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Securities and Exchange Commission
Washington, D.C. 20549
Form 10-K
/x/ Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1996
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 LIMITED PARTNERSHIP
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(Exact name of registrant as specified in its charter)
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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)
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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___ (Not Applicable. On August 25, 1992, the
Registrant filed an application for relief from the reporting requirements of
the Securities Exchange Act of 1934 pursuant to Section 12(h) thereof. Because
of the pendency of such application, the Registrant was not required to, and did
not make, any filings pursuant to the Securities Exchange Act of 1934 from
October 23, 1989 until the application was voluntarily withdrawn on November 10,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
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TABLE OF CONTENTS
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PAGE NO.
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PART I
Item 1. Business.............................................................. 1
Item 2. Property.............................................................. 5
Item 3. Legal Proceedings..................................................... 6
Item 4. Submission of Matters to a Vote of Security Holders................... 6
PART II
Item 5. Market For The Partnership's Limited Partnership Units
and Related Security Holder Matters................................... 7
Item 6. Selected Financial Data............................................... 8
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................. 9
Item 8. Financial Statements and Supplementary Data........................... 13
Item 9. Changes In and Disagreements With Accountants on Accounting
and Financial Disclosure.............................................. 27
PART III
Item 10. Directors and Executive Officers...................................... 27
Item 11. Management Remuneration and Transactions.............................. 28
Item 12. Security Ownership of Certain Beneficial Owners and Management........ 28
Item 13. Certain Relationships and Related Transactions........................ 29
PART IV
Item 14. Exhibits, Supplemental Financial Statement Schedules
and Reports on Form 8-K............................................... 32
</TABLE>
<PAGE>
PART I
ITEM 1. BUSINESS
Description of the Partnership
Atlanta Marriott Marquis Limited Partnership (the "Partnership"), 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 Partnership, with a 1% interest, is Marriott
Marquis Corporation (the "General Partner"), a wholly-owned subsidiary of Host
Marriott.
On October 8, 1993, Marriott Corporation's operations were divided into two
separate companies: Host Marriott and Marriott International, Inc. ("MII"). On
December 29, 1995, Host Marriott's operations were divided into two separate
companies: Host Marriott which continued the business of owning lodging
properties and Host Marriott Services Corporation which continued the business
of concession operations at airports and toll roads. Host Marriott, when used
herein in reference to a period or date prior to October 8, 1993, means Marriott
Corporation as it existed prior to its division.
The Partnership is engaged solely in the business of owning and operating the
Hotel and, therefore, is engaged in one industry segment. The principal offices
of the Partnership are located at 10400 Fernwood Road, Bethesda, Maryland 20817.
The Hotel is operated as part of the MII full-service hotel system and is
managed by MII 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. See Item 13, "Certain Relationships and Related Transactions."
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 Hotel. See "Competition"
below and Item 2, "Property."
Historically, the Partnership's financing needs have been funded through loan
agreements with independent financial institutions. See "Mortgage Debt
Financing" below.
Organization of the Partnership
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.
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Mortgage Debt Financing
As of December 31, 1996, the Partnership's mortgage debt consists of a
$215,574,000 nonrecourse mortgage note of Ivy (the "Mortgage Debt"). Interest
accrues on the Mortgage Debt at a fixed rate of 10.3%. Interest only is payable
semiannually in arrears. The cash payment rate is 10.17% until maturity on July
10, 1997. The difference between the cash payment rate and the accrual rate
("Deferred Interest") is added to the balance of the Mortgage Debt. The
cumulative Deferred Interest added to the Mortgage Debt totalled $16.5 million
and $14.7 million at December 31, 1996 and 1995, respectively. The Mortgage Debt
was funded with the proceeds of a secured note offering. The notes consist of
$159 million of Senior Secured Notes and $40 million of Subordinated Secured
Notes. In addition, the Mortgage Debt was issued at a discount of $2.5 million
which was amortized as interest expense through March 24, 1991.
The General Partner is currently attempting to refinance the Mortgage Debt which
matures on July 10, 1997. In conjunction with the refinancing, the Partnership
is expected to incur significant refinancing costs which will be funded from
Partnership cash reserves of approximately $4.6 million as of December 31, 1996.
The refinanced debt will likely require significant amortization of principal in
addition to interest; the Partnership's debt service payments are currently for
interest only. There can be no assurance that a successful refinancing will be
achieved. Failure to refinance the debt could lead to a foreclosure of the
Hotel.
The Mortgage Debt is currently supported by certain guarantees provided by Host
Marriott. Host Marriott has agreed to advance up to $50 million to cover
interest and principal shortfalls (respectively, the "Interest Guarantee" and
the "Principal Guarantee") on the Mortgage Debt. Should cash flow from
operations be insufficient to fully fund interest due, $20 million is available
under the Interest Guarantee through loan maturity. The $30 million Principal
Guarantee is available at maturity or in case of a sale, refinancing or
acceleration of the principal amount of the underlying notes resulting from an
Event of Default, as defined and deficiency in proceeds. To the extent the
Interest Guarantee is not used, it becomes available as an additional Principal
Guarantee. There are no amounts outstanding under either the Interest Guarantee
or the Principal Guarantee. No amounts have been funded under the Principal
Guarantee.
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 has not been fully funded shall reduce,
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 do not bear interest. Amounts advanced in excess of $33 million accrue
interest at 1% over the prime rate. As of December 31, 1996 and 1995, the
Partnership 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 MII as
a back-up guarantor and on December 21, 1994, the agreement was finalized. MII,
as back-up guarantor, will be required to perform the obligations under the
Interest Guarantee and the Principal Guarantee in the event that Host Marriott
fails to do so.
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Material Contracts
Hotel Management Agreement
Ivy entered into a long-term hotel management agreement (the "Agreement") with
MII to manage the Hotel as part of the MII full-service hotel system. The
Agreement has an initial term expiring on May 28, 2010. Ivy or MII has the
option to renew the Agreement for five additional 10-year terms. MII is entitled
to compensation for its services in the form of a base management fee equal to
3% of gross sales. In addition, MII is entitled to an incentive management fee
equal to 50% of assumed net cash flow of the Hotel, as defined. For additional
information, see Item 13, "Certain Relationships and Related Transactions."
Land Lease
On the Closing Date, the Partnership acquired the Land on which the Hotel is
located from Ivy for $10 million. The Partnership has leased the Land back to
Ivy for a period of 99 years. 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. Because of this,
Atlanta has not experienced the demand increases associated with the lodging
industry overall. Although rooms supply growth in the luxury and upscale
segments is forecasted to be limited, significant growth in the budget and
mid-priced hotel segment in Atlanta has had a strong impact on demand as the
convention attendee will move freely between the upscale and mid-priced
segments.
MII believes that by emphasizing management and personnel development and
maintaining a competitive price structure, the Hotel's share of the market will
be maintained or increased. 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 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.
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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 provides 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 Units (excluding those 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 MII.
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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.
Description
The Hotel opened on July 1, 1985. The 1,671 room Hotel includes 70 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.
Guest Room Renovations and Replacements
In 1991, the Hotel underwent a $6.8 million refurbishment which focused on
carpeting, bedspreads, upholstery, drapes and other similar items ("Softgoods").
In 1997, the Hotel will begin a $7.0 million refurbishment of approximately half
its guest rooms which will include the replacement of the Softgoods and also the
dressers, chairs, beds and other furniture ("Casegoods"). The refurbishment of
the remaining rooms will be provided for in conjunction with the refinancing of
the Mortgage Debt or will be provided for with future years' contributions to
the property improvement fund. Also in 1997 the facade repair project will be
started which will entail a repair of the entire facade of the building. The
project is expected to cost between $4.5 million and $11.0 million and will be
funded by the Partnership pursuant to the terms of the management agreement. The
project will be completed during 1998.
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 Hilton Atlanta & 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
332,000 square feet of meeting space. 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 1996 and none are
expected to open in 1997. However, during 1996 three limited service hotels
opened representing approximately 600 additional rooms. As these hotels target a
significantly different market segment, this new supply is not expected to have
a significant impact on the Hotel's revenues. However, the Hotel may experience
some decline in the transient business segment.
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ITEM 3. LEGAL PROCEEDINGS
Neither the Partnership, Ivy nor the Hotel is presently subject to any material
litigation nor, to the General Partner's knowledge, is any material litigation
threatened against the Partnership or the Hotel, other than 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 condition or results of operations of the Partnership.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the limited partners in 1996 or in prior
years.
6
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PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP UNITS
AND RELATED SECURITY HOLDER MATTERS
There is currently no established public trading market for the Units and it is
not anticipated that a public market for the Units will develop. Transfers of
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, 1996, there were 755 holders of record of the 530 Units.
In accordance with Section 4.06 and 4.09 of the Partnership Agreement, cash
available for distribution will be distributed for each fiscal year
semi-annually to the partners as follows:
(i) through December 31, 1990, 1% to the General Partner and 99% to the
Class A limited partners;
(ii) 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
(iii) 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 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 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, the Partnership has distributed a total of $16,128,724 from
operations (consisting primarily of ground rent paid by Ivy to the Partnership)
as follows: $161,414 to the General Partner and $15,967,310 to the Limited
Partners ($30,127 per limited partner Unit). 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 Partnership require certain tax deductions previously allocable
to the limited partners to be allocated instead to the General Partner. To
compensate limited partners for lost value as a result of this reallocation, the
limited partners have been paid 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) 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 October 31, 1995, the Partnership 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
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partners ($3,110 per Unit). On April 15, 1996, the Partnership made a final
distribution solely from 1995 ground rent paid to the Partnership of $814,810 as
follows: $8,150 to the General Partner and $806,660 to the limited partners
($1,522 per Unit).
On October 31, 1994, the Partnership made an interim distribution solely from
ground rent paid to the Partnership of $1,111,930 as follows: $11,120 to the
General Partner and $1,100,810 to the limited partners ($2,077 per Unit). On
April 17, 1995, the Partnership made a final distribution solely from 1994
ground rent paid to the Partnership of $683,110 as follows: $6,830 to the
General Partner and $676,280 to the limited partners ($1,276 per Unit).
Future cash distributions will be dependent upon the outcome of the debt
refinancing. 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 the Partnership for each of the five years ended December 31, 1996 (in
thousands, except per Unit amounts):
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1996 1995 1994 1993 1992
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Hotel revenues*.............................. $ 38,654 $ 34,831 $ 32,201 $ 29,563 $ 26,441
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Net income (loss)............................ $ 2,543 $ (413) $ (3,073) $ (5,935) $ (9,020)
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Net income (loss) per limited partner
Unit (530 Units)......................... $ 4,751 $ (772) $ (5,740) $ (11,087) $ (16,849)
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Total assets................................. $ 181,508 $ 175,963 $ 179,821 $ 186,138 $ 188,534
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Total liabilities............................ $ 239,047 $ 235,226 $ 236,324 $ 237,679 $ 232,543
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Cash distributions per limited partner
Unit (530 Units)......................... $ -- $ 4,632 $ 3,353 $ 3,235 $ 2,949
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Payment due to Reallocation of
Tax Losses................................... $ 284 $ 0 $ 0 $ 844 $ 1,411
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* Hotel revenues represent house profit of Ivy's Hotel since Ivy has
delegated substantially all of the operating decisions related to the
generation of house profit of the Hotel to the Manager. House profit
reflects hotel operating results which flow to Ivy as property owner 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.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
CAPITAL RESOURCES AND LIQUIDITY
The Partnership's financing needs have been historically funded through loan
agreements with independent financial institutions. The General Partner believes
that the Partnership's ability to continue to conduct its operations in the
ordinary course of business is contingent upon the General Partner's ability to
successfully refinance the Partnership's Mortgage Debt.
Mortgage Debt
As of December 31, 1996, the Atlanta Marriott Marquis Limited Partnership (the
"Partnership") debt consists of a $215,574,000 nonrecourse mortgage note (the
"Mortgage Debt"). Interest accrues on the Mortgage Debt at a fixed rate of 10.3%
and interest only is paid semiannually in arrears. The cash payment rate on the
Mortgage Debt is 10.17% until maturity on July 10, 1997. The difference between
the cash payment rate and the accrual rate ("Deferred Interest") is added to the
balance of the Mortgage Debt. Deferred Interest added to the Mortgage Debt
totalled $16.5 million and $14.7 million at December 31, 1996 and 1995,
respectively. The Mortgage Debt was funded with the proceeds of a secured note
offering. The Notes consist of $159 million of Senior Secured Notes and $40
million of Subordinated Secured Notes. In addition, the Mortgage Debt was issued
at a discount of $2.5 million which has been fully amortized.
The Partnership's mortgage debt matures on July 10, 1997 with approximately $217
million due at that time. The General Partner is continuing its efforts to
refinance the Mortgage Debt upon maturity and expects to enter into a commitment
from a prospective lender during the upcoming weeks. Based on the General
Partner's experience with recent partnership refinancings, the refinanced debt
will likely require significant amortization of principal in addition to
interest; the Partnership's debt service payments are currently for interest
only. It is difficult to predict the term, but the General Partner anticipates
the refinanced term will be for approximately seven to fifteen years with an
interest rate of Treasuries plus 2-3% and require principal amortization over a
20 or 25 year schedule. In addition, it is likely that the refinanced mortgage
debt may be split into two tranches: one "senior" tranche which would be secured
by the assets of the Hotel and a "junior" tranche which would be secured only by
Partnership equity and therefore carry a significantly higher interest rate.
Alternatives being considered for the funding of the "junior" tranche include
either a preferred equity infusion or a participating loan. The combination of
these two factors is expected to result in an increased annual debt service
obligation when compared to the existing Mortgage Debt. There can be no
assurance that a successful refinancing will be achieved. Failure to refinance
the Mortgage Debt could lead to a foreclosure of the Hotel.
The Mortgage Debt is currently supported by certain guarantees provided by Host
Marriott. Host Marriott has agreed to advance up to $50 million to cover
interest and principal shortfalls (respectively, the "Interest Guarantee" and
"Principal Guarantee"). Should cash flow from operations be insufficient to fund
fully interest due, $20 million is available under the Interest Guarantee
through loan maturity. The $30 million Principal Guarantee is available at
maturity or in case of a sale, refinancing or acceleration of the principal
amount of the underlying notes resulting from an Event of Default. To the extent
the Interest Guarantee is not used, it becomes available as a Principal
Guarantee. There are no amounts outstanding under either the Interest Guarantee
or the Principal Guarantee. On March 24, 1994, the note holders voted to accept
Marriott International, Inc. ("MII") as a back-up guarantor and effective
December 21, 1994, the agreement was finalized. MII, as back-up guarantor, will
be required to perform the obligations under the guarantees in the unlikely
event that Host Marriott fails to do so.
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Host Marriott had guaranteed up to $33 million of the original debt (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 furniture, fixtures
and equipment expenditures and ground rent shortfalls. Any interest, principal
or guarantee loans made at a time when the Commitment has not been fully funded
shall reduce, dollar for dollar, but not below zero, the remaining unfunded
amount of the Commitment. Advances under the Principal Guarantee, Interest
Guarantee and Commitment (the "Host Marriott Guarantee") up to the cumulative
funding of $33 million do not bear interest. Amounts advanced in excess of $33
million accrue interest at 1% over the prime rate. As of December 31, 1996 and
1995, $20.1 million was outstanding under the Commitment. There were no
Commitment repayments made in 1996 as all cash flow was reserved in anticipation
of the upcoming refinancing.
Principal Sources and Uses of Cash
The Partnership's principal source of cash is cash from Hotel operations. Its
principal uses of cash are to pay debt service on the Partnership's Mortgage
Debt, to make guarantee repayments, to fund the property improvement fund and to
make distributions to the partners. Cash provided from Hotel operations was $9.9
million, $10.1 million, and $5.6 million for the years ended December 31, 1996,
1995 and 1994, respectively. The Partnership paid $20.4 million, $20.4 million
and $19.7 million of interest on the Mortgage Debt for the years ended December
31, 1996, 1995, and 1994, respectively. No guarantee repayments to Host Marriott
were made in 1996. The Partnership made guarantee repayments of $3.5 million and
$2.7 million for the years ended December 31, 1995 and 1994, respectively.
Contributions to the property improvement fund for the years ended December 31,
1996, 1995, and 1994, were $4.1 million, $3.3 million, and $3.0 million,
respectively. Distributions to partners were $800,000 in 1996, $2.3 million in
1995 and $1.9 million in 1994.
In 1996, the General Partner established a reserve in anticipation of the costs
which will be incurred to refinance the Mortgage Debt. Though these costs are
not currently estimable, based on the General Partner's experience with other
partnerships, they are expected to be substantial. These costs include lender
property appraisals, legal expenses, bank fees, environmental studies and other
transaction costs. The reserve is being funded from 1996 ground rent paid to the
Partnership, as well as any 1997 ground rent received up to debt maturity. In
addition, Ivy is also reserving all cash flow in excess of ground rent for owner
funded capital needs of the Hotel. The 1996 capital expenditure budget
identified approximately $3.5 million of capital expenditure projects which are
to funded by the Partnership pursuant to the terms of the management agreement.
Any cash held in excess of the actual costs of these projects will be reserved
to provide for additional financing costs. As of December 31, 1996, the reserve
for refinancing costs totals $4.6 million, while the reserve for the capital
needs of the Hotel is approximately $3.5 million. Based upon current forecasts,
the reserves established will be sufficient to cover the estimated refinancing
costs as well as the expected capital needs of the Hotel.
Property Improvement Fund
The Partnership is required to maintain the Hotel in good repair and condition.
The management agreement provides for the establishment of a property
improvement fund to cover the cost of non-routine repairs and maintenance and
renewals and replacements to the Hotel's property and equipment. Contributions
to the fund for 1994 through June of 1995 were 4% of Hotel gross sales and
increased to 5% thereafter. Currently, the funds available in the property
improvement fund are sufficient for the scheduled $7.0 million rooms
refurbishment for approximately half of the Hotel's rooms. However, the reserve
is not sufficient to fund a refurbishment for the remaining rooms. The General
Partner expects that the funds for the refurbishment of the remaining rooms will
be provided for in conjunction with the refinancing of the Mortgage Debt or will
be provided for with future years' contributions to the property improvement
fund.
10
<PAGE>
RESULTS OF OPERATIONS
1996 Compared to 1995:
Hotel Revenues. Hotel 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. The decline in average occupancy is
primarily due to a significant decline in occupancy throughout the Atlanta
market in the months prior to and subsequent to the Olympic Games. While there
were many benefits to the media focus on the city, the coverage of the
preparation for the Olympic Games also acted as a deterrent to many potential
visitors as people avoided the city believing it to be in a perpetual state of
construction. However, the Hotel was able to more than offset this decline by
maximizing its average room rate during the Games. During the 17-day Centennial
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.
No new full-service hotels opened in the Atlanta market in 1996 and none are
expected to open in 1997. However, during 1996 three limited service hotels
opened representing approximately 600 additional rooms. As these hotels target a
significantly different market segment, this new supply is not expected to have
a significant impact on the Hotel's revenues. However, the Hotel may experience
some decline in the transient business segment. Hotel management is optimistic
about the coming year as the Hotel will look to improve the overall guest
experience at the Hotel through a renewed commitment to customer service. In
addition, the Hotel will begin a $7.0 million rooms refurbishment of
approximately half of the Hotel's rooms in the latter part of the year. In 1997
Hotel management will look to increase occupancy by employing a number of new
marketing efforts including a quarterly mailing targeting group meeting
planners, as well as a direct mail campaign to transient customers highlighting
the Hotel features that would enhance their overall experience.
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 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.
1995 Compared to 1994:
Hotel Revenues. Hotel revenues for 1995 increased to $34.8 million from $32.2
million in 1994. The increase in revenues is primarily the result of a 3%
increase in REVPAR combined with a $1.3 million increase in food and beverage
profits. REVPAR increased due to a 6% increase in average room rate to
approximately $115 partially offset by a 1.8 percentage point decrease in
occupancy to the low-70's. Food and beverage profit margins increased 3.4
percentage points due to a large increase in catering sales, a reduction in
labor costs, and a shift in banquet sales from lower margin outside banquet
sales to higher margin in-house banquet sales.
11
<PAGE>
Depreciation. Depreciation decreased $.9 million, or 11%, in 1995 when compared
to 1994 due to a portion of the Hotel's furniture and equipment becoming fully
depreciated in 1994.
Incentive Management Fees. In 1995, $1.0 million of incentive management fees
were earned as compared with no incentive management fees earned in 1994. The
increase in incentive management fees earned was the result of improved Hotel
operating results resulting in certain cash flow priorities having been met.
Net Income (Loss). In 1995, the Partnership had a net loss of $.4 million, a
decrease of $2.6 million over 1994's net loss of $3.0 million. This decrease 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. MII is generally
able to pass through increased costs to customers through higher room rates.
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.
12
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index Page
----- ----
Report of Independent Public Accountants........................... 14
Consolidated Statement of Operations............................... 15
Consolidated Balance Sheet......................................... 16
Consolidated Statement of Changes in Partners' Deficit............. 17
Consolidated Statement of Cash Flows............................... 18
Notes to Consolidated Financial Statements......................... 19
13
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- - --------------------------------------------------------------------------------
TO THE PARTNERS OF ATLANTA MARRIOTT MARQUIS LIMITED PARTNERSHIP:
We have audited the accompanying consolidated balance sheet of Atlanta Marriott
Marquis Limited Partnership (a Delaware limited partnership) and Ivy Street
Hotel Limited Partnership, its majority-owned subsidiary partnership, as of
December 31, 1996 and 1995, 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, 1996. 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 Limited Partnership and subsidiary as of December 31, 1996 and 1995, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1996 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As discussed in Note 6 to the
financial statements, the Partnership's mortgage debt matures on July 10, 1997.
This raises substantial doubt about its ability to continue as a going concern.
The Partnership's plans in regard to this matter are also described in Note 6.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
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) (Schedule III Real Estate and Accumulated Depreciation) 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 28, 1997
(except for the matter discussed in Note 9, as to which the date is August 15,
1997)
14
<PAGE>
CONSOLIDATED STATEMENT OF OPERATIONS
Atlanta Marriott Marquis Limited Partnership and Subsidiary
For the Years Ended December 31, 1996, 1995 and 1994
(in thousands, except per Unit amounts)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES
Hotel (Note 3)..................................................... $ 38,654 $ 34,831 $ 32,201
Interest income.................................................... 651 529 349
---------- ---------- -----------
39,305 35,360 32,550
---------- ---------- -----------
OPERATING COSTS AND EXPENSES
Interest........................................................... 22,890 22,712 22,493
Depreciation....................................................... 5,525 6,608 7,464
Property taxes..................................................... 2,858 2,692 2,784
Base management fee................................................ 2,654 2,435 2,337
Incentive management fee........................................... 2,018 969 --
Equipment rent and other........................................... 817 357 545
---------- ---------- -----------
36,762 35,773 35,623
---------- ---------- -----------
NET INCOME (LOSS)..................................................... $ 2,543 $ (413) $ (3,073)
========== ========== ===========
ALLOCATION OF NET INCOME (LOSS)
General Partner..................................................... $ 25 $ (4) $ (31)
Limited Partners.................................................... 2,518 (409) (3,042)
---------- ---------- -----------
$ 2,543 $ (413) $ (3,073)
========== ========== ===========
NET INCOME (LOSS) PER LIMITED PARTNER UNIT
(530 Units).............................................................$ 4,751 $ (772) $ (5,740)
========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
15
<PAGE>
CONSOLIDATED BALANCE SHEET
Atlanta Marriott Marquis Limited Partnership and Subsidiary
December 31, 1996 and 1995
(in thousands)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
---------- -------
<S> <C> <C>
ASSETS
Property and equipment, net................................................... $ 162,111 $ 164,194
Amounts held by Marriott International, Inc................................... 3,490 874
Working capital and supplies held by Marriott International, Inc.............. 2,900 2,900
Property improvement fund..................................................... 6,864 5,822
Deferred financing costs, net of accumulated amortization..................... 542 1,163
Cash and cash equivalents..................................................... 5,601 1,010
---------- -----------
$ 181,508 $ 175,963
=========== ===========
LIABILITIES AND PARTNERS' DEFICIT
LIABILITIES
Mortgage debt.............................................................. $ 215,574 $ 213,743
Due to Host Marriott under Original Debt Service Guarantee and Commitment.. 20,134 20,134
Due to Marriott International, Inc......................................... 3,030 1,064
Accounts payable and accrued expenses...................................... 309 285
---------- -----------
Total Liabilities........................................................ 239,047 235,226
---------- -----------
PARTNERS' DEFICIT
General Partner
Capital contributions.................................................... 536 536
Capital distributions.................................................... (165) (157)
Cumulative net losses.................................................... (885) (910)
---------- -----------
(514) (531)
---------- -----------
Limited Partners
Capital contributions, net of offering costs of $6,430................... 46,570 46,570
Capital distributions.................................................... (15,982) (15,171)
Cumulative net losses.................................................... (87,613) (90,131)
---------- -----------
(57,025) (58,732)
---------- -----------
Total Partners' Deficit.................................................. (57,539) (59,263)
---------- -----------
$ 181,508 $ 175,963
========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
16
<PAGE>
CONSOLIDATED STATEMENT OF CHANGES IN
PARTNERS' DEFICIT
Atlanta Marriott Marquis Limited Partnership and Subsidiary
For the Years Ended December 31, 1996, 1995 and 1994
(in thousands)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
------- -------- -----
<S> <C> <C> <C>
Balance, December 31, 1993.......................................... $ (454) $ (51,087) $ (51,541)
Capital distributions............................................ (19) (1,870) (1,889)
Net loss......................................................... (31) (3,042) (3,073)
---------- ----------- -----------
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)
========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
17
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
Atlanta Marriott Marquis Limited Partnership and Subsidiary
For the Years Ended December 31, 1996, 1995 and 1994
(in thousands)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
------------ ----------- ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)................................................... $ 2,543 $ (413) $ (3,073)
Noncash items:
Depreciation .................................................... 5,525 6,608 7,464
Deferred interest................................................ 1,831 1,654 2,765
Amortization of financing costs as interest...................... 621 619 633
(Gain) loss on disposition of assets............................. (1) 64 (3)
Changes in operating accounts:
Accounts payable and accrued expenses............................ 24 (178) (1,207)
Due from Marriott International, Inc............................. (2,616) 782 (764)
Due to Marriott International, Inc............................... 1,966 926 (213)
------------ ----------- ------------
Cash provided by operating activities........................ 9,893 10,062 5,602
------------ ----------- ------------
INVESTING ACTIVITIES
Additions to property and equipment, net............................ (3,444) (2,643) (1,531)
Change in property improvement fund................................. (1,039) (1,097) (1,568)
------------ ----------- ------------
Cash used in investing activities............................ (4,483) (3,740) (3,099)
------------ ----------- ------------
FINANCING ACTIVITIES
Capital distributions............................................... (819) (2,347) (1,889)
Repayments under Original Debt Service Guarantee and Commitment -- (3,500) (2,700)
------------ ----------- ------------
Cash used in financing activities............................ (819) (5,847) (4,589)
------------ ----------- ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS....................... 4,591 475 (2,086)
CASH AND CASH EQUIVALENTS at beginning of year......................... 1,010 535 2,621
------------ ----------- ------------
CASH AND CASH EQUIVALENTS at end of year............................... $ 5,601 $ 1,010 $ 535
============ =========== ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for mortgage interest..................................... $ 20,438 $ 20,438 $ 19,706
============ =========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Atlanta Marriott Marquis Limited Partnership and Subsidiary
December 31, 1996 and 1995
- - --------------------------------------------------------------------------------
NOTE 1. THE PARTNERSHIP
Description of the Partnership
Atlanta Marriott Marquis Limited Partnership (the "Partnership"), 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 direct subsidiary of
Host Marriott. On December 29, 1995, Host Marriott's operations were divided
into two separate companies: Host Marriott and Host Marriott Services
Corporation. 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.
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 3% of annual gross room sales of annual cash available
for distribution from Ivy was paid to the Partnership through December 31, 1994.
Thereafter, an amount equal to 5% of annual gross room sales will be paid to the
Partnership from annual cash available for distribution from Ivy unless Ivy
exercises its option to repurchase the Land.
During 1990, the Partnership determined that the probability of collecting the
minority interest receivable from Portman was remote. Thus, the Partnership
wrote off this receivable which totaled $3,542,000 and began recording 100% of
the losses of Ivy. In future years, if the Partnership records income, 100% of
the income will be allocated to the Partnership until such excess income
allocated to the Partnership equals the excess losses previously recorded by the
Partnership. Thereafter, any income would be allocated 80% to the Partnership
and 20% to Portman. As of December 31, 1996 and 1995, excess losses recognized
by the Partnership were $50,000 and $581,000, respectively. Partnership net
losses, as defined, are generally allocated as follows:
(i) through December 31, 1990, 1% to the General Partner and 99% to the Class
A limited partners;
(ii) beginning in 1991 and continuing until the Class A limited partners and
the General Partner have 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
19
<PAGE>
(iii) thereafter, 1% to the General Partner, 65% to the Class A limited
partners and 34% to the Class B limited partner.
These allocations may be 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 will be distributed
semi-annually as follows:
(i) through December 31, 1990, 1% to the General Partner and 99% to the Class
A limited partners;
(ii) beginning in 1991, and continuing until the Class A limited partners and
the General Partner have 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
(iii) 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 have 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 are allocated in the same ratio as Cash
Available for Distribution. Excess net profits will then be applied to offset
prior net losses in excess of the partners' remaining invested capital.
Notwithstanding the above allocations, the Partnership Agreement provides 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 provides for
specific allocations of any excess refinancing or land sale proceeds.
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.
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.
20
<PAGE>
Revenues and Expenses
Hotel revenues represent house profit of Ivy's Hotel since Ivy has delegated
substantially all of the operating decisions related to the generation of house
profit of the Hotel to the Manager. House profit reflects hotel operating
results which flow to Ivy as property owner 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.
Property and Equipment
Property and equipment is recorded at cost which includes interest, rent and
real estate taxes incurred during development. Ivy sold the Land to the
Partnership for $2.6 million less than its carrying value. This amount is being
amortized over the life of the lease (99 years). Depreciation is computed using
the straight-line method over the following estimated useful lives of the
assets, less a 10% residual value on the original building costs:
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.
Accumulated amortization of the deferred financing costs totaled $4,090,000 and
$3,469,000 at December 31, 1996 and 1995, 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 for income tax purposes. As a result of these
differences, the excess of the tax basis in net Partnership liabilities and the
net liabilities reported in the accompanying financial statements is $72,111,000
and $67,967,000 as of December 31, 1996 and 1995, respectively.
21
<PAGE>
Reclassification
Certain prior year amounts have been reclassified to conform with current year
presentation.
New Statement of Financial Accounting Standards
In the first quarter of 1996, the Partnership 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. REVENUES
Revenues consist of Hotel operating results for the three years ended December
31 (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
HOTEL SALES
Rooms........................................................ $ 56,115 $ 50,515 $ 48,982
Food and beverage............................................ 25,968 25,379 23,920
Other........................................................ 6,381 5,277 4,987
----------- ----------- -----------
88,464 81,171 77,889
----------- ----------- -----------
HOTEL EXPENSES
Departmental direct costs
Rooms...................................................... 11,508 10,821 11,156
Food and beverage......................................... 18,003 17,289 17,092
Other hotel operating expenses............................... 20,299 18,230 17,440
----------- ----------- -----------
49,810 46,340 45,688
----------- ----------- -----------
REVENUES........................................................ $ 38,654 $ 34,831 $ 32,201
=========== =========== ===========
</TABLE>
22
<PAGE>
NOTE 4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following as of December 31 (in
thousands):
1996 1995
----------- -----------
Leased land acquisition costs and land.......... $ 12,617 $ 12,617
Building and improvements....................... 182,597 181,806
Furniture and equipment......................... 34,142 33,457
----------- -----------
229,356 227,880
----------- -----------
Less accumulated depreciation................... (67,245) (63,686)
----------- -----------
$ 162,111 $ 164,194
=========== ===========
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:
<TABLE>
<CAPTION>
As of December 31, 1996 As of December 31, 1995
---------------------------- -------------------------
Estimated Estimated
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- --------- -------- ---------
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Mortgage debt $ 215,574 $ 215,574 $ 213,743 $ 213,743
Due to Host Marriott under Original Debt
Service Guarantee and Commitment $ 20,134 $ 14,300 $ 20,134 $ 7,114
Incentive management fees due to
Marriott International, Inc. $ 2,987 $ -- $ 969 $ 208
</TABLE>
The estimated fair value of the mortgage debt is based on the expected future
debt service payments discounted at estimated market rates adjusted for the
presence of the Principal and Interest Guarantees, as defined in Note 6. The
Host Marriott liability and the incentive management fees due are valued based
on the expected future payments from operating cash flow discounted at
risk-adjusted rates.
23
<PAGE>
NOTE 6. MORTGAGE DEBT
As of December 31, 1996, the Partnership's mortgage debt consists of a
$215,574,000 nonrecourse mortgage note of Ivy (the "Mortgage Debt"). Interest
accrues on the Mortgage Debt at a fixed rate of 10.3%. Interest only is payable
semi-annually in arrears. The cash payment rate is 10.17% until maturity on July
10, 1997. The difference between the cash payment rate and the accrual rate
("Deferred Interest") is added to the balance of the Mortgage Debt. The
cumulative Deferred Interest added to the Mortgage Debt totaled $16.5 million
and $14.7 million at December 31, 1996 and 1995, respectively. The Mortgage Debt
was funded with the proceeds of a secured note offering. The Notes consist of
$159 million of Senior Secured Notes and $40 million of Subordinated Secured
Notes. In addition, the Mortgage Debt was issued at a discount of $2.5 million
which was amortized as interest expense through March 24, 1991.
The General Partner is currently attempting to refinance the Mortgage Debt which
matures on July 10, 1997. In conjunction with the refinancing, the Partnership
is expected to incur significant refinancing costs which will be funded from
Partnership cash reserves. The refinanced debt will likely require significant
amortization of principal in addition to interest; the Partnership's debt
service payments are currently for interest only. There can be no assurance that
a successful refinancing will be achieved. Failure to refinance the debt could
lead to a foreclosure of the Hotel.
The Mortgage Debt is supported by certain guarantees provided by Host Marriott.
Host Marriott has agreed to advance up to $50 million to cover interest and
principal shortfalls (respectively, the "Interest Guarantee" and the "Principal
Guarantee") on the Mortgage Debt. Should cash flow from operations be
insufficient to fully fund interest due, $20 million is available under the
Interest Guarantee through loan maturity. The $30 million Principal Guarantee is
available at maturity or 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 is not used, it becomes available
as an additional Principal Guarantee. There are no amounts outstanding under
either the Interest Guarantee or the Principal Guarantee. No amounts have been
funded under the Principal Guarantee.
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 has not been fully funded shall reduce,
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 do not bear interest. Amounts advanced in excess of $33 million accrue
interest at 1% over the prime rate. As of December 31, 1996 and 1995, the
Partnership 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, will be required to perform the
obligations under the guarantees in the event that Host Marriott fails to do so.
24
<PAGE>
NOTE 7. HOTEL MANAGEMENT AGREEMENT
Ivy entered into a hotel management agreement (the "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 is 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 1996, 1995 and 1994 were
$2,654,000, $2,435,000 and $2,337,000, respectively.
In addition, the Manager earns an incentive management fee equal to 50% of
assumed net cash flow of the Hotel, as defined. However, once total cumulative
incentive management fees reach an amount equal to or greater than 20% of total
cumulative Hotel profit, as defined, the Manager will 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 is paid out of cash flow
available for incentive management fee, as defined, and is subordinated to the
Mortgage Debt, guarantee repayments and rent under the Land lease. Any incentive
management fees earned but not paid will be deferred without interest and paid
out of the first cash flow available for the incentive management fee. As of
December 31, 1996 and 1995, $2,018,000 and $969,000, respectively, in incentive
management fees have been earned. Through December 31, 1996, no incentive
management fees have ever been paid. Deferred incentive management fees for the
years ended December 31, 1996 and 1995 were $2,987,000 and $969,000,
respectively, and are included in Due to Marriott International, Inc. in the
accompanying financial statements. Payment of such deferred fees is not expected
to occur in the near-term.
Pursuant to the terms of the 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
Marriott full-service hotel system. In addition, the Hotel also participates in
the Manager's Honored Guest Awards Program ("HGA"). The cost of this program is
charged to all hotels in the Marriott full-service hotel system. The total
amount of Chain Services and HGA costs allocated to the Hotel was $2,685,000 in
1996, $2,431,000 in 1995 and $2,202,000 in 1994.
Pursuant to the terms of the 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 provided 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 but
owned by Ivy. Upon termination of the Agreement, the working capital and
supplies will be returned to the Partnership. The individual components of
working capital and supplies controlled by the Manager are not reflected in the
Partnership's balance sheet. As of December 31, 1996 and 1995, $3,077,000 has
been provided to the Manager for working capital and supplies which is reflected
as working capital and supplies held by Marriott International, Inc. in the
accompanying financial statements. The supplies provided to the Manager are
recorded at their estimated net realizable value. At December 31, 1996 and 1995,
accumulated amortization related to the revaluation of these supplies totaled
$177,000.
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 equalled 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, 1996, 1995, and 1994 were $4,122,000, $3,302,000 and
$2,954,000, respectively.
25
<PAGE>
NOTE 8. LAND LEASE
On the Closing Date, the Partnership acquired the Land on which the Hotel is
located from Ivy for $10 million. The Partnership has leased the Land to Ivy for
a period of 99 years. Through 1994, Ivy paid annual rent equal to $1 million
plus 3% of annual gross room sales from the Hotel in excess of $20 million, up
to a maximum of $2.5 million. Beginning January 1, 1995, annual rental increased
to 5% of annual gross room sales from the Hotel. Ivy has 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, 1996, the option price was
$25,825,000. Total rentals under the lease, which were eliminated in
consolidation, were $2,806,000 in 1996, $2,526,000 in 1995 and $1,869,000 in
1994.
NOTE 9. SUBSEQUENT EVENT
On July 10, 1997 (the "Extension Date"), the Partnership and Ivy entered into a
letter agreement (the "Letter Agreement") which effectively extends the maturity
of the Mortgage Debt until February 2, 1998 (the "New Maturity Date"). On the
Extension Date, the Partnership and Ivy were required to pay $17,590,000
representing the Deferred Interest on the Mortgage Debt in addition to the
scheduled interest payment due of $10,119,000. As a result, the Mortgage Debt
balance outstanding was reduced to $199,000,000. The payment of the Deferred
Interest was funded from $7,200,000 of Ivy cash reserves and $10,390,000 drawn
pursuant to a Host Marriott interest guarantee (the "Interest Guarantee"). Host
Marriott had agreed to advance up to $50,000,000 to cover interest and principal
shortfalls. Should cash flow from operations be insufficient to fund fully
interest due, $20,000,000 was available under the Interest Guarantee through
loan maturity. The remaining $30,000,000 was available under the Principal
Guarantee. Prior to the payment of Deferred Interest in the amount of
$10,390,000 on July 10, 1997, 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 is available at maturity
or in case of a sale, refinancing or acceleration of the principal amount of the
underlying Notes resulting from an Event of Default. To the extent the Interest
Guarantee is not used, it becomes available as a Principal Guarantee. The
General Partner estimates that a sale of the Hotel would generate sufficient
proceeds to repay the maturing Mortgage Debt, outstanding advances from Host
Marriott and cover transaction costs; therefore, no advances under the
guarantees would be required.
During the term of the Letter Agreement, the Mortgage Debt continues to be
nonrecourse, and will accrue interest at 12.3% per annum with interest payments
due on January 10 and February 2, 1998. Additionally, all funds remitted by the
Manager during the term of the extension will be held by the Partnership 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. It is expected that cash flow from
operations will provide adequate funds to meet the scheduled interest payments.
The General Partner is continuing its efforts to refinance the Mortgage Debt
upon or prior to the New Maturity Date and expects to enter into a commitment
with a prospective lender during the upcoming weeks.
26
<PAGE>
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>
<CAPTION>
Age at
Name Current Position December 31, 1996
- - -------------------------- ---------------------------------------------- -----------------
<S> <C> <C>
Bruce F. Stemerman President and Director 41
Robert E. Parsons, Jr. Director 41
Christopher G. Townsend Vice President, Director and Assistant Secretary 49
Patricia K. Brady Vice President and Chief Accounting Officer 35
Bruce D. Wardinski Treasurer 36
</TABLE>
Business Experience
Bruce F. Stemerman was elected President of the General Partner in June 1997. He
has been a Director General Partner since October 1993 and was Chief Accounting
Officer of the General Partner, as well as Vice President--Finance from October
1993 to June 1997. 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.
Robert E. Parsons, Jr. was elected Director of the General Partner in September
1988. 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.
Christopher G. Townsend has been Vice President, Director and Assistant
Secretary of the General Partner since May 1987. 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.
Patricia K. Brady was appointed to Vice President and Chief Accounting Officer
of the General Partner on October 10, 1996. 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.
27
<PAGE>
Bruce D. Wardinski was elected Treasurer of the General Partner in 1996. 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, 1996, 1995 and 1994, administrative expenses reimbursed to
the General Partner totaled $65,000, $84,000 and $125,000, 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, 1996, 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 the Partnership and Class B limited partnership interest
representing a 19% - 34% limited partnership interest in the Partnership after
payment of priority items.
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.
28
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Hotel Management Agreement
Ivy entered into a hotel management agreement (the "Agreement") with MII to
manage the Hotel for a term of 25 years, renewable at Ivy's or MII's option for
five additional 10-year terms. MII is 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 1996, 1995 and 1994 were $2,654,000, $2,435,000 and $2,337,000,
respectively.
In addition, MII earns an incentive management fee equal to 50% of assumed net
cash flow of the Hotel, as defined. However, once total cumulative incentive
management fees reach an amount equal to or greater than 20% of total cumulative
Hotel profit, as defined, MII will 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 is paid out of cash flow available for incentive
management fee, as defined, and is subordinated to the Mortgage Debt, guarantee
repayments and rent under the Land lease. Any incentive management fees earned
but not paid will be deferred without interest and paid out of the first cash
flow available for the incentive management fee. As of December 31, 1996 and
1995, $2,018,000 and $969,000, respectively, in incentive management fees have
been earned. Through December 31, 1996, no incentive management fees have been
paid. Deferred incentive management fees for the years ended December 31, 1996
and 1995 were $2,987,000 and $969,000, respectively. Payment of such deferred
fees is not expected to occur in the near-term.
Pursuant to the terms of the Agreement, MII 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 MII 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 MII full-service
hotel system. In addition, the Hotel also participates in MII's Honored Guest
Awards Program ("HGA"). The cost of this program is charged to all hotels in the
MII full-service hotel system. The total amount of Chain Services and HGA costs
allocated to the Hotel was $2,685,000 in 1996, $2,431,000 in 1995 and $2,202,000
in 1994.
Pursuant to the terms of the Agreement, Ivy is required to provide MII with
working capital and supplies to meet the operating needs of the Hotel. MII
converts cash advanced by Ivy into other forms of working capital consisting
primarily of operating cash, inventories, and trade receivables and payables
which are maintained and controlled by MII. Upon termination of the Agreement,
the working capital and supplies will be returned to Ivy. The individual
components of working capital and supplies controlled by MII are not reflected
in the consolidated balance sheet of the Partnership. As of December 31, 1996
and 1995, $3,077,000 has been advanced to MII for working capital and supplies.
At December 31, 1996 and 1995, accumulated amortization related to the
revaluation of these supplies totaled $177,000.
Ivy 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 are 5%
thereafter. Total contributions to the property improvement fund for the years
ended December 31, 1996, 1995 and 1994 were $4,122,000, $3,302,000 and
$2,954,000, respectively.
29
<PAGE>
The Agreement provides that Ivy may sell the Hotel at any time and any partner
of the owner shall have the right to sell or assign all or a portion of their
interest in the owner. Any sale will be subject to the Agreement. In the event
of a bona fide written offer for the sale of the Hotel to a competitor of MII or
the sale of all or a portion of a partner's interest in Ivy to a competitor, MII
may either (i) purchase the Hotel at the same price and upon the same terms and
conditions, or (ii) consent to such sale and assignment of the Agreement.
Ivy and/or MII have the right to terminate the Agreement under the following
conditions: (I) if either party breaches any term, covenant or condition thereof
and fails to commence to cure the breach within 30 days of notice and thereafter
fails to diligently pursue all efforts necessary to effect such cure; and (ii)
upon certain events of insolvency and bankruptcy with respect to MII or the
Hotel. Ivy shall have the right to terminate the Agreement (i) after the first
six years of its term upon not less than 60 days prior notice to MII if the
Minimum Performance Standards are not met; provided, however, (a) MII shall have
the right to cure such default by tendering a certified check within said 60 day
period for an amount which shall be sufficient, when added to Hotel Profit for
the immediately preceding three fiscal years prior to the fiscal year for the
date of the notice of default, to bring the amount for said three-year period
within the limits of the Minimum Performance Standards and (b) that one-third of
any payment made pursuant to the foregoing provision shall be deemed to have
been added to Hotel Profit for each of said three fiscal years for the purpose
of determining whether the Minimum Performance Standards have been achieved in
succeeding fiscal years; (ii) upon not less than 60 days prior notice if MII
breaches its agreement with regard to the Non-Competition Area as set forth in
the Agreement; and (iii) upon 15 days prior notice if (a) the Investor
Partnership fails to meet its obligations under the Agreement for all or part of
its capital contributions to Ivy, or (b) MII fails to comply with its Payment
Obligation.
In addition, the Agreement may, under certain circumstances, be terminated upon
damage, destruction or condemnation of the Hotel. If the Hotel is damaged or
destroyed, MII may terminate the Agreement if Ivy fails to undertake repair work
within 180 days, and diligently complete the work in the time agreed to by MII
and Ivy, unless the reason for such failure is beyond the control of Ivy. Ivy
has the responsibility to repair damage from a condemnation or a casualty as its
own expense. However, Ivy may terminate the Agreement if (i) the Hotel is
damaged or destroyed to such an extent that the cost of repairs or restorations
exceeds 30% of the full replacement cost of the Hotel, (ii) the food and
beverage facilities are rendered unusable for the last 18 months of the initial
or any renewal term, or (iii) the number of guest rooms rendered unusable
exceeds a certain percentage ranging from 10% to 30% depending on the number of
years left in the term. If the Hotel is condemned, the Agreement will terminate
(a) unless only a part of the Hotel is condemned and the remainder can be
operated as a first-class convention hotel or (b) the proceeds of a condemnation
are not made available to Ivy by the Lenders.
The Hotel will continue to be managed by MII under the Management Agreement.
Although the Management Agreement has a 25-year initial term, MII has agreed to
renegotiate the terms of the Management Agreement prior to the repayment of the
Mortgage Debt. Ivy Street entered into the Management Agreement at the time of
the original offering of Units in 1985 at which time MII was a subsidiary of
Host Marriott as described above. Although the General Partner believes that the
Management Agreement is fair to Ivy Street and reflects commercially reasonable
terms, the General Partner has made no independent investigation as to whether
the Management Agreement was on terms at least as favorable as those that would
have been obtained from a third party.
Land Lease
On the Closing Date, the Partnership acquired the Land on which the Hotel is
located from Ivy for $10
30
<PAGE>
million. The Partnership has leased the Land to Ivy for a period of 99 years.
