telecommunications antennas at the Hotel (other than to
service Hotel equipment) or entering into any lease, license or concession
relating to conducting time-share activities are examples of "non-hotel uses")
without the prior written consent of Owner, which consent may be withheld in
Owner=s sole discretion.
J. Administer the leases, concessions and licenses for shops and other
facilities within the Hotel (whether entered into pursuant to subsection I,
above, or otherwise).
K. Provide the Central Office Services and the Chain Services.
L. Provide, or cause to be provided, risk management services relating to
the types of insurance required to be obtained or provided by Management Company
under this Agreement, provided that the costs and expenses of providing such
services are to be paid as described in Section 12.04 B.
M. Reasonably cooperate with Owner concerning (i) disputes with any Holder
regarding the Hotel, (ii) contests of Impositions and Legal Requirements, and
(iii) adjustments of insurance claims and condemnation awards involving the
Hotel.
N. Reasonably cooperate (provided that Management Company shall not, except
as otherwise specifically set forth in Section 6.01, be obligated to enter into
any amendments of this Agreement) with Owner in any attempt(s) by Owner to
effectuate a Sale of the Hotel (provided that nothing herein shall affect the
provisions of Section 20.05), or to obtain any Secured Loan. Such cooperation
shall include, without limitation: (i) answering any reasonable questions by
prospective purchasers and Holders; (ii) preparing lists and schedules of
leases, concessions, FF&E, Fixed Asset Supplies, Inventories, and similar items;
and (iii) making such certifications and representations to Owner, to such
purchasers and to such Holders, regarding the Hotel and the operation thereof,
as Owner may reasonably request (taking into account the extent of Management
Company's control and responsibility provided for hereunder). Owner shall
promptly reimburse Management Company, from its own funds and not as a
Deduction, for the reasonable costs and expenses incurred by Management Company
in connection with any actions necessary to comply with the requirements of this
Section 2.03 N, provided that such actions are not otherwise required under
other provisions of this Agreement.
O. Arrange for and supervise public relations and advertising, and prepare
annual marketing plans.
P. Endeavor to manage the timing of expenditures to replenish Inventories,
Fixed Asset Supplies, payments on accounts payable and collections of accounts
receivable, so as to avoid or minimize any cash deficits with respect to Hotel
operations, which deficits would otherwise require additional funding of Working
Capital by Owner.
Q. Comply with all provisions in any Existing Mortgages which are by their
terms applicable to the operation of the Hotel; provided, however, that all
practices and procedures used by Management Company in the operation of the
Hotel as of the Effective Date shall be deemed to be in compliance with all
Existing Mortgages; but provided further, that if any Holder under an Existing
Mortgage shall, from time to time, notify Management Company that it has
determined that certain practices and procedures which are used by Management
Company in the operation of the Hotel are not in compliance with the provisions
of such Existing Mortgage (as the case may be), Management Company shall
promptly alter such practices and procedures to ensure such compliance; and
provided further, that if such compliance would require work by Management
Company which is beyond the normal course of Hotel operations, or would impose
additional financial burdens on the Hotel which are beyond the normal course of
Hotel operations, Owner (from its own funds, not as a Deduction) shall
compensate Management Company for such work and such additional burdens.
2.04 Limitations on Authority
Notwithstanding anything in Section 2.02 or elsewhere in this Agreement to
the contrary (unless otherwise stated in this Section 2.04), and in addition to
the various other provisions of this Agreement which prohibit Management Company
from taking certain actions or which allow certain actions only if Owner's
consent thereto has been obtained, Management Company shall not, without the
prior written approval of Owner, which approval Owner may withhold in its sole
discretion, perform any of the following actions in connection with the Hotel
and on behalf of or burdening Owner:
1. Acquiring any land or interest therein;
2. Acquiring any capital assets or interest therein except (i) items in the
approved Building Estimate, and (ii) FF&E, Fixed Asset Supplies and Inventories
(to the extent the same constitute capital assets) in the ordinary course of
business as expressly provided for in this Agreement;
3. Financing, refinancing or mortgaging of any portion of the Hotel or the
revenue due to Owner therefrom;
4. Selling (other than dispositions of FF&E, Fixed Asset Supplies and
Inventories in the ordinary course of business as expressly provided for in this
Agreement), leasing (other than as expressly provided for in this Agreement), or
other transferring of, or the pledging or placing of any lien or encumbrance on,
any part of the Hotel;
5. In the event of a total or partial condemnation, consenting to any award
or participating in any condemnation proceeding, except as expressly provided
for in this Agreement;
6. Entering into, modifying or terminating any lease, concession or
license, except to the extent permitted under Section 2.02;
7. Adjusting any claim or settling any Litigation which (a) is not covered
by any of the insurance policies described in Article XII and is not an Employee
Claim, and which would result in a Deduction or payment in excess of Five
Hundred Thousand Dollars ($500,000) in any Fiscal Year, as adjusted by the GDP
Deflator, or (b) would impose on Owner any material liability or obligation
other than the payment of money, or would require Owner to make any material
admission; or
8. Adjusting any claim, under the applicable property insurance policies,
regarding injury or damage to the Hotel or its contents, where the estimated
cost of restoration is in excess of One Million Dollars ($1,000,000), as
adjusted by the GDP Deflator.
2.05 Covenants, Conditions or Restrictions
A. As of the Effective Date, there are existing covenants, conditions,
restrictions and/or agreements, including reciprocal easements or cost-sharing
arrangements (all of the foregoing types of encumbrances on the Hotel, or
agreements relating to the Hotel, whether existing as of the Effective Date or
not, shall be collectively referred to as "CC&R's"; those CC&R's which are in
existence as of the Effective Date, and which are referenced in the title
insurance policy, a copy of which is attached hereto as Exhibit "G", shall be
referred to in this Agreement as "Existing CC&R's"). Management Company hereby
gives its consent to all Existing CC&R's. All costs, expenses and charges which
are imposed on the Hotel under the Existing CC&R's shall be paid from Gross
Revenues as Deductions; provided, however, that any such costs, expenses or
changes which are treated under generally-accepted accounting principles as
"capital expenditures" (for example, building a common roadway) shall be treated
as expenditures under Section 8.03 for purposes of this Agreement.
B. CC&R's which are entered into, or become encumbrances on the Hotel
and/or the Site, after the Effective Date shall be referred to in this Agreement
as "Future CC&R's." Owner agrees that it will give Management Company written
notice of its intention to execute any Future CC&R's, such notice to be
reasonably in advance of the execution thereof. Owner covenants that, during the
Term of this Agreement, there will not be (unless Management Company has given
its prior written consent thereto) any Future CC&R's affecting the Site or the
Hotel: (i) which purport to impose any material financial obligations on the
Hotel; (ii) which would prohibit or limit Management Company from operating the
Hotel, including cocktail lounges, restaurants and other facilities customarily
a part of or related to a first-class hotel, in accordance with the Marriott
Standards; or (iii) which would allow Hotel facilities (for example, parking
spaces) to be used by persons other than guests, invitees or employees of the
Hotel.
C. All financial obligations imposed on Owner or on Management Company or
on the Hotel pursuant to any Future CC&R's shall be paid by Owner from its own
funds, and not from Gross Revenues or from the FF&E Reserve, unless Management
Company has given its prior written consent to such Future CC&R's. Management
Company agrees that it will not unreasonably withhold its consent to any such
Future CC&R's; provided, however, that Management Company shall be entitled to
withhold its consent in its discretion if a proposed Future CC&R would have a
material impact on the operation of the Hotel, as described in clauses (i), (ii)
or (iii) of Section 2.05 B.
2.06 Licenses and Permits
Owner agrees that, upon request by Management Company, it will sign
promptly and without charge applications for Licenses necessary for operation of
the Hotel.
END OF ARTICLE II
ARTICLE III
HOTEL
3.01 Ownership of Hotel
A. Owner hereby represents that: (i) it has no reason to believe that title
to the Site and the Hotel is other than as set forth in the title policy, a copy
of which is attached as Exhibit "G" hereto; and (ii) that it has purchased title
insurance with regard to such title, as described in said Exhibit "G". Owner
hereby covenants that, throughout the Term of this Agreement, it will not change
the status of title to the Site from that which is in existence as of the
Effective Date (as described on Exhibit "G" hereto), except that Owner shall
have the right either (i) to effectuate a Sale of the Hotel in accordance with
Article XIX, or (ii) to encumber the Site and the Hotel with the following:
1. Mortgages which are given to secure any one or more Qualified Loans;
2. Liens for Impositions or other public charges not yet due or which are
being contested in good faith; and
3. Easements or other encumbrances (not including those described in
subsection 1 or 2 above) which do not adversely affect the operation of the
Hotel by Management Company and which are not prohibited pursuant to Section
2.05 B of this Agreement.
END OF ARTICLE III
ARTICLE IV
TERM
4.01 Term
A. The initial term ("Initial Term") of this Agreement shall commence with
the Effective Date and, unless sooner terminated as herein provided, shall
continue until the expiration of the twenty-fifth (25th) full Fiscal Year after
the Opening Date. The Term shall thereafter be automatically renewed for five
successive renewal terms of ten (10) full Fiscal Years each (each such ten (10)
year period bring defined as a "Renewal Term"), unless either: (i) Management
Company, at its option, notifies Owner, in accordance with Section 20.09, at any
time within the period of eighteen (18) months prior to the expiration of the
Initial Term of its intention not to renew; or (ii) Management Company has
committed an Event of Default, and has been notified by Owner of such Event of
Default, under Article XVI of this Agreement, as of the date of such renewal; or
(iii) the average annual Operating Profit, computed with respect to the most
recent three (3) full Fiscal Years prior to the date of such renewal, does not
equal or exceed the Extension Threshold calculated for the same period of time.
B. If Management Company so notifies Owner of its intention not to renew
pursuant to Section 4.01 A, Management Company shall continue to manage the
Hotel pursuant to this Agreement until the termination date set forth in such
notice, provided that such termination date shall be: (i) no less than twelve
(12) months after the date of such notice, and (ii) in no event earlier than the
expiration date of the Initial Term. Such termination date may be after the
expiration of the Initial Term, provided that the requirements of the preceding
sentence are satisfied. However, if Management Company has so notified Owner of
its intention not to renew, Owner may, at its option, by written notice to
Management Company at least ninety (90) days prior to the date on which Owner
desires Termination to occur, reduce the period of time prior to Termination to
any shorter period of time which Owner desires, provided that such shorter
period of time shall be at least the greater of: (a) ninety (90) days (beginning
as of the date of such notice from Owner), or (b) the minimum period (the
"Minimum Period") of time which Management Company reasonably decides is
prudent, given the requirements of the applicable Employment Laws regarding
employee discharges. If the Term of this Agreement is not renewed pursuant to
clause (iii) of Section 4.01 A (as opposed to clause (i) or (ii) thereof), the
Term shall be automatically extended for the Minimum Period (despite such
non-renewal). In no event shall the fact that Management Company may, pursuant
to either of the two (2) preceding sentences, be managing the Hotel after the
expiration of the Initial Term be construed as an election by Management Company
to renew the Term, if Management Company has elected (in accordance with this
Section 4.01) not to so renew.
4.02 Actions to be Taken Upon Termination
Upon a Termination of this Agreement, the following shall be applicable:
A. Management Company shall, within sixty (60) days after Termination of
this Agreement, prepare and deliver to Owner a final accounting statement with
respect to the Hotel, as more particularly described in Section 9.01 hereof,
along with a statement of any sums due from Owner to Management Company pursuant
hereto, dated as of the date of Termination. Within thirty (30) days after the
receipt by Owner of such final accounting statement, the parties will make
whatever cash adjustments are necessary pursuant to such final statement. The
cost of preparing such final accounting statement shall be a Deduction, unless
the Termination occurs as a result of an Event of Default by either party, in
which case the defaulting party shall pay such cost. Management Company and
Owner acknowledge that there may be certain adjustments for which the necessary
information will not be available at the time of such final accounting, and the
parties agree to readjust such amounts and make the necessary cash adjustments
when such information becomes available; provided, however, that (unless there
are ongoing disputes of which each party has received notice) all accounts shall
be deemed final as of one hundred eighty (180) days after such Termination.
B. As of the date of the final accounting referred to in subsection A
above, Management Company shall release and transfer to Owner any of Owner's
funds which are held or controlled by Management Company with respect to the
Hotel, with the exception of funds to be held in escrow pursuant to Section
12.04 and Section 14.01 F. During the period between the date of Termination and
the date of such final accounting, Management Company shall pay (or reserve
against) all Deductions which accrued (but were not paid) prior to the date of
Termination, using for such purpose any Gross Revenues which accrued prior to
the date of Termination.
C. Management Company shall make available to Owner such books and records
respecting the Hotel (including those from prior years, subject to Management
Company's reasonable records retention policies) as will be needed by Owner to
prepare the accounting statements, in accordance with the Uniform System of
Accounts, for the Hotel for the year in which the Termination occurs and for any
subsequent year. Such books and records shall not include: (i) employee records
which must remain confidential either under Legal Requirements or under
reasonable chain-wide corporate policies of Management Company; or (ii) any
Intellectual Property.
D. Management Company shall (to the extent permitted by Legal Requirements)
assign to Owner, or to any other manager employed by Owner to operate and manage
the Hotel, all operating Licenses for the Hotel which have been issued in
Management Company's name; provided that if Management Company has expended any
of its own funds in the acquisition of any of such Licenses, Owner shall
reimburse Management Company therefor if it has not done so already.
E. All Proprietary Signage shall be removed by Management Company from the
Hotel and from the Site (and from any locations other than the Site). The cost
of such removal shall be a Deduction, unless the Termination occurs either: (i)
as a result of an Event of Default by either party, in which case the defaulting
party shall pay the cost of such removal from its own funds, and not as a
Deduction; or (ii) as a result of Management Company's election not to renew the
Term, as of the expiration of either the Initial Term or any Renewal Term (as
the case may be), in which case Management Company shall pay the cost of such
removal from its own funds, and not as a Deduction.
F. Various other actions shall be taken, as described in this Agreement,
including, but not limited to, the actions described in Sections 7.01, 8.02 B,
10.02, 10.03, 10.04, 12.04 B, and 14.01 F.
G. Management Company shall cooperate with the new operator of the Hotel as
to effect a smooth transition and shall peacefully vacate and surrender the
Hotel to Owner.
The provisions of this Section 4.02 shall survive any Termination.
4.03 Performance Termination
A. Subject to the provisions of Section 4.03 B below, Owner shall have the
option to terminate this Agreement if:
1. With respect to any two (2) consecutive Fiscal Years (not including any
period of time prior to the third (3rd) anniversary of the Effective Date),
Operating Profit, for each of such two (2) Fiscal Years is less than the
Performance Termination Threshold; and
2. The Revenue Index of the Hotel during each of such two (2) consecutive
Fiscal Years is less than the Revenue Index Threshold (provided, however, that
if Management Company elects under Section 4.03 B to avoid Termination by making
a Cure Payment, this subclause (2) of Section 4.03 A shall be deemed to be
deleted from this Agreement with respect to any subsequent election by Owner to
terminate this Agreement pursuant to Section 4.03 A); and
3. The fact that the Hotel is not meeting the test set forth in Section
4.03 A(1) is not the result of either (x) Force Majeure or (y) any major
renovation of the Hotel.
Such option to terminate shall be exercised by serving written notice
thereof on Management Company no later than sixty (60) days after the receipt by
Owner of the annual accounting under Section 9.01 hereof for the second (2nd) of
the two (2) Fiscal Years referred to in Section 4.03 A(1). If Management Company
does not elect to avoid such Termination pursuant to Section 4.03 B below, this
Agreement shall terminate as of the end of the fourth (4th) full Accounting
Period following the date on which Management Company receives Owner's written
notice of its intent to terminate this Agreement; provided that such period of
time shall be extended as required by applicable Legal Requirements pertaining
to the termination of the employment of the employees at the Hotel. Owner's
failure to exercise its right to terminate this Agreement pursuant to Section
4.03 A with respect to any given Fiscal Year shall not be deemed an estoppel or
waiver of Owner's right to terminate this Agreement with respect to subsequent
Fiscal Years to which this Section 4.03 A may apply.
B. Upon receipt of a written notice of Termination sent by Owner to
Management Company pursuant to Section 4.03 A, Management Company shall have the
option, subject to Section 4.03 C below, to be exercised by written notice (the
"Cure Notice") to Owner within sixty (60) days after receipt of said notice from
Owner, to avoid such Termination by making a Cure Payment (as defined below).
The term "Cure Payment" shall mean: (i) with respect to the first (1st) occasion
on which Owner elects to terminate this Agreement pursuant to Section 4.03A,
either of the following two (2) choices (whichever Management Company shall
elect): (x) the payment to Owner of the aggregate amount, with respect to each
of the two (2) consecutive Fiscal Years described in Section 4.03 A (1), by
which Operating Profit was less than the Performance Termination Threshold; or
(y) the waiver by Management Company of receipt of the Base Management Fees
during the Cure Period (as defined below); and (ii) with respect to the second
(2nd) occasion on which Owner elects to terminate this Agreement pursuant to
Section 4.03A, the waiver by Management Company of receipt of the Base
Management Fees during the Cure Period. The term "Cure Period" shall mean the
period of two (2) consecutive calendar years, beginning with the first full
Accounting Period after the date of the Cure Notice. In the event Management
Company elects to avoid such Termination pursuant to this Section 4.03 B, the
two consecutive Fiscal Years referred to in Section 4.03 A(1) with respect to
which such election was made shall thereafter not be treated, for purposes of
subsequent elections by Owner pursuant to Section 4.03 A, as Fiscal Years in
which the circumstances described in Section 4.03 A(1) have occurred. If
Management Company exercises such option to make a Cure Payment, then (i) the
foregoing Owner's election to terminate this Agreement under Section 4.03 A
shall be canceled and of no force or effect and this Agreement shall not
terminate. In the event Management Company elects to waive the Base Management
Fee for the Cure Period, then Owner shall not be entitled to send any subsequent
written notice of Termination pursuant to Section 4.03 until the expiration of
the Cure Period. Management Company=s election to avoid a Termination (pursuant
to this Section 4.03 B) shall not affect the right of Owner, as to each
subsequent Fiscal Year to which Section 4.03 A applies, to again elect to
terminate this Agreement, pursuant to the provisions of Section 4.03 A (provided
that, in the case of an election by Management Company to waive receipt of the
Base Management Fee during the Cure Period, such election by Owner to terminate
shall be made only after the expiration of the Cure Period). If Management
Company does not exercise its option to make a Cure Payment pursuant to this
Section 4.03 B, then this Agreement shall be terminated as of the date set forth
in Section 4.03 A. An election by Management Company to avoid a Termination
pursuant to this Section 4.03 B shall only operate to cancel Owner's election to
terminate this Agreement under Section 4.03 A, and shall not operate to cure any
outstanding Defaults by Management Company under Article XVI.
C. Management Company shall be entitled to avoid Termination by exercise of
its rights pursuant to Section 4.03 B on only two (2) occasions during the Term
of this Agreement. In the event of a subsequent election by Owner to terminate
this Agreement pursuant to Section 4.03 A, after the expiration of the Cure
Period which follows the second (2nd) exercise by Management Company of its
right to avoid Termination pursuant to Section 4.03 B, Management Company shall
not again be entitled to avoid Termination under Section 4.03 B.
END OF ARTICLE IV
ARTICLE V
COMPENSATION OF MANAGEMENT COMPANY; DISTRIBUTIONS
5.01 Management Fees
In consideration of services to be performed during the Term of this
Agreement, Management Company shall retain the Management Fees. All Incentive
Management Fees (and any interest earned thereon) to which Management Company
was entitled pursuant to Article Five of the Prior Management Agreement which
were deferred or accrued, but not paid, prior to the Effective Date shall be
waived by Management Company.
5.02 Accounting and Interim Payments
A. On or before the twentieth (20th) day after the close of each Accounting
Period, Management Company shall deliver to Owner a reasonably detailed
accounting statement (the "Accounting Period Statement") in substantially the
form set forth in Exhibit "B" hereto. Upon Owner's written request therefor,
Management Company shall forward copies of any such Accounting Period Statement
to any Holders, at the addresses specified by Owner. Such Accounting Period
Statement shall set forth the results of the operations (by department) of the
Hotel for the preceding Accounting Period and for the Fiscal Year-to-date, all
in accordance with generally accepted accounting principles applied on a
consistent basis. Each Accounting Period Statement shall be accompanied by a
statement, by either the controller of the Hotel or Management Company's
regional controller, that, to the best of his or her knowledge and belief, and
subject to routine year-end audit and adjustment, such Accounting Period
Statement is true and correct in all material respects. Each Accounting Period
Statement shall include: (i) calculations of Gross Revenues, Deductions,
Operating Profit, the Management Fees; and (ii) comparisons with the applicable
Annual Operating Budget. With each such Accounting Period Statement, Management
Company shall transfer any interim Owner's Distribution due to Owner, and shall
retain any interim Management Fees due to Management Company.
B. Calculations and payments of the Management Fees and the Owner's
Distribution with respect to each Accounting Period within a Fiscal Year shall
be accounted for cumulatively. Within seventy-five (75) days after the close of
each Fiscal Year, Management Company shall submit an Annual Operating Statement,
as more fully described in Section 9.01, for such Fiscal Year to Owner, which
Annual Operating Statement shall be controlling over the interim Accounting
Period Statements. Any adjustments or payments required by any such Annual
Operating Statement shall be made promptly by the parties. Operating Losses
shall not be carried forward or backward to subsequent or prior Fiscal Years.
C. For purposes of calculating the Management Fees for any given Fiscal
Year, Operating Profit shall not include adjustments for either refunds or
additional payments of Impositions relating to any prior Fiscal Years. In the
event such refunds or additional payments occur, the Operating Profit with
respect to the prior Fiscal Years in which such Impositions accrued shall be
recalculated to show such refund or additional payment; if the Management Fees
with respect to such prior Fiscal Years are either increased or decreased as a
result of such recalculation of Operating Profit, the party which owes money to
the other party shall promptly pay the amount owed.
END OF ARTICLE V
ARTICLE VI
FINANCING OF THE HOTEL
6.01 Amendments of Management Agreement
A. If requested by any Qualified Lender or prospective Qualified Lender,
Management Company agrees to execute and deliver any amendment of this Agreement
which is reasonably required by such Qualified Lender or prospective Qualified
Lender, provided that Management Company shall be under no obligation to amend
this Agreement if the result of such amendment would be: (i) to reduce, defer or
delay the amount of any payment to be made to Management Company hereunder; (ii)
to materially increase Management Company's obligations under this Agreement;
(iii) to change the Term of this Agreement; (iv) to cause the Hotel to be
operated other than pursuant to the Marriott Standards; (v) to amend materially
either Section 8.02 or Section 14.01; or (vi) to otherwise materially affect
Management Company's rights under this Agreement. Any such amendment shall take
effect as of the funding of such Qualified Loan.
B. In addition to the provisions of Section 6.01 A, if a Qualified Lender
or prospective Qualified Lender requests that Management Company enter into an
amendment of this Agreement, and if such amendment would impose additional
duties (for example, an increase in the reporting requirements or in the
record-keeping requirements, or adding the obligation to prepare parallel
accounting statements using a different fiscal year) on Management Company or
would otherwise adversely affect Management Company's rights under this
Agreement, but not to the degree described in clauses (i) through (vi) of
Section 6.01 A, Management Company hereby agrees that it will execute and
deliver such requested amendment of this Agreement, provided that Owner
compensates Management Company for the additional burden imposed by such
amendment. It is understood that the word "burden", as used in the preceding
sentence, shall encompass not only additional work to be performed by Management
Company, but also the adverse effect on the Incentive Management Fee which would
be caused by requiring increased services by third parties. Any dispute as to
whether Management Company is entitled to any compensation pursuant to this
Section 6.01 B, or as to the amount of such compensation, shall be resolved by
arbitration pursuant to Section 20.13.
C. Proposed amendments to this Agreement which are requested by any
Qualified Lender or prospective Qualified Lender, and which would affect the
insurance provisions set forth in Article XII, shall be governed exclusively by
Article XII.
6.02 Notice and Opportunity to Cure
A. In the event of (i) a Default by Owner in the performance or observance
of any of the terms and conditions of this Agreement, or (ii) any other
occurrence which entitles Management Company to terminate this Agreement, and in
the event that Management Company gives written notice thereof to Owner pursuant
to Article XVI of this Agreement, Management Company shall also give a duplicate
copy (herein referred to as the "First Notice") of such notice to each Qualified
Lender, at the address(es) previously provided to Management Company. Any such
notice will be sent in the manner described in Section 20.09 hereof. In
addition, in the event that such Default is not cured within the applicable cure
period under Article XVI of this Agreement, and Management Company intends to
exercise its remedy of terminating this Agreement, Management Company shall send
a second notice (the "Second Notice") to each Qualified Lender, to the same
address(es) and in the same manner applicable to the First Notice, stating
Management Company's intention to terminate this Agreement. Management Company
shall forbear from taking any action to terminate this Agreement for a period of
thirty (30) days after the service of the First Notice, and for an additional
period of thirty (30) days after the service of the Second Notice (if such
Second Notice is required, as set forth above).
B. In the event of a Default by Owner under the provisions of this
Agreement, Management Company agrees to accept performance by any Qualified
Lender with the same force and effect as if same were performed by Owner, in
accordance with the provisions and within the cure periods prescribed in this
Agreement (except that each Qualified Lender shall have such additional cure
periods, not available to Owner, as are set forth in this Section 6.02).
C. No notice given by Management Company to Owner shall be effective as a
notice under Article XVI of this Agreement unless the applicable duplicate
notice to each Qualified Lender which is required under Section 6.02 A (either
the First Notice or the Second Notice, as the case may be) has been given. It is
understood that any failure by Management Company to give such a duplicate
notice (either the First Notice or the Second Notice, as the case may be) to any
Qualified Lender shall not itself be a Default by Management Company under this
Agreement, but rather shall operate only to void the effectiveness of any such
notice by Management Company to Owner under Article XVI of this Agreement.
D. Except as specifically limited by this Section 6.02, nothing herein
shall preclude Management Company from exercising any of its rights or remedies
against Owner with respect to any Default by Owner under this Agreement.
6.03 Assignment of Management Agreement
Owner shall have the right to collaterally assign to any Qualified Lender,
as additional security for the indebtedness evidenced by a Qualified Loan, all
of Owner's right, title and interest in and to this Agreement, including the
right to distributions payable to Owner pursuant to Article V thereof. If,
pursuant to any such assignment (or subsequent loan documentation entered into
between Owner and a Qualified Lender with a similar purpose), and provided that
Management Company has previously received a copy of such assignment and such
subsequent documentation, Management Company may receive (from time to time) a
notice or notices from such Qualified Lender directing Management Company to pay
to such Qualified Lender subsequent distributions under Article V of this
Agreement which would otherwise be payable to Owner, Management Company shall
comply with any such notice. Management Company shall continue to make payments
in compliance with any such notice from such Qualified Lender until Management
Company receives written instructions to the contrary from such Qualified
Lender. Owner hereby gives its consent to any such payments by Management
Company to such Qualified Lender which are in compliance with any such notice.
The foregoing consent by Owner shall be deemed to be irrevocable until the
entire Qualified Loan has been discharged, as evidenced either by the
recordation of a satisfaction or release executed by such Qualified Lender, or
by the delivery of a written statement to that effect from such Qualified Lender
to Management Company. Management Company shall comply with the direction set
forth in any such notice without any necessity to investigate why such Qualified
Lender sent such notice, or to confirm whether or not Owner is in fact in
default under the terms of such Qualified Loan. If Management Company receives
such notices from more than one Qualified Lender, Management Company shall (at
its option) either (i) comply with the provisions of the notice sent by the
Qualified Lender whose Qualified Loan has the senior lien priority, or (ii)
institute Litigation for a declaratory judgment to determine to whom payments
under this Agreement shall be made (in which case, the costs and expenses of
such Litigation, including attorneys' fees, shall be Deductions).
6.04 Subordination of Management Agreement
A. This Agreement, and Management Company's right to continue to manage and
operate the Hotel pursuant to this Agreement, are and shall be subject and
subordinate to the lien of any Qualified Loan (i.e., upon a Foreclosure of any
such Qualified Loan, such Qualified Lender, at its option, unless it has
otherwise agreed to the contrary in a Non-Disturbance Agreement, shall have the
right to terminate this Agreement). Notwithstanding the foregoing, during the
Term of this Agreement, all debt service (including increased or accelerated
payments after a default) payable with respect to any Qualified Loan shall be
paid exclusively from Owner's Distribution.
B. Section 6.04 A is intended to be, and is, fully effective and binding,
as between Management Company and any such Qualified Lender; however, Management
Company agrees to execute such confirmatory documentation (in recordable form in
the jurisdiction in which the Hotel is located) as such Qualified Lender shall
reasonably request.
C. Notwithstanding the possible termination of this Agreement which is set
forth in the foregoing provisions of this Section 6.04, it is understood that,
until such time as this Agreement is validly terminated either (i) pursuant to
the applicable provision of this Agreement, or (ii) pursuant to a court order in
connection with the Foreclosure of a Qualified Loan (assuming that such
termination does not breach any binding Non-Disturbance Agreement), the Holder
of each Qualified Loan will honor and recognize the right of Management Company
to operate the Hotel in accordance with this Agreement (including the right of
Management Company to collect all Gross Revenues and to make expenditures in
accordance with this Agreement).
6.05 Non-Disturbance Agreement
A. Owner agrees that, in connection with the obtaining by Owner of any
Secured Loan or Secured Loans, from time to time, Owner will use good faith
reasonable efforts to obtain a Non-Disturbance Agreement from each Holder or
Holders. The phrase "good faith reasonable efforts" shall be determined by
reference to the following: (i) normal loan underwriting procedures and
practices (including those practices relating to non-disturbance agreements)
which are generally being implemented by entities which are making loans similar
to such Secured Loan, as of that point in time; and (ii) the concessions which
Management Company is, as of that point in time, reasonably prepared to make in
order to satisfy the objectives of lenders in connection with the lender-manager
relationship after a Foreclosure. In no event, however, shall the failure of
Owner to obtain such a Non-Disturbance Agreement affect or modify any of the
responsibilities of Management Company toward Qualified Lenders which are
contained elsewhere in this Article VI.
B. Notwithstanding Section 6.05 A, Owner agrees that, prior to obtaining
any Qualified Loan, it will obtain from each prospective Holder or Holders
thereof a Non-Disturbance Agreement pursuant to which Management Company's
rights under this Agreement will not be disturbed as a result of a loan default
stemming from non-monetary factors which (i) relate to Owner and do not relate
solely to the Hotel, and (ii) are not Defaults by Management Company under
Article XVI of this Agreement. If Owner desires to obtain a Qualified Loan,
Management Company, on written request from Owner, shall promptly identify those
provisions in the proposed loan documents which fall within the categories
described in clauses (i) and (ii) above, and Management Company shall otherwise
assist in expediting the preparation of an agreement between the prospective
Holder and Management Company which will implement the provisions of this
Section 6.05 B.
6.06 Attornment
A. Management Company agrees that, subject to the provisions of Section
6.06 B, upon a Foreclosure of any Qualified Loan, provided that this Agreement
has not expired or otherwise been earlier terminated in accordance with its
terms, Management Company shall attorn to any Subsequent Owner and shall remain
bound by all of the terms, covenants and conditions of this Agreement for the
balance of the remaining Term (including any Renewal Terms) with the same force
and effect as if such Subsequent Owner were the "Owner" under this Agreement;
provided, however, that Management Company shall be under no such obligation to
so attorn, and, to the contrary, shall thereupon have the right to terminate
this Agreement on thirty (30) days' prior written notice to both Owner and such
Subsequent Owner: (i) if such Subsequent Owner would not qualify as a permitted
transferee under Section 19.01 A of this Agreement; or (ii) unless such
Subsequent Owner, within twenty (20) days after the Foreclosure Date (or, in the
event such Subsequent Owner acquires title to the Hotel after the Foreclosure
Date, within twenty (20) days after the date of such acquisition of title to the
Hotel), assumes all of the obligations of the "Owner" under this Agreement which
arise from and after the Foreclosure Date (or such later date of acquisition of
title to the Hotel), pursuant to a written assumption agreement which shall be
delivered to Management Company. Upon the written request of any Qualified
Lender, Management Company shall periodically execute and deliver a statement,
in a form reasonably satisfactory to such Qualified Lender, reaffirming
Management Company's obligation to attorn as set forth in this Section 6.06 A.
B. It is understood by the parties that, in view of the fact that a
Qualified Lender will have the right to terminate this Agreement on a
Foreclosure under the provisions of Section 6.04, Management Company has an
interest in being informed, within a reasonable period of time after a Secured
Loan Acceleration, of whether or not such Qualified Lender intends to exercise
such right of termination. Accordingly, if, by no later than that date (the
"Post-Foreclosure Decision Date") which is ninety (90) days after the date of
any Secured Loan Acceleration, Management Company has not received a
Non-Disturbance Agreement executed by the Holder of such Secured Loan,
Management Company shall, as of the Post-Foreclosure Decision Date and
thereafter, no longer be under any obligation to attorn (pursuant to the
provisions of Section 6.06 A) with respect to any Foreclosure of that Secured
Loan, and Management Company shall have the option to terminate this Agreement,
by written notice to both Owner and the Holder of each existing Qualified Loan,
at any time within the sixty (60) day period immediately following the
Post-Foreclosure Decision Date.
6.07 No Modification or Termination of Agreement
If the documents evidencing and securing a Qualified Loan require the
consent of the Qualified Lender to any amendment or modification of this
Agreement which materially affects such Qualified Lender, no such amendment or
modification of this Agreement shall be binding or effective unless such
Qualified Lender shall have consented in writing thereto.
6.08 Owner's Right to Finance the Hotel
Owner shall have the right, from time to time, without Management Company's
prior consent or approval, to obtain Qualified Loans, and to encumber the Hotel
with Mortgages securing such Qualified Loans. Owner shall not, without the prior
consent of Management Company, have the right to obtain Secured Loans which are
not Qualified Loans.
6.09 Sale/Leaseback Transactions
Any single transaction or related series of transactions in which (i)
Owner's interest in the Hotel is sold or transferred by the then Owner
("Seller") to a buyer ("Buyer"), and (ii) the Buyer (as "landlord") leases the
Hotel to the Seller (as "tenant"), is hereby defined as a "Sale/leaseback
Transaction". With respect to each Sale/leaseback Transaction during the Term of
this Agreement, the following provisions will apply: (a) the sale or transfer of
the Hotel will be considered a Sale of the Hotel; however, the Seller (as tenant
under the aforesaid lease), not the Buyer, shall thereafter be treated as the
"Owner" for purposes of this Agreement; (b) the purchase price will not be a
Secured Loan, but any mortgage financing placed (either at the time of the
transaction or later) on the Buyer's interest in the Hotel will be treated as a
Secured Loan, and the proceeds of each such Secured Loan will be aggregated with
all outstanding Secured Loans, which encumber either the Buyer's interest in the
Hotel or the Seller's leasehold interest in the Hotel, for purposes of
determining whether a given Secured Loan qualifies as a Qualified Loan; (c)
payments pursuant to such lease shall not be treated as Deductions, except for
Impositions and similar items which would have been treated as Deductions in the
absence of such Sale/leaseback Transaction; and (d) all subsequent sales,
transfers or assignments of either Buyer's interest in the Hotel or Seller's
interest in the Hotel will be treated as Sales of the Hotel. Owner will not
enter into any Sale/leaseback Transaction unless Management Company and the
proposed Buyer have previously executed a mutually satisfactory attornment
agreement pursuant to which, as of the date of the termination of Seller's
leasehold interest, the provisions of this Agreement will (unless there has been
an Event of Default or other event entitling either party to terminate this
Agreement) be binding both on Management Company and on Buyer (as the successor
"Owner"); such attornment agreement will also contain an immediately-effective
provision which will incorporate the terms of Section 6.08 of this Agreement,
binding both on Management Company and on Buyer. Management Company will not
unreasonably withhold its consent to an attornment agreement with Buyer.
END OF ARTICLE VI
ARTICLE VII
WORKING CAPITAL AND FIXED ASSET SUPPLIES
7.01 Working Capital
A. As of the Effective Date, Owner has provided Management Company with the
initial Working Capital for the Hotel.
B. Owner shall, from time to time thereafter during the Term of this
Agreement, provide Management Company, within thirty (30) days after Owner's
receipt of written request therefor by Management Company, with the funds
necessary to maintain Working Capital at levels determined by Management Company
to be reasonably necessary to operate the Hotel in accordance with the Marriott
Standards. Any such request by Management Company shall be accompanied by a
detailed explanation of the reasons for the request. If Owner fails to respond
to any such request within thirty (30) days after Owner's receipt thereof,
Management Company shall be entitled, at its option, without affecting other
remedies which may be available pursuant to Article XVI, to lend Owner the
necessary additional Working Capital from Management Company's own funds, which
loan will bear interest at the Interest Rate (compounded annually), and will be
secured by a security interest (subordinated to any Qualified Loan) encumbering
all Working Capital previously or thereafter provided by either Owner or
Management Company, and will be repaid in accordance with such terms and
conditions as Management Company shall at that time reasonably determine.
C. Management Company will manage the Working Capital of the Hotel
prudently and in accordance with the Marriott Standards. Management Company
shall review and analyze the Working Capital needs of the Hotel on an annual
basis. If Management Company reasonably determines that there is excess Working
Capital, such excess shall be returned to Owner.
D. Working Capital provided by Owner pursuant to this Section 7.01 shall
remain the property of Owner throughout the Term of this Agreement. Upon
Termination, Owner shall retain any of its unused Working Capital, except for
Inventories purchased by Management Company pursuant to Section 10.02.
7.02 Fixed Asset Supplies
As of the Effective Date, the Owner has provided the Hotel with the Fixed
Asset Supplies which are necessary to operate the Hotel in accordance with the
Marriott Standards. Owner shall, from time to time thereafter during the Term of
this Agreement, provide Management Company, within thirty (30) days after
Owner's receipt of written request therefor by Management Company, with any
additional funds necessary to maintain Fixed Asset Supplies at levels determined
by Management Company to be necessary to operate the Hotel in accordance with
the Marriott Standards. Fixed Asset Supplies shall remain the property of Owner
throughout the Term of this Agreement, except for Fixed Asset Supplies purchased
by Management Company pursuant to Section 10.02.
END OF ARTICLE VII
ARTICLE VIII
REPAIRS, MAINTENANCE AND REPLACEMENTS
8.01 Routine Repairs and Maintenance
A. Management Company shall maintain the Hotel in good repair and
condition, and in conformity with applicable Legal Requirements and the Marriott
Standards, and shall make or cause to be made such routine and preventative
maintenance, repairs and minor alterations, the cost of which can be expensed
under generally accepted accounting principles, as it, from time to time, deems
reasonably necessary for such purposes. The cost of such maintenance, repairs
and alterations shall be paid from Gross Revenues and shall be treated as a
Deduction in determining Operating Profit.
B. Management Company shall (pursuant to a schedule which shall be subject
to the reasonable approval of both Owner and Management Company) arrange for and
coordinate routine and other appropriate inspections of the structure and
exterior facade of the Hotel, and of the mechanical, electrical, heating,
ventilating, air conditioning, plumbing, and vertical transportation elements of
the Hotel. The costs of such inspections shall be treated as Deductions.
C. Management Company shall submit to Owner (at the same time as the
submission of the Annual Operating Projection) a signed copy of an annual report
summarizing all preventative maintenance activities (including repairs,
alterations and inspections conducted at the Hotel) on all building components
of the Hotel during the previous twelve (12) calendar months.
8.02 FF&E Reserve
A. Management Company shall on behalf of Owner establish a reserve account
(the "FF&E Reserve") in a bank designated by Management Company (and approved by
Owner, such approval not to be unreasonably withheld) to cover the cost of:
1. Replacements and renewals to the Hotel's FF&E and
2. Certain routine Capital Expenditures such as exterior and interior
repainting, resurfacing building walls, floors, roofs and parking areas, and
replacing folding walls and the like.
Management Company agrees that it will, from time to time, execute such
reasonable documentation as may be requested by any Qualified Lender to assist
such Qualified Lender in establishing or perfecting its security interest in the
funds which are in the FF&E Reserve; provided, however, that no such
documentation shall contain any amendment or modification of any of the
provisions of this Agreement, including this Section 8.02.
B. During the period of time from the Opening Date through the Termination
of this Agreement, subject to the provisions of Sections 8.02 E, Management
Company shall transfer (as of the end of each Accounting Period) into the FF&E
Reserve an amount equal to five percent (5%) of Gross Revenues. All such amounts
transferred into the FF&E Reserve shall be paid from Gross Revenues and shall
constitute Deductions in determining Operating Profit. Any amounts remaining at
termination shall be paid to Owner.
C. Each year, at the same time as Management Company submits the Annual
Operating Budget described in Section 9.03, Management Company shall prepare an
estimate (the "FF&E Estimate") of the expenditures necessary for (i)
replacements and renewals to the Hotel's FF&E, and (ii) repairs to the Hotel
building of the nature described in Section 8.02 A 2, during the ensuing Fiscal
Year, and shall submit such FF&E Estimate to Owner for its review. Management
Company shall also, if Owner so elects, prepare tentative forecasts of such
expenditures with regard to the four (4) subsequent Fiscal Years. Management
Company will at all times give good faith consideration to Owner's suggestions
regarding any FF&E Estimate. In the event that Owner requests forecasts covering
the aforesaid subsequent Fiscal Years, and such forecasts project a deficit in
the FF&E Reserve at some point during the current Fiscal Year or during such
four (4) subsequent Fiscal Years, Owner and Management Company will work
together in good faith to prepare alternative forecasts for such Fiscal Years
which will reduce or eliminate such deficit, but also take into account the
needs of the Hotel during such periods of time. All expenditures from the FF&E
Reserve will be (as to both the amount of each such expenditure and the timing
thereof) both reasonable and necessary, given the objective that the Hotel will
be maintained and operated in accordance with the Marriott Standards.
Expenditures from the FF&E Reserve may include fees and expenses of the
Architect for work done on the Hotel with respect to the expenditures set forth
in the first sentence of this subsection 8.02C.
D. Management Company shall from time to time make such (1) replacements
and renewals to the Hotel's FF&E, and (2) repairs to the Hotel building of the
nature described in Section 8.02 A 2, as it deems necessary, provided that
Management Company shall not expend more than the balance in the FF&E Reserve
without the prior approval of Owner. Management Company will endeavor to follow
the applicable FF&E Estimate, but shall be entitled to depart therefrom, in its
reasonable discretion, provided that: (A) such departures from the applicable
FF&E Estimate result from circumstances which could not reasonably have been
foreseen at the time of the submission of such FF&E Estimate; and (B) such
departures from the applicable FF&E Estimate result from circumstances which
require prompt repair and/or replacement; and (C) Management Company has
submitted to Owner a revised FF&E Estimate setting forth and explaining such
departures. At the end of each Fiscal Year, any amounts remaining in the FF&E
Reserve shall be retained in the FF&E Reserve, and shall be carried forward to
the next Fiscal Year. Upon a Sale of the Hotel, funds in the FF&E Reserve will
not be affected (or, if withdrawn, will be replaced as set forth in Section
19.01 D), and all dispositions of such funds (both before and after such Sale of
the Hotel) will continue to be made exclusively pursuant to the provisions of
this Agreement. Proceeds from the sale of FF&E no longer necessary to the
operation of the Hotel shall be deposited in the FF&E Reserve, as shall any
interest which accrues on amounts placed in the FF&E Reserve. Neither (i)
proceeds from the disposition of FF&E, nor (ii) interest which accrues on
amounts held in the FF&E Reserve, shall either (x) result in any reduction in
the required contributions to the FF&E Reserve set forth in subsection B above,
or (y) be included in Gross Revenues. The only items of FF&E which Management
Company is authorized to lease (rather than purchase) shall be (a) Telephones
and Miscellaneous Equipment; (b) shuttle vans; and (c) the "Next Generation
System" computer system ("NGS"). If Management Company enters into a lease
described in the preceding sentence, Management Company shall give Owner notice
of such lease either prior to or promptly after entering into such lease. Lease
payments with respect to Telephones and Miscellaneous Equipment shall be
Deductions, as set forth in paragraph 13 of the definition of "Operating Profit"
in Section 1.01; lease payments with respect to shuttle vans and NGS shall be
paid from the FF&E Reserve. If Management Company proposes that items of FF&E
other than Telephones and Miscellaneous Equipment, shuttle vans or NGS should be
leased rather than purchased, Management Company shall submit such proposal
(which proposal shall include, without limitation, an indication as to whether
the rental which is owed under such lease will be treated as a Deduction or paid
from the FF&E Reserve) to Owner for Owner's approval (not to be unreasonably
withheld). In connection with the foregoing, it is understood that the failure
of a Qualified Lender to approve such leasing proposal shall justify Owner in
withholding its approval thereof, regardless of whether withholding such
approval would otherwise be deemed to be unreasonable.
E. The percentage contribution for the FF&E Reserve which is described in
Section 8.02 B is an estimate based upon Management Company's prior experience
with other comparable hotels. As the Hotel ages, this percentage may not be
sufficient to keep the FF&E Reserve at the levels necessary to make the
replacements and renewals to the Hotel's FF&E, or to make the repairs to the
Hotel building of the nature described in Section 8.02 A 2, which are required
to maintain the Hotel in accordance with the Marriott Standards. If any FF&E
Estimate which is prepared in accordance with Section 8.02 C would require
funding in excess of the applicable percentage of Gross Revenues which is set
forth on Exhibit A-1, Owner may either:
1. Agree to increase the percentages of Gross Revenues set forth in Section
8.02 B up to the level set forth in such FF&E Estimate, in order to provide the
additional funds required, such increases to be treated as Deductions under
paragraph 12 of the definition of "Operating Profit", or
2. Make a lump-sum contribution to the FF&E Reserve in the necessary amount
(in which case such lump-sum contribution plus interest (at the Prime Rate plus
one percentage point (1%) per annum), shall be reimbursed to Owner from Gross
Revenues in equal installments over the period of the next sixty-five (65)
Accounting Periods beginning the first full Accounting Period after the date of
such contribution, and such installment repayments shall be Deductions).
3. Obtain financing for the additional funds required, in which event, the
principal and interest payments (which shall be on a commercially reasonable
amortization basis) for such financing shall be paid by Management Company out
of either (i) Gross Revenue and shall be treated as Deductions in computing
Operating Profit, or (ii) out of the FF&E Reserve. The choice of funding for
such payments shall be as mutually agreed to by Management Company and Owner.
If Owner elects not to agree to any of options 1, 2 or 3 above (or Owner
does not respond with respect to either option) within thirty (30) days after
the submission of such FF&E Estimate (or, if Owner has elected option 2, if
Owner fails to fund the required amount within a sixty (60) day period after the
date of such election), Management Company shall be entitled, at its option, to
terminate this Agreement upon ninety (90) days' written notice to Owner (with a
copy to each Qualified Lender); however, such failure by Owner shall not be
deemed a Default by Owner under Article XVI, and Management Company shall not be
entitled to any remedies with respect to such failure other than such
termination of this Agreement. If Management Company so elects to terminate this
Agreement, it shall notify Owner of such election within the sixty (60) day
period following either: (x) the date of receipt of Owner's election not to
agree to either any of options 1, 2 or 3 about the expiration of the aforesaid
thirty (30) day period without Owner making an election with respect to either
option; or (y) if Owner has elected option 2, the date of the expiration of the
aforesaid sixty (60) day period without Owner funding the required amount.
8.03 Building Alterations, Improvements, Renewals, and Replacements
A. Management Company shall prepare an annual estimate (the "Building
Estimate") of the expenditures necessary for major repairs, alterations,
improvements, renewals and replacements to the structure or exterior facade of
the Hotel, or to the mechanical, electrical, heating, ventilating, air
conditioning, plumbing, or vertical transportation elements of the Hotel
building (the foregoing expenditures, together with all other repair and
maintenance expenditures which are classified as capital expenditures under
generally-accepted accounting principles, shall be collectively referred to as
"Capital Expenditures"). Management Company shall submit each such Building
Estimate to Owner for its approval at the same time the Annual Operating Budget
is submitted. Except with respect to the items described in Section 8.02 A (2),
Management Company shall not make any Capital Expenditures without the prior
written consent of Owner. Owner shall not unreasonably withhold its consent with
respect to Capital Expenditures which are required by reason of any Legal
Requirement, or required under Management Company's current life-safety
standards (provided that, in order for any such life-safety standards to be
"required" within the meaning of this Section 8.03 A, such standards must be
both required and in the process of being implemented at a majority of the
hotels within the Marriott Hotel System which are comparable to the Hotel), or
otherwise required for the continued safety of guests or prevention of material
damage to property, including the removal of Hazardous Materials in compliance
with all Environmental Laws pursuant to Section 20.10. All Capital Expenditures
which are described in the preceding sentence shall be referred to in this
Agreement as "Required Capital Expenditures".
B. In the event of (x) an emergency threatening the Hotel, its guests,
invitees or employees, or (y) the receipt by Management Company of a
governmental order or other Legal Requirement regarding any Required Capital
Expenditures, Management Company shall give Owner notice thereof within five (5)
business days thereafter or sooner if circumstances reasonably warrant.
Management Company shall then be authorized (but not obligated) to take
appropriate remedial action without receiving Owner's prior consent as follows:
(i) in an emergency threatening the Hotel, its guests, invitees or employees; or
(ii) if the continuation of the given condition could (in Management Company's
reasonable judgment) subject Management Company and/or Owner to either criminal
or more than de minimis civil liability, and Owner has either failed to remedy
the situation or has failed to take appropriate legal action to stay the
effectiveness of any applicable Legal Requirement. Management Company shall
cooperate with Owner in the pursuit of any such action and shall have the right
to participate therein. Owner shall reimburse Management Company for any costs
incurred by Management Company in connection with any such remedial action
within thirty (30) days after Owner's receipt of notice from Management Company
of the amount of such costs.
C. The cost of all Capital Expenditures (including the expenses incurred by
either Owner or Management Company in connection with any civil or criminal
proceeding described above, but not including costs of those Capital
Expenditures which are described in Section 8.02 A(2) hereof) shall be borne
solely by Owner, and shall not be paid from Gross Revenues or from the FF&E
Reserve.
D. The failure of Owner to either (i) approve and provide funding for any
proposed Required Capital Expenditure, within seventy-five (75) days after
Management Company's request therefor, or (ii) in the case of any Legal
Requirement which is described in Section 8.03 B, to either comply therewith or
to stay the effectiveness of such Legal Requirement during the period of any
contesting thereof, shall be a Default by Owner. In such event, Management
Company shall be entitled (without affecting its other remedies under Article
XVI) to terminate this Agreement upon ninety (90) days' written notice to Owner
(with a copy to each Qualified Lender); provided, however, that Management
Company shall have the right to stipulate such shorter period of time as may be
appropriate, given the time periods which are mandated by Legal Requirements, as
described in Section 8.03 A or B, or given Management Company's good faith
concerns about its own civil and/or criminal liability.
E. Management Company shall have the right, from time to time, to set forth
in any Building Estimate the recommendations of Management Company regarding
proposed ROI Capital Expenditures. Notwithstanding the provisions of Section
8.03 C to the contrary, the cost of all ROI Capital Expenditures shall be paid,
to the extent reasonably possible (given the requirement, set forth in Section
8.02, that the balance in the FF&E Reserve be maintained in accordance with the
Marriott Standards) from the FF&E Reserve, and Owner shall pay such costs from
its own funds only to the extent there are not adequate funds for such purpose
in the FF&E Reserve. Expenditures which are, pursuant to the preceding sentence,
made from the FF&E Reserve shall not be treated as Additional Invested Capital.
Any failure of Owner to approve and provide funding for any ROI Capital
Expenditures, or any other Capital Expenditures (not including those Capital
Expenditures which are described in Section 8.02 A(2) hereof) which are not
Required Capital Expenditures, within sixty (60) days after Management Company's
request therefor, shall not be a Default by Owner but shall entitle Management
Company to terminate this Agreement. Such Termination shall be evidenced by a
written notice to Owner (with a copy to each Qualified Lender), which notice
shall be delivered to Owner no later than ninety (90) days after the expiration
of the sixty (60) day period described in the preceding sentence. The effective
date of such Termination shall be the date stated by Management Company in such
notice, provided that such effective date shall be no less than one hundred
eighty (180) days, and no more than three hundred sixty (360) days, after the
date of such notice.
F. It is understood that "alterations" and "improvements" which either (a)
increase or decrease the number of guestrooms in the Hotel, or (b) involve
changing the architectural footprint of the Hotel or involve other significant
changes in the structural design of the Hotel, in any case by more than a de
minimis amount, are beyond the scope of this Article VIII, and would require an
amendment of this Agreement prior to implementation by either party.
8.04 Liens
Management Company and Owner shall use their best efforts to prevent any
liens from being filed against the Hotel which arise from any maintenance,
repairs, alterations, improvements, renewals or replacements in or to the Hotel.
They shall cooperate fully in obtaining the release of any such liens, and the
cost thereof, if the lien was not occasioned by the fault of either party, shall
be treated the same as the cost of the matter to which it relates. If the lien
arises as a result of the fault of either party, then the party at fault shall
bear the cost of obtaining the lien release.
8.05 Ownership of Replacements, Etc.
All repairs, alterations, improvements, renewals or replacements of the
Hotel which are made pursuant to Article VIII or otherwise shall be the property
of Owner. Subject to the provisions of Section 8.02, the funds in the FF&E
Reserve shall be the property of Owner.
8.06 Architect
Management Company agrees that John Portman & Associates shall continue as
Architect for the Hotel so long as Portman shall be alive, competent, active, a
general partner of Owner and the major principal of John Portman & Associates.
Subject to the Hotel Policy Committee (as defined in Owner=s partnership
agreement) approval, the Architect shall have the right to review architectural
and interior design matters (other than with respect to the Hotel kitchen and
other back-of-the-house areas), including, without limitation, replacement of
FF&E and repairs, maintenance and alterations pursuant to this Article VIII, so
long as his determinations are consistent with the approved Hotel budgets and
with the architecture of the Hotel. Owner=s plans for the design matters set
forth above shall be submitted to Architect and Management Company for their
review prior to any implementation thereof.
END OF ARTICLE VIII
ARTICLE IX
BOOKKEEPING AND BANK ACCOUNTS
9.01 Books and Records
A. Books of control and account shall be kept on the accrual basis and in
material respects in accordance with the Uniform System of Accounts, with the
exceptions provided in this Agreement. Owner may at reasonable intervals during
Management Company's normal business hours examine such records. Within
seventy-five (75) days following the close of each Fiscal Year, Management
Company shall furnish Owner a statement (the "Annual Operating Statement") in
reasonable detail summarizing the Hotel operations for such Fiscal Year and a
certificate of Management Company's chief accounting officer (or its controller
or any vice-president), certifying that such year-end Annual Operating Statement
is true and correct. Owner shall have sixty (60) days after receipt to examine
or review (at Owner's sole expense, and not as a Deduction) said Annual
Operating Statement. If Owner raises no objections within said sixty (60) day
period, the Annual Operating Statement shall be deemed to have been accepted by
Owner as true and correct, and Owner shall have no further right to question its
accuracy. If Owner does raise such an objection, by notice to Management
Company, Owner shall arrange for an independent audit to be commenced within
sixty (60) days after the date of such objection, and shall diligently cause
such audit to be completed within a reasonable period of time. Owner shall pay
all costs and expenses of such audit at its sole expense (and not as a
Deduction); however, if such audit establishes that Management Company has
understated the Operating Profit for that Fiscal Year by five percent (5%) or
more, the reasonable costs and expenses of such audit shall be paid as a
Deduction.
B. Management Company shall, on an annual basis, at the time of the
delivery of the Annual Operating Statement, prepare and deliver to Owner the
Management Analysis Report. In addition, Management Company shall, in connection
with an impending Sale of the Hotel or commitment by a Qualified Lender to make
a Qualified Loan, within thirty (30) days after written request therefor from
Owner, prepare and deliver to Owner an updated Management Analysis Report
describing significant changes since the effective date of the most recent
Management Analysis Report. The costs and expenses of preparing the Management
Analysis Report shall be paid as Deductions.
C. Owner shall have the right to require that any given Annual Operating
Statement will include a reasonably detailed report setting forth the components
of Chain Services, the amounts billed for each such component during the Fiscal
Year in question and the method of allocation for each such component; provided,
however, that Owner must request Management Company to prepare such report by no
later than thirty (30) days prior to the date on which such Annual Operating
Statement is to be delivered to Owner.
9.02 Hotel Accounts, Expenditures
A. All funds derived from operation of the Hotel shall be deposited by
Management Company in Hotel bank accounts (the "Operating Accounts") in a bank
or banks designated by Management Company and approved by Owner, which approval
shall not be unreasonably withheld. Withdrawals from said accounts shall be made
only by representatives of Management Company whose signatures have been
authorized. Reasonable petty cash funds shall be maintained at the Hotel.
B. All payments made by Management Company hereunder shall be made from
authorized bank accounts, petty cash funds, or from Working Capital provided by
Owner pursuant to Section 7.01. Management Company shall not be required to make
any advance or payment to or for the account of Owner except out of such funds,
and Management Company shall not be obligated to incur any liability or
obligation for Owner's account without assurances that necessary funds for the
discharge thereof will be provided by Owner. Debts and liabilities incurred by
Management Company as a result of its operation and management of the Hotel
pursuant to the terms hereof, whether asserted before or after the Termination
of this Agreement, will be paid by Owner to the extent funds are not available
to Management Company for that purpose from Gross Revenues.
9.03 Annual Operating Budget
A. Management Company shall submit to Owner for its approval (which shall
not be unreasonably withheld or delayed), at least thirty (30) days prior to the
beginning of each Fiscal Year which begins after the Effective Date, a
preliminary draft of the budget (the "Annual Operating Budget") of the estimated
financial results of the operation of the Hotel during the next Fiscal Year.
Owner's approval shall be deemed to have been given if Management Company has
received no notice from Owner to the contrary within thirty (30) days after
Owner's receipt of such preliminary draft of the Annual Operating Budget. Such
Annual Operating Budget shall project the estimated Gross Revenues, departmental
profits, Deductions, and Operating Profit for the forthcoming Fiscal Year for
the Hotel. In preparing the Annual Operating Budget for each Fiscal Year,
Management Company's goal will be the maximization of the long-term Operating
Profit of the Hotel, in keeping with the Marriott Standards and the general
standards of the hotel industry for similar properties. If there are material
items in any given Annual Operating Budget which have been budgeted at
significantly different amounts from the amounts actually experienced (or
projected) for the same items in the preceding Fiscal Year, Management Company
agrees to take reasonable steps to ensure that, at Owner's request, qualified
personnel from Management Company's staff are available to explain these
differences to Owner. A meeting (or meetings) for such purpose shall be held, at
Owner's request, within a reasonable period of time after the submission to
Owner of the preliminary draft of the Annual Operating Budget. Management
Company will at all times give good faith consideration to Owner's suggestions
regarding any Annual Operating Budget. Management Company shall thereafter
submit to Owner, by no later than thirty (30) days after the beginning of such
Fiscal Year, the final Annual Operating Budget.
B. Owner shall not be entitled to withhold its approval of any Annual
Operating Budget based on its objection to: (i) Management Company's reasonable
projections of either Gross Revenues or the components thereof; (ii) projected
costs and expenses which are "system charges" ( that is, costs and expenses
which are generally uniform throughout the Marriott Hotel System, such as: the
charges for Chain Services; the costs of Marriott Rewards and other chain-wide
marketing programs; employee benefits and other compensation programs); (iii)
costs and expenses which are not within the control of either Owner or
Management Company, such as Impositions and the cost of utilities; or (iv)
increases in projected costs and expenses of operating the Hotel, which
increases are primarily caused by projected increases in Gross Revenues. The
approval of Owner (as set forth in the first sentence of Section 9.03 A) shall
not be required if, and to the extent that, the proposed Annual Operating Budget
for a given Fiscal Year is, in all material respects, the same as the Annual
Operating Budget for the preceding Fiscal Year with adjustments for inflation.
If Owner and Management Company fail to mutually agree on the Annual Operating
Budget within forty-five (45) days after the submission to Owner of the
preliminary draft described in the first sentence of 9.01 A, either party shall
have the right to submit to arbitration (in accordance with Section 20.13) the
issue of whether or not Management Company's proposed Annual Operating Budget is
unreasonable, given the goals which are set forth in the fourth sentence of
Section 9.03 A. While such arbitration proceedings are pending, Management
Company shall operate the Hotel, in all material respects, based on the Annual
Operating Budget for the preceding Fiscal Year, with adjustments for inflation.
C. Each Annual Operating Budget will constitute a standard to which
Management Company shall use its reasonable best efforts to adhere. It is
understood, however, that the Annual Operating Budget is an estimate only and
that unforeseen circumstances such as, but not limited to, the costs of labor,
materials, services and supplies, casualty, operation of law, or economic and
market conditions may make adherence to the Annual Operating Budget
impracticable, and Management Company shall be entitled to depart therefrom for
such reasons; provided, however, that nothing herein shall be deemed to
authorize Management Company to take any action prohibited by this Agreement nor
to reduce Management Company's other rights or obligations hereunder.
D. Management Company shall notify Owner of any significant variations from
the Annual Operating Budget promptly after Management Company learns of the
same, but in no event later than the date on which Management Company is
required to give Owner the Accounting Period Statement covering the period in
which such variation occurs. Any such notice shall set forth in reasonable
detail the nature, extent and, if known by Management Company, the cause of such
variation, and recommendations of appropriate actions, either to correct the
variation or to prevent or minimize its occurrence or effect. Owner and
Management Company shall, at Owner's request, meet to review such variations and
to take appropriate action with respect thereto.
9.04 Operating Losses; Credit
A. To the extent there is an Operating Loss, additional funds in the amount
of any such Operating Loss shall be provided by Owner within thirty (30) days
after Management Company has given written notice thereof to Owner; provided,
however, that if Owner has already received a request from Management Company
for additional Working Capital pursuant to Section 7.01 A, and if such request
under Section 7.01 A reflects fundamentally the same cash shortage which
resulted in a request under this Section 9.04 A, Owner and Management Company
shall mutually discuss the extent to which the requests under Section 7.01 A and
Section 9.04 A may overlap, and such requests shall be modified accordingly.
B. In no event shall either party borrow money in the name of or pledge the
credit of the other.
END OF ARTICLE IX
ARTICLE X
PROPRIETARY MARKS; INTELLECTUAL PROPERTY
10.01 Proprietary Marks
A. During the Term of this Agreement, the Hotel shall be known as a
Marriott Hotel, with such additional identification as may be agreed to by Owner
and Management Company to provide local identification. If the name of the
Marriott Hotel System is changed, Management Company shall have the right to
change the name of the Hotel to conform thereto.
B. The name "Marriott," whether used alone or in connection with another
word or words, and all other Proprietary Marks shall in all events remain the
exclusive property of Management Company and its Affiliates. Owner shall have no
right to use the Marriott name or any other Proprietary Mark; provided, however,
that Owner shall have the right, during the Term of this Agreement, to have
Proprietary Signage installed (in strict conformance with the specifications
provided by Management Company prior to the Effective Date, or subsequent
specifications provided by Management Company from time to time during the Term)
in the Hotel and on the Site.
C. Except as provided in Section 10.02, upon Termination, any use of or
right to use the Marriott name or any other Proprietary Mark by Owner under this
Agreement shall immediately cease. As of the date of Termination, Management
Company shall remove all Proprietary Signage from the Hotel and from the Site
(and from any locations other than the Site). The cost of such removal shall be
paid as set forth in Section 4.02 E.
D. Notwithstanding the foregoing, those trademarks, trade names, symbols,
logos and designs which are specifically listed on Exhibit "F" shall be deemed
"Proprietary Marks" only during the Term of this Agreement; upon a Termination,
the exclusive control of such Proprietary Marks shall revert to Owner.
10.02 Purchase of Inventories and Fixed Asset Supplies
Upon Termination, Management Company shall have the option, to be exercised
by no later than thirty (30) days prior to Termination, to purchase, at their
then book value, any items of the Hotel's Inventories and Fixed Asset Supplies
as may be marked with the Marriott name or any other Proprietary Mark. In the
event Management Company does not exercise such option, Owner agrees that it
will use any such items not so purchased exclusively in connection with the
Hotel until they are consumed.
10.03 Computer Software and Equipment
A. All Software is and shall remain the exclusive property of Management
Company or one of its Affiliates (or the licensor of such Software, as the case
may be), and Owner shall have no right to use, or to copy, any Software.
B. Upon Termination, Management Company shall have the right to remove from
the Hotel, without compensation to Owner, all Software. Furthermore, upon
Termination, Management Company shall be entitled to remove from the Hotel any
computer equipment which is utilized as part of a centralized reservation or
property management system or is otherwise considered proprietary by Management
Company. If any of such removed computer equipment is owned by Owner, Management
Company shall reimburse Owner for all previous expenditures made by Owner for
the purchase of such equipment, subject to a reasonable allowance for
depreciation.
10.04 Intellectual Property
All Intellectual Property shall at all times be proprietary to Management
Company or its Affiliates, and shall be the exclusive property of Management
Company or its Affiliates. During the Term of this Agreement, Management Company
shall be entitled to take all reasonable steps to ensure that the Intellectual
Property remains confidential and is not disclosed to anyone other than
Management Company's employees at the Hotel. Upon Termination, all Intellectual
Property shall be removed from the Hotel by Management Company, without
compensation to Owner.
10.05 Breach of Covenant
Management Company and/or its Affiliates shall be entitled, in case of any
breach of the covenants of Article X by Owner or others claiming through it, to
injunctive relief and to any other right or remedy available at law. Article X
shall survive Termination.
END OF ARTICLE X
ARTICLE XI
POSSESSION AND USE OF HOTEL
11.01 Quiet Enjoyment
Owner covenants that, so long as (i) an Event of Default by Management
Company has not occurred under Article XVI of this Agreement, and (ii) Owner
does not have the right to terminate this Agreement under any other Section of
this Agreement, Management Company shall quietly hold, occupy and enjoy the
Hotel throughout the Term hereof free from hindrance or ejection by Owner or
other party claiming under, through or by right of Owner (except as may be
otherwise set forth in Section 6.04). Owner agrees to pay and discharge any
payments and charges and, at its expense, to prosecute all appropriate actions,
judicial or otherwise, necessary to assure such free and quiet occupation.
Nothing set forth in the preceding sentence, however, shall be deemed to create
a recourse obligation by Owner to pay any payment or charge pursuant to a
contract which is non-recourse to Owner.
11.02 Use
A. Management Company shall use the Hotel solely for the operation of a
hotel pursuant to the Marriott Standards, and for all activities in connection
therewith which are customary and usual to such an operation.
B. Management Company shall comply with and abide by all Legal Requirements
pertaining to the operation of the Hotel, provided that: (i) all costs and
expenses (other than those which are specifically described in clauses (ii) or
(iii) of this Section 11.02 B) of such compliance shall be paid from Gross
Revenues as Deductions in the computation of Operating Profit; (ii) all costs
and expenses of compliance with Environmental Laws shall be paid as set forth in
Section 20.10; (iii) all costs and expenses of compliance with the Legal
Requirements which are described in Section 8.03 A shall be paid as set forth in
Section 8.03; and (iv) Management Company shall have the right, but not the
obligation, in its reasonable discretion, to contest or oppose, by appropriate
proceedings, any such Legal Requirements (provided that the consent of Owner,
not to be unreasonably withheld, shall be obtained prior to initiating any such
proceedings which involve Owner's ownership interest in the Hotel in a material
manner). The reasonable expenses of any such contest shall be paid from Gross
Revenues as Deductions.
11.03 Chain Services
A. Management Company shall, beginning with the Effective Date and
thereafter during the Term of this Agreement, cause to be furnished to the Hotel
certain services ("Chain Services") which are furnished generally on a central
or regional basis to other full service hotels in the Marriott chain. Chain
Services shall include: (i) national sales office services; central training
services; career development and relocation of management personnel; central
advertising and promotion (including direct and image media and advertising
administration); the Marriott national reservations system and the Marriott
computer payroll and accounting services; and (ii) such additional central or
regional services as are or may be, from time to time, furnished for the benefit
of hotels in the Marriott chain or in substitution for services now performed at
individual hotels which may be more efficiently performed on a group basis;
provided, however, that services shall only be added to "Chain Services"
pursuant to clause (ii) above if, and to the extent that, such services: (a) are
not Central Office Services; (b) are not services relating to non-routine work
(it being understood that the cost and expense of such non-routine services
shall be Deductions as set forth in paragraph 6 of the definition of Operating
Profit); and (c) are either (x) new services (i.e., not previously performed at
or for the Hotel) or (y) services which theretofore had been performed at the
Hotel, but which can be performed more efficiently and economically on a
centralized or regional basis.
B. Costs and expenses incurred in the providing of Chain Services shall be
allocated on a fair and equitable basis among all Marriott hotels owned, leased
or managed by Management Company in the United States. Such allocation shall be
made without regard to any "caps" or other limitations on the amount which
Management Company or its Affiliates may charge to a given hotel, pursuant to
agreements which Management Company (or its Affiliates) may have with the owner
of such hotel. Any excess of that portion of such costs and expenses which is
fairly allocated to a given hotel over the "cap" which may be in effect with
regard to that hotel shall be paid by Management Company from its own funds.
Management Company shall make no profit from Chain Services. Upon Owner's
written request, an explanation of the current Chain Services will be given to
Owner, and the basis for the allocation of the charge for each Chain Service
will be explained to Owner, in reasonable detail, at the time of the submission
of the Annual Operating Statement (as more particularly set forth in Section
9.01).
11.04 Owner's Right to Inspect
Owner or its agents shall have access to the Hotel at any and all
reasonable times for the purpose of inspection or showing the Hotel to
prospective purchasers, tenants or Holders.
11.05 Indemnity
A. Management Company shall indemnify and hold harmless Owner (and any
officer, director, employee, advisor, partner or shareholder of Owner) in
respect of, and, at Owner's request, shall defend any action, cause of action,
suit, debt, cost, expense (including, without limitation, reasonable attorneys'
fees), claim or demand whatsoever brought or asserted by any third person
whomsoever, at law or in equity, arising by reason of: (i) liabilities stemming
from general corporate matters of Management Company or its Affiliates, to the
extent the same are not directly and primarily related to the Hotel; (ii)
infringement and other claims relating to the Proprietary Marks; (iii) if
Management Company fails to maintain insurance coverage that it is required to
maintain pursuant to this Agreement, the excess of the amount of any liability
or loss that would have been covered over the amount of any applicable
deductible; and (iv) the bad faith or willful misconduct of Management Company
or its Affiliates, or any of their employees, servants or agents or other
persons for whom they are responsible, resulting in a claim for bodily injury,
death or property damage occurring on, in or in conjunction with the business of
the Hotel, to the extent that such claim exceeds the insurance proceeds
(including Hotel Retentions) which are available to pay such claim.
B. If any claim, action or proceeding is made or brought against Owner,
against which claim, action or proceeding Management Company shall be obligated
to indemnify pursuant to the terms of this Agreement, then, upon demand by
Owner, Management Company, at its sole cost and expense, shall resist or defend
such claim, action or proceeding (in Owner's name, if necessary), using such
attorneys as Owner shall approve, which approval shall not be unreasonably
withheld. If, in Owner's reasonable opinion, (i) there exists a conflict of
interest which would make it inadvisable to be represented by counsel for
Management Company, or (ii) there are legal defenses available to Management
Company that are different from or inconsistent with those available to Owner,
or (iii) there are claims at issue which are not covered by Management Company's
insurance, Owner shall be entitled to retain its own attorneys, and Management
Company shall pay the reasonable fees and disbursements of such attorneys.
C. Matters with respect to which Management Company has specifically agreed
to indemnify Owner under other provisions of this Agreement (for example,
Section 14.01 regarding "Employee Claims", and Section 20.11 regarding
environmental matters) are to be treated exclusively under such other provisions
and not under this Section 11.05.
END OF ARTICLE XI
ARTICLE XII
INSURANCE
12.01 Interim Insurance [Intentionally omitted]
12.02 Property and Operational Insurance
Management Company shall, commencing with the Effective Date and thereafter
during the Term of this Agreement, procure and maintain, either with insurance
companies of recognized responsibility or by legally qualifying itself as a self
insurer, a minimum of the following insurance:
A. Property insurance on the Hotel building(s) and contents against loss or
damage by fire, lightning and all other risks covered by the usual extended
coverage endorsement, all in an amount not less than one hundred percent (100%)
of the replacement cost thereof (excluding the cost of foundations and
excavations);
B. Boiler and machinery insurance against loss or damage from explosion of
boilers or pressure vessels to the extent applicable to the Hotel;
C. Business interruption insurance covering loss of profits and necessary
continuing expenses for interruptions caused by any occurrence covered by the
insurance referred to in Section 12.02 A and B, which shall be of a type and in
such amounts (but such coverage shall in no event be for less than one (1) year)
as are generally established by Management Company at similar hotels it owns,
leases or manages under the Marriott name in the United States;
D. General liability insurance against claims for bodily injury, death or
property damage occurring on, in, or in conjunction with the business of the
Hotel, and automobile liability insurance on vehicles operated in conjunction
with the Hotel, with a combined single limit for each occurrence of not less
than One Hundred Million Dollars ($100,000,000); representatives of Management
Company and Owner shall meet, at Owner's request, at intervals of approximately
once every five (5) years, to review the adequacy of such limit;
E. Workers' compensation and employer's liability insurance as may be
required under applicable laws covering all of Management Company's employees at
the Hotel;
F. Fidelity bonds, with reasonable limits to be determined by Management
Company, covering its employees in job classifications normally bonded in other
similar hotels it leases or manages under the Marriott name in the United States
or as otherwise required by law, and comprehensive crime insurance to the extent
Management Company and Owner mutually agree it is necessary for the Hotel; and
G. Such other insurance in amounts as Management Company and Owner, in
their reasonable judgment, mutually deem advisable for protection against
claims, liabilities and losses arising out of or connected with the operation of
the Hotel.
12.03 General Insurance Provisions
A. All insurance described in Section 12.02 may be obtained by Management
Company by endorsement or equivalent means under its blanket insurance policies,
provided that such blanket policies substantially fulfill the requirements
specified herein. Upon the request of either Owner or any Qualified Lender,
representatives of the requesting party shall be entitled to examine, at
Management Company's corporate headquarters, all insurance policies maintained
by Management Company regarding the Hotel.
B. Management Company may self insure or otherwise retain such risks or
portions thereof as it does with respect to other similar hotels it owns, leases
or manages under the Marriott name in the United States.
C. All policies of insurance required under Section 12.02 shall be carried
in the name of Management Company. The policies required under Sections 12.02 A,
B, C and D shall include the Owner as an additional insured. Upon notice by the
Owner, Management Company shall also have the policies required under Sections
12.02 A, B, C and D include any Qualified Lender as an additional insured. Any
property losses thereunder shall be payable to the respective parties as their
interests may appear. Any Mortgage on the Hotel shall contain provisions to the
effect that proceeds of the insurance policies required to be carried under
Section 12.02 A and B shall, with respect to any casualty involving less than
twenty-five percent (25%) of the replacement cost of the Hotel, be available for
repair and restoration of the Hotel.
D. Management Company shall deliver to the Owner certificates of insurance
with respect to all policies so procured and, in the case of insurance policies
about to expire, shall deliver certificates with respect to the renewal thereof.
E. All certificates of insurance provided for under Article XII shall, to
the extent obtainable, state that the insurance shall not be cancelled or
materially changed without at least thirty (30) days' prior written notice to
Owner.
F. The term "Hotel Retention" shall mean the amount of any loss or reserve
under Management Company's blanket insurance or self-insurance programs which is
allocated to the Hotel, not to exceed the higher of (a) the maximum per
occurrence limit established for similar hotels participating in such programs,
or (b) the insurance policy deductible on any loss which may fall within high
hazard classifications as mandated by the insurer (e.g., earthquake, flood,
windstorm on coastal properties, etc.). If the Hotel is not a participant under
Management Company's blanket insurance or self-insurance programs, "Hotel
Retention" shall mean the amount of any loss or reserve allocated to the Hotel,
not to exceed the insurance policy deductible.
12.04 Cost and Expense
A. [Intentionally omitted]
B. Insurance premiums and any other costs or expenses with respect to the
insurance or self-insurance required under Section 12.02, including any Hotel
Retention, shall be paid from Gross Revenues as Deductions. To the extent that
such costs or expenses include reimbursement by Management Company of its own
costs or expenses, or those of one of its Affiliates, such costs or expenses
shall be generally competitive (as calculated over the Term of this Agreement)
with costs and expenses of non-affiliated entities providing similar services.
Such premiums and costs shall be allocated on an equitable basis to the hotels
participating under Management Company's blanket insurance or self-insurance
programs. Any reserves, losses, costs or expenses which are uninsured shall be
treated as a cost of insurance and shall be Deductions. Upon Termination, an
escrow fund in an amount reasonably acceptable to Management Company shall be
established from Gross Revenues (or, if Gross Revenues are not sufficient, with
funds provided by Owner) to cover the amount of any Hotel Retention and all
other costs which will eventually have to be paid by either Owner or Management
Company with respect to pending or contingent claims, including those which
arise after Termination for causes arising during the Term of this Agreement.
Upon the final disposition of all such pending or contingent claims, any
unexpended funds remaining in such escrow shall be paid to Owner.
12.05 Owner's Option to Obtain Certain Insurance
Owner may, at its option, by written notice to Management Company which
shall be delivered no later than ninety (90) days prior to the natural
expiration of the insurance policies which Management Company has obtained
pursuant to Section 12.02 A, B and C, procure and maintain the insurance
specified in Section 12.02 A, B and C (in which case Management Company shall
allow such policies obtained by it under Section 12.02 A, B, and C to expire),
subject to the following terms and conditions:
A. All such policies of insurance shall be carried in the name of Owner,
with Management Company as an additional insured. Any property losses thereunder
shall be payable to the respective parties as their interests may appear. The
documentation with respect to each Secured Loan shall contain provisions to the
effect that proceeds of the insurance policies required to be carried under
Section 12.01 A and B shall be available for repair and restoration of the
Hotel, to the extent required pursuant to Section 12.03 C. However, any Holder
of such Secured Loan shall be entitled to impose reasonable conditions on the
disbursement of insurance proceeds for the repair and/or restoration of the
Hotel, including a demonstration by Owner and/or Management Company that the
amount of such proceeds (together with other funds Owner agrees to make
available) is sufficient for such purpose.
B. Owner shall deliver to Management Company certificates of insurance with
respect to all policies so procured and, in the case of insurance policies about
to expire, shall deliver certificates with respect to the renewal thereof.
C. All such certificates of insurance shall, to the extent obtainable,
state that the insurance shall not be canceled or materially changed without at
least thirty (30) days' prior written notice to the certificate holder.
D. Premiums for such insurance coverage shall be treated as Deductions,
provided that if the cost of such insurance procured by Owner exceeds the cost
of Management Company's comparable coverage by more than ten percent (10%), all
such excess costs shall be the sole responsibility of Owner and shall not be a
Deduction.
E. Should Owner exercise its option to procure the insurance described in
this Section 12.05, Owner hereby waives its rights of recovery from Management
Company or any of its Affiliates (and their respective directors, officers,
shareholders, agents and employees) for loss or damage to the Hotel, and any
resultant interruption of business.
F. Should Owner exercise its right to obtain the insurance described in
this Section 12.05, Owner acknowledges that Management Company is under no
obligation to thereafter include the Hotel in its blanket insurance program
(with respect to the coverage described in Section 12.02 A, B and C) for the
balance of the Term of this Agreement. However, upon a Sale of the Hotel, a
successor Owner shall have the right, notwithstanding the fact that the previous
Owner may have obtained insurance in accordance with this Section 12.05, to have
the Hotel included in Management Company's blanket insurance program (provided
that the Hotel, as of that point in time, satisfies the applicable criteria for
admission to such program, as established by the program's insurance carriers)
by making a written request to Management Company for such inclusion not later
than thirty (30) days after the date on which such party becomes the Owner.
G. All insurance procured by Owner hereunder shall be obtained from
reputable insurance companies reasonably acceptable to Management Company.
END OF ARTICLE XII
ARTICLE XIII
TAXES
13.01 Real Estate and Personal Property Taxes
A. Except as specifically set forth in subsection B below, all Impositions
which accrue during the Term of this Agreement (or are properly allocable to
such Term under generally accepted accounting principles) shall be paid by
Management Company from Gross Revenues, as a Deduction, before any fine,
penalty, or interest is added thereto or lien placed upon the Hotel or the
Agreement, unless payment thereof is stayed. Owner shall within five (5)
business days after the receipt of any invoice, bill, assessment, notice or
other correspondence relating to any Imposition, furnish Management Company with
a copy thereof. Management Company shall, within the earlier of thirty (30) days
of payment or five (5) business days following written demand by Owner, furnish
Owner with copies of official tax bills and assessments which Management Company
has received, and evidence of payment or contest thereof. Either Owner or
Management Company (in which case each party agrees to sign the required
applications and otherwise cooperate with the other party in expediting the
matter) may initiate proceedings to contest any Imposition, and all reasonable
costs of any negotiations or proceedings with respect to any such contest shall
be paid from Gross Revenues and shall be a Deduction in determining Operating
Profit; provided, however, that neither party shall have the right to expend in
excess of Five Thousand Dollars ($5,000) (to be adjusted by the GDP Deflator)
with respect to any such negotiations or proceedings without the consent of the
other party.
B. The word "Impositions", as used in this Agreement, shall not include the
following, all of which shall be paid solely by Owner, not from Gross Revenues
nor from the FF&E Reserve:
1. Any franchise, corporate, estate, inheritance, succession, capital levy
or transfer tax imposed on Owner, or any income tax imposed on any income of
Owner (including distributions to Owner pursuant to Article V hereof);
2. Special assessments (regardless of when due or whether they are paid as
a lump sum or in installments over time) imposed because of facilities which are
constructed by or on behalf of the assessing jurisdiction (for example, roads,
sidewalks, sewers, culverts, etc.) which directly benefit the Hotel (regardless
of whether or not they also benefit other buildings), which assessments shall
not be treated as Deductions, but rather shall be added to the Additional
Invested Capital as of each payment by Owner with respect thereto;
3. "Impact Fees" (regardless of when due or whether they are paid as a lump
sum or in installments over time) which are required of Owner as a condition to
the issuance of site plan approval, zoning variances or building permits, which
impact fees shall not be treated as Deductions, but rather shall be added to the
Additional Invested Capital as of each payment by Owner with respect thereto;
and
4. "Tax-increment financing" or similar financing whereby the municipality
or other taxing authority has assisted in financing the construction of the
Hotel by temporarily reducing or abating normal Impositions in return for
substantially higher levels of Impositions at later dates.
C. Owner shall have the right to require Management Company to establish an
escrow account (with either any Qualified Lender or another entity reasonably
acceptable to both Owner and Management Company) from which Impositions will be
paid. Payments into such escrow account will be Deductions. Any interest which
accrues on amounts deposited in such escrow account shall be added to the
balance in such escrow account and used to pay Impositions.
END OF ARTICLE XIII
ARTICLE XIV
HOTEL EMPLOYEES
14.01 Employees
A. All personnel employed at the Hotel shall be the employees of Management
Company. Subject to the provisions of this Agreement, Management Company shall
have absolute discretion to hire, promote, supervise, direct, train and
discharge all employees at the Hotel, to fix their compensation and, generally,
establish and maintain all policies relating to employment; provided, however,
that (i) all of the foregoing shall be in accordance with the Marriott
Standards, and (ii) Management Company shall not enter into any written
employment agreements with any person which purport to bind the Owner and/or
purport to be effective regardless of a Termination, without obtaining Owner's
prior consent which may be withheld in Owner's sole discretion. Management
Company and Owner shall each comply with all Legal Requirements regarding labor
relations; if either Management Company or Owner shall be required, pursuant to
any such Legal Requirement, to recognize a labor union or to enter into
collective bargaining with a labor union, the party so required shall promptly
notify the other party pursuant to Section 20.09.
B. Management Company shall decide which, if any, of the Hotel's employees
shall reside at the Hotel (provided that Owner's prior approval shall be
obtained if more than two (2) such employees and their immediate families reside
at the Hotel), and shall be permitted to provide free accommodations and
amenities to its employees and representatives living at or visiting the Hotel
in connection with its management or operation. No person shall otherwise be
given gratuitous accommodations or services without prior joint approval of
Owner and Management Company except in accordance with usual practices of the
hotel and travel industry.
