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 August 31, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission file number 0-14019
Ridgewood Properties, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 58-1656330
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2859 Paces Ferry Road, Suite 700
Atlanta, Georgia 30339
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (404) 434-3670
--------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
----------------------------
(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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes __X__ No _____
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. _____
Aggregate market value of voting stock held by non-affiliates on October 31,
1995 - cannot be determined due to an absence of an established public
trading market in the common stock. Common shares outstanding on October 31,
1995 - 963,480 shares (1) Portions of the registrant's Annual Report to
Shareholders for the fiscal year ended August 31, 1995 (the "1995 Annual
Report to Shareholders") are incorporated by reference in Part II of
this Report.
(2) Portions of the registrant's definitive Proxy Statement
relating to the 1996 Annual Meeting (the "1996 Proxy Statement")
to be filed with the Commission on or about December 1, 1995,
are incorporated by reference in Part III of this Report.
PART I
Item 1. Business
Ridgewood Properties, Inc. (the "Company") is primarily
engaged in the business of acquiring, developing, operating and
selling real estate property in the Southeast and "Sunbelt"
areas. Additionally, the Company, through its investment in a
limited partnership, is engaged in acquiring and managing hotel
properties in the Southeast. During fiscal year 1995, the
Company sold its hotel in Orlando, Florida, such that the only
remaining operating property is the hotel in Longwood, Florida.
All of the Company's other properties are land properties held
for sale, and no additional development is currently anticipated
for the land. The Company was incorporated under the laws of
the State of Delaware on October 29, 1985. Prior to December
31, 1985, the Company operated under the name CMEI, Inc.
On August 15, 1994, the Company purchased all (4.38
million) of the shares (the "Triton Shares") of the Company's
common stock, $.01 par value ("common stock"), held by the
Company's then-majority stockholder, Triton Group Ltd.
("Triton"). The Triton Shares represented 74.4% of the 5.88
million shares of common stock outstanding prior to the
consummation of the transaction. In consideration for the
Triton Shares, the Company paid $8.0 million in cash (the cash
was a portion of the proceeds received by the Company from the
sale of its mobile home parks in June 1994) and issued 450,000
shares of the Company's Series A Convertible Preferred Stock,
$1.00 par value per share (the "preferred stock"). The
preferred stock is redeemable by the Company at $8.00 per share
and accrues dividends at a rate of $0.40 per share annually for
the first two years, and at a rate of $0.80 per share annually
thereafter. Dividends are payable quarterly commencing on
November 1, 1994. Each share of the preferred stock is
convertible into three shares of the Company's common stock
either upon default of the dividend payments or at the end of
two years and is subject to certain anti-dilution adjustments.
In the event of any liquidation, dissolution or winding up of
the Company, whether voluntary or involuntary, the holders of
the shares of preferred stock shall be entitled to receive $8.00
per share of preferred stock plus all dividends accrued and
unpaid thereon. So long as a minimum of 50,000 shares of
preferred stock is outstanding, Triton shall be entitled to
elect one additional director to serve on the Board of Directors
of the Company. Additionally, as long as Triton is the holder
of the minimum 50,000 shares of preferred stock and both John C.
Stiska and Michael M. Earley are officers of Triton, then the
Company's Board of Directors shall consist of four members, two
of which would be Mr. Stiska and Mr. Earley (and wherein either
Mr. Stiska or Mr. Earley is considered to be the additional
director to which Triton is entitled to elect). No change of
control for financial reporting purposes of the company is
deemed to have occurred because of Triton's retaining control of
50% of the Board of Directors and holding preferred shares
convertible into 1,350,000 of the Company's common stock
representing 58% of the total shares outstanding (after giving
effect to the issuance thereof).
In addition, on August 29, 1994, the Company purchased
all (539,640) of the shares of common stock owned by Hesperus
Partners Ltd. ("Hesperus") (the "Hesperus Shares"), formerly
known as Harris Associates, L.P., in exchange for a note
receivable in the principal amount of $1.45 million (the "Note")
made by Sun Communities Operating Limited Partnership in
connection with the sale of the Company's mobile home parks and
assigned by the Company to Hesperus. In addition to assigning
the Note and the mortgage securing the Note, the Company agreed
to and did pay Hesperus interest on the outstanding principal
balance of the Note from the closing date through June 15, 1995
and granted Hesperus the right to require the Company to
repurchase the Note and the mortgage following an uncured
principal payment default by the obligor under the Note or by
certain uncured payment defaults by the Company.
On August 16, 1995, RW Hotel Partners, L.P. was
organized as a limited partnership (the "Partnership") under the
laws of the State of Delaware. Concurrently, the Company formed
Ridgewood Hotels, Inc., a Georgia corporation ("Ridgewood
Hotels") which became the sole general partner in the
Partnership with RW Hotel Investments, L.L.C. ("Investor") as
the limited partner. Ridgewood Hotels has a 1% base
distribution percentage versus 99% for the Investor. However,
distribution percentages do vary depending on certain defined
preferences and priorities pursuant to the Partnership Agreement
("Agreement") which are discussed below. The partnership was
formed to acquire a hotel property in Louisville, Kentucky. The
terms of this partnership will serve as a guideline for other
potential acquisitions with the Investor or its affiliates.
The Partnership Agreement was amended and restated on
September 8, 1995. Distributable Cash is defined as the net
income from the property before depreciation plus any net sale
proceeds and net financing proceeds less capital costs.
Distributions of Distributable Cash shall be made as follows:
- First, to the Investor until there has been
distributed to the Investor an amount equal to a 15% cumulative
internal rate of return on the Investor's investment.
- Second, to Ridgewood Hotels until the aggregate
amount received by Ridgewood Hotels equals the aggregate cash
contributions made by Ridgewood Hotels to the Partnership (as of
August 31, 1995, Ridgewood Hotels had contributed approximately
$232,000).
- Third, 12% to Ridgewood Hotels and 88% to the
Investor until there has been distributed to the Investor an
amount equal to a 25% cumulative internal rate of return on
Investor's investment.
- Fourth, 75% of the residual to the Investor and 25%
to Ridgewood Hotels.
A Management Agreement exists between the Partnership
and the Company as Manager ("Manager") for the purpose of
managing a hotel in Louisville, Kentucky. The Manager shall be
entitled to the following property management fees:
(1) 2.5% of the gross revenues from the hotel
property.
(2) 1% of the gross revenues from the hotel property
as an incentive fee if distributable cash equals or exceeds
13.5% of certain aggregate acquisition costs. No management
fees are payable with respect to the first 12-month period of
management of this hotel.
A Construction Management Agreement exists between the
Partnership and the Manager for the purpose of managing certain
improvements to the property. Currently, no construction
management fees are payable with respect to the hotel purchased
in Louisville, Kentucky.
The Company currently has approximately $232,000
invested in the Partnership for the purchase of the hotel in
Louisville, Kentucky. Five other hotels are under contract to
be purchased by the partnership for an aggregate cost of
approximately $18,000,000, and would require approximately
$500,000 in capital contribution to the Partnership by the
Company. The Company also has approximately $113,000 of due
diligence costs incurred for the hotels under contract that will
be reimbursed to the Company upon the closing of the hotels.
The Company may make future capital contributions to the
Partnership. Management expects to fund such capital
contributions through available cash or from loans from the
Partnership. Additionally, the Company may invest in other
partnerships to acquire hotels in the future.
The Company formed a hotel management subsidiary in
December 1994. The loss from the subsidiary for the fiscal year
ended August 31, 1995 was $75,000. The loss was generated by
expenses attributable to the hotel management operations
exceeding management fee revenue. This loss is attributable to
the assets of another company which the Company has an option to
purchase. The option agreement requires Cornerstone Management
and Development, Inc. (Maryland) to repay the Company if losses
occur, but because of the uncertainty of collecting this amount,
the Company has included this loss in its results of operations.
During fiscal year 1995, the Company had sales of real
property aggregating approximately $4,676,000, which included
$2,964,000 from the sale of a hotel in Orlando, Florida.
Additionally, the Company sold approximately $1,319,000 of
residential lots in Atlanta, Georgia, $393,000 of undeveloped
land in Ohio and all but one of the Company's condominium loans
in Florida. The net proceeds from the sale of the loans in
Florida was approximately $342,000. Gains of approximately
$248,000 and $91,000 were recognized on the sales of the hotel
and the land in Ohio, respectively. Losses of approximately
$184,000 were recognized on the sales of the residential lots in
Atlanta, Georgia. The losses of approximately $184,000
recognized on the sale of these residential lots was before
taking into consideration approximately $172,000 of loss
reserves provided in the prior year and $50,000 provided in
the current year. The remaining condominium loan was repaid in
full in September 1995.
In November 1994, the Company increased the allowance
for possible losses on a residential lot in Atlanta, Georgia by
$50,000 to reflect its net realizable value. The lot was sold
in December 1994.
In March 1995 the Company borrowed approximately
$381,000 against the cash value on key-person life insurance
contracts which the Company purchased concurrently with the
implementation of the Supplemental Retirement and Death Benefit
Plan. The net proceeds to the Company were approximately
$358,000 due to the prepayment of interest on the loan.
In June 1995, the Company received a loan from a
commercial lender to refinance the Ramada Inn in Longwood,
Florida. The loan proceeds are $2,800,000. The loan is for a
term of 20 years with an amortization period of 25 years, at the
rate of 10.35%. Principal and interest payments are
approximately $26,000 per month beginning August 1, 1995. A
portion of the proceeds from the loan was used to repay the term
loan. The remaining proceeds of approximately $1,500,000 were
used for working capital. In addition, the Company is required
to make a repair escrow payment comprised of 4% of estimated
revenues, as well as real estate tax and insurance escrow
payments. The total amount for these items will be a payment of
approximately $20,000 per month and can be adjusted annually.
The escrow funds will be used as tax, insurance and repair needs
arise. As of August 31, 1995, there was approximately $140,000
of escrowed funds related to this loan agreement. Also,
commitment fees and loan costs of approximately $159,000 are
being amortized over 20 years.
In April 1995, the Company sold the Ridgewood Lodge,
its weekly rental hotel in Orlando, Florida. The net proceeds,
after commissions, were approximately $2,700,000. The gain on
the sale was approximately $250,000. The proceeds were used to
reduce the outstanding balance of the Company's term loan
discussed below.
The Company's term loan entered into in November 1989
was repaid in June 1995 from the proceeds from the sale of the
hotel in Orlando, Florida and a portion of the proceeds from the
sale of land in Ohio and the refinancing of the Ramada Inn
discussed above.
In December 1993, the Company entered into a joint
venture agreement for the purpose of developing approximately a
150 lot subdivision in Atlanta, Georgia. The Company
contributed development funds, and the other partner provided
the land. As of August 31, 1995, the Company had invested
approximately $61,000 into the joint venture, but was refunded
its entire investment in September 1995. The joint venture has
been dissolved.
The Company owns and operates one hotel and owns a
number of land parcels which are held for sale or development.
The success of the Company's operations continues to be
dependent upon such unpredictable factors as the general and
local economic conditions to which the real estate industry is
particularly sensitive: zoning, labor, material and energy
availability, weather conditions and the availability of
satisfactory financing.
The monthly average occupancy of the Company's only hotel
was 60% for the month of August 1995.
The Company's principal office is located at 2859
Paces Ferry Road, Suite 700, Atlanta, Georgia 30339 (telephone
number: (770) 434-3670). The Company employs approximately 90
persons (of which 14 are located at its principal office) at
August 31, 1995.
Item 2. Properties
The Company does not own any real property material to
conducting the administrative aspects of its business
operations. Its principal office in Atlanta, Georgia is leased
until May 1997 and consists of approximately 6,200 square feet.
As a result of its operations, the Company is the owner of
various other properties, including developed and undeveloped
real estate.
Significant properties owned by the Company are as
follows:
Number of
Type of Property Properties Locations
Hotel 1 Florida
Non-operating land parcels 9 Georgia (3),
Florida (3),
Texas,
Arizona,
Ohio
The hotel serves as collateral for the Company's $2,796,000 term
loan with a commercial lender.
For further information on such properties, see the
accompanying consolidated financial statements and Schedule XI,
Real Estate and Accumulated Depreciation, contained elsewhere
herein.
Item 3. Legal Proceedings
On May 2, 1995 a complaint was filed in the Court of
Chancery of the State of Delaware (New Castle County) entitled
William N. Strassburger v. Michael M. Early, Luther A.
Henderson, John C. Stiska, N. Russell Walden, and Triton Group,
Ltd., defendants, and Ridgewood Properties, Inc., nominal
defendant, C.A. No. 14267 (the "Complaint"). The plaintiff is
an individual shareholder of the Company who purports to file
the Complaint individually, representatively on behalf of all
similarly situated shareholders, and derivatively on behalf of
the Company. The Complaint challenges the actions of the
Company and its directors in consummating the Company's August
1994 repurchases of its common stock held by Triton Group, Ltd.
and Hesperus Partners Ltd. in five counts, denominated Waste of
Corporate Assets, Breach of Duty of Loyalty to Ridgewood, Breach
of Duty of Good Faith, Intentional Misconduct, and Breach of
Duty of Loyalty and Good Faith to Class.
The Complaint seeks (a) permission of the court to
proceed as a class action with respect to one count; (b)
rescission of the repurchase of Triton's Ridgewood common stock,
together with recovery (to Ridgewood) of the approximately $8
million in cash and the shares of the preferred stock received
by Triton in the repurchase, or in the alternative, unspecified
restitution or damages to Ridgewood resulting from the Triton
repurchase; (c) unspecified restitution or damages to Ridgewood
resulting from the Hesperus repurchase; (d) unspecified damages
to Ridgewood resulting from the alleged breaches of the
defendants' duties of loyalty and good faith and their alleged
intentional misconduct; (e) unspecified damages for any separate
injury allegedly suffered by members of the purported class; and
(f) the plaintiff's costs and expenses of this litigation,
including attorneys' fees.
The Company has answered the Complaint, denying all
allegations of wrongdoing either on its part or that of its
directors. The Company's management believes the claims made in
the Complaint are without merit, and that the shareholders of
Ridgewood benefited from the challenged transactions.
Management intends to vigorously contest this matter.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security
holders during the fourth quarter of the Company's fiscal year
ended August 31, 1995.
Item 4.5 Executive Officers of the Registrant
The following sets forth certain information regarding
the executive officers of the Company:
Name Age Present Positions
N. Russell Walden 57 President and Chief Executive
Officer, Director
Byron T. Cooper 45 Vice President -
Construction and Planning
Karen S. Hughes 40 Vice President, Chief Financial
Officer and Secretary
The officers of the Company, who are appointed by the
Board of Directors, hold office until their successors are
chosen and qualified, or until their earlier death, resignation
or removal.
Mr. Walden has been President and Chief Executive
Officer of the Company since its formation on October 29, 1985.
Mr. Walden was a director of Sunbelt Nursery Group, Inc.
("Sunbelt") from 1983 until 1990. He is the former President,
Chief Executive Officer and director of CMEI, Inc. and a former
director of Pier 1 Inc.
Mr. Cooper has been Vice President - Construction and
Planning of the Company since its formation.
Ms. Hughes has been Vice President, Chief Financial
Officer and Secretary of the Company since its formation.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
Information regarding the market for the Company's
common stock, the Company's dividend policy and the approximate
number of holders of the common stock at October 31, 1995, is
included under the caption "Market for Registrant's Common
Equity and Related Stockholder Matters" on page 1 of the 1995
Annual Report to Shareholders and is incorporated herein by
reference.
Item 6. Selected Financial Data
A summary of selected financial data for the Company
for the fiscal years 1991 through 1995 is included under the
caption entitled "Selected Financial Data" on page 1 of the 1995
Annual Report to Shareholders and is incorporated herein by
reference.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Information regarding the Company's financial
condition, changes in financial condition and results of
operations is included under the caption entitled "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" on pages 4 through 9 of the 1995 Annual Report to
Shareholders and is incorporated herein by reference.
Item 8. Financial Statements
Consolidated financial statements and notes thereto
for the Company, which are included on pages 10 through 31 of
the 1995 Annual Report to Shareholders under the following
captions listed below, are incorporated herein by reference.
Consolidated Balance Sheets at August 31, 1995 and
1994.
Consolidated Statements of Loss for the years ended
August 31, 1995, 1994 and 1993.
Consolidated Statements of Shareholders' Investment
for the years ended August 31, 1995, 1994 and 1993.
Consolidated Statements of Cash Flows for the years
ended August 31, 1995, 1994 and 1993.
Notes to Consolidated Financial Statements.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by this item with respect to
directors is incorporated by reference to the Company's Proxy
Statement for its 1996 Annual Shareholder Meeting (the "1996
Proxy Statement"). Information concerning the Company's
executive officers is included in Item 4.5 in Part I of this
report.
Item 11. Executive Compensation
Information regarding compensation of officers and
directors of the Company is set forth under the caption entitled
"Executive Compensation" in the Company's 1996 Proxy Statement
and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Information regarding ownership of certain of the
Company's securities is set forth under the caption entitled
"Beneficial Ownership of the Company's Securities" in the
Company's 1996 Proxy Statement and is incorporated herein by
reference.
Item 13. Certain Relationships and Related Transactions
Information regarding certain relationships and
related transactions with the Company is set forth under the
caption entitled "Certain Relationships and Related
Transactions" in the Company's 1996 Proxy Statement and is
incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K
(a)(1) The following financial statements, together with
the applicable report of independent public accountants, are set
forth on pages 10 through 31 of the 1995 Annual Report to
Shareholders and are incorporated by reference at Item 8 herein:
Report of Independent Accountants
Consolidated Balance Sheets at August
31, 1995 and 1994
Consolidated Statements of Loss
for the years ended August 31, 1995,
1994 and 1993
Consolidated Statements of Shareholders'
Investment for the years ended
August 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows for the
years ended August 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
(a)(2) The following financial statement schedules,
together with the applicable report of independent public
accountants, are filed as a part of this Report.
Page Number
in Form 10-K
Report of Independent Accountants
on Schedules at August 31, 1995, 1994 and
1993 S-1
III - Real Estate and Accumulated
Depreciation - August 31, 1995 S-2 thru S-3
IV - Mortgage Loans on Real Estate
August 31, 1995 S-4 thru S-5
All other schedules are omitted because they are not applicable
or because the required information is given in the financial
statements or notes thereto.
(a)(3) The exhibits filed herewith or incorporated by
reference herein are set forth on the Exhibit
Index on pages E-1 through E-10 hereof. Included
in those exhibits are the following Executive
Compensation Plans and Arrangements:
10(a) Employment Agreement between N. R. Walden and CMEI, Inc.,
dated March 28, 1985.
10(h) Ridgewood Properties, Inc. Supplemental Retirement and
Death Benefit Plan dated January 1, 1987 (filed as an
Exhibit to Registrant's Form 10-K for the fiscal year
ended August 31, 1988 and incorporated herein by
reference).
10(j) Post-Employment Consulting Agreement between N. R. Walden
and Ridgewood Properties, Inc. dated September 4, 1991
(filed as an Exhibit to Registrant's Form 10-K for the
fiscal year ended August 31, 1991 and incorporated herein
by reference).
10(k) Post-Employment Consulting Agreement between Karen S.
Hughes and Ridgewood Properties, Inc. dated September 4,
1991 (filed as an Exhibit to Registrant's Form 10-K for
the fiscal year ended August 31, 1991 and
incorporated herein by reference).
10(l) Post-Employment Consulting Agreement between Byron T.
Cooper and Ridgewood Properties, Inc. dated September 4,
1991 (filed as an Exhibit to Registrant's Form 10-K for
the fiscal year ended August 31, 1991 and incorporated
herein by reference).
10(m) Post-Employment Consulting Agreement between M. M.
McCullough and Ridgewood Properties, Inc. dated
September 4, 1991 (filed as an Exhibit to Registrant's
Form 10-K for the fiscal year ended August 31, 1991 and
incorporated herein by reference).
10(x) Ridgewood Properties, Inc. Stock Option Plan dated March
30, 1993 and as amended September 14, 1993 (filed as an
Exhibit to Registrant's Form 10-Q for the quarter ended
February 28, 1994, and incorporated herein by reference).
10(y) Stock Option Agreement between Byron T. Cooper and
Ridgewood Properties, Inc. dated April 1, 1993 and as
approved on January 12, 1994 (filed as an Exhibit to
Registrant's Form 10-Q for the quarter ended February 28,
1994, and incorporated herein by reference).
10(z) Stock Option Agreement between Luther A. Henderson and
Ridgewood Properties, Inc. dated April 1, 1993 and as
approved on January 12, 1994 (filed as an Exhibit to
Registrant's Form 10-Q for the quarter ended February 28,
1994, and incorporated herein by reference).
10(aa) Stock Option Agreement between Karen S. Hughes and
Ridgewood Properties, Inc. dated April 1, 1993 and as
approved on January 12, 1994 (filed as an Exhibit to
Registrant's Form 10-Q for the quarter ended February 28,
1994, and incorporated herein by reference).
10(bb) Stock Option Agreement between M. M. McCullough and
Ridgewood Properties, Inc. dated April 1, 1993 and as
approved on January 12, 1994 (filed as an Exhibit to
Registrant's Form 10-Q for the quarter ended February 28,
1994, and incorporated herein by reference).
10(cc) Stock Option Agreement between N. R. Walden and Ridgewood
Properties, Inc. dated April 1, 1993 and as approved on
January 12, 1994 (filed as an Exhibit to Registrant's
Form 10-Q for the quarter ended February 28, 1994, and
incorporated herein by reference).
10(dd) Stock Option Agreement between Gregory T. Weigle and
Ridgewood Properties, Inc. dated April 1, 1993 and as
approved on January 12, 1994 (filed as an Exhibit to
Registrant's Form 10-Q for the quarter ended February 28,
1994, and incorporated herein by reference).
10(ee) Stock Option Agreement between Karen S. Hughes and
Ridgewood Properties, Inc. dated January 31, 1994 (filed
as an Exhibit to Registrant's Form 10-Q for the quarter
ended February 28, 1994, and incorporated herein by
reference).
10(ff) Stock Option Agreement between N. R. Walden and Ridgewood
Properties, Inc. dated January 31, 1994 (filed as an
Exhibit to Registrant's Form 10-Q for the quarter ended
February 28, 1994, and incorporated herein by reference).
10(jj) Ridgewood Properties, Inc. 1993 Stock Option Plan, as
amended on October 26, 1994 (filed as an Exhibit to
Registrant's Registration Statement on Form S-8 filed
November 8, 1994 (No. 33-86084) and incorporated herein
by reference).
No reports on Form 8-K were filed during the fourth quarter of
the Company's fiscal year ended August 31, 1995.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
RIDGEWOOD PROPERTIES, INC.
By: /s/ N. R. Walden__________
N. Russell Walden,
President, Chief
Executive Officer
Dated: November 17, 1995
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
the date indicated:
/s/ N. R. Walden_______________
N. Russell Walden, President,
Chief Executive Officer and
Director
/s/ Karen S. Hughes____________
Karen S. Hughes,
Vice President, Chief
Accounting and Financial
Officer and Secretary
/s/ Michael M. Earley__________
Michael M. Earley, Director
/s/ Luther A. Henderson________
Luther A. Henderson, Director
/s/ John C. Stiska_____________
John C. Stiska, Director
Dated: November 17, 1995
Report of Independent Accountants on
Financial Statement Schedules
October 25, 1995
To the Board of Directors
of Ridgewood Properties, Inc.
Our audits of the consolidated financial statements referred to
in our report dated October 25, 1995 appearing in the 1995
Annual Report to Shareholders of Ridgewood Properties, Inc.
(which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the Financial Statement Schedules
listed in Item 14(a) of this Form 10-K. In our opinion, these
Financial Statements present fairly, in all material respects,
the information set forth therein when read in conjunction with
the related consolidated financial statements.
PRICE WATERHOUSE LLP
<TABLE>
RIDGEWOOD PROPERTIES, INC. AND SUBSIDIARIES SCHEDULE III
------------------------------------------- Page 1 of 2
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
-------------------------------------------------------
AUGUST 31, 1995
---------------
(000'S Omitted)
<CAPTION>
Cost Capitalized Gross Amount at Which
Initial Cost Subsequent to Carried at August 31, 1995
to Company Acquisition (A)(B)(D)
------------------ ------------------ ----------------------------------
Building Building Accumu-
and Carry- and lated Date of
Encum- Improve- Improve- ing Improve- Deprecia- Construc- Date
Description brances Land ments ments Costs Land ments Total tion (C) tion Acquired
- ----------- -------- ---- -------- -------- ------ ---- -------- ----- -------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LAND
- ----
Georgia $ -- $ 48 $ -- $ 7 $ -- $ 48 $ 13 $ 61 $ -- -- 12/93
Georgia -- 944 -- 77 -- 106 1 107 -- -- 12/75
Texas -- 5,338 -- 2 -- 5,338 2 5,340 -- -- 12/85
--
Florida -- 530 -- 5 -- 475 -- 475 -- -- 3/85
Florida -- 3,849 -- 4,056 1,771 302 6 308 -- -- 5/77
Florida -- 5 -- 35 -- 41 -- 41 -- -- 6/78
Florida -- 100 -- -- -- 80 -- 80 -- -- 11/79
Florida -- 4,885 -- 731 -- 1,184 -- 1,184 -- -- 2/85
Arizona -- 1,585 -- 210 -- 978 107 1,085 -- -- 3/85
Ohio -- 2,150 -- 614 14 1,255 168 1,423 -- -- 12/77
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total Non-
operating
properties -- 19,434 -- 5,737 1,785 9,807 297 10,104 --
--------- --------- --------- --------- --------- --------- --------- --------- ---------
HOTEL
- --------------
Florida 2,796 439 1,921 1,050 -- 439 2,391 2,830 1,369 1973 9/74
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total
operating
properties 2,796 439 1,921 1,050 -- 439 2,391 2,830 1,369
-------- -------- -------- -------- -------- -------- -------- -------- --------
GRAND TOTAL $ 2,796 $ 19,873 $ 1,921 $ 6,787 $ 1,785 $ 10,246 $ 2,688 $ 12,934 $ 1,369
========= ========= ========= ========= ========= ========= ========= ========= =========
</TABLE>
SCHEDULE III
Page 2 of 2
(A) Except as discussed in Note 2 to the "Notes to
Consolidated Financial Statements," real estate owned is carried at
the lower of cost or estimated net realizable value. At August
31, 1995, the amount of the allowance for possible losses was
approximately $4,700,000, which related to real estate properties.
(B) Reconciliation of real estate properties:
For the Year Ended
(000's omitted)
8/31/95 8/31/94 8/31/93
------- ------- -------
Balance, beginning of year $17,768 $39,911 $44,339
Additions during the period:
Acquisitions 830 455 804
Capitalized costs 81 559 582
Deductions during the period:
Real estate sold or assets
retired (on which financing
was provided by the Company
in certain cases) 5,745 23,157 5,814
------- ------- -------
Balance, end of year $12,934 $17,768 $39,911
======= ======= =======
(C) Operating properties and any related improvements are being
depreciated by the "straight line" method over the estimated
useful lives of such assets, which are generally 30 years for
buildings and 5 years for furniture and fixtures.
Reconciliation of accumulated depreciation:
For the Year Ended
(000's omitted)
8/31/95 8/31/94 8/31/93
------- ------- -------
Balance, beginning of year $2,669 $ 7,239 $ 7,086
Additions during the period 326 1,006 1,392
Depreciation associated with
assets sold or retired (1,626) (5,576) (1,239)
------ ------- -------
Balance, end of year $1,369 $ 2,669 $ 7,239
====== ======= =======
(D) The aggregate cost for federal income tax purposes is approximately
$13,033,000 at August 31, 1995.
<TABLE>
RIDGEWOOD PROPERTIES, INC. AND SUBSIDIARIES SCHEDULE IV
------------------------------------------ Page 1 of 2
SCHEDULE IV MORTGAGE LOANS ON REAL ESTATE
-----------------------------------------
AUGUST 31, 1995
---------------
(000'S OMITTED)
<CAPTION> ---------------
Principal Amount
Periodic Face Carrying of Loans Subject
Interest Final Payment Prior Amount of Amount of to Delinquent
Rate Maturity Terms Liens Mortgages Mortgages Principal or
Description (b) Date (d) (d) (d) (c) Interest
- ----------- -------- -------- -------- ----- --------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Land
- ----
First Mortgage Loan, 10% 1/97 Principal and Interest -- 7 $ 7 --
Texas Payable Monthly
Condominium
- -----------
First Mortgage Loan on Principal and Interest -- $ 37 37 --
Individual Condominium Payable Monthly
Unit, Florida 11.75% 7/13 --------
TOTALS $ 44
========
</TABLE>
SCHEDULE IV
Page 2 of 2
NOTES:
(a) Reconciliation of mortgage loans on real estate:
(000's
omitted)
Balance, August 31, 1992 $ 815
Principal payments received
on mortgage loans (10)
Reductions to mortgage loans
including foreclosure/defaults,
net of amortization of
discounts (22)
------
Balance, August 31, 1993 $ 783
Principal payments received
on mortgage loans (60)
Reductions to mortgage loans -
Amortization of discounts 7
Charge-off of fully
reserved loan (227)
------
Balance, August 31, 1994 $ 503
Payment received on sale of
mortgage loans (342)
Principal payments received
on mortgage loans (36)
Discount on loans sold, net of
amortization of discounts (81)
------
Balance, August 31, 1995 $ 44
======
(b) Interest rates shown include, where applicable,
amortization of discounts.
(c) Aggregate cost for federal income tax purposes is
approximately $44,000 at August 31, 1995.
(d) Information is given in these columns only for loans
which exceed three percent of the total loans.
EXHIBIT INDEX
Report on Form 10-K for the fiscal year ended August 31, 1995
Page Number
Exhibit in Manually
Number Description Signed Original
3(a) Certificate of Incorporation of
Registrant.*
3(b) By-Laws of Registrant.*
3(c) Certificate of Amendment to the
Certificate of Incorporation (filed
as an Exhibit to Registrant's Form
10-K for the fiscal year ended August
31, 1987 and incorporated herein by
reference).
3(d) Certificate of Amendment to the
Certificate of Incorporation of the
Registrant (filed as an Exhibit to
Registrant's Form 10-K for the
fiscal year ended August 31, 1989 and
incorporated herein by reference).
3(e) Certificate of Amendment of the
Certificate of Incorporation of
Ridgewood Properties, Inc. dated May
23, 1991 (filed as an Exhibit
to Registrant's Form 10-K for the
fiscal year ended August 31, 1991 and
incorporated herein by reference).
3(f) Certificate of Amendment of the
Certificate of Incorporation of
Ridgewood Properties, Inc.
dated March 30, 1993 (filed as
Exhibit 3 to Registrant's Form 10-Q
for the fiscal quarter ended February
28, 1993 and incorporated herein by
reference).
3(g) Certificate of Amendment of the
Certificate of Incorporation of
Ridgewood Properties, Inc. dated
January 26, 1994 (filed as Exhibit 3
to Registrant's Form 10-Q for the
fiscal quarter ended February 28,
1994 and incorporated herein by
reference).
4(a) Stock Purchase Agreement between
Ridgewood Properties, Inc. and Triton
Group Ltd., dated as of August 15,
1994 (filed as an Exhibit to
Registrant's Form 8-K on August 15,
1994, and incorporated herein by
reference).
4(b) August 15, 1994 Press Release issued
by Ridgewood Properties, Inc. (filed
as an Exhibit to Registrant's Form
8-K on August 15, 1994, and
incorporated herein by reference).
4(c) Stock Purchase Agreement between
Ridgewood Properties, Inc. and
Hesperus Partners Ltd., dated as of
August 29, 1994 (filed as an Exhibit
to Registrant's Form 8-K on August
15, 1994, and incorporated herein by
reference).
4(d) Certificate of Designation,
Preferences and Rights of Series A
Convertible Preferred Stock of the
Registrant (filed as an Exhibit to
Registrant's Registration Statement
on Form S-8 filed on November 8, 1994
(No. 33-866084) and incorporated
herein by reference).
10(a) Employment Agreement between N. R.
Walden and CMEI, Inc., dated March
28, 1985.*
10(b) Stock Assignment Separate from
Certificate dated August 28, 1985
from Pier 1 Inc. to CMEI, Inc.*
10(c) Assignment of certain agreements by
Pier 1 Inc. to CMEI, Inc. dated
August 28, 1985.*
10(d) Security Agreement among Pier 1 Inc.,
Pier 1 Holdings, Inc. and Intermark,
Inc. dated November 27, 1984
(subsequently assigned to
CMEI, Inc. by Pier 1 Inc.).*
10(e) Guaranty Agreement between Pier 1
Inc. and Intermark, Inc. dated
November 27, 1984 (subsequently
assigned by Pier 1 Inc. to CMEI,
Inc.).*
10(f) Escrow Agreement among Pier 1 Inc.,
Pier 1 Holdings, Inc., and Escrow
Agent, dated November 27, 1984
(subsequently assigned by
Pier 1 Inc. to CMEI, Inc.).*
10(g) Bill of Sale and Assumption of
Liabilities between CMEI, Inc. and
Ridgewood Properties, Inc. dated
December 9, 1985.*
10(h) Ridgewood Properties, Inc.
Supplemental Retirement and Death
Benefit Plan dated January 1, 1987
(filed as an Exhibit to
Registrant's Form 10-K for the fiscal
year ended August 31, 1988 and
incorporated herein by reference).
10(i) $15,000,000 Revolving Line of Credit
Agreement from First American Bank of
Georgia, N.A. to Ridgewood
Properties, Inc. dated November 22,
1989 (filed as an Exhibit to
Registrant's Form 10-K for the fiscal
year ended August 31, 1989 and
incorporated herein by reference).
10(j) Post-Employment Consulting Agreement
between N. R. Walden and Ridgewood
Properties, Inc. dated September 4,
1991 (filed as an Exhibit to
Registrant's Form 10-K for the fiscal
year ended August 31, 1991 and
incorporated herein by reference).
10(k) Post-Employment Consulting Agreement
between Karen S. Hughes and Ridgewood
Properties, Inc. dated September 4,
1991 (filed as an Exhibit to
Registrant's Form 10-K for the fiscal
year ended August 31, 1991 and
incorporated herein by reference).
10(l) Post-Employment Consulting Agreement
between Byron T. Cooper and Ridgewood
Properties, Inc. dated September 4,
1991 (filed as an Exhibit to
Registrant's Form 10-K for the fiscal
year ended August 31, 1991 and
incorporated herein by reference).
10(m) Post-Employment Consulting Agreement
between M. M. McCullough and
Ridgewood Properties, Inc. dated
September 4, 1991 (filed as an
Exhibit to Registrant's Form 10-K for
the fiscal year ended August 31, 1991
and incorporated herein by
reference).
10(n) Modification of $15,000,000 Line of
Credit Loan to Ridgewood Properties,
Inc. from First American Bank of
Georgia, N.A. dated March 1, 1991
(filed as an Exhibit to Registrant's
Form 10-Q for the quarter ended
February 28, 1991 and incorporated
herein by reference).
10(o) Second Amendment to $15,000,000 Line
of Credit Loan to Ridgewood
Properties, Inc. from First American
Bank of Georgia, N.A. dated May 8,
1991 (filed as an Exhibit to
Registrant's Form 10-Q for the
quarter ended May 31, 1991 and
incorporated herein by reference).
10(p) Consolidated Amendatory Agreement
between Ridgewood Properties, Inc.
and First American Bank of Georgia,
N.A. dated January 31, 1992 (filed as
an Exhibit to Registrant's Form 10-Q
for the quarter ended February 28,
1992 and incorporated herein by
reference).
10(q) Amendment to Loan Agreement between
Ridgewood Properties, Inc. and First
American Bank of Georgia, N.A. dated
March 26, 1992 (filed as an Exhibit
to Registrant's Form 10-Q for the
quarter ended February 28, 1992 and
incorporated herein by reference).
10(r) Amendment to Loan Agreement between
Ridgewood Properties, Inc. and First
American Bank of Georgia, N.A. dated
April 27, 1992 (filed as an Exhibit
to Registrant's Form 10-Q for the
quarter ended May 31, 1992 and
incorporated herein by reference).
10(s) Wholesale Financing Agreement between
Ridgewood Properties, Inc. and ITT
Commercial Finance Corp. dated
December 14, 1992 (filed as Exhibit
10(a) to Registrant's Form 10-Q for
the fiscal quarter ended February 28,
1993, and incorporated herein by
reference).
10(t) Mortgage and Promissory Note between
Ridgewood Properties, Inc. and ITT
Commercial Finance Corp. dated
January 22, 1993 (filed as Exhibit
10(b) to Registrant's Form 10-Q for
the fiscal quarter ended February 28,
1993, and incorporated herein by
reference).
10(u) Deed of Trust and Deed of Trust Note
between Ridgewood Timber, Inc. and
Suburban Mortgage Associates, Inc.
dated November 30, 1992 (filed as
Exhibit 10 to Registrant's Form 10-Q
for the fiscal quarter ended November
30, 1992, and incorporated herein by
reference).
10(v) Joint Venture Agreement between
Ridgewood Properties, Inc. and
Eagle's Lake, Inc. dated December 17,
1993 (filed as an Exhibit to
Registrant's Form 10-Q for the
quarter ended November 30, 1994, and
incorporated herein by reference).
10(w) Promissory Note between Ridgewood
Properties, Inc. and Triton Group
Ltd. dated December 6, 1993 (filed as
an Exhibit to Registrant's Form 10-Q
for the quarter ended November 30,
1994, and incorporated herein by
reference.)
10(x) Ridgewood Properties, Inc. Stock
Option Plan dated March 30, 1993 and
as amended September 14, 1993 (filed
as an Exhibit to Registrant's Form
10-Q for the quarter ended February
28, 1994, and incorporated herein by
reference).
10(y) Stock Option Agreement between Byron
T. Cooper and Ridgewood Properties,
Inc. dated April 1, 1993 and as
approved on January 12, 1994 (filed
as an Exhibit to Registrant's Form
10-Q for the quarter ended February
28, 1994, and incorporated herein by
reference).
10(z) Stock Option Agreement between Luther
A. Henderson and Ridgewood
Properties, Inc. dated April 1, 1993
and as approved on January 12, 1994
(filed as an Exhibit to Registrant's
Form 10-Q for the quarter ended
February 28, 1994, and incorporated
herein by reference).
10(aa) Stock Option Agreement between Karen
S. Hughes and Ridgewood Properties,
Inc. dated April 1, 1993 and as
approved on January 12, 1994 (filed
as an Exhibit to Registrant's Form
10-Q for the quarter ended February
28, 1994, and incorporated herein by
reference).
10(bb) Stock Option Agreement between M. M.
McCullough and Ridgewood Properties,
Inc. dated April 1, 1993 and as
approved on January 12, 1994 (filed
as an Exhibit to Registrant's Form
10-Q for the quarter ended February
28, 1994, and incorporated herein by
reference).
10(cc) Stock Option Agreement between N. R.
Walden and Ridgewood Properties, Inc.
dated April 1, 1993 and as approved
on January 12, 1994 (filed as an
Exhibit to Registrant's Form 10-Q for
the quarter ended February 28, 1994,
and incorporated herein by
reference).
10(dd) Stock Option Agreement between
Gregory T. Weigle and Ridgewood
Properties, Inc. dated April 1, 1993
and as approved on January 12, 1994
(filed as an Exhibit to Registrant's
Form 10-Q for the quarter ended
February 28, 1994, and incorporated
herein by reference).
10(ee) Stock Option Agreement between Karen
S. Hughes and Ridgewood Properties,
Inc. dated January 31, 1994 (filed as
an Exhibit to Registrant's Form 10-Q
for the quarter ended February 28,
1994, and incorporated herein by
reference).
10(ff) Stock Option Agreement between N. R.
Walden and Ridgewood Properties, Inc.
dated January 31, 1994 (filed as an
Exhibit to Registrant's Form 10-Q for
the quarter ended February 28, 1994,
and incorporated herein by
reference).
10(gg) Promissory Note between Ridgewood
Properties, Inc. and Triton Group
Ltd. dated May 5, 1994 (filed as an
Exhibit to Registrant's Form 10-Q for
the quarter ended May 31, 1994, and
incorporated herein by reference).
10(hh) Amendment to Loan Agreement between
Ridgewood Properties, Inc. and First
American Bank of Georgia, N.A. dated
June 21, 1994 (filed as an Exhibit to
Registrant's Form 10-Q for the
quarter ended May 31, 1994, and
incorporated herein by reference).
10(ii) Real Estate Note executed by Sun
Communities Operating Limited
Partnership and payable to the order
of Ridgewood Properties, Inc. dated
June 16, 1994 (filed as an Exhibit to
Registrant's Form 8-K on June 29,
1994 and incorporated herein by
reference).
10(jj) Ridgewood Properties, Inc. 1993 Stock
Option Plan, as amended on October
26, 1994 (filed as an Exhibit to
Registrant's Registration Statement
on Form S-8 filed on November 8, 1994
(No. 33-86084) and incorporated
herein by reference).
10(kk) Amended and Restated Basic Agreement
between RW Hotel Investment Partners,
L.P. and Ridgewood Hotels, Inc. dated
August 14, 1995
10(ll) Amended and Restated Limited
Partnership Agreement of RW Hotel
Partners, L.P. dated September 8,
1995
10(mm) Management Agreement (Holiday Inn
Hurstbourne) between RW Hotel
Partners, L.P. and Ridgewood
Properties, Inc. dated August 16,
1995
10(nn) Mortgage, Assignment of Leases and
Rents and Security Agreement Between
Bloomfield Acceptance Company, L.L.C.
and Ridgewood Orlando, Inc. dated
June 30, 1995
10(oo) Security Agreement between Ridgewood
Orlando, Inc. and Bloomfield
Acceptance Company, L.L.C. dated June
30, 1995
10(pp) Mortgage Note between Bloomfield
Acceptance Company and Ridgewood
Orlando, Inc. dated June 30, 1995
13 1995 Annual Report to Shareholders.
22 Subsidiaries of Registrant.
27 Financial Data Schedule.
28(a) Cross Indemnification Agreement
between CMEI, Inc., Pier 1 Inc. and
Sunbelt Nursery Group (filed as an
Exhibit to Registrant's Form 10-K for
the fiscal year ended August 31, 1986
and incorporated herein by
reference).
_______________
* Previously filed as an Exhibit to Registrant's
Registration Statement on Form 10 (Securities Exchange Act
File No. 0-14019), and incorporated herein by reference.
AMENDED AND RESTATED
BASIC AGREEMENT
(Holiday Inn Hurstbourne, Louisville, Kentucky)
THIS AGREEMENT is made as of August 14, 1995, by and among
RIDGEWOOD PROPERTIES, INC., a Delaware corporation ("Operator"),
RIDGEWOOD HOTELS, INC., a Georgia corporation ("Operator
Subsidiary"), RW HOTEL INVESTMENT PARTNERS, L.P., a Delaware limited
partnership ("Investor"). Operator and Operator Subsidiary are
sometimes herein individually and collectively called "Developer".
R E C I T A L S:
A. Developer has expertise in acquiring, refurbishing,
operating and selling Holiday Inn hotels.
B. Developer has entered into that certain agreement (the
"Purchase Agreement") captioned "CONTRACT FOR THE PURCHASE AND SALE
OF PROPERTY", dated July 7, 1995, by and among Operator, as
purchaser, Fox Fire L.L.C., an Arizona limited liability company, as
seller, and Lawyers Title Insurance Corporation, as escrow agent,
providing for the sale of a Holiday Inn known as the "Holiday Inn
Hurstbourne" and located near Louisville, in Jefferson County,
Kentucky, a copy of which agreement is attached as Exhibit "A".
C. Developer and Investor desire to form a partnership and to
cause such partnership to acquire, refurbish, operate and sell such
hotel, all upon and subject to the terms and conditions hereinafter
set forth.
IN VIEW OF THE FOREGOING FACTS, and in consideration of the
respective undertakings of the parties hereto, it is hereby agreed
as follows:
ARTICLE I FORMATION AND FINANCING OF PARTNERSHIP
Section 1.1 Formation of Partnership. On the "Closing Date"
(as hereinafter defined), Operator Subsidiary, Developer and
Investor shall enter into a partnership agreement (the "Partnership
Agreement") of RW Hotel Partners, L.P., a Delaware limited
partnership (the "Partnership"), in substantially the form of
Exhibit "B", which shall be effective, if at all, if and only if the
"Closing" (as hereinafter defined) occurs.
Section 1.2 Business Plan and Budgets. The Partnership
Agreement contemplates a "Business Plan", an "Operating Budget" and
a "Rehab Budget". Such items are to be completed and attached as an
exhibit to the Partnership Agreement, but have not yet been
completed as of the date hereof. Developer shall use diligent
efforts to prepare such items for submission to Investor for its
approval and to finalize the same as promptly as possible in a
manner satisfactory to all parties hereto.
Section 1.3 Obligation to Seek Credit Facility. Developer
shall use diligent efforts to obtain on behalf of the Partnership a
credit facility in accordance with the terms (the "Required
Financing Terms") set forth on Exhibit "C". A credit facility that
complies with each of the Required Financing Terms (excluding any
deviation therefrom specifically approved in writing by Investor) is
herein called a "Qualified Credit Facility". However, no
application, commitment or other loan document obligating the
Partnership or its partners to pay any fees, costs or other amounts
shall be executed without the prior written consent of Investor. If
the Partnership obtains a Qualified Credit Facility, it shall be
herein called the "Project Financing".
ARTICLE II ACQUISITION OF PROPERTY
Section 2.1 Incorporation of Definitions From Purchase
Agreement. The following terms shall have the meanings specified
for the same in the Purchase Agreement: "Closing Date" (except that
the Closing Date under this Agreement shall not include any
extension of the Closing Date under the Purchase Agreement that has
not been approved in writing by Investor), "Escrow Agent",
"Examination Period", "Deposit", "Property" and "Seller".
Section 2.2 Other Definitions.
"Closing" means the closing of the purchase under the Purchase
Agreement and the closing of the transactions contemplated by this
Agreement.
Section 2.3 Existing Documents re Deposit. The following
documents have been entered into in connection with the Deposit:
A. That certain agreement (the "Deposit Agreement") captioned
"DEPOSIT AGREEMENT", dated as of July 10, 1995, between Operator and
Farallon Capital Partners, a California limited partnership ("FCP"),
as amended by a letter agreement dated August 11, 1995; and
B. That certain promissory note (the "Deposit Note")
captioned "PROMISSORY NOTE", in the original principal amount of
$200,000, dated as of July 10, 1995.
Section 2.4 Action Taken Under Purchase Agreement. With
respect to the Purchase Agreement, the following provisions shall
apply:
A. Generally. At all times between the date hereof and the
Closing, Developer shall not give any notice, take any action or
waive any matter under the Purchase Agreement except with the prior
written consent of Investor. The parties will use reasonable
efforts to cooperate in order to meet any time deadlines for
consents by the "Buyer" under the Purchase Agreement. Developer and
Investor agree to cooperate in their due diligence efforts, and
without limitation on the foregoing, Developer shall supply Investor
with such information relating to the Property as Investor may
reasonably request from time to time (to the extent obtainable).
B. Due Diligence. During the Examination Period, Developer
shall perform such environmental, land use, financial, operational,
physical, legal, title, survey, contractual and other due diligence
as is customarily done by an institutional purchaser (and, without
limitation, such due diligence shall be conducted with a view
towards satisfying a provider of a Qualified Credit Facility). Such
due diligence shall include each of the items described on Exhibit
"D" and, without limitation on the foregoing, an inspection and
review of all books and records of the Property (including financial
records for 1993, 1994 and 1995 year to date), an inspection and
review of all required licenses and permits and their assignability,
a physical inspection of the condition of the Property, an analysis
of the demographics in the area, an inspection and review of the
hotel servicing and administrative operations, and an interview of
the personnel at the hotel. Developer shall complete its due
diligence and report its findings to Investor in writing at least
five business days prior to the end of the Examination Period. All
such due diligence shall be conducted in a professional manner in
compliance with the Purchase Agreement and the "Requirements" (as
defined in the Partnership Agreement) and Developer shall indemnify
and defend Investor and the Partnership, and each of them, from any
claims (and resulting liability, costs and expenses including
attorneys' fees) arising from the manner in which such due diligence
is conducted by them (such as claims for property damage, physical
injury and claims for indemnification by the seller under the
Purchase Agreement) to the extent the same are not fully covered by
the Partnership's insurance.
C. Pre Formation Due Diligence Costs. Developer shall
advance all reasonable due diligence costs incurred pursuant to this
Agreement prior to the execution of the Partnership Agreement and
the closing of the acquisition of the Property by the Partnership.
Upon any such acquisition, Developer shall be reimbursed at the
closing for the reasonable due diligence costs associated with the
Property. If the Property is not acquired by the Partnership
pursuant to this Agreement for any reason, Developer shall be solely
responsible for all due diligence and other costs incurred in
connection with the Property.
D. Business Plan/Budgets. During the Examination Period,
Developer shall prepare a draft Business Plan, a draft Operating
Budget and a draft Rehab Budget for the Property and submit the same
to Investor for its approval, and shall use diligent efforts to
finalize the same in a manner satisfactory to all parties.
E. Deposit. Investor has previously advanced to Developer
$200,000 which has been used to fund the Deposit pursuant to the
Purchase Agreement. The Deposit under the Purchase Agreement shall
be invested in a federally insured money market account or such
other investments as may be approved in writing by Investor. Prior
to the end of the Examination Period, Developer shall cause such
amount to be refunded to Investor in the event Investor elects not
to proceed with the transaction under the Purchase Agreement. In
the event that the Closing shall occur, the Deposit shall be deemed
applied against the Deposit Note and then credited against
Investor's initial contribution obligation under the Partnership
Agreement. The Deposit is to be applied and treated by Seller as
provided in the Purchase Agreement. Developer shall not default or
take or fail to take any action that would result in a forfeiture or
delay in the return of the Deposit. The Buyer's right under the
Purchase Agreement to terminate the transaction and receive a refund
of the deposit thereunder shall be exercised by Operator at the
election of Investor or any partner in the Partnership (which
election may be made in its sole discretion); provided, however,
that no such termination shall be permitted if it does not result in
a refund of the deposit (unless such termination without a refund
has been expressly approved or directed in writing by Investor). In
the event of a refund of the Deposit, such refund shall be returned
to Investor and applied against the Deposit Note. If the
transactions contemplated by this Agreement are not consummated on
the Closing Date because a condition in Section 5.1 has not been
satisfied, then in addition to any other rights and remedies that
Investor may have under this Agreement, FCP may recover the
outstanding balance of the Deposit Note from Developer.
ARTICLE III ADDITIONAL MATTERS
Section 3.1 Additional Transaction Documents. Upon the
closing of the acquisition of the Property pursuant to the Purchase
Agreement, the following additional agreements shall be executed and
delivered:
A. Management Agreement. The Partnership, as owner
("Owner"), and Operator, as manager ("Manager"), shall enter into an
agreement (a "Management Agreement") meeting the parameters set
forth in Exhibit "E".
B. Construction Management Agreement. The Partnership, as
owner, and Operator, as construction manager, shall enter into a
construction management agreement (a "Construction Management
Agreement") meeting the parameters set forth in Exhibit "F".
C. Assignment of Pre Formation Agreement. The Purchase
Agreement shall be assigned to the Partnership, as of the closing of
the acquisition thereunder, by an assignment ("Assignment") in form
reasonably satisfactory to the parties (under which the Partnership
shall assume the obligations of the Buyer thereunder first arising
from and after the date of such assignment), whereupon the
Partnership shall have the benefit of all of the right, title and
interest of the "Buyer" in and to the Purchase Agreement (including
the benefit of all of Seller's covenants, representations and
warranties thereunder). Developer shall obtain the prior written
consent of Seller to such assignment (to the extent required under
the Purchase Agreement) prior to the end of the Examination Period.
Section 3.2 Closing Contributions. Concurrently with the
Closing, each of Investor and Developer shall make the initial
contributions to the Partnership required of it under the
Partnership Agreement; provided, however, the obligations of
Investor to form the Partnership and to make the contributions
required of it under the Partnership Agreement are subject to the
satisfaction of the conditions set forth in this Agreement.
ARTICLE IV REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties of Parties. Each
party hereby represents and warrants to the other parties and the
Partnership, and each of them, now and as of the Closing Date, as
follows: This Agreement and all agreements, instruments and
documents herein provided to be executed or to be caused to be
executed by it is and on the Closing Date will be duly authorized,
executed and delivered by and are and will be binding upon the same.
It is a corporation or partnership as indicated in the preamble,
duly organized and validly existing under the laws of the State of
its formation, as indicated in the preamble. It is duly authorized
and qualified to enter into and do all things required of it under
the agreements it is executing in connection with this transaction.
Neither this Agreement nor any agreement, document or instrument
executed or to be executed in connection with the same, nor anything
provided in or contemplated by this Agreement or any such other
agreement, document or instrument, breaches, invalidates, cancels,
makes inoperative or interferes with, or results in the acceleration
or maturity of, or requires any consent or authorization that has
not been obtained under, any contract, agreement, lease, easement,
right or interest, law or regulation to which it is subject
(excluding, in the case of Investor, any of the same to which
Investor will become subject upon the Closing by reason of this
Agreement).
Section 4.2 Additional Representations and Warranties of
Developer. Developer represents and warrants to Investor and the
Partnership, and each of them:
A. Purchase Agreement. Attached hereto as Exhibit "A" is
a true, complete and correct copy of the Purchase Agreement and all
amendments, supplements, waivers, extensions and other modifications
thereto. There are no oral modifications or understandings with
respect to the Purchase Agreement and, without limitation, the
"Buyer" thereunder has not delivered to Seller, and has not received
from Seller, any notice or demand under or in connection with the
Purchase Agreement that is not included in Exhibit "A" hereto.
There is no material breach or default by the Buyer under the
Purchase Agreement and to the knowledge of Developer, there is no
material breach or default by Seller under the Purchase Agreement
(where, for purposes of this sentence, it is assumed that Seller has
knowledge of all information relating to the Property that is known
to Developer). Operator is the holder of all right, title and
interest to the Buyer's interest under the Purchase Agreement and,
upon the Closing Date, the Partnership will acquire all such right,
title and interest.
B. Actions Previously Taken Under the Purchase Agreement.
(1) Leases. To the knowledge of Developer, no leases
affect the Property other than the following leases (which shall be
identified by parties, date and premises, and dates of all
amendments), each of which has been delivered to and approved by
Investor: the leases (the "Leases") described in Exhibits "C" and
"D" to the Purchase Agreement.
(2) Contracts. To the knowledge of Developer, no
agreements (other than the Leases) affect the Property other than
the following agreements (which shall be described by parties, date
and subject matter and dates of all amendments), each of which has
been delivered to and approved in writing by Investor: the
Contracts described on Exhibit "B" to the Purchase Agreement.
(3) Due Diligence. To the knowledge of Developer, there
is no basis for any claim by Seller for indemnification under the
Purchase Agreement (including any claim based on Buyer's due
diligence activities).
(4) Physical Reports. All physical and environmental
reports received by Developer or its affiliates respecting the
Property from any source have previously been delivered to Investor.
C. Information Acquired From Due Diligence. Neither
Developer nor any of its affiliates has received any written notice
or has any other actual knowledge of any change contemplated in any
laws, ordinances or restrictions affecting the Property, or any
judicial or administrative action, or any action by adjacent
landowners with respect to the Property, and neither Developer nor
any of its respective affiliates has received any written notice or
has any other actual knowledge of any other fact, circumstance or
condition, financial or otherwise, which would prevent, limit,
impede or render more costly the acquisition, refurbishment,
operation and sale of the Property in accordance with the Business
Plan.
D. Update. On the date that is three business days prior
to the end of the Examination Period under the Purchase Agreement,
Developer shall execute and deliver by facsimile to Investor a
certificate in form reasonably satisfactory to Investor under which
Developer shall represent and warrant that the representations and
warranties contained in this Agreement are true and correct without
exception as of such date as if made on and as of such date (or,
specifying in reasonable detail such exceptions, if any, which then
exist). Developer shall not take any action or omit to take any
action, which action or omission would result in any such exception.
ARTICLE V CONDITIONS
Section 5.1 Conditions to Investor's Obligations. Investor's
obligations to perform its undertakings provided in this Agreement
(including its obligation to execute the Partnership Agreement and
to make the contributions provided in the Partnership Agreement) are
conditioned on the following:
A. Performance by Developer and Operator. The due
performance by each of Developer and Operator in all material
respects of each and every undertaking and agreement to be performed
by it hereunder (including the delivery to Investor of the items
specified in Section 6.3) and the truth of each representation and
warranty in all material respects made by it in this Agreement or
any document executed in connection herewith at the time as of which
the same is made and as of the Closing Date as if made on and as of
the Closing Date. Without limitation on the foregoing, there shall
be no exceptions noted in the Closing Certificate.
B. No Bankruptcy or Dissolution. That at no time on or before
the Closing Date shall any of the following ("Banktuprcy/Dissolution
Event") have been done by, against or with respect to Seller,
Developer, Operator or any of their respective constituent entities
or principals: (1) the commencement of a case under Title 11 of the
U.S. Code, as now constituted or hereafter amended, or under any
other applicable federal or state bankruptcy law or other similar
law; (2) the appointment of a trustee or receiver of any property
interest; (3) an assignment for the benefit of creditors; (4) an
attachment, execution or other judicial seizure of a substantial
property interest; (5) the taking of, failure to take, or submission
to any action indicating an inability to meet its financial
obligations as they accrue; or (6) a dissolution or liquidation.
C. Plans/Budgets. That on or before the Closing Date, the
parties shall have agreed in writing upon the Business Plan,
Operating Budget and Rehab Budget for the Property.
D. Satisfaction of Conditions Under Purchase Agreement. That
each and all the conditions to the obligation of the "Buyer" to
purchase the Property under the Purchase Agreement shall have been
satisfied in full or waived with the written consent of Investor on
or before the Closing Date.
E. Title Insurance. The Partnership shall receive on the
Closing Date an ALTA (Form B) (1970, amended 10/17/70) extended
coverage owner's title insurance policy with respect to the Property
or an irrevocable and unconditional written commitment to issue the
same (herein called the "Title Policy"), insuring the Partnership,
as owner of the Property, as of the date and time the deed to the
Partnership is recorded, including such endorsements as Investor may
reasonably request and otherwise meeting the requirements
hereinafter set forth in this Section. The Title Policy shall be
issued by Escrow Agent. The Title Policy shall cover the Property
and shall show that fee simple title in and to the Property and any
easements appurtenant thereto is vested in the Partnership, subject
only to exceptions approved in writing by Investor. The Title
Policy shall be in the form of the pro forma title policy attached
to the "Closing Procedure Letter" (as hereinafter defined), and
Developer shall use diligent efforts to deliver to the Escrow Agent
such instruments and agreements as the Escrow Agent shall reasonably
require from Seller, and shall deliver to the Escrow Agent such
instruments and agreements as the Escrow Agent shall reasonably
require of Developer, in order to issue the Title Policy. The
endorsements to the Title Policy shall include the following
endorsements: (1) access (CLTA Form 103.7), (2) contiguity (CLTA
Form 116.4), (3) limited liability company treated as a corporation
for "Fairway" purposes, (4) owner's comprehensive (CLTA Form 100
[Owner's Modified]), (5) encroachment (CLTA Form 103.9), and (6)
survey (CLTA Form 116.1).
Section 5.2 Waiver of Conditions. Any party may at any time
or times, at its election, waive any of the conditions to its
obligations hereunder, but any such waiver shall be effective only
if contained in a writing signed by such party. No such waiver
shall reduce the rights or remedies of a party by reason of any
breach by the other party hereunder.
ARTICLE VI CLOSING CONFERENCE
The closing (the "Closing") of the transactions herein provided
shall be consummated through a closing conference (the "Closing
Conference") which shall be held on the Closing Date at the offices
of Pircher, Nichols & Meeks, 1999 Avenue of the Stars, Suite 2600,
Los Angeles, California 90067 or such other place as the parties
hereto may hereafter agree upon.
Section 6.1 Closing Date. As used herein, the "Closing Date"
means August 16, 1995, or such other date as the parties may agree
upon in writing.
Section 6.2 Escrow. The deliveries to be made under this
Article shall be made in accordance with and subject to an escrow
letter (the "Closing Procedure Letter") from the parties to the
Escrow Agent being executed concurrently herewith.
Section 6.3 Deliveries. On the Closing Date, the parties
shall deliver the following items:
A. Items to be Delivered by Investor. Investor shall deliver
or cause to be delivered:
(1) Funds. The amount required to be contributed by it
to the Partnership on the Closing Date under the Partnership
Agreement.
(2) Partnership Agreement. Four original counterparts of
the Partnership Agreement, duly executed by Investor.
B. Items to be Delivered by Operator and Operator Subsidiary.
Operator and Operator Subsidiary shall deliver or cause to be
delivered:
(1) Funds; Demand Notes; Pledge Agreements. The funds
and demand notes required to be contributed by Operator Subsidiary
to the Partnership on the Closing Date under the Partnership
Agreement and the collateral (including the demand notes from
Operator to Operator Subsidiary) and duly executed endorsements and
pledge agreements therein required to be delivered in connection
therewith.
(2) Partnership Agreement. Four original counterparts of
the Partnership Agreement, duly executed by Operator Subsidiary.
(3) Management Agreement. Four originals of a Management
Agreement, duly executed by Operator Subsidiary, as a partner of the
Partnership, and Operator, as manager, with respect to the Property
acquired by the Partnership on the Closing Date.
(4) Construction Management Agreement. Four originals of
a Construction Management Agreement, duly executed by Operator
Subsidiary, as a partner of the Partnership, and Operator, as
construction manager, with respect to the Property acquired by the
Partnership on the Closing Date.
(5) Assignment. Four originals of the Assignment, duly
executed by Operator, with respect to the Purchase Agreement.
(6) Closing Certificate. If the Closing Date occurs
after the date of this Agreement, a certificate (the "Closing
Certificate") in a form reasonably agreed upon by the parties and
consistent with this paragraph, dated as of the Closing Date and
duly executed by Developer, representing that the representations
and warranties of Developer contained in this Agreement or any
document executed in connection herewith are true and correct
without exception as of the Closing Date as if made on and as of the
Closing Date (or, specifying in reasonable detail such exceptions,
if any, which then exist). Developer shall not take any action or
omit to take any action, which action or omission would result in
any such exception.
Section 6.4 Closing Authorization. Upon satisfaction of all
the conditions in the Closing Procedure Letter for delivery of the
funds and instruments described in Section 6.3 and receipt of
written advice by the Escrow Agent that such conditions have been
satisfied and that Escrow Agent is prepared to close the escrow,
Investor shall deliver the authorization of Investor to close as
specified in the Closing Procedure Letter.
ARTICLE VII MISCELLANEOUS
Section 7.1 Brokers.
A. Except as provided in subsection B below, each party
represents and warrants to the other party and the Partnership, and
each of them, that no broker or finder has been engaged by it (or
any of its affiliates) in connection with the formation of the
Partnership contemplated by this Agreement or the other transactions
contemplated hereby. In the event of a claim for broker's or
finder's fee or commissions in connection herewith, then each party
shall indemnify and defend the other parties and the Partnership,
and each of them, from the same if it shall be based upon any
statement or agreement alleged to have been made by the indemnifying
party or its affiliates.
B. Developer has engaged Prudential California Realty, Inc.
(as finder), Lullwater Investors, L.P., Terry Huggins, Charles
Swanson and Michael Lewitt in connection with the transactions
contemplated by this Agreement, and Developer shall be solely
responsible for all fees and other compensation which it has agreed
to pay such persons and entities and shall indemnify, protect,
defend and hold Investor, the Partnership, and the assets of the
Partnership, and each of them, harmless from and against any and all
"Claims" (as defined in the Partnership Agreement) in any way
arising in connection with any claims made by such persons and
entities in connection with the transactions contemplated hereby.
Section 7.2 Survival. All warranties, representations,
covenants, obligations and agreements contained in this Agreement
shall survive the closing hereunder and the transfer and conveyance
of the Property hereunder and any and all performances hereunder.
All warranties and representations shall be effective regardless of
any investigation made or which could have been made by the party
benefitting from such warranties and representations.
Section 7.3 Further Instruments. Each party will, whenever
and as often as it shall be requested so to do by the other, cause
to be executed, acknowledged or delivered any and all such further
instruments and documents as may be necessary or proper, in the
reasonable opinion of the requesting party, in order to carry out
the intent and purpose of this Agreement.
Section 7.4 Limitation of Liability. No advisor, trustee,
director, officer, partner, employee, beneficiary, shareholder,
participant or agent of or in Investor (including Farallon Capital
Management, Inc.), or of or in Farallon Capital Management, Inc.,
shall have any personal liability, directly or indirectly, under or
in connection with this Agreement or any agreement made or entered
into under or pursuant to the provisions of this Agreement, or any
amendment or amendments to any of the foregoing made at any time or
times, heretofore or hereafter, and each party and its respective
successors and assigns and, without limitation, all other persons
and entities, shall look solely to Investor's assets for the payment
of any claim against, or for any performance by such party, and each
party hereby waives any and all such personal liability. The
limitations of liability provided in this Section are in addition
to, and not in limitation of, any limitation on liability applicable
to Investor provided by law or by any other contract, agreement or
instrument.
Section 7.5 Matters of Construction.
A. Entire Agreement. This Agreement contains the entire
agreement between the parties respecting the matters herein set
forth and supersedes all prior agreements between the parties hereto
respecting such matters. Without limitation on the foregoing, this
Agreement amends and restates and supersedes in its entirety that
certain agreement captioned "BASIC AGREEMENT" dated as of August 14,
1995, by and among the parties hereto. This Agreement may be
amended by written agreement of amendment executed by all parties
hereto, but not otherwise.
B. Time of the Essence. Time is of the essence of this
Agreement.
C. Captions. Article, Section and Exhibit headings shall not
be used in construing this Agreement.
D. Cumulative Remedies. No remedy conferred upon a party in
this Agreement is intended to be exclusive of any other remedy
herein or by law provided or permitted, but each shall be cumulative
and shall be in addition to every other remedy given hereunder or
now or hereafter existing at law, in equity or by statute (except as
otherwise expressly herein provided). Operator and Operator
Subsidiary shall be primarily, jointly and severally liable for each
of the obligations and liabilities of Developer, each of the
obligations and liabilities of Operator, and each and all of the
obligations and liabilities of Operator Subsidiary, under this
Agreement or any other agreement or instrument executed in
connection herewith (including the Partnership Agreement, the
Management Agreement and the Construction Management Agreement and
the certificates required to be rendered under this Agreement or
such other agreements). Each of Operator and Operator Subsidiary
hereby waives any surety or guarantor defenses that might otherwise
apply.
E. No Waiver. No waiver by a party of any breach of this
Agreement or of any warranty or representation hereunder by the
other party shall be deemed to be a waiver of any other breach by
such other party (whether preceding or succeeding and whether or not
of the same or similar nature), and no acceptance of payment or
performance by a party after any breach by the other party shall be
deemed to be a waiver of any breach of this Agreement or of any
representation or warranty hereunder by such other party, whether or
not the first party knows of such breach at the time it accepts such
payment or performance. No failure or delay by a party to exercise
any right it may have by reason of the default of the other party
shall operate as a waiver of default or modification of this
Agreement or shall prevent the exercise of any right by the first
party while the other party continues to be so in default.
F. Governing Law; Venue. This Agreement shall be construed
and enforced in accordance with the laws of the State of California
(without regard to conflicts of law). Each party hereby consents to
the jurisdiction of any state or federal court located within Los
Angeles or San Francisco County, California, waives personal service
of any and all process upon it, consents to service of process by
registered mail directed to it at the address stated in Section 7.8
hereof, and acknowledges that service so made shall be deemed to be
completed upon actual delivery thereof (whether accepted or
refused). In addition, each party consents and agrees that venue of
any action instituted under this Agreement or any agreement executed
in connection herewith shall be proper in Los Angeles or San
Francisco County, California, and hereby waives any objection to
venue.
G. Incorporation of Exhibits. All exhibits attached and
referred to in this Agreement are hereby incorporated herein as
fully set forth in this Agreement.
H. Non Business Days. Whenever action must be taken
(including the giving of notice or the delivery of documents) under
this Agreement during a certain period of time or by a particular
date that ends or occurs on a non business day (i.e., Saturday,
Sunday or a holiday recognized by the U.S. federal government or the
State of New York, Georgia or California), then such period or date
shall be extended until the immediately following business day.
I. Severability. If any term or provision of this Agreement
or the application thereof to any person or circumstance shall, to
any extent, be invalid or unenforceable, the remainder of this
Agreement, or the application of such term or provision to persons
or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each such term and
provision of this Agreement shall be valid and be enforced to the
fullest extent permitted by law.
J. No Third Party Beneficiaries. Except as set forth in
Section 2.4E, with respect to FCP, nothing in this Agreement,
expressed or implied, is intended to confer any rights or remedies
upon any person, other than the parties hereto and, subject to the
restrictions on assignment herein contained, their respective
successors and assigns.
K. Certain Terminology.
(1) Whenever the words "including", "include" or
"includes" are used in this Agreement, they should be interpreted in
a non exclusive manner as though the words ", without limitation"
immediately followed the same.
(2) Except as otherwise indicated, all Article, Section
and Exhibit references in this Agreement shall be deemed to refer to
the Articles and Sections in, and the Exhibits to, this Agreement.
L. Consents and Approvals. Except as otherwise expressly
provided herein, any approval or consent provided to be given by a
party hereunder may be given or withheld in the absolute discretion
of such party and shall not be deemed to have been given unless
given in writing.
Section 7.6 Attorneys' Fees. If any party obtains a judgment
against any other party by reason of breach of this Agreement
(whether in an action or through arbitration), such party shall be
entitled to recover its court (or arbitration) costs, and reasonable
attorneys' fees (including the reasonable value of in house attorney
services) and disbursements incurred in connection therewith and in
any appeal or enforcement proceeding thereafter, in addition to all
other recoverable costs.
Section 7.7 Successors and Assigns. No party may assign or
transfer any of its rights or obligations under this Agreement
without the prior written consent of the others (in which event such
transferee shall assume in writing all of the transferor's
obligations hereunder, but such transferor shall not be released
from its obligations hereunder). No consent given to any such
transfer or assignment shall be construed as a consent to any other
transfer or assignment. Subject to the foregoing, this Agreement
and the terms and provisions hereof shall inure to the benefit of
and be binding upon the successors and assigns of the parties.
Section 7.8 Notices. Any notice which a party is required or
may desire to give another party shall be in writing and may be
delivered (1) personally, (2) by United States registered or
certified mail, postage prepaid, (3) by Federal Express or other
reputable courier service regularly providing evidence of delivery
(with charges paid by the party sending the notice), or (4) by
telecopy, provided that such telecopy shall be immediately followed
by delivery of such notice pursuant to clause (1), (2) or (3) above.
Any such notice shall be addressed as follows (subject to the right
of a party to designate a different address for itself by notice
similarly given):
TO DEVELOPER, OPERATOR OR OPERATOR SUBSIDIARY:
Ridgewood Properties, Inc.
2859 Paces Ferry Road
Suite 700
Atlanta, Georgia 30339
Attention: Mr. N. Russell Walden
Telephone No.: (404) 434 3670
Facsimile No.: (404) 433 8935
With Copy to:
Troutman Sanders
Suite 5200
600 Peachtree Street, N.E.
Atlanta, Georgia 30308/2216
Attention: John W. Moore, Esq.
Telephone No.: (404) 885 3188
Facsimile No.: (404) 885 3900
TO INVESTOR:
c/o Farallon Capital Management, Inc.
One Maritime Plaza
Suite 1325
San Francisco, California 94111
Attention: Mr. Jason M. Fish
Telephone No.: (415) 421 2132
Facsimile No.: (415) 421 2133
With Copy To:
Pircher, Nichols & Meeks
1999 Avenue of the Stars, Suite 2600
Los Angeles, California 90067
Attention: Real Estate Notices (SAC/RCS)
Telephone No.: (310) 201 8900
Facsimile No.: (310) 201 8922
Any notice so given by mail or courier service shall be deemed to
have been given as of the date of delivery (whether accepted or
refused) established by U.S. Post Office return receipt or other
proof of delivery. Any such notice not so given (including
facsimile transmission) shall be deemed given upon receipt of the
same by the party to whom the same is to be given.
Section 7.9 Counderparts. This Agreement may be executed in
any number of counterparts, provided each of the parties hereto
executes at least one counterpart; each such counterpart hereof
shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the day and year first above written.
INVESTOR:
RW HOTEL INVESTMENT PARTNERS, L.P.
a Delaware limited partnership,
By: RW HOTEL INVESTORS, INC.,
a Delaware corporation,
General Partner
By: ____________________________
Name: __________________________
Title: __________________________
OPERATOR:
RIDGEWOOD PROPERTIES, INC.,
a Delaware corporation
By: ______________________________
Name: ____________________________
Title: ___________________________
OPERATOR SUBSIDIARY
RIDGEWOOD HOTELS, INC.,
a Georgia corporation
By: _____________________________
Name: ___________________________
Title: ___________________________
ASSIGNMENT, ASSUMPTION AND RELEASE
Effective as of September 8, 1995:
1. Assignment. RW Hotel Investment Partners, L.P., a Delaware
limited partnership ("Assignor"), hereby transfers all of the right,
title and interest of "Investor" under the foregoing agreement to RW
Hotel Investment Associates, L.L.C., a Delaware limited liabilty
company ("Assignee").
2. Assumption. Assignee hereby assumes all of the obligations
and liabilities of Investor under the foregoing agreement.
3. Release. Ridgewood Properties, Inc. and Ridgewood Hotels,
Inc. hereby consent to such transfer and assignment and agree that
Assignor and its general partner are hereby released from any and
all liability and obligations under the foregoing agreement or any
document executed in connection therewith.
ASSIGNOR:
RW HOTEL INVESTMENT PARTNERS, L.P.
a Delaware limited partnership,
By: RW HOTEL INVESTORS, INC.,
a Delaware corporation,
General Partner
By: ____________________________
Name: __________________________
Title: _________________________
OPERATOR:
RIDGEWOOD PROPERTIES, INC.,
a Delaware corporation
By: _____________________________
Name: ___________________________
Title: __________________________
OPERATOR SUBSIDIARY
RIDGEWOOD HOTELS, INC.,
a Georgia corporation
By: _____________________________
Name: ___________________________
Title: __________________________
ASSIGNEE:
RW HOTEL INVESTMENT ASSOCIATES,
L.L.C.,
a Delaware limited liability
company
By: FARALLON CAPITAL MANAGEMENT,
INC.,
a Delaware corporation,
Manager
By: ____________________________
Name: __________________________
Title: _________________________
TABLE OF DEFINED TERMS
Term Page
"Agreement" Exh. "C"
"Approved Budget" Exh. "E"
"Approved Rehab Budget" Exh. "F"
"Assignment" 5
"Bankruptcy/Dissolution Event" 8
"Business Plan" 1
"Closing" 2; 9
"Closing Certificate" 10
"Closing Conference" 9
"Closing Date" 9
"Closing Procedure Letter" 9
"Construction Management Agreement" 5
"Contractors" Exh. "F"
"Deposit" 2
"Deposit Agreement" 2
"Deposit Note" 2; 4
"Developer" 1
"Escrow Agent" 2
"Examination Period" 2
"FF&E Reserve" Exh. "E"
"Institutional Investor" Exh. "C"
"Investor" 1
"Management Agreement" 5
"Manager" 5
"Operating Budget" 1
"Operator" 1
"Operator Subsidiary" 1
"Owner" 5
"Partnership" 1
"Partnership Agreement" 1
"Project" Exh. "F"
"Project Financing" 2
"Property" 2
"Proposed Encumbrance" Exh. "C"
"Proposed Lender" Exh. "C"
"Proposed Loan" Exh. "C"
"Purchase Agreement" 1
"Qualified Credit Facility" 2
"Rehab Budget" 1
"Requirements" 3
"Required Financing Terms" 2; Exh. "C"
"Required Improvements" Exh. "F"
"Requirements" 3
"Title Policy" 8
EXHIBIT LIST
A Purchase Agreement
B Form of Partnership Agreement
C Required Financing Terms
D Due Diligence Checklist
E Management Agreement Parameters
F Construction Management Agreement Parameters
EXHIBIT "A"
PURCHASE AGREEMENT
[SEE ATTACHED]
EXHIBIT "B"
FORM OF PARTNERSHIP AGREEMENT
[SEE ATTACHED]
EXHIBIT "C"
REQUIRED FINANCING TERMS
The following requirements constitute the "Required Financing
Terms" referred to in the agreement (this "Agreement") to which this
Exhibit is attached and of which this Exhibit is a part. Except as
otherwise indicated, each capitalized term used herein shall have
the meaning set forth for the same elsewhere in this Agreement.
Without limitation on the other requirements set forth in this
Agreement, any financing (the "Proposed Loan"), as well as the note
(the "Proposed Note") evidencing the same and the deed of trust and
other security instruments (collectively, the "Proposed
Encumbrance") securing the same, must satisfy each of the
requirements set forth in this Exhibit, except for any deviation
therefrom specifically approved in writing by Investor.
1. Proposed Lender. The lender ("Proposed Lender") under
the Proposed Loan must be an "Institutional Investor" (which, as
used herein, means a banking institution, building and loan
association, pension fund, municipal or state employees' or
teachers' retirement fund, real estate investment trust, federal or
state savings and loan association, savings bank or insurance
company) reasonably satisfactory to the Partners.
