<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ] 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 1-9563
AIRCOA HOTEL PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
Delaware 84-1042607
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
5775 DTC Boulevard
Suite 300
Englewood, Colorado 80111
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 220-2000
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 twelve 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
----- -----
There were 5,340,214 Units outstanding of the Registrant's Class A Units, as of
August 11, 1995.
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<PAGE>
AIRCOA HOTEL PARTNERS, L.P.
INDEX
Page
Number
------
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheets
June 30, 1995 (Unaudited) and
December 31, 1994 2 - 3
Consolidated Statements of Operations
Three Months and Six Months Ended June 30, 1995
and 1994 (Unaudited) 4
Consolidated Statement of Partners' Capital
Six Months Ended June 30, 1995
(Unaudited) 5
Consolidated Statements of Cash Flows
Six Months Ended June 30, 1995 and 1994
(Unaudited) 6
Notes to Consolidated Financial
Statements (Unaudited) 7 - 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10 - 11
PART II. OTHER INFORMATION AND SIGNATURES 12 - 13
-1-
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
AIRCOA HOTEL PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Assets June 30, 1995 December 31, 1994
------ ------------- ------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,615 $ 1,261
Accounts receivable:
Trade 2,289 2,555
Affiliates --- 43
Inventory 442 401
Prepaid expenses 348 498
---------- ----------
Total current assets 6,694 4,758
---------- ----------
Property and equipment, at cost:
Land and leasehold improvements 8,791 8,767
Buildings and leasehold improvements 70,119 70,109
Furniture, fixtures and equipment 16,328 16,304
Construction in progress 760 407
---------- ----------
95,998 95,587
Less accumulated depreciation and amortization (29,250) (27,234)
---------- ----------
Net property and equipment 66,748 68,353
---------- ----------
Other assets, including debt issue costs, net of
accumulated amortization of $123 in 1995 and
$212 in 1994 1,085 431
---------- ----------
$ 74,527 $ 73,542
---------- ----------
---------- ----------
</TABLE>
(Continued)
See accompanying notes to consolidated financial statements
-2-
<PAGE>
AIRCOA HOTEL PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS (Continued)
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Liabilities and Partners' Capital June 30, 1995 December 31, 1994
--------------------------------- ------------- -----------------
<S> <C> <C>
Current liabilities:
Current installments of long-term debt $ 1,080 $ 2,185
Trade accounts payable 1,505 1,634
Payables to affiliates:
Trade accounts 478 444
Interest 2,460 2,100
Accrued liabilities:
Payroll 104 327
Taxes, other than income taxes 778 982
Other 1,540 2,450
Deferred revenue and advance deposits 1,342 1,814
---------- ----------
Total current liabilities 9,287 11,936
Long-term debt, excluding current installments 43,830 40,180
Notes payable to affiliates 6,000 6,000
Accrued administration and management fees
payable to affiliate 253 253
---------- ----------
Total liabilities 59,370 58,369
---------- ----------
Partners' capital:
General partner 370 376
Limited partners:
Class A Unitholders 21,022 21,605
Class B Unitholders (deficit) (6,235) (6,808)
---------- ----------
Total partners' capital 15,157 15,173
---------- ----------
$ 74,527 $ 73,542
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements
-3-
<PAGE>
AIRCOA HOTEL PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(Unaudited)
(In Thousands Except Unit Data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- ---------------------------
<S> <C> <C> <C> <C>
1995 1994 1995 1994
------ ------ ------- ------
Revenue:
Rooms $ 7,184 $ 7,180 $ 13,692 $ 13,859
Food and beverage 3,250 3,478 5,885 6,292
Other property operations 1,908 1,904 3,659 3,611
---------- ---------- ---------- ----------
12,342 12,562 23,236 23,762
---------- ---------- ---------- ----------
Costs and operating expenses:
Rooms 1,914 1,881 3,671 3,656
Food and beverage 2,292 2,398 4,339 4,376
Other property operations 841 914 1,786 1,805
Administrative and general 1,201 1,178 2,351 2,322
Marketing 1,011 1,046 2,069 2,153
Energy 573 573 1,151 1,138
Property maintenance 644 557 1,189 1,080
Rent, taxes and insurance 730 641 1,353 1,264
Management fees 491 500 925 944
Depreciation and amortization 1,003 989 2,016 1,956
---------- ---------- ---------- ----------
10,700 10,677 20,850 20,694
---------- ---------- ----------- -----------
Operating income 1,642 1,885 2,386 3,068
Interest expense, including amortization
of debt costs 1,168 1,141 2,402 2,217
---------- ----------- ----------- ----------
Net income (loss) $ 474 $ 744 $ (16) $ 851
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net income (loss) per limited partnership Unit:
Class A Unitholders:
Net income (loss) $ .03 $ .07 $ (.11) $.04
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
Class B Unitholders:
Net income $ .33 $ .34 $ .61 $.65
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average number of units outstanding:
Class A 5,340,214 5,340,214 5,340,214 5,340,214
Class B 950,000 950,000 950,000 950,000
</TABLE>
See accompanying notes to consolidated financial statements
-4-
<PAGE>
AIRCOA HOTEL PARTNERS, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
SIX MONTHS ENDED JUNE 30, 1995
(Unaudited)
(In Thousands, Except Unit Data)
<TABLE>
<CAPTION>
Limited Partners' Capital (Deficit) Total
------------------------------------
General Class A Unitholders Class B Unitholders Partners'
-------------------- --------------------
Partner Units Capital Units Deficit Capital
-------- ------ ------- ------ ------- --------
<S> <C> <C> <C> <C> <C> <C>
Balances at
December 31, 1994 $ 376 5,340,214 $21,605 950,000 $(6,808) $ 15,173
Net income (loss) (6) -- (583) -- 573 (16)
-------- --------- ------- -------- ------- -------
Balances at
June 30, 1995 $ 370 5,340,214 $21,022 950,000 $(6,235) $15,157
----- ----------- ------- ------- ------- -------
----- ----------- ------- ------- ------- -------
</TABLE>
See accompanying notes to consolidated financial statements
-5-
<PAGE>
AIRCOA HOTEL PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 22,344 $ 22,650
Cash paid to suppliers and vendors (13,650) (13,947)
Cash paid to employees (6,507) (6,018)
Interest paid (1,919) (1,621)
Other cash receipts, net 834 920
---------- ----------
Net cash provided by operating activities 1,102 1,984
---------- ----------
Cash flows from investing activities:
Capital expenditures (411) (97)
---------- ----------
Cash flows from financing activities:
Principal payments on long-term debt (42,455) (1,375)
Proceeds from refinancing 45,000 --
Payments for debt issuance cost (882) --
---------- ----------
Net cash provided by (used in) financing activities 1,663 (1,375)
---------- ----------
Increase in cash and cash equivalents 2,354 512
Cash and cash equivalents at beginning of period 1,261 2,916
---------- ----------
Cash and cash equivalents at end of period $ 3,615 $ 3,428
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements
-6-
<PAGE>
AIRCOA HOTEL PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30,1995
(Unaudited)
(1) BASIS OF PRESENTATION
AIRCOA Hotel Partners, L.P., a Delaware limited partnership (the
"Partnership") was organized in December 1986 to acquire, own and operate hotel
and resort properties. The Partnership owns and operates six hotel and resort
properties (the "Properties") through operating partnerships (the "Operating
Partnerships") which were acquired in 1986.
The Partnership holds a 99% limited partner interest in each of the six
Operating Partnerships which hold title to the Properties and through which the
Partnership conducts all of its operations. AHS, a wholly owned subsidiary of
Richfield Hospitality Services, Inc. ("Richfield"), is also the 1% General
Partner of each of the Operating Partnerships. Richfield operates the
Properties for the Partnership under certain management agreements.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and, therefore, do not
include all information and disclosures necessary for a fair presentation of
financial position, results of operations and cash flows in conformity with
generally accepted accounting principles. In the opinion of management, these
financial statements reflect all adjustments (which include only normal
recurring adjustments) necessary for a fair presentation of the results of
operations and financial position for the interim periods presented. These
interim financial statements should be read in conjunction with the Annual
Report on Form 10-K for the period ended December 31, 1994. Operating results
for the six months ended June 30, 1995, are not necessarily indicative of the
results that may be expected for the year ended December 31, 1995.
(2) LONG-TERM DEBT AND NOTES PAYABLE TO AFFILIATES
On June 8, 1995, the Partnership signed a credit agreement with a new
lender which provided a $45,000,000 new first mortgage loan and a $1,000,000
revolving credit line. The purpose of the $45,000,000 loan was to provide
proceeds to refinance, on a long-term basis, the Partnership's existing
mortgage loan in the amount of $38,950,000 and the note payable to bank of
$1,790,000 which were due July 31, 1995 and October 31, 1995, respectively,
and to provide approximately $3,000,000 to fund hotel property renovations
with the balance of the funds used for payment of a facility fee and closing
costs.
The interest rate at June 30, 1995 of 8.0625% was based on the current
Eurodollar rate plus 2%. Repayment of the first mortgage loan is based on a
twenty-year amortization with maturity date in June 2000. Payments will consist
of consecutive monthly principal installments of $90,000 plus interest on the
unpaid balance. The revolving credit line is renewable annually at the option
of the lender.
-7-
<PAGE>
AIRCOA HOTEL PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
(Unaudited)
(2) LONG-TERM DEBT (CONTINUED)
Long term debt is summarized as follows (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
----------- -----------
<S> <C> <C>
Mortgage loan $ 44,910 $ 40,450
Note payable to bank -- 1,915
----------- -----------
44,910 42,365
Less current installments 1,080 2,185
----------- -----------
Long-term debt, excluding current installments $ 43,830 $ 40,180
----------- -----------
----------- -----------
</TABLE>
The new first mortgage loan and revolving credit line contain various
covenants including minimum debt service ratios, restrictions on additional
indebtedness, limitations on annual cash distributions to Class A Unitholders,
limitations on the payment of principal on the affiliate notes payable,
prepayment premium during the first two years, deferral of management fees
payable to Richfield if minimum debt service ratios are not achieved,
maintenance of a capital expenditure reserve account equal to 4% of gross
revenue in 1995 and 5% thereafter, and a maximum loan-to-value ratio of 65%
based on the aggregate appraised values of the Properties. The new first
mortgage loan and revolving credit line are subject to certain limited
guarantees of an affiliate of the Partnership. The new first mortgage loan also
requires the Bank's approval of any dilution in the present ownership interests
of affiliates of the General Partner in the Partnership.
In accordance with the Partnership Agreement, the General Partner received
a 1% financing fee in exchange for arranging the refinancing of the
Partnership's indebtedness. Such fee was reduced by the amount of the financing
fee paid to the lender. In addition, the Partnership will pay an annual 0.5%
guarantee fee (based on outstanding loan and commitment) to an affiliate for the
limited guarantee of the new first mortgage loan and the revolving credit line.
(3) NOTES PAYABLE TO AFFILIATES
The Partnership's affiliate notes payable of $6,000,000 at 12% were due
January 1995. A condition of the credit agreement signed by the Partnership
for the new first mortgage loan and revolving credit line requires the
subordination of the affiliate notes payable principal balance. The affiliate
has agreed to the subordination of these notes payable and a provision
within the credit agreement that provides for 25% of excess cash flow, as
defined therein, to be applied against the principal portion of the notes
outstanding.
-8-
<PAGE>
AIRCOA HOTEL PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
(Unaudited)
(4) DISTRIBUTIONS AND RECEIVABLES
The Partnership Agreement provides for periodic distribution of
distributable cash flow, as defined, to the Partners at the discretion of
the General Partner. Distributable cash flow is generally defined as cash
flow from operations of the hotel properties. Such cash is allocated and
distributed (net of AHS' 1% general partnership interest in the Operating
Partnerships) 99% to the Class A Unitholders and 1% to the general partner
until the Class A Unitholders have received defined minimum annual
distributions. The Minimum Annual Distribution is presently $2.16 per
Class A Unit.
(5) RELATED PARTY TRANSACTIONS
The following amounts resulting from transactions with affiliates are
included in the accompanying consolidated statements of operations (in
thousands):
<TABLE>
<CAPTION>
For the six
months ended June 30,
---------------------
1995 1994
---- ----
<S> <C> <C>
Partnership administration fee $ 101 $ 110
------- -------
------- -------
Management fees $ 925 $ 944
------- -------
------- -------
Allocated insurance expenses $ 720 $ 784
------- -------
------- -------
Allocated data processing cost $ 25 $ 24
------- -------
------- -------
Interest expense $ 360 $ 360
------- -------
------- -------
Lease income $ 101 $ 151
------- -------
------- -------
License fee $ 106 $ 81
------- -------
------- -------
Financing fee $ 160 $ --
------- -------
------- -------
</TABLE>
The properties are obligated to reimburse an affiliate for payroll,
professional fees, and certain out-of-pocket expenses incurred by the affiliate
on their behalf. Affiliates are also paid purchasing and design fees in
connection with renovations of the hotels and purchases of furnishings,
equipment and supplies.
(6) INCOME TAXES
No current provision or benefit for income taxes is included in the
accompanying consolidated financial statements since the taxable income or
loss of the Partnership is included in the tax returns of the individual
partners of the Partnership.
The Partnership's only significant temporary difference is an excess of the
tax basis over the book basis of the Partnership's hotels of $2,350,000
which gives rise to a net deferred tax asset of approximately $940,000.
The Partnership has established a 100% valuation allowance on these net
deferred tax assets.
(7) SUBSEQUENT EVENT
During July of 1995, the Bloomington Clarion Fourwinds property experienced
substantial damage to the dock areas due to severe weather. At this time
the final dollar estimate of damages has not been completed by the
insurance company.
-9-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Partnership revenue for the first six months of 1995 decreased $526,000 or
2.2% compared to the first six months of 1994 and declined 1.8% in the
three month period ended June 30, 1995 when compared to the corresponding
period in 1994. Average occupancy and daily room rates for the portfolio
(a total of 1,586 rooms) are summarized as follows:
<TABLE>
<CAPTION>
Three months Six months
ended June 30, ended June 30,
--------------------------- --------------------------
1995 1994 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
Average occupancy 83.9% 81.3% 79.5% 78.3%
Average daily room rates $59.19 $61.05 $59.89 $61.48
Number of rooms 1,586 1,586 1,586 1,586
</TABLE>
The Partnership's properties produced lower revenue in the first six months
of 1995 when compared to the first six months of 1994 (and in the second quarter
of 1995 compared with the second quarter of 1994) primarily as a result of lower
average daily room rates and decreased food and beverage revenue. Rooms revenue
for the six month period ended June 30, 1995 decreased in aggregate by $167,000
or 1.2% with the largest decreases occurring at Sheraton Lakeside and Sheraton
Buffalo Airport. The leisure market at Sheraton Lakeside continues to be
impacted by significant competitive pressures, resulting from an increase in
room supply in the Orlando area. The reduction in rooms revenue at Sheraton
Buffalo is due to a decrease in the Canadian leisure activity resulting from the
declines in the value of the Canadian dollar and loss of a substantial room
block contract.
Food and beverage revenue for the first six months of 1995 decreased 6.5%
or $407,000 compared to the first six months of 1994 and decreased 6.5% in the
second quarter of 1995 compared to the second quarter of 1994. The primary
reason for the decrease is related to the increased competition from stand-alone
restaurants surrounding the Scottsdale Regal McCormick, the smaller percentage
of the Canadian leisure market maintained at the Sheraton Buffalo and a decrease
in banquet activity at both locations. Food and beverage expenses for the first
half of 1995 decreased .8% or $37,000 compared to the first half of 1994 and
declined 4.4% between the second quarter of 1995 and the corresponding period of
1994. The decrease in expenses is not proportional to the change in revenue as
a result of cost incurred for promotional campaigns and marketing plans of
repositioning restaurant concepts at Bloomington Clarion Fourwinds, Aurora Inn
and Scottsdale Regal McCormick. These initiatives have not generated
corresponding revenue to date.
Operating income for the first six months of 1995 decreased $682,000 or
22.2% compared to the first six months of 1994 as operating costs increased .8%
while revenue was down 2.2%. Operating income for the second quarter of 1995
was approximately 12.9% less than in the second quarter of 1994, while operating
costs were virtually identical in the two periods.
Interest expense increased $185,000 or 8.3% during the first half of 1995
as compared to 1994 as a result of an increase in the interest rate on the
Partnership's previous mortgage loan from 7% to 9.25%.
Cash flow from operations differs from net income of the Partnership due to
the effects of depreciation, amortization and accruals as reflected in the
consolidated statements of cash flows. Net loss per Class A Unit and the net
income per Class B Unit reflect allocations of the net income as required by the
Partnership Agreement.
-10-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the first six months of 1995
was $1,102,000, a decrease of $882,000 as compared with the same period in
1994. The decrease is primarily attributable to the increase in cash paid
to employees for salaries and benefits and interest paid. Cash used in
investing activities increased $314,000 in the first half of 1995
compared to the first half of 1994. The increase is due to the timing of
capital expenditures and completion of the Sheraton, Durham renovation.
Cash provided by financing activities increased $3,038,000 in the first
six months of 1995 compared to the first six months of 1994. The increase
is attributable to the receipt of proceeds from refinancing of $45,000,000
net of facility and closing costs of approximately $882,000.
The Partnership's working capital requirements are expected to be satisfied
through the management and timing of payment of payables, collection of
receivables, and use of the revolving credit line.
In addition to its operating obligations, the Partnership currently has a
Minimum Annual Distribution requirement of $2.16 per Class A Unit. Based
on the appraised value of the Properties at December 31, 1994, the
cumulative unpaid Minimum Annual Distribution per Class A Unit exceeds the
Partnership's net assets per Unit of approximately $6.00 by 50%. Under the
terms of the new mortgage loan, cash distributions to Class A Unitholders
are permitted based upon a percentage of annual excess cash flow as defined
in the new loan agreement. At this time no excess cash flow is anticipated
to be available for distribution in 1995.
On June 8, 1995 the Partnership signed a credit agreement with a new lender
to provide a new $45,000,000 first mortgage loan and a $1,000,000 revolving
credit line. The purpose of the $45,000,000 loan was to provide proceeds
to pay off the existing mortgage loan and the note payable to bank, and
to fund certain property renovations with the balance available for the
payment of a facility fee and closing costs. Regal Hotels International
Holdings Limited ("RHL") has agreed to provide a limited guarantee for
the new first mortgage loan. The Partnership will pay a fee equal to 0.5%
to RHL for the limited guarantee on an annual basis.
The refinancing includes a variety of interest rate options, the most
favorable of which is the Eurodollar Rate plus 2% which was 8.0625% at June
30, 1995. Repayment of the new first mortgage loan is based on a twenty-
year amortization with a maturity date in June 2000 while the revolving
credit line is renewable annually at the option of the lender.
The Partnership's affiliate notes payable of $6,000,000 were due January
1995. The affiliate has agreed to the subordination of these notes payable
to the new first mortgage loan and revolving credit line. A provision
within the credit agreement provides for 25% of excess cash flow, as
defined therein, to be applied against the principal portion of the notes
outstanding. At this time no excess cash flow, is anticipated for the
following twelve months, thus the affiliate notes payable principal balance
is classified as long-term at June 30, 1995.
The market value of the Partnership's properties differs significantly from
the historical cost of the properties as reflected in the Partnership's
balance sheet at June 30, 1995. As indicated under Item 2 in the
Partnership's 1994 Form 10-K, the aggregate appraised value of the hotel
properties at December 31, 1994 was $86,490,000. The December 1994
appraised value may not be representative of the appraised value which will
be obtained as of December 31, 1995 and is not necessarily indicative of
the ability of the Partnership to consummate a sale of the properties or
the actual sale price to be realized from the sale of the properties.
However, the appraised value does represent the appraiser's opinion of the
most probable price for which the hotel properties should sell in a
competitive market.
-11-
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
10.40 Credit Agreement dated June 8, 1995, between the
Partnership and the Operating Partnerships as makers,
to The HongKong and Shanghai Banking Corporation
Limited as payee
10.40a Promissory Note dated June 8, 1995, by the Partnership
and the Operating Partnerships as makers, to The
HongKong and Shanghai Banking Corporation Limited as
payee in the principal amount of $18,085,000
10.40b Promissory Note dated June 8, 1995, by the Partnership
and the Operating Partnerships as makers, to The
HongKong and Shanghai Banking Corporation Limited as
payee in the principal amount of $1,000,000
10.40c Renewal Note dated June 8, 1995, by the Partnership as
maker, to The HongKong and Shanghai Banking Corporation
Limited as payee in the principal amount of $17,690,000
10.40d Promissory Note dated June 8, 1995, by the Buffalo
Operating Partnership, L.P. as maker, to The HongKong
and Shanghai Banking Corporation Limited as payee in
the principal amount of $9,225,000
27 Financial Data Schedule
b) Reports on Form 8-K
Registrant filed a Current Report on Form 8-K, dated June 20,
1995, in respect to Registrant's press release dated June 22,
1995, announcing Registrant's finalization of a five-year, $45
million mortgage loan and $1 million revolving credit line with
The HongKong and Shanghai Banking Corporation Limited
-12-
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
AIRCOA HOTEL PARTNERS, L.P.
By: AIRCOA Hospitality Services, Inc.,
General Partner
Date: August 14, 1995 By: /s/ Douglas M. Pasquale
------------------ -----------------------------
Douglas M. Pasquale
Executive Vice President
and Chief Financial Officer
(Duly Authorized Officer and
Principal Financial Officer)
-13-
<PAGE>
EXECUTION COPY
************************************************************
AIRCOA HOTEL PARTNERS, L.P.,
AURORA INN OPERATING PARTNERSHIP, L.P.,
FOURWINDS OPERATING PARTNERSHIP, L.P.,
MCCORMICK RANCH OPERATING PARTNERSHIP, L.P.,
BUFFALO OPERATING PARTNERSHIP, L.P.,
LAKESIDE OPERATING PARTNERSHIP, L.P.,
and
DURHAM OPERATING PARTNERSHIP, L.P.
CREDIT AGREEMENT
Dated as of June 8, 1995
______________________________
THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED
************************************************************
<PAGE>
TABLE OF CONTENTS
THIS TABLE OF CONTENTS IS NOT PART OF THE AGREEMENT TO WHICH IT IS
ATTACHED BUT IS INSERTED FOR CONVENIENCE OF REFERENCE ONLY.
Page
----
SECTION 1. DEFINITIONS AND ACCOUNTING MATTERS . . . . . . . . . . . . . 1
1.01 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . 1
1.02 Accounting Terms and Determinations . . . . . . . . . . . . . 14
SECTION 2. THE COMMITMENTS, LOANS, NOTES AND PREPAYMENTS. . . . . . . . 15
2.01 The Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.02 Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.03 Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.04 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.05 Optional Prepayments. . . . . . . . . . . . . . . . . . . . . 17
2.06 Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . 17
2.07 Interest and Other Charges on Prepayment. . . . . . . . . . . 18
SECTION 3. PAYMENTS OF PRINCIPAL AND INTEREST . . . . . . . . . . . . . 18
3.01 Repayment . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.02 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 4. PAYMENTS; COMPUTATIONS; ETC. . . . . . . . . . . . . . . . . 20
4.01 Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.02 Computations. . . . . . . . . . . . . . . . . . . . . . . . . 21
4.03 Certain Notices . . . . . . . . . . . . . . . . . . . . . . . 21
4.04 Set-off . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 5. YIELD PROTECTION, ETC. . . . . . . . . . . . . . . . . . . . 23
5.01 Additional Costs. . . . . . . . . . . . . . . . . . . . . . . 23
5.02 Eurodollar Rate . . . . . . . . . . . . . . . . . . . . . . . 25
5.03 Illegality. . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.04 Compensation. . . . . . . . . . . . . . . . . . . . . . . . . 26
5.05 Withholding Taxes . . . . . . . . . . . . . . . . . . . . . 27
SECTION 6. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . 28
SECTION 7. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . 32
7.01 Corporate Existence . . . . . . . . . . . . . . . . . . . . . 32
7.02 Financial Condition . . . . . . . . . . . . . . . . . . . . . 33
7.03 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.04 No Breach . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.05 Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.06 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.07 Use of Credit . . . . . . . . . . . . . . . . . . . . . . . . 34
7.08 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.09 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.10 Investment Company Act. . . . . . . . . . . . . . . . . . . . 34
7.11 Public Utility Holding Company Act. . . . . . . . . . . . . . 35
7.12 Material Agreements . . . . . . . . . . . . . . . . . . . . . 35
(i)
<PAGE>
7.13 Condemnation. . . . . . . . . . . . . . . . . . . . . . . . . 35
7.14 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.15 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.16 Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.17 Other Indebtedness. . . . . . . . . . . . . . . . . . . . . . 35
7.18 Liquor License. . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 8. COVENANTS OF THE BORROWERS . . . . . . . . . . . . . . . . . 36
8.01 Financial Statements Etc. . . . . . . . . . . . . . . . . . . 36
8.02 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.03 Existence, Etc. . . . . . . . . . . . . . . . . . . . . . . . 40
8.04 Limitation on Transfer. . . . . . . . . . . . . . . . . . . . 40
8.05 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . 41
8.06 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . 42
8.07 Appraisals. . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.08 Affiliate Loans . . . . . . . . . . . . . . . . . . . . . . . 43
8.09 Hotel Management Agreement and License Agreement. . . . . . . 44
8.10 Minimum Debt Service Coverage Ratio . . . . . . . . . . . . . 45
8.11 Distributions . . . . . . . . . . . . . . . . . . . . . . . . 45
8.12 Capital Expenditure Reserve Account . . . . . . . . . . . . . 45
8.13 Compliance with Agreements. . . . . . . . . . . . . . . . . . 46
8.14 Operation of Hotels . . . . . . . . . . . . . . . . . . . . . 46
8.15 Transactions with Affiliates. . . . . . . . . . . . . . . . . 47
8.16 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.17 Debt Service Reserve Account. . . . . . . . . . . . . . . . . 48
8.18 Annual Calculations . . . . . . . . . . . . . . . . . . . . . 49
8.19 Environmental Work. . . . . . . . . . . . . . . . . . . . . . 49
8.20 Engineering Work. . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 9. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . 50
SECTION 10. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 53
10.01 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.02 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 54
10.03 Expenses, Etc. . . . . . . . . . . . . . . . . . . . . . . . 54
10.04 Amendments.. . . . . . . . . . . . . . . . . . . . . . . . . 55
10.05 Successors and Assigns . . . . . . . . . . . . . . . . . . . 55
10.06 Assignments and Participations . . . . . . . . . . . . . . . 55
10.07 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . 56
10.08 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . 56
10.09 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 56
10.10 Governing Law; Submission to Jurisdiction;
Severability . . . . . . . . . . . . . . . . . . . . . . . 56
10.11 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . 57
10.12 Credit Agreement to Control. . . . . . . . . . . . . . . . . 57
10.13 Exculpation. . . . . . . . . . . . . . . . . . . . . . . . . 57
10.14 Releases . . . . . . . . . . . . . . . . . . . . . . . . . . 59
10.15 Obligations of the Borrowers . . . . . . . . . . . . . . . . 60
SCHEDULE I - The Hotels and the Operating Partnerships
(ii)
<PAGE>
SCHEDULE II - Ground Leases
SCHEDULE III - License Agreements
SCHEDULE IV - Insurance Requirements
SCHEDULE V - Capital Leases
SCHEDULE VI - Other Indebtedness
SCHEDULE VII - Environmental Work
SCHEDULE VIII - Engineering Work
SCHEDULE IX - Pending Litigation
SCHEDULE X - Management Agreements
EXHIBIT A-1 - Form of Mortgage Note
EXHIBIT A-2 - Form of New York Restated Note
EXHIBIT A-3 - Form of Florida Renewal Note
EXHIBIT A-4 - Form of Revolving Note
(iii)
<PAGE>
THIS CREDIT AGREEMENT (this "AGREEMENT") is made and entered into by
and between AIRCOA HOTEL PARTNERS, L.P., a Delaware limited partnership
("AIRCOA"), AURORA INN OPERATING PARTNERSHIP, L.P., a Delaware limited
partnership ("AURORA"), FOURWINDS OPERATING PARTNERSHIP, L.P., a Delaware
limited partnership ("FOURWINDS"), MCCORMICK RANCH OPERATING PARTNERSHIP, L.P.,
a Delaware limited partnership ("MCCORMICK"), BUFFALO OPERATING PARTNERSHIP,
L.P., a Delaware limited partnership ("BUFFALO"), LAKESIDE OPERATING
PARTNERSHIP, L.P., a Delaware limited partnership ("LAKESIDE") and DURHAM
OPERATING PARTNERSHIP, L.P., a Delaware limited partnership ("DURHAM") (each of
Aurora, Fourwinds, McCormick, Buffalo, Lakeside, and Durham being herein called
an "OPERATING PARTNERSHIP" and the Operating Partnerships and AIRCOA being
herein collectively called the "BORROWERS" and, individually, a "BORROWER"), and
THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED, a bank organized under
the laws of Hong Kong (the "BANK"), having a Branch at 140 Broadway, New York,
New York, as of June 8, 1995.
The Borrowers have requested the Bank to make loans to the Borrowers
to refinance certain first mortgage debt in respect of the Hotels (as
hereinafter defined), to refinance certain other debt, to finance renovations at
certain of the Hotels, and to fund certain related costs, and (in the case of
the Revolving Loans as hereinafter defined) to fund the seasonal working capital
needs of the Hotels, and the Bank is prepared to provide such financing upon the
terms and conditions hereof. Accordingly, the parties hereto agree as follows:
SECTION 1. DEFINITIONS AND ACCOUNTING MATTERS.