C. Any proposed settlement of any Employee Claim where the amount proposed
to be offered to the employee by Management Company is in excess of the
Settlement Threshold Amount shall be jointly approved by Management Company and
Owner. In addition, Management Company shall give Owner a written notice
(pursuant to Section 20.09) of any settlement of any Employee Claim where the
settlement amount is below the Settlement Threshold Amount, but is in excess of
Fifty Thousand Dollars ($50,000) (said dollar amount to be adjusted by the GDP
Deflator). Any dispute between Owner and Management Company as to whether
Management Company's settlement recommendation is reasonable, where such
proposed settlement is in excess of the Settlement Threshold Amount, shall be
resolved by arbitration under Section 20.13 hereof; provided that Management
Company shall have the right to settle any Employee Claim (prior to the
arbitration on the reasonableness of the settlement, as described in this
sentence) based on Management Company's recommendation, which shall be
Management Company's reasonable estimate, in good faith, by using: (i) funds
from Gross Revenues (as a Deduction) up to the amount of Owner's settlement
recommendation, which shall be Owner's reasonable estimate, in good faith, and
(ii) Management Company's own funds to the extent Management Company's
recommendation exceeds the amount described in subparagraph (i) above. Following
the settlement of such Employee Claim, the parties will arbitrate under Section
20.13 the issue of whether Management Company's settlement recommendation was
reasonable under the circumstances. If the arbitrators decide that Management
Company's recommendation was reasonable, Management Company shall be entitled to
reimburse itself from Gross Revenues (as a Deduction) in the amount of the funds
advanced under subparagraph (ii) above, together with accrued interest thereon
at the Prime Rate. If the arbitrators decide that Management Company's
settlement recommendation was not reasonable, then Management Company shall not
be entitled to any reimbursement of the amounts advanced by it under
subparagraph (ii) above, nor to accrued interest thereon.
D. Management Company shall pay from its own funds, and not from Gross
Revenues, any Employee Claim where the basis of such Employee Claim is conduct
by Management Company which: (i) is a substantial violation of the standards of
responsible labor relations as generally practiced by prudent owners or
operators of similar hotel properties in the general geographic area of the
Hotel; and (ii) is not the isolated act of individual employees, but rather is a
direct result of corporate policies of Management Company which either encourage
or fail to discourage such conduct. In addition, Management Company shall
indemnify, defend and hold harmless Owner from and against any fines or
judgments arising out of such conduct, and all Litigation expenses (including
reasonable attorneys' fees and expenses) incurred in connection therewith. Any
dispute between Owner and Management Company as to whether or not certain
conduct by Management Company is not in accordance with the aforesaid standards
shall be resolved by arbitration under Section 20.13 hereof. The arbitration
proceedings described in the preceding sentence shall be conducted independently
of any arbitration proceedings with respect to such Employee Claim pursuant to
the applicable employment-related contract and/or pursuant to Section 14.01 C of
this Agreement.
E. With respect to all Litigation or arbitration involving Employee Claims
in which both Management Company and Owner are involved as actual or potential
defendants, Management Company shall have exclusive and complete responsibility
(subject to the rights of Owner to approve certain settlements, as set forth in
Section 14.01 C) for the resolution of such Employee Claims. In the event that
any Employee Claim is made against Owner, but not against Management Company,
Owner shall give notice to Management Company of the Employee Claim in a timely
manner so as to avoid any prejudice to the defense of the Employee Claim,
provided that Management Company shall in all events be so notified within
twenty (20) days after the date such Employee Claim is made against Owner.
Management Company will thereafter assume exclusive and complete responsibility
for the resolution of such Employee Claim.
F. At Termination, other than by reason of an Event of Default of
Management Company hereunder, an escrow fund shall be established from Gross
Revenues (or, if Gross Revenues are not sufficient, with funds provided by
Owner) to reimburse Management Company for all costs and expenses incurred by
Management Company which arise out of either the transfer or the termination of
employment of Management Company's employees at the Hotel, such as reasonable
transfer costs, severance pay, unemployment compensation and other employee
liability costs.
G. Management Company (and not Owner) shall have the power to hire,
dismiss or transfer the general manager of the Hotel, provided, however, that
Management Company shall keep Owner reasonably informed and shall give Owner the
opportunity to participate in the process with respect to any such hiring,
dismissal or transfer, as follows:
1. Owner shall be given at least forty-five (45) days' prior notice of any
proposed hiring, dismissal or transfer of the general manager (except that such
notice period shall be appropriately shortened in the event that such dismissal
is the result of a violation of a Legal Requirement or of Management Company's
policies, or is the result of similar extraordinary circumstances which, in the
reasonable judgment of Management Company, necessitate such shorter notice
period).
2. Prior to any dismissal or transfer of the general manager, Owner shall
be notified and Owner shall be advised of the reason for such proposed dismissal
or transfer of the general manager and of the qualifications of any proposed
replacement manager. Owner shall be given a period of ten (10) days within which
to interview the proposed general manager. Owner shall be given the opportunity
to meet with the appropriate executive of Management Company to discuss the
advisability of effectuating any proposed hiring, dismissal or transfer and any
possible alternatives thereto. Management Company shall consider in good faith
the opinions and requests of Owner with respect to such matters and, if
Management Company elects not to implement any such request, Management Company
shall explain its decision to Owner in reasonable detail. H. Management Company
shall give Owner the opportunity to provide to Management Company an evaluation
of the performance of the general manager of the Hotel, which shall be provided
reasonably in advance of the date of Management Company=s annual review of the
general manager. Management Company shall consider such evaluation by Owner in
good faith, and shall explain in reasonable detail to Owner how Management
Company=s evaluation of the general manager differs (if at all) from such
evaluation by Owner.
END OF ARTICLE XIV
ARTICLE XV
DAMAGE, CONDEMNATION AND FORCE MAJEURE
15.01 Damage and Repair
A. If, during the Term hereof, the Hotel is damaged or destroyed by fire,
casualty or other cause, Owner shall, with all reasonable diligence, to the
extent that proceeds from the insurance described in Section 12.02 are available
(subject to the provisions of any Mortgage encumbering the Hotel, but with the
limitations described in Section 12.03 C) for such purpose, repair or replace
the damaged or destroyed portion of the Hotel to the same condition as existed
previously.
B. In the event damage or destruction to the Hotel from any cause
materially and adversely affects the operation of the Hotel and Owner fails to
timely (subject to Force Majeure, and subject to unreasonable delays caused by
Management Company, including unreasonable delays in adjusting the insurance
claim with the carriers which participate in Management Company's blanket
insurance program) commence and complete the repairing, rebuilding or
replacement of the same so that the Hotel shall be substantially the same as it
was prior to such damage or destruction, Management Company may, at its option,
elect to terminate this Agreement upon one hundred twenty (120) days' written
notice.
15.02 Condemnation
A. In the event all or substantially all of the Hotel shall be taken in any
eminent domain, condemnation, compulsory acquisition, or similar proceeding by
any competent authority for any public or quasi-public use or purpose, or in the
event a portion of the Hotel shall be so taken, but the result is that it is
unreasonable to continue to operate the Hotel, this Agreement shall terminate.
B. In the event a portion of the Hotel shall be taken by the events
described in Section 15.02 A, or the entire Hotel is affected but on a temporary
basis, and the result is not to make it unreasonable to continue to operate the
Hotel, this Agreement shall not terminate. However, so much of any award for any
such partial taking or condemnation as shall be necessary to render the Hotel
equivalent to its condition prior to such event shall be used for such purpose;
the balance of such award, if any, shall be fairly and equitably apportioned
between Owner and Management Company in accordance with their respective
interests. The Owner's Investment shall be reduced by that portion of the total
amount (if any) received by Owner pursuant to this Section 15.02 B which is not
used to restore the Hotel; in addition, the Performance Termination Threshold
shall be reduced by an amount equal to eight percent (8%) of such total amount
(if any) received by Owner pursuant to this Section 15.02 B which is not used to
restore the Hotel.
C. In the event of any proceeding described in Section 15.02 A or B, Owner
and Management Company shall each have the right to initiate such proceedings as
they deem advisable to recover any damages to which they may be entitled;
provided, however, that Management Company shall be entitled to retain the award
or compensation it may obtain through proceedings which are conducted separately
from those of Owner only if such award or compensation does not reduce the award
or compensation otherwise available to Owner. For this purpose, any award or
compensation received by any Holder shall be deemed to be an award or
compensation received by Owner.
15.03 Force Majeure
A. The withdrawal or revocation of any License which is material to the
operation of the Hotel in accordance with the Marriott Standards, where such
withdrawal or revocation (i) is not due to the fault of either Management
Company or Owner, and (ii) is not otherwise within the reasonable control of
either Management Company or Owner, shall not be an Event of Default under
Article XVI of this Agreement. Management Company and Owner shall each, in good
faith, use all commercially reasonable efforts (including the diligent pursuit
of all available appeals), during the period of one hundred twenty (120) days
after the date of such withdrawal or revocation, to have such License
reinstated. If, notwithstanding such efforts, such License is not reinstated
prior to the expiration of the aforesaid period of one hundred twenty (120)
days, either Owner or Management Company shall have the right, at its option, to
terminate this Agreement upon no less than sixty (60) days' notice to the other
party; provided, however, that the terminating party must deliver such notice of
Termination to the other party by no later than ninety (90) days after the
expiration of such one hundred twenty (120) day period; and provided further,
that no such Termination shall be effective if, prior to the effective date of
such Termination, such License is reinstated or such withdrawal or revocation of
such License is stayed.
B. If an order, judgment or directive by a court or administrative body is
issued, in connection with any Litigation involving Owner, which restricts or
prevents Management Company, in a material adverse manner, from operating the
Hotel in accordance with the Marriott Standards, and which, in Management
Company's reasonable opinion, will have a significant adverse effect upon
operations of the Hotel, Management Company shall be entitled, at its option, to
terminate this Agreement upon sixty (60) days' written notice; provided,
however, that Management Company shall (if it so elects) deliver such notice of
Termination to Owner by no later than ninety (90) days after the issuance of
such order, judgment or directive (or, if such order, judgment or directive is
appealed, within ninety (90) days after the final disposition of such appeal).
END OF ARTICLE XV
ARTICLE XVI
DEFAULTS
16.01 Definition of "Default"
Any one or more of the following shall constitute a "Default," to the
extent permitted by applicable law:
A. The filing of a voluntary petition in bankruptcy or insolvency or a
petition for reorganization under any bankruptcy law by either party, or the
admission by either party that it is unable to pay its debts as they become due;
B. The consent to an involuntary petition in bankruptcy or the failure to
vacate, within ninety (90) days from the date of entry thereof, any order
approving an involuntary petition by either party;
C. The entering of an order, judgment or decree by any court of competent
jurisdiction, on the application of a creditor, adjudicating either party as
bankrupt or insolvent or approving a petition seeking reorganization or
appointing a receiver, trustee, or liquidator of all or a substantial part of
such party's assets, and such order, judgment or decree's continuing unstayed
and in effect for any period of ninety (90) days;
D. The failure of either party to make any payment required to be made in
accordance with the terms of this Agreement, as of the due date which is
specified in this Agreement;
E. The failure of either party to perform, keep or fulfill any of the other
covenants, undertakings, obligations or conditions set forth in this Agreement.
16.02 Definition of "Event of Default"
A. Upon the occurrence of any Default by either party hereto (hereinafter
referred to as the "defaulting party") under Section 16.01 A, B or C, such
Default shall immediately and automatically, without the necessity of any notice
to the defaulting party, constitute an "Event of Default" under this Agreement.
B. Upon the occurrence of any Default by a defaulting party under Section
16.01 D, such Default shall constitute an "Event of Default" under this
Agreement if the defaulting party fails to cure such Default within ten (10)
days after written notice from the non-defaulting party specifying such Default
and demanding such cure.
C. Upon the occurrence of any Default by either party hereto under Section
16.01 E, such Default shall constitute an "Event of Default" under this
Agreement if the defaulting party fails to cure such Default within thirty (30)
days after written notice from the non-defaulting party specifying such Default
and demanding such cure, or, if the Default is such that it cannot reasonably be
cured within said thirty (30) day period of time, if the defaulting party fails
to commence the cure of such Default within said thirty (30) day period of time
or thereafter fails to diligently pursue such efforts to completion.
16.03 Remedies Upon an Event of Default
A. Upon the occurrence of an Event of Default under the provisions of
Section 16.02, the non-defaulting party shall have the right to pursue any one
or more of the following courses of action: (i) in the event of a material
breach by the defaulting party of its obligations under this Agreement, to
terminate this Agreement by written notice to the defaulting party, which
termination shall be effective as of the effective date which is set forth in
said notice, provided that said effective date shall be at least thirty (30)
days after the date of said notice; and provided further that, if the defaulting
party is the employer of all or a substantial portion of the employees at the
Hotel, the foregoing period of thirty (30) days shall be extended to
seventy-five (75) days (or such longer period of time as may be necessary under
applicable Legal Requirements pertaining to termination of employment); (ii) to
institute forthwith any and all proceedings permitted by law or equity,
including, without limitation, actions for specific performance and/or damages;
and (iii) to avail itself of any one or more of the other remedies described in
this Section 16.03.
B. Upon the occurrence of a Default by either party under the provisions of
Section 16.01 D, the amount owed to the non-defaulting party shall accrue
interest, at the Interest Rate, from and after the date on which such payment
was originally due to the non-defaulting party.
C. The rights granted hereunder are intended to be cumulative, and shall
not be in substitution for, but shall be in addition to, any and all rights and
remedies available to the non-defaulting party (including, without limitation,
injunctive relief and damages; provided that the satisfaction of damage awards
against Owner shall be limited by the provisions of Section 16.04) by reason of
applicable provisions of law or equity.
16.04 Owner's Estate
Notwithstanding any other provision of this Agreement, in the event of any
Event of Default by Owner pursuant to the terms of this Agreement, Management
Company shall look only to Owner's estate and interest in the Site and the Hotel
(which shall, for this purpose, include (i) amounts deposited in the Operating
Accounts and in the FF&E Reserve, and (ii) accounts receivable) for the
satisfaction of a money judgment against Owner resulting from such Event of
Default, and no other property or assets of Owner, or of its partners, officers,
directors, shareholders or principals, shall be subject to levy, execution or
other enforcement procedure for the satisfaction of such judgment. Management
Company's right to look to Owner's estate and interest in the Site and the Hotel
for satisfaction of such a money judgment against Owner shall survive
Termination and shall not be affected by any one or more Sales of the Hotel.
Nothing contained in this Section 16.04 shall be deemed to affect or diminish
Management Company's remedies under this Article XVI other than money damages
against Owner (including, without limitation, Termination of this Agreement).
END OF ARTICLE XVI
ARTICLE XVII
WAIVER AND PARTIAL INVALIDITY
17.01 Waiver
The failure of either party to insist upon a strict performance of any of
the terms or provisions of this Agreement, or to exercise any option, right or
remedy herein contained, shall not be construed as a waiver or as a
relinquishment for the future of such term, provision, option, right or remedy,
but the same shall continue and remain in full force and effect. No waiver by
either party of any term or provision hereof shall be deemed to have been made
unless expressed in writing and signed by such party.
17.02 Partial Invalidity
If any portion of this Agreement shall be declared invalid by order, decree
or judgment of a court, this Agreement shall be construed as if such portion had
not been inserted herein except when such construction would operate as an undue
hardship on Management Company or Owner, or constitute a substantial deviation
from the general intent and purpose of said parties as reflected in this
Agreement.
END OF ARTICLE XVII
ARTICLE XVIII
ASSIGNMENT
18.01 Assignment
A. Management Company shall not assign or transfer its management
responsibilities under this Agreement without the prior written consent of
Owner; provided, however, that Management Company shall have the right, without
such consent, to (1) assign its interest in this Agreement to any of its
Affiliates, and any such Affiliate shall be deemed to be the Management Company
for the purposes of this Agreement, and (2) sublease shops or grant licenses or
concessions at the Hotel so long as the terms of any such subleases, licenses or
concessions are consistent with the provisions of Section 2.02. In the event of
such an assignment by Management Company of its interest in this Agreement to an
Affiliate, the Management Company which is named in the Preamble to this
Agreement: (i) shall automatically be deemed to guarantee the performance of
such Affiliate under this Agreement; (ii) shall, at the request of Owner,
execute a guaranty, in form and substance reasonably satisfactory to both
parties, of the performance of such Affiliate under this Agreement (provided
that the failure of Owner to obtain an executed guaranty pursuant to this clause
(ii) shall not affect the validity or enforceability of the guaranty which is
automatically created pursuant to clause (i); and provided further, that, when
Owner does so receive an executed guaranty pursuant to this clause (ii), such
executed guaranty shall be deemed to have superseded the guaranty described in
clause (i) above); and (iii) shall make available to such Affiliate, in
connection with the performance by such Affiliate under this Agreement,
Management Company's skill, personnel, facilities and resources.
B. Owner shall not assign or transfer its interest in this Agreement other
than (i) in connection with a Sale of the Hotel which complies with the
provisions of Article XIX hereof, or (ii) as set forth in Section 18.01 C.
C. Nothing contained herein shall prevent (i) the collateral assignment of
this Agreement by Owner as security for any Mortgage which complies with the
provisions of Section 3.01; or (ii) the transfer of this Agreement in connection
with a merger or consolidation or a sale of all or substantially all of the
assets of either party, provided that (x) if such transfer is by Owner, the
provisions of Article XIX hereof shall be complied with, and (y) if such
transfer is by Management Company, such transfer is being done as a part of a
merger or consolidation or a sale of all or substantially all of the business
which consists of managing the Marriott Hotel System.
D. In the event either party consents to an assignment of this Agreement by
the other, no further assignment shall be made without the express consent in
writing of such party, unless such assignment may otherwise be made without such
consent pursuant to the terms of this Agreement.
E. An assignment (either voluntarily or by operation of law) by Owner of
its interest in this Agreement (in compliance with Article XVIII) shall not
relieve Owner from its obligations under this Agreement which accrued prior to
the date of such assignment, but shall relieve Owner of such obligations
accruing after such date, if the assignment complies with Section 18.01 B and if
Management Company has received an assumption agreement executed by the assignee
(in form and substance reasonably satisfactory to Management Company). An
assignment (either voluntarily or by operation of law) by Management Company of
its interest in this Agreement shall not relieve Management Company from its
obligations under this Agreement, unless Owner so agrees in writing.
F. Subject to the provisions of this Article XVIII, the terms and
conditions of this Agreement shall inure to the benefit of, and be binding upon,
the respective successors, heirs, legal representatives, or assigns of each of
the parties hereto.
END OF ARTICLE XVIII
ARTICLE XIX
SALE OF THE HOTEL
19.01 Sale of the Hotel
A. Owner shall not enter into any Sale of the Hotel to any individual or
entity which: (i) does not have sufficient financial resources and liquidity to
fulfill Owner's obligations under this Agreement; (ii) is in control of or
controlled by persons who have been convicted of felonies involving moral
turpitude in any state or federal court; or (iii) is engaged in the business of
operating (as distinguished from owning) a branded hotel chain having five
thousand (5,000) or more guestrooms in competition with Management Company. An
individual or entity shall not be deemed to be in the business of operating
hotels in competition with Management Company solely by virtue of (x) the
ownership of such hotels, either directly or indirectly through subsidiaries,
affiliates and partnerships, or (y) holding a Mortgage or Mortgages secured by
one or more hotels. Notwithstanding the foregoing, if Owner or an Affiliate of
Owner is a corporation whose shares are listed on a public stock exchange, and
if a Sale of the Hotel occurs as a result of purchases of such shares, through
such public stock exchange, in sufficient quantities to cause a transfer of the
"controlling interest" in Owner (as described in the definition of "Sale of the
Hotel"), and if such Sale of the Hotel is not in compliance with the provisions
of this Section 19.01 A, Management Company shall have the right, at its option,
to terminate this Agreement by written notice to Owner (as more particularly
described in Section 19.01 B), but such non-compliance with this Section 19.01 A
shall not be an Event of Default nor shall it subject Owner to claims for
damages by Management Company pursuant to Article XVI.
B. If Owner receives a bona fide written offer to enter into a Sale of the
Hotel, Owner shall give written notice thereof to Management Company, stating
the name of the prospective purchaser or tenant, as the case may be. Such notice
shall include appropriate information relating to such prospective purchaser or
tenant demonstrating compliance with the provisions of Section 19.01 A; if
Management Company reasonably requests additional information, Owner shall
promptly furnish such information to Management Company. If Management Company
decides that a Sale of the Hotel to such prospective purchaser or tenant would
violate the provisions of Section 19.01 A, Management Company shall so notify
Owner by no later than thirty (30) days after receipt of such notice; provided,
however, that any decision by Management Company regarding any such prospective
purchaser or tenant shall not be binding if the information furnished by Owner
pursuant to the preceding sentence is inaccurate. Concurrently with the
finalization of such Sale of the Hotel, the purchaser or tenant, as the case may
be, shall, by appropriate instrument reasonably satisfactory to Management
Company, assume all of Owner's obligations hereunder. An executed copy of such
assumption agreement shall be delivered to Management Company. If the proposed
Sale of the Hotel would violate the provisions of Section 19.01 A, Owner will
not enter into any agreement relating to such Sale of the Hotel. However, if
Owner does enter into such an agreement, Management Company shall have the right
to terminate this Agreement by written notice to Owner, which notice will set an
effective date for such Termination not earlier than thirty (30) days, nor more
than one hundred twenty (120) days, following the date of the giving of such
notice. Management Company shall have the right to change such effective date of
Termination to coincide with the date of the finalization of the proposed Sale
of the Hotel. At Management Company's election, said notice of Termination shall
not be effective if such Sale of the Hotel is not finalized. If such Termination
by Management Company results from a Default by Owner under Section 19.01 A,
such Termination shall not relieve Owner (except as otherwise set forth to the
contrary in the last sentence of Section 19.01 A) of liability to Management
Company for such Default.
C. In connection with the possibility of a Sale of the Hotel achieved by
means of a transfer of the controlling interest in Owner, Owner, upon written
request of Management Company, shall (unless Owner is a publicly-traded
corporation which is registered under Section 12 or Section 15 of the Securities
Act of 1934) furnish Management Company with a list of the names and addresses
of the owners of the capital stock (but only those owners which hold an
ownership interest of thirty percent (30%) or more), or the partnership
interests (both (i) general partner, and (ii) any limited partner holding an
ownership interest of thirty percent (30%) or more), or other ownership
interests in Owner. In addition, Owner shall notify Management Company of any
transaction or series of transactions in which Owner reduces its ownership
interest in the Hotel below fifty percent (50%) or in which the former
controlling interest in Owner is reduced below fifty percent (50%). Management
Company agrees that it will treat all such lists confidential in accordance with
the provisions of Section 20.04.
D. It is understood that no Sale of the Hotel (which is otherwise in
compliance with the provisions of this Article XIX) shall reduce or otherwise
affect: (i) the current level of Working Capital; (ii) the current amount
deposited in the FF&E Reserve; or (iii) any of the Operating Accounts maintained
by Management Company pursuant to this Agreement. If, in connection with any
Sale of the Hotel, the selling Owner intends to withdraw, for its own use, any
of the cash deposits described in the preceding sentence, the selling Owner must
obtain the contractual obligation of the buying Owner to replenish those
deposits (in the identical amounts) simultaneously with such withdrawal. The
selling Owner is hereby contractually obligated to Management Company to ensure
that such replenishment in fact occurs. The obligations described in this
Section 19.01 D shall survive such Sale of the Hotel and shall survive
Termination.
E. Management Company shall have the right to terminate this Agreement, on
thirty (30) days' written notice, if title to or possession of the Hotel is
transferred by judicial or administrative process (including, without
limitation, a Foreclosure, or a sale pursuant to an order of a bankruptcy court,
or a sale by a court-appointed receiver) to an individual or entity which would
not qualify as a permitted transferee under clause (i), (ii) or (iii) of Section
19.01 A, regardless of whether or not such transfer is the voluntary action of
the transferring Owner, or whether (under applicable law) the Owner is in fact
the transferor; provided, however, that Management Company shall not have the
right to so terminate this Agreement based on the assertion that a Qualified
Lender fails to so qualify as a permitted transferee under said clauses (i),
(ii) or (iii) of Section 19.01 A.
END OF ARTICLE XIX
ARTICLE XX
MISCELLANEOUS
20.01 Right to Make Agreement
A. Each party warrants, with respect to itself, that neither the execution
of this Agreement nor the finalization of the transactions contemplated hereby
shall: (i) violate any provision of law or any judgment, writ, injunction, order
or decree of any court or governmental authority having jurisdiction over it;
(ii) result in or constitute a breach or default under any indenture, contract,
other commitment or restriction to which it is a party or by which it is bound,
to the extent that the remedies for such breach or default would have a material
adverse effect on such party's ability to perform under this Agreement; or (iii)
require any consent, vote or approval which has not been taken, or at the time
of the transaction involved shall not have been given or taken. Each party
covenants that it has and will continue to have throughout the Term of this
Agreement and any extensions thereof, the full right to enter into this
Agreement and perform its obligations hereunder.
B. Each party agrees that it will, as of the Effective Date, provide the
other party with: (i) certified copies of the applicable resolutions of its
board of directors (if it is a corporation), or written authorization by all
general partners (if it is a partnership) or other appropriate documentation
establishing its authority to execute this Agreement; and (ii) such opinions of
counsel as the other party shall reasonably request regarding the matters
described in this Section 20.01.
20.02 Consents
Wherever in this Agreement the consent or approval of Owner or Management
Company is required, such consent or approval shall (except to the extent that
such consent or approval is specifically designated as being "within the
discretion" of a party, or words to that effect, in the applicable provision)
not be unreasonably withheld, shall be in writing and shall be executed by a
duly authorized officer or agent of the party granting such consent or approval.
If either Owner or Management Company fails to respond within thirty (30) days
to a request by the other party for a consent or approval, such consent or
approval shall be deemed to have been given.
20.03 Independent Contractor
The relationship of Owner and Management Company in respect to management
of the Hotel shall be one of an independent contractor whereby management should
act on behalf of Owner, solely for Owner=s account and upon Owner=s credit.
Nothing contained in this Agreement shall be construed to create a partnership
or joint venture or agency relationship between them or their successors in
interest. Nothing contained herein shall prohibit, limit or restrict Management
Company or any of its Affiliates from developing, owning, operating, leasing,
managing or franchising hotels in the market area where the Hotel is located,
and Management Company and its Affiliates hereby specifically reserve the right
to do any of the foregoing.
20.04 Confidentiality
The parties hereto agree that the matters set forth in this Agreement are
strictly confidential and each party will make every effort to ensure that such
matters are not disclosed to any outside person or entities (including the
press) without the written consent of the other party; provided, however, that
such consent will not be required with respect to: (i) legally required filings
and other disclosures mandated by Legal Requirements; and (ii) in the case of
Owner, disclosure to any Qualified Lender or prospective Qualified Lender, or to
prospective purchasers of the Hotel (subject to the provisions of Section 20.05,
if applicable).
20.05 Equity and Debt Offerings
No reference to Management Company or to any of its Affiliates will be made
in any prospectus, private placement memorandum, offering circular or offering
documentation related thereto (herein collectively referred to as the
"Prospectus"), issued by Owner or one of its Affiliates, which is designed to
interest potential investors or lenders in the Hotel, unless Management Company
has previously received a copy of all such references. However, regardless of
whether Management Company does or does not so receive a copy of all such
references, neither Management Company nor any of its Affiliates will be deemed
a sponsor of the offering described in the Prospectus, nor will it have any
responsibility for the Prospectus, and the Prospectus will so state. Unless
Management Company agrees in advance, the Prospectus will not include: (i) any
Proprietary Mark; or (ii) except as required by applicable securities laws, the
text of this Agreement. Owner shall be entitled, however, to include in the
Prospectus an accurate summary of this Agreement. If there are no Legal
Requirements pursuant to which such information must be publicly disclosed,
appropriate measures shall be taken to ensure that entities or individuals
receiving such Prospectus shall acknowledge the confidentiality of such
information. Owner shall indemnify, defend and hold Management Company and its
Affiliates (and their respective directors, officers, shareholders, employees
and agents) harmless from and against all loss, costs, liability and damage
(including attorneys' fees and expenses, and the cost of Litigation) arising out
of any Prospectus or the offering described therein.
20.06 Applicable Law
This Agreement shall be construed under and shall be governed by the laws
of the state of Georgia.
20.07 Recordation
The terms and provisions of this Agreement shall run with the land
designated as the Site, and with Owner's interest therein, and shall be binding
upon all successors to such interest. At the request of either party, the
parties shall execute an appropriate memorandum of this Agreement in recordable
form and cause the same to be recorded in the jurisdiction where the Hotel is
located. Any cost of such recordation shall be borne by Management Company.
20.08 Headings
Headings of Articles and Sections are inserted only for convenience and are
in no way to be construed as a limitation on the scope of the particular
Articles or Sections to which they refer.
20.09 Notices
Notices, statements and other communications to be given under the terms of
this Agreement shall be in writing, and shall be either (i) delivered by hand
against receipt, or (ii) sent by certified or registered mail, postage prepaid,
return receipt requested or (iii) sent by either Federal Express or by "fax"
machine (provided that, in either case, a confirmatory copy is thereafter sent
by certified or registered mail):
To Owner:
HMA Realty Limited Partnership
c/o Host Marriott Corporation
10400 Fernwood Road
Bethesda, Maryland 20817
Attn: Law Department 923
with a copy to:
HMA Realty Limited Partnership
c/o Host Marriott Corporation
10400 Fernwood Road
Bethesda, Maryland 20817
Attn: Asset Management Department
72-908
To Management Company:
New Marriott MI, Inc.
10400 Fernwood Road
Bethesda, Maryland 20817
Attn: Law Department/Lodging Operations 52/923
with a copy to:
New Marriott MI, Inc.
10400 Fernwood Road
Bethesda, Maryland 20817
Attn: Senior Vice President-Finance
Marriott Hotels, Resorts & Suites
or at such other address as is from time to time designated by the party
receiving the notice. Any such notice which is properly mailed, as described
above, shall be deemed to have been served as of three (3) business days after
said posting.
20.10 Environmental Matters
A. Management Company shall indemnify, defend and hold Owner and its
Affiliates (and their respective directors, officers, shareholders, employees
and agents) harmless from and against all loss, cost, liability and damage
(including, without limitation, engineers' and attorneys' fees and expenses, and
the cost of Litigation) arising from the placing, discharge, leakage, use or
storage of Hazardous Materials, in violation of applicable Environmental Laws,
on the Site or in the Hotel by Management Company's employees, representatives
or agents during the Term of this Agreement. Regardless of whether or not a
given Hazardous Material is permitted on the Site under applicable Environmental
Law, Management Company shall only bring on the Site such Hazardous Materials as
are needed in the normal course of business of the Hotel.
B. In the event of the discovery of Hazardous Materials on any portion of
the Site or in the Hotel during the Term of this Agreement, Owner shall (except
to the extent such removal is Management Company's responsibility pursuant to
Section 20.10 A) promptly remove (if required by applicable Environmental Law)
such Hazardous Materials, together with all contaminated soil and containers,
and shall otherwise remedy the problem in accordance with all Environmental
Laws. Owner shall (except to the extent that the removal of such Hazardous
Materials is Management Company's responsibility pursuant to Section 20.10 A)
indemnify, defend and hold Management Company and its Affiliates (and their
respective directors, officers, shareholders, employees and agents) harmless
from and against all loss, cost, liability and damage (including, without
limitation, engineers' and attorneys' fees and expenses, and the cost of
Litigation) arising from the presence of Hazardous Materials on the Site or in
the Hotel.
C. All costs and expenses of the removal of Hazardous Materials from the
Site or the Hotel pursuant to Section 20.10 B, and of the aforesaid compliance
with all Environmental Laws, and any amounts paid to Management Company pursuant
to the indemnity set forth in the last sentence of Section 20.10 B, shall be
paid by Owner from its own funds, not as a Deduction nor from the FF&E Reserve,
and shall be treated as an expenditure by Owner pursuant to Section 8.03.
20.11 Estoppel Certificates
Each party to this Agreement shall at any time and from time to time, upon
not less than thirty (30) days' prior notice from the other party, execute,
acknowledge and deliver to such other party, or to any third party specified by
such other party, a statement in writing: (a) certifying that this Agreement is
unmodified and in full force and effect (or if there have been modifications,
that the same, as modified, is in full force and effect and stating the
modifications); (b) stating whether or not to the best knowledge of the
certifying party (i) there is a continuing default by the non-certifying party
in the performance or observance of any covenant, agreement or condition
contained in this Agreement, or (ii) there shall have occurred any event which,
with the giving of notice or passage of time or both, would become such a
default, and, if so, specifying each such default or occurrence of which the
certifying party may have knowledge; and (c) stating such other information as
the non-certifying party may reasonably request. Such statement shall be binding
upon the certifying party and may be relied upon by the non-certifying party
and/or such third party specified by the non-certifying party as aforesaid. The
obligations set forth in this Section 21.11 shall survive Termination (that is,
each party shall, on request, within the time period described above, execute
and deliver to the non-certifying party and to any such third party a statement
certifying that this Agreement has been terminated).
20.12 [Intentionally Omitted}
20.13 Arbitration
A. In the event of a dispute between Owner and Management Company with
respect to any issue of fact specifically mentioned herein as a matter to be
decided by arbitration, such dispute shall be determined by arbitration as
provided in this Section 20.13.
B. Disputes shall be resolved in accordance with the Commercial Arbitration
Rules of the American Arbitration Association then pertaining. The decision of
the arbitrators shall be binding, final and conclusive on the parties.
C. Owner and Management Company shall each appoint and pay all fees of a
fit and impartial person as arbitrator who shall have had at least ten (10)
years' recent professional experience in the general subject matter of the
dispute. Notice of such appointment shall be sent in writing by each party to
the other, and the arbitrators so appointed, in the event of their failure to
agree within thirty (30) days after the appointment of the second arbitrator
upon the matter so submitted, shall appoint a third arbitrator. If either Owner
or Management Company shall fail to appoint an arbitrator, as aforesaid, for a
period of twenty (20) days after written notice from the other party to make
such appointment, then the arbitrator appointed by the party having made such
appointment shall appoint a second arbitrator and the two so appointed shall, in
the event of their failure to agree upon any decision within thirty (30) days
thereafter, appoint a third arbitrator. If such arbitrators fail to agree upon a
third arbitrator within forty-five (45) days after the appointment of the second
arbitrator, then such third arbitrator shall be appointed by the American
Arbitration Association from its qualified panel of arbitrators, and shall be a
person having at least ten (10) years' recent professional experience as to the
subject matter in question. The fees of the third arbitrator and the expenses
incident to the proceedings shall be borne equally between Owner and Management
Company, unless the arbitrators decide otherwise. The fees of respective counsel
engaged by the parties, and the fees of expert witnesses and other witnesses
called for the parties, shall be paid by the respective party engaging such
counsel or calling or engaging such witnesses.
D. The decision of the arbitrators shall be rendered within thirty (30)
days after appointment of the third arbitrator. Such decision shall be in
writing and in duplicate, one counterpart thereof to be delivered to Owner and
one to Management Company. A judgment of a court of competent jurisdiction may
be entered upon the award of the arbitrators in accordance with the rules and
statutes applicable thereto then obtaining.
20.14 Affiliates
Except as otherwise specifically set forth in this Agreement, Management
Company shall be entitled to contract with one or more of its Affiliates to
provide goods and/or services to the Hotel only if the prices and/or fees paid
to any such Affiliate are competitive with the prices and/or fees currently
being paid to reputable and qualified parties which are not Affiliates of
Management Company. In determining, pursuant to the foregoing sentence, whether
such prices and/or fees are competitive, the goods and/or services which are
being purchased shall be grouped in reasonable categories, rather than being
compared item by item.
20.15 Entire Agreement
This Agreement, together with other writings signed by the parties which
are expressly stated to be supplemental hereto and together with any instruments
to be executed and delivered pursuant to this Agreement, supersedes the Prior
Management Agreement and constitutes the entire agreement between the parties,
and supersedes all prior written and oral understandings. This Agreement may be
amended only by a writing signed by both parties hereto.
20.16 Owner Communications
Any communications to and from Owner shall be made only through Owner=s
Managing Partner, Atlanta Marriott Marquis Limited Partnership.
20.17 Third Party Beneficiary
Portman shall be deemed to be a third party beneficiary of this Agreement
for the purpose of enabling Portman to enforce the agreement or rights extended
to him in Sections 8.02C and 8.06.
END OF ARTICLE XX
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
Attest: HMA REALTY LIMITED PARTNERSHIP
("Owner")
/s/ Bonnie Freeman By: HMA - GP, INC.
Assistant Secretary
By: /s/ Christopher G. Townsend
Name: Christopher G. Townsend
Title: Vice President
Attest: NEW MARRIOTT MI, INC.
("Management Company")
/s/ Carolyn Colton By /s/ Raymond G. Murphy
Assistant Secretary Vice President
EXHIBIT "A" TO MANAGEMENT AGREEMENT
Location of Hotel; Legal Description of the Site
ALL THAT TRACT or parcel of land lying and being in Land Lot 51 of the
14th District of Fulton County, Georgia, containing 3.58 acres, same being more
particularly described as follows:
TO FIND THE TRUE POINT OF BEGINNING, begin at a drill hole set which
marks the intersection of the northerly Right-of-Way Line of Harris Street
(Sixty (60') foot Right-of-Way) with the easterly Right-of-Way Line of Peachtree
Center Avenue (Sixty (60') foot Right-of-Way); thence traveling along the
northerly Right-of-Way Line of said Harris Street south 89 degrees 10 minutes 36
seconds east a distance of 207.07 feet to a drill hole set on said Right-of-Way
Line which drill hole set is the TRUE POINT OF BEGINNING; from the TRUE POINT OF
BEGINNING as thus established leaving said Right-of-Way Line and traveling north
00 degrees 49 minutes 24 seconds east a distance of 112.72 feet to a point;
thence traveling north 89 degrees 10 minutes 36 seconds west a distance of
206.60 feet to a nail set on the easterly Right-of-Way Line of said Peachtree
Center Avenue; thence traveling along said Right-of-Way Line north 01 degrees 03
minutes 48 seconds east a distance of 177.30 feet to a drill hole set on said
Right-of-Way Line; thence leaving said Right-of-Way Line and traveling south 89
degrees 10 minutes 36 seconds east a distance of 205.92 feet to a point; thence
traveling north 00 degrees 49 minutes 24 seconds east a distance of 113.30 feet
to a nail set on the southerly Right-of-Way Line of Baker Street (Sixty (60')
foot Right-of-Way); thence traveling along said Right-of-Way Line south 89
degrees 19 minutes 51 seconds east a distance of 296.41 feet to a drill hole set
on said Right-of-Way Line at its intersection with the westerly Right-of-Way
Line of Courtland Street (Seventy (70') foot Right-of-Way); thence traveling
along the westerly Right-of-Way Line of said Courtland Street south 01 degrees
03 minutes 16 seconds west a distance of 404.12 feet to a drill hole set on said
Right-of-Way Line at its intersection with the northerly Right-of-Way Line of
said Harris Street; thence traveling along the northerly Right-of-Way Line of
said Harris Street north 89 degrees 10 minutes 36 seconds west a distance of
294.84 feet to a drill hole set on said Right-of-Way Line, which drill hole set
marks the TRUE POINT OF BEGINNING.
The above described property being shown on that certain Survey
entitled "ALTA/ACSM Land Title Survey for Atlanta Marriott Marquis Limited
Partnership, Ivy Street Hotel Limited Partnership, Marriott/Portman Finance
Corporation, The Citizens and Southern National Bank & Ticor Title Insurance
Company of California", prepared by Planners and Engineers Collaborative,
bearing the seal of Robert Lee White, Georgia Registered Land Surveyor No.
2080, dated January 5, 1990.
TOGETHER WITH the following two (2) easement parcels, on the terms and
subject to the conditions set forth with respect thereto in, to and under that
certain Declaration of Easements and Restrictions dated on September 1, 1982 and
recorded at Deed Book 8291, Page 40, Fulton County, Georgia Records; as amended
by First Amendment to Declaration of Easements and Restrictions, dated as of
August 4, 1983, recorded at Deed Book 8657, Page 385, aforesaid Records:
EASEMENT PARCELS
(MARQUIS TWO TOWER)
All that tract or parcel of land lying and being in the City of
Atlanta, in Land Lot 51 of the 14th District of Fulton County, Georgia, and
being more particularly described as follows:
BEGINNING at the point formed by the intersection of the east
right-of-way line of Peachtree Center Avenue (formerly known as Ivy Street) (as
presently located) with the south right-of-way line of Baker Street (as
presently located; run thence south 89 degrees, 19 minutes, 51 seconds east, as
measured along the south right-of-way line of Baker Street (as presently
located), a distance of 205.44 feet to a point; run thence south 00 degrees, 49
minutes, 24 seconds west, a distance of 113.30 feet to a point; run thence north
89 degrees, 10 minutes, 36 seconds west, a distance of 205.92 feet to a point
lying on the east right-of-way line of Peachtree Center Avenue (formerly known
as Ivy Street) (as presently located); run thence north 01 degrees, 03 minutes,
49 seconds east, as measured along the east right-of-way line of Peachtree
Center Avenue (formerly known as Ivy Street) (as presently located) a distance
of 112.75 feet to a point formed by the intersection of the south right-of-way
line of Baker Street (as presently located) with the east right-of-way line of
Peachtree Center Avenue (formerly known as Ivy Street) (as presently located)
and the POINT OF BEGINNING; being property shown on the plat of survey, to which
reference is made for all purposes, prepared for P.C. Towers, L.P., a Georgia
limited partnership, by Planners and Engineers Collaborative, bearing the
certification of Robert L. White, Georgia Registered Land Surveyor, number 2080,
dated July 20, 1988, last revised September 9, 1988.
(MARQUIS ONE TOWER)
All that tract or parcel of land lying and being in the City of
Atlanta, in Land Lot 51, of the 14th District, of Fulton County, Georgia, and
being more particularly described as follows:
BEGINNING at the point formed by the intersection of the east
right-of-way line of Peachtree Center Avenue (formerly known as Ivy Street) (as
presently located) with the north right-of-way line of Harris Street (as
presently located); run thence north 01 degrees, 03 minutes, 49 seconds east, as
measured along the east right-of-way line of Peachtree Center Avenue (formerly
known as Ivy Street) (an presently located), a distance of 112.72 feet to a
point; run thence south 89 degrees, 10 minutes, 36 seconds east, a distance of
206.60 feet to a point; run thence south 00 degrees, 49 minutes, 24 seconds
west, a distance of 112.72 feet to a point located on the north right-of-way
line of Harris Street (as presently located); run thence north 89 degrees, 10
minutes, 36 seconds west, as measured along the north right-of-way line of
Harris Street (as presently located), a distance of 207.07 feet to a point
formed by the intersection of the east right-of-way line of Peachtree Center
Avenue (formerly known as Ivy Street) (as presently located) with the north
right-of-way line of Harris Street (as presently located) and the POINT OF
BEGINNING; being property shown on the plat of survey, to which reference is
made for all purposes, prepared for P.C. Towers, L.P., a Georgia limited
partnership, by Planners and Engineers Collaborative, bearing the certification
of Robert L. White, Georgia Registered Land Surveyor, number 2080, dated July
20, 1988, last revised September 9, 1988.
EXHIBITS "A-1", B, C, D, D-1 TO MANAGEMENT AGREEMENT
[Intentionally Omitted]
EXHIBIT "E" TO MANAGEMENT AGREEMENT
Existing Mortgage
Loan for principal amount $164,000,000 between Nomura Asset Capital
Corporation and HMA Realty Limited Partnership.
EXHIBIT "F"
TO MANAGEMENT AGREEMENT
Proprietary Marks owned by Owner (if any)
NONE
EXHIBIT "G"
Copy of Title Insurance Policy
MANAGEMENT AGREEMENT
between
HMA REALTY LIMITED PARTNERSHIP
("Owner")
and
NEW MARRIOTT MI, INC.
("Management Company")
TABLE OF CONTENTS
Page
ARTICLE I - DEFINITION OF TERMS
1.01 Definition of Terms.............................................1
ARTICLE II - APPOINTMENT OF MANAGEMENT COMPANY
2.01 Appointment....................................................24
2.02 Delegation of Authority........................................24
2.03 Operational Standards..........................................25
2.04 Limitations on Authority.......................................28
2.05 Covenants, Conditions or Restrictions..........................29
2.06 Licenses and Permits...........................................30
ARTICLE III - HOTEL
3.01 Ownership of Hotel.............................................31
ARTICLE IV - TERM
4.01 Term...........................................................32
4.02 Actions to be Taken Upon Termination...........................33
4.03 Performance Termination........................................35
ARTICLE V - COMPENSATION OF MANAGEMENT COMPANY; DISTRIBUTIONS
5.01 Management Fees................................................38
5.02 Accounting and Interim Payments................................38
ARTICLE VI - FINANCING OF THE HOTEL
6.01 Amendments of Management Agreement.............................40
6.02 Notice and Opportunity to Cure.................................41
6.03 Assignment of Management Agreement.............................42
6.04 Subordination of Management Agreement..........................43
6.05 Non-Disturbance Agreement......................................44
6.06 Attornment.....................................................45
6.07 No Modification or Termination of Agreement....................46
6.08 Owner's Right to Finance the Hotel.............................46
6.09 Sale/Leaseback Transactions....................................46
ARTICLE VII - WORKING CAPITAL AND FIXED ASSET SUPPLIES
7.01 Working Capital................................................48
7.02 Fixed Asset Supplies...........................................49
ARTICLE VIII - REPAIRS, MAINTENANCE AND REPLACEMENTS
8.01 Routine Repairs and Maintenance................................50
8.02 FF&E Reserve...................................................50
8.03 Building Alterations, Improvements, Renewals,
and Replacements.................................................54
8.04 Liens..........................................................57
8.05 Ownership of Replacements, Etc.................................57
8.06 Architect......................................................58
ARTICLE IX - BOOKKEEPING AND BANK ACCOUNTS
9.01 Books and Records..............................................59
9.02 Hotel Accounts, Expenditures...................................60
9.03 Annual Operating Budget........................................61
9.04 Operating Losses; Credit.......................................63
ARTICLE X - PROPRIETARY MARKS; INTELLECTUAL PROPERTY
10.01 Proprietary Marks.............................................64
10.02 Purchase of Inventories and Fixed Asset Supplies .............64
10.03 Computer Software and Equipment...............................65
10.04 Intellectual Property.........................................65
10.05 Breach of Covenant............................................66
ARTICLE XI - POSSESSION AND USE OF HOTEL
11.01 Quiet Enjoyment...............................................67
11.02 Use...........................................................67
11.03 Chain Services................................................68
11.04 Owner's Right to Inspect......................................69
11.05 Indemnity.....................................................69
ARTICLE XII - INSURANCE
12.01 Interim Insurance.............................................71
12.02 Property and Operational Insurance............................71
12.03 General Insurance Provisions..................................72
12.04 Cost and Expense..............................................73
12.05 Owner's Option to Obtain Certain Insurance....................74
ARTICLE XIII - TAXES
13.01 Real Estate and Personal Property Taxes.......................76
ARTICLE XIV - HOTEL EMPLOYEES
14.01 Employees.....................................................78
ARTICLE XV - DAMAGE, CONDEMNATION AND FORCE MAJEURE
15.01 Damage and Repair.............................................82
15.02 Condemnation..................................................82
15.03 Force Majeure.................................................83
ARTICLE XVI - DEFAULTS
16.01 Definition of "Default".......................................85
16.02 Definition of "Event of Default"..............................85
16.03 Remedies Upon an Event of Default.............................86
16.04 Owner's Estate................................................87
ARTICLE XVII - WAIVER AND PARTIAL INVALIDITY
17.01 Waiver........................................................88
17.02 Partial Invalidity............................................88
ARTICLE XVIII - ASSIGNMENT
18.01 Assignment....................................................89
ARTICLE XIX - SALE OF THE HOTEL
19.01 Sale of the Hotel.............................................91
ARTICLE XX - MISCELLANEOUS
20.01 Right to Make Agreement.......................................94
20.02 Consents......................................................94
20.03 Independent Contractor........................................95
20.04 Confidentiality...............................................95
20.05 Equity and Debt Offerings.....................................95
20.06 Applicable Law................................................96
20.07 Recordation...................................................96
20.08 Headings......................................................96
20.09 Notices.......................................................97
20.10 Environmental Matters.........................................98
20.11 Estoppel Certificates.........................................99
20.12 Trade Area Restriction........................................99
20.13 Arbitration...................................................99
20.14 Affiliates...................................................101
20.15 Entire Agreement.............................................101
20.16 Owner Communication..........................................101
20.17 Third Party Beneficiary......................................101
Exhibit "A" - Location of Hotel; Legal Description
Exhibit "B" - Form of Accounting Period Statement
Exhibit "E" - Existing Mortgages
Exhibit "F" - Proprietary Marks owned by Owner (if any)
Exhibit "G" - Title Insurance Policy
COLLATERAL ASSIGNMENT OF DOCUMENTS AND PROPERTY RIGHTS
by
HMA REALTY LIMITED PARTNERSHIP
("Assignor")
- to -
NOMURA ASSET CAPITAL CORPORATION ("Assignee")
Dated: As of January 30, 1998
COLLATERAL ASSIGNMENT OF DOCUMENTS AND PROPERTY RIGHTS
COLLATERAL ASSIGNMENT OF DOCUMENTS AND PROPERTY RIGHTS (this "Assignment"),
dated as of January 30, 1998, by HMA REALTY LIMITED PARTNERSHIP, a Delaware
limited partnership, having its principal office c/o Host Marriot Corporation,
10400 Fernwood Road, Bethesda, Maryland 20817 ("Assignor"), to NOMURA ASSET
CAPITAL CORPORATION, a Delaware corporation, having its principal office at 2
World Financial Center, Building B, New York, New York 10281-1198 ("Assignee").
W I T N E S S E T H:
WHEREAS:
A. Pursuant a certain Loan Agreement (as may be modified, amended,
restated, consolidated, replaced or supplemented from time to time, the "Loan
Agreement"), dated as of January ____, 1998 between Assignor and Assignee,
Assignee has made a loan (the "Loan") to Assignor in the principal amount of
$164,000,000, which Loan is evidenced by that certain Secured Promissory Note of
Assignor, dated as of the date hereof, in the original principal amount of the
Loan (as may be modified, amended, restated, consolidated, replaced or
supplemented from time to time, the "Note");
B. The Loan is secured by, among other things, (i) a deed to secure debt,
assignments of leases, security agreement and fixture filing dated as of the
date hereof (collectively, as may be modified, amended, restated, consolidated,
replaced or supplemented from time to time, the "Mortgage"), from Assignor to
Assignee, which Mortgage creates a lien on, among other things, certain land and
the buildings, improvements and structures now or hereafter located thereon
(collectively, the "Premises") at the locations described on Exhibit A annexed
hereto, and (ii) certain other documents executed and delivered in connection
with the Mortgage (together with the Loan Agreement and the Note, as any of the
same may be modified, amended, restated, consolidated, replaced or supplemented
from time to time, the "Transaction Documents"); and
C. To induce Assignee to make the Loan and to accept the Mortgage, Assignor
has agreed to assign to Assignee, as further security for the Loan, subject to
and in accordance with the provisions of the Transaction Documents and in
accordance with Paragraph 8 hereof, all of Assignor's right, title, estate and
interest in, to and under all Documents (as hereinafter defined) and all
Property Rights (as hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Assignor hereby agrees with Assignee as follows:
1. Assignment of Documents and Property Rights.
Subject to and in accordance with the provisions of the Transaction
Documents, Assignor hereby grants, assigns, transfers and sets over unto
Assignee a lien and security interest in all of Assignor's right, title, estate
and interest in, to and under the following, in each case, to the fullest extent
permitted by law and the terms and conditions of each of the following:
(i) all of Assignor's right, title and interest in, to and under all
documents, contracts, instruments, plans, permits, licenses, approvals,
applications, trade names, insurance policies, equipment leases, purchase and
sale agreements, property management agreements, and asset management agreements
(including, without limitation, that certain Amended and Restated Management
Agreement dated as of January 3, 1998, between Assignor and New Marriot MI,
Inc., as amended, covering all of the Premises) with respect to the Premises or
the hotel or motel operations conducted thereon, and including any amendments or
modifications thereto, any replacements thereof executed during the term of the
Note and any other similar documents or instruments now in existence or
hereafter executed by Assignor or now in the possession of Assignor or hereafter
obtained by Assignor (collectively, the "Documents");
(ii) all claims, rights, powers, privileges, remedies and causes of action
of every kind which Assignor now has or may in the future have under, with
respect to or by reason of its ownership of the Premises or its interest in the
Documents, together with full power and authority to demand, receive, enforce,
collect or receipt for any or all of the foregoing, to endorse or execute any
checks or other instruments or orders, to file any claims and to take any other
action which Assignee may reasonably deem necessary or advisable in connection
therewith (collectively, the "Property Rights"); and
(iii) any and all proceeds (including non-cash proceeds) of any of the
foregoing (the Documents, the Property Rights and the items enumerated in this
subparagraph being hereinafter collectively referred to as the "Collateral").
2. Security. This Assignment is given to induce Assignee to make the Loan
and accept the Mortgage. This Assignment does not secure or create any new or
further indebtedness other than the indebtedness which under any contingency is
or may be secured by the Mortgage.
3. Protection of Security. To protect this Assignment and the Collateral
hereby assigned, Assignor covenants and agrees as follows:
(a) Assignor, promptly after obtaining knowledge thereof, shall notify
Assignee of the termination of any Document referred to in Exhibit B annexed
hereto (together with any replacements thereto, the "Major Documents"), the
receipt of any notice of default or termination under any Document, and of any
notice, action or proceeding regarding any of the Collateral which may, in
Assignor's reasonable judgment, materially and adversely affect the Premises;
(b) Assignor shall, at its sole cost and expense, perform and comply with,
or cause to be performed and complied with, all of the terms, covenants and
conditions of the Documents to be performed or complied with by Assignor
thereunder, the nonperformance or noncompliance of which would materially and
adversely impair Assignor's ability to perform its obligations under the
Transaction Documents or would impair the substantial realization by Assignee of
the benefits and rights conferred hereunder or under any of the Transaction
Documents; and
(c) Assignor shall not alter, amend, extend, modify or change any of the
Documents in any material respect, nor shall Assignor cancel or terminate any of
the Documents without the prior written consent of Assignee in each instance,
which consent shall not be unreasonably withheld, except that Assignor may
terminate any Document which is not a Major Document provided that if the
absence of the goods or services provided under such Document would materially
and adversely impair Assignor's ability to perform its obligations under the
Transaction Documents or would impair the substantial realization by Assignee of
the benefits and rights conferred hereunder or under any of the Transaction
Documents, such terminated Document shall be simultaneously replaced with a
Document covering similar goods or services.
4. Status of Collateral. Assignor represents and warrants to Assignee that:
(a) its principal place of business is its address as set forth above;
(b) it has good title to the Collateral hereby assigned and has full right,
power and authority to assign the same;
(c) the Major Documents, and, to the best knowledge of Assignor, all of the
other Documents, (i) are in full force and effect in accordance with their
respective terms, (ii) have not been modified, amended or canceled, and (iii)
have not been assigned, pledged or encumbered by Assignor, except pursuant to
the Mortgage and this Assignment;
(d) to the best knowledge of Assignor, no default or event of default which
remains uncured beyond the expiration of any applicable grace or notice period
has occurred and is continuing under any of the Major Documents which default,
singly or together with other defaults, might reasonably be expected to have a
Material Adverse Effect (as such term is defined in the Loan Agreement); to the
best knowledge of Assignor, no notice of default has been issued and remains
uncured under any of the other Documents which default, singly or together with
other defaults, might reasonably be expected to have a Material Adverse Effect;
(e) to the best knowledge of Assignor, no person or entity which has
contracted with or is a party to any of the Major Documents (collectively, the
"Contracting Parties", and individually, a "Contracting Party") has any defense,
setoff or counterclaim against Assignor or offset to the payment or performance
of any obligation of such Contracting Party thereunder except as set forth in
its Document; and
(f) to the best knowledge of Assignor, Assignor has not performed any act
or executed any other instrument which may prevent Assignee from operating under
any of the terms and conditions of this Assignment or which would limit Assignee
in such operation. Without limiting the foregoing, Assignor represents and
warrants that it has obtained, where required, the consent or approval to the
assignment herein of the Major Documents except for any consents the failure of
which to obtain might reasonably be expected to have a Material Adverse Effect.
5. Rights upon Default; Reliance by Contracting Parties.
(a) If an Event of Default shall have occurred hereunder or under any of
the Transaction Documents, this Assignment shall constitute a direction to and
full authority to the Contracting Parties to perform their obligations under the
Documents for the benefit of Assignee, or such other person as Assignee may
direct, without proof of the default relied upon. In addition, Assignor agrees
that it shall, promptly upon request of Assignee following the occurrence of an
Event of Default, execute and deliver notices to the Contracting Parties
directing that the future payment or performance of such Contracting Party's
obligations be made directly to Assignee, or to such other person as Assignee
may direct.
(b) Anything contained herein to the contrary notwithstanding, Assignor
hereby irrevocably authorizes the Contracting Parties to rely upon and comply
with any written notice or written demand by Assignee for the payment or
performance of any obligations due or to become due under any Documents for the
benefit of Assignee. Assignee shall not give any such notice until the
occurrence of an Event of Default hereunder or under the Transaction Documents
and shall withdraw such notice when such Event of Default no longer exists. The
Contracting Parties shall have no right or duty to inquire whether an Event of
Default has actually occurred and Assignor shall have no claim against the
Contracting Parties for any such payment or performance made by the Contracting
Parties to Assignee or such other person as Assignee may direct pursuant to
Assignee's written demand or written notice.
6. No Obligation.
(a) Neither this Assignment nor any action or inaction on the part of
Assignee shall in and of itself constitute an assumption on the part of Assignee
of any duty or obligation with respect to the Collateral, nor shall Assignee
have any duty or obligation to make any payment to be made by Assignor under the
Collateral, or to perform any obligation to be performed by Assignor with
respect to the Collateral, or to present or file any claim, or to take any other
action to collect or enforce the payment of any amounts or the performance of
any obligations which have been assigned to Assignee or to which it may be
entitled hereunder at any time or times. No action or inaction on the part of
Assignee shall adversely affect or limit in any way the rights of Assignee
hereunder or under the Collateral or under any of the other Transaction
Documents. Except if arising from Assignee's gross negligence or wilful
misconduct, Assignee shall not incur any liability on account of any action
taken (or not taken) by it or on its behalf in connection with the Collateral in
good faith, whether or not same shall prove to be improper, inadequate or
invalid, in whole or in part.
(b) In the absence of the taking of actual possession of the Premises by
Assignee in the exercise of the powers granted Assignee herein or in the other
Transaction Documents, neither this Assignment nor anything contained herein
shall (i) constitute or be construed as constituting Assignee as a "mortgagee in
possession", or (ii) place responsibility for the control, care, management or
repair of the Premises upon Assignee, or (iii) operate to make Assignee
responsible or liable (as to Assignor) for any waste committed with respect to
the Premises by any party, or for any Hazardous Substances (as defined in the
Mortgage) placed upon or found at the Premises, or for any dangerous or
defective condition of the Premises or for any negligence in the management,
up-keep, repair or control of the improvements resulting in loss, injury, death
or damage to any contractor, sub-contractor, licensee, invitee, employee, or
other party, or for any other thing or matter whatsoever, all such
responsibility or liability being expressly waived and released by Assignor.
7. Indemnity. Assignor shall indemnify, defend and hold Assignee harmless
from and against any and all liabilities, damages, losses, costs and expenses
(including, without limitation, reasonable attorneys' fees and disbursements
(including paralegal fees)) which Assignee may incur with respect to the
Collateral or by reason of this Assignment arising prior to the time Assignee
directly or through an agent takes actual possession of the Premises, through
foreclosure or otherwise (or arising at any time, with respect to obligations or
liabilities arising with respect to contracts or Documents entered into by
Assignor in violation of Assignor's covenants in the Transaction Documents), and
(b) from and against any and all claims and demands whatsoever which may be
asserted against Assignee by reason of any alleged obligations to be performed
or discharged by Assignee with respect to the Collateral or this Assignment
(excluding Assignee's gross negligence and wilful misconduct) arising prior to
the time Assignee directly or through an agent takes actual possession of the
Premises, through foreclosure or otherwise (or arising at any time, with respect
to obligations or liabilities arising with respect to contracts or Documents
entered into by Assignor in violation of Assignor's covenants in the Transaction
Documents), and the amount thereof, including interest, if any, reasonable
costs, expenses and reasonable attorneys' fees and disbursements (including
paralegal fees), shall be secured hereby and by the other Transaction Documents,
and Assignor shall reimburse Assignee as applicable, therefor within ten (10)
days after demand, and if not paid within said ten (10) day period, shall accrue
interest at the Default Rate (as such term is defined in the Note) from and
including the date of demand or advance by Assignee as applicable, to and
including the date of repayment by Assignor.
8. Termination. This Assignment shall terminate upon the payment in full of
all sums due Assignee under the Note, the Loan Agreement and the other
Transaction Documents, and any other indebtedness secured by the Mortgage or as
otherwise provided for in the Loan Agreement.
9. Further Assurances. Assignor, at its expense, will execute and deliver
all such instruments (including, without limitation, supplemental assignments)
and take all such action as Assignee from time to time, may reasonably request
in order to obtain the full benefits of this Assignment and of the rights and
powers herein created. To the extent permitted by law, Assignor irrevocably
authorizes Assignee, at the expense of Assignor, to file financing statements
and continuation statements with respect to the Collateral without the signature
of Assignor following the occurrence of an Event of Default. Assignor agrees to
pay all reasonable costs incurred by Assignee in connection with the foregoing,
including without limitation, reasonable attorneys' fees and disbursements
(including paralegal fees).
10. Consents to Jurisdiction and Waivers. To the extent permitted by law,
Assignor hereby irrevocably:
(a) consents to any suit, action or proceeding with respect to this
Assignment being, at the option of Assignee brought in any court of competent
jurisdiction located in the State of New York;
(b) waives any objection that it may have now or hereafter to the venue of
any such suit, action or proceeding in any such court and any claim that any of
the foregoing have been brought in an inconvenient forum;
(c) acknowledges the competence of any such court, and submits to the
jurisdiction of any such court in any such suit, action or proceeding and agrees
that a final judgment in any such suit, action or proceeding brought in any such
court, after expiration of all rights of appeal, shall be conclusive and binding
upon it and may be enforced in any court in any jurisdiction which Assignor is
or may be subject by a suit upon such judgment, a certified copy of which shall
be conclusive evidence of its liability;
(d) submits to the non-exclusive jurisdiction of the State and Federal
Courts in the State of New York and agrees that service of process in any suit,
action or proceeding brought in any such court may be made upon Assignor by
notice sent by certified mail to the address set forth in Section 11(c) hereof,
or to such other address of which Assignor shall have given written notice to
Assignee; and
(e) waives all claims of error by reason of any service effected in
accordance with the provisions of subparagraph (d) above and agrees that such
service shall be deemed in every respect effective service upon it in any suit,
action or proceeding and shall be taken and held to be valid personal service
upon or personal delivery to it, to the fullest extent permitted by law.
11. Miscellaneous.
(a) Wherever there is any conflict or inconsistency between any terms or
provisions of this Assignment, the Mortgage, or any of the other Transaction
Documents, the terms and provisions of this Assignment shall control, except
that the terms and provisions of the Mortgage shall control to the extent that
the Mortgage shall impose greater burdens upon Assignor, shall further restrict
the rights of Assignor or shall give Assignee greater rights.
(b) To the extent permitted by applicable law, all rights and remedies
herein conferred may be exercised whether or not foreclosure proceedings are
pending under the Mortgage or any other action or proceeding has commenced under
any of the other Transaction Documents. Assignee shall not be required to resort
first to the security of this Assignment before resorting to the security of the
Mortgage or any of the other Transaction Documents and Assignee may exercise the
security hereof or thereof concurrently or independently and in any order or
preference.
(c) All notices, requests, demands, consents or other communications to or
upon the respective parties hereto shall be in writing and be deemed to have
been duly given or made when received, addressed to the party to which such
notice, request, demand or other communication is being given at its address set
forth below, or at such other address as any of the parties hereto may hereafter
notify the others by notice given hereunder:
If to Assignee:
Nomura Asset Capital Corporation
2 World Financial Center, Building B
New York, New York 10281
Attention: Daniel S. Abrams
Telecopier: (212) 667-1022
With a copy to:
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
Attention: Robert I. Fisher, Esq.
Telecopier: (212) 940-8776
and:
Nomura Asset Capital Corporation
2 World Financial Center, Building B
New York, New York 10281
Attention: Sheryl McAfee
Telecopier: (212) 667-1206
If to Assignor:
HMA Realty Limited Partnership
c/o Host Marriott Corporation
10400 Fernwood Road
Bethesda, Maryland 20817
Attention: Law Department 923/Assistant General Counsel,
Asset Management
Telecopier: 301-380-6332
With a copy to:
HMA Realty Limited Partnership
c/o Host Marriott Corporation
10400 Fernwood Road
Bethesda, Maryland 20817
Attention: Lodging Partnerships Department 908
Telecopier: 301-380-8260
Evidence of such receipt shall include personal delivery, electronic
confirmation (hard copy to be sent by regular mail) and the failure to accept a
communication sent by registered or certified U.S. mail, postage prepaid. By
notice complying with this Paragraph, either party may from time to time change
the address to be subsequently applicable to it or the identity of its
individual officer or its counsel, except that such notice shall be effective
only upon receipt, as evidenced by a receipt signed by a party at such address.
Assignor agrees to give Assignee not less than 30 days' prior written notice of
any change in the location of Assignor's principal place of business.
(d) The headings and captions of the paragraphs of this Assignment are for
convenience of reference only and are not to be construed as defining or
limiting, in any way, the scope or intent of the provisions hereof.
(e) The provisions of this Assignment shall be binding upon Assignor, its
successors and assigns, and all persons claiming under or through Assignor or
any such successor or assign, and shall inure to the benefit of and be
enforceable by Assignee and its successors and assigns.
(f) Whenever the context may require, any pronouns used herein shall
include the corresponding masculine, feminine or neuter forms, and the singular
form of nouns and pronouns shall include the plural and vice versa. The terms
"herein", "hereof" or "hereunder" or similar terms used in this Assignment refer
to this entire Assignment and not to the particular provision in which the term
is used. Whenever the context may require, the term "Assignor" shall mean
Assignor and any subsequent owner(s) of the Premises or any part thereof.
12. Governing Law; Interpretation; Terms Subject to Applicable Law.
(a) IN ALL RESPECTS, INCLUDING, WITHOUT LIMITATION, MATTERS OF CONSTRUCTION
AND VALIDITY, THIS ASSIGNMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THE STATE OF NEW YORK (WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAWS) AND ANY APPLICABLE LAWS OF THE UNITED
STATES OF AMERICA.
(b) If any of the provisions of this Assignment, or the application thereof
to any person or circumstance shall, to any extent, be held to be invalid,
illegal or unenforceable, the remainder of this Assignment, or the application
of such provision or provisions to persons or circumstances other than those to
whom or which it is held invalid or unenforceable, shall not be affected thereby
and every provision of this Assignment shall be valid and enforceable to the
fullest extent permitted by law.
13. Waiver of Jury Trial. BOTH ASSIGNOR AND ASSIGNEE HEREBY IRREVOCABLY
WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING BROUGHT BY EITHER PARTY HERETO
AGAINST THE OTHER, OR IN ANY MATTERS WHATSOEVER ARISING OUT OF OR IN ANY WAY
CONNECTED WITH THIS ASSIGNMENT, THE NOTE, THE MORTGAGE OR ANY OF THE OTHER
TRANSACTION DOCUMENTS TO THE FULL EXTENT PERMITTED BY LAW.
IN WITNESS WHEREOF, the parties have caused this Assignment to be executed
as of the day and year first above written.
HMA Realty Limited Partnership
By: HMA-GP, Inc.
its sole general partner
By: /s/ P. K. Brady
Name: Patricia K. Brady
Title: Vice President
NOMURA ASSET CAPITAL CORPORATION
By: /s/ Robert J. Spinna
Name: Robert J. Spinna
Title: Vice President
EXHIBIT A
Description of the Property
ALL THAT TRACT or parcel of land lying and being in Land Lot 51 of the
14th District of Fulton County, Georgia, containing 3.58 acres, same being more
particularly described as follows:
TO FIND THE TRUE POINT OF BEGINNING, begin at a drill hole set which
marks the intersection of the northerly Right-of-Way Line of Harris Street
(Sixty (60') foot Right-of-Way) with the easterly Right-of-Way Line of Peachtree
Center Avenue (Sixty (60') foot Right-of-Way); thence traveling along the
northerly Right-of-Way Line of said Harris Street south 89 degrees 10 minutes 36
seconds east a distance of 207.07 feet to a drill hole set on said Right-of-Way
Line which drill hole set is the TRUE POINT OF BEGINNING; from the TRUE POINT OF
BEGINNING as thus established leaving said Right-of-Way Line and traveling north
00 degrees 49 minutes 24 seconds east a distance of 112.72 feet to a point;
thence traveling north 89 degrees 10 minutes 36 seconds west a distance of
206.60 feet to a nail set on the easterly Right-of-Way Line of said Peachtree
Center Avenue; thence traveling along said Right-of-Way Line north 01 degrees 03
minutes 48 seconds east a distance of 177.30 feet to a drill hole set on said
Right-of-Way Line; thence leaving said Right-of-Way Line and traveling south 89
degrees 10 minutes 36 seconds east a distance of 205.92 feet to a point; thence
traveling north 00 degrees 49 minutes 24 seconds east a distance of 113.30 feet
to a nail set on the southerly Right-of-Way Line of Baker Street (Sixty (60')
foot Right-of-Way); thence traveling along said Right-of-Way Line south 89
degrees 19 minutes 51 seconds east a distance of 296.41 feet to a drill hole set
on said Right-of-Way Line at its intersection with the westerly Right-of-Way
Line of Courtland Street (Seventy (70') foot Right-of-Way); thence traveling
along the westerly Right-of-Way Line of said Courtland Street south 01 degrees
03 minutes 16 seconds west a distance of 404.12 feet to a drill hole set on said
Right-of-Way Line at its intersection with the northerly Right-of-Way Line of
said Harris Street; thence traveling along the northerly Right-of-Way Line of
said Harris Street north 89 degrees 10 minutes 36 seconds west a distance of
294.84 feet to a drill hole set on said Right-of-Way Line, which drill hole set
marks the TRUE POINT OF BEGINNING.
The above described property being shown on that certain Survey
entitled "ALTA/ACSM Land Title Survey for Atlanta Marriott Marquis Limited
Partnership, Ivy Street Hotel Limited Partnership, Marriott/Portman Finance
Corporation, The Citizens and Southern National Bank & Ticor Title Insurance
Company of California", prepared by Planners and Engineers Collaborative,
bearing the seal of Robert Lee White, Georgia Registered Land Surveyor No.
2080, dated January 5, 1990.
TOGETHER WITH the following two (2) easement parcels, on the terms and
subject to the conditions set forth with respect thereto in, to and under that
certain Declaration of Easements and Restrictions dated on September 1, 1982 and
recorded at Deed Book 8291, Page 40, Fulton County, Georgia Records; as amended
by First Amendment to Declaration of Easements and Restrictions, dated as of
August 4, 1983, recorded at Deed Book 8657, Page 385, aforesaid Records:
EASEMENT PARCELS
(MARQUIS TWO TOWER)
All that tract or parcel of land lying and being in the City of
Atlanta, in Land Lot 51 of the 14th District of Fulton County, Georgia, and
being more particularly described as follows:
BEGINNING at the point formed by the intersection of the east
right-of-way line of Peachtree Center Avenue (formerly known as Ivy Street) (as
presently located) with the south right-of-way line of Baker Street (as
presently located; run thence south 89 degrees, 19 minutes, 51 seconds east, as
measured along the south right-of-way line of Baker Street (as presently
located), a distance of 205.44 feet to a point; run thence south 00 degrees, 49
minutes, 24 seconds west, a distance of 113.30 feet to a point; run thence north
89 degrees, 10 minutes, 36 seconds west, a distance of 205.92 feet to a point
lying on the east right-of-way line of Peachtree Center Avenue (formerly known
as Ivy Street) (as presently located); run thence north 01 degrees, 03 minutes,
49 seconds east, as measured along the east right-of-way line of Peachtree
Center Avenue (formerly known as Ivy Street) (as presently located) a distance
of 112.75 feet to a point formed by the intersection of the south right-of-way
line of Baker Street (as presently located) with the east right-of-way line of
Peachtree Center Avenue (formerly known as Ivy Street) (as presently located)
and the POINT OF BEGINNING; being property shown on the plat of survey, to which
reference is made for all purposes, prepared for P.C. Towers, L.P., a Georgia
limited partnership, by Planners and Engineers Collaborative, bearing the
certification of Robert L. White, Georgia Registered Land Surveyor, number 2080,
dated July 20, 1988, last revised September 9, 1988.
(MARQUIS ONE TOWER)
All that tract or parcel of land lying and being in the City of
Atlanta, in Land Lot 51, of the 14th District, of Fulton County, Georgia, and
being more particularly described as follows:
BEGINNING at the point formed by the intersection of the east
right-of-way line of Peachtree Center Avenue (formerly known as Ivy Street) (as
presently located) with the north right-of-way line of Harris Street (as
presently located); run thence north 01 degrees, 03 minutes, 49 seconds east, as
measured along the east right-of-way line of Peachtree Center Avenue (formerly
known as Ivy Street) (an presently located), a distance of 112.72 feet to a
point; run thence south 89 degrees, 10 minutes, 36 seconds east, a distance of
206.60 feet to a point; run thence south 00 degrees, 49 minutes, 24 seconds
west, a distance of 112.72 feet to a point located on the north right-of-way
line of Harris Street (as presently located); run thence north 89 degrees, 10
minutes, 36 seconds west, as measured along the north right-of-way line of
Harris Street (as presently located), a distance of 207.07 feet to a point
formed by the intersection of the east right-of-way line of Peachtree Center
Avenue (formerly known as Ivy Street) (as presently located) with the north
right-of-way line of Harris Street (as presently located) and the POINT OF
BEGINNING; being property shown on the plat of survey, to which reference is
made for all purposes, prepared for P.C. Towers, L.P., a Georgia limited
partnership, by Planners and Engineers Collaborative, bearing the certification
of Robert L. White, Georgia Registered Land Surveyor, number 2080, dated July
20, 1988, last revised September 9, 1988.
EXHIBIT B
Major Documents
1. Amended and Restated Management Agreement between Assignor and New
Marriott MI, Inc., as amended from time to time in accordance herewith.
EXHIBIT 10.10
MODIFICATION, SUBORDINATION AND NON-DISTURBANCE AGREEMENT,
ESTOPPEL, ASSIGNMENT AND CONSENT
This Agreement (this "Agreement"), dated as of January __, 1998, among NEW
MARRIOTT MI, INC., a Delaware corporation ("Manager"), having an office at 10400
Fernwood Road, Bethesda, Maryland 20817, NOMURA ASSET CAPITAL CORPORATION (the
"Lender"), having an address at 2 World Financial Center, Building B, New York,
New York 10281, and HMA REALTY LIMITED PARTNERSHIP, a Delaware limited
partnership (the "Borrower"), having an office at 10400 Fernwood Road, Bethesda,
Maryland 20817.
W I T N E S S E T H:
WHEREAS:
A. Pursuant to the provisions of that certain Loan Agreement, dated as of
the date hereof, between Borrower and Lender (as the same may hereafter be
modified, amended or supplemented from time to time, the "Loan Agreement"),
Borrower is executing and delivering to Lender its promissory note in the
aggregate principal amount of $164,000,000 (collectively, as the same may
hereafter be modified, amended or supplemented from time to time, the "Note");
and
B. The Note will be secured by, among other things, (i) one or more deeds
to secure debt, dated as of the date hereof (collectively, as the same may
hereafter be modified, amended or supplemented from time to time, the "Security
Deed"), from Borrower to Lender, which Security Deed creates a lien on the hotel
property more particularly described in Exhibit A annexed hereto (the
"Property"), and (ii) certain other documents executed and delivered in
connection with the Security Deed (together with the Loan Agreement, the Note,
and the Security Deed, and any other documents executed and delivered by
Borrower in connection with the Note and the loan evidenced thereby, as the same
may be modified, amended, restated, consolidated, replaced or supplemented from
time to time, the "Loan Documents"); and
C. Manager has agreed, pursuant to a certain Amended and Restated
Management Agreement dated as of January 3, 1998 (as further amended or modified
from time to time, the "Management Agreement") to manage the hotel located on
the Property; and
D. Pursuant to the Collateral Assignment of Documents and Property Rights,
dated as of the date hereof (the "Collateral Assignment of Documents"), Borrower
is assigning its rights under, among other things, the Management Agreement to
Lender; and
E. It is a condition precedent to Lender making the Loan (as hereinafter
defined) that Manager execute and deliver to Lender this Agreement.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
I. Definitions.
(a) Capitalized terms used in this Agreement and not otherwise defined in
this Agreement shall have the respective meanings ascribed to them in the
Management Agreement.
(b) References in this Agreement to "Cash Management Procedures" shall mean
the Cash Management Procedures in effect as of the date hereof (as set forth in
Exhibit B annexed hereto) and any modifications thereto approved by Lender,
Borrower and Manager in writing.
(c) As used herein:
(1)"Adjusted Rate" shall mean the Base Rate adjusted in accordance with
paragraph 4(e) of the Note, as such paragraph is in effect as of the date
hereof. A copy of paragraph 4(e) of the Note is annexed hereto as Exhibit G.
(2)"Base Rate" shall have the meaning set forth in the Note.
(3)"Business Day" shall mean a day on which banks and foreign exchange
markets are open for business in New York, New York.
(4)"Capital Expenditure and FF&E Reserve Accounts" shall have the meaning
set forth in the Cash Management Procedures.
(5)"Cure Notice" shall mean a written notice delivered to Manager by Lender
acknowledging that an Event of Default has been cured (and such cure has been
accepted by Lender) or waived, which notice Lender agrees to deliver promptly
upon any such cure (if accepted by Lender) or waiver.
(6)"Debt Service Payment Date" shall mean the 11th day of each calendar
month or, if such date is not a Business Day, the next Business Day immediately
thereafter.
(7)"Deed in Lieu of Foreclosure" shall mean an instrument transferring
title to all or a portion of the Property from Borrower to Lender or a Lender
Affiliate or from Borrower to a third party as the result of an Event of Default
under the Loan Documents.
(8)"Default Interest Rate" shall mean a rate per annum equal to the lesser
of (a) two percent (2%) above the Base Rate or Adjusted Rate, as applicable, and
(b) the maximum rate allowed by law.
(9)"Default Notice" shall mean any notice of a Payment Event of Default or
Non-Payment Event of Default from Lender or the Servicer to Manager.
(10)"Deferred Fees" shall mean the cumulative total (which shall not bear
interest) of those portions of any Incentive Management Fees for each Fiscal
Year (or portion thereof) which are not paid to Manager on a current basis owing
to the limitations set forth in the Management Agreement or this Agreement.
(11)"Defeasance Deposits" shall have the meaning set forth in Section
2.3(e) of the Loan Agreement, as in effect as of the date hereof, as set forth
in Schedule II to the Cash Management Procedures.
(12)"Deposit Account" shall have the meaning set forth in the Cash
Management Procedures.
(13)"Event of Default" shall have the meaning set forth in Section 4.1A of
the Loan Agreement, as set forth in Schedule II to the Cash Management
Procedures.
(14)"Excess Cash Flow" shall have the meaning set forth in the Loan
Agreement.
(15)"Excess Contributions" shall have the meaning set forth in Section 3(h)
hereof.
(16)"Financial Information" shall have the meaning set forth in Section
3(m) hereof.
(17)"General Partner" shall mean Atlanta Marriott Marquis Limited
Partnership, the general partner of the Borrower.
(18)"Lender Affiliate" shall mean a nominee or designee controlled by
Lender which shall acquire the Property on behalf of Lender at a foreclosure
sale or by Deed in Lieu of Foreclosure.
(19)"Loan" shall mean the loan evidenced by the Note.
(20)"Manager Loans" shall mean any loans made by Manager pursuant to
Section 7.01B of the Management Agreement.
(21)"Marriott" shall mean Marriott International, Inc., the corporate
parent of Manager.
(22)"Marriott Affiliate" shall mean any corporation of which Marriott,
either directly or indirectly through one or more intermediary corporations,
owns fifty one percent (51%) or more of the voting stock. Notwithstanding the
foregoing and for purposes of this Agreement, in no event shall Host Marriott
Corporation or any entity directly or indirectly controlled by Host Marriott
Corporation (including, without limitation, Borrower or the General Partner)
constitute a Marriott Affiliate.
(23)"Monthly Debt Service Payments" shall mean interest at the Base Rate or
Default Interest Rate, as applicable, then due and payable under the Note, and
principal then due and payable under the Note, as the same may be adjusted
pursuant to paragraph 4(d) of the Note as such paragraph is in effect as of the
date hereof. A copy of paragraph 4(c) of the Note is annexed hereto as Exhibit
H, and a schedule of Monthly Debt Service Payments is annexed hereto as Exhibit
F.
(24)"Non-Payment Event of Default" shall mean any Event of Default other
than a Payment Event of Default.
(25)"Operating Account" shall have the meaning set forth in the Cash
Management Procedures.
(26)"Optional Prepayment Date" shall have the meaning set forth in the Cash
Management Procedures.
(27)"Paid in Full" shall mean, with respect to the Note, that all
indebtedness evidenced by the Note has been paid, provided, however, that the
Note shall be deemed to have been Paid in Full for purposes of this Agreement
(but not for purposes of the Loan Documents) at such time as the Property has
been transferred to Lender or a Lender Affiliate, or to a third party purchaser,
through foreclosure or Deed in Lieu of Foreclosure, it being understood that the
Note shall not be deemed to have been Paid in Full (unless all indebtedness
evidenced by the Note shall actually have been paid) so long as the Property
remains subject to the lien of the Security Deed.
(28)"Payment Blockage Period" shall have the meaning set forth in Section
8(d) hereof.
(29)"Payment Event of Default" shall mean any Event of Default resulting
from a default in payment required under any of the Loan Documents.
(30)"Rating Agency" shall mean one or more of Standard & Poor's Rating
Services, Fitch Investors Services Inc., Duff & Phelps Credit Rating Co., and
Moody's Investor Service, Inc. that are, at the time of determination, selected
by Lender to rate the Securities.
(31)"Rating Comfort Letter" shall mean a letter from each Rating Agency
pursuant to which it confirms that the taking of the action referred to therein
will not result in a withdrawal, qualification or downgrade of the then existing
ratings of the Securities.
(32)"Refinancing Debt" shall mean any refinancing in an amount not to
exceed the balance of the Secured Obligations at the time of such refinancing
after reduction of such balance resulting from liquidations of all U.S.
Obligations purchased with Defeasance Deposits, together with indebtedness
incurred to finance the reasonable costs of any such refinancing (but not in
excess of four percent (4%) of the principal amount of any simultaneous
refinancing), so long as the amount refinanced does not exceed $164,000,000.
(33)"Secured Obligations" shall mean all payments of debt service under the
Loan Documents, including, without limitation, (A) Monthly Debt Service
Payments, (B) the application of Excess Cash Flow after the Optional Prepayment
Date to the reduction of the principal amount of the Note (as provided for in
the Cash Management Procedures), (C) balloon payments, whether payable on the
Optional Prepayment Date, the Maturity Date, or in connection with the
acceleration of the Note, (D) Yield Maintenance Premiums, and (E) default
interest as set forth in Paragraph 3(c) of the Note as the same is in effect as
of the date hereof.
(34)"Securities" shall have the meaning set forth in Section 13 hereof.
(35)"Securitizations" shall have the meaning set forth in Section 13
hereof.
(36)"Servicer" shall mean any nationally recognized servicer of commercial
mortgage loans selected by Lender.
(37)"Subordinated Fees" shall mean all Incentive Management Fees,
including, without limitation, all Deferred Fees.
(38)"Successor Owner" shall mean, with respect to the Property, any
purchaser at a foreclosure sale (including, without limitation, Lender or a
Lender Affiliate, if applicable) or other sale under the Security Deed or any
transferee by Deed in Lieu of Foreclosure (including, without limitation, Lender
or a Lender Affiliate, if applicable), and their successors in interest and
assigns.
(39)"to the best of Manager's knowledge" shall mean actual knowledge of,
after due inquiry, the general manager of the Hotel, parties reporting directly
to the general manager of the Hotel, the Law Department of Manager, the Treasury
Department of Manager, and the CFO Marriott Lodgings.
(40)"Trustee" shall have the meaning set forth in Section 12 hereof.
(41)"U.S. Obligations" shall have the meaning set forth in the Loan
Agreement.
(42)"Yield Maintenance Premiums" shall have the meaning set forth in the
Loan Agreement.