2. Fees, Points and Other Charges. Any application fees,
earnest money deposits, commitment fees, points and other charges
must be approved in writing by Investor.
3. Amount. The principal amount of the Proposed Note
must not exceed an amount which, when added to the maximum amount of
any other loans to which the "Partnership Property" (as defined in
the Partnership Agreement") is then subject or is then to be subject
(assuming that any possible achievement or other fundings will in
fact be funded), equals 70% of the then-current fair market value of
the Partnership Property.
4. Debt Service Coverage. The debt service under the
Proposed Loan shall be such that the following debt service coverage
requirement is satisfied (and Developer shall deliver to Investor
evidence reasonably satisfactory to Investor of the satisfaction of
such requirement): The then stabilized net operating income (or, if
less, the then actual net operating income from the Partnership
Property) shall be no less than 150% of the sum of the aggregate
annual amount of monthly payments of principal and interest payable
under the Proposed Loan and any other loans to which the Partnership
Property is then subject or is then to be subject (assuming that any
possible future achievement or other fundings will in fact be
funded).
5. Nonrecourse Loan; Security. The Proposed Loan must be
nonrecourse, and Proposed Lender must expressly agree in the
Proposed Note and the Proposed Encumbrance to look solely to the
Partnership Property for repayment of the Proposed Loan. There may
be customary exceptions from the nonrecourse provisions for fraud or
intentional misrepresentation, intentional misappropriation of
rents, security deposits, casualty and condemnation proceeds or
other proceeds from the Partnership Property, and violations of
environmental laws; however, the Proposed Lender's recourse with
respect to such exceptions shall be limited to the assets of the
Partnership or the general partners thereof (and their respective
constituents and principals). In no event may the Proposed Loan be
secured by real or personal property other than the Partnership
Property; and in no event may the Proposed Loan be guaranteed by any
individual, partnership, corporation or other entity without
Investor's prior written consent.
6. Security Instruments. The Proposed Encumbrance may
include only the following instruments: (a) a first mortgage or
first deed of trust which shall cover only the Partnership Property;
(b) a security agreement covering the personal property included in
the Partnership Property; (c) an assignment of the tenant leases of
space in the building included in the Partnership Property; (d) an
assignment of rents covering the receipts under such tenant leases;
and (e) such other instruments as may be reasonably requested by
Proposed Lender (provided that the terms of such documents otherwise
comply with these Required Financing Terms).
7. Exculpation of Partners. The Proposed Note and
Proposed Encumbrance shall each contain an express provision to the
effect that no personal liability or cost or expense of any kind or
nature may be imposed upon or result to any Partner or any advisor,
member, trustee, director, officer, partner, employee, beneficiary,
shareholder or agent of any Partner or any direct or indirect
partner of any Partner (including Farallon Capital Management,
Inc.), directly or indirectly, by reason of or in connection with
the Proposed Loan, the Proposed Note and Proposed Encumbrance;
provided, however, that the Proposed Note and the Proposed
Encumbrance may contain an exception to the exculpatory provisions
under which the general partners of the Partnership may have
personal liability for fraud or intentional misappropriation of
funds.
8. Dragnets; Cross Defaults. The Proposed Encumbrance
may not secure (and no rights will be exercisable thereunder by
reason of breach or default under) any obligation, indebtedness,
claim or right other than (a) the Proposed Note executed in
connection therewith (including any modifications, extensions or
renewals thereof), and (b) the covenants relating to the Partnership
Property made in such Proposed Encumbrance. Without limitation on
the generality of the foregoing, the Proposed Encumbrance will not
secure any monetary debts or obligations except those evidenced by
the Proposed Note or consisting of costs and charges related to
enforcement of covenants in the Proposed Encumbrance upon default.
9. Changes in Terms of Proposed Loan. The Proposed
Encumbrance must provide that Proposed Lender may not, without the
prior written consent of all Partners, agree to (a) renew or extend
the Proposed Loan or (b) change any economic terms or conditions or
materially change any non economic terms or conditions of the
Proposed Note or Proposed Encumbrance (including any increase in the
amount of the Proposed Loan).
10. No Equity Participation. The Proposed Lender shall
not be given any equity participation. The Proposed Loan may not
permit any interest to accrue without being paid within one month;
and no additional interest, percentage interest or contingent
interest (including any interest based on a percentage or share of
gross or net income or of sale, financing, insurance or condemnation
proceeds) may be payable under or in connection with the Proposed
Loan.
11. Interest. The Proposed Loan must provide for
interest at a rate approved by Investor. There shall be no interest
accruals, any interest being payable monthly on a current basis.
12. Monthly Payments; Amortization. The Proposed Loan
may provide for monthly payments and amortization approved by
Investor.
13. Prepayment. Prepayment must be permitted, in whole
or in part, without premium or penalty (other than a customary
yield maintenance formula that will not apply during the 90 day
period prior to maturity).
14. Term; Maturity. The Proposed Loan must have a term
of not less than 5 years (i.e., the maturity date of the Proposed
Loan must not occur, absent acceleration due to default, prior to
the date which is 5 years after the first funding of the Proposed
Loan). Proposed Lender must have no right to "call" (i.e.,
accelerate without cause) the Proposed Loan without at least nine
months' prior written notice and in no event prior to the end of the
5th year.
15. Notice. The Proposed Encumbrance and the Proposed
Note must provide that before taking any action by reason of any
default under the Proposed Encumbrance or Proposed Note, Proposed
Lender must give not less than five days' written notice to the
Partnership (in the case of a monetary default) and 30 days' written
notice to the Partnership of such default (in the case of
nonmonetary default), and the Partnership shall have the right to
cure the default within the five day period (in the case of monetary
default) and to commence curing the default within such 30-day
period and to thereafter diligently prosecute such cure to
completion (in the case of a nonmonetary default).
16. Due on Sale or Encumbrance. The Proposed Note and
Proposed Encumbrance may not restrict or limit the sale, assignment,
encumbrance or transfer of the Partnership Property (or any portion
thereof) or any interest in the Partnership Property or in the
Partnership, except upon such reasonable conditions as Proposed
Lender may impose.
17. Insurance and Condemnation Proceeds. The Proposed
Encumbrance must provide that insurance and condemnation proceeds
are to be released for the purpose of effecting repairs and
restoration of the Partnership Property connected with the damage,
loss or taking which resulted in such insurance or condemnation
proceeds, subject to such reasonable conditions as Proposed Lender
may impose.
18. Other Terms. The other terms and provisions of the
Proposed Note and Proposed Encumbrance shall be satisfactory to
Investor and may not be more onerous or disadvantageous to the
Partnership than the provisions contained in then market loans under
similar circumstances.
EXHIBIT "D"
DUE DILIGENCE CHECKLIST
I. COLLECTION OF INFORMATION
Collection of information concerning the hotel, including:
A. FINANCIAL.
Audited annual profit and loss statements, with full
supporting schedules, for the past five years.
Most recent year-to-date profit and loss statement with
comparison to previous year.
Monthly profit and loss statements, with full supporting
schedules, for the past three years.
Audited balance sheet for the past five years.
B. OPERATIONS.
1. Occupancy and rates
Occupancy and average rate by month for the past
three years.
Detailed list of advanced reservations and bookings,
including name of party, deposit received, rate
guaranteed, dates, status, and other pertinent
information.
2. Capital Expenditures. Capital expenditures for the
past five years, with any current estimates for
future expenditures, including any PIP expenditures
required by franchisor.
3. Taxes. Real and personal property tax bills for the
past three years.
4. Insurance. List of all insurance coverage, including
cost and expiration.
5. Services and Supplies. List of all purveyors and
sources of supplies and services.
6. Inventory. List of inventory.
7. Payroll. List of employees, including name,
position, salary and wage scale, and benefits to
which they are entitled.
8. Leasing. List of all tenants, rent rolls, deposits,
and terms of leases.
C. FRANCHISE INFORMATION.
Franchise inspection and deficiency reports for the past
two years.
Franchise reservation reports for the past two years.
D. FINANCING.
Copies of all notes and mortgages currently encumbering
the property.
Estoppel (or payoff) letter from any mortgagee.
E. INTELLECTUAL PROPERTY.
Copies of all trademarks, trade names, and copyrights.
F. MARKET INFORMATION.
Copies of all recent (i.e., within the past three years)
appraisals, market studies and marketing plans.
G. PHYSICAL.
Architectural and engineering plans and specifications.
Engineering and soil reports, and environmental audits.
Recent health, fire, building, and elevator inspection
reports.
Physical inventory of FF&E, supplies, consumables, and
inventories.
H. LEGAL.
1. Litigation. Details of any litigation pending
against the hotel.
2. Compliance. Copies of liquor licenses and any other
required licenses, permits or governmental
authorizations.
3. Contracts. Copies of all service contracts, leases,
franchises, employee contracts, permits, management
agreements, union agreements, and any instruments
that the purchaser is expected to assume.
4. Title. Survey (as built), legal description, most
recent title policy, commitment or report and copies
of all documents affecting title.
II. ANALYSIS
Analyze all information collected and, without limitation,
undertake the following:
A. MARKET ANALYSIS.
Conduct or commission an economic market study [and
appraisal].
B. PROPERTY INSPECTION.
Thorough property inspection and evaluation and an
in depth review of all physical components of the
property, including: mechanical, electrical, plumbing,
and structural elements, as well as telephone, electronic,
and computer systems and items of decor. This review
should be performed by an engineer approved by Investor
who is familiar with the industry.
C. FINANCIAL AUDIT.
An audit of operating statements and other financial
information relied upon by the purchaser. This audit
should be performed by an accountant approved by Investor
with experience in the industry.
D. TITLE REVIEW.
A review of the various factors that could affect the
title to a property. A title search should be performed
by a title insurance company approved by Investor and the
documents affecting title and a survey should be reviewed
by counsel approved by Investor.
E. PROPERTY TAX VERIFICATION.
An investigation into the current status of the tax
assessment imposed on the property. When a hotel is sold,
the local taxing jurisdiction is likely to investigate the
terms of the sale and possibly adjust the property's
assessed value upward to reflect the sale price. A new
assessed value (with the resulting increase in property
taxes) could adversely affect the property's future cash
flow. A property tax verification shall be performed by a
knowledgeable property tax consultant approved by Investor
to: (1) provide an accurate estimate of future tax
liabilities; and (2) assist in minimizing any upward
adjustment made by the assessor.
F. ENRIVONMENTAL INSPECTION.
An inspection made by a qualified engineer approved by
Investor to disclose any potential environmental hazards
(e.g. subsurface toxic waste materials) that may exist on
or within the property site.
G. LEGAL VERIFICATIONS.
An investigation undertaken by an attorney approved by
Investor into all the property's licenses, permits,
franchises, and other documents to determine (1) whether
they can be freely transferred from the seller to the
buyer and (2) whether the property is in compliance with
applicable laws (and if such compliance has been waived
because the property is "grandfathered", whether
compliance will be required in the event of substantial
damage or alterations).
EXHIBIT "E"
MANAGEMENT AGREEMENT PARAMETERS
The terms of the Management Agreement shall be as follows (or
as otherwise agreed upon by Investor and Operator):
Term: Until December 31, 2000, subject to early termination
(at the election of Investor on behalf of the
Partnership) for cause, including default,
bankruptcy/dissolution events, change in ownership,
control or operation of Operator, termination of
Operating Subsidiary as the General Partner of the
Partnership, sale, casualty, condemnation of the
Property, or termination of the Partnership.
Obligations: Operator will have all of the customary third party
manager obligations relating to hotel management and
operations and without limitation, will have its own
employees (so that the Partnership will not be
required to hire employees) to carry out its
responsibilities under the Management Agreement
(provided that, to the extent specifically permitted
under the Operating Budget, full time on site
employees may be employed by Ridgewood Hotels, Inc.
so long as their sole responsibilities for Ridgewood
Hotels, Inc. is as on site employees for the Property
and they are not employees of Owner). Such
obligations will include the preparation of an annual
budget and monthly updates (which shall be subject to
the approval of Investor on behalf of the
Partnership, and as approved shall be referred to as
the "Approved Budget"), maintenance of books and
records, maintenance and repair, procuring and
maintaining insurance, advertising and promotions,
leasing rooms and other facilities on a daily basis,
collection of revenue and generation of monthly
reports, the making of payments on behalf of the
Partnership, monitoring compliance with the
obligations of and restrictions upon the Property
(including all obligations under the Holiday Inn or
other franchise agreement applicable to the
Property), negotiating (and presenting them to the
Partnership for approval) contracts and rental
agreements, recommending legal action, and
maintaining and utilizing a furniture, fixtures and
equipment reserve ("FF&E Reserve") for such Property,
which shall be established from monthly available net
cash flow from the Property in an amount equal to 4%
of the monthly gross revenues from the Property (or
such other amount as may be approved by Investor on
behalf of the Partnership).
Compensation: Operator shall be entitled to the following property
management fees: (1) on the 15th day of each month,
Operator shall be entitled to 2.5% of the gross
revenues from the Property for the prior month, which
will be paid concurrently with the delivery of the
monthly report for the Property; and (2) concurrently
with the delivery of the annual report for the
Property for each whole or partial calendar year
during the term of the Management Agreement, Operator
shall be entitled to an additional incentive fee
equal to 1% of the gross revenues from the Property
for such year, but only if the aggregate "Net
Operating Income" (which, for a particular period,
means the "Distributable Cash", as defined in the
Partnership Agreement, for such period with the
following adjustments: (i) no sale proceeds or
financing proceeds shall be included in Distributable
Cash; (ii) there shall be no deduction for principal
or interest payments under any loan to the
Partnership; (iii) costs that are capitalized and
then included in "Qualified Aggregate Acquisition
Costs" shall not be deducted as expenses; and (iv) no
income or expense from property not owned by the
Partnership at the end of such period shall be taken
into account, on an annualized basis for a particular
year, but in any case after payment of all incentive
management fees contemplated by this clause (2))
equals or exceeds 13.5% of the then "Aggregate
Acquisition Costs" (which, as of a particular date,
means the following costs, to the extent paid or
incurred by the Partnership on or before such date,
by the Partnership: purchase price, due diligence
costs, closing costs, PIP costs and other costs that
would normally be capitalized and are required to be
capitalized under generally accepted accounting
principles as part of the acquisition cost of such
property); provided, however, that the fees described
in clauses (1) and (2) above shall be reduced by any
construction cost overruns that have not been offset
by construction management fees, pursuant to the
Construction Management Agreement. "Qualified
Aggregate Acquisition Costs" as of a particular date
means the aggregate purchase prices actually paid on
or before such date by the Partnership for
Partnership Property then or theretofore owned by the
Partnership as to which all rehabilitation work and
other capital improvements contemplated by the
Business Plan (including any work required by the
Holiday Inn Property Improvement Plan or similar
franchise program) have been completed and paid for
and approved in writing by Holiday Inns Franchising,
Inc. or other applicable franchisor. No other
compensation shall be payable to Operator in
connection with the Management Agreement (including
any leasing or rental commissions or brokerage fees).
Notwithstanding the foregoing, there will be no
property management fees payable pursuant to clauses
(1) or (2) above with respect to the 12-month period
commencing upon the Closing. Operator shall be
entitled to its reasonable, out-of-pocket third party
expenses in connection with the performance of its
duties under the Management Agreement but only to the
extent the same are described in and are within the
limits set forth in the Approved Budget.
Other Terms: The form of the Management Agreement shall
incorporate the foregoing parameters and shall
otherwise be subject to the reasonable approval of
Operator and Investor.
EXHIBIT "F"
CONSTRUCTION MANAGEMENT AGREEMENT PARAMETERS
The terms of the Construction Management Agreement shall be as
follows (or as otherwise agreed upon by Investor and Operator):
Term: The earlier of (a) completion of the improvements which
are the subject of the Construction Management
Agreement, and delivering to Owner evidence (to be
specified) that such completion has occurred in
accordance with the Construction Management Agreement,
subject to early termination (at the election of
Investor on behalf of the Partnership) for cause,
including default, bankruptcy/dissolution events, change
in ownership, control or operation of Operator,
termination of Operating Subsidiary as the General
Partner of the Partnership, sale, casualty, condemnation
of the Property, or termination of the Partnership.
Obligations:Operator will have all of the customary third party
construction management obligations relating to the
planning, development, construction and completion of
certain improvements to the Property, as such
improvements are designated by Investor on behalf of the
Partnership in the Construction Management Agreement
(which such improvements shall include any improvements
required under any franchise agreement applicable to the
Property or any other improvements as may be agreed upon
by the partners in the Partnership, and shall be known
collectively as the "Required Improvements"). Operator
shall be responsible for the preparation of the budget
for such Required Improvements and monthly updates
thereof (which shall be subject to the approval of
Investor on behalf of the Partnership, and as approved
shall be referred to as the "Approved Rehab Budget") .
Operator will have its own employees (so that the
Partnership will not be required to hire employees) to
carry out its responsibilities under the Construction
Management Agreement, but shall retain third party
independent contractors (collectively, "Contractors"),
such as architects, engineers, contractors and
attorneys, interior designers, landscape architects and
other consultants which are necessary or desirable in
connection with the project contemplated by the Approved
Rehab Budget (the "Project"), provided such Contractors
are approved by the Partnership and are contemplated by
the Approved Rehab Budget. Operator is to administer,
supervise and coordinate with the Contractors on behalf
of the Partnership in order to complete the Project in
accordance with the Approved Rehab Budget, all
applicable laws and the plans and specifications for the
Project approved by the Partnership. Operator shall
perform other normal development functions including
negotiating contracts with such Consultants (and
presenting them to the Partnership for approval),
procuring of all governmental permits and approvals,
establishing and maintaining appropriate books and
financial records and cost control systems for the
Project, and making monthly financial reporting to the
Partnership.
Compensation: Operator shall be entitled to a construction
management fee equal to 3.5% of hard and third party
soft construction costs in the Approved Rehab Budget,
which shall be paid upon completion of the Project.
Any cost overruns from the Approved Rehab Budget
shall be netted dollar for dollar against such
construction management fee and, to the extent any
portion of such cost overruns have not been offset,
the same shall be netted dollar for dollar against
the fees under the Management Agreement). However,
any subsequent cost savings shall result in
reimbursement of any fees previously netted in the
amount of or equal to such savings. Notwithstanding
the foregoing, there will be no construction
management fees payable to Operator in connection
with the Project. No other compensation shall be
payable to Operator in connection with any
Construction Management Agreement. Operator shall be
entitled to its reasonable, out of pocket third party
expenses in connection with the performance of its
duties under the Construction Management Agreement
but only to the extent the same are described in and
are within the limits set forth in the Approved
Budget.
Other Terms: The form of the Construction Management Agreement
shall incorporate the foregoing parameters and shall
otherwise be subject to the reasonable approval of
Operator and Investor.
AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
OF
RW HOTEL PARTNERS, L.P.,
A Delaware limited partnership
HOLIDAY INN HURSTBOURNE
LOUISVILLE, KENTUCKY
TABLE OF CONTENTS
Section Pages
ARTICLE I CONTINUATION OF PARTNERSHIP; BASIC INFORMATION
Section 1.2 Name
Section 1.3 Termination
Section 1.4 Character of Business
Section 1.5 Names and Addresses of Partners
Section 1.6 Principal Office
Section 1.7 Registered Office; Agent for Service of Process
Section 1.8 Certain Definitions
Section 1.9 Title to Property
ARTICLE II CERTAIN INCORPORATED MATTERS
Section 2.1 Tax and Accounting
ARTICLE III CAPITALIZATION AND LOANS BY PARTNERS
Section 3.1 Contributions By Partners
Section 3.2 Hotel Projects: Rehab Contributions
Section 3.3 Maximum Rehab Contribution Amount
Section 3.4 Partner Loans
ARTICLE IV DISTRIBUTIONS
Section 4.1 Distributions
Section 4.2 Timing of Distributions
Section 4.3 Distributions of Interest on Deferred Sale Price
Section 4.4 Distributions of Capital
ARTICLE V POWERS, RIGHTS AND DUTIES OF PARTNERS
Section 5.1 Authority of Partners
Section 5.2 Sale and Financing Rights
Section 5.3 Certain Obligations of General Partner
Section 5.4 Other Activities
Section 5.5 Liability of General Partner
Section 5.6 Indemnity of General Partner
Section 5.7 Compensation of General Partner
Section 5.8 Hotel Consultant
ARTICLE VI TRANSFER OF PARTNERSHIP INTERESTS
Section 6.1 Restrictions on Transfer
Section 6.2 Effect of Assignment; Documents
Section 6.3 Additional Partners
ARTICLE VII CERTAIN REMEDIES
Section 7.1 Security Agreement
Section 7.2 Termination of Management Rights
Section 7.3 Arbitration
Section 7.4 No Partition
Section 7.5 Litigation Without Termination
Section 7.6 Attorneys' Fees
Section 7.7 Cumulative Remedies
Section 7.8 No Waiver
ARTICLE VIII DISSOLUTION OF THE PARTNERSHIP
Section 8.1 Events Giving Rise to Dissolution
Section 8.2 Purchase and Conversion Options
Section 8.3 Procedure
ARTICLE IX MISCELLANEOUS
Section 9.1 Notices
Section 9.2 Acknowledgement by Partners
Section 9.3 Construction
Section 9.4 Time is of the Essence
Section 9.5 Entire Agreement
Section 9.6 Amendments
Section 9.7 Governing Law; Venue
Section 9.8 Successors and Assigns
Section 9.9 Captions
Section 9.10 Severability
Section 9.11 Counterparts
Section 9.12 No Third Party Beneficiaries
Section 9.13 Certain Terminology
Section 9.14 Incorporation of Exhibits
Section 9.15 Consents and Approvals
Section 9.16 Effectiveness
AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
OF
RW HOTEL PARTNERS, L.P.
Holiday Inn Hurstbourne
Louisville, Kentucky
THIS AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
("Agreement") is made and entered into as of the 8th day of
September, 1995, by and among RIDGEWOOD HOTELS, INC., a Georgia
corporation ("Ridgewood"), RW HOTEL INVESTMENT PARTNERS, L.P., a
Delaware limited partnership ("Original Investor") and RW HOTEL
INVESTMENTS, L.L.C., a Delaware limited liability company
("Investor").
R E C I T A L S:
WHEREAS, RW Hotel Partners, L.P., was organized as a limited
partnership (the "Partnership"), under the laws of the State of
Delaware on August 16, 1995, pursuant to the filing of a Certificate
of Limited Partnership with the Delaware Secretary of State in
accordance with the Delaware Revised Uniform Limited Partnership Act
(the "Act");
WHEREAS, Ridgewood and Original Investor entered into a
partnership agreement (the "Partnership Agreement") captioned
"LIMITED PARTNERSHIP AGREEMENT OF RW HOTEL PARTNERS, L.P.", dated as
of August 16, 1995, in order to set out their agreement as to the
conduct of business and the affairs of the Partnership;
WHEREAS, as of the date hereof, Original Investor is assigning
its interest in the Partnership to Investor (and Original Investor
is withdrawing as a partner in the Partnership) and Investor is
being admitted as a substitute limited partner; and
WHEREAS, Ridgewood and Investor desire to amend, restate and
supersede the Partnership Agreement in its entirety.
IN VIEW OF THE FOREGOING FACTS, and in consideration of the
respective undertakings of the parties hereto, effective as of the
date of this Agreement, the Partnership Agreement of the Partnership
is hereby amended and restated in its entirety as follows:
ARTICLE I CONTINUATION OF PARTNERSHIP; BASIC INFORMATION
Section 1.1 Continuation. This Agreement amends, restates and
supersedes the Partnership Agreement in its entirety. As of the
date of this Agreement, sole and only rights of the "Partners" (as
defined below) as partners in this "Partnership" (as defined below)
shall be as set forth in this Agreement. The Partnership shall
continue to operate without interruption as a limited partnership
under the Act. If there is a conflict between the provisions of
this Agreement and the Act, the provisions of the Act shall control
(it being understood that if the Act provides for a particular rule
but allows the partners of a limited partnership to provide to the
contrary in their partnership agreement, and if the parties hereto
have so provided hereunder, then such provisions shall not be deemed
to constitute a conflict for purposes of the foregoing). The
Partners shall execute and deliver and "General Partner" (as defined
below) shall file the Certificate of Limited Partnership of the
Partnerships and any assumed or fictitious or business name
statement or certificate or any similar document required by the Act
or applicable law to be filed in connection with the formation and
operation of the Partnership and General Partner shall perform such
other actions as are required under the Act and applicable law in
order to qualify the Partnership to conduct the business
contemplated by this Agreement (including any required publication).
The Partners further agree to acknowledge, file, record, and publish
as necessary, such amendments to the foregoing as may be required by
this Agreement, the Act or applicable law, and such other documents
as may be appropriate to comply with such requirements for the
formation, preservation, or operation of the Partnership. Upon
termination of the Partnership, General Partner shal promptly
execute and cause to be filed all filings required under the Act and
other applicable laws. General Partner shall promptly deliver to
the Partners copies of all filings made on behalf of the Partnership
in accordance with this Section.
Section 1.2 Name. The Partnership's business shall continue
to be conducted solely under the name of "RW Hotel Partners, L.P."
or any fictitious name upon which the Partners may agree and for
which the appropriate certificate of fictitious name shall be filed
with the appropriate government agency.
Section 1.3 Termination. The term of the Partnership shall
continue until and shall terminate on December 31, 2000, inclusive,
unless sooner terminated as hereinafter provided. As used herein,
"Partnership Year" manes (a) that portion of the current calendar
year (i.e., the calendar year in which the date hereof occurs) which
occurs on or after the date hereof and prior to the termination of
the Partnership in accordance with this Agreement, (b) each full
calendar year on or after the date hereof and prior to the
termination of the Partnership in accordance with Agreement, and (c)
that portion of the calendar year in which the Partnership
terminates in accordance with this Agreement that is on or after the
date hereof and prior to such termination.
Section 1.4 Character of Business. The Partnership may engage
in any lawful purpose expressly approved in writing by the Partners,
except for banking or insurance. The principal purpose of the
Partnership shall be to acquire, improve, maintain, operate, market,
sell and otherwise use the "Hotel Property" (as defined below) for
profit and to engage in all activities related thereto.
Section 1.5 Names and Addresses of Partners. The names and
addresses of the Partners are as follows:
General Partner
Ridgewood Hotels, Inc.
2859 Paces Ferry Road
Suite 700
Atlanta, Georgia 30339
Attention: Mr. N. Russell Walden
Limited Partner
RW Hotel Investment Partners, L.P.
c/o Farallon Capital Management Inc.
One Maritime Plaza, Suite 1325
San Francisco, California 94111
Attention: Mr. Jason M. Fish
Section 1.6 Principal Office. The office and place of
business of the Partnership, at which Partnership records must be
maintained in written form, is 2859 Paces Ferry Road, Suite 700,
Atlanta, Georgia 30339, or at such other place as the Partners shall
from time to time determine. The Partnership may maintain other
offices at such other locations as the Partners shall determine from
time to time.
Section 1.7 Registered Office; Agent for Service of Process.
The registered office and the registered agent for service of
process of the Partnership shall be Corporation Service Company,
1013 Centre Road, Wilmington, Delaware 19805 or such other place as
the Partners may from time to time designate. General Partner shall
cause to be promptly delivered to the Partners a copy of any notice,
complaint or other material received by such agent on behalf of the
Partnership.
Section 1.8 Certain Definitions. As used herein, the
following terms have the following meanings:
"Affiliate" of a person or entity (or words of similar import,
whether or not capitalized) includes (1) any officer, director,
employee, shareholder, partner, member or relative within the third
degree of kindred of the person or entity in question; (2) any
corporation, partnership, limited liability company, trust or other
person or entity controlling, controlled by or under common control
with (a) the person or entity in question or (b) any affiliate of
the person or entity in question (whether directly or indirectly
through one or more intermediaries); and (3) any officer, director,
trustee, partner, member or employee of any person or entity
described in (2) above. For the purpose of this definition,
"control" means the possession, directly or indirectly, of the power
to direct or cause the direction of management and policies, whether
through the ownership of voting securities or by contract or
otherwise. Without limitation on the foregoing, "Manager" (as
hereinafter defined) shall be deemed to be an Affiliate of General
Partner.
"Applicable Rate" means the lesser of (1) 25% per annum, and
(2) the maximum interest that may be charged under any applicable
usury law.
"Bankruptcy/Dissolution Event" with respect to a person or
entity, means the commencement or occurrence of any of the following
with respect to such person or entity: (1) a case under Title 11 of
the U.S. Code, as now constituted or hereafter amended, or under any
other applicable federal or state bankruptcy law or other similar
law; (2) the appointment of (or a proceeding to appoint) a trustee
or receiver of any property interest; (3) an attachment, execution
or other judicial seizure of (or a proceeding to attach, execute or
seize) a substantial property interest; (4) an assignment for the
benefit of creditors; (5) the taking of, failure to take, or
submission to any action indicating (after reasonable investigation)
an inability to meet its financial obligations as they accrue; or
(6) a dissolution or liquidation; provided, however, that the events
described in clauses (1), (2) or (3) shall not be included if the
same are (a) involuntary and not at any time consented to,
(b) contested within 30 days of commencement and thereafter
diligently and continuously contested, and (c) dismissed or set
aside, as the case may be, within 90 days of commencement.
"Base Percentages", "Interim Percentages" and "Residual
Percentages" (collectively, the "Distribution Percentages") mean the
following respective percentages for each of the Partners (subject
to adjustment pursuant to Sections 7.2 and 8.2B):
Base Interim Residual
Partner Percentage Percentage Percentage
Limited
Partner 99% 88% 75%
General
Partner 1% 12% 25%
"Basic Agreement" means that certain agreement captioned
"AMENDED AND RESTATED BASIC AGREEMENT", dated as of August 14, 1995
among Ridgewood, Ridgewood Properties, Inc. ("Operator") and
Investor. The Basic Agreement provides for, among other matters,
the execution and delivery of this Agreement. The following terms
shall have the meanings set forth for the same in the Basic
Agreement: "Closing Date", "Construction Management Agreement",
"Construction Manager", "Management Agreement", "Manager", "Project
Financing", "Purchase Agreement", "Purchase Agreement Certificate",
"Qualified Credit Facility", and "Required Financing Terms".
"Business Agreement" means any lease, rental agreement, loan
agreement, mortgage, easement, covenant, restriction or other
agreement or instrument at any time or times affecting all or a
portion of the Hotel Property or any other "Partnership Property"
(as hereinafter defined).
"Business Plan" means the business plan for the Hotel Property
and Partnership attached as Exhibit "A", as the same may be amended
from time to time in accordance with this Agreement. The Business
Plan shall include the "Operating Budget" and "Rehab Budget" for the
Hotel Property, and shall address the matters set forth in
Exhibit "A". Neither the Business Plan nor any component thereof
shall be deemed to include any matter that has not been approved in
writing by Investor.
"Claim" means any obligation, liability, claim (including any
claim for damage to property or injury to or death of any persons),
lien or encumbrance, loss, damage, cost or expense (including any
judgment, award, settlement, reasonable attorneys' fees and other
costs and expenses incurred in connection with the defense of any
actual or threatened action, proceeding or claim).
"Collateral Agreement" means any agreement, instrument,
document or covenant made or entered into under, pursuant to, or in
connection or concurrently with the Basic Agreement or this
Agreement and any amendment or amendments made at any time or times
heretofore or hereafter to any of the same (including the Management
Agreement or the Construction Management Agreement).
"Cure Period" means (1) fifteen (15) days after written notice
from a Partner to a defaulting Partner specifying the nature of a
default or breach under this Agreement, in connection with a
monetary default that is not a "Noncurable Default" (as hereinafter
defined); (2) thirty (30) days after written notice from a Partner
to a defaulting Partner specifying the nature of a default or breach
under this Agreement, in connection with a non-monetary default that
is not a Noncurable Default (provided, however, that if such
non monetary default cannot reasonably be cured within such 30-day
period, and such defaulting Partner promptly commences the cure of
such default and diligently pursues such cure to completion, then
such 30 day period shall be extended to the extent reasonably
necessary, but in no event after the date that is 45 days after such
written notice); and (3) no period at all for a Noncurable Default.
A "Noncurable Default" means any of the following: (a) a breach of
a representation or warranty, (b) a breach of Section 6.1 or any
other restriction upon transfer or hypothecation, (c) an intentional
breach, (d) a breach of fiduciary duty or a breach constituting
fraud, bad faith or willful misconduct, (e) a breach of Section 5.4
or any other exclusive or non competition covenant, (f) a breach of
an obligation if there have been two prior breaches of such
obligation or a similar obligation within the immediately preceding
two year period (e.g., a failure to timely deliver information if
there have been at least two failures to timely deliver the same or
different information within the immediately preceding 2 year
period), (g) taking action on behalf of the Partnership that is
beyond the scope of authority established by this Agreement, or
(h) a Bankruptcy/Dissolution Event.
"Default Rate" means the lesser of (1) five percentage points
over the Applicable Rate and (2) the maximum interest that may be
charged under any applicable usury law.
"Distributable Cash" for the applicable period means the amount
by which (1) the gross cash revenues and funds received from
Partnership operations during such period (other than funds received
as capital contributions or loans from any Partner), including the
"Net Sale Proceeds" and "Net Financing Proceeds" (each as defined
below) received during such period; exceed (2) the sum of (a) cash
expenditures made by the Partnership or which the Partnership is
obligated to make for or during such period in connection with the
Partnership's operations or in connection with the Partnership
Property, including business taxes and real and personal property
taxes and assessments, insurance premiums, leasing commissions and
fees, tenant improvements and other capital costs, all expenditures
made or required to be made by Manager on behalf of the Partnership
under the Management Agreement, fees payable to Manager under the
Management Agreement, and other operating costs (except to the
extent paid from the "Working Capital Reserve" (as defined below) or
other reserves established pursuant to Section 5.3G or the
Management Agreement), (b) all installments and payments of
principal and interest and other sums and amounts paid or payable
for or during such period on or in connection with any secured or
unsecured indebtedness of the Partnership (including required debt
service and other payments required of the Partnership in connection
with the Project Financing), and (c) the establishment of or
additions to the Working Capital Reserve (as defined below) and such
other reserves as may be established by the Partners pursuant to
Section 5.3G or the Management Agreement (namely, the FF&E reserve
therein described). If the amount described in clause (2) above for
the applicable period exceeds the amount described in clause (1) for
such period, then such excess shall be referred to herein as the
"Negative Cash Flow" for such period. Nothing contained in this
paragraph will limit General Partner's obligations under this
Agreement, including its obligation to comply with the Operating
Budget and Rehab Budget.
"General Partner" means Ridgewood and its successors and
assigns as a general partner in the Partnership, subject to Sections
7.2 and 8.2.
"Governmental Requirements" means all permits, licenses,
approvals, entitlements and other governmental authorizations
required in connection with the ownership, construction, use,
operation or maintenance of the Partnership Property, including any
development agreement, indemnity, surety or performance bond or
other similar assurances to governmental agencies in connection with
the obtaining of entitlements and other governmental approvals for
the "Hotel Project".
"Hotel Property" means that certain Holiday Inn and related
improvements known as the "Holiday Inn Hurstbourne" and located near
Louisville, in Jefferson County, Kentucky, and more particularly
described in the Purchase Agreement. "Hotel Project" means the
refurbishment of the Hotel Property in accordance with the Business
Plan.
"Key Individual" means N. Russell Walden.
"Laws" means all procedural and substantive federal, state and
local laws, moratoria, initiatives, referenda, ordinances, rules,
regulations, standards, orders and other governmental requirements
(including those relating to the environment, health and safety, or
handicapped persons), applicable to Partnership Property, or the
ownership, use, operation, maintenance, sale, lease or other
disposition thereof.
"Limited Partner" means Investor, and its successors and
assigns as a Limited Partner in the Partnership.
"Net Financing Proceeds" and "Net Sale Proceeds" mean,
respectively, that portion of Distributable Cash representing the
net proceeds from (1) any financing or refinancing of the
Partnership Property or any part thereof (other than proceeds from
the Project Financing), and (2) any sale, disposition, taking or
loss (including the proceeds from any eminent domain proceeding or
conveyance in lieu thereof or from casualty insurance [other than
rental income insurance] or title insurance) of the Partnership
Property or any part thereof. In the computation of Net Financing
Proceeds and Net Sale Proceeds there shall be deducted the payment
of all costs and other expenses related thereto and approved by the
Partners and the satisfaction of any debt being refinanced or
discharged and any other debts or liabilities of the Partnership for
which the Partners decide to use the same and the setting aside of
any reserves therefrom reasonably deemed proper by the Partners.
The Partners shall set aside reasonable reserves upon the closing of
any transaction generating Net Financing Proceeds or Net Sale
Proceeds to account for potential post closing liabilities and such
other matters as the Partners may reasonably agree (unless otherwise
agreed in writing by the Partners).
"Operating Account" means the operating account to be
established in the name of the Partnership at a financial
institution reasonably approved by Limited Partner.
"Operating Budget" means the operating budget for the Hotel
Property and the Partnership, which shall be attached to the
Business Plan, as the same may be amended from time to time pursuant
to the written approval of Limited Partner in accordance with this
Agreement.
"Partner" means General Partner or Limited Partner. "Partners"
means General Partner and Limited Partner, collectively.
"Partnership" means the limited partnership governed by this
Agreement.
"Partnership Agreement" or this "Agreement" means this
Agreement, as amended, modified or supplemented from time to time.
"Partnership Property" means all property, of whatever kind or
nature, owned by the Partnership from time to time.
"Plans and Specifications" means the plans and specifications
for the Hotel Property or Hotel Project to be approved by the
Partners pursuant to Section 5.3H, as the same may be amended from
time to time in accordance with this Agreement.
"Qualified Lease" as of a particular date means a lease of a
portion of the Hotel Property to an unrelated third party which
meets all of the following tests as of such date: (1) such lease is
in full force and effect, free from default by either the tenant or
landlord thereunder; and (2) such lease is approved in writing by
Limited Partner.
"Rehab Budget" means a budget for refurbishing the Hotel
Property, which shall be attached to the Business Plan, as the same
may be amended from time to time pursuant to the written approval of
Limited Partner in accordance with this Agreement.
"Requirements" means this Agreement, the Business Plan, the
Operating Budget, the Rehab Budget, the Business Agreements, all
Plans and Specifications, Laws and Governmental Requirements,
collectively.
"Working Capital Reserve" shall have the meaning set forth in
Section 5.3G.
Section 1.9 Title to Property. Title to the assets and
property of the Partnership shall be held in the name of the
Partnership.
ARTICLE II CERTAIN INCORPORATED MATTERS
Section 2.1 Tax and Accounting. Each and all of the
provisions of Exhibit "B" are incorporated herein and shall
constitute part of this Agreement. Exhibit "B" provides for, among
other matters, the maintenance of capital accounts, the allocation
of profits and losses, and the maintenance of books and records.
ARTICLE III CAPITALIZATION AND LOANS BY PARTNERS
Section 3.1 Contributions By Partners.
A. Initial Contributions. On the Closing Date, the Partners
made the following contributions to the Partnership:
(1) General Partner. General Partner contributed the sum
of $165,000.00, and caused Operator to assign its interest in the
Purchase Agreement to the Partnership.
(2) Limited Partner. Limited Partner contributed the sum
of $16,335,000.00.
The contributions by the Partners under this Subsection A shall be
used to fund the following: (a) the purchase price, reasonable
closing costs and other amounts required to be paid by the
Partnership under the Purchase Agreement; (b) reimbursement to
General Partner for its reasonable out of pocket third party costs
paid by General Partner in connection with due diligence under the
Purchase Agreement; and (c) the balance shall be placed by General
Partner in the Operating Account to be applied in accordance with
the Operating Budget and the Rehab Budget.
B. Additional Contributions by General Partner. On each date
(the "Applicable Contribution Date") that a contribution is made or
required to be made by Limited Partner under Section 3.2 of this
Agreement, General Partner shall make a contribution in an amount
(the "Applicable General Partner Contribution Amount") equal to
1/99th of the amount of the contribution to be made by Limited
Partner by delivering the following items:
(1) a demand note (the "General Partner Demand Note") in
the Applicable General Partner Contribution Amount dated as of the
Applicable Contribution Date, duly executed by General Partner and
payable to the order of the Partnership, in the form of
Exhibit "C-1";
(2) a demand note (the "Operator Demand Note") in an
amount equal to the Applicable General Partner Contribution Amount,
from Operator in its capacity as sole shareholder of General
Partner, dated as of the Applicable Contribution Date, duly executed
by Operator, in the form of Exhibit "C-2" and duly endorsed by
General Partner to the Partnership (with an endorsement in the form
of Exhibit "D");
(3) a pledge agreement ("General Partner Pledge
Agreement") dated as of the Applicable Contribution Date and duly
executed by General Partner, in the form of Exhibit "E" pledging the
Operator Demand Note as security for the payment of the General
Partner Demand Notes (except that after the General Partner Pledge
Agreement is delivered for the first contribution by General Partner
under this Section, General Partner shall deliver instead a
supplement to the General Partner Pledge Agreement in form
reasonably required by Limited Partner to reflect the additional
Operator Demand Notes and General Partner Demand Notes delivered);
and
(4) such other documents as Limited Partner may
reasonably request, including evidence of due authorization and
enforceability and an amendment and restatement of the General
Partner Pledge Agreement to evidence and consolidate multiple
supplements then or theretofore delivered.
Section 3.2 Hotel Project: Rehab Contributions. It is
anticipated by the Partners that the funds necessary for the Hotel
Project in accordance with the Business Plan and Rehab Budget shall
be funded from available Partnership funds, with the remaining
amount to be funded by Limited Partner (up to the "Maximum Rehab
Contribution Amount" with respect thereto), upon and subject to the
terms and conditions hereinafter set forth. No additional capital
contributions shall be required by the Partners other than expressly
provided in this Section 3.2 and Section 3.1B.
A. Procedure and Conditions for Each Rehab Contribution.
(1) Procedure. Subject to the terms and conditions set
forth in this Section 3.2, on or before the first day of each
calendar month, Limited Partner shall contribute into the
Partnership Operating Account the amount to be contributed by the
Partners specified in the "Contribution Request" (as defined below)
for such month (the "Rehab Contributions"). General Partner shall
use the Rehab Contributions in strict conformity with the applicable
Contribution Request, the Business Plan and the Rehab Budget
(subject to the deviations permitted under Section 5.1B(3)) and
Requirements. If at any time the Hotel Project cannot be completed
in strict conformity with the most recently approved Business Plan
and Rehab Budget, General Partner shall immediately submit to
Limited Partner for its approval a revised Business Plan and Rehab
Budget in the same form as currently attached as Exhibit "A", except
that General Partner shall identify changes in any line items and
the reasons for the changes. Limited Partner need not make any
further Rehab Contributions unless and until the Partners approve
the revised Business Plan and Rehab Budget. Each modification to
the Business Plan and Rehab Budget is subject to the approval of
Limited Partner pursuant to Section 5.1B.
(2) Conditions to Rehab Contributions. Before Limited
Partner becomes obligated to make any Rehab Contribution, the
following conditions must be satisfied:
(a) Performance by General Partner. The due performance
by General Partner and its affiliates of each and every undertaking
and agreement to be performed by it hereunder in all material
respects and the truth of each representation and warranty made by
it in this Agreement and each Collateral Agreement in all material
respects at the time as of which the same is made and as of the date
each Rehab Contribution is to be made pursuant to this Section 3.2,
as if made on and as of the date such Rehab Contribution is to be
made.
(b) No Defaults. There is no default by the Partnership
under any Project Financing or other Business Agreement.
(c) No Bankruptcy or Dissolution. That at no time shall
any Bankruptcy/Dissolution Event have occurred with respect to
General Partner or any Affiliate.
(d) Key Individual. The Key Individual (1) is not then
dead, insane, incapacitated or the subject of a
Bankruptcy/Dissolution Event; and (2) continues to be actively
involved in the management and affairs of the Project.
(e) Ownership. The Key Individual and Karen Hughes
continue to own at least 43.5% of the ownership interests in
Operator and General Partner, directly or indirectly.
(f) Contribution Request. Limited Partner shall have
received a Contribution Request for such Rehab Contribution meeting
the requirements and within the time period set forth in subsection
B below, and Limited Partner has received any other documentation or
information in connection with such Contribution Request that
Limited Partner may reasonably require.
(g) Reports. Limited Partner shall have received all
financial reports required to have been furnished to date by General
Partner under Section 5.3F.
(h) No Material and Adverse Event. Limited Partner is
not aware of any circumstance which Limited Partner reasonably
determines is likely to have a material and adverse effect upon the
rehabilitation and occupancy of the Hotel Project in conformance
with the Requirements. Any expenditure (or reasonably anticipated
expenditure) which is not within the Rehab Budget approved by
Limited Partner in writing under Section 5.1B (subject to the
overruns which do not require the consent of Limited Partner as
described in Section 5.1B(3)), shall be deemed material and adverse
for purposes of this Agreement.
(i) No Damage. That there shall not have occurred
destruction of or damage or loss to the Partnership Property from
any cause whatsoever, which, according to Limited Partner's best
estimate, would cost more than $50,000 or take longer than 30 days
to restore, unless Limited Partner reasonably determines that the
contingency category in the Rehab Budget, Operating Budget and
insurance proceeds (when combined with the amount of the applicable
deductible) are sufficient to pay for all repairs in a timely
manner.
(j) No Taking. That there shall not have occurred any
taking or proposed or threatened taking of the Hotel Property by
eminent domain (or any part thereof which would render the remaining
portion of the Hotel Property unsuitable for the use and operation
of a hotel in compliance with Laws and Governmental Requirements).
(k) Lien Waivers; Other Evidence of Payment. With
respect to the work covered by each prior Contribution Request,
Limited Partner shall have received invoices, appropriate
unconditional waivers of mechanics' and materialmen's lien rights in
the form required by Laws executed by all contractors,
subcontractors and other persons rendering services, delivering
materials or otherwise receiving payments covered by each prior
Contribution Request (or to the extent lien waivers are
inappropriate due to the nature of the payment involved, cancelled
checks), and such other information and documentation as may be
reasonably required by Limited Partner evidencing that General
Partner have utilized the proceeds of all contributions in
connection with all prior Contribution Requests in accordance with
the Requirements, and that all work covered by prior Contribution
Requests has been done on a lien-free basis (it being understood
that General Partner may bond over liens, provided that Limited
Partner's written consent is first obtained). With respect to the
work covered by the current Contribution Request, Limited Partner
shall have received invoices from all contractors, subcontractors
and other persons rendering services or delivering materials covered
by the current Contribution Request, and such other information and
documentation as may be reasonably required by Limited Partner to
evidence that General Partner will be utilizing the proceeds of the
current Contribution Request in accordance with the Requirements.
With respect to payment of any expenditure in excess of $25,000 (or
any payment regardless of the amount thereof if General Partner is
then in monetary or material non-monetary default or breach under
this Agreement), Limited Partner shall have the right to cause the
payment to the party entitled through an escrow established with
Title Company (and such payment through escrow shall be deemed a
contribution to the Partnership and subsequent expenditure by the
Partnership).
(l) Construction Contracts. Limited Partner shall have
received and approved in writing all engineering, construction,
supply and other material contracts for work (and the parties
thereto) which is the subject of the current Contribution Request
prior to the submission of such Contribution Request (which approval
shall not be unreasonably withheld or delayed and shall not be
required to the extent approval is not required pursuant to
Section 5.1B(6)). Without limitation on the foregoing, each such
contract shall provide for at least 10% retention of all amounts
payable thereunder until verification by the Partnership that all
work and materials required to be provided thereunder have been
provided in accordance with the terms of such contract.
(m) Plans and Specifications. To the extent not
previously approved, any Plans and Specifications pursuant to which
any of the work covered by the current Contribution Request shall
have been approved by Limited Partner, and all applicable
governmental authorities.
(n) Requirements. Limited Partner shall have received
evidence reasonably satisfactory to it that all permits, approvals
and consents then required under the Requirements for the
construction of the work described in such Contribution Request have
been obtained.
(o) Leasing Requirements. To the extent that the work
for which such Contribution Request is made includes work to satisfy
the requirements under any lease, that such lease is a Qualified
Lease, Limited Partner shall received a fully executed copy of such
Qualified Lease, and that the work or proposed work is in full
compliance with such Qualified Lease (and, without limitation, that
the reasonably projected completion date of such work is within the
dates by which such work is required to be completed under such
Qualified Lease).
(p) Retainage. The Contribution Request shall not cover
any retainage unless Limited Partner has received evidence
satisfactory that all work and materials required to be provided
under the contract in question have been provided in accordance with
such contract.
(q) Franchisor Approvals. Without limitation on
subsection A(2)(n) above, Limited Partner shall have received
evidence of all consents and approvals then or theretofore required
by Holiday Inn or any other franchisor with respect to the Hotel
Project.
(r) General Partner Contribution. The corresponding
contribution required to be made by General Partner under Section
3.1B shall have been made (and without limitation on the foregoing,
all documents required to be delivered by General Partner with
respect to such contribution shall have been duly executed and
delivered).
B. Contribution Requests. At least ten (10) days prior to the
first day of each calendar month until the completion of the Hotel
Project, General Partner shall submit a written contribution request
for such month to the Partners describing the contributions to the
Project required of the Partners under this Section 3.2 and meeting
the requirements of this subsection B ("Contribution Request").
Each Contribution Request shall be in a form approved by Limited
Partner, and shall (1) describe in reasonable detail the anticipated
expenditures of the Project for such month set forth in the Rehab
Budget (to be allocated among the specified line item(s) of the
Rehab Budget); (2) indicate the amounts expended by the Partnership
to date for the Project among the specified line item(s) of the
Rehab Budget; (3) describe the portion of such month's expenditures
anticipated to be funded from available Partnership funds;
(4) describe the portion of such month's expenditures which is to be
funded by contributions of Limited Partner; (5) set forth Limited
Partner's required contribution; and (6) be accompanied by the
documentation and information as is required under Section 3.2A(2)
above. General Partner may submit Contribution Requests to the
Partners no more frequently than once each month, unless Limited
Partner has given its prior written consent in each instance. Each
Contribution Request shall constitute General Partner's
representation and warranty to Limited Partner and the Partnership
that (a) all disbursements made to date as well as those being
currently requested were and will be utilized in compliance with the
applicable Contribution Requests and in compliance with the
Requirements; and (b) all representations and warranties of General
Partner or any of its Affiliates in this Agreement, the Basic
Agreement or any Collateral Agreement are true and correct on the
date of such Contribution Request in all material respects (as if
made on and as of such date).
C. No Waiver of Conditions. Any waiver by Limited Partner of
a condition of or to a contribution under this Section 3.2 must be
expressly made by Limited Partner in writing. If Limited Partner
makes a contribution before fulfillment of one or more required
conditions, such contribution shall not be a waiver of such
contribution conditions, and Limited Partner reserves the right to
require their fulfillment before making its share of any further
Rehab Contributions. If all contribution conditions are not
satisfied, Limited Partner, acting in its reasonable judgment and
without waiving any rights or conditions as to any other or further
disbursements, may disburse selectively as to certain items or
categories of costs and not others. Limited Partner's approval of
any matter in connection with this Agreement shall be for the sole
purpose of protecting Limited Partner's investment in the
Partnership, and shall not constitute a waiver of any default by
General Partner or its Affiliates under this Agreement or any
Collateral Agreement (unless such waiver is expressly made by
Limited Partner in writing with specific reference to such default
and agreement) or a representation by Limited Partner of any kind
with regard to the matter being approved. Limited Partner is under
no duty to visit the Hotel Property or to supervise or observe
construction or to examine any books or records. No site visit,
observation or examination by Limited Partner shall impose any
liability on Limited Partner, result in any waiver of any default by
General Partner or its Affiliates under this Agreement or any
Collateral Agreement, or constitute a representation that the Hotel
Project complies or will comply with any Requirement or that any
construction is free from defective materials or workmanship.
Neither General Partner nor any other party is entitled to rely on
any site visit, observation or examination by Limited Partner, and
Limited Partner assumes no personal responsibility for any negligent
or defective design or construction. Limited Partner shall have the
right to contact representatives of the local, state and other
governmental authorities having jurisdiction over the Hotel Project,
or engineers, architects, contractors, suppliers or other third
parties involved in the Hotel Project, in order to verify compliance
by General Partner with this Agreement (including satisfaction of
the conditions set forth in Section 3.2A(2) above).
Section 3.3 Maximum Rehab Contribution Amount.
Notwithstanding anything herein to the contrary, Limited Partner
shall not be required to contribute in excess of an aggregate of
$443,000 pursuant to Section 3.2 above (the "Maximum Rehab
Contribution Amount").
Section Partner Loans. Except as otherwise expressly provided
under this Agreement, any Partner making a loan to the Partnership
shall be entitled to interest thereon at the Applicable Rate,
compounded monthly, and the same, together with interest as
aforesaid, shall be repaid before any distribution shall be made
under Article IV. However, except as otherwise expressly provided
under this Agreement, no such loan to the Partnership shall be made
without the prior written consent of the Partners.
ARTICLE IV DISTRIBUTIONS
Section 4.1 Distributions. Each distribution of Distributable
Cash (excluding interest on any deferred portions of the sale price
of Partnership Property, which shall be distributed under Section
4.3) shall be made as follows:
A. First Level. All such Distributable Cash shall first be
distributed, in preference and priority to any other distribution of
Distributable Cash, to Limited Partner until there shall have been
distributed to Limited Partner under this subsection A an amount
equal to the then "15% IRR Deficiency" (as defined in Exhibit "F");
and there shall be no distributions of Distributable Cash under
subsections B, C or D below at any time when there is a positive 15%
IRR Deficiency.
B. Second Level. The balance, if any, of such Distributable
Cash remaining after the distributions pursuant to subsection A
above shall be distributed to General Partner until the aggregate
amount then or theretofore received by General Partner under this
subsection B equals $165,000.00 (or, if greater, the aggregate cash
contributions actually made by General Partner to the Partnership
under Section 3.1 [it being understood that a demand note does not
constitute a cash contribution, but amounts paid by General Partner
to the Partnership pursuant to a demand note delivered under Section
3.1B of the Partnership Agreement constitute a cash contribution to
the Partnership under Section 3.1]).
C. Third Level. The balance, if any, of such Distributable
Cash remaining after the distributions pursuant to subsections A and
B above shall be distributed to the Partners in accordance with
their respective Interim Percentages on a pari passu basis until
there shall have been distributed to Limited Partner under this
subsection C an amount equal the then "25% IRR Deficiency" (as
defined in Exhibit "F"); and there shall be no distributions of
Distributable Cash under subsection D below at any time when there
is a positive 25% IRR Deficiency.
D. Fourth Level. The balance, if any, of such Distributable
Cash remaining after the distributions pursuant to subsections A, B
and C above shall be distributed to the Partners in accordance with
their respective Residual Percentages on a pari passu basis.
The cash portion of the sale price of the Partnership Property or
any part thereof, together with all installments and payments of
cash (other than interest) of or against any deferred portion of
such purchase price, shall be distributed in accordance with the
levels provided above, with each person or entity entitled to
payment under a level receiving the entire amount of such cash until
the sum payable under such level shall have been discharged in cash.
Section 4.2 Timing of Distributions. Distributions of
Distributable Cash shall be made on a monthly basis on the 20th day
after the end of each calendar month, unless otherwise agreed upon
by the Partners. Notwithstanding the foregoing, distributions of
Net Sale Proceeds and Net Financing Proceeds shall be made promptly
upon receipt, unless otherwise agreed upon by the Partners.
Section 4.3 Distributions of Interest on Deferred Sale Price.
Interest on any deferred portion of the sale price of Partnership
Property shall be distributed to the Partner or Partners entitled
under Section 4.1 to receive the principal portion of such sale
price with respect to which such interest shall have been paid.
Section 4.4 Distributions of Capital. Except as expressly
provided in this Agreement or as otherwise agreed by the Partners,
no Partner shall be entitled to withdraw capital or to receive
distributions of or against capital without the prior written
consent of, and upon the terms and conditions agreed upon by, the
Partners. Each Partner shall look solely to the assets of the
Partnership for return of such Partner's capital contributions.
ARTICLE V POWERS, RIGHTS AND DUTIES OF PARTNERS
Section 5.1 Authority of Partners.
A. Authority of General Partner. Except as otherwise provided
in this Agreement, General Partner shall have full power and
authority to manage the operations and affairs of the Partnership
and to act for and to bind the Partnership to the extent provided by
applicable law, and shall have the duty and authority, on behalf of
the Partnership, to do all things appropriate to the accomplishment
of the purposes of the Partnership, including:
(1) Filing appropriate organizational documents for the
Partnership with the appropriate governmental authorities.
(2) Operating the Hotel Property and entering into
agreements and undertakings pertaining to the operation of the Hotel
Property.
(3) Employing consultants, attorneys, accountants and
agents.
(4) Executing contracts, agreements, deeds and other
writings.
(5) In general, managing the business and affairs of the
Partnership and taking such actions as may be necessary or
appropriate thereto.
B. Major Decisions. General Partner shall fully consult with
Limited Partner at all times, and each of the following matters
("Major Decisions") must be previously approved in writing by
Limited Partner:
(1) The adoption of, and any material supplement to,
material revision of, or material deviation from, the Business Plan.
(2) The adoption of, and any supplement to, revision of,
or deviation from, the Operating Budget, the Rehab Budget or any
other Partnership budget (subject to subsection (3) below). General
Partner shall submit to Limited Partner, on or before November 1 of
each year, the proposed Operating Budget and Rehab Budget for the
following calendar year, which proposed budgets shall be in the same
form as the form of the initial Operating Budget and Rehab Budget
attached to the Business Plan, and which proposed Operating Budget
and Rehab Budget shall be subject to the prior written approval of
Limited Partner.
(3) Any deviation from or expenditure inconsistent with
the Operating Budget, the Rehab Budget or any other Partnership
budget. Notwithstanding the foregoing, Limited Partner's consent to
an expenditure relating to the Hotel Property payable to a third
party exceeding the amount specified for such expenditure in the
Operating Budget or the Rehab Budget shall not be required in any of
the following circumstances: (a) General Partner, in its reasonable
judgment, deems to constitute an emergency requiring immediate
action for the protection of the Hotel Property or persons; (b) such
expenditure is related to the Hotel Project, and when combined with
the amount of all expenditures made or reasonably expected to be
made in connection with the Hotel Project, would not cause the total
amount of expenditures for the Hotel Project to exceed one hundred
five percent (105%) of the total amount of expenditures for the
Hotel Project set forth in the Rehab Budget; (c) such expenditure is
contemplated by the Operating Budget for the Hotel Property (and not
the Rehab Budget), and when combined with the amount of all
expenditures made or reasonably expected to be made in connection
with the Hotel Property for such calendar year (other than the
expenditures for the Hotel Project or described in clause (d)
below), would not cause the total amount of expenditures for the
Hotel Property for such calendar year (other than the expenditures
for the Hotel Project or described in clause (d) below), to exceed
one hundred five percent (105%) of the total amount of expenditures
for such calendar year set forth in the Operating Budget (other than
the expenditures for the Hotel Project or described in clause (d)
below); and (d) expenditures for real property taxes and
assessments, utilities and insurance for the Hotel Property, and
required debt service under the Project Financing. General Partner
shall promptly notify Limited Partner of each expenditure made
pursuant to this subsection (3) and shall promptly supply Limited
Partner with such information with respect thereto as Limited
Partner may reasonably request.
(4) Any material activity (including the entry into any
contract or incurring any obligation) or expenditure which is
inconsistent with the Business Plan (it being understood that the
Business Plan is a general outline only, and does not contemplate
every activity or expenditure which is customarily undertaken or
incurred in connection with projects similar to the Hotel Project);
and prior to the preparation by General Partner of the Business Plan
(or any required update thereof) and approval of the same by Limited
Partner, the entry into any contract or incurring any obligation or
taking any other action that could give rise to any cost or
liability in excess of $25,000.
(5) Any transaction or matter that is not in the ordinary
course of the Partnership's business or that is not directly related
to the acquisition, refurbishment, operation or sale of the Hotel
Property.
(6) The entry into any construction, development or other
agreement which provides for a term greater than three months or
contemplates an aggregate amount to be spent by the Partnership
under such agreement in excess of $100,000 (and a series of related
agreements for amounts less than $100,000 shall be construed as a
single agreement for purposes of this subsection); or any
termination or material modification to any of the foregoing. Any
execution, termination or modification of the Management Agreement
or the Construction Management Agreement shall be subject to the
prior approval of Limited Partner.
(7) Any capital transaction (including the sale,
financing or refinancing of the Partnership Property or any portion
thereof, or the acquisition of any other property or business) and
the terms thereof.
(8) Any compensation or reimbursement to, or other
transaction with any Affiliate of General Partner or any other
person or entity with which General Partner or any of its Affiliates
has a significant business relationship.
(9) The establishment and maintenance of reserves and
contributions thereto (the foregoing not being intended to require
the consent of Limited Partner in connection with the maintenance of
the FF&E Reserve by Manager pursuant to the terms and conditions of
the Management Agreement).
(10) Any litigation, arbitration or settlement involving
the Partnership or its assets. Notwithstanding the foregoing,
Limited Partner's consent shall not be required in connection with
defense of Claims against the Partnership which are covered by
insurance of the Partnership, or in connection with necessary legal
action or proceedings for the collection of rent or other income
from the Partnership Property, or for the ousting or dispossessing
of defaulting tenants or other persons therefrom (except that any
such action taken with respect to a tenant occupying 10,000 square
feet or more of the Hotel Property shall constitute a Major
Decision).
(11) All income tax elections, tax returns and tax
audits.
(12) Establishment of and any material amendment or
supplement to the Plans and Specifications for any construction work
for the Hotel Property.
(13) The entry into or the material modification of any
Governmental Requirements, including the creation of any material
concessions by or restrictions on the Partnership, the Hotel Project
or the Hotel Property or other Partnership Property in connection
with obtaining zoning, variances, map approval, entitlements,
permits or other governmental approvals.
(14) The entry into or any material amendment or
modification to any lease, and the terms thereof.
(15) Establishment and any modification to the lease form
for the Partnership.
(16) The employment and retention of a manager, leasing
agent and other personnel (the foregoing not being intended to
require the consent of Limited Partner in connection with the
employment by Manager of its employees and personnel).
(17) Any other decision or action which requires the
approval of the Partners as provided elsewhere in this Agreement.
General Partner shall use its reasonable business judgment in
proposing Major Decisions, and Limited Partner shall use its good
faith judgment in approving or withholding approval of the same.
Notwithstanding the immediately preceding sentence, Limited Partner
may withhold or impose conditions upon its approval of any
acquisition of any additional property or business by the
Partnership in its sole and absolute discretion (including General
Partner or Operator's agreement to a modification of the economic
terms of the Partnership Agreement, Management Agreement or
Construction Management Agreement to the extent they are related to
such additional property or business which is the subject of such
acquisition). Any approval by Limited Partner pursuant to this
subsection B must be in writing; provided, however, that General
Partner may give Limited Partner written notice of any proposed
Major Decision, and if Limited Partner does not object to the same
or request further information with respect thereto within 15 days
after receipt of such notice, Limited Partner shall be deemed to
have disapproved the proposed Major Decision. Notwithstanding the
foregoing, if General Partner gives Limited Partner written notice
(in the form prescribed below) requesting approval of any lease
pursuant to clause (14) above and if Limited Partner does not object
to the same or request further information with respect thereto
within 3 business days (such period extended to 10 business days in
connection with a lease of 10,000 square feet or more) after receipt
of such notice, Limited Partner shall be deemed to have approved
such lease. Any notice requesting Limited Partner's approval of a
lease shall prominently state in capitalized boldface language that
Limited Partner's consent will be deemed to have been given if no
response is made within the applicable period. If further
information is requested by Limited Partner within the applicable
time period set forth above, General Partner shall use reasonable
and diligent efforts to supply the requested information and may
thereupon give a new notice of the proposed Major Decision as
provided above. If Limited Partner fails to approve a proposed
Major Decision, the Partners shall attempt in good faith to resolve
the deadlock as quickly as practicable.
C. Management and Construction Management Agreements. The
parties hereby confirm that the Management Agreement and the
Construction Management Agreement have been entered into with
Operator with respect to the Hotel Property in the forms prescribed
by the Basic Agreement and otherwise in accordance with the Business
Plan.
D. Prohibited Acts. No Partner shall have any authority to:
(1) Unilaterally amend this Agreement.
(2) Extend the term of the Partnership.
(3) Do any act in contravention of this Agreement or
which would make it impossible to carry on the business of the
Partnership.
(4) Possess any Partnership Property or assign the rights
of the Partnership in specific Partnership Property for other than a
Partnership purpose.
(5) Admit a person or entity as a Partner except as
provided in this Agreement.
(6) Permit the Partnership to merge or consolidate with
any other entity.
(7) Engage in any transaction on behalf of the
Partnership with itself or an Affiliate, even if approved by the
Partners, except upon terms which are fair as respects the
Partnership and competitive with the terms available to the
Partnership from non Affiliates.
(8) Make, execute or deliver on behalf of the Partnership
any assignment for the benefit of creditors (other than a collateral
assignment, as security, to a lender under Section 5.2) or any
guarantee, indemnity bond or surety bond, other than reasonable and
customary bonds and assurances to governmental agencies in
connection with the obtaining of entitlements and other governmental
approvals or to lenders in connection with development or
construction financing; or obligate the Partnership or any Partner
as a surety, guarantor or accommodation party to any obligation.
(9) Lend funds belonging to the Partnership or any
Partner to any Partner or third party or extend to any person, firm
or corporation, credit on behalf of the Partnership.
(10) Subject to Section 5.2, borrow on behalf of the
Partnership, or pledge, mortgage or encumber, or grant of a security
interest in, any Partnership Property.
(11) Confess any judgment on behalf of the Partnership.
(12) File any petition, or consent to the appointment of
a trustee or receiver or any judgment or order, under the federal
bankruptcy laws.
(13) Any action that will result in the Partnership not
being treated as a partnership for income tax purposes.
E. Required Signatures. Limited Partner's signature (or a
written notice granting General Partner sole authority to sign)
shall be required for all contracts (including documents related to
the acquisition, sale, financing or transfer of any portion of the
Partnership Property) entered into by or on behalf of the
Partnership. However, only General Partner's signature will be
required for (1) contracts and agreements (but not documents related
to the acquisition, sale, financing or transfer of any portion of
the Partnership Property, which are also to be executed by Limited
Partner or expressly approved in writing by a notice with the form
of document attached) that are provided for in an approved
Partnership Budget or otherwise permitted without the consent of
Limited Partner pursuant to subsections B(2) and B(3) above, and (2)
leases which are approved or deemed approved by Limited Partner
pursuant to Section 5.1B.
F. Affiliate Transactions. Notwithstanding anything to the
contrary herein, any decision by the Partnership to terminate or
exercise any right (including any right to approve or request, or
any right to receive documents) or remedy under any contract between
the Partnership and General Partner or an Affiliate of General
Partner (or any instrument from or by General Partner or an
Affiliate of General Partner in favor of or for the benefit of the
Partnership) shall be made exclusively by Limited Partner on behalf
of the Partnership (and thus, for example, Limited Partner shall
make the decision, on behalf of the Partnership with respect to the
Partnership's termination of, or the exercise of any right or remedy
under, the Management Agreement or the Construction Management
Agreement and Limited Partner shall make the decision, on behalf of
the Partnership, with respect to the exercise of any right or remedy
under each General Partner Demand Note, General Partner Pledge
Agreement and the collateral thereunder). If a contract with an
Affiliate is terminated, any substitute contract shall be with a
third party reasonably satisfactory to the Partners. In addition,
notwithstanding anything to the contrary herein (including any loss
of voting rights), any act or other transaction between the
Partnership on the one hand, and any Partner, its Affiliates or any
other person or entity with which such Partner or any of its
Affiliates has a significant business or personal relationship, on
the other hand, shall require the prior written approval of the
other Partner.
G. Determinations by the Partners. Any approval, consent,
judgement or other determination to be made by the Partners under
and in connection with this Agreement shall be made jointly by the
Partners and shall therefore require their mutual agreement.
Section 5.2 Sale and Financing Rights. From and after the
date which is 30 months after the date of this Agreement, Limited
Partner shall have the right (without the consent of General
Partner) to propose that the Partnership sell or finance the Hotel
Property (and all matters incidental thereto), in which event
General Partner shall use diligent efforts to cause such proposal to
be promptly effectuated, subject to compliance with the provisions
of this Article (other than Sections 5.1B(7) and 5.1D(10) hereof).
A. Financing Terms. Unless otherwise approved by the
Partners, any financing obtained on behalf of the Partnership under
this Section 5.2 shall comply with the Required Financing Terms.
B. Sale Terms. Except as otherwise approved by the Partners,
the purchase price for the Hotel Property or the portion thereof to
be sold or disposed of shall be payable (1) entirely in cash; or
(2) by taking title subject to or assuming existing indebtedness; or
(3) both. In addition, the terms of the sale of the Hotel Property
(other than the Purchase Price) shall be subject to the reasonable
approval of the Partners, and shall not impose upon the Partnership
or any Partner any material liability or obligation unless the
aggregate liability under such contract does not exceed 5% of the
purchase price and no obligations survive for more than twelve
months after the closing of the sale without the approval of the
Partners.
C. Sale to Affiliate; Affiliate Financing. No sale of any
Partnership Property shall be made to an Affiliate of a Partner, and
no financing shall be provided by an Affiliate of a Partner, without
the prior written approval of the other Partner.
D. Right of First Opportunity. Prior to consummating a
proposed sale, Limited Partner (the "Selling Partner") shall provide
the "Non-Selling Partner" (i.e., General Partner) with a right to
purchase the Selling Partner's interest in the Partnership on and
subject to the terms and conditions hereinafter stated:
(1) The Selling Partner shall give written notice (the
"Proposed Sale Notice") to the Non-Selling Partner setting forth the
"Basic Sale Terms" (as hereinafter defined) of such proposed sale.
As used herein, "Basic Sale Terms" means the proposed purchase
price, the amount of cash payable to the Partnership by the
purchaser at the closing, the amount and terms of the purchase money
note, if any, evidencing a portion of the purchase price and
security for such promissory note, any other material economic terms
of the proposed sale, and the estimated closing date of the
transaction. The Basic Sale Terms shall comply with the
requirements of subsection B above.
(2) The Non Selling Partner shall have fifteen (15) days
(the "Election Period") after the giving of the Proposed Sale Notice
to elect to purchase the Selling Partner's interest in the
Partnership (such election to be made, if at all, by giving written
notice thereof to the Selling Partner within the Election Period).
The purchase price of the Selling Partner's Partnership interest and
the terms of such purchase will be such as will produce for the
Selling Partner the same consideration and security at the same time
or times as the Selling Partner would have received if the proposed
sale by the Partnership had been consummated (and no sales
commissions had been paid by the Partnership [i.e., without any
deduction for a sales commission]) and the Partnership had been
dissolved and wound up following such sale and the proceeds of such
sale and other assets of the Partnership had been distributed to the
Partners in accordance with the provisions of this Agreement.
(3) If the Non Selling Partner fails to make the election
to purchase, then the Selling Partner may close a sale at any time
or times during the six month period (the "Closing Period") that
commences on the first day after the Election Period, for a purchase
price and on terms which are at least as favorable to the
Partnership as the Basic Sale Terms contained in the Proposed Sale
Notice; but if a sale for such purchase price and on such terms is
not consummated within such period, then the rights of the
Non-Selling Partner to notice and purchase as aforesaid will
continue as to any sale occurring subsequent to such period. A sale
shall be deemed "at least as favorable" as that set forth in the
Proposed Sale Notice if the net purchase price and net cash down
payment (after the payment by the Partnership of all of its expenses
[other than attorneys' fees] associated with the sale, including any
real estate commissions) shall be at least equal to that set forth
in the Proposed Sale Notice (after deduction for the expenses
therein set forth) and the deferred portion, if any, of such
purchase price, shall be payable at an interest rate and in
installments which are at least as great as, and be payable over a
period which is not longer than, the deferred portion, if any, of
the purchase price specified in the Proposed Sale Notice.
(4) If the Non Selling Partner makes the election to
purchase, then such election shall be deemed to create a contract
between the Non Selling Partner and the Selling Partner pursuant to
which the Non Selling Partner agrees to acquire the interest of the
Selling Partner in the Partnership on the terms specified in clause
(2) above, except that the closing date for such sale shall be the
date which is 60 days after the making of such election. If the
Non Selling Partner makes the election to purchase but the closing
fails to occur due to the Non Selling Partner's default, then
without limitation on the Selling Partner's other rights and
remedies (including specific performance and damages), the
Non Selling Partner's rights under this subsection 5.2 will be
permanently lost.
Section 5.3 Certain Obligations of General Partner
A. Generally. General Partner shall at all times act in a
fiduciary capacity in exercising its power and authority and shall
not engage in any dealings having the appearance of impropriety.
General Partner shall fully and faithfully discharge its obligations
and responsibilities, and shall devote sufficient time and attention
to Partnership affairs to ensure the proper management and
supervision of the Partnership's business and the discharge of its
duties under this Agreement. General Partner shall diligently and
continuously pursue the planning, acquisition, refurbishment,
operation, marketing and sale of the Partnership Property in
accordance with reasonable business judgment, and shall make its
personnel and the personnel of its Affiliates available to the
Partnership to the extent necessary in order that its obligations
may be adequately discharged.
B. Project Administration. Without limitation on the
foregoing or other provisions of this Article V, General Partner
shall coordinate and manage the administration necessary for the
planning, acquisition, refurbishment, operation, marketing and sale
of the Hotel Property and the Hotel Project within the time schedule
set forth and in full compliance with all Requirements, and shall,
at all times, exercise good faith and shall use diligent and
professional efforts to promote and protect the best interests of
the Hotel Project, the Hotel Property and the Partnership (without
consideration being made to the separate interests of any particular
Partner, including the effect of any action or omission upon the
distributions provided for in Article IV). Without limiting the
generality of the foregoing, General Partner shall have the
following duties and obligations:
(1) Cooperation with Limited Partner in connection with
their preparation of and the Partners' approval of the Business
Plan, and all elements thereof (including the Operating Budget and
Rehab Budget) and amendments thereto, in a timely manner, and the
acquisition, refurbishment, operation, marketing, and sale of the
Hotel Property in compliance therewith.
(2) [INTENTIONALLY OMITTED.]
(3) Making regular inspections of the Partnership
Property and using diligent and professional efforts to have all
problems, if any, observed by General Partner corrected in such
manner as is in the best interests of the Partnership.
(4) Seeking, negotiating and closing the Project
Financing and monitoring the same on a regular basis to ensure
compliance by the Partnership with respect to the requirements
thereof.
(5) Monitoring the Partnership's compliance with
Requirements and taking such steps as may be reasonably necessary to
ensure the Partnership's compliance with the Requirements.
(6) Procurement of insurance for the Partnership and the
Partnership Property through an agent acceptable to Limited Partner,
including casualty, public liability, workers' compensation and all
other insurance required by law, and such other insurance as may be
required by Limited Partner, with the amounts and coverages approved
by Limited Partner; and requiring that all contractors,
subcontractors, consultants, marketing and leasing agents,
third-party vendors and service agents maintain such insurance as
General Partner reasonably deems necessary to the extent such
insurance is customarily maintained by such parties in the City in
which the Hotel Property is located in connection with projects
similar to the Hotel Project in order to protect the interests of
the Partnership for all work, materials or services to be provided
by them hereunder.
(7) Developing and implementing a system for the
preparation, review and processing of "Change Orders" (as such term
is hereinafter defined) and recommending necessary or desirable
changes to the Partnership and consultants, reviewing requests for
Change Orders, submitting recommendations to the Partnership and
consultants, and negotiation of Change Orders. As used herein,
"Change Orders" shall mean changes permitted by this Agreement or
authorized by the Partners in the construction of the Hotel Project,
including changes in materials, labor or additional construction
authorized by the Partnership or omissions of certain aspects of the
construction previously authorized by the Partnership. Each Change
Order shall comply with all Requirements and shall require the
consent of Limited Partner if it involves an amount greater than
$5,000.
(8) Payment or contestation of all real and personal
property taxes and assessments for the Partnership Property to the
extent not done under the Management Agreement.
(9) Notification of the Partners of any material adverse
Claim or dispute or any actual or threatened material litigation (or
condemnation or eminent domain proceeding or action) against the
Partnership, the Partnership Property (or any portion thereof), any
Partner, and all contractors, subcontractors, material suppliers,
consultants and marketing agents of which General Partner become
aware; provided, however, that with respect to any litigation that
only respects General Partner and is not related to the Partnership
Property, General Partner shall be obligated to notify the
Partnership of such matter only if said matter involves an amount in
excess of $100,000 or could have an adverse material impact on
General Partner.
(10) The use of diligent and professional efforts to
prevent any mechanic's or materialmen's liens to be filed by any
contractors, subcontractors, materialmen or suppliers against the
Partnership Property or any portion thereof, or against any monies
due or to become due on account of, arising out of or relating to
the Hotel Project. If any such lien is filed, General Partner shall
(i) promptly notify the Partnership upon discovering the existence
of such lien and (ii) promptly take such action as General Partner
reasonably determines to be necessary to protect the Partnership
Property after consultation with Limited Partner.
(11) Compliance with all Requirements in connection with
the performance of General Partner's duties and obligations under
this Agreement.
(12) Conducting meetings of the Partnership, as may be
reasonably required by Limited Partner, for the purpose of reviewing
the progress of the planning, refurbishment, operation, marketing or
sale of the Partnership Property.