1.01 CERTAIN DEFINED TERMS. As used herein, the following terms
shall have the following meanings (all terms defined in this Section 1.01 or in
other provisions of this Agreement in the singular to have the same meanings
when used in the plural and VICE VERSA):
"AFFILIATE" means (a) with respect to a corporation, any officer or
director thereof and any Person that is, directly or indirectly, the legal or
beneficial owner of or otherwise controls more than ten percent (10%) of any
class of shares or other equity security of such corporation, or any Person,
that directly or indirectly controls or is controlled by or is under common
control with such corporation and (b) with respect to a partnership or venture,
any general partner, general partner of a general partner, partnership with a
common general partner or co-venturer thereof, or any sponsor of such
partnership, as that term is used in any offering memorandum prepared in respect
to any federal or state securities laws or the rules or regulations issued
pursuant thereto, or any Person that, directly or indirectly, controls or is
controlled by or is under common
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control with such partnership or venture and, if any general partner or general
partner of a general partner or co-venturer is a corporation, any Person that is
an Affiliate as defined in clause (a) above of such corporation. "CONTROLS"
(including the correlative meanings of "controlled by" and "under common control
with") means effective power, directly or indirectly, to direct or cause the
direction of the management and policies of such Person, whether by contract or
otherwise.
"ANNUAL EXCESS CASH FLOW" means, for any fiscal year of AIRCOA, the
aggregate consolidated net income of AIRCOA and the Operating Partnerships for
such fiscal year (before tax and any extraordinary and non-recurring items)
determined in accordance with generally accepted accounting principles PLUS (a)
depreciation and amortization and (b) interest expense, MINUS (x) the aggregate
amount of principal of and interest on the Loans accrued and payable during such
fiscal year and for the year 1995, any closing costs and expenses relating to
the Loans, and MINUS (y) the greater of (1) the aggregate amount required by
Section 8.12 to be expended by the Borrowers for Capital Improvements during
such fiscal year (4% of Gross Revenues in 1995 and 5% of Gross Revenues in each
year thereafter), and (2) the amount actually expended by the Borrowers for
Capital Improvements during the applicable fiscal year, MINUS the Carryover
Amount in the Capital Expenditure Reserve Account on April 15 of such fiscal
year and MINUS (z) the aggregate amount of interest paid by any Borrower to any
Affiliate of any Borrower.
"APPLICABLE ALLOCATED AMOUNT" means, with respect to each Mortgaged
Property, the following amounts:
Property Amount
-------- ------
1. Buffalo $ 9,225,000
2. Durham $ 5,175,000
3. Fourwinds $ 5,307,000
4. Aurora $ 1,961,000
5. Trout Club $ 1,951,000
6. Lakeside $17,690,000
7. McCormick $ 4,690,000
The Applicable Allocated Amounts with respect to each Mortgaged Property above
shall be reduced in proportion to their relative amounts by (i) any principal
payments made by the Borrowers in respect of the Mortgage Loan and (ii) any
permanent reduction of the Revolving Loan Commitment.
"APPLICABLE LENDING OFFICE" means the Branch of the Bank at 140
Broadway, New York, New York, or such other office of
<PAGE>
- 3 -
the Bank (or of an affiliate of the Bank) as the Bank may from time to time
specify to the Borrowers (PROVIDED, that if the Bank shall specify another
office and as a result the Borrowers would incur costs under Section 5 hereof in
excess of those otherwise payable under such Section, then the Borrowers shall
not be required to reimburse the Bank for such additional costs).
"APPLICABLE MARGIN" means (i) for any Floating Rate Loan, 1.25% per
annum, (ii) for any Eurodollar Loan, 2.00% per annum, and (iii) for any Fixed
Rate Period, 2.00% per annum.
"APPRAISED VALUE" means, as to any Hotel, the appraised value of such
Hotel as most recently determined by an Appraiser in accordance with
Section 8.07 hereof, PROVIDED, that the value conclusion reached by such
Appraiser shall have been previously reviewed and approved in writing by the
Bank.
"APPRAISER" means an independent real estate appraiser engaged by the
Bank.
"BASIC DOCUMENTS" means, collectively, this Agreement, the Notes, the
Guaranty Agreement, the Mortgages, the Security Agreement and the Subordination
Agreements.
"BUSINESS DAY" means any day on which commercial banks are not
authorized or required to close in New York City or Denver, Colorado and in
respect of any payments or notices in respect of a Eurodollar Loan, on which
dealings in Dollar deposits are carried out in the London interbank market.
"CAPITAL EXPENDITURE RESERVE ACCOUNT" means an account established
with the Bank by the Borrowers, designated as "AIRCOA Capital Expenditure
Reserve Account", which account shall be funded and maintained pursuant to
Section 8.12 hereof.
"CAPITAL IMPROVEMENTS" means all rehabilitation, renovation,
refurbishing, equipping, construction and reconstruction with respect to the
Hotels, including, without limitation, repair and replacement of facilities,
furniture, fixtures and equipment, but excluding any such work which is financed
with the proceeds of the Mortgage Loan.
"CAPITAL LEASE OBLIGATIONS" means, for any Person, all obligations of
such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) Property to the extent such obligations are required
to be classified and accounted for as a capital lease on a balance sheet of such
Person under generally accepted accounting principles (including Statement of
Financial Accounting Standards No. 13 of the Financial Accounting Standards
Board), and, for purposes of this
<PAGE>
- 4 -
Agreement, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with generally accepted accounting principles
(including such Statement No. 13).
"CARRYOVER AMOUNT" has the meaning assigned to such term in
Section 8.12 hereof.
"CASUALTY EVENT" means any loss of or damage to, or any condemnation
or other taking of, any Property of any Operating Partnership.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time.
"COMMITMENTS" means, collectively, the Mortgage Loan Commitment and
the Revolving Loan Commitment.
"CONVERSION DATE" has the meaning attributed thereto in
Section 3.02(c) hereof.
"DEBT SERVICE COVERAGE RATIO" means, for any fiscal year of AIRCOA,
the ratio of (i) the aggregate consolidated net income of AIRCOA and the
Operating Partnerships for such fiscal year (before tax and any extraordinary
and non-recurring items) determined in accordance with generally accepted
accounting principles PLUS (a) depreciation and amortization and (b) interest
expense, MINUS the aggregate amount expended for Capital Improvements as
required by Section 8.12 during such fiscal year, to (ii) the aggregate amount
of principal and interest on the Loans scheduled to be paid during the
immediately succeeding fiscal year of the Borrowers (using an estimated interest
rate equal to the three month Eurodollar Rate in effect on April 15 of such
succeeding year, plus the Applicable Margin).
"DEBT SERVICE RESERVE ACCOUNT" means an account established by AIRCOA
with the Bank, designated as AIRCOA Debt Service Reserve Account, which account
shall be funded and maintained pursuant to Section 8.17 hereof.
"DEFAULT" means an Event of Default or an event that with notice or
lapse of time or both would become an Event of Default.
"DOLLARS" and "$" mean lawful money of the United States of America.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time together with the regulations promulgated and rulings
issued thereunder.
<PAGE>
- 5 -
"ERISA AFFILIATE" means any corporation or trade or business that is a
member of any group of organizations (i) described in Section 414(b) or (c) of
the Code of which any Borrower is a member and (ii) solely for purposes of
potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of
the Code and the lien created under Section 302(f) of ERISA and Section 412(n)
of the Code, described in Section 414(m) or (o) of the Code of which any
Borrower is a member.
"EURODOLLAR BASE RATE" means, for any Interest Period in respect of
any Eurodollar Loan, the rate per annum (rounded upwards, if necessary, to the
nearest 1/16 of 1%) determined by the Bank at approximately 11:00 a.m. London
time (or as soon thereafter as practicable) on the date two Business Days prior
to the first day of such Interest Period to be the rate for the offering by the
Bank to leading banks in the London interbank market of Dollar deposits having a
term comparable to such Interest Period and in an amount comparable to the
principal amount of the relevant Eurodollar Loan to be outstanding for such
Interest Period.
"EURODOLLAR LOAN" means any Loan while it bears interest at a rate
based upon the Eurodollar Rate.
"EURODOLLAR RATE" means, for any Interest Period, a rate per annum
(rounded upwards, if necessary, to the nearest 1/16 of 1%) determined by the
Bank to be equal to the Eurodollar Base Rate for such Interest Period divided by
1 minus the Reserve Requirement for such Interest Period.
"EVENT OF DEFAULT" has the meaning assigned to such term in Section 9
hereof.
"EXCESS PROCEEDS" means the gross proceeds derived from any sale or
refinancing of any Hotel less (i) the Applicable Allocated Amount, and less (ii)
reasonable commissions and broker's fees (of parties unrelated to the Borrowers)
and closing costs incurred in connection with the sale or refinancing and less
(iii) a fee in an amount equal to 1% of such gross proceeds payable to the
General Partner.
"EXISTING CREDIT AGREEMENT" means the Loan Agreement dated as of
February 20, 1987 among AIRCOA, certain banks and Bankers Trust Company, as
Agent, as amended.
"FIXED RATE" means the interest rate applicable to the Mortgage Loan
by reason of the exercise, with respect to the Mortgage Loan, of the fixed rate
option provided in Section 3.02(c) hereof.
<PAGE>
- 6 -
"FIXED RATE PERIOD" has the meaning specified in Section 3.02(c)
hereof.
"FIXED RATE LOAN" means the Mortgage Loan during the Fixed Rate
Period.
"FLOATING RATE" means, for any day, the Prime Rate for such day PLUS
the Applicable Margin.
"FLOATING RATE LOAN" means any Loan while it bears interest at the
Floating Rate.
"FLORIDA RENEWAL NOTE" has the meaning specified in Section 2.04(a)
hereof.
"FLORIDA RENEWAL NOTE GUARANTY" means an unconditional limited
Guaranty by the Borrowers in respect of the obligations of AIRCOA under the
Florida Renewal Note, in form and substance satisfactory to the Bank, as amended
from time to time.
"GENERAL PARTNER" means AIRCOA Hospitality Services, Inc., a Delaware
corporation.
"GOVERNMENTAL AUTHORITY" means any arbitrator, court, governmental
department, commission, board, bureau, agency or instrumentality, whether local,
state, Federal or foreign.
"GROSS REVENUES" means, for any Hotel or for all of the Hotels, as the
case may be, for any applicable accounting period of the applicable Operating
Partnership, revenues and income of every kind resulting from the operation of
the Hotel(s) and all of its or their facilities from guests, tenants, licensees,
concessionaires and other persons occupying space or rendering services in, at,
on or from the Hotel(s), including, but not limited to, room, food, beverage,
telephone, newsstand, recreation and rental fees, whether paid in cash or by
credit, the cash value of items to the extent given without consideration or to
the extent given for services rendered, except customary complementary rooms and
services, and proceeds, if any, from rent or business interruption or other loss
of income insurance, all as determined in accordance with generally accepted
accounting principles; PROVIDED, however, that Gross Revenues shall exclude:
(i) cash or credit refunds paid to customers with respect to transactions
included in Gross Revenues, (ii) gratuities, sales taxes or other items added to
sales to the extent such items are paid or payable to a third party,
(iii) insurance proceeds, other than rent or business interruption or other loss
of income insurance, (iv) gains arising from the sale or other disposition of
capital assets including the sale of furniture, fixtures and
<PAGE>
- 7 -
equipment, and (v) interest or other amounts received or payable in respect of
Inter-Company Advances.
"GROUND LEASES" means those certain leases more particularly described
on Schedule II hereto, as from time to time amended.
"GROUND LEASE SUBORDINATION AGREEMENTS" means Subordination Agreements
executed by the landlords under the Ground Leases in form and substance
satisfactory to the Bank, as from time to time amended.
"GUARANTOR" means Regal Hotels International Holdings Limited, a
corporation organized and existing under the laws of Bermuda, and its successors
and assigns.
"GUARANTY" means, with respect to any Person, a guaranty, endorsement,
or contingent agreement to purchase or to furnish funds for the payment or
maintenance of, or otherwise to be or become contingently liable under or with
respect to, the Indebtedness, other obligations, net worth, working capital or
earnings of any other Person, or a guarantee of the payment of dividends or
other distributions upon the stock or equity interests of such other Person, or
an agreement to purchase, sell or lease (as lessee or lessor) Property,
products, materials, supplies or services primarily for the purpose of enabling
a debtor to make payment of such debtor's obligations or an agreement to assure
a creditor against loss, and including, without limitation, causing a bank or
other financial institution to issue a letter of credit or other similar
instrument for the benefit of another Person, but excluding endorsements for
collection or deposit in the ordinary course of business. The terms "GUARANTY"
and "GUARANTEED" used as a verb shall have a correlative meaning.
"GUARANTY AGREEMENT" means an unconditional limited guaranty by the
Guarantor in respect of the obligations of each Borrower hereunder and under the
other Basic Documents, in form and substance satisfactory to the Bank, as
amended from time to time.
"HOTEL LICENSOR AGREEMENTS" means one or more Consent, Subordination
and Recognition Agreements or Consent and Recognition Agreements among the
Operating Partnerships, the Bank and the Licensor under each License Agreement,
in form and substance satisfactory to the Bank, as amended from time to time.
"HOTEL MANAGEMENT AGREEMENTS" means the Management Agreements between
the respective Operating Partnerships and the
<PAGE>
- 8 -
Hotel Manager, as amended from time to time and more particularly described on
Schedule X hereto.
"HOTEL MANAGER" means Richfield Hospitality Services, Inc., a Delaware
corporation, or any other substitute hotel management company selected by the
Borrower with the prior written approval of the Bank in its discretion, which
approval will not be unreasonably withheld.
"HOTEL MANAGER SUBORDINATION AGREEMENT" means a Consent, Subordination
and Recognition Agreement among the Operating Partnerships, the Hotel Manager
and the Bank relating to the Hotel Management Agreements, in form and substance
satisfactory to the Bank, as amended from time to time.
"HOTELS" means the hotels identified and described in Schedule I
hereto, and "HOTEL" means any thereof.
"INDEBTEDNESS" means, for any Person, (a) obligations created, issued
or incurred by such Person for borrowed money (whether by loan, the issuance and
sale of debt securities or the sale of Property to another Person subject to an
understanding or agreement, contingent or otherwise, to repurchase such Property
from such Person); (b) obligations of such Person to pay the deferred purchase
or acquisition price of Property or services, (other than trade accounts payable
(other than for borrowed money) arising, and accrued expenses incurred, in the
ordinary course of business so long as such trade accounts payable are payable
within 90 days of the date the respective goods are delivered or the respective
services are rendered); (c) Indebtedness of others secured by a Lien on the
Property of such Person, whether or not the respective Indebtedness so secured
has been assumed by such Person; (d) obligations of such Person in respect of
letters of credit or similar instruments issued or accepted by banks and other
financial institutions for account of such Person; (e) Capital Lease Obligations
of such Person; and (f) Indebtedness of others Guaranteed by such Person.
"INTER-COMPANY ADVANCES" means advances by AIRCOA to one or more of
the Operating Partnerships.
"INTEREST PERIOD" means, while any Loan is a Eurodollar Loan, each
period commencing on the date of such Loan or on the date such Loan was
converted hereunder to a Eurodollar Loan, or the last day of the next preceding
Interest Period, and ending on the numerically corresponding day in the first,
second, third, sixth or twelfth calendar month thereafter, as the Borrowers may
select as provided in Section 4.03 hereof; provided that (i) each Interest
Period that commences on the last Business Day of a calendar month (or on any
day for which there is no numerically
<PAGE>
- 9 -
corresponding day in the appropriate subsequent calendar month) shall end on the
last Business Day of the appropriate subsequent calendar month; (ii) each
Interest Period that would otherwise end on a day which is not a Business Day
shall end on the next succeeding Business Day (or, if such next succeeding
Business Day falls in the next succeeding calendar month, on the next preceding
Business Day); (iii) any Interest Period in respect of the Mortgage Loan that
would otherwise extend beyond the Mortgage Loan Final Maturity Date shall end on
the Mortgage Loan Final Maturity Date and any Interest Period in respect of a
Revolving Loan that would otherwise extend beyond the Revolving Loan Termination
Date shall end on the Revolving Loan Termination Date; and (iv) subject to
clause (iii) above, if an Interest Period with respect to the Mortgage Loan
commences before and ends after any Principal Payment Date relating to the
Mortgage Loan, that portion of the Mortgage Loan due to be repaid on such
Principal Payment Date shall have a separate Interest Period ending on such
Principal Payment Date and in no event shall an Interest Period extend beyond
the Mortgage Loan Final Maturity Date.
"LICENSE AGREEMENTS" means those certain License Agreements executed
by Buffalo, Durham, Lakeside, Fourwinds and McCormick and more particularly
described on Schedule III hereto, as from time to time amended.
"LICENSOR" means each of those Licensors described on Schedule III
attached hereto or any other substitute Licensor selected by the Borrowers with
the prior written approval of the Bank, which approval shall not be unreasonably
withheld or delayed. Without limiting the generality of the foregoing, the Bank
hereby consents to the change of the Licensor in connection with the Fourwinds
Hotel set forth on Schedule III attached hereto.
"LIEN" means, with respect to any Property, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
Property. For purposes of this Agreement and the other Basic Documents, a
Person shall be deemed to own subject to a Lien any Property that it has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
(other than an operating lease) relating to such Property.
"LOANS" means, collectively, the Mortgage Loan and the Revolving
Loans, and "LOAN" means any thereof.
"LOAN TO VALUE RATIO" means, as at any date, the ratio of (a) the then
aggregate outstanding principal amount of the
<PAGE>
- 10 -
Loans to (b) the aggregate Appraised Value of the Hotels as most recently
determined by an Appraiser in accordance with the provisions of Sections 8.07 or
6(a)(xiii) hereof.
"MANAGER/LICENSOR AGREEMENTS" means the Hotel Licensor Agreements and
the Hotel Manager Subordination Agreement.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) any
Hotel or the operation thereof, (b) the ability of the Borrowers to perform
their payment obligations under any of the Basic Documents, or their obligations
hereunder in respect of maintenance of insurance or maintenance of the Hotel
owned by such Borrower at the quality level at which it is currently operated,
(c) the validity or enforceability of any of the Basic Documents, (d) the rights
and remedies of the Bank under any of the Basic Documents or (e) the timely
payment of the principal of or interest on the Loans or other amounts payable in
connection therewith.
"MONTHLY DEBT SERVICE AMOUNT" means, for any month, the aggregate
amount of principal of and interest on the Loans scheduled to be paid during
such month.
"MORTGAGE" means any first priority Mortgage, Security Agreement,
Assignment of Leases and Rents and Fixture Filing, between an Operating
Partnership as mortgagor, and the Bank as mortgagee, or any first priority Deed
of Trust, Security Agreement, Assignment of Leases and Rents and Fixture Filing,
from the Operating Partnership as grantor to the Bank as grantee, each creating
a lien on a Hotel and the related Mortgaged Property, and in form and substance
satisfactory to the Bank, as amended from time to time.
"MORTGAGED PROPERTY" means, collectively, all Property subject to the
Liens of the Mortgages.
"MORTGAGE LOAN" has the meaning set forth in Section 2.01(a) hereof.
"MORTGAGE LOAN COMMITMENT" means the obligation of the Bank, on and
subject to the terms and conditions of this Agreement, to make the Mortgage
Loan.
"MORTGAGE LOAN FINAL MATURITY DATE" means the date five (5) years
after the date of this Agreement; PROVIDED, that if such date is not a Business
Day, the Mortgage Loan Final Maturity Date shall be the immediately preceding
Business Day.
"MORTGAGE NOTE" has the meaning specified in Section 2.04(a) hereof.
<PAGE>
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"MULTIEMPLOYER PLAN" means a multiemployer plan defined as such in
Section 3(37) of ERISA to which AIRCOA or an ERISA Affiliate is then making
contributions or to which contributions have been made by AIRCOA or any ERISA
Affiliate during the preceding five years and which is covered by Title IV of
ERISA.
"NATIONAL CITY BANK DEBT" means unsecured indebtedness owed by AIRCOA
to National City Bank (Indiana), the principal amount of which on the date
hereof is $1,815,000.
"NEW YORK RESTATED NOTE" has the meaning specified in Section 2.04(a)
hereof.
"NOTES" means, collectively, the Mortgage Note, the Florida Renewal
Note, the New York Restated Note and the Revolving Note.
"OPERATING PARTNERSHIPS" means, collectively, the respective entities
specified on Schedule I hereto, each of which is the owner of the Hotel
corresponding to its name on said Schedule.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PERIL" means, collectively, fire, lightning, flood, windstorm, hail,
earthquake, explosion, riot and civil commotion, vandalism and malicious
mischief, damage from aircraft, vehicles and smoke and all other perils covered
by the "all-risk" endorsement then in use in the jurisdictions where the
properties of the respective Operating Partnerships are located.
"PERMITS" means all certificates, permits, licenses and other
approvals, including, certificates of occupancy and liquor licenses, now or
hereafter necessary or required in connection with the ownership, use, occupancy
and operation of any Hotel.
"PERSON" means any individual, corporation, company, voluntary
association, partnership, joint venture, trust, unincorporated organization or
government (or any agency, instrumentality or political subdivision thereof).
"PLAN" means an employee benefit or other plan established or
maintained by AIRCOA or any ERISA Affiliate and that is covered by Title IV of
ERISA, other than a Multiemployer Plan.
"POST-DEFAULT RATE" means, in respect of any principal, interest or
other amount payable under this Agreement, the Notes
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or any other Basic Document that is not paid when due (whether at stated
maturity, by acceleration, by optional or mandatory prepayment or otherwise), a
rate per annum during the period from and including the due date to but
excluding the date on which such amount is paid in full equal to (i) in respect
of any Eurodollar Loan, 2% per annum in excess of the rate otherwise applicable
hereunder for the balance of the then current Interest Period and thereafter 2%
per annum above the Floating Rate in effect from time to time, or (ii) in
respect of any Floating Rate Loan, 2% per annum above the Floating Rate in
effect from time to time, or (iii) in respect of any Loan that bears interest at
the Fixed Rate, 2% per annum above the Fixed Rate.
"PREVAILING MARKET RATE" means, for the Fixed Rate Period, the rate
reasonably determined by the Bank to be the Bank's fixed rate cost of funding an
amount equal to the unpaid principal amount of the Mortgage Loan for the Fixed
Rate Period.
"PRIME RATE" means the rate of interest from time to time publicly
announced by Marine Midland Bank at its New York City Main Branch as its prime
rate (being a base rate for calculating interest on certain loans), each change
in any interest rate hereunder based on the Prime Rate to take effect at the
time of such change in the Prime Rate.
"PRINCIPAL PAYMENT DATE" means the first Business Day of each calendar
month commencing with July 1, 1995 to and including the first Business Day of
the month in which the Mortgage Loan Final Maturity Date falls and the Mortgage
Loan Final Maturity Date.
"PROPERTY" means all property of any kind whatsoever, whether real,
personal or mixed and whether tangible or intangible and any right or interest
therein.
"RELEASE PRICE" shall mean, with respect to each Hotel, the sum of (i)
the Applicable Allocated Amount, plus (ii) an amount equal to 50% of the Excess
Proceeds.
"REGULATORY CHANGE" means any change after the date of this Agreement
in Federal, state or foreign law or regulations (including, without limitation,
Regulation D of the Board of Governors of the Federal Reserve System) applying
to a class of banks including the Bank or the adoption or making after such date
of any interpretation, directive or request applying to a class of banks
including the Bank of or under any Federal, state or foreign law or regulations
(whether or not having the force of law and whether or not failure to comply
therewith would be unlawful) by any court or governmental or monetary authority
charged with the interpretation or administration thereof.
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"REVOLVING LOAN" has the meaning set forth in Section 2.01(b) hereof.
"REVOLVING LOAN COMMITMENT" means the obligation of the Bank, on and
subject to the terms and conditions of this Agreement, to make Revolving Loans.
"REVOLVING LOAN TERMINATION DATE" means the date one (1) year after
the date of this Agreement, as such date may be extended pursuant to
Section 2.01(b)(3) hereof; PROVIDED, that if said date or any such extended date
would otherwise fall on a day that is not a Business Day, the Revolving Loan
Termination Date shall be the immediately preceding Business Day.
"REVOLVING NOTE" has the meaning specified in Section 2.04(b) hereof.
"RESERVE REQUIREMENT" means, for any Interest Period, the average
maximum rate at which reserves (including, without limitation, any marginal,
supplemental or emergency reserves) are required to be maintained during such
Interest Period under Regulation D of the Board of Governors of the Federal
Reserve System by member banks of the Federal Reserve System in New York City
with deposits exceeding one billion Dollars against "Eurocurrency liabilities"
(as such term is used in said Regulation D). Without limiting the effect of the
foregoing, the Reserve Requirement shall include any other reserves required to
be maintained by such member banks by reason of any Regulatory Change with
respect to (i) any category of liabilities that includes deposits by reference
to which the Eurodollar Base Rate is to be determined as provided in the
definition of "Eurodollar Base Rate" in this Section 1.01 or (ii) any category
of extensions of credit or other assets that includes the Loans.
"SECURITY AGREEMENT" means a Security Agreement among the Borrowers
and the Bank covering personal property relating to the Hotels (together with
any and all instruments evidencing the same), in form and substance satisfactory
to the Bank, as amended from time to time.
"SECURITY DOCUMENTS" means, collectively, the Security Agreement, the
Mortgages and all Uniform Commercial Code financing statements required by this
Agreement, the Security Agreement or the Mortgages to be filed with respect to
the security interests in the personal property and fixtures created pursuant to
the Security Agreement and the Mortgages.
"SUBSIDIARY" means, for any Person, any corporation, partnership or
other entity of which at least a majority of the securities or other ownership
interests having by the terms
<PAGE>
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thereof ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions of such corporation, partnership or
other entity (irrespective of whether or not at the time securities or other
ownership interests of any other class or classes of such corporation,
partnership or other entity shall have or might have voting power by reason of
the happening of any contingency) is at the time directly or indirectly owned or
controlled by such Person or one or more Subsidiaries of such Person or by such
Person and one or more Subsidiaries of such Person.
"TITLE COMPANY" and "TITLE POLICY" have the meanings assigned to such
terms in Section 6(a)(vii) hereof.
"UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code in effect
in any state to the extent the same is applicable by law to any portion of the
Mortgaged Property.
"UNIFORM SYSTEM OF ACCOUNTS" means the "Uniform System of Accounts for
Hotels", as approved by the American Hotel and Motel Association, as in effect
from time to time.
In addition, the terms "ENVIRONMENTAL CLAIM", "ENVIRONMENTAL LAWS",
"HAZARDOUS MATERIALS", "IMPROVEMENTS", "LAND", "LEASES", "LEGAL REQUIREMENTS",
"MATERIAL CONTRACTS", "PERMITTED ENCUMBRANCES" and "TRANSFER" have the
respective meanings assigned to them in the Mortgages.
1.02 ACCOUNTING TERMS AND DETERMINATIONS.
(a) Except as otherwise expressly provided herein, all accounting
terms used herein shall be interpreted, and all financial statements,
certificates, reports and calculations as to financial matters required to be
delivered to the Bank hereunder shall be prepared, in accordance with the
Uniform System of Accounts, subject to generally accepted accounting principles
and public reporting requirements as required by Securities and Exchange
Commission rules and regulations used in the preparation of the latest financial
statements furnished to the Bank in connection herewith.
(b) Without first obtaining the Bank's consent, which shall not be
unreasonably withheld, the Borrowers will not change the last day of their
fiscal year from December 31 of each year, or the last days of the first three
fiscal quarters in each of their fiscal years from the last day of March, June
and September of each year, respectively.
(c) The Borrowers shall retain an independent certified public
accounting firm of recognized national standing
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in connection with the preparation and/or audit of the financial statements of
the Borrowers, which accounting firm shall be reasonably acceptable to the Bank.
The Borrowers have as of the date hereof engaged KPMG Peat Marwick, such firm
being deemed acceptable to the Bank.
SECTION 2. THE COMMITMENTS, LOANS, NOTES AND PREPAYMENTS.
2.01 THE LOANS.
(a) (1) The Bank agrees, on and subject to the terms and conditions
of this Agreement, to make one loan to the Borrowers (the "MORTGAGE LOAN")
in Dollars on a Business Day on or before June 30, 1995 in the amount of
$45,000,000.
(2) The proceeds of the Mortgage Loan shall be applied by the
Borrowers forthwith as follows (PROVIDED, that the Bank shall have no
responsibility as to the use of any of such proceeds):
(i) an amount equal to $38,950,000 shall be applied to
repay in full the aggregate outstanding principal amount of the loans
under the Existing Credit Agreement;
(ii) an amount equal to $1,815,000 shall be applied to
repay in full the National City Bank Debt;
(iii) an amount equal to $3,250,000 shall be applied to
the making of Inter-Company Advances to one or more of the Operating
Partnerships to fund renovations at the Hotels; and
(iv) an amount equal to $985,000 shall be available to
fund the payment of facility fee and estimated closing costs in
connection herewith (including legal, environmental and engineering
due diligence expenses and a fee in the amount of $160,000 payable to
the General Partner and a fee in the amount of $230,000 payable to the
Guarantor or its designee).