2. Cash Management Procedures.
(a) So long as (i) the Note has not been Paid in Full, or (ii) Lender or a
Lender Affiliate shall hold title to the Property as the result of a foreclosure
or Deed in Lieu of Foreclosure, Lender (and Servicer on its behalf), Borrower
and Manager shall comply at all times with the Cash Management Procedures,
whether or not such provisions are consistent with any provisions of the
Management Agreement. At such time as (x) the Note has been Paid in Full, and
(y) Lender or a Lender Affiliate no longer holds title to the Property as the
result of a foreclosure or Deed in Lieu of Foreclosure, all funds then held by
Lender or Servicer with respect to the Property shall be turned over to Manager
to be held, applied or disbursed in accordance with the terms of the Management
Agreement.
(b) Notwithstanding the provisions of Section 2(a), Manager shall not be
required to comply with the Cash Management Procedures unless and until Servicer
and each succeeding Servicer has agreed in writing for the benefit of Manager to
be bound by the terms of the Cash Management Procedures.
(c) The Cash Management Procedures will not apply to Manager at any time,
following the initial Securitization, when the Loan is not subject to any
Securitization. However, the Cash Management Procedures will remain in effect if
at any time the Loan, or any portion thereof, is sold to Lender, any affiliate
of Lender, or the holder of the residual interest of any Securitization.
(d) Section 7.12 of the Cash Management Procedures shall not apply to
Manager.
(e) Borrower and Manager agree that notwithstanding the priority of
payments set forth in Sections 4.3, 4.4, 7.9.3 and 7.10 of the Cash Management
Procedures, the calculation and payment of Incentive Management Fees, Manager
Loans and Deferred Fees shall be made pursuant to the Management Agreement,
except that if the amounts distributed to Manager pursuant to such Sections are
insufficient to pay on a current basis the amount owed Manager pursuant to such
calculation, then any unpaid Incentive Management Fees shall become a Deferred
Fee and any Manager Loans shall continue to be outstanding.
3. Modification of Management Agreement. Borrower and Manager hereby
acknowledge and agree that so long as (i) the Note has not been Paid in Full, or
(ii) Lender or a Lender Affiliate shall hold either fee (or, if applicable,
leasehold) title to the Property as the result of a foreclosure or a Deed in
Lieu of Foreclosure (provided, however, that the provisions of Sections 3(d),
(f), (g), (l), (m), (n), (p), (q), (u), (v), (w), (x), (y), (aa) and (ab) will
no longer apply if the Note has been Paid in Full, whether or not Lender or a
Lender Affiliate holds fee or leasehold title to the Property as the result of a
foreclosure or a Deed in Lieu of Foreclosure):
(a) All Chain Services provided by Manager shall be performed at Manager's
cost, without mark-up or profit, it being understood that Manager's cost
includes both Manager's out-of-pocket expenditures and allocations, determined
on a fair and equitable basis, in Manager's reasonable judgment, of Manager's,
Marriott's, and any Marriott Affiliate's overhead costs related to providing
Chain Services. Services included in the cost of Chain Services which are
customarily or could be performed by independent third party contractors may be
performed by Marriott Affiliates subject to the provisions of Section 3(c)
hereof.
(b) Notwithstanding anything to the contrary contained in the Management
Agreement, all accounting shall be done under generally accepted accounting
principles in the United States of America (as such principles may change from
time to time) applied on a consistent basis, both as to classification of items
and amounts.
(c) All third party transactions and transactions with Marriott Affiliates
entered into by Manager in connection with the Property shall reflect arms'
length terms that are competitive with terms available from reputable and
reliable contractors and suppliers.
(d) Lender shall have the right, at any time, in the place and stead of
Borrower, to exercise the termination rights of Borrower under Section 4.03 and
16.03 of the Management Agreement, and shall have the right at any time
following the occurrence of an Event of Default under the Loan Documents and
delivery of a Default Notice with respect thereto and until a Cure Notice has
been received by Manager with respect to such Event of Default, to exercise any
termination rights of Borrower under the Management Agreement (including,
without limitation, those set forth in Section 4.03 and 16.03 thereof), it being
agreed, however, that the rights of Manager to manage the Property under the
Management Agreement shall not be terminated other than in accordance with the
terms thereof.
(e) [Intentionally omitted]
(f) Following notice from Lender to Manager that Borrower has failed to
provide to Lender any FF&E Estimates, Building Estimates or Annual Operating
Budgets, or other information required by the Management Agreement (including,
without limitation, Article VIII thereof) that Manager has provided to Borrower
or was obligated to provide to Borrower under the Management Agreement, Manager
shall promptly provide copies of the same to Lender.
(g) Following the occurrence of an Event of Default under the Loan
Documents and delivery of a Default Notice with respect thereto, and until a
Cure Notice has been received by Manager with respect to such Event of Default,
Manager shall promptly provide to Lender copies of all FF&E Estimates, Building
Estimates and Annual Operating Budgets as and when the same are required to be
submitted to Borrower under the Management Agreement.
(h) Notwithstanding the provisions of Section 8.02E of the Management
Agreement, Manager shall not reduce the percentage contributions to the FF&E
Reserve Account to less than 5% of Gross Revenues specified in Section 8.02B of
the Management Agreement without the prior written consent of Lender, nor
increase the percentage contributions for the FF&E Reserve Account to more than
5% of Gross Revenues without the prior written consent of Lender, provided,
however, that from and after the Fiscal Year commencing on or about January 1,
2003, Manager may increase the percentage contributions for the FF&E Reserve
Account without such consent, provided that any contribution in excess of 5%
(the "Excess Contributions") shall be subordinate to the Secured Obligations in
accordance with the provisions of Section 7(c) of this Agreement.
(i) To the extent that Manager in its good faith discretion ascertains that
amounts on deposit in the Capital Expenditure and FF&E Reserve Account are in
excess of the amounts anticipated to be necessary (taking into account
anticipated future deposits into the Capital Expenditure and FF&E Reserve
Account) for present or future replacements, renewals and other items provided
for in Section 8.02 of the Management Agreement, Manager will use such excess
amounts in the Capital Expenditure and FF&E Reserve Account for Capital
Expenditures approved by Borrower under Section 8.03 of the Management
Agreement.
(j) Any assignment of the Management Agreement by Manager pursuant to
Section 18.01 thereof shall be subject to the prior receipt by Lender of (i) a
Rating Comfort Letter, and any such assignment in the absence of such Rating
Comfort Letter shall be void, and (ii) a guarantee by Marriott International,
Inc. of the obligations of the assignee in form reasonably satisfactory to
Lender.
(k) Following the occurrence of a Payment Event of Default and delivery of
a Default Notice with respect thereto and until receipt of a Cure Notice with
respect thereto, the following provisions shall apply:
(i)(aa) Manager shall submit to Lender for its approval (which approval
shall not be unreasonably withheld or delayed), at least thirty (30) days prior
to the beginning of the next Fiscal Year, a proposed Annual Operating Budget or
such Fiscal Year prepared by Manager in good faith. Additionally, with respect
to any Fiscal Year during which Manager receives, on or prior to June 30, a
Default Notice regarding a Payment Event of Default, Lender shall have the right
to approve (which approval shall not be unreasonably withheld or delayed) the
Annual Operating Budget applicable to such Fiscal Year as it relates to the
remainder of such Fiscal Year. Lender's approval shall be deemed to have been
given if Manager has received no notice from Lender to the contrary within
thirty (30) days after Lender's receipt of any such proposed or then existing
Annual Operating Budget (it being understood that upon receipt of a Default
Notice containing a request for the then-current Annual Operating Budget,
Manager shall promptly send to Lender a copy of the then current Annual
Operating Budget). Any notice of disapproval delivered by Lender shall specify
the items listed in the proposed (or then existing) Annual Operating Budget of
which Lender, in good faith, disapproves. Any items not so specified shall be
deemed approved. In preparing the Annual Operating Budget for each Fiscal Year,
Manager's goal will be the maximization of the long-term and short-term
Operating Profit of the Hotel, in keeping with Marriott Standards. Manager
agrees to take reasonable steps to ensure that, at Lender's request, qualified
personnel from Manager's staff are available to discuss with Lender any proposed
Annual Operating Budget and the Annual Operating Budget applicable to the Fiscal
Year in which the Payment Event of Default occurs. A meeting (or meetings) for
such purpose shall be held, at Lender's request, within a reasonable period of
time after Lender's request. Manager will at all times give good faith
consideration to Lender's suggestions regarding any such proposed (or then
existing) Annual Operating Budget.
(bb) Lender shall not be entitled to withhold its approval of any item in
any proposed (or then existing) Annual Operating Budget based on its objection
to: (w) Manager's reasonable projections of either Gross Revenues or the
components thereof, (x) projected costs and expenses that are "system charges"
(that is, costs and expenses that are generally uniform among the Marriott
hotels operated by Manager, Marriott and any Marriott Affiliate, such as: the
charges for Chain Services, and employee benefits and other compensation
programs); (y) costs and expenses that are not within the control of Borrower,
Lender or Manager, such as Impositions and the cost of utilities; or (z)
increases in projected costs and expenses of operating the Hotel, which
increases are primarily attributable to projected increases in occupancy at the
Hotel. The approval of Lender (as set forth in Section 3(k)(i)(aa) above) shall
not be required if, and to the extent that, the proposed (or then existing)
Annual Operating Budget for a given Fiscal Year is, in all material respects,
the same as the Annual Operating Budget for the preceding Fiscal Year with
adjustments for inflation. If Lender and Manager fail to mutually agree on any
item in any proposed (or then existing) Annual Operating Budget within the
thirty (30) day period described in the first or second sentence of Section
3(k)(i)(aa), as applicable, Lender shall have the right to submit to arbitration
(in accordance with Section 3(k)(iii) below) the issue of whether or not the
Lender's disapproval of the contested item in the proposed (or then existing)
Annual Operating Budget is reasonable, given, among other factors, the goals set
forth in the sixth sentence of Section 3(k)(i)(aa). While such arbitration
proceedings are pending, Manager shall operate the Hotel, as to the items
approved or deemed approved, in accordance with the proposed (or then existing)
Annual Operating Budget and, as to the items that were disapproved, in
accordance with the Annual Operating Budget for the preceding Fiscal Year, with
adjustments for inflation and changes in occupancy. If Lender fails to notify
Manager within ten (10) days after expiration of the above-stated thirty (30)
day period that it is submitting a specific contested item to arbitration, then
Lender shall be deemed to have rescinded its disapproval of such contested item
and such item shall be deemed approved. The proposed (or then existing) Annual
Operating Budget shall be considered final with respect to all items approved or
deemed approved pursuant to Section 3(k)(i)(aa) and this Section 3(k)(i)(bb) or
in accordance with the decision of the arbitrators in accordance with Section
3(k)(iii).
(cc) Each Annual Operating Budget will constitute a standard to which
Manager shall use its reasonable best efforts to adhere. It is understood,
however, that the Annual Operating Budget is an estimate only and that
unforeseen circumstances such as, but not limited to, the costs of labor,
materials, services and supplies, casualty, operation of law, or economic and
market conditions may make adherence to the Annual Operating Budget
impracticable, and Manager shall be entitled to reasonable departures therefrom
for such reasons and consistent with the goal of maximizing long-term and
short-term Operating Profit, in keeping with Marriott Standards; provided,
however, that nothing herein shall be deemed to authorize Manager to take any
action prohibited by this Agreement or the Management Agreement nor to reduce
Manager's other rights or obligations hereunder or thereunder.
(dd) Manager shall notify Lender of any significant variations from the
Annual Operating Budget promptly after Manager learns of the same but in no
event later than the date on which Manager is required to deliver the interim
accounting statement (pursuant to Section 5.02A of the Management Agreement)
covering the period in which such variation occurs. Lender and Manager shall, at
Lender's request, meet to review such variations and their cause and to discuss
appropriate action with respect to correcting the variations or preventing or
minimizing their occurrence or effect.
(ii) (aa) Manager shall submit to Lender for its approval (which approval
shall not be unreasonably withheld or delayed), at the same time as submission
of the proposed Annual Operating Budget, a proposed FF&E Estimate prepared by
Manager in good faith. Lender's approval shall be deemed to have been given if
Manager has received no notice from Lender to the contrary within thirty (30)
days after Lender's receipt of such proposed FF&E Estimate. Any notice of
disapproval delivered by Lender shall specify the items shown on the proposed
FF&E Estimate of which Lender, in good faith, disapproves. Any items not so
specified shall be deemed approved. Manager agrees to take reasonable steps to
ensure that, at Lender's request, qualified personnel from Manager's staff are
available to discuss the proposed FF&E Estimate with Lender. A meeting (or
meetings) for such purpose shall be held, at Lender's request, within a
reasonable period of time after the submission to Lender of the proposed FF&E
Estimate. Manager will at all times give good faith consideration to Lender's
suggestions regarding any such proposed FF&E Estimate that Manager is required
to submit to Lender.
(bb) Lender shall not be entitled to withhold its approval of any
particular item described in any proposed FF&E Estimate if such item is
reasonably required to enable the Hotel to be or remain in compliance with
Marriott Standards. If Lender and Manager fail to mutually agree on any
particular item in the proposed FF&E Estimate within thirty (30) days after the
submission to Lender of the proposed FF&E Estimate described in the first
sentence of Section 3(k)(ii)(aa), Lender shall have the right to submit to
arbitration (in accordance with Section 3(k)(iii) below) the issue of whether or
not the contested item in the FF&E Reserve is reasonably required to enable the
Hotel to be or remain in compliance with Marriott Standards. While such
arbitration proceedings are pending, Manager shall be entitled to make the
repairs and replacements described in the proposed FF&E Estimate to which Lender
did not timely object, but it shall not make any of the repairs or replacements
described in the proposed FF&E Estimate to which Lender timely objected. If
Lender fails to notify Manager within ten (10) days after expiration of the
above-stated thirty (30) day period that it is submitting a specific contested
item to arbitration, then Lender shall be deemed to have rescinded its
disapproval of such contested item and such item shall be deemed approved. The
proposed FF&E Estimate shall be considered final with respect to all items
approved or deemed approved pursuant to Section 3(k)(ii)(aa) and this Section
3(k)(ii)(bb) or in accordance with the decision of the arbitration in accordance
with Section 3(k)(iii).
(iii) (aa) Disputes described in Sections 3(k)(i)(bb) and 3(k)(ii)(bb)
above shall be resolved in accordance with the Commercial Arbitration Rules of
the American Arbitration Association then pertaining. The decision of the
arbitrators shall be binding, final and conclusive on the parties.
(bb) Lender and Manager shall each appoint, within twenty (20) days after
receipt by Manager of Lender's notice that it is submitting a specific contested
item to arbitration, a reputable, fit and impartial person as arbitrator who
shall have had at least ten (10) years' recent professional experience in hotel
management or hotel management consulting who is not at such time employed by
any competitor of Manager or by Manager or any of its Affiliates. Notice of such
appointment shall be sent in writing by each party to the other, and the
arbitrators so appointed, in the event of their failure to agree within thirty
(30) days after the appointment of the second arbitrator upon the matter
submitted, shall appoint a third arbitrator. If either Lender or Manager shall
fail to appoint an arbitrator, as aforesaid, for a period of twenty (20) days
after written notice from the other party to make such appointment, then the
arbitrator appointed by the party having made such appointment shall appoint a
second arbitrator and the two so appointed shall, in the event of their failure
to agree upon any decision within thirty (30) days thereafter, appoint a third
arbitrator. If such arbitrators fail to agree upon a third arbitrator within
forty-five (45) days after the appointment of the second arbitrator, then such
third arbitrator shall be appointed by the American Arbitration Association from
its qualified panel of arbitrators, and shall be a person having the same
qualifications as described above. The costs and fees of the arbitrators and the
arbitration shall be paid out of Gross Revenues and shall constitute a Deduction
in the year in which the arbitration is completed, provided, however, that the
fees of respective counsel engaged by the parties and the costs and fees of
expert witnesses and other witnesses called for the parties shall be paid by the
respective party engaging such counsel or calling or engaging such witnesses.
(cc) The decision of the arbitrators shall be rendered within thirty (30)
days after appointment of the third arbitrator. Such decision shall be in
writing and in duplicate, one counterpart thereof to be delivered to Lender and
one to Manager and shall be final and binding on the parties.
(dd) If in Manager's good faith judgment the decision of the arbitrators
would require the Manager to operate the Hotel at a standard that is materially
below Manager's standards generally applied with respect to Marriott Standards,
Manager shall be entitled to terminate the Management Agreement as of a date
three (3) months after the date of Manager's notice of termination to Lender and
Borrower.
(l) Following (i) notice from Lender to Manager that Borrower has failed to
provide to Lender any information that Borrower has obtained or could have
obtained from an inspection of Manager's books and records (as they relate to
the Property), or (ii) the occurrence of an Event of Default and delivery of a
Default Notice with respect thereto (unless and until a Cure Notice has been
received by Manager with respect to such Event of Default), Lender and its
agents shall have the same rights to inspect Manager's books and records (as
they relate to the Property) and to the receipt of information regarding the
Property from Manager as are afforded to Borrower under the Management
Agreement.
(m) Following (i) notice from Lender to Manager that Borrower has failed to
provide the financial information ("Financial Information") to Lender that
Borrower is entitled to receive under the Management Agreement at the times
specified in the Management Agreement including, without limitation, notices and
information required under Sections 8.01, 8.02 and 8.03 of the Management
Agreement, or (ii) the occurrence of an Event of Default under the Loan
Documents and delivery of a Default Notice with respect thereto, and until a
Cure Notice has been received by Manager with respect to such Event of Default,
Manager shall (except as otherwise provided in Sections 3 (f), (g), (k) and (l)
hereof) provide Financial Information to Lender, as and when the same is
required to be submitted to Borrower under the Management Agreement.
(n) Lender and its agents and designees shall have the right to inspect the
Property at reasonable times on reasonable advance notice.
(o) Manager will provide to Lender, upon thirty (30) days' prior written
notice, a written estoppel certificate (A) stating whether or not the following
statements are correct, indicating in reasonable detail, where applicable, the
circumstances causing any of the statements not to be correct:
(i) the Management Agreement and this Agreement are in full force and
effect;
(ii) To the best of Manager's knowledge, there is no default under the
Management Agreement or this Agreement, or any event which, with the giving of
notice, the passage of time, or both, would constitute an event of default
thereunder, nor has Manager commenced any action or served any notice for the
purpose of terminating the Management Agreement; and
(iii) all sums then due and payable to Manager under the Management
Agreement or under this Agreement have been paid in full; and
(B) setting forth a schedule of all Deferred Fees.
(p) Without the prior written consent of Lender in each instance, Manager
shall not (i) terminate (except as specifically permitted in the Management
Agreement or under this Agreement) or consent to the cancellation or surrender
of the Management Agreement, or (ii) modify the Management Agreement so as to
shorten the unexpired term thereof, or change any renewal option therein, or in
any other material respect, or (i) subject to the provisions of the last
sentence of this Section 3(p), in any manner impair the title to the Property or
the validity or priority of the Security Deed or any other Transaction Document.
Any purported modification, amendment, termination (except as specifically
permitted in the Management Agreement or under this Agreement), cancellation,
surrender or impairment made without the prior written consent of Lender in each
instance shall be null and void as against Lender at its option. Notwithstanding
the foregoing, Manager shall not have any obligation to expend its own funds to
prevent or cure any impairment of the title to the Property or the validity or
priority of the Security Deed or other Loan Documents, unless such impairment
was caused by the acts or omissions of Manager that were outside of the scope of
its obligations under the Management Agreement or resulted directly from the
breach by Manager of its obligations under the Management Agreement.
(q) If any act or omission by Borrower or any other act, condition or event
would give Manager the right, immediately or after notice or lapse of time or
both, to cancel or terminate the Management Agreement, Manager will not exercise
any such right and no notice of cancellation shall be effective until (i)
Manager has given written notice of such act or omission to Lender (referring to
the provisions of this Section 3(q) and the obligation to respond thereto within
the time periods hereinafter provided) and Lender has received such notice, and
(ii) a time period for remedying such act or omission equal to (A) 60 days for
any act or omission under Section 8.02 or 8.03 of the Management Agreement, (B)
15 days for any failure to supply additional Working Capital or cure any
monetary default (except as provided in clause (A) of this Section 3(q)), (C) 45
days as to any nonmonetary act, omission, condition or event which, in the
reasonable judgment of Manager (as set forth in such notice) will, if not cured,
have a material and adverse impact on Manager's ability to operate the Hotel in
the manner required by the Management Agreement (as modified by Sections 2 and 3
of this Agreement), and (D) 90 days for any nonmonetary act, omission, condition
or event other than as set forth in clause (C) of this Section 3(q), shall have
elapsed, which period (whether under clause (A), (B), (C), or (D) of this
Section 3(q)) shall commence on a date which shall be the later of (x) the date
of expiration of the cure period available to Borrower under the Management
Agreement, or (y) the date of Lender's receipt of the notice referred to in
Section 3(q)(i). Lender shall, within ten (10) days after its receipt of
Manager's notice of an act or omission referred to in clause (B) above, or
within thirty (30) days of its receipt of any other Manager's notice, give
Manager notice of its intention to, and with reasonable diligence thereafter
commence and continue to, remedy such act or omission or to cause the same to be
remedied. If, after delivery of such notice, Lender fails to remedy the act or
omission that it undertook in such notice to remedy, Lender shall have no
liability of any kind under such notice for such failure and Manager's sole
right against Lender under this Section 3(q), or in respect of such notice,
shall be to exercise its rights under the Management Agreement as if such notice
had never been delivered. It is recognized that Lender does not have the ability
to cure the following defaults by Borrower: bankruptcy, assignment for the
benefit of creditors, or the appointment of a receiver or trustee. Therefore,
foreclosure of (or the exercise of the power of sale pursuant to or acceptance
of a deed in lieu of foreclosure thereof) the Security Deed shall constitute
cure of such default under the Management Agreement, and Lender shall have a
reasonable period (not to exceed one (1) year) to effect the same. Manager shall
promptly give Lender copies of all notices of default given to Borrower under
the Management Agreement, but the failure of Manager to comply with the
provisions of this sentence shall not affect the efficacy of any notice to
Borrower and shall not constitute a default hereunder.
(r) Manager will not enter into any leases of FF&E other than as set forth
in clauses (a), (b) and (c) of Section 8.02D of the Management Agreement without
the prior written consent of Lender.
(s) Manager shall make no Manager Loans that, when added to the outstanding
balance of previous Manager Loans, would cause the total outstanding balance of
Manager Loans to exceed the sum of (i) average amount of Deductions for each
Accounting Period during the preceding full 13 Accounting Periods, and (ii) an
amount equal to one Monthly Debt Service Payment then in effect.
(t) The words "subject to the provisions of any mortgage of the Hotel"
shall be deemed added to the end of the second sentence of Section 15.02(B) of
the Management Agreement.
(u) Notwithstanding the provisions of Sections 2.02 and 2.03 of the
Management Agreement, Manager shall not enter into any (x) lease demising 5% or
more of the floor area of the Property regardless of the term of such lease or
(y) lease demising any room or suite in the Property for a period in excess of
365 calendar days (including so-called seasonal leases aggregating to a time
period in excess of 365 days whether or not such days run consecutively) without
the prior written consent of Lender.
(v) Notwithstanding the provisions of clause (8) of Section 2.04 of the
Management Agreement, Manager shall not adjust any insurance claims without the
prior written consent of Lender unless Borrower has such right (without the
consent of Lender) under provisions of the Loan Documents annexed hereto as
Exhibit J.
(w) The provisions of Section 6.01C of the Management Agreement shall be
inapplicable.
(x) To the extent the provisions of Article XII of the Management Agreement
are inconsistent with the provisions of the Loan Documents, the provisions of
the Loan Documents shall control.
(y) The consent of Manager to actions taken by Owner (or Lender on its
behalf) under Section 13.01A of the Management Agreement costing in excess of
$5,000 shall not be required, provided that if the consent of Manager is not
obtained, any costs in excess of $5,000 shall not constitute a Deduction.
(z) [Intentionally omitted]
(aa) Manager will not make any Capital Expenditures that are not Required
Capital Expenditures without the prior written consent of Lender, unless
included in a Building Estimate approved by Owner and Lender.
(bb) Any lease of equipment in respect of the Hotel shall be subject to the
limitation that, so long as any portion of the Debt shall remain outstanding as
an obligation of Borrower, Manager shall not, without the prior consent of
Lender, enter into any equipment lease other than solely with the supplier or
owner of the furnishings, fixtures or equipment subject to such lease or sell
any such furnishings, fixtures, or equipment to any third party under a "Sale
Leaseback" arrangement.
4. Assignment; Consents of Manager.
(a) Manager hereby acknowledges that Borrower has, pursuant to the
Collateral Assignment of Documents, assigned and pledged its right, title and
interest in, to and under the Management Agreement to Lender. Manager
acknowledges and consents to the express terms of the Collateral Assignment of
Documents as it relates to the Management Agreement.
(b) To effectuate the rights set forth in Section 3(d) of this Agreement as
they relate to Section 4.03 of the Management Agreement, Borrower hereby
presently and absolutely grants, assigns, transfers and sets over unto Lender
Borrower's rights to terminate the Management Agreement under Section 4.03
thereof, until such time as the Note is Paid in Full.
(c) Manager hereby consents to the assignment set forth in Section 4(b)
hereof.
(d) Manager hereby consents to the Secured Obligations and agrees that (i)
both the Secured Obligations and any Refinancing Debt shall constitute Qualified
Loans, and satisfy the provisions of Sections 3.01A and 6.08 of the Management
Agreement, and any other conditions set forth in the Management Agreement
relating to the mortgaging of the Property, (ii) the provisions of the last
sentence of Section 3.01A of the Management Agreement are satisfied (or, to the
extent not satisfied, are deemed waived by Manager) by the provisions of the
Loan Documents and this Agreement, and (iii) Lender, any assignee of Lender, and
any Trustee shall each be deemed to be a Qualified Lender.
(e) Manager hereby consents to a transfer of the fee interest in the Hotel
to Atlanta Marriott Marquis II Limited Partnership ("AMM II") (or other entity
created in connection with pending litigation relating to the sale of the fee
interest in the Hotel to Borrower, or settlement thereof), and Manager and
Borrower agree to enter into appropriate modifications of this Agreement to
reflect that any ground rent will be paid in accordance with revised Cash
Management Procedures if a ground lease is entered into between AMM II (or such
other entity) and Borrower in connection with such litigation or settlement
thereof. If, in connection with such litigation or settlement thereof, the
operating interest in the Hotel is transferred to AMM II (or such other entity),
Manager and Lender agree to cooperate in good faith in connection with the
negotiation of a new Management Agreement between Manager and AMM II (or such
other entity) and a new Modification, Subordination and Non-Disturbance
Agreement, estoppel, Assignment and Consent among Manager, AMM II (or such other
entity) and Lender.
5. Certifications, Representations and Agreements of Manager. Manager
hereby certifies, represents and agrees to and with Lender as of the date
hereof, as follows:
(a) Manager is the manager under the Management Agreement, pursuant to
which the Property is operated as a full service first-class Marriott hotel in
accordance with Marriott Standards.
(b) Annexed hereto as Exhibit C is a true and correct copy of the
Management Agreement. The Management Agreement and this Agreement constitute the
entire agreement between Manager and Borrower with respect to the Property
(other than agreements entered into in the ordinary course of business to
facilitate Manager's provisions of services as required under the Management
Agreement, which agreements do not affect the rights of Lender under this
Agreement or the Cash Management Procedures). The Management Agreement is in
full force and effect as against Manager and has not been amended or modified in
any way, except as otherwise stated in Sections 2 and 3 of this Agreement.
(c) To the best of Manager's knowledge there is no default under the
Management Agreement, or any event which, with the giving of notice, the passage
of time or both, would constitute an event of default thereunder, nor has
Manager commenced any action or served any notice for the purpose of terminating
the Management Agreement. Unless earlier terminated or extended as provided
therein, the Management Agreement will terminate on the last day of Fiscal Year
2011.
(d) All fees currently payable under the Management Agreement have been
paid in full through the last day of the thirteenth (13th) Accounting Period of
Fiscal Year 1997. All Base Management Fees, Incentive Management Fees, and any
other amounts payable to Manager under the Management Agreement have been paid
in full or waived by Manager with respect to any and all periods through and
including the end of Fiscal Year 1997.
(e) Except as otherwise set forth in Exhibit E annexed hereto, as of the
date hereof, the Property complies with all current operating standards and, to
the best of Manager's knowledge, all current property standards for full service
first-class Marriott hotels (including, without limitation, Marriott Standards).
(f) There are no property condition and operating standards generally
employed by Manager for full service first-class Marriott hotels as of the date
hereof (including, without limitation, Marriott Standards) which are not already
satisfied or reflected in work provided for in the FF&E Estimate for Fiscal Year
1998 unless the same are otherwise set forth in Exhibit E annexed hereto.
(g) Manager has the right to use the Proprietary Marks, Proprietary
Signage, Software, and other Intellectual Property in connection with the
management and operation of the Hotel.
(h) To the best of Manager's knowledge, all interim and annual accounting
statements given by Manager to Borrower with respect to the Property are true
and complete in all material respects and do not contain any untrue statement of
a material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(i) Any assignment of the Management Agreement shall be subject to (i) the
provisions of Section 3(j) of this Agreement, and (ii) the assumption in writing
of the terms of this Agreement by the assignee.
(j) None of the amendments to the Management Agreement set forth in this
Agreement shall constitute a "burden", as such term is defined Section 6.01B of
the Management Agreement.
6. Obligations of Lender to Provide Notices to Manager.
(a) Lender shall promptly give Manager copies of all Default Notices, and
Borrower acknowledges that Manager may, for purposes of this Agreement, rely on
any Default Notices.
(b) None of the provisions of this Agreement that become effective on an
Event of Default shall apply until Lender has delivered a Default Notice with
respect thereto to Manager.
(c) Lender shall give Manager copies of any material modifications to the
Loan Documents.
(d) The failure of Lender to comply with the provisions of this Section 6
shall not affect the efficacy of any notice or documents as to Borrower.
7. Subordination.
(a) The Management Agreement and all right, title and interest of Manager
in and to the Property and the Hotel are and shall be subject and subordinate to
the lien of the Security Deed; provided, however, that, notwithstanding the
foregoing subordination, neither Lender nor any successor or assignee thereof
shall name or join Manager as a party defendant in any foreclosure or otherwise
in any suit, action or proceeding commenced or maintained for the purpose of
foreclosure of the Security Deed to recover possession of the Property unless
Manager or any person claiming through or under Manager is deemed a necessary
party under the law of the applicable jurisdiction or by the court, in which
event such party may be so named or joined but such naming or joinder shall not
otherwise be in derogation of the rights of Manager set forth in this Agreement,
and the Management Agreement shall not be subject to forfeiture or termination,
other than in accordance with the terms thereof, by reason of any such suit,
action or proceeding or any judgment rendered therein, provided that nothing
contained in this Section 7(a) shall impair the exercise of any remedies by
Lender under the Loan Documents, at law or in equity, or by statute, including,
without limitation, the right to foreclose and the right to appointment of a
receiver. Should the exercise of any such remedies impair, by events not within
the control of Lender (such as operation of law or actions taken by a receiver
other than at the request of Lender), the rights of Manager under this Section
7(a) or Section 9 hereof, Lender shall have no liability or obligation to
Manager (subject, however, to the rights of Manager under Section 9 of this
Agreement once Lender or a Successor Owner has obtained possession of the
Property).
(b) Manager agrees that payment of all Subordinated Fees is hereby
subordinated to the Secured Obligations and, except as set forth in Section 8,
Manager will not take, retain, or receive from Borrower any Gross Revenues or
other funds of Borrower by setoff or in any other manner, in payment of the
whole or in part of the Subordinated Fees, nor any security for any of the
foregoing, unless and until the Note has been Paid in Full and the Cash
Management Procedures are no longer operative.
(c) Manager agrees that payment of all Excess Contributions is hereby
subordinated to the Secured Obligations, and Manager will not take, retain, or
receive from Borrower any Gross Revenues or other funds of Borrower by setoff or
in any other manner (other than funds advanced by Borrower from sources other
than Gross Revenues or Operating Profit, or funds payable to Borrower under the
Cash Management Procedures), in payment of the whole or in part of the Excess
Contributions, nor any security for any of the foregoing, unless and until the
Note has been Paid in Full and the Cash Management Procedures are no longer
operative.
(d) Upon the foreclosure or conveyance by Deed in Lieu of Foreclosure of
the Property, the payment of any Subordinated Fees (including, without
limitation, any Deferred Fees) incurred prior thereto and any obligation of
Borrower to repay Manager Loans incurred prior thereto shall be deemed to have
been waived as to Lender, any Lender Affiliate, and any Successor Owner, and as
to the Property, but shall not be deemed to have been waived as to Borrower.
8. Payment of Subordinated Fees and Manager Loans.
(a) Subject to the provisions of this Section 8, Manager, shall, for any
period prior to the earlier to occur of (i) the occurrence of an Event of
Default and receipt by Manager of a Default Notice, or (ii) the Optional
Prepayment Date, be entitled to accept from Borrower, Lender or Servicer (as
applicable), repayment of Manager Loans and accrued interest thereon, and
payments of Subordinated Fees, each of which shall be payable (at such times and
to the extent payable under the Management Agreement) solely from funds (if any)
payable to Manager under Section 4.3(E) or 7.9.3(B) (whichever is then
applicable) of the Cash Management Procedures.
(b) Following the Optional Prepayment Date, Manager shall not be entitled
to and shall not accept from Borrower, Lender or Servicer (as applicable),
repayment of Manager Loans or accrued interest thereon or payments of any
Subordinated Fees (other than (i) repayment of Manager Loans and accrued
interest thereon, provided that for such purpose the principal balance of any
Manager Loan shall be amortized on a five year straight line basis, from the
later of (x) the date funds were advanced, or (y) the Optional Prepayment Date,
and (ii) payment of Incentive Management Fees for the then current Fiscal Year),
which shall be payable (at such times and to the extent payable under the
Management Agreement) solely from funds (if any) payable to Manager under
Section 4.4(C) or 7.10(B) (whichever is then applicable) of the Cash Management
Procedures).
(c) Upon the occurrence of any Payment Event of Default and receipt by
Manager of a Default Notice with respect thereto, Manager shall not be entitled
to and shall not accept from Borrower, Lender or Servicer (as applicable),
repayments of Manager Loans or accrued interest thereon, or payments of any
Subordinated Fees, unless and until a Cure Notice in respect of such Payment
Event of Default shall have been received by Manager, after which Manager shall
again, subject to all of the other terms and conditions of this Agreement, be
entitled to repayments of Manager Loans and accrued interest thereon and
payments in respect of Subordinated Fees (excluding Deferred Fees, if incurred
subsequent to the Optional Prepayment Date), including any such payments not
previously made for the period commencing with the giving of the Default Notice
and ending with the giving of the Cure Notice, each of which shall be payable
(at such times and to the extent payable under the Management Agreement) solely
from funds (if any) payable to Manager under Section 4.3(E), 7.9.3(B), 4.4(E) or
7.10(B) (whichever is then applicable) of the Cash Management Procedures.
(d) Upon any Non-Payment Event of Default and receipt by Manager of a
Default Notice with respect thereto, Manager shall not be entitled to and shall
not accept from Borrower, Lender or Servicer (as applicable), repayment of any
Manager Loans or accrued interest thereon, or payments of any Subordinated Fees,
for a period (a "Payment Blockage Period") commencing on the date of the receipt
by Manager of such Default Notice and ending upon the earliest of the date (x)
180 days thereafter, (y) the date on which a Cure Notice with respect to such
Non-Payment Event of Default shall have been received by Manager, or (z) such
Payment Blockage Period shall have been terminated by notice to Manager from
Lender, after which Manager shall again, subject to all of the other terms and
conditions of this Agreement, be entitled to repayments of Manager Loans and
accrued interest thereon and payments in respect of the Subordinated Fees
(excluding Deferred Fees if subsequent to the Optional Prepayment Date),
including any such payments not previously made during the Payment Blockage
Period, each of which shall be payable (at such times and to the extent payable
under the Management Agreement) solely from funds (if any) payable to Manager
under Section 4.3(E), 7.9.3(B), 4.4(C) or 7.10(B) (whichever is then applicable)
of the Cash Management Procedures.
(e) No Non-Payment Event of Default under any Secured Obligation that
existed on the date of the commencement of any Payment Blockage Period shall be
made the basis for the commencement of a second Payment Blockage Period, but the
occurrence of a similar Non-Payment Event of Default (such as, for example, the
failure by Borrower to comply, on a second occasion, with the same obligation as
gave rise to the initial Non-Payment Event of Default) shall be the basis for
the commencement of a second Payment Blockage Period.
(f) Notwithstanding anything in Section 8(d) hereof to the contrary, in the
event that the maturity of any Secured Obligation is accelerated by Lender, or
Lender commences an action (judicial or nonjudicial) to foreclose on the
Security Deed as a result of an Event of Default, or Lender commences an action
or proceeding for the appointment of a receiver or receivers with respect to all
or any portion of the Property as the result of an Event of Default, then any
Non-Payment Event of Default shall, for purposes of this Section 8, be deemed to
have the effect of a Payment Event of Default, in which event the payment or
non-payment of Manager Loans and accrued interest thereon and Subordinated Fees
shall be governed by Section 8(c) hereof, provided, however, that if all such
receivers are discharged prior to the time at which (A) the maturity of any
Secured Obligation is accelerated by Lender or (B) Lender commences an action
(judicial or nonjudicial) to foreclose on the Security Deed, then upon the
discharge of all such receivers (and until such time as the maturity of any
Secured Obligation is accelerated by Lender, or Lender commences an action
(judicial or nonjudicial) to foreclose on the Security Deed) Manager shall
again, subject to all of the other terms and conditions of this Agreement, be
entitled to repayments of Manager Loans and accrued interest thereon and
payments in respect of the Subordinated Fees (excluding Deferred Fees if
subsequent to the Optional Prepayment Date), including any such payments not
previously made during the Payment Blockage Period, each of which shall be
payable (at such times and to the extent payable under the Management Agreement)
solely from funds (if any) payable to Manager under Section 4.3(E), 7.9.3(B),
4.4(E) or 7.10(B) (whichever is then applicable) of the Cash Management
Procedures.
(g) In the event that there are insufficient funds available to make
permitted repayment of all Manager Loans and accrued interest thereon and
permitted payments of all Subordinated Fees, payment shall be made in the
following order of priority: (i) accrued interest on Manager Loans, (ii) the
outstanding principal balance of Manager Loans, (iii) current Incentive
Management Fees, and (iv) Deferred Fees, if applicable.
(h) If Manager is entitled under Sections 8(a), (b), (c), (d) or (f) hereof
to repayments of Manager Loans and accrued interest thereon or payments of
Subordinated Fees, Borrower (or the Servicer on its behalf) shall make such
payments from available cash subject to, and in accordance with, the Cash
Management Procedures.
(i) In the event that, notwithstanding the foregoing, Borrower, Lender or
Servicer, as applicable, shall make any payment to Manager to which Manager is
not entitled by this Section 8 or the Cash Management Procedures, then such
payment shall be received in trust by the Manager and paid over and delivered
forthwith by the Manager to Lender for deposit into the Deposit Account.
(j) The provisions of this Section 8 shall supersede any inconsistent
provisions in Section 7.01B of the Management Agreement regarding the repayment
terms of any Manager Loans). Manager will not invoke provisions of any other
Sections of the Management Agreement that are inconsistent with provisions
specifically addressed in this Section 8.
9. Non-Disturbance and Attornment.
(a) If, at any time, a Successor Owner shall succeed to the rights of
Borrower under the Management Agreement or otherwise obtain possession of the
Property as a result of the exercise of Lender's rights upon the occurrence of
an Event of Default (whether voluntary, involuntary or by operation of law)
prior to the expiration date of the Management Agreement, Lender agrees (which
agreement shall be binding on all Successor Owners) that the terms of the
Management Agreement shall be binding on each Successor Owner if, at the time
such Successor Owner succeeds to the rights of Borrower (1) Manager is in
compliance with the terms and provisions of this Agreement in all material
respects, the Management Agreement is in full force and effect (or has been
terminated as a result of Borrower's bankruptcy or the actions of a receiver,
and such Successor Owner has or is in the process of obtaining a new Management
Agreement pursuant to the provisions of Section 9(b) hereof) and Manager is not
then in default in any material respect under the Management Agreement beyond
any applicable grace periods provided for therein, or (2) if the provisions of
clause (1) above are not satisfied but the Successor Owner nevertheless waives
such provisions in writing, then (i) all Successor Owners shall recognize the
rights of Manager under the Management Agreement, (ii) Manager shall not be
disturbed in its right to manage the Property pursuant to the Management
Agreement, (iii) the Management Agreement shall not terminate as a result of
Lender's actions (or if terminated as set forth in clause (1) above, shall,
subject to the provisions of Section 9(b) hereof, be reinstated), (iv) Manager
shall attorn to and recognize the Successor Owner as the "Owner" under the
Management Agreement, and (v) the Successor Owner shall accept such attornment
and recognize Manager as the manager of the Property under the Management
Agreement. Upon such attornment and recognition, the Management Agreement shall
continue in full force and effect as, or as if it were, a direct Management
Agreement between the Successor Owner and Manager upon and subject to all of the
then executory terms, conditions and covenants as are set forth in the
Management Agreement (as amended by Sections 2 and 3 of this Agreement, if the
Successor Owner is Lender or a Lender Affiliate) and which shall be applicable
to the Property after such attornment and recognition. Manager further agrees
that the following shall apply following a foreclosure of the Property or a Deed
in Lieu of Foreclosure:
(i) No Successor Owner shall be liable for any act or omission of Borrower
under the Management Agreement;
(ii) No Successor Owner shall be subject to any offsets, defenses or
counterclaims accruing prior to the date or dates of foreclosure or delivery of
a Deed in Lieu of Foreclosure that Manager might have against Borrower under the
Management Agreement;
(iii) No Successor Owner, in its capacity as Successor Owner, shall be
liable for payment of any Deferred Fees or Manager Loans or accrued interest
thereon accruing or made prior to the date on which such Successor Owner
acquires title to the Property;
(iv) No Successor Owner shall be bound by any amendment or modification of
the Management Agreement or by any waiver or forbearance on the part of Borrower
under the Management Agreement requiring the consent of Lender made or given
without the prior written consent of Lender;
(v) Except as set forth in Section 9(a)(vi) hereof, and except with respect
to the obligations of Lender (or the Servicer, on Lender's behalf) under the
Cash Management Procedures, neither Lender nor any Lender Affiliate shall in any
event or at any time be personally liable for the payment or performance of the
obligations required by or permitted of the Owner under the Management Agreement
or in any document executed in connection with the Management Agreement by
Lender or such Lender's Affiliate, and the sole recourse of Manager shall be
against the interest of Lender or such Lender Affiliate in the Management
Agreement or the Property (or portion thereof so acquired), and no attachment,
execution, writ or other process for enforcement of a judgment for damages shall
be initiated by or on behalf of Manager against Lender or such Lender Affiliate
personally (other than such interest as Lender or Lender Affiliate may have in
the Management Agreement or the Property) as a result of any such breach or
default;
(vi) Lender and any Lender Affiliate shall be bound by the covenants and
agreements contained in the Management Agreement on the part of the Owner only
with respect to the period beginning with the date of the transfer of the
Owner's interest in the Management Agreement to Lender or such Lender Affiliate
and ending on the date of its subsequent transfer of such interest to its
successors;
(vii) No Successor Owner shall be bound by the covenants and agreements
contained in the Management Agreement on the part of the Owner for any period
following its subsequent transfer of its interest to its successors;
(viii) No Successor Owner shall have any liability for a breach by Borrower
(but not by any prior Successor Owner) or Manager of the Cash Management
Procedures, provided that this provision shall not in any way release Lender or
Servicer of their respective obligations under the Cash Management Procedures;
and
(ix) No Successor Owner shall have any liability or obligation for any
application or transfer fee to Manager in connection with the substitution of
such party as Owner under the Management Agreement.
(b) If the Management Agreement shall be rejected or disaffirmed pursuant
to any bankruptcy law or any other law affecting creditors' rights, or suspended
or terminated by the actions of a receiver, Lender or any Successor Owner and
Manager shall, within sixty (60) days after such Successor Owner obtains
possession of the Property or portion thereof, enter into a new agreement for
the management thereof on the same terms and conditions as are contained in the
Management Agreement (as amended to reflect the provisions of Sections 3 and 10
hereof, if such Successor Owner is Lender or a Lender Affiliate), and other
applicable provisions of this Agreement for the remainder of the term of the
Management Agreement, provided, however, that (i) neither Lender nor any
Successor Owner shall have such obligation if the conditions set forth in
Section 9(a) hereof have not been satisfied by Manager, and (ii) neither Lender
nor any Successor Owner nor Manager shall have such obligation as to the
Property if Lender or the Successor Owner shall not have obtained possession of
the Property within one (1) year after the date of termination or suspension of
the Management Agreement. Neither Lender nor any Successor Owner shall have any
liability or obligation for any application or transfer fee to Manager in
connection with such new agreement.
(c) This Agreement satisfies Owner's obligations under the provisions of
Sections 6.04C, 6.05, and 6.06 of the Management Agreement.
10. Modifications Following Foreclosure.
(a) The restrictions in Article XIX of the Management Agreement shall not
apply to any acquisition of the Hotel at a foreclosure sale or by Deed in Lieu
of Foreclosure by Lender or a Lender Affiliate.
(b) In the event that Lender or a Lender Affiliate enters into a Sale of
the Hotel in violation of Section 19.01A of the Management Agreement, the sole
remedy of Manager shall be to terminate the Management Agreement pursuant to
Section 19.01B thereof.
(c) The provisions of Section 8.06 of the Management Agreement shall not
apply following a Foreclosure.
11. No Litigation, No Bankruptcy Filings. Manager agrees not to bring any
action against Borrower nor to cause the filing of a petition in bankruptcy
against Borrower for non-payment to Manager of any Base Management Fee,
Incentive Management Fee, Deferred Fee, Manager Loans or accrued interest
thereon or other amounts payable to Manager under the Management Agreement until
the Note has been Paid in Full, and (as to the filing of a petition in
bankruptcy) the expiration of a period equal to the applicable preference period
under the federal Bankruptcy Code (Title 11 of the United States Code) plus ten
(10) days following the date on which the Note has been Paid in Full. The
foregoing shall not in any way affect the rights of Manager to bring an action
against Lender or the Servicer, or Lender to bring an action against Manager,
for breach of their respective obligations under this Agreement.
12. Assignment by Lender. Manager acknowledges that Lender may, from time
to time, assign all or any part of its right, title and interest in, to and
under this Agreement in connection with a sale or assignment (which may include
a reassignment if Lender reacquires all or any portion of the Note) of the Note
(or any portion thereof) and the other Loan Documents to one or more third
parties, including, without limitation, to an agent for one or more
participants, or a trustee (each, a "Trustee") for the benefit of holders (the
"Holders") of the Securities, and Manager agrees that all of the covenants and
agreements made by Manager in this Agreement (and in the Management Agreement if
Lender and/or one or more assignees of the Note) succeed to the rights of the
Owner thereunder) are also for the benefit of, and that all of the rights of
Lender hereunder shall inure to the benefit of, the successors and assigns of
the Lender in connection with any such sale or assignment of the Note and other
Loan Documents, including, without limitation, a Trustee and any Holders. Except
as set forth above, Lender shall not assign its rights hereunder without
Manager's prior written consent, which consent shall not be unreasonably
withheld, conditioned or delayed.
13. Securitization.
(a) Manager shall use commercially reasonable efforts to cooperate with
Lender in its activities in connection with the sale of the Loan as a whole loan
or any securitization of all or a portion of the Loan, which may include a
resecuritization of portions of the Loan reacquired by Lender (collectively,
"Securitizations"), including obtaining ratings of the Loan or the Securities by
the Rating Agencies and annual rating reviews of the Loan or the Securities by
the Rating Agencies. The Securitization will involve the issuance of rated
single- or multi-class securities secured by or evidencing ownership interests
in the Loan Documents (the "Securities"). Such cooperation shall include,
without limitation, the obligation to cooperate with Lender in providing to the
Rating Agencies such information as is customarily provided by a property
manager on behalf of a borrower in connection with annual reviews conducted in
commercial mortgage backed securities transactions similar to the
Securitization, provided, however, that in no event shall Manager be required to
cooperate in any request for Manager, Marriott or any Marriott Affiliate to be
rated by any Rating Agency that, as of the date hereof, does not rate Manager,
Marriott, or any Marriott Affiliate.
(b) Lender shall indemnify, defend and hold Manager, Marriott and all
Marriott Affiliates (and their respective directors, officers, shareholders,
employees and agents) harmless from and against all loss, costs, liability and
damage, including attorneys' fees and expenses, and the costs of litigation
related thereto (collectively "Losses") to which any such persons may become
subject under the Securities Act of 1933, as amended, or otherwise, insofar as
the Losses arise out of or are based upon any untrue statement of material fact
contained in the offering documents used in the offering of the Securities or
any other securities issued by Lender with respect to the Loan or arise out of
or are based upon the omission or alleged omission to state in such offering
documents a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading; provided, however, that the indemnification contained herein shall
not be operative if such untrue statement or omission was made in reliance upon
any information given by Manager to Borrower referred to in Section 5(h) hereof.
(c) The provisions of this Section 13 shall supersede any inconsistent
provisions in Section 20.05 of the Management Agreement). Manager will not
invoke provisions of any other Sections of the Management Agreement that are
inconsistent with provisions specifically addressed in this Section 13.
14. Disclosure. Borrower, Lender, the Servicer, and any Trustee may
disclose information regarding the Management Agreement and this Agreement and
the operation of the Hotel, and provide copies of the Management Agreement, this
Agreement, and any financial statements or reports delivered by Manager pursuant
to the Management Agreement or this Agreement to Lender, any Trustee and
Servicer or any holder of the Securities, and any counsel to or agents,
officers, employees, and representatives of any such Person, and may disclose
and describe the terms hereof and of the Management Agreement in any offering
memorandum, prospectus, or registration statement or other filing required under
applicable law, provided, however, that (i) Borrower, the Servicer, Lender, and
any Trustee, shall implement procedures to restrict the dissemination of
information to the holders of the Loan or the Securities concerning revenues per
available rooms, Gross Revenues, Operating Profit, and occupancy and room rate
statistics of the Hotel to the extent reasonably practicable, giving due regard
to the desire of holders of the Securities to have access to such information
and to the requirements of applicable securities laws and (ii) any disclosure of
information in any offering memorandum, prospectus, or registration statement,
or other filing which is accessible to the general public ("disclosure
document") required under applicable law or to any prospective holder of the
Securities concerning revenue per available rooms, Gross Revenues, Operating
Profit, occupancy and room rate statistics shall be made in the following
format: (A) such information (excluding Operating Profit) may be disclosed in a
narrative description in the text of a disclosure document, identifying the
Property by name, but only for the thirteen (13) Accounting Periods immediately
preceding the disclosure, and (B) such information (including Operating Profit)
may be disclosed in tabular form in an exhibit to a disclosure document that is
not immediately adjacent to the foregoing narrative description (in the case of
a prospectus, the degree of separation between exhibit and narrative description
will be substantially similar to that in the Prospectus Supplement dated
________________, for Nomura Asset Securities Corporation, Commercial Mortgage
Pass-Through Certificates, Series 1996-MD V). Notwithstanding the foregoing, any
such offering memorandum, prospectus, registration or other filing required
under applicable law or given to any prospective holder of the Securities, may
identify the Hotel by specific location, number of rooms, date of opening,
appraised value, average occupancy, average daily room rate, and revenue per
available rooms, and such other information as is required by applicable
securities laws. The provisions of this Section 14 shall supersede any
inconsistent provisions in Section 20.05 of the Management Agreement). Manager
will not invoke provisions of any other Sections of the Management Agreement
that are inconsistent with provisions specifically addressed in this Section 14.
15. Default by Manager. A failure by Manager (i) to make good faith efforts
to comply with all material provisions of the Cash Management Procedures that
are within the control of Manager, which failure shall continue for more than
ten (10) days after written notice thereof from Lender or the Servicer (it being
understood that Manager's obligation to make transfers of Operating Profit is
conditioned on the Servicer's compliance in all material respects with its
obligation to transfer funds to Manager in accordance with the requirements of
the Cash Management Procedures) or (ii) to comply in all material respects with
the provisions of Sections 3(l), 3(m), 3(n) or 13 of this Agreement, which
failure shall continue for more than thirty (30) days after written notice
thereof from Lender or the Servicer, shall be deemed by Borrower and Manager to
constitute an "event of default" of Manager under the Management Agreement and
an Event of Default under the Loan Agreement. In addition, a purported
assignment by Manager of the Management Agreement without receipt of the Rating
Comfort Letter referred to in Section 3(j) of this Agreement shall be deemed an
"event of default" of Manager under the Management Agreement and an Event of
Default under the Loan Agreement if either Manager or the purported assignee of
the Management Agreement claims that such assignment is valid.
16. Miscellaneous.
(a) Nothing contained in this Agreement shall in any way impair or affect
the lien created by the Security Deed. The provisions of this Section 16(a) are
not intended to modify the rights of Manager under Sections 7, 8 and 9 hereof.
(b) Manager and Borrower each acknowledge that nothing contained in the
Management Agreement shall be deemed an amendment to the Loan Documents, or to
constitute a waiver by Lender of any provisions thereof.
(c) Manager shall have no obligation to perform the obligations of Borrower
under the Loan Documents, except to the extent such obligations are obligations
of Manager under the Management Agreement or this Agreement. In no event shall
Manager have any liability for payment of the Secured Obligations (but the
provisions of this sentence shall not affect the obligations of Manager under
the Cash Management Procedures).
(d) This Agreement shall bind and inure to the benefit of the parties
hereto, and every reference herein to the parties shall be deemed to refer to
each of those parties and their respective successors in interest and assigns as
permitted hereunder and under the Management Agreement. Notwithstanding the
provisions of the immediately preceding sentence, in the event of the assignment
or transfer of the interest of Lender in and to all or a portion of the Loan
Documents, all obligations and liabilities of Lender under this Agreement shall
terminate as to the portion transferred, and thereupon all obligations and
liabilities shall be the sole responsibility of the party to whom the interest
of Lender has been assigned or transferred, which assignee shall be deemed to
have assumed all of such obligations and liabilities of Lender hereunder.
Acceptance of any such assignment shall be deemed an acknowledgement by the
assignee that it has so assumed such obligations and liabilities of Lender
hereunder. Notwithstanding the foregoing, there shall be no termination of
obligations and liabilities incurred prior to the assignment by or termination
of a Servicer with respect to the obligations of such Servicer under the Cash
Management Procedures.
(e) Manager agrees that this Agreement satisfies any condition or
requirement in the Management Agreement relating to the granting of a
non-disturbance agreement (including, without limitation, Section 6.05 thereof)
from the holder of the Security Deed.
(f) All notices and other communications hereunder (including, without
limitation, notices that Lender is obligated to give to Manager under Section 6
hereof) shall be in writing and shall be delivered by recognized overnight
courier service or mailed by certified or registered mail, return receipt
requested, postage prepaid, and shall be deemed to have been duly given or made
when received (or when delivery is refused), addressed to each of the parties at
the following addresses (provided, however, such addresses may be changed by
giving like notice for such purpose to the other parties):
If to Lender:
Nomura Asset Capital Corporation
2 World Financial Center, Building B
New York, New York 10281
Att: Daniel S. Abrams, Director
With a copy to:
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
Att: Robert I. Fisher, Esq.
and
Nomura Asset Capital Corporation
2 World Financial Center, Building B
New York, New York 10281
Att: Sheryl McAfee
If to Manager:
New Marriott MI, Inc.
10400 Fernwood Road
Bethesda, Maryland 20817
Att: Law Department - Dept. 52.923/Lodging Operations
With a copy to:
New Marriott MI, Inc.
10400 Fernwood Road
Bethesda, Maryland 20817
Att: Senior Vice President - Finance
Marriott Lodging
If to Borrower:
HMA Realty Limited Partnership
c/o Host Marriott Corporation
10400 Fernwood Road
Bethesda, Maryland 20817
Att: Law Department
(g) The provisions of this Agreement shall be self-operative and no further
instrument shall be necessary to effect the aforementioned non-disturbance,
attornment, recognition and subordination. Nevertheless, in confirmation
thereof, Manager or Lender shall execute and deliver appropriate certificates to
confirm such non-disturbance, attornment, recognition and subordination upon
request of the other.
(h) The parties hereto will, from time to time upon the request of any
other party, execute all reasonable instruments of further assurance and all
such reasonable supplemental instruments with respect to this Agreement as the
other may specify.
(i) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO NEW YORK'S
PRINCIPLES OF CONFLICTS OF LAW). NOTWITHSTANDING THE FOREGOING, NOTHING HEREIN
SHALL AFFECT THE CHOICE OF LAW PROVISIONS OF THE LOAN DOCUMENTS.
(j) No amendment, modification, supplement, termination or waiver of or to
any provision of this Agreement, or consent to any departure by Manager
therefrom, shall be effective unless in writing and signed by Lender or its
successors and assigns and Manager. Any amendment, modification or supplement of
or to any provision of this Agreement, any waiver of any provision of this
Agreement, and any consent to any departure by Manager from the terms of any
provision of this Agreement shall be effective only in the specific instance and
for the specific purpose for which made or given.
(k) This Agreement and any amendments, waivers, consents or supplements
hereto may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed and delivered
shall be deemed to be an original, but all such counterparts shall constitute
one and the same agreement.
(l) TO THE EXTENT PERMITTED BY LAW, THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY SUIT, ACTION, OR PROCEEDING ARISING OUT
OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT OR THE SUBJECT MATTER HEREOF.
(m) Wherever there is any conflict or inconsistency between any terms or
provisions of this Agreement and the Management Agreement, the terms and
provisions of this Agreement shall control.
(n) Manager and Borrower each acknowledge that Lender is relying on the
matters contained herein.
(o) Any party to this Agreement may cause a short form or memorandum
hereof, in form reasonably satisfactory to all parties (or the Agreement in its
entirety, if required by applicable law) to be recorded in the land records of
the jurisdiction in which the Property is located.
(p) At such time as the Security Deed is released pursuant to the
provisions of Section 2.3 or 2.6 of the Loan Agreement, the security interest in
the Management Agreement granted to Lender under the Collateral Assignment of
Documents and the rights granted to Lender by this Agreement shall be
terminated, and all obligations of Manager hereunder owed to the Lender shall
terminate and Lender shall, on Manager's request, deliver a written instrument
in recordable form acknowledging such termination. Borrower agrees that
following such termination Manager may recover any Deferred Fees from Available
Cash Flow.
(q) In consideration for and as an inducement to Lender entering into this
Agreement, Marriott International, Inc. (i) represents that Manager is its
wholly owned subsidiary and is controlled by Marriott International, Inc., and
(ii) guarantees to Lender and any Lender Affiliate, and their respective
successors and assigns, the full performance and observance of all of the
covenants, conditions and agreements of Manager contained in this Agreement and
in the Management Agreement, as each may, from time to time, be amended (whether
or not notice of such amendment is delivered to Marriott International, Inc.).
(Signature page follows)
IN WITNESS WHEREOF, we have set our hands as of the day and year first
above written.
NEW MARRIOTT MI, INC.,
a Delaware corporation
Attest: /s/ Carolyn Colton By: /s/ Raymond G. Murphy
Name: Raymond G. Murphy
Title: Vice President
NOMURA ASSET CAPITAL CORPORATION,
a Delaware corporation
Attest: /s/ Rebecca Prien By: /s/ Robert Spinna
Name: Robert Spinna
Title: Vice President
HMA REALTY LIMITED PARTNERSHIP,
a Delaware limited partnership
Attest: /s/ Susan Wallace By: HMA-GP, INC., General Partner
By: /s/ P. K. Brady
Name: Patricia K. Brady
Title: Vice President
For the purposes of Section 16(q) hereof:
MARRIOTT INTERNATIONAL, INC.,
a Delaware corporation
By: /s/ Raymond G. Murphy
Name: Raymond G. Murphy
Title: Vice President
[This document was prepared by:
Stephen R. Senie
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022]
EXHBIT 10.11
1/29/98
LOAN AGREEMENT
between
HMA REALTY LIMITED PARTNERSHIP
and
NOMURA ASSET CAPITAL CORPORATION
Dated as of January 30, 1998
LOAN AGREEMENT, dated as of January 30, 1998, between HMA Realty
Limited Partnership, a Delaware limited partnership (the "Borrower"), and Nomura
Asset Capital Corporation ("NACC") (together with its assigns and successors,
the "Lender").
W I T N E S S E T H:
WHEREAS, the Borrower wishes to obtain a loan from the Lender in the
principal amount of $164,000,000 which, together with other funds made available
to the Borrower, shall, among other things, (i) satisfy all existing debt
secured by the Property (as hereinafter defined), (ii) provide initial funding
for reserves for deferred maintenance, environmental remediation, compliance
with the Americans With Disabilities Act of 1990, replacement of furniture,
fixtures and equipment and capital improvements, (iii) pay the costs of
completing the transactions contemplated hereby and (iv) provide working capital
to the Borrower, and the Lender is willing to make such loan to the Borrower on
the terms and conditions hereinafter set forth; and
WHEREAS, such loan is to be evidenced by the Notes (as hereinafter
defined) and secured by, inter alia, the Mortgage (as hereinafter defined),
NOW, THEREFORE, in consideration of the above-mentioned premises and
the agreements, representations and warranties hereafter set forth, the Borrower
and the Lender agree as follows:
ARTICLE I
DEFINITIONS
Section I.1 Definitions. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Section have the meanings assigned to them in
this Section, and include the plural as well as the singular;
(b) the words "herein," "hereof," "hereto" and "hereunder" and other words
of similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision;
(c) all references to any agreement or instrument shall be to that
agreement or instrument as in effect from time to time, including any
amendments, consolidations, replacements, restatements, modifications and
supplements thereto;
(d) all terms defined in this Section with reference to the Cash Management
Procedures shall continue in effect after the termination of such Cash
Management Procedures in accordance with the terms thereof;
(e) all references to "Section(s)" and "Exhibit(s)" shall mean the
Section(s) of and Exhibit(s) annexed to this Agreement unless expressly stated
to be Section(s) or Exhibit(s) of the Cash Management Procedures; and
(f) certain terms defined in this Section appear only in this Agreement and
not in the Cash Management Procedures and vice versa.
"Accounting Period" means, initially, each accounting period of four
consecutive weeks having the same beginning and ending dates as the Manager's
corresponding four week accounting periods, except that the last Accounting
Period in a Fiscal Year may be longer than four consecutive weeks when and to
the extent necessary to conform the accounting system to the calendar, or if the
accounting year on the basis of which the Hotel is operated changed to a
calendar year or a conventional 365-day fiscal year, "Accounting Period" shall
mean each calendar month in such fiscal year.
"Accounting Quarter" means, initially, three (or, in the case of the last
Accounting Quarter in any Fiscal Year, four) consecutive Accounting Periods,
ending on the last day of the third, sixth, ninth and last Accounting Period in
each Fiscal Year, or, if the accounting year on the basis of which the Hotel is
operated is changed to a calendar year or a conventional 365-day fiscal year,
"Accounting Quarter" shall mean each of the fiscal quarters in such fiscal year
(i.e., there shall be four consecutive Accounting Quarters of three months
each).
"Action" means any action, suit, claim, arbitration, governmental
investigation or other proceeding.
"ADA Compliance Work" means the repairs, improvements and replacements to
the Property to be made to comply with the Americans with Disabilities Act of
1990, as amended from time to time, in the amounts more particularly described
on Exhibit A annexed hereto.
"Additional Capital Expenditures" has the meaning set forth in Section 8.3
of the Cash Management Procedures.
"Adjusted Rate" means the per annum rate of interest that is the greater of
(xx) the Base Rate plus 2% and (yy) the yield as of the Optional Prepayment
Date, calculated by linear interpolation (rounded to three decimal places), of
the yields of United States Treasury Constant Maturities with terms (one longer
and one shorter) most nearly approximating those of U.S. Obligations having
maturities as close as possible to the thirteenth anniversary of the Optional
Prepayment Date, as determined by the Lender on the basis of Federal Reserve
Statistical Release H.15-Selected Interest Rates under the heading U.S.
Governmental Securities/Treasury Constant Maturities, or other recognized source
of financial market information selected by the Lender in each case on the last
Business Day of the week immediately prior to the Optional Prepayment Date, plus
3.75%.
"Affiliate" means, with respect to any Person, any Person which controls,
is controlled by or is under common control with, such Person, including,
without limitation, (a) any officer or director of any of the foregoing and (b)
any partner, member or shareholder that controls any of the foregoing, and
"control" shall mean ownership of more than twenty-five percent (25%) of all of
the voting stock of a corporation or more than twenty-five percent (25%) of all
of the legal and beneficial interests in any other entity or the possession of
the power, directly or indirectly, to direct or cause the direction of the
management and policy of a corporation or other entity, whether through the
ownership of voting securities, common directors or officers, the contractual
right to manage the business affairs of such entity, or otherwise.
"Agreement" means this Loan Agreement.
"Annual Plan" has the meaning set forth in Section 5.2(d)(vi).
"Bankruptcy Custodian" has the meaning set forth in Section 4.1A(g)(A)(2).
"Base Rate" means 7.40% per annum.
"Base Rate Interest" means interest on the Notes at the Base Rate or the
Default Rate, as applicable, then due and payable for the applicable Debt
Service Period.
"Best Knowledge" means with respect to any provision, knowledge or
information obtained by the Borrower or any officer or director of the General
Partner other than the Independent Director.
"Borrower" means HMA Realty Limited Partnership.
"Business Day" means a day on which banks are open for business in New
York, New York.
"Capital Budget" has the meaning set forth in Section 5.2(d)(vi).
"Capital Expenditure and FF&E Reserve Accounts" means the accounts
established pursuant to Section 8.1 of the Cash Management Procedures.
"Capital and FF&E Expenditures" means the expenditures of amounts for the
purpose of the FF&E Reserve, as such term in defined in the Management
Agreement.
"Cash Management Procedures" means the provisions of Exhibit B.
"Change of Control" means any Grant of (i) the capital stock in the General
Partner, (ii) the general partnership interest in the Borrower, (iii) any
limited partnership interest in the Borrower or (iv) an interest in a limited
partner of the Borrower such that as a result of such transfers and any other
such transfers prior to the date of determination, any person other than Host
Marriott, Ivy Street Hotel Limited Partnership or Atlanta Marriott Marquis II
Limited Partnership directly or indirectly, holds more than 51% of the capital
stock in the General Partner or 51% of the partnership interests in the
Borrower.
"Clearing Account" has the meaning set forth in Section 7.2.2 of the Cash
Management Procedures.
"Closing Date" means the date of execution and delivery of this Agreement.
"Condemnation Proceeds" has the meaning set forth in the Mortgage.
"DCR" means Duff & Phelps Credit Rating Co.
"Debt" means the obligations of the Borrower under the Transaction
Documents, together with all interest thereon, and all other sums, including,
without limitation, fees, expenses, commissions, premiums and indemnities, which
may or shall become due under any of the Transaction Documents, including the
costs and expenses of enforcing any provision of the Transaction Documents that
may be reimbursable thereunder.
"Debt Service Payment Date" means the 11th day of each calendar month or if
in any month the 11th day is not a Business Day, the Debt Service Payment Date
for such month shall be the first Business Day thereafter.
"Debt Service Period" means the period from and including the eleventh
(11th) day of the month immediately preceding each Debt Service Payment Date to
and including the tenth (10th) day of the month in which such Debt Service
Payment Date occurs.
"Debt Service Reserve Account" has the meaning set forth in Section 5 of
the Cash Management Procedures.
"Default Rate" means a rate per annum equal to the lesser of (aa) two
percent (2%) above the Base Rate or Adjusted Rate, as applicable, compounded
monthly, and (bb) the maximum rate allowed by law.
"Defeasance Collateral" has the meaning set forth in Section 2.3(a)(iv)(A).
"Defeasance Deposit" has the meaning set forth in Section 2.3(e).
"Defeasance Security Agreement" has the meaning set forth in Section
2.3(a)(iv)(A).
"Deferred Maintenance Work" means the repairs, improvements and
replacements to the Property in the amounts more particularly described on
Exhibit A hereto.
"Deposit Account" means the account established and held by the Servicer
pursuant to Section 4.1 of the Cash Management Procedures.
"Direct Manager Funds" has the meaning set forth in Section 12.5 of the
Cash Management Procedures.
"Disclosure Report" means the schedule annexed hereto as Schedule 1.
"Eligible Account" means either (i) an account maintained with a federal or
state chartered depository institution or trust company, (a) if the funds
therein are to be retained for more than 30 days, the long-term unsecured debt
obligations of which (or, in the case of a depository institution or trust
company that is the principal subsidiary of a holding company, the long-term
unsecured debt obligations of the holding company of which) are rated by each
Rating Agency in one of its two highest rating categories (or such other ratings
as will not result in the rating of any of the Securities being reduced below
their respective ratings on the date determination is to be made and as to which
the Rating Agencies may otherwise agree) at the time of the deposit therein, or
(b) if the funds therein are to be retained for less than 30 days, the
short-term unsecured debt obligations of such depository institution or trust
company (or, in the case of a depository institution or trust company that is
the principal subsidiary of a holding company, the short-term unsecured debt
obligations of the holding company of which), as the case may be, are rated not
lower than A-1+ by S&P or the equivalent rating of the other Rating Agencies, or
(ii) a segregated trust account maintained with the trust department of a
federal or state chartered depository institution or trust company acting in its
fiduciary capacity, provided that such account is subject to fiduciary funds on
deposit regulations (or internal guidelines) substantially similar to 12 C.F.R.
'9.10(b), or (iii) after the Securitization, an account in any other insured
depository institution reasonably acceptable to the Servicer and the Trustee, so
long as prior to the establishment of an account in any such other depository
institution each of the Rating Agencies shall have delivered a Rating Comfort
Letter with respect thereto.
"Emergency Expenditures" means expenditures arising in the event of an
emergency arising out of a fire or other casualty at the Hotel or other events,
circumstances or conditions which give rise to safety or life threatening
situations, to the extent such expenditures are necessary to protect the safety
or welfare of guests and employees or to protect against further property damage
to the Hotel.
"Entities" has the meaning set forth in Section 6.1(b).
"Environmental Indemnity Agreement" means the environmental indemnity
agreement, dated the Closing Date, from the Borrower to NACC.
"Environmental Laws" has the meaning set forth in the Environmental
Indemnity Agreement.
"Environmental Remediation Work" means the actions taken with respect to
the Property set forth on Exhibit C.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder.
"ERISA Affiliate" means all members of a controlled group of
corporations and all trades and businesses (whether or not incorporated) under
common control and all other entities which, together with the Borrower, are
treated as a single employer under any or all of Sections 414(b), (c), (m) or
(o) of the IRC.
"Event of Default" has the meaning set forth in Section 4.1A.
"Excess Cash Flow" means, for the period of determination, the difference
between (i) Net Operating Income and (ii) the sum of (A) the Monthly Debt
Service Payments, (B) other Debt then due and payable to the Lender (other than
payments required under Section 3.4(d)), and (C) withdrawals from the Deposit
Account applied for the purposes set forth in clauses (E), (F) and (G) of
Section 4.4 of the Cash Management Procedures or, if Section 7.10 of the Cash
Management Procedures is applicable, clauses (B), (C) and (D) thereof.
"Expense Deposit" has the meaning set forth in Section 7.1(c).
"Fiscal Year" means January 1 of each year through and including December
31 of such year except that, for purposes of calculating the Debt Service
Coverage Ratio or any other calculation requiring reference to Gross Revenues,
Net Operating Income or other amounts calculated with reference to the
Accounting Periods, "Fiscal Year" shall mean the fiscal year of the Manager, as
defined in the Management Agreement.
"GAAP" means generally accepted accounting principles in the United States
of America (as such principles may change from time to time) applied on a
consistent basis (except for changes in application in which the Borrower's
independent certified public accountants concur), both as to classification of
items and amounts.
"General Partner" means HMA-GP, Inc., a Delaware corporation.
"Governmental Authority" means any court, agency, authority, board
(including, without limitation, environmental protection, planning and zoning),
bureau, commission, department, office or instrumentality of any nature
whatsoever of any governmental or quasi-governmental unit of the United States
or the state, county or city where the Property is located or any political
subdivision of any of the foregoing, whether now or hereafter in existence, or
any officer or official thereof, having jurisdiction over the Borrower or the
General Partner or the Property or any portion thereof.
"Grant" means any sale, conveyance, transfer, lease (including any
amendment, extension, modification, waiver or renewal thereof), assignment,
mortgage, pledge, grant of a security interest or hypothecation, whether by law
or otherwise.
"Gross Revenues" shall mean all revenues and receipts of every kind derived
from operating the Hotel and parts thereof, including, but not limited to:
income (from both cash and credit transactions), before commissions and
discounts for prompt or cash payments, from rental of rooms, stores, offices,
meeting, exhibit or sales space of every kind; license, lease and concession
fees and rentals (not including gross receipts of licensees, lessees and
concessionaires); income from vending machines; health club membership fees;
food and beverage sales; sales of merchandise (other than proceeds from the sale
of FF&E no longer necessary to the operation of the Hotel, which shall be
deposited in the FF&E Reserve Account as set forth in Section 8.02D of the
Management Agreement); service charges, to the extent not distributed to the
employees at the Hotel as, or in lieu of, gratuities; and proceeds, if any, from
business interruption or other loss of income insurance; provided, however, the
Gross Revenues shall not include the following: gratuities to Hotel employees;
federal, state or municipal excise, sales, use or similar taxes collected
directly from patrons or guests or included as part of the sales price of any
goods or services; insurance proceeds (other than proceeds from business
interruption or other loss of income insurance); condemnation proceeds (other
than for a temporary taking); any proceeds from any sale of the Hotel or from
the refinancing of any debt encumbering the Hotel; proceeds from the disposition
of FF&E no longer necessary for the operation of the Hotel; interest which
accrues on amounts deposited in either the FF&E Reserve or any escrow accounts
which are established in accordance with Section 13.01 C of the Management
Agreement; or Cure Payments (as such term is defined in the Management
Agreement).
"Host Marriott" means Host Marriott Corporation, a Delaware corporation.
"Hotel" means the Atlanta Marriott Marquis Hotel located at 265 Peachtree
Center Avenue, Atlanta, Georgia.
"Impositions" has the meaning set forth in the Mortgage.
"Indebtedness" means for any Person (a) obligations for borrowed money
(including, without limitation, in the case of the Borrower, the Debt), (b)
obligations under letters of credit, (c) obligations relating to Purchase Money
Security Interests, (d) obligations, whether or not assumed, secured by Liens or
payable out of the proceeds or production from property now owned by such
Person, (e) obligations for trade credit or acceptances incurred in the ordinary
course of business which are 60 days past due, and (f) obligations of another
Person of the type set forth in clauses (a) through (e) above which such Person
has guaranteed or in respect of which such Person is liable, contingently or
otherwise, including, without limitation, by way of agreement to purchase
property or services, to provide funds to or otherwise invest in such other
Person, or otherwise to assure a creditor of such other Person against loss.
"Indemnified Parties" shall have the meaning set forth in Section 7.2(a).
"Independent Director" means a person reasonably satisfactory to the Lender
who is not at the time of such individual's appointment as a director, and has
not been during the preceding five years, (i) an officer, director, employee,
partner, stockholder or beneficial-interest holder of the General Partner or the
Borrower; (ii) an officer, director, employee, partner, member,
beneficial-interest holder or stockholder of any Affiliate (as defined below) of
the General Partner or the Borrower; (iii) a customer of or supplier to the
Borrower or any Affiliate thereof (other than a hotel guest or a customer or
supplier that does not derive more than 10% of its revenues from its activities
with the Borrower or any Affiliate thereof); or (iv) a spouse, parent, sibling,
or child of any person described in (i), (ii), or (iii); provided, however, that
a person shall not be deemed to be a director of an Affiliate solely by reason
of such person being a director of a single-purpose entity which would otherwise
be deemed an Affiliate. For the purpose of this definition alone, "Affiliate"
means any person or entity (i) which owns beneficially, directly or indirectly,
more than 10 percent of the outstanding shares of the common stock of the
General Partner or which is otherwise in control of the General Partner, (ii) of
which more than 10% of the outstanding voting securities are owned beneficially,
directly or indirectly, by any person or entity described in clause (i) above,
or (iii) which is controlled by, or under common control with, any person or
entity described in clause (i) above; the terms "control" and "controlled by"
shall have the meanings assigned to them in Rule 405 under the Securities Act of
1933.
"Insolvency Law" has the meaning set forth in Section 4.1A(g)(A)(1).
"Insurance Proceeds" has the meaning set forth in the Mortgage.
"Insurance Requirements" means all terms of any insurance policy required
by the Mortgage covering or applicable to a particular Property or any part
thereof and all requirements of the insurance carrier, all as more fully
described in such Mortgage.
"IRC" means the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder, or any successor
statute(s).
"Legal Requirements" has the meaning set forth in the Mortgage.
"Lien" means any security interest, mortgage, pledge, lien, restriction on
transferability, claim, charge, encumbrance, title retention agreement or
analogous instrument, in, of or on the Property or any of them.
"Lender" means NACC and its assigns and successors.
"Loan" means the loan evidenced by the Notes.
"Local Account" has the meaning set forth in Section 7.3 of the Cash
Management Procedures.
"Lockbox Event" has the meaning set forth in Section 7 of the Cash
Management Procedures.
"Lockbox Period" has the meaning set forth in Section 7 of the Cash
Management Procedures.
"Management Agreement" means the Management Agreement dated January 3, 1998
as amended by the SNDA, and any other management agreement entered into by the
Borrower as required or permitted herein.
"Management Expenses" means, for the Hotel, (a) the cost of sales including
salaries, wages, employee benefits, Employee Claims (as such term is defined in
the Management Agreement), payroll taxes and other costs related to Hotel
employees; (b) departmental expenses, administrative and general expenses and
the cost of hotel advertising and business promotion; the cost of heat, light,
power and water; and the cost of routine repairs, maintenance and minor
alterations treated as Deductions under Section 8.01 of the Management
Agreement; (c) the cost of Inventories and Fixed Asset Supplies (as such terms
are defined in the Management Agreement) consumed in the operation of the Hotel;
(d) a reasonable reserve for uncollectible accounts receivable as determined by
the Manager; (e) all reasonable costs and fees of independent professionals or
other third parties who are retained by Manager to perform services required or
permitted under the Management Agreement; (f) the cost and expense of technical
consultants and operational experts, including Affiliates (as such term is
defined in the Management Agreement) of the Manager, for specialized services in
connection with non-routine Hotel work; (g) the Base Management Fee (as such
term is defined in the Management Agreement); (h) the Hotel's pro rata share of
costs and expenses incurred by the Manager or its Affiliates in providing Chain
Services (as defined in the Management Agreement); (i) the Hotel's pro rata
share of costs and expenses incurred in connection with sales, advertising
and/or promotional programs developed for or within the Marriott Hotel System
(as such term is defined in the Management Agreement), where such costs and
expenses are not deducted as either departmental expenses under clause (b) above
or as Chain Services under clause (h) above; (j) insurance costs and expenses in
Section 12.04B of the Management Agreement; (k) any amounts transferred into the
FF&E Reserve under Section 8.02 of the Management Agreement; (l) license fees
and taxes, if any, payable by or assessed against the Manager related to the
Management Agreement or to the Manager's operation of the Hotel (exclusive of
the Manager's income taxes or franchise taxes) including any Impositions (as
such term is defined in the Management Agreement) assessed against the Hotel;
(m) rent payable under any telephone or equipment leases; (n) any reimbursements
to the owner of the amount of any Owner Deductions (as such term is defined in
the Management Agreement); and (o) such other costs and expenses as are
specifically provided for as Deductions in the Management Agreement or are
otherwise reasonable necessary for the proper and efficient operation of the
Hotel.
"Manager" means New Marriott MI, Inc. or any entity that is an Affiliate of
MII and any property manager appointed as permitted herein.
"Manager's Account" has the meaning set forth in Section 1.2 of the Cash
Management Procedures.
"Material Adverse Effect" means a material adverse effect on (a) the
Borrower's ability to enter into or fulfill its material obligations under the
Transaction Documents or to effect the transactions contemplated thereby or (b)
a material adverse effect on the condition (financial or otherwise), business,
prospects, assets, liabilities, management, financial position or results of
operations of the Borrower or the Property.
"Maturity Date" shall mean the earlier to occur of (1) February 11, 2023 or
(2) such date to which the maturity of the Debt may be accelerated upon an Event
of Default or as otherwise provided in any Transaction Document.
"MII" means Marriott International, Inc., a Delaware corporation, or, at
such time as the name of New Marriott MI, Inc. or any entity that succeeds to
the business of MII is changed to Marriott International, Inc. as contemplated
by the letter dated January 7, 1998 from Marriott International Inc. to Amresco
Services, L.P., New Marriott MI, Inc. or such entity.
"MII Cash Management Conditions" means the following conditions: (i) the
Property is managed by the Manager under the Management Agreement and (ii) the
Manager is MII or a wholly owned, direct or indirect, subsidiary of MII.
"MII Debt" has the meaning set forth in Section 6 of the Cash Management
Procedures.
"Monthly Debt Service Payment" means with reference to each Note,
$600,649.08.
"Mortgage" means, the mortgage, deed of trust or other security instrument
creating a first mortgage lien on the Property, dated as of the Closing Date,
from the Borrower to or for the benefit of the Lender.
"NACC" means Nomura Asset Capital Corporation.
"Net Operating Income" means, in respect of any fiscal period, Gross
Revenues less the sum of, without duplication, (A) Management Expenses and (B)
Impositions or insurance premiums paid or reserved for payment with respect to
the Property.
"Non-Recourse" means, with respect to the Debt, that the Debt is limited in
recourse solely to the Pledged Property and is not guaranteed directly or
indirectly by any Partner or the Manager and no Partner or the Manager or any
shareholder, member, director, officer, employee or agent of any Partner or the
Manager, either directly or indirectly, shall be personally liable in any
respect (except to the extent of their respective interests in the Pledged
Property) for (i) the payment of any Debt, (ii) the performance of any covenant
or obligation under any Transaction Document or (iii) monetary damages for the
breach of performance of any covenant or obligation contained in any Transaction
Document; provided, however, that in the event of any fraud, material
misrepresentation or misappropriation of funds under any Transaction Document or
under the Management Agreement, nothing herein or in such other documents shall
estop the Lender from prosecuting an Action against the party or parties
committing such fraud, misappropriation or material misrepresentation, or
misappropriating such funds, or the recipient or beneficiary of such fraud,
material misrepresentation or misappropriation, whether or not such party,
recipient or beneficiary is the Borrower or a Partner or the Manager, to the
extent of losses relating to or arising from such fraud, material
misrepresentation or misappropriation of funds under any Transaction Document;
provided, further, that the Borrower's obligations in respect of the
Environmental Indemnity Agreement and the covenants, indemnities,
representations and warranties relating to environmental matters contained in
any Transaction Document shall not be Non-Recourse to the Borrower (but shall be
Non-Recourse to its Partners other than the General Partner). The foregoing
provisions shall not (a) prevent recourse to the Pledged Property or constitute
a waiver, release or discharge of any Debt, and the same shall continue until
paid or discharged, (b) limit the right of any Person, if required by applicable
law, to name the Borrower or any successor or assign of the Borrower as a party
defendant in any Action in the exercise of any remedy under any Transaction
Document, so long as no judgment seeking the performance of any act requiring
the expenditure of money shall be sought against the Borrower or any such
successor or assign and so long as any monetary judgment seeking the expenditure
of money is payable only from the Pledged Property or (c) impair any right of
the Lender to obtain a deficiency judgment against the Borrower or any such
successor or assign in any Action where necessary as a matter of law to preserve
the rights and remedies of the Lender against the Pledged Property, provided
that such deficiency judgment may only be enforced against the Pledged Property.
Notwithstanding the foregoing, under no circumstances shall the Debt be recourse
to any limited partner of the Partnership in its capacity as such.
"Notes" means that certain Secured Promissory Note A, dated the Closing
Date, from the Borrower to the Lender in the principal amount of $82,000,000 and
that certain Secured Promissory Note B, dated the Closing Date, from the
Borrower to the Lender in the principal amount of $82,000,000.
"Officer's Certificate" means a certificate signed by any officer of the
General Partner who is authorized to act hereunder on behalf of the Borrower.
"Operating Account" has the meaning set forth in Section 7.7 of the Cash
Management Procedures.
"Operating Budget" has the meaning set forth in Section 5.2(d)(vi).
"Operating Profit" has the meaning set forth in the Management Agreement.
"Operating Profit Payment Date" means the last Business Day of the third
week in each Accounting Period.