Through 1994, Ivy paid annual rent equal to $1 million plus 3% of annual gross
room sales from the Hotel in excess of $20 million, up to a maximum of $2.5
million. Beginning January 1, 1995, annual rental increased to 5% of annual
gross room sales from the Hotel. Ivy has 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, 1996, the option price was $25,825,000. Total
rentals under the lease, eliminated in consolidation, were $2,806,000 in 1996,
$2,526,000 in 1995 and $1,869,000 in 1994.
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, 1996, 1995 and 1994
(in thousands). The table also includes accrued but unpaid incentive management
fees:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- -------
<S> <C> <C> <C>
Payments to Host Marriott and subsidiaries:
Administrative expenses................................ $ 65 $ 84 $ 125
Cash distributions..................................... 10 30 19
--------- --------- ---------
$ 75 $ 114 $ 144
========= ========= =========
Payments to MII and subsidiaries:
Base management fee.................................... $ 2,654 $ 2,435 $ 2,337
Chain Services and HGA costs........................... 2,685 2,431 2,202
--------- --------- ---------
$ 5,339 $ 4,866 $ 4,539
========= ========= =========
</TABLE>
31
<PAGE>
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
<TABLE>
<CAPTION>
Exhibit
Number Description
- - -------------- ----------------------------------------------------------- ---------------
<S> <C>
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
NationsBank 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
NationsBank 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 betweeen 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)
</TABLE>
32
<PAGE>
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)
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during 1996.
33
<PAGE>
SCHEDULE III
ATLANTA MARRIOTT MARQUIS LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1996
<TABLE>
<CAPTION>
Gross Amount at December 31, 1996
---------------------------------------------------------
(in thousands)
Initial Costs
--------------------------
Subsequent
Buildings & Costs Buildings &
Encumbrances Land Improvements Capitalized Land Improvements Total
------------ ----------- ------------- ------------ ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Atlanta Marriott Marquis
Atlanta, GA $ 215,574 $ 12,565 $ 177,852 $ 4,797 $ 12,617 $ 182,597 $ 195,214
============= =========== ============= ============ ========== ============= =============
Date of
Accumulated Complettion Date Depreciation
Depreciation Construction Acquired Life
------------ ------------ -------- ----
Atlanta Marriott Marquis
Atlanta, GA $ 39,982 1985 1985 50 years
</TABLE>
<TABLE>
<CAPTION>
1994 1995 1996
------------ ------------ -----------
(in thousands)
<S> <C> <C> <C>
Notes:
(a) Reconciliation of Real Estate:
Balance at beginning of year............................. $ 193,765 $ 194,117 $ 194,423
Capital expenditures................................. 352 306 815
Dispositions......................................... -- -- (24)
------------ ------------- ------------
Balance at end of year................................... $ 194,117 $ 194,423 $ 195,214
============ ============= ============
(b) Reconciliation of Accumulated Depreciation:
Balance at beginning of year.............................. $ 28,833 $ 32,518 $ 36,258
Depreciation and amortization......................... 3,685 3,740 3,748
Dispositions and other ............................... -- -- (24)
------------ ------------- ------------
Balance at end of year.................................... $ 32,518 $ 36,258 $ 39,982
============ ============= ============
</TABLE>
(c) The aggregate cost of land, buildings and improvements for Federal income
tax purposes was approximately $229,369 at December 31, 1996.
(d) The Hotel is pledged as collateral for the Partnership's mortgage debt of
$215.6 million as of December 31, 1996.
34
<PAGE>
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 November 10, 1997.
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 November 10, 1997.
Signature Title
- - --------- -----
MARRIOTT MARQUIS CORPORATION
/s/ Bruce F. Stemerman
- - ----------------------------- President and Director
Bruce F. Stemerman
/s/ Christopher G. Townsend
- - ----------------------------- Vice President, Director and Assistant
Christopher G. Townsend Secretary
/s/ Bruce D. Wardinski
- - ----------------------------- Treasurer
Bruce D. Wardinski
35
Exhibit 10.1
NOTE PRINCIPAL AMOUNT
- - ---------------------
$199,000,000.00
SECURED NOTE
------------
As of July 10, 1990
IVY STREET LIMITED PARTNERSHIP, a Georgia limited partnership having an
office at 10400 Fernwood Road, Bethesda, Maryland 20058 ("Maker", which term
shall also include, without limitation, any successor tenant under the Ground
Lease (as defined in the Deed, as hereinafter defined) and any successor owner
of the Improvements, as defined in the Deed, which assumes all or part of the
Maker's obligations in accordance with, and to the extent provided in the Deed),
for value received, hereby promises to pay to the order of MARRIOTT/PORTMAN
FINANCE CORPORATION, a Delaware corporation having an office at 10400 Fernwood
Road, Bethesda, Maryland 20058 (such corporation and any subsequent holder of
this Secured Note being hereinafter referred to as "Payee") on July 10, 1997
(the "Stated Maturity") the principal sum of ONE HUNDRED NINETY-NINE MILLION AND
00/100 DOLLARS ($199,000,000.00) (the "Note Principal Amount"), plus all
Deferred Interest (as defined herein) and to pay interest as provided below upon
the Note Principal Amount semiannually in arrears on January 10 and July 10 of
each year, commencing January 10, 1991 (each such date being referred to
hereinafter as a "Payment Date") at the Payment Rate hereinafter provided, from
the most recent prior Payment Date to which interest has been paid or, if no
interest has been paid, from July 10, 1990, until payment of the Note Principal
Amount has been made. Capitalized terms used herein but undefined herein shall
have the meaning given them in that certain Deed to Secure Debt, Security
Agreement and Assignment of Leases and Rents made by Maker and AMMLP to Payee,
of even date herewith (as amended or supplemented from time to time, the
"Deed").
1. The Note Principal Amount shall bear interest at the rate of 8.39%
per annum to March 24, 1991 (the "Deferred Interest Commencement Date"). The
Note Principal Amount shall bear interest from the Deferred Interest
Commencement Date until the Stated Maturity or such earlier date, if any, as the
Note Principal Amount hereunder becomes due in accordance with the terms hereof
(the earlier to occur of the Stated Maturity and such earlier date, hereinafter
being referred to as the "Maturity Date") at the rate of 10.30% per annum (the
"Interest Rate"). Interest shall be computed on the basis of a 360-day year
comprised of twelve 30-day months. Notwithstanding the Interest
<PAGE>
Rate, payments of interest on the Note Principal Amount will be made at the rate
(the "Payment Rate") of 8.39% per annum from July 10, 1990 to July 10, 1992,
8.8848% per annum from July 10, 1992 to July 10, 1994 and 10.17% per annum from
July 10, 1994 until the Maturity Date. The amount by which (a) interest earned
at the Interest Rate on the Note Principal Amount from and after the Deferred
Interest Commencement Date for any period commencing with a Payment Date (or,
for the first such period, commencing on the Deferred Interest Commencement
Date) and ending on the next succeeding Payment Date (or, for the last such
period, ending on the Maturity Date exceeds (b) the amount of interest due and
payable at the Payment Rate for such period, (such excess, the "Deferred
Interest") shall accrue on the last day of such period and thereafter until the
Maturity Date earn interest at the Interest Rate, compounded semiannually on
each subsequent Payment Date and on the Maturity Date, as applicable. Interest
earned on Deferred Interest shall be added to Deferred Interest on each Payment
Date and on the Maturity Date, as applicable, and the term "Deferred Interest"
shall include such added interest. Deferred Interest shall be due and payable on
the Maturity Date.
2. If Maker shall fail to pay any amount hereunder on the date such
amount is due, such overdue amount shall, to the extent permitted by law, bear
interest from and including the date such overdue amount was due until such
overdue amount has been paid at a rate (the "Default Rate") equal to the lesser
of (a) the Interest Rate plus four If Maker shall fail to pay any amount
hereunder on the date such amount is percent (4%) per annum, and (b) the maximum
rate of interest per annum then permitted by applicable law.
3. Notwithstanding anything in this Secured Note to the contrary,
whenever interest is stated in this Secured Note to accrue (a) from a particular
date, interest shall accrue from and including such date, or (b) to or until a
particular date, interest shall accrue to, but not including, such date.
4. Maker shall pay to Payee as additional interest on the Secured Note
("Secured Note Additional Interest") the sum of (a) the Additional Interest
payable under the Notes as and when the same shall be due, plus (b) such
additional amounts as are necessary in order that every net payment by Maker to
Payee of the Note Principal Amount, Deferred Interest, interest, Secured Note
Yield Maintenance Amount, if any, the Secured Note Accreted Amount (as
hereinafter defined), any amount payable pursuant to Section 4(a) above and any
other amounts due and payable under this Secured Note, after withholding for or
on account of any tax, assessment or other governmental charge imposed with
respect to or as a result of any such such payments, will not be less than the
amount provided in this Secured Note to be then due and payable without such
withholding.
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<PAGE>
5. All payments to be made hereunder shall be paid by federal funds,
wire or other transfer of good and immediately available funds in lawful money
of the United States of America which shall be legal tender for the payment of
all debts and dues, public and private, at the time of payment, without any
counterclaim, set-off or deduction whatsoever, at such place as may be
designated, from time to time, in writing by Payee, upon not less than five (5)
Business Days' prior written notice; provided, however, that Payee shall have
the right to elect, from time to time, by written notice to Maker, upon not less
than five (5) Business Days' prior written notice, to have payments made to
Payee by unendorsed bank check drawn on a commercial bank acceptable to Payee,
at the address of Payee set forth above or at such other address as may be
designated in writing by Payee from time to time. No payment shall be deemed
made until actually received by Payee on a Business Day, and, notwithstanding
the foregoing, any payment received hereunder after 12:00 noon at the place of
receipt shall not be deemed received until the next Business day.
6. This Secured Note is secured by, and Payee is entitled to the
benefits of, the Deed, the Security Agreement, the Management Agreement
Assignment, the Bank Accounts Assignment and the other Real Estate Security
Documents. Reference is hereby made to the above documents, and any and all
other Financing Documents related thereto for a statement of the respective
rights, limitations of rights, obligations, duties and immunities hereunder of
the Collateral Trustee, Maker and Payee.
7. This Secured Note and certain other documents shall be pledged and/or
assigned to the Collateral Trustee pursuant to the Assignment and Pledge
Agreement.
8. (a) If an Event of Default, as defined in the Deed, shall have
occurred and be continuing, unless the same has been rescinded, annulled or
waived by the requisite Holders of the Notes of each series of Notes which has
been accelerated in accordance with Sections 502 or 513 of the Indenture, then
this Secured Note may be declared due and payable by Payee (or by such other
parties permitted to do so under Section 502 of the Indenture) and upon such
declaration, the entire Note Principal Amount (or, if prior to the Deferred
Interest Commencement Date, the Original Note Principal Amount (as hereinafter
defined) and the Secured Note Accreted Amount (as hereinafter defined) accrued
thereon), together with all accrued Deferred Interest, all accrued and unpaid
interest, the Secured Note Yield Maintenance Amount, if any, and all accrued and
unpaid Secured Note Additional Interest, if any, shall become immediately due
and payable, in the manner, with the effect and subject to the conditions, if
any, provided in the Deed and the Indenture. For the purposes hereof, (i) the
term "Original Note Principal Amount" shall mean the principal sum of
$196,500,000.00, and (ii) the
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<PAGE>
term "Secured Note Accreted Amount" shall mean, as of any accrual date set forth
below, the Secured Note Accreted Amount set forth below and as of any other
date, the Secured Note Accreted Amount set forth below for the immediately
preceding accrual date plus the Proportionate Amount to such date:
Accrual Date Secured Note Accreted Amount
------------ ----------------------------
July 10, 1990 $ 9,839.44
August 9, 1990 295,183.33
September 9, 1990 590,366.67
October 9, 1990 885,550.00
November 9, 1990 1,180,733.33
December 9, 1990 1,475,916.67
January 9, 1991 1,771,100.00
February 9, 1991 2,066,283.33
March 9, 1991 2,361,466.67
March 23, 1991 2,500,000.00
"Proportionate Amount" is defined as an amount equal to the product of (i) the
Secured Note Accreted Amount for the immediately following accrual date less the
Secured Note Accreted Amount for the immediately preceding accrual date
multiplied by (ii) a fraction (not to exceed one), the numerator of which is the
number of days elapsed from (and including) the immediately preceding accrual
date to (but not including) the date for which the Proportionate Amount is being
determined, and the denominator of which is (A) at any date prior to March 9,
1991, 30 or (B) at any date subsequent to March 9, 1991, 14. For the purposes
hereof, the term "Secured Note Yield Maintenance Amount" shall mean, on the
Maturity Date, an amount equal to the excess, if any, of (A) the present value
of all Secured Note Remaining Payments (as hereinafter defined) with respect to
this Secured Note, calculated using a discount rate applied on a semiannual
basis equal to the arithmetic average (rounded down to the nearest basis point)
of the per annum yield to maturity of the United States Treasury Department
fixed interest rate securities having a maturity date nearest to the Stated
Maturity, based on the closing bid prices on the Business Day immediately
preceding the Maturity Date, as quoted by each of three (3) United States
Government securities dealers of recognized standing selected by the Payee over
(B) the Original Note Principal Amount, Deferred Interest, Secured Note Accreted
Amount and interest accrued under this Secured Note as of the Maturity Date,
such amount to be calculated by Independent Accountants reasonably acceptable to
the Payee and the Payee shall be entitled to rely on such Independent
Accountants' calculation thereof. Maker acknowledges that the Secured Note Yield
Maintenance Amount does not constitute a penalty but rather is calculated to
compensate Payee, in the event of an acceleration of this Secured Note, for the
loss of investment, the amount of which loss Payee acknowledges if difficult or
impossible to calculate. For the purposes hereof, the term "Secured Note
Remaining Payments" shall
-4-
<PAGE>
mean, with respect to this Secured Note as of any date, the amount of all
payments of Original Note Principal Amount, Deferred Interest, Secured Note
Accreted Amount and interest to be made subsequent to such date, assuming this
Secured Note is outstanding through, and paid in full at, the Stated Maturity.
(b) If an Event of Default has occurred under the Indenture and the
Notes shall be accelerated pursuant to Section 502 of the Indenture, then if and
only if the requisite Holders of the Notes of each series of Notes which has
been accelerated rescind, annul or waive a declaration that the Notes are due
and payable in accordance with the provisions of Section 502 of the Indenture,
any declaration that this Secured Note is due and payable shall be deemed to be
similarly rescinded, annulled or waived.
9. Notwithstanding anything to the contrary contained herein, recourse
under this Secured Note against the partners (or constituent partners in such
partners), officers, directors, or shareholders of the Maker or any person
comprising or controlling the Maker shall be limited as provided in Section 26.7
of the Deed.
10. Except as hereinafter set forth, this Secured Note shall not be
prepaid in whole or in part. This Secured Note shall be prepaid in whole if all
the Notes then outstanding are redeemed in accordance with their terms (whether
pursuant to an optional or mandatory redemption) and the amount to be paid upon
such prepayment shall be (a) in the case of any such prepayment of this Secured
Note prior to the Deferred Interest Commencement Date, the Original Principal
Amount plus the Secured Note Accreted Amount thereon to the Redemption Date (as
defined in the Indenture), accrued and unpaid interest, accrued and unpaid
Secured Note Additional Interest, if any, and any other amounts, if any, due and
payable on the date of prepayment, and (b) in the case of any such prepayment of
this Secured Note on or after the Deferred Interest Commencement Date, the Note
Principal Amount, accrued and unpaid Deferred Interest, accrued and unpaid
interest, accrued and unpaid Secured Note Additional Interest, if any, and any
other amounts, if any, due and payable on the date of prepayment. Any amounts
required to be prepaid under this paragraph shall be paid on the same date as
the Issuer is required to make the corresponding redemption payment with respect
to the Notes.
11. Maker agrees to pay all reasonable costs and expenses of collection
incurred by Payee (including, without limitation, reasonable attorneys' fees and
disbursements) and all reasonable costs and expenses incurred in connection with
the execution, administration, enforcement or attempted enforcement of this
Secured Note or the protection of or realization of collateral, whether or not
by suit on this Secured Note, on any of
-5-
<PAGE>
the other Financing Documents or any foreclosure proceeding is filed, and all
such reasonable costs and expenses shall be payable upon demand (and shall be
paid with interest thereon at the Default Rate from the date of demand) and also
shall be secured by the Deed and all other collateral at any time held by Payee
as security for Maker's obligations to Payee under this Secured Note. Maker
agrees to pay all other costs and expenses required to be paid by Maker under
and in accordance with the terms of the Deed or under any other Financing
Documents.
12. All notices and other communications to Maker and Payee hereunder
shall be given in the manner provided in the Deed.
13. Presentment for payment, demand, protest and notice of demand,
protest and non-payment and all other notices not expressly required herein or
under the Real Estate Security Documents to be given by Payee are hereby waived
by Maker. No failure to accelerate the debt evidenced hereby by reason of
default hereunder, acceptance of a past due installment or indulgences granted
from time to time shall be construed (i) as a novation of this Secured Note or
as a reinstatement of the indebtedness evidenced hereby or as a waiver of such
right of acceleration or of the right of Payee thereafter to insist upon strict
compliance with the terms of this Secured Note, or (ii) to prevent the exercise
of such right of acceleration or any other right granted hereunder or by
applicable law; and Maker hereby expressly waives the benefit of any statute of
rule of law or equity now provided, or which may hereafter be provided, which
would produce a result contrary to or in conflict with the foregoing. No
extension of the time for the payment of this Secured Note or any installment
due hereunder made by agreement with any person now or hereafter liable for the
payment of this Secured Note shall operate to release, discharge, modify, change
or affect the original liability of Maker under this Secured Note, either in
whole or in part unless Payee agrees otherwise in writing.
14. Maker hereby waives and renounces for itself, its heirs, successors
and assigns, all rights to the benefits of any statute of limitations and any
moratorium, reinstatement, marshalling, forbearance, valuation, stay, extension,
redemption, appraisement, exemption and homestead now provided, or which may
hereafter be provided, by the Constitution and laws of the United States of
America and of any state thereof, both as to itself and in and to all of its
property, real and personal, against the enforcement and collection of the
obligations evidenced by this Secured Note. Maker hereby transfers, conveys and
assigns to Payee a sufficient amount of such homestead or exemption as may be
set apart in bankruptcy, to pay this Secured Note in full, with all costs of
collection, and does hereby direct any trustee in bankruptcy having possession
of such homestead or exemption to deliver to Payee a sufficient amount of
property or money set apart as exempt to pay the indebtedness evidenced hereby,
or any renewal thereof, and does hereby appoint Payee the attorney-in-fact for
Maker to claim any and all homestead exemptions allowed by law.
15. Notwithstanding anything herein or elsewhere to the contrary, in no
event shall the amount of interest due or payable hereunder exceed the maximum
rate of interest allowed by applicable law, and in the event any such payment is
inadvertently paid by the undersigned or inadvertently received by the Payee,
then such excess sum shall be returned to the Maker on demand. It is the express
intent hereof that the Maker not pay and the Payee not receive, directly or
indirectly, interest in excess of that which may be legally paid by the
undersigned under applicable law.
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<PAGE>
16. This Secured Note shall be deemed to be a contract made under the
laws of the State of Georgia and shall for all purposes be governed by, and
construed in accordance with, the internal laws of such State without giving
effect to the principles of conflict of laws.
17. In the event any Payment Date hereunder or the date any other
payment is due hereunder or under any of the other Financing Documents is a day
other than a Business Day, then the amount of the payment due on such date need
not be made on such date, but shall be made no later than the next succeeding
Business Day, with the same force and effect as if made on the original payment
date, provided that no interest shall accrue on the amount so payable for the
period from and after such payment date occurring on a day other than a Business
Day through and including the next Business Day.
18. This Secured Note will be marked paid in full and cancelled upon the
occurrence of a Property Release, as described in Section 20.2 of the Deed. This
Secured Note may not be changed or terminated orally but only by an agreement in
writing signed by the party against whom enforcement of such change or
termination is sought. This Secured Note may be amended, modified, supplemented
or waived by written agreement between Maker and Payee, but only if such
amendment, modification, supplement or waiver complies with the provisions of
Article Nine of the Indenture.
19. If, as and when Marriott hereafter pays, as provided under either
of the Guaranties, the following sums under either of the Guaranties, such
payments shall likewise be deemed to constitute payments of equal amounts under
the Secured Note as follows:
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<PAGE>
(a) any payment under the Interest/Principal Guaranty applied to
interest shall be deemed to constitute payment of interest in the same
amount under this Secured Note;
(b) any payment under the Interest/Principal Guaranty applied to
Deferred Interest (as defined in the Indenture) shall be deemed to
constitute payment of Deferred Interest in the same amount under this
Secured Note;
(c) any payment under the Interest/Principal Guaranty applied to
Yield Maintenance Amount (as defined in the Indenture) shall be deemed
to constitute payment of Secured Note Yield Maintenance Amount in the
same amount under this Secured Note;
(d) any payment under the Interest/Principal Guaranty applied to
Additional Interest (as defined in the Indenture) shall be deemed to
constitute payment of Secured Note Yield Additional Interest in the same
amount under this Secured Note;
(e) any payment under the Interest/Principal Guaranty applied to
Accreted Amount (as defined in the Indenture) shall be deemed to
constitute payment of Secured Note Accreted Amount in the same amount
under this Secured Note; and
(f) any payment under either the Interest/Principal Guaranty or
the Principal Guaranty applied to the Original Principal Amount of the
Notes (as defined in the Indenture) shall be deemed to constitute
payment of Original Note Principal Amount in the same amount under this
Secured Note;
provided, however, that no such payment shall constitute a payment under the
Secured Note to the extent it is required to be
-8-
<PAGE>
repaid or disgorged by the Payee, as a result of any bankruptcy, insolvency,
reorganization or creditors' rights law or otherwise.
IN WITNESS WHEREOF, Maker has duly executed this Secured Note as of the
day and year first above written.
IVY STREET HOTEL LIMITED PARTNERSHIP
Signed, sealed and By: Atlanta Marriott Marquis
delivered in the Limited Partnership,
presence of: General Partner
/s/ Carolyn Coltar
- - ------------------------- By: Marriott Marquis Corporation,
Witness General Partner
/s/ Sandra I. Schmitt By: /s/ Robert E. Parsons, Jr.
- - ------------------------- ------------------------------
Sandra I. Schmitt
Notary Public Name: Robert E. Parsons, Jr.
Title: President
Commission
Expiration Date: 10-2-91
Attest: /s/ Stephen McKenna
- - ------------------------- --------------------------
(NOTARIAL SEAL) Its Asst. Secretary
----------------------
SANDRA I. SCHMITT (CORPORATE SEAL)
NOTARY PUBLIC, State of New York
No. 41-4956835
Qualified in Queens County
Term Expires Oct. 2, 1991
Signed, sealed and
delivered in the
presence of:
/s/ Carolyn Colton By: /s/ Neal M. Kamin [SEAL]
- - ------------------------- ------------------------------
Carolyn Colton
Witness John C. Portman, Jr.,
General Partner
By: Neal M. Kamin,
Attorney-in-fact
/s/ Sandra I. Schmitt
- - -------------------------
Sandra I. Schmitt
Notary Public
Commission
Expiration Date: 10-2-91
- - -------------------------
(NOTARIAL SEAL)
SANDRA I. SCHMITT Pay to the Order of The Citizens
NOTARY PUBLIC, State of New York and Southern National Bank as
No. 41-4956835 Collateral Trustee under the
Qualified in Queens County
Term Expires Oct. 2, 1991
-9-
================================================================================
Exhibit 10.2
Real Property and Financing Statement Indexes
GEORGIA Fulton County Clerk's Office Superior Court
Filed and Recorded July 11, 1990 at 11:40
/s/ Juanita Hicks, CLERK
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
Date: As of July 10, 1990
Secured Note Amount: $199,000,000.00
Maturity Date: July 10, 1997
Property: Land Lot(s): 51
District: 14
County: Fulton
State: Georgia
RECORD AND RETURN TO:
Suzanne J. Roberts, Esq.
The Citizens and Southern National Bank
c/o Powell Goldstein
Frazer & Murphy
1100 C & S National Bank Building
35 Broad Street
Atlanta, Georgia 30335
- - -------------
* THIS INSTRUMENT IS TO BE FILED IN THE REAL ESTATE RECORDS AND IS ALSO TO BE
INDEXED IN THE INDEX OF FINANCING STATEMENTS. THE NAMES OF THE DEBTOR AND THE
SECURED PARTY, THE MAILING ADDRESS OF THE SECURED PARTY FROM WHICH
INFORMATION CONCERNING THE SECURITY INTEREST MAY BE OBTAINED AND THE MAILING
ADDRESS OF THE DEBTOR ARE AS DESCRIBED
(footnote cont'd on p. 1)
- - --------------------------------------------------------------------------------
I certify that the Intangible Tax required by law on the notes prior to the
recording of Security Deed (@$1.50 per $500 or fraction as shown by face of
Security Deed) in the amount of $25,000.00 tax has been paid, this 11 day of
July, 1990.
FRANK D. COX, Tax Commissioner By /s/ J. Jackson, Deputy.
------------------
J. Jackson, Deputy
<PAGE>
TABLE OF CONTENTS
RECITALS
Paragraph I .................................................................3
Paragraph II .................................................................7
Paragraph III ...............................................................21
Paragraph IV ................................................................22
Paragraph V..................................................................24
Article 1 INDEBTEDNESS..................................................24
Article 2 IMPOSITIONS...................................................24
Article 3 MAINTENANCE AND REPAIRS; WASTE................................27
Article 4 COMPLIANCE WITH LAWS; USE OF-PREMISES;
ETC. .......................................................29
Article 5 INSURANCE; ETC. ..............................................31
Article 6 ALTERATIONS; DEMOLITION; ETC..................................41
Article 7 TRANSFERS; PLEDGES; FINANCING.................................42
Article 8 PRIORITY OF SECURITY DEED; NO MERGER..........................53
Article 9 CONDEMNATION..................................................54
Article 10 SPACE LEASES..................................................56
Article 11 ASSIGNMENT OF LEASES AND RENTS; ETC...........................57
Article 12 GRANTEE MAY CURE OWNER'S AND/OR
GROUND LESSOR'S DEFAULT.....................................59
Article 13 BOOKS AND RECORDS; FINANCIAL
STATEMENTS, ETC. ...........................................60
Article 14 RECORDED INSTRUMENTS..........................................62
Article 15 DEFAULT; ACCELERATION OF PRINCIPAL............................62
Article 16 LEGAL EXPENSES; SUBROGATION;
WAIVER OF OFFSETS...........................................65
Article 17 INDEMNIFICATION...............................................66
Article 18 NO CREDITS....................................................67
Article 19 DEFAULT AND FORECLOSURE.......................................68
Article 20 SEVERANCE; RELEASE............................................76
Article 21 NO WAIVER.....................................................77
Article 22 MODIFICATION..................................................78
Article 23 NOTICES.......................................................78
Article 24 FURTHER ASSURANCES............................................79
Article 25 GROUND LEASE; JOINDER OF GROUND LESSOR........................80
Article 26 MISCELLANEOUS PROVISIONS......................................85
Article 27 APPLICATION OF FUNDS..........................................89
Article 28 SUCCESSORS AND ASSIGNS........................................90
Article 29 GENDER AND NUMBER; CONSTRUCTION...............................90
Article 30 INVALIDITY OF PROVISIONS......................................91
Article 31 GRANTEE'S REPRESENTATIVE......................................91
Exhibit A Description of Land
Exhibit B Permitted Exceptions
Exhibit C Security Agreement Information
Exhibit D Existing Indebtedness
<PAGE>
18650015
DEED TO SECURE DEBT, SECURITY AGREEMENT
AND ASSIGNMENT OF LEASES AND RENTS
STATE OF GEORGIA )
) KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF FULTON )
THIS DEED TO SECURE DEBT, SECURITY AGREEMENT AND ASSIGNMENT OF LEASES
AND RENTS (hereinafter referred to as the "Deed") entered into as of this 10th
day of July, 1990 by IVY STREET HOTEL LIMITED PARTNERSHIP (hereinafter referred
to as "Owner"), a Georgia limited partnership, having an office at 10400
Fernwood Road, Bethesda, Maryland 20058, ATLANTA MARRIOTT MARQUIS LIMITED
PARTNERSHIP (hereinafter referred to as "AMMLP" or "Ground Lessor" and together
with the owner hereinafter referred to as the "Grantors", such Grantors to have
joint and several liability hereunder), a Delaware limited partnership having an
office at 10400 Fernwood Road, Bethesda, Maryland 20058 and MARRIOTT/PORTMAN
FINANCE CORPORATION, a Delaware corporation having an office at 10400 Fernwood
Road, Bethesda, Maryland 20058 (hereinafter referred to as "Grantee").
- - ------------------
IN EXHIBIT C ATTACHED HERETO, IN COMPLIANCE WITH THE REQUIREMENTS OF ARTICLE
9, SECTION 402 OF THE UNIFORM COMMERCIAL CODE, TITLE 11 OF THE OFFICIAL CODE
OF GEORGIA ANNOTATED.
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS AND SECURES
OBLIGATIONS CONTAINING PROVISIONS FOR EXTENSIONS OF TIME FOR PAYMENT AND
OTHER MODIFICATIONS IN THE TERMS OF THE OBLIGATIONS.
A POWER OF SALE HAS BEEN GRANTED IN THIS INSTRUMENT, PURSUANT TO WHICH THE
GRANTEE MAY TAKE THE COLLATERAL AND SELL IT WITHOUT GOING TO COURT IN A
JUDICIAL FORECLOSURE ACTION UPON DEFAULT BY GRANTOR UNDER THIS INSTRUMENT.
PORTIONS OF THE COLLATERAL ARE GOODS WHICH ARE OR ARE TO BECOME AFFIXED TO
OR FIXTURES ON THE LAND DESCRIBED IN EXHIBIT A HERETO.
THE COLLATERAL SECURES INDEBTEDNESS EVIDENCED BY THE NOTE SECURED HEREUNDER
IN THE ORIGINAL PRINCIPAL AMOUNT OF ONE HUNDRED NINETY NINE MILLION AND
NO/100 DOLLARS ($199,000,000.00), THE FINAL MATURITY OF WHICH IS JULY 10,
1997.
<PAGE>
W I T N E S S E T H:
WHEREAS, AMMLP is the owner of the fee estate in the land described in
Exhibit A hereto and all rights, easements and appurtenances thereto
(collectively, the "Land"); and
WHEREAS, pursuant to a Ground Lease between Ground Lessor, as landlord,
and the Owner, as lessee, dated May 28, 1985 (as may be amended or supplemented
from time to time, the "Ground Lease"), the Owner is the owner of the leasehold
estate in the Land, and the fee owner of certain other property interests
described below, including the buildings and improvements now and hereafter
erected on the Land (the fee and leasehold estates under the Ground Lease in the
Land, buildings and improvements sometimes referred to hereinafter as the
"Premises"); and
WHEREAS, the Grantee is simultaneously with the execution and delivery
hereof issuing certain notes due July 10, 1997 under that certain Indenture
dated as of July 1, l990 between the Grantee, as Issuer, Marriott Corporation
("Marriott"), as Guarantor, and The Citizens and Southern National Bank, as
Collateral Trustee, Senior Trustee and Subordinated Trustee (as may be amended
or supplemented from time to time, the "Indenture"); and
WHEREAS, the Owner is executing and delivering to the Grantee a secured
note of even date herewith in the principal amount of $199,000,000 due on or
before July 10, 1997 (as may be amended or supplemented from time to time, the
"Secured Note"), said Secured Note to be payable at such times and with interest
thereon at such rates as specified therein; and
WHEREAS, as further security for the payment and performance of the
obligations secured by this Deed, concurrently with the execution and delivery
of this Deed, the Owner is executing and delivering to the Grantee a Management
Agreement Assignment, a Security Agreement and a Bank Accounts Assignment (as
such terms are hereinafter defined); and
WHEREAS, as further security for the payment and performance of the
obligations secured by this Deed, concurrently with the execution and delivery
of this Deed, Ground Lessor, as owner of the fee estate in the Land and lessor
under the Ground Lease, is joining in the execution and delivery of this Deed
for the purpose of conveying, as security, its fee estate in the Land to the
Grantee and thereby subjecting the terms and provisions of the Ground Lease to
the terms and provisions of this Deed; and
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WHEREAS, concurrently with the execution and delivery of this Deed, the
Grantee, as the Issuer under the Indenture, intends to execute an Assignment and
Pledge Agreement (as hereinafter defined), pursuant to which there shall be
assigned and/or pledged to the Collateral Trustee (as hereinafter defined) this
Deed, the Secured Note, the Assignment, the Bank Accounts Assignment and the
Security Agreement, all as collateral for the Notes authorized to be issued
pursuant to the Indenture;
NOW, THEREFORE,
I. To secure the payment of the aforesaid principal sum of One Hundred
Ninety Nine Million and No/100 Dollars (S199,000,000.00) with interest thereon
according to the Secured Note (including Default Interest, if any, Secured Note
Additional Interest, if any, and Deferred Interest calculated in accordance with
the Secured Note but not to exceed $17,589,720.00, as such terms are hereinafter
defined) with final payment due on July 10, 1997, and to secure the faithful
performance of each and every covenant, term, condition and agreement of the
Grantors contained herein, in the Secured Note and the other Financing Documents
(as hereinafter defined), and the payment by the Grantors to the Grantee of all
such sums, if any, as may be expended or advanced by the Grantee in the
performance of any obligation of the Grantors hereunder or as may be expended or
advanced by the Grantee to protect and preserve the collateral granted hereunder
or the security interest hereby created therein, and any other sums or charges
which may be due and payable by the Grantors to the Grantee hereunder or
thereunder (collectively sometimes hereinafter referred to as the
"Obligations"), the Grantors do hereby GRANT, ASSIGN, BARGAIN, SELL, CONVEY,
TRANSFER, PLEDGE and SET OVER unto Grantee all of the following Mortgaged
Premises (as hereinafter defined), subject, however, to the Permitted Exceptions
(as hereinafter defined), TO HAVE AND HOLD all the Mortgaged Premises unto
Grantee, its successors and assigns forever, and the Grantors warrant and
covenant that the Owner and Ground Lessor are lawfully seized and possessed of
the Mortgaged Premises and have good right to convey the same and do hereby bind
themselves, their successors and assigns to warrant and forever defend the title
to the Mortgaged Premises unto Grantee against every person whomsoever lawfully
claiming or to claim the same or any part thereof (subject, however, to the
Permitted Exceptions), to wit:
ALL of the Ground Lessor's fee estate in and to the Land and the Ground
Lessor's rights, title and interest as landlord under the Ground Lease and the
Ground Lessor's rights, title and interest, if any, which it may hereafter
acquire in the leasehold estate in and to the Land and as tenant under the
Ground Lease and the premises demised thereunder;
ALL of the Owner's leasehold estate in and to the Land and the Owner's
right, title and interest as tenant under the Ground Lease and the premises
demised thereunder, including, without limitation, renewals and extensions, if
any, and rights
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to so renew and extend, and the lessee's interest under the Ground Lease in
and to "Tenant's Investment", as such term is defined in the Ground Lease;
TOGETHER with all right, title and interest of the Grantors now owned
or hereafter acquired, in and to, all and singular, the easements, tenements,
hereditaments and appurtenances belonging to or in any way appertaining to the
Premises and the reversion and remainder thereof including, without limitation,
all right, title and interest of the Grantors under that certain Agreement,
dated February 21, 1984, by and between the City of Atlanta and the Owner, which
Agreement was filed and recorded April 16, 1984 in the Office of the Clerk of
the Superior Court of Fulton County, Georgia in Book 8931, page 310;
TOGETHER with all right, title and interest of the Grantors now owned
or hereafter acquired, in and to any land lying in the bed of any street, road
or avenue, open or proposed, in front of or adjoining or adjacent to the
Premises and any and all sidewalks, alleys and strips and gores of land adjacent
to or used in connection with the Premises;
TOGETHER with all right, title and interest of the Grantors in and to
all insurance or other proceeds for damage done to buildings, structures or
other improvements or personal property of the Grantors on the Premises and all
awards heretofore made or hereafter to be made to or for the account of the
Grantors for the permanent or temporary taking by eminent domain of the whole or
any part of the Mortgaged Premises or any lesser estate in, or easement
appurtenant to the Mortgaged Premises (including, without limitation, any awards
for change of grade of streets), all of which proceeds and awards are hereby
assigned to the Grantee subject to the further provisions of this Deed;
TOGETHER with all of the rents, issues, benefits and profits of the
Mortgaged Premises, including all right, title and interest of Ground Lessor in
and to the Ground Lease (including Ground Rent) and all right, title and
interest of the Grantors in and to the Space Leases (as hereinafter defined) now
or hereafter entered into covering any part of the Mortgaged Premises, and all
security and other deposits and down payments made pursuant thereto, all of
which are hereby assigned to the Grantee, subject, however, to the right of the
Grantors to receive and use the same as hereinafter provided, subject, further,
to the right, power and authority hereafter given to and conferred upon the
Grantee to collect and apply such rents, issues, benefits and profits;
TOGETHER with all of the records and books of account now or hereafter
maintained by or on behalf of the Grantors in connection with the operation of
the Mortgaged Premises;
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TOGETHER also with all right, title and interest of the Grantors in and
to (a) all buildings, structures and other improvements now or hereafter
erected, constructed or situated upon the Premises or any part thereof; (b) all
machinery, devices, fixtures, interior improvements, appurtenances, equipment
and articles of personal property of every kind and nature whatsoever now or
hereafter attached to or placed in or upon the Premises or any such building,
structure or other improvement, whether as a hotel or otherwise, or any part
thereof, and used or procured for use in connection with the operation of any
such building, structure or other improvement, including, but without limiting
the generality of the foregoing, all materials, engines, furnaces, boilers,
stokers, pumps, tanks, heaters, oil burners, dynamos, generators, motors,
scales, motor vehicles, laboratory and testing equipment, swimming pools and
related equipment, maintenance equipment of every kind and nature, switchboards,
partitions, doors, electrical wiring and equipment, projection equipment,
heating, plumbing, washroom, toilet and lavatory fixtures and equipment,
lifting, ventilating and incinerating apparatus, sprinkler and other fire
extinguishing and fire prevention apparatus or systems, air-conditioning
apparatus, gas, electric and steam fixtures, elevators, conveyors, escalators,
hoists, vaults and safes, fittings, radiators, chutes, ducts, machinery, snow
removal, sweeping, vacuuming and other cleaning equipment, tools, building
supplies, window washing hoists, as well as all additions thereto and
replacements thereof collectively (exclusive of "Furnishings and Furniture,"
as defined below), "Building Service Equipment"] (such buildings, structures
or improvements now or hereafter erected, constructed or situated upon the
Premises or any part thereof and the Building Service Equipment are sometimes
collectively called the "Improvements"); (c) all of the furniture,
furnishings, beds, bedsprings, mattresses, bureaus, chiffonniers, chairs,
chests, desks, bookcases, tables, rugs, carpets, curtains, draperies, hangings,
decorations, pictures, outdoor sculpture and works of art, divans, couches,
glassware, silverware, tableware, linens, towels, bedding, blankets, china,
ornaments, bric-a-brac, kitchen equipment, and utensils, bars, bar fixtures,
uniforms, safes, cash registers, accounting and duplicating machines,
telephones, communication equipment, vaults, washtubs, sinks, stoves, ranges,
radios, television sets, laundry machines, iceboxes, refrigerators, awnings,
screens, window shades, venetian blinds, statuary, lamps, mirrors, and all other
appliances, fittings, and equipment of every kind now or hereafter situated in,
or used in the operation of the business conducted at the rooms, halls, lounges,
restaurants, bars and kitchen facilities, offices, lobbies, lavatories,
basements, cellars, vaults and other portions of and of the Improvements, as
well as any and all replacements thereof and additions thereto (collectively,
the "Furnishings and Furniture"); and (d) all leases, if any, leasing to the
Grantors any of the property described in (a), (b) and (c) above, including,
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without limitation, Permitted Leased Equipment (as hereinafter defined).
The Owner shall have the right, at any time and from time to time to
remove and dispose of Building Service Equipment or Furnishings and Furniture
which may have become obsolete or unfit for use or which is no longer useful in
the operation and maintenance of the Improvements or the business conducted
thereat, provided that the Owner promptly replace the same with other Building
Service Equipment or (except as hereinafter provided) Furnishings and Furniture,
as the case may be, owned by Owner and free of liens or claims (or leased by the
Owner provided same qualify as Permitted Leased Equipment), not necessarily of
the same character but of at least equal quality, value and usefulness in
connection with the operation and maintenance of the Improvements or the rooms,
halls, lounges, offices, lobbies, lavatories, basements, cellars, vaults,
restaurants, bars and kitchen facilities or other portions of the Improvements
or the business conducted thereat, and, in any event, of a type and quality at
least comparable with other premier class convention hotels in the Marriott
hotel system. Notwithstanding the foregoing, the Owner shall not be obligated to
replace such Furnishings and Furniture as may have become functionally obsolete,
provided that the Improvements and Furnishings and Furniture, as a whole, are of
a type and quality at least comparable with other premier class convention
hotels in the Marriott hotel system.
All property of every kind acquired by the Grantors after the date
hereof, which by the terms hereof is required or intended to be subjected to the
lien or security interest of this Deed shall, immediately upon the acquisition
thereof, and without the necessity of any further deed of trust, mortgage or
other instrument, become subject to the lien and security interest of this Deed.
Neither the Owner nor the Ground Lessor may acquire nor agree to acquire any
property of any nature which by the terms hereof is required or intended to be
subjected to the lien or security interest of this Deed subject to any chattel
mortgage, security agreement, conditional sale, or other lien, encumbrance or
charge, except as expressly permitted herein;
TOGETHER with the Grantors' rights, if any, in and to the name or
names, if any, as may now or hereafter be used for the Improvements, including
"Atlanta Marriott Marquis" and the good will associated therewith;
TOGETHER with the Grantors' rights, if any, in and to al1 permits,
licenses and contract rights, to the extent assignable (including, without
limitation, leasing, maintenance, service and architectural contracts), but no
such assignment shall be construed as a consent by the Grantee to any permit,
license or contract so assigned or to impose on the Grantee any obligations with
respect thereto;
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TOGETHER with the Grantors' rights, if any, in and to all water, water
rights, mineral rights, ditches, ditch rights, reservoirs and reservoir rights
appurtenant to, located on or used in connection with the Land or the
Improvements, whether existing now or hereafter acquired;
TOGETHER with all of the Owner's rights, title and interest in and to
any right pursuant to Section 365(h) of the U.S. Bankruptcy Code (the
"Bankruptcy Code") or any successor to such Section, (a) to possession or
statutory term of years derived from or incident to the Ground Lease or (b) to
treat the Ground Lease as terminated; and
TOGETHER with all right, title and interest in Owner's option under the
Ground Lease to purchase Ground Lessor's fee estate in the Land (the "Purchase
Option"), with any other right, title and interest hereafter acquired by the
Owner in and to all options to purchase or lease the Premises or any other
collateral granted under any of the Real Estate Security Documents, or any
portion thereof or interest therein.
All of the foregoing including, without limitation, the described
property, premises, appurtenances, easements, estates, rights, privileges,
interests and franchises hereby granted and released, assigned, transferred, set
over and mortgaged, or intended so to be, are hereinafter collectively referred
to as the "Mortgaged Premises".
This Deed is intended (a) to operate and is to be construed as a deed
passing the title to the Mortgaged Premises to Grantee and is made under those
provisions of the existing laws of the State of Georgia relating to deeds to
secure debt, and not as a mortgage, and (b) to constitute a security agreement
pursuant to the Uniform Commercial Code of Georgia.
II. In addition to other definitions contained herein, the following
terms shall have the meanings set forth below unless the context of this Deed
otherwise requires.
1. "Accounting Period" shall mean the four (4) week accounting periods
having the same beginning and ending dates as Owner's four (4) week accounting
periods, except that an Accounting Period may occasionally contain an additional
number of days when necessary to conform the Owner's accounting system to the
calendar.
2. "Accounting Quarter" shall mean the Accounting Periods ending on the
third, sixth, ninth and last Accounting Periods within each Fiscal Year of the
Owner.
3. "Additional Financing" shall have the meaning specified in Section
7.6.
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4. "Administrative Services Agreement" shall mean the Administrative
Services Agreement, dated as of the date hereof, between the Grantee and Eastdil
Realty, Inc.
5. "Administrative Services Representative" shall mean Eastdil Realty,
Inc. or any permitted replacement Administrative Services Representative.
6. "Affiliate" shall mean, with respect to any specified Person,
except as elsewhere in this Deed specifically provided, any other Person that
directly or indirectly controls, is controlled by, or in under common control
with such specified Person. For purposes of this definition, "control" when
used with respect to any Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms "controlled by"
and "under common control" have meanings correlative to the foregoing.
7. "Affiliate Loans" shall have the meaning specified in Section 7.6.1.
8. "AICPA" shall mean the American Institute of Certified Public
Accountants or any successor standard-setting authority for certified public
accountants.
9. "AMMLP" shall mean Atlanta Marriott Marquis Limited Partnership, a
Delaware limited partnership.
10. "Appraisers" shall mean a Person not an Affiliate of the Grantors,
the Grantee, the Collateral Trustee, Senior Trustee, Subordinated Trustee or the
Administrative Services Representative engaged in the business of appraising
property or otherwise competent to determine the market value of the Mortgaged
Premises, who shall be (i) a nationally recognized independent appraiser, and
(ii) a member of the American Institute of Real Estate Appraisers (or any
successor thereto) with at least ten years' experience in appraising mayor
hotels in the United States.
11. "Approved Cash Equivalent" shall mean United States Treasury
securities, U.S. denominated certificates of deposit having terms of six (6)
months or least issued by and money market accounts of an Eligible Bank.
12. "Architect" shall mean John Portman & Associates or other
nationally recognized licensed independent architect or engineer holding a
current certificate of registration from the Georgia State Board of
Architecture.
13. "Assignment and Pledge Agreement" shall mean the Assignment and
Pledge Agreement, dated as of the date hereof,
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from the Grantee, as assignor, to the Collateral Trustee, as assignee, as may be
amended and supplemented from time to time.
14. "Award" shall have the meaning specified in Section 9.2.
15. "Bank Accounts Assignments" shall mean the Collateral Assignment of
Bank Accounts, dated as of the date hereof, from the Owner, as assignor, to the
Issuer, as assignee, as may be amended and supplemented from time to time.
16. "Bankers Trust Loan" shall have the meaning specified in Section
7.6.3.
17. "Bankruptcy Code" shall have the meaning specified in Paragraph I.
18. "Building Service Equipment" shall have the meaning specified in
Paragraph I.
19. "Business Day" shall have the meaning specified in the Indenture.
20. "Certificate of No Material Impairment" shall mean an Officers'
Certificate with respect to a proposed action to the effect that in the good
faith judgment of the officers executing such Certificate, in light of then
current circumstances, the taking of such proposed action will not result in a
Material Impairment. A Certificate of No Material Impairment shall be binding
and conclusive on the Grantee and the Holders that the action described therein
does not cause a Material Impairment, absent bad faith or fraud.
21. "Collateral Trustee" shall have the meaning specified in the
Indenture.