(b) (1) The Bank agrees, on and subject to the terms and conditions
of this Agreement, to make loans ("REVOLVING LOANS") to the Borrowers in
Dollars on any Business Day on or before the Revolving Loan Termination
Date up to an aggregate principal amount at any one time outstanding equal
to $1,000,000. Each borrowing under this Section 2.01(b) shall be in the
minimum amount of $50,000 or an integral multiple thereof.
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(2) The proceeds of the Revolving Loans shall be applied by the
Borrowers to finance the seasonal working capital needs of the respective
Hotels; PROVIDED, that the Bank shall have no responsibility as to the use
of any of such proceeds.
(3) The Revolving Loan Termination Date at any time shall be
automatically extended to the date (an "extended date") one (1) year
thereafter if, immediately prior to and on such Revolving Loan Termination
Date, (i) no Default has occurred and is continuing, and (ii) the aggregate
outstanding principal amount of the Revolving Loans is reduced to $500,000
or less for a period of 60 consecutive days during such year, commencing
with January 1996; PROVIDED, that no such extension shall cause the
Revolving Loan Termination Date to fall on a date later than the Mortgage
Loan Final Maturity Date. In the event of each such extension, the
Revolving Loan Termination Date shall be the extended date.
(4) No Revolving Loans shall be made until the Mortgage Loan has been
made.
(c) The proceeds of each Loan shall, subject to the terms and
conditions of this Agreement, be remitted as directed by the Borrowers.
2.02 BORROWING. The Borrowers shall give the Bank notice of each
borrowing hereunder as provided in Section 4.03 hereof. At or prior to 11:00
a.m. on the date specified for such borrowing hereunder, the Bank shall, subject
to the terms and conditions of this Agreement, make available the amount of such
borrowing as specified in Section 2.01(c) hereof.
2.03 FEES. In consideration of the Bank's entering into this
Agreement, the Borrowers shall pay to the Bank on the date hereof a non-
refundable facility fee in an amount equal to U.S. $300,000, which fee is
allocated ratably between the Mortgage Loan and the Revolving Loan facilities.
2.04 NOTES.
(a) The Mortgage Loan shall be collectively evidenced by the
following notes:
(i) a promissory note in substantially the form of EXHIBIT A-1
hereto (as from time to time amended, the "MORTGAGE NOTE");
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(ii) a promissory note in substantially the form of EXHIBIT A-2
hereto (as from time to time amended, the "NEW YORK RESTATED NOTE");
and
(iii) a promissory note in substantially the form of EXHIBIT A-3
hereto (as from time to time amended, the "FLORIDA RENEWAL NOTE").
(b) The Revolving Loans shall be evidenced by a promissory note in
substantially the form of EXHIBIT A-4 hereto (as from time to time amended,
the "REVOLVING NOTE").
2.05 OPTIONAL PREPAYMENTS. The Borrowers shall have the right to
prepay the Loans in whole or in part at any time or from time to time, subject
always to Section 5.04 hereof, PROVIDED that (a) the Borrowers shall give the
Bank notice of each such prepayment as provided in Section 4.03 hereof (and, on
the date specified in any such notice of prepayment, the amount to be prepaid
shall become due and payable hereunder); (b) each prepayment under this Section
2.05 shall be in a principal amount of $250,000 or an integral multiple thereof
(or, if less, the then aggregate unpaid principal amount of the Loans) and shall
be applied, in the case of prepayments of the Mortgage Loan, to the installments
of principal thereof in the inverse order of maturity; and (c) the Borrowers
shall, simultaneously with the making of each prepayment of principal of the
Mortgage Loan pursuant to this Section 2.05, pay to the Bank a prepayment
premium, such prepayment premium to be (i) in the case of any such prepayment
during the period from the date of the Mortgage Loan to and including the second
anniversary of the date of this Agreement, an amount equal to 1% of the
principal amount so prepaid and (ii) in the case of any such prepayment
thereafter and to and including the third anniversary of the date of this
Agreement, an amount equal to 0.5% of the principal amount so prepaid (and no
prepayment premium shall be applicable to prepayments under this Section 2.05
after such third anniversary). Notwithstanding the provisions of (c) above, but
without prejudice to the provisions of Section 5.04, no prepayment penalty shall
be due in connection with repayments of the Revolving Loans, Mandatory
Prepayments pursuant to Section 2.06, or upon acceleration of the Loan following
an Event of Default.
2.06 MANDATORY PREPAYMENTS. (a) If a Casualty Event shall occur
with respect to any Hotel, the Borrowers shall prepay the Mortgage Loan on
the dates, and in the amounts, specified in the Mortgage relating to such
Hotel.
(b) The Borrowers shall prepay the Mortgage Loan in accordance with
Section 10.14 hereof in the case of any
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release of any Hotel from the Lien of the Security Documents effected
pursuant to said Section.
(c) Each prepayment of the Mortgage Loan pursuant to this Section
2.06 shall be applied to the installments of principal of the Mortgage Loan
in the inverse order of their maturities.
(d) Nothing in this Section 2.06 shall be deemed to limit any
obligation of any Borrower under any Mortgage or under the Security
Agreement.
2.07 INTEREST AND OTHER CHARGES ON PREPAYMENT. If the Loans are
prepaid, in whole or in part, pursuant to Sections 2.05 or 2.06, each such
prepayment shall be made (in the case of prepayments under Section 2.05) on the
prepayment date specified in the notice to the Bank pursuant to Section 4.03
hereof, and in every case together with (a) the accrued and unpaid interest on
the principal amount prepaid and (b) any amounts payable to the Bank pursuant to
Section 5.04 with respect to such principal amount.
SECTION 3. PAYMENTS OF PRINCIPAL AND INTEREST.
3.01 REPAYMENT.
(a) The Borrowers agree to repay to the Bank the principal amount of
the Mortgage Loan in consecutive monthly installments, one payable on each
Principal Payment Date, commencing with the first such date after the date
of the Mortgage Loan. Each such installment shall be in the amount of
$90,000 except that the final such installment, payable on the Mortgage
Loan Final Maturity Date, shall be in an amount equal to the then unpaid
principal amount of the Mortgage Loan.
(b) The Borrowers agree to repay to the Bank the aggregate
outstanding principal amount of the Revolving Loans on the Revolving Loan
Termination Date.
3.02 INTEREST.
(a) Each Loan shall bear interest at a rate based upon the Eurodollar
Rate (during which period such Loan shall be referred to as a "EURODOLLAR
LOAN"), or, at the option of the Borrowers as provided below, at the Floating
Rate (during which period such Loan shall be referred to as a "FLOATING RATE
LOAN"), and the Borrowers may, subject to Sections 3.02(c) and (f) hereof,
convert such Loan from one basis to another as provided herein.
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(b) The Borrowers agree to pay interest on the unpaid principal
amount of each Loan, for the period from and including the date of such Loan to
but not including the date such principal shall be paid in full, (i) while it is
a Eurodollar Loan, for each Interest Period relating thereto, at the Eurodollar
Rate for such Interest Period PLUS the Applicable Margin and (ii) while it is a
Floating Rate Loan, at the Floating Rate; PROVIDED, however, that if the
Borrowers shall exercise the fixed rate option provided in Section 3.02(c)
hereof with respect to the Mortgage Loan, the Borrowers agree to pay interest on
the unpaid principal amount of the Mortgage Loan, for the Fixed Rate Period, at
the Fixed Rate.
(c) The Borrowers may, by not less than ten Business Days' prior
written notice to the Bank, elect to convert interest on the Mortgage Loan (or a
portion of the principal amount thereof, any such portion not to be in an amount
of less than $1,000,000) to a fixed rate basis as herein provided, any such
conversion to take effect on the date (each, a "CONVERSION DATE") specified in
such notice (which shall be the last day of an Interest Period if the Mortgage
Loan is a Eurodollar Loan) and to have effect for a period (each, a "FIXED RATE
PERIOD") of not less than one year and not more than five years (and shall in
any event not extend beyond the Mortgage Loan Final Maturity Date) as specified
in any such notice. The Borrowers may not have more than two different Fixed
Rate Periods with respect to the Mortgage Loan in effect at any one time. The
rate applicable for any such Fixed Rate Period shall be the rate (the "FIXED
RATE") determined by the Bank to be the sum of (i) the Bank's fixed cost of
funding the Mortgage Loan (or portion thereof) for such Fixed Rate Period PLUS
(ii) the Applicable Margin. During any such Fixed Rate Period the Borrowers may
not convert the Loans as contemplated by Section 3.02(a) hereof.
(d) Notwithstanding the foregoing, the Borrowers agree to pay
interest on the overdue principal of any Loan and on any interest or other
amount whatsoever payable hereunder or under the Notes which shall not be paid
in full when due (whether at stated maturity, by acceleration, by mandatory
prepayment or otherwise), at the applicable Post-Default Rate.
(e) Accrued interest on each Loan shall be payable, while it is a
Eurodollar Loan, on the last day of each Interest Period therefor and, in the
case of an Interest Period of longer than three months, on each quarterly
anniversary of the first day of such Interest Period, and while it is a Floating
Rate Loan, monthly on the last Business Day of each calendar month, and upon any
conversion of such Loan from a Floating Rate Loan to a Eurodollar Loan, and, if
the Borrowers have exercised the fixed rate option provided in Section 3.02(c)
hereof as to the Mortgage
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Loan, on each Principal Payment Date, and at maturity; PROVIDED, that interest
payable at the Post-Default Rate shall be payable from time to time on demand.
(f) The Borrowers may, by giving not less than two Business Days'
prior written notice to the Bank, convert any Floating Rate Loan to a Eurodollar
Loan or, on the last day of an Interest Period for any Eurodollar Loan, convert
such Eurodollar Loan to a Floating Rate Loan; PROVIDED, that the principal
amount converted shall in each case be at least $500,000; and FURTHER PROVIDED,
that the Borrowers may not have more than three different Interest Periods with
respect to Eurodollar Loans in effect at any one time.
(g) Promptly after the determination of any interest rate provided
for herein or any change therein, the Bank shall give notice thereof to the
Borrowers.
SECTION 4. PAYMENTS; COMPUTATIONS; ETC.
4.01 PAYMENTS.
(a) Except to the extent otherwise provided herein, all payments of
principal, interest and other amounts to be made by the Borrowers under this
Agreement and the Notes and all payments to be made by the Borrowers under any
other Basic Document shall be made in Dollars, in immediately available funds,
without deduction, set-off or counterclaim, to the Bank at its branch at
140 Broadway, New York, New York (or such other location in New York State as
the Bank may direct in writing), not later than 2:00 p.m. New York time on the
date on which such payment shall become due (each such payment made after such
time on such due date to be deemed to have been made on the next succeeding
Business Day).
(b) The Bank may (but shall not be obligated to) debit the amount of
any such payment that is not made by such time to any ordinary deposit account
of any of the Borrowers with the Bank (with notice to the Borrowers promptly
thereafter).
(c) The Borrowers shall, at the time of making each payment under
this Agreement or the Notes, specify to the Bank the Loan or Loans or other
amount payable hereunder to which such payment is to be applied (and in the
event the Borrowers fail to so specify, or if an Event of Default has occurred
and is continuing, the Bank may apply the amount of such payment toward amounts
then due and owing in such manner as it may determine to be appropriate).
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(d) Except as otherwise expressly provided herein, if the due date of
any payment under this Agreement or the Notes would otherwise fall on a day that
is not a Business Day, such date shall be extended to the next succeeding
Business Day, and interest shall be payable for any principal so extended for
the period of such extension.
4.02 COMPUTATIONS. Interest on the Loans based on the Eurodollar
Rate or the Fixed Rate shall be computed on the basis of a year of 360 days and
actual days elapsed (including the first day but excluding the last day)
occurring in the period for which payable and interest on the Loans based on the
Floating Rate, if applicable, shall be computed on the basis of a year of 365 or
366 days, as the case may be, and actual days elapsed (including the first day
but excluding the last day) occurring in the period for which payable.
4.03 CERTAIN NOTICES. All notices and other communications to be
given by the Borrowers under this Agreement and the other Basic Documents
(including without limitation all notices of borrowing, all notices as to
payments or prepayments, all notices as to the selection of Interest Periods or
the conversion of interest rates, and all other notices whatsoever) shall be
given by AIRCOA on behalf of the Borrowers, and all notices and other
communications whatsoever to be given by the Bank to the Borrowers hereunder
shall be given to AIRCOA on behalf of the Borrowers. Notices by the Borrowers
to the Bank of borrowings, optional prepayments of any of the Loans, selection
of the duration of Interest Periods, conversion to a Eurodollar Loan or to a
Floating Rate Loan and any exercise of the fixed rate option pursuant to Section
3.02(c) hereof shall be irrevocable and shall be effective only if received by
the Bank not later than 2:00 p.m. New York time on the number of Business Days
prior to the date of the relevant occurrence specified below:
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Number of
Business Days'
Notice Prior Notice
------ ------------
Borrowing 2
Prepayment 3
Selection of duration of Interest
Period 2
Conversion to Eurodollar Loan or
Floating Rate Loan 2
Conversion to Fixed Rate 10
Each notice of optional prepayment shall specify the amount of the Loans to be
prepaid, the allocation of such prepayment among the Loans and the date of
prepayment (which shall be a Business Day) and such other details as the Bank
may request, each notice of selection of an Interest Period shall specify the
duration of such Interest Period, each notice of conversion pursuant to Section
3.02 hereof shall specify the amount converted and the date of such conversion,
and any notice of election pursuant to Section 3.02(c) hereof shall specify the
date on which such election is to take effect.
In the event that the Borrowers fail to select the duration of an
Interest Period within the time period and otherwise as provided in this
Section 4.03, the duration of such Interest Period will automatically be one
month. In the event the Borrowers fail to select the allocation of payments
among the Loans, the Bank shall select such allocation.
4.04 SET-OFF. The Borrowers agree that, in addition to (and without
limitation of) any right of set-off, banker's lien or counterclaim the Bank may
otherwise have, the Bank shall be entitled, at its option, to offset balances
held by it for account of any of the Borrowers at any of its offices, in Dollars
or in any other currency, against any principal of or interest on the Loans or
any other amount payable to the Bank hereunder that is not paid when due
(regardless of whether such balances are then due to any such Borrower), in
which case it shall promptly notify the Borrowers thereof, PROVIDED, that the
Bank's failure to give such notice shall not affect the validity thereof.
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SECTION 5. YIELD PROTECTION, ETC.
5.01 ADDITIONAL COSTS.
(a) The Borrowers shall pay to the Bank from time to time such
amounts as the Bank may reasonably determine to be necessary to compensate the
Bank for any costs that the Bank determines are attributable to its making or
maintaining of any Loan as a Eurodollar Loan or its obligation to make any Loan
as a Eurodollar Loan hereunder, or any reduction in any amount receivable by the
Bank hereunder in respect of such Loan or such obligation (such increases in
costs and reductions in amounts receivable being herein called "ADDITIONAL
COSTS"), in each case resulting from any Regulatory Change that:
(i) changes the basis of taxation of any amounts payable to the Bank
under this Agreement or the Notes (other than taxes imposed on or measured
by the overall net income of the Bank or of its Applicable Lending Office
by the jurisdiction in which the Bank or such Applicable Lending Office or
its principal office is located); or
(ii) imposes or modifies any reserve, special deposit or similar
requirements (other than the Reserve Requirement utilized in the
determination of the Eurodollar Rate) relating to any extensions of credit
or other assets of, or any deposits with or other liabilities of, the Bank
(including, without limitation, any such deposits referred to in the
definition of "Eurodollar Base Rate" in Section 1.01 hereof), or any
commitment of the Bank (including, without limitation, the Commitments); or
(iii) imposes any other condition affecting this Agreement or the
Notes (or any of such extensions of credit or liabilities) or the
Commitments.
(b) Without limiting the effect of the provisions of clause (a) of
this Section 5.01 (but without duplication), in the event that, by reason of any
Regulatory Change, the Bank either (i) incurs Additional Costs based on or
measured by the excess above a specified level of the amount of a category of
deposits or other liabilities of the Bank that includes deposits by reference to
which the Eurodollar Rate is determined as provided in this Agreement or a
category of extensions of credit or other assets of the Bank that includes the
Loans or (ii) becomes subject to restrictions on the amount of such a category
of liabilities or assets that it may hold, then, if the Bank so elects by notice
to the Borrowers, the obligation of the Bank to continue the Loans based on the
Eurodollar Rate hereunder shall be suspended effective on the last day of the
then current
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Interest Period until such Regulatory Change ceases to be in effect and each
Loan shall, during such suspension, bear interest at the Floating Rate (unless
and until converted to a Loan based upon the Fixed Rate pursuant to
Section 3.02(c) hereof).
(c) Without limiting the effect of the foregoing provisions of this
Section 5.01 (but without duplication), the Borrowers shall pay to the Bank from
time to time on request such amounts as the Bank may reasonably determine to be
necessary to compensate the Bank (or, without duplication, the bank holding
company of which the Bank is a subsidiary) for any costs that it determines are
attributable to the maintenance by the Bank (or any Applicable Lending Office or
such bank holding company), pursuant to any law or regulation or any
interpretation, directive or request (whether or not having the force of law and
whether or not failure to comply therewith would be unlawful) of any
Governmental Authority (i) following any Regulatory Change or (ii) implementing
any risk-based capital guideline or other requirement (whether or not having the
force of law and whether or not the failure to comply therewith would be
unlawful) applying to a class of banks including the Bank, hereafter issued by
any government or governmental or supervisory authority implementing at the
national level the Basle Accord (including, without limitation, the Final
Risk-Based Capital Guidelines of the Board of Governors of the Federal Reserve
System (12 C.F.R. Part 208, Appendix A; 12 C.F.R. Part 225, Appendix A) and the
Final Risk-Based Capital Guidelines of the Office of the Comptroller of the
Currency (12 C.F.R. Part 3, Appendix A)), of capital in respect of the
Commitments or the Loans (such compensation to include, without limitation, an
amount equal to any reduction of the rate of return on assets or equity of the
Bank (or any Applicable Lending Office or such bank holding company) to a level
below that which the Bank (or any Applicable Lending Office or such bank holding
company) could have achieved but for such law, regulation, interpretation,
directive or request). For purposes of this Section 5.01(c), "BASLE ACCORD"
shall mean the proposals for risk-based capital framework described by the Basle
Committee on Banking Regulations and Supervisory Practices in its paper entitled
"International Convergence of Capital Measurement and Capital Standards" dated
July 1988, as amended, modified and supplemented and in effect from time to time
or any replacement thereof.
(d) The Bank shall notify the Borrowers of any event occurring after
the date of this Agreement entitling the Bank to compensation under clause (a)
or (c) of this Section 5.01 as promptly as practicable, and will designate a
different Applicable Lending Office for the Loans if such designation will avoid
the need for, or reduce the amount of, such compensation and will not, in the
reasonable opinion of the Bank, be
<PAGE>
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disadvantageous to the Bank. The Bank will furnish to the Borrowers a
certificate setting forth the basis and amount of each request by the Bank for
compensation under clause (a) or (c) of this Section 5.01. Determinations and
allocations by the Bank for purposes of this Section 5.01 of the effect of any
Regulatory Change pursuant to clause (a) or (b) of this Section 5.01, or of the
effect of capital maintained pursuant to clause (c) of this Section 5.01, on its
costs or rate of return of maintaining the Loans or its obligation to make the
Loans, or on amounts receivable by it in respect of the Loans, and of the
amounts required to compensate the Bank under this Section 5.01, shall be
conclusive and binding on each of the Borrowers in the absence of manifest
error.
(e) Notwithstanding anything to the contrary in this Agreement, in
the event that the Bank exercises any of its rights pursuant to this Section
5.01, (a) the Borrowers shall be entitled to repay the Loans without payment of
any prepayment penalty required pursuant to Section 2.05 above, but without
prejudice to the provisions of Section 5.04 and (b) the Bank agrees not to
impose Additional Costs or apply the provisions of this Section 5.01 to the
Borrowers unless it confirms to the Borrowers it is imposing costs similar to
those described in this Section 5.01 to similarly situated borrowers, as
determined by the Bank.
5.02 EURODOLLAR RATE. Anything herein to the contrary
notwithstanding, if, on or prior to the determination of any Eurodollar Base
Rate for any Interest Period, the Bank reasonably determines that:
(a) quotations of interest rates for the relevant deposits referred
to in the definition of "Eurodollar Base Rate" in Section 1.01 hereof are
not being provided in the relevant amounts or for the relevant maturities
for purposes of determining rates of interest for any Eurodollar Loans as
provided herein; or
(b) the relevant rates of interest referred to in the definition of
"Eurodollar Base Rate" in Section 1.01 hereof upon the basis of which the
rate of interest for the Eurodollar Loans for such Interest Period is to be
determined are not likely adequately to cover the cost to the Bank of
making or maintaining any Eurodollar Loans for such Interest Period;
then the Bank shall give the Borrowers prompt notice thereof and, so long as
such condition remains in effect, the Bank shall be under no obligation to make
any such Eurodollar Loan, or if any such Loan is already outstanding as a
Eurodollar Loan, it shall,
<PAGE>
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commencing immediately after the end of the then current Interest Period, bear
interest at the Floating Rate (unless and until such Loan is thereafter
converted to a Loan based upon the Fixed Rate pursuant to Section 3.02(c)
hereof). The Bank shall promptly notify the Borrowers upon the cessation of any
facts and circumstances which resulted in suspension under this Section 5.02,
whereupon the Borrowers' right to cause such Loan to be Eurodollar Loans shall
be reinstated.
5.03 ILLEGALITY. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for the Bank or its Applicable
Lending Office to honor its obligation to make or maintain the Loans, then the
Bank shall promptly notify the Borrowers thereof and the Bank's obligation to
make the Loans shall be suspended until such time as the Bank may again make the
Loans and the Borrowers shall, if required by applicable law, upon the request
of the Bank, prepay the Loans together with accrued interest thereon (without
any prepayment penalty under Section 2.05, but without any prejudice to the
provisions of Section 5.04).
5.04 COMPENSATION. The Borrowers shall pay to the Bank, upon the
request of the Bank, such amount or amounts as shall be sufficient (in the
reasonable opinion of the Bank) to compensate it for any loss, cost or expense
that the Bank determines is attributable to:
(a) any payment or prepayment (mandatory or optional) of the
principal of a Eurodollar Loan for any reason (including, without
limitation, the acceleration of such Loan pursuant to Section 9 hereof) on
a date other than the last day of an Interest Period with respect thereto
(and the Bank will use reasonable efforts to minimize any such loss, cost
or expense if it can reasonably do so without material disadvantage to the
Bank); or
(b) any failure by the Borrowers for any reason (including, without
limitation, the failure of any of the conditions precedent specified in
Section 6 hereof to be satisfied) to borrow a Eurodollar Loan on the date
for such borrowing specified in the relevant notice of borrowing given
pursuant to Section 2.02 hereof or any failure to convert to or from a
Eurodollar Loan after notice pursuant to Section 2.02 hereof; or
(c) during the Fixed Rate Period any payment or prepayment (mandatory
or optional) of the Mortgage Loan for any reason (including, without
limitation, the acceleration of the maturity of the Mortgage Loan pursuant
to Section 9 hereof) except for payment on any Principal Payment Date in
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respect of the Mortgage Loan of the amount scheduled to be paid on such
date.
Except with respect to any such event occurring during the Fixed Rate
Period or with respect to the Fixed Rate Loan, such compensation with respect to
such Loan shall be an amount equal to the excess, if any, of (i) the amount of
interest that otherwise would have accrued on the principal amount so paid,
prepaid or not borrowed for the period from the date of such payment, prepayment
or failure to borrow to the last day of the then current Interest Period (or, in
the case of a failure to borrow, the Interest Period that would have commenced
on the date specified for such borrowing) at the applicable rate of interest
(not including the Applicable Margin) for such Loan provided for herein over
(ii) the amount of interest that otherwise would have accrued on such principal
amount at a rate per annum equal to the rate the Bank would have bid in the
London interbank market for Dollar deposits of leading banks in amounts
comparable to such principal amount and with maturities comparable to such
period (as reasonably determined by the Bank).
With respect to any such event occurring during the Fixed Rate Period
or with respect to the Fixed Rate Loan, such compensation shall be an amount
equal to the excess, if any, of (i) the amount of interest (discounted to
present value at such rate as the Bank may reasonably determine) that otherwise
would have accrued on the principal amount so paid or prepaid for the period
from the date of such payment or prepayment to the last day of the Fixed Rate
Period at the Fixed Rate (but not including the Applicable Margin) over (ii) the
amount of interest (discounted as aforesaid) that would accrue on such principal
amount at the Prevailing Market Rate for such period.
The Bank will use reasonable efforts to minimize any losses, costs and
expenses as to which the Borrowers will be required to compensate the Bank
hereunder, to the extent the Bank can reasonably do so without material
disadvantage to the Bank.
Notwithstanding anything to the contrary in this Agreement, in the
event that the Bank exercises any of its rights pursuant to this Section 5.04(a)
the Borrowers shall be entitled to repay the Loans without the payment of any
prepayment penalty required pursuant to Section 2.05 above (but subject to
payment of the amounts provided for in this Section 5.04) and (b) the Bank
agrees not to request compensation from or apply the provisions of this Section
5.04 to the Borrowers unless the Bank confirms to the Borrowers it is requiring
similar compensation from similarly situated borrowers as determined by the
Bank.
5.05 WITHHOLDING TAXES. The Borrowers agree to pay to the Bank such
additional amounts as are necessary in order that
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the net payment of any amount due hereunder or under any of the other Basic
Documents, after deduction for or withholding of any present or future tax
imposed by or within the United States, will be not less than the amount stated
to be due hereunder; PROVIDED, that if such taxes are incurred as a result of
the Bank's decision to change the Applicable Lending Office to which the income
from the Loans is attributable for U.S. tax purposes, the Borrowers shall not be
responsible for those costs which exceed those they would have incurred had the
Bank not changed the Applicable Lending Office. The Bank shall provide the
Borrowers with a form prescribed by the United States Internal Revenue Service
(currently, Form 4224 or Form 1001) certifying the Bank's exemption from United
States withholding taxes with respect to all payments to be made to the Bank
under this Agreement and any other Basic Document at the date of such
certificate, and if the Bank fails to provide the Borrowers with the prescribed
form referred to in the preceding sentence, indicating that such payments are
not subject to United States withholding tax or are subject to such tax at a
rate reduced by an applicable tax treaty, the Borrowers may withhold taxes from
such payments at the applicable statutory rate and shall not be obligated to pay
any additional amounts described in the first sentence of this section;
PROVIDED, that this sentence shall be inapplicable in the event that the Bank is
not able to make the certification set forth in such prescribed form as a result
of a change in United States federal income tax law, regulation or
interpretation occurring after the date hereof, or of an amendment, modification
or revocation of an applicable tax treaty or a change in official position
regarding the application or interpretation thereof, in each case, occurring
after the date hereof.
SECTION 6. CONDITIONS PRECEDENT. (a) The obligation of the Bank to
make the Mortgage Loan is subject to the condition precedent that the Bank shall
have received the following documents, each of which shall be satisfactory to
the Bank in form and substance:
(i) CORPORATE DOCUMENTS. Certified copies of the partnership
agreements and other documents evidencing the existence and good standing
of each Borrower, the Hotel Manager and the Guarantor and the due
authorization of the making and performance by them of this Agreement and
the other Basic Documents to which each is a party.
(ii) LEGAL OPINIONS.
(A) An opinion or opinions, dated the date of the Mortgage Loan,
of counsel to the Borrowers, the Guarantor and the Hotel Manager
covering such matters
<PAGE>
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with respect to this Agreement and the other Basic Documents to which
they are parties as the Bank or its counsel may require which opinions
shall contain a statement that any financial institution that obtains
an assignment of any interest in the Loans or a participation interest
in the Loans can rely on such opinions as if such opinions were
addressed to such financial institution (and the Borrowers hereby
instruct such counsel to deliver such opinion or opinions to the
Bank).
(B) An opinion of Milbank, Tweed, Hadley & McCloy, special New
York counsel to the Bank, as to such matters relating hereto as the
Bank may require.
(iii) NOTES. The Notes, duly completed and executed.
(iv) GUARANTY AGREEMENTS. The Guaranty Agreement and the Florida
Renewal Note Guaranty.
(v) MANAGER/LICENSOR AGREEMENTS. The Hotel Manager Subordination
Agreement and the Hotel Licensor Agreements, together with evidence of the
due authorization thereof by the parties thereto.
(vi) ACCOUNTS. Evidence of the authorization and establishment of the
Capital Expenditure Reserve Account and the Debt Service Reserve Account.