"Operational Agreements" means (i) the Management Agreement, (ii) the
Property Agreements, (iii) leases of furniture, fixtures and equipment used in
connection with the Property and (iv) the respective written or unwritten
agreements pursuant to which lessees, tenants or other third parties are
occupying any portion of the Property excluding, however, the letting of rooms
and other facilities to hotel guests in the ordinary course of business, if any,
and any assignment and assumption agreements or other agreements related
thereto.
"Optional Prepayment Date" means February 11, 2010.
"Paid-in-Full" means at such time as the Debt is not outstanding.
"Partners" means the limited partners of the Borrower as constituted from
time to time and the General Partner, in their capacities as such.
"Permits" means all permits, licenses, certificates, approvals,
authorizations and other documents necessary for the construction, use,
operation or maintenance of the Hotel and the Property.
"Permitted Exceptions" has the meaning set forth in the Mortgage.
"Permitted Investments" has the meaning set forth in Exhibit D hereto.
"Person" means any individual, corporation, partnership, joint venture,
association, limited liability company, joint stock company, estate, trust,
unincorporated organization or other business entity or Governmental Authority.
"Plan(s)" means an employee benefit or other plan established or maintained
by the Borrower or any ERISA Affiliate or to which the Borrower or any ERISA
Affiliate makes or is obligated to make contributions and which is covered by
Title IV of ERISA or Section 302 of ERISA or Section 412 of the IRC.
"Pledged Property" means the Property and the other collateral in which a
security interest is being granted pursuant to the Security Documents.
"Potential Event of Default" means an event which, with the giving of any
applicable notice and/or lapse of any applicable time period, would become an
Event of Default.
"Principal Payment" means the difference between the Monthly Debt Service
Payment and the Base Rate Interest paid for the applicable Debt Service Period.
"Property" or means the Hotel or, as the context may require, the fee
estate owned by the Borrower therein, including the Borrower's ownership
interest in all improvements thereon, fixtures thereto, direct interests
therein, and personal property related thereto or included therein; provided,
however, that "Property" shall not include any property owned by tenants,
guests, licensees or concessionaires of or to the Property.
"Property Agreements" means all material agreements, contracts and other
documents not specifically referred to herein relating to the operation of the
Hotel other than agreements for services performed by third parties which
services are generally available from other third parties and which agreements
can be terminated on not more than 30 days' prior notice without payment of any
damages or penalty.
"Purchase Money Security Interest" means purchase money mortgages or
security interests, conditional sale arrangements and other similar security
interests on furniture, fixtures or equipment acquired by the Borrower in the
ordinary course of business (and not inconsistent with customary industry
practices), with the proceeds of the indebtedness secured thereby; provided,
however, that (i) any Purchase Money Security Interest shall attach only to the
furniture, fixtures or equipment acquired in such transaction (and any proceeds,
as defined in the Uniform Commercial Code, thereof), and (ii) such indebtedness
shall not exceed the cost of such furniture, fixtures or equipment.
"Rating Agencies" means one or more of S&P, Fitch Investors Service, Inc.,
DCR and Moody's Investors Service, Inc. that are, at the time of determination,
selected by NACC to rate the Securities.
"Rating Comfort Letter" a letter from each Rating Agency pursuant to which
it confirms that the taking of the action referred to therein will not result in
a withdrawal, qualification or downgrade of the then existing ratings of the
Securities.
"Rehabilitation Work" means the repairs, improvements and replacements to
the Property as more particularly described on Exhibit J annexed hereto.
"Release Date" has the meaning set forth in Section 2.3(a)(i).
"REMIC" has the meaning set forth in Section 2.3(a).
"Required Amount" has the meaning set forth in Section 8.6 of the Cash
Management Procedures.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw-Hill,
Inc.
"Securities" has the meaning set forth in Section 6.1.
"Securities Act" means the Securities Act of 1933, as amended from time to
time, and the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
"Securitization" has the meaning set forth in Section 6.1.
"Security Documents" means (a) the Mortgage, (b) the collateral assignment
of documents and property rights, dated as of the Closing Date, by the Borrower
to the Lender, (c) the assignments of leases, rents and profits, dated as of the
Closing Date, by the Borrower to the Lender, (d) the collateral account
agreement, dated as of the Closing Date, among the Servicer, the Borrower and
the Lender, (e) the Environmental Indemnity Agreement, (f) all Uniform
Commercial Code financing statements relating to the Debt and (g) any other
documents securing the Debt.
"Servicer" means any nationally recognized servicer of commercial mortgage
loans selected by the Lender and its assigns and successors.
"Servicing Expenses" has the meaning set forth in Section 4.3(A)(i) of the
Cash Management Procedures.
"SNDA" means the Modification, Subordination and Non-Disturbance Agreement,
Estoppel, Assignment and Consent, dated as of the Closing Date, among the
Manager, the Borrower and the Lender.
"Subordinate Debt" means Indebtedness incurred by the Borrower and after
February, 2000 that is expressly subordinate in right of payment to the Debt
pursuant to the provisions of the Mortgage and with respect to which evidence is
provided satisfactory to the Lender that the Debt Service Coverage Ratio on its
date of issuance is at least 2.0:1 and if the Securitization has been effected,
as to which the Rating Agencies deliver a Rating Comfort Letter. For the purpose
of this definition, Debt Service Coverage Ratio means, as of any given date, the
ratio of (i) Net Operating Income for the 13 full Accounting Periods for which
financial statements are required to be furnished to the Lender pursuant to
Section 5.2(d)(ii) immediately preceding the date of calculation (or 12
Accounting Periods in the case of a calendar year or 365 day Fiscal Year) to
(ii) Debt Service Expense in respect of the 13 full Accounting Periods next
succeeding such date (or 12 Accounting Periods in the case of a calendar year or
365 day Fiscal Year). For the purpose of this definition, Debt Service Expense
means the aggregate amount of scheduled interest and principal payable on the
Notes, the proposed subordinate indebtedness, any other Indebtedness secured by
any assets of the Borrower and any outstanding Indebtedness incurred by Ivy
Street Hotel Limited Partnership and Atlanta Marriott Marquis II Limited
Partnership.
"Substantive Consolidation Opinion" has the meaning set forth in Section
6.1(b).
"Successor Entity" has the meaning set forth in Section 2.3(d).
"Third Party Payors" has the meaning set forth in Section 2.1 of the Cash
Management Procedures.
"Transaction Documents" means this Agreement, the Security Documents, the
Notes and all other documents executed and delivered by the Borrower in favor of
the Lender in connection with the Loan, including, without limitation, all
agreements, instruments and documents pursuant to which the Pledged Property is
assigned, collaterally assigned and/or pledged to the Lender hereunder.
"Transition Period" has the meaning set forth in Section 7.3 of the Cash
Management Procedures.
"Trustee" means the trustee to which NACC assigns its interest in the
Transaction Documents in connection with a Securitization.
"Uncontrollable Circumstances" means circumstances causing delay due to
acts of God, governmental restrictions (other than arising from the Borrower's
failure to comply with applicable law), enemy acts, civil commotion or other
causes beyond the reasonable control of the Borrower.
"United States" means the United States of America (including the States
and the District of Columbia), its territories, its possessions and other areas
subject to its jurisdiction.
"U.S. Obligations" has the meaning set forth in Section 2.3(e).
"Welfare Plan" means an employee welfare benefit plan, as defined in
Section 3(1) of ERISA.
"Work" has the meaning set forth in Section 8.1 of the Cash Management
Procedures.
"Yield Maintenance Premium" shall mean an amount in cash that would be
necessary at any date of determination to purchase U.S. Obligations in an amount
that would be sufficient, together with U.S. Obligations that could be purchased
with the unpaid principal of and accrued interest on the Notes payable to the
Lender (i) upon an acceleration of the Notes pursuant to Section 4.2 or (ii) as
otherwise provided for in this Agreement, to provide funds at least equal to,
but in no event less than, the payments due under the Loan on or prior to, but
as close as possible to, all successive Debt Service Payment Dates from and
after such date of determination in respect of (i) the remaining Monthly Debt
Service Payments that would be required under the Notes through and including
the Optional Prepayment Date and (ii) a balloon payment of the outstanding
principal balance of the Notes and accrued and unpaid interest as of the
Optional Prepayment Date as if such balloon payment were then due and payable.
ARTICLE II
PROVISIONS CONCERNING THE ACCOUNTS AND PLEDGED PROPERTY
Section II.1 Cash ManagementProcedures
The provisions of Exhibit B are incorporated herein by reference.
Section II.2 Right to Contest. To the extent consistent with the Mortgage,
the Borrower at its expense may contest, by appropriate Action conducted in good
faith and with due diligence, the amount or validity or application, in whole or
in part, of any Imposition or Lien therefor or any Legal Requirement or
Insurance Requirement or the application of any instrument of record affecting
the Pledged Property or any part thereof or any claims or judgments of
mechanics, materialmen, suppliers or vendors or Liens therefor, and may direct
the Manager or the Servicer, as the case may be, to withhold payment of the same
pending such Action if permitted by law; provided, however, that (a) in the case
of any Impositions or Liens therefor or any claims or judgments of mechanics,
materialmen, suppliers or vendors or Liens therefor, such Action shall suspend
the enforcement thereof and the accrual of penalties thereon payable by the
Borrower, the Manager and the Servicer and otherwise with respect to the Pledged
Property, (b) neither the Pledged Property nor any part thereof or interest
therein could be in any danger of being sold, forfeited or lost if the Borrower
pays the amount or satisfies the condition being contested, and the Borrower
would have the opportunity to so pay or satisfy if the Borrower fails to prevail
in the contest and (c) in the case of an Insurance Requirement, the failure of
the Borrower to comply therewith shall not impair the validity of any insurance
required to be maintained by the Borrower under the Mortgage or the right to
full payment of any claims thereunder.
Section II.3 Defeasance
(a) At any time after the date which is the earlier of (i) two years from
the "startup day," within the meaning of Section 860G(a)(9) of the IRC, of one
or more "real estate mortgage investment conduits," within the meaning of
Section 860D of the IRC (a "REMIC"), that hold the Notes and (ii) February 11,
2001, but prior in either case to the Optional Prepayment Date, and provided no
Event of Default has occurred and is continuing the Borrower may cause the
release of the Property from the Lien of the Security Documents by providing the
Lender with funds in an amount equal to the Defeasance Deposit, upon the
satisfaction of the following conditions:
(i) not less than 30 days' notice to the Lender specifying a Debt Service
Payment Date (the "Release Date") on which the Defeasance Deposit is to be made;
(ii) the payment to the Lender of accrued and unpaid interest on the
principal balance of the Notes to but not including the Release Date and all
other Debt due on the Release Date;
(iii) the payment to the Lender of the Defeasance Deposit; and
(iv) the delivery to the Lender of:
(A) a security agreement (the "Defeasance Security Agreement"), in form and
substance satisfactory to the Lender, creating a first priority perfected
security interest in favor of the Lender in the Defeasance Deposit and the U.S.
Obligations purchased with the Defeasance Deposit in accordance with Section
2.6(b) (together, the "Defeasance Collateral");
(B) form of release of the Property from the Lien of the Security Documents
(for execution by the Lender) appropriate for the State of Georgia;
(C) an Officer's Certificate certifying that the requirements set forth in
subsections (a) (ii)-(iv) have been satisfied;
(D) an opinion of counsel for the Borrower (which may be a "reasoned"
opinion), in form and substance satisfactory to the Lender, that (i) the
transfer of the Defeasance Collateral in exchange for release of the Property
will not constitute an avoidable preference under Section 547 of the United
States Bankruptcy Code in the event of a filing of a petition for relief under
the United States Bankruptcy Code for or against the Borrower, (ii) the
Defeasance Deposit and the Defeasance Collateral has been duly and validly
transferred and assigned to the Trustee for the benefit of the holders of the
Securities, (iii) the Trustees hold a first priority perfected security interest
in the Defeasance Deposit and the Defeasance Collateral for the benefit of such
holders, (iv) such transfer will not result in a deemed exchange of the
Securities pursuant to Section 1001 of the IRC, (v) such transfer will not, by
itself, adversely affect the status of the Securities as indebtedness for
federal income tax purposes and (vi) such transfer will not adversely affect the
status of the entity holding the Debt as a REMIC (assuming for such purposes
that such entity otherwise qualifies as a REMIC and that the Notes were
transferred to such REMIC not later than two years prior to the Release Date);
(E) a certificate of a certified public accountant acceptable to the Lender
that the Defeasance Collateral complies with the requirements set forth in
subsection (b) below;
(F) such other certificates, documents or instruments as the Lender may
reasonably request; and
(G) a Rating Comfort Letter.
(b) The Borrower hereby appoints the Lender as the agent and
attorney-in-fact to use the Defeasance Deposit to purchase U.S. Obligations at
least equal to, but in no event less than, the payments due under the Loan on or
prior to, but as close as possible to, all successive Debt Service Payment Dates
from and after the Release Date in respect of (i) the remaining Monthly Debt
Service Payments that would be required under the Notes through and including
the Optional Prepayment Date and (ii) a balloon payment of the outstanding
principal balance of the Notes and accrued and unpaid interest as of the
Optional Prepayment Date as if such balloon payment were then due and payable.
(c) Upon compliance with the requirements of this Section 2.3, the Property
shall be released from the Lien of the Security Documents and the U.S.
Obligations shall constitute substitute collateral, which shall secure the Debt.
(d) The Borrower may assign its obligations under the Notes together with
the U.S. Obligations to a successor entity (the "Successor Entity") designated
by NACC and thereupon be released fully from all obligations relating to the
Debt. In such event the opinion of counsel provided for in clause (a)(iv)(D) of
this Section 2.3 shall provide that upon such assignment the Defeasance
Collateral will not be part of the estate of the Borrower under Section 541 of
the United States Bankruptcy Code. NACC shall retain its obligation to designate
a Successor Entity notwithstanding the transfer of the Notes unless such
obligation is specifically assumed by the transferee. In consideration for the
payment of $1,000 by the Borrower, such Successor Entity shall assume the
Borrower's obligations under the Notes and the Defeasance Security Agreement,
the Borrower shall be relieved of its obligations thereunder and the Debt of the
Borrower shall not be deemed outstanding for any purpose of this Agreement. If
required by the applicable Rating Agencies, the Borrower shall also deliver or
cause to be delivered a Substantive Consolidation Opinion with respect to the
Successor Entity in form and substance satisfactory to the Lender and the
applicable Rating Agencies.
(e) "Defeasance Deposit" shall mean the sum of (i) an amount in cash
necessary to purchase U.S. Obligations whose cash flows are in an amount
sufficient to make the payments required under subsection (b), (ii) any costs
and expenses incurred or to be incurred in making such purchase and (iii) any
costs and expenses of the Lender associated with a release of the Lien of the
Security Documents provided for above and reasonable attorney's fees and
expenses; and "U.S. Obligations" shall mean obligations or securities not
subject to prepayment, call or early redemption which are direct obligations of,
or obligations fully guaranteed as to timely payment by, the United States of
America or any agency or instrumentality of the United States of America, the
obligations of which are backed by the full faith and credit of the United
States of America;
(f) The Borrower, pursuant to the Defeasance Security Agreement or other
appropriate document, shall irrevocably authorize and direct that the payments
received from the U.S. Obligations be made directly to the Lender and applied to
satisfy the obligations of the Borrower under the Notes. Any portion of the
Defeasance Deposit in excess of the amount necessary to purchase the U.S.
Obligations required by this Section 2.3(f) and satisfy Borrower's obligations
under Section 2.3 shall be remitted to Borrower. Payments from or with respect
to U.S. Obligations held by the Lender on the Optional Prepayment Date shall be
applied (i) first, to payment of accrued and unpaid interest on the Notes and
(ii) second, to prepayment of the unpaid principal amount of the Notes.
Section II.4 Provided that no Event of Default has occurred and is
continuing, upon at least 60 days' notice to the Lender, the Borrower has the
right to Grant the Property, subject to the Debt, to any Person so long as (a)
prior to the Securitization, such Person is approved by NACC, and, after the
Securitization, by the Lender, such approval not to be unreasonably withheld,
and (b) the Rating Agencies deliver a Rating Comfort Letter. It is understood
that the Rating Agencies may require, as a condition to such delivery, matters
equivalent to those contained in clauses (i) and (ii) of Section 2.5. Upon such
approval and delivery, the Lender shall deliver to the Borrower for execution
and delivery such instruments as may be reasonably required to effect an
assignment and assumption of the Debt and a release of the obligations of the
Borrower under the Transaction Documents, including, without limitation, new
Notes as to which the purchaser of the Property shall be the obligor, in a
principal amount equal to the then outstanding principal amount of the Notes.
Section II.5 There shall be no Change of Control; provided, however, that
if no Event of Default has occurred and is continuing there can be a Change of
Control if (i) the Borrower submits to the Lender an opinion in form and
substance and from a firm satisfactory to the Lender, with respect to the
requested Change of Control, to the same effect as the Substantive Consolidation
Opinion, (ii) the organizational documents of the Person involved in the
requested Change of Control are approved by the Lender, (iii) prior to the
Securitization, the Change of Control is approved by NACC and (iv) after the
Securitization, the Rating Agencies deliver a Rating Comfort Letter.
Section II.6 Release after the Optional Prepayment On the Optional
Prepayment Date and each Debt Service Payment Date thereafter, upon the sale of
Property to any Person, the Borrower may cause the release of the Property from
the Lien of the Security Documents upon the satisfaction of the following
conditions:
(a) not less than 30 days' notice to the Lender specifying a Debt Service
Payment Date on which the amount set forth in clause (b) below is to be provided
to the Servicer, which notice shall be accompanied by an Officer's Certificate
to the effect that no Potential Event of Default or Event of Default has
occurred and is continuing and that such Release will comply with all applicable
requirements of this Section 2.6;
(b) the payment to the Lender of an amount equal to the outstanding
principal balance of the Notes, interest accrued and unpaid on the principal
balance of the Notes and all other sums due under the Transaction Documents,
through and including such Debt Service Payment Date; and
(c) delivery to the Lender for execution of forms of release of the
Property from the Lien of the Security Documents appropriate for Georgia.
ARTICLE III
PAYMENTS
Section III.1 Payments on the Notes. All payments made on the Notes shall
be made in the manner, and subject to the conditions, provided in this Agreement
and the Notes. The Borrower shall not have the right to prepay the Notes except
as expressly provided for in this Section 3.1. On the Optional Prepayment Date
and each Debt Service Payment Date thereafter, the Notes may be prepaid, at the
option of the Borrower, in full or in part, without penalty or premium.
Section III.2 Interest.
(a)Except as set forth in Sections 3.4(b) and 3.4(c), the Debt shall bear
interest for each Debt Service Period at the Base Rate.
(b)Calculations of interest shall be made on the basis of a 360-day year
and actual days elapsed during each Debt Service Period.
Section III.3 Payments without Deduction, etc. III.3 Payments without
Deduction, etc. III.3 All payments of the Debt to the Lender shall be absolute
and unconditional, shall be paid strictly in accordance with the terms of the
Transaction Documents without being subject to any claim, set-off, defense or
other right which the Borrower may have against the Lender or any other Person,
whether in connection with this Agreement, the transactions contemplated herein
or any other circumstance or happening whatsoever. The Borrower shall pay such
payments to the Lender free and clear of, and without deduction for, any and all
present or future taxes, levies, imposts, deductions, charges, penalties or
withholdings, and any liabilities with respect thereto, by whomever imposed,
other than present or future taxes on the income of the Lender or franchise
taxes imposed on the Lender as a result of its conducting business in specific
jurisdictions. The Borrower shall pay and indemnify and hold the Lender harmless
from and against, any present or future claim for liability for United States,
state or local taxes or assessments on the ownership by the Lender of the debt
obligations of the Borrower evidenced by the Notes, the Mortgage or on the
principal, interest, fees or other amounts payable under any Transaction
Document or otherwise in respect of the Debt (other than income or franchise
taxes imposed on the Lender or its Affiliates by any jurisdiction). The
obligations of the Borrower hereunder shall survive repayment of the Debt and
termination of the Transaction Documents.
Section III.4 Periodic Payments
(a)On February 11, 1998, the Borrower shall pay to the Lender interest on
the Notes at the Base Rate for the period from and including the Closing Date to
and including February 10, 1998.
(b)From and after the Optional Prepayment Date, interest on the Notes shall
accrue at the Adjusted Rate and be payable as provided in Section 3.4(d).
(c)On each Debt Service Payment Date occurring after February 11, 1998, the
Borrower shall pay the Monthly Debt Service Payment (based on the Base rate and
a 300-month amortization schedule) to the Lender. Such amount shall be applied
(i) first, to the payment of the Base Rate Interest then due and payable for the
applicable Debt Service Period, and (ii) next, to the Principal Payment.
Following the Maturity Date and while an Event of Default has occurred and is
continuing, the Monthly Debt Service Payment shall be increased to reflect
payment of interest at the Default Rate; provided, however, that for the
purposes of this sentence, an Event of Default shall be considered to have
occurred and be continuing until such Event of Default has been waived or cured.
(d)Subsequent to the Optional Prepayment Date and in accordance with the
Cash Management Procedures, the Borrower shall pay to the Lender on each Debt
Service Payment Date (without duplication) any Excess Cash Flow for all
Accounting Periods for which the Operating Profit Payment Date occurred during
the Debt Service Period immediately preceding such Debt Service Payment Date,
which payments shall be applied (A) first, to prepayment of each Principal
Payment required to be made on each Debt Service Payment Date, in inverse order
of maturity, until the principal of the Notes have been paid in full, and (B)
next, to payment of the difference, if any, between (y) the sum of (i) interest
accrued and unpaid on the Notes calculated at the Adjusted Rate and (ii)
interest on such accrued and unpaid amount at the Adjusted Rate and (z) the Base
Rate Interest paid on each Debt Service Payment Date.
Section III.5 Late Payment Charge. If any regularly scheduled payment of
principal or interest or other sum due under any Transaction Document is not
paid by the Borrower on the date on which it is due, the Borrower shall pay to
the Lender upon demand an amount equal to the lesser of 5% of such unpaid sum or
the maximum amount permitted by applicable law, in order to defray the expense
incurred by the Lender in handling and processing such delinquent payment and to
compensate the Lender for the loss of the use of such delinquent payment. Such
amount shall be secured by the Transaction Documents.
ARTICLE IV
DEFAULT; REMEDIES; ENFORCEMENT
Section IV.1A Any of the following shall constitute a default under this
Agreement (an "Event of Default"):
(a) failure by the Borrower to pay on the due date any interest or
principal due and payable on the Notes as set forth therein; or
(b) failure by the Borrower to make any other payment due under any
Transaction Document within ten (10) days after demand therefor shall have been
made; or
(c) any representation or warranty of the Borrower contained in any
Transaction Document (other than the representations and warranties contained in
Sections 5.1(n) and 5.1(v) shall have been untrue or incorrect when made in any
respect that may have a Material Adverse Effect or a representation or warranty
contained in Sections 5.1(n) and 5.1(v) shall have been untrue or incorrect when
made; provided, however, that for the purpose of this clause (c) the words "To
the Best Knowledge of the Borrower" shall be deleted, where used, from the
provisions of each representation and warranty contained in Section 5.1 (other
than Sections 5.1(f), 5.1(g), 5.1(ad), 5.1(ao), 5.1(ar) and 5.1(as); or
(d) failure by the Borrower to perform its covenants in Section 5.2(d), and
such failure continues unremedied for ten days after notice thereof by the
Lender to the Borrower requiring the same to be remedied; or
(e) failure by the Borrower to perform or observe any other of its
covenants under any Transaction Document (other than the covenants contained in
Sections 5.2(g)(i), 5.3(f), 5.3(j) and 5.3(n)) that has a Material Adverse
Effect, or (ii) its covenants contained in Sections 5.2(g)(i) and (ii), 5.3(f)
5.3(j) and 5.3(n), and in each case such failure continues unremedied for 30
days after notice thereof by the Lender to the Borrower requiring the same to be
remedied or such shorter period as shall be provided in such Transaction
Document; provided, however, that it shall not be an Event of Default if such
failure is curable but is not reasonably capable of being cured within such
30-day or shorter period and the Borrower shall have commenced to cure such
failure within such 30-day or shorter period and thereafter shall diligently
pursue such cure to completion, but in no event later than 180 days after the
date on which the Borrower received such notice from the Lender; or
(f) an order (that has not been vacated or stayed within 60 days from the
entry thereof) is made for, or the Partners take any action with regard to, the
winding up of the Borrower or the General Partner except a winding up for the
purpose of a merger, restructuring or contribution, the terms of which have
previously been consented to by the Lender; or
(g) (A) the Borrower or the General Partner shall commence any Action (1)
under any existing or future law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization or relief of debtors
(collectively, "Insolvency Law") seeking to have an order for relief entered
with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts, or (2)
seeking appointment of a receiver, trustee, custodian or other similar official
(each a "Bankruptcy Custodian") for it or for all or substantially all of its
assets, or the Borrower or the General Partner shall make a general assignment
for the benefit of its creditors; or (B) there shall be commenced against the
Borrower or the General Partner any Action of a nature referred to in clause (A)
above which (1) results in the entry of any order for relief or any such
adjudication or appointment and (2) remains undismissed, undischarged or
unbonded for a period of 60 days; or (C) there shall be commenced against the
Borrower or the General Partner any Action seeking issuance of a warrant of
attachment, execution, distraint or similar process against all or substantially
all of its assets which results in the entry of an order for any such relief
that shall not have been vacated, discharged, stayed, satisfied or bonded
pending appeal within 60 days from the entry thereof; or (D) the Borrower or the
General Partner shall generally not, or shall be unable to, or shall admit in
writing its inability to, pay its debts as they become due; or
(h) Unless (a) the Borrower causes the Hotel to come under management by
another nationally recognized hotel operator acceptable to the Lender, in the
exercise of its reasonable discretion, (b) the Hotel is operated as part of a
comparable nationally recognized hotel system acceptable to the Lender in the
exercise of its reasonable discretion and (c) each of the Rating Agencies
delivers to the Lender a Rating Comfort Letter with respect thereto: (A) the
Manager shall commence any Action (1) under any Insolvency Law seeking to have
an order for relief entered with respect to it, or seeking to adjudicate it a
bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with respect
to it or its debts, or (2) seeking appointment of a Bankruptcy Custodian for it
or for all or substantially all of its assets, or the Manager shall make a
general assignment for the benefit of its creditors; or (B) there shall be
commenced against the Manager any Action of a nature referred to in clause (A)
above which (1) results in the entry of any order for relief or any such
adjudication or appointment and (2) remains undismissed, undischarged or
unbonded for a period of 60 days; or (C) there shall be commenced against the
Manager any Action seeking issuance of a warrant of attachment, execution,
distraint or similar process against all or substantially all of its assets
which results in the entry of an order for any such relief that shall not have
been vacated, discharged, stayed, satisfied or bonded pending appeal within 60
days from the entry thereof; or (D) the Manager shall generally not, or shall be
unable to, or shall admit in writing its inability to, pay its debts as they
become due; or
(i) one or more judgments or decrees, not covered by insurance, in an
aggregate amount exceeding $500,000 shall be entered against the Borrower or the
General Partner, and such judgments or decrees shall not have been vacated,
discharged, stayed, satisfied or bonded pending appeal within 60 days from the
entry thereof; or
(j) there is a Change of Control, unless permitted under Section 2.5; or
(k) any statement, representation or warranty set forth in the Certificates
(as such term is defined in the opinion (the "Opinion") of Arnold & Porter,
dated this date, with respect to issues of "substantive consolidation" under the
Bankruptcy Code) shall have been untrue, incorrect or misleading in any material
respect on the date hereof, and the Borrower fails (a) to cause the entity
responsible for such untrue, incorrect, or misleading statement, representation
or warranty (the "Offending Party"; the Offending Party may be the Borrower, the
General Partner, Atlanta Marriott Marquis II Limited Partnership, Marriott
Marquis Corporation or Host Marriott Corporation) to take such action as may be
required within 30-days after notice (each a "Notice") of the untruth,
inaccuracy or misleading nature thereof by the Lender to the Borrower to "cure"
such failure such that such statement, representation or warranty would not have
been untrue, incorrect or misleading in any material respect if such "cure" had
been in effect on the date hereof or (b) to cause such breach to be cured within
30 days after Notice; provided, however, that it shall not be an "Event of
Default" if such "cure" is not reasonably capable of being implemented within
such 30-day period and the Offending Party shall have commenced such "cure"
within such 30-day period and thereafter shall diligently pursue such cure to
completion, but in no event later than 180 days after the date on which the
Borrower received the Notice.
Section IV.1B None of the foregoing shall constitute an Event of Default if
after the occurrence thereof, the Borrower tenders a cure for such Event of
Default or a plan to cure such Event of Default and the Lender accepts such
tender, such acceptance to contain such conditions as the Lender, in the
exercise of its sole discretion, may require. If the Borrower tenders to the
Lender all sums, the non-payment of which constituted an Event of Default under
clauses (a) or (b) of Section 4.1A, and the Lender accepts such sums, such
non-payment shall not constitute an Event of Default. If the Lender does not
accept any such tender of sums, the Event of Default shall be continuing. The
Lender shall be deemed to have accepted a tender of cash if the Lender does not
return such cash to the Borrower within 10 Business Days of its receipt thereof.
Except as contemplated by the preceding sentence, if the Lender fails to respond
to the Borrower within 30 days of its receipt of such tender, it shall be deemed
to be rejected.
Section IV.2 If an Event of Default shall have occurred and be
continuing, the Lender shall have the right, in its sole discretion, by notice
to the Borrower (with a copy to the Manager) (except upon the occurrence of an
Event of Default under clauses (f) or (g) of Section 4.1A, in which case all
principal and accrued interest on the Notes will be immediately due and payable
without any declaration or other act on the part of the Lender) to take one or
more of the following actions:
(a) To declare the principal of and all amounts accrued but unpaid under
the Notes and the Transaction Documents, together with the Yield Maintenance
Premium if the Event of Default occurs and is continuing prior to the Optional
Prepayment Date, to be immediately due and payable, and such amounts shall
thereupon become immediately due and payable, without presentment, demand,
protest or notice of any kind, other than any notice specifically required by
this Section 4.2, all of which are hereby expressly waived by Borrower;
(b) Pursue such rights and remedies against the Borrower, or otherwise, as
are provided under and pursuant to the Mortgage or any of the other Transaction
Documents and as may be available to the Lender at law or in equity, including,
without limitation, during such time as the Lender may be considering a tender
of a cure or a plan pursuant to Section 4.1B; provided, however, that the Lender
shall not initiate foreclosure proceedings unless five (5) Business Days' prior
notice of such intention is given to Borrower and the tender of a cure or a plan
therefor shall not have been accepted by the Lender pursuant to the provisions
of Section 4.1B before the end of such 5 Business Day period; and
(c) If the Event of Default involves the Borrower's failure to pay any
Imposition or to comply with the Insurance Requirements, or to perform or
observe any other covenant, condition or term in any Transaction Document or in
the Management Agreement, the Lender may, at its option, without waiving or
affecting any of its rights or remedies hereunder, pay,perform or observe the
same, and, in connection therewith, the Lender shall be entitled to rely on any
representations and statements of the Manager under the Management Agreement in
regard to alleged breaches or violations thereof, and all payments made or costs
or expenses incurred by the Lender in connection therewith shall be repaid by
Borrower to the Lender within fifteen (15) days after demand therefor, and shall
be added to and become a part of the Debt. The Lender is hereby empowered to
enter and to authorize others to enter upon any Property for the purpose of
performing or observing any such defaulted covenant, condition or term, without
thereby becoming liable to Borrower or any Person in possession holding under
Borrower.
Section IV.3 Remedies Cumulative; Delay or Omission Not a Waiver. To the
extent permitted by law, every remedy given hereunder or in any other
Transaction Document to the Lender shall not be exclusive of any other remedy or
remedies, and every such remedy shall be cumulative and in addition to every
remedy provided by statute, law, equity or otherwise. The Lender may exercise
all or any of the powers, rights or remedies given to it hereunder or which may
be now or hereafter given by statute, law, equity or otherwise, in its absolute
discretion. No course of dealing between the Borrower and the Lender or any
delay or omission of the Lender to exercise any power, right or remedy accruing
upon any Event of Default shall impair any power, right or remedy or shall be
construed to be a waiver of any such Event of Default or acquiescence therein,
and every power, right and remedy given by each Transaction Document to the
Lender may, to the extent permitted by law, be exercised from time to time and
as often as may be deemed expedient by the Lender.
Without limiting the generality of the foregoing, the Borrower expressly
and knowingly waives all defenses that may arise from a delay or forbearance by
the Lender in exercising any power, right or remedy accruing upon any Event of
Default relating to a breach by the Borrower of Section 5.3(d).
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section V.1 Representations and Warranties of the Borrower. The Borrower
represents and warrants to, and covenants with the Lender, that, as of the
Closing Date, except as set forth on the Disclosure Report:
(a) Exhibit E hereto sets forth the organizational structure of the
Borrower, and the equity interests and holders therein. The Borrower is a
limited partnership validly existing and in good standing under the laws of the
State of Delaware and is qualified to do business in each jurisdiction where the
nature of its business or location of the Property requires it to be so
qualified. The General Partner is a corporation validly existing and in good
standing under the laws of the State of Delaware and is qualified to do business
in each jurisdiction where the nature of its business or location of the
Property requires it to be so qualified. Neither the General Partner nor the
Borrower has engaged in any business unrelated to the ownership of the Property.
Neither the General Partner nor the Borrower has assets other than those related
to the Property;
(b) The Borrower has, and at relevant times has had, the requisite power
and authority to own its assets and conduct its business, to execute and deliver
each of the Transaction Documents and all Operational Agreements to which the
Borrower is a party and to carry out the transactions contemplated thereby;
(c) The execution, delivery and performance by the Borrower of (i) each of
the Transaction Documents and (ii) the Operational Agreements to which the
Borrower is a party have been duly and validly authorized by all necessary
actions and proceedings on the part of the General Partner and the Borrower, and
no further approvals or filings of any kind, including, without limitation, any
approval of or filing with any Governmental Authority, are required as a
condition thereof;
(d) Neither the execution and delivery of each of the Transaction Documents
and the Operational Agreements, nor the fulfillment of or compliance with the
terms and conditions thereof:
(i) will conflict with or result in any breach or violation of any law,
rule or regulation issued by any Governmental Authority, or any judgment or
order applicable to the Borrower or the General Partner, or to which the
Borrower or the General Partner or the Property is subject;
(ii) will conflict with or result in any breach or violation of, or
constitute a default under, any of the provisions of the Agreement of Limited
Partnership of the Borrower, the Certificate of Incorporation of the General
Partner, or, in addition to the foregoing result in the creation or imposition
of any Lien pursuant to, any agreement or instrument to which the Borrower or
the General Partner is a party or to which the Borrower or the General Partner
or the Property is subject; or
(iii) will result in or require the creation of any Lien on the Property
except Permitted Exceptions and Liens in favor of the Lender;
(e) The Borrower's rights under the Permits and the Management Agreement
will not be adversely affected by the execution and delivery of the Transaction
Documents, Borrower's performance thereunder, the recordation of the Mortgage,
or the exercise of any remedies by the Lender.
(f) Each of (i) the Transaction Documents and (ii) the Operational
Agreements to which the Borrower is a party, and, to the Best Knowledge of the
Borrower, each of the Operational Agreements, if any, to which the Borrower is
not a party, has been duly executed and delivered by the Borrower and to the
Best Knowledge of the Borrower, the other parties thereto and constitutes the
legal, valid and binding obligation of the Borrower, enforceable against the
Borrower in accordance with its terms subject to the effects of bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally and general equitable principles (whether
considered in a proceeding in equity or at law) To the Borrower's Best
Knowledge, each of the Operational Agreements to which it is not a party has
been duly executed and delivered by the parties thereto;
(g) Other than as set forth in Schedule 1, there is no Action pending to
which the Borrower or the General Partner is a party or to which the Property is
subject, directly or indirectly, and, to the Best Knowledge of the Borrower and,
based on a certification to the Borrower by the Manager, of the Manager, no such
Action is threatened or contemplated by any Person, in each case, other than an
Action that does not involve an amount in controversy in excess of $25,000;
(h) The Borrower is not a party to any agreement or instrument or subject
to any restriction which might adversely affect the Borrower or the Property, or
the Borrower's business, properties, operations or condition, financial or
otherwise. The Borrower is not in default in any material respect in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any Permitted Exception or any other agreement or
instrument to which it is a party or by which it or the Property is bound.
(i) The Borrower has not received notice of, and does not have any
knowledge of, any violations of any Legal Requirements affecting the Property or
the construction, development, use, operation, maintenance or management
thereof, except as set forth in the Exhibits and Schedules to this Agreement;
(j) Neither the Borrower nor the General Partner has any subsidiaries;
(k) Except for the Debt, since its inception, the Borrower has not incurred
Indebtedness other than Purchase Money Security Interests;
(l) The Borrower does not have any employees;
(m) True and complete copies of the Operational Agreements (including all
amendments, agreements, side letters and all other material documents relating
thereto other than those effected in the ordinary course of business and which
individually or in the aggregate do not have a Material Adverse Effect) have
been made available to the Lender; each such agreement is unmodified and in full
force and effect; to the Best Knowledge of the Borrower, there is no default by
any party thereunder; and no event has occurred and is continuing which, with
the passage of time and/or the giving of notice, would constitute a default or
event of default by the Borrower thereunder. All necessary consents to the
transactions described in the Transaction Documents required by such agreements
have been obtained. Since its inception, neither the Borrower nor the General
Partner has entered into any agreements or obligations other than the
Transaction Documents, the Operational Agreements and other agreements relating
to the Property entered into in the ordinary course of business;
(n) All necessary governmental consents, approvals, authorizations,
regulations or qualifications, if any, to the transactions described in the
Transaction Documents have been obtained and are in full force and effect;
(o) The Operating Budget annexed hereto as Exhibit F contains all
anticipated operating expenses for the Property for the year ending December 31,
1998. The Capital Budget annexed hereto as Exhibit G contains all anticipated
Capital and FF&E Expenditures for the Property for the year ending December 31,
1998;
(p) All Permits material to the operations of the Property have been
obtained and are in full force and effect and are in the Borrower's name or
available for its use;
(q) The Hotel has available to it adequate parking to comply with all Legal
Requirements and to permit the operation of the Hotel as a full service hotel in
the Marriott Hotel System and comparable to a "quality segment" full service
hotel in other full service hotel systems in compliance with the Management
Agreement;
(r) The Borrower is not subject to any United States or state income,
unincorporated business, capital, franchise or similar gross income or income
based taxes;
(s) (i)Neither the Borrower, nor any ERISA Affiliate of the Borrower,
maintains, sponsors, contributes to or is obligated to contribute to, or during
the five (5) years ending on the date of the execution and delivery of this
Agreement, has maintained, sponsored, contributed to or was obligated to
contribute to, any Plan;
(ii) The Borrower does not, and is not obligated to, maintain, sponsor or
contribute to any Welfare Plan;
(iii) The assets of the Borrower are not nor are they deemed "plan assets",
whether by operation of law or under regulations promulgated under ERISA;
(t) The Borrower (1) has not entered into any Transaction Document with the
actual intent to hinder, delay, or defraud any creditor and (2) has received
reasonably equivalent value in exchange for its obligations under the
Transaction Documents. The fair saleable value of the Borrower's assets is and
immediately after the execution and delivery of the Transaction Documents will
be greater than the Borrower's probable liabilities, including the maximum
amount of its contingent liabilities or its debts as such debts become absolute
and matured. The Borrower's assets do not and immediately after the execution
and delivery of the Transaction Documents will not constitute unreasonably small
capital to carry out its business as conducted or as proposed to be conducted.
The 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 as they mature (taking into
account the timing and amounts to be payable on or in respect of obligations of
the Borrower);
(u) The Borrower has not sustained any loss or interference with its
business from fire, explosion, flood or other calamity, or from any labor
dispute or governmental action, order or decree, nor has there been any material
adverse change, nor any other development or event that, in each case, may have
a Material Adverse Effect;
(v) The Security Documents, when duly executed and delivered, and (to the
extent required or contemplated) filed or recorded, will create a valid and
enforceable first priority perfected security interest in the Borrower's right,
title and interest in and to the rights and properties described therein, as to
which perfection may be effected by such filing or recording, for the benefit of
the Lender, subject only to Permitted Exceptions;
(w) The Borrower is not (1) an "investment company" or a company
"controlled" by an "investment company," within the meaning of the Investment
Company Act of 1940, as amended, (2) a "holding company" or a "subsidiary
company" of a "holding company" or an "affiliate" of either a "holding company"
or a "subsidiary company" within the meaning of the Public Utility Holding
Company Act of 1935, as amended, nor (3) subject to any other federal or state
law or regulation which purports to restrict or regulate its ability to borrow
money;
(x) There exists no Event of Default or Potential Event of Default;
(y) To the Best Knowledge of the Borrower, no representation or warranty by
the Borrower made in any Transaction Document, and no schedule, exhibit,
certificate, written statement, list, document or other material furnished or to
be furnished to the Lender pursuant to or in connection with any Transaction
Document or any of the transactions contemplated thereby contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading;
(z) There is no offset, defense, counterclaim or right to rescission with
respect to the Notes or the other Transaction Documents other than as may be
attributable to the acts or omissions of the Lender;
(aa) All taxes and governmental assessments currently due and owing in
respect of, and affecting, the Property, have been paid, or an escrow of funds
in an amount sufficient to cover such assessments has been established with the
Servicer or title insurance company;
(ab) There is no Action pending, or, to the Best Knowledge of the Borrower,
threatened, for the total or partial condemnation of the Property, and except
for ADA Compliance Work, Deferred Maintenance Work, Environmental Remediation
Work and Rehabilitation Work, the Property is in good repair and free and clear
of any damage that could affect materially and adversely the value of the
Property as security for the Notes or the use for which the Property is
intended;
(ac) Insurance required to be maintained pursuant to the Mortgage is in
effect; and the Property and the use and operation thereof constitute a legal
use under applicable zoning regulations and comply in all respects with all
applicable Legal Requirements;
(ad) To the Best Knowledge of the Borrower, the amounts deposited in the
Capital Expenditure and FF&E Reserve Accounts for ADA Compliance Work, Deferred
Maintenance Work and Environmental Remediation Work are sufficient for their
intended purposes;
(ae) The Property is not listed in or, to the Best Knowledge of the
Borrower and, based on a certification to the Borrower by the Manager, of the
Manager, proposed for listing in the United States Environmental Protection
Agency's National Priorities List of sites or any other comparable list of sites
maintained by any state or local governmental agency;
(af) The Property is not subject to any Lien or claim for Lien in favor of
any Governmental Authority or any other Person as a result of any Hazardous
Substance (as such term is defined in the Environmental Indemnity Agreement) on,
in or affecting the Property;
(ag) The Property is not subject to any collective bargaining or other
union contracts;
(ah) Each of the Borrower and the General Partner has (a) not sought or
consented to any dissolution, winding up, liquidation, consolidation, merger or
sale of all or substantially all of its assets, (b) not failed to correct any
known misunderstanding regarding its separate identity, (c) maintained its
accounts, books and records separate from those of any other Person (except
that, for accounting and reporting purposes, the Borrower or the General Partner
may be included in the consolidated financial statements of Ivy Street Hotel
Limited Partnership or an affiliate of Ivy Street Hotel Limited Partnership in
accordance with generally accepted accounting principles) provided that in
connection therewith, the existence of the Borrower or the General Partner and
the ownership of the Property are disclosed in a footnote to such financial
statements, (d) maintained its books, records, resolutions and agreements as
official records, (e) not commingled its funds or other assets with those of any
other Person (except as specifically contemplated by the Cash Management
Procedures) and has held its assets in its own name, (f) conducted its business
in its name, (g) maintained its financial statements, accounting records and
other corporate or partnership documents separate from those of any other Person
(except that, for accounting and reporting purposes, the Borrower or the General
Partner may be included in the consolidated financial statements of Host
Marriott in accordance with generally accepted accounting principles), (h)
observed all partnership and corporate formalities, as the case may be, (i) not
assumed or guaranteed or become obligated for the debts of any other Person or
held out its credit as being available to satisfy the obligations of any other
Person (other than as permitted by the Transaction Documents), (j) not acquired
obligations or securities of its partners or shareholders, as the case may be,
(k) participated in the fair and reasonable allocation of any overhead expenses
and other common expenses for facilities, goods or services provided to multiple
entities and used its own stationery, invoices and checks (except when acting in
a representative capacity), (l) not pledged any of its assets for the benefit of
any other Person other than the Lender (except for Purchase Money Security
Interests or as otherwise permitted by the Transaction Documents), (m) held and
identified itself as a separate and distinct entity under its own name and not
as a division or part of any other Person (i.e., an integral component of such
other Person, as distinguished from a separate entity) (except for inclusion of
the Borrower and the General Partner in consolidated financial statements of
Host Marriott), (n) not made any loans to any other Person, (o) not identified
its partners or shareholders, as the case may be, or any of its Affiliates as a
division or part of it (i.e., an integral component of such entity, as
distinguished from a separate entity), (p) not entered into or become a party to
any transaction with its partners or shareholders, as the case may be, or any of
its Affiliates except in the ordinary course of its business and on terms which
are fair and are no less favorable to it than would be obtained in a comparable
arms' length transaction with an unrelated third party, (q) not filed a
bankruptcy or insolvency petition or otherwise instituted insolvency proceedings
with respect to itself or to any other entity in which it has a direct or
indirect legal or beneficial ownership interest, (r) maintained adequate capital
in light of its contemplated business operations, (s) not engaged in any
business activity other than as stated in Article III of the Agreement of
Limited Partnership of the Borrower and Section 3 of the Certificate of
Incorporation of the General Partner, as the case may be, (t) maintained an
arms' length relationship with partners, affiliates and any other party
furnishing services to it, (u) paid its own liabilities out of its own funds and
other assets, and (v) held its assets in its own name.
(ai) The Permitted Exceptions do not materially and adversely affect (1)
the ability of the Borrower to pay in full the principal and interest on the
Notes in a timely manner or (2) the use of the Property for the use currently
being made thereof, the operation of the Property as currently being operated or
the value of the Property;
(aj) [Intentionally omitted]
(ak) To the Best Knowledge of the Borrower, the Borrower has no material
contingent liabilities;
(al) The Borrower has no material financial obligation under any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Borrower is a party or by which the Borrower or the Property is bound,
other than obligations incurred in the ordinary course of the operation of the
Property and under the Transaction Documents;
(am) The Borrower has not borrowed or received debt financing that has not
been heretofore or contemporaneously herewith repaid in full, other than
Purchase Money Security Interests permitted by the provisions of this Loan
Agreement;
(an) To the Borrower's Best Knowledge, none of its principals, or the
General Partner, or officer authorized to execute and deliver an Officer's
Certificate, has ever been indicted and/or convicted of a felony under any
federal, state or foreign laws;
(ao) There are no pending or, to the Best Knowledge of the Borrower,
proposed, special or other assessments for public improvements or otherwise
affecting the Property, nor, to the Best Knowledge of the Borrower and, based on
a certification to the Borrower by the Manager, to the Best Knowledge of the
Manager, are there any contemplated improvements to the Property or that may
result in such special or other assessment;
(ap) All of the rooms at the Hotel are in service, except for rooms that
are temporarily out of service for routine maintenance and repair;
(aq) The Borrower has or anticipates that it will have sufficient funds
available to it for implementing the reasonably anticipated Capital and FF&E
Expenditures and Rehabilitation Work.
(ar) All financial statements, including the statements of cash flow and
income and operating expense, that have been delivered to the Lender in respect
of the Property (i) are true, complete and correct in all material respects as
of the date on which such statements were prepared, (ii) accurately represent
the financial condition of the Property as of the date of such statements, and
(iii) to the extent prepared by an independent certified public accounting firm,
have been prepared to the Best Knowledge of the Borrower in accordance with GAAP
consistently applied throughout the periods covered, except as disclosed
therein. The Borrower has no contingent liabilities, liabilities for taxes,
unusual forward or long-term commitments or unrealized or anticipated losses
from any unfavorable commitments that are known to the Borrower and reasonably
likely to have a materially adverse effect on the Property or the operation
thereof, except as referred to or reflected in such financial statements. Since
the date of such financial statements, there has been no materially adverse
change in the financial condition, operations or business of the Borrower from
that set forth in said financial statements.
(as) The Management Agreement is in full force and effect. There is no
default, breach or violation existing thereunder, and no event has occurred
(other than payments due but not yet delinquent) that, with the passage of time
or the giving of notice, or both, would constitute a default, breach or
violation thereunder, by Borrower or to the Best Knowledge of Borrower, by
Manager.
Section V.2 Affirmative Covenants. So long as any of the Debt remains
outstanding as an obligation of the Borrower, the Borrower shall:enants
(a) do all things necessary to keep in full force and effect its valid
existence as a limited partnership and to qualify to do business in each
jurisdiction in which such qualification is necessary to the conduct of its
business or to protect the validity and enforceability of the Transaction
Documents;
(b) do all things necessary to enable it to comply with all applicable
legal, fiscal and accounting rules and regulations;
(c) keep proper books of account and records in which full, true and
correct entries in accordance with GAAP shall be made of all transactions in
relation to its business and activities; allow the Lender access to such books
of account and records at all reasonable times during normal business hours upon
reasonable notice; and permit the Lender to discuss the affairs, finances and
accounts of the Borrower with any of the management employees of the General
Partner or the Manager;
(d) furnish to the Lender:
(i) not later than 120 days after the end of each Fiscal Year, audited
financial statements (including balance sheet, income statement and statement of
cash flows of the Borrower), prepared in accordance with GAAP consistently
applied, audited by a "Big Five" accounting firm;
(ii) not later than 27 days after the end of each Accounting Period (i)
unaudited financial statements, covering such Accounting Period and the annual
amount for the period to date showing in detail sales, house profit, average
room and average occupancy rates, each of the foregoing with a comparison to the
prior year, and (ii) a rent letter and if not included in the rent letter, an
escrow analysis;
(iii) not later than 60 days after the end of each Accounting Quarter,
quarterly and year-to-date unaudited financial statements (including, without
limitation, the Borrower's balance sheet, income statement, statements of cash
flows and such other quarterly financial information as is provided to the
limited partners of Atlanta Marriott Marquis II Limited Partnership;
(iv) such other reports and other documents as shall be replacements of the
foregoing, which reports and other documents shall not contain less detail than
that provided for in clauses (i), (ii) and (iii) above;
(v) together with the financial statements provided for in clauses (ii) and
(iii) above, an Officer's Certificate of a senior executive of the General
Partner stating that such financial statements fairly present the financial
position and results of operations of the Borrower for the relevant period and
stating whether or not the signer of the Officer's Certificate thereof knows of
any Event of Default;
(vi) on or before February 15 of each year commencing on February 15, 1998,
an annual plan (the "Annual Plan") for such year for the Property which Annual
Plan shall include a detailed operating budget (an "Operating Budget") and a
detailed capital expenditure budget (a "Capital Budget"), reflecting the
Manager's best good faith estimate of the anticipated results of operations of
the Property, including revenues from all sources, home profit operating
expenses, average room rate and average occupancy and Capital and FF&E
Expenditures. The Operating Budget shall provide for deposit into the Capital
Expenditure and FF&E Reserve Accounts of an amount equal to at least 5% of
projected Gross Revenues for each year;
(vii) copies of all rent letters, Format 90s and other periodic reports
prepared by the Manager relating to the Property promptly upon receipt thereof;
and
(viii) such other information and reports as shall be reasonably requested
by the Lender or the Rating Agencies;
(e) (i) if the Borrower has the right under the Management Agreement to
approve any aspect of each Annual Operating Projection or the FF&E Estimate (as
such terms are defined in the Management Agreement) or any other budget, submit
each of the foregoing to the Lender for its approval;
(ii) submit to the Lender for its approval the Building Estimate (as such
term is defined in the Management Agreement); and
(iii) the Lender's review and approval of each of the foregoing shall not
be unreasonably withheld or delayed;
(f) take all reasonable actions necessary so that the Borrower is not
required to register as an investment company under the Investment Company Act
of 1940, as amended;
(g) promptly inform the Lender in writing of the following:
(i) the Borrower becoming aware of the commencement of any rule making or
disciplinary proceeding or the promulgation of any proposed or final rule
affecting the Borrower or the Property (other than a rule or proceeding which
has general applicability to Persons including the Borrower and is not likely to
have a Material Adverse Effect);
(ii) the Borrower becoming aware of the commencement of any Action by or
against the Borrower or with respect to the Property before any Governmental
Authority or arbitration board, or the written threat of any such Action;
(iii) the receipt of written notice from any Governmental Authority that
(1) the Borrower is being placed under regulatory supervision, (2) any Permit
material to the conduct of the Borrower's business is to be suspended or revoked
or (3) the Borrower is to cease and desist any practice, procedure or policy
employed by the Borrower in the conduct of its business; and
(iv) the receipt of written notice from the Manager that the Borrower has
not complied with any of its obligations under the Management Agreement or
altering in any material respect the rules, standards and requirements of the
Manager thereunder.
(h) generally pay its debts as they become due;
(i) do or cause to be done all things necessary to establish, perfect,
maintain and continue the perfection and first priority (subject to Permitted
Exceptions) of the security interest of the Lender in the Pledged Property and
pay the costs and expenses of all filings and recordings and all searches
necessary to establish and determine the validity and the priority of such
security interest;
(j) subject to Section 2.2, pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, all taxes, assessments and
governmental charges levied or imposed upon the Borrower or upon the income,
profits or property of the Borrower;
(k) subject to Section 2.2, pay or cause to be paid all operating expenses
and all other costs and expenses associated with the operation and maintenance
of the Property in accordance with the Annual Operating Budget, FF&E Estimate,
and Building Estimate in accordance with the provisions of the Management
Agreement;
(l) [intentionally omitted];
(m) pay over to the Servicer for application pursuant to the Mortgage,
Insurance Proceeds and Condemnation Proceeds;
(n) complete all Work within 6 months except as set forth on Exhibit A and
all Rehabilitation Work by the date set forth on Exhibit J (under the
supervision of a qualified employee of the Manager except for those items
designated on Exhibit A which shall be completed under the supervision of a
licensed engineer or architect), and in a good and workmanlike manner, using
materials comparable in quality to the original installation and all items of
Capital and FF&E Expenditures as set forth in the Capital Budget for the year
ending December 31, 1998 attached hereto as Exhibit G and the then effective
Annual Operating Projection, Building Estimate, or FF&E Estimate (as such terms
are defined in the Management Agreement) under the supervision of a qualified
employee of the Manager, and in all events, complete all such work as required
under the Management Agreement and this Agreement and any additional work that
shall be necessary to maintain standards at least as high as those standards
comparable to those that apply generally to "quality segment" full service
hotels located in Atlanta, Georgia, in compliance with Marriott Hotel System
standards and the Management Agreement. Borrower shall notify the Lender of the
completion of any work completed in accordance with this provision. Any work to
be completed in accordance with this provision shall be completed despite the
insufficiency, if any, of funds in the Capital Expenditure and FF&E Reserve
Accounts and Rehabilitation Account to complete such work;
(o) promptly on request, furnish to the Lender copies of all material
contracts, bills of sale, statements, receipted vouchers and agreements in its
possession or control under which the Borrower claims title to any materials,
fixtures or articles of personal property used in construction at or operation
of the Property;
(p) cause the Manager to operate the Hotel as a full service hotel in the
Marriott Hotel System and comparable to a "quality segment" full service hotel
in other full service hotel systems open for business under the Management
Agreement;
(q) promptly on request, from time to time, deliver to the Lender a
statement setting forth all of the accounts maintained by the Borrower or the
Manager with respect to the Hotel and the Property, the purposes of such
accounts and the balances thereof;
(r) maintain or cause to be maintained each of the Transaction Documents
and Operational Agreements to which it is a party in full force and effect, and
observe and perform or cause to be observed or performed all of its obligations
thereunder;
(s) maintain or cause to be maintained each of the liquor licenses and all
other Permits in connection with the Hotel in full force and effect (and replace
any thereof that may be cancelled or otherwise lapsed), and observe and perform
or cause to be observed or performed all of the Borrower's obligations
thereunder;
(t) comply with and cause the Property to be in compliance with all Legal
Requirements and all Insurance Requirements;
(u) give the Lender prompt notice upon the discovery, to the Best Knowledge
of the Borrower, of the occurrence of any Potential Event of Default or Event of
Default;
(v) give the Lender prompt notice of any event that if effected would
constitute a Change of Control;
(w) ensure that the Manager pays all trade indebtedness within 60 days of
the date incurred except for such trade indebtedness that is subject to a bona
fide dispute;
(x) ensure that the General Partner shall have an Independent Director at
all times, or if the Independent Director has resigned, shall not take any
action which may not be taken pursuant to the organizational documents of the
General Partner without the consent of the Independent Director;
(y) provide to the Lender not less than (10) days prior to the execution
thereof, a true and complete copy of any proposed amendment to the Agreement of
Limited Partnership of the Borrower (other than amendments of a ministerial
nature that will not have any adverse impact on the Lender, the value of the
Pledged Property, the validity or priority of the Lender's security interest
therein, or any of the Lender's rights or remedies under the Transaction
Documents);
(z) ensure that the representations and warranties contained in Section
5.1(a) and 5.1(ah) remain true and accurate at all times with respect to itself;
and
(aa) operate the Hotel in accordance with the then effective Annual Plan;
provided, however, that the Borrower may make Emergency Expenditures not
reflected in the then effective Annual Plan if it gives the Lender notice of any
such Emergency Expenditures promptly after they are made.
(ab) promptly provide to (y) the Lender and (z) to Commonwealth Land Title
Insurance, First American Title Insurance and Chicago Title Insurance Company at
the addresses provided to the Borrower by such entities copies of all motions,
orders, judgments and, after becoming aware thereof, pleadings and other papers
that have been or shall be served, filed or docketed in the Actions described in
Schedule 1 or on any appeal from any order or judgment therein.
Section V.3 Negative Covenants. So long as any portion of the Debt shall
remain outstanding as an obligation of the Borrower, except as expressly
permitted in this Agreement, the Borrower shall not, without the prior consent
of the Lender:
(a) purchase any real properties other than the Property, have any assets
or liabilities other than assets or liabilities derived from or related to the
Property, or engage in any business or undertake any activity other than as
permitted herein, including, without limitation, the operation, as a lessee or
otherwise, of any property other than the Property;
(b) have any subsidiaries;
(c) amend, supplement or otherwise modify the Partnership Agreement in any
way that would cause a breach of the covenants in this Agreement;
(d) Grant any of the Pledged Property other than as permitted in the
Transaction Documents and pursuant to the Permitted Exceptions; provided,
however, that the Borrower may sell or otherwise dispose of personalty or
fixtures from time to time constituting portions of the Property so long as such
personalty or fixtures are replaced by personalty or fixtures of equal or better
quality to those sold or otherwise disposed of and except for immaterial amounts
of personalty disposed of in the ordinary course of business and items that need
not be replaced to continue the then existing level of quality of operation.
Without limiting the generality of the foregoing, a judicial order in the
Actions set forth in Schedule 1 or any other action based on the same facts,
circumstance and legal theories contained in such Actions which results in the
transfer of any interest of the Borrower in the Property shall be deemed a
"Grant of any of the Pledged Property"; provided, however, that it shall not be
so deemed if within 20 days of entry of such judicial order the Borrower (i)
provides evidence satisfactory to the Lender that the interest so transferred is
subject to the Mortgage and (ii) provides the Lender with a Rating Comfort
Letter;
(e) dissolve, liquidate, merge or consolidate with any Person (and the
Borrower agrees that upon any dissolution, liquidation, merger or consolidation
in breach of this clause (e), the Pledged Property shall continue to be held
under and otherwise subject to the Lien of the Security Documents until the Debt
is paid in full);
(f) permit the validity or effectiveness of any of the Transaction
Documents or, unless replaced with other necessary agreements that do not have a
Material Adverse Effect, any of the Operational Agreements to be impaired or
permit the Lien of the Security Documents to be amended, hypothecated,
subordinated, terminated or discharged or permit any Liens to be created on or
extend to or otherwise arise upon or burden the Pledged Property or any part
thereof or any interest therein or the proceeds thereof (other than any
Permitted Exceptions);
(g) take any action if such action is likely to interfere with the
enforcement of any rights of the Lender under the agreements or instruments
relating to any of the Pledged Property;
(h) incur any Indebtedness other than (a) the Notes, (b) Subordinate Debt,
or (c) unsecured Indebtedness incurred to provide working capital (such as for
trade payables and including loans for such purpose in de minimis amounts that
may be made by the Manager and/or the General Partner), in an aggregate amount,
which when added to the outstanding balance of previous indebtedness incurred
and outstanding for such purpose, shall not exceed the average amount of the
Management Expenses for each Accounting Period during the preceding full 13
Accounting Periods; provided, however, that in the case of indebtedness incurred
pursuant to clause (c) the payee of such indebtedness shall agree not to assert
any remedies with respect to the non-payment thereof so long as the Debt is
outstanding or (d) Indebtedness covered by Purchase Money Security Interests, in
an aggregate amount not to exceed $5,000,000 outstanding at any time.
(i) enter into any equipment lease other than solely with the supplier of
or financing company with respect to the furnishings, fixtures or equipment
subject to such lease or sell any such furnishings, fixtures, or equipment to
any third party under a "Sale Leaseback" arrangement;
(j) terminate, amend or modify any Operational Agreements if the same would
have a Material Adverse Effect;
(k) (a) maintain, sponsor, contribute to or become obligated to contribute
to, or suffer or permit any ERISA Affiliate of the Borrower to, maintain,
sponsor, contribute to or become obligated to contribute to, any Plan or any
Welfare Plan or (b) permit the assets of the Borrower to become "plan assets,"
whether by operation of law or under regulations promulgated under ERISA;
(l) engage in any transactions with its Affiliates except, on terms at
least as favorable to the Borrower as those obtainable from unrelated third
parties acting in their own best interests and without duress and which, taken
singly or in the aggregate, would not reasonably be expected to have a Material
Adverse Effect;
(m) (A) cancel, release, terminate or surrender the Management Agreement or
permit any cancellation, release, termination or surrender thereof or (B) amend,
modify or alter the terms of the Management Agreement in any material respect;
provided, however, that the Borrower may cancel, release, terminate, surrender,
amend, modify or alter the Management Agreement in connection with the
replacement of the Manager if, before the date on which the Manager ceases to be
the Manager of the Hotel, (i) the Borrower causes the Hotel to come under
management by a nationally recognized hotel operator acceptable to the Lender,
in the exercise of its reasonable discretion, (ii) the Hotel continues to be
part of a comparable nationally recognized hotel system acceptable to the
Lender, and (iii) each of the Rating Agencies delivers to the Lender a Rating
Comfort Letter;
(n) permit the General Partner to amend its Certificate of Incorporation
(other than amendments of a ministerial nature that will not have an adverse
impact on the Lender, the value of any of the Property or the obligations of the
Borrower under this Agreement or the other Transaction Documents);
(o) make any distributions of cash to its partners, except as expressly
contemplated by the Cash Management Procedures, if in the reasonable judgment of
the General Partner such funds will be necessary for expenses to be borne by the
Borrower pursuant to Section 8.03 of the Management Agreement or for expenses
contemplated by Section 8.02 of the Management Agreement for which funds are not
available in the Capital Expenditure and FF&E Reserve Accounts;
(p) take any action in furtherance of, or stating its consent to, approval
of, or acquiescence in, any of the acts set forth above; or
(q) engage (either as transferor or transferee) in any material transaction
with any Affiliate other than for fair value and on terms similar to those
obtainable in arms' length transactions with unaffiliated Persons or engage in
any transaction with any Affiliate involving any intent to hinder, delay or
defraud any entity.
Section V.3A. General Partner Covenant. So long as any portion of the Debt
shall remain outstanding, the General Partner shall not (a) incur any enant.
Indebtedness except in its capacity as the general partner of the Borrower or
(b) withdraw as a general partner of the Borrower unless the remaining or
substitute general partner satisfies the single purpose entity criteria of the
Rating Agencies and the Rating Agencies have delivered a Rating Comfort Letter.
Section V.4. Further Assurances. The Borrower shall execute and deliver or
cause to be executed and delivered, all such additional instruments, and do, or
cause to be done, all such additional acts as (i) may be necessary or proper, to
carry out the purposes of this Agreement and to make subject to the Lien of the
Security Documents any property intended so to be subject, including, without
limitation, the delivery of such instruments and documents, including
confirmatory and corrective mortgages, financing statements and continuation
statements under the Uniform Commercial Code of each applicable jurisdiction,
and the delivery of such updated mortgagee's title insurance policies or
endorsements (or commitments therefor) in favor of the Lender as may be
reasonably required to confirm and/or secure continued coverage under the title
policies issued to the Lender in respect of the Property or the Mortgage,
including payment of all fees and title insurance premiums required to maintain
such continuity of title insurance coverage, (ii) may be necessary or proper to
transfer to any assignee of the Lender the estate, powers, instruments and funds
held in trust hereunder and to confirm the Security Documents, or (iii) the
Lender may reasonably request in connection with the Loan; provided, however,
that such instruments shall contain express unconditional exculpations of the
Partners and the Borrower's officers, employees or agents and any of their
successors or assigns exculpating such Persons from any liability arising under
or by reason of their obligations, covenants, representations, warranties and
agreements contained in such instruments, subject to the exceptions set forth in
the definition of Non-Recourse. If, in connection with the Securitization, the
Borrower is required to furnish newly issued title policies with respect to the
Property, the Lender shall bear the cost thereof.
Section V.5 Representations, Warranties and Covenants of NACC. NACC
represents and warrants to, and agrees with the Borrower, that, as of the
Closing Date: (i) it has the power and authority to perform its obligations
under this Agreement and the other Transaction Documents, (ii) this Agreement
and the other Transaction Documents have been duly authorized, executed and
delivered by NACC, and constitute valid and legally binding instruments
enforceable against NACC in accordance with their respective terms, subject to
the effects of bankruptcy, insolvency, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally and general
equitable principles (whether considered in a proceeding in equity or at law),
and (iii) it has such knowledge, sophistication and experience in financial and
business matters as to be capable of evaluating the merits and risks of an
investment in the Notes, is able to bear the economic risk of an investment in
the Notes and is an "accredited investor" within the meaning of Section 2(15) of
the Securities Act and (iv) no part of the Loan shall be deemed "plan assets"
within the meaning of ERISA.
Section V.6 Other.
Neither the Borrower nor any Person acting on behalf of the Borrower has
dealt with any broker or any other Person entitled to a fee or commission in
connection with the Loan and the Borrower shall indemnify and hold NACC and its
Affiliates harmless from and against any claims or commissions, finder's fee and
other payments, no matter how described, and against any and all costs and
expenses including, without limitation, attorneys' fees relating to any such
claim.
ARTICLE VI
SECURITIZATION
Section V.1. Securitization. The Borrower and the General Partner shall use
commercially reasonable best efforts to cooperate with NACC in its activities in
connection with one or more sales of the Loan as a whole loan, one or more sales
of participations in the Loan or one or more securitizations of the Loan (such
sales or securitizations, the "Securitizations"), including obtaining ratings by
the Rating Agencies. The Securitization will involve the issuance of rated
single-class or multi-class securities secured by or evidencing ownership
interests in the Transaction Documents (the "Securities"). Such cooperation
shall include, without limitation, the obligation to:
(a) maintain the ownership of the Property in an entity that permits the
Borrower to comply with its obligations under clauses (x) and (z) of Section
5.2;
(b) structure and maintain the organizational, operational and financial
affairs of the Borrower and the General Partner, (collectively, the "Entities")
to enable its counsel to render a reasoned opinion if requested by the Rating
Agencies in form and substance customary or required for rating the Securities
(the "Substantive Consolidation Opinion") that upon a petition for bankruptcy
under the United States Bankruptcy Code, neither Host Marriott nor Atlanta
Marriott Marquis L.P. II nor Portman Marquis Corporation nor Ivy Street Hotel
Limited Partnership as a debtor in possession nor its bankruptcy trustees nor
creditors nor any other party in interest would have sufficient basis to cause a
court to order the substantive consolidation of the assets and liabilities of
the General Partner or the Borrower, with those of the debtor in bankruptcy,
which counsel and which opinion shall be satisfactory to NACC and the Rating
Agencies;
(c) provide such financial and other information with respect to the Hotel,
the Borrower, the General Partner and, if such information is reasonably
available to the Borrower, the Manager, as may be requested by the Rating
Agencies or as may be reasonably requested by NACC, including, without
limitation, audits or agreed-upon procedures of operating cash flow, Net
Operating Income, occupancy statistics, average room rates and quarterly and
annual financial statements for the Hotel (reviewed and in the case of annual
financial statements audited) by a firm of certified public accountants
acceptable to NACC and the Rating Agencies to the extent customarily given in
similar transactions;
(d) prepare and deliver such agreements and instruments relating to the
Notes, the Securities, the Property and the Entities, including (A) agreements
to indemnify the Rating Agencies, NACC and any servicer or trustee, to the
extent customarily given in commercial mortgage-backed securities transactions,
and (B) amendments of any of the Transaction Documents that are necessary to
effect the Securitization, in form and scope satisfactory to the Rating Agencies
and reasonably satisfactory to NACC;
(e) perform or permit to be performed such appraisals, surveys, site
inspections, market studies, current environmental reviews and reports (Phase
I's, including, without limitation, testing for asbestos, lead paint or radon
gas and Phase II's and other environmental investigations recommended by
environmental consultants), structural engineering reports (which shall include
an analysis of requirements for deferred maintenance and ongoing capital
expenditure and furniture, fixtures and equipment reserve requirements), reviews
of property, casualty, business interruption, earthquake, flood, liability and
title insurance and other due diligence items customarily requested by
nationally recognized underwriters in connection with the origination and
securitization of comparably sized commercial real estate loans or by any Rating
Agency in connection with rating the Loan or the Securities; provided, however,
that (A) the Borrower shall not be unreasonably required to incur excess
auditing costs and (B) NACC shall use its best efforts to limit the
circumstances under which the Borrower or the General Partner will be required
to duplicate its efforts or third party costs in complying with its obligations
under this clause (e);
(f) provide copies of business plans and budgets relating to the Property
as may be requested by the Rating Agencies;
(g) cause counsel to render opinions (which may be reasoned opinions) with
respect to the Property, the Entities, and the Transaction Documents as to
bankruptcy remoteness and other matters customary in securitization
transactions, which may be requested by the Rating Agencies in form and
substance customary or required for rating the Securities which counsel and
which opinion shall be satisfactory to the Rating Agencies and reasonably
satisfactory to NACC; provided, however, that if the Rating Agencies request
opinions subsequent to the Closing Date in connection with the Securitizations
that are materially different from the opinions delivered on the Closing Date,
the Lender shall bear the fees and expenses incurred by counsel in rendering
such opinions;
(h) make such representations and warranties with respect to the Property,
the Entities, and the Transaction Documents as are customary in securitization
transactions and as may be requested by the Rating Agencies and reasonably
requested by NACC 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 Transaction Documents;
(i) cooperate with NACC in providing to the Rating Agencies such
information as is customarily provided in connection with annual reviews
conducted in commercial mortgage backed securities transactions similar to the
Securitization;
(j) cooperate with NACC in the preparation, at NACC's cost, of a private
placement memorandum, prospectus, prospectus supplement or other disclosure
document to be used by Nomura Securities, Inc. or any of its Affiliates to
privately place or publicly distribute the Loan as a whole loan or the
Securities in a manner and to the extent that the same satisfy the requirements
of the Securities Act and applicable state securities laws; and
(k) permit NACC to provide to the Rating Agencies, potential investors in
the Securities and others as may be required to effect the Securitization, the
information provided to NACC by the Borrower and the Manager and their
respective Affiliates in connection with the transactions contemplated by this
Agreement.
Any and all due diligence materials (including without limitation
appraisals, engineering reports and environmental reports) shall be addressed to
and shall run to the benefit of NACC and its successors and assigns, the Rating
Agencies and the Borrower, and shall, upon delivery, become the property of
NACC, its successors and assigns and the Borrower.
ARTICLE VII
PAYMENT OF FEES AND EXPENSES; INDEMNIFICATION
Section VII.1 Fees and Expenses
(a) The Borrower shall pay or reimburse NACC and after the Securitization,
NACC and the Lender (in each case, without duplication), on demand, without
set-off, withholding or deduction, for the payment of all of the reasonable
fees, costs and expenses incurred by NACC in connection with the underwriting,
negotiation, documentation and closing of the Loan, and the fees, costs and
expenses of the following:
(i) title insurance, transfer taxes (if any), mortgage taxes and recording
fees;
(ii) counsel and local counsel to the Borrower;
(iii) counsel and local counsel to NACC, whose fees and expenses shall be
reasonable;
(iv) due diligence activities of NACC including, without limitation,
auditors, credit and lien searches, surveys, appraisals, environmental reports,
engineering reports, insurance reviews and site inspections;
(v) bank charges relating to the operation of the Debt Service Reserve
Account, Lockbox Accounts, Capital Expenditure and FF&E Reserve Accounts, Tax
and Insurance Account, the Deposit Account and Operating Account;
(vi) initial and ongoing activity of any special servicer incurred as a
result of an Event of Default;
(vii) the Rating Agencies (for the annual ratings reviews);
(viii) the negotiation, preparation, execution, delivery and administration
of any consents, amendments, waivers or other modifications of or under any
Transaction Documents; and
(ix) enforcing any obligations of or collecting any payments due from the
Borrower under any Transaction Document or with respect to the Property or in
connection with any refinancing or restructuring of the Loan in the nature of a
"work-out", or any insolvency or bankruptcy proceedings.
Any costs and expenses due and payable to Lender hereunder which are not
paid by the Borrower within ten days after demand may be paid from any amounts
in the Deposit Account, with notice thereof to the Borrower.
(b) The Lender shall pay the initial and regular ongoing fees of the
Servicer and the Trustee and except as set forth in Section 7.1(a), the costs of
any Securitization.
(c) The Borrower has provided $75,000 to NACC (the "Expense Deposit") for
the payment of the fees, costs and expenses payable pursuant to Section 7.1(a)
of this Agreement. If any portion of the Expense Deposit remains after payment
of such fees, costs and expenses, NACC shall pay such portion to the Borrower
within 30 days after the closing of the Loan. The establishment of the Expense
Deposit shall not limit the Borrower's obligations to pay the fees, costs and
expenses described in Section 7.1(a).
Section VII.2 Indeminification
(a) The Borrower, for itself and all those claiming under or through the
Borrower, to the fullest extent permitted by law, hereby releases and shall
defend, hold harmless and indemnify NACC and after the Securitization, NACC and
the Lender, and its respective directors, officers, agents and employees,
(together, the "Indemnified Parties") from and against any and all liabilities,
claims, charges, losses, expenses or damages of any kind or nature, including
reasonable attorneys' fees and disbursements, which may arise in connection with
(i) the performance or non-performance by the Borrower of any of the Transaction
Documents or the operation of the Property by the Borrower and (ii) any breach
or failure by the Borrower to comply with any representation, warranty or
covenant made by the Borrower herein or in any other document furnished by the
Borrower in connection with the transactions contemplated by the Transaction
Documents, except to the extent caused by the willful acts or omissions, gross
negligence or bad faith of any Indemnified Party. It is understood that if the
Borrower performs its obligations set forth in the Transaction Documents
strictly in accordance with the terms and provisions thereof, the provisions of
clause (i) of the foregoing sentence in so far as they relate to the
"performance ... by the Borrower of any of the Transaction Documents," shall not
be applicable. The Borrower shall appear in and defend any Action that might in
any way in the good faith judgment of the Lender affect the value of the
Property, the title to the Property, the priority of the Mortgage or the rights
and powers of the Lender. Any sums due under this Section 7.2 shall be payable
by the Borrower within 10 days of demand therefor with evidence of the amount
due and, if not paid within such 10-day period, shall bear interest from the
date of demand to the date of payment at the Default Rate. The Borrower shall
pay the cost of suit, cost of evidence of title and reasonable attorneys' fees
and disbursements in any Action brought by the Lender to foreclose the Mortgage,
including trial and any appeal with respect to any such Action;
(b) The Borrower shall indemnify and holds NACC and its Affiliates,
including, without limitation, Nomura Securities International, Inc., harmless
against all costs, expenses and damages incurred by NACC and its Affiliates
(including, without limitation, all liabilities under all applicable federal and
state securities laws) as a direct result of any untrue statement of a material
fact contained in the offering documents used in connection with the
Securitization based on information provided by the Borrower or the Manager,
which describes the Borrower or the Manager, the Property (and the management
thereof) or any aspect of the Loan or the parties directly involved therein, or
as a result of any untrue statement of a material fact in any of the financial
statements of the Borrower or the Manager incorporated into such offering
documents or the failure to include in such financial statements or in such
offering documents any material fact relating to the Borrower or the Manager,
the Property (and the management thereof) and any aspect of the Loan necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided, however, that the Borrower shall
have had an opportunity to review, comment on and approve the relevant portions
of such offering documents but Borrower shall have a minimum of five (5)
business days to review such offering documents and one (1) business day to
review subsequent revisions thereof. The Borrower shall act reasonably and
promptly in connection with its approval of the relevant portions of the
offering documents. The Borrower shall not indemnify NACC for any cost, expense
or damage incurred as a result of the inclusion of any erroneous or misleading
information in such offering documents, or the omission of material information
from the offering documents, provided that the Borrower or its counsel shall
have previously indicated to NACC or its counsel the erroneous or misleading
nature of such information or the omission of material information, as the case
may be. At the time of the use of such offering documents, NACC shall execute
and deliver to the Borrower an instrument (in form and substance reasonably
satisfactory to the Borrower) indemnifying and holding each of the Borrower, the
General Partner (and the officers and directors thereof), and its agents and
employees harmless against all costs, expenses and damages (other than costs and
expenses specifically agreed by the Borrower to be borne by it) incurred by them
(including, without limitation, all liabilities under all applicable federal and
state securities laws) caused by and directly relating to the offering described
in such Offering Documents; provided, however, that such indemnification shall
not apply if any such costs, expenses or damages arise out of or are based upon
an untrue statement of a material fact or an omission to state a material fact
in such offering documents or in the Borrower's financial statements for which
the Borrower is providing indemnification as provided above;
(c) Promptly after receipt by an indemnified party under Section 7.2(a) or
7.2(b) of notice of the commencement of any action for which a claim for
indemnification is to be made against an indemnifying party, such indemnified
party shall notify the indemnifying party in writing of such commencement, but
the omission to so notify the indemnifying party will not relieve the
indemnifying party from any liability that it may have to any indemnified party
hereunder except to the extent that failure to notify causes prejudice to the
indemnifying party. If any action is brought against any indemnified party, and
it notifies an indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that it may
elect by written notice delivered to the indemnified party promptly after
receiving the aforesaid notice of commencement, to assume the defense thereof
with counsel satisfactory to such indemnified party. After notice from the
indemnifying party to such indemnified party under this Section 7.2(c), the
indemnifying party shall not be responsible for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that 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 not being raised by Host Marriott or counsel selected by Host
Marriott, then the indemnified party shall give written notice thereof to Host
Marriott and if Host Marriott fails to raise and pursue such defense, then the
indemnified party or parties shall have the right to select separate counsel, at
the expense of the indemnifying party, to assert such legal defenses and to
otherwise participate in the defense of such action on behalf of such
indemnified party or parties.
(d) The obligations of the Borrower under this Section 7.2 shall survive
termination of this Agreement;
(e) The provisions of the sixth and seventh paragraphs of that certain
Commitment Letter, dated October 28, 1997, of NACC are incorporated herein by
reference to the extent such provisions impose indemnification obligations on
the Borrower and NACC that are more burdensome than those contained in this
Section 7.2.
ARTICLE VIII
IMMUNITY
Section VIII.1 Partners, Employees and Agents of the Borrower Immune from
Liability
Notwithstanding anything to the contrary herein, including, without
limitation, Article Seven, the obligations under each Transaction Document shall
be Non-Recourse.
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section IX.1 All notices, requests, demands, consents, reports or other
communications, including, without limitation, a tender of a cure pursuant to
Section 4.1B, to or upon the respective parties hereto shall be in writing and
be deemed to have been duly given or made when received, addressed to the party
to which such notice, request, demand, consent, report or other communication is
being given at its address set forth below, or at such other address as any of
the parties hereto may hereafter notify the others by notice given hereunder:
If to NACC:
Nomura Asset Capital Corporation
2 World Financial Center, Building B
New York, New York 10281
Attention: Daniel S. Abrams, Managing Director
Telecopier: (212) 667-1022
With a copy to:
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
Attention: Robert I. Fisher, Esq.
Telecopier: (212) 940-8776
and:
Nomura Asset Capital Corporation
2 World Financial Center, Building B
New York, New York 10281
Attention: Sheryl McAfee
Telecopier: (212) 667-1206
If to the Borrower:
HMA Realty Limited Partnership c/o Host Marriott Corporation 10400 Fernwood
Road Bethesda, Maryland 20817 Attention: Law Department 923/Deputy General
Counsel, Asset Management Telecopier: (301) 380-6332
With a copy to:
HMA Realty Limited Partnership
c/o Host Marriott Corporation
10400 Fernwood Road
Bethesda, Maryland 20817
Attention: Asset Management Department 908
Telecopier: (301) 380-8260
and:
Arnold and Porter
555 Twelfth Street, N.W.
Washington, D.C. 20004-1206
Attention: S. Lee Narrow, Esq.
Telecopier: (202) 942-5999
Evidence of such receipt shall include personal delivery, electronic
confirmation (hard copy to be sent by regular mail) and the failure to accept a
communication sent by registered or certified U.S. mail, postage prepaid.
Section IX.2 Benefit of Agreement. This Agreement shall be binding upon,
inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto; provided, however, that the Borrower may not
assign or transfer any of its rights or obligations hereunder without the
consent of the Lender which may be withheld in the sole discretion of the
Lender. Except as expressly provided otherwise in the Agreement, any such
assignment or transfer shall not release the Borrower from any obligations or
liabilities hereunder. The Lender's interests under the Transaction Documents
shall be freely assignable and transferrable. No party other than the parties
hereto and their permitted assigns shall be deemed to have any benefits or
obligations under this Agreement.
Section IX.3. Governing Law. This Agreement and the rights and obligations
of the parties under the Transaction Documents except for the Mortgage and the
assignments of leases, rents and profits, dated the Closing Date, from the
Borrower to the Lender which shall be governed by the laws of the State of
Georgia shall be governed by the internal laws of the State of New York.
Section IX.4. This Agreement may be executed in any number of counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument.
Section IX.5 Index, Descriptive Headings. The Index to this Agreement and
the descriptive headings of the several Sections and Articles of this Agreement
are inserted for convenience only and shall not in any way affect the meaning or
construction of any provision of this Agreement. In the preparation of the
Transaction Documents indistinguishable contributions were made by
representatives of both NACC and the Borrower, and each of the Lender and the
Borrower waives any and all rights, either at law or in equity, to have the
provisions of any Transaction Document interpreted in favor of one over the
other based on a claim that representatives of one or the other were the
principal draftsmen thereof.
Section IX.6 Amendment or Waiver; Integration. No provision of this
Agreement may be amended, changed, waived, discharged or terminated orally, but
only by an instrument in writing signed by the party against whom enforcement of
the amendment, change, waiver, discharge or termination is sought. This
Agreement and the other Transaction Documents set forth the entire agreement and
understanding of the parties with respect to the subject matter hereof and
thereof, and supersede any and all prior agreements and understandings of the
parties hereto with respect to the subject matter hereof and thereof including,
without limitation, that certain Commitment Letter, dated October 28, 1997 and
is between the Borrower and NACC, which prior agreements and understandings are
terminated in all respects.
Section IX.7 Survival of Representations and Warranties; Reliance. All
representations and warranties contained in this Agreement shall survive the
execution and delivery of this Agreement and the making of the Loan and shall be
considered to have been relied upon by the Lender regardless of any
investigation made by or on behalf of it.
Section IX.8. Returned Payments. If after receipt of any payment of all or
any part of the Debt, the Lender is for any reason compelled to surrender such
payment to any Person because such payment is determined to be void or voidable
as a preference, an impermissible set-off, a diversion of trust funds or for any
other reason, this Agreement shall continue in full force, and the Borrower
shall be liable to, and shall indemnify and hold the Lender harmless for, the
amount of such payment surrendered until the Lender shall have been finally and
irrevocably paid in full. The provisions of the foregoing sentence shall be and
remain effective notwithstanding any contrary action which may have been taken
by the Lender in reliance upon such payment, and any such contrary action so
taken shall be without prejudice to the Lender's rights under this Agreement and
shall be deemed to have been conditioned upon such payment having become final
and irrevocable.