(13) Conducting periodic evaluations in order to
determine compliance by third parties under their engagement
agreements with the Partnership, and the diligent enforcement of the
rights and remedies of the Partnership in connection therewith.
C. Monitoring Management and Construction Management
Agreements. General Partner shall monitor and supervise Manager's
activities under or in connection with the Construction Management
Agreement and the Management Agreement.
D. [OMITTED]
E. Books and Records. General Partner shall cause to be kept
proper and complete records and books of account in which shall be
entered fully and accurately all transactions and other matters
relating to the Partnership's business as are usually entered into
such records and books of account kept for business of a like
character. The Partnership's records and books shall be kept on an
accrual basis, except as the Partners may otherwise determine. At
all times, such books and records shall be available at the
Partnership's principal place of business for inspection,
examination, photocopying or audit by any Partner, or the duly
authorized representative thereof, during reasonable business hours
and upon reasonable advance notice.
F. Reports. General Partner shall provide Limited Partner
with reports as follows:
(1) An annual report of all income and all expenses
within 90 days of the end of the calendar year, audited by an
independent accounting firm reasonably satisfactory to Limited
Partner.
(2) Copies of the Partnership's annual federal and state
income tax returns together with a copy of that certain IRS form
commonly referred to as a "Schedule K-1," plus a copy of its
equivalent in California, Delaware and any other state in which a
Partner is required to pay income taxes by reason of the
Partnership, within 60 days following the end of each calendar year
(or at such other times as may be agreed to in writing by the
Partners).
(3) Monthly operating statements and reports of financial
condition of the Partnership for each calendar month certified by
General Partner to be true, accurate and complete in all material
respects, and submitted to Limited Partner within 20 days of the end
of each such calendar month (the "Monthly Report"). The Monthly
Report shall be in a form approved by Limited Partner, and shall
include a report regarding the status of the Hotel Project and a
Contribution Request with respect thereto containing General
Partner's estimate of the amount needed to be contributed pursuant
to Section 3.2 to meet costs of the Hotel Project for the succeeding
calendar month and to replenish the Working Capital Reserve and
other reserves established by the Partners.
(4) A monthly variance report, within 20 days after the
end of each calendar month, comparing actual costs and expenses and
revenues with budgeted costs and expenses and revenues on a
line-item basis and on a category basis along with an explanation of
all material or significant variances and all changes in any time
schedules relating thereto.
(5) Monthly reports, within 20 days after the end of each
month, which shall describe in reasonable detail the daily occupancy
and room rates (and average daily rate) for such month.
(6) At least 60 days prior to each fiscal year of the
Partnership, annual updates of the Business Plan, the Operating
Budget and the Rehab Budget for the Hotel Property.
(7) Such other reports as may be reasonably requested by
Limited Partner.
G. Working Capital Reserve and Other Reserves. In addition to
the FF&E Reserve established by Manager pursuant to each Management
Agreement, the Partners, in their reasonable discretion, shall
establish and maintain such other reasonable reserves for future
costs, expenses and payments or for substantial costs (including
capital repairs, improvements and replacements, and anticipated
tenant improvements), to the extent the payment of such costs is not
contemplated by the FF&E Reserves. Without limitation on the
foregoing, General Partner shall maintain a working capital reserve
in the Partnership Operating Account in order to meet anticipated
and unanticipated cash needs of the Partnership (the "Working
Capital Reserve"). The Working Capital Reserve shall be established
in the Master Budget but (1) shall not be less than $200,000 and
(2) shall not exceed $1,000,000, without the prior written consent
of Limited Partner.
H. Approval of Plans and Specifications. As to any item
of the construction work as to which plans, or plans and
specifications, are typically prepared in accordance with customary
practice in the real estate construction industry in the state in
which the Hotel Property is located (collectively, the "Plans and
Specifications"), General Partner shall use diligent and
professional efforts to ensure that such Plans and Specifications
are prepared in accordance with all Requirements and are otherwise
sufficient to permit the affected portion of the construction work
to be completed in a good and workmanlike manner, free from defects.
All such Plans and Specifications shall be subject to the reasonable
approval of the Partners.
I. Fidelity Bond. General Partner shall obtain at its
expense and deliver to the Partners a fidelity bond covering General
Partner and its employees and agents with a liability amount of at
least $5,000,000, which such bond shall be maintained by General
Partner throughout the term of this Agreement. Limited Partner, in
the exercise of its reasonable discretion, may require General
Partner to increase the amount of such bond at General Partner's
expense if Limited Partner determines that circumstances (including
the anticipated average balance of the Operating Account) reasonably
warrant such increase in view of the risks involved.
Section 5.4 Other Activities.
A. Generally. Except as provided in subsections B and C
below: (1) each Partner recognizes that the other Partner has an
interest in investing in, developing, constructing, operating,
transferring, leasing and otherwise using real property and
interests therein for profit, and engaging in any and all activities
related or incidental thereto and that each will make other
investments consistent with such interests; (2) neither the
Partnership nor any Partner shall have any right by virtue of this
Agreement or the Partnership relationship created hereby in or to
any other ventures or activities in which any Partner is involved or
to the income or proceeds derived therefrom; (3) the pursuit of
other ventures and activities by any Partner, even if competitive
with the business of the Partnership, is hereby consented to by the
other Partner and shall not be deemed wrongful or improper; (4) no
Partner and no Affiliate of a Partner shall be obligated to present
any particular investment opportunity to the Partnership, even if
such opportunity is of a character which, if presented to the
Partnership, could be taken by the Partnership; and (5) each Partner
and each Affiliate of a Partner shall have the right to take for its
own account, or to recommend to others, any such particular
investment opportunity.
B. Anti Competition Covenant. Notwithstanding the foregoing:
(1) without the prior written consent of the Partners, none of
General Partner, Operator or any of their respective owners or
principals shall attempt, either directly or through an Affiliate,
to (a) acquire a hotel within a ten mile radius of the Hotel
Property, except for the benefit of the Partnership, (b) acquire any
Holiday Inn in the United States of America (except (i) for the
benefit of the Partnership or (ii) in strict compliance with
subsection C below), or (c) divert any person or entity that is a
potential patron or tenant of the Hotel Property; and (2) Key
Individual shall not pursue any business opportunity (other than (i)
business opportunities pursued on behalf of the Partnership in
accordance with this Agreement, (ii) business opportunities pursued
in strict compliance with subsection C below, or (iii) management
opportunities pursued on behalf of Operator that are expressly
permitted by subsection C below), without the prior written consent
of Limited Partner (which consent shall not be unreasonably
withheld).
C. Right of First Offer. General Partner and Operator each
represents and warrants to Limited Partner and the Partnership, and
each of them, that no person or entity has a right of first refusal
or other contractual right to purchase or finance any interest in,
or provide equity capital for, the acquisition, refurbishment,
operation or sale of Holiday Inns or any other hotel in a
transaction involving any one or more of Operator, General Partner
and their respective owners and principals. In consideration of
Limited Partner's effort and expense in analyzing and negotiating
the transactions contemplated by the Basic Agreement and this
Agreement, during the period ("Exclusivity Period") commencing on
the date hereof and continuing until the earlier of (1) December 31,
1996, or (2) the date that Limited Partner delivers to General
Partner and Operator a written termination notice specifically
waiving the requirements of this subsection C, neither Operator,
General Partner nor any of their respective owners or principals
will make any offers to, or accept any offers from, and will have no
discussions with, third parties (i.e., any person or entity other
than the Partnership) as to any transaction involving the
acquisition, refurbishment, operation or sale of Holiday Inns or any
other hotel, except strictly in compliance with either subsection
(1) or (2) below.
(1) Right of First Offer. During the Exclusivity Period,
General Partner and Operator and any of their respective owners or
principals shall first present all opportunities involving the
acquisition, refurbishment, operation or sale of Holiday Inns or any
other hotel to Limited Partner, which notice shall include a
reasonably detailed description of such opportunity, and to the
extent available, all relevant documentation as to such opportunity
(individually, an "Opportunity Notice"). If any particular hotel
acquisition described in an Opportunity Notice is rejected in
writing by Limited Partner, then Operator, General Partner or an
affiliate thereof shall have the right to acquire the same provided
that (a) all material terms of such acquisition were disclosed to
Limited Partner in the Opportunity Notice, (b) such acquisition is
on terms that are no more favorable to the purchaser than those
disclosed to Limited Partner in the Opportunity Notice, (c) such
acquisition is consummated on a date no later than six months after
the date that the opportunity described in the Opportunity Notice is
so rejected by Limited Partner, (d) it is not reasonably likely that
such acquisition or the operation of the opportunity described in
the Opportunity Notice will interfere with or otherwise conflict
with the obligations of General Partner and Operator under this
Agreement or any Collateral Agreement, and (e) General Partner or
Operator provides Limited Partner sufficient information to
establish that the foregoing conditions are satisfied. Limited
Partner shall respond to an Opportunity Notice within 30 days after
Limited Partner's receipt thereof, together with such other
information as Limited Partner may reasonably request.
(2) Permitted Activities by Operator. Operator may
continue to perform as manager under bona fide management agreements
entered into prior to the date hereof and may enter into any
subsequent management agreements provided that it is reasonably
likely that such performance (when added to all other then existing
obligations of Operator and its affiliates) will not interfere with
or otherwise conflict with obligations of General Partner or
Operator under this Agreement or any Collateral Agreement (and
Operator provides Limited Partner with such information as may be
reasonably necessary to establish the foregoing, including quarterly
reports setting forth, among other matters, a list of all then
existing management contracts under which Operator or an affiliate
is the manager).
D. Joinder by Operator. Operator is joining this Agreement
solely for the purpose of agreeing to the provisions of this Section
5.4.
Section 5.5 Liability of General Partner. Subject to the
provisions of any other agreement to which the General Partner is a
party, and except for the obligations to a Partner or Partners or
the Partnership imposed under such other agreement, General Partner
shall not be liable, responsible or accountable in damages or
otherwise to the Partnership or any other Partner for any action
taken or failure to act by General Partner in its business judgment
on behalf of the Partnership within the scope of the authority
conferred on it by this Agreement unless such action or omission
constituted a breach or default under this Agreement, the Basic
Agreement or any Collateral Agreement, a breach of fiduciary duty, a
tort or willful misconduct.
Section 5.6 Indemnity of General Partner. The Partnership
(but not the Partners personally) shall indemnify, defend and hold
General Partner harmless from and against any loss, expense, damage
or injury suffered or sustained by it by reason of any acts,
omissions or alleged acts or omissions by General Partner on behalf
of the Partnership within the scope of authority conferred on it by
this Agreement, including any judgment, award, settlement,
reasonable attorneys' fees and other costs and expenses incurred in
connection with the defense of any actual or threatened action,
proceeding or claim; provided that the acts or omissions or alleged
acts or omissions upon which such actual or threatened action,
proceeding or claim is based were in good faith in accordance with
its business judgment and did not constitute a breach or default
under this Agreement, the Basic Agreement, or any Collateral
Agreement, a breach of fiduciary duty, a tort or willful misconduct
(and General Partner shall indemnify, defend and hold harmless the
Partnership and Limited Partner, and each of them, from and against
any loss, expense, damage or injury suffered or sustained by it by
reason of the matters described in this proviso).
Section 5.7. Compensation of General Partner. General Partner
shall not receive any fee or other compensation or reimbursement in
connection with the performance by it of its obligations under this
Agreement.
Section 5.8 Hotel Consultant. In the event Limited Partner
determines in its sole discretion that it is in the interest of the
Partnership to have a consultant overseeing the operations and
activities of the Partnership, Limited Partner shall have the right
to retain a consultant ("Hotel Consultant"), at the Partnership's
expense, as Limited Partner's consultant in connection with the
Partnership, in order to advise Limited Partner in connection with,
among other matters, all approvals requested of Limited Partner
under this Agreement (including Major Decisions and the
administration of all Contribution Requests pursuant to Section
3.2). If Hotel Consultant is retained, it shall be furnished with
copies of all information, reports, documents, notices and other
materials required to be provided to Limited Partner pursuant to
this Agreement, at the same time furnished to Limited Partner. In
addition, Limited Partner shall have the right by written notice to
General Partner to cause General Partner to furnish certain
information, reports, documents and other materials solely to Hotel
Consultant as agent for Limited Partner.
ARTICLE VI TRANSFER OF PARTNERSHIP INTERESTS
Section 6.1 Restrictions on Transfer.
A. No sale, exchange, delivery, assignment, transfer,
disposal, encumbrance, pledge or hypothecation, whether voluntary,
involuntary, by operation of law, or resulting from death,
disability or otherwise (a "Transfer") shall be made by a Partner of
the whole or any part of its interest in the Partnership (including
its interest in the capital or profits of the Partnership) without
the prior written consent of the other Partner.
B. No Transfer shall be made of any direct or indirect
interest in General Partner without the prior written consent of
Limited Partner; provided, however, that Limited Partner's consent
shall not be unreasonably withheld in connection with any Transfer
(other than a hypothecation), of any direct or indirect interest in
General Partner so long as, immediately after such Transfer, the
conditions set forth in Section 3.2A(2)(d) and Section 3.2A(2)(e)
remain satisfied.
C. No transfer or assignment of an interest in the Partnership
may be made to any person or entity (1) if, in the opinion of legal
counsel for the Partnership, such transfer or assignment may result
in the Partnership becoming an investment company under the
Investment Company Act of 1940, as amended (the "1940 Act") or (2)
unless the transferee provides a legal opinion, if requested by
General Partner, from a law firm and in form reasonably satisfactory
to General Partner, to the effect that the Partnership will not
constitute an investment company under the 1940 Act by reason of
such transfer or assignment.
D. No Transfer in violation of the provisions hereof shall be
valid or effective for any purpose, and no consent to one or more of
the same shall be deemed consent to any other of the same.
Section 6.2 Effect of Assignment; Documents. In the event of
any Transfer permitted hereunder, subject to Article VIII, the
Partnership shall not be terminated but instead shall continue as
before, with, however, the addition or substitution of such new
Partner. No such Transfer shall relieve the assignor from any of
its obligations under this Agreement. Notwithstanding the
foregoing, as a condition to any sale or assignment by a Partner,
the transferee or assignee must execute and deliver to the other
Partner an assumption (in form reasonably satisfactory to the other
Partner) of all the obligations of the assignee under this Agreement
arising from and after the date of such assignment. If any Transfer
is made in violation of this Article VI, the transferee shall have
no right to become a Partner and shall have no right to participate
in the management and affairs of the Partnership. The transferee in
such case shall only be entitled to receive the share of the
distributions payable to it under Article IV to which the
transferring Partner would have been entitled.
Section 6.3 Additional Partners. Without limitation on the
foregoing, no person or entity shall become an additional partner
without the prior written consent of the Partners. In the event
such consent is granted, the existing Partners and such new Partner
shall execute such documents as may be reasonably required by the
existing Partners to effect such admission, including, without
limitation an amendment to this Agreement.
ARTICLE VII CERTAIN REMEDIES
Section 7.1 Security Agreement.
A. Assignment. Each Partner shall and does hereby assign and
transfer to the Partnership and the other Partner, all its right,
title and interest in and claims against the Partnership (or any
successor thereto) now or at any time or times hereafter held,
including its interest in the capital and the profits and losses of
the Partnership.
B. Obligations Secured. The property and interests assigned
and transferred as aforesaid by each Partner shall constitute and
shall be held as collateral security for each and all of the
obligations of such Partner (and its Affiliates) under this
Agreement, the Basic Agreement or any Collateral Agreement, and such
Partner hereby grants to the Partnership and the other Partner a
security interest in the property and interests assigned and
transferred as aforesaid for such purposes (and hereby waives any
guarantor or suretyship defense that may otherwise apply with
respect thereto).
C. Remedies. In the event a Partner shall breach or default
in, or fail to comply with, any of its obligations secured hereby
and such breach shall continue past the expiration of the Cure
Period, then the Partnership and the other Partner, or any of them,
in addition to its or their other rights and remedies (including
those provided by law and those provided by any other agreement or
security agreement), may (1) pursue the remedies against the
property and interests transferred and assigned hereunder available
under the applicable provisions of law, including the applicable
provisions of any state commercial code, and (2) cause to be paid to
it or them any sum payable on account of or with respect to the
property and interests assigned as security as aforesaid (including
any distribution with respect to a Partnership interest) and apply
such sum to the amount to which the Partnership and such other
Partner, or any of them, are or become entitled with respect to the
obligation or obligations secured hereunder. Notwithstanding the
foregoing, if General Partner is entitled to and timely delivers an
"Arbitration Notice" (as defined below) pursuant to Section 7.2
below, then the Cure Period shall be tolled as and to the extent
provided in Section 7.2B(b) below.
(1) Any foreclosure of a Partner's interest pursuant to
this Section may, at the election of such foreclosing party, be made
subject to this security agreement as to any future obligations and
liabilities of such foreclosed Partner under this Agreement (with
the result that the Partnership and the other Partner may make
multiple foreclosures of each Partner's interest in the
Partnership).
(2) Each Partner shall execute and cause to be filed such
financing statements as the Partnership or the other Partner$shall
from time to time reasonably request to perfect or maintain the
perfection of the security interests herein granted to the
Partnership or such other Partner hereunder.
(3) Each Partner shall have priority to the Partnership
with respect to the rights assigned hereunder.
Section 7.2 Termination of Management Rights.
A. Limited Partner may deliver a termination notice to General
Partner ("Termination Notice") upon the occurrence of any of the
following events:
(1) Any act of fraud, dishonesty, or material breach of
fiduciary duty.
(2) Any material breach of this Agreement or any
Collateral Agreement by General Partner (or an Affiliate), other
than a breach described in clause (3) below, which is not cured
within the Cure Period.
(3) The failure by General Partner to provide effective
management of the Partnership and the Hotel Project pursuant to
Article V hereof in a manner consistent with prevailing commercial
practices for the planning, acquisition, refurbishment, operation,
marketing and sale of similar projects (and such failure has or is
reasonably expected to have a material and adverse effect upon the
Partnership or the Hotel Property), and the failure to correct such
deficiencies within the Cure Period.
(4) The occurrence of a Bankruptcy/Dissolution Event with
respect to General Partner or any of its constituent entities or
principals or the failure of any of the conditions set forth in
Section 3.2A(2)(d) or 3.2A(2)(e).
B. The Termination Notice shall specify with particularity the
basis for the same and shall become effective the later of (1) (10)
ten days after the date of the Termination Notice, or (2) if
applicable, after the expiration of the applicable Cure Period set
forth above. Notwithstanding the foregoing, General Partner may
dispute the existence of grounds for the termination described in
subsection A(1), A(2) (but not subsection A(3)) by written notice
("Arbitration Notice") to Limited Partner within 10 days after its
receipt of the Termination Notice. In the event an Arbitration
Notice is given within the period set forth above, then (a) the
dispute shall be resolved by arbitration as provided in Section 7.3,
(b) the applicable Cure Period set forth above shall be tolled
pending the resolution of the dispute by arbitration, and (c) if the
arbitrators uphold the termination, then the Termination Notice
shall become effective after the expiration of the applicable Cure
Period set forth above (subject to clause (b) above). A Termination
Notice shall become effective immediately solely in connection with
a termination described in subsection A(3) above.
C. If a Termination Notice becomes effective, then:
(1)(a) the Limited Partner shall have the right to
designate and admit a managing General Partner of the Partnership
with all the power and authority previously possessed by General
Partner, (b) General Partner shall remain a Partner in the
Partnership, but with no power, authority or right to vote, approve
or act for or bind the Partnership with respect to any matter in
connection with the Partnership or its operation, (c) with respect
to all Distributable Cash for the period commencing upon the date
that the Termination Notice become effective, General Partner's
Residual Percentage and Interim Percentage shall not exceed its Base
Percentage, and accordingly, all distributions under Section 4.1C
and 4.1D shall be made to the Partners in accordance with their
respective Base Percentages on a pari passu basis, (d) Limited
Partner, at its option, may terminate the term of the Partnership by
written notice to General Partner, and (e) Limited Partner, at its
option, may terminate the term of the Management Agreement and the
Construction Management Agreement.
(2) [INTENTIONALLY OMITTED]
(3) Any sums distributable or payable to General Partner
or its Affiliates shall be offset against any damages due the
Partnership or Limited Partner from General Partner or Affiliate (as
such damages are determined by a final unappealable judgment from a
court of proper jurisdiction).
(4) General Partner shall execute and acknowledge any
required amendments to this Agreement reflecting the foregoing, in
such form and content as Limited Partner may reasonably prescribe.
In addition, General Partner hereby constitutes Limited Partner as
its true and lawful attorney in fact, on its behalf and in its
stead, with full power of substitution, to execute and acknowledge
any such amendment. This power of attorney shall be deemed coupled
with an interest and shall not be vevoked by the dissolution,
insolvency or otherwise.
(5) General Partner's obligations under this Agreement
shall in no event be limited (except that General Partner shall no
longer be obligated to perform those obligations under Article V
that require authority of General Partner that has been terminated).
D. Limited Partner's right to deliver a Termination Notice
pursuant to this Section shall be in addition to, and not in lieu
of, any other remedy available to the Partners or the Partnership at
law or in equity (including the collection of monetary damages, the
enforcement of this Agreement in equity or the appointment of a
receiver for all or part of the Partnership Property) in the event
of a breach by General Partner (or any Affiliate) of its obligations
under this Agreement or any Collateral Agreement.
Section 7.3 Arbitration
ARBITRATION OF DISPUTES
A. SUBJECT TO THE PROVISIONS OF THIS SECTION 7.3, ANY DISPUTE
AMONG THE PARTNERS UNDER SECTION 7.2 SHALL BE RESOLVED BY
ARBITRATION IN SAN FRANCISCO, CALIFORNIA, IN ACCORDANCE WITH THE
FOLLOWING (WHERE, FOR PURPOSES OF THIS SECTION):
(1) THE PARTNER DESIRING ARBITRATION SHALL GIVE WRITTEN
NOTICE OF THAT FACT TO THE OTHER PARTNER, ACCOMPANIED BY A
DESIGNATION OF AN ARBITRATOR; IF THE OTHER PARTNER FAILS TO
DESIGNATE ANOTHER ARBITRATOR BY WRITTEN NOTICE TO THE FIRST PARTNER
WITHIN THE TIME PERIOD DESCRIBED BELOW, THE ARBITRATOR SHALL BE THE
PERSON DESIGNATED BY THE FIRST PARTNER; IF THE OTHER PARTNER
DESIGNATES ANOTHER ARBITRATOR WITHIN SUCH PERIOD, THEN THE TWO
ARBITRATORS SO DESIGNATED SHALL SELECT A THIRD ARBITRATOR AS SOON AS
PRACTICABLE THEREAFTER, AND THE ARBITRATION SHALL BE CONDUCTED BY
ALL THREE ARBITRATORS. FOR PURPOSES OF THE PRECEDING SENTENCE, THE
REQUIRED TIME PERIOD SHALL BE 15 DAYS AFTER SUCH DESIGNATION.
(2) THE PARTNERS AND THE ARBITRATORS SHALL USE THEIR
MUTUAL DILIGENT EFFORTS TO CAUSE THE ARBITRATION TO BE CONDUCTED AND
A DECISION RENDERED WITHIN 60 DAYS THEREAFTER.
(3) THE ARBITRATORS SHALL CONDUCT THE ARBITRATION
GENERALLY IN ACCORDANCE WITH THE RULES OF THE AMERICAN ARBITRATION
ASSOCIATION, WITH SUCH MODIFICATIONS THEREOF AS THEY MAY DEEM
APPROPRIATE; WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE
ARBITRATORS MAY AFFORD THE PARTIES THE OPPORTUNITY TO CONDUCT
DISCOVERY IN ACCORDANCE WITH SUCH RULES AND LIMITATIONS AS THE
ARBITRATORS MAY PRESCRIBE.
(4) THE ARBITRATORS MAY RETAIN COUNSEL (WHICH ARE NOT
AFFILIATES OF ANY PARTNER) TO ADVISE THEM AS TO THE INTERPRETATION
OF THE PARTNERSHIP AGREEMENT OR OTHER LEGAL MATTERS, THE COST OF
WHICH SHALL BE A COST OF THE ARBITRATION.
(5) THE ARBITRATORS SHALL BE ENTITLED TO REASONABLE
COMPENSATION AND REIMBURSEMENT OF EXPENSES AS MUTUALLY AGREED WITH
THE PARTNERS, OR IF THEY ARE UNABLE TO AGREE THEN AS REASONABLY
DETERMINED BY THE ARBITRATORS.
(6) THE COMPENSATION OF THE ARBITRATORS AND OTHER COSTS
OF THE ARBITRATION SHALL BE PAID BY THE PARTNERS IN SUCH EQUITABLE
PROPORTIONS AS MAY BE DETERMINED BY THE ARBITRATORS.
(7) THE AWARD AND ALL OTHER DECISIONS OF THE ARBITRATORS
SHALL BE FINAL AND BINDING UPON THE PARTNERS AND THE PARTNERSHIP,
AND A JUDGMENT MAY BE RENDERED THEREON IN ANY COURT OF RECORD,
EXCEPT THAT ANY PARTNER MAY CONTEST AND OBTAIN JUDICIAL REVIEW OF
THE REASONABLENESS OF THE ARBITRATORS' DETERMINATION OF COMPENSATION
PURSUANT TO CLAUSE (5) ABOVE.
B. THE ONLY ISSUES TO BE DETERMINED BY THE ARBITRATORS SHALL
BE THE EFFECTIVENESS OR INEFFECTIVENESS OF A TERMINATION NOTICE.
THE ARBITRATORS SHALL HAVE NO AUTHORITY TO AWARD ANY LEGAL OR
EQUITABLE RELIEF (INCLUDING MONETARY DAMAGES). THE PARTIES RESERVE
THEIR RIGHT TO A TRIAL BY A COURT OF LAW OR EQUITY OF ANY CLAIM FOR
LEGAL OR EQUITABLE RELIEF AS A CONSEQUENCE OF ANY MATTER COVERED BY
SECTION 7.2, ALTHOUGH IN ANY SUCH TRIAL THE DECISION OF THE
ARBITRATORS SHALL BE BINDING WITH RESPECT TO THE ISSUES DETERMINED
BY THEM.
C. DISPUTES UNDER PROVISIONS OF THIS AGREEMENT OTHER THAN
SECTION 7.2 SHALL NOT BE RESOLVED BY ARBITRATION UNLESS THE PARTIES
OTHERWISE AGREE, EXCEPT THAT THE ARBITRATORS SHALL HAVE THE
AUTHORITY TO DETERMINE ISSUES UNDER OTHER PROVISIONS OF THIS
AGREEMENT TO THE EXTENT NECESSARY TO RESOLVE DISPUTES UNDER
SECTION 7.2.
D. EACH ARBITRATOR SHALL BE AN INDEPENDENT PERSON OR ENTITY
THAT IS THEN ACTIVE IN (AND HAS AT LEAST FIVE YEARS' EXPERIENCE IN)
OWNING, OPERATING OR CONSULTING IN THE HOTEL/MOTEL INDUSTRY IN THE
UNITED STATES AND AT LEAST ONE OF WHICH SHALL BE AN INDEPENDENT
COMMERCIAL PROPERTY MANAGEMENT FIRM THAT IS THEN ACTIVE IN (AND HAS
AT LEAST FIVE YEARS' EXPERIENCE IN) THE MANAGEMENT AND OPERATION OF
COMMERCIAL PROPERTIES SIMILAR TO THE PARTNERSHIP PROPERTY. NO
ARBITRATOR SHALL BE IN THE EMPLOY OF THE PARTNERSHIP, ANY PARTNER OR
ANY AFFILIATE OF THE FOREGOING DURING THE PENDENCY OF THE
ARBITRATION.
ASSENT TO ARBITRATION PROVISION
NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO
HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE
"ARBITRATION OF DISPUTES" PROVISION DECIDED BY NEUTRAL ARBITRATION
AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE
DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY INITIALING IN THE
SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND
APPEAL, UNLESS THOSE RIGHTS ARE SPECIFICALLY INCLUDED IN THE
"ARBITRATION OF DISPUTES" PROVISION. YOUR AGREEMENT TO THIS
ARBITRATION PROVISION IS VOLUNTARY.
WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE %PAGES
TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE
"ARBITRATION OF DISPUTES" PROVISION TO NEUTRAL ARBITRATION.
___ General Partner ___ Limited Partner
Section 7.4 No Partition. Each Partner hereby irrevocably
waives any and all rights that it may have to maintain any action
for partition of any of the Partnership Property.
Section 7.5 Litigation Without Termination. Any Partner shall
be entitled to maintain, on its own behalf or on behalf of the
Partnership, any action or proceeding against the other Partner or
the Partnership (including any action for damages, specific
performance or declaratory relief) for or by reason of breach of
such party of this Agreement or any other agreement entered into in
connection with the same, notwithstanding the fact that any or all
of the parties to such proceeding may then be Partners in the
Partnership, and without resulting in a termination of the
Partnership.
Section 7.6 Attorneys' Fees. If the Partnership or any party
obtains a judgment against any other party by reason of breach of
this Agreement (whether in an action or through arbitration), then
the Partnership or such party shall be entitled to recover its court
(or arbitration) costs, and reasonable attorneys' fees (including
the reasonable value of in-house attorney services) and
disbursements incurred in connection therewith and in any appeal or
enforcement proceeding thereafter, in addition to all other
recoverable costs.
Section 7.7 Cumulative Remedies. No remedy conferred upon the
Partnership or any Partner in this Agreement is intended to be
exclusive of any other remedy herein or by law provided or
permitted, but each shall be cumulative and shall be in addition to
every other remedy given hereunder or now or hereafter existing at
law, in equity or by statute (subject, however, to the limitations
expressly herein set forth). General Partner shall be primarily,
jointly and severally liable for each of the obligations and
liabilities of General Partner and its Affiliates under this
Agreement, the Basic Agreement and each Collateral Agreement.
General Partner hereby waives any surety or guarantor defense that
may otherwise apply.
Section 7.8 No Waiver. No waiver by a Partner or the
Partnership of any breach of this Agreement shall be deemed to be a
waiver of any other breach of any kind or nature, and no acceptance
of payment or performance by a Partner or the Partnership after any
such breach shall be deemed to be a waiver of any breach of this
Agreement, whether or not such Partner or the Partnership knows of
such breach at the time it accepts such payment or performance. No
failure or delay on the part of a Partner or the Partnership to
exercise any right it may have shall prevent the exercise thereof by
such Partner or the Partnership at any time such other may continue
to be so in default, and no such failure or delay shall operate as a
waiver of any default.
ARTICLE VIII DISSOLUTION OF THE PARTNERSHIP
Section 8.1 Events Giving Rise to Dissolution. No act, thing,
occurrence, event or circumstance shall cause or result in the
dissolution of the Partnership; except that the happening of any one
of the following events (individually, a "Dissolution Event") shall
work an immediate dissolution of the Partnership (unless in
connection with such event a Partner is entitled to and exercises a
"Partnership Purchase Option" or a "Partnership Conversion Option"
[as defined below] pursuant to Section 8.2 below):
A. The death, incapacity, insanity, retirement, resignation or
expulsion of General Partner, or the occurrence of a
Bankruptcy/Dissolution Event with respect to General Partner. As
used herein, with respect to General Partner only, a Dissolution
Event shall also include (1) the failure of conditions set forth in
Section 3.2A(2)(d) or Section 3.2A(2)(e) to remain satisfied; or (2)
the occurrence of a Bankruptcy/Dissolution Event with respect to
Operator.
B. The sale of all of the real estate assets of the
Partnership (provided, however, that if a portion of the purchase
price of such sale is evidenced by a promissory note, the
Partnership shall not be dissolved by reason of such sale so long as
the Partnership is the holder of such promissory note).
C. The unanimous agreement in writing by the Partners to
dissolve the Partnership.
D. The termination of the term of the Partnership pursuant to
Section 1.3 or 7.2C(1) of this Agreement.
E. At the written election of Limited Partner (which election
may not be made prior to the date that is three years after the date
of this Agreement).
Without limitation on the other provisions hereof, neither the
assignment of all or any part of a Partner's interest in the
Partnership permitted hereunder nor the admission of a new member
shall work the dissolution of the Partnership. Except as otherwise
provided in this Agreement, each Partner agrees that, without the
consent of the Partners, a Partner may not retire or withdraw from
or cause a voluntary dissolution of the Partnership (except that the
foregoing shall not be deemed to require any Partner to exercise a
Partnership Purchase Option or a Partnership Conversion Option).
Section 8.2 Purchase and Conversion Options. In the event of
a Dissolution Event described in Section 8.1A (the General Partner
being herein called the "Dissolution Partner"), then the "Electing
Partner" (i.e., Limited Partner) shall have the option, exercisable
by written notice to the Dissolution Partner or its personal
representative, successor or assign, at any time within 90 days
after it learns of the Dissolution Event, either (A) to have the
Partnership interest of the Dissolution Partner converted to that of
a silent Partner with no right to vote, approve or act with respect
to any Partnership matter (such option being herein called the
"Partnership Conversion Option"), or (B) to purchase the Partnership
interest of the Dissolution Partner on the terms hereinafter set
forth (such option being herein called the "Partnership Purchase
Option"). Nothing herein shall be deemed to require the Electing
Partner to exercise either such option.
A. Partnership Conversion Option. In the event of the
exercise of the Partnership Conversion Option, the Electing Partner
shall have the right to appoint a new General Partner and the
Dissolution Partner (or its personal representative, successor or
assign) shall thereafter have no right to vote, approve or act with
respect to any Partnership matter, but the Partnership shall
otherwise be identical in every respect (including the terms and
conditions of this Agreement) to the Partnership prior to such
conversion (and, subject to the adjustment in Distribution
Percentages provided in subsection B below, if applicable), each
Partner shall thus hold the same interest in the profits and losses
and Distributable Cash as it held immediately prior to such
conversion as a Partner hereunder, except that the Dissolution
Partner's interest in the Partnership after such conversion shall be
such that the Dissolution Partner shall have no right to vote,
approve or act with respect to any Partnership matter and Electing
Partner shall have the right to designate and admit a managing
General Partner of the Partnership. The Dissolution Partner agrees,
on behalf of itself and its representatives, successors and assigns,
to promptly execute such documents and agreements (including an
amendment to this Agreement) and do such other acts as may be
reasonably deemed to be necessary or desirable by the Electing
Partner or its counsel to carry out the Partnership Conversion
Option. In addition, the Dissolution Partner, on behalf of itself,
its representatives, successors and assigns, hereby constitutes and
appoints the Electing Partner its true and lawful attorney-in-fact
with full power of substitution to execute documents and agreements
(including amendments to this Agreement) and to take such further
acts as may be reasonably determined by such attorney-in-fact or its
counsel to be necessary or desirable to carry out the Partnership
Conversion Option. This power of attorney shall be deemed to be a
power coupled with an interest which cannot be revoked by the
occurrence of a Bankruptcy/Dissolution Event or otherwise.
B. Adjustment to Distribution Percentages. Effective upon the
exercise by Limited Partner of its Partnership Conversion Option in
connection therewith: (1) the Partners' Distribution Percentages
shall be adjusted in the same manner as provided under Section
7.2C1(c); and (2) [INTENTIONALLY OMITTED].
C. Partnership Purchase Option. In the event of the exercise
of the Partnership Purchase Option, the consideration for the
Dissolution Partner's Partnership interest shall be the amount (if
any) that will produce for the Dissolution Partner the same amount
in cash as it would have received if the Partnership Property owned
by the Partnership at the date on which the Dissolution Event occurs
had been sold at 95% of its then fair market value (such 5% discount
being intended to reflect the reduction in value attributable to the
sale of a partial interest) and the Partnership had been dissolved
and wound up following such sale and the distributions of the Net
Sale Proceeds of such sale had been made in accordance with
Section 4.1.
(1) The fair market value of such Partnership Property
shall be as agreed upon by the Electing Partner and the Dissolution
Partner, or if they fail to agree upon such value within 45 days
after the giving of the Partnership Purchase Option notice, then as
determined by appraisal, in accordance with procedure set forth in
Exhibit "G".
(2) Any sum payable for the Dissolution Partner's
Partnership interest as hereinabove determined must be paid in cash
within 60 days after the determination of the amount of the same as
aforesaid. Concurrently with the payment of such sum (or if no
amount shall be payable for such interest, then upon demand of the
assignee), the assignor of such interest shall deliver or cause to
be delivered to such assignee such assignments of Partnership
interest and other instruments and documents confirming the
assignment and transfer as such assignee shall reasonably request.
The acquisition of such Partnership interest as aforesaid shall be
deemed effective as of the date on which the Dissolution Event
occurred ("Dissolution Event Date"), and, accordingly, the assignee
shall be entitled to all profits and losses and distributions of
Distributable Cash for any period after the Dissolution Event Date.
(3) The Electing Partner may assign its rights under this
Section 8.2 to purchase the Dissolution Partner's Partnership
interest.
Section 8.3 Procedure.
A. In the event of the dissolution or termination of the
Partnership for any reason, General Partner (or if a Dissolution
Event under Section 8.1A or 8.1B has occurred, then Limited Partner)
shall commence to wind up the affairs of the Partnership and to
liquidate its investments. The Partner obligated to wind up %PAGEE
the affairs of the Partnership as aforesaid is herein called the
"Winding Up Partner". The Partners shall continue to share profits,
losses, gain or loss on sale or disposition, and Distributable Cash
during the period of liquidation in the same manner and proportion
as though the Partnership had not dissolved or terminated. The
Winding Up Partner shall have full right and unlimited discretion to
determine in good faith the time, manner and terms of any sale or
sales of Partnership Property pursuant to such liquidation having
due regard to the activity and condition of the relevant market and
general financial and economic conditions.
B. Following the payment of all debts and liabilities of the
Partnership and all expenses of liquidation, and subject to the
right of the Winding Up Partner to set up such cash reserves as and
for so long as it may deem reasonably necessary in good faith for
any contingent or unforeseen liabilities or obligations of the
Partnership, the proceeds of the liquidation and any other funds of
the Partnership shall be distributed in accordance with Section 4.1
hereof (after deducting from the distributive share of a Partner any
sum such Partner owes the Partnership).
C. Each Partner shall look solely to the assets of the
Partnership for all distributions with respect to the Partnership
and its capital contribution thereto and share of profits or losses
thereof and shall have no recourse therefor (in the event of any
deficit in a Partner's capital account or otherwise) against the
other Partner; provided that nothing herein contained shall relieve
any Partner of such Partner's obligation to make the capital
contributions herein provided or to pay any liability or
indebtedness owing the Partnership by such Partner, and the
Partnership and the other Partner shall be entitled at all times to
enforce such obligations of such Partner. No holder of a
Partnership interest shall have any right to demand or receive
property other than cash upon dissolution and termination of the
Partnership.
D. Upon the completion of the liquidation of the Partnership
and the distribution of all Partnership funds, the Partnership shall
terminate and the Winding Up Partner shall have the authority to
execute and record a certificate of termination of the Partnership,
as well as any and all other documents required to effectuate the
dissolution and termination of the Partnership.
ARTICLE IX MISCELLANEOUS
Section 9.1 Notices. Any notice which a party is required or
may desire to give the other party shall be in writing and may be
delivered (1) personally, (2) by United States registered or
certified mail, postage prepaid, (3) by Federal Express or other
reputable courier service regularly providing evidence of delivery
(with charges paid by the party sending the notice), or (4) by
telecopy, provided that such telecopy shall be immediately followed
by delivery of such notice pursuant to clause (1), (2) or (3) above.
Any such notice shall be addressed as follows (subject to the right
of a party to designate a different address for itself by notice
similarly given):
TO GENERAL PARTNER:
Ridgewood Hotels, Inc.
2859 Paces Ferry Road
Suite 700
Atlanta, Georgia 30339
Attention: Mr. N. Russell Walden
Telephone No.: (404) 434 3670
Facsimile No.: (404) 433 8935
With Copy to:
Troutman Sanders
Suite 5200
600 Peachtree Street, N.E.
Atlanta, Georgia 30308 2216
Attention: John W. Moore, Esq.
Telephone No.: (404) 885 3188
Facsimile No.: (404) 885 3900
TO LIMITED PARTNER:
c/o Farallon Capital Management, Inc.
One Maritime Plaza, Suite 1325
San Francisco, California 94111
Attention: Mr. Jason M. Fish
Office (gen.): (415) 421 2132
Telecopy: (415) 421 2133
With Copy To:
Pircher, Nichols & Meeks
1999 Avenue of the Stars
Suite 2600
Los Angeles, California 90067
Attention: Real Estate Notices (SAC/RCS)
Office (gen.): (310) 201 8900
Telecopy: (310) 201 8922
Any notice so given by United States mail or courier service shall
be deemed to have been given on the date delivered (whether accepted
or refused) as evidenced by the return receipt or other proof of
delivery. Any notice not so given by U.S. mail or courier service
shall be deemed to be given upon receipt of the same by the party to
whom the same is to be given.
Section 9.2 Acknowledgement by Partners. Each Partner
acknowledges the following: (A) it is familiar with the business
proposed to be conducted by the Partnership; (B) it has been advised
that the Partnership Interest may not be sold, transferred, or
otherwise disposed of except as provided herein; (C) it understands
that the securities being purchased hereby have not been registered
under the Securities Act of 1933, (the "Act"), or any State
securities laws, in reliance on an exemption for private offerings
and, therefore, the securities cannot be resold unless they are
registered under the Act and applicable State securities laws or
unless an exemption from such registration is available; (D) it is a
"sophisticated investor" with substantial prior experience in
high-risk business investments and is aware of and familiar with the
risks associated with a private limited partnership and would
qualify as an "accredited investor" as such is defined in Rule 501
of Regulation D, as enacted pursuant to Sections 3(b) and 4(2) of
the Act; and (E) it is purchasing the Partnership Interest for his,
her, or its own account, for investment only and with no present
intention of distributing, reselling, pledging, or otherwise
disposing of its interest; (F) that it is familiar with the type of
investment which the Partnership interest in the Partnership
constitutes and have reviewed the purchase of the interest with its
tax and independent legal counsel and investment representatives to
the extent he deems necessary.
Section 9.3 Construction. Every covenant, term, and provision
of this Agreement shall be construed simply according to its fair
meaning and not strictly for or against any Partner (notwithstanding
any rule of law requiring an Agreement to be strictly construed
against the drafting party).
Section 9.4 Time is of the Essence. Time is of the essence
with respect to this Agreement.
Section 9.5 Entire Agreement. This Agreement constitutes the
entire agreement between the parties. This Agreement supersedes any
prior agreement or understandings between the parties.
Section 9.6 Amendments. This Agreement may be amended by
written agreement of amendment executed by the Partners, but not
otherwise, unless expressly provided herein.
Section 9.7 Governing Law; Venue. This Agreement and the
rights of the parties hereunder shall be governed by and interpreted
in accordance with the laws of the State of Delaware (without regard
to conflicts of laws). Each party hereby consents to the
jurisdiction of any state or federal court located within Los
Angeles or San Francisco County, California, waives personal service
of any and all process upon it, consents to service of process by
registered mail directed to it at the address stated in Section 9.1,
and acknowledges that service so made shall be deemed to be
completed upon actual delivery thereof (whether accepted or
refused). In addition, each party consents and agrees that venue of
any action instituted under this Agreement or any agreement executed
in connection herewith shall be proper in Los Angeles or San
Francisco County, California, and hereby waives any objection to
venue.
Section 9.8 Successors and Assigns. Except as herein
otherwise specifically provided, this Agreement shall be binding
upon and inure to the benefit of the parties and their legal
representatives, successors and assigns.
Section 9.9. Captions. Captions contained in this Agreement
in no way define, limit or extend the scope or intent of this
Agreement.
Section 9.10 Severability. If any provision of this
Agreement, or the application of such provision to any person or
circumstance, shall be held invalid, the remainder of this
Agreement, or the application of such provision to the persons or
circumstances, shall not be affected thereby.
Section 9.11 Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed an original, but
all of which shall constitute one and the same document.
Section 9.12 No Third Party Beneficiaries. Nothing in this
Agreement, expressed or implied, is intended to confer any rights or
remedies upon any person, other than the parties hereto and, subject
to the restrictions on assignment herein contained, their respective
successors and assigns.
Section 9.13 Certain Terminology.
A. Whenever the words "including", "include" or "includes" are
used in this Agreement, they should be interpreted in a
non-exclusive manner as though the words ",without limitation,"
immediately followed the same.
B. Except as otherwise indicated, all Article, Section and
Exhibit references in this Agreement shall be deemed to refer to the
Sections and Articles in, and the Exhibits to, this Agreement.
Section 9.14 Incorporation of Exhibits. All exhibits attached
and referred to in this Agreement are hereby incorporated herein as
fully set forth in (and shall be deemed to be a part of) this
Agreement.
Section 9.15 Consents and Approvals. Except as otherwise
expressly provided herein, any approval or consent provided to be
given by a party hereunder may be given or withheld in the absolute
discretion of such party and shall not be deemed to have been given
unless given in writing.
Section 9.16 Effectiveness. In no event shall any draft of
this Agreement create any obligation or liability, it being
understood that this Agreement shall be effective and binding only
when a counterpart hereof has been executed and delivered by each
party hereto.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first above written.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION
WHICH MAY BE ENFORCED BY THE PARTIES.
LIMITED PARTNER:
RW HOTEL INVESTMENT ASSOCIATES,
L.L.C.,
a Delaware limited liability
company
By: FARALLON CAPITAL MANAGEMENT,
INC.,
a Delaware corporation,
Manager
By:_______________________________
Name: ____________________________
Title: ___________________________
GENERAL PARTNER:
RIDGEWOOD HOTELS, INC.,
a Georgia corporation
By: ______________________________
Name: ____________________________
Title: ___________________________
ASSIGNMENT, ASSUMPTION AND WITHDRAWAL
The undersigned hereby confirms and agrees that:
(1) immediately prior to the foregoing amendment and
restatement: (a) RW Hotel Investment Partners, L.P. ("Assignor")
transferred (and hereby transfers) the interest of the "Limited
Partner" in the Partnership to RW Hotel Investments, L.L.C.
("Assignee"), (b) Assignor withdrew (and hereby withdraws) as a
partner in the Partnership, and (c) Assignee assumed (and hereby
assumes) all of the obligations and liability of Assignor as a
partner in the Partnership.
(2) Assignor no longer has any right, title and interest in
the Partnership (all the same having been assigned to Assignee).
ASSIGNEE:
RW HOTEL INVESTMENT PARTNERS,
L.P.,
a Delaware limited
partnership
By: RW HOTEL INVESTORS, INC.,
a Delaware corporation,
General Partner
By:_______________________________
Name:_____________________________
Title:____________________________
ASSIGNEE:
RW HOTEL INVESTMENT ASSOCIATES,
L.L.C.,
a Delaware limited liability
company
By: FARALLON CAPITAL MANAGEMENT,
INC.,
a Delaware corporation,
Manager
By: ______________________________
Name: ____________________________
Title: ___________________________
CONSENT AND RELEASE
The undersigned hereby consents to the foregoing assignment and
withdrawal and the substitution of the RW Hotel Investment
Associates, L.L.C. as the Limited Partner in the Partnership and
hereby releases RW Hotel Investment Partners, L.P. from any and all
liability under the foregoing Partnership Agreement or any other
document executed in connection therewith.
RIDGEWOOD HOTELS, INC.,
a Georgia corporation
By: ______________________________
Name: ____________________________
Title: ___________________________
AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
Exhibits
A Business Plan and Budgets
B Certain Tax and Accounting Matters
C1 Form of General Partner Demand Note
C2 Form of Operator Demand Note
D Form of Endorsement
E Form of Pledge and Security Agreement
F Certain IRR Deficiency Calculations
G Appraisal Procedure
JOINDER
For good and valuable consideration, for the benefit of the
Partnership and Limited Partner, the undersigned joins in the
execution of this Agreement solely for the purpose of agreeing to be
bound by the representations, warranties and covenants set forth in
Section 5.4B and 5.4C of this Agreement.
OPERATOR:
RIDGEWOOD PROPERTIES, INC.,
a Delaware corporation
By: ______________________________
Name: ____________________________
Title: ___________________________
EXHIBIT "A"
DESCRIPTION OF BUSINESS PLAN AND BUDGETS
In addition to the Operating Budget and Rehab Budget, the
Business Plan to be attached as this Exhibit "A" shall detail the
overall plan for the acquisition, refurbishment, design,
development, construction, completion, operation and sale of the
Hotel Property, and shall contain the following matters:
1. A description of the proposed improvements and a tentative
schedule (based on events or time or both) for their completion and
outline for (a) obtaining the necessary zoning, variances and other
approval needed to construct such improvements, including projected
obligations associated therewith, and (b) any engineering,
feasibility, environmental impact or similar types of studies deemed
necessary or advisable to be conducted.
2. A general description and projected completion schedule of
all plans and specifications for all improvements within the Hotel
Project.
3. A general description of plans for any leasing of the
Hotel Project, including parameters for leasing (including
parameters as to the length of the term of proposed leases, the
minimum rental rates, the nature of the tenant, and the
creditworthiness of the tenant, and the amount and nature of any
improvements or other costs contemplated to be constructed or
incurred as the Partnership's expense with respect to such lease).
4. All other items or matters that may be appropriate for the
Hotel Project, including other items reasonably requested by Limited
Partner.
EXHIBIT "B"
CERTAIN TAX AND ACCOUNTING MATTERS
ARTICLE I CAPITAL ACCOUNTS
Section 1.1 Maintenance of Capital Accounts; General Rules.
A separate "Book Capital Account" (as defined in Section 1.2 of this
Exhibit "B") shall be maintained for each Partner in accordance with
the provisions of this Article I.
Section 1.2 Book Capital Accounts. A capital account (the
"Book Capital Account") for each Partner shall be maintained at all
times during the term of the Partnership in accordance with this
Section 1.2 and the capital accounting rules set forth in
Section 1.704-1(b)(2)(iv) of the Income Tax Regulations, as the same
may be amended from time to time ("Regulations"). The Partnership
shall make all adjustments required by said Section
1.704-1(b)(2)(iv), including, without limitation, the adjustments
contained in Section 1.704-1(b)(2)(iv)(g) of the Regulations
(relating to "Section 704(c) Property", as defined in
Section 2.3B(1) of this Exhibit "B"). In the event that at any time
during the term of the Partnership it shall be determined that the
Book Capital Accounts shall not have been maintained as required by
this Section 1.2, then said accounts shall be retroactively adjusted
so that the same shall conform to this Section 1.2.
A. Initial Book Basis of Partnership Property. The "Book
Basis" (as hereinafter defined) as of the date hereof of each item
of Partnership Property described in Schedule "1" hereof is as set
forth in said Schedule "1" opposite such item. As used herein,
"Book Basis" of an item of Partnership Property means the adjusted
basis of such item as reflected in the books of the Partnership,
determined and maintained in accordance with the capital accounting
rules contained in Section 1.704-1(b)(2)(iv) of the Regulations.
B. Initial Book Capital Accounts. As used herein, the
"Initial Book Capital Account" of each Partner means the Book
Capital Account as of the date hereof but following the making of
the contributions described in Section 3.1A of the Partnership
Agreement. The Initial Book Capital Account of each Partner as of
the date hereof shall be as follows:
Partner Book Capital Account
Limited Partner $16,335,000.00
General Partner $165,000.00
C. Optional Revaluations of Partnership Property. The
Partnership will not make the election to revalue Partnership
Property permitted under Section 1.704-1(b)(2)(iv)(f) of the
Regulations except as determined by the Partners.
D. Determination of Book Items. Consistent with the
provisions of Section 1.704-1(b)(2)(iv)(g)(3) of the Regulations:
(i) "Book Depreciation" (which means the depreciation, depletion or
amortization deduction or allowance that shall be allowable to the
Partnership with respect to an item of Partnership Property,
determined in the manner hereinafter set forth) for each item of
Partnership Property shall be the amount that bears the same
relationship to the "Adjusted Book Basis" (which means, with respect
to an item of Partnership Property, the Book Basis of such item as
the same may be adjusted from time to time by Book Depreciation
allowable with respect to such item of Partnership Property) of such
item of Partnership Property as the Tax Depreciation (as defined in
Section 2.3A) with respect to such item of Partnership Property for
such year bears to the "adjusted basis" (within the meaning of
Section 1011(a) of the Internal Revenue Code of 1986, as amended
[the "Code"]) of such item of Partnership Property; and (ii) "Book
Gain or Loss" shall be the gain or loss recognized by the
Partnership from the sale or other disposition of Partnership
Property (such gain or loss determined by reference to the Adjusted
Book Basis, and not the adjusted tax basis, of such property to the
Partnership). If an item of Partnership Property shall have an
"adjusted basis" (as defined in the preceding sentence) equal to
zero, Book Depreciation shall be determined under a reasonable
method, which method shall be selected by the Partnership.
E. Book Adjustments on Distributions. With respect to all
distributions of Partnership Property to the Partners, the
Partnership shall comply with the provisions contained in
Section 1.704-1(b)(2)(iv)(e) of the Regulations (relating to
adjustments to the Partners' Book Capital Accounts in connection
with such distributions) and all allocations and adjustments made in
connection therewith shall be in accordance with Article II of this
Exhibit "B".
ARTICLE II ALLOCATION OF INCOME, LOSSES AND DEDUCTIONS
FOR BOOK AND TAX PURPOSES
Section 2.1 Profits and Losses. Subject in all events to
Section 2.7 of this Exhibit "B", the "Profits" or "Losses" of the
Partnership (which means the Partnership's taxable income or loss,
respectively, as calculated in accordance with
Section 703(a) of the Code [with, however, (i) all items of income,
gain, loss or deduction required to be stated separately pursuant to
Section 703(a)(1) of the Code being included in such taxable income
or loss, (ii) any income and gain that is exempt from tax, and all
expenditures described in Section 705(a)(2)(B) of the Code (or
treated as expenditures so described pursuant to Section
1.704-1(b)(2)(iv)(i) of the Regulations) being included in such
Profits or Losses, (iii) Book Depreciation (and not Tax Depreciation
[as defined in Section 2.3A of this Exhibit "B"]) and all items of
Nonrecourse Deductions (as defined in Section 2.4C) being included
in calculating such Profits or Losses, and (iv) Book Gain or Loss
(and not Tax Gain or Loss [as defined in Section 2.3B of this
Exhibit "B"]) being included in calculating such Profits or Losses],
but excluding in such calculation the amounts allocated under
Sections 2.2, 2.3, 2.4 and 2.5 immediately below) for each fiscal
year of the Partnership, shall be allocated to the Partners in the
following order and priority:
A. Profits. If there shall be Profits for such fiscal year,
such Profits shall be allocated among the Partners as follows:
(i) first, to General Partner until there shall have been
allocated to General Partner pursuant to this Section 2.1A(i)
Profits equal to the excess, if any, of (X) the cumulative amount of
losses and deductions allocated to General Partner solely on account
of clause (ii) of Section 2.4A(1) hereof through and including such
fiscal year; over (Y) the cumulative amount of Profits allocated to
General Partner pursuant to this Section 2.1A(i) through and
including such fiscal year;
(ii) next, to the Partners (in proportion to the total of the
amounts to be allocated pursuant to this Section 2.1A(ii)) until
there shall have been allocated to each Partner pursuant to this
Section 2.1A(ii) Profits equal to the excess, if any, of (X) the
cumulative amount of losses and deductions allocated to such Partner
solely on account of clause (i) of Section 2.4A(1) hereof through
and including such fiscal year; over (Y) the cumulative amount of
Profits allocated to such Partner pursuant to this Section 2.1A(ii)
through and including such fiscal year;
(iii) next, to the Partners (in proportion to the total of
the amounts to be allocated pursuant to this Section 2.1A(iii))
until there shall have been allocated to each Partner Profits equal
to the excess, if any, of (X) the cumulative amount of Losses
allocated to such Partner pursuant to Section 2.1B(vi) hereof
through and including such fiscal year; over (Y) the cumulative
amount of Profits allocated to such Partner pursuant to this Section
2.1A(iii) through and including such fiscal year; and
(iv) next, to Limited Partner until there shall have been
allocated to Limited Partner Profits equal to the excess, if any, of
(X) the cumulative amount of Losses allocated to Limited Partner
pursuant to Section 2.1B(v) through and including such fiscal year;
over (Y) the cumulative amount of Profits allocated to Limited
Partner pursuant to this Section 2.1A(iv) through and including such
fiscal year;
(v) next, to General Partner until there shall have been
allocated to General Partner Profits equal to the excess, if any, of
(X) the lesser of (i) $165,000 (or, if greater, the aggregate cash
contributions actually made by General Partner to the Partnership
under Section 3.1 [it being understood that a demand note does not
constitute a cash contribution, but amounts paid by General Partner
to the Partnership pursuant to a demand note delivered under Section
3.1B of the Partnership Agreement constitute a cash contribution to
the Partnership under Section 3.1]) or (ii) the cumulative amount of
Losses allocated to General Partner pursuant to Section 2.1B(iv)
through and including such fiscal year; over (Y) the cumulative
amount of Profits allocated to General Partner pursuant to this
Section 2.1A(v) through and including such fiscal year; and
(vi) the remainder of such Profits shall be allocated among
the Partners in proportion to their respective relative Residual
Percentages.
B. Losses. If there shall be Losses for such fiscal year,
such Losses shall be allocated among the Partners as follows:
(i) first, to General Partner until there shall have been
allocated to General Partner pursuant to this Section 2.1B(i) Losses
equal to the excess, if any, of (X) the cumulative amount of income
and gain allocated to General Partner solely on account of clause
(ii) of Section 2.4A(1) hereof through and including such fiscal
year; over (Y) the cumulative amount of Losses allocated to General
Partner pursuant to this Section 2.1B(i) through and including such
fiscal year;
(ii) next, to the Partners (in proportion to the total of the
amounts to be allocated pursuant to this Section 2.1B(ii)) until
there shall have been allocated to the each Partner pursuant to this
Section 2.1B(ii) Losses equal to the excess, if any, of (X) the
cumulative amount of income and gain allocated to such Partner
pursuant to Section 2.5 hereof through and including such fiscal
year; and (Y) the cumulative amount of Losses allocated to such
Partner pursuant to this Section 2.1B(ii) through and including such
fiscal year;
(iii) next, to the Partners (in proportion to the total of the
amounts to be allocated pursuant to this Section 2.1B(iii)) until
there shall have been allocated to the each Partner Losses equal to
the excess, if any, of (X) the cumulative amount of Profits
allocated to such Partner pursuant to Section 2.1A(vi) hereof
through and including such fiscal year; and (Y) the cumulative
amount of Losses allocated to such Partner pursuant to this Section
2.1B(iii) through and including such fiscal year;
(iv) next, to General Partner until there shall have been
allocated to General Partner Losses equal to the excess, if any, of
(X) the cumulative amount of the contributions by General Partner to
the Partnership pursuant to Article III of the Partnership Agreement
(not including any contribution made pursuant to Article III(4) of
this Exhibit "B"); over (Y) the cumulative amount of Losses
allocated to General Partner pursuant to this Section 2.1B(iv), net
of the cumulative amount of Profits (if any) allocated to General
Partner pursuant to Section 2.1A(v), through and including such
fiscal year; and
(v) next, to Limited Partner until there shall have been
allocated to Limited Partner Losses equal to the excess, if any, of
(X) the cumulative amount of the contributions by Limited Partner to
the Partnership pursuant to Article III of the Partnership Agreement
(not including any contribution made pursuant to Article III(4) of
this Exhibit "B"); over (Y) the cumulative amount of Losses
allocated to Limited Partner pursuant to this Section 2.1B(v), net
of the cumulative amount of Profits (if any) allocated to Limited
Partner pursuant to Section 2.1A(iv), through and including such
fiscal year;
(vi) the remainder of such Losses shall be allocated among
the Partners in proportion to their respective relative Residual
Percentages.
Section 2.2 Allocation of Items of Gross Income. Subject in
all events to Section 2.7 of this Exhibit "B", for each fiscal year
of the Partnership, before any allocations of Profits or Losses
shall be made to the Partners pursuant to Section 2.1, there shall
first be allocated to the Partners items of gross income (without
duplication) in the following order and priority:
A. First, to Limited Partner until the cumulative amount of
the items of gross income allocated to Limited Partner pursuant to
this Section 2.2.A for the current and all prior fiscal years is
equal to the cumulative amount of the "Interest Component" (as
hereinafter defined) of the distributions made to Limited Partner
pursuant to Section 4.1.A of the Partnership Agreement for, or in
respect of, the current and all prior fiscal years.
For purposes of this Section 2.2.A, the "Interest Component"
of the distributions made to Limited Partner pursuant to Section
4.1.A of the Partnership Agreement shall mean the portion of each
such distribution that would have been characterized as interest if:
(i) the capital contributions described in Article III had been
treated as loans instead of as capital contributions; (ii) interest
on such loans had accrued at a rate equal to 15% per annum,
compounded quarterly; (iii) all cash previously distributed pursuant
to Section 4.1.A of the Partnership Agreement had been treated as
first applying to accrued interest on such loans; and (iv) the
assumptions set forth in Section B of Exhibit "F" had applied to
such loans.
B. Next, to the Partners until the cumulative amount of the
items of gross income allocated to each Partner pursuant to this
Section 2.2.B for the current and all prior fiscal years is equal to
the cumulative amount of the distributions made to such Partner
pursuant to Section 4.1.C of the Partnership Agreement for, or in
respect of, the current and all prior fiscal years. If, for any
fiscal year, there shall not be sufficient items of gross income to
fully accomplish the allocation required by the foregoing sentence,
such gross income as there is available for allocation under this
Section 2.2.B shall be allocated among the Partners under this
Section 2.2.B in the same proportions as gross income would
have been allocated among them under this Section 2.2.B if there had
been sufficient gross income to fully accomplish the allocation
required by this Section 2.2.B for such fiscal year.
Section 2.3 Tax Allocations.
A. Allocation of Tax Depreciation. Except to the extent
required by Section 704(c) of the Code or the regulations
promulgated thereunder, "Tax Depreciation" for each fiscal year of
the Partnership (which means the depreciation, depletion or
amortization deduction or allowance that shall be allowable for
federal income tax purposes to the Partnership with respect to an
item of Partnership Property) shall be allocated to the Partners in
the same manner that Book Depreciation shall have been allocated to
the Partners pursuant to Section 2.1 of this Exhibit "B".
B. Tax Gain or Loss. The gain or loss for federal income tax
purposes from the sale or other disposition of Partnership Property
("Tax Gain or Loss") for each fiscal year of the Partnership shall
be allocated to the Partners as provided in this Section 2.3. Tax
gain or loss for purposes of this Section shall be calculated (i)
without including any income from interest on any deferred portion
of the sale price and (ii) without including in the tax basis of the
Partnership Property any remaining special basis adjustment to
Partnership Property under Section 732(d) or 743 of the Code except
to the extent that such special basis adjustment is allocated to the
common basis of Partnership Property under Section 1.734-2(b)(1) of
the Regulations. The Partners agree that the tax effects of any
special basis adjustment that is not included in the calculation of
tax gain or loss in accordance with clause (ii) of the preceding
sentence shall be separately reflected in calculating the tax gain
or loss of the Partner or Partners to whom such special basis
adjustment relates.
(1) In General. In the case of "Section 704(c) Property" (as
hereinafter defined), Tax Gain or Loss (as the case may be) shall be
allocated in accordance with the requirements of Section 704(c) of
the Code and the Regulations thereunder and such other provisions of
the Code as govern the treatment of Section 704(c) Property. Any
gain or loss in excess of the amount allocated pursuant to the
preceding sentence (or, in the case of property which is not Section
704(c) Property, all Tax Gain or Loss) shall be allocated among all
the Partners in the same ratio that the book gain or loss with
respect to such property is allocated in accordance with Article II
of this Exhibit "B"; provided, however, in the event that there is
no book gain or loss, then any Tax Gain or Loss in excess of the
amount allocated pursuant to the preceding sentence shall be
allocated among the Partners in accordance with
Section 1.704-1(b)(3) of the Regulations. As used herein,
"Section 704(c) Property" means (1) each item of Partnership
Property which is contributed to the Partnership and to which
Section 704(c) of the Code or Section 1.704-1(b)(2)(iv)(d) of the
Regulations applies, and (2) each item of Partnership Property
which, as contemplated by Section 1.704-1(b)(4)(i) and other
analogous provisions of the Regulations, is governed by the
principles of Section 704(c) of the Code (or principles analogous to
the principles contained in Section 704(c) of the Code) by virtue of
(a) an increase or decrease in the Book Capital Accounts of the
Partners to reflect a revaluation of Partnership Property on the
Partnership's books as provided by Section 1.704-1(b)(2)(iv)(f) of
the Regulations, (b) the fact that it constitutes a receivable,
account payable, or other accrued but unpaid item which, under
principles analogous to those applying to an item of Partnership
Property having an adjusted tax basis that differs from its Book
Basis, is treated as an item of property described in
Section 1.704-1(b)(2)(iv)(g)(2) of the Regulations, (c) the
constructive liquidation and reconstruction of the Partnership under
Section 708(b)(1)(B) of the Code (see, e.g.,
Section 1.704-1(b)(2)(iv)(l) of the Regulations), or (d) any other
provision of the Code or the Regulations (including, without
limitation, Section 1.704-1(b)(4)(i) of the Regulations) as the same
may from time to time be construed, to the extent that, and for so
long as, such item of Partnership Property continues to be governed
by the principles of Section 704(c) of the Code (or principles
analogous to the principles contained in Section 704(c) of the
Code).
(2) Recapture Income. If, in the event of a gain on any
sale, exchange or other disposition of Partnership Property, all or
a portion of such gain is characterized as ordinary income
("Recapture") by virtue of the recapture rules of Section 1250,
Section 1245 or otherwise, then the Recapture shall be allocated
between or among the Partners in the same ratio that Tax
Depreciation allowable with respect to such Partnership Property had
been allocated between or among them; provided, however, that under
no circumstances shall there be allocated to any Partner Recapture
in excess of the gain allocated to such Partner under subsection A
above (and such excess shall be allocated instead between or among
the Partners as to which this proviso does not apply, in proportion
to the gain allocated between or among them).
(3) Other Items Relating to Section 704(c) Property. Any
item of income, gain, loss or deduction relating to an item of
Section 704(c) Property shall be allocated in accordance with the
requirements of Section 704(c) of the Code and the Regulations
thereunder and such other provisions of the Code as govern the
treatment of Section 704(c) Property and the related book item shall
be allocated in a manner consistent with the Regulations promulgated
under Section 704(b) of the Code.
Section 2.4 Exceptions.
A. Limitations.
(1) General Limitations. Notwithstanding anything to the
contrary contained in this Article II: (i) no allocation shall be
made to a Partner which would cause such Partner to have a deficit
balance in its Adjusted Book Capital Account which exceeds the sum
of such Partner's share of Partnership Minimum Gain and such
Partner's share of Partner Nonrecourse Debt Minimum Gain; and (ii)
for each fiscal year of the Partnership, at least 1% of each item of
Partnership income, gain, loss and deduction shall be allocated in
the aggregate to General Partner. Clause (ii) of the preceding
sentence shall take precedence over clause (i) thereof. Furthermore,
if the limitation contained in clause (i) of the first sentence of
this Section 2.4A(1) would apply to cause an item of loss or
deduction to be unavailable for allocation to the Partners, then
such item of loss or deduction shall be allocated to General
Partner.
(2) Partner Nonrecourse Deductions. Notwithstanding anything
to the contrary contained in this Article II hereof, any and all
items of loss and deduction and any and all expenditures described
in Section 705(a)(2)(B) of the Code (or treated as expenditures so
described pursuant to Section 1.704-1(b)(2)(iv)(i) of the
Regulations) (collectively, "Partner Nonrecourse Deductions") that
are (in accordance with the principles set forth in
Section 1.704-2(i)(2) of the Regulations) attributable to Partner
Nonrecourse Debt shall be allocated to the Partner that bears the
Economic Risk of Loss for such Partner Nonrecourse Debt. If more
than one Partner bears such Economic Risk of Loss, such Partner
Nonrecourse Deductions shall be allocated between or among such
Partners in accordance with the ratios in which they share such
Economic Risk of Loss. If more than one Partner bears such Economic
Risk of Loss for different portions of a Partner Nonrecourse Debt,
each such portion shall be treated as a separate Partner Nonrecourse
Debt.
B. Minimum Gain Chargebacks.
(1) Partnership Minimum Gain. Except to the extent provided
in Section 1.704-2(f)(2), (3), (4) and (5) of the Regulations, if
there is, for any fiscal year of the Partnership, a net decrease in
Partnership Minimum Gain, there shall be allocated to each Partner,
before any other allocation pursuant to Article II hereof is made
under Section 704(b) of the Code of Partnership items for such
fiscal year, items of income and gain for such year (and, if
necessary, for subsequent years) equal to such Partner's share of
the net decrease in Partnership Minimum Gain. A Partner's share of
the net decrease in Partnership Minimum Gain is the amount of such
total net decrease multiplied by the Partner's percentage share of
the Partnership's minimum gain at the end of the immediately
preceding taxable year, determined in accordance with
Section 1.704-2(g)(1) of the Regulations. Items of income and gain
to be allocated pursuant to the foregoing provisions of this
Section 2.4B(1) shall consist first of gains recognized from the
disposition of items of Partnership Property subject to one or more
Nonrecourse Liabilities of the Partnership, and then of a pro rata
portion of the other items of Partnership income and gain for that
year.
(2) Partner Nonrecourse Debt Minimum Gain. Except to the
extent provided in Section 1.704-2(i)(4) of the Regulations, if
there is, for any fiscal year of the Partnership, a net decrease in
Partner Nonrecourse Debt Minimum Gain, there shall be allocated to
each Partner that has a share of Partner Nonrecourse Debt Minimum
Gain at the beginning of such fiscal year before any other
allocation pursuant to Article II hereof (other than an allocation
required pursuant to Section 2.4B(1)) is made under Section 704(b)
of the Code of Partnership items for such fiscal year, items of
income and gain for such year (and, if necessary, for subsequent
years) equal to such Partner's share of the net decrease in the
Partner Nonrecourse Debt Minimum Gain. The determination of a
Partner's share of the net decrease in Partner Nonrecourse Debt
Minimum Gain shall be made in a manner consistent with the
principles contained in Section 1.704-2(g)(1) of the Regulations.
The determination of which items of income and gain to be allocated
pursuant to the foregoing provisions of this Section 2.4B(2) shall
be made in a manner that is consistent with the principles contained
in Section 1.704-2(f)(6) of the Regulations.
C. Certain Defined Terms. For purposes of this Exhibit "B":
(i) "Partner Minimum Gain" shall have the meaning set forth in
Section 1.704-2(b)(2) of the Regulations; (ii) "Partner Nonrecourse
Debt" shall have the meaning set forth in Section 1.704(b)-2(b)(4)
of the Regulations; (iii) "Partner Nonrecourse Debt Minimum Gain"
shall have the meaning set forth in Section 1.704-2(i)(2) of the
Regulations; (iv) "Nonrecourse Liability" shall have the meaning set
forth in Section 1.704-2(b)(3) of the Regulations; (v) "Adjusted
Book Capital Account" means the Book Capital Account of a Partner
reduced by any adjustments, allocations or distributions described
in Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) of the Regulations;
(viii) "Economic Risk of Loss" shall have the meaning set forth in
Section 1.752-2(b)-(j) of the Regulations; and (ix) "Nonrecourse
Deductions" shall have the meaning set forth in
Section 1.704-2(b)(1) of the Regulations.
Section 2.5 Qualified Income Offset. Notwithstanding
anything to the contrary in this Exhibit "B", in the event any
Partner unexpectedly receives any adjustments, allocations or
distributions described in Section 1.704-1(b)(2)(ii)(d)(4), (5), or
(6) of the Regulations, there shall be specially allocated to such
Partner such items of Partnership income and gain, at such times and
in such amounts as will eliminate as quickly as possible the deficit
balance (if any) in its Book Capital Account (in excess of the sum
of such Partner's share of Partner Minimum Gain and such Partner's
share of Partner Nonrecourse Debt Minimum Gain) created by such
adjustments, allocations or distributions. To the extent permitted
by the Code and the Regulations, any special allocations of items of
income or gain pursuant to this Section 2.5 shall be taken into
account in computing subsequent allocations of Profits or Losses
pursuant to this Article II, so that the net amount of any items so
allocated and the subsequent Profits or Losses allocated to the
Partners pursuant to this Article II shall, to the extent possible,
be equal to the net amounts that would have been allocated to each
such Partner pursuant to the provisions of this Article II if such
unexpected adjustments, allocations or distributions had not
occurred.
Section 2.6 Partners' Interests in Partnership Profits for
Purposes of Section 752. As permitted by Section 1.752-3(a)(3) of
the Regulations, the Partners hereby specify that solely for
purposes of determining their respective shares of excess
Nonrecourse Liabilities of the Partnership, the Partners' respective
shares of Partnership profits shall be equal to their respective
Residual Percentages.
Section 2.7 Compliance with Section 514(c)(9)(E) of the Code.
Notwithstanding anything to the contrary contained in Section 2.1 or
Section 2.2 of this Exhibit "B":
A. General Limitation. Under no circumstance shall Limited
Partner be allocated in any fiscal year more than 88% of the
"overall partnership income" of the Partnership (within the meaning
of Section 514(c)(9)(E)(i)(I) of the Code and Section
1.514(c) 2(c)(1) of the Regulations) or less than 88% of the
"overall partnership loss" of the Partnership (within the meaning of
Section 514(c)(9)(E)(i)(I) of the Code and Section 1.514 2(c)(1) of
the Regulations). For these purposes, the Partners agree that, in
accordance with the provisions of Section 1.514(c) 2(d) of the
Regulations, the gross income allocation contained in Section 2.2A
of this Exhibit "B" shall be disregarded in determining "overall
partnership income" and "overall partnership loss" as it constitutes
a "reasonable preferred return" on the capital of Limited Partner.
B. Special Chargebacks. If any item of income shall be
allocated to General Partner solely by application of Section 2.7A
of this Exhibit "B", items of deduction or loss of the Partnership
shall be allocated to General Partner as soon as possible in a
manner that is consistent with the provisions of Section
514(c)(9)(E)(ii)(I) of the Code and Section 1.514(c) 2(e) to
chargeback and offset the effects of such prior allocation of income
to General Partner. If any item of deduction or loss shall be
allocated to Limited Partner solely by application of Section 2.7A
of this Exhibit "B", items of income or gain of the Partnership
shall be allocated to Limited Partner as soon as possible in a
manner that is consistent with the provisions of Section
514(c)(9)(E)(ii)(I) of the Code and Section 1.514(c) 2(e) to
chargeback and offset the effects of such prior allocation of
deduction or loss to Limited Partner.
C. Intent. The provisions of the Partnership Agreement and
this Exhibit "B" shall be interpreted consistent with the Partners'
intent that the allocations contained herein are "permitted
allocations" under Section 514(c)(9)(E) of the Code and the
Regulations thereunder. General Partner agrees to make such
amendments or changes to the Partnership Agreement or this Exhibit
"B" as are reasonably requested by Limited Partner to effectuate
this intent; provided, however, that the same shall not have a
material adverse effect upon General Partner.
ARTICLE III TAX AND ACCOUNTING MATTERS
(1) The Partnership will be on the accrual basis for both tax
and accounting purposes.
(2) The Partnership books and records shall be prepared in
accordance with tax accounting principles, consistently applied.
Such books and records shall be audited by such certified public
accountants as selected by the Partners, at least annually and at
such other times as are determined by Partners.
(3) The fiscal year of the Partnership shall end on the 31st
day of December in each year.
(4) General Partner shall comply with the requirements
contained in Section 1446 of the Code and comparable tax laws of any
other State in which the Partnership is engaged in business
(regarding income tax withholding on certain income that is
allocated to Partners who are non-U.S. persons) and any successor or
replacement provision or provisions of law or administrative
guidance (the "Foreign Partner Withholding Law"). General Partner
is hereby authorized and directed by each Partner to withhold from
the distributions or other amounts payable to such Partner under the
Partnership Agreement such amount or amounts ("Required Foreign
Partner Withholding") as General Partner reasonably determines are
required by the Foreign Partner Withholding Law, and to remit the
Required Foreign Partner Withholding to the Internal Revenue Service
and/or such other applicable State taxing agency at such time or
times as may from time to time be required by the relevant taxing
authority. If General Partner determines at any time that the
Required Foreign Partner Withholding with respect to a particular
Partner exceeds the amount of distributions or other amounts payable
to such Partner at such time (a "Cash Shortfall"), the Partner in
question shall immediately make a cash contribution to the
Partnership equal to the amount of such Cash Shortfall, which
General Partner shall use to effectuate the Required Foreign Partner
Withholding. When remitting the Required Foreign Partner
Withholding, General Partner shall inform the relevant taxing
authority of the name and tax identification number of the Partner
for whose account such Required Foreign Partner Withholding is being
made. In complying with the provisions of this paragraph, General
Partner shall be entitled to presume irrebuttably that a Partner is
subject to the Foreign Partner Withholding Law unless: (i) Such
Partner shall have previously provided General Partner with a
completed and signed certificate of non-foreign status, in the Form
attached as Schedule "2", such certificate was furnished to General
Partner not earlier than during the third taxable year of the
Partnership preceding the taxable year under consideration, General
Partner has not been notified by such partner that its status under
such certificate has changed, and General Partner does not have
actual knowledge that the status of such Partner under such
certificate has changed; or (ii) General Partner reasonably
determines, based upon all facts and circumstances (including,
without limitation, the provisions contained in Revenue Procedure
89-31, 1989-1 Cum. Bull. 895, or any successor Revenue Procedure,
guideline or administrative pronouncement), that the Foreign Partner
Withholding Law does not apply in a particular instance.