(vii) MORTGAGE AND TITLE INSURANCE. The following documents with
respect to each Hotel, each of which shall be executed (and, where
appropriate, acknowledged) by Persons satisfactory to the Bank:
(A) the Mortgage relating to such Hotel, duly executed and
delivered by the applicable Operating Partnership in recordable form
(in such number of copies as the Bank shall have requested), together
with appropriately completed and duly executed Uniform Commercial Code
financing statements and payment of all mortgage recording fees;
(B) American Land Title Association, extended coverage, loan
policy of title insurance Form B-1970 (Rev. 10-17-84) or other form
satisfactory to the Bank, issued by a title insurance company
acceptable to the Bank, insuring the lien of such Mortgage in an
aggregate amount not less than the amount of the Mortgage Loan and
confirming the nonexistence of any Liens, judgments, taxes or
assessments affecting the
<PAGE>
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Mortgaged Property (other than the Liens created by the relevant
Mortgage and the Security Agreement and Permitted Encumbrances),
together with such endorsements as the Bank shall require and evidence
of payment of all premiums due thereon and charges and fees in respect
thereof (such title company is referred to herein as the "TITLE
COMPANY" and such title policy is referred to herein as the "TITLE
POLICY"); and
(C) an updated "as-built" survey, prepared by a licensed
surveyor acceptable to the Bank showing such matters as may be
required by the Bank with respect to such Hotel, certified by surveyor
and otherwise satisfactory to the Bank and the Title Company and
adequate for the Title Company to remove the general survey exception
from the Title Policy.
(viii) SECURITY AGREEMENT. The Security Agreement, together with
evidence that the Borrowers shall have taken such other action (including,
without limitation, delivering to the Bank, for filing, appropriately
completed and duly executed copies of Uniform Commercial Code financing
statements and satisfactory UCC searches) as the Bank shall have requested
in order to perfect the security interests created pursuant to the Security
Agreement as first priority security interests.
(ix) UCC SEARCHES. Evidence that a search of the public records
discloses no conditional sales contracts, chattel mortgages, leases of
personalty, financing statements, or Liens filed or recorded against
AIRCOA, the Operating Partnerships or the Hotels or in respect of any other
property interests covered, or to be covered, by the Liens referred to in
the Security Agreement, other than those granted by AIRCOA and the
Operating Partnerships to the Bank as contemplated by this Agreement, and
those expressly permitted by the Security Documents or those which will be
removed of record prior to the making of the Mortgage Loan.
(x) INSURANCE. Certificates of insurance evidencing the existence of
all insurance required to be maintained by the Operating Partnerships
pursuant to Section 8.13 hereof and the designation of the Bank as the loss
payee or additional insured, as the case may be, thereunder to the extent
required by said Section 8.13 in respect of all insurance covering the
Property of the Operating Partnerships, such certificates to be in such
form and contain such information as is specified in said Section 8.13.
<PAGE>
- 31 -
(xi) ENVIRONMENTAL SURVEYS. A "Phase I" environmental survey and
assessment with respect to each Hotel, prepared by a firm of licensed
engineers familiar with the identification of toxic and hazardous
substances, at the Borrowers' expense, in form and substance satisfactory
to the Bank, such environmental survey and assessment to be based upon
physical on-site inspections by such firm, as well as a historical review
of the uses of the related real estate and of the business and operations
thereof, and stating whether or not there exist Hazardous Materials of any
kind located on or beneath, or stored at, such Hotel, and including in any
event a certification, in the event of the presence of any such Hazardous
Materials, that they will not become a hazard to public health or violate
any standard then applicable requiring removal, containment or treatment.
(The Environmental Surveys prepared by A.T.C. Environmental, Inc. dated
December 1993, heretofore delivered by the Borrowers to the Bank, are
deemed satisfactory to the Bank for purposes of this Section 6(a)(xi).)
(xii) PROPERTY CONDITION SURVEY. A property condition survey
concerning each Hotel, prepared by a qualified engineer engaged by the Bank
at the Borrowers' expense.
(xiii) APPRAISALS. A certified copy of an appraisal with respect to
each Hotel, prepared by an Appraiser at the Borrowers' expense, dated a
recent date, which appraisal shall be acceptable to the Bank in all
respects, specifying the Appraised Value of such Hotel, the calculation of
such Appraised Value having been previously received and approved by the
Bank.
(xiv) CONTRACTS/SPACE LEASES/PERMITS. (i) A certified copy of each
Hotel Management Agreement and License Agreement, (ii) all material Leases
in effect with respect to each Hotel, and (iii) all Permits with respect to
each Hotel (including without limitation each Certificate of Occupancy and
Fire Underwriter's Certificate with respect to each Hotel, but excluding
Permits in the possession of tenants), with estoppel letters in form and
substance satisfactory to the Bank signed by each manager, operator,
franchisor and licensor, and evidence that no municipal or other violations
exist of record and that such Hotel complies in all material respects with
all applicable local, state and federal laws and regulations, each document
to be certified by the applicable Operating Partnership to be true, correct
and complete.
(xv) TAXES. Evidence that all taxes with respect to each Hotel are
current and have been paid.
<PAGE>
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(xvi) OTHER DOCUMENTS. Such other documents relating to this Agreement
and the other Basic Documents as the Bank or its counsel may reasonably
request.
(b) The obligation of the Bank to make each Loan (including without
limitation the Mortgage Loan) hereunder is also subject to the payment by the
Borrowers of such fees as AIRCOA shall have agreed to pay or deliver to the Bank
in connection herewith, including, without limitation, the reasonable fees and
expenses of Milbank, Tweed, Hadley & McCloy, special New York counsel to the
Bank, and the reasonable fees and expenses of the Bank's local counsel, if any,
in connection with the negotiation, preparation, execution and delivery of this
Agreement and the other Basic Documents and the making of the Loans (to the
extent that statements for such fees and expenses have been delivered to
AIRCOA).
The obligation of the Bank to make each Loan (including without
limitation the Mortgage Loan) is subject to the further conditions precedent
that, both immediately prior to the making of such Loan and also after giving
effect thereto and to the intended use thereof, (a) no Default shall have
occurred and be continuing, (b) the representations and warranties made by the
Borrowers in Section 7 hereof, and by the Borrowers and the Guarantor in each of
the other Basic Documents, shall be true on and as of the date of such Loan with
the same force and effect as if made on and as of such date and (c) no part of
any Hotel shall have suffered any Casualty Event in excess of $200,000 that has
not been fully repaired or that is not in the process of being fully repaired or
shall be subject to actual or threatened condemnation or taking, by eminent
domain or otherwise. Each notice of borrowing hereunder shall constitute a
certification by the Borrowers to the effect set forth in the preceding sentence
(both as of the date of such notice and, unless the Borrowers otherwise notify
the Bank prior to the date of such Loan, as of such date).
SECTION 7. REPRESENTATIONS AND WARRANTIES. The Borrowers represent
and warrant to the Bank (PROVIDED, that the representations and warranties by
each Operating Partnership herein shall be made with respect to itself, and the
representations and warranties by AIRCOA herein shall be made with respect to
the Borrowers) that:
7.01 CORPORATE EXISTENCE. Each of AIRCOA and the Operating
Partnerships is a limited partnership duly organized, validly existing and in
good standing under the laws of Delaware. Each of AIRCOA and the Operating
Partnerships has all requisite partnership power, and has all material
governmental licenses, authorizations, consents and approvals necessary to own
its
<PAGE>
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assets and carry on its business substantially as now being or as proposed to be
conducted and is qualified to do business and is in good standing in each
location where such qualification is necessary to carry on its business.
7.02 FINANCIAL CONDITION. The financial statements heretofore
furnished to the Bank and identified in a writing furnished to the Bank
concurrently herewith, as of the dates specified therein, fairly present, in all
material respects, the financial position of AIRCOA and the Operating
Partnerships, and are prepared in accordance with the Uniform System of Accounts
subject to generally accepted accounting principles. AIRCOA and the Operating
Partnerships do not have on the date hereof any contingent liabilities,
liabilities for taxes, unusual forward or long-term commitments or unrealized or
anticipated losses from any unfavorable commitments which in each case are known
to AIRCOA or any of the Operating Partnerships, as applicable, and which, in the
opinion of AIRCOA or any of the Operating Partnerships, as applicable, are
reasonably likely to result in a Material Adverse Effect, except as referred to
or reflected or provided for in said balance sheets as at said dates.
7.03 LITIGATION. Except as set forth on Schedule IX attached hereto,
there are no legal or arbitral proceedings, or any proceedings by or before any
Governmental Authority, now pending or (to the best of the knowledge of AIRCOA
or any of the Operating Partnerships, as applicable) threatened against AIRCOA
or any Operating Partnership which are reasonably likely to have a Material
Adverse Effect.
7.04 NO BREACH. The making and performance by each Borrower of this
Agreement, the Notes and the other Basic Documents to which it is a party do not
and will not result in a breach of, or require any consent under, the charter or
by-laws of any Borrower or any applicable law or regulation, or any order, writ,
injunction or decree of any court or Governmental Authority, or any agreement or
instrument to which any Borrower is a party or by which it or any of its
Property is bound or to which it is subject, or constitute a default thereunder,
or (except for the Liens created pursuant to the Security Documents) result in
the creation or imposition of any Lien upon any Property of any Borrower.
7.05 ACTION. Each Borrower has all necessary power under its
constitutive partnership agreement to make and perform its obligations under
this Agreement, the Notes and each of the other Basic Documents to which it is a
party; the making and performance by each Borrower of said documents have been
duly authorized by all necessary partnership action; and this Agreement has been
duly and validly executed and delivered by
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each Borrower and constitutes, and the Notes and each of the other Basic
Documents to which it is a party when executed and delivered for value will
constitute, its legal, valid and binding obligation, enforceable against each
Borrower in accordance with its terms, except as such enforceability may be
limited by (a) bankruptcy, insolvency, reorganization, moratorium or similar
laws of general applicability affecting the enforcement of creditors' rights and
(b) the application of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
7.06 APPROVALS. No authorizations, approvals or consents of, and no
filings or registrations with, any Governmental Authority are necessary for the
making or performance by any Borrower of this Agreement, the Notes or any of the
other Basic Documents, except for filings and recordings in respect of the Liens
created pursuant to the Mortgages and the Security Agreement.
7.07 USE OF CREDIT. No Borrower is engaged principally, or as one of
its important activities, in the business of extending credit for the purpose,
whether immediate, incidental or ultimate, of buying or carrying margin stock
within the meaning of Regulations U and X of the Board of Governors of the
Federal Reserve System, and no part of the proceeds of the extension of credit
hereunder will be used by any Borrower to buy or carry any such margin stock.
7.08 ERISA. Each Plan is in compliance in all material respects with
the presently applicable provisions of
ERISA and the Code and no event or condition has occurred and is continuing as
to which any Borrower would be under an obligation to furnish a report to the
Bank under Section 8.01(h) hereof.
7.09 TAXES. All Federal, state and other tax returns required to be
filed by the Borrowers have been filed, and all Federal, state income or other
taxes, assessments or fees imposed upon any Borrower and/or any of the Mortgaged
Property, which are due and payable, have been paid, except (i) to the extent
contested in good faith by appropriate proceedings or (ii) if the failure to
make such filing, or pay such tax, assessment fee or charge could not materially
and adversely affect the assets, business prospects, profits and financial
condition of any such Borrower or Mortgaged Property.
7.10 INVESTMENT COMPANY ACT. No Borrower is an "investment company",
or a company "controlled" by an "investment company", within the meaning of the
Investment Company Act of 1940, as amended.
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7.11 PUBLIC UTILITY HOLDING COMPANY ACT. Neither AIRCOA nor any
Operating Partnership is a "holding company", or an "affiliate" of a "holding
company" or a "subsidiary company" of a "holding company", within the meaning of
the Public Utility Holding Company Act of 1935, as amended.
7.12 MATERIAL AGREEMENTS. Exhibit B to the Security Agreement is a
complete and correct list, as of the date of this Agreement, of all Material
Contracts (as defined in the Security Agreement) relating to ownership,
operation and maintenance of each Hotel.
7.13 CONDEMNATION. No condemnation or eminent domain proceeding has
been commenced or, to the best of any Borrower, is threatened against any Hotel
or any portion thereof.
7.14 PERMITS. Except as previously disclosed to the Bank in writing,
each Borrower has all Permits required by the Legal Requirements for the use,
ownership, occupancy and operation of each Hotel as a first class hotel, failure
to obtain which would have a Material Adverse Effect (except for the Pine Lake
Trout Club which shall satisfy all such requirements applicable to its operation
as a membership club); all of the foregoing are in full force and effect and not
subject to any pending actions or proceedings for revocation, amendment,
release, suspension, forfeiture or the like; no appeals with respect to same are
pending from any order, decision or determination; and the present and/or
contemplated use, occupancy and operation of the Hotels does not in any material
respect conflict with or violate any such Permit.
7.15 INSURANCE. The insurance policies required by Section 8.13
hereof are in full force and effect, with no outstanding notice of default or of
unperformed work, and all premiums payable in respect thereof have been paid to
date.
7.16 OWNERSHIP. Except for Permitted Encumbrances and Liens
permitted under Section 8.05 and the Liens created pursuant to the Mortgages and
the Security Agreement, each Operating Partnership (a) is lawfully seized and
possessed of a good and marketable fee simple or leasehold title in and to the
Land and Improvements relating to the Hotel owned by it, free and clear of all
Liens and (b) has good and indefeasible title to all other Properties currently
owned and reflected in the financial statements referred to in Section 7.02
hereof free and clear of all Liens.
7.17 OTHER INDEBTEDNESS. The Borrowers have no outstanding
Indebtedness other than as heretofore disclosed to
<PAGE>
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the Bank in writing as set forth in Schedule VI hereof or as is permitted under
Section 8.06 hereof.
7.18 LIQUOR LICENSE. Service of alcoholic beverages in accordance
with the current practice at each Hotel complies with the applicable Legal
Requirements or, if such service does not comply, the failure to comply will not
have a Material Adverse Effect.
7.19. TRADEMARKS, PATENTS, ETC. Each Operating Partnership possesses
the right to use the trademarks, trade names, copyrights, permits, franchises
and licenses, or rights in any thereof, adequate for the conduct of the
operation of each of the Hotels, as a "Clarion" hotel (with respect to the
Hotels in Bloomington, Indiana), as a "Sheraton" hotel (with respect to the
Hotels located in Cheektowaga (Buffalo), New York, Orlando, Florida and Durham,
North Carolina) and as a "Regal" hotel (with respect to the Hotel located in
Scottsdale, Arizona), in each case in substantially the same manner as other
hotels operated under the "Clarion", "Sheraton", or "Regal" name, as the case
may be, and as now proposed to be conducted, without known conflict with the
rights of others. There are no trademarks, tradenames, copyrights, permits,
franchises or licenses necessary for the operation of the Hotel in Aurora, Ohio
as the Aurora Inn or of the Hotel in Chagrin Falls, Ohio as the Pine Lake Trout
Club.
SECTION 8. COVENANTS OF THE BORROWERS. The Borrowers covenant and
agree with the Bank that, so long as either of the Commitments or any principal
of or interest on the Loans is outstanding and until payment in full of all
other amounts payable by the Borrowers hereunder:
8.01 FINANCIAL STATEMENTS ETC. The Borrowers shall deliver or cause
to be delivered to the Bank:
(a) as soon as available and in any event within 60 days after the
end of each quarterly fiscal period of each fiscal year of the Borrowers,
consolidated statements of operations, partners' capital and cash flow of
AIRCOA and the Operating Partnerships for such period and for the period
from the beginning of the respective fiscal year to the end of such period,
and the related consolidated balance sheet of AIRCOA and the Operating
Partnerships as at the end of such period, setting forth in each case in
comparative form the corresponding figures for the corresponding period in
the preceding fiscal year (all of such information may be supplied in the
form of AIRCOA's Form 10-Q as submitted to the Securities and Exchange
Commission);
<PAGE>
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(b) as soon as available and in any event within 120 days after the
end of each fiscal year of the Borrowers, consolidated statements of
operations, partners' capital and cash flow of AIRCOA and the Operating
Partnerships for such fiscal year and the related consolidated balance
sheet of AIRCOA and the Operating Partnerships as at the end of such fiscal
year, setting forth in each case in comparative form the corresponding
figures for the preceding fiscal year, and accompanied by an opinion
thereon of independent certified public accountants of recognized national
standing, which opinion shall state that said financial statements fairly
present in all material respects the financial position and results of
operations of AIRCOA and the Operating Partnerships as at the end of and
for such fiscal year in conformity with generally accepted accounting
principles;
(c) as soon as available and in any event within 30 days after the
end of each month, a monthly operating statement for each Hotel, in a
format reasonably satisfactory to the Bank;
(d) forthwith upon receipt by AIRCOA, a copy of each STAR Report
received by it;
(e) as soon as available and in any event within 180 days after the
end of each fiscal year of Regal Hotels International Holdings Limited, a
consolidated profit and loss account for and a consolidated balance sheet
as at the end of such fiscal year with respect to said company and its
Subsidiaries, accompanied by an opinion thereon of independent certified
public accountants of recognized standing;
(f) as soon as available and in any event within 60 days after the
end of each quarterly fiscal period of each fiscal year of the Hotel
Manager, a statement of operations, partners' capital and cash flow for and
a balance sheet as at the end of such period with respect to the Hotel
Manager, accompanied by a certificate of a senior financial officer of the
Hotel Manager, which certificate shall state that said financial statements
fairly present in all material respects the financial position and results
of operations of the Hotel Manager in accordance with generally accepted
accounting principles, as at the end of and for such period (subject to
year-end audit adjustments);
(g) as soon as available and in any event within 120 days after the
end of each fiscal year of the Hotel Manager, a statement of operations,
retained earnings and cash flow of the Hotel Manager as at the end of such
fiscal
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year, accompanied by an opinion thereon of independent certified public
accountants of recognized national standing, which opinion shall state that
said financial statements fairly present in all material respects the
financial position and results of operations of the Hotel Manager as at the
end of and for such fiscal year in accordance with generally accepted
accounting principles;
(h) as soon as possible, and in any event within 30 days after any
Borrower knows or has reason to believe that any of the events or
conditions specified below has occurred or exists, a statement signed by a
senior financial officer of the General Partner, as applicable, setting
forth details respecting such event or condition and the action, if any,
that AIRCOA proposes to take with respect thereto (and a copy of any report
or notice required to be filed with or given to PBGC by any Borrower or any
ERISA Affiliate with respect to such event or condition):
(i) any reportable event, as defined in Section 4043(b) of ERISA
and the regulations issued thereunder, with respect to a Plan, as to
which PBGC has not by regulation waived the requirement of
Section 4043(a) of ERISA that it be notified within 30 days of the
occurrence of such event; and any request for a waiver under
Section 412(d) of the Code for any Plan;
(ii) the distribution under Section 4041 of ERISA of a notice of
intent to terminate any Plan (other than a "Standard Termination"
within the meaning of Section 4041 of ERISA) or any action taken by
AIRCOA or any Operating Partnership or an ERISA Affiliate to terminate
any Plan (other than a "Standard Termination" within the meaning of
Section 4041 of ERISA);
(iii) the institution by PBGC of proceedings under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by any Borrower or any ERISA
Affiliate of a notice from a Multiemployer Plan that such action has
been taken by PBGC with respect to such Multiemployer Plan;
(iv) the receipt by any Borrower of a notice from the sponsor of
a Multiemployer Plan following the complete or partial withdrawal from
a Multiemployer Plan by AIRCOA or any Operating Partnership or any
ERISA Affiliate concerning the imposition of any withdrawal liability
on any Borrower in excess of
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$2,000,000 under Section 4201 or 4204 of ERISA (including the
obligation to satisfy secondary liability as a result of a purchaser
default) or the receipt by any Borrower or any ERISA Affiliate of
notice from a Multiemployer Plan that it is in reorganization or
insolvency pursuant to Section 4241 or 4245 of ERISA or that it
intends to terminate or has terminated under Section 4041A of ERISA;
(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against any Borrower or any ERISA Affiliate to
enforce Section 515 of ERISA, which proceeding is not dismissed within
30 days; and
(vi) the adoption of an amendment to any Plan that, pursuant to
Section 401(a)(29) of the Code or Section 307 of ERISA, would result
in the loss of tax-exempt status of the trust of which such Plan is a
part if any Borrower or an ERISA Affiliate fails to timely provide
security to the Plan in accordance with the provisions of said
Sections;
(i) within 5 Business Days after the filing thereof with the
Securities and Exchange Commission, copies of each Report by AIRCOA on Form
10K or 10Q;
(j) no later than 30 days after the beginning of each fiscal year of
the Borrowers, the "Annual Business Plan" for each of the Hotels (as such
term is defined in Section 5.01 of the Management Agreements);
(k) promptly after any Borrower knows or has reason to believe that
any Default has occurred, a notice of such Default describing the same in
reasonable detail and, together with such notice or as soon thereafter as
possible, a description of the action that AIRCOA and the relevant
Operating Partnership have taken or propose to take with respect thereto;
and
(l) from time to time such other information regarding the financial
condition, operations, business or prospects of AIRCOA or any Operating
Partnership or any Hotel as the Bank may reasonably request.
The Borrowers will furnish to the Bank, at the time they furnish each set of
financial statements pursuant to paragraphs (a), (b), (c) or (d) above, a
certificate of a senior financial officer of the General Partner to the effect
that no Default has occurred and is continuing (or, if any Default has occurred
and is
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continuing, describing the same in reasonable detail and describing the action
that the Borrowers have taken or propose to take with respect thereto).
8.02 LITIGATION. The Borrowers will promptly give to the Bank notice
of all legal or arbitral proceedings, and of all proceedings by or before any
Governmental Authority, and any material development in respect of such legal or
other proceedings, affecting any Borrower, except proceedings which, if
adversely determined, would not have a Material Adverse Effect. Without
limiting the generality of the foregoing, the Borrowers will give to the Bank
notice of the assertion of any Environmental Claim by any Person against, or
with respect to the activities of, any Borrower or any Hotel and notice of any
alleged violation of or non-compliance with any Environmental Laws or any
material Permits.
8.03 EXISTENCE, ETC. Each of the Borrowers will, and AIRCOA will
cause each Borrower to:
(a) (i) preserve and maintain its legal existence and (ii) preserve
and maintain all of its material rights, privileges, licenses and
franchises;
(b) comply with the Legal Requirements and pay attorneys' fees (as
reasonably needed) on an ongoing basis;
(c) unless the Borrowers are contesting such payment in good faith
and by appropriate proceedings, pay and discharge all taxes, assessments
and governmental charges or levies imposed on it or on its income or
profits or the Mortgaged Property relating to such Borrower prior to the
date on which penalties attach thereto, except for any such tax,
assessment, charge or levy the payment of which is being contested in good
faith and by proper proceedings and against which adequate reserves are
being maintained;
(d) keep adequate records and books of account, in which complete
entries will be made based on the Uniform System of Accounts subject to
generally accepted accounting principles; and
(e) permit representatives of the Bank, during normal business hours,
to examine, copy and make extracts from its books and records, to inspect
the Hotels, and to discuss its business and affairs with its officers, all
to the extent reasonably requested by the Bank after reasonable notice.
8.04 LIMITATION ON TRANSFER. The Borrowers will not (a) without the
prior written consent of the Bank, which consent
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will not be unreasonably withheld, modify or amend their respective partnership
agreements, except as required to provide for the substitution and/or addition
of limited partners of such Borrower and any subsequent transfers of such
interests, (b) sell, discount or otherwise dispose of (except by collection), or
agree to sell, discount or otherwise dispose of any of its notes, receivables,
contracts or accounts receivable, installment or conditional sales agreements or
any other evidences of indebtedness except for transactions in the ordinary
course of business in a maximum aggregate amount of $1,500,000 per fiscal year
or (c) make any Transfer, except as permitted under Section 5.10(b) of each
Mortgage.
8.05 LIMITATION ON LIENS. The Borrowers will not create, incur,
assume or suffer to exist any Lien upon any of their Property, whether now owned
or hereafter acquired, except:
(a) Liens created pursuant to the Mortgages and the Security
Agreement;
(b) Liens imposed by any Governmental Authority for taxes,
assessments or charges not yet due and payable, or which are being
contested in good faith and by appropriate proceedings if adequate reserves
with respect thereto are maintained on the books of AIRCOA or an Operating
Partnership in accordance with generally accepted accounting principles;
(c) Permitted Encumbrances;
(d) lessors' interests in personal property, furniture, fixtures
and/or equipment leased by a Borrower in the ordinary course of business
pursuant to operating leases;
(e) other Liens which (1) are subordinate to the liens of the
Mortgages and Security Agreement, (2) do not secure the repayment of money
borrowed, (3) have not attached with the consent of a Borrower, and
(4) either (i) are discharged of record within 90 days of their creation,
or (ii) to the extent not so discharged, are being contested in good faith
and as to which enforcement is effectively stayed;
(f) Liens created pursuant to Capital Leases, PROVIDED, that the
Indebtedness secured by such Liens does not in the aggregate exceed
$1,000,000 (including those Capital Leases to which the Borrowers are a
party, as disclosed in Schedule V hereto);
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(g) Liens securing Indebtedness permitted pursuant to Section 8.06
below;
(h) the Lien granted to the lessor pursuant to the Ground Lease
covering the Regal Inn at McCormick Ranch; and
(i) other Liens which do not secure the repayment of money borrowed,
and are not monetary in nature, and which are granted by the Borrowers in
the ordinary course of business of the operation of the Hotels.
8.06 INDEBTEDNESS. The Borrowers will not create, incur or suffer to
exist any Indebtedness for borrowed money except:
(a) Indebtedness to the Bank hereunder;
(b) Until the date of the Mortgage Loan, (i) Indebtedness under the
Existing Credit Agreement and (ii) the National City Bank Debt;
(c) Loans or extensions of credit to AIRCOA or any Operating
Partnership by Affiliates which are in compliance with Section 8.08 hereof;
(d) Capital Leases, the aggregate Indebtedness under which does not
exceed $1,000,000 (including those Capital Leases to which the Borrowers
are a party as disclosed on Schedule V hereto); and
(e) Purchase Money Indebtedness and other Indebtedness incurred by
the Borrowers in the ordinary course of business for the purchase of
equipment and similar items with respect to the Hotels, provided that the
Indebtedness outstanding at any one time shall not exceed $50,000 per
Hotel.
8.07 APPRAISALS. (a) The Bank will cause to have completed on, or
within 30 days before, the second and fourth anniversaries of the date of
this Agreement a new appraisal of each Hotel, prepared by Appraisers at the
applicable Operating Partnership's expense and in scope and substance
satisfactory to the Bank, the value conclusion reached by the Appraisers
having been previously reviewed and approved by the Bank. The Borrowers
may submit to the Bank for its review additional appraisals prepared by an
appraiser selected by the Borrower at the Borrower's expense which the Bank
may consider in determining the Appraised Values of the Hotels. If the
Borrowers object to the value conclusion reached by the Bank with respect
to the Appraised Value of a Hotel or the Hotels, a third appraisal shall be
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reviewed by the Bank, which appraisal shall have been prepared by a third
appraiser selected by the appraisers initially selected by the Bank and the
Borrowers. In such event, the Appraised Value of any such Hotel shall be
determined by taking the average of the value conclusion reached in the
three appraisals. The Borrowers shall pay the full cost of the third
appraisal.
(b) The Bank may at any time and from time to time request new or
updated appraisals of each Hotel in addition to those required under
Section 8.07(a) hereof, prepared by Appraisers commissioned by the Bank,
and each Operating Partnership will cooperate with the Bank and such
Appraisers in connection with such appraisals; PROVIDED, that the charges
of each Appraiser for such appraisals shall be for the account of the Bank.
The Borrowers may submit to the Bank for its review additional appraisals
prepared by an appraiser selected by the Borrower at the Borrower's expense
which the Bank may consider in determining the Appraised Values of the
Hotels. If the Borrowers object to the value conclusion reached by the
Bank with respect to the Appraised Value of a Hotel or the Hotels, a third
appraisal shall be reviewed by the Bank, which appraisal shall have been
prepared by a third appraiser selected by the appraisers initially selected
by the Bank and the Borrowers. In such event, the Appraised Value of any
such Hotel shall be determined by taking the average of the value
conclusion reached in the three appraisals. The Borrowers shall pay the
full cost of the third appraisal.
8.08 AFFILIATE LOANS. Each Borrower shall assure that any and all
loans or extensions of credit by an Affiliate to such Borrower (i) shall be
solely for the purpose of financing the operation or improvement of the Hotels,
(ii) shall be subordinate and subject in right of payment to the obligations of
such Borrower hereunder and under the Notes on terms and pursuant to
documentation in form and substance satisfactory to the Bank and (iii) shall not
be secured by any Lien on the Property of such Borrower. AIRCOA will assure
that the aggregate amount of payments by the Borrowers in respect of the
principal of such loans and extensions of credit existing on the date hereof in
any fiscal year will not exceed 25% of Annual Excess Cash Flow for such fiscal
year; PROVIDED, that no payments of interest may be made on any such loans or
extensions of credit at any time when the Borrowers are in default in payment of
any principal of or interest on any Loan; and PROVIDED, further, that no payment
of principal of or interest on any such loans or extensions of credit may be
made if at the time thereof and after giving effect thereto the Borrowers are
not in compliance with Section 8.10 hereof.
<PAGE>
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8.09 HOTEL MANAGEMENT AGREEMENT AND LICENSE AGREEMENT.
(a) AIRCOA agrees that:
(i) each Operating Partnership will promptly perform and/or observe
all of the material covenants and agreements required to be performed and
observed by it under the Hotel Management Agreement and the License
Agreement to which it is a party and do all things necessary to preserve
and to keep unimpaired its material rights thereunder;
(ii) each Operating Partnership will promptly notify the Bank of any
material default under such Hotel Management Agreement and License
Agreement of which it is aware;
(iii) each Operating Partnership will promptly use reasonable efforts
to enforce the performance and observance of all of the material covenants
and agreements required to be performed and/or observed by the Hotel
Manager under such Hotel Management Agreement or by the licensor under such
License Agreement;
(iv) AIRCOA will not permit the aggregate amount of management fees
and similar charges accrued and payable to the Hotel Manager in respect of
the Hotels during any fiscal year of AIRCOA to exceed an amount equal to 4%
of Gross Revenues for such fiscal year; and
(v) the Operating Partnerships will not pay any management fees or
similar charges to the Hotel Manager at any time when the Borrowers are not
in compliance with Section 8.10 hereof (relating to the minimum Debt
Service Coverage Ratio).