SECTION IX.9 JURISDICTION AND SERVICE; WAIVER OF JURY TRIAL. EACH OF THE
GENERAL PARTNER AND THE BORROWER HEREBY (I) IRREVOCABLY CONSENTS AND SUBMITS
ITSELF AND ACKNOWLEDGES AND RECOGNIZES THE JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK LOCATED IN NEW YORK COUNTY AND THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR PURPOSES OF ANY ACTION ARISING
OUT OF, UNDER, OR IN CONNECTION WITH, RELATING TO, OR BASED UPON ANY TRANSACTION
DOCUMENT OR THE SUBJECT MATTER THEREOF, (II) AGREES THAT SUCH COURTS SHALL BE
THE SOLE AND EXCLUSIVE COURTS AND FORUMS FOR THE PURPOSE OF ANY SUCH ACTION AND
(III) WAIVES AND AGREES NOT TO ASSERT, AS A DEFENSE OR OTHERWISE, IN ANY SUCH
ACTION, ANY CLAIM THAT SUCH COURTS DO NOT HAVE JURISDICTION OVER IT OR THAT SUCH
ACTION IS BROUGHT IN AN INCONVENIENT FORUM; PROVIDED, HOWEVER, THAT NOTHING
CONTAINED HEREIN SHALL LIMIT, IN ANY MANNER, THE RIGHT OF THE LENDER TO
INSTITUTE OR TAKE ANY ACTION IN ANY COURT IN ANY JURISDICTION FOR THE PURPOSE OF
PROTECTING, PRESERVING OR REALIZING UPON ANY COLLATERAL, IF ANY, SECURING THE
DEBT OR ENFORCING ANY JUDGMENT OBTAINED BY IT IN CONNECTION WITH ANY TRANSACTION
DOCUMENT OR THE SUBJECT MATTER THEREOF. EACH OF THE GENERAL PARTNER, THE
BORROWER AND THE LENDER HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, RELATING TO, OR BASED UPON ANY TRANSACTION DOCUMENT OR THE
SUBJECT MATTER THEREOF, AND AGREES THAT PROCESS IN ANY SUCH ACTION, IN ADDITION
TO ANY OTHER METHOD PERMITTED BY LAW, MAY BE SERVED UPON IT BY REGISTERED OR
CERTIFIED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO THE GENERAL PARTNER OR
THE BORROWER OR THE LENDER AT THE ADDRESS SET FORTH IN SECTION 9.1 OR AT SUCH
OTHER ADDRESS AS THE GENERAL PARTNER OR THE BORROWER OR THE LENDER MAY DESIGNATE
BY NOTICE, AND SUCH SERVICE SHALL BE DEEMED EFFECTIVE AS IF PERSONAL SERVICE HAD
BEEN MADE UPON IT WITHIN NEW YORK COUNTY.
Section IX.10. Enforceability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the Borrower hereby waives any provision of law which renders
any provision hereof prohibited or unenforceable in any respect.
Section IX.11. Conflicting Terms. In the event of any direct conflict
between any provision of this Agreement and any provision of any other
Transaction Document, this Agreement shall govern; provided, however, that (a)
notwithstanding the foregoing, the remedies contained in the Mortgage and any
other Transaction Document shall govern in the event of any direct conflict with
any remedy contained in this Agreement, and (b) the parties intend that the
terms and provisions of each of the Transaction Documents be given full effect,
and, accordingly, the provisions of the other Transaction Documents, to the
fullest extent possible, shall be construed to be additional and supplementary
to, and not in conflict with or in derogation of, the provisions of this
Agreement.
Section IX.12 Relationship of Parties. The relationship of the Borrower to
the Lender is strictly and solely that of borrower and lender and mortgagor and
mortgagee and nothing contained in any Transaction Document is intended to
create, or shall in any event or under any circumstance be construed as
creating, a partnership, joint venture, tenancy-in-common, joint tenancy or
other relationship of any nature whatsoever between the Borrower and the Lender
other than as borrower and lender and mortgagor and mortgagee. The Borrower
acknowledges that (a) NACC engages in the business of real estate financings and
other real estate transactions and investments which may be viewed as adverse to
or competitive with the business of the Borrower or its Affiliates, (b) it is
represented by competent counsel and has consulted counsel before executing this
Agreement and (c) it shall rely solely on its own judgement and advisors in
entering into the transactions contemplated hereby without relying in any manner
on any statements, representations or recommendations of NACC or any Affiliate
of NACC except as set forth in Section 5.6.
Section IX.13 Retention of Servicer. The Lender reserves the right to
retain the Servicer to act as its agent hereunder with such powers as are
specifically delegated to the Servicer by Lender, whether pursuant to the terms
of this Agreement, the Pooling and Servicing Agreement used in the
Securitization or otherwise, together with such other powers as are reasonably
incidental thereto. The Borrower shall pay any reasonable fees and expenses of
the Servicer in connection with a defeasance, release of the Property,
assumption or modification of the Loan or enforcement of the Transaction
Documents.
IN WITNESS WHEREOF, each of the Borrower and NACC has caused this
Agreement to be signed and delivered, all as of the day and year first above
written.
NOMURA ASSET CAPITAL CORPORATION
By: /s/ Robert J. Spinna
Robert J. Spinna
Vice President
HMA REALTY LIMITED PARTNERSHIP
By: HMA-GP, Inc., its sole general partner
By: /s/ Patricia K. Brady
Patricia K. Brady
Vice President
TABLE OF CONTENTS
Page
ARTICLE I: DEFINITIONS....................................... 1
Section 1.1 Definitions.............................. 1
ARTICLE II: PROVISIONS CONCERNING THE ACCOUNTS
AND PLEDGED PROPERTY........................... 17
Section 2.1 Cash Management Procedures............... 17
Section 2.2 Right to Contest......................... 17
Section 2.3 Defeasance............................... 18
Section 2.4 Sale of the Property..................... 21
Section 2.5 Change of Control........................ 21
Section 2.6 Release after the
Optional Prepayment Date............. 21
ARTICLE III: PAYMENTS.......................................... 22
Section 3.1 Payments on the Notes.................... 22
Section 3.2 Interest................................. 22
Section 3.3 Payments without Deduction, etc.......... 22
Section 3.4 Periodic Payments........................ 23
Section 3.5 Late Payment Charge...................... 23
ARTICLE IV: DEFAULT; REMEDIES; ENFORCEMENT.................... 24
Section 4.1A Events of Default........................ 24
Section 4.1B Event of Default Cure.................... 26
Section 4.2 Remedies................................. 27
Section 4.3 Remedies Cumulative; Delay or Omission
Not a Waiver......................... 28
ARTICLE V: REPRESENTATIONS, WARRANTIES AND COVENANTS......... 28
Section 5.1 Representations and Warranties
of the Borrower...................... 28
Section 5.2 Affirmative Covenants.................... 37
Section 5.3 Negative Covenants....................... 42
Section 5.3A General Partner Covenant................. 44
Section 5.4 Further Assurances....................... 44
Section 5.5 Representations, Warranties
and Covenants of NACC................ 45
Section 5.6 Other.................................... 46
ARTICLE VI: SECURITIZATION.................................... 46
Section 6.1 Securitization........................... 46
ARTICLE VII: PAYMENT OF FEES AND EXPENSES; INDEMNIFICATION......48
Section 7.1 Fees and Expenses........................ 48
Section 7.2 Indemnification.......................... 50
ARTICLE VIII: IMMUNITY.......................................... 52
Section 8.1 Partners, Employees and Agents of the
Borrower Immune from Liability....... 52
ARTICLE IX: MISCELLANEOUS PROVISIONS.......................... 52
Section 9.1 Notices.................................. 52
Section 9.2 Benefit of Agreement..................... 54
Section 9.3 Governing Law............................ 54
Section 9.4 Counterparts............................. 54
Section 9.5 Index, Descriptive Headings.............. 54
Section 9.6 Amendment or Waiver; Integration......... 55
Section 9.7 Survival of Representations
and Warranties; Reliance............. 55
Section 9.8 Returned Payments........................ 55
SECTION 9.9 JURISDICTION AND SERVICE;
WAIVER OF JURY TRIAL................. 55
Section 9.10 Enforceability........................... 56
Section 9.11 Conflicting Terms........................ 56
Section 9.12 Relationship of Parties.................. 57
Section 9.13 Retention of Servicer.................... 57
Exhibit A - ADA Compliance Work and Deferred Maintenance Work
Exhibit B - Cash Management Procedures
Exhibit C - Environmental Remediation Work
Exhibit D - Permitted Investments
Exhibit E - Organizational Structure of the Borrower
Exhibit F - Operating Budget
Exhibit G - Capital Budget
Exhibit J - Rehabilitation Work
Schedule 1 - Disclosure Report
EXHIBIT B
CASH MANAGEMENT PROCEDURES
Capitalized terms used in this Exhibit shall have the meanings ascribed to
them in Schedule I hereto and if not defined therein, in the Management
Agreement.
1. Manager's Account
1.1 The Manager has established a segregated account for the Property in
its name for which accounting of deposits and withdrawals shall be maintained
(such account, including any supplements thereto or replacements thereof, the
"Manager's Account"). The Manager may also establish segregated accounts for the
Property (a) from which payments for alcoholic beverages purchased for the Hotel
are made, (b) in which accounts receivable from credit card companies are
deposited, (c) with respect to which charges for returned checks are made and
(d) into which excess funds not currently needed for Management Expenses are
deposited for investment; provided, however, that each such account other than
the account referred to in clause (d) shall be a "zero-balance" account except
for de minimis amounts retained therein, i.e., at the end of each day the
amounts contained therein shall be transferred to the Manager's Account.
2. Payments of Management Expenses; Remittance to the Borrower
2.1 The Manager shall deposit into the Manager's Account (or during a
Lockbox Period, into the Local Account or Clearing Account), within one full
Business Day after the receipt thereof, all Gross Revenues received by the
Manager, other than customary amounts of petty cash and amounts in the "house
banks" held at the Property, and shall direct all third parties from whom the
Borrower has accounts receivable, including, without limitation, credit card
companies, but excluding guests who pay by cash or check at the Hotel ("Third
Party Payors") to send their payments directly to the Manager's Account;
provided, however, that accounts receivables from credit card companies may be
deposited in the credit card account referred to in Section 1.1.
2.2 The Manager's Account shall be controlled by the Manager. Funds on
deposit in the Manager's Account shall not be commingled with funds related to
any other properties owned or managed by the Manager or any other Person other
than the Borrower.
2.3 From and after the Closing Date, and except during a Lockbox Period,
the Manager shall make disbursements for the Property on behalf of the Borrower
from funds on deposit in the Manager's Account or from petty cash at the
Property to pay Management Expenses (i.e., "Deductions," as such term is defined
in the Management Agreement) including, without limitation, to make deposits
into the Capital Expenditure and FF&E Reserve Account as required by Section
8.2. Such disbursements may include disbursements to the accounts referred to in
clauses (a), (c) and (d) of the second sentence of Section 1.1.
2.4 On the last Business Day of the first and third week of each Accounting
Period commencing with the Accounting Period that begins on January 3, 1998, the
Manager shall transfer cash from the Manager's Account (relating to the prior
Accounting Period's Operating Profit) to the Deposit Account for application by
the Servicer on the next Debt Service Payment Date. The amount of cash
transferred from the Manager's Account on or before the last Business Day of the
first week in each Accounting Period will be equal to 50% of the estimated
Operating Profit for the immediately preceding Accounting Period. The amount of
cash transferred from the Manager's Account on or before the last Business Day
of the third week in each Accounting Period (the "Operating Profit Payment
Date") will be an amount equal to the Operating Profit as of the end of the
immediately preceding Accounting Period, calculated on a cumulative basis
(taking into account previous transfers). Such transfer shall be effected by
federal wire, automated clearing house funds, or other transfer of next-day
available funds, to the Deposit Account; provided, however, that any such
transfer made within five days prior to a Debt Service Payment Date shall be
made by federal wire of immediately available funds. The date of the first
transfer provided for herein shall be February 6, 1998 and shall relate to the
Operating Profit for the Accounting Period that begins on January 3, 1998. On or
before the last Business Day of the fourth week in each Accounting Period, the
Borrower will provide to the Lender a statement setting forth the calculation of
the amount of Operating Profit transferred to the Deposit Account with respect
to the immediately preceding Accounting Period and certifying that the correct
amount has been transferred.
3. [Omitted]
4. Deposit Account
4.1 On or before the Closing Date, the Servicer shall establish and
maintain one or more segregated accounts in its name on behalf of the Lender
(collectively the "Deposit Account"), which must be Eligible Accounts, into
which all amounts received by the Servicer from the Manager's Account (and,
during a Lockbox Period from the Clearing Account and any other account
functioning as a lockbox account), and all other funds of the Borrower (other
than funds held in the Capital Expenditure and FF&E Reserve Account and the
Rehabilitation Account) held as security for the Loan shall be deposited. On a
monthly basis, the Servicer shall provide to the Manager and the Borrower such
information relating to the transactions in the Deposit Account as the Manager
or the Borrower shall reasonably request, including, without limitation, the
amounts deposited in the Deposit Account from the Manager's Account and all
transactions during a Lockbox Period.
4.2 From time to time, the Servicer will establish one or more segregated
subaccounts of the Deposit Account into which (a) Insurance Proceeds held by the
Lender in accordance with Section 13 of the Mortgage, the text of which is set
forth in Schedule II hereto, shall be deposited, (b) certain payments of
Condemnation Proceeds held by the Lender pursuant to Section 14 of the Mortgage,
the text of which is set forth in Schedule II hereto, shall be deposited, (c)
the tax and insurance escrows required by Section 6 shall be deposited, and (d)
the amounts in the Debt Service Reserve Account required by Section 5 shall be
deposited. All Condemnation Proceeds and Insurance Proceeds (except Condemnation
Proceeds and Insurance Proceeds that the Borrower is permitted to retain under
the terms of the Mortgage) shall be deposited into the appropriate subaccount to
be disbursed by the Servicer in the manner contemplated by the Mortgage.
4.3 On each Debt Service Payment Date up to and including the Optional
Prepayment Date, except during a Lockbox Period, withdrawals from the Deposit
Account (excluding amounts held in escrow, reserve, or other subaccounts, which
shall be withdrawn and applied solely for the purposes for which such
subaccounts are maintained) shall be made by the Servicer only for the following
purposes and in the following order of priority:
(A) (i) if the Securitization has been effected, to transfer funds to the
Collection Account (as such term is defined in the Pooling and Servicing
Agreement used in the Securitization) in the amount needed to pay (y) first, the
fees, costs and expenses (together, the "Servicing Expenses") to be paid or
reimbursed by the Borrower pursuant to the provisions of clauses (v) and (vi) of
Section 7.1(a) of the Loan Agreement, the text of which is set forth in Schedule
II hereto, to the parties entitled thereto and (z) next, to the extent that the
payments called for under this clause (i) have not been received by the Servicer
from or with respect to U.S. Obligations held by the Servicer pursuant to
Section 2.3 of the Loan Agreement, the text of which is set forth in Schedule II
hereto (the "U.S. Obligations"), (a) first, the interest at the Base Rate or
Default Rate, as applicable, then due and payable under the Note, (b) next, the
Principal Payment then due and payable under the Note, and (c) next, any other
Debt then due and payable to the Lender (items (a) and (b) with respect to the
Note hereinafter, the "Monthly Debt Service Payment");
(ii) if the Securitization has not been effected, to pay (y) first, the
Servicing Expenses and (z) next, to the extent that the payments called for
under this clause (ii) have not been received by the Servicer from or with
respect to U.S. Obligations held by the Servicer pursuant to Section 2.3 of the
Loan Agreement, (a) first, the Monthly Debt Service Payment, and (b) next, any
other Debt then due and payable to the Lender;
(B) if required under the terms of Section 6, to transfer amounts necessary
to fund the escrow accounts maintained by the Servicer for real estate taxes and
insurance premiums;
(C) to fund any shortfall in the Debt Service Reserve Account in the amount
required under Section 5;
(D) to fund any shortfall in the Capital Expenditure and FF&E Reserve
Account in the amount required under Section 8.2;
(D1) to deposit into the FF&E Reserve Account (as such term is referred to
in Section 8.1) an amount equal to any Excess Contributions (as such term is
defined in the SNDA);
(E) to remit to the Manager any funds to which the Manager is entitled
pursuant to the provisions of the Management Agreement and any other agreement
between the Borrower and the Manager, including, without limitation, for the
payment of amounts then due and payable on each loan made by the Manager to the
Borrower (a "Manager Loan") and accrued and unpaid interest thereon; and
(F) subject to Section 6.6 hereof, so long as no Event of Default has
occurred and is continuing, to remit to the Borrower any funds remaining in the
Deposit Account to be applied in accordance with the provisions of the
Partnership Agreement.
In making the distributions specified in clauses (D) and (E) above, the
Servicer shall rely conclusively on written instructions that the Manager shall
provide at least one Business Day prior to the Debt Service Payment Date (with
copies to the Borrower) as to the amounts to be paid and compliance with the
provisions of the documents named therein. The Servicer shall have no duty to
recompute, recalculate, or verify the data contained in such instructions or
information and shall incur no liability to the Borrower or the Manager if the
Servicer disburses funds in accordance therewith.
4.4 Until the Note has been Paid in Full, unless the procedures set forth
in Section 7 apply, on each Debt Service Payment Date after the Optional
Prepayment Date withdrawals from the Deposit Account (excluding amounts held in
escrow, reserve, or other subaccounts, which shall be withdrawn and applied
solely for the purposes for which such subaccounts are maintained) shall be made
by the Servicer only for the following purposes and in the following order of
priority:
(A) (i) if the Securitization has been effected, to transfer funds to the
Collection Account in the amount needed to pay (x) first, the Servicing
Expenses, (y) next, the Monthly Debt Service Payment, and (z) next, any other
Debt then due and payable to the Lender (other than pursuant to the provision of
clause (H) below);
(ii) if the Securitization has not been effected, to pay (x) first, the
Servicing Expenses, (y) next, the Monthly Debt Service Payment, and (z) next,
any other Debt then due and payable to the Lender (other than pursuant to the
provisions of clause (H) below);
(B) if required under the terms of Section 6, to transfer amounts necessary
to fund the escrow accounts maintained by the Servicer for real estate taxes and
insurance premiums;
(C) to fund any shortfall in the Debt Service Reserve Account in the amount
required under Section 5;
(D) to fund any shortfall in the Capital Expenditure and FF&E Reserve
Account in the amount required under Section 8.2;
(E) to remit to the Manager any funds to which the Manager is entitled
pursuant to the provisions of the Management Agreement (which are not
Deductions) to be applied to (i) first, repayment of all amounts then due and
payable with respect to each Manager Loan and accrued and unpaid interest
thereon; provided, however, that for such purpose the principal balance of each
Manager Loan and accrued and unpaid interest thereon shall be amortized on a
five year straight line basis, from the later of (x) the date funds were
advanced or (y) the Optional Prepayment Date and (ii) next, payment of Incentive
Management Fees earned in the then current Fiscal Year, until all amounts then
due and payable in respect of the foregoing have been paid in full;
(F) to remit to the Borrower the lesser of (x) the aggregate amount of
payments for, or reserves created for payment for, administrative expenses of
the Borrower with respect to the Fiscal Year in which such Debt Service Payment
Date occurs not previously remitted to the Borrower pursuant to the provisions
of this clause (F)(x) and (y) $300,000 for the Fiscal Year ending December 31,
1998, which amount shall be increased by the CPI Percentage for each Fiscal Year
thereafter;
(G) to remit to the Manager such amount, as may be agreed upon by the
Borrower, the Manager and the Lender, that the Manager has advised the Lender
will be necessary to effect repairs, alterations, improvements, renewals or
replacements, the cost of which is to be borne by the Borrower pursuant to
Section 8.03 of the Management Agreement; and
(H) subject to the provisions of Section 6.6 hereof, to the extent of
Excess Cash Flow, for each of the Operating Profit Payment Dates occurring
during the period from and including the eleventh (11th) day of the calendar
month immediately preceding such Debt Service Payment Date to and including the
tenth (10th) day of the calendar month in which such Debt Service Payment Date
occurs, (a) first, to prepayment of each Principal Payment required to be made
on such Debt Service Payment Date, in inverse order of maturity, until the
principal of the Note has been paid in full, and (b) next, to payment of the
difference, if any, between, (y) the sum of (i) interest accrued and unpaid on
the Note calculated at the Adjusted Rate and (ii) interest on such accrued and
unpaid amount at the Adjusted Rate and (z) interest at the Base rate paid on
such Debt Service Payment Date pursuant to clause (A) of this Section 4.4.
At such time as the Note has been Paid In Full, the Servicer shall remit
(a) to the Manager, for application consistent with the Management Agreement,
any funds remaining in the Deposit Account (including subaccounts thereof,
subject to the exception set forth in (b) below), the Capital Expenditure and
FF&E Reserve Account and the Rehabilitation Account and (b) to the Borrower, any
funds remaining in the Debt Service Reserve Account.
In making the distributions and payments specified in clauses (D), (E) and
(G) above, the Servicer shall rely conclusively on written instructions that the
Manager shall provide at least one Business Day prior to the Debt Service
Payment Date (with copies to the Borrower) as to the amounts to be paid and
compliance with the provisions of the documents named therein. In making the
distributions specified in clause (F) and (H) above, the Servicer shall rely
conclusively on written instructions that the General Partner shall provide at
least one Business Day prior to such Debt Service Payment Date (with copies to
the Borrower) as to the amounts to be paid. The Servicer shall have no duty to
recompute, recalculate, or verify the data contained in such instructions or
information and shall incur no liability to the Borrower or the Manager if the
Servicer disburses funds in accordance therewith.
5. Debt Service Reserve Account
The Servicer shall maintain, as a sub-account of the Deposit Account, an
account (the "Debt Service Reserve Account") to be used by the Servicer to pay
the Monthly Debt Service Payment if the amounts available from (a) Operating
Profit transmitted by the Manager to the Servicer pursuant to Section 2.4 or
Section 7.9.2, as applicable, and (b) U.S. Obligations held by the Servicer
pursuant to Section 2.3 of the Loan Agreement are insufficient for such purpose.
On the Closing Date, the Borrower has deposited in the Debt Service Reserve
Account an amount equal to three months' Monthly Debt Service Payments, one of
which has been deposited as set forth in Section 6.8. Thereafter, the Debt
Service Reserve Account shall be funded in accordance with Sections 4.3(C),
4.4(C) and 7.9.1 to an amount equal to twice the Monthly Debt Service Payment in
effect from time to time.
6. Single Downgrade Procedures
In addition to the other procedures set forth in this Exhibit, the
procedures set forth in this Section 6 shall apply during each period, if any,
from time to time, (a) beginning with the first day of the first full Accounting
Period following such time as (i) the long-term senior unsecured debt of MII
(the "MII Debt") is rated BBB+ by S&P, unless a Lockbox Event has occurred and
is continuing, in which event the procedures in Section 7 shall apply, and (ii)
the Servicer delivers a notice to the Manager and the Borrower that such
procedures are in effect and (b) ending on the date set forth in Section 6.7.
The Borrower will notify the Servicer and the Lender promptly after becoming
aware of the event described above.
6.1 The Servicer will maintain escrow accounts, as subaccounts of the
Deposit Account, for payments of the next succeeding payments of all insurance
premiums (including property, liability, and other insurance, but not including
workers compensation insurance) and real estate taxes coming due for the
Property. The escrow accounts will be funded (i) upon commencement of these
procedures, by transfers from the Manager's Account to the Deposit Account of
amounts previously deducted by the Manager for payment of future insurance
premiums and real estate taxes for the Property, but not expended and (ii)
thereafter, from cash in the Deposit Account on each Debt Service Payment Date
in accordance with Sections 4.3(B) and 4.4(B) (or otherwise by funds provided by
the Borrower or by the Manager pursuant to Section 12.5), such that the balance
in each escrow account is equal, with respect to each tax payment or insurance
premium owing with respect to the Property, to the product of (x) the amount of
such next payment or premium (or, the most recent payment or premium if the
amount of the next payment or premium is unknown) times (y) a fraction, the
numerator of which is the number of whole Accounting Periods since the date of
the last payment of the applicable tax or premium and the denominator of which
is the number of whole Accounting Periods from the date of the last payment of
the applicable tax or premium to the date of the next payment of such tax or
premium. With regard to any insurance obtained for the Property from the blanket
insurance program of the Manager or its Affiliates, the premiums shall be the
Property's allocable share of insurance premiums and such premiums shall be paid
directly to the Manager when due out of such escrows or other funds in the
Deposit Account or provided by the Borrower.
6.2 Provided that the necessary invoices or bills have been provided timely
to the Servicer by the Manager or the Borrower, the Servicer shall pay directly
all real estate taxes and insurance premiums with respect to which escrows have
been established prior to the imposition of any fine, penalty, interest or other
cost for non-payment from the amounts held in such escrows or, if such amounts
are insufficient, from amounts available in the Deposit Account or additional
funds provided by the Borrower (or by the Manager pursuant to Section 12.5) and
the Manager shall be relieved of any such obligation. The Borrower and/or the
Manager shall promptly send all such invoices or bills to the Servicer. Upon
acceleration of the maturity of the Note following an Event of Default, the
Lender shall be entitled to apply the funds held in such escrows (other than
escrows for payment of liability insurance premiums) to payment of the Note.
6.3 [Omitted]
6.4 During any period when the procedures set forth in this Section 6
apply, the amounts of Operating Profit remitted by the Manager to the Deposit
Account pursuant to Section 2.4 shall be calculated without deduction for any
taxes or premiums referred to in Section 6.1.
6.5 [Omitted]
6.6 The Borrower shall deposit into the Debt Service Reserve Account an
amount equal to the Monthly Debt Service Payment then in effect such that at the
end of such period, the Debt Service Reserve Account will contain an amount
equal to three times the Monthly Debt Service Payment then in effect; provided,
however, that the Borrower shall be deemed to be in compliance with the
provisions of this Section 6.6 if the Borrower delivers an irrevocable direction
to the Servicer to deposit such amount out of (y) prior to the Optional
Prepayment Date, all amounts payable to the Borrower pursuant to Sections 4.3(F)
and 7.9.3(C) hereof and (z) after the Optional Prepayment Date, amounts
available immediately prior to the application of excess cash flow pursuant to
the provisions of (i) Sections 4.4(H) and 7.10(E) but after amounts are paid to
the Manager pursuant to Sections 4.4(E) and 4.4(G) and 7.10(B) and 7.10(D).
6.7 Beginning with the first full Accounting Period following such time as
the MII Debt is rated at least A- by S&P, (i) the Borrower will no longer be
required to maintain the escrow accounts described in Section 6.1 and all
amounts then held in such escrow accounts will be transferred to the Manager's
Account pursuant to the Manager's instructions and thereafter the Manager will
be responsible for paying real estate taxes and insurance premiums in accordance
with the terms of the Management Agreement and (ii) all amounts then held in the
Debt Service Reserve Account in excess of two Monthly Debt Service Payments will
be returned to the Borrower.
6.8 The procedures set forth in Section 6 are applicable on the date hereof
since the MII Debt is rated BBB+ by S&P; provided, however, that on the Closing
Date, the Borrower has deposited an amount equal to the Monthly Debt Service
Payment into the Debt Service Reserve Account as provided for in Section 6.6.
7. Lockbox
A "Lockbox Event" shall occur at any time or times if (a) (i) any of the
MII Cash Management Conditions are not satisfied or (ii) S&P does not rate the
MII Debt at least BBB+ or (iii) either (x) at any time after July 11, 1998, S&P
rates the MII Debt at least A- and the Debt Service Reserve Account contains
less than one Monthly Debt Service Payment in effect at such time or (y) at any
time after February 11, 1999, S&P rates the MII Debt BBB+ and the Debt Service
Reserve Account contains less than two Monthly Debt Service Payments in effect
at such time and (z) in each of cases (x) and (y) above, the Borrower (or the
Manager pursuant to Section 12.5) does not fund the shortfall in the Debt
Service Reserve Account within fifteen days of notice to such effect from the
Servicer to the Borrower and the Manager and (b) the Servicer delivers a notice
to the Manager and the Borrower that the procedures described in this Section 7
are in effect. If a Lockbox Event occurs, such procedures shall apply in lieu of
the procedures set forth in Sections 2, 4.3, 4.4 and 6 during the period, as
provided below, beginning no later than the later of (A) two weeks after the
date on which the Servicer delivers the notice described in subclause (b) above
and (B) 120 days after the Closing Date, and continuing thereafter until the
first day of the first full Accounting Period after (i) each of the MII Cash
Management Conditions is again satisfied, (ii) S&P rates the MII Debt at least
BBB+, and (iii) either (y) if S&P rates the MII Debt at least A-, the Debt
Service Reserve Account contains at least two Monthly Debt Service Payments then
in effect or (z) if S&P rates the MII Debt BBB+, the Debt Service Reserve
Account contains at least three Monthly Debt Service Payments then in effect
(any such period, a "Lockbox Period"). The Servicer shall advise the Manager and
Borrower when the procedures set forth in this Section 7 are no longer in
effect. The Borrower will notify the Lender and the Servicer promptly after
becoming aware that a Lockbox Event has occurred.
7.1 [Omitted]
7.2 The following transition procedures will apply after a Lockbox Event:
7.2.1 As soon as possible but, in any event, not later than 7 Business Days
after the occurrence of a Lockbox Event, if the Manager's Account is an Eligible
Account, the Manager shall change the name on the Manager's Account to the
Servicer.
7.2.2 Not later than two weeks after the occurrence of a Lockbox Event,
provided that the Operating Account has been established for the Property
pursuant to Section 7.9, a lockbox account (the "Clearing Account") will be
established for the Property pursuant to the Lender's standard clearing account
agreement (pursuant to which the Lender or its designee shall agree to comply
with the provisions of these Cash Management Procedures) as a segregated account
in the name of the Servicer on behalf of the Lender, into which Gross Revenues
will be deposited and, with respect to the Manager's Account that does not
become the Clearing Account, funds from the Local Account will be transferred
during the Lockbox Period pursuant to Section 7.3.2. The Manager may also
establish the accounts described in clauses (a), (c) and (d) of the second
sentence of Section 1.1. The Clearing Account shall be an Eligible Account and
shall be the same account as the Manager's Account or a newly established
Eligible Account, subject to the following:
(i) if the Manager's Account is an Eligible Account or if the Manager's
Account is not an Eligible Account and the Manager determines after consultation
with the Lender or if the Securitization has occurred, with the Rating Agencies,
that the Manager's Account can become the Clearing Account, then the Manager's
Account shall become the Clearing Account. The Servicer on behalf of the Lender
will have sole control over the Clearing Account.
(ii) If the Manager's Account is not an Eligible Account and the Manager is
unable to so determine that the Manager's Account can become the Clearing
Account, then the Servicer shall open a new Eligible Account to be the Clearing
Account and will convert the Manager's Account into a lockbox account, in the
name of the Servicer over which the Servicer on behalf of the Lender will have
sole control.
(iii) If the Manager determines, in its good faith reasonable judgment
after due inquiry, that LaSalle National Bank or any other bank suggested by the
Servicer appears capable of putting in place within the Transition Period the
systems required to service the Manager's cash management needs and LaSalle
National Bank or such other suggested bank then meets the requirements for
establishing an Eligible Account, then the Manager shall select such bank to
hold the Clearing Account.
7.3 If the Manager's Account does not become the Clearing Account, the
transition procedures described in this Section 7.3 will apply to the Property
for a period (the "Transition Period") of up to 120 days after the beginning of
the Lockbox Period:
7.3.1 The Manager will notify Third Party Payors in their billing
statements or otherwise that all payments owing to the Borrower thereafter
should be sent to the Clearing Account. The Manager will work diligently with
Third Party Payors to enable them to send their payments to the Clearing Account
at the earliest reasonably practicable date. During the Transition Period, Third
Party Payors may continue to send their payments to the Manager's Account. Any
amounts received into the Manager's Account during the Lockbox Period will be
transferred by the Servicer, within one Business Day of receipt, to the Deposit
Account. Within 60 days after the beginning of the Lockbox Period, the Manager
shall deliver a report to the Borrower, and shall provide copies thereof to the
Lender or, after the Securitization, the Lender and each Rating Agency,
regarding the status of the transition to the new cash management procedures,
and upon the request of NACC or, after the Securitization, the Lender or a
Rating Agency, shall provide up to two additional reports (no more frequently
than 30 days after the prior report) regarding the status thereof.
7.3.2 The Manager shall be entitled to establish, from time to time, a
segregated account in its name or the name under which the Property operates,
which is not required to be an Eligible Account, at a financial institution
located in the vicinity of the Property (the "Local Account"), solely for the
purpose of receiving deposits of Gross Revenues, other than payments from credit
card companies, received by the Manager. Funds on deposit in the Local Account
shall not be commingled with funds related to any other properties owned or
managed by the Manager or any other Person. Once the Clearing Account is
established, the Manager shall transfer daily, by federal wire, automated
clearing house funds, or other transfer of next-day available funds, to the
Clearing Account, all available funds held on deposit in the Local Account less
customary amounts needed for petty cash and the "house banks" held at the
Property; provided, however, that (a) the amounts shall not exceed $150,000
(subject to adjustment at the end of each Fiscal Year for increases in the CPI
Percentage) and (b) such amount shall be increased, by agreement of the
Borrower, the Manager and the Lender, if the Property shall be expanded to
increase the number of rooms contained therein.
7.4 [Omitted]
7.5 [Omitted]
7.6 [Omitted]
7.7 Any funds received by the Borrower or the Manager during a Lockbox
Period and not yet deposited into the Clearing Account shall irrevocably be
deemed to be held in trust for the benefit of the Lender and (other than
receipts received at the Property and held as petty cash) shall immediately upon
receipt (and in no event later than one full Business Day after receipt) be
deposited by the Borrower or the Manager, as applicable, into the Clearing
Account. Funds on deposit in the Clearing Account shall not be commingled with
funds related to any other properties owned or managed by the Manager or any
other Person.
7.8 During a Lockbox Period, the Servicer shall maintain escrow accounts,
as subaccounts of the Deposit Account, for prepayments of the next succeeding
payments of all insurance premiums and real estate taxes, as described in
Section 6. During a Lockbox Period, provided that the necessary invoices or
bills have been provided timely to the Servicer by the Manager or the Borrower,
the Servicer will pay directly all real estate taxes and insurance premiums with
respect to which escrows have been established prior to the imposition of any
fine, penalty, interest or other cost for non-payment from the amounts held in
such escrows or, if such amounts are insufficient, from amounts available in the
Deposit Account or additional funds provided by the Borrower, and the Manager
will be relieved of any such obligation. The Borrower and/or the Manager shall
promptly send all such invoices or bills to the Servicer. Upon acceleration of
the maturity of the Note following an Event of Default, the Lender shall be
entitled to apply all of the funds held in such escrows (other than escrows for
payment of liability insurance premiums) to payment of the Note.
7.9 Prior to commencement of a Lockbox Period, the Servicer will establish
a segregated account (the "Operating Account"), in its name on behalf of the
Lender, which shall be an Eligible Account at a bank selected by the Manager and
reasonably acceptable to the Lender. If the Manager determines, in its good
faith reasonable judgment after due inquiry, that LaSalle National Bank or any
other bank suggested by the Servicer appears capable of putting in place the
systems required to service the Manager's cash management needs and LaSalle
National Bank or such other suggested bank then meets the requirements of an
Eligible Account, then the Manager shall select such bank to hold the Operating
Account. At the beginning of the Lockbox Period, the Manager shall transfer, by
immediately available funds, to the Operating Account, all funds of the Borrower
then held in the Manager's Account, less (i) amounts required to cover
outstanding checks, which the Servicer shall honor, and (ii) amounts which the
Servicer advises the Manager are required to be applied for the purposes set
forth in First, Second, Third and Fourth of Section 7.9.1. Subject to the
foregoing, the Manager shall transfer to the Deposit Account, by immediately
available funds, the amounts advised by the Servicer to be so required for
application by the Servicer for such purposes under clause (ii) above. The
Manager will have the authority to write checks on, and make other transfers
from, the Operating Account for (i) payment of Management Expenses (i.e.,
"Deductions," as such term is defined in the Management Agreement) (excluding
real estate taxes and insurance premiums with respect to which escrows are being
maintained by the Servicer), (ii) making deposits into the Capital Expenditure
and FF&E Reserve Account as required by Section 8.2 and (iii) repayment of
Direct Manager Funds provided pursuant to the provisions of Section 12.5 and
(iv) making payments for expenditures on furniture, fixtures and equipment. The
Manager may also disburse funds from Operating Account to the segregated
accounts provided for in clauses (a), (c) and (d) of Section 1.1 in accordance
with the provisions thereof. Within 20 days following the end of each Accounting
Period ending after funds are first deposited into the Operating Account, the
Manager will be required to certify that all prior expenditures from the
Operating Account have been for Management Expenses (excluding real estate taxes
and insurance premiums with respect to which escrows are being maintained) or
for the purposes specified in the immediately preceding sentence and that, to
the best of the Manager's knowledge, there are no accounts payable, either
singly or in the aggregate, of the Property with an unpaid balance of more than
$250,000 that are more than 60 days past due (unless payment is being contested
in good faith in accordance with Section 2.2 of the Loan Agreement, the text of
which is set forth in Schedule II hereto), except as otherwise stated with an
explanation therefor.
7.9.1 During a Lockbox Period all Gross Revenues that are received in cash
in the Clearing Account shall be transferred to subaccounts of the Deposit
Account within one Business Day after receipt thereof and together with any
Direct Manager Funds received in the Deposit Account pursuant to the provisions
of Section 12.5, shall be applied by the Servicer on such Business Day in the
following order of priority, and to the extent of available funds; provided,
however, that the Servicer shall give the Manager three Business Days' notice of
its intention to apply Gross Revenues for the purpose set forth in paragraph
Second:
First: to fund the tax and insurance escrows in the amount specified in
Section 6 above (to the extent the balance of any such escrows is insufficient);
Second: to fund the Debt Service Reserve Account until the balance in such
Account equals twice the Monthly Debt Service Payment in effect at such time;
Third: to fund any shortfall in the Capital Expenditure and FF&E Reserve
Account in accordance with Section 8.2 until the balance in such Account equals
the amount required to be deposited therein; and
Fourth: after the balances in the escrow accounts, the Debt Service Reserve
Account and the Capital Expenditure and FF&E Reserve Account described in First,
Second and Third are at the required levels, the remaining Gross Revenues will
be transferred by the Servicer from the Deposit Account to the Operating Account
as directed by the Manager.
In making the funding and payment specified in Third above, the Servicer
shall rely conclusively on written instructions that the Manager shall provide
at such times as the Servicer shall request (with copies to the Borrower) as to
the amounts to be funded. The Servicer shall have no duty to recompute,
recalculate, or verify the information contained in such instructions and shall
incur no liability to the Borrower or the Manager if the Servicer disburses
funds in accordance therewith.
7.9.2 At least one Business Day prior to each Debt Service Payment Date,
the Manager will transfer from the Operating Account to the Deposit Account, by
immediately available funds, an amount equal to the Operating Profit
(subtracting any amount that was transferred during the applicable period to the
Debt Service Reserve Account pursuant to Section 7.9.1 (Second) instead of the
Operating Account) for each Accounting Period ended at least three weeks prior
to such Debt Service Payment Date with respect to which the Manager has not
theretofore transferred such Operating Profit.
7.9.3 On each Debt Service Payment Date up to and including the Optional
Prepayment Date, withdrawals (a) from the Deposit Account in the amount of (and
not exceeding) the Operating Profit transferred to the Deposit Account by the
Manager pursuant to Section 7.9.2 with respect to such Debt Service Payment
Date, and (b) where required for the purpose of clause (A) below, from the Debt
Service Reserve Account, shall be made by the Servicer only for the following
purposes and in the following order of priority (excluding amounts held in
escrow, reserve, or other subaccounts, which shall be withdrawn and applied
solely for the purposes for which such subaccounts are maintained):
(A) (i) if the Securitization has been effected, to transfer funds to the
Collection Account in the amount needed to pay (y) first, the Servicing Expenses
and (z) next, to the extent that the payments called for under this clause (i)
have not been received by the Servicer from or with respect to U.S. Obligations
held by the Servicer pursuant to Section 2.3 of the Loan Agreement, (a) first,
the Monthly Debt Service Payment, and (b) next, any other Debt then due and
payable to the Lender;
(ii) if the Securitization has not been effected, to pay (y) first, the
Servicing Expenses and (z) next, to the extent that the payments called for
under this clause (ii) have not been received by the Servicer from or with
respect to U.S. Obligations held by the Servicer pursuant to Section 2.3 of the
Loan Agreement, (a) first, the Monthly Debt Service Payment, and (b) next, any
other Debt then due and payable to the Lender;
(B) to remit to the Manager that portion of any remainder of such Operating
Profit to which the Manager is entitled pursuant to the provisions of the
Management Agreement and any other agreement between the Borrower and the
Manager, including, without limitation, for the payment of amounts due and
payable on each Manager Loan and accrued and unpaid interest thereon; and
(B1) to deposit into the FF&E Reserve Account an amount equal to any Excess
Contributions (as such term is defined in the SNDA);
(C) subject to the provisions of Section 7.13 hereof, so long as no Event
of Default has occurred and is continuing, to remit to the Borrower the
remainder of such Operating Profit to be applied in accordance with the
provisions of the Partnership Agreement.
In making the distributions specified in clause (B) above, the Servicer
shall rely conclusively on written instructions that the Manager shall provide
at least one Business Day prior to the Debt Service Payment Date (with copies to
the Borrower) as to the amounts to be paid and compliance with the provisions of
the documents named therein. The Servicer shall have no duty to recompute,
recalculate, or verify the data contained in such instructions or information
and shall incur no liability to the Borrower or the Manager if the Servicer
disburses funds in accordance therewith.
7.10 Until the Note has been Paid in Full, on each Debt Service Payment
Date after the Optional Prepayment Date, withdrawals from (a) the Deposit
Account in the amount of (and not exceeding) the Operating Profit transferred to
the Deposit Account by the Manager pursuant to Section 7.9.2 with respect to
such Debt Service Payment Date, and (b) where required for the purposes of
clause (A) below, from the Debt Service Reserve Account, shall be made by the
Servicer only for the following purposes and in the following order of priority
(excluding amounts held in escrow, reserve, or other subaccounts, which shall be
withdrawn and applied solely for the purposes for which such subaccounts are
maintained):
(A) (i) if the Securitization has been effected, to transfer funds to the
Collection Account in the amount needed to pay (x) first, the Servicing
Expenses, (y) next, the Monthly Debt Service Payment, and (z) next, any other
Debt then due and payable to the Lender (other than pursuant to the provisions
of clause (E) below;
(ii) if the Securitization has not been effected, to pay (x) first, the
Servicing Expenses, (y) next, the Monthly Debt Service Payment, and (z) next,
any other Debt then due and payable to the Lender (other than pursuant to the
provisions of clause (E) below;
(B) to remit to the Manager, to be applied to (i) first, repayment of all
amounts then due and payable with respect to each Manager Loan and accrued and
unpaid interest thereon; provided, however, that for such purpose the principal
balance of each Manager Loan and accrued and unpaid interest thereon shall be
amortized on a five year straight line basis, from the later of (x) the date
funds were advanced, or (y) the Optional Prepayment Date and (ii) payment of
Incentive Management Fees earned in the then current Fiscal Year until all
amounts then due and payable in respect of the foregoing have been paid in full;
(C) to remit to the Borrower the lesser of (x) the aggregate amount of
payments for, or reserves created for payment for, administrative expenses of
the Borrower with respect to the Fiscal Year in which such Debt Service Payment
Date occurs not previously remitted to the Borrower pursuant to the provisions
of this clause (C)(i) and (y) $300,000 for such Fiscal Year ending December 31,
1998, which amount shall be increased by the CPI Percentage for each Fiscal Year
thereafter;
(D) to remit to the Manager such amount, as may be agreed upon by the
Borrower and the Lender, that the Manager has advised the Lender will be
necessary to effect repairs, alterations, improvements, renewals or
replacements, the cost of which is to be borne by the Borrower pursuant to
Section 8.03 of the Management Agreement;
(E) subject to the provisions of Section 7.13 hereof, to the extent of
Excess Cash Flow, in each case for each of the Operating Profit Payment Dates
occurring during the period from and including the eleventh (11th) day of the
calendar month immediately preceding such Debt Service Payment Date to and
including the tenth (10th) day of the calendar month in which such Debt Service
Payment Date occurs, (a) first, to prepayment of each Principal Payment in
inverse order of maturity, until the principal of the Note has been paid in
full, and (b) next, to payment of the difference, if any, between (y) the sum of
(i) interest accrued and unpaid on the Note calculated at the Adjusted Rate and
(ii) interest on such accrued and unpaid amount at the Adjusted Rate and (z)
interest at the Base Rate paid on each Debt Service Payment Date pursuant to
clause (A) of this Section 7.10.
At such time as the Note has been Paid In Full, the Servicer shall remit
(a) to the Manager, for application consistent with the Management Agreement,
any funds remaining in the Deposit Account (including subaccounts thereof,
subject to the exception set forth in (b) below), the Operating Account, the
Clearing Account, the Capital Expenditure and FF&E Reserve Account and the
Rehabilitation Account, and (b) to the Borrower, any funds remaining in the Debt
Service Reserve Account.
In making the distributions and payments specified in clauses (B) and (D)
above, the Servicer shall rely conclusively on written instructions that the
Manager shall provide at least one Business Day prior to the Debt Service
Payment Date (with copies to the Borrower) as to the amounts to be paid and
compliance with the provisions of the documents named therein. In making the
distributions specified in clauses (C) and (E) above, the Servicer shall rely
conclusively on written instructions that the General Partner shall provide at
least one Business Day prior to the Debt Service Payment Date (with copies to
the Manager) as to the amounts to be paid. The Servicer shall have no duty to
recompute, recalculate, or verify the data contained in such instructions or
information and shall incur no liability to the Borrower or the Manager if the
Servicer disburses funds in accordance therewith.
7.11 At such time as the Lockbox Period terminates and until a further
Lockbox Event occurs, the Manager shall have the option of reinstating the cash
management procedures set forth in Sections 2, 4.3, 4.4 and 6 (as applicable) by
notice to the Lender, the Servicer, the Borrower, and if NACC is not the Lender,
NACC, and all funds then held in the Operating Account shall be transferred to
the Clearing Account and the Clearing Account will be changed to the Manager's
Account and unless the provisions of Section 6 apply, all funds held in the real
estate tax and insurance escrows shall be transferred to the Manager's Account.
7.12 If an entity that is an Affiliate of MII or MII itself is not the
manager of the Property, the Borrower shall take such action as may be required
to ensure that the procedures set forth in Section 7, to the maximum extent
possible, are followed by a replacement manager at the Property. In any event,
the Borrower shall ensure that credit card companies continue to send payments
directly to the Clearing Account.
7.13 The requirements set forth in Section 6.6 to deposit an additional
Monthly Debt Service Payment into the Debt Service Reserve Account are hereby
incorporated by reference except that the obligation to make such deposit set
forth therein shall commence on the date the Servicer delivers a notice to the
Manager and the Borrower that the lockbox procedures are in effect, as provided
for in the preamble to Section 7. If a Lockbox Period terminates pursuant to the
provisions of the preamble to Section 7 prior to the completion of such
obligation, the requirement to make such deposit shall continue in effect.
8. Capital Expenditure and FF&E Reserve Account; Rehabilitation Account
8.1 On or before the Closing Date, the Servicer shall establish and
maintain two segregated subaccounts of the Deposit Account for the Property,
both of which shall be Eligible Accounts, in its name on behalf of the Lender at
LaSalle National Bank (individually, the "FF&E Reserve Account" or the "Capital
Expenditure Account"; together the "Capital Expenditure and FF&E Reserve
Accounts"). On the Closing Date, there shall be deposited by the Manager in the
FF&E Reserve Account the amounts set forth below under "FF&E Reserve Deposit"
(i.e., the existing balances in the FF&E Reserve, as such term is defined in the
Management Agreement, less amounts required to cover outstanding checks) will be
deposited by the Manager. On the Closing Date, there shall be deposited by the
Borrower in the Capital Expenditure Account the amounts set forth below for the
Property for ADA Compliance Work, Environmental Remediation Work and Deferred
Maintenance Work (collectively, the "Work").
FF&E Reserve ADA Compliance Environmental Deferred
Deposit Work Remediation Work Maintenance Work
$2,755,380.19 $19,812.50 $3,500 $10,132,937.50
8.2 On or before the date three weeks after the end of each Accounting
Period, the Manager on behalf of the Borrower shall make deposits directly into
the FF&E Reserve Account in an amount equal to the difference between (i) the
percentage contribution of Gross Revenues for such Accounting Period as may be
required from time to time under the Management Agreement to be made to the FF&E
Reserve referred to therein and (ii) the Capital and FF&E Expenditures for such
Accounting Period; provided, however, that the amounts set forth in clause (a)
of Section 8.1 shall not be credited towards the Manager's obligation to make
the deposits provided for in this Section 8.2. Within 75 days after the end of
each Fiscal Year, amounts deposited into the FF&E Reserve Account during such
Fiscal Year shall be adjusted to ensure that the aggregate amount of all
deposits made into the FF&E Reserve Account during such Fiscal Year is equal to
the amount required to have been deposited therein in accordance with this
Section 8.2. Any shortfall in the FF&E Reserve Account on the date such
adjustment is computed based on such percentage shall be funded into the FF&E
Reserve Account from amounts that otherwise would be distributed to the Borrower
from the Deposit Account at the end of the month in which such adjustment is
computed, and any overages shall be transferred from the FF&E Reserve Account to
the Deposit Account on such date.
8.3 So long as each of the MII Cash Management Conditions shall remain
satisfied, the Manager will be permitted to request withdrawals of funds from
the Capital Expenditure and FF&E Reserve Accounts once each week (or more
frequently in the case of an Emergency Expenditure, as certified by the Manager
to the Lender), based on its reasonable estimate of upcoming, near-term
expenditures for Capital and FF&E Expenditures, such Emergency Expenditure and
Work and, to the extent permitted by the Management Agreement, for expenditures
("Additional Capital Expenditures") set forth in an approved Building Estimate
as such term is defined in the Management Agreement. Each such request shall
specify whether the withdrawal shall be made for the FF&E Reserve Account or the
Capital Expenditure Account. Each such request shall be deemed, without any
further action being required, a certification by the Manager to the Servicer
that (i) withdrawals made from the Capital Expenditure and FF&E Reserve Accounts
during the preceding Accounting Period were necessary for the aforesaid purposes
(and to the extent the same were used for Additional Capital Expenditures, that
the applicable provisions of the Management Agreement have been complied with),
(ii) all funds that it previously has withdrawn from the Capital Expenditure and
FF&E Reserve Accounts (other than amounts being retained for reasonably
estimated future Capital and FF&E Expenditures) have been used to pay Capital
and FF&E Expenditures, Work, or subject to the foregoing provisions of this
Section 8.3, Additional Capital Expenditures, and (iii) that, to the Best
Knowledge of the Manager, there are no accounts payable for Capital and FF&E
Expenditures or Work with an unpaid balance of more than, either singly or in
the aggregate, $250,000 that are more than 60 days past due (unless payment is
being contested in good faith in accordance with Section 2.2 of the Loan
Agreement, as set forth in Schedule II), except as otherwise stated with an
explanation therefor. If, to the Best Knowledge of the Manager, any such account
payable is more than 60 days past due (other than for the reason specified in
the preceding sentence), the Manager shall inform the Lender of such fact
concurrently with a request for funds. The Manager will not be required to
obtain approval of the Lender or any other Person for individual expenditures,
except as otherwise required by the Management Agreement. Upon the request of
the Lender in writing, the Manager or the Borrower will provide a detailed
written accounting of expenditures for Capital and FF&E Expenditures, Work,
Emergency Expenditures and Additional Capital Expenditures, in a form
customarily maintained by the Manager in the ordinary course of business.
8.4 During a Lockbox Period, in addition to the requirements set forth in
Section 8.3, each request for a withdrawal of funds from the Capital Expenditure
and FF&E Reserve Accounts shall be accompanied by (a) a certificate of the
Manager verifying that (i) the amounts requested are to pay for Capital and FF&E
Expenditures, Emergency Expenditures, Additional Capital Expenditures, or Work,
(ii) all funds that it previously has withdrawn from the Capital Expenditure and
FF&E Reserve Accounts (other than amounts being retained for reasonably
estimated future Capital and FF&E Expenditures) have been used to pay Capital
and FF&E Expenditures, or Work, and (iii) that, to the Best Knowledge of the
Manager, there are no accounts payable for Capital and FF&E Expenditures,
Emergency Expenditures, Additional Capital Expenditures or Work with an unpaid
balance of more than, either singly or in the aggregate, $250,000 that are more
than 60 days past due (unless payment is being contested in good faith in
accordance with Section 2.2 of the Loan Agreement, as set forth in Schedule II),
except as otherwise stated with an explanation therefor, and (b) a schedule
setting forth the names of the payees and amounts to be paid out of the proceeds
of such disbursement. The Manager will not be required to obtain approval of the
Lender or any other Person for individual expenditures, except as otherwise
required by the Management Agreement.
8.5 On or before the Closing Date, the Servicer shall establish and
maintain a segregated subaccount of the Deposit Account for the Property, which
shall be an Eligible Account, in its name on behalf of the Lender at LaSalle
National Bank (the "Rehabilitation Account"), into which there will be deposited
$7,500,000 for Rehabilitation Work.
8.6 So long as each of the MII Cash Management Conditions shall remain
satisfied, the Manager will be permitted to request withdrawals of funds from
the Rehabilitation Account once each week based on its reasonable estimate of
upcoming, near-term expenditures for Rehabilitation Work. The Manager will be
required to certify within 20 days of the end of each Accounting Period to the
Lender that (i) withdrawals made from the Rehabilitation Account during the
preceding Accounting Period were necessary to pay for Rehabilitation Work, (ii)
all funds that it previously has withdrawn from the Rehabilitation Account have
been used to pay for Rehabilitation Work, and (iii) that, to the Best Knowledge
of the Manager, there are no accounts payable for Property for Rehabilitation
Work with an unpaid balance of more than, either singly or in the aggregate,
$250,000 that are more than 60 days past due (unless payment is being contested
in good faith in accordance with Section 2.2 of the Loan Agreement, as set forth
in Schedule II), except as otherwise stated with an explanation therefor. If, to
the Best Knowledge of the Manager, any such account payable is more than 60 days
past due (other than for the reason specified in the preceding sentence), the
Manager shall inform the Lender of such fact concurrently with a request for
funds. The Manager shall not be required to obtain approval of the Lender or any
other Person for individual expenditures for Rehabilitation Work, except as
otherwise required by the Management Agreement. Upon the request of the Lender
in writing, the Manager or the Borrower will provide a detailed written
accounting of expenditures for Rehabilitation Work in a form customarily
maintained by the Manager in the ordinary course of business.
8.7 During a Lockbox Period, in addition to the requirements set forth in
Section 8.6, each request for a withdrawal of funds from the Rehabilitation
Account shall be accompanied by (a) a certificate of the Manager verifying that
(i) the amounts requested are to pay for Rehabilitation Work, (ii) all funds
that it previously has withdrawn from the Rehabilitation Account have been used
to pay Rehabilitation Work, and (iii) that, to the Best Knowledge of the
Manager, there are no accounts payable for Rehabilitation Work with an unpaid
balance of more than, either singly or in the aggregate, $250,000 that are more
than 60 days past due (unless payment is being contested in good faith in
accordance with Section 2.2 of the Loan Agreement, as set forth in Schedule II),
except as otherwise stated with an explanation therefor, and (b) a schedule
setting forth the names of the payees and amounts to be paid out of the proceeds
of such withdrawal. The Manager shall not be required to obtain approval of the
Lender or any other Person for individual expenditures for Rehabilitation Work,
except as otherwise required by the Management Agreement.
8.8 Upon the receipt of a request from the Manager for a disbursement from
the Capital Expenditure and FF&E Reserve Accounts or Rehabilitation Account, the
Servicer shall disburse the requested amount to the Manager or at the Manager's
direction by automated clearing house funds or by Federal wire on the same day
for requests made no later than 11:00 a.m. on any Business Day or on the next
Business Day for requests made after such time on any Business Day, to be held
in the name of the Manager for payment of Capital and FF&E Expenditures,
Emergency Expenditures, Additional Capital Expenditures, Work or Rehabilitation
Work.
9. Security for Loan
The funds on deposit in the Clearing Account, the Capital Expenditure and
FF&E Reserve Account, the Rehabilitation Account, the Operating Account, and the
Deposit Account and each subaccount thereof, and all Permitted Investments
thereof, are pledged to the Lender as further security for the Loan pursuant to
the Security Agreement and the Collateral Account Agreement. The authority of
the Manager to pay Management Expenses in the manner set forth in this Exhibit
shall not be terminated, unless the Management Agreement shall have been
terminated and until all Management Expenses incurred or contracted for prior to
or as a result of such termination have been paid or an amount sufficient to pay
such expenses is set aside in a reserve. Unless and until the Management
Agreement is terminated and all expenses relating to Capital and FF&E
Expenditures and Rehabilitation Work made or contracted for prior to termination
have been paid in full, or an amount sufficient to pay such expenses has been
set aside in a reserve, (a) the Lender shall not freeze or otherwise restrict
the ability of the Manager to obtain disbursements of funds from the Capital
Expenditure and FF&E Reserve Accounts and Rehabilitation Account in accordance
with Section 8 or apply funds on deposit in the Capital Expenditure and FF&E
Reserve Accounts and Rehabilitation Account to repayment of the Note and (b) the
right of the Manager to direct the expenditure of funds in the Capital
Expenditure and FF&E Reserve Accounts and the Rehabilitation Account in
accordance with the procedures set forth in Section 8 shall not be terminated
unless otherwise agreed by the Lender and the Manager.
10. Investment of Funds in Accounts
The Borrower shall have the right to instruct the Servicer to invest funds,
if any, in the Deposit Account, the Capital Expenditure and FF&E Reserve
Accounts and the Rehabilitation Account at the risk of and for the benefit of
the Borrower, in Permitted Investments.
11. Notice of New Accounts
The Manager shall notify the Lender in writing of the account name and
account numbers of the Manager's Account, and of each supplemental or
replacement account established by the Manager from time to time in connection
with the Property and the institution in which each such Account is maintained.
The Manager shall not change the Manager's Account without obtaining the consent
of the Lender, which shall not be unreasonably withheld and shall be granted if
a supplemental or replacement account is an Eligible Account. If the Manager's
Account shall be changed, or any new Manager's Account shall be opened, by the
Manager or the Borrower, the Manager or the Borrower, as the case may be, shall
send a notice to the Lender, specifying the new or changed Manager's Account and
any Manager's Account replaced thereby.
12. General
12.1 The Lender shall cause the Manager and the Borrower to have access to
information each Business Day regarding activity and balances and source of
receipts in the Deposit Account and all subaccounts thereof, the Capital
Expenditure and FF&E Reserve Accounts, the Rehabilitation Account, the Operating
Account, and the Clearing Account.
12.2 Unless the context specifies otherwise, transfers of funds held in any
Account that are required by this Agreement shall require only the transfer of
available funds.
12.3 Once each Accounting Period, the Manager will certify to the Lender
that, to its Best Knowledge, it has complied with the cash management procedures
set forth in this Exhibit in all material respects.
12.4 [Intentionally omitted]
12.5 For the purposes of these Cash Management Procedures, the Manager may
transfer funds to the Deposit Account and the Capital Expenditure and FF&E
Reserve Accounts to be applied in the same manner as the Operating Profit or
Gross Revenues, as applicable, is to be applied pursuant to the provisions of
Sections 4.3, 4.4, 7.9.1, 7.9.3 and 7.10. Such transfers are sometimes herein
referred to as "Direct Manager Funds."
LOAN AGREEMENT
Schedule I
Section I.1 Definitions. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Section have the meanings assigned to them in
this Section, and include the plural as well as the singular;
(b) the words "herein," "hereof," "hereto" and "hereunder" and other words
of similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision;
(c) all references to any agreement or instrument shall be to that
agreement or instrument as in effect from time to time, including any
amendments, consolidations, replacements, restatements, modifications and
supplements thereto;
(d) all terms defined in this Section with reference to the Cash Management
Procedures shall continue in effect after the termination of such Cash
Management Procedures in accordance with the terms thereof;
(e) all references to "Section(s)" and "Exhibit(s)" shall mean the
Section(s) of and Exhibit(s) annexed to this Agreement unless expressly stated
to be Section(s) or Exhibit(s) of the Cash Management Procedures; and
(f) certain terms defined in this Section appear only in this Agreement and
not in the Cash Management Procedures and vice versa.
"Accounting Period" means, initially, each accounting period of four
consecutive weeks having the same beginning and ending dates as the Manager's
corresponding four week accounting periods, except that the last Accounting
Period in a Fiscal Year may be longer than four consecutive weeks when and to
the extent necessary to conform the accounting system to the calendar, or if the
accounting year on the basis of which the Hotel is operated changed to a
calendar year or a conventional 365-day fiscal year, "Accounting Period" shall
mean each calendar month in such fiscal year.
"Accounting Quarter" means, initially, three (or, in the case of the last
Accounting Quarter in any Fiscal Year, four) consecutive Accounting Periods,
ending on the last day of the third, sixth, ninth and last Accounting Period in
each Fiscal Year, or, if the accounting year on the basis of which the Hotel is
operated is changed to a calendar year or a conventional 365-day fiscal year,
"Accounting Quarter" shall mean each of the fiscal quarters in such fiscal year
(i.e., there shall be four consecutive Accounting Quarters of three months
each).
"Action" means any action, suit, claim, arbitration, governmental
investigation or other proceeding.
"ADA Compliance Work" means the repairs, improvements and replacements to
the Property to be made to comply with the Americans with Disabilities Act of
1990, as amended from time to time, in the amounts more particularly described
on Exhibit A annexed hereto.
"Additional Capital Expenditures" has the meaning set forth in Section 8.3
of the Cash Management Procedures.
"Adjusted Rate" means the per annum rate of interest that is the greater of
(xx) the Base Rate plus 2% and (yy) the yield as of the Optional Prepayment
Date, calculated by linear interpolation (rounded to three decimal places), of
the yields of United States Treasury Constant Maturities with terms (one longer
and one shorter) most nearly approximating those of U.S. Obligations having
maturities as close as possible to the thirteenth anniversary of the Optional
Prepayment Date, as determined by the Lender on the basis of Federal Reserve
Statistical Release H.15-Selected Interest Rates under the heading U.S.
Governmental Securities/Treasury Constant Maturities, or other recognized source
of financial market information selected by the Lender in each case on the last
Business Day of the week immediately prior to the Optional Prepayment Date, plus
3.75%.
"Affiliate" means, with respect to any Person, any Person which controls,
is controlled by or is under common control with, such Person, including,
without limitation, (a) any officer or director of any of the foregoing and (b)
any partner, member or shareholder that controls any of the foregoing, and
"control" shall mean ownership of more than twenty-five percent (25%) of all of
the voting stock of a corporation or more than twenty-five percent (25%) of all
of the legal and beneficial interests in any other entity or the possession of
the power, directly or indirectly, to direct or cause the direction of the
management and policy of a corporation or other entity, whether through the
ownership of voting securities, common directors or officers, the contractual
right to manage the business affairs of such entity, or otherwise.
"Agreement" means this Loan Agreement.
"Annual Plan" has the meaning set forth in Section 5.2(d)(vi).
"Bankruptcy Custodian" has the meaning set forth in Section 4.1A(g)(A)(2).
"Base Rate" means 7.40% per annum.
"Base Rate Interest" means interest on the Notes at the Base Rate or the
Default Rate, as applicable, then due and payable for the applicable Debt
Service Period.
"Best Knowledge" means with respect to any provision, knowledge or
information obtained by the Borrower or any officer or director of the General
Partner other than the Independent Director.
"Borrower" means HMA Realty Limited Partnership.
"Business Day" means a day on which banks are open for business in New
York, New York.
"Capital Budget" has the meaning set forth in Section 5.2(d)(vi).
"Capital Expenditure and FF&E Reserve Accounts" means the accounts
established pursuant to Section 8.1 of the Cash Management Procedures.
"Capital and FF&E Expenditures" means the expenditures of amounts for the
purpose of the FF&E Reserve, as such term in defined in the Management
Agreement.
"Cash Management Procedures" means the provisions of Exhibit B.
"Change of Control" means any Grant of (i) the capital stock in the General
Partner, (ii) the general partnership interest in the Borrower, (iii) any
limited partnership interest in the Borrower or (iv) an interest in a limited
partner of the Borrower such that as a result of such transfers and any other
such transfers prior to the date of determination, any person other than Host
Marriott, Ivy Street Hotel Limited Partnership or Atlanta Marriott Marquis II
Limited Partnership directly or indirectly, holds more than 51% of the capital
stock in the General Partner or 51% of the partnership interests in the
Borrower.
"Clearing Account" has the meaning set forth in Section 7.2.2 of the Cash
Management Procedures.
"Closing Date" means the date of execution and delivery of this Agreement.
"Condemnation Proceeds" has the meaning set forth in the Mortgage.
"DCR" means Duff & Phelps Credit Rating Co.
"Debt" means the obligations of the Borrower under the Transaction
Documents, together with all interest thereon, and all other sums, including,
without limitation, fees, expenses, commissions, premiums and indemnities, which
may or shall become due under any of the Transaction Documents, including the
costs and expenses of enforcing any provision of the Transaction Documents that
may be reimbursable thereunder.
"Debt Service Payment Date" means the 11th day of each calendar month or if
in any month the 11th day is not a Business Day, the Debt Service Payment Date
for such month shall be the first Business Day thereafter.
"Debt Service Period" means the period from and including the eleventh
(11th) day of the month immediately preceding each Debt Service Payment Date to
and including the tenth (10th) day of the month in which such Debt Service
Payment Date occurs.
"Debt Service Reserve Account" has the meaning set forth in Section 5 of
the Cash Management Procedures.
"Default Rate" means a rate per annum equal to the lesser of (aa) two
percent (2%) above the Base Rate or Adjusted Rate, as applicable, compounded
monthly, and (bb) the maximum rate allowed by law.
"Defeasance Collateral" has the meaning set forth in Section 2.3(a)(iv)(A).
"Defeasance Deposit" has the meaning set forth in Section 2.3(e).
"Defeasance Security Agreement" has the meaning set forth in Section
2.3(a)(iv)(A).
"Deferred Maintenance Work" means the repairs, improvements and
replacements to the Property in the amounts more particularly described on
Exhibit A hereto.
"Deposit Account" means the account established and held by the Servicer
pursuant to Section 4.1 of the Cash Management Procedures.
"Direct Manager Funds" has the meaning set forth in Section 12.5 of the
Cash Management Procedures.
"Disclosure Report" means the schedule annexed hereto as Schedule 1.
"Eligible Account" means either (i) an account maintained with a federal or
state chartered depository institution or trust company, (a) if the funds
therein are to be retained for more than 30 days, the long-term unsecured debt
obligations of which (or, in the case of a depository institution or trust
company that is the principal subsidiary of a holding company, the long-term
unsecured debt obligations of the holding company of which) are rated by each
Rating Agency in one of its two highest rating categories (or such other ratings
as will not result in the rating of any of the Securities being reduced below
their respective ratings on the date determination is to be made and as to which
the Rating Agencies may otherwise agree) at the time of the deposit therein, or
(b) if the funds therein are to be retained for less than 30 days, the
short-term unsecured debt obligations of such depository institution or trust
company (or, in the case of a depository institution or trust company that is
the principal subsidiary of a holding company, the short-term unsecured debt
obligations of the holding company of which), as the case may be, are rated not
lower than A-1+ by S&P or the equivalent rating of the other Rating Agencies, or
(ii) a segregated trust account maintained with the trust department of a
federal or state chartered depository institution or trust company acting in its
fiduciary capacity, provided that such account is subject to fiduciary funds on
deposit regulations (or internal guidelines) substantially similar to 12 C.F.R.
'9.10(b), or (iii) after the Securitization, an account in any other insured
depository institution reasonably acceptable to the Servicer and the Trustee, so
long as prior to the establishment of an account in any such other depository
institution each of the Rating Agencies shall have delivered a Rating Comfort
Letter with respect thereto.
"Emergency Expenditures" means expenditures arising in the event of an
emergency arising out of a fire or other casualty at the Hotel or other events,
circumstances or conditions which give rise to safety or life threatening
situations, to the extent such expenditures are necessary to protect the safety
or welfare of guests and employees or to protect against further property damage
to the Hotel.
"Entities" has the meaning set forth in Section 6.1(b).
"Environmental Indemnity Agreement" means the environmental indemnity
agreement, dated the Closing Date, from the Borrower to NACC.
"Environmental Laws" has the meaning set forth in the Environmental
Indemnity Agreement.
"Environmental Remediation Work" means the actions taken with respect to
the Property set forth on Exhibit C.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder.
"ERISA Affiliate" means all members of a controlled group of
corporations and all trades and businesses (whether or not incorporated) under
common control and all other entities which, together with the Borrower, are
treated as a single employer under any or all of Sections 414(b), (c), (m) or
(o) of the IRC.
"Event of Default" has the meaning set forth in Section 4.1A.
"Excess Cash Flow" means, for the period of determination, the difference
between (i) Net Operating Income and (ii) the sum of (A) the Monthly Debt
Service Payments, (B) other Debt then due and payable to the Lender (other than
payments required under Section 3.4(d)), and (C) withdrawals from the Deposit
Account applied for the purposes set forth in clauses (E), (F) and (G) of
Section 4.4 of the Cash Management Procedures or, if Section 7.10 of the Cash
Management Procedures is applicable, clauses (B), (C) and (D) thereof.
"Expense Deposit" has the meaning set forth in Section 7.1(c).
"Fiscal Year" means January 1 of each year through and including December
31 of such year except that, for purposes of calculating the Debt Service
Coverage Ratio or any other calculation requiring reference to Gross Revenues,
Net Operating Income or other amounts calculated with reference to the
Accounting Periods, "Fiscal Year" shall mean the fiscal year of the Manager, as
defined in the Management Agreement.
"GAAP" means generally accepted accounting principles in the United States
of America (as such principles may change from time to time) applied on a
consistent basis (except for changes in application in which the Borrower's
independent certified public accountants concur), both as to classification of
items and amounts.
"General Partner" means HMA-GP, Inc., a Delaware corporation.
"Governmental Authority" means any court, agency, authority, board
(including, without limitation, environmental protection, planning and zoning),
bureau, commission, department, office or instrumentality of any nature
whatsoever of any governmental or quasi-governmental unit of the United States
or the state, county or city where the Property is located or any political
subdivision of any of the foregoing, whether now or hereafter in existence, or
any officer or official thereof, having jurisdiction over the Borrower or the
General Partner or the Property or any portion thereof.
"Grant" means any sale, conveyance, transfer, lease (including any
amendment, extension, modification, waiver or renewal thereof), assignment,
mortgage, pledge, grant of a security interest or hypothecation, whether by law
or otherwise.
"Gross Revenues" shall mean all revenues and receipts of every kind derived
from operating the Hotel and parts thereof, including, but not limited to:
income (from both cash and credit transactions), before commissions and
discounts for prompt or cash payments, from rental of rooms, stores, offices,
meeting, exhibit or sales space of every kind; license, lease and concession
fees and rentals (not including gross receipts of licensees, lessees and
concessionaires); income from vending machines; health club membership fees;
food and beverage sales; sales of merchandise (other than proceeds from the sale
of FF&E no longer necessary to the operation of the Hotel, which shall be
deposited in the FF&E Reserve Account as set forth in Section 8.02D of the
Management Agreement); service charges, to the extent not distributed to the
employees at the Hotel as, or in lieu of, gratuities; and proceeds, if any, from
business interruption or other loss of income insurance; provided, however, the
Gross Revenues shall not include the following: gratuities to Hotel employees;
federal, state or municipal excise, sales, use or similar taxes collected
directly from patrons or guests or included as part of the sales price of any
goods or services; insurance proceeds (other than proceeds from business
interruption or other loss of income insurance); condemnation proceeds (other
than for a temporary taking); any proceeds from any sale of the Hotel or from
the refinancing of any debt encumbering the Hotel; proceeds from the disposition
of FF&E no longer necessary for the operation of the Hotel; interest which
accrues on amounts deposited in either the FF&E Reserve or any escrow accounts
which are established in accordance with Section 13.01 C of the Management
Agreement; or Cure Payments (as such term is defined in the Management
Agreement).
"Host Marriott" means Host Marriott Corporation, a Delaware corporation.
"Hotel" means the Atlanta Marriott Marquis Hotel located at 265 Peachtree
Center Avenue, Atlanta, Georgia.
"Impositions" has the meaning set forth in the Mortgage.
"Indebtedness" means for any Person (a) obligations for borrowed money
(including, without limitation, in the case of the Borrower, the Debt), (b)
obligations under letters of credit, (c) obligations relating to Purchase Money
Security Interests, (d) obligations, whether or not assumed, secured by Liens or
payable out of the proceeds or production from property now owned by such
Person, (e) obligations for trade credit or acceptances incurred in the ordinary
course of business which are 60 days past due, and (f) obligations of another
Person of the type set forth in clauses (a) through (e) above which such Person
has guaranteed or in respect of which such Person is liable, contingently or
otherwise, including, without limitation, by way of agreement to purchase
property or services, to provide funds to or otherwise invest in such other
Person, or otherwise to assure a creditor of such other Person against loss.
"Indemnified Parties" shall have the meaning set forth in Section 7.2(a).
"Independent Director" means a person reasonably satisfactory to the Lender
who is not at the time of such individual's appointment as a director, and has
not been during the preceding five years, (i) an officer, director, employee,
partner, stockholder or beneficial-interest holder of the General Partner or the
Borrower; (ii) an officer, director, employee, partner, member,
beneficial-interest holder or stockholder of any Affiliate (as defined below) of
the General Partner or the Borrower; (iii) a customer of or supplier to the
Borrower or any Affiliate thereof (other than a hotel guest or a customer or
supplier that does not derive more than 10% of its revenues from its activities
with the Borrower or any Affiliate thereof); or (iv) a spouse, parent, sibling,
or child of any person described in (i), (ii), or (iii); provided, however, that
a person shall not be deemed to be a director of an Affiliate solely by reason
of such person being a director of a single-purpose entity which would otherwise
be deemed an Affiliate. For the purpose of this definition alone, "Affiliate"
means any person or entity (i) which owns beneficially, directly or indirectly,
more than 10 percent of the outstanding shares of the common stock of the
General Partner or which is otherwise in control of the General Partner, (ii) of
which more than 10% of the outstanding voting securities are owned beneficially,
directly or indirectly, by any person or entity described in clause (i) above,
or (iii) which is controlled by, or under common control with, any person or
entity described in clause (i) above; the terms "control" and "controlled by"
shall have the meanings assigned to them in Rule 405 under the Securities Act of
1933.
"Insolvency Law" has the meaning set forth in Section 4.1A(g)(A)(1).
"Insurance Proceeds" has the meaning set forth in the Mortgage.
"Insurance Requirements" means all terms of any insurance policy required
by the Mortgage covering or applicable to a particular Property or any part
thereof and all requirements of the insurance carrier, all as more fully
described in such Mortgage.
"IRC" means the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder, or any successor
statute(s).
"Legal Requirements" has the meaning set forth in the Mortgage.
"Lien" means any security interest, mortgage, pledge, lien, restriction on
transferability, claim, charge, encumbrance, title retention agreement or
analogous instrument, in, of or on the Property or any of them.
"Lender" means NACC and its assigns and successors.
"Loan" means the loan evidenced by the Notes.
"Local Account" has the meaning set forth in Section 7.3 of the Cash
Management Procedures.
"Lockbox Event" has the meaning set forth in Section 7 of the Cash
Management Procedures.
"Lockbox Period" has the meaning set forth in Section 7 of the Cash
Management Procedures.
"Management Agreement" means the Management Agreement dated January 3, 1998
as amended by the SNDA, and any other management agreement entered into by the
Borrower as required or permitted herein.
"Management Expenses" means, for the Hotel, (a) the cost of sales including
salaries, wages, employee benefits, Employee Claims (as such term is defined in
the Management Agreement), payroll taxes and other costs related to Hotel
employees; (b) departmental expenses, administrative and general expenses and
the cost of hotel advertising and business promotion; the cost of heat, light,
power and water; and the cost of routine repairs, maintenance and minor
alterations treated as Deductions under Section 8.01 of the Management
Agreement; (c) the cost of Inventories and Fixed Asset Supplies (as such terms
are defined in the Management Agreement) consumed in the operation of the Hotel;
(d) a reasonable reserve for uncollectible accounts receivable as determined by
the Manager; (e) all reasonable costs and fees of independent professionals or
other third parties who are retained by Manager to perform services required or
permitted under the Management Agreement; (f) the cost and expense of technical
consultants and operational experts, including Affiliates (as such term is
defined in the Management Agreement) of the Manager, for specialized services in
connection with non-routine Hotel work; (g) the Base Management Fee (as such
term is defined in the Management Agreement); (h) the Hotel's pro rata share of
costs and expenses incurred by the Manager or its Affiliates in providing Chain
Services (as defined in the Management Agreement); (i) the Hotel's pro rata
share of costs and expenses incurred in connection with sales, advertising
and/or promotional programs developed for or within the Marriott Hotel System
(as such term is defined in the Management Agreement), where such costs and
expenses are not deducted as either departmental expenses under clause (b) above
or as Chain Services under clause (h) above; (j) insurance costs and expenses in
Section 12.04B of the Management Agreement; (k) any amounts transferred into the
FF&E Reserve under Section 8.02 of the Management Agreement; (l) license fees
and taxes, if any, payable by or assessed against the Manager related to the
Management Agreement or to the Manager's operation of the Hotel (exclusive of
the Manager's income taxes or franchise taxes) including any Impositions (as
such term is defined in the Management Agreement) assessed against the Hotel;
(m) rent payable under any telephone or equipment leases; (n) any reimbursements
to the owner of the amount of any Owner Deductions (as such term is defined in
the Management Agreement); and (o) such other costs and expenses as are
specifically provided for as Deductions in the Management Agreement or are
otherwise reasonable necessary for the proper and efficient operation of the
Hotel.
"Manager" means New Marriott MI, Inc. or any entity that is an Affiliate of
MII and any property manager appointed as permitted herein.
"Manager's Account" has the meaning set forth in Section 1.2 of the Cash
Management Procedures.
"Material Adverse Effect" means a material adverse effect on (a) the
Borrower's ability to enter into or fulfill its material obligations under the
Transaction Documents or to effect the transactions contemplated thereby or (b)
a material adverse effect on the condition (financial or otherwise), business,
prospects, assets, liabilities, management, financial position or results of
operations of the Borrower or the Property.
"Maturity Date" shall mean the earlier to occur of (1) February 11, 2023 or
(2) such date to which the maturity of the Debt may be accelerated upon an Event
of Default or as otherwise provided in any Transaction Document.
"MII" means Marriott International, Inc., a Delaware corporation, or, at
such time as the name of New Marriott MI, Inc. or any entity that succeeds to
the business of MII is changed to Marriott International, Inc. as contemplated
by the letter dated January 7, 1998 from Marriott International Inc. to Amresco
Services, L.P., New Marriott MI, Inc. or such entity.
"MII Cash Management Conditions" means the following conditions: (i) the
Property is managed by the Manager under the Management Agreement and (ii) the
Manager is MII or a wholly owned, direct or indirect, subsidiary of MII.
"MII Debt" has the meaning set forth in Section 6 of the Cash Management
Procedures.
"Monthly Debt Service Payment" means with reference to each Note,
$600,649.08.
"Mortgage" means, the mortgage, deed of trust or other security instrument
creating a first mortgage lien on the Property, dated as of the Closing Date,
from the Borrower to or for the benefit of the Lender.
"NACC" means Nomura Asset Capital Corporation.
"Net Operating Income" means, in respect of any fiscal period, Gross
Revenues less the sum of, without duplication, (A) Management Expenses and (B)
Impositions or insurance premiums paid or reserved for payment with respect to
the Property.
"Non-Recourse" means, with respect to the Debt, that the Debt is limited in
recourse solely to the Pledged Property and is not guaranteed directly or
indirectly by any Partner or the Manager and no Partner or the Manager or any
shareholder, member, director, officer, employee or agent of any Partner or the
Manager, either directly or indirectly, shall be personally liable in any
respect (except to the extent of their respective interests in the Pledged
Property) for (i) the payment of any Debt, (ii) the performance of any covenant
or obligation under any Transaction Document or (iii) monetary damages for the
breach of performance of any covenant or obligation contained in any Transaction
Document; provided, however, that in the event of any fraud, material
misrepresentation or misappropriation of funds under any Transaction Document or
under the Management Agreement, nothing herein or in such other documents shall
estop the Lender from prosecuting an Action against the party or parties
committing such fraud, misappropriation or material misrepresentation, or
misappropriating such funds, or the recipient or beneficiary of such fraud,
material misrepresentation or misappropriation, whether or not such party,
recipient or beneficiary is the Borrower or a Partner or the Manager, to the
extent of losses relating to or arising from such fraud, material
misrepresentation or misappropriation of funds under any Transaction Document;
provided, further, that the Borrower's obligations in respect of the
Environmental Indemnity Agreement and the covenants, indemnities,
representations and warranties relating to environmental matters contained in
any Transaction Document shall not be Non-Recourse to the Borrower (but shall be
Non-Recourse to its Partners other than the General Partner). The foregoing
provisions shall not (a) prevent recourse to the Pledged Property or constitute
a waiver, release or discharge of any Debt, and the same shall continue until
paid or discharged, (b) limit the right of any Person, if required by applicable
law, to name the Borrower or any successor or assign of the Borrower as a party
defendant in any Action in the exercise of any remedy under any Transaction
Document, so long as no judgment seeking the performance of any act requiring
the expenditure of money shall be sought against the Borrower or any such
successor or assign and so long as any monetary judgment seeking the expenditure
of money is payable only from the Pledged Property or (c) impair any right of
the Lender to obtain a deficiency judgment against the Borrower or any such
successor or assign in any Action where necessary as a matter of law to preserve
the rights and remedies of the Lender against the Pledged Property, provided
that such deficiency judgment may only be enforced against the Pledged Property.
Notwithstanding the foregoing, under no circumstances shall the Debt be recourse
to any limited partner of the Partnership in its capacity as such.
"Notes" means that certain Secured Promissory Note A, dated the Closing
Date, from the Borrower to the Lender in the principal amount of $82,000,000 and
that certain Secured Promissory Note B, dated the Closing Date, from the
Borrower to the Lender in the principal amount of $82,000,000.
"Officer's Certificate" means a certificate signed by any officer of the
General Partner who is authorized to act hereunder on behalf of the Borrower.
"Operating Account" has the meaning set forth in Section 7.7 of the Cash
Management Procedures.
"Operating Budget" has the meaning set forth in Section 5.2(d)(vi).
"Operating Profit" has the meaning set forth in the Management Agreement.
"Operating Profit Payment Date" means the last Business Day of the third
week in each Accounting Period.
"Operational Agreements" means (i) the Management Agreement, (ii) the
Property Agreements, (iii) leases of furniture, fixtures and equipment used in
connection with the Property and (iv) the respective written or unwritten
agreements pursuant to which lessees, tenants or other third parties are
occupying any portion of the Property excluding, however, the letting of rooms
and other facilities to hotel guests in the ordinary course of business, if any,
and any assignment and assumption agreements or other agreements related
thereto.
"Optional Prepayment Date" means February 11, 2010.
"Paid-in-Full" means at such time as the Debt is not outstanding.
"Partners" means the limited partners of the Borrower as constituted from
time to time and the General Partner, in their capacities as such.
"Permits" means all permits, licenses, certificates, approvals,
authorizations and other documents necessary for the construction, use,
operation or maintenance of the Hotel and the Property.
"Permitted Exceptions" has the meaning set forth in the Mortgage.
"Permitted Investments" has the meaning set forth in Exhibit D hereto.
"Person" means any individual, corporation, partnership, joint venture,
association, limited liability company, joint stock company, estate, trust,
unincorporated organization or other business entity or Governmental Authority.
"Plan(s)" means an employee benefit or other plan established or maintained
by the Borrower or any ERISA Affiliate or to which the Borrower or any ERISA
Affiliate makes or is obligated to make contributions and which is covered by
Title IV of ERISA or Section 302 of ERISA or Section 412 of the IRC.
"Pledged Property" means the Property and the other collateral in which a
security interest is being granted pursuant to the Security Documents.
"Potential Event of Default" means an event which, with the giving of any
applicable notice and/or lapse of any applicable time period, would become an
Event of Default.
"Principal Payment" means the difference between the Monthly Debt Service
Payment and the Base Rate Interest paid for the applicable Debt Service Period.