(5) All federal and state income tax returns of the
Partnership shall be prepared by such certified public accountants
as are selected by the Partners. Tax audits and litigation shall be
conducted under the direction of General Partner. The determination
of whether the Partnership shall make available elections for
federal, state or local income tax purposes shall be made by the
Partners. General Partner is hereby designated as the "tax matters
partner" for the Partnership (as such term is defined in
Section 6231(a)(7) of the Code).
ARTICLE IV LIQUIDATING DISTRIBUTIONS; DEFICIT FUNDING
OBLIGATION
(1) Notwithstanding anything to the contrary contained in
this Exhibit "B" or in the Partnership Agreement, in the event the
Partnership is "liquidated" within the meaning of Section
1.704 1(b)(2)(ii)(g) of the Regulations, liquidating distributions
shall be made, in compliance with Section 1.704 1(b)(2)(ii)(b)(2) of
the Regulations, only to the Partners, if any, who have positive
Book Capital Account balances (or in the ratio of such positive Book
Capital account balances, if more than one Partner shall have a
positive Book Capital Account balance and the amount to be
distributed is less than the sum of the positive Book Capital
Account balances). In the event any Partner's interest in the
Partnership is "liquidated" within the meaning of Section 1.761 1(d)
of the Regulations, liquidating distributions, if any, shall be made
to such Partner in the same amounts and at the same times as would
have been made to such Partner if the Partnership itself were being
"liquidated". For purposes of this Article IV, Book Capital Account
balances shall be determined after applying the provision set forth
in Section 1.2E of this Exhibit "B".
(2) Notwithstanding anything to the contrary contained in
this Exhibit "B" or in the Partnership Agreement, no Partner shall
be at any time obligated to restore all or any portion of a deficit
balance in such Partner's Book Capital Account.
ARTICLE V ORDER OF APPLICATION
For purposes of this Exhibit "B", the following provisions set
forth in the Partnership Agreement and this Exhibit "B" shall be
applied in the following order:
A. Article IV of the Partnership Agreement relating to
distributions, in the case of distributions other than distributions
to which Article IV applies.
B. Section 2.4A(1) of this Exhibit "B" relating to general
limitations.
C. Section 2.4A(2) of this Exhibit "B" relating to Partner
Nonrecourse Deductions.
D. Section 2.4B(1) of this Exhibit "B" relating to
chargebacks of Partnership Minimum Gain.
E. Section 2.4B(2) of this Exhibit "B" relating to
chargebacks of Partner Nonrecourse Debt Minimum Gain.
F. Section 2.5 of this Exhibit "B" relating to qualified
income offset.
G. Section 2.2 of this Exhibit "B" relating to allocations of
items of gross income (adjusted, as appropriate, by Section 2.7).
H. Section 2.1 of this Exhibit "B" relating to allocations of
Profits and Losses (adjusted, as appropriate, by Section 2.7).
I. Article IV of this Exhibit "B", in the case of liquidating
distributions.
These provisions shall be applied as if all contributions,
distributions and allocations with respect to a given fiscal year
were made at the end of the Partnership's fiscal year. Where any
provision depends on the Book Capital Account of any Partner, such
Book Capital Account shall be determined after the application of
all preceding provisions for the year.
ARTICLE VI CLOSING OF PARTNERSHIP BOOKS IN CONNECTION
WITH ADMISSION OF NEW PARTNER OR TRANSFER OF PARTNERS'S INTEREST
Upon the effective date (the "Effective Date") of the
admission of a new partner into the Partnership or of a valid
transfer of all or part of a Partner's interest in the Partnership
pursuant to Article VI of the Partnership Agreement, the books of
the Partnership shall be closed in accordance with Section 706(d) of
the Code, and consistent therewith: (X) items of income, deduction,
gain, loss and/or credit of the Partnership that are recognized
prior to the Effective Date shall be allocated among those persons
or entities who were Partners in the Partnership prior to the
Effective Date; and (Y) items of income, deduction, gain, loss
and/or credit of the Partnership that are recognized after the
Effective Date shall be allocated among the persons or entities who
were Partners after the Effective Date.
SCHEDULE "1" TO Exhibit "B"
Partnership Property Book Basis As of Closing Date
The Hotel Property $16,200,000.00
Cash $300,000.00
SCHEDULE "2" TO Exhibit "B"
[INDIVIDUAL]
CERTIFICATION OF NON-FOREIGN STATUS
Section 1446 of the Internal Revenue Code provides that a
partnership must pay a withholding tax to the Internal Revenue
Service with respect to a partner's allocable share of the
partnership's effectively connected taxable income. To inform RW
Hotel Partners, L.P. (the "Partnership") that the provisions of
Section 1446 do not apply, I _______________________________ hereby
certify the following:
1. I am not a nonresident alien for purposes of U.S. income
taxation.
2. My U.S. taxpayer identification number (social security
number) is _________________.
3. My home address is:
_______________________________________________
_______________________________________________
_______________________________________________
I hereby agree that if I become a nonresident alien, I will notify
the Partnership within sixty (60) days of doing so. I understand
that this certification may be disclosed to the Internal Revenue
Service by the Partnership and that any false statement contained
herein could be punished by fine, imprisonment, or both.
Under penalties of perjury, I declare that I have examined
this certification and to the best of my knowledge and belief it is
true, correct and complete.
Executed as of the ____ day of _________ , 19__, at
______________________.
__________________________________
[ENTITY]
CERTIFICATION OF NON-FOREIGN STATUS
Section 1446 of the Internal Revenue Code provides that a
partnership must pay a withholding tax to the Internal Revenue
Service with respect to a partner's allocable share of the
partnership's effectively connected taxable income. To inform RW
Hotel Partners, L.P. (the "Partnership") that the provisions of
Section 1446 do not apply, the undersigned hereby certifies on
behalf of _____________________________ the following:
1. _____________________________ is not a foreign
corporation, foreign partnership, foreign trust, or foreign estate
(as those terms are defined in the Internal Revenue Code and Income
Tax Regulations);
2. ______________________'s U.S. taxpayer identification
number is ____________________________.
3. _____________________________'s office address is:
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________ hereby agrees to notify the
Partnership within sixty (60) days of the date
_______________________________ becomes a foreign person.
_______________________________ understands that this certification
may be disclosed to the Internal Revenue Service by the Partnership
and that any false statement contained herein could be punished by
fine, imprisonment, or both.
Under penalties of perjury, I declare that I have examined
this certification and to the best of my knowledge and belief it is
true, correct and complete, and I further declare that I have
authority to sign this document on behalf of
_______________________________________.
Executed as of the ___ day of __________, 19__, at
_______________________________.
_____________________________
EXHIBIT "C-1"
FORM OF GENERAL PARTNER DEMAND NOTE
$________________ ____________, 19__
FOR VALUE RECEIVED, the undersigned, RIDGEWOOD HOTELS, INC., a
Georgia corporation ("Maker"), hereby promises to pay to the order
of RW HOTEL PARTNERS, L.P., a Delaware limited partnership
("Lender"), on demand, or in the event no demand has theretofore
been made, on December 31, 2000, (the "Maturity Date"), the amount
of _______________________________ and all accrued but unpaid
interest thereon. The outstanding principal amount hereof shall
bear interest until the Maturity Date at the "Applicable Federal
Rate" (as defined in Section 7872(f)(2)(B) of the Internal Revenue
Code of 1986, as amended). Interest accruing under this Note shall
be compounded semi-annually and shall be computed on the basis of a
365-day year and the actual number of days elapsed in the period
during which it accrues and, if not paid in advance, shall be
payable on demand or at the Maturity Date.
If any payment hereunder shall be due on a legal holiday under
the laws of the State of Delaware or any other day on which
commercial banks in the City of Dover, Delaware, are obligated or
authorized by law to close, such payment shall be made on the next
succeeding business day, and such additional time shall be included
in computing interest in connection with such payment.
All payments hereunder are payable in lawful money of the
United States of America to Lender (at such address or location as
the then holder of this Note may specify from time to time in
writing) in immediately available funds. This Note shall be
governed by and construed and enforced in accordance with the laws
of the State of Delaware. No provision of this Note shall alter or
impair the obligation of Maker, which is absolute and unconditional,
to pay the principal of and interest on this Note in the manner
herein prescribed. Maker and any endorsers of this Note hereby
consent to renewals and extensions of time at or after the maturity
hereof, without notice, and hereby waive diligence, presentment for
payment, demand, notice of dishonor and protest of this Note and
further agree that none of the terms or provisions of this Note may
be waived, altered, modified or amended except as Lender may consent
thereto in a writing duly signed for and on its behalf. If this
Note is not paid when due, Maker promises to pay all costs of
enforcement and collection, including but not limited to, reasonable
attorney's fees and costs, whether or not any action or proceeding
is brought to enforce the provisions hereof.
IN WITNESS WHEREOF, Maker has executed this Note as of the
date first written above and delivered it to Lender.
RIDGEWOOD HOTELS, INC.,
a Georgia corporation
By:_______________________________
Name:_____________________________
Title:____________________________
EXHIBIT "C-2"
FORM OF OPERATOR DEMAND NOTE
$__________________ __________, 19__
FOR VALUE RECEIVED, the undersigned, RIDGEWOOD PROPERTIES,
INC., a Delaware corporation ("Maker"), hereby promises to pay to
the order of RIDGEWOOD HOTELS, INC., a Georgia corporation
("Lender"), on demand, or in the event no demand has theretofore
been made, on December 31, 2000, (the "Maturity Date"), the amount
of _______________________________ and all accrued but unpaid
interest thereon. The outstanding principal amount hereof shall
bear interest until the Maturity Date at the "Applicable Federal
Rate" (as defined in Section 7872(f)(2)(B) of the Internal Revenue
Code of 1986, as amended). Interest accruing under this Note shall
be compounded semi-annually and shall be computed on the basis of a
365-day year and the actual number of days elapsed in the period
during which it accrues and, if not paid in advance, shall be
payable on demand or at the Maturity Date.
If any payment hereunder shall be due on a legal holiday under
the laws of the State of Delaware or any other day on which
commercial banks in the City of Dover, Delaware, are obligated or
authorized by law to close, such payment shall be made on the next
succeeding business day, and such additional time shall be included
in computing interest in connection with such payment.
All payments hereunder are payable in lawful money of the
United States of America to Lender (at such address or location as
the then holder of this Note may specify from time to time in
writing) in immediately available funds. This Note shall be
governed by and construed and enforced in accordance with the laws
of the State of Delaware. No provision of this Note shall alter or
impair the obligation of Maker, which is absolute and unconditional,
to pay the principal of and interest on this Note in the manner
herein prescribed. Maker and any endorsers of this Note hereby
consent to renewals and extensions of time at or after the maturity
hereof, without notice, and hereby waive diligence, presentment for
payment, demand, notice of dishonor and protest of this Note and
further agree that none of the terms or provisions of this Note may
be waived, altered, modified or amended except as Lender may consent
thereto in a writing duly signed for and on its behalf. If this
Note is not paid when due, Maker promises to pay all costs of
enforcement and collection, including but not limited to, reasonable
attorney's fees and costs, whether or not any action or proceeding
is brought to enforce the provisions hereof.
IN WITNESS WHEREOF, Maker has executed this Note as of the
date first written above and delivered it to Lender.
RIDGEWOOD PROPERTIES, INC.,
a Delaware corporation
By:_______________________________
Name: ____________________________
Title:____________________________
EXHIBIT "D"
FORM OF ENDORSEMENT
ENDORSEMENT ATTACHED TO THAT CERTAIN PROMISSORY NOTE,
captioned "NEGOTIATE DEMAND PROMISSORY NOTE", dated ______________,
19____, made by RIDGEWOOD PROPERTIES, INC., a Delaware corporation
("Maker"), to the order of RIDGEWOOD HOTELS, INC., a Georgia
corporation ("Lender"), in the original principal amount of
__________________________ Dollars ($________________).
PAY TO THE ORDER OF
RW HOTEL PARTNERS, L.P.,
a Delaware limited partnership
RIDGEWOOD HOTELS, INC.
a Georgia corporation
By:___________________________
Name:_________________________
Its:___________________________
EXHIBIT "E"
FORM OF PLEDGE AGREEMENT
PLEDGE, ASSIGNMENT AND SECURITY AGREEMENT
THIS PLEDGE, ASSIGNMENT AND SECURITY AGREEMENT (this "Pledge
Agreement") is entered into as of _______________________, 1995, by
and between RIDGEWOOD HOTELS, INC., a Georgia corporation
("Pledgor"), and RW HOTEL PARTNERS, L.P., a Delaware limited
partnership ("Secured Party"), on the following terms and
conditions:
RECITALS:
A. Pledgor, as general partner, and RW Hotel Investment
Partners, L.P., a Delaware limited partnership, as limited partner,
are partners in Secured Party.
B. Secured Party is governed by that certain partnership
agreement captioned "AMENDED AND RESTATED LIMITED PARTNERSHIP
AGREEMENT OF RW HOTEL PARTNERS, L.P." dated as of August 16, 1995
(the "Partnership Agreement"). Unless otherwise defined herein, all
terms used in a capitalized manner herein shall have the meaning set
forth in the Partnership Agreement.
C. The Partnership Agreement requires the execution and
delivery of this Pledge Agreement by Pledgor.
NOW, THEREFORE, in consideration of the Recitals, the mutual
promises contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, Pledgor and Secured Party agree as follows:
1. Certain Defined Terms and Related Matters. As used
herein, the following terms shall have the meanings indicated:
"Collateral" shall have the meaning assigned to such term in
Section 2 hereof.
"Cure Period" shall have the meaning assigned to such term in
the Partnership Agreement.
"Event of Default" shall have the meaning assigned to such
term in Section 8 hereof.
"General Partner Demand Note" means the General Partner Demand
Notes described in Exhibit "A" attached hereto and made a part
hereof, together with any additional General Partner Demand Notes
delivered by Pledgor pursuant to Section 3.1B of the Partnership
Agreement, collectively.
"Loan Documents" means (a) the General Partner Demand Notes;
(b) the UCC-1 financing statements; (c) this Pledge Agreement; and
(d) any and all other documents executed by Pledgor and evidencing,
securing, governing or otherwise pertaining to the Obligations, as
each may be modified, amended, extended, or renewed from time to
time.
"Obligations" shall have the meaning assigned to such term in
Section 3 hereof.
"Operator Demand Notes" means the Operator Demand Notes
described in Exhibit "B" attached hereto and made a part hereof,
together with any additional Operator Demand Notes delivered by
Operator pursuant to Section 3.1B of the Partnership Agreement,
collectively.
"Pledge Agreement" means this Pledge Agreement.
"UCC" means the Uniform Commercial Code as adopted in the
State of Delaware.
Unless otherwise defined herein, the terms in Article 9 of the UCC
are used herein as therein defined.
2. Grant of Security Interest. Pledgor hereby assigns and
pledges to Secured Party, and hereby grants to Secured Party a
security interest in, all of Pledgor's right, title and interest in
and to the Operator Demand Notes, whether now owned or hereafter
acquired by Pledgor, any rights, remedies, or claims with respect
thereto, and any amendments thereof, additions thereto, or
replacements or substitutions therefor, and all proceeds, in cash or
otherwise, of the foregoing (collectively, the "Collateral"):
3. Security for Obligations. This Pledge Agreement secures
the prompt and complete payment and performance of all obligations,
covenants and conditions of Pledgor now or hereafter existing under
the (a) the General Partner Demand Notes; and (b) the Loan
Documents, as each may be modified, amended, extended, or renewed
from time to time (being hereinafter collectively referred to as
the "Obligations").
4. Delivery of Collateral and Other Documents. Immediately
upon the execution hereof, Pledgor shall deliver to Secured Party
the following:
(a) Operator Demand Notes. The original executed Operator
Demand Notes described on Exhibit "B" attached hereto and made a
part hereof, endorsed by Pledgor payable to the order of Secured
Party; and
(b) Additional Documents. As and when any additional General
Partner Demand Note is delivered by Pledgor pursuant to Section 3.1B
of the Partnership Agreement, Pledgor shall deliver a supplement to
Exhibits "A" and "B" to this Pledge Agreement, in the form required
by the Partnership Agreement (adding such General Partner Demand
Note to Exhibit "A" and the related Operator Demand Note to Exhibit
"B"), together with the executed original of such General Partner
Demand Note and the original executed related Operator Demand Note,
endorsed by Pledgor payable to the order of Secured Party.
5. Releases. Upon full payment and satisfaction of any
General Partner Demand Note, Secured Party shall release the related
Operator Demand Note from the security interest and assignment
created hereunder and Secured Party shall deliver to Pledgor, or to
an escrow satisfactory to Secured Party for delivery to Pledgor, the
related Operator Demand Note with endorsement back to Pledgor,
without recourse or warranty.
6. Further Assurances.
6.1 Financing Statements: Further Instruments and Documents.
Pledgor authorizes Secured Party to file Uniform Commercial Code
financing statements (including, without limitation, Form UCC-1,
Form UCC-2 or Form UCC-3, as the case may be) in such offices and
locations as are necessary or advisable in the opinion of Secured
Party to perfect the security interests granted herein. Pledgor
further agrees that from time to time and at the expense of Pledgor,
Pledgor will promptly execute and deliver all further instruments
and documents, end take all further action that may be necessary or
desirable, or that Secured Party reasonably may request, in order to
perfect and protect any security interests renewed and extended or
granted or purported to be granted hereby or to enable Secured Party
to exercise and enforce its rights and remedies hereunder with
respect to any of the Collateral, including, without limitation, the
filing of any financing or continuation statements under the UCC or
the Uniform Commercial Code as in effect in any other jurisdiction
with respect to the security interests created hereby. If any
amount payable under or in connection with any of the Collateral
shall be or shall become evidenced by any instrument, such
instrument shall be delivered to Secured Party, duly endorsed in a
manner satisfactory to Secured Party (but without recourse or
warranty), to be held as Collateral pursuant to this Pledge
Agreement.
6.2 Pledge Agreement as Financing Statement. Pledgor
authorizes Secured Party to file a carbon, photographic, or other
reproduction of this Pledge Agreement as a financing statement or to
file one or more financing or continuation statements, and
amendments thereto, relative to all or any part of the Collateral
without the signature of Pledgor where permitted by law, and the
same shall be sufficient as a financing statement for filing in any
such jurisdiction.
6.3 Amendments of Collateral. Pledgor will deliver to
Secured Party immediately upon the execution and delivery thereof
any amendments, renewals, extensions, replacements and substitutions
to, of or for any of the Collateral (but the foregoing shall not be
construed to authorize Pledgor to agree to any of such amendments,
renewals, extensions, replacements and substitutions), and any other
additional documents, instruments, agreements and other information
relating to the Collateral.
7. Rights of Secured Party.
7.1 Secured Party's Appointment as Attorney-in-Fact.
(a) Pledgor hereby irrevocably constitutes and appoints
Secured Party and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of Pledgor
and in the name of Pledgor or in its own name, from time to time, or
in Secured Party's discretion, for the purpose of carrying out the
terms of this Pledge Agreement, and the other Loan Documents, to
take any and all appropriate action and to execute any and all
documents and instruments which may be necessary or appropriate to
accomplish the purpose of this Pledge Agreement and the other Loan
Documents, and, without limiting the generality of the foregoing,
Pledgor hereby grants Secured Party the power and rights on behalf
of Pledgor, without notice to or assent by Pledgor, to do the
following:
(i) During the existence of any Event of Default, in the name
of Pledgor or in its own name, or otherwise, to take possession of
and indorse and collect any checks, drafts, notes, acceptances, or
other instruments for the payment of monies due under, or with
respect to, any of the Operator Demand Notes or any of the other
Collateral, and to file any claim or to take any other action or
proceeding in any court of law or equity or otherwise deemed
appropriate by Secured Party for the purpose of collecting any and
all such moneys due or with respect to Operator Demand Notes or
other Collateral whenever payable; and
(ii) During the existence of any Event of Default, (A) to
direct any party liable for any payment under any Operator Demand
Note or other Collateral to make payment of any and all monies due
or to become due thereunder directly to Secured Party or as Secured
Party shall direct; (B) to ask or demand for, collect, receive
payment of and receipt for, any and all monies, claims, and other
amounts due or to become due at any time in respect of or arising
out of any Operator Demand Note or other Collateral; (C) to sign and
indorse any drafts against debtors, assignments, verifications,
notices, and other documents in connection with any Operator Demand
Note or other Collateral; (D) to commence and prosecute any suits,
actions, or proceedings at law or in equity in any court of
competent jurisdiction to collect the Operator Demand Notes and
other Collateral or any part thereof and to enforce any other rights
in respect of other Collateral; (E) to defend any suit, action, or
proceeding brought against Pledgor with respect to any of the
Collateral; (F) to settle, compromise, or adjust any suit, action,
or proceeding described in the preceding clause and, in connection
therewith, to give such discharges or releases as Secured Party may
deem appropriate; and (G) generally, to sell, transfer, pledge, and
make any agreement with respect to or otherwise deal with any
Operator Demand Note or other Collateral as fully and completely as
though Secured Party were the absolute owner thereof for all
purposes, and to do, at Secured Party's option and Pledgor's
expense, at any time, or from time to time, all acts and things
which Secured Party deems necessary to protect, preserve, or realize
upon the Promotor Partner Demand Notes and other Collateral and the
security interests of Secured Party therein and to effect the
interest of this Pledge Agreement and the other Loan Documents, all
as fully and effectively as Pledgor might do.
Pledgor hereby ratifies all that said attorney shall lawfully
do or cause to be done by virtue hereof. This power of attorney is
a power coupled with an interest and shall be irrevocable.
(b) Pledgor also authorizes Secured Party, at any time and
from time to time, to execute any endorsements, assignments, or
other instruments of conveyance or transfer with respect to the
Collateral.
7.2 Secured Party May Perform. If Pledgor fails to perform
any agreement contained herein, then Secured Party may itself
perform, or cause performance of, such agreement, and the expenses
of Secured Party incurred in connection therewith shall be payable
by Pledgor upon demand by Secured Party, together with interest
thereon from the date advanced at the rate set forth in the General
Partner Demand Notes.
7.3 No Duty. The powers conferred on Secured Party hereunder
are solely to protect its interest in the Collateral and shall not
impose any duty upon Secured Party to exercise any such powers.
Except for the safe custody of any Operator Demand Notes or other
Collateral in its possession and the accounting for amounts actually
received by it hereunder, Secured Party shall not have any duty as
to any Operator Demand Notes or other Collateral or as to the taking
of any necessary steps to preserve rights against prior parties or
any other rights pertaining to any Operator Demand Notes or other
Collateral.
8. Events of Default. Any of the following shall constitute
an event of default ("Event of Default") hereunder: (a) a
Bankruptcy/Dissolution Event with respect to Pledgor or any partner
thereof; or (b) the failure by Pledgor or any Affiliate thereof to
pay any amount when due under the Partnership Agreement, any
Collateral Agreement or any of the Loan Documents, if the same
remains unpaid within the Cure Period; or (c) any other breach or
default by Pledgor or any Affiliate thereof under the Partnership
Agreement, Basic Agreement, any Collateral Agreement or any of the
Loan Documents, if the same remains uncured within the Cure Period.
9. Remedies. If any Event of Default shall have occurred and
be continuing, Secured Party may take any one or more of the
following actions:
9.1 Realization upon Collateral. Secured Party may exercise,
in addition to all other rights and remedies granted to it in this
Pledge Agreement and in any other of the Loan Documents, all rights
and remedies of a secured party under the UCC. Without limiting the
generality of the foregoing, Secured Party, without demand of
performance or other demand, presentment, protest, advertisement, or
notice of any kind (except any notice required by law referred to
below) to or upon Pledgor or any other person (all and each of which
demands, defenses, advertisements, and notices are hereby waived),
may in such circumstances forthwith collect, receive, appropriate,
and realize upon the Collateral, or any part thereof, and/or
forthwith sell, lease, assign, give an option or options to
purchase, or otherwise dispose of and deliver the Operator Demand
Note, the other Collateral or any part thereof (or contract to do
any of the foregoing), at a private or public sale, at any exchange,
broker's board or office of Pledgor or elsewhere upon such terms and
conditions as it may deem advisable and at such prices as it may
deem satisfactory, for cash or on credit or for future delivery
without assumption of any credit risk, and, without further notice
to Pledgor, shall be authorized to complete and record, or deliver
any endorsement of any Operator Demand Note or assignment of any
other portion of the Collateral. Secured Party shall have the right
upon any such public sale or sales, and, to the extent permitted by
law, upon any such private sale or sales, to purchase the whole or
any part of the Collateral so sold, free of any right or equity of
redemption in Pledgor, which right or equity is hereby waived and
released. Pledgor further agrees, at Secured Party's request, to
assemble any Collateral and make it available to Secured Party at
places which Secured Party shall reasonably select, whether at
Pledgor's premises or elsewhere. Secured Party shall apply the net
proceeds of any such collection, recovery, receipt, appropriation,
realization, or sale, after deducting all costs and expenses of
every kind incurred therein or incidental to the care or safekeeping
of any of the Collateral or in any way relating to the Collateral or
the rights of Secured Party hereunder, including, without
limitation, reasonable attorneys' fees and actual disbursements in
accordance with Section 10 hereof. To the extent permitted by
applicable law, Pledgor waives all claims, damages and demands it
may acquire against Secured Party arising out of the exercise by
Secured Party of any rights hereunder. If any notice of a proposed
sale or other disposition of Collateral shall be required by law,
Pledgor hereby agrees that such notice shall be deemed reasonable
and proper if given at least ten (10) days before such sale or other
disposition.
10. Application of Proceeds. If an Event of Default shall
have occurred and be continuing and Secured Party receives proceeds
with respect to the Collateral, through a foreclosure sale of the
Collateral or otherwise in connection with the enforcement of any
right or remedy hereunder, such proceeds shall be applied as
follows:
10.1 First, to the payment of costs and expenses of any such
sale, including reasonable compensation to Secured Party, its agents
and counsel, and of any judicial proceedings herein the same may be
made, and all costs and expenses incurred by Secured Party in
connection with its duties hereunder and under the other Loan
Documents, including, but not limited to, fees paid by Secured Party
to any agents, attorneys, and servicing companies retained by
Secured Party;
10.2 Second, to the payment of the whole amount then due,
owing, and unpaid upon the General Partner Demand Notes for
principal, together with any and all applicable interest and late
charges;
10.3 Third, to the payment of any other sums required to be
paid by Pledgor pursuant to this Pledge Agreement or any of the
other Loan Documents; and
10.4 Fourth, to the payment of any surplus then remaining
from such proceeds to Pledgor, or to its successors or assigns, or
as a court of competent jurisdiction may direct.
11. Miscellaneous.
11.1 Successors and Assigns. This Pledge Agreement shall be
binding upon and inure to the benefit of Secured Party and Pledgor
and the respective successors and assigns of Secured Party and
Pledgor, provided that no party comprising Pledgor may, without the
prior written consent of Secured Party, assign any rights, duties,
or obligations hereunder.
11.2 Waiver of Marshalling. All rights of marshalling of
assets of Pledgor, including any such right with respect to the
Collateral, are hereby waived by Pledgor.
11.3 Limitation by Law. All rights, remedies, and powers
provided in this Pledge Agreement may be exercised only to the
extent that the exercise thereof does not violate any applicable
provision of law, and all the provisions of this Pledge Agreement
are intended to be (a) subject to all applicable mandatory
provisions of law which may be controlling and (b) limited to the
extent necessary so that they will not render this Pledge Agreement
invalid, unenforceable, in whole or in part, or not entitled to be
recorded, registered, or filed under the provisions of any
applicable law.
11.4 Severability. The invalidity of any one or more
covenants, phrases, clauses, sentences, or paragraphs of this Pledge
Agreement shall not affect the remaining portions of this Pledge
Agreement, or any part thereof, and in case of any such invalidity,
this Pledge Agreement shall be construed as if such invalid
covenants, phrases, clauses, sentences, or paragraphs had not been
inserted.
11.5 Captions. The captions in this Pledge Agreement have
been inserted for convenience only and shall be given no substantive
meaning or significance whatsoever in construing the terms and
provisions of this Pledge Agreement.
11.6 Notices. Any notice which a party is required or may
desire to give the other party shall be in writing and shall be
delivered in the manner provided in Section 9.1 of the partnership
agreement of Secured Party.
11.7 No Waiver; Cumulative Remedies. No failure on the part
of Secured Party to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies
herein provided are cumulative and not exclusive of any remedies
provided by law.
11.8 Execution in Counterparts. This Pledge Agreement may be
executed in any number of counterparts, each of which when so
executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
11.9 Governing Law. THIS PLEDGE AGREEMENT IS INTENDED TO BE
PERFORMED IN THE STATE OF DELAWARE, AND THE LAWS OF SUCH STATE AND
OF THE UNITED STATES OF AMERICA SHALL GOVERN THE RIGHTS AND DUTIES
OF THE PARTIES HERETO AND THE VALIDITY, CONSTRUCTION, ENFORCEMENT,
AND INTERPRETATION OF THIS PLEDGE AGREEMENT.
11.10 Amendments, Etc. No amendment, modification or waiver
of any provision of this Pledge Agreement, nor consent to any
departure by Pledgor herefrom, shall be effective unless the same
shall be$in writing and signed by Secured Party, in which event such
waiver or consent shall be effective only in the specific instance
and for the specific purpose given.
IN WITNESS WHEREOF, this Agreement has been duly executed as
of the date first written above.
PLEDGOR:
RIDGEWOOD HOTELS, INC.,
a Georgia corporation
By:________________________
Name: ________________________
Title: _________________________
EXHIBIT "F"
CERTAIN IRR DEFICIENCY CALCULATIONS
This Exhibit describes the internal rate of return calculation
contemplated by Section 4.1 of the partnership agreement (this
"Partnership Agreement") to which this Exhibit is attached and of
which this Exhibit forms a part. Except as otherwise indicated in
this Exhibit, each capitalized term used herein shall have the
meaning given to the same elsewhere in the Partnership Agreement.
A. CERTAIN DEFINITIONS.
"End of Year N" means the date that is N years after Time O.
"Contributions" of a Partner means all contributions made
under Article III by such Partner to the Partnership on or
after Time O.
"Distributions" to a Partner means all distributions made to
such Partner under Article IV on or after Time O.
"IRR Rate" means the "15% IRR Rate" or the "25% IRR Rate", as
applicable.
"N" is an integer greater than zero.
"Time O" means June 7, 1995.
"Year N" means the Nth "Calculation Year" (as defined below)
after Time O.
"15% IRR Rate" means 15% per annum.
"25% IRR Rate" means 25% per annum.
B. ASSUMPTIONS. For the purpose of performing the future
value calculations described in this Exhibit:
(1) Periods. All calculations shall be based on consecutive
12-month periods (individually, a "Calculation Year"), the first of
which shall commence at Time O.
(2) Distributions. All Distributions will be considered to
have been made at the end of the Calculation Year in which they were
actually made. However, the amount of each Distribution of Net Sale
Proceeds or Net Financing Proceeds in a particular Calculation Year
will be increased to its future value as of the end of such
Calculation Year (from the date actually made) using the applicable
IRR Rate.
Example: [PLEASE SEE ATTACHED]
(3) Contributions: All amounts advanced by Limited Partner
or its partners shall be deemed to be Contributions as of the date
advanced, including the $100,000 deposit made on June 7, 1995,
whether or not reimbursed (it being understood that any such
reimbursement shall constitute a Distribution). All Contributions
after Time 0 will be considered to have been made at the end of the
year in which they were actually made; however, the amount of each
Contribution will be increased to its future value as of the end of
such Calculation Year (from the date actually made) using the
applicable IRR Rate.
Example: [PLEASE SEE ATTACHED]
C. CALCULATION. With respect to any particular IRR Rate, the
amount (the "IRR Deficiency") as of any particular date that Limited
Partner must receive in order to receive its internal rate of return
(using such IRR Rate) equals the amount by which (1) the future
value as of such date (but, as to any particular Contribution, not
less than one year after such Contribution is made) at such IRR
Rate, compounded quarterly, of all Contributions of Limited Partner,
exceeds (2) the future value (as of such date) at such IRR Rate,
compounded quarterly, of all Distributions to such Partner made on
or before such date. Accordingly, the "15% IRR Deficiency" is the
IRR Deficiency using the 15% IRR Rate and the "25% IRR Deficiency"
is the IRR Deficiency using the 25% IRR Rate.
Example: [PLEASE SEE ATTACHED]
EXHIBIT "G"
APPRAISAL PROCEDURE
The following provisions set forth the procedure for
determining fair market value referred to in the partnership
agreement (this "Agreement") to which this Exhibit is attached and
of which this Exhibit is a part. Except as otherwise indicated,
each capitalized term used herein shall have the meaning set forth
for the same elsewhere in this Agreement.
A. Definition. "Fair Market Value" means the price (as
determined pursuant to this Exhibit) at which the property (the
"Subject Property") to be appraised would be sold for cash by a
willing seller, not compelled to sell, to a willing buyer, not
compelled to buy, on a free and clear basis, unencumbered by any
financing (including, without limitation, any deeds of trust,
mortgages, ground leases [in connection with sale/leaseback
financing] or other security instruments securing any financing).
However, the determination of the Fair Market Value of the Subject
Property shall take into account (and be reduced by) the total
closing costs (including attorneys' fees, title insurance costs,
brokers' fees and recordation costs) that would customarily be paid
by the seller of properties of like kind and stature.
B. Agreement Procedure. First, the Partners shall attempt to
determine the Fair Market Value of the Subject Property by agreement
in accordance with this subsection B.
(1) Proposal. On (or within 15 days before or after) the
date (the "Determination Date") as of which the determination of
Fair Market Value is to be made, Electing Partner may give
Dissolution Partner written notice of its proposed Fair Market Value
of the Subject Property. If Dissolution Partner disagrees with such
proposed Fair Market Value, Dissolution Partner shall notify
Electing Partner in writing, within 10 business days after Electing
Partner's proposal is delivered, of its disagreement and its
counterproposal (and failure to do so within such 10-business day
period shall be deemed to constitute Dissolution Partner's agreement
with Electing Partner's proposal). Such 10-business day period is
herein called the "Proposal Period".
(2) Supplemental Discussion. If the parties fail to reach
actual (or deemed) agreement during the Proposal Period (or if the
proposal described above is not given), then the parties shall use
good faith efforts to reach agreement on the Fair Market Value of
the Subject Property on or before the "Outside Negotiation Date"
(which, as used herein, means the date that is 20 business days
after the Determination Date or, if later, 10 business days after
the Proposal Period, if any).
C. Appraisal Procedure. If agreement is not reached (or
deemed reached) on or before the Outside Negotiation Date, then the
Fair Market Value of the Subject Property shall be determined by an
appraisal made by a single appraiser or by a board of three
appraisers as hereinafter provided in this subsection C.
(1) Appointment of Appraisers.
(a) Appraiser Qualifications. Each appraiser selected under
this Exhibit must (i) be a reputable real estate appraiser, (ii) be
a member of the American Institute of Real Estate Appraisers or a
successor body hereinafter constituted exercising a similar
function, (iii) have experience in appraising property similar to
the Subject Property (in terms of location, size, improvements and
quality) and (iv) have no direct or indirect financial or other
business interests in any party to this Agreement or the Hotel
Property.
(b) Selection Process. During the 15-day period immediately
following the Outside Negotiation Date, the parties will endeavor to
jointly select, approve and appoint an appraiser to appraise the
Subject Property for the purposes of this Exhibit. If the parties
have not jointly appointed an appraiser by the date which is 15 days
after the Outside Negotiation Date, the appraisal of the Subject
Property for the purposes of this Exhibit will be conducted by a
board of three appraisers, one appointed by Electing Partner, one
appointed by Dissolution Partner and the third appointed by the
first two appraisers. In such event, the first two appraisers shall
be appointed by the parties by a date which is not later than 30
days after the Outside Negotiation Date, and the third appraiser
shall be appointed by the first two appraisers within 15 days after
the appointment of the first two appraisers. If the first two
appraisers are unable to agree on a third appraiser, such third
appraiser shall be appointed by the senior federal district court
judge, or such other federal district court judge as he may
designate, for the district in which the Subject Property is
located, acting in his non-judicial capacity. If such federal
district court judge refuses to act within 15 days after such
request, such third appraiser shall be appointed pursuant to the
rules of the American Arbitration Association.
(c) Costs. The costs and expenses of each of the first two
appraisers shall be paid by the party appointing such appraiser, and
the costs and expenses of the third appraiser (or the single
appraiser, if one appraiser, instead of three appraisers, is used)
shall be shared equally by the parties.
(2) Determination by Appraisers.
(a) Appraisal by One Appraiser. If the appraisal is to be
conducted by a single appraiser appointed jointly by the parties,
the appraiser appointed shall proceed to appraise the Subject
Property and notify the parties by written notice of the amount of
the Fair Market Value of the Subject Property, which notice shall be
accompanied by a copy of his appraisal report, not later than the
earlier to occur of the date which is 30 days after the appointment
of such appraiser and the date which is 45 days after the Outside
Negotiation Date, and such appraiser's determination of the Fair
Market Value of the Subject Property shall be deemed to be the Fair
Market Value of the Subject Property.
(b) Appraisal by Three Appraisers. If the appraisal is to be
conducted by a board of three appraisers, the appraisers shall
proceed to appraise the Subject Property and notify the parties by
written notice of the amount of their determinations of the Fair
Market Value of the Subject Property, which notices shall be
accompanied by copies of their appraisal reports and be given not
later than 30 days after the appointment of the third appraiser. If
the determinations of the Fair Market Value of the Subject Property
of any two or all three of the appraisers shall be identical in
amount, such amount shall be deemed to be the Fair Market Value of
the Subject Property, but if such determinations of all three
appraisers shall be different in amount, then the Fair Market Value
of the Subject Property shall be determined as follows:
(i) If neither the highest nor the lowest appraised value
differs from the middle appraised value by more than 10% of the
middle appraised value or if highest and lowest appraised values
each differ from the middle appraised value by the same amount, then
the Fair Market Value of the Subject Property shall be deemed to be
the average of the three appraised values; and
(ii) Otherwise, the Fair Market Value of the Subject Property
shall be deemed to be the average of the middle appraised value and
the appraised value closer in amount to the middle appraised value.
D. Conclusive Determination. The Fair Market Value of the
Subject Property determined in accordance with the provisions of
this Exhibit shall be binding and conclusive on the parties.
MANAGEMENT AGREEMENT
(Holiday Inn Hurstbourne, Louisville, Kentucky)
This AGREEMENT dated as of this 16th day of August, 1995 by and
between RW HOTEL PARTNERS, L.P., a Delaware limited partnership,
(hereinafter called "Owner") and RIDGEWOOD PROPERTIES, INC.,
a Delaware corporation (hereinafter called "Manager").
WHEREAS, Owner is the owner of that certain property described
in Exhibit"A" attached hereto and by this reference made a part
hereof (the"Property"), and Owner desires to engage Manager to
manage and operate the same.
NOW, THEREFORE, in consideration of Ten ($10.00) Dollars and
other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties agree as follows:
ARTICLE 1. THE APPOINTMENT
1.1 MANAGEMENT. Owner hereby appoints Manager and Manager
hereby accepts such appointment, to manage the Property in
accordance with the terms of this Agreement for the term set forth
in Article 2. Manager shall fully and faithfully discharge its
obligations and responsibilities hereunder, and shall devote
sufficient time and attention to ensure the full and prompt
discharge of its duties under this Agreement. Manager shall at all
times use diligent and professional efforts to promote and protect
the best interests of Owner and the Property.
1.2 RENTAL. Owner hereby appoints Manager, and Manager hereby
accepts the appointment, as the sole and exclusive rental agent of
the Property to rent rooms and other facilities on a daily basis in
order to further the hotel business being conducted on the Property.
ARTICLE 2. TERM
2.1 TERM. The Manager's duties and responsibilities under
this Agreement shall commence on the date hereof and shall expire on
the earlier of December 31, 2005 or the expiration of the term of
the "License Agreement" (as defined below). This Agreement shall be
subject to early termination by Owner pursuant to Section 2.2 below.
2.2 TERMINATION BY OWNER. Owner may terminate this Agreement
by written notice to Manager at any time after any of the following
events:
(a) DEFAULT. Default by Manager under this Agreement or the
default by Manager or any "Affiliate" (as defined below) of Manager
under any Ancillary Agreement, provided such default is not cured
within the "Cure Period" (as defined below), if any.
(b) BANKRUPTCY/DISSOLUTION. A "Bankruptcy/Dissolution Event"
(as defined below) occurs with respect to Manager or an Affiliate of
Manager.
(c) REMOVAL OF RHI AS GENERAL PARTNER IN OWNER. The removal
of Ridgewood Hotels, Inc., a Georgia corporation ("RHI"), which is a
wholly owned subsidiary of Manager, as general partner of Owner
under the partnership agreement of Owner.
(d) CERTAIN EVENTS WITH RESPECT TO KEY INDIVIDUAL. N. Russell
Walden (1) is dead, insane, incapacitated or the subject of a
Bankruptcy/Dissolution Event; or (2) ceases to be actively involved
in the management and affairs of Manager or the Property.
(e) FAILURE OF REQUIRED OWNERSHIP. N. Russell Walden and
Karen Hughes cease to own at least 43.5% of the ownership interests
in Manager and RHI, directly or indirectly.
(f) SALE. All or a substantial part of the land and
improvements included in the Property shall have been disposed of or
sold by Owner.
(g) CASUALTY OR CONDEMNATION. Owner permanently discontinues
the operation of the Property on account of damage to or destruction
of, or a taking by (or sale under threat of) eminent domain of, all
or a substantial part of the Property.
The termination of this Agreement in connection with a default
shall be in addition to any other right or remedy available to Owner
at law or equity in connection therewith.
ARTICLE 3. MANAGER'S RESPONSIBILITIES
3.1 MANAGEMENT. Manager shall manage, operate and maintain
the Property in an efficient and satisfactory manner in accordance
with all "Requirements" (as defined below). Manager accepts the
relationship of trust and confidence established between it and
Owner by this Agreement and covenants with Owner to furnish its best
skill and prudent business judgment in furthering the interests of
Owner, and Manager shall act in a fiduciary capacity with respect to
the proper protection of and accounting for Owner's assets. Manager
shall not do business with any "Affiliate" (as defined below) of
Manager without Owner's prior written consent. Manager's duties
shall include those set forth below in this Article III.
3.2 EMPLOYEES. Manager shall be responsible for employing a
sufficient number of capable employees to enable it to properly,
adequately, safely and economically manage, operate, maintain, and
account for the Property. All matters pertaining to the employment,
supervision, training (including attendance at meetings and
seminars, if set forth in the "Approved Operating Budget" [as
defined below]), compensation, promotion and discharge of such
employees are the responsibility of Manager (with respect to which
Manager shall exercise reasonable care); and Manager is in all
respects the employer of such employees, subject to the last
sentence of this Section 3.2. Manager shall negotiate with any
union lawfully entitled to represent such employees and may execute
in its own name, and not as agent for Owner, collective bargaining
agreements or labor contracts resulting therefrom. Manager
acknowledges that Owner has acquired the Property on the date hereof
and Manager shall comply with the Worker Adjustment and Retraining
Notification Act and successor or similar laws in all respects.
Manager shall assure compliance with all "Laws" (as defined below)
with respect to worker's compensation, social security, unemployment
insurance, hours of labor, wages, working conditions, and other
employer-employee related subjects. Manager represents that it is
and will continue to be an equal opportunity employer and must
advertise as such. This Agreement is not one of agency by Manager
for Owner, but one with Manager engaged independently in the
business of managing properties on its own behalf as an independent
contractor. All employment arrangements are therefore solely
Manager's responsibility and Owner shall have no liability with
respect thereto. Nothing contained herein, however, shall be deemed
to permit Manager to charge Owner, or to use the income of the
Property to pay, for the services of Manager's employees (except to
the extent provided in the "On-Site Expense Schedule" [as defined
below] included in the Approved Operating Budget). Owner
acknowledges and agrees that, notwithstanding the foregoing, Manager
may delegate to RHI the obligation to hire the on-site employees
listed on the On-Site Expense Schedule, so long as such employees'
sole responsibilities to RHI are as on-site employees of the
Property and such employees are not the employees of Owner. Such
delegation by Manager shall not relieve Manager for its primary
responsibilities to Owner under this Section 3.2, and the
reimbursement for the costs of such employees shall remain subject
to the terms and conditions of this Agreement.
3.3 COMPLIANCE WITH REQUIREMENTS. Manager shall comply with
and shall be responsible for causing the Property and the use,
operation and maintenance thereof to be in full compliance with the
Requirements. Manager shall promptly notify Owner of any violation
of any Requirements which comes to Manager's attention and, at
Owner's expense and with Owner's prior approval, promptly remedy any
such violation. Manager shall not be required to make any payment
required under the Requirements to the extent that the income from
the Property is insufficient for such purpose, Manager promptly
notifies Owner of such deficiency, and Owner fails to provide the
needed funds. Manager shall, as an expense under the Approved
Operating Budget, keep in full force and effect all licenses and
permits necessary or convenient to operate the Property as a hotel
similar to other hotels of comparable size, class and standing,
including licenses and permits required for the rental of rooms,
sale of food and alcoholic beverages, for signage and for all other
business to be conducted as part of the hotel. Manager shall also
obtain all new and renewal licenses and permits necessary to
accomplish the foregoing. Actions in remedying violations of the
Requirements may be implemented prior to obtaining Owner's approval
if the estimated expenses to be incurred are contemplated and are
within the Approved Operating Budget or "Approved Capital Budget"
(as defined below), or are otherwise permitted as "Permitted Budget
Deviations" under Section 3.4(d). When more than such amount is
required, or if the violation is one for which the Owner might be
subject to penalty, Manager shall notify Owner within five (5)
business days so that prompt arrangements may be made to remedy the
violation.
3.4 BUDGETS.
(a) PREPARATION OF BUDGETS. At least thirty (30) days prior
to the first day of each whole or partial calendar year during the
Term, Manager shall prepare and submit to Owner for its approval the
following: (1) a proposed operating budget ("Operating Budget")
which shall set forth, among other matters, anticipated income,
expenditures (including promotion, operation, repair, management and
maintenance and reserves) for the Property for such year; and (2) a
proposed capital budget ("Capital Budget") which shall set forth,
among other matters, anticipated and proposed capital expenditures
for such year and the source of funds in respect thereto (including
the amount and timing of expenditures to be made from the FF&E
Reserve and the projected time and amount for any required advances
by Owner for expenditures not contemplated by the FF&E Reserve).
The Operating Budget and Capital Budget shall be in the form of the
partial year 1995 budget attached hereto as Exhibit "B". The
Operating Budget shall include a separate schedule of anticipated
expenses to be reimbursable to Manager as contemplated by Section
5.4, including the costs of on-site employees ("On-Site Expense
Schedule"), and a price schedule for room sales, licensing,
concessions and other services provided by the hotel business being
conducted on the Property. Manager shall include in the proposed
Operating Budget and Capital Budget all expenditures for
maintenance, repairs and capital improvements required by the
License Agreement (except that the Capital Budget shall not include
the cost of the improvements contemplated under the Construction
Management Agreement). Owner will consider the proposed Operating
Budget and Capital Budget and will consult with Manager prior to the
commencement of the forthcoming calendar year, and the Operating
Budget and Capital Budget for any calendar year which is approved by
Owner in writing shall be referred to herein as the "Approved
Operating Budget" and an "Approved Capital Budget".
(b) MONTHLY UPDATES. Concurrently with its submission of the
"Monthly Report" (as defined below), Manager shall provide Owner
with a monthly variance report to reflect any changes indicated by
the actual results of operations, and comparing actual costs and
expenses and revenues with budgeted costs and expenses and revenues
on a line-item basis and on a category basis along with an
explanation of all material or significant variances and all changes
in any time schedules relating thereto. However, nothing in this
subsection (b) shall be construed as releasing Manager from its
obligation to manage the Property in strict accordance with the
Approved Operating Budget and Approved Capital Budget.
(c) OBLIGATION AND AUTHORITY TO IMPLEMENT APPROVED BUDGETS.
Manager shall implement the Approved Operating Budget and Approved
Capital Budget and shall be authorized, without the need for further
approval by Owner, to make the specified expenditures and incur the
specified obligations provided for in the Approved Operating Budget
and Approved Capital Budget, but only if Manager acts in strict
conformance with (i) the Approved Operating Budget and Approved
Capital Budget in all respects [with respect to, among other
matters, the nature, amount and timing of each such expenditure or
obligation] except as provided in subsection (d) below, and (ii) the
other provisions of this Agreement. All expenses must be charged to
the proper account in accordance with the Uniform System of Accounts
for Hotels, as approved and adopted by the American Hotel & Motel
Association (the "Uniform Accounting System").
(d) PERMITTED DEVIATIONS FROM APPROVED OPERATING BUDGET.
Notwithstanding subsection (c), Owner's consent to an expenditure
relating to the Property payable to a third party exceeding the
amount specified for such expenditure in the Approved Operating
Budget shall not be required in any of the following circumstances
("Permitted Budget Deviations"): (1) Manager, in its reasonable
judgment, deems to constitute an emergency requiring immediate
action for the protection of the Property or persons; (2) such
expenditure is contemplated by the Approved Operating Budget, is not
reimbursable under Section 5.2, and when combined with the amount of
all expenditures made or reasonably expected to be made in
connection with the Property for such calendar year (other than the
expenditures under the Construction Management Agreement,
expenditures under the Approved Capital Budget, or expenditures
described in clause (3) below), would not cause the total amount of
expenditures for the Property for such calendar year (other than the
expenditures under the Construction Management Agreement,
expenditures under the Approved Capital Budget, or expenditures
described in clause (3) below), to exceed one hundred five percent
(105%) of the total amount of expenditures for such calendar year
set forth in such Approved Operating Budget (other than the
expenditures under the Construction Management Agreement,
expenditures under the Approved Capital Budget, or expenditures
described in clause (3) below); (3) expenditures for real property
taxes and assessments, utilities and insurance for the Property; and
(4) expenditures permitted to be made without Owner's consent as
contemplated by Section 5.3. Manager shall immediately notify Owner
orally of each expenditure made pursuant to this subsection (d) and
shall promptly supply Owner with written notice of the same together
with such information with respect thereto as Owner may reasonably
request.
3.5 REPORTS; BOOKS AND RECORDS.
(a) MONTHLY REPORT. Within fifteen (15) days after the end of
each full or partial calendar month during the term of this
Agreement, Manager shall prepare and submit to Owner a monthly
operating statement and report of financial condition ("Monthly
Report") in a manner and form acceptable to Owner summarizing the
operations of the Property for the previous month, certified by
Manager to be true, accurate and complete in all material respects.
Owner will review each Monthly Report with Manager at a mutually
convenient time. The Monthly Report shall include the information
set forth in Exhibit "C".
(b) ANNUAL REPORT. Within sixty (60) days after the end of
each full or partial calendar year during the term of this
Agreement, Manager shall prepare and submit to Owner an annual
report of all income and all expenses of the Property, which shall
be certified by Manager to be true, accurate and complete in all
material respects, and prepared in accordance with the Uniform
Accounting System; together with such additional information as may
be necessary for the preparation of Owner's annual federal and state
income tax returns. Within ninety (90) days after the end of each
full or partial calendar year during the term of this Agreement,
Manager shall cause the report delivered pursuant to the immediately
preceding sentence to be audited by an independent accounting firm
reasonably satisfactory to Owner and delivered to Owner.
(c) BOOKS AND RECORDS. Manager shall also keep accurate books
and records of the Property in accordance with the Uniform
Accounting System consistently applied. Owner shall have the right
from time to time to inspect and audit the books and records of the
Property in the Manager's office at the Property or at the Manager's
main office. All books and records of accounts are and shall remain
the property of Owner and shall be delivered to Owner upon
termination of this Agreement or within five (5) business days after
any written demand by Owner. Provided Owner has given prior notice
to Manager of such reporting requirements, Manager shall prepare all
reports and financial statements required by any financing
encumbering the Property, and deliver the same to Owner within a
time period such that Owner will be able to satisfy its reporting
obligations under the loan documents relating to such financing.
3.6 COLLECTION OF RENTS AND OTHER INCOME. Manager shall use
diligent efforts to collect all room rents, food and beverage
charges and other charges due from guests, tenants, and
concessionaires and other charges which may become due at any time
from any tenant or from others for services provided in connection
with or for the use of the Property or any portion thereof. Manager
shall collect and identify any income due the Owner from
miscellaneous services provided to tenants or the public including,
but not limited to, parking income, tenant storage, and coin
operated machines of all types (e.g., vending machines, pay
telephones, etc.). All monies will be deposited immediately in a
separate checking account in the Manager's name maintained by the
Manager in trust for Owner at a bank approved by the Owner (the
"Owner's Account"). No funds of the Manager shall be deposited in
the Owner's Account, and the funds in Owner's Account shall not be
commingled with Manager's funds. Either Manager (provided Owner is
not then entitled to terminate this Agreement pursuant to Article
III) or Owner shall be entitled to draw upon such Owner's Account,
but all such money shall be deemed to be the property of Owner.
Manager may withdraw from such Owner's Account (subject to the
limitations set forth in this Agreement) disbursements required to
be made under this Agreement.
3.7 SERVICE CONTRACTS. Manager shall enter into service
contracts for cleaning, maintaining, repairing or servicing the
Property and any of the constituent parts of the Property consistent
with the Approved Operating Budget. All service contracts shall:
(a) be in the name of the Manager, (b) be assignable, at Owner's
option, to Owner's nominee, (c) not be for a term of more than one
year and include a provision for cancellation thereof by Owner upon
not more than thirty (30) days' written notice without charge, and
upon three (3) days' notice for cause without charge, (d) shall
require that all contractors provide evidence of sufficient
insurance and (e) shall be within the guidelines set forth in the
Approved Operating Budget. The entry into any service or other
agreement which provides for an aggregate amount to be spent by
Owner under such agreement in excess of $100,000 (and a series of
related agreements for amounts less than $100,000 shall be construed
as a single agreement for purposes of this subsection), or any
termination or material modification thereto, shall require the
prior written consent of Owner. A copy of each service contract
shall be delivered to Owner immediately after it is executed by
Manager.
3.8 REPAIRS. In accordance with Section 3.13 below, Manager
shall administer and coordinate all ordinary and extraordinary
repairs, decorations, alterations, capital improvements, remodeling
and tenant improvements, all subject to the terms of this Agreement;
provided that the management of the construction of the improvements
required by the current PIP inspection shall be conducted pursuant
to the Construction Management Agreement.
3.9 MORTGAGES; TAXES; UTILITIES, BUSINESS AGREEMENTS. Manager
shall obtain and pay bills for (a) all mortgages, deeds of trust,
and other liens approved by Owner; (b) all real estate and personal
property taxes, improvement assessments and other like charges which
are or may become liens against the Property; (c) all charges for or
related to water, electricity, telephone service or other
commodities or services furnished the Property or any part thereof
during the Term; and (d) all amounts otherwise required to be paid
under any Business Agreement to which the Property is or may be
subject during the Term. Owner shall forward to Manager all copies
of any tax assessments it may receive. Manager shall obtain, verify
and pay such bills in time to permit Owner to avoid penalty for late
payment and to permit Owner to take advantage of discounts. Manager
will recommend and pursue tax abatements for the Property with
approval of Owner.
3.10 OCCUPANCY; ADVERTISING. Manager shall use its best
efforts to rent and keep the rooms and facilities at the Property
rented on a daily basis by procuring occupants, guests and tenants
on the best terms available for Owner. Manager acknowledges that it
has a fiduciary duty to Owner not to divert (and Manager shall not
divert) any potential occupants, guests and tenants of the Property
to any other hotel or motel. Manager shall prepare advertising
plans and promotional material for the benefit of the Property.
Such plans and materials shall be used only if approved in advance
in writing by Owner and in conformance with such approval. Manager
shall not use Owner's name in any advertising or promotional
material without Owner's prior written consent in each instance.
Advertising and promotional materials shall be prepared in full
compliance with the Requirements.
3.11 COOPERATION. Manager shall have the right to institute
legal proceedings with regard to the Property or the operation of
the Property in its own name, but only if the prior written consent
of Owner is first obtained. Manager shall keep Owner regularly
informed with respect to any such legal proceedings and shall take
such action in connection therewith (or refrain from taking such
action) that may be requested by Owner from time to time. Should
any claims, demands, suits or other legal proceedings be made or
instituted by any person against Owner, Manager shall give Owner all
pertinent information and reasonable assistance in the defense or
other disposition thereof.
3.12 COMPLIANCE WITH LICENSE AGREEMENT. Manager shall be
responsible to keep in full force and effect and comply with all
obligations under the License Agreement between Manager and Holiday
Inns Franchising, Inc. ("Licensor") to operate the Property as a
"Holiday Inn" (the "License Agreement"), which has been approved by
Owner and a copy of which is attached as Exhibit "D". If there is
any conflict between the terms of this Agreement and the terms of
the License Agreement pertaining to the Property, the terms of the
License Agreement shall govern and control; provided, however, that
the foregoing shall not reduce Manager's obligations or Owner's
rights hereunder (and, without limitation, shall not limit Owner's
rights to terminate this Agreement in accordance with the terms
hereof). Manager shall operate the Property as required by the
License Agreement and the regulations of Licensor to the extent
permitted hereunder and shall send to Owner all notices, reports and
other information received by the Manager under the License
Agreement, promptly upon receipt of the same. The parties
acknowledge that the License Agreement is not assignable. Without
limitation on the foregoing, Manager shall not modify, amend, renew
or extend the License Agreement, or make any transfer, sale,
hypothecation, or assignment of its rights and obligations
thereunder, without the prior written consent of Owner. Manager
shall deliver to Owner all reports, notices and other information
delivered to the Licensor under the License Agreement, concurrently
with their delivery to Licensor. Although the License Agreement is
an obligation of Manager, in consideration of the benefits to the
Property by reason of the existence of the License Agreement, Owner
consents to Manager's use of the income from the Property in
connection with expenditures required for the performance by Manager
of its obligations thereunder (including its obligation to pay
certain license fees to Licensor), but only to the extent set forth
in an Approved Operating Budget or Approved Capital Budget, or as
otherwise permitted to be spent by Manager pursuant to Section
3.4(d).
3.13 RESERVE FOR FF&E REPLACEMENT.
(a) Owner shall maintain during the term a reserve (the "FF&E
Reserve") from which Manager shall draw funds for replacements and
renewals to the Hotel's FF&E in accordance with the Capital Budget.
The funds in the FF&E Reserve shall be maintained by Owner in
Owner's general accounts in addition to working capital and any
other amounts therein (and, accordingly, may be commingled), but
Owner shall maintain on its books a separate accounting of such
funds. As used in this Agreement, the term "FF&E" shall mean the
furniture, fixtures and equipment typically used in the operation of
a hotel, and shall include, without limitation, guest room,
corridor, restaurant and lounge furnishings, office furniture and
equipment, carpeting, computers and other on-site electronic data
processing equipment, telephones, televisions, radios, signs and
vehicles.
(b) Amounts shall be accrued on, and Funds shall be
transferred into, the FF&E Reserve during each calendar year at the
rate of four percent (4%) of the gross revenues from the Property,
to the extent of available cash flow from the Property.
(c) Interest, if any, accruing on any funds on deposit in the
FF&E Reserve will be not be credited to the FF&E Reserve. If, at
any time, the accumulated funds in the FF&E Reserve exceed 8% of the
gross revenue from the prior calendar year, further accruals and
contributions will be temporarily suspended until they can be made
without causing the accumulated funds in the FF&E Reserve (less all
amounts then or thereafter payable under existing contracts or other
known or reasonably anticipated FF&E expenditures within the
following six months) to exceed 8% of the greater of (x) the gross
revenue from the prior calendar year or (y) the gross revenue
projected in the Approved Operating Budget for the then current
calendar year.
(d) Any proceeds from sale(s) of FF&E shall be transferred to
the FF&E Reserve, and the amount that would otherwise be transferred
to the FF&E Reserve shall be reduced by such proceeds. At the end
of each calendar year, any amounts remaining in the FF&E Reserve
shall be carried forward to the next calendar year.
(e) Subject to the Approved Capital Budget and Approved
Operating Budget in effect from time to time, and to the extent
sufficient working capital is made available, Manager will make such
expenditures for repairs and maintenance as it deems necessary to
keep the Hotel in good operating condition, provided that Owner's
prior approval shall be required for any individual expenditure (or
group of related expenditures covered by one contract) in excess of
$50,000.00.
(f) In accordance with the Approved Capital Budget, Manager
shall make such substitutions and replacements or renewals to FF&E
as it deems necessary or desirable, up to the balance in the FF&E
Reserve. No expenditure will be made in excess of said balance or
for any other capital improvement without the approval of Owner.
(g) If the FF&E component of the Approved Capital Budget
exceeds the available funds in the FF&E Reserve, or if said Budget
includes contemplated expenditures for capital improvements other
than FF&E, and in any such case Owner approves such amounts, Owner
shall provide Manager with monies sufficient to fund the
contemplated expenditures.
ARTICLE 4. INSURANCE
4.1 INSURANCE. During the Term, Manager shall procure and
maintain insurance (in form and with endorsements, waivers and
deductibles and with insurance companies designated or approved by
Owner) naming Owner and Manager (and, if requested by Owner, Owner's
lenders) as insureds thereunder, as follows:
(a) REQUIRED COVERAGE.
(1) ALL-RISK INSURANCE Broad form "all-risk" insurance
covering all real and personal property, covering at least 100% of
the replacement value with a stipulated amount or agreed valuation
endorsement.
(2) PUBLIC LIABILITY INSURANCE Comprehensive general
public liability and automobile liability insurance with liability
limits of not less than $5,000,000 combined bodily injury and broad
form property damage.
(3) BUSINESS INTERRUPTION INSURANCE Rental income and
business interruption insurance in an amount not less than 100% of
the projected gross income for 12 months from the Property.
(4) MANDATORY INSURANCE Workers' compensation and all
other insurance required by any ordinance, law or governmental
regulation, or any lender.
Notwithstanding the foregoing, if the insurance coverage provided by
or available under the policies intended by Manager to satisfy, in
whole or in part, its obligations under the foregoing provisions of
this subsection 4.1(a) shall be greater than specified in such
provisions, then Manager shall be deemed required under this
subsection 4.1(a) to provide such greater coverage.
(b) PLACEMENT. Except as otherwise hereinafter provided, all
insurance coverage required to be provided by the foregoing
provisions of this Section 4.1 shall be placed with or through such
insurance broker or agency as Owner may from time to time hereafter
designate by written notice to Manager.
(c) WAIVER OF SUBROGATION. The insurance policies required
under subsection 4.1(a)(1) above shall contain a provision, if
available at a cost approved by Owner, to the effect that such
insurance shall not be invalidated or limited if any one or more of
the insureds thereunder waive any or all claims for recovery from
the other insureds thereunder; and, in addition to any other
limitation of liability expressly set forth in this Agreement, so
long as such provision is in effect, each of Manager and Owner
hereby waives all claims for recovery from the other for any loss or
damage insured under such policies to the extent of any recovery
collected by Manager or Owner, respectively, under such policies for
such loss or damage.
(d) EVIDENCE OF INSURANCE. Manager shall provide Owner with
the original policies of insurance or certificates thereof on the
date of this Agreement and shall provide evidence of renewal
insurance prior to the expiration of the then existing policies upon
request.
Nothing herein shall affect the general requirement of this
Agreement that the Property shall be managed, operated and
maintained in a safe condition and in a proper and careful manner.
Manager shall furnish whatever information is requested by Owner for
the purpose of establishing the placement of insurance coverage and
shall aid and cooperate in every reasonable way with respect to such
insurance and any loss thereunder.
4.2 MANAGER'S INSURANCE. Manager shall maintain casualty
insurance policies for its furniture, furnishings or fixtures
situated at the Property including waiver of subrogation clause with
respect to losses payable under such policies. Manager shall obtain
at its expense and deliver to Owner a fidelity bond covering General
Partner and its employees and agents with a liability amount of at
least $1,000,000, which such bond shall be maintained by Manager
throughout the term of this Agreement. Owner, in the exercise of
its reasonable discretion, may require Manager to increase the
amount of such bond at Manager's expense if Owner determines that
circumstances (including the anticipated average balance of Owner's
Account) reasonably warrant such increase in view of the risks
involved.
4.3 SUBCONTRACTOR'S INSURANCE. Manager shall require that all
subcontractors have insurance coverage at the subcontractor's
expense, in the following minimum amounts:
(a) Worker's compensation Statutory Amount
(b) Employer's Liability $100,000.00 minimum
(c) Comprehensive General Liability
i. $1,000,000.00 Bodily Injury each occurrence and
aggregate $100,000.00 Property Damage
ii. $1,000,000.00 Combined Single Limit
(d) Employee Dishonesty $20,000.00
(e) Business Auto Policy "Non-owned Autos Only"
Higher amounts may be required if the work to be performed is
sufficiently hazardous. The Manager shall obtain and keep on file a
Certificate of Insurance which shows that the subcontractor is so
insured.
ARTICLE 5. PAYMENT OF EXPENSES
5.1 PROCESSING OF INVOICES. Manager shall receive, review and
approve all invoices for expenses incurred in operating the Property
and shall timely pay such invoices if they are within the Approved
Operating Budget or Approved Capital Budget or if they have
otherwise been approved by the Owner in writing.
5.2 MANAGER'S REIMBURSABLE COSTS. To the extent advanced by
Manager and not described in Section 5.3, Manager shall be entitled
to reimbursement from Owner of its reasonable, out-of-pocket third
party expenses in connection with the performance of its duties
under this Agreement, including the expenses set forth in the
On-Site Expense Schedule, but only to the extent the same are
described in and are within the limits set forth in the Approved
Operating Budget.
5.3 NON-REIMBURSABLE COSTS. The following expenses or costs
incurred by Manager in connection with management of the Property
shall be at the sole cost and expense of Manager and shall not be
reimbursable by Owner:
(a) Cost of gross salary and wages, payroll taxes,
insurance, worker's compensation and other benefits of Manager's
office personnel located at the central office in Atlanta, Georgia.
(b) General accounting and reporting services which are
within Manager's office overhead.
(c) Political or charitable contributions, except that
charitable contributions will be reimbursable if the prior written
consent of Owner is obtained or if they are part of the Approved
Operating Budget.
(d) Manager's office overhead.
5.4 METHOD OF REIMBURSEMENT. Manager may write checks on the
Owner's Account to pay all costs and expenses permitted under
Section 5.2. Manager shall also be entitled to the payment of fees
referred to in Section 6.1 from the Owner's Account. If the funds
in the Owner's Account are not sufficient to pay amounts approved
for payment under this Agreement, Manager will give Owner at least
ten (10) days' written notice of any additional funds Owner must
deposit in the Owner's Account.
ARTICLE 6. COMPENSATION
6.1 MANAGEMENT FEES.
(a) MONTHLY FEE. On the 15th day of each calendar month,
Manager shall be entitled to a monthly fee ("Monthly Fee") equal to
2.5% of the gross revenues from the Property for the prior calendar
month, such Monthly Fee to be paid to Manager concurrently with the
delivery by Manager to Owner of the "Monthly Report" (as defined
below) for such prior calendar month. The Monthly Fee for any
partial calendar month during the term of this Agreement shall be
equitably prorated.
(b) INCENTIVE FEE. Concurrently with the delivery of the
"Annual Report" (as defined below) to Owner for each whole or
partial calendar year during the term of this Agreement, Manager
shall be entitled to an incentive fee ("Incentive Fee) equal to 1%
of the gross revenues from the Property for such whole or partial
year. The Incentive Fee for any partial calendar year during the
term of this Agreement shall be equitably prorated. Notwithstanding
the foregoing, the Incentive Fee for any particular whole or partial
calendar year shall only be payable to Manager if the "Net Operating
Income" (as defined below) for such whole or partial calendar year
equals or exceeds 13.5% of then "Acquisition Costs" (as defined
below) for the Property (calculated as of the last day of such
calendar year). For the purpose of calculating the Net Operating
Income for any partial calendar year during the term of this
Agreement, such Net Operating Income shall be annualized.
(c) FEE ABATEMENT. Notwithstanding the foregoing, Manager
shall not be entitled to any fees under subsections (a) or (b) above
for the period ending on the date which is one year after the date
hereof.
(d) FEE OFFSET. Any cost overruns for the "Project" (as
defined below) under the Construction Management Agreement shall be
offset on a dollar-for-dollar basis against the fees otherwise
payable to Manager pursuant to subsections (a) and (b) above.
However, any subsequent cost savings under the Construction
Management Agreement shall result in reimbursement of any fees
previously offset under this subsection (d) to the extent of such
savings.
(e) ACCOUNTING FEE. Manager shall be entitled to an
accounting fee equal to $1,500.00 per month for the Property, in
order to compensate Manager for the accounting services required of
Manager in connection with the performance of its obligations under
this Agreement. Accordingly, notwithstanding anything to the
contrary contained herein, Manager is not entitled to a separate
reimbursement of its accounting costs in connection with this
Agreement; provided, however, that the cost of the annual audit by
an independent accountant required by Section 3.5(b) shall be the
responsibility of Owner.
(f) NO LEASING, BROKERAGE FEES OR OTHER COMPENSATION. No fee
will be paid to the Manager for entering into any lease, license,
concession agreement or service contract. All discounts, rebates
and other inducements shall belong to Owner. No other compensation
shall be payable to Manager or its Affiliates in connection with
this Agreement, except as expressly set forth in this Agreement.
ARTICLE 7. TERMINATION
7.1 FINAL ACTION. Upon the expiration or sooner termination
of this Agreement pursuant to Article 2 for any reason, Manager
shall (a) complete the necessary accounting work for the Property
upon its departure and deliver to Owner a final accounting;
(b) surrender and deliver up to Owner possession of the Property and
all rents and income, including deposits, of the Property and other
monies of Owner on hand and in any bank account; (c) deliver to
Owner, as received, any monies due Owner under this Agreement but
received after such termination; (d) deliver to Owner all materials
and supplies, keys, contracts and documents, and such other
accounting papers and records pertaining to this Agreement as Owner
shall request; (e) assign to Owner or its designee any right Manager
may have in and to any existing contracts relating to the operation
and maintenance of the Property as Owner shall require, excluding
the License Agreement, but including any service agreement entered
into pursuant to Section 3.7 (and Manager shall indemnify, defend,
protect and hold harmless Owner for any defaults [and all resulting
costs, expenses and liabilities, including attorneys fees, arising
therefrom] under such contracts arising from Manager's acts or
omissions prior to the date of such assignment, except to the extent
caused by Owner's default in providing funds required to be provided
hereunder for payments to be made under such service contracts); and
(f) deliver to Owner, or Owner's duly appointed agent, all records,
books, accounts, contracts, leases, receipts for deposits, unpaid
bills and other papers or documents which pertain to the Property
with the exception of employee records which must be retained by
Manager according to law. Manager shall have the right to keep and
maintain copies of any records which it delivers to Owner, provided
that the same be kept in confidence by Manager. Owner shall have
the right to obtain access during normal business hours to inspect
Manager's employee records. In the alternative, the Manager shall
provide Owner with copies of these records, upon Owner's request.
Upon such termination Owner will assume responsibility for payment
of all approved or authorized unpaid bills of the Property.
EFFECT OF TERMINATION. Termination of this Agreement shall
terminate all rights and obligations of the parties hereunder,
except that such termination shall not prejudice the rights of
either party against the other for any breach of this Agreement.
Without limitation on the generality of the foregoing, Owner's
termination of this Agreement shall terminate any and all rights of
Manager to act on behalf of or with respect to the Property (and
Manager shall, if Owner so requests, execute a notice to third
parties, in form reasonably satisfactory to Owner, to the effect
that Manager's rights have been so terminated). Owner and Manager
acknowledge that the termination of this Agreement for any reason
shall result in a termination of the License Agreement in accordance
with its terms.
COOPERATION. In the event this Agreement is terminated,
Manager shall cooperate with Owner to allow Owner to effectively and
productively continue the leasing and other management activities of
Manager. Without limitation on the foregoing, Manager shall (a)
cooperate with Owner in order to obtain a replacement license
agreement to be granted to Owner or an agent or designee designated
by Owner (and, if this Agreement is terminated by reason of a
default by Manager or any of its Affiliates under this Agreement or
any Ancillary Agreement, Manager shall be solely responsible for all
costs and expenses associated with such issuance of the replacement
License Agreement); and (b) deliver to Owner such information and
documentation as Owner may reasonably request concerning potential
tenants or guests for the Property. In connection with a sale of
the Property, Owner acknowledges that the License Agreement shall
terminate pursuant to its terms upon the sale of the Property,
unless the terms of the sale of the Property (which such terms shall
be as approved by Owner) provide for the continued management of the
Property by Manager under this Agreement.
ARTICLE 8. MISCELLANEOUS
8.1 NOTICES: Any notice which a party is required or may
desire to give another party shall be in writing and may be
delivered (1) personally, (2) by United States registered or
certified mail, postage prepaid, (3) by Federal Express or other
reputable courier service regularly providing evidence of delivery
(with charges paid by the party sending the notice), or (4) by
telecopy, provided that such telecopy shall be immediately followed
by delivery of such notice pursuant to clause (1), (2) or (3) above.
Any such notice shall be addressed as follows (subject to the right
of a party to designate a different address for itself by notice
similarly given):
TO OWNER:
RW Hotel Partners, L.P.
c/o Ridgewood Hotels, Inc.
2859 Paces Ferry Road
Suite 700
Atlanta, Georgia 30339
Attention: Mr. N. Russell Walden
Telephone No.: (770) 434 3670
Facsimile No.: (770) 433 8935
WITH A COPY TO:
c/o Farallon Capital Management, Inc.
One Maritime Plaza
Suite 1325
San Francisco, California 94111
Attention: Mr. Jason M. Fish
Telephone No.: (415) 421 2132
Facsimile No.: (415) 421 2133
WITH A COPY TO:
Pircher, Nichols & Meeks
1999 Avenue of the Stars, Suite 2600
Los Angeles, California 90067
Attention: Real Estate Notices (SAC/RCS)
Telephone No.: (310) 201 8900
Facsimile No.: (310) 201 8922
TO MANAGER:
Ridgewood Properties, Inc.
2859 Paces Ferry Road
Suite 700
Atlanta, Georgia 30339
Attention: Mr. N. Russell Walden
Telephone No.: (770) 434 3670
Facsimile No.: (770) 433 8935
WITH A COPY TO:
Troutman Sanders
Suite 5200
600 Peachtree Street, N.E.
Atlanta, Georgia 30308/2216
Attention: John W. Moore, Esq.
Telephone No.: (404) 885 3188
Facsimile No.: (404) 885 3900
Any notice so given by mail or courier service shall be deemed to
have been given as of the date of delivery (whether accepted or
refused) established by U.S. Post Office return receipt or other
proof of delivery. Any such notice not so given (including
facsimile transmission) shall be deemed given upon receipt of the
same by the party to whom the same is to be given.
8.2 CONSENT AND APPROVALS. Except as otherwise expressly
provided herein, any approval or consent provided to be given by a
party hereunder may be given or withheld in the absolute discretion
of such party and shall not be deemed to have been given unless
given in writing.
8.3 AMENDMENTS. Except as otherwise herein provided, any and
all amendments, additions or deletions to this Agreement shall be
null and void unless approved by the parties (and Investor pursuant
to Section 8.16). A change in the Monthly Report Forms set forth in
Exhibit "C" or the Uniform Accounting System may be made by Owner,
effective upon written notice thereof by Owner to Manager; upon
receipt of such notice by Manager, such Exhibit "C" shall be deemed
to have been amended.
8.4 HEADINGS. All headings herein are inserted only for
convenience of reference and are not to be considered in the
construction or interpretation of any provision of this Agreement.
8.5 REPRESENTATIONS. Manager represents and warrants that it
is fully qualified and licensed, to the extent required by law, to
manage hotels and perform all obligations assumed by Manager
hereunder and is fully capable of performing such obligations.
Manager agrees to comply with all such laws now or hereafter in
effect.
8.6 INDEMNIFICATION BY MANAGER. Manager shall indemnify,
protect, defend and hold Owner, each partner of Owner and each of
their respective officers, directors, members, partners and
employees harmless from and against any and all claims, demands,
losses, damages, liabilities, actions, lawsuits and other
proceedings, judgments and awards, and costs and expenses (including
reasonable attorneys' fees) (collectively, "Claims"), arising
directly or indirectly, in whole or in part, out of any act or
omission of Manager or of any of its agents, officers, employees or
representatives, but only to the extent such act or omission
constitutes willful misconduct, a material breach of this Agreement,
an intentional act outside Manager's scope of authority or gross
negligence. Such indemnification shall not apply to Manager's
performance of its obligations under the License Agreement to the
extent a default under the License Agreement is caused, directly or
indirectly, by Owner's failure to provide the necessary funds for
capital improvements or alterations reasonably required under the
License Agreement within a reasonable time after written notice from
Manager of such requirement. The provisions of this Section shall
survive termination of this Agreement and the completion of
Manager's services hereunder.