22. "Debt Service" shall mean, in respect of any Indebtedness of the
Owner for any period (exclusive of Affiliate Loans and Guaranty Loans),
principal (other than "balloon payments" of principal due on demand or at
maturity) and all interest which is payable during such period (other than
default interest) including any Secured Note Additional Interest (or, with
respect to any Subordinate Deed, any similar amount on account of withholding or
excise taxes) which is payable during such period with respect to such
Indebtedness; provided, however, Debt Service on the Secured Note shall mean the
interest payable and accrued for any period (i.e., interest payable at the
Payment Rate plus Deferred Interest accruing during such period, as such terms
are defined in the Secured Note). For purposes of calculating the amount of Debt
Service payable during any period under any Indebtedness with respect to which
payments of Secured Note Additional Interest (or, with respect to any
Subordinate Deed, similar amounts on account of withholding or excise taxes)
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are payable at the time the Debt Service Coverage Test is actually being
applied, there shall be included in Debt Service the maximum amount actually due
and payable by the Owner during such period on account of such payments of
Secured Note Additional Interest (or such similar amounts on account withholding
or excise taxes) after giving effect to any of "caps" or other limitations with
respect thereto provided for under the terms of such Indebtedness. For purposes
of calculating the amount of Debt Service payable during any period under any
Indebtedness which provides for interest at other than a fixed rate (which is
not a participation, contingent payment or payment of default interest or
Secured Note Additional Interest (or similar amounts on account of excise or
withholding taxes, with respect to any Subordinate Deed) which is not included
in Debt Service as provided above), there shall be included in Debt Service the
amount which would be payable by the Owner during such period on account of
interest assuming the maximum interest rate payable by the Owner under the terms
of such Indebtedness (i) after giving effect to any "caps" or other limitations
with respect thereto provided for under the terms of such Indebtedness and (ii)
after giving effect to any arrangements (including, without limitation, interest
rate swaps) which modify the maximum effective rate of interest to the Owner
with respect to such Secured Indebtedness, provided that such arrangements are
made with a Person which, at the time such arrangement is made, either (A) has a
Rating of at least "A" by a Rating Agency or (B) has a Net Worth of at least $1
billion; provided, however, such maximum interest rate shall not exceed two
hundred (200) basis points over the true interest rate payable as of the date
the Debt Service Coverage Test is being applied.
23. "Debt Service Coverage Test" shall be satisfied if, at the time the
Debt Service Coverage Test is being applied, the Net Cash Flow of the Owner from
the Mortgaged Premises for each of the previous two semi-annual interest payment
periods for the Secured Note (without an expense deduction for Ground Rent),
shall equal or exceed 115% of the aggregate Debt Service of the Owner for the
two, six month periods following the date on which the Additional Financing then
contemplated is being entered into.
24. "Default Interest" shall have the meaning specified in the Secured
Note.
25. "Default Rate" shall have the meaning specified in the Secured
Note.
26. "Deferred Interest" shall have the meaning specified in the Secured
Note.
27. "Deferred Interest Commencement Date" shall mean March 24, 1991.
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28. "Depositary" shall mean the Collateral Trustee.
29. "Eligible Bank" shall mean any bank or trust company organized or
regulated under the 1aws of the United States or Japan, having a Rating of at
least "A" from each Rating Agency.
30. "Environmental Indemnity" shall mean the Environmental Indemnity,
dated as of the date hereof, from the Grantors to the Grantee and the Collateral
Trustee, as may be amended or supplemented from time to time.
31. "Equipment" shall mean collectively, the Building Service Equipment
and Furnishings and Furniture.
32. "Event of Default" shall have the meaning specified in Article 15.
33. "Expense Deductions" shall mean all operating expenses (including,
without limitation, fixed expenses) of the Mortgaged Premises (excluding all
payments made in respect of any borrowings of the Owner, the Incentive
Management Fee, as defined in the Management Agreement, and Ground Rent),
calculated on an accrual basis of accounting in accordance with generally
accepted U.S. accounting principles, including, without limitation:
(a) contributions to the Repairs and Equipment Reserve (as defined
in the Management Agreement) and any other required reserves;
(b) the cost of all insurance (including premiums, deductibles and
other self-insured losses);
(c) lease payments for only the telephone equipment or other
equipment which is approved by Owner and the maintenance portion of
Approved Equipment Leases (as defined in the Management Agreement);
(d) the cost of sales including salaries, wages, fringe benefits
(i.e., insurance, sick leave, holiday and vacations, pensions and
similar benefits), payroll taxes and other costs related to Hotel
employees;
(e) departmental expenses including all expenses incurred in the
generation of departmental revenues, including, without limitation,
room revenues, food and beverage revenues, telephone revenues, parking
revenues and retail sales/rental revenues;
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(f) administrative and general expenses and the coat of Hotel
marketing, advertising, business promotion and public relations
expenses, heat, light and power;
(g) the cost of inventories and fixed asset supplies consumed in
the operation of the Hotel;
(h) all costs and fees of independent accountants or other third
parties who perform Services in connection with the Mortgaged Premises;
(i) the cost and expense of technical consultants and operational
experts for specialized services in connection with non-routine Hotel
work;
(j) the Basic Management Fee;
(k) the Hotel's pro rata share of costs and expenses incurred by
the Management Company in providing Chain Services (as defined in the
Management Agreement);
(1) Impositions;
(m) a reasonable reserve for bad debts and/or doubtful accounts
receivable as determined by the Management Company in accordance with
its accounting policies and consistent with other premier convention
hotels in the Marriott hotel system; and
(n) the cost of routine maintenance, repairs and minor alterations,
the cost of which can be expensed under generally accepted accounting
principles.
34. "Extraordinary Revenues" shall mean the proceeds from (a) sales or
other dispositions of any of the assets of the Owner other than in the ordinary
course of business of the Mortgaged Premises; (b) proceeds of casualty
insurance; (c) Awards or proceeds from the sales in lieu of and under the threat
of a Taking; (d) income derived from securities and other property acquired and
held for investment; (e) proceeds of the Secured Note and of any other
borrowings by the Owner, including Affiliate Loans; and (f) proceeds from
capital contributions of he partners of the Owner.
35. "Financing Documents" shall have the meaning specified in the
Indenture.
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36. "Financial Statements" shall have the meaning set forth in the
definition of "Net Worth" herein.
37. "Fiscal Year" shall mean the fiscal year of the Owner.
38. "Furnishings and Fixtures" shall have the meaning specified in
Paragraph I.
39. "Governmental Authorities" shall mean all Federal, state, county,
municipal and local governments and all departments, commissions, boards,
bureaus and offices thereof, having jurisdiction over the Mortgaged Premises or
any part thereof.
40. "GP-AMMLP" shall mean Marriott Marquis Corporation, a Delaware
corporation, and any successor or assign which is the sole general partner of
AMMBP.
41. "Grantee" shall mean the Issuer, as defined in the Indenture,
subject to the terms of the Assignment and Pledge Agreement and Paragraph III
herein.
42. "Grantors" shall mean, collectively, the Owner and Ground Lessor
herein named, or any subsequent holder or holders of the Owner's and Ground
Lessor's estates in the Mortgaged Premises or any portion thereof, and their
respective heirs, executors, administrators, successors and assigns.
43. "Gross Revenues" shall mean the sum of all revenue and income of
any kind from the operation of the Mortgaged Premises, calculated on the accrual
basis of accounting, including rentals or other payments from lessees, licensees
or concessionaires (but not including gross receipts of any such lessees,
licensees or concessionaires except as may be received by or on behalf of Owner
as rent), the proceeds of business interruption insurance and telephone charges
and all interest on deposits, all determined in accordance with generally
accepted accounting principles, excluding all refunds, rebates, discounts and
credits of a similar nature, given, paid or returned by the Owner or the
Management Company in the course of obtaining such revenue and income; provided,
however, that any amounts received, recognized or realized, in the nature of the
following shall not be included as Gross Revenues: (a) applicable sales, use and
excise taxes or similar governmental charges collected directly from patrons or
guests, or as part of the sales price of any goods, services or displays
(including, without limitation, occupancy, gross receipts, admission, cabaret or
similar equivalent taxes); (b) gratuities; (c) Extraordinary Revenues; and (d)
interest earned on the Repairs and Equipment Reserve (as defined in the
Management Agreement).
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44. "Ground Lease" shall have the meaning specified in the Recitals.
45. "Ground Lessor" shall mean Atlanta Marriott Marquis Limited
Partnership ("AMMLP") or any subsequent holder or holders of the Ground Lessor's
estate in the Mortgaged Premises or any portion thereof.
46. "Ground Rent" shall mean the Rental, as defined in the Ground
Lease.
47. "Guaranties" shall mean the Interest/Principal Guaranty and the
Principal Guaranty, collectively.
48. "Guarantor" shall mean Marriott.
49. "Guaranty Loans" shall have the meaning specified in Section 7.6.2.
50. "Holder" shall have the meaning specified in the Indenture.
51. "Hotel" shall mean the Atlanta Marriott Marquis Hotel presently
located upon the Land.
52. "Hotel Consultant" shall mean Laventhol & Horwath, Kenneth
Leventhal & Company, Pannell, Kerr & Forster or any other nationally recognized
independent Person, whichever Owner shall select, which has performed hotel
consulting for at least ten years.
53. "Impositions" shall mean all duties, taxes, water and sewer rents,
rates and charges, assessments (including, but not limited to all assessments
for public improvements or benefit), charges for public utilities, excises,
levies, license and permit fees and other charges, ordinary or extraordinary,
whether foreseen or unforeseen, of any kind and nature whatsoever, which prior
to or during the term of this Deed will have been or may be laid, levied,
assessed or imposed upon or become due and payable out of or in respect of, or
become a lien on the Premises, the Improvements, the Equipment or any other
property or rights included in the Mortgaged Premises, or any part thereof or
appurtenances thereto, or which are levied or assessed against the income
received by the Owner or Ground Lessor from all or any part of the Mortgaged
Premises (other than income, franchise or other taxes based upon net income), by
virtue of any present or future law, order or ordinance of any Governmental
Authority.
54. "Improvement" shall have the meaning specifed in Paragraph I.
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55. "Indebtedness" shall have the meaning specified in the indenture
(except that for purposes of this Deed, "Indebtedness" shall not include the
Ground Lease).
56. "Indenture" shall have the meaning specified in the Recitals.
57. "Independent Accountants" shall have the meaning specified in the
Indenture.
58. "Institutional Lender" shall mean any reputable commercial bank,
savings and loan association or building loan association, real estate
investment trust, insurance company or pension fund, trust or similar
organization which has a net worth of at least One Hundred Million Dollars
($100,000,000) and total assets of at least Five Hundred Million Dollars
($500,000,000).
59. "Insurance Adjuster" shall mean an insurance claims adjuster
employed by the insurance carrier insuring the Premises with respect to a
particular casualty, which adjuster shall have at least five (5) years'
experience with respect to the adjustment of insurance proceeds for property
claims.
60. "Interest/Principal Guaranty" shall have the meaning specified in
the Indenture.
61. "Issuer" shall have the meaning specified in the Indenture.
62. "Land" shall have the meaning specified in the Recitals.
63. "Legal Requirements" shall mean all present and future laws,
ordinances, rules, regulations and requirements of all Governmental Authorities,
and all orders, rules and regulations of any national or local board of fire
underwriters or other body exercising similar functions, foreseen or unforeseen,
ordinary or extraordinary, which may be applicable to the Mortgaged Premises or
any part thereof, or to the use or manner of such of any of the foregoing by any
Person, or to the owners thereof, or to the tenants, or occupants thereof (with
respect to the Mortgaged Premises), whether or not any such law, ordinance,
rule, regulation or requirement shall necessitate structural changes or
improvements or shall interfere with the use or enjoyment of any of the
foregoing, and shall also mean and include all requirements of the policies of
public liability, fire and all other insurance at any time required to be
maintained in force under this Deed with respect to any of the foregoing.
64. "Management Agreement" shall mean the Restated and Amended Hotel
Management Agreement, dated May 28,
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1985, between the Owner and the Management Company, as amended by the First
Amendment to the Restated and Amended Hotel Management Agreement dated as of the
date hereof between the Owner and the Management Company, as same may be further
amended or supplemented.
65. "Management Agreement Assignment" shall mean the Assignment of
Management Agreement, dated as of the date hereof, by the Owner and the
Management Company to the Issuer, as same may be amended or supplemented.
66. "Management Company" shall mean Marriott Hotels, Inc. and any
successor or assign permitted under the terms of the Management Agreement and
the Management Agreement Assignment.
67. "Marriott" shall mean Marriott Corporation.
68. "Marriott Commitment" shall mean collectively, (i) that certain
loan commitment letter dated May 28, 1985 pursuant to which Marriott committed
to lend to the Owner up to $33,000,000 and (ii) that certain Marriott/Ivy Street
Loan Agreement, dated as of the date hereof, between Marriott and the Owner
concerning the agreement of Marriott to lend the Owner certain funds without any
amendments or supplements thereto.
69. "Marriott Controlled Person" shall have the meaning specified in
Section 7.3.1.
70. "Material Impairment" shall be deemed to result from any proposed
action, if such proposed action, in light of then current circumstances, would
(i) materially adversely impair the fair market value of the Mortgaged Premises,
or (ii) materially adversely impair the security of the Deed as a whole. In
deciding whether the standard set forth in clauses (i) and (ii) of the preceding
sentence have been complied with, the Grantors shall consider the cumulative
effect of the proposed action and of all actions previously taken with respect
to which Certificates of No Material Impairment were given or required to have
been given, but such prior actions shall be taken into account only if, and to
the extent, that such prior actions would have had an adverse effect even if
there had been no change in circumstances since the date such prior actions were
taken.
71. "Mortgaged Premises" shall have the meaning specified in Paragraph
I herein.
72. "Net Cash Flow" shall mean, with respect to any period, the amount
by which Gross Revenues exceeds Expense Deductions.
73. "Net Worth" shall mean, with respect to a Person and a date, and
based upon such Person's audited financial
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statements which are certified by Independent Accountants (or if such Person
does not have audited financial statements, based upon such Person's "reviewed"
financial statements prepared by Independent Accountants) and prepared in
accordance with generally accepted U.S. accounting principles or in accordance
with the accounting principles or requirements determined or promulgated by a
regulatory agency having jurisdiction over such Person, as applied in Canada,
the United Kingdom, the Netherlands, France, Switzerland, Italy, the Federal
Republic of Germany, or Japan ("Financial Statements") and dated as of the end
of the latest fiscal year of sueh Person (unless such fiscal year ended within
120 days of the date as of which Net Worth is determined, in which event, unless
Financial Statements are available within such 120 day period, such Financial
Statements may be dated as of the end of the prior fiscal year of such person),
the owners' equity of such Person computed on a consolidated basis. Any
Financial Statements which are prepared in accordance with accounting principles
or requirements of Canada, the United Kingdom or Japan and in which any amounts
therein are shown in a currency other than U.S. Dollars shall be, for purposes
of determining Net Worth, converted to U.S. Dollars in effect as of the date
with respect to which such Financial Statements were prepared.
74. "Notes" shall have the meaning specified in the Indenture.
75. "Note Principal Amount" shall mean the principal sum of
$199,000,000.
76. "Obligations" shall have the meaning specified in Paragraph I
herein.
77. "Officers' Certificate" shall mean the certificate of the Owner or,
as specified in a particular case, a specified Person, in the case of a
corporation, signed by its Chairman of the Board, its Chairman to the Executive
Committee, its President or a Vice President, and by its Treasurer, an Assistant
Treasurer, its Controller, an Assistant Controller, its Secretary or an
Assistant Secretary or in a case of a partnership, signed by a direct or
indirect general partner thereof (and if such direct or indirect general partner
is a corporation, such certificate shall be signed by such corporation, as
direct or indirect general partner by such Person that would be required to sign
such a certificate if such partnership were a corporation) or in case of an
entity other than a corporation or a partnership, such Person as is authorized
to bind such entity, and delivered to the Grantee. Any Officers' Certificate
delivered pursuant to the terms of the Financing Documents shall be binding and
conclusive on the Grantee, Holders and the Administrative Services
Representative, if applicable, absent bad faith, gross negligence or fraud. Such
Officers' Certificate shall contain a statement that (a) in ordinary course of
the
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performance by the signer of his duties, he would normally obtain knowledge of
or (b) he has made such inquiry as is sufficient, in his reasonable judgment, as
to, in each case, the existence of any conditions or events necessary to make
the statement set forth in such Officers' Certificate.
78. "Opinion of Counsel" shall have meaning specified in the Indenture.
79. "Original Note Principal Amount" means $196,500,000.
80. "Outstanding" shall have the meaning specified in the Indenture.
81. "Owner" shall mean Ivy Street Hotel Limited Partnership, or any
subsequent holder or holders of the Owner's estate in the Mortgaged Premises or
any portion thereof, and its or their respective heirs, executors,
administrators, successors and assigns.
82. "Permitted Equipment Lease" shall mean any assignment, pledge,
grant of a security interest in, conditional sale or other title retention
agreement given by the Owner to a provider, lessor or supplier of equipment,
materials or supplies for use in connection with the Premises (any such
equipment, materials and supplies is hereinafter referred to as "Permitted
Leased Equipment") which is given by the Owner to acquire the use of such
Permitted Leased Equipment, provided (a) any Permitted Equipment Lease shall not
cover the heating, ventilation, air conditioning, electrical, plumbing or other
mechanical systems of the Improvements (unless the Permitted Equipment Lease
specifically provides that the Permitted Leased Equipment covered thereby will
not, in any circumstances, be removed from the Premises and will be available
for use by the Grantee upon foreclosure, Grantee's exercise of its power of sale
hereunder or acceptance of a deed in lieu thereof), and (b) with respect to all
Permitted Equipment Leases in effect at any one time, the annual aggregate costs
to be incurred by Owner in connection therewith (exclusive of maintenance
charges) which are not passed through to Space Tenants shall not exceed Five
Hundred Thousand Dollars ($500,000.00); provided, however, Permitted Equipment
Leases may nevertheless be entered into by Owner when such annual aggregate
costs of all Permitted Equipment Leases (exclusive of maintenance charges) in
effect at any one time exceed $500,000 if, prior to the execution of each
Permitted Equipment Lease entered into when the annual aggregate costs of all
Permitted Equipment Leases (exclusive of maintenance charges) are, or upon
execution of the proposed Permitted Equipment Lease will be, in excess of
$500,000, the Owner and the Management Company delivers to the Grantee an
Officers' Certificate certifying that (i) the terms of the Permitted Equipment
Lease are commercially reasonable, (ii) the Permitted Equipment Lease is
permitted under the terms of the Owner's partnership agreement, (iii) the
Permitted Leased Equipment is reasonably necessary for the
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operation of a premier class convention hotel and (iv) if commercially
available, the terms of the Permitted Equipment Lease provide the Grantee with
notice of any default under the Permitted Equipment Lease and give the Grantee
the opportunity to cure any such default.
83. "Permitted Exceptions" shall mean those matters set forth on
Exhibit B annexed hereto.
84. "Person" shall have the meaning specified in the Indenture.
85. "Postman" shall mean John C. Portman, Jr.
86. "Premises" shall have the meaning set forth in the Recitals.
87. "Principal Guaranty" shall have the meaning specified in the
Indenture.
88. "Purchase Option" shall have the meaning set forth in Paragraph I
herein.
89. "Qualified Purchaser" shall have the meaning specified in Section
7.1.1 of this Deed.
90. "Rated or Rating" shall having the meanings specified in the
Indenture.
91. "Rating Agency" shall having the meaning specified in the
Indenture, except that the Rating Agency shall be as elected by the Owner, if
the Issuer has not designated a Rating Agency under the Indenture.
92. "Real Estate Security Documents" shall have the meaning specified
in the Indenture.
93. "Rents" shall mean all of the rents, revenues, income, proceeds,
profits and other benefits paid or payable by any Persons to the Owner for
using, leasing, licensing, possessing, operating from, residing in, or otherwise
enjoying the Mortgaged Premises.
94. "Required Net Worth Certificate" shall mean, with respect to a
Person, a given minimum Net Worth amount (the "Minimum Net Worth") and a date
(the "Determination Date"), an Officers' Certificate of such Person to the
effect that the Net Worth of such Person, determined as of such Determination
Date, is at least equal to the Minimum Net Worth. In addition to providing such
certificate, such Person will also show the Financial Statements which provided
the basis for such certificate to the Grantee, or, alternatively, provide a
certificate from an Independent Accountant to the same effect as such
certificate.
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95. "Secured Indebtedness" shall mean any Indebtedness which the Deed
or any Subordinate Deed secures.
96. "Secured Note" shall have the meaning specified in the Recitals.
97. "Secured Note Accreted Amount" shall have the meaning specified in
the Secured Note.
98. "Secured Note Additional Interest" shall have the meaning specified
in the Secured Note.
99. "Secured Note Yield Maintenance Amount" shall have the meaning
specified in the Secured Note.
100. "Security Agreement" shall mean the Security Agreement, dated as
of the date hereof, between the Owner, Ground Lessor and the Grantee, as same
may be amended or supplemented.
101. "Service Agreements" shall mean agreements, other than Space
Leases and the Management Agreement, which relate to the operation or
maintenance of the Improvements, such as utility contracts, maintenance
agreements and service contracts.
102. "Space Leases" shall mean any and all leases (excluding the Ground
Lease), licenses, concessions or other agreements (written or verbal, now or
hereafter in effect), which grant a possessory interest in and to, or the right
to use part of the Improvements, but specifically excludes the Management
Agreement, subleases to which the Owner is not a party and any agreements for
the temporary rental of hotel rooms, meeting and banquet rooms and similar hotel
facilities. The Space Leases shall not include Service Agreements.
103. "Space Tenant" shall mean the tenant, or other user or occupant of
part of the Improvements under a Space Lease.
104. "State" shall mean the State of Georgia, in which the Premises are
located.
105. "Subordinate Deed" shall have the meaning specified in Section
7.6.
106. "Subordinate Lender" shall have the meaning specified in Section
7.7.1.
107. "Subordinated Obligations" shall mean the debtor's obligations to
a Subordinate Lender under a Subordinate Deed and the related loan documents.
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108. "Substitute Real Estate Collateral" shall have the meaning
specified in the Indenture.
109. "Taken" or "Taking" shall have the meaning provided in Section
3.3 hereof.
110. "Total Loss" shall have the meaning specified in Section 5.12.
111. "Total Taking" shall have the meaning specified in Section 9.3.
112. "Veto Power" shall mean with respect to any Person, the direct or
indirect rights (whether pursuant to the constituent documents of such Person,
by contract or through representation on a board of directors or other governing
body of such Person or in another manner) which either legally or, in practical
effect, enable them to make or veto significant management decisions with
respect to such Person.
113. "Work" shall have the meaning provided in Section 5.11.2 hereof.
114. "Yield Maintenance Amount" shall have the meaning specified in the
Indenture.
The term "as may be amended and supplemented" when used to qualify any
agreement described above, shall not be deemed the consent by the Grantee to, or
agreement to be bound by, any amendment or supplement to such agreement, or a
waiver or modification of the Grantee's right (if any) to consent to any such
amendment. Furthermore, any reference to a Person's heirs, executors,
administrators, successors and/or assigns, when used with respect to any Party
described above, shall not be deemed a consent by the Grantee to, or a waiver or
modification of the Grantee's right (if any) to consent to any sale, assignment,
conveyance or other transfer of such Person's interests.
III. Concurrently with its execution and delivery to the Grantee, this
Deed is being collaterally assigned to the Collateral Trustee, as trustee for
the benefit of the Holders under the Indenture and pursuant to the Assignment
and Pledge Agreement. The address of the Collateral Trustee is as shown on the
cover of the Assignment and Pledge Agreement. Upon such assignment, the
Collateral Trustee shall for all purposes be Grantee hereunder and shall
exercise and benefit from all of the rights and remedies of the Grantee
hereunder subject to the terms hereof, including, without limitation, the right
to inspect the Premises, to give and receive notices, to receive financial
information, to grant or withhold consent or approvals, to benefit from
indemnities, and to exercise all rights and remedies of the Grantee hereunder.
The Grantors hereby acknowledge the
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foregoing and agree to be bound to the Collateral Trustee, upon the execution
and delivery of such Assignment and Pledge Agreement, as if the Collateral
Trustee were the Grantee hereunder and had executed this Deed as the Grantee.
IV. The Grantors represent, covenant and warrant as follows:
1. that Owner is lawfully seized and possessed of the leasehold estate
granted under the Ground Lease and the Ground Lessor is lawfully seized and
possessed of the fee estate in the Land, and that they hold good and marketable
title thereto and to the rest of the Mortgaged Premises, subject only to the
Permitted Exceptions;
2. that the Mortgaged Premises are now free and clear of all liens,
security interests and encumbrances whatsoever, other than the Permitted
Exceptions, and that the Grantors have good right and lawful authority to
mortgage and convey the same in the manner and form herein provided, and that
they will warrant and defend title to the Mortgaged Premises against all claims
and demands whatsoever (other than the Permitted Exceptions);
3. that the Real Estate Security Documents and the Environmental
Indemnity have been authorized, executed and delivered in accordance with
applicable law and all partnership, corporate and governmental consents,
authorizations and approvals necessary or required therefore have been duly or
effectively taken or obtained;
4. that the Real Estate Security Documents (exclusive of the Assignment
and Pledge Agreement) and the Environmental Indemnity are legal, valid and
binding obligations of the Owner and/or the Ground Lessor, as the case may be,
enforceable in accordance with their terms against the parties thereto, except
as may be limited by bankruptcy, insolvency and other laws affecting creditors'
rights generally and by equitable principles of law;
5. that the Ground Lease and the Management Agreement were duly
authorized, executed and delivered, are in full force and effect, and the Owner
and the Ground Lessor have received no notice of default thereunder and have no
knowledge of (a) any default thereunder, (b) any violations of any Governmental
Requirements applicable to the Premises or the operation thereof which could
adversely affect the value of the Mortgaged Premises, or (c) any non-compliance
by the Owner or the Ground Lessor of their obligations under the Permitted
Exceptions;
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6. that the Owner is a limited partnership, duly organized and validly
existing under the laws of the State of Georgia and duly authorized to do
business ]n the State of Georgia, and has the power and lawful authority to own
its properties, to carry on its business as now conducted and to enter into and
perform its obligations under the Secured Note, the Deed, the Management
Agreement Assignment, the Security Agreement, the Bank Accounts Assignment and
the Environmental Indemnity. The general partners of the Owner are AMMLP and
Portman. GP-AMMLP is an indirect wholly-owned subsidiary of Marriott;
7. that the execution and delivery of the Secured Note, the Management
Agreement Assignment, the Security Agreement, the Bank Accounts Assignment and
the Environmental Indemnity and the performance by the Owner of its obligations
thereunder will not conflict with, or cause a default under, (a) the partnership
agreement of the Owner or any judgment, statute, rule, order, writ, decree or
injunction of any Court or Governmental Authority having jurisdiction over it,
or (b) any agreement binding upon the Owner or its property, the effect of which
conflict with, or default under such agreement would be to materially impair the
ability of the Owner to perform its obligations under the Secured Note, the
Management Agreement Assignment, the Security Agreement, the Bank Accounts
Assignment or the Environmental Indemnity;
8. that the Owner has all necessary certificates, licenses and other
approvals, governmental and otherwise, necessary for the operation of the
Premises as presently operated and conducted and the conduct of its business at
the Premises as presently operated and conducted and all required zoning,
building code, land use, environmental and other similar permits or approvals,
all of which are in full force and effect as of the date hereof and not subject
to revocation, suspension, forfeiture or modification (except to the extent any
particular type of permit or approval for comparable Improvements is customarily
subject to revocation, suspension, forfeiture or modification, provided,
however, the Owner has no knowledge of any anticipated revocation, suspension,
forfeiture or modification);
9. that the Premises and the present and contemplated use and occupancy
thereof are in full compliance with all applicable zoning ordinances, building
codes, land use and other similar laws, other than such violations which have an
immaterial effect on the value of the Mortgaged Premises;
10. that the Ground Lessor is a limited partnership, duly organized and
validly existing under the laws of the State of Delaware and qualified to do
business in the State of Georgia, and has the power and lawful authority to own
its properties, to carry on its business as now conducted and to
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enter into and perform its obligations under this Deed, the Security Agreement
and the Environmental Indemnity. The sole general partner of the Ground Lessor
is Marriott Marquis Corporation ("GP-AMMLP"); and
11. that the execution and delivery of this Deed, the Security
Agreement and the Environmental Indemnity and the performance by the Ground
Lessor of its obligations thereunder will not conflict with, or cause a default
under, (a) the partnership agreement of the Ground Lessor or any judgment,
statute, rule, order, writ, decree or injunction of any court or Governmental
Authority having jurisdiction over it, or (b) any agreement binding upon the
Ground Lessor or its property, the effect or which conflict with, or default
under such agreement would be to materially impair the ability of the Ground
Lessor to perform its obligations under this Deed.
V. The Grantors and the Grantee further covenant as follows:
1. INDEBTEDNESS.
1.1 The Owner will pay, as and when due, the indebtedness
evidenced by the Secured Note and secured hereby. As used in this Article and
elsewhere in this Deed, the term "indebtedness" shall mean and include the Note
Principal Amount, together with all interest thereon (including Default
Interest, Secured Note Additional Interest, if any, and Deferred Interest
payable with respect to the Secured Note), and Secured Note Yield Maintenance
Amount, if any, secured by this Deed, all costs of collection provided for
herein, and all other sums and charges at any time secured by or otherwise due
under this Deed or the Secured Note.
2. IMPOSITIONS.
2.1 The Grantors will pay or cause to be paid as and when due and
payable, and before they become delinquent, all Impositions. Notwithstanding
the foregoing, if by law any Imposition may at the option of the taxpayer be
paid in installments (whether or not interest shall accrue on the unpaid balance
thereof), the Grantors may, provided that no Event of Default and no event
which, with notice or passage of time or both, could constitute an Event of
Default, shall then exist under this Deed, and provided that payment in
installments would not create or cause to be created any lien on the Mortgaged
Premises (other than with respect to liens with respect to Impositions not yet
due and payable), cause to be paid or to pay the same (and any accrued interest
on the unpaid balance of such Imposition) in installments as they fall due and
before any fine, penalty, further interest or cost may be added thereto.
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2.2 The Grantors will pay or cause to be paid any taxes
(including, without limitation, stamp taxes and note intangible taxes), with
interest and fines and penalties, if any, except income taxes assessed by the
United States government or the State or any political subdivision of either, or
franchise or similar taxes based upon or measured by income, that may be levied,
imposed or assessed on the Grantee under or upon or by reason of this Deed, the
Secured Note or the receipt of the interest payable thereunder, or the other
Real Estate Security Documents.
2.3 In the event a tax or other governmental charge (other than
income, franchise or other taxes based upon net income and other than recording
or filing charges) is imposed directly or indirectly on this Deed, the Secured
Note or the indebtedness secured hereby, or any modification, amendment,
extension and/or consolidation hereof or upon the interest of the Ground Lessor,
the Owner or the Grantee in the Mortgaged Premises, in lieu of or in addition to
a tax on the Mortgaged Premises and/or the Improvements, whether by reason of
(a) the passage after the date of this Deed of any law of the State of Georgia
deducting from the value of real property for the purposes of taxation of any
lien thereon, (b) any change in the laws for the taxation of deeds to secure
debt or debts secured by deeds for state or local purposes or the manner of the
collection of any such taxes, or (c) a change in the means of collection of any
such tax or otherwise, the Grantors shall, within fifteen (15) days after notice
by the Grantee, pay such taxes and deliver to the Grantee satisfactory evidence
of payment thereof. If the Grantors shall pay such taxes pursuant to the terms
hereof, then in such event, the Grantors, at their option, shall have the right
to elect to prepay in full the Secured Note and all other amounts due under this
Deed and the Secured Note (exclusive of Secured Note Yield Maintenance Amount)
and cause the Issuer to redeem the Notes in full (exclusive of Yield Maintenance
Amount) in accordance with the provisions of the Indenture and the Notes and the
procedures set forth in Article Eleven of the Indenture. If such payment of the
tax or other governmental charge by the Grantors shall be unenforceable, then
the Grantee, at its option, within sixty (60) days after giving notice to the
Holders of such unenforceability, may declare the Note Principal Amount (or, if
prior to the Deferred Interest Commencement Date, the Original Note Principal
Amount and the Secured Note Accreted Amount) and all other indebtedness to be
immediately due and payable (exclusive of Secured Note Yield Maintenance
Amount), and the Grantors shall cause the Notes immediately to be redeemed in
full by the Issuer in accordance with the provisions of the Indenture, the Notes
and the procedures set forth in Article Eleven of the Indenture.
2.4 The certificate, advice or bill of the appropriate official
designated by law to make or issue the same
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or to receive payment of any Imposition, which such certificate, advice or bill
indicates the nonpayment 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.
2.5 The Grantors shall have the right, after giving notice to the
Grantee, to contest the amount or validity, in whole or in part, of any
Imposition, or to seek a reduction in the valuation of the Land, Improvements or
the Equipment as assessed for real estate or personal property tax purposes by
appropriate proceedings diligently conducted in good faith, but only after
payment of such Imposition, unless such payment would operate as a bar to such
contest or interfere materially with the prosecution thereof, in which event the
Grantors may postpone or defer payment of such Imposition, and upon request by
the Grantors, the Grantee shall postpone or defer payment of such Imposition if:
2.5.1 Neither the Mortgaged Premises nor any part thereof
would by reason of such postponement or deferment be in imminent danger of being
forfeited or lost; and
2.5.2 The Grantors shall either have deposited with the
Grantee the amount so contested and unpaid, (net of any portion thereof paid to
or deposited with the applicable taxing authority) together with all interest
and penalties in connection therewith and all charges that may or might be
assessed against or become a charge on the Mortgaged Premises, or any part
thereof, in such proceedings or in lieu thereof, or shall have posted with the
Grantee a bond by an independent, reputable surety company in such amount,
whereby such surety undertakes to pay such Imposition, interest, penalties and
charges in the event that the Grantors shall fail to pay the same upon the final
disposition of the contest (including appeals), or in the event that the
Mortgaged Premises or any part thereof is in imminent danger of being forfeited
or lost during the pendency of such contest or if the Grantors fail to increase
the amount of such bond or deliver an Officers' Certificate as hereinafter
provided. In determining the amount of such deposit or bond, the Grantors shall
be credited with any amounts theretofore deposited with the Grantee in respect
of the Imposition being contested. Any deposit made by the Grantors under the
provisions of this subsection 2.5.2, together with any additions thereto made
pursuant to this subsection 2.5.2, and all interest, if any, earned thereon,
shall be held and disposed of as hereinafter provided. Upon the termination of
any such proceeding (including appeals), or if the Grantors should so elect, at
any time prior thereto, the Grantors shall pay the amount of such Imposition or
part thereof as finally determined in such proceeding (or appeal), the payment
of which may have been deferred during the prosecution of such proceeding (or
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appeal), together with any costs, fees, interest, penalties or other liabilities
in connection therewith, and upon such payment, the Grantee shall return any
amount deposited with it (and not previously applied by it as hereinafter
provided) and interest thereon, if any, with respect to such Imposition. Such
payment, at the request of the Grantors, shall be made by the Grantee out of the
amount deposited with it with respect to such Imposition, to the extent that
such amount is sufficient therefor, and any balance due shall be paid by the
Grantors and any balance remaining shall be paid by the Grantee to the Grantors
with interest, if any, earned thereon. During the pendency of such contest
provided for herein, the Grantors shall increase the amount deposited with the
Grantee or the amount of the bond, as the case may be, at least thirty (30) days
in advance of any increase in the amount so contested and unpaid (or as soon
thereafter as the Grantors obtain knowledge of such increase), or in the amount
of interest, penalties or any other charges that may or might be assessed
against or become a charge on the Mortgaged Premises, or any part thereof, and
shall simultaneously deliver to the Grantee an Officers' Certificate certifying
as to the sufficiency of such increased deposit or bond, and, upon failure of
the Grantors to either increase the deposit or bond as aforesaid, or to deliver
an Officer's Certificate with respect thereto, the Grantee may require the
amount theretofore deposited with it to be applied (or the Grantee may require
application of the bonded amount by the surety company, if a bond has been
furnished) to or on account of the payment, removal or discharge of any such
Imposition and the interest and penalties in connection therewith and any costs,
fees or other liability accruing in any such proceeding, or any part of any of
the same, regardless of the effect thereof on the Grantors' contest, and the
balance, if any, shall be returned to the Grantors. If, at any time during the
continuance of such proceeding, the Mortgaged Premises or any part thereof, is,
in the reasonable judgment of the Grantee, in any substantial danger of being
forfeited or lost, the Grantee may require that the amount theretofore deposited
with it be applied to the payment of such Imposition (or the Grantee may require
application of the bonded amount by the surety company, if a bond has been
furnished) in the manner provided in the preceding sentence. Notwithstanding
anything contained herein to the contrary, no such deposit held by the Grantee,
or any part thereof, shall be returned to the Grantors so long as any Event of
Default or any event which, with notice or passage of time or both, could
constitute an Event of Default shall exist hereunder. Any monies held by the
Grantee under this subsection 2.5.2 shall, at the direction of the Owner, be
invested in Approved Cash Equivalents.
3. MAINTENANCE AND REPAIRS; WASTE
3.1 The Grantors will not commit or permit waste on the Mortgaged
Premises and will keep and maintain at its
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own expense, or cause to be maintained, the Improvements and the Furnishings and
Furniture in a first-class condition and state of repair, and in a condition
consistent with the premier class convention hotels in the Marriott hotel
system. The Grantors will promptly make all necessary repairs, renewals,
replacements, additions and improvements to the Improvements, Furnishings and
Furniture, interior and exterior, structural and non-structural, foreseen and
unforeseen, or otherwise necessary to insure that the same as part of the
security under this Deed shall not in any way be diminished or impaired, subject
to reasonable wear and tear. The Grantors will neither do nor permit to be done
anything to the Mortgaged Premises that may materially impair the value thereof
or which may violate any covenant, condition or restriction affecting the same,
or any part thereof, or any change therein or in the condition thereof which
will increase the danger of fire or other hazard arising out of the operation
thereof. All Service Agreements affecting the Premises (i) shall be bona fide
agreements, and (ii) shall be on commercially reasonable terms and conditions in
light of then market conditions and (iii) if between the Owner and Affiliates
thereof or Affiliates of a partner of Owner, same shall comply with the
provisions of the partnership agreement of the Owner with respect to dealings
with Affiliates. The Grantors shall deliver to the Grantee copies of each
Service Agreement with an Affiliate of the Owner or a partner of the Owner
executed after the date hereof which requires annual payments to the service
provider in excess of Two Hundred Thousand Dollars ($200,000.00). The Grantee,
its authorized employees and/or its agents may enter and inspect the Mortgaged
Premises at any time during usual business hours and upon reasonable prior
notice to the Owner (except in the event of an emergency, in which event such
entry may be without notice and during non-business hours), to inspect the
Mortgaged Premises or to determine whether it is necessary to make such repairs,
replacements, renewals or additions, or to perform such items of maintenance, to
the Mortgaged Premises.
3.2 The Mortgaged Premises shall be operated solely as a premier
class convention hotel and related operations and as the "Atlanta Marriott
Marquis Hotel," subject to the provisions of the Management Agreement
Assignment. The Grantors shall cause the Mortgaged Premises to be operated under
standards comparable to those presently prevailing in the premier class
convention hotels in the Marriott hotel system.
3.3 In the event that any portion of the Improvements or
Equipment shall be damaged or destroyed by fire or any other casualty, the
Grantors shall repair, replace, rebuild or alter the same without regard to the
adequacy of any insurance proceeds provided for in this Deed, all as provided in
Section 5.11 hereof. In the event of a taking of any portion of the Mortgaged
Premises as a result of any exercise of the right of condemnation or the power
of eminent domain or by agreement of
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the interested parties in lieu of such condemnation (hereinafter called a
"Taking" or having been "Taken"), the Grantors shall promptly restore, replace,
rebuild or alter any Improvements affected, and repair or replace any Equipment
taken so as to restore the Mortgaged Premises as nearly as practicably possible
to its condition and value immediately preceding such Taking, without regard to
the adequacy of condemnation proceeds, if any, made available to the Grantors
pursuant to Section 9.3 hereof.
4. COMPLIANCE WITH LAWS; USE OF PREMISES; ETC.
4.1 The Grantors, at their own expense, will promptly cure all
violations of law, other than such violations which have an immaterial effect on
the value of the Mortgaged Premises, and will comply with, or cause to be
complied with, all present and future Legal Requirements, other than such
violations which would have an immaterial effect on the value of the Mortgaged
Premises.
4.2 The Grantors will use and permit the use of the Mortgaged
Premises only in strict accordance with any applicable licenses and permits
issued by Governmental Authorities, other than such deviations which have an
immaterial effect on the value and operation of the Mortgaged Premises and the
security of the Deed.
4.3 The Grantors will procure, pay for and maintain all permits,
licenses and other authorizations required pursuant to any Legal Requirement to
be procured and/or maintained by the owners and/or operators of the Mortgaged
Premises for use of the Mortgaged Premises, or any part thereof, and for the
lawful and proper operation and maintenance thereof.
4.4 Notwithstanding the foregoing, the Grantors shall have the
right, after prior notice to the Grantee, to contest by appropriate legal
proceedings, diligently conducted in good faith, the validity or application of
any Legal Requirement if and so long as the Grantors shall promptly furnish to
the Grantee an Officers' Certificate to such effect showing the steps taken to
comply with such provisions, provided in each case that:
4.4.1 If by the terms of any such Legal Requirement,
compliance therewith pending the prosecution of any such contest may legally be
delayed without the incurrence of any lien, charge or liability of any kind
against the Mortgaged Premises, or any part thereof, and without subjecting the
Grantors or the Grantee to any liability, civil or criminal, for failure so to
comply therewith, the Grantors may delay compliance therewith until the final
determination of any such proceeding.
4.4.2 If any lien, charge or civil liability would be
incurred by reason of any such contest or
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deferral with compliance, the Grantors nevertheless may contest as aforesaid and
delay as aforesaid, provided that such delay would not subject the Grantee to
criminal liability and the Grantors (a) furnish to the Grantee security
reasonably satisfactory to the Grantee against loss or injury by reason of such
contest, delay or deferral and (b) prosecutes the contest with due diligence.
4.4.3 Notwithstanding the foregoing, if any delay in
compliance with any Legal Requirement shall, in the reasonable judgment of the
Grantee, place all or any part of the Mortgaged Premises in substantial danger
of being forfeited or lost, the Grantors shall, upon notice from the Grantee,
immediately comply with such Legal Requirement.
4.5 The Grantors will not, without the prior written consent of
the Administrative Services Representative (a) initiate, support or obtain any
zoning reclassification of the Premises, seek any variance under existing zoning
ordinances applicable to the Premises (b) use or permit the use of the Premises
in a manner which would result in any use becoming a non-conforming use under
applicable zoning ordinances, (c) modify, amend or supplement any of the
Permitted Exceptions, (d) impose or consent to any restrictive covenants or
encumbrances upon the Premises, execute or file any subdivision plat affecting
the Premises or the Improvements to any municipality, or (e) permit or suffer
the Premises to be used by the public or any person in such manner as might make
possible a claim of adverse usage or possession or of any implied dedication or
easement. Consent of the Administrative Services Representative to any of the
foregoing matters described in clauses (a) through (e) above shall not be
unreasonably withheld or delayed, provided that, together with the Grantors'
request for such consent, the Grantors deliver to the Administrative Services
Representative and the Grantee Certificates of No Material Impairment with
respect to such matter.
4.6 The Grantors shall not operate or permit the Premises or any
part thereof to be operated as a cooperative, condominium or similar form of
ownership.
4.7 The Grantors will not engage, directly or indirectly, in any
business or activity other than (a) the acquisition, construction, ownership,
alteration, management, leasing, operation and financing of the Mortgaged
Premises, any activities which the Grantors, in good faith, believe are
incidental to the operation of the Mortgaged Premises as a premier class
convention hotel and any activities reasonably necessary for the performance of
their obligations hereunder or the other Financing Documents, or the obligations
of the Issuer under the Indenture (to the extent required to enable the Issuer
to comply with its obligations thereunder), or necessary to
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perform their obligation. under any other instruments evidencing or securing any
Subordinate Deeds or other financings or credit arrangements permitted under the
Financing Documents, and (b) as to Owner only, the ownership and operation of
the Issuer and any other subsidiary created for the sole purpose of obtaining
financing for the Mortgaged Premises.
4.8 GP-AMMLP will not engage, directly or indirectly, in any
business or activity other than those reasonably necessary to perform its
obligations as the sole general partner of AMMLP.
4.9 The Grantors and GP-AMMLP will do or cause to be done all
things necessary to preserve and keep in full force and effect their existence,
rights and franchises. In no event shall the Grantors be deemed in default
pursuant to this Section 4.9 by reason of any dissolution of the Ground Lessor
or the Owner resulting from the withdrawal of a partner of the Ground Lessor or
the owner or a transfer of a partnership interest in the Ground Lessor or the
Owner or the death, dissolution, liquidation, termination, bankruptcy or
insolvency of a partner of the Ground Lessor or the Owner provided that the
Ground Lessor or the Owner, as the case may be, is reconstituted within a
reasonable period of time after such dissolution; provided, however, that
nothing herein shall be deemed to permit a transfer otherwise prohibited under
Article 7 hereof.
4.10 None of the assets of Ivy Street Hotel Limited Partnership
shall constitute plan assets for purposes of the Employee Retirement Income
Security Act of 1974, as amended.
4.11 All of the terms and provisions of the Environmental
Indemnity are deemed repeated herein as if same were separately fully set forth
in this Deed and the obligations of the Grantors under such provisions (as
incorporated herein) shall be secured by this Deed and shall survive any
termination or satisfaction of this Deed. The provisions of the Environmental
Indemnity shall be enforceable separately or in conjunction with this Deed, at
the Grantee's election.
5. INSURANCE, ETC.
5.1 The Grantors shall keep the Premises, the Improvements and
Equipment insured for the benefit of the Grantee, an loss payee, as follows:
5.1.1 Against damage or loss by fire and such other hazards
(including water, sprinkler leakage, collapse, lightning, windstorm, hurricane,
hail, explosion, riot, riot attending a strike, civil commotion, vandalism,
malicious mischief, aircraft, vehicle and smoke) under an "All Risk" form on an
"Agreed Amount" basis, in an amount not leas than the full
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replacement coat (as defined in Section 5.8) of the property insured, adding the
Grantee as loss payee thereunder.
5.1.2 Rent/business interruption or use and occupancy
insurance utilizing an "All Risk" coverage in an amount necessary to provide for
not less than one (1) year's loss of profit plus continuing overhead (including
all Debt Service) for interruptions caused by any occurrence covered by the
insurance referred to in subsection 5.1.1 with an extended period of indemnity
for 180 days.
5.1.3 Against damage or loss by flood if the Premises are
located in an area identified by the Secretary of Housing and Urban Development
or any successor as an area having special flood hazards and in which flood
insurance has been made available under the National Flood Insurance Act of 1968
or the Flood Disaster Protection Act of 1973, as amended, modified, supplemented
or replaced from time to time.
5.1.4 Boiler and machinery insurance in the amount of full
replacement cost, which insurance shall be written on a comprehensive form and,
if not provided under the same policy affording the property insurance required
by Subsection 5.1.1., appropriately coordinated under a "joint loss agreement"
(or the equivalent) with the coverage hereinabove described, and shall cover all
steam, mechanical and electrical equipment, including, without limitation, any
boilers, pressure vessels, pressure piping, components of central heating,
ventilation or air conditioning systems, or similar apparatus, installed in the
Premises.
