<PAGE>
================================================================================
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-K
[X] Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1996
OR
[_] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission File Number: 0-15736
COURTYARD BY MARRIOTT LIMITED PARTNERSHIP
-----------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 52-1468081
- ----------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10400 Fernwood Road
Bethesda, Maryland 20817
- ----------------------------------- ----------------------------------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: 301-380-2070
Securities registered pursuant to Section 12(b) of the Act:
Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
Title of Class
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. Yes ___ No ____ (Not Applicable). On August 25, 1992, the
Registrant filed an application for relief from the reporting requirements of
the Securities Exchange Act of 1934 pursuant to Section 12(h) thereof. Pursuant
to a grant of relief requested in such application, the Registrant was not
required to, and did not make, any filings pursuant to the Securities Exchange
Act of 1934 from October 23, 1989 until the application was voluntarily
withdrawn on January 27, 1998.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ] (Not Applicable)
Documents Incorporated by Reference
None
================================================================================
<PAGE>
- --------------------------------------------------------------------------------
Courtyard by Marriott Limited Partnership
================================================================================
TABLE OF CONTENTS
-----------------
PAGE NO.
----------
PART I
<TABLE>
<CAPTION>
<S> <C> <C>
Item 1. Business.................................................... 1
Item 2. Properties.................................................. 7
Item 3. Legal Proceedings........................................... 9
Item 4. Submission of Matters to a Vote of Security Holders......... 9
PART II
Item 5. Market For The Partnership's Limited Partnership Units
and Related Security Holder Matters......................... 9
Item 6. Selected Financial Data..................................... 11
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 11
Item 8. Financial Statements and Supplementary Data................. 16
Item 9. Changes In and Disagreements With Accountants on Accounting
and Financial Disclosure.................................... 31
PART III
Item 10. Directors and Executive Officers............................ 31
Item 11. Management Remuneration and Transactions.................... 32
Item 12. Security Ownership of Certain Beneficial Owners
and Management.............................................. 32
Item 13. Certain Relationships and Related Transactions.............. 33
PART IV
Item 14. Exhibits, Supplemental Financial Statement Schedules
and Reports on Form 8-K..................................... 37
</TABLE>
<PAGE>
PART I
ITEM 1. BUSINESS
Description of the Partnership
Courtyard by Marriott Limited Partnership, a Delaware limited partnership (the
"Partnership"), was formed on July 15, 1986 to acquire and own 50 Courtyard by
Marriott hotels (the "Hotels") and the respective fee or leasehold interests in
the land on which the Hotels are located. The Hotels are located in 16 states
and contain a total of 7,223 guest rooms as of December 31, 1996. The
Partnership commenced operations on August 20, 1986 and will terminate on
December 31, 2086, unless earlier dissolved.
The sole general partner of the Partnership is CBM One Corporation, a Delaware
corporation (the "General Partner"), a wholly-owned subsidiary of Host Marriott
Corporation ("Host Marriott"). On October 8, 1993, Marriott Corporation's
operations were divided into two separate companies: Host Marriott and Marriott
International, Inc. ("MII"). On December 29, 1995, Host Marriott's operations
were divided into two separate companies: Host Marriott, which continued the
business of owning lodging properties and Host Marriott Services Corporation
which continued the business of concession operations at airports and toll
roads.
The Partnership is engaged solely in the business of owning and operating hotels
and therefore is engaged in one industry segment. The principal offices of the
Partnership are located at 10400 Fernwood Road, Bethesda, Maryland 20817.
The Hotels are operated as part of the Courtyard by Marriott system, which
includes over 286 hotels worldwide in the moderately-priced segment of the U.S.
lodging industry. The Hotels are managed by Courtyard Management Corporation
(the "Manager"), a wholly-owned subsidiary of MII. As part of the refinancing
in March 1997, the two Operating Agreements were converted into a single
management agreement (the "Management Agreement") effective January 4, 1997.
The initial term of the Management Agreement expires at the end of 2017. The
Manager can extend the Management Agreement for up to four successive periods of
ten years. The Hotels have the right to use the Courtyard by Marriott name
pursuant to the Management Agreement and, if the Management Agreement is
terminated or not renewed, the Partnership would lose that right for all
purposes (except as part of the Partnership's name). See Item 13 "Certain
Relationships and Related Transactions."
The objective of the Courtyard by Marriott system, including the Hotels, is to
provide consistently superior lodging at a fair price with an appealing,
friendly and contemporary residential character. Courtyard by Marriott hotels
have fewer guest rooms than traditional, full-service hotels, containing
approximately 150 guest rooms, including approximately 12 suites, as compared to
full-service Marriott hotels which typically contain 350 or more guest rooms.
Each Courtyard by Marriott hotel is designed around a courtyard area containing
a swimming pool (indoor pool in northern climates), walkways, landscaped areas
and a gazebo. Each Hotel generally contains a small lobby, a restaurant with
seating for approximately 50 guests, a lounge, a hydrotherapy pool, a guest
laundry, an exercise room and two small meeting rooms. The hotels do not
contain as much public space and related facilities as full-service hotels.
1
<PAGE>
Courtyard by Marriott hotels are designed for business and vacation travelers
who desire high quality accommodations at moderate prices. Most of the Hotels
are located in suburban areas near office parks or other commercial activities.
See Item 2 "Properties." Courtyard by Marriott hotels provide large, high
quality guest rooms which contain furnishings comparable in quality to those in
full-service Marriott hotels. Each guest room contains a large, efficient work
desk, remote control television, a television entertainment package, in-room
coffee and tea services and other amenities. Approximately 70% of the guest
rooms contain king-size beds.
Organization of the Partnership
On August 20, 1986, the Partnership began operations and executed a purchase
agreement (the "Purchase Agreement") with Host Marriott to acquire the Hotels,
all related personal property, and the fee or leasehold interests in the land on
which the Hotels are located. On August 20, 1986 (the "Final Closing Date"),
1,150 units of limited partnership interests (the "Units") in the Partnership,
representing a 95% interest in the Partnership, had been sold in a private
placement offering. The offering price per Unit was $100,000, $15,200 payable
at subscription with the balance due in four annual installments through March
31, 1990, or, as an alternative, $88,372 in cash at closing as full payment of
the subscription price. The limited partners paid $23,899,000 as of the Final
Closing Date, representing 1,062 Units purchased on the installment basis and 88
Units paid in full. The limited partners' obligations to make the installment
payments were evidenced by promissory notes (the "Investor Notes") payable to
the Partnership and secured by the Units. On August 20, 1986, the General
Partner made capital contributions consisting of $1,211,000 in cash and land on
which certain of the Hotels are located valued at $4,842,000 for its 5% general
partner interest.
The total purchase price under the Purchase Agreement was $448.2 million. Of
this total, $374.7 million was paid in cash from the proceeds of the mortgage
financing and the initial installment on the sale of the Units with the
remaining $73.5 million paid in the form of a note payable to Host Marriott
(which has since been repaid). Twenty-eight of the Hotels were conveyed to the
Partnership in 1986, twenty-one Hotels in 1987 and the final Hotel in January
1988.
Debt Financing
As of December 31, 1996, the Partnership had a $282.2 million non-recourse
mortgage loan for 49 of the 50 Partnership Hotels (the "49 Hotels Loan"). The
49 Hotels Loan required minimum annual principal payments of $7 million. In
addition, the 49 Hotels Loan required that certain percentages of cash flow be
used to paydown the loan as follows: (i) 100% of available cash flow, as
defined, was used to pay principal until the loan balance was below $300
million, (ii) 80% of available cash flow, as defined, was used to pay principal
if the loan balance was between $250 million and $299 million, and (iii) 75% of
available cash flow, as defined, was used to pay principal, if the loan balance
was $250 million or less. The 49 Hotels Loan would have matured on June 15,
1997; however, the term could have been extended for two one-year terms if
certain performance operating profit levels, as defined, were met. These
performance levels were met for 1995 and 1996. During 1996, the Partnership
repaid $28.4 million of principal on the 49 Hotels Loan. In addition, the
Partnership repaid $8.2 million of principal from fourth quarter 1996
Partnership operations in February 1997. The loan bore interest at LIBOR plus
1.5 percentage points from January 1, 1996 through June 15, 1996 and LIBOR plus
1.75 percentage points from June 16, 1996 through December 31, 1996. The
weighted average interest rate was 7.1% for 1996.
2
<PAGE>
In addition, as of December 31, 1996, the Partnership had $6.3 million of non-
recourse debt related to the Windsor Connecticut Hotel (the "Windsor Loan").
The Windsor Loan bore interest at a floating rate equal to the adjusted CD rate
or LIBOR plus two percentage points. Amortization of the Windsor Loan began in
1992 with a scheduled maturity of August 15, 1996. In exchange for Host
Marriott providing a guaranty of repayment of the loan balance at maturity, the
lender agreed to extend the maturity to March 31, 1997. The weighted average
interest rate for 1996 was 7.46%.
On March 21, 1997 (the "Refinancing Date") both the 49 Hotels Loan and the
Windsor Loan were refinanced. The total amount of the debt was increased from
$280.8 million to $325.0 million. The $44.2 million of excess refinancing
proceeds were used to: (i) make a $7 million contribution to the property
improvement fund to cover anticipated shortfalls; (ii) pay approximately $7
million of refinancing costs; and (iii) make a $30.2 million partial return of
capital distribution to the partners. The new loan continues to be non-recourse
and requires monthly payments of interest at a fixed rate of 7.865% and
principal based on a 20-year amortization schedule. The loan has a scheduled
maturity in April 2012; however, the loan maturity can be extended for an
additional five years. During the extended loan term, the loan bears interest
at an Adjusted Rate, as defined, and all cash flow, from Partnership operations
is used to amortize the principal balance of the loan.
The refinanced mortgage loan is secured by first mortgages on all 50 of the
Partnership's Hotels, related personal property, and the land on which the
Hotels located or an assignment of the Partnership's interest under the land
leases. All obligations under the debt guaranties (see Note 6) expired with the
repayment of the 49 Hotels Loan and the Windsor Loan. No new guaranties have
been provided by Host Marriott Corporation or Marriott International, Inc.
("MII"), the parent company of Courtyard Management Corporation, the Manager.
As additional security, affiliates of MII, as the land lessors, agreed to
continue to subject their ownership interest as well as receipt of ground rent
to debt service on the mortgage loan.
Material Contracts
Operating Agreements/Management Agreement
In connection with the debt refinancing, the Operating Agreements, as defined
below, were terminated as of January 3, 1997. A new management agreement (the
"Management Agreement") was executed as of January 4, 1997 for the management of
the 50 Partnership Hotels.
On the Closing Date, the Partnership entered into a long-term management
agreement (the "Original Management Agreement") with Courtyard Management
Corporation to operate the Hotels as part of the Courtyard by Marriott hotel
system. Effective January 1, 1994, in connection with the 49 Hotels Loan
agreement, the Original Management Agreement was converted into two long-term
operating agreements (the "Operating Agreement(s)") with the Operator, one for
the 49 Hotels and one for the Windsor Hotel. The Operating Agreements had
initial terms expiring on December 31, 2007 for a majority of the Hotels. The
Operator could renew the term, for one or more of the Hotels, at its option, for
up to five successive terms of 10 years each.
Effective July 1, 1989, the Original Management Agreement was amended to defer
the Courtyard management fee and base management fee to the extent that cash
flow provided to the Partnership was less than $2,945,000 for 1989 and
$6,973,000 per year in 1990 through 1993 (the "Partnership Objective"). The
Partnership Objective provided a 3% per annum return on Partners' invested
capital,
3
<PAGE>
as defined, for 1989 and 6% per annum from 1990 through 1993. In order
to meet the Partnership Objective, the Courtyard management fee was first
subject to deferral followed by the base management fee. As of December 31,
1993, the balance of deferred incentive, Courtyard and base management fees
totalled $51.5 million. During 1994, these fees were extinguished pursuant to
the 49 Hotels Loan and the forgiveness of these fees is recorded as an
extraordinary item in the statement of operations.
The Operating Agreements provided for annual payments to the Operator of (i) the
base management fee equal to 3% of gross sales from the Hotels, (ii) the
Courtyard management fee equal to 3% of gross sales from the Hotels, and (iii)
the incentive management fee equal to 15% of operating profit, as defined, (25%
of operating profit after the Partners have received distributions of aggregate
refinancing proceeds equal to $60,526,500).
As part of the refinancing, the two Operating Agreements were converted into a
single Management Agreement effective January 4, 1997. The initial term of the
Management Agreement expires at the end of 2017. The Manager can extend the
Management Agreement for up to four successive periods of ten years. Under the
Management Agreement, MII has agreed to subordinate a portion of the Courtyard
system fee equal to 1% of gross Hotel sales to debt service on the mortgage
loan. In addition, the Partnership paid $4.2 million of deferred incentive
management fees at closing and MII agreed to forgive approximately $15 million
of deferred fees leaving a $6.5 million balance of accrued incentive management
fees. Incentive management fees are equal to 15% of operating profit. Deferred
and current year incentive management fees will be payable from 50% of available
cash after the payment of: (i) debt service; (ii) deferred Courtyard system
fees, if any; (iii) deferred MII ground rent, if any; and (iv) a priority return
to the Partnership equal to 10% of cumulative capital less sale and refinancing
proceeds. In addition, incentive management fees paid are capped at 15% of
operating profit and no longer increase to 25% of operating profit once
cumulative distributions of refinancing proceeds equal $60.5 million. Deferred
management fees are not payable to the Manager from sale or refinancing
proceeds. Future unpaid incentive management fees will not accrue.
The Operating Agreements and Management Agreement provide for the establishment
of a property improvement fund to ensure that the physical condition and product
quality of the Hotels are maintained. The operating agreements provided for 5%
of gross Hotel sales to be placed in the property improvement fund through 1996.
Under the new Management Agreement, contributions to the property improvement
fund will remain at 5% of gross Hotel sales through 1998. However,
contributions can be increased to 6% of gross Hotel sales for 1999 and 2000 and
7% thereafter.
Ground Leases
The land on which 31 of the Hotels are located is leased from MII or affiliates
of MII. In addition, two of the Hotels are located on land leased from third
parties. The land leases have remaining terms (including renewal options)
expiring between the years 2058 and 2081. The MII land leases and the third
party land leases provide for rent based on specific percentages (from 2% to
9.75%) of gross sales in certain categories, subject to minimum amounts. The
minimum rentals are adjusted at various anniversary dates throughout the lease
terms, as defined in the agreements. For 1996, the Partnership paid a total of
$7,478,000 in ground rent. See Item 2 "Properties" for a listing of Hotels that
have ground leases.
4
<PAGE>
Competition
The United States lodging industry generally is comprised of two broad segments:
full-service hotels and limited-service hotels. Full-service hotels generally
offer restaurant and lounge facilities and meeting spaces, as well as a wide
range of services, typically including bell service and room service. Limited-
service hotels generally offer accommodations with limited or no services and
amenities. As moderately priced hotels, the Hotels compete effectively with
both full-service and limited-service hotels in their respective markets by
providing streamlined services and amenities exceeding those provided by typical
limited-service hotels at prices that are significantly lower than those
available at full-service hotels.
Significant competitors in the moderately priced lodging segment include Holiday
Inn, Ramada Inn, Sheraton Inn, Hampton Inn and Hilton Inn. The lodging industry
in general, and the moderately priced segment in particular, is highly
competitive, but the degree of competition varies from location to location and
over time. An increase in supply growth began in 1996 with the introduction of
a number of new national brands. For 1997, the outlook continues to be
positive. Courtyards continue to command a premium share of the market in which
they are located in spite of the growth of new chains. It is expected that
Courtyard will continue outperforming both national and local competitors. The
brand is continuing to carefully monitor the introduction of new mid-priced
brands including Wingate Hotels, Hilton Garden Inns, Four Points by Sheraton,
Mainstay, Candlewood, Club Hotels and Clarion.
The Manager believes that by emphasizing management and personnel development
and maintaining a competitive price structure, the Partnership's share of the
market will be maintained or increased. The inclusion of the Hotels within the
nationwide Courtyard by Marriott system provides the benefits of name
recognition, centralized reservations and advertising, system-wide marketing and
promotion, centralized purchasing and training and support services.
Conflicts of Interest
Because Host Marriott, the parent of the General Partner, MII and their
affiliates own and/or operate hotels other than the Partnership Hotels and MII
and its affiliates license others to operate hotels under the various brand
names owned by MII and its affiliates, potential conflicts of interest exist.
With respect to these potential conflicts of interest, Host Marriott, MII and
their affiliates retain a free right to compete with the Partnership's Hotels,
including the right to develop, own, and operate competing hotels now and in the
future in markets in which the Hotels are located, in addition to those existing
hotels which may currently compete directly or indirectly with the Hotels.
Under Delaware law, the General Partner has unlimited liability for the
obligations of the Partnership, unless those obligations are, by contract,
without recourse to the partners of the Partnership. Since the General Partner
is entitled to operate and control the business and operations of the
Partnership, and because certain actions taken by the General Partner or the
Partnership could expose the General Partner or its parent, Host Marriott, to
liability that is not shared by the limited partners (for example, tort
liability and environmental liability), this control could lead to conflicts of
interest.
5
<PAGE>
Policies with Respect to Conflicts of Interest
It is the policy of the General Partner that the Partnership's relationship with
the General Partner, any affiliate of the General Partner, or persons employed
by the General Partner or its affiliates be conducted on terms that are fair to
the Partnership and that are commercially reasonable. Agreements and
relationships involving the General Partner or its affiliates and the
Partnership are on terms consistent with the terms on which the General Partner
or its affiliates have dealt with unrelated parties.
The Amended and Restated Agreement of Limited Partnership (the "Partnership
Agreement") provides that any agreements, contracts or arrangements between the
Partnership and the General Partner or any of its affiliates, except for
rendering legal, tax, accounting, financial, engineering, and procurement
services to the Partnership by employees of the General Partner or its
affiliates, will be on commercially reasonable terms and will be subject to the
following additional conditions:
(i) the General Partner or any such affiliate must have the ability to render
such services or to sell or lease such goods;
(ii) such agreements, contracts or arrangements must be fair to the
Partnership and reflect commercially reasonable terms and must be
embodied in a written contract which precisely describes the subject
matter thereof and all compensation to be paid therefor;
(iii) no rebates or give-ups may be received by the General Partner or any such
affiliate, nor may the General Partner or any such affiliate participate
in any reciprocal business arrangements which would have the effect of
circumventing any of the provisions of the Partnership Agreement; and
(iv) no such agreement, contract or arrangement as to which the limited
partners had previously given approval may be amended in such a manner as
to increase the fees or other compensation payable by the Partnership to
the General Partner or any of its affiliates or to decrease the
responsibilities or duties of the General Partner or any such affiliate
in the absence of the consent of the holders of a majority in interest of
the limited partners.
Employees
Neither the General Partner nor the Partnership has any employees. Host
Marriott provides the services of certain employees (including the General
Partner's executive officers) of Host Marriott to the Partnership and the
General Partner. The Partnership and the General Partner anticipate that each
of the executive officers of the General Partner will generally devote a
sufficient portion of his or her time to the business of the Partnership.
However, each of such executive officers also will devote a significant portion
of his or her time to the business of Host Marriott and its other affiliates.
No officer or director of the General Partner or employee of Host Marriott
devotes a significant percentage of time to Partnership matters. To the extent
that any officer, director or employee does devote time to the Partnership, the
General Partner or Host Marriott, as applicable, is entitled to reimbursement
for the cost of providing such services. See Item 11 "Management Remuneration
and Transactions" for information regarding payments made to Host Marriott or
its subsidiaries for the cost of providing administrative services to the
Partnership.
Consolidation
The General Partner has undertaken, on behalf of the Partnership, to
pursue, subject to further approval of the partners, a potential transaction
(the "Consolidation") in which (i) subsidiaries of CRF Lodging Company, L.P.
(the "Company"), a newly formed Delaware limited partnership, would merge with
and into the Partnership and up to five other limited partnerships, with the
Partnership and the other limited partnerships being the surviving entities
(each, a "Merger and collectively, the "Mergers"), subject to the satisfaction
or waiver of certain conditions, (ii) CRF Lodging Trust ("CRFLT"), a Maryland
real estate investment trust, the sole general partner of the Company, would
offer its common shares of beneficial interest, par value $0.01 per share (the
"Common Shares") to investors in an underwritten public offering and would
invest the proceeds of such offering in the Company in exchange for units of
limited partnership interests in the Company ("Units") and (iii) the Partnership
would enter into a Lease for the operation of its Hotels pursuant to which a
Lessee would pay rent to the Partnership based upon the greater of a fixed
dollar amount of base rent or specified percentages of gross sales, as specified
in the Lease. If the partners approve the transaction and other conditions are
satisfied, the partners of the Partnership would receive Units in the Merger in
exchange for their interests in the Partnership.
A preliminary Prospectus/Consent Solicitation was filed as part of a
Registration Statement on Form S-4 with the Securities and Exchange Commission
and which describes the potential transaction in greater detail. Any offer of
Units in connection with the Consolidation will be made solely by a final
Prospectus/Consent Solicitation.
6
<PAGE>
ITEM 2. PROPERTIES
Introduction
The properties consisted of 50 Courtyard by Marriott hotels as of December 31,
1996. The Hotels have been in operation for at least nine years. The Hotels
range in age between 9 and 14 years. The Hotels are geographically diversified
among 16 states, and no state has more than nine Hotels.
The lodging industry in general, and the moderately-priced segment in
particular, is highly competitive, but the degree of competition varies from
location to location and over time. On a combined basis, competitive forces
affecting the Hotels are not, in the opinion of the General Partner, more
adverse than the overall competitive forces affecting the lodging industry
generally. See Item 1 "Business--Competition."
The following table shows selected combined operating and financial statistics
for the Hotels (in thousands, except combined average occupancy, combined
average daily room rate, revenue per available room ("REVPAR") and number of
rooms:
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Combined average occupancy................. 79.2% 81.0% 81.4%
Combined average daily room rate........... $ 76.39 $ 71.23 $ 66.32
REVPAR..................................... $ 60.50 $ 57.70 $ 53.98
Number of rooms............................ 7,223 7,223 7,223
Rooms sales................................ $162,126 $151,571 $141,894
Food and beverage sales.................... 12,975 12,787 13,313
Other sales................................ 6,538 6,441 6,633
-------- -------- --------
Total hotel sales.......................... 181,639 170,799 161,840
Direct hotel operating costs and expenses.. 91,339 87,756 85,753
-------- -------- --------
Hotel Revenues............................. $ 90,300 $ 83,043 $ 76,087
======== ======== ========
</TABLE>
REVPAR is a commonly used indicator of market performance for hotels which
represents the combination of daily room rate charged and the average daily
occupancy achieved.
The following table sets forth certain information related to the Hotels.
7
<PAGE>
COURTYARD BY MARRIOTT
LIMITED PARTNERSHIP HOTELS
(50 Courtyard Hotels)
<TABLE>
<CAPTION>
Location Rooms Location Rooms
- -------- ----- -------- -----
<S> <C> <C> <C>
Alabama Michigan
Montgomery (1) 146 Dearborn (1) 147
Southfield 147
Arizona Troy 147
Phoenix Airport (1) 145 Warren 147
California North Carolina
Buena Park (1) 145 Charlotte-Arrowood Road (1) 146
Fremont (1) 146 Raleigh-Wake Forest Road 153
Pleasanton 145
Sacramento-Rancho Cordova 144 New York
San Francisco Airport (2) 147 Tarrytown 139
Santa Ana (1) 145
Ohio
Connecticut Cincinnati-Blue Ash (1) 149
Windsor (1) 149 Columbus-Dublin (1) 147
Columbus-Worthington (1) 145
Florida
Melbourne (1) 146 Pennsylvania
Miami Airport-West (1) 145 Valley Forge (1) 150
Tallahassee (1) 154
Tennessee
Georgia Brentwood (1) 145
Atlanta-Delk Road (1) 146 Memphis-Park Avenue East (1) 146
Atlanta-Executive Park (1) 145
Atlanta-Northlake (2) 128 Texas
Atlanta-Peachtree Corners 131 Arlington 147
Atlanta-Peachtree Dunwoody 128 Bedford (1) 145
Atlanta-Windy Hill 127 Dallas-Addison (1) 145
Augusta 130 Dallas-Las Colinas 147
Columbus 139 Dallas-LBJ Northwest (1) 146
Savannah 144 San Antonio Airport (1) 145
San Antonio-Medical Center (1) 146
Illinois
Naperville (1) 147 Virginia
Fair Oaks 144
Maryland Herndon (1) 146
Hunt Valley (1) 146 Hampton (1) 146
Landover 152 Richmond (1) 145
Rockville (1) 147 Virginia Beach (1) 146
</TABLE>
(1) Land is leased by MII or an affiliate of MII.
(2) Land is leased by third party.
8
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
Marvin Schick, et. al. v. Host Marriott Corporation, et. al. In the
Chancery Court for New Castle County, Delaware; C.A. No. 15991. The plaintiffs,
two members of an ad hoc committee of Courtyard by Marriot Limited Partners,
recently filed this purported class action lawsuit against Host, Marriott
International and others, alleging breach of fiduciary duty, breach of contract,
tortious interference and aiding and abetting liability in connection with the
refinancings of Courtyard by Marriott's debt. Among other things, the plaintiffs
contend that certain changes to Courtyard by Marriott's Management Agreement
could not be made without the consent of a majority vote of the Courtyard by
Marriott Limited Partners. The defendants (which do not include Courtyard by
Marriott) believe that the lawsuit is without merit and, if current discussions
fail to resolve the dispute, intend to vigorously defend the suit.
The Partnership and the Hotels are involved in routine litigation and
administrative proceedings arising in the ordinary course of business, some of
which are expected to be covered by liability insurance and which collectively
are not expected to have a material adverse effect on the business, financial
condition or results of operations of the Partnership.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP UNITS AND RELATED
SECURITY HOLDER MATTERS
There is currently no established public trading market for the units and it is
not anticipated that a public market for the Units will develop. Transfers of
Units are limited to the first date of each accounting period and may be made
only to accredited investors. All transfers are subject to approval by the
General Partner. As of December 31, 1996, there were 1,235 holders (including
holders of half-units) of record of the 1,150 Units.
In accordance with Sections 4.07 and 4.10 of the Partnership Agreement, cash
available for distribution for any year will be distributed at least annually to
the general and limited partners (the "Partners") of record at the end of each
accounting period during such year as follows:
9
<PAGE>
(i) first, through and including the end of the accounting period during
which the Partners shall have received cumulative distributions of sales
or refinancing proceeds ("Capital Receipts") equal to $60,526,500, 5% to
the General Partner and 95% to the limited partners;
(ii) next, through and including the end of the accounting period during which
the Partners shall have received cumulative distributions of Capital
Receipts equal to $121,053,000, 15% to the General Partner and 85% to the
limited partners; and
(iii) thereafter, 30% to the General Partner and 70% to the limited partners.
Cash available for distribution means, with respect to any fiscal period, the
cash revenues of the Partnership from all sources during the fiscal period,
other than Capital Receipts, less (i) all cash expenditures of the Partnership
during such fiscal period, including, without limitation, repayment of all
Partnership indebtedness to the extent required to be paid, but not including
expenditures of Capital Receipts, plus fees for management services and
administrative expenses and (ii) such reserves as may be determined by the
General Partner, in its sole discretion to be necessary to provide for the
foreseeable needs of the Partnership.
As of December 31, 1996, the Partnership has distributed a total of $1,463,559
to the General Partner and $30,108,150 to the limited partners ($26,181 per
limited partner unit) since inception. In 1996, $2,300,000 ($2,000 per limited
partner unit) was distributed to the limited partners from 1996 operations. In
1995 and 1994, no distributions were made to the Partners. Included in the
$26,181 of distributions per limited partner unit was $4,000 per limited partner
unit distribution from excess refinancing proceeds that was distributed to the
partners in 1988.
In addition, in April 1997, the Partnership made a partial return of capital
distribution of $1,513,158 to the General Partner and $28,750,000 to the limited
partners ($25,000 per limited partner unit) from excess refinancing proceeds.
As of December 5, 1997, the Partnership has also distributed $484,211 to the
General Partner and $9,200,000 to the limited partners ($8,000 per limited
partner unit) from year-to-date third quarter 1997 operations.
10
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data presents historical operating information
for the Partnership for each of the five years in the period ended December 31,
1996 presented in accordance with generally accepted accounting principles.
<TABLE>
1996 1995 1994 1993 1992
---------- ----------- ----------- ---------- -----------
(in thousands, except per unit amounts)
<S> <C> <C> <C> <C> <C>
Revenues..........................................$ 90,300 $ 83,043 $ 76,087 $ 68,780 $ 61,738
========== =========== =========== ========== ===========
Net income (loss).................................$ 13,454 $ 4,988 $ 53,409 $ 1,863 $ (6,925)
========== =========== =========== ========== ===========
Net income (loss) per limited
partner unit (1,150 Units)......................$ 11,114 $ 4,120 $ 44,120 $ 1,539 $ (5,721)
========== =========== =========== ========== ===========
Total assets......................................$ 330,509 $ 338,740 $ 349,641 $ 365,337 $ 370,154
========== =========== =========== ========== ===========
Total liabilities.................................$ 349,839 $ 369,224 $ 385,113 $ 454,218 $ 460,898
========== =========== =========== ========== ===========
Cash distributions per limited
partner unit (1,150 Units)......................$ 2,000 $ -- $ -- $ -- $ 3,988
========== =========== =========== ========== ===========
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS
Certain matters discussed herein are forward-looking statements within the
meaning of the Private Litigation Reform Act of 1995 and as such may involve
known and unknown risks, uncertainties, and other factors which may cause the
actual results, performance or achievements of the Partnership to be different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Although Partnership believes the expectations
reflected in such forward-looking statements are based upon reasonable
assumptions, it can give no assurance that its expectations will be attained.
These risks are detailed from time to time in the Partnership's filings with the
Securities and Exchange Commission. The Partnership undertakes no obligation to
publicly release the result of any revisions of these forward-looking statements
that may be made to reflect any future events or circumstances.
GENERAL
The following discussion and analysis addresses results of operations for the
fiscal years ended December 31, 1996, 1995 and 1994. Since 1990, Courtyard by
Marriott Limited Partnership ("the Partnership") has owned the 50 hotels (the
"Hotels") which, as of December 31, 1996, contain a total of 7,223 guest rooms.
During the period from 1994 through 1996, Partnership revenues grew from $76.1
11
<PAGE>
million to $90.3 million, while the Partnership's total hotel sales grew from
$161.8 million to $181.6 million. Growth in room sales, and thus hotel sales, is
driven primarily by growth in revenue per available room ("REVPAR"). REVPAR is a
commonly used indicator of market performance for hotels which represents the
combination of daily room rate charged and the average daily occupancy achieved.
REVPAR does not include food and beverage or other ancillary revenues generated
by the property. During the period from 1994 through 1996, the Hotels' combined
average room rate increased by $10 to $76, while the combined average occupancy
decreased two percentage points to 79%.
The Partnership's operating costs and expenses are, to a great extent, fixed.
Therefore, the Partnership derives substantial operating leverage from increases
in revenue offset in part by (i) base and Courtyard management fees under the
Management Agreement, which are each 3% of gross hotel sales, and (ii) variable
ground lease payments.
RESULTS OF OPERATIONS
1996 Compared to 1995:
Revenues. Revenues increased $7.3 million, or 9%, to $90.3 million in 1996 from
$83 million in 1995 as a result of strong growth in REVPAR of 5%. Hotel sales
increased $10.8 million, or 6%, to $181.6 million in 1996 also reflecting
improvements in REVPAR for the year. The increase in REVPAR was primarily a
result of a 7% increase in average room rates and a two percentage point
decrease in average occupancy. Results were further enhanced by a one percentage
point increase in the house profit margin.
Operating Costs and Expenses. Operating costs and expenses increased $2 million,
or 4%, to $54.3 million in 1996 from $52.3 million in 1995, primarily reflecting
an increase in management fees associated with rising revenues and operating
profit. As a percentage of hotel revenues, operating costs and expenses
represented 60% of revenues for 1996 and 63% in 1995.
Operating Profit. As a result of the changes in revenues and operating costs and
expenses discussed above, operating profit increased $5.2 million to $36
million, or 40% of total revenues, in 1996 from $30.8 million, or 37% of
revenues, in 1995.
Interest Expense. Interest expense decreased $3.5 million to $23.5 million due
to the impact of lower average interest rates and a decreased level of debt as a
result of principal amortization.
Net Income. Net income increased $8.5 million to $13.5 million, or 15% of total
revenues, in 1996 from $5 million, or 6% of total revenues, in 1995 due to
improved lodging results and the impact of the decrease in interest expense
discussed above.
12
<PAGE>
1995 Compared to 1994:
Revenues. Revenues increased $6.9 million, or 9%, to $83 million in 1995 from
$76.1 million in 1994 as a result of strong growth in REVPAR of 7%. The increase
in REVPAR was primarily a result of a 7% increase in average room rates and a
decrease in average occupancy of less than one percentage point.
Operating Costs and Expenses. Operating costs and expenses decreased $.3 million
to $52.3 million, or 63% of revenues, in 1995 from $52.6 million, or 69% of
revenues, in 1994.
Operating Profit. Operating profit increased $7.2 million, or 31%, to $30.7
million, or 37% of revenues, in 1995 from $23.5 million, or 31% of revenues, in
1994 due to the changes in revenues and operating costs discussed above.
Interest Expense. Interest expense increased $4.5 million to $27 million for
1995 primarily due to higher variable interest rates during 1995 on the mortgage
debt of 7.62% versus 5.92% in 1994 which was partially offset by the declining
loan balance resulting from required principal amortization.
Income Before Extraordinary Item. Income before extraordinary item increased
$3.1 million to $5 million, or 6% of revenues, in 1995, from $1.9 million, or 2%
of revenues, in 1994.
Extraordinary Item. The Partnership recognized an extraordinary gain in 1994 of
$51.5 million representing the forgiveness of deferred management fees by
Marriott International.
Net Income. Net income decreased to $5 million, or 6% of revenues, in 1995, from
$53.4 million in 1994 primarily due to the $51.5 million extraordinary gain in
1994, partially offset by improved operating results.
LIQUIDITY AND CAPITAL RESOURCES
Principal Sources and Uses of Cash
Cash provided by operations was $42.7 million in 1996, $34.7 million in 1995 and
$33 million in 1994, primarily due to a 19% increase in revenues from 1994 to
1996.
Cash used in investing activities was $9.6 million, $9.4 million and $6.9
million in fiscal years 1996, 1995 and 1994, respectively. The Partnership's
cash investing activities consists primarily of contributions to the property
improvement fund and capital expenditures for improvements to existing hotels.
As part of the debt refinancing, contributions to the property improvement fund
will remain at 5% of gross hotel sales through 1998 and can be increased to 6%
in 1999 and 2000 and 7% thereafter.
13
<PAGE>
Cash used in financing activities was $31.4 million, $25.1 million and $22.3
million in fiscal years 1996, 1995 and 1994, respectively. The Partnership's
cash financing activities primarily consisted of capital distributions to
partners, repayments of debt and payment of financing costs, as well as the
refinancing of certain debts of the partnership.
Refinancing
In March 1997, the General Partner refinanced all of its outstanding mortgage
debt. The total amount of debt increased from $280.8 million to $325 million.
The $44.2 million of excess financing proceeds were used to make a $7 million
contribution to the property improvement fund, a $30.2 million partial return of
capital distribution to the partners and to pay $7 million of refinancing costs.
The new non-recourse loan matures in April 2012, requires principal amortization
on a 20-year term and carries a fixed interest rate of 7.865%.
Property Improvement Fund
The Operating Agreement/Management Agreement requires annual contributions to a
property improvement fund to ensure that the physical condition and product
quality of the Hotels are maintained. Contributions to this fund are based on a
percentage of annual total hotel sales, currently equal to 5%. The Partnership
believes that the 5% contribution requirement is consistent with industry
standards and provides a sufficient reserve for the future capital repair and
replacement needs of the Hotels. However, in accordance with the Management
Agreement, contributions to the property improvement fund may be increased to 6%
in 1999 and 2000 and 7% thereafter. The balance in the fund totaled $8.4 million
as of December 31, 1996. Total capital expenditures for 1996, 1995 and 1994 were
$19.1 million, $10.5 million and $9.1 million, respectively. Of these
expenditures for 1996, 1995 and 1994, $19.0 million, $7.9 million and $4.2
million, respectively, were funded from the property improvement fund.
General
The General Partner believes that cash from hotel operations combined with the
ability to defer incentive management fees to the Manager and ground rent
payments to MII will provide adequate funds in the short term and long term for
the operational and capital needs of the Partnership.
Competition
The moderately priced lodging segment continues to be highly competitive. An
increase in supply growth began in 1996 with the introduction of a number of new
national brands. For 1997, the outlook continues to be positive. Courtyards
continue to command a premium share of the market in which they are located in
spite of the growth of new chains. It is expected that Courtyard will continue
outperforming both national and local competitors. The brand is continuing to
carefully monitor the introduction of new mid-priced brands including Wingate
Hotels, Hilton Garden Inns, Four Points by Sheraton, Mainstay, Candlewood, Club
Hotels and Clarion.
14
<PAGE>
Inflation
The rate of inflation has been relatively low in the past four years. The
Manager is generally able to pass through increased costs to customers through
higher room rates and prices. In 1996, average rates of Courtyard hotels
exceeded inflationary costs, but lagged the increases of direct competitors who
have been able to realize higher rates due to climbing occupancies.
Seasonality
Demand, and thus room occupancy, is affected by normally recurring seasonal
patterns. For most of the Hotels, demand is higher in the spring and summer
months (March through October) than during the remainder of the year.
15
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index Page
- ----- ----
Courtyard by Marriott Limited Partnership Financial Statements:
Report of Independent Public Accountants............................ 17
Statement of Operations............................................. 18
Balance Sheet....................................................... 19
Statement of Changes in Partners' Capital (Deficit)................. 20
Statement of Cash Flows............................................. 21
Notes to Financial Statements....................................... 22
16
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE PARTNERS OF COURTYARD BY MARRIOTT LIMITED PARTNERSHIP:
We have audited the accompanying balance sheet of Courtyard by Marriott Limited
Partnership (a Delaware limited partnership) as of December 31, 1996 and 1995,
and the related statements of operations, changes in partners' capital (deficit)
and cash flows for each of the three years in the period ended December 31,
1996. These financial statements and schedule are the responsibility of the
General Partner's management. Our responsibility is to express an opinion on
these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Courtyard by Marriott Limited
Partnership as of December 31, 1996 and 1995, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1996 in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed at Item 14(a)(2) are
presented for the purpose of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial statements and, in
our opinion, fairly state in all material respects the financial data required
to be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Washington, D.C.
April 11, 1997
17
<PAGE>
STATEMENT OF OPERATIONS
Courtyard By Marriott Limited Partnership
For the Years Ended December 31, 1996, 1995 and 1994
(in thousands, except per Unit amounts)
<TABLE>
1996 1995 1994
------------ ------------- ------------
<S> <C> <C> <C>
REVENUES
Hotel (Note 3)................................................$ 90,300 $ 83,043 $ 76,087
------------ ------------- -------------
OPERATING COSTS AND EXPENSES
Depreciation.................................................. 19,258 19,753 21,075
Base and Courtyard management fees............................ 10,898 10,248 9,710
Incentive management fee...................................... 9,365 8,615 7,616
Ground rent................................................... 7,246 7,066 6,948
Property taxes................................................ 5,977 5,381 5,868
Insurance and other........................................... 1,571 1,228 1,292
------------ ------------- -------------
54,315 52,291 52,509
------------ ------------- -------------
OPERATING PROFIT................................................... 35,985 30,752 23,578
Interest expense.............................................. (23,529) (27,001) (22,461)
Interest income............................................... 998 1,237 799
------------ ------------- -------------
INCOME BEFORE EXTRAORDINARY ITEM................................... 13,454 4,988 1,916
EXTRAORDINARY ITEM
Gain on forgiveness of deferred management fees............... -- -- 51,493
------------ ------------- -------------
NET INCOME.........................................................$ 13,454 $ 4,988 $ 53,409
============ ============= =============
ALLOCATION OF NET INCOME
General Partner...............................................$ 673 $ 250 $ 2,671
Limited Partners.............................................. 12,781 4,738 50,738
------------ ------------- -------------
$ 13,454 $ 4,988 $ 53,409
============ ============= =============
NET INCOME PER LIMITED PARTNER UNIT (1,150 Units)..................$ 11,114 $ 4,120 $ 44,120
============ ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
BALANCE SHEET
Courtyard By Marriott Limited Partnership
December 31, 1996 and 1995
(in thousands)
<TABLE>
1996 1995
----------- ----------
<S> <C> <C>
ASSETS
Property and equipment, net...................................................................$ 300,939 $ 301,117
Property improvement fund..................................................................... 8,449 17,940
Due from Courtyard Management Corporation..................................................... 5,325 4,772
Deferred financing costs, net of accumulated amortization..................................... 3,087 3,898
Cash and cash equivalents..................................................................... 12,709 11,013
----------- -----------
$ 330,509 $ 338,740
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
LIABILITIES
Mortgage debt.................................................................................$ 288,975 $ 317,763
Management fees due to Courtyard Management Corporation....................................... 25,596 16,231
Straight-line and deferred ground rent due to affiliates of Marriott International, Inc....... 19,848 20,116
Debt service guaranty and accrued interest payable to Host Marriott Corporation............... 12,975 12,366
Accounts payable and accrued liabilities...................................................... 2,445 2,748
----------- -----------
Total Liabilities.......................................................................... 349,839 369,224
----------- -----------
PARTNERS' CAPITAL (DEFICIT)
General Partner
Capital contributions...................................................................... 28,218 28,218
Capital distributions...................................................................... (1,464) (1,464)
Cumulative net losses...................................................................... (26,280) (26,953)
----------- -----------
474 (199)
----------- -----------
Limited Partners
Capital contributions, net of offering costs of $12,912.................................... 100,845 100,845
Investor notes receivable.................................................................. (98) (98)
Capital distributions...................................................................... (30,108) (27,808)
Cumulative net losses...................................................................... (90,443) (103,224)
----------- -----------
(19,804) (30,285)
----------- -----------
Total Partners' Deficit.................................................................... (19,330) (30,484)
----------- -----------
$ 330,509 $ 338,740
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
STATEMENT OF CHANGES IN
PARTNERS' CAPITAL (DEFICIT)
Courtyard by Marriott Limited Partnership
For the Years Ended December 31, 1996, 1995 and 1994
(in thousands)
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
----------- ----------- -----------
<S> <C> <C> <C>
Balance, December 31, 1993........................$ (3,120) $ (85,761) $ (88,881)
Net income................................... 2,671 50,738 53,409
----------- ----------- -----------
Balance, December 31, 1994........................ (449) (35,023) (35,472)
Net income................................... 250 4,738 4,988
----------- ----------- -----------
Balance, December 31, 1995........................ (199) (30,285) (30,484)
Capital distributions........................ (2,300) (2,300)
Net income................................... 673 12,781 13,454
----------- ----------- -----------
Balance, December 31, 1996........................$ 474 $ (19,804) $ (19,330)
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
STATEMENT OF CASH FLOWS
Courtyard by Marriott Limited Partnership
For the Years Ended December 31, 1996, 1995 and 1994
(in thousands)
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income...................................................................$ 13,454 $ 4,988 $ 53,409
Extraordinary item........................................................... -- -- 51,493
----------- ----------- -----------
Income before extraordinary item............................................. 13,454 4,988 1,916
Noncash items:
Depreciation.............................................................. 19,258 19,753 21,075
Deferred incentive management fees........................................ 9,365 8,615 7,616
Amortization of deferred financing costs as interest expense.............. 1,126 1,123 773
Deferred interest on guaranty advances ................................... 609 648 533
Straight-line and deferred ground rent.................................... -- 192 765
Changes in operating accounts:
Due from Courtyard Management Corporation................................. (553) (355) (923)
Straight-line and deferred ground rent due to affiliates of
Marriott International, Inc............................................. (268) -- --
Accounts payable and accrued liabilities.................................. (303) (263) 1,370
----------- ----------- -----------
Cash provided by operations............................................. 42,688 34,701 33,125
----------- ----------- -----------
INVESTING ACTIVITIES
Additions to property and equipment, net..................................... (19,080) (7,942) (4,186)
Change in property improvement fund.......................................... 9,491 (1,467) (4,360)
Change in contingency reserve fund........................................... -- -- 1,643
----------- ----------- -----------
Cash used in investing activities....................................... (9,589) (9,409) (6,903)
----------- ----------- -----------
FINANCING ACTIVITIES
Payment of mortgage debt..................................................... (28,788) (25,081) (27,896)
Capital distributions........................................................ (2,300) -- --
Payment of financing costs................................................... (315) (54) (4,381)
Change in refinancing escrow account......................................... -- -- 10,013
----------- ----------- -----------
Cash used in financing activities....................................... (31,403) (25,135) (22,264)
----------- ----------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS............................................. 1,696 157 3,958
CASH AND CASH EQUIVALENTS at beginning of year.................................... 11,013 10,856 6,898
----------- ----------- -----------
CASH AND CASH EQUIVALENTS at end of year..........................................$ 12,709 $ 11,013 $ 10,856
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for mortgage interest..............................................$ 22,122 $ 25,493 $ 19,735
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Courtyard by Marriott Limited Partnership
December 31, 1996 and 1995
NOTE 1. THE PARTNERSHIP
Description of the Partnership
Courtyard by Marriott Limited Partnership (the "Partnership"), a Delaware
limited partnership, was formed to acquire and own 50 Courtyard by Marriott
hotels (the "Hotels") and the land on which certain of the Hotels are located.
The Partnership's 50 Hotels are located in 16 states in the United States: nine
in Georgia; seven in Texas; six in California; five in Virginia; four in
Michigan and three or less in each of the other 11 states. On December 29, 1995,
Host Marriott Corporation's operations were divided into two separate companies:
Host Marriott Corporation ("Host Marriott") and Host Marriott Services
Corporation. The sole general partner of the Partnership, with a 5% interest, is
CBM One Corporation (the "General Partner"), a wholly-owned subsidiary of Host
Marriott. The Hotels are operated as part of the Courtyard by Marriott hotel
system by Courtyard Management Corporation (the "Operator" or "Manager"), a
wholly-owned subsidiary of Marriott International, Inc. ("MII").
On August 20, 1986 (the "Closing Date"), 1,150 limited partnership interests
(the "Units"), representing a 95% interest in the Partnership, had been sold
pursuant to a private placement offering at $100,000 per Unit. The General
Partner made capital contributions consisting of $1,211,000 in cash and land on
which certain of the Hotels are located valued at $4,842,000 for its 5% general
partner interest.
On the Closing Date, the Partnership executed a purchase agreement (the
"Purchase Agreement") with Host Marriott to acquire the Hotels and the land on
which certain of the Hotels are located for a total fixed price of $448,184,000.
Of the total purchase price, $374,656,000 was paid in cash from the proceeds of
the mortgage financing and the initial installment on the sale of the Units with
the remaining $73,528,000 evidenced by a note payable to Host Marriott.
Twenty-eight of the Hotels were conveyed to the Partnership in 1986, twenty-one
Hotels in 1987 and the final Hotel in January 1988.
Partnership Allocations and Distributions
Partnership allocations and distributions are generally made as follows:
a. Cash available for distribution will be distributed (i) first, 5% to the
General Partner and 95% to the limited partners until the General Partner
and limited partners (collectively, the "Partners") have received
cumulative distributions of sale or refinancing proceeds ("Capital
Receipts") equal to $60,526,500; (ii) next, 15% to the General Partner and
85% to the limited partners until the Partners have received cumulative
distributions of Capital Receipts equal to $121,053,000; and (iii)
thereafter, 30% to the General Partner and 70% to the limited partners.
b. Capital Receipts, other than from the sale or other disposition of
substantially all of the assets of the Partnership, not retained by the
Partnership will be distributed (i) first, 5% to the General Partner and
95% to the limited partners until the Partners have received cumulative
distributions of Capital Receipts equal to $121,053,000 and (ii)
thereafter, 30% to the General Partner and 70% to the limited partners.
c. Proceeds from the sale of substantially all of the assets of the
Partnership or from a related series of Hotel sales leading to the sale of
substantially all of the assets of the Partnership will be distributed to
the Partners pro-rata in accordance with their capital account balances.
d. Net profits are generally allocated in the same ratio in which cash
available for distribution is distributed. Net losses are generally
allocated to the General Partner. To the extent the General Partner makes
debt service advances to the Partnership and other loans as outlined in the
partnership agreement, the General Partner will be allocated net losses
equal to the amounts advanced.
22
<PAGE>
e. In general, gain recognized by the Partnership will be allocated, with
respect to any year, in the following order of priority: (i) to all
Partners whose capital accounts have negative balances until such negative
balances are brought to zero; (ii) to all Partners up to the amount
necessary to bring their respective capital account balances to an amount
equal to their invested capital, as defined; and (iii) thereafter, 30% to
the General Partner and 70% to the limited partners.
Gain arising from the sale or other disposition (or from a related series
of sales or dispositions) of substantially all of the assets of the
Partnership will be allocated (i) to the limited partners in an amount
equal to the excess, if any, of (1) the sum of 15% times the weighted
average of the limited partners' invested capital each year, over (2) the
sum of distributions to the limited partners of Capital Receipts and cash
available for distribution each year; and (ii) next, to the General Partner
until it has been allocated an amount equal to 30/70 times the amount
allocated to the limited partners under clause (i); and (iii) thereafter,
30% to the General Partner and 70% to the limited partners.
f. For financial reporting purposes, profits and losses are allocated among
the Partners based on their stated interests in cash available for
distribution.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The Partnership records are maintained on the accrual basis of accounting and
its fiscal year coincides with the calendar year.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Revenues and Expenses
Hotel revenues represent house profit of the Partnership's Hotels since the
Partnership has delegated substantially all of the operating decisions related
to the generation of house profit of the Hotels to the Operator. House profit
reflects Hotel operating results which flow to the Partnership as property owner
and represents Hotel sales less property-level expenses, excluding depreciation,
Courtyard, base and incentive management fees, real and personal property taxes,
ground and equipment rent, insurance and certain other costs, which are
disclosed separately in the statement of operations.
Property and Equipment
Property and equipment is recorded at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets as follows:
<TABLE>
<CAPTION>
<S> <C>
Building and improvements 40 years
Leasehold improvements 40 years
Furniture and equipment 4-10 years
</TABLE>
All property and equipment is pledged to secure the mortgage debt described in
Note 6 and Note 9.
The Partnership assesses impairment of its real estate properties based on
whether estimated undiscounted future cash flows from such properties will be
less than their net book value. If a property is impaired, its basis is adjusted
to fair market value.
Deferred Financing Costs
Deferred financing costs represent the costs incurred in connection with
obtaining the mortgage debt (see Note 6 and Note 9) and are amortized, using the
straight-line method, over the term of the loan including available extensions.
During 1996, the Partnership paid $315,000 in financing costs related to
refinancing the Partnership's mortgage debt as discussed in Note 9.
23
<PAGE>
Refinancing costs as of December 31, 1996 and 1995 were $6,107,000 and
$5,792,000, respectively. Accumulated amortization of financing costs as of
December 31, 1996 and 1995 totalled $3,019,000 and $1,893,000, respectively.
Ground Rent
The land leases with affiliates of MII (see Note 7) include scheduled increases
in minimum rents per property. These scheduled rent increases, which are
included in minimum lease payments, are being recognized by the Partnership on a
straight-line basis over the 95 year term of the leases. The adjustment included
in ground rent expense to reflect minimum lease payments on a straight-line
basis was ($232,000) for 1996, $166,000 for 1995 and $765,000 for 1994.
Income Taxes
Provision for Federal and state income taxes has not been made in the
accompanying financial statements since the Partnership does not pay income
taxes, but rather, allocates its profits and losses to the individual Partners.
Significant differences exist between the net income for financial reporting
purposes and the net income as reported in the Partnership's tax return. These
differences are due primarily to the use, for income tax purposes, of
accelerated depreciation methods, shorter depreciable lives for the assets,
differences in the timing of recognition of certain fees and straight-line rent
adjustments. As a result of these differences, the excess of the tax basis in
net Partnership liabilities over the net Partnership liabilities reported in the
accompanying financial statements is $20,483,000 and $29,190,000 as of December
31, 1996 and 1995, respectively.
New Statement of Financial Accounting Standards
In the first quarter of 1996, the Partnership adopted Statement of Financial
Accounting Standards ("SFAS") No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." Adoption of SFAS
No. 121 did not have an effect on its financial statements.
Cash and Cash Equivalents
The Partnership considers all highly liquid investments with a maturity of three
months or less at date of purchase to be cash equivalents.
Reclassifications
Certain reclassifications were made to prior year financial statements to
conform to the 1996 presentation.
NOTE 3. HOTEL REVENUES
Hotel revenues consist of Hotel operating results for the three years ended
December 31 as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
HOTEL SALES
Rooms.......................................$ 162,126 $ 151,571 $ 141,894
Food and beverage........................... 12,975 12,787 13,313
Other....................................... 6,538 6,441 6,633
----------- ----------- -----------
181,639 170,799 161,840
----------- ----------- -----------
HOTEL EXPENSES
Departmental direct costs
Rooms................................... 36,059 34,244 31,975
Food and beverage....................... 11,165 10,726 10,785
Other hotel operating expenses.............. 44,115 42,786 42,993
----------- ----------- -----------
91,339 87,756 85,753
----------- ----------- -----------
HOTEL REVENUES..................................$ 90,300 $ 83,043 $ 76,087
=========== =========== ===========
</TABLE>
24
<PAGE>
NOTE 4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following as of December 31 (in
thousands):
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Land and improvements...............................$ 30,797 $ 30,797
Leasehold improvements.............................. 199,595 195,320
Building and improvements........................... 133,728 130,481
Furniture and equipment............................. 144,869 133,311
----------- -----------
508,989 489,909
Less accumulated depreciation....................... (208,050) (188,792)
----------- -----------
$ 300,939 $ 301,117
=========== ===========
</TABLE>
NOTE 5. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of financial instruments are shown below. The fair
values of financial instruments not included in this table are estimated to be
equal to their carrying amounts:
<TABLE>
<CAPTION>
As of December 31, 1996 As of December 31, 1995
---------------------------- ---------------------------
Estimated Estimated
Carrying Fair Carrying Fair
Amount Value Amount Value
------------- ----------- ------------- ----------
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Mortgage debt..............................................$ 288,975 $ 288,975 $ 317,763 $ 317,763
Management fees due to Courtyard
Management Corporation.................................$ 25,596 $ 7,777 $ 16,231 $ 7,497
Debt service guaranty and accrued interest payable
to Host Marriott Corporation...........................$ 12,975 $ 9,918 $ 12,366 $ ---
</TABLE>
The estimated fair value of mortgage debt obligations is based on the expected
future debt service payments discounted at estimated market rates, adjusted for
the presence of the debt service guaranties. Management fees due to Courtyard
Management Corporation and debt service guaranty payable to Host Marriott
Corporation including accrued interest are valued based on the expected future
payments from operating cash flow discounted at risk adjusted rates.
NOTE 6. DEBT
The 49 Hotels Loan and the Windsor Loan as discussed below were refinanced on
March 21, 1997 and the lenders were repaid in full (see Note 9).
49 Hotels Loan
On June 15, 1988, the Partnership restructured the 49 hotels loan (the "Original
49 Hotels Loan") of $373,149,000 with a group of banks (the "Lenders"). The
Original 49 Hotels Loan matured on June 15, 1993 with the entire $373,149,000
balance due. The Partnership did not have sufficient cash to repay the Original
49 Hotels Loan at maturity and defaulted on the loan. On December 15, 1993, the
Partnership entered into a forbearance agreement whereby the Lenders agreed not
to exercise their rights and remedies for nonpayment of the Original 49 Hotels
Loan. In exchange, the Partnership and the Lenders agreed that the Original 49
Hotels Loan would bear interest at LIBOR plus 1.5 percentage points from June
15, 1993 through April 17, 1994. In connection with the restructuring of the
loan, the Partnership repaid $20 million of principal leaving a balance of
$353,149,000.
25
<PAGE>
On April 18, 1994, the Partnership entered into a restated loan agreement (the
"49 Hotels Loan") with the Lenders for the 49 Hotels. The 49 Hotels Loan bore
interest at floating rates at the Partnership's option equal to the following:
<TABLE>
<CAPTION>
Time Period Interest Rate
-------------------------------------- ----------------------------------------------------------------------
<S> <C>
Closing through June 15, 1996 (1) LIBOR plus 1.5 percentage points or the higher of (2) .5
percentage points plus (a) prime, or (b) .5 percentage points plus (i)
the three week average 3-month CD rate or (ii) the federal funds rate
June 16, 1996 through June 15, 1997 (1) LIBOR plus 1.75 percentage points or the higher of (2) .75
percentage points plus (a) prime, or (b) .5 percentage points plus (i)
the three week average 3-month CD rate or (ii) the federal funds rate
</TABLE>
The 49 Hotels Loan required minimum annual principal payments of $7,000,000.
Additionally, while the loan balance was above $300,000,000, 100% of Available
Cash Flow (equal to operating profit, as defined, less the sum of (1) interest
expense, (2) the $7,000,000 annual principal payment, (3) partnership
administrative expenses of up to $250,000, as adjusted annually for the consumer
price index, and (4) ground rent payments to MII) was used to pay additional
principal on the 49 Hotels Loan. While the loan balance was between $250,000,000
and $299,999,999, 80% of Available Cash Flow was used to pay additional
principal on the 49 Hotels Loan and once the loan balance was less than
$250,000,000, 75% of Available Cash Flow would have been used to pay additional
principal on the loan.
For 1996 and 1995, the Partnership paid $28,416,000 and $24,584,000,
respectively, in principal payments on the 49 Hotels Loan leaving a balance of
$282,686,000 at December 31, 1996. The weighted average interest rate on the 49
Hotels Loan was 7.08% in 1996, 7.62% in 1995 and 5.92% in 1994. The interest
rate on the 49 Hotels Loan was 7.25% at December 31, 1996. The 49 Hotels Loan
would have matured on June 15, 1997; however, the term could have been extended
for two one-year periods if certain operating profit levels, as defined, were
met.
As security for the 49 Hotels Loan, the Lenders had a mortgage on the
Partnership's fee or leasehold interest in each of the Hotels, except the
Windsor, Connecticut Hotel. In addition, all of the Lenders had a security
interest in certain personal property associated with each Hotel and granted a
security interest in the Partnership's rights under the operating agreement (see
Note 8) and Purchase Agreement. Thirty of the 49 hotels covered by the 49 Hotels
Loan lease land (see Note 7) from affiliates of MII. These affiliates agreed to
subject their ownership interests as well as subordinate their receipt of ground
rent to the payment of debt service on the 49 Hotels Loan. Deferred ground rent
payable to affiliates of MII bore interest at two percentage points under the
base rate announced by Citibank, N.A. Deferred ground rent and related accrued
interest could not be repaid until the 49 Hotels Loan balance was less than
$300,000,000. There was no deferred ground rent related to the 49 Hotels Loan
during 1996 and 1995.
Windsor Hotel Loan
On February 9, 1988, the Partnership entered into a loan agreement to provide
non-recourse mortgage debt of $8,274,000 (the "Windsor Loan") to pay
approximately 80% of the purchase price of the Windsor, Connecticut Hotel (the
"Windsor Hotel"). The Windsor Loan bore interest at a floating rate equal to the
adjusted CD rate or LIBOR plus 2.0 percentage points. The Windsor Loan matured
on August 15, 1996 with the remaining principal balance of $6,289,000 plus
accrued interest due at that time. In exchange for Host Marriott providing a
guaranty of repayment of the loan at maturity, the lender agreed to extend the
Windsor Loan maturity to March 31, 1997. The Partnership agreed to continue to
pay interest on the Windsor Loan at LIBOR plus 200 basis points until the
earlier of repayment or March 31, 1997. No principal amortization on the Windsor
Loan was required until maturity. The weighted average interest rate on the
Windsor Loan was 7.46%, 8.23% and 6.44% for 1996, 1995 and 1994, respectively.
The interest rate on the Windsor Loan was 7.50% on December 31, 1996 and 7.94%
on December 31, 1995.
As security for the Windsor Loan, the bank had a mortgage on the Partnership's
leasehold interest in the Windsor Hotel. Additionally, the bank had a security
interest in the Partnership's interest in the personal property associated with
the Windsor Hotel and a security interest in the Partnership's rights under the
operating agreement and Purchase Agreement.
26
<PAGE>
The Windsor Hotel land is also leased from an affiliate of MII, which agreed to
subject their ownership interest as well as their receipt of ground rent to the
payment of debt service on the Windsor Loan. Deferred ground rent payable to the
affiliate of MII bore interest at two percentage points under the base rate
announced by Citibank, N.A. Deferred ground rent and accrued interest related to
the Windsor Loan was repaid with available funds from the Windsor Hotel after
payment of debt service. The deferred ground rent as of December 31, 1995 in the
amount of $36,000 was paid in 1996. As of December 31, 1996, there was no
deferred ground rent related to the Windsor Hotel.
49 Hotels Loan Guaranties
Host Marriott provided additional security to the Lenders in the form of a debt
guaranty (the "Debt Service Guaranty") of aggregate interest and principal of up
to $40 million. Host Marriott's performance under the Debt Service Guaranty was
backed by a $40 million guaranty of aggregate principal and interest from MII
(the "Backup Guaranty"). Payments by Host Marriott under the Debt Service
Guaranty or MII under the Backup Guaranty would have been treated as advances to
the Partnership and bore interest at the base rate announced by The First
National Bank of Chicago. The Debt Service Guaranty replaced the original
guarantee of $37.3 million under the Original 49 Hotels Loan. No amounts have
been advanced under the Debt Service Guaranty or the Backup Guaranty covering
the 49 Hotels Loan. As of December 31, 1996 and 1995, $7,341,000 had been
advanced by the General Partner under the Original 49 Hotels Loan guaranty. The
weighted average interest rate on the Original 49 Hotel Loan guaranty advances
was 8.3%, 8.8% and 7.15% for 1996, 1995 and 1994, respectively. The interest
rate at December 31, 1996 was 8.25% and 8.5% at December 31, 1995. Accrued
interest on the guaranty advance as of December 31, 1996 and 1995, was
$5,634,000 and $5,025,000, respectively.
MII provided two additional guaranties to the Lenders: the debt and tenant
change guaranty (the "Debt and Tenant Change Guaranty") and the Marriott
International Guaranty (the "MII Guaranty").
The Debt and Tenant Change Guaranty provided that in the event of nonpayment of
principal and interest when due or upon loan maturity, MII would have advanced
amounts, in addition to amounts advanced under the Backup Guaranty for principal
and interest not to exceed the following:
<TABLE>
<S> <C>
From closing through June 15, 1997 $10.0 million
From June 16, 1997 through June 15, 1998 $12.5 million
Thereafter $15.0 million
</TABLE>
Additionally, the Debt and Tenant Change Guaranty provided that if the Operator
ceases to be a wholly-owned subsidiary of MII, then MII would have advanced $15
million (the "Tenant Change Payment") for principal and interest on the 49
Hotels Loan. However, if MII would have paid $15 million to the Lenders prior to
the occurrence of a tenant change, then MII would have no further obligation to
fund the Tenant Change Payment.
The MII Guaranty provided that in the event of nonpayment of principal and
interest when due or upon loan maturity, MII had the option of (1) remaining the
Operator of the 49 Hotels by advancing amounts to the Lenders for principal and
interest equal to the lesser of (i) $40 million minus amounts advanced under the
Debt and Tenant Change Guaranty or (ii) the amount necessary to reduce the
outstanding principal balance on the 49 Hotels Loan to $180 million or (2)
conveying its rights, title and interest in the 49 Hotels operating agreement to
the Lenders.
In the event of nonpayment of principal and interest when due or upon maturity,
for Courtyard Management Corporation to remain as the Operator of the 49 Hotels,
MII could have been required to advance as much as $80 million ($40 million
pursuant to the Backup Guaranty if Host Marriott failed to perform under the
Debt Service Guaranty and, at its option, $40 million, collectively, under the
MII Guaranty and the Debt and Tenant Change Guaranty). However, in the event
that MII conveyed its rights, title and interest in the 49 Hotels operating
agreement to the Lenders, the maximum amount that MII would have been required
to advance to the Lenders would have been $55 million ($40 million under the
Backup Guaranty if Host Marriott failed to perform under the Debt Service
Guaranty and $15 million under the Debt and Tenant Change Guaranty). Payments by
MII under the Debt and Tenant Change Guaranty and the MII Guaranty,
respectively, would have been treated as advances to the Partnership and bore
interest at the base rate announced by The First National Bank of Chicago. No
amounts were advanced pursuant to the Debt and Tenant Change Guaranty and the
MII Guaranty.
27
<PAGE>
Windsor Loan Guaranty
Host Marriott directly or through the General Partner provided additional
security to the Windsor Loan lenders in the form of a debt service guaranty of
aggregate interest and principal on the Windsor Loan of up to $706,000. Payments
by Host Marriott or the General Partner under the debt service guaranty were
treated as advances to the Partnership and bore interest at the base rate
announced by The First National Bank of Chicago. No amounts were advanced under
the Windsor Loan guaranty. However, in exchange for Host Marriott providing a
guaranty of repayment of the loan at maturity, the lender agreed to extend the
Windsor Loan maturity to March 31, 1997.
Upon the refinancing of the Partnership's debt, Host Marriott and MII were
released from these guaranties as discussed in Note 9.
NOTE 7. LAND LEASES
The land on which 31 of the Hotels are located is leased from affiliates of MII.
In addition, two of the Hotels are located on land leased from third parties.
The ground leases have remaining terms (including all renewal options) expiring
between the years 2058 and 2081. The MII ground leases and one of the third
party ground leases provide for rent based on specific percentages (from 2% to
9.75%) of certain sales categories, subject to minimum amounts. The minimum
rentals are adjusted at various anniversary dates throughout the lease terms, as
defined in the agreements.
Minimum future rental payments during the term of the ground leases are as
follows (in thousands):
<TABLE>
<CAPTION>
Lease Ground
Year Leases
--------- -----------
<S> <C>
1997 $ 7,068
1998 7,068
1999 7,068
2000 7,140
2001 7,140
Thereafter 546,703
-----------
$ 582,187
===========
</TABLE>
Total ground rent expense was $7,478,000 in 1996, $7,569,000 in 1995, and
$7,675,000 in 1994.
NOTE 8. MANAGEMENT AGREEMENT/OPERATING AGREEMENT
In connection with the debt refinancing, the Operating Agreements, as defined
below, were terminated as of January 3, 1997. A new management agreement (the
"Management Agreement") was executed as of January 4, 1997 for the management of
the 50 Partnership Hotels.
On the Closing Date, the Partnership entered into a long-term management
agreement (the "Original Management Agreement") with Courtyard Management
Corporation to operate the Hotels as part of the Courtyard by Marriott hotel
system. Effective January 1, 1994, in connection with the 49 Hotels Loan
agreement, the Original Management Agreement was converted into two long-term
operating agreements (the "Operating Agreement(s)") with the Operator, one for
the 49 Hotels and one for the Windsor Hotel. The Operating Agreements had
initial terms expiring on December 31, 2007 for a majority of the Hotels. The
Operator could renew the term, for one or more of the Hotels, at its option, for
up to five successive terms of 10 years each.
Effective July 1, 1989, the Original Management Agreement was amended to defer
the Courtyard management fee and base management fee to the extent that cash
flow provided to the Partnership was less than $2,945,000 for 1989 and
$6,973,000 per year in 1990 through 1993 (the "Partnership Objective"). The
Partnership Objective provided a 3% per annum return on Partners' invested
capital, as defined, for 1989 and 6% per annum from 1990 through 1993. In order
to meet the Partnership Objective, the Courtyard management fee was first
subject to deferral followed by the base management fee. As of December 31,
1993, the balance of deferred incentive, Courtyard and base management fees
totalled $51.5 million. During 1994, these fees were extinguished pursuant to
the 49 Hotels Loan and the forgiveness of these fees is recorded as an
extraordinary item in the statement of operations.
28
<PAGE>
The 49 Hotels Operating Agreement provided for annual payments to the
Partnership equal to 85% of operating profit, as defined (75% of operating
profit after the Partners have received cumulative distributions of loan
proceeds equal to $60,526,500). However, until the 49 Hotels Loan balance was
below $300 million, 100% of Available Cash Flow from the 49 Hotels would have
been paid by the Operator to the Partnership. The additional payment to the
Partnership of 15% or 25% of operating profit accrued as deferred incentive
management fees. As of December 31, 1996 and 1995, $25,076,000 and $15,899,000,
respectively, of incentive management fees related to the 49 Hotels were
deferred. Once the 49 Hotels Loan balance was between $250,000,000 and
$299,999,999, the incentive management fee was payable out of 20% of Available
Cash Flow after the payment of the following: (i) deferred MII ground rent; (ii)
interest and principal on advances under the Backup Guaranty; (iii) interest and
principal on advances under the Debt Service Guaranty; (iv) interest and
principal under the Debt and Tenant Change Guaranty and the MII Guaranty; and
(v) a priority return to the Partnership equal to 10% of cumulative capital less
sales proceeds and loan proceeds, as defined. Additionally, once the 49 Hotels
Loan balance was below $250,000,000, the incentive management fee was payable
out of 25% of Available Cash Flow after the payment of items (i) through (v)
above.
The Windsor Hotel Operating Agreement also provided for annual payments to the
Partnership equal to 85% of operating profit, as defined, for the Windsor Hotel
(75% of operating profit after the Partners have received cumulative
distributions of loan proceeds equal to $60,526,500). However, if 85% or 75% of
operating profit from the Windsor Hotel was insufficient to cover debt service
on the Windsor Hotel, then the 15% or 25% of operating profit, as defined, was
paid to the Partnership. This additional payment to the Partnership of 15% or
25% of operating profit, as defined, accrued as deferred incentive management
fees. As of December 31, 1996 and 1995, $520,000 and $332,000, respectively, of
incentive management fees related to the Windsor Hotel were deferred.
The Operating Agreements provided for annual payments to the Operator of (i) the
base management fee equal to 3% of gross sales from the Hotels, (ii) the
Courtyard management fee equal to 3% of gross sales from the Hotels, and (iii)
the incentive management fee equal to 15% of operating profit, as defined, (25%
of operating profit after the Partners have received distributions of aggregate
refinancing proceeds equal to $60,526,500).
The Operator was required to furnish certain services ("Chain Services") which
are furnished generally on a central or regional basis to all managed, owned or
leased hotels in the Courtyard by Marriott hotel system. Effective January 1,
1994, the Operating Agreements provided that charges for certain Chain Services
cannot exceed 5% of gross Hotel sales. The Operator will be responsible for any
Chain Services in excess of the 5% of gross Hotel sales limit from its own
funds. Chain Services charges for 1996, 1995 and 1994 did not exceed the
limitation. The total amount of Chain Services was $6,540,000 in 1996,
$6,412,000 in 1995 and $6,265,000 in 1994.
The Partnership is required to provide the Operator with working capital and
fixed asset supplies to meet the operating needs of the Hotels. Upon termination
of the Operating Agreements, the working capital and supplies will be returned
to the Partnership. Of the $3,213,000 originally advanced to the Operator for
working capital, $2,000,000 of excess working capital was returned to the
Partnership in 1988, leaving a balance of $1,213,000 as of December 31, 1996 and
1995.
The Operating Agreements provided for a property improvement fund to be
maintained to ensure that the physical condition and product quality of the
Hotels are maintained. Contributions to the property improvement fund were 5% of
gross Hotel sales through 1996. Beginning in 1997 contributions to the property
improvement fund could have been increased to 6% of gross Hotel sales if certain
operating profit levels were met. For the years ended December 31, 1996, 1995
and 1994, the Partnership contributed $9,082,000, $8,540,000 and $8,092,000,
respectively, to the property improvement fund.
NOTE 9. SUBSEQUENT EVENT
Mortgage Debt
On March 21, 1997 (the "Refinancing Date") both the 49 Hotels Loan and the
Windsor Loan were refinanced. The total amount of the debt was increased from
$280.8 million to $325.0 million. The $44.2 million of excess refinancing
proceeds were used to: (i) make a $7 million contribution to the property
improvement fund to cover anticipated shortfalls; (ii) pay approximately $7
million of refinancing costs; and (iii) make a $30.2 million partial return of
capital distribution to the
29
<PAGE>
Partners. The new loan continues to be non-recourse and requires monthly
payments of interest at a fixed rate of 7.865% and principal based on a 20 year
amortization schedule. The loan has a scheduled maturity in April 2012; however,
the loan maturity can be extended for an additional five years. During the
extended loan term, the loan bears interest at an adjusted rate, as defined, and
all cash flow from Partnership operations is used to amortize the principal
balance of the loan.
Debt maturities under the refinanced loan are as follows (in thousands):
<TABLE>
<S> <C>
1997 $ 4,593
1998 7,356
1999 7,955
2000 8,604
2001 9,306
Thereafter 287,186
--------
$325,000
========
</TABLE>
The refinanced mortgage loan is secured by first mortgages on all of the Hotels,
related personal property, and the land on which they are located or an
assignment of the Partnership's interest under the land leases. All obligations
under the debt guaranties (see Note 6) expired with the repayment of the 49
Hotels Loan and the Windsor Loan. No new guaranties have been provided by Host
Marriott or MII.
The lender is currently working on the securitization of the mortgage debt
through the issuance and sale of commercial mortgage-backed securities.
Management Agreement
As part of the refinancing, the two Operating Agreements (see Note 8) were
converted into a single management agreement (the "Management Agreement")
effective January 4, 1997. The initial term of the Management Agreement expires
at the end of 2017. The Manager can extend the Management Agreement for up to
four successive periods of ten years. Under the Management Agreement, the
Manager has agreed to subordinate a portion of the Courtyard system fee equal to
1% of gross Hotel sales to debt service on the mortgage loan. In addition, in
exchange for payment of $4.2 million of deferred incentive management fees at
closing, the Manager agreed to forgive approximately $15 million of deferred
fees leaving a $6.5 million balance of accrued incentive management fees. The
$15 million of forgiven fees will be recognized as extraordinary income in the
first quarter of 1997. Incentive management fees are equal to 15% of operating
profit. Deferred and current year incentive management fees will be payable from
50% of available cash after the payment of: (i) debt service; (ii) deferred
Courtyard system fees, if any; (iii) deferred MII ground rent, if any; and (iv)
a priority return to the Partnership equal to 10% of cumulative capital less
sale and refinancing proceeds. In addition, incentive management fees paid are
capped at 15% of operating profit and no longer increase to 25% of operating
profit once cumulative distributions of refinancing proceeds equal $60.5
million. Deferred management fees are not payable to the Manager from sale or
refinancing proceeds. Future unpaid incentive management fees will not accrue.
In addition, contributions to the property improvement fund will remain at 5% of
gross Hotel sales through 1998. However, contributions can be increased to 6% of
gross Hotel sales for 1999 and 2000 and 7% thereafter.
Land Leases
Additionally, affiliates of MII, as the land lessors, agreed to continue to
subordinate their ownership interest as well as receipt of ground rent to debt
service on the mortgage loan.
30
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The Partnership has no directors or officers. The business and policy making
functions of the Partnership are carried out through the directors and executive
officers of CBM One Corporation, the General Partner, who are listed below:
<TABLE>
<CAPTION>
Age at
Name Current Position December 31, 1996
----------------------- ---------------------------- -----------------
<S> <C> <C>
Bruce F. Stemerman President and Director 41
Christopher G. Townsend Vice President and Director 49
Earla L. Stowe Vice President and
Chief Accounting Officer 35
Anna Mary Coburn Secretary 41
Bruce Wardinski Treasurer 36
</TABLE>
Business Experience
Bruce F. Stemerman joined Host Marriott in 1989 as Director--Partnership
Services. He became Vice President--Lodging Partnerships in 1994 and became
Senior Vice President--Asset Management in 1996. Prior to joining Host Marriott,
Mr. Stemerman spent ten years with Price Waterhouse. He also serves as a
director and an officer of numerous Host Marriott subsidiaries.
Christopher G. Townsend joined Host Marriott's Law Department in 1982 as a
Senior Attorney. In 1984 he was made Assistant Secretary of Host Marriott. In
1986 he was made an Assistant General Counsel. He was made Senior Vice
President, Corporate Secretary and Deputy General Counsel of Host Marriott in
1993. In January 1997, he was made General Counsel of Host Marriott. He also
serves as a director and an officer of numerous Host Marriott subsidiaries.
Earla L. Stowe was appointed to Vice President and Chief Accounting Officer of
CBM One Corporation on October 8, 1996. Ms. Stowe joined Host Marriott
Corporation in 1982 and held various positions in the tax department until 1988.
She joined the Partnership Services department as an accountant in 1988 and in
1989 she became an Assistant Manager--Partnership Services. She was promoted to
Manager--Partnership Services in 1991 and to Director--Asset Management in 1996.