8.7 INDEMNIFICATION BY OWNER. Owner shall indemnify, protect,
defend and hold Manager (in its capacity as Manager [but not in any
other capacity, including its capacity as the parent of RHI]) and
all officers, directors, and employees of Manager harmless from any
and all Claims arising out of the performance by Manager of its
obligations and duties hereunder in accordance with the terms
hereof; provided, however, that Owner does not hereby agree, and
shall not be obligated to, so indemnify Manager from any such loss,
cost, damage, liability or expense arising out of any act or
omission of Manager or any of its agents, officers, employees or
representatives, which act or omission constitutes willful
misconduct, a material breach of this Agreement, an intentional act
outside Manager's scope of authority or gross negligence. The
provisions of this Section shall survive termination of this
Agreement and the completion of Manager's services hereunder.
8.8 ENTIRE AGREEMENT: This Agreement contains the entire
understanding among the parties with respect to the matters
contained herein, and supersedes any prior understanding and
agreements between them respecting the within subject matter. There
are no representations, agreements, arrangements, or understandings,
oral or written, between or among the parties hereto relating to the
subject matter of this Agreement which are not fully expressed
herein.
8.9 GOVERNING LAW. This Agreement shall be governed,
construed and interpreted by the laws of the State of Kentucky,
without regard to conflicts of law principles.
8.10 ATTORNEYS' FEES: If any party obtains a judgment against
any other party by reason of breach of this Agreement (whether in an
action or through arbitration), such party shall be entitled to
recover its court (or arbitration) costs, and reasonable attorneys'
fees (including the reasonable value of in-house attorney services)
and disbursements incurred in connection therewith and in any appeal
or enforcement proceeding thereafter, in addition to all other
recoverable costs.
8.11 CERTAIN DEFINITIONS: As used herein:
"Acquisition Costs" as of a particular date means the sum
of the following: (a) Owner's aggregate acquisition cost of the
Property, including all due diligence costs and closing costs, which
the parties hereby agree is equal to [$16,191,571.94] as of the date
hereof; (b) the aggregate of all costs paid or incurred by Owner
under the Construction Management Agreement on or prior to such
date, including PIP costs; and (c) the aggregate of any other
expenditures paid or incurred by Owner in connection with the
Property on or prior to such date that would normally be capitalized
under generally accepted accounting principles.
"Affiliate" of a person or entity (or words of similar import,
whether or not capitalized) includes (1) any officer, director,
employee, shareholder, partner, member or relative within the third
degree of kindred of the person or entity in question; (2) any
corporation, partnership, limited liability company, trust or other
person or entity controlling, controlled by or under common control
with (a) the person or entity in question or (b) any affiliate of
the person or entity in question (whether directly or indirectly
through one or more intermediaries); and (3) any officer, director,
trustee, partner, member or employee of any person or entity
described in (2) above. For the purpose of this definition,
"control" means the possession, directly or indirectly, of the power
to direct or cause the direction of management and policies, whether
through the ownership of voting securities or by contract or
otherwise. Without limitation on the foregoing, RHI shall be deemed
to be an Affiliate of Manager.
"Ancillary Agreement" means any agreement, instrument, document
or covenant made or entered into under, pursuant to, or in
connection or concurrently with this Agreement and any amendment or
amendments made at any time or times heretofore or hereafter to any
of the same (including the License Agreement, the partnership
agreement of Owner and the "Basic Agreement" and "Construction
Management Agreement" therein defined).
"Bankruptcy/Dissolution Event" with respect to a person or
entity, means the commencement or occurrence of any of the following
with respect to such person or entity: (1) a case under Title 11 of
the U.S. Code, as now constituted or hereafter amended, or under any
other applicable federal or state bankruptcy law or other similar
law; (2) the appointment of (or a proceeding to appoint) a trustee
or receiver of any property interest; (3) an attachment, execution
or other judicial seizure of (or a proceeding to attach, execute or
seize) a substantial property interest; (4) an assignment for the
benefit of creditors; (5) the taking of, failure to take, or
submission to any action indicating (after reasonable investigation)
an inability to meet its financial obligations as they accrue; or
(6) a dissolution or liquidation; provided, however, that the events
described in clauses (1), (2) or (3) shall not be included if the
same are (a) involuntary and not at any time consented to,
(b) contested within 30 days of commencement and thereafter
diligently and continuously contested, and (c) dismissed or set
aside, as the case may be, within 90 days of commencement.
"Business Agreement" means any lease, rental agreement, loan
agreement, mortgage, easement, covenant, restriction or other
agreement or instrument at any time or times affecting all or a
portion of the Property.
"Business Plan" means the business plan for the Property of
Owner, as the same may be amended from time to time.
"Cure Period" means (1) fifteen (15) days after written notice
specifying the nature of a default or breach in connection with a
monetary default that is not a "Noncurable Default" (as hereinafter
defined); (2) thirty (30) days after written notice specifying the
nature of a default or breach under this Agreement, in connection
with a non-monetary default that is not a Noncurable Default
(provided, however, that if such non-monetary default cannot
reasonably be cured within such 30-day period, and the defaulting
party promptly commences the cure of such default and diligently
pursues such cure to completion, then such 30-day period shall be
extended to the extent reasonably necessary, but in no event after
the date that is 45 days after such written notice); and (3) no
period at all for a Noncurable Default. A "Noncurable Default"
means any of the following: (a) a breach of a representation or
warranty, (b) a breach of any restriction upon transfer or
hypothecation, (c) an intentional breach, (d) a breach of fiduciary
duty or a breach constituting fraud, bad faith or willful
misconduct, (e) a breach of Section 8.12 or any other exclusive or
non-competition covenant, (f) a breach of an obligation if there
have been two prior breaches of such obligation or a similar
obligation within the immediately preceding two-year period (e.g., a
failure to timely deliver information if there have been at least
two failures to timely deliver the same or different information
within the immediately preceding 2-year period), (g) taking action
on behalf of Owner that is beyond the scope of authority established
by this Agreement (or in the case of a default under a Ancillary
Agreement, such Ancillary Agreement), or (h) a
Bankruptcy/Dissolution Event.
"Governmental Requirements" means all permits, licenses,
approvals, entitlements and other governmental authorizations
required in connection with the ownership, construction, use,
operation or maintenance of the Property, including any development
agreement, indemnity, surety or performance bond or other similar
assurances to governmental agencies in connection with the obtaining
of entitlements and other governmental approvals for the Property.
"Laws" means all procedural and substantive federal, state and
local laws, moratoria, initiatives, referenda, ordinances, rules,
regulations, standards, orders and other governmental requirements
(including those relating to the environment, health and safety, or
handicapped persons), applicable to Property, or the ownership, use,
operation, maintenance, sale, lease or other disposition thereof.
"Net Operating Income" for a particular period means the
"Distributable Cash" (as defined in the partnership agreement of
Owner) for such period with the following adjustments: (a) no sale
or financing proceeds shall be included in Distributable Cash; and
(b) there shall be no deduction for the following in order to arrive
at Distributable Cash: (i) principal or interest payments under any
indebtedness of Owner; and (ii) costs that are capitalized and
included in Acquisition Costs.
"Requirements" means this Agreement, the Business Plan, the
Approved Operating Budget, the Approved Capital Budget, the Business
Agreements, the License Agreement, all plans and specifications
approved by Owner, Laws and Governmental Requirements, collectively.
8.12 COMPETITION: Without limitation on the obligations of
Manager and its Affiliates under Ancillary Agreements, during the
term of this Agreement, Manager shall not engage in activities which
would adversely affect Manager's ability to perform its obligations
under this Agreement or which are competitive with the Property.
8.13 COUNTERPARTS: This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same Agreement.
8.14 TERMINOLOGY: Section headings are for reference only and
do not modify or affect this Agreement. When the context requires,
any gender includes any other gender, the singular includes the
plural, and the plural includes the singular. Whenever the words
"including", "include" or "includes" are used in this Agreement,
they should be interpreted in a non-exclusive manner as though the
words ", without limitation," immediately followed the same.
Except as otherwise indicated, all Section and Exhibit references in
this Agreement shall be deemed to refer to the Sections in and
Exhibits to this Agreement.
8.15 TIME: Time is of the essence of this Agreement.
8.16 INVESTOR: It is understood that Manager is the parent of
RHI, which is the general partner of Owner and, in light of this
affiliation, all notices, reports, and other documents and
information required to be provided to Owner hereunder shall be
provided simultaneously by Manager to both RHI and the other limited
partner in Owner ("Investor"), and any approval, consent or other
determination or judgment to be made by Owner hereunder shall not be
effective unless approved in writing by Investor. Without
limitation on the foregoing, this Agreement shall not be amended
without the prior written consent of Investor.
8.17 ASSIGNMENT: Manager may not directly or indirectly
transfer, sell, assign, or hypothecate its interest under this
Agreement or any rights hereunder to any other entity or person,
without the written consent of Owner. Any assignment of this
Agreement by Manager is subject to approval by Holiday Inns
Franchising, Inc.
8.18 ILLEGALITY: If any provision of this Agreement or the
application thereof to any person or circumstances shall be invalid
or unenforceable to any extent, the remainder of this Agreement and
the application of such provisions to other persons or circumstances
shall not be affected thereby and shall be enforceable to the
greatest extent permitted by law.
8.19 NO JOINT VENTURE. This Agreement shall not be construed
as effecting a partnership or joint venture between Owner and
Manager.
8.20 CUMULATIVE REMEDIES. The rights and remedies of the
parties hereto shall not be mutually exclusive, i.e., the exercise
of one or more of the provisions hereof shall not preclude the
exercise of any other provision hereof.
8.21 LIMITATION OF LIABILITY. Owner shall not be personally
liable in any manner or to any extent under or in connection with
this Agreement, and Manager and its successors and assigns and,
without limitation, all other persons, partnerships, limited
liability companies, corporations and entities shall look solely to
the Property for the satisfaction of any claims or judgments against
Owner. The limitation of liability provided in this Section is in
addition to, and not in limitation of, any limitation on liability
applicable to Owner provided by law or by any other contract,
agreement or instrument.
8.22 BINDING EFFECT; WAIVER: This Agreement shall be binding
upon the parties hereto and their respective permitted successors
and assigns. Except as expressly provided in Sections 8.6 and 8.16,
this Agreement shall not benefit or be enforceable by any other
person or entity. No waiver of any breach of any covenant,
condition or agreement contained herein shall be construed to be a
subsequent waiver of that covenant, condition or agreement or of any
subsequent breach thereof or of this Agreement.
IN WITNESS WHEREOF the parties hereto have executed this
Agreement under seal as of the date first written above.
OWNER:
RW HOTEL PARTNERS, L.P.,
a Delaware limited partnership
By: RIDGEWOOD HOTELS, INC.,
a Georgia corporation
General Partner
By: ________________________
Name: _______________________
Title: ______________________
MANAGER:
RIDGEWOOD PROPERTIES, INC.,
a Delaware corporation
By: _________________________
Name: ________________________
Title: ______________________
EXHIBIT A
LEGAL DESCRIPTION OF PROPERTY
Property situated in the City of Jeffersontown, County of Jefferson,
State of Kentucky, and more particularly described as follows:
BEGINNING at a point in the East right of way line of Hurstbourne
Lane, which point is 400 feet North of the intersection of the North
line of Ramp No. 1 of I-64, as measured along the East line of
Hurstbourne Lane; thence South 79 degrees 31 minutes 29 seconds East
250 feet; thence South 10 degrees 28 minutes 31 seconds West 543.83
feet to a point in the North right of way line of said Ramp No. 1 of
I-64; thence with the said right of way line South 56 degrees 52
minutes 3 seconds East 364.70 feet to a pipe; thence continuing with
said right of way line, South 71 degrees 27 minutes 23 seocnds East
255.13 feet to a pipe; thence leaving the said right of way line,
North 40 degrees 24 minutes East 502.19 feet to a pipe; thence North
56 degrees 39 minutes 48 seconds West 900.57 feet to a pipe; thence
North 79 degrees 31 minutes 29 seconds West 259.86 feet to a pipe in
the East right of way line of Hursbourne Lane; thence with said
right of way line, South 10 degrees 28 minutes 31 seconds West 65
feet to the point of beginning.
EXHIBIT B
FORM OF OPERATING BUDGET AND CAPITAL BUDGET
LVIBUD95.ssf
09/25/95
Holiday Inn - Louisville
Operating Budget for 1995
($000)
AUG-16 SEP95 OCT95 NOV95 DEC95 1995
Rooms Available 4405 8010 8277 8010 8277 36979
Rooms Occupied 3381 6090 6378 4827 4318 24994
Average Rate 74.00 73.02 72.97 72.26 71.45 72.71
Occupancy % 76.8% 76.0% 77.1% 60.3% 52.2% 67.6%
Gross Revenue 330.5 615.7 643.3 503.1 447.4 2540.0
Rooms Revenue 250.2 444.7 465.4 348.4 308.5 1817.2
Labor Cost 32.6 61.2 63.1 52.8 50.3 260.0
Other Exp 16.8 29.3 33.2 27.1 22.1 128.5
Total Expenses 49.4 90.5 96.3 79.9 72.4 388.5
Dept Profit 200.8 354.2 369.1 268.5 236.1 1428.7
Telephone Revenue 7.5 15.4 16.1 14.7 12.0 65.7
Cost 2.5 5.3 6.2 4.6 5.7 24.3
Dept Profit 5.0 10.1 9.9 10.1 6.3 41.4
Food Revenue 61.7 126.8 133.5 116.3 101.3 539.6
Food Cost 16.8 35.1 37.0 31.5 29.0 149.4
Labor Cost 21.0 42.8 45.2 40.7 39.7 189.4
Other 5.0 11.2 13.1 9.5 8.2 47.0
Total Expenses 42.8 89.1 95.3 81.7 76.9 385.8
Dept Profit 18.9 37.7 38.2 34.6 24.4 153.8
Bar Revenue 9.8 25.5 26.4 21.5 23.4 106.5
Beverage Cost 2.0 5.3 5.4 4.4 4.9 22.0
Labor Cost 1.2 2.4 2.4 2.1 1.9 10.0
Entertn Cost 0.0 0.6 0.0 0.0 4.7 5.3
Other 0.6 1.1 1.1 1.0 0.8 4.6
Total Expenses 3.8 9.4 8.9 7.5 12.3 41.9
Dept Profit 6.0 16.1 17.5 14.0 11.1 64.6
Food & Bev Dept Profit 24.9 53.8 55.7 48.6 35.5 218.4
Other Income 1.3 3.3 1.9 2.2 2.2 10.9
Gross Operating Income 232.0 421.4 436.6 329.4 280.1 1699.5
Admin & Genl 27.0 50.7 52.4 46.9 50.8 227.7
Franchise Fee 10.1 17.8 18.9 13.3 12.3 72.4
Marketing 20.6 37.2 40.3 32.6 33.2 163.9
Utilities 11.8 18.5 18.8 17.1 22.2 88.4
R&M Labor 9.0 17.1 17.4 15.7 17.5 76.7
R&M Other 7.5 12.1 15.5 15.3 14.5 64.9
Total Expenses 86.0 153.4 163.3 140.9 150.5 694.1
Profit before Fixed Exp 146.0 268.0 273.3 188.5 129.6 1005.3
Taxes & Insurance 10.4 15.5 20.2 18.1 16.0 80.2
FF&E Reserve 13.2 24.6 25.7 20.1 17.9 101.6
Income before Deprn (NOI) 122.3 227.9 227.3 150.3 95.7 823.5
Holiday Inn - Louisville
Capital Budget for 1995
($000)
Capital Budget for balance of 1995:
Modernization budget 443.0
Other capital items:
Computer equipment 4.2
Dance floor & stage riser 12.6
Kitchen equipment 9.0
Leased equipment:
Van, $25K, operating lease 0.0
_____
Total capital budget 468.8
EXHIBIT C
MONTHLY REPORTS
Manager shall generate, update and maintain the following reports,
using the Uniform Accounting System:
Income Recaps
Rents Receivable Report
Property Profit and Loss Statement
Capital Expenditure and Leasing Commissions Report
Management Reports
Variance Analysis
Departmental Schedules
INCOME RECAP: Identify all income and security deposits billed
and amounts collected. The ending accounts receivable balance
equals the sum of: 1) the beginning accounts receivable, plus
2) the billing of the current month, less 3) amounts collected.
The ending accounts receivable balance should agree to the
Accounts Receivable Report. The advance deposit report should
reflect the Owner's total liability for advance deposits
outstanding at report date.
PROPERTY PROFIT & LOSS STATEMENT: Report monthly and year to
date property income and expenses using Uniform Code of
Accounts Schedules and Chart of Accounts. Prepare budget
variance analysis. Explain any significant operating issues
and significant budget to actual variances. Include reconciled
bank statements and reconciliations. Reconcile the bank
statement cash balance to the operating statement ending
balance. Indicates the amount available to be available to the
Owner (Owner's Cash Flow).
CAPITAL EXPENDITURE: Describe and cost all capitalized
disbursement items.
EXHIBIT D
LICENSE AGREEMENT
LOCATION: 1325 Hurstbourne Lane Louisville, KY 40222
LOCATION No.: #3013
DATE:_________________________
HOLIDAY INNS FRANCHISING, INC.
HOLIDAY INN r CHANGE OF OWNERSHIP AGREEMENT
WITH
RIDGEWOOD PROPERTIES, INC.
LICENSEE
HOLIDAY INNS FRANCHISING, INC.
LICENSE AGREEMENT
TABLE OF CONTENTS
1. THE LICENSE
A. The Hotel
B. The System
2. GRANT OF LICENSE
3. LICENSEE'S RESPONSIBILITIES
A. Operational and Other Requirements
B. Upgrading of the Hotel
C. Fees
4. LICENSOR'S RESPONSIBILITIES
A. Training
B. Reservation Services
C. Consultation on Operations, Facilities and Marketing
D. Use of Marketing, and Reservation Contribution
E. Maintenance of Standards
F. Application of Manual
G. Other Arrangements for Marketing, Etc.
H. Licensor's Use of Other Advertising/Promotional Support
Funds
5. APPEALS, CHANGES IN THE MANUAL
A. Appeals
B. Changes in the Manual
C. Decisions on Appeal
D. Limitation on Appeal Rights
6. IAHI
A. Membership
B. Function of Committees
7. PROPRIETARY RIGHTS
A. Ownership of System
B. Trademark Disputes
C. Protection of Name and Marks
8. RECORDS AND AUDITS
A. Monthly Statements
B. Preparation and Maintenance of Records
C. Audit
D. Annual Financial Statements
9. INDEMNITY AND INSURANCE
A. Indemnity
B. Insurance
C. Evidence of Insurance
10. TRANSFER
A. Transfer by Licensor
B. Transfer by Licensee
C. Transfer of Equity Interests That Are Not Publicly Traded
D. Transfers of Publicly-Traded Equity Interests
E. Transfer of the License
F. Transfers of the License or Equity Interest
in the License Upon Death
G. Registration of a Proposed Transfer of Equity Interests
H. Transfer of Real Estate
I. Management of the Hotel
11. CONDEMNATION AND CASUALTY
A. Condemnation
B. Casualty
C. No Extensions of Term
12. TERMINATION
A. Expiration of Term
B. Termination by Licensee on Advance Notice
C. Termination by Licensor on Advance Notice
D. Immediate Termination by Licensor
E. De-Identification of Hotel Upon Termination
F. Payment of Liquidated Damages
13. RELATIONSHIP OF PARTIES
A. No Agency Relationship
14. MISCELLANEOUS
A. Severability and Interpretation
B. Binding Effect
C. Exclusive Benefit
D. Entire Agreement
E. Licensor Withholding Consent
F. Notices
G. General Release and Covenant Not to Sue
H. Performance of the Work
I. Reimbursement of Expenses
J. Descriptive Headings
SPECIAL STIPULATIONS
GUARANTY
ATTACHMENT A
HOLIDAY INNS FRANCHISING, INC. THREE RAVINIA DRIVE,
ATLANTA, GEORGIA 30346 HOLIDAY INN r CHANGE OF OWNERSHIP
AGREEMENT
This License Agreement dated___________________, 19 between
Holiday Inns Franchising, Inc., a Delaware corporation ("Licensor"),
and Ridgewood Properties, Inc. a Delaware corporation ("Licensee")
whose address is 2859 Paces Ferry Road, Suite 700, Atlanta, GA
30339.
THE PARTIES AGREE AS FOLLOWS:
1. THE LICENSE:
Licensor owns, operates and licenses a system designed to
provide a distinctive, high quality hotel service to the public
under the name "Holiday Innr", (the "System"). High standards
established by Licensor are the essence of the System. Future
investments may be required of Licensee under this License Agreement
("License"). Licensee has independently investigated the risks of
the business to be operated hereunder, including current and
potential market conditions, competitive factors and risks, has
read Licensor's Offering Circular for Prospective Franchisees; and
has made an independent evaluation of all such facts. Neither
Licensor nor any other person on Licensor's behalf has made any
representation to Licensee concerning this License not fully set
forth herein. Aware of the relevant facts, Licensee desires to
enter into this License in order to obtain a license to use the
System in the operation of a Holiday Inn hotel (the "Hotel") located
at 1325 Hurstbourne Lane, Louisville, KY 40222.
A. The Hotel. The Hotel comprises all structures,
facilities, appurtenances, furniture, fixtures, equipment, and
entry, exit, parking and other areas from time to time located on
the land identified by Licensee to Licensor in anticipation of this
License, or located on any land from time to time approved by
Licensor for additions, signs or other facilities. The Hotel now
includes the facilities listed on Attachment "A" hereto. No change
in the number of approved guest rooms and no other significant
change in the Hotel may be made without Licensor's approval.
Licensee represents that it is entitled to possession of the Hotel
during the entire license term without restrictions that would
interfere with anything contemplated in this License.
B. The System. The System is composed of elements, as
designated from time to time by Licensor, designed to identify
"Holiday Inn hotels" to the consuming public and/or to contribute to
such identification and its association with quality standards. The
System at present includes the service marks "Holiday Innr",
"Holiday Inn Garden Courtsm", "Crowne Plazar", "Holiday Inn
Expressr", "Holiday Inn Hotel & Suites," Holiday Inn Selectsm",
"Holiday Inn SunSpree Resort", and "Crowne Plazar Resort hotels",
(as appropriate to the specific hotel operation to which it
pertains) "Holidexr", and such other service marks and such
copyrights, trademarks and similar property rights as may be
designated from time to time by Licensor in accordance with
Licensor's specifications to be part of the System; access to a
reservation service; distribution of advertising, publicity and
other marketing programs and materials; the furnishing of training
programs and materials; standards, specifications and policies for
construction, furnishing, operation, appearance and service of the
Hotel, and other requirements as stated or referred to in this
License and from time to time in Licensor's Holiday Inn Standards
Manual (the "Manual") or in other communications to Licensee; and
programs for inspecting the Hotel and consulting with Licensee.
Licensor may add elements to the System or modify, alter or delete
elements of the System in its sole discretion from time to time.
2. GRANT OF LICENSE:
Licensor hereby grants to Licensee a non-exclusive license to
use the System only at the Hotel, but only in accordance with this
License and only during the "License Term" beginning with the date
hereof and terminating under paragraph 12 hereof. The License
applies to the location specified herein and to no other location.
Licensee acknowledges that Licensor, its divisions, subsidiaries,
affiliates and parent are and may in the future be engaged in other
business activities including activities involving transient lodging
and related activities, and that Licensee is acquiring no rights
hereunder other than the right to use the System as specifically
defined herein in accordance with the terms of this License. This
License does not limit Licensor's right or the rights of any parent,
subsidiary or affiliate of Licensor, to use or license the System or
any part thereof or to engage in or license any business activity at
any other location.
3. LICENSEE'S RESPONSIBILITIES:
A. Operational and Other Requirements. During the License
Term, Licensee will:
(1) maintain a high moral and ethical standard
and atmosphere at the Hotel;
(2) maintain the Hotel in a clean, safe and orderly
manner and in first class condition;
(3) provide efficient, courteous and high-quality
service to the public;
(4) operate the Hotel 24 hours a day every day except as
otherwise permitted by Licensor based on special
circumstances;
(5) strictly comply in all respects with the Manual and
with all other general, company-wide policies, procedures and
requirements of Licensor which may be from time to time
communicated to Licensee in writing by Licensor;
(6) strictly comply with all of Licensor's general,
company-wide standards and specifications for goods and
services used in the operation of the Hotel and other
reasonable requirements to protect the System and the Hotel
from unreliable sources of supply;
(7) strictly comply with Licensor's general, company
wide requirements for licensees as to:
(a) the types of services and products that may be
used, promoted or offered at the Hotel;
(b) the types and quality of services and products
that, to supplement services listed on Attachment A, must be
used, promoted or offered at the Hotel;
(c) use, display, style and type of signage;
(d) directory and reservation service listings of
the Hotel;
(e) training of persons to be involved in the
operation of the Hotel;
(f) participation in all marketing, reservation
service, advertising, training and operating programs
designated by Licensor as System-wide (or area-wide) programs
in the best interests of hotels using the System, provided
that with regard to area-wide programs, Licensee may request
Licensor's approval that Licensee need not participate,
reasonable approval not to be withheld;
(g) maintenance, appearance and condition of the
Hotel; and
(h) quality and types of services offered to
customers at the Hotel.
(8) use such automated guest service and/or hotel
management and/or telephone or telecommunication system(s)
which Licensor deems to be in the best interests of the
System, including any additions, enhancements, supplements, or
variants thereof which may be developed during the term
hereof; provided that, if compliance with the requirements of
this paragraph will cause Licensee undue hardship, Licensee
may terminate the License by complying with the provisions of
paragraph 12.B;
(9) participate in and use those reservation services
which Licensor deems to be in the best interests of the
System, including any additions, enhancements, supplements or
variants thereof which may be developed during the term
hereof;
(10) adopt all improvements or changes to the System as
may be from time to time designated by Licensor;
(11) strictly comply with all governmental requirements,
pay all taxes, and maintain all governmental licenses and
permits necessary to operate the Hotel in accordance with the
System;
(12) permit inspection of the Hotel by Licensor's
representatives at any time and give them free lodging for
such time as may be reasonably necessary to complete their
inspections;
(13) promote the Hotel on a local or regional basis
subject to Licensor's requirements as to form, content and
prior approvals;
(14) insure that no part of the Hotel or the System is
used to further or promote a competing business or other
lodging facility, except as Licensor may approve for
businesses or lodging facilities owned, licensed, operated or
otherwise approved by Licensor or its parent, divisions,
subsidiaries, and affiliates;
(15) use every reasonable means to encourage use of
Holiday Inn Express facilities everywhere by the public;
(16) in all respects use Licensee's best efforts to
reflect credit upon and create favorable public response to
the name "Holiday Inn"; and
(17) promptly pay to Licensor all amounts due Licensor,
its parent, subsidiaries and affiliates as royalties or fees,
whether or not arising out of this License, or for goods or
services purchased by Licensee for use at the Hotel.
B. Upgrading of the Hotel. Using the same standards
applicable generally to hotels under the System operated by Licensor
and its licensees in the same category as the Hotel, Licensor may
at any time during the term hereof require substantial
modernization, renovation and other upgrading of the Hotel. Limited
exceptions from those standards may be made by Licensor based on
local conditions or special circumstances. If the upgrading
requirements contained in this paragraph 3.B cause Licensee undue
hardship, Licensee may terminate the License by complying with
paragraph 12.B.
C. Fees.
(1) For each month (or part of a month) during the License Term,
Licensee will pay to Licensor by the 15th of the following
month:
(a) a royalty of 5% of the gross rooms revenues attributable
to or payable for rental of guest rooms at the Hotel with
deductions for sales and room taxes only ("Gross Rooms
Revenue"); and
(b) a "Marketing Contribution" of 1.5% of Gross Rooms
Revenue, this contribution being subject to change by
Licensor from time to time if either approved by:
(i) a majority of members (which shall be counted on the
basis of one hotel, one vote) of the System who
represent a majority of the hotels to be subject to
the increase; or
(ii)approved by a majority of the members of the System
or the "IAHI" (the International Association of
Holiday Inns, Inc. or successor sanctioned as such by
Licensor) at a meeting of System licensees or at an
annual IAHI meeting either as may be convened by
Licensor upon no less than 45 days' advance notice;
Licensor may, in its sole discretion upon 30 days' prior
written notice, increase this Contribution by an amount
not to exceed .5% of Gross Rooms Revenue and such
increase shall be effective for a period no longer than
12 months provided that, in the event of such increase,
Licensor shall not make such a discretionary increase
again for a period of 24 months after the expiration date
of any such increase; and
(c) a "Reservation Contribution" of 1% of Gross Rooms
Revenue, this contribution being subject to change in the
same manner as provided above for the Marketing
Contribution; and
(d) a monthly Holidex fee of $6.12 for each guest room at the
Hotel plus such increases as Licensor may judge
reasonable, but in no case exceeding in any calendar year
10% of the fee in effect at the beginning of that year;
and
(e) all fees due for Travel Agent Commission Programs and
Hotel Marketing Association and Field Marketing Co-op
Programs attributable to the Hotel if Licensee uses the
same or if such programs are mandatory on a company-wide
basis; and
(f) an amount equal to any sales, gross receipts or similar
tax imposed on Licensor and calculated solely on payments
required hereunder, unless the tax is an optional
alternative to an income tax otherwise payable by
Licensor.
Licensee will operate the Hotel so as to maximize gross rooms
revenues of the Hotel consistent with sound marketing and
industry practice and will not engage in any conduct which
reduces gross rooms revenues of the Hotel in order to further
other business activities.
(2) A standard initial fee as set forth in Licensor's then current
Offering Circular for Prospective Franchisees will be charged
upon application for any guest rooms to be added to the Hotel.
(3) Additional royalties may be charged on revenues (or upon any
other basis, if so determined by Licensor) from any activity
if it is added at the Hotel by mutual agreement and:
(a) it is not now offered at System hotels generally and is
likely to benefit significantly from or be identified
significantly with the Holiday Inn name or other aspects
of the System; or
(b) it is designed or developed by or for Licensor.
(4) Charges may be made for optional products or services accepted
by Licensee from Licensor, either in accordance with current
practice or as developed in the future.
(5) Each payment under this paragraph 3.C, except the standard
initial fee, shall be accompanied by the monthly statement
referred to in paragraph 8.A. Licensor may apply any amounts
received under this paragraph 3.C. to any amounts due under
this License. If any amounts are not paid when due, such
non-payment shall constitute a breach of this License and in
addition, such unpaid amounts, will accrue interest beginning
on the first day of the month following the due date at 1 1/2%
per month or the maximum interest permitted by applicable law,
whichever is less.
(6) Local and regional marketing programs and related activities
may be conducted by Licensee, but only at Licensee's expense
and subject to Licensor's requirements. Reasonable charges
may be made for optional advertising materials ordered or
supplied by Licensor to Licensee for such programs and
activities.
(7) Licensor and Licensee shall comply with each other's
reasonable requirements concerning confidentiality of
information.
4. LICENSOR'S RESPONSIBILITIES:
A. Training. During the License Term, Licensor will continue
to specify and provide required and optional training services and
programs at various locations. A fee will be charged for required
training with respect to certain computer systems provided by
Licensor or its affiliates in accordance with the terms of the
agreements relating to those systems, however, no charge will be
made for other required training services and programs. Travel,
lodging and other expenses of Licensee and its employees will be
borne by Licensee. Reasonable charges may be made for training
materials.
B. Reservation Services. During the License Term, so long as
Licensee is in full compliance with its material obligations
hereunder, Licensor will afford Licensee access to Reservation
Service for the Hotel on terms consistent with this License.
C. Consultation on Operations, Facilities and Marketing.
During the License Term, Licensor will, from time to time at
Licensor's discretion, make available to Licensee consultation and
advice in connection with operations, facilities and marketing.
D. Use of Marketing, and Reservation Contribution. The
Marketing Contribution will be used by Licensor for costs associated
with advertising, promotion, publicity, market research and other
marketing programs and related activities for the System. The
Reservation Contribution will be used by Licensor exclusively for
costs associated with reservation programs and related activities
for the System. Licensor will make available and use for the same
purposes, marketing and reservation funds computed on the basis
generally applicable to licensees of the System. Licensor is not
obligated to expend funds for marketing or reservation services in
excess of the amounts received from licensees using the System and
those funds made available by Licensor as set out hereinabove.
Local and regional marketing programs and related activities may be
conducted by Licensee, but only at Licensee's expense and subject to
Licensor's requirements. Reasonable charges may be made for
optional advertising materials ordered or used by Licensee for such
programs and activities.
E. Maintenance of Standards. Licensor will conscientiously
seek to maintain high standards of quality, cleanliness, appearance
and service at all hotels using the System so as to promote, protect
and enhance the public image and reputation of the Holiday Inn name
and to increase the demand for services offered by the System.
Licensor's judgment in such matters shall be controlling in all
respects, and it shall have wide latitude in making such judgments.
F. Application of Manual. All hotels operated under the
System will be subject to the Manual, as it may from time to time be
modified or revised by Licensor, including limited exceptions from
compliance which may be made based on local conditions, type of
hotel or special circumstances.
G. Other Arrangements for Marketing, Etc. Licensor may enter
into arrangements for development, reservation services, marketing,
operations, administrative, technical and support functions,
facilities, programs, services and/or personnel with any other
entity, and may use any facilities, programs, services or personnel
used in connection with the System, in connection with any business
activities of its parent, subsidiaries, divisions or affiliates.
H. Licensor's Use of Other Advertising/Promotional Support
Funds. To the extent that advertising and/or promotional support
and/or funding may become available to Licensor's parent, affiliates
or subsidiaries and/or Licensor from third parties on account of the
totality of the activities of Licensor's parent, affiliates and
subsidiaries, including hotels operated under the System, such
support and/or funding may be used or designated by Licensor's
parent, affiliates or subsidiaries, or Licensor, to benefit such
enterprises in the aggregate, in such proportion and manner as
Licensor's parent, affiliates or subsidiaries, or Licensor
determines reasonably promotes the totality of such enterprises,
exercising reasonable good faith business judgment with respect to
such determination, provided that any such support or funding coming
from activities of the System shall be used for the benefit of the
System.
5. APPEALS, CHANGES IN THE MANUAL:
A. Appeals. Decisions, other than termination notices, made
on behalf of Licensor specifically with reference to the Hotel may
be appealed to Licensor's Franchise Committee if done promptly after
Licensee has diligently sought relief through Licensor's normal
channels of authority. With the approval in writing of any member of
the Franchisee Committee, the decision may be further appealed to
the Executive Committee of Licensor's Board of Directors.
B. Changes in the Manual. Each change in the Manual must be
explained in writing to Licensee at least 30 days before it goes
into effect. Licensor's Franchise Committee or its equivalent must
approve any such change and must determine that the change was
formulated in good faith in the best interests of the System, after
seeking the advice and counsel of the Rules of Operation Committee
of the IAHI.
C. Decisions on Appeal. Licensor shall have the right to
decide appeals under this paragraph 5, solely on the basis of
written submissions. No appeal will suspend a decision or change,
until and unless the appeal is successful. Any action taken by
Licensor in the enforcement of this Agreement that is shown to be
arbitrary or capricious will be rescinded by Licensor to the extent
feasible, but wide discretion and latitude will be allowed to the
judgment of Licensor in the discharge of its overriding
responsibility to maintain and improve the standards, performance
and facilities of the hotels using the Holiday Inn, Crowne Plaza,
Holiday Inn Express, Holiday Inn Hotel & Suites, Holiday Inn Select,
Holiday Inn SunSpree Resort, Crowne Plaza Resort, or any other
Holiday Inn hotel brand or Holiday Inn name. Licensor will
conscientiously seek to maintain high standards of quality,
cleanliness, appearance and service at all hotels using the System
so as to promote, protect and enhance the public image and
reputation of all Holiday Inn hotel brand names or any other Holiday
Inn name, and to increase the demand for services offered by the
System. The Manual will apply to all hotels operated under the
System by Licensor and its licensees. Limited exceptions from
compliance may be made based on local conditions or special
circumstances.
D. Limitation on Appeal Rights. Licensee will not be
arbitrary, capricious or unreasonable in exercising its appeal (or
any other) rights under this License, and will use them only for the
purpose for which intended.
6. IAHI:
A. Membership. Licensee, other licensees of the System, and
Licensor are eligible for membership in the IAHI and are entitled to
vote at its meetings on the basis of one hotel, one vote, provided
that Licensee or Licensor, as the case may be, has paid all its dues
and fees owing to the IAHI. The purposes of the IAHI will be to
consider and discuss, and make recommendations on common problems
relating to the operation of System hotels. Licensor will seek the
advice and counsel of the IAHI Board of Directors and its Rules of
Operations, Advertising and Reservation Committees.
B. Function of Committees. IAHI committees, their functions
and their members will be subject to approval in writing by
Licensor, which approval will not be unreasonably withheld.
Recognizing that the IAHI must function in a manner consistent with
the best interests of all persons using the System, the Licensee and
Licensor will use their best efforts to cause the governing rules of
the IAHI to be consistent with this License.
7. PROPRIETARY RIGHTS:
A. Ownership of System. The Licensee acknowledges and will
not contest, either directly or indirectly Licensor's unrestricted
and exclusive ownership of the System and any element(s) or
component(s) thereof, or that Licensor has the sole right to grant
licenses to use all or any element(s) or component(s) of the System.
Licensee specifically agrees and acknowledges that Licensor is the
owner of all right, title and interest in and to the marks "Holiday
Inn," "Crowne Plaza," "Holiday Inn Express," "Holiday Inn Hotel &
Suites", "Holiday Inn Select," "Holiday Inn SunSpree Resort,"
"Crowne Plaza Resort," and all other marks associated with the
System together with the goodwill symbolized thereby, and that
Licensee will not contest directly or indirectly the validity or
ownership of the marks either during the term of this License or
after its termination. All improvements and additions whenever made
to or associated with the System by the parties hereto or anyone
else, and all service marks, trademarks, copyrights, and service
mark and trademark registrations at any time used, applied for or
granted in connection with the System, and all goodwill arising from
Licensee's use of Licensor's marks shall inure to the benefit of and
become the property of Licensor. Upon expiration or termination of
this License, no monetary amount shall be assigned as attributable
to any goodwill associated with Licensee's use of the System or any
element(s) or component(s) of the System including any trademarks or
service marks licensed hereunder.
B. Trademark Disputes. Licensor will have the sole right and
responsibility to handle disputes with third parties concerning use
of all or any part of the System, and Licensee will, at its
reasonable expense, extend its full cooperation to Licensor in all
such matters, provided that Licensee shall have the right to defend
itself against a claim of infringement should Licensor decline to do
so. All recoveries made as a result of disputes with third parties
regarding use of the System or any part thereof shall be for the
account of Licensor. Licensor need not initiate suit against
alleged imitators or infringers, and may settle any dispute by grant
of a license or otherwise. Licensee will not initiate any suit or
proceeding against alleged imitators or infringers, or any other
suit or proceeding to enforce or protect the System.
C. Protection of Name and Marks. Both parties will make
every effort consistent with the foregoing to protect and maintain
the name and mark "Holiday Inn" and its distinguishing
characteristics (and the other service marks, trademarks, slogans,
etc., associated with the System). Licensee agrees to execute any
documents deemed necessary by Licensor or its counsel to obtain
protection for Licensor's marks or to maintain their continued
validity and enforceability. Licensee agrees to use the names and
marks associated with the System only in the manner authorized by
Licensor and acknowledges that any unauthorized use thereof shall
constitute infringement of Licensor's rights.
8. RECORDS AND AUDITS:
A. Monthly Statements. At least monthly, Licensee shall
prepare a statement which will include all information concerning
Gross Rooms Revenue, other revenues generated at the Hotel, room
occupancy rates, reservation data and other information required by
Licensor that may be useful in connection with marketing and other
functions of Licensor, its parent, subsidiaries, divisions or
affiliates (the "Data"). The Data shall be the property of
Licensor. The Data will be permanently recorded and retained by
Licensee as may be reasonably required by Licensor. By the 3rd of
each month, Licensee will submit to Licensor a statement setting
forth the Data and reflecting the computation of the amounts then
due under paragraph 3.C. The statement will be in such form and
detail as Licensor may reasonably request from time to time, and may
be used by Licensor for its reasonable purposes.
B. Preparation and Maintenance of Records. Licensee will, in
a manner and form satisfactory to Licensor and utilizing accounting
and reporting standards as reasonably required by Licensor, prepare
on a current basis (and preserve for no less than 4 years), complete
and accurate records concerning Gross Rooms Revenue and all
financial, operating, marketing and other aspects of the Hotel, and
maintain an accounting system which fully and accurately reflects
all financial aspects of the Hotel and its business. Such records
shall include but not be limited to books of account, tax returns,
governmental reports, register tapes, daily reports, and complete
quarterly and annual financial statements (profit and loss
statements, balance sheets and cash flow statements).
C. Audit. Licensor may require Licensee to have the Gross
Rooms Revenue or other monies due hereunder computed and certified
as accurate by a certified public accountant. During the License
Term and for two years afterward, Licensor and its authorized agents
will have the right to verify information required under this
License by requesting, receiving, inspecting and auditing, at all
reasonable times, any and all records referred to above wherever
they may be located (or elsewhere if reasonably requested by
Licensor). If any such inspection or audit discloses a deficiency
in any payments due hereunder, and the deficiency in any payment is
willful or exceeds 5% of the correct amount and is not offset by
overpayment, Licensee shall immediately pay to Licensor the
deficiency and interest thereon as provided in paragraph 3.C(5) and
Licensee shall also immediately pay to Licensor the entire cost of
the inspection and audit, including but not limited to travel,
lodging, meals, salaries and other expenses of the inspecting or
auditing personnel. If the audit discloses an overpayment, Licensor
will immediately refund it to Licensee.
D. Annual Financial Statements. Licensee will submit to
Licensor as soon as available but not later than 90 days after the
end of Licensee's fiscal year, and in a format as reasonably
required by Licensor, complete financial statements for such year.
Licensee will certify them to be true and correct and to have been
prepared in accordance with generally accepted accounting principles
consistently applied, and any false certification will be a breach
of this License.
9. INDEMNITY AND INSURANCE:
A. Indemnity. Licensee will indemnify Licensor, its parent,
and its subsidiaries and affiliates and their officers, directors,
employees, agents, successors and assigns against, hold them
harmless from, and promptly reimburse them for, all payments of
money (fines, damages, legal fees, expenses, etc.) by reason of any
claim, demand, tax, penalty, or judicial or administrative
investigation or proceeding (even where negligence of Licensor
and/or its parent, subsidiaries and affiliates is alleged) arising
from and after the date of this License any claimed occurrence at
the Hotel or any act, omission or obligation of Licensee or anyone
associated or affiliated with Licensee or the Hotel. At the
election of Licensor, Licensee will also defend Licensor and/or its
parent, subsidiaries and affiliates and their officers, directors,
employees, agents, successors and assigns against same. In any
event, Licensor will have the right, through counsel of its choice,
to control any matter to the extent it could directly or indirectly
affect Licensor and/or its parent, subsidiaries or affiliates or
their officers, directors, employees, agents, successors or assigns.
Licensee agrees to pay Licensor all expenses including attorney's
fees and court costs, incurred by Licensor, its parent,
subsidiaries, affiliates, and their successors and assigns to remedy
any defaults of or enforce any rights under the License; effect
termination of the License or collect any amounts due under the
License. Notwithstanding anything else herein to the contrary,
Licensee does not indemnify Licensor hereunder when any damages
result due to Licensor's sole negligence, as determined by a court
of competent jurisdiction.
B. Insurance. During the License Term, Licensee will comply
with all insurance requirements of any lease or mortgage covering
the Hotel, and Licensor's specifications for insurance as to the
amount and type of coverage as may be reasonably specified by
Licensor from time to time in writing, and will in any event
maintain on the Hotel as a minimum, the following insurance
underwritten by an insurer approved by Licensor:
(1) employer's liability with minimum limits of $10,000,000 per
occurrence; and
(2) Statutory worker's compensation insurance as prescribed by
applicable law; and
(3) the holder of the liquor license will maintain liquor
liability insurance with single limit coverage for personal
and bodily injury and property damage of at least $10,000,000
for each occurrence naming Licensor and its parent,
subsidiaries and affiliates (and Licensee if applicable) as
additional insureds; and
(4) comprehensive-commercial general liability insurance,
(including coverage for product liability, completed
operations, contractual liability, host liquor liability and
fire legal liability) and comprehensive automobile liability
insurance (including hired and non-owned liability) with
single-limit coverage for personal and bodily injury and
property damage of at least $10,000,000 for each occurrence,
naming Licensor and its parent, subsidiaries and affiliates as
additional insureds. In connection with all construction at
the Hotel during the License Term, Licensee will cause the
general contractor to maintain comprehensive general liability
insurance (including coverage for product liability, completed
operations and contractual liability) and comprehensive
automobile liability insurance (including hired and non-owned
liability) with limits of at least $10,000,000 per occurrence
for personal and bodily injury and property damage
underwritten with insurers approved by Licensor. Licensor and
its parent , subsidiaries and affiliates will be named as
additional insureds.
All policies must be written on a fully insured basis.
Deductibles or self-insured retentions are subject to approval on an
individual basis.
C. Evidence of Insurance. At all times during the License
Term, Licensee will furnish to Licensor certificates of insurance
evidencing the term and limits of coverage in force, names of
applicable insurers and persons insured, and a statement that
coverage may not be canceled, altered or permitted to lapse or
expire without 30 days' advance written notice to Licensor. Revised
certificates of insurance shall be forwarded to Licensor each time a
change in coverage or insurance carrier is made by Licensee, and/or
upon renewal of expired coverages. At Licensor's option, Licensee
may be required to provide certified insurance policy copies.
10. TRANSFER:
A. Transfer by Licensor. Licensor shall have the right to
transfer or assign this License or any of Licensor's rights or
obligations hereunder to any person or legal entity.
B. Transfer by Licensee. Licensee understands and
acknowledges that the rights and duties set forth in this License
are personal to Licensee, and that Licensor has granted this License
in reliance on the business skill, financial status, and personal
character of Licensee (if Licensee is an individual), and upon the
partners or stockholders of Licensee (if Licensee is a partnership
or corporation). Accordingly, neither Licensee nor any immediate or
remote successor to any part of Licensee's interest in the License,
nor any individual, partnership, corporation, or other legal entity
which directly or indirectly owns an equity interest (as that term
is defined herein) in Licensee or the License, shall sell, assign,
transfer, convey, pledge, mortgage, encumber, or give away, any
direct or indirect interest in the License or equity interest in
Licensee, except as provided in this License. Any purported sale,
assignment, transfer, conveyance, pledge, mortgage, or encumbrance
by operation of law or otherwise, of any interest in the License or
any equity interest in Licensee not in accordance with the
provisions of this License, shall be null and void and shall
constitute a material breach of this License, for which Licensor may
terminate upon notice without opportunity to cure pursuant to
paragraph 12. C(1) of this License.
(1) For the purposes of this paragraph 10, the term "equity
interests" shall mean any stock or partnership interests in
Licensee, the interests of any partner, whether general or
limited, in any partnership, with respect to such partnership,
and any stockholder of any corporation with respect to such
corporation, which partnership or corporation is the Licensee
hereunder or which partnership or corporation owns a direct or
indirect beneficial interest in Licensee. References in this
License to "publicly-traded equity interests" shall mean any
equity interests which are traded on any securities exchange
or are quoted in any publication or electronic reporting
service maintained by the National Association of Securities
Dealers, Inc. or any of its successors.
(2) If Licensee is a partnership or corporation, Licensee
represents that the equity interests in Licensee are directly
and (if applicable) indirectly owned, as shown in Attachment
A.
C. Transfer of Equity Interests That Are Not Publicly Traded.
(1) Except where otherwise provided in this License, equity
interests in the Licensee that are not publicly-traded may be
transferred, issued, or eliminated with Licensor's prior
written consent, which will not be unreasonably withheld;
provided that after the transaction:
(a) 50% or less of all equity interests in Licensee will have
changed hands since Licensee first became a party to this
License, or
(b) 80% or less of all equity interest in Licensee will have
changed hands since Licensee first became a party to this
License, and no equity interest(s) will be held by other
than those who held them when Licensee first became a
party to this License.
(2) In computing the percentages referred to in paragraph 10.C(1)
above, limited partners will not be distinguished from general
partners, and Licensor's judgment will be final if there is
any question as to the definition of "equity interests" or as
to the computation of relative equity interests, the principal
considerations being:
(a) direct and indirect power to exercise control over the
affairs of Licensee;
(b) direct and indirect right to share in Licensee's profits;
and
(c) amounts directly or indirectly exposed at risk in the
Licensee's business.
D. Transfers of Publicly-Traded Equity Interests.
(1) Except as otherwise provided in this License, publicly-traded
equity interests in the Licensee may be transferred without
Licensor's consent but only if:
(a) immediately before the proposed transfer, the transferor
owns less than 25% of the equity interest of Licensee;
and
(b) immediately after the transfer, the transferee will own
less than 25% of the equity interest of Licensee; and
(c) the transfer is exempt from registration under federal
securities law.
(2) Publicly-traded equity interests may be transferred with
Licensor's written consent, which may not be unreasonably
withheld, if the transfer is exempt from registration under
federal securities law.
(3) The chief financial officer of Licensee shall certify annually
to Licensor that Licensee is in compliance with the provisions
of this paragraph 10.D. Such certification shall be delivered
to Licensor with the Annual Financial Statements referred to in
paragraph 8.D.
E. Transfer of the License.
(1) Licensee, if a natural person, may with Licensor's consent,
which will not be unreasonably withheld, transfer the License
to Licensee's spouse, parent, sibling, niece, nephew,
descendant, or spouse's descendant, provided that:
(a) adequate provision is made for the management of the
Hotel; and
(b) the transferee executes a new license agreement for the
unexpired term of this License, on the standard form then
being used to license new Hotels under the System, except
the fees charged then shall be the same as those
contained herein including any adjustments to such fees
as may have been implemented from time to time in
accordance with the terms of this License; and
(c) Licensee guarantees, in Licensor's usual form the
performance of the transferee's obligations under the
newly executed License.
(2) If Licensee is a natural person, he may, without the consent
of Licensor, upon 30 days' prior written notice to Licensor,
transfer the License to a corporation entirely owned by him,
provided that:
(a) adequate provision is made for the management of the
Hotel; and
(b) the transferee executes a new license agreement for the
unexpired term of this License, on the standard form then
being used to license new Hotels under the System, except
the fees charged then shall be the same as those
contained herein including any adjustments to such fees
as may have been implemented from time to time in
accordance with the terms of this License; and
(c) the Licensee guarantees, in Licensor's usual form, the
performance of the new licensee's obligations hereunder.
F. Transfers of the License or Equity Interest in the License Upon
Death.
(1) If Licensee is a natural person, upon Licensee's death, the
License will pass in accordance with Licensee's will, or, if
Licensee dies intestate, in accordance with laws governing the
distribution of Licensee's estate, provided that:
(a) adequate provision has been made for management of the
Hotel; and
(b) Licensor gives written consent, which consent will not be
unreasonably withheld; and
(c) the transferee is one or more of the decedent's spouse,
parent, siblings, nieces, nephews, descendants, or
spouse's descendants and;
(d) Licensee's heirs or legatees promptly advise Licensor and
promptly execute a new license agreement for the
unexpired term of this License, on the standard form then
being used to license new Hotels under the System, except
the fees charged thereunder shall be the same as
contained herein including any adjustments to such fees
as may have been implemented from time to time in
accordance with the terms of this License.
(2) If an equity interest is owned by a natural person, subject to
paragraph 10.D above, the equity interest will pass upon such
person's death, in accordance with such person's will or, if
such person dies intestate, in accordance with the laws of
intestacy governing the distribution of Licensee's estate,
provided that:
(a) adequate provision is made for management of the Hotel;
and
(b) Licensor gives written consent, which consent will not be
unreasonably withheld; and
(c) the transferee is one or more of the decedent's spouse,
parent, siblings, nieces, nephews, descendants, or
spouse's descendants and;
(d) transferee assumes, in writing, on a continuing basis,
the decedent's guarantee, if any, of the Licensee's
obligations hereunder.
G. Registration of a Proposed Transfer of Equity Interests. If a
proposed transfer of an equity interest in the Licensee requires registration
under any federal or state securities law, Licensee shall:
(1) Request the Licensor's consent at least 45 days before the
proposed effective date of the registration; and
(2) Accompany such request with one payment of a non-refundable
fee of $25,000; and
(3) Reimburse Licensor for expenses incurred by Licensor in
connection with review of the materials concerning the
proposed registration, including without limitation,
attorney's fees and travel expenses; and
(4) Agree in writing, and all participants in the proposed
offering subject to registration agree in writing, to fully
indemnify Licensor in connection with the registration;
furnish the Licensor all information requested by Licensor,
avoid any implication of Licensor's participation in, or
endorsing the offering; and use the Licensor's service marks
and trademarks only as authorized by Licensor.
H. Transfer of Real Estate. If the real property used in the
operation of the Hotel is owned, directly or indirectly by Licensee and
Licensee proposes to transfer all or a substantial part of such property to a
third party, such transfer shall constitute a transfer under the provisions
of this License requiring an application for a new License Agreement, unless
Licensee receives Licensor's prior written consent for the transaction.
I. Management of the Hotel. Licensee must at all times,
retain and exercise direct management control over the Hotel's
business. Licensee shall not enter into any lease, management
agreement, or other similar arrangement for the operation of the
Hotel or any part thereof (including without limitation, food and/or
beverage service facilities) with any entity other than Licensee,
without the prior written consent of Licensor.
11. CONDEMNATION AND CASUALTY:
A. Condemnation. Licensee shall, at the earliest possible
time, give Licensor full notice of any proposed taking by eminent
domain. If Licensor acknowledges that the Hotel or a substantial
part thereof is to be taken, Licensor will give due and prompt
consideration without any obligation, to transferring the License to
a nearby location selected by Licensee and approved by Licensor as
promptly as reasonably possible and in any event within four months
of the taking, provided that Licensee has promptly filed an
application to transfer the License to such new location. If the new
location is approved by Licensor, and the transfer authorized by
Licensor, and if Licensee opens a new hotel at the new location in
accordance with Licensor's specifications within two years of the
closing of the Hotel, the new hotel will thenceforth be deemed to be
the Hotel licensed under this License. If a condemnation takes
place and a new hotel does not, for whatever reason, become the
Hotel under this License in strict accordance with this paragraph
(or if it is reasonably evident to Licensor that such will be the
case), the License will terminate forthwith upon notice thereof by
Licensor to Licensee.
B. Casualty. If the Hotel is damaged by fire or other
casualty, Licensee will expeditiously repair the damage. If the
damage or repair requires closing the Hotel, Licensee will
immediately notify Licensor; will repair or rebuild the Hotel in
accordance with Licensor's standards; will commence reconstruction
within four months after closing; will expeditiously continue on an
uninterrupted basis with such reconstruction and will reopen the
Hotel for continuous business operations as soon as practicable (but
in any event within 24 months after closing of the Hotel), giving
Licensor ample advance notice of the date of reopening. If the
Hotel is not reopened in accordance with this paragraph, the License
will forthwith terminate upon notice thereof by Licensor to
Licensee.
The License may be replaced by a new license agreement as provided
in paragraph 10 and the License may terminate as provided in this
paragraph 11 without liquidated damages.
C. No Extensions of Term. Nothing in this paragraph 11 will
extend the License Term but Licensee shall not be required to make
any payments pursuant to paragraph 3.C.(1) and (3) for periods
during which the Hotel is closed by reason of condemnation or
casualty.
12. TERMINATION:
A. Expiration of Term. This License and the license granted
hereunder will expire without notice 10 years from the date hereof,
subject to earlier termination as set forth herein. The parties
recognize the difficulty of ascertaining damages to Licensor
resulting from premature termination of the License, and have
provided for liquidated damages which represent their best estimate
as to the damages arising from the circumstances in which they are
provided.
B. Termination by Licensee on Advance Notice. If the
License Term exceeds 10 years, Licensee may terminate the License on
its 10th anniversary, or otherwise as provided in paragraph 3.A(8)
or paragraph 3.B, by giving at least 12 but less than 15 months'
advance notice to Licensor accompanied by a lump sum payment as an
early termination fee, and not as a penalty or in lieu of any other
payments required under this License, equal to the total of all
amounts required under paragraph 3.C for the 12 calendar months of
operation preceding the notice or if the Hotel has been in operation
in the System for less than 12 months, the greater of (i) 12 times
the monthly average of such amounts for the period during which the
Hotel has been in operation in the System, or (ii) 12 times such
amounts as are due for the one month preceding the termination.
C. Termination by Licensor on Advance Notice.
(1) In accordance with notice from Licensor to Licensee, this
License and the license granted hereunder will terminate
(without any further notice unless required by law), provided
that:
(a) the notice is mailed at least 30 days (or longer, if
required by law) in advance of the termination date;
(b) the notice reasonably identifies one or more breaches of
the Licensee's obligations; and
(c) the breach(es) are not fully remedied within the time
period specified in the notice.
(2) If during the then preceding 12 months Licensee shall have
engaged in a violation of this License for which a notice of
termination was given and termination failed to take effect
because the default was remedied, the period given to remedy
defaults will, if and to the extent permitted by law,
thereafter be 10 days instead of 30.
(3) In any judicial proceeding in which the validity of
termination is at issue, Licensor will not be limited to the
reasons set forth in any notice sent under this paragraph.
(4) Licensor's notice of termination or suspension of services
shall not relieve Licensee of its obligations under this
License.
D. Immediate Termination by Licensor.
This License and the license granted hereunder may be immediately
terminated upon notice from Licensor to Licensee (or at the
earliest time permitted by applicable law) if:
(1) (a) Licensee or any guarantor of Licensee's obligations
hereunder shall generally not pay its debts as they
become due, or shall admit in writing its inability to
pay its debts, or shall make a general assignment for the
benefit of creditors; or
(b) Licensee or any such guarantor shall commence any case,
proceeding or other action seeking reorganization,
arrangement, adjustment, liquidation, dissolution or
composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of
debtors, or seeking appointment of a receiver, trustee,
custodian or other similar official for it or for all or
any substantial part of its property; or
(c) Licensee or any such guarantor shall take any corporate
or other action to authorize any of the actions set forth
above in paragraphs (a) or (b); or
(d) any case proceeding or other action against Licensee or
any such guarantor shall be commenced seeking to have an
order for relief entered against it as debtor, or seeking
reorganization, arrangement, adjustment, liquidation,
dissolution or composition of it or its debts under any
law relating to bankruptcy, insolvency, reorganization or
relief of debtors, or seeking appointment of a receiver,
trustee, custodian or other similar official for it or
for all or any substantial part of its property, and such
case, proceeding or other action; (i) results in the
entry of any order for relief against it which is not
fully stayed within seven business days after the entry
thereof; or (ii) remains undismissed for a period of 90
days; or
(e) an attachment remains on all or a substantial part of the
Hotel or of Licensee's or any such guarantor's assets for
90 days; or
(f) Licensee or any such guarantor fails, within 90 days of
the entry of a final judgment against Licensee in any
amount exceeding $50,000, to discharge, vacate or reverse
the judgment, or to stay execution of it, or if appealed,
to discharge the judgment within 30 days after a final
adverse decision in the appeal; or
(2) Licensee loses possession or the right to possession of all or
a significant part of the Hotel, except as otherwise provided
in paragraph 11; or
(3) Licensee contests in any court or proceeding Licensor's
ownership of the System or any part of it, or the validity of
any service marks or trademarks associated with Licensor's
business; or
(4) A breach of paragraph 10 occurs; or
(5) Licensee fails to continue to identify itself to the public as
a System hotel; or
(6) Any action is taken toward dissolving or liquidating Licensee
or any guarantor hereunder, if it is a corporation or
partnership, except for any such actions resulting from the
death of a partner; or
(7) Licensee (or any principal stockholder or partner of Licensee
as the case may be) is, or is discovered to have been,
convicted of a felony (or any other offense if it is likely to
adversely reflect upon or affect the Hotel, the System or
Licensor in any way); or
(8) Licensee maintains false books and records of account or
submits false reports or information to Licensor.
(9) Licensee knowingly fails to comply with the requirements of
the Manual on safety, security, or privacy for its guests at
the Hotel, and such failure may significantly adversely
reflect upon or affect the Hotel, the Holiday Inn System or
Licensor, its parent, subsidiaries and affiliates in any way.
E. De-Identification of Hotel Upon Termination. Licensee
will take whatever action is necessary to assure that no use is made
of any part of the System at or in connection with the Hotel after
the License Term ends. This will involve, among other things,
returning to Licensor the Manual and all other materials proprietary
to Licensor, ceasing the use of any of Licensor's trademarks or
service marks, physical changes of distinctive System features of
the Hotel, including removal of the primary freestanding sign down
to the structural steel, and all other actions required to preclude
any possibility of confusion on the part of the public that the
Hotel is no longer using all or any part of the System or otherwise
holding itself out to the public as a Holiday Inn hotel. Anything
not done by Licensee in this regard within 30 days after
termination, may be done at Licensee's expense by Licensor or its
agents who may enter upon the premises of the Hotel for that
purpose.
F. Payment of Liquidated Damages. If the License terminates
pursuant to paragraph 12. C or 12. D above, Licensee will promptly
pay Licensor (as liquidated damages for the premature termination
only, and not as a penalty nor as damages for breaching the License
nor in lieu of any other payment) a lump sum equal to the total
amounts required under paragraph 3.C (1) (3) and (4) during the 36
calendar months of operation preceding the termination, but not more
than the number of months then remaining in the License Term; or if
the Hotel has not been in operation in the System for 36 months, the
greater of:
(i) 36 times the monthly average of such amounts for the period
during which the Hotel has been in operation in the System, or
(ii) 36 times such amounts as are due for the one month preceding
such termination.
13. RELATIONSHIP OF PARTIES:
A. No Agency Relationship. Licensee is an independent
contractor. Neither party is the legal representative or agent of,
or has the power to obligate (or has the right to direct or
supervise the daily affairs of) the other for any purpose
whatsoever. Licensor and Licensee expressly acknowledge that the
relationship intended by them is a business relationship based
entirely on and circumscribed by the express provisions of this
License and that no partnership, joint venture, agency, fiduciary or
employment relationship is intended or created by reason of this
License.
B. Licensee's Notices to Public Concerning Independent
Status. Licensee will take such steps as are necessary and such
steps as Licensor may from time to time reasonably request, to
minimize the chance of a claim being made against Licensor for
anything that occurs at the Hotel or for acts, omissions or
obligations of Licensee or anyone associated or affiliated with
Licensee or the Hotel. Such steps may, for example, include giving
notice in guest rooms, public rooms and advertisements, on business
forms and stationery, etc., making clear to the public that Licensor
is not the owner or operator of the Hotel and is not accountable for
what happens at the Hotel. Unless required by law, Licensee will
not use the word "Holiday," or any similar word in its corporate,
partnership, or trade name, nor authorize or permit such use by
anyone else. Licensee will not use the words, "Holiday" or "Holiday
Inn" or any other name or mark associated with the System, to incur
any obligation or indebtedness on behalf of Licensor.
14. MISCELLANEOUS:
A. Severability and Interpretation. The remedies provided in
this License are not exclusive. In the event any provision of this
License is held to be unenforceable, void or voidable as being
contrary to the law or public policy of the United States or any
other jurisdiction entitled to exercise authority hereunder, all
remaining provisions shall nevertheless continue in full force and
effect, unless deletion of the provision(s) deemed unenforceable,
void or voidable impairs the consideration for this License in a
manner which frustrates the purpose of the parties or makes
performance commercially impracticable. In the event any provision
of this License requires interpretation, such interpretation shall
be based on the reasonable intention of the parties in the context
of this transaction without interpreting any provision in favor of,
or against, any party hereto by reason of the draftsmanship of the
party or its position relative to the other party.
B. Binding Effect. This License shall become valid when
executed and accepted by Licensor at Atlanta, Georgia. It shall be
deemed made and entered into in the State of Georgia, and shall be
governed and construed under, and in accordance with the laws of the
State of Georgia. In entering into this License, Licensee
acknowledges that it has sought, voluntarily accepted and become
associated with Licensor who is headquartered in Atlanta, Georgia.
The choice of law designation permits, but does not require that all
suits concerning this License shall be filed in the State of
Georgia.
C. Exclusive Benefit. This License is exclusively for the
benefit of the parties hereto, and it may not give rise to liability
to a third party. No agreement between Licensor and anyone else is
for the benefit of Licensee.
D. Entire Agreement. This is the entire Agreement and
supersedes all previous agreements pertaining to the licensing of
the Hotel to be operated as a Holiday Inn Hotel. No change in this
License will be valid unless in writing signed by both parties. No
failure to require strict performance or to exercise any right or
remedy hereunder will preclude requiring strict performance or
exercising any right or remedy in the future.
E. Licensor Withholding Consent. Licensor's consent,
whenever required, may be withheld if any default by Licensee exists
under this License. Approvals and consents by Licensor will not be
effective unless evidenced by a writing duly executed on behalf of
Licensor.
F. Notices. Notices will be effective hereunder when and
only when they are reduced to writing and delivered personally or
mailed by Federal Express or comparable overnight delivery service,
by facsimile transmission or certified mail to the appropriate party
at its address, hereinafter set forth, or to such person and at such
address as may subsequently be designated by one party to the other.
Licensor:
Holiday Inns Franchising, Inc. Three Ravinia Drive Suite 2000
Atlanta, GA 30346-2149 Attn: Vice President - Franchise
Administration
Licensee:
Ridgewood Properties, Inc. 2859 Paces Ferry Road Suite 700 Atlanta,
GA 30339 Attn: N. Russell Walden
H. Performance of the Work. Licensee agrees to perform the
construction, upgrading and renovation work, including the purchase
of furniture, fixtures and equipment set forth on Attachment "B"
attached hereto and incorporated herein by reference (the "Work").
Licensee acknowledges that its agreement to perform the Work is an
essential element of the consideration relied upon by Licensor in
entering into the License and agrees that, notwithstanding any other
provision of the License, Licensee may be authorized to use the
System at the Hotel prior to completion of the Work only during such
time as Licensee is actively meeting its performance obligations in
full compliance with the requirements of Attachment "B." Licensee's
failure to perform the Work in accordance with Licensor's
requirements and specifications (including the progress, milestone,
completion and other dates specified in Attachment "B") shall
constitute a material breach of Licensee's obligations under the
License.
I. Reimbursement of Expenses. Licensee agrees to pay
Licensor all expenses including attorney's fees and court costs,
incurred by Licensor, its parent, subsidiaries, affiliates, and
their successors and assigns to remedy any defaults of or enforce
any rights under the License; effect termination of the license or
collect any amounts due under the License.
J. Descriptive Headings. The descriptive headings in this
License are for convenience only and shall not control or affect the
meaning or construction of any provision in this License.
15. SPECIAL STIPULATIONS.
A. Change of Ownership Rights. Notwithstanding Paragraph 10,
if Licensee is not then in default under this License, a new license
agreement may be issued to a new applicant upon Licensee's written
request, the applicant's submission of a completed application on
Licensor's then current form, the applicant's qualification under
Licensor's then current standards for new licensees, and Licensor's
approval of the application including market viability, with payment
of one - half of the then current application fee but only if the
request is received and the Hotel is sold within the Holiday Inn
System within twenty-four (24) months from the date hereof.
Licensor may require the execution of its then current standard form
of license agreement, which agreement shall have a term equal to the
remaining balance of the original term of this License, a new or
supplemental guarantee agreement and related agreements by the
applicant and its principals, payment of all System Fees and other
amounts due under this License, payment of other amounts then owed
Licensor, Holiday Inns and their affiliates by Licensee, the
applicant, or their respective affiliates and principals, reasonable
renovation and upgrading of the Hotel to System standards applicable
to entering conversion Hotels at that time, and execution of general
releases by Licensee and each of its principals as conditions
precedent to the execution of the Change of Ownership License
Agreement. Under no circumstances shall any such Change of
Ownership have the effect of releasing Licensee from its obligations
hereunder or releasing the liability of any guarantor of Licensee's
obligations, arising or accruing prior to, or in respect of events
occurring prior to, the execution of the Change of Ownership License
Agreement with the new applicant.
(Signatures on following page)
IN WITNESS WHEREOF, the parties have executed this
License, under Seal, as of the date first stated above.
Licensee:
RIDGEWOOD PROPERTIES, INC.
By:______________________________ N. Russell Walden President
Attest:__________________________ Secretary
Licensor:
HOLIDAY INNS FRANCHISING, INC.
By:______________________________ Jim Darby Vice President Franchise
Administration
Attest:___________________________ Assistant Secretary
GUARANTY
As an inducement to Holiday Inns Franchising, Inc.
("Licensor") to execute the above License, the undersigned, jointly
and severally, hereby unconditionally warrant to Licensor and its
successors and assigns that all of Licensee's representations in the
License and the application submitted by Licensee to obtain the
License are true, and guarantee that all of Licensee's obligations
under the above License, including any amendments thereto whenever
made (the "License"), will be punctually paid and performed.
Upon default by the Licensee and notice from Licensor, the
undersigned will immediately make each payment and perform each
obligation required of Licensee under the License. Without
affecting the obligations of the undersigned under this Guaranty,
Licensor may without notice to the undersigned extend, modify or
release any indebtedness or obligation of Licensee, or settle,
adjust or compromise any claims against Licensee. The undersigned
waive notice of amendment of the License and notice of demand for
payment or performance by Licensee.
Upon the death of an individual guarantor, the estate of such
guarantor will be bound by this Guaranty but only for defaults and
obligations hereunder existing at the time of death, and the
obligations of the other guarantors will continue in full force and
effect.
The Guaranty constitutes a guaranty of payment and performance
and not of collection, and each of the guarantors specifically
waives any obligation of Licensor to proceed against Licensee on any
money or property held by Licensee or by any other person or entity
as collateral security, by way of set off or otherwise. The
undersigned further agree that this Guaranty shall continue to be
effective or be reinstated as the case may be, if at any time
payment of any of the guaranteed obligations is rescinded or must
otherwise be restored or returned by Licensor upon the insolvency,
bankruptcy or reorganization of Licensee or any of the undersigned,
all as though such payment has not been made.
This Guaranty shall be governed and construed under, and in
accordance with the laws of the State of Georgia.
IN WITNESS WHEREOF, each of the undersigned has signed this
Guaranty, under Seal, as of the date of the above License.
Witnesses Guarantors:
(No Signatures Required)
ATTACHMENT A
Facilities and Services (paragraph 1):
Site-Area and general description: Seven story interior corridor
hotel.
Fee owners (names and addresses): R.W. Hotel Partners,
L.P. 2859 Paces Ferry Road, Suite 700 Atlanta, GA
30339
Leases (parties, terms, etc.) if any: Management Agreement
dated __________ between R.W. Hotel Partners,
L.P.("Owner") and Ridgewood Properties, Inc. ("Manager") for a term
of _____ years.
Separate parcels for signs: None
Number of approved guest rooms: 266
Restaurants and lounges (number, seating capacity, names and
description): Restaurant - "Terrace Bistro" - seats 165. Lounge -
"Filly's"
Holidome indoor recreation center: No
Gift shop: Yes
Other concessions and shops:
Parking facilities (number of spaces, description):
Swimming pool: Indoor pool
Other facilities and services: Fitness center, Eight
Meeting/Banquet rooms to accommodate up to 800.
ATTACHMENT A-continued
Ownership of Licensee (paragraph 10):
Ridgewood Properties, Inc., 100% a Delaware corporation (publicly
traded corporation)
RIDGEWOOD ORLANDO, INC.
(Mortgagor)
To
BLOOMFIELD ACCEPTANCE COMPANY, L.L.C.
(Mortgagee)
MORTGAGE, ASSIGNMENT OF LEASES AND RENTS AND
SECURITY AGREEMENT
Dated: As of June 30, 1995
Property Location:
Ramada Inn North Orlando
2025 West State Road 434
Longwood, Florida 32779
Loan No.: 04-05-FL-0000
RECORD AND RETURN TO:
Simpson Zelenock, P.C.
260 East Brown Street
Suite 300
Birmingham, Michigan 48009 6232
Attn: Jeffrey C. Urban, Esq.
THIS MORTGAGE, ASSIGNMENT OF LEASES AND RENTS AND SECURITY
AGREEMENT (the "Mortgage"), made as of June 30, 1995, by RIDGEWOOD
ORLANDO, INC., a Florida corporation, having its principal place
of business at 2025 West State Road 434, Longwood, Florida 32779,
("Mortgagor"), to BLOOMFIELD ACCEPTANCE COMPANY, L.L.C., a
Michigan limited liability company, having its principal place of
business at Suite 100, 260 East Brown Street, Birmingham, Michigan
48009-6233 ("Mortgagee").
WITNESSETH:
To secure the payment of an indebtedness in the original
principal sum of Two Million Eight Hundred Thousand Dollars
($2,800,000), lawful money of the United States of America, to be
paid with interest according to a certain mortgage note of even
date herewith made by Mortgagor to Mortgagee (the mortgage note
together with all extensions, renewals or modifications thereof
being hereinafter collectively called the "Note") and all other
sums due hereunder and under the Note (said indebtedness and
interest due under the Note and all other sums due hereunder and
under the Note being hereinafter collectively referred to as the
"Debt"), Mortgagor has mortgaged, given, granted, bargained, sold,
alienated, enfeoffed, conveyed, confirmed, warranted, pledged,
assigned, and hypothecated and by these presents does hereby
mortgage, give, grant, bargain, sell, alien, enfeoff, convey,
confirm, warrant, pledge, assign and hypothecate unto Mortgagee
each with power of sale, the real property described in Exhibit A
attached hereto (the "Premises") and the buildings, structures,
fixtures, additions, enlargements, extensions, modifications,
repairs, replacements and improvements now or hereafter located
thereon (the "Improvements");
TOGETHER WITH: all right, title, interest and estate of
Mortgagor now owned, or hereafter acquired, in and to the
following property, rights, interests and estates (the Premises,
the Improvements, and the property, rights, interests and estates
hereinafter described are collectively referred to herein as the
"Mortgaged Property"):
(a) all easements, rights-of-way, strips and gores of land,
streets, ways, alleys, passages, sewer rights, water, water
courses, water rights and powers, air rights and development
rights, all rights to oil, gas, minerals, coal and other
substances of any kind or character, and all estates, rights,
titles, interests, privileges, liberties, tenements, hereditaments
and appurtenances of any nature whatsoever, in any way belonging,
relating or pertaining to the Premises and the Improvements and
the reversion and reversions, remainder and remainders, and all
land lying in the bed of any street, road, highway, alley or
avenue, opened, vacated or proposed, in front of or adjoining the
Premises, to the center line thereof and all the estates, rights,
titles, interests, dower and rights of dower, curtesy and rights
of curtesy, property, possession, claim and demand whatsoever,
both at law and in equity, of Mortgagor of, in and to the Premises
and the Improvements and every part and parcel thereof, with the
appurtenances thereto;
(b) all machinery, furniture, furnishings, equipment,
computer software and hardware, fixtures (including, without
limitation, all heating, air conditioning, plumbing, lighting,
communications and elevator fixtures, inventory and articles of
personal property and accessions thereof and renewals,
replacements thereof and substitutions therefor, if any
(including, but not limited to, beds, bureaus, chiffoniers,
chests, chairs, desks, lamps, mirrors, bookcases, tables, rugs,
carpeting, drapes, draperies, curtains, shades, venetian blinds,
screens, paintings, hangings, pictures, divans, couches, luggage
carts, luggage racks, stools, sofas, chinaware, linens, pillows,
blankets, glassware, foodcarts, cookware, dry cleaning facilities,
dining room wagons, keys or other entry systems, bars, bar
fixtures, liquor and other drink dispensers, icemakers, radios,
televisions sets, intercom and paging equipment, electric and
electronic equipment, dictating equipment, private telephone
systems, medical equipment, potted plants, heating, lighting and
plumbing fixtures, fire prevention and extinguishing apparatus,
cooling and air-conditioning systems, elevators, escalators,
fittings, plants, apparatus, stoves, ranges, refrigerators,
laundry machines, tools, machinery, engines, dynamos, motors,
boilers, incinerators, switchboards, conduits, compressors, vacuum
cleaning systems, floor cleaning, waxing and polishing equipment,
call systems, brackets, electrical signs, bulbs, bells, ash and
fuel, conveyors, cabinets, lockers, shelving, spotlighting
equipment, dishwashers, garbage disposals, washers and dryers),
other customary hotel equipment and other property of every kind
and nature, whether tangible or intangible, whatsoever owned by
Mortgagor, or in which Mortgagor has or shall have an interest,
now or hereafter located upon the Premises and the Improvements,
or appurtenant thereto, and usable in connection with the present
or future operation and occupancy of the Premises and the
Improvements and all building equipment, materials and supplies of
any nature whatsoever owned by Mortgagor, or in which Mortgagor
has or shall have an interest, now or hereafter located upon the
Premises and the Improvements, or appurtenant thereto, or usable
in connection with the present or future operation, enjoyment and
occupancy of the Premises and the Improvements (hereinafter
collectively referred to as the "Equipment"), including any leases of any of
the foregoing, any deposits existing at any time in connection with any of
the foregoing, and the proceeds of any sale or transfer of the foregoing, and
the right, title and interest of Mortgagor in and to any of the Equipment
that may be subject to any "security interests' as defined in the Uniform
Commercial Code, as adopted and enacted by the State or States where any of
the Mortgaged Property is located (the "Uniform Commercial Code"), superior
in lien to the lien of this Mortgage;
(c) all awards or payments, including interest thereon, that
may heretofore and hereafter be made with respect to the Premises
and the Improvements, whether from the exercise of the right of
eminent domain or condemnation (including, without limitation, any
transfer made in lieu of or in anticipation of the exercise of
said rights), or for a change of grade, or for any other injury to
or decrease in the value of the Premises and Improvements;
(d) all leases and other agreements or arrangements
heretofore or hereafter entered into affecting the use, enjoyment
or occupancy of, or the conduct of any activity upon or in, the
Premises and the Improvements, including any extensions, renewals,
modifications or amendments thereof (hereinafter collectively
referred to as the "Leases") and all rents, rent equivalents,
moneys payable as damages or in lieu of rent or rent equivalents,
royalties (including, without limitation, all oil and gas or other
mineral royalties and bonuses), income, receivables, receipts,
revenues, deposits (including, without limitation, security,
utility and other deposits), accounts, cash, issues, profits,
charges for services rendered, and other consideration of whatever
form or nature received by or paid to or for the account of or
benefit of Mortgagor or its agents or employees from any and all
sources arising from or attributable to the Premises and the
Improvements, including, without limitation, all revenues and
credit card receipts collected from guest rooms, restaurants,
bars, meeting rooms, banquet rooms and recreational facilities,
all receivables, customer obligations, installment payment
obligations and other obligations now existing or hereafter
arising or created out of the sale, lease, sublease, license,
concession or other grant of the right of the use and occupancy of
property or rendering of services by Mortgagor or any operator or
manager of the hotel or the commercial space located in the
Improvements or acquired from others (including, without
limitation, from the rental of any office space, retail space,
guest rooms or other space, halls, stores, and offices, and
deposits securing reservations of such space), license, lease,
sublease and concession fees and rentals, health club membership
fees, food and beverage wholesale and retail sales, service
charges, vending machine sales and proceeds, if any, from business
interruption or other loss of income insurance (the "Rents"),
together with all proceeds from the sale or other disposition of
the Leases and the right to receive and apply the Rents to the
payment of the Debt;
(e) all proceeds of and any unearned premiums on any
insurance policies covering the Mortgaged Property, including,
without limitation, the right to receive and apply the proceeds of
any insurance, judgments, or settlements made in lieu thereof, for
damage to the Mortgaged Property;
(f) the right, in the name and on behalf of Mortgagor, to
appear in and defend any action or proceeding brought with respect
to the Mortgaged Property and to commence any action or proceeding
to protect the interest of Mortgagee in the Mortgaged Property;
(g) all accounts, escrows, documents, instruments, chattel
paper, claims, deposits and general intangibles, as the foregoing
terms are defined in the Uniform Commercial Code, and all
franchises, trade names, trademarks, symbols, service marks,
books, records, plans, specifications, designs, drawings, permits,
consents, licenses (to the extent assignable), franchise and/or
license agreements, management agreements, contract rights
(including, without limitation, any contract with any architect or
engineer or with any other provider of goods or services for or in
connection with any construction, repair, or other work upon the
Mortgaged Property), approvals, actions, refunds of real estate
taxes and assessments (and any other governmental impositions
related to the Mortgaged Property), and causes of action that now
or hereafter relate to, are derived from or are used in connection
with the Mortgaged Property, or the use, operation, maintenance,
occupancy or enjoyment thereof or the conduct of any
business or activities thereon (hereinafter collectively referred
to as the "Intangibles");
and
(h) all proceeds, products, offspring, rents and profits
from any of the foregoing, including, without limitation, those
from sale, exchange, transfer, collection, loss, damage,
disposition, substitution or replacement of any of the foregoing.