5.1.5 During the period of any construction, repair,
restoration or replacement of any portion of the Improvements, a standard
builder's rick policy with extended coverage for an amount at least equal to the
full replacement cost of such Improvements and worker's compensation, in
statutory amounts.
5.1.6 Fidelity Bond coverage in an amount no less than
S3,000,000 (which coverage may be part of a Marriott blanket policy).
5.2 The Grantors shall also procure and maintain commercial or
comprehensive general liability insurance covering the Grantors and the Grantee
against claims for bodily injury, personal injury or death or property damage
occurring in, upon or about or resulting from the Premises, or any street,
drive, sidewalk, curb or passageway adjacent thereto, in standard form and with
such insurance company or companies and in the amount no less than equal to the
lesser of (a) $100,000,000, or (b) the greatest amount commercially available at
commercially reasonable rates and terms, which insurance shall include liquor
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liability, employer's automobile non-ownership liability, safe deposit box lega1
liability and innkeepers' legal liability, garage keepers liability (to the
extent necessary to protect guests' valet parked vehicles), workers'
compensation (in statutory amounts, which coverage, however, may be
self-insured), employers' liability, garage liability and blanket broad form
contractual liability coverage, which insures contractual liability under the
indemnification set forth in Article 17 of this Deed (but such coverage or the
amount thereof shall in no way limit such indemnification). Grantee acknowledges
that safe deposit box legal liability and innkeepers' legal liability may be
limited in amount by Legal Requirements. Grantee shall be named as an additional
insured under all liability policies.
5.3 The Grantors, at the Grantee's request, shall procure and
maintain such other insurance, through endorsements or otherwise, or such
additional amounts of insurance, covering the Grantors or the Premises, as the
Grantee shall from time to time reasonably require, including, without
limitation, insurance coverage commonly required by mortgagees of premier class
convention hotels in Atlanta.
5.4 All insurance required under this Article shall be fully paid
for and nonassessable. The property insurance shall be issued by such insurance
companies doing business in the jurisdiction in which the Premises are located
having a then current rating in the latest edition of Best's Insurance Reports
of not less than "A" (Policyholders' Rating) and not less than "IX" (Financial
Size Category). The primary liability insurance shall be issued by such
insurance companies doing business in the jurisdiction in which the Premises are
located having a then current rating in the latest edition of Best's Insurance
Reports of not less than "A", "IX", if such rating is available on commercially
reasonable terms, but in no event less than "A", "VIII"; provided, however, the
primary liability insurance may be issued by an insurance company having a
Best's rating of "A", "VIII" only if the Grantors shall have delivered to the
Grantee an Officers' Certificate certifying that a rating of "A", "IX" or higher
is not then available on commercially reasonable terms. The Grantee consents to
the Grantors' present carrier of primary insurance coverage, provided its Best's
rating remains not less than "A", "VIII". Notwithstanding the foregoing, all
excess liability insurance may be issued by insurance carriers rated not less
than "B+", "VIII" or if not rated, either (i) which have a surplus in excess of
$500,000,000 or (ii) which the Grantors, in their reasonable judgment, conclude
would have equivalent ratings of "B+", "VIII" or higher if such insurance
carrier were evaluated by Best's Insurance Reports and deliver to the Grantee an
Officers' Certificate as to such conclusion. Supplementing the foregoing, all
insurance required under this Article 5 (except for such excess liability
insurance issued by unrated carriers permitted
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under this Section 5.4) shall be issued by such insurance companies having
Best's ratings not less than those of insurance carriers for comparable
insurance covered by the Marriott blanket policy for premier class convention
hotels in the Marriott hotel system. All insurance required under this Article 5
shall have deductible limits charged to either or both of the Grantors in an
amount no greater than those limits applicable to other premier class convention
hotels in the Marriott hotel system, but in no event greater than $250,000.
5.5 The Grantors shall also deliver to the Grantee original
certificates of insurance and renewals thereof at least five (5) days prior to
renewal evidencing the insurance required under this Section and any additional
insurance on the Premises.
5.6 The Grantors shall not carry separate or additional insurance
concurrent in form or contributing in the event of loss with that required under
this Section unless endorsed in favor of the Grantee in accordance with the
requirements of this Article and otherwise approved by the Grantee in all
respects.
5.7 In the event of the sale, under the power of sale created
herein, of the Mortgaged Premises or the foreclosure of this Deed or other
transfer of title or assignment of the Mortgaged Premises in extinguishment, in
whole or in part, of the Obligations, all right, title and interest of the
Grantors in and to all policies of insurance required under this Article (other
than blanket policies) or otherwise then in force with respect thereto and all
proceeds payable thereunder and unearned premiums thereon shall immediately vest
in the purchaser or other transferee of the Mortgaged Premises. The Grantors
agree, immediately upon demand, to execute and deliver such assignments or other
authorizations or instruments as may be necessary or desirable to effectuate the
foregoing.
5.8 For purposes of this Section, the term "full replacement cost"
shall mean the actual cost of replacing the property in question, without
allowance for depreciation and exclusive of the cost of excavations, foundations
and footings, as determined for the Improvements and the Furnishings and
Furniture from time to time.
5.9 Within thirty (30) days after the commencement of each Fiscal
Year, the Owner, Management Company and AMMLP shall provide Grantee with
Officers' Certificates stating that the insurance coverage for the Premises
complies with the requirements of this Deed, such statements in said Officers'
Certificates to be confirmed in writing by a senior insurance consultant used by
Marriott with a minimum of five (5)
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years' experience with respect to insurance coverage for hotels or a senior
member of Marriott's risk management department.
5.10 All such insurance policies shall (a) provide as follows: (i)
all losses except those not exceeding $2,500,000.00 per occurrence payable
thereunder with respect to the Improvements and Furnishings and Furniture shall
be payable directly to the Grantee (rather than to any of the other insureds and
the Grantee jointly) pursuant to a standard mortgagee clause or standard
lender's loss payable clause naming the Grantee, without contribution as the
loss payable party, such provision to be in form and substance reasonably
satisfactory to the Grantee and such proceeds of loss to be held and applied by
the Grantee, as provided in Section 5.11; and (ii) all losses thereunder shall
be adjusted by the Grantors, provided that in no event shall the Grantors
approve or consent to any final adjustment in any amount exceeding $2,500,000.00
per occurrence without obtaining the prior approval of the Administrative
Service Representative to the amount of such adjustment, which approval shall
not be unreasonably withheld or delayed; (b) provide that the insurer agrees to
give not less than thirty (30) days' prior written notice to the Grantee of a
proposed policy cancellation or of a material change in the policy provisions;
(c) provide that no act, omission or negligence of the Grantors which might
otherwise result in a forfeiture of such insurance or any part thereof, shall in
any way affect the validity or enforceability of such insurance insofar as the
Grantee is concerned. If, notwithstanding the provisions of Section 5.10(a)(i),
any such insurance proceeds are made payable to the Grantors, rather than the
Grantee, as is required, Grantors hereby appoint Grantee as their
attorney-in-fact, irrevocably, to endorse or transfer any such payment to the
name of Grantee. The policy or policies of insurance of the character required
hereunder may consist of blanket policies insuring the Mortgaged Premises and
other property of the Grantors or Marriott or Marriott Affiliates; provided that
such policy or policies shall set forth the amount of insurance in force
thereunder applicable to the Mortgaged Premises, Improvements and Furnishings
and Furniture and shall otherwise comply with the provisions of this Article 5
and shall afford the same protections to the Grantee as would be provided by
property policies individually applicable to the Mortgaged Premises (except with
respect to any flood hazard insurance required by Section 5.1.3 herein).
5.11 In the event that any of the Improvements or Furnishings
and Furniture shall be damaged or destroyed, in whole or in part, by fire or
other casualty, or all or any portion of the Premises are Taken, the Grantors
shall give prompt notice thereof to the Grantee (except with respect to any
damage, the cost of which to repair is less than $100,000), and shall promptly
restore, replace or rebuild the damaged or destroyed Improvements and
Furnishings and Furniture, or restore, replace,
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repalr or rebuild the portion of the Mortgaged Premises not so taken, in either
case as nearly as possible to the value, condition, character (as a premier
class convention hotel) and size such Improvements and/or Furnishings and
Furniture were in prior to such damage or destruction or Taking, without regard
to the adequacy of insurance proceeds or the Award. All such restoration shall
be performed diligently, in a good and workmanlike manner, in compliance with
all Legal Requirements and consistent with a premier class convention hotel in
the Marriott hotel system. If the damage, destruction or Taking requires either
restoration work costing in excess of $2,500,000 or structural work, the plans
and specifications therefor shall be delivered to the Grantee, together with an
Architect's certificate (except for non-structural work for which no Architect
is used) with respect to item (i) below and an Officers' Certificate as to items
(i), (ii) and (iii) below certifying that (i) the plans and specifications
comply substantially with all applicable Legal Requirements, (ii) the
restoration work indicated by the plans and specifications comply with all other
requirements in this Deed governing alterations and (iii) the restoration work
indicated by the plans and specifications restores the Improvements and/or
furnishings as nearly as possible to the value, condition, character (as a
premier class convention hotel) and size as same were in prior to such damage or
destruction or Taking. If by reason of any such damage or destruction any sums
are paid under any insurance policy hereinabove mentioned or contemplated, or if
by reason of any Taking any Award is paid, such sums shall be paid as follows
(except that the proceeds of any loss of business interruption coverage shall be
paid as provided in Section 5.13 below):
5.11.1 If the aggregate insurance proceeds or Award (net of
all collection costs, including attorney's fees and consultants' fees) received
by reason of any single instance of such damage or destruction or Taking, as the
case may be, shall be $2,500,000.00 or less, such net insurance proceeds or
Award, as the case may be, shall be directly paid over to the Owner by the
insurer, who shall hold the same as a trust fund to be used first for the
payment of the entire cost of restoring, repairing, rebuilding or replacing the
damaged or destroyed Improvements and Furnishings and Furniture, or the
Improvements not so Taken and Furnishings and Furniture located therein, as the
case may be, and the balance, if any, shall be delivered to the Depositary who
shall hold such balance for application to the next installment of interest on
the Secured Note and thereafter shall deliver any remaining balance to the
Grantors; provided, however, that if any Event of Default shall exist hereunder
at the time such proceeds or Award are to be paid over to the Owner and if the
entire Principal Balance of the Secured Note has been declared due and payable,
such proceeds shall at the option of the Grantee be paid to the Grantee to be
applied as provided in Section 506 of the Indenture, unless any
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such declaration and the consequencoe thereof are rescinded and annulled in
accordance with the provisions of Section 502 of the Indenture or waived
pursuant to Section 513 of the Indenture.
5.11.2 If the aggregate insurance proceeds or Award (net of
all collection costs, including attorneys' fees and consultants' fees)
received by reason of any single instance of such damage or destruction or
Taking shall be more than $2,500,000.00, or shall be $2,500,000.00 or less, but
such proceeds or Award are required to be paid to Grantee pursuant to the
provisions of Section 5.11.1 hereof, all such net proceeds or Award are required
to be paid to the Depositary, and each such insurance company or Governmental
Authority concerned is hereby authorized and directed to make payment of such
loss or of such Award directly to the Grantee instead of the Grantors. If the
Grantee, by reason of such insurance or Award, receives any money for loss or
damage or Taking, as the case may be, such amount shall be applied to the
repair, replacement, restoration or rebuilding of the damaged or destroyed
Improvements or Furnishings and Furniture, or such Improvements not so Taken and
Furnishings and Furniture located therein, subject to the provisions of Section
5.12 and Section 9.3 herein. Should such insurance proceeds or Award be applied
to the repair, replacement, restoration or rebuilding of the damaged
Improvements or Furnishings and Furniture or such Improvements not so Taken and
Furnishings and Furniture located therein (the "Work"), such proceeds or Award
shall be paid out by the Depositary from time to time to the Owner (or, at the
option of Grantee, jointly to the Owner and the persons furnishing labor and/or
material incident to such Work or directly to such persons) as the Work
progresses subject to the following conditions: (a) an Architect shall be
retained by the Owner (except an Architect shall not be required for
non-structural Work for which it is commercially reasonable to perform without
an architect), at the Owner's expense, and charged with the preparation of the
plans and specifications for the Work and periodic inspection thereof and the
Owner shall have prepared and submitted to the Grantee the plans and
specifications for such Work in accordance with Section 5.11; (b) each request
for payment by the Owner shall be made on ten (10) days' prior written notice to
Grantee and shall be accompanied by Officers' Certificates of Owner and
Management Company and, except for non-structural Work for which it is
commercially reasonable to perform without an architect, a certificate (with
respect to item (i) below only) to be made by the Architect charged with the
preparation of the plans and specifications for the Work and periodic inspection
thereof, dated no more than ten (10) days prior to such request, stating, among
such other matters as may be reasonably required by Grantee, that: (i) all of
the Work completed has been done in substantial compliance with the approved
plans and specifications; (ii) the sum requested is justly required to reimburse
the Owner for payments by the Owner to, or is justly due to, the contractor,
subcontractors, materialmen, laborers, engineers,
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architects or other persons rendering services or materials for the Work, giving
a brief description of such services and materials and the several amounts so
paid or due to such persons, and stating that no part of such expenditures has
been or is being made the basis, in any previous disbursement or then pending
request, for the withdrawal of insurance proceeds or the Award; (iii) that the
full deductible amount contained in the insurance policy or policies under which
insurance proceeds have been disbursed has been theretofore applied by the Owner
to the cost of the Work; (iv) when added to all sums previously paid out by the
Owner, the sum requested does not exceed the value of the Work done to the date
of such certificate; and (v) the amount of insurance proceeds or Award remaining
in the hands of Grantee will be sufficient on completion of the Work to pay for
the same in full (giving in such reasonable detail as the Grantee may require an
estimate of the cost of such completion); (c) each request shall be accompanied
by waivers of lien satisfactory in form and substance to Grantee covering that
part of the Work for which payment is requested, together with a certificate by
a title company or licensed abstractor or by other evidence satisfactory to
Grantee that there has not been filed with respect to the Mortgaged Premises any
mechanic's lien or other lien, affidavit or instrument asserting any lien or any
lien rights with respect to the Mortgaged Premises; (d) there has not occurred
and is continuing any Event of Default; and (e) in the case of the request for
the final disbursement, such request is accompanied by a copy of any Certificate
of Occupancy or other certificate required by any Legal Requirement to render
occupancy of the Mortgaged Premises lawful. If, upon completion of the Work, any
portion of the insurance proceeds or Award has not been disbursed to the Owner
(or one or more of the other aforesaid persons), the Grantee shall retain such
balance for application to the next installment of interest on the Secured Note
and thereafter shall deliver any remaining balance to the Grantors; provided,
however and if the entire unpaid principal amount of the Secured Note has been
declared due and payable, such balance shall, at the option of the Grantee, be
paid to the Grantee to be applied as provided in Section 506 of the Indenture,
unless such declaration and the consequences thereof are rescinded and annulled
in accordance with the provisions of Section 502 of the Indenture or waived
pursuant to Section 513 of the Indenture. Nothing herein shall be interpreted to
prohibit the Depositary from (A) withholding from each such disbursement ten
percent (10%) of the amount otherwise herein provided to be disbursed, and from
continuing to withhold such sum, until the earlier of (i) the expiration of the
time permitted for perfecting liens against the Mortgaged Premises has expired
and (ii) the Grantor's delivery of all lien waivers necessary to preclude the
filing of any liens against the Mortgaged Premises in connection with such Work,
at which time the amount withheld shall be disbursed to the Owner (or to the
Owner and any person or persons furnishing labor and/or material for the Work or
directly to such persons), or (B)
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applying at any time the whole or any part of such insurance proceeds or Award
to the curing of any Event of Default. If at any time the Grantee shall
determine that the insurance proceeds or the Award which are to be applied to
the Work under this Section 5.11 and which are to be paid to or for the account
of the Owner in accordance with the terms of this Deed will be insufficient to
pay the entire cost of the Work, the Owner shall pay the deficiency to Grantee
within ten (10) days after request therefor, prior to receiving any part of such
insurance proceeds or Award, such monies to be invested by the Grantee in
accordance with Section 5.15 and disbursed from time to time for the Work in
accordance with this Section 5.11. This Section shall not be deemed for the
benefit of any third person or party, including those furnishing labor, supplies
or materials for the Work, and nothing herein shall be deemed to create any
right of such persons in and to such insurance proceeds or Award.
5.12 In the event of a Total Loss (as such term is defined
hereinbelow), the Grantee may, by written notice given within forty-five (45)
days after the determination that a Total Loss has occurred, declare the Note
Principal Amount (or, if prior to the Deferred Interest Commencement Date, the
Original Note Principal Amount and Secured Note Accreted Amount) and all other
indebtedness to be immediately due and payable (exclusive of Secured Note Yield
Maintenance Amount) and all net proceeds of insurance or Awards shall be applied
to such indebtedness and the Grantors shall cause the Issuer to redeem the Notes
in full (exclusive of Yield Maintenance Amount) in accordance with the
provisions of the Indenture, the Notes and the procedures set forth in Article
Eleven of the Indenture. The balance, if any, of such insurance proceeds or
Award not required to be applied in accordance with the foregoing sentence shall
be paid over to the Grantors. A Taking or casualty with regard to which the
Award or the net insurance proceeds exceeds $2,500,000 shall be deemed to be a
"Total Loss" for the purposes of this Section 5.12 and Section 9.3 hereof if,
within sixty (60) days from the Taking or the casualty, the Grantors and the
Management Company shall not deliver to the Grantee Officers' Certificates
(together with the Architect's and/or Insurance Adjuster's and/or Appraisers'
estimates as set forth below) certifying that either:
(a) the cost of the repair or restoration of the Improvements
and the Furnishings and Furniture required hereunder, as estimated by
an Architect and/or an Insurance Adjuster, at the Grantors' sole cost
and expense, is an amount equal or less than $20,000,000; or
(b) the cost of repair or restoration of the Improvements and
the Furnishings and Furniture required hereunder, as estimated by an
Architect and/or an Insurance Adjuster, at the Grantors' sole cost and
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expense, is an amount greater than $20,000,000 and less than or equal
to $65,000,000, but that the fair market value of the Premises after
such repair or restoration, as estimated by an Appraiser, at the
Grantors' sole cost and expense, shall be greater than or equal to
$222,000,000.
Notwithstanding the foregoing, the sixty (60) day period in which the Grantors
and the Management Company are obligated to submit Officers' Certificates in
accordance with this Section 5.12 may be extended for such additional period,
not to exceed sixty (60) days, necessary for the Grantors and the Management
Company, acting diligently, to obtain such Officers' Certificates if, at least
fifteen (15) days prior to the expiration of the initial sixty (60) day period
(but no earlier than thirty (30) days prior to the expiration of such period),
the Grantors and the Management Company submit Officers' Certificates certifying
that (i) they have diligently sought to obtain the estimates required under this
Section 5.12 and have been unable to obtain such estimates within the initial
sixty (60) day period, (ii) they reasonably believe that such estimates can and
will be obtained within such additional sixty (60) day period and (iii) they
have not previously obtained any oral or written estimates from an Architect
and/or an Insurance Adjuster inconsistent with the certifications set forth in
(a) and (b) above.
5.13 All net proceeds of rent/business interruption insurance
payable as a result of the occurrence of any damage or destruction shall be paid
to the Depositary. The Depositary shall apply such proceeds to payment of
scheduled debt service under the Secured Note, Impositions, insurance premiums,
and the normal operating expenses of the Premises from and after the date of the
occurrence of such damage until the completion of the restoration or replacement
or until the exhaustion of such proceeds, whichever comes first. Upon completion
of such restoration or replacement, any remainder of such business interruption
insurance held by the Grantee shall be paid to the Owner; provided, however,
that if any Event of Default shall exist hereunder at the time such proceeds or
Award are to be paid over to the Owner and if the entire indebtedness under the
Secured Note has been declared due and payable, such proceeds shall at the
option of the Grantee be paid to the Grantee to be applied as provided in
Section 506 of the Indenture, unless any such declaration and the consequences
thereof are rescinded and annulled in accordance with the provisions of Section
502 of the Indenture or waived pursuant to Section 513 of the Indenture.
5.14 Nothing in Section 5.12 hereof contained shall relieve the
Grantors of their duty to repair, restore, rebuild or replace the Improvements
and the Furnishings and Furniture following damage or destruction by fire or
other casualty in the event that no or inadequate proceeds of insurance
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are available to defray the cost of such repairing, restoring, rebuilding or
replacement. In addition, nothing contained herein shall relieve the Owner of
its duty to make or cause to be made all payments required by the Secured Note
and this Deed subsequent to the occurrence of any fire or other casualty or
Taking.
5.15 All insurance proceeds or Awards deposited with Depositary
shall at the direction of the Owner be invested in Approved Cash Equivalents.
The certificates or other instruments evidencing all such obligations shall be
in the possession of the Depositary or, if in registered form, registered in
the name of the Depositary or a financial intermediary selected by and acting on
behalf of the Depositary, and, if issued in book-entry form, the name of the
Depositary should appear on the books of the Federal Reserve Bank or other
issuing party or agent therefore as the owner of such book-entry securities. The
Depositary shall not be liable for any loss resulting from the liquidation of
each and every such investment, except if same results from its gross negligence
or willful misconduct. Interest earned on such insurance proceeds or Award shall
be used and applied in the same manner as the proceeds and the Awards and paid
to the same parties who are entitled to receive the balance of the proceeds or
Award on which it was earned after the payment of all costs in connection with
the required restoration.
6. ALTERATIONS; DEMOLITION; ETC.
6.1 No part of the Improvements (exclusive of Furnishings and
Furniture) shall be altered, removed or demolished, nor shall any new or
additional building, structure or improvements or extension of or addition to an
existing building, structure or improvement, be constructed, if such alterations
are of a structural nature or would, in the reasonable judgment of the Owner,
exceed $2,500,000 in aggregate cost during any twenty-four (24) month period,
unless the Owner and the Management Company deliver to the Grantee the plans and
specifications for such alterations together with Officers' Certificates
certifying that such alterations do not reduce the value or utility of the
Improvements nor change the character thereof as a premier class convention
hotel and an Architect's certificate (except for non-structural work for which
no Architect is used) certifying that the plans and specifications substantially
comply with all applicable Legal Requirements. If, in the reasonable judgment of
the owner, such alterations would exceed $l0,000,000 in aggregate cost during
any twenty-four (24) month period, such alterations shall be permitted only if
the Officers' Certificates and Architect's certificate described in the
foregoing sentence are delivered to the Grantee, together with a certification
from an Appraiser or a Hotel Consultant confirming the matters set forth in the
Officers' Certificates. The Grantee may require that the Owner obtain a payment
and/or
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performance bond in form satisfactory to the Grantee from the contractor
performing the work (or other security comparable thereto reasonably
satisfactory to the Grantee). All work performed by the Owner in accordance with
this Article shall be in compliance with all applicable Legal Requirements. No
Eguipment with a value of more than $2,500,000 shall be removed from the
Premises during the course of any work performed in accordance with this Article
(except for such Equipment the Grantors are permitted to dispose of under this
Deed), unless the Grantors take such action and deliver such financing
statements as are necessary to retain the Grantee's security interest in such
Equipment. The provisions of this Article shall apply to any change, alteration
or addition made or required to be made by the Grantors in the course of
complying with the provisions of any other Article contained herein. If plans
and/or specifications shall be required by law to be filed with any Governmental
Authority prior to or at any time in connection with such alterations or
demolition or new construction (regardless of cost), duplicates of all sets of
such plans and/or specifications shall be furnished to the Grantee.
7. TRANSFERS; PLEDGES; FINANCING
7.1 No sale, conveyance, assignment, lease (except as permitted by
Article 10 herein), mortgaging, pledging, encumbering, creating a security
interest in or security deed on, or other transfer of, all or part of the
Mortgaged Premises or any of the rents, issues or profits generated thereby
shall be permitted without the prior written consent of the Grantee, except for
(a) sales of Equipment in the ordinary course of business of the Hotel, (b)
Permitted Equipment Leases, (c) sale by the Ground Lessor of the fee estate in
the Land to the Owner in accordance with Section 12.01 of the Ground Lease as
presently in effect, (d) sale of all of the Ground Lessor's interest and the
Owner's interest in the Mortgaged Premises to a Qualified Purchaser; provided
that (i) the Qualified Purchaser shall be a single purpose entity permitted only
to engage in the business and activities set forth in Section 4.7, (ii) upon any
sale to a Qualified Purchaser, the Grantors shall have satisfied the Tax
Condition (as defined in the Indenture), (iii) Marriott shall remain obligated
under the Guaranties and under its guaranty of the Management Company's
obligations under the Management Agreement, (iv) subject to the provisions of
the Management Agreement Assignment, Marriott Hotel, Inc. shall remain the
Management Company of the Hotel under the Management Agreement (v) the Hotel
name shall remain the "Atlanta Marriott Marquis", subject to such changes
permitted under the Management Agreement Assignment, and (vi) the transfer will
not constitute a "prohibited transaction" for purposes of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") nor will such
transfer cause any of the actions which the Qualified Purchaser would be
required to perform under any of the Financing Documents
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to be a "prohibited transaction" for purposes of ERISA, (e) encumbering all or a
portion of the Mortgaged Premises as permitted under and in accordance with
Section 7.6 herein in connection with certain Additional Financings and (f) a
Taking. A sale within the meaning of this Section 7.1 shall be deemed to include
an installment sales agreement wherein all or part of the Mortgaged Premises is
to be sold for a price to be paid in installments.
7.1.1 A "Qualified Purchaser", for purposes of this Section
7.1, shall mean (a) a limited partnership of which, at the time of the sale and
thereafter during the term of the Secured Note (i) (A) Marriott (or one or more
of Marriott's wholly owned subsidiaries) owns not less than a 51% equity
interest in and controls, directly or indirectly, the sole general partner in
such limited partnership or (B) if the general partner of the Qualified
Purchaser is a limited partnership, then Marriott (or one or more of Marriott's
wholly owned subsidiaries) owns not less than a 51% equity interest in and
controls, directly or indirectly, the sole general partner in the sole general
partner of the Qualified Purchaser, (ii) the limited partners have no greater
control or Veto Power than that of the limited partners of the Owner, (iii) the
limited partners shall be restricted from transferring or encumbering all or a
majority of all of their aggregate rights and interests in one transaction or a
series of related transactions and (iv) the Net Worth of which (excluding any
interest in the Mortgaged Premises) is at least $15 million; or (b) an entity
which at the time of the sale (i) has, together with its Affiliates permitted to
be consolidated under generally accepted accounting principles, a Net Worth
(inclusive of any interest in the Mortgaged Premises) of at least $75 million
and the entity owning the Mortgaged Premises has a Net Worth (exlusive of the
interest in the Mortgaged Premises) of at least $15 million, or (ii) has a Net
Worth (exclusive of any interest in the Mortgaged Premises) of at least $15
million and is or is owned and controlled by an experienced and recognized owner
and/or manager of major hotels in the United States with at least 750 Class A
hotel rooms in the United States under its ownership and/or management or (c) a
Subordinate Lender (or a subsidiary of such Subordinate Lender) which acquires
the Mortgaged Premises by exercise of a power of sale, foreclosure, deed in lieu
of foreclosure or other enforcement of a Subordinate Deed. The Grantors shall
deliver to the Grantee an Officers' Certificate and Required Net Worth
Certificate evidencing the satisfaction of the requirements of this Section
7.1.1 prior to any transfer to a Qualified Purchaser.
7.1.2 Each transferee of the Premises or a direct ownership
interest therein (such as an interest as tenant-in-common) shall, upon such
transfer, be deemed automatically to have assumed or joined in, as the case may
be, the obligations of the transferor accruing after such transfer under this
Deed, the other Real Estate Security Documents and the
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Environmental Indemnity, subject, in each case, to the limitations on recourse
set forth herein (with all references to "Grantors" or "Owner" in Section 26.7
being deemed to refer to such transferee) and in the Environmental Indemnity and
shall execute and deliver to the Grantee instruments (in recordable form) to
confirm such assumption.
7.2 Except as permitted in Section 7.3 below, without the prior
written consent of the Grantee, no sale, assignment, pledge, hypothecation,
encumbering or other transfer, directly or indirectly and whether of record or
beneficially (including the amalgamation, merger or consolidation of the Owner
or AMMLP or the owner of a direct or indirect ownership interest therein with
another Person), of any ownership interests in or assets of the Owner, AMMLP,
GP-AMMLP shall be permitted (exclusive of asset divestitures expressly permitted
by this Deed), nor shall the admission of an additional general partner in the
Owner or AMMLP nor the creation or issuance of new stock of GP-AMMLP be
permitted without the prior written consent of the Grantee. Furthermore, no
change in the control of the Owner, AMMLP or GP-AMMLP (including any change in
the identity of the sole managing general partner of Owner or AMMLP) shall be
permitted without the prior written consent of the Grantee. The Grantee has
specifically relied upon the particular financial status, abilities and
management of the Ground Lessor and Owner in entering into the Financing
Documents and providing the financial accommodations to the Owner thereunder.
The loan evidenced by the Secured Note would, furthermore, not have been made
unless the Mortgaged Premises were under the ownership of the Grantors.
Accordingly, subject to those transfers expressly permitted under this Article
7, the adequacy of the Grantee's security depends upon the Grantors continuing
to hold and own their estates in the Mortgaged Premises until the indebtedness
under the Secured Note has been paid in full. The owner (or a Qualified
Purchaser succeeding to Owner's interests in the Mortgaged Premises) will at all
times directly own one hundred percent (100%) of the shares of the Issuer.
7.3 Notwithstanding the provisions of Section 7.2, the following
transfers shall be permitted, provided that Marriott shall remain obligated
under the Guaranties and under its guaranty of the Management Company's
obligations under the Management Agreement, and, subject to the provisions of
Section 3.2, Marriott Hotels, Inc. shall remain the Management Company under the
Management Agreement and the Hotel name shall remain the "Atlanta Marriott
Marquis" (subject to such changes permitted under the Management Agreement
Assignment):
7.3.1 Sales, assignments, pledges, hypothecations, or other
transfers of limited partnership interests in the Owner and AMMLP, provided that
(a) there is no increase in the control rights and/or Veto Power, if any, of the
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limited partners, and (b) such transfers, alone or together with any and all
previous transfers, shall not constitute a transfer of all or substantially
all of the limited partnership interests in AMMLP to a single Person or a group
of Affiliates; provided, however, that the foregoing clauses (a) and (b) shall
not apply with respect to a transfer to a Person controlled, at all times, by
Marriott and of which Marriott (or one or more of Marriott's wholly owned
subsidiaries) owns not less than a 51% equity interest (a "Marriott Controlled
Person"), so long as Persons who are neither Marriott nor Marriott Controlled
Persons shall have no greater control rights and/or Veto Power, if any, after
such transfer than they had prior to such transfer; and further provided, that
the foreclosure of any assignment, pledge, hypothecation or encumbrance shall
be considered to be a transfer subject to the restrictions in (a) and (b) of
this Section 7.3.1
7.3.2 Sale or transfer (excluding any assignment, pledge,
hypothecation, encumbering, sale or other transfer made for the purposes of
granting a security interest) of all of the ownership interests in GP-AMMLP to
another Person which (a) is and continues to be wholly-owned by Marriott, (b)
has and maintains thereafter a Net Worth at least equal to that of the
then-existing GP-AMMLP; and (c) is and continues to be a special purpose entity
for the purposes permitted by Section 4.8;
7.3.3 Sale or transfer (excluding any assignment, pledge,
hypothecation, encumbering, sale or other transfer made for the purposes of
granting a security interest) of Portman's general partnership interests in the
Owner to Persons which are and shall continue to be wholly owned and controlled
by Portman, Marriott and/or AMMLP; and
7.3.4 Transfer of Portman's general and limited partnership
interests in the Owner resulting from the death or incapacity of Portman;
provided, however, that upon the death or incapacity of Portman, his interest as
a general partner shall be converted to that of a limited partner in accordance
with the provisions of the partnership agreement of the Owner and no Person
other than John C. Portman, III shall replace Portman as a general partner upon
such death or incapacity without the Grantee's prior written consent.
7.4 Without the prior consent of the Grantee, the partnership
certificates and agreements of the Owner and AMMLP presently in effect shall not
be modified, supplemented or amended (except those required to evidence
transfers permitted under this Article 7) nor shall such certificates or
agreements be allowed to terminate, expire, lapse or become ineffective.
7.5 For purposes of this Article 7, "control", when used with
respect to any Person, shall mean the power to direct the management and
policies of such Person,
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directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise.
7.6 Additional Financing. Neither the Owner, AMMLP nor GP-AMMLP
will incur, create, assume or allow to remain outstanding any Indebtedness,
except for:
(a) Indebtedness in respect to taxes, assessments and
governmental charges or levies as and to the extent permitted to remain
unpaid and undischarged by Section 2.5 of this Deed;
(b) Unsecured current liabilities (not the result of
borrowing) incurred and customarily paid in the ordinary course of
business for current purposes and not evidenced by any note or other
evidence of Indebtedness;
(c) Permitted Equipment Leases, if applicable;
(d) The Indebtedness described on Exhibit D, which the
Grantors hereby represent identifies any and all other existing
Indebtedness of Owner, AMMLP and GP-AMMLP and as to which the Owner
agrees that from and after the occurrence and during the continuance of
an Event of Default or an event as to which the Grantee has given the
Owner notice which, with notice or passage of time or both, would
become an Event of Default, the Owner shall not, without the prior
written consent of the Grantee, make any payments, in cash or other
property, of any or all of the obligations under any of such
Indebtedness;
(e) Indebtedness of AMMLP to another partner of the Owner
under a Cure Loan to AMMLP made pursuant to Section 6.4.1 of the
partnership agreement of the Owner;
(f) The indebtedness secured by this Deed; and
(g) Additional Financings (as defined below).
The following financings (each an "Additional Financing") may be incurred,
provided that (i) prior to entering into any Additional Financing, the Owner
delivers an Officers' Certificate to the Grantee certifying that no Event of
Default has occurred and is continuing nor has any event occurred which is, or
after notice or lapse of time or both would become an Event of Default under
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this Deed (except same shall not be a condition with respect to Affiliate Loans
and Guaranty Loans) and that such Additional Financinq, as described in such
Officers' Certificate, is in compliance with the provisions of this Section 7.6,
(ii) the payment of all sums thereunder shall be fully subordinated to payments
by the Owner under the Secured Note in accordance with the followinq provisions
of this Section 7.6 and Section 7.7 and the Owner agrees that from and after the
occurrence and during the continuance of an Event of Default or an event as to
which the Grantee has given the Owner notice which, with notice or passage of
time or both, would become an Event of Default, the Owner shall not, without the
prior written consent of the Grantee, make any payments, in cash or other
property, of any or all of the obligations under the Additional Financings,
(iii) when secured in whole or part by all or a portion of the Mortgaged
Premises, such lien shall be fully subject and subordinate to the lien of this
Deed and the rights of the Grantee hereunder and the deed to secure debt or
comparable security instrument executed in connection therewith shall expressly
contain the provisions set forth in Section 7.7 and (iv) no such financings
shall provide for participations or contingent payments based on gross revenues,
sales, appreciation in value or other items except pursuant to Section 7.6.1
below (each such permitted deed to secure debt herein referred to as a
"Subordinate Deed" and the indebtedness secured thereby, items Indebtedness"):
7.6.1 Secured or unsecured loans from Marriott, any person
who at all times is a Marriott Controlled Person, any partner in the Owner or
any Person controlled, at all times, by Portman and of which Portman owns not
less than a 51% equity interest, to the Owner ("Affiliate Loans"), provided (a)
such Affiliate Loans contain terms and interest rates not more onerous to the
Owner than are commercially reasonable, (b) all payments on such Affiliate Loans
are payable solely in compliance with the provisions of Article 27 herein and
solely from (i) the amount by which Net Cash Flow of Owner for the semi-annual
interest payment period under the Secured Note immediataly preceding the date of
such payment exceeds all payments actually made during such period in respect of
any secured or unsecured borrowings of Owner (other than Affiliate Loans), (ii)
net proceeds from sales or other dispositions of any of the assets of the Owner
permitted under this Deed after the acquisition of any replacements thereof,
(iii) net proceeds from casualty insurance or Awards from a Taking which the
Owner is entitled to retain under this Deed after any required restoration or
repair, (iv) net proceeds of any Additional Financing permitted under Section
7.6.3 herein, (v) the proceeds of capital contributions of the partners in the
Owner and (vi) the net proceeds of any Affiliate Loan and (c) the loan
documentation entered into, if any, with respect to such Affiliate Loans shall
acknowledge such limitation on payments set forth in the foregoing clause (b) of
this subsection 7.6.1 and shall furthermore provide that from and after
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the occurrence and during the continuance of an Event of Default or an event
which, with notice or the passage or time or both, would become an Event of
Default, as to which Grantee has given the lender notice (provided the Grantee
has notice of such loan), the lender shall not, without the prior written
consent of the Grantee, in each instance, ask, demand, seek, take or receive,
directly or indirectly from the owner, in cash or other property, by set-off, or
in any other manner, payment of any or all or the obligations to such lender
under the Affiliate Loan;
7.6.2 Unsecured loans from one or more third party
Institutional Lenders to the Owner, which loans are fully guaranteed by Marriott
and the proceeds of which are used to fund debt service actually paid under the
Secured Note and for which debt service Marriott would have otherwise been
liable pursuant to the Interest/Princlpal Guaranty ("Guaranty Loans"), provided
(a) all payments by the Owner on such loans are payable solely in compliance
with the provisions of Article 27 herein and solely from (i) the amount by which
Net Cash Flow of Owner for the semi-annual interest payment period under the
Secured Note immediately preceding the date of such payment exceeds all payments
actually made during such period in respect of any secured or unsecured
borrowings of Owner (other than Guaranty Loans), (ii) net proceeds from sales or
other dispositions of any of the assets of the Owner permitted under this Deed,
(iii) net proceeds from casualty insurance or Awards from a Taking to which the
Owner is entitled to retain under this Deed after any required restoration or
repair, (iv) net proceeds of any Additional Financing permitted under Section
7.6.3 herein, (v) the net proceeds of Affiliate Loans and (vi) the proceeds of
capital contributions of the partners in the Owner and (b) the loan
documentation entered into with respect to such Guaranty Loans shall acknowledge
such limitation on payments set forth in the foregoing clause (a) of this
subsection 7.6.2 and shall furthermore provide that from and after the
occurrence and during the continuance of an Event of Default or an event which,
with notice or the passage of time or both, would become an Event of Default, as
to which Grantee has given the lender notice (provided the Grantee has notice of
such loan), such lender shall not, without the prior written consent of the
Grantee, in each instance, ask, demand, seek, take or receive, directly or
indirectly from the Owner, in cash or other property, by set-off, or in any
other manner, payment of any or all of the obligations to such lender under the
Guaranty Loan (other than from Marriott, as guarantor);
7.6.3 Unsecured loan(s) from one or more third party
Institutional Lenders to the Owner in an aggregate principal amount not to
exceed $20,000,000, less the outstanding principal amount from time to time
under the loan from Bankers Trust Company to the Owner pursuant to a Loan
Agreement and Offering Basis Finance Agreement, both dated as of October 15,
1987, between the Owner and Bankers Trust Company as in effect on the date
hereof (the "Bankers Trust Loan"); provided
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that any such unsecured loan(s) shall provide that from and after the occurrence
and during the continuance of an Event of Default or an event which, with notice
or the passage of time or both, would become an Event of Default, as to which
Grantee has given the lender notice (provided the Grantee has notice of such
loan), such lender shall not, without the prior written consent of the Grantee,
in each instance, ask, demand, seek, take or receive, directly or indirectly
from the Owner, in cash or other property, by set-off, or in any other manner,
payment of any or all of the obligations to such lender under the unsecured loan
(other than from a guarantor of such loan); and
7.6.4 On or after January 1, 1992, secured or unsecured
loan(s) from a third party Institutional Lender to the Owner for the sole
purpose of financing the Owner's acquisition of the fee estate in the Land,
provided that:
(a) the aggregate amount of the loan(s) do not exceed the
purchase price of the fee estate in the Land (including transaction costs) and
that such net proceeds are applied solely to purchase the fee estate in the Land
from the Ground Lessor in accordance with the provisions of Section 12.01 of the
Ground Lease as in effect on the date hereof;
(b) after giving effect to the loan(s), the Debt Service
Coverage Test is satisfied;
(c) as of the date of the execution and delivery of the loan
documents with respect to the secured loan(s), (i) the aggregate sum of the Note
Principal Amount of the Secured Note (plus Deferred Interest to such date) and
all other Indebtedness of the Owner (excluding Affiliate Loans and Guaranty
Loans), including the principal amount of proposed secured loan(s), does not
exceed an amount equal to ninety percent (90%) of the fair market value of the
Mortgaged Premises based upon an appraisal of the Mortgaged Premises prepared by
an Appraiser, at the Owner's sole cost and expense, such appraisal to be dated
not more than six (6) months prior to the date of such determination and (ii)
the total outstanding balance of the Notes, including principal and Deferred
Interest to such date, net of the unfunded outstanding amount of the Principal
Guaranty, does not exceed an amount equal to seventy-five percent (75%) of the
fair market value of the Mortgaged Premises based upon an appraisal of the
Mortgage Premises prepared by an Appraiser, at the Owner's sole cost and
expense, such appraisal to be dated not more than six (6) months prior to the
date of such determination. For the purposes hereof, the principal amount of the
proposed secured loan(s) securing "zero coupon" or other discount indebtedness
shall be deemed to be the lesser of (i) the accreted principal amount at
maturity of such loan(s), or (ii) the accreted principal amount of such loan(s)
at the Stated Maturity (an defined in the Secured Note); and
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(d) any such unsecured loan(s) shall provide that from and
after the occurrence of an Event of Default or an event which, with notice or
the passage of time or both, would become an Event of Default, as to which
Grantee has given the lender notice (provided the Grantee has knowledge of such
loan), such lender shall not, without the prior written consent of the Grantee,
in each instance, ask, demand, seek, take or receive, directly or indirectly
from the Owner, in cash or other property, by set-off, or in any other manner,
payment of any or all of the obligations to such lender under the unsecured
loan.
Prior to the incurring of any Secured Indebtedness or any unsecured loan(s)
permitted under Section 7.6.4, there shall be delivered to the Grantee (x) true
and correct copies of the Subordinate Deed, if any, the note evidencing such
indebtedness and any other loan documents related thereto and (y) an Officers'
Certificate of the Owner setting forth in reasonable detail the calculations and
other evidence required to demonstrate compliance with this Section 7.6 as
confirmed by a certificate of Independent Accountants, stating that, based on
such Officers' Certificate, the requirements of this Section 7.6 have been met.
With respect to the satisfaction of the Debt Service Coverage Test, the
Officers' Certificate delivered to the Grantee shall include a certification by
the Management Company that the calculation of item (m) in the definition of
"Expense Deductions" is in accordance with the Management Company's accounting
policies and consistent with other premier convention hotels in the Marriott
hotel system.
7.7 Each Subordinate Deed shall provide substantially as follows:
7.7.1 The lien and rights of the lender under the Subordinate
Deed (the "Subordinate Lenders") shall be fully subject and subordinate to the
lien of and security title granted by this Deed and the rights of the Grantee
hereunder, including all subsequent modifications, amendments, extensions,
renewals, consolidations or replacements hereof (excluding any increases in the
indebtedness secured by this Deed other than as expressly permitted hereunder or
under the Secured Note); and the Subordinate Lender shall agree to execute and
deliver from time to time, at the request of the Grantee, such additional
documents as may be reasonably necessary to confirm such subordination;
7.7.2 The Subordinate Lender will send copies of all notices
of default under the Subordinate Deed which it delivers to the Ground Lessor or
Owner under the provisions of the Subordinate Deed;
7.7.3 The Subordinate Lender will not exercise its power of
sale or exercise any other right or take any other remedial action (excluding
the advancing of monies in
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order to protect its security or in connection with the operation of the
Premises) which it is entitled to take with respect to the Mortgaged Premises
unless and until it shall have given the Grantee not less than sixty (60) days'
prior written notice of and an opportunity to cure or cause to be cured any
default beyond the applicable grace periods under the Subordinate Deed or, if
such default is subject to a longer cure periods, such longer cure period as is
provided in the Subordinate Deed. In any foreclosure action or the Subordinate
Lender's exercise of its power of sale, notice thereof will be given to the
Grantee and true copies of all papers served or entered in connection therewith
will be served upon the Grantee;
7.7.4 From and after the occurrence and during the
continuance of an Event of Default or an event which, with notice or passage of
time or both, would become an Event of Default, as to which Grantee has given
the Subordinate Lender notice, the Subordinate Lender will not, without the
prior written consent of the Grantee, in each instance, ask, demand, seek, take
or receive, directly or indirectly from the Owner, in cash or other property, by
set-off, by realizing or seeking to realize upon any collateral (subject,
however, to the Subordinate Lender's right to pursue a foreclosure of the
Subordinate Deed to the extent permitted under Section 7.7.3), or in any other
manner, payment of, or security for, any or all of the obligations to the
Subordinate Lender under the Subordinate Deed or the related loan documents (the
"Subordinate Obligations"). The foregoing sentence shall not, however, preclude
the Subordinate Lender from realizing upon collateral which secures the
Subordinate Obligations but which does not secure the indebtedness secured by
this Deed.
7.7.5 Notwithstanding anything to the contrary contained in
this Deed, if the Grantee gives its consent or is satisfied as to any matter to
which the consent or satisfaction of both the Grantee and the Subordinate Lender
is required, then the Subordinate Lender shall be deemed to have given its
consent or to be satisfied under this Deed or under the Subordinate Lender's
documents, provided the Grantee has given the Subordinate Lender notice with
respect thereto (but in no event shall such notice be a condition to the
effectiveness of Grantee's consent or satisfaction as to any such matter),
unless the Subordinate Lender (a) reasonably determines that the Grantee's
consent or satisfaction is imprudent and would materially and adversely impair
the Subordinate Lender's security in the Premises and (b) gives the Grantee
written notice of such determination together with an explanation of the reasons
therefor. Notwithstanding that the Owner shall be entitled to take certain
actions with the approval of the Grantee, the Grantee shall owe no fiduciary
duty of any kind to the Subordinate Lender nor shall it be held responsible or
accountable to the Subordinate Lender for any consent or approval
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which the Grantee shall give or which it shall be entitled to give, to the
Owner.
7.7.6 The Grantee may collect and retain any and all proceeds
and Awards realized from insurance or from condemnation proceedings as to the
Premises and apply them first in the manner provided for in this Deed. The
Subordinate Lender shall have no claim to such proceeds and no right to be made
a party to the proceeds check issued by any insurance company or condemning
authority unless and until all sums required to be paid under this Deed have
been first paid in full to the Grantee.