Anna Mary Coburn joined Host Marriott as an Attorney in 1988, became Assistant
General Counsel in 1993, and was elected Corporate Secretary and Associate
General Counsel in 1997. Prior to joining Host Marriott, Ms. Coburn was an
Attorney for the law firm of Shawe & Rosenthal and was a law clerk
31
<PAGE>
for the United States Court of Appeals for the Fourth Circuit. Ms. Coburn
resigned from this position in January 1998. Christopher G. Townsend will assume
her responsibilities.
Bruce Wardinski joined Host Marriott in 1987 as a Senior Financial Analyst of
Financial Planning & Analysis and was named Manager in June 1988. He was
appointed Director, Financial Planning & Analysis in 1989, Director of Project
Finance in January 1990, Senior Director of Project Finance in June 1993, Vice
President--Project Finance in June 1994, and Senior Vice President of
International Development in October 1995. In June 1996, Mr. Wardinski was
named Senior Vice President and Treasurer of Host Marriott. Prior to joining
Host Marriott, Mr. Wardinski was with the public accounting firm Price
Waterhouse.
ITEM 11. MANAGEMENT REMUNERATION AND TRANSACTIONS
As noted in Item 10 above, the Partnership has no directors or officers nor does
it have any employees. Under the Partnership Agreement, however, the General
Partner has the exclusive right to conduct the business and affairs of the
Partnership subject only to the management agreements described in Items 1 and
13. The General Partner is required to devote to the Partnership such time as
may be necessary for the proper performance of its duties, but the officers and
directors of the General Partner are not required to devote their full time to
the performance of such duties. No officer or director of the General Partner
devotes a significant percentage of time to Partnership matters. To the extent
that any officer or director does devote time to the Partnership, the General
Partner is entitled to reimbursement for the cost of providing such services.
For the fiscal years ending December 31, 1996, 1995 and 1994, the Partnership
reimbursed the General Partner in the amount of $154,000, $129,000 and $163,000,
respectively, for the cost of providing all administrative and other services as
General Partner. For information regarding all payments made by the Partnership
to Host Marriott and subsidiaries, see Item 13 "Certain Relationships and
Related Transactions."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
As of December 31, 1996, no person owned of record, or to the Partnership's
knowledge owned beneficially, more than 5% of the total number of limited
partnership Units. The General Partner owns a total of 15 Units representing a
1.3% limited partnership interest in the Partnership.
As of December 31, 1996, an officer and director of the General Partner and Host
Marriott owned a quarter unit; an officer of Host Marriott owned a quarter unit;
and two officers of MII owned one unit each.
The Partnership is not aware of any arrangements which may, at a subsequent
date, result in a change in control of the Partnership other than the
consolidation described in Item 1.
32
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Operating Agreement/Management Agreement
In connection with the debt refinancing, the 49 Hotels Operating Agreement and
the Windsor Hotel Operating Agreement in effect from January 1, 1994 to January
3, 1997 were terminated. A new Management Agreement was executed as of January
4, 1997 for the management of the 50 Partnership Hotels. The following primarily
discusses the new Management Agreement.
Term
The Management Agreement has an initial term expiring December 31, 2017 and can
be renewed for four successive ten year periods as to one or more of the Hotels.
The Partnership may terminate the Management Agreement if, during any three
consecutive years, the average operating profit, as defined, does not exceed
$40,198,000 plus 8% of the sum of owner funded capital expenditures.
Management Fees
The Management Agreement provides for annual payments of (i) the base management
fee equal to 3% of gross Hotel sales, (ii) the Courtyard management fee equal to
3% of gross Hotel sales, and (iii) the incentive management fee equal to 15% of
operating profit, as defined. A portion of the Courtyard management fee equal
to 1% of gross Hotel sales is subordinate to debt service on the mortgage loan.
Deferral Provisions
At December 31, 1996, the Partnership had $25.6 million of accrued incentive
management fees. As part of the new refinancing, the Partnership agreed to pay
$4.2 million of deferred incentive management fees and the Manager agreed to
forgive $14.9 million of these fees at the new mortgage closing on March 21,
1997. This left a remaining balance of $6.5 million of accrued incentive
management fees as of March 21, 1997.
Under the new Management Agreement, base and Courtyard management fees no longer
accrue if not paid. In addition, incentive management fees are capped at 15% of
operating profit and no longer increase to 25% of operating profit once
cumulative distributions of refinancing proceeds equal $60.5 million. Deferred
and current year incentive management fees are payable from 50% of available
cash after the payment of: (i) debt service; (ii) deferred Courtyard management
fees; if any; (iii) deferred MII ground rent, if any; and (iv) a priority return
to the Partnership equal to 10% of cumulative capital less sale and refinancing
proceeds. Deferred management fees are not payable to the Manager from sale or
refinancing proceeds. Future unpaid incentive management fees will not accrue.
33
<PAGE>
Chain Services
The Manager is required to furnish certain services ("Chain Services") which are
furnished generally on a central or regional basis to all hotels managed, owned
or leased in the Courtyard by Marriott hotel system. The total amount of Chain
Services allocated to the Partnership was $6,540,000 in 1996, $6,412,000 in 1995
and $6,265,000 in 1994.
Working Capital
The Partnership is required to provide the Manager with working capital and
fixed asset supplies to meet the operating needs of the Hotels. Upon
termination of the Management Agreement, the working capital and supplies will
be returned to the Partnership. As of December 31, 1996, the Partnership has
advanced the Manager $1,213,000 in working capital.
Property Improvement Funds
The Management Agreement provides for the establishment of a repairs and
equipment reserve (property improvement fund) for the Hotels. The funding of
this reserve is based on a percentage of gross Hotel sales. The contribution to
the property improvement fund is at 5% of gross Hotel sales through 1998 and may
be increased, at the option of the Manager, to 6% of gross Hotel sales in 1999
and 2000 and 7% thereafter.
Payments to MII and Subsidiaries
The following table sets forth the amount paid to MII and affiliates under both
the Operating Agreement and the ground lease agreements for the years ended
December 31, 1996, 1995 and 1994 (in thousands). The table also sets forth
accrued but unpaid incentive management fees:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Ground rent..................................... $ 6,966 $ 6,402 $ 5,712
Chain services allocation....................... 6,540 6,412 6,265
Base management fee............................. 5,449 5,124 4,855
Courtyard management fee........................ 5,449 5,124 4,855
------- ------- -------
$24,404 $23,062 $21,687
======= ======= =======
Accrued but unpaid fees:
Incentive management fee........................ $ 9,365 $ 8,615 $ 7,616
======= ======= =======
</TABLE>
34
<PAGE>
Payments to Host Marriott and Subsidiaries
The following sets forth amounts paid by the Partnership to Host Marriott and
its subsidiaries for the years ended December 31, 1996, 1995 and 1994 (in
thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Administrative expenses reimbursed................. $154 $129 $163
Cash distributions................................. 30 -- --
---- ---- ----
$184 $129 $163
==== ==== ====
</TABLE>
Mortgage Debt Guarantees
Upon the refinancing of the Partnership debt on March 21, 1997, Host Marriott
and MII were released from the following guaranties.
49 Hotels Loan Guaranties
Host Marriott provided additional security to the Lenders in the form of a debt
guaranty (the "Debt Service Guaranty") of aggregate interest and principal of up
to $40 million. Host Marriott's performance under the Debt Service Guaranty was
backed by a $40 million guaranty of aggregate principal and interest from MII
(the "Backup Guaranty"). Payments by Host Marriott under the Debt Service
Guaranty or MII under the Backup Guaranty would have been treated as advances to
the Partnership and bore interest at the base rate announced by The First
National Bank of Chicago. The Debt Service Guaranty replaced the original
guarantee of $37.3 million under the Original 49 Hotels Loan. No amounts have
been advanced under the Debt Service Guaranty or the Backup Guaranty covering
the 49 Hotels Loan. As of December 31, 1996 and 1995, $7,341,000 had been
advanced by the General Partner under the Original 49 Hotels Loan guaranty. The
weighted average interest rate on the Original 49 Hotel Loan guaranty advances
was 8.3%, 8.8% and 7.15% for 1996, 1995 and 1994, respectively. The interest
rate at December 31, 1996 was 8.25% and 8.5% at December 31, 1995. Accrued
interest on the guaranty advance as of December 31, 1996 and 1995, was
$5,634,000 and $5,025,000, respectively.
MII provided two additional guaranties to the Lenders: the debt and tenant
change guaranty (the "Debt and Tenant Change Guaranty") and the Marriott
International Guaranty (the "MII Guaranty").
The Debt and Tenant Change Guaranty provided that in the event of nonpayment of
principal and interest when due or upon loan maturity, MII would have advanced
amounts, in addition to amounts advanced under the Backup Guaranty for principal
and interest not to exceed the following:
From closing through June 15, 1997 $10.0 million
From June 16, 1997 through June 15, 1998 $12.5 million
Thereafter $15.0 million
35
<PAGE>
Additionally, the Debt and Tenant Change Guaranty provided that if the Operator
ceases to be a wholly-owned subsidiary of MII, then MII would have advanced $15
million (the "Tenant Change Payment") for principal and interest on the 49
Hotels Loan. However, if MII would have paid $15 million to the Lenders prior
to the occurrence of a tenant change, then MII would have no further obligation
to fund the Tenant Change Payment.
The MII Guaranty provided that in the event of nonpayment of principal and
interest when due or upon loan maturity, MII had the option of (1) remaining the
Operator of the 49 Hotels by advancing amounts to the Lenders for principal and
interest equal to the lesser of (i) $40 million minus amounts advanced under the
Debt and Tenant Change Guaranty or (ii) the amount necessary to reduce the
outstanding principal balance on the 49 Hotels Loan to $180 million or (2)
conveying its rights, title and interest in the 49 Hotels operating agreement to
the Lenders.
Windsor Loan Guaranty
Host Marriott directly or through the General Partner provided additional
security to the Windsor Loan lenders in the form of a debt service guaranty of
aggregate interest and principal on the Windsor Loan of up to $706,000.
Payments by Host Marriott or the General Partner under the debt service guaranty
were treated as advances to the Partnership and bore interest at the base rate
announced by The First National Bank of Chicago. No amounts were advanced under
the Windsor Loan guaranty. However, in exchange for Host Marriott providing a
guaranty of repayment of the loan at maturity, the lender agreed to extend the
Windsor Loan maturity to March 31, 1997.
36
<PAGE>
PART IV
ITEM 14. EXHIBITS, SUPPLEMENTAL FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) List of Documents Filed as Part of This Report
(1) Financial Statements
All financial statements of the registrant as set forth
under Item 8 of this Report on Form 10-K.
(2) Financial Statement Schedules
The following financial information is filed herewith on the
pages indicated.
Schedule III - Real Estate and Accumulated Depreciation
All other schedules are omitted because they are not applicable or the required
information is included in the financial statements or notes thereto.
(3) EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description Page
- ------------- ------------------------------------------------------------------------------------------ --------
<C> <S> <C>
*2. Purchase Agreement between Marriott Corporation and Courtyard by Marriott Limited N/A
Partnership dated August 4, 1986.
*3. Amended and Restated Certificate and Amended and Restated Agreement of Limited N/A
Partnership of Courtyard by Marriott Limited Partnership dated August 20, 1986.
*10.a Management Agreement between Courtyard by Marriott Limited Partnership and Courtyard N/A
Management Corporation dated August 14, 1986.
*10.b Assignment of sublease and Warranty and Assumption of Obligations between Marriott N/A
Corporation and the Courtyard by Marriott Limited Partnership dated August 19, 1986 for
the Northlake, Georgia property. Sublease Agreement between Crow-Atlanta Retail, Ltd.
and Marriott Corporation dated April 5, 1983.
*10.c Assignment of Lease and Warranty and Assumption of Obligations between Marriott N/A
Corporation and the Courtyard by Marriott Limited Partnership dated August 19, 1986 for
the Windy Hill, Georgia property. Marriott Hotel Land Lease between Kan Am Properties
Limited and Marriott Corporation dated September 1, 1982.
*10.d Assignment of Lease and Warranty and Assumption of Obligations between Marriott N/A
Corporation and the Courtyard by Marriott Limited Partnership dated December 9, 1986 for
the San Francisco Airport, California property. Marriott Hotel Land Lease between AE
Properties, Inc. and Marriott Corporation dated May 6, 1985.
</TABLE>
37
<PAGE>
<TABLE>
<C> <S> <C>
*10.e The Courtyard by Marriott Limited Partnership received an assignment from Marriott N/A
Corporation of 12 Ground Leases for land that Marriott Corporation had previously leased
from various affiliates (the "Original Landlords") on April 13, 1986. The 12 Ground
Leases are identical in all material respects except as to their assignment date to the
Partnership, rents due (Exhibit A of each Ground Lease) and the affiliates of Marriott
Corporation who are the Original Landlords. The schedule below sets forth the terms of
each Ground Lease not filed which differ from the copy of the example Ground Lease
(Atlanta-Delk Road) which is filed herewith. In addition, a copy of Exhibit A is being
filed for each excluded Ground Lease.
</TABLE>
<TABLE>
<CAPTION>
Property State Assignment Date Original Landlord
-------- ----- --------------- -----------------
<S> <C> <C> <C>
Atlanta-Delk Road GA 12/09/86 Host Restaurants, Inc.
Buena Park CA 12/09/86 Essex House Condominium
Corporation
Cincinnati-Blue Ash OH 10/15/86 Host Restaurants, Inc.
Columbus-Dublin OH 11/12/86 Host Restaurants, Inc.
Dearborn MI 11/12/86 Host Restaurants, Inc.
Hunt Valley MD 10/15/86 Essex House Condominium
Corporation
Memphis-Park Ave-East TN 10/15/86 Host Restaurants, Inc.
Montgomery AL 12/09/86 Host Restaurants, Inc.
Naperville IL 12/09/86 Casa Maria of Maryland, Inc.
Brentwood (Nashville) TN 09/17/86 Host Restaurants, Inc.
Norfolk-VA Beach VA 12/09/86 Host Restaurants, Inc.
Brookfield (Richmond) VA 12/09/86 Newark Properties, Inc.
</TABLE>
<TABLE>
<C> <S> <C>
10.f Loan Agreement between Citibank, N.A., The First National Bank of Chicago and Courtyard by N/A
Marriott Limited Partnership dated February 9, 1988.
10.g Promissory Note for $4,136,995 between Courtyard by Marriott Limited Partnership and The N/A
First National Bank of Chicago dated February 10, 1988 and Promissory Note for $4,136,995
between Courtyard by Marriott Limited Partnership and Citibank, N.A. dated February 10,
1988.
10.h Debt Service Guaranty between Marriott Corporation, as Guarantor, and Citibank, N.A. and N/A
the First National Bank of Chicago, as Lender, dated February 10, 1988.
10.i Lease Agreement between Courtyard Management Corporation and Courtyard by Marriott N/A
Limited Partnership with LaSalle National Trust, N.A. and Alexander Title Agency, Inc.
as Trustees dated January 1, 1994.
10.j Lease Agreement between Courtyard Management Corporation and Courtyard by Marriott Limited N/A
Partnership dated January 1, 1994.
10.k Second Amendment and Restated Loan Agreement for $304,788,924.58 between the Banks as named N/A
within the Agreement and Citibank, N.A., as Agent, and Courtyard by Marriott Limited
Partnership dated April 7, 1994.
10.l Amended and Restated Debt Service Guaranty dated April 7, 1994 between Host Marriott N/A
Corporation, as Guarantor, and the Lenders as named within the Second Amended and Restated
Loan Agreement dated April 7, 1994 and Citibank, N.A., as Agent.
10.m Management Agreement by and between Courtyard Management Corporation (Manager) dated N/A
January 4, 1997 and Courtyard by Marriott Limited Partnership (Owner).
10.n Loan Agreement by and between Courtyard by Marriott Limited Partnership (Borrower) and N/A
Lehman Brothers Holdings, Inc. (Lender) dated March 21, 1997.
10.o First Amendment to Loan Agreement by and between Courtyard by Marriott Limited N/A
</TABLE>
38
<PAGE>
<TABLE>
<S> <C> <C>
Partnership (Borrower) and Lehman Brothers Holdings, Inc.
(Lender) dated March 21, 1997.
10.p Mortgage Note by Courtyard by Marriott Limited N/A
Partnership Payable to The Order of Lehman Brothers
Holdings, Inc. d/b/a Lehman Capital in the amount of
$325,000,000.00 dated March 21, 1997.
10.q Courtyard by Marriott Limited Partnership Promissory Note N/A
in favor of Host Marriott Corporation in the amount of
$7,340,744.00 together with Endorsement by CBM One
Holdings, Inc. dated March 21, 1997.
10.r Intercreditor Agreement by and between Lehman Brothers N/A
Holdings, Inc., d/b/a Lehman Brothers Holdings, Inc.
(Senior Lender) and CBM One Holdings, Inc. (Junior
Lender) dated March 21, 1997.
10.s Second Amendment of Ground Leases by and among Courtyard N/A
by Marriott Limited Partnership, Host Restaurants, Inc.
(HRI), Newark Properties, Inc. (Newark), Casa Maria of
Maryland, Inc. (Casa Maria) and Essex House Condominium
Corporation (Essex House) (Landlord and Collectively
Landlords) dated March 21, 1997.
27. Financial Data Schedule.
*28. Pages 28 through 36 and pages 40 through 44 of Courtyard by N/A
Marriott Limited Partnership Private Placement Memorandum.
</TABLE>
--------------------
* Incorporated by reference to the same numbered exhibit in the Partnership's
General Form for Registration of Securities on Form 10 previously filed with
the Commission.
(b) REPORTS ON FORM 8-K
39
<PAGE>
SCHEDULE III
COURTYARD BY MARRIOTT LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1996
(in thousands)
<TABLE>
<CAPTION>
Initial Costs Gross Amount at December 31, 1996
------------------------- ----------------------------------------
Subsequent
Buildings & Costs Buildings & Accumulated
Description Encumbrances Land Improvements Capitalized Land Improvements Total Depreciation
- ----------- ------------ ---- ------------ ----------- ---- ------------ ----- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
50 Courtyard by
Marriott Hotels
(each less than
5% of total) $ 288,975 $30,797 $ 310,705 $22,618 $30,797 $ 333,323 $364,120 $ 88,768
========== ======= ========== ======= ======= ========== ======== =========
<CAPTION>
Date of
Completion of Date Depreciation
Construction Acquired Life
------------ -------- ----
<S> <C> <C> <C>
50 Courtyard by 1983 - 1988 1986 - 1988 40 years
Marriott Hotels
</TABLE>
<TABLE>
<CAPTION>
Notes:
- ------
1994 1995 1996
--------- -------- --------
<S> <C> <C> <C>
(a) Reconciliation of Real Estate:
Balance at beginning of year.......................... $352,376 $355,228 $356,598
Capital Expenditures.................................. 2,852 1,370 7,522
Dispositions.......................................... -- -- --
-------- -------- --------
Balance at end of year................................ $355,228 $356,598 $364,120
======== ======== ========
(b) Reconciliation of Accumulated Depreciation:
Balance at beginning of year.......................... $58,684 $68,494 $78,524
Depreciation.......................................... 9,810 10,030 10,244
------- ------- -------
Balance at end of year................................ $68,494 $78,524 $88,768
======= ======= =======
(c) The aggregate cost of land, buildings and
improvements for Federal income tax purposes
is approximately $330.9 million at
December 31, 1996.
</TABLE>
40
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this Form 10-K to be signed on its
behalf by the undersigned, thereunto duly authorized, on this 27th day of
January, 1998.
COURTYARD BY MARRIOTT
LIMITED PARTNERSHIP
By: CBM ONE CORPORATION
General Partner
/s/ Bruce F. Stemerman
----------------------------
Bruce F. Stemerman
President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
the capacities and on the date indicated above.
Signature Title
- --------- -----
(CBM ONE CORPORATION)
/s/Bruce F. Stemerman President and Director
- ------------------------------- (Principal Executive Officer)
Bruce F. Stemerman
/s/ Christopher G. Townsend Vice President, Secretary and Director
- -------------------------------
Christopher G. Townsend
/s/ Earla L. Stowe Vice President and Chief Accounting Officer
- -------------------------------
Earla L. Stowe
/s/ Bruce Wardinski Treasurer
- -------------------------------
Bruce Wardinski
41
<PAGE>
EXHIBIT 10.f
COURTYARD BY MARRIOTT
Loan Agreement
For
WINDSOR, CONNECTICUT
<PAGE>
LOAN AGREEMENT
--------------
AGREEMENT dated as of the 9th day of February 1988, by and among
CITIBANK, N.A., a national banking association of the United States of America,
and THE FIRST NATIONAL BANK OF CHICAGO, a national banking association of the
United States of America (collectively, the Original Lenders, and severally, an
"Original Lender,"), and COURTYARD BY MARRIOTT LIMITED PARTNERSHIP, a Delaware
limited partnership (the "Borrower").
WITNESSETH:
WHEREAS, Borrower has contracted with Marriott Corporation to purchase
fifty (50) Courtyard by Marriott hotels under an agreement dated August 14, 1986
("Purchase Agreement") including a hotel located in Windsor, Connecticut; and
WHEREAS, the Original Lenders have agreed to make and the Borrower has
agreed to accept the loan hereinafter described for the purpose of financing a
portion of the cost of the purchase of the Windsor, Connecticut hotel (the
"Hotel") on the terms and conditions set forth herein.
NOW, THEREFORE, IT IS AGREED:
1. DEFINITIONS.
For all purposes of this Agreement and of the other Loan Documents (as
hereinafter defined), the following terms used in this Agreement and in the
other Loan Documents without definition shall have the following respective
meanings:
1.1 The term "Accounting Period" means each four (4) week accounting
-----------------
period having the same beginning and ending dates as the General Partner's four
(4) week accounting periods, except that the first or last Accounting Period in
each year may occasionally be shorter or longer than four (4) weeks when
necessary to conform the accounting system to the calendar.
1.2 The term "Accounting Quarter" means the Accounting Periods ending
------------------
on the third, sixth, ninth and last Accounting Periods within each Fiscal Year.
<PAGE>
1.3 The term "Affiliate" means, with respect to any Person, (a) any
---------
other Person who is in Control of such Person, directly or indirectly, (b) any
Corporation or organization (other than the borrower) of which a Person referred
to in clause (a) above is an officer or partner or is, directly or indirectly,
the beneficial owner of ten percent (10%) or more of any class of equity
securities, (c) any trust or other estate in which a Person referred to in
clause (a) above has a substantial beneficial interest or as to which a Person
referred to in clause (a) above serves as trustee or in a similar fiduciary
capacity, and (d) any relative or spouse of a Person referred to in clause (a)
above, or any relative of such spouse, who has the same home as a Person
referred to in clause (a) above.
1.4 The term "Agreement" means this agreement, including any and all
---------
Exhibits and Schedules hereto, as the same may be amended, supplemented or
otherwise modified from time to time, and the terms "herein," "whereof,"
"whereunder" and like terms shall be taken as referring to this Agreement in its
entirety and shall not be limited to any particular section or provision hereof.
1.5 The term "Assessment Rate" means for any CD Interest Period, the
---------------
average of the net assessment rates per annum (rounded upwards if necessary, to
the next higher 1/100 of 1%) payable to the Federal Deposit Insurance
Corporation (or any successor) for the insurance of domestic deposits of the
Original Lenders during the calendar year in which the first day of such CD
Interest Period falls, as estimated by the Original Lenders using reasonable
means on the first day of the CD Interest Period.
1.6 The term "Authorized Representative" means any representative of
-------------------------
the General Partner who, pursuant to written notice from the Borrower to the
Lenders, is authorized by the Borrower to act in connection with the giving of
any Borrowing Notice.
1.7 The term "Base Eurodollar Rate" means, with respect to a
--------------------
Eurodollar Borrowing for a Eurodollar Interest Period, the numerical average of
the Citibank Eurodollar Rate and the FNBC Eurodollar Rate. The Base Eurodollar
Rate shall be rounded to the nearest one hundredth of one percent or, if there
is no nearest one-hundredth of one percent, rounded to the next highest one-
hundredth of one percent.
2
<PAGE>
1.8 The term "Base Fixed CD Rate" means, with respect to a Fixed CD
------------------
Rate Borrowing for the relevant CD Interest Period, the numerical average of the
Citibank CD Rate and the FNBC CD Rate. The Base Fixed CD Rate shall be rounded
to the nearest one-hundredth of one percent or, if there is no nearest one-
hundredth of one percent, rounded to the next highest one-hundredth of one
percent.
1.9 The term "Base Rate" means a fluctuating interest rate per
---------
annum announced publicly by Citibank in New York, New York, from time to time,
as Citibank's Base Rate.
1.10 The term "Base Management Fee" means a fee payable to the
-------------------
Manager under the Management Agreement during each Fiscal Year in an amount
equal to three percent (3%) of Gross Revenues for such Fiscal Year.
1.11 The term "Borrower" has the meaning provided therefor in the
--------
Preamble hereof.
1.12 The term "Borrowing" means a Eurodollar Borrowing or a Fixed CD
---------
Rate Borrowing.
1.13 The term "Borrowing Notice" means an irrevocable written, telex
----------------
or telephone notice given by an Authorized Representative to and received by the
Original Lenders specifying (a) the amount of each Borrowing, (b) whether the
Borrowing is a Eurodollar Borrowing or a Fixed CD Rate Borrowing, (c) the
Interest Period applicable to the Borrowing and (d) the Effective Date of each
such Borrowing.
1.14 The term "Business Day" means a day on which the principal
------------
offices of the Original Lenders are both open for the full transacting of their
banking business and, with respect to the borrowing, rate selection or payment
of Eurodollar Borrowings, a date on which, in addition to the foregoing,
dealings in Dollars are carried on in the London interbank market.
1.15 The term "Cash Flow Available for the Loan" means, for any
--------------------------------
Accounting Period, Accounting Quarter or Fiscal Year, the Operating Profit of
the Hotel plus rent payments under the Ground Lease during such period.
3
<PAGE>
1.16 The term "CD Interest Period" means, with respect to a Fixed CD
------------------
Rate Borrowing, a period of 30, 60, 90 or 180 days commencing on a Business Day
and selected by the Borrower in its Borrowing Notice. If such n Interest Period
would end on a day which is not a Business Day, such CD Interest Period shall
end on the next succeeding Business Day.
1.17 The term "Citibank" means Citibank, N.A., a national banking
--------
association of the United States of America.
1.18 The term "Citibank CD Rate" means, with respect to a Fixed CD
----------------
Rate Borrowing for the relevant CD Interest Period, the quotient of (i) the rate
determined by Citibank to be the arithmetic average of the prevailing bid rates
quoted to Citibank at or before 10:00 a.m. (New York time) on the first day of
such CD Interest Period by three certificates of deposit dealers in New York or
Chicago of recognized standing elected by Citibank in its sole discretion for
the purchase at face value of certificates of deposit of Citibank in the
approximate amount of Citibank's Pro Rata Share of the relevant Fixed CD Rate
Borrowing and having a maturity approximately equal to the relevant CD Interest
Period, divided by (ii) one minus the Citibank Reserve Requirement (expressed as
a decimal).
1.19 The term "Citibank Eurodollar Rate" means, with respect to a
------------------------
Eurodollar Borrowing for a Eurodollar Interest Period, the quotient of (i) the
rate at which deposits in dollars are offered by Citibank to first-class banks
in the London interbank market at approximately 11:00 a.m. (London time) two (2)
Business Days prior to the first day of such Eurodollar Interest Period, with a
maturity approximately equal to such Eurodollar Interest Period and in the
approximate amount of Citibank's Pro Rata Share of the relevant Eurodollar
Borrowing, divided by (ii) one minus the Citibank Reserve Requirement (expressed
as a decimal).
1.20 The term "Citibank Reserve Requirement" means, with respect to a
----------------------------
Eurodollar Interest Period or a CD Interest Period, the maximum aggregate
reserve requirements (including all basic, supplemental, marginal and other
reserves) of Citibank which are imposed under Regulation D on new non-personal
time deposits of $100,000 or more with a maturity equal to that of the CD
Interest Period (in the case of Fixed CD Rate Borrowings) or on Eurocurrency
liabilities (in the case of Eurodollar Borrowings).
4
<PAGE>
1.21 The term "Closing" means the disbursement of the Loan and
-------
without limitation of the foregoing, the closing shall not be deemed to have
occurred merely upon the execution of this Agreement.
1.22 The term "Control" means the power to direct or cause the
-------
direction of the management and policies of a Person, either alone or in
conjunction with others and whether through the ownership of Stock, by contract
or otherwise.
1.23 The term "Corporation" shall include an association, joint stock
-----------
company, business trust or other similar organization (other than a
partnership).
1.24 The term "Courtyard Management Fee" means a fee payable to the
------------------------
Manager under the Management Agreement during each Fiscal Year in an amount
equal to three percent (3%) of Gross Revenues for such Fiscal Year.
1.25 The term "Current Accounting Quarters" means the most recent
---------------------------
Accounting Quarters, ending with the Accounting Quarter most recently completed
as of the date a determination of Debt Service Coverage is to be made under
Section 7.2(e) hereof and including those Accounting Quarters immediately and
consecutively preceding such Accounting Quarter. In no event shall the first of
the Current Accounting Quarter be an Accounting Quarter preceding the first full
Accounting Quarter following the Closing, and Debt Service Coverage requirements
for Current Accounting Quarters must be satisfied by the required number of
Accounting Quarters commencing no earlier than the first full Accounting Quarter
following the Closing.
1.26 The term "Debt Service" means the sum of all payments of
------------
principal and interest required to be made with respect to any specified
Indebtedness during a given period.
1.27 The term "Debt Service Guaranty" means a guaranty of Debt
---------------------
Service on the Loan in the form of Exhibit A hereto.
1.28 The term "Deductions" means the following amounts incurred in
----------
operating the Hotel:
(a) The cost of sales including salaries, wages, fringe
benefits, payroll taxes and other costs related to employees of the Hotel;
5
<PAGE>
(b) Departmental expenses, administrative and general
expenses, heat, light and power, advertising and promotional expense, relocation
expense, and routine repairs, maintenance and minor alterations treated as
Deductions under Section 8.01 of the Management Agreement;
(c) The cost of "Inventories" and "Fixed Asset Supplies"
(both as defined in the Management Agreement) consumed in the operation of the
Hotel;
(d) A reasonable deduction for uncollectible accounts
receivable;
(e) All reasonable cots and fees of independent accountants
or other third parties who perform services required or permitted under the
Management Agreement;
(f) The reasonable cost and expense of technical consultants
and operational experts for specialized services in connection with nonroutine
work at the Hotel;
(g) The Base Management Fee;
(h) The Courtyard Management Fee;
(i) The reasonable costs and expenses incurred by Manager in
providing "Chain Services" (as defined in the Management Agreement) to the Hotel
as allocated in Section 11.03 of the Management Agreement in amounts not
exceeding the amounts permitted under the Management Agreement;
(j) Insurance costs and expenses as provided
in Article 12 of the Management Agreement;
(k) Taxes, if any, payable by or assessed against the
Manager related to the Management Agreement or to the Manager's operation of the
Hotel (exclusive of the Manager's income taxes);
(l) The required FF&E Reserve contribution;
6
<PAGE>
(m) Ground rent paid under the Ground Lease;
(n) All real estate and personal property taxes, levies,
assessments and similar charges on or relating to the Hotel, including any such
amounts which shall be required to be paid pursuant to the Ground Lease;
(o) Such other costs and expenses as are specifically
provided for herein or are otherwise reasonably necessary for the proper and
efficient operation of the Hotel.
1.29 The term "Dollars" and the sign "$" mean lawful currency of the
-------
United States of America.
1.30 The term "Effective Date" means any Business Day designated by
--------------
the Borrower in a Borrowing Notice as the effective date of a Borrowing.
1.31 The term "Eurodollar Borrowing" means a Borrowing accruing
--------------------
interest at a Eurodollar Rate.
1.32 The term "Eurodollar Interest Period" means, with respect to a
--------------------------
Eurodollar Borrowing, a period of one, two, three, six or twelve months, to the
extent Eurodollar borrowings of such or similar periods are available to the
Original Lenders, commencing on a Business Day and selected by the Borrower in
its Borrowing Notice. A month means a period starting on one day in a calendar
month and ending on the numerically corresponding day in the next calendar
month. If there is no such numerically corresponding day in the month in which
the Eurodollar Interest Period ends, the Eurodollar Interest Period shall end on
the last Business Day of such month. If any Eurodollar Interest Period would
otherwise end on a day which is not a Business Day, such Eurodollar Interest
Period shall end on the next succeeding Business Day, provided, however, that,
if said next succeeding Business Day fall in a new month, such Eurodollar
Interest Period shall end on the immediately preceding Business Day. Any such
Eurodollar Interest Period must end on or before the Maturity Date.
1.33 The term "Eurodollar Rate" means, with respect to a Eurodollar
---------------
Borrowing and a Eurodollar Interest Period, the sum of (i) the Base Eurodollar
Rate applicable to that
7
<PAGE>
Eurodollar Interest Period, plus (ii) the Increment. If at any time either
Citibank or FNBC is not offering deposits to first-class banks in the London
interbank market, or adequate and fair means do not exist for determining the
Eurodollar Rate, for any one or more Eurodollar Interest Periods, then the
availability of the Eurodollar Rate for such Eurodollar Interest Period or
Periods shall be immediately suspended hereunder and the Eurodollar Rate for
such Eurodollar Interest Period or Periods may not be selected until such time
as both Citibank and FNBC are offering such deposits and adequate and fair means
exist for such determination.
1.34 The term "Events of Default" has the meaning provided therefor
-----------------
in Section 9.1 hereof.
1.35 The term "Extraordinary Revenues" means the proceeds from (a)
----------------------
sales or other dispositions of any of the assets of Borrower other than in the
ordinary course of business of the Hotel; (b) damage recoveries and casualty
insurance proceeds; (c) income derived from securities and other property
acquired and held for investment; (d) condemnation awards or sales in lieu of
and under the threat of permanent condemnation; (e) proceeds from any
Indebtedness permitted under Section 7.2 hereof; and (f) proceeds from capital
contributions of partners of Borrower or from loans by partner of Borrower.
1.36 The term "FF&E" means all furniture, fixtures and equipment
----
acquired or to be acquired in connection with the operation of the Hotel.
l.37 The term "FF&E Lease" means a lease (other than a TV System
----------
Lease or a Telephone Lease) to the Borrower of any FF&E that is customarily
located in the hotel industry or as otherwise approved by the Original Lenders,
such leased FF&E not to exceed at any time $200,000.00 in value for the Hotel
1.38 The term "FF&E Reserve" has the meaning provided therefor in
------------
Section 6.13 hereof.
1.39 The term "Financial Statements" has the meaning provided
--------------------
therefor in Section 5.6 hereof.
8
<PAGE>
1.40 The term "First Courtyard Loan Agreement" means those certain
------------------------------
Loan Agreements dated August 14, 1986 by and among Borrower (as the borrower
thereunder) and the Original Lenders and Bankers Trust Company, Bank of America
National Trust and Savings Association, The Bank of Nova Scotia, First
Interstate Bank of California and Security Pacific National Bank (collectively,
as lenders).
1.41 The term "Fiscal Year" means the calendar year. If Borrower's
-----------
Fiscal Year is changed in the future, appropriate adjustment to the Agreement's
reporting and accounting procedures shall be made; provided, however, that no
such change or adjustment shall alter in any material respect any determinations
of Cash Flow Available for the Loan or other amounts determinable hereunder with
reference to a Fiscal Year or any part thereof.
1.42 The term "Fixed CD Rate" means, with respect to a Fixed CD Rate
-------------
Borrowing for the relevant CD Interest Period, the sum of (i) the Base Fixed CD
Rate applicable to that CD Interest Period, plus (ii) the Assessment Rate
applicable to that CD Interest Period, plus (iii) the Increment.
1.43 The term "Fixed CD Rate Borrowing" means a Borrowing accruing
-----------------------
interest at the Fixed CD Rate.
1.44 The term "FNBC" means The First National Bank of Chicago, a
----
national banking association of the United States of America.
1.45 The term "FNBC CD Rate" means, with respect to a Fixed CD Rate
------------
Borrowing for the relevant CD Interest Period, the quotient of (i) the rate
determined by FNBC to be the arithmetic average of the prevailing bid rates
quoted to FNBC at or before 10:00 a.m. (New York time) on the first day of such
CD Interest Period by three certificates of deposit dealers in New York or
Chicago of recognized standing selected by FNBC in its sole discretion for the
purchase at face value of certificates of deposit of FNBC in the approximate
amount of FNBC's Pro Rata Share of the relevant Fixed CD Rate Borrowing, and
having a maturity approximately equal to the relevant CD Interest Period,
divided by (ii) one minus the FNBC Reserve Requirement (expressed as a decimal).
1.46 The term "FNBC Eurodollar Rate" means, with respect to a
--------------------
Eurodollar Borrowing for a Eurodollar Interest Period, the quotient of (i) the
rate at which deposits in dollars
9
<PAGE>
are offered by FNBC to first-class banks in the London interbank market at
approximately 11:00 A.M. (London time) two (2) Business Days prior to the first
day of such Eurodollar Interest Period, with a maturity approximately equal to
such Eurodollar Interest Period and in the approximate amount of FNBC's Pro Rata
Share of the relevant FNBC Eurodollar Borrowing, divided by (ii) one minus the
Reserve Requirement (expressed as a decimal).
1.47 The term "FNBC Reserve Requirement" means, with respect to a
------------------------
Eurodollar Interest Period or a CD Interest Period, the maximum aggregate
reserve requirements (including all basic, supplemental, marginal and other
reserves) of FNBC which are imposed under Regulation D on new nonpersonal time
deposits of $100,000 or more with a maturity equal to that of the CD Interest
Period (in the case of Fixed CD Rate Borrowings) or on Eurocurrency liabilities
(in the Case of Eurodollar Borrowings).
1.48 The term "General Partner" means CBM One Corporation, a Delaware
---------------
corporation and sole general partner of Borrower.
1.49 The term "Governmental Authority" means any nation or
----------------------
government, any state or other political subdivision thereof, and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of government.
1.50 The term "Gross Revenues" means all revenue and income of any
--------------
kind derived from the Hotel and all departments and parts thereof, including
rentals or other payments from lessees, licensees or concessionaires in the
Hotel (but not including gross receipts of any such lessees, licensees or
concessionaires except as may be received by or on behalf of Borrower as rent),
the proceeds of business interruption insurance and telephone charges, all
determined in accordance with generally accepted accounting principles,
excluding all refunds, rebates, discounts and credits of a similar nature,
given, paid or returned by Borrower in the course of obtaining such revenue and
income. However, any amounts received, recognized or realized, in the nature of
the following shall not be included as Gross Revenues: (a) applicable sales,
use and excise taxes or similar governmental charges collected directly from
patrons or guests, or as part of the sales price of any goods, services or
displays (including, without limitation, occupancy, gross receipts, admission,
cabaret or similar equivalent taxes); (b) gratuities; (c) Extraordinary
Revenues; and (d) interest earned on any reserves including the FF&E Reserve.
10
<PAGE>
1.51 The term "Ground Lease" means that certain Lease between Essex
------------
House Condominium Corporation, as Landlord and Marriott Corporation, as tenant
(whose interest has been subsequently assigned to Borrower) dated August 13,
1986 demising the Land.
1.52 The term "Guaranties" means the Debt Service Guaranty and the
----------
Management Guaranty, collectively.
1.53 The term "Hotel" shall have the meaning et forth in the
-----
Preamble.
1.54 The term "Hotel Property" means the Hotel and the Land
--------------
underlying it (without regard to whether the Land is owned or leased by the
Borrower) and all easements and appurtenances thereunto belonging.
1.55 The term "Incentive Management Fee" means the "Incentive
------------------------
Management Fee" provided for in the Management Agreement but determined solely
with respect to the Hotel and as if the Hotel was the only hotel subject to the
Management Agreement.
1.56 The term "Increment" means the following interest increments:
---------
(a) one and one-half percent (1-1/2%) through and including August 15, 1991, and
(b) two percent (2%) thereafter.
1.57 The term "Indebtedness," with respect to any Person, means,
------------
without duplication, (i) obligations for money borrowed by such Person, (ii)
obligations secured by any Lien existing on any property or other asset owned by
such Person subject to such Lien, whether or not the obligations secured thereby
shall have been assumed; (iii) such Person's capitalized lease obligations,
purchase money obligations and obligations under conditional sales or other
title retention agreements and FF&E Leases; (iv) such Person's guaranties and
endorsements (other than endorsements for collection in the ordinary course of
business) of another Person's (A) obligations for money borrowed, (B)
obligations secured by any Lien existing on any property or other. asset owned
by such other Person subject to such Lien, whether or not the obligations
secured thereby shall have been assumed by such other Person and (C) capitalized
lease obligations, purchase money obligations and obligations under conditional
sales or other title retention agreements; and (v) such Person's other
contingent liabilities in respect of, or any obligations to purchase or
otherwise acquire or service or assume or become a surety for obligations of
others.
11
<PAGE>
1.58 The term "Interest Period" means a Eurodollar Interest Period or
---------------
CD Interest Period.
1.59 The term "Land" means the parcel of land on which the Hotel is
----
located, which parcel consists of approximately the acreage identified, and is
located as described on Exhibit B hereto.
1.60 The term "Laws" means all present and future laws, ordinances,
----
rules, regulations and requirements of any Governmental Authority having or
claiming jurisdiction over the Hotel or any part thereof, and all orders, rules
and regulations of any national or local board of fire underwriters or other
body exercising similar functions, foreseen or unforeseen, ordinary or
extraordinary, which may be applicable to the Hotel or any part thereof, or to
the use or manner of such of any of the foregoing, or to the owners, tenants, or
occupants thereof, whether or not any such law, ordinance, rule, regulation or
requirement shall necessitate structural changes or improvements or shall
interfere with the use or enjoyment of any of the foregoing, and shall also mean
and include all requirements of the policies of public liability, fire and all
other insurance at any time in force with respect to any of the foregoing.
1.61 The term "Legal Rate" means a fluctuating interest rate per
----------
annum which is two and one-half percent (2 1/2%) per annum above the Base Rate
in effect from time to time.
1.62 The term "Lenders" means the Original Lenders and, in case of
-------
the assignment of the Notes or any interest therein permitted hereby, shall
include the holder or holders of the Notes.
1.63 The term "Lending Installation" means any office or branch of a
--------------------
Lender.
1.64 The term "Lien" means any charge, lien, mortgage, deed of trust,
----
deed to secure debt, pledge, hypothecation, collateral assignment, security
interest or other encumbrance of any nature whatsoever upon, of or in property
or other assets of a Person, whether absolute or conditional, voluntary or
involuntary, whether created pursuant to agreement, arising by force of statute,
by judicial proceedings or otherwise.
12
<PAGE>
1.65 The term "Loan" means, collectively, the loans to be made by the
----
Original Lenders to the Borrower in the aggregate principal amount of
$8,273,990.00 and to be evidenced by the Notes.
1.66 The term "Loan Commitment" has the meaning provided therefor in
---------------
Section 2.1(a).
1.67 The term "Loan Debt Service" means Debt Service on the Loan.
-----------------
1.68 The term "Loan Debt Service Coverage" means for any given
--------------------------
period, the ratio of (a) Cash Flow Available for the Loan to (b) Loan Debt
Service.
1.69 The term "Loan Documents" means this Agreement, the Notes, the
-------------
Mortgage, the Guaranties, the Security Agreement, the Management Agreement
Assignment, the Purchase Agreement Assignment, and all other documents now or
hereafter executed evidencing or securing the Loan, including any and all
exhibits and schedules to the foregoing, as the same may be amended,
supplemented or modified from time to time.
1.70 The term "Management Agreement" means that certain Management
--------------------
Agreement dated August 14, 1986 by and between Courtyard Management Corporation
and the Borrower, providing for the management of the Hotel and other Courtyard
by Marriott hotels.
1.71 The term "Management Agreement Assignment" has the meaning
-------------------------------
provided therefor in Section 4.2(c) hereof.
1.72 The term "Management Guaranty" means a guaranty of the
-------------------
performance by the Manager under the Management Agreement in the form of Exhibit
C hereto.
1.73 The term "Manager" means Courtyard Management Corporation, a
-------
Delaware corporation, or any permitted assignee thereof as provided in the
Management Agreement Assignment.
1.74 The term "Marriott" means Marriott Corporation, a Delaware
--------
corporation.
13
<PAGE>
1.75 The term "Marriott Lease" means a ground lease between an
--------------
affiliate of Marriott a landlord and Borrower as tenant (by assignment of the
interest of the original tenant thereunder) demising to the Borrower the land on
which a hotel is located.
1.76 The term "Marriott Lessor" means Essex House Condominium
---------------
Corporation, a direct or indirect wholly-owned subsidiary of Marriott and lessor
under the Ground Lease.
1.77 The term "Maturity Date" means August 15, 1996, subject to
-------------
acceleration of such date as provided herein or in the other Loan Documents.
1.78 The term "Memorandum" means the private placement memorandum
----------
dated July 15, 1986, issued in connection with the sale of limited partnership
interests in Borrower.
1.79 The term "Minimum Notice Period" means receipt by the Original
---------------------
Lenders of notice no later than (a) 11:00 a.m. (New York, New York time) on the
Effective Date of a Fixed CD Rate Borrowing, or (b) 11:00 a.m. (New York, New
York time), three Business Days prior to the Effective Date of a Eurodollar
Borrowing.
1.80 The term "Mortgage" means the mortgage securing the Loan and
--------
encumbering the Hotel, the Borrower's leasehold estate in the Land, and the
Marriott Lessor's fee simple interest in the Land in the form of Exhibit D.
1.81 The term "Notes" means those certain promissory notes, each in
-----
the form attached hereto a Exhibit E, made by Borrower, each payable to the
order of one of the Original Lenders, in the following amounts:
The First National Bank of Chicago $4,136,995.00
Citibank, N.A. $4,136,995.00
The Notes are sometimes individually referred to as "Note."
1.82 The term "Operating Profit" means for any Accounting Period,
----------------
Accounting Quarter or Fiscal Year, the excess of Gross Revenues of the Hotel
over Deductions for the Hotel, for such Accounting Period, Accounting Quarter or
Fiscal Year.
14
<PAGE>
1.83 The term "Original Lenders" shall have the meaning set forth in
----------------
the Preamble.
1.84 The term "Original Pro Rata Share" means, with respect to both
-----------------------
of the Original Lenders, such Original Lender's proportional fifty percent (50%)
interest in the Loan.
1.85 The term "Partnership Documents" has the meaning provided
---------------------
therefor in Section 4.4 hereof.
1.86 The term "Permitted Exceptions" means any of the following
--------------------
matters to which title to the Hotel Property is subject: (a) general real
estate taxes and assessments not yet due and payable or due and payable but not
yet delinquent; (b) the matters listed in Exhibit F hereto, and (c) such other
matters as the Original Lenders may approve in writing.
1.87 The term "Person" shall include an individual, a partnership
------
(including, without limitation, the Borrower), a joint venture, a Corporation, a
trust, an estate, an unincorporated organization or association or a
Governmental Authority.
1.88 The term "Potential Default" means an event or circumstance
-----------------
that, except for the giving of notice or the passage of time or both the giving
of notice and the passage of time, would constitute an Event of Default.
1.89 The term "Pro Forma Debt Service" means, with respect to any
----------------------
proposed Indebtedness under Section 7.2(e), the sum of the Debt Service on such
Indebtedness, as projected by the Borrower and approved by the Original Lenders,
payable during the one-year period following the date on which such Indebtedness
is incurred; provided, however, that, if the Original Lenders determine, in good
faith, that, by reason of the method of calculation, or the nature of, the
interest payable on such Indebtedness or the timing of the payments of principal
or interest or other factors affecting the Borrower's obligations thereunder, a
projection of the principal and interest payable on such Indebtedness during
such year may not accurately reflect the anticipated annual obligations of the
Borrower with respect to such Indebtedness, the Original Lenders may adjust such
projection as they deem appropriate to reflect accurately such anticipated
annual obligations of the Borrower, but, in making such adjustment, the Original
Lenders shall not adjust the interest rate payable on such
15
<PAGE>
Indebtedness to an amount exceeding the sum of (a) the maximum rate of interest
payable on any portion of the Loans as of the date of such determination of Pro
Forma Debt Service, plus (b) two percent (2%) per annum.
1.90 The term "Pro Rata Share" means the percentage of the aggregate
--------------
outstanding principal amount of the Loan held by each Lender from time to time.
As long as both Original Lenders retain sole ownership of the Note originally
made payable to it hereunder, the Original Pro Rata Share of the Loan of each
Original Lender shall equal its Pro Rata Share of the Loan.
1.91 The term "Purchase Agreement" has the meaning provided therefor
------------------
in the recitals hereof.
1.92 The term "Quarterly Payment Date" means each January 1, April 1,
----------------------
July 1 and October 1, commencing on the first such date to occur on or after the
date hereof and through and including the Maturity Date.
1.93 The term "Rate Option" means a Eurodollar Rate or a Fixed CD
-----------
Rate.
1.94 The term "Regulation D" means Regulation D of the Board of
------------
Governors of the Federal Reserve System from time to time in effect and shall
include any successor or other regulation or official interpretation of said
Board of Governors relating to reserve requirements applicable to member banks
of the Federal Reserve System.
1.95 The term "Secured Debt Service" means Debt Service on the
--------------------
secured Indebtedness referred to in Section 7.2(e) hereof.
1.96 The term "Security Agreement" has the meaning provided therefor
------------------
in Section 4.2(a) hereof.
1.97 The term "Stock" shall include any and all shares, interests,
-----
participations or other equivalents (however designated) of stock in a
Corporation.
16
<PAGE>
1.98 The term "Subordination Agreement" has the meaning provided
-----------------------
therefor in Section 4.2(e) hereof.
1.99 The term "Telephone Lease" means a lease leasing to the
---------------
Borrower the telephones and/or other telecommunications systems and equipment
located in a Hotel.
1.100 The term "Title Insurer" means Chicago Title Insurance Company
-------------
together with such other co-insurers or reinsurers or other title insurer or
insurers as may be approved by the Original Lenders.
1.101 The term "TV System Lease" means a lease or other agreement
---------------
under which the Borrower rents or is otherwise provided, with or without right
or option to purchase, equipment (excluding television set) for the transmission
into Hotel rooms of televised programming.
2. THE LOAN.
2.1 Agreement to Lend and Borrow.
----------------------------
(a) Each Original Lender severally agrees, on the terms and
conditions set forth in this Agreement, to lend to the Borrower, and Borrower
hereby agrees to borrow from the Original Lenders, the principal amount of the
Note made payable to such Original Lender (the obligation to lend such principal
amount for either Original Lender being herein referred to as its Loan
Commitment" and, for both Original Lenders, their "Loan Commitments").
(b) Each Original Lender shall disburse such amount upon the
satisfaction of the conditions set forth in this Agreement.
(c) The proceeds of the Loan shall be used by the Borrower
solely for payment of a portion of the cost of acquiring the Hotel, pre-opening
costs provided for in the Memorandum, and for no other purpose.
(d) To evidence the Loan, the Borrower shall deliver the
Notes.
17
<PAGE>
2.2 Required Principal Payments in the Loan
-----------------------------------------
The Borrower shall pay the following amounts of principal of the
Loan on the dates indicated:
<TABLE>
<CAPTION>
Payment Date Principal Payment
<S> <C>
01 Jan. 92 $ 82,739.90
01 Apr. 92 82,739.90
01 Jul. 92 82,739.90
01 Oct. 92 82,739.90
01 Jan. 93 82,739.90
01 Apr. 93 82,739.90
01 Jul. 93 82,739.90
01 Oct. 93 103,424.87
01 Jan. 94 103,424.87
01 Apr. 94 103,424.87
01 Jul. 94 103,424.87
01 Oct. 94 124,109.85
01 Jan. 95 124,109.85
01 Apr. 95 124,109.85
01 Jul. 95 124,109.85
01 Oct. 95 124,109.85
01 Jan. 96 124.109.85
01 Apr. 96 124,109.85
01 Jul. 96 124,109.85
-------------
1,985,757.58
</TABLE>
The making of any other payment of principal of the Loan (including,
without limitation, a voluntary prepayment, and the payments referred to in
Section 7.2(e) hereof shall not affect the Borrower's obligation to make the
foregoing principal payments.
2.3 Payment at Maturity Date. The entire outstanding principal
------------------------
balance of the Loan, all accrued and unpaid interest and any other amounts due
and owing the Lenders hereunder or under the other Loan Documents shall be paid
in full, if not sooner paid, on the Maturity Date.
18
<PAGE>
2.4 Method of Selections Rate Options and Interest Periods. The
------------------------------------------------------
Borrower shall select the Rate Options and Interest Periods applicable to each
Borrowing from time to time by giving a Borrowing Notice to each of the Original
Lenders in not less than the Minimum Notice Period applicable to the Rate Option
selected. The unpaid principal amount of each Borrowing shall bear interest at
the applicable Rate Option from and including the first day of the Interest
Period therefor to, but not including, the last day of such Interest Period. If
the Borrower fails to give a Borrowing Notice electing a Rate Option in
accordance with the provisions hereof, then in the case of the rollover of a
Borrowing for which the Interest Period is ending (but subject to Section 2.5),
the rollover of such Borrowing shall be for to same Rate Option and Interest
Period as the Borrowing for which the Interest Period has so ended; but in no
event shall a Eurodollar Interest Period extend beyond the Maturity Date. If the
Loan is not accruing interest at a Rate Option for any other reason, then the
Borrowing shall accrue interest at fluctuating interest rate per annum equal to
the Base Rate plus the Increment. Any Borrowing not paid at maturity, whether
by acceleration or otherwise, shall bear interest, until paid in full, at the
Legal Rate.
2.5 No Default. The Borrower shall not be entitled to elect a
----------
Eurodollar Rate or Fixed CD Rate (whether by giving a Borrowing Notice under the
first sentence of Section 2.4 hereof or by failure to give a Borrowing Notice
under the third sentence of Section 2.4) if, on the Effective Date thereof,
there exists an Event of Default.
2.6 Minimum Requirements. Each Borrowing shall be in the full amount
--------------------
of the Loan.
2.7 Original Lenders' Notification. No later than 11:00 A.M. (New
------------------------------
York, New York time) on the Business Day following the Original Lenders' receipt
of a Borrowing Notice selecting an Interest Period given by the Borrower in
accordance herewith, the Original Lenders, by written, telex or telephone notice
to an Authorized Representative, shall advise the Borrower of the Citibank
Eurodollar Rate and the FNBC Eurodollar Rate or the Citibank CD Rate and the
FNBC CD Rate, as the case may be, for the Interest Period selected in the
Borrowing Notice. The Borrower, by written, telex or telephone notice given by
an Authorized Representative to, and received by, both of the Original Lenders
no later than 3:00 P.M. (New York, New York time) on the day on which the
Original Lenders give the advice provided for in the preceding sentence, shall
advise the Original Lenders of the Eurodollar Rate or the Fixed CD Rate, as the
case may be, for the Borrowing for the Interest Period selected by the Borrower
in its Borrowing Notice.
19
<PAGE>
2.8 Interest Payments. Interest accrued on Borrowings at a rate
-----------------
other than a Rate Option (a fluctuating rate) shall be payable in arrears on
each Quarterly Payment Date. Interest accrued on Borrowings shall be payable in
arrears on the last day of the applicable Interest Period, except that, where
the Interest Period exceeds three months, interest shall be paid on each
Quarterly Payment Date from the Effective Date relating thereto and on the last
day of the applicable Interest Period. Interest shall be payable for the day a
Borrowing is made but not for the day of any payment if payment is made in
accordance herewith and is received prior to the time, and at the place,
provided in Section 2.15 hereof.
2.9 Prepayment. Upon not less than 30 days' prior written notice
----------
given by an Authorized Representative to all of the Original Lenders, the
Borrower may (except as hereinafter provided) pay all, or, in a minimum amount
of $1,000,000.00, pay from time to time any part, of the principal of the Loan
at any time outstanding by paying, in addition to the principal amount of such
prepayment, all interest accrued on the amount of such prepayment to the date
thereof. Borrowings may not be prepaid prior to the last day of the applicable
Interest Period, provided, however, that if notwithstanding the foregoing, a
Borrowing is prepaid, because of acceleration of the Maturity Date pursuant to
the Loan Documents or for any other reason, the Borrower shall reimburse the
Lenders for any loss incurred or to be incurred pursuant to Section 2.11 hereof
2.10 Lending Installations. Each Lender may book each Borrowing at
---------------------
any Lending Installation of such Lender selected by it from time to time and may
change the Lending Installation from time to time. All terms of this Agreement
shall apply to any such Lending Installation. If, prior to the date that a
Lender books a Borrowing at a particular Lending Installation, the Lender has
knowledge of any taxes (referred to in Section 2.12 hereof) or any additional
interest (referred to in Section 2.13 hereof) that would be (referred to in
Section 2.12 hereof) or any additional interest (referred to in Section 2.13
hereof) that would be payable by the Borrower by reason of the Lender's booking
such Borrowing at such Lending Installation that would not be payable by the
Borrower if such Borrowing were booked at an alternative Lending Installation at
which the Lender may lawfully book such Borrowing without otherwise incurring,
in its reasonable judgment, material liabilities, obligations or risks, then,
notwithstanding the provisions of Section 2.12 and 2.13, the Borrower's
obligations to such Lender under such Sections with respect to such Borrowing
shall be limited to the amount that the Borrower would have incurred under such
Sections had the Lender booked such Borrowing at such alternative Lending
Installation.
20
<PAGE>
2.11 Failure to Pay or Borrow on Certain Dates. If, whether by
-----------------------------------------
payment or by acceleration of the Maturity Date or otherwise, (i) any payment,
in full or in part, of a Borrowing occurs on a date which is not the last day of
the applicable Interest Period, or (ii) a Borrowing is not made on the date
specified in a Borrowing Notice for any reason, the Borrower will indemnify each
of the Lenders for any losses and costs incurred by it resulting therefrom,
including, without limitation, any loss in liquidating or employing deposits
acquired to fund or maintain a Borrowing.
2.12 Taxes.
-----
(a) In the event the Borrower shall be required by law to
deduct and withhold any taxes (as hereinafter defined) from amounts payable
hereunder, the Borrower shall be entitled to do so, provided it shall provide a
statement setting forth the amount of taxes withheld, the applicable rate and
any other information which may reasonably be requested for the purpose of
assisting the Lender from whom taxes were withheld to obtain any allowable
credits or deductions for the taxes so withheld in each jurisdiction in which
subject to tax. However, the Borrower shall not withhold taxes from payments
required to be made to any Lender that is a corporation organized under the laws
of the United States or any state or territory thereof or is permitted by law to
file and keep in effect and has on file and in effect with the Borrower such
duly executed form(s) or statement(s) which may, from time to time, be
prescribed by law and which, pursuant to applicable provisions of (i) an income
tax treaty between the United States and the country of residence of such
Lender, (ii) the U.S. Internal Revenue Code of 1986, as amended, or (iii) any
applicable rules or regulations, permit the Borrower to make such payments free
of withholding. The term "taxes" shall mean any taxes, levies, imports, duties,
fees, assessments or other charges of whatever nature, now or hereafter imposed
on any Lender by any jurisdiction or by any department, agency, state or other
political subdivision thereof or therein. Notwithstanding the foregoing, the
Borrower agrees to make to any Lender, with respect to which the Borrower has
withheld taxes pursuant to the foregoing, such payments as may be necessary to
ensure that such Lender receives the full amount payable to it by the Borrower
under this Agreement if the foregoing provisions of this Section 2.12(a) are
disregarded. All stamp, documentary and intangible taxes shall be paid by the
Borrower. if, notwithstanding the foregoing, a Lender pays any such taxes, the
Borrower will reimburse such Lender for the amount paid if, as and to the extent
such reimbursement is permitted by applicable law. The Borrower will furnish to
the Lenders official tax receipts or other evidence of payment of all such
taxes.
21
<PAGE>
(b) If the Borrower shall be required to make any payment to a
Lender under this Section 2.12 and if the Lender is able, in its sole opinion,
to claim any deduction, credit or similar tax benefit by reason of such payment,
such Lender will promptly reimburse the Borrower for the amount of such benefit.
As and to the extent that the Borrower may be able to mitigate or reduce the
amount of any such payments under the provisions of any treaty, law or other
governmental regulation, the Lenders will render, at the expense of the
Borrower, whatever reasonable assistance may be required to effect such
mitigation or reduced payment.
2.13 Certificates; Survival of Indemnity. A certificate of a Lender
-----------------------------------
as to the amount due under Sections 2.11 or 2.12 hereof shall be conclusively
presumed to be correct in the absence of manifest error, and the Borrower shall
pay such Lender all amounts specified in such certificate. Such Lender will, on
request, provide evidence supporting said certificate. Determination of amounts
payable under such Sections in connection with a Borrowing shall be calculated
(to the extent that such calculation is applicable to the determination of the
amounts payable) as though the Lender funded its Pro Rata Share of the actual or
anticipated Borrowing through the purchase of a deposit of the type, maturity
and amount corresponding to the deposit used as a reference in determining the
Rate Option applicable to the Borrowing. Unless otherwise provided herein, the
amount specified in the certificate shall be payable within thirty (30) days of
demand by such Lender, which demand shall include such certificate if such
certificate was not theretofore delivered to the Borrower. The obligations
under Sections 2.11 and 2.12 hereof shall survive payment of the Loan and
termination of this Agreement.
2.14 Telephonic Notices. The Lenders are hereby authorized to effect
------------------
Borrowings based on telephonic Borrowing Notices made by any person the Lenders
in good faith believe to be an Authorized Representative acting on behalf of the
Borrower. If requested by an Original Lender, the Borrower agrees to confirm
promptly to each of the Original Lenders any telephonic Borrowing Notice, and
any telephonic notice given by the Borrower under Section 2.7 hereof, in writing
signed by an Authorized Representative. If the written confirmation differs in
any material respect from the action taken by the Lenders, the records of the
Lenders shall govern, absent manifest error.
2.15 Method of Payment.
-----------------
(a) Except as otherwise provided in Section 2.15(b), the
Borrower shall pay, without set-off or counterclaim, to both of the Original
Lenders, at their respective addresses specified below (or such other address as
such Original Lender may specify by written notice to the
22
<PAGE>
Borrower), all amounts payable by the Borrower to the Lenders under the Loan
Documents, in immediately available funds, not later than 2:00 p.m. (local time
at the place of payment) on the date when due. The respective addresses of the
Original Lenders for the purpose of payments hereunder are:
Citibank, N.A.
399 Park Avenue
New York, NY 10043
Attention: Hilda Phinizy
The First National Bank of Chicago
One First National Plaza
Chicago, IL 60670
Attention: Susan Gianesin, Real Estate Department
(b) The Borrower shall satisfy its obligation to make payments
of principal and interest by paying, in the manner provided in Section 2.15(a),
to each of the Original Lenders its respective Original Pro Rata Share of
principal and interest payments when due on the Loan, and it shall be the
obligation of each such Original Lender to forward to any Lender to which it has
assigned or transferred any of its interest in the Loan such Lender's required
share of any such principal or interest payment.
2.16 General Provisions Concerning Loan. All interest shall be
----------------------------------
computed for the actual number of days elapsed or the basis of a 360-day year.
If any payment of principal of or interest on the Notes becomes due and payable
or a day which is not a Business Day, the due date thereof shall be extended to
the next succeeding Business Day and, in the case of principal, interest thereon
shall be payable at the then applicable rate during such extension. The failure
of a Lender to make any notation or entry on any grid attached to any Note shall
not limit or otherwise affect any obligations of the Borrower under this
Agreement or under the Notes.
2.17 Loan Documents. All the Loan Documents (other than the
--------------
Notes) shall name the Original Lenders or, at the election of the Original
Lenders, one of the Original Lenders as the payee, lender, mortgagee, grantee,
collateral assignee, beneficiary or secured party, as the case may be, as agent
for itself and the other Original Lender, and shall otherwise run in favor of
the Original Lenders. The Original Lenders shall hold in their possession the
Loan Documents (other than the Notes) and any security delivered by the Borrower
or others in connection therewith for the benefit
23
<PAGE>
of themselves and the other Lenders, as their respective interests appear in the
Loan, subject to the provisions of this Agreement.
2.18 Use of Proceeds. The Borrower represents, warrants and
---------------
covenants that the proceeds of the Loans will be used solely for the purposes
set forth in Section 2.1(c) hereof, and for no other purpose.
2.19 Exculpation. The Lenders agree that they shall look solely
-----------
to the collateral security for the Loan, for payment of the Loan and performance
of Borrower's obligations under the Loan Documents and (except as otherwise
provided in the Loan Documents) shall not seek recovery, whether by direct suit,
deficiency judgment in foreclosure proceeding, or otherwise, in whole or in
part, from the Marriott Lessor (except for the liability of Marriott under the
Guaranties and the Subordination Agreement) or from any of the partners (general
or limited) of the Borrower or any of the assets of any such partners; provided,
however, that the foregoing exculpation from individual liability shall not be
construed to release or impair the Indebtedness evidenced by the Notes or any of
the Borrower's other obligations hereunder or under the other Loan Documents, or
the Liens securing such obligations, or any other rights of the Lenders except
as specifically stated in this Section 2.19.
3. ADVANCE OF LOAN.
3.1 Disbursement of Loan Proceeds. Both of the Original Lenders
-----------------------------
shall disburse to the Borrower its Original Pro Rata Share of the Loan, at
Closing, provided the conditions set forth in Article 4 have been satisfied.
The loan proceeds shall be made by deposit into an account of Borrower
maintained at NCNB National Bank of North Carolina.
3.2 Payment of Expenses. Subject to the provisions of the next
-------------------
succeeding sentence, the Original Lenders may, but shall not be obligated to,
apply directly out of the proceeds of the Loan any amount necessary for the
payment of expenses due or payable by the Borrower in obtaining the Loan,
including, without limitation, expenses relating to the examination of the title
and title insurance, costs of surveys, fees and expenses of the Lenders'
counsel, documentary stamps, intangible taxes, mortgage taxes and other similar
taxes, recording fees and taxes, sums payable for insurance premiums, amounts
necessary to discharge any encumbrance, tax, assessment of other charge or Lien
upon the Hotel, as well as interest and fees which are payable to the Lenders by
24
<PAGE>
reason of the Loan. The Original Lenders shall advise the Borrower of their
intent to pay any expense under the preceding sentence, and, as long as no Event
of Default has occurred, the Original Lender shall not pay to any third party
any such expenses which the Borrower has advised the Original Lenders it is
contesting. The amounts so applied by the Original Lenders shall be deemed
advances to the Borrower under this Agreement, shall satisfy pro tanto the
--- -----
obligations of the Original Lenders under this Agreement, and shall be evidenced
by the Notes and secured by the Mortgage and all other collateral securing the
Loan.
3.3 Advances through Title Insurer. The Original Lenders may, at
------------------------------
their option, advance the Loan through the Title Insurer if reasonably necessary
in order to obtain the title insurance provided in Section 4.16 hereof.
3.4 Other Advances By Lenders. Upon the occurrence and during
-------------------------
the continuance of an Event of Default, the Lenders may advance sums of money
(i) for the payment or performance of any of the Borrower's obligations set
forth in this Agreement or in any of the Loan Documents (except interest and
principal payments on the Loan) and (ii) for any other costs or expenses
incurred by the Borrower or the Lenders in connection with the Loan, and the
execution of this Agreement by the Borrower shall, and hereby does, constitute
an irrevocable direction and authorization to the Lenders so to disburse such
funds as Indebtedness evidenced by the Notes. No further direction or
authorization from the Borrower shall be necessary for such disbursements, and
all such disbursements shall satisfy, to the extent of such disbursement, the
obligations of the Lenders hereunder and shall be evidenced by the Notes and
secured by the Mortgage and each of the other Loan Documents as fully as if made
to Borrower, regardless of the disposition of the funds so disbursed. Such
advances shall bear interest at the Legal Rate and shall be payable on demand.
4. CONDITIONS TO LOANS.
The obligation of each Original Lender, severally, to fund its
Original Pro Rata Share of the Loan to the Borrower hereunder is subject to the
satisfaction, on or before the Closing, of each of the following conditions
precedent:
4.1 Notes. The Notes shall have been duly executed and delivered
by the Borrower to the Original Lenders.
25
<PAGE>
4.2 Collateral Security. In order to secure the payment of the
Loan when due, whether by acceleration or otherwise, and all other Indebtedness
of the Borrower to the Lenders arising hereunder or related hereto:
(a) The Borrower shall have duly executed and delivered a
Security Agreement in the form of Exhibit G hereto (the "Security Agreement").
(b) The Borrower shall have furnished the Guaranties duly
executed and delivered by Marriott.
(c) The Borrower shall have assigned to the Original Lenders,
all rights of the Borrower relating to the Hotel under the Management Agreement
pursuant to an agreement of assignment ( the "Management Agreement Assignment"),
duly executed and delivered by the Borrower and the Manager in the form of
Exhibit H hereto.
(d) The Borrower shall have assigned to the Original Lenders,
all rights of the Borrower relating to the Hotel under the Purchase Agreement
pursuant to an instrument of assignment (the "Purchase Agreement Assignment"),
duly executed and delivered by the Borrower and Marriott in the form of Exhibit
I hereto.
(e) The General Partner and Marriott shall each have
subordinated repayment of any loan advances and interest thereon and, in the
case of the General Partner, capital contributions at any time made by the
General Partner to the Borrower to the prior payment of the Loan, and shall have
assigned to the Original Lenders the right to repayment of any and all such loan
advances and interest thereon or capital contributions made by the General
Partner to the Borrower, pursuant to the provisions of a subordination agreement
in the form attached hereto as Exhibit J (the "Subordination Agreement.").
(f) The Borrower shall have duly executed and delivered such
financing statements as the Lenders or their counsel shall require to further
evidence, confirm and perfect the security interests granted or to be granted in
the Security Agreement, Mortgage, Subordination Agreement and in the other
collateral assignments provided for in this Section 4.2.
(g) The Borrower shall have duly executed and delivered such
other and further agreements, documents and instruments as the Lenders or their
counsel may request to
26
<PAGE>
further evidence, perfect and preserve any of the collateral security for the
Borrower's obligations provided for in this Section 4.2.
4.3 Mortgage and Recording. The Mortgage shall have been duly
---------------------
executed and delivered by the Borrower and the Marriott Lessor and shall have
been recorded in the appropriate recording office in the jurisdiction in which
the Hotel is located, and such financing statements and other documents provided
for in Sections 4.2(f) and (g) hereof shall have been executed, delivered and,
where appropriate, filed in the appropriate filing offices.
4.4 Partnership Documents. The Borrower shall have furnished to
---------------------
the Original Lenders the following: (a) a copy of the agreement of limited
partnership of Borrower, certified by the General Partner to be a true, correct
and complete copy thereof and copies of certificates of limited partnership of
Borrower, filed or recorded in the appropriate offices in the State of Delaware,
the State of Maryland and the State of Connecticut to the extent required, each
certified by the General Partner to be true, correct and complete copies thereof
(collectively, "Partnership Documents"), and (b) evidence that the Borrower is
qualified (to the extent such qualification is necessary or appropriate) in the
State of Delaware, the State of Maryland and the State of Connecticut.
4.5 General Partner's Corporate Documents. The Borrower shall
-------------------------------------
have delivered to the Original Lenders the following: (a) a certificate of the
secretary or an assistant secretary of the General Partner dated on or after the
date hereof, certifying as to (i) resolutions of the Board of Directors of the
General Partner authorizing the execution, delivery and performance of the
Partnership Documents, the Loan Documents, the Ground Lease and all other
documents or instruments to be executed and delivered by the General Partner
(either individually or on behalf of the Borrower) pursuant to the provisions
hereof; (ii) the full force and effect of such resolutions on such date; and
(iii) the incumbency and signature of each of the officers of the General
Partner signing such documents; (b) the Articles of Incorporation of the General
Partner certified by the Secretary of State of the State of Delaware as of a
date on or after the date hereof; (c) a long-form good-standing certificate of
the General Partner issued by the Secretary of State of the State of Delaware as
of a date on or after the date hereof; (d) good-standing certificates (or other
proof of qualification and good standing satisfactory to the Original Lenders)
evidencing the General Partner's qualification and good standing as a foreign
corporation in the State of Maryland and the State of Connecticut; (e) the
bylaws of the General Partner certified as of a date on or after the date
27
<PAGE>
hereof by the secretary or assistant secretary of the General Partner as being
in full force and effect without further amendment or modification; and (f) such
additional supporting documents relating to the General Partner as the Original
Lenders may request.
4.6 Marriott Corporate Documents. The Borrower shall have
----------------------------
delivered to the Original Lender the following: (a) a certificate of the
secretary or an assistant secretary of Marriott dated on or after the date
hereof, certifying as to (i) resolutions of the Board of Directors of Marriott
authorizing the execution, delivery and performance of the Guaranties, the
Purchase Agreement Assignment, the Subordination Agreement and all other
documents or instruments to be executed and delivered by Marriott pursuant to
the provisions hereof; (ii) the full force and effect of such resolutions on
such date; and (iii) the incumbency and signature of each of the officers of
Marriott signing such documents; (b) the Articles of Incorporation of Marriott
certified by the Secretary of State of the State of Delaware as of a date on or
after the date hereof; (c) a long-form good-standing certificate of Marriott
issued by the Secretary of State of the State of Delaware as of a date on or
after the date hereof; (d) good-standing certificates (or other proof of
qualification and good standing satisfactory to the Original Lenders) evidencing
Marriott's qualification and good standing as a foreign corporation in the State
of Maryland and in the State of Connecticut; (e) the bylaws of Marriott
certified as of a date on or after the date hereof by the secretary or assistant
secretary of Marriott as being in full force and effect without further
amendment or modification; and (f) such additional supporting documents relating
to Marriott as the Original Lenders may request.
4.7 Manager's Corporate Documents. The Borrower shall have
-----------------------------
delivered to the Original Lenders the following (a) a certificate of the
secretary or an assistant secretary of the Manager dated on or after the date
hereof, certifying as to (i) resolutions of the Board of Directors of the
Manager authorizing the execution, delivery and performance of the Management
Agreement Assignment and all other documents or instruments to be executed and
delivered by the Manager pursuant to the provisions hereof (ii) the full force
and effect of such resolutions on such date, and (iii) the incumbency and
signature of each of the officers of the Manager signing such documents; (b) the
Articles of Incorporation of the Manager certified by the Secretary of State of
the State of Delaware as of a date on or after the date hereof; (c) a long-form
good-standing certificate of the Manager issued by the Secretary of State of the
State of Delaware as of a date on or after the date hereof; (d) good standing
certificates (or other proof of qualification and good standing satisfactory to
the Original Lenders) evidencing the Manager's qualification and good standing
as a foreign corporation in the State of Maryland and the State of Connecticut;
(e) the bylaws of the Manager
28
<PAGE>
certified as of a date on or after the date hereof by the secretary or assistant
secretary or the Manager as being in full force and effect without further
amendment or modification; and (f) such additional supporting documents relating
to the Manager as the Original Lenders may request.
4.8 Marriott Lessor Corporate Documents. The Borrower shall have
-----------------------------------
delivered to the Original Lenders the following: (a) a certificate of the
secretary or an assistant secretary of the Marriott Lessor dated on or after the
date hereof, certifying as of (i) resolutions of the Board of Directors of such
Marriott Lessor authorizing the execution, delivery and performance of the
Ground Lease and any memoranda thereof, the Mortgage and all other documents or
instruments to be executed and delivered by such Marriott Lessor pursuant to the
provisions hereof; (ii) the full force and effect of such resolutions on such
date; and (iii) the incumbency and signature of each of the officers of such
Marriott Lessor signing such documents; (b) the Articles of Incorporation of
such Marriott Lessor certified by the Secretary of State of the State of
Delaware as of a date on or after the date hereof; (c) a long-form good-standing
certificate of such Marriott Lessor issued by the Secretary of State of the
State of Delaware as of a date on or after the date hereof; (d) good standing
certificates (or other proof of qualification and good standing satisfactory to
the Original Lenders) evidencing the Marriott Lessor's qualification and good
standing as a foreign corporation in Maryland and Connecticut; (e) the bylaws of
such Marriott Lessor certified as of a date on or after the date hereof by the
secretary or assistant secretary of such Marriott Lessor as being in full force
and effect without further amendment or modification; and (f) such additional
supporting documents relating to the Marriott Lessors as the Original Lenders
may request.
4.9 Costs. The Borrower shall have paid all intangible taxes and
-----
other taxes on the Notes and other similar taxes and fees, all recording and
filing fees and expenses, and all mortgage and stamp taxes, appraisal fees,
survey fees and expenses, title insurance premiums and expenses, and the fees
and expenses of the Lenders' counsel and local counsel.
4.10 Financial Statements. The Borrower shall have furnished to
--------------------
each of the Lenders copies of the most current available Financial Statements,
if any, of the Borrower certified by the chief accounting officer of the General
Partner as having been prepared in accordance with generally accepted accounting
principles and the most current Financial Statements of Marriott certified by
the chief accounting officer of Marriott as having been prepared in accordance
with generally accepted accounting principles.