TO HAVE AND TO HOLD the above granted and described Mortgaged
Property unto and to the use and benefit of Mortgagee and its successors
and assigns, forever;
PROVIDED, HOWEVER, these presents are upon the express
condition that, if Mortgagor shall well and truly pay to Mortgagee
the Debt at the time and in the manner provided in the Note and
this Mortgage and shall well and truly abide by and comply with
each and every covenant and condition set forth herein, in the
Note and in the other Loan Documents (hereinafter defined) in a
timely manner, these presents and the estate hereby granted shall
cease, terminate and be void;
AND Mortgagor represents and warrants to and covenants and agrees
with Mortgagee as follows:
1 . Payment of Debt and Incorporation of Covenants,
Conditions and Agreements. Mortgagor shall pay the Debt at the
time and in the manner provided in the Note and in this Mortgage.
All the covenants, conditions and agreements contained in (i) the
Note and (ii) all and any of the documents, including the Note and
this Mortgage, now or hereafter executed by Mortgagor and/or
others and by or in favor of Mortgagee, which evidences, secures
or guarantees all or any portion of the payments due under the
Note or otherwise is executed and/or delivered in connection with
the Note and this Mortgage (the "Loan Documents") are hereby made
a part of this Mortgage to the same extent and with the same force
as if fully set forth herein. The Note is evidence of that
certain loan made to the Mortgagor by the Mortgagee (the "Loan").
2. Warranty of Title. Mortgagor warrants that Mortgagor has
good, marketable and insurable title to the Mortgaged Property and
has the full power, authority and right to execute, deliver and
perform its obligations under this Mortgage and to encumber,
mortgage, give, grant, bargain, sell, alienate, enfeoff, convey,
confirm, pledge, assign and hypothecate the same and that
Mortgagor possesses an unencumbered fee estate in the Premises and
the Improvements and that it owns the Mortgaged Property free and
clear of all liens, encumbrances and charges whatsoever except for
those exceptions shown in the title insurance policy insuring the
lien of this Mortgage and that this Mortgage is and will remain a
valid and enforceable first lien on and security interest in the
Mortgaged Property, subject only to said exceptions. Mortgagor
shall forever warrant, defend and preserve such title and the
validity and priority of the lien of this Mortgage and shall
forever warrant and defend the same to Mortgagee against the
claims of all persons whomsoever.
3. Insurance.
(a) Mortgagor, at its sole cost and expense, for the mutual
benefit of Mortgagor and Mortgagee, shall obtain and maintain
during the entire term of this Mortgage (the "Term") policies of
insurance against loss or damage by fire and lightning and against
loss or damage by all other risks and hazards covered by a
standard extended coverage insurance policy including, without
limitation, riot and civil commotion, vandalism, malicious
mischief, burglary and theft. Such insurance shall be in an
amount equal to the greater of (i) the full insurable value of the
Mortgaged Property, (ii)the then full replacement cost of all
insurable items, portions and components of the Mortgaged
Property, including all Improvements and Equipment, without
deduction for physical depreciation, and (iii) such amount that
the insurer would not deem Mortgagor to be a co-insurer under said
policies. The policies of insurance carried in accordance with
this paragraph shall be paid annually in advance and shall contain
a "Replacement Cost Endorsement" with a waiver of depreciation,
and shall have a deductible no greater than $25,000.00 unless so
agreed by Mortgagee.
(b) Mortgagor, at its sole cost and expense, for the mutual
benefit of Mortgagor and Mortgagee, shall also obtain and maintain
during the Term the following policies of insurance:
(i) Flood insurance if any part of the Mortgaged Property is
located in an area identified by the Federal Emergency
Management Agency as an area having special flood hazards and
in which flood insurance has been made available under the
National Flood Insurance Program in an amount equal to the
insurable Improvements and Equipment under said program.
(ii) Earthquake insurance if any part of the Mortgaged Property is
identified by the insurance industry or other experts (i.e.,
a professional engineer selected by and acceptable to
Mortgagee) as located within an area that is a high probable
earthquake area, in an amount equal to the maximum limit of
coverage available with respect to the insurable Improvements
and Equipment.
(iii) Insurance against loss or damage from (A) leakage of
sprinkler systems and (B) explosion of steam boilers, air
conditioning equipment, high pressure piping, machinery and
equipment, pressure vessels or similar apparatus now or
hereafter installed in the Improvements (without exclusion for
explosions), in an amount at least equal to the outstanding
principal amount of the Note or $2,000,000, whichever is less.
(iv) Comprehensive public liability insurance, including broad
form property damage, blanket contractual and personal
injuries (including death resulting therefrom) coverages and
containing minimum limits per occurrence of $1,000,000 and
$2,000,000 in the aggregate for any policy year. In addition, at least
$10,000,000 excess and/or umbrella liability insurance shall be obtained
and maintained for any and all claims, including all legal liability
imposed upon Mortgagor and all court costs and attorneys' fees incurred
in connection with the ownership, operation and maintenance of the
Mortgaged Property.
(v) Rental loss and/or business interruption insurance in an
amount equal to the greater of (A) estimated gross revenues
from the operations of the Mortgaged Property for a period of
18 months or (B) the projected annual operating expenses
(including debt service) for the maintenance and operation of
the Mortgaged Property (and including such rental loss
insurance in the event of earthquake and/or flood, where
casualty insurance is required for those perils). The amount
of such rental loss insurance shall be increased from time to
time during the Term as and when new Leases and renewal
Leases are entered into and the Rents increase or the annual
estimate of (or the actual) gross revenue, as may be
applicable, increases.
(vi) Worker's compensation insurance with respect to any employees
of Mortgagor, as required by any governmental authority or
legal requirement.
(vii) During any period of repair or restoration, builder's
"all risk" insurance in an amount equal to not less than the
full insurable value of the Mortgaged Property against such
risks (including, without limitation, fire and extended
coverage and collapse of the Improvements to agreed limits)
as Mortgagee may request, in form and substance acceptable to
Mortgagee.
(viii) If the Mortgaged Property is or becomes a "non-
conforming use" under applicable zoning and building
ordinances, ordinance or law coverage to compensate for the
cost of demolition after an insured casualty and for the
increased cost of construction in connection with the repair
or restoration of the Mortgaged Property thereafter.
(ix) Sinkhole and mine subsidence insurance shall be obtained and
maintained, in an amount up to the full principal balance of
the Loan as determined by Mortgagee in the exercise of its
sole discretion, if in the opinion of a professional
engineer, selected by and acceptable to Mortgagee, there is a
foreseeable risk of loss due to the perils customarily
insured by that coverage.
(x) Such other insurance as may from time to time be reasonably
required by Mortgagee in order to protect its interests.
(c) All policies of insurance (the "Policies") required
pursuant to this paragraph: (i) shall be issued by
companies approved by Mortgagee and licensed to do
business in the state where the Mortgaged Property is located,
with a claims paying ability rating of "AA" or better by Standard
& Poor's Ratings Group or a rating of "A:X" or better in the
current Best's Insurance Reports; (ii) shall name Mortgagee and
successors and/or assigns as their interests may appear as the
mortgagee; (iii) shall contain a Non-Contributory Standard
Mortgagee Clause and a Lender's Loss Payable Endorsement (Form 438
BFU NS), or their equivalents, naming Mortgagee as the person to
which all payments made by such insurance company shall be paid;
(iv) shall contain a waiver of subrogation against Mortgagee; (v)
shall be maintained throughout the Term without cost to Mortgagee;
(vi) shall be assigned and the originals delivered to Mortgagee;
(vii) shall contain such provisions as Mortgagee deems reasonably
necessary or desirable to protect its interest including, without
limitation, endorsements providing that neither Mortgagor,
Mortgagee nor any other party shall be a co-insurer under said
Policies and that Mortgagee shall receive at least thirty (30)
days prior written notice of any modification, reduction or
cancellation; and (viii) shall be satisfactory in form and
substance to Mortgagee and shall be approved by Mortgagee as to
amounts, form, risk coverage, deductibles, loss payees and
insureds. Mortgagor shall pay the premiums for such Policies (the
"Insurance Premiums") as the same become due and payable and shall
furnish to Mortgagee evidence of the renewal of each of the
Policies with receipts for the payment of the Insurance Premiums
or other evidence of such payment reasonably satisfactory to
Mortgagee (provided, however, that Mortgagor is not required to
furnish such evidence of payment to Mortgagee in the event that
such Insurance Premiums have been paid by Mortgagee pursuant to
Paragraph 5 hereof). If Mortgagor does not furnish such evidence
and receipts at least thirty (30) days prior to the expiration of
any expiring Policy, then Mortgagee may procure, but shall not be
obligated to procure, such insurance and pay the Insurance
Premiums therefor, and Mortgagor agrees to reimburse Mortgagee for
the cost of such Insurance Premiums promptly on demand. Within
thirty (30) days after request by Mortgagee, Mortgagor shall
obtain such increases in the amounts of coverage required
hereunder as may be reasonably requested by Mortgagee, taking into
consideration changes in the value of money over time, changes in
liability laws, changes in prudent customs and practices, and the
like.
(d) If the Mortgaged Property shall be damaged or destroyed,
in whole or in part, by fire or other casualty (an "Insured
Casualty"), Mortgagor shall give prompt notice thereof to
Mortgagee. Following the occurrence of an Insured Casualty,
Mortgagor, regardless of whether insurance proceeds are available,
shall promptly proceed to restore, repair, replace or rebuild the
same to be of at least equal value and of substantially the same
character as prior to such damage or destruction, all to be
effected in accordance with applicable law. The expenses incurred
by Mortgagee in the adjustment and collection of insurance
proceeds shall become part of the Debt and be secured hereby and
shall be reimbursed by Mortgagor to Mortgagee upon demand.
(e) In case of loss or damages covered by any of the Policies,
the following provisions shall apply:
(i) In the event of an Insured Casualty that does not exceed
$100,000.00, Mortgagor may settle and adjust any claim
without the consent of Mortgagee and agree with the insurance
company or companies on the amount to be paid upon the loss;
provided that such adjustment is carried out in a competent
and timely manner. In such case Mortgagor is hereby
authorized to collect and receipt for any such insurance
proceeds.
(ii) In the event an Insured Casualty shall exceed $100,000.00,
then and in that event, Mortgagee may settle and adjust any
claim without the consent of Mortgagor and agree with the
insurance company or companies on the amount to be paid on
the loss and the proceeds of any such policy shall be due and
payable solely to Mortgagee and held in escrow by Mortgagee
in accordance with the terms of this Mortgage.
(iii)In the event of an Insured Casualty where the loss is in an
aggregate amount less than twenty-five percent (25%) of the
original principal balance of the Note, and if, in the reasonable
judgment of Mortgagee, the Mortgaged Property can be restored
within six (6) months (and prior to the maturity of the Note) to
an economic unit not less valuable (including an assessment of the
impact of the termination of any Leases due to such Insured Casualty)
and not less useful than the same was prior to the Insured Casualty, and
after such restoration will adequately secure the outstanding balance of
the Debt, then, if no Event of Default (as hereinafter defined) shall
have occurred and be then continuing, the proceeds of insurance (after
reimbursement of any expenses incurred by Mortgagee) shall be applied to
reimburse Mortgagor for the cost of restoring, repairing, replacing or
rebuilding the Mortgaged Property or part thereof subject to the Insured
Casualty, in the manner set forth below. Mortgagor hereby covenants and
agrees to commence and diligently to prosecute such restoring,
repairing, replacing or rebuilding; provided always, that Mortgagor
shall pay all costs (and if required by Mortgagee, Mortgagor shall
deposit the total thereof with Mortgagee in advance) of such restoring,
repairing, replacing or rebuilding in excess of the net proceeds of
insurance made available pursuant to the terms hereof.
(iv) Except as provided above, the proceeds of insurance collected upon any
Insured Casualty shall, at the option of Mortgagee in its sole
discretion, be applied to the payment of the Debt or applied to
reimburse Mortgagor for the cost of restoring, repairing, replacing or
rebuilding the Mortgaged Property or part thereof subject to the Insured
Casualty, in the manner set forth below. Any such application to the
Debt shall be without any prepayment consideration except that if an
Event of Default, or an event with notice and/or the passage of time
would constitute an Event of Default, has occurred then the Mortgagor
shall pay to Mortgagee an additional amount equal to the Yield
Maintenance Premium (hereinafter defined), if any, that would be
required under Paragraph .57 hereof if a Defeasance Deposit (hereinafter
defined) was to be made by Mortgagor. Any such application to the Debt
shall be applied to those payments of principal and interest last due
under the Note and shall not postpone or reduce any payments otherwise
required pursuant to the Note other than such last due payments.
(v) In the event Mortgagor is entitled to reimbursement out of insurance
proceeds held by Mortgagee, such proceeds shall be disbursed from time
to time upon Mortgagee being furnished with (1) evidence satisfactory to
it of the estimated cost of completion of the restoration, repair,
replacement and rebuilding, (2) funds or, at Mortgagee's option,
assurances satisfactory to Mortgagee that such funds are available,
sufficient in addition to the proceeds of insurance to complete the
proposed restoration, repair, replacement and rebuilding, and (3) such
architect's certificates, waivers of lien, contractor's sworn
statements, title insurance endorsements, bonds, plats of survey and
such other evidences of cost, payment and performance as Mortgagee may
reasonably require and approve. Mortgagee may, in any event, require
that all plans and specifications for such restoration, repair,
replacement and rebuilding be submitted to and approved by Mortgagee
prior to commencement of work. No payment made prior to the final
completion of the restoration, repair, replacement and rebuilding shall
exceed ninety percent (90%) of the value of the work performed from time
to time; funds other than proceeds of insurance shall be disbursed prior
to disbursement of such proceeds; and at all times, the undisbursed
balance of such proceeds remaining in the hands of Mortgagee, together
with funds deposited for that purpose or irrevocably committed to the
satisfaction of Mortgagee by or on behalf of Mortgagor for that purpose,
shall be at least sufficient in the reasonable judgment of Mortgagee to
pay for the cost of completion of the restoration, repair, replacement
or rebuilding, free and clear of all liens or claims for lien. Any
surplus which may remain out of insurance proceeds held by Mortgagee
after payment of such costs of restoration, repair, replacement or
rebuilding shall be paid to any party entitled thereto.
4. Payment of Taxes, Etc. Mortgagor shall pay all taxes, assessments,
water rates and sewer rents, now or hereafter levied or assessed or imposed
against the Mortgaged Property or any part thereof (the "Taxes") and all
ground rents, maintenance charges, other impositions, and other charges,
including, without limitation, vault charges and license fees for the use of
vaults, chutes and similar areas adjoining the Premises, now or hereafter
levied or assessed or imposed against the Mortgaged Property or any part
thereof (the "Other Charges") as the same become due and payable. Mortgagor
will deliver to Mortgagee receipts for payment or other evidence satisfactory
to Mortgagee that the Taxes and Other Charges have been so paid or are not
then delinquent no later than thirty (30) days prior to the date on which the
Taxes and/or Other Charges would otherwise be delinquent if not paid.
Mortgagor shall not suffer and shall promptly cause to be paid and discharged
any lien or charge whatsoever which may be or become a lien or charge against
the Mortgaged Property, and shall promptly pay for all utility services
provided to the Mortgaged Property. Mortgagor shall furnish to Mortgagee
receipts for the payment of the Taxes and the Other Charges prior to the date
the same shall become delinquent (provided, however, that Mortgagor is not
required to furnish such receipts for payment of Taxes in the event that such
Taxes have been paid by Mortgagee pursuant to Paragraph 5 hereof).
5. Tax and Insurance Escrow Fund. Mortgagor shall pay to Mortgages on
the first day of each calendar month (a) one-twelfth of the Taxes that
Mortgagee estimates will be payable during the next ensuing twelve (12)
months in order to accumulate with Mortgagee sufficient funds to pay all such
Taxes at least thirty (30) days prior to their respective due dates, and (b)
one-twelfth of the Insurance Premiums that Mortgagee estimates will be
payable for the renewal of the coverage afforded by the Policies upon the
expiration thereof in order to accumulate with Mortgagee sufficient funds to
pay all such Insurance Premiums at least thirty (30) days prior to the
expiration of the Policies (said amounts in (a) and (b) above hereinafter
called the "Tax and Insurance Escrow Fund"). The Tax and Insurance Escrow
Fund and the payments of interest or principal or both, payable pursuant to
the Note, shall be added together and shall be paid as an aggregate sum by
Mortgagor to Mortgagee. Mortgagor hereby pledges to Mortgagee and grants to
Mortgagee a security interest in any and all monies now or hereafter
deposited in the Tax and Insurance Escrow Fund as additional security for the
payment of the Debt. Mortgagee will apply the Tax and Insurance Escrow Fund
to payments of Taxes and Insurance Premiums required to be made by Mortgagor
pursuant to Paragraphs 3 and 4 hereof. In making any payment relating to the
Tax and Insurance Escrow Fund, Mortgagee may do so according to any bill,
statement or estimate procured from the appropriate public office (with
respect to Taxes) or insurer or agent (with respect to Insurance Premiums),
without inquiry into the accuracy of such bill, statement or estimate or into
the validity of any tax, assessment, sale, forfeiture, tax lien or title or
claim thereof. If the amount of the Tax and Insurance Escrow Fund shall
exceed the amounts due for Taxes and Insurance Premiums pursuant to
Paragraphs 3 and 4 hereof, Mortgagee shall, in its sole discretion, return
any excess to Mortgagor or credit such excess against future payments to be
made to the Tax and Insurance Escrow Fund. In allocating such excess,
Mortgagee may deal with the person shown on the records of Mortgagee to be
the owner of the Mortgaged Property. If at any time Mortgagee determines
that the Tax and Insurance Escrow Fund is not or will not be sufficient to
pay the items set forth in (a) and (b) above, Mortgagee shall notify
Mortgagor of such determination and Mortgagor shall increase its monthly
payments to Mortgagee by the amount that Mortgagee estimates is sufficient to
make up the deficiency at least thirty (30) days prior to delinquency of the
Taxes and/or expiration of the Policies, as the case may be. Upon the
occurrence of an Event of Default, Mortgagee may apply any sums then present
in the Tax and Insurance Escrow Fund to the payment of the Debt in any order
in its sole discretion. Until expended or applied as above provided, any
amounts in the Tax and Insurance Escrow Fund shall constitute additional
security for the Debt. The Tax and Insurance Escrow Fund shall not
constitute a trust fund and may be commingled with other monies held by
Mortgagee. No earnings or interest on the Tax and Insurance Escrow Fund
shall be payable to Mortgagor. If Mortgagee so elects at any time, Mortgagor
shall provide, at Mortgagor's expense, a tax service contract for the Term
issued by a tax reporting agency acceptable to Mortgagee. If Mortgagee does
not so elect, Mortgagor shall reimburse Mortgagee for the cost of making
annual tax searches throughout the Term.
6. Replacement Escrow Fund. Mortgagor shall pay to Mortgagee on the
first day of each calendar month one-twelfth of four percent (4%) of the
total revenues of Mortgagor arising out of or in connection with the
Mortgaged Property during the preceding calendar year as the amount estimated
by Mortgagee in its sole discretion to be due for replacements and capital
repairs and repairs and replacements to furniture, fixtures and equipment
required to be made to the Mortgaged Property during each calendar year (the
"Replacement Escrow Fund"). Mortgagor hereby pledges to Mortgagee any and all
monies now or hereafter deposited in the Replacement Escrow Fund as
additional security for the payment of the Debt. Mortgagee may reassess its
estimate of the amount necessary for the Replacement Escrow Fund from time to
time in its sole discretion, and may adjust the monthly amounts required to
be deposited into the Replacement Escrow Fund upon thirty (30) days notice to
Mortgagor. Mortgagee shall make disbursements from the Replacement Escrow
Fund as requested by Mortgagor, and approved by Mortgagee in its sole
discretion, on a quarterly basis in increments of no less than $5,000.00 upon
delivery by Mortgagor of Mortgagee's standard form of draw request
accompanied by copies of paid invoices for the amounts requested and, if
required by Mortgagee, lien waivers and releases from all parties furnishing
materials and/or services in connection with the requested payment.
Mortgagee may require an inspection of the Mortgaged Property at Mortgagor's
expense prior to making a quarterly disbursement in order to verify
completion of replacements and repairs for which reimbursement is sought.
The Replacement Escrow Fund shall be held in an interest bearing account in
Mortgagee's name at a financial institution selected by Mortgagee in its sole
discretion and subject to an administrative fee determined by Mortgagee in
its sole discretion. Upon the occurrence of an Event of Default, Mortgagee
may apply any sums then present in the Replacement Escrow Fund to the payment
of the Debt in any order in its sole discretion. Until expended or applied
as above provided, the Replacement Escrow Fund shall constitute additional
security for the Debt. The Replacement Escrow Fund shall not constitute a
trust fund and may be commingled with other monies held by Mortgagee. All
earnings or interest on the Replacement Escrow Fund shall be and become part
of such Replacement Escrow Fund and shall be disbursed as provided in this
paragraph.
7. Condemnation. Mortgagor shall promptly give Mortgagee written
notice of the actual or threatened commencement of any condemnation or
eminent domain proceeding (a "Condemnation") and shall deliver to Mortgagee
copies of any and all papers served in connection with such Condemnation.
Following the occurrence of a Condemnation, Mortgagor, regardless of whether
an Award (hereinafter defined) is available, shall promptly proceed to
restore, repair, replace or rebuild the same to the extent practicable to be
of at least equal value and of substantially the same character as prior to
such Condemnation, all to be effected in accordance with applicable law.
(a) Mortgagee is hereby irrevocably appointed as Mortgagor's
attorney-in-fact, coupled with an interest, with exclusive power to collect,
receive and retain any award or payment ("Award") for any taking accomplished
through a Condemnation (a "Taking") and to make any compromise or settlement
in connection with such Condemnation, subject to the provisions of this
Mortgage. Notwithstanding any Taking by any public or quasi-public authority
(including, without limitation, any transfer made in lieu of or in
anticipation of such a Taking), Mortgagor shall continue to pay the Debt at
the time and in the manner provided for in the Note, in this Mortgage and the
other Loan Documents and the Debt shall not be reduced unless and until any
Award shall have been actually received and applied by Mortgagee to expenses
of collecting the Award and to discharge of the Debt. Mortgagee shall not be
limited to the interest paid on the Award by the condemning authority but
shall be entitled to receive out of the Award interest at the rate or rates
provided in the Note. Mortgagor shall cause any Award that is payable to
Mortgagor to be paid directly to Mortgagee.
(b) In the event of any Condemnation where the Award is in an
aggregate amount less than fifteen percent (15%) of the original principal
balance of the Note, and if, in the reasonable judgment of Mortgagee, the
Mortgaged Property can be restored within six (6) months (and prior to
maturity of the Note) to an economic unit not less valuable (including an
assessment of the impact of the termination of any Leases due to such
Condemnation) and not less useful than the same was prior to the
Condemnation, and after such restoration will adequately secure the
outstanding balance of the Debt, then, if no Event of Default shall have
occurred and be then continuing, the proceeds of the Award (after
reimbursement of any expenses incurred by Mortgagee) shall be applied to
reimburse Mortgagor for the cost of restoring, repairing, replacing or
rebuilding the Mortgaged Property or part thereof subject to Condemnation, in
the manner set forth below. Mortgagor hereby covenants and agrees to
commence and diligently to prosecute such restoring, repairing, replacing or
rebuilding; provided always, that Mortgagor shall pay all costs (and if
required by Mortgagee, Mortgagor shall deposit the total thereof with
Mortgagee in advance) of such restoring, repairing, replacing or rebuilding
in excess of the Award made available pursuant to the terms hereof.
(c) Except as provided above, the Award collected upon any Condemnation
shall, at the option of Mortgagee in its sole discretion, be applied to the
payment of the Debt or applied to reimburse Mortgagor for the cost of
restoring, repairing, replacing or rebuilding the Mortgaged Property or part
thereof subject to the Condemnation, in the manner set forth below. Any such
application to the Debt shall be without any prepayment consideration except
that if an Event of Default, or an event with notice and/or the passage of
time would constitute an Event of Default, has occurred then the Mortgagor
shall pay to Mortgagee an additional amount equal to the Yield Maintenance
Premium, if any, that would be required under Paragraph 57 hereof if a
Defeasance Deposit was to be made by Mortgagor. Any such application to the
Debt shall be applied to those payments of principal and interest last due
under the Note and shall not postpone or reduce any payments otherwise
required pursuant to the Note other than such last due payments. If the
Mortgaged Property is sold, through foreclosure or otherwise, prior to the
receipt by Mortgagee of such Award, Mortgagee shall have the right, whether
or not a deficiency judgment on the Note shall be recoverable or shall have
been sought, recovered or denied, to receive all or a portion of said Award
sufficient to pay the Debt.
(d) In the event Mortgagor is entitled to reimbursement out of the
Award received by Mortgagee, such proceeds shall be disbursed from time to
time upon Mortgagee being furnished with (1) evidence satisfactory to it of
the estimated cost of completion of the restoration, repair, replacement and
rebuilding resulting from such Condemnation, (2) funds, or, at Mortgagee's
option, assurances satisfactory to Mortgagee that such funds are available,
sufficient in addition to the proceeds of the Award to complete the proposed
restoration, repair, replacement and rebuilding, and (3) such architect's
certificates, waivers of lien, contractor's sworn statements, title insurance
endorsements, bonds, plats of survey and such other evidences of costs,
payment and performance as Mortgagee may reasonably require and approve; and
Mortgagee may, in any event, require that all plans and specifications for
such restoration, repair, replacement and rebuilding be submitted to and
approved by Mortgagee prior to commencement of work. No payment made prior
to the final completion of the restoration, repair, replacement and
rebuilding shall exceed ninety percent (90%) of the value of the work
performed from time to time; funds other than proceeds of the Award shall be
disbursed prior to disbursement of such proceeds; and at all times, the
undisbursed balance of such proceeds remaining in the hands of Mortgagee,
together with funds deposited for that purpose or irrevocably committed to
the satisfaction of Mortgagee by or on behalf of Mortgagor for that purpose,
shall be at least sufficient in the reasonable judgment of Mortgagee to pay
for the costs of completion of the restoration, repair, replacement or
rebuilding, free and clear of all liens or claims for lien. Any surplus
which may remain out of the Award received by Mortgagee after payment of such
costs of restoration, repair, replacement or rebuilding shall, in the sole
and absolute discretion of Mortgagee, be retained by Mortgagee and applied to
payment of the Debt.
8. Leases and Rents.
(a) Mortgagor does hereby absolutely and unconditionally assign to
Mortgagee, all Mortgagor's right, title and interest in all current and
future Leases and Rents, it being intended by Mortgagor that this assignment
constitutes a present, absolute assignment and not an assignment for
additional security only. Such assignment to Mortgagee shall not be
construed to bind Mortgagee to the performance of any of the covenants,
conditions or provisions contained in any such Lease or otherwise impose any
obligation upon Mortgagee. Mortgagor agrees to execute and deliver to
Mortgagee such additional instruments, in form and substance satisfactory to
Mortgagee, as may hereafter be requested by Mortgagee to further evidence and
confirm such assignment. Nevertheless, subject to the terms of this
paragraph, Mortgagee grants to Mortgagor a revocable license to operate and
manage the Mortgaged Property and to collect the Rents. Mortgagor shall hold
the Rents, or a portion thereof, sufficient to discharge all current sums due
on the Debt, in trust for the benefit of Mortgagee for use in the payment of
such sums. Upon an Event of Default, and without the need for notice or
demand, the license granted to Mortgagor herein shall automatically be
revoked, and Mortgagee shall immediately be entitled to possession of all
Rents, whether or not Mortgagee enters upon or takes control of the Mortgaged
Property. Mortgagee is hereby granted and assigned by Mortgagor the right,
at its option, upon revocation of the license granted herein, to enter upon
the Mortgaged Property in person, by agent or by court appointed receiver to
collect the Rents. Any Rents collected after the revocation of the license
may be applied toward payment of the Debt in such priority and proportions as
Mortgagee in its sole discretion shall deem proper.
(b) All Leases shall be written on the standard form of lease which has
been approved by Mortgagee. Upon request, Mortgagor shall furnish Mortgagee
with executed copies of all Leases. No material changes may be made to the
Mortgagee approved standard lease without the prior written consent of
Mortgagee. All Leases shall provide that they are subordinate to this
Mortgage and that the tenant agrees to attorn to Mortgagee. Unless otherwise
approved by Mortgagee, each Lease shall contain a provision requiring
continuous operations of tenant's business on the premises. None of the
Leases shall contain any option to purchase, any right of first refusal to
lease or purchase, any right to terminate the lease term (except in the event
of the destruction of all or substantially all of the Mortgaged Property),
any nondisturbance or similar recognition agreement or any other similar
provisions which adversely affect the Mortgaged Property or which might
adversely affect the rights of any holder of the Mortgaged Loan without the
prior written consent of Mortgagee. Each tenant shall conduct business only
in that portion of the Mortgaged Property covered by its lease. Upon
request, Mortgagor shall furnish Mortgagee with executed copies of all
Leases.
(c) Mortgagor (i) shall observe and perform all the obligations imposed
upon the lessor under the Leases and shall not do or permit to be done
anything to impair the value of the Leases as security for the Debt; (ii)
shall promptly send copies to Mortgagee of all notices of material default by
Mortgagor which Mortgagor shall receive with respect to any Leases; (iii)
shall not collect any of the Rents more than one (1) month in advance; (iv)
shall not execute any other assignment of the lessor's interest in the Leases
or the Rents; (v) shall deliver to Mortgagee, upon request, tenant estoppel
certificates from each commercial tenant at the Mortgaged Property, in form
and substance reasonably satisfactory to Mortgagee, provided that Mortgagor
shall not be required to deliver such certificates more frequently than two
(2) times in any calendar year; and (vi) shall execute and deliver at the
request of Mortgagee all such further assurances, confirmations and
assignments in connection with the Mortgaged Property as Mortgagee shall from
time to time require. Upon request by Mortgagee after an Event of Default,
Mortgagor shall promptly send copies to Mortgagee of all notices of default
which Mortgagor shall send under the Leases. Except to the extent Mortgagor
is acting in the ordinary course of business as a prudent operator of
property similar to the Mortgaged Property, Mortgagor (A) shall enforce all
of the terms, covenants and conditions contained in the Leases upon the part
of the tenant thereunder to be observed or performed, short of termination
thereof; (B) shall not alter, modify or change the terms of the Leases in any
material respect without the prior written consent of Mortgagee; (C) shall
not convey or transfer or suffer or permit a conveyance or transfer of the
Mortgaged Property or of any interest therein so as to effect a merger of the
estates and rights of, or a termination or diminution of the obligations of,
tenants under the Leases; (D) shall not consent to any assignment of or
subletting under the Leases not in accordance with their terms, without the
prior written consent of Mortgagee; and (E) shall not cancel or terminate the
Leases or accept a surrender thereof, except if a tenant is in default
thereunder; provided, however, that any Lease may be canceled if at the time
of the cancellation thereof a new Lease is entered into on substantially the
same terms or more favorable terms as the canceled Lease.
(d) Mortgagor, as the lessor thereunder, may enter into proposed lease
renewals and new leases without the prior written consent of Mortgagee if
such proposed Lease or extension: (i) is not for greater than or equal to 1
0,000 square feet of the net rentable area of the Mortgaged Property, or
greater than or equal to ten percent (10%) of the total net rentable area of
the Mortgaged Property; (ii) shall have an initial term of not less than
three (3) years or greater than ten (1 0) years; (iii) shall provide for
rental rates comparable to existing local market rates and shall be an
arms length transaction; (iv) shall not contain any options for renewal or
expansion by the tenant thereunder at rental rates which are either below
comparable market levels or less than the rental rates paid by the tenant
during the initial lease term; (v) shall be to a tenant which is experienced,
creditworthy and reputable; (vi) shall provide that it is subordinate to this
Mortgage and that the tenant thereunder agrees to attorn to Mortgagee; and
(vii) shall comply with the provisions of subparagraph (b), above. Mortgagor
may enter into a proposed lease which does not satisfy all of the conditions
set forth in clauses (i) through (vii) immediately above, provided Mortgagee
consents in writing to such proposed lease, such consent not to be
unreasonably withheld or delayed. Mortgagor expressly understands that any
and all proposed leases are included in the definition of "Lease" or "Leases"
as such terms may be used throughout this Mortgage, the Note and the other
Loan Documents.
(e) All security deposits of tenants, whether held in cash or any other
form, shall not be commingled with any other funds of Mortgagor and, if cash,
shall be deposited by Mortgagor at such commercial or savings bank or banks
as may be reasonably satisfactory to Mortgagee. Notwithstanding the
foregoing, security deposits of tenants which are received by Mortgagor in
cash may be commingled with other funds of Mortgagor if (i) permitted by law
and (ii) a bond for the full amount thereof is posted in accordance with the
provisions of law and the following provisions of this subparagraph (d). Any
bond or other instrument which Mortgagor is permitted to hold in lieu of cash
security deposits under any applicable legal requirements shall be maintained
in full force and effect in the full amount of such deposits unless replaced
by cash deposits as hereinabove described, shall be issued by an institution
reasonably satisfactory to Mortgagee, shall, if permitted pursuant to any
legal requirements, name Mortgagee as payee or mortgagee thereunder (or at
Mortgagee's option, be fully assignable to Mortgagee) and shall, in all
respects, comply with any applicable legal requirements and otherwise be
reasonably satisfactory to Mortgagee. Mortgagor shall, upon request, provide
Mortgagee with evidence reasonably satisfactory to Mortgagee of Mortgagor's
compliance with the foregoing. Following the occurrence and during the
continuance of any Event of Default, Mortgagor shall, upon Mortgagee's
request, if permitted by any applicable legal requirements, turn over to
Mortgagee the security deposits (and any interest theretofore earned thereon)
with respect to all or any portion of the Mortgaged Property, to be held by
Mortgagee subject to the terms of the Leases.
9. Representations and Covenants Concerning Loan. Mortgagor represents,
warrants and covenants as follows:
(a) The Note, this Mortgage and the other Loan Documents are not
subject to any right of rescission, set-off, counterclaim or defense,
including the defense of usury, nor would the operation of any of the terms
of the Note, this Mortgage and the other Loan Documents, or the exercise of
any right thereunder, render this Mortgage unenforceable, in whole or in
part, or subject to any right of rescission, set-off, counterclaim or
defense, including the defense of usury.
(b) All certifications, permits, licenses and approvals, including,
without limitation, certificates of completion and occupancy permits required
for the legal use, occupancy and operation of the Mortgaged Property as a
hotel (collectively, the "Licenses"), have been obtained and are in full
force and effect (including, without limitation, any applicable liquor
license). The Mortgagor shall keep and maintain all licenses necessary for
the operation of the Mortgaged Property as a hotel. The Mortgaged Property
is free of material damage and is in good repair, and there is no proceeding
pending for the total or partial condemnation of, or affecting, the Mortgaged
Property.
(c) All of the Improvements which were included in determining the
appraised value of the Mortgaged Property lie wholly within the boundaries
and building restriction lines of the Mortgaged Property, and no improvements
on adjoining properties encroach upon the Mortgaged Property, and no
easements or other encumbrances upon the Premises encroach upon any of the
Improvements, so as to affect the value or marketability of the Mortgaged
Property except those which are insured against by title insurance. All of
the Improvements comply with all material requirements of any applicable
zoning and subdivision laws and ordinances.
(d) The Mortgaged Property is not subject to any Leases other than the
Leases described in the rent roll delivered to Mortgagee in connection with
this Mortgage. No person has any possessory interest in the Mortgaged
Property or right to occupy the same except under and pursuant to the
provisions of the Leases, The current Leases are in full force and effect and
there are no defaults thereunder by Mortgagor or (to Mortgagor's knowledge)
by any tenant thereunder, and there are no conditions which, with the giving
of notice, the passage of time, or both, would constitute defaults thereunder
by Mortgagor or (to Mortgagor's knowledge) by any tenant thereunder.
(e) The survey of the Mortgaged Property delivered to Mortgagee in
connection with this Mortgage, has been performed by a duly licensed surveyor
or registered professional engineer in the jurisdiction in which the
Mortgaged Property is situated, and does not fail to reflect any material
matter affecting the Mortgaged Property or the title thereto.
(f) The Mortgaged Property is and shall at all times remain in
compliance with all statutes, ordinances, regulations and other governmental
or quasigovernmental requirements and private covenants now or hereafter
relating to the ownership, construction, use or operation of the Mortgaged
Property, but Mortgagor, upon providing Mortgagee with security satisfactory
to the Mortgagee in its sole discretion, may proceed diligently and in good
faith to contest the validity or applicability of any such statute,
ordinance, regulation or requirement.
(g) There has not been committed by Mortgagor (or any Person
affiliated with Mortgagor, including any Person managing the Mortgaged
Property, or to Mortgagor's knowledge any other Person in occupancy of the
Mortgaged Property) any act or omission affording the Federal government or
any state or local government the right of forfeiture as against the
Mortgaged Property or any part thereof or any monies paid in performance of
Mortgagor's obligations under any of the Loan Documents. Mortgagor hereby
covenants and agrees not to commit, permit or suffer to exist any act or
omission affording such right of forfeiture.
(h) The License Agreement dated December 29, 1993 (the "License
Agreement"), between Mortgagor and Ramada Franchise Systems, Inc., pursuant
to which Mortgagor has the right to operate the hotel located on the
Mortgaged Property under a name and/or hotel system controlled by such
franchisor, is in full force and effect and there is no default, breach or
violation existing thereunder by any party thereto and no event has occurred
(other than payments due but not yet delinquent) that, with the passage of
time or the giving of notice. or both, would constitute a default, breach or
violation by any party thereunder.
(i) The Hotel Management Agreement dated June 29, 1995 (the "Management
Agreement"), between Mortgagor and Ridgewood Properties, Inc., pursuant to
which such hotel manager operates the Mortgaged Property as a hotel, is in
full force and effect and there is no default, breach or violation existing
thereunder by any party thereto and no event has occurred (other than
payments due but not yet delinquent) that, with the passage of time or the
giving of notice, or both, would constitute a default, breach or violation by
any party thereunder.
(j) Neither the execution and delivery of the Loan Documents, the
Mortgagor's performance thereunder, the recordation of this Mortgage, nor the
exercise of any remedies by Mortgagee, will adversely affect Mortgagor's
rights under the License Agreement, the Management Agreement, or any of the
Licenses.
10. Single Purpose Entity/Separateness. Mortgagor represents, warrants and
covenants as follows:
(a) Mortgagor does not own and will not own any encumbered asset or
property other than (i) the Mortgaged Property, and (ii) incidental personal
property necessary for the ownership or operation of the Mortgaged Property.
(b) Mortgagor will not engage in any business other than the ownership,
management and operation of the Mortgaged Property and Mortgagor will conduct
and operate its business as presently conducted and operated.
(c) Mortgagor will not enter into any contract or agreement with any
affiliate of the Mortgagor, any constituent party of Mortgagor, any guarantor
(a "Guarantor") of the Debt or any part thereof or any affiliate of any
constituent party or Guarantor, except upon terms and conditions that are
intrinsically fair and substantially similar to those that would be available
on an arms-length basis with third parties other than any such party.
(d) Mortgagor has not incurred and will not incur any indebtedness,
secured or unsecured, direct or indirect, absolute or contingent (including
guaranteeing any obligation), other than (i) the Debt, (ii) trade and
operational debt incurred in the ordinary course of business with trade
creditors and in amounts as are normal and reasonable under the
circumstances, and (iii) debt incurred in the financing of equipment and
other personal property used on the Premises. No indebtedness other than the
Debt may be secured (subordinate or @pari passu) by the Mortgaged Property.
(e) Mortgagor has not made and will not make any loans or advances to
any third party (including any affiliate or constituent party, any Guarantor
or any affiliate of any constituent party or Guarantor).
(f) Mortgagor is and will remain solvent and Mortgagor will pay its
debts and liabilities (including employment and overhead expenses) from its
assets as the same shall become due.
(g) Mortgagor has done or caused to be done and will do all things
necessary to observe corporate formalities and preserve its existence, and
Mortgagor will not, nor will Mortgagor permit any constituent party or
Guarantor to amend, modify or otherwise change the partnership certificate,
partnership agreement, articles of incorporation and bylaws, trust or other
organizational documents of Mortgagor or such constituent party or Guarantor
in a manner which would adversely affect the Mortgagor's existence as a
single purpose entity.
(h) Mortgagor will maintain books and records and bank accounts
separate from those of its affiliates and any constituent party and Mortgagor
will file its own tax returns.
(i) Mortgagor will be, and at all times will hold itself out to the
public as, a legal entity separate and distinct from any other entity
(including any affiliate of Mortgagor, any constituent party of Mortgagor,
any Guarantor or any affiliate of any constituent party or Guarantor), and
shall maintain and utilize separate stationery, invoices and checks.
(j) Mortgagor will maintain adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character and in light
of its contemplated business operations.
(k) Neither Mortgagor nor any constituent party will seek the
dissolution or winding up, in whole or in part, of the Mortgagor.
(l) Mortgagor will not commingle the funds and other assets of
Mortgagor with those of any affiliate or constituent party, any Guarantor, or
any affiliate of any constituent party or Guarantor, or any other person.
(m) Mortgagor has and will maintain its assets in such a manner that it
will not be costly or difficult to segregate, ascertain or identify its
individual assets from those of any affiliate or constituent party, any
Guarantor, or any affiliate of any constituent party or Guarantor, or any
other person.
(n) Mortgagor does not and will not hold itself out to be responsible
for the debts or obligations of any other person.
11. Maintenance of Mortgaged Property. Mortgagor shall cause the
Mortgaged Property to be maintained in a good and safe condition and repair.
The Improvements and the Equipment shall not be removed, demolished or
materially altered (except for normal replacement of the Equipment) without
the consent of Mortgagee. Mortgagor shall promptly comply with all laws,
orders and ordinances affecting the Mortgaged Property, or the use thereof.
Mortgagor shall promptly repair, replace or rebuild any part of the Mortgaged
Property that is destroyed by any casualty, or becomes damaged, worn or
dilapidated or that is affected by any proceeding of the character referred
to in Paragraph 7 hereof and shall complete and pay for any structure at any
time in the process of construction or repair on the Premises.
Notwithstanding the foregoing, in the event that a sufficient amount of the
proceeds of casualty insurance from an Insured Casualty exist (together with
other funds provided to Mortgagee's satisfaction by Mortgagor from other
sources) which would permit the replacement or rebuilding of that portion of
the Mortgaged Property which has been damaged or destroyed by that Insured
Casualty, but Mortgagee shall not elect to permit Mortgagor to use those
proceeds for that purpose, Mortgagor shall not be required to rebuild or
replace the damaged or destroyed portion of the Mortgaged Property (except
that Mortgagor shall under all circumstances be required to rebuild, replace
or restore, as necessary, any portion or element of the Mortgaged Property
that represents a dangerous condition or that threatens damage or destruction
to the remaining elements of the Mortgaged Property). Mortgagor shall not
initiate, join in, acquiesce in, or consent to any change in any private
restrictive covenant, zoning law or other public or private restriction,
limiting or defining the uses which may be made of the Mortgaged Property or
any part thereof. If under applicable zoning provisions the use of all or
any portion of the Mortgaged Property is or shall become a nonconforming use,
Mortgagor will not cause or permit such nonconforming use to be discontinued
or abandoned without the express written consent of Mortgagee. Mortgagor
shall not (i) change the use of the Mortgaged Property, (ii) permit or suffer
to occur any waste on or to the Mortgaged Property or to any portion thereof,
or (iii) take any steps whatsoever to convert the Mortgaged Property, or any
portion thereof, to a condominium or cooperative form of management.
Mortgagor will not install or permit to be installed on the Premises any
underground storage tank.
12. Transfer or Encumbrance of the Mortgaged Property.
(a) Mortgagor acknowledges that Mortgagee has examined and relied on
the creditworthiness and experience of Mortgagor in owning and operating
properties such as the Mortgaged Property in agreeing to make the Loan, and
that Mortgagee will continue to rely on Mortgagor's ownership of the
Mortgaged Property as a means of maintaining the value of the Mortgaged
Property as security for repayment of the Debt. Mortgagor acknowledges that
Mortgagee has a valid interest in maintaining the value of the Mortgaged
Property so as to ensure that, should Mortgagor default in the repayment of
the Debt, Mortgagee can recover the Debt by a sale of the Mortgaged Property.
Mortgagor shall not, without the prior written consent of Mortgagee, sell,
convey, alienate, mortgage, encumber, pledge or otherwise Transfer (as
defined below) the Mortgaged Property or any part thereof, or permit the
Mortgaged Property or any part thereof to be sold, conveyed, alienated,
mortgaged, encumbered, pledged or otherwise transferred.
(b) A "Transfer" within the meaning of this Paragraph 12, shall mean
any sale, conveyance, alienation, mortgage, encumbrance, pledge or transfer
of the Mortgaged Property or any interest therein, or any change in the
control of Mortgagor or any Person who controls Mortgagor, and shall be
deemed to include: (i) an installment sales agreement wherein Mortgagor
agrees to sell the Mortgaged Property or any part thereof for a price to be
paid in installments; (ii) an agreement by Mortgagor leasing all or a
substantial part of the Mortgaged Property for other than actual occupancy by
a space tenant thereunder or a sale, assignment or other transfer of, or the
grant of a security interest in, Mortgagor's right, title and interest in and
to any Leases or any Rents; (iii) if Mortgagor, any Guarantor, or any
managing partner, general partner or manager of Mortgagor or Guarantor is a
corporation, partnership, limited partnership, joint venture or limited
liability company (an "Entity"), the voluntary or involuntary sale,
conveyance or transfer of such Entity's stock, general or limited partnership
interests, membership interests or other indicia of ownership (the
"Interests") (or the Interests of any entity directly or indirectly
controlling such Entity by operation of law or otherwise) or the creation or
issuance of new Interests, in one or a series of transactions by which an
aggregate of more than 10% of such Entity's Interests shall be vested in a
party or parties who are not now stockholders, partners, general partners,
limited partners, joint venturers or members, or a change in control of such
Entity; and (iv) if Mortgagor, any Guarantor or any general partner, managing
partner, manager or joint venturer of Mortgagor or any Guarantor is a limited
or general partnership or joint venture, the change, removal, resignation or
addition of a general partner, managing partner, manager or joint venturer or
the transfer of the Interest of any general partner, managing partner,
manager or joint venturer. As used herein, the term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a person or entity, whether
through ownership of voting securities, by contract or otherwise.
(c) Mortgagee shall not be required to demonstrate any actual
impairment of its security or any increased risk of default hereunder in
order to declare the Debt immediately due and payable upon any Transfer which
occurs without Mortgagee's consent. This provision shall apply to every
Transfer regardless of whether voluntary or not, or whether or not Mortgagee
has consented to any previous Transfer.
(d) Mortgagee's consent to one proposed Transfer shall not be deemed to
be a waiver of Mortgagee's right to require such consent to any future
occurrence of same. Any Transfer made in contravention of this paragraph
shall be null and void and of no force and effect.
(e) Mortgagor agrees to bear and shall pay or reimburse Mortgagee on
demand for all reasonable expenses (including, without limitation, reasonable
attorney's fees and disbursements, title search costs and title insurance
endorsement premiums) incurred by Mortgagee in connection with the review,
approval and documentation of any such proposed Transfer.
(f) The following shall not be considered Transfers subject to the
foregoing provisions and requirements:
(i) A Transfer that occurs by inheritance, devise, or bequest or by
operation of law upon the death of a natural person who is an owner of the
Mortgaged Property or the owner of a direct or indirect ownership interest in
Mortgagor, except if that Transfer shall effect a change in control of
Mortgagor from among those Persons who exercise control over Mortgagor as of
the date of this Mortgage.
(ii) The sale or other disposition of obsolete or worn out personal
property which is contemporaneously replaced by comparable personal property
of equal or greater value which is free and clear of liens, encumbrances and
security interests other than those created by this Mortgage or the other
Loan Documents.
(iii) The grant of an easement, if prior to the granting of the easement
Mortgagor causes to be submitted to Mortgagee all information required by
Mortgagee to evaluate the easement, and if Mortgagee, in its sole discretion,
determines that the easement will not materially affect the operation of the
Mortgaged Property or Mortgagee's interest in the Mortgaged Property and
Mortgagor pays to Mortgagee, on demand, all cost and expenses incurred by
Mortgagee in connection with reviewing Mortgagor's request.
13. Estoppel Certificates and No Default Affidavits.
(a) After request by Mortgagee, Mortgagor shall within ten (10) days
furnish Mortgagee with a statement, duly acknowledged and certified, setting
forth (i) the amount of the original principal amount of the Note, (ii) the
unpaid principal amount of the Note, (iii) the rate of interest of the Note,
(iv) the date installments of interest and/or principal were last paid, (v)
any offsets or defenses to the payment of the Debt, if any, and (vi) that the
Note, this Mortgage and the other Loan Documents are valid, legal and binding
obligations and have not been modified or if modified, giving particulars of
such modification.
(b) After request by Mortgagee, Mortgagor shall within ten (10) days
furnish Mortgagee with a certificate reaffirming all representations and
warranties of Mortgagor set forth herein and in the other Loan Documents as
of the date requested by Mortgagee or, to the extent of any changes to any
such representations and warranties, so stating such changes.
(c) Mortgagor shall deliver to Mortgagee upon request, tenant estoppel
certificates from each commercial tenant at the Mortgaged Property in form
and substance reasonably satisfactory to Mortgagee provided that Mortgagor
shall not be required to deliver such certificates more frequently than two
(2) times in any calendar year.
14. Changes in Laws Regarding Taxation. If any law is enacted or
adopted or amended after the date of this Mortgage which deducts the Debt
from the value of the Mortgaged Property for the purpose of taxation or which
imposes a tax, either directly or indirectly, on the Debt or Mortgagee's
interest in the Mortgaged Property, Mortgagor will pay such tax, with
interest and penalties thereon, if any. In the event Mortgagee is advised by
counsel chosen by it that the payment of such tax or interest and penalties
by Mortgagor would be unlawful or taxable to Mortgagee or unenforceable or
provide the basis for a defense of usury, then in any such event, Mortgagee
shall have the option, by written notice of not less than ninety (90) days,
to declare the Debt immediately due and payable.
15. No Credits on Account of the Debt. Mortgagor will not claim or
demand or be entitled to any credit or credits on account of the Debt for any
part of the Taxes or Other Charges assessed against the Mortgaged Property,
or any part thereof, and no deduction shall otherwise be made or claimed from
the assessed value of the Mortgaged Property, or any part thereof, for real
estate tax purposes by reason of this Mortgage or the Debt. In the event
such claim, credit or deduction shall be required by law, Mortgagee shall
have the option, by written notice of not less than ninety (90) days, to
declare the Debt immediately due and payable.
16. Documentary Stamps. If at any time the United States of America,
any State thereof or any subdivision of any such State shall require revenue
or other stamps to be affixed to the Note or this Mortgage, or impose any
other tax or charge on the same, Mortgagor will pay for the same, with
interest and penalties thereon, if any.
17. Controlling Agreement. It is expressly stipulated and agreed to be
the intent of Mortgagor and Mortgagee at all times to comply with applicable
state law or applicable United States federal law (to the extent that it
permits Mortgagee to contract for, charge, take, reserve, or receive a
greater amount of interest than under state law) and that this Paragraph 17
shall control every other covenant and agreement in this Mortgage and the
other Loan Documents. If the applicable law (state or federal) is ever
judicially interpreted so as to render usurious any amount called for under
the Note or under any of the other Loan Documents, or contracted for,
charged, taken, reserved, or received with respect to the Debt, or if
Mortgagee's exercise of the option to accelerate the maturity of the Note, or
if any prepayment by Mortgagor results in Mortgagor having paid any
interest-in excess of that permitted by applicable law, then it is
Mortgagor's and Mortgagee's express intent that all excess amounts
theretofore collected by Mortgagee shall be credited on the principal balance
of the Note and all other Debt (or, if the Note and all other Debt have been
or would thereby be paid in full, refunded to Mortgagor), and the provisions
of the Note and the other Loan Documents immediately be deemed reformed and
the amounts thereafter collectible hereunder and thereunder reduced, without
the necessity of the execution of any new documents, so as to comply with the
applicable law, but so as to permit the recovery of the fullest amount
otherwise called for hereunder or thereunder. All sums paid or agreed to be
paid to Mortgagee for the use, forbearance, or detention of the Debt shall,
to the extent permitted by applicable law, be amortized, prorated, allocated,
and spread throughout the full stated term of the Debt until payment in full
so that the rate or amount of interest on account of the Debt does not exceed
the maximum lawful rate from time to time in effect and applicable to the
Debt for so long as the Debt is outstanding. Notwithstanding anything to the
contrary contained herein or in any of the other Loan Documents, it is not
the intention of Mortgagee to accelerate the maturity of any interest that
has not accrued at the time of such acceleration or to collect unearned
interest at the time of such acceleration.
18. Financial Statements.
(a) The financial statements heretofore furnished to Mortgagee are, as
of the dates specified therein, complete and correct and fairly present the
financial condition of the Mortgagor, the Mortgaged Property, and any other
persons or entities that are the subject of those financial statements.
Mortgagor does not have any contingent liabilities, liabilities for taxes,
unusual forward or long term commitments or unrealized or anticipated losses
from any unfavorable commitments that are known to Mortgagor and reasonably
likely to have a materially adverse effect on the Mortgaged Property or the
operation thereof as a hotel and/or motel and restaurant, except as referred
to or reflected in said financial statements. Since the date of such
financial statements, there has been no materially adverse change in the
financial condition, operation or business of Mortgagor from that set forth
in said financial statements.
(b) Mortgagor will maintain full and accurate books of accounts and
other records reflecting the results of the operations of the Mortgaged
Property and will furnish, or cause to be furnished, to Mortgagee on or
before forty-five (45) days after the end of each calendar quarter the
following items, accompanied by a certificate of the chief financial officer
of Mortgagor or the general partner of Mortgagor, as applicable, stating that
such items are true, correct, accurate, and complete and fairly present the
financial condition and results of the operations of Mortgagor and the
Mortgaged Property and are prepared in accordance with generally accepted
accounting principles, consistently applied (subject to normal year-end
adjustments): (i) a written statement dated as of the last day of each such
calendar quarter identifying each of the Leases by the term, space occupied,
rental required to be paid, security deposit paid, any rental concessions,
and identifying any defaults or payment delinquencies thereunder, a report of
occupancy for the subject quarter including an average daily rate, and any
and all franchise inspection reports received by Mortgagor during the subject
quarter; (ii) monthly and year to date operating statements prepared for each
calendar month during each such calendar quarter, noting Net Operating
Income, Gross Income from Operations, and Hotel Operating Expenses (all as
hereinafter defined), and other information necessary and sufficient under
generally accepted accounting practices to fairly represent the financial
position and results of operation of the Mortgaged Property during such
calendar month, all in form satisfactory to Mortgagee; (iii) a property
balance sheet for each such calendar quarter; (iv) a comparison of the
budgeted income and expenses and the actual income and expenses for each
calendar quarter and year to date together with a detailed explanation of any
variances of five percent (5%) or more between budgeted and actual amounts
for such quarterly periods and year to date; and (v) a calculation reflecting
the Debt Service Coverage Ratio (hereinafter defined) as of the last day of
each such calendar quarter. All monthly operating statements shall be
prepared based upon the Uniform System of Accounts for Hotels, current
edition.
(c) As used herein the term "Net Operating income" means the amount
obtained by subtracting Hotel Operating Expenses from Gross Income from
Operations. "Gross Income from Operations" shall mean all income, computed on
an accrual basis in accordance with generally accepted accounting practices
and principles, derived for each full or partial month during the Term from
the ownership and operation of the Mortgaged Property from whatever source,
including, but not limited to, all guest room revenues, all food, beverage,
and merchandise sales receipts, all interest income, if any, rent, utility
charges, escalations, forfeited security deposits, service fees or charges,
license fees, parking fees, rent concessions or credits, and any business
interruption insurance proceeds but excluding sales, use and occupancy or
other taxes on receipts required to be accounted for by Mortgagor to any
government or governmental agency, refunds and uncollectible accounts, sales
of furniture, fixtures and equipment, proceeds of casualty insurance and
condemnation awards, and interest on credit accounts. Gross income shall not
be diminished as a result of the Mortgage or the creation of any intervening
estate or interest in the Mortgaged Property or any part thereof. "Hotel
Operating Expenses" shall mean the total of all expenditures of whatever kind
relating to the operation, maintenance and management of the Mortgaged
Property that are incurred on a regular monthly or other periodic basis,
including without limitation, utilities, ordinary repairs and maintenance,
insurance, license fees, taxes and assessments, advertising expenses,
management fees, franchise and/or license fees, contributions to the
Replacement Escrow Fund, payroll and related taxes, computer processing
charges, operational equipment or other lease payments as approved by
Mortgagee, and other similar costs, but excluding depreciation, debt service,
and capital expenditures, all calculated on a monthly basis in accordance
with generally accepted accounting practices and principles consistently
applied.
(d) Within ninety (90) days following the end of each calendar year,
Mortgagor shall furnish statements of its financial affairs and condition
including a balance sheet and a statement of profit and loss for the
Mortgagor in such detail as Mortgagee may request, and setting forth the
financial condition and the income and expenses for the Mortgaged Property
for the immediately preceding calendar year, including without limitation
statements of annual Net Operating Income, Gross Income from Operations and
Hotel Operating Expenses prepared by a certified public accountant approved
by Mortgagee. Mortgagor's annual financial statements shall be accompanied
by a certificate executed by the chief financial officer of Mortgagor or the
general partner of Mortgagor, as applicable, stating that each such annual
financial statement presents fairly the financial condition of the Mortgaged
Property being reported upon and has been prepared in accordance with
generally accepted accounting principles consistently applied and the Uniform
System of Accounts for Hotels, current edition. At any time and from time to
time Mortgagor shall deliver to Mortgagee or its agents such other financial
data as Mortgagee or its agents shall reasonably request with respect to the
ownership, maintenance, use and operation of the Mortgaged Property.
(e) In the event that Mortgagor fails to provide to Mortgagee or its
designee any of the financial statements, certificates, reports or
information (the "Required Records") required by this Paragraph 18 within
thirty (30) days after the date upon which such Required Record is due,
Mortgagor shall pay to Mortgagee, at Mortgagee's option and in its sole
discretion, an amount equal to $5,000 for each Required Record that is not
delivered, provided that. Mortgagee has given at least fifteen (15) days
prior written notice to Mortgagor of such failure by Mortgagor to timely
submit the applicable Required Record.
19. Performance of Other Agreements. Mortgagor shall observe and
perform each and every term to be observed or performed by Mortgagor pursuant
to the terms of any agreement or recorded instrument affecting or pertaining
to the Mortgaged Property.
20. Further Acts, Etc.
(a) Mortgagor will, at the cost of Mortgagor, and without expense to
Mortgagee, do, execute, acknowledge and deliver all and every such further
acts, deeds, conveyances, mortgages, assignments, notices of assignment,
Uniform Commercial Code financing statements or continuation statements,
transfers and assurances as Mortgagee shall, from time to time, require, for
the better assuring, conveying, assigning, transferring, and confirming unto
Mortgagee the property and rights hereby mortgaged, given, granted,
bargained, sold, alienated, enfeoffed, conveyed, confirmed, pledged, assigned
and hypothecated or intended now or hereafter so to be, or which Mortgagor
may be or may hereafter become bound to convey or assign to Mortgagee, or for
carrying out the intention or facilitating the performance of the terms of
this Mortgage or for filing, registering or recording this Mortgage or for
facilitating the sale of the Loan and the Loan Documents as described in the
following subparagraph (b). Mortgagor, on demand, will execute and deliver
and hereby authorizes Mortgagee to execute in the name of Mortgagor or
without the signature of Mortgagor to the extent Mortgagee may lawfully do
so, one or more financing statements, chattel mortgages or other instruments,
to evidence more effectively the security interest of Mortgagee in the
Mortgaged Property. Upon foreclosure, the appointment of a receiver or any
other relevant action, Mortgagor will, at the cost of Mortgagor and without
expense to Mortgagee, cooperate fully and completely to effect the assignment
or transfer of any license, permit, agreement or any other right necessary or
useful to the operation of the Mortgaged Property. Mortgagor grants to
Mortgagee an irrevocable power of attorney coupled with an interest for the
purpose of exercising and perfecting any and all rights and remedies
available to Mortgagee at law and in equity, including, without limitation,
such rights and remedies available to Mortgagee pursuant to this paragraph.
(b) Mortgagor acknowledges that Mortgagee and its successors and
assigns may (i) sell this Mortgage, the Note and other Loan Documents to one
or more investors as a whole loan, (ii) participate the Loan secured by this
Mortgage to one or more investors, (iii) deposit this Mortgage, the Note and
other Loan Documents with a trust, which trust may sell certificates to
investors evidencing an ownership interest in the trust assets, or (iv)
otherwise sell the Loan or interest therein to investors (the transactions
referred to in clauses [i] through [iv] are hereinafter each referred to as
"Secondary Market Transaction"). Mortgagor shall cooperate with Mortgagee in
effecting any such Secondary Market Transaction and shall cooperate to
implement all requirements imposed by any Rating Agency (herein defined)
involved in any Secondary Market Transaction. Mortgagor shall provide such
information and documents relating to Mortgagor, Guarantor, if any, the
Mortgaged Property and any tenants of the Improvements as Mortgagee may
reasonably request in connection with such Secondary Market Transaction. In
addition, Mortgagor shall make available to Mortgagee all information
concerning its business and operations that Mortgagee may reasonably request.
Mortgagee shall be permitted to share all such information with the
investment banking firms, Rating Agencies (herein defined), accounting firms,
law firms and other third-party advisory firms involved with the Loan and the
Loan Documents or the applicable Secondary Market Transaction. It is
understood that the information provided by Mortgagor to Mortgagee may
ultimately be incorporated into the offering documents for the Secondary
Market Transaction and thus various investors may also see some or all of the
information. Mortgagee and all of the aforesaid third-party advisors and
professional firms shall be entitled to rely on the information supplied by,
or on behalf of, Mortgagor. Mortgagee may publicize the existence of the
Loan in connection with its marketing for a Secondary Market Transaction or
otherwise as part of its business development. The term "Rating Agencie.1'as
used herein shall mean each of Standard & Poor's Ratings Group, a division of
McGraw-Hill, Inc., Moody's Investors Service, Inc., Duff & Phelps Credit
Rating Co. and Fitch Investors Service, Inc. or any other nationally
recognized statistical rating agency which has been approved by Mortgagee;
21. Recording of Mortgage, Etc. Mortgagor forthwith upon the
execution and delivery of this Mortgage and thereafter, from time to time,
will cause this Mortgage, and any security instrument creating a lien or
security interest or evidencing the lien hereof upon the Mortgaged Property
and each instrument of further assurance to be filed, registered or recorded
in such manner and in such places as may be required by any present or future
law in order to publish notice of and fully to protect the lien or security
interest hereof upon, and the interest of Mortgagee in, the Mortgaged
Property. Mortgagor will pay all filing, registration or recording fees, and
all expenses incident to the preparation, execution and acknowledgment of
this Mortgage, any mortgage supplemental hereto, any security instrument with
respect to the Mortgaged Property and any instrument of further assurance,
and all federal, state, county and municipal, taxes, duties, imposts,
assessments and charges arising out of or in connection with the execution
and delivery of this Mortgage, any mortgage supplemental hereto, any security
instrument with respect to the Mortgaged Property or any instrument of
further assurance, except where prohibited by law so to do. Mortgagor shall
hold harmless and indemnify Mortgagee, its successors and assigns, against
any liability incurred by reason of the imposition of any tax on the making
and recording of this Mortgage.
22. Reporting Requirements. Mortgagor agrees to give prompt notice to
Mortgagee of the insolvency or bankruptcy filing of Mortgagor or the death,
insolvency or bankruptcy filing of any Guarantor.
23. Events of Default. The Debt shall become immediately due and
payable at the option of Mortgagee, upon the happening of any one or more of
the following events of default (each an "Event of Default"):
(a) if any regular installment of principal and/or interest on the Debt
is not paid within the period provided in the Note, and/or if any sum payable
by Mortgagor under the provisions of paragraph 5 hereof with respect to the
Tax and Insurance Escrow Fund is not paid within the period provided in the
Note for payment of installments of principal and interest, or if any other
portion of the Debt is not paid within five (5) days after the same is due;
(b) subject to Mortgagor's right to contest as provided herein, if any
of the Taxes or Other Charges are not paid when the same are due and payable;
(c) if the Policies are not kept in full force and effect, or if the
Policies are not delivered to Mortgagee upon request;
(d) if Mortgagor Transfers or encumbers any portion of the Mortgaged
Property without Mortgagee's prior written consent;
(e) if any representation or warranty of Mortgagor, or of any
Guarantor, made herein or in any other Loan Document, or in any certificate,
report, financial statement or other instrument or document furnished to
Mortgagee shall have been false or misleading in any material respect when
made;
(f) if Mortgagor or any Guarantor shall make an assignment for the
benefit of creditors or if Mortgagor shall generally not be paying its debts
as they become due;
(g) if a receiver, liquidator or trustee of Mortgagor or of any
Guarantor shall be appointed or if Mortgagor or any Guarantor shall be
adjudicated a bankrupt or insolvent, or if any petition for bankruptcy,
reorganization or arrangement pursuant to federal bankruptcy law, or any
similar federal or state law, shall be filed by or against, consented to, or
acquiesced in by, Mortgagor or any Guarantor or if any proceeding for the
dissolution or liquidation of Mortgagor or of any Guarantor shall be
instituted; however, if such appointment, adjudication, petition or
proceeding was involuntary and not consented to by Mortgagor or such
Guarantor, upon the same not being discharged, stayed or dismissed within
sixty (60) days;
(h) if Mortgagor shall be in default under any other mortgage or
security agreement covering any part of the Mortgaged Property whether it be
superior or junior in lien to this Mortgage;
(i) subject to Mortgagor's right to contest as provided herein, if the
Mortgaged Property becomes subject to any mechanic's, materialman's or other
lien except a lien for local real estate taxes and assessments not then due
and payable;
(j) if Mortgagor fails to cure properly any violations of laws or
ordinances affecting or which may be interpreted to affect the Mortgaged
Property within thirty (30) days after Mortgagor first receives notice of any
such violations;
(k) except as permitted in this Mortgage, the actual or threatened
alteration, improvement, demolition or removal of any of the Improvements
without the prior consent of Mortgagee;
(l) if Mortgagor shall continue to be in default under any term,
covenant, or provision of the Note, or any of the other Loan Documents,
beyond applicable cure periods contained in those documents;
(m) if Mortgagor fails to cure a default under any other term, covenant
or provision of this Mortgage within thirty (30) days after Mortgagor first
receives notice of any such default; provided, however, if such default is
reasonably susceptible of cure, but not within such thirty (30) day period,
then Mortgagor may be permitted up to an additional sixty (60) days to cure
such default provided that Mortgagor diligently and continuously pursues such
cure;
(n) if without Mortgagee's prior consent, (i) the hotel manager for the
Mortgaged Property under the Management Agreement (or any successor
management agreement) resigns or is removed, or (ii) the ownership,
management or control of such hotel manager is transferred to a person or
entity other than the general partner or managing partner of the Mortgagor,
or (iii) there is any material change in the Management Agreement (or any
successor management agreement);
(o) if a default has occurred and continues beyond any applicable cure
period under the Management Agreement (or any successor management agreement)
if such default permits the hotel manager to terminate or cancel the
Management Agreement (or any successor management agreement);
(p) if without Mortgagee's prior consent, there is any material change
in the License Agreement (or any successor franchise and/or license
agreement);
(q) if a default has occurred and continues beyond any applicable cure
period under the License Agreement (or any successor franchise and/or license
agreement) if such default permits the franchiser to terminate or cancel the
License Agreement (or any successor franchise and/or license agreement); or
(r) if Mortgagor ceases to do business as a hotel or motel on the
Mortgaged Property or terminates such business for any reason whatsoever
(other than temporary cessation in connection with any renovations to the
Mortgaged Property).
24. Late Payment Charge. If any portion of the Debt is not paid on the
date on which it is due, Mortgagor shall pay to Mortgagee upon demand an
amount equal to the lesser of five percent (5%) of such unpaid portion of the
Debt or the maximum amount permitted by applicable law in order to defray a
portion of the expenses incurred by Mortgagee in handling and processing such
delinquent payment and to compensate Mortgagee for the loss of the use of
such delinquent payment, and such amount shall be secured by this Mortgage.
25. Right To Cure Defaults. Upon the occurrence of any Event of Default
or if Mortgagor fails to make any payment or to do any act as herein
provided, Mortgagee may, but without any obligation to do so and without
notice to or demand on Mortgagor and without releasing Mortgagor from any
obligation hereunder, make or do the same in such manner and to such extent
as Mortgagee may deem necessary to protect the security hereof. Mortgagee is
authorized to enter upon the Mortgaged Property for such purposes or appear
in, defend, or bring any action or proceeding to protect its interest in the
Mortgaged Property or to foreclose this Mortgage or collect the Debt, and the
cost and expense thereof (including reasonable attorneys' fees and
disbursements to the extent permitted by law), with interest at the Default
Rate (as defined in the Note) for the period after notice from Mortgagee that
such cost or expense was incurred to the date of payment to Mortgagee, shall
constitute a portion of the Debt, shall be secured by this Mortgage, and the
other Loan Documents and shall be due and payable to Mortgagee upon demand.
26. Remedies.
(a) Upon the occurrence of any Event of Default, Mortgagee may take
such action, without notice or demand except as may be required by law or the
terms of this Mortgage, as it deems advisable to protect and enforce its
rights against Mortgagor and in and to the Mortgaged Property by Mortgagee
itself or otherwise, including, without limitation, the following actions,
each of which may be pursued concurrently or otherwise, at such time and in
such order as Mortgagee may determine, in its sole discretion, without
impairing or otherwise affecting the other rights and remedies of Mortgagee;
(i) declare the entire Debt to be immediately due and payable (and the
institution by Mortgagee of any action or process of foreclosure shall
automatically constitute the election by Mortgagee to accelerate the entire
Debt, unless specifically stated otherwise in writing by the Mortgagee);
(ii) institute a proceeding or proceedings, judicial or nonjudicial, by
advertisement or otherwise, for the complete foreclosure of this Mortgage in
which case the Mortgaged Property or any interest therein may be sold for
cash or upon credit in one or more parcels or in several interests or
portions and in any order or manner;
(iii) with or without entry, to the extent permitted and pursuant to the
procedures provided by applicable law, institute proceedings for the partial
foreclosure of this Mortgage for the portion of the Debt then due and
payable, subject to the continuing lien of this Mortgage for the balance of
the Debt not then due;
(iv) sell for cash or upon credit the Mortgaged Property or any part
thereof and all estate, claim, demand, right, title and interest of Mortgagor
therein and rights of redemption thereof, pursuant to the power of sale or
otherwise, at one or more sales, as an entirety or in parcels, at such time
and place, upon such terms and after such notice thereof as may be required
or permitted by law.
(v) institute an action, suit or proceeding in equity for the specific
performance of any covenant, condition or agreement contained herein or in
the other Loan Documents;
(vi) recover judgment on the Note either before, during or after any
proceedings for the enforcement of this Mortgage;
(vii) apply for the appointment of a trustee, receiver, liquidator or
conservator of the Mortgaged Property, without notice and without regard for
the adequacy of the security for the Debt, and without regard for the
solvency of the Mortgagor, any Guarantor or of any person, firm or other
entity liable for the payment of the Debt;
(viii) enforce Mortgagee's interest in the Leases and Rents and enter
into or upon the Mortgaged Property, either personally or by its agents,
nominees or attorneys and dispossess Mortgagor and its agents and servants
therefrom, and thereupon Mortgagee may (A) use, operate, manage, control,
insure, maintain, repair, restore and otherwise deal with all and every part
of the Mortgaged Property and conduct the business thereat; (B) complete any
construction on the Mortgaged Property in such manner and form as Mortgagee
deems advisable; (C) make alterations, additions, renewals, replacements and
improvements to or on the Mortgaged Property; (D) exercise all rights and
powers of Mortgagor with respect to the Mortgaged Property, whether in the
name of Mortgagor or otherwise, including, without limitation, the right to
make, cancel, enforce or modify Leases, obtain and evict tenants, and demand,
sue for, collect and receive all Rents; and (E) apply the receipts from the
Mortgaged Property to the payment of Debt, after deducting therefrom all
expenses (including reasonable attorneys' fees and disbursements) incurred in
connection with the aforesaid operations and all amounts necessary to pay the
taxes, assessments insurance and other charges in connection with the
Mortgaged Property, as well as just and reasonable compensation for the
services of Mortgagee, its counsel, agents and employees;
(ix) require Mortgagor to pay monthly in advance to Mortgagee, or any
receiver appointed to collect the Rents, the fair and reasonable rental value
for the use and occupation of any portion of the Mortgaged Property occupied
by Mortgagor and require Mortgagor to vacate and surrender possession to
Mortgagee of the Mortgaged Property or to such receiver and, in default
thereof, evict Mortgagor by summary proceedings or otherwise; or
(x) pursue such other rights and remedies as may be available at law or
in equity or under the Uniform Commercial Code including without limitation
the right to receive and/or establish a lock box for all Rents, proceeds from
the Intangibles, and any other receivables or rights to payments of Mortgagor
relating to the Mortgaged Property.
In the event of a sale, by foreclosure or otherwise, of less than all of
the Mortgaged Property, this Mortgage shall continue as a lien on the
remaining portion of the Mortgaged Property.
(b) The proceeds of any sale made under or by virtue of this paragraph,
together with any other sums which then may be held by Mortgagee under this
Mortgage, whether under the provisions of this paragraph or otherwise, shall
be applied by Mortgagee to the payment of the Debt in such priority and
proportion as Mortgagee in its sole discretion shall deem proper.
(c) Mortgagee may adjourn from time to time any sale by it to be made
under or by virtue of this Mortgage by announcement at the time and place
appointed for such sale or for such adjourned sale or sales; and, except as
otherwise provided by any applicable provision of law, Mortgagee, without
further notice or publication, may make such sale at the time and place to
which the same shall be so adjourned.