7.7.7 The Subordinate Lender shall, to the extent permitted
by applicable law, waive any and all equitable claims or rights which it may
have, including, but not limited to, the right to marshall assets, which impose
a restriction on the Grantee as to the manner or order in which it, in its
sole discretion, is entitled to exercise its rights and remedies under the
Financing Documents;
7.7.8 The subordination provisions of the Subordinate Deed
and the provisions relating to this Deed and other Financing Documents shall be
for the benefit of the Grantee and its successors and assigns;
7.7.9 The Grantee may waive any of the terms, covenants or
conditions of this Deed or any of the other Financing Documents in whole or in
part and may release any portion of the Mortgaged Premises or any other
security, and grant much extensions and indulgences in relation to the
indebtedness secured by this Deed as the Grantee may determine, without the
consent of the Subordinate Lender, and without any obligation to give notice of
any kind to the Subordinate Lender, and without in any manner affecting the
priority or the lien of this Deed on all or any part of the Mortgaged Premises;
7.7.10 That nothing in the terms of this Deed shall be deemed
a consent by the Grantee to any sale of the Premises by foreclosure or by a sale
pursuant to a power of sale except to a Person to whom the Premises may be
transferred without causing a default under Section 7.1 of this Deed;
7.7.11 That the Subordinate Lender shall not request the
appointment of any receiver for the Premises unless prior notice has been given
to the Grantee and such receiver shall be instructed by the Subordinate Lender
to apply (to the extent permitted by applicable law) any rents, issues and
profits received first to the payment of costs and expenses of the Premises,
then to amounts then due under the terms of this Deed and the Secured Note, and
then to the payment of interest (but not principal) then due and payable under
the Subordinate Mortgage; and
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7.7.12 The Subordinate Lender will not seek to evict any
Space Tenant in any foreclosure action or in connection with its exercise of its
power of sale nor take any other action in connection therewith which would have
the effect of terminating any Space Lease.
8. PRIORITY OF SECURITY DEED; NO MERGER
8.1 This Deed is and will be maintained as a valid first priority
security deed on the Mortgaged Premises, and the Grantors will not, directly or
indirectly, create or suffer or permit to be created, or to stand against the
Mortgaged Premises or any portion thereof, or against the rents, issues and
profits therefrom, and will promptly discharge any security deed or charge on
the Mortgaged Premises (or any pledge or other encumbrance of the direct or
indirect ownership interests of the Grantor) other than the Permitted Exceptions
and as permitted by Article 7 hereof; provided, however, that nothing herein
contained shall require the Grantors to pay or cause to be paid any Imposition
prior to the time the same shall become due. The Grantors will keep and maintain
the Mortgaged Premises, and every part thereof, free from all liens of persons
supplying labor and materials in connection with the construction, alteration,
repair, improvement or replacement of the Improvements or of the Equipment. If
any such liens shall be filed against the Mortgaged Premises, or any part
thereof, the Grantors agree to discharge the same of record, by bonding or
otherwise, within thirty (30) days after the filing thereof. The Grantors shall
exhibit to the Grantee upon request all receipts or other satisfactory evidence
of the payment of taxes, assessments, charges, claims, liens or any other item
which may cause any such lien to be filed against the Mortgaged Premises.
8.2 In no event shall the Grantors do or permit to be done, or
omit to do or permit the omission of, any act or thing which, the doing or
omission of which would impair the security or priority of this Deed.
8.3 All Space Leases (excluding concession agreements which have
terms of less than three years) of all or any portion of the Mortgaged Premises
executed after the date hereof will (a) be subordinated to the security interest
created by this Deed and to all renewals, modifications, consolidations,
replacements, increases and extensions thereof, (b) require the Space Tenants
thereunder to execute any documents required to further effectuate such
subordination at the Grantee's request and (c) provide that following sale of
the Mortgaged Premises or any part thereof through foreclosure or otherwise, or
following conveyance of the Mortgaged Premises or any part thereof by deed in
lieu of foreclosure, the Space Tenant under each such Space Lease will, upon ten
(10) days' written notice from the purchaser of the Mortgaged
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Premises or any part thereof (or its assignee) given within thirty (30) days
after the sale thereof, attorn to such purchaser or assignee as the direct
tenant of such purchaser or assignee.
8.4 It is the intention of the parties hereto that if the Grantee
shall at any time hereafter acquire title to all or any portion of the Mortgaged
Premises, then, and until the indebtedness secured hereby has been paid in full
or Substitute Real Estate Collateral has been provided, the interest of the
Grantee hereunder and the security interest of this Deed shall not merge or
become merged in or with the estate and interest of the Grantee as holder and
owner of title to all or any portion of the Mortgaged Premises and that, until
such payment, the estate of the Grantee in the Mortgaged Premises and the
security interest of this Deed and the interest of the Grantee hereunder shall
continue in full force and effect to the same extent as if the Grantee had not
acquired title to all or any portion of the Mortgaged Premises.
9. CONDEMNATION
9.1 The Grantors shall promptly notify the Grantee of notice to it
of the institution of any proceeding or negotiations for the Taking of the
Premises or any part thereof, shall keep the Grantee currently advised, in
detail, as to the status of such proceedings or negotiations and will promptly
give to the Grantee copies of all notices, pleadings, judgments, determinations
and other papers received or delivered by the Grantors therein. The Grantee
shall have the right (but shall have no obligation) to appear and participate
therein at the Grantors' cost and may be represented by counsel, who, if the
Grantee elects, may also be the counsel retained by the Owner and/or the Ground
Lessor. The Grantors from time to time will execute and deliver to the Grantee
all instruments requested by the Grantee or as may be required to permit such
participation. The Grantors will not, without the prior written consent of the
Administrative Services Representative, which consent shall not be unreasonably
withheld or delayed, enter into any agreement for the Taking of the Premises, or
any part thereof, with anyone authorized to acquire the same by eminent domain
or in condemnation.
9.2 In the event that the Premises, or any portion thereof, shall
be Taken, the Grantee shall be entitled to and shall receive (subject to the
provisions of Section 5.ll and 9.3 herein) the total of such portion of all
awards made that shall be allowed or allocated to the Grantors or the Grantee
with respect to all the right, title and interest of the Grantors in and to the
Premises or the portion thereof affected (herein called the "Awards"). The
obligations of the Owner to perform the terms, covenants and conditions of this
Deed and to continue to make all payments on the indebtedness shall continue
unimpaired
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until the actual vesting of title in such proceeding and the prepayment of
the Secured Note and any other indebtedness secured hereby.
9.3 If a Taking results in a Total Loss, the provisions of Section
5.12 shall apply. If a Taking results in a Total Taking (as hereinafter
defined), the Grantee, within forty-five (45) days of the determination of a
Total Taking, may declare the Note Principal Amount (or, if prior to the
Deferred Interest Commencement Date, the Original Note Principal Amount and the
Secured Note Accreted Amount) and all other indebtedness to be immediately due
and payable (exclusive of Secured Note Yield Maintenance Amount) all net
proceeds of the Award shall be applied to such indebtedness and the Grantors
shall cause the Issuer to redeem the Notes in full (exclusive of Yield
Maintenance Amount) in accordance with the provisions of the Indenture, the
Notes and the procedures set forth in Article Eleven of the Indenture. The
balance, if any, of such Award not required to be applied in accordance with the
immediately preceding sentence of this Section, shall be paid over to the
Grantors. A Total Taking shall be either (a) a Taking of all of the Ground
Lessor's fee title to the Premises and the Owner's leasehold interest in the
Premises or (b) if the Grantors and the Management Company fail to deliver,
within sixty (60) day. after the Taking, Officers' Certificates (together with
the Hotel Consultant's confirmation as set forth below) certifying that either
(x) the value of the Mortgaged Premises has been reduced by less than $2,500,000
or (y) the projected Net Cash Flow upon restoration, plus the amount available
under the Guaranties to pay Debt Service under the Secured Note in accordance
with Paragraph 19 thereof, will be sufficient to pay all future Debt Service
under the Secured Note and the foregoing conclusion is confirmed by a written
projection of a Hotel Consultant delivered to the Grantee. Notwithstanding the
foregoing, the sixty (60) day period in which the Grantors and the Management
Company are obligated to submit Officers' Certificates in accordance with this
Section 9.3 may be extended for such additional period, not to exceed sixty (60)
days, necessary for the Grantors and the Management Company, acting diligently,
to obtain such Officers' Certificates if, at least fifteen (15) days prior to
the expiration of the initial sixty (60) day period (but no earlier than thirty
(30) days prior to the expiration of such period), the Grantors and the
Management Company submit Officers' Certificates certifying that (i) they have
diligently sought to obtain the information and confirmation required under this
Section 9.3 and have been unable to obtain such information and confirmation
within the initial sixty (60) day period, (ii) they reasonably believe that such
information and confirmation, as applicable, can and will be obtained within
such additional sixty (60) day period and (iii) they have not previously
obtained any oral or written estimate inconsistent with both of the
certifications set forth in clauses (x) and (y) above.
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9.4 In the event of a Taking of all or part of the Premises for
temporary use or occupancy, the net amount of such Award shall be held in escrow
by the Depositary until there becomes payable the respective installments due on
the indebtedness and accruing during the period of such Taking for temporary use
or occupancy, at which times such monies shall be delivered to the Grantee and
applied to such installments due on the indebtedness,
9.5 The Grantors shall promptly notify the Grantee if the whole or
any portion of the Premises shall be taken in condemnation proceedings for a
temporary use or occupancy.
9.6 If any balance of Award paid to the Grantee pursuant to the
provisions of this Article 9 remains held by the Grantee after the payment in
full of the indebtedness, such balance shall be paid over to the Owner.
10. SPACE LEASES
10.1 The Grantors will not enter into any Space Leases of all or
any portion of the Premises (excluding transient room rentals, restaurant
rentals to customers and conference room rentals in the ordinary course of the
Hotel's business) except that Owner may enter into Space Leases which are to
retail Space Tenants for actual occupancy and whose business is consistent with
the operation of a premier class convention hotel, under bona fide Space Leases
on commercially reasonable terms and conditions in light of then market
conditions. In no event shall any Space Lease contain an option to purchase all
or any portion of the Premises.
10.2 The Owner shall not cancel (or accept a cancellation or
surrender of) any Space Lease or materially modify or waive any provision of a
Space Lease unless, in the good faith Judgment of the Owner, such cancellation,
modification or waiver is commercially reasonable in light of then market
conditions or, with respect to a termination or cancellation, is in the normal
course of operation of the Premises for default of the Space Tenant entitling
Owner to so terminate the Space Lease. The Owner shall not collect or accept
payments of rent under any Space Lease more than one month in advance, except
for security deposits.
10.3 The Owner shall duly and punctually perform and observe all
of the material terms, covenants and conditions of the Space Leases required to
be performed and observed by it as landlord thereunder. The Owner will further
do all things necessary to preserve and keep unimpaired its rights under all
Space Leases, except that Owner may terminate any Space Lease as permitted in
Section 10.2 above. The Owner shall require all Space Tenants to observe, keep
and perform all
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material covenants and agreements imposed upon them under the Space Leases.
The Owner shall appear in and defend any action or proceeding arising under
or in any manner connected with any of the Space Leases.
10.4 The Owner shall furnish to the Grantee a true and complete
copy of each Space Lease promptly after its execution. The Owner shall deliver
annually to the Grantee a schedule of all Space Leases then in effect, which
schedule shall include the following: (a) the name of the Space Tenant under the
Space Lease; (b) a description of the space leased thereunder, including but
not limited to the approximate number of square feet leased thereunder, type of
activity performed under such lease and type of space leased; (c) the rental
rate, including any escalations, if any; (d) the term of the Space Lease; and
(e) such other information as the Grantee may request.
11. ASSIGNMENT OF LEASES AND RENTS; ETC.
11.1 The Grantors hereby assign to the Grantee, as further
security for the payment of the indebtedness secured hereby, all of the
Grantor's right, title and interest in and to the rents, issues and profits of
the Mortgaged Premises (including the Ground Rent), together with the Ground
Lease, all Space Leases and any other documents evidencing such rents, issues
and profits now or hereafter in effect and any and all deposits held as security
under said Space Leases, and shall, upon demand, deliver to the Grantee an
executed counterpart of each such Space Lease or other document. Nothing
contained in the foregoing sentence shall be construed to bind the Grantee to
the performance of any of the covenants, conditions or provisions contained in
the Ground Lease or any such Space Lease or other document or otherwise to
impose any obligation on the Grantee (including, without limitation, any
liabi1ity under the covenant of quiet enjoyment contained in the Ground Lease or
any Space Lease in the event that by reason of any sale under this Deed by
virtue of the power of sale herein granted or pursuant to any order or judgment
in any judicial proceeding or otherwise, any tenant shall have been barred and
foreclosed of all right, title and interest and equity of redemption in the
Premises), except that the Grantee shall be accountable for money actually
received pursuant to such assignment. The Grantors hereby further grant to the
Grantee the right (a) with or without taking possession of the Premises, to
receive the rents, issues or profits of the Premises; (b) to enter upon and take
possession of the Premises without the appointment of a receiver, or an
application therefor, with or without employing for a managing agent of the
Premises and let the same, either in its own name, or in the name of the
Grantors; (c) to dispossess by the usual summary proceedings any Space Tenant
defaulting in the payment of rent to the Grantee, and (d) to apply said rents,
issues and profits, after payment of all necessary charges and expenses, on
account
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of said indebtedness. Such assignment and grant shall continue in effect until
the indebtedness secured by this Deed is paid or Substitute Real Estate
Collateral is purchased and deposited with the Collateral Trustee in accordance
with and in the full amount required by Article Thirteen of the Indenture, the
execution of this Deed constituting and evidencing the irrevocable consent of
the Grantors to the entry upon and taking possession of the Premises by the
Grantee pursuant to such grant, whether foreclosure or other remedy hereunder
has been instituted or not and without applying for a receiver. The Grantee,
however, hereby waives the right to enter upon and take possession of the
Premises for the purpose of collecting said rents, issues and profits, and the
Grantors shall have a license to collect and receive the same until the
occurrence and during the continuation of an Event of Default by the Owner
and/or Ground Lessor under any of the covenants, conditions or agreements
contained in this Deed. Neither the entry upon and taking possession of the
Premises, nor the collection and application of the rents, issues and profits as
aforesaid, nor any other action taken by the Grantors in connection therewith,
shall cure or waive any default hereunder or waive or modify any notice thereof
or notice of acceleration of the maturity of the Secured Note. Such license of
the Grantors to collect and receive said rents, issues and profits may be
revoked by the Grantee upon any such Event of Default by the Owner and/or Ground
Lessor by giving not less than five (5) days written notice of such revocation,
served personally upon or sent by registered or certified mail to the record
owner of the Premises.
11.2 Upon notice and demand, the Owner shall, from time to time,
execute, acknowledge and deliver or cause to be executed, acknowledged and
delivered to the Grantee, in form satisfactory to the Grantee, one or more
separate assignments (confirmatory of the general assignment provided in Section
11.1 hereof) of the lessor's interest in any Space Lease now or hereafter
affecting the whole or any part of the Premises, which shall also restrict the
Owner's right or power, as against the Grantee, to cancel, abridge or otherwise
modify, or accept prepayments of installments of rent to become due under, any
such Space Lease to the extent provided herein; that the Owner shall pay to the
Grantee the reasonable expenses incurred by the Grantee in connection with the
preparation and recording of any such instrument; that the Owner will (a)
fulfill or perform each and every material condition and covenant of each such
Space Lease to be fulfilled or performed by the lessor thereunder, (b) give
prompt notice to the Grantee of any notice of default by the lessor thereunder
received by the Owner together with a complete copy of any such notice, and (c)
enforce, short of termination thereof, except to the extent provided herein, the
performance or observance of each and every material covenant and condition
thereof by the lessee thereunder to be performed or observed.
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11.3 A notice in writing by the Grantee to the Space Tenants under
the Space Leases advising them that the Owner has defaulted hereunder and
requesting that all future payments of rent, additional rent or other charges
under the Space Leases be made to the Grantee (or its agent), shall be
construed as conclusive authority to such Space Tenants that such payments are
to be made to the Grantee (or its agent), and such Space Tenant shall be fully
protected in making such payments to the Grantee (or its agent), and the Owner
hereby irrevocably constitutes and appoints the Grantee the attorney-in-fact and
agent of the Owner, coupled with an interest, for the purpose of endorsing the
consent of the Owner on any such notice.
11.4 Upon notice and demand, the Ground Leasor shall execute,
acknowledge and deliver to the Grantee, in form satisfactory to the Grantee, a
separate assignment (confirmatory of the general assignment provided in Section
11.1 hereof) of the lessor's interest in the Ground Lease, which shall also
restrict the Ground Lessor's right or power, as against Grantee, to cancel,
abridge or otherwise modify, or except prepayments of installments of Ground
Rent to become due under the Ground Lease to the extent provided in Article 25
herein; that the Owner shall pay to the Grantee the expenses incurred by the
Grantee in connection with the preparation and recording of any such instrument;
that the Ground Lessor will (a) fulfill or perform each and every condition and
covenant of the Ground Lease to be fulfilled or performed by the ground lessor
thereunder, (b) give prompt notice to the Grantee of any notice of default by
the ground lessor thereunder received by the Ground Lessor together with a
complete copy of any such notice, and (c) enforce, short of termination thereof,
the performance of observance of each and every covenant and condition thereof
by the ground lessee thereunder to be performed or observed. A notice in
writing by the Grantee to the Owner under the Ground Lease advising it that a
default has occurred hereunder and requesting that all future payments of Ground
Rent and other charges under the Ground Lease be made to the Grantee (or its
agent), shall be construed as conclusive authority to Owner that such payments
are to be made to the Grantee (or its agent), and the Ground Lessor hereby
irrevocably constitutes and appoints the Grantee, the attorney-in-fact an agent
of the Ground Lessor, coupled with an interest, for the purpose of endorsing the
consent of the Ground Lessor on any such notice.
12. GRANTEE MAY CURE OWNER'S AND/OR GROUND LESSOR'S DEFAULT.
Without limiting any other provision of this Deed, and without waiving
or releasing the Owner and/or the Ground Lessor from any obligation or default
hereunder, the Grantee (or any receiver of the Mortgaged Premises) shall have
the right, but not the obligation, upon the occurrence and continuance of an
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Event of Default, to make any payment or to perform or observe any other term,
covenant, condition or obligation required to be performed or observed by the
Owner and/or the Ground Lessor under this Deed or indebtedness secured hereby
that the Owner and/or the Ground Lessor has failed to make, perform or observe,
or take any appropriate action, including, without limitation, entry on the
Mortgaged Premises and performance of work thereat, as it, in its sole
discretion, may deem necessary or appropriate to cause such other term,
covenant, condition or obligation to be promptly performed or observed on behalf
of the Owner and/or the Ground Lessor or to protect the security of this Deed.
All monies expended by the Grantee in exercising its rights under this Article
12, including, but not limited to, legal expenses and disbursements, together
with interest thereon at the Defaults Rate from the date of each such
expenditure, shall be paid by the Grantors to the Grantee forthwith upon demand
by the Grantee, and shall be secured by this Deed.
13. B00KS AND RECORDS; FINANCIAL STATEMENTS, ETC.
13.1 The Grantors will keep proper records and books of account,
in which true, correct and complete entries will be made in accordance with
generally accepted accounting principles consistently applied, reflecting all
financial transactions of the Grantors. All financial statements required to be
delivered under this Article 13 shall be prepared in accordance with generally
accepted accounting principles consistently applied. The Grantors further
covenant that they will, at any reasonable time, and from time to time, permit
the Grantee or any agents or representatives thereof to examine and make copies
of and abstracts from the books and records of account of, and visit the
Premises and to discuss the affairs, finances and accounts of the Grantors with
their partners, officers and other representatives.
13.2 The Grantors shall each deliver to the Grantee:
13.2.1 Not later than ninety (90) days after the expiration
of each Fiscal Year, and within sixty (60) days after the expiration of each
Accounting Quarter (other than the last Accounting Quarter), reasonably detailed
balance sheets, statements of income, changes in partners' capital and cash flow
for such period for Owner and Ground Leasor, including comparative statements
from the figures for the previous year, or Accounting Quarter, as the case may
be;
13.2.2 Any and all budgets, accountings, projections,
statements and reports required to be prepared by the Management Company under
the Management Agreement, including any recommendations of the Management
Company relating to the budget, operations or capital improvements
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for the Hotel, supplemental statements and data and, no later than thirty (30)
days after the beginning of each Fiscal Year, an "Annual Operating Projection"
for the Hotel, as defined in the Management Agreement;
13.2.3 Not later than one hundred twenty (120) days after the
expiration of each Fiscal Year, the statement of Annual Gross Room Sales (as
defined in the Ground Lease) certified by the Owner, prepared in accordance with
the requirements of the Ground Lease; and
13.2.4 The year-end financial statements for each Fiscal Year
for each of Owner and Ground Lessor shall be accompanied by an Independent
Accountants' Report with respect thereto and such Independent Accountants'
Report shall include a report from the Independent Accountants stating that they
have no knowledge of any Event of Default which is continuing as of the date of
such statement or, if in the opinion of the Independent Accountants, any Event
of Default shall exist, shall include a statement as to the nature and status
thereof. Each such Independent Accountants' Report and report on Event of
Default shall also include such other reports, schedules, assumptions and
information as may be pertinent thereto and customarily included in reports of
such type. Such statements for each Fiscal Year and each Accounting Quarter
shall be accompanied by an Officers' Certificate certifying that to the best
knowledge and belief of the signers of such certificate, all such statements are
true and correct in all material respects, such statements were prepared under
their supervision in accordance with generally accepted accounting principles
consistently applied and consistent with the principles applied in the financial
statements for the preceding Fiscal Year and stating that such officer has no
knowledge of any Event of Default hereunder which is continuing as of the date
of the delivery of such statement, or, if any such Event of Default exists,
specifying each such Event of Default and the nature, status and period of
existence thereof and what action is being taken and proposed to be taken with
respect thereto.
13.3 The Owner covenants that it will, at its own expense, deliver
to the Grantee, within fifteen (15) days after request, a written statement
executed by the Owner, in recordable form, setting forth (a) the amount then due
under the Secured Note; (b) the date to which interest has been paid under the
Secured Note; (c) whether any offsets or defenses exist against the indebtedness
secured hereby, and, if any such offsets or defenses are alleged to exist, then
the nature of such offsets or defenses; and (d) any other matters reasonably
requested by the Grantee.
13.4 The Grantee covenants that it will, at the Grantor's expense,
deliver to the Grantors, within fifteen
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(15) Business Days after request, a written statement executed by the Grantee,
setting forth (a) the Original Note Principal Amount and the Secured Note
Accreted Amount, (b) the date to which interest has been paid under the Secured
Note and (c) whether the Grantee has delivered the Owner or AMMLP a notice of
default under the Deed.
13.5 The Grantors shall also make available to the Grantee, upon
reasonable notice by the Grantee, such information with respect to the Mortgaged
Premises as the Grantee may, from time to time, reasonably request.
14. RECORDED INSTRUMENTS
The Grantors will promptly perform and observe, or cause to be
performed and observed, all of the terms, covenants and conditions of all
instruments of record affecting the Mortgaged Premises, where noncompliance
therewith might affect the security of this Deed or might impose any duty or
obligation upon the Ground Lessor, Owner or any Space Tenant under a Space
Lease, and the Grantors shall do or cause to be done all things reasonably
within their respective control to preserve intact and unimpaired and to renew
any and all rights of way, easements, grants, appurtenances, privileges,
licenses, franchises and other interests and rights in favor of or constituting
any portion of the Mortgaged Premises.
15. DEFAULT; ACCELERATION OF PRINCIPAL
15.1 The occurrence of any one or more of the following events
(each herein called an "Event of Default") for any reason whatsoever, and
whether such occurrence shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any
governmental body or otherwise shall be an "Event of Default" hereunder:
15.1.1 Any default shall occur in the payment of any
installment of interest (or Secured Note Additional Interest, if any) on the
Secured Note, as and when the same shall become due and payable, and continuance
of such default for three (3) days, but not less than two (2) Business Days; or
15.1.2 Any default in the payment of Secured Note Yield
Maintenance Amount, the Original Note Principal Amount, the Secured Note
Accreted Amount or the Deferred Interest, if any, at the maturity of the Secured
Note, by acceleration or otherwise; or
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15.1.3 Any default in the performance, or breach, of any
material covenant or warranty, or any material inaccuracy in any representation
(or any material misstatement) when made of the Owner or Ground Lessor contained
herein or in the other Financing Documents or in any Officers' Certificate
delivered pursuant hereto or thereto (other than a covenant, representation or
warranty, a default in the performance of which or breach of which is
specifically dealt with elsewhere in this Section), and with respect to a
default or breach, continuance of such default or breach for a period of thirty
(30) days after there has been given, by registered or certified mail (and
otherwise in accordance with Article 23 hereof), to the Owner by the Grantee or
to the Owner and the Grantee by the Holders of at least 25% of the aggregate
principal amount of the Notes then Outstanding, a written notice specifying such
default or breach and requiring it to be remedied and stating that such notice
is a "Notice of Default" hereunder (unless such default or breach requires work
to be performed, acts to be done, or conditions to be removed which cannot by
their nature reasonably be performed, done or removed, as the case may be,
within such thirty (30) day period, in which case no Event of Default shall be
deemed to exist as long as the Owner or Ground Lessor shall have commenced (or
caused to have commenced) curing the same within such thirty (30) day period and
shall prosecute (or cause to be prosecuted) the same to completion with
reasonable diligence); or
15.1.4 Either of the Grantors shall default in the
performance of their obligations under Section 4.7 hereof, or GP-AMMLP shall
default in the performance of its obligations under Section 4.8 hereof; or
15.1.5 The entry by a court having jurisdiction over the
Premises of a decree or order for relief in respect of the Owner, AMMLP,
GP-AMMLP or the Management Company in an involuntary case or proceeding under
any applicable Federal or state bankruptcy, insolvency, reorganization (relating
to an insolvency) or other similar law or the appointment of a custodian,
receiver, liquidator, assignee, trustee, seguestrator or other similar official
of such Person, or of any substantial part of its property, or in connection
with such a proceeding ordering the winding-up or liquidation of its affairs,
and the continuance of any such decree or order for relief or any such other
decree or order unstayed and in effect for a period of ninety (90) consecutive
days; or
l5.1.6 The commencement by the Owner, AMMLP, GP-AMMHP or the
Management Company of a voluntary case or proceeding under any applicable
Federal or state bankruptcy, insolvency, reorganization (in connection with an
insolvency) or other similar law or the commencement of any other case or
proceeding to be adjudicated a bankrupt or insolvent, or the consent by such
Person to the entry of a decree or order for
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relief in an involuntary case or proceeding under any applicable Federal or
state bankruptcy, insolvency, reorganization (in connection with the insolvency
of such Person) or other similar law or to the commencement of any bankruptcy or
insolvency case or proceeding, or the filing by such Person of a petition or
answer or consent seeking reorganization or relief under any applicable Federal
or state bankruptcy insolvency or similar law, or the consent by such Person to
the filing of such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, seguestrator or similar
official of any substantial part of the property of such Person, or the making
by such Person of an assignment for the benefit of creditors, or the admission
by such Person in writing of its inability to pay its debts generally as they
become due; or
15.1.7 Any order, judgment or decree shall be entered in any
proceeding against the Owner, AMMLP, GP-AMMLP or the Management Company
decreeing the dissolution or split-up of the Owner, AMMLP, GP-AMMLP or the
Management Company or the divestiture of any assets of the Owner, AMMLP,
GP-AMMLP or the Management Company (other than pursuant to a Taking) having, in
the aggregate, a value in excess of S250,000, and such order, judgment or decree
shall remain undischarged or unstayed for a period in excess of sixty (60) days;
or
15.1.8 The Grantors shall make or permit to occur any sale,
conveyance, pledge, encumbering or other transfer in violation of Article 7 to
occur; or
15.1.9 Final judgment for the payment of money in excess of
S250,000 shall be rendered by a court of record against the Ground Lessor or
Owner and the Ground Lessor or Owner shall not discharge the same or provide for
its discharge in accordance with its terms, or procure a stay of execution
thereof within thirty (30) days from the date of entry thereof and within such
period of thirty (30) days, or such longer period during which execution of such
judgment shall have been stayed, appeal therefrom and cause the execution
thereof to be stayed during such appeal; or
15.1.10 If Marriott shall cease to own, directly or
indirectly, all of the issued and outstanding shares of capital stock of the
Management Company; or
15.1.11 If an "Event of Default" shall occur and be
continuing under either of the Guaranties, the Indenture or any other of the
Financing Documents; or
15.1.12 If there shall occur a default in the observance or
performance by either party of its covenants, agreements or obligations under
the Management Agreement and such default is not cured within any applicable
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notice and/or grace period provided in such agreement (provided, however, the
Management Company's failure to meet the Minimum Performance Standards, as
defined in the Management Agreement, or to cure such failure as provided by
the terms of the Management Agreement, shall not be deemed a default for
purposes of this Section 15.1.12) or if either party to any such agreement shall
terminate or seek to terminate the Management Agreement, except as permitted by
the Management Agreement Assignment; or
15.1.13 If a default and the expiration of any applicable
grace and cure period (without the cure thereof) has occurred under any
Additional Financing; or
15.1.14 If the Grantors shall fail to pay any tax which they
are required to pay under Section 2.3 within the period after notice provided
for therein; or
15.1.15 If the Owner shall fail to comply with its
obligations and undertakings under a Letter Agreement, dated the date hereof,
from the Grantors to the Grantee and the Collateral Trustee with respect to
certain improvements to the Premises, after the passage of any applicable grace
period and the delivery of any notice provided for in such Letter Agreement.
If an Event of Default occurs and is continuing, the Grantee may, and,
if pursuant to the terms of Section 502 of the Indenture, the Notes have been
accelerated at the direction of the Holders, the Grantee shall, by written
notice declare the Secured Note to be due and payable and the Grantee may
exercise the remedies provided for herein for an Event of Default; provided,
however, that any such declaration and the consequences thereof may be rescinded
and annulled in accordance with the provisions of Section 502 of the Indenture,
or waived pursuant to Section 513 of the Indenture.
16. LEGAL EXPENSES; SUBROGATION; WAIVER OF OFFSETS
16.1 The Grantors will pay to the Grantee, on demand, all costs,
charges and expenses (including, without limitation, attorneys' fees and
expenses) incurred or paid at any time by the Grantee because of the failure of
the Ground Lessor or owner to perform, comply with or abide by any of the
stipulations, agreements, conditions or covenants contained herein or in any
other Financing Document, together with interest on each such payment made by
the Grantee at the Default Rate from the date each such payment is made.
16.2 If any action or proceeding be commenced in which the
Grantee is made a party, or in which it becomes necessary to defend or uphold
the security interest or priority of this Deed, all sums paid by the Grantee for
the reasonable expense of any litigation to prosecute or defend the title,
rights and security interest created by this Deed (including,
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without limitation, attorneys' fees and expenses) shall be paid by the Grantors,
together, to the extent permitted by law, with interest thereon at the Default
Rate from the date each such payment is made, and all such sums and the interest
thereon shall be a lien on the Mortgaged Premises, prior to any right, title or
interest in or claim upon the Mortgaged Premises attaching or accruing
subsequent to this Deed, and shall be deemed to be secured by this Deed. In any
action or proceeding to foreclose this Deed, or to recover or collect the debt
secured hereby, the provisions of law respecting the recovery of costs,
disbursements and allowances, if inconsistent with the foregoing, shall prevail
unaffected by this covenant.
16.3 Provided that a waiver of subrogation can be obtained by
Ground Lessor and Owner from their respective insurance carriers at commercially
reasonable rates using commercially reasonable efforts, Grantors waive any and
all right to claim or recover against Grantee, its officers, the Premises,
Grantors' property or the property of others under Grantors' control from any
cause insured against or required to be insured against by the provisions of
this Deed.
16.4 All sums payable by Grantors hereunder shall be paid without
notice, demand, counterclaim, setoff, deduction of defense and without
abatement, suspension, deferment, diminution or reduction, and the obligations
and liabilities of Grantors hereunder shall in no way be released, discharged or
otherwise affected by reason of: (a) any damage to or destruction of or any
Taking of the Mortgaged Premises or any part thereof; (b) any restriction or
prevention of or interference with any use of the Mortgaged Premises or any part
thereof; (c) any title defect or encumbrance or any eviction from the Land or
the Improvements or any part thereof by title paramount or otherwise; (d) any
bankruptcy, insolvency, reorganization, composition, adjustment, dissolution,
liquidation, or other like proceeding relating to Grantee, or any action taken
with respect to this Deed by any trustee or receiver of Grantee, or by any
court, in such proceeding; (e) any claim which Grantors have, or might have,
against Grantee; or (f) any other occurrence whatsoever, whether similar or
dissimilar to the foregoing, whether or not Grantors shall have notice or
knowledge of any of the foregoing. Grantors waive all rights now or hereafter
conferred by statute or otherwise to any abatement, suspension, deferment,
diminution, or reduction of any sum secured hereby and payable by Grantors.
17. INDEMNIFICATION
Grantors indemnify, defend and hold Grantee harmless against: (a) any
and all claims for brokerage, leasing, finders or similar fees which may be made
relating to the Premises or the indebtedness, excluding claims with respect to
any fee payable to Eastdil Realty, Inc., Nomura Securities International, Inc.
or Nomura International Plc or to any Person
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to the extent claiming by, through or under Eastdil Realty, Inc., Nomura
Securities International, Inc. or Nomura International Plc relating to the
Mortgaged Premises or the indebtedness (other than those fees payable at the
closing of the transactions contemplated by this Deed and any fees and expenses
payable to Eastdil Realty, Inc. in its capacity as Administrative Services
Representative) and (b) any and all liabilities, obligations, losses, damages,
penalties, claims, actions, suits, costs and expenses (including its attorneys'
fees actually incurred, together with reasonable appellate counsel fees actually
incurred, if any) of whatever kind or nature (except to the extent caused by the
gross negligence or willful misconduct of the Grantee or by the actions of the
Grantee after the Grantee forecloses upon the Deed and succeeds to the ownership
of the Mortgaged Premises) which may be imposed on or incurred by Grantee at any
time pursuant either to a judgment or decree or other order entered into by a
court or administrative agency or to a settlement reasonably approved by
Grantors, which judgment, decree, order or settlement relates in any way to or
arises out of the offer, sale or lease of the Mortgaged Premises and/or the
ownership, use, occupation or operation of any portion of the Mortgaged Premises
including without limitation: (i) ownership of this Deed, the Premises or any
interest therein or receipt of any rents (excluding income taxes of the
Grantee); (ii) any accident, injury to or death of persons or loss of or damage
to property occurring in, on or about the Premises or any part thereof or on the
adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets
or ways; (iii) any use, nonuse or condition in, on or about the Premises or any
part thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent
parking areas, streets or ways; (iv) any failure on the part of the Ground
Lessor or Owner to perform or comply with any of the terms of this Deed; or (v)
performance of any labor or services or the furnishing of any materials or other
property in respect of the Premises or any part thereof. The indemnity provided
for by this Article 17 shall not apply to the liability of Grantee under this
Deed, if any, to Owner or the Ground Lessor. Any amounts payable to the Grantee
by reason of the application of this Article shall become immediately due and
payable and shall bear interest at the Default Rate, from the date loss or
damage is sustained by Grantee until paid, and the same shall be added to the
indebtedness secured hereby and be secured by this Deed. The obligations of the
Grantors under this Article shall survive any termination or satisfaction of
this Deed.
18. NO CREDITS
The Grantors shall not have, nor will they claim nor demand nor be
entitled to receive, any credit or credits against the principal or interest or
other indebtedness secured hereby provided, and the same shall be paid without
abatement of or deduction from, and without counterclaim or set-off against such
principal, interest and other indebtedness for any reason, including, without
limitation, for so much of the taxes assessed
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against the Mortgaged Premises as is equal to the tax rate applied to the amount
due on this Deed or any part thereof, and no deduction shall otherwise be made
or claimed from the taxable value of the Mortgaged Premises, or any part
thereof, by reason of the indebtedness secured hereby or by this Deed.
19. DEFAULT AND FORECLOSURE
19.1 If an Event of Default shall occur and be continuing, Grantee
may, at Grantee's election and by and through Grantee or otherwise, exercise any
or all of the following rights, remedies and recourse or any of the remedies set
forth in the other Financing Documents:
19.1.1 Declare the Note Principal Amount (or, if prior to the
Deferred Interest Commencement Date, the Original Note Principal Amount and
Secured Note Accreted Amount), Deferred Interest, if any, Secured Note
Additional Interest, if any, Default Interest, if any, the accrued interest and
any other accrued but unpaid portion of the indebtedness and the Secured Note
Yield Maintenance Amount to be immediately due and payable, without further
notice, presentment, protest, demand or action of any nature whatsoever (each of
which hereby is expressly waived by Grantors), whereupon the same shall become
immediately due and payable, time being of the essence in this Deed, and no
omission on the part of Grantee to exercise such option when entitled so to do
shall be considered as a waiver of such right.
19.1.2 Demand that the Grantors shall forthwith surrender to
Grantee the actual possession of the Mortgaged Premises, and/or terminate the
license granted Grantors in Section 11.1 hereof to receive the rents, issues and
profits generated by the Mortgaged Premises and, to the extent permitted by law,
enter and take possession of all of the Mortgaged Premises without the
appointment of a receiver, or make an application therefor, and exclude Grantors
and its agents and employees wholly therefrom, and have joint (and several)
access with Grantors to the books, papers and accounts of Grantors.
If the Grantors shall for any reason fail to surrender or deliver the
Mortgaged Premises or any part thereof after such demand by Grantee, Grantee may
obtain a judgment or decree conferring upon Grantee the right to immediate
possession or requiring the Grantors to deliver immediate possession of the
Mortgaged Premises to Grantee, and the Grantors hereby specifically covenant and
agree that Grantors will not oppose, contest or otherwise hinder or delay
Grantee in any action or proceeding by Grantee to obtain such judgment or
decree. The Grantors will pay to Grantee, upon demand, all expenses of obtaining
such judgment or decree, including reasonable compensation to Grantee, its
attorneys and agents and all such expenses and compensation
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shall, until paid, become part of the Indebtedness and shall be secured by this
Deed.
Upon every such entering upon or taking of possession, Grantee may
hold, store, use, operate, manage and control the Mortgaged Premises and conduct
the business thereof, and, from time to time (a) make all necessary and proper
maintenance, repairs, renewals, replacements, additions, betterment and
improvements thereto and thereon and purchase or otherwise acquire additional
fixtures, personalty and other property; (b) insure or keep the Mortgaged
Premises insured; (c) manage and operate the Mortgaged Premises and exercise all
the rights and powers of the Grantors to the same extent as Grantors could in
their own names or otherwise act with respect to the same; and (d) enter
into any and all agreements with respect to the exercise by others of any of the
powers herein granted to Grantee, all as Grantee from time to time may determine
to be in its best interest. Whether or not Grantee has obtained possession of
the Mortgaged Premises, upon the termination of Grantors' license to receive the
Rents, the Grantee may collect, sue for and receive all of the Rents and other
issues, profits and revenues from the Mortgaged Premises, including those past
due as well as those accruing thereafter. Anything in this Deed to the contrary
notwithstanding, Grantee shall not be obligated to discharge or perform the
duties of the landlord to any Space Tenant or incur any liability as the result
of any exercise by Grantee of its rights under this Deed, nor shall Grantee be
responsible or liable for waste committed on the Premises by any tenant or other
person or for any dangerous or defective condition of the Premises or for any
negligence in the management, upkeep, repair or control of the Premises
resulting in the loss, injury or death to any tenant, licensee, employee or
stranger, and Grantee shall be liable to account only for the Rents actually
received by Grantee.
Whether or not Grantee takes possession of the Mortgaged Premises,
Grantee may make, modify, enforce, cancel or accept surrender of any Space
Lease, remove and evict any Space Tenant, increase or decrease Rents under any
Space Lease, appear in and defend any action or proceeding purporting to affect
the Mortgaged Premises, and perform and discharge each and every obligation,
covenant and agreement of Grantors contained in any Space Lease. Neither the
entering upon and taking possession of the Mortgaged Premises, nor the
collection of any Rents and the application thereof as aforesaid, shall cure or
waive any Event of Default theretofore or thereafter occurring, or affect any
notice of an Event of Default hereunder or invalidate any act done pursuant to
any such notice. Grantee shall not be liable to Grantors, anyone claiming under
or through Grantors or any one having an interest in the Mortgaged Premises by
reason of anything done or left undone by Grantee hereunder. Nothing contained
in this Subsection 19.1.2 shall require Grantee to incur any expense or do any
act. If the Rents are not sufficient to
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meet the costs of taking control of and managing the Mortgaged Premises and/or
collecting the Rents, any funds expended by Grantee for such purposes shall
become indebtedness of Grantors to Grantee secured by this Deed. Such amounts,
together with interest at the Default Rate and attorneys' fees and expenses if
applicable shall be immediately due and payable. Notwithstanding Grantee's
continuance in possession or receipt and application of Rents, Grantee shall be
entitled to exercise every right provided for in this Deed or by law upon or
after the occurrence of an Event of Default. Any of the actions referred to in
this Subsection 19.1.2 may be taken by Grantee at such time as Grantee is so
entitled, without regard to the adequacy of any security for the indebtedness
hereby secured. For the purpose of carrying out the provisions of this
paragraph, Grantors hereby constitute and appoint Grantee the true and lawful
attorney-in-fact of Grantors to do and perform, from time to time, any and all
actions necessary and incidental to such purpose and do by these presents,
ratify and confirm any and all actions of said attorney in fact in the Premises.
In the event that all such interest, deposits and principal
installments and other sums due under any of the terms, covenants, conditions
and agreements of this Deed shall be paid and all Events of Default shall be
cured, and as a result thereof Grantee surrenders possession of the Mortgaged
Premises to Grantors, the same right herein given to Grantee shall continue to
exist if any subsequent Events of Default shall occur.
19.1.3 Sell the Mortgaged Premises or any part thereof at one
or more public sales before the door of the courthouse of Fulton County,
Georgia, without notice except as required or set forth herein (as the Mortgaged
Premises is not residential as to Grantors), to the highest bidder for cash, in
order to pay the indebtedness, and insurance premiums, liens, assessments, taxes
and charges, including utility charges, if any, with accrued interest thereon,
and all expenses of sale and of all proceedings in connection therewith,
including attorney's fees, 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 said county. At any such public sale, Grantee may execute and
deliver to the purchaser a conveyance of the Mortgaged Premises or any part of
the Mortgaged Premises in fee simple, with full warranties of title and to this
end, Grantors hereby constitute and appoint Grantee the agent and
attorney-in-fact of the Grantors to make such sale and conveyance, and thereby
to divest the Grantors of all right, title and equity that the Grantors may have
in and to the Mortgaged Premises 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 the Grantors. The aforesaid
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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 indebtedness and shall
not be exhausted by one exercise thereof but may be exercised until full payment
of all of the indebtedness. In the event of any sale under this Deed by virtue
of the exercise of the powers herein granted, or pursuant to any order in any
judicial proceedings or otherwise, the Mortgaged Premises may be sold as an
entirety or in separate parcels and in such manner or order as Grantee in its
sole discretion may elect, and if Grantee so elects, Crantee may sell the
collateral covered by this Deed at one or more separate sales in any manner
permitted by the Uniform Commercial Code of the State of Georgia, and one or
more exercises of the powers herein granted shall not extinguish nor exhaust
such posers, until the entire Mortgaged Premises is sold or the indebtedness is
paid in full. If the indebtedness is now or hereafter further secured by any
chattel mortgages, pledges, contracts or guaranty, assignments of lease or other
security instruments, Grantee may at its option exhaust the remedies granted
under any of said security instruments either concurrently or independently, and
in such order as Grantee may determine.
Grantee, may, in addition to and not in abrogation of the rights
covered under the immediately preceding subparagraph, or elsewhere in this
Article 19, either with or without entry or taking possession as herein provided
or otherwise, proceed by a suit or suits in law or in equity or by any other
appropriate proceeding or remedy (a) to enforce payment of the Secured Note, the
Guaranties or the performance of any term, covenant, condition or agreement of
this Deed or any other right and (b) to pursue any other remedy available to it,
all as Grantee in its sole discretion may elect.
19.1.4 Upon application to a court of competent jurisdiction
Grantee shall be entitled as a matter of strict right and without notice to
Grantors or regard to the adequacy of the Mortgaged Premises for the repayment
of the indebtedness, or the solvency of any Person liable for payment thereof,
for appointment of a receiver of the Mortgaged Premises and the Grantors do
hereby irrevocably consent to such appointment. Any such receiver shall have all
the usual powers and duties of receivers in similar cases as permitted under the
laws of the State of Georgia, including the full power to rent, maintain and
otherwise operate the Mortgaged Premises upon such terms as may be approved by
the court, and shall apply such Rents in accordance with the provisions of
Section 19.9 hereinbelow. Grantors shall pay to Grantee upon demand all
expenses, including receiver's fees, attorney's fees and expenses, costs and
agent's compensation, incurred pursuant to the provisions of this Section, and
any such amounts paid by Grantee shall be added to the indebtedness and shall be
secured by this Deed.
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19.1.5 Exercise any and all other rights and remedies granted
under this Deed or now or hereafter existing in equity, at law, by virtue of
statute or otherwise.
19.1.6 Pay, perform or observe any term, covenant or
condition of this Deed not paid, performed or observed by Ground Lessor and/or
the Owner and all payments made or costs or expenses incurred by Grantee in
connection therewith shall be secured hereby and shall be, without demand,
immediately repaid by the Grantors to Grantee with interest thereon at the
Default Rate. Grantee shall be the sole judge of the necessity for any such
actions and of the amounts to be paid. Grantee is hereby empowered to enter and
to authorize others to enter upon the Mortgaged Premises or any part thereof for
the purpose of performing or observing any such defaulted term, covenant or
condition without thereby becoming liable to Grantors or any person in
possession holding under the Grantors.
19.1.7 Exercise any and all other rights and remedies granted
under any other Financing Document, in such order and priority as the Grantee
shall determine in its sole discretion.
19.2 The Mortgaged Premises may be sold in one or more parcels and
in such manner and order as the Grantee, in its sole discretion, may elect, it
being expressly understood and agreed that the right of sale arising out of any
Event of Default shall not be exhausted by any one or more sales.
19.3 The Grantee shall have all rights, remedies and recourses
granted in the Deed and available at law or equity (including specifically those
granted by the Uniform Commercial Code) and same (a) shall be cumulative and
concurrent, (b) may be pursued separately, successively or concurrently against
Grantors, or others obligated under the Financing Documents, or against the
Mortgaged Premises, or against any one or more of them, at the sole discretion
of the Grantee, (c) may be exercised as often as occasion therefor shall arise,
it being agreed by Grantors that the exercise or failure to exercise any of same
shall in no event be construed as a waiver or release thereof or of any other
right, remedy or recourse and (d) are intended to be, and shall be,
nonexclusive. Moreover, the Grantee may not be required to proceed hereunder
before proceeding against any other security and shall not be required to
proceed against any other security before proceeding hereunder, and shall not be
precluded from proceeding against any or all of any security in any order or at
the same time. Notice is hereby given to all Persons now or hereafter claiming
an interest in the Mortgaged Premises subordinate and inferior to this Deed that
such Persons shall have no right or claim of right to cause a marshalling of the
Grantors' assets or property before proceeding against the security afforded by
this Deed or to
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proceed or to enforce any of the remedies afforded the Grantee hereunder or by
law in any order or at the same time or at all.