"Property" or means the Hotel or, as the context may require, the fee
estate owned by the Borrower therein, including the Borrower's ownership
interest in all improvements thereon, fixtures thereto, direct interests
therein, and personal property related thereto or included therein; provided,
however, that "Property" shall not include any property owned by tenants,
guests, licensees or concessionaires of or to the Property.
"Property Agreements" means all material agreements, contracts and other
documents not specifically referred to herein relating to the operation of the
Hotel other than agreements for services performed by third parties which
services are generally available from other third parties and which agreements
can be terminated on not more than 30 days' prior notice without payment of any
damages or penalty.
"Purchase Money Security Interest" means purchase money mortgages or
security interests, conditional sale arrangements and other similar security
interests on furniture, fixtures or equipment acquired by the Borrower in the
ordinary course of business (and not inconsistent with customary industry
practices), with the proceeds of the indebtedness secured thereby; provided,
however, that (i) any Purchase Money Security Interest shall attach only to the
furniture, fixtures or equipment acquired in such transaction (and any proceeds,
as defined in the Uniform Commercial Code, thereof), and (ii) such indebtedness
shall not exceed the cost of such furniture, fixtures or equipment.
"Rating Agencies" means one or more of S&P, Fitch Investors Service, Inc.,
DCR and Moody's Investors Service, Inc. that are, at the time of determination,
selected by NACC to rate the Securities.
"Rating Comfort Letter" a letter from each Rating Agency pursuant to which
it confirms that the taking of the action referred to therein will not result in
a withdrawal, qualification or downgrade of the then existing ratings of the
Securities.
"Rehabilitation Work" means the repairs, improvements and replacements to
the Property as more particularly described on Exhibit J annexed hereto.
"Release Date" has the meaning set forth in Section 2.3(a)(i).
"REMIC" has the meaning set forth in Section 2.3(a).
"Required Amount" has the meaning set forth in Section 8.6 of the Cash
Management Procedures.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw-Hill,
Inc.
"Securities" has the meaning set forth in Section 6.1.
"Securities Act" means the Securities Act of 1933, as amended from time to
time, and the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
"Securitization" has the meaning set forth in Section 6.1.
"Security Documents" means (a) the Mortgage, (b) the collateral assignment
of documents and property rights, dated as of the Closing Date, by the Borrower
to the Lender, (c) the assignments of leases, rents and profits, dated as of the
Closing Date, by the Borrower to the Lender, (d) the collateral account
agreement, dated as of the Closing Date, among the Servicer, the Borrower and
the Lender, (e) the Environmental Indemnity Agreement, (f) all Uniform
Commercial Code financing statements relating to the Debt and (g) any other
documents securing the Debt.
"Servicer" means any nationally recognized servicer of commercial mortgage
loans selected by the Lender and its assigns and successors.
"Servicing Expenses" has the meaning set forth in Section 4.3(A)(i) of the
Cash Management Procedures.
"SNDA" means the Modification, Subordination and Non-Disturbance Agreement,
Estoppel, Assignment and Consent, dated as of the Closing Date, among the
Manager, the Borrower and the Lender.
"Subordinate Debt" means Indebtedness incurred by the Borrower and after
February, 2000 that is expressly subordinate in right of payment to the Debt
pursuant to the provisions of the Mortgage and with respect to which evidence is
provided satisfactory to the Lender that the Debt Service Coverage Ratio on its
date of issuance is at least 2.0:1 and if the Securitization has been effected,
as to which the Rating Agencies deliver a Rating Comfort Letter. For the purpose
of this definition, Debt Service Coverage Ratio means, as of any given date, the
ratio of (i) Net Operating Income for the 13 full Accounting Periods for which
financial statements are required to be furnished to the Lender pursuant to
Section 5.2(d)(ii) immediately preceding the date of calculation (or 12
Accounting Periods in the case of a calendar year or 365 day Fiscal Year) to
(ii) Debt Service Expense in respect of the 13 full Accounting Periods next
succeeding such date (or 12 Accounting Periods in the case of a calendar year or
365 day Fiscal Year). For the purpose of this definition, Debt Service Expense
means the aggregate amount of scheduled interest and principal payable on the
Notes, the proposed subordinate indebtedness, any other Indebtedness secured by
any assets of the Borrower and any outstanding Indebtedness incurred by Ivy
Street Hotel Limited Partnership and Atlanta Marriott Marquis II Limited
Partnership.
"Substantive Consolidation Opinion" has the meaning set forth in Section
6.1(b).
"Successor Entity" has the meaning set forth in Section 2.3(d).
"Third Party Payors" has the meaning set forth in Section 2.1 of the Cash
Management Procedures.
"Transaction Documents" means this Agreement, the Security Documents, the
Notes and all other documents executed and delivered by the Borrower in favor of
the Lender in connection with the Loan, including, without limitation, all
agreements, instruments and documents pursuant to which the Pledged Property is
assigned, collaterally assigned and/or pledged to the Lender hereunder.
"Transition Period" has the meaning set forth in Section 7.3 of the Cash
Management Procedures.
"Trustee" means the trustee to which NACC assigns its interest in the
Transaction Documents in connection with a Securitization.
"Uncontrollable Circumstances" means circumstances causing delay due to
acts of God, governmental restrictions (other than arising from the Borrower's
failure to comply with applicable law), enemy acts, civil commotion or other
causes beyond the reasonable control of the Borrower.
"United States" means the United States of America (including the States
and the District of Columbia), its territories, its possessions and other areas
subject to its jurisdiction.
"U.S. Obligations" has the meaning set forth in Section 2.3(e).
"Welfare Plan" means an employee welfare benefit plan, as defined in
Section 3(1) of ERISA.
"Work" has the meaning set forth in Section 8.1 of the Cash Management
Procedures.
"Yield Maintenance Premium" shall mean an amount in cash that would be
necessary at any date of determination to purchase U.S. Obligations in an amount
that would be sufficient, together with U.S. Obligations that could be purchased
with the unpaid principal of and accrued interest on the Notes payable to the
Lender (i) upon an acceleration of the Notes pursuant to Section 4.2 or (ii) as
otherwise provided for in this Agreement, to provide funds at least equal to,
but in no event less than, the payments due under the Loan on or prior to, but
as close as possible to, all successive Debt Service Payment Dates from and
after such date of determination in respect of (i) the remaining Monthly Debt
Service Payments that would be required under the Notes through and including
the Optional Prepayment Date and (ii) a balloon payment of the outstanding
principal balance of the Notes and accrued and unpaid interest as of the
Optional Prepayment Date as if such balloon payment were then due and payable.
LOAN AGREEMENT
Schedule II
ARTICLE II
PROVISIONS CONCERNING THE ACCOUNTS AND PLEDGED PROPERTY
Section II.1 Right to Contest. To the extent consistent with the Mortgage,
the Borrower at its expense may contest, by appropriate Action conducted in good
faith and with due diligence, the amount or validity or application, in whole or
in part, of any Imposition or Lien therefor or any Legal Requirement or
Insurance Requirement or the application of any instrument of record affecting
the Pledged Property or any part thereof or any claims or judgments of
mechanics, materialmen, suppliers or vendors or Liens therefor, and may direct
the Manager or the Servicer, as the case may be, to withhold payment of the same
pending such Action if permitted by law; provided, however, that (a) in the case
of any Impositions or Liens therefor or any claims or judgments of mechanics,
materialmen, suppliers or vendors or Liens therefor, such Action shall suspend
the enforcement thereof and the accrual of penalties thereon payable by the
Borrower, the Manager and the Servicer and otherwise with respect to the Pledged
Property, (b) neither the Pledged Property nor any part thereof or interest
therein could be in any danger of being sold, forfeited or lost if the Borrower
pays the amount or satisfies the condition being contested, and the Borrower
would have the opportunity to so pay or satisfy if the Borrower fails to prevail
in the contest and (c) in the case of an Insurance Requirement, the failure of
the Borrower to comply therewith shall not impair the validity of any insurance
required to be maintained by the Borrower under the Mortgage or the right to
full payment of any claims thereunder.
Section II.2 Defeasance
(a) At any time after the date which is the earlier of (i) two years from
the "startup day," within the meaning of Section 860G(a)(9) of the IRC, of one
or more "real estate mortgage investment conduits," within the meaning of
Section 860D of the IRC (a "REMIC"), that hold the Notes and (ii) February 11,
2001, but prior in either case to the Optional Prepayment Date, and provided no
Event of Default has occurred and is continuing the Borrower may cause the
release of the Property from the Lien of the Security Documents by providing the
Lender with funds in an amount equal to the Defeasance Deposit, upon the
satisfaction of the following conditions:
(i) not less than 30 days' notice to the Lender specifying a Debt Service
Payment Date (the "Release Date") on which the Defeasance Deposit is to be made;
(ii) the payment to the Lender of accrued and unpaid interest on the
principal balance of the Notes to but not including the Release Date and all
other Debt due on the Release Date;
(iii) the payment to the Lender of the Defeasance Deposit; and
(iv) the delivery to the Lender of:
(A) a security agreement (the "Defeasance Security Agreement"), in form and
substance satisfactory to the Lender, creating a first priority perfected
security interest in favor of the Lender in the Defeasance Deposit and the U.S.
Obligations purchased with the Defeasance Deposit in accordance with Section
2.6(b) (together, the "Defeasance Collateral");
(B) form of release of the Property from the Lien of the Security Documents
(for execution by the Lender) appropriate for the State of Georgia;
(C) an Officer's Certificate certifying that the requirements set forth in
subsections (a) (ii)-(iv) have been satisfied;
(D) an opinion of counsel for the Borrower (which may be a "reasoned"
opinion), in form and substance satisfactory to the Lender, that (i) the
transfer of the Defeasance Collateral in exchange for release of the Property
will not constitute an avoidable preference under Section 547 of the United
States Bankruptcy Code in the event of a filing of a petition for relief under
the United States Bankruptcy Code for or against the Borrower, (ii) the
Defeasance Deposit and the Defeasance Collateral has been duly and validly
transferred and assigned to the Trustee for the benefit of the holders of the
Securities, (iii) the Trustees hold a first priority perfected security interest
in the Defeasance Deposit and the Defeasance Collateral for the benefit of such
holders, (iv) such transfer will not result in a deemed exchange of the
Securities pursuant to Section 1001 of the IRC, (v) such transfer will not, by
itself, adversely affect the status of the Securities as indebtedness for
federal income tax purposes and (vi) such transfer will not adversely affect the
status of the entity holding the Debt as a REMIC (assuming for such purposes
that such entity otherwise qualifies as a REMIC and that the Notes were
transferred to such REMIC not later than two years prior to the Release Date);
(E) a certificate of a certified public accountant acceptable to the Lender
that the Defeasance Collateral complies with the requirements set forth in
subsection (b) below;
(F) such other certificates, documents or instruments as the Lender may
reasonably request; and
(G) a Rating Comfort Letter.
(b) The Borrower hereby appoints the Lender as the agent and
attorney-in-fact to use the Defeasance Deposit to purchase U.S. Obligations at
least equal to, but in no event less than, the payments due under the Loan on or
prior to, but as close as possible to, all successive Debt Service Payment Dates
from and after the Release Date in respect of (i) the remaining Monthly Debt
Service Payments that would be required under the Notes through and including
the Optional Prepayment Date and (ii) a balloon payment of the outstanding
principal balance of the Notes and accrued and unpaid interest as of the
Optional Prepayment Date as if such balloon payment were then due and payable.
(c) Upon compliance with the requirements of this Section 2.3, the Property
shall be released from the Lien of the Security Documents and the U.S.
Obligations shall constitute substitute collateral, which shall secure the Debt.
(d) The Borrower may assign its obligations under the Notes together with
the U.S. Obligations to a successor entity (the "Successor Entity") designated
by NACC and thereupon be released fully from all obligations relating to the
Debt. In such event the opinion of counsel provided for in clause (a)(iv)(D) of
this Section 2.3 shall provide that upon such assignment the Defeasance
Collateral will not be part of the estate of the Borrower under Section 541 of
the United States Bankruptcy Code. NACC shall retain its obligation to designate
a Successor Entity notwithstanding the transfer of the Notes unless such
obligation is specifically assumed by the transferee. In consideration for the
payment of $1,000 by the Borrower, such Successor Entity shall assume the
Borrower's obligations under the Notes and the Defeasance Security Agreement,
the Borrower shall be relieved of its obligations thereunder and the Debt of the
Borrower shall not be deemed outstanding for any purpose of this Agreement. If
required by the applicable Rating Agencies, the Borrower shall also deliver or
cause to be delivered a Substantive Consolidation Opinion with respect to the
Successor Entity in form and substance satisfactory to the Lender and the
applicable Rating Agencies.
(e) "Defeasance Deposit" shall mean the sum of (i) an amount in cash
necessary to purchase U.S. Obligations whose cash flows are in an amount
sufficient to make the payments required under subsection (b), (ii) any costs
and expenses incurred or to be incurred in making such purchase and (iii) any
costs and expenses of the Lender associated with a release of the Lien of the
Security Documents provided for above and reasonable attorney's fees and
expenses; and "U.S. Obligations" shall mean obligations or securities not
subject to prepayment, call or early redemption which are direct obligations of,
or obligations fully guaranteed as to timely payment by, the United States of
America or any agency or instrumentality of the United States of America, the
obligations of which are backed by the full faith and credit of the United
States of America;
(f) The Borrower, pursuant to the Defeasance Security Agreement or other
appropriate document, shall irrevocably authorize and direct that the payments
received from the U.S. Obligations be made directly to the Lender and applied to
satisfy the obligations of the Borrower under the Notes. Any portion of the
Defeasance Deposit in excess of the amount necessary to purchase the U.S.
Obligations required by this Section 2.3(f) and satisfy Borrower's obligations
under Section 2.3 shall be remitted to Borrower. Payments from or with respect
to U.S. Obligations held by the Lender on the Optional Prepayment Date shall be
applied (i) first, to payment of accrued and unpaid interest on the Notes and
(ii) second, to prepayment of the unpaid principal amount of the Notes.
Section VII.1 Fees and Expenses
(a) The Borrower shall pay or reimburse NACC and after the Securitization,
NACC and the Lender (in each case, without duplication), on demand, without
set-off, withholding or deduction, for the payment of all of the reasonable
fees, costs and expenses incurred by NACC in connection with the underwriting,
negotiation, documentation and closing of the Loan, and the fees, costs and
expenses of the following:
(v) bank charges relating to the operation of the Debt Service Reserve
Account, Lockbox Accounts, Capital Expenditure and FF&E Reserve Accounts, Tax
and Insurance Account, the Deposit Account and Operating Account;
(vi) initial and ongoing activity of any special servicer incurred as a
result of an Event of Default;
MORTGAGE
13. Damage to and Destruction of the Mortgaged Property.
(a) In the event that the Mortgaged Property shall be damaged or destroyed,
in whole or in part, by fire or other casualty, whether insured or uninsured,
Grantor shall give prompt written notice thereof to Grantee, together with
Grantor's best estimate of the cost of restoration (the "Restoration Cost").
Subject to the provisions of this Paragraph 13, Grantor shall restore the
Premises to the standard required by Paragraph 12 (a) (vi) of this Security
Deed. Grantor shall timely file all claims or proofs of claim so as not to
prejudice any claim and, if the Restoration Cost is equal to or greater than an
amount (the "Restoration Benchmark") equal to $1,000,000.00, or, irrespective of
the Restoration Cost, if an Event of Default exists as of the date of submission
of any claims or proofs of claim, and until the Debt has been paid in full,
Grantor shall submit copies of all claims or proofs of claim and other
submissions to Grantee for the written approval of Grantee prior to any such
filing, which approval shall not be unreasonably withheld, conditioned or
delayed.
(b) Provided that no Event of Default exists at the time of settlement,
Grantor shall have the right to settle any insurance claim with respect to any
casualty where the Restoration Cost is less than the Restoration Benchmark, but
shall give prompt written notice of any such claim and settlement to Grantee. In
such event, Grantor shall apply the Insurance Proceeds relating to such casualty
to restoration, replacement, rebuilding or repair (hereinafter collectively
referred to as "Restoration") of the damage to the standard required by
Paragraph 12 (a) (vi) hereof.
(c) If the Restoration Cost equals or exceeds the Restoration Benchmark,
and unless Grantor has obtained the release of this Security Deed as a Casualty
Event Release (as hereinafter defined) in accordance with the Loan Agreement,
Grantee shall have the right to participate in the settlement of all insurance
claims relating to such casualty, and all Insurance Proceeds relating to such
casualty shall be paid directly to Grantee as their interest may appear, and,
after settlement of the claim(s) and subject to Paragraph 13 (d) hereof, such
Insurance Proceeds shall be deposited in the subaccount for Insurance Proceeds
(as described in Section 4.2 of the Cash Management Procedures) of the Cash
Collateral Account (as defined in the Loan Agreement) and advanced to Grantor
from time to time (subject to the conditions set forth below) in reimbursement
for amounts expended by Grantor or as direct payments to contractors in
Restoration of the Mortgaged Property. Upon completion of the entire Restoration
and provided no uncured Event of Default exists at the time of payment, Grantee
shall pay the remaining amount of the Insurance Proceeds, if any, to Grantor;
provided, however, that nothing herein contained shall prevent Grantee from
applying at any time the whole or any part of the Insurance Proceeds to the
curing of any default under any Transaction Document or to the payment of the
Debt in the circumstances set forth in Paragraph 13 (d). Advances of Insurance
Proceeds shall be made available to Grantor, no less frequently than monthly, in
accordance with the general procedures employed at the time by Grantee in
connection with the disbursement of loan proceeds in general by Grantee,
including, without limitation, endorsements to each of the Titles Policies
insuring the continued first priority lien of this Security Deed against
mechanics' liens that may arise out of the Restoration and appropriate
certifications from a licensed architect or engineer selected by Grantor subject
to the reasonable approval of Grantee (each, an "Architect") that the requested
payment is for work completed in accordance with plans and specifications
approved by Grantee and that the balance of funds held on deposit after such
payment will be sufficient to pay the Restoration Cost (provided, however, that
if the Restoration Cost is or is estimated to be less than $1,000,000.00,
Grantee will accept a certificate of the officer of the general partner of
Grantor certifying to this effect), and evidence satisfactory to Grantee that no
liens have been filed for the labor and materials used in connection therewith
and that the requested payment will be received in trust, to be applied first to
the payment for such labor and materials in amounts which are equal to the
percentage of completion attained at the time of such advance, less, in the case
of any Restoration in which the original estimated Restoration Cost is
$500,000.00 or more, all amounts previously advanced and a holdback of 10% (or
such lesser amount as may be customary in the trade in such location or as may
be required under the applicable restoration contract, but in no event less than
5% for any contract where a holdback is required), which remaining amounts will
be advanced upon full completion of the Restoration as due under the applicable
Restoration contract. All Property Insurance Proceeds and other sums deposited
with Grantee pursuant to this Paragraph 13 (b), until expended or applied as
provided in this Paragraph 13 (b), shall constitute additional security for the
Debt and shall be invested in Permitted Investments (as such term is defined in
the Loan Agreement) with income thereon inuring to the benefit of Grantor in
accordance with the Loan Agreement.
(d) Notwithstanding the foregoing, if an Event of Default exists or if, in
Grantee's reasonable judgment based on professional consultation:
(i) the Restoration of the Improvements cannot be completed (A) so as to
constitute an economically viable building or (B) at least six (6) months prior
to the Maturity Date; or
(ii) the amount of business interruption insurance is insufficient to cover
all fixed and operating expenses of the Premises, including such portion of debt
service on the Loan as is reasonably allocable to the Premises, during
Restoration and until the operation of Grantor's business at the Premises is
resumed; or
(iii) the amount of Insurance Proceeds equals or exceeds the amount of the
outstanding principal balance of the Loan; or
(iv) Restoration of the Mortgaged Property cannot be completed except at a
Restoration Cost which exceeds the amount of available Insurance Proceeds and
Grantor shall not have deposited with Grantee, within ninety (90) days following
Grantee's receipt of such Insurance Proceeds and delivery to Grantor of notice
of a deficiency, an amount, in cash or cash equivalent, equal to the excess of
the estimated Restoration Cost as determined by an Architect over the amount of
such Insurance Proceeds;
then Grantee shall have the option to apply Insurance Proceeds to the
payment of the Note, interest accrued and unpaid thereon (but no Yield
Maintenance Premium shall be due), and other unpaid amounts of the Debt, all in
such order as Grantee shall designate in accordance with the Transaction
Documents, provided, however, that, except as otherwise provided in the Loan
Agreement, any such application shall in no event affect the payments to be made
in respect of the Note.
(e) Grantor shall, promptly after the occurrence of casualty, commence and
thereafter with reasonable diligence prosecute to completion any Restoration of
the Mortgaged Property or part thereof to the standard required by Paragraph 12
(a) (vi) hereof. Any such Restoration shall be undertaken and completed in
accordance with this Paragraph 13, subject to the final provision of this
Paragraph 13 (e). All Restoration shall be in a good and workmanlike manner with
reasonable diligence, and in compliance with all Legal Requirements. Seasonality
or weather permitting, if Grantor fails to commence Restoration within thirty
(30) days following Grantee's receipt of Insurance Proceeds or fails to
prosecute the Restoration to completion, Grantee may upon ten (10) days' notice
to Grantor, but shall not be obligated to, perform the Restoration, and may use
any of the Insurance Proceeds and Grantor's funds deposited pursuant to
Paragraph 13 (c) or 13 (d) in payment therefor. Grantor shall pay to Grantee,
within ten (10) days after written demand, the amount of any deficiency between
funds available for the Restoration and the Restoration Cost (including funds
deposited by Grantor pursuant to Paragraph 13(c) or 13 (d) together with
interest thereon at the Default Rate from such tenth (10th) day through and
including the date of payment to Grantee.
(f) It is intended that, anything contained herein to the contrary
notwithstanding, no trust or fiduciary relationship shall be created by the
receipt by Grantee of any Insurance Proceeds, but only a debtor-creditor
relationship between Grantee, on the one hand, and Grantor, on the other, and
only to the extent of the Insurance Proceeds.
(g) If any Insurance Proceeds are not paid until after the extinguishment
of the Debt, whether by foreclosure or otherwise, and Grantee shall not have
received the entire amount of the Debt outstanding at the time of such
extinguishment, then such Insurance Proceeds, to the extent of the amount of the
Debt not so received, shall be paid to Grantee and be the property of Grantee;
and Grantor hereby assigns, transfers and sets over to Grantee all of Grantor's
right, title and interest in and to such proceeds. The balance of such Insurance
Proceeds, if any, shall be paid to and be the property of Grantor. The
provisions of this Paragraph 13(g) shall survive the termination of this
Security Deed by foreclosure or otherwise as a consequence of the rights and
remedies of Grantee hereunder after an Event of Default.
(h) Subject to the provisions of Paragraph 13(d) or 13 (e), as applicable,
nothing herein contained shall be deemed to excuse Grantor from repairing or
maintaining the Mortgaged Property as provided in this Security Deed or
restoring all damage or destruction to the Mortgaged Property, regardless of the
sufficiency or availability of Insurance Proceeds, and the application or
release by Grantee of Insurance Proceeds shall not be deemed, in and of itself,
to cure or waive any default or Event of Default or notice of default.
Notwithstanding any casualty, Grantor shall continue to pay the Debt at the time
and in the manner provided for its payment in this Security Deed and the Note
and the Debt shall not be reduced until any Insurance Proceeds shall have been
actually received by Grantee and applied to the discharge of the Debt or
payments with respect to a Casualty Event Release.
(i) Grantee, to the extent that Grantee has not been reimbursed therefor by
Grantor, shall be entitled as a first priority out of any Insurance Proceeds, to
reimbursement for all actual costs, fees, reimbursements and expenses of Grantee
incurred in the determination and collection of any such proceeds.
14. Condemnation Proceedings.
(a) In the event that the Mortgaged Property, or any part thereof, shall be
taken pursuant to Condemnation Proceedings, Grantee shall, as hereinafter set
forth, have certain consent rights with respect to settlement of any such
Condemnation Proceedings, but shall not participate in any such Condemnation
Proceedings except as expressly provided herein, and any Condemnation
Proceedings that may be made or any proceeds thereof are hereby assigned to
Grantee and shall be received and deposited into the subaccount for Condemnation
Proceeds (as described in Section 4.2 of the Cash Management Procedures) of the
Cash Collateral Account and held and distributed by Grantee in the manner herein
set forth. Grantor will give Grantee prompt notice of the actual commencement of
any Condemnation Proceedings affecting the Mortgaged Property or of any
threatened condemnation of which Grantor becomes aware, including proceedings
for severance and change in grade of streets, and will deliver to Grantee copies
of any and all papers served in connection with any Condemnation Proceedings.
Grantee is hereby authorized to commence, appear in, and prosecute in its own
name or Grantor's name any action or proceeding relating to any Condemnation
Proceedings, upon not less that ten (10) Business Days' prior written notice to
Grantor, if Grantor has not commenced any such action or proceeding. Grantor may
not settle or compromise any claim in connection with any Condemnation
Proceeding, whether involving a Total Taking, Partial Taking or Temporary
Taking, which claim equals or exceeds, or, at the outset of any such
Condemnation Proceedings, appears to involve a sum which is likely to equal or
exceed, in Grantee's reasonable judgment based on professional consultation, the
Restoration Benchmark, without the prior written consent of Grantee in each
instance, which consent shall not be unreasonably withheld, conditioned or
delayed, and Grantee shall have the right to settle or compromise any claim in
connection therewith (irrespective of amount), without the consent of Grantor
after the occurrence of an Event of Default. Grantor agrees to execute any and
all further documents that may be reasonably required in order to facilitate the
collection of any Condemnation Proceeds and the making of any such deposit and
Grantor hereby appoints Grantee its attorney-in-fact for the limited purpose of
executing any such documents after the occurrence of an Event of Default, such
power being coupled with an interest and irrevocable.
(b) If, at any time during the term of the Loan, there occurs a Total
Taking (as hereinafter defined), Grantee shall collect any Condemnation
Proceeds, and apply the same, after payment of Grantee's reasonable costs of
collection thereof, including reasonable attorneys' fees and disbursements, to
payment of the Debt (but no Yield Maintenance Premium shall be due), all in such
order as Grantee shall designate, provided, however, that except as otherwise
provided in the Loan Agreement, any such application shall in no event affect
the payments to be made in respect of the Note. Any potion of any Condemnation
Proceeds remaining after the payment in full of the Debt shall be released by
Grantee to Grantor. For the purposes of this Paragraph, a "Total Taking" shall
mean any taking or any constructive taking of Grantor's title to the Premises in
Condemnation Proceedings or by agreement by Grantor which shall, in the
reasonable opinion of Grantee, render it impracticable to restore, within six
(6) months prior to the Maturity Date, the portion of the Premises not subject
to such taking to a complete architectural unit of substantially the same
economic viability and for the same purposes and uses as existed immediately
prior to the date of the commencement of the Condemnation Proceedings.
(c) If, at any time during the term of the Loan, there occurs a taking
which is less than a Total Taking (a "Partial Taking"), then, provided that no
Event of Default exists as of the date of submission of Grantor's claim in the
Condemnation Proceeding with respect to such Partial Taking, Grantor shall have
the right to settle any such claim with respect to any Partial Taking where the
Restoration Cost is less than the Restoration Benchmark, but shall give prompt
written notice of any such claim and settlement to Grantee. If the Restoration
Cost equals or exceeds, or, at the outset of such Condemnation Proceedings,
appears to involve a sum which is likely to equal or exceed, in Grantee's
reasonable judgment based on professional consultation, the Restoration
Benchmark, then, unless Grantor has obtained the release of this Security Deed
as a Condemnation Event Release (as hereinafter defined) in accordance with the
Loan Agreement, Grantee shall have the right to participate in the settlement of
such claim and all Condemnation Proceeds relating to such Partial Taking shall
be held by Grantee and shall be released to pay the costs of restoration of the
Improvements (a "Condemnation Restoration") subject to and upon satisfaction of
the conditions set forth in Paragraphs 13 (c) and 13 (d) hereof as if such
Condemnation Proceeds constituted Insurance proceeds and the balance, if any,
shall be paid to Grantor; unless, in Grantee's reasonable judgment based on
professional consultation, the Condemnation Restoration cannot be completed in
accordance with the conditions of Paragraphs 13(c) and 13(d). In the event that
there exists an Event of Default, or (xx) any of such conditions shall not have
been met, or (yy) the Condemnation Restoration cannot be completed, in Grantee's
reasonable judgment based on professional consultation, prior to a date which is
at least six (6) months prior to the Maturity Date, regardless of compliance
with all of the other conditions of Paragraphs 13 (c) and 13 (d), or (zz) if the
Condemnation Proceeds exceed the cost of the Condemnation Restoration, Grantee,
at the discretion of Grantee, shall apply the Condemnation Proceeds, or balance
thereof, to payment of the Debt, (but no Yield Maintenance Premium shall be
due), all in such order as Grantee shall designate, provided, however, that,
except as otherwise provided in the Loan Agreement, any such application shall
in no event affect the schedule of payments to be made in respect of the Note.
If there is any balance of any Condemnation Proceeds remaining in the hands of
Grantee after any payment of the Debt in full, such balance shall be released to
Grantor. In the event that the costs of any permitted Condemnation Restoration,
as estimated reasonably by Grantee at any time, shall exceed the net
Condemnation Proceeds received by Grantee, Grantor shall deposit such deficiency
with Grantee.
(d) In the event of any taking of all or any portion of the Mortgaged
Property for temporary use or occupancy ("Temporary Taking"), any Condemnation
Proceeds with respect to such Temporary Taking shall be treated as Gross
Revenues (as defined in the Loan Agreement) and shall be distributed and applied
in the manner contemplated in the Loan Agreement (but only to the extent that
any such Condemnation Proceeds have not been used for Condemnation Restoration).
(e) Except as otherwise provided in this Paragraph 14 (e), nothing
contained in this Paragraph 14 shall relieve Grantor of its duty to maintain,
repair, replace or restore the Improvements or the Equipment or rebuild the
Improvements, from time to time, following any Condemnation Proceedings with
respect to a Partial Taking or Temporary Taking and nothing in this Paragraph 14
shall relieve Grantor of its duty to pay the Debt, which shall be absolute,
regardless of any such occurrence with respect to all or any portion of the
Mortgaged Property. Notwithstanding any taking, whether a Total Taking, a
Partial Taking or a Temporary Taking, Grantor shall continue to pay the Debt at
the time and in the manner provided for its payment in this Security Deed and
the Note, and the Debt shall not be reduced until any award or payment therefor
shall have been actually received by Grantee and applied to the discharge of the
Debt.
(f) If a claim under any Condemnation Proceedings arising during the term
of this Security Deed is not paid until after the extinguishment of the Debt,
whether by foreclosure or otherwise, and Grantee shall not have received the
entire amount of the Debt outstanding at the time of such extinguishment, then
the Condemnation Proceeds relating to any such Condemnation received, shall be
paid to Grantee and be the property of Grantee; and Grantor hereby assigns,
transfers and sets over to Grantee all of Grantor's right, title and interest in
and to such Condemnation Proceeds. The balance of such Condemnation Proceeds, if
any, shall be paid to and be the property of Grantor. The provisions of this
Paragraph shall survive the termination of this Security Deed by foreclosure or
otherwise as a consequence of the rights and remedies of Grantee hereunder after
an Event of Default.
(g) All Condemnation Proceeds and other sums deposited with Grantee
pursuant to this Paragraph 14, until expended or applied as provided in this
Paragraph 14, shall constitute additional security for the Debt and shall be
invested in Permitted Investments with income thereon inuring to the benefit of
Grantor.
EXHIBIT C
ENVIRONMENTAL REMEDIATION WORK
<TABLE>
<S> <C> <C>
Engineer's Actual Amount
Item Recommended Work Estimate Reserved
- --------------------------------- ----------------------------------------------- --------------- ---------------
Asbestos containing materials Implement an operations and maintenance program $300.00 $375.00
Dry cleaning units/chemical drums Construct a secondary containment system $2,500.00 $3,125.00
for the two drycleaning units and dry cleaning
chemical drums/containers on-site
</TABLE>
EXHIBIT D
"Permitted Investments" means any one or more of the following obligations
or securities:
(a) obligations of, or obligations fully guaranteed as to payment of
principal and interest by, the United States or any agency or instrumentality
thereof provided such obligations are backed by the full faith and credit of the
United States of America including, without limitation, obligations of: the U.S.
Treasury (all direct or fully guaranteed obligations), the Farmers Home
Administration (certificates of beneficial ownership), the General Services
Administration (participation certificates), the U.S. Maritime Administration
(guaranteed Title XI financing), the Small Business Administration (guaranteed
participation certificates and guaranteed pool certificates), the U.S.
Department of Housing and Urban Development (local authority bonds) and the
Washington Metropolitan Area Transit Authority (guaranteed transit bonds);
provided, however, that the investments described in this clause must (A) have a
predetermined fixed dollar of principal due at maturity that cannot vary or
change, (B) if rated by S&P, must not have an "r" highlighter affixed to their
rating, (C) if such investments have a variable rate of interest, such interest
rate must be tied to a single interest rate index plus a fixed spread (if any)
and must move proportionately with that index, and (D) such investments must not
be subject to liquidation prior to their maturity;
(b) Federal Housing Administration debentures;
(c) obligations of the following United States government sponsored
agencies: Federal Home Loan Mortgage Corp. (debt obligations), the Farm Credit
System (consolidated systemwide bonds and notes), the Federal Home Loan Banks
Mortgage Association (debt obligations), the Student Loan Marketing Association
(debt obligations), the Financing Corp. (debt obligations), and the Resolution
Funding Corp. (debt obligations); provided however, that the investments
described in this clause must (A) have a predetermined fixed dollar of principal
due at maturity that cannot vary or change, (B) if rated by S&P, must not have
an "r" highlighter affixed to their rating, (C) if such investments have a
variable rate of interest, such interest rate must be tied to a single interest
rate index plus a fixed spread (if any) and must move proportionately with that
index, and (D such investments must not be subject to liquidation prior to their
maturity;
(d) federal funds, unsecured certificates of deposit, time deposits,
bankers' acceptances and repurchase agreements having maturities of not more
than 365 days of any bank, the short term obligations of which are rated in the
highest short term rating category by each Rating Agency (or, if not rated by
any Rating Agency other than S&P, otherwise acceptable to such Rating Agency or
Agencies, as applicable, as confirmed in writing that such investment would not,
in and of itself, result in a downgrade, qualification or withdrawal of the then
current ratings assigned to the Securities); provided, however, that the
investments described in this clause must (A) have a predetermined fixed dollar
of principal due at maturity that cannot vary or change, (B) if rated by S&P,
must not have an "r" highlighter affixed to their rating, (C) if such
investments have a variable rate of interest, such interest rate must be tied to
a single interest rate index plus a fixed spread (if any) and must move
proportionately with that index, and (D) such investments must not be subject to
liquidation prior to their maturity;
(e) fully Federal Deposit Insurance Corporation-insured demand and time
deposits in, or certificates of deposit of, or bankers' acceptances issued by,
any bank or trust company, savings and loan association or savings bank, the
short term obligations of which are rated in the highest short term rating
category by reach Rating Agency (or, if not rated by any Rating Agency other
than S&P, otherwise acceptable to such Rating Agency or Agencies, as applicable,
as confirmed in writing that such investment would not, in and of itself, result
in a downgrade, qualification or withdrawal of the then current ratings assigned
to the Securities); provided, however, that the investments described in this
clause must (A) have a predetermined fixed dollar of principal due at maturity
that cannot vary or change, (B) if rated by S&P, must not have an "r"
highlighter affixed to their rating, (C) if such investments have a variable
rate of interest, such interest rate must be tied to a single interest rate
index plus a fixed spread (if any) and must move proportionately with that
index, and (D) such investments must not be subject to liquidation prior to
their maturity;
(f) debt obligations with maturities of not more than 365 days and rated by
each Rating Agency (or, if not rated by any Rating Agency other than S&P,
otherwise acceptable to such Rating Agency or Agencies, as applicable, as
confirmed in writing that such investment would not, in and of itself, result in
a downgrade, qualification or withdrawal of the then current ratings assigned to
the Securities) in the highest long-term unsecured rating category; provided,
however, that the investments described in this clause must (A) have a
predetermined fixed dollar of principal due at maturity that cannot vary or
change, (B) if rated by S&P, must not have an "r" highlighter affixed to their
rating, (C) if such investments have a variable rate of interest, such interest
rate must be tied to a single interest rate index plus a fixed spread (if any)
and must move proportionately with that index, and (D) such investments must not
be subject to liquidation prior to their maturity;
(g) commercial paper (including both non-interest-bearing discount
obligations and interest-bearing obligations payable on demand or on a specified
date not more than one year after the date of issuance thereof) with maturities
of not more than 365 days and rated by each Rating Agency (or, if not rated by
any Rating Agency other than S&P, otherwise acceptable to such Rating Agency or
Agencies, as applicable, as confirmed in writing that such investment would not,
in and of itself, result in a downgrade, qualification or withdrawal of the then
current rating assigned to the Securities) in its highest short-term unsecured
debt rating; provided, however, that the investments described in this clause
must (A) have a predetermined fixed dollar of principal due at maturity that
cannot vary or change, (B) if rated by S&P, must not have an "r" highlighter
affixed to their rating, (C) if such investments have a variable rate of
interest, such interest rate must be tied to a single interest rate index plus a
fixed spread (if any) and must move proportionately with that index, and (D)
such investments must not be subject to liquidation prior to their maturity;
(h) the Federated Prime Obligation Money Market Fund (the "Fund") so long
as the Fund is rated "AAA" by each Rating Agency (or, if not rated by any Rating
Agency other than S&P, otherwise acceptable to such Rating Agency or Agencies,
as applicable, as confirmed in writing that such investment would not, in and of
itself, result in a downgrade, qualification or withdrawal of the then current
ratings assigned to the Securities);
(i) any other demand, money market or time deposit, or any other
obligation, security or investment, provided that, each Rating Agency has
confirmed in writing to the Lender, that such investment would not, in and of
itself, result in a downgrade, qualification or withdrawal of the then current
ratings assigned to the Securities; and
(j) such other obligations as are acceptable as Permitted Investments to
each Rating Agency, as confirmed in writing to the Lender, that such obligations
would not, in and of itself, result in a downgrade, qualification or withdrawal
of the then current ratings assigned to the Securities;
provided, however, that, in the judgment of the Lender, such instrument
continues to qualify as a "cash flow investment" pursuant to Code Section
860G(a)(6) earning a passive return in the nature of interest and that no
instrument or security shall be a Permitted Investment if (i) such instrument or
security evidences a right to receive only interest payments or (ii) the right
to receive principal and interest payments derived from the underlying
investment provides a yield to maturity in excess of 120% of the yield to
maturity at par of such underlying investment.
EXHIBIT F
IVY STREET HOTEL LIMITED PARTNERSHIP/
ATLANTA MARRIOTT MARQUIS LIMITED PARTNERSHIP
BOOK (LOSS) INCOME
1998 BUDGET
<TABLE>
<S> <C>
1998
BUDGET
--------------
AVERAGE ROOM RATE $130.46
AVERAGE OCCUPANCY RATE 70.4%
REVPAR $91.84
TOTAL SALES $87,898
HOUSE PROFIT 38,313
DEDUCTS: FF&E ESCROW (4,028)
REAL ESTATE TAXES (2,975)
PERSONAL PROPERTY TAX (235)
EQUIPMENT RENT (225)
CENTRAL OFFICE FEE (2,537)
OTHER (240)
---------------
(10,340)
NET HOUSE PROFIT 27,937
</TABLE>
EXHIBIT J
REHABILITATION WORK
<TABLE>
<S> <C> <C> <C> <C> <C>
Budgeted Source Actual Amount
Item Rehabilitation Work Amount of Fund Reserved Deadline
- ------------------------------------------------------------------------------------------------------------------------------------
Guest Rooms/Suites Complete Phase I of guest room $350,000.00 Escrow Funded out of FF&E reserve 6/30/98
renovation
Guest Rooms/Suites Phase II of guest room renovation $7,500,000.00 Owner $7,500,000.00 12/31/98
Allies - Restaurant Finish renovation $65,000.00 Escrow Funded out of FF&E reserve 6/30/98
Pompanos - Steakhouse Finish renovation $21,000.00 Escrow Funded out of FF&E reserve 6/30/98
Imperial Ballroom Finish renovation $9,000.00 Escrow Funded out of FF&E reserve 6/30/98
Sound/lighting
------------- -------------------------
Total $7,945,000.00 $7,500,000.00
------------- -------------------------
</TABLE>
SCHEDULE I
DISCLOSURE REPORT
Actions:
1. Hiram and Ruth Sturm, as Joint Tenants, on their own behalf, on behalf
of all others similarly situated and derivatively on behalf of the Nominal
Defendant v. Marriott Marquis Corp., Host Marriott Corporation, Bruce F.
Stemerman, Robert E. Parsons and Christopher G. Townsend, Defendants, and
Atlanta Marriott Marquis Limited Partnership, Nominal Defendant, United States
District Court for the Northern District of Georgia, Case No. 197-CV-3706 (TWT).
2. Howard H. Poorvu, Individually, on behalf of all other similarly
situated and derivatively on behalf of the Nominal Defendants v. Marriott
Marquis Corporation, a Delaware corporation, Host Marriott Corporation, a
Delaware corporation, Bruce F.Stemerman, Robert E. Parsons, Jr. and Christopher
G. Townsend, Defendants, and Atlanta Marriott Marquis Limited Partnership, a
Delaware limited partnership, and Atlanta Marriott Marquis II Limited
Partnership, a Delaware limited partnership, Nominal Defendants, In the Court of
Chancery of the State of Delaware in and for New Castle County, C.A. No.
16095-NC.
EXHIBIT 10.12
SECURED PROMISSORY NOTE A
made by
HMA REALTY LIMITED PARTNERSHIP
(the "Maker")
- to -
NOMURA ASSET CAPITAL CORPORATION
(the "Payee")
Dated: January 30, 1998
SECURED PROMISSORY NOTE A
$82,000,000
New York, New York
January 30, 1998
FOR VALUE RECEIVED, HMA REALTY LIMITED PARTNERSHIP, a Delaware limited
partnership (the "Maker"), promises to pay to the order of NOMURA ASSET CAPITAL
CORPORATION, a Delaware corporation (together with its successors and assigns,
the "Payee"), the principal amount of Eighty Two Million Dollars and 00/100
($82,000,000) (the "Loan"), in the manner set forth herein; together with
interest on the unpaid principal amount of this Note at the Base Rate or Default
Rate, as applicable; together with payments with respect to amortization of
principal as described in Paragraph 4 hereof; together with the Yield
Maintenance Premium, if any, due and payable under the Loan Agreement; and
together with all other amounts due (including, without limitation, all items of
Debt) hereunder or under any of the other Transaction Documents.
This Note is intended to be pari passu with the same priority of payment
with that other promissory note dated the date hereof by Maker to Payee in the
principal amount of Eighty Two Million Dollars and 00/100 ($82,000,000) (the
"Other Note"). All rights and benefits of Payee of this Note shall be coordinate
with the rights and benefits of the Payee of the Other Note.
I. Definitions. For the purposes of this Note, each of the following terms
shall have the meaning specified with respect thereto:
(a) "Accounting Period" has the meaning set forth in the Loan Agreement.
(b) "Adjusted Rate" has the meaning set forth in paragraph 4(d) of this
Note.
(c) "Base Rate" means 7.40% per annum.
(d) "Business Day" means a day on which banks are open for business in New
York, New York.
(e) "Debt" has the meaning set forth in the Loan Agreement.
(f) "Debt Service Payment Date" means the 11th day of each calendar month
or if in any month the 11th day is not a Business Day, the Debt Service Payment
Date for such month shall be the first Business Day thereafter.
(g) "Debt Service Period" means the period from and including the eleventh
(11th) day of the calendar month immediately preceding each Debt Service Payment
Date to and including the tenth (10th) day of the calendar month in which such
Debt Service Payment Date occurs.
(h) "Default Rate" means a rate per annum equal to the lesser of (aa) two
percent (2%) above the Base Rate or Adjusted Rate, as applicable, compounded
monthly, and (bb) the maximum rate allowed by law.
(i) "Event of Default" has the meaning set forth in the Loan Agreement.
(j) "Excess Cash Flow" has the meaning set forth in the Loan Agreement.
(k) "Loan Agreement" means that certain Loan Agreement, dated as of the
date hereof, between the Maker and the Payee, as amended, modified, supplemented
or restated, from time to time.
(l) "Maturity Date" shall mean the earlier to occur of (1) February 11,
2023 or (2) such date to which the maturity of the Debt may be accelerated upon
an Event of Default or as otherwise provided in any Transaction Document.
(m) "Monthly Debt Service Payment" means $600,649.08, the constant payment
on each Debt Service Payment Date applicable to this Note up to the Maturity
Date.
(n) "Non-Recourse" has the meaning set forth in the Loan Agreement.
(o) "Optional Prepayment Date" means February 11, 2010.
(p) "Transaction Documents" has the meaning set forth in the Loan
Agreement.
(q) "Yield Maintenance Premium" has the meaning set forth in the Loan
Agreement.
Certain additional terms are defined in the particular provisions of this
Note to which they pertain or in which they are initially used.
2. Payment of Debt.
The Maker shall punctually pay the Debt at the time and in the manner
provided for its payment in this Note and the other Transaction Documents. It is
expressly agreed that the entire Debt may, at the Payee's election (or
automatically upon the occurrence of the events described in clauses (f) and (g)
of Section 4.1A of the Loan Agreement), become immediately due and payable upon
the occurrence of an Event of Default, as set forth in the Loan Agreement.
3. Interest Rate.
(a) Prior to the Optional Prepayment Date and except as set forth below,
the Debt shall bear interest for each Debt Service Period at the Base Rate.
(b) On and after the Optional Prepayment Date and except as set forth
below, the Debt shall bear interest for each Debt Service Period at the Adjusted
Rate.
(c) Following the Maturity Date or while an Event of Default has occurred
and is continuing, the Debt shall bear interest at the Default Rate.
(d) Calculations of interest shall be made on the basis of a 360-day year
and actual days elapsed during each Debt Service Period.
4. Periodic Payments.
(a) On February 11, 1998 the Maker shall pay to the Payee interest on this
Note at the Base Rate for the period beginning the date hereof and ending on
February 10, 1998.
(b) On each Debt Service Payment Date occurring after February 11, 1998,
the Maker shall pay to the Payee an amount equal to the Monthly Debt Service
Payment. Such amount shall be applied (i) first, to the payment of interest (the
"Base Rate Interest") on this Note at the Base Rate or the Default Rate, as
applicable, then due and payable for the applicable Debt Service Period, and
(ii) next, to the payment of principal on this Note in reduction of such
principal in the amount of the difference between the Monthly Debt Service
Payment and the Base Rate Interest paid pursuant to sub-clause (i) above (each,
a "Principal Payment"). Following the Maturity Date and while an Event of
Default has occurred and is continuing, the Monthly Debt Service Payment shall
be increased to reflect payment of interest at the Default Rate.
(c) On the Maturity Date, the Maker shall pay to the Payee an amount equal
to the then outstanding principal balance of the Loan, plus interest accrued and
unpaid thereon and any other Debt then due and payable.
(d) (i) On the Optional Prepayment Date, the per annum rate of interest
applicable to the Debt shall be set at the greater of (xx) the Base Rate plus 2%
and (yy) the yield as of the Optional Prepayment Date, calculated by linear
interpolation (rounded to three decimal places), of the yields of United States
Treasury Constant Maturities with terms (one longer and one shorter) most nearly
approximating those of noncallable United States Treasury obligations having
maturities as close as possible to the thirteenth anniversary of the Optional
Prepayment Date, as determined by the Payee on the basis of Federal Reserve
Statistical Release H.15-Selected Interest Rates under the heading U.S.
Governmental Securities/Treasury Constant Maturities, or other recognized source
of financial market information selected by the Payee in each case on the last
Business Day of the week immediately prior to the Optional Prepayment Date plus
3.75% (any such increased rate being hereinafter referred to as the "Adjusted
Rate").
(ii) Additionally, on each Debt Service Payment Date subsequent to the
Optional Prepayment Date, the Maker shall pay to the Payee any Excess Cash Flow
for all of the Accounting Periods the Operating Profit Payment Dates (as defined
in the Loan Agreement) for which occurred during the Debt Service Period
immediately preceding such Debt Service Payment Date, which Excess Cash Flow
payments shall be applied (A) first, to prepayment of each Principal Payment
required to be made on such Debt Service Payment Date in inverse order of
maturity until the principal of this Note has been paid in full, and (B) next,
to payment of the difference, if any, between (y) the sum of (i) interest
accrued and unpaid on this Note calculated at the Adjusted Rate and (ii)
interest on such accrued and unpaid interest compounded monthly at the Adjusted
Rate and (z) the Base Rate interest paid on such Debt Service Payment Date.
(e) All payments (including prepayments) to be made by the Maker on account
of principal, interest and all other amounts payable with respect to the Debt,
shall be made by wire transfer to the Payee without set-off, counterclaim or any
deduction whatsoever, in lawful money of the United States of America and in
immediately available funds, not later than 2 p.m. (New York time) on the dates
such payments are due, by payment to:
Mellon Bank, Pittsburgh
ABA # 043000261
NACC Clearance Account
Account #1092525
Attention: Lance W. Haberin
Reference: HMA Realty
Limited Partnership
or at such other place as the Payee may, from time to time, designate in
writing.
(f) If any payment hereunder becomes due and payable on a day other than a
Business Day, the due date thereof shall be extended to the next succeeding
Business Day and, with respect to such payments, interest (at the applicable
rate hereunder) thereon shall be payable during such extension. Any payments
received after 2 p.m. (New York time) shall be deemed received on the following
Business Day.
5. Prepayments.
(a) This Note may not be prepaid prior to the Optional Prepayment Date.
(b) If the Maturity Date occurs as a result of an Event of Default and the
Maker tenders payment of the Debt or any part thereof to the Payee, such tender
shall require the payment by the Maker of all sums required pursuant to Section
4.2 of the Loan Agreement, including, without limitation, the Yield Maintenance
Premium.
6. Cost of Collection. The Maker shall pay all costs of collection when
incurred, including, without limitation, the reasonable attorneys' fees and
disbursements of the Payee's counsel and all court costs, which costs may be
added to the indebtedness evidenced hereby and must be paid within fifteen (15)
days after written demand by the Payee. Such costs shall bear interest at the
Base Rate or the Adjusted Rate, as then in effect, from the date of incurrence
and interest at the Default Rate from and after delivery of such written demand.
7. Usury. It is the intent of the Payee and the Maker to comply at all
times with applicable usury laws. If at any time such laws would render usurious
any amounts called for under this Note, then it is the Maker's and the Payee's
express intention that such excess amount be immediately credited on the
principal balance of this Note (or, if this Note has been fully paid, refunded
by the Payee to the Maker, and the Maker shall accept such refund), and the
provisions hereof be immediately deemed to be reformed and the amounts
thereafter collectible hereunder reduced to comply with the then applicable
laws, without the necessity of the execution of any further documents, but so as
to permit the recovery of the fullest amount otherwise called for hereunder. To
the extent permitted by law, any such crediting or refund shall not cure or
waive any default by the Maker under this Note. If at any time following any
such reduction in the interest rate payable by the Maker, there remains unpaid
any principal amount under this Note and the maximum interest rate permitted by
applicable law is increased or eliminated, then the interest rate payable
hereunder shall be readjusted, to the extent permitted by applicable law, so
that the total dollar amount of interest payable hereunder shall be equal to the
dollar amount of interest which the Maker would have paid without giving effect
to the reduction in interest resulting from compliance with the applicable usury
laws theretofore in effect. The Maker agrees, however, that in determining
whether or not any interest payable under this Note exceeds the highest rate
permitted by law, any non-principal payment (except payments specifically stated
in this Note to be "interest"), including, without limitation, prepayment fees
and late charges, shall be deemed to the extent permitted by law, to be an
expense, fee or premium rather than interest.
8. Applicable Law. This Note has been negotiated, executed, made and
delivered in the Borough of Manhattan, City, County and State of New York. THIS
NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
9. Waivers; Security.
(a) The Maker and any endorsers, sureties and guarantors hereof or hereon,
and all parties now or hereafter liable with respect to this Note, hereby
jointly and severally waive presentment for payment, demand, protest, notice of
non-payment or dishonor and of protest, and agree to remain bound until the Debt
is paid in full notwithstanding any extensions of time for payment which may be
granted even though the period of extension be indefinite, and notwithstanding
any inaction by, or failure to assert any legal right available to, the Payee.
(b) The Maker and any endorsers, sureties and guarantors hereof or hereon,
and all parties now or hereafter liable with respect to this Note, further
expressly agree that any waiver by the Payee, other than a waiver in writing
signed by the Payee, of any term or provision hereof or of any other Transaction
Document or of any right, remedy or option under this Note or any other
Transaction Document shall not be controlling, nor shall it prevent or estop the
Payee from thereafter enforcing such term, provision, right, remedy or option,
and the failure or refusal of the Payee to insist in any one or more instances
upon the strict performance of any such term or provision shall not be construed
as a waiver or relinquishment for the future of any such term or provision, but
the same shall continue in full force and effect, it being understood and agreed
that the Payee's rights, remedies and options under this Note and the other
Transaction Documents are and shall be cumulative and are in addition to all
other rights, remedies and options of the Payee in law or in equity or under any
other agreement.
(c) TO THE EXTENT PERMITTED BY APPLICABLE LAW THE MAKER AND THE PAYEE
HEREBY IRREVOCABLY WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION OR OTHER
PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE. The Maker also waives the
right in such action or other proceeding to interpose any counterclaims (except
to the extent such counterclaims are compulsory and may not be brought in a
separate action) or set-offs of any kind or description; provided, however,
nothing contained herein shall prohibit the Maker from asserting any claims
against the Payee in a separate proceeding.
(d) This Note is secured by, among other things, the Mortgage (as defined
in the Loan Agreement) made by the Maker in favor of the Payee encumbering the
Property (as defined in the Loan Agreement).
10. Non-Recourse. The obligations of the Maker under this Note shall be
Non-Recourse.
11. Miscellaneous.
(a) This Note may not be changed, waived, modified, discharged or
terminated orally, but only by an agreement in writing, signed by the party
against whom enforcement of any such change, waiver, modification, discharge or
termination is sought.
(b) In order to implement the provisions of the Loan Agreement this Note
may be severed, split, consolidated, restated, substituted or otherwise amended
into multiple notes evidencing the same Debt as evidenced by this Note.
(c) The term the "Payee" shall mean the then holder of this Note, from time
to time, and its successors and assigns.
(d) If any provision of this Note or the application thereof to the Maker
or any circumstance in any jurisdiction governing this Note shall, to any
extent, be invalid or unenforceable under any applicable statute, regulation or
rule of law, such provision shall be deemed inoperative to the extent that it
may conflict therewith and shall be deemed modified to conform to such statute,
regulation or rule of law, and the remainder of this Note and the application of
any such invalid or unenforceable provision to parties, jurisdictions or
circumstances other than to whom or to which it is held invalid or unenforceable
shall not be affected thereby nor shall the same affect the validity or
enforceability of any other provision of this Note.
(e) Time is of the essence as to all dates set forth in this Note, subject
to any applicable notice or grace period provided herein or in any other
Transaction Document.
(f) The Maker shall perform and comply with each of the terms, covenants
and provisions contained in this Note and in any instrument evidencing or
securing the indebtedness evidenced by this Note on the part of the Maker to be
observed and/or performed hereunder and thereunder. No release of any security
for the principal amount due under this Note, or of any portion thereof, and no
alteration, amendment or waiver of any provision of this Note or of any such
instrument (including the Transaction Documents) made by agreement between the
Payee and any other person shall release, discharge, modify, change or affect
the liability of the Maker under this Note or under such instrument.
(g) No act of commission or omission of any kind or at any time upon the
part of the Payee in respect of any matter whatsoever shall in any way impair
the rights of the Payee to enforce any right, power or benefit under this Note
and no set-off, counterclaim, reduction or diminution of any obligation or any
defense of any kind or nature which the Maker has against the Payee shall be
available hereunder to the Maker.
(h) All notices and other communications given hereunder shall be given in
the manner provided for in the Loan Agreement.
(i) The captions preceding the text of the various paragraphs contained in
this Note are provided for convenience only and shall not be deemed to in any
way affect or limit the meaning or construction of any of the provisions hereof.
(signature page follows)
IN WITNESS WHEREOF, the Maker has caused this Note to be executed on
the day and year first above written.
HMA REALTY LIMITED PARTNERSHIP,
a Delaware limited partnership
By: HMA-GP, INC., General Partner
By: /s/ Patricia K. Brady
Name: Patricia K. Brady
Title: Vice President
EXHIBIT 10.13
SECURED PROMISSORY NOTE B
made by
HMA REALTY LIMITED PARTNERSHIP
(the "Maker")
- to -
NOMURA ASSET CAPITAL CORPORATION
(the "Payee")
Dated: January 30, 1998
SECURED PROMISSORY NOTE B
$82,000,000
New York, New York
January 30, 1998
FOR VALUE RECEIVED, HMA REALTY LIMITED PARTNERSHIP, a Delaware limited
partnership (the "Maker"), promises to pay to the order of NOMURA ASSET CAPITAL
CORPORATION, a Delaware corporation (together with its successors and assigns,
the "Payee"), the principal amount of Eighty Two Million Dollars and 00/100
($82,000,000) (the "Loan"), in the manner set forth herein; together with
interest on the unpaid principal amount of this Note at the Base Rate or Default
Rate, as applicable; together with payments with respect to amortization of
principal as described in Paragraph 4 hereof; together with the Yield
Maintenance Premium, if any, due and payable under the Loan Agreement; and
together with all other amounts due (including, without limitation, all items of
Debt) hereunder or under any of the other Transaction Documents.
This Note is intended to be pari passu with the same priority of payment
with that other promissory note dated the date hereof by Maker to Payee in the
principal amount of Eighty Two Million Dollars and 00/100 ($82,000,000) (the
"Other Note"). All rights and benefits of Payee of this Note shall be coordinate
with the rights and benefits of the Payee of the Other Note.
I. Definitions. For the purposes of this Note, each of the following terms
shall have the meaning specified with respect thereto:
(a) "Accounting Period" has the meaning set forth in the Loan Agreement.
(b) "Adjusted Rate" has the meaning set forth in paragraph 4(d) of this
Note.
(c) "Base Rate" means 7.40% per annum.
(d) "Business Day" means a day on which banks are open for business in New
York, New York.
(e) "Debt" has the meaning set forth in the Loan Agreement.
(f) "Debt Service Payment Date" means the 11th day of each calendar month
or if in any month the 11th day is not a Business Day, the Debt Service Payment
Date for such month shall be the first Business Day thereafter.
(g) "Debt Service Period" means the period from and including the eleventh
(11th) day of the calendar month immediately preceding each Debt Service Payment
Date to and including the tenth (10th) day of the calendar month in which such
Debt Service Payment Date occurs.
(h) "Default Rate" means a rate per annum equal to the lesser of (aa) two
percent (2%) above the Base Rate or Adjusted Rate, as applicable, compounded
monthly, and (bb) the maximum rate allowed by law.
(i) "Event of Default" has the meaning set forth in the Loan Agreement.
(j) "Excess Cash Flow" has the meaning set forth in the Loan Agreement.
(k) "Loan Agreement" means that certain Loan Agreement, dated as of the
date hereof, between the Maker and the Payee, as amended, modified, supplemented
or restated, from time to time.
(l) "Maturity Date" shall mean the earlier to occur of (1) February 11,
2023 or (2) such date to which the maturity of the Debt may be accelerated upon
an Event of Default or as otherwise provided in any Transaction Document.
(m) "Monthly Debt Service Payment" means $600,649.08, the constant payment
on each Debt Service Payment Date applicable to this Note up to the Maturity
Date.
(n) "Non-Recourse" has the meaning set forth in the Loan Agreement.
(o) "Optional Prepayment Date" means February 11, 2010.
(p) "Transaction Documents" has the meaning set forth in the Loan
Agreement.
(q) "Yield Maintenance Premium" has the meaning set forth in the Loan
Agreement.
Certain additional terms are defined in the particular provisions of this
Note to which they pertain or in which they are initially used.
2. Payment of Debt.
The Maker shall punctually pay the Debt at the time and in the manner
provided for its payment in this Note and the other Transaction Documents. It is
expressly agreed that the entire Debt may, at the Payee's election (or
automatically upon the occurrence of the events described in clauses (f) and (g)
of Section 4.1A of the Loan Agreement), become immediately due and payable upon
the occurrence of an Event of Default, as set forth in the Loan Agreement.
3. Interest Rate.
(a) Prior to the Optional Prepayment Date and except as set forth below,
the Debt shall bear interest for each Debt Service Period at the Base Rate.
(b) On and after the Optional Prepayment Date and except as set forth
below, the Debt shall bear interest for each Debt Service Period at the Adjusted
Rate.
(c) Following the Maturity Date or while an Event of Default has occurred
and is continuing, the Debt shall bear interest at the Default Rate.
(d) Calculations of interest shall be made on the basis of a 360-day year
and actual days elapsed during each Debt Service Period.
4. Periodic Payments.
(a) On February 11, 1998 the Maker shall pay to the Payee interest on this
Note at the Base Rate for the period beginning the date hereof and ending on
February 10, 1998.
(b) On each Debt Service Payment Date occurring after February 11, 1998,
the Maker shall pay to the Payee an amount equal to the Monthly Debt Service
Payment. Such amount shall be applied (i) first, to the payment of interest (the
"Base Rate Interest") on this Note at the Base Rate or the Default Rate, as
applicable, then due and payable for the applicable Debt Service Period, and
(ii) next, to the payment of principal on this Note in reduction of such
principal in the amount of the difference between the Monthly Debt Service
Payment and the Base Rate Interest paid pursuant to sub-clause (i) above (each,
a "Principal Payment"). Following the Maturity Date and while an Event of
Default has occurred and is continuing, the Monthly Debt Service Payment shall
be increased to reflect payment of interest at the Default Rate.
(c) On the Maturity Date, the Maker shall pay to the Payee an amount equal
to the then outstanding principal balance of the Loan, plus interest accrued and
unpaid thereon and any other Debt then due and payable.
(d) (i) On the Optional Prepayment Date, the per annum rate of interest
applicable to the Debt shall be set at the greater of (xx) the Base Rate plus 2%
and (yy) the yield as of the Optional Prepayment Date, calculated by linear
interpolation (rounded to three decimal places), of the yields of United States
Treasury Constant Maturities with terms (one longer and one shorter) most nearly
approximating those of noncallable United States Treasury obligations having
maturities as close as possible to the thirteenth anniversary of the Optional
Prepayment Date, as determined by the Payee on the basis of Federal Reserve
Statistical Release H.15-Selected Interest Rates under the heading U.S.
Governmental Securities/Treasury Constant Maturities, or other recognized source
of financial market information selected by the Payee in each case on the last
Business Day of the week immediately prior to the Optional Prepayment Date plus
3.75% (any such increased rate being hereinafter referred to as the "Adjusted
Rate").
(ii) Additionally, on each Debt Service Payment Date subsequent to the
Optional Prepayment Date, the Maker shall pay to the Payee any Excess Cash Flow
for all of the Accounting Periods the Operating Profit Payment Dates (as defined
in the Loan Agreement) for which occurred during the Debt Service Period
immediately preceding such Debt Service Payment Date, which Excess Cash Flow
payments shall be applied (A) first, to prepayment of each Principal Payment
required to be made on such Debt Service Payment Date in inverse order of
maturity until the principal of this Note has been paid in full, and (B) next,
to payment of the difference, if any, between (y) the sum of (i) interest
accrued and unpaid on this Note calculated at the Adjusted Rate and (ii)
interest on such accrued and unpaid interest compounded monthly at the Adjusted
Rate and (z) the Base Rate interest paid on such Debt Service Payment Date.
(e) All payments (including prepayments) to be made by the Maker on account
of principal, interest and all other amounts payable with respect to the Debt,
shall be made by wire transfer to the Payee without set-off, counterclaim or any
deduction whatsoever, in lawful money of the United States of America and in
immediately available funds, not later than 2 p.m. (New York time) on the dates
such payments are due, by payment to:
Mellon Bank, Pittsburgh
ABA # 043000261
NACC Clearance Account
Account #1092525
Attention: Lance W. Haberin
Reference: HMA Realty
Limited Partnership
or at such other place as the Payee may, from time to time, designate in
writing.
(f) If any payment hereunder becomes due and payable on a day other than a
Business Day, the due date thereof shall be extended to the next succeeding
Business Day and, with respect to such payments, interest (at the applicable
rate hereunder) thereon shall be payable during such extension. Any payments
received after 2 p.m. (New York time) shall be deemed received on the following
Business Day.
5. Prepayments.
(a) This Note may not be prepaid prior to the Optional Prepayment Date.
(b) If the Maturity Date occurs as a result of an Event of Default and the
Maker tenders payment of the Debt or any part thereof to the Payee, such tender
shall require the payment by the Maker of all sums required pursuant to Section
4.2 of the Loan Agreement, including, without limitation, the Yield Maintenance
Premium.
6. Cost of Collection. The Maker shall pay all costs of collection when
incurred, including, without limitation, the reasonable attorneys' fees and
disbursements of the Payee's counsel and all court costs, which costs may be
added to the indebtedness evidenced hereby and must be paid within fifteen (15)
days after written demand by the Payee. Such costs shall bear interest at the
Base Rate or the Adjusted Rate, as then in effect, from the date of incurrence
and interest at the Default Rate from and after delivery of such written demand.
7. Usury. It is the intent of the Payee and the Maker to comply at all
times with applicable usury laws. If at any time such laws would render usurious
any amounts called for under this Note, then it is the Maker's and the Payee's
express intention that such excess amount be immediately credited on the
principal balance of this Note (or, if this Note has been fully paid, refunded
by the Payee to the Maker, and the Maker shall accept such refund), and the
provisions hereof be immediately deemed to be reformed and the amounts
thereafter collectible hereunder reduced to comply with the then applicable
laws, without the necessity of the execution of any further documents, but so as
to permit the recovery of the fullest amount otherwise called for hereunder. To
the extent permitted by law, any such crediting or refund shall not cure or
waive any default by the Maker under this Note. If at any time following any
such reduction in the interest rate payable by the Maker, there remains unpaid
any principal amount under this Note and the maximum interest rate permitted by
applicable law is increased or eliminated, then the interest rate payable
hereunder shall be readjusted, to the extent permitted by applicable law, so
that the total dollar amount of interest payable hereunder shall be equal to the
dollar amount of interest which the Maker would have paid without giving effect
to the reduction in interest resulting from compliance with the applicable usury
laws theretofore in effect. The Maker agrees, however, that in determining
whether or not any interest payable under this Note exceeds the highest rate
permitted by law, any non-principal payment (except payments specifically stated
in this Note to be "interest"), including, without limitation, prepayment fees
and late charges, shall be deemed to the extent permitted by law, to be an
expense, fee or premium rather than interest.
8. Applicable Law. This Note has been negotiated, executed, made and
delivered in the Borough of Manhattan, City, County and State of New York. THIS
NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
9. Waivers; Security.
(a) The Maker and any endorsers, sureties and guarantors hereof or hereon,
and all parties now or hereafter liable with respect to this Note, hereby
jointly and severally waive presentment for payment, demand, protest, notice of
non-payment or dishonor and of protest, and agree to remain bound until the Debt
is paid in full notwithstanding any extensions of time for payment which may be
granted even though the period of extension be indefinite, and notwithstanding
any inaction by, or failure to assert any legal right available to, the Payee.
(b) The Maker and any endorsers, sureties and guarantors hereof or hereon,
and all parties now or hereafter liable with respect to this Note, further
expressly agree that any waiver by the Payee, other than a waiver in writing
signed by the Payee, of any term or provision hereof or of any other Transaction
Document or of any right, remedy or option under this Note or any other
Transaction Document shall not be controlling, nor shall it prevent or estop the
Payee from thereafter enforcing such term, provision, right, remedy or option,
and the failure or refusal of the Payee to insist in any one or more instances
upon the strict performance of any such term or provision shall not be construed
as a waiver or relinquishment for the future of any such term or provision, but
the same shall continue in full force and effect, it being understood and agreed
that the Payee's rights, remedies and options under this Note and the other
Transaction Documents are and shall be cumulative and are in addition to all
other rights, remedies and options of the Payee in law or in equity or under any
other agreement.
(c) TO THE EXTENT PERMITTED BY APPLICABLE LAW THE MAKER AND THE PAYEE
HEREBY IRREVOCABLY WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION OR OTHER
PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE. The Maker also waives the
right in such action or other proceeding to interpose any counterclaims (except
to the extent such counterclaims are compulsory and may not be brought in a
separate action) or set-offs of any kind or description; provided, however,
nothing contained herein shall prohibit the Maker from asserting any claims
against the Payee in a separate proceeding.
(d) This Note is secured by, among other things, the Mortgage (as defined
in the Loan Agreement) made by the Maker in favor of the Payee encumbering the
Property (as defined in the Loan Agreement).
10. Non-Recourse. The obligations of the Maker under this Note shall be
Non-Recourse.
11. Miscellaneous.
(a) This Note may not be changed, waived, modified, discharged or
terminated orally, but only by an agreement in writing, signed by the party
against whom enforcement of any such change, waiver, modification, discharge or
termination is sought.
(b) In order to implement the provisions of the Loan Agreement this Note
may be severed, split, consolidated, restated, substituted or otherwise amended
into multiple notes evidencing the same Debt as evidenced by this Note.
(c) The term the "Payee" shall mean the then holder of this Note, from time
to time, and its successors and assigns.
(d) If any provision of this Note or the application thereof to the Maker
or any circumstance in any jurisdiction governing this Note shall, to any
extent, be invalid or unenforceable under any applicable statute, regulation or
rule of law, such provision shall be deemed inoperative to the extent that it
may conflict therewith and shall be deemed modified to conform to such statute,
regulation or rule of law, and the remainder of this Note and the application of
any such invalid or unenforceable provision to parties, jurisdictions or
circumstances other than to whom or to which it is held invalid or unenforceable
shall not be affected thereby nor shall the same affect the validity or
enforceability of any other provision of this Note.
(e) Time is of the essence as to all dates set forth in this Note, subject
to any applicable notice or grace period provided herein or in any other
Transaction Document.
(f) The Maker shall perform and comply with each of the terms, covenants
and provisions contained in this Note and in any instrument evidencing or
securing the indebtedness evidenced by this Note on the part of the Maker to be
observed and/or performed hereunder and thereunder. No release of any security
for the principal amount due under this Note, or of any portion thereof, and no
alteration, amendment or waiver of any provision of this Note or of any such
instrument (including the Transaction Documents) made by agreement between the
Payee and any other person shall release, discharge, modify, change or affect
the liability of the Maker under this Note or under such instrument.
(g) No act of commission or omission of any kind or at any time upon the
part of the Payee in respect of any matter whatsoever shall in any way impair
the rights of the Payee to enforce any right, power or benefit under this Note
and no set-off, counterclaim, reduction or diminution of any obligation or any
defense of any kind or nature which the Maker has against the Payee shall be
available hereunder to the Maker.
(h) All notices and other communications given hereunder shall be given in
the manner provided for in the Loan Agreement.
(i) The captions preceding the text of the various paragraphs contained in
this Note are provided for convenience only and shall not be deemed to in any
way affect or limit the meaning or construction of any of the provisions hereof.
(signature page follows)
IN WITNESS WHEREOF, the Maker has caused this Note to be executed on the
day and year first above written.
HMA REALTY LIMITED PARTNERSHIP,
a Delaware limited partnership
By: HMA-GP, INC., General Partner
By: /s/ Patricia K. Brady
Name: Patricia K. Brady
Title: Vice President
Marriott/Atlanta
RECORDING REQUESTED BY
WHEN RECORDED MAIL TO
Name Michael Peskowitz, Esq.
Rosenman & Colin LLP
Mailing Address 575 Madison Avenue
City, State, New York, New York 10022
Zip Code
- ---------------------- ------------------------------------ -------------------
SPACE ABOVE THIS LINE RESERVED FOR RECORDERS' USE
EXHIBIT 10.14
DEED TO SECURE DEBT, ASSIGNMENT OF LEASES AND SECURITY AGREEMENT
- made by -
HMA REALTY LIMITED PARTNERSHIP ("Grantor"), having an
address of:
c/o Host Marriott Corporation
10400 Fernwood Road
Bethesda, Maryland 20817
- to -
NOMURA ASSET CAPITAL CORPORATION ("Grantee"), having an
address of:
Two World Financial Center
Building B - 21st Floor
New York, New York 10281-1198
Dated: As of January 30, 1998
in the amount of
$164,000,000.00
Maturity Date: January 11, 2023
Relating to Premises located at 265 Peachtree Center Avenue, Atlanta
County of Fulton, State of Georgia
DEED TO SECURE DEBT, ASSIGNMENT OF LEASES AND SECURITY AGREEMENT
DEED TO SECURE DEBT, ASSIGNMENT OF LEASES AND SECURITY AGREEMENT (this
"Security Deed"), dated as of January 30, 1998, made by HMA REALTY LIMITED
PARTNERSHIP, a Delaware limited partnership having its principal office c/o Host
Marriott Corporation, 10400 Fernwood Road, Bethesda, Maryland 20817 ("Grantor")
to NOMURA ASSET CAPITAL CORPORATION, a Delaware corporation, having its
principal office at Two World Financial Center, Building B, 21st Floor, New
York, New York 10281-1198 ("Grantee").
W I T N E S S E T H :
WHEREAS:
A. Grantor is the owner of fee simple title to all that certain parcel of
real property (the "Land") located in the County of Fulton, State of Georgia
(the "State"), as more particularly described in Exhibit A annexed hereto,
together with the building and improvements located thereon comprising a hotel
and hotel operations (the buildings and other improvements now or hereafter
located on such parcel of Land are hereinafter referred to as the
"Improvements"; the Land, together with such Improvements, being hereinafter
collectively referred to as the "Premises");
B. Pursuant to that certain Loan Agreement (the "Loan Agreement"), dated as
of the date hereof between Grantor and Grantee, Grantee is making a loan to
Grantor in the original principal amount of ONE HUNDRED SIXTY-FOUR MILLION
DOLLARS AND 00/100 ($164,000,000.00) (the "Loan");
C. The Loan is evidenced by those certain Secured Promissory Notes dated as
of the date hereof, made by Grantor in favor of Grantee, in the aggregate
original principal amount of $164,000,000.00 (such Secured Promissory Notes,
together with all extensions, renewals, substitutions, restatements, severances,
splitters, consolidations, amendments and modifications thereof, being
hereinafter collectively referred to as the "Note") and secured by, inter alia,
this Security Deed;
D. To induce Grantee to make the Loan and to secure payment of the Note,
together with interest thereon, Grantor has agreed to the execution and delivery
of this Security Deed; and
E. Grantee accepts the benefits of this Security Deed.
GRANTING CLAUSES
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein contained and other good and valuable consideration, the receipt and
legal sufficiency whereof are hereby acknowledged, and as an inducement to
Grantee to make the Loan, and to secure the payment of the aggregate principal
amount of the Note of ONE HUNDRED SIXTY-FOUR MILLION AND 00/100 DOLLARS
($164,000,000.00), or so much thereof as may have been advanced to Grantor
together with all interest thereon, additional amounts payable under the Loan
Agreement, including without limitation, the Yield Maintenance Premium (as such
term is defined in the Loan Agreement), if any, and all other sums which may or
shall become due hereunder or under the Note or any of the other documents
evidencing, securing or executed by Grantor in connection with the Loan (such
other documents, including, without limitation, the Loan Agreement and that
certain Assignment of Leases, Rents and Profits of even date herewith given by
Grantor to Grantee with respect to the Premises (as such assignment may, from
time to time, be modified, amended, extended, restated, severed, split,
consolidated or supplemented, the "Assignment"), together with the Note and this
Security Deed (as any of the same may, from time to time, be modified, amended,
extended, restated, severed, split, consolidated or supplemented) being
hereinafter collectively referred to as the "Transaction Documents") and
including the costs and expenses of enforcing any provision of the Note, this
Security Deed or any of the other Transaction Documents (all such sums being
hereinafter collectively referred to as the "Debt"), and in order to charge with
such performance and with such payments the Premises and other property
hereinafter described and the rents, revenues, issues, income and profits
thereof, Grantor has created a security interest in and DOES HEREBY WARRANT,
PLEDGE, TRANSFER, SET OVER, ASSIGN, HYPOTHECATE, GIVE, GRANT, ALIENATE, ENFEOFF,
BARGAIN, SELL, CONVEY, DEMISE, RELEASE AND CONFIRM UNTO GRANTEE AND ITS
SUCCESSORS AND ASSIGNS, all right, title, estate and interest of Grantor now
owned, or hereafter acquired, in and to the Premises,
TOGETHER WITH all right, title, estate, and interest of Grantor, if any,
now owned, or hereafter acquired, in and to the following property, rights and
interests (the Premises, together with such property, rights and interests,
being hereinafter collectively referred to as the "Mortgaged Property"):
(a) all easements, rights-of-way, strips and gores of land, streets, ways,
alleys, passages, sewer rights, waters, water courses, water rights and powers,
and all estates, rights, title, interests, privileges, liberties, tenements,
hereditaments, and appurtenances of any nature whatsoever, in any way belonging,
relating or pertaining to the Premises (including, without limitation, gas, oil
and mineral rights, air rights, development rights and any other rights, however
denominated, to construct floor area on the Land), and all right, title and
interest of Grantor in, including any right to use and occupy, any land adjacent
to the Land, and any land lying in the bed of any street, road or avenue, open,
vacated or proposed, in front of or adjoining the Land, and any and all
sidewalks, drives, curbs, passageways, streets, spaces and alleys adjacent to or
used in connection with the Premises;
(b) all machinery, apparatus, equipment, fittings, fixtures and other
property of every kind and nature whatsoever owned by Grantor, or in which
Grantor has or shall have an interest (to the extent same can be mortgaged or an
interest therein can be granted if not owned by Grantor), now or hereafter
located upon the Premises or any portion thereof, or appurtenances thereto, and
used in connection with the present or future operation and occupancy of the
Premises or any portion thereof, and all building equipment, materials and
supplies of any nature whatsoever owned by Grantor, or in which Grantor has or
shall have an interest (to the extent same can be mortgaged or an interest
therein can be granted if not owned by Grantor), now or hereafter located in or
upon the Premises or any portion thereof, and any building equipment, materials
and supplies obtained for use in connection with the Premises or any portion
thereof, and all additions, replacements, modifications and alterations of any
of the foregoing, including, but without limiting the generality of the
foregoing, all heating, lighting, incinerating, waste removal and power
equipment, engines, pipes, tanks, motors, conduits, switchboards, radio,
television, security and alarm systems, plumbing, lifting, cleaning, fire
prevention, fire extinguishing, refrigerating, ventilating, and communications
apparatus, air cooling and air conditioning apparatus, escalators, elevators,
ducts and compressors (collectively, the "Equipment"), which Equipment shall be
deemed to be part and parcel of the real estate and appropriated to the use of
the real estate and, whether or not affixed or annexed to the Premises, shall
for the purpose of this Security Deed be deemed conclusively to be real estate
and conveyed hereby;
(c) all other furniture, furnishings, decorations, fixtures and equipment
owned by Grantor and now or hereafter installed in, affixed to, placed upon or
used in connection with the Premises or the business conducted by Grantor
thereon, including, without limitation, communication systems, computer systems,
hardware and software, furniture, carpeting, art work, lighting fixtures,
millwork, draperies, kitchen, restaurant, bar and lounge equipment, laundry
equipment, cash registers, safes, safety deposit boxes, office furniture,
athletic and pool equipment, gift shop equipment, employees' lockers, coat
racks, linens, blankets, pillows and uniforms (to the extent each of the
foregoing shall exist), all present and future "accounts", "equipment",
"inventory" and "general intangibles" (as such terms are defined in the Uniform
Commercial Code as enacted and in effect in the State (the "Code")) relating to
the hotel and hotel operations at the Premises, excluding, however, (xx) all
property subject to written leases between the owner/installer of such
equipment, as lessor, and Grantor, as lessee, as permitted pursuant to the
provisions of the Loan Agreement, and (yy) to the extent not assignable or
mortgageable under State or local law, alcoholic beverages and licenses to serve
alcoholic beverages at the Premises (collectively, the "Personal Property");
(d) all awards or payments, and any interest paid or payable with respect
thereto, which may be made with respect to all or any portion of the Premises,
whether from the exercise of right of condemnation, eminent domain or similar
proceedings (including any transfer made in lieu of the exercise of said right),
or from any taking for public use, or for any other injury to or decrease in the
value of all or any portion of the Premises (including, without limitation, any
awards resulting from a change of grade of streets and awards for severance
damages), all of the foregoing to be held, applied and paid in accordance with
the provisions of this Security Deed (collectively, the "Condemnation
Proceeds");
(e) all proceeds of, and any unearned premiums on, the Policies (as
hereinafter defined) and any other insurance policies covering all or any
portion of the Premises, the Equipment, the Personal Property and/or the Rents
(as hereinafter defined), including, without limitation, the right to receive
and apply the proceeds of any insurance, judgments, or settlements made in lieu
thereof, for damage to all or any portion of the Premises, the Equipment and/or
the Personal Property, and any interest actually paid with respect thereto, all
of the foregoing to be held, applied and paid in accordance with the provisions
of this Security Deed (collectively, the "Insurance Proceeds");
(f) all refunds or rebates of Impositions (as hereinafter defined), and
interest paid or payable with respect thereto (collectively, the "Refunds");
(g) all leases and other agreements, if any, affecting the use or occupancy
of all or any portion of the Premises now in effect or hereafter entered into
(including, without limitation, subleases, licenses, concessions, tenancies and
other occupancy agreements covering or encumbering all or any portion of the
Premises), together with any guarantees, supplements, amendments, modifications,
extensions and renewals of the same, and all additional remainders, reversions,
and other rights and estates appurtenant thereto (collectively, the "Leases")
and absolutely and presently all rents, revenues which Grantor generates from
the collection of room rates in the course of its hotel operations, additional
rents, percentage rents, revenues, issues, profits, cash collateral, royalties,
income, bonuses, rights and benefits due and other benefits now or in the future
payable under the Leases, and all security deposits, advance rentals and
payments of similar nature (subject to the rights of lessees or depositors
thereof) held by Grantor in connection with the Leases, if any, and all proceeds
from any and all concessions and license agreements (including, without
limitation, receivables, revenues, rentals and receipts from guest rooms,
meeting rooms, other public facilities, food and beverage facilities, vending
machines, telephone systems, guest laundry and other items of revenue, receipts,
or income identified in the Uniform Systems of Accounts for Hotels, 8th Revised
Edition, International Association of Hospitality Accountants and Hotel
Association of New York) and, as defined under Section 552(b) of the federal
bankruptcy code (as amended from time to time, and including any successor
legislation thereto, the "Bankruptcy Code"), all other fees, charges, accounts,
payments, income, issues, proceeds, product, offspring, profits and benefits of
any nature arising from the possession, use, occupancy or enjoyment of the
Mortgaged Property (collectively, the "Rents"), together with the right, but not
the obligation, following an Event of Default (as hereinafter defined) by
Grantor under this Security Deed or any of the other Transaction Documents, to
exercise options, to give consents and to collect, receive and receipt for the
Rents and apply the Rents to the payment of the Debt and to demand, sue for and
recover the Rents when due and payable;
(h) all contract rights relating to the Mortgaged Property, including,
without limitation, and to the extent permitted by applicable law, all permits,
licenses, certificates, consents, approvals, authorizations and other documents
obtained or to be obtained in connection with the demolition, construction, use,
operation or maintenance of the Premises or any portion thereof (collectively,
"Permits"), all reciprocal easements, restrictive covenants and similar
agreements (collectively, "REAs"), all appurtenances and utility rights
pertaining to the Premises or any portion thereof, all zoning, land use, air
rights and development agreements, all operating contracts, management
agreements, service contracts, supply and maintenance contracts, equipment
leases, warranties, guaranties and all other agreements affecting the Premises
or any part thereof or used in connection with the management or operation
thereof (to the extent assignable pursuant to the provisions of the applicable
instrument or agreement creating or conferring such rights or benefits or
pursuant to applicable law) together with all of the rights, reversions or
equities now or hereafter appurtenant thereto (such Permits, REAs and other
appurtenances, rights, contracts and agreements collectively, the "Agreements");
(i) all of the right, title and interest of Grantor in and to any other
property, whether real or personal, tangible or intangible, owned or held in
connection with the Premises or the business conducted by Grantor thereon,
including, without limitation, appraisals, architectural and engineering plans,
specifications and studies (subject to the proprietary rights of others
therein), soil, environmental and other reports relating to the Premises
(subject to the proprietary rights of others therein), license and contract
rights, accounts receivable, warranties, guaranties, catalogues, tenant lists
(but excluding proprietary guest list information), advertising materials
relating to the Premises or the business conducted by Grantor thereon, telephone
exchange numbers as identified in such materials, trade names, trademarks and
logos relating to the Premises or the business conducted by Grantor thereon
(subject to the rights of franchisors or licensors) and goodwill relating to the
Premises or the business conducted by Grantor thereon;
(j) all rights of Grantor in and to the Management Agreement (as defined in
the Loan Agreement) applicable to the Premises and any other similar agreement
or license affecting the management or operation of any part of the Premises
(subject in each case to the provisions thereof and any limitations set forth
therein);
(k) all rights of Grantor in any owners' or members' association or similar
group having responsibility for managing or operating any part of the Premises;
(l) all claims against any person or entity with respect to any damage to
or loss of the Mortgaged Property, including, without limitation, damage arising
from any defect in or with respect to the design or construction of the
Improvements or the Equipment and any damage resulting therefrom and all the
right to appear in and defend any action or proceeding brought with respect to
the Mortgaged Property and to commence any action or proceeding to protect the
interest of Grantee in the Mortgaged Property;
(m) all deposits or other security or advance payments, including rental
payments made by or on behalf of Grantor to others, with respect to utility
services, cleaning, maintenance, repair and similar services, refuse removal and
sewer service, parking and similar services and rights, and rental of Equipment
relating to or otherwise used in the operation of the Mortgaged Property;
(n) all options in connection with the purchase, lease, encumbrance or
other disposition of the Mortgaged Property or any interest therein; and
(o) any and all other, further or additional rights, title, estates and
interests which Grantor may now own or hereafter acquire, in and to the Premises
and/or the Mortgaged Property, and all renewals, substitutions and replacements
of and all additions and appurtenances to the Premises and/or the Mortgaged
Property constructed, assembled or placed by Grantor on the Premises, and all
conversions of the security constituted thereby which, immediately upon such
acquisition, construction, assembling, placement or conversion, as the case may
be, and in each such case without any further mortgage, conveyance, assignment
or other act by Grantor, shall become subject to the lien of this Security Deed
as fully and completely, and with the same effect, as though now owned by
Grantor, Grantor expressly agreeing that if Grantor shall at any time acquire
any other right, title, estate or interest in and to the Premises and/or the
Mortgaged Property, the lien of this Security Deed shall automatically attach to
and encumber such other right, title, estate or interest as a lien thereon.