29
<PAGE>
4.11 Opinion of Counsel to Borrower. The Original Lenders shall
------------------------------
have received from William O. Kafes, counsel for the Borrower, and of local
counsel for the Borrower, a favorable opinion addressed to the Original Lenders
and dated on or after the date hereof, to the effect set forth in Exhibit K
hereto and covering such other matters incident to the transactions herein
contemplated as the Original Lenders may request.
4.12 Opinion of Counsel to Marriott. The Original Lenders shall
------------------------------
have received from William O. Kafes, counsel for the General Partner, Marriott,
the Marriott Lessor and the Manager, a favorable opinion addressed to the
Original Lenders and dated on or after the date hereof, to the effect set forth
in Exhibit L hereto and covering such other matters incident to the transactions
herein contemplated as the Original Lenders may request.
4.13 UCC Searches. The Original Lenders shall have received
------------
advice from the Title Insurer, or another source satisfactory to the Original
Lenders, to the effect that a search of the applicable public records of the
States of Delaware, Maryland and Connecticut discloses no conditional sales
contracts, chattel mortgages, leases of property, financing statements or title
retention agreements filed or recorded against the Borrower or in respect of any
property interests covered, or to be covered, by the Liens referred to in
Section 4.2 hereof, other than those granted to the Lenders pursuant to this
Agreement or those granted to the Original Lenders and Bankers Trust Company,
Bank of America National Trust and Savings Association, Bank of Nova Scotia,
First Interstate Bank of California, and Security Pacific National Bank,
pursuant to the First Courtyard Loan Agreement.
4.14 Certificate. The Borrower shall have furnished to the
-----------
Original Lenders a certificate duly executed by the Borrower, Marriott and the
Manager certifying that (A) the construction, furnishing and equipping of the
Hotel (as described in Exhibit M hereto) has been substantially completed in a
good and workmanlike manner, in accordance with the plans and specifications
therefor and in compliance with all Laws, subject only to minor punch list items
at an aggregate cost to complete of not more than $250,000.00; (B) not less than
80% of the guest rooms are complete (with FF&E fully installed) and ready for
occupancy; (C) the kitchen and restaurant of the Hotel are complete and ready
for use by and service to Hotel guests; (D) the manager has commenced, or is
unconditionally prepared to commence, the performance of its obligations under
the Management Agreement with respect to such Hotel; and (E) not later than
sixty (60) days following the delivery of such certificate (subject only to
delays caused by casualty occurring after the
30
<PAGE>
disbursement of the loan amount), the Hotel will open to the public for business
and there will be issued all appropriate licenses and certificates not
theretofore issued for the operation of the Hotel (including all of its
amenities).
4.15 Certificate of Occupancy. The Borrower shall have furnished
------------------------
to the Original Lenders a copy of a certificate of occupancy (whether permanent
or temporary) if the same has been issued with respect to the Hotel by the
governmental authority having jurisdiction over such matters.
4.16 Title Insurance. There shall have been issued by the Title
---------------
Insurer to the Original Lenders a policy or policies of title insurance (or
binding commitment therefor) dated and effective as of the date of disbursement,
insuring the Lien of the Mortgage subject only to the Permitted Exceptions (and
copies of all documents included within such exceptions shall have been
furnished to the Original Lenders) and not subject to any general, standard or
printed exceptions relating to mechanic's liens, survey matters or other similar
matters, and otherwise in form and substance satisfactory to the Original
Lenders and the Original Lenders' counsel. Without limitation of the foregoing,
the title insurance policy shall contain the following endorsements: (a) a
"long-form" (3.1) zoning endorsement; (b) a "doing business" endorsement; (c) a
usury endorsement; (d) a "comprehensive" or other similar endorsement insuring
that there are no encroachments affecting the Hotel Property and that the Hotel
Property is in compliance with all covenants, conditions and restrictions of
record; and (e) such other endorsements as the Original Lenders may require.
The title insurance policy shall be issued in an amount equal to $8,273,990.00.
The Original Lenders may require that reinsurance and "direct access" agreements
in form and with insurers satisfactory to the Original Lenders be furnished.
4.17 Survey. The Borrower shall have furnished to the Original
------
Lenders a current survey of the Hotel Property and all other properties
subjected to an easement in favor of the Hotel Property, by a registered
surveyor satisfactory to the Original Lenders, in form and content satisfactory
to the Original Lenders and the Title Insurer, and certified to said parties as
having been prepared in accordance with American Land Title Insurance
Association land survey standards, showing (a) the boundaries of the Land,
established building setback lines, if any, and the location of the Hotel as
being within the boundaries of the Land and any established recorded or zoning
setback lines, (b) no encroachments by any structures on adjoining property over
the Land and (c) no other state of facts which, in the opinion of the Lenders'
counsel, would render title to the Hotel Property
31
<PAGE>
unmarketable or which would, in the judgment of the Original Lenders, diminish
the value of the Hotel Property in any material respect.
4.18 Evidence of Insurance. The Original Lenders shall have
---------------------
received, with respect to the Hotel, original insurance certificates, insurance
binders, original policies of insurance or certified true copies of insurance
policies evidencing hazard, liability, worker's compensation, flood and other
insurance in form, amount and with such coverages as are required in this
Agreement, naming the Original Lenders as an insured interest for liability
insurance, and as mortgagee and loss payee for other insurance as required in
this Agreement. If the Land is not in a 100-year flood plain zone, the Borrower
shall have furnished evidence thereof satisfactory to the Original Lenders.
4.19 Compliance, Access, Utilities. The Borrower shall have
-----------------------------
established to the satisfaction of the Original Lenders: (a) that all required
zoning, planning, environmental and building code approvals relating to the
acquisition and construction of the Hotel have been obtained and that the Hotel
conforms to and is permitted by all Laws; (b) that all utility services
necessary for the use and operation of the Hotel are available and in operation;
and (c) that the Borrower has also obtained all appropriate rights and easements
to insure the availability of ingress and egress to the Hotel from public
highways.
4.20 Conveyance. The Borrower shall have furnished to the
----------
Original Lenders evidence that the Hotel Property has been transferred and
conveyed to the Borrower as provided in the Purchase Agreement (except that the
Land underlying the Hotel shall not be transferred to the Borrower but the
Ground Lease shall be assigned and transferred to the Borrower).
4.21 Ground Lease. There shall have been furnished to the
------------
Original Lenders a copy of the Ground Lease and evidence that the Ground Lease
or a memorandum thereof and the assignment thereof to the Borrower (both of
which shall also be furnished to the Original Lenders) have been duly recorded
1n the appropriate recording office in the jurisdiction in which the Hotel is
located, which Ground Lease, memorandum and assignment shall be certified by the
Borrower to be true, correct and complete copies thereof.
4.22 No Default. There shall exist no Event of Default and no
----------
Potential Default.
32
<PAGE>
4.23 Representations and Warranties. All representations and
------------------------------
warranties contained herein or in the other Loan Documents shall be true and
correct in all material respects, with the same force and effect as if made on
and as of the date of the Closing, and, without limitation of the foregoing, the
representations and warranties set forth in Article 5 hereof shall also be true
and correct in all material respects (and shall be deemed remade as of the date
of Closing) in respect of all of the Financial Statements and all other
information furnished to the Lenders as of any date, or with respect to any
period, subsequent to the date of this Agreement.
4.24 No Material Adverse Change. There shall have occurred no
--------------------------
adverse change in the financial condition of the Borrower that the Original
Lenders deem to be material.
4.25 Indemnity Agreement. The Borrower shall have duly executed
-------------------
and delivered to the Original Lenders an Indemnity Agreement in the form
attached hereto as Exhibit N. The disbursement of the Loan hereunder shall
constitute a representation and warranty by the Borrower to the Lenders that all
of the conditions specified in this Article have been satisfied as of the date
of Closing.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce the Lenders to enter into this Agreement and to
make the Loan, the Borrower represents and warrants to each of the Lenders that,
except as otherwise set forth in Exhibit O attached hereto:
5.1 The Borrower. The Borrower is a duly organized and validly
------------
existing limited partnership under the laws of the State of Delaware and has the
power and authority to own its properties and other assets and to transact the
business in which it is now engaged or proposes to engage and to transact such
business in Connecticut. The Borrower has entered into this Agreement for its
partnership business purposes and will use the proceeds of the Loan for the
purposes as provided herein as principal for its own account. The General
Partner is the sole general partner of the Borrower.
5.2 Ownership by Marriott. The General Partner and the Manager
---------------------
are both, directly or indirectly, wholly-owned subsidiaries of Marriott, and the
Marriott Lessor is a direct or indirect wholly-owned subsidiary of Marriott.
33
<PAGE>
5.3 Authorization and Execution. The Borrower has the power and
---------------------------
authority to execute, deliver and carry out the terms and provisions of the Loan
Documents (other than the Guaranties), the Management Agreement, the Purchase
Agreement, and the Ground Lease. The execution, delivery and performance by the
Borrower of the Loan Documents (other than the Guaranties), the Management
Agreement, the Purchase Agreement and the Ground Lease and the borrowings
hereunder have been duly authorized by all requisite action by and on behalf of
the partners of the Borrower, and this Agreement is, and when executed and
delivered by the Borrower pursuant hereto, the other Loan Documents (other than
the Guaranties), the Management Agreement, the Purchase Agreement and the Ground
Lease will be, valid and binding obligations of the Borrower, enforceable in
accordance with their respective terms.
5.4 Compliance with Other Instruments. Except for defaults,
---------------------------------
conflicts and breaches that do not materially affect Borrower's right, authority
and ability to perform its obligations under the Loan Documents or materially
impair the Lenders' rights, remedies or security under the Loan Documents, (a)
the Borrower is not in default in the performance, observance or fulfillment of
any of the obligations, covenants or conditions contained in any evidence of
Indebtedness of the Borrower or contained in any instrument under or pursuant to
which any such evidence of Indebtedness has been issued or made and delivered or
contained in any FF&E Lease, Telephone Lease or TV System Lease; and (b) neither
the execution and delivery of this Agreement, nor the consummation of the
transactions herein contemplated, nor compliance with the terms, conditions and
provisions hereof and of the other Loan Documents, nor the acquisition and
operation by the Borrower of the Hotel will conflict with or result in a breach
of any of the terms, conditions or provisions of the Partnership Documents or of
any agreement or instrument to which the Borrower is a party or otherwise bound
or to which any of its properties or other assets is subject, or of any order or
decree of any court or governmental instrumentality, or of any arbitration
award, franchise or permit, or constitute a default thereunder, or, except as
contemplated hereby, result in the creation or imposition of any Lien upon any
of the properties or other assets of the Borrower.
5.5 Consents. No consent, order, authorization or approval of,
--------
or exemption by, or registration, declaration or filing with any Person
(including, without limitation, any or all of the partners of the Borrower other
than the General Partner signing the Loan Documents on its behalf) and no waiver
of any right by any Person is required to authorize or permit, or is otherwise
required in connection with, the execution, delivery and performance by the
Borrower of this Agreement or
34
<PAGE>
the Notes or any of the other Loan Documents or in connection with the validity
and priority of any Liens granted thereunder (except for filings and recordings
to be accomplished under Article 4 hereof and except for such consents, orders,
authorizations, approvals, registrations, declarations, filings or exemptions as
have been obtained or accomplished by Borrower).
5.6 Financial Statements. The financial statements (''Financial
--------------------
Statements") of Borrower furnished to the Lenders from time to time shall
present fairly the financial position of the Borrower prepared in accordance
with generally accepted accounting principles. Except as disclosed by or
reserved against in the Financial Statements, the Borrower shall have no
material contingent liabilities, including disputed or contingent liabilities
for taxes, or any unrealized or anticipated losses. In the case of each
Borrowing under this Agreement, the same representations and warranties as are
set forth in this Section 5.6 shall also be deemed to have been made in respect
of the then most recent Financial Statements furnished to the Lenders, subject
in the case of interim financial statements to year-end audit adjustments.
5.7 No Material Changes. There shall have been no material
-------------------
adverse change in the business, properties or other assets or in the condition,
financial or otherwise, of the Borrower, or its assets and properties since the
date of the then most recent Financial Statements.
5.8 Title to Property. The Borrower will have obtained and shall
-----------------
at all times have, with respect to the Hotel, good and marketable title to (a)
the Hotel Property (except the Land underlying the Hotel) and (b) the leasehold
estate under the Ground Lease, subject only to the Permitted Exceptions, and
good title to the FF&E (or, in the case of FF&E permitted to be leased to the
Borrower hereunder, a good and valid leasehold interest in such FF&E) and all
other properties and assets reflected in the then most recent Financial
Statements, or acquired by the Borrower after such date (excepting, however,
personal property sold or otherwise disposed of in the ordinary course of
business subsequent to such date), in each case free and clear of all Liens
except Liens securing the Loan. The Marriott Lessor shall have good and
marketable title to the Land, subject only to the Permitted Exceptions, free and
clear of all Liens except Liens securing the Loan. None of the foregoing
properties or assets of the Borrower or the Marriott Lessor are subject to any
agreement obligating the Borrower or the Marriott Lessor to mortgage, lien,
pledge, grant a security interest in or otherwise encumber, or to sell and lease
back, any such property or assets, and there is not on file in any public
office, and neither the Borrower nor Marriott Lessor has signed, any financing
statement naming the Borrower or the Marriott Lessor as debtor except for
financing statements in
35
<PAGE>
favor of the Original Lenders and financing statements evidencing leases
permitted hereunder. The Borrower has not subordinated any of its rights under
any obligation owing to it to the rights of any other Person.
5.9 Leases. None of the properties or other assets reflected in
------
the Financial Statements is held by the Borrower as lessee under any lease or as
conditional lessee under any conditional sales contract or other title retention
agreement, except as otherwise disclosed in the Financial Statements and except
for the Marriott Leases, the FF&E Leases, the TV System Leases and the Telephone
Leases, and comparable leases on the Borrower's other Courtyard by Marriott
hotels.
5.10 Courtyard by Marriott Hotel. Pursuant to the Management
---------------------------
Agreement, the Borrower possesses rights adequate for the conduct of the
operation of the Hotel as a "Courtyard by Marriott" hotel in substantially the
same manner as other similar hotels operated under the "Courtyard by Marriott"
name and as now proposed to be conducted, without conflict with the rights of
others.
5.11 Litigation. There are no actions, suits investigations or
----------
proceedings (whether or not purportedly on behalf of the Borrower) pending or,
to the knowledge of the Borrower, threatened, and no judgment, order, writ,
injunction, decree, award, rule or regulation of any court, arbitrator or
Governmental Authority against or affecting the Borrower or the Hotel, or any
other of the assets or properties of the Borrower at law or in equity or before
or by any Governmental Authority or before any arbitrator of any kind, which
involve the possibility of liability in excess of $1,000,000,000.00 or of any
material adverse effect on the business, operations, prospects, properties or
other assets or in the condition, financial or otherwise, of the Borrower or the
Hotel.
5.12 Burdensome Provisions. The Borrower is not a party to or
---------------------
otherwise bound by any agreement or instrument or subject to any other
restriction or any judgment, order, writ, injunction, decree, award, rule or
regulation which materially and adversely affects the business, operations,
prospects, properties or other assets, or the condition, financial or otherwise,
of the Borrower or the Hotel. Except for defaults that do not materially affect
the right, authority and ability of the Borrower to perform its obligations
under the Loan Documents, the Management Agreement, the Purchase Agreement and
the Ground Lease or materially impair the Lenders' rights, remedies or security
under the Loan Documents, the Borrower is not in default (a) under any
36
<PAGE>
obligation for borrowed money or (b) in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
other agreement or instrument to which it is a party, by which it is otherwise
bound or to which the Hotel or any of Borrower's other property is subject,
including, without limitation, the Management Agreement, the Purchase Agreement,
the Ground Lease and the Marriott Lease.
5.13 Force Majeure. Neither the Hotel nor other business,
-------------
properties or assets of the Borrower have been materially and adversely affected
in any way as the result of any fire or other casualty, strike, lockout or other
labor trouble, embargo, shortage, confiscation, condemnation, riot, civil
disturbance, activity of armed forces, or act of God since the date of the most
recent Financial Statements which shall have been delivered to the Lenders
pursuant to the provisions of this Agreement.
5.14 Tax Liability. The Borrower has filed all tax returns which
-------------
are required to be filed and has paid all taxes (including interest and
penalties), if any, which have become due by Borrower pursuant to such returns
or pursuant to any assessment or notice of tax claim or deficiency received by
it. All tax liabilities were adequately provided for at the end of the most
recent Fiscal Year of the Borrower and are now so provided for on the books of
the Borrower. No material tax liability has been asserted by the Internal
Revenue Service or any other taxing authority for taxes (or interest or
penalties thereon) in excess of those already paid.
5.15 Distributions. Except as reflected in the Financial
-------------
Statements from time to time furnished by Borrower hereunder, the Borrower has
not applied any of its funds as a distribution to its partners, or any of them.
5.16 Regulation U, etc. The Borrower does not own any "margin
-----------------
stock" as defined in Regulation U (12 CFR, Chapter II Part 207) of the Board of
Governors of the Federal Reserve System. None of the proceeds of the Loan will
be used, directly or indirectly, for the purpose of purchasing or carrying any
margin stock or for any other purpose which might constitute this transaction a
"purpose credit" within the meaning of such Regulation U. Neither the Borrower
nor any agent acting on its behalf has taken or will take any action which might
cause this Agreement or the Notes to violate Regulation U or any other
regulation of the Board of Governors of the Federal Reserve System.
37
<PAGE>
5.17 Compliance with Law. The Hotel is in compliance with all
-------------------
Laws, and the Borrower and all of the Borrower's other assets and properties are
in compliance, in all material respects, with all requirements of law and all
applicable rules and regulations of each Governmental Authority.
5.18 Permits and Licenses. No proceedings are pending or, to the
--------------------
Borrower's knowledge, threatened with respect to the revocation or suspension of
any material permits, licenses and approvals issued with respect to the Hotel
and such permits, licenses and approvals shall not be altered or amended, nor
shall the Borrower make any attempt to alter or amend the same, in any material
respect, without the prior written consent of the Lenders.
5.19 No Notices. There is no note or notice in any municipal or
----------
other public department that the Hotel violates or does not comply with any
Laws.
5.20 Disclosure. Neither this Agreement nor any document,
----------
certificate or Financial Statement furnished to the Lenders by or on behalf of
the Borrower in connection herewith contains any untrue statement of a material
fact or omits to state any material fact necessary in order to make the
statements contained herein and therein not misleading. There is no fact known
to the Borrower which materially adversely affects the business, operations,
prospects, property, other assets or financial condition of the Borrower or the
Hotel which has not been set forth in this Agreement or the Memorandum or in
other documents, certificates and Financial Statements furnished to the Lenders
by or on behalf of the Borrower in connection with the transactions contemplated
hereby.
5.21 Equity Contributions. The limited partners of Borrower have
--------------------
contributed or subscribed to contribute, as provided in the Memorandum, not less
than $86,158,000.00 that will be applied solely for the purposes described in
the Memorandum, and the General Partner has contributed the cash and property
provided for in the Memorandum.
5.22 Net Worth. The General Partner has been capitalized with a
---------
net worth of not less than $13,000,000.00, and such net worth shall be reduced
solely by reason of the General Partner's payment of amounts required to be paid
by the General Partner under the Memorandum or as may otherwise be necessary to
meet Borrower's obligations in the ordinary course of business.
38
<PAGE>
5.23 Compliance with Securities Laws. The Borrower has been
-------------------------------
formed, and limited partnership interests in Borrower have been offered for sale
and sold, in compliance with all applicable federal and state laws and
regulations relating thereto, and the Borrower has made all disclosures required
by such laws and regulations and in accordance therewith.
5.24 Brokerage Fees. No brokerage fees or other similar fees or
--------------
commissions (except amounts payable to the Lenders) are payable to anyone
engaged by the Borrower, Marriott or any Affiliate of the Borrower or Marriott
in connection with entering into this Agreement.
5.25 Best Efforts. Borrower will exercise its best efforts to
------------
cause all of the conditions hereof to be satisfied on the part of the Borrower
at the time and in the manner herein provided.
The representations and warranties contained in this Article 5 are
made on and as of the date hereof and shall also be made (without the execution
or delivery of any written instrument) on and as of the date of the Closing. The
representations and warranties in Sections 5.1, 5.2, 5.3, 5.16, 5.21 and 5.22
shall also be remade (without the execution or delivery of any written
instrument) on the first day of each Interest Period hereunder.
6. AFFIRMATIVE COVENANTS.
The Borrower covenants and agrees that, from and after the date hereof
and as long as the Loan, interest or any other obligations incurred hereunder
are outstanding, unless the Lenders shall otherwise consent in a writing
delivered to the Borrower, the Borrower will:
6.1 Pay Principal and Interest. Punctually pay the principal and
--------------------------
interest to become due in respect to the Notes according to the terms hereof.
6.2 Maintenance of Borrower's Office. Maintain an office in
--------------------------------
Bethesda, Maryland (or such other place in the United States of America as the
Borrower may designate in writing to the Lenders) where notices and demands to
or upon the Borrower in respect of the Loan Documents may be given or made.
39
<PAGE>
6.3 Keep Books; Set Aside Reserves. Keep proper books of record
------------------------------
and account in which true, correct and complete entries will be made of its
transactions in accordance with generally accepted accounting principles,
including the setting aside on its books from its earnings for each Fiscal Year,
beginning in Fiscal Year 1987, and for each Fiscal Year thereafter, adequate
reserves for depreciation, obsolescence and/or amortization of its properties
during such year, and all other proper reserves which should be set aside from
such earnings in connection with its business.
6.4 Payment of Taxes; Corporate Existence; Maintenance of
-----------------------------------------------------
Properties.
- ----------
(a) Pay and discharge promptly all taxes (including, without
limitation, all payroll withholdings), assessments and governmental charges or
levies, if any, imposed upon it or upon its income or profits or upon any of its
property, real, personal or mixed, or upon any part thereof, before the same
shall become delinquent, as well as all claims for labor, materials and supplies
which, if unpaid, might by law become a Lien upon its property; provided,
however, that the Borrower shall not be required to pay any such tax,
assessment, charge, levy or claim or discharge any such Lien if the validity
thereof shall be contested in good faith by appropriate proceedings and if the
Borrower shall have established such reserves, if any, as may be required in
accordance with generally accepted accounting principles with respect to the
tax, assessment, charge, levy or claim so contested;
(b) (i) Conduct continuously and operate actively its
business (subject to temporary cessation of, or other limitations on, in its
activities due to strikes, lockouts, casualties, acts of God, war, governmental
regulation or control, or other causes beyond the reasonable control of
Borrower, provided prompt written notice thereof is given to the Lenders); (ii)
keep in full force and effect and existence all rights, licenses, permits and
franchises required for the use or operation of the Hotel and comply with all
Laws; and (iii) make all such reports and pay all such franchise and other taxes
and license fees, and do all such other things as lawfully may be required, to
maintain all such rights, licenses, powers and franchises under the laws of the
United States of America and of the States or jurisdictions in which it is
organized or does business; and
(c) Maintain and keep, or cause to be maintained and kept,
its properties, including the Hotel, in good repair, working order and
condition, and from time to time make or cause to be made all needful repairs,
renewals, replacements and improvements so that the business carried on in
connection therewith may be properly and advantageously conducted at all times.
40
<PAGE>
6.5 Insurance. Without limiting the provisions of Article 8
---------
hereof, (a) keep all of its insurable properties and interests insured at all
times with financially sound and responsible insurance carriers satisfactory to
the Lenders against loss or damage by fire and such other risks, casualties and
contingencies as the Lenders may reasonably request; (b) maintain adequate
insurance at all times with financially sound and responsible insurance carriers
satisfactory to the Lenders against liability on account of damage or injury to
persons and properties and under all applicable workers' compensation laws; and
(c) maintain adequate insurance covering such other risks as the Lenders may
reasonably request from time to time and as may then be customarily maintained
in the hotel industry.
6.6 Financial Statements and Reports. Furnish to each of the
--------------------------------
Original Lenders the following Financial Statements:
(a) As soon as practicable, and in any event within fifty
(50) days after the end of each Accounting Quarter (other than the last
Accounting Quarter) in each Fiscal Year an unaudited balance sheet of the
Borrower as at the end of such Accounting Quarter and an unaudited statement of
income, retained earnings and changes in financial position of the Borrower for
each such Accounting Quarter and for that part of the Fiscal Year then ended,
all in reasonable detail and satisfactory in scope to the Lenders, setting forth
in each case in comparative form the corresponding figures for the corresponding
period(s) of the preceding Fiscal Year, which statements shall, as a whole,
fairly present the financial position of the Borrower as at the end of the
periods involved and the results of the operations of the Borrower for such
periods, and which shall be certified by the chief accounting officer of the
General Partner (or his or her duly appointed representative, reasonably
acceptable to Lenders), as having been prepared under his or her supervision in
accordance with generally accepted accounting principles consistently applied
and consistent with the principles applied in the Financial Statements for the
preceding Fiscal Year, subject to year-end audit and adjustments, and that he or
she knows of no facts inconsistent with such statements;
(b) As soon as practicable, and in any event within one
hundred twenty (120) days after the end of each Fiscal Year, a balance sheet of
the Borrower as at the end of such Fiscal Year and a statement of income,
retained earnings and changes in financial position of the Borrower for such
Fiscal Year, setting forth in each case in comparative form the corresponding
figures for the preceding Fiscal Year, prepared in accordance with generally
accepted accounting principles consistently applied and accompanied by (i) an
audit report and opinion in respect of such Financial Statements of Arthur
Andersen & Co. or other independent certified public accountants of
41
<PAGE>
recognized standing selected by the Borrower and acceptable to the Lenders,
which report and opinion shall be unqualified as to the scope of the audit and
reasonably satisfactory to the Lenders in all other respects, and (ii) a
certification of the chief accounting officer of the General Partner (or his or
her duly appointed representative, reasonably acceptable to Lenders) in respect
of such Financial Statements, to the same effect as provided in Section 6.6(a)
excluding any reference to year-end audit adjustments;
(c) Concurrently with the Financial Statements delivered
pursuant to Section 6.6(b), the written statement of such accountants that, in
making the examination necessary for their report and opinion on such Financial
Statements, they have obtained no knowledge of any condition, event or act which
constitutes an Event of Default or Potential Default, or, if such accountants
shall have obtained such knowledge, they shall disclose in such statement the
Event of Default or Potential Default involved and the nature and status
thereof;
(d) Concurrently with the Financial Statements delivered
pursuant to Sections 6.6(a) and 6.6(b), a certificate of the chief accounting
officer of the General Partner (or his or her duly appointed representative,
reasonably acceptable to Lenders) to the effect that there exists no condition,
event or act which constitutes an Event of Default or a Potential Default, or if
any such condition, event or act exists, specifying the nature thereof, the
period of its existence and what action the Borrower proposes to take with
respect thereto. The Borrower further covenants that, forthwith upon any
officer's of the General Partner obtaining knowledge of any Event of Default or
a Potential Default, it will deliver to the Original Lenders a statement of an
executive officer of the General Partner, specifying the nature thereof, the
period of existence thereof and what action the Borrower proposes to take with
respect thereto;
(e) Promptly upon request of any of the Lenders, copies of
any reports submitted to the Borrower by its accountants in connection with any
examination of the Financial Statements of the Borrower made by such
accountants, and copies of any other communications received by the Borrower or
the General Partner from such accountants relative to any Financial Statements
or audit or internal controls and systems of the Borrower;
(f) As soon as practicable, and in any event within seventy-
five (75) days after the end of each Fiscal Year, an unaudited operating
statement with respect to the Hotel for such Fiscal Year, in the form
customarily prepared by the Borrower and certified by the chief
42
<PAGE>
accounting officer of the General Partner (or his or her duly appointed
representative, reasonably acceptable to Lenders) as having been prepared under
his or her supervision in accordance with the provisions hereof;
(g) No later than thirty (30) days subsequent to the
beginning of each Fiscal Year, an annual operating projection for the Hotel, for
such Fiscal Year containing the information provided for in Section 9.03 of the
Management Agreement and including a projection of the average annual occupancy
and average annual room rate for the Hotel for such Fiscal Year; the Borrower
shall also promptly provide to the Original Lenders copies of the annual
accounting made by the Manager pursuant to Section 9.01 of the Management
Agreement;
(h) No later than fifty (50) days after the end of each
Accounting Quarter, a operating statement with respect to the Hotel, for such
Accounting Quarter, showing the results of the operations for the Hotel during
such Accounting Quarter, including a statement showing Gross Revenues,
Deductions and Cash Flow Available for the Loan for the Hotel for such
Accounting Quarter, and which shall be certified by the chief accounting officer
of the General Partner (or his or her duly appointed representative, reasonably
acceptable to Lenders) as having been prepared under his or her supervision in
accordance with the provisions hereof;
(i) No later than fifty (50) days after the end of each
Accounting Quarter, a statement of the Loan Debt Service Coverage for such
Accounting Quarter, which shall be certified by the chief accounting officer of
the General Partner (or his or her duly appointed representative, reasonably
acceptable to Lenders) as having been prepared under his or her supervision in
accordance with the provisions hereof;
(j) Promptly upon their becoming available, copies of all
Financial Statements, reports, notices and statements sent or made available
generally by the Borrower to its limited partners, and of all reports,
registration statements and prospectuses filed by the Borrower with any
securities exchange or with the Securities and Exchange Commission, or any
governmental authority succeeding to any of its functions;
(k) Not later than ten (10) days prior to the execution
thereof, a true and complete copy of any proposed amendment to the Partnership
Documents (other than amendments which merely reflect the admission or
withdrawal of limited partners);
43
<PAGE>
(l) Promptly following the occurrence thereof, notice of any
material adverse change in the business or in the condition, financial or
otherwise, of the Borrower; and
(m) Such other information as to the financial condition,
operations, business, properties and other assets of the Borrower, as the
Lenders, or any of them, may from time to time reasonably request.
6.7 Inspection. On not less than two (2) Business Days' notice,
----------
permit each of the Lenders or any of their representatives to visit and inspect
any of the properties of the Borrower, to examine its books of account and
records relating to the Hotel and to discuss the affairs, finances and accounts
of the Borrower with its representatives, all at such reasonable times and as
often as the Lenders, or any of them may request.
6.8 Notice of Claims. Promptly give written notice to the
----------------
Original Lenders of (a) any action, proceeding or claim of which the Borrower
may have notice, which may be commenced or asserted against the Borrower in
which the amount involved is $1,000,000.00 or more and is not covered by
insurance as to which the insurer has not disclaimed liability, or which seeks
injunctive or other equitable remedy, and (b) any dispute which may exist
between the Borrower and any Person, which may materially affect the normal
business operations of the Borrower of any of its properties and other assets
and (c) all complaints and charges made by any Governmental Authority materially
and adversely affecting the Hotel, the Borrower or its business.
6.9 Agreements. Perform punctually and fully all of its
----------
obligations under the Management Agreement, the Purchase Agreement, the Ground
Lease and all other contracts and agreements relating to the acquisition,
ownership or operation of the Hotel.
6.10 Completion. To the extent that the Hotel was not fully
----------
completed at the time of the disbursement, complete or cause to be completed
fully and as soon as reasonably possible the Hotel, including, without
limitation, all of its amenities and all FF&E.
6.11 Licenses To procure, within sixty (60) days following the
--------
delivery of the certificate provided for in Section 4.14 hereof, all licenses
and certificates necessary or appropriate
44
<PAGE>
for the operation of the Hotel (including all of its amenities and all FF&E) and
to deliver copies thereof to the Original Lenders within such 60-day period.
6.12 Operations. To operate continuously the Hotel as a
----------
"Courtyard by Marriott" hotel in accordance with the standards established by
Marriott with respect to its Courtyard by Marriott hotels.
6.13 FF&E Reserve. Establish and maintain, on a consolidated
------------
basis with respect to the Hotel and other hotels of Borrower, an escrow reserve
account ("FF&E Reserve") to cover the cost of:
(a) Replacements and renewals to FF&E (including
communications systems and computer systems); and
(b) Certain routine repairs and maintenance to hotels owned
by the Borrower, including the Hotel, which are normally capitalized under
generally accepted accounting principles such as exterior and interior
repainting, resurfacing building walls, floors, roofs and parking areas, and
replacing folding walls and the like, but which are not major repairs,
alterations, improvements, renewals or replacements to the Hotel's structure or
to its mechanical, electrical, heating, ventilating, air conditioning, plumbing
or vertical transportation systems.
The Borrower shall from time to time contribute to the FF&E Reserve
such amounts as are sufficient to keep the FF&E Reserve at the levels necessary
to make the replacements and renewals to the FF&E, and to make the repairs to
hotels owned by the Borrower, including the Hotel, necessary or appropriate to
keep and maintain the hotels in the condition required under the Loan Documents
and the First Courtyard Loan Agreement, but in no event less than the following
amounts with respect to the Hotel:
(i) during the period of time up to the expiration of the
second full Fiscal Year after the opening of the Hotel, an amount equal to two
and one-half percent (2-1/2%) of Gross Revenues for such period of time;
(iii) commencing with the third full Fiscal Year after such
operating and for all Fiscal Years thereafter, an amount equal to six percent
(6%) of Gross Revenues for each of such Fiscal Years.
45
<PAGE>
6.14 Restrictive Covenants. To comply with all covenants,
---------------------
conditions and restrictions affecting the Hotel unless the Lenders are insured
against loss, in a form satisfactory to Original Lenders, for noncompliance in
the applicable policy of title insurance issued pursuant hereto.
6.15 Easements. To submit to the Original Lenders for approval,
---------
prior to the execution thereof, all proposed easements (except for customary
utility easements not benefiting other property) benefiting or burdening the
Hotel, accompanied by a survey, and surveyor's written descriptions, showing the
portion of the Hotel Property and any adjoining property affected by said
easements.
7. NEGATIVE COVENANTS
The Borrower covenants and agrees that, from and after the date hereof
and as long as the Loan, interest or any other obligations incurred hereunder
are outstanding, unless the Lenders shall otherwise consent in a writing
delivered to the Borrower, the Borrower will not:
7.1 Allocation of Cash Flow Available for the Loan. At any time
----------------------------------------------
prior to the Maturity Date, apply or distribute Cash Flow Available for the Loan
realized in any Accounting Quarter, except for the following purposes and in
accordance with the following priorities:
First: Payment of interest on the Notes due during such Accounting
Quarter.
Second: Payment of required principal payments on the Notes due
during such Accounting Quarter.
Third: Payment of current rent on the Ground Lease.
Fourth: Payment of deferred rent on the Ground Lease, with interest
thereon at a rate not in excess of the Base Rate.
Fifth: Payment of the "Priority Return" provided for in the
Management Agreement
Sixth: Payment of the Incentive Management Fee to the Manager.
46
<PAGE>
Seventh: Payment of Indebtedness permitted under Section 7.2 hereof.
Eighth: The balance, if any, for any purpose not prohibited by this
Agreement or the other Loan Documents.
The provisions for allocation of Cash Flow Available for the Loan in
this Section 7.1 shall not limit or otherwise affect the Borrower's obligation
to pay the Loan and interest thereon upon the terms provided therefor in this
Agreement and the Notes, whether or not there is any Cash Flow Available for the
Loan. The Borrower shall not make any payments referred to in item Fifth,
Seventh or Eighth or any payments for any other purpose (except permitted
Deductions) from Cash Flow Available for the Loan for any Accounting Quarter
until the sums due under items First and Second have been paid in full for such
Accounting Quarter and all prior Accounting Quarters, or if an Event of Default
hereunder shall have occurred and be continuing. The provisions for Allocation
of Cash Flow Available for the Loan in this Section 7.1 shall not limit or
otherwise affect the provisions of the Debt Service Guaranty relating to the
obligations of Marriott thereunder with respect to Debt Service on the Loan.
7.2 Indebtedness. In any manner become or be liable,
------------
contingently or otherwise, in respect of, or permit or suffer to exist, any
Indebtedness (other than the Loan and the loans made under the First Courtyard
Loan Agreement), except the following:
(a) Indebtedness in respect of taxes, assessments and
governmental charges or levies and claims for labor, materials and supplies, as
and to the extent permitted to remain unpaid and undischarged by Section 6.4(a);
(b) Indebtedness secured by Liens specifically permitted by
Section 7.3(a);
(c) Other unsecured Indebtedness, including obligations on
FF&E Leases and TV System Leases (which shall be valued, for the purposes of the
limitations set forth below, in the amount of the value of the equipment so
leased), which Indebtedness shall not exceed, in the aggregate $10,000,000.00;
47
<PAGE>
(d) Indebtedness to Marriott, including, without limitation,
Indebtedness arising by reason of payment by Marriott of any amounts pursuant to
the Debt Service Guaranty, and Indebtedness to any Affiliate of Marriott, but
only if (1) the repayment of such Indebtedness shall have been subordinated to
payment of the Loan pursuant to the provisions of the Subordination Agreement or
a subordination agreement substantially in the form of the Subordination
Agreement completed to be made applicable to such Indebtedness, executed and
delivered to the Lenders by Marriott or such Affiliate making any such advance,
and (ii) the Original Lenders and their counsel shall be satisfied as to the due
authorization, validity and enforceability of the Subordination Agreement or
such subordination agreement as delivered to the Original Lenders;
(e) Indebtedness secured by a junior mortgage of the Hotel,
but only if: (i) the security position of the junior mortgagee is expressly
subordinate to that of the Lenders; (ii) on the date of incurrence, Debt Service
Coverage on the Loan and any Indebtedness heretofore permitted under this
Section 7.2(e) shall have exceeded 1.2 for each of the eight Current Accounting
Quarters; (iii) on the date of incurrence, Debt Service Coverage on the Loan,
any Indebtedness heretofore permitted under this Section 7.2(e), and Pro Forma
Debt Service on the proposed Indebtedness under this Section 7.2(e), shall have
exceeded 1.2 for each of the four Current Accounting Quarters; and (iv) on the
date of incurrence, at least $450,000 shall remain available under the Debt
Service Guaranty or the Debt Service Guaranty shall have terminated under
Paragraph 5 thereof. The Borrower shall furnish to the Original Lenders such
evidence relating to the foregoing requirements as the Original Lenders shall
determine is necessary or appropriate in order to assure the Lenders that such
requirements are satisfied;
(f) Indebtedness arising under interest exchange agreements
with one or more of the Original Lenders;
(g) Indebtedness secured by hotels other than the Hotel or
by other assets of the Borrower unrelated to the Hotel; and
(h) The Telephone Leases.
7.3 Liens. Contract, create, assume, incur or suffer to be
-----
created, assumed or incurred or to exist any Lien (other than as permitted by
Section 6.4(a)) upon, or pledge of, or subject to the prior payment of any
Indebtedness (other than the Loan), any property or other assets of the
48
<PAGE>
Borrower or any interest therein, whether owned at the date hereof or hereafter
acquired, or acquire or agree to acquire any property or other assets subject to
any Lien, or suffer to exist any Indebtedness of the Borrower or (except as and
to the extent permitted by Section 6.4(a)) any claims or demands against the
Borrower which, if unpaid, might (in the hands of the holder or anyone who shall
have guaranteed the same or who has any right or obligation to purchase the
same) by law or upon bankruptcy or insolvency or otherwise, be given any
priority whatsoever over its general creditors; excluding, however, from the
operation of this Section 7.3:
(a) Pledges or deposits to secure obligations under workers'
compensation laws or similar legislation, including Liens of judgments
thereunder which are not currently dischargable; deposits of cash or readily
marketable securities to secure public or statutory obligations of the Borrower;
materialmen's, mechanics', vendors' or other like Liens incurred in the ordinary
course of business with respect to obligations which are being contested in good
faith and as to which adequate reserves have been established or deposits of
cash or readily marketable securities required to obtain the release of such
liens have been made; liens created by or resulting from any legal proceedings
(including legal proceedings instituted by the Borrower) which are being
contested in good faith by appropriate proceedings, including appeals of
judgments as to which a stay of execution shall have been issued and adequate
reserves shall have been established; and zoning restrictions, easements,
licenses, restrictions on the use of real property or minor irregularities in
title thereto, which do not materially detract from the value or impair the use
of such property;
(b) Any Liens provided for herein securing payment of the Loan
(c) Liens securing the Indebtedness permitted under Section 7.2(f)
hereof, but only if the interest exchange agreement is with respect to interest
payable on all or any part of the Loan and such Lien may be foreclosed only upon
nonpayment under the interest exchange agreement, and which Liens are
subordinated to the Liens securing the Loan;
(d) Liens securing the Indebtedness permitted under Sections 7.2(d)
and (e) hereof, and which Liens are subordinated to the Liens securing the Loan;
and
(e) Liens securing Indebtedness permitted under Section 7.2(g)
hereof.
49
<PAGE>
7.4 Distribution. Make any distribution, by reduction of capital
------------
or otherwise, to any of its partners, general or limited, if there shall as a
result exist, or if after giving effect thereto there would exist, any Event of
Default or Potential Default hereunder.
7.5 Sale and Leaseback. Enter into any arrangement, directly or
------------------
indirectly, with any Person whereby the Borrower shall sell or transfer any
property related to the Hotel, whether owned on the date hereof or hereafter
acquired, used or useful in the business of the Borrower and then or thereafter
rent or lease such property or other property which the Borrower intends to use
for substantially the same purposes as the property so sold or transferred,
except for FF&E Leases and except with respect to hotels other than the Hotel.
7.6 Change in Partnership; Disposal of Property.
-------------------------------------------
(a) Wind up, liquidate or dissolve; (b) modify or amend the
Partnership Documents (except for the sale of limited partnership interests);
(c) sell, discount or otherwise dispose of, or agree to sell, discount or
otherwise dispose of (except by collection), any of its notes receivable,
contracts or accounts receivable, installment or conditional sales agreements or
any other evidences of indebtedness, except for (i) the pledge to Marriott, or
the sale, of notes made by the limited partners of Borrower as provided in the
Memorandum, and (ii) any of the foregoing actions taken with respect to hotels
other than the Hotel; or (d) sell, exchange, lease, transfer, convey or
otherwise dispose of (or agree to do any of the foregoing) the Hotel except as
expressly permitted herein or by the Mortgage and the Security Agreement.
7.7 Certain Transactions with Affiliated Persons. Except as
--------------------------------------------
otherwise expressly permitted herein, directly or indirectly, pay any funds to
or for the account or benefit of, or purchase, acquire or lease any property
from, or sell, transfer or lease any property to, or engage in any other
transaction with, Marriott, the General Partner, an Affiliate of the Borrower,
an Affiliate of the General Partner or an Affiliate of Marriott; provided,
however, that, notwithstanding the foregoing:
(a) The Borrower may pay salaries and fees to its employees
for services rendered in such capacities in connection with the Hotel in
customary amounts which bear a reasonable relationship to the amount and type of
such services;
50
<PAGE>
(b) The Borrower may, subject to the other provisions of
this Agreement, enter into agreements, contracts and arrangements with Marriott,
the General Partner or any Affiliate of the Borrower, any Affiliate of the
General Partner or any Affiliate of Marriott subject to the conditions and
limitations contained in the Partnership Documents; and
(c) The Borrower may execute and deliver the Management
Agreement, the Purchase Agreement, the Ground Lease and other agreements
affecting only hotels other than the Hotel, but shall make payments thereunder
only in accordance with the terms and provisions of Section 7.1 of this
Agreement, the Mortgage, the Management Agreement Assignment and Purchase
Agreement Assignment.
7.8 Amendments to Agreements. Modify, amend, terminate or cancel
------------------------
the Management Agreement (except as permitted in the Management Agreement
Assignment), the Purchase Agreement (except as permitted in the Purchase
Agreement Assignment) or the Ground Lease (except as permitted in the Mortgage).
7.9 Maintenance of Present Business. Engage in, as its principal
-------------------------------
business, any business other than the ownership and operation of hotels.
7.10 Leases. Create, assume, incur or guarantee, or in any manner
------
be liable for or suffer to exist, any lease or license of real or personal
property where the Borrower is lessee or licensee, except the Ground Lease, or
create, assume or suffer to exist any lease or license of real or personal
property where the Borrower is lessor or licensor, except (i) with respect to
hotels other than the Hotel, (ii) for the FF&E Leases, the TV System Leases and
the Telephone Leases and (iii) as may be permitted by the Mortgage.
7.11 Use of Loan Proceeds. Use any part of the proceeds of the
--------------------
Loans hereunder for any purpose other than those specified in Section 2.1(c)
hereof.
7.12 FF&E Reserve. Cause or permit all or any portion of the FF&E
------------
Reserve to be used for any purpose other than as described in Section 6.14
hereof.
8. INSURANCE.
51
<PAGE>
8.1 Hazard Insurance. The Borrower shall furnish to the Original
----------------
Lenders originals or certified true copies of, or the Original Lenders may (but
shall not be obligated to) procure at the Borrower's expense, policies of fire
insurance with extended coverage endorsements and such other hazard insurance
(including, without limitation, building collapse), covering the Hotel for its
replacement cost, as well as business interruption, loss of rent and extra
expense forms of insurance as the Original Lenders shall require. Such policies
shall be issued by companies having a then current rating in the latest edition
of Best's Insurance Reports of not less than "B" (Policyholders' Rating) and not
less than "XIII" (Financial Size Category), shall be in form and amounts
satisfactory to the Original Lenders and shall provide that loss, if any,
thereunder be payable to the Original Lenders pursuant to a standard mortgagee
clause (without contribution) and a standard lender's loss payable clause.
8.2 Other Insurance. The Borrower shall also provide the
---------------
Original Lenders with certified true copies of its insurance policies or
certificates of insurance evidencing liability insurance, including bodily
injury and property damage, workers' compensation insurance and employer's
liability insurance and such other insurance as the Original Lenders shall
reasonably require. Such policies and coverage shall be issued by companies
having a then current rating in the latest edition of Best's Insurance Reports
of not less than "B" (Policyholders' Rating) and not less than "XIII" (Financial
Size Category), be in form and substance, and in amounts, satisfactory to the
Original Lenders.
8.3 Required Notices. All such policies or certificates shall
----------------
contain the agreement of the insurer to give not less than thirty (30) days'
(or, in the case of nonpayment of premiums, twenty (20) days') prior notice to
the Original Lenders of a proposed policy cancellation or of a material change
in the Policy Provisions.
8.4 Payment and Application. Insurance proceeds payable with
-----------------------
respect to damage to or destruction of the Hotel shall be paid and applied as
provided in the Mortgage of such Hotel.
9. DEFAULTS AND REMEDIES.
9.1 Events of Default. In the case of the occurrence of any of
-----------------
the following events for any reason whatsoever, and whether such occurrence
shall be voluntary or involuntary or come
52
<PAGE>
about or be effected by operation of law or pursuant to or in compliance with
any judgment, decree or order of any court or any order, rule or regulation of
any governmental body or otherwise (each herein called an "Event of Default"):
(a) Any representation, warranty or written statement made
herein or in any other Loan Document, report, certificate, Financial Statement
or other instrument heretofore or hereafter delivered to the Lenders in
connection with this Agreement or any Loan Document or any borrowing hereunder
shall prove to be false or misleading, or is breached, in any material respect
when made or remade; or
(b) Any default shall occur in the payment of principal of
any of the Notes as and when the same shall become due and payable whether at
the due date thereof, by acceleration or otherwise; or
(c) Any default shall occur in the payment of interest on
any of the Notes as and when the same shall become due and payable, and (except
in the case of the payment of interest due at maturity, by acceleration or
otherwise) such default is not cured within three (3) days; or
(d) Any default shall occur in the due observance or
performance of any covenant, agreement or condition contained in Article 7
hereof; or
(e) Any default shall occur in the due observance or
performance of any covenant or agreement to be observed or performed by the
Borrower pursuant to the terms hereof, other than those referred to in (a), (b),
(c) and (d) of this Section 9.1, and such default shall continue unremedied for
a period of more than thirty (30) days after written notice thereof to the
Borrower by the Original Lenders; or
(f) The Borrower, the Manager or the General Partner shall
suspend or discontinue its business, shall call a meeting of its creditors for
the purpose of postponing or adjusting its liabilities or seeking an arrangement
with its creditors, shall make an assignment for the benefit of creditors or a
composition with creditors, shall be unable, or admit in writing its inability
to pay its debts as they mature, shall file a petition in bankruptcy, shall
become insolvent (howsoever such insolvency may be evidenced), shall suffer an
order for relief to be entered against it under any bankruptcy law, shall
petition or apply to any tribunal for the appointment of any
53
<PAGE>
receiver, custodian, liquidator or trustee of or for it or any substantial part
of its property or other assets or shall commence any proceeding relating to it
under any bankruptcy, reorganization, arrangement, readjustment of debt,
receivership, dissolution or liquidation law or statute of any jurisdiction,
whether now or hereafter in effect; or there shall be commenced against the
Borrower, the Manager or the General Partner any such proceeding which shall
remain undismissed for a period of thirty (30) days or more, or the Borrower,
the Manager or the General Partner shall by any act or failure to act indicate
its consent to, approval of or acquiescence in, any such proceeding or in the
appointment of any receiver, custodian, liquidator or trustee of or for it or
any substantial part of its property or other assets, or shall suffer any such
appointment to continue undischarged or unstayed for a period of thirty (30)
days or more; or the Borrower, the Manager or the General Partner shall take any
action for the purpose of effecting any of the foregoing; or
(g) Any order, judgment or decree shall be entered in any
proceeding against the Borrower, Marriott, the Manager or the General Partner
decreeing the dissolution or split-up of the Borrower, Marriott, the Manager or
the General Partner or the divestiture of any asset of the Borrower (except for
a hotel other than the Hotel or other assets unrelated to the Hotel), the
Manager or the General Partner, and such order, judgment or decree shall remain
undischarged or unstayed for a period in excess of sixty (60) days, provided,
however, that the split-up, or the divestiture of the assets, of Marriott shall
not constitute an Event of Default if, following such occurrence, Marriott
continues to own and operate substantially all of its hotel business in
substantially the same manner as prior to such occurrence; or
(h) Final judgment for the payment of money in excess of
$1,000,000.00 shall be rendered by a court of record against the Borrower, the
Manager or the General Partner and the Borrower, the Manager or the General
Partner shall not discharge the same or provide for its discharge in accordance
with its terms, or procure a stay of execution thereof within thirty (30) days
from the date of entry thereof and within such period of thirty (30) days, or
such longer period during which execution of such judgment shall have been
stayed, appeal therefrom and cause the execution thereof to be stayed during
such appeal; or
(i) If the General Partner shall cease to be the sole
general partner of the Borrower or if the General Partner, the Manager or the
Marriott Lessor shall cease to be a direct or indirect wholly-owned subsidiary
of Marriott; or
54
<PAGE>
(j) If an "Event of Default" (as defined therein) shall
occur and be continuing under either of the Guaranties; or
(k) If there shall occur and be continuing a default in the
observance or performance by either party of its covenants, agreements or
obligations under the Management Agreement or the Purchase Agreement or by
Borrower under the Ground Lease and such default is not cured within any
applicable notice and/or grace period provided in such agreement or if either
party to any such agreement or Ground Lease shall, without the prior consent of
the Lenders, terminate or seek to terminate any such agreement or Ground Lease,
except as otherwise provided; in respect of the Management Agreement in the
Management Agreement Assignment and in respect of the Purchase Agreement in the
Purchase Agreement Assignment; or
(l) Any default or event of default shall have occurred
under the Mortgage (subject to the provisions of Section 9.2) or under any other
Loan Document or any event, act or condition shall have occurred which under the
provisions of any Loan Document has the effect of accelerating the stated
maturity of the Loan or permits the Lenders to cause the Loan to become due
prior to their stated maturity; then, if any event described in any subsection
of this Section 9.1 shall have occurred, and at any time thereafter, if any such
event shall then be continuing, the Original Lenders, shall take any one or more
of the following actions:
(i) declare the principal of and accrued interest on the
Notes to be due and payable, both as to principal and interest, without
presentment, demand, protest or other notice of any kind, all of which, to the
extent permitted by law, are hereby expressly waived, anything contained herein
or in any Note to the contrary notwithstanding; or
(ii) enter upon, take possession of, and use the Hotel and
all parts thereof and all FF&E, material, equipment and supplies thereon and
elsewhere which were ordered for or appropriated to the operation of the Hotel,
and do anything which is necessary or desirable to fulfill, pay, settle or
compromise the obligations of Borrower hereunder. All sums paid or incurred for
the operation of the Hotel pursuant to the provisions of this paragraph or
otherwise, and all other payments made or liabilities incurred by the Lenders
hereunder of any kind whatsoever, shall bear interest from the date of payment
or incurrence at the Legal Rate and such amounts, including interest, shall be
deemed and shall constitute advances under this Agreement. The Lenders and their
designees, representatives, agents, licensees and contractors shall be entitled
to such entry, possession and use without the consent of any party and without
any legal process or other condition
55
<PAGE>
precedent whatsoever, and the Borrower acknowledges that any denial of such
entry, possession and use by the Lenders will cause irreparable injury and
damages to the Lenders.
9.2 Default under the Mortgage. If any "Property Default" as
--------------------------
defined in the Mortgage shall occur under the Mortgage, then such "Property
Default" shall not constitute an Event of Default hereunder if the Borrower
shall promptly undertake the cure thereof, diligently pursue such cure and fully
cure the "Property Default" as promptly as reasonably possible but in no event
later than one (1) year from the Original Lenders notice of such "Property
Default."
9.3 Suits for Enforcement. Subject to the provisions of Section
---------------------
2.19 hereof, in case any one or more of such Events of Default shall occur and
be continuing, the Lenders may proceed, to the extent permitted by law, to
protect and enforce their rights either by suit in equity or by action at law,
or both, whether for the specific performance of any covenant, condition or
agreement contained in this Agreement or the Note or in aid of the exercise of
any power granted in this Agreement or the Note, or proceed to enforce the
payment of the Note or to enforce any other legal or equitable right of the
Lenders.
9.4 Remedies Cumulative. Subject to the provisions of Section
-------------------
2.19 hereof, no right or remedy herein or in any other agreement or instrument
conferred upon the Lenders or the holders of the Notes is intended to be
exclusive of any other right or remedy, and each and every such right or remedy
shall be cumulative and shall be in addition to every other right and remedy
given hereunder or under any Loan Document or now or hereafter existing at law
or in equity or by statute or otherwise. Without limiting the generality of the
foregoing, if any Note or any of the other obligations of the Borrower to the
Lenders shall not be paid when due, whether at the stated maturity thereof, by
acceleration or otherwise, the Lenders shall not be required to resort to any
particular security, right or remedy or to proceed in any particular order of
priority, and the Lenders shall have the right at any time and from time to
time, in any manner and in any order, to enforce their security interests,
Liens, rights and remedies, or any of them, as the Lenders deem appropriate in
the circumstances and apply the proceeds of their collateral to the obligations
of the Borrower.
10. MISCELLANEOUS.
10.1 Notices and Addresses. Except as otherwise provided with
respect to Borrowing Notices and notices under Section 2.7 hereof, all notices,
demands or requests provided for
56
<PAGE>
or permitted to be given pursuant to this Agreement shall be deemed to have been
properly given or served by personal delivery or by depositing in the United
States mail, postpaid and registered or certified, return receipt requested, and
addressed to the addresses set forth below. All notices, demands and requests
shall be effective upon being personally delivered or deposited in the United
States mail. The time period in which a response to any notice, demand or
request must be given, if any, shall commence to run from the date of personal
delivery or the date of receipt of the notice, demand or request, by the
addressee thereof as disclosed by the return receipt. Rejection or other
refusal to accept or the inability to deliver because of changed address of
which no notice was given shall be deemed to be receipt of the notice, demand or
request sent. No other method of giving notice is hereby precluded. By giving
at least ten (10) days' written notice thereof, any party hereto shall have the
right from time to time and at any time during the term of this Agreement to
change its address and each shall have the right to specify as its address any
other address within the United States of America. For the purposes of this
Agreement, the addresses of the parties are as follows:
Borrower:
Courtyard by Marriott Limited Partnership
c/o CBM One Corporation 10400 Fernwood Road
Bethesda, Maryland 20058
Attention: Law Department
Associate General Counsel-
Corporate Affairs
Original Lenders:
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Attention: Lorraine Montero
The First National Bank of Chicago
1615 L Street N.W.
Suite 900
Washington, D.C. 20036
Attention: Steven D. Franklin
10.2 Survival of Representations; Successors and Assigns. All
---------------------------------------------------
covenants, agreements, representations and warranties made herein and in any
certificate delivered pursuant hereto shall be effective as of the date stated
therein, and shall survive the execution and delivery of this Agreement and the
other Loan Documents, the making by the Lenders of the Loan and the
57
<PAGE>
execution and delivery of the Notes, regardless of any investigation made by the
Lenders and of the Lenders' access to any information and shall continue in full
force and effect so long as the Loan or any obligation created hereunder is
outstanding and unpaid.
Whenever in this Agreement there is a reference to any of the parties
hereto, such reference shall be deemed to include the successors and assigns of
such party, subject to the provisions hereof. All covenants, agreements,
representations and warranties by or on behalf of the Borrower or Marriott or
any other Person which are contained or incorporated in this Agreement or any
other Loan Document or any other document referred to herein or executed or
delivered in connection with the Loan shall inure to the benefit of the
successors and assigns of the Lenders and any holders of the Notes or any
interest therein. Except for the parties hereto and their respective successors
and assigns, no other Person shall be entitled to the benefits of this Agreement
or to rely hereon. Each Lender shall be individually and severally bound by
this Agreement and the other Loan Documents but shall not be jointly obligated
hereunder and thereunder and shall have no responsibility for any failure of any
other Lender to comply with any of its other obligations under this Agreement or
the other Loan Documents.
10.3 Effect of Delay; No Waivers. No failure or delay on the part
---------------------------
of the Lenders or any of them in exercising any right, power or privilege
hereunder or under the Notes, nor any course of dealing between the Borrower and
the Lenders or any of them, shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise or the
exercise of any other right, power or privilege. No advance made at a time when
an Event of Default exists shall constitute a waiver of any right or remedy of
the Lenders existing by reason of such Event of Default.
10.4 Expenses. Whether or not the transactions contemplated
--------
hereby shall be consummated, the Borrower agrees to pay, and the Lenders may
charge any deposit account(s) of the Borrower for, all expenses incurred by the
Lenders in connection with the negotiation, preparation and administration of
this Agreement (including, without limitation, any modifications of or waivers
under this Agreement), the other Loan Documents, the enforcement, defense and
preservation of the rights of the Lenders under or in connection with this
Agreement, the Notes and the other Loan Documents, and all attorneys' fees and
disbursements incurred by the Lenders which arise out of or are connected,
directly or indirectly, to any transaction contemplated by this Agreement,
including, but not limited to, the fees and disbursements of Sidley & Austin,
counsel for the Original Lenders,
58
<PAGE>
and fees and disbursements of any local counsel for the Lenders, for the
preparation of this Agreement and such other instruments, the fees of appraisers
and surveyors, filing and recording fees and taxes, mortgage taxes, intangible
taxes and insurance (including title insurance) premiums. All of such expenses
shall be paid by the Borrower at or prior to the time of the execution of this
Agreement to the extent incurred and billed and thereafter on demand as
incurred. The provisions of this Section shall survive any termination of this
Agreement, whether by reason of bankruptcy of the Borrower or otherwise.
10.5 Use of Accounting Terms. Except as otherwise provided
-----------------------
herein, accounting terms used in this Agreement shall be construed, calculations
hereunder shall be made and financial data required hereunder shall be prepared,
both as to classification of items and as to amounts, in accordance with
generally accepted accounting principles in effect as of the date hereof
consistently applied. All statements relating to earnings and expenses shall
set forth separately or otherwise identify all extraordinary and non-recurring
items.
10.6 Equitable Adjustment Among Lenders. The Lenders agree among
----------------------------------
themselves that, with respect to all sums received by the Lenders applicable to
the payment of principal of or interest on the Notes, equitable adjustment will
be made among the Lenders so that, in effect, all such sums shall be shared
ratably by each of the Lenders based upon their Pro Rata Shares of the Loan,
whether received by voluntary or required payment or prepayment, by realization
upon security, by the exercise of the right of setoff or banker's lien, by
counterclaim or cross-action or by the enforcement of the Notes or the
Guaranties. Each Lender hereby agrees that any sums received by it from the
Borrower by exercise of the right of set-off or banker's lien shall be applied
solely to payment of the Notes outstanding hereunder and not to payment of any
other financial accommodations extended by such Lender to the Borrower.
10.7 Assignment.
----------
(a) The Borrower shall not assign this Agreement or any of
the moneys due or to become due hereunder or convey, transfer, encumber (except
as otherwise permitted herein or in any of the other Loan Documents) or
otherwise hypothecate the Hotel or any part thereof by operation of law or
otherwise, without the prior written consent of the Lenders.
(b) Except as otherwise provided in this Section 10.7(b),
any Lender may, from time to time, sell, assign, transfer or grant participation
interests in all or any part of its
59
<PAGE>
interest in the Loan. Each of the Original Lenders covenants and agrees (i) to
maintain at all times interests in the Loan, (ii) to remit promptly to any
Lender to which it sells, assigns or transfers any interest in the Loan the
amount of any payment due such Lender hereunder and actually paid by the
Borrower to such Original Lender, and (iii) to forward, with reasonable
promptness, to any Lender to which it sells, assigns or transfers any interest
in the Loan copies of any Financial Statements or other reports or information
actually furnished by or on behalf of the Borrower to such Original Lender from
and after the date on which such Lender requires an interest in the Loan from
such Original Lender.
10.8 Books and Records. The Lenders or any of their
-----------------
representatives shall have, upon not less than two Business Days' notice and at
reasonable times and as often as the Lenders, or any of them, may request, the
right to inspect all the books and records of the Borrower relating to the
operation of the Hotel and shall be furnished with all information reasonably
requested by them in connection therewith.
10.9 Proceedings. All legal proceedings and all instruments and
-----------
agreements in connection with the transactions contemplated by this Agreement
(including without limitation those provided for in Articles 4 and 8 and
Sections 7.2(d) and (e) hereof) shall be satisfactory in form, scope and
substance to the Lenders and their counsel, and the Lenders and such counsel
shall have received all information and copies of all documents which the
Lenders or their counsel may reasonably have requested in connection therewith,
such documents where appropriate to be certified by proper governmental
authorities.
10.10 Time of the Essence. Time is hereby declared to be of the
-------------------
essence of this Agreement and any part hereof.
10.11 Exhibits. The Exhibits to this Agreement have been attached
--------
hereto or, if not so attached, have been marked for identification by the
Original Lenders and the Borrower. The Original Lenders shall be authorized by
the Lenders prior to the Closing to consent to such changes to the Exhibits
which are not material but which the Original Lenders determine are necessary or
appropriate.
10.12 Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which shall constitute one and the same agreement.
60
<PAGE>
10.13 Construction and Jurisdiction. This Agreement and the Notes
-----------------------------
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. Borrower hereby irrevocably consents and agrees that any
legal action, suit, or proceeding arising out of or in any way in connection
with this Agreement may be instituted or brought in the courts of the State of
New York, in the County of New York, or the United States Courts for the
Southern District of New York, as Lenders may elect, and by execution and
delivery of this Agreement hereby irrevocably accepts and submits to generally
and unconditionally, the non-exclusive jurisdiction of any such court, and to
all proceedings in such courts. The parties also consent that service of
process in any such action or proceeding may be made upon any party by mailing a
copy of the summons and the complaint to such party, by registered mail, return
receipt requested, at its address designated for notices under Section 10.1 of
this Agreement. Nothing in this Agreement or elsewhere shall affect the
Lenders' right to serve process in any other manner permitted by law or limit
the right of the Lenders to bring actions, suits or proceedings in the courts of
any other jurisdiction. In any action or proceeding relating to this Agreement
or the Note or any of the other Loan Documents or any of the liens, security
interests or collateral security for the Loans or any of them, the parties
mutually waive trial by jury, and the Borrower waives (a) any claim for
consequential or special damages, and (b) the right to assert therein any set-
off or counterclaim.
10.14 Description of Documents. The description or
------------------------
characterization of any Loan Document or any other document or instrument
contained in this Agreement or in any other Loan Document is solely for the
purpose of identification and such description or characterization shall not be
used for the purpose of, and shall not otherwise affect, the construction or
interpretation of such Loan Document or other document or instrument so
described or characterized. In the event of any conflict between any such
description or characterization and the terms of any such Loan Document or other
document or instrument, the terms of the latter shall control.
10.15 Headings. Article and Section headings and the description
--------
of Exhibits contained in the list of Exhibits hereto are for convenience only
and shall not affect the interpretation or construction of this Agreement or the
other Loan Documents.
10.16 Indemnity. Borrower agrees to indemnify the Lenders for all
---------
injury, damage and liability to the person or property of the parties hereto or
to any other Person by reason of the operation of the Hotel contemplated herein.
Borrower shall undertake at its own expense, by counsel
61
<PAGE>
reasonably approved by the Lenders, the defense of the Lenders in any lawsuit
commenced as a result of injury, damage or liability occurring by reason of the
operation of the Hotel.
10.17 Validity. In the event that any of the covenants,
--------
agreements, terms or provisions contained in this Agreement or in any other Loan
Document shall be invalid, illegal or unenforceable in any respect, the validity
of the remaining covenants, agreements, terms or provisions contained herein or
in any other Loan Document (or the application of the covenant, agreement, term
held to be invalid, illegal or unenforceable, to Persons or circumstances other
than those in respect of which it is invalid, illegal or unenforceable) shall be
in no way affected, prejudiced or disturbed thereby.
10.18 Incorporation by Reference. All the terms, covenants,
--------------------------
obligations and agreements contained in the Notes and the other Loan Documents
are hereby incorporated herein and made in part hereof to the same extent and
effect as if fully set forth herein.
62
<PAGE>
IN WITNESS WHEREOF, the Borrower and the Original Lenders have caused
this Agreement to be duly executed and delivered in New York, New York, by their
duly authorized officers, all as of the day and year first above written.
COURTYARD BY MARRIOTT LIMITED
PARTNERSHIP
By: CBM ONE CORPORATION
general partner
Attest: By:
--------------------- ----------------------------------
Assistant Secretary Vice President
(corporate seal)
CITIBANK, N.A.
By:
Title:
-------------------------------
THE FIRST NATIONAL BANK OF
CHICAGO
By:
Title:
-------------------------------
63
<PAGE>
IN WITNESS WHEREOF, the Borrower and the Original Lenders have caused
this Agreement to be duly executed and delivered in New York, New York, by their
duly authorized officers, all as of the day and year first above written.
COURTYARD BY MARRIOTT LIMITED
PARTNERSHIP
By: CBM ONE CORPORATION
general partner
Attest: By:
------------------------- --------------------------------
Assistant Secretary Vice President
(corporate seal)
CITIBANK, N.A.
By:
Title:
-------------------------------
THE FIRST NATIONAL BANK OF
CHICAGO
By:
Title:
-------------------------------
64
<PAGE>
EXHIBIT B
Legal Description
-----------------
Parcel: Marriott Corporation, Areas after Proposed Take
Area: 312,360 Square Feet, 7.17 Acres
A certain parcel of land situated in the Town of Windsor, County of
Hartford, State of Connecticut, being more particularly bounded and described as
follows:
Beginning at a point (N 378575.55 - E 623346.40) on the division line
between land now or formerly of Alcan Aluminum Corporation and land of the
grantor, said point being 27.70 feet distant and southwesterly from a
Connecticut Department of Transportation Highway bound Stone on the westerly
highway line of the Hartford-Springfield Expressway, interstate Route 91;
thence running South 82 degrees -01' -15" West 204.12 feet to a point,
thence turning and running South 81 degrees -39' -45" West 266.11 feet, all
along land now or formerly of Alcan Aluminum Corporation, to 8 point being an
iron pin;
thence running North 55 degrees -48' -03" West 68.24 feet to a point,
thence turning and running along a clockwise curve, having a radius of 300.00
feet, 225.15 feet to a point being a concrete monument, thence turning and
running North 12 degrees -48' -03" West 285.59 feet, all along the easterly
street line of Lamberton Road, to a point;
thence running North 71 degrees -47' -53" East 207.49 feet to a point,
thence turning and running along a clockwise curve, having a radius of 330.18
feet, 614.04 feet to a point, thence turning and running South 11 degrees -19'
26" East 245.93 feet, all along a proposed taking line, to the point of
beginning.
Said parcel being more particularly described in a map titled:
"Courtyard by Marriott, Windsor, Conn. As-Built Plan' Scale: 1"-40', dated:
April 16, 1987, Revised: January 20, 1988, and prepared by: The Center for
Engineering, Inc., Wallingford, Connecticut.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
PREAMBLE, RECITALS........................................................................................
1. DEFINITIONS......................................................................................
1.1 Accounting Period.......................................................................
1.2 Accounting Quarter......................................................................
1.3 Affiliate...............................................................................
1.4 Agreement...............................................................................
1.5 Assessment Rate.........................................................................
1.6 Authorized Representative...............................................................
1.7 Base Eurodollar Rate....................................................................
1.8 Base Fixed CD Rate......................................................................
1.9 Base Rate...............................................................................
1.10 Base Management Fee.....................................................................
1.11 Borrower................................................................................
1.12 Borrowing...............................................................................
1.13 Borrowing Notice........................................................................
1.14 Business Day............................................................................
1.15 Cash Flow Available for Loan............................................................
1.16 CD Interest Period......................................................................
1.17 Citibank................................................................................
1.18 Citibank CD Rate........................................................................
1.19 Citibank Eurodollar Rate................................................................
1.20 Citibank Reserve Requirement............................................................
1.21 Closing.................................................................................
1.22 Control.................................................................................
1.23 Corporation.............................................................................
1.24 Courtyard Management Fee................................................................
1.25 Current Accounting Quarters.............................................................
1.26 Debt Service............................................................................
1.27 Debt Service Guaranty...................................................................
1.28 Deductions..............................................................................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1.29 Dollars.................................................................................
1.30 Effective Date..........................................................................
1.31 Eurodollar Borrowing....................................................................
1.32 Eurodollar Interest Period..............................................................
1.33 Eurodollar Rate.........................................................................
1.34 Events of Default.......................................................................
1.35 Extraordinary Revenues..................................................................
1.36 FF&E....................................................................................
1.37 FF&E Lease..............................................................................
1.38 FF&E Reserve............................................................................
1.39 Financial Statements....................................................................
1.40 First Courtyard Loan Agreement..........................................................
1.41 Fiscal Year.............................................................................
1.42 Fixed CD Rate...........................................................................
1.43 Fixed CD Rate Borrowing.................................................................
1.44 FNBC....................................................................................
1.45 FNBC CD Rate............................................................................
1.46 FNBC Eurodollar Rate....................................................................
1.47 FNBC Reserve Requirement................................................................
1.48 General Partner.........................................................................
1.49 Governmental Authority..................................................................
1.50 Gross Revenues..........................................................................
1.51 Ground Lease............................................................................
1.52 Guaranties..............................................................................
1.53 Hotel...................................................................................
1.54 Hotel Property..........................................................................
1.55 Incentive Management Fee................................................................
1.56 Increment...............................................................................
1.57 Indebtedness............................................................................
1.58 Interest Period.........................................................................
1.59 Land....................................................................................
1.60 Laws....................................................................................
1.61 Legal Rate..............................................................................
1.62 Lenders.................................................................................
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1.63 Lending Installation....................................................................
1.64 Lien....................................................................................
1.65 Loan....................................................................................
1.66 Loan Commitment.........................................................................
1.67 Loan Debt Service.......................................................................
1.68 Loan Debt Service Coverage..............................................................
1.69 Loan Documents..........................................................................
1.70 Management Agreement....................................................................
1.71 Management Agreement Assignment.........................................................
1.72 Management Guaranty.....................................................................
1.73 Manager.................................................................................
1.74 Marriott................................................................................
1.75 Marriott Lease..........................................................................
1.76 Marriott Lessor.........................................................................
1.77 Maturity Date...........................................................................
1.78 Memorandum..............................................................................
1.79 Minimum Notice Period...................................................................
1.80 Mortgage................................................................................
1.81 Notes...................................................................................
1.82 Operating Profit........................................................................
1.83 Original Lenders........................................................................
1.84 Original Pro Rata Share.................................................................
1.85 Partnership Documents...................................................................
1.86 Permitted Exceptions....................................................................
1.87 Person..................................................................................
1.88 Potential Default.......................................................................
1.89 Pro Forma Debt Service..................................................................
1.90 Pro Rate Share..........................................................................
1.91 Purchase Agreement......................................................................
1.92 Quarterly Payment Date..................................................................
1.93 Rate Option.............................................................................
1.94 Regulation D............................................................................
1.95 Secured Debt Service....................................................................
1.96 Security Agreement......................................................................
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
1.97 Stock...................................................................................
1.98 Subordination Agreement.................................................................
1.99 Telephone Lease.........................................................................
1.100 Title Insurer...........................................................................
1.101 TV System Lease.........................................................................
2. THE LOAN
2.1 Agreement to Lend and Borrow............................................................
2.2 Required Principal Payments on the Loan.................................................
2.3 Payment at Maturity Date................................................................
2.4 Method of Selecting Rate Options and Interest Period....................................
2.5 No Default..............................................................................
2.6 Minimum Requirements....................................................................
2.7 Original Lender's Notification..........................................................
2.8 Interest Payments.......................................................................
2.9 Prepayment..............................................................................
2.10 Lending Installations...................................................................
2.11 Failure to Pay or Borrow on Certain Dates...............................................
2.12 Taxes...................................................................................
2.13 Certificates; Survival of Indemnity.....................................................
2.14 Telephonic Notices......................................................................
2.15 Method of Payment.......................................................................
2.16 General Provisions Concerning Loan......................................................
2.17 Loan Documents..........................................................................
2.18 Use of Proceeds.........................................................................
2.19 Exculpation.............................................................................
3. ADVANCES OF LOAN
3.1 Disbursement of Loan Proceeds...........................................................
3.2 Payment of Expenses.....................................................................
3.3 Advances through Title Insurer..........................................................
3.4 Other Advances by Lenders...............................................................
4. CONDITIONS TO LOANS
4.1 Notes...................................................................................
4.2 Collateral Security.....................................................................
4.3 Mortgage and Recording..................................................................
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
4.4 Partnership Documents...................................................................
4.5 General Partner's Corporate Documents...................................................
4.6 Marriott Corporate Documents............................................................
4.7 Manager's Corporate Documents...........................................................
4.8 Marriott Lessor Corporate Documents.....................................................
4.9 Costs...................................................................................
4.10 Financial Statements....................................................................
4.11 Opinion of Counsel to Borrower..........................................................
4.12 Opinion of Counsel to Marriott..........................................................
4.13 UCC Searches............................................................................
4.14 Certificate.............................................................................
4.15 Certificate of Occupancy................................................................
4.16 Title Insurance.........................................................................
4.17 Survey..................................................................................
4.18 Evidence of Insurance...................................................................
4.19 Compliance, Access, Utilities...........................................................
4.20 Conveyance..............................................................................
4.21 Ground Lease............................................................................
4.22 No Default..............................................................................
4.23 Representations and Warranties..........................................................
4.24 No Material Adverse Change..............................................................
4.25 Indemnity Agreement.....................................................................
5. REPRESENTATIONS AND WARRANTIES
5.1 The Borrower............................................................................
5.2 Ownership by Marriott...................................................................
5.3 Authorization and Execution.............................................................
5.4 Compliance with Other Instruments.......................................................
5.5 Consents................................................................................
5.6 Financial Statements....................................................................
5.7 No Material Changes.....................................................................
5.8 Title to Property.......................................................................
5.9 Leases..................................................................................
5.10 Courtyard by Marriott Hotel.............................................................
5.11 Litigation..............................................................................
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
5.12 Burdensome Provisions...................................................................
5.13 Force Majeure...........................................................................
5.14 Tax Liability...........................................................................
5.15 Distributions...........................................................................
5.16 Regulation U, etc.......................................................................
5.17 Compliance with Law.....................................................................
5.18 Permits and Licenses....................................................................
5.19 No Notices..............................................................................
5.20 Disclosure..............................................................................
5.21 Equity Contributions....................................................................
5.22 Net Worth...............................................................................
5.23 Compliance with Securities Laws.........................................................
5.24 Brokerage Fees..........................................................................
5.25 Best Efforts............................................................................
6. AFFIRMATIVE COVENANTS
6.1 Pay Principal and Interest..............................................................
6.2 Maintenance of Borrower's Office........................................................
6.3 Keep Books; Set Aside Reserves..........................................................
6.4 Payment of Taxes; Corporate Existence; Maintenance of Properties........................
6.5 Insurance...............................................................................
6.6 Financial Statements and Reports........................................................
6.7 Inspection..............................................................................
6.8 Notice of Claims........................................................................
6.9 Agreements..............................................................................
6.10 Completion..............................................................................
6.11 Licenses................................................................................
6.12 Operations..............................................................................
6.13 FF&E Reserve............................................................................
6.14 Restrictive Covenants...................................................................
6.15 Easements...............................................................................
7. NEGATIVE COVENANTS
7.1 Allocation of Cash Flow Available for the Loan..........................................
7.2 Indebtedness............................................................................
7.3 Liens...................................................................................
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
7.4 Distribution............................................................................
7.5 Sale and Leaseback......................................................................
7.6 Change in Partnership; Disposal of Property.............................................
7.7 Certain Transactions with Affiliated Persons............................................
7.8 Amendments to Agreements................................................................
7.9 Maintenance of Present Business.........................................................
7.10 Leases..................................................................................
7.11 Use of Loan Proceeds....................................................................
7.12 FF&E Reserve
8. INSURANCE........................................................................................
8.1 Hazard Insurance........................................................................
8.2 Other Insurance.........................................................................
8.3 Required Notices........................................................................
8.4 Payment and Application.................................................................
9. DEFAULTS AND REMEDIES............................................................................
9.1 Events of Defaults......................................................................
9.2 Default under the Mortgage..............................................................
9.3 Suits of Enforcement....................................................................
9.4 Remedies Cumulative.....................................................................
10. MISCELLANEOUS....................................................................................
10.1 Notices and Addresses...................................................................
10.2 Survival of Representation; Successor and Assigns.......................................
10.3 Effect of Delay; No Waivers.............................................................
10.4 Expenses................................................................................
10.5 Use of Accounting Terms.................................................................
10.6 Equitable Adjustment Among Lenders......................................................
10.7 Assignment..............................................................................
10.8 Books and Records.......................................................................
10.9 Proceedings.............................................................................
10.10 Time of the Essence.....................................................................
10.11 Exhibits................................................................................
10.12 Counterparts............................................................................
10.13 Construction and Jurisdiction...........................................................
10.14 Description of Documents................................................................
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
10.15 Headings................................................................................
10.16 Indemnity...............................................................................
10.17 Validity................................................................................
10.18 Incorporation by Reference..............................................................
</TABLE>
8
<PAGE>
EXHIBIT 10.g
PROMISSORY NOTE
$4,136,995.00 February 10th, 1988
FOR VALUE RECEIVED, the undersigned COURTYARD BY MARRIOTT LIMITED
PARTNERSHIP (the "Borrower"), a Delaware limited partnership whose general
partner is CBM ONE CORPORATION, a Delaware corporation, hereby promises to pay
to the order of THE FIRST NATIONAL BANK OF CHICAGO, a national banking
association of the United States of America ("Lender"), on the date hereinafter
set forth, the principal sum of FOUR MILLION, ONE HUNDRED THIRTY-SIX THOUSAND,
NINE HUNDRED NINETY-FIVE AND NO/100 DOLLARS ($4,136,995.00) or so much thereof
as may be advanced by Lender hereunder pursuant to the provisions of a Loan
Agreement of this date (the "Loan Agreement") among the Borrower, the Lender and
another Lender, providing for, among other things, the making of the Loan in the
maximum principal amount of $8,273,990.00. This Note evidences the Lender's
Original Pro Rata Share of the Loan.