19.4 Neither Owner nor any other Person hereafter obligated for
payment of all or any part of the indebtedness shall be relieved of such
obligation by reason of (a) the failure of Grantee to comply with any request of
Owner or Ground Lessor, or of any other person so obligated, to foreclose this
Deed or to enforce any provisions of the Financing Documents, (b) the release,
regardless of consideration, of the Mortgaged Premises or any other collateral
security for the indebtedness or the addition of any other property to the
Mortgaged Premises of any other collateral security for the indebtedness, (c)
any agreement or stipulations between any subsequent owner of the Mortgaged
Premises and the Grantee extending, renewing, rearranging or in any other way
modifying the terms of the Financing Documents or any other collateral security
for the indebtedness without first having obtained the consent of, given notice
to or paid any consideration to Grantors, or such other person, and in such
event Grantors and all such other persons shall continue to be liable to make
payment according to the terms of any such extension or modification agreement
unless expressly released and discharged in writing by the Grantee, or (d) by
any other act or occurrence save and except the complete payment of the
indebtedness.
19.5 The Grantee may release, regardless of consideration, any
part of the Mortgaged Premises or any other collateral security for the
indebtedness without, as to the remainder, in any way impairing, affecting,
subordinating or releasing the conveyance, lien or security interests created in
or evidenced by this Deed of its stature as a first priority security deed, lien
or security interest in and to the Mortgaged Premises. For payment of the
indebtedness, the Grantee may resort to any other security therefor held by
Grantee in such order and manner as the Grantee may elect. The Grantee may, to
the full extent that it may lawfully do so, pursue any one or more remedies
permitted hereunder or under applicable law to enforce the provisions of this
Deed, to collect the indebtedness secured hereby or to realize the security
given therefor at the same time or at different time without in any way
impairing or waiving their right to pursue any other remedies so provided.
19.6 Without notice to or consent of the Grantors and without
impairment of the lien and rights created by this Deed, the Grantee may accept
(but Grantors shall not be obligated to furnish) from the Ground Lessor, Owner
or from any other Person or Persons, additional security for the Secured Note.
Neither the giving of this Deed nor the acceptance of any such additional
security shall prevent the Grantee from resorting to such additional security,
and/or to the security created by this Deed, in any order, separately or
together, without affecting the Grantee's lien and rights under this Deed.
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19.7 Grantors agree, to the full extant permitted by law, that in
case of an Event of Default hereunder, neither Owner nor Ground Lessor nor
anyone claiming through or under Crantor will set up, claln or seek to take
advantage of any moratorium, reinstatement, forbearance, appraisement,
valuation, stay, extension, homestead, exemption or redemption laws now or
hereafter in force, in order to prevent or hinder the enforcement or foreclosure
of this Deed, or the absolute sale of the Mortgaged Premises, the delivery of
possession thereof immediately after such sale to the purchaser at such sale, or
the exercise of any other remedy hereunder, and the Grantors, for themselves and
all who may at any time claim through or under them, hereby waive to the full
extent that Grantors may lawfully so do, the benefit of all such laws, and any
and all right to have assets subject to the security interest of this Deed
marshalled upon any foreclosure or sale in inverse order of alienation.
19.8 In case the Grantee shall bave proceeded to invoke or enforce
any right, remedy or recourse permitted under this Deed and the same shall have
been determined adversely to the Grantee, or the Grantee shall thereafter elect
to discontinue or abandon same for any reason, the Grantee shall have the
unqualified right to do so and, in such an event, (a) Grantors and the Grantee
shall be restored to their former positions with respect to the indebtedness,
this Deed, the Mortgaged Premises and otherwise, (b) all rights, remedies,
recourses and powers of the Grantee shall continue as if same had never been
invoked, (c) each and every Event of Default declared or occurring prior or
subsequent to such withdrawal, discontinuance or abandonment shall and shall be
deemed to be a continuing Event of Default and (d) neither this Deed, nor the
Secured Note nor the indebtedness, nor any other Financing Document, shall be or
shall be deemed to have been reinstated or otherwise affected by such
withdrawal, discontinuance or abandonment; and Grantors hereby expressly waive
the benefit of any statute or rule of law now provided, or which may hereafter
be provided, which would produce a result contrary to or in conflict with the
above.
19.9 The proceeds of any foreclosure or sale of, and the Rents and
other amounts generated by the holding, leasing, operation or other use of, the
Mortgaged Premises or any part thereof together with any other moneys at the
time held by the Grantee, shall be applied as provided in Section 506 of the
Indenture.
19.10 Grantee, at its option, is authorized to foreclose this Deed
subject to the rights of any Space Tenants of the Mortgaged Premises, and the
failure to make any such Space Tenants parties to any such foreclosure
proceedings and to foreclose their rights will not be, nor be asserted to be by
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Grantor, a defense to any proceedings instituted by Grantee to collect the
indebtedness.
19.11 Upon any foreclosure sale or sales of all or any portion of
the Mortgaged Premises under the power herein granted, Grantee may bid for and
purchase the Mortgaged Premises and shall be entitled to apply all or any part
of the indebtedness as a credit to the purchase price.
19.12 In the event of any such foreclosure sale or sales under the
power herein granted, Owner and Ground Lessor shall be deemed tenants holding
over and shall forthwith deliver possession to the purchaser or purchasers at
such sale or be summarily dispossessed according to provisions of law applicable
to tenants holding over.
19.13 Grantee shall have the power to institute and maintain such
suits and proceedings as it may deem expedient (a) to prevent any impairment of
the Mortgaged Premises by any acts which may be unlawful or constitute an Event
of Default under this Deed, (b) to preserve or protect its interest in the
Mortgaged Premises and in the Space Leases and Rents arising therefrom and (c)
to restrain the enforcement of or compliance with any legislation or other
governmental enactment, rule or order that may be unconstitutional or otherwise
invalid, if the enforcement of or compliance with such enactment, rule or order
would impair the security hereunder or be prejudicial to the interest of
Grantee.
19.14 In the case of any receivership, insolvency, bankruptcy,
reorganization, arrangement, adjustment, composition or other proceedings
affecting Ground Lessor or Owner, their creditors or their property, Grantee, to
the extent permitted by law, shall be entitled to file such proofs of claim and
other documents as may be necessary or advisable in order to have the claims of
Grantee allowed in such proceedings for the entire amount of the indebtedness at
the date of the institution of such proceedings and for any additional amount of
the indebtedness which may become due and payable after such date.
19.15 Waiver of Grantors' Rights. BY EXECUTION OF THIS DEED AND BY
INITIALING THIS SECTION 19.15, GRANTORS EXPRESSLY: (a) ACKNOWLEDGE THE RIGHT OF
GRANTEE TO ACCELERATE THE INDEBTEDNESS EVIDENCED BY THE SECURED NOTE AND ANY
OTHER INDEBTEDNESS AND THE POWER OF ATTORNEY GIVEN HEREIN TO GRANTEE TO SELL THE
MORTGAGED PREMISES BY NON-JUDICIAL FORECLOSURE UPON AN EVENT OF DEFAULT
HEREUNDER 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 DEED: (b) WAIVE ANY AND ALL RIGHTS WHICH GRANTORS MAY HAVE UNDER THE
CONSTITUTION OF THE UNITED STATES OF AMERICA (INCLUDING, WITHOUT LIMITATION, THE
FIFTH AND FOURTEENTH AMENDMENTS THEREOF), THE VARIOUS PROVISIONS OF THE
CONSTITUTIONS
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FOR THE SEVERAL STATES, OR BY REASON OF ANY OTHER APPLICABLE LAW, (i) 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 GIVEN UNDER THE PROVISIONS OF THIS DEED AND (ii) CONCERNING THE
RIGHTS OR BENEFITS OF ANY STATUTE OF LIMITATION ANY MORATORIUM, REINSTATEMENT,
MARSHALLING, FORBEARANCE, APPRAISEMENT, VALUATION, STAY, EXTENSION, HOMESTEAD,
EXEMPTION OR REDEMPTION LAWS: (c) ACKNOWLEDGE THAT GRANTORS HAVE READ THIS DEED
AND ANY AND ALL QUESTIONS OF GRANTORS REGARDING THE LEGAL EFFECT OF THIS DEED
AND ITS PROVISIONS HAVE BEEN EXPLAINED FULLY TO GRANTORS, AND GRANTORS HAVE
CONSULTED WITH COUNSEL OF GRANTORS' CHOICE AND HAVE BEEN APPRISED OF AND
COUNSELED WITH RESPECT TO POSSIBLE ALTERNATIVE RIGHTS OF GRANTORS PRIOR TO
EXECUTING THIS DEED AND INITIALLING THIS SECTION 19.15; AND (d) ACKNOWLEDGE THAT
ALL WAIVERS OF THE AFORESAID RIGHTS OF GRANTORS' HAVE BEEN MADE KNOWINGLY,
VOLUNTARILY, INTELLIGENTLY, INTENTIONALLY AND WILLINGLY BY GRANTORS AS PART OF A
BARGAINED FOR LOAN TRANSACTION AND THAT THIS DEED IS VALID AND ENFORCEABLE BY
GRANTEE AGAINST GRANTORS IN ACCORDANCE WITH ALL THE TERMS AND CONDITIONS HEREOF.
INITIALLED BY GRANTORS:
/s/_____________________
/s/_____________________
20. SEVERANCE; RELEASE
20.1 Severance. This Deed and the Secured Note may at any time, at
the sole election of the Grantee, be split or divided into two notes and two
deeds constituting liens on the Mortgaged Premises or portions thereof in such
principal amounts as may be agreed upon, but in no event to exceed the aggregate
principal amount evidenced by the Note and secured, or which under any
contingency may be secured, by this Deed. The Grantors, upon request of the
Grantee, shall execute, acknowledge and deliver to the Grantee and/or its
designee or designees such documents as may be necessary to effectuate the
foregoing, including such supplemental or substitute deeds to secure debt,
assignments of rents and leases and security agreements and supplemental or
substitute notes as the Grantee may require. The Grantors shall pay all
reasonable expenses in connection with the making and recording of such
documents, including, without limitation, recording fees, mortgage recording
taxes, if any, note intangible tax, if any, the fees, expenses and disbursements
of the Grantee's attorneys, fees and expenses relating to examination of title
and title insurance premiums, if any.
20.2 Release. If (a) the Owner (or such other Person as may be
specified in the applicable provisions of the Indenture) shall have elected to
effectuate the portion of the Property Release described in Section 1305(1) of
the Indenture and shall have so elected in accordance with any of the terms of
the Indenture, or (b) if the provisions of this Article 20 shall otherwise be
expressly applicable pursuant to any of the
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other provisions of the Financing Documents, then in any such event the Grantee
shall,
(i) deliver to the Owner a duly executed satisfaction of this
Deed and any of the other recorded Real Estate Security Documents, in recordable
form pursuant to which this Deed and such other instruments shall be discharged
or recorded together with the original of the Secured Note marked cancelled; and
(ii) deliver to the Owner such Uniform Commercial Code
termination statements and other instruments as shall be reasonably requested by
the Grantors, to terminate the liens and security interests created hereunder or
under the Security Agreement, Management Agreement Assignment, Bank Accounts
Assignment, or pursuant hereto or thereto, and release to the Grantors or any of
its designees any other collateral held by the Grantee hereunder or thereunder,
provided, however, that nothing in this Article 20 shall be deemed to require
the Collateral Trustee to release any collateral held by it pursuant to Articles
Thirteen, Fourteen or Fifteen of the Indenture or under the Principal Guaranty
or the Interest/Principal Guaranty or any funds or property held pursuant to
Article Four of the Indenture.
Any release, satisfaction, assignment, endorsement, termination
statement or other instrument executed by the Grantee pursuant to (i) above
shall be without recourse, representation or warranty.
21. NO WAIVER
21.1 No failure or delay or omission on the part of the Grantee in
exercising any power or right hereunder shall operate as a waiver thereof or a
waiver of any other term, provision or condition hereof, nor shall any single or
partial exercise of any such right or power preclude any other or further
exercise thereof or the exercise of any other right or power hereunder; and all
rights and remedies of the Grantee hereunder are cumulative and shall not be
deemed exclusive of any rights or remedies provided by law.
21.2 A consent or waiver in one or more instances of any of the
terms, covenants, conditions or provisions hereof or of the indebtedness secured
hereby shall apply to the particular instance or instances and at the particular
time or times only, and no such consent or waiver shall be deemed a continuing
waiver, but all of the terms, covenants and other provisions of this Deed and of
the indebtedness secured hereby shall survive and continue to remain in full
force and effect; and no consent or waiver shall be effective unless in writing,
dated and signed by the Grantee.
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22. MODIFICATION
No change, amendment, modification, cancellation or discharge hereof,
or any part hereof, shall be valid unless in writing, dated and signed by the
party against whom such change, amendment, modification, cancellation or
discharge is sought to be charged.
23. NOTICES
Any notice, direction, request or demand (each a "Notice") which by any
provision of this Deed is required or permitted to be given or served by the
Grantee to or on the Owner may be given or served only if in writing and either
delivered personally with receipt acknowledged, by courier with receipt
acknowledged, or mailed by registered or certified mail, postage prepaid, return
receipt requested addressed to the Owner at 10400 Fernwood Road, Bethesda,
Maryland, 20058, Attention: Legal Department/Hotel Operations with a copy to
John C. Portman, Jr., 225 Peachtree Street, N.E., Atlanta, Georgia 30303,
Attention: Legal Department and a copy to the Guarantor at its address set forth
in the Guaranties or as otherwise filed with the Collateral Trustee. In
addition, the Grantee shall give or serve copies of all notices of default or
Event of Default hereunder (in the manner hereinabove specified) to any
Subordinate Lenders, but in no event shall the Grantee be required to give
notices of default or Event of Default to more than three (3) Subordinate
Lenders. Any Notice which by any provision of the Deed is required or permitted
to be given or served by the Grantee to or on the Ground Lessor may be given or
served only if in writing and either delivered personally with receipt
acknowledged, by courier with receipt acknowledged, or mailed by registered or
certified mail, postage prepaid, return receipt requested addressed to the
Ground Lessor at 10400 Fernwood Road, Bethesda, Maryland 20058, Attention: Legal
Department/Hotel Operations. Any such Notice or other document shall be deemed
given or served as of the date of the delivery to the Owner and/or the Ground
Lessor, as the case may be, (and the copies to Portman and the Guarantor as
required above), and, if such Notice is a notice of default, then also to the
Subordinate Lenders, except that if a Notice or other document is refused
delivery or cannot be delivered because of a changed address of which no Notice
was given, such Notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver. Any Notice by the Owner or
the Ground Lessor to or upon the Grantee shall be deemed to have been
sufficiently given or made, for all purposes, if given or made to the Issuer,
and, upon the assignment of this Deed to the Collateral Trustee on the date
hereof, to the Collateral Trustee, in both cases as provided in the Indenture.
All Notices and documents delivered to the Grantee pursuant to this Deed shall
be simultaneously delivered to the Administrative Services Representative, 40
West 57th Street, New York, New York 10019, Attention: Stephen T. Burger;
provided, however, any
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failure to so deliver any Notice or other document shall not be a default
hereunder.
24. FURTHER ASSURANCES
24.1 The Grantors will, at any time and from time to time after
the execution and delivery of this Deed, promptly upon request, execute and
deliver such further deeds to secure debt, mortgages, instruments of further
assurances and other documents and do such further acts and things as the
Grantee may reasonably request in order to evidence further and keep valid and
effective the lien, security title and security interest of this Deed and
otherwise to effect fully the purposes of this Deed.
24.2 The Grantors shall execute any and all such documents,
including Financing Statements pursuant to the Uniform Commercial Code of the
State of Georgia, as the Grantee may request, to preserve and maintain the
priority of the title granted hereby to property which may reasonably be deemed
personal property or fixtures, and shall pay to the Grantee on demand any
expenses reasonably incurred by the Grantee in connection with the preparation,
execution and filing of any such documents. The Grantors hereby authorize and
empower the Grantee to execute and file, on the Grantors' behalf, all Financing
Statements, and refilings and continuations thereof as the Grantee reasonably
deems necessary or advisable to create, preserve and protect said title. This
instrument is hereby made and declared to be a security agreement encumbering
each and every item of personal property included herein as a part of the
Mortgaged Premises, in compliance with the provisions of the Uniform Commercial
Code as enacted in the State of Georgia (the "Code"). The remedies for any
violation of the covenants, terms and conditions of the security agreement
contained in this instrument shall be (a) as prescribed herein, or (b) as
prescribed by general law, or (c) as prescribed by the specific statutory
consequences now or hereinafter enacted and specified in the Code, all at the
Grantee's election and the discretion of the Grantee. The Grantors and the
Grantee agree that everything used in connection with the production of income
from the Premises or adopted for use therein or which is described or reflected
in this instrument, is, and all times and for all purposes and in all
proceedings, legal and equitable, shall be, regarded as part of the real estate
conveyed hereby and that the filing of any financing statement or statements in
the records normally having to do with personal property shall not in any way
affect such agreement. Similarly, the mention of any such financing statement of
statements of the rights in and to (i) the proceeds of any insurance policy, or
(ii) any award in eminent domain proeeedings for a Taking or for a loss of value
or (iii) the Grantors' interest as lessor in any present or future leases or
rights to income growing out of the use and/or occupancy of
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the Premises, whether pursuant to a lease or otherwise, shall not in any way
limit any of the rights of the Grantee as determined by this instrument or
affect the priority of the Grantee's security interest granted hereby or by any
other recorded document, it being understood and agreed that such mention in
such financing statement or statements is solely for the protection of the
Grantee in the event any court shall at any time hold, with respect thereto,
that notice of Grantee's priority of interest, to be effective against all
persons or against a particular class of persons, must be filed in the Code
records. The names of "Debtors" and "Secured Party" (which are the Grantors and
the Grantee, respectively), the address of the Debtors and the Secured Party
(which is also the address from which information concerning the security
interest created hereby may be obtained from Secured Party) are set forth in
Exhibit C, attached hereto. The Grantors agree to furnish the Grantee with
notice of any changes in either of their (A) name, identity or corporate
structure, (a) residence or principal place of business, or (C) mailing address
within ten (10) days after the effective date of any such change.
25. GROUND LEASE; JOINDER OF GROUND LESSOR
25.1 The Ground Lessor, being the owner in fee simple of the Land,
joins in this Deed for the purpose of subjecting and subordinating its fee
estate in and to the Land and its rights, title and interest as landlord under
the Ground Lease to the security title of this Deed but, by so doing, does not
intend to, and shall not, unless specifically provided, assume any personal
liability for the compliance, observance or performance of any of the covenants
or conditions of this Deed or for the payment of the Secured Note or of any
other sums required to be paid hereunder. However, in the event of the
termination of the leasehold estate for any reason whatsoever, the ground Lessor
shall be deemed to have made the covenants of the Owner set forth herein and the
word "Owner" shall be deemed to refer to the Ground Lessor whenever the sense of
this Deed as it affects the Ground Lessor so requires. The Ground Lessor agrees
that this Deed shall constitute a "Fee Mortgage" under the Ground Lease,
notwithstanding the provisions of Section 6.06 of the Ground Lease or otherwise.
25.2 The Ground Lessor and the Owner together covenant with the
Grantee that, in any foreclosure action or proceeding to exercise the power of
sale under this Deed, the Grantee may proceed against either the Land or the
leasehold estate therein created by the Ground Lease, or both, and the Land
and/or such leasehold estate may be sold to one or more purchasers at the sale.
The Owner and the Ground Lessor for themselves and all who may claim under them,
hereby waive, to the extent that they lawfully may, all right to have the
estates covered by this Deed marshalled upon any sale pursuant to the power of
sale granted hereunder.
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25.3 The Grantors agree that all of the terms, covenants and
conditions of the Ground Lease shall be subject and subordinate to the terms,
covenants and conditions of this Deed including, without limitation, the
provisions with respect to casualty, Takings, assignment and subletting. Ground
Lessor furthermore expressly subordinates any and all claims which Ground
Lessor has or may have in and to the leasehold estate under the Ground Lease or
against owner by reason of any default by Owner under the Ground Lease or
otherwise, to the rights and claims of the Grantee hereunder or under the
Financing Documents. Furthermore, notwithstanding the provisions of Article 27
herein, from and after the occurrence and during the continuance of an Event of
Default, the Ground Lessor shall not, without the prior written consent of the
Grantee, in each instance, ask, demand, seek, take or receive, directly or
indirectly from the Owner, in cash or other property, by set-off or in any other
manner, payment of any Ground Rent and the Owner shall not make any such payment
as aforesaid to the Ground Lessor.
25.4 The Owner will pay all Ground Rent and other charges required
under the Ground Lease as and when the same are due, and the Owner and Ground
Lessor will keep, observe and perform, or cause to be kept, observed and
performed, all of the other terms, covenants, provisions and agreements of the
Ground Lease on the part of the lessee or lessor, respectively, thereunder to be
kept, observed and performed, and will not in any manner, cancel, terminate or
surrender, or permit any cancellation, termination or surrender of the Ground
Lease, in whole or in part, or modify, amend or permit any modification or
amendment either orally or in writing of any of the terms thereof in any
material respect, and any attempt on the part of the Owner or the Grantee to
exercise any such right shall be null and void. Prior to any modification of the
Ground Lease, the Owner shall deliver to the Grantee an Officers' Certificate
certifying that the modification (i) does not modify the Ground Lease in any
material respect, (ii) does not adversely affect in any material respect the
rights of Grantee and (iii) does not affect the provisions of the Ground Lease
providing that there shall be no merger of the fee and leasehold interests under
the Ground Lease.
25.5 The Owner will do, or cause to be done, all things necessary
to preserve and keep unimpaired the rights of the Owner as lessee under the
Ground Lease, and to prevent any default under the Ground Lease, or any
termination, surrender, cancellation, forfeiture or impairment thereof, and in
the event of the failure of the Owner to make any payment required to be made by
the Owner pursuant to the provisions of the Ground Lease or to keep, observe or
perform, or cause to be kept, observed or performed, any of the terms,
covenants, provisions or agreements of the Ground Lease, the Owner agrees that
the Grantee may (but shall not be obligated to) take any action on behalf of the
Owner
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to make or cause to be kept, observed or performed any such terms, covenants,
provisions or agreements and to enter upon the Premises and take all such action
as may be necessary therefor, to the end that the rights of the owner in and to
the Ground Lease shall be kept unimpaired and free from default, and all money
so expended by the Grantee, with interest thereon at the Default Rate from the
date of each such expenditure, shall be added to the indebtedness and shall be
paid by the Owner to the Grantee promptly upon demand by the Grantee. The Ground
Lessor hereby agrees to accept from the Grantee any performance of any term,
condition, covenant or obligation by the Grantee on behalf of the Owner as
performance by the Owner, but the Ground Lessor agrees that in no event shall
the Grantee be obligated to render any such performance. In such event the
Grantee shall have, in addition to any other remedy of the Grantee, the same
rights and remedies in the event of non-payment of any such sum by the Owner as
in the case of a default in the payment of any sums due under the Secured Note.
25.6 The Owner will enforce the obligations of the Ground Lessor
to the end that the Owner may enjoy all of the rights granted to it under the
Ground Lease, and the Owner and the Ground Lessor will promptly notify the
Grantee in writing of any default by the Ground Lessor or by the Owner in the
performance or observance of any of the terms, covenants or conditions on the
part of the Ground Lessor or the Owner, as the case may be, to be performed or
observed under the Ground Lease. If, pursuant to the Ground Lease, the Ground
Lessor shall deliver to the Grantee a copy of any notice of default given to the
Owner, such notice shall constitute full authority and protection to the Grantee
for any action taken or omitted to be taken by the Grantee in good faith in
reliance thereon.
25.7 If any action or proceeding shall be instituted to evict the
Owner or to recover possession of the Premises or for any other purpose
affecting the Ground Lease or this Deed, the Owner will, immediately upon
service thereof on or to the Owner, deliver to the Grantee a true copy of each
petition, summons, complaint, notice of motion, order to show cause and of all
other provisions, pleadings, and papers, however designated, served in any such
action or proceeding.
25.8 The Owner and Ground Lessor covenant and agree that unless
the Grantee shall otherwise expressly consent in writing, the fee title to the
Land and any other property demised by the Ground Lease and the leasehold estate
granted thereunder shall not merge, but shall always remain separate and
distinct, notwithstanding the union of said estates either in the Owner, the
Ground Lessor, or a third party by purchase or otherwise.
25.9 Upon the foreclosure of the security title granted by this
Deed pursuant to the provisions hereof or
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sale of the Premises pursuant to the power of sale granted hereunder, any Space
Leases then existing and affecting all or any portion of the Premises shall not
be terminated or destroyed by application of the doctrine of merger or as a
matter of law or as a result of such foreclosure or sale.
25.10 No release or forbearance of any of the Owner's obligations
under the Ground Lease, pursuant to the Ground Lease or otherwise, shall release
the Owner or the Ground Lessor from any obligations under this Deed, including
the Owner's obligation with respect to the payment of rent as provided for in
the Ground Lease and the performance of all of the terms, provisions, covenants,
conditions and agreements contained in the Ground Lease, to be kept, performed
and complied with by the tenant therein.
25.ll The Owner will give the Grantee prompt written notice of the
commencement of any arbitration or appraisal proceeding under or pursuant to the
provisions of the Ground Lease. The Grantee shall have the right to intervene
and participate in any such proceeding and the selection of an arbitrator and
the Owner shall confer with the Grantee to the extent which the Grantee deems
reasonably necessary for the protection of the Grantee. Upon the written request
of the Grantee, after default under the Ground Lease and after the expiration of
any applicable grace period, the Owner will exercise all rights of arbitration
conferred upon it by the Ground Lease.
25.12 The lien of this Deed shall attach to all of the Owner's
rights and remedies at any time arising under or pursuant to Subsection 365(h)
of the Bankruptcy Code, including, without limitation, all of the Owner's rights
to remain in possession of the Premises. Neither Owner nor the Ground Lessor
shall, without the Grantee's prior written consent, elect to treat the Ground
Lease as terminated under Subsection 365(h)(1) of the Bankruptcy Code, 11 U.S.C.
ss. 365(h)(1). Any such election made without the Grantee's consent shall be
void.
25.12.1 The Owner hereby unconditionally assigns, transfers
and sets over to the Grantee all of the Owner's claims and rights to the payment
of damages arising from any rejection of the Ground Lease by the Ground Lessor
or any other fee owner of the Premises under the Bankruptcy Code. The Grantee
shall have the right to proceed in its own name or in the name of the Owner or
the Ground Lessor in respect of any claim, suit, action or proceeding relating
to the rejection of the Ground Lease, including, without limitation, the right
to file and prosecute any proofs of claim, complaints, motions, applications,
notices and other documents, in any case in respect to the lessor or any fee
owner under the Bankruptcy Code. Unless any Event of Default shall have occurred
and be continuing, the Owner shall be entitled to join with the Grantee in such
proceedings, provided, however, that in doing so the Owner shall
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take no actions which are adverse to the interests of the Grantee. This
assignment constitutes a present, irrevocable and unconditional assignment of
the foregoing claims, rights and remedies, and shall continue in effect until
all of the obligations secured by this Deed shall have been satisfied and
discharged in full. Any amounts received by the Grantee as damages arising out
of the rejection of the Ground Lease as aforesaid shall be applied first to all
costs and expenses of the Grantee (including, without limitation, attorneys'
fees) incurred in connection with the exercise of any of its rights or remedies
under this section. The Owner shall promptly make, execute, acknowledge and
deliver, in form and substance satisfactory to the Grantee, a UCC Financing
Statement (Form UCC-1) and all such additional instruments, agreements and other
documents, as may at any time hereafter be required by the Grantee to effectuate
and carry out the assignment made pursuant to this section.
25.12.2 If pursuant to Subsection 365(h)(2) of the Bankruptcy
Code, the Owner shall seek to offset against the rent reserved in the Ground
Lease the amount of any damages caused by the nonperformance by the Ground
Lessor or any fee owner of any of their obligations under the Ground Lease after
the rejection by the Ground Lessor or any fee owner of the Ground Lease under
the Bankruptcy Code, the Owner shall, prior to effecting such offset, notify the
Grantee of its intent to do so, setting forth the amounts proposed to be so
offset and the basis therefor. The Grantee shall have the right to object to all
or any part of such offset that, in the reasonable judgment of the Grantee,
would constitute a breach of the Ground Lease, and in the event of such
objection, the Owner shall not effect any offset of the amounts so objected to
by the Grantee. Neither Grantee's failure to object as aforesaid nor any
objection relating to such offset shall constitute an approval of any such
offset by the Grantee. The Owner shall pay and protect the Grantee and indemnify
and save the Grantee harmless from and against, any and all claims, demands,
actions, suits, proceedings, damages, losses, costs and expenses of every nature
whatsoever (including without limitation attorneys' fees and expenses) arising
from or relating to any offset by the Owner against the rent reserved in the
Ground Lease.
25.12.3 If any action, proceeding, motion or notice shall be
commenced or filed in respect of the Ground Lessor or any fee owner, the
Premises or the Ground Lease in connection with any case under the Bankruptcy
Code, the Grantee shall have the option, exercisable upon notice from the
Grantee to the Owner, to conduct and control any such litigation with counsel of
the Grantee's choice. The Grantee may proceed in its own name or in the name of
the Owner in connection with any such litigation, and the Owner agrees to
execute any and all powers, authorizations, consents or other documents required
by the Grantee in connection therewith. The Owner shall, upon demand, pay to the
Grantee all costs and expenses (including attorney's fees and expenses) paid or
incurred by the Grantee in
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connection with the prosecution or conduct of any such proceedings. Any such
costs or expenses not paid by the Owner as aforesaid shall be secured by the
lien of this Deed and shall be added to the principal amount of the indebtedness
secured hereby. Unless an Event of Default shall have occurred and be
continuing, the Owner shall be entitled to join with the Grantee in such
proceedings, provided, however, that in doing so the Owner shall take no actions
which are adverse to the interests of the Grantee. The Owner shall not commence
any action, suit, proceeding or case, or file any application or make any
motion, in respect of the Ground Lease in any such case under the Bankruptcy
Code without the prior written consent of the Grantee, which consent shall not
be unreasonably withheld or delayed.
25.12.4 The Owner shall, after obtaining knowledge thereof,
promptly notify the Grantee of any filing by or against the Ground Lessor or
other fee owner of a petition under the Bankruptcy Code. The Owner shall
promptly deliver to the Grantee following receipt, copies of any and all
notices, summonses, pleadings, applications and other documents received by the
Owner in connection with any such petition and any proceedings relating thereto.
25.12.5 If there shall be filed by or against the Owner a
petition under the Bankruptcy Code and the Owner, as lessee under the Ground
Lease, shall determine to reject the Ground Lease pursuant to Section 365(a) of
the Bankruptcy Code, the Owner shall give the Grantee not less than thirty
(30) days' prior notice of the date on which the Owner shall apply to the
Bankruptcy Court for authority to reject the Ground Lease. The Grantee shall
have the right, but not the obligation, to serve upon the Owner within such
thirty (30) days period a notice stating that the Grantee demands that the Owner
assume and assign the Ground Lease to the Grantee pursuant to Section 365 of the
Bankruptcy Code. If the Grantee shall serve upon the owner the notice described
in the preceding sentence, the Owner shall not seek to reject the Ground Lease
and shall comply with the demand provided for in the preceding sentence.
26. MISCELLANEOUS PROVISIONS
26.1 All sums which, by the terms of this Deed or any other Financing
Documents are payable by the Grantors to the Grantee shall, together with the
interest thereon provided for herein or in such other Financing Documents, be
secured by this Deed and added to and deemed part of the indebtedness secured
hereby whether or not the provision which obligates the Grantors to make any
such payment to the Grantee specifically so states.
26.2 Any interest provided to be paid to the Grantee in this Deed, or
any other Financing Document, whether or not such interest is on the principal
sum of such indebtedness,
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or on any other sum which is due under Section 26.1 hereof, shall constitute
part of the indebtedness secured hereby.
26.3 The assignment and security interest herein granted shall not
be deemed or construed to constitute Grantee as a trustee or trustees in
possession of the Mortgaged Premises, to obligate Grantee to lease the Mortgaged
Premises or attempt to do same, or to take any action, incur any expenses or
perform or discharge any obligation, duty or obligation whatsoever under the
Ground Lease, any of the Space Leases or otherwise.
26.4 By accepting or approving anything required to be observed,
performed or fulfilled or to be given to Grantee pursuant to this Deed,
including (but not limited to) any Officers' Certificate, balance sheet,
statement of profit and loss or other financial statement, survey, appraisal or
insurance policy, Grantee shall in no event be deemed to have warranted,
consented to, or affirmed the sufficiency, legality, effectiveness or legal
effect of the same, or of any term, provision or condition thereof, and such
acceptance or approval thereof shall not be or constitute any warranty, consent
or affirmation with respect thereto by Grantee.
26.5 All obligations contained in this Deed are intended by the
parties to be, and shall be construed as, covenants running with the Mortgaged
Premises.
26.6 This Deed shall be governed by and construed according to the
laws of the State of Georgia, without giving effect to principles of conflicts
of law.
26.7 Non-Recourse.
26.7.1 Notwithstanding anything to the contrary in this Deed
or in any of the other Real Estate Security Documents, but subject to the
provisions of subparagraph 26.7.2 of this Subsection 26.7, by accepting this
Deed and the other Real Estate Security Documents, the Grantee agrees that (i)
Grantee's source of satisfaction of the indebtedness evidenced by the Secured
Note and/or secured by this Deed and Grantee's recourse with respect to the
breach of any covenants or other undertakings of the Grantors under this Deed or
the other Real Estate Security Documents (subject, however, to Grantee's right
to cure the Grantors' defaults in accordance with the provisions of the Real
Estate Security Documents, including, without limitation, Article 12 of this
Deed; provided, however, such limitation on recourse shall nevertheless apply to
the Grantors' obligations under the last sentence of Article 12 and comparable
provisions of the other Real Estate Security Documents) is limited to the
Mortgaged Premises, the rents, issues, profits therefrom and all other property
covered by this Deed, any other collateral or security for the Secured Note and
this Deed, and any other assets of the Owner and (ii) neither the Ground Lessor
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nor any of the partners (or constituent partners in such partners), officers,
directors or shareholders of the Grantors or any person comprising or
controlling the Grantors (collectively, the "Exculpated Parties") shall have any
personal liability for the payment of said indebtedness or for the performance
of any other covenant or other undertaking of the Grantors under any of the Real
Estate Security Documents, and the Grantee will not seek to enforce out of any
assets, other than the Mortgaged Premises and other collateral or security for
the Secured Note and this Deed, of the Ground Lessor or the Exculpated Parties,
any judgment for any sum of money which is or may be payable under the Secured
Note or under any of the other Real Estate Security Documents, or for any
deficiency remaining after foreclosure of the Deed or sale pursuant to the power
of sale herein, nor shall Grantee bring any action against Owner, Ground Lessor
or any of the Exculpated Parties seeking specific performance of any obligations
under any of the Real Estate Security Documents, unless and except as may be
necessary in order to fully foreclose or to otherwise realize upon the
collateral available to Grantee for the satisfaction of the indebtedness secured
hereby.
26.7.2 (1) Nothing herein contained shall be deemed to be a
release, waiver, discharge or impairment of the Secured Note, this Deed or any
other collateral or security given or to be given to secure the Secured Note or
otherwise in connection therewith or herewith, or shall preclude the Grantee
from foreclosing the Deed or exercising its power of sale in case of any default
hereunder or under the Real Estate Security Documents, or from enforcing any of
its rights or remedies hereunder or under the Secured Note, except as set forth
in this Section 26.7, including the appointment of a receiver or putting into
effect the assignment of said rents, issues, or profits contained in this Deed
or any separate assignment of rents, or from obtaining injunctive relief under
the Real Estate Security Documents or from enforcing any of its rights with
respect to any other security or collateral.
(2) Furthermore, nothing herein contained shall be
taken to prevent recourse to and the enforcement (i) against the Issuer of its
obligations to the extent provided for in the Indenture or (ii) against the
Guarantor of its obligations to the extent provided for in the Guaranties. It is
specifically agreed that the foregoing provisions of this Section 26.7 shall not
operate to relieve any of the Grantors or the Exculpated Parties of any
liabilities such parties would otherwise have under the Real Estate Security
Documents:
(a) For fraud or intentional or willful misrepresentation;
(b) For any distribution to the partners of the Owner or the
Ground Lessor (whether as a capital distribution or a repayment of
debt or otherwise) of any monies arising with respect to the
Premises collected by the Owner or the Ground Lessor, as the
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case may be, after a default has occurred under the Deed and the
Grantee has given notice to the Grantors of such default, to the
full extent of the monies so collected and distributed to any of
the partners of the Owner or the Ground Lessor, as the case may
be, during the period commencing with the giving of any such
notice and continuing until the default has been cured as
permitted by and in accordance with the terms of this Deed;
(c) For the payment of Ground Rent by the Owner and/or the
receipt thereof by the Ground Lessor in violation of Subsection
25.3 of this Deed;
(d) For the fair market value as of the time of the giving
of any notice referred to in clause (b) hereinabove of any
personal property or fixtures removed or disposed of by the Owner
or the Ground Lessor, other than in accordance with the terms of
this Deed, during the period commencing with the giving of any
such notice and continuing until the default has been cured as
permitted by and in accordance with the terms of this Deed;
(e) For the misapplication by the Owner, Ground Lessor or
their agents, employees or Affiliates of any proceeds, to the full
extent of said misapplied proceeds, under any insurance policies
or awards resulting from condemnation or the exercise of the power
of eminent domain or by reason of damage, loss or destruction to
any portion of the Premises;
(f) For any damage to or destruction of the Premises
intentionally or recklessly committed by the Ground Lessor or the
Owner; and
(g) For the Grantors' obligations under the Environmental
Indemnity, subject to the provisions concerning recourse set forth
therein.
26.8 Grantors hereby waive and renounce all homestead and similar
exemption rights provided for by the Constitution and Laws of the United States
and/or the State of Georgia in and to the Mortgaged Premises as against the
collection of the indebtedness secured by this Deed, or any part thereof.
26.9 Grantors agree that where, by the terms of this conveyance or
the indebtedness secured hereby, a day is named or a time fixed for the payment
of any sum of money or the performance of any agreement, the time stated enters
the consideration and is of the essence of the whole contract.
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<PAGE>
26.10 Any provision of this Deed or any of the other Real Estate
Security Documents notwithstanding, the amount of any attorneys' fees payable by
the Grantors to the Grantee under this Deed or under any of the other Real
Estate Security Documents shall not be governed by the provisions of O.C.G.A.
ss 13-1-11.
26.11 If the Secured Note is accelerated after an Event of
Default, such Event of Default shall be deemed to be "continuing" hereunder
unless such Event of Default is waived, rescinded or annulled as contemplated by
Sections 502 or 513 of the Indenture or all of the Obligations are paid.
26.12 The Grantee shall not, by signing this Deed, become or be
considered to be an endorser, co-maker or co-obligor on the Secured Note or on
any other obligation of the Grantor secured by this Deed.
26.13 This Deed may be executed in any number of counterparts,
each of which shall be an original, but all of which together shall constitute
one and the same instrument.
27. APPLICATION OF FUNDS
At any time prior to the indefeasible satisfaction in full of all
obligations under the Secured Note, the Owner shall not, without the prior
consent of the Grantee, apply or distribute any sums other than in any one or
more of the following ways (to the extent not prohibited by the Financing
Documents): (a) in respect of Deductions (as defined in the Management
Agreement), (b) payments from reserve funds of Owner for the purposes for which
the reserves were established, (c) payments made to the Ground Lessor to
purchase the fee estate in the Land pursuant to the Purchase Option (and
customary transaction costs incurred in Connection therewith) but only if and
when such option is exercised by the Owner, (d) payments (other than Deductions)
for the operation, repair, maintenance, improvement or restoration of the Hotel
and (e) payments for the following purposes, as long as such payments are made
in accordance with the following priorities:
(1) first to the payment of Ground Rent (as presently defined
in the Ground Lease) then due and payable;
(ii) then to the payment of all interest and any and all
other sums then due and payable under the Secured Note, this Dead
or any other Financing Documents;
(iii) then to the payment of all interest and all other sums
then due and payable under the Bankers Trust Loan and such other
unsecured loans to the Owner made in accordance with Section
7.6.3, if any, to the extent the proceeds thereof are used for the
payout of any items
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required by this Article 27 to be paid pursuant to clauses (a),
(d), (i) and (ii) above;
(iv) then to the payment of all interest and any and all
other sums then outstanding under Guaranty Loans;
(v) then to the full repayment to Marriott of any outstanding
"Interest Loans" made by Marriott to the Owner pursuant to the
Marriott Commitment;
(vi) then to the payment of all interest and any and all
other sums then due and payable under any loans made in accordance
with Section 7.6.4, if any;
(vii) then to the payment of all interest and any and all
other sums then due and payable under any other loans made to the
Owner other than as described in (viii) below;
(viii) then to the payment of all interest and any and all
other sums then outstanding under any other loans made by Marriott
and by partners in the Owner to the Owner in accordance with the
Owner's presently existing partnership agreement; and
(ix) then for any purpose whatsoever.
28. SUCCESSORS AND ASSIGNS
The covenants and agreements contained in this Deed shall run with the
land and bind the Grantors, the heirs, executors, administrators, legal
representatives, successors and assigns of the Grantors and all subsequent
owners, encumbrancers and tenants of the Mortgaged Premises, or any part thereof
(provided that nothing in this Section shall be deemed to constitute the consent
of the Grantee to any sale, lease, assignment, conveyance or encumbrance of the
Mortgaged Premises by Grantors), and shall bind and inure to the benefit of the
Grantee, its successors and assigns and all subsequent beneficial owners of this
Deed.
29. GENDER AND NUMBER; CONSTRUCTION
29.1 In this Deed, wherever the context so requires, the neuter
gender includes the masculine and/or feminine gender and the singular number
includes the plural.
29.2 The words "include" or "including" or words of similar import
shall be deemed to be followed by the words "but not limited to" or "without
limitation".
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30. INVALIDITY OF PROVISIONS
If fulfillment of any provision hereof or any transaction related
hereto or to the Secured Note, at the time performance of such provisions shall
be due, shall involve transcending the limit of validity prescribed by law, then
ipso facto, the obligation to be fulfilled shall be reduced to the limit of such
validity; and if any clause or provisions herein contained operates or would
prospectively operate to invalidate this Deed in whole or in part, then such
clause or provision only shall be held for naught, as though not herein
contained, and the remainder of this Deed shall remain operative and in full
force and effect.
31. GRANTEE'S REPRESENTATIVE
The Grantee has, by separate agreement (the "Administrative Services
Agreement"), appointed Eastdil Realty, Inc. ("Eastdil"), as the Grantee's
representative (referred to herein as the "Administrative Services
Representative") in exercising certain consent rights expressly granted in
Subsections 4.5, 5.10 and 9.1 of this Deed and performing certain services on
behalf of the Collateral Trustee. The Grantors and their representatives shall
meet with the Administrative Services Representative and its representatives
from time to time, but not less than once per year, as reasonably requested by
the Grantee. Any action by the Administrative Services Representative pursuant
to this Deed or the other Financing Documents in accordance with the
Administrative Services Agreement shall be binding upon the Grantee. The Owner
shall pay or cause to be paid all fees and
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expenses required to be paid to the Administrative Services Representative under
the Administrative Services Agreement.
IN WITNESS THE EXECUTION HEREOF, Grantors and Grantee have executed
this Deed as of the day and year first above written.
GRANTORS:
IVY STREET HOTEL LIMITED PARTNERSHIP
Signed, sealed and By: Atlanta Marriott Marquis
delivered in the Limited Partnership,
presence of: General Partner
[N.P. SEAL]
/s/ Carolyn Colton
- - ----------------------- By: Marriott Marquis Corporation,
Witness General Partner
/s/ Lisa J. Zydel By: /s/ Robert E. Parsons, Jr.
- - ---------------------------- ---------------------------
Notary Public Name: Robert E. Parsons, Jr.
Title: President
Commission
Expiration Date:
LISA J. ZYDEL
NOTARY PUBLIC, State of New York
No. 4746837
Qualified in Suffolk County
Commission Expires April 30, 1991
- - ------------------------------ Attest: Stephen McKenna
(NOTARIAL SEAL) -----------------------
Its Assistant Secretary
-------------------
(CORPORATE SEAL)
[CORP.
SEAL]
By: Neal M. Kamin (SEAL)
Signed, sealed and -------------------------
delivered in the John C. Portman, Jr.,
presence of: General Partner
By: Neal M. Kamin,
[N.P. SEAL] pursuant to a Power
of Attorney recorded on
/s/ Carolyn Colton July 11, 1990, in the
- - ------------------------------ Office of the Clerk of
Witness the Superior Court of
Fulton County, Georgia,
/s/ Sandra I. Schmitt in Deed Book 13547 at
- - ------------------------------ Page 2.
Notary Public
Commission
Expiration Date: 10-2-91
- - ------------------------------
(NOTARIAL SEAL)
SANDRA I. SCHIMITT
NOTARY PUBLIC, State of New York
No. 41-4956835
Qualified in Queens County
Term Expires Oct 2, 191
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<PAGE>
ATLANTA MARRIOTT MARQUIS LIMITED
PARTNERSHIP
Signed, sealed and By: Marriott Marquis Corporation,
delivered in the General Partner
presence of:
/s/ Carolyn Colton By: /s/ Robert E. Parsons, Jr.
- - ------------------------------ ----------------------------
Witness Name: Robert E. Parsons, Jr.
Title: President
/s/ Lisa J. Zydel
- - ------------------------------ Attest: /s/ Stephen McKenna
Notary Public ------------------------
Its Assistant Secretary
--------------------
(CORPORATE SEAL)
Commission
Expiration Date:
- - ------------------------------
(NOTARIAL SEAL)
[N.P.
SEAL]
LISA J. ZYDEL
NOTARY PUBLIC, State of New York
No. 4746837
Qualified in Suffolk County
Commission Expires April 30, 1991
[CORP.
SEAL]
GRANTEE:
Signed, sealed and MARRIOTT/PORTMAN FINANCE CORPORATION
delivered in the
presence of:
/s/ Carolyn Colton By: /s/ Douglas W. Miller
- - ------------------------------ ----------------------------
Witness Name: Douglas W. Miller
Title: Vice President
/s/ Sandra I. Schmitt Attest: /s/ Neal M. Kamin
- - ------------------------------ ---------------------------
Notary Public Its Assistant Secretary
----------------------
(CORPORATE SEAL)
Commission
Expiration Date: 10-2-91
- - ------------------------------
(NOTARIAL SEAL)
SANDRA I. SCHIMITT
NOTARY PUBLIC, State of New York
No. 41-4956835
Qualified in Queens County
Term Expires Oct 2, 1991
[N.P. [CORP.
SEAL] SEAL]
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<PAGE>
EXHIBIT A
DESCRIPTION OF THE 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 degree 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 degree 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 Partnershlp, 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.
<PAGE>
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.
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<PAGE>
(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) (as
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.