AND, as additional security, Grantor hereby grants to Grantee a security
interest in (1) the Equipment, (2) the Personal Property, (3) the Condemnation
Proceeds, (4) the Insurance Proceeds, (5) the Refunds, (6) the Leases, (7) the
Rents, (8) the Agreements, (9) to the extent deeds to secure debt or similar
lien instruments may lawfully grant the same, all other components of the
Mortgaged Property, described in clauses (a) through (o) immediately preceding,
and (10) all proceeds of the foregoing collateral described in clauses (1)
through (9) (collectively, the "Security Interest Property"), and this Security
Deed shall be effective as a security agreement pursuant to the Code.
HABENDUM
TO HAVE AND TO HOLD the Mortgaged Property, the properties, rights and
privileges hereby warranted, bargained, sold, pledged, conveyed, demised,
released, granted, assigned, transferred, set over and confirmed, for the
benefit and behoof of Grantee, IN FEE SIMPLE FOREVER intended so to be, unto
Grantee, its successors and assigns, and with the possession and right of
possession thereof, for the uses and purposes herein set forth.
THIS SECURITY DEED is a deed passing the title to the Mortgaged Property to
Grantee and is made under those provisions of the laws of the State of Georgia
relating to deeds to secure debt (including without limitation, Chapter 44-14 of
the Official Code of Georgia Annotated and is neither a deed of trust nor a
mortgage, and is given to secure payment of the Debt and the performance of
obligations, covenants, conditions and agreements of the Transaction Documents.
References and definitions using terms such as "Mortgaged Property", "Mortgage
lien", "Grantor", "Grantee" or to the "lien of this Security Deed" are for
convenience only and shall not imply or indicate any intent contrary to the
immediately preceding sentence.
PROVIDED ALWAYS, and these presents are upon the express condition, that if
Grantor shall well and truly pay to Grantee the Debt at the time and in the
manner provided in the Note, this Security Deed and the other Transaction
Documents and shall well and truly abide by and comply with each and every
covenant and condition set forth herein, in the Note and in the other
Transaction Documents, then these presents and the estate hereby granted shall
be cancelled and surrendered.
Each and every term and provision of all of the Transaction Documents,
including the rights, remedies, obligations, covenants, conditions, agreements,
indemnities, representations and warranties of all parties thereto are hereby
incorporated by reference herein as though set forth in full and shall be
considered a part of this Security Deed. Terms used in this Security Deed which
are not defined herein or which are not defined by reference to the Loan
Agreement shall have the meanings assigned to them in the Loan Agreement.
REPRESENTATIONS, WARRANTIES, COVENANTS, AGREEMENTS AND CONDITIONS
THIS SECURITY DEED FURTHER WITNESSETH the following representations,
warranties, covenants, agreements and conditions:
1. Payment of Debt
(a) Grantor shall punctually pay the Debt at the time and in the manner
provided for its payment in the Note. The maturity date of the Note (the
"Maturity Date") is the earliest to occur of:
(i) January 11, 2023; and
(ii) such earlier date to which the maturity of the Debt may be accelerated
upon an Event of Default as otherwise provided in any Transaction Documents.
(b) All payments of principal and interest accrued thereon shall be made
without demand therefor, or presentation or surrender of the Note, to the extent
permitted by applicable law.
2. Warranty of Title
(a) Grantor specially warrants that it has good and marketable title to the
Mortgaged Property and owns the Mortgaged Property free and clear of all liens,
claims, charges, restrictions, encumbrances, security interests and other
matters, subject only to (i) the lien of this Security Deed and of the other
Transaction Documents, (ii) the matters set forth as exceptions to the policies
of title insurance (the "Title Policies") relating to the Mortgaged Property
issued by Commonwealth Land Title Insurance, First American Title Insurance and
Chicago Title Insurance Company in connection with the Loan; (iii) easements and
other rights in the Mortgaged Property granted by Grantor in the ordinary course
of business which will not, individually or in the aggregate, materially and
adversely affect (xx) the Premises, (yy) Grantor's hotel operations thereon, or
(zz) the value or validity of Grantee's lien on and security interest in the
Mortgaged Property, (iv) any financing permitted pursuant to Paragraph 3 of this
Security Deed, and (v) such other matters to which Grantee shall have consented
to in writing (collectively, the "Permitted Exceptions"). All items set forth
hereunder as Permitted Exceptions are subject to the additional representations
and warranties set forth in Paragraph 4(e) hereof. Grantor represents and
warrants that no interest in all or any part of the development rights
appurtenant to the Premises have been granted, transferred or assigned by
Grantor.
(b) Grantor, at its sole cost and expense, covenants and agrees to defend
its title to the Mortgaged Property and the priority of this Security Deed
against all claims and demands of parties claiming or to claim by, through or
under Grantor, subject to the Permitted Exceptions and will maintain and
preserve such priority as long as the Loan Agreement remains in effect or the
Debt (or any portion thereof) remains outstanding.
3. Further Mortgages and Liens
(a) This Security Deed is and will be maintained by Grantor as a valid and
enforceable security title to, mortgage lien on and security interest in the
Mortgaged Property subject only to the Permitted Exceptions. Except for
Permitted Subordinate Mortgages (as hereinafter defined), Grantor shall not,
directly or indirectly, create or suffer, or permit to be created or suffered,
against the Mortgaged Property or any part thereof, including, without
limitation, the Rents or the Leases, and Grantor will promptly discharge or bond
over, any mortgage, lien (including the liens of mechanics and materialmen),
pledge, conditional sale or other title retention agreement, easement or other
covenant, attachment, security interest, encumbrance or charge which may affect
the Mortgaged Property or any part thereof or interest therein, except (i) the
Permitted Exceptions, (ii) Permitted Subordinate Mortgages and (iii) matters
being contested in good faith and by appropriate proceedings in the manner
permitted by Paragraph 16 of this Security Deed. If any mortgage, other lien or
encumbrance not permitted hereunder is filed, Grantor will cause the same to be
discharged within thirty (30) days after recordation thereof and will exhibit to
Grantee, upon request, evidence of discharge or other disposition satisfactory
to Grantee.
(b) Notwithstanding anything to the contrary contained in Paragraph 3(a),
but subject to the requirements set forth in Paragraph 3(c) and (d), Grantor may
grant one or more deeds to secure debt on the Mortgaged Property, each
subordinate to the lien of this Security Deed (each such deed to secure debt
being referred to individually as a "Permitted Subordinate Mortgage" and
collectively as the "Permitted Subordinate Mortgages").
(c) With respect to each Permitted Subordinate Mortgage, but not with
respect to an FF&E Financing (as hereinafter defined) (for which the
requirements of Paragraph 3(e) (including the provisions cross-referenced
therein) shall apply), in addition to the requirements set forth in Paragraph
3(d), the following shall apply:
(i) no Permitted Subordinate Mortgage shall be permitted to be granted
prior to the date which is two (2) years from the date hereof;
(ii) each Permitted Subordinate Mortgage shall at all times be held by a
savings bank, savings and loan association, commercial bank or trust company,
insurance company, investment banking institution or a union, federal, state,
municipal or secular employee's welfare, benefit, pension or retirement fund;
(iii) the Debt Service Coverage Ratio (as defined in the Loan Agreement)
requirement set forth in the Loan Agreement with respect to maintenance of a
Debt Service Coverage Ratio (calculated using all secured and unsecured debt
obligations of the Grantor) of at least 2.0:1 shall be satisfied; and
(iv) the Rating Agencies (as defined in the Loan Agreement) shall confirm
that the existence of such Permitted Subordinate Mortgage and the debt secured
thereby will not result in a withdrawal, qualification or downgrade of any then
existing ratings given by any such Rating Agencies with respect to the
Securities (as defined in the Loan Agreement), if applicable.
(d) The granting of any Permitted Subordinate Mortgage shall be subject to
the following additional requirements:
(i) Grantor shall not then be in default of its obligations under this
Security Deed, the Note, or any of the Transaction Documents beyond any
applicable cure period;
(ii) Grantor shall give Grantee written notice (the "Permitted Subordinate
Mortgage Notice") of Grantor's intention to enter into a Permitted Subordinate
Mortgage not less than thirty (30) days prior to the placement thereof, such
notice to be accompanied by a copy of the proposed Permitted Subordinate
Mortgage or term sheet setting forth the terms thereof, and shall promptly
thereafter deliver to Grantee copies of the proposed Permitted Subordinate
Mortgage, when available (if not theretofore delivered), and modifications of
the proposed Permitted Subordinate Mortgage and of said term sheet;
(iii) each Permitted Subordinate Mortgage shall be expressly subject and
subordinate in lien to this Security Deed and all of the other Transaction
Documents, and any agreement now or hereafter given as additional security for
the Note or this Security Deed, and to all of the terms, covenants and
conditions of this Security Deed and the other Transaction Documents and said
agreements and all extensions, renewals, modifications, supplements,
consolidations, spreaders or replacements thereof (each, a "Renewal") and any
other action permitted or contemplated by this Security Deed or any other
Transaction Document (including, without limitation, increases in the amount of
the Loan for accrued and unpaid interest, additional interest, prepayment
premiums or charges, Yield Maintenance Premiums, if any, and other fees and
charges, and increases in the amount of the Debt resulting from protective
advances made by Grantee pursuant to the Transaction Documents, including
without limitation, advances made for taxes, insurance premiums, and maintenance
of the Premises which are secured by this Security Deed or any other Transaction
Document;
(iv) each Permitted Subordinate Mortgage shall provide that the holder
thereof shall furnish the holder of this Security Deed with a copy of any notice
of default or legal process sent to Grantor simultaneously with the transmittal
thereof to Grantor;
(v) each Permitted Subordinate Mortgage, and any other document evidencing
or securing the debt which such Permitted Subordinate Mortgage secures, shall
provide that it is expressly subject and subordinate to any and all advances of
the Loan, in whatever amounts and whenever made, with interest thereon, and to
any expenses, charges and fees incurred, including any and all such advances,
interest, expenses, charges and fees which may increase the indebtedness secured
by this Security Deed and any other deeds to secure debt given in connection
with the Loan above the original principal amount thereof;
(vi) each Permitted Subordinate Mortgage shall provide that (A) if any
action or proceeding is brought for the foreclosure thereof, the rents from the
Mortgaged Property shall be collected only by a receiver appointed by a court or
referee after notice of the application for the appointment of such receiver
shall have been given to the then holder of this Security Deed, (B) all monies
collected by such receiver shall be applied first to the payment of all sums
then due which are secured by this Security Deed and the balance, if any, may
then be applied to the payment of any sums then due which are secured by said
Permitted Subordinate Mortgage and (C) if, during the pendency of any such
foreclosure action or proceedings, an action or proceeding shall be brought by
the then holder or holders of this Security Deed for the foreclosure of this
Security Deed and an application is made by the then holder or holders of this
Security Deed for an extension of such receivership for the benefit of the then
holder or holders of this Security Deed all such rents held by such receiver, as
of the date of such application, shall be applied by the receiver solely for the
benefit of the then holder or holders of this Security Deed (including, without
limitation, the outstanding principal balance of the Loan, or any portion
thereof, if payment of the same is accelerated, and any late charges, or other
charges and fees that may be payable, from time to time, in connection with the
Loan or any portion thereof) before the holder of such Permitted Subordinate
Mortgage shall be entitled to any portion thereof;
(vii) each Permitted Subordinate Mortgage shall provide that if any action
or proceeding shall be brought to foreclose said Permitted Subordinate Mortgage,
no tenant of any portion of the Mortgaged Property will be named as a party
defendant in any such foreclosure action or proceeding, nor will any other
action be taken with respect to any tenant of any portion of the Mortgaged
Property the effect of which would be to terminate any lease without the written
consent of the then holder or holders of this Security Deed;
(viii) no holder of a Permitted Subordinate Mortgage shall acquire by
subrogation, contract or otherwise, any lien upon any other estate, right or
interest in the Mortgaged Property, including, but not limited to, any which may
arise with respect to real estate taxes, assessments or other governmental
charges which are or may be prior in right to this Security Deed or any other
Transaction Document, or any Renewal of this Security Deed or any other
Transaction Document, unless within sixty (60) days following written notice of
such intention to acquire such other estate, right or interest from the
mortgagee thereunder, or its successors or assigns, the then holder of this
Security Deed shall fail or refuse to purchase or acquire, by subrogation or
otherwise, such prior lien, estate, right or interest, or shall fail, within
such period, to commence and thereafter proceed diligently to purchase or
acquire the same;
(ix) each Permitted Subordinate Mortgage shall provide that the mortgagee
thereunder, its successors or assigns, or any other legal holder thereof, shall
agree to assign and release unto the legal holder of this Security Deed (A) all
of its right, title, interest or claim, if any, in and to Insurance Proceeds for
application upon the indebtedness secured by, or other disposition thereof in
accordance with the provisions of, this Security Deed and (B) all of its right,
title and interest, and interest of claim, if any, in and to all Condemnation
Proceeds for application upon the indebtedness secured by, or other disposition
thereof in accordance with the provisions of, this Security Deed;
(x) each Permitted Subordinate Mortgage shall provide that so long as this
Security Deed and any other mortgages or deeds of trust given in connection with
the Loan shall remain upon the Mortgaged Property or any part thereof, the
mortgagee thereunder, its successors or assigns or any other legal holder
thereof, shall execute, acknowledge and deliver, upon demand, at any time or
times, any and all further subordinations or other instruments, in recordable
form, reasonably sufficient for that purpose, or that Grantor or Grantee, their
respective successors or assigns or other legal holder of this Security Deed,
may hereafter reasonably require for carrying out the true purpose and intent of
the foregoing covenant;
(xi) each Permitted Subordinate Mortgage (and any underlying note or
obligation) shall be nonrecourse, except for misappropriation of funds, material
misrepresentation, fraud and environmental liabilities;
(xii) a default under any Permitted Subordinate Mortgage as and when
declared by the holder thereof shall constitute a default under this Security
Deed; a default under any Permitted Subordinate Mortgage not cured within the
applicable cure period, if any, shall constitute an Event of Default under this
Security Deed; provided that Grantee shall not accelerate the Debt secured by
this Security Deed or commence to foreclose the lien of this Security Deed
unless and until the holder of the Permitted Subordinate Mortgage then in
default accelerates the debt secured thereby or commences to foreclose the lien
secured by its Permitted Subordinate Mortgage;
(xiii) if a Permitted Subordinate Mortgage is not executed and delivered
within sixty (60) days after delivery to Grantee of the Permitted Subordinate
Mortgage Notice then no such Permitted Subordinate Mortgage may be placed
against the Mortgaged Property or any portion thereof unless Grantor again
complies with all of the provisions of this Paragraph 3;
(xiv) a true copy of each Permitted Subordinate Mortgage shall be furnished
to Grantee promptly after the execution and delivery thereof;
(xv) Grantor shall pay Grantee's reasonable attorneys' fees and other
reasonable out-of-pocket costs incurred in connection with review and approval
of the documentation; and
(xvi) In no event shall any Permitted Subordinate Mortgage provide for the
accrual of all or any portion of the interest payable thereunder (other than
normal accruals, not to exceed ninety (90) days in any event), and in no event
shall any Permitted Subordinate Mortgage provide for debt service which is
dependent upon the amount of cash flow or other proceeds generated from the
Premises.
(e) Grantor may enter into one or more purchase money financings, not
secured by a lien on real property, in connection with the purchase of
furniture, fixtures and/or equipment for the Premises (each, an "FF&E
Financing"); provided that each FF&E Financing secures a principal balance not
in excess of $5,000,000.00. The FF&E Financing granted from time to time by
Grantor, if any, need not comply with the provisions of sub-clauses (i), (ii),
(iii) or (iv) of Paragraph 3(c) or the provisions of Paragraph 3(d) other than
clause (i) of such Paragraph 3(d).
4. Representations and Warranties. To induce Grantee to accept the Note and
this Security Deed, and to make the Loan evidenced by the Note and secured by
this Security Deed, Grantor represents and warrants to Grantee that:
(a) The covenants in this Security Deed and in the other Transaction
Documents have been observed and performed in all material respects to the
extent applicable on and as of the date hereof. The representations and
warranties in this Security Deed and in the other Transaction Documents are true
and correct in all material respects on and as of the date hereof. All such
covenants, representations and warranties are hereby incorporated by reference.
(b) The granting of this Security Deed, the consummation of the
transactions herein contemplated and the execution and delivery of, and the
performance and observance of Grantor's obligations under this Security Deed,
the other Transaction Documents and other instruments herein mentioned to which
Grantor is a party and which have been executed and delivered in connection with
the transactions contemplated in the Transaction Documents have been duly
authorized by all necessary action on the part of Grantor and its general
partner and, to the Best Knowledge of Grantor (as such term is defined in
Paragraph 46(a) hereof), no other consent, license, permit, approval or
authorization of, exemption by, notice or report to, or registration, filing or
declaration with, any Governmental Authority (as hereinafter defined)
(collectively, "Approvals") is required which has not been obtained by Grantor
in connection with the execution, delivery or performance by Grantor of this
Security Deed, the other Transaction Documents and other instruments herein
mentioned to which Grantor is a party. For the purposes hereof, "Governmental
Authority" shall mean any court, agency, authority, board (including, without
limitation, environmental protection, planning and zoning), bureau, commission,
department, office or instrumentality of any nature whatsoever of any
governmental or quasi-governmental unit of the United States or the State or the
county or city where the Premises are located or any political subdivision of
any of the foregoing, whether now or hereafter in existence, or any officer or
official thereof, having jurisdiction over Grantor or the Mortgaged Property or
any portion thereof.
(c) This Security Deed and each of the other Transaction Documents have
been duly authorized, executed and delivered on behalf of Grantor by its general
partner, and this Security Deed constitutes, and each of the other Transaction
Documents and other instruments mentioned herein to which Grantor is a party
constitute, a legal, valid and binding obligation of Grantor, enforceable
against Grantor in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, moratorium, reorganization or
other similar laws affecting the enforcement of creditors' rights generally or
by principles of equity or public policy (whether asserted in equity or in
proceedings at law).
(d) This Security Deed constitutes a valid mortgage lien on, and, to the
extent permitted by applicable law, security interest in, the Mortgaged
Property, subject to no liens, charges or encumbrances other than the Permitted
Exceptions. There are no defenses, counterclaims or offsets to Grantor's
obligation to pay the Debt pursuant to this Security Deed, the Note or any of
the other Transaction Documents. To the Best Knowledge of Grantor, there are no
defenses, counterclaims or offsets to any of Grantor's other obligations
pursuant to this Security Deed, the Note or any of the other Transaction
Documents.
(e) The Permitted Exceptions do not and will not materially and adversely
interfere with (i) the ability of Grantor to pay in full the Debt in the manner
required by the Note or (ii) the use of the Mortgaged Property for the use
currently being made thereof, the operation of the Mortgaged Property as
currently being operated for hotel purposes or the value of the Mortgaged
Property.
(f) Except as set forth on the "Disclosure Schedule" (as defined in the
Loan Agreement), and approved by Grantee in writing, there are no Leases
affecting the Mortgaged Property. To the extent that the Disclosure Schedule
lists any leases affecting the Mortgaged Property, to the Best Knowledge of
Grantor, except as expressly disclosed on the Disclosure Schedule (i) no tenant
under any of the Leases is entitled to any rent concession, (ii) Grantor has not
accepted any prepayment of any rent, additional rent or other sums due under any
of the Leases, except a payment of rent or additional rent one (1) month in
advance or a prepayment in the nature of security for the performance of
obligations of the tenant under any of the Leases and (iii) no tenant has any
defense, set-off or counterclaim against Grantor or to the payment of any rent,
additional rent or other sums payable pursuant to its Lease or to the
performance of any obligations of the tenant thereunder. No tenant under any of
the Leases has any right or option relating to the sale or other disposition of
any of the Mortgaged Property.
(g) The copies of the Leases, if any, previously delivered by Grantor to
Grantee are true, correct and complete copies of those documents, and contain
the entire agreement between the parties thereto with respect to the subject
matter thereof.
(h) Except as set forth in the Disclosure Schedule applicable to the
Mortgaged Property, Grantor has obtained or has caused Manager to obtain (i)
where required by applicable law, a valid, permanent Certificate of Occupancy
for the Improvements which permits the uses to which the Premises are put and
the uses permitted under any applicable Lease, and in such instances where
relevant, such Certificate of Occupancy is in full force and effect, and (ii)
all Permits of all Governmental Authorities required with respect to the use,
operation, ownership and maintenance of the Mortgaged Property, and all of the
same are in full force and effect and the Improvements comply in all material
respects therewith.
(i) Grantor has all easements, appurtenances or other rights and interests,
including those for use, maintenance, and access (by pedestrians, automobiles
and trucks) necessary or appropriate for the full and proper operation, repair,
maintenance, occupancy and use of every portion of the Mortgaged Property as a
full-service, first-class Marriott hotel and in compliance with the Loan
Agreement. To the Best Knowledge of Grantor, all utility services necessary for
the operation and occupancy of the Mortgaged Property for such purposes are
available at the Mortgaged Property and will continue to be operational and
adequate.
(j) Grantor's possession of the Premises has been peaceable and undisturbed
and Grantor's title thereto has never been disputed or questioned and, except
for the Permitted Exceptions Grantor does not know of any facts by reason of
which any adverse claim to any part of the Mortgaged Property or to any
undivided interest therein might be made.
(k) Except as disclosed on the Title Policies or set forth on the
Disclosure Schedule applicable to the Premises and approved in writing by
Grantee, no condemnation or eminent domain proceedings or other exercise of the
right of eminent domain or conveyance in lieu of condemnation (hereinafter
collectively called "Condemnation Proceedings") have been commenced and remain
ongoing with respect to the Mortgaged Property or any portion thereof and, to
the Best Knowledge of Grantor, no Condemnation Proceedings are pending, nor has
Grantor received written notice of any threatened Condemnation Proceedings.
(l) All costs arising from the construction of the Improvements have been
fully paid. All Equipment, Personal Property and all other fixtures and articles
of personalty attached to the Premises, or usable in connection with the
operation and maintenance thereof (xx) have been fully paid for other than for
purchase money financing in de minimis amounts not exceeding $5,000,000, (yy)
are the property of Grantor and (zz) except for property subject to the
foregoing purchase money financings, are not subject to any conditional bills of
sale, chattel mortgages or any other title retention agreement of a similar
nature or to any other liens or encumbrances other than those created by the
Transaction Documents or otherwise specifically permitted hereunder, except for:
(i) such matters as are set forth on the Disclosure Schedule applicable to
the Premises and approved in writing by Grantee, which shall include existing
purchase money equipment arrangements;
(ii) such matters which, pursuant to the Loan Agreement, or as defined in
this Paragraph 4(l), as de minimis and not required to be disclosed;
(iii) Equipment or Personal Property subject to written leases between the
owner/installer of such Equipment and/or Personal Property, as lessor, and
Grantor, as lessee, to the extent permitted in the Loan Agreement; and
(iv) Equipment or Personal Property, if any, that is owned by tenants or
guests at the Premises.
(m) Grantor is not a "national" of a "designated foreign country" (or a
person defined as a "designated foreign country") as such quoted terms are
defined in the Foreign or Cuban Assets Control Regulations of the United States
Treasury Department, 31 CFR, Subtitle B, Chapter V, as amended, or any
regulation or ruling issued thereunder.
(n) Grantor, pursuant to the Title Policies, or an irrevocable commitment
therefor, effective as of the date of the closing of the Loan has caused to be
issued to Grantee an ALTA Lender's title insurance policy insuring a valid first
lien on the Premises, subject only to the Permitted Exceptions which Title
Policies are in full force and effect and are freely assignable to and will
inure to the benefit of any trustee or servicer selected by Grantee in
connection with a Securitization (as defined in the Loan Agreement).
(o) To the Best Knowledge of Grantor, no representation or information
contained herein or in any other Transaction Document, nor any written statement
or other instrument furnished, or to be furnished, to Grantee or any other
person entitled thereto under the terms of the Transaction Documents executed by
Grantor or its general partner taken as a whole contains, or will contain, any
untrue statement of a material fact, or omits, or will omit, to state a material
fact necessary to make the statements contained herein or therein not materially
misleading.
5. Covenants of Grantor as to Performance and Other Matters
(a) Grantor shall duly perform and observe all of the agreements,
covenants, conditions and obligations imposed by the provisions of this Security
Deed, the Note, the other Transaction Documents or imposed upon or assumed by
Grantor by virtue of the provisions of the Permitted Exceptions or any deed,
conveyance, agreement, statute or ordinance pursuant to which Grantor or any
predecessor in title of the Mortgaged Property acquired the Mortgaged Property
or any right or privileges appurtenant thereto or for the benefit thereof.
(b) Grantor shall, so long as Grantor is the owner of the Mortgaged
Property, do all things necessary to preserve and keep in full force and effect
the existence, rights and privileges of Grantor under the laws of the state of
its formation and the State in which the Premises are located.
(c) Grantor shall not, without the prior written consent of Grantee, which
consent shall not be unreasonably withheld, conditioned or delayed, institute,
join in, execute or consent to any change in any covenant, condition,
restriction, easement, declaration, zoning ordinance, or other public or private
restriction limiting, defining or otherwise controlling construction on or
use(s) of all or any part of the Mortgaged Property.
(d) Except as expressly permitted in the Loan Agreement or any other
Transaction Document, Grantor shall not, without the prior written consent of
Grantee, which consent shall not be unreasonably withheld, conditioned or
delayed, enter into, amend or modify any agreements relating to the management
of the Mortgaged Property or the operation of the hotel or hotel operations
thereon.
(e) Except as expressly permitted in the Loan Agreement, Grantor shall not,
without the prior written consent of Grantee, enter into, amend or modify any
agreements relating to the Mortgaged Property or the operation of the hotel or
hotel operations thereon with any "Affiliate" (as defined in the Loan Agreement)
of Grantor except on terms that are no less favorable to Grantor than would be
contained in similar arrangements on arms length terms with independent third
parties consistent with any provisions of the Loan Agreement. All such
agreements shall to the extent required under the Transaction Documents be fully
and expressly subject and subordinate in all respects to the Debt, this Security
Deed, and the Transaction Documents and to any and all extensions, renewals,
additions, modifications, increases, consolidations, spreaders, amendments,
replacements, restatements and substitutions hereof and thereof.
(f) Grantor shall obtain all Approvals, if any, required in connection with
the execution, delivery or performance by Grantor of this Security Deed, the
other Transaction Documents and the other instruments herein mentioned to which
Grantor is a party.
(g) Grantor shall cause all Permits and Certificates of Occupancy required
with respect to the use, operation, ownership and maintenance of the Mortgaged
Property to remain in full force and effect at all times during the term hereof,
and Grantor shall not permit or suffer to exist a violation of any such Permit
or Certificate of Occupancy, or enter into any Lease which causes or permits the
violation thereof.
6. Due on Sale or Encumbrance
(a) Grantor acknowledges that the continuous ownership, operation and
management of the Mortgaged Property by Grantor (directly, or through the
Manager) is of a material nature to this transaction and the making of the Loan
evidenced and secured by this Security Deed and the other Transaction Documents.
Grantor hereby covenants and agrees that Grantor shall not, without the written
consent of Grantee, directly or indirectly, voluntarily or involuntarily or by
operation of law, (i) dissolve, or terminate or amend the terms of the existence
of the Grantor or its general partner in any respect that is not expressly
permitted by the Transaction Documents, or (ii) sell, convey, assign, mortgage,
encumber (except by the Permitted Exceptions), hypothecate or otherwise
transfer, alienate or dispose of, including, without limitation, any lease of
the Premises as a whole or substantially as a whole, any interest in the
Mortgaged Property or any legal or beneficial interest in the Grantor or its
general partner, except as expressly permitted by the Transaction Documents.
(b) If Grantee shall not consent in writing to a sale, conveyance,
assignment, mortgaging, encumbering or other transfer, alienation or disposition
prohibited by subparagraph 6.(a) hereof, and Grantor nevertheless proceeds with
such sale, conveyance, assignment, mortgaging, encumbering or other transfer,
alienation or disposition, then Grantee may, at its option, and without limiting
any other right or remedy available to Grantee hereunder, at law or in equity
(but subject to Grantor's right pursuant to and in accordance with the Loan
Agreement to obtain the release by Grantee of the Mortgaged Property), in its
sole and absolute discretion and without regard to the adequacy of its security,
declare the Note, in whole or in part, immediately due and payable.
(c) The giving of written consent by Grantee to the transfer, alienation or
disposition of all or any part of the Mortgaged Property or any interest in the
Mortgaged Property or Grantor or its general partner in any one or more
instances shall not limit or be deemed a waiver of the requirement for such
consent in any other or subsequent instances. Except as otherwise expressly
provided to the contrary in any Transaction Document, if any mortgage,
encumbrance or other lien shall be placed on the Mortgaged Property or any
portion thereof (other than this Security Deed) without the prior written
consent of Grantee, such prohibited lien shall be deemed to be null and void ab
initio.
7. Hazardous Substances
(a) As used herein:
(i) "Environment" shall mean soil, surface waters, ground waters, land,
stream, sediments, surface or subsurface strata and ambient air.
(ii) "Environmental Laws" shall mean all Federal, state and local
environmental, health or safety laws, regulations, ordinances, orders, actions,
policies and rules of common law (whether now existing or hereafter enacted or
promulgated), of all Governmental Authorities and all applicable judicial and
administrative and regulatory decrees, judgments and orders, including common
law rulings and determinations, relating to injury to, or the protection of,
human health or the Environment, including, without limitation, all requirements
pertaining to reporting, licensing, permitting, investigation, remediation and
removal of emissions, discharges, releases or threatened releases of Hazardous
Substances, into the Environment, or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Substances.
(iii) "Environmental Report" shall mean the environmental reports
(described in the Disclosure Schedule) applicable to the Premises or any update
thereof or supplement thereto.
(iv) "Hazardous Substances" shall mean any chemical, material, gas, vapor,
energy, radiation or substance (A) the presence of which requires or may
hereafter require notification, investigation or remediation under any
applicable Environmental Law, (B) which is or becomes defined as a "hazardous
waste", "hazardous material" or "hazardous substance" or "controlled industrial
waste" or "pollutant" or "contaminant" under any present or future Environmental
Laws, (C) which is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and is or becomes
regulated by any Governmental Authority, (D) the presence of which on the
Mortgaged Property poses a hazard to the Mortgaged Property or to the health or
safety of persons or property on or about the Mortgaged Property, (E) without
limitation, which contains gasoline, diesel fuel or other petroleum hydrocarbons
or volatile organic compounds, (F) without limitation, which contains PCBs or
asbestos or urea formaldehyde foam insulation, or (G) without limitation, which
contains or emits radioactive particles, waves or material, including radon gas
in amounts the presence of which poses or threatens to pose a hazard to the
Mortgaged Property or to the health or safety of persons or property on or about
the Mortgaged Property.
(b) Grantor hereby represents and warrants as of the date hereof as
follows:
(i) Except as set forth in the applicable Environmental Report:
(A) neither Grantor nor, to the Best Knowledge of Grantor, any prior owner,
occupant or user of the Mortgaged Property nor any other person (each, a "Prior
User") has engaged in or permitted any operations or activities upon, or any use
or occupancy of the Mortgaged Property, or any portion thereof, for the purpose
of or in any way involving the handling, manufacture, treatment, storage, use,
generation, release, discharge, refining, dumping or disposal of any Hazardous
Substances (whether legal or illegal, accidental or intentional) on, under, in
or about the Mortgaged Property, except to the extent commonly used in the
day-to-day operation of the Mortgaged Property and in such case substantially in
compliance with all Environmental Laws;
(B) neither Grantor nor, to the Best Knowledge of Grantor, any Prior User,
has transported any Hazardous Substances to, from or across the Mortgaged
Property, except substantially in compliance with all Environmental Laws;
(C) to the Best Knowledge of Grantor, no Hazardous Substances have migrated
from other properties upon, about or beneath the Mortgaged Property; and
(D) to the Best Knowledge of Grantor, there are no Hazardous Substances
presently deposited, stored, or otherwise included in or located on, under, in
or about the Mortgaged Property, except Hazardous Substances stored and used in
amounts reasonably related to the normal operation of the Mortgaged Property for
hotel operations and in such case substantially in compliance with all
Environmental Laws.
(ii) Except as set forth in the applicable Environmental Report, the
Mortgaged Property and the use, maintenance and operation of the Mortgaged
Property, and all activities and conduct of business related thereto,
substantially comply and to the Best Knowledge of Grantor have at all relevant
times substantially complied with all Environmental Laws, and no activity on or
condition of the Property has been alleged in writing to Grantor to be a
material nuisance with respect to any third party.
(iii) Grantor has obtained any or all permits, licenses and authorizations
necessary to Grantor's operation of the Mortgaged Property under applicable
Environmental Laws, including laws relating to emissions, discharges, releases
or threatened releases of Hazardous Substances into the Environment or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Substances. To the Best Knowledge
of Grantor, Grantor and the Mortgaged Property are substantially in compliance
with all terms and conditions of any required permits, licenses and
authorizations.
(iv) Except as set forth in the applicable Environmental Report, neither
Grantor nor, to the Best Knowledge of Grantor, any Prior User has received
notice or other communication from a Governmental Authority having jurisdiction
over the Grantor, the Mortgaged Property or any such Prior User concerning any
alleged violation of or liability under any Environmental Laws with respect to
the Mortgaged Property. Additionally, Grantor has not received notice or other
communication from a Governmental Authority concerning any alleged material
violation or material liability under any Environmental Laws by Grantor, or
relating in whole or in part to the Mortgaged Property, or with respect to the
real property adjacent to the Mortgaged Property, it being understood that the
term "adjacent" shall refer to real property within the relevant radius for the
violation of applicable Environmental Laws as set forth in the applicable
Environmental Report. Except as set forth in the applicable Environmental
Report, there exists no writ, injunction, decree, order or judgment outstanding,
nor any lawsuit, claim, proceeding, citation, directive, summons or
investigation, pending or, to the Best Knowledge of Grantor, threatened,
relating to the ownership, use, maintenance or operation of the Mortgaged
Property by any person or entity, or related to any alleged violation of
Environmental Laws, or any suspected presence of Hazardous Substances thereon.
(v) Except to the extent set forth in the applicable Environmental Report,
Grantor has not placed, nor to Grantor's Best Knowledge has there been
constructed, placed, deposited, stored, disposed of or located on the Mortgaged
Property any PCB nor any transformer, capacitor, ballast, or other equipment
which contains dielectric fluid containing PCBs in concentrations that exceed
federal standards, nor any asbestos or asbestos-containing materials nor any
insulating material containing urea formaldehyde or any radon gas in amounts the
presence of which poses or threatens to pose a hazard to the Mortgaged Property
or to the health or safety of persons or property on or about the Mortgaged
Property. To the Best Knowledge of Grantor, except to the extent set forth in
the Environmental Report or as may have been removed in accordance with
Environmental Laws, no underground improvements, including, but not limited to,
treatment or storage tanks, or water, gas or oil wells, are located on the
Mortgaged Property.
(c) Grantor hereby covenants and agrees that Grantor shall not, unless
Grantee shall otherwise consent in writing:
(i) Cause or, to the best of Grantor's ability to prevent such activity,
permit or suffer any Hazardous Substance to be brought upon, treated, kept,
stored, disposed of, discharged, released, produced, manufactured, generated,
refined or used upon, about or beneath the Mortgaged Property or any portion
thereof by Grantor, its agents, employees, contractors, invitees, tenants, or
any other person, except to the extent commonly used in the ordinary operation
of the Mortgaged Property or in any such contractor's ordinary course of trade,
and in each case in compliance with applicable Environmental Laws. The foregoing
shall not apply to any Hazardous Substances that may have migrated or leached
onto the Mortgaged Property from any other property.
(ii) Cause, permit or suffer the existence or the commission by Grantor,
its agents, employees, or contractors of a violation of any Environmental Laws
upon, about or beneath the Mortgaged Property or any portion thereof and Grantor
shall use commercially reasonable efforts to prevent any such violation of any
Environmental Laws by any invitees or any other person on the Mortgaged
Property. Any removal or encapsulation of or other remedial action taken by or
on behalf of Grantor in connection with any Hazardous Substance located on the
Mortgaged Property (including, without limitation, subsequent disposal thereof)
shall be performed in accordance with all applicable Environmental Laws and
other Legal Requirements (as defined in Paragraph 15 hereof).
(iii) Subject to the provisions of Paragraph 16 hereof relating to
permitted contests, create, or to the best of Grantor's ability to prevent such
encumbrances, suffer to exist with respect to the Mortgaged Property, or permit
any of its agents to create or suffer to exist, any lien, security interest or
other charge or encumbrance of any kind under any Environmental Laws, including,
without limitation, any lien imposed pursuant to section 107(l) of the Superfund
Amendments and Reauthorization Act of 1986 (42 U.S.C. Section 9607(1)) or any
similar state statute.
(d) Grantor hereby covenants and agrees that Grantor will at all times
comply with the following requirements:
(i) Grantor shall, at its sole cost and expense, but without waiver or
limitation of any rights or remedies Grantor may have against anyone other than
Grantee, promptly take all actions required of Grantor or any Affiliate of
Grantor by any Governmental Authority which arise from the presence upon, about
or beneath the Mortgaged Property of a Hazardous Substance or a violation of
Environmental Laws. Such action shall include, but not be limited to, the
investigation of the environmental condition of the Mortgaged Property, the
preparation of any feasibility studies, reports or remedial plans, and the
performance of any clean-up, remediation, containment, operation, maintenance,
monitoring or restoration work, whether on or off the Mortgaged Property, to the
extent required by applicable Environmental Laws. Grantor shall take all actions
necessary to restore the Mortgaged Property to a condition that complies with
any standard of remediation required under applicable Environmental Law. Grantor
shall proceed continuously and diligently with all such required investigatory
and remedial actions, provided that in all cases such actions shall be in
accordance with all applicable Environmental Laws. Any such actions shall be
performed in a good, safe and workmanlike manner and shall, to the extent
practicable, minimize any impact on the business conducted at the Mortgaged
Property. Grantor shall pay all costs in connection with such investigatory and
remedial activities, including, but not limited to, all power and utility costs,
and any and all taxes or fees that may be applicable to such activities. Grantor
shall promptly provide to Grantee copies of testing results and reports that are
generated in connection with the above activities. If required by applicable
Environmental Law, promptly upon completion of such investigation and
remediation, Grantor shall permanently seal or cap all monitoring wells and test
holes in compliance with applicable Legal Requirements and industry standards,
remove all associated equipment, and restore the Mortgaged Property, which shall
include, without limitation, the repair of any surface damage, including paving,
caused by such investigation or remediation. Nothing in this subsection shall
preclude the performance of any action required by any Governmental Authority,
as described above, by anyone other than Grantor or Grantee. In such event,
Grantor shall take all appropriate measures to ensure that such action is
performed in accordance with all applicable Environmental Laws, and is
consistent with the terms of this Security Deed.
(ii) If Grantor shall become aware of or receive actual notice concerning
any actual, alleged or suspected violation of or liability under any
Environmental Laws, or a substantial risk that any such Environmental Law will
be violated with respect to the Premises, or that any representation of Grantor
contained herein relating to Hazardous Substance is not or is no longer accurate
in any material respect, including but not limited to actual notice or other
written communication concerning any actual or threatened investigation,
inquiry, lawsuit, claim, citation, directive, summons, proceeding, complaint,
notice, order, writ or injunction, relating to same, and including without
limitation any notice or other communication by Grantor, then Grantor shall
deliver to Grantee, (x) within ten (10) days after receipt of such notice, a
written description of said violation, liability, investigation or actual or
threatened event or condition, together with copies of any documents evidencing
same and (y) within thirty (30) days after receipt of such notice, a written
description of the corrective action, if any, proposed by Grantor in response
thereto. Receipt of such notices by Grantee shall not be deemed to create any
obligation on the part of Grantee to defend or otherwise respond to any such
notification.
(iii) Grantee shall have the right (but not the obligation) to enter upon
the Mortgaged Property, from time to time at reasonable times and upon
reasonable notice, and in its sole and absolute discretion, to conduct
inspections of the Mortgaged Property and the activities conducted thereon to
determine compliance with all Environmental Laws, the presence of Hazardous
Substances and the existence of any potential damages as a result of the
condition of the Mortgaged Property. In furtherance thereof, Grantor hereby
grants to Grantee, and its agents, employees, and qualified consultants and
contractors, the right to enter upon the Mortgaged Property and to perform such
tests on the Mortgaged Property as are reasonably necessary to make such
determination. Grantee shall conduct such inspections and tests at reasonable
times, shall use its best efforts to minimize interference with the operation of
the Mortgaged Property and agrees to restore the condition of the Mortgaged
Property to substantially the same condition as existed immediately before such
tests were performed, and Grantee shall not be liable for any interference
caused thereby unless due to the gross negligence or willful misconduct or
omission of Grantee.
8. Insurance
(a) The insurance requirements set forth on Schedule X annexed hereto are
incorporated by reference herein and are made a part of this Security Deed. At
Grantor's expense, Grantor shall maintain continuously during the term of this
Security Deed policies of insurance (collectively, the "Policies") in form and
in amounts and issued by companies, associations or organizations satisfactory
to Grantee and meeting the requirements set forth in Schedule X.
(b) When and if required by the applicable insurance company, Grantor shall
furnish Grantee with an appraisal satisfactory to Grantee showing the full
replacement value of the Improvements, the Equipment and the Personal Property.
(c) At the request of Grantee, Grantor shall assign (provided that such
policy assignments have the approval of the property insurer) the Property
Policies to Grantee for the benefit of Grantee as collateral and further
security for the payment of the Debt. In the event of a foreclosure of this
Security Deed, the purchaser of the Mortgaged Property shall succeed to all the
rights of Grantor to the extent permissible under the Policies and applicable
law, including any right to the allocated unearned premiums, in and to the
Policies assigned or delivered to Grantee pursuant to this Paragraph.
(d) If Grantor fails to maintain the insurance required to be maintained
hereunder or on Schedule X or fails to deliver evidence of insurance, Grantee
may, but shall not be obligated to on not less than five (5) Business Days'
written notice to Grantor (or sooner, if required to replace any insurance
before it expires), obtain insurance and pay the premiums therefor on behalf of
Grantor if Grantor does not immediately obtain such insurance, and Grantor shall
reimburse Grantee, on written demand, for all sums advanced and expenses
incurred in connection therewith. Such sums and expenses, together with interest
thereon at the Default Rate (as defined in Paragraph 20), shall be deemed part
of the Debt and secured by the lien of this Security Deed.
(e) Nothing contained in this Paragraph 8 or elsewhere in this Security
Deed shall relieve Grantor of its duty to maintain, repair, replace or restore
the Improvements, the Equipment or the Personal Property or rebuild the
Improvements, from time to time, as required by the Transaction Documents,
following damage thereto or destruction thereof whether or not sufficient
proceeds of insurance are available to defray the cost of such repairs or
restoration, and following any condemnation of all or any portion of the
Mortgaged Property, and nothing contained in this Paragraph 8 or elsewhere in
this Security Deed shall relieve Grantor of its duty to pay the Debt, which
shall be absolute, regardless of the occurrence of damage to or destruction of
or condemnation of all or any portion of the Mortgaged Property.
(f) In the event that prior to payment in full of the Debt, any property
insurance claim under any Property Policy has not been paid and distributed in
accordance with the terms of this Security Deed, and any such claim shall be
paid after foreclosure of this Security Deed or other transfer of title to the
Mortgaged Property shall have resulted in extinguishing the Debt for an amount
less than the total of the unpaid principal balance together with accrued
interest and the Yield Maintenance Premium, if any, plus costs and disbursements
at the time of the extinguishment of the Debt, and such insurance claim is
thereafter paid, then and in that event that portion of the payment in
satisfaction of the claim which is equal to the aforesaid deficiency shall
belong to and be the property of Grantee as its interest may appear and shall be
paid to Grantee as its interest may appear, and Grantor hereby assigns,
transfers and sets over to Grantee all of Grantor's right, title and interest in
and to said sums. The balance, if any, shall be promptly paid to, or as directed
by, Grantor. Notwithstanding the above, Grantor shall retain an interest in the
Policies above described during any redemption period. The provisions of this
Paragraph 8(f) shall survive the termination of this Security Deed by
foreclosure or otherwise as a consequence of the exercise of any rights and
remedies of Grantee hereunder after an Event of Default.
9. Payment of Impositions and Utility Charges
(a) Except as specifically provided in the cash management procedures set
forth in the Loan Agreement or the Exhibits thereto (collectively, the "Cash
Management Procedures") and subject to the provisions of Paragraph 16 hereof,
Grantor shall pay or cause to be paid, before any interest or penalty for
non-payment attaches thereto, all taxes, assessments, water rates, sewer rents,
vault charges, permit fees, user fees, ground rents, maintenance charges and
other governmental charges, and other charges of any kind or nature whatsoever,
general or special, ordinary or extraordinary, now or hereafter levied, assessed
or imposed upon or which constitute a lien upon or against the Mortgaged
Property or any portion thereof, or upon the Rents derived from the Mortgaged
Property or arising in respect of the occupancy, use or possession thereof
(collectively, the "Impositions"). If Grantor shall fail to pay or cause to be
paid any Impositions before any interest or penalty for non-payment attaches
thereto, Grantee shall have the right, but shall not be obligated (except as
specifically provided under the Cash Management Procedures), to pay such
Impositions upon not less than five (5) Business Days' prior written notice to
Grantor (subject to the provisions of the next succeeding sentence), and Grantor
shall repay to Grantee, within ten (10) days after written demand, any amount so
paid by Grantee, with interest thereon (xx) at the regular Base Rate provided
for in the Note from the date of Grantee's payment up to the date of demand for
repayment by Grantee, and (yy) at the Default Rate from and including the date
of such demand by Grantee to the date of repayment by Grantor, and such amount,
together with such interest, shall constitute a portion of the Debt secured by
the lien of this Security Deed. If an Escrow Fund (as defined in Paragraph 10)
is in effect with respect to the Loan, Grantee shall not be required to give
Grantor prior written notice of payments from such Escrow Fund with respect to
Impositions and the provisions of Paragraph 10 of this Security Deed and any
Collateral Account Agreement or similar agreement with respect to such Escrow
Funds shall apply. In the case of any assessment payable in installments, each
installment thereof shall be paid prior to or on the date on which such
installment becomes due and payable without imposition of any fine, penalty,
interest or cost. Grantor shall not be entitled to any credit on the Note, or
any other sums which may become payable under the terms thereof or hereof, or
otherwise, by reason of the payment of the Impositions.
(b) Grantor shall promptly deliver to Grantee, upon request, receipted
bills, canceled checks or other evidence reasonably satisfactory to Grantee
evidencing the payment of the Impositions. The certificate, advice or bill of
the appropriate official designated by law to make or issue the same or to
receive payment of such Imposition shall be prima facie evidence that such
Imposition is due and unpaid at the time of the making or issuance of such
certificate, advice or bill. If Grantor shall fail to provide Grantee with such
evidence evidencing the payment of Impositions within thirty (30) days after
notice, Grantor shall pay Grantee, on written demand, all charges, payments,
fees, costs or expenses reasonably incurred by Grantee in connection with
obtaining evidence satisfactory to Grantee that payment of all Impositions is
current and that there are no Impositions due and owing or which have become a
lien on the Mortgaged Property or any portion thereof or any appurtenances
thereto.
(c) Grantor shall timely pay or cause to be paid all charges for
electricity, power, gas, water and other utilities used in connection with the
Mortgaged Property and, upon the written request of Grantee, Grantor shall
promptly deliver to Grantee receipted bills, canceled checks or other evidence
reasonably satisfactory to Grantee evidencing the payment of such charges.
10. Escrow Fund
(a) Grantor shall, at the option of Grantee to be exercised by written
notice at any time after the occurrence of an Event of Default, or as otherwise
required by the Cash Management Procedures, pay to Grantee (or, if applicable,
any servicer named in or named pursuant to the Loan Agreement for the benefit of
Grantee) the amount required in connection with the Escrow Fund under the Cash
Management Procedures, if any, on or before the date required by the Cash
Management Procedures. If at any time such Cash Management Procedures are not in
effect, on the Debt Service Payment Date (as defined in the Note), Grantor
shall, at the option of Grantee to be exercised by written notice after the
occurrence of an Event of Default, deposit with Grantee an amount (hereinafter
referred to as the "Escrow Fund") which amount, at the option of Grantee, shall
be the amount which would have been required by the Cash Management Procedures,
if any, including Paragraph 6.1 thereof, had the Cash Management Procedures been
in effect, or, at Grantee's option, an amount equal to one-twelfth (1/12th) of
the amount which would be sufficient to pay the Impositions and all premiums on
the Policies payable, or estimated by Grantee to be payable, during the ensuing
twelve (12) months. Such deposits shall not be, nor be deemed to be, trust funds
and shall be held by Grantee in a segregated sub-account of the Cash Collateral
Account (as defined in the Loan Agreement) (the "Tax and Insurance Account") and
invested in Permitted Investments (as hereinafter defined) (except as otherwise
required by any Legal Requirement) which shall be free of any liens or claims on
the part of creditors of Grantor.
(b) Grantee will apply monies in the Escrow Fund, if any, (and any earnings
inuring thereon) to the payment when due of Impositions and premiums on the
Policies which are required to be paid by Grantor pursuant to the provisions of
the Cash Management Procedures, or if such Cash Management Procedures are not in
effect, this Security Deed. If the amount of the Escrow Fund shall exceed the
amount of the Impositions and premiums on the Policies payable by Grantor
pursuant to the provisions of this Security Deed, Grantee shall, in its sole
discretion (i) return any excess to Grantor or (ii) credit such excess against
future payments to be made to the Escrow Fund. In allocating such excess,
Grantee may deal with the person shown on the records of Grantee to be the owner
of the Mortgaged Property. If the Escrow Fund is not sufficient to pay the
Impositions and premiums on the Policies as the same become due and payable,
Grantor shall pay to Grantee an amount which Grantee shall estimate as
sufficient to make up the deficiency.
(c) Until expended or applied as above provided, any amounts in the Escrow
Fund shall constitute additional security for the Debt. If this Security Deed is
sold or assigned, Grantee shall transfer to the assignee the amount then held by
Grantee under this Paragraph 10, and upon delivery to the Grantor of evidence of
such assignment and transfer, together with a written acknowledgement of receipt
of such amount by the transferee, the transferring Grantee shall not have any
further obligation to Grantor with respect to such amount. If at any time
Grantor tenders to Grantee full payment of the entire Debt, including any
applicable premium or penalty, and Grantee has no further obligation under the
Loan Agreement to make Advances, Grantee shall credit to the account of Grantor
any balance remaining in the Escrow Fund accumulated by Grantee under this
Paragraph 10, including interest earned thereon. Upon the occurrence and during
the continuation of an Event of Default, Grantee shall be authorized and
empowered (but not required) to apply the balance remaining in the Escrow Fund
in the manner set forth in Paragraph 23 hereof and shall give Grantor prompt
notice thereof.
11. Leases and Rents
(a) Grantor hereby grants and assigns to Grantee the right to enter the
Mortgaged Property for the purpose of enforcing its interest in the Leases, if
any, and collecting the Rents, this Security Deed constituting a present,
absolute assignment of the Leases and Rents. Notwithstanding the foregoing, but
subject to the terms and conditions of this Paragraph 11, Grantee hereby grants
to Grantor a revocable license to operate and manage the Mortgaged Property and
to collect the Rents. Grantor shall hold the Rents, or an amount sufficient to
discharge all current sums due on the Debt, in trust for use in payment of the
Debt. The license herein granted to Grantor to collect the Rents and enforce its
interests in the Leases may be revoked by Grantee following an Event of Default
under this Security Deed or any of the other Transaction Documents, by giving
written notice of such revocation to Grantor. Following such notice, Grantee may
collect, retain and apply the Rents toward payment of the Debt in such priority
and proportions as Grantee, in its sole discretion, shall deem proper, or to the
operation, maintenance and repair of the Mortgaged Property. In addition to the
rights which Grantee may have herein, Grantee, at its option, may require
Grantor to pay, monthly in advance, to Grantee, or any receiver appointed to
collect the Rents, the fair and reasonable rental value for the use and
occupation of such part of the Premises as may be in the possession of Grantor
for its own use (it being understood that for such purpose Grantor shall not be
deemed to be in possession of a hotel room unless Grantor or its affiliates is
using the same), other than such portions of the Premises used for the operation
of the Hotel. Upon default in any such payment, Grantor will vacate and
surrender possession of such portions of the Premises to Grantee, or to such
receiver and, in default thereof, Grantor may be evicted from such portions of
the Premises by summary proceedings or otherwise. Nothing contained in this
Paragraph 11 shall be construed as imposing on Grantee any of the obligations of
the lessor under the Leases. The provisions of this Paragraph 11 shall be in
addition to, and not in lieu of, the provisions of the Assignment, and, if any
conflict or inconsistency exists between the provisions of this Security Deed
and the provisions of the Assignment with respect to the Leases or Rents, the
provisions of the Assignment shall control, except to the extent that this
Security Deed shall impose greater burdens upon Grantor, shall further restrict
rights of Grantor or shall give Grantee greater rights. Grantee shall be
entitled to all the rights and benefits of the applicable laws of the State. It
shall never be necessary for Grantee to institute legal proceedings of any kind
whatsoever to enforce the provisions of this Paragraph 11(a). The rights of
Grantee hereunder in the Leases and Rents shall be subject to (i) the rights of
Grantee in the Leases and Rents, and (ii) the rights of Grantee in the Leases
and Rents and revenues created under the Assignment.
(b) Except as otherwise provided in the Loan Agreement, Grantor shall not,
without the prior written consent of Grantee, enter into any Material Lease with
respect to the Premises. For purposes of this Security Deed and all of the
Transaction Documents, the term "Material Lease" shall mean (xx) a lease
demising 5% or more of the floor area of the Premises regardless of the term of
such lease or (yy) a lease demising any room or suite in the Premises for a
period in excess of 365 calendar days (including so-called seasonal leases
aggregating to a time period in excess of 365 days whether or not such days run
consecutively). All new Leases (including Material Leases) shall be with tenants
unaffiliated with Grantor, shall be on arms-length terms and conditions and
shall be at annual rents at least comparable to the market rents then being paid
for comparable premises in the vicinity of the Premises.
(c) Any Lease entered into by Grantor from and after the date hereof and
each renewal of an existing Lease (excluding, however, a renewal pursuant to an
option contained in an existing Lease) shall provide:
(i) that such Lease is and shall be subject and subordinate in all respects
to this Security Deed and the lien created hereby, and to any renewals thereof,
including any increase in the principal amount secured by this Security Deed,
and any increase in the interest rates set forth in the Note and to each and all
of the rights of Grantee or any holder thereof;
(ii) that such provision shall be self-operative;
(iii) that, in confirmation of such subordination, each tenant under a
Lease (each, a "Tenant" and, collectively, the "Tenants") shall promptly execute
and deliver following Grantee's written request such commercially reasonable
agreement of subordination that Grantee may request; and
(iv) that the Tenant shall execute and deliver estoppel certificates (each,
a "Tenant Estoppel Certificate") addressed to Grantee certifying as to the
following information:
(A) an identification of the Lease and all modifications by date, parties,
and space;
(B) the commencement date and expiration dates of the original term and any
renewal periods of such Lease;
(C) the base rent and additional rent then payable under such Lease;
(D) that such Lease is in full force and effect;
(E) that, to the best knowledge of such Tenant, Grantor is not in default
of any of the terms of such Lease (or, if in default, specifying the default);
(F) that, to the best knowledge of such Tenant, it has no rights of offset,
defenses or counterclaims under the Lease (or, if it has any, specifying the
same); and
(G) the last day to which base rent under the Lease has been paid.
(d) Grantor, promptly after obtaining actual knowledge thereof, shall
notify Grantee of the termination of any Material Lease, the receipt of any
notice of default under any Material Lease, and of any notice, action or
proceeding regarding any Material Lease which may, in Grantor's reasonable
judgment, materially and adversely affect the Mortgaged Property.
(e) Grantor shall at all times perform and comply with, or cause to be
performed and complied with in all material respects, all of the terms,
covenants and conditions of the Leases to be performed or complied with by
Grantor thereunder.
(f) Upon written notice, but not more frequently than annually, Grantor
shall deliver to Grantee, on request, if applicable, a rent roll and schedule of
the Leases then in existence, certified by Grantor to be true and complete,
together with a counterpart original or a copy of every Lease and any amendments
with respect to which a counterpart original or copy has not previously been
furnished to Grantee, and containing such other information as Grantee may
reasonably request. In addition, Grantor, upon Grantee's reasonable request,
shall use reasonable efforts to obtain from each tenant at the Premises a Tenant
Estoppel Certificate.
(g) All security or other deposits, if any, of Tenants held by Grantor
(collectively, "Security Deposits") shall be treated as trust funds of Grantor
and shall be deposited in a tenant's security account maintained by Grantor at a
commercial bank, savings bank or savings and loan association, identified to
Grantee.
(h) The provisions in subparagraphs 11(b), (c) and (f) of this Paragraph
shall not apply to any nightly rentals or other arrangements for occupancy of
individual hotel rooms or suites at the Premises in the ordinary course of the
operation of Grantor's hotel business, provided that any such nightly rentals or
other arrangements for occupancy are not effected pursuant to Material Leases.
12. Maintenance of the Mortgaged Property; Changes
(a) Grantor agrees to keep, operate and maintain the Mortgaged Property as
a first-class, full-service Marriott hotel and in compliance in all material
respects with the Loan Agreement and the Management Agreement, subject to
Uncontrollable Circumstances (as defined in the Loan Agreement), Temporary
Takings (as defined in Paragraph 14(d) hereof) and temporary closures for
repairs in the ordinary course of Grantor's business (provided that such
temporary closures shall not in any event affect the entire hotel or a material
part thereof and shall not last longer than thirty (30) consecutive days) and
further subject to the effects of casualty and condemnation provided that
Grantor is using diligent efforts to mitigate the effects of any such event to
the extent required by, and in compliance with, the provisions of Paragraph 13
hereof, with respect to the effects of casualty, and Paragraph 14 hereof, with
respect to the effects of any Condemnation Proceedings. Without limitation,
Grantor agrees:
(i) not to desert or abandon all or any portion of the Mortgaged Property;
(ii) to keep, or cause to be kept, the Mortgaged Property and the sidewalks
and the curbs adjoining the Mortgaged Property in good, safe and insurable
condition and as required by Legal Requirements (whether or not a violation has
been noted or issued therefor);
(iii) to maintain, or cause to be maintained or replaced, all Improvements,
Equipment and Personal Property in substantially the same or better condition as
they exist on the date hereof;
(iv) not to commit or suffer waste;
(v) not to make or permit to be made, except as permitted by the
Transaction Documents, any structural or non-structural alterations in or
additions to the Improvements (collectively, "Changes") or demolish the
Improvements or any portion thereof, except in accordance with the provisions of
the Transaction Documents and with the prior written consent of Grantee, which
consent shall not be unreasonably conditioned, withheld or delayed, except (x)
as may otherwise be permitted by the provisions of this Security Deed (including
the provisions of Paragraph 12(b)), or (y) as may be required by any
Governmental Authority, subject to the provisions of Paragraph 13 hereof;
(vi) except as otherwise provided in Paragraph 13 hereof, to promptly
repair, replace, restore or rebuild, or cause to be promptly repaired, replaced,
restored or rebuilt, all Improvements now or hereafter constituting a part of
the Mortgaged Property which may become damaged or destroyed, with materials and
workmanship of as good quality as existed before such damage or destruction;
(vii) to refrain from impairing or diminishing the value of the Mortgaged
Property or the security value of this Security Deed; and
(viii) not to remove any of the Equipment or Personal Property without the
prior written consent of Grantee, except for substitution or replacement in the
ordinary course of business of any component of Equipment or Personal Property
with items of equivalent value and utility, provided, however, that Grantor
shall not be required to replace any Personal Property or Equipment if the same
shall be obsolete or if Grantor shall no longer have any use for any such
Equipment or Personal Property.
Notwithstanding anything to the contrary contained in this Paragraph 12(a),
nothing herein shall preclude Grantor's right to decide, in the exercise of its
good business judgment, the manner, methodology and extent of Grantor's
maintenance or repair of the Mortgaged Property, provided that the Mortgaged
Property and Grantor shall at all times comply with all Legal Requirements, and
that the Premises continuously (except during periods of Uncontrollable
Circumstances, restoration or repair) operates as a first-class, full-service
Marriott hotel and at all times in compliance in all material respects with the
Loan Agreement and the Management Agreement.
(b) Notwithstanding anything to the contrary contained in Paragraph 12(a),
the prior consent of Grantee shall not be required with respect to those Changes
which are either (i) approved by Grantee pursuant to the Loan Agreement,
including any amounts disbursed from any account provided for in the Loan
Agreement or the Cash Management Procedures or disbursed pursuant to any
applicable budget described in the Loan Agreement, or (ii) which (xx) are
non-structural, (yy) will not adversely affect any building system and (zz)
which in the good faith estimate of Grantor will not, with respect to any single
Change or related set of Changes, cost in excess of $25,000.00.
(c) In giving consent to any Changes or other demolitions or alterations to
the Improvements, Grantee, in the exercise of its reasonable consent right as
set forth in Paragraph 12(a) shall take into account evidence provided by
Grantor that the completion of such Changes, demolition or other alterations
will not adversely affect Grantor's financial condition, the value of the
Mortgaged Property or the Net Operating Income (as defined in the Loan
Agreement) therefrom. If the cost of any proposed Changes is in excess of the
amount provided in Paragraph 12(b), Grantee, in the exercise of its reasonable
consent right, may require the Grantor to post collateral in the amount of the
estimated cost of any such Change or to take such other steps to ensure
completion of the Changes as may be prudent for a mortgage lender in similar
circumstances considering all of the factors of Grantor's operation of the
Premises and the continuation of Net Operating Income therefrom.
(d) All Changes shall be performed lien-free (subject to the provisions for
bonding of liens and contests set forth in Paragraph 16 hereof), in a good and
workmanlike manner, and in compliance with all Legal Requirements. No material
part of the Improvements shall be demolished in connection with any Changes and
the hotel operations at the Premises shall not be suspended as a consequence
thereof. Promptly upon completion of any material structural Changes, as-built
plans and evidence reasonably satisfactory to Grantee of lien-free construction
shall be delivered to Grantee.
(e) Grantee, and its agents or designated representatives, shall, upon
reasonable prior notice to Grantor and at reasonable times, have the right of
entry and free access to the Mortgaged Property to inspect any work authorized
by Grantee and the work done, labor performed, materials furnished or Changes to
the Mortgaged Property. Grantor shall make the officers and directors of the
general partner of Grantor and such regional supervisors as are primarily
charged with responsibility over such matters available for Grantee to discuss
Grantor's affairs, finances and accounts relating to any work done, labor
performed, materials furnished or Changes to the Mortgaged Property and will
cooperate with, and request that its contractors and any subcontractors
cooperate with, Grantee or any of its designated representatives to enable them
to perform these functions, at all reasonable times and as often as Grantee may
reasonably request.
(f) Grantor, in connection with its obligations hereunder to maintain the
Mortgaged Property as a first-class, full-service Marriott hotel, represents and
warrants to Grantee that: the Mortgaged Property has adequate rights of access
to public ways and is served by adequate water, sewer, sanitary sewer and storm
drain facilities; all public utilities necessary to the continued use and
enjoyment of the Mortgaged Property as presently used and enjoyed are located in
the public right-of-way abutting the Mortgaged Property or in easements
benefitting the Premises, and all such utilities are connected so as to serve
the Mortgaged Property without passing over other real property (except as
covered by such easement benefitting the Premises); all roads necessary for the
full utilization of the Mortgaged Property for its current purpose have been
completed and dedicated to public use and accepted by all Governmental
Authorities or are the subject of access easements for the benefit of the
Mortgaged Property; except as described in the Disclosure Schedule the Mortgaged
Property is not located in a flood hazard area as defined by the Federal
Insurance Administration; and except as disclosed in the Title Policies with
respect to the Premises, there are no pending or, to the Best Knowledge of
Grantor, proposed special or other assessments for public improvements or
otherwise affecting the Mortgaged Property, nor, to the Best Knowledge of
Grantor, are there any contemplated improvements to the Mortgaged Property that
may result in such special or other assessments.
13. Damage to and Destruction of the Mortgaged Property
(a) In the event that the Mortgaged Property shall be damaged or destroyed,
in whole or in part, by fire or other casualty, whether insured or uninsured,
Grantor shall give prompt written notice thereof to Grantee, together with
Grantor's best estimate of the cost of restoration (the "Restoration Cost").
Subject to the provisions of this Paragraph 13, Grantor shall restore the
Premises to the standard required by Paragraph 12(a)(vi) of this Security Deed.
Grantor shall timely file all claims or proofs of claim so as not to prejudice
any claim and, if the Restoration Cost is equal to or greater than an amount
(the "Restoration Benchmark") equal to $1,000,000.00, or, irrespective of the
Restoration Cost, if an Event of Default exists as of the date of submission of
any claims or proofs of claim, and until the Debt has been paid in full, Grantor
shall submit copies of all claims or proofs of claim and other submissions to
Grantee for the written approval of Grantee prior to any such filing, which
approval shall not be unreasonably withheld, conditioned or delayed.
(b) Provided that no Event of Default exists at the time of settlement,
Grantor shall have the right to settle any insurance claim with respect to any
casualty where the Restoration Cost is less than the Restoration Benchmark, but
shall give prompt written notice of any such claim and settlement to Grantee. In
such event, Grantor shall apply the Insurance Proceeds relating to such casualty
to restoration, replacement, rebuilding or repair (hereinafter collectively
referred to as "Restoration") of the damage to the standard required by
Paragraph 12(a)(vi) hereof.
(c) If the Restoration Cost equals or exceeds the Restoration Benchmark,
and unless Grantor has obtained the release of this Security Deed as a Casualty
Event Release (as hereinafter defined) in accordance with the Loan Agreement,
Grantee shall have the right to participate in the settlement of all insurance
claims relating to such casualty, and all Insurance Proceeds relating to such
casualty shall be paid directly to Grantee as their interest may appear, and,
after settlement of the claim(s) and subject to Paragraph 13(d) hereof, such
Insurance Proceeds shall be deposited in the subaccount for Insurance Proceeds
(as described in Section 4.2 of the Cash Management Procedures) of the Cash
Collateral Account (as defined in the Loan Agreement) and advanced to Grantor
from time to time (subject to the conditions set forth below) in reimbursement
for amounts expended by Grantor or as direct payments to contractors in
Restoration of the Mortgaged Property. Upon completion of the entire Restoration
and provided no uncured Event of Default exists at the time of payment, Grantee
shall pay the remaining amount of the Insurance Proceeds, if any, to Grantor;
provided, however, that nothing herein contained shall prevent Grantee from
applying at any time the whole or any part of the Insurance Proceeds to the
curing of any default under any Transaction Document or to the payment of the
Debt in the circumstances set forth in Paragraph 13(d). Advances of Insurance
Proceeds shall be made available to Grantor, no less frequently than monthly, in
accordance with the general procedures employed at the time by Grantee in
connection with the disbursement of loan proceeds in general by Grantee,
including, without limitation, endorsements to each of the Titles Policies
insuring the continued first priority lien of this Security Deed against
mechanics' liens that may arise out of the Restoration and appropriate
certifications from a licensed architect or engineer selected by Grantor subject
to the reasonable approval of Grantee (each, an "Architect") that the requested
payment is for work completed in accordance with plans and specifications
approved by Grantee and that the balance of funds held on deposit after such
payment will be sufficient to pay the Restoration Cost (provided, however, that
if the Restoration Cost is or is estimated to be less than $1,000,000.00,
Grantee will accept a certificate of the officer of the general partner of
Grantor certifying to this effect), and evidence satisfactory to Grantee that no
liens have been filed for the labor and materials used in connection therewith
and that the requested payment will be received in trust, to be applied first to
the payment for such labor and materials in amounts which are equal to the
percentage of completion attained at the time of such advance, less, in the case
of any Restoration in which the original estimated Restoration Cost is
$500,000.00 or more, all amounts previously advanced and a holdback of 10% (or
such lesser amount as may be customary in the trade in such location or as may
be required under the applicable restoration contract, but in no event less than
5% for any contact where a holdback is required), which remaining amounts will
be advanced upon full completion of the Restoration as due under the applicable
Restoration contract. All Property Insurance Proceeds and other sums deposited
with Grantee pursuant to this Paragraph 13(b), until expended or applied as
provided in this Paragraph 13(b), shall constitute additional security for the
Debt and shall be invested in Permitted Investments (as such term is defined in
the Loan Agreement) with income thereon inuring to the benefit of Grantor in
accordance with the Loan Agreement.
(d) Notwithstanding the foregoing, if an Event of Default exists or if, in
Grantee's reasonable judgment based on professional consultation:
(i) the Restoration of the Improvements cannot be completed (A) so as to
constitute an economically viable building or (B) at least six (6) months prior
to the Maturity Date; or
(ii) the amount of business interruption insurance is insufficient to cover
all fixed and operating expenses of the Premises, including such portion of debt
service on the Loan as is reasonably allocable to the Premises, during
Restoration and until the operation of Grantor's business at the Premises is
resumed; or
(iii) the amount of Insurance Proceeds equals or exceeds the amount of the
outstanding principal balance of the Loan;or
(iv) Restoration of the Mortgaged Property cannot be completed except at a
Restoration Cost which exceeds the amount of available Insurance Proceeds and
Grantor shall not have deposited with Grantee, within ninety (90) days following
Grantee's receipt of such Insurance Proceeds and delivery to Grantor of notice
of a deficiency, an amount, in cash or cash equivalent, equal to the excess of
the estimated Restoration Cost as determined by an Architect over the amount of
such Insurance Proceeds;
then Grantee shall have the option to apply Insurance Proceeds to the
payment of the Note, interest accrued and unpaid thereon (but no Yield
Maintenance Premium shall be due), and other unpaid amounts of the Debt, all in
such order as Grantee shall designate in accordance with the Transaction
Documents, provided, however, that, except as otherwise provided in the Loan
Agreement, any such application shall in no event affect the payments to be made
in respect of the Note.
(e) Grantor shall, promptly after the occurrence of a casualty, commence
and thereafter with reasonable diligence prosecute to completion any Restoration
of the Mortgaged Property or part thereof to the standard required by Paragraph
12(a)(vi) hereof. Any such Restoration shall be undertaken and completed in
accordance with this Paragraph 13, subject to the final provision of this
Paragraph 13(e). All Restoration shall be in a good and workmanlike manner with
reasonable diligence, and in compliance with all Legal Requirements. Seasonality
or weather permitting, if Grantor fails to commence Restoration within thirty
(30) days following Grantee's receipt of Insurance Proceeds or fails to
prosecute the Restoration to completion, Grantee may upon ten (10) days' notice
to Grantor, but shall not be obligated to, perform the Restoration, and may use
any of the Insurance Proceeds and Grantor's funds deposited pursuant to
Paragraph 13(c) or 13(d) in payment therefor. Grantor shall pay to Grantee,
within ten (10) days after written demand, the amount of any deficiency between
funds available for the Restoration and the Restoration Cost (including funds
deposited by Grantor pursuant to Paragraph 13(c) or 13(d)) together with
interest thereon at the Default Rate from such tenth (10th) day through and
including the date of payment to Grantee.
(f) It is intended that, anything contained herein to the contrary
notwithstanding, no trust or fiduciary relationship shall be created by the
receipt by Grantee of any Insurance Proceeds, but only a debtor-creditor
relationship between Grantee, on the one hand, and Grantor, on the other, and
only to the extent of the Insurance Proceeds.
(g) If any Insurance Proceeds are not paid until after the extinguishment
of the Debt, whether by foreclosure or otherwise, and Grantee shall not have
received the entire amount of the Debt outstanding at the time of such
extinguishment, then such Insurance Proceeds, to the extent of the amount of the
Debt not so received, shall be paid to Grantee and be the property of Grantee;
and Grantor hereby assigns, transfers and sets over to Grantee all of Grantor's
right, title and interest in and to such proceeds. The balance of such Insurance
Proceeds, if any, shall be paid to and be the property of Grantor. The
provisions of this Paragraph 13(g) shall survive the termination of this
Security Deed by foreclosure or otherwise as a consequence of the rights and
remedies of Grantee hereunder after an Event of Default.
(h) Subject to the provisions of Paragraph 13(d) or 13(e), as applicable,
nothing herein contained shall be deemed to excuse Grantor from repairing or
maintaining the Mortgaged Property as provided in this Security Deed or
restoring all damage or destruction to the Mortgaged Property, regardless of the
sufficiency or availability of Insurance Proceeds, and the application or
release by Grantee of Insurance Proceeds shall not be deemed, in and of itself,
to cure or waive any default or Event of Default or notice of default.
Notwithstanding any casualty, Grantor shall continue to pay the Debt at the time
and in the manner provided for its payment in this Security Deed and the Note
and the Debt shall not be reduced until any Insurance Proceeds shall have been
actually received by Grantee and applied to the discharge of the Debt or
payments with respect to a Casualty Event Release.
(i) Grantee, to the extent that Grantee has not been reimbursed therefor by
Grantor, shall be entitled as a first priority out of any Insurance Proceeds, to
reimbursement for all actual costs, fees, reimbursements and expenses of Grantee
incurred in the determination and collection of any such proceeds.
14. Condemnation Proceedings
(a) In the event that the Mortgaged Property, or any part thereof, shall be
taken pursuant to Condemnation Proceedings, Grantee shall, as hereinafter set
forth, have certain consent rights with respect to settlement of any such
Condemnation Proceedings, but shall not participate in any such Condemnation
Proceedings except as expressly provided herein, and any Condemnation
Proceedings that may be made or any proceeds thereof are hereby assigned to
Grantee and shall be received and deposited into the subaccount for Condemnation
Proceeds (as described in Section 4.2 of the Cash Management Procedures) of the
Cash Collateral Account and held and distributed by Grantee in the manner herein
set forth. Grantor will give Grantee prompt notice of the actual commencement of
any Condemnation Proceedings affecting the Mortgaged Property or of any
threatened condemnation of which Grantor becomes aware, including proceedings
for severance and change in grade of streets, and will deliver to Grantee copies
of any and all papers served in connection with any Condemnation Proceedings.
Grantee is hereby authorized to commence, appear in, and prosecute in its own
name or Grantor's name any action or proceeding relating to any Condemnation
Proceedings, upon not less than ten (10) Business Days' prior written notice to
Grantor, if Grantor has not commenced any such action or proceeding. Grantor may
not settle or compromise any claim in connection with any Condemnation
Proceeding, whether involving a Total Taking, Partial Taking or Temporary
Taking, which claim equals or exceeds, or, at the outset of any such
Condemnation Proceedings, appears to involve a sum which is likely to equal or
exceed, in Grantee's reasonable judgment based on professional consultation, the
Restoration Benchmark, without the prior written consent of Grantee in each
instance, which consent shall not be unreasonably withheld, conditioned or
delayed, and Grantee shall have the right to settle or compromise any claim in
connection therewith (irrespective of amount), without the consent of Grantor
after the occurrence of an Event of Default. Grantor agrees to execute any and
all further documents that may be reasonably required in order to facilitate the
collection of any Condemnation Proceeds and the making of any such deposit and
Grantor hereby appoints Grantee its attorney-in-fact for the limited purpose of
executing any such documents after the occurrence of an Event of Default, such
power being coupled with an interest and irrevocable.
(b) If, at any time during the term of the Loan, there occurs a Total
Taking (as hereinafter defined), Grantee shall collect any Condemnation
Proceeds, and apply the same, after payment of Grantee's reasonable costs of
collection thereof, including reasonable attorneys' fees and disbursements, to
payment of the Debt (but no Yield Maintenance Premium shall be due), all in such
order as Grantee shall designate, provided, however, that except as otherwise
provided in the Loan Agreement, any such application shall in no event affect
the payments to be made in respect of the Note. Any portion of any Condemnation
Proceeds remaining after the payment in full of the Debt shall be released by
Grantee to Grantor. For the purposes of this Paragraph, a "Total Taking" shall
mean any taking or any constructive taking of Grantor's title to the Premises in
Condemnation Proceedings or by agreement by Grantor which shall, in the
reasonable opinion of Grantee, render it impracticable to restore, within six
(6) months prior to the Maturity Date, the portion of the Premises not subject
to such taking to a complete architectural unit of substantially the same
economic viability and for the same purposes and uses as existed immediately
prior to the date of the commencement of the Condemnation Proceedings.
(c) If, at any time during the term of the Loan, there occurs a taking
which is less than a Total Taking (a "Partial Taking"), then, provided that no
Event of Default exists as of the date of submission of Grantor's claim in the
Condemnation Proceeding with respect to such Partial Taking, Grantor shall have
the right to settle any such claim with respect to any Partial Taking where the
Restoration Cost is less than the Restoration Benchmark, but shall give prompt
written notice of any such claim and settlement to Grantee. If the Restoration
Cost equals or exceeds, or, at the outset of such Condemnation Proceedings,
appears to involve a sum which is likely to equal or exceed, in Grantee's
reasonable judgment based on professional consultation, the Restoration
Benchmark, then, unless Grantor has obtained the release of this Security Deed
as a Condemnation Event Release (as hereinafter defined) in accordance with the
Loan Agreement, Grantee shall have the right to participate in the settlement of
such claim and all Condemnation Proceeds relating to such Partial Taking shall
be held by Grantee and shall be released to pay the costs of restoration of the
Improvements (a "Condemnation Restoration") subject to and upon satisfaction of
the conditions set forth in Paragraphs 13(c) and 13(d) hereof as if such
Condemnation Proceeds constituted Insurance Proceeds and the balance, if any,
shall be paid to Grantor; unless, in Grantee's reasonable judgment based on
professional consultation, the Condemnation Restoration cannot be completed in
accordance with the conditions of Paragraphs 13(c) and 13(d). In the event that
there exists an Event of Default, or (xx) any of such conditions shall not have
been met, or (yy) the Condemnation Restoration cannot be completed, in Grantee's
reasonable judgment based on professional consultation, prior to a date which is
at least six (6) months prior to the Maturity Date, regardless of compliance
with all of the other conditions of Paragraphs 13(c) and 13(d), or (zz) if the
Condemnation Proceeds exceed the cost of the Condemnation Restoration, Grantee,
at the discretion of Grantee, shall apply the Condemnation Proceeds, or balance
thereof, to payment of the Debt, (but no Yield Maintenance Premium shall be
due), all in such order as Grantee shall designate, provided, however, that,
except as otherwise provided in the Loan Agreement, any such application shall
in no event affect the schedule of payments to be made in respect of the Note.
If there is any balance of any Condemnation Proceeds remaining in the hands of
Grantee after any payment of the Debt in full, such balance shall be released to
Grantor. In the event that the costs of any permitted Condemnation Restoration,
as estimated reasonably by Grantee at any time, shall exceed the net
Condemnation Proceeds received by Grantee, Grantor shall deposit such deficiency
with Grantee.
(d) In the event of any taking of all or any portion of the Mortgaged
Property for temporary use or occupancy ("Temporary Taking"), any Condemnation
Proceeds with respect to such Temporary Taking shall be treated as Gross
Revenues (as defined in the Loan Agreement) and shall be distributed and applied
in the manner contemplated in the Loan Agreement (but only to the extent that
any such Condemnation Proceeds have not been used for Condemnation Restoration).
(e) Except as otherwise provided in this Paragraph 14(e), nothing contained
in this Paragraph 14 shall relieve Grantor of its duty to maintain, repair,
replace or restore the Improvements or the Equipment or rebuild the
Improvements, from time to time, following any Condemnation Proceedings with
respect to a Partial Taking or Temporary Taking and nothing in this Paragraph 14
shall relieve Grantor of its duty to pay the Debt, which shall be absolute,
regardless of any such occurrence with respect to all or any portion of the
Mortgaged Property. Notwithstanding any taking, whether a Total Taking, a
Partial Taking or a Temporary Taking, Grantor shall continue to pay the Debt at
the time and in the manner provided for its payment in this Security Deed and
the Note, and the Debt shall not be reduced until any award or payment therefor
shall have been actually received by Grantee and applied to the discharge of the
Debt.
(f) If a claim under any Condemnation Proceedings arising during the term
of this Security Deed is not paid until after the extinguishment of the Debt,
whether by foreclosure or otherwise, and Grantee shall not have received the
entire amount of the Debt outstanding at the time of such extinguishment, then
the Condemnation Proceeds relating to any such Condemnation Proceedings, to the
extent of the amount of the Debt not so received, shall be paid to Grantee and
be the property of Grantee; and Grantor hereby assigns, transfers and sets over
to Grantee all of Grantor's right, title and interest in and to such
Condemnation Proceeds. The balance of such Condemnation Proceeds, if any, shall
be paid to and be the property of Grantor. The provisions of this Paragraph
shall survive the termination of this Security Deed by foreclosure or otherwise
as a consequence of the rights and remedies of Grantee hereunder after an Event
of Default.
(g) All Condemnation Proceeds and other sums deposited with Grantee
pursuant to this Paragraph 14, until expended or applied as provided in this
Paragraph 14, shall constitute additional security for the Debt and shall be
invested in Permitted Investments with income thereon inuring to the benefit of
Grantor.
15. Compliance With Agreements, Lawa, etc. Subject to the provisions of
Paragraph 16 hereof relating to permitted contests, Grantor agrees to perform
and comply, and instruct the tenants under any Leases to comply, with all
covenants, agreements and restrictions affecting Grantor, the Mortgaged Property
or any portion thereof, the nonperformance of which would materially impair
Grantor's ability to meet its obligations under any of the Transaction Documents
or would impair the substantial realization by Grantee of the benefits and
rights conferred hereunder or under any of the Transaction Documents, and with
all Legal Requirements, whether the same be directed to the erection, repair,
manner of use or structural alteration of the Improvements or otherwise and to
procure and maintain all licenses or other authorizations required for the
proper use, maintenance and operation of the Mortgaged Property. For the
purposes hereof, "Legal Requirements" shall mean all of the following, whether
or not a note or notice of violation has been entered, issued or received as a
consequence of non-compliance therewith:
(a) statutes, laws, rules, rulings, orders, regulations, ordinances,
judgments, decrees and injunctions of any Governmental Authority (including,
without limitation, Environmental Laws, the Americans with Disabilities Act
(P.L. 101-336, 42 U.S.C. ' 12,101 et seq.), and fire, health, handicapped
access, sanitation, ecological, historic, landmark, zoning, wetlands and
building laws and codes) in any way applicable to Grantor or the Mortgaged
Property or any portion thereof, or to the ownership, use, development,
improvement, occupancy, possession, operation or maintenance of the
Improvements;
(b) requirements of the local Board of Fire Underwriters or similar body
acting in and for the locality in which the Premises are situated;
(c) requirements of each insurance policy covering or applicable to all or
any portion of the Mortgaged Property or the ownership, use, development,
improvement, occupancy, possession, operation or maintenance thereof and all
requirements of the issuer of each such policy;
(d) requirements of each Permit; and
(e) all REAs and all covenants, agreements, regulations, restrictions and
other encumbrances contained in any instrument either of record or known to
Grantor at any time affecting the Mortgaged Property or any portion thereof or
the ownership, use, development, improvement, occupancy, possession, operation
or maintenance thereof, in each case whether now or hereafter enacted or in
force. Grantor agrees to enforce all material provisions of all REAs in
accordance with their terms and to comply with all reasonable requests from
Grantee with respect to such enforcement.