All capitalized terms used in this Note which are not expressly
defined herein shall have the meanings assigned to such terms in the Loan
Agreement. This Note constitutes one of the Notes under the Loan Agreement.
The Borrower promises also to pay as provided in the Loan Agreement
interest on the amount of the principal as shall from time to time be
outstanding hereunder.
The outstanding balance of principal and all accrued and unpaid
interest shall be due and payable on August 15, 1996.
All payments of principal and interest are payable in lawful money of
the United States of America to the Lender, at its address specified in the Loan
Agreement, or at such other address as may be specified in writing by Lender, in
immediately available funds. Payments of the Loan shall be applied in the order
of priority set forth in the Loan Agreement.
The principal of this Note may be prepaid, in whole or in part,
without premium or penalty, provided that any partial prepayment of the Loan
under the Loan Agreement shall be in a minimum aggregate amount as in the Loan
Agreement set forth, and that any prepayment, whether in whole or in part, shall
be subject to compliance with the provisions applicable to prepayment set
<PAGE>
forth in the Loan Agreement. Notwithstanding the above, full prepayment shall
be made in the event described in the Loan Agreement.
In case an Event of Default shall occur and be continuing, the
principal of this Note and interest accrued thereon may be declared to be due
and payable, in the manner and with the effect provided in the Loan Agreement.
The Borrower also promises to pay all reasonable costs and expenses
(including attorneys' fees) actually incurred by the holder or holders of this
Note in enforcing this Note and all collateral securing this Note if any payment
of principal or interest under this Note is not made when due.
This Note shall be governed by, and construed in accordance with, the
laws of the State of New York applicable to contracts made by residents of that
State to be performed entirely within that State; and the Borrower confirms that
the Loan Agreement contains the consent by the Borrower to the jurisdiction of
the courts of the State of New York, and of a United States District Court
sitting in the State of New York, in any action or proceeding brought in
connection with this Note and a consent that service or process in any such
action or proceeding may be made in the manner in the Loan Agreement set forth.
The holder or holders of this Note shall look solely to the collateral
security for this Note for payment of the indebtedness evidenced by this Note
(including principal and interest) and shall not seek recovery, whether by
direct suit, deficiency judgment in foreclosure proceeding, or otherwise, in
whole or in part, from any of the partners (general or limited) of the Borrower
or any of the assets of such partners; provided, however, that the foregoing
exculpation from individual liability shall not be construed to release or
impair the indebtedness evidenced by this Note or any of the Borrower's other
obligations under any of the other Loan Documents, or the liens and security
interests securing such obligations, or any other rights of the Lender except as
otherwise stated in this paragraph.
This Note may not be modified or discharged, nor may compliance with
any provision of this Note be waived, except by a writing duly executed by the
required parties in the manner provided in the Loan Agreement.
Time is hereby declared to be of the essence of this Note and any part
hereof.
Presentment for payment, demand, notice of dishonor, protest and
notice of protest is hereby waived by the Borrower.
-2-
<PAGE>
It is the intention of Borrower and Lenders to comply with the laws of
the State of New York pertaining to the rate of interest which may be charged
upon indebtedness. Accordingly, it is agreed that, any provision of this Note
or of any other Loan Document to the contrary notwithstanding, no such provision
shall require the payment of interest in excess of the maximum amount permitted
by law. If any interest in excess of such maximum amount is paid, collected or
demanded, then in such event (i) the provisions of this paragraph shall govern
and control, (ii) neither Borrower nor any other party shall be liable in whole
or in part for the payment of any such interest which is in excess of the
maximum amount permitted by law, (iii) any such excess which may be collected
shall be refunded to Borrower and (iv) the effective rate of interest shall
automatically be limited to the maximum lawful contract rate, if any, allowed
under the applicable usury laws of the State of New York.
-3-
<PAGE>
IN WITNESS WHEREOF, the Borrower has caused this Note to be duly
executed and delivered as of the day and Year first above written.
COURTYARD BY MARRIOTT LIMITED
PARTNERSHIP
By: CBM ONE CORPORATION,
general partner
By:
--------------------------
Vice President
Attest:
Secretary
- -------------------
(CORPORATE SEAL)
-4-
<PAGE>
PROMISSORY NOTE
$4,136,995.00 February 10th, 1988
FOR VALUE RECEIVED, the undersigned COURTYARD BY MARRIOTT LIMITED
PARTNERSHIP (the "Borrower"), a Delaware limited partnership whose general
partner is CBM ONE CORPORATION, a Delaware corporation, hereby promises to pay
to the order of CITIBANK, N.A., national banking association of the United
States of America ("Lender"), on the date hereinafter set forth, the principal
sum of FOUR MILLION, ONE HUNDRED THIRTY-SIX THOUSAND, NINE HUNDRED NINETY-FIVE
AND NO/100 DOLLARS ($4,136,995.00) or so much thereof as may be advanced by
Lender hereunder pursuant to the provisions of a Loan Agreement of this date
(the "Loan Agreement") among the Borrower, the Lender and another Lender,
providing for, among other things, the making of the Loan in the maximum
principal amount of $8,273,990.00. This Note evidences the Lender's Original
Pro Rata Share of the Loan.
All capitalized terms used in this Note which are not expressly
defined herein shall have the meanings assigned to such terms in the Loan
Agreement. This Note constitutes one of the Notes under the Loan Agreement.
The Borrower promises also to pay as provided in the Loan Agreement
interest on the amount of the principal as shall from time to time be
outstanding hereunder.
The outstanding balance of principal and all accrued and unpaid
interest shall be due and payable on August 15, 1996.
All payments of principal and interest are payable in lawful money of
the United States of America to the Lender, at its address specified in the Loan
Agreement, or at such other address as may be specified in writing by Lender, in
immediately available funds. Payments of the Loan shall be applied in the order
of priority set forth in the Loan Agreement.
The principal of this Note may be prepaid, in whole or in part,
without premium or penalty, provided that any partial prepayment of the Loan
under the Loan Agreement shall be in a minimum aggregate amount as in the Loan
Agreement set forth, and that any prepayment, whether in whole or in part, shall
be subject to compliance with the provisions applicable to prepayment set forth
in the Loan Agreement. Notwithstanding the above, full prepayment shall be made
in the event described in the Loan Agreement.
<PAGE>
In case an Event of Default shall occur and be continuing, the
principal of this Note and interest accrued thereon may be declared to be due
and payable, in the manner and with the effect provided in the Loan Agreement.
The Borrower also promises to pay all reasonable costs and expenses
(including attorneys' fees) actually incurred by the holder or holders of this
Note in enforcing this Note and all collateral securing this Note if any payment
of principal or interest under this Note is not made when due.
This Note shall be governed by, and construed in accordance with, the
laws of the State of New York applicable to contracts made by residents of that
State to be performed entirely within that State; and the Borrower confirms that
the Loan Agreement contains the consent by the Borrower to the jurisdiction of
the courts of the State of New York, and of a United States District Court
sitting in the State of New York, in any action or proceeding brought in
connection with this Note and a consent that service or process in any such
action or proceeding may be made in the manner in the Loan Agreement set forth.
The holder or holders of this Note shall look solely to the collateral
security for this Note for payment of the indebtedness evidenced by this Note
(including principal and interest) and shall not seek recovery, whether by
direct suit, deficiency judgment in foreclosure proceeding, or otherwise, in
whole or in part, from any of the partners (general or limited) of the Borrower
or any of the assets of such partners; provided, however, that the foregoing
exculpation from individual liability shall not be construed to release or
impair the indebtedness evidenced by this Note or any of the Borrower's other
obligations under any of the other Loan Documents, or the liens and security
interests securing such obligations, or any other rights of the Lender except as
otherwise stated in this paragraph.
This Note may not be modified or discharged, nor may compliance with
any provision of this Note be waived, except by a writing duly executed by the
required parties in the manner provided in the Loan Agreement.
Time is hereby declared to be of the essence of this Note and any part
hereof.
Presentment for payment, demand, notice of dishonor, protest and
notice of protest is hereby waived by the Borrower.
It is the intention of Borrower and Lenders to comply with the laws of
the State of New York pertaining to the rate of interest which may be charged
upon indebtedness. Accordingly, it
-2-
<PAGE>
is agreed that, any provision of this Note or of any other Loan Document to the
contrary notwithstanding, no such provision shall require the payment of
interest in excess of the maximum amount permitted by law. If any interest in
excess of such maximum amount is paid, collected or demanded, then in such event
(i) the provisions of this paragraph shall govern and control, (ii) neither
Borrower nor any other party shall be liable in whole or in part for the payment
of any such interest which is in excess of the maximum amount permitted by law,
(iii) any such excess which may be collected shall be refunded to Borrower and
(iv) the effective rate of interest shall automatically be limited to the
maximum lawful contract rate, if any, allowed under the applicable usury laws of
the State of New York.
-3-
<PAGE>
IN WITNESS WHEREOF, the Borrower has caused this Note to be duly
executed and delivered as of the day and Year first above written.
COURTYARD BY MARRIOTT LIMITED
PARTNERSHIP
By: CBM ONE CORPORATION,
general partner
By:
-----------------------------
Vice President
Attest:
Secretary
- -------------------
(CORPORATE SEAL)
-4-
<PAGE>
EXHIBIT 10.h
DEBT SERVICE
GUARANTY
--------
THIS GUARANTY, made as of the 10th day of February, 1988, by MARRIOTT
CORPORATION, a corporation organized under the laws of the State of Delaware,
having an office at 10400 Fernwood Road, Bethesda, Maryland 20058 (the
"Guarantor"), to CITIBANK, N.A., a national banking association organized under
the laws of the United States of America, and THE FIRST NATIONAL BANK OF
CHICAGO, a national banking association organized under the laws of the United
States of America (each banking institution being herein referred to as an
"Original Lender" and collectively, the "Original Lenders").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, COURTYARD BY MARRIOTT LIMITED PARTNERSHIP, a limited
partnership organized under the laws of the State of Delaware (the "Borrower"),
and the Original Lenders have entered into a Loan Agreement of even date
herewith providing for the Original Lenders to make a loan the principal amount
of $8,273,990.00 evidenced by two promissory notes of even date herewith in said
aggregate amount (collectively, the "Notes") for the purpose of financing a
portion of the cost of the purchase of that certain Courtyard by Marriott hotel
located in Windsor, Connecticut, as more specifically described in the Loan
Agreement, and for other purposes set forth in the Loan Agreement;
WHEREAS, the Guarantor indirectly owns CBM One Corporation, a Delaware
corporation, which is the general partner of the Borrower, and Guarantor desires
that the Original Lenders make the Loan, the Guarantor expecting to derive
benefits, directly or indirectly, from the proceeds of the Loan;
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration the receipt of which is hereby acknowledged, the
Guarantor does hereby represent, covenant, warrant and agree with the Lenders as
follows:
1. The Guarantor acknowledges that it is fully familiar with the
Loan Agreement, the Notes and all other Loan Documents (as defined in the Loan
Agreement).
2. Capitalized terms used herein without definition which are
defined in the Loan Agreement shall have the same meaning when used herein as is
given to such terms in the Loan Agreement.
<PAGE>
3. The Guarantor does hereby irrevocably and unconditionally
guarantee, to the extent in Paragraph 4 hereof set forth, the punctual payment
of the full amount, when due (whether by acceleration or otherwise) of the
principal of the Notes and all interest accruing on the Notes, whether now or
hereafter existing, due or to become due ("Payment Obligations"); and in
furtherance of the Payment Obligations agrees that upon any default by the
Borrower in the payment when due, whether by acceleration or otherwise, of all
or any installment of principal of, or interest on the Notes, the Guarantor will
pay the same immediately upon demand therefor.
4. (a) The Guarantor may satisfy the Payment Obligations by
making payment directly to the Lenders or by making, or causing the General
Partner to make, after demand is made upon the Guarantor pursuant to Paragraph 3
hereof, additional contributions to the capital of, or loans or advances to, the
Borrower, if (i) any such payment, capital contribution, loan or advance
(individually, a "Guaranty Payment" and collectively, "Guaranty Payments")
thereafter may be repaid or withdrawn only out of Cash Flow Available for the
Loan to the extent permitted in Section 7.l of the Loan Agreement; (ii) any such
Guaranty Payment shall be subordinated to repayment of the Loan in accordance
with the provisions of Section 4.2(e) or Section 7.2(d) of the Loan Agreement;
and (iii) such Guaranty Payment shall be made after demand is made upon
Guarantor pursuant to Paragraph 3 hereof in respect of such Payment Obligations,
and the proceeds thereof were intended, and in fact were used, to satisfy such
Payment Obligations (as distinguished from funds contributed, loaned or advanced
to meet other obligations of the Borrower or obligations under the Management
Guaranty). The Guarantor shall be given credit against the maximum amount it may
be called upon to pay in respect of the Payment Obligations if Cash Flow
Available for the Loan for any Accounting Quarter is insufficient to enable
payment of any amounts subject to the Payment Obligations then due, and such
Payment Obligations are nevertheless paid to the Original Lenders as, or out of
the proceeds of, a Guaranty Payment referred to in the preceding sentence, to
the extent of such Guaranty Payment.
(b) Notwithstanding anything to the contrary herein
contained, the Guarantor shall not be given credit against the maximum amount of
the Payment Obligations unless, within thirty (30) days after any payment for
which the Guarantor claims credit against the Payment Obligations, the Guarantor
shall have furnished to each of the Original Lenders (i) a certificate of the
chief accounting officer of the Guarantor stating the amount of the credit
claimed by the Guarantor, the facts supporting such claim (making reference to
the specific provisions of this Guaranty pursuant to which credit is claimed)
and the then maximum amount which the Guarantor may be called upon to pay in
respect of the Payment Obligations after giving effect to such credit so
claimed, and (ii) an opinion of Guarantor's counsel (which may be in-house
counsel) to the effect that such credit may properly be claimed. The failure by
the Lenders to object to such certificate or
<PAGE>
statement shall not operate as a waiver of any of the rights and remedies of the
Lenders pursuant hereto or the other Loan Documents.
(c) The maximum aggregate amount which the Guarantor may be
called upon to pay from time to time in respect of the Payment Obligations, so
long as the Payment Obligations shall continue in effect, shall be limited to
(i) SEVEN HUNDRED SIX THOUSAND AND NO ONE-HUNDREDTHS DOLLARS ($706,000.00), plus
(ii) any distributions of Cash Flow Available for the Loan which are made other
than as permitted by Section 7.1 of the Loan Agreement, less (iii) the amount,
----
if any, by which the sum of all Guaranty Payments for which Guarantor is given
credit under Paragraphs 4(a) and 4(b) hereof exceeds the sum of all repayments
thereof made by Borrower to the Guarantor or the General Partner (as the case
may be) or deemed to be made pursuant to the next succeeding sentence. Guaranty
Payments shall be deemed to have been repaid as of the last day of each
Accounting Quarter (without regard to whether such amounts are actually repaid)
in the amount by which Cash Flow Available for the Loan for such Accounting
Quarter, after payment of Priorities First through Fourth as defined in Section
7.1 of the Loan Agreement exceeds the sum of (A) an amount equal to the
Incentive Management Fee determined with respect to such Accounting Quarter
(whether or not actually paid or payable), plus (B) interest (at a rate not in
----
excess of the Base Rate) payable by the Borrower on the Guaranty Payments.
5. The obligations of the Guarantor under this Guaranty shall
terminate and be of no further force or effect in the event and from and after a
date not earlier than August 15, 1991, upon which each of the following
conditions shall have been fully satisfied: (a) no Event of Default shall have
occurred and shall be continuing under any of the Loan Documents (including this
Guaranty); (b) the Borrower shall have fully performed, to the extent
performance of the same is required at that time, all its obligations under the
Loan Agreement; (c) Loan Debt Service Coverage shall have exceeded l.3 for each
of the eight (8) Current Accounting Quarters; and (d) the Lenders shall have
received a certificate from the chief accounting officer of the Guarantor, to
the effect that all of the above conditions have been satisfied, stating the
date as of which each such condition was so satisfied, or if such condition must
be satisfied on the date of such certificate, then so stating, which certificate
shall contain sufficient detail as to the determination of the satisfaction of
such conditions as the Lenders may require. The termination of further
responsibility for the Payment Obligations Pursuant to the Provisions of this
Paragraph 5 shall not affect or impair any of the Payment Obligations which
arose under Paragraph 3 prior to the date such termination became effective.
6. This Guaranty is an absolute, unconditional, present and
continuing guaranty of payment and performance and not of collection. No
setoff, counterclaim, reduction or
<PAGE>
diminution of an obligation, or any defense of any kind or nature (other than
(a) performance by the Guarantor of its obligations hereunder or (b) performance
by the Borrower of the obligations guaranteed hereunder) which the Guarantor has
or may have with respect to a claim under this Guaranty, shall be available
hereunder to the Guarantor against the Lenders. Each and every default in any
payment of the Payment Obligations shall give rise to a separate cause of action
hereunder, and separate suits may be brought hereunder against the Guarantor as
each cause of action arises.
7. All payments by the Guarantor under or by virtue of this
Guaranty shall be made in lawful money of the United States of America and in
immediately available funds, to the Original Lenders, at their offices specified
in the Loan Agreement, or at such other place as the Original Lenders may
hereafter designate in writing.
8. Except as expressly provided herein to the contrary, the
Guarantor does hereby waive notice of acceptance of this Guaranty, notice of any
liability to which it may apply, notice and proof of reliance by the Lenders
upon this Guaranty, presentment and demand for payment, notice of dishonor,
protest and notice of protest or compliance with the terms and provisions of any
of the Loan Documents, or of non-performance or non-observance thereof.
9. The Guarantor hereby waives any and all legal requirements that
the Lenders shall institute any action or proceeding at law or in equity against
the Borrower, or anyone else, with respect to the Loan Documents, or with
respect to any other security held by the Lenders, as a condition precedent to
bringing any action against the Guarantor upon this Guaranty. All remedies
afforded to the Lenders by reason of this Guaranty are separate and cumulative
remedies, no one of such remedies, whether or not exercised by the Lenders,
shall be deemed to exclude the exercise of any other remedy or remedies
available to the Lenders, and the exercise or non-exercise thereof shall in no
way limit or prejudice any other legal or equitable remedies which the Lenders
may have. The Lenders shall not be required to resort to any collateral through
foreclosure or otherwise, prior to the commencement of any action against the
Guarantor or against the Borrower on or in respect of any of the Payment
Obligations. The Guarantor agrees that the Lenders shall not in any foreclosure
proceeding under the Mortgage be required to seek or obtain a deficiency
judgment against the Borrower and that the obligations of the Guarantor shall in
no way be diminished or otherwise affected by the failure to seek or obtain a
deficiency judgment; and waives the right to claim any credit for the fair
market value of the property foreclosed or for a deficiency judgment.
<PAGE>
10. So far as the Guarantor is concerned, the Lenders may, at any
time and from time to time with the consent of the Borrower if and to the extent
required under the Loan Documents, but without the consent of, or notice to, the
Guarantor, and without impairing or releasing any of the obligations of the
Guarantor hereunder, upon or without any terms or conditions and in whole or in
part:
(a) change the manner, place or terms of, and/or change or
extend the time of payment of, or modify, renew or alter, any of the Payment
Obligations, any security therefor, or any liability incurred directly or
indirectly in respect thereof, or any of the Loan Documents, and this Guaranty
shall apply to the Payment Obligations and such security, liability and Loan
Documents as so changed, extended, modified, renewed or altered, and each
reference in this Guaranty to any or all the Payment Obligations, security,
liability or Loan Documents shall include, such change, extension, modification,
renewal or alteration;
(b) sell, exchange, release (whether pursuant to Section 9.3
of the Loan Agreement or otherwise), surrender, realize upon or otherwise deal
with, in any manner and in any order, any property by whomsoever at any time
pledged or mortgaged to secure, or howsoever securing, the Payment Obligations,
or any liabilities (including any of these hereunder) incurred directly or
indirectly in respect thereof or hereof, and/or offset there against, or
substitute or replace or surrender any of such property.
(c) exercise or refrain from exercising any rights against
the Guarantor or others or otherwise act or refrain from acting; and when making
any demand hereunder against the Guarantor, the Lenders may, but shall be under
no obligation to, make a similar demand on any other person directly or
indirectly liable in respect of the Payment Obligations, and any failure by the
Lenders to make any such demand or to collect any payments from any other person
or any release of any other such person, shall not relieve the Guarantor of its
obligations or liabilities hereunder, and shall not release, impair or affect
the rights and remedies, express or implied, or as a matter of law, of the
Lenders against the Guarantor (for the purposes of this subparagraph, "demand"
shall include the commencement and continuance of any legal proceedings);
(d) settle or compromise any of the Payment Obligations, any
security therefor or any liability incurred directly or indirectly in respect
thereof or hereof, or subordinate the payment of all or any part thereof to the
payment of any liability (whether due or not) of the obligor thereon to
creditors of such obligor other than the Lenders;
(e) apply any sums by whomsoever paid or howsoever realized
to whatever obligations of the Borrower in respect of the Loan or the Loan
Documents as are then
<PAGE>
outstanding, as the Lenders may deem appropriate, regardless of what obligation
or obligations of the Guarantor then remain unsatisfied, the order and method of
such application to be in the Lenders' discretion, and should the same sums be
insufficient to fully pay the liabilities and obligations of the Guarantor
hereunder, the Guarantor acknowledges that it shall remain liable for any
deficiency; and
(f) amend or otherwise modify, consent to or waive any breach
of, or any act, omission or default under, the Loan Documents or any of them.
11. No failure or any claimed failure to make any advance to
Borrower or to extend, modify or vary the obligations of the Guarantor, nor any
invalidity, irregularity or unenforceability of all or any part of the Payment
Obligations or of any security therefor or of any of the Loan Documents
(including, without limitation, by reason of any insolvency or bankruptcy of the
Borrower or other primary obligor or any disaffirmance of any such obligation by
or on behalf of the Borrower or other primary obligor), nor any delay on the
part of the Lenders in exercising any of their rights, powers or options
hereunder or under any of the Loan Documents or a partial or single exercise
thereof, shall affect, impair or be a defense to this Guaranty, and this
Guaranty shall be construed as a continuing, absolute and unconditional guaranty
of payment and performance without regard to the validity, regularity or
enforceability of the Payment Obligations, or of any of the Loan Documents or
any other instrument, document or rights of offset with respect thereto at any
time or from time to time held by the Lenders and without regard to any defense,
offset or counterclaim which may at any time be available to or be asserted by
any primary obligor or any other person against the Lenders and which
constitutes, or might be construed to constitute, an equitable or legal
discharge of the primary obligor or any other person for the Payment
Obligations, or any part thereof, whether in bankruptcy proceedings or under any
other circumstances.
12. The Guarantor covenants and agrees that so long as this
Guaranty shall remain in full force and effect, the Guarantor will furnish to
each of the Original Lenders (i) as soon as practicable and in any event within
sixty (60) days after the close of each quarter of each fiscal year of the
Guarantor and its subsidiaries, as at the end of and for the period commencing
at the end of the previous fiscal year and ending with such quarter, an
unaudited consolidated balance sheet of the Guarantor and its subsidiaries,
together with unaudited consolidated statements of income and retained earnings
of the Guarantor and its subsidiaries, all in reasonable detail and certified by
the chief accounting officer of the Guarantor but subject to year-end audit and
adjustments; (ii) as soon as practicable and in any event within one hundred
twenty (120) days after the close of each fiscal year of the Guarantor and its
subsidiaries as at the end and for the fiscal year just closed, a consolidated
balance sheet of the Guarantor and its subsidiaries and a consolidated statement
of
<PAGE>
income and retained earnings of the Guarantor and its subsidiaries for such
fiscal year, all in reasonable detail and certified by Arthur Andersen & Co. or
other independent certified public accountants of recognized standing selected
by the Guarantor and satisfactory to the Lenders; (iii) as soon as practicable
and in any event within fifty (50) days after the end of each Accounting Quarter
a statement of the maximum aggregate amount that the Guarantor may be called
upon to pay in respect of the Payment Obligations under paragraph 4 of this
Guaranty, as at the end of the Accounting Quarter just closed, in reasonable
detail and certified by the chief accounting officer of the Guarantor; (iv) with
reasonable promptness, copies of all regular and periodical financial and/or
other reports which the Guarantor and its subsidiaries may make available to
stockholders and bondholders; and (v) with reasonable promptness, such other
information respecting the business, operation and/or financial condition of the
Guarantor and its subsidiaries, as the Lenders may, from time to time,
reasonably request.
13. (a) An "Event of Default" shall exist if any of the following
shall have occurred:
(i) The Guarantor defaults in the payment of the
Payment Obligations as and when the same shall become due and payable;
(ii) The Guarantor defaults in the payment, observation
or performance of any covenant, condition or agreement set forth herein (other
than the Payment Obligations), and such failure continues for more than thirty
(30) days after written notice of such default has been given to the Guarantor
by the Lenders;
(iii) Any default (unless duly waived in writing by the
obligee) shall occur with respect to any evidence of Indebtedness of the
Guarantor or under any agreement under which any evidence of Indebtedness may be
issued by the Guarantor, and such default shall continue for more than the
period of grace, if any, specified therein, if the result of such default is the
acceleration of the maturity of any such Indebtedness exceeding $20,000,000.00,
or if any such Indebtedness exceeding $20,000,000.00 shall not be paid when due;
(iv) The Guarantor shall suspend or discontinue its
business, shall call a meeting of its creditors for the purpose of postponing or
adjusting its liabilities or seeking an arrangement with its creditors, shall
make an assignment for the benefit of creditors or a composition with creditors,
shall be unable, or admit in writing its inability, to pay its debts as they
mature, shall file a petition in bankruptcy, shall become insolvent (howsoever
such insolvency may be evidenced), shall suffer an order for relief to be
entered against it under any bankruptcy law, shall petition or apply to any
tribunal for the appointment of any receiver, custodian, liquidator or trustee
<PAGE>
of or for it or any substantial part of its property or other assets or shall
commence any proceeding relating to it under any bankruptcy, reorganization,
arrangement, readjustment of debt, receivership, dissolution or liquidation law
or statute of any jurisdiction, whether now or hereafter in effect; or there
shall be commenced against the Guarantor any such proceeding which shall remain
undismissed for a period of thirty (30) days or more, or the Guarantor shall by
any act or failure to act indicate its consent to, approval of or acquiescence
in, any such proceeding or in the appointment of any receiver, custodian,
liquidator or trustee of or for it or any substantial part of its property or
other assets, or shall suffer any such appointment to continue undischarged or
unstayed for a period of thirty (30) days or more; or the Guarantor shall take
any action for the purpose of effecting any of the foregoing;
(v) Any order, judgment or decree shall be entered in
any proceeding against the Guarantor decreeing the dissolution or split-up of
the Guarantor or the divestiture of any asset of the Guarantor, and such order,
judgment or decree shall remain undischarged or unstayed for a period in excess
of sixty (60) days, provided, however, that the split-up or divestiture of the
assets of Guarantor shall not constitute an Event of Default if, following such
occurrence, Guarantor continues to own and operate substantially all of its
hotel business in substantially the same manner as prior to such occurrence; or
(vi) Any warranty, representation or other statement by
or on behalf of the Guarantor contained in this Guaranty or any other writing
delivered in connection herewith or in connection with any other Loan Document
shall prove to be false or misleading, or is breached, in any material respect.
(b) The Guarantor may cure any Event of Default hereunder if,
immediately upon demand therefor by the Lenders, the Guarantor shall deposit
with the Lenders (i) a sum of money equal to the then maximum aggregate amount
that the Guarantor may be called upon to pay in respect of the Payment
Obligations under Paragraph 4 hereof, which sum shall be paid to the Lenders in
payment of the obligations of the Guarantor from time to time hereunder; (ii)
all notes or other evidences of indebtedness evidencing obligations of the
Borrower to repay any Guaranty Payment and all security or collateral therefor;
and (iii) pledges and assignments to the Original Lenders of the notes,
evidences of indebtedness, and security and collateral referred to in clause
(ii) above, satisfactory in form and substance to the Original Lenders. Such
deposit shall cure such Event of Default but shall not otherwise relieve
Guarantor of its obligations hereunder, except to the extent of cash so
deposited.
<PAGE>
(c) The Guarantor acknowledges that an Event of Default under
this Guaranty shall constitute an Event of Default under the Loan Agreement with
the effect as in the Loan Agreement provided.
14. The Guarantor makes the following representations and
warranties, which shall survive the execution and delivery of this Guaranty:
(a) The Guarantor has examined the Loan Documents, including
the Exhibits attached thereto, and all of the representations and warranties set
forth in the Loan Documents, to the extent the same relate to the Guarantor, are
true and correct.
(b) The Guarantor has all necessary power and authority to
execute, deliver and carry out the terms and provisions of this Guaranty, the
Management Guaranty, the Purchase Agreement Assignment, and the Subordination
Agreement executed by the Guarantor (as all of such capitalized terms are
defined in the Loan Agreement, and, together with this Guaranty, are hereafter
called the "Marriott Documents"); the Guarantor has taken all necessary
corporate and other action (including, without limitation, obtaining any consent
of stockholders required by law or by its Certificate of Incorporation or By-
Laws) to authorize the execution and delivery of any of the Marriott Documents.
Each of the Marriott Documents is the valid and binding obligation of the
Guarantor, enforceable in accordance with their respective terms, subject to the
effect of bankruptcy, insolvency, or other similar laws affecting creditors'
rights generally, and the effect of the application by courts having
jurisdiction of equitable principles to the exercise of any equitable remedies
contained therein.
(c) Except for defaults, conflicts and breaches that do not
materially affect Marriott's right, authority and ability to perform its
obligations under the Marriott Documents or do not materially impair the
Lenders' rights, remedies or security under this Guaranty, neither the execution
and delivery of any of the Marriott Documents or the Loan Documents, nor the
consummation of the transactions in this or any of such other instruments
contemplated, nor compliance with the terms and provisions hereof, will
contravene any provision of law, statute, rule or regulation to which the
Guarantor is subject or any judgment, decree, award, franchise, order or permit
applicable to the Guarantor, or will conflict or will be inconsistent with, or
will result in any breach of, any of the terms, covenants or provisions of, or
constitute a default under, or result in the creation or imposition of any Lien
upon any of the properties or assets of the Guarantor pursuant to the terms of,
any indenture, mortgage, deed of trust, agreement or other instrument to which
the Guarantor is a party or by which it may be bound or to which it may be
subject, or violate any provision of the Certificate of Incorporation or By-Laws
of the Guarantor.
<PAGE>
(d) No consent or approval of, or exemption by, or
registration or declaration with, any governmental or public body or authority
is required to authorize, or is required in connection with the execution,
delivery and performance by Marriott of any of the Marriott Documents or any of
the instruments or agreements herein or therein referred to, or the taking of
any action hereby or thereby contemplated (except for such consents, approvals
or exemptions as have been obtained by the Guarantor).
(e) After giving effect to the transactions contemplated by
the Loan Agreement and the making of this Guaranty and the other Marriott
Documents, the Guarantor has complied with and performed all of its covenants
and agreements contained in all applicable provisions of its loan agreements and
there has not occurred any event of default, or any condition, act or event,
which upon the giving of notice or lapse of time or both, would constitute an
event of default, under its loan agreements, except for defaults that do not
materially affect the Guarantor's right, authority and ability to perform its
obligations under the Marriott Documents or do not materially impair the
Lenders' rights, remedies or security under this Guaranty.
15. (a) This Guaranty may not be waived, modified or amended
except by an agreement in writing signed by the Original Lenders and the
Guarantor. The rights and obligations of the Guarantor and the Lenders pursuant
to this Guaranty shall be governed by and construed in accordance with the laws
of the State of New York.
(b) This Guaranty shall be binding upon and shall inure to
the benefit of, the parties hereto and their respective successors and assigns,
including, without limiting the generality of the foregoing, any assignee of
either of the Notes.
(c) Any action or proceeding in connection with this Guaranty
may be brought in a court of record of the State of New York, or the United
States District Court for the Southern District of New York, the parties hereby
consenting to the jurisdiction thereof, and service of process may be made upon
any party by mailing a copy of the summons and complaint to such party, by
registered or certified mail, at its address to be used for the giving of
notices under this Guaranty. In any action or proceeding relating to this
Guaranty, the parties mutually waive trial by jury.
(d) The Guarantor also agrees to pay all costs and expenses,
including attorneys' fees, incurred by any Lender if any action or proceeding be
commenced to enforce any of the obligations of Guarantor hereunder, and such
sums shall not be included within the limitations on the amount of liabilities
and obligations of the Guarantor hereunder provided for in Paragraph 4 hereof.
<PAGE>
16. If this Guaranty would be held or determined to be void,
invalid or unenforceable by reason of the amount of the Guarantor's liability
under this Guaranty, then, notwithstanding any other provision of this Guaranty
to the contrary, the maximum amount of the liability of the Guarantor under this
Guaranty shall, without any further action by the Guarantor, the Lenders or any
other person, be automatically limited and reduced to an amount which is valid
and enforceable.
17. In the event that the Guarantor shall advance or become
obligated to pay any sums hereunder, or in the event that for any reason
Borrower or any subsequent owner of the Hotel is now or shall hereafter become
indebted to the Guarantor, the right and claim of the Guarantor with respect to
each and every such sum and indebtedness (excluding, however, Guarantor's right
to any payments to be made by the Borrower under the Purchase Agreement as
payment of the purchase price of the Hotel) shall at all times be subordinate as
to lien, time of payment and in all other respects, to the amounts owing to the
Lenders under the Loan Documents; and the Guarantor shall not be entitled to
enforce or receive any payment on account thereof until all moneys owing to the
Lenders under, or in respect of, the Loan Documents have been paid to the
Lenders in full, except in the event and to the extent permitted by the
Subordination Agreement referred to in Section 4.2(e) of the Loan Agreement; and
the Guarantor agrees that any sums it may receive on account of the claims so
subordinated shall be received by the Guarantor as trustee for the Lenders and
shall, immediately upon receipt, be remitted by the Guarantor to the Lenders for
application against the indebtedness and other obligations guaranteed hereunder.
Nothing herein contained is intended or shall be construed to give to the
Guarantor any right of subrogation in or under the Loan Documents or any right
to participate in any way therein, or in the right, title or interest of the
Lenders in the Hotel or any part thereof, notwithstanding any payments made
under this Guaranty; and all rights of subrogation and participation are hereby
expressly waived and released by the Guarantor, unless and until the Loan and
all other obligations of Borrower under the Loan Documents shall be paid in
full.
18. If claim is ever made upon the Lenders for repayment or
recovery of any amount or amounts received by it or them in payment or on
account of any of the Payment Obligations and the Lenders repay all or part of
such amount by reason of (a) any judgment, decree or order of any court or
administrative body having jurisdiction or (b) any settlement or compromise of
any such claim effected by the Lenders with any such claimant (including the
Borrower or the Guarantor), then in such event the Guarantor agrees that any
such judgment, decree, order, settlement or compromise shall be binding upon the
Guarantor, notwithstanding the cancellation of any bond, note or other
instrument evidencing any of the Payment Obligations and the Guarantor
<PAGE>
shall be and remain liable hereunder to the same extent as if such amount had
never originally been received by the Lenders.
19. All notices, demands or requests provided for or permitted to
be given pursuant to this Guaranty shall be deemed to have been properly given
or served by personal delivery or by depositing in the United States Mail, post-
paid and registered or certified, return receipt requested, and addressed to the
addresses set forth below. All notices, demands and requests shall be effective
upon being personally delivered or deposited in the United States Mail. However,
the time period in which a response to any notice, demand or request must be
given, if any, shall commence to run from the date of personal delivery or the
date of receipt of the notice, demand or request, by the addressee thereof as
disclosed by the return receipt. Rejection or other refusal to accept or the
inability to deliver because of changed address of which no notice was given
shall be deemed to be receipt of the notice, demand or request sent. No other
method of giving notice is hereby precluded. By giving at least thirty (30)
days' written notice thereof, Guarantor or Lenders shall have the right from
time to time and at any time during the term of this Guaranty to change their
respective addresses, and each shall have the right to specify as its address
any other address within the United States of America. For the purposes of this
Guaranty, the addresses of the parties are as follows:
Guarantor: Marriott Corporation
10400 Fernwood Road
Bethesda, Maryland 200583
Attn.: Law Department
Associate General
Counsel - Corporate
Affairs
Lenders: CITIBANK, N.A.
388 Park Avenue
New York, New York 10043
Attn.: Lorraine Montero
The First National
Bank of Chicago
1615 L Street, N.W.
Suite 900
Washington, D.C. 20036
Attn.: Steven D. Franklin
<PAGE>
20. This Guaranty may be executed in several counterparts, each of
which shall be an original and all of which shall constitute one and the same
instrument.
21. Time is hereby declared to be of the essence of this Guaranty
and any part hereof.
IN WITNESS WHEREOF, the Guarantor has duly executed this Guaranty the
day and Year first above written.
MARRIOTT CORPORATION
By
--------------------------------
Vice President
ATTEST:
- -------------------
Assistant Secretary
(Corporate seal)
<PAGE>
EXHIBIT 10.i
LEASE AGREEMENT
BETWEEN
COURTYARD BY MARRIOTT LIMITED PARTNERSHIP
AND
CERTAIN LAND TRUST TRUSTEES
("Landlord")
AND
COURTYARD MANAGEMENT CORPORATION
("Tenant")
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - DEFINITION OF TERMS......................................................2
1.01 Definition of Terms.......................................................2
-------------------
1.02 Terms Defined in Other Sections..........................................12
-------------------------------
ARTICLE II - LEASE OF THE HOTELS....................................................14
2.01 Granting Clause..........................................................14
---------------
2.02 Operating Permits........................................................14
-----------------
2.03 Non-Discrimination.......................................................14
------------------
ARTICLE III - OWNERSHIP OF HOTELS...................................................15
3.01 Ownership of Hotels......................................................15
-------------------
3.02 Subordination, Nondisturbance, and Attornment............................15
---------------------------------------------
ARTICLE IV - TERM...................................................................17
4.01 Term.....................................................................17
----
4.02 Termination Fee..........................................................18
---------------
4.03 Performance Termination..................................................19
-----------------------
4.04 Actions to be Taken Upon Termination.....................................20
------------------------------------
ARTICLE V - RENT....................................................................22
5.01 Annual Rent..............................................................22
-----------
5.02 Additional Rent..........................................................22
---------------
5.03 Distribution of Operating Profit.........................................23
--------------------------------
5.04 Accounting and Interim Payment...........................................27
------------------------------
5.05 Advances to Avoid Foreclosure............................................28
-----------------------------
5.06 Application of Sale and Loan Proceeds....................................28
-------------------------------------
ARTICLE VI - [THIS ARTICLE INTENTIONALLY OMITTED]...................................30
ARTICLE VII - HOTEL WORKING CAPITAL AND FIXED ASSET SUPPLIES........................31
7.01 Hotel Working Capital, Inventories, and Fixed Asset Supplies.............31
------------------------------------------------------------
ARTICLE VIII - REPAIRS, MAINTENANCE, AND REPLACEMENTS...............................32
8.01 Repairs and Maintenance..................................................32
-----------------------
8.02 Repairs and Equipment Reserve............................................32
-----------------------------
8.03 Building Alterations, Improvements, Renewals, and Replacements...........34
--------------------------------------------------------------
8.04 Liens....................................................................35
-----
8.05 Ownership of Replacements................................................35
-------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE IX - BOOKKEEPING AND BANK ACCOUNTS..........................................36
9.01 Books and Records........................................................36
-----------------
9.02 Hotel Accounts and Expenditures..........................................36
-------------------------------
9.03 Annual Operating Projection; Five-Year Forecast..........................36
-----------------------------------------------
9.04 Operating Losses; Credit.................................................37
------------------------
ARTICLE X - TRADEMARK AND TRADE NAME................................................38
10.01 Courtyard by Marriott Name..............................................38
--------------------------
10.02 Purchase of Inventories and Fixed Asset Supplies........................38
------------------------------------------------
10.03 Breach of Covenant......................................................38
------------------
10.04 Computer Software and Equipment.........................................38
-------------------------------
ARTICLE XI - HOTELS.................................................................40
11.01 Payment of Ground Rent and Other Charges................................40
----------------------------------------
11.02 Use, Operation of Hotels and Quiet Enjoyment............................40
--------------------------------------------
11.03 Chain Services..........................................................41
--------------
11.04 Landlord's Right to Inspect.............................................41
---------------------------
ARTICLE XII - INSURANCE.............................................................42
12.01 Property Insurance......................................................42
------------------
12.02 Operational Insurance...................................................42
---------------------
12.03 Coverage................................................................43
--------
12.04 Cost and Expense........................................................43
----------------
12.05 Policies and Endorsements...............................................43
-------------------------
ARTICLE XIII - TAXES................................................................45
13.01 Real Estate, Personal Property and Other Taxes..........................45
----------------------------------------------
ARTICLE XIV - HOTEL EMPLOYEES.......................................................46
14.01 Employees...............................................................46
---------
ARTICLE XV - DAMAGE, CONDEMNATION, AND AIR FORCE MAJEURE............................47
15.01 Damage and Repair.......................................................47
-----------------
15.02 Condemnation............................................................47
------------
15.03 Force Majeure...........................................................47
-------------
ARTICLE XVI - DEFAULTS..............................................................49
16.01 Defaults................................................................49
--------
16.02 Remedies................................................................49
--------
ARTICLE XVII - WAIVER AND PARTIAL INVALIDITY........................................52
17.01 Waiver..................................................................52
------
17.02 Partial Invalidity......................................................52
------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE XVIII - ASSIGNMENT..........................................................53
18.01 Assignment..............................................................53
----------
18.02 Collateral Assignment...................................................53
---------------------
ARTICLE XIX - SALE OF HOTELS........................................................54
19.01 Right of Sale by Landlord...............................................54
-------------------------
19.02 Rights of Tenant on Sale of Hotels......................................54
----------------------------------
19.03 Meaning of "Sale" and "Sell"............................................55
---------------------------
ARTICLE XX - ARBITRATION............................................................56
20.01 Arbitration.............................................................56
-----------
ARTICLE XXI - MISCELLANEOUS.........................................................57
21.01 Right to Make Agreement.................................................57
-----------------------
21.02 Consents................................................................57
--------
21.03 Agency..................................................................57
------
21.04 Confidentiality.........................................................57
---------------
21.05 Applicable Law..........................................................57
--------------
21.06 Other Operations........................................................58
----------------
21.07 Headings................................................................58
--------
21.08 Notices.................................................................58
-------
21.09 Entire Agreement........................................................59
----------------
21.10 Limited Liability.......................................................59
-----------------
21.11 Memorandum of Lease.....................................................59
-------------------
21.12 Severability............................................................59
------------
21.13 Counterparts............................................................60
------------
21.14 Trustees................................................................60
--------
</TABLE>
<PAGE>
LEASE AGREEMENT
This LEASE AGREEMENT (this "Agreement") is executed as of the 1st day
of January, 1994 (the "Effective Date"), by COURTYARD BY MARRIOTT LIMITED
PARTNERSHIP, a Delaware limited partnership with its principal offices at 10400
Fernwood Road, Bethesda, Maryland 20817, LA SALLE NATIONAL TRUST, N.A., a
national banking association, as trustee under Trust Agreement dated December 9,
1986 and known as Trust No. 111800, with its principal office at 120 South La
Salle Street, Chicago, Illinois 60690, and ALEXANDER TITLE AGENCY, INC., a
Virginia corporation, as trustee under (a) the Hampton Courtyard by Marriott
Limited Partnership Land Trust, (b) the Virginia Beach Courtyard by Marriott
Limited Partnership Land Trust, (c) the Herndon-Reston Courtyard by Marriott
Limited Partnership Land Trust, (d) the Richmond Courtyard by Marriott Limited
Partnership Land Trust, and (e) the Courtyard by Marriott Limited Partnership
Land Trust, with its principal offices at 7921 Jones Branch Drive, 6th Floor,
McLean, Virginia 22102 (collectively, the "Landlord"), and COURTYARD MANAGEMENT
CORPORATION, a Delaware corporation with its principal offices at 10400 Fernwood
Road, Bethesda, Maryland 20817 (the "Tenant").
RECITALS
WHEREAS, Landlord has heretofore acquired forty-nine (49) Courtyard by
Marriott Hotels that are located as described in Exhibit A; and
WHEREAS, Landlord desires to let to Tenant and Tenant desires to hire,
lease and operate the Hotels, all on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties agree as follows:
<PAGE>
-2-
ARTICLE I
DEFINITION OF TERMS
-------------------
1.01 Definition of Terms
-------------------
The following terms when used in this Agreement shall have the
meanings indicated:
"Accounting Period" means the four (4) week accounting periods having
-----------------
the same beginning and ending dates as Tenant's four (4) week accounting
periods, except that an Accounting Period may occasionally contain five (5)
weeks when necessary to conform Tenant's accounting system to the calendar. A
calendar showing Accounting Period ending dates for Accounting Periods through
Fiscal Year 2000 is attached hereto as Exhibit B.
"Additional MI Guaranties" shall mean, jointly, (i) that certain Debt
------------------------
and Tenant Change Guaranty given by MI to the Lenders and Citibank, N.A., as
agent, and (ii) that certain MI Guaranty given by MI to the Lenders and
Citibank, N.A., as agent, both dated of even date with the Loan Agreements and
both as amended from time to time in accordance with their terms, provided that
no such amendment that would have a material adverse effect on Tenant's rights
or obligations hereunder shall be effective against Tenant without Tenant's
prior written approval, both of which are being given by MI pursuant to the
requirements of the Loan Agreements.
"Administrative and General Expenses" shall mean costs and expenses
-----------------------------------
that would constitute administrative and general costs and expenses under the
Uniform System of Accounts, including, without limitation, (a) cash overages and
shortages at the Hotels, (b) commissions paid to credit card companies, (c)
credit and collection costs, (d) the cost of data processing services, other
than rental of equipment, (e) the cost of dues and subscriptions for the hotel
and staff, (f) the cost of recruiting, relocating and training employees, (g)
the cost of internal audits conducted by Tenant or its Affiliates and with
respect to which the reasonable cost incurred by Tenant or its Affiliates is
billed by Tenant or its Affiliates, (h) the cost of internal communication
systems such as pagers, copiers and phones, (i) the payments made for guest
property lost or damaged in excess of the amounts recovered from insurance, (j)
the cost of operating supplies such as printed forms, manuals, postage,
facsimiles and telegrams, (k) the cost of professional fees such as those of
attorneys and accountants, (l) a charge adequate to provide for the probable
loss in collection of accounts, (m) the cost of contract security, (n) the cost
of transportation other than that directly related to guests, (o) the cost of
travel expenses and entertainment expenses of employees of Tenant traveling on
or otherwise pertaining to business for the Hotels, (p) the cost of employee
uniforms, and (q) the cost of employee relations and incentives.
"Affiliate/Affiliates or Affiliated Persons" shall mean, when used
------------------------------------------
with reference to a specified Person, (i) any Person that directly or indirectly
through one or more intermediaries controls or is controlled by or is under
common control with the specified Person, (ii) any Person that is an officer of,
partner in, or trustee of, or serves in a similar capacity with respect to, the
specified Person or of which the specified Person is an officer, partner, or
trustee, or with respect to which the specified Person serves in a similar
capacity, (iii) any Person that, directly or indirectly, is the beneficial owner
of ten percent (10%) or more of any class of equity securities of the specified
Person or of which the specified Person is directly or indirectly the owner of
ten percent (10%) or more of any class of equity securities, and (iv) any
relative or spouse of the specified Person who makes his or her home with that
of the specified Person. Affiliate/Affiliates or Affiliated Persons of Landlord
or the general partner of Landlord does not include a Person who is a partner in
a partnership or joint venture with Landlord or any other Affiliate if such
Person is not otherwise an Affiliate of Landlord or the general partner of
Landlord. For purposes of this definition, all shares of stock, partnership
interests or similar interests in a corporation, partnership or other Person
owned by a spouse, sibling, parent, child, or grandchild of an individual, by
any such relative of a spouse of such
<PAGE>
-3-
individual or by any relative of such individual or spouse who makes his or her
home with such individual or spouse shall be deemed to be owned by that
individual. For purposes of this Agreement, neither Landlord, any partner of
Landlord, HM, any subsidiary of HM, nor any partnership in which HM or an HM
subsidiary is a partner shall be considered to be an Affiliate of Tenant, MI or
any MI Ground Lessor, unless, by reason of transactions occurring subsequent to
the date hereof, such person would be an Affiliate under the foregoing
definition.
"Agent" shall have the meaning ascribed to it in the Loan Agreements.
-----
"Bankruptcy Code" means the U.S. Bankruptcy Code, 11 U.S.C. (S)(S)101
---------------
et seq., together with all amendments, modifications and replacements as the
same may exist on any relevant date.
"Base Price" shall mean, as to each Hotel, that amount set forth
----------
opposite the name of the Hotel as shown on Exhibit C attached hereto.
"Central Office Functions" shall mean certain functions performed for
------------------------
the general benefit of the Courtyard by Marriott System by personnel not
normally located at the Hotels and include corporate planning and policy
activities, corporate financial planning, legislative and governmental
representation, corporate human resources planning and benefits planning, in-
house legal services and trademark protection relating to proprietary marks
(including trademarks, trade names, symbols, logos, slogans, designs, insignia,
devices, service marks, and distinctive designs of buildings and signs, and
combinations thereof) which are used generally in the Courtyard by Marriott
System. Any service which is defined as being included within the term "Chain
Services" shall not also be included within "Central Office Functions." Any
function which is defined as being included within the term "Central Office
Functions" shall not also be included in any Deduction other than the Deduction
for the Tenant's Priority Base Retention. The Central Office Functions which are
provided to the Hotels shall be generally consistent with those Central Office
Functions which are provided to other comparable Courtyard by Marriott hotels
within the Courtyard by Marriott System.
"Chain Services" shall mean those certain services furnished to the
--------------
Hotels which are furnished generally on a central or regional basis to other
hotels in the Courtyard by Marriott System. Chain Services shall include: (i)
national and central sales office services; central operational support for
rooms, food and beverage and engineering; central training services; career
development; relocation of central management personnel; central safety and loss
prevention services; central advertising and promotion (including direct and
image media and advertising administration); centralized consumer affairs; to
the extent not charged or allocated directly to the Hotels as a Deduction, the
national and regional reservations system service and inventory and revenue
management services; centralized computer payroll and accounting services;
centralized computer system development, support and operating costs; central
monitoring and management support from "line management" personnel such as area
managers; (ii) such additional services as are or may be, from time to time,
furnished centrally or regionally for the benefit of hotels in the Courtyard by
Marriott System or in substitution for services now performed at individual
hotels which may be more efficiently performed on a group basis; provided,
however, that services not currently included in Chain Services pursuant to (i)
and (ii) above shall only be added to "Chain Services" if, and to the extent
that such services: (a) are not Central Office Functions (it being understood
that Tenant's sole means of covering the costs and expenses incurred by it in
connection with the Central Office Functions shall be Tenant's Priority Base
Retention) or System Functions (it being understood that Tenant's sole means of
covering the costs and expenses incurred by it in connection with the System
Functions shall be retention of the Tenant's Priority System Retention); (b) are
not services relating to non-routine work (it being understood that the cost and
expense of such non-routine services shall be Deductions as set forth in
Paragraph 4 of the definition of Deductions), and (c) are either (x) new
services (i.e., not previously performed at or for the Hotels) or (y) services
which theretofore had been
<PAGE>
-4-
performed at the Hotels, but which can be performed more efficiently and
economically on a centralized, regional or other basis.
"Combined Loan Documents" shall have the meaning ascribed to it in the
-----------------------
Loan Agreements, provided, however, that no amendment of any of the Combined
Loan Documents that would have a material adverse effect on Tenant's rights or
obligations hereunder shall be effective against Tenant without Tenant's prior
written approval.
"Computer Lease" means a lease or other agreement under which computer
--------------
equipment located in one or more Hotels is leased (including the license, if
any, of operating software therefor).
"Courtyard by Marriott System" shall mean the group of hotels managed,
----------------------------
leased, or otherwise operated by Tenant (or one or more of its Affiliates) from
time to time, which hotel group is operated, as of the Effective Date, under the
trade name "Courtyard by Marriott".
"CPI" means the Consumer Price Index, all items for All Urban
---
Consumers, U.S. City Average and (a) using 1982-1984 as the standard reference
base period equal to 100 or (b) if the CPI ceases to be issued with the
reference base period referred to in clause (a) for any time period for which
the CPI is to be determined hereunder, using for the CPI for the time period for
which such reference base period is not used the standard reference base period
for such time period times a conversion factor that will convert such CPI to a
value corresponding to a 1982-1984 base period equal to 100.
"Cumulative Capital" means One Hundred Twenty-one Million, Fifty-three
------------------
Thousand Dollars ($121,053,000.00), which is the amount of money or agreed value
of other real or personal property (other than evidences of indebtedness)
actually contributed to Landlord; provided, however, that, for purposes of
Severance Leases, Cumulative Capital shall be an amount equal to (a) in the case
of Severance Lease involving a new landlord but the same tenant in possession
immediately before the transaction giving rise to the need for a Severance
Lease, (i) if the new landlord is not an Affiliate of the lender pursuant to a
loan on the Hotels immediately before the transaction giving rise to the need
for the Severance Lease, the difference between the purchase price paid by such
new landlord to acquire the Hotel(s) subject to the Severance Lease and the
principal amount of indebtedness referred to in (a) and (b) of the definition of
Deemed Debt Service, which principal amount shall be subject to reduction
pursuant to the provisos as described in said definition, or (ii) if the new
landlord acquired the Hotel(s) by deed in lieu of foreclosure or pursuant to a
foreclosure wherein the new landlord or its Affiliate was the lender whose loan
was in default, then Cumulative Capital shall be an amount equal to the
remainder of (y) the sum of the Base Prices of the Hotel(s) subject to the
Severance Lease less (z) the principal amount of indebtedness referred to in (a)
and (b) of the definition of Deemed Debt Service, which principal amount shall
be subject to reduction pursuant to the same provisos as described in said
definition.
"Cumulative Tenant Period" shall mean, at any Payment Date, the three
------------------------
or four (as the case may be) consecutive Accounting Periods ending with the
Accounting Period that ends on the date that is closest to, but at least thirty
(30) days before, such Payment Date. Notwithstanding the preceding sentence, (a)
the first Cumulative Tenant Period shall begin on February 26, 1994 and shall
end on March 25, 1994, (b) the Cumulative Tenant Period for the February 1, 1997
Payment Date shall end with (and include) the Accounting Period ending January
3, 1997 and (c) the Cumulative Tenant Period for the February 1, 1998 Payment
Date shall end with (and include) the Accounting Period ending January 2, 1998.
The first and last day of each Cumulative Tenant Period through June 18, 1999 is
set forth on Exhibit D attached hereto.
"Current Ground Rent" shall mean the ground rent due and payable,
-------------------
exclusive of any Deferred Ground Rent, to the MI Ground Lessors under the MI
Ground Leases each Fiscal Year.
<PAGE>
-5-
"Debt Service" shall mean all payments required to be made (a)(1)
------------
under the Combined Loan Documents, except Excess Principal Payments, so long as
either of the Loan Agreements is in effect, and (2) under the terms of any loan
obtained to refinance all or any part of the indebtedness under the Combined
Loan Documents or any successive financing or refinancing thereof (any financing
or refinancing referred to in this clause (a)(2), a "Refinancing"), provided
-----------
that the principal amount of any Refinancing, when added to the amount of
indebtedness under the applicable Loan documents, if any, that will not be paid
off as part of such Refinancing shall not exceed all obligations due under the
applicable loan documents at the time of such refinancing or, if such amount is
less than Three Hundred Million Dollars ($300,000.000), then Three Hundred
Million Dollars ($300,000,000), which $300,000,000 limit shall be reduced each
time the Hotel Term of any Hotel or Hotels is terminated to an amount equal to
$300,000,000 times a fraction, the numerator of which shall be the sum of the
Base Prices of those Hotels, the Hotel Terms of which have not been terminated,
and the denominator of which shall be the Total Base Price; (b) under the terms
of any loan incurred to fund the cost of any expansion of those Hotels, the
Hotel Term of which has not been terminated; and (c) under the terms of any loan
incurred to fund expenditures made pursuant to Section 8.03 with respect to
those Hotels, the Hotel Term of which has not been terminated or, as to (b) and
(c) above, any Refinancing of said loans but only as it relates to those Hotels,
the Hotel Term of which has not been terminated.
"Deductions" means for each Fiscal Year the following expenses,
----------
without duplication, incurred in operating the Hotels
1. The cost of sales including, without limitation, salaries,
wages, employee benefits, payroll taxes and other costs related to the Hotels'
employees (the foregoing costs shall not include salaries and other employee
costs of executive personnel of Tenant who do not work at the Hotels on a
regular basis except that the foregoing costs shall include the allocable
portion of the salary and other employee costs of central personnel the cost of
whom are not included within the definitions of Chain Services or System
Functions assigned to a "cluster" of hotels which includes one or more of the
Hotels; provided, however, that such allocable portion of salary and employee
costs shall be a Deduction only to the extent that such costs relate directly to
the Hotels;
2. Departmental expenses; Administrative and General
Expenses; the cost of the Hotels' advertising, marketing and business promotion;
all utility costs including but not limited to the cost of heat, light, power
and water; and the cost of routine maintenance, repairs and minor alterations
which are treated as Deductions under Section 8.01;
3. The cost of Inventories and Fixed Asset Supplies consumed
in the operation of the Hotels;
4. The reasonable cost and expense of technical consultants
and operational experts (including employees of Tenant or one of its Affiliates)
who perform specialized services in connection with non-routine Hotel work;
provided, however, that the costs and expenses of employees of Tenant or one of
its Affiliates so incurred shall only be Deductions to the extent such costs and
expenses are reasonable and competitively priced, as compared to similar work
done by outside consultants or experts;
5. The Tenant's Priority Base Retention;
6. The Tenant's Priority System Retention;
7. Subject to and in accordance with Section 11.03.B, the
Hotels' prorata share of costs and expenses incurred by Tenant (or its
Affiliate) in providing Chain Services;
<PAGE>
-6-
8. The Hotels' fair share of costs and expenses incurred in
connection with sales, advertising, marketing and/or promotional programs
developed for or within the Courtyard by Marriott System, such as (without
limitation) the Courtyard Club, where such costs and expenses are not deducted
as either departmental expenses under Paragraph 2 above or as Chain Services
under Paragraph 7 above;
9. Insurance costs and expenses as provided in Article XII;
10. Taxes, if any, payable by or assessed against Tenant
related to this Agreement or to Tenant's operation of the Hotels (exclusive of
Tenant's income taxes or franchise taxes) and all Impositions assessed against
the Hotels;
11. Amounts which are required to be transferred into the
Reserve in accordance with the provisions of Section 8.02;
12. All sums charged to the Hotels for room reservations
obtained for the Hotels through the reservation system used by Tenant, but in no
event in excess of the amount charged, on a per reservation basis, for similarly
computed activity to other Hotels in the Courtyard by Marriott System using such
reservation system;
13. Such other costs and expenses incurred by Tenant or its
Affiliates as are specifically provided for elsewhere in this Agreement or are
otherwise reasonably necessary for the proper and efficient operation of the
Hotels so long as such other reasonably necessary costs and expenses are
commonly treated as Deductions with respect to other hotels owned, leased or
managed by Tenant or its Affiliates in the Courtyard by Marriott System;
14. Ground rent paid or (as to the current Accounting Quarter)
payable under any Third Party Ground leases covering the land on which any of
the Hotels are located;
15. The amount of any additional funds supplied by Tenant for
Hotel Working Capital, Inventories, and Fixed Asset Supplies pursuant to Section
7.01 over and above the amount of Initial Working Capital; and
16. At Tenant's option, lease payments pursuant to leases of
any FF&E and motor vehicles as described in Section 8.02.A.3 to the extent such
payments are not made out of the Reserve and provided, however, that Tenant
shall be entitled to treat such lease payments as Deductions only to the extent
the indebtedness incurred under such leases does not exceed Thirty-five Thousand
Dollars ($35,000) in the case of Hotels having only one vehicle and Sixty
Thousand Dollars ($60,000) in the case of Hotels having more than one vehicle
(which amounts shall be adjusted upward each Fiscal Year to reflect the
percentage increase in the CPI as announced for November of the immediately
preceding Fiscal Year over the CPI announced for December 1993, provided that if
such percentage increase is a negative number in any given Fiscal Year, then
there shall be no increase in such amount over the previous Fiscal Year) per
Hotel per Fiscal Year; and for purposes of this Item 16, "indebtedness incurred"
shall mean the fair market value at the time of leasing of the FF&E and vehicles
covered by such leases.
The term "Deductions" shall not include (i) debt service payments
pursuant to any loan or rental payments pursuant to any MI Ground Lease, both of
the foregoing shall be paid by Landlord from its own funds (except as provided
in Section 5.03) and not from Gross Revenues nor from the Reserve; (ii) the
excess of any amounts paid to HM or Affiliates of Tenant or of HM for goods and
services over the customary charges for such goods and services; (iii) as to
Central Office Functions, any amounts in excess of the Tenant's Priority Base
Retention; (iv) as to System Functions, any amounts in excess of the Tenant's
Priority System Retention; (v) as to Chain Services,
<PAGE>
-7-
any amounts in excess of the amounts allowed under Section 11.03; and (vi) any
amounts paid with funds from the Reserve.
"Deemed Debt Service" shall mean all scheduled payments of interest
-------------------
and principal that would be required to be made by a borrower with respect to a
loan (the "Deemed Loan") (a) in a principal amount equal to the Combined
Obligations (as defined in the Loan Agreements) of the Landlord, as borrower,
outstanding on the Final Maturity Date (as defined in the MI Guaranty), assuming
such loan provided for (i) annual payments of principal equal to Seven Million
Dollars ($7,000,000) and (ii) interest payments at an interest rate equal to the
Eurodollar Rate (as defined in the Loan Agreements) for successive three month
Interest Periods (as defined in the Loan Agreements) with the first such
Interest Period commencing on the Final Maturity Date, plus the Applicable
Margin (as defined in the Loan Agreements) that would have been in effect from
time to time before the Final Maturity Date (as defined in the MI Guaranty)
under the Loan Agreements (and for any period after the Final Maturity Date, at
the Eurodollar Rate plus the highest Applicable Margin); or (b) if a Refinancing
has occurred, in a principal amount equal to the total payment obligations of
the borrower outstanding thereunder on the date on which all such amounts become
due and payable, whether by acceleration or maturity, assuming annual
amortization in an amount no less than the principal amount that would have been
due in the year in which the total payment obligations of the borrower became
due and payable, other than so-called balloon payments, and an annual interest
rate equal to the average of the highest rate (other than the default rate, if
any) and the lowest rate in effect for such year (but with amortization and
interest in no event less than the amounts specified in clauses (a)(i) and (ii),
respectively); provided, however, that the amounts determined in both (a) and
(b) above shall be applicable to Deemed Debt Service for all 49 Hotels and, in
any case in which a Severance Lease applies to fewer than all 49 Hotels, the
amount calculated pursuant to (a) or (b) above shall be reduced to an amount
equal to the amount so calculated times a fraction, the numerator of which shall
be the greater of the sum of the Base Prices or the sum of the actual purchase
prices (in the case of a voluntary sale) of all Hotels subject to such Severance
Lease and the denominator of which shall be the Total Base Price; and further
provided that each time thereafter that the Hotel Term of any Hotel or Hotels
subject to such Severance Lease is terminated, the amount so calculated shall be
reduced to an amount equal to the amount calculated times a fraction, the
numerator of which shall be the greater of the sum of the Base Prices or the sum
of the actual purchase prices (in the case of a voluntary sale) of those Hotels,
the Hotel Term of which has not been terminated, and the denominator of which
shall be the sum of the Base Prices of all Hotels originally included in the
Severance Lease.
"Deferred Ground Rent" shall mean ground rent due to the MI Ground
--------------------
Lessors under the MI Ground Leases but not paid when due pursuant to the
provisions of the MI Ground Leases.
"Excess Principal Payments" shall mean payments of principal required
-------------------------
under any provisions of the Loan Agreements other than Sections 2.02 and 2.03
thereof.
"FF&E" means (i) furniture, fixtures, furnishings, and equipment, and
----
(ii) FF&E Replacements.
"FF&E Lease" means a lease of any FF&E located in one or more Hotels
----------
other than a TV System Lease, a Telephone Lease, a Computer Lease, or a lease of
a motor vehicle used primarily for transporting Hotel guests.
"FF&E Replacements" means the items enumerated in Paragraphs (1) and
-----------------
(2) of Section 8.02.A .
"Five Year Forecast" shall have the meaning ascribed to it in Section
------------------
9.03.B.
<PAGE>
-8-
"Fiscal Year" means Tenant's Fiscal Year, which now ends at midnight
-----------
on the Friday closest to December 31 in each calendar year; the new Fiscal Year
begins on the Saturday immediately following said Friday. Exhibit B attached
hereto shows the ending dates of each Fiscal Year through Fiscal Year 2000. Any
partial Fiscal Year between the Effective Date and the commencement of the first
full Fiscal Year shall be a separate Fiscal Year. A partial Fiscal Year between
the end of the last full Fiscal Year and the termination of the Agreement shall,
for purposes of the Agreement, constitute a separate Fiscal Year. If Tenant's
Fiscal Year is changed in the future, appropriate adjustment to the Agreement's
reporting and accounting procedures shall be made. No such change or adjustment
shall, however, alter the term of the Agreement or in any way reduce the
distributions of Operating Profit or other payments due Landlord or Tenant
hereunder.
"Fixed Asset Supplies" means supply items, including linen, china,
--------------------
glassware, tableware, and similar items.
"Gross Loan Proceeds" means the cumulative proceeds received by
-------------------
Landlord from time to time (a) from any Refinancing or (b) from any borrowing by
Landlord for distribution to Landlord or its partners, in either case including
the proceeds of a sale and leaseback on which no taxable gain is recognized for
Federal income tax purposes.
"Gross Revenues" means for each Fiscal Year all revenue and income of
--------------
any kind derived from the Hotels and all departments and parts thereof,
including rentals or other payments from lessees, licensees, or concessionaires
in the Hotels (but not including gross receipts of any such lessees, licensees,
or concessionaires except as may be received by or on behalf of Tenant as rent),
the proceeds of business interruption insurance and the proceeds of telephone
charges, all determined in accordance with generally accepted accounting
principles, excluding all refunds, rebates, discounts, and credits of a similar
nature, given, paid, or returned by Landlord or Tenant in the course of
obtaining such revenue and income. Nevertheless, any amounts received,
recognized, or realized in the nature of the following shall not be included as
Gross Revenues: (i) applicable sales, use, and excise taxes or similar
governmental charges collected directly from patrons or guests, or as part of
the sales price of any goods, services, or displays (including, without
limitation, occupancy, gross receipts, admission, cabaret, or similar or
equivalent taxes); (ii) gratuities; (iii) Gross Sale Proceeds or Sale Proceeds,
Gross Loan Proceeds or Loan Proceeds, and any other loan proceeds; (iv) interest
earned on any reserves, including the FF&E Reserve; and (v) proceeds from the
sale of used FF&E.
"Gross Sale Proceeds" means the cumulative proceeds received by
-------------------
Landlord from time to time from (i) the exchange, condemnation, eminent domain
taking, casualty, sale, or other disposition of all or a portion of Landlord's
assets, or (ii) the liquidation of Landlord's property interest in the Hotels in
connection with a dissolution of Landlord.
"HM" means Host Marriott Corporation (formerly named Marriott
--
Corporation).
"HM Debt Service Guaranty" shall mean that certain Amended and
------------------------
Restated Debt Service Guaranty of even date with the Loan Agreements given to
the Lenders by HM pursuant to the requirements of the Loan Agreements, as such
Guaranty may be amended from time to time in accordance with its terms, provided
that no such amendment that would have a material adverse effect on Tenant's
rights or obligations hereunder shall be effective against Tenant without
Tenant's prior written approval.
"Hotel" or "Hotels" shall refer individually or collectively to the up
----- ------
to forty-nine (49) hotels that are located as set forth on Exhibit A but, as to
this Agreement, shall not include any Hotels the Hotel Term of which has been
terminated or which Hotel(s) are subject to a Severance Lease. The term "Hotel"
or "Hotels" shall incorporate not only the legal interest in the real estate
(either fee or leasehold) but all easement or other appurtenant rights along
with all improvements constructed or to be constructed thereon and all FF&E and
supplies installed therein.
<PAGE>
-9-
"Initial Reserve Deposit" shall mean the initial deposit of funds of
-----------------------
Landlord made to the Reserve, which deposit shall be equal to that portion of
the amount held in reserve pursuant to the Management Agreement on December 31,
1993 (the effective date of termination of the Management Agreement) that is
fairly allocable to the forty-nine (49) Hotels.
"Initial Working Capital" shall mean the Working Capital in the
-----------------------
aggregate amount of One Million, One Hundred Eighty-eight Thousand, Seven
Hundred Forty Dollars ($1,188,740.00), which is that portion of Net Working
Capital allocable to the forty-nine (49) Hotels.
"Inventories" means "Inventories" as defined in the Uniform System of
-----------
Accounts, such as provisions in storerooms, refrigerators, pantries, and
kitchens; beverages in wine cellars and bars; other merchandise intended for
sale; fuel; mechanical supplies; stationery; and other expensed supplies and
similar items.
"Lenders" means the lenders under the Loan Agreements.
-------
"Loan Agreements" means two amended and restated Loan Agreements dated
---------------
as of April 7, 1994 among Landlord as borrower, the Lenders party thereto, and
Citibank, N.A., as Agent for the Lenders, providing financing for the Hotels,
both as amended from time to time in accordance with their terms, provided that
no such amendment that would have a material adverse effect on Tenant's rights
or obligations hereunder shall be effective against Tenant without Tenant's
prior written approval.
"Loan Proceeds" means Gross Loan Proceeds minus (i) first, funds used
-------------
to pay commercially reasonable transaction costs in connection with such
Refinancing or borrowing, and (ii) second, funds used for contemporaneous
repayment of indebtedness related to the Loan Agreements or any Refinancing.
"Management Agreement" means the Management Agreement dated August 14,
--------------------
1986 between Landlord, as owner, and Tenant, as manager (as such agreement was
amended from time to time in accordance with its terms), that covered all forty-
nine (49) of the Hotels plus one additional hotel.
"MI" means Marriott International, Inc.
--
"MI Backup Guaranty" shall mean that certain Backup Debt Service
------------------
Guaranty of even date with the Loan Agreements given to the Lenders and Agent by
MI pursuant to the requirements of the Loan Agreements, as such Guaranty may be
amended from time to time in accordance with its terms, provided that no such
amendment that would have a material adverse effect on Tenant's rights or
obligations hereunder shall be effective against Tenant without Tenant's prior
written approval.
"MI Ground Leases" means those certain ground leases, covering the
----------------
land underlying certain of the Hotels, between MI or an MI subsidiary, and their
successors and assigns, as landlord, and Landlord (or, in certain cases one of
the Trustees), as tenant, as amended from time to time in accordance with their
terms, provided that no such amendment that would have a material adverse effect
on Tenant's rights or obligations hereunder shall be effective against Tenant
without Tenant's prior written approval.
"MI Ground Lessors" means the landlords under the MI Ground Leases and
-----------------
their successors and assigns.
"Net Working Capital" means the difference between the original
-------------------
Working Capital supplied by Landlord as owner under the Management Agreement
(which covered fifty (50) hotels)
<PAGE>
-10-
less the total amount of Working Capital returned to landlord as owner under the
Management Agreement, which net amount is One Million, Two Hundred Thirteen
Thousand Dollars ($1,213,000.00).
Notes shall mean either (a) the International Subordinated A Note(s)
-----
(as defined in the MI Backup Guaranty), (b) the International Subordinated B
Note(s) (as defined in the Debt and Tenant Change Guaranty described in the
definition of "Additional MI Guaranties"), (c) the International Subordinated C
Note(s) (as defined in the MI Guaranty described in the definition of "MI
Additional Guaranties"), (d) the Host Subordinated Note (as defined in the HM
Debt Service Guaranty), or (e) the promissory note(s) given pursuant to a
Foreclosure Avoidance Loan, in each case as the context requires.
"Opening Date" means the opening date of each Hotel, as heretofore
------------
established and set forth on Exhibit E.
"Operating Loss" means a negative Operating Profit.
--------------
"Operating Profit" means for any Fiscal Year the excess of Gross
----------------
Revenues over Deductions.
"Paid Over Amounts" shall mean all amounts paid over to the Agent by
-----------------
HM, MI, Tenant, and the MI Ground Lessors pursuant to the Consolidated Amended
and Restated Subordination Agreement made by HM, MI, CBM One Corporation,
Tenant, and the MI Ground Lessors, and Landlord in favor of the Lenders and
Citibank, N.A., of even date with the Loan Agreements, as same may be amended
from time to time in accordance with its terms, provided that no such amendment
that would have an adverse effect on Tenant's rights or obligations hereunder
shall be effective against Tenant without Tenant's prior written approval, and
which is being given pursuant to the requirements of the Loan Agreements.
"Payment Date" means each August 1, November 1, February 1, and May 1.
------------
"Person" means any individual, partnership, corporation, trust, or
------
other legal entity.
"Priority Return" means an annual non-cumulative priority return to
---------------
Landlord equal to ten percent (10%) of the remainder of Cumulative Capital less
cumulative distributions to the partners of Landlord of Sale Proceeds and Loan
Proceeds.
"Sale Proceeds" means cumulative Gross Sale Proceeds minus (a) first,
-------------
funds used to pay commercially reasonable transaction costs in connection with a
sale, (b) second, funds used to establish the escrow of funds required in
Section 13.01.B, (c) third, funds required to be used and used for repayment of
indebtedness related to the loans under the Loan Agreements (or any prior
refinancing thereof), and (d) fourth, in the case of a condemnation, eminent
domain, taking or casualty, funds used to pay all costs of repairing, restoring,
replacing, and reconstructing the affected Hotel(s) or portions thereof. Sale
Proceeds shall not include the proceeds from the sale of used FF&E not in
connection with the disposition of a Hotel.
"Severance Lease" shall mean a new lease covering one or more Hotels
---------------
acquired by a new landlord in a transaction in which less than all of the Hotels
are acquired but pursuant to which the then Tenant remains in possession. Each
Severance Lease shall commence immediately upon the Termination of the Hotel
Term(s) of the Hotel(s) subject to the Severance Lease and shall continue for a
period equal to the then remaining period of this Agreement including any
remaining Renewal Terms. Subject to the exceptions stated herein, the Severance
Lease shall be upon all of the terms, covenants, and conditions as contained in
this Agreement with such additional prorations,
<PAGE>
-11-
adjustments and changes as are appropriate, in the determination of the new
landlord and Tenant, both acting reasonably, to reflect the number and value of
the Hotels subject to the Severance Lease.