(b) Without the prior written consent of the Bank, which consent will
not be unreasonably withheld, AIRCOA will assure that no Operating Partnership
will (i) surrender, terminate or cancel any Hotel Management Agreement or
License Agreement, (ii) reduce or consent to the reduction of the term of any
Hotel Management Agreement or License Agreement, (iii) increase or consent to
the increase of the amount of any charges under any Hotel Management Agreement
or License Agreement, except as expressly provided in such Hotel Management
Agreement or License Agreement, as in effect on the date hereof or (iv)
otherwise modify, change, supplement, alter or amend, or waive or release any of
its rights and remedies under, any Hotel Management Agreement or License
Agreement in any material respect, except as set forth on Schedule III hereto.
Notwithstanding the foregoing, any Borrower may take any of the actions set
forth in clauses (b)(iii) or (b)(iv) above provided
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that the Hotel Management Agreement or License Agreement is not with an
Affiliate of any Borrower and provided that any increase in charges or any
modification of such agreement is at the prevailing market rate or on terms
customary in the industry. Notwithstanding the foregoing, in the event the
Borrowers choose to convert the Sheraton Inns located in Durham, Buffalo and
Lakeside to Sheraton Four Points facilities, the Bank shall consent to such
conversion, but all new license agreements shall be subject to the terms hereof
and of the Hotel Licensor Agreement.
8.10 MINIMUM DEBT SERVICE COVERAGE RATIO. The Borrowers will cause
the Debt Service Coverage Ratio for each fiscal year of the Borrowers to be
equal to or greater than the ratios set forth below for the respective fiscal
years set forth below:
Minimum Debt
Fiscal Year Ending Service Coverage Ratio
------------------ ----------------------
December 31, 1995 1.25
December 31, 1996 1.25
December 31, 1997 1.25
Each fiscal year thereafter 1.30
8.11 DISTRIBUTIONS. AIRCOA will not (a) permit the aggregate amount
of cash distributions to or for the benefit of holders of its Class A
partnership units in any fiscal year to exceed an amount equal to 50% of Annual
Excess Cash Flow for such fiscal year, PROVIDED, that if the Debt Service
Coverage Ratio for any fiscal year is 1.50 or greater and the Debt Service
Reserve Account is fully funded as at the end of such fiscal year, the figure
50% shall automatically become 75% for the immediately succeeding fiscal year;
or (b) make any cash distribution to or for the benefit of any of such holders
if at the time of such distribution and after giving effect thereto either (i)
any amount due and payable by the Borrowers under this Agreement is unpaid or
(ii) the Borrowers are not in compliance with Section 8.10 hereof.
8.12 CAPITAL EXPENDITURE RESERVE ACCOUNT. No later than April 15 of
each fiscal year, the Borrowers shall deliver to the Bank a detailed accounting
of the aggregate amount expended by each Operating Partnership for Capital
Improvements for such fiscal year accompanied by a calculation of the percentage
of the aggregate Gross Revenues of the Borrowers for such fiscal year that such
amount represents, which accounting and calculation shall be certified as true
and correct by an officer of the General Partner. If for any fiscal year such
percentage is less than 5% of Gross Revenues (or in the case of 1995, 4%), then
the
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Borrowers shall deposit into the Capital Expenditure Reserve Account an amount
equal to the difference between the amount expended and 5% of Gross Revenues for
such fiscal year (or 4%, in the case of 1995). Amounts deposited into the
Capital Expenditure Reserve Account shall be disbursed as provided below, but
any amounts disbursed from such account shall not be included in the calculation
of amounts expended for Capital Improvements for the current fiscal year
although disbursed in such fiscal year; PROVIDED, that if the Bank in its sole
discretion believes that adequate amounts were expended by the Borrowers on
Capital Improvements for such fiscal year, the amounts disbursed from the
Capital Expenditure Reserve Account may be included in the calculation of
Capital Improvement expenditures for the fiscal year in which the disbursements
occurred. The Capital Expenditure Reserve Account shall be used exclusively to
pay the costs of Capital Improvements; PROVIDED, that the funds in said account
not used in any fiscal year shall be retained in said account for application
against the following year's requirement under this Section 8.12 (the "CARRYOVER
AMOUNT"). The Bank shall, upon written request from any Operating Partnership,
release to such Operating Partnership from the Capital Expenditure Reserve
Account amounts necessary to reimburse such Operating Partnership for the cost
of Capital Improvements, PROVIDED, that (i) no Default or Event of Default shall
have occurred and be continuing and (ii) such written request shall be
accompanied by a statement of the General Partner certifying as to the amount
requested to be advanced and that such amount will be used to reimburse such
Operating Partnership for the cost of Capital Improvements previously made.
Upon request by the Bank, such Operating Partnership shall deliver such
additional information or documentation with respect to the requested advance as
the Bank may require. All earnings or interest on the Capital Expenditure
Reserve Account shall be remitted to and become part of the Capital Expenditure
Reserve Account. Until expended or applied as above provided, the Capital
Expenditure Reserve Account shall constitute additional security for the Loans
and all other amounts payable hereunder, and upon the occurrence of an Event of
Default, the Bank may apply any funds in the Capital Expenditure Reserve Account
first to the payment of the principal of and interest on the Mortgage Loan and
other amounts payable thereunder and thereafter to the payment of the principal
of and interest on the Revolving Loans and other amounts payable thereunder.
8.13 COMPLIANCE WITH AGREEMENTS. Each Operating Partnership will
comply in all material respects with the requirements of each License Agreement
to which it is a party.
8.14 OPERATION OF HOTELS. No Operating Partnership shall engage to
any substantial extent in any line of business
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other than the business of owning, operating, renovating and maintaining the
Hotels. The Operating Partnerships shall actively operate the Hotels or cause
the Hotels to be actively operated as first class hotels (or in the case of Pine
Lake Trout Club, as a membership club).
8.15 TRANSACTIONS WITH AFFILIATES. None of the Borrowers shall enter
into any transactions with any Affiliate (other than loans or extensions of
credit by Affiliates complying with Section 8.08 hereof), including without
limitation any arrangement providing for the managing of the Hotels, the
rendering or receipt of services or the purchase or sale of inventory, except
(i) any such transaction in the ordinary course of business of such Borrower if
the monetary or business consideration arising therefrom would be substantially
as advantageous to such Borrower as the monetary or business consideration which
would obtain in a comparable transaction with a Person not an Affiliate,
(ii) Indebtedness to Affiliates permitted by Section 8.08 hereof (and payment of
debt service thereon), (iii) that AIRCOA, the Operating Partnerships and the
Hotel Manager may perform their respective obligations and exercise their
respective rights under the Hotel Management Agreements in accordance with the
provisions thereof, and (iv) that AIRCOA may make additional advances or
distributions to Affiliates if no Default exists at the time of, or immediately
following, the making of any such advance or distribution.
8.16 INSURANCE. (a) The Operating Partnerships will keep insured by
financially sound and reputable insurers all Property of a character usually
insured by corporations engaged in the same or similar business similarly
situated (including without limitation, insurance for the peril of flood in the
case of any Hotel in a flood hazard zone) against loss or damage of the kinds
and in the amounts customarily insured against by such corporations and carry
such other insurance as is usually carried by such corporations, PROVIDED that
in any event the Operating Partnerships will maintain all insurance set forth on
SCHEDULE IV hereto except to the extent commercially impracticable.
(b) All such insurance required under this Section 8.16 shall be
written by financially responsible companies selected by the Operating
Partnerships and having an A. M. Best rating of "A-" or better and being in a
financial size category of VII or larger, or by other companies acceptable to
the Bank, and (other than workers' compensation) shall name the Bank as
mortgagee, additional insured, or loss payee, as its interests may appear. Each
policy required under this Section 8.16 (or another writing containing such an
undertaking by an insurance carrier) shall provide that such policy will not be
canceled, or allowed to lapse without renewal, except after
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not less than 10 days' notice to the Bank, and shall also provide that the
interests of the Bank shall not be invalidated by any act or negligence of any
Operating Partnerships. The Operating Partnerships will advise the Bank
promptly of any policy cancellation, reduction or amendment which causes the
coverage under such policy not to comply with the insurance requirements
hereunder and will provide the Bank with such information related thereto as the
Bank may reasonably request.
(c) On or before the date of the Mortgage Loan, the Operating
Partnerships will deliver to the Bank certificates of insurance satisfactory to
the Bank evidencing the existence of all insurance required to be maintained by
the Operating Partnerships hereunder setting forth the respective coverages,
limits of liability, carrier, policy number and period of coverage, subject only
to the payment of premiums as they become due (and attaching copies of any
policies with respect to casualty insurance). The Operating Partnerships shall
pay insurance premiums in a timely manner so as to assure continued coverage of
all insurance policies required hereunder through the date when the obligations
of each of the Borrowers hereunder have been paid in full. The Operating
Partnerships will not obtain or carry separate insurance concurrent in form or
contributing in the event of loss with that required by this Section 8.16 unless
the Bank is the named insured thereunder, with loss payable as provided herein.
The Operating Partnerships will immediately notify the Bank whenever any such
separate insurance is obtained and shall deliver to the Bank the certificates
evidencing the same.
(d) Without limiting the obligations of the Operating Partnerships
under the foregoing provisions of this Section 8.16, in the event any of the
Operating Partnerships shall fail to maintain in full force and effect insurance
as required by the foregoing provisions of this Section 8.16, then the Bank may
after reasonable notice to the Operating Partnership, but shall have no
obligation to, procure insurance covering the interests of the Bank in such
amounts and against such risks as the Bank shall reasonably deem appropriate,
and the Operating Partnership shall reimburse the Bank in respect of any
premiums paid by the Bank in respect thereof.
8.17 DEBT SERVICE RESERVE ACCOUNT. (a) Subject to clause (b) below,
the Borrowers will, not later than April 15 of each year, cause the Debt Service
Reserve Account to have a balance equal to the sum of the Monthly Debt Service
Amount for each of the next three consecutive months (such sum being herein
called the "REQUIRED DEBT SERVICE RESERVE AMOUNT"), PROVIDED that the Borrowers'
obligation to fund the Debt Service Reserve
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Account shall be limited to the amount required under clause (b) below.
(b) For each year after 1995, the Debt Service Reserve Account shall
be funded by the Borrowers by the deposit therein not later than April 15 of
each year of an amount equal to 25% of the Annual Excess Cash Flow for the
previous year until the Required Debt Service Reserve Amount is fully funded.
All earnings or interest on the Debt Service Reserve Account shall be remitted
to and become part of the Debt Service Reserve Account. Until expended or
applied as above provided, the Debt Service Reserve Account shall constitute
additional security for the Loans and all other amounts payable hereunder, and
upon the occurrence of an Event of Default, the Bank may apply any funds in the
Debt Service Reserve Account first to the payment of the principal of and
interest on the Mortgage Loan and all other amounts payable thereunder and
thereafter to the payment of the principal of and interest on the Revolving
Loans and all other amounts payable thereunder.
(c) Notwithstanding any of the foregoing to the contrary, if the
Borrowers maintain a Debt Service Coverage Ratio as certified under Section 8.18
of 1.50 or greater for two successive fiscal years, the Borrowers may withdraw
all funds in the Debt Service Reserve Account provided that at the time of such
withdrawal no Event of Default has occurred and is continuing.
8.18 ANNUAL CALCULATIONS. On or before April 15 of each fiscal year,
the Borrowers shall deliver to the Bank a calculation of the Annual Excess Cash
Flow for the immediately preceding fiscal year and a calculation of the Debt
Service Coverage Ratio and Monthly Debt Service Amount for such fiscal year,
which calculations shall be certified as true and correct by the chief financial
officer of the General Partner and subject to the review and approval of the
Bank.
8.19 ENVIRONMENTAL WORK. The Borrowers agree to perform the work
necessary to complete the tasks identified on SCHEDULE VII hereto (the
"ENVIRONMENTAL WORK") within the time period specified on such Schedule.
8.20 ENGINEERING WORK. The Borrowers agree to perform the work
necessary to complete the tasks identified on SCHEDULE VIII hereto (the
"ENGINEERING WORK") within the time periods specified on such Schedule provided
that the time periods for completion and scope of the Engineering Work may be
revised by the Borrower on an annual basis subject to the approval of the Bank
and after receipt by the Bank of the annual budget for each Hotel.
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SECTION 9. EVENTS OF DEFAULT. If one or more of the following events
(each being herein called an "EVENT OF DEFAULT") shall occur and be continuing:
(a) The Borrowers shall default for five days or more in the payment
when due of any principal of or interest on any Loan or in the payment when
due of any fee or any other amount payable hereunder or under any other
Basic Document; or
(b) Any Borrower or the General Partner or the Guarantor shall
default in the payment when due of any principal of or interest on any of
its other Indebtedness the principal amount of which exceeds $1,000,000
($10,000,000 with respect to the Guarantor) and such default causes or
permits acceleration of the maturity of such Indebtedness; or any event
specified in any note, agreement, indenture or other document evidencing or
relating to any such Indebtedness shall occur if the effect of such event
is to cause, or is to permit the holder or holders of such Indebtedness (or
a trustee or agent on behalf of such holder or holders) then to cause, such
Indebtedness to become due, or to be prepaid in full (whether by
redemption, purchase, offer to purchase or otherwise), prior to its stated
maturity; or
(c) Any representation and warranty, or certification, made or deemed
made herein or in any other Basic Document (or in any modification or
supplement hereto or thereto) by any Borrower or by the Guarantor, or by a
party to any Hotel Manager Subordination Agreement or Hotel Licensor
Agreement, or in any certificate furnished to the Bank pursuant to the
provisions hereof or thereof, shall prove to have been false or misleading
as of the time made or furnished in any material respect; or
(d) Any Borrower or the Guarantor shall default in the performance of
any of its other obligations in this Agreement or any other Basic Document
(other than defaults covered elsewhere in this Section 9) and such default
shall continue unremedied for a period of 45 days after notice thereof to
the Borrowers by the Bank; or
(e) Any Borrower or the Guarantor or the General Partner or the Hotel
Manager (if such Hotel Manager is an Affiliate of the Borrowers) shall
admit in writing its inability to, or be generally unable to, pay its debts
as such debts become due; or
(f) Any Borrower or the Guarantor or the General Partner or the Hotel
Manager (if such Hotel Manager is an
<PAGE>
- 51 -
Affiliate of the Borrowers) shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian,
trustee, examiner or liquidator of itself or all or a substantial part
of its Property, (ii) make a general assignment for the benefit of its
creditors, (iii) commence a voluntary case under the Federal Bankruptcy
Code of 1978, as amended, (iv) file a petition seeking to take advantage
of any other law relating to bankruptcy, insolvency, reorganization,
liquidation, dissolution, arrangement or winding up, or composition or
readjustment of debts, or (v) take any corporate action for the purpose
of effecting any of the foregoing; or
(g) A proceeding or case shall be commenced, without the application
or consent of any Borrower or the Guarantor or the General Partner or the
Hotel Manager (if such Hotel Manager is an Affiliate of the Borrowers), in
any court of competent jurisdiction, seeking (i) its reorganization,
liquidation, dissolution, arrangement or winding up, or the composition or
readjustment of its debts, (ii) the appointment of a receiver, custodian,
trustee, examiner, liquidator or the like of any Borrower or the Guarantor
or the General Partner or the Hotel Manager (if such Hotel Manager is an
Affiliate of the Borrowers) or of all or any substantial part of its
Property, or (iii) similar relief in respect of any Borrower or the
Guarantor or the General Partner or the Hotel Manager (if such Hotel
Manager is an Affiliate of the Borrowers) under any law relating to
bankruptcy, insolvency, reorganization, winding up, or composition or
adjustment of debts, and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or ordering any of
the foregoing shall be entered and continue unstayed and in effect, for a
period of 90 or more days; or an order for relief against any Borrower or
the Guarantor or the General Partner or the Hotel Manager (if such Hotel
Manager is an Affiliate of the Borrowers) shall be entered in an
involuntary case under said Bankruptcy Code; or
(h) A final judgment or judgments for the payment of money in excess
of $1,000,000 ($10,000,000 with respect to the Guarantor) in the aggregate
(exclusive of judgment amounts to the extent covered by insurance where the
insurer has admitted liability in respect of such judgment) shall be
rendered by one or more courts, administrative tribunals or other bodies
having jurisdiction against any Borrower or the Guarantor and the same
shall not be discharged (or provision shall not be made for such
discharge), or a stay of execution thereof shall not be procured, within 90
days from the date of entry thereof and such Borrower or the Guarantor
<PAGE>
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shall not, within said period of 90 days, or such longer period during
which execution of the same shall have been stayed, appeal therefrom and
cause the execution thereof to be stayed during such appeal; or
(i) An event or condition specified in Section 8.01(h) hereof shall
occur or exist and, as a result of such event or condition, together with
all other such events or conditions, any Borrower or any ERISA Affiliate
shall incur a liability to a Plan, a Multiemployer Plan or PBGC which would
constitute a Material Adverse Effect; or
(j) A claim or claims shall be asserted against any Borrower or the
Guarantor for which a reasonable basis shall exist and which is or are
based on or arise from the generation, storage, transport, handling or
disposal of Hazardous Materials by such Borrower or the Guarantor, or any
predecessor in interest of any Borrower or the Guarantor, or relating to
any site or facility owned, operated or leased by such Borrower or the
Guarantor, which claim or claims (insofar as they are payable by such
Borrower or the Guarantor but after deducting any portion thereof which is
reasonably expected to be paid by other creditworthy Persons solely or
jointly and severally liable therefor), in the reasonable judgment of the
Bank, are reasonably likely to be determined adversely to such Borrower or
the Guarantor, and the amount thereof is, singly or in the aggregate,
reasonably likely to have a material adverse effect on the financial
condition of AIRCOA or any Operating Partnership or the Guarantor; or
(k) A default has occurred and continues beyond any applicable cure
period under any Hotel Management Agreement if such default permits a party
to terminate or cancel such Hotel Management Agreement; or
(l) Except for expiration in accordance with its terms, any of the
Security Documents shall be terminated or shall cease to be in full force
and effect, for whatever reason to the extent that a material interest of
the Bank is in the opinion of the Bank jeopardized or the termination
cannot be remedied; or
(m) Any Borrower completely ceases to do business or terminates all
of its business for any reason whatsoever or causes or institutes any
proceeding for its dissolution or termination;
(n) The shares of the Guarantor shall, for any reason, be suspended
from trading on the Hong Kong Stock Exchange
<PAGE>
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for a consecutive period of ten trading days or the Guarantor ceases to be
listed on the Hong Kong Stock Exchange; or
(o) The Guarantor or any United States Subsidiary of the Guarantor
shall, without the prior written approval of the Bank (which shall not be
unreasonably withheld in the case of a reduction to 51% or more), cease to
own, directly or indirectly, beneficially and of record, at least 71% of
the total voting rights of all outstanding Class A limited partnership
units of AIRCOA;
THEREUPON: (1) in the case of an Event of Default other than one referred to in
clause (f) or (g) of this Section 9 with respect to any Borrower, the Bank may,
unless and until the Event of Default shall have been fully remedied to the
satisfaction of the Bank, by notice to AIRCOA, terminate the Commitments and/or
declare the principal amount then outstanding of, and the accrued interest on,
the Loans and all other amounts payable by each of the Borrowers hereunder and
under the Notes (including, without limitation, any amounts payable under
Section 5.04 hereof) to be forthwith due and payable, whereupon such amounts
shall be immediately due and payable without presentment, demand, protest or
other formalities of any kind, all of which are hereby expressly waived by each
of the Borrowers; and (2) in the case of the occurrence of an Event of Default
referred to in clause (f) or (g) of this Section 9 with respect to any Borrower,
the Commitments shall automatically be terminated and the principal amount then
outstanding of, and the accrued interest on, the Loans and all other amounts
payable by the Borrowers hereunder and under the Notes (including, without
limitation, any amounts payable under Section 5.04 hereof) shall automatically
become immediately due and payable without presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly waived by each of the
Borrowers.
Notwithstanding the foregoing, the Bank agrees that following an Event
of Default, before accelerating the Loan or enforcing its rights against the
Guarantor under the Guaranty Agreement it will first apply all amounts, if any,
in the Debt Service Reserve Account, to the extent permitted by law and by the
terms hereof, to the payment of any amounts due hereunder.
SECTION 10. MISCELLANEOUS.
10.01 WAIVER. No failure on the part of the Bank to exercise and no
delay in exercising, and no course of dealing with respect to, any right, power
or privilege under this Agreement or the Notes or any of the other Basic
Documents shall operate as a waiver thereof, nor shall any single or partial
<PAGE>
- 54 -
exercise of any right, power or privilege under this Agreement or the Notes or
any of the other Basic Documents preclude any other or further exercise thereof
or the exercise of any other right, power or privilege. The remedies provided
herein are cumulative and not exclusive of any remedies provided by law.
10.02 NOTICES. All notices, requests and other communications
provided for herein and under the Security Documents (including, without
limitation, any modifications of, or waivers or consents under, this Agreement)
shall be given or made in writing (including, without limitation, by telex or
telecopy) delivered to the intended recipient at the "Address for Notices"
specified below its name on the signature pages hereof; or, as to any party, at
such other address as shall be designated by such party in a notice to each
other party. Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given when transmitted by telex
or telecopier or personally delivered or, in the case of a mailed notice, upon
receipt, in each case given or addressed as aforesaid.
10.03 EXPENSES, ETC. The Borrowers agree to pay or reimburse the
Bank for paying (a) all reasonable out-of-pocket costs and expenses of the Bank
(including, without limitation, the reasonable fees and expenses of Milbank,
Tweed, Hadley & McCloy, special New York counsel to the Bank) in connection with
(i) the negotiation, preparation, execution and delivery of this Agreement and
the other Basic Documents and the making of the Loans hereunder and (ii) any
modification, supplement or waiver of any of the terms of this Agreement or any
of the other Basic Documents; (b) all reasonable out-of-pocket costs and
expenses of the Bank (including, without limitation, reasonable counsels' fees)
in connection with (i) any Default and any enforcement or collection proceedings
resulting therefrom or in connection with the negotiation of any restructuring
or "work-out" (whether or not consummated) of the obligations of each of the
Borrowers hereunder and (ii) the enforcement of this Section 10.03; (c) all
transfer, stamp, documentary or other similar taxes, assessments or charges
levied by any governmental or revenue authority in respect of this Agreement
or any of the other Basic Documents or any other document referred to herein or
therein and all costs, expenses, taxes, assessments and other charges heretofore
or at any time hereafter properly incurred with respect to any filing,
registration, recording or perfection of any security interest contemplated by
any Basic Document or any other document referred to therein; (d) all costs,
expenses and other charges in respect of title insurance procured with respect
to the Liens created pursuant to the Mortgages; and (e) all fees and
disbursements of each Appraiser (except to the extent such fees and
disbursements are explicitly stated to be for the account of the Bank under
<PAGE>
- 55 -
Section 8.07(b)) and the environmental engineering concern and the engineering
concern referred to in this Agreement, PROVIDED, that such fees and
disbursements under this clause (e) will only be payable to the extent incurred
in accordance with the other provisions of this Agreement and the other Basic
Documents.
10.04 AMENDMENTS. No provision of this Agreement may be amended
except by an instrument in writing signed by the Borrowers and the Bank and no
provision may be waived by the Bank except by an instrument in writing signed by
the Bank.
10.05 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
10.06 ASSIGNMENTS AND PARTICIPATIONS.
(a) No Borrower may assign any of its rights or obligations hereunder
or under the Notes without the prior consent of the Bank.
(b) The Bank may at any time change its Applicable Lending Office
(following notice to the Borrowers) and (subject to the provisions of Section
10.06(c)) may assign or transfer all or any portion of the Loans, the Notes and
the Commitments. Upon execution and delivery by the assignee to AIRCOA of an
instrument in writing pursuant to which such assignee agrees to become a "Bank"
hereunder having the Commitments and the Loans specified in such instrument, the
assignee shall have, to the extent of such assignment, the obligations, rights
and benefits of the Bank hereunder holding the Commitments and the Loans (or
portions thereof) assigned to it (in addition to the Commitments and the Loans,
if any, theretofore held by such assignee) and the Bank shall, to the extent of
such assignment, be released from the Commitments (or portion thereof) so
assigned.
(c) Subject to the provisions hereof, the Bank may sell or agree to
sell to one or more other Persons a participation in the Loans, and in the
Commitments, in which event each purchaser of a participation (a "PARTICIPANT")
shall be entitled to the rights and benefits of the provisions of
Section 8.01(l) hereof with respect to its participation as if (and the
Borrowers shall be directly obligated to such Participant under such provisions
as if) such Participant were the "Bank" for purposes of said Section, but shall
not have any other rights or benefits under this Agreement or the Notes or any
other Basic Document (the Participant's rights against the Bank in respect of
such participation to be those set forth in the agreements executed by the Bank
in favor of the Participant); PROVIDED, that at all times the Bank or an
Affiliate of the Bank
<PAGE>
- 56 -
shall hold in the aggregate at least a 51% interest in the Loans. All amounts
payable by the Borrowers to the Bank under Section 5 hereof in respect of the
Loans, and the Commitments, shall be determined as if the Bank had not sold or
agreed to sell any participations in the Loans and Commitments, or assign any
rights thereunder, and as if the Bank were funding the Loans and Commitments in
the same way that it is funding the portion of the Loans and Commitments in
which no participations have been sold or rights assigned.
(d) The Bank may furnish any information concerning the Hotels or any
Borrower or the Guarantor or the General Partner in the possession of the Bank
from time to time to permitted assignees and participants (including permitted
prospective assignees and participants).
10.07 SURVIVAL. The obligations of the Borrowers under Sections
5.01, 5.04 and 10.03 hereof shall survive the repayment of the Loans and the
termination of the Commitments.
10.08 CAPTIONS. The table of contents and captions and section
headings appearing herein are included solely for convenience of reference and
are not intended to affect the interpretation of any provision of this
Agreement.
10.09 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
10.10 GOVERNING LAW; SUBMISSION TO JURISDICTION; SEVERABILITY. This
Agreement and the Notes shall be governed by, and construed in accordance with,
the law of the State of New York. Each of the Borrowers hereby submits to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York and of any New York state court sitting in New York City
for the purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. Each of the Borrowers hereby
irrevocably appoints Coudert Bros., Attention: Anthony Williams, Esq., having
offices on the date hereof at 1114 Avenue of the Americas, New York, New York
10036, as its agent for service of process in connection with any such
proceedings in New York, and further agrees that such service of process may be
made in any manner permitted by law. Each of the Borrowers irrevocably waives,
to the fullest extent permitted by applicable law, any objection which it may
now or hereafter have to the laying of the venue of any such proceeding brought
in such a court and any claim that any such proceeding brought in such a court
has been brought in
<PAGE>
- 57 -
an inconvenient forum. Any provision of this Agreement or any of the other
Basic Documents which is prohibited or unenforceable in any jurisdiction shall
be ineffective in such jurisdiction, but only to the extent of such prohibition
or unenforceability without invalidating the remaining provisions hereof or
thereof.
10.11 WAIVER OF JURY TRIAL. EACH OF THE BORROWERS AND THE BANK
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
10.12 CREDIT AGREEMENT TO CONTROL. In the event of any conflicts or
inconsistencies between this Credit Agreement and one or more of the other Basic
Documents, the provisions of this Credit Agreement shall control, and such other
Basic Document or Basic Documents shall, to the extent of any such conflicts or
inconsistencies, be deemed to be modified to comport with the provisions of this
Credit Agreement.