16. Contest of Impositions, Legal Requirements and Liens. Notwithstanding
anything to the contrary contained in this Security Deed, Grantor shall have the
right to contest, at its own expense, by appropriate legal proceedings conducted
in good faith and with due diligence, the amount or validity (or the
applicability to Grantor or the Mortgaged Property or to the Note or this
Security Deed) of any Impositions or encumbrances referred to herein (other than
this Security Deed and the other Transaction Documents) or any Legal
Requirements, provided that (a) Grantor gives Grantee timely notice of its
intention to contest the same and keeps Grantee regularly advised as to the
status of such proceedings, (b) the commencement of such proceedings shall
suspend the collection or enforcement of the matter under contest, (c) there
shall be no impairment of the lien of this Security Deed or undue interference
with the normal conduct of business at the Mortgaged Property, (d) neither the
Mortgaged Property, nor any Rents therefrom, nor any part thereof or interest
therein, would be in any immediate danger of being sold, forfeited, attached,
condemned, vacated or lost, (e) neither Grantor nor Grantee would be potentially
subject to criminal liability or be in imminent danger of civil liability for
failure to comply therewith pending the outcome of such proceedings, (f) in the
case of an Imposition, Grantor shall have either (i) paid the amount in dispute
prior to instituting such contest, in which event the notice requirement of
clause (a) of this Paragraph shall be satisfied by giving notice prior to
initiating such contest rather than prior to making payment, (ii) set aside on
its books such reserves with respect thereto as may be required by sound
accounting principles or, at Grantee's request, furnished security in an amount
equal to 125% of the disputed amount, in rated securities, cash or bond, to
Grantee during the pendency of such proceedings, and (g) if such contest be
finally resolved against Grantor, Grantor shall promptly pay the amount required
to be paid, together with all interest and penalties accrued thereon, and
otherwise comply with the applicable requirement, which payment may be made from
the security, if any, furnished to Grantee pursuant to clause (ii), and any
excess thereof following payment in full of the applicable imposition shall be
returned to Grantor. Grantor shall indemnify and save Grantee harmless from and
against any liability, loss, damage, cost or expense of any kind that may be
imposed upon Grantee in connection with any such contest and any determination
resulting therefrom. If an Event of Default under this Security Deed or any
other Transaction Document shall occur and be continuing during any such
proceeding, Grantor shall pay or cause to be paid to Grantee all refunds
resulting from such proceeding which shall be applied to the payment of the Debt
in such order and priority as Grantee shall determine in its sole discretion
consistent with the Transaction Documents. Following the occurrence of an Event
of Default and until the Debt has been paid in full, and on five (5) days' prior
written notice to Grantor (so long as no time period for seeking reductions
passes or lapses in such 5-day period, but otherwise on such shorter notices as
will not allow any such time period to pass or lapse) Grantor hereby appoints
Grantee as its attorney-in-fact to seek reductions in the assessed valuation of
the Mortgaged Property for real property tax purposes or for other purposes and
to prosecute any action or proceeding in connection therewith. This power of
attorney is a power coupled with an interest and is irrevocable.
17. Cure of Defaults by Grantee. If Grantor shall:
(a) default in the payment of any Impositions as herein required (subject
to the provisions of Paragraph 16 relating to permitted contests);
(b) fail to keep in any material respect the Improvements, Equipment and
Personal Property in good repair and such failure shall not be cured within any
applicable grace period;
(c) fail or refuse to insure the Mortgaged Property as herein required;
(d) fail to pay and satisfy liens or encumbrances against the Mortgaged
Property in accordance with the terms of this Security Deed (subject to the
provisions of Paragraph 16 relating to permitted contests);
(e) fail to pay any other sum or make any other deposit elsewhere in this
Security Deed required to be paid or deposited and such failure shall not be
cured within any applicable grace period; or
(f) otherwise fail to make any payment or fail in any material respect to
perform any act required to be made or performed hereunder, and such failure
shall not be cured within any applicable grace period; then Grantee, following
not less than five (5) Business Days' prior written notice to Grantor (or such
shorter notice as shall be reasonable under the circumstances, including no
notice in the case of an emergency in which no notice may feasibly be given) and
without waiving or releasing Grantor from any obligation or default hereunder,
may (without having any obligation to do so):
(i) pay such Impositions or redeem the Mortgaged Property from any tax sale
or forfeiture or purchase any tax title obtained, or that shall be obtained,
thereon without inquiring into the validity or invalidity of any such
Impositions or tax deed;
(ii) make repairs to the Mortgaged Property;
(iii) procure such insurance and pay such insurance premium charges; it
being agreed that the power of attorney granted by Grantor to Grantee pursuant
to the final clause of this Paragraph 17 shall apply to the matters set forth in
the immediately preceding sub-clauses (i), (ii) and (iii);
and, additionally, in accordance with and consistent with the provisions of
this Paragraph 17 and the contractual agreements between Grantor and Grantee set
forth in the Transaction Documents generally, but without the right to utilize
the power of attorney set forth in the final clause of this Paragraph 17,
Grantee may:
(iv) pay or settle any and all suits or claims for such liens or satisfy
any such encumbrances or any other claims that may be made against the Mortgaged
Property or any part thereof;
(v) pay any other sum or make any other deposit herein required to be paid
or made by Grantor; or
(vi) pay any such sum or perform any such act for the account and at the
expense of Grantor, and enter upon the Mortgaged Property upon reasonable notice
and at reasonable times for any such purpose and take all such action thereon
as, in the reasonable opinion of Grantee, may be necessary or appropriate
therefor.
All monies paid for any of the purposes set forth in this Security Deed and
all expenses paid or incurred in connection therewith, including reasonable
attorneys' fees and disbursements and any other monies disbursed or advanced by
Grantee to protect the lien of this Security Deed, or expended pursuant to any
of sub-clause (i) through (vi) above, shall be due and payable by Grantor to
Grantee within ten (10) days after written demand therefor and, if not paid
within such ten (10) day period, shall bear interest, from and including the
date of disbursement or advance to and including the date of repayment by
Grantor, at the Default Rate, and to the extent that such amounts and costs paid
by Grantee shall constitute payment of (A) Impositions, (B) insurance premiums,
(C) expenses incurred in connection with upholding the lien of this Security
Deed, including, without limitation, the expenses of any litigation to prosecute
or defend the rights and liens created by this Security Deed, or (D) any
amounts, costs or charges to which Grantee becomes subrogated, upon payment,
whether under recognized principles of law or equity or express statutory
authority; then, and in each such event, such amounts, costs and charges and
interest thereon shall be added to the Debt and be secured by this Security
Deed. For the purpose of carrying out the provisions and exercising the rights,
powers and privileges granted by sub-clauses (i) or (ii) or (iii) of this
Paragraph, Grantor hereby irrevocably constitutes and appoints Grantee,
following an Event of Default, its true and lawful attorney-in-fact to execute,
acknowledge and deliver any instruments and do and perform any acts such as are
referred to in this Paragraph, in the name and on behalf of Grantor, with full
power of substitution vested in Grantee to designate another entity or entities
to exercise any power and perform any function which Grantee could perform
pursuant to the foregoing grant. This power of attorney is a power coupled with
an interest and is irrevocable.
18. Indemnity. Subject to the Non-Recourse provisions of the final sentence
of this Paragraph 18, Grantor hereby indemnifies Grantee and its directors,
officers, agents and employees (collectively the "Indemnified Parties"), and
saves each of them harmless from and against all liabilities (other than tax
liability imposed on Grantee for any income earned by reason of the Note or any
other Transaction Document) claims, demands, actions, proceedings, suits, causes
of action, injuries, obligations, loss, actual damages (including, without
limitation, Grantee's costs and expenses related thereto and any applicable
Yield Maintenance Premium), fines, penalties, judgments, costs, expenses
(including, without limitation, reasonable architects', engineers',
accountants', consultants' and attorneys' fees and disbursements) expenses of
bonding liens, and other litigation expenses, incurred by, imposed upon or
asserted against the Indemnified Parties (except as a result of the willful,
wrongful acts or omissions or gross negligence of the applicable Indemnified
Party) in connection with or arising out of:
(a) Grantee's interest in this Security Deed, the Assignment, the Note, any
other Transaction Document, or any other document or instrument hereafter
executed by Grantor and delivered to Grantee in connection with the Debt or any
restructuring thereof;
(b) any acts or omissions of Grantee in connection with the reasonable
exercise by Grantee of any right, power or remedy available to Grantee under
this Security Deed or any other Transaction Document, including, without
limitation, any action or proceeding to protect the lien of this Security Deed
or to foreclose this Security Deed;
(c) any failure by Grantor to comply with any terms, conditions or other
provisions set forth in this Security Deed or any other Transaction Document;
(d) any use, non-use, possession, occupancy, alteration, repair, condition
(patent or latent), operation, maintenance, or management of the Mortgaged
Property or any portion thereof;
(e) any accident, injury (including death), or damage to any person or
property occurring in, on or about the Mortgaged Property or any part thereof,
whether resulting from any act, omission or negligence of Grantor, its agents,
employees, contractors, lessees, sublessees, licensees, invitees, or otherwise;
(f) any misrepresentation by Grantor, or its general partner contained in
this Security Deed or in any other Transaction Document;
(g) any claim for any premium or other charge or any brokerage commission
or other compensation by any person acting as such with respect to the Loan and
this Security Deed and claiming through Grantor but not through Grantee;
(h) any capital improvements or other work or thing done in, on or about
the Mortgaged Property or any part thereof (except any of the foregoing that are
directed by Grantee);
(i) any past, current and/or future offer for the purchase or sale of
equity interests in Grantor, including, without limitation, liabilities under
any applicable securities or blue sky laws; or
(j) any tax attributable to the ownership, assignment, execution, delivery,
filing, recording or enforcement of any of the Transaction Documents.
GRANTOR'S OBLIGATION TO SO INDEMNIFY THE GRANTEE SHALL INCLUDE
INDEMNIFICATION FOR ANY SUCH MATTERS CAUSED IN WHOLE OR IN PART BY THE
NEGLIGENCE OF THE GRANTEE.
Nothing contained in this Paragraph 18, however, shall impose upon Grantor
the costs of the Securitization which are, pursuant to the Loan Agreement, to be
paid by Grantee. All sums payable to any of the Indemnified Parties under this
Paragraph 18 shall be deemed a part of the Debt, shall be paid by Grantor to the
applicable Indemnified Party within ten (10) days after written demand (unless
another period is expressly set forth in this Security Deed or another
Transaction Document) and, if not paid within such ten (10) day or other
specified period, shall accrue interest at the Default Rate from and including
the date of disbursement or advance by the applicable Indemnified Party to and
including the date of repayment by Grantor. Grantor's obligations under this
Paragraph 18 shall, until the expiration of all applicable statutes and periods
of limitation, if any, survive payment in full of the Note and any discharge,
release or satisfaction of this Security Deed, any complete or partial
foreclosure of this Security Deed and/or the delivery of one or more deeds in
lieu of any such foreclosure. Grantor's obligations under this Paragraph 18
shall be Non-Recourse (as such term is defined in the Loan Agreement); provided
that nothing contained herein shall be deemed to be in derogation of any right
or remedy of Grantee under any Transaction Document which, by its express terms,
is a right or remedy which is not Non-Recourse as to Grantor.
19. Events of Default
(a) Each of the following events shall constitute an "Event of Default"
hereunder:
(i) an "Event of Default", as such term is defined in the Loan Agreement;
(ii) failure of Grantor to pay on the due date any payment due under the
Note;
(iii) failure by Grantor to perform or observe in any material respect any
other covenant, obligation, condition or provision hereunder which failure
continues unremedied for a period of thirty (30) days after written notice
thereof to Grantor requiring the same to be remedied; provided, however, that if
such failure is susceptible of cure but cannot be cured within such thirty (30)
day period and provided Grantor has within such thirty (30) day period commenced
and is diligently prosecuting such cure, such thirty (30) day period shall be
extended to not later than one hundred eighty (180) days after the date on which
Grantor received such written notice;
(iv) any event which, pursuant to clause (xii) of Paragraph 3(d),
constitutes an Event of Default with respect to a Permitted Subordinate Mortgage
(provided, however, that Grantee's remedies shall be exercised in accordance
with such clause (xii)) or any default beyond any applicable grace period under
any lien or deed of trust encumbering any part of the Mortgaged Property,
whether senior or junior in lien to this Security Deed and whether now or
hereafter held by Grantee or any other party.
(b) Upon the occurrence of an Event of Default, Grantee may, at its option,
declare the entire unpaid balance of the Debt to be forthwith due and payable,
and thereupon such balance shall become so due and payable without presentment,
protest or further demand or notice of any kind, all of which are hereby
expressly waived, and Grantor will forthwith pay to Grantee the entire Debt,
including principal of and interest accrued on the Note and, to the extent
permitted by law, the Yield Maintenance Premium, and all other premiums and
charges, if any, provided in the Note, this Security Deed and the other
Transaction Documents; provided, however, that if at any time prior to the
Maturity Date the balance of the Debt shall become so due and payable, and all
arrears of interest and other charges of any kind due as part of the Debt (with
interest so far as may be lawful on any overdue installments of interest at the
Default Rate) shall be paid, and all defaults (other than the payment of
principal hereunder which has been so declared due and payable) shall have been
cured or the cure thereof secured to the sole satisfaction of Grantee or other
provision deemed by Grantee to be adequate shall be made therefor, then and in
such case Grantee, in its sole discretion, and by written notice delivered to
Grantor, may waive such Event of Default and its consequences and rescind or
annul such declaration, but no such waiver shall extend to or affect any
subsequent default, or impair any right consequent thereon.
(c) To the extent that a default under this Security Deed or any of the
other Transaction Documents is not cured within the applicable notice and cure
period, if any, specified herein or therein, the same shall not constitute an
Event of Default hereunder or thereunder, as the case may be, if such default is
subsequently cured and such cure is accepted in writing by Grantee or if such
default is subsequently waived in writing by Grantee and any rights or remedies
available to Grantee hereunder or under any of the other Transaction Documents
on account of any such Event of Default so cured and accepted or waived shall
thereupon terminate (but such remedies shall continue to be available in
connection with any subsequent or other Events of Default, whether of like or
unlike nature).
20. Default Rate. Upon an Event of Default, Grantee shall be entitled to
receive and Grantor shall pay interest on the entire unpaid principal sum
(including, without limitation and to the extent permitted by law, any accrued
and unpaid interest thereon) at the "Default Rate" (as defined in the Note) for
the duration of such default (unless Grantee has, at its option, declared the
entire unpaid balance of the Debt to be forthwith due and payable in which case
interest shall continue to be paid at the Default Rate until the Debt has been
paid in full). In no event shall the Default Rate exceed the maximum rate
allowed by law. Any interest that accrues under any of the Transaction Documents
at the Default Rate shall be payable whether accruing before or after entry of
any judgment.
21. Remedies. If any one or more of the Events of Default shall occur, then
and in any such event Grantee shall have the right of acceleration and all other
remedies provided in this Security Deed or in the Note or otherwise provided in
any Transaction Document, by law or statute or in equity, all of which rights
and remedies shall, to the fullest extent permitted by law, be cumulative. To
the extent the laws of the State limit or deny (i) the availability of the
exercise of any of the remedies set forth below, including without limitation,
the remedies involving a power of sale on the part of the Grantee and terms of
this Security Deed, or (ii) the enforcement of waivers and indemnities made by
Grantor, such remedies, waivers or indemnities shall be exercisable or
enforceable, any provisions in this Security Deed to the contrary
notwithstanding, if, and only to the extent, permitted by the laws of the State
in force at the time of the exercise of such remedies or the enforcement of such
waivers or indemnities without regard to the enforceability of such remedies,
waivers or indemnities at the time of execution and delivery of this Security
Deed. Such rights and remedies of Grantee shall include, without limitation, the
following:
(a) Possession, Management and Income. Grantor, upon written demand of
Grantee, shall forthwith surrender to Grantee the actual possession of the
Mortgaged Property, and Grantee and such officers or agents as either may
appoint, (i) may enter and take possession of the Mortgaged Property together
with the books, papers and accounts of Grantor relating thereto, (ii) may
dispossess Grantor, its agents and servants and all other persons therefrom
(excluding bona fide hotel guests), (iii) may hold, operate and manage the
Mortgaged Property and from time to time make all necessary repairs and such
alterations, additions, advances and improvements as Grantee shall deem prudent,
(iv) may receive the Rents thereof and exercise all rights and powers of Grantor
with respect to the Mortgaged Property and the Improvements, whether in the name
of Grantor or otherwise, including, without limitation, the right to make,
cancel, enforce or modify Leases, obtain and evict tenants (in accordance with
applicable law), and demand, sue for, collect and receive all Rents and may pay
therefrom all costs and expenses of so taking, holding and managing the
Mortgaged Property, including, without limitation, reasonable compensation to
Grantee's agents and attorneys, all prior or subordinate liens and encumbrances,
all Impositions and other assessments and other charges then due or thereafter
accruing, and all expenses of such repairs, alterations, additions, improvements
and other disbursements made by Grantee pursuant to the terms hereof, and
Grantee may apply the remainder of the monies so received by it to the payment
of the unpaid principal of, and interest on, the Note, the Yield Maintenance
Premium and other items of the Debt then due and payable, and (v) may succeed to
all the rights of Grantor, including any rights to unearned premiums, in and to
any insurance policies covering all or any portion of the Premises, the
Improvements, the Personal Property and/or the Equipment, including the right to
receive Refunds, Insurance Proceeds and Condemnation Proceeds which would
otherwise be payable to Grantor pursuant to this Security Deed. Grantee shall
not be subject to any liability for, or by reason of, any such entry, taking
possession, exclusion, holding, operation or management, except for willful,
wrongful acts or omissions or gross negligence of Grantee or its officers,
directors, agents, contractors or employees;
(b) Partial Foreclosure. Grantee, at its option, may upon five (5) days'
notice or such longer notice period as may be required by statute institute
proceedings for the complete or partial foreclosure of this Security Deed or
take such steps to protect and enforce its rights whether by action, suit or
proceeding in equity or at law for the specific performance of any covenant,
condition or agreement in the Note or in this Security Deed (without being
required to foreclose this Security Deed), or in aid of the execution of any
power herein granted, or for any foreclosure hereunder, or for the enforcement
of any other appropriate legal or equitable remedy or otherwise as Grantee shall
elect, including, without limitation, to foreclose this Security Deed for any
portion of the Debt which is then due and payable; provided, however, that if a
partial foreclosure sale is made, such sale shall be subject to the continuing
lien of the Transaction Documents for the unmatured part of the Debt; and such
sale shall not in any manner affect the unmatured part of the Debt, but as to
such unmatured part thereof, and the lien thereon, the same shall remain in full
force and effect as though no foreclosure had occurred. Several foreclosure
sales may be made pursuant to partial foreclosures without exhausting the right
of full or partial foreclosure sale for any unmatured part of the Debt, it being
the purpose to provide for a partial foreclosure sale of the Debt for any
matured portion of the Debt without exhausting the power to foreclose and to
sell the Mortgaged Property pursuant to such partial foreclosure for any other
part of the Debt, whether matured at the time or subsequently maturing, and
without exhausting any right of acceleration and full foreclosure.
Notwithstanding the filing of any partial foreclosure or entry of a decree of
sale therein, Grantee may elect at any time prior to a foreclosure sale pursuant
to such decree to discontinue such partial foreclosure and to accelerate the
Debt by reason of any uncured Event of Default upon which such partial
foreclosure was predicated or by reason of any other Events of Default and
proceed with full foreclosure proceedings;
(c) Suits. To the extent permitted by law, Grantee, at its option, may,
either with or without first taking possession, to proceed by suit or suits in
equity and/or at law, or by any other appropriate remedy or proceeding, protect
and enforce Grantee's rights hereunder whether for the specific performance (to
the extent permitted by law) of any covenant or agreement contained herein or in
the Note or for an injunction against the violation of any of the terms hereof
or thereof or in aid of the exercise of any right, power or remedy granted to
Grantee herein or therein, or to enforce the payment of the Note, or foreclose
the lien and security interest of this Security Deed against the Mortgaged
Property or any part thereof and to have all of the Mortgaged Property or any
part thereof sold in one or more sales (as an entirety or in parcels) under the
judgment or decree of a court of competent jurisdiction or otherwise. All rights
of action under this Security Deed or in respect of the Note may be enforced by
Grantee, without the production of the Note and without the possession thereof
(to the extent Grantee or its agent gives a bona fide lost note affidavit in
compliance with local law) at any trial or other proceeding relative thereto to
the extent permitted by law;
(d) Receiver. To the extent permitted by law and without the necessity to
prove the value or occupancy of the security or the solvency or insolvency of
any person then legally or equitably liable for payment of the Debt, Grantee
shall be entitled as a matter of right, ex parte and without notice, to the
appointment of a receiver to enter upon and take possession of the Mortgaged
Property, perform all acts necessary or useful for the operation, use and
maintenance of the Mortgaged Property and to collect all Rents thereof and apply
the same and to exercise such other powers as are permitted by applicable law
and the court making such appointment may direct and Grantor hereby consents to
the appointment of such receiver. The expenses, including receiver's fees,
reasonable attorneys' fees, costs and disbursements and agent's compensation,
incurred pursuant to the powers herein contained shall be secured by this
Security Deed. The right to enter and take possession of and to manage and
operate the Mortgaged Property, and to collect the Rents, whether by a receiver
or otherwise, shall be cumulative to any other right or remedy hereunder or
afforded by law, and may be exercised concurrently therewith or independently
thereof. Grantee shall be liable to account only for such Rents actually
received by Grantee, whether received pursuant to this subparagraph 21(d) or
subparagraph 21(a). Notwithstanding the appointment of any receiver or other
custodian, Grantee shall be entitled as pledgee to the possession and control of
any cash, deposits, or instruments at the time held by or payable or deliverable
under the terms of this Security Deed to Grantee. Without limiting any of
Grantee's rights hereunder, Grantee shall be entitled, as a matter of strict
right, without notice and upon ex parte application, and without regard to the
value or occupancy of the security, or the solvency of Grantor, or the adequacy
of the Mortgaged Property or other collateral as security for the Notes, to have
a receiver appointed to enter upon and take possession of the Mortgaged
Property, collect the Rents and revenues and apply the same as the court may
direct, such receiver to have all the rights and powers permitted under the laws
of the jurisdiction in which the Mortgaged Property is located. Grantor hereby
waives any requirements on the receiver or Grantee to post any surety or other
bond. Grantee or the receiver may also take possession of, and for these
purposes use, any and all personalty which is a part of the Mortgaged Property
and used by Grantor in the rental or leasing thereof or any part thereof. The
expense (including the receiver*s fees, counsel fees, costs and agent*s
compensation) incurred pursuant to the powers herein contained shall be secured
by this Security Deed. To the extent not prohibited by applicable law, Grantee
shall (after payment of all costs and expenses incurred) apply such Rents and
revenues received by it in the order set forth in Paragraph 23 of this Security
Deed. The right to enter and take possession of the Mortgaged Property, to
manage and operate the same, and to collect the Rents and revenues, whether by
receiver or otherwise, shall be cumulative to any other right or remedy
hereunder or afforded by law, and may be exercised concurrently therewith or
independently thereof. Grantee shall be liable to account only for such Rents
and revenues actually received by Grantee.
(e) Sale in One Parcel. In the event of a sale, the Mortgaged Property may
be sold in one parcel. Grantor hereby waives its rights, if any, to require that
the Mortgaged Property be sold as separate units, tracts or estates;
(f) Security Interest. In addition to the rights and remedies of Grantee
set forth herein and in the Note and the other Transaction Documents, and not in
lieu thereof, Grantee shall have all of the rights and remedies of a holder of a
security interest under the Code, or under other applicable law with respect to
the Security Interest Property and all rights and remedies provided or referred
to herein and therein, shall, to the fullest extent permitted by applicable law,
be cumulative;
(g) Non Judicial Foreclosure, Power of Sale. Grantee, at its option, may
institute an action to foreclose this Security Deed upon five (5) days' notice
or such longer period for notice required by statute, or take such other action
as may be permitted and available to Grantee, at law or in equity, for the
enforcement of the Transaction Documents and the realization on the Mortgaged
Property or any other security held by Grantee, and proceed thereon through to
final judgment and execution thereon for the Debt, including, without
limitation, all accrued and unpaid interest, the Yield Maintenance Premium, and
all costs of enforcement, including attorney's fees. In furtherance thereof,
Grantee shall have the full power and right to sell the Mortgaged Property or
any part of the Mortgaged Property at public sale or sales before the door of
the courthouse of the county in which the Mortgaged Property is located, to the
highest bidder for cash, in order to pay the Debt, or a portion thereof secured
hereby, and accrued interest thereon, and all expenses of the sale and of all
proceedings in connection therewith, including reasonable attorneys' fees as
provided herein and in the Note, after advertising the time, place and terms of
sale once a week for four (4) weeks immediately preceding such sale (but without
regard to the number of days) in a newspaper in which sheriff's sales are
advertised in the county in which the Mortgaged Property is located. At any such
public sale, Grantee may execute and deliver to the purchaser or purchasers a
conveyance of the Mortgaged Property, or any part of the Mortgaged Property, in
fee simple, with full warranties of title and to this end, Grantor hereby
constitutes and appoints Grantee the agent and attorney-in-fact of Grantor to
make such sale and conveyance, and thereby to divest Grantor of all right, title
or equity that Grantor may have in and to the Mortgaged Property, and to vest
the same in the purchaser or purchasers at such sale or sales, and all the acts
and doings of said agent and attorney-in-fact are hereby ratified and confirmed
and any recitals in said conveyance or conveyances as to facts essential to a
valid sale shall be binding upon Grantor. The aforesaid power of sale and agency
hereby granted are coupled with an interest and are irrevocable by death or
otherwise, are granted as cumulative of the other remedies provided hereby or by
law for collection of the Debt secured hereby and shall not be exhausted by one
exercise thereof but may be exercised until full payment of all said
indebtedness. In the event of any such foreclosure sale by Grantee, Grantor
shall be deemed a tenant holding over and shall forthwith deliver possession to
the purchaser or purchasers at such sale or be summarily dispossessed according
to the provisions of law applicable to tenants holding over. Grantor further
agrees that in the event of a sale, by foreclosure or otherwise, of less than
all of the Mortgaged Property, the Transaction Documents shall continue as a
lien and this Security Deed shall continue as an encumbrance upon the remaining
portion of the Mortgaged Property. Grantor hereby assents to the passage of a
decree for the sale of the Mortgaged Property upon the occurrence of an Event of
Default by any court having jurisdiction.
Grantee shall be entitled, in its sole discretion, to exercise all or any
of the rights and remedies provided herein or in any of the other Transaction
Documents or which may be given by statute, at law or in equity, or otherwise in
such order and manner as Grantee shall elect, without impairing Grantee's rights
under any of the Transaction Documents and without affecting the liability of
any person, firm, corporation, or other entity for the sums secured by the
Transaction Documents.
22. Authorization to Execute Deeds; Adjournments
(a) Grantor irrevocably appoints Grantee as its true and lawful
attorney-in-fact, which appointment is coupled with an interest, for the
purpose, following an Event of Default and the establishment of the maturity of
the Debt (in accordance with the provisions of this Security Deed or by a court
of competent jurisdiction), of effectuating, to the extent permitted by
applicable law of the State, any sale, assignment, transfer or delivery of the
Mortgaged Property or any part thereof or any interest therein for the
enforcement of this Security Deed as Grantee may consider reasonably necessary
or appropriate, with full power of substitution.
(b) Grantee may adjourn, from time to time, in accordance with applicable
law, any sale to be made by it under or by virtue of this Security Deed by
announcement at the time and place appointed for such sale or for such adjourned
sale or sales and, except as otherwise provided by any applicable provision of
law, Grantee, without further notice or publication, may make such sale at the
time and place to which the same shall be so adjourned.
(c) In the event that Grantee has proceeded with the enforcement of any
right under this Security Deed by foreclosure sale or otherwise and such
proceedings shall have been discontinued or abandoned for any reason or shall
have been determined adversely, then, in every such case, Grantor and Grantee
shall be restored to their respective former positions and rights hereunder with
respect to the Mortgaged Property, subject to the lien hereof.
23. Proceeds of Foreclosure Sale. In any foreclosure of this Security Deed
there shall be allowed and included in the decree of sale, to be paid, in the
following order, out of the rents, revenues, issues, income, products and
profits derived from the Mortgaged Property or the proceeds of such sale:
First: All court costs, allowances authorized or permitted by statute or a
court, fees and expenses of receivers, reasonable attorneys' fees and
disbursements (which may include reasonable, actual billed costs, if any, of any
attorney in the employ of Grantee and fees for services performed by legal
assistants and other non-lawyers), appraisers' fees, costs of environmental
audits and reports, expenditures for documentary and expert evidence,
stenographers' charges, publication costs and costs of procuring all abstracts
of title, title searches and examinations, title policies and similar data with
respect to title which Grantee may reasonably incur and any other expenses of
the foreclosure proceeding (all of which may be estimated as to items to be
expended after the entry of the decree), with interest thereon (to the extent
permitted by law), from the date of any such advance until paid to Grantee,
computed at the Default Rate;
Second: All other amounts (including, without limitation, all Impositions
other than taxes subject to which the Mortgaged Property was sold and all direct
and indirect costs and expenses incurred by or on behalf of Grantee in the
operation and maintenance of the Mortgaged Property, the collection of Rents and
the enforcement of any of their remedies under the Transaction Documents or by
applicable law) advanced or paid by Grantee pursuant to the Note, this Security
Deed or any other Transaction Document, with interest thereon (to the extent
permitted by law), from the date of any such advance until paid to Grantee,
computed at the Default Rate;
Third: Any indebtedness secured by this Security Deed and at the time due
and payable (whether by acceleration or otherwise), including all principal
amounts, the Yield Maintenance Premium, if any, and interest at the time due and
payable under the Note, and interest (to the extent permitted by law) at the
Default Rate on any overdue principal and (to the extent permitted by law) any
other sum constituting a portion of the Debt in such order and priority as
Grantee shall in its sole discretion determine; and
Fourth: All other amounts required to be paid by Grantor pursuant to any
provision of any Transaction Document.
Any surplus of the proceeds of such sale shall be paid promptly to the
person or entity legally entitled thereto. In the event Grantee cannot determine
the person or persons to whom the surplus should be paid or Grantee concludes
that a controversy exists with respect to the surplus, Grantee may pay the
surplus into a court of competent jurisdiction in an interpleader action and all
expenses of such action, including legal fees incurred by Grantee, shall be paid
from the surplus or, if the surplus is insufficient, by Grantor.
24. Purchase of the Morgaged Property by Grantee. Grantee may be a
purchaser of the Mortgaged Property or any part thereof or any interest therein
at any sale thereof, whether pursuant to foreclosure or power of sale or
otherwise, and may apply the amount of the Debt outstanding (or such portion
thereof as the Grantee shall determine in its sole discretion), and the expenses
of the sale and costs of the action and any other sums which Grantee is
authorized to charge under this Security Deed or under applicable law toward the
purchase price thereof.
25. Security Agreement; Uniform Commercial Code
(a) This Security Deed constitutes a security agreement under the Code and
a security interest shall be deemed, and hereby is, granted by Grantor to
Grantee and attached to the Security Interest Property for the benefit of
Grantee as additional security for the Debt.
(b) To the extent permitted by law, Grantor hereby authorizes Grantee to
file financing and continuation statements to continue such lien with respect to
the Security Interest Property without the signature of Grantor and, upon
reasonable request, Grantor shall promptly execute financing and continuation
statements in form satisfactory to Grantee to secure Grantee's interest in the
Security Interest Property. Grantor shall further, from time to time, upon the
written demand of Grantee, execute, acknowledge and deliver any financing
statement, renewal, affidavit, certificate, continuation statement or other
document as Grantee may request in order to perfect, preserve, continue, extend
or maintain the security interest and priority of this Security Deed or such
other security instrument as a first lien subject to the Permitted Exceptions.
Grantor hereby irrevocably appoints Grantee as attorney-in-fact (which
appointment shall be deemed to be coupled with an interest) for the limited
purpose of executing and filing such financing and continuation statements.
Grantor agrees to pay to Grantee, on written demand, all costs and expenses
(including reasonable attorneys' fees and disbursements) incurred by Grantee in
connection with the preparation, execution, acknowledgment, recording, filing
and refiling of any such instrument or document, including, without limitation,
the charges for examining title which amounts, as well as any other amounts
required to be paid to Grantee pursuant to this Paragraph, together with
interest thereon at the Default Rate from the date of any such expenditure by
Grantee until repayment, and such sum, together with such interest, shall
constitute a portion of the Debt secured by the lien of this Security Deed.
Neither a request of Grantee hereunder nor the failure of Grantee to make such a
request shall be construed as a release of any portion of the Mortgaged Property
from the lien of this Security Deed, this covenant and any such security
agreement or other similar security instrument delivered to Grantee being
cumulative and additional security for payment of the Debt.
(c) Upon the occurrence of any Event of Default, Grantee shall have all of
the rights and remedies of a secured party under the Code with respect to the
Security Interest Property, or other applicable law, and all rights and remedies
provided for herein and in the Note, all of which rights and remedies are
cumulative to those provided elsewhere in this Security Deed or otherwise
available to Grantee. Upon the occurrence and continuance of any Event of
Default, Grantee shall have the option to proceed as to both real and personal
property in accordance with its rights and remedies in respect of the real
property, in which event the default provisions of the Code shall not apply. The
parties agree that in the event Grantee elects to proceed with respect to the
Security Interest Property separately from the real property, Grantor will
assemble the Security Interest Property (other than those items of Equipment
which are affixed to the Improvements and not removable without material damage
to such items or the Improvements) and make the Security Interest Property
available to Grantee at a place or places reasonably convenient to Grantee. Any
notice of sale, disposition or other intended action by Grantee, sent to Grantor
at the address of Grantor specified for notices herein at least fifteen (15)
days prior to such action, shall constitute reasonable notice to Grantor and the
method of sale or disposition or other intended action set forth in such notice
shall conclusively be deemed to be commercially reasonable within the meaning of
the Code unless objected to in writing by Grantor within ten (10) days after
receipt by Grantor of such notice.
(d) All replacements, renewals and additions to the Equipment and the
Personal Property shall become and be immediately subject to the security
interest herein of Grantee and be covered by this Security Deed as part of the
Mortgaged Property. Grantor warrants and represents that all Security Interest
Property now is, and that all replacements thereof, substitutions therefor and
additions thereto, will be, owned by Grantor free and clear of liens,
encumbrances or security interests of others except for the Permitted
Exceptions.
(e) Neither the provisions of this Paragraph 25 nor the filing of any
separate security agreement or financing statement, with respect to Grantee's
security interest in the Security Interest Property, shall be construed as in
any way derogating or impairing the intention of the parties hereto that the
Security Interest Property shall, at all times and for all purposes and in all
proceedings, both legal and equitable, be regarded as a part of the Mortgaged
Property.
26. Certificate as to No Default, etc.; Information
(a) Grantor will deliver to Grantee, within thirty (30) days after written
request, a written statement duly acknowledged by an authorized representative
of Grantor stating (i) the outstanding amount of the Debt (ii) whether to the
Best Knowledge of Grantor any offsets or defenses exist against the Debt, and
(iii) whether to the Best Knowledge or Grantor, there exists no default,
condition or event which, with the giving of notice or lapse of time or both,
would constitute a default in the performance or observance of any of the terms
of this Security Deed or any of the other Transaction Documents, or if any such
default exists, specifying to the nature and period of existence thereof and
what action Grantor is taking or proposes to take with respect thereto.
(b) In addition to the information provided for in paragraph (a) above, (i)
Grantor will deliver to Grantee, within thirty (30) days after written request,
such further information with respect to the Mortgaged Property as Grantee may,
from time to time, reasonably request, (ii) Grantor will direct all Tenants
under the Leases and lessors under the Equipment Leases (as defined in the Loan
Agreement) to deliver to Grantee such information requested by Grantee to the
extent required to be furnished under such Lease or Equipment Lease, and (iii)
Grantor will use its reasonable efforts to cause such Tenants or lessors to
deliver to Grantee such information to the extent not so required to be
furnished under such Lease or Equipment Lease. Each such request for additional
information of Grantor or any such Tenant or lessor may be made by Grantee, from
time to time, for any reasonable business purpose.
27. Books and Records; Financial Statements. Grantee or its designated
representatives shall, upon reasonable prior notice to Grantor, have (a) the
right of entry and free access to the Premises (subject to the rights of hotel
guests) during business hours to inspect the Mortgaged Property and (b) the
right at reasonable times and upon not less than five (5) Business Days' notice,
to inspect all books, contracts and records of Grantor relating to the Mortgaged
Property. Grantor shall make the officers, directors of its general partners,
and its regional supervisors and retained professionals knowledgeable of such
matters available for Grantee or its designated representatives to discuss
Grantor's affairs, finances and accounts relating to the Mortgaged Property and
Grantor will cooperate with, and request that each of the foregoing individuals
cooperate with, Grantee and its designated representative to enable them to
perform these functions, at all reasonable times and as often as Grantee may
reasonably request.
28. Application of Proceeds. Any sum which by the terms of this Security
Deed is to be applied to the Loan or the Note shall be applied by Grantee in
such order and priority as is set forth herein or in any other Transaction
Document.
29. Terms Subject to Applicable Law; Severability. All rights, powers and
remedies provided herein are intended to be limited to the extent necessary so
that they will not render this Security Deed invalid, unenforceable or not
entitled to be recorded, registered or filed under any applicable law. If any
term of this Security Deed shall be held to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the other terms
hereof shall in no way be affected thereby.
30. Further Acts, etc. Grantor shall, at its sole cost and expense, and
without expense to Grantee, do, execute, acknowledge and deliver all and every
such further acts, deeds, conveyances, mortgages, assignments, notices of
assignments, transfers, assurances as Grantee shall, from time to time,
reasonably require for better assuring, conveying, assigning, transferring and
confirming unto Grantee the property and rights hereby mortgaged or intended now
or hereafter so to be, or which Grantor may be or may hereafter become bound to
convey or assign to Grantee, or for carrying out the intention or facilitating
the performance of the terms of this Security Deed or filing, registering or
recording this Security Deed and, on written demand, will execute and deliver
one or more financing statements to evidence more effectively the lien hereof
upon the Mortgaged Property except that Grantor shall have no obligation to
comply with the foregoing if any such action would increase Grantor's liability
hereunder or increase Grantee's rights hereunder. Grantor will reimburse
Grantee, on written demand, for any sums (including reasonable attorneys' fees
and disbursements) reasonably expended by Grantee in preparing, executing,
acknowledging, filing, registering and recording such instruments, certificates
and documents.
31. Limitation of Liability of Grantee. Neither this Security Deed nor any
action or inaction on the part of Grantee shall, without such party's written
consent, constitute an assumption on such party's part of any obligation under
any of the Leases or any other agreement affecting the Mortgaged Property, nor
shall Grantee have any obligation to make any payment to be made by Grantor
under the Leases or any such other agreement, or to present or file any claim,
or to take any other action to collect or enforce the payment of any amounts
which have been assigned to Grantee or to which Grantee may be entitled
hereunder at any time or times. No action or inaction on the part of Grantee
shall adversely affect or limit in any way the rights of Grantee hereunder or
under the Leases or the Note or the Assignment.
32. Documentary Stamps. If at any time any Governmental Authority shall
require revenue or other stamps to be affixed to the Note or this Security Deed,
Grantor will pay for the same, with interest and penalties thereon, if any. The
provisions of the final sentence of Paragraph 34 shall apply to any failure of
Grantor to make any such payment.
33. Cumulative Remedies of Grantee; No Waiver. No legal, equitable or
contractual right, power or remedy of Grantee shall be exclusive of any other,
but rather, each right, power or remedy shall be separate, cumulative and
concurrent and shall be in addition to every right, power or remedy now or
hereafter existing at law or in equity. No delay in the exercise of, or omission
to exercise, any right, power or remedy accruing on any default shall impair any
such right, power or remedy or be construed to be a waiver of any such default
or acquiescence therein, nor shall it affect any subsequent default of the same
or a different nature. Every such right, power or remedy may be exercised
concurrently or independently, and when and as often as may be deemed expedient,
by Grantee. Grantee may resort for the payment of the Debt to the Mortgaged
Property and to any other security held by Grantee in such order and manner as
Grantee, in its sole discretion, consistent with the Transaction Documents, may
elect. Grantee may take action to recover the Debt, or any portion thereof, or
to enforce any covenant hereof without prejudice to the right of Grantee
thereafter to foreclose this Security Deed or sell the Mortgaged Property
pursuant to the power of sale, if any, contained herein. No act of Grantee shall
be construed as an election to proceed under any one provision herein to the
exclusion of any other provision.
34. Filing of Security Deed, etc. Grantor forthwith upon the execution and
delivery of this Security Deed and thereafter, from time to time, as reasonably
required or requested by Grantee, will cause this Security Deed, the Assignment,
and any security instrument or Transaction Document creating a lien or
evidencing the lien hereof upon the Mortgaged Property and each instrument of
further assurance, and each supplement to any of the foregoing and each
modification to any of the foregoing, to be filed, registered or recorded in
such manner and in such places as may be required by any present or future law
in order to publish notice of and fully to protect the lien hereof upon, and the
interests of Grantee in the Mortgaged Property. Grantor will pay all filing,
registration or recording fees, and all reasonable expenses incident to the
execution and acknowledgment of this Security Deed, any mortgage or deed of
trust supplemental hereto, any security instrument with respect to the Mortgaged
Property and any instrument of further assurance, and all Federal, state, county
and municipal taxes, duties, imposts, assessments and charges arising out of or
in connection with the execution and delivery of this Security Deed, any
mortgage or deed of trust supplemental hereto, any security instrument with
respect to the Mortgaged Property or any instrument of further assurance. In the
event that Grantor shall fail to make any such payment, Grantee shall have the
right, but not the obligation, to pay at the direction of Grantee the amount due
and shall notify Grantor of such payment and Grantor shall reimburse Grantee
therefor, upon written demand, with interest thereon at the Default Rate from
the date of demand by Grantee to the date of repayment, and such amount,
together with such interest, shall constitute a portion of the Debt secured by
the lien of this Security Deed.
35. Usury Laws. It is the intent of Grantor and Grantee to comply at all
times with applicable usury laws. If at any time such laws would render usurious
any amounts called for under the Note or any of the Transaction Documents, then
it is Grantor's and Grantee's express intention that such excess amount be
immediately credited on the principal balance of the Note (or, if the Note has
been fully paid, and Grantee has no further obligation under the Loan Agreement
to make Advances, refunded by Grantee to Grantor and Grantor shall accept such
refund), and the provisions hereof and thereof be immediately deemed to be
reformed to comply with the then applicable laws, without the necessity of the
execution of any further documents, but so as to permit the recovery of the
fullest amount otherwise called for hereunder and thereunder. Any such crediting
or refund shall not cure or waive any default by Grantor under the Note or under
any of the other Transaction Documents. If, at any time following any such
reduction in the interest rate payable by Grantor, there remains unpaid any
principal amounts under the Note and the maximum interest rate permitted by
applicable law is increased or eliminated, then the interest rate payable
hereunder shall be readjusted, to the extent permitted by applicable law, so
that the total dollar amount of interest payable hereunder shall be equal to the
dollar amount of interest which would have been paid by Grantor without giving
effect to the applicable usury laws theretofore in effect. Grantor agrees,
however, that in determining whether or not any interest payable under the Note
or any of the other Transaction Documents exceeds the highest rate permitted by
law, any non-principal payment (except payments specifically stated in the Note
or in any other Transaction Document to be "interest"), including, without
limitation, prepayment fees and late charges, shall be deemed, to the extent
permitted by law, to be an expense, fee or premium rather than interest. Without
limiting the foregoing, it is the intent of Grantor and Grantee and all other
parties to the Transaction Documents to conform to and contract in strict
compliance with applicable usury laws from time to time in effect. All
agreements between Grantee and Grantor (or any other party liable with respect
to any indebtedness under the Transaction Documents) are hereby limited by the
provisions of this Paragraph 35 which shall override and control all such
agreements, whether now existing or hereafter arising and whether written or
oral. In no way, nor in any event or contingency (including but not limited to
prepayment, default, demand for payment, or acceleration of the maturity of any
obligation), shall the interest taken, reserved, contacted for, charged or
received under this Security Deed, the Notes or otherwise, exceed the maximum
amount permissible under applicable law. If, from any possible construction of
any document, interest would otherwise be payable in excess of the maximum
lawful amount, any such construction shall be subject to the provisions of this
Paragraph 35 and such document shall be automatically reformed and the interest
payable shall be automatically reduced to the maximum amount permitted under
applicable law, without the necessity of execution of any amendment or new
document. If Grantee shall ever receive anything of value which is characterized
as interest under applicable law and which would apart from this provision be in
excess of the maximum lawful amount, an amount equal to the amount which would
have been excessive interest shall, without penalty, be applied to the reduction
of the principal amount owing on the obligations of Grantor under the
Transaction Documents in the inverse order of its maturity and not to the
payment of interest, or refunded to Grantor or the other payor thereof if and to
the extent such amount which would have been excessive exceeds such unpaid
principal. The right to accelerate maturity of the Notes or any other
obligations of Grantor under the Transaction Documents does not include the
right to accelerate any interest which has not otherwise accrued on the date of
such acceleration, and Grantee does not intend to charge or receive any unearned
interest in the event of acceleration. All interest paid or agreed to be paid to
Grantee shall, to the extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full stated term (including any
renewal or extension) of such indebtedness so that the amount of interest on
account of such indebtedness does not exceed the maximum permitted by applicable
law. As used in this Paragraph 35, the term "applicable law" shall mean the laws
of the State or the federal laws of the United States applicable to this
transaction, whichever laws allow the greater interest, as such laws now exist
or may be changed or amended or come into effect in the future.
36. Marshalling. Grantor waives and releases any right to have the
Mortgaged Property marshalled.
37. Waiver of Notice. Grantor shall not be entitled to any notices of any
nature whatsoever from Grantee except with respect to matters for which this
Security Deed, the Loan Agreement or the Note specifically and expressly
provides for the giving of notices by Grantee to Grantor, and Grantor hereby
expressly waives the right to receive any notice from Grantee with respect to
any matter for which this Security Deed, the Loan Agreement or the Note does not
specifically and expressly provide for the giving of notice by Grantee to
Grantor.
38. Recovery of Sums Required To Be Paid. Grantee shall have the right from
time to time to take action to recover any sum or sums which constitute a part
of the Debt as the same become due, without regard to whether or not the balance
of the Debt shall be due, and without prejudice to the right of Grantee to
thereafter bring an action of foreclosure, or any other action, for a default or
defaults by Grantor existing at the time such earlier action was commenced.
39. Intentionally omitted.
40. No Oral Change. This Security Deed may only be modified or amended by
an agreement in writing signed by Grantor and Grantee, and may only be released,
discharged or satisfied of record by an instrument in writing signed by Grantee.
41. Notices. Except as otherwise specified herein, all notices, requests,
demands, consents, reports or other communications, including, without
limitation, a tender of cure pursuant to Paragraph 19 (c), to or upon the
respective parties hereto shall be in writing and be deemed to have been duly
given or made when received, if personally delivered by messenger or national
overnight courier service, or if sent by registered or certified U.S. mail,
postage prepaid, return receipt requested, if sent by telecopier with electronic
confirmation of receipt (hard copy to be sent by regular mail), addressed to the
party to which such notice, request, demand, consent, report or other
communication is being given at its address set forth below, or at such other
address as any of the parties hereto may hereafter notify the others by notice
given hereunder:
Grantee: Nomura Asset Capital Corporation
Two World Financial Center
Bldg. B, 21st Floor
New York, New York 10281-1198
Att: Daniel S. Abrams, Director
Fax: (212) 667-1022
with a copy to: Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
Att: Michael Peskowitz, Esq.
Fax: (212) 940-8776
Grantor: HMA Realty Limited Partnership
c/o Host Marriott Corporation
10400 Fernwood Road
Bethesda, Maryland 20817
Att: Law Department 923/
Deputy General Counsel
Fax: (301) 380-6332
with a copy to: HMA Realty Limited Partnership
c/o Host Marriott Corporation
10400 Fernwood Road
Bethesda, Maryland 20817
Att: Asset Management Department 908
Fax: (301) 380-8260
42. Joint and Several Liability. If Grantor consists of more than one
person, the obligations and liability of each such person hereunder shall be
joint and several.
43. Headings, etc. The headings and captions of the paragraphs of this
Security Deed are for convenience of reference only and are not to be construed
as defining or limiting, in any way, the scope or intent of the provisions
hereof.
44. Successors and Assigns. The provisions of this Security Deed shall be
binding upon Grantor and Grantee, and their respective successors and assigns,
and all persons claiming under or through Grantor or Grantee or any such
successor or assign, and shall inure to the benefit of, and be enforceable by,
Grantee and its respective successors and assigns.
45. Survival of Assignment. Notwithstanding anything to the contrary
contained in this Security Deed, the assignment, pledge and mortgaging of the
Condemnation Proceeds, the Insurance Proceeds and the Refunds, and the right to
apply any of the foregoing in accordance with the terms of this Security Deed,
shall survive any foreclosure of the lien of this Security Deed.
46. Construction; Counterparts
(a) Unless the context clearly indicates a contrary intent or unless
otherwise specifically provided herein, words used in this Security Deed shall
be used interchangeably in singular or plural form, the word "Grantor" shall
mean each Grantor and any subsequent owners of the Mortgaged Property or any
part thereof or interest therein, the word "Grantee" shall mean each Grantee and
any subsequent holder of any of the Note, and the word "person" shall include an
individual, corporation, partnership, limited liability company, limited
liability partnership, trust, unincorporated association, government,
governmental authority, or other entity. References to "this Paragraph" shall
mean the paragraph commencing with an Arabic numeral in which the affected
phrase or sentence is contained. The phrase "Best Knowledge of Grantor" shall
mean knowledge after appropriate and proper inquiry obtained by Grantor or any
officer or director of Grantor or any regional supervisor of Grantor charged
with primary responsibility as to such matters in connection with operation of
the Mortgaged Property. Whenever the context may require, any pronouns used
herein shall include the corresponding masculine, feminine or neuter forms, and
the singular form of nouns and pronouns shall include the plural and vice versa.
The terms "herein", "hereof" or "hereunder" or similar terms used in this
Security Deed refer to this entire Security Deed and not to the particular
provision in which the term is used.
(b) It is acknowledged and agreed that in the preparation of this Security
Deed and the other Transaction Documents indistinguishable contributions were
made by representatives of both Grantor and Grantee, and that Grantor and
Grantee each waives any and all rights, either at law or in equity, to have the
provisions of this Security Deed or any part thereof or the provisions of any
other Transaction Document interpreted in favor of one over the other based on a
claim that representatives of one or the other were the principal draftsmen of
any such document.
(c) In the event that the provisions of this Security Deed directly
conflict with any provision of the Loan Agreement, the provisions of the Loan
Agreement shall govern, except the provisions of the Security Deed with respect
to Grantee's perfection of a security interest or lien on the Mortgaged
Property, and the enforcement thereof shall be governed by the terms and
provisions of the Security Deed.
(d) This Security Deed may be executed in any number of duplicate originals
and each such duplicate original shall be deemed to constitute but one and the
same instrument.
47. Governing Law. IN ALL RESPECTS, INCLUDING, WITHOUT LIMITATION, MATTERS
OF CONSTRUCTION AND VALIDITY, THIS DEED OF TRUST AND THE OBLIGATIONS ARISING
HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL
LAWS OF THE STATE APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THE STATE
(WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS OR COMITY) AND ANY APPLICABLE
LAWS OF THE UNITED STATES OF AMERICA. NOTWITHSTANDING THE FOREGOING, THE NOTE
AND LOAN AGREEMENT ARE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
48. Expenses of Enforcement. All reasonable costs and expenses of Grantee
in the enforcement of any covenant of Grantor or any right or remedy afforded
Grantee pursuant to this Security Deed or any other Transaction Document or in
connection with any proceedings, including probate and bankruptcy proceedings,
to which Grantee shall be a party, either as plaintiff, claimant or defendant,
by reason of this Security Deed or any indebtedness hereby secured or in
connection with preparations for the commencement of any suit for the
foreclosure hereof after accrual of such right to foreclose, whether or not
actually commenced shall be paid by Grantor within ten (10) days after written
demand by Grantee, and, to the extent permitted by law, shall bear interest, at
the Default Rate from ten (10) days after the date of demand until the actual
date of repayment by Grantor, and shall be deemed a part of the Debt and secured
by this Security Deed. As used herein, "reasonable costs and expenses" shall
include, without limitation, actual expenses incurred by Grantee, fees and
expenses of Grantee's agents, reasonable attorneys fees and expenses (which may
include reasonable, actual billed costs, if any, of any attorney in the employ
of Grantee and fees for services performed by legal assistants and other
non-lawyers), court costs and filing fees, allowances authorized or permitted by
statute or of a court, fees and expenses of receivers, appraisers fees, costs of
environmental audits and reports, expenditures for documentary and expert
evidence, stenographers charges, publication costs and the cost of procuring
abstracts of title, title searches and examinations, title policies and similar
data with respect to title which Grantee may deem reasonably necessary and all
other expenses of the foreclosure or similar enforcement proceeding, all of
which may be estimated as to items to be expended after the entry of the decree.
49. Waivers; Sale Bar Against Foreclosure
(a) Grantor hereby expressly waives the pleading of any statute of
limitations or other bar to an action based on the passage of time as a defense
to any obligations secured by the Transaction Documents to the full extent
permitted by law.
(b) In any action to foreclose the lien or liens of this Security Deed,
including a partial foreclosure, no defense, counterclaim or setoff shall be
available to Grantor other than one which denies the existence or sufficiency of
the facts upon which the action is grounded or which raises an issue concerning
the priority of liens. If any defense, counterclaim or setoff, other than one
permitted by this Paragraph 49 is timely raised in such foreclosure action, such
defense, counterclaim or setoff shall be dismissed; provided, however, if such
defense, counterclaim or setoff is based on a claim which could be tried in an
action for money damages, such claim may be brought in a separate action which
shall not thereafter be consolidated with such foreclosure action. The bringing
of such separate action for money damages shall not be deemed to afford any
grounds for staying the foreclosure action.
(c) Grantor hereby expressly waives for itself and all who may claim
through or under it, and to the fullest extent Grantor may do so under
applicable law, any and all rights of redemption in the event of a foreclosure
sale, and the sale of the Mortgaged Property, or any part thereof, or any
interest therein, whether pursuant to foreclosure or partial foreclosure or
otherwise, any such foreclosure or partial foreclosure sale under this Security
Deed shall be a perpetual bar against Grantor.
(d) Notwithstanding anything to the contrary contained in this Security
Deed, Grantor hereby agrees that, to the extent permitted by applicable law,
Grantor shall not at any time:
(i) insist upon, plead or in any manner whatever claim or take any benefit
or advantage of any stay, extension or moratorium law or an exemption from
execution or sale of the Mortgaged Property or any part thereof, wherever
enacted, now or at any time hereafter in force, which may affect the covenants
and terms of performance of this Security Deed or any other Transaction
Document;
(ii) claim, take or insist upon any benefit or advantage of any law now or
hereafter in force providing for the valuation or appraisal of the Mortgaged
Property, or any part thereof, prior to any sale or sales thereof which may be
made pursuant to any provision hereof or pursuant to the decree, judgment or
order of any court of competent jurisdiction or upon execution of any judgment
recovered for all or any portion of the Debt; or
(iii) avail itself of any benefits that might accrue to it by virtue of any
present or future laws excepting the Mortgaged Property, or any proceeds arising
from the sale thereof, from attachment, levy, or sale under execution from civil
process, or extension of time for payment.
50. No Claim of Credit for Impositions. Grantor will not make deduction
from or claim credit on the principal or interest secured by this Security Deed
by reason of any governmental taxes, assessments or charges. Grantor will not
claim any deduction from the taxable value of the Mortgaged Property by reason
of this Security Deed.
51. Sole Discretion of Grantee; Reasonableness
(a) Wherever pursuant to the provisions of this Security Deed, Grantee
exercises any right given to it to approve or disapprove, or any arrangement or
term is to be satisfactory to Grantee, in Grantee's opinion, judgment or
discretion, then the decision of Grantee to approve or disapprove or to decide
that arrangements or terms are satisfactory or not satisfactory shall be in
Grantee's sole discretion, and shall be final and conclusive.
(b) In the event the consent or approval of Grantee is required to be
reasonable under any provision in this Security Deed or any other Transaction
Document and Grantor believes that such consent or approval was withheld or
delayed in violation of such standard, then Grantor's sole remedy in such case
shall be either (i) to seek the release of the Mortgaged Property and this
Security Deed in accordance with the Loan Agreement, or (ii) to seek injunctive
relief or specific performance, and if the court determines, without right to
further appeal, that such approval or consent was withheld in violation of the
applicable standard, then (A) the consent or approval shall be deemed granted,
(B) Grantee shall deliver prompt written confirmation of such consent or
approval, (C) the granting of such consent or approval shall be the only remedy
available to Grantor, (D) neither Grantee nor its officers or agents shall have
any liability for having withheld or delayed such consent or approval, and (E)
Grantor's obligations under the Transaction Documents shall not be diminished in
any way.
52. Modification by Grantee. Grantor agrees that, without affecting the
liability of Grantor or any other person (except any person expressly released
in writing) liable for payment of the Debt or for performance of any obligation
contained herein or affecting the lien and security interest of this Security
Deed upon the Mortgaged Property or any part thereof, Grantee may, at any time
and from time to time, regardless of consideration, without notice to or
obtaining the consent of any person (a) release any person liable for payment of
any indebtedness secured hereby or for performance of any obligation, (b) extend
the time or agree to alter the terms of payment of any such indebtedness,
including, without limitation, modifying the interest rate, the amortization
period or any other provision of the Note, (c) modify or waive any obligation
(to the extent same does not increase Grantor's obligations), (d) subordinate,
modify or otherwise deal with the lien and security interest hereof, (e) release
the whole or any part of the Mortgaged Property or any other security, (f)
accept additional security of any kind, (g) consent to the making of any map or
plat of the Mortgaged Property, the creating of any easements thereon or any
covenants restricting use or occupancy thereof, or (h) exercise, refrain from
exercising or waive any right Grantee may have without in any manner impairing
or affecting the Transaction Documents, as so extended, modified and
supplemented, or the lien or priority thereof unless expressly released or
discharged from such obligation by Grantee in writing.
53. Assignment; Participations
(a) Grantee shall have the right in its sole discretion and at its sole
cost and expense, except to the extent expressly provided to the contrary in the
Loan Agreement, at any time during the term of the Loan to sell, assign,
syndicate, securitize or otherwise transfer or dispose of its interest in all or
any portion of the Loan, provided, however, that all of the provisions hereof
shall continue in full force and effect following any such sale, assignment,
syndication, securitization or other transfer.
(b) Grantee may at any time grant to one or more banks, life insurance
companies or other financial institutions (each a "Participant") participating
interests in all or a portion of Grantee's interest in the Loan, provided that,
in the event of any such grant by Grantee of a participating interest to a
Participant, whether or not upon notice to Grantor, Grantee shall remain
responsible for the performance of its obligations hereunder, and Grantor shall
continue to deal solely and directly with the Grantee named herein in connection
with Grantee's rights and obligations under this Security Deed. Grantee shall
give Grantor written notice of any such grant by Grantee of such a participating
interest to a Participant.
54. No Merger. If both the landlord's and the tenant's estates under any
Lease shall at any time become vested in one owner, or if Grantor's and
Grantee's estates under this Security Deed shall at any time become vested in
one owner, including, without limitation, upon the delivery of a deed to Grantee
in lieu of a foreclosure sale, or upon a purchase of the Mortgaged Property by
Grantee in a foreclosure sale, this Security Deed and the lien created hereby
shall not be destroyed or terminated by the application of the doctrine of
merger and in such event Grantee shall continue to have and enjoy all of the
rights and privileges of Grantee as to the separate estates; and, as a
consequence thereof, upon the foreclosure of the lien created by this Security
Deed any Leases or subleases then existing and created by Grantor shall not be
destroyed or terminated by application of the law of merger or as a result of
such foreclosure unless Grantee or any purchaser at any such foreclosure sale
shall so elect. No act by or on behalf of Grantee or any such purchaser shall
constitute a termination of any Lease or sublease unless Grantee or such
purchaser shall give written notice thereof to the Tenant or sublessee
thereunder.
55. Running with the Land. All covenants contained in this Security Deed
shall run with the land of the Mortgaged Property.
56. True Copy. GRANTOR ACKNOWLEDGES HAVING RECEIVED A TRUE COPY OF THIS
Security Deed WITHOUT CHARGE.
57. Waiver of Jury Trial. GRANTOR, AND Grantee BY ITS ACCEPTANCE OF THIS
SECURITY DEED, EACH HEREBY EXPRESSLY WAIVES TRIAL BY JURY IN ANY ACTION OR
PROCEEDING BROUGHT BY EITHER PARTY HERETO AGAINST THE OTHER, OR IN ANY MATTERS
WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS SECURITY DEED, THE
NOTE, THE ASSIGNMENT OR ANY OF THE OTHER TRANSACTION DOCUMENTS TO THE FULL
EXTENT PERMITTED BY LAW.
58. After-Acquired Property. If, after the date of this Security Deed,
Grantor acquires any property located on and used in connection with the
Mortgaged Property and that by the terms of this Security Deed is required or
intended to be encumbered by this Security Deed, the property shall become
subject to the lien and security interest of this Security Deed immediately upon
its acquisition by Grantor and without any further mortgage, conveyance,
assignment or transfer. Nevertheless, upon Grantee's reasonable request, from
time to time, Grantor will execute, acknowledge and deliver any additional
instruments and assurances of title and will do or cause to be done anything
further that is reasonably necessary for carrying out the intent of this
Security Deed.
59. Non-Recourse. The obligations of Grantor hereunder are "Non-Recourse"
as such term is defined in the Loan Agreement.
60. Variable Rate on Interest; Additional Interest.
On the Optional Prepayment Date (as such term is defined in the Loan
Agreement) and on each anniversary thereof, the interest rate on the Note
secured by this Security Deed will be adjusted to be equivalent to the Adjusted
Rate (as such term is determined in accordance with the Note and the Loan
Agreement.) During the period following the Optional Prepayment Date it is
possible that some or all of the additional interest may be unpaid and may be
accruing until the Maturity Date.
61. Splitting of the Security Deed. This Security Deed and the Note shall,
at any time until the same shall be fully paid and satisfied, at the sole
election of the Grantee, be split or divided into two or more notes and two or
more Deeds to Secure Debt and related Security Documents, each of which shall
cover all or a portion of the Mortgaged Property having pari passu or varying
payment and/or lien priority as among one another, as will be more particularly
described therein. To that end, the Grantor, upon written request of the
Grantee, shall execute, acknowledge and deliver to the Grantee and/or its
designee or designees substitute notes and security instruments in such
principal amounts, aggregating not more than the then unpaid principal amount
secured by this Security Deed, and containing terms, provisions and clauses no
less favorable to the Grantor than those contained herein and in the Note, and
such other documents and instruments may be required by the Grantee to effect
the splitting of the Note and this Security Deed.
62. Georgia Provisions.
(i) Time is of the essence with respect to this Security Deed and any Event
of Default.
(ii) As used in this Security Deed and in the other Transaction Documents,
"reasonable attorney's fees of Grantee's counsel" or words of like effect shall
mean the reasonable fees and expenses of Grantee's counsel actually incurred at
standard hourly rates of such counsel rather than a percentage of principal and
interest as provided in O.C.G.A. Sec. 13-1-11(a)(2).
(iii) BY EXECUTION OF THIS SECURITY DEED AND BY INITIALING THIS PARAGRAPH
62, GRANTOR EXPRESSLY: (A) ACKNOWLEDGES THE RIGHT OF GRANTEE TO ACCELERATE THE
INDEBTEDNESS EVIDENCED BY THE NOTE AND THE POWER OF ATTORNEY GIVEN HEREIN TO
GRANTEE TO SELL THE MORTGAGED PROPERTY OR A PORTION THEREOF, BY NONJUDICIAL
FORECLOSURE UPON DEFAULT BY GRANTOR WITHOUT ANY JUDICIAL HEARING AND WITHOUT ANY
NOTICE OTHER THAN SUCH NOTICE (IF ANY) AS IS SPECIFICALLY REQUIRED TO BE GIVEN
UNDER THE PROVISIONS OF THIS SECURITY DEED; (B) WAIVES ANY AND ALL RIGHTS WHICH
GRANTOR MAY HAVE UNDER THE CONSTITUTION OF THE UNITED STATES (INCLUDING THE
FIFTH AND FOURTEENTH AMENDMENTS THEREOF), THE VARIOUS PROVISIONS OF THE
CONSTITUTIONS FOR THE SEVERAL STATES, OR BY REASON OF ANY OTHER APPLICABLE LAW
(1) TO NOTICE AND TO JUDICIAL HEARING PRIOR TO THE EXERCISE BY GRANTEE OF ANY
RIGHT OR REMEDY HEREIN PROVIDED TO GRANTEE, EXCEPT SUCH NOTICE (IF ANY) AS IS
SPECIFICALLY REQUIRED TO BE PROVIDED IN THIS SECURITY DEED; AND (2) CONCERNING
THE APPLICATION, RIGHTS OR BENEFITS OF ANY MORATORIUM, REINSTATEMENT,
MARSHALLING, FORBEARANCE, APPRAISEMENT, VALUATION, STAY, EXTENSION, HOMESTEAD,
EXEMPTION OR REDEMPTION LAWS; (C) ACKNOWLEDGES THAT GRANTOR HAS READ THIS
SECURITY DEED AND ITS PROVISIONS HAVE BEEN EXPLAINED FULLY TO GRANTOR AND
GRANTOR HAS CONSULTED WITH COUNSEL OF GRANTOR'S CHOICE PRIOR TO EXECUTING THIS
SECURITY DEED; AND (D) ACKNOWLEDGES THAT ALL WAIVERS OF THE AFORESAID RIGHTS OF
GRANTOR HAVE BEEN MADE KNOWINGLY, INTENTIONALLY AND WILLINGLY BY GRANTOR AS PART
OF A BARGAINED FOR LOAN TRANSACTION AND THAT THIS SECURITY DEED IS VALID AND
ENFORCEABLE BY GRANTEE AGAINST GRANTOR IN ACCORDANCE WITH ALL THE TERMS AND
CONDITIONS HEREOF.
INITIALED BY GRANTOR:
-------------------
(iv) This Security Deed is a deed and security agreement passing legal
title pursuant to the laws of the State of Georgia governing loan or security
deeds and security agreements and is not a mortgage.
(v) The Grantor represents and warrants to the Grantee that neither all of
the Premises nor any part thereof is to be used as a dwelling place by the
Grantor at the time this Security Deed is entered into and, accordingly, the
notice requires of O.C.G.A. '44-14-162.2 shall not be applicable to any exercise
of the power of sale contained in this Security Deed.
(vi) The interest of the Grantee under this Security Deed and the liability
and obligation of the Grantor for the payment of the indebtedness secured by the
Deed arise from a "commercial transaction" within the meaning of O.C.G.A.
'44-14-260, the Grantor waives any and all rights which the Grantor may have to
notice prior to seizure by the Grantee of any interest in personal property of
the Grantor which constitutes part of the Premises, whether such seizure is by
writ of possession or otherwise.
(Signature page follows)
IN WITNESS WHEREOF, Grantor has duly executed and sealed this Security
Deed as of the day and year first above written.
Signed, sealed and delivered in the presence of:
WITNESSES: HMA REALTY LIMITED PARTNERSHIP,
a Delaware limited partnership
By: HMA-GP, Inc., its general partner
By: /s/ P.K. Brady
Unofficial Witness: Name: Patricia K. Brady
Title: Vice President
[CORPORATE SEAL]
Notary Public:
My Commission expires:
[Notary seal]
STATE OF )
)ss.:
COUNTY OF )
On this _____ day of January, 1998, before me personally came Patricia
K. Brady, to me known to be the individual who executed the foregoing
instrument, and who, being duly sworn by me, did depose and say that he is a
Vice President of HMA-GP, Inc., the General Partner of HMA Realty Limited
Partnership, a Delaware limited partnership, and that he has the authority to
sign the same, and acknowledged that he executed the same as the act and deed of
said corporation.
Signature
Name:
EXHIBIT A
Legal Description of Land
ALL THAT TRACT or parcel of land lying and being in Land Lot 51 of the
14th District of Fulton County, Georgia, containing 3.58 acres, same being more
particularly described as follows:
TO FIND THE TRUE POINT OF BEGINNING, begin at a drill hole set which
marks the intersection of the northerly Right-of-Way Line of Harris Street
(Sixty (60') foot Right-of-Way) with the easterly Right-of-Way Line of Peachtree
Center Avenue (Sixty (60') foot Right-of-Way); thence traveling along the
northerly Right-of-Way Line of said Harris Street south 89 degrees 10 minutes 36
seconds east a distance of 207.07 feet to a drill hole set on said Right-of-Way
Line which drill hole set is the TRUE POINT OF BEGINNING; from the TRUE POINT OF
BEGINNING as thus established leaving said Right-of-Way Line and traveling north
00 degrees 49 minutes 24 seconds east a distance of 112.72 feet to a point;
thence traveling north 89 degrees 10 minutes 36 seconds west a distance of
206.60 feet to a nail set on the easterly Right-of-Way Line of said Peachtree
Center Avenue; thence traveling along said Right-of-Way Line north 01 degrees 03
minutes 48 seconds east a distance of 177.30 feet to a drill hole set on said
Right-of-Way Line; thence leaving said Right-of-Way Line and traveling south 89
degrees 10 minutes 36 seconds east a distance of 205.92 feet to a point; thence
traveling north 00 degrees 49 minutes 24 seconds east a distance of 113.30 feet
to a nail set on the southerly Right-of-Way Line of Baker Street (Sixty (60')
foot Right-of-Way); thence traveling along said Right-of-Way Line south 89
degrees 19 minutes 51 seconds east a distance of 296.41 feet to a drill hole set
on said Right-of-Way Line at its intersection with the westerly Right-of-Way
Line of Courtland Street (Seventy (70') foot Right-of-Way); thence traveling
along the westerly Right-of-Way Line of said Courtland Street south 01 degrees
03 minutes 16 seconds west a distance of 404.12 feet to a drill hole set on said
Right-of-Way Line at its intersection with the northerly Right-of-Way Line of
said Harris Street; thence traveling along the northerly Right-of-Way Line of
said Harris Street north 89 degrees 10 minutes 36 seconds west a distance of
294.84 feet to a drill hole set on said Right-of-Way Line, which drill hole set
marks the TRUE POINT OF BEGINNING.
The above described property being shown on that certain Survey
entitled "ALTA/ACSM Land Title Survey for Atlanta Marriott Marquis Limited
Partnership, Ivy Street Hotel Limited Partnership, Marriott/Portman Finance
Corporation, The Citizens and Southern National Bank & Ticor Title Insurance
Company of California", prepared by Planners and Engineers Collaborative,
bearing the seal of Robert Lee White, Georgia Registered Land Surveyor No.
2080, dated January 5, 1990.
TOGETHER WITH the following two (2) easement parcels, on the terms and
subject to the conditions set forth with respect thereto in, to and under that
certain Declaration of Easements and Restrictions dated on September 1, 1982 and
recorded at Deed Book 8291, Page 40, Fulton County, Georgia Records; as amended
by First Amendment to Declaration of Easements and Restrictions, dated as of
August 4, 1983, recorded at Deed Book 8657, Page 385, aforesaid Records:
EASEMENT PARCELS
(MARQUIS TWO TOWER)
All that tract or parcel of land lying and being in the City of
Atlanta, in Land Lot 51 of the 14th District of Fulton County, Georgia, and
being more particularly described as follows:
BEGINNING at the point formed by the intersection of the east
right-of-way line of Peachtree Center Avenue (formerly known as Ivy Street) (as
presently located) with the south right-of-way line of Baker Street (as
presently located; run thence south 89 degrees, 19 minutes, 51 seconds east, as
measured along the south right-of-way line of Baker Street (as presently
located), a distance of 205.44 feet to a point; run thence south 00 degrees, 49
minutes, 24 seconds west, a distance of 113.30 feet to a point; run thence north
89 degrees, 10 minutes, 36 seconds west, a distance of 205.92 feet to a point
lying on the east right-of-way line of Peachtree Center Avenue (formerly known
as Ivy Street) (as presently located); run thence north 01 degrees, 03 minutes,
49 seconds east, as measured along the east right-of-way line of Peachtree
Center Avenue (formerly known as Ivy Street) (as presently located) a distance
of 112.75 feet to a point formed by the intersection of the south right-of-way
line of Baker Street (as presently located) with the east right-of-way line of
Peachtree Center Avenue (formerly known as Ivy Street) (as presently located)
and the POINT OF BEGINNING; being property shown on the plat of survey, to which
reference is made for all purposes, prepared for P.C. Towers, L.P., a Georgia
limited partnership, by Planners and Engineers Collaborative, bearing the
certification of Robert L. White, Georgia Registered Land Surveyor, number 2080,
dated July 20, 1988, last revised September 9, 1988.
(MARQUIS ONE TOWER)
All that tract or parcel of land lying and being in the City of
Atlanta, in Land Lot 51, of the 14th District, of Fulton County, Georgia, and
being more particularly described as follows:
BEGINNING at the point formed by the intersection of the east
right-of-way line of Peachtree Center Avenue (formerly known as Ivy Street) (as
presently located) with the north right-of-way line of Harris Street (as
presently located); run thence north 01 degrees, 03 minutes, 49 seconds east, as
measured along the east right-of-way line of Peachtree Center Avenue (formerly
known as Ivy Street) (an presently located), a distance of 112.72 feet to a
point; run thence south 89 degrees, 10 minutes, 36 seconds east, a distance of
206.60 feet to a point; run thence south 00 degrees, 49 minutes, 24 seconds
west, a distance of 112.72 feet to a point located on the north right-of-way
line of Harris Street (as presently located); run thence north 89 degrees, 10
minutes, 36 seconds west, as measured along the north right-of-way line of
Harris Street (as presently located), a distance of 207.07 feet to a point
formed by the intersection of the east right-of-way line of Peachtree Center
Avenue (formerly known as Ivy Street) (as presently located) with the north
right-of-way line of Harris Street (as presently located) and the POINT OF
BEGINNING; being property shown on the plat of survey, to which reference is
made for all purposes, prepared for P.C. Towers, L.P., a Georgia limited
partnership, by Planners and Engineers Collaborative, bearing the certification
of Robert L. White, Georgia Registered Land Surveyor, number 2080, dated July
20, 1988, last revised September 9, 1988.
SCHEDULE X
INSURANCE
1.1.1. Risks to Be Insured.
The Grantor, at the Grantor's expense, will obtain and maintain in full
force and effect, or cause to be obtained and maintained in full force and
effect, at all times until all Debt has been fully paid, with Qualified
Insurance Companies (as that term is defined in Section 1.1.2), insurance
against the following risks:
(i) Loss and damage by fire and all other casualties on or to the
Improvements, the Equipment and the Personal Property as are included in the
form of casualty insurance commonly referred to as "all risk or special causes
of loss" (including, without limitation, windstorm, explosion and such other
risks as are typically insured against by owners of like properties in the area
in which the Premises is located) in no event less than one hundred percent
(100%) of the full replacement cost of the foregoing (exclusive of excavation
and foundations, and without deduction for physical depreciation) and in no
event less than the amount required to prevent the Grantor from becoming a
co-insurer within the terms of the applicable policies.
(ii) Comprehensive public liability insurance on an "occurrence basis"
against claims for personal injury, including without limitation, bodily injury,
death or property damage occurring on, in or about the Property with a combined
single limit of not less than $2,000,000 (including not more than $100,000
retention) with respect to personal injury or death to one or more persons and
with "umbrella" liability coverage of not less than $18,000,000, or such greater
amounts as may from time to time be required by institutional lenders on similar
loans secured by properties similar to the Premises;
(iii) Business interruption insurance for loss of income from the Property
(on an "actual loss sustained" basis, subject to a deductible reasonably
acceptable to Grantor and Grantee, but in no event for a period of less than
eighteen (18) months, covering the same risks as are covered by the policies
described in Section 1.1.1(i);
(iv) If the Land is located in an area designated by the U.S. Department of
Housing and Urban Development as a flood hazard area, or in an area designated
as "flood prone" pursuant to the National Flood Insurance Act of 1968 and the
Flood Disaster Protection Act of 1973 (42 U.S.C. "4001-4128) and any amendments
or supplements thereto or substitutions therefor, insurance for the peril of
flood as is available under the National Flood Insurance Program;
(v) Broad form boiler and machinery insurance on a comprehensive form in an
amount adequate to provide protection against the insurable damage possible to
building, improvements and contents resulting from explosion or other covered
occurrences relating to boilers, pressure vessels, machinery and equipment on or
about the Premises which in no event shall be less than $2,000,000;
(vi) During the performance of any material construction or renovations on
or about the Premises, broad form Builder's Risk Insurance on an all-risk,
completed value basis;
(vii) Unless otherwise provided by the Manager, workers' compensation and
employer's liability insurance in such forms and in such amounts as may be
required by the laws of the state in which the Property is located or a
self-insurance program complying with the laws of the State;
(viii) Such other insurance as is generally available on commercially
reasonable terms and is generally required by institutional lenders on loans
secured by properties similar to the Premises.
1.1.2. Qualified Insurance Companies.
An insurer satisfying the applicable requirements of this Section 1.1.2
shall be deemed to be a "Qualified Insurance Company."
All primary insurers must be authorized to issue insurance in the State in
which the Premises is located. The insurance described in clause (i) of Section
1.1.1 and the insurance coverage described in clauses (ii), (iii), (v) and (vi)
of Section 1.1.1, will be maintained with one or more primary insurers having a
claims-paying ability (published or unpublished) as rated by Standard & Poor's
Ratings Services, a division of the McGraw-Hill Companies, of not less than
"AA". If permitted by the laws of the state in which the Premises is located,
the insurance required by clause (vii) of Section 1.1.1 may be provided by a
state approved and regulated employer's self-insurance fund.
1.1.3. Policy Provisions.
All insurance policies required by Section 1.1.1 shall be on forms and with
endorsements reasonably satisfactory to the Grantee. All policies of casualty
and other property related insurance required by this Schedule shall contain
suitable loss-payable and standard noncontribution clauses reasonably acceptable
to and in favor of the Grantee, its successors and assigns. The Grantee in the
circumstances described in Section 13 of this Security Deed may apply Insurance
Proceeds to the repayment of the Debt; in all other cases, Insurance Proceeds
shall be applied to Restoration or as otherwise provided in by Section 13.
All policies of insurance maintained by the Grantor pursuant to this
Section 1.1.1 (except 1.1.1 (vii) and (viii)) shall:
(i) Name the Grantee (and the Trustees, as applicable) as additional
insureds or loss payees, as applicable, as their respective interests may
appear;
(ii) provide that the Grantee shall be advised in writing of any property
related insurance claims in an amount equal to or greater than $100,000, before
payment thereon is made and, except in the case of worker's compensation,
employer's liability, D&O and public liability insurance, that all proceeds for
losses of less than $1,000,000, shall be adjusted by the Grantor, in accordance
with Section 13 and all proceeds for losses equal to or exceeding $1,000,000,
shall be adjusted by the Grantor with approval of the Grantee, and in either
case, paid to the Grantee or the Grantor in accordance with Section 13, pursuant
to a mortgagee endorsement reasonably acceptable to the Grantee;
(iii) provide that the Grantee's rights under the casualty and other
property-related insurance shall not be impaired or invalidated by virtue of (A)
any act, failure to act, or neglect of the Grantor, (B) the occupation or use of
the insured properties for purposes more hazardous than permitted by the terms
of the policy, (C) any foreclosure or other proceeding or notice of sale
relating to the insured properties, or any change in the possession of the
insured properties without a change in the identity of the holder of actual
title to the Premises (provided that with respect to item (C) any notice
requirements of the applicable policies are satisfied);
(iv) provide that no material changes or mid-term cancellation shall be
effective until at least thirty (30) days after the insurers mail or deliver to
the Grantor and the Grantee written notice thereof (and no termination for
non-payment of premium shall be effective until at least ten (10) days after
receipt of written notice thereof by the Grantor and the Grantee), with the
Grantee having the opportunity, but being under no obligation, to pay all moneys
or to do any act necessary to prevent such alteration, cancellation, termination
or expiration or to cause such renewal, the cost thereof together with interest
thereon at the Default Rate provided for in the Loan Agreement, to be added to
the Debt and secured by this Security Deed;
(v) include effective waivers by the insurer of all claims for insurance
premiums against all loss payees and additional insureds (other than the
Grantor) and, where applicable, all rights of subrogation against any loss
payee, additional insured or named insured pursuant to this Agreement;
(vi) permit the Grantee to pay the premiums and continue any insurance upon
failure of the Grantor to pay premiums when due, upon the insolvency of the
Grantor, or through foreclosure or other transfer of title to the Property (it
being understood that the Grantor's rights to coverage under such policies may
not be assignable without the consent of the provider); and
(vii) be reasonably satisfactory to the Grantee in all other respects.
The insurance required to be maintained by clauses (i), (ii), (iii), (iv),
(v) (vi), (vii) and (viii) of Section 1.1.1 may be provided by a blanket policy
so long as the blanket policy complies with the terms of this Section 1.1 and
such insurance is comparable to that which is covered by operator/owners of
similar properties and that (except in the case of claims relating to D&O,
product liability, completed operations coverage, advertising injury and
personal injury, such as libel or slander, but not bodily injury to persons)
such coverage and limits will be no less than those which would be provided
under separate policies even if there is a total loss of all properties covered
by the blanket policy.
The Grantor shall not take out separate insurance concurrent in form or
contributing in the event of loss with the insurance required under this
Schedule unless: (i) the certificates of insurance are submitted to the Grantee
for approval, which approval shall not be unreasonable withheld or delayed; (ii)
the insurers thereunder and the terms thereof are approved by the Grantee, which
approval shall not be unreasonably withheld or delayed; and (iii) the Grantee is
included therein as an additional named insured or loss payee to the same extent
as provided in this Schedule with respect to insurance required to be maintained
hereunder. The Grantor shall notify the Grantee at least fifteen (15) days
before any such separate insurance is taken out and shall furnish the Grantee
with a certificate or certificates of insurance executed by the insurer or its
authorized agent with respect thereto.
1.1.4. Delivery of Insurance Documentation.
Prior to the execution of this Deed, and thereafter not less than fifteen
(15) days prior to the expiration date of any policy required pursuant to this
Section 1.1, the Grantor will deliver to the Grantee original certificates of
the insurers for all policies of insurance required by this Security Deed, which
shall bear notations upon written request evidencing the payment of premiums
then due and payable and the date through which said coverage is made effective
by the evidenced payment. Grantor shall, upon request from Grantee, and upon
reasonable prior notice to Grantor, have copies of the policies required under
this Deed available for review by representatives of Grantor or the Rating
Agencies during regular business hours at Grantor's office at 10400 Fernwood
Road, Bethesda, Maryland, so long as the insured has received copies of such
policies from the insurer.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Form 10-K and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0001048447
<NAME> Atlanta Marriott Marquis II Limited Partnership
<MULTIPLIER> 1000
<CURRENCY> U.S. dollar
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> Dec-31-1997
<EXCHANGE-RATE> 1.00
<CASH> 21,502
<SECURITIES> 3,077
<RECEIVABLES> 4,425
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 29,004
<PP&E> 237,867
<DEPRECIATION> (72,495)
<TOTAL-ASSETS> 194,376
<CURRENT-LIABILITIES> 16,914
<BONDS> 229,543
0
0
<COMMON> 0
<OTHER-SE> (52,108)
<TOTAL-LIABILITY-AND-EQUITY> 194,376
<SALES> 0
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<INTEREST-EXPENSE> 25,389
<INCOME-PRETAX> (569)
<INCOME-TAX> 0
<INCOME-CONTINUING> (569)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (569)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