"Telephone Lease" means a lease of the telephones and/or other
---------------
telecommunication systems and equipment located in one or more Hotels.
"Tenant's Earnings" shall mean, for each Fiscal Year, that portion of
-----------------
Operating Profit retained by Tenant pursuant to Section 5.03 and not paid to
Landlord or others, including any Affiliates of Tenant, on Landlord's behalf.
"Tenant's Priority Base Retention" shall mean an amount equal to three
--------------------------------
percent (3%) of Gross Revenues for each Fiscal Year (or portion thereof) that
shall be retained by Tenant out of Gross Revenues to cover the cost and expenses
incurred by Tenant and its Affiliates in connection with the Central Office
Functions. Tenant's Priority Base Retention shall be a Deduction from Gross
Revenues in determining Operating Profit.
"Tenant's Priority System Retention" shall mean an amount equal to
----------------------------------
three percent (3%) of Gross Revenues for each Fiscal Year (or portion thereof)
that shall be retained by Tenant out of Gross Revenues to cover the cost and
expenses incurred by Tenant in connection with certain functions ("System
Functions") which are for the benefit of the Courtyard by Marriott System, are
not Central Office Functions or Chain Services, and are performed by personnel
not normally located at the Hotels. System Functions shall be limited to
divisional executive management, divisional financial planning, divisional
contracting, divisional product (including food products) planning and
development, divisional human resources planning and development, divisional
marketing planning, and services of Tenant's technical and operational experts
making routine inspection and consultation visits to the Hotels (but
specifically excluding "line management" personnel such as area managers and
services of Tenant's or Tenant's Affiliate's Architecture and Construction
personnel who provide design, procurement, construction or related services).
Any function included within the term "System Functions" shall not also be
included in any Deduction other than the Deduction for the Tenant's Priority
System Retention.
"Termination" means the expiration or sooner cessation of this
-----------
Agreement with respect to a given Hotel or Hotels.
"Termination Fee Term" shall mean, as to each Hotel, the period
--------------------
beginning on the later of August 14, 1986 or the Opening Date and ending on the
date on which the obligation to pay the Termination Fee arises.
"Third Party Ground Leases" means (a) the Sublease Agreement dated
-------------------------
April 5, 1983 between Crow-Atlanta Retail, Ltd., as sublandlord, and Marriott
Corporation, as subtenant, as assigned by Marriott Corporation to the Landlord
by an assignment dated August 19, 1986, and (b) the Ground Lease dated May 6,
1985, between A. E. Properties, Ltd., as landlord, and Marriott Corporation, as
tenant, as assigned by Marriott Corporation to the Landlord by an assignment
dated December 9, 1986.
"Total Base Price" shall mean an amount equal to Three Hundred
----------------
Seventy-Three Million, One Hundred Forty-Eight Thousand, Nine Hundred Ninety-
Nine Dollars ($373,148,999), which is the sum of the Base Prices of all 49
Hotels.
"Trustees" shall mean the La Salle National Trust, N.A. and Alexander
--------
Title Agency, Inc., and their successors and assigns, as trustees of the land
trusts described in the preamble of this Agreement.
<PAGE>
-12-
"TV System Lease" means a lease or other agreement under which
---------------
equipment (excluding television sets) for the transmission into Hotel rooms of
televised programming is leased or otherwise provided, regardless of whether
such lease or other agreement contains a right or option to purchase such
equipment.
"Uniform System of Accounts" means the Uniform System of Accounts for
--------------------------
Hotels, Eighth Revised Edition, 1986, as published by the Hotel Association of
New York City, Inc.
"Working Capital" means funds which are reasonably necessary for the
---------------
day-to-day operation of the business of the Hotels, including, without
limitation, amounts sufficient for the maintenance of change and petty cash
funds, operating bank accounts, accounts receivable, payrolls, prepaid expenses,
and funds required to maintain Inventories, less accounts payable and accrued
current liabilities.
1.02 Terms Defined in Other Sections
-------------------------------
The following terms when used in the Agreement shall have the meanings
described in the Agreement as indicated below:
"Additional Rent" - Section 5.02.A.
---------------
"Agreement" - Preamble.
---------
"Annual Operating Projection" - Section 9.03.A.
---------------------------
"Annual Operating Statement" - Section 9.01.
--------------------------
"Annual Rent" - Section 5.01.
-----------
"Building Estimate" - Section 8.03.A.
-----------------
"Economic Gain" - Section 4.02.C.
-------------
"Effective Date" - Preamble.
--------------
"Five-Year Forecast" - Section 9.03.B.
------------------
"Foreclosure Avoidance Loan" - Section 5.05.
--------------------------
"Hotel Term" - Section 4.01.B.
----------
"Impositions" - Section 13.01.
-----------
"Initial Term" - Section 4.01.B.
------------
"Landlord" - Preamble.
--------
"Qualified Arbitrator" - Section 20.01.B.
--------------------
"Refinancing" - Section 1.01 (within the definition of "Debt
-----------
Service").
"Renewal Term(s)" - Section 4.01.B.
---------------
"Rent Letter" - Section 5.04.A.
-----------
<PAGE>
-13-
"Repairs and Equipment Estimate" - Section 8.02.D.
------------------------------
"Reserve" - Section 8.02.A.
-------
"System Functions" - Section 1.01 (within the definition of "Tenant's
----------------
Priority System Retention").
"Tenant" - Preamble.
------
"Termination Fee" - Section 4.02.A.
---------------
"Trustee(s)" - Section 21.14.
----------
END OF ARTICLE I
<PAGE>
-14-
ARTICLE II
LEASE OF THE HOTELS
-------------------
2.01 Granting Clause
---------------
In consideration of the rentals, covenants, and agreements to be paid,
kept, and performed hereunder, Landlord, for the term and on the conditions
hereinafter set forth, leases to Tenant and Tenant leases and takes from
Landlord the Hotels.
2.02 Operating Permits
-----------------
Landlord agrees upon request by Tenant to sign promptly and without
charge applications for licenses, permits, or other instruments necessary for
operation of the Hotels.
2.03 Non-Discrimination
------------------
The parties recognize that Tenant and its Affiliates act as lessee or
manager of certain other hotels, some of which may be owned by MI, the parent of
Tenant, or its Affiliates or by other third parties. Certain of these hotels,
now or in the future, may be located within the general geographical area of one
or more of the Hotels. Tenant shall institute reasonable internal controls and
procedures to ensure that no favoritism shall be accorded to such other hotels
on the basis of the ownership thereof and that, at all times, Tenant will
operate the various hotels that it leases, owns, or manages, including the
Hotels, in a non-discriminatory manner. Tenant shall have no liability under
this Section 2.03 unless it can be shown that it has acted in willful disregard
of this provision.
END OF ARTICLE II
<PAGE>
-15-
ARTICLE III
OWNERSHIP OF HOTELS
-------------------
3.01 Ownership of Hotels
-------------------
A. Landlord covenants that it has and will keep and maintain fee or
leasehold title to each of the Hotels free and clear of any and all liens,
encumbrances, or other charges, except as follows:
1. Easements or other encumbrances (other than those described in
subsections 2, 3, 4 and 5 hereof) that do not adversely affect the operation of
any Hotel by Tenant;
2. Mortgages, deeds of trust, or similar security instruments
pursuant to the Loan Agreements (all as amended from time to time in accordance
with their terms, provided that no such amendment that would have a material
adverse effect on Tenant's rights or obligations hereunder shall be effective
against Tenant without Tenant's prior written approval) and any Refinancings
that contain a provision reasonably acceptable to Tenant's counsel that this
Agreement will not be subject to forfeiture or Termination other than in
accordance with the terms hereof, notwithstanding a default under such mortgage,
deed of trust, or security instrument;
3. Liens for taxes, assessments, levies, or other public charges
not yet due or that are being contested in good faith; and
4. The terms and conditions of any Third Party Ground Leases or
MI Ground Leases for the land in effect on Effective Date on which any of the
Hotels are located
B. Landlord shall pay and discharge, at or prior to the due date, (i)
any and all installments of principal and interest due and payable upon any
mortgage, deed of trust, or like instrument described in this Section and shall
indemnify Tenant from and against all claims and litigation and damages (other
than damages representing Tenant's lost profits) arising from the failure to
make such payments as and when required and (ii) any and all charges for capital
expenditures assessed pursuant to any covenants, conditions and restrictions
affecting the Hotels.
C. Landlord agrees that, in the event it acquires fee title to the
land underlying any of the Hotels that are subject to a Third Party Ground Lease
or an MI Ground Lease, any resultant merger of its interest in any such ground
lease into its newly-acquired fee title shall not result in a termination of
this Agreement.
3.02 Subordination, Nondisturbance, and Attornment
---------------------------------------------
A. Tenant agrees that this Agreement, each Severance Lease, and any
extensions, renewals, replacements or modifications to either of them and all
right and interest of Tenant in and to the Hotels shall, at the option of any
mortgagee pursuant to any Refinancing, be subject and subordinate to such
mortgage provided that such mortgagee agrees in writing, in an instrument
recordable in each jurisdiction in which a Hotel is located that is reasonably
acceptable to Tenant's counsel and has been previously approved in writing by
Tenant's counsel, that in the event the mortgagee or any other party comes into
possession of any of the Hotels by virtue of a foreclosure, deed or assignment
in lieu of foreclosure or other transfer pursuant to such mortgage, Tenant shall
not be disturbed in its rights hereunder so long as Tenant is not in material
default hereunder.
B. Provided that such mortgagee has delivered to Tenant the
recordable instrument described in subsection A above, in the event that such
mortgagee or any other party
<PAGE>
-16-
comes into possession of any of the Hotels by virtue of a foreclosure, deed or
assignment in lieu of foreclosure, or other transfer pursuant to such mortgage,
Tenant shall be obligated to such mortgagee or such third party to perform all
of the terms and conditions of this Agreement for the balance of the remaining
term but subject to Tenant's rights to terminate pursuant to Section 19.02.B.2
hereof.
END OF ARTICLE III
<PAGE>
-17-
ARTICLE IV
TERM
----
4.01 Term
----
A. The term of this Agreement shall be from the Effective Date
to the last occurring expiration date of any Hotel Term (as defined in
subsection B) for the last Hotel to which this Agreement applies.
B. For each Hotel, the "Hotel Term" shall consist of an "Initial
Term" and the "Renewal Term(s)." The "Initial Term" of all Hotels except those
located in Maryland shall begin on the Effective Date and, unless sooner
terminated as herein provided, shall continue to December 31, 2007. Except as
provided below for the Hotels located in California, Maryland, New York, and
Pennsylvania, and unless Tenant elects not to renew as provided below, the Hotel
Term shall thereafter be renewed automatically without notice for each Hotel, on
the same terms and conditions contained herein, for each of five (5) successive
periods of ten (10) Fiscal Years, provided that Tenant is not then in default
hereunder. With respect to the Hotels located in California, after the Initial
Terms, the Hotel Terms shall thereafter be renewed automatically without notice
by Tenant, on the same terms and conditions contained herein, for each of two
(2) successive periods of ten (10) Fiscal Years, provided that Tenant is not
then in default hereunder, and further provided, however, that in no event shall
the Hotel Terms of the Hotels located in California extend beyond thirty-four
(34) calendar years. With respect to the Hotel located in New York, after the
Initial Term, the Hotel Term shall thereafter be renewed automatically without
notice by Tenant, on the same terms and conditions contained herein, for each of
three (3) successive periods of ten (10) Fiscal Years followed by one (1) period
of four (4) Fiscal Years, provided that Tenant is not then in default hereunder,
and further provided, however, that in no event shall the Hotel Term of the
Hotel located in New York extend beyond forty-eight (48) calendar years. With
respect to the Hotel located in Pennsylvania, after the Initial Term, the Hotel
Term shall thereafter be renewed automatically without notice by Tenant, on the
same terms and conditions contained herein, for one (1) period of ten (10)
Fiscal Years followed by one (1) period of five (5) Fiscal Years, provided that
Tenant is not then in default hereunder, and further provided, however, that in
no event shall the Hotel Term of the Hotel located in Pennsylvania extend beyond
twenty-nine (29) calendar years, with the last day of such Hotel Term, assuming
Tenant does not elect not to renew, being December 31, 2022. With respect to the
Hotels located in Maryland, the "Initial Term" shall begin on the Effective Date
and, unless sooner terminated as herein provided, shall continue to December 31,
2000; and Tenant shall have the option, to be exercised by written notice to
Landlord on or before June 30, 1999 and thereafter on or before June 30 of each
of 2006, 2013, 2020, and 2027, as applicable, to renew the Hotel Terms of the
Maryland Hotels on the same terms and conditions as contained herein, for each
of six (6) successive periods of seven (7) calendar years each, with Tenant's
notice of renewal in each case being required to be given on June 30 of the last
year of the applicable Renewal Term. Each successive period of ten (10), seven
(7), five (5) or four (4), as applicable, Fiscal Years for which the Lease may
be renewed as to the various Hotels, automatically or by notice, as applicable,
shall be called a "Renewal Term". If Tenant elects not to renew the term of this
Agreement as to any Hotel other than those located in Maryland following
expiration of the then current Initial Term or Renewal Term, it shall give
Landlord notice of non-renewal at least one hundred (180) days prior to the
expiration of the then current Initial Term or Renewal Term and shall
nevertheless continue to occupy and operate the Hotel(s) in question as Tenant
hereunder until the earlier to occur of (i) the later of the expiration of the
Initial Term or the Renewal Term, whichever is in effect on the last date on
which notice of non-renewal could be given, or the three year anniversary of the
last date on which notice of non-renewal could be given, (ii) three years after
the expiration of the then current term, or (iii) such time as Landlord effects
a sale of the Hotel(s) or secures a new tenant or operator but, in any such
case, not earlier than the expiration of the then current term of this
Agreement. If Tenant does not timely elect to renew the Hotel Term as to any
Hotel located in Maryland, then the Hotel Term as to any
<PAGE>
-18-
such Hotel shall terminate on the last day of the Initial Term or Renewal Term
then in effect as to such Hotel(s). Tenant may, at its option, elect not to
renew for any Renewal Term with respect to any one (1) or more of the Hotels at
any given time. Notwithstanding any other provision of this Lease, including,
without limitation, Section 4.04 hereof, there is no current obligation on the
part of either Landlord or Tenant that Tenant continue to occupy or operate any
of the Hotels beyond the applicable Hotel Term.
C. The Hotel Term with respect to each of the Hotels subject to a
ground lease shall not exceed the term of the applicable ground lease. Landlord
agrees that with respect to any ground lease that is about to expire it will
deliver a written notice to Tenant no later than ninety (90) days before the
last day on which Landlord can elect to renew the term of said ground lease,
informing Tenant of the impending expiration of the ground lease and whether
Landlord will elect to renew the ground lease for said applicable renewal
period.
4.02 Termination Fee
---------------
A. If the Hotel Term of a particular Hotel is terminated before the
natural expiration (and assuming the exercise of all Renewal Terms) thereof due
solely to either (i) the provisions of Section 15.01 or 15.02 with respect to a
casualty or condemnation, or (ii) upon a sale of a Hotel in accordance with the
terms of Article XIX, then Tenant shall, except as provided below, receive from
Landlord a termination fee (the "Termination Fee") in an amount determinable
under Section 4.02.B below. The purpose of the Termination Fee is to compensate
Tenant for the loss of earnings from operation of the Hotel due to a premature
termination of this Agreement as to a particular Hotel or Hotels. No Termination
Fee shall be due upon a foreclosure, deed in lieu of foreclosure, or any other
transfer taking place pursuant to the Combined Loan Documents after acceleration
or maturity of the obligations thereunder but before such obligations are
satisfied in full or extinguished.
B. The Termination Fee shall be an amount equal to the net present
value, as computed by Tenant, of the reasonably anticipated amount of Tenant's
Earnings over the next ensuing forty (40) years or, if he then remaining term of
this Agreement for the Hotel for which the calculation is made (assuming the
exercise of all Renewal Terms) is less than forty (40) years, such lesser
period. The discount rate to be employed in making such computation shall be a
percentage equal to the sum of (i) three percentage points plus (ii) the then
base rate of interest charged by Citibank, N.A. (or its successor). Such fee
computation shall not be binding on Landlord unless the firm of independent
auditors regularly employed by Landlord has reported on the mathematical
accuracy of the computation and that the forecast used as the basis for
computing such anticipated earnings was prepared using assumptions that are
reasonable as a basis for forecasting anticipated earnings over the period in
question. Nevertheless, the Termination Fee shall in no event exceed the
percentage set forth in the table below, of the "Economic Gain," as defined in
Section 4.02.C, applicable to the year of the particular Termination Fee Term in
which the right to a Termination Fee accrues:
<TABLE>
<CAPTION>
Year of Termination Fee Term Percentage
---------------------------- -------------------------------------------------
<C> <S>
1-15 50%
16-40 49% in year 16, declining by one percentage point per
year thereafter.
</TABLE>
<PAGE>
-19-
C. For purposes hereof, "Economic Gain" shall mean (i) any Sale
Proceeds minus (ii) 113% (123% in the 21st and subsequent years of the
Termination Fee Term) of the sum of (1) Landlord's original cost basis of the
Hotel and FF&E when Landlord acquired the Hotels (as shown on Exhibit F attached
hereto and not including the cost of any FF&E Replacements, repairs,
maintenance, building improvements, alterations, or replacements or other costs
incurred after completion of each Hotel) involved in the condemnation, casualty,
or sale, plus (2) the cost of any structural repairs or replacements
necessitated by previous condemnations or casualties in excess of insurance or
condemnation proceeds received as a result of a casualty or condemnation
occurring prior to any casualty or condemnation triggering Landlord's obligation
hereunder to pay a Termination Fee.
D. If the Termination Fee exceeds the available Sale Proceeds,
the amount, if any, of such excess shall not be due.
E. The Termination Fee due under subsection A shall be paid in
full by Landlord to Tenant upon the later to occur of (i) the termination of
this Agreement as to that particular Hotel, or (ii) the date on which the Sale
Proceeds become available to Landlord. In the event of any Sale Proceeds
represented by evidences of indebtedness, Landlord shall assign to Tenant,
without recourse, all or such portion of the principal amount thereof (and any
interest accruing thereon) as equals that portion of the Termination Fee not
other wise paid. Any such assignment shall be deemed payment of the Termination
Fee to the extent of the principal amount so assigned.
F. Any dispute between Landlord and Tenant with respect to the
Termination Fee or the obligation of Landlord or Tenant thereunder shall, at the
request of either party, be submitted to arbitration in accordance with Article
XX.
4.03 Performance Termination
-----------------------
A. If the average of the Operating Profit (computed for purposes
of this Section 4.03 only (a) by adding back thereto (i) any Impositions or (ii)
any funds supplied by Tenant for Working Capital, Inventories, or Fixed Asset
Supplies over and above Initial Working Capital pursuant to Section 7.01, or
(iii) any taxes (including any penalties, fines, and interest added thereto)
payable by or assessed against Landlord or Tenant related to Tenant's lease
hereunder of the Hotels and the personal property located therein, but (b) with
a deduction for the annual ground rent payable on all MI Ground Leases, whether
paid or deferred) during any three (3) consecutive Fiscal Years during the term
of this Agreement fails to equal or exceed the lesser of (I) eight percent (8%)
of the sum of the aggregate original costs incurred by Landlord with respect to
purchase of the Hotels then subject to this Agreement and any subsequent
expansions thereof, or (2) the sum of (i) the average annual amount of the
interest portion of Debt Service with respect to such Fiscal Years plus (ii) $5
million, Landlord shall, subject to the conditions of Section 4.03.B, have the
option to terminate this Agreement. Such option may be exercised by serving
written notice of Landlord's election to terminate this Agreement upon Tenant
not later than ninety (90) days after receipt of the Annual Operating Statement
for such third consecutive Fiscal Year. Such notice shall state the basis on
which Landlord asserts the right of termination and shall show all mathematical
calculations constituting the basis therefor.
B. Upon receipt of Landlord's written notice of termination under
Section 4.03.A, Tenant shall have the option, to be exercised within thirty (30)
days after receipt of said notice, to pay to Landlord the amount of any
deficiency described in clauses (1) and (2) of Section 4.03.A and which
constituted the basis of said notice. If Tenant does not exercise its option to
make the payment permitted by this Section 4.03.B, then this Agreement shall
terminate as of the end of the third (3rd) full Accounting Period following the
date on which Tenant receives Landlord's written notice of termination under
Section 4.03.A; provided, however, that such period of time shall be extended as
required by applicable law pertaining to the termination of the employment of
the
<PAGE>
-20-
employees at the Hotels either for the minimum period required by law in order
not to be in violation thereof or for such lesser period as may be permitted if
certain payments are made (but only if such payments are made by Landlord).
4.04 Actions to be Taken Upon Termination
------------------------------------
A. Upon termination of this Agreement, the following shall be
applicable:
1. Tenant shall, within ninety (90) days after termination
of this Agreement, prepare and deliver to Landlord a final accounting statement
with respect to the Hotels, as more particularly described in Section 9.01
hereof, along with a statement of any sums due from Landlord to Tenant or from
Tenant to Landlord pursuant hereto, dated as of the date of termination. Within
thirty (30) days after the receipt by Landlord of such final accounting
statement, the parties will make whatever cash adjustments are necessary
pursuant to such final statement. The cost of preparing such final accounting
statement shall be a Deduction from Gross Revenues attributable to the final
Fiscal Year of the Term, unless the Termination occurs as a result of a default
by either party, in which case the defaulting party shall pay such cost. Tenant
and Landlord acknowledge that there may be certain adjustments for which the
information will not be available at the time of the final accounting and the
parties agree to readjust such amounts and make the necessary cash adjustments
when such information becomes available; provided, however, that all accounts
shall be deemed final two (2) years after termination.
2. Tenant shall release and transfer to Landlord any of
Landlord's funds which are held or controlled by Tenant with respect to the
Hotels with the exception of funds to be held in escrow pursuant to Sections
12.04, 13.01.B and 14.01.C, funds necessary to compensate Tenant pursuant to
Section 7.01, funds necessary to reimburse Tenant pursuant to Sections 5.05 and
9.04, and otherwise in accordance herewith.
3. Tenant shall make available to Landlord such books and
records respecting the Hotels (including those from prior years, subject to
Tenant's reasonable records retention policies) as will be needed by Landlord to
prepare the accounting statements, in accordance with the Uniform System of
Accounts, for the Hotels for the year in which the Termination occurs and for
any subsequent year.
4. Tenant shall (to the extent permitted by law or by
applicable agreement) assign to Landlord or to the new tenant all subleases,
concession agreements, operating licenses and permits for the Hotels which have
been issued in Tenant's name (including liquor and restaurant licenses, if any);
provided that if Tenant has expended any of its own funds in the acquisition of
any of such licenses or permits, Landlord shall reimburse Tenant therefor if it
has not done so already.
5. Various other actions shall be taken, as described in
this Agreement, including, but not limited to, the actions described in Sections
7.01, 10.02, 10.04.C, 12.04, and 14.01.C.
6. Tenant shall peacefully vacate and surrender the Hotels
to Landlord.
B. Upon Termination of the Hotel Term of one or more but less
than all Hotels prior to termination of this Agreement, the parties shall make
such prorations, adjustments and changes to this Agreement as are appropriate,
in the determination of Landlord and Tenant, both acting reasonably, and the
following shall be applicable:
1. If Tenant is not to continue operating the Hotel(s) being
terminated, then:
<PAGE>
-21-
a. Tenant shall release and transfer to Landlord that
portion of Landlord's funds properly allocable to the Hotel which are held or
controlled by Tenant with respect to the Hotels with the exception of funds to
be held in escrow pursuant to Sections 12.04, 13.01.B, and 14.01.C, funds
necessary to compensate Tenant pursuant to Section 7.01, funds necessary to
reimburse Tenant pursuant to Section 9.04, and otherwise in accordance herewith.
b. Tenant shall (to the extent permitted by law or by
applicable agreement) assign to Landlord or to the new tenant all subleases,
concession agreements, operating licenses and permits for the Hotel which have
been issued in Tenant's name (including liquor and restaurant licenses, if any);
provided that if Tenant has expended any of its own funds in the acquisition of
any of such licenses or permits, Landlord shall reimburse Tenant therefor if it
has not done so already.
c. Various other actions shall be taken, as described
in this Agreement, including, but not limited to, the actions described in
Sections 7.01, 10.02, 10.04.C, 12.04, and 14.01.C.
d. Tenant shall peacefully vacate and surrender the
Hotel to Landlord; or
2. If Tenant will continue to operate the Hotel(s) being
terminated, then:
a. Tenant and the new landlord shall enter into a
Severance Lease as to such Hotel(s). To the extent permitted by law, each
Severance Lease and this covenant shall automatically be superior to all rights,
liens and interests intervening between the date of this Agreement and the
recordation of a memorandum or short form of each such Severance Lease. The
provisions of this Section 4.04.B.2.a shall be self-executing and the new
landlord shall execute one or more Severance Leases as herein provided and a
memorandum or short form of such Severance Lease in form reasonably satisfactory
to Tenant and any other documents reasonably requested by Tenant to evidence the
creation of the leasehold under the Severance Lease. If either the new landlord
or Tenant shall fail to enter into a Severance Lease upon the occurrence of the
events described herein, the Severance Lease shall nonetheless be and shall be
construed to be in full force and effect, the parties' actually entering into
said Severance Lease in such instance constituting merely evidentiary
confirmation of such Severance Lease and not a condition precedent to the
effectiveness thereof.
b. Tenant shall release and transfer to Landlord that
portion of Landlord's funds properly allocable to the Hotel which are held or
controlled by Tenant with respect to the Hotels with the exception of funds to
be held in escrow pursuant to Sections 12.04, 13.01.B, and 14.01.C, funds
necessary to compensate Tenant pursuant to Section 7.01, funds necessary to
reimburse Tenant pursuant to Section 9.04, and otherwise in accordance herewith.
c. Various other actions shall be taken, as described in
this Agreement, including, but not limited to, the actions described in Sections
7.01, 10.02, 10.04.C, 12.04, 13.01.B, and 14.01.C.
C. The provisions of this Section 4.04 shall survive termination of
this Agreement.
END OF ARTICLE IV
<PAGE>
-22-
ARTICLE V
RENT
----
5.01 Annual Rent
-----------
A. Tenant agrees to pay Landlord during the Initial Term and any
Renewal Terms hereof annual rental with respect to each Fiscal Year (the "Annual
Rent") equal to (1) (a) eighty-five percent (85%) of Operating Profit in each
Fiscal Year until such time as the partners of Landlord have received cumulative
distributions of Loan Proceeds equal to Sixty Million, Five Hundred Twenty-Six
Thousand, Five Hundred Dollars ($60,526,500), less (b) an amount equal to the
sum of any Deductions for Hotel Working Capital, Inventories, and Fixed Asset
Supplies to which Tenant is entitled under Section 7.01 and the amount of all
Deductions for taxes (including fines, penalties, and interest, if any, added
thereto) payable by or assessed against Landlord or Tenant related to Tenant's
lease of the Hotels and the personal property located therein from Landlord,
multiplied by .15, and thereafter, (2) (a) seventy-five percent (75%) of
Operating Profit for each Fiscal Year, less (b) an amount equal to the sum of
any Deductions for Hotel Working Capital, Inventories, and Fixed Asset Supplies
to which Tenant is entitled under Section 7.01 and the amount of all Deductions
for taxes (including fines, penalties, and interest, if any, added thereto)
payable by or assessed against Landlord or Tenant related to Tenant's lease of
the Hotels and the personal property located therein from Landlord, multiplied
by .25. Notwithstanding Tenant's agreement to pay Annual Rent to Landlord, a
portion of Annual Rent may be (x) paid by Tenant directly to the MI Ground
Lessors on Landlord's behalf, (y) paid by Tenant directly to MI under the MI
Backup Guaranties and the Additional MI Guaranties on Landlord's behalf, and (z)
retained by Tenant to satisfy certain obligations of Landlord to Tenant, but
only in accordance with Section 5.03.
B. Notwithstanding the foregoing, as to any Severance Lease, (1) if
the Annual Rent being paid by Tenant has been reduced from the amount stated in
Section 5.01.A(1) to the amount stated in Section 5.01.A.2 prior to the
transaction giving rise to the Severance Lease, then Annual Rent under the
Severance Lease shall be the amount stated in Section 5.01.A.2; and (2) (a) if
the Annual Rent being paid by Tenant has not been reduced from the amount stated
in Section 5.01.A(1) to the amount stated in Section 5.01.A(2) prior to the
transaction giving rise to the Severance Lease, then under the Severance Lease,
Annual Rent shall be equal to eighty-five percent (85%) of Operating Profit less
the amounts stated in Section 5.01.A(1)(b) of the Severance Lease until the new
landlord has received a cumulative return of equity (through (y) Loan Proceeds
or (z) distributions of Operating Profit in excess of the Priority Return) equal
to fifty percent (50%) of its original investment of equity in the Hotels
covered by the Severance Lease and (b) thereafter, Annual Rental shall be equal
to seventy-five percent (75%) of Operating Profit less the amounts stated in
Section 5.01.A(2)(b) of the Severance Lease.
5.02 Additional Rent
---------------
A. The term "Additional Rent" as used hereinafter shall mean the
excess, if any, of (1) the aggregate amount paid by Tenant in each Fiscal Year
under Section 5.03 to (a) Landlord or, on Landlord's behalf, to parties other
than Landlord or Tenant, (b) Tenant as repayment of Foreclosure Avoidance Loans,
(c) Tenant as reimbursement of Additional Rent paid in previous Fiscal Years,
and (d) Tenant as payment on any due but unpaid Termination Fee, over (2) Annual
Rent.
B. It shall be the obligation of Landlord to refund to Tenant any
Additional Rent paid by Tenant; provided, however, that such refund shall be
made to Tenant only from Operating Profit in future Fiscal Years as provided in
Section 5.03. Such refund shall be made without interest. Upon termination of
this Agreement as to all of the Hotels, Landlord shall have no further liability
for any refund of Additional Rent previously paid by Tenant.
<PAGE>
-23-
5.03 Distribution of Operating Profit
--------------------------------
A. For each Fiscal Year until the earlier to occur of (i)
satisfaction in full of all obligations of Landlord under the Combined Loan
Documents, or (ii) a foreclosure, deed in lieu of foreclosure or any other
transfer having taken place as to all Hotels under any of the Combined Loan
Documents, Operating Profit, to the extent available, shall be distributed by
Tenant as follows (without duplication):
1. First, an amount equal to Debt Service shall be paid to
Landlord to be used to pay such obligations; then
2. An amount equal to administrative expenses of Landlord, as
set forth on Exhibit G attached hereto, in an aggregate amount not to exceed Two
Hundred Fifty Thousand Dollars ($250,000) in Fiscal Year 1994, and thereafter an
amount equal to Two Hundred Fifty Thousand Dollars ($250,000) as adjusted upward
each Fiscal Year so that such amount reflects the percentage increase in the CPI
as announced for November of the immediately preceding Fiscal Year over the CPI
announced for December 1993, provided that if such percentage increase is a
negative number in any given Fiscal Year, then there shall be no increase in
such amount over the previous Fiscal Year, shall be paid to Landlord, provided
that, with respect to interim amounts paid to Landlord pursuant to Section 5.04,
the amount of Operating Profit paid to Landlord pursuant to this subsection
shall be limited to the amount of such expenses for which Tenant has received
written notice from Landlord no later than five (5) days after the last day of
the Accounting Period for which the interim payment is being made and provided
that such notice contains an itemized listing of the expenses for which the
distribution is to be made; then
3. On Landlord's behalf, an amount equal to the Current Ground
Rent due under all MT Ground Leases shall be paid (prorata, if necessary) to the
MI Ground Lessors; then
4. a. For such time as the outstanding principal balance under
the Loan Agreements is greater than Three Hundred Million Dollars ($300,000,000)
as of the last day of the Cumulative Tenant Period as computed by Agent in
accordance with the Loan Agreements, any and all remaining Operating Profit
shall be paid to Landlord to be used to pay the Excess Principal Payments;
b. For such time as the outstanding principal balance under
the Loan Agreements is greater than Two Hundred Fifty Million Dollars
($250,000,000) as of the last day of the Cumulative Tenant Period as computed by
Agent in accordance with the Loan Agreements, but less than or equal to Three
Hundred Million Dollars ($300,000,000) as of the last day of the Cumulative
Tenant Period as computed by Agent in accordance with the Loan Agreements, then
the remaining Operating Profit shall, except as to any Operating Profit from any
Accounting Periods covered by Section 5.03.A.4.d below, be distributed as
follows:
i. Eighty percent (80%) of any remaining Operating
Profit shall be paid to Landlord to be used by Landlord to pay down the loan
balance under the Loan Agreements; and
ii. Twenty percent (20%) of any remaining Operating
Profit shall be distributed as follows:
(a) first, an amount equal to the Deferred Ground
Rent (and any Paid Over Amounts with respect thereto if not reflected therein),
plus interest accrued thereon on all MI Ground Leases shall be paid (prorata, if
necessary) to the extent not previously reimbursed to the MI Ground Lessors, on
Landlord's behalf, to the MI Ground Lessors; then
<PAGE>
-24-
(b) an amount equal to all payments made by MI to
the Lenders under the MI Backup Guaranty (and any Paid Over Amounts with respect
thereto if not reflected therein), plus interest accrued thereon, as evidenced
by the Note(s), shall be paid, to the extent not previously reimbursed to MI, on
Landlord's behalf, to MI; then
(c) an amount equal to all payments made by HM to
the Lenders under the HM Debt Service Guaranty (and any Paid Over Amounts with
respect thereto if not reflected therein), plus interest accrued thereon, as
evidenced by the Note(s), shall be paid to Landlord, to the extent not
previously reimbursed to HM, to be used to repay HM for making such payments;
then
(d) an amount equal to all payments made by MI to
the Lenders under the Additional MI Guaranties (and any Paid Over Amounts with
respect thereto if not reflected therein), plus interest accrued thereon, as
evidenced by the Note(s), shall be paid, to the extent not previously reimbursed
to MI, on Landlord's behalf, to MI; then
(e) an amount equal to the Priority Return shall be
paid to Landlord; then
(f) an amount equal to the excess, if any, of
Annual Rent over the sum of the Priority Return plus the amount of the
distribution made to Landlord under Section 5.03.A.1, up to but not exceeding
fifty percent (50%) of such remaining Operating Profit, shall be paid to
Landlord; then
(g) an amount equal to the unrefunded Additional
Rent (and any Paid Over Amounts with respect thereto if not reflected therein)
shall be retained by Tenant to be applied by Tenant to the refund of such
Additional Rent; then
(h) an amount equal to the outstanding balance of
any Foreclosure Avoidance Loans (and any Paid Over Amounts with respect thereto
if not reflected therein), including interest accrued thereon as evidenced by
the Note(s), shall be retained by Tenant and applied by Tenant to repayment of
the Foreclosure Avoidance Loans; then
(i) an amount equal to any due but unpaid
Termination Fee (and any Paid Over Amounts with respect thereto if not reflected
therein) shall be retained by Tenant to be applied by Tenant to the payment of
such Termination Fee; then
(j) if the amount paid to Landlord under Section
5.03.A.4.b.ii(f) above was less than the excess of Annual Rent over the sum of
the Priority Return plus the amount of the distribution made to Landlord under
Section 5.03.A.1, then an amount equal to such deficiency shall be paid to
Landlord; and then
(k) any and all remaining Operating Profit shall be
retained by Tenant.
c. If the outstanding principal balance under the Loan Agreements is
less than or equal to Two Hundred Fifty Million Dollars ($250,000,000) as of the
last day of the Cumulative Tenant Period, as computed by Agent in accordance
with the Loan Agreements, then the remaining Operating Profit, except as to
Operating Profit from any Accounting Periods covered by Section 5.03.A.4.d
below, shall be distributed as follows:
i. Seventy-five percent (75%) of such remaining Operating Profit
shall be paid to Landlord to be used by Landlord to pay down the loan balance
under the Loan Agreements; and
<PAGE>
-25-
ii. Twenty-five percent (25%) of such remaining Operating Profit
shall be distributed with the same priority and to the same parties for the same
purposes as set forth in Section 5.03.A.4.b.ii(a) through (k).
d. Notwithstanding the provisions of Sections 5.03.A.4.b and c above,
one hundred percent (100%) of all Operating Profit remaining after the
distributions described in Sections 5.03.A.1, 2 and 3 above from the Cumulative
Tenant Period (without regard to Fiscal Year end adjustments) applicable to a
Payment Date on which either (i) a Potential Default (as defined in the Loan
Agreements) consisting of the nonpayment by the Landlord of any principal or
interest due and payable under either of the Loan Agreements or (ii) an Event of
Default (as defined in the Loan Agreements), in either case of which Tenant has
been given written notice from Lenders within ten (10) days after such Payment
Date, shall have occurred and be continuing on such Payment Date, shall be paid
to Landlord to be used by Landlord to pay the amounts required by the Loan
Agreements. To the extent any portion of such Operating Profit has been
previously retained by Tenant and not paid out to others on Landlord's behalf,
Tenant shall, within ten (10) days after receipt of Agent's notice, pay such
Operating Profit retained by Tenant to Landlord to be used by Landlord to make
such payment. To the extent Tenant has distributed any part of such Operating
Profit to Landlord or to MI or the MI Ground Lessors on Landlord's behalf,
Tenant shall have no obligation to pay such portion to Landlord out of its own
funds or future amounts to be retained by it pursuant to this Section 5.03, it
being understood that any obligation of Landlord, MI or the MI Ground Lessors to
disgorge any portion of such Operating Profit previously distributed to them
shall be pursuant to a direct agreement between Landlord and/or Lenders and MI
and the MI Ground Lessors, as applicable.
B. Commencing with the occurrence of the event described in Section
5.03.A(i) and for each Fiscal Year thereafter during the term of this Agreement,
Operating Profit, to the extent available, shall be distributed as follows
(without duplication):
1. An amount equal to Debt Service shall be paid to Landlord to
be used by Landlord to pay such Debt Service; then
2. An amount equal to administrative expenses of Landlord, as set
forth on Exhibit G attached hereto, in an aggregate amount not to exceed Two
Hundred Fifty Thousand Dollars ($250,000) in Fiscal Year 1994, and thereafter an
amount equal to Two Hundred Fifty Thousand Dollars ($250,000) as adjusted upward
each Fiscal Year so that such amount reflects the percentage increase in the CPI
as announced for November of the immediately preceding Fiscal Year over the CPI
announced for December 1993, provided that if such percentage Increase is a
negative number in any given Fiscal Year, then there shall be no increase in
such amount over the previous Fiscal Year, shall be paid to Landlord, provided
that, with respect to interim amounts paid to Landlord pursuant to Section 5.04,
the amount of Operating Profit paid to Landlord pursuant to this subsection
shall be limited to the amount of such expenses for which Tenant has received
written notice from Landlord no later than five (5) days after the last day of
the Accounting Period for which the interim payment is being made and provided
that such notice contains an itemized listing of the expenses for which the
distribution is to be made; then
3. On Landlord's behalf, an amount equal to the Current Ground
Rent due under all MI Ground Leases shall be paid (prorata, if necessary) by
Tenant to the MI Ground Lessors; then
4. An amount equal to the Deferred Ground Rent (and any Paid Over
Amounts with respect thereto if not reflected therein), plus interest accrued
thereon, on all MI Ground Leases shall be paid (prorata, if necessary), to the
extent not previously reimbursed to the MI Ground Lessors, on Landlord's behalf,
to the MI Ground Lessors; then
<PAGE>
-26-
5. An amount equal to all payments made by MI to the Lenders
under the MI Backup Guaranty (and any Paid Over Amounts with respect thereto if
not reflected therein), plus interest accrued thereon, as evidenced by the
Note(s), shall be paid, to the extent not previously reimbursed to MI, on
Landlord's behalf, to MI; then
6. An amount equal to all payments made by HM to the Lenders
under the HM Debt Service Guaranty (and any Paid Over Amounts with respect
thereto if not reflected therein), plus interest accrued thereon, as evidenced
by the Note(s), shall be paid to Landlord, to the extent not previously
reimbursed to HM, to be used to repay HM for making such payments; then
7. An amount equal to all payments made by MI to the Lenders
under the Additional MI Guaranties (and any Paid Over Amounts with respect
thereto if not reflected therein), plus interest accrued thereon, as evidenced
by the Note(s), shall be paid, to the extent not previously reimbursed to MI, on
Landlord's behalf, to MI; then
8. An amount equal to the Priority Return shall be paid to
Landlord; then
9. An amount equal to the excess, if any, of Annual Rent over the
sum of the Priority Return plus Debt Service, up to but not exceeding fifty
percent (50%) of such remaining Operating Profit, shall be paid to Landlord;
then
10. An amount equal to the unrefunded Additional Rent (and any
Paid Over Amounts with respect thereto if not reflected therein) shall be
retained by Tenant to be applied by Tenant to the refund of such Additional
Rent; then
11. An amount equal to the outstanding balance of any Foreclosure
Avoidance Loans (and any Paid Over Amounts with respect thereto if not reflected
therein), including interest accrued thereon as evidenced by the promissory note
provided for in Section 5.05, shall be retained by Tenant and applied by Tenant
to repayment of the Foreclosure Avoidance Loans; then
12. An amount equal to any due but unpaid Termination Fee shall be
retained by Tenant to be applied by Tenant to the payment of such Termination
Fee (and any Paid Over Amounts with respect thereto if not reflected therein);
then
13. If the amount paid to Landlord under Section 5.03.B.9 was less
than the excess of Annual Rent over the sum of the Priority Return plus Debt
Service, then an amount equal to such deficiency shall be paid to Landlord; and
then
14. Any and all remaining Operating Profit shall be retained by
Tenant.
C. For each Fiscal Year (i) commencing with the event described in
Section 5.03.A(ii) in the event of a foreclosure, deed in lieu of foreclosure,
or any other transfer having taken place as to all Hotels under the Combined
Loan Documents, which transfer occurs simultaneously as to all Hotels then
subject to this Agreement, or (ii) with respect to any Severance Lease,
Operating Profit, to the extent available, shall be distributed as follows
(without duplication):
1. An amount equal to Deemed Debt Service shall be paid to the new
landlord; then
2. On the new landlord's behalf, an amount equal to the Current
Ground Rent due under all, if any, MI Ground Leases affecting the applicable
Hotel(s) shall be paid (prorata, if necessary) by Tenant to the MI Ground
Lessors; then
<PAGE>
-27-
3. An amount equal to the Deferred Ground Rent, plus interest
accrued thereon, on any MI Ground Leases affecting the applicable Hotel(s) shall
be paid (prorata, if necessary), to the extent not previously reimbursed to the
MI Ground Lessors, on the new landlord's behalf, to the MI Ground Lessors
(including Deferred Ground Rent applicable to all Hotels (in the case of C(i)
above) or only to the Hotel(s) subject to the Severance Lease (in the case of
C(ii) above) that accrued prior to the Severance Lease); then
4. An amount equal to the Priority Return shall be paid to the
new landlord; then
5. An amount equal to the excess, if any, of Annual Rent over
the sum of the Priority Return plus Deemed Debt Service, up to but not exceeding
fifty percent (50%) of such remaining Operating Profit, shall be paid to the new
landlord; then
6. An amount equal to the unrefunded Additional Rent shall be
retained by Tenant to be applied by Tenant to the refund of such Additional Rent
(not including any unrefunded Additional Rent owed to Tenant prior to the event
described in C(i) above or prior to the Severance Lease, whichever is
applicable); then
7. An amount equal to the outstanding balance of any
Foreclosure Avoidance Loans, including interest accrued thereon as evidenced by
the Note(s), shall be retained by Tenant and applied by Tenant to repayment of
the Foreclosure Avoidance Loans (not including amounts owed to Tenant on any
Foreclosure Avoidance Loans made prior to the event described in C(i) above or
prior to the Severance Lease, whichever is applicable); then
8. An amount equal to any due but unpaid Termination Fee shall
be retained by Tenant to be applied by Tenant to the payment of such Termination
Fee (not including any unpaid Termination Fee that accrued prior to the event
described in C(i) above or prior to the Severance Lease, whichever is
applicable); then
9. If the amount paid to the new landlord under Section
5.03.C.5 was less than the excess of Annual Rent over the sum of the Priority
Return plus Deemed Debt Service, then an amount equal to such deficiency shall
be paid to the new landlord; and then
10. Any and all remaining Operating Profit shall be retained by
Tenant.
5.04 Accounting and Interim Payment
------------------------------
A. Within twenty (20) days after the close of each Accounting
Period, Tenant shall submit an interim accounting, or "Rent Letter",
substantially in the form of Exhibit H attached hereto, to Landlord showing
Gross Revenues, Deductions, Operating Profit, and the application thereof under
Section 5.03 on an aggregate basis. Tenant shall transfer with each Rent Letter
any interim amounts of Annual Rent and Additional Rent to be paid to Landlord,
which amounts shall be a reasonable estimate of the portions of Annual Rent and
Additional Rent allocable to such Accounting Period.
B. Calculations and payments of Annual Rent and Additional Rent and
applications of Operating Profit made with respect to each Accounting Period
shall be accounted for cumulatively within each Fiscal Year. Within seventy-five
(75) days after the close of each Fiscal Year, Tenant shall submit an
accounting, as more fully described in Section 9.01, for such Fiscal Year to
Landlord, which accounting shall be controlling over the interim accountings.
Any deficiency in the amount of Annual Rent or Additional Rent as shown by the
Fiscal Year accounting shall be promptly paid by Tenant to Landlord or to others
on Landlord's behalf in accordance with Section 5.03. Any overpayment of Annual
Rent or Additional Rent made by Tenant as shown by the Fiscal
<PAGE>
-28-
Year accounting shall be a credit against both Annual Rent and Additional Rent
owed by Tenant to Landlord in succeeding Accounting Periods. If this Agreement
is terminated for any reason before Tenant has recovered all such overpayments,
then Tenant shall be entitled to recover the remaining amount of such
overpayments from either of the following sources: (i) by deduction from any of
Landlord's funds which are held or controlled by Tenant, or (ii) Landlord shall
pay Tenant the remaining amount of such credit out of any Sale Proceeds. No
adjustment shall be made for any Operating Loss in a preceding or subsequent
Fiscal Year.
5.05 Advances to Avoid Foreclosure
-----------------------------
The parties agree that Tenant shall have no liability with respect to
any obligations of Landlord. However, Tenant shall have the right, but not the
obligation, to make Debt Service payments on behalf of Landlord as and to the
extent necessary to avoid the foreclosure of any lien or security interest
applicable to a particular Hotel or Hotels. Any such payments (each of which
shall be referred to as a "Foreclosure Avoidance Loan") shall be deemed a loan
by Tenant to Landlord in such amount, shall bear annual interest at two
percentage points over the base rate of interest charged by Citibank, N.A. (or
its successor) and shall be repayable by Landlord on the date that is fifteen
(15) years after the date of each Foreclosure Avoidance Loan or, if earlier,
upon termination of this Agreement. Tenant shall be entitled to reimburse itself
for such Foreclosure Avoidance Loans in accordance with Section 5.03. Landlord
shall evidence each Foreclosure Avoidance Loan by executing a promissory note
payable to Tenant in the principal amount of each Foreclosure Avoidance Loan and
bearing interest as aforesaid.
5.06 Application of Sale and Loan Proceeds
-------------------------------------
Landlord agrees that Gross Sale Proceeds shall be applied to the uses
described and in the order listed in (a), (b), (c) and (d) of the definition of
Sale Proceeds. Loan Proceeds and Sale Proceeds shall be applied, and Landlord
shall be obligated to apply same, in the following manner:
A. First, an amount equal to the funds required for the escrows as
set forth in Sections 12.04 and 14.01.C; then
B. An amount equal to the Deferred Ground Rent (and any Paid Over
Amounts with respect thereto if not reflected therein) on all Hotels subject to
MI Ground Leases, if any, shall be paid (prorata, if necessary), to the extent
not previously reimbursed, to the MI Ground Lessors; then
C. An amount equal to all payments made by MI to the Lenders under
the MI Backup Guaranty (and any Paid Over Amounts with respect thereto if not
reflected therein), plus interest accrued thereon as evidenced by the Note(s),
if any, shall be paid, to the extent not previously reimbursed, to MI (but this
shall not apply to a distribution of Sale Proceeds or Loan Proceeds received by
a new landlord as described in Section 5.03.C(i) or under a Severance Lease);
then
D. An amount equal to all payments made by HM to the Lenders under
the HM Debt Service Guaranty (and any Paid Over Amounts with respect thereto if
not reflected therein), plus interest accrued thereon as evidenced by the
Note(s), if any, shall be paid, to the extent not previously reimbursed, to HM
(but this shall not apply to a distribution of Sale Proceeds or Loan Proceeds
received by a new landlord as described in Section 5.03.C(i) or under a
Severance Lease), then
E. An amount equal to all payments made by MI to the Lenders under
the Additional MI Guaranties (and any Paid Over Amounts with respect thereto if
not reflected therein), plus interest accrued thereon as evidenced by the
Note(s), if any, shall be paid (prorata, if necessary),
<PAGE>
-29-
to the extent not previously reimbursed, to MI (but this shall not apply to a
distribution of Sale Proceeds or Loan Proceeds received by a new landlord as
described in Section 5.03.C(i) or under a Severance Lease); then
F. An amount equal to the unrefunded Additional Rent (and any Paid
Over Amounts with respect thereto if not reflected therein), if any, shall be
paid to Tenant (but, after the event described in Section 5.03.C(i) and as to a
Severance Lease, this shall include only such amounts accruing to Tenant after
such event or under such Severance Lease after the commencement of the Severance
Lease, whichever is applicable); then
G. An amount equal to the outstanding balance of any Foreclosure
Avoidance Loans (and any Paid Over Amounts with respect thereto if not reflected
therein), including interest thereon as evidenced by the Note(s), if any, shall
be paid to Tenant (but, after the event described in Section 5.03.C(i) and as to
a Severance Lease, this shall include only such amounts accruing to Tenant after
such event or under such Severance Lease after the commencement of the Severance
Lease, whichever is applicable); then
H. An amount equal to any outstanding deficiencies owed Tenant
pursuant to Section 9.04 (and any Paid Over Amounts with respect thereto if not
reflected therein), if any, shall be paid to Tenant (but, after the event
described in Section 5.03.C(i) and as to a Severance Lease, this shall include
only such amounts accruing to Tenant after such event or under such Severance
Lease after the commencement of the Severance Lease, whichever is applicable);
then
I. An amount equal to any uncompensated amounts owed to Tenant
pursuant to Section 7.01 (and any Paid Over Amounts with respect thereto if not
reflected therein), if any, shall be paid to Tenant (but, after the event
described in Section 5.03.C(i) and as to a Severance Lease, this shall include
only such amounts accruing to Tenant after such event and under such Severance
Lease after the commencement of the Severance Lease, whichever is applicable);
then
J. An amount equal to any unpaid Termination Fee (and any Paid Over
Amounts with respect thereto if not reflected therein), if any, owed Tenant
pursuant to Section 4.02 (but, after the event described in Section 5.03.C(i) or
as to a Severance Lease, this shall include only such amounts accruing to Tenant
after such event and under such Severance Lease after the commencement of the
Severance Lease, whichever is applicable); and then
K. The remaining balance of the Loan Proceeds or Sale Proceeds, as
the case may be, shall be retained by Landlord (or the new landlord in the case
of a Severance Lease).
The Landlord and Tenant agree that MI, HM, and the MI Ground Lessors
are intended third party beneficiaries of the rights and obligations set forth
in this Section 5.06. As such third party beneficiaries, MI, HM, and the MI
Ground Lessors, in addition to Tenant, shall have all remedies available at law
or in equity for the enforcement of the obligations set forth herein. In
addition to all such remedies, in the event Landlord fails to apply Loan
Proceeds or Sale Proceeds in accordance with the provisions hereof, Tenant shall
have the right, notwithstanding any other provision in this Agreement to the
contrary or Tenant's obligation to pay Annual Rent or Additional Rent to
Landlord, to offset all amounts owed as described in subsections A through K
above against any future Annual Rent or Additional Rent, and to pay MI, HM, the
MI Ground Lessors, and itself in accordance with the provisions of this Section
5.06 out of such offset amounts. Any amounts offset by Tenant shall not,
however, affect the amounts required to be distributed by Tenant to Landlord to
be used to make payments to Lenders as specifically set forth in Sections
5.03.A.1, 5.03.A.4.a, 5.03.A.4.b.i, 5.03.A.4.c.i, 5.03.A.4.d. and 5.03.C.1. The
provisions of this Section 5.06 shall survive any Termination as to any
particular Hotel or Hotels and any termination of this Agreement.
END OF ARTICLE V
<PAGE>
-30-
ARTICLE VI
[THIS ARTICLE INTENTIONALLY OMITTED]
END OF ARTICLE VI
<PAGE>
-31-
ARTICLE VII
HOTEL WORKING CAPITAL AND FIXED ASSET SUPPLIES
----------------------------------------------
7.01 Hotel Working Capital, Inventories, and Fixed Asset Supplies
------------------------------------------------------------
From time to time additional funds may be necessary to maintain Hotel
Working Capital, Inventories, and Fixed Asset Supplies at levels reasonably
determined by Tenant to be necessary to satisfy the needs of the Hotels as their
operation may then require. Tenant shall be entitled to take as Deductions any
additional necessary funds supplied by it for such purposes and shall use such
funds only for Hotel Working Capital, Inventories and Fixed Asset Supplies in
accordance with the purposes of this Agreement. Upon Termination, Tenant shall
leave in the Hotels for Landlord any unused Inventories, except for Inventories
purchased by Tenant under Section 10.02. Fixed Asset Supplies, including
additions and replacements thereto, shall remain the property of Landlord
throughout the term of this Agreement, except for Fixed Asset Supplies purchased
by Tenant under Section 10.02. Upon termination of this Agreement, Tenant shall
pay to Landlord the difference, if any, between Initial Working Capital and
funds supplied by Tenant for additional Working Capital, Inventories, and Fixed
Asset Supplies. If Working Capital at the time of termination (for any reason)
of this Agreement is inadequate to fully compensate Tenant for such additional
funds supplied by Tenant, then Tenant shall be entitled to deduct such
deficiency from either of the following sources: (i) by deduction from any funds
of Landlord then held or controlled by Tenant, or (ii) out of any Sale Proceeds.
Upon the Termination of the Hotel Term of a particular Hotel prior to
termination of this Agreement, Tenant shall disburse to Landlord the difference,
if any, between that portion of Initial Working Capital properly allocable to
the Hotel and that portion of funds supplied by Tenant for additional Working
Capital, Inventories, and Fixed Asset Supplies properly allocable to the Hotel
after payment by Tenant of all charges properly payable out of such Working
Capital with respect to the particular Hotel unless Tenant will continue
operating the Hotel pursuant to Section 19.02.B, in which case Tenant shall
continue to hold such amount for the benefit of the new owner of the Hotel to be
used in the operation of the Hotel.
END OF ARTICLE VII
<PAGE>
-32-
ARTICLE VIII
REPAIRS, MAINTENANCE, AND REPLACEMENTS
--------------------------------------
8.01 Repairs and Maintenance
-----------------------
Tenant shall, on Landlord's behalf and as Landlord's agent with
respect to such obligation, maintain each Hotel in good repair and condition and
in conformity with applicable laws and regulations and shall make or cause to be
made such routine maintenance, repairs, and minor alterations, the cost of which
can be expensed under generally accepted accounting principles, as it, from time
to time, deems necessary for such purposes. The cost of such maintenance,
repairs, and alterations shall be paid from Gross Revenues and shall be treated
as a Deduction in determining Operating Profit.
8.02 Repairs and Equipment Reserve
-----------------------------
A. Tenant shall, on behalf of Landlord and in Landlord's name but
with Tenant having the sole authority to make withdrawals or transact other
business with respect thereto, establish and maintain, on a consolidated basis,
an escrow reserve account (the "Repair and Equipment Reserve" or the "Reserve")
in a bank designated by Landlord. The Reserve shall be used to cover the cost of
FF&E Replacements consisting of:
1. Replacements and renewals related solely to the FF&E of a
Hotel (including communication systems and computer systems);
2. Certain routine repairs and maintenance to the building
structures of a Hotel, the cost of which is normally capitalized under generally
accepted accounting principles, such as exterior and interior repainting,
resurfacing building walls, floors, roofs, and parking areas, and replacing
folding walls and the like, but which are not alterations, improvements,
renewals, or replacements to the structure of the building or to its mechanical,
electrical, heating, ventilating, air conditioning, plumbing, or vertical
transportation systems, the cost of which are Landlord's sole responsibility
under Section 8.03; and
3. Lease payments for any FF&E and motor vehicles that are
leased instead of purchased and not treated as Deductions pursuant to Item 16 of
the definition of Deductions.
B. As of the Effective Date, Landlord and Tenant shall make the
Initial Reserve Deposit into the Reserve. Except as provided below and subject
to the provisions of Section 8.02.E, for each Fiscal Year during the term of
this Agreement, Tenant shall transfer into the Reserve an amount equal to five
percent (5%) of Gross Revenues attributable to each such Hotel for such period
of time. Commencing with Fiscal Year 1997, Tenant shall have the right, but not
the obligation, to increase the amount it transfers into the Reserve to any
amount to greater than five percent (5%) but not exceeding six percent (6%) of
Gross Revenues for such Fiscal Year and each successive Fiscal Year if, based
upon a review of capital requirements for the Hotels, such increase is mutually
agreed upon by Landlord and Tenant; provided, however, that Landlord's agreement
to increase the amount to be transferred into the Reserve to up to six percent
(6%) of Gross Revenues shall not be required if Operating Profit for each of
Fiscal Years 1994 through 1996 equals or exceeds the amounts shown as Operating
Profit on Exhibit I. For purposes of the preceding sentence, Operating Profit
shall be computed by adding back thereto (i) any Deductions for Working Capital,
Inventories, or Fixed Asset Supplies over and above Initial Working Capital
pursuant to Section 7.01, or (ii) any taxes (including any penalties, fines, and
interest added thereto) payable by or assessed against Landlord or Tenant
related to Tenant's lease hereunder of the Hotels and personal property located
therein. Notwithstanding the foregoing, no deduction and transfer into the
Reserve will be required to the
<PAGE>
-33-
extent that such deduction and transfer, when added to amounts already in the
Reserve, would make the then balance exceed the gross amount of the transfers
for the previous eight (8) Fiscal Years. Any amounts held in the Reserve may be
allocated among the Hotels and may be applied as set forth in this Article VIII
without regard to the source of such amounts. Any interest which accrues on any
amounts held in the Reserve shall be retained therein without reduction of
Tenant's obligation to make transfers thereto. All amounts held in the Reserve
shall belong to Landlord.
C. Tenant shall, on behalf of Landlord and as Landlord's agent with
respect to such obligation, from time to time make such (i) replacements and
renewals to each Hotel's FF&E, and (ii) repairs to each Hotel of the nature
described in Section 8.02.A.2, as it deems necessary, and (iii) lease payments
as described in Section 8.02.A.3 as it deems necessary, up to the balance in the
Reserve. No expenditures will be made other than as set forth in the approved
Repairs and Equipment Estimate and in no event may expenditures be made in
excess of such balance without the prior approval of Landlord; provided,
however, that (1) Tenant may effect emergency repairs necessary to prevent
further loss or damage without such approval, and (2) Tenant may, in its sole
discretion, expend up to ten thousand dollars ($10,000) per Hotel (as adjusted
upward each Fiscal Year to reflect the percentage increase in the CPI announced
for November of the immediately preceding Fiscal Year over the CPI announced for
December 1993, provided that if such percentage increase is a negative number in
any given Fiscal Year, then there shall be no increase in such amount over the
previous Fiscal Year) in each Fiscal Year for matters not contemplated in the
Repairs and Equipment Estimate. At the end of each Fiscal Year, any amounts
remaining in the Reserve shall be carried forward to the next Fiscal Year.
Proceeds from the sale of FF&E no longer necessary to the operation of the Hotel
shall be deposited in the Reserve without reduction of Tenant's obligation to
make transfers thereto. Expenditures made by Tenant out of the Reserve for
replacements and renewals to the Hotels' FF&E, repairs to each Hotel of the
nature described in Section 8.02.A.2, and lease payments as described in Section
8.02.A.3 shall not also be treated as Deductions. Upon the Termination of the
Hotel Term of a particular Hotel prior to termination of this Agreement, Tenant
shall disburse to Landlord from the Reserve the amount held in the Reserve
properly allocable to such Hotel after payment by Tenant of all charges properly
payable out of the Reserve with respect to the particular Hotel unless Tenant
will continue operating such Hotel, in which case Tenant shall transfer the
amount held in the Reserve properly allocable to such Hotel to a new account for
the benefit of the new owner of the Hotel. Upon termination of this Agreement
and after payment by Tenant of all charges properly payable out of the Reserve,
Tenant shall pay to Landlord all amounts held in the Reserve unless Tenant will
continue operating some or all of the Hotels, in which case Tenant shall
transfer all amounts held in the Reserve, in the event Tenant will continue
operating all of the Hotels, or the amount held in the Reserve properly
allocable to the Hotels Tenant will continue operating, to one or more new
accounts for the benefit of the new landlord(s) of the Hotels. If for any reason
Tenant is prohibited, in contradiction to the terms stated above, from
transferring such Reserve funds to one or more new accounts for the benefit of
the new landlord(s), then Tenant shall be entitled, in addition to the transfers
into the Reserve provided in Section 8.02.B, to transfer from Gross Revenues
into the new Reserve account an amount equal to Twenty Thousand, Four Hundred
Dollars ($20,400) per Hotel that Tenant will continue to lease from or operate
for such new landlord(s). Tenant, in its sole but reasonable discretion, and
subject to the exceptions stated below, shall decide whether to purchase or
lease any replacement FF&E or motor vehicles used in transporting Hotel guests.
If Tenant enters into any lease of replacement FF&E or motor vehicles used in
transporting Hotel guests, it shall do so on Landlord's behalf and as Landlord's
agent; or, upon Tenant's recommendation and request, Landlord shall directly
enter into such leases. Notwithstanding the foregoing, Tenant shall not and
shall not require Landlord to enter into any lease other than (i) Telephone
Leases, (ii) Computer Leases, (iii) TV System Leases, (iv) FF&E Leases, and (v)
leases of vehicles used in transporting Hotel guests. With respect to FF&E
Leases only, Tenant shall be required to obtain Landlord's prior written
approval before entering into or requesting that Landlord enter into any FF&E
Lease, if (a) the fair market value of the FF&E with respect to all FF&E Leases
relating to each Hotel (including those being entered into) would exceed at any
time $200,000 in respect of such Hotel, (b) the FF&E to be covered by such FF&E
<PAGE>
-34-
Lease is FF&E that is not customarily leased in the hotel industry in the United
States, or (c) such FF&E Lease is on payment terms (including amount and time of
payment) materially more favorable to the lessor thereof than payment terms
customary in the hotel industry in the United States for similar leases. With
respect to TV System Leases only, Tenant shall be required to obtain Landlord's
prior written approval before entering into or requesting the Landlord enter
into any TV System Lease, if (a) the equipment to be covered by such TV System
Lease is not customarily leased in the hotel industry in the United States or
(b) such TV System Lease is on payment terms (including amount and time of
payment) materially more favorable to the lessor thereof than payment terms
customary in the hotel industry in the United States for similar leases. In
cases described in the preceding two sentences, Landlord's approval shall not be
unreasonably withheld; provided, however, that the failure of Lenders to approve
such leasing proposal shall justify Landlord in withholding its approval.
D. Tenant shall annually prepare a written estimate (the "Repairs
and Equipment Estimate") for FF&E Replacements necessary for the forthcoming
Fiscal Year and shall submit the Repairs and Equipment Estimate to Landlord at
the same time it submits the Annual Operating Projection described in Section
9.03. The Repairs and Equipment Estimate shall be prepared on a consolidated
basis showing proposed expenditures as to each Hotel and the Hotels
collectively. It shall also indicate the estimated time schedule for making such
replacements and renewals. Landlord shall review the Repairs and Equipment
Estimate submitted in good faith by Tenant. If Landlord shall fail to approve
such Repairs and Equipment Estimate as to one or more or all of the Hotels
within thirty (30) days of the receipt thereof, or if Tenant does not agree to
any modifications made by Landlord within fifteen (15) days, Tenant shall have
the option of terminating this Agreement as to those Hotels as to which
agreement was not reached upon giving thirty (30) days written notice to
Landlord. If Tenant does not so notify Landlord, it shall continue to occupy and
operate the Hotels in question as provided under this Agreement without making
the FF&E Replacements to which Landlord did not agree.
E. The percentage contributions for the Reserve described in
Section 8.02.B are estimates. As the Hotels age, these percentages may not be
sufficient to keep the Reserve at the levels necessary to make the replacements
and renewals to one or more or all of the Hotels' FF&E, or to make the repairs
to the Hotel buildings of the nature described in Section 8.02.A.2, required to
maintain the Hotels in first-class condition. If the Repairs and Equipment
Estimate prepared in good faith by Tenant exceeds the available funds in the
Reserve, Landlord shall:
1. Agree to increase the annual percentage in Section 8.02.B
to provide the additional funds required, or
2. Provide outside financing for the additional funds
required, in which event the principal and interest payments on such financing
(but not the expenditure of such additional funds from the Reserve after their
deposit into the Reserve) shall constitute Deductions.
A failure or refusal by Landlord to agree to 1 or 2 above within a
sixty (60) day period after Tenant's request therefor shall entitle Tenant,
within thirty (30) days thereafter, to notify Landlord that it will terminate
this Agreement as to those Hotels as to which agreement was not reached as of a
date six (6) months after the date of Tenant's notice.
8.03 Building Alterations, Improvements, Renewals, and Replacements
--------------------------------------------------------------
A. Tenant shall prepare an annual estimate of aggregate
expenditures necessary for alterations (including major repairs), improvements,
renewals, and replacements (which alterations, improvements, renewals, and
replacements are not among those referred to in Section 8.02.A.2) to the
structural, mechanical, electrical, heating, ventilating, air conditioning,
plumbing, and vertical transportation elements of each of the Hotels (the
"Building Estimate") and shall submit
<PAGE>
-35-
such Building Estimate to Landlord for its approval at the same time the Annual
Operating Projection is submitted. The Building Estimate shall be prepared on a
consolidated basis showing proposed expenditures as to each Hotel. Tenant shall
not make any expenditures for such purposes until Landlord approves the Building
Estimate; provided that if such alterations, improvements, renewals, or
replacements to the Hotels (whether included in the Building Estimate or the
need for which arises at any time during any Fiscal Year) are required by reason
of any law, ordinance, regulation, or order of a competent governmental
authority, or are otherwise required for the continued orderly operation of the
Hotels. Tenant shall give Landlord notice thereof and shall be authorized, on
Landlord's behalf and as Landlord's agent, to take appropriate remedial action
without such approval if Landlord does not act. Tenant shall, on Landlord's
behalf and as Landlord's agent, make such alterations, improvements, renewals,
and replacements in accordance with the provisions hereof; and the cost of all
such alterations, improvements, renewals, or replacements shall be borne solely
by Landlord.
B. If Landlord does not approve the Building Estimate as to one or
more or all of the Hotels within thirty (30) days after it has been submitted,
Tenant shall have the option, to be exercised by written notice within thirty
(30) days thereafter, of terminating this Agreement as to those Hotels as to
which agreement was not reached upon giving thirty (30) days written notice to
Landlord.
8.04 Liens
-----
Tenant and Landlord severally shall use their best efforts to prevent
any mechanics', materialmen's and similar liens from being filed against any
Hotel that arise from any such alterations, improvements, renewals, or
replacements in or to such Hotel. They shall cooperate fully in obtaining the
release of any such liens, and the cost thereof, if the lien was not occasioned
by the fault of either party, shall be paid for by Landlord. If the lien arises
as a result of the fault of either party, then the party at fault shall bear the
cost of obtaining the lien release.
8.05 Ownership of Replacements
-------------------------
All alterations, improvements, renewals, or replacements made or
acquired under Article VIII shall be Landlord's property.
END OF ARTICLE VIII
<PAGE>
-36-
ARTICLE IX
BOOKKEEPING AND BANK ACCOUNTS
-----------------------------
9.01 Books and Records
-----------------
Books of control and account shall be kept on the accrual basis and in
all material respects in accordance with the Uniform System of Accounts, with
the exceptions provided in this Agreement. Landlord may at reasonable intervals
upon two (2) business days' notice during Tenant's normal business hours examine
such records. Within seventy-five (75) days following the close of each Fiscal
Year, Tenant shall furnish Landlord a statement (the "Annual Operating
Statement") in the form attached as Exhibit J hereto summarizing operations of
all Hotels in the aggregate for such Fiscal Year and a certificate of Tenant's
chief accounting officer or his designee certifying that such year-end statement
is true and correct. Landlord shall have ninety (90) days after receipt to
examine and review said statement and to notify Tenant if it wishes to have said
statement audited. If Landlord raises no objections within said ninety (90) day
period, then such statement shall be deemed to be conclusively accepted by
Landlord as being true and correct, and Landlord shall have no right thereafter
to question its accuracy. Landlord shall be required to commence any audit of
which it has timely notified Tenant within ten (10) days after the date of such
notice and to work diligently to and complete said audit within ninety (90) days
after commencement. All reviews and audits by Landlord as provided herein shall
be at Landlord's sole cost and expense.
9.02 Hotel Accounts and Expenditures
-------------------------------
A. All funds derived from operation of the Hotels shall be
deposited in a bank and in an account chosen by Tenant subject to the reasonable
approval of Landlord. Withdrawals from said accounts shall be made by
representatives of Tenant whose signatures have been authorized. Reasonable
petty cash funds shall be maintained at each Hotel.
B. All payments Tenant makes hereunder shall be made from
authorized bank accounts, or petty cash funds, or from Working Capital under
Section 7.01. Tenant shall not be required to make any advance or payment to or
for the account of Landlord except as otherwise provided herein, and Tenant
shall not be obligated to incur any liability or obligation for Landlord's
account without assurances satisfactory to Tenant in Tenant's sole discretion
that Landlord will provide necessary funds for the discharge thereof. Debts and
liabilities Tenant incurs as a result of its occupation and operation of the
Hotels under the terms hereof (other than debts and liabilities incurred in a
manner inconsistent with the terms hereof), whether asserted before or after the
termination of this Agreement, will be paid by Landlord to the extent funds are
not available for that purpose from the operation of the Hotels.
9.03 Annual Operating Projection; Five-Year Forecast
-----------------------------------------------
A. Tenant shall submit to Landlord for its review five (5) days
before the first day of each Fiscal Year an "Annual Operating Projection". Such
projection shall be on a consolidated basis, shall include a projection for
Chain Services, and shall be in the form of Exhibit K attached hereto. Tenant
shall use its best efforts to adhere to the Annual Operating Projection. It is
understood, however, that the Annual Operating Projection is an estimate only
and unforeseen circumstances such as, but not limited to, those relating to
costs of labor, material, services, and supplies, casualty, operation of law,
economic and market conditions, and Acts of God may make adherence to the Annual
Operating Projection impracticable, and therefore Tenant shall have the right to
depart therefrom for such causes or other similar causes.
B. Except as stated below, Tenant shall submit to Landlord each
Fiscal Year, promptly upon but no later than thirty (30) days after its
completion a "Five-Year Forecast". Tenant's
<PAGE>
-37-
obligation to submit such a Five-Year Forecast shall be in effect only for so
long as Tenant is required in the normal course of its business by its own or
MI's corporate requirements to prepare same. Such forecast shall be on a
consolidated basis for each of the five Fiscal Years commencing with the
immediately following Fiscal Year and shall be in the form of Exhibit L attached
hereto. Due to the difficulty in forecasting beyond one year, any reliance by
Landlord or others on such forecast shall be at their own risk and Tenant shall
be under no obligation to achieve the results set forth in such forecast.
9.04 Operating Losses; Credit
------------------------
A. To the extent there is an Operating Loss for any Accounting
Period, additional funds in the amount of any such deficiency shall be provided
by Landlord within ten (10) days if Tenant gives written notice to Landlord of
such Operating Loss. To the extent Tenant elects not to so collect or Landlord
does not so forward upon request, Tenant shall be entitled to a credit in the
amount of any such deficiency against both Annual Rent and Additional Rent owed
by Tenant to Landlord in succeeding Accounting Periods. If Landlord fails to
provide additional funds in the amount of such Operating Loss within such ten
(10) day period, Tenant shall have the option of terminating this Agreement upon
not less than thirty (30) days written notice to Landlord. If this Agreement is
terminated for any reason before Tenant has recovered all such deficiencies,
then Tenant shall be entitled to recover the remaining deficiencies from either
of the following sources: (i) by deduction from any of Landlord's funds which
Tenant holds or controls, or (ii) out of any Sale Proceeds or Loan Proceeds.
B. In no event shall either party borrow money in the name of or
pledge the credit of the other.
END OF ARTICLE IX
<PAGE>
-38-
ARTICLE X
TRADEMARK AND TRADE NAME
------------------------
10.01 Courtyard by Marriott Name
--------------------------
During the term of this Agreement, each Hotel shall be known as a
Courtyard by Marriott, with such additional identification as may be necessary
to provide local identification. If the name of the Courtyard by Marriott System
is changed, the name of the Hotels shall change to conform thereto and
references herein to "Courtyard" and "Courtyard by Marriott" shall be deemed
references to such new name. The names "Courtyard" and "Courtyard by Marriott,"
when used alone or in connection with another word or words, and the Courtyard
or Courtyard by Marriott trademarks, trade names, symbols, logos, and designs
shall in all events remain the exclusive property of MI, and nothing contained
herein shall confer on Landlord the right to use the Courtyard or Courtyard by
Marriott names, trademarks, trade names, symbols, logos, or designs otherwise
than in strict accordance with the terms of this Agreement. Except as provided
in Section 10.02, upon Termination, any use of or right to use the Courtyard or
Courtyard by Marriott names, trademarks, trade names, symbols, logos, or designs
by Landlord shall cease forthwith and Landlord shall promptly remove from each
Hotel at Landlord's cost any signs or similar items that contain the Courtyard
or Courtyard by Marriott names, trademarks, trade names, symbols, logos, or
designs; provided, however, that Landlord shall not be required to change its
legal name ("Courtyard by Marriott Limited Partnership") to remove "Courtyard by
Marriott" from its name.
10.02 Purchase of Inventories and Fixed Asset Supplies
------------------------------------------------
A. Upon Termination, either of this entire Agreement or with
respect to a given Hotel, Tenant shall have the option, to be exercised within
thirty (30) days after Termination, to purchase, at their then book value, any
items of such Hotel's Inventories and Fixed Asset Supplies as may be marked with
the Courtyard or Courtyard by Marriott names or any Courtyard or Courtyard by
Marriott trademark, trade name, symbol, logo or design. If Tenant does not
exercise such option, Landlord will use any items not so purchased exclusively
in connection with the Hotel in which they are located until they are consumed.
10.03 Breach of Covenant
------------------
Tenant and/or its Affiliates shall have the right, in case of any
breach of the covenants of this Article X by Landlord or others claiming through
it, to injunctive relief and to any other right or remedy available at law or in
equity. This Article X shall survive Termination.
10.04 Computer Software and Equipment
-------------------------------
A. Any computer software (including upgrades and replacements) at
any of the Hotels that is owned by Tenant, MI, any Affiliate of MI, or the
licensor of any of them, is proprietary to Tenant, MI, such MI Affiliate, or the
licensor of any of them, whichever is applicable, and shall in all events remain
the exclusive property of Tenant, MI, such MI Affiliate, or the licensor of any
of them, as the case may be, and nothing contained in this Agreement shall
confer on Landlord the right to use any such software.
B. Upon Termination as to any particular Hotel and upon
termination of this Agreement, Tenant shall have the right to remove from the
Hotel or Hotels, as applicable, without compensation to Landlord, (1) any
computer software (including upgrades and replacements), including without
limitation, the PMS and MARSHA software, owned by Tenant, MI, any Affiliate of
MI, or the licensor of any of them, and (2) any computer equipment utilized as
part of a centralized
<PAGE>
-39-
reservation system or owned by a party other than Landlord, except any computer
equipment leased to Landlord pursuant to a financing lease as provided for in
Article VIII.
C. Tenant shall, upon Termination as to any particular Hotel Term
and upon termination of this Agreement, provide Landlord with a copy of the data
stored in the software described in Section 10.04.A.
END OF ARTICLE X
<PAGE>
-40-
ARTICLE XI
HOTELS
------
11.01 Payment of Ground Rent and Other Charges
----------------------------------------
Landlord covenants to properly pay and discharge (i) any ground rent
due under any ground leases applicable to any of the Hotels, and (ii) any
payments and charges in the ordinary course of the business of the Hotels
necessary to ensure continued operation of the Hotels by Tenant; provided,
however, that Landlord irrevocably directs Tenant to pay and discharge all
payments and charges set forth in subsections (i) and (ii) above and Tenant
agrees to make such payments to the extent of the availability of Gross Revenues
after payment of or accrual for all other Deductions, in the case of Third Party
Ground Leases and payments due and charges incurred under subsection (ii) above,
and to the extent of the availability of Operating Profit and according to the
order of disbursement of Operating Profit pursuant to Section 5.03, in the case
of MI Ground Leases.