(d) Upon the completion of any sale or sales pursuant hereto, Mortgagee
or an officer of any court empowered to do so, shall execute and deliver to
the accepted purchaser or purchasers a good and sufficient instrument, or
good and sufficient instruments, conveying, assigning and transferring all
estate, right, title and interest in and to the property and rights sold.
Mortgagee is hereby irrevocably appointed the true and lawful attorney of
Mortgagor, in its name and stead, to make all necessary conveyances,
assignments, transfers and deliveries of the Mortgaged Property and rights so
sold and for that purpose Mortgagee may execute all necessary instruments of
conveyance, assignment and transfer, and may substitute one or more persons
with like power, Mortgagor hereby ratifying and confirming all that its said
attorney or such substitute or substitutes shall lawfully do by virtue
hereof. Any sale or sales made under or by virtue of this paragraph, whether
made under the power of sale herein granted or under or by virtue of judicial
proceedings or of a judgment or decree of foreclosure and sale, shall operate
to divest all the estate, right, title, interest, claim and demand
whatsoever, whether at law or in equity, of Mortgagor in and to the
properties and rights so sold, and shall be a perpetual bar both at law and
in equity against Mortgagor and against any and all persons claiming or who
may claim the same, or any part thereof from, through or under Mortgagor.
(e) Upon any sale made under or by virtue of this paragraph, whether
made under a power of sale or under or by virtue of judicial proceedings or
of a judgment or decree of foreclosure and sale, Mortgagee may bid for and
acquire the Mortgaged Property or any part thereof and in lieu of paying cash
therefor may make settlement for the purchase price by crediting upon the
Debt the net sales price after deducting therefrom the expenses of the sale
and costs of the action and any other sums which Mortgagee is authorized to
deduct under this Mortgage.
(f) No recovery of any judgment by Mortgagee and no levy of an
execution under any judgment upon the Mortgaged Property or upon any other
property of Mortgagor shall affect in any manner or to any extent the lien of
this Mortgage upon the Mortgaged Property or any part thereof, or any liens,
rights, powers or remedies of Mortgagee hereunder, but such liens, rights,
powers and remedies of Mortgagee shall continue unimpaired as before.
(g) Mortgagee may terminate or rescind any proceeding or other action
brought in connection with its exercise of the remedies provided in this
paragraph at any time before the conclusion thereof, as determined in
Mortgagee's sole discretion and without prejudice to Mortgagee.
(h) Mortgagee may resort to any remedies and the security given by the
Note, this Mortgage, or in any of the other Loan Documents in whole or in
part, and in such portions and in such order as determined by Mortgagee's
sole discretion. No such action shall in any way be considered a waiver of
any rights, benefits or remedies evidenced or provided by the Note, this
Mortgage or the other Loan Documents. The failure of Mortgagee to exercise
any right, remedy or option provided in the Note, this Mortgage or the other
Loan Documents shall not be deemed a waiver of such right, remedy or option
or of any covenant or obligation secured by the Note, this Mortgage or the
other Loan Documents. No acceptance by Mortgagee of any payment after the
occurrence of any Event of Default and no payment by Mortgagee of any
obligation for which Mortgagor is liable hereunder shall be deemed to waive
or cure any Event of Default with respect to Mortgagor, or Mortgagor's
liability to pay such obligation. No sale of all or any portion of the
Mortgaged Property, no forbearance on the part of Mortgagee, and no extension
of time for the payment of the whole or any portion of the Debt or any other
indulgence given by Mortgagee to Mortgagor, shall operate to release or in
any manner affect the interest of Mortgagee in the remaining Mortgaged
Property or the liability of Mortgagor to pay the Debt. No waiver by
Mortgagee shall be effective unless it is in writing and then only to the
extent specifically stated. All costs and expenses of Mortgagee in
exercising its rights and remedies under this Paragraph 26 (including
reasonable attorneys' fees and disbursements to the extent permitted by law),
shall be paid by Mortgagor immediately upon notice from Mortgagee, with
interest at the Default Rate for the period after notice from Mortgagee and
such costs and expenses shall constitute a portion of the Debt and shall be
secured by this Mortgage.
(i) The interests and rights of Mortgagee under the Note, this Mortgage
or the other Loan Documents shall not be impaired by any indulgence,
including (i) any renewal, extension or modification which Mortgagee may
grant with respect to any of the Debt, (ii) any surrender, compromise,
release, renewal, extension, exchange or substitution which Mortgagee may
grant with respect to the Mortgaged Property or any portion thereof; or (iii)
any release or indulgence granted to any maker, endorser, Guarantor or surety
of any of the Debt.
27. Right of Entry. In addition to any other rights or remedies granted
under this Mortgage, Mortgagee and its agents shall have the right to enter
and inspect the Mortgaged Property at any reasonable time during the Term.
In the event that Mortgagee determines, as a result of the inspection of the
Mortgaged Property, that an Event of Default exists, or a condition that with
the passage of time or the giving of notice, or both, would constitute such
an Event of Default, the costs of that inspection and, if additional costs or
expenses are incurred in connection with any such Event of Default all
follow-up or additional investigations or inquiries deemed reasonably
necessary by Mortgagee as a result of such inspection or condition, then
those additional expenses and costs, shall be borne by Mortgagor, and the
amount thereof shall be secured by this Mortgage and shall bear interest
thereafter at the Default rate until paid to Mortgagee in full upon demand.
28. Security Agreement. This Mortgage is both a real property mortgage
and a "security agreement" within the meaning of the Uniform Commercial Code.
The Mortgaged Property includes both real and personal property and all other
rights and interests, whether tangible or intangible in nature, of Mortgagor
in the Mortgaged Property. Mortgagor by executing and delivering this
Mortgage has granted and hereby grants to Mortgagee, as security for the
Debt, a security interest in the Mortgaged Property to the full extent that
the Mortgaged Property may be subject to the Uniform Commercial Code (said
portion of the Mortgaged Property so subject to the Uniform Commercial Code
being called in this paragraph the "Collateral"). Mortgagor hereby agrees
with Mortgagee to execute and deliver to Mortgagee, in form and substance
satisfactory to Mortgagee, such financing statements and such further
assurances as Mortgagee may from time to time, reasonably consider necessary
to create, perfect, and preserve Mortgagee's security interest herein
granted. This Mortgage shall also constitute a "fixture filing" for the
purposes of the Uniform Commercial Code. As such, this Mortgage covers all
items of the Collateral that are or are to become fixtures. Information
concerning the security interest herein granted may be obtained from the
parties at the addresses of the parties set forth in the first paragraph of
this Mortgage. If an Event of Default shall occur, Mortgagee, in addition to
any other rights and remedies which it may have, shall have and may exercise
immediately and without demand, any and all rights and remedies granted to a
secured party upon default under the Uniform Commercial Code, including,
without limiting the generality of the foregoing, the right to take
possession of the Collateral or any part thereof, and to take such other
measures as Mortgagee may deem necessary for the care, protection and
preservation of the Collateral. Upon request or demand of Mortgagee,
Mortgagor shall at its expense assemble the Collateral and make it available
to Mortgagee at a convenient place acceptable to Mortgagee. Mortgagor shall
pay to Mortgagee on demand any and all expenses, including attorneys' fees
and disbursements, incurred or paid by Mortgagee in protecting the interest
in the Collateral and in enforcing the rights hereunder with respect to the
Collateral. Any notice of sale, disposition or other intended action by
Mortgagee with respect to the Collateral sent to Mortgagor in accordance with
the provisions hereof at least five (5) days prior to such action, shall
constitute commercially reasonable notice to Mortgagor. The proceeds of any
disposition of the Collateral, or any part thereof, may be applied by
Mortgagee to the payment of the Debt in such priority and proportions as
Mortgagee in its sole discretion shall deem proper. In the event of any
change in name, identity or structure of any Mortgagor, such Mortgagor shall
notify Mortgagee thereof and promptly after request shall execute, file and
record such Uniform Commercial Code forms as are necessary to maintain the
priority of Mortgagee's lien upon and security interest in the Collateral,
and shall pay all expenses and fees in connection with the filing and
recording thereof. If Mortgagee shall require the filing or recording of
additional Uniform Commercial Code forms or continuation statements,
Mortgagor shall, promptly after request, execute, file and record such
Uniform Commercial Code forms or continuation statements as Mortgagee shall
deem necessary, and shall pay all expenses and fees in connection with the
filing and recording thereof, it being understood and agreed, however, that
no such additional documents shall increase Mortgagor's obligations under the
Note, this Mortgage and the other Loan Documents. Mortgagor hereby
irrevocably appoints Mortgagee as its attorney-in-fact, coupled with an
interest, to file with the appropriate public office on its behalf any
financing or other statements signed only by Mortgagee, as secured party, in
connection with the Collateral covered by this Mortgage.
29. Actions and Proceedings. Mortgagee has the right to appear in and
defend any action or proceeding brought with respect to the Mortgaged
Property and to bring any action or proceeding, in the name and on behalf of
Mortgagor, which Mortgagee, in its sole discretion, decides should be brought
to protect their interest in the Mortgaged Property. Mortgagee shall, at its
option, be subrogated to the lien of any mortgage or other security
instrument discharged in whole or in part by the Debt, and any such
subrogation rights shall constitute additional security for the payment of
the Debt.
30. Waiver of Setoff and Counterclaim. All amounts due under this
Mortgage, the Note and the other Loan Documents shall be payable without
setoff, counterclaim or any deduction whatsoever. Mortgagor hereby waives the
right to assert a setoff, counterclaim (other than a mandatory or compulsory
counterclaim) or deduction in any action or proceeding in which Mortgagee is
a participant, or arising out of or in any way connected with this Mortgage,
the Note, any of the other Loan Documents, or the Debt.
31. Contest of Certain Claims. Notwithstanding the provisions of
Paragraphs 4 and 23 hereof, Mortgagor shall not be in default for failure to
pay or discharge Taxes, Other Charges or mechanic's or materialman's lien
asserted against the Mortgaged Property if, and so long as, (a) Mortgagor
shall have notified Mortgagee of same within five (5) days of obtaining
knowledge thereof; (b) Mortgagor shall diligently and in good faith contest
the same by appropriate legal proceedings which shall operate to prevent the
enforcement or collection of the same and the sale of the Mortgaged Property
or any part thereof, to satisfy the same; (c) Mortgagor shall have furnished
to Mortgagee a cash deposit, or an indemnity bond satisfactory to Mortgagee
with a surety satisfactory to Mortgagee, in the amount of the Taxes, Other
Charges or mechanic's or materialman's lien claim, plus a reasonable
additional sum to pay all costs, interest and penalties that may be imposed
or incurred in connection therewith, to assure payment of the matters under
contest and to prevent any sale or forfeiture of the Mortgaged Property or
any part thereof; (d) Mortgagor shall promptly upon final determination
thereof pay the amount of any such Taxes, Other Charges or claim so
determined, together with all costs, interest and penalties which may be
payable in connection therewith; (e) the failure to pay the Taxes, Other
Charges or mechanic's or materialman's lien claim does not constitute a
default under any other deed of trust, mortgage or security interest covering
or affecting any part of the Mortgaged Property; and (f) notwithstanding the
foregoing, Mortgagor shall immediately upon request of Mortgagee pay (and if
Mortgagor shall fail so to do, Mortgagee may, but shall not be required to,
pay or cause to be discharged or bonded against) any such Taxes, Other
Charges or claim notwithstanding such contest, if in the opinion of
Mortgagee, the Mortgaged Property or any part thereof or interest therein may
be in danger of being sold, forfeited, foreclosed, terminated, canceled or
lost. Mortgagee may pay over any such cash deposit or part thereof to the
claimant entitled thereto at any time when, in the judgment of Mortgagee, the
entitlement of such claimant is established.
32. Recovery of Sums Required to be Paid. Mortgagee shall have the
right from time to time to take action to recover any sum or sums which
constitute a part of the Debt as the same become due, without regard to
whether or not the balance of the Debt shall be due, and without prejudice to
the right of Mortgagee thereafter to bring an action of foreclosure, or any
other action, for a default or defaults by Mortgagor existing at the time
such earlier action was commenced.
33. Marshaling and Other Matters. Mortgagor hereby waives, to the
extent permitted by law, the benefit of all appraisement, valuation, stay,
extension, reinstatement and redemption laws now or hereafter in force and
all rights of marshaling in the event of any sale hereunder of the Mortgaged
Property or any part thereof or any interest therein. Further, Mortgagor
hereby expressly waives any and all rights of redemption from sale under any
order or decree of foreclosure of this Mortgage on behalf of Mortgagor, and
on behalf of each and every person acquiring any interest in or title to the
Mortgaged Property subsequent to the date of this Mortgage and on behalf of
all persons to the extent permitted by applicable law.
34. Hazardous Substances. Mortgagor hereby represents and warrants to
Mortgagee that, to the best of Mortgagor's knowledge, after due inquiry and
investigation: (a) the Mortgaged Property is not in direct or indirect
violation of any local, state, federal or other governmental authority,
statute, ordinance, code, order, decree, law, rule or regulation pertaining
to or imposing liability or standards of conduct concerning environmental
regulation, contamination or clean-up including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended ("CERCLA"), the Resource Conservation and Recovery Act, as amended
("RCRA"), the Emergency Planning and Community Right-to-Know Act of 1986, as
amended, the Hazardous Substances Transportation Act, as amended, the Solid
Waste Disposal Act, as amended, the Clean Water Act, as amended, the Clean
Air Act, as amended, the Toxic Substance Control Act, as amended, the Safe
Drinking Water Act, as amended, the Occupational Safety and Health Act, as
amended, any state super-lien and environmental clean-up statutes, and all
regulations adopted in respect to the foregoing laws (collectively,
"Environmental Laws"); (b) the Mortgaged Property is not subject to any
private or governmental lien or judicial or administrative notice or action
or inquiry, investigation or claim relating to hazardous and/or toxic,
dangerous and/or regulated, substances, wastes, materials, raw materials
which include hazardous constituents, pollutants or contaminants, including
without limitation petroleum, tremolite, anthlophylie, actinolite or
polychlorinated biphenyls and any other substances or materials which are
included under or regulated by Environmental Laws or which are considered by
scientific opinion to be otherwise dangerous in terms of the health, safety
or welfare of humans (collectively, "Hazardous Substances"); (c) no Hazardous
Substances are or have been (including the period prior to Mortgagor's
acquisition of the Mortgaged Property) discharged, generated, treated,
disposed of or stored on, incorporated in, or removed or transported from the
Mortgaged Property other than in compliance with all Environmental Laws; (d)
no Hazardous Substances are present in, on or under any nearby real property
which could migrate to or otherwise affect the Mortgaged Property; (e) no
underground storage tanks exist on any of the Mortgaged Property; and (f) no
Hazardous Substances which are upon the Property, but which are not subject
to the Environmental Laws, present a threat to the health, safety or welfare
of any person. So long as Mortgagor owns or is in possession of the
Mortgaged Property, Mortgagor (i) shall keep or cause the Mortgaged Property
to be kept free from Hazardous Substances and in compliance with all
Environmental Laws, (ii) shall promptly notify Mortgagee if Mortgagor shall
become aware of any Hazardous Substances on or near the Mortgaged Property
and/or if Mortgagor shall become aware that the Mortgaged Property is in
direct or indirect violation of any Environmental Laws and/or if Mortgagor
shall become aware of any condition on or near the Mortgaged Property which
shall pose a threat to the health, safety or welfare of humans, and (iii)
shall remove such Hazardous Substances and/or cure such violations and/or
remove such threats, as applicable, as required by law (or as shall be
required by Mortgagee in the case of removal which is not required by law,
but in response to the opinion and recommendation of a licensed
hydrogeologist, licensed environmental engineer or other qualified consultant
engaged by Mortgagee ("Mortgagee's Consultant")), promptly after Mortgagor
becomes aware of same, at Mortgagor's sole expense. Nothing herein shall
prevent Mortgagor from recovering such expenses from any other party that may
be liable for such removal or cure. The obligations and liabilities of
Mortgagor under this paragraph shall survive any termination, satisfaction or
assignment of this Mortgage and the exercise by Mortgagee of any of its
rights or remedies hereunder, including, but not limited to, the acquisition
of the Mortgaged Property by foreclosure or a conveyance in lieu of
foreclosure.
35. Asbestos. Mortgagor represents and warrants that, to the best of
Mortgagor's knowledge, after due inquiry and investigation, no asbestos or
any substance or material containing asbestos ("Asbestos") is located on the
Mortgaged Property, except as may have been disclosed in an environmental
report delivered to Mortgagee prior to the date of this Mortgage. Mortgagor
shall not install in the Mortgaged Property, nor permit to be installed in
the Mortgaged Property, Asbestos and shall remove any Asbestos promptly upon
discovery to the satisfaction of Mortgagee, at Mortgagor's sole expense.
Mortgagor shall in all instances comply with, and ensure compliance by all
occupants of the Mortgaged Property with, all applicable federal, state and
local laws, ordinances, rules and regulations with respect to Asbestos, and
shall keep the Mortgaged Property free and clear of any liens imposed
pursuant to such laws, ordinances, rules or regulations. In the event that
Mortgagor receives any notice or advice from any governmental agency or any
source whatsoever with respect to Asbestos on, affecting or installed on the
Mortgaged Property, Mortgagor shall immediately notify Mortgagee. The
obligations and liabilities of Mortgagor under this paragraph shall survive
any termination, satisfaction or assignment of this Mortgage and the exercise
by Mortgagee of any of its rights or remedies hereunder, including, but not
limited to, the acquisition of the Mortgaged Property by foreclosure or a
conveyance in lieu of foreclosure.
36. Environmental Monitoring. Mortgagor shall give prompt written
notices to Mortgagee of: (a) any proceeding or inquiry by any party with
respect to the presence of any Hazardous Substance or Asbestos on, under,
from or about the Mortgaged Property, (b) all claims made or threatened by
any third party against Mortgagor or the Mortgaged Property relating to any
loss or injury resulting from any Hazardous Substance or Asbestos, and (c)
Mortgagor's discovery of any occurrence or condition on any real property
adjoining or in the vicinity of the Mortgaged Property that could cause the
Mortgaged Property to be subject to any investigation or cleanup pursuant to
any Environmental Law. Mortgagor shall permit Mortgagee to join and
participate in, as a party if it so elects, any legal proceedings or actions
initiated with respect to the Mortgaged Property in connection with any
Environmental Law, Hazardous Substance or Asbestos, and Mortgagor shall pay
all attorneys' fees and disbursements incurred by Mortgagee in connection
therewith. In the event that any environmental site assessment report
prepared for the Mortgaged Property recommends that an operations and
maintenance plan be implemented for Asbestos or any Hazardous Substance,
Mortgagor shall cause such operations and maintenance plan to be prepared and
implemented at Mortgagor's expense upon request of Mortgagee. In the event
that any investigation, site monitoring, containment, cleanup, removal,
restoration or other work of any kind is reasonably necessary or desirable
under any applicable Environmental Law (the "Remedial Work"), Mortgagor shall
commence and thereafter diligently prosecute to completion all such Remedial
Work within thirty (30) days after written demand by Mortgagee for
performance thereof (or such shorter period of time as may be required under
applicable law). All Remedial Work shall be performed by contractors
approved in advance by Mortgagee, and under the supervision of a consulting
engineer approved by Mortgagee. All costs and expenses of such Remedial Work
shall be paid by Mortgagor including, without limitation, Mortgagee's
reasonable attorneys' fees and disbursements incurred in connection with
monitoring or review of such Remedial Work. In the event Mortgagor shall
fail to timely commence, or cause to be commenced, or fail to diligently
prosecute to completion, such Remedial Work, Mortgagee may, but shall not be
required to, cause such Remedial Work to be performed, and all costs and
expenses thereof, or incurred in connection therewith, shall be added to the
Debt and shall bear interest thereafter, until paid, at the Default Rate.
37. Environmental Audits. Upon Mortgagee's request, at any time and
from time to time while this Mortgage is in effect, Mortgagor shall permit
Mortgagee and/or its agents to inspect or conduct an environmental inspection
or audit of the Mortgaged Property for the presence of Hazardous Substances
or Asbestos, and Mortgagor hereby grants to Mortgagee and its employees and
agents access to the Mortgaged Property and a license to undertake such
inspection or audit. Mortgagor shall reimburse Mortgagee for the cost of any
such inspection or audit (including the cost of licensed hydrologists or
licensed environmental engineer, and similarly qualified third parties
approved by Mortgagee) conducted by or at Mortgagee's direction, if: (i)
Mortgagee shall initiate that inspection or audit based upon a good faith
concern relating to the potential presence of Hazardous Substances or
Asbestos on the Mortgaged Property (including, by way of illustration and not
of limitation, any additional investigation or analysis initiated based upon
a recommendation contained in the report of any Phase I audit or inspection,
even if no Asbestos or Hazardous Substances are discovered as a result of
that additional investigation or analysis); or (ii) the results of any
inspection or audit disclose the presence of any Hazardous Substance or
Asbestos, and if any Remedial Work (as defined and provided in paragraph 35
of this Mortgage) shall be required in connection therewith. Notwithstanding
the foregoing, Mortgagor shall be required to reimburse the Mortgagee once
during the first ten years during the term of this Mortgage and thereafter
once during each successive five year period during the term of this Mortgage
for the costs of any such "Phase I" inspection or audit, without regard to
the basis upon which Mortgagee shall determine to conduct that inspection or
audit, with the exception that Mortgagee shall not charge Mortgagor for the
costs of any inspection or audit undertaken solely in connection with the
sale, assignment or transfer of the Note and this Mortgage or any interest
therein (unless payment by Mortgagor would otherwise be required under the
provisions of the foregoing clause [ii]). The cost of any such inspection or
audit for which Mortgagor shall be required to reimburse Mortgagee shall be
added to the principal balance of the sums due under the Note and this
Mortgage and shall bear interest thereafter, until paid, at the Default Rate.
The obligations and liabilities of Mortgagor under this paragraph shall
survive any termination, satisfaction, or assignment of this Mortgage and the
exercise by Mortgagee of any of its rights or remedies hereunder, including,
without limitation, the acquisition of the Mortgaged Property by foreclosure
or a conveyance in lieu of foreclosure.
38. Handicapped Access.
(a) Mortgagor agrees that the Mortgaged Property shall at all times
strictly comply to the extent applicable with the requirements of the
Americans with Disabilities Act of 1990, the Fair Housing Amendments Act of
1988 (if applicable), all state and local laws and ordinances related to
handicapped access and all rules, regulations, and orders issued pursuant
thereto including, without limitation, the Americans with Disabilities Act
Accessibility Guidelines for Buildings and Facilities (collectively "Access
Laws").
(b) Notwithstanding any provisions set forth herein or in any other
document regarding Mortgagee's approval of alterations of the Mortgaged
Property, Mortgagor shall not alter the Mortgaged Property in any manner
which would increase Mortgagor's responsibilities for compliance with the
applicable Access Laws without the prior written approval of Mortgagee. The
foregoing shall apply to tenant improvements constructed by Mortgagor or by
any of its tenants. Mortgagee may condition any such approval upon receipt
of a certificate of Access Law compliance from an architect, engineer, or
other person acceptable to Mortgagee.
(c) Mortgagor agrees to give prompt notice to Mortgagee of the receipt
by Mortgagor of any complaints related to violation of any Access Laws and of
the commencement of any proceedings or investigations which relate to
compliance with applicable Access Laws.
39. Indemnification. In addition to any other indemnifications provided
herein or in the other Loan Documents, Mortgagor shall protect, defend,
indemnify and save harmless Mortgagee from and against all liabilities,
obligations, claims, demands, damages, penalties, causes of action, losses,
fines, costs and expenses (including, without limitation, reasonable
attorneys' fees and disbursements), imposed upon or incurred by or asserted
against Mortgagee by reason of (a) ownership of this Mortgage, the Mortgaged
Property or any interest therein or receipt of any Rents; (b) any accident,
injury to or death of persons or loss of or damage to property occurring in,
on or about the Mortgaged Property or any part thereof or on the adjoining
sidewalks, curbs, adjacent property or adjacent parking areas, streets or
ways; (c) any use, nonuse or condition in, on or about the Mortgaged Property
or any part thereof or on adjoining sidewalks, curbs, adjacent property or
adjacent parking areas, streets or ways; (d) any failure on the part of
Mortgagor to perform or comply with any of the terms of this Mortgage; (e)
performance of any labor or services or the furnishing of any materials or
other property in respect of the Mortgaged Property or any part thereof; (f)
the presence, disposal, escape, seepage, leakage, spillage, discharge,
emission, release, or threatened release of any Hazardous Substance or
Asbestos on, from, or affecting the Mortgaged Property or any other property;
(g) any personal injury (including wrongful death) or property damage (real
or personal) arising out of or related to such Hazardous Substance or
Asbestos; (h) any lawsuit brought or threatened, settlement reached, or
government order relating to such Hazardous Substance or Asbestos; (i) any
violation of the Environmental Laws, which are based upon or in any way
related to such Hazardous Substance or Asbestos including, without
limitation, the costs and expenses of any Remedial Work, attorney and
consultant fees and disbursements, investigation and laboratory fees, court
costs, and litigation expenses; 0) any failure of the Mortgaged Property to
comply with any Access Laws; (k) any representation or warranty made in the
Note, this Mortgage or the other Loan Documents being false or misleading in
any material respect as of the date such representation or warranty was made;
(1) any claim by brokers, finders or similar persons claiming to be entitled
to a commission in connection with any Lease or other transaction involving
the Mortgaged Property or any part thereof under any legal requirement or any
liability asserted against Mortgagee with respect thereto; and (m) the claims
of any tenant of any or any portion of the Mortgaged Property or any person
acting through or under any tenant or otherwise arising under or as a
consequence of any Lease. Any amounts payable to Mortgagee by reason of the
application of this paragraph shall be secured by this Mortgage and shall
become immediately due and payable and shall bear interest at the Default
Rate from the date loss or damage is sustained by Mortgagee until paid. The
obligations and liabilities of Mortgagor under this paragraph shall survive
any termination, satisfaction or assignment of this Mortgage and the exercise
by Mortgagee of any of its rights or remedies hereunder, including, but not
limited to, the acquisition of the Mortgaged Property by foreclosure or a
conveyance in lieu of foreclosure.
40. Notices. Any notice, demand, statement, request or consent made
hereunder shall be in writing and shall be deemed to be received by the
addressee on the third (3rd) day following the day such notice is deposited
with the United States postal service first class certified mail, return
receipt requested, addressed to the address, as set forth above, of the party
to whom such notice is to be given, or to such other address as Mortgagor or
Mortgagee, as the case may be, shall in like manner designate in writing.
41. Authority. (a) Mortgagor (and the undersigned representative of
Mortgagor, if any) represent and warrant that it (or they, as the case may
be) has full power, authority and right to execute, deliver and perform its
obligations pursuant to this Mortgage, and to mortgage, give, grant, bargain,
sell, alien, enfeoff, convey, confirm, warrant, pledge, hypothecate and
assign the Mortgaged Property pursuant to the terms hereof and to keep and
observe all of the terms of this Mortgage on Mortgagor's part to be
performed; and (b) Mortgagor represents and warrants that Mortgagor is not a
"foreign person" within the meaning of Section 1445(f)(3) of the Internal
Revenue Code of 1986, as amended and the related Treasury Department
regulations, including temporary regulations.
42. Waiver of Notice. Mortgagor shall not be entitled to any notices of
any nature whatsoever from Mortgagee except with respect to matters for which
this Mortgage specifically and expressly provides for the giving of notice by
Mortgagee to Mortgagor and except with respect to matters for which Mortgagee
is required by applicable law to give notice, and Mortgagor hereby expressly
waives the right to receive any notice from Mortgagee with respect to any
matter for which this Mortgage does not specifically and expressly provide
for the giving of notice by Mortgagee to Mortgagor.
43. Remedies of Mortgagor. In the event that a claim or adjudication is
made that Mortgagee has acted unreasonably or unreasonably delayed acting in
any case where by law or under the Note, this Mortgage or the other Loan
Documents, it has an obligation to act reasonably or promptly, Mortgagee
shall not be liable for any monetary damages, and Mortgagor's remedies shall
be limited to injunctive relief or declaratory judgment.
44. Sole Discretion of Mortgagee. Wherever pursuant to this Mortgage,
Mortgagee exercises any right given to it to consent or not consent or
approve or disapprove, or any arrangement or term is to be satisfactory to
Mortgagee, the decision of Mortgagee to consent or not consent, to approve or
disapprove or to decide that arrangements or terms are satisfactory or not
satisfactory shall be in the sole discretion of Mortgagee and shall be final
and conclusive, except as may be otherwise expressly and specifically
provided herein.
45. Non-Waiver. The failure of Mortgagee to insist upon strict
performance of any term hereof shall not be deemed to be a waiver of any term
of this Mortgage. Mortgagor shall not be relieved of Mortgagor's obligations
hereunder by reason of (a) the failure of Mortgagee to comply with any
request of Mortgagor or Guarantor to take any action to foreclose this
Mortgage or otherwise enforce any of the provisions hereof or of the Note or
the other Loan Documents, (b) the release, regardless of consideration, of
the whole or any part of the Mortgaged Property, or of any person liable for
the Debt or any portion thereof, or (c) any agreement or stipulation by
Mortgagee extending the time of payment or otherwise modifying or
supplementing the terms of the Note, this Mortgage or the other Loan
Documents. Mortgagee may resort for the payment of the Debt to any other
security held by Mortgagee in such order and manner as Mortgagee, in its sole
discretion, may elect. Mortgagee may take action to recover the Debt, or any
portion thereof, or to enforce any covenant hereof without prejudice to the
right of Mortgagee thereafter to foreclosure this Mortgage. The rights and
remedies of Mortgagee under this Mortgage shall be separate, distinct and
cumulative and none shall be given effect to the exclusion of the others. No
act of Mortgagee shall be construed as an election to proceed under any one
provision herein to the exclusion of any other provision. Mortgagee shall not
be limited exclusively to the rights and remedies herein stated but shall be
entitled to every right and remedy now or hereafter afforded at law or in
equity.
46. No Oral Change. This Mortgage, and any provisions hereof, may not
be modified, amended, waived, extended, changed, discharged or terminated
orally or by any act or failure to act on the part of Mortgagor or Mortgagee,
but only by an agreement in writing signed by the party against whom
enforcement of any modification, amendment, waiver, extension, change,
discharge or termination is sought.
47. Liability. If Mortgagor consists of more than one person, the
obligations and liabilities of each such person hereunder shall be joint and
several. Subject to the provisions hereof requiring Mortgagee's consent to
any transfer of the Mortgaged Property, this Mortgage shall be binding upon
and inure to the benefit of Mortgagor and Mortgagee and their respective
successors and assigns forever.
48. Inapplicable Provisions. If any term, covenant or condition of the
Note or this Mortgage is held to be invalid, illegal or unenforceable in any
respect, the Note and this Mortgage shall be construed without such
provision.
49. Headings, Etc. The headings and captions of various paragraphs of
this Mortgage are for convenience of reference only and are not to be
construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.
50. Duplicate Originals. This Mortgage may be executed in any number
of duplicate originals and each such duplicate original shall be deemed to be
an original.
51. Definitions. Unless the context clearly indicates a contrary intent
or unless otherwise specifically provided herein, words used in this Mortgage
may be used interchangeably in singular or plural form and the word
"Mortgagor" shall mean "each Mortgagor and any subsequent owner or owners of
the Mortgaged Property or any part thereof or any interest therein," the word
"Mortgagee" shall mean "Mortgagee and any subsequent holder of the Note," the
word "Note" shall mean "the Note and any other evidence of indebtedness
secured by this Mortgage," the word "person" shall include an individual,
corporation, partnership, trust, unincorporated association, government,
governmental authority, and any other entity, the words "Mortgaged Property"
shall include any portion of the Mortgaged Property and any interest therein
and the words "attorneys' fees shall include any and all attorneys' fees,
paralegal and law clerk fees, including, without limitation, fees at the
pre-trial, trial and appellate levels incurred or paid by Mortgagee in
protecting its interest in the Mortgaged Property and Collateral and
enforcing its rights hereunder. Notwithstanding anything to the contrary in
this Mortgage, no reference in this Mortgage to the other Loan Documents
shall be deemed to include the Environmental and Hazardous Substance
Indemnity Agreement executed by Mortgagor in favor of Mortgagee (the
"Environmental Indemnity"). Whenever the context may require, any pronouns
used herein shall include the corresponding masculine, feminine or neuter
forms, and the singular form of nouns and pronouns shall include the plural
and vice versa.
52. Homestead. Mortgagor hereby waives and renounces all homestead and
exemption rights provided by the Constitution and the laws of the United
States and of any state, in and to the Mortgaged Property as against the
collection of the Debt, or any part hereof.
53. Assignments. Mortgagee shall have the right to assign or transfer
its rights under this Mortgage without limitation. Any assignee or
transferee shall be entitled to all the benefits afforded Mortgagee under
this Mortgage.
54. Waiver of Jury Trial. MORTGAGOR HEREBY AGREES NOT TO ELECT A TRIAL
BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL
BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST
WITH REGARD TO THE NOTE, THIS MORTGAGE, OR THE OTHER LOAN DOCUMENTS, OR ANY
CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS
WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY
MORTGAGOR, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH
ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE.
MORTGAGEE IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY
PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY MORTGAGOR.
55. Miscellaneous.
(a) Any consent or approval by Mortgagee in any single instance shall
not be deemed or construed to be Mortgagee's consent or approval in any like
matter arising at a subsequent date, and the failure of Mortgagee to promptly
exercise any right, power, remedy, consent or approval provided herein or at
law or in equity shall not constitute or be construed as a waiver of the same
nor shall Mortgagee be estopped from exercising such right, power, remedy,
consent or approval at a later date. Any consent or approval requested of
and granted by Mortgagee pursuant hereto shall be narrowly construed to be
applicable only to Mortgagor and the matter identified in such consent or
approval and no third party shall claim any benefit by reason thereof, and
any such consent or approval shall not be deemed to constitute Mortgagee a
venturer or partner with Mortgagor nor shall privity of contract be presumed
to have been established with any such third party. If Mortgagee deems it to
be in its best interest to retain assistance of persons, firms or
corporations (including, without limitation, attorneys, title insurance
companies, appraisers, engineers and surveyors) with respect to a request for
consent or approval, Mortgagor shall reimburse Mortgagee for all costs
reasonably incurred in connection with the employment of such persons, firms
or corporations.
(b) Mortgagor covenants and agrees that during the Term, unless
Mortgagee shall have previously consented in writing, (a) Mortgagor will take
no action that would cause it to become an "employee benefit plan" as defined
in 29 C.F.R. Section 2510.3-1 01, or "assets of a governmental plan" subject
to regulation under the state statutes, and (b) Mortgagor will not sell,
assign or transfer the Mortgaged Property, or any portion thereof or interest
therein, to any transferee that does not execute and deliver to Mortgagee its
written assumption of the obligations of this covenant. Mortgagor further
covenants and agrees to protect, defend, indemnify and hold Mortgagee
harmless from and against all loss, cost, damage and expense (including
without limitation, all attorneys' fees and excise taxes, costs of correcting
any prohibited transaction or obtaining an appropriate exemption) that
Mortgagee may incur as a result of Mortgagor's breach of this covenant. This
covenant and indemnity shall survive the extinguishment of the lien of this
Mortgage by foreclosure or action in lieu thereof; furthermore, the foregoing
indemnity shall supersede any limitations on Mortgagor's liability under any
of the Loan Documents.
(c) The Loan Documents contain the entire agreement between Mortgagor
and Mortgagee relating to or connected with the Loan. Any other agreements
relating to or connected with the Loan not expressly set forth in the Loan
Documents are null and void and superseded in their entirety by the
provisions of the Loan Documents.
(d) Mortgagor represents and warrants to Mortgagee that there has not
been committed by Mortgagor or any other person in occupancy of or involved
with the operation or use of the Mortgaged Property any act or omission
affording the federal government or any state or local government the right
of forfeiture as against the Mortgaged Property or any part thereof or any
monies paid in performance of Mortgagor's obligations under the Note or under
any of the other Loan Documents. Mortgagor hereby covenants and agrees not
to commit, permit or suffer to exist any act, omission or circumstance
affording such right of forfeiture. In furtherance thereof, Mortgagor hereby
indemnities Mortgagee and agrees to defend and hold Mortgagee harmless from
and against any loss, damage or injury by reason of the breach of the
covenants and agreements or the representations and warranties set forth in
this paragraph. Without limiting the generality of the foregoing, the filing
of formal charges or the commencement of proceedings against Mortgagor or all
or any part of the Mortgaged Property under any federal or state law for
which forfeiture of the Mortgaged Property or any part thereof or of any
monies paid in performance of Mortgagor's obligations under the Loan
Documents is a potential result, shall, at the election of Mortgagee,
constitute an Event of Default hereunder without notice or opportunity to
cure.
56. Non-Recourse Provisions. Subject to the qualifications below,
Mortgagee shall not enforce the liability and obligation of Mortgagor to
perform and observe the obligations contained in this Mortgage, the Note or
the other Loan Documents by any action or proceeding wherein a money judgment
shall be sought against Mortgagor, except that Mortgagee may bring a
foreclosure action, an action for specific performance or any other
appropriate action or proceeding to enable Mortgagee to enforce and realize
upon its interests under the Note, this Mortgage or the other Loan Documents
or in the Mortgaged Property, the Rents or any other collateral given to
Mortgagee pursuant to this Mortgage and the other Loan Documents; provided,
however, that, except as specifically provided herein, any judgment in any
such action or proceeding shall be enforceable against Mortgagor only to the
extent of Mortgagor's interest in the Mortgaged Property, in the Rents and in
any other collateral given to Mortgagee, and Mortgagee, by accepting this
Mortgage, the Note and the other Loan Documents, agrees that it shall not sue
for, seek or demand any deficiency judgment against Mortgagor, in any such
action or proceeding, under or by reason of or in connection with this
Mortgage, the Note or the other Loan Documents. The provisions of this
paragraph shall not, however, (i) constitute a waiver, release or impairment
of any obligation evidenced or secured by this Mortgage, the Note or the
other Loan Documents; (ii) impair the right of Mortgagee to name Mortgagor as
a party defendant in any action or suit for foreclosure and sale under this
Mortgage; (iii) affect the validity or enforceability of any guaranty made in
connection with the Loan or any of the rights and remedies of the Mortgagee
thereunder; (iv) impair the right of Mortgagee to obtain the appointment of a
receiver; (v) impair the enforcement of the Assignment of Leases and Rents or
the Environmental Indemnity executed in connection herewith; or (vi)
constitute a waiver of the right of Mortgagee to enforce the liability and
obligation of Mortgagor, by money judgment or otherwise, to the extent of any
loss, damage, cost, expense, liability, claim or other obligation incurred by
Mortgagee (including attorneys' fees and costs reasonably incurred) arising
out of or in connection with the following:
(a) fraud or intentional misrepresentation by Mortgagor or any
Guarantor in connection with the Loan:
(b) the gross negligence or willful misconduct of Mortgagor;
(c) physical waste of the Mortgaged Property;
(d) the breach of any provision in that certain Environmental and
Hazardous Substance Indemnification Agreement of even date herewith given by
Mortgagor to Mortgagee or in this Mortgage concerning Environmental Laws,
Hazardous Substances and Asbestos and any indemnification of Mortgagee with
respect thereto in either document;
(e) the removal or disposal of any portion of the Mortgaged Property
after an Event of Default;
(f) the misapplication or conversion by Mortgagor of (i) any insurance
proceeds paid by reason of any loss, damage or destruction to the Mortgaged
Property, (ii) any awards or other amounts received in connection with the
condemnation of all or a portion of the Mortgaged Property, or (iii) any
Rents following an Event of Default;
(g) costs incurred by Mortgagee (including reasonable attorneys' fees)
in the collection or enforcement of the Debt, the protection or foreclosure
of the security therefor, or the enforcement of the Loan Documents;
(h) failure to pay taxes (provided that the liability of Mortgagor
shall be only for amounts in excess of the amount held by Mortgagee in escrow
for the payment of taxes, computed without taking into consideration any
portion of any such escrow that Mortgagee may have applied in satisfaction of
any portion of the Debt other than those taxes), assessments, charges for
labor or materials or other charges that can create liens on any portion of
the Mortgaged Property; and
(i) any security deposits collected with respect to the Mortgaged
Property which are not delivered to Mortgagee upon a foreclosure of the
Mortgaged Property or action in lieu thereof, except to the extent any such
security deposits were applied in accordance with the terms and conditions of
any of the Leases prior to the occurrence of the Event of Default that gave
rise to such foreclosure or action in lieu thereof.
Notwithstanding anything to the contrary in any of the Loan Documents,
(i) Mortgagee shall not be deemed to have waived any right which Mortgagee
may have under Sections 506(a), 506(b), 1111(b) or any other provisions of
the U.S. Bankruptcy Code to file a claim for the full amount of the Debt
secured by this Mortgage or to require that all collateral shall continue to
secure all of the Debt owing to Mortgagee in accordance with the Loan
Documents, and (ii) the Debt shall be fully recourse to Mortgagor, and
Mortgagor shall be liable for all damages, (including but not limited to
attorneys' fees and expenses reasonably incurred) arising, in the event that:
(i) the first full monthly payment of principal and interest under the
Note is not paid when due;
(ii) Mortgagor tails to permit on-site inspections of the Mortgaged
Property, tails to provide financial information (if unremedied as permitted
in paragraph 22[m] of this Mortgage), or fails to maintain its status as a
single purpose entity, each as required by, and in accordance with the terms
of, this Mortgage;
(iii) Mortgagor fails to obtain Mortgagee's prior written consent to any
subordinate financing or other voluntary lien encumbering the Mortgaged
Property; or
(iv) Mortgagor fails to obtain Mortgagee's prior written consent to any
Transfer (as defined in this Mortgage), as required by this Mortgage.
57. Defeasance.
(a) At any time after the date which is three years from the date
hereof and provided no Event of Default exists, Mortgagor may obtain the
release of the Mortgaged Property from the lien of this Mortgage upon the
satisfaction of the following conditions precedent:
(i) not less than thirty (30) days prior written notice to Mortgagee
specifying a regularly scheduled payment date (the "Release Date") on which
the Defeasance Deposit (hereinafter defined) is to be made;
(ii) the payment to Mortgagee of interest accrued and unpaid on the
principal balance of the Note to and including the Release Date;
(iii) the payment to Mortgagee of all other sums, not including
scheduled interest or principal payments, due under the Note, this Mortgage,
the Assignment of Leases, and the other Loan Documents;
(iv) the payment to Mortgagee of the Defeasance Deposit: and
(v) the delivery to Mortgagee of:
(a) a security agreement, in form and substance satisfactory to
Mortgagee, creating a first priority lien on the Defeasance Deposit and the
U.S. Obligations (hereinafter defined) purchased on behalf
of Mortgagor with the Defeasance Deposit in accordance with this provision of
this paragraph (the "Security Agreement");
(b) a release of the Mortgaged Property from the lien of this Mortgage
(for execution by Mortgagee) in a form appropriate for the jurisdiction in
which the Mortgaged Property is located;
(c) an officer's certificate of Mortgagor certifying that the
requirements set forth in this subparagraph (a) have been satisfied;
(d) an opinion of counsel for Mortgagor in form satisfactory to
Mortgagee stating, among other things, that Mortgagee has a perfected first
priority security interest in the Defeasance Deposit and the U.S. Obligations
purchased by Mortgagee on behalf of Mortgagor;
(e) evidence in writing from the applicable Rating Agencies to the
effect that such release will not result in a requalification, reduction or
withdrawal of any rating in effect immediately prior to such defeasance for
any securities issued in connection with a Secondary Market Transaction; and
(f) such other certificates, documents or instruments as Mortgagee may
reasonably request.
In connection with the conditions set forth in subparagraph (a)(v)
above, Mortgagor hereby appoints Mortgagee as its agent and attorney-in-fact
for the purpose of using the Defeasance Deposit to purchase U.S. Obligations
which provide payments on or prior to, but as close as possible to, all
successive scheduled payment dates after the Release Date upon which interest
and principal payments are required under the Note (including the amounts due
on the Maturity Date) and in amounts equal to the scheduled payments due on
such dates under the Note (the "Scheduled Defeasance Payment@'). Mortgagor,
pursuant to the Security Agreement or other appropriate document, shall
authorize and direct that the payments received from the U.S. Obligations may
be made directly to Mortgagee and applied to satisfy the obligations of the
Mortgagor under the Note.
(b) Upon compliance with the requirements of this paragraph, the
Mortgaged Property shall be released from the lien of this Mortgage and the
pledged U.S. Obligations shall be the sole source of collateral securing the
Note. Any portion of the Defeasance Deposit in excess of the amount
necessary to purchase the U.S. Obligations required by subparagraph (a) above
and satisfy the Mortgagor's obligations under this paragraph shall be
remitted to the Mortgagor with the release of the Mortgaged Property from the
lien of this Mortgage. In connection with such release, Nomura Asset Capital
Corporation ("NACC") shall establish or designate a successor entity (the
"Successor Mortgagor") and Mortgagor shall transfer and assign all
obligations, rights and duties under and to the Note together with the
pledged U.S. Obligations to such Successor Mortgagor. The obligation of NACC
to establish or designate a Successor Mortgagor shall be retained by NACC
notwithstanding the sale or transfer of this Mortgage unless such obligation
is specifically assumed by the transferee. Such Successor Mortgagor shall
assume the obligations under the Note and the Security Agreement and
Mortgagor shall be relieved of its obligations thereunder. The Mortgagor
shall pay $1,000 to any such Successor Mortgagor as consideration for
assuming the obligations under the Note and the Security Agreement.
Notwithstanding anything in this Mortgage to the contrary, no other
assumption fee shall be payable upon a transfer of the Note in accordance
with this paragraph, but Mortgagor shall pay all costs and expenses incurred
by Mortgagee, including Mortgagee's attorneys' fees and expenses, incurred in
connection with this paragraph.
(c) For purposes of this paragraph, the following terms shall have
the following meanings:
(i) The term "Defeasance Deposit" shall mean an amount equal to the
remaining principal amount of the Note, the Yield Maintenance Premium, any
costs and expenses incurred or to be incurred in the purchase of U.S.
Obligations necessary to meet the Scheduled Defeasance Payments and any
revenue, documentary stamp or intangible taxes or any other tax or charge due
in connection with the transfer of the Note or otherwise required to
accomplish the agreements of this Paragraph 57;
(ii) The term "Yield Maintenance Premium" shall mean the amount (if any)
which, when added to the remaining principal amount of the Note, will be
sufficient to purchase U.S. obligations providing the required Scheduled
Defeasance Payments; and
(iii) The term "U.S. Obligations" shall mean direct noncallable
obligations of the United States of America
58. Certain Hotel Covenants. Mortgagor further covenants and agrees with
Mortgagee as follows:
(a) Mortgagor shall cause the hotel located on the Mortgaged Property
to be operated pursuant to the License Agreement and the Management
Agreement.
(b) Mortgagor shall:
(i) promptly perform and/or observe all of the covenants and agreements
required to be performed and observed by it under the License Agreement and
the Management Agreement and do all things necessary to preserve and to keep
unimpaired its material rights thereunder;
(ii) promptly notify Mortgagee of any default under the License
Agreement or the Management Agreement of which it is aware;
(iii) promptly deliver to Mortgagor a copy of each financial statement,
business plan, capital expenditures plan, notice, report and estimate
received by it under the License Agreement or the Management Agreement; and
(iv) promptly enforce the performance and observance of all of the
covenants and agreements required to be performed and/or observed by the
franchiser under the License Agreement and the manager under the Management
Agreement.
(c) Mortgagor shall not, without Mortgagor's prior consent:
(i) surrender, terminate or cancel the License Agreement or the
Management Agreement;
(ii) reduce or consent to the reduction of the term of the License
Agreement or the Management Agreement;
(iii) increase or consent to the increase of the amount of any charges
under the License Agreement or the Management Agreement; or
(iv) otherwise modify, change, supplement, alter or amend, or waive or
release any of its rights and remedies under, the License Agreement or the
Management Agreement in any material respect.
(d) Mortgagor shall not, without Mortgagee's prior consent, enter into
transactions with any affiliate, including without limitation any arrangement
providing for the managing of the hotel on the Mortgaged Property, the
rendering or receipt of services or the purchase or sale of inventory, except
any such transaction in the ordinary course of business of Mortgagor if the
monetary or business consideration arising therefrom would be substantially
as advantageous to Mortgagor as the monetary or business consideration that
would obtain in a comparable transaction with a person not an affiliate of
Mortgagor.
(e) Mortgagor shall achieve and within forty-five (45) days of the end
of each calendar quarter provide evidence to Mortgagee of the achievement of
a Debt Service Coverage Ratio for the Mortgaged Property of not less than 1.2
to 1 .0. For purposes of this Mortgage, "Debt Service Coverage Ratio" shall
mean a ratio in which:
(i) the first number is the sum of pre-tax income from normal hotel
operations of the Improvements as set forth in the quarterly statements
provided pursuant to Paragraph 18 hereof (and compared against the annual
statements for the operation of the Improvements as required under paragraph
18), without deduction for (A) actual management fees paid in connection with
the operation of the Improvements, (B) franchise and/or license fees, (C)
debt service on the Note, calculated based upon the preceding twelve (12)
months, plus interest expense and non-cash expenses or allowances for
depreciation and amortization of the Mortgaged Property for said period, or
(D) any amounts paid or payable as distributions or other payments to
partners (to the extent not otherwise deducted in determining pretax income,
but whether or not classified as an expense according to generally accepted
accounting principles), less (1) management fees equal to the greater of (w)
assumed management fees of four percent (4%) of total room revenues for said
period or (x) the actual management fees, and (2) franchise and/or license
fees equal to the greater of (y) assumed franchise and/or license fees of
four percent (4%) of total room revenues for said period or (z) the actual
franchise and/or license fees; provided, however, that the total amount to be
subtracted as management and franchise and/or license fees shall be the
higher of the actual combined amount of such fees or 8% of total room
revenues for said period; and
(ii) the second number is the annual aggregate amount of principal and
interest payments on the current portion of the long term debt (i.e.,
obligations that are due more than one (1) year from the date as of which the
computation thereof is made) incurred for the benefit of the Mortgaged
Property (including debt service on the Note). All calculations of Debt
Service Coverage Ratio shall be subject to verification by Mortgagee.
(f) Mortgagor shall maintain the Management Agreement for the operation
of the Mortgaged Property in full force and effect and timely perform all of
Mortgagor's obligations thereunder and enforce performance of all obligations
of the manager thereunder, and not permit the termination or amendment of
such Management Agreement unless the prior written consent of Mortgagee is
first obtained. Mortgagor will enter into and cause the manager to enter
into an assignment and subordination of such Management Agreement in form
satisfactory to Mortgagee, assigning and subordinating the manager's interest
in the Mortgaged Property and all fees and other rights of the manager
pursuant to such Management Agreement to the rights of Mortgagee. Upon an
Event of Default Mortgagor at Mortgagee's request made at any time while such
Event of Default continues, shall terminate the Management Agreement and
replace the manager with a manager approved by Mortgagee.
(g) Notwithstanding anything in this Mortgage or the other Loan
Documents to the contrary, the declaration of a default by Ramada Franchise
Systems, Inc. a Delaware corporation (or its successor in interest, each
hereafter referred to as "Ramada"), under that certain License Agreement
entered into between Ridgewood Properties, Inc., a Delaware corporation, (as
"Licensee"), and Ramada, the Licensee's interest in which has been or is to
be assigned to Mortgagor, shall constitute a matured Event of Default under
this Mortgage, the Note and the other Loan Documents.
Special Florida Provisions.
(a) Future Advances. This Mortgage secures such future or additional
advances as may be made by the Mortgagee or the holder hereof, at its
exclusive option, to the Mortgagor or its successors or assigns in title, for
any purpose, provided that all such advances are made within 20 years from
the date of this Mortgage or within such lesser period of time as may be
provided by law as a prerequisite for the sufficiency of actual notice or
record notice of such optional future or additional advances as against the
rights of creditors or subsequent purchasers for valuable consideration to
the same extent as if such future or additional advances were made on the
date of the execution of this Mortgage. The total amount of indebtedness
secured by this Mortgage may be increased or decreased from time to time, but
the total unpaid balance so secured at any one time shall not exceed twice
the face amount of the Note, plus interest thereon and any disbursements made
under this Mortgage for the payment of impositions, taxes, assessments,
levies, insurance, or otherwise with interest on such disbursements, plus any
increases in the principal balance as the result of negative amortization or
deferred interest, if any. All such future advances shall be secured to the
same extent as if made on the date of the execution of this Mortgage and this
Mortgage shall secure the payment of the Note and any additional advances
made from time to time pursuant hereto, all of said indebtedness being
equally secured hereby and having the same priority as any amounts advanced
as of the date of this Mortgage. It is agreed that any additional sum or
sums advanced by Mortgagee shall be equally secured with and have the same
priority as the original indebtedness and shall be subject to all of the
terms, provisions and conditions of this Mortgage, whether or not such
additional loans or advances are evidenced by other promissory notes or other
guaranties of Mortgagor and whether or not identified by a recital that it or
they are secured by this Mortgage. It is further agreed that any additional
promissory note or guaranty or promissory notes or guaranties executed and
delivered pursuant to this paragraph shall automatically be deemed to be
included in the term "Note" wherever it appears in the context of this
Mortgage. Without the prior written consent of Mortgagee, which Mortgagee
may grant or withhold in its sole discretion, Mortgagor shall not file for
record any notice limiting the maximum principal amount that may be secured
by this Mortgage to a sum less than the maximum principal amount set forth in
this paragraph.
IN WITNESS WHEREOF, Mortgagor has executed this instrument the day and
year first above written.
MORTGAGOR:
Ridgewood Orlando, Inc., a Florida
corporation
By: /s/ N. R. Walden
N. Russell Walden, President
And By: /s/ Karen S. Hughes
Karen S. Hughes, Secretary
STATE OF GEORGIA
COUNTY OF FULTON
The foregoing document was acknowledged before me this 28th date of June,
1995, by N. Russell Walden, President and Karen S. Hughes, Secretary of
Ridgewood Orlando, Inc., a Florida corporation on behalf of the corporation.
N. Russel Walden and Karen, S. Hughes are either personally known to me or
produced Drivers License as identification.
/s/ June D. Smith
Notary Public, Gwinnett County, Georgia
My Commission Expires: August 6, 1995
(SEAL)
EXHIBIT A
Legal Description
A portion of the Southeast quarter of the Northwest quarter of Section 2,
Township 21 South, Range 29 East, County of Seminole, State of Florida, more
particularly described as follows:
Beginning at the Northwest corner of the Northwest Quarter of the Northeast
Quarter of the Southwest Quarter of Section 2, Township 21 South, Range 29
East; thence North 00 degrees 14'19" West 180.52 feet to the True Point of
Beginning; thence North 00 degrees 12'19" West 498.38 feet; thence North
58 degrees 53'58" East 148.74 feet; thence North 00 degrees 15'46" West 45
feet; thence North 89 degrees 44'14" East 245.00 feet to a point on the
Westerly right-of-way line of Interstate Highway 4; thence South 10
degrees 01'51" West 540.95 feet along said right-of-way line; thence south
06 degrees 48'14" West a distance of 88.05 feet along said right-of-way;
thence South 89 degrees 44' 14" West 265.72 feet to the True Point of
Beginning.
TOGETHER with all right, title and interest of Grantor in an easement over
and upon the following described real property:
The South 180.52 feet of the East 35 feet of the Southeast Quarter of the
Southwest Quarter of the Northwest Quarter of Section 2, Township 21 South,
Range 29 East, Seminole County, Florida.
AND: The South 180.52 feet of the West 25 feet of the Southwest Quarter of
the Southeast Quarter of the Northwest Quarter of Section 2, Township 21
South, Range 29 East, Seminole County, Florida.
AND: That part of the West 25 feet of the Northeast Quarter of the Northeast
Quarter of the Southwest Quarter of Section 2, Township 21 South, Range 29
East, Seminole County, Florida, lying North of State Road #434.
AND: That part of the east 35 feet of the Northeast Quarter of the Northwest
Quarter of the Southwest Quarter of Section 2, Township 21 South, Range 29
East, Seminole County, Florida, lying North of State Road #434.
FURTHER TOGETHER WITH (a) a non-exclusive perpetual right, privilege and
easement to connect and tap into an existing sanitary sewer line located as
shown on that certain Special Purpose Sketch prepared for Ridgewood
Properties, Inc. ("RPI") by Ganung & Associates, Inc. dated April 13, 1995
and recertified June 12, 1995, (the "Survey"), and to discharge effluent into
said sanitary sewer line; (b) a non-exclusive perpetual right, privilege and
easement to tap into and use an existing underground water line located as
shown on the Survey; (c) a non-exclusive perpetual right, privilege and
easement to connect and tie into those certain existing storm sewer lines and
facilities located as shown on the Survey together with the right to utilize
the storm and surface water drainage and retention system located thereon;
PROVIDED, HOWEVER, that RPI and its successors and successors-in-title to the
property burdened by said easements shall have and hereby reserve the right
to relocate from time to time the sanitary sewer lines, water lines and storm
sewer lines and retention area and facilities which are located as shown on
the Survey; provided that such relocation shall be at the sole cost and
expense of RPI and its successors and successors-in-title to the property
burdened by said easements, and shall not interrupt, interfere with or
diminish the service provided by such sewer lines, water lines and storm
sewer lines and retention facilities. The easements granted in (a) through
(c) above are expressly made SUBJECT TO the rights of Sanlando Utilities
Corporation ("Sanlando") under that certain Grant of License between
Ridgewood Properties and Sanlando recorded in Official Records Book 1974,
Page 1827, of the Public Records of Seminole County, Florida.
SECURITY AGREEMENT
THIS AGREEMENT made and entered into this 30th day of June,
1995, by and between RIDGEWOOD ORLANDO, INC., a Florida
corporation ("Borrower") the address of which is 2025 West State
Road 434, Longwood, Florida 32779, and BLOOMFIELD ACCEPTANCE
COMPANY, L.L.C., a Michigan limited liability company, the address
of which is 260 East Brown Street, Suite 100, Birmingham, Michigan
48009-6233 (hereinafter referred to as the "Lender").
WITNESSETH:
Contemporaneously with the execution of this Security
Agreement, Lender and Borrower have entered into a Loan
transaction pursuant to which Lender has agreed to loan to
Borrower the sum of $2,800,000, pursuant to the terms of a
Mortgage Note (the "Note"), a Mortgage, Assignment of Lease and
Rents and Security Agreement (the "Mortgage") and certain other
"Loan Documents" (as defined in the Note), on the condition that
Borrower provide to Lender a perfected first security interest in
that Collateral described in this Agreement to secure the payment
of the Debt described in the Note.
NOW, THEREFORE, in consideration of the foregoing and other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged by Borrower, Borrower agrees as
follows:
1 . Creation Of Security Interest. As additional security to
secure the payment of the Debt or otherwise required to be paid by
Borrower to the Lender under this Agreement (as defined in the
Note), Borrower does hereby create in favor of the Lender, its
successors and assigns, a continuing security interest in all of
the items of property identified on the attached Exhibit "A",(all
of which is hereinafter from time to time referred to as the
"Collateral"):
2. Acceleration Clause. Upon default in the payment of any
portion of the Debt, as provided in the Note, or upon the
occurrence of any other default under the Loan Documents, all the
rest or any portion of the Debt, whether due or not, shall at the
Lender's option become immediately due and payable without notice
or demand.
3. Use Of Collateral. The Collateral will be used
exclusively in connection with the conduct of Borrower's present
business, unless the Lender gives its written consent to another
use. The Lender shall have the right to inspect the Collateral at
any time, to inspect Borrower's books and records with respect
thereto and to make inquiry of account and contract debtors in
connection therewith.
4. Removal. The Collateral will be kept at Borrower's business
premises, and shall not be removed therefrom without the written consent of
the Lender. Removal of any of the Collateral by the Borrower, or its agents,
servants or employees, shall be deemed a willful taking, an unlawful
conversion and a default under this Security Agreement. Use of the Collateral
in the regular and ordinary course of the Borrower's business shall not
constitute a prohibited removal of the collateral for the purpose of this
Security Agreement.
5. Repairs And Taxes. To the extent that the Collateral is
comprised of any equipment or other tangible personal property,
Borrower shall at its own expense, from time to time, replace and
repair all parts of the Collateral as may be broken, worn, damaged
or otherwise in need of repair, and shall keep the Collateral in
every respect in good working order and repair. The Lender may
cause necessary replacements and repairs to be made if not
promptly or fully performed by Borrower. The cost of replacements
and repairs made by the Lender and the cost of necessary labor,
supplies or parts furnished by the Lender for use on or in
connection with the Collateral shall be a lien thereon, secured by
this Security Agreement and payable on demand with interest at the
highest default rate set forth in the Note. Borrower shall permit
the Lender to have free access to the Collateral at all reasonable
times. Borrower shall pay all taxes charged against, assessed or
imposed upon any of the Collateral. In the event of a default by
Borrower in paying those taxes, it shall be lawful for the Lender
to pay and discharge them, and the amounts expended by the Lender
in the payment or discharge of those taxes shall be a lien upon
the Collateral, secured by the Mortgage and this Security
Agreement and payable at the Default Rate set forth in the Note.
6. Insurance. Borrower shall keep the insurable portions of
the Collateral insured against loss and damage by casualty, theft
and such other perils, and against public liability, if and as
shall be required by, and in insurance companies and amounts
approved by, the Lender, consistent with and as required by the
provisions of the Mortgage.
7. Borrower's Warranties And Representations. Borrower warrants and
represents that:
A. The Collateral is or will be owned by Borrower and (except as
otherwise permitted by or acknowledged by the Lender's prior
written consent) is not subject to any security interest,
liens or encumbrances, except as created by this Agreement,
and Borrower will defend the Collateral against the claims
and demands of all persons;
B. Except as may be specifically otherwise permitted by the
terms of the other Loan Documents, Borrower will not sell,
exchange, lease, encumber or pledge the Collateral, create
any security interest therein (except that created by this
Agreement), or otherwise dispose of the Collateral or any of
Borrower's rights therein or under this Agreement without the
prior written consent of the Lender, nor will Borrower remove
the Collateral from the state or states in which it is
located on the date of this Agreement, except for temporary
periods in the normal and customary use thereof, without the
Lender's prior written consent;
C. Except as specifically authorized by Lender in writing,
Borrower will not permit any other security interest to
attach to any of the Collateral, permit the Collateral to be
levied upon under any legal process, or permit anything to be
done that may impair the value of any of the Collateral or
the security intended to be afforded by this Agreement;
D. The Borrower will execute, and will pay all costs of filing
of, any financing, continuation or termination statement with
respect to the security interest created by this Agreement.
The Lender is hereby appointed Borrower's attorney-in-fact to
do all acts and things which the Lender may deem necessary to
perfect and continue perfected the security interest created
by this Agreement and to protect the Collateral;
E. Borrower will promptly notify the Lender of any change in the
location of any place of Borrower's business or residence and
of the establishment of any new place of business or
residence;
F. Borrower shall give the Lender written notice of each office
of Borrower at which records pertaining to the Collateral are
kept. Except as such notice is given, all records of
Borrower pertaining to Collateral are and shall be kept at
that address set forth in the heading of this Agreement; and
8. Default. The following shall constitute defaults under this
Agreement:
A. Any failure in the prompt or full payment of any portion of
the Debt when due;
B. The occurrence of any misrepresentation or misstatement in
connection with, noncompliance or nonperformance of any of
Borrower's obligations or agreements under this Agreement
(including the occurrence of any other default identified
under this Agreement); or
C. The occurrence of any Event of Default under the Note,
Mortgage or other Loan Documents.
9. Remedies. In the event of the occurrence of any default,
the Lender may exercise its rights under law, including by way of
enforcement under the Uniform Commercial Code in effect in the
State of Florida at the date of this Agreement. The Lender may
enter Borrower's premises without legal process and remove the
Collateral or require the Borrower to assemble the Collateral and
make it available to the Lender at a place within the State of
Florida designated by the Lender. If it so elects, the Lender may
and is hereby empowered (without legal process) to enter any
premises where the Collateral may be kept and take exclusive
possession of it on those premises with or without a custodian.
The Lender may thereafter sell the Collateral at one or more
public or private sales, on or away from Borrower's business
premises. Unless the Collateral is perishable, threatens to
decline speedily in value or is of a type customarily sold on a
recognized market, the Lender shall give Borrower reasonable
notice of the time and place of any public sale thereof, or of the
time after which any private sale or any other intended
disposition thereof is to be made. The requirement of reasonable
notice shall be met if notice is mailed to Borrower, postage
prepaid, by first class certified mail, return receipt requested,
at least five (5) days prior to the date of the proposed sale or
disposition. At any such sale, the Lender may in its absolute
discretion sell and dispose of all the right, title, and interest
of Borrower in and to any of the Collateral. Any such sale may be
for cash or for credit, and the Lender may be the Purchaser. Out
of the moneys arising from the sale of the Collateral, the Lender
shall retain any and all sums then owing to the Lender, including
all additional advances and debts, and all costs, fees, charges
and expenses in connection therewith, with interest, including
reasonable attorneys fees, disbursements as herein defined,
premiums on bonds, custodian's fees, fees of public officers,
auctioneer's fees, plus advertising and labor, disbursements for
use and occupancy of premises and any and all other disbursements
made by the Lender in connection with the taking, maintaining,
storage and disposing of the Collateral, tendering the excess (if
any) to Borrower or its successors or assigns. If for any reason
the Collateral shall fail to satisfy all of the foregoing items,
Borrower shall, subject to the terms of the other Loan Documents,
pay to the Lender the resulting deficiency upon demand.
10. Waiver By Borrower. If the Lender shall at any time obtain or be
entitled to possession of any of the Collateral, either with or without legal
process, it shall not be necessary for the Lender to remove it from
Borrower's premises. Borrower hereby authorizes and empowers the Lender to
keep the Collateral in Borrower's place of business, and to remove any locks
thereon and put the Lender's own lock on those premises or on any other
premises where the Collateral may be located until five days after the sale
of the Collateral sold from those premises. Borrower waives any and all
claims of any nature, kind or description which it has or may claim to have
against the Lender or its representatives, by reason of taking possession,
selling or collecting the Collateral. Borrower expressly waives the right to
a jury trial in any action or proceeding between the parties.
11. Waiver Of Breach. The acceptance of any partial payments
by the Lender after maturity, or the waiver of any breach or
default, shall not constitute a waiver of any other or subsequent
breach or default or prevent the Lender from immediately pursuing
any or all its remedies hereunder, or under any other document
providing additional security to the Lender.
12. Counsel Fees And Expenses. If the Lender commences proceedings for
the purpose of collecting any monies which may be secured in any way by this
Agreement, or to recover, collect or protect its interest in the Collateral
by reason of a default or breach by Borrower, Borrower agrees to pay the
Lender's reasonable attorneys fees, additional advances and debts, and all
costs, fees, charges and expenses in connection therewith; together with any
and all disbursements incurred by the Lender in connection with the
collecting, taking, maintaining and disposing of the Collateral, including
all premiums on bonds and undertakings, fees for public officers, custodians,
auctioneers, charges for use and occupancy of premises and for electric
current; all of which shall be a lien upon the Collateral, secured by this
Agreement and payable on demand with interest at the highest Default Rate set
forth in the Note. Counsel fees and disbursements are in no event to effect,
but are to be paid in addition to, any statutory court costs and
disbursements.
13. Severability. If any provision of this Agreement shall
for any reason be held to be invalid or unenforceable, that
invalidity or unenforceability shall not affect any other
provision hereof, and this Agreement shall be construed as if the
invalid or unenforceable provision had never been contained
herein.
14. Notices. All notices to the parties under this Agreement shall
be sufficient if served in accordance with the provisions of the Mortgage.
15. Governing Law. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of Florida.
16. Captions. Captions to paragraphs contained in this Agreement are
for convenience only and are entirely without substantive effect.
17. Successors. This Agreement shall be binding upon, and the benefits
hereof shall inure to, the parties hereto and their respective successors and
assigns.
[THIS DOCUMENT IS EXECUTED ON THE FOLLOWING PAGE]
IN WITNESS WHEREOF, Borrower has executed this Security Agreement on the
day and year first above written.
BORROWER:
RIDGEWOOD ORLANDO, INC., a Florida
corporation
By: /s/ N. R. Walden
N. Russell Walden, President
And by: /s/ Karen S. Hughes
Karen S. Hughes, Secretary
STATE OF GEORGIA
COUNTY OF FULTON
The foregoing document was acknowledged before me this 28th of
June, 1995, by N. Russell Walden, President and Karen S. Hughes,
Secretary of Ridgewood Orlando, Inc., a Florida corporation on
behalf of the corporation. N. Russell Walden and Karen S. Hughes are either
personally known to me or produced Drivers License as identification.
/s/ June D. Smith
Notary Public, Gwinnett County,
Georgia
My Commission Expires: August 6, 1995
(SEAL)
EXHIBIT A
DESCRIPTION OF COLLATERAL
All of the following, whether now owned or hereafter acquired
by Borrower, and all books, records, instruments and documents
relating thereto or useful in maintaining or realizing upon the
Collateral. Enumeration of specific items within general types of
Collateral is for the purpose of convenient reference and
illustration and shall not limit the scope of the security
interest created under this Security Agreement.
A. Accounts Receivable. All rents, issues, profits, revenues,
income, contract rights, accounts receivable (including
credit card and charge card receivables) general intangibles,
insurance premiums, actions and rights of action and all
other amounts due or to become due to Borrower from any
tenant, licensee, occupant, guest or any other person for the
use, operation, occupancy of or otherwise with respect to the
premises described herein.
B. Claims. All right, title and interest in and to any and all
claims which Borrower may now or hereafter have for refunds,
reparation, offset or adjustment, including any consequential
or incidental damages recoverable with respect thereto.
C. Contracts. all of Borrower's right, title and interest,
whether now owned or hereafter acquired, in, to and under all
of the contracts, licenses, approvals, consents, guarantees,
warranties, work product, studies, data, drawings,
renderings, rights, privileges and appurtenances, permits,
agreements, warranties, plans and specifications
(collectively, the "Contract@') whether now existing or
hereafter created or obtained by or on behalf of Borrower for
and in respect to the use, ownership, management, operation
or maintenance of the Property, including, without limitation
(i) all rights of Borrower to receive monies due and to
become due under or pursuant to the Contracts, (ii) all
claims of Borrower for damages arising out or for breach of
or default under the Contracts (iii) all rights of Borrower to
terminate, amend, supplement, modify or waive performance under the
Contracts, to compel performance and otherwise to exercise all remedies
thereunder, (iv) to the extent not included in the foregoing, all cash
and non-cash proceeds, products, offspring, rents, revenues, issues,
profits, royalties, income benefits, additions, substitution,
replacement and accessions of and to any and all of the foregoing, and
(v) Lender shall automatically succeed to and stand in the place of
Borrower under the Contracts and shall be entitled, but under no
obligation, to exercise all rights, title and interest of Borrower under
the Contracts or to perform the duties of Borrower under the Contracts;
D. Equipment. All fixtures and articles of personal property and
all appurtenances and additions thereto and substitutions or
replacements thereof, now or at any time hereafter owned by
Borrower and now or hereafter attached to, contained in, or used
in connection with the premises or placed in any part thereof
though not attached thereto, including, but not limited to, all
screens, awnings, shades, blinds, curtains, draperies, carpets,
rugs, furniture and furnishings, heating, lighting, plumbing,
ventilating, air conditioning, refrigerating, incinerating, and
elevator plants, stoves, ranges, vacuum cleaning systems,
sprinkler systems and other fire prevention and extinguishing
apparatus and materials, motors, machinery, pipes, appliances,
equipment, fittings and fixtures and trade name, goodwill and
books and records relating to the business operated on the
premises. Without limiting the foregoing, Borrower hereby grants
to Lender the security interest in all of Borrower's present and
future "fixtures", "equipment" and "general intangibles" (as said
quoted terms are defined in or encompassed by the Uniform
Commercial Code of the State of Florida).
E. Liquor License. Subject to the provisions and limitations of
law, and the requirements of the State of Florida Division of
Alcoholic Beverages and Tobacco - Department of Business
Regulation, any liquor license held by Borrower at any time.
F. Proceeds. Proceeds, and proceeds of hazard insurance and
eminent domain or condemnation awards of all of the foregoing
described assets and/or properties or interests therein,
including all products of, and accessions to, such assets or
properties or interests therein. In addition thereto, any and
all deposits or other sums at any time credited by or due from
the Lender to Borrower and any and all instruments, documents,
policies and certificates of insurance, securities, goods,
accounts receivable, choses in action, chattel paper, cash,
property and the proceeds thereof (whether or not the same are
Collateral or Proceeds thereof hereunder) owned by Borrower or
in which Borrower has an interest, which are now or at any
time hereafter in possession or control of the Lender or in
transit by mail or carrier to or from the Lender or in
possession of any third party acting on the Lender's behalf,
without regard to whether the Lender received the same in
pledge, for safekeeping, as agent or otherwise, or whether the
Lender has conditionally released the same; and
G. Specific Collateral On Property. by way of illustration, and
not by way of limitation, all of those items described in the
"Equipment Inventory" following this Exhibit A;
H. all proceeds, products, offspring, rents and profits from any
of the foregoing, including, without limitation, those from
sale, exchange, transfer, collection, loss, damage,
disposition, substitution or replacement of any of the
foregoing.
EQUIPMENT INVENTORY
All of the following, whether now owned or hereafter acquired
by Borrower, and all books, records, instruments and documents
relating thereto or useful in maintaining or realizing upon the
Collateral. Enumeration of specific items within general types of
Collateral is for the purpose of convenient reference and
illustration and shall not limit the scope of the security
interest created under this Security Agreement.