-3-
<PAGE>
EXHIBIT B
PERMITTED EXCEPTIONS
1. a. All taxes for the year 1990, liens not yet due or payable, and
subsequent years.
b. The following matters as 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:
1. Stairs and grate encroaching onto property adjoining to the southwest;
2. Twelve (12') foot diameter column centered on the southwesterly most
boundary line of the Premises;
3. Three (3) planters encroaching onto property adjoining to the
southwest;
4. Air vent encroaching onto property adjoining to the southwest;
5. Overhead concrete structures encroaching onto the Rights-of-Way of
Peachtree Center Avenue, Baker Street, Courtland Street and Harris
Street;
6. Air vent encroaching onto property adjoining to the west-northwest;
7. Three (3) planters encroaching onto property adjoining to the
west-northwest;
8. Stairs and grate encroaching onto property adjoining to the northwest;
9. Five (5') feet of a fifteen (15') foot Georgia Power vault easement
traversing a portion of the northerly boundary line of the Premises;
10. Mechanical vault located in the northerly portion of the Premises and
encroaching onto the Right-of-Way of Baker Street;
11. Two (2) islands located on the northerly portion of the Premises and
encroaching onto the Right-of-Way of Baker Street;
<PAGE>
12. Two (2) water meters located on the northeasterly boundary line of the
Premises;
13. Three (3) signs located on the northeasterly boundary line of the
Premises;
14. Seven (7) signs located on the southeasterly and southerly boundary
lines of the Premises;
15. Steel pipe with clean-outs traversing a portion of the southerly
boundary line of the Premises and encroaching onto the Rights-of-ways
of Courtland Street and Harris Street;
16. Grate traversing a portion of the southerly boundary line of the
Premises; and
17. Paving and curbing located throughout the Premises and encroaching
onto the Rights-of-Ways of Peachtree Center Avenue, Baker Street,
Courtland Street and Harris Street.
c. Easements, Restrictions and Covenants created pursuant to Declaration of
Easements and Restrictions between Ivy Street Associates, Ltd. and The
S. J. Company, dated September 1, 1982, recorded at Deed Book 8291, Page
40, Records of Fulton County, Georgia; as amended by First Amendment to
Declaration of Easements and Restrictions dated as of August 4, 1983, and
recorded at Deed Book 8657, Page 385 in the aforesaid Records.
d. Easement Agreement between The S. J. Company, a Georgia limited
partnership, and Georgia Power Company, dated September 1, 1982, recorded
at Deed Book 8291, Page 76, Records of Fulton County, Georgia.
-2-
<PAGE>
EXHIBIT C
SECURITY AGREEMENT INFOMATION
PART 1
Description of the Debtor and the Secured Party
A. Debtor:
1. Name and Legal Structure:
The Debtor is comprised of Ivy Street Hotel Limited Partnership, a Georgia
limited partnership, and Atlanta Marriott Marquis Limited Partnership, a
Delaware limited partnership.
2. The principal place of business of the Debtor in the State of Georgia
is located at 265 Peachtree Center Avenue, Atlanta, Georgia 30303.
3. Ivy Street Hotel Limited Partnership has been using or operating under
said name and legal structure without change since July 31, 1982 and
Atlanta Marriott Marquis Limited Partnership has been using or operating
under said name and legal structure without change since May 28, 1985.
B. Secured Party: Marriott/Portman Finance Corporation is a Delaware
corporation.
<PAGE>
PART 2
Notice Mailing Addresses of the Debtor and the Secured Party
A. The mailing address of the Debtor is:
Ivy Street Hotel Limited Partnership
10400 Fernwood Road
Bethesda, Maryland 20058
Attention: Legal Department/Hotel Operations
with a copy to:
John C. Portman, Jr.
c/o Portman Properties
225 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attention: Legal Department
Atlanta Marriott Marquis Limited Partnership
10400 Fernwood Road
Bethesda, Maryland 20058
Attention: Legal Department/Hotel Operations
B. The mailing address of the Secured Party is:
Marriott/Portman Finance Corporation
10400 Fernwood Road
Bethesda, Maryland 20058
<PAGE>
EXHIBIT D
EXISTING INDEBTEDNESS
1. Amounts currently owing and amounts which from time to time herafter may be
owing by Owner in accordance with the provisions of the following:
Loan Agreement between Ivy Street Hotel Limited Partnership and Bankers
Trust Company dated as of October 15, 1987
Offering Basis Finance Agreement between Ivy Street Motel Limited
Partnership and Bankers Trust Company dated October 15, 1987
2. Amounts currently owing by Owner to Marriott under loans made pursuant to
the Marriott Commitment (which loans shall nevertheless be subject to the
provisions of Section 7.6.1 hereof).
Exhibit 10.3
PRINCIPAL GUARANTY
PRINCIPAL GUARANTY dated as of July 10, 1990, made by MARRIOTT
CORPORATION, a Delaware corporation (the "Guarantor") having an address at 10400
Fernwood Road, Bethesda, Maryland 20058.
W I T N E S S E T H:
WHEREAS, Marriott/Portman Finance Corporation, a Delaware corporation
(the "Issuer"), The Citizens and Southern National Bank, as collateral trustee,
senior trustee and subordinated trustee, and the Guarantor, which Guarantor
expects to derive benefits, directly or indirectly, from the proceeds of the
offering described herein, have entered into an Indenture dated as of July 1,
1990 (as amended, modified or supplemented from time to time, the "Indenture")
in connection with the issuance by the Issuer of U.S. $159,000,000 Principal
Amount of Senior Secured Notes due July 10, 1997 (the "Senior Notes") and of
U.S. S40,000,000 Principal Amount of Subordinated Secured Notes due July 10,
1997 (the "Subordinated Notes"). The Senior Notes and the Subordinated Notes are
collectively referred to herein as the "Notes";
WHEREAS, this Principal Guaranty is provided pursuant to the terms of
the Indenture and the Subordinated Notes;
WHEREAS, it is a condition precedent to the issuance of the
Subordinated Notes by the Issuer pursuant to the Indenture that the Guarantor
shall have executed and delivered to the Subordinated Trustee a guaranty of
certain of the obligations of the Issuer under the Subordinated Notes; and
WHEREAS, the Guarantor has determined that its execution, delivery and
performance of this Principal Guaranty directly benefit, and are within the
corporate purposes and in the best interests of, the Guarantor;
NOW, THEREFORE, in consideration of the premises and the agreements
herein, the Guarantor hereby makes the following representations, warranties,
covenants and agreements to the Collateral Trustee, for the benefit of each
holder of the Subordinated Notes (a "Holder" and collectively the "Holders") and
to each Holder, and hereby agrees as follows:
SECTION 1. Definitions. Reference is hereby made to the Indenture for a
statement of the terms thereof. All terms used in this Principal Guaranty which
are defined therein and not
<PAGE>
otherwise defined herein shall have the same meanings herein as set forth
therein.
SECTION 2. Principa1 Guaranty.
(a) The Guarantor hereby (i) irrevocably, absolutely and
unconditionally guaranties to the Collateral Trustee, for the benefit of each
Holder, and to each Holder, the prompt payment as and when due and payable at
Maturity of that portion of the Principal Amount of the Subordinated Notes that
shall constitute the Original Principal Amount of the Subordinated Notes (the
"Obligations"); and (ii) agrees to pay any and all reasonable expenses
(including counsel fees and expenses) incurred by the Collateral Trustee and the
Holders in enforcing their rights under this Principal Guaranty; provided,
however, that, notwithstanding any other provision of this Principal Guaranty to
the contrary, the maximum liability of the Guarantor hereunder with respect to
the Obligations shall in no event exceed the Guarantor's Maximum Principal
Guarantied Amount (as defined below). The Guarantor and the Collateral Trustee
acknowledge that the Obligations may at any time and from time to time exceed
the Maximum Principal Guarantied Amount and that same shall not impair this
Principal Guaranty or affect the rights and remedies of the Collateral Trustee
and the Holders hereunder.
(b) The Maximum Principal Guarantied Amount shall mean (i) $14,000,000
if the Guaranty Default Date (as defined below) occurs during the period from
and including July 10, 1990 through December 31, 1990, or (ii) $24,000,000 if
the Guaranty Default Date occurs during the period from and including January 1,
1991 through December 31, 1991, or (iii) $30,000,000 if the Guaranty Default
Date occurs on or after January 1, 1992.
(c) For the purpose of this Principal Guaranty the "Guaranty Default
Date" shall be the date of Maturity of the Subordinated Notes (whether at the
Stated Maturity, or earlier by declaration of acceleration or call for
redemption or otherwise) unless the declaration of acceleration results from an
Event of Default described in Sections 501(1) or (2) of the Indenture, in which
event the Guaranty Default Date shall be the date of such Event of Default;
provided, however, that if the Event of Default with respect to which the
Principal Amount of the Subordinated Notes has been accelerated shall thereafter
be cured and cease to be continuing, the Maximum Principal Guarantied Amount
shall thereafter be determined by reference to the next succeeding Guaranty
Default Date.
(d) Upon the occurrence and during the continuance of an Event of
Default under the Indenture, the Collateral Trustee and the Holders of the
Subordinated Notes shall make demand for payment under this Principal Guaranty
prior to making demand for payment under the Interest/Principal Guaranty, but
only with
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respect to the payment of that portion of the Original Principal Amount of the
Subordinated Notes then due and payable that does not exceed the Maximum
Principal Guarantied Amount under this Principal Guaranty. If payment shall not
be made under this Principal Guaranty on or prior to the close of business on
the Business Day following the date of such demand, the Collateral Trustee and
the Holders shall have the right to exercise any and all of the remedies in
Article FIVE of the Indenture or Article 19 of the Deed, or otherwise.
SECTION 3. Covenants. The Guarantor agrees that so long as any of the
Obligations are outstanding, unless the Collateral Trustee shall otherwise
consent in writing to the Guarantor, the Guarantor will:
(a) Solvency Certificates. Deliver Solvency Certificates to the
Collateral Trustee not less than thirty (30) days prior to each scheduled
increase in the Maximum Principal Guarantied Amount. Each Solvency Certificate
shall state that the Guarantor will be Solvent after giving effect to the
scheduled increase in the Maximum Principal Guarantied Amount pursuant to which
the Solvency Certificate is being delivered.
(b) Financial Statements. Furnish to the Collateral Trustee (i) as soon
as practicable and in any event within sixty (60) days after the close of each
of the first three quarters of each fiscal year of the Guarantor, as at the end
of and for the period commencing at the end of the previous fiscal year and
ending with such quarter, an unaudited consolidated balance sheet of the
Guarantor and its subsidiaries, together with unaudited consolidated statements
of income and surplus accounts of the Guarantor and its subsidiaries, all in
reasonable detail and certified by the chief accounting officer of the Guarantor
but subject to year-end audit and adjustments; (ii) as soon as practicable and
in any event within ninety (90) days after the close of each fiscal year of the
Guarantor as at the end for the fiscal year just closed, a consolidated balance
sheet of the Guarantor and its subsidiaries and a consolidated statement of
income and surplus accounts of the Guarantor and its subsidiaries for such
fiscal year, all in reasonable detail and audited by Arthur Andersen & Co. or
other independent certified public accountants of recognized standing selected
by the Guarantor; and (iii) with reasonable promptness, copies of all regular
and periodical financial and/or other reports which the Guarantor and its
subsidiaries may make available generally to stockholders and bondholders.
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SECTION 4. Designated Events.
(a) For the purpose of this Principal Guaranty, the term "Designated
Event" shall mean an event or series of events as a result of which:
(i) any Person or Group (within the meaning of Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), other than the Marriott Family (as hereinafter defined) and other
than any Employee Benefit Plan (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended) maintained by the
Guarantor or by any Affiliate of the Guarantor, becomes the Beneficial Owner
(as defined in Rule 13d-3 under the Exchange Act) of Voting Shares (as
hereinafter defined) entitled to cast more than 30% of the votes entitled to
be cast by the holders of all then outstanding Voting Shares; provided that
if the Marriott Family shall not be at the time of the event the Beneficial
Owner, in the aggregate, of Voting Shares entitled to cast at least 20% of
the votes entitled to be cast by the holders of all then outstanding Voting
Shares, a Designated Event shall be deemed to have occurred if any Person or
Group, other than any such Employee Benefit Plan, becomes the Beneficial
Owner of Voting Shares entitled to cast more than 20% of the votes entitled
to be cast by the holders of all then outstanding Voting Shares. For the
purpose of this Principal Guaranty, the term "Voting Shares" shall mean any
issued and outstanding shares of capital stock of the Guarantor then
entitled to vote in the election of directors and the term "Marriott Family"
means J. Willard Marriott, Sr., his spouse, his siblings and their spouses
and any lineal descendants of any of them, and their spouses (or any
nominee, trust, foundation, holding company or Affiliate holding shares of
Marriott established by or for the benefit of any of them);
(ii) the Marriott Family shall acquire Voting Shares so that after
giving effect to such acquisition the Marriott Family shall become the
Beneficial Owner, in the aggregate, of Voting Shares entitled to cast more
than 50% of the votes entitled to be cast by the holders of all then
outstanding Voting Shares;
(iii) Guarantor shall merge or consolidate with or into another
Person (whether or not the Guarantor is the surviving corporation), or enter
into any sale, lease, exchange, transfer or other disposition (in a
transaction or series of related transactions) of all or substantially all
of the assets of the Guarantor, in either event pursuant to a transaction in
which all or substantially all of the Guarantor's Voting Shares are changed
into or exchanged for
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cash, securities or other property and excluding transactions between the
Guarantor and any of its Subsidiaries. For the purpose of this clause (iii)
only, the term "Subsidiary" shall mean any corporation or other entity of
which a majority of each class or series of equity securities or other
comparable ownership interests is owned, directly or indirectly, by the
Guarantor immediately prior to the time the merger, consolidation or
disposition of assets occurs;
(iv) Guarantor or any Subsidiary acquires, by merger, consolidation
or acquisition of assets or stock or otherwise, any Person whose total
assets on a consolidated basis have a fair market value (as determined in
good faith by the Board of Directors of the Guarantor, whose determination
shall be conclusive) which exceeds 50% of the fair market value (as
determined in good faith by the Board of Directors of the Guarantor, whose
determination shall be conclusive) of the Guarantor's total assets on a
consolidated basis immediately prior to such acquisition. For the purpose of
clauses (iv) and (vi) only, the term "Subsidiary" shall mean any corporation
or other entity of which the Guarantor owns a majority of the issued and
outstanding securities then entitled to vote in the election of directors,
general partners or other persons or entities holding similar duties,
obligations and powers;
(v) during any period of twenty-four (24) consecutive months,
Persons who at the beginning of such period constitute the Guarantor's Board
of Directors cease to constitute a majority of the directors then in office
other than with the consent of a majority of the Continuing Directors. For
the purpose of this clause (v), "Continuing Directors" shall mean a Person
who was a member of the Board of Directors of the Guarantor as of January 1,
1990, or a Person thereafter elected by the stockholders or appointed by the
Board of Directors whose appointment or recommendation by the Board of
Directors for election by the Guarantor's stockholders was approved by at
least a majority of the Continuing Directors then on the Board of Directors;
(vi) the Guarantor and/or any Subsidiary purchases or otherwise
acquires, directly or indirectly, the Guarantor's Voting Shares, if after
giving effect to any such acquisition, the Guarantor and its Subsidiaries
have acquired 30% or more of such Voting Shares within any period of twelve
(12) consecutive months; or
(vii) on any date, the Guarantor makes any distribution of cash,
property or securities (other than additional Voting Shares of the Guarantor
or regular cash dividends) to holders of the Guarantor's Voting Shares or
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purchases or otherwise acquires its Voting Shares and the sum of such
distributions and purchases during any period of twelve (12) consecutive
months is at least 30% of the aggregate fair market value (based on the
Current Market Price (as defined below)) of the Guarantor's outstanding
capital stock on the day prior to the first day of such distribution or
purchase. For the purpose of this Principal Guaranty, "Current Market Price"
shall mean the closing price (or, if none, the average of the last daily bid
and asked prices) of the applicable class of capital stock as quoted by the
primary securities exchange on which the stock is traded, or, if none, the
primary inter-dealer quotation system, which reports quotations for the
class of capital stock, for the last trading day immediately prior to the
occurrence of the event to which this definition applies.
The Guarantor shall give to the Collateral Trustee written notice of the
occurrence of a Designated Event, not later than 10 days following the date of
the first public announcement or public notice of the Designated Event in the
case of any Designated Event specified in clauses (i) or (ii) and not later than
10 days following the date of the occurrence of the Designated Event in the case
of any Designated event specified in clauses (iii), (iv), (v), (vi) or (vii).
(b) From and after the occurrence of a Triggering Event (as hereinafter
defined) the Guarantor shall comply with the provisions of Article Fourteen of
the Indenture. The term "Triggering Event" shall mean the reduction of the
Rating of the Guarantor by either Rating Agency to less than Baa3 (in the case
of Moody's Investor Services, Inc.) or BBB - (in the case of Standard & Poor's
Corporation) during the Determination Period. The term "Determination Period"
shall mean the 90-day period commencing on the first public announcement or
public notice of a Designated Event; provided that if a Rating Agency shall
publicly announce during such 90-day period that the Rating of the Guarantor is
under review, the Determination Period shall be extended for an additional
period, expiring on the earlier of 180 days following the initial commencement
of the Determination Period and the first Business Day following the public
announcement by the Rating Agency of the Rating of the Guarantor or that the
Rating of the Guarantor is no longer under review.
SECTION 5. Representations and Warranties. The Guarantor hereby
represents and warrants as follows:
(a) The Guarantor (i) is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation
as set forth on the first page hereof, (ii) has all requisite corporate power
and authority to execute, deliver and perform this Principal Guaranty, the
Interest/Principal Guaranty, the Indenture and each other
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<PAGE>
agreement or instrument related thereto to which the Guarantor is a party, and
(iii) is duly qualified to do business in every jurisdiction in which the
failure so to qualify could have a material adverse effect on the business of
the Guarantor and its consolidated subsidiaries taken as a whole.
(b) The Guarantor has examined the Indenture, including the Exhibits
annexed thereto, and all of the representations and warranties set forth in the
Indenture, to the extent the same relate to the Guarantor, are true and correct
in all material respects.
(c) Except for defaults, conflicts and breaches that do not materially
affect the Guarantor's right, authority and ability to perform its obligations
under the Indenture, the Notes, this Principal Guaranty, the Interest/Principal
Guaranty each other agreement or instrument related thereto to which the
Guarantor is a party (all such documents are together referred to herein as the
"Marriott Documents") or that do not materially impair the rights, remedies or
security of the Collateral Trustee and the Holders under this Principal
Guaranty, the execution, delivery and performance by the Guarantor of the
Marriott Documents (i) have been duly authorized by all necessary corporate
action, (ii) do not and will not contravene its charter or by-laws, law or any
contractual restriction binding on or affecting the Guarantor or any of its
properties, and (iii) do not and will not result in or require the creation of
any lien, security interest or other charge or encumbrance upon, or with respect
to, any of its properties.
(d) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or other regulatory body is required
on or prior to the date hereof for the due execution, delivery and performance
by the Guarantor of the Marriott Documents.
(e) Each of the Marriott Documents is a legal, valid and binding
obligation of the Guarantor, enforceable against the Guarantor in accordance
with its terms, except as enforcement of such terms may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally and except that the availability of equitable remedies is
subject to the discretion of the court before which any proceedings may be
brought.
(f) After giving effect to the transactions contemplated by the
Indenture and the execution and delivery of this Principal Guaranty and the
other Marriott Documents, the Guarantor has complied with and performed all of
its material covenants and agreements contained in all applicable provisions of
its agreements for borrowed money and there has not occurred any event of
default, or any condition, act or event, which upon
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the giving of notice or lapse of time or both, would constitute an event of
default, under its agreements for borrowed money, except for defaults that do
not materially affect the Guarantor's right, authority and ability to perform
its obligations under the Marriott Documents or do not materially impair the
Collateral Trustee's or the Holders' rights, remedies or security under this
Principal Guaranty.
(g) There is no action, suit or proceeding pending or, to the best of
the Guarantor's knowledge, threatened against or otherwise affecting the
Guarantor before any court or other governmental authority or any arbitrator
which may reasonably be expected to materially adversely affect the Guarantor's
ability to perform its obligations hereunder or under any other Marriott
Document.
(h) After giving effect to the transactions contemplated by the
Indenture, the Notes, this Principal Guaranty and the Interest/Principal
Guaranty, the Guarantor is Solvent.
(i) The Guarantor will do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence, rights
(charter and statutory) and franchises; provided, however, that the Guarantor
shall not be required to preserve any such right or franchise if it shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of the Guarantor.
SECTION 6. Events of Default. An "Event of Default" shall exist under
this Principal Guaranty if any of the following shall have occurred:
(a) the Guarantor defaults in the payment of its obligations with
respect to this Principal Guaranty as and when the same shall become due and
payable;
(b) the Guarantor defaults in the observation or performance of any
covenant made in Section 3(a) hereof and such default shall continue unremedied
for a period of ten (10) days after such default shall become known to the
Guarantor;
(c) the Guarantor defaults in the payment, observation or performance
of any covenant, condition or agreement set forth herein (other than the payment
of the Obligations or any covenant made in Section 3(a)) and such failure
continues for more than thirty (30) days after written notice of such default
has been given to the Guarantor by the Subordinated Trustee;
(d) any event of default under any Indebtedness (or any Refinancing
thereof), whether now existing or hereafter created, issued pursuant to the
Indenture, dated as of April 1, 1985, between the Guarantor and The First
National Bank of
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Chicago, as trustee (the "Marriott Indenture"), if either (i) such event of
default results from any failure to pay all or any Portion of such Indebtedness
as and when due (after giving effect to any applicable cure period) or (ii) as a
result of such event of default such Indebtedness (or such Refinancing) shall
become due and payable prior to the stated maturity thereof. As used in this
Section, "Refinancing" shall mean any Indebtedness issued in exchange for or the
proceeds of which are used to repay, refinance or otherwise retire for value
Indebtedness under the Marriott Indenture or any Refinancing;
(e) the entry by a court having jurisdiction of a decree or order for
relief with respect to the Guarantor in an involuntary case or proceeding
commenced against the Guarantor under any applicable Federal or state
bankruptcy, insolvency, reorganization (relating to an insolvency) or other
similar law or the appointment of a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official of the Guarantor, or of any
substantial part of its property, or in connection with such a proceeding
ordering the winding up or liquidation of its affairs, and any such decree or
order for relief or any such appointment remains unstayed and in effect for a
period of ninety (90) consecutive days;
(f) the commencement by the Guarantor of a voluntary case or proceeding
under any applicable Federal or state bankruptcy, insolvency, reorganization (in
connection with an insolvency) or other similar law or the commencement by the
Guarantor of any other case or proceeding to be adjudicated a bankrupt or
insolvent, or the consent by the Guarantor to the entry of a decree or order for
relief in an involuntary case or proceeding commenced against the Guarantor
under any applicable Federal or state bankruptcy, insolvency, reorganization (in
connection with the insolvency of the Guarantor) or other similar law, or the
filing by the Guarantor of a petition or answer or consent seeking
reorganization or relief under any applicable Federal or state bankruptcy,
insolvency or similar law, or the consent by the Guarantor to the filing of such
petition or to the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or similar official of any
substantial part of the property of the Guarantor, or the making by the
Guarantor of an assignment for the benefit of creditors generally, or the
admission by the Guarantor in writing of its inability to pay its debts
generally as they become due;
(g) any warranty, representation or other statement by the Guarantor
contained in this Principal Guaranty or any other writing delivered in
connection herewith or in connection with the Indenture or any other Marriott
Document shall prove to have been false or misleading in any material respect
when made and (i) the same is not cured or corrected within thirty (30) days
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after written notice thereof to the Guarantor by the Collateral Trustee, or (ii)
the same cannot be cured; or
(h) the Guarantor fails to pledge the Guaranty Support Collateral if
and as required in accordance with Article Fourteen of the Indenture.
The Guarantor acknowledges that an Event of Default under this
Principal Guaranty shall constitute an Event of Default under the Indenture with
the effect as in the Indenture provided.
SECTION 7. Guarantor's Obligations Unconditional.
(a) The Guarantor hereby guaranties, subject to the Maximum Principal
Guarantied Amount, that the Obligations will be paid strictly in accordance with
the terms of the Indenture. The liability of the Guarantor hereunder shall be
absolute and unconditional irrespective of: (i) any lack of validity,
irregularity or enforceability of the Indenture, the Interest/Principal
Guaranty, this Principal Guaranty, the Notes, the Real Estate Security Documents
or any other agreement or instrument relating thereto; (ii) any change in the
time, manner or place of payment of or in any other term in respect of all or
any of the Obligations, or any other amendment or waiver of, or consent to, any
departure from the Indenture, the Interest/Principal Guaranty, this Principal
Guaranty, the Real Estate Security Documents, the Notes or any other agreement
or instrument relating thereto; (iii) any exchange or release of or non-
perfection of any lien on or security interest in, any collateral, or any
release or amendment or waiver of or consent to any departure from the Deed, the
Secured Note, the Indenture or the Notes granted by the Collateral Trustee or by
any Holder, for all or any part of the Obligations, Drovided, however, that,
notwithstanding the foregoing, no such change, release, amendment, waiver or
consent shall, without the consent of the Guarantor, increase the Principal
Amount of the Subordinated Notes; (iv) any failure to enforce the provisions of
the Indenture, any Real Estate Security Documents, any Subordinated Note or any
other agreement or instrument relating thereto; or (v) any other circumstance
which might otherwise constitute a defense available to, or a discharge of, the
Owner, the Issuer or the Collateral Trustee or any other guarantor with respect
to the Obligations or the Guarantor with respect hereto or the obligations of
the Guarantor under any Marriott Documents.
(b) This Principal Guaranty (i) is a continuing guaranty and shall
remain in full force and effect until the indefeasible satisfaction in full of
the Obligations and the payment of the other expenses to be paid by the
Guarantor pursuant hereto; and (ii) shall continue to be effective or shall be
reinstated, as the case may be, if at any time any payment of
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any of the Obligations is rescinded or must otherwise be returned by any Holder
upon the insolvency, bankruptcy or reorganization of the Owner, the Issuer or
otherwise, all as though such payment had not been made.
(c) The Guarantor understands that upon the occurrence of an "Event of
Default" under the Deed causing the acceleration of the Secured Note, any
proceeds realized as a result of the foreclosure of the Mortgaged Premises or
any part thereof, or other enforcement of the Deed or any other disposition of
any collateral security for the Secured Note shall be deemed to have been
applied in the order of priority established by Section 506(a) of the Indenture,
notwithstanding that, as a result of the direction of any court, the Collateral
Trustee shall apply any of such payments or proceeds in any other or different
order of priority. Therefore, the Guarantor further agrees that in the event net
proceeds shall be realized as a result of the foreclosure of the Mortgaged
Premises or other enforcement of the Deed or otherwise (whether prior to or
after maturity of the Secured Note) or net proceeds shall be realized upon the
disposition of any other collateral security for the Secured Note, or if the
Collateral Trustee receives any other payments or prepayments of the Secured
Note or with respect of any of the collateral security for the Secured Note,
then, irrespective of the collateral security in respect of which such proceeds
were derived, without regard to the priority of application of such proceeds
pursuant to the Real Estate Security Documents, such payments or net proceeds
shall, for purposes of this Principal Guaranty, be deemed allocable, and be
applied, in accordance with the priorities established by Section 506(a) of the
Indenture.
SECTION 8. Waivers: Waiver of Subrogation.
(a) The Guarantor hereby waives (i) promptness and diligence; (ii)
notice of acceptance and notice of the incurrence of any Obligation by the
Issuer; (iii) notice of any actions taken by the Issuer, any Holder, the
Collateral Trustee, the Subordinated Trustee or any other party under the
Indenture, the Real Estate Security Documents or any other agreement or
instrument relating thereto; (iv) notice of any actions against the Owner taken
by the Issuer, any Holder, the Collateral Trustee, the Subordinated Trustee or
any other party under the Indenture, the Real Estate Security Documents or any
other agreement or instrument relating thereto; (v) (except for notices and
demands for which express provision is made in this Principal Guaranty) all
other notices, presentments, demands and protests, and all other formalities of
every kind in connection with the enforcement of the Obligations or of the
obligations of the Guarantor hereunder, the omission of or delay in which, but
for the provisions of this Section 8, might constitute grounds for relieving the
Guarantor of its obligations hereunder; (vi) the filing of a claim with a court
in the event of merger or
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bankruptcy of the Issuer or the Owner; and (vii) any requirement including,
without limitation, the provisions of Official Code of Georgia Annotated Section
10-7-24, that the Collateral Trustee, any Series Trustee or any Holder protect,
secure, perfect or insure any security interest or lien or any property subject
thereto or exhaust any right or take any action against the Owner, the Issuer or
any other Person or any collateral.
(b) Until the Notes and the Secured Note have been indefeasibly paid in
full, the Guarantor will not exercise any rights which it may have or acquire by
way of subrogation hereunder, by any payment made by it hereunder or otherwise.
Until the Notes and the Secured Note have been indefeasibly paid in full, the
Guarantor hereby unconditionally and irrevocably waives any subrogation rights
and any rights of reimbursement, contribution or indemnity from or with respect
to the Collateral Trustee, the Issuer, the Owner or AMMLP whether now or
hereafter existing and whether arising under contract, under law or equity or
otherwise. If any amount shall be paid to the Guarantor on account of such
subrogation rights at any time prior to the indefeasible payment in full of the
Notes and the Secured Note and all such other expenses, such amount (subject to
the limitations of Section 2 hereof) shall be paid over to the Collateral
Trustee, in the original form and on the date of receipt thereof, with any
necessary endorsements, to be applied in whole or in part by the Collateral
Trustee against the Obligations, whether matured or unmatured, and all such
other expenses in accordance with the terms of this Principal Guaranty and the
Indenture, as such Indenture relates to the Notes.
SECTION 9. Submission to Jurisdiction; Waivers.
(a) By the execution and delivery of this Principal Guaranty, the
Guarantor hereby irrevocably submits, to the extent permitted by applicable law,
to the jurisdiction of any New York State or Federal court sitting in New York
City, Borough of Manhattan, or of any Georgia State or Federal Court sitting in
Fulton County, Georgia in any action or proceeding arising out of or relating to
the Indenture, this Principal Guaranty or the Notes, and the Guarantor hereby
irrevocably agrees that all claims against it with respect to such action or
proceeding against the Guarantor may be heard and determined in such courts. To
the extent permitted by applicable law, no other court, except those described
in the preceding sentence, will have any jurisdiction in any action or
proceeding against the Guarantor arising out of or relating to the Indenture,
this Principal Guaranty or the Notes. The Guarantor hereby irrevocably appoints
The Prentice-Hall Corporation System, Inc. (the "Process Agent") at its offices
at One Gulf & Western Plaza, New York, New York 10023 and 66 Luckie Street,
Suite 604, Atlanta, Georgia 30303 as its agent to receive, on behalf of the
Guarantor and its property, service of the summons and complaint and any other
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process which may be served in any such action or proceeding in the courts
referred to in the first sentence of this Section 9. Such service may be made
by delivering by hand or certified or overnight mail a copy of such process to
the Guarantor, in care of the Process Agent at either of the Process Agent's
addresses set forth above and the Guarantor hereby irrevocably authorizes and
directs the Process Agent to accept such service on its behalf, with delivery of
a copy thereof to the Guarantor in the same manner and to the same address as
notices are required to be delivered to the Guarantor under Section 10. To the
extent permitted by applicable law, the Guarantor agrees that a final judgment
obtained in any such court described in the first sentence of this Section 9 in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
(b) Subject to the exclusive jurisdiction provided in Subsection (a)
above, nothing in this Section 9 shall affect the right of the Collateral
Trustee or any Holder to serve legal process in any other manner permitted by
law.
(c) To the extent that the Guarantor has or hereafter may acquire any
immunity from jurisdiction of any such court referred to in the first sentence
of Subsection (a) above or from any legal process (whether through service or
notice, attachment prior to judgment, attachment in aid of execution, execution
or otherwise) with respect to itself or its property, to the extent permitted by
applicable law, the Guarantor hereby irrevocably waives such immunity with
respect to its obligations under the Indenture, this Principal Guaranty and the
Notes.
(d) The Guarantor hereby irrevocably waives, to the extent permitted by
applicable law, any objection, including, without limitation, any objection to
the laying of venue or based on the grounds of forum non conveniens, which it
may now or hereafter have to the bringing of any such action or proceeding in
such respective courts referred to in the first sentence of Subsection (a)
above.
(e) The Guarantor and each Holder, by its purchase of the Subordinated
Notes, irrevocably waive (and, in the case of each Holder, direct the Collateral
Trustee to waive), to the extent permitted by applicable law, all right to trial
by jury in any action, proceeding or counterclaim arising out of or relating to
the Indenture, this Principal Guaranty or the Notes or the transactions
contemplated hereby or thereby.
(f) The appointment of the Process Agent pursuant to Subsection (a)
above shall be irrevocable so long as the Holders shall have any rights pursuant
to the terms of this Principal Guaranty until the appointment of a successor by
the Guarantor with the consent of the Collateral Trustee (which consent will
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<PAGE>
not be unreasonably withheld or delayed) and such successor's acceptance of such
appointment. The Guarantor further agrees to take any and all action, including
the execution and filing of any and all such documents and instruments, as may
be necessary to continue such designation and appointment of such agent or
successor.
SECTION 10. Notices. Etc. All notices and other communications provided
for hereunder to be given to
(a) the Collateral Trustee by the Guarantor shall be deemed sufficient
for every purpose hereunder when received by the Collateral Trustee at its
Corporate Trust Office, 33 North Avenue, Suite 700, Atlanta, Georgia 30308,
Attention: Corporate Trust Department, either personally, by courier, telegram,
facsimile transmission or mailed, first-class postage prepaid, or
(b) the Guarantor by the Collateral Trustee shall be sufficient for
every purpose hereunder when received by the Guarantor at 10400 Fernwood Road,
Bethesda, Maryland 20058, Attention: Legal Department, with copies to the
Issuer, or at any other address for the Guarantor filed with the Collateral
Trustee by the Guarantor if in writing and either delivered personally with
receipt acknowledged, or mailed by registered or certified mail, first-class
postage prepaid, return receipt requested. Any notice or other communication
delivered under this Section 10(b) shall be deemed given or served as of the
date of the delivery to the Guarantor, except that if a notice or other
communication is refused delivery or cannot be delivered because of a changed
address of which no notice was given, such notice or other document shall be
deemed to have been delivered on the date of such refusal or inability to
deliver.
SECTION ll. Miscellaneous.
(a) The Guarantor will make each payment hereunder in lawful money of
United States of America and in immediately available funds to the Collateral
Trustee at its address specified in Section 10 hereof.
(b) No amendment of any provision of this Principal Guaranty shall be
effective unless it is in writing and signed by the Guarantor, the Issuer and
the Collateral Trustee, and no waiver of any provision of this Principal
Guaranty, and no consent to any departure by the Guarantor therefrom, shall be
effective unless it is in writing and signed by the Issuer and the Collateral
Trustee, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
(c) No failure on the part of the Collateral Trustee or any Holder to
exercise, and no delay in exercising, any right
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<PAGE>
hereunder or under the Indenture or any other agreement or instrument related
thereto shall operate as a waiver thereof, nor shall any single or partial
exercise of any right preclude any other or further exercise thereof or the
exercise of any other right. The rights and remedies of the Collateral Trustee
or any Holder provided herein, in the Indenture and in any other agreement or
instrument related thereto are cumulative and are in addition to, and not
exclusive of, any rights or remedies provided by law. The rights of the
Collateral Trustee and the Holders under the Indenture or any other agreement or
instrument related thereto against any party thereto are not conditional or
contingent on any attempt by the Collateral Trustee or any Holder to exercise
any of its rights under the Indenture and the Real Estate Security Documents or
any other agreement or instrument related thereto against such party or against
any other Person.
(d) Any provision of this Principal Guaranty 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 portions hereof or thereof or affecting the validity or enforceability
of such provision in any other jurisdiction.
(e) This Principal Guaranty shall (i) be minding on the Guarantor and
its successors and assigns, and (ii) inure, together with all rights and
remedies of the Collateral Trustee and each Holder hereunder, to the benefit of
each Holder and its successors, transferees and assigns. Without limiting the
generality of clause (ii) of the immediately preceding sentence, each Holder may
assign or otherwise transfer its Subordinated Note and its rights under the
Indenture or any other agreement or instrument related thereto in accordance
with the terms of its Subordinated Note and the Indenture, to any other Person,
and such other Person shall thereupon become vested with all of the benefits
with respect thereto granted to the Holder herein or otherwise. None of the
rights or obligations of the Guarantor hereunder may be assigned or otherwise
transferred without the prior written consent of the Issuer and the Collateral
Trustee.
(f) This Principal Guaranty shall be governed by and construed in
accordance with the law of the State of New York applicable to contracts made
and to be performed wholly within such State.
(g) This Principal Guaranty shall not be valid or obligatory for any
purpose as to any Note until a certificate of authentication of such Note shall
have been manually executed by or on behalf of the Collateral Trustee.
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(h) Time is of the essence in the performance of this Principal
Guaranty.
IN WITNESS WHEREOF, the guarantor has caused this Principal Guaranty to
be executed by an officer thereunto duly authorized, as of the date first above
written.
MARRIOTT CORPORATION
By: /s/ Robert E. Parsons, Jr.
-----------------------------
Name: Robert E. Parsons, Jr.
Title: Asst. Treasurer
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Exhibit 10.4
INTEREST/PRINCIPAL GUARANTY
INTEREST/PRINCIPAL GUARANTY dated as of July 10, 1990, made by MARRIOTT
CORPORATION, a Delaware corporation (the "Guarantor") having an address at 10400
Fernwood Road, Bethesda, Maryland 20058.
W I T N E S S E T H :
WHEREAS, Marriott/Portman Finance Corporation, a Delaware corporation
(the "Issuer"), The Citizens and Southern National Bank, as collateral trustee,
senior trustee and subordinated trustee, and the Guarantor, which Guarantor
expects to derive benefits, directly or indirectly, from the proceeds of the
offering described herein, have entered into an Indenture dated as of July 1,
1990 (as amended, modified or supplemented from time to time, the "Indenture")
in connection with the issuance by the Issuer of U.S. $159,000,000 Principal
Amount of Senior Secured Notes due July 10, 1997 (the "Senior Notes") and of
U.S. $40,000,000 Principal Amount of Subordinated Secured Notes due July 10,
1997 (the "Subordinated Notes"). The Senior Notes and the Subordinated Notes are
collectively referred to herein as the "Notes";
WHEREAS, this Interest/Principal Guaranty is provided pursuant to the
terms of the Indenture and the Notes;
WHEREAS, it is a condition precedent to the issuance of the Notes by
the Issuer pursuant to the Indenture that the Guarantor shall have executed and
delivered to the Collateral Trustee a guaranty of certain of the obligations of
the Issuer under the Notes; and
WHEREAS, the Guarantor has determined that its execution, delivery and
performance of this Interest/Principal Guaranty directly benefit, and are within
the corporate purposes and in the best interests of, the Guarantor;
NOW, THEREFORE, in consideration of the premises and the agreements
herein, the Guarantor hereby makes the following representations, warranties,
covenants and agreements to the Collateral Trustee, for the benefit of each
holder of the Notes (a "Holder" and collectively the "Holders") and to each
Holder, and hereby agrees as follows:
SECTION 1. Definitions. Reference is hereby made to the Indenture for a
statement of the terms thereof. All terms used in this Interest/Principal
Guaranty which are defined
<PAGE>
therein and not otherwise defined herein shall have the same meanings herein as
set forth therein.
SECTION 2. Interest/Principa1 Guaranty.
(a) The Guarantor hereby irrevocably, absolutely and unconditionally
guaranties to the Collateral Trustee, for the benefit of each Holder, and to
each Holder the prompt payment as and when due and payable from time to time of
all amounts now or hereafter owing with respect to the Notes and the Indenture
for interest, Deferred Interest, Yield Maintenance Amount, Additional Interest
on the Notes or that portion of the Principal Amount of the Notes that shall
constitute the Accreted Amount, (collectively, the "Interest Obligations");
provided, however, that, notwithstanding any other provision of this
Interest/Principal Guaranty to the contrary, the maximum liability of the
Guarantor hereunder with respect to the Interest Obligations shall in no event
exceed the Maximum Interest Guarantied Amount (as defined below). The Guarantor
and the Collateral Trustee acknowledge that the Interest Obligations may at any
time and from time to time exceed the Maximum Interest Guarantied Amount and
that same shall not impair this Interest/Principal Guaranty or affect the rights
and remedies of the Collateral Trustee and the Holders hereunder.
(b) The Guarantor hereby irrevocably, absolutely and unconditionally
guaranties to the Collateral Trustee, for the benefit of each Holder, and to
each Holder the prompt payment as and when due and payable at Maturity of that
portion of the Principal Amount of the Notes that shall constitute the Original
Principal Amount of the Notes (the "Principal Obligations"); provided, however,
that notwithstanding any other provision of this Interest/Principal Guaranty to
the contrary, the maximum liability of the Guarantor hereunder with respect to
the Principal Obligations shall in no event exceed the Maximum Principal
Guarantied Amount (as defined below). The Guarantor and the Collateral Trustee
acknowledge that the Principal Obligations may at any time and from time to time
exceed the Maximum Principal Guarantied Amount and the same shall not impair
this Interest/Principal Guaranty or affect the rights and remedies of the
Collateral Trustee and the Holders hereunder.
(c) Subject to Section 2(d), below, the Maximum Interest Guarantied
Amount shall mean (A) (i) $25,000,000 if the Guaranty Default Date (as defined
below) occurs during the period from and including July 10, 1990 through and
including December 31, 1991; or (ii) $20,000,000 if the Guaranty Default Date
occurs at any time thereafter; less (B) the amount, if any, paid by the
Guarantor pursuant to this Interest/Principal Guaranty with respect to the
Interest Obligations and the Principal Obligations; less (C) the amount, if any,
of borrowings of the Owner (unsecured by any assets of the Owner) from the
Guarantor
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<PAGE>
to the extent that the proceeds of such borrowings have been applied to the
Interest Obligations or the Principal Obligations; less (D) the amount, if any,
of borrowings of the Owner (unsecured by any assets of the Owner) from any
Person not an Affiliate of the Guarantor (an "Unaffiliated Lender") to the
extent that (x) the proceeds of such borrowings have been applied to the payment
of the Interest Obligations or the Principal Obligations and (y) the repayment
of such borrowings to the Unaffiliated Lender has been guarantied by the
Guarantor; plus (E) the amount, if any, repaid by the Owner or the Issuer to the
Guarantor in respect of the amounts described in clause (B) and (C) above; plus
(F) the amount, if any, repaid by the Owner to the Unaffiliated Lender in
respect of the amounts described in clause (D) above.
(d) Notwithstanding any other provision of this Interest/Principal
Guaranty or any Financing Document, (i) the Guarantor shall not be required to
make any payment of Interest Obligations with respect to the Senior Notes
pursuant to this Interest/Principal Guaranty to the extent such payment, when
added to the sum of (X) all payments of Interest Obligations with respect to the
Senior Notes previously paid by the Guarantor pursuant to this
Interest/Principal Guaranty or previously paid by the Owner pursuant to
borrowings described in clauses (C) or (D) of Section 2(c) above, to the extent
proceeds thereof were applied to the payment of Interest Obligations (but not
Principal Obligations) on the Senior Notes, less the amount of any repayments
described in clauses (E) or (F) of Section 2(c) above to the extent such
repayments were applied to the repayment of payments or borrowings the proceeds
of which were applied to the payment of Interest Obligations (but not Principal
Obligations) on the Senior Notes, and (Y) 0.79875 (determined by dividing the
sum of the total interest, Deferred Interest and Accreted Amount that will
accrue on the Senior Notes during their term by the sum of the total interest,
Deferred Interest and Accreted Amount that will accrue on the Senior Notes and
the Subordinated Notes during their term) multiplied by the amount of any
payments of Ground Rent (as defined in the Deed) made from the proceeds of Cash
Flow Loans (as defined in the Marriott Commitment) made by the Guarantor
pursuant to the Marriott Commitment (as defined in the Deed) to the extent such
portion of such Cash Flow Loans has not been repaid to Guarantor pursuant to the
Marriott Commitment ("Net Guarantor Ground Lease Payments"), would cause the sum
of all such payments to exceed twenty percent (20%) of the total interest,
Deferred Interest and Accreted Amount that will accrue on the Senior Notes
during their term (i.e., 20% of $119,460,327); and (ii) the Guarantor shall not
be required to make any payment of Interest Obligations with respect to the
Subordinated Notes pursuant to this Interest/Principal Guaranty to the extent
such payment, when added to the sum of (X) all payments of Interest Obligations
with respect to the Subordinated Notes previously paid by the Guarantor pursuant
to this
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<PAGE>
Interest/Principal Guaranty or previously paid by the Owner pursuant to
borrowings described in clauses (C) or (D) of Section 2(c) above, to the extent
proceed thereof were applied to the payment of Interest Obligations (but not
Principal Obligations) on the Subordinated Notes, less the amount of any
repayments described in clauses (E) or (F) of Section 2(c) above, to the extent
such repayments were applied to the repayment of payments or borrowings the
proceeds of which were applied to the payment of Interest Obligations (but not
Principal Obligations on the Subordinated Notes), and (Z) 0.20125 (determined by
dividing the sum of the total interest, Deferred Interest and Accreted Amount
that will accrue on the Subordinated Notes during their term by the sum of the
total interest, Deferred Interest and Accreted Amount that will accrue on the
Senior Notes and the Subordinated Notes during their term) multiplied by the
amount of Net Guarantor Ground Lease Payments, would cause the sum of all such
payments to exceed twenty percent (20%) of the total interest, Deferred Interest
and Accreted Amount that will accrue on the Subordinated Notes during their term
(i.e., 20% of $30,097,793).
(e) The Maximum Principal Guarantied Amount shall mean (A)(i) zero if
the Guaranty Default Date occurs during the period from and including July 10,
1990 through and including December 31, 1991; or (ii) $2,000,000 if the Guaranty
Default Date occurs during the period from and including January 1, 1992 through
and including December 31, 1992; or (iii) $9,000,000 if the Guaranty Default
Date occurs during the period from and including January 1, 1993 through and
including December 31, 1993; or (iv) $16,000,000 if the Guaranty Default Date
occurs during the period from and including January 1, 1994 through and
including December 31, 1994; or (v) $20,000,000 if the Guaranty Default Date
occurs on or after January 1, 1995; less (B) the sum of the amounts, if any,
specified in clauses (B), (C) and (D) of Section 2(c) above; plus (C) the sum of
the amounts, if any, specified in clauses (E) and (F) of Section 2(c).
(f) For the purpose of this Interest/Principal Guaranty the "Guaranty
Default Date" shall be the date of Maturity of the Notes (whether at the Stated
Maturity, or earlier by declaration of acceleration or call for redemption or
otherwise), unless the declaration of acceleration results from an Event of
Default described in Sections 501(1) or (2) of the Indenture, in which case the
Guaranty Default Date shall be the date of such Event of Default; provided,
however, that if the Event of Default with respect to which the Interest
Obligations or the Principal Obligations have been accelerated shall thereafter
be cured and cease to be continuing, the Maximum Interest Guarantied Amount and
the Maximum Principal Guarantied Amount, as the case may be, shall thereafter be
determined by reference to the next succeeding Guaranty Default Date.
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<PAGE>
(g) The Guarantor hereby agrees to pay any and all reasonable expenses
(including counsel fees and expenses) incurred by the Collateral Trustee and the
Holders in enforcing their rights under this Interest/Principal Guaranty.