11.02 Use, Operation of Hotels and Quiet Enjoyment
--------------------------------------------
A. Tenant shall operate the Hotels as hotels and for no other use and
under standards comparable to those prevailing for other Courtyard by Marriott
hotels operated by Tenant or its Affiliates and for all activities in connection
therewith that are customary and usual to such an operation; provided, however,
that Tenant shall not be held to such standard if Landlord fails (i) to approve
the Repairs and Equipment Estimate or provide funds necessary to pay for the
repairs, replacements, and renewals covered therein in the event funds in the
Reserve are inadequate, or (ii) to approve the Building Estimate or provide
funds necessary to pay for the alterations, improvements, renewals and
replacements covered therein, in either case if Landlord's failure to so approve
or provide funds prevents Tenant from maintaining such standard. Tenant shall,
except as otherwise provided in this Agreement, be responsible for the proper
and efficient operation of the Hotels.
B. Tenant shall have the option to terminate the Agreement with
respect to a given Hotel at any time upon sixty (60) days' written notice to
Landlord in the event of a withdrawal or revocation, by any lawful governing
body having jurisdiction thereof, of any license or permit required for Tenant's
performance hereunder as to such Hotel where such withdrawal or revocation is
due to circumstances beyond Tenant's control.
C. Except as otherwise provided herein, Tenant shall, during the
Term, operate each of the Hotels continuously except to the extent and for such
time as Tenant is unable to operate any of the Hotels according to the standards
set forth herein as a result of (1) damage or destruction caused by fire,
casualty, or other cause, (2) condemnation, (3) any of the occurrences described
in Section 15.03, or (4) all or any portion of any Hotel being closed for
alterations, improvements, renewals, rebuilding, or repairs.
D. Tenant shall, upon the request of Landlord or Landlord's
mortgagees, or the agent of either of them, make a qualified representative from
Tenant's corporate staff available at reasonable times and intervals to answer
questions regarding the operation of the Hotels.
E. Tenant shall use reasonable efforts to comply with and abide by
all applicable laws and regulations, including, without limitation,
environmental laws and regulations, pertaining to its operation of the Hotels,
provided that (i) all costs and expenses of such compliance shall be paid from
Gross Revenues as Deductions or from the Reserve, whichever is applicable under
the provisions of this Agreement, and (ii) Tenant shall have the right, but not
the obligation, subject to Landlord's prior written approval which approval
shall not be unreasonably withheld, to contest or
<PAGE>
-41-
oppose, by appropriate proceedings, any such laws and regulations; the
reasonable expenses of such contest shall be paid from Gross Revenues as
Deductions.
F. Possession of the Hotels shall be delivered to Tenant on the
Effective Date, and Tenant shall quietly hold, occupy, and enjoy the Hotels
throughout the term of this Agreement without any hindrance, ejection, or
molestation by Landlord or anyone claiming under or through Landlord, subject,
nevertheless, to the terms and conditions of this Agreement.
11.03 Chain Services
--------------
A. Tenant shall, beginning with the Effective Date and thereafter
during the Term of this Agreement, cause Chain Services to be furnished to the
Hotels.
B. Costs and expenses incurred in the providing of Chain Services
shall be allocated on a fair and equitable basis among all Courtyard by Marriott
hotels owned, leased, operated or managed by Tenant or its Affiliates in the
United States which benefit from these services. Such allocation shall be made
without regard to any "caps" or other limitations on the amount which Tenant or
its Affiliates may charge to a given hotel, pursuant to agreements which Tenant
(or its Affiliates) may have with the owner of such hotel. Any excess of that
portion of such costs and expenses which is fairly allocated to a given hotel
over the "cap" which may be in effect with regard to that hotel shall be paid by
Tenant from its own funds and shall not be a Deduction. Tenant shall make no
profit from amounts paid for Chain Services. In no event will the total charge
for all of the Chain Services which are described in the definition of Chain
Services in Section 1.01 (exclusive of reservation system services), for any
given Fiscal Year, exceed five percent (5%) of Gross Revenues for such Fiscal
Year. The parties hereby stipulate that the limitation set forth in the
preceding sentence is intended to apply only to the services which are currently
listed (as of the Effective Date) in the definition of Chain Services in Section
1.01; accordingly, if there are types of expenditures which were originally
treated as Deductions (other than pursuant to Paragraph 7 of the definition of
"Deductions" in Section 1.01), but which are later determined to be more
properly treated as Chain Services, such expenditures shall be treated as
Deductions pursuant to said Paragraph 7 of the definition of "Deductions"
without regard to the aforesaid limitation. If services currently provided as
Chain Services are subsequently determined to be appropriately charged as
Deductions, the cost of the services will continue to be considered as a Chain
Service cost in determining the total charge allowed under the "cap" of five
percent (5%) of Gross Revenues.
11.04 Landlord's Right to Inspect
---------------------------
Landlord, Landlord's mortgagees, and the agents of both of them shall
have access to any Hotel at any and all reasonable times for the purpose of
protecting the same against fire or other casualty, prevention of damage to such
Hotel, inspection, making repairs, or showing such Hotel to prospective
purchasers, tenants, or mortgagees.
END OF ARTICLE XI
<PAGE>
-42-
ARTICLE XII
INSURANCE
---------
12.01 Property Insurance
------------------
A. Tenant shall, commencing with the Effective Date and thereafter
throughout the term of this Agreement, procure and maintain, with insurance
companies of recognized responsibility approved by Landlord in its reasonable
discretion, a minimum of the following insurance:
1. Insurance on each Hotel (including contents) against loss
or damage by fire, lightning and all other risks covered by the usual standard
extended coverage endorsements, with such deductible limits as are generally
established by Tenant and its Affiliates at the other hotels it operates under
the Courtyard by Marriott name in the United States, all in an amount not less
than the full replacement cost thereof exclusive of excavation, footings and
foundation costs;
2. Insurance against loss or damage from explosion of
boilers, pressure vessels, pressure pipes and sprinklers, to the extent
applicable, installed in each Hotel;
3. Business interruption insurance covering loss of profits
and necessary continuing expenses for interruptions caused by any occurrence
covered by the insurance referred to in Section 12.01.A.1 and 2, of a type and
in amounts and with such deductible limits as are generally established by
Tenant and its Affiliates at the other hotels it operates under the Courtyard by
Marriott name in the United States.
B. All policies of insurance required under Section 12.01.A. 1 and
2 shall be carried with the Landlord, the holder of the first-lien permanent
mortgage on the Hotels, and the landlords under the Third Party Ground Leases
and the MI Ground Leases (where applicable) as additional insureds and loss
payees, as the case may be, except that, so long as the Combined Loan Documents
are in effect, such policies shall show Citibank, N.A., as agent (or, if
applicable, the successor agent) for the Lenders, in place of the Lenders
themselves as mortgagee; and any losses thereunder shall be payable to the
parties as their respective interests may appear.
12.02 Operational Insurance
---------------------
Tenant shall, commencing with the Effective Date and thereafter
throughout the Term, procure and maintain, using funds deducted from Gross
Revenues, with insurance companies approved by Landlord, the following
insurance:
A. Workers' compensation and employer's liability insurance as may
be required under applicable laws covering all of Tenant's employees at each
Hotel, with such deductible limits or self-insured retentions as are generally
established by Tenant or its Affiliates at the other hotels it operates under
the Courtyard by Marriott name in the United States;
B. Fidelity bonds, with reasonable limits and deductibles to be
determined by Tenant, covering its employees in job classifications normally
bonded in the other hotels it operates under the Courtyard by Marriott name in
the United States or as otherwise required by law, and comprehensive crime
insurance to the extent Tenant and Landlord mutually agree it is necessary for
each Hotel;
C. Commercial general liability insurance against claims for
personal injury, death or property damage occurring on, in, or about each Hotel,
and automobile insurance on vehicles operated in conjunction with each Hotel,
with a combined single limit of not less than
<PAGE>
-43-
Twenty-five Million Dollars ($25,000,000) for each occurrence for personal
injury, death and property damage, with such deductible limits or self-insured
retentions as are generally established by Tenant or its Affiliates at the other
hotels it operates under the Courtyard by Marriott name in the United States;
and
D. Such other insurance in amounts as Landlord and Tenant in their
reasonable judgment deems advisable for protection against claims, liabilities
and losses arising out of or connected with the operation of the Hotels.
12.03 Coverage
--------
All insurance described in Sections 12.01 and 12.02 may be obtained by
Tenant by endorsement or equivalent means under its blanket insurance policies,
provided that such blanket policies substantially fulfill the requirements
specified herein. Deductible limits and retentions shall be as provided in the
blanket policies covering the hotels operated by Tenant and its Affiliates under
the Courtyard by Marriott name in the United States. In addition, in the case of
insurance described in Sections 12.01 and 12.02, Tenant may insure through its
Affiliates, or its Affiliates may otherwise retain such risks, if, where legally
required to do so, such Affiliates are legally qualified to do so.
12.04 Cost and Expense
----------------
Insurance premiums and any costs or expenses with respect to the
insurance described in Sections 12.01 and 12.02, including insurance reinsured
by an Affiliate of Tenant, shall be Deductions in determining Operating Profit.
Premiums on policies for more than one year shall be charged prorata over the
period of the policies. The expenses incurred in maintaining Tenant's self-
insurance program shall be charged on an equitable basis to the hotels
participating in such programs. Any reserves, losses, costs, damages or expenses
which are uninsured (as long as Tenant maintains proper insurance and does not
abrogate policies), or fall within deductible limits or self-insured retentions
as are generally established by Tenant or its Affiliates, shall be treated as a
cost of insurance and shall be Deductions in determining Operating Profit. Upon
termination, either of this entire Agreement or with respect to a given Hotel,
an escrow fund in an amount reasonably acceptable to Tenant shall be established
from Gross Revenues (or, if Gross Revenues are not sufficient, with funds
provided by Landlord) to cover the amount of any deductible limits or self-
insured retentions and all other costs which will eventually have to be paid by
either Landlord or Tenant with respect to pending or contingent claims,
including those which arise after Termination for causes arising during the term
of the Agreement; provided, however, that such escrow shall not include any
amounts expected to be covered by insurance proceeds (exclusive of deductibles
and self-insured retentions).
12.05 Policies and Endorsements
-------------------------
A. Where permitted, all insurance provided under Section 12.02
shall name Landlord, Tenant, Lenders, and the landlords under the Third Party
Ground Leases and the MI Ground Leases (where applicable) as additional insureds
as their interests may appear. Tenant shall deliver to Landlord certificates of
insurance with respect to all policies procured, including existing, additional
and renewal policies and, in the case of insurance about to expire, shall
deliver certificates of insurance with respect to the renewal policies not less
than ten (10) days prior to the respective dates of expiration.
B. All policies of insurance provided for under Article XII shall,
to the extent obtainable, have attached thereto an endorsement that such policy
shall not be canceled or materially changed without at least thirty (30) days'
prior written notice to Landlord, Lenders, Tenant, and landlords under the Third
Party Ground Leases and the MI Ground Leases (where applicable).
<PAGE>
-44-
END OF ARTICLE XII
<PAGE>
-45-
ARTICLE XIII
TAXES
-----
13.01 Real Estate, Personal Property and Other Taxes
----------------------------------------------
A. The cost of all real estate and personal property taxes
(including tax, if any, on the lease of personal property payable by or assessed
against Landlord or Tenant), levies, assessments and similar charges on or
relating to each Hotel (the "Impositions") during the term of this Agreement,
including any such amounts required to be paid under ground leases, shall be
borne solely by Landlord. The term "Impositions" shall include any fines,
penalties, or interest with respect to tax, if any, on the lease of personal
property payable by or assessed against Landlord or Tenant. Except as provided
below, Tenant shall, on Landlord's behalf and to the extent of the availability
of Gross Revenues after payment or accrual for all other Deductions, pay all
Impositions from Gross Revenues, before any fine, penalty, or interest is added
thereto or lien placed on any Hotel or this Agreement, unless payment thereof is
in good faith being contested and enforcement thereof is stayed. Notwithstanding
the foregoing, (i) Landlord shall make any necessary filings with respect to any
taxes that might be payable by or assessed against Landlord or Tenant pertaining
to the lease of personal property and, at Landlord's request, Tenant shall pay
any such taxes and any fines, penalties and interest added thereto to the extent
of the availability of Gross Revenues after payment of or accrual for all other
Deductions, and (ii) Tenant shall not be liable for any fines, penalties, or
interest that is added to taxes, if any, payable by or assessed against Landlord
or Tenant related to Tenant's lease of personal property from Landlord under
this Agreement. Except as provided in Section 5.01, any such payments and
accruals for such payments shall be a Deduction in determining Operating Profit.
Landlord shall, within five (5) days of receipt, furnish Tenant with copies of
any official tax bills and assessments that it may receive for any of the
Hotels. Either Tenant or Landlord may initiate proceedings to contest any
Imposition. All reasonable costs of any such contest shall be paid from Gross
Revenues and treated as a Deduction and the non-initiating party shall
reasonably cooperate with the initiating party.
B. Upon any termination, either of this entire Agreement or with
respect to a given Hotel, an escrow fund in an amount reasonably acceptable to
Tenant shall be established from Gross Revenues (or, if Gross Revenues are not
sufficient, with funds provided by Landlord) to cover all taxes (including any
fines, penalties, or interest that may be added thereto), if any, that might, in
Tenant's reasonable judgment, be payable or assessed against Landlord or Tenant
related to Tenant's lease of personal property from Landlord under this
Agreement.
END OF ARTICLE XIII
<PAGE>
-46-
ARTICLE XIV
HOTEL EMPLOYEES
---------------
14.01 Employees
---------
A. All personnel employed at each Hotel shall at all times be the
employees of or otherwise provided by the Tenant. Tenant shall have absolute
discretion to hire, fire, promote, supervise, direct, and train all employees at
each Hotel, to fix their compensation and, generally, establish and maintain all
policies relating to employment.
B. Tenant shall be permitted to provide free accommodations and
amenities to its employees and representatives living at or visiting each Hotel
in connection with its operation of the Hotels. No person shall otherwise be
given gratuitous accommodations or services without prior joint approval of
Landlord and Tenant except in accordance with usual practices of the hotel and
travel industry.
C. At termination, either of this entire Agreement or with respect
to a given Hotel, other than by reason of a default of Tenant hereunder, an
escrow fund shall be established from Gross Revenues (or, if Gross Revenues are
not sufficient, with funds provided by Landlord) to reimburse Tenant for all
costs and expenses incurred by Tenant in terminating its employees at the
affected Hotels, such as severance pay, unemployment compensation, and other
employee liability costs arising out of the termination of employment by Tenant
of Tenant's employees at such Hotel or of all the Hotels, as the case may be.
END OF ARTICLE XIV
<PAGE>
-47-
ARTICLE XV
DAMAGE, CONDEMNATION, AND AIR FORCE MAJEURE
-------------------------------------------
15.01 Damage and Repair
-----------------
A. If, during the term hereof, any of the Hotels are damaged or
destroyed by fire, casualty, or other cause, Landlord shall, at its cost and
expense and with all reasonable diligence, repair or replace the damaged or
destroyed portion of such Hotel to the same condition as existed previously. To
the extent available, proceeds from the insurance described in Section 12.01
shall be applied to such repairs or replacements. If a Hotel is so damaged or
destroyed that Landlord reasonably determines that it cannot be repaired or
replaced within one (1) year of the fire, casualty, or other cause, Landlord
shall have the option on sixty (60) days' written notice to terminate this
Agreement as to such Hotel and Tenant shall be entitled to the Termination Fee
provided by Section 4.02, which shall be paid in accordance with the provisions
of Section 5.06.
B. If damage or destruction to any Hotel from any cause materially
and adversely affects the operation of such Hotel and Landlord fails to promptly
commence and complete the repairing, rebuilding, or replacement of the same
(other than with respect to a Hotel as to which a termination is effected under
Section 15.01.A above) so that such Hotel shall be substantially the same as it
was before such damage or destruction, Tenant may elect to terminate this
Agreement as to such Hotel on sixty (60) days' written notice, whereupon Tenant
shall be entitled to the Termination Fee provided by Section 4.02, which shall
be paid in accordance with the provisions of Section 5.06, it being agreed that
Tenant shall not have the right to terminate after Landlord has commenced such
repairs, rebuilding, or replacements unless Landlord thereafter fails to
diligently and continuously pursue completion of such repairs, rebuilding, or
replacements.
15.02 Condemnation
------------
A. If all or substantially all of any Hotel shall be taken in any
eminent domain, condemnation, compulsory acquisition, or similar proceeding by
any competent authority for any public or quasi-public use or purpose, or if a
portion of such Hotel shall be so taken, but the result is that Landlord deems
it unreasonable to continue to operate such Hotel, this Agreement shall
terminate and Tenant shall be entitled to the Termination Fee provided by
Section 4.02, which shall be paid in accordance with the provisions of Section
5.06. In order to provide funds with which to pay the Termination Fee, Landlord
shall initiate such proceedings against the condemning authorities to recover
any damages to which it may be entitled. Tenant shall have no independent right
to bring any action claiming damages or an award as a result of a condemnation.
B. If a portion of any Hotel shall be taken as a result of one of
the events described in Section 15.02.A, or an entire Hotel is affected on a
temporary basis, and as a result it is not unreasonable to continue to operate
such Hotel, this Agreement shall not terminate. Nevertheless, so much of any
award for any such partial taking or condemnation as shall be necessary to
render such Hotel equivalent to its condition before such event shall be used
for such purpose; Landlord shall retain the balance of such award, if any.
15.03 Force Majeure
-------------
If acts of God, acts of war, civil disturbance, or governmental
action, including the revocation of any license or permit necessary for the
operation contemplated under this Agreement where such revocation is not due to
Tenant's fault, or any other causes beyond the control of Tenant, shall, in
Tenant's reasonable opinion have a significant adverse effect upon operations of
any Hotel, then Tenant shall have the right to terminate this Agreement as to
such Hotel on sixty (60) days'
<PAGE>
-48-
written notice to Landlord; provided, however, that this Section 15.03 shall not
apply to any Hotel that suffers damage or destruction to which Section 15.01 is
applicable.
END OF ARTICLE XV
<PAGE>
-49-
ARTICLE XVI
DEFAULTS
--------
16.01 Defaults
--------
The following shall constitute "events of default" to the extent
permitted by applicable law:
A. The failure of either party to make any payment required to be
made in accordance with the terms hereof within ten (10) days after written
notice that such payment has not been made;
B. The failure of either party to perform, keep, or fulfill any of
the other covenants, undertakings, obligations, or conditions set forth in this
Agreement, and the failure to cure such default within thirty (30) days after
notice of said failure or, if such default is not susceptible of being cured
within thirty (30) days, the failure to commence said cure within thirty (30)
days and thereafter to complete said cure within the shortest commercially
reasonable time;
C. If by order of a court of competent jurisdiction a receiver or
liquidator of the property of either party shall be appointed and shall not be
dismissed within sixty (60) days after such appointment;
D. If either party shall be liquidated or dissolved, if either
party shall file a voluntary bankruptcy seeking liquidation or dissolution, or
if a petition or an answer proposing the liquidation or dissolution of either
party under the Federal Bankruptcy Code or any similar law, federal or state,
shall be filed in, and approved by, any court; or
E. If any of the creditors of either party shall file a petition
to liquidate or dissolve such party under the Federal Bankruptcy Code or any
similar law, federal or state, and if such petition shall not be discharged or
denied within sixty (60) days after the date on which such petition was filed.
16.02 Remedies
--------
A. It is the intention of the parties that this Agreement shall be
non-terminable upon the occurrence of an event of default unless it can be shown
that any other remedy afforded by law or equity is inadequate. Accordingly, if
either party alleges that the other party has committed a default hereunder, the
party alleging such default shall first serve a notice and demand upon the other
party outlining the facts of the alleged default and requesting its cure. Such
other party shall have ten (10) days within which to reply and may either admit
the default or dispute the same in whole or in part.
B. If the party alleged to be in default admits or is deemed to
have admitted the default it shall:
1. In the case of a non-monetary default, cure the default
within thirty (30) days, or, if such default is not susceptible of being cured
within thirty (30) days, proceed immediately to cure the default in the shortest
commercially reasonable time.
2. In the case of a monetary default, pay the amount
demanded within ten (10) days.
<PAGE>
-50-
C. Except for an event of default occurring under Section 16.01.C,
D or E, if the party alleged to be in default disputes the claim of default
within said ten (10) days and if the parties are unable to reconcile such
dispute within the following thirty (30) days, or if the party alleged to be in
default acknowledges the default but fails to cure same within the applicable
time period, then the manner shall be settled by arbitration in accordance with
Article XX. The matters to be decided by arbitration are (i) whether the alleged
default occurred (if the parry alleged to be in default has timely disputed the
claim of default) and (ii) the appropriate remedy or remedies to which the non-
defaulting party is entitled, including termination if the arbitrators determine
that no other remedy afforded by law or equity is adequate and, in the case of a
termination decision against Tenant, such remedy shall include, at the non-
defaulting party's request, the arbitrators' order to Tenant to vacate the
Hotels within seventy-five (75) days after the date of such decision.
D. If the party alleged to be in default neither acknowledges nor
disputes the claim of default, such party shall be deemed to have admitted the
default.
E. Upon a final, binding, and nonappealable determination in favor
of the non-defaulting party, including a determination that the non-defaulting
party's remedy, whether exclusive or nonexclusive, is termination of this
Agreement after consideration of the provisions of Section 16.02.A, the non-
defaulting party shall have up to ninety (90) days after the date such
determination becomes final, binding, and nonappealable to deliver notice of
termination to the defaulting party; and this Agreement shall terminate on the
date set forth in such notice, which date shall be not less than seventy-five
(75) days nor more than one hundred fifty (150) days after the date of such
notice. If the non-defaulting party fails to exercise such termination remedy
within the time period set forth above, then such remedy shall be null and void
as to the applicable default. Notwithstanding the foregoing, if the arbitrators,
at the non-defaulting party's request, order the Tenant (in accordance
<PAGE>
-51-
with C above) to vacate the Hotels within seventy-five (75) days after the date
of the arbitrators decision, Tenant shall so vacate without the need for any
further notice from Landlord.
END OF ARTICLE XVI
<PAGE>
-52-
ARTICLE XVII
WAIVER AND PARTIAL INVALIDITY
-----------------------------
17.01 Waiver
------
Failure of either party to insist on strict performance of any of the
terms or provisions of this Agreement, or to exercise any option, right, or
remedy herein contained, shall not be construed as a waiver or relinquishment
for the future of such term, provision, option, right, or remedy, but the same
shall continue and remain in full force and effect. No waiver by either party of
any term or provision hereof shall be deemed to have been made unless expressed
in writing and signed by such party.
17.02 Partial Invalidity
------------------
If any portion of the Agreement shall be declared invalid by order,
decree, or judgment of a court, this Agreement shall be construed as if such
portion had not been inserted herein except when such construction would operate
as an undue hardship on Tenant or Landlord or constitute a substantial deviation
from the general intent and purpose of said parties as reflected in this
Agreement.
END OF ARTICLE XVII
<PAGE>
-53-
ARTICLE XVIII
ASSIGNMENT
----------
18.01 Assignment
----------
A. Neither party shall assign or transfer or permit the assignment
or transfer of this Agreement without the prior written consent of the other,
provided, however that Tenant shall have the right without such consent, to (1)
assign its interest in the Agreement to any of its Affiliates (other than any
Affiliate which may be a partner of Landlord), and any such assignee shall be
deemed to be the Tenant for the purposes of the Agreement, and (2) sublease
shops or grant concessions at the Hotels on commercially reasonable terms so
long as the terms of any such subleases or concessions do not exceed the term of
the Agreement. Nothing contained herein shall prevent an assignment of the
Agreement in connection with an approved sale of the Hotels pursuant to Section
19.02.B.
B. If either party consents to an assignment of the Agreement by
the other, no further assignment shall be made without the express consent in
writing of such party, unless such assignment may otherwise be made without such
consent pursuant to the terms of the Agreement. An assignment by either Landlord
or Tenant of its interest in the Agreement shall not relieve Landlord or Tenant,
as the case may be, from their respective obligations under the Agreement, and
shall inure to the benefit of, and be binding upon, their respective successors,
heirs, legal representatives, or assigns.
18.02 Collateral Assignment
---------------------
Landlord and Tenant may each from time to time collaterally assign and
mortgage its interest under this Agreement to secure indebtedness under the
Combined Loan Documents, or under any extensions, modifications, replacements,
or Refinancings. In connection with any such collateral assignment, Tenant and
Landlord shall each, on request of any lenders, enter into such supplemental
agreements as may obligate Tenant or Landlord to (i) provide the lenders with
notice of any default by Landlord or Tenant hereunder and thereafter permit the
lenders to effect a cure thereof within a reasonable period, (ii) supply the
lenders with copies of any notices or other communications contemplated by this
Agreement, (iii) subordinate Tenant's interest in this Agreement to the rights
of the lenders upon foreclosure of any mortgage, deed of trust, security
agreement, or like instrument against the Hotels or by a deed or assignment in
lieu of foreclosure so long as such lenders enter into the written
nondisturbance agreement described in Section 3.02, (iv) attorn to and recognize
the lenders or their assignees as being Landlord, according to the terms set
forth in Section 3.02.B, or Tenant, as the case may be, hereunder upon
conveyance of title to the Hotels or of the Tenant's interest in this Agreement
to the Lenders or assignees, whether such conveyance is upon foreclosure of a
mortgage, deed of trust, security agreement, or like instrument or by a deed or
assignment in lieu of foreclosure, and (v) containing such other provisions as
are customary for the protection of Landlord, Tenant, and the lenders.
END OF ARTICLE XVIII
<PAGE>
-54-
ARTICLE XIX
SALE OF HOTELS
--------------
19.01 Right of Sale by Landlord
-------------------------
Landlord reserves the right at all times and from time to time to sell
any one or more or all of the Hotels subject, however, in each such case, to
rights of Tenant provided by Section 19.02. Upon any such proposed sale,
Landlord shall send a notice thereof to the Tenant at least thirty (30) days
before the date on which such sale is proposed to close. Such notice shall set
forth (i) the name, address, and business of the proposed purchaser, (ii) the
proposed sales price or method by which such price is to be determined, and
(iii) whether or not it is proposed that the provisions of this Agreement remain
in effect.
19.02 Rights of Tenant on Sale of Hotels
----------------------------------
A. Except as provided in Sections 19.02.B and 19.02.C, this
Agreement will terminate as to a particular Hotel upon the conveyance of title
of such Hotel and the simultaneous payment to the Tenant of its Termination Fee
as provided in Section 4.02.
B. If Landlord sells a Hotel, such sale will be, at Landlord's
election, either:
1. Free and clear of this Agreement, in which event this
Agreement shall terminate as to such Hotel and Tenant shall be entitled to
payment of its Termination Fee as provided in Section 4.02 simultaneously with
conveyance of title to such Hotel; provided, however, that Landlord may not
before December 31, 2001 sell more than fifteen (15) Hotels free and clear of
this Agreement; or
2. Subject to the continuation in effect of occupancy by
Tenant under a Severance Lease or, at Tenant's option, management by Tenant
pursuant to a management agreement having no less favorable terms to Tenant than
this Agreement or that is otherwise reasonably satisfactory to Tenant, in which
event Tenant may either (i) consent to the continuation in effect of such lease
or management arrangement, or (ii) if, in its sole discretion, Tenant reasonably
believes and so notifies the Landlord within thirty (30) days after notice of
the proposed closing of sale, that any one or more of the following is true: (1)
the proposed purchaser is a competitor of Tenant or any Affiliate of Tenant, (2)
the business character and reputation of the proposed purchaser has not been
firmly established, or (3) the financial condition and prospects of the proposed
purchaser may not be adequate to the discharge of the obligations of Landlord
under this Agreement (or replacement agreement), cause the termination of this
Agreement as to such Hotel and require the payment of a Termination Fee as
provided in Section 4.02 simultaneously with the conveyance of title to the
Hotels.
C. Notwithstanding the provisions of Section 4.02 hereof and this
Section 19.02, no Termination Fee shall be due or payable if a Hotel or Hotels
are sold, condemned, or destroyed and Tenant or an Affiliate thereof continues
to lease or manage such Hotel or Hotels, whether or not pursuant to this
Agreement.
D. In the event this Agreement is terminated in its entirety upon
a sale of all of the Hotels, Landlord shall repay to Tenant simultaneously with
the conveyance of title to such Hotels, any and all indebtedness, if any, owing
by Landlord to Tenant excepting, however, any unrefunded Additional Rent.
E. In the event this Agreement is terminated in part only with
respect to the sale of one or more Hotels, Landlord shall repay to Tenant
simultaneously with the conveyance of
<PAGE>
-55-
title to such Hotels, that fraction of any indebtedness (other than any
unrefunded Additional Rent, which shall continue to be owing in accordance with
the terms of this Agreement), if any, owing to Tenant of which the numerator is
the Gross Revenues attributable to the Hotel or Hotels being sold for the most
recently concluded Fiscal Year, and the denominator of which is the Gross
Revenues attributable to all the Hotels for such Fiscal Year.
19.03 Meaning of "Sale" and "Sell"
----------------------------
As used in this Article XIX, "sale" or "sell" shall not refer to the
condemnation or destruction of any Hotel.
END OF ARTICLE XIX
<PAGE>
-56-
ARTICLE XX
ARBITRATION
-----------
20.01 Arbitration
-----------
A. Disputes and remedies specifically mentioned herein as a matter
to be decided by arbitration shall be resolved in accordance with the commercial
rules of the American Arbitration Association (or its successor) in Washington,
D.C. then in effect and pursuant to the Federal Arbitration Act. The decision of
the arbitrators shall be final and binding on the parties. The arbitrators shall
have no right to amend or modify this Agreement.
B. Additional procedures to be complied with in connection with
any arbitration are as follows:
1. Landlord and Tenant shall each appoint a fit and impartial
person as arbitrator who shall have had at least ten (10) years' experience in a
calling connected with the subject matter of the dispute (a "Qualified
Arbitrator"). Such appointment shall be signed in writing by each party to the
other. If either Landlord or Tenant shall fail to appoint a Qualified Arbitrator
within ten (10) days after written notice from the other party to make such
appointment, then the party having made such appointment shall apply to the
American Arbitration Association (or its successor) in Washington, D.C. for the
appointment of a second Qualified Arbitrator and the two so appointed shall
appoint a third Qualified Arbitrator. If such two Qualified Arbitrators fail to
agree on a third Qualified Arbitrator within ten (10) days after appointment of
the second Qualified Arbitrator, then the American Arbitration Association in
Washington, D.C. (or its successor) shall appoint such third Qualified
Arbitrator.
2. The decision of the arbitrators shall be rendered within
thirty (30) days after appointment of the third arbitrator. Such decision shall
be in writing, shall contain a reasonably detailed explanation of the basis for
the decision, and shall be in duplicate, one counterpart thereof to be delivered
to each of Landlord and Tenant. A judgment of a court of competent jurisdiction
may be entered on the award of the arbitrators.
3. If a dispute shall be submitted to arbitration, notice of
appointment of the arbitrators shall be given by Landlord to any first
mortgagee. Such first mortgagee shall then have the right to participate in the
arbitration proceedings, provided that such participation shall be in
association with Landlord and shall not (i) entitle such first mortgagee to
participate in the appointment of Tenant's arbitrator, (ii) allow it to appoint
an additional arbitrator, or (iii) enlarge Landlord's or Tenant's rights in such
arbitration proceedings.
4. If under the provision of this Agreement a matter shall be
submitted to arbitration and Landlord shall fail timely to appoint an
arbitrator, the first mortgagee, if any, shall be entitled to appoint an
arbitrator to represent Landlord's interests.
END OF ARTICLE XX
<PAGE>
-57-
ARTICLE XXI
MISCELLANEOUS
-------------
21.01 Right to Make Agreement
-----------------------
Each party warrants, with respect to itself, that neither the
execution of this Agreement, nor the finalization of the transactions
contemplated hereunder, shall violate any provision of law or any judgment,
writ, injunction, order, or decree of any court or governmental authority having
jurisdiction over it; result in or constitute a breach or default under any
indenture, contract, other commitment, or restriction to which it is a party or
by which it is bound; or require any consent, vote, or approval that has not
been given or taken, or at the time of the transaction involved shall not have
been given or taken. Each party covenants that it has and will continue to have
throughout the term of this Agreement and any extensions thereof, the full right
to enter into this Agreement and perform its obligations thereunder.
21.02 Consents
--------
Wherever in this Agreement the consent or approval of Landlord or
Tenant is required, such consent, agreement or approval shall not be
unreasonably withheld, conditioned or delayed, shall be in writing and shall be
executed by a duly authorized officer or agent of the party granting such
consent, agreement or approval. If either Landlord or Tenant fails to respond
within thirty (30) days to a written request by the other party for a consent,
agreement or approval, such consent, agreement or approval shall be deemed to
have been given.
21.03 Agency
------
In the event that Tenant is deemed to act as Landlord's agent under
the terms of this Agreement, such agency is coupled with an interest and may not
be terminated by Landlord until the expiration of the term of this Agreement,
except as provided in Articles IV, XV, XVI, or XIX.
21.04 Confidentiality
---------------
The parties agree that matters set forth in and information, budgets,
and reports generated as a result of this Agreement are strictly confidential
and each party will make every effort to ensure that the information is not
disclosed to any outside person or entities (including the press) without the
written consent of the other party except as may be reasonably necessary (i) to
obtain licenses, permits and other public approvals necessary for the
refurbishment or operation of the Hotels, (ii) in connection with Landlord's
financing of the Hotels or any sale of any Hotel, (iii) in connection with a
sale of a controlling interest in Landlord, Tenant, or MI, (iv) in connection
with an audit or other investigation conducted pursuant to this Agreement or the
Landlord's or Tenant's interest in any of the Hotels, or (v) in connection with
a foreclosure sale on Landlord's interest in the Hotels, or (vi) as required by
law; provided, however, that all parties to whom the matters set forth in this
Agreement and information, budgets, and reports generated as a result of this
Agreement are to be disclosed, except under the circumstances described in (i),
(v) and (vi) above, shall have, prior to such disclosure, signed a
confidentiality agreement with respect to such matters for the benefit of
Landlord and Tenant.
21.05 Applicable Law
--------------
The Agreement shall be construed under and shall be governed by the
laws of the State of Maryland except that matters specifically mentioned herein
as matters to be decided by arbitration shall be arbitrated in accordance with
Article XX.
<PAGE>
-58-
21.06 Other Operations
----------------
Nothing herein shall be construed to prohibit, limit or restrict
Tenant or any of its Affiliates from developing, owning, operating, managing,
leasing, or franchising, either directly or indirectly, any Marriott hotel,
Marriott Suites, Marriott Inn, Courtyard by Marriott, Fairfield Inn, Residence
Inn, or any other lodging or related facility of any kind or nature in the
market area where any of the Hotels are located.
21.07 Headings
--------
Headings of articles and sections are inserted only for convenience
and are not to be construed as a limitation on the scope of the particular
articles or sections to which they refer.
21.08 Notices
-------
Notices, statements, and other communications to be given under the
terms of this Agreement shall be in writing and delivered by hand against
receipt or sent by certified mail, registered mail, return receipt requested or
by Express Mail service, or overnight courier postage prepaid:
To Landlord:
-----------
Courtyard by Marriott Limited Partnership
c/o Host Marriott Corporation
10400 Fernwood Road
Bethesda, Maryland 20817
Attention: Law Department 72.923/Host Marriott
Deputy General Counsel
<PAGE>
-59-
To Tenant:
---------
Courtyard Management Corporation
c/o Marriott International, Inc.
10400 Fernwood Road
Bethesda, Maryland 20817
Attn: Chief Financial Officer
Dept. 51.933.15
Courtyard Management Corporation
c/o Marriott International, Inc.
10400 Fernwood Road
Bethesda, Maryland 20817
Attn: Law Department 52.923
Hotel Operations
or at such other address as is from time to time designated by the party
receiving the notice. Any such notice that is properly mailed shall for purposes
of establishing that the sending party complied with the applicable time
limitations set forth herein be deemed to have been served as of five (5) days
after said posting, but shall not be binding on the addressee until received.
21.09 Entire Agreement
----------------
This Agreement, with other writings signed by the parties stated to be
supplemental hereto and instruments to be executed and delivered hereunder,
constitute the entire agreement between the parties, supersede all prior
understandings and writings, and may be changed only by writings signed by the
parties.
21.10 Limited Liability
-----------------
Tenant agrees that no limited partner of Landlord, if any, shall have
any personal liability hereunder in excess of such limited partner's
contribution to the capital of Landlord.
21.11 Memorandum of Lease
-------------------
Landlord and Tenant shall, simultaneously with the execution of this
Agreement, execute memoranda or short forms of this Agreement containing the
names of the parties, legal descriptions for the land underlying the Hotels, the
term of the Lease, and such other provisions as either party may require in such
forms as may be required for recording purposes in each jurisdiction in which a
Hotel is located. It is agreed that a Trustee's execution of any such memorandum
is not required or applicable with respect to any memorandum or short form of
this Agreement recorded to give notice of this Lease as it relates to any Hotel
the legal title to which is not held by such Trustee. The cost and expense of
recording the memoranda, short forms or, where necessary, a duplicate original
of the Agreement (including any deed stamps, transfer taxes and similar costs),
shall be borne by the Landlord; and, if Tenant undertakes the recording,
Landlord shall promptly reimburse Tenant for all such costs and expenses
incurred by Tenant. No recording shall take place, however, until such time as
either party requires recording. Each party agrees that it will not record the
Agreement in its entirety unless such a recording is required to protect the
rights of either party or unless required by applicable law.
21.12 Severability
------------
Any provision of this Agreement which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or
<PAGE>
-60-
unenforceability, without invalidating the remaining provisions hereof or
thereof or affecting the validity or enforceability of such provision in any
other jurisdiction unless the severing of such provision would undermine the
essence of the Agreement itself.
21.13 Counterparts
------------
This Agreement may be executed in several counterparts and by
different parties thereto in separate counterparts, each of which shall be
deemed to be an original and all of which taken together shall constitute one
and the same instrument.
21.14 Trustees
--------
The Trustees join in the execution of this Agreement as the holders of
legal title to certain of the Hotels and at the request and direction of
Courtyard by Marriott Limited Partnership, which is the beneficiary under all of
the trusts described in the preamble to this Agreement. It is understood that
nothing contained herein shall be construed as creating any liability on the
Trustees, and it is agreed that all obligations and liabilities of Landlord are
those of Courtyard by Marriott Limited Partnership, and its successors and
assigns, and not those of the Trustees.
<PAGE>
-61-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed under seal as of the day and year first written above.
Witnesses:
COURTYARD BY MARRIOTT LIMITED
PARTNERSHIP
- ----------------------------- By: CBM ONE CORPORATION,
Printed Name: General Partner
- -----------------------------
Printed Name:
By: /s/ Christopher G. Townsend (SEAL)
------------------------------------
Christopher G. Townsend
Vice President
Attest: /s/ Pamela Murch
--------------------------------
Pamela Murch
Assistant Secretary
[SEAL]
Witnesses: LA SALLE NATIONAL TRUST, N.A.,
not personally but as Trustee under
Trust Agreement dated December 9,
- ----------------------------------- 1986 and known as Trust Number 111800
Printed Name:
----------------------
By: (SEAL)
---------------------------------
Printed Name:
- ----------------------------------- -----------------------
Printed Name: Title:
---------------------- ------------------------------
Attest:
-----------------------------
Printed Name:
-----------------------
Title:
------------------------------
<PAGE>
-62-
ALEXANDER TITLE AGENCY, INC., a Virginia
corporation, not personally but as Trustee of the
Virginia Beach Courtyard by Marriott Limited
Partnership Land Trust, the Herndon/Reston
Courtyard by Marriott Limited Partnership Land
Trust, the Courtyard by Marriott Limited
Partnership Land Trust, the Richmond Courtyard by
Marriott Limited Partnership Land Trust, and the
Hampton Beach Courtyard by Marriott Limited
Partnership Land Trust
Witnesses:
/s/ Laura Finamore
- ----------------------------
Laura Finamore
40-05 192 Street
Flushing, NY 11358
/s/ Sean O'Connor
- ----------------------------
Sean O'Connor
415 East 82nd Street
New York, NY 10028
By: /s/ Edward Chertowsky (SEAL)
----------------------------
Edward Chertowsky
Vice President
Attest: /s/ Ann Minichino
------------------------
Ann Minichino
Assistant Secretary
<PAGE>
-63-
Witnesses: COURTYARD MANAGEMENT
CORPORATION
/s/ Laura Finamore
- ------------------------------
Laura Finamore
40-05 192 Street
Flushing, NY 11358
/s/ Sean O'Connor
- ------------------------------
Sean O'Connor
415 East 82nd Street
New York, NY 10028
By: /s/ James L. Best (SEAL)
------------------------------
James L. Best
Vice President
Attest: /s/ Ward R. Cooper
--------------------------
Ward R. Cooper
Assistant Secretary
[SEAL]
<PAGE>
Illinois Exculpation Clause:
This Lease Agreement is executed by LA SALLE NATIONAL TRUST, N.A., not
personally, but as Trustee under Trust No. 111800 in the exercise of the power
and authority conferred upon and vested in it as such Trustee (and said LA SALLE
NATIONAL TRUST, N.A. hereby warrants that it possesses full power and authority
to execute the Instrument) and it is expressly understood and agreed that
nothing contained herein shall be construed as creating any liability on the
part of said LA SALLE NATIONAL TRUST, N.A. personally to perform any covenant,
either express or implied, herein contained, all such liability, if any, being
hereby waived by the Tenant and by every person now or hereafter claiming any
right hereunder; and that so far as the said LA SALLE NATIONAL TRUST, N.A.
personally is concerned, the Tenant shall look solely to the Hotels hereby
leased for the payment thereof. Trustee does not warrant, indemnify, defend
title nor is it responsible for any environmental damage.
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 14th day of April, 1994, before me, the undersigned officer,
personally appeared Christopher G. Townsend (residing at 10 Paramus Court,
Gaithersburg, MD 20878) and Pamela Murch (residing at 3309 Glenway Drive,
Kensington, MD 20895), personally known and acknowledged themselves to me to be
the Vice President and Assistant Secretary respectively of CBM One Corporation,
a Delaware corporation and general partner of COURTYARD BY MARRIOTT LIMITED
PARTNERSHIP, a Delaware limited partnership, and that as such officers, being
duly authorized to do so pursuant to its by-laws or a resolution of its board of
directors, executed and acknowledged the foregoing instrument for the purposes
therein contained, by signing the name of the corporation by themselves as such
officer(s) as their free and voluntary act and deed and the voluntary act and
deed of said corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Jennifer V. Alleyne
--------------------------------------------
Printed Name: Jennifer V. Alleyne
-------------------------------
Notary Public
My Commission Expires:
[NOTARIAL SEAL] May 21, 1994
--------------------------------------------
- --------------------------
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 14th day of April, 1994, before me, the undersigned officer,
personally appeared James L. Best (residing at 26 Buckspark Court, Potomac, MD
20854) and Ward R. Cooper (residing at 9618 Dilston Road, Silver Spring, MD
20903), personally known and acknowledged themselves to me to be the Vice
President and Assistant Secretary respectively of COURTYARD MANAGEMENT
CORPORATION, a Delaware corporation, and that as such officers, being duly
authorized to do so pursuant to its by-laws or a resolution of its board of
directors, executed and acknowledged the foregoing instrument for the purposes
therein contained, by signing the name of the corporation by themselves as such
officer(s) as their free and voluntary act and deed and the voluntary act and
deed of said corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Jennifer V. Alleyne
-------------------------------------------
Printed Name: Jennifer V. Alleyne
------------------------------
Notary Public
My Commission Expires:
[NOTARIAL SEAL] May 21, 1994
-------------------------------------------
- --------------------------
<PAGE>
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Harriet Denisewicz, the undersigned, a Notary Public in and for
said County, in the State aforesaid, DO HEREBY CERTIFY that Joseph W. Lang and
Rosemary Collin of LA SALLE NATIONAL TRUST, N.A. personally known to me to be
the same person whose name is subscribed to the foregoing instrument as such Sr.
Vice President & Asst. Secretary appeared before me this day in person and
acknowledged that they signed and delivered said instrument as their own free
and voluntary act of said bank, as trustee as aforesaid, for the uses and
purposes therein set forth; and said Asst. Secretary then and there acknowledged
that she did affix the seal of said bank to said instrument as her own free and
voluntary act and as the free and voluntary act of said bank, as trustee as
aforesaid, for the uses and purposes therein set forth.
GIVEN under my hand and Notarial Seal this 13 day of April, 1994.
/s/ Harriet Denisewicz
-------------------------------------------
Printed Name: Harriet Denisewicz
------------------------------
Notary Public [SEAL]
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ____ day of April, 1994, before me, the undersigned officer,
personally appeared Edward Chertowsky (residing at 234 Metedeconk Trail,
Jackson, New Jersey 08527), personally known and acknowledged to me to be Vice
President of Alexander Title Agency, Inc. and that as such officer, being duly
authorized to do so pursuant to its by-laws or a resolution of its board of
directors, and being informed of the contents of such instrument, executed and
acknowledged the foregoing instrument for the purposes therein contained, by
signing the name of the corporation by himself as such officer as his free and
voluntary act and deed and the voluntary act and deed of said corporation, and
by affixing the corporate seal of such corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Jennifer V. Alleyne
--------------------------------------------
Printed Name: Jennifer V. Alleyne
-------------------------------
Notary Public
My Commission Expires:
[NOTARIAL SEAL] May 21, 1994
--------------------------------------------
- --------------------------
<PAGE>
EXHIBIT B
---------
LAND
----
BEGINNING at a point which is located in the northerly margin of the right of
way of Arrowood Road (60 foot right of way), which point is located along a tie
line S 68-41-15 E 813.21 feet from an iron marking the intersection of the
easterly margin of the right of way of Arrowridge Boulevard (80 foot right of
way) and the southerly margin of the right of way of Arrowood Road; thence, N
29-15-12 E 56.00 feet to a point; thence, N 07-25-00 E 165.00 feet to a point;
thence, N 00-30-00 W 133.00 feet to a point; thence, N 89-30-00 E 130.00 feet to
a point; thence, S 60-44-33 E 376.48 feet to a point; thence, S 07-14-40 W
411.07 feet to a point which is located in the northerly margin of the right of
way of Arrowood Road; thence, continuing with said margin of Arrowood Road N 60-
44-48 W 516.01 feet to the point and place of Beginning, containing 4.304 acres,
more or less, all as shown on that survey dated August 8, 1985 and prepared by
F. Donald Lawrence and Associates, P.A.
Line 8 above should read as follows:
thence, N 28-15-12 E 56.00 feet to a point; thence, N 07-
TOGETHER WITH that certain Slope Easement and Agreement recorded in Book 5142,
Page 24, Mecklenburg County Public Registry.
EXCEPT FROM the premises above described a 10 ft. wide strip taken for road
widening purposes along Arrowood Road.
<PAGE>
EXHIBIT 10.j
LEASE AGREEMENT
between
COURTYARD BY MARRIOTT LIMITED PARTNERSHIP,
as Landlord ("Landlord")
and
COURTYARD MANAGEMENT CORPORATION
as Tenant ("Tenant")
Dated as of: January 1, 1994
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I - DEFINITION OF TERMS ........................................... 2
1.01 Definition of Terms............................................... 2
1.02 Terms Defined in Other Sections...................................15
ARTICLE II - LEASE OF THE HOTELS...........................................17
2.01 Granting Clause...................................................17
2.02 Operating Permits.................................................17
2.03 Non-Discrimination................................................17
ARTICLE III - OWNERSHIP OF HOTELS..........................................18
3.01 Ownership of Hotels...............................................18
3.02 Subordination, Nondisturbance and Attornment......................19
ARTICLE IV - TERM..........................................................20
4.01 Term..............................................................20
4.02 Termination Fee...................................................21
4.03 Performance Termination...........................................23
4.04 Actions to be Taken Upon Termination..............................23
ARTICLE V - RENT...........................................................27
5.01 Annual Rent......................................................27
5.02 Additional Rent..................................................28
5.03 Distribution of Operating Profit.................................28
5.04 Accounting and Interim Payment...................................34
5.05 Advances to Avoid Foreclosure....................................35
5.06 Application of Sale and Loan Proceeds............................35
ARTICLE VI - INTENTIONALLY DELETED.........................................38
ARTICLE VII- HOTEL WORKING CAPITAL AND FIXED ASSET SUPPLIES................39
7.01 Hotel Working Capital, Inventories, and Fixed Asset Supplies......39
ARTICLE VIII - REPAIRS, MAINTENANCE, AND REPLACEMENTS......................40
8.01 Repairs and Maintenance...........................................40
8.02 Repairs and Equipment Reserve.....................................40
8.03 Building Alterations, Improvements, Renewals, and Replacements....43
8.04 Liens.............................................................44
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
8.05 Ownership of Replacements.........................................44
ARTICLE IX - BOOKKEEPING AND BANK ACCOUNTS.................................45
9.01 Books and Records.................................................45
9.02 Hotel Accounts and Expenditures...................................45
9.03 Annual Operating Projection; Five-Year Forecast...................46
9.04 Operating Losses; Credit..........................................46
ARTICLE X - TRADEMARK AND TRADE NAME.......................................47
10.01 Courtyard by Marriott Name........................................47
10.02 Purchase of Inventories and Fixed Asset Supplies..................47
10.03 Breach of Covenant................................................47
10.04 Computer Software and Equipment...................................48
ARTICLE XI- HOTELS.........................................................49
11.01 Payment of Ground Rent and Other Charges..........................49
11.02 Use, Operation of Hotels and Quiet Enjoyment......................49
11.03 Chain Services....................................................50
11.04 Landlord's Right to Inspect.......................................51
ARTICLE XII- INSURANCE.....................................................52
12.01 Property Insurance................................................52
12.02 Operational Insurance.............................................52
12.03 Coverage..........................................................53
12.04 Cost and Expense..................................................53
12.05 Policies and Endorsements.........................................54
ARTICLE XIII - TAXES.......................................................55
13.01 Real Estate, Personal Property and Other Taxes....................55
ARTICLE XIV - HOTEL EMPLOYEES..............................................56
14.01 Employees.........................................................56
ARTICLE XV - DAMAGE, CONDEMNATION, AND FORCE MAJEURE.......................57
15.01 Damage and Repair.................................................57
15.02 Condemnation......................................................57
15.03 Force Majeure.....................................................58
ARTICLE XVI - DEFAULTS.....................................................59
16.01 Defaults..........................................................59
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
16.02 Remedies..........................................................59
ARTICLE XVII - WAIVER AND PARTIAL INVALIDITY...............................61
17.01 Waiver............................................................61
17.02 Partial Invalidity................................................61
ARTICLE XVIII - ASSIGNMENT.................................................62
18.01 Assignment........................................................62
18.02 Collateral Assignment.............................................62
ARTICLE XIX - SALE OF HOTELS...............................................64
19.01 Right of Sale by Landlord.........................................64
19.02 Rights of Tenant on Sale of Hotels................................64
19.03 Meaning of "Sale" and "Sell"......................................65
ARTICLE XX - ARBITRATION...................................................66
20.01 Arbitration.......................................................66
ARTICLE XXI- MISCELLANEOUS.................................................68
21.01 Right to Make Agreement............................................68
21.02 Consents...........................................................68
21.03 Agency.............................................................68
21.04 Confidentiality....................................................68
21.05 Applicable Law.....................................................69
21.06 Other Operations...................................................69
21.07 Headings...........................................................69
21.08 Notices............................................................69
21.09 Entire Agreement...................................................70
21.10 Limited Liability..................................................70
21.11 Memorandum of Lease................................................70
21.12 Severability.......................................................71
21.13 Counterparts.......................................................71
21.14 Trustees...........................................................71
</TABLE>
EXHIBIT A - Legal Descriptions
EXHIBIT B - Accounting Period/Fiscal Year Calendar
EXHIBIT C - Base Prices
EXHIBIT D - Cumulative Tenant Periods
EXHIBIT E - Hotel Opening Dates
EXHIBIT F - Landlord's Original Cost Basis in Hotels
EXHIBIT G - Administrative Expenses of Landlord
EXHIBIT H - Rent Letter
EXHIBIT I - Operating Profit Needed
in FY 1994-1996 for Tenant
<PAGE>
to Unilaterally Increase Transfers to Reserve
EXHIBIT J - Annual Operating Statement
EXHIBIT K - Annual Operating Projection
EXHIBIT L - Five-Year Forecast
<PAGE>
EXHIBIT 10.j
LEASE AGREEMENT
THIS LEASE AGREEMENT (this "Agreement") is executed as of the 1st day of
January, 1994 (the "Effective Date"), by COURTYARD BY MARRIOTT LIMITED
PARTNERSHIP, a Delaware limited partnership with its principal offices at 10400
Fernwood Road, Bethesda, Maryland 20817 (the "Landlord"), and COURTYARD
MANAGEMENT CORPORATION, a Delaware corporation with its principal offices at
10400 Fernwood Road, Bethesda, Maryland 20817 (the "Tenant").
RECITALS
WHEREAS, Landlord has heretofore acquired the Courtyard by Marriott Hotel,
located in Windsor, Connecticut on the land described on Exhibit A attached
---------
hereto; and
WHEREAS, Landlord desires to let to Tenant and Tenant desires to hire,
lease and operate the Hotel on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties agree as follows:
ARTICLE I
DEFINITION OF TERMS
-------------------
1.01 Definition of Terms
-------------------
The following terms when used in this Agreement shall have the meanings
indicated:
"Accounting Period" means the four (4) week accounting periods having the
-----------------
same beginning and ending dates as Tenant's four (4) week accounting periods,
except that an Accounting Period may occasionally contain five (5) weeks when
necessary to conform Tenant's accounting system to the calendar. A calendar
showing Accounting Period ending dates for Accounting Periods through Fiscal
Year 2000 is attached hereto as Exhibit B.
---------
"Administrative and General Expenses" shall mean costs and expenses that
-----------------------------------
would constitute administrative and general costs and expenses under the Uniform
System of Accounts, including, without limitation, (a) cash overages and
shortages at the Hotel, (b) commissions paid to credit card companies, (c)
credit and collection costs, (d) the cost of data processing services, other
than rental of equipment, (e) the cost of dues and subscriptions for the Hotel
and staff, (f) the cost of recruiting, relocating and training employees, (g)
the cost of internal audits conducted by Tenant or its Affiliates and with
respect to which the reasonable cost incurred by Tenant or its Affiliates is
billed by Tenant or its Affiliates, (h) the cost of internal communication
systems such as pagers, copiers and phones, (i) the payments made for guest
property lost or damaged in excess of the amounts recovered from insurance, (j)
the cost of operating supplies such as printed forms, manuals, postage,
facsimiles and telegrams, (k) the cost of professional fees such as those of
attorneys and accountants, (l) a charge adequate to provide for the probable
loss in collection of accounts, (m) the cost of contract security, (n) the cost
of transportation other than that directly related to guests, (o) the cost of
travel expenses and entertainment expenses of employees of Tenant traveling on
or otherwise pertaining to business for the Hotel, (p) the cost of employee
uniforms, and (q) the cost of employee relations and incentives.
<PAGE>
"Affiliate/Affiliates or Affiliated Persons" shall mean, when used with
------------------------------------------
reference to a specified Person, (i) any Person who directly or indirectly
through one or more intermediaries controls or is controlled by or is under
common control with the specified Person, (ii) any Person who is an officer of,
partner in, or trustee of, or serves in a similar capacity with respect to, the
specified Person or of which the specified Person is an officer, partner, or
trustee, or with respect to which the specified Person serves in a similar
capacity, (iii) any Person who, directly or indirectly, is the beneficial owner
of ten percent (10%) or more of any class of equity securities of the specified
Person or of which the specified Person is directly or indirectly the owner of
ten percent (10%) or more of any class of equity securities, and (iv) any
relative or spouse of the specified Person who makes his or her home with that
of the specified Person. Affiliate/Affiliates or Affiliated Persons of Landlord
or the general partner of Landlord does not include a Person who is a partner in
a partnership or joint venture with Landlord or any other Affiliate if such
Person is not otherwise an Affiliate of Landlord or the general partner of
Landlord. For purposes of this definition, all shares of stock, partnership
interests or similar interests in a corporation, partnership or other Person
owned by a spouse, sibling, parent, child, or grandchild of an individual, by
any such relative of a spouse of such individual or by any relative of such
individual or spouse who makes his or her home with such individual or spouse
shall be deemed to be owned by that individual. For purposes of this Agreement,
neither Landlord, any partner of Landlord, HM, any subsidiary of HM, nor any
partnership in which HM or an HM subsidiary is a partner shall be considered to
be an Affiliate of Tenant, MI or the Ground Lessor, unless, by reason of
transactions occurring subsequent to the date hereof, such person would be an
Affiliate under the foregoing definition.
"Bankruptcy Code" means the U.S. Bankruptcy Code, 11 U.S.C. (S)(S)101 et seq.,
---------------
together with all amendments, modifications and replacements as the same may
exist on any relevant date.
"Central Office Functions" shall mean certain functions performed for the
------------------------
general benefit of the Courtyard by Marriott System by personnel not normally
located at the Hotel, including corporate planning and policy activities,
corporate financial planning, legislative and governmental representation,
corporate human resources planning and benefits planning, in-house legal
services and trademark protection relating to proprietary marks (including
trademarks, trade names, symbols, logos, slogans, designs, insignia, devices,
service marks, and distinctive designs of buildings and signs, and combinations
thereof) which are used generally in the Courtyard by Marriott System. Any
service which is defined as being included within the term "Chain Services"
shall not also be included within "Central Office Functions." Any function
which is defined as being included within the term "Central Office Functions"
shall not also be included in any Deduction other than the Deduction for the
Tenant's Priority Base Retention. The Central Office Functions which are
provided to the Hotel shall be generally consistent with those Central Office
Functions that are provided to other comparable Courtyard by Marriott hotels
within the Courtyard by Marriott System.
"Chain Services" shall mean those certain services furnished to the Hotel
--------------
which are furnished generally on a central or regional basis to other hotels in
the Courtyard by Marriott System. Chain Services shall include: (i) national
and central sales office services; central operational support for rooms, food
and beverage and engineering; central training services; career development;
relocation of central management personnel; central safety and loss prevention
services; central advertising and promotion (including direct and image media
and advertising administration); centralized consumer affairs; to the extent not
charged or allocated directly to the Hotel as a Deduction, the national and
regional reservations system service and inventory and revenue management
services; centralized computer payroll and accounting services; centralized
computer system development, support and operating costs; central monitoring and
management support from "line management" personnel such as area managers; (ii)
such additional services as
2
<PAGE>
are or may be, from time to time, furnished centrally or regionally for the
benefit of hotels in the Courtyard by Marriott System or in substitution for
services now performed at individual hotels which may be more efficiently
performed on a group basis; provided, however, that services not currently
included in Chain Services pursuant to (i) and (ii) above shall only be added to
"Chain Services" if, and to the extent that, such services: (a) are not Central
Office Functions (it being understood that Tenant's sole means of covering the
costs and expenses incurred by it in connection with the Central Office
Functions shall be Tenant's Priority Base Retention) or System Functions (it
being understood that Tenant's sole means of covering the costs and expenses
incurred by it in connection with the System Functions shall be retention of the
Tenant's Priority System Retention); (b) are not services relating to non-
routine work (it being understood that the cost and expense of such non-routine
services shall be Deductions as set forth in Paragraph 4 of the definition of
Deductions); and (c) are either (x) new services (i.e., not previously performed
at or for the Hotel) or (y) services which theretofore had been performed at the
Hotel, but which can be performed more efficiently and economically on a
centralized, regional or other basis.
"Computer Lease" means a lease or other agreement under which computer
--------------
equipment located in the Hotel is leased (including the license, if any, of
operating software therefor).
"Courtyard by Marriott System" shall mean the group of hotels managed, leased,
----------------------------
or otherwise operated by Tenant (or one or more of its Affiliates) from time to
time, which hotel group is operated, as of the Effective Date, under the trade
name "Courtyard by Marriott."
"CPI" means the Consumer Price Index, all items for All Urban Consumers, U.S.
---
City Average and (a) using 1982-1984 as the standard reference base period equal
to 100 or (b) if the CPI ceases to be issued with the reference base period
referred to in clause (a) for any time period for which the CPI is to be
determined hereunder, using for the CPI for the time period for which such
reference base period is not used the standard reference base period for such
time period times a conversion factor that will convert such CPI to a value
corresponding to a 1982-1984 base period equal to 100.
"Current Ground Rent" shall mean the ground rent due and payable, exclusive of
-------------------
any Deferred Ground Rent, to the Ground Lessor under the Ground Lease each
Fiscal Year.
"Debt Service" shall mean all payments required to be made (a)(1) under the
------------
Loan Agreement, so long as the Loan Agreement is in effect, and (2) under the
terms of any loan obtained to refinance all or any part of the indebtedness
under the Loan Agreement or any successive financing or refinancing thereof (any
financing or refinancing referred to in this clause (a)(2), a "Refinancing"),
-----------
provided that the principal amount of any Refinancing, when added to the amount
of indebtedness under the applicable Loan Documents, if any, that will not be
paid off as part of such Refinancing shall not exceed all obligations due under
the applicable Loan Documents at the time of such refinancing or, if such amount
is less than $8,273,990.00, then $8,273,990.00; (b) under the terms of any loan
incurred to fund the cost of any expansion of the Hotel; and (c) under the terms
of any loan incurred to fund expenditures made pursuant to Section 8.03 with
respect to the Hotel, or, as to (b) and (c) above, any Refinancing of said
loans.
"Debt Service Guaranty" shall mean that certain Debt Service Guaranty of even
---------------------
date with the Loan Agreement given to the Lender by Host Marriott Corporation
pursuant to the requirements of the Loan Agreement and joined in by Marriott
International, Inc. pursuant to the Modification, as such Guaranty may be
amended from time to time in accordance with its terms, provided that no such
amendment that would have a material adverse effect on Tenant's rights or
obligations hereunder shall be effective against Tenant without Tenant's prior
written approval.
3
<PAGE>
"Deductions" means for each Fiscal Year the following expenses, without
----------
duplication, incurred in operating the Hotel:
1. The cost of sales including, without limitation, salaries, wages,
employee benefits, payroll taxes and other costs related to the Hotel's
employees (the foregoing costs shall not include salaries and other employee
costs of executive personnel of Tenant who do not work at the Hotel on a regular
basis except that the foregoing costs shall include the allocable portion of the
salary and other employee costs of central personnel the cost of whom are not
included within the definitions of Chain Services or System Functions assigned
to a "cluster" of hotels which includes the Hotel; provided, however, that such
allocable portion of salary and employee costs shall be a Deduction only to the
extent that such costs relate directly to the Hotel;
2. Departmental expenses; Administrative and General Expenses; the
cost of the Hotel's advertising, marketing and business promotion; all utility
costs including but not limited to the cost of heat, light, power and water; and
the cost of routine maintenance, repairs and minor alterations which are treated
as Deductions under Section 8.01;
3. The cost of Inventories and Fixed Asset Supplies consumed in the
operation of the Hotel;
4. The reasonable cost and expense of technical consultants and
operational experts (including employees of Tenant or one of its Affiliates) who
perform specialized services in connection with non-routine Hotel work;
provided, however, that the costs and expenses of employees of Tenant or one of
its Affiliates so incurred shall only be Deductions to the extent such costs and
expenses are reasonable and competitively priced, as compared to similar work
done by outside consultants or experts;
5. The Tenant's Priority Base Retention;
6. The Tenant's Priority System Retention;
7. Subject to and in accordance with Section 11.03.B, the Hotel's pro
rata share of costs and expenses incurred by Tenant (or its Affiliate) in
providing Chain Services;
8. The Hotel's fair share of costs and expenses incurred in
connection with sales, advertising, marketing and/or promotional programs
developed for or within the Courtyard by Marriott System, such as (without
limitation) the Courtyard Club, where such costs and expenses are not deducted
as either departmental expenses under Paragraph 2 above or as Chain Services
under Paragraph 7 above;
9. Insurance costs and expenses as provided in Article XII;
10. Taxes, if any, payable by or assessed against Tenant related to
this Agreement or to Tenant's operation of the Hotel (exclusive of Tenant's
income taxes or franchise taxes) and all Impositions assessed against the Hotel;
11. Amounts which are required to be transferred into the Reserve in
accordance with the provisions of Section 8.02;
12. All sums charged to the Hotel for room reservations obtained for
the Hotel through the reservation system used by Tenant, but in no event in
excess of the amount charged, on
4
<PAGE>
a per reservation basis, for similarly computed activity to other hotels in the
Courtyard by Marriott System using such reservation system;
13. Such other costs and expenses incurred by Tenant or its Affiliates
as are specifically provided for elsewhere in this Agreement or are otherwise
reasonably necessary for the proper and efficient operation of the Hotel so long
as such other reasonably necessary costs and expenses are commonly treated as
Deductions with respect to other hotels owned, leased or managed by Tenant or
its Affiliates in the Courtyard by Marriott System;
14. The amount of any additional funds supplied by Tenant for Hotel
Working Capital, Inventories, and Fixed Asset Supplies pursuant to Section 7.01
over and above the amount of Initial Working Capital; and
15. At Tenant's option, lease payments pursuant to leases of any FF&E
and motor vehicles as described in Section 8.02.A.3 to the extent such payments
are not made out of the Reserve and provided, however, that Tenant shall be
entitled to treat such lease payments as Deductions only to the extent the
indebtedness incurred under such leases does not exceed Thirty-five Thousand
Dollars ($35,000) if the Hotel has only one vehicle and Sixty Thousand Dollars
($60,000) if the Hotel has more than one vehicle (which amounts shall be
adjusted upward each Fiscal Year to reflect the percentage increase in the CPI
as announced for November of the immediately preceding Fiscal Year over the CPI
announced for December 1993, provided that if such percentage increase is a
negative number in any given Fiscal Year, then there shall be no increase in
such amount over the previous Fiscal Year) per Fiscal Year; and for purposes of
this Item 16, "indebtedness incurred" shall mean the fair market value at the
time of leasing of the FF&E and vehicles covered by such leases.
The term "Deductions" shall not include (i) debt service payments pursuant to
any loan or rental payments pursuant to the Ground Lease, both of the foregoing
shall be paid by Landlord from its own funds (except as provided in Section
5.03) and not from Gross Revenues nor from the Reserve; (ii) the excess of any
amounts paid to HM or Affiliates of Tenant or of HM for goods and services over
the customary charges for such goods and services; (iii) as to Central Office
Functions, any amounts in excess of the Tenant's Priority Base Retention; (iv)
as to System Functions, any amounts in excess of the Tenant's Priority System
Retention; (v) as to Chain Services, any amounts in excess of the amounts
allowed under Section 11.03; and (vi) any amounts paid with funds from the
Reserve.
"Deferred Ground Rent" shall mean ground rent due to the Ground Lessor under
--------------------
the Ground Lease but not paid when due pursuant to the provisions of the Ground
Lease.
"FF&E" means (i) furniture, fixtures, furnishings, and equipment, and (ii)
----
FF&E Replacements.
"FF&E Lease" means a lease of any FF&E located in the Hotel other than a TV
----------
System Lease, a Telephone Lease, a Computer Lease, or a lease of a motor vehicle
used primarily for transporting Hotel guests.
"FF&E Replacements" means the items enumerated in Paragraphs (1) and (2) of
-----------------
Section 8.02.A.
"Five Year Forecast" shall have the meaning ascribed to it in Section 9.03.B.
------------------
5
<PAGE>
"Fiscal Year" means Tenant's Fiscal Year, which now ends at midnight on the
-----------
Friday closest to December 31 in each calendar year; the new Fiscal Year begins
on the Saturday immediately following said Friday. Exhibit B attached hereto
---------
shows the ending dates of each Fiscal Year through Fiscal Year 2000. Any
partial Fiscal Year between the Effective Date and the commencement of the first
full Fiscal Year shall be a separate Fiscal Year. A partial Fiscal Year between
the end of the last full Fiscal Year and the Termination shall, for purposes of
the Agreement, constitute a separate Fiscal Year. If Tenant's Fiscal Year is
changed in the future, appropriate adjustment to this Agreement's reporting and
accounting procedures shall be made. No such change or adjustment shall,
however, alter the term of this Agreement or in any way reduce the distributions
of Operating Profit or other payments due Landlord or Tenant hereunder.
"Fixed Asset Supplies" means supply items, including linen, china, glassware,
--------------------
tableware, and similar items.
"Gross Loan Proceeds" means the cumulative proceeds received by Landlord from
-------------------
time to time (a) from any Refinancing or (b) from any borrowing by Landlord for
distribution to Landlord or its partners, in either case including the proceeds
of a sale and leaseback on which no taxable gain is recognized for Federal
income tax purposes.
"Gross Revenues" means, for each Fiscal Year, all revenue and income of any
--------------
kind derived from the Hotel and all departments and parts thereof, including
rentals or other payments from lessees, licensees, or concessionaires in the
Hotel (but not including gross receipts of any such lessees, licensees, or
concessionaires except as may be received by or on behalf of Tenant as rent),
the proceeds of business interruption insurance and the proceeds of telephone
charges, all determined in accordance with generally accepted accounting
principles, excluding all refunds, rebates, discounts, and credits of a similar
nature, given, paid, or returned by Landlord or Tenant in the course of
obtaining such revenue and income. Nevertheless, any amounts received,
recognized, or realized in the nature of the following shall not be included as
Gross Revenues: (i) applicable sales, use, and excise taxes or similar
governmental charges collected directly from patrons or guests, or as part of
the sales price of any goods, services, or displays (including, without
limitation, occupancy, gross receipts, admission, cabaret, or similar or
equivalent taxes); (ii) gratuities; (iii) Gross Sale Proceeds or Sale Proceeds,
Gross Loan Proceeds or Loan Proceeds, and any other loan proceeds; (iv) interest
earned on any reserves, including the FF&E Reserve; and (v) proceeds from the
sale of used FF&E.
"Gross Sale Proceeds" means the cumulative proceeds received by Landlord from
-------------------
time to time from (i) the exchange, condemnation, eminent domain taking,
casualty, sale, or other disposition of all or a portion of the Hotel, or (ii)
the liquidation of Landlord's property interest in the Hotel in connection with
a dissolution of Landlord.
"Ground Lease" means that certain ground lease dated 10/13/86 covering the
------------
land underlying the Hotel, between the Ground Lessor, as landlord, and Landlord,
as tenant, as amended from time to time in accordance with its terms, provided
that no such amendment that would have a material adverse effect on Tenant's
rights or obligations hereunder shall be effective against Tenant without
Tenant's prior written approval.
"Ground Lessor" means Essex House Condominium Corporation, a Delaware
-------------
corporation having its principal office at 10400 Fernwood Road, Bethesda,
Maryland 20817, the landlord under the Ground Lease, and its successors and
assigns.
"HM" means Host Marriott Corporation (formerly named Marriott Corporation).
--
6
<PAGE>
"Hotel" shall refer to the hotel that is located on the land described on
-----
Exhibit A. The term "Hotel" shall incorporate not only the Landlord's interest
- ---------
in the real estate but all easement or other appurtenant rights along with all
improvements constructed or to be constructed thereon and all FF&E and supplies
installed therein.
"Initial Reserve Deposit" shall mean the initial deposit of funds of Landlord
-----------------------
made to the Reserve, which deposit shall be equal to that portion of the amount
held in reserve pursuant to the Management Agreement on December 31, 1993 (the
effective date of termination of the Management Agreement) that is fairly
allocable to the Hotel.
"Initial Working Capital" shall mean Working Capital in the aggregate amount
-----------------------
of Twenty-four Thousand Two Hundred Sixty Dollars ($24,260).
"Inventories" means "Inventories" as defined in the Uniform System of
-----------
Accounts, such as provisions in storerooms, refrigerators, pantries, and
kitchens; beverages in wine cellars and bars; other merchandise intended for
sale; fuel; mechanical supplies; stationery; and other expensed supplies and
similar items.
"Lender" means, Citibank, N.A. and its successors and assigns under the Loan
------
Agreement.
"Loan Agreement" means the Loan Agreement dated as of February 9, 1988 between
--------------
Landlord, as borrower, and the Citibank, N.A., and First National Bank of
Chicago, as lenders, FNBC's rights thereunder having subsequently been assigned
to Citibank, N.A., which is currently the sole lender thereunder, providing
financing for the Hotel, as amended by the Modification and as such Loan
Agreement may be further amended from time to time in accordance with its terms,
provided that no such amendment that would have a material adverse effect on
Tenant's rights or obligations hereunder shall be effective against Tenant
without Tenant's prior written approval.
"Loan Documents" has the meaning ascribed to it in the Loan Agreement.
--------------
"Loan Proceeds" means Gross Loan Proceeds minus (i) first, funds used to pay
-------------
commercially reasonable transaction costs in connection with a Refinancing or
borrowing, and (ii) second, funds used for contemporaneous repayment of
indebtedness related to the Loan Agreement or any Refinancing.
"Management Agreement" means the Management Agreement dated August 14, 1986
--------------------
between Landlord, as owner, and Tenant, as manager (as such agreement was
amended from time to time in accordance with its terms), that covered the Hotel
to which this Agreement relates, plus the Portfolio Hotels.
"MI" means Marriott International, Inc., a Delaware corporation.
--
"Modification" means that certain Modification of Loan Documents dated as of
------------
the Effective Date by and among Landlord, Tenant, MI and Lender.
"Notes" shall mean those certain [promissory notes], each dated as of February
-----
10, 1988 by Landlord, as borrower, to the order of Lender in the original
principal amount of Eight Million, Two Hundred Seventy-Three Thousand, Nine
Hundred Ninety Dollars ($8,273,990).
"Opening Date" means the opening date of the Hotel, which is May 30, 1987.
------------
"Operating Loss" means a negative Operating Profit.
--------------
7
<PAGE>
"Operating Profit" means for any Fiscal Year the excess of Gross Revenues over
----------------
Deductions.
"Person" means any individual, partnership, corporation, trust, or other legal
------
entity.
"Portfolio Hotels" means the forty-nine (49) hotels described in the Portfolio
----------------
Loan Documents and which are covered thereby, and excluding the Hotel covered by
this Agreement.
"Portfolio Loan Documents" means the $304,788,924.58 Second Amended and
------------------------
Restated Loan Agreement dated as of April 7, 1994 by and between Landlord, as
borrower, certain lenders party thereto (the "Portfolio Lenders"), as lenders,
and Citibank, N.A., as agent (the "Agent") for the benefit of such Portfolio
Lenders (the "Multi-State Portfolio Loan Agreement"); the $48,360,075.42 Second
Amended and Restated Loan Agreement dated as of April 7, 1994 by and between
Landlord, as borrower, the Portfolio Lenders, as lenders, and the Agent, as
agent for the benefit of the Portfolio Lenders (the "California Portfolio Loan
Agreement and, together with the Multistate Portfolio Loan Agreement, the
"Portfolio Loan Agreements"); the Multistate Loan Documents, as defined in the
Portfolio Loan Agreements; and the California Loan Documents, as defined in the
Portfolio Loan Agreements all as may be amended from time to time in accordance
with their terms.
"Reimbursement Agreement" has the meaning ascribed to it in the Loan
-----------------------
Documents.
"Replacement Lease" means a lease, substantially on the terms and conditions
-----------------
hereof, entered into with a successor Landlord following foreclosure or transfer
in lieu of foreclosure of the Landlord's interest hereunder.
"Sale Proceeds" means cumulative Gross Sale Proceeds minus (a) first, funds
-------------
used to pay commercially reasonable transaction costs in connection with a sale,
(b) second, funds used to establish the escrow of funds required in Section
13.01.B, (c) third, funds required to be used and used for repayment of
indebtedness related to the loan under the Loan Agreement (or any prior
refinancing thereof), and (d) fourth, in the case of a condemnation, eminent
domain, taking or casualty, funds used to pay all costs of repairing, restoring,
replacing, and reconstructing the Hotel or portions thereof. Sale Proceeds
shall not include the proceeds from the sale of used FF&E not in connection with
the disposition of the Hotel.
"Telephone Lease" means a lease of the telephones and/or other
---------------
telecommunication systems and equipment located in the Hotel.
"Tenant's Earnings" shall mean, for each Fiscal Year, that portion of
-----------------
Operating Profit retained by Tenant pursuant to Section 5.03 and not paid to
Landlord or others, including any Affiliates of Tenant, on Landlord's behalf.
"Tenant's Priority Base Retention" shall mean an amount equal to three percent
--------------------------------
(3%) of Gross Revenues for each Fiscal Year (or portion thereof) that shall be
retained by Tenant out of Gross Revenues to cover the cost and expenses incurred
by Tenant and its Affiliates in connection with the Central Office Functions.
Tenant's Priority Base Retention shall be a Deduction from Gross Revenues in
determining Operating Profit.