10.13. EXCULPATION. The payment obligations of the Borrowers under
this Agreement and the Notes are joint and several, without prejudice to the
terms of this Section 10.13. The Bank agrees that in any action brought to
enforce the obligations of the Borrowers to pay the indebtedness evidenced by
the Notes, or to enforce the obligations of the Borrower created or arising
under this Agreement and the Security Documents, the judgment or decree shall be
enforceable only to the extent of the Mortgaged Property and the other
collateral subject to the Mortgages and the other Security Documents and the
income therefrom and the proceeds thereof, and any other collateral security
which is the subject of any other security instrument securing the Notes; and
the Bank irrevocably waives any and all right to sue for, seek or demand any
deficiency judgment, personal money judgment or a judgment for specific
performance to be satisfied by assets other than such interest in the Mortgaged
Property, said collateral and the proceeds generated by any of the foregoing
against (i) each Borrower, the General Partner or any officer, director or
shareholder thereof or any other partner of AIRCOA; or (ii) any legal
representative, heir, legatee, successor or assignee of any of the foregoing; or
(iii) any other Person in any foreclosure action under or by reason of, or in
connection with any Security Documents. Any such judgments shall not be subject
to execution on, or be a lien on, assets of such party except to the extent of
its interest in such Mortgaged Property and any other collateral covered by any
Security Document; PROVIDED, however, that the foregoing provisions shall not
prevent recourse to such Mortgaged Property or any collateral security for the
Notes or constitute a waiver, release or discharge of, or otherwise affect the
obligation to pay, any
<PAGE>
- 58 -
indebtedness evidenced by the Notes or any of the Security Documents, or limit
the right of any Person to name any Borrower or any transferee of an interest in
such Mortgaged Property, or any other Person claiming an interest in or right to
such Mortgaged Property, as party defendant in any action or suit for judicial
foreclosure or in the exercise of any other right or remedy, including
injunctive or other equitable relief, under any Security Documents so long as no
judgment in the nature of a deficiency or personal money judgment or other
relief or remedy shall be asked for, obtained or enforced against any Borrower
and any such other Person out of any property, assets or funds, other than such
Mortgaged Property and/or such collateral. Further, the foregoing provisions of
this Section 10.13 shall not in any way limit, increase or otherwise affect the
contractual liability of any Person or entity who shall have guaranteed either
or both of payment and performance of any or all of the indebtedness and other
obligations evidenced by the Notes or any of the Security Documents or the right
of the Bank to commence an action against or to obtain and enforce a personal
judgment against any such Person in regard to such guaranty, and this Section
10.13 shall not impair the right of the Bank to obtain the appointment of a
receiver, or constitute a waiver of the right of the Bank to enforce the
liability and obligation of any Borrower, by money judgment or otherwise, to the
extent of any loss, damage, cost, expense, liability, claim or other obligation
incurred by the Bank (including attorneys' fees and costs reasonably incurred)
arising out of or in connection with the following:
(i) fraud or intentional misrepresentation by any Borrower or the
Guarantor in connection with the Loans;
(ii) the gross negligence or willful misconduct of any Borrower or the
Guarantor in connection with the Loans;
(iii) physical waste of the Mortgaged Property;
(iv) the breach of any provision in the Mortgages concerning
environmental laws, hazardous substances and asbestos and any
indemnification of the Bank with respect thereto;
(v) the removal or disposal of any portion of the Mortgaged Property
after an Event of Default;
(vi) the misapplication or conversion by any Borrower or the Guarantor
of (A) any insurance proceeds paid by reason of any loss, damage
or destruction to the Mortgaged Property, (B) any awards or other
<PAGE>
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amounts received in connection with the condemnation of all or a
portion of the Mortgaged Property, or (C) any Rents (as defined
in the Mortgages) following an Event of Default;
(vii) failure to pay charges for labor or materials or other charges
that can create liens on any portion of the Mortgaged Property;
and
(viii) any security deposits collected with respect to the Mortgaged
Property which are not delivered to the Bank 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 Mortgages) prior to the occurrence of the Event of Default
that gave rise to such foreclosure or action in lieu thereof.
10.14. RELEASES. The Bank agrees to release from the Lien of the
Security Documents one or more of the Hotels (and related Mortgaged Property) in
connection with any refinancing or sale of such Hotel in accordance with the
provisions of this Section 10.14. A release shall be given only upon, and
subject to satisfaction of, the terms and conditions that:
(a) The Bank shall have received, in immediately available funds, the
Release Price for such property, which Release Price, or any component
thereof, shall not be reduced by reason of any Lien or other debt affecting
such property;
(b) All releases be prepared by the attorney for the Bank at the
expense of the applicable Operating Partnership;
(c) No Event of Default shall have occurred and be continuing at the
time of such proposed release nor would occur after giving effect to the
proposed release;
(d) All reasonable costs and charges of any kind and nature in
respect of a requested release, including all legal fees of counsel for the
Bank, shall be paid by the applicable Operating Partnership;
(e) With respect to the sale of said property, (i) the Bank shall
have received the contract of sale with respect to said property, (ii) said
sale is an "all-cash", "arm's length" transaction between a Borrower and an
unrelated third party and (iii) the Bank shall have received evidence
<PAGE>
- 60 -
satisfactory to it that said contract of sale is a true and complete
statement of the terms of the sale;
(f) The Bank shall have received evidence satisfactory to it that the
consummation of such sale or refinancing will not violate the terms of this
Agreement or any other agreement to which a Borrower is a party; and
(g) After giving effect to any sale or refinancing the resulting Loan
to Value Ratio with respect to the remaining Mortgaged Property is not
greater than 65%.
It is understood and agreed that the net amount payable to the Bank
hereunder shall never be less than the Release Price for the relevant property,
and that to the extent that the cash proceeds from any sale or refinancing of a
property are less than the Applicable Allocated Amount with respect to the
property being sold or refinanced, the Borrowers shall pay the shortfall to the
Bank (in immediately available funds) from their separate funds as an additional
condition to such release of said property from the Lien of the applicable
Security Documents; PROVIDED that if upon the sale of the relevant property and
the payment to the Bank of the net sales proceeds from such sale (even if less
than the Release Price), the Loan to Value Ratio is at least 65%, the Borrowers
shall not be required to pay any resulting shortfall to the Bank or if the Loan
to Value Ratio is less than 65%, the Borrowers shall pay only so much of the
shortfall as shall be required to achieve a 65% Loan to Value Ratio.
10.15. OBLIGATIONS OF THE BORROWERS. The obligations of the
Borrowers hereunder are joint and several. Any one or more of the undersigned,
or any other party liable upon, or in respect of any obligation hereunder may be
released without affecting the liability of any of the undersigned not so
released.
<PAGE>
- 61 -
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the day and year first above written.
AIRCOA HOTEL PARTNERS, L.P.
By: AIRCOA HOSPITALITY SERVICES,
INC., its general partner
By: /s/ Michael Sheh
----------------------------
Michael Sheh
Senior Vice President
By: /s/ David C. Ridgley
----------------------------
David C. Ridgley
Vice President
AURORA INN OPERATING PARTNERSHIP,
L.P.
By: AIRCOA HOSPITALITY SERVICES,
INC., its general partner
By: /s/ Michael Sheh
----------------------------
Michael Sheh
Senior Vice President
By: /s/ David C. Ridgley
----------------------------
David C. Ridgley
Vice President
<PAGE>
- 62 -
FOURWINDS OPERATING
PARTNERSHIP, L.P.
By: AIRCOA HOSPITALITY SERVICES,
INC., its general partner
By: /s/ Michael Sheh
----------------------------
Michael Sheh
Senior Vice President
By: /s/ David C. Ridgley
----------------------------
David C. Ridgley
Vice President
McCORMICK RANCH OPERATING
PARTNERSHIP, L.P.
By: AIRCOA HOSPITALITY SERVICES,
INC., its general partner
By: /s/ Michael Sheh
----------------------------
Michael Sheh
Senior Vice President
By: /s/ David C. Ridgley
----------------------------
David C. Ridgley
Vice President
<PAGE>
- 63 -
BUFFALO OPERATING PARTNERSHIP, L.P.
By: AIRCOA HOSPITALITY SERVICES,
INC., its general partner
By: /s/ Michael Sheh
----------------------------
Michael Sheh
Senior Vice President
By: /s/ David C. Ridgley
----------------------------
David C. Ridgley
Vice President
LAKESIDE OPERATING PARTNERSHIP,
L.P.
By: AIRCOA HOSPITALITY SERVICES,
INC., its general partner
By: /s/ Michael Sheh
----------------------------
Michael Sheh
Senior Vice President
By: /s/ David C. Ridgley
----------------------------
David C. Ridgley
Vice President
<PAGE>
- 64 -
DURHAM OPERATING PARTNERSHIP, L.P.
By: AIRCOA HOSPITALITY SERVICES,
INC., its general partner
By: /s/ Michael Sheh
----------------------------
Michael Sheh
Senior Vice President
By: /s/ David C. Ridgley
----------------------------
David C. Ridgley
Vice President
Address for Notices:
5775 DTC Boulevard
Englewood, CO 80111
Attention: Michael Sheh
Senior Vice President
Telecopier No.: 303-220-2341
Telephone No.: 303-220-2000
with a copy to:
5775 DTC Boulevard
Englewood, CO 80111
Attn: Lyle Boll, Esq.
Corporate Counsel
<PAGE>
- 65 -
THE HONGKONG AND SHANGHAI BANKING
CORPORATION LIMITED
By /s/ John C. Holsey
--------------------------------
Title: John C. Holsey
Exec. Vice Pres.
Lending Office:
New York Branch
140 Broadway
New York, New York 10005-1196
Address for Notices:
140 Broadway
New York, New York 10005-1196
Attention: Andrew J. Andreasen
Telex No.: MCI - 232234
62390
235065
Answerback: HSBC
Cable: Hongbank
Telecopier No.: 212-658-2813
Telephone No.: 212-658-5100
<PAGE>
SCHEDULE IV
INSURANCE REQUIREMENTS
(1) CASUALTY INSURANCE -- insurance against loss or damage covering
the Hotels and all other personal Property of the Borrowers by reason of
any Peril in such amounts (subject to such deductibles as shall be
customary for comparable hotel chains, or as shall be reasonably
satisfactory to the Bank) as shall be reasonable and customary and
sufficient to avoid the insured named therein from becoming a co-insurer of
any loss under such policy but in any event in an amount (i) in the case of
fixed assets and equipment (including, without limitation, vehicles on an
ACV basis), at least equal to 100% of the actual replacement cost of such
assets (excluding foundation, footings and excavation costs), subject to
deductibles as aforesaid and (ii) in the case of inventory, not less than
the fair market value thereof, subject to deductibles as aforesaid.
(2) AUTOMOBILE LIABILITY INSURANCE FOR BODILY INJURY AND PROPERTY
DAMAGE -- insurance against liability for bodily injury and Property damage
in respect of all vehicles (whether owned, hired or rented by the
Borrowers) at any time located at, or used in connection with, its
Properties or operations in such amounts as are then customary for vehicles
used in connection with similar Properties and businesses, but in any event
to the extent required by applicable law.
(3) COMPREHENSIVE GENERAL LIABILITY INSURANCE -- insurance against
claims for bodily injury, death or Property damage occurring on, in or
about the Property (and adjoining streets and sidewalks) of the Borrower,
in the amount of not less than $2,000,000 per occurrence, and excess
liability coverage with aggregate limits of not less than $100,000,000
which shall include, but not limited to, premises liability, blanket
contractual liability, products liability and personal injury liability.
(4) WORKERS' COMPENSATION INSURANCE -- workers' compensation
insurance (including, without limitation, Employers' Liability Insurance)
to the extent required by applicable law.
(5) LIQUOR LIABILITY INSURANCE -- insurance against claims for bodily
injury, death or Property damage arising under any applicable [Dram Shop
Act] or any other Governmental Authority having jurisdiction, in amounts as
may be reasonably required by the Bank, but in no event less
<PAGE>
- 2 -
than the statutory limit of maximum liability in effect from time to time.
(6) BUSINESS INTERRUPTION INSURANCE/RENTAL VALUE INSURANCE --
insurance against loss of operating income up to an aggregate amount equal
to one year's net profits plus fixed and continuing expenses from the
operation of the Hotels by reason of any Peril (as defined in this Credit
Agreement).
(7) OTHER INSURANCE -- such other insurance as is generally carried
by owners of similar Properties in the jurisdictions where such Properties
are located, in such amounts and against such risks as are then customary
for Property similar in use.
All of the foregoing insurance may be provided through "blanket" insurance
policies covering the Hotel and other hotels owned or managed by the
Borrower or its Affiliates, in accordance with customary practice of
comparable hotel chains.
The foregoing insurance may be subject to such deductibles as shall be
customary for other comparable hotel chains, or as shall be reasonably
satisfactory to the Bank.
<PAGE>
EXHIBIT A-1
$18,085,000 June __, 1995
New York, New York
[FORM OF MORTGAGE NOTE]
PROMISSORY NOTE
FOR VALUE RECEIVED, AIRCOA HOTEL PARTNERS, L.P., AURORA INN OPERATING
PARTNERSHIP, L.P., FOURWINDS OPERATING PARTNERSHIP, L.P., MCCORMICK RANCH
OPERATING PARTNERSHIP, L.P., BUFFALO OPERATING PARTNERSHIP, L.P., LAKESIDE
OPERATING PARTNERSHIP, L.P. and DURHAM OPERATING PARTNERSHIP, L.P., each being a
Delaware limited partnership (collectively, the "COMPANY") hereby jointly and
severally promise to pay to THE HONGKONG AND SHANGHAI BANKING CORPORATION
LIMITED (the "BANK"), for account of its Applicable Lending Office provided for
by the Credit Agreement referred to below, at its principal New York office at
140 Broadway, New York, New York 10005-1196, the principal amount of Eighteen
Million Eighty-Five Thousand Dollars ($18,085,000), in lawful money of the
United States of America and in immediately available funds, on the dates and in
the principal amounts provided in the Credit Agreement, and to pay interest on
the unpaid principal amount hereof, at such office, in like money and funds, for
the period commencing on the date hereof until such principal amount shall be
paid in full, at the rates per annum and on the dates provided in the Credit
Agreement.
The date, amount, interest rate and duration of Interest Period (if
applicable) of the principal amount evidenced hereby, and each payment made on
account thereof, shall be recorded by the Bank on its books and, prior to any
transfer of this Promissory Note, endorsed by the Bank on the schedule attached
hereto or any continuation thereof, PROVIDED that the failure of the Bank to
make any such recordation or endorsement shall not affect the obligations of the
Company to make a payment when due of any amount owing under the Credit
Agreement or hereunder in respect of the principal amount evidenced hereby.
This Promissory Note is the Mortgage Note referred to in the Credit
Agreement dated as of June __, 1995 (as amended from time to time, the "CREDIT
AGREEMENT") between the Company and Bank, and evidences in part the Mortgage
Loan made by the Bank thereunder. Terms used but not defined in this Promissory
Note have the respective meanings assigned to them in the Credit Agreement.
The Credit Agreement provides for the acceleration of the maturity of
this Note upon the occurrence of certain events and for prepayments of the Loans
upon the terms and conditions specified therein.
<PAGE>
- 2 -
Except as permitted by Section 10.06(b) and (c) of the Credit
Agreement, this Note may not be assigned by the Bank to any other Person.
This Promissory Note shall be governed by and construed in accordance
with the law of the State of New York.
AIRCOA HOTEL PARTNERS, L.P.
By: AIRCOA HOSPITALITY SERVICES,
INC., its general partner
By:
--------------------------------
Michael Sheh
Senior Vice President
By:
--------------------------------
David C. Ridgley
Vice President
AURORA INN OPERATING PARTNERSHIP,
L.P.
By: AIRCOA HOSPITALITY SERVICES,
INC., its general partner
By:
--------------------------------
Michael Sheh
Senior Vice President
By:
--------------------------------
David C. Ridgley
Vice President
<PAGE>
- 3 -
FOURWINDS OPERATING
PARTNERSHIP, L.P.
By: AIRCOA HOSPITALITY SERVICES,
INC., its general partner
By:
--------------------------------
Michael Sheh
Senior Vice President
By:
--------------------------------
David C. Ridgley
Vice President
McCORMICK RANCH OPERATING
PARTNERSHIP, L.P.
By: AIRCOA HOSPITALITY SERVICES,
INC., its general partner
By:
--------------------------------
Michael Sheh
Senior Vice President
By:
--------------------------------
David C. Ridgley
Vice President
<PAGE>
- 4 -
BUFFALO OPERATING PARTNERSHIP, L.P.
By: AIRCOA HOSPITALITY SERVICES,
INC., its general partner
By:
--------------------------------
Michael Sheh
Senior Vice President
By:
--------------------------------
David C. Ridgley
Vice President
LAKESIDE OPERATING PARTNERSHIP,
L.P.
By: AIRCOA HOSPITALITY SERVICES,
INC., its general partner
By:
--------------------------------
Michael Sheh
Senior Vice President
By:
--------------------------------
David C. Ridgley
Vice President
<PAGE>
- 5 -
DURHAM OPERATING PARTNERSHIP, L.P.
By: AIRCOA HOSPITALITY SERVICES,
INC., its general partner
By:
--------------------------------
Michael Sheh
Senior Vice President
By:
--------------------------------
David C. Ridgley
Vice President
Address for Notices:
5775 DTC Boulevard
Englewood, CO 80111
Attention: Michael Sheh
Senior Vice President
Telecopier No.: 303-220-2341
Telephone No.: 303-220-2000
with a copy to:
5775 DTC Boulevard
Englewood, CO 80111
Attn: Lyle Boll, Esq.
Corporate Counsel
<PAGE>
SCHEDULE OF LOAN
This Mortgage Note evidences the Mortgage Loan made under the
within-described Credit Agreement to the Company, on the date, in the principal
amount, bearing interest at the rates and having Interest Periods (if
applicable) of the durations set forth below, subject to the payments,
conversion and prepayments of principal set forth below:
Amount
Date Prin- Paid,
Made, cipal Duration Prepaid Unpaid
Continued Amount of Continued Prin-
or of Interest Interest or cipal Notation
Converted Loan Rate Period Converted Amount Made by
--------- ------ ----- -------- --------- ------ --------
<PAGE>
EXHIBIT A-2
$17,690,000 June __, 1995
New York, New York
[FORM OF FLORIDA RENEWAL NOTE]
RENEWAL NOTE
FOR VALUE RECEIVED, AIRCOA HOTEL PARTNERS, L.P., a Delaware limited
partnership (the "COMPANY") hereby promises to pay to THE HONGKONG AND SHANGHAI
BANKING CORPORATION LIMITED (the "BANK"), for account of its Applicable Lending
Office provided for by the Credit Agreement referred to below, at its principal
New York office at 140 Broadway, New York, New York 10005-1196, the principal
amount of Seventeen Million Six Hundred Ninety Thousand and 00/100 Dollars
($17,690,000), in lawful money of the United States of America and in
immediately available funds, on the dates and in the principal amounts provided
in the Credit Agreement, and to pay interest on the unpaid principal amount
hereof, at such office, in like money and funds, for the period commencing on
the date hereof until such principal amount shall be paid in full, at the rates
per annum and on the dates provided in the Credit Agreement.
The date, amount, interest rate and duration of Interest Period (if
applicable) of the principal amount evidenced hereby, and each payment made on
account thereof, shall be recorded by the Bank on its books and, prior to any
transfer of this Renewal Note, endorsed by the Bank on the schedule attached
hereto or any continuation thereof, PROVIDED that the failure of the Bank to
make any such recordation or endorsement shall not affect the obligations of the
Company to make a payment when due of any amount owing under the Credit
Agreement or hereunder in respect of the principal amount evidenced hereby.
This Renewal Note is the Florida Renewal Note referred to in the
Credit Agreement dated as of June __, 1995 (as amended from time to time, the
"CREDIT AGREEMENT") between the Company and Bank, and evidences in part the
Mortgage Loan made by the Bank thereunder. Terms used but not defined in this
Renewal Note have the respective meanings assigned to them in the Credit
Agreement.
The Credit Agreement provides for the acceleration of the maturity of
this Renewal Note upon the occurrence of certain events and for prepayments of
the Loans upon the terms and conditions specified therein.
Except as permitted by Section 10.06(b) and (c) of the Credit
Agreement, this Renewal Note may not be assigned by the Bank to any other
Person.
<PAGE>
This Renewal Note shall be governed by and construed in accordance
with the law of the State of New York.
AIRCOA HOTEL PARTNERS, L.P.
By: AIRCOA HOSPITALITY SERVICES,
INC., its general partner
By:
--------------------------------
Michael Sheh
Senior Vice President
By:
--------------------------------
David C. Ridgley
Vice President
<PAGE>
SCHEDULE OF LOAN
This Renewal Note evidences in part the Mortgage Loan made under the
within-described Credit Agreement to the Company, on the date, in the principal
amount, bearing interest at the rates and having Interest Periods (if
applicable) of the durations set forth below, subject to the payments,
conversion and prepayments of principal set forth below:
Amount
Date Prin- Paid,
Made, cipal Duration Prepaid Unpaid
Continued Amount of Continued Prin-
or of Interest Interest or cipal Notation
Converted Loan Rate Period Converted Amount Made by
--------- ------ ----- -------- --------- ------ --------
<PAGE>
EXHIBIT A-3
$9,225,000 June 8, 1995
New York, New York
[FORM OF NEW YORK RESTATED NOTE]
PROMISSORY NOTE
FOR VALUE RECEIVED, BUFFALO OPERATING PARTNERSHIP, L.P., a Delaware
limited partnership (collectively, the "COMPANY") hereby promises to pay to THE
HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED (the "BANK"), for account of
its Applicable Lending Office provided for by the Credit Agreement referred to
below, at its principal New York office at 140 Broadway, New York, New York
10005-1196, the principal amount of Nine Million Two Hundred Twenty-Five
Thousand and 00/100 Dollars ($9,225,000), in lawful money of the United States
of America and in immediately available funds, on the dates and in the principal
amounts provided in the Credit Agreement, and to pay interest on the unpaid
principal amount hereof, at such office, in like money and funds, for the period
commencing on the date hereof until such principal amount shall be paid in full,
at the rates per annum and on the dates provided in the Credit Agreement.
This Note restates in its entirety and is given in substitution for a
portion of that certain note in the original principal amount of $90,000,000
dated as of February 20, 1987 made by AIRCOA for the benefit of Bankers Trust
Company which Note was assigned by Bankers Trust Company to the Bank and split
pursuant to a Note Severance Agreement dated as of the date hereof between
AIRCOA and the Bank into two separate and distinct notes one of which is
evidenced hereby.
The date, amount, interest rate and duration of Interest Period (if
applicable) of the principal amount evidenced hereby, and each payment made on
account thereof, shall be recorded by the Bank on its books and, prior to any
transfer of this Promissory Note, endorsed by the Bank on the schedule attached
hereto or any continuation thereof, PROVIDED that the failure of the Bank to
make any such recordation or endorsement shall not affect the obligations of the
Company to make a payment when due of any amount owing under the Credit
Agreement or hereunder in respect of the principal amount evidenced hereby.
This Promissory Note is the New York Restated Note referred to in the
Credit Agreement dated as of June 8, 1995 (as amended from time to time, the
"CREDIT AGREEMENT") between the Company and Bank, and evidences in part the
Mortgage Loan made by the Bank thereunder. Terms used but not defined in this
Promissory Note have the respective meanings assigned to them in the Credit
Agreement.
The Credit Agreement provides for the acceleration of the maturity of
this Promissory Note upon the occurrence of certain events and
<PAGE>
- 2 -
for prepayments of the Loans upon the terms and conditions specified therein.
Except as permitted by Section 10.06(b) and (c) of the Credit
Agreement, this Promissory Note may not be assigned by the Bank to any other
Person.
This Promissory Note shall be governed by and construed in accordance
with the law of the State of New York.
BUFFALO OPERATING PARTNERSHIP, L.P.
By: AIRCOA HOSPITALITY SERVICES,
INC., its general partner
By:
--------------------------------
Michael Sheh
Senior Vice President
By:
--------------------------------
David C. Ridgley
Vice President
Address for Notices:
5775 DTC Boulevard
Englewood, CO 80111
Attention: Michael Sheh
Senior Vice President
Telecopier No.: 303-220-2341
Telephone No.: 303-220-2000
with a copy to:
5775 DTC Boulevard
Englewood, CO 80111
Attn: Lyle Boll, Esq.
Corporate Counsel
<PAGE>
SCHEDULE OF LOAN
This Promissory Note evidences in part the Mortgage Loan made under
the within-described Credit Agreement to the Company, on the date, in the
principal amount, bearing interest at the rates and having Interest Periods (if
applicable) of the durations set forth below, subject to the payments,
conversion and prepayments of principal set forth below:
Amount
Date Prin- Paid,
Made, cipal Duration Prepaid Unpaid
Continued Amount of Continued Prin-
or of Interest Interest or cipal Notation
Converted Loan Rate Period Converted Amount Made by
--------- ------ ----- -------- --------- ------ --------
<PAGE>
EXHIBIT A-4
$1,000,000 June __, 1995
New York, New York
[FORM OF REVOLVING NOTE]
PROMISSORY NOTE
FOR VALUE RECEIVED, AIRCOA HOTEL PARTNERS, L.P., AURORA INN OPERATING
PARTNERSHIP, L.P., FOURWINDS OPERATING PARTNERSHIP, L.P., MCCORMICK RANCH
OPERATING PARTNERSHIP, L.P., BUFFALO OPERATING PARTNERSHIP, L.P., LAKESIDE
OPERATING PARTNERSHIP, L.P. and DURHAM OPERATING PARTNERSHIP, L.P., each being a
Delaware limited partnership (collectively, the "COMPANY"), hereby jointly and
severally promise to pay to THE HONGKONG AND SHANGHAI BANKING CORPORATION
LIMITED (the "BANK"), for account of its Applicable Lending Office provided for
by the Credit Agreement referred to below, at its principal New York office at
140 Broadway, New York, New York 10005-1196, the principal amount of One Million
Dollars ($1,000,000) (or, such lesser amount as shall equal the aggregate unpaid
principal amount of the Revolving Loans made by the Bank to the Company under
the Credit Agreement), in lawful money of the United States of America and in
immediately available funds, on the dates and in the principal amounts provided
in the Credit Agreement, and to pay interest on the unpaid principal amount
hereof, at such office, in like money and funds, for the period commencing on
the date hereof until such principal amount shall be paid in full, at the rates
per annum and on the dates provided in the Credit Agreement.
The date, amount, interest rate and duration of Interest Period (if
applicable) of the principal amount evidenced hereby, and each payment made on
account thereof, shall be recorded by the Bank on its books and, prior to any
transfer of this Promissory Note, endorsed by the Bank on the schedule attached
hereto or any continuation thereof, PROVIDED, that the failure of the Bank to
make any such recordation or endorsement shall not affect the obligations of the
Company to make a payment when due of any amount owing under the Credit
Agreement or hereunder in respect of the principal amount evidenced hereby.
This Promissory Note is the Revolving Note referred to in the Credit
Agreement dated as of June __, 1995 (as amended from time to time, the "CREDIT
AGREEMENT") between the Company and Bank, and evidences the Revolving Loans made
by the Bank thereunder. Terms used but not defined in this Note have the
respective meanings assigned to them in the Credit Agreement.
The Credit Agreement provides for the acceleration of the maturity of
this Note upon the occurrence of certain events and for prepayments of the
Revolving Loans upon the terms and conditions specified therein.
<PAGE>
- 2 -
Except as permitted by Section 10.06(b) and (c) of the Credit
Agreement, this Note may not be assigned by the Bank to any other Person.
This Promissory Note shall be governed by and construed in accordance
with the law of the State of New York.
AIRCOA HOTEL PARTNERS, L.P.
By: AIRCOA HOSPITALITY SERVICES,
INC., its general partner
By:
--------------------------------
Michael Sheh
Senior Vice President
By:
--------------------------------
David C. Ridgley
Vice President
AURORA INN OPERATING PARTNERSHIP,
L.P.
By: AIRCOA HOSPITALITY SERVICES,
INC., its general partner
By:
--------------------------------
Michael Sheh
Senior Vice President
By:
--------------------------------
David C. Ridgley
Vice President
<PAGE>
- 3 -
FOURWINDS OPERATING
PARTNERSHIP, L.P.
By: AIRCOA HOSPITALITY SERVICES,
INC., its general partner
By:
--------------------------------
Michael Sheh
Senior Vice President
By:
--------------------------------
David C. Ridgley
Vice President
McCORMICK RANCH OPERATING
PARTNERSHIP, L.P.
By: AIRCOA HOSPITALITY SERVICES,
INC., its general partner
By:
--------------------------------
Michael Sheh
Senior Vice President
By:
--------------------------------
David C. Ridgley
Vice President
<PAGE>
- 4 -
BUFFALO OPERATING PARTNERSHIP, L.P.
By: AIRCOA HOSPITALITY SERVICES,
INC., its general partner
By:
--------------------------------
Michael Sheh
Senior Vice President
By:
--------------------------------
David C. Ridgley
Vice President
LAKESIDE OPERATING PARTNERSHIP,
L.P.
By: AIRCOA HOSPITALITY SERVICES,
INC., its general partner
By:
--------------------------------
Michael Sheh
Senior Vice President
By:
--------------------------------
David C. Ridgley
Vice President
<PAGE>
- 5 -
DURHAM OPERATING PARTNERSHIP, L.P.
By: AIRCOA HOSPITALITY SERVICES,
INC., its general partner
By:
--------------------------------
Michael Sheh
Senior Vice President
By:
--------------------------------
David C. Ridgley
Vice President
Address for Notices:
5775 DTC Boulevard
Englewood, CO 80111
Attention: Michael Sheh
Senior Vice President
Telecopier No.: 303-220-2341
Telephone No.: 303-220-2000
with a copy to:
5775 DTC Boulevard
Englewood, CO 80111
Attn: Lyle Boll, Esq.
Corporate Counsel
<PAGE>
SCHEDULE OF LOAN
This Revolving Note evidences the Revolving Loans made under the
within-described Credit Agreement to the Company, on the date, in the principal
amount, bearing interest at the rates and having Interest Periods (if
applicable) of the durations set forth below, subject to the payments,
conversion and prepayments of principal set forth below:
Amount
Date Prin- Paid,
Made, cipal Duration Prepaid Unpaid
Continued Amount of Continued Prin-
or of Interest Interest or cipal Notation
Converted Loan Rate Period Converted Amount Made by
--------- ------ ----- -------- --------- ------ --------
<PAGE>
SCHEDULE I
THE HOTELS AND THE OPERATING PARTNERSHIPS
1. Aurora Inn
3020 Shawnee Trail, Aurora, Ohio 44202
Aurora Inn Operating Partnership, L.P.