SECTION 3. Additional Provisions
(a) Payments of Interest Obligations pursuant to this
Interest/Principal Guaranty shall, pursuant to Section 506(a)(v) of the
Indenture, be made with respect to the Senior Notes and the Subordinated Notes
ratably, without preference or priority of any kind, according to the amounts
due and payable for the respective Interest Obligations. Notwithstanding the
foregoing, if an Event of Default under the Indenture shall have occurred and be
continuing, any moneys collected by the Collateral Trustee, any Series Trustee
or any Holder pursuant to this Interest/Principal Guaranty shall be applied as
provided in Section 506(a)(ii) of the Indenture.
(b) Upon the occurrence and during the continuance of an Event of
Default under the Indenture, the Collateral Trustee and the Holders of the
Subordinated Notes shall make demand for payment under the Principal Guaranty
prior to making demand for payment under this Interest/Principal Guaranty, but
only with respect to the payment of that portion of the Original Principal
Amount of the Subordinated Notes then due and payable that does not exceed the
Maximum Principal Guarantied Amount under the Principal Guaranty. If payment
shall not be made under the Principal Guaranty on or prior to the close of
business on the Business Day following the date of such demand, the Collateral
Trustee and the Holders shall have the right to exercise any and all of the
remedies provided in Article Five of the Indenture or Article 19 of the Deed, or
otherwise.
(c) Upon the occurrence and during the continuance of an Event of
Default under the Indenture with respect to the payment of Interest Obligations
on the Notes, the Collateral Trustee and/or the Holders shall make demand for
payment of all such due and unpaid Interest Obligations under this
Interest/Principal Guaranty prior to exercising the remedies provided in Article
Five of the Indenture or Article 19 of the Deed. If payment shall not be made
under this Interest/Principal Guaranty on or prior to the close of business on
the Business Day following the date of such demand, the Collateral Trustee and
the Holders shall have the right to exercise any and all of the remedies
provided in Article Five of the Indenture or Article 19 of the Deed, or
otherwise.
SECTION 4. Covenants. The Guarantor agrees that so long as any of the
Interest Obligations or Principal Obligations (individually and collectively,
the "Obligations") are
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outstanding, unless the Collateral Trustee shall otherwise consent in writing to
the Guarantor, the Guarantor will:
(a) Financial Statements. Furnish to the Collateral Trustee (i) as soon
as practicable and in any event within sixty (60) days after the close of each
of the first three quarters of each fiscal year of the Guarantor, as at the end
of and for the period commencing at the end of the previous fiscal year and
ending with such quarter, an unaudited consolidated balance sheet of the
Guarantor and its subsidiaries, together with unaudited consolidated statements
of income and surplus accounts of the Guarantor and its subsidiaries, all in
reasonable detail and certified by the chief accounting officer of the Guarantor
but subject to year-end audit and adjustments; (ii) as soon as practicable and
in any event within ninety (90) days after the close of each fiscal year of the
Guarantor as at the end and for the fiscal year just closed, a consolidated
balance sheet of the Guarantor and its subsidiaries and a consolidated statement
of income and surplus accounts of the Guarantor and its subsidiaries for such
fiscal year, all in reasonable detail and audited by Arthur Andersen & Co. or
other independent certified public accountants of recognized standing selected
by the Guarantor; and (iii) with reasonable promptness, copies of all regular
and periodical financial and/or other reports which the Guarantor and its
subsidiaries may make available generally to stockholders and bondholders.
(b) Unsecured Borrowings. Furnish to the Collateral Trustee, as soon as
practicable and in any event within ninety (90) days after the close of each
fiscal year of the Guarantor, as at the end and for the fiscal year just closed,
an Officer's Certificate of the Guarantor setting forth the following:
(i) the outstanding amount, if any, of unsecured borrowings of the
Owner from the Guarantor to the extent that the proceeds of such borrowings
have been applied to each of (A) the Interest Obligations with respect to
the Senior Notes, (B) the Principal Obligations with respect to the Senior
Notes, (C) the Interest Obligations with respect to the Subordinated Notes,
and (D) the Principal Obligations with respect to the Subordinated Notes;
(ii) the outstanding amount, if any, of borrowings of the Owner
(unsecured by any assets of the Owner) from an Unaffiliated Lender, the
repayment of which to the Unaffiliated Lender has been guarantied by the
Guarantor, to the extent that the proceeds of such borrowings have been
applied to the payment of each of (A) the Interest Obligations with respect
to the Senior Notes, (B) the Principal Obligations with respect to the
Senior Notes, (C) the Interest Obligations with respect to the Subordinated
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<PAGE>
Notes, and (D) the Principal Obligations with respect to the Subordinated
Notes;
(iii) the outstanding amount, if any, paid by the Guarantor (A)
pursuant to this Interest/Principal Guaranty with respect to each of (1)
the Interest Obligations with respect to the Senior Notes, (2) the
Principal Obligations with respect to the Senior Notes, (3) the Interest
Obligations with respect to the Subordinated Notes, and (4) the Principal
Obligations with respect to the Subordinated Notes, and (B) with respect to
the amounts described in clause (i) of this Section 4(b);
(iv) the outstanding amount of Net Guarantor Ground Lease
Payments.
SECTION 5. Designated Events.
(a) For the purpose of this Interest/Principal Guaranty, the term
"Designated Event" shall mean an event or series of events as a result of which:
(i) any Person or Group (within the meaning of Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), other than the Marriott Family (as hereinafter defined) and other
than any Employee Benefit Plan (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended) maintained by the
Guarantor or by any Affiliate of the Guarantor, becomes the Beneficial
Owner (as defined in Rule 13d-3 under the Exchange Act) of Voting Shares
(as hereinafter defined) entitled to cast more than 30% of the votes
entitled to be cast by the holders of all then outstanding Voting Shares;
provided that if the Marriott Family shall not be at the time of the event
the Beneficial Owner, in the aggregate, of Voting Shares entitled to cast
at least 20% of the votes entitled to be cast by the holders of all then
outstanding Voting Shares, a Designated Event shall be deemed to have
occurred if any Person or Group, other than any such Employee Benefit Plan,
becomes the Beneficial Owner of Voting Shares entitled to cast more than
20% of the votes entitled to be cast by the holders of all then outstanding
Voting Shares. For the purpose of this Interest/Principal Guaranty, the
term "Voting Shares" shall mean any issued and outstanding shares of
capital stock of the Guarantor then entitled to vote in the election of
directors and the term "Marriott Family" means J. Willard Marriott, Sr.,
his spouse, his siblings and their spouses, and any lineal descendants of
any of them, and their spouses (or any nominee, trust, foundation, holding
company or Affiliate holding shares of Marriott established by or for the
benefit of any of them);
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(ii) the Marriott Family shall acquire Voting Shares so that after
giving effect to such acquisition the Marriott Family shall become the
Beneficial Owner, in the aggregate, of Voting Shares entitled to cast more
than 50% of the votes entitled to be cast by the holders of all then
outstanding Voting Sheres;
(iii) the Guarantor shall merge or consolidate with or into
another Person (whether or not the Guarantor is the surviving corporation),
or enter into any sale, lease, exchange, transfer or other disposition (in
a transaction or series of related transactions) of all or substantially
all of the assets of the Guarantor, in either event pursuant to a
transaction in which all or substantially all of the Guarantor's Voting
Shares are changed into or exchanged for cash, securities or other property
and excluding transactions between the Guarantor and any of its
Subsidiaries. For the purpose of this clause (iii) only, the term
"Subsidiary" shall mean any corporation or other entity of which a majority
of each class or series of equity securities or other comparable ownership
interests is owned, directly or indirectly, by the Guarantor immediately
prior to the time the merger, consolidation or disposition of assets
occurs;
(iv) the Guarantor or any Subsidiary acquires, by merger,
consolidation or acquisition of assets or stock or otherwise, any Person
whose total assets on a consolidated basis have a fair market value (as
determined in good faith by the Board of Directors of the Guarantor, whose
determination shall be conclusive) which exceeds 50% of the fair market
value as determined in good faith by the Board of Directors of the
Guarantor, whose determination shall be conclusive) of the Guarantor's
total assets on a consolidated basis immediately prior to such acquisition.
For the purpose of clauses (iv) and (vi) only, the term "Subsidiary" shall
mean any corporation or other entity of which the Guarantor owns a majority
of the issued and outstanding securities then entitled to vote in the
election of directors, general partners or other persons or entities
holding similar duties, obligations and powers;
(v) during any period of twenty-four (24) consecutive months,
Persons who at the beginning of such period constitute the Guarantor's
Board of Directors cease to constitute a majority of the directors then in
office other than with the consent of a majority of the Continuing
Directors. For the purpose of this clause (v), "Continuing Directors" shall
mean a Person who was a member of the Board of Directors of the Guarantor
as of January 1, 1990, or a Person thereafter elected by the stockholders
or appointed
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<PAGE>
by the Board of Directors whose appointment or recommendation by the
Board of Directors for election by the Guarantor's stockholders was
approved by at least a majority of the Continuing Directors then on the
Board of Directors;
(vi) the Guarantor and/or any Subsidiary purchases or otherwise
acquires, directly or indirectly, the Guarantor's Voting Shares, if after
giving effect to any such acquisition, the Guarantor and its Subsidiaries
have acquired 30% or more of such Voting Shares within any period of twelve
(12) consecutive months; or
(vii) on any date, the Guarantor makes any distribution of cash,
property or securities (other than additional Voting Shares of the
Guarantor or regular cash dividends) to holders of the Guarantor's Voting
Shares or purchases or otherwise acquires its Voting Shares and the sum of
such distributions and purchases during any period of twelve (12)
consecutive months is at least 30% of the aggregate fair market value
(based on the Current Market Price (as defined below)) of the Guarantor's
outstanding capital stock on the day prior to the first day of such
distribution or purchase. For the purpose of this Interest/Principal
Guaranty, "Current Market Price" shall mean the closing price (or, if none,
the average of the last daily bid and asked prices) of the applicable class
of capital stock as quoted by the primary securities exchange on which the
stock is traded, or, if none, the primary inter-dealer quotation system,
which reports quotations for the class of capital stock, for the last
trading day immediately prior to the occurrence of the event to which this
definition applies.
The Guarantor shall give to the Collateral Trustee written notice of the
occurrence of a Designated Event, not later than 10 days following the date of
the first public announcement or public notice of the Designated Event in the
case of any Designated Event specified in clauses (i) or (ii) and not later than
10 days following the date of the occurrence of the Designated Event in the case
of any Designated event specified in clauses (iii), (iv), (v), (vi) or (vii).
(b) From and after the occurrence of a Triggering Event (as hereinafter
defined) the Guarantor shall comply with the provisions of Article Fourteen of
the Indenture. The term "Triggering Event" shall mean the reduction of the
Rating of the Guarantor by either Rating Agency to less than Baa3 (in the case
of Moody's Investor Services, Inc.) or BBB- (in the case of Standard & Poor's
Corporation) during the Determination Period. The term "Determination Period"
shall mean the 90-day period commencing on the first public announcement or
public notice of a Designated Event; provided that if a Rating Agency shall
publicly
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announce during such 90-day period that the Rating of the Guarantor is under
review, the Determination Period shall be extended for an additional period,
expiring on the earlier of 180 days following the initial commencement of the
Determination Period and the first Business Day following the public
announcement by the Rating Agency of the Rating of the Guarantor or that the
Rating of the Guarantor is no longer under review.
SECTION 6. Representations and Warranties. The Guarantor hereby
represents and warrants as follows:
(a) The Guarantor (i) is a corporation duly organized, validly existing
and in good standing under the laws of the state of its incorporation as set
forth on the first page hereof, (ii) has all requisite corporate power and
authority to execute, deliver and perform this Interest/Principal Guaranty, the
Principal Guaranty, the Indenture and each other agreement or instrument related
thereto to which the Guarantor is a party, and (iii) is duly qualified to do
business in every jurisdiction in which the failure so to qualify could have a
material adverse effect on the business of the Guarantor and its consolidated
subsidiaries taken as a whole.
(b) The Guarantor has examined the Indenture, including the Exhibits
annexed thereto, and all of the representations and warranties set forth in the
Indenture, to the extent the same relate to the Guarantor, are true and correct
in all material respects.
(c) Except for defaults, conflicts and breaches that do not materially
affect the Guarantor's right, authority and ability to perform its obligations
under the Indenture, the Notes, this Interest/Principal Guaranty, the Principal
Guaranty and each other agreement or instrument related thereto to which the
Guarantor is a party (all such documents are together referred to herein as the
"Marriott Documents") or that do not materially impair the rights, remedies or
security of the Collateral Trustee and the Holders under this Interest/Principal
Guaranty, the execution, delivery and performance by the Guarantor of the
Marriott Documents (i) have been duly authorized by all necessary corporate
action, (ii) do not and will not contravene its charter or by-laws, law or any
contractual restriction binding on or affecting the Guarantor or any of its
properties, and (iii) do not and will not result in or require the creation of
any lien, security interest or other charge or encumbrance upon, or with respect
to, any of its properties.
(d) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or other regulatory body is required
on or prior to the date hereof for the due execution, delivery and performance
by the Guarantor of the Marriott Documents.
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(e) Each of the Marriott Documents is a legal, valid and binding
obligation of the Guarantor, enforceable against the Guarantor in accordance
with its terms, except as enforcement of such terms may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally and except that the availability of equitable remedies is
subject to the discretion of the court before which any proceedings may be
brought.
(f) After giving effect to the transactions contemplated by the
Indenture and the execution and delivery of this Interest/Principal Guaranty and
the other Marriott Documents, the Guarantor has complied with and performed all
of its material covenants and agreements contained in all applicable provisions
of its agreements for borrowed money and there has not occurred any event of
default, or any condition, act or event, which upon the giving of notice or
lapse of time or both, would constitute an event of default, under its
agreements for borrowed money, except for defaults that do not materially affect
the Guarantor's right, authority and ability to perform its obligations under
the Marriott Documents or do not materially impair the Collateral Trustee's or
the Holders' rights, remedies or security under this Interest/Principal
Guaranty.
(g) There is no action, suit or proceeding pending or, to the best of
the Guarantor's knowledge, threatened against or otherwise affecting the
Guarantor before any court or other governmental authority or any arbitrator
which may reasonably be expected to materially adversely affect the Guarantor's
ability to perform its obligations hereunder or under any other Marriott
Document.
(h) After giving effect to the transactions contemplated by the
Indenture, the Notes, this Interest/Principal Guaranty and the Principal
Guaranty, the Guarantor is Solvent.
(i) The Guarantor will do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence, rights
(charter and statutory) and franchises; provided, however, that the Guarantor
shall not be required to preserve any such right or franchise if it shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of the Guarantor.
SECTION 7. Events of Default. An "Event of Default" shall exist under
this Interest/Principal Guaranty if any of the following shall have occurred:
(a) the Guarantor defaults in the payment of its obligations with
respect to this Interest/Principal Guaranty as and when the same shall become
due and payable;
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(b) the Guarantor defaults in the payment, observation or performance
of any covenant, condition or agreement set forth herein (other than the payment
of the Obligations) and such failure continues for more than thirty (30) days
after written notice of such default has been given to the Guarantor by the
Subordinated Trustee;
(c) any event of default under any Indebtedness (or any Refinancing
thereof), whether now existing or hereafter created, issued pursuant to the
Indenture, dated as of March 1, 1985, between the Guarantor and The First
National Bank of Chicago, as trustee (the "Marriott Indenture"), if either (i)
such event of default results from any failure to pay all or any portion of such
Indebtedness as and when due (after giving effect to any applicable cure period)
or (ii) as a result of such event of default such Indebtedness (or such
Refinancing) shall become due and payable prior to the stated maturity thereof.
As used in this Section, "Refinancing" shall mean any Indebtedness issued in
exchange for or the proceeds of which are used to repay, refund, refinance or
otherwise retire for value Indebtedness under the Marriott Indenture or any
Refinancing;
(d) the entry by a court having jurisdiction of a decree or order for
relief in respect of the Guarantor in an involuntary case or proceeding
commenced against the Guarantor under any applicable Federal or state
bankruptcy, insolvency, reorganization (relating to an insolvency) or other
similar law or the appointment of a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official of the Guarantor, or of any
substantial part of its property, or in connection with such a proceeding
ordering the winding up or liquidation of its affairs, and any such decree or
order for relief or any such appointment remains unstayed and in effect for a
period of ninety (90) consecutive days;
(e) the commencement by the Guarantor of a voluntary case or proceeding
under any applicable Federal or state bankruptcy, insolvency, reorganization (in
connection with an insolvency) or other similar law or the commencement by the
Guarantor of any other case or proceeding to be adjudicated a bankrupt or
insolvent, or the consent by the Guarantor to the entry of a decree or order for
relief in an involuntary case or proceeding commenced against the Guarantor
under any applicable Federal or state bankruptcy, insolvency, reorganization (in
connection with the insolvency of the Guarantor) or other similar law, or the
filing by the Guarantor of a petition or answer or consent seeking
reorganization or relief under any applicable Federal or state bankruptcy,
insolvency or similar law, or the consent by the Guarantor to the filing of such
petition or to the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or similar official
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of any substantial part of the property of the Guarantor, or the making by the
Guarantor of an assignment for the benefit of creditors generally, or the
admission by the Guarantor in writing of its inability to pay its debts
generally as they become due;
(f) any warranty, representation or other statement by the Guarantor
contained in this Interest/Principal Guaranty or any other writing delivered in
connection herewith or in connection with the Indenture or any other Marriott
Document shall prove to have been false or misleading in any material respect
when made and (i) the same is not cured or corrected within thirty (30) days
after written notice thereof to the Guarantor by the Collateral Trustee or any
Series Trustee, or (ii) the same cannot be cured; or
(g) the Guarantor fails to pledge the Guaranty Support Collateral if
and as required in accordance with Article Fourteen of the Indenture.
The Guarantor acknowledges that an Event of Default under this
Interestl/Principal Guaranty shall constitute an Event of Default under the
Indenture with the effect as in the Indenture provided.
SECTION 8. Guarantor's Obligations Unconditional.
(a) The Guarantor hereby guaranties, subject to the Maximum Principal
Guarantied Amount and the Maximmm Interest Guarantied Amount and, in the case of
the Interest Obligations, to the provisions of Section 2(d), that the
Obligations will be paid strictly in accordance with the terms of the Indenture.
The liability of the Guarantor hereunder shall be absolute and unconditional
irrespective of: (i) any lack of validity, irregularity or enforceability of the
Indenture, this Interest/Principal Guaranty, the Principal Guaranty, the Notes,
the Real Estate Security Documents or any other agreement or instrument relating
thereto; (ii) any change in the time, manner or place of payment of or in any
other term in respect of all or any of the Obligations, or any other amendment
or waiver of, or consent to, any departure from the Indenture, this
Interest/Principal Guaranty, the Principal Guaranty, the Real Estate Security
Documents, the Notes or any other agreement or instrument relating thereto;
(iii) any exchange or release of or non-perfection of any lien on or security
interest in, any collateral, or any release or amendment or waiver of or consent
to any departure from the Deed, the Secured Note, the Indenture or the Notes
granted by the Collateral Trustee or by any Holder, for all or any of the
Obligations, provided, however, that, notwithstanding the foregoing, no such
change, release, amendment, waiver or consent shall, without the consent of the
Guarantor, increase the Yield Maintenance Amount, the Principal Amount of the
Notes, the Original Principal Amount of the Notes,
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the Interest Rate, the Payment Rate, the Default Rate, the Deferred Interest or
the Accreted Amount thereon or increase any premium payable upon redemption
thereof; (iv) any failure to enforce the provisions of the Indenture, any Real
Estate Security Documents, any Note or any other agreement or instrument
relating thereto; or (v) any other circumstance which might otherwise constitute
a defense available to, or a discharge of, the Owner, the Issuer or the
Collateral Trustee or any other guarantor with respect to the Obligations or the
Guarantor with respect hereto or the obligations of the Guarantor under any
Marriott Documents.
(b) This Interest/Principal Guaranty (i) is a continuing guaranty and
shall remain in full force and effect until the indefeasible satisfaction in
full of the Obligations and the payment of the other expenses to be paid by the
Guarantor pursuant hereto; and (ii) shall continue to be effective or shall be
reinstated, as the case may be, if at any time any payment of any of the
Obligations is rescinded or must otherwise be returned by any Holder upon the
insolvency, bankruptcy or reorganization of the Owner, the Issuer or otherwise,
all as though such payment had not been made.
(c) The Guarantor understands that upon the occurrence of an "Event of
Default" under the Deed causing the acceleration of the Secured Note, any
proceeds realized as a result of the foreclosure of the Mortgaged Premises or
any part thereof, or other enforcement of the Deed or any other disposition of
any collateral security for the Secured Note shall be deemed to have been
applied in the order of priority established by Section 506(a) of the Indenture,
notwithstanding that, as a result of the direction of any court, the Collateral
Trustee shall apply any of such payments or proceeds in any other or different
order of priority. Therefore, the Guarantor further agrees that in the event net
proceeds shall be realized as a result of the foreclosure of the Mortgaged
Premises or other enforcement of the Deed or otherwise (whether prior to or
after maturity of the Secured Note) or net proceeds shall be realized upon the
disposition of any other collateral security for the Secured Note, or if the
Collateral Trustee receives any other payments or prepayments of the Secured
Note or with respect of any of the collateral security for the Secured Note,
then, irrespective of the collateral security in respect of which such proceeds
were derived, without regard to the priority of application of such proceeds
pursuant to the Real Estate Security Documents, such payments or net proceeds
shall, for purposes of this Interest/Principal Guaranty, be deemed allocable,
and be applied, in accordance with the priorities established by Section 506(a)
of the Indenture.
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SECTION 9. Waivers; Waiver of Subrogation.
(a) The Guarantor hereby waives (i) promptness and diligence; (ii)
notice of acceptance and notice of the incurrence of any Obligation by the
Issuer; (iii) notice of any actions taken by the Issuer, any Holder, the
Collateral Trustee, any Series Trustee or any other party under the Indenture,
the Real Estate Security Documents or any other agreement or instrument relating
thereto; (iv) notice of any actions against the Owner taken by the Issuer, any
Holder, the Collateral Trustee, any Series Trustee or any other party under the
Indenture, the Real Estate Security Documents or any other agreement or
instrument relating thereto; (v) (except for notices and demands for which
express provision is made in this Interest/Principal Guaranty) all other
notices, presentments, demands and protests, and all other formalities of every
kind in connection with the enforcement of the Obligations or of the obligations
of the Guarantor hereunder, the omission of or delay in which, but for the
provisions of this Section 9, might constitute grounds for relieving the
Guarantor of its obligations hereunder; (vi) the filing of a claim with a court
in the event of merger or bankruptcy of the Issuer or the Owner; and (vii) any
requirement including, without limitation, the provisions of Official Code of
Georgia Annotated Section 10-7-24, that the Collateral Trustee, any Series
Trustee or any Holder protect, secure, perfect or insure any security interest
or lien or any property subject thereto or exhaust any right or take any action
against the Owner, the Issuer or any other Person or any collateral.
(b) Until the Notes and the Secured Note have been indefeasibly paid in
full, the Guarantor will not exercise any rights which it may have or acquire by
way of subrogation hereunder, by any payment made by it hereunder or otherwise.
Until the Notes and the Secured Note have been indefeasibly paid in full, the
Guarantor hereby unconditionally and irrevocably waives any subrogation rights
and any rights of reimbursement, contribution or indemnity from or with respect
to the Collateral Trustee, the Issuer, the Owner or AMMLP whether now or
hereafter existing and whether arising under contract, under law or equity or
otherwise. If any amount shall be paid to the Guarantor on account of such
subrogation rights at any time prior to the indefeasible payment in full of the
Notes and the Secured Note, and all such other expenses, such amount (subject to
the limitations of Section 2 hereof) shall be paid over to the Collateral
Trustee, in the original form and on the date of receipt thereof, with any
necessary endorsements, to be applied in whole or in part by the Collateral
Trustee against the Obligations, whether matured or unmatured, and all such
other expenses in accordance with the terms of this Interest/Principal Guaranty
and the Indenture, as such Indenture relates to the Notes.
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<PAGE>
SECTION 10. Submission to Jurisdiction; Waivers.
(a) By the execution and delivery of this Interest/Principal Guaranty,
the Guarantor hereby irrevocably submits, to the extent permitted by applicable
law, to the exclusive jurisdiction of any New York State or Federal court
sitting in New York City, Borough of Manhattan, or of any Georgia State or
Federal Court sitting in Fulton County, Georgia in any action or proceeding
arising out of or relating to the Indenture, this Interest/Principal Guaranty or
the Notes, and the Guarantor hereby irrevocably agrees that all claims against
it with respect to such action or proceeding against the Guarantor may be heard
and determined in such courts. To the extent permitted by applicable law, no
other court, except those described in the preceding sentence, will have any
jurisdiction in any action or proceeding against the Guarantor arising out of or
relating to the Indenture, this Interest/Principal Guaranty or the Notes. The
Guarantor hereby irrevocably appoints The Prentice-Hall Corporation System, Inc.
(the "Process Agent") at its offices at One Gulf & Western Plaza, New York, New
York 10023 and 66 Luckie Street, Suite 604, Atlanta, Georgia 30303 as its agent
to receive, on behalf of the Guarantor and its property, service of the summons
and complaint and any other process which may be served in any such action or
proceeding in the courts referred to in the first sentence of this Section 10.
Such service may be made by delivering by hand or certified or overnight mail a
copy of such process to the Guarantor, in care of the Process Agent at either of
the Process Agent's addresses set forth above and the Guarantor hereby
irrevocably authorizes and directs the Process Agent to accept such service on
its behalf, with delivery of a copy thereof to the Guarantor in the same manner
and to the same address as notices are required to be delivered to the Guarantor
under Section 11. To the extent permitted by applicable law, the Guarantor
agrees that a final judgment obtained in any such court described in the first
sentence of this Section 10 in any such action or proceeding shall be conclusive
and may be enforced in other jurisdictions by suit on the judgment or in any
other manner provided by law.
(b) Subject to the exclusive jurisdiction provided in Subsection (a)
above, nothing in this Section 10 shall affect the right of the Collateral
Trustee or any Holder to serve legal process in any other manner permitted by
law.
(c) To the extent that the Guarantor has or hereafter may acquire any
immunity from jurisdiction of any such court referred to in the first sentence
of Subsection (a) above or from any legal process (whether through service or
notice, attachment prior to judgment, attachment in aid of execution, execution
or otherwise) with respect to itself or its property, to the extent permitted by
applicable law, the Guarantor hereby irrevocably
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<PAGE>
waives such immunity with respect to its obligations under the Indenture, this
Interest/Principal Guaranty and the Notes.
(d) The Guarantor hereby irrevocably waives, to the extent permitted by
applicable law, any objection, including, without limitation, any objection to
the laying of venue or based on the grounds of forum non conveniens, which it
may now or hereafter have to the bringing of any such action or proceeding in
such respective courts referred to in the first sentence of Subsection (a)
above.
(e) The Guarantor and each Holder, by its purchase of the Notes,
irrevocably waive (and, in the case of each Holder, direct the Collateral
Trustee to waive), to the extent permitted by applicable law, all right to trial
by jury in any action, proceeding or counterclaim arising out of or relating to
the Indenture, this Interest/Principal Guaranty or the Notes or the transactions
contemplated hereby or thereby.
(f) The appointment of the Process Agent pursuant to Subsection (a)
above shall be irrevocable so long as the Holders shall have any rights pursuant
to the terms of this Interest/Principal Guaranty until the appointment of a
successor by the Guarantor with the consent of the Collateral Trustee (which
consent will not be unreasonably withheld or delayed) and such successor's
acceptance of such appointment. The Guarantor further agrees to take any and all
action, including the execution and filing of any and all such documents and
instruments, as may be necessary to continue such designation and appointment of
such agent or successor.
SECTION 11. Notices, Etc. All notices and other communications provided
for hereunder to be given to
(a) the Collateral Trustee by the Guarantor shall be deemed sufficient
for every purpose hereunder when received by the Collateral Trustee at its
Corporate Trust Office, 33 North Avenue, Suite 700, Atlanta, Georgia 30308,
Attention: Corporate Trust Department, either personally, by courier, telegram,
facsimile transmission or mailed, first-class postage prepaid, or
(b) the Guarantor by the Collateral Trustee shall be sufficient for
every purpose hereunder when received by the Guarantor at 10400 Fernwood Road,
Bethesda, Maryland 20058, Attention: Legal Department, with copies to the
Issuer, or at any other address for the Guarantor filed with the Collateral
Trustee by the Guarantor if in writing and either delivered personally with
receipt acknowledged, by courier with receipt acknowledged, or mailed by
registered or certified mail, first-class postage prepaid, return receipt
requested. Any notice or other communication delivered under this Section ll(b)
shall be deemed given or served as of the date
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<PAGE>
of the delivery to the Guarantor, except that if a notice or other communication
is refused delivery or cannot be delivered because of a changed address of which
no notice was given, such notice or other document shall be deemed to have been
delivered on the date of such refusal or inability to deliver.
SECTION 12. Miscellaneous.
(a) The Guarantor will make each payment hereunder in lawful money of
United States of America and in immediately available funds to the trust account
designated by the Collateral Trustee.
(b) No amendment of any provision of this Interest/Principal Guaranty
shall be effective unless it is in writing and signed by the Guarantor, the
Issuer and the Collateral Trustee, and no waiver of any provision of this
Interest/Principal Guaranty, and no consent to any departure by the Guarantor
therefrom, shall be effective unless it is in writing and signed by, the Issuer
and the Collateral Trustee, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
(c) No failure on the part of the Collateral Trustee or any Holder to
exercise, and no delay in exercising, any right hereunder or under the Indenture
or any other agreement or instrument related thereto shall operate as a waiver
thereof, nor shall any single or partial exercise of any right preclude any
other or further exercise thereof or the exercise of any other right. The rights
and remedies of the Collateral Trustee or any Holder provided herein, in the
Indenture and in any other agreement or instrument related thereto are
cumulative and are in addition to, and not exclusive of, any rights or remedies
provided by law. The rights of the Collateral Trustee and the Holders under the
Indenture or any other agreement or instrument related thereto against any party
thereto are not conditional or contingent on any attempt by the Collateral
Trustee or any Holder to exercise any of its rights under the Indenture and the
Real Estate Security Documents or any other agreement or instrument related
thereto against such party or against any other Person.
(d) Any provision of this Interest/Principal Guaranty 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 portions hereof or thereof or affecting the validity
or enforceability of such provision in any other jurisdiction.
(e) This Interest/Principal Guaranty shall (i) be binding on the
Guarantor and its successors and assigns, and (ii) inure, together with all
rights and remedies of the Collateral Trustee and each Holder hereunder, to the
benefit of each Holder
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and its successors, transferees and assigns. Without limiting the generality of
clause (ii) of the immediately preceding sentence, each Holder may assign or
otherwise transfer its Note and its rights under the Indenture or any other
agreement or instrument related thereto in accordance with the terms of the Note
and the Indenture, to any other Person, and such other Person shall thereupon
become vested with all of the benefits with respect thereto granted to the
Holder herein or otherwise. None of the rights or obligations of the Guarantor
hereunder may be assigned or otherwise transferred without the prior written
consent of the Issuer and the Collateral Trustee.
(f) This Interest/Principal Guaranty shall be governed by and construed
in accordance with the law of the State of New York applicable to contracts made
and to be performed wholly within such State.
(g) This Interest/Principal Guaranty shall not be valid or obligatory
for any purpose as to any Note until a certificate of authentication of such
Note shall have been manually executed by or on behalf of the Collateral
Trustee.
(h) Time is of the essence in the performance of this
Interest/Principal Guaranty.
IN WITNESS WHEREOF, the Guarantor has caused this Interest/Principal
Guaranty to be executed by an officer thereunto duly authorized, as of the date
first above written.
MARRIOTT CORPORATION
By: Robert E. Parsons, Jr.
------------------------
Name: Robert E. Parsons, Jr.
Title: Asst. Treasurer
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Exhibit 10.5
FIRST AMENDMENT
TO RESTATED AND AMENDED HOTEL MANAGEMENT AGREEMENT
THIS FIRST AMENDMENT TO RESTATED AND AMENDED HOTEL MANAGEMENT AGREEMENT
("First Amendment" or "Amendment") is entered into and is effective as of the
10th day of July, 1990 between IVY STREET HOTEL LIMITED PARTNERSHIP ("Owner"), a
Georgia limited partnership, and MARRIOTT HOTELS, INC. ("Management Company"), a
Delaware corporation.
R E C I T A L S
A. Owner and Management Company entered into that certain Restated and
Amended Management Agreement as of the 28th day of May, 1985 (the "Management
Agreement") relating to the management and operation of the Atlanta Marriott
Marquis Hotel; and
B. Owner is in the process of refinancing that portion of the Approved
Debt presently described in Exhibit E to the Management Agreement, and
Management Company and Owner have agreed that it is appropriate to amend the
Management Agreement by reflecting or incorporating therein certain of the
terms, conditions and provisions of the refinancing and to otherwise update and
clarify certain terms, conditions and provisions of the Management Agreement.
NOW, THEREFORE, for and in consideration of good and valuable
consideration, the receipt and sufficiency whereof is hereby acknowledged, Owner
and Management Company hereby covenant and agree as follows:
<PAGE>
1. Amendments to Section 1.1.
Section 1.1 of the Management Agreement, "Definition of Terms", is
hereby amended as follows:
(a) Clause (i) in the definition of "Approved Debt" is hereby
deleted in its entirety and the following is substituted therefor:
"(i) the financing described in Exhibit E attached hereto and
incorporated herein by this reference;"
(b) The definition of "Assumed Net Cash Flow" is hereby deleted in
its entirety and the following is substituted therefor:
"'Assumed Net Cash Flow' means in any Fiscal Year the excess of
Hotel Profit over the lesser of: (i) the greater of (x) $24,000,000.00 or (y) if
there is a Compulsory Refinancing of all or a portion of the Approved Debt, or
any renewal or replacement thereof, or if additional indebtedness is incurred
due to financing the cost of Major Capital Improvements, which cost exceeds the
amount provided therefor in the Repairs and Equipment Reserve, the total of (a)
actual debt service (including contingent or additiona1 interest) on that
portion of the Approved Debt which is not so refinanced, renewed or replaced and
(b) an amount equal to debt service (including contingent or additional
interest) which would be paid on the principal amount of the refinanced,
renewed, replaced or such additional indebtedness assuming full amortization in
300 equal monthly payments of principal and interest with interest
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payable at the interest rate required at the time such refinancing, renewal,
replacement or additional indebtedness was incurred; or (ii) actual debt
service on Approved Debt (including contingent or additional interest) plus
a ten percent (lO%) annual return on Asset Base less the principal amount of
the Approved Debt. For purposes of this definition, the term 'actual debt
service' when applied to that portion of the Approved Debt described in
Exhibit E shall mean actual debt service calculated at the Interest Rate and
not at the Payment Rate."
(c) The definition of "Marriott Commitment" is hereby deleted in its
entirety and the following is substituted therefor:
"'Marriott Commitment' shall mean collectively (i) that certain loan
commitment letter dated May 28, 1985 pursuant to which Marriott committed
to lend to Owner up to $33,000,000 for the purposes and subject to the
terms and conditions set forth in said commitment letter, and (ii) that
certain Marriott/Ivy Street Loan Agreement dated as of the date hereof by
and between Marriott and Owner concerning the agreement of Marriott to lend
Owner certain funds for the purposes and - subject to the terms and
conditions more fully set forth in said Loan Agreement."
(d) The definition of "Marriott Loans" is hereby deleted in its
entirety and the following is substituted therefor:
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"'Marriott Loans' means those loans made by Marriott to Owner
pursuant to the Marriott Commitments."
(e) The definition of "Net Cash Flow Available for Distribution" is
hereby deleted in its entirety and the following is substituted therefor:
"'Net Cash Flow Available for Distribution' means, for any Fiscal
Year, that amount of cash received by or on behalf of Owner in such Fiscal
Year (other than as a result of Extraordinary Revenues) in excess of the
amount required to pay all operating and fixed expenses of the Hotel
(including payments to cash reserves but excluding depreciation and other
non-cash charges), rentals due under the Land Lease, Incentive Management
Fee, and actual debt service other than debt service on Partner's Loans. For
purposes of this definition, the term 'actual debt service' when applied to
that portion of the Approved Debt described in Exhibit E shall mean actual
debt service calculated at the Interest Rate and not at the Payment Rate."
(f) The definition of "Het Cash Flow Available for Incentive Management
Fee" is hereby deleted in its entirety and the following is substituted
therefor:
"'Net Cash Flow Available for Incentive Management Fee' means, for
any Fiscal Year, that amount of cash received by or on behalf of Owner in
such Fiscal Year (other than as a result of Extraordinary Revenues) in
excess of the amount required to
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pay all operating and fixed expenses of the Hotel (including payments to
cash reserves but excluding depreciation and other non-cash charges) and
actual debt service on Project Indebtedness other than: (i) the Incentive
Management Fee; and (ii) debt service on Partner's Loans. For purposes of
this definition, the term 'actual debt service' when applied to that portion
of the Approved Debt described in Exhibit E shall mean actual debt service
calculated at the Interest Rate and not at the Payment Rate."
(g) The definition of "Opening Date" is hereby deleted in its entirety
and the following is substituted therefor:
"'Opening Date' means July 1, 1985."
(h) The definition of "Partner's Loans" is hereby deleted in its
entirety and the following is substituted therefor:
"'Partner's Loans' means 'Partner Loans' as defined in Section 6 of the
Partnership Agreement."
(i) The definition of "Partnership Agreement" is hereby deleted in its
entirety and the following is substituted therefor:
"'Partnership Agreement' means that certain agreement of limited
partnership of Owner dated as of July 31, 1982, as first restated on May 28,
1985 and again restated on or about the date hereof, and as the same may be
subsequently amended and restated."
(j) The definitions of "ProDerty Leasing Agreement" and "Property
Leasing Fee" are hereby deleted in their entirety, and
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<PAGE>
any and all provisions with respect thereto wherever appearing in this Agreement
shall be of no further force and effect.
(k) The following new definitions shall be added in appropriate
alphabetical order to Section 1.1:
"'Horder' means the 'Grantee' as defined in the Deed to Secure Debt
of even date with this Amendment, which Deed to Secure Debt was entered into
by Owner as one of the Grantors thereunder and which secures the financing
described in Exhibit E or any other Holder of Approved Debt of whom
Management Company has received notice.
'Interest Rate' shall have the meaning set forth in the loan
documents evidencing and securing that portion of the Approved Debt
described in Exhibit E.
'Payment Rate' shall have the meaning set forth in the loan
documents evidencing and securing that portion of the Approved Debt
described in Exhibit E."
2. Section 3.7.1 of the Management Agreement is amended by adding the
words "If requested by Landlord," at the beginning of the last sentence thereof.
3. Section 9.3.2 of the Management Agreement is hereby deleted in its
entirety and the following is substituted therefor:
"9.3.2 The procedures governing the operation of any and all bank
accounts of Ivy Street set forth in this Section 9.3
- 6 -
<PAGE>
shall be subject to the requirements of the instruments and agreements
evidencing or securing (a) the financing described in Exhibit E, and (b) the
Approved Line of Credit Financing, if any. In the event of any conflict
between the provisions of this Section 9.3 or the provisions of the
documents evidencing the Approved Line of Credit Financing and the
instruments and agreements evidencing or securing the financing described in
Exhibit E, the instruments evidencing and securing the financing described
in Exhibit E shall govern.
4. Section 11.1 of the Management Agreement is deleted in its entirety
and the following is substituted therefor:
"Management. Owner covenants that so long as Management Company is
not in default under the Agreement, Management Company shall be entitled to
manage the Hotel throughout the Term in accordance with the terms of this
Agreement, and Management Company covenants and agrees that so long as Owner
is not in default under this Agreement, Management Company shall manage the
Hotel throughout the Term in accordance with the terms of this Agreement."
5. Section 12.2.1.1 of the Management Agreement is amended by changing
the period at the end thereof to a comma and adding the following:
-7-
<PAGE>
"or such greater percentage in excess of ninety percent (90%) to the extent
required by the Holder of that portion of the Approved Debt described in
Exhibit E."
6. Section 16.1.3 of the Management Agreement is amended by deleting
the word "default" in the fifth (5th) line thereof and substituting the word
"deficiency" therefor.
7. Section 16.1.5 of the Management Agreement is hereby deleted in its
entirety and the following is substituted therefor:
"16.1.5 Owner shall have the right to terminate this Agreement upon fifteen
(15) days' prior Notice if Marriott fails to meet its obligations under the
Marriott Commitment."
8. Section 18.1 of the Management Agreement is hereby deleted in its
entirety and the following is substituted therefor:
"18.1 Assignment by Management Company. Management Company shall
have the right to assign all of its right and interest under this Agreement:
(i) to a subsidiary company provided that the Marriott Corporation shall at
all times own one hundred percent (100%) of all classes of capital stock of
said subsidiary; or (ii) to any successor or assignee of Marriott
Corporation which may result from any merger,
-8-
<PAGE>
consolidation or reorganization or to another corporation which acquires all
or substantially all of the business and assets of Marriott Corporation.
Notwithstanding any such assignment, and as a condition thereof, Marriott
Corporation shall continue to be liable for its agreements hereunder and
shall unconditionally guarantee the obligations of such subsidiary,
successor or assignee under a guaranty agreement acceptable to Owner, and
any such subsidiary, successor or assignee shall assume and agree to be
bound by all the provisions and agreements herein. No other assignment of
this Agreement by Management Company or its successors and assignees shall
be effective without the prior written consent of Owner and Holders."
9. Section 20.9 of the Management Agreement is hereby deleted in its
entirety and the following is substituted therefor:
"20.9 Notices. All notices, demands and other communications
required or permitted under the provisions of this Agreement ('Notice')
shall, unless otherwise specified, be in writing, sent by telegram, or telex
or hand delivery, or by certified first-class mail, postage prepaid, return
receipt requested, to the following addresses:
-9-
<PAGE>
As to Owner:
Ivy Street Limited Partnership
c/o Atlanta Marriott Marquis Limited Partnership
c/o Marriott Marquis Corporation
10400 Fernwood Road
Bethesda, Maryland 20058
With a Copy to:
Ivy Street Limited Partnership
225 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attn: John C. Portman, Jr.
As to Management Company:
Marriott Motels, Inc.
10400 Fernwood Road
Bethesda, Maryland 20058
Attn: Law Department
or to such other address in the United States as the party to whom the
notice is sent shall have designated in writing in accordance with the
provisions of this Section 20.9. The date of service of such notices shall
be the date such notices are delivered to the party to whom the notice is
given. Any party to this Agreement may change its address by giving the
other party written Notice of its new address as herein provided."
10. Section 20.12 of the Management Agreement is hereby amended by
deleting the word "such" in the fourth (4th) line thereof and substituting the
word "sums" therefor.
-10-
<PAGE>
11. Section 20.14 of the Management Agreement is hereby amended by
deleting the last sentence thereof and substituting the following therefor:
"Notwithstanding anything to the contrary contained herein, Management
Company and any of its affiliates shall be allowed to continue to manage or
to own an equity interest (to the extent of the equity interest on the date
hereof) in the existing Marriott Hotel located at the intersection of
Courtland Street and International Boulevard in Atlanta, Georgia."
12. Attached to this Amendment are revised Exhibits D and E which
supersede in their entirety Exhibits D and E previously attached to the
Management Agreement.
13. Except as otherwise amended by this First Amendment, all of the
other terms, conditions and provisions of the Management Agreement remain in
full force and effect.
-11-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment as of the date first written above.
IVY STREET HOTEL LIMITED
PARTNERSHIP ("Owner")
Signed, sealed and
delivered in the presence By: ATLANTA MARRIOTT MARQUIS
of: LIMITED PARTNERSHIP,
/s/ Carolyn Colton general partner
- - ------------------------
Carolyn Colton
Witness
/s/ Sandra I. Schmitt
- - ------------------------
Sandra I. Schmitt
Notary Public By: MARRIOTT MARQUIS CORPORATION,
Commission Expiration Date: general partner
10-2-91
- - ------------------------ By: /s/ Robert E. Parsons, Jr.
(Notarial Seal) ----------------------------
Name: Robert E. Parsons, Jr.
Title: President
SANDRA I. SCHMITT
NOTARY PUBLIC, State of New York
No. 41-4956835 /s/ Stephen McKenna
Qualified in Queens County --------------------------------
Term Expires Oct. 2. 1991 Stephen McKenna
Assistant Secretary
(corporate seal)
Signed, sealed and
delivered in the presence By: John C. Portman, Jr. (seal)
of: ----------------------------
/s/ Carolyn Colton JOHN C. PORTMAN, JR.,
- - ------------------------ general partner
Carolyn Colton By: Neal M. Kamin,
Witness Attorney-in-Fact
/s/ Sandra I. Schmitt
- - ------------------------
Sandra I. Schmitt
Notary Public
Commission Expiration Date: 10-2-91
- - ------------------------
(Notarial Seal)
SANDRA I. SCHMITT
NOTARY PUBLIC, State of New York
No. 41-4956835
Qualified in Queens County
Term Expires Oct. 2. 1991
-12-
<PAGE>
MARRIOTT HOTELS, INC.
Signed, sealed and ("Management Company")
delivered in the presence
of: By: /s/ Robert E. Parsons, Jr.
/s/ Carolyn Colton --------------------------
- - ------------------------ Robert E. Parsons, Jr.
Carolyn Colton Vice President
Witness
/s/ Sandra I. Schmitt ATTEST: /s/ Stephen McKenna
- - ------------------------ --------------------
Sandra I. Schmitt Stephen McKenna
Notary Public Asst. Secretary
Commission Expiration Date: 10-2-91
- - ------------------------
(Notarial Seal)
SANDRA I. SCHMITT
NOTARY PUBLIC, State of New York
No. 41-4956835
Qualified in Queens Count
Term Expires Oct. 2, 1991
-13-
<PAGE>
EXHIBIT "D"
NON-COMPETITION AREA
ATLANTA, FULTON COUNTY, GEORGIA
That certain area in the City of Atlanta bounded generally on the north
by North Avenue, on the east by Boulevard, on the south by U.S. Interstate 20
and on the west by Northside Drive.
-14-
<PAGE>
EXHIBIT "E"
Certain mortgage financing evidenced by a secured note of the Owner in the
principal amount of $199,000,000, which financing was obtained by Owner 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 the date hereof among Marriott/Portman Finance
Corporation, Marriott Corporation and The Citizens and Southern National Bank,
as collateral trustee.
-15-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT 10-K OR IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000770809
<NAME> Atlanta Marriott Marquis Limited Partership
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollar
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Dec-31-1996
<EXCHANGE-RATE> 1.00
<CASH> 5,601
<SECURITIES> 7,406<F1>
<RECEIVABLES> 6,390<F2>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 19,397
<PP&E> 229,356
<DEPRECIATION> (67,245)
<TOTAL-ASSETS> 181,508
<CURRENT-LIABILITIES> 3,339<F3>
<BONDS> 235,708<F4>
0
0
<COMMON> 0
<OTHER-SE> (57,539)
<TOTAL-LIABILITY-AND-EQUITY> 181,508
<SALES> 0
<TOTAL-REVENUES> 39,305
<CGS> 0
<TOTAL-COSTS> 13,872
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,890
<INCOME-PRETAX> 2,543
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,543
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,543
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>This include property improvement fund and Deferred Financing Costs, net of
acummulated amortization.
<F2>This includes amounts held by MII and working capital and supplies held by
MII.
<F3>This includes due to MII and acounts payable and accrued expenses.
<F4>This includes the mortgage debt and the due to HMC.
</FN>
</TABLE>