"Tenant's Priority System Retention" shall mean an amount equal to three
----------------------------------
percent (3%) of Gross Revenues for each Fiscal Year (or portion thereof) that
shall be retained by Tenant out of Gross Revenues to cover the cost and expenses
incurred by Tenant in connection with certain functions ("System Functions")
which are for the benefit of the Courtyard by Marriott System, are not Central
Office Functions or Chain Services, and are performed by personnel not normally
located
8
<PAGE>
at the Hotel. System Functions shall be limited to divisional executive
management, divisional financial planning, divisional contracting, divisional
product (including food products) planning and development, divisional human
resources planning and development, divisional marketing planning, and services
of Tenant's technical and operational experts making routine inspection and
consultation visits to the Hotel (but specifically excluding "line management"
personnel such as area managers and services of Tenant's or Tenant's Affiliate's
Architecture and Construction personnel who provide design, procurement,
construction or related services). Any function included within the term
"System Functions" shall not also be included in any Deduction other than the
Deduction for the Tenant's Priority System Retention.
"Termination" means the expiration or earlier cessation of this Agreement.
-----------
"Termination Fee Term" shall mean the period beginning on the Opening Date and
--------------------
ending on the date on which the obligation to pay the Termination Fee arises.
"TV System Lease" means a lease or other agreement under which equipment
---------------
(excluding television sets) for the transmission into Hotel rooms of televised
programming is leased or otherwise provided, regardless of whether such lease or
other agreement contains a right or option to purchase such equipment.
"Uniform System of Accounts" means the Uniform System of Accounts for Hotels,
--------------------------
Eighth Revised Edition, 1986, as published by the Hotel Association of New York
City, Inc.
"Working Capital" means funds which are reasonably necessary for the day-to-
---------------
day operation of the business of the Hotel, including, without limitation,
amounts sufficient for the maintenance of change and petty cash funds, operating
bank accounts, accounts receivable, payrolls, prepaid expenses, and funds
required to maintain Inventories, less accounts payable and accrued current
liabilities.
1.02 Terms Defined in Other Sections
-------------------------------
The following terms when used in the Agreement shall have the meanings
described in the Agreement as indicated below:
"Additional Rent" - Section 5.02.A.
---------------
"Agreement" - Preamble.
---------
"Annual Operating Projection" - Section 9.03.A.
---------------------------
"Annual Operating Statement" - Section 9.01.
--------------------------
"Annual Rent" - Section 5.01.
-----------
"Building Estimate" - Section 8.03.A.
-----------------
"Economic Gain" - Section 4.02.C.
-------------
"Effective Date" - Preamble.
--------------
"Five-Year Forecast" - Section 9.03.B.
------------------
9
<PAGE>
"Foreclosure Avoidance Loan" - Section 5.05.
--------------------------
"Hotel Term" - Section 4.01.B.
----------
"Impositions" - Section 13.01.
-----------
"Initial Term" - Section 4.01.B.
------------
"Landlord" - Preamble.
--------
"Qualified Arbitrator" - Section 20.01.B.
--------------------
"Refinancing" - Section 1.01 (within the definition of "Debt Service").
-----------
"Renewal Term(s)" - Section 4.01.B.
---------------
"Rent Letter" - Section 5.04.A.
-----------
"Repairs and Equipment Estimate" - Section 8.02.D.
------------------------------
"Reserve" - Section 8.02.A.
-------
"System Functions" - Section 1.01 (within the definition of "Tenant's Priority
----------------
System Retention").
"Tenant" - Preamble.
------
"Termination Fee" - Section 4.02.A.
---------------
END OF ARTICLE I
10
<PAGE>
ARTICLE II
LEASE OF THE HOTEL
==================
2.01 Granting Clause
---------------
In consideration of the rentals, covenants, and agreements to be paid, kept,
and performed hereunder, Landlord, for the term and on the conditions
hereinafter set forth, leases to Tenant, and Tenant leases and takes from
Landlord, the Hotel.
2.02 Operating Permits
-----------------
Landlord agrees upon request by Tenant to sign promptly and without charge
applications for licenses, permits, or other instruments necessary for operation
of the Hotel.
2.03 Non-Discrimination
-------------------
The parties recognize that Tenant and its Affiliates act as lessee or manager
of certain other hotels, some of which may be owned by MI, the parent of Tenant,
or its Affiliates or by other third parties. Certain of these hotels, now or in
the future, may be located within the general geographical area of the Hotel.
Tenant shall institute reasonable internal controls and procedures to ensure
that no favoritism shall be accorded to such other hotels on the basis of the
ownership thereof and that, at all times, Tenant will operate the various hotels
that it leases, owns, or manages, including the Hotel, in a non-discriminatory
manner. Tenant shall have no liability under this Section 2.03 unless it can be
shown that it has acted in willful disregard of this provision.
END OF ARTICLE II
11
<PAGE>
ARTICLE III
OWNERSHIP OF THE HOTEL
----------------------
3.01 Ownership of the Hotel
----------------------
A. Landlord covenants that it has and will keep and maintain leasehold
title to the land underlying the Hotel, and fee simple title to the hotel
building and other improvements thereon, in each case free and clear of any and
all liens, encumbrances, or other charges, except as follows:
1. Easements or other encumbrances (other than those described in
subsections 2, 3, 4 and 5 hereof) that do not adversely affect the operation of
the Hotel by Tenant;
2. Mortgages, deeds of trust, or similar security instruments
pursuant to the Loan Agreement (all as amended from time to time in accordance
with their terms, provided that no such amendment that would have a material
adverse effect on Tenant's rights or obligations hereunder shall be effective
against Tenant without Tenant's prior written approval) and any Refinancings
that contain a provision reasonably acceptable to Tenant's counsel that this
Agreement will not be subject to forfeiture or Termination other than in
accordance with the terms hereof, notwithstanding a default under such mortgage,
deed of trust, or security instrument;
3. Liens for taxes, assessments, levies, or other public charges
not yet due or that are being contested in good faith; and
4. The terms and conditions of the Ground Lease.
B. Landlord shall pay and discharge, at or prior to the due date, (i)
any and all installments of principal and interest due and payable upon any
mortgage, deed of trust, or like instrument described in this Section and shall
indemnify Tenant from and against all claims and litigation and damages (other
than damages representing Tenant's lost profits) arising from the failure to
make such payments as and when required and (ii) any and all charges for capital
expenditures assessed pursuant to any covenants, conditions and restrictions
affecting the Hotel.
C. Landlord agrees that, in the event it acquires fee title to the land
underlying the Hotel, any resultant merger of its interest in the Ground Lease
into its newly-acquired fee title shall not result in a Termination.
3.02 Subordination, Nondisturbance, and Attornment
---------------------------------------------
A. Tenant agrees that this Agreement and any extensions, renewals,
replacements or modifications to it and all right and interest of Tenant in and
to the Hotel shall, at the option of any mortgagee pursuant to any Refinancing,
be subject and subordinate to such mortgage provided that such mortgagee agrees
in writing, in an instrument recordable in the jurisdiction in which the Hotel
is located that is reasonably acceptable to Tenant's counsel and has been
previously approved in writing by Tenant's counsel, that in the event the
mortgagee or any other party comes into possession of the Hotel by virtue of a
foreclosure, deed or an assignment of the Ground Lease in lieu of foreclosure,
or other transfer pursuant to such mortgage, Tenant shall not be disturbed in
its rights hereunder so long as Tenant is not in material default hereunder.
B. Provided that such mortgagee has delivered to Tenant the recordable
instrument described in subsection 3.02.A above, in the event that such
mortgagee or any other party comes into possession of the Hotel by virtue of a
foreclosure, deed or an assignment of the Ground Lease in lieu
12
<PAGE>
of foreclosure, or other transfer pursuant to such mortgage, Tenant shall be
obligated to such mortgagee or such third party to perform all of the terms and
conditions of this Agreement for the balance of the remaining term but subject
to Tenant's rights to terminate pursuant to Section 19.02.B.2 hereof.
END OF ARTICLE III
13
<PAGE>
ARTICLE IV
TERM
====
4.01 Term
----
A. The term of this Agreement shall be from the Effective Date to the
expiration date of the Hotel Term (as defined in subsection 4.01.B).
B. The "Hotel Term" shall consist of an "Initial Term" and the "Renewal
Term(s)." The "Initial Term" shall begin on the Effective Date and, unless
sooner terminated as herein provided, shall continue to December 31, 2007.
Unless Tenant elects not to renew as provided below, the Hotel Term shall
thereafter be renewed automatically without notice, on the same terms and
conditions contained herein, for each of five (5) successive periods of ten (10)
Fiscal Years, provided that Tenant is not then in default hereunder. Each
successive period of ten (10) Fiscal Years for which the Lease may be renewed
shall be called a "Renewal Term." If Tenant elects not to renew the term of this
Agreement following expiration of the then current Initial Term or Renewal Term,
it shall give Landlord notice of non-renewal at least one hundred (180) days
prior to the expiration of the then current Initial Term or Renewal Term and
shall nevertheless continue to occupy and operate the Hotel as Tenant hereunder
until the earlier to occur of (i) the later of the expiration of the Initial
Term or the Renewal Term, whichever is in effect on the last date on which
notice of non-renewal could be given, or the three year anniversary of the last
date on which notice of non-renewal could be given, (ii) three years after the
expiration of the then current term, or (iii) such time as Landlord secures a
new tenant or operator but, in any such case, not earlier than the expiration of
the then current term of this Agreement.
C. The Hotel Term shall not exceed the term of the Ground Lease. Landlord
agrees that when the Ground Lease is about to expire, it will deliver a written
notice to Tenant no later than ninety (90) days before the last day on which
Landlord can elect to renew the term of said Ground Lease, informing Tenant of
the impending expiration of the Ground Lease and whether Landlord will elect to
renew the Ground Lease for said applicable renewal period.
14
<PAGE>
4.02 Termination Fee
---------------
A. If the Hotel Term is terminated before the natural expiration (and
assuming the exercise of all Renewal Terms) thereof due solely to either (i) the
provisions of Section 15.01 or 15.02 with respect to a casualty or condemnation,
or (ii) upon a sale and/or assignment of the leasehold interest in the Hotel in
accordance with the terms of Article XIX, then Tenant shall, except as provided
below, receive from Landlord a Termination fee (the "Termination Fee") in an
amount determinable under Section 4.02.B below. The purpose of the Termination
Fee is to compensate Tenant for the loss of earnings from operation of the Hotel
due to a premature Termination. No Termination Fee shall be due upon a
foreclosure, deed in lieu of foreclosure, assignment of the Ground Lease, or any
other transfer taking place pursuant to the Loan Agreement after acceleration or
maturity of the obligations thereunder but before such obligations are satisfied
in full or extinguished.
B. The Termination Fee shall be an amount equal to the net present
value, as computed by Tenant, of the reasonably anticipated amount of Tenant's
Earnings over the next ensuing forty (40) years or, if the then remaining term
of this Agreement (assuming the exercise of all Renewal Terms) is less than
forty (40) years, such lesser period. The discount rate to be employed in
making such computation shall be a percentage equal to the sum of (i) three
percentage points plus (ii) the then base rate of interest charged by Citibank,
N.A. (or its successor). Such fee computation shall not be binding on Landlord
unless the firm of independent auditors regularly employed by Landlord has
reported on the mathematical accuracy of the computation and that the forecast
used as the basis for computing such anticipated earnings was prepared using
assumptions that are reasonable as a basis for forecasting anticipated earnings
over the period in question. Nevertheless, the Termination Fee shall in no
event exceed the percentage set forth in the table below, of the "Economic
Gain," as defined in Section 4.02.C, applicable to the year of the Termination
Fee Term in which the right to a Termination Fee accrues:
<TABLE>
<CAPTION>
Year of Termination Fee Term Percentage
-----------------------------------------------------------------
<S> <C>
1-15 50%
16-40 49% in year 16, declining
by one percentage point per
year thereafter.
</TABLE>
C. For purposes hereof, "Economic Gain" shall mean (i) any Sale
Proceeds minus (ii) 113% (123% in the 21st and subsequent years of the
Termination Fee Term) of the sum of (1) $10,022,000.00, which is Landlord's
original cost basis of the Hotel and FF&E when Landlord acquired the Hotel (not
including the cost of any FF&E Replacements, repairs, maintenance, building
improvements, alterations, or replacements or other costs incurred after
completion of the Hotel) involved in the condemnation, casualty, or sale, plus
(2) the cos t of any structural repairs or replacements necessitated by previous
condemnations or casualties in excess of insurance or condemnation proceeds
received as a result of a casualty or condemnation occurring prior to any
casualty or condemnation triggering Landlord's obligation hereunder to pay a
Termination Fee.
D. If the Termination Fee exceeds the available Sale Proceeds, the
amount, if any, of such excess shall not be due.
E. The Termination Fee due under Section 4.02.A shall be paid in full
by Landlord to Tenant upon the later to occur of (i) the Termination, or (ii)
the date on which the Sale Proceeds become available to Landlord. In the event
of any Sale Proceeds represented by evidences of indebtedness, Landlord shall
assign to Tenant, without recourse, all or such portion of the principal amount
thereof (and any interest accruing thereon) as equals that portion of the
Termination Fee not
15
<PAGE>
otherwise paid. Any such assignment shall be deemed payment of the Termination
Fee to the extent of the principal amount so assigned.
F. Any dispute between Landlord and Tenant with respect to the
Termination Fee or the obligation of Landlord or Tenant with respect thereto
shall, at the request of either party, be submitted to arbitration in accordance
with Article XX.
4.03 [Intentionally omitted]
4.04 Actions to be Taken Upon Termination
------------------------------------
A. Upon Termination, the following shall be applicable:
1. Tenant shall, within ninety (90) days after Termination,
prepare and deliver to Landlord a final accounting statement, as more
particularly described in Section 9.01 hereof, along with a statement of any
sums due from Landlord to Tenant or from Tenant to Landlord pursuant hereto,
dated as of the date of Termination. Within thirty (30) days after the receipt
by Landlord of such final accounting statement, the parties will make whatever
cash adjustments are necessary pursuant to such final statement. The cost of
preparing such final accounting statement shall be a Deduction from Gross
Revenues attributable to the final Fiscal Year of the Term, unless the
Termination occurs as a result of a default by either party, in which case the
defaulting party shall pay such cost. Tenant and Landlord acknowledge that
there may be certain adjustments for which the information will not be available
at the time of the final accounting, and the parties agree to readjust such
amounts and make the necessary cash adjustments when such information becomes
available; provided, however, that all accounts shall be deemed final two (2)
years after Termination.
2. Tenant shall release and transfer to Landlord any of
Landlord's funds which are held or controlled by Tenant with respect to the
Hotel with the exception of funds to be held in escrow pursuant to Sections
12.04, 13.01.B and 14.01.C, funds necessary to compensate Tenant pursuant to
Section 7.01, funds necessary to reimburse Tenant pursuant to Sections 5.05 and
9.04.A, and otherwise in accordance herewith.
3. Tenant shall make available to Landlord such books and
records (including those from prior years, subject to Tenant's reasonable
records retention policies) as will be needed by Landlord to prepare the
accounting statements, in accordance with the Uniform System of Accounts for the
year in which the Termination occurs and for any subsequent year.
4. Tenant shall (to the extent permitted by law or by
applicable agreement) assign to Landlord or to the new tenant all subleases,
concession agreements, operating licenses and permits for the Hotel which have
been issued in Tenant's name (including liquor and restaurant licenses, if any);
provided, that if Tenant has expended any of its own funds in the acquisition of
any of such licenses or permits, Landlord shall reimburse Tenant therefor if it
has not done so already.
5. Various other actions shall be taken, as described in this
Agreement, including, but not limited to, the actions described in Sections
7.01, 10.02, 10.04.C, 12.04, and 14.01.C.
6. Tenant shall peacefully vacate and surrender the Hotel to
Landlord.
B. The provisions of this Section 4.04 shall survive Termination.
16
<PAGE>
END OF ARTICLE IV
17
<PAGE>
ARTICLE V
RENT
----
5.01 Annual Rent
-----------
Tenant agrees to pay Landlord during the Initial Term and any Renewal Terms
hereof annual rental with respect to each Fiscal Year (the "Annual Rent") equal
to (1) at such times as Tenant is required to pay Landlord as rent under the
"Hotel Lease" referred to in the Portfolio Loan Documents 85% of "Operating
Profit" as defined therein, (a) eighty-five percent (85%) of Operating Profit,
as defined in this Lease, in each Fiscal Year less (b) an amount equal to the
sum of any Deductions for Hotel Working Capital, Inventories, and Fixed Asset
Supplies to which Tenant is entitled under Section 7.01 and the amount of all
Deductions for taxes (including fines, penalties, and interest, if any, added
thereto) payable by or assessed against Landlord or Tenant related to Tenant's
lease and the personal property located therein from Landlord, in each case
multiplied by .15, and thereafter, (2) at such times as Tenant is required to
pay Landlord as rent under the "Hotel Lease" referred to in the Portfolio Loan
Documents 75% of "Operating Profit" as defined therein, (a) seventy-five percent
(75%) of Operating Profit, as defined herein, for each Fiscal Year, less (b) an
amount equal to the sum of any Deductions for Hotel Working Capital,
Inventories, and Fixed Asset Supplies to which Tenant is entitled under Section
7.01 and the amount of all Deductions for taxes (including fines, penalties, and
interest, if any, added thereto) payable by or assessed against Landlord or
Tenant related to Tenant's lease of the Hotel and the personal property located
therein from Landlord, in each case multiplied by .25. Notwithstanding Tenant's
agreement to pay Annual Rent to Landlord, a portion of Annual Rent may be (x)
paid by Tenant directly to the Ground Lessor on Landlord's behalf (y) paid by
Tenant directly to MI under the Reimbursement Agreement on Landlord's behalf,
and (z) retained by Tenant to satisfy certain obligations of Landlord to Tenant,
but only in accordance with Section 5.03.
5.02 Additional Rent
---------------
A. The term "Additional Rent" as used hereinafter shall mean the
excess, if any, of (1) the aggregate amount paid by Tenant in each Fiscal Year
under Section 5.03 to (a) Landlord or, on Landlord's behalf, to parties other
than Landlord or Tenant, (b) Tenant as repayment of Foreclosure Avoidance Loans,
(c) Tenant as reimbursement of Additional Rent paid in previous Fiscal Years,
and (d) Tenant as payment on any due but unpaid Termination Fee, over (2) Annual
Rent.
B. It shall be the obligation of Landlord to refund to Tenant any
Additional Rent paid by Tenant; provided, however, that such refund shall be
made to Tenant only from Operating Profit in future Fiscal Years as provided in
Section 5.03. Such refund shall be made without interest. Upon Termination of
this Agreement, Landlord shall have no further liability for any refund of
Additional Rent previously paid by Tenant.
5.03 Distribution of Operating Profit
--------------------------------
For each Fiscal Year, Operating Profit, to the extent available,
shall be distributed by Tenant as follows (without duplication):
1. First, an amount equal to Debt Service shall be paid to
Landlord to be used to pay such obligations; then
2. [Intentionally omitted]
18
<PAGE>
3. On Landlord's behalf, an amount equal to the Current
Ground Rent due under the Ground Lease shall be paid by Tenant to the Ground
Lessor; then
4. An amount equal to the Deferred Ground Rent, plus interest
accrued thereon, on the Ground Lease shall be paid, to the extent not previously
reimbursed to the Ground Lessor, on Landlord's behalf, to the Ground Lessor;
then
5. An amount equal to all payments made by MI to the Lender
under the Debt Service Guaranty, plus interest accrued thereon, shall be paid,
to the extent not previously reimbursed to MI, on landlord's behalf, to MI; then
6. An amount equal to all payments made by HM to the Lenders
under the Debt Service Guaranty plus interest accrued thereon, as evidenced by
the Reimbursement Agreement (as defined in the Loan Documents) and the
Reimbursement Note (as defined in the Loan Documents), shall be paid to
Landlord, to the extent not previously reimbursed to HM, to be used to repay HM
for making such payments; then
7. [Intentionally omitted]
8. An amount equal to the excess, if any, of Annual Rent over
Debt Service, up to but not exceeding fifty percent (50%) of such remaining
Operating Profit, shall be paid to Landlord; then
9. An amount equal to the unrefunded Additional Rent shall be
retained by Tenant to be applied by Tenant to the refund of such Additional
Rent; then
10. An amount equal to the outstanding balance of any
Foreclosure Avoidance Loans, including interest accrued thereon as evidenced by
the promissory note provided for in Section 5.05, shall be retained by Tenant
and applied by Tenant to repayment of the Foreclosure Avoidance Loans; then
11. [Intentionally omitted]
12. If the amount paid to Landlord under Section 5.03.8 was
less than the excess of Annual Rent over Debt Service, then an amount equal to
such deficiency shall be paid to Landlord; and then
13. Any and all remaining Operating Profit shall be retained
by Tenant.
5.04 Accounting and Interim Payment
------------------------------
A. Within twenty (20) days after the close of each Accounting
Period, Tenant shall submit an interim accounting, or "Rent Letter,"
substantially in the form of Exhibit C attached hereto, to Landlord showing
---------
Gross Revenues, Deductions, Operating Profit, and the application thereof under
Section 5.03 on an aggregate basis. Tenant shall transfer with each Rent Letter
any interim amounts of Annual Rent and Additional Rent to be paid to Landlord,
which amounts shall be a reasonable estimate of the portions of Annual Rent and
Additional Rent allocable to such Accounting Period.
B. Calculations and payments of Annual Rent and Additional Rent and
applications of Operating Profit made with respect to each Accounting Period
shall be accounted for cumulatively
19
<PAGE>
within each Fiscal Year. Within seventy-five (75) days after the close of each
Fiscal Year, Tenant shall submit an accounting, as more fully described in
Section 9.01, for such Fiscal Year to Landlord, which accounting shall be
controlling over the interim accountings. Any deficiency in the amount of
Annual Rent or Additional Rent as shown by the Fiscal Year accounting shall be
promptly paid by Tenant to Landlord or to others on Landlord's behalf in
accordance with Section 5.03. Any overpayment of Annual Rent or Additional Rent
made by Tenant as shown by the Fiscal Year accounting shall be a credit against
both Annual Rent and Additional Rent owed by Tenant to Landlord in succeeding
Accounting Periods. If this Agreement is terminated for any reason before
Tenant has recovered all such overpayments, then Tenant shall be entitled to
recover the remaining amount of such overpayments from either of the following
sources: (i) by deduction from any of Landlord's funds which are held or
controlled by Tenant, or (ii) Landlord shall pay Tenant the remaining amount of
such credit out of any Sale Proceeds. No adjustment shall be made for any
Operating Loss in a preceding or subsequent Fiscal Year.
5.05 Advances to Avoid Foreclosure
-----------------------------
The parties agree that Tenant shall have no liability with respect to any
obligations of Landlord. However, Tenant shall have the right, but not the
obligation, to make Debt Service payments on behalf of Landlord as and to the
extent necessary to avoid the foreclosure of any lien or security interest
applicable to the Hotel. Any such payments (each of which shall be referred to
as a "Foreclosure Avoidance Loan") shall be deemed a loan by Tenant to Landlord
in such amount, shall bear annual interest at two percentage points over the
base rate of interest charged by Citibank, N.A. (or its successor) and shall be
repayable by Landlord on the date that is fifteen (15) years after the date of
each Foreclosure Avoidance Loan or, if earlier, upon Termination. Tenant shall
be entitled to reimburse itself for such Foreclosure Avoidance Loans in
accordance with Section 5.03. Landlord shall evidence each Foreclosure
Avoidance Loan by executing a promissory note payable to Tenant in the principal
amount of each Foreclosure Avoidance Loan and bearing interest as aforesaid.
5.06 Application of Sale and Loan Proceeds
-------------------------------------
Landlord agrees that Gross Sale Proceeds shall be applied to the uses
described and in the order listed in (a), (b), (c) and (d) of the definition of
Sale Proceeds. Loan Proceeds and Sale Proceeds shall be applied, and Landlord
shall be obligated to apply same, in the following manner:
A. First, an amount equal to the funds required for the escrows as
set forth in Sections 12.04 and 14.01.C; then
B. An amount equal to the Deferred Ground Rent on the Hotel shall be
paid (pro rata, if necessary), to the extent not previously reimbursed, to the
Ground Lessor; then
C. An amount equal to all payments made by MI to the Lender under
the Debt Service Guaranty, plus interest accrued thereon, shall be paid, to the
extent not previously reimbursed, to MI;
D. An amount equal to the unrefunded Additional Rent, if any, shall
be paid to Tenant;
E. An amount equal to the outstanding balance of any Foreclosure
Avoidance Loans, including interest thereon, shall be paid to Tenant; then
F. An amount equal to any outstanding deficiencies owed Tenant
pursuant to Section 9.04, if any, shall be paid to Tenant; then
20
<PAGE>
G. An amount equal to any uncompensated amounts owed to Tenant
pursuant to Section 7.01, if any, shall be paid to Tenant; then
H. An amount equal to the Termination Fee, if any, owed to Tenant
pursuant to Section 4.02 shall be paid to Tenant; and then
I. The remaining balance of the Loan Proceeds or Sale Proceeds, as
the case may be, shall be retained by Landlord (or any successor to Landlord,
whether by foreclosure or otherwise).
The Landlord and Tenant agree that MI, HM, and the Ground Lessor are intended
third party beneficiaries of the rights and obligations set forth in this
Section 5.06. As such third party beneficiaries, MI, HM, and the Ground Lessor,
in addition to Tenant, shall have all remedies available at law or in equity for
the enforcement of the obligations set forth herein. In addition to all such
remedies, in the event Landlord fails to apply Loan Proceeds or Sale Proceeds in
accordance with the provisions hereof, Tenant shall have the right,
notwithstanding any other provision in this Agreement to the contrary or
Tenant's obligation to pay Annual Rent or Additional Rent to Landlord, to offset
all amounts owed as described in subsections A through I above against any
future Annual Rent or Additional Rent, and to pay MI, HM, the Ground Lessor, and
itself in accordance with the provisions of this Section 5.06 out of such offset
amounts. Any amounts offset by Tenant shall not, however, affect the amounts
required to be distributed by Tenant to Landlord to be used to make payments of
Debt Service to Lender. The provisions of this Section 5.06 shall survive any
Termination.
END OF ARTICLE V
21
<PAGE>
ARTICLE VI
[THIS ARTICLE INTENTIONALLY OMITTED]
END OF ARTICLE VI
22
<PAGE>
ARTICLE VII
HOTEL WORKING CAPITAL AND FIXED ASSET SUPPLIES
==============================================
7.01 Hotel Working Capital, Inventories, and Fixed Asset Supplies
------------------------------------------------------------
From time to time additional funds may be necessary to maintain Hotel Working
Capital, Inventories, and Fixed Asset Supplies at levels reasonably determined
by Tenant to be necessary to satisfy the needs of the Hotel as its operation may
then require. Tenant shall be entitled to take as Deductions any additional
necessary funds supplied by it for such purposes and shall use such funds only
for Hotel Working Capital, Inventories and Fixed Asset Supplies in accordance
with the purposes of this Agreement. Upon Termination, Tenant shall leave in
the Hotel for Landlord any unused Inventories, except for Inventories purchased
by Tenant under Section 10.02. Fixed Asset Supplies, including additions and
replacements thereto, shall remain the property of Landlord throughout the term
of this Agreement, except for Fixed Asset Supplies purchased by Tenant under
Section 10.02. Upon Termination, Tenant shall pay to Landlord the difference,
if any, between Initial Working Capital and funds supplied by Tenant for
additional Working Capital, Inventories, and Fixed Asset Supplies. If Working
Capital at the time of Termination (for any reason) is inadequate to fully
compensate Tenant for such additional funds supplied by Tenant, then Tenant
shall be entitled to deduct such deficiency from either of the following
sources: (i) by deduction from any funds of Landlord then held or controlled by
Tenant, or (ii) out of any Sale Proceeds.
END OF ARTICLE VII
23
<PAGE>
ARTICLE VIII
REPAIRS, MAINTENANCE, AND REPLACEMENTS
--------------------------------------
8.01 Repairs and Maintenance
-----------------------
Tenant shall, on Landlord's behalf and as Landlord's agent with respect to
such obligation, maintain the Hotel in good repair and condition and in
conformity with applicable laws and regulations and shall make or cause to be
made such routine maintenance, repairs, and minor alterations, the cost of which
can be expensed under generally accepted accounting principles, as it, from time
to time, deems necessary for such purposes. The cost of such maintenance,
repairs, and alterations shall be paid from Gross Revenues and shall be treated
as a Deduction in determining Operating Profit.
8.02 Repairs and Equipment Reserve
-----------------------------
A. Tenant shall, on behalf of Landlord and in Landlord's name but
with Tenant having the sole authority to make withdrawals or transact other
business with respect thereto, establish and maintain, an escrow reserve account
(the "Repair and Equipment Reserve" or the "Reserve") in a bank designated by
Landlord. The Reserve shall be used to cover the cost of FF&E Replacements
consisting of:
1. Replacements and renewals related solely to the FF&E of the
Hotel (including communication systems and computer systems);
2. Certain routine repairs and maintenance to the building
structures of the Hotel, the cost of which is normally capitalized under
generally accepted accounting principles, such as exterior and interior
repainting, resurfacing building walls, floors, roofs, and parking areas, and
replacing folding walls and the like, but which are not alterations,
improvements, renewals, or replacements to the structure of the building or to
its mechanical, electrical, heating, ventilating, air conditioning, plumbing, or
vertical transportation systems, the cost of which are Landlord's sole
responsibility under Section 8.03; and
3. Lease payments for any FF&E and motor vehicles that are leased
instead of purchased and not treated as Deductions pursuant to Item 16 of the
definition of Deductions.
B. As of the Effective Date, Landlord and Tenant shall make the Initial
Reserve Deposit into the Reserve. Except as provided below and subject to the
provisions of Section 8.02.E, for each Fiscal Year during the term of this
Agreement, Tenant shall transfer into the Reserve an amount equal to five
percent (5%) of Gross Revenues attributable to the Hotel for such period of
time. Notwithstanding the foregoing, no deduction and transfer into the Reserve
will be required to the extent that such deduction and transfer, when added to
amounts already in the Reserve, would make the then balance exceed the gross
amount of the transfers for the previous eight (8) Fiscal Years. Any interest
which accrues on any amounts held in the Reserve shall be retained therein
without reduction of Tenant's obligation to make transfers thereto. All amounts
held in the Reserve shall belong to Landlord.
C. Tenant shall, on behalf of Landlord and as Landlord's agent with
respect to such obligation, from time to time make such (i) replacements and
renewals to the Hotel's FF&E, and (ii) repairs to the Hotel of the nature
described in Section 8.02.A.2, as it deems necessary, and (iii) lease payments
as described in Section 8.02.A.3 [as it deems necessary], up to the balance in
the Reserve. No expenditures will be made other than as set forth in the
approved Repairs and Equipment
24
<PAGE>
Estimate and in no event may expenditures be made in excess of such balance
without the prior approval of Landlord; provided, however, that (1) Tenant may
effect emergency repairs necessary to prevent further loss or damage without
such approval, and (2) Tenant may, in its sole discretion, expend up to ten
thousand dollars ($10,000) (as adjusted upward each Fiscal Year to reflect the
percentage increase in the CPI announced for November of the immediately
preceding Fiscal Year over the CPI announced for December 1993, provided that if
such percentage increase is a negative number in any given Fiscal Year, then
there shall be no increase in such amount over the previous Fiscal Year) in each
Fiscal Year for matters not contemplated in the Repairs and Equipment Estimate.
At the end of each Fiscal Year, any amounts remaining in the Reserve shall be
carried forward to the next Fiscal Year. Proceeds from the sale of FF&E no
longer necessary to the operation of the Hotel shall be deposited in the Reserve
without reduction of Tenant's obligation to make transfers thereto.
Expenditures made by Tenant out of the Reserve for replacements and renewals to
the Hotel's FF&E, repairs to the Hotel of the nature described in Section
8.02.A.2, and lease payments as described in Section 8.02.A.3 shall not also be
treated as Deductions. Upon Termination of this Agreement and after payment by
Tenant of all charges properly payable out of the Reserve, Tenant shall pay to
Landlord all amounts held in the Reserve unless Tenant will continue operating
the Hotel, in which case Tenant shall transfer all amounts held in the Reserve
to one or more new accounts for the benefit of the new owner of the Landlord's
interest in the Hotel. If for any reason Tenant is prohibited, in contradiction
to the terms stated above, from transferring such Reserve funds to one or more
new accounts for the benefit of the new landlord(s), then Tenant shall be
entitled, in addition to the transfers into the Reserve provided in Section
8.02.B, to transfer from Gross Revenues into the new Reserve account an amount
equal to Twenty Thousand, Four Hundred Dollars ($20,400). Tenant, in its sole
but reasonable discretion, and subject to the exceptions stated below, shall
decide whether to purchase or lease any replacement FF&E or motor vehicles used
in transporting Hotel guests. If Tenant enters into any lease of replacement
FF&E or motor vehicles used in transporting Hotel guests, it shall do so on
Landlord's behalf and as Landlord's agent; or, upon Tenant's recommendation and
request, Landlord shall directly enter into such leases. Notwithstanding the
foregoing, Tenant shall not and shall not require Landlord to enter into any
lease other than (i) Telephone Leases, (ii) Computer Leases, (iii) TV System
Leases, (iv) FF&E Leases, and (v) leases of vehicles used in transporting Hotel
guests. With respect to FF&E Leases only, Tenant shall be required to obtain
Landlord's prior written approval before entering into or requesting that
Landlord enter into any FF&E Lease, if (a) the fair market value of the FF&E
with respect to the FF&E Leases relating to the Hotel would exceed at any time
$200,000 in the aggregate (b) the FF&E to be covered by such FF&E Lease is FF&E
that is not customarily leased in the hotel industry in the United States, or
(c) such FF&E Lease is on payment terms (including amount and time of payment)
materially more favorable to the lessor thereof than payment terms customary in
the hotel industry in the United States for similar leases. With respect to TV
System Leases only, Tenant shall be required to obtain Landlord's prior written
approval before entering into or requesting the Landlord enter into any TV
System Lease, if (a) the equipment to be covered by such TV System Lease is not
customarily leased in the hotel industry in the United States or (b) such TV
System Lease is on payment terms (including amount and time of payment)
materially more favorable to the lessor thereof than payment terms customary in
the hotel industry in the United States for similar leases. In cases described
in the preceding two sentences, Landlord's approval shall not be unreasonably
withheld; provided, however, that the failure of Lenders to approve such leasing
proposal shall justify Landlord in withholding its approval.
D. Tenant shall annually prepare a written estimate (the "Repairs
and Equipment Estimate") for FF&E Replacements necessary for the forthcoming
Fiscal Year and shall submit the Repairs and Equipment Estimate to Landlord at
the same time it submits the Annual Operating Projection described in Section
9.03. The Repairs and Equipment Estimate shall indicate the estimated time
schedule for making such replacements and renewals. Landlord shall review the
Repairs and Equipment Estimate submitted in good faith by Tenant. If Landlord
shall fail to
25
<PAGE>
approve such Repairs and Equipment Estimate within thirty (30) days of the
receipt thereof, or if Tenant does not agree to any modifications made by
Landlord within fifteen (15) days after such modifications are suggested, Tenant
shall have the option of terminating this Agreement by giving written notice to
Landlord within 30 days thereafter, such termination to be effective 60 days
after the giving of such termination notice (or such later time as may be
required to avoid liability under the WARN Act or any similar law). If Tenant
does not so notify Landlord, it shall continue to occupy and operate the Hotel
as provided under this Agreement without making the FF&E Replacements to which
Landlord did not agree.
E. The percentage contributions for the Reserve described in Section
8.02.B are estimates. As the Hotel ages, these percentages may not be
sufficient to keep the Reserve at the levels necessary to make the replacements
and renewals to the Hotel's FF&E, or to make the repairs to the Hotel buildings
of the nature described in Section 8.02.A.2, required to maintain the Hotel in
first-class condition. If the Repairs and Equipment Estimate prepared in good
faith by Tenant exceeds the available funds in the Reserve, Landlord shall:
1. Agree to increase the annual percentage in Section 8.02.B
to provide the additional funds required, or
2. Provide outside financing for the additional funds
required, in which event the principal and interest payments on such financing
(but not the expenditure of such additional funds from the Reserve after their
deposit into the Reserve) shall constitute Deductions.
A failure or refusal by Landlord to agree to 1 or 2 above within a sixty (60)
day period after Tenant's request therefor shall entitle Tenant, within thirty
(30) days thereafter, to notify Landlord that it will terminate this Agreement
if agreement was not reached as of a date six (6) months after the date of
Tenant's notice.
8.03 Building Alterations, Improvements, Renewals, and Replacements
--------------------------------------------------------------
A. Tenant shall prepare an annual estimate of aggregate expenditures
necessary for alterations (including major repairs), improvements, renewals, and
replacements (which alterations, improvements, renewals, and replacements are
not among those referred to in Section 8.02.A.2) to the structural, mechanical,
electrical, heating, ventilating, air conditioning, plumbing, and vertical
transportation elements of the Hotel (the "Building Estimate") and shall submit
such Building Estimate to Landlord for its approval at the same time the Annual
Operating Projection is submitted. Tenant shall not make any expenditures for
such purposes until Landlord approves the Building Estimate; provided, however,
that if such alterations, improvements, renewals, or replacements to the Hotel
(whether included in the Building Estimate or the need for which arises at any
time during any Fiscal Year) are required by reason of any law, ordinance,
regulation, or order of a competent governmental authority, or are otherwise
required for the continued orderly operation of the Hotels, Tenant shall give
Landlord notice thereof and shall be authorized, on Landlord's behalf and as
Landlord's agent, to take appropriate remedial action without such approval if
Landlord does not act. Tenant shall, on Landlord's behalf and as Landlord's
agent, make such alterations, improvements, renewals, and replacements in
accordance with the provisions hereof; and the cost of all such alterations,
improvements, renewals, or replacements shall be borne solely by Landlord.
B. If Landlord does not approve the Building Estimate within thirty
(30) days after it has been submitted, Tenant shall have the option, to be
exercised by written notice within thirty (30) days thereafter, of terminating
this Agreement, such termination to be effective 60 days after the
26
<PAGE>
giving of such termination notice (or such later time as may be required to
avoid liability under the WARN Act or any similar law).
8.04 Liens
-----
Tenant and Landlord severally shall use their best efforts to prevent any
mechanic's, materialmen's and similar liens from being filed against the Hotel
that arise from any such alterations, improvements, renewals, or replacements in
or to the Hotel. They shall cooperate fully in obtaining the release of any
such liens, and the cost thereof, if the lien was not occasioned by the fault of
either party, shall be paid for by Landlord. If the lien arises as a result of
the fault of either party, then the party at fault shall bear the cost of
obtaining the lien release.
8.05 Ownership of Replacements
-------------------------
All alterations, improvements, renewals, or replacements made or acquired
under Article VIII shall be Landlord's property.
END OF ARTICLE VIII
27
<PAGE>
ARTICLE IX
BOOKKEEPING AND BANK ACCOUNTS
-----------------------------
9.01 Books and Records
-----------------
Books of control and account shall be kept on the accrual basis and in all
material respects in accordance with the Uniform System of Accounts, with the
exceptions provided in this Agreement. Landlord may at reasonable intervals
upon two (2) business day's notice during Tenant's normal business hours examine
such records. Within seventy-five (75) days following the close of each Fiscal
Year, Tenant shall furnish Landlord a statement ("the "Annual Operating
Statement") in the form attached as Exhibit D hereto summarizing operations of
---------
the Hotel for such Fiscal Year and a certificate of Tenant's chief accounting
officer or his designee certifying that such year-end statement is true and
correct. Landlord shall have ninety (90) days after receipt to examine and
review said statement and to notify Tenant if it wishes to have said statement
audited. If Landlord raises no objections within said ninety (90) day period,
then such statement shall be deemed to be conclusively accepted by Landlord as
being true and correct, and Landlord shall have no right thereafter to question
its accuracy. Landlord shall be required to commence any audit of which it has
timely notified Tenant within ten (10) days after the date of such notice and to
work diligently to and complete said audit within ninety (90) days after
commencement. All reviews and audits by Landlord as provided herein shall be at
Landlord's sole cost and expense.
9.02 Hotel Accounts and Expenditures
-------------------------------
A. All funds derived from the operation of the Hotel shall be deposited
in a bank and in an account chosen by Tenant subject to the reasonable approval
of Landlord. Withdrawals from said accounts shall be made by representatives of
Tenant whose signatures have been authorized. Reasonable petty cash funds shall
be maintained at the Hotel.
B. All payments Tenant makes hereunder shall be made from authorized
bank accounts, or petty cash funds, or from Working Capital under Section 7.01.
Tenant shall not be required to make any advance or payment to or for the
account of Landlord except as otherwise provided herein, and Tenant shall not be
obligated to incur any liability or obligation for Landlord's account without
assurances satisfactory to Tenant in Tenant's sole discretion that Landlord will
provide necessary funds for the discharge thereof. Debts and liabilities Tenant
incurs as a result of its occupation and operation of the Hotel under the terms
hereof (other than debts and liabilities incurred in a manner inconsistent with
the terms hereof), whether asserted before or after the Termination of this
Agreement, will be paid by Landlord to the extent funds are not available for
that purpose from the operation of the Hotel.
9.03 Annual Operating Projection; Five-Year Forecast
-----------------------------------------------
A. Tenant shall submit to Landlord for its review five (5) days before
the first day of each Fiscal Year an "Annual Operating Projection." Such
projection shall be on a consolidated basis, shall include a projection for
Chain Services, and shall be in the form of Exhibit E attached hereto. Tenant
---------
shall use its best efforts to adhere to the Annual Operating Projection. It is
understood, however, that the Annual Operating Projection is an estimate only
and unforeseen circumstances such as, but not limited to, those relating to
costs of labor, material, services, and supplies, casualty, operation of law,
economic and market conditions, and Acts of God may make adherence to the Annual
Operating Projection impracticable, and therefore Tenant shall have the right to
depart therefrom for such causes or other similar causes.
28
<PAGE>
B. Except as stated below, Tenant shall submit to Landlord each Fiscal
Year, promptly upon but no later than thirty (30) days after its completion a
"Five-Year Forecast." Tenant's obligation to submit such a Five-Year Forecast
shall be in effect only for so long as Tenant is required in the normal course
of its business by its own or MI's corporate requirements to prepare same. Such
forecast shall be on a consolidated basis for each of the five Fiscal Years
commencing with the immediately following Fiscal Year and shall be in the form
of Exhibit F attached hereto. Due to the difficulty in forecasting beyond one
---------
year, any reliance by Landlord or others on such forecast shall be at their own
risk and Tenant shall be under no obligation to achieve the results set forth in
such forecast.
9.04 Operating Losses; Credit
------------------------
A. To the extent there is an Operating Loss for any Accounting Period,
additional funds in the amount of any such deficiency shall be provided by
Landlord within ten (10) days if Tenant gives written notice to Landlord of such
Operating Loss. To the extent Tenant elects not to so collect or Landlord does
not so forward upon request, Tenant shall be entitled to a credit in the amount
of any such deficiency against both Annual Rent and Additional Rent owed by
Tenant to Landlord in succeeding Accounting Periods. If Landlord fails to
provide additional funds in the amount of such Operating Loss within such ten
(10) day period, Tenant shall have the option of terminating this Agreement upon
not less than thirty (30) days written notice to Landlord. If this Agreement is
terminated for any reason before Tenant has recovered all such deficiencies,
then Tenant shall be entitled to recover the remaining deficiencies from either
of the following sources: (i) by deduction from any of Landlord's funds which
Tenant holds or controls, or (ii) out of any Sale Proceeds or Loan Proceeds.
B. In no event shall either party borrow money in the name of or pledge
the credit of the other.
END OF ARTICLE IX
29
<PAGE>
ARTICLE X
TRADEMARK AND TRADE NAME
------------------------
10.01 Courtyard by Marriott Name
--------------------------
During the term of this Agreement, the Hotel shall be known as a Courtyard
by Marriott, with such additional identification as may be necessary to provide
local identification. If the name of the Courtyard by Marriott System is
changed, the name of the Hotel shall change to conform thereto and references
herein to "Courtyard" and "Courtyard by Marriott" shall be deemed references to
such new name. The names "Courtyard" and "Courtyard by Marriott," when used
alone or in connection with another word or words, and the Courtyard or
Courtyard by Marriott trademarks, trade names, symbols, logos, and designs shall
in all events remain the exclusive property of MI, and nothing contained herein
shall confer on Landlord the right to use the Courtyard or Courtyard by Marriott
names, trademarks, trade names, symbols, logos, or designs otherwise than in
strict accordance with the terms of this Agreement. Except as provided in
Section 10.02, upon Termination, any use of or right to use the Courtyard or
Courtyard by Marriott names, trademarks, trade names, symbols, logos, or designs
by Landlord shall cease forthwith and Landlord shall promptly remove from the
Hotel at Landlord's cost any signs or similar items that contain the Courtyard
or Courtyard by Marriott names, trademarks, trade names, symbols, logos, or
designs; provided, however, that Landlord shall not be required to change its
legal name ("Courtyard by Marriott Limited Partnership") to remove "Courtyard by
Marriott" from its name.
10.02 Purchase of Inventories and Fixed Asset Supplies
------------------------------------------------
A. Upon Termination, Tenant shall have the option, to be exercised within
thirty (30) days after Termination, to purchase, at their then book value, any
items of the Hotel's Inventories and Fixed Asset Supplies as may be marked with
the Courtyard or Courtyard by Marriott names or any Courtyard or Courtyard by
Marriott trademark, trade name, symbol, logo or design. If Tenant does not
exercise such option, Landlord will use any items not so purchased exclusively
in connection with the Hotel until they are consumed.
30
<PAGE>
10.03 Breach of Covenant
------------------
Tenant and/or its Affiliates shall have the right, in case of any breach of
the covenants of this Article X by Landlord or others claiming through it, to
injunctive relief and to any other right or remedy available at law or in
equity. This Article X shall survive Termination.
10.04 Computer Software and Equipment
-------------------------------
A. Any computer software (including upgrades and replacements) at the
Hotel that is owned by Tenant, MI, any Affiliate of MI, or the licensor of any
of them, is proprietary to Tenant, MI, such MI Affiliate, or the licensor of any
of them, whichever is applicable, and shall in all events remain the exclusive
property of Tenant, MI, such MI Affiliate, or the licensor of any of them, as
the case may be, and nothing contained in this Agreement shall confer on
Landlord the right to use any such software.
B. Upon Termination, Tenant shall have the right to remove from the
Hotel, as applicable, without compensation to Landlord, (1) any computer
software (including upgrades and replacements), including without limitation,
the PMS and MARSHA software, owned by Tenant, MI, any Affiliate of MI, or the
licensor of any of them, and (2) any computer equipment utilized as part of a
centralized reservation system or owned by a party other than Landlord, except
any computer equipment leased to Landlord pursuant to a financing lease as
provided for in Article VIII.
C. Tenant shall, upon Termination, provide Landlord with a copy of the
data stored in the software described in Section 10.04.A.
END OF ARTICLE X
31
<PAGE>
ARTICLE XI
THE HOTEL
---------
11.01 Payment of Ground Rent and Other Charges
----------------------------------------
Landlord irrevocably directs Tenant to properly pay and discharge (i) the
ground rent due under the Ground Lease applicable to the Hotel, to the extent of
the availability of and according to the order of disbursement of Operating
Profit pursuant to Section 5.03, and (ii) any payments and charges in the
ordinary course of the business of the Hotel necessary to ensure continued
operation of the Hotel by Tenant to the extent of Gross Revenues after payment
of or accrual for all other Deductions.
11.02 Use and Operation of the Hotel and Quiet Enjoyment
--------------------------------------------------
A. Tenant shall operate the Hotel as a hotel and for no other use and
under standards comparable to those prevailing for other Courtyard by Marriott
hotels operated by Tenant or its Affiliates and for all activities in connection
therewith that are customary and usual to such an operation; provided, however,
that Tenant shall not be held to such standard if Landlord fails (i) to approve
the Repairs and Equipment Estimate or provide funds necessary to pay for the
repairs, replacements, and renewals covered therein in the event funds in the
Reserve are inadequate, or (ii) to approve the Building Estimate or provide
funds necessary to pay for the alterations, improvements, renewals and
replacements covered therein, in either case if Landlord's failure to so approve
or provide funds prevents Tenant from maintaining such standard. Tenant shall,
except as otherwise provided in this Agreement, be responsible for the proper
and efficient operation of the Hotel.
B. Tenant shall have the option to terminate the Agreement at any time
upon sixty (60) days' written notice to Landlord in the event of a withdrawal or
revocation, by any lawful governing body having jurisdiction thereof, of any
license or permit required for Tenant's performance where such withdrawal or
revocation is due to circumstances beyond Tenant's control.
C. Except as otherwise provided herein, Tenant shall, during the Term,
operate the Hotel continuously except to the extent and for such time as Tenant
is unable to operate the Hotel according to the standards set forth herein as a
result of (1) damage or destruction caused by fire, casualty, or other cause,
(2) condemnation, (3) any of the occurrences described in Section 15.03, or (4)
all or any portion of the Hotel being closed for alterations, improvements,
renewals, rebuilding, or repairs.
D. Tenant shall, upon the request of Landlord or Landlord's mortgagees,
or the agent of either of them, make a qualified representative from Tenant's
corporate staff available at reasonable times and intervals to answer questions
regarding the operation of the Hotel.
E. Tenant shall use reasonable efforts to comply with and abide by all
applicable laws and regulations, including, without limitation, environmental
laws and regulations, pertaining to its operation of the Hotel, provided that
(i) all costs and expenses of such compliance shall be paid from Gross Revenues
as Deductions or from the Reserve, whichever is applicable under the provisions
of this Agreement, and (ii) Tenant shall have the right, but not the obligation,
subject to Landlord's prior written approval which approval shall not be
unreasonably withheld, to contest or oppose, by appropriate proceedings, any
such laws and regulations; the reasonable expenses of such contest shall be paid
from Gross Revenues as Deductions.
32
<PAGE>
F. Possession of the Hotel shall be delivered to Tenant on the
Effective Date, and Tenant shall quietly hold, occupy, and enjoy the Hotel
throughout the term of this Agreement without any hindrance, ejection, or
molestation by Landlord or anyone claiming under or through Landlord, subject,
nevertheless, to the terms and conditions of this Agreement.
11.03 Chain Services
--------------
A. Tenant shall, beginning with the Effective Date and thereafter
during the Term of this Agreement, cause Chain Services to be furnished to the
Hotel.
B. Costs and expenses incurred in the providing of Chain Services shall
be allocated on a fair and equitable basis among all Courtyard by Marriott
hotels owned, leased, operated or managed by Tenant or its Affiliates in the
United States which benefit from these services. Such allocation shall be made
without regard to any "caps" or other limitations on the amount which Tenant or
its Affiliates may charge to a given hotel, pursuant to agreements which Tenant
(or its Affiliates) may have with the owner of such hotel. Any excess of that
portion of such costs and expenses which is fairly allocated to a given hotel
over the "cap" which may be in effect with regard to that hotel shall be paid by
Tenant from its own funds and shall not be a Deduction. Tenant shall make no
profit from amounts paid for Chain Services. In no event will the total charge
for all of the Chain Services which are described in the definition of Chain
Services in Section 1.01 (exclusive of reservation system services), for any
given Fiscal Year, exceed five percent (5%) of Gross Revenues for such Fiscal
Year. The parties hereby stipulate that the limitation set forth in the
preceding sentence is intended to apply only to the services which are currently
listed (as of the Effective Date) in the definition of Chain Services in Section
1.01; accordingly, if there are types of expenditures which were originally
treated as Deductions (other than pursuant to Paragraph 7 of the definition of
"Deductions" in Section 1.01), but which are later determined to be more
properly treated as Chain Services, such expenditures shall be treated as
Deductions pursuant to said Paragraph 7 of the definition of "Deductions"
without regard to the aforesaid limitation. If services currently provided as
Chain Services are subsequently determined to be appropriately charged as
Deductions, the cost of the services will continue to be considered as a Chain
Service cost in determining the total charge allowed under the "cap" of five
percent (5%) of Gross Revenues.
11.04 Landlord's Right to Inspect
---------------------------
Landlord, Landlord's mortgagees, and the agents of both of them shall have
access to the Hotel at any and all reasonable times for the purpose of
protecting the same against fire or other casualty, prevention of damage to the
Hotel, inspection, making repairs, or showing the Hotel to prospective
purchasers, tenants, or mortgagees.
END OF ARTICLE XI
33
<PAGE>
ARTICLE XII
INSURANCE
---------
12.01 Property Insurance
------------------
A. Tenant shall, commencing with the Effective Date and thereafter
throughout the term of this Agreement, procure and maintain, with insurance
companies of recognized responsibility approved by Landlord in its reasonable
discretion, a minimum of the following insurance:
1. Insurance on the Hotel (including contents) against loss or
damage by fire, lightning and all other risks covered by the usual standard
extended coverage endorsements, with such deductible limits as are generally
established by Tenant and its Affiliates at the other hotels it operates under
the Courtyard by Marriott name in the United States, all in an amount not less
than the full replacement cost thereof, exclusive of excavation, footings and
foundation costs;
2. Insurance against loss or damage from explosion of boilers,
pressure vessels, pressure pipes and sprinklers, to the extent applicable,
installed in the Hotel;
3. Business interruption insurance covering loss of profits and
necessary continuing expenses for interruptions caused by any occurrence covered
by the insurance referred to in Section 12.01.A.1 and 2, of a type and in
amounts and with such deductible limits as are generally established by Tenant
and its Affiliates at the other hotels it operates under the Courtyard by
Marriott name in the United States.
B. All policies of insurance required under Section 12.01.A.1 and 2
shall be carried with the Landlord and the holder of the first-lien permanent
mortgage (for itself or as agent for a group of lenders, as applicable) on the
Hotels and the Ground Lease, as additional insureds and loss payees as their
respective interests may appear.
12.02 Operational Insurance
---------------------
Tenant shall, commencing with the Effective Date and thereafter throughout
the Term, procure and maintain, using funds deducted from Gross Revenues, with
insurance companies approved by Landlord, the following insurance:
A. Workers' compensation and employer's liability insurance as may be
required under applicable laws covering all of Tenant's employees at the Hotel,
with such deductible limits or self-insured retentions as are generally
established by Tenant or its Affiliates at the other hotels it operates under
the Courtyard by Marriott name in the United States;
B. Fidelity bonds, with reasonable limits and deductibles to be
determined by Tenant, covering its employees in job classifications normally
bonded in the other hotels it operates under the Courtyard by Marriott name in
the United States or as otherwise required by law, and comprehensive crime
insurance to the extent Tenant and Landlord mutually agree it is necessary for
the Hotel;
C. Commercial general liability insurance against claims for personal
injury, death or property damage occurring on, in, or about the Hotel, and
automobile insurance on vehicles operated in conjunction with the Hotel, with a
combined single limit of not less than Twenty-five Million Dollars ($25,000,000)
for each occurrence for personal injury, death and property damage, with such
34
<PAGE>
deductible limits or self-insured retentions as are generally established by
Tenant or its Affiliates at the other hotels it operates under the Courtyard by
Marriott name in the United States; and
D. Such other insurance in amounts as Landlord and Tenant in their
reasonable judgment deems advisable for protection against claims, liabilities
and losses arising out of or connected with the operation of the Hotel.
12.03 Coverage
--------
All insurance described in Sections 12.01 and 12.02 may be obtained by
Tenant by endorsement or equivalent means under its blanket insurance policies,
provided that such blanket policies substantially fulfill the requirements
specified herein. Deductible limits and retentions shall be as provided in the
blanket policies covering the hotels operated by Tenant and its Affiliates under
the Courtyard by Marriott name in the United States. In addition, in the case of
insurance described in Sections 12.01 and 12.02, Tenant may insure through its
Affiliates, or its Affiliates may otherwise retain such risks, if, where legally
required to do so, such Affiliates are legally qualified to do so.
12.04 Cost and Expense
----------------
Insurance premiums and any costs or expenses with respect to the insurance
described in Sections 12.01 and 12.02, including insurance reinsured by an
Affiliate of Tenant, shall be Deductions in determining Operating Profit.
Premiums on policies for more than one year shall be charged pro rata over the
period of the policies. The expenses incurred in maintaining Tenant's self-
insurance program shall be charged on an equitable basis to the hotels
participating in such programs. Any reserves, losses, costs, damages or
expenses which are uninsured (as long as Tenant maintains proper insurance and
does not abrogate policies), or fall within deductible limits or self-insured
retentions as are generally established by Tenant or its Affiliates, shall be
treated as a cost of insurance and shall be Deductions in determining Operating
Profit. Upon Termination, an escrow fund in an amount reasonably acceptable to
Tenant shall be established from Gross Revenues (or, if Gross Revenues are not
sufficient, with funds provided by Landlord) to cover the amount of any
deductible limits or self-insured retentions and all other costs which will
eventually have to be paid by either Landlord or Tenant with respect to pending
or contingent claims, including those which arise after Termination for causes
arising during the term of the Agreement; provided, however, that such escrow
shall not include any amounts expected to be covered by insurance proceeds
(exclusive of deductibles and self-insured retentions).
12.05 Policies and Endorsements
-------------------------
A. Where permitted, all insurance provided under Section 12.02 shall
name Landlord, Tenant and Lender as additional insureds as their interests may
appear. Tenant shall deliver to Landlord certificates of insurance with respect
to all policies procured, including existing, additional and renewal policies
and, in the case of insurance about to expire, shall deliver certificates of
insurance with respect to the renewal policies not less than ten (10) days prior
to the respective dates of expiration.
B. All policies of insurance provided for under Article XII shall, to
the extent obtainable, have attached thereto an endorsement that such policy
shall not be canceled or materially changed without at least thirty (30) days'
prior written notice to Landlord, Lender and Tenant.
END OF ARTICLE XII
35
<PAGE>
ARTICLE XIII
TAXES
-----
13.01 Real Estate, Personal Property and Other Taxes
----------------------------------------------
A. The cost of all real estate and personal property taxes (including
tax, if any, on the lease of personal property payable by or assessed against
Landlord or Tenant), levies, assessments and similar charges on or relating to
the Hotel (the "Impositions") during the term of this Agreement, including any
such amounts required to be paid under ground leases, shall be borne solely by
Landlord. The term "Impositions" shall include any fines, penalties, or interest
with respect to tax, if any, on the lease of personal property payable by or
assessed against Landlord or Tenant. Except as provided below, Tenant shall, on
Landlord's behalf and to the extent of the availability of Gross Revenues after
payment or accrual for all other Deductions, pay all Impositions from Gross
Revenues, before any fine, penalty, or interest is added thereto or lien placed
on the Hotel or this Agreement, unless payment thereof is in good faith being
contested and enforcement thereof is stayed. Notwithstanding the foregoing, (i)
Landlord shall make any necessary filings with respect to any taxes that might
be payable by or assessed against Landlord or Tenant pertaining to the lease of
personal property and, at Landlord's request, Tenant shall pay any such taxes
and any fines, penalties and interest added thereto to the extent of the
availability of Gross Revenues after payment of or accrual for all other
Deductions, and (ii) Tenant shall not be liable for any fines, penalties, or
interest that is added to taxes, if any, payable by or assessed against Landlord
or Tenant related to Tenant's lease of personal property from Landlord under
this Agreement. Except as provided in Section 5.01, any such payments and
accruals for such payments shall be a Deduction in determining Operating Profit.
Landlord shall, within five (5) days of receipt, furnish Tenant with copies of
any official tax bills and assessments that it may receive for the Hotel. Either
Tenant or Landlord may initiate proceedings to contest any Imposition. All
reasonable costs of any such contest shall be paid from Gross Revenues and
treated as a Deduction and the non-initiating party shall reasonably cooperate
with the initiating party.
B. Upon Termination, an escrow fund in an amount reasonably acceptable
to Tenant shall be established from Gross Revenues (or, if Gross Revenues are
not sufficient, with funds provided by Landlord) to cover all taxes (including
any fines, penalties, or interest that may be added thereto), if any, that
might, in Tenant's reasonable judgment, be payable or assessed against Landlord
or Tenant related to Tenant's lease of personal property from Landlord under
this Agreement.
END OF ARTICLE XIII
36
<PAGE>
ARTICLE XIV
HOTEL EMPLOYEES
---------------
14.01 Employees
---------
A. All personnel employed at the Hotel shall at all times be the
employees of or otherwise provided by the Tenant. Tenant shall have absolute
discretion to hire, fire, promote, supervise, direct, and train all employees at
the Hotel, to fix their compensation and, generally, establish and maintain all
policies relating to employment.
B. Tenant shall be permitted to provide free accommodations and
amenities to its employees and representatives living at or visiting the Hotel
in connection with its operation of the Hotel. No person shall otherwise be
given gratuitous accommodations or services without prior joint approval of
Landlord and Tenant except in accordance with usual practices of the hotel and
travel industry.
C. At Termination, other than by reason of a default of Tenant
hereunder, an escrow fund shall be established from Gross Revenues (or, if Gross
Revenues are not sufficient, with funds provided by Landlord) to reimburse
Tenant for all costs and expenses incurred by Tenant in terminating its
employees at the Hotel, such as severance pay, unemployment compensation, and
other employee liability costs arising out of the Termination of employment by
Tenant of Tenant's employees at the Hotel.
END OF ARTICLE XIV
37
<PAGE>
ARTICLE XV
DAMAGE, CONDEMNATION, AND FORCE MAJEURE
---------------------------------------
15.01 Damage and Repair
-----------------
A. If, during the term hereof, the Hotel is damaged or destroyed by
fire, casualty, or other cause, Landlord shall, at its cost and expense and with
all reasonable diligence, repair or replace the damaged or destroyed portion of
the Hotel to the same condition as existed previously. To the extent available,
proceeds from the insurance described in Section 12.01 shall be applied to such
repairs or replacements. If the Hotel is so damaged or destroyed that Landlord
reasonably determines that it cannot be repaired or replaced within one (1) year
of the fire, casualty, or other cause, Landlord shall have the option on sixty
(60) days' written notice to terminate this Agreement and Tenant shall be
entitled to the Termination Fee provided by Section 4.02, which shall be paid in
accordance with the provisions of Section 5.06.
B. If damage or destruction to the Hotel from any cause materially and
adversely affects the operation of such Hotel and Landlord fails to promptly
commence and complete the repairing, rebuilding, or replacement of the same so
that the Hotel shall be substantially the same as it was before such damage or
destruction, Tenant may elect to terminate this Agreement on sixty (60) days'
written notice, whereupon Tenant shall be entitled to the Termination Fee
provided by Section 4.02, which shall be paid in accordance with the provisions
of Section 5.06, it being agreed that Tenant shall not have the right to
terminate after Landlord has commenced such repairs, rebuilding, or replacements
unless Landlord thereafter fails to diligently and continuously pursue
completion of such repairs, rebuilding, or replacements.
15.02 Condemnation
------------
A. If all or substantially all of the Hotel shall be taken in any
eminent domain, condemnation, compulsory acquisition, or similar proceeding by
any competent authority for any public or quasi-public use or purpose, or if a
portion of the Hotel shall be so taken, but the result is that Landlord deems it
unreasonable to continue to operate the Hotel, this Agreement shall terminate
and Tenant shall be entitled to the Termination Fee provided by Section 4.02,
which shall be paid in accordance with the provisions of Section 5.06. In order
to provide funds with which to pay the Termination Fee, Landlord shall initiate
such proceedings against the condemning authorities to recover any damages to
which it may be entitled. Tenant shall have no independent right to bring any
action claiming damages or an award as a result of a condemnation.
B. If a portion of the Hotel shall be taken as a result of one of the
events described in Section 15.02.A, or the entire Hotel is affected on a
temporary basis, and as a result it is not unreasonable to continue to operate
the Hotel, this Agreement shall not terminate. Nevertheless, so much of any
award for any such partial taking or condemnation as shall be necessary to
render the Hotel equivalent to its condition before such event shall be used for
such purpose; Landlord shall retain the balance of such award, if any.
15.03 Force Majeure
-------------
If acts of God, acts of war, civil disturbance, or governmental action,
including the revocation of any license or permit necessary for the operation
contemplated under this Agreement where such revocation is not due to Tenant's
fault, or any other causes beyond the control of Tenant, shall, in Tenant's
reasonable opinion have a significant adverse effect upon operations of the
Hotel, then Tenant shall have the right to terminate this Agreement on sixty
(60) days' written notice to
38
<PAGE>
Landlord; provided, however, that this Section 15.03 shall not apply if the
Hotel suffers damage or destruction to which Section 15.01 is applicable.
END OF ARTICLE XV
39
<PAGE>
ARTICLE XVI
DEFAULTS
--------
16.01 Defaults
--------
The following shall constitute "events of default" to the extent permitted
by applicable law:
A. The failure of either party to make any payment required to be made
in accordance with the terms hereof within ten (10) days after written notice
that such payment has not been made;
B. The failure of either party to perform, keep, or fulfill any of the
other covenants, undertakings, obligations, or conditions set forth in this
Agreement, and the failure to cure such default within thirty (30) days after
notice of said failure or, if such default is not susceptible of being cured
within thirty (30) days, the failure to commence said cure within thirty (30)
days and thereafter to complete said cure within the shortest commercially
reasonable time;
C. If by order of a court of competent jurisdiction a receiver or
liquidator of the property of either party shall be appointed and shall not be
dismissed within sixty (60) days after such appointment;
D. If either party shall be liquidated or dissolved, if either party
shall file a voluntary bankruptcy seeking liquidation or dissolution, or if a
petition or an answer proposing the liquidation or dissolution of either party
under the Federal Bankruptcy Code or any similar law, federal or state, shall be
filed in, and approved by, any court; or
E. If any of the creditors of either party shall file a petition to
liquidate or dissolve such party under the Federal Bankruptcy Code or any
similar law, federal or state, and if such petition shall not be discharged or
denied within sixty (60) days after the date on which such petition was filed.
16.02 Remedies
--------
A. It is the intention of the parties that this Agreement shall be
non-terminable upon the occurrence of an event of default unless it can be shown
that any other remedy afforded by law or equity is inadequate. Accordingly, if
either party alleges that the other party has committed a default hereunder, the
party alleging such default shall first serve a notice and demand upon the other
party outlining the facts of the alleged default and requesting its cure. Such
other party shall have ten (10) days within which to reply and may either admit
the default or dispute the same in whole or in part.
B. If the party alleged to be in default admits or is deemed to have
admitted the default, it shall:
1. In the case of a non-monetary default, cure the default within
thirty (30) days, or, if such default is not susceptible of being cured within
thirty (30) days, proceed immediately to cure the default in the shortest
commercially reasonable time.
2. In the case of a monetary default, pay the amount demanded
within ten (10) days.
40
<PAGE>
C. Except for an event of default occurring under Section 16.01.C, D or
E, if the party alleged to be in default disputes the claim of default within
said ten (10) days and if the parties are unable to reconcile such dispute
within the following thirty (30) days, or if the party alleged to be in default
acknowledges the default but fails to cure same within the applicable time
period, then the matter shall be settled by arbitration in accordance with
Article XX. The matters to be decided by arbitration are (i) whether the alleged
default occurred (if the party alleged to be in default has timely disputed the
claim of default) and (ii) the appropriate remedy or remedies to which the non-
defaulting party is entitled, including termination if the arbitrators determine
that no other remedy afforded by law or equity is adequate and, in the case of a
termination decision against Tenant, such remedy shall include, at the non-
defaulting party's request, the arbitrators' order to Tenant to vacate the Hotel
within seventy-five (75) days after the date of such decision.
D. If the party alleged to be in default neither acknowledges nor
disputes the claim of default, such party shall be deemed to have admitted the
default.
E. Upon a final, binding, and nonappealable determination in favor of
the non-defaulting party, including a determination that the non-defaulting
party's remedy, whether exclusive or nonexclusive, is Termination after
consideration of the provisions of Section 16.02.A, the non-defaulting party
shall have up to ninety (90) days after the date such determination becomes
final, binding, and nonappealable to deliver notice of termination to the
defaulting party; and this Agreement shall terminate on the date set forth in
such notice, which date shall be not less than seventy-five (75) days nor more
than one hundred fifty (150) days after the date of such notice. If the non-
defaulting party fails to exercise such termination remedy within the time
period set forth above, then such remedy shall be null and void as to the
applicable default. Notwithstanding the foregoing, if the arbitrators, at the
non-defaulting party's request, order the Tenant (in accordance with C above) to
vacate the Hotel within seventy-five (75) days after the date of the arbitrators
decision, Tenant shall so vacate without the need for any further notice from
Landlord.
END OF ARTICLE XVI
41
<PAGE>
ARTICLE XVII
WAIVER AND PARTIAL INVALIDITY
-----------------------------
17.01 Waiver
------
Failure of either party to insist on strict performance of any of the terms
or provisions of this Agreement, or to exercise any option, right, or remedy
herein contained, shall not be construed as a waiver or relinquishment for the
future of such term, provision, option, right, or remedy, but the same shall
continue and remain in full force and effect. No waiver by either party of any
term or provision hereof shall be deemed to have been made unless expressed in
writing and signed by such party.
17.02 Partial Invalidity
------------------
If any portion of the Agreement shall be declared invalid by order, decree,
or judgment of a court, this Agreement shall be construed as if such portion had
not been inserted herein except when such construction would operate as an undue
hardship on Tenant or Landlord or constitute a substantial deviation from the
general intent and purpose of said parties as reflected in this Agreement.
END OF ARTICLE XVII
42
<PAGE>
ARTICLE XVIII
ASSIGNMENT
----------
18.01 Assignment
----------
A. Neither party shall assign or transfer or permit the assignment or
transfer of this Agreement without the prior written consent of the other,
provided, however that Tenant shall have the right without such consent, to (1)
assign its interest in the Agreement to any of its Affiliates (other than any
Affiliate which may be a partner of Landlord), and any such assignee shall be
deemed to be the Tenant for the purposes of the Agreement, and (2) sublease
shops or grant concessions at the Hotel on commercially reasonable terms so long
as the terms of any such subleases or concessions do not exceed the term of the
Agreement. Nothing contained herein shall prevent an assignment of the Agreement
in connection with an approved sale of the Hotel pursuant to Section 19.02.B.
B. If either party consents to an assignment of the Agreement by the
other, no further assignment shall be made without the express consent in
writing of such party, unless such assignment may otherwise be made without such
consent pursuant to the terms of the Agreement. An assignment by either Landlord
or Tenant of its interest in the Agreement shall not relieve Landlord or Tenant,
as the case may be, from their respective obligations under the Agreement, and
shall inure to the benefit of, and be binding upon, their respective successors,
heirs, legal representatives, or assigns.
18.02 Collateral Assignment
---------------------
Landlord and Tenant may each from time to time collaterally assign and
mortgage its interest under this Agreement to secure indebtedness under the Loan
Documents, or under any extensions, modifications, replacements, or
Refinancings. In connection with any such collateral assignment, Tenant and
Landlord shall each, on request of any lenders, enter into such supplemental
agreements as may obligate Tenant or Landlord to (i) provide the lenders with
notice of any default by Landlord or Tenant hereunder and thereafter permit the
lenders to effect a cure thereof within a reasonable period, (ii) supply the
lenders with copies of any notices or other communications contemplated by this
Agreement, (iii) subordinate Tenant's interest in this Agreement to the rights
of the lenders upon foreclosure of any mortgage, deed of trust, security
agreement, or like instrument against the Hotel or by a deed or assignment of
the Ground Lease in lieu of foreclosure so long as such lenders enter into the
written nondisturbance agreement described in Section 3.02, (iv) attorn to and
recognize the lenders or their assignees as being Landlord, according to the
terms set forth in Section 3.02.B, or Tenant, as the case may be, hereunder upon
conveyance of title to the Hotel and/or assignment of the Ground Lease or of the
Tenant's interest in this Agreement to the Lenders or assignees, whether such
conveyance is upon foreclosure of a mortgage, deed of trust, security agreement,
or like instrument or by a deed or assignment in lieu of foreclosure, and (v)
containing such other provisions as are customary for the protection of
Landlord, Tenant, and the lenders.
END OF ARTICLE XVIII
43
<PAGE>
ARTICLE XIX
SALE OF THE HOTEL
-----------------
19.01 Right of Sale by Landlord
-------------------------
Landlord reserves the right at all times and from time to time to sell the
Hotel or assign its leasehold interest under the Ground Lease, subject, however,
in each such case, to rights of Tenant provided by Section 19.02. Upon any such
proposed sale or assignment, Landlord shall send a notice thereof to the Tenant
at least thirty (30) days before the date on which such sale is proposed to
close. Such notice shall set forth (i) the name, address, and business of the
proposed purchaser, (ii) the proposed sales price or method by which such price
is to be determined, and (iii) whether or not it is proposed that the provisions
of this Agreement remain in effect.
19.02 Rights of Tenant on Sale of the Hotel
-------------------------------------
A. Except as provided in Sections 19.02.B and 19.02.C, this Agreement will
terminate upon the conveyance of title to the Hotel or the assignment of the
Landlord's interest under the Ground Lease and the simultaneous payment to the
Tenant of its Termination Fee as provided in Section 4.02.
B. If Landlord sells the Hotel or assigns the Ground Lease, such sale will
be, at Landlord's election, either:
1. Free and clear of this Agreement, in which event this Agreement
shall terminate and Tenant shall be entitled to payment of its Termination Fee
as provided in Section 4.02 simultaneously with conveyance of title to the Hotel
or the assignment of the Ground Lease; or
2. Subject to the continuation in effect of occupancy by Tenant
under this Lease or, at Tenant's option, management by Tenant pursuant to a
management agreement having no less favorable terms to Tenant than this
Agreement or that is otherwise reasonably satisfactory to Tenant, in which event
Tenant may either (i) consent to the continuation in effect of such lease or
management arrangement, or (ii) if, in its sole discretion, Tenant reasonably
believes and so notifies the Landlord within thirty (30) days after notice of
the proposed closing of sale, that any one or more of the following is true: (1)
the proposed purchaser is a competitor of Tenant or any Affiliate of Tenant, (2)
the business character and reputation of the proposed purchaser has not been
firmly established, or (3) the financial condition and prospects of the proposed
purchaser may not be adequate to the discharge of the obligations of Landlord
under this Agreement (or replacement agreement), cause the termination of this
Agreement and require the payment of a Termination Fee as provided in Section
4.02 simultaneously with the conveyance of title to the Hotel or assignment of
the Ground Lease.
C. Notwithstanding the provisions of Section 4.02 hereof and this
Section 19.02, no Termination Fee shall be due or payable if the Hotel is sold,
condemned, or destroyed, or the Ground Lease is assigned, and Tenant or an
Affiliate thereof continues to lease or manage the Hotel, whether or not
pursuant to this Agreement.
D. In the event this Agreement is terminated upon a sale of the Hotel or
an assignment of the Ground Lease, Landlord shall repay to Tenant simultaneously
with the conveyance of title to the Hotel or the assignment of the Ground Lease,
any and all indebtedness, if any, owing by Landlord to Tenant excepting,
however, any unrefunded Additional Rent.
44
<PAGE>
19.03 Meaning of "Sale" and "Sell"
----------------------------
As used in this Article XIX, "sale" or "sell" shall not refer to the
condemnation or destruction of the Hotel.
END OF ARTICLE XIX
45
<PAGE>
ARTICLE XX
ARBITRATION
-----------
20.01 Arbitration
-----------
A. Disputes and remedies specifically mentioned herein as a matter to be
decided by arbitration shall be resolved in accordance with the commercial rules
of the American Arbitration Association (or its successor) in Washington, D.C.
then in effect and pursuant to the Federal Arbitration Act. The decision of the
arbitrators shall be final and binding on the parties. The arbitrators shall
have no right to amend or modify this Agreement.
B. Additional procedures to be complied with in connection with any
arbitration are as follows:
1. Landlord and Tenant shall each appoint a fit and impartial person
as arbitrator who shall have had at least ten (10) years' experience in a
calling connected with the subject matter of the dispute (a "Qualified
Arbitrator"). Such appointment shall be signed in writing by each party to the
other. If either Landlord or Tenant shall fail to appoint a Qualified Arbitrator
within ten (10) days after written notice from the other party to make such
appointment, then the party having made such appointment shall apply to the
American Arbitration Association (or its successor) in Washington, D.C. for the
appointment of a second Qualified Arbitrator and the two so appointed shall
appoint a third Qualified Arbitrator. If such two Qualified Arbitrators fail to
agree on a third Qualified Arbitrator within ten (10) days after appointment of
the second Qualified Arbitrator, then the American Arbitration Association in
Washington, D.C. (or its successor) shall appoint such third Qualified
Arbitrator.
2. The decision of the arbitrators shall be rendered within thirty
(30) days after appointment of the third arbitrator. Such decision shall be in
writing, shall contain a reasonably detailed explanation of the basis for the
decision, and shall be in duplicate, one counterpart thereof to be delivered to
each of Landlord and Tenant. A judgment of a court of competent jurisdiction may
be entered on the award of the arbitrators.