The following specific items of personal property located at
the Ramada Inn North Orlando, 2025 West State Road 434, Longwood,
Florida 32779 (the legal description of which is attached hereto
as Exhibit B), including any replacements thereof, and all books,
records, computer tapes, instruments and documents relating
thereto or useful in maintaining or realizing upon the Collateral:
MAINTENANCE POOL AREA
UNIT ITEM UNIT ITEM
1 PRESSURE CLEANER 8 TABLE
1 DRIVEWAY VACUUM 30 CHAIR
1 HONDA LAWNMOWER 16 LOUNGE CHAIR
4 SPARE G.E. A/C/ UNIT 4 UMBRELLA
5 SPARE G.E. TV
1 WET CARPET FAN HOUSEKEEPING
2 WET VAC UNIT ITEM
2 LARGE FAN 20 KING SHEET
2 BLOWER - GROUNDS 468 QUEEN/DOUBLE SHEET
4 MANITOWOC ICE MACHINE 608 PILLOW CASE
304 BED PAD
HOUSEKEEPING 304 BLANKET
UNIT ITEM 608 PILLOW
3 DRYER 10 KING BEDSPREAD
3 WASHER 50# CAPACITY 70 QUEEN BEDSPREAD
14 VACUUM CLEANER 224 DOUBLEBEDSPREAD
12 MAID CART 192 SHOWER CURTAIN
11 ROLLAWAY BED 688 BATH TOWEL
6 PORTABLE BABY CRIB 688 HAND TOWEL
688 WASH CLOTH
LINEN SHELF INVENTORY 193 BATH MAT
UNIT ITEM
36 PILLOWS ROOMS INVENTORY
10 BATH TOWELS UNIT ITEM
26 HAND TOWELS 10 KING BOX SPRING/MATTRESS
60 WASH CLOTHS 224 DOUBLE BOX SPRING/MATTRESS
30 BATH MATS 70 QUEEN BOX SPRING/MATTRESS
4 KING BEDSPREAD 2 SOFA BED
3 QUEEN BEDSPREAD 64 RECLINER
42 ARMOIRE
LOUNGE 80 DESK
UNIT ITEM 36 CORNER TABLE/DESK
1 ROUND TABLE 80 DRESSER/DESK COMBINATION
9 FOUR TOP TABLE 71 DRESSER - LOWBOY
50 CHAIRS 304 HEADBOARD
1 RCA 46" COLOR TV 230 NIGHTSTAND
1 RCA 19" COLOR TV 194 DESK CHAIR
1 BALDWIN PIANO 256 ARM CHAIR
30 DOZEN ASSORTED BAR GLASSWARE 157 DRESSER MIRROR
2 TOPSIDE REACH-IN BEER COOLERS 100 FLOOR LAMP
1 MIXER 340 SINGLE ARM LAMP
1 THREE COMPARTMENT BAR SINK 64 SWING ARM LAMP
1 BARTENDER ICE BIN 192 DOUBLE ARM LAMP
1 PIANO BAR 195 DESK LAMP
192 CLOCK RADIO
BANQUET EQUIPMENT 192 TELEVISION
UNIT ITEM 196 WINDOW TREATMENTS (SHUTTERS)
10 6'TABLE 6X24X30 576 SHEER DRAPES
6 8'TABLE 8X24X30 200 G.E. ZONE LINE A/C UNIT
16 8'TABLE (BANQUET) 224 DOUBLE BEDSPREAD
10 6'TABLE (BANQUET) 70 QUEEN BEDSPREAD
4 1O' ROUND TABLE 10 KING BEDSPREAD
25 8'ROUND TABLE 10 KING BED RAILS
4 4'TABLE 294 DOUBLE/QUEEN RAILS
225 BANQUET CHAIR
60 GARDEN ROOM CHAIR TABLE TOP ITEMS
2 FREE STANDING PODIUM UNIT ITEM
2 TABLE TOP PODIUM 15 DINNER FORKS/DOZEN
3 OVERHEAD PROJECTOR 18 SALAD FORKS/DOZEN
2 SLIDE PROJECTOR 15 DINNER KNIVES/DOZEN
4 EASELSTAND 18 TEASPOONS/DOZEN
5 LARGE PULL DOWN SCREEN 8 BOUILLON SPOONS/DOZEN
4 8'SERPENTINE TABLE 4 OVAL PLATTER
2 6'SERPENTINE TABLE 16 10" ROUND DINNER PLATE/DOZ
1 CONFERENCE TABLE (8 SEATER) 13 7" ROUND SALAD PLATE/DOZ
1 CONFERENCE TABLE (10 SEATER) 11 SAUCERS/DOZEN
18 CONFERENCE ROOM CHAIR 10 CUPS/DOZEN
2 SELF CONTAINED WALL MOUNTED 13 5" SIDE PLATE/DOZEN
CONFERENCE CENTER UNIT
1 PORTABLE BUFFET LINE 12 4 1/2 OZ FRUIT DISH/DOZEN
10 PARTITIONS 2 CEREAL BOWL/DOZEN
4 RISERS 6X6 10 7" GOLD RIM PLATE/DOZEN
1 DANCE FLOOR 12 X 12 5 SALT & PEPPERS/DOZEN
2 FREE STANDING PROJECTION SCREEN 5 SUGAR BOWL/DOZEN
1 PORTABLE BAR 11 10 1/2 OZ WATER GOBLET/DOZ
2 TV 25" 7 4 1/2 OZ WINE GLASS/DOZEN
3 VCR PLAY 10 4 1/2 OZ CHAMPAGNE GLASS/DOZEN
2 TV STAND 12 8 OZ WATER GLASS/DOZEN
2 OVERHEADSTAND 12 TULIP WINE GLASS/DOZEN
8 CHAFING DISHES 12 SERVING TRAY
4 WATER PITCHERS/DOZEN
TABLE LINEN 10 BEVERAGE SERVER
UNIT ITEM
16 NAPKINS/WHITE
5 NAPKINS/BEIGE KITCHEN EQUIPMENT
6 NAPKINS/MELON UNIT ITEM
4 T/C WHITE 42X42 3 BUS CART
5 BURGUNDY 17Xl7 2 ROLLING CART
3 T/C WHITE 54X54 2 TWO DOOR REACH-IN COOLER
3 BURGUNDY TOPPERS 1 SINGLE DOOR REFRIGERATOR
2 T/C WHITE 54X95 1 TWO DOOR FREEZER
1 T/C BEG 54X96 1 SINGLE DOOR REFRIGERATOR-REACH
IN FREEZER
2 BURGUNDY 54X54 1 BROILER
2 T/C WHITE 54Xl2O 3 COMMERCIAL STOVE/OVENS/GRIDDLE
COMBINATION
1 T/C BEG 2 DUAL DEEP FRYER
12 T/C BEIGE 84X84 EACH 1 COMMERCIAL CONVECTION OVEN
22 T/C WHITE 84X84 EACH 1 COMMERCIAL MICROWAVE OVEN
10 T/C SEAFOAM 84X84 EACH 1 BLAKESLEE MIXER
T/C PEACH 84X84 EACH 6 ROLLABLE SHELF CART
1 COMBINATION WALK-IN
REFRIGERATOR/FREEZER
DINING ROOM 2 CHEF WORK STATION
UNIT ITEM 1 STEAM TABLE - 5 SLOTS
7 FOUR TOP TABLE 1 REFRIGERATED WORK STATION WITH
SANDWICH UNIT & REFRIGERATOR
9 TWO TOP TABLE 1 SIMPLEX TIME RECORDER
48 CHAIRS 6 TRAY STAND
5 WALL HANGINGS 3 COREY COFFEE WARMER
1 CUSTOM BUFFET LINE/SALAD BAR 4 COFFEE URN
1 FOOD WARMER 3 THERMOS COFFEE URN
1 CALCULATOR 1 BUNN OMATIC COFFEE MAKER
4 5'ROUND 1 CECILMATIC COFFEE MAKER
3 FOUR SLICE TOASTER
LOBBY 1 BREAD WARMER
UNIT ITEM 1 MIRKLE MEAT SLICER
2 LOVE SEAT 1 DISHWASHER WORK STATION
2 TUB CHAIR 1 MANITOWOC ICE MAKER
1 COFFEE TABLE 1 THREE COMPARTMENT SINK
4 END TABLE 4 HEAVY DUTY STORAGE RACK
2 DECORATIVE LAMP 1 FOUR NODE AMPLIFYING PA SYSTEM
2 FLOOR/CEILING DRAPER 1 VACUUM CLEANER
1 MAIN DOOR DRAPER 4 DISH RACK DOLLY
1 WALL MIRROR
1 SOFA TABLE GARDEN ROOM
1 DECORATIVE 6'BENCH UNIT ITEM
4 WALL PICTURES DRAPERY
6 WALL PICTURES
ADMINISTRATIVE OFFICES 1 MIRROR
UNIT ITEM 1 MIRROR
3 DESK
2 FIVE DRAWER FILE CABINETS
1 TV/VCR TELECOLOR
3 CALCULATORS
2 TUB CHAIRS
7 ARM CHAIRS
3 DESK CHAIRS
1 CORNER TABLE
1 NIGHTSTAND
1 CREDENZA
3 OFFICE COMPUTER WITH MONITOR
1 LASER PRINTER
2 TOSHIBA PRINTER
1 CANNON FACSIMILE MACHINE
1 MICROS PM SYSTEM
W/COMMUNICATIONS TO D.RM &
LOUNGE UNITS
1 FLOOR SAFE
3 DESK LAMPS
1 XEROX COPIER
EXHIBIT B
LEGAL DESCRIPTION OF THE PROPERTY
A portion of the Southeast quarter of the Northwest quarter of
Section 2, Township 21 South, Range 29 East, County of Seminole,
State of Florida, more particularly described as follows:
Beginning at the Northwest corner of the Northwest Quarter of the
Northeast Quarter of the Southwest Quarter of Section 2, Township
21 South, Range 29 East; thence North 00014'19" West 180.52 feet
to the True Point of Beginning; thence North 00012'19" West 498.38
feet; thence North 58053'58" East 148.74 feet; thence North
00015'46" West 45 feet; thence North 89044'1 4" East 245.00 feet
to a point on the Westerly right-of-way line of Interstate Highway
4; thence South 10001'51" West 540.95 feet along said right-of-way
line; thence south 06048'14" West a distance of 88.05 feet along
said right-of-way; thence South 89044'1 4" West 265.72 feet to the
True Point of Beginning.
TOGETHER with all right, title and interest of Grantor in an
easement over and upon the following described real property:
The South 180.52 feet of the East 35 feet of the Southeast Quarter
of the Southwest Quarter of the Northwest Quarter of Section 2,
Township 21 South, Range 29 East, Seminole County, Florida.
AND: The South 180.52 feet of the West 25 feet of the Southwest
Quarter of the Southeast Quarter of the Northwest Quarter of
Section 2, Township 21 South, Range 29 East, Seminole County,
Florida.
AND: That part of the West 25 feet of the Northeast Quarter of the
Northeast Quarter of the Southwest Quarter of Section 2, Township
21 South, Range 29 East, Seminole County, Florida, lying North of
State Road #434.
AND: That part of the east 35 feet of the Northeast Quarter of the
Northwest Quarter of the Southwest Quarter of Section 2, Township
21 South, Range 29 East, Seminole County, Florida, lying North of
State Road #434.
FURTHER TOGETHER WITH (a) a non-exclusive perpetual right,
privilege and easement to connect and tap into an existing
sanitary sewer line located as shown on that certain Special
Purpose Sketch prepared for Ridgewood Properties, Inc. ("RPI") by
Ganung & Associates, Inc. dated April 13, 1995 and recertified
June 12, 1995, (the "Survey"), and to discharge effluent into said
sanitary sewer line; (b) a non-exclusive perpetual right,
privilege and easement to tap into and use an existing underground
water line located as shown on the Survey; (c) a non-exclusive
perpetual right, privilege and easement to connect and tie into
those certain existing storm sewer lines and facilities located as
shown on the Survey together With the right to utilize the storm
and surface water drainage and retention system located thereon;
PROVIDED, HOWEVER, that RPI and its successors and successors-in-title
to the property burdened by said easements shall have and
hereby reserve the right to relocate from time to time the
sanitary sewer lines, water lines and storm sewer lines and
retention area and facilities which are located as shown on the
Survey; provided that such relocation shall be at the sole cost
and expense of RPI and its successors and successors-in-title to
the property burdened by said easements, and shall not interrupt,
interfere with or diminish the service provided by such sewer
lines, water lines and storm sewer lines and retention facilities.
The easements granted in (a) through (c) above are expressly made
SUBJECT TO the rights of Sanlando Utilities Corporation
("Sanlando") under that certain Grant of License between Ridgewood
Properties and Sanlando recorded in Official Records Book 1974,
Page 1827, of the Public Records of Seminole County, Florida.
MORTGAGE NOTE
Loan No. 04-05-FL-0000
$2,800,000 June 30, 1995
FOR VALUE RECEIVED, RIDGEWOOD ORLANDO, INC., a Florida
corporation, having its principal place of business at 2025 West
State Road 434, Longwood, Florida 32779 (hereinafter referred to
as "Maker"), promises to pay to the order of BLOOMFIELD ACCEPTANCE
COMPANY, L.L.C., a Michigan limited liability company, at its
principal place of business at Suite 100, 260 East Brown Street,
Birmingham, Michigan 48009-6233 (hereinafter referred to as
"Payee"), or at such place as the holder hereof may from time to
time designate in writing, the principal sum of Two Million Eight
Hundred Thousand Dollars ($2,800,000), in lawful money of the
United States of America, with interest thereon to be computed on
the unpaid principal balance from time to time outstanding at the
Applicable Interest Rate (as hereinafter defined), and to be paid
in installments as follows:
1. A payment of interest only upon the execution of this Note,
representing the interest that will accrue hereunder through
June 30, 1995;
2. A constant payment of $26,137.69, on the first day of August,
1995, and on the first day of each calendar month thereafter
up to and including the first day of June, 2015, each of such
payments to be applied (a) to the payment of interest
computed at the rate aforesaid; and (b) the balance applied
toward the reduction of the principal sum; and
3. The balance of said principal sum, together with all accrued
and unpaid interest thereon and any other amounts due under
this Note shall be due and payable on the first day of July,
2015 (the "Maturity Date").
Interest on the principal sum of this Note shall be calculated on
the basis of a three hundred sixty (360) day year composed of
twelve (12) months of thirty (30) days each, except that interest
due and payable for a period less than a full month shall be
calculated by multiplying the actual number of days elapsed in
such period by a daily rate based on said 360 day year. All
amounts due under this Note shall be payable without setoff,
counterclaim or any other deduction whatsoever.
The term "Applicable Interest Rate" as used in this Note
shall mean from the date of this Note through and including the
Maturity Date, a rate of * percent (**%) per annum.
*Ten and Thirty Five One Hundredths
**10.35
DOCUMENTARY STAMPS AS REQUIRED PURSUANT TO FLORIDA LAW HAVE BEEN
AFFIXED TO THE MORTGAGE SECURING THIS NOTE.
This Note is evidence of that certain loan made by Payee to
Maker contemporaneously herewith (the "Loan"). This Note is
secured by (a) a Mortgage, Assignment of Leases and Rents and
Security Agreement of even date herewith in the amount of this
Note, given by Maker for the use and benefit of Payee and covering
the fee estate of Maker in certain premises as more particularly
described therein (the "Mortgage"), (b) an Assignment of Leases
and Rents of even date herewith executed by Maker in favor of
Payee (the "Assignment of Leases"), and (c) the other Loan
Documents (as hereinafter defined). The term "Loan Documents" as
used in this Note relates collectively to this Note, the Mortgage,
the Assignment of Leases, and any and all other documents
securing, evidencing or guaranteeing all or any portion of the
Loan or otherwise executed and/or delivered in connection with
this Note and the Loan, but not including the Environmental and
Hazardous Substance Indemnification Agreement executed by Maker in
favor of Payee of even date herewith (the "Environmental
Indemnity").
If any sum payable under this Note is not paid on the date on
which it is due, Maker shall pay to Payee upon demand an amount
equal to the lesser of five percent (5%) of such unpaid sum or the
maximum amount permitted by applicable law in order to defray a
portion of the expenses incurred by Payee in handling and
processing such delinquent payment and to compensate Payee for the
loss of the use of such delinquent payment. If the day when any
payment required under this Note is due is not a Business Day (as
hereinafter defined), then payment shall be due on the first
Business Day thereafter. The term "Business Day" shall mean a day
other than (i) a Saturday or Sunday, or (ii) any day on which
banking and savings and loan institutions in New York are
authorized or obligated by law or executive order to be closed.
The whole of the principal sum of this Note, together with
all interest accrued and unpaid thereon and all other sums due
under the Loan Documents (all such sums hereinafter collectively
referred to as the "Debt"), or any portion thereof, shall without
notice become immediately due and payable at the option of Payee
(i) if any payment required in this Note is not paid on the date
on which it is due; or (ii) upon the happening of any other Event
of Default (as defined in the Mortgage). In the event that it
should become necessary to employ counsel to collect or enforce
the Debt or to protect or foreclose the security therefor, Maker
also shall pay on demand all costs of collection incurred by
Payee, including attorneys' fees and costs reasonably incurred for
the services of counsel whether or not suit be brought.
Maker does hereby agree that upon the occurrence of an Event of
Default (including upon the failure of Maker to pay the Debt in
full on the Maturity Date), Payee shall be entitled to receive and
Maker shall pay interest on the entire unpaid principal sum and
any other amounts due at a rate (the "Default Rate") equal to the
lesser of (a) the maximum rate permitted by applicable law, or (b)
five percent (5%) above the Applicable Interest Rate. The Default
Rate shall be computed from the occurrence of the Event of Default
until the actual receipt and collection of the Debt (or that
portion thereof that is then due). This charge shall be added to
the Debt and shall be secured by the Mortgage. This paragraph,
however, shall not be construed as an agreement or privilege to
extend the date of the payment of the Debt, nor as a waiver of any
other right or remedy accruing to Payee by reason of the
occurrence of any Event of Default.
This Note may not be prepaid prior to the Maturity Date;
provided, however, Maker shall have the right and option to
release the Mortgaged Property (as defined in the Mortgage) from
the lien of the Mortgage in accordance with the terms and
provisions set forth in Paragraph 57 of the Mortgage (the
"Defeasance Option"). Notwithstanding the foregoing sentence,
Maker shall have the privilege to prepay the entire principal
balance of this Note and any other amounts outstanding on any
scheduled payment date during the three (3) months preceding the
Maturity Date. If following the occurrence of any Event of
Default, Maker shall tender payment of an amount sufficient to
satisfy the Debt at any time prior to a sale of the Mortgaged
Property, either through foreclosure or the exercise of the other
remedies available to Payee under the Mortgage, such tender by
Maker shall be deemed to be voluntary and Maker shall pay, in
addition to the Debt, the Yield Maintenance Premium (as defined in
the Mortgage), if any, that would be required under the Defeasance
Option.
It is expressly stipulated and agreed to be the intent of
Maker and Payee at all times to comply with applicable state law
or applicable United States federal law (to the extent that it
permits Payee to contract for, charge, take, reserve, or receive a
greater amount of interest than under state law) and that this
paragraph shall control every other covenant and agreement in this
Note and the other Loan Documents. If the applicable law (state
or federal) is ever judicially interpreted so as to render
usurious any amount called for under this Note or under any of the
other Loan Documents, or contracted for, charged, taken, reserved,
or received with respect to the Debt, or if Payee's exercise of
the option to accelerate the Maturity Date, or if any prepayment
by Maker results in Maker having paid any interest in excess of
that permitted by applicable law, then it is Payee's express
intent that all excess amounts theretofore collected by Payee
shall be credited on the principal balance of this Note and all
other Debt and the provisions of this Note and the other Loan
Documents immediately be deemed reformed and the amounts
thereafter collectible hereunder and thereunder reduced, without
the necessity of the execution of any new documents, so as to
comply with the applicable law, but so as to permit the recovery
of the fullest amount otherwise called for hereunder or
thereunder. All sums paid or agreed to be paid to Payee for the
use, forbearance, or detention of the Debt shall, to the extent
permitted by applicable law, be amortized, prorated, allocated,
and spread throughout the full stated term of the Debt until
payment in full so that the rate or amount of interest on account
of the Debt does not exceed the maximum lawful rate from time to
time in effect and applicable to the Debt for so long as the Debt
is outstanding. Notwithstanding anything to the contrary
contained herein or in any of the other Loan Documents, it is not
the intention of Payee to accelerate the maturity of any interest
that has not accrued at the time of such acceleration or to
collect unearned interest at the time of such acceleration.
This Note may not be modified, amended, waived, extended, changed,
discharged or terminated orally or by any act or failure to act on
the part of Maker or Payee, but only by an agreement in writing
signed by the party against whom enforcement of any modification,
amendment, waiver, extension, change, discharge or termination is
sought. Whenever used, the singular number shall include the
plural, the plural the singular, and the words "Payee" and "Maker"
shall include their respective successors, assigns, heirs,
executors and administrators. If Maker consists of more than one
person or party, the obligations and liabilities of each such
person or party shall be joint and several.
Maker and all others who may become liable for the payment of
all or any part of the Debt do hereby severally waive presentment
and demand for payment, notice of dishonor, protest, notice of
protest, notice of nonpayment, notice of intent to accelerate the
maturity hereof and of acceleration. No release of any security
for the Debt or any person liable for payment of the Debt, no
extension of time for payment of this Note or any installment
hereof, and no alteration, amendment or waiver of any provision of
the Loan Documents made by agreement between Payee and any other
person or party shall release, modify, amend, waive, extend,
change, discharge, terminate or affect the liability of Maker, and
any other person or party who may become liable under the Loan
Documents for the payment of all or any part of the Debt.
Subject to the qualifications below, Payee shall not enforce
the liability and obligation of Maker to perform and observe the
obligations contained in this Note, the Mortgage or the other Loan
Documents by any action or proceeding wherein a money judgment
shall be sought against Maker, except that Payee may bring a
foreclosure action, an action for specific performance or any
other appropriate action or proceeding to enable Payee to enforce
and realize upon its interest under this Note, the Mortgage and
the other Loan Documents, or in the Mortgaged Property, the Rents
(as defined in the Mortgage), or any other collateral given to
Payee pursuant to the Loan Documents; provided, however, that,
except as specifically provided herein, any judgment in any such
action or proceeding shall be enforceable against Maker only to
the extent of Maker's interest in the Mortgaged Property, in the
Rents and in any other collateral given to Payee, and Payee, by
accepting this Note, the Mortgage and the other Loan Documents,
agrees that it shall not sue for, seek or demand any deficiency
judgment against Maker in any such action or proceeding, under or
by reason of or under or in connection with this Note, the
Mortgage or the other Loan Documents. The provisions of this
paragraph shall not, however, (a) constitute a waiver, release or
impairment of any obligation evidenced or secured by any of the
Loan Documents; (b) impair the right of Payee to name Maker as a
party defendant in any action or suit for foreclosure and sale
under the Mortgage; (c) affect the validity or enforceability of
any guaranty made in connection with the Loan or any of the rights
and remedies of Payee thereunder; (d) impair the right of Payee to
obtain the appointment of a receiver; (e) impair the enforcement
of the Assignment of Leases or the Environmental Indemnity; or (f)
constitute a waiver of the right of Payee to enforce the liability
and obligation of Maker, by money judgment or otherwise, to the
extent of any loss, damage, cost, expense, liability, claim or
other obligation incurred by Payee (including attorneys' fees and
costs reasonably incurred) arising out of or in connection with
the following:
(A) fraud or intentional misrepresentation by Maker or any
guarantor in connection with the Loan;
(B) the gross negligence or willful misconduct of Maker;
(C) physical waste of the Mortgaged Property;
(D) the breach of any provision in the Environmental Indemnity or
in the Mortgage concerning environmental laws, hazardous
substances and asbestos and any indemnification of Payee with
respect thereto in either document;
(E) the removal or disposal of any portion of the Mortgaged
Property after an Event of Default;
(F) the misapplication or conversion by Maker of (i) any
insurance proceeds paid by reason of any loss, damage or
destruction to the Mortgaged Property, (ii) any awards or
other amounts received in connection with the condemnation of
all or a portion of the Mortgaged Property, or (iii) any
Rents (as defined in the Mortgage), following an Event of
Default;
(G) costs incurred by Payee (including reasonable attorneys'
fees) in the collection or enforcement of the Debt, the
protection or foreclosure of the security therefor, or the
enforcement of the Loan Documents;
(H) failure to pay taxes (provided that the liability of Maker
shall be only for amounts in excess of the amount held by
Payee in escrow for the payment of taxes, computed without
taking into consideration any portion of any such escrow that
Payee may have applied in satisfaction of any portion of the
Debt other than those taxes), assessments, charges for labor
or materials or other charges that can create liens on any
portion of the Mortgaged Property; and
(I) any security deposits collected with respect to the
Mortgaged Property which are not delivered to Payee upon a
foreclosure of the Mortgaged Property or action in lieu
thereof, except to the extent any such security deposits were
applied in accordance with the terms and conditions of any of
the Leases (as defined in the Mortgage) prior to the
occurrence of the Event of Default that gave rise to such
foreclosure or action in lieu thereof.
Notwithstanding anything to the contrary in this Note or any of
the Loan Documents, (i) Payee shall not be deemed to have waived
any right which Payee may have under Section 506(a), 506(b), 1111
(b) or any other provisions of the U.S. Bankruptcy Code to file
a claim for the full amount of the Debt secured by the Mortgage or
to require that all collateral shall continue to secure all of the
Debt owing to Payee in accordance with the Loan Documents, and
(ii) the Debt shall be fully recourse to Maker, and Maker shall be
liable for all damages (including but not limited to attorneys'
fees and expenses reasonably incurred) arising, in the event that:
(1) the first full monthly payment of principal and interest
under this Note is not paid when due;
(2) Maker fails to permit on-site inspections of the Mortgaged
Property, fails to provide financial information (if
unremedied after any applicable notice and cure period under
the Mortgage), or fails to maintain its status as a single
purpose entity, each as required by, and in accordance with
the terms and provisions of, the Mortgage;
(3) Maker fails to obtain Payee's prior written consent to any
subordinate financing or other voluntary lien encumbering the
Mortgaged Property; or
(4) Maker fails to obtain Payee's prior written consent to any
"Transfer" (as defined in the Mortgage), as required by the
Mortgage.
Maker (and the undersigned representative of Maker, if any)
represents that Maker has full power, authority and legal right to
execute, deliver and perform its obligations pursuant to this
Note, the Mortgage and the other Loan Documents and that this
Note, the Mortgage and the other Loan Documents constitute valid
and binding obligations of Maker.
All notices or other communications required or permitted to
be given pursuant hereto shall be given in the manner specified in
the Mortgage directed to the parties at their respective addresses
as provided therein.
MAKER HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE
TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY
FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER
EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM,
COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH.
THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND
VOLUNTARILY BY MAKER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY
EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY
JURY WOULD OTHERWISE ACCRUE. PAYEE IS HEREBY AUTHORIZED TO FILE A
COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF
THIS WAIVER BY MAKER.
This Note shall be governed by and construed in accordance
with the laws of the State of Florida, in which the real property
encumbered by the Mortgage is located, and the applicable laws of
the United States of America.
Maker has duly executed this Note the day and year first above
written.
MAKER:
RIDGEWOOD ORLANDO, INC., a Florida
corporation
By: /s/ N. R. Walden
N. Russell Walden, President
And by: /s/ Karen S. Hughes
Karen S. Hughes, Secretary
Pay to the order of ________________________________________,
without recourse.
Bloomfield Acceptance Company,
L.L.C., a Michigan
limited liability company,
By: ____________________________
Print Name: Creighton J. Weber
Print Title: Exec. VP
EXHIBIT 13
RIDGEWOOD
PROPERTIES, INC.
ANNUAL REPORT
1995
FINANCIAL STATEMENTS
Ridgewood Properties, Inc. (the "Company") is primarily engaged
in the business of acquiring, developing, operating and selling real
estate property in the Southeast and "Sunbelt" areas. Additionally,
the Company, through its investment in a limited partnership, is
engaged in acquiring and managing hotel properties in the Southeast.
Board of Directors Officers
Michael M. Earley N. Russell Walden
President - Triton Group Ltd. President
Luther A. Henderson Byron T. Cooper
President - Pirvest, Inc. Vice President, Construction and
Planning
John C. Stiska
Chairman and Chief Executive Karen S. Hughes
Officer - Triton Group Ltd. Vice President, Chief Financial
Officer and Secretary
N. Russell Walden
President - Ridgewood
Properties, Inc.
Corporate Offices
2859 Paces Ferry Road, Suite 700
Atlanta, Georgia 30339
Telephone: (770) 434-3670
Market For Registrant's Common Equity and Related Stockholder Matters
The common stock, $0.01 par value per share ("the common
stock"), of the Company is listed in the broker-dealer "Pink Sheets"
and trades in the over-the-counter market. Prior to June 12, 1989,
the common stock was quoted in the automated quotation system of the
National Association of Securities Dealers (NASDAQ). Subsequent to
the deletion of the Company's stock from the automated quotation
system of NASDAQ, there has been an absence of an established public
trading market for the common stock.
Shares outstanding and per share amounts for all periods
presented have been retroactively adjusted for the twenty-for-one
stock split effected in the form of a stock dividend on December 31,
1992, two-for-one stock split effected in the form of a stock dividend
on August 31, 1993, and a three-for-one stock split effected in the
form of a stock dividend on October 31, 1994. On October 31, 1995,
there were 963,480 shares of common stock outstanding held by
approximately 300 shareholders of record. The Company paid its first
and only cash dividend on the common stock during fiscal year 1990.
The dividend paid was approximately $0.06 per share of common stock,
which totaled approximately $397,000. The Company may pay future
dividends if and when earnings and cash are available. The
declaration of dividends on the common stock is within the discretion
of the Board of Directors of the Company and is, therefore, subject to
many considerations, including operating results, business and capital
requirements and other factors.
<TABLE>
Selected Financial Data
<CAPTION>
-----------------------------------------------------------------
($000's omitted, except
per share data) 1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data as of August 31
Total Assets $ 9,673 $ 14,351 $ 34,655 $ 38,857 $ 44,619
Term Loan(s) Payable 2,796 5,415 12,316 14,620 15,797
Shareholders' Investment 5,612 7,440 20,564 22,424 29,884
Income Statement Data
Year Ended August 31
Net Revenues 8,675 30,082 18,619 16,667 13,878
Net Loss (1,656) (3,631) (1,860) (4,460) (4,859)
Loss Per Common Share (1) $ (1.77) $ (0.64) $ (0.32) $ (0.76) $ (0.83)
<FN>
(1) Retroactively adjusted for the twenty-for-one stock split effected
in the form of a stock dividend on December 31, 1992, two-for-one
stock split effected in the form of a stock dividend on August 31, 1993,
and a three-for-one stock split effected in the form of a stock dividend
on October 31, 1994.
</FN>
</TABLE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources -
The Company's term loan entered into in November 1989 was
repaid in June 1995 from the proceeds from the sale of the hotel in
Orlando, Florida and a portion of the proceeds from the sale of land in
Ohio and the refinancing of the Ramada Inn discussed below. With the
repayment of this loan, the Company will be relieved of the burden of
servicing this debt and further deteriorating its cash position.
In April 1995, the Company sold its weekly rental hotel in
Orlando, Florida. The net proceeds were approximately $2,700,000. The
proceeds were used to reduce the outstanding balance of the Company's term
loan discussed above. Additionally, the Company received net proceeds of
approximately $1,920,000 from the sale of residential lots in Atlanta,
Georgia, undeveloped land in Ohio and all but one of the Company's
condominium loans in Florida. The proceeds were used to reduce the term
loan discussed above and to provide additional working capital to the
Company.
In June 1995, the Company received a loan from a commercial
lender to refinance the Ramada Inn in Longwood, Florida. The loan
proceeds are $2,800,000. The loan is for a term of 20 years with an
amortization period of 25 years, at the rate of 10.35%. Principal and
interest payments will be approximately $26,000 per month beginning August
1, 1995. A portion of the proceeds from the loan was used to repay the
term loan discussed above. The remaining proceeds of approximately
$1,500,000 will be used for working capital. In addition, the Company is
required to make a repair escrow payment comprised of 4% of estimated
revenues, as well as real estate tax and insurance escrow payments. The
total amount for these items will be a payment of approximately $20,000
per month and can be adjusted annually. The escrow funds will be used as
tax, insurance and repair needs arise. As of August 31, 1995, there was
approximately $140,000 of escrowed funds related to this loan agreement.
In March 1995, the Company borrowed approximately $381,000
against the cash value on key-person life insurance contracts which the
Company purchased concurrently with the implementation of the Supplemental
Retirement and Death Benefit Plan. The net proceeds to the Company were
approximately $358,000 due to the prepayment of interest on the loan. The
proceeds were used to provide additional working capital to the Company.
On August 16, 1995, RW Hotel Partners, L.P. was organized as a
limited partnership (the "Partnership") under the laws of the State of
Delaware. Concurrently, the Company formed Ridgewood Hotels, Inc., a
Georgia corporation ("Ridgewood Hotels") which became the sole general
partner in the Partnership with RW Hotel Investments, L.L.C. ("Investor")
as the limited partner. Ridgewood Hotels has a 1% base distribution
percentage versus 99% for the Investor. However, distribution percentages
do vary depending on certain defined preferences and priorities pursuant
to the Partnership Agreement ("Agreement") which are discussed below. The
partnership was formed to acquire a hotel property in Louisville,
Kentucky. The terms of this partnership will serve as a guideline for
other potential acquisitions with the Investor or its affiliates.
The Partnership Agreement was amended and restated on September
8, 1995. Distributable Cash is defined as the net income from the
property before depreciation plus any net sale proceeds and net financing
proceeds less capital costs. Distributions of Distributable Cash shall be
made as follows:
- First, to the Investor until there has been distributed to
the Investor an amount equal to a 15% cumulative internal rate of return
on the Investor's investment.
- Second, to Ridgewood Hotels until the aggregate amount
received by Ridgewood Hotels equals the aggregate cash contributions made
by Ridgewood Hotels to the Partnership (as of 8/31/95, Ridgewood Hotels
had contributed approximately $232,000).
- Third, 12% to Ridgewood Hotels and 88% to the Investor until
there has been distributed to the Investor an amount equal to a 25%
cumulative internal rate of return on Investor's investment.
- Fourth, 75% of the residual to the Investor and 25% to
Ridgewood Hotels.
A Management Agreement exists between the Partnership and the
Company as Manager ("Manager") for the purpose of managing a hotel in
Louisville, Kentucky. The Manager shall be entitled to the following
property management fees:
(1) 2.5% of the gross revenues from the hotel property.
(2) 1% of the gross revenues from the hotel property as an
incentive fee if distributable cash equals or exceeds 13.5% of certain
aggregate acquisition costs. Currently, no management fees are payable
with respect to the first 12-month period of management of the hotel.
A Construction Management Agreement exists between the
Partnership and the Manager for the purpose of managing certain
improvements to the property. No construction management fees are payable
with respect to the hotel purchased in Louisville, Kentucky.
The Company currently has approximately $232,000 invested in
the Partnership for the purchase of a hotel in Louisville, Kentucky. Five
other hotels are under contract to be purchased and would require
approximately $500,000 in additional capital contribution to the
Partnership by the Company. The Company also has approximately $113,000
of due diligence costs incurred for the hotels under contract that will be
reimbursed to the Company upon the closing of the hotels. The Company may
make future capital contributions to the Partnership. Management expects
to fund such capital contributions through available cash or from loans
from the Partnership. Additionally, the Company may invest in other
partnerships to acquire hotels in the future.
The Company formed a hotel management subsidiary in December
1994. The loss from the subsidiary for the fiscal year ended August 31,
1995 was $75,000. The loss was generated by expenses attributable to the
hotel management operations exceeding management fee revenue. This loss
is attributable to the assets of another company which the Company has an
option to purchase. The option agreement requires Cornerstone Management
and Development, Inc. (Maryland) to repay the Company if losses occur, but
because of the uncertainty of collecting this amount, the Company has
included this loss in its results of operations.
Since the Company is not currently generating sufficient
operating cash to cover overhead and debt service, the Company must
continue to sell real estate, seek alternative financing or otherwise
recapitalize the Company. Due to the sale of the hotel in Orlando,
Florida and the refinancing of the Ramada Inn, there is available cash of
approximately $1.8 million. This available cash will be used to fund
operating losses until new sources of income can be generated. The
Company also intends to aggressively pursue the acquisition of hotels and
hotel management contracts through similar partnerships as described above
which would provide additional cash flow.
The Company owns and operates one hotel and owns a number of
land parcels which are held for sale or development. The success of the
Company's operations continues to be dependent upon such unpredictable
factors as the general and local economic conditions to which the real
estate industry is particularly sensitive: labor, environmental issues,
weather conditions, consumer spending or general business conditions and
the availability of satisfactory financing.
Results of Operations -
Sales of real estate properties for the fiscal year ended
August 31, 1995 decreased 75% compared to 1994 due to the sale of the
Company's five mobile home parks and apartment complexes in 1994. Sales
of real estate properties for the fiscal year ended August 31, 1994,
increased 229% compared to 1993 due to the sale of the Company's five
mobile home parks. The Company had gains from real estate sales of
approximately $291,000, $1,789,000 and $1,407,000 during fiscal years
1995, 1994 and 1993, respectively. Gains or losses on real estate sales
are dependent upon the timing, sales price and the Company's basis in
specific assets sold and will vary considerably from period to period.
Revenues from real estate properties for fiscal year 1995
decreased $2,158,000, or 40%, compared to 1994. The decrease was
primarily due to the sale of the mobile home parks and apartments in 1994.
Revenues from real estate properties for fiscal year 1994 decreased
$1,273,000, or 19%, compared to 1993. This decrease also was primarily
due to the sale of the mobile home parks and apartments in 1994.
There were no mobile home sales during fiscal year ended August
31, 1995 due to the sale of the mobile home parks in prior years. Mobile
home sales decreased $1,103,000, or 19%, for the fiscal year ended August
31, 1994, compared to 1993. This decrease was due to the sale of certain
mobile home parks. Related costs and expenses decreased $662,000, or 10%,
for the same period due to the sale of the mobile home parks.
Expenses of real estate properties decreased $1,987,000, or
41%, for the fiscal year ended August 31, 1995 compared to 1994 due to the
sale of the mobile home parks, apartments and hotel. Expenses of real
estate properties decreased $374,000, or 7%, for the fiscal year ended
August 31, 1994, compared to 1993 due to the sale of the mobile home parks
and apartments.
Income from loans and temporary investments decreased $68,000
for the fiscal year ended August 31, 1995 compared to 1994. The decrease
is due to less cash available for investment. Income from loans and
temporary investments increased $37,000 for the fiscal year ended August
31, 1994, compared to 1993. The increase is due to more cash available
for investment.
Other income remained relatively insignificant for all three
fiscal years ending August 31, 1995, 1994 and 1993. The provision of
$50,000 for possible losses in fiscal year 1995 pertains to a land parcel
in Atlanta, Georgia which has been sold. The provision of $1,638,000 for
possible losses in fiscal year 1994 pertains to land parcels in Dallas,
Texas; Phoenix, Arizona and Atlanta, Georgia. It was management's belief
that an additional provision in 1995 and 1994 was necessary to properly
reflect the current net realizable value of the property.
Interest expense decreased by $328,000 during the fiscal year
ended August 31, 1995, compared to 1994 and $224,000 during the fiscal
year ended August 31, 1994, compared to 1993. The decreases are primarily
due to reductions in the principal amount outstanding under the Company's
term loans.
General, administrative and other expenses decreased by
$245,000 and $166,000 for the fiscal year ended August 31, 1995, compared
to 1994 and fiscal year ended August 31, 1994, compared to 1993,
respectively. Both of these decreases were due to management's continuing
effort to reduce and control overhead.
During fiscal year ended August 31, 1995, the Company formed a
hotel management subsidiary. The loss from the subsidiary was $75,000.
The loss was generated by expenses attributable to the hotel management
operations exceeding management fee revenue.
Due to the Company's aggressive movement into the business of
acquiring, developing, operating and selling hotel properties throughout
the country, the Company incurred business development costs of $165,000
in fiscal year 1995.
In September 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 (FAS 109), "Accounting for Income Taxes".
Upon adoption of FAS 109 the Company changed its method of accounting for
income taxes from the deferred method (APB 11) to an asset and liability
approach. This approach requires the recognition of deferred tax
liabilities and assets for the expected future tax consequences of
temporary differences between the carrying amounts and the tax bases of
other assets and liabilities. The adoption of FAS 109 had no effect on
the Company's financial condition or results of operations for the year
ended August 31, 1994.
In March 1995, the Financial Accounting Standards Board issued
Statement of Accounting Standards No. 121 (FAS 121), "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of."
FAS 121 establishes new standards for determining and measuring impairment
of long-lived assets held by an entity for investment purposes or for
disposal. According to the provisions of FAS 121, an entity should assess
impairment on assets held for investment or disposal whenever events or
changes in circumstances, whether economical or otherwise, indicate the
recorded amount of the asset may not be recoverable. FAS 121 is effective
for fiscal years beginning after December 15, 1995, although early
adoption is encouraged. The Company's management has elected to defer
early adoption of the effects of FAS 121; however, upon adoption,
management does not expect the effects of FAS 121 to have a material
adverse impact on the Company's financial statements.
Effect of Inflation -
Inflation tends to increase the Company's cash flow from income
producing properties since rental rates generally increase by a greater
amount than associated expenses. Inflation also generally tends to
increase the value of the Company's land portfolio.
Offsetting these beneficial effects of inflation are the
increased cost and decreased supply of investment capital for real estate
that generally accompany inflation.
<TABLE>
RIDGEWOOD PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AUGUST 31, 1995 AND 1994
($000'S omitted, except per share data)
<CAPTION>
August 31, August 31,
ASSETS 1995 1994
------ --------- ---------
<S> <C> <C>
REAL ESTATE INVESTMENTS:
Real Estate Properties
Operating Properties $ 1,461 $ 4,196
Land Held for Sale 10,104 10,903
---------- ----------
11,565 15,099
Mortgage Loans 44 503
---------- ----------
Total real estate investments 11,609 15,602
Allowance for Possible Losses (4,700) (4,873)
---------- ----------
Net real estate investments 6,909 10,729
INVESTMENT IN LIMITED PARTNERSHIP 232 --
CASH AND CASH EQUIVALENTS 1,880 2,804
OTHER ASSETS 652 818
---------- ----------
$ 9,673 $ 14,351
========== ==========
<FN>
The accompanying notes are an integral part of these consolidated
financial statements.
</FN>
</TABLE>
<TABLE>
<CAPTION>
August 31, August 31,
LIABILITIES AND SHAREHOLDERS' INVESTMENT 1995 1994
---------------------------------------- ---------- ----------
<S> <C> <C>
ACCOUNTS PAYABLE $ 102 $ 253
ACCRUED SALARIES, BONUSES AND
OTHER COMPENSATION 737 673
ACCRUED PROPERTY TAX EXPENSE 146 187
ACCRUED INTEREST AND OTHER LIABILITIES 280 383
TERM LOAN 2,796 5,415
---------- ----------
Total Liabilities 4,061 6,911
---------- ----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' INVESTMENT
Series A Convertible Preferred Stock,
$1 par value, 1,000,000 shares
authorized, 450,000 shares
issued and outstanding in 1994 and 1995
liquidation preference
and callable at $3,600,000. 450 450
Common stock, $0.01 par value, 5,000,000
shares authorized, 963,480
shares issued and outstanding in 1994 and 10 10
1995.
Paid-in Surplus 16,196 16,368
Accumulated deficit since
December 30, 1985 (11,044) (9,388)
---------- ----------
Total Shareholders' Investment 5,612 7,440
---------- ----------
$ 9,673 $ 14,351
========== ==========
<FN>
The accompanying notes are an integral part of these consolidated
financial statements.
</FN>
</TABLE>
<TABLE>
RIDGEWOOD PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF LOSS
FOR THE YEARS ENDED AUGUST 31, 1995, 1994 AND 1993
($000's Omitted, except per share data)
<CAPTION>
1995 1994 1993
--------- ------- --------
<S> <C> <C> <C>
REVENUES:
Revenues from real estate properties............... $ 3,252 $ 5,410 $ 6,683
Revenues from hotel management .................... 287 -- --
Sales of real estate properties ................... 5,018 19,848 6,032
Sales of mobile homes.............................. -- 4,594 5,697
Income from loans and temporary investments........ 113 181 144
Other.............................................. 5 49 63
---------- --------- ---------
8,675 30,082 18,619
---------- --------- ---------
COSTS AND EXPENSES:
Expenses of real estate properties................. 2,868 4,855 5,229
Expenses of hotel management ...................... 362 -- --
Costs of real estate sold ......................... 4,727 18,059 4,625
Costs of mobile homes sold......................... -- 5,757 6,419
Depreciation ...................................... 364 1,074 1,486
Provision for possible losses ..................... 50 1,638 --
Interest expense, net of interest capitalized...... 410 738 962
General, administration and other.................. 1,347 1,592 1,758
Business development .............................. 165 -- --
---------- --------- ---------
10,293 33,713 20,479
---------- --------- ---------
LOSS BEFORE INCOME TAXES (1,618) (3,631) (1,860)
INCOME TAXES (38) -- --
---------- --------- ---------
NET LOSS $ (1,656) $ (3,631) $ (1,860)
---------- --------- ---------
LOSS PER COMMON SHARE $ (1.72) (0.64) (0.32)
========== ========= =========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<TABLE>
Ridgewood Properties, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the Years Ended August 31, 1995, 1994 and 1993
($000's Omitted)
<CAPTION>
1995 1994 1993
Cash flows from operating activities: --------- ----------- -----------
<S> <C> <C> <C>
Net loss ................................................... $ (1,656) $ (3,631) $ (1,860)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization .......................... 437 1,078 1,617
(Decrease) Increase in allowance for possible losses.... (173) 1,638 (49)
Gain from sale of real estate properties ............... (68) (1,788) (1,348)
Decrease in mobile home inventory ...................... -- 1,355 223
Decrease (increase) in other assets .................... 209 411 (427)
Decrease in accounts payable and accrued liabilities.... (232) (370) (39)
---------- ------------ ------------
Total adjustments ...................................... 173 2,324 (23)
---------- ------------ ------------
Net cash used by operating activities .................. (1,483) (1,307) (1,883)
---------- ------------ ------------
Cash flows from investing activities:
Principal payments received on mortgage loans ............ 36 60 10
Foreclosures on mortgage loans ........................... -- -- (10)
Investment in limited partnership ........................ (232) -- --
Proceeds from sale of real estate ........................ 4,620 17,867 5,870
Additions to real estate properties ...................... (915) (1,015) (1,290)
---------- ------------ ------------
Net cash provided by investing activities .............. 3,509 16,912 4,580
---------- ------------ ------------
Cash flows from financing activities:
Dividends on preferred stock ............................. (172) -- --
Purchase and retirement of common stock .................. -- (8,042) --
Proceeds from issuance of debt ........................... 2,800 2,433 3,831
Debt financing costs ..................................... (159) -- --
Repayments of debt ....................................... (5,419) (9,334) (6,135)
---------- ------------ ------------
Net cash used by financing activities .................. (2,950) (14,943) (2,304)
---------- ------------ ------------
Net (decrease) increase in cash and cash equivalents ......... (924) 662 393
Cash and cash equivalents at beginning of year ............... 2,804 2,142 1,749
---------- ------------ ------------
Cash and cash equivalents at end of year ..................... $ 1,880 $ 2,804 $ 2,142
========== ============ ============
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<TABLE>
Ridgewood Properties, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the Years Ended August 31, 1995, 1994 and 1993
- -------------------------------------------------------------------------------------------------
<CAPTION>
Supplemental disclosures of
cash flow information:
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Interest paid ...................................... $ 450,000 $ 698,000 $ 996,000
Income taxes paid .................................. $ 38,000 $ -- $ --
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
<S> <C>
Supplemental disclosure of non-cash activity in fiscal year 1994:
Charge-off of fully-reserved loan ................... $ 227,000
Issuance of preferred stock in exchange for shares of
common stock ........................................ $ 450,000
Purchase of common stock in exchange for note........ $ 1,450,000
- ------------------------------------------------------------------------------------------------
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<TABLE>
RIDGEWOOD PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
FOR THE YEARS ENDED AUGUST 31, 1995, 1994 AND 1993
($000's Omitted, except per share data)
(NOTES 1, 6 & 10)
<CAPTION>
Preferred Common
Stock Stock Accumulated Total
----------------------- ------------------------- Paid-in Earnings Shareholders'
Shares Amount Shares Amount Surplus (Deficit) Investment
---------- ---------- ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, August 31, 1992 -- $ -- 5,868,960 $ 59 $ 26,262 $ (3,897) $ 22,424
Net loss -- -- -- -- -- (1,860) (1,860)
---------- ---------- ------------ ----------- ----------- ----------- -----------
Balance, August 31, 1993 -- $ -- 5,868,960 $ 59 $ 26,262 $ (5,757) $ 20,564
Purchase of common stock
for cash and issuance
of preferred stock 450,000 450 (4,365,840) (44) (8,449) -- (8,043)
Purchase of common
stock in exchange
for note -- -- (539,640) (5) (1,445) -- (1,450)
Net Loss -- -- -- -- -- (3,631) (3,631)
----------- ----------- ------------- ----------- ----------- ----------- -----------
Balance, August 31, 1994 450,000 $ 450 963,480 $ 10 $ 16,368 $ (9,388) $ 7,440
Net Loss -- -- -- -- -- (1,656) (1,656)
Dividends on
Preferred Stock -- -- -- -- (172) -- (172)
----------- ----------- ------------- ----------- ----------- ----------- -----------
Balance, August 31, 1995 450,000 $ 450 963,480 $ 10 $ 16,196 $ (11,044) $ 5,612
=========== =========== ============= =========== =========== =========== ===========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
Ridgewood Properties, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
August 31, 1995, 1994 and 1993
1. Significant Accounting Policies
General -
Shares outstanding and per share amounts for all periods
presented have been retroactively adjusted for the twenty-for-one stock
split effected in the form of a stock dividend on December 31, 1992, a
two-for-one stock split effected in the form of a stock dividend on August
31, 1993, and a three-for-one stock split effected in the form of a stock
dividend on October 31, 1994.
The Company's common stock is listed in the broker-dealer "Pink
Sheets" and traded in the over-the-counter market (see Note 6). During
the fourth quarter of fiscal year 1994, the Company purchased and retired
all of the shares of common stock ("Triton Shares") owned by the Company's
then-majority stockholder, Triton Group, Ltd. ("Triton"). The cash used
to purchase the common stock was from the proceeds received by the Company
from the sale of its mobile home parks in June 1994. In conjunction with
this purchase, the Company issued 450,000 shares of Series A Convertible
Preferred Stock (the "preferred stock") to Triton. The preferred stock is
redeemable by the Company at $8.00 per share and accrues dividends at a
rate of $0.40 per share annually for the first two years and at a rate of
$0.80 per share annually thereafter. Dividends are payable quarterly
commencing on November 1, 1994. Each share of the preferred stock is
convertible into three shares of the Company's common stock either upon
default of the dividend payments or at the end of two years and is subject
to certain anti-dilution adjustments. In the event of any liquidation,
dissolution or winding up of the Company, whether voluntary or
involuntary, the holders of the shares of preferred stock shall be
entitled to receive $8.00 per share of preferred stock plus all dividends
accrued and unpaid thereon. So long as a minimum of 50,000 shares of
preferred stock is outstanding, Triton shall be entitled to elect one
additional director to serve on the Board of Directors of the Company.
Additionally, as long as Triton is the holder of the minimum 50,000 shares
of preferred stock and both John C. Stiska and Michael M. Earley are
officers of Triton, then the Company's Board of Directors shall consist of
four members, two of which would be Mr. Stiska and Mr. Earley (and wherein
either Mr. Stiska or Mr. Earley is considered to be the additional
director to which Triton is entitled to elect.) No change of control for
financial reporting purposes of the Company is deemed to have occurred
because of Triton's retaining control of 50% of the Board of Directors and
holding preferred shares convertible into 1,350,000 of the Company's
common stock representing 58% of the total shares outstanding (after
giving effect to the issuance thereof).
The Company also purchased and retired all the shares of common
stock owned by Hesperus Partners, Ltd. ("Hesperus") (the "Hesperus
Shares), formerly known as Harris Associates, L.P. The stock was
exchanged for a note the Company received from Sun Communities Operating
Limited Partnership in conjunction with the sale of the mobile home parks
(the "Note"). In addition to assigning the Note and the mortgage securing
the Note, the Company had agreed and did pay Hesperus interest on the
outstanding principal balance of the Note from the closing date through
June 15, 1995, and has agreed to grant Hesperus the right to require the
Company to repurchase the Note and the mortgage following an uncured
principal payment default by the obligor under the Note or by certain
uncured payment defaults by the Company. The Company's President, N.
Russell Walden, is the owner of approximately 42% of the Company's
outstanding shares of common stock.
Since the Company is not currently generating sufficient
operating cash to cover overhead and debt service cost, the Company must
continue to sell real estate, seek alternative financing, or otherwise,
recapitalize the Company. It is currently reviewing the viability of all
of these alternatives.
Basis of Presentation and Consolidation -
The accompanying financial statements of the Company present the
historical cost basis amount of assets, liabilities, revenues, costs and
expenses and shareholders' investment of the real estate business,
formerly known as CMEI, for the periods presented.
In 1995, the Company formed two wholly-owned subsidiaries for
the purpose of managing hotels and another for the sole purpose of owning
the hotel in Longwood, Florida, which serves as collateral for the
Company's term loan. The lender required that a separate subsidiary own
the hotel. One other subsidiary remains, but is not operational.
All significant intercompany balances and transactions have
been eliminated.
Valuation of Real Estate Properties -
The Company carries its real estate properties at the lower of cost
or net realizable value. Where estimated net realizable value is lower
than cost, an allowance for possible losses is provided (see Note 2).
The allowance for possible losses relates to all real estate
investments, including mortgage loans and real estate properties. The
adequacy of the allowance for possible losses is evaluated by means of
periodic reviews of the investment portfolio on an individual asset basis.
In March 1995, the Financial Accounting Standards Board issued
Statement of Accounting Standards No. 121 (FAS 121), "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of."
FAS 121 establishes new standards for determining and measuring impairment
of long-lived assets held by an entity for investment purposes or for
disposal. According to the provisions of FAS 121, an entity should assess
impairment on assets held for investment or disposal whenever events or
changes in circumstances, whether economical or otherwise, indicate the
recorded amount of the asset may not be recoverable. FAS 121 is effective
for fiscal years beginning after December 15, 1995, although early
adoption is encouraged. The Company's management has elected to defer
early adoption of the effects of FAS 121; however, upon adoption,
management does not expect the effects of FAS 121 to have a material
adverse impact on the Company's financial statements.
Depreciation Policies -
The Company depreciates operating properties and any related
improvements by using the straight-line method over the estimated useful
lives of such assets, which are generally 30 years for building and land
improvements and 5 years for furniture, fixtures and equipment.
Capitalization Policies -
The Company capitalizes interest as a cost of properties while they
are under construction or development. Costs of planning and development
performed by outside contractors and all other direct costs related to
properties under construction or development are also capitalized.
Capitalization of interest and other costs is discontinued when a project
is substantially completed, or if active development ceases.
Total interest incurred and paid amounted to approximately $450,000,
$698,000, and $996,000 in 1995, 1994 and 1993, respectively. No interest
was capitalized; however, the effect on the financial statements from
capitalizing amounts permitted would not have been material.
Repairs and maintenance costs are expensed in the period
incurred. Major improvements to existing properties which increase the
usefulness or useful life of the property are capitalized.
Sale of Real Estate -
All revenue related to the sale of real estate is recognized at the
time of closing. The Company allocates costs of real estate sold using
the specific identification or relative sales value methods based on the
nature of the development. Profit recognition is based upon the Company
receiving adequate cash down payments and other criteria specified by
existing accounting literature.
Cash and Cash Equivalents -
For the purpose of the Statement of Cash Flows, cash includes cash
equivalents. Cash equivalents include all highly liquid investments with
maturities of three months or less.
2. Real Estate Investments
The Company's real estate properties by type at August 31, 1995, and
1994 were as follows ($000's omitted):
Furniture
August 31, 1995 Land & Fixtures &
Type of Project Buildings Equipment Total
Hotel 2,535 295 2,830
Less -- accumulated
depreciation (1,369)
Net operating properties 1,461
Land 10,104 - 10,104
Total $11,565
=======
Furniture,
August 31, 1994 Land & Fixtures &
Type of Project Buildings Equipment Total
Hotels $ 5,328 $ 1,537 $ 6,865
Less -- accumulated
depreciation (2,669)
-------
Net operating properties 4,196
Land 10,903
-------
Total $15,099
=======
Changes in the allowance for possible losses for the
years ended August 31, 1995, 1994 and 1993 were as follows
($000's omitted):
1995 1994 1993
Allowance, beginning of year $4,873 $3,625 $3,674
Provision for possible losses 50 1,638 --
Chargeoff and reversal of
reserves from the sales of
real estate assets (223) (163) (49)
Chargeoff of fully reserved
loan -- (227) --
Allowance, end of year $4,700 $4,873 $3,625
====== ======= ======
3. Commitments and Contingencies
In August 1991, each executive officer was offered a Post-
Employment Consulting Agreement (the "Consulting Agreement(s)") whereby
the officer agrees that if he or she is terminated by the Company for
other than good cause, the officer will be available for consulting at a
rate equal to their annual compensation immediately prior to termination.
All officers have chosen to enter into Consulting Agreements. In
addition, one other employee was offered and has chosen to enter into a
one year Consulting Agreement. The executive, upon termination, agrees to
sign an unconditional release of all claims and liability in exchange for
a one (one employee) or two (three executives) year consulting fee
arrangement, depending upon the years of service as an officer or the
designation as a senior executive officer.
On May 2, 1995 a complaint was filed in the Court of Chancery of the
State of Delaware (New Castle County) entitled William N. Strassburger v.
Michael M. Early, Luther A. Henderson, John C. Stiska, N. Russell Walden,
and Triton Group, Ltd., defendants, and Ridgewood Properties, Inc.,
nominal defendant, C.A. No. 14267 (the "Complaint"). The plaintiff is an
individual shareholder of the Company who purports to file the Complaint
individually, representatively on behalf of all similarly situated
shareholders, and derivatively on behalf of the Company. The Complaint
challenges the actions of the Company and its directors in consummating
the Company's August 1994 repurchase of its common stock held by Triton
Group, Ltd. and Hesperus Partners Ltd. in five counts, denominated Waste
of Corporate Assets, Breach of Duty of Loyalty to Ridgewood, Breach of
Duty of Good Faith, Intentional Misconduct, and Breach of Duty of Loyalty
and Good Faith to Class.
The Complaint seeks (a) permission of the court to proceed as a
class action with respect to one count; (b) rescission of the repurchase
of Triton's Ridgewood common stock, together with recovery (to Ridgewood)
of the approximately $8 million in cash and the shares of the preferred
stock received by Triton in the repurchase, or in the alternative,
unspecified restitution or damages to Ridgewood resulting from the Triton
repurchase; (c) unspecified restitution or damages to Ridgewood resulting
from the Hesperus repurchase; (d) unspecified damages to Ridgewood
resulting from the alleged breaches of the defendants' duties of loyalty
and good faith and their alleged intentional misconduct; (e) unspecified
damages for any separate injury allegedly suffered by members of the
purported class; and (f) the plaintiff's costs and expenses of this
litigation, including attorneys' fees.
The Company has answered the Complaint, denying all allegations
of wrongdoing either on its part or that of its directors. The Company's
management believes the claims made in the Complaint are without merit,
and that the shareholders of Ridgewood benefited from the challenged
transactions. Management intends to vigorously contest this matter.
As more fully described in Note 8, the Company is required to
fund certain capital contributions to RW Hotel Partners, L.P. as the
partnership acquires hotels.
4. Notes Payable
A. In November 1989, the Company entered into a $15,000,000
Revolving Line of Credit with a commercial bank. Effective December 31,
1991, the Company's Revolving Line of Credit expired and the outstanding
principal balance of $15,000,000 was converted to a term loan. In January
1992, the term loan was amended to postpone principal payments for seven
months. Under the amended agreement, interest accrued at the rate of one
percent (1%) per annum above the prime rate of the lender. Under the term
loan agreement, the Company was required to make interest payments on the
outstanding principal balance of the note, which payments commenced on
February 1, 1992, and monthly thereafter through December 1, 1996.
Commencing on September 1, 1992, and thereafter on the first day of each
month through December 1, 1996, the outstanding principal amount of the
note shall be repaid in equal monthly payments. In June 1994, the loan
agreement was amended whereby proceeds from future sales of property
securing the term loan will serve to reduce the remaining monthly
amortization thereby reducing the monthly payment rather than reducing
the remaining principal due at the end of the term loan. On January 1,
1997, the remaining outstanding principal balance was to be payable in
full. The entire loan was repaid in full in June 1995.
The approximate average amounts of borrowings on the term loan
during fiscal years 1995 and 1994 were $3,996,000 and $7,782,000, at
average interest rates of approximately 9.32% and 7.47%, respectively.
The maximum amounts of borrowings outstanding under this note payable
during fiscal years 1995 and 1994 were $5,415,000 and $10,191,000,
respectively.
B. The Company entered into a $1,750,000 Wholesale Financing
Agreement ("Agreement") with a major commercial lender in February 1993.
This Agreement was repaid in full with the closing of the sale of all of
the mobile home parks in fiscal year 1994.
The approximate average amount of borrowings on the Agreement
during fiscal year 1994 was $976,000, at an average interest rate of
approximately 8.0%. The maximum amount of borrowings outstanding under
this note payable during fiscal year 1994 was approximately $1,318,000.
C. In November 1992, the Company entered into a term loan with
a commercial lender for $1,020,000. The entire loan was assumed by
another entity in March 1994. The approximate average amount of
borrowings on the term loan during fiscal year 1994 was $1,016,000, at an
average interest rate of 8.75%. The maximum amount of borrowings
outstanding under this term note during fiscal year 1994 was approximately
$1,017,000.
D. In June 1995, the Company entered into a loan with a
commercial lender to refinance the Ramada Inn in Longwood, Florida. The
loan proceeds are $2,800,000. The loan is for a term of 20 years with an
amortization period of 25 years, at the rate of 10.35%. Principal and
interest payments are approximately $26,000 per month beginning August 1,
1995. A portion of the proceeds from the loan was used to repay the term
loan discussed in A above. The remaining proceeds of approximately
$1,500,000 will be used for working capital. In addition, the Company is
required to make a repair escrow payment comprised of 4% of estimated
revenues, as well as real estate tax and insurance escrow payments. The
total amount for these items will be a payment of approximately $20,000
per month and can be adjusted annually. The escrow funds will be used as
tax, insurance and repair needs arise. As of August 31, 1995, there was
approximately $140,000 of escrowed funds related to this loan agreement.
Also, commitment fees and loan costs of approximately $159,000 are being
amortized over 20 years.
The approximate average amount of borrowings on the term loan
during fiscal year 1995 was $2,799,000, at an average interest rate of
10.35%. The maximum amount of borrowings outstanding under this loan was
$2,800,000.
Maturities of long-term debt during the Company's next five
fiscal years are as follows: 1996 - $25,000; 1997 - $28,000; 1998 -
$31,000; 1999 - $35,000; 2000 - $38,000.
5. Income Taxes
In September 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 (FAS 109), "Accounting for Income Taxes".
Upon adoption, the Company changed its method of accounting for income
taxes from the deferred method (APB 11) to an asset and liability
approach. This approach requires the recognition of deferred tax
liabilities and assets for the expected future tax consequences of
temporary differences between the carrying amounts and the tax bases of
other assets and liabilities. The adoption of FAS 109 had no effect on
the Company's financial condition or results of operations for the year
ended August 31, 1994.
The Company's 1995 provision for income taxes is comprised of
$38,000 in alternative minimum tax. There was no provision for income
taxes for the years ended August 31, 1994 or 1993.
Deferred tax assets (liabilities) are comprised of the
following at August 31, 1995, and September 1, 1994, respectively:
(000's omitted)
1995 1994
Allowance for possible losses $ 1,598 $ 1,657
Excess of tax over book basis, land held
for sale or future development 14 14
Excess of tax over book basis, operating
properties -- 59
Excess of tax over book basis, other
investments -- 119
Depreciation 105 31
Other 232 54
Tax loss carryforwards 3,759 3,170
----- -----
Gross deferred tax assets 5,708 5,104
----- -----
Excess of book over tax basis, land held
for sale or future development (39) (39)
Excess of book over tax basis, operating
properties
Depreciation
Gross deferred tax liabilities (39) (39)
------ ------
Deferred tax assets valuation allowance (5,669) (5,065)
------ ------
$ 0 $ 0
======== =======
The net change in the valuation allowance for deferred tax
assets was an increase of $604,000. This change resulted primarily from
an increase in the Company's tax loss carryforward and other deferred tax
assets, offset by a decrease in nondeductible allowance for possible
losses relating to certain properties sold during fiscal year 1995.
Approximately $11,055,000 of tax loss carryforwards remain at
August 31, 1995 for income tax purposes. The carryforwards expire
$2,080,000 in 2005, $4,150,000 in 2006, $1,524,000 in 2007, $1,699,000 in
2008 and $1,602,000 in 2010. As a result of a change in control during
fiscal year 1994, the amount of tax loss carryforwards which may be
utilized by the Company in any one year period is limited to
approximately $940,000. The Company has unused net operating loss
carryforwards in certain states in which it operates which are available
to offset future state taxable income in those states. No benefit for the
remaining loss carryforwards has been recognized in the financial
statements.
6. Shareholders' Investment
Authorized Shares of Common and Preferred Stock -
On March 30, 1993, the shareholders of the Company approved an
amendment to the Company's Certificate of Incorporation increasing the
authorized number of shares of the Company's common stock, par value $0.01
per share, from 1,000,000 shares to 2,000,000 shares. On January 12,
1994, the shareholders of the Company approved an amendment to the
Company's Certificate of Incorporation increasing the authorized number of
shares of the Company's common stock from 2,000,000 shares to 3,000,000
shares. On January 4, 1995, the shareholders of the Company approved an
amendment to the Company's Certificate of Incorporation increasing the
authorized number of shares of the Company's common stock from 3,000,000
shares to 5,000,000 shares and to increase the number of authorized shares
of the Company's preferred stock, par value $1.00 per share, from 500,000
shares to 1,000,000 shares. In addition, the shareholders approved and
adopted a proposal to amend the Ridgewood Properties, Inc. 1993 Stock
Option Plan, increasing the number of shares of common stock reserved for
issuance or transfer upon the exercise of options to be granted from time
to time thereunder, from an aggregate of 900,000 to 1,200,000 shares of
common stock. Accordingly, 4,036,520 shares of common stock are available
for future issuance, of which 1,200,000 are reserved for the Company's
stock option plan. There are currently 963,480 shares of common stock
outstanding.
There are currently 1,000,000 authorized shares of the
Company's Series A Convertible Preferred Stock. On August 15, 1994, the
Company issued 450,000 shares of the Company's preferred stock (see
"Purchase of Common Shares" below), which represent the only outstanding
preferred shares. Accordingly, 550,000 shares of preferred stock are
available for future issuance.
Stock Splits -
On December 31, 1992, the Board of Directors declared a stock
split effected in the form of a stock dividend on the Company's
outstanding common stock. All shareholders of record as of December 31,
1992 received a dividend of 19 shares of common stock for each one share
of common stock held. The stock dividend was distributed on January 15,
1993.
On August 31, 1993, the Board of Directors declared a stock
split effected in the form of a stock dividend on the Company's
outstanding common stock. All shareholders of record as of August 31,
1993 received one share of common stock for each share of common stock
held. The stock was distributed on September 20, 1993.
On October 26, 1994, the Board of Directors declared a stock
split effected in the form of a stock dividend on the Company's
outstanding common stock. All shareholders of record as of October 31,
1994 received two shares of common stock for each share of common stock
held.
The number of shares presented in the accompanying financial
statements has been changed to reflect the stock splits. Because of the
retroactive treatment, some share numbers presented in the financial
statements give the appearance that there were, in some instances, more
shares of common stock outstanding than authorized when, in fact, there
was not.
Loss Per Common Share -
Loss per common share is calculated based upon the weighted
average number of shares outstanding during the period of approximately
963,000, 5,676,000 and 5,868,000 in 1995, 1994 and 1993, respectively.
Purchases of Common Stock by the Company -
As described in Note 1, on August 15, 1994, the Company
purchased all (4.38 million) of the shares of the Company's common stock,
$0.01 par value, held by the Company's then-majority stockholder, Triton
Group Ltd. The Triton Shares represented 74.4% of the 5.88 million shares
of common stock outstanding prior to the consummation of the transaction.
In consideration for the Triton Shares, the Company paid $8.0 million in
cash and authorized and issued 450,000 shares of the Company's preferred
stock.
In addition, on August 29, 1994, the Company acquired all
(539,640) of the shares of common stock owned by Hesperus Partners Ltd.,
formerly known as Harris Associates, L.P., in exchange for a note
receivable in the principal amount of $1.45 million executed by Sun
Communities Operating Limited Partnership and held by the Company (see
Note 1). In addition to assigning the Note and the mortgage securing the
Note, the Company had agreed and did pay to Hesperus interest on the
outstanding principal balance of the Note from the closing date through
June 15, 1995, and has agreed to grant Hesperus the right to require the
Company to repurchase the Note and the mortgage following an uncured
principal payment default by the obligor under the Note or by certain
uncured payment defaults by the Company.
Following the purchase of the Triton and Hesperus Shares by the
Company, there are 963,480 shares of common stock outstanding. Of the
Company's issued and outstanding shares of common stock, approximately 42%
are owned by the Company's President, N. Russell Walden.
1993 Stock Option Plan -
On March 30, 1993, the Company granted options to purchase
378,000 shares of common stock at a price of approximately $1.83 per share
to its key employees and one director under the Ridgewood Properties, Inc.
1993 Stock Option Plan (the "Plan"). The options will vest over a four
year period in 25% increments. All options expire ten years from the date
of grant, unless earlier by reason of death, disability, termination of
employment, or for other reasons outlined in the Plan. As of August 31,
1994, approximately 284,000 options are currently exercisable.
On January 28, 1994, the Company granted options to purchase
375,000 and 75,000 shares of common stock at a price of $1.00 per share to
its President and Chief Financial Officer, respectively, under the Plan.
The options are exercisable immediately and expire on January 31, 1997.
If all vested options are exercised, the President and Chief Financial
Officer would hold 53% and 8%, respectively, of the total outstanding
shares of common stock.
On January 4, 1995, the shareholders approved an increase in
the number of authorized shares reserved for the Company's stock option
plan from 900,000 to 1,200,000.
7. Supplemental Retirement and Death Benefit Plan
The Company implemented a non-qualified Supplemental Retirement
and Death Benefit Plan with an effective date of January 1, 1987. The
Plan supplements other retirement plans and also provides pre-retirement
death benefits to participants' beneficiaries.
Concurrent with the implementation of the Supplemental
Retirement and Death Benefit Plan, the Company purchased key-person life
insurance contracts on the lives of the Plan participants. The policies
are owned by and payable to the Company and are "increasing whole life"
insurance. The Company pays level annual premiums, may borrow against
cash values earned, and pays interest annually on any loans which may be
cumulatively outstanding. In March 1995, the Company borrowed
approximately $381,000 against the cash values. The net proceeds to the
Company were approximately $358,000 due to the prepayment of interest on
the loan.
For the fiscal years ending August 31, 1995, 1994 and 1993, the
pension expense was approximately $60,000, $63,000, and $66,000,
respectively.
8. Investment in Limited Partnership
On August 16, 1995, RW Hotel Partners, L.P. was organized as a
limited partnership (the "Partnership") under the laws of the State of
Delaware. Concurrently, the Company formed Ridgewood Hotels, Inc., a
Georgia corporation ("Ridgewood Hotels") which became the sole general
partner in the Partnership with RW Hotel Investments, L.L.C. ("Investor")
as the limited partner. Ridgewood Hotels has a 1% base distribution
percentage versus 99% for the Investor. However, distribution percentages
do vary depending on certain defined preferences and priorities pursuant
to the Partnership Agreement ("Agreement") which are discussed below. The
partnership was formed to acquire a hotel property in Louisville,
Kentucky. The terms of this partnership will serve as a guideline for
other potential acquisitions with the Investor or its affiliates.
The Partnership Agreement was amended and restated on September
8, 1995. Distributable Cash is defined as the net income from the
property before depreciation plus any net sale proceeds and net financing
proceeds less capital costs. Distributions of Distributable Cash shall be
made as follows:
- First, to the Investor until there has been distributed to
the Investor an amount equal to a 15% cumulative internal rate of return
on the Investor's investment.
- Second, to Ridgewood Hotels until the aggregate amount
received by Ridgewood Hotels equals the aggregate cash contributions made
by Ridgewood Hotels to the Partnership (as of 8/31/95, Ridgewood Hotels
contributed approximately $232,000).
- Third, 12% to Ridgewood Hotels and 88% to the Investor until
there has been distributed to the Investor an amount equal to a 25%
cumulative internal rate of return on Investor's investment.
- Fourth, 75% of the residual to the Investor and 25% to
Ridgewood Hotels.
A Management Agreement exists between the Partnership and the
Company as Manager ("Manager") for the purpose of managing a hotel in
Louisville, Kentucky. The Manager shall be entitled to the following
property management fees:
(1) 2.5% of the gross revenues from the hotel property.
(2) 1% of the gross revenues from the hotel property as an
incentive fee if distributable cash equals or exceeds 13.5% of certain
aggregate acquisition costs. No management fees are payable with respect
to the first 12-month period of management of this hotel.
A Construction Management Agreement exists between the
Partnership and the Manager for the purpose of managing future
improvements to the property.
The Company currently has approximately $232,000 invested in
the Partnership. The Partnership purchased a hotel in Louisville,
Kentucky for approximately $16,000,000. Five other hotels are under
contract to be purchased by the partnership for an aggregate cost of
approximately $18,000,000, and would require approximately $500,000 in
additional capital contribution to the Partnership by the Company. The
Company also has approximately $113,000 of due diligence costs incurred
for the hotels under contract that will be reimbursed to the Company upon
the closing of the hotels. These costs are reflected in Other Assets.
The Company may make future capital contributions to the Partnership.
Management expects to fund such capital contributions through available
cash or from loans from the Partnership. Additionally, the Company may
invest in other partnerships to acquire hotels in the future.
In December 1993, the Company entered into a joint venture
agreement for the purpose of developing approximately a 150 lot
subdivision in Atlanta, Georgia. The Company contributed development
funds, and the other partner provided the land. Both partners are
responsible for any deficits resulting from the project. As of August 31,
1995, the Company has invested approximately $61,000 into the joint
venture, but was refunded its entire investment in September 1995. The
joint venture has been dissolved.
9. Employee Savings Plan
The Ridgewood Properties Employee Savings Plan ("Savings Plan")
is a savings and salary deferral plan which is intended to qualify for
favorable tax treatment under Sections 401(a) and 401(k) of the Internal
Revenue Code of 1986. The Savings Plan includes all employees of the
Company who have completed one year of service and have attained age
twenty-one.
Each participant in the Savings Plan may elect to reduce his or
her compensation by any percentage, not to exceed 15% of compensation when
combined with any Matching Basic or Discretionary Employer Contributions
(below) made on behalf of the participant, and have such amount
contributed to his or her account under the Savings Plan. Elective
employer contributions are made prior to the withholding of income taxes
on such amounts. A participant may also elect to contribute to the Plan
an amount of cash or property equal to or up to 10% of his or her
compensation ("Voluntary Contributions"). Voluntary Contributions are
made on an after-tax basis.
The Savings Plan provides for an employer matching contribution
in an amount equal to 50% of the elective employer contributions, provided
that in no event shall such employer matching contributions exceed 3% of
the participant's compensation. In addition, the Board of Directors of
the Company is authorized to make discretionary contributions to the
Savings Plan out of the Company's current or accumulated profits
("Discretionary Contributions"). Discretionary Contributions are
allocated among those participants who complete at least 1,000 hours of
service during the plan year and are employed by the Company on the last
day of the plan year.
Employees are subject to a seven year graduated vesting
schedule with respect to Basic Employer Contributions, Matching Employer
Contributions and Discretionary Contributions.
Distributions from the Savings Plan will generally be available
upon or shortly following a participant's termination of employment with
the Company, with additional withdrawal rights with respect to Voluntary
Contributions.
For the fiscal years ending August 31, 1995, 1994 and 1993,
expense for the Employee Savings Plan was approximately $15,000, $17,000
and $38,000, respectively.
10. Sale of Operating Properties
In November 1992, the Company sold its warehouse in Tennessee
for $400,000. The Company recognized a gain on the sale of approximately
$135,000. In May 1993, the Company sold one of its mobile home parks for
$3,990,000, resulting in a gain of approximately $1,256,000.
In March 1994, the Company sold its apartments in Dallas,
Texas, for $4,100,000, resulting in a gain of approximately $1,227,000.
The gross purchase price included a $1,015,000 term loan secured by one of
the apartments which is insured by the Department of Housing and Urban
Development and which was assumed by the buyer at the time of purchase.
An additional $1,710,000 of the proceeds were used to reduce the Company's
debt. Net proceeds to the Company were approximately $1,100,000.
In June 1994, the Company sold its five mobile home parks for
$13,900,000, resulting in a gain of approximately $694,000. Net proceeds
to the Company were approximately $12,000,000. Approximately $386,000 was
applied to certain selling and operational costs. In addition, the
Company accepted a $1,450,000 note which is secured by one of the mobile
home parks. The note was subsequently exchanged for common stock of the
Company in August 1994 as discussed in Note 1.
In April 1995, the Company sold the Ridgewood Lodge, its weekly
rental hotel in Orlando, Florida. The net proceeds, after commissions,
were approximately $2,700,000. The gain on the sale was approximately
$250,000. The proceeds were used to reduce the outstanding balance of the
Company's term loan.
Report of Independent Accountants
To the Board of Directors and
Shareholders of Ridgewood Properties, Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of loss, of cash flows and of
shareholders' investment present fairly, in all material respects, the
financial position of Ridgewood Properties, Inc. and its subsidiaries at
August 31, 1995 and 1994, and the results of their operations and their
cash flows for each of the three years in the period ended August 31,
1995, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that
we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Atlanta, Georgia
October 25, 1995
Market Information
The Company's common stock is traded in the over-the-counter
market and is listed in the broker-dealer "Pink Sheets."
Transfer Agent and Registrar
Society National Bank, Dallas, Texas is the Company's stock
transfer agent and registrar. Society National Bank maintains the
Company's shareholder records. To change name, address or ownership of
stock, to report lost certificates, or to consolidate accounts, contact:
Society National Bank
Shareholder Services, Inc.
1201 Elm Street, Suite 5050
Dallas, Texas 75270
(214) 658-0200
General Counsel
Rogers & Hardin
2700 Cain Tower
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Independent Accountants
Price Waterhouse LLP
50 Hurt Plaza
Suite 1700
Atlanta, Georgia 30303
Shareholder and General Inquiries
The Company is required to file an Annual Report on Form 10-K
for its fiscal year ended August 31, 1995 with the Securities and Exchange
Commission. Copies of this annual report may be obtained without charge
upon written request to:
Ridgewood Properties, Inc.
Shareholder Relations
2859 Paces Ferry Road
Suite 700
Atlanta, Georgia 30339
(770) 434-3670
EXHIBIT 22
RIDGEWOOD PROPERTIES, INC. AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
Percentage
State or of Voting
Jurisdiction Securities
of Incorporation Owned
---------------- ----------
Florida Communities, Inc. Florida 100%
Ridgewood Orlando, Inc. Florida 100%
Ridgewood Hotels, Inc. Georgia 100%
Cornerstone Management &
Development, Inc. Georgia 100%
The foregoing subsidiaries are included in the
consolidated financial statements of the Company.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial information extracted from
the Consolidated Balance Sheets, Statements of Consolidated Loss and
Consolidated Statement of Cash Flows and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> AUG-31-1995
<CASH> 1,880,000
<SECURITIES> 0
<RECEIVABLES> 213,000
<ALLOWANCES> 4,700,000
<INVENTORY> 18,000
<CURRENT-ASSETS> 0
<PP&E> 3,100,000
<DEPRECIATION> 1,531,000
<TOTAL-ASSETS> 9,673,000
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 10,000
0
450,000
<OTHER-SE> 5,152,000
<TOTAL-LIABILITY-AND-EQUITY> 9,673,000
<SALES> 5,018,000
<TOTAL-REVENUES> 8,675,000
<CGS> 4,727,000
<TOTAL-COSTS> 8,321,000
<OTHER-EXPENSES> 1,512,000
<LOSS-PROVISION> 50,000
<INTEREST-EXPENSE> 410,000
<INCOME-PRETAX> (1,618,000)
<INCOME-TAX> 38,000
<INCOME-CONTINUING> (1,656,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,656,000)
<EPS-PRIMARY> (1.72)
<EPS-DILUTED> (1.72)
</TABLE>