2. Pine Lake Trout Club
17021 Chillicothe Road, Chagrin Falls, Ohio 44022
Aurora Inn Operating Partnership, L.P.
3. Fourwinds/Resort and Marina
South Fairfax Road, Bloomington, Indiana 47402
Fourwinds Operating Partnership, L.P.
4. Regal McCormick Ranch
7401 N. Scottsdale Road, Scottsdale, Arizona 85253
McCormick Ranch Operating Partnership, L.P.
5. Sheraton Inn Buffalo Airport
2040 Walden Avenue, Buffalo, NY 14225
Buffalo Operating Partnership, L.P.
6. Sheraton Inn Lakeside
7769 West Irlo Bronson Memorial Highway, Kissimmee, FL 34747
Lakeside Operating Partnership, L.P.
7. Sheraton Inn University Center
2800 Middletown Avenue, Durham, NC 27705
Durham Operating Partnership, L.P.
<PAGE>
SCHEDULE II
GROUND LEASES
Sheraton Inn - Buffalo East
1. Ground Lease Agreement ("GROUND LEASE #1") dated May 8, 1970 between Joseph
A. Malecki and Josephine Gloria Malecki, as landlord, and Consolidated
Motor Inns, Inc., as tenant, a Memorandum of which was recorded in the
Erie County Clerk's Office on December 31, 1970 in Liber 7759 of Deeds,
page 305; as assigned to CTW Holding Corporation ("CTW"), by Assignment
of Lease recorded on October 21, 1971 in Liber 7853 of Deeds, page 95; as
amended by Amendment to Ground Lease Agreement, dated March 19, 1973 and
recorded on November 15, 1973 in Liber 8111 of Deeds, page 474; as amended
by Second Amendment to Ground Lease Agreement dated January 28, 1974 and
recorded on January 29, 1974 in Liber 8133 of Deeds, page 551; as amended
by Amendment to Ground Lease Agreement dated February 20, 1987 and
recorded May 28, 1987 in Liber 9717 of Deeds, page 42; and as amended by
Amendment No. 4 To Ground Lease dated June 25, 1988 and recorded June 25,
1988 in Liber 9881 of Deeds, page 250, covering premises situate in the
Town of Cheektowaga, Erie County, New York, more particularly described
as Parcel I of EXHIBIT A hereto.
2. Ground Lease Agreement ("GROUND LEASE #2") dated May 11, 1970 between John
Zola, Chester Zola, and Thaddeus Zola and Clara Zola, as landlord, and
Consolidated Motor Inns, Inc., as tenant, a Memorandum of which was
recorded in the Erie County Clerk's Office on February 8, 1971 in Liber
7768 of Deeds, page 587; as assigned to CTW by Assignment of Lease recorded
on October 21, 1971 in Liber 7853 of Deeds at page 99; as amended by
Amendment to Ground Lease Agreement, recorded on November 15, 1973 in Liber
8111 of Deeds, page 477; as amended by Second Amendment to Ground Lease
Agreement, recorded on January 29, 1974 in Liber 8133 of Deeds, page 535;
as amended by Amendment to Ground Lease Agreement dated February 20, 1987
and recorded May 28, 1987 in Liber 9717 of Deeds, page 27; as amended by
Amendment No. 4 To Ground Lease dated June 28, 1988 and recorded June 28,
1988 in Liber 9881 of Deeds, page 235, covering premises situate in the
Town of Cheektowaga, Erie County, New York, more particularly described as
Parcel II of EXHIBIT A hereto.
Ground Lease # 1 and Ground Lease # 2 were assigned by CTW to Archris Hotel
Partnership - Buffalo, a California limited partnership ("ARCHRIS"), by
Assignment of Leases recorded November 15, 1973 in Liber 8111 of Deeds, page
481; and further assigned by Archris to CTW by Assignment of Leases recorded
January 29, 1974 in Liber 8134 of Deeds, page 49; and assigned by CTW to Archris
by Assignment of Leases recorded January 29, 1974 in Liber 8133 of Deeds at page
555; and assigned by Archris to Archris Hotel
<PAGE>
Partnership - Buffalo, a partnership ("AHP") by Assignment, dated September 15,
1978 and recorded September 22, 1978 in Liber 8699 of Deeds, page 127; and
assigned by AHP to Arthur L. Duggan by Assignment recorded November 8, 1979 in
Liber 8850 of Deeds, page 679 and assigned by Arthur L. Duggan to Buffalo Inn
Associates by Assignment recorded November 4, 1981 in Liber 9077 of Deeds, page
574; and assigned by Buffalo Inn County Clerk Associates to AIRCOA Hotel
Partners, L.P. ("AIRCOA") by Assignment recorded May 28, 1987 in Liber 9717 of
Deeds, page 1; and assigned by AIRCOA to Buffalo Operating Partnership, L.P., a
Delaware limited partnership, by Assignment recorded May 28, 1987 in Liber 9717
of Deeds at page 82.
<PAGE>
Fourwinds/A Clarion Resort
1. Lease dated November 16, 1967, between the Department of the Army by and
through the Secretary of the Army, as lessor and the State of Indiana,
Department of Natural Resources, as lessee; as assigned by General
Conveyance, Assignment and Bill of Sale, dated August 25, 1975 and recorded
October 6, 1975 in Book 091, page 443; as assigned by General Conveyance
and Assignment by Fourwinds to AEI, dated December 30, 1986 and recorded
March 2, 1987 in Book 174, page 180; as assigned by General Conveyance and
Assignment by Monroe to AEI, dated December 30, 1986 and recorded March 2,
1987 in Book 174, page 197; as assigned by General Conveyance and
Assignment by AEI to Newpaort, L.P., dated December 30, 1986 and recorded
March 2, 1987 in Book 174, page 214; as assigned by General Conveyance and
Assignment by Newpart, L.P. to AIRCOA Hotel Partners, L.P. ("AHP"), dated
December 31, 1986 and recorded March 2, 1987 in Book 174, page 233; and as
further assigned by General Conveyance and Assignment by AHP to Fourwinds
Operating Partnership, L.P., dated February 20, 1987 and recorded March 2,
1987 in Book 174, page 266.
2. Lease Agreement, dated January 6, 1969, between the Department of Natural
Resources of the State of Indiana, as lessor, and the Taggart Corporation,
as lessee; as amended and assigned by Amendment No. 1 to Lease Agreement,
dated April 19, 1972 and recorded April 26, 1972 in Misc. Book 079, page
412; as assigned by General Conveyance, Assignment and Bill of Sale, dated
August 25, 1975 and recorded October 6, 1975 in Book 091, page 443; as
amended by Amendment No. 2 to Lease Agreement, dated April 1, 1975 and
recorded October 8, 1975 in Misc. Book 091, page 494; as amended by
unrecorded Amendment No. 3 to Lease Agreement, dated May 23, 1983; as
amended by unrecorded Amendment No. 4 to Lease Agreement, dated May 9,
1985; as assigned by General Conveyance and Assignment by Fourwinds to AEI,
dated December 30, 1986 and recorded March 2, 1987 in Book 174, page 180;
as assigned by General Conveyance and Assignment by Monroe to AEI, dated
December 30, 1986 and recorded March 2, 1987 in Book 174, page 197; as
assigned by General Conveyance and Assignment by AEI to Newpart, L.P.,
dated December 30, 1986 and recorded March 2, 1987 in Book 174, page 214;
as assigned by General Conveyance and Assignment by Newpart, L.P. to AIRCOA
Hotel Partners, L.P. ("AHP"), dated December 31, 1986 and recorded March 2,
1987 in Book 174, page 233; and as further assigned by General Conveyance
and Assignment by AHP to Fourwinds Operating Partnership, L.P., dated
February 20, 1987 and recorded March 2, 1987 in Book 174, page 266; as
amended by Amendment No. 5 to Lease Agreement, dated March 10,
<PAGE>
1987 and recorded June 11, 1987 in Book 177, page 85; as amended by
Amendment No. 6 to Lease Agreement, dated September 22, 1987 and recorded
December 14, 1987 in Book 181, page 244; and as further amended and
restated by that certain unrecorded Amended and Restated Indenture of
Ground Lease, dated May 20, 1991, between the Indiana Department of Natural
Resources of the State of Indiana and Fourwinds Operating Partnership, L.P.
<PAGE>
The Clarion Inn at McCormick Ranch
1. Lease No. 4102, dated August 31, 1978 from Fred E Trotter, H. C.
Eichelberger and Wade H. McVay, as Trustees under the Will and of the
Estate of James Campbell to ARI, Inc., an Ohio corporation ("ARI"), as
disclosed by Memorandum of Lease dated August 31, 1978 and recorded on
September 25, 1978 at Docket 13126, page 1106, as amended by that certain
unrecorded Amendment of Lease dated May 7, 1980, as assigned by that
certain unrecorded Lease Assignment, dated December 31, 1986, between ARI
and Newpart, L.P. ("Newpart"); and as assigned by unrecorded Lease
Assignment dated December 31, 1986 between Newpart and AIRCOA Hotel
Partners; and as assigned to McCormick Ranch Operating Partnership, L.P.,
a Delaware limited partnership, by Lease Assignment recorded March 10, 1987
in Recording No. 87-143631.
<PAGE>
SCHEDULE III
LICENSE AGREEMENTS
1. Sheraton Inn-Buffalo East
License Agreement dated November 2, 1991 between Sheraton Inns, Inc., a
Delaware corporation ("Sheraton") and Buffalo Operating Partnership, L.P.,
a Delaware limited partnership ("BOL"), as amended by Amendment of License
Agreements and License Fee Deferral Agreement dated November 5, 1993
between Sheraton and BOL and Lakeside Operating Partnership, L.P., a
Delaware limited partnership ("LOL").
2. Sheraton University Center (Durham)
License Agreement dated August 1, 1982 between Sheraton and James E. Russel
Jr. and John F. Lowndes, as amended by letter agreement dated March 11,
1987 between Sheraton and Durham Operating Partnership, L.P., a Delaware
limited partnership.
3. Sheraton-Lakeside Inn
License Agreement dated May 14, 1992 between Sheraton and LOL as amended by
Amendment of License Agreements and License Fee Deferral Agreement dated
November 5, 1993 between Sheraton and BOL and LOL.
4. Fourwinds-A Clarion Resort
License Agreement dated February 20, 1987 between The Clarion Hotel
Corporation, a Colorado corporation ("Clarion"), and AIRCOA Hotel Partners,
L.P., a Delaware limited partnership, as amended by License Agreement
Amendment dated August 3, 1989 between Clarion and Fourwinds Operating
Partnership, L.P., a Delaware limited partnership. Lender acknowledges
that the Licensor of the Fourwinds may become Richfield Holdings, Inc.
pursuant to a License Agreement substantially similar to the License
Agreement described in 5 below, and that such change does not require
Lender's consent.
5. The Regal at McCormick Ranch
License Agreement dated December 16, 1991 between Regal-AIRCOA Companies,
Inc., a Colorado corporation (now known as Richfield Holdings, Inc.) and
McCormick Ranch Operating Partnership, L.P., a Delaware limited
partnership.
<PAGE>
SCHEDULE V
CAPITAL LEASES
Equipment lease for telephone system at
Sheraton Durham dated Feb. 1995
due Jan 2000 $154,563
SCHEDULE VI
OTHER INDEBTEDNESS
Aircoa Hotel Partners, L.P.
Debt Schedule
Note to Aircoa Hospitality Service,
a subsidiary of Richfield Hospitality
Service, at 12% due Jan. 1995 $6 million
Equipment lease for telephone system at
Sheraton Durham dated Feb. 1995
due Jan. 2000 $154,563
SCHEDULE VII
RICHFIELD PROJECT MANAGEMENT /logo/
MEMORANDUM
Date: May 22, 1995
To: Michael Sheh
From: Michael Hollingsworth /s/ Mike
Regarding: AHP - Phase IESA
---------------------------------------------------------------------------
I have reviewed the Phase I Environmental Site Assessments performed by ATC
Environmental, Inc. for the AHP properties and the HSBC Corporate Banking letter
dated May 9, 1995 regarding same. I have discussed these reports with
representatives at each of the properties and submit the following for your
review and consideration:
I. SHERATON DURHAM
A. We are not aware of radon levels sufficient to warrant action.
II. SHERATON BUFFALO
A. By July 1, 1995 we will request additional information regarding
the two upgradient LUST's from the State of New York EPA. We
will forward their response to your attention upon receipt from
the State.
B. Also, by July 1, 1995 we will request the State of New York EPA
to remove the hotel as a reported LUST site. As soon as the
record is confirmed corrected, we will notify you.
III. SHERATON LAKESIDE
A. The nine transformers at the project are owned by the Florida
Power Corp. and at the time of the Phase I review were not
leaking. FPC has notified our Facility Manager, Mr. John Kerr,
verbally that no PCB's are present.
B. A Corporate Operations & Maintenance Plan for managing ACM's will
be developed by an environmental engineering firm for
distribution to the property by September 1, 1995.
C. Analysis of the water at the water cooler suspected of having
lead components has been tested annually by the Kissimmee Water
Department and found to be within acceptable standards.
<PAGE>
IV. FOURWINDS RESORT
A. The five above ground storage tanks (AST) observed at the site
are propane tanks which are owned by a third party vendor. They
are not currently leaking and catch basins are not considered
particularly beneficial for this application and are not planned
to be installed.
B. We are not aware of radon levels sufficient to warrant action.
C. A Corporate Operations & Maintenance Plan for managing ACM's will
be developed by an environmental engineering firm for
distribution to the property by September 1, 1995.
D. It is our policy to perform a comprehensive asbestos survey
concurrent with renovation activity planned for an area suspected
of containing ACM's.
E. The latest report from American Environmental Corp. regarding the
UST's indicates that we have successfully completed all
requirements of the State of Indiana. Therefore, site closure
has been achieved.
V. REGAL MCCORMICK RANCH
A. The transformers on-site are owned by Arizona Public Service and
are not leaking. Information has been received from APS
confirming that no PCB's are present.
B. The banquette service floor tile, which is an ACM, has been
determined to be non-friable. The property as part of their 1995
Capital Improvement process is investigating the costs of repair,
replacement and encapsulation.
C. A Corporate Operations & Maintenance Plan for managing ACM's will
be developed by an environmental engineering firm for
distribution to the property by September 1, 1995.
D. By July 1, 1995 the property will have an analysis completed of
the water dispensed from the drinking fountain for lead
contamination.
VI. AURORA INN
A. A Corporate Operations & Maintenance Plan for managing ACM's will
be developed by an environmental engineering firm for
distribution to the property by September 1, 1995.
B. It is our policy to perform a comprehensive asbestos survey
concurrent with renovation activity planned for an area suspected
of containing ACM's.
<PAGE>
VII. PINE LAKE
A. By July 1, 1995 we will request from the State of Ohio the
requirements of abandoning the UST on-site and the cost of
removal and disposal. When a decision has been made as to the
disposition of this UST, we will immediately notify you of the
process to be implemented.
B. The five above ground storage tanks (AST) observed at the site
are propane tanks which are owned by a third party vendor. They
are not currently leaking and catch basins are not considered
particularly beneficial for this application and are not planned
to be installed.
C. By July 1, 1995 we will request additional information regarding
the 1991 spill from the State of Ohio EPA. We will forward their
response to you upon our receipt.
If you have any questions regarding the above, please contact me at X-2202.
MH:sk
c: Carlson
Lambert
Ward
<PAGE>
SCHEDULE VIII
ENGINEERING WORK
REGAL McCORMICK RANCH
<TABLE>
<CAPTION>
ESTIMATED CAPITAL OR
REPAIR ITEM COST OPERATIONS UPDATE MAJOR MAINT. 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Curb replacement 1,000 Cosmetic
North parking 29,500 C 29,500
South parking 4,500 M 4,500
Paint exterior 25,000 M 25,000
Replace EPDM roof 120,000 C 60,000 60,000
Mechanical unit 71,500 C 39,000 32,000
Pool decking 6,000 M 6,000
</TABLE>
<PAGE>
FOURWINDS
<TABLE>
<CAPTION>
ESTIMATED CAPITAL OR
REPAIR ITEM COST OPERATIONS UPDATE MAJOR MAINT. 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dock area 1,552,600 C 200,000 220,000 250,000 290,000 320,000
Patio door replacement 30,000 Included in room C 30,000
renovation in 1995
Wood siding replacement 12,000 Included in exterior C 12,000
area renovation in
1995
Building reroofing 85,000 C 85,000
HVAC unit replacement 73,000 C 40,000 40,000 20,000
Emergency generator 53,000 C 30,000
Pavement repair 23,000 M 20,000 3,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ESTIMATED CAPITAL OR
REPAIR ITEM COST OPERATIONS UPDATE MAJOR MAINT. 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Rotted Wood 13,000 Not planned but MM 6,000
Roof Eaves 500 Contingency in the 500
1995 Major Mainten-
ance Item.
Wooden Headers 500 Not planned. Can be MM 500
covered in 95 contin-
gency.
Block foundations 3,200 Not planned/Major MM 3,200
maintenance to 96.
Broken doors 1,000 We do this out of
operations as needed
Chimneys 600 Not planned. 1995 MM 600
contingency.
Reseal parking lot 4,000 Disagree with costs. MM 1,000
We will patch only
Gravel roads 4,800 Disagree. the roads MM 1,000
are not that bad.
Gravel roads are
part of the overall
experience. Some
patching/repair is
needed. not $4000.
Drainage 500 Agree. Major mainten- MM 500
ance in 1996.
Lodge masonry 2,200 Not planned. Can be MM 2,200
a 96 major mainten-
ance.
Furnaces 2,400 Not planned. Could be C 600 600 600 600
done 1/yr.
Lodge roof 5,600 Not planned, but needed. MM 1,400 1,400 1,400 1,400
1,400/yr for mainten-
ance.
Cabin replacement 240,000 These have another 10
years life.
ADA 9,000 Not required. C
TOTALS 287,300 3,600 13,900 2,000 2,000 2,000
</TABLE>
<PAGE>
SHERATON BUFFALO
<TABLE>
<CAPTION>
ESTIMATED CAPITAL OR
REPAIR ITEM COST OPERATIONS UPDATE MAJOR MAINT. 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sidewalk repairs 1,500 Planned in the 1995 Major MM 3,510
Maintenance Plan
Roof Repairs 6,200 Planned. MM 6,200
Compressor 10,800 Not planned. Can be done over C 3,600 3,600 3,600
a 3 year period.
Reseal pavement 11,000 Not planned. Can be a 1996 MM 11,000
major maintenance.
Cooling Tower 18,000 Agree. C 18,000
Exhaust Fans 11,700 replace as needed only.
Glass curtain walls 40,300 Disagree. Existing glass
is fine.
Water system 25,000 Replace when/if needed.
pavement repair 46,000 Agree but would do over a 2
year period. MM 13,000 11,000 11,000 11,000
ADA requirements 56,200 Not required. MM
TOTALS 226,700 9,710 27,600 14,600 32,600 11,000
</TABLE>
<PAGE>
AURORA INN
<TABLE>
<CAPTION>
REPAIR ITEM ESTIMATED CAPITAL OR
COST OPERATIONS UPDATE MAJOR MAINT. 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Water penetration 500 Will do out of 1995 contingency. MM 500
Parking Lot Repairs 15000 Completed over a 2 year period. MM 7500 7500
Damaged curbs 5000 Not planned. 1996 major Maintenance MM 5000
Trip hazards 1000 Will do out of 1995 contingency. MM 1000
Cracks in slabs. 500 Will seal with our Maintenance Dept.
Damage/Pool 500 Planned in 1995 Major Maintenance MM 500
Resurface pool 7000 Not planned. Can be 97 Major Maintenance C 7000
HVAC units 2500 Not planned. Not really needed. C 2500
This could be a capital expense in 1997.
Roof 9500 Not budgeted but we agree with the need. MM 6000 5450
HVAC Units 10000 5 per year. C 5000 5000
Cooling Tower 50000 Recommendation is to replace in 5 years.C 50000
Tennis courts 6000 Not planned. 1996 major maintenance. MM 6000
Circuit Breakers 2000 Rusted boxes by pool. MM 2000
Not Planned
Stairs 2500 Not planned. Deteriorating concrete. MM 2500
Chain link fence 7000 Disagree. Would repaint, not replace. 1000
Railroad ties 2000 Disagree with price. Can do locally
for 500. C 500
Decorative brick walls 3500 Planned as a 1995 Major Maintenance
Item. MM 3500
ADA requirements 30500 Not required. C
TOTALS 155000 5500 24500 23000 8450 55000
</TABLE>
<PAGE>
SHERATON LAKESIDE
<TABLE>
<CAPTION>
ESTIMATED CAPITAL
REPAIR ITEM COST OPERATIONS UPDATE MAJOR MAINT. 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Roof replacement 770000 repairs should be budgeted every year
as opposed to a total replacement. MM 9630 25000 25000 25000 25000
Soft screens 2000 Building #14. This is a 95 contingency
item. MM 2000
Stucco Repair 2500 Budgeted in the 95 Major Maintenance
plan. MM 2500
Foundation cracks 21400 Planned as a 95 major maintenance item. MM 21400
Wooden Fence 7000 Not needed. Repairs just made after
storm.
Pool decking 20000 Not planned. Can be a major maintenance
item in 1996. MM 20000
Pavement Repairs 28890 Planned major maintenance in 1995 MM 28890
Copper piping 60000 Do not feel the situation is bad enough
to warrant any expenditures at
this time.
ADA requirements 99525 Not required. C 64420 45000 25000 25000 25000
TOTALS 1011315
</TABLE>
<PAGE>
SHERATON DURHAM
<TABLE>
<CAPTION>
REPAIR ITEM COST OPERATIONS UPDATE MAJOR MAINT. 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Broken sidewalks 500 Will do immediately out of operations MM 500
Roof repairs 45000 Will repair over a four year period. MM 10000 10000 10000 10000
Pavement repairs 2500 Just done. This could be a 96 item MM 2500
Roof top HVAC 5000 This is an estimate for annual
maintenance. We can do this work with
our own
staff.
Exterior painting 200000 Front of building included in the 1995
major renovation budget. C 80000
Water heater 3500 Capital item included in the 95, 4
million dollar plan C 3500
Exterior caulking 10000 1996 Major Maintenance. MM 10000
Caulking of HVAC 15000 1996 Major Maintenance. MM 15000
ADA requirements 28440 Not required. C
TOTALS 309940 64000 37500 10000 10000 10000
</TABLE>
<PAGE>
SCHEDULE IX
EXCEPTIONS TO SECTION 7.03 LITIGATION REPRESENTATION
GNOMES KNOLL FARMS, INC. AND JOHN AND KAREN ADRAS V. AURORA INN
OPERATING PARTNERSHIP, L. P. AND REGAL-AIRCOA COMPANIES, INC.
On January 31, 1992, Plaintiffs filed a lawsuit and motion for
temporary restraining order, in which they asserted, INTER ALIA, a right to a
dollar-a-year, ten-year, non-cancelable oral lease of approximately 6.3 acres of
Pine Lake Trout Club ("Pine Lake") property adjacent to their residential
parcel, with a right to renew the lease for an additional ten years, a right of
first refusal to purchase the property, or alternatively, an equitable right to
an easement by estoppel. All allegations except the estoppel allegation were
disposed of by motion favorably to the Defendants. Plaintiffs asserted that in
the event of eviction their damages would be at least $250,000, representing
Plaintiffs' alleged investment in property improvements. A two-day trial to the
court was held beginning on February 1, 1993, and a verdict was entered in favor
of the Partnership. Plaintiffs appealed the verdict on or about April 7, 1993,
and the Ohio court of Appeals determined that the issues as to which summary
judgment was granted should be tried. Plaintiffs continue to assert that they
have the 10-20 year oral lease or a permanent easement-by-estoppel to the
disputed six-acre parcel. The Partnership estimates the disputed parcel to be
worth in excess of $250,000.00. The Partnership continues to believe that
Plaintiff's claims are meritless and that this lawsuit was filed to forestall
eviction of Plaintiffs from the Pine Lake property. The retrial, argued on
trail briefs and the previous trial record only, was held on May 17, 1995. The
Partnership's counsel believe that the second trial court's decision could take
several weeks at a minimum.
13-D FILING
A Schedule 13-D filing has been made by a group of investors in AHP
who claim to have acquired slightly more than 5% of the outstanding A Units.
These investors have proposed a transaction for the formation of a real estate
investment trust ("REIT") that would own the AHP properties and certain economy
lodging hotels that the investor group owns or controls. The materials and
correspondence received by AHP's management from the investor group contain
allegations of breaches of fiduciary duties and other improper actions by AHS as
general partner. We have reviewed the allegations made and have had them
reviewed by outside counsel as well, and both we and our outside counsel have
determined that the allegations are meritless. The investor group has
threatened to institute legal proceedings against AHP or the general
partner. The outcome of such legal proceedings, if instituted cannot be
predicted at this time. A copy of a letter dated May 6, 1995, from AHP to
the investor's representative responding to the investor's claims is
attached hereto for reference.
<PAGE>
SCHEDULE IX
AIRCOA E BIT A
--------------------------------------------------------------------------------
HOTEL PARTNERS, L.P.
May 6, 1995
VIA AIRBORNE EXPRESS
Mr. Michael S. McNulty
8235 Douglas Avenue, Suite 1300
Dallas, Texas 75225
RE: AIRCOA HOTEL PARTNERS, L.P. ("AHP")
Dear Michael:
I received your letter of April 28, 1995 and I have reviewed it with the
Board of Directors of AIRCOA Hospitality Services, Inc. ("AHP") and with the
Advisory Committee of AHP. There are a number of inaccuracies in your letter
that have been discussed by the members of the Board and the Advisory Committee
to which I would like to draw your attention. They include the following:
- EQUITY DETERIORATION ANALYSIS - We are aware that the appraised values
of the hotel properties have declined. What your analysis does not
take into account, however, is that while appraised values and net
equity fell over the period covered by your chart, AHP remained viable
and in business during a period when many hotel properties and their
operators went into bankruptcy and vanished. As you know, it is a
simple fact of the hotel business that the addition of new hotel rooms
and properties in a very competitive market (such as Orlando) will
tend to drive down the appraised value of existing hotel properties.
Your letter does not point out that the net equity of AHP actually
declined less than the decline in the appraised value of the
portfolio, in spite of competitive pressures and a difficult economy,
indicating that the Partnership's properties have performed well. The
numbers bear this out. Partnership revenue has increased every year
since 1991, while operating income (before depreciation and
amortization) increased by more than $1 million between 1992 and 1994.
<PAGE>
Mr. Michael McNulty
May 6, 1995
Page 2
- APPRAISED VALUES - The annual appraisals of the AHP properties are
conducted pursuant to the mortgage loan agreement and are directed by
the lender. Obviously, if we believed that the appraisals were not
reasonable, we would present our position to the appraisers and the
lender in order to try to achieve reasonable appraisals. However,
although we believe that the appraisals are reasonable, it should be
noted that appraisals of hotels have become much more conservative
in the last five years, contributing in part to the decline in the
appraised values over the time period you have tracked. Part of this
trend is due to problems in the banking industry and part of the
trend is due to the view that appraisals were inflated during
the 1980's. At the same time, the hotel industry has been affected by
declining average rates and occupancy levels until approximately 24
months ago. Therefore, we would suggest that the most recent
appraisals are more conservative than earlier appraisals.
- PROPOSED FINANCING AND DISTRIBUTIONS - Your letter states that the
proposed new Partnership financing will result in continued
depreciation in values and no dividends to unitholders. This is not
correct. There is no reason to expect that the new financing will
decrease the value of the AHP portfolio. The funds that will be made
available under the new line will make it possible for us to undertake
improvements that we believe will help increase the value of our
properties over the long term. In addition, as noted in the
Form 10-K, the new financing will, in fact, allow us to
make distributions in circumstances where we have not previously been
allowed. Of all of the loan packages we reviewed, the one we selected
had the lowest overall cost and significant flexibility with respect
to refinancing, asset sales, and distributions to unitholders. The
Board of AHS and the AHP Advisory Committee believe that the new
financing package is markedly superior to alternative financing
packages that we have explored.
- FORM 10-K DISCLOSURE - You state that the most recent Form 10-K
discloses for the first time that Class B Units are required to be
converted into Class A Units beginning in 1997. Actually, information
concerning the conversion of the Class B Units beginning in 1997 has
been set forth in the notes to the financial statements to the
Form 10-K for at least the past five years and was certainly
highlighted in the initial public offering prospectus.
<PAGE>
Mr. Michael McNulty
May 6, 1995
Page 3
- NEW LOAN ARRANGEMENTS - Your complaints (at least in this letter)
appear to revolve around the assumption that the new financing would
prevent or materially impede the sale of all or a portion of the
properties prior to 1997. The new financing would not prevent or
materially impede the sale of all or a portion of the portfolio at any
time during the life of the loan. The proceeds of any such
disposition would, of course, first be applied to amounts due on the
loan, as you would expect with a mortgage loan. In addition, we do
not believe that the new financing package prevents us from planning
ways to address the impact of I.R.S. Code Section 7704. As noted in
the 1994 Form 10-K at page II-8, we are aware of, and have been
considering, ways of minimizing any adverse impact of corporate
taxation on AHP.
With respect to your proposed "resolution," please be advised that AHP does
not intend to attempt to "redeem out" the interests of any of its partners by
making an in-kind distribution of its hotel properties. AHP is committed to
building value for all of its unitholders through the continued successful
operation of its hotel properties and such other actions as AHP deems
appropriate for all of its unitholders.
Even aside from the fact that AHP is not interested in disposing of its
properties at this time to redeem out the interest of certain of its partners,
we believe that your suggested transaction ignores or dismisses a number of
inportant issues.
- None of the unit owning entities affiliated with AHS has expressed any
interest in having their ownership interests in AHP redeemed in
exchange for AHP hotel properties. None of these affiliated entities
has any legal obligation to agree to such a transaction and AHP has no
legal basis for forcing this kind of exchange, assuming AHP otherwise
thought this transaction made sense.
- A disposition of four or five properties would almost certainly
constitute a sale of substantially all of the assets of the
Partnership for purposes of the Partnership Agreement, requiring
solicitations of proxies, filing of a detailed proxy statement with
the SEC and a vote of the unitholders. Contrary to your assertion
that the "process is quite simple," the time, effort and expense to
AHP and its partners in determining whether such a transaction would
be feasible and then implementing it if it were feasible, would be
substantial and burdensome.
<PAGE>
Mr. Michael McNulty
May 6, 1995
Page 4
- The existing AHP mortgage loan indebtedness is due and payable on July
31, 1995. The existing lenders expect to be repaid. They do not
intend to extend the loans beyond maturity while a complicated
division of property and new financing arrangements are worked out on
a divided portfolio. The fact that the lenders are "adequately
secured" does not change the due date of the existing first mortgage.
The loan arrangements we have negotiated with our new lender will permit us
to pay our existing mortgage lender on a timely basis. We believe that on all
counts - flexibility, cost and the ability to pay out distributions from
distributable cash flow - the new financing package constitutes an excellent
arrangement for AHP. We unequivocally reject your suggestion that the new
financing arrangement constitutes a breach of fiduciary duties. In fact, we
believe that we would have been open to legitimate criticism from unitholders if
we had selected one of the other more expensive or restrictive loan packages we
identified or that were made known to us.
The management of AHP remains committed to building value for all
unitholders. As we have said in the past, we are always willing to consider
suggestions from unitholders. The transaction you have proposed in your letter
of April 28, 1995 which calls for the effective dismemberment of the
Partnership, is not, in our view, a tenable way of building values for all
unitholders.
As a final point, we find it odd that you now state that the best
resolution would be to sell all of the properties (i.e., the liquidation of the
portfolio) and distribute the net proceeds to unitholders. This is completely
at odds with previous correspondence from your group. In February, just two and
one-half months ago, you accused management of orchestrating a "de facto
liquidation of the portgolio without seeking unitholder approval. Indeed, in the
"Executive Summary" you presented to us at that time you stated that "Aircoa is
in a liquidation mode" and added "LIQUIDATION LEAVES A LOT OF MONEY ON THE
TABLE"(emphasis in the original). The complete flip-flop in your position is
confusing to us and raises questions as to the Investor Group's motives.
Only two elements of your various communications with us since February
have been consistent. First, each transaction proposed by you would result in
your Investor Group having substantial control in AHP. Second, in each case you
attempt to coerce AHS and its affiliates into accepting less than fair value for
their interests by making implied threats to sue over alleged breaches of
fiduciary duties. As we have previously expressed to your group in a letter
from our outside counsel to Mr. Gardner-Smith, we categorically reject your
allegations of breaches of fiduciary duty.
<PAGE>
Mr. Michael McNulty
May 6, 1995
Page 5
Given that we have no interest in discussing your proposed transaction we
see no useful reason to meet with the Investor Group at this time.
Sincerely,
AIRCOA Hotel Partners, L.P.
By AIRCOA Hospitality Services, Inc.,
its general partner
/s/ Douglas M. Pasquale
Executive Vice President
Chief Financial Officer
cc: AHS Board of Directors
AHP Advisory Committee
<PAGE>
SCHEDULE X
MANAGEMENT AGREEMENTS
1. Sheraton Inn-Buffalo East
Management Agreement dated February 20, 1987 between AIRCOA Hotel Partners,
L.P., a Delaware limited partnership ("APH"), and Associated Inns &
Restaurants Company Of America, a Delaware corporation ("AIRCOA"), as
assigned and assumed by Assignment And Assumption Agreement dated February
20, 1987 between AHP and Buffalo Operating Partnership, L.P., a Delaware
limited partnership ("BOL"), and as assigned and assumed by Assignment And
Assumption Of Management Agreement dated November 5, 1993 by and among BOL,
AIRCOA Hospitality Services, Inc. and Richfield Hotel Management, Inc.
("Richfield").
2. Sheraton University Center (Durham)
Management Agreement dated February 20, 1987 between AHP and AIRCOA, as
assigned and assumed by Assignment And Assumption Agreement dated February
20, 1987 between AHP and Durham Operating Partnership, L.P., a Delaware
limited partnership ("DOL"), and as assigned and assumed by Assignment And
Assumption Of Management Agreement dated November 5, 1993 by and among DOL,
AIRCOA Hospitality Services, Inc. and Richfield.
3. Sheraton-Lakeside Inn
Management Agreement dated February 20, 1987 between AHP and AIRCOA, as
assigned and assumed by Assignment And Assumption Agreement dated February
20, 1987 between AHP and Lakeside Operating Partnership, L.P., a Delaware
limited partnership ("LOL"), and as assigned and assumed by Assignment And
Assumption Of Management Agreement dated November 5, 1993 by and among LOL,
AIRCOA Hospitality Services, Inc. and Richfield.
4. Fourwinds-A Clarion Resort
Management Agreement dated February 20, 1987 between AHP and AIRCOA, as
assigned and assumed by Assignment And Assumption Agreement dated
February 20, 1987 between AHP and Fourwinds Operating Partnership, L.P., a
Delaware limited partnership ("FOL"), and as assigned and assumed by
Assignment And Assumption Of Management Agreement dated November 5, 1993 by
and among FOL, AIRCOA Hospitality Services, Inc. and Richfield.
<PAGE>
$18,085,000 June 8, 1995
New York, New York
PROMISSORY NOTE
FOR VALUE RECEIVED, AIRCOA HOTEL PARTNERS, L.P., AURORA IN AIRCOA
OPERATING PARTNERSHIP, L.P., FOURWINDS OPERATING PARTNERSHIP, L.P., MCCORMICK
RANCH OPERATING PARTNERSHIP, L.P., BUFFALO OPERATING PARTNERSHIP, L.P., LAKESIDE
OPERATING PARTNERSHIP, L.P. and DURHAM OPERATING PARTNERSHIP, L.P., each being
a Delaware limited partnership (collectively, the "COMPANY") hereby jointly and
severally promise to pay to THE HONGKONG AND SHANGHAI BANKING CORPORATION
LIMITED (the "BANK"), for account of its Applicable Lending Office provided for
by the Credit Agreement referred to below, at its principal New York office at
140 Broadway, New York, New York 10005-1196, the principal amount of Eighteen
Million Eighty-Five Thousand Dollars ($18,085,000), in lawful money of the
United States of America and in immediately available funds, on the days and
in the principal amounts provided in the Credit Agreement, and to pay interest
on the unpaid principal amount hereof, at such office, in like money and funds,
for the period commencing on the date hereof until such principal amount shall
be paid in full, at the rates per annum and on the dates provided in the Credit
Agreement.
The date, amount, interest rate and duration of Interest Period (if
applicable) of the principal amount evidenced hereby, and each payment made on
account thereof, shall be recorded by the Bank on its books and prior to any
transfer of this Promissory Note, endorsed by the Bank on the schedule attached
hereto or any continuation thereof, PROVIDED that the failure of the Bank to
make any such recordation or endorsement shall not affect the obligations of the
Company to make a payment when due of any amount owing under the Credit
Agreement of hereunder in respect of the principal amount evidenced hereby.
This Promissory Note is the Mortgage Note referred to in the Credit
Agreement dated as of June 8, 1995 (as amended from time to time, the "CREDIT
AGREEMENT") between the Company and Bank, and evidences in part the Mortgage
Loan made by the Bank thereunder. Terms used but not defined in this Promissory
Note have the respective meanings assigned to them in the Credit Agreement.
The Credit Agreement provides for the acceleration of the maturity of
this Note upon the occurrence of certain events and for prepayments of the
Loans upon the terms and conditions specified therein.
Except as permitted by Section 10.06(b) and (c) of the Credit
Agreement, this Note may not be assigned by the Bank to any other Person.
Exhibit 10.40a
<PAGE>
2
This Promissory Note shall be governed by and construed in accordance
with the law of the State of New York.
AIRCOA HOTEL PARTNERS, L.P.
By: AIRCOA HOSPITALITY SERVICES,
INC., its general partner
By:/s/ Michael Sheh
---------------------
Michael Sheh
Senior Vice President
By:/s/ David C. Ridgley
--------------------
Vice President
AURORA INN OPERATING
PARTNERSHIP, L.P.
By: AIRCOA HOSPITALITY SERVICES,
INC., its general partner
By:/s/ Michael Sheh
----------------------------
Michael Sheh
Senior Vice President
By:/s/David C. Ridgley
----------------------------
David C. Ridgley
Vice President
<PAGE>
3
FOURWINDS OPERATING
PARTNERSHIP, L.P.
By: AIRCOA HOSPITALITY SERVICES,
INC., its general partner
By:/s/Michael Sheh
----------------
Michael Sheh
Senior Vice President
By:/s/David C. Ridgley
-----------------
David C. Ridgley
Vice President
MCCORMICK RANCH OPERATING
PARTNERSHIP, L.P.
By: AIRCOA HOSPITALITY SERVICES,
INC., its general partner
By:/s/Michael Sheh
----------------------------
Michael Sheh
Senior Vice President
By:/s/David C. Ridgley
----------------------------
David C. Ridgley
Vice President
<PAGE>
4
BUFFALO OPERATING PARTNERSHIP,
L.P.
By: AIRCOA HOSPITALITY SERVICES,
INC., its general partner
By:/s/Michael Sheh
----------------
Michael Sheh
Senior Vice President
By:/s/David C. Ridgley
-----------------
David C. Ridgley
Vice President
LAKESIDE OPERATING PARTNERSHIP,
L.P.
By: AIRCOA HOSPITALITY SERVICES,
INC., its general partner
By:/s/Michael Sheh
----------------------------
Michael Sheh
Senior Vice President
By:/s/David C. Ridgley
----------------------------
David C. Ridgley
Vice President
<PAGE>
5
DURHAM OPERATING PARTNERSHIP, L.P.
By: AIRCOA HOSPITALITY SERVICES,
INC., its general partner
By:/s/Michael Sheh
----------------
Michael Sheh
Senior Vice President
By:/s/David C. Ridgley
-----------------
Michael Sheh
Vice President
Address for Notices:
5775 DTC Boulevard
Englewood, CO 80111
Attention: Michael Sheh
Senior Vice President
Telecopier No.: 303-220-2341
Telephone No.: 303-220-2000
with a copy to:
5775 DTC Boulevard
Englewood, CO 80111
Attn: Lyle Boll, Esq.
Corporate Counsel
<PAGE>
SCHEDULE OF LOAN
This Mortgage Note evidences the Mortgage Loan made under the within-
described Credit Agreement to the Company, on the date, in the principal amount,
bearing interest at the rates and having Interest Periods (if applicable) of the
durations set forth below, subject to the payments, conversion and prepayments
of principal set forth below:
Amount
Date Prin- Paid,
Made, cipal Duration Prepaid Unpaid
Continued Amount of Continued Prin- Notation
or of Interest Interest or cipal
Converted Loan Rate Period Converted Amount Made by
--------- ------ ------ -------- --------- ------ -------
<PAGE>
$1,000,000 June 8, 1995
New York, New York
PROMISSORY NOTE
FOR VALUE RECEIVED, AIRCOA HOTEL PARTNERS, L.P., AURORA INN OPERATING
PARTNERSHIP, L.P., FOURWINDS OPERATING PARTNERSHIP, L.P., MCCORMICK RANCH
OPERATING PARTNERSHIP, L.P., BUFFALO OPERATING PARTNERSHIP, L.P., LAKESIDE
OPERATING PARTNERSHIP, L.P. and DURHAM OPERATING PARTNERSHIP, L.P., each being
a Delaware limited partnership (collectively, the "COMPANY"), hereby jointly and
severally promise to pay to THE HONGKONG AND SHANGHAI BANKING CORPORATION
LIMITED (the "BANK"), for account of its Applicable Lending Office provided for
by the Credit Agreement referred to below, at its principal New York office at
140 Broadway, New York, New York 10005-1196, the principal amount of One Million
Dollars ($1,000,000) (or, such lesser amount as shall equal the aggregate unpaid
principal amount of the Revolving Loans made by the Bank to the Company under
the Credit Agreement), in lawful money of the United States of America and in
immediately available funds, on the dates and in the principal amounts provided
in the Credit Agreement, and to pay interest on the unpaid principal amount
hereof, at such office, in like money and funds, for the period commencing on
the date hereof until such principal amount shall be paid in full at the rates
per annum and on the dates provided in the Credit Agreement.
The date, amount, interest rate and duration of Interest Period (if
applicable) of the principal amount evidenced hereby, and each payment made on
account thereof, shall be recorded by the Bank on its books and, prior to any
transfer of this Promissory Note, endorsed by the Bank on the schedule attached
hereto or any continuation thereof, PROVIDED, that the failure of the Bank to
make any such recordation or endorsement shall not affect the obligations of the
Company to make a payment when due of any amount owing under the Credit
Agreement or hereunder in respect of the principal amount evidenced hereby.
This Promissory Note is the Revoling Note referred to in the Credit
Agreement dated as of June 8, 1995 (as amended from time to time, the "CREDIT
AGREEMENT") between the Company and Bank, and evidences the Revoling
Loans made by the Bank thereunder. Terms used but not defined in this
Note have the respective meanings assigned to them in the Credit Agreement.
The Credit Agreement provides for the acceleration of the maturity of this
Note upon the occurrence of certain events and for prepayments of the Revolving
Loans upon the terms and conditions specified therein.
Exhibit 10.40b
<PAGE>
2
Except as permitted by Section 10.06(b) and (c) of the Credit Agreement,
this Note may not be assigned by the Bank to any other Person.
This Promissory Note shall be governed by and construed in accordance with
the law of the State of New York.
AIRCOA HOTEL PARTNERS, L.P.
By: AIRCOA HOSPITALITY SERVICES,
INC., its general partner
By:/s/ Michael Sheh
------------------------------
Michael Sheh
Senior Vice President
By:/s/ David C. Ridgley
------------------------------
David C. Ridgley
Vice President
AURORA INN OPERATING
PARTNERSHIP, L.P.
By: AIRCOA HOSPITALITY SERVICES,
INC., its general partner
By:/s/ Michael Sheh
------------------------------
Michael Sheh
Senior Vice President
By:/s/ David C. Ridgley
------------------------------
David C. Ridgley
Vice President
<PAGE>
3
FOURWINDS OPERATING
PARTNERSHIP, L.P.
By: AIRCOA HOSPITALITY SERVICES,
INC., its general partner
By:/s/ Michael Sheh
------------------------------
Michael Sheh
Senior Vice President
By:/s/ David C. Ridgley
------------------------------
David C. Ridgley
Vice President
By: AIRCOA HOSPITALITY SERVICES,
INC., its general partner
By:/s/Michael Sheh
----------------
Michael Sheh
Senior Vice President
By:/s/David C. Ridgley
-----------------
David C. Ridgley
Vice President
MCCORMICK RANCH OPERATING
PARTNERSHIP, L.P.
By: AIRCOA HOSPITALITY SERVICES,
INC., its general partner
By:/s/Michael Sheh
----------------------------
Michael Sheh
Senior Vice President
By:/s/David C. Ridgley
----------------------------
David C. Ridgley
Vice President
LAKESIDE OPERATING PARTNERSHIP,
L.P.
By: AIRCOA HOSPITALITY SERVICES,
INC., its general partner
By:/s/Michael Sheh
----------------------------
Michael Sheh
Senior Vice President
By:/s/David C. Ridgley
----------------------------
David C. Ridgley
Vice President
DURHAM OPERATING PARTNERSHIP, L.P.
BUFFALO OPERATING PARTNERSHIP,
L.P.
By: AIRCOA HOSPITALITY SERVICES,
INC., its general partner
By:/s/ Michael Sheh
------------------------------
Michael Sheh
Senior Vice President
By:/s/ David C. Ridgley
------------------------------
David C. Ridgley
Vice President
<PAGE>
5
DURHAM OPERATING PARTNERSHIP, L.P.
By: AIRCOA HOSPITALITY SERVICES,
INC., its general partner
By:/s/ Michael Sheh
------------------------------
Michael Sheh
Senior Vice President
By:/s/ David C. Ridgley
------------------------------
David C. Ridgley
Vice President
Address for Notices:
5775 DTC Boulevard
Englewood, CO 80111
Attention: Michael Sheh
Senior Vice President
Telecopier No.: 303-220-2341
Telephone No.: 303-220-2000
with a copy to:
5775 DTC Boulevard
Englewood, CO 80111
Attn: Lyle Boll, Esq.
Corporate Counsel
<PAGE>
SCHEDULE OF LOAN
This Mortgage Note evidences the Mortgage Loan made under the within-
described Credit Agreement to the Company, on the date, in the principal amount,
bearing interest at the rates and having Interest Periods (if applicable) of the
durations set forth below, subject to the payments, conversion and prepayments
of principal set forth below:
Amount
Date Prin- Paid,
Made, cipal Duration Prepaid Unpaid
Continued Amount of Continued Prin- Notation
Converted Loan Rate Period Converted Amount Made by
--------- ------ ------ -------- --------- ------ -------
<PAGE>
$17,690,000 June 8, 1995
New York, New York
RENEWAL NOTE
FOR VALUE RECEIVED, AIRCOA HOTEL PARTNERS, L.P., a Delaware limited
partnership (the "COMPANY") hereby promises to pay to THE HONGKONG AND SHANGHAI
BANKING CORPORATION LIMITED (the "BANK"), for account of its Applicable Lending
Office provided for by the Credit Agreement referred to below, at its principal
New York office at 140 Broadway, New York, New York 10005-1196, the principal
amount of Seventeen Million Six Hundred Ninety Thousand and 00/100 Dollars
($17,690,000), in lawful money of the United States of America and in
immediately available funds, on the dates and in the principal amounts provided
in the Credit Agreement, and to pay interest on the unpaid principal amount
hereof, at such office, in like money and funds, for the period commencing on
the date hereof until such principal amount shall be paid in full, at the rates
per annum and on the dates provided in the Credit Agreement.
The date, amount, interest rate and duration of Interest Period (if
applicable) of the principal amount evidenced hereby, and each payment made on
account thereof, shall be recorded by the Bank on its books and, prior to any
transfer of this Renewal Note, endorsed by the Bank on the schedule attached
hereto or any continuation thereof, PROVIDED that the failure of the Bank to
make any such recordation or endorsement shall not affect the obligations of the
Company to make a payment when due of any amount owing under the Credit
Agreement or hereunder in respect of the principal amount evidenced hereby.
This Renewal Note is the Florida Renewal Note referred to in the
Credit Agreement dated as of June 8, 1995 (as amended from time to time, the
"CREDIT AGREEMENT") between the Company and Bank, and evidences in part the
Mortgage Loan made by the Bank thereunder. Terms used but not defined in this
Renewal Note have the respective meanings assigned to them in the Credit
Agreement.
The Credit Agreement provides for the acceleration of the maturity of
this Renewal Note upon the occurrence of certain events and for prepayments of
the Loans upon the terms and conditions specified therein.
Except as permitted by Section 10.06(b) and (c) of the Credit
Agreement, this Renewal Note may not be assigned by the Bank to any other
Person.
Exhibit 10.40c
<PAGE>
This Renewal Note shall be governed by and construed in accordance with the
law of the State of New York.
AIRCOA HOTEL PARTNERS, L.P.
By: AIRCOA HOSPITALITY SERVICES,
INC., its general partner
By:/s/ Michael Sheh
------------------------------
Michael Sheh
Senior Vice President
By:/s/ David C. Ridgley
------------------------------
David C. Ridgley
Vice President
<PAGE>
SCHEDULE OF LOAN
This Renewal Note evidences in part the Mortgage Loan made under the
within-described Credit Agreement to the Company, on the date, in the principal
amount, bearing interest at the rates and having Interest Periods (if
applicable) of the durations set forth below, subject to the payments,
conversion and prepayments of principal set forth below:
Amount
Date Prin- Paid,
Made, cipal Duration Prepaid Unpaid
Continued Amount of Continued Prin- Notation
or of Interest Interest or cipal
Converted Loan Rate Period Converted Amount Made by
--------- ------ ------ -------- --------- ------ -------
<PAGE>
NOTE
----
$90,000,000 New York, New York
February 20, 1987
FOR VALUE RECEIVED, the undersigned, AIRCOA HOTEL PARTNERS, L.P., a
Delaware limited partnership (the "Borrower"), hereby promises to pay to the
order of BANKERS TRUST COMPANY (the "Agent") on January 31, 1992, for the
ratable benefit of the Lenders, the lesser of the principal sum of NINETY
MILLION DOLLARS ($90,000,000) or the aggregate unpaid principal amount of all
Loans made by the Lenders to the Borrower pursuant to the Agreement.
The Borrower shall pay interest on the unpaid principal amount hereof from
time to time outstanding from the date hereof until such principal amount is
paid in full at the rates per annum set forth in or established pursuant to the
Loan Agreement of even date herewith by and among the Borrower, as borrower,
Bankers Trust Company and Cassa Di Risparmio Di Torino, New York Branch, as
Lenders, and Bankers Trust Company, as Agent (as the same may from time to time
be amended or otherwise, modified the "Agreement"). Such interest shall be
payable on such dates as are determined from time to time pursuant to the
Agreement and shall be calculated as therein provided.
Both the principal hereof and the interest her on are payable in
immediately available funds at the Payment Office or at such other place as the
Agent may specify in writing.
The Agent shall, and is hereby authorized by the Borrower to, note on
the schedule(s) annexed hereto and constituting a part hereof the date and
amount of each Loan made by the Lenders pursuant to the Agreement, the type of
each such Loan as a Prime Rate Loan, a CD Rate Loan, a Eurodollar Loan or a
Special Rate Loan, the last day of each Interest Period applicable thereto and
each conversion of a Loan.
Presentment, protest and other notice of any kind are hereby expressly
waived.
This Note is secured by the Security Documents and is entitled to the
benefit thereof.
The personal obligation of the Borrower in respect of the Indebtedness
evidenced hereby is limited as set forth in SECTION 9.15 of the Agreement.
<PAGE>
In the event that any action, suit or other proceeding is brought by
the holder hereof to collect this Note, the Borrower shall be liable for all
court costs and expenses of collection, including, without limitation,
attorneys' fees and disbursements.
This Note is executed and delivered to the Agent pursuant to the
Agreement, and is entitled to the benefits of the Agreement, which, among other
things, contains provisions for the acceleration of the maturity hereof upon the
happening of certain stated events. All capitalized terms used in the Agreement
are used herein with the same meanings as are set forth in the Agreement.
This Note shall be governed by and construed and enforced in
accordance with the laws of the State of New York applicable to contracts made
and to be performed wholly within such State, without reference to any choice or
conflict of laws rules.
This Note, to the extent of $59,627,713, to the extent of the Durham
Refinancing Loan, if made, and to the extent of the Kona Refinancing Loan, if
made, does not create any additional or further indebtedness other than that
evidenced by the original notes initially secured by existing mortgages assigned
to the Agent or refinanced with Loan proceeds.
No more than $19,000,000 of the Indebtedness evidenced hereby is
secured by the fee and leasehold estates of the Borrower or any other Person in
the properties comprising or underlying the Buffalo Lease.
This Note may not be modified or discharged orally or otherwise,
except by a writing duly executed by the holder hereof.
AIRCOA HOTEL PARTNERS, L.P.
By: Associated Inns &
Restaurants Company of
America, General Partner
By:/s/ Frank D. Palmer
--------------------------------
Title: Vice President
-2-
<PAGE>
SCHEDULE OF PRIME RATE, CD RATE, EURODOLLAR
LOANS, SPECIAL RATE LOANS AND PAYMENTS AND
CONVERSIONS OF PRINCIPAL MADE PURSUANT TO THE AGREEMENT
Type of Loan
(Prime Rate, CD Rate Amount
Eurodollar Rate or Last Day of Amount Paid or Amount Notation
Date Special Rate) Interest Period of Loan Prepaid Converted Made By
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
-3-
<PAGE>
$9,225,000 June 8, 1995
New York, New York
PROMISSORY NOTE
FOR VALUE RECEIVED, BUFFALO OPERATING PARTNERSHIP, L.P., a Delaware
limited partnership (collectively, the "COMPANY") hereby promises to pay to THE
HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED (the "BANK"), for account of
its Applicable Lending Office provided for by the Credit Agreement referred to
below, at its principal New York office at 140 Broadway, New York, New York
10005-1196, the principal amount of Nine Million Two Hundred Twenty-Five
Thousand and 00/100 Dollars ($9,225,000), in lawful money of the United States
of America and in immediately available funds, on the dates and in the principal
amounts provided in the Credit Agreement, and to pay interest on the unpaid
principal amount hereof, at such office, in like money and funds, for the period
commencing on the date hereof until such principal amount shall be paid in full,
at the rates per annum and on the dates provided in the Credit Agreement.
This Note restates in its entirety and is given in substitution for a
portion of that certain note in the original principal amount of $90,000,000
dated as of February 20, 1987 made by AIRCOA for the benefit of Bankers Trust
Company which Note was assigned by Bankers Trust company to the Bank and split
pursuant to a Note Severance Agreement dated as of the date hereof between
AIRCOA and the Bank into two separate and distinct notes one of which is
evidenced hereby.
The date, amount, interest rate and duration of Interest Period (if
applicable) of the principal amount evidenced hereby, and each payment made on
account thereof, shall be recorded by the Bank on its books and, prior to any
transfer of this Promissory Note, endorsed by the Bank on the schedule attached
hereto or any continuation thereof, PROVIDED that the failure of the Bank to
make any such recordation or endorsement shall not affect the obligations of the
Company to make a payment when due of any amount owing under the Credit
Agreement or hereunder in respect of the principal amount evidenced hereby.
This Promissory Note is the New York Restated Note referred to in the
Credit Agreement dated as of June 8, 1995 (as amended from time to time, the
"CREDIT AGREEMENT") between the Company and Bank, and evidences in part the
Mortgage Loan made by the Bank thereunder. Terms used but not defined in this
Promissory Note have the respective meanings assigned to them in the Credit
Agreement.
The Credit Agreement provides for the acceleration of the maturity of
this Promissory Note upon the occurrence of certain events and
Exhibit 10.40d
<PAGE>
2
for prepayments of the Loans upon the terms and conditions specified therein.
Except as permitted by Section 10.06(b) and (c) of the Credit
Agreement, this Promissory Note may not be assigned by the Bank to any other
Person.
This Promissory Note shall be governed by and construed in accordance
with the law of the State of New York.
BUFFALO OPERATING PARTNERSHIP, L.P.
By: AIRCOA HOSPITALITY SERVICES,
INC., its general partner
By: /s/ Michael Sheh
--------------------------------
Michael Sheh
Senior Vice President
By: /s/ David C. Ridgley
--------------------------------
David C. Ridgley
Vice President
Address for Notices:
5775 DTC Boulevard
Englewood, CO 80111
Attention: Michael Sheh
Senior Vice President
Telecopier No.: 303-220-2341
Telephone No.: 303-220-2000
with a copy to:
5775 DTC Boulevard
Englewood, CO 80111
Attn: Lyle Boll, Esq.
Corporate Counsel
<PAGE>
SCHEDULE OF LOAN
This Promissory Note evidences in part the Mortgage Loan made under
the within-described Credit Agreement to the Company, on the date, in the
principal amount, bearing interest at the rates and having Interest Periods (if
applicable) of the durations set forth below, subject to the payments,
conversion and prepayments of principal set forth below:
Amount
Date Prin- Paid,
Made, cipal Duration Prepaid Unpaid
Continued Amount of Continued Prin-
or of Interest Interest or cipal Notation
Converted Loan Rate Period Converted Amount Made by
--------- ------ -------- -------- --------- ------ --------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 3,615
<SECURITIES> 0
<RECEIVABLES> 2,289
<ALLOWANCES> 0
<INVENTORY> 442
<CURRENT-ASSETS> 6,694
<PP&E> 95,998
<DEPRECIATION> 29,250
<TOTAL-ASSETS> 74,527
<CURRENT-LIABILITIES> 9,287
<BONDS> 49,830
<COMMON> 0
0
0
<OTHER-SE> 15,157
<TOTAL-LIABILITY-AND-EQUITY> 74,527
<SALES> 0
<TOTAL-REVENUES> 23,236
<CGS> 0
<TOTAL-COSTS> 20,850
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,402
<INCOME-PRETAX> (16)
<INCOME-TAX> 0
<INCOME-CONTINUING> (16)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (16)
<EPS-PRIMARY> (.11)<F1>
<EPS-DILUTED> 0
<FN>
<F1>Applies to Class A Unitholders only. Class B Unitholders Primary EPS is .61.
</FN>
</TABLE>