3. If a dispute shall be submitted to arbitration, notice of
appointment of the arbitrators shall be given by Landlord to any first
mortgagee. Such first mortgagee shall then have the right to participate in the
arbitration proceedings, provided that such participation shall be in
association with Landlord and shall not (i) entitle such first mortgagee to
participate in the appointment of Tenant's arbitrator, (ii) allow it to appoint
an additional arbitrator, or (iii) enlarge Landlord's or Tenant's rights in such
arbitration proceedings.
4. If under the provision of this Agreement a matter shall be
submitted to arbitration and Landlord shall fail timely to appoint an
arbitrator, the first mortgagee, if any, shall be entitled to appoint an
arbitrator to represent Landlord's interests.
END OF ARTICLE XX
46
<PAGE>
ARTICLE XXI
MISCELLANEOUS
-------------
21.01 Right to Make Agreement
-----------------------
Each party warrants, with respect to itself, that neither the execution of
this Agreement, nor the finalization of the transactions contemplated hereunder,
shall violate any provision of law or any judgment, writ, injunction, order, or
decree of any court or governmental authority having jurisdiction over it;
result in or constitute a breach or default under any indenture, contract, other
commitment, or restriction to which it is a party or by which it is bound; or
require any consent, vote, or approval that has not been given or taken, or at
the time of the transaction involved shall not have been given or taken. Each
party covenants that it has and will continue to have throughout the term of
this Agreement and any extensions thereof, the full right to enter into this
Agreement and perform its obligations thereunder.
21.02 Consents
--------
Wherever in this Agreement the consent or approval of Landlord or Tenant is
required, such consent, agreement or approval shall not be unreasonably
withheld, conditioned or delayed, shall be in writing and shall be executed by a
duly authorized officer or agent of the party granting such consent, agreement
or approval. If either Landlord or Tenant fails to respond within thirty (30)
days to a written request by the other party for a consent, agreement or
approval, such consent, agreement or approval shall be deemed to have been
given.
21.03 Agency
------
In the event that Tenant is deemed to act as Landlord's agent under the terms
of this Agreement, such agency is coupled with an interest and may not be
terminated by Landlord until the expiration of the term of this Agreement,
except as provided in Articles IV, XV, XVI, or XIX.
21.04 Confidentiality
---------------
The parties agree that matters set forth in and information, budgets, and
reports generated as a result of this Agreement are strictly confidential and
each party will make every effort to ensure that the information is not
disclosed to any outside person or entities (including the press) without the
written consent of the other party except as may be reasonably necessary (i) to
obtain licenses, permits and other public approvals necessary for the
refurbishment or operation of the Hotel, (ii) in connection with Landlord's
financing of the Hotel or the sale of any interest in the Hotel or assignment of
the Ground Lease, (iii) in connection with a sale of a controlling interest in
Landlord, Tenant, or MI, (iv) in connection with an audit or other investigation
conducted pursuant to this Agreement or the Landlord's or Tenant's interest in
the Hotel, or (v) in connection with a foreclosure sale on Landlord's interest
in the Hotel, or (vi) as required by law; provided, however, that all parties to
whom the matters set forth in this Agreement and information, budgets, and
reports generated as a result of this Agreement are to be disclosed, except
under the circumstances described in (i), (v) and (vi) above, shall have, prior
to such disclosure, signed a confidentiality agreement with respect to such
matters for the benefit of Landlord and Tenant.
21.05 Applicable Law
--------------
47
<PAGE>
The Agreement shall be construed under and shall be governed by the laws of
the State of _______________ except that matters specifically mentioned herein
as matters to be decided by arbitration shall be arbitrated in accordance with
Article XX.
21.06 Other Operations
----------------
Nothing herein shall be construed to prohibit, limit or restrict Tenant or any
of its Affiliates from developing, owning, operating, managing, leasing, or
franchising, either directly or indirectly, any Marriott hotel, Marriott Suites,
Marriott Inn, Courtyard by Marriott, Fairfield Inn, Residence Inn, or any other
lodging or related facility of any kind or nature in the market area where the
Hotel is located.
21.07 Headings
--------
Headings of articles and sections are inserted only for convenience and are
not to be construed as a limitation on the scope of the particular articles or
sections to which they refer.
21.08 Notices
-------
Notices, statements, and other communications to be given under the terms of
this Agreement shall be in writing and delivered by hand against receipt or sent
by certified mail, registered mail, return receipt requested or by Express Mail
service, or overnight courier postage prepaid:
To Landlord:
-----------
Courtyard by Marriott Limited Partnership
c/o Host Marriott Corporation
10400 Fernwood Road
Bethesda, Maryland 20817
Attention: Law Department 72.923/Host Marriott
Deputy General Counsel
To Tenant:
---------
Courtyard Management Corporation
c/o Marriott International, Inc.
10400 Fernwood Road
Bethesda, Maryland 20817
Attn: Chief Financial Officer
Dept. 51.933.15
Courtyard Management Corporation
c/o Marriott International, Inc.
10400 Fernwood Road
Bethesda, Maryland 20817
Attn: Law Department 52.923
Hotel Operations
48
<PAGE>
or at such other address as is from time to time designated by the party
receiving the notice. Any such notice that is properly mailed shall for
purposes of establishing that the sending party complied with the applicable
time limitations set forth herein be deemed to have been served as of five (5)
days after said posting, but shall not be binding on the addressee until
received.
21.09 Entire Agreement
----------------
This Agreement, with other writings signed by the parties stated to be
supplemental hereto and instruments to be executed and delivered hereunder,
constitute the entire agreement between the parties, supersede all prior
understandings and writings, and may be changed only by writings signed by the
parties.
21.10 Limited Liability
-----------------
Tenant agrees that no limited partner of Landlord, if any, shall have any
personal liability hereunder in excess of such limited partner's contribution to
the capital of Landlord.
21.11 Notice of Lease
---------------
Landlord and Tenant shall, simultaneously with the execution of this
Agreement, execute memoranda or short forms of this Agreement containing the
names of the parties, a legal description for the land underlying the Hotel, the
term of the Lease, and such other provisions as either party may require in such
forms as may be required for recording purposes in each jurisdiction in which
the Hotel is located. The cost and expense of recording the memoranda, short
forms or, where necessary, a duplicate original of the Agreement (including any
deed stamps, transfer taxes and similar costs), shall be borne by the Landlord;
and, if Tenant undertakes the recording, Landlord shall promptly reimburse
Tenant for all such costs and expenses incurred by Tenant. No recording shall
take place, however, until such time as either party requires recording. Each
party agrees that it will not record the Agreement in its entirety unless such a
recording is required to protect the rights of either party or unless required
by applicable law.
21.12 Severability
------------
Any provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability, without invalidating the remaining
provisions hereof or thereof or affecting the validity or enforceability of such
provision in any other jurisdiction unless the severing of such provision would
undermine the essence of the Agreement itself.
21.13 Counterparts
------------
This Agreement may be executed in several counterparts and by different
parties thereto in separate counterparts, each of which shall be deemed to be an
original and all of which taken together shall constitute one and the same
instrument.
49
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal as of the day and year first written above.
Witnesses:
COURTYARD BY MARRIOTT LIMITED PARTNERSHIP
By: CBM ONE CORPORATION,
General Partner
By: /s/ Christopher G. Townsend (SEAL)
-----------------------------------
Christopher G. Townsend
Vice President
Attest: /s/ Pamela Murch
------------------------------
Pamela Murch
Assistant Secretary
[SEAL]
COURTYARD MANAGEMENT CORPORATION
By: /s/ James L. Best (SEAL)
----------------------------------
James L. Best
Vice President
Attest: /s/ Ward R. Cooper
------------------------------
Ward R. Cooper
Assistant Secretary
[SEAL]
1
<PAGE>
Exhibit 10.k
$304,788,924.58
SECOND AMENDED AND RESTATED LOAN AGREEMENT
Dated as of April 7, 1994
Among
COURTYARD BY MARRIOTT LIMITED PARTNERSHIP,
as Borrower
-- --------
and
THE BANKS NAMED HEREIN,
as Banks
-- -----
and
CITIBANK, N.A.,
as Agent
-- -----
<PAGE>
Exhibit 10.k
T A B L E O F C O N T E N T S
---------------------------------
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.01 Certain Defined Terms..............................
1.02 Computation of Time Periods........................
1.03 Accounting Terms...................................
ARTICLE II
AMENDMENT AND RESTATEMENT; REPAYMENT
OF THE LOANS
2.01 Amendment and Restatement;
Consolidation of Loans..........................
2.02 Repayment..........................................
2.03 Extensions.........................................
2.04 Prepayments........................................
2.05 Interest...........................................
2.06 Minimum Amount of Eurodollar Rate
Advances; Maximum Number of
Interest Periods................................
2.07 Conversion of Multistate Advances..................
2.08 Increased Costs, Etc...............................
2.09 Payments and Computations..........................
2.10 Taxes..............................................
2.11 Sharing of Payments, Etc...........................
2.12 Non-Recourse.......................................
ARTICLE III
CONDITIONS PRECEDENT
3.01 Conditions Precedent...............................
3.02 Determinations Under Section 3.01..................
ARTICLE IV
RELEASE OF HOTELS
4.01 Release............................................
4.02 Conditions to Release..............................
4.03 Release of Secondary Hotels........................
4.04 Defined Terms Used in this Article.................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01 Representations and Warranties of the
Borrower........................................
ARTICLE VI
COVENANTS OF THE BORROWER
6.01 Affirmative Covenants...............................
6.02 Negative Covenants..................................
6.03 Reporting Requirements..............................
ARTICLE VII
EVENTS OF DEFAULT
7.01 Events of Default...................................
7.02 Cure of Certain Events of Default by
Host Marriott and Marriott
International...................................
7.03 Events of Default with Respect to Marriott
International, Host Marriott and their
Subsidiaries....................................
7.04 Specific Performance................................
ARTICLE VIII
THE AGENT
8.01 Authorization and Action............................
8.02 Agent's Reliance, Etc...............................
8.03 Citibank and Affiliates.............................
8.04 Lender Credit Decision..............................
8.05 Indemnification.....................................
8.06 Successor Agents....................................
ARTICLE IX
MISCELLANEOUS
9.01 Amendments, Etc....................................
9.02 Notices, Etc.......................................
9.03 No Waiver; Remedies................................
9.04 Costs and Expenses.................................
9.05 Right of Set-off...................................
9.06 Binding Effect.....................................
9.07 Assignments and Participations.....................
9.08 Obligations Several................................
9.09 Headings...........................................
9.10 Severabiity of Provisions..........................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
9.11 Consents of the Lenders Associated with
Reorganization and Amendment and
Restatement.....................................
9.12 Agreement of Lenders Not to Object
and Waiver......................................
9.13 Governing Law......................................
9.14 Execution in Counterparts..........................
9.15 Confidentiality....................................
9.16 Consent of Jurisdiction............................
9.17 Release............................................
9.18 Waiver of One Action Rule, Etc.....................
9.19 Waiver of Jury Trial, Etc..........................
</TABLE>
<PAGE>
SECOND AMENDED AND RESTATED LOAN AGREEMENT
THIS SECOND AMENDED AND RESTATED LOAN AGREEMENT is dated as of April
7, 1994 among Courtyard by Marriott Limited Partnership, a Delaware limited
partnership (the "Borrower"), the banks (the "Banks") listed on the signature
-------- -----
pages hereof, and Citibank, N.A. ("Citibank"), as agent (together with any
successor appointed pursuant to Article VIII, the "Agent") for the Lenders
hereunder.
PRELIMINARY STATEMENTS:
(1) The Borrower, Citibank, The First National Bank of Chicago
("FNBC"), Bankers Trust Company, Bank of America National Trust and Savings
----
Association, The Bank of Nova Scotia, First Interstate Bank of California and
Security Pacific National Bank (such banks being the "Original Banks"), and
--------------
Citibank and FNBC as agents for the Original Banks, entered into two Loan
Agreements, each dated as of August 14, 1986 (as amended prior to the
effectiveness of the 1988 Loan Agreements referred to in paragraph (2) below,
the "1986 Loan Agreements"), in which the Original Banks agreed to make loans to
--------------------
the Borrower in an aggregate principal amount not in excess of $373,149,000.
(2) The Borrower, the Original Banks other than Security Pacific
National Bank (the "1988 Banks"), and Citibank and FNBC, as agents for the 1988
----------
Banks, subsequently entered into two Amended and Restated Loan Agreements, each
dated as of June 15, 1988 (the "1988 Loan Agreements"), which among other things
--------------------
amended and restated the 1986 Loan Agreements, changed the maturity date of the
loans made by the Original Banks under the 1986 Loan Agreements to June 15, 1993
and provided for the assignment by Security Pacific National Bank of its
interest in the loans made by it to the Borrower under the 1986 Loan Agreements
to certain of the 1988 Banks. Citibank subsequently assigned to The Sumitomo
Trust & Banking Co. Ltd., New York Branch ("Sumitomo") a portion of Citibank's
--------
interest in the loans governed by the l988 Loan Agreements.
(3) In March 1993, FNBC resigned as agent under the 1988 Loan
Agreements and assigned its interest in the loans thereunder to Citibank.
Citibank continued to act as agent for the remaining 1988 Banks and Sumitomo
(the "1988 Lenders").
------------
(4) The Banks consist of the 1988 Lenders and certain financial
institutions that have purchased participation interests in the 1988 Loan
Agreement governing loans to the Borrower in the aggregate principal amount of
$322,050,133 (the "1988 Multistate Loan Agreement"). The Borrower did not make
------------------------------
on the June 15, 1993 maturity date the payments required under the 1988 Loan
Agreements. The Borrower has requested that the Banks consent to the
Reorganization (as defined in Section 1.01) of Marriott Corporation and extend
the maturity date of the loans governed by the 1988 Loan Agreements. The Banks
have agreed to the Borrower's request on the terms and conditions set forth
herein and in the $48,360,075.42 Second Amended and Restated Loan Agreement
dated as of the date hereof among the Borrower, the Banks and the Agent (the
"California Loan Agreement"). This Agreement, among other things, amends and
- --------------------------
restates the 1988 Multistate Loan Agreement, consolidates the loans governed
thereby, extends the maturity date of such loans and provides for the assignment
by certain Banks of part of their interest in the Multistate Advances (as
defined in Section 2.01) owing to them to the Banks that previously purchased
participation interests in the 1988 Multistate Loan Agreement. The California
Loan Agreement, among other things, amends and restates the 1988 Loan Agreement
governing loans to the Borrower in the aggregate principal amount of $51,098,867
(the "1988 California Loan Agreement"), consolidates the loans governed thereby,
------------------------------
extend the maturity date of such loans and provides for the assignment by
certain 1988 Lenders of part of their interest in the advances
-2-
<PAGE>
governed by the California Loan Agreement to certain financial institutions that
purchased participations from such 1988 Lenders in the 1988 California Loan
Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the parties hereto hereby agree that,
subject to the satisfaction of the conditions precedent set forth in Article
III, the 1988 Multistate Loan Agreement is, on and as of the Closing Date (as
defined in Section 1.01), amended and restated in its entirety as set forth
below.
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms.
---------------------
As used in this Agreement, the following terms shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):
"Additional Interest" has the meaning specified in Section 2.05(b).
-------------------
"Adjusted Multistate Amount" means, for each Lender, the unpaid
--------------------------
principal amount of the Multistate Advances owing to such Lender from time to
time plus, on and after the date, if any, that all or any Additional Interest
----
owing to such Lender is not paid when due pursuant to Section 2.05(b), the
amount equal to such unpaid Additional Interest on such date.
"Adjusted Operating Profit" means, for any period, Operating Profit of
-------------------------
the Hotels for such period under the Hotel Lease plus the sum of the following
----
(without duplication) during such period: (a) the Net Cash Proceeds from the
execution of all easements benefiting or affecting the Hotel Properties; (b) all
interest and other amounts earned by the Borrower in respect of (i) funds in the
Borrower Operating Account (including the proceeds of all investments and
reinvestments of such funds, interest and other amounts), (ii) funds in all
other accounts (excluding the FF&E Reserve Account and accounts containing funds
relating only to the Connecticut Hotel) of the Borrower (including the proceeds
of all investments and reinvestments of such funds, interest and other amounts),
(iii) all investments in Cash Equivalents and (iv) all other securities, if any,
held for investment; (c) the amount, if any, of the net proceeds of any
insurance paid directly to the Borrower on account of damage or destruction to
any part of a Hotel (including any personal property therein) that is not used
by the Borrower to repair or replace the damaged or destroyed Hotel (including
personal property) pursuant to Section 15.01A of the Hotel Lease, not used to
reimburse other Persons for amounts advanced by them for the repair or
replacement of the damaged or destroyed Hotel (including personal property) or
not deposited in the FF&E Reserve Account to replenish amounts withdrawn from
the FF&E Reserve Account to repair or replace the damaged or destroyed Hotel
(including personal property); and (d) any refunds of ground rent paid by any
International Ground Lessor to the Borrower or the Tenant to the extent such
refund is not included in Gross Revenues (as defined in the Hotel Lease) in
calculating Operating Profit.
"Adjusted Partnership Costs" has the meaning specified in Section
--------------------------
6.02(q).
"Administrative Holdback Amount" means $169,200, which is the
------------------------------
Borrower's estimate of Partnership Costs payable by it from five days prior to
the Closing Date through the end of the Cumulative Tenant Period with the
Payment Date of August 1, 1994.
-3-
<PAGE>
"Affiliate" means, as to any Person, any other Person that, (a)
---------
directly or indirectly, controls, is controlled by or is under common control
with such Person, (b) is a director or officer of such Person or of an Affiliate
of such Person and (c) is an Affiliate of any such director or officer. For
purposes of this definition, the term "control" (including the terms
"controlling," "controlled by" and "under common control with") of a Person
means the possession, direct or indirect, of the power to vote 10% or more of
the Voting Stock of such Person or to direct or cause the direction of the
management and policies of such Person, whether through the ownership of Voting
Stock, by contract or otherwise. For purposes of this definition, all shares of
stock, partnership interests or similar interests in a corporation, partnership
or other Person owned by a spouse, sibling, parent, child or grandchild of an
individual, by any such relative of a spouse of such individual or by any
relative of such individual or spouse who makes his or her home with such
individualor spouse shall be deemed to be owned by that individual.
"Agent" has the meaning specified in the recital of parties to this
-----
Agreement.
"Agent's Account" means the account of the Agent maintained by the
---------------
Agent at its office at 399 Park Avenue, New York, New York 10043, Account No.
36852248, Attention: Philip Green.
"Aggregate Recapture Amount" means, for any Tenant Fiscal Year, the
--------------------------
sum of the Excess Earnings Recapture on which the Borrower's payments under
Section 2.04(b)(i) were based for each Cumulative Tenant Period included in such
Tenant Fiscal Year. For purposes of calculating the Aggregate Recapture Amount,
if Excess Earnings Recapture for any Cumulative Tenant Period is a negative
number, the Excess Earnings Recapture for such Cumulative Tenant Period shall be
deemed to equal zero dollars.
"Amended MI Revolver" means the MI Revolver as in effect on the
-------------------
Closing Date and as amended from time to time thereafter in accordance with its
terms.
"Annual Interest Payments" has the meaning specified in Section 4.04.
------------------------
"Annual Loan Coverage of the Remaining Hotels" has the meaning
--------------------------------------------
specified in Section 4.04.
"Annualized Recapture Amount" has the meaning specified in Section
---------------------------
6.03(d)(ii).
"Applicable Lending Office" means, with respect to each Lender, such
-------------------------
Lender's Domestic Lending Office in the case of a Base Rate Advance and such
Lender's Eurodollar Lending Office in the case of a Eurodollar Rate Advance.
"Applicable Margin" means (a) for Base Rate Advances, the applicable
-----------------
percentage per annum set forth below and (b) for Eurodollar Rate Advances, the
applicable percentage per annum set forth below corresponding to the period in
which the first day of the Interest Period for such Eurodollar Rate Advance
occurs.
<TABLE>
<CAPTION>
Base Rate
Advance Eurodollar Rate
Applicable Advance Applicable
Period Margin Margin
- ------ ------ ------
<S> <C> <C>
Closing Date through June 15, 1996 0.50% 1.50%
June 16, 1996 through June 15, 1997 0.75% 1.75%
From and after June 16, 1997 1.00% 2.00%
</TABLE>
-4-
<PAGE>
"Asset Transfer Date" means October 8, 1993, on which date the
-------------------
Reorganization occurred.
"Asset Transfers" means the transfer by Marriott Corporation to
---------------
Marriott International of the stock of certain Marriott Corporation Subsidiaries
principally engaged in the lodging and senior living services management, golf
management, timeshare resort development and operation, food service and
facilities management and other contract services businesses and certain other
transfers to allocate the assets and liabilities related thereto to Marriott
International and assets and liabilities related to the ownership of hotels and
senior living facilities and the operation of restaurants, cafeterias, gift
shops and related facilities at airports, stadiums, arenas and tourist
attractions and on highway systems to Marriott Corporation, as required by the
terms of the Distribution Agreement.
"Assigning Bank" means a 1988 Lender that is, on the Closing Date,
--------------
selling and assigning a portion of its rights and obligations under this
Agreement (including, without limitation, a portion of the Multistate Advances
owing to it) and the other Multistate Loan Documents pursuant to Section 2.01 to
another Bank that has purchased prior to the date hereof a participation
interest in the 1988 Multistate Loans of the 1988 Lender making the sale and
assignment.
"Assignment and Acceptance" means an assignment and acceptance entered
-------------------------
into by a Lender and an Eligible Assignee, and accepted by the Agent, in
accordance with Section 9.07 and substantially in the form of Exhibit C.
"Assuming Participant" means a Bank that purchased prior to the
--------------------
Closing Date a participation interest in the 1988 Multistate Loans owing to an
Assigning Bank and that is, on the Closing Date, in exchange for the retransfer
of such participation interest to such Assigning Bank, (a) acquiring a portion
of the rights and obligations of such Assigning Bank under this Agreement
(including, without limitation, a portion of the Multistate Advances owing to
the Assigning Bank) and the other Multistate Loan Documents pursuant to Section
2.01 and (b) assuming such portion of the rights and obligations of such
Assigning Bank under this Agreement and the other Multistate Loan Documents
pursuant to Section 2.01.
"Attornment Agreement" means the Subordination, Nondisturbance and
--------------------
Attornment Agreement in substantially the form of Exhibit P, as amended from
time to time in accordance with its terms.
"Authorized Accounting Officer" means the chief accounting officer of
-----------------------------
the General Partner, or one of his or her duly authorized representatives who,
as set forth in a written notice from such chief accounting officer to the
Agent, is duly authorized to act on behalf of such chief accounting officer in
connection herewith.
"Authorized Representative" means any duly authorized representative
-------------------------
of the General Partner who, as set forth in a written notice from the Borrower
to the Agent, is authorized by the Borrower to act in connection herewith.
"Backup Debt Service Guaranty" means the Backup Debt Service Guaranty
----------------------------
in substantially the form of Exhibit K, as amended from time to time in
accordance with its terms.
"Backup Guaranteed Obligations" has the meaning specified in the
-----------------------------
Backup Debt Service Guaranty.
-5-
<PAGE>
"Bankruptcy Code" means the U.S. Bankruptcy Code, 11 U.S.C. (S)(S) 101
---------------
et seq., together with all amendments, modifications and replacements as the
same may exist on any relevant date.
"Banks" has the meaning specified in the recital of parties to this
-----
Agreement.
"Base Rate" means a fluctuating interest rate per annum in effect from
---------
time to time, which rate per annum shall at all times be equal to the highest
of:
(a) the rate of interest announced publicly by Citibank in New
York, New York, from time to time, as Citibank's base rate;
(b) the sum (adjusted to the nearest 1/4 of 1% or, if there is no
nearest 1/4 of 1%, to the next higher 1/4 of 1%) of (i) 1/2 of 1% per
annum, plus (ii) the rate obtained by dividing (A) the latest three-week
----
moving average of secondary market morning offering rates in the United
States for three-month certificates of deposit of major United States money
market banks, such three-week moving average (adjusted to the basis of a
year of 360 days) being determined weekly on each Monday (or, if such day
is not a Business Day, on the next succeeding Business Day) for the three-
week period ending on the previous Friday by Citibank on the basis of such
rates reported by certificate of deposit dealers to and published by the
Federal Reserve Bank of New York or, if such publication shall be suspended
or terminated, on the basis of quotations for such rates received by
Citibank from three New York certificate of deposit dealers of recognized
standing selected by Citibank, by (B) a percentage equal to 100% minus the
average of the daily percentages specified during such three-week period by
the Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, but not limited to,
any emergency, supplemental or other marginal reserve requirement) for
Citibank with respect to liabilities consisting of or including (among
other liabilities) three-month U.S. dollar non-personal time deposits in
the United States, plus (iii) the average during such three-week period of
----
the annual assessment rates estimated by Citibank for determining the then
current annual assessment payable by Citibank to the Federal Deposit
Insurance Corporation (or any successor) for insuring U.S. dollar deposits
of Citibank in the United States; and
(c) 1/2 of one percent per annum above the Federal Funds Rate.
"Base Rate Advance" means a Multistate Advance that bears interest as
-----------------
provided in Section 2.05(a)(ii).
"Base Release Price" means, with respect to a Hotel, the dollar amount
------------------
specified as the "Base Release Price" opposite such Hotel on Schedule 4.01.
"Borrower" has the meaning specified in the recital of parties to this
--------
Agreement.
"Borrower Accounting Period" means each accounting period of four
--------------------------
consecutive weeks having the same beginning and ending dates as the General
Partner's corresponding four week accounting period except that the last
Borrower Accounting Period in a Borrower Fiscal Year may be longer than four
consecutive weeks when and to the extent necessary to conform the Borrower's
accounting system to the calendar. The first and last day of each Borrower
Accounting Period between January 1, 1994 and December 31, 1999 are set forth on
Schedule 1.01A.
"Borrower Accounting Quarter" means three (or, in the case of the last
---------------------------
Borrower Accounting Quarter for a Borrower Fiscal Year, four) consecutive
Borrower Accounting Periods, ending on the last day of the third, sixth, ninth
and last Borrower Accounting Period in each
-6-
<PAGE>
Borrower Fiscal year. The first and last day of each Borrower Accounting
Quarter between January 1, 1994 and December 31, 1999 are set forth on Schedule
1.01.
"Borrower Operating Account" has the meaning specified in the
--------------------------
Multistate Security Agreement.
"Borrower Fiscal Year" means the calendar year.
--------------------
"Borrower Material Adverse Change" means any material adverse change
--------------------------------
in the business, condition (financial or otherwise), operations, performance,
properties (including the Hotel Properties and the respective interest of the
Borrower therein) or prospects of the Borrower or the General Partner.
"Borrower Material Adverse Effect" means a material adverse effect on
--------------------------------
(a) the business, condition (financial or otherwise), operations, performance,
properties (including the Hotel Properties and the respective interest of the
Borrower therein) or prospects of the Borrower or the General Partner, (b) the
rights and remedies of the Agent or the Lender under any Multistate Loan
Document or Related Document to which the Borrower or the General Partner is or
is to be a party or the priority of any Multistate Mortgage or other Lien
granted by the Borrower in favor of the Lenders or (c) the ability of the
Borrower or the General Partner to perform its Obligations under any Multistate
Loan Document or Related Document to which it is or is to be a party.
"Business Day" means a day of the year on which banks are not required
------------
or authorized to close in New York City and, if the applicable Business Day
relates to any Eurodollar Rate Advances, on which dealings are carried on in the
London interbank market.
"California Advance" has the meaning specified in the California Loan
------------------
Agreement.
"California Base Advance" means a California Advance that bears
-----------------------
interest as provided in Section 2.05(a)(ii) of the California Loan Agreement.
"California Assignment of Leases" has the meaning specified in the
-------------------------------
California Loan Agreement.
"California Borrowing" has the meaning specified in the California
--------------------
Loan Agreement.
"California Collateral Documents" has the meaning specified in the
-------------------------------
California Loan Agreement.
"California Eurodollar Advance" means a California Advance that bears
-----------------------------
interest as provided in Section 2.05(a)(i) of the California Loan Agreement.
"California Loan Agreement" has the meaning specified in the
-------------------------
Preliminary Statements.
"California Loan Documents" has the meaning specified in the
-------------------------
California Loan Agreement.
"California Mortgages" has the meaning specified in the California
--------------------
Loan Agreement.
"California Obligations" has the meaning specified in Section 2.11.
----------------------
"California Required Lenders" means the "Required Lenders" as defined
---------------------------
in the California Loan Agreement.
-7-
<PAGE>
"California Withheld Amount" has the meaning specified in the
--------------------------
California Loan Agreement.
"Capitalized Leases" has the meaning specified in clause (e) of the
------------------
definition of Indebtedness.
"Cash Equivalents" means any of the following, to the extent owned by
----------------
the Borrower free and clear of all Liens and having a maturity of not greater
than 90 days from the date of acquisition thereof: (a) readily marketable direct
obligations of the Government of the United States or any agency or
instrumentality thereof or obligations unconditionally guaranteed by the full
faith and credit of the Government of the United States, (b) certificates of
deposit of or time deposits with any commercial bank that (i) is a Lender or a
member of the Federal Reserve System, (ii) issues (or the parent of which
issues) commercial paper rated as described in clause (c), (iii) is organized
under the laws of the United States or any State thereof and (iv) has combined
capital and surplus of at least $1,000,000,000 or (c) commercial paper in an
aggregate amount of no more than $250,000 per issuer outstanding at any time,
issued by any corporation organized under the laws of any State of the United
States and rated at least "Prime-1" (or the then equivalent grade) by Moody's
Investors Services, Inc. or "A-1" (or the then equivalent grade) by Standard &
Poor's Corporation.
"CERCLA" means the Comprehensive Environmental Response, Compensation
------
and Liability Act of 1980.
"Chain Services" has the meaning specified in the Hotel Lease.
--------------
"Citibank" has the meaning specified in the Preliminary Statements.
--------
"Closing Date" means the first date on which the conditions set forth
------------
in Article III have been satisfied.
"Closing Date MI Revolver" means the MI Revolver as in effect on the
------------------------
Closing Date.
"CMC" means Courtyard Management Corporation, a Delaware corporation.
---
"Combined Advances" means the Multistate Advances and the California
-----------------
Advances.
"Combined Loan Documents" means the Multistate Loan Documents and the
-----------------------
California Loan Documents.
"Combined Obligations" has the meaning specified in Section 2.11.
--------------------
"Computer Lease" means a lease or other agreement under which the
--------------
Borrower leases (including the license, if any, of operating software therefor)
computer equipment located in a Hotel.
"Confidential Information" means (a) information that the Borrower
------------------------
furnishes to the Agent or any Lender in a writing designated as confidential
with a reference to Section 9.15 hereof and (b) any financial information
regarding the Borrower and the Hotel Properties, including projections of the
operating results of the Hotels, that the Borrower furnishes to the Agent or any
Lender, but in each case does not include any such information that is or
becomes generally available to the public or that is or becomes available to the
Agent or such Lender from a source other than the Borrower or any Affiliate
thereof.
"Connecticut Hotel" means the Borrower's hotel in Windsor,
-----------------
Connecticut.
-8-
<PAGE>
"Connecticut Hotel Documents" means (a) the Loan Agreement dated as of
---------------------------
February 9, 1988 among the Borrower, Citibank and FNBC as amended after the
Closing Date due to the termination of the 1986 Management Agreement and (b) the
Loan Documents referred to in such Loan Agreement.
"Consolidated" means, with respect to any Person, the consolidation of
------------
the accounts of such Person and its Subsidiaries in accordance with generally
accepted accounting principles as in effect from time to time in the United
States of America.
"Conversion", "Convert" and "Converted" each refers to a conversion of
---------- ------- ---------
Multistate Advances of one Type into Multistate Advances of the other Type
pursuant to Section 2.07.
"Corresponding California Borrowing" has the meaning specified in
----------------------------------
paragraph (c) of the definition of Interest Period.
"CPI" means the CPI-U (a) using 1982-1984 as the standard reference
---
base period equal to 100 or (b) if the CPI-U ceases to be issued with the
reference base period referred to in clause (a) for any time period for which
the CPI is to be determined hereunder, using for the CPI-U for the time period
for which such reference base period is not used the standard reference base
period for such time period times a conversion factor that will convert such
CPI-U to a value corresponding to a 1982-1984 base period equal to 100. As used
in this definition, "CPI-U" means the Consumer Price Index, All Items for All
-----
Urban Consumers, U.S. City Average.
"CPI Adjustment Factor" means, for any Tenant Fiscal Year for which
---------------------
maximum permitted Partnership Costs are being determined pursuant to Section
6.02(q), (a) 100 percent plus the percentage increase in the CPI announced for
November of the immediately preceding Tenant Fiscal Year over the CPI announced
for December of 1993 or (b) if the percentage increase referred to in clause (a)
is a negative number, one (1).
"Cumulative Difference" has the meaning specified in Section
---------------------
2.04(b)(ii).
"Cumulative Tenant Period" means, at any Payment Date, the three or
------------------------
four (as the case may be) consecutive Tenant Accounting Periods ending with the
Tenant Accounting Period that ends on the date that is closest to, but at least
thirty (30) days before, such Payment Date. Notwithstanding the preceding
sentence, (a) the first Cumulative Tenant Period hereunder shall begin on
February 26, 1994 and shall end on March 25, 1994, (b) the Cumulative Tenant
Period for the February 1, 1997 Payment Date shall end with (and include) the
Tenant Accounting Period ending January 3, 1997 and (c) the Cumulative Tenant
Period for the February 1, 1998 Payment Date shall end with (and include) the
Tenant Accounting Period ending January 2, 1998. The first and last day of each
Cumulative Tenant Period through June 18, 1999 is set forth on Schedule 1.01B.
"Current Ground Rent" means, at any time, all rent due and payable
-------------------
under the International Ground Leases the payment of which has not been
deferred. The term "Current Ground Rent" does not include Deferred Ground Rent.
-------------------
"Current Year" has the meaning specified in Section 4.04.
------------
"Debt and Tenant Chance Guaranty" means the Debt and Tenant Change
-------------------------------
Guaranty in substantially the form of Exhibit S, as amended from time to time in
accordance with its terms.
"Debt Service Guaranty" means the Amended and Restated Debt Service
---------------------
Guaranty in substantially the form of Exhibit J, as amended from time to time in
accordance with its terms.
-9-
<PAGE>
"Default" means any Event of Default or any Potential Default.
-------
"Deferred Ground Rent" means, at any time, all rent payable under the
--------------------
International Ground Leases the payment of which has been deferred by the
Borrower in accordance with Section 6.01(s).
"Deferred Incentive Management Fees" means, without duplication, all
----------------------------------
of the following as in existence and calculated as of December 31, 1993: (a) all
"Deferred Incentive Management Fees" referred to in the 1986 Management
Agreement, (b) all "Base Management Fees" and "Courtyard Management Fees"
referred to in the 1986 Management Agreement and treated as "Deferred Incentive
Management Fees" pursuant to Section 5.02E thereof and (c) all other "Incentive
Management Fees" (excluding in each case those referred to in clauses (a) and
(b) above) accrued through December 31, 1993 on the Tenant's financial records.
"Deferred Purchase Note" means the Deferred Purchase Note of the
----------------------
Borrower payable to the order of Marriott Corporation in the principal amount of
$79,947,000 and issued by the Borrower pursuant to the Purchase Agreement as
partial payment for the sale of the Hotels and the Connecticut Hotel by Marriott
Corporation to the Borrower.
"Determined Libor Rate" means a rate equal to 3.56% per annum, which
---------------------
would be the Determined Libor Rate (as defined in the Forbearance Agreement) for
a one month Interest Period commencing on March 18, 1994.
"Distribution" means the special dividend transaction consisting of a
------------
distribution to shareholders of Host Marriott, on a share-for-share basis, of
all outstanding shares of common stock of Marriott International, as set forth
in the Proxy Statement.
"Distribution Agreement" means the Distribution Agreement dated as of
----------------------
September 15, 1993 between Marriott Corporation and Marriott International.
"Distribution Documents" means the Distribution Agreement, the
----------------------
Employee Benefits Allocation Agreement, the Tax Sharing Agreement, the LYONS
Allocation Agreement, the Host Marriott Lodging Management Agreements, the
Consolidation Agreement, the Senior Living Services Lease Agreements, the
Philadelphia Mortgage, the Host Consulting Agreement, the Assignment and License
Agreement, the Noncompetition Agreement and the Transitional Services
Agreements, as each such agreement is defined in the Proxy Statement if not
otherwise defined herein, and each other agreement governing the Asset Transfers
and the Distribution.
"Dollars" and the sign "$" each means lawful currency of the United
-------
States of America.
"Domestic Lending Officer" means, with respect to any Lender, the
------------------------
office of such Lender specified as its "Domestic Lending Office" opposite its
name on Schedule 2.01B or in the Assignment and Acceptance pursuant to which it
became a Lender, or such other office of such Lender as such Lender may from
time to time specify in writing to the Borrower and the Agent.
"Eligible Assignee" means (a) a commercial bank organized under the
-----------------
laws of the United States, or any State thereof, and having total assets in
excess of $1,000,000,000, any holding company thereof and any Affiliate having
total assets in excess of $1,000,000,000 of any such holding company; (b) a
savings and loan association or savings bank organized under the laws of the
United States, or any State thereof, and having total assets in excess of
$500,000,000, any holding company thereof and any Affiliate having total assets
in excess of $500,000,000 of any such holding company; (c) a commercial or
consumer finance company (whether a corporation, partnership, trust or other
entity) that is engaged in making, purchasing or otherwise investing in
commercial loans
-10-
<PAGE>
in the ordinary course of its business, having total assets in excess of
$50,000,000 and whose debt is rated "BBB" or better by Standard & Poor's
Corporation, "Baa" or better by Moody's Investors Service, Inc., or rated in one
of the top four categories of any other nationally recognized rating agency; (d)
any Person organized under the laws of the United States, or any state thereof,
that is organized as a mutual fund or registered investment company and having
total assets in excess of $50,000,000; and (e) any other Person approved by the
Agent and the Borrower, which approvals will not be unreasonably withheld;
provided, however, that neither an Affiliate of the Borrower nor an Affiliate of
- -------- -------
the Tenant shall qualify as an Eligible Assignee under this definition.
"Environmental Action" means any administrative, regulatory or
--------------------
judicial action, suit, demand, demand letter, claim, notice of non-compliance or
violation, investigation, proceeding, consent order or consent agreement
relating in any way to any Environmental Law or any Environmental Permit
including, without limitation, (a) any claim by any governmental or regulatory
authority for enforcement, cleanup, removal, response, remedial or other actions
or damages pursuant to any Environmental Law and (b) any claim by any third
party seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from Hazardous Materials or arising
from alleged injury or threat of injury to health, safety or the environment.
"Environmental Law" means any federal, state or local law, rule,
-----------------
regulation, order, writ, judgment, injunction, decree or determination relating
to the environment, health, safety or Hazardous Materials, including, without
limitation, CERCLA, the Resource Conservation and Recovery Act, the Hazardous
Materials Transportation Act, the Clean Water Act, the Toxic Substances Control
Act, the Clean Air Act, the Safe Drinking Water Act, the Atomic Energy Act, the
Federal Insecticide, Fungicide and Rodenticide Act and the Occupational Safety
and Health Act.
"Environmental Permit" means any permit, approval, identification
--------------------
number, license or other authorization required under any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, and the regulations promulgated and rulings issued
thereunder.
"ERISA Affiliate" of any Person means any other Person that for
---------------
purposes of Title IV of ERISA is a member of such Person's controlled group, or
under common control with such Person, within the meaning of Section 414 of the
Internal Revenue Code.
"Estimated Unpaid Transaction Costs" means $535,266.85, which is the
----------------------------------
Borrower's estimate of Transaction Costs, excluding those paid on or before the
Closing Date.
"Eurocurrency Liabilities" has the meaning specified in Regulation D
------------------------
of the Board of Governors of the Federal Reserve System, as in effect from time
to time.
"Eurodollar Lending Office" means, with respect to any Lender, the
-------------------------
office of such Lender specified as its Eurodollar Lending Office opposite its
name on Schedule 2.01B or in the Assignment and Acceptance pursuant to which it
became a Lender (or, if no such office is specified, its Domestic Lending
Office), or such other office of such Lender as such Lender may from time to
time specify in writing to the Borrower and the Agent.
"Eurodollar Rate" means, for any Interest Period for all Eurodollar
---------------
Rate Advances comprising part of the same Multistate Borrowing, an interest rate
per annum equal to the rate per annum obtained by dividing (a) the rate per
annum at which deposits in U.S. dollars are offered by the principal office of
the Reference Bank in London, England to prime banks in the London interbank
market at 11:00 A.M. (London time) two Business Days before the first day of
such Interest Period in an amount substantially equal to the greeter of (i)
$5,000,000 and (ii) the sum of
-11-
<PAGE>
such Reference Bank's Eurodollar Rate Advance comprising part of such Multistate
Borrowing to be outstanding during such Interest Period and such Reference
Bank's California Eurodollar Advance comprising part of the California Borrowing
to be outstanding during such Interest Period and for a period equal to such
Interest Period by (b) a percentage equal to 100% minus the Eurodollar Rate
Reserve Percentage, if any, for such Interest Period. Notwithstanding the
preceding sentence, "Eurodollar Rate" means, if the Borrower selects in April
---------------
1994 the Interest Period of longer than three months described in the second
parenthetical of the definition of "Interest Period", for purposes of
calculating the Eurodollar Rate for that Interest Period only clause (a) of the
preceding sentence shall be modified prior to the words "by the principal office
of the Reference Bank" to read "the rate per annum at which deposits in U.S.
dollars would be offered as determined by the Reference Bank in its discretion."
"Eurodollar Rate Advance" means a Multistate Advance that bears
-----------------------
interest as provided in Section 2.05(a)(i).
"Eurodollar Rate Reserve Percentage" means, for any Interest Period
----------------------------------
for any Eurodollar Rate Advance comprising part of the same Multistate
Borrowing, the reserve percentage applicable two Business Days before the first
day of such Interest Period under regulations issued from time to time by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, without limitation, any
emergency, supplemental or other marginal reserve requirement) for the Reference
Bank with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities (or with respect to any other category of liabilities
that includes deposits by reference to which the interest rate on Eurodollar
Rate Borrowings is determined) having a term equal to such Interest Period.
"Events of Default" has the meaning specified in Section 7.01.
-----------------
"Excess Earnings Recapture" means, for any period, Adjusted Operating
Profit for such period less the sum of (a) payments of principal (including
----
under Section 2.02, 2.03 and 2.04(a) of this Agreement and of the California
Loan Agreement), interest and other Obligations of the Borrower under the
Combined Loan Documents paid by the Borrower during such period pursuant to the
Combined Loan Documents (excluding (i) payments of principal and interest made
in such period pursuant to Section 2.04(b)(i) hereof and of the California Loan
Agreement to the extent related to prior periods, (ii) payments of principal and
interest made in such period pursuant to Section 2.04(b)(ii) hereof and of the
California Loan Agreement to the extent related to prior periods, (iii) payments
of principal and interest made in such period pursuant to Article IV of this
Agreement and the California Loan Agreement in connection with the release of a
Hotel Property, (iv) for purposes of the calculation of Excess Earnings
Recapture made for the second Cumulative Tenant Period hereunder, payments of
principal, interest, fees and expenses paid by the Borrower on the Closing Date
pursuant to this Agreement and the California Loan Agreement and (v) to the
extent not included in (iv) payments to the Agent made in such period of
proceeds of sales of Multistate Collateral to the extent such proceeds are not
included in Gross Revenues), (b) payments of Partnership Costs for such period
(excluding payments of Partnership Costs made after the Closing Date until such
Partnership Costs exceed the Administrative Holdback Amount), (c) Current Ground
Rent paid by the Borrower or the Tenant to the international Ground Lessors
during such period in accordance with this Agreement and (d) for purposes of the
calculation of Excess Earnings Recapture made for the second Cumulative Tenant
Period hereunder, Transaction Costs paid by the Borrower after the Closing Date
during such period. Notwithstanding the preceding sentence, there shall not be
deducted from Adjusted Operating Profit in calculating Excess Earnings Recapture
(x) the payment described in the last sentence of Section 2.04(b)(i) of this
Agreement and of the California Loan Agreement made on account of Transaction
Costs or (y) the payment described in Section 6.01(j) of this Agreement and of
the California Loan Agreement. As used in this definition, "Transaction Costs"
-----------------
means the fees and expenses incurred by the Borrower in connection with the
preparation, negotiation, execution and delivery on the Closing
-12-
<PAGE>
Date of the Combined Loan Documents, including without limitation (1) the fees
and expenses of Hogan & Hartson L.L.P., (2) the fees and expenses of local
counsel to the Borrower, (3) the cost of obtaining good standing certificates
and other documents certified by governmental entities and required to be
delivered hereunder on the Closing Date and (4) the fees, expenses and premiums
charged by title insurance companies and other search companies for the
provision pursuant to this Agreement and the California Loan Agreement of title
insurance on the Hotel Properties and the recording, filing and retrieval of the
documents required to be recorded, filed and retrieved by this Agreement and the
California Loan Agreement.
"Exchange Offer" means the offer made by Marriott Corporation pursuant
--------------
to which holders of certain notes of Marriott Corporation had the right to
exchange their notes for a combination of cash and common stock of Host Marriott
and new senior notes issued by a Subsidiary of Host Marriott.
"Exculpated Parties" has the meaning specified in section 2.12.
------------------
"Extension Notice" has the meaning specified in Section 2.03(c).
----------------
"Excluded Period" means, with respect to any additional amount payable
---------------
under Section 2.08(a) or 2.08(b), the period ending 120 days prior to the
applicable Lender's delivery of a certificate referenced in Section 2.08(a) or
2.08(b), as applicable, with respect to such additional amount.
"Federal Funds Rate" means, for any period, a fluctuating interest
------------------
rate per annum equal for each day during such period to the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day that is a Business Day, the average of the quotations for such day for such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.
"Fee Interest" means any Mortgaged Interest in which the Borrower (or,
------------
in the case of the Hotel in Fairfax (Fair Oaks), Virginia, the Courtyard by
Marriott Limited Partnership Land Trust) has a fee simple interest in the entire
Hotel Property.
"FF&E" means all furniture, fixtures, furnishings and equipment
----
acquired or to be acquired in connection with the operation of a Hotel Property,
including without limitation all such furniture, fixtures, equipment and
furnishings acquired after the date hereof and all replacements thereof.
"FF&E Lease" means (a) a lease (other than a TV System Lease,
----------
Telephone Lease or Computer Lease) to the Borrower or the Tenant of any FF&E
that is customarily leased in the hotel industry in the United States and on
payment terms (including amount and time of payment) not materially more
favorable to the lessor thereof than payment terms customary in the hotel
industry in the United States for similar leases, (b) one or more other leases
(other than a TV System Lease, Telephone Lease, Computer Lease or lease
described in clause (a)) of any FF&E, including without limitation any
Capitalized Lease, the Borrower's or Tenant's payment Obligations under which do
not exceed $2,000 per Hotel per Tenant Fiscal Year and $100,000 in the aggregate
per Tenant Fiscal Year and (c) any lease (other than a TV System Lease,
Telephone Lease, Computer Lease or lease described in clause (a) or clause (b))
to the Borrower or the Tenant of any other FF&E that is approved by the Agent.
"FF&E Reserve" means the "Repair and Equipment Reserve" or "Reserve"
------------
as defined in Section 8.02 of the Hotel Lease.
-13-
<PAGE>
"FF&E Reserve Account" has the meaning specified in the Multistate
--------------------
Security Agreement.
"Financial Statements" means the financial statements of the Borrower
--------------------
furnished to the Agent or the Lenders from time to time, including, without
limitation, those furnished by the Borrower pursuant to Section 6.03 hereof.
"FIRREA" means the Federal Financial Institutions Reform, Recovery and
------
Enforcement Act of 1989, as amended from time to time, and the regulations
promulgated and rulings issued thereunder.
"FNBC" has the meaning specified in the Preliminary Statements.
----
"Forbearance Agreement Rate" means the Forbearance Agreement dated
--------------------------
December 15, 1993 among the Borrower, the 1988 Lenders and Citibank as agent for
the 1988 Lenders.
"Forbearance Agreement Rate" means an interest rate equal to 5.06% per
--------------------------
annum, which equals the Determined Libor Rate plus 1.50%.
----
"Foreign Lender" has the meaning specified in Section 2.10(g).
--------------
"GAAP" has the meaning specified in Section 1.03.
----
"General Partner" means CBM One Corporation, a Delaware corporation.
---------------
"Governmental Authority" means any nation, state or other political
----------------------
subdivision or instrumentality of such nation or state and any entity (including
any public agency or unincorporated association) exercising executive,
legislative, judicial, regulatory or administrative functions of government.
"Gross Revenues" has the meaning specified in the Hotel Lease.
--------------
"Ground Lease" means an International Ground Lease or a Third Party
------------
Ground Lease.
"Ground Lease Amendment" means a First Amendment to Ground Lease in
----------------------
substantially the form of Exhibit I amending an International Ground Lease.
"Ground Lessor" means an International Ground Lessor or a Third Party
-------------
Ground Lessor.
"Guarantee" has the meaning specified in the Closing Date MI Revolver
---------
(with all defined terms used in the MI Revolver in connection with the
definition of "Guarantee" having the respective meanings set forth in the
---------
Closing Date MI Revolver).
"Guaranteed Obligations" has the meaning specified in the Debt Service
----------------------
Guaranty.
"Hazardous Materials" means (a) petroleum or petroleum products,
-------------------
natural or synthetic gas, asbestos in any form, urea formaldehyde foam
insulation and radon gas, (b) any substances defined as or included in the
definition of "hazardous substances" "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants," "contaminants" or "pollutants," or synonymous words under
any
-14-
<PAGE>
Environmental Law and (c) any other substance exposure to which is regulated
under any Environmental Law.
"Host Event" has the meaning specified in Section 7.03(b).
----------
"Host Material Adverse Effect" has the meaning specified in Section
----------------------------
5(c) of the Debt Service Guaranty.
"Host Marriott" means Host Marriott Corporation, a Delaware
-------------
corporation formerly named Marriott Corporation.
"Host Marriott Indemnity Agreement" means the Indemnity Agreement in
---------------------------------
substantially the form of Exhibit R, as amended from time to time in accordance
with its terms.
"Host Subordinated Notes" has the meaning specified in the Debt
-----------------------
Service Guaranty.
"Hotel" means a Courtyard by Marriott hotel identified on Schedule
-----
5.01(z) and further described on Schedule 5.01(aa), all FF&E of such hotel and
all improvements on the Land on which such hotel is located, in each case
whether now existing or hereafter acquired, and all alterations and additions
thereto, including all fixtures and appurtenances now or hereafter attached to
such improvements or to the Land; provided that such hotel and, FF&E
--------
improvements shall cease to be included in the term "Hotel" for purposes of this
Agreement and the other Multistate Loan Documents from and after such time as
the "Hotel Property" which includes such hotel is released from its Multistate
Mortgage, Multistate Assignment of Leases and the other Multistate Collateral
Documents encumbering such Hotel Property pursuant to Article IV.
Notwithstanding any such release, (a) all calculations made and payments
required or permitted to be made for any period by reference to any Hotel or
Hotel Property (including without limitation Excess Earnings Recapture) shall
include the released Hotel or Hotel Property, as the case may be, up to the time
during such period when the Hotel Property was so released and (b) all reports,
financial statements and other information covering one or more Hotels for any
period during which the Hotel Property is released shall include such Hotel
Property up to the time of its release. In addition, the foregoing proviso and
the provisos in the definition of "Land" shall not limit or otherwise affect any
----
obligations of the Borrower or any other Loan Party to indemnify, hold harmless
or otherwise reimburse the Agent or any Lender on account of any matter
involving the Hotel, the Land on which it is located, the Multistate Loan
Documents or the transactions contemplated hereby.
"Hotel Lease" means the Lease Agreement in substantially the form of
-----------
Exhibit M, as amended from time to time in accordance with its terms and with
the terms of the Attornment Agreement.
"Hotel Lease Guaranty" means the Hotel Lease Guaranty in substantially
--------------------
the form of Exhibit Q, as amended from time to time in accordance with its
terms.
"Hotel Property" means a Hotel and the Land underlying it (without
--------------
regard to whether the Land is owned or leased by the Borrower) and all easements
and appurtenances relating to such Land.
"Indebtedness" of any Person means, without duplication, (a) all
------------
indebtedness of such Person for borrowed money, (b) all Obligations of such
Person for the deferred purchase price of property or services (other than trade
payables not overdue by more than 60 days incurred in the ordinary course of
such Person's business), (c) all Obligations of such Person evidenced by notes,
bonds, debentures or other similar instruments, (d) all Obligations of such
Person created or arising under any conditional sale or other title retention
agreement with respect to property acquired by
-15-
<PAGE>
such Person (even though the rights and remedies of the seller or lender under
such agreement in the event of default are limited to repossession or sale of
such property), (e) all Obligations of such Person as lessee under leases that
have been or should be, in accordance with GAAP, recorded as capital leases
("Capitalized Leases") and including, in the case of the Borrower, all
------------------
Obligations of the Borrower under FF&E Leases, (f) all Obligations, contingent
or otherwise, of such Person under acceptance, letter of credit or similar
facilities, (g) all Obligations of such Person to purchase, redeem, retire,
defease or otherwise make any payment in respect of any capital stock of or
other ownership or profit interest in such Person or any other Person or any
warrants, rights or options to acquire such capital stock, valued, in the case
of Redeemable Preferred Stock, at the greater of its voluntary or involuntary
liquidation preference plus accrued and unpaid dividends, (h) all Obligations of
such Person in respect of interest rate swap, cap or collar agreements, interest
rate future or option contracts, currency swap agreements, currency future or
option contracts and other similar agreements, (i) all Indebtedness of others
referred to in clauses (a) through (h) above to the extent guaranteed directly
or indirectly in any manner by such Person, or in effect (and to the extent)
guaranteed directly or indirectly by such Person through an agreement (i) to pay
or purchase such Indebtedness or to advance or supply funds for the payment or
purchase of such Indebtedness, (ii) to purchase, sell or lease (as lessee or
lessor) property, or to purchase or sell services, primarily for the purpose of
enabling the debtor to make payment of such Indebtedness or to assure the holder
of such Indebtedness against loss, (iii) to supply funds to or in any other
manner invest in the debtor (including any agreement to pay for property or
services irrespective of whether such property is received or such services are
rendered) or (iv) otherwise to assure a creditor against loss, and (j) the
amount of all indebtedness referred to in clauses (a) through (h) above that is
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on property (including,
without limitation, accounts and contract rights) owned by such Person, even
though such Person has not assumed or become liable for the payment of such
Indebtedness.
"Indemnified Party" has the meaning specified in Section 9.04(b).
-----------------
"Initial Excess Cash Amount" means the product of (a) $2,704,019.64
--------------------------
and (b) 86.30604209%. The Borrower's calculation of the dollar amount specified
in clause (a) is set forth in Schedule 1.01C.
"Interest Period" means, for each Eurodollar Rate Advance comprising
---------------
part of the same Multistate Borrowing, the period commencing on the date of such
Eurodollar Rate Advance or the date of the Conversion of any Base Rate Advance
into a Eurodollar Rate Advance, and ending on the last day of the period
selected by the Borrower pursuant to the provisions below and, thereafter, each
subsequent period commencing on the last day of the immediately preceding
Interest Period and ending on the last day of the period selected by the
Borrower pursuant to the provisions below. The duration of each such Interest
Period shall be one, two or three months, as the Borrower may select, upon
notice received by the Agent not later than 11:00 A.M. (New York City time) on
the third Business Day prior to the first day of such Interest Period (except
that the Borrower may select in April 1994 an Interest Period longer than three
months that ends on or before the August l, 1994 Payment Date); provided,
--------
however, that:
- -------
(a) the Borrower may not select any Interest Period that ends
after any principal repayment installment date unless, after giving effect
to such selection, the aggregate principal amount of Base Rate Advances and
Eurodollar Rate Advances having Interest Periods that end on or prior to
such principal repayment installment date shall be at least equal to the
aggregate principal amount of Multistate Advances due and payable on or
prior to such date;
(b) subject to the limitations of Section 2.06 and paragraph (c)
below, the Borrower may, on any Business Day, divide any existing
Multistate Borrowing comprised
-16-
<PAGE>
of Eurodollar Rate Advances into two or more new Multistate Borrowings
consisting of Base Rate Advances, Eurodollar Rate Advances or both, each
such new Multistate Borrowing having a principal amount as designated by
the Borrower and all such new Multistate Borrowings collectively having an
aggregate principal amount equal to the aggregate principal amount of such
existing Multistate Borrowing, provided, however, that if the date of such
-------- -------
division is not the last day of the then existing Interest Period therefor,
the Borrower shall compensate the Lenders therefor under Section 9.04(d);
(c) the Borrower may not select any Interest Period for
Eurodollar Rate Advances comprising part of the same Multistate Borrowing
unless (i) the Borrower selects an Interest Period (as defined in the
California Loan Agreement) under the California Loan Agreement for
California Eurodollar Advances comprising part of the same California
Borrowing (such California Borrowing being the "Corresponding California
------------------------
Borrowing") with the same beginning and ending dates as the Interest Period
---------
for such Eurodollar Rate Advances and (ii) the aggregate outstanding
principal amount of the California Eurodollar Advances with such
corresponding Interest Period (as defined in the California Loan Agreement)
shall be equal on the date the Borrower selects the Interest Period for
such Eurodollar Rate Advances hereunder to (x) the aggregate outstanding
principal amount of the California Advances on such date multiplied by (y)
a fraction, the numerator of which is the aggregate outstanding principal
amount of such Eurodollar Rate Advances on such date and the denominator of
which is the aggregate outstanding principal amount of all Multistate
Advances on such date. For example, the Borrower may not select an Interest
Period for Eurodollar Rate Advances comprising twenty-two (22) percent of
the Multistate Advances unless the Borrower selects an Interest Period (as
defined in the California Loan Agreement) for California Eurodollar
Advances comprising twenty-two (22) percent of the California Advances with
the same beginning and ending dates as the Interest Period for such
Eurodollar Rate Advances;
(d) whenever the last day of any Interest Period would otherwise
occur on a day other than a Business Day, the last day of such Interest
Period shall be extended to occur on the next succeeding Business Day,
provided, however, that if such extension would cause the last day of such
-------- -------
Interest Period to occur in the nest following calendar month, the last day
of such Interest Period shall occur on the next preceding Business Day; and
(e) whenever the first day of any Interest Period occurs on a day
of an initial calendar month for which there is no numerically
corresponding day in the calendar month that succeeds such initial calendar
month by the number of months equal to the number of months in such
Interest Period, such Interest Period shall end on the last Business Day of
such succeeding calendar month.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
---------------------
amended from time to time, and the regulations promulgated and rulings issued
thereunder.
"International Ground Lease" means a ground lease between an
--------------------------
International Ground Lessor, as landlord, and the Borrower, as tenant, granting
the Borrower a leasehold interest on the Land on which a Hotel is located;
provided that with respect to the Hotels in Illinois and Virginia "International
- -------- -------------
Ground Lease" means a ground lease between an International Ground Lessor, as
- ------------
landlord, and a Land Trust, as tenant, granting such Land Trust a leasehold
interest on the Land on which a Hotel is located.
"International Ground Lessor" means Host Restaurants, Inc., Casa Maria
---------------------------
of Maryland, Inc., Newark Properties, Inc. or Essex House Condominium
Corporation, as applicable and, if any after the Closing Date, their successors
and assigns.
-17-
<PAGE>
"International Subordinated A Notes" has the meaning specified in the
----------------------------------
Backup Debt Service Guaranty.
"International Subordinated Notes" has the meaning specified in the
--------------------------------
Subordination Agreement.
"Inventory" means all Inventory referred to in Section l(b) of the
---------
Multistate Security Agreement.
"Investment" in any Person means any loan or advance to such Person,
----------
any purchase or other acquisition of any capital stock, warrants, rights,
options, obligations or other securities of such Person, any capital
contribution to such Person or any other investment in such Person, including,
without limitation, any arrangement pursuant to which the investor incurs
Indebtedness of the types referred to in clauses (i) and (j) of the definition
of "Indebtedness" in respect of such Person.
------------
"Knowledge," "Knows" or "Known". The Borrower or the General Partner
--------- ----- -----
has "Knowledge" of or "Knows" of a particular event or other matter, or an event
or other matter is "Known" to the Borrower or the General Partner, when it is
brought to the attention of (i) the President (or, when such position is not
filled, the Person acting in such capacity) of the General Partner, (ii) any
other Designated Executive Officer of the General Partner who in the ordinary
course of his or her responsibilities handles matters relating to the operation
of the Hotel Properties or the administration of any of the Combined Loan
Documents or (iii) any Designated Executive Officer of Host Marriott. Any Loan
Party other than the Borrower or the General Partner has "Knowledge" of or
"Knows" of a particular event or other matter, or any event or other matter is
"Known" to such Loan Party, when it is brought to the attention of any
Designated Executive Officer of such Loan Party. As used in this definition,
"Designated Executive Officer" of any Loan Party means the persons holding the
----------------------------
following positions at such Loan Party, or, when any of such positions is not
filled, acting in such capacity, (a) in the case of the General Partner, the
president, each vice president, each treasurer, the chief accounting officer and
each director of the General Partner, (b) in the case of Host Marriott, the
president, the chief executive officer, the general counsel, the executive vice
president - treasury, the senior vice president - legal, the senior vice
president - treasury, the chief financial officer, each vice president in the
treasury department, each vice president in the legal department, the chief
financial officer and the controller, in each case in this clause (b) who in the
ordinary course of his or her responsibilities handles matters relating to the
operation of the Hotel Properties or the administration of any of the Combined
Loan Documents and (c) in the case of Marriott International, the Tenant and
each International Ground Lessor, the president, the chief executive officer,
any vice president who in the ordinary course of his or her responsibilities
handles matters relating to the operation of the Hotel Properties or the
administration of any of the Combined Loan Documents, the chief financial
officer, each treasurer or assistant treasurer, the chief accounting officer and
the controller. Designated Executive Officer of each of the Borrower, the
General Partner and Host Marriott also means the Persons holding from time to
time the positions other than those listed above for such Loan Party as set
forth in a notice from the Agent to such Loan Party when the Agent reasonably
believes that the Persons holding such other positions in the ordinary course of
their responsibilities handle matters relating to the operation of the Hotel
Properties or the administration of any of the Combined Loan Documents.
"Land" means the parcel of land on which a Hotel is located, which
----
parcel consists of approximately the acreage identified, and is located as
described, on Schedule 5.01(aa) hereto, provided that such parcel of land shall
--------
cease to be included in the term "Land" for purposes of this Agreement and the
other Multistate Loan Documents from and after such time as the Hotel Property
which includes such parcel of land is released from its Multistate Mortgage and
Multistate Assignment of Leases pursuant to Article IV. References in this
Agreement to "Land" on which a
-18-
<PAGE>
Hotel n is located-, to the Land "underlying" a Hotel and phrases with similar
meanings shall mean such entire parcel of land.
"Land Trusts" means each of (a) LaSalle National Bank, as Trustee
-----------
under that certain land trust agreement dated December 9, 1986 known as Trust
No. 1118000, (b) the Virginia Beach Courtyard by Marriott Limited Partnership
Land Trust, (c) the Richmond Courtyard by Marriott Limited Land Trust, (d) the
Herndon-Reston Courtyard by Marriott Limited Partnership Land Trust, (e) the
Hampton Beach Courtyard by Marriott Limited Partnership Land Trust and (f) the
Courtyard by Marriott Limited Partnership Land Trust.
"Leasehold Interest" means any Mortgaged Interest in which the
------------------
Borrower (or a Land Trust for the benefit of the Borrower) has a leasehold
interest in the Land.
"Lenders" means the Banks listed on the signature pages hereof and
-------
each Eligible Assignee that shall become a party hereto pursuant to Section
9.07.
"Lien" means any lien, security interest or other charge or
----
encumbrance of any kind, or any other type of preferential arrangement,
including, without limitation, the lien or retained security title of a
conditional vendor and any easement, right of way or other encumbrance on title
to real property.
"Loan Parties" means the Borrower, Host Marriott, Marriott
------------
International, the General Partner, the Tenant and each International Ground
Lessor.
"LYONS Allocation Agreement" means the agreement between Marriott
--------------------------
International and Host Marriott pursuant to which Marriott International assumed
certain obligations evidenced by Host Marriott's outstanding Liquid Yield Option
Notes due 2006, as described in the Proxy Statement.
"Margin Stock" has the meaning specified in Regulation U.
------------
"Marriott Corporation" means Marriott Corporation, a Delaware
--------------------
corporation now named Host Marriott Corporation.
"Marriott International" means Marriott International, Inc., a
----------------------
Delaware corporation.
"Marriott International Indemnity Agreement" means the Marriott
------------------------------------------
International Indemnity Agreement in substantially the form of Exhibit E hereto,
as amended from time to time in accordance with its terms.
"Material Adverse Change" means any material adverse change in the
-----------------------
business, condition (financial or otherwise), operations, performance,
properties (including the Hotel Properties and the respective interest of any
Loan Party therein) or prospects of any Loan Party.
"Material Adverse Effect" means a material adverse effect on (a) the
-----------------------
business, condition (financial or otherwise), operations, performance,
properties (including the Hotel Properties and the respective interest of the
Borrower or the Tenant therein) or prospects of the Borrower, the General
Partner, the Tenant or Marriott International, (b) the rights and remedies of
the Agent or any Lender under any Multistate Loan Document or Related Document
or the priority of any Multistate Mortgage or other Lien in favor of the Lenders
or (c) the ability, of any Loan Party to perform its Obligations under any
Multistate Loan Document or Related Document to which it is or is to be a party.
-19-
<PAGE>
"Material Contract" means, with respect to any Person, each contract
-----------------
to which such Person is a party involving aggregate consideration payable to or
by such Person of $2,000,000 or more in any year or otherwise material to the
business, condition (financial or otherwise), operations, performance,
properties or prospects of such Person.
"Material Subsidiary" of any Person means, at any time, a Subsidiary
-------------------
of such Person having (a) at least 10% of the total Consolidated assets of such
Person and its Subsidiaries (determined as of the last day of the most recent
fiscal quarter of such Person) or (b) at least 5% of the Consolidated revenues
of such Person and its Subsidiaries for the Rolling Period ending on the last
day of the most recent fiscal quarter of such Person.
"Material Term" means, with respect to the Hotel Lease, any term or
-------------
provision of the Hotel Lease (a)(i) that directly or indirectly affects any
amount payable to the Borrower or the Tenant thereunder (including amounts that
the Tenant is entitled to retain out of Operating Profit), (ii) that directly or
indirectly affects any amount payable by the Tenant to Marriott International,
Host Marriott or the Ground Lessors thereunder, (iii) that affects the date the
Tenant is required to pay any amounts to the Borrower thereunder or affects the
requirement that the Tenant pay any specified amount to the Borrower by
depositing it in the Borrower Operating Account or (iv) that affects the timing
or content of the budgets, operating results and other information to be
provided by the Tenant thereunder or (b) the failure of the Borrower or the
Tenant to perform which could impair the value of the interest or rights of the
Borrower thereunder or impair the rights or interests of the Agent or any Lender
with respect thereto. Without limiting the preceding sentence, each of the
following provisions of the Hotel Lease is a Material Term: (1) the definition
of "Deductions" (including the defined terms used therein); (2) the definitions
of "Gross Revenues", Operating Profit", "Refinancing Proceeds" and "Sale
Proceeds"; (3) Section 2.03; (4) Article IV (including the defined terms used
therein); (5) Article V (including the defined terms used therein); (6) Article
VII through Article IX; (7) Section 10.01 and Section 10.02; (8) Article XI; (9)
Article XII; (10) Article XIII; (11) Section 14.01A and Section 14.01C; (12)
Article XV; (13) Article XVI; (14) Article XVIII; and (15) Article XIX.
"Memorandum" means the private placement memorandum dated July 15,
----------
1986, issued in connection with the sale of 1,150 units of limited partnership
interests in the Borrower.
"Memorandum of Ground Lease" has the meaning specified in Section
--------------------------
3.01(k)(xiii).
"MI Debt" means "Indebtedness" as defined in the Closing Date MI
------- ------------
Revolver (with all defined terms used in the Closing Date MI Revolver in
connection with the definition of "Indebtedness". having the respective meanings
------------
set forth in the Closing Date MI Revolver).
"MI Guaranty" means the MI Guaranty in substantially the form of
-----------
Exhibit N, as amended from time to time in Accordance with its terms.
"MI Revolver" means the $1,000,000,000 Credit Agreement dated as of
-----------
August 25, 1993 among Marriott International, the Lenders party thereto,
Citibank as Administrative Agent, Citibank, The Bank of Nova Scotia, Chemical
Bank and The First National Bank of Chicago as Managing Agents and The Bank of
Nova Scotia as Letter of Credit Agent.
"MI Senior Credit Facility" means, at any time of determination, the
-------------------------
agreement, if any, in effect at such time between Marriott International and one
or more commercial banks, funds (if any) and other institutional lenders (if
any) party thereto for which both (a) such banks, funds and other lenders have
binding commitments under such agreement (whether or not Marriott International
shall have then borrowed all amounts available to it under such agreement) to
lend to Marriott International at the time of determination and from time to
time on a revolving basis United States dollars in an aggregate amount at any
time outstanding at least equal to
-20-
<PAGE>
$250,000,000 and (b) Marriott International's payment obligations thereunder are
not subordinated to any other Indebtedness of Marriott International; provided
--------
that if at the time of determination, there shall be more than one agreement
satisfying the preceding requirements of this definition, MI Senior Credit
Facility shall mean the agreement under which the lenders party thereto have
binding commitments to lend Marriott International in the aggregate the largest
dollar amount.
"Mortgaged Interest" means, at any time, (a) as to each Hotel located
------------------
(in whole or part) on Land owned by an International Ground Lessor, all right,
title and interest of the Borrower (or a Land Trust) and such International
Ground Lessor in such Hotel and the Land underlying it and (b) as to each other
Hotel, all right, title and interest of the Borrower (or in the case of the
Hotel in Fairfax (Fair Oaks), Virginia, the Courtyard by Marriott Limited
Partnership Land Trust) in such Hotel and the Land underlying it.
"Multiemployer Plan" of any Person means a multiemployer plan, as
------------------
defined in Section 4001(a)(3) of ERISA, to which such Person or any of its ERISA
Affiliates is making or accruing an obligation to make contributions, or has
within any of the preceding five plan years made or accrued an obligation to
make contributions.
"Multiple Employer Plan" of any Person means a single employer plan,
----------------------
as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees
of such Person or any of its ERISA Affiliates and at least one Person other than
such Person and its ERISA Affiliates or (b) was so maintained and in respect of
which such Person or any of its ERISA Affiliates could have liability under
Section 4064 or 4069 of ERISA in the event such plan has been or were to be
terminated.
"Multistate Advance" has the meaning specified in Section
------------------
2.01(a)(iii).
"Multistate Assignment of Leases" means the Assignment of Leases and
-------------------------------
Rents in substantially the form of Exhibit O-1 (for Multistate Primary Hotels)
or O-2 (for Multistate Secondary Hotels), as amended from time to time in
accordance with its terms.
"Multistate Borrowing" means a borrowing consisting of Multistate
--------------------
Advances of the same Type and, in the case of Eurodollar Rate Advances, having
Interest Periods of the same duration commencing on the same date.
"Multistate Closing Payment" means the $8,630,604.21 payment of
--------------------------
principal in respect of 1988 Multistate Loan A, which payment is to be made by
the Borrower on the Closing Date.
"Multistate Collateral" means all "Collateral" referred to in the
---------------------
Multistate Collateral Documents and all other property that is subject to any
Lien in favor of the Agent or the Lenders securing any Obligations of the
Borrower under any of the Multistate Loan Documents including, without
limitation, all "Collateral" referred to in the Multistate Security Agreement
and the Hotel Properties subject to Liens in favor of the Agent or the Lenders
pursuant to the Multistate Mortgages.
"Multistate Collateral Documents" means the Multistate Security
-------------------------------
Agreement, the Multistate Mortgages and the Multistate Assignments of Leases.
"Multistate Loan Documents" means this Agreement, the Multistate
-------------------------
Notes, the Debt Service Guaranty, the Backup Debt Service Guaranty, the Debt and
Tenant Change Guaranty, the MI Guaranty, the Hotel Lease Guaranty, the
Subordination Agreement, the Host Marriott Indemnity Agreement, the Marriott
International Indemnity Agreement, the Attornment Agreement and the Multistate
Collateral Documents.
-21-
<PAGE>
"Multistate Mortgage Amendments" means the Multistate Primary Hotel
------------------------------
Mortgage Amendments and the Multistate Secondary Hotel Mortgage Amendments.
"Multistate Mortgages" means the 1986 Multistate Mortgages, each as
--------------------
amended by, as set forth in Section 3.01(k)(xii), a Multistate Primary Hotel
Mortgage Amendment or a Multistate Secondary Hotel Mortgage Amendment, and as
further amended from time to time in accordance with their respective terms.
"Multistate Note" means a promissory note of the Borrower payable to
---------------
the order of any Lender in substantially the form of Exhibit A hereto,
evidencing the indebtedness of the Borrower to such Lender in respect of the
Multistate Advances.
"Multistate Obligations" has the meaning specified in Section 2.11.
----------------------
"Multistate Primary Hotel" means a Hotel located outside the State of
------------------------
California.
"Multistate Primary Hotel Mortgage Amendment has the meaning specified
-------------------------------------------
in Section 3.01(k)(xii).
"Multistate Secondary Hotel" means a Hotel located within the State of
--------------------------
California.
"Multistate Secondary Hotel Mortgage Amendment" has the meaning
---------------------------------------------
specified in Section 3.01(k)(xii).
"Multistate Secondary Hotel Property" means a Hotel Property located
-----------------------------------
within the State of California.
"Multistate Security Agreement" means the Amended and Restated
-----------------------------
Security Agreement in substantially the form of Exhibit D, as amended from time
to time in accordance with its terms.
"Multistate Withheld Amount" has the meaning specified in Section
--------------------------
2.04(b)(iv).
"Net Cash Proceeds" means with respect to any sale, lease, transfer or
-----------------
other disposition of any asset by any Person, including the granting of any
easement, the aggregate amount of cash received from time to time by or on
behalf of such Person in connection with such transaction after deducting
therefrom only (a) reasonable and customary brokerage commissions, underwriting
fees and discounts, legal fees, finders' fees and other similar fees and
commissions and (b) the amount of taxes payable in connection with or as a
result of such transaction (in each case referred to in clauses (a) and (b), to
the extent not deducted or to be deducted from Gross Revenues under the Hotel
Lease in calculating Operating Profit).
"1986 California Loan Agreement" means the Loan Agreement dated as of
------------------------------
August 14, 1986, as amended prior to the effectiveness of the 1988 California
Loan Agreement, among the Borrower, the Original Banks and Citibank and FNBC as
agents for the Original Banks, in which the Original Banks agreed to make loans
to the Borrower in an aggregate principal amount not in excess $51, 098,867.
"1986 Loan Agreements" has the meaning specified in the Preliminary
--------------------
Statements.
"1986 Management Agreement" means the Management Agreement dated as of
-------------------------
August 14, 1986 between CMC and the Borrower, as amended by amendments dated
January 1, 1988, July 1, 1989 and January 1, 1992.
-22-
<PAGE>
"1986 Multistate Loan Agreement" means the 1986 Loan Agreement
------------------------------
governing loans to the Borrower in an aggregate outstanding principal amount not
to exceed $322,050,133.
"1986 Multistate Loan Documents" means the 1986 Multistate Loan
------------------------------
Agreement and the other Loan Documents (as defined in the 1986 Multistate Loan
Agreement).
"1986 Multistate Mortgages" means the deeds of trust, trust deeds,
-------------------------
mortgages, leasehold mortgages and leasehold deeds of trust originally securing
the loans governed by the 1986 Multistate Loan Agreement, as amended by
amendments executed in connection with the 1988 Multistate Loan Agreement.
"1988 Banks" has the meaning specified in the Preliminary Statements.
----------
"1988 California Loan Agreement" has the meaning specified in the
------------------------------
Preliminary Statements.
"1988 California Loans" has the meaning specified in the California
---------------------
Loan Agreement.
"1988 Lenders" has the meaning specified in the Preliminary
------------
Statements.
"1988 Loan Agreements" has the meaning specified in the Preliminary
--------------------
Statements.
"1988 Multistate Loan A" means, collectively, the loans to the
----------------------
Borrower in the aggregate outstanding principal amount of $140,807,444.59
governed prior to the Closing Date by the 1988 Multistate Loan Agreement and
defined therein as "Loan A".
"1988 Multistate Loan Agreement" has the meaning specified in the
------------------------------
Preliminary Statements.
"1988 Multistate Loan B" means, collectively, the loans to the
----------------------
Borrower in the aggregate outstanding principal amount of $172,612,084.20
governed prior to the Closing Date by the 1988 Multistate Loan Agreement and
defined therein as "Loan B".
"1988 Multistate Loan Documents" means the 1988 Multistate Loan
------------------------------
Agreement and the other Loan Documents (as defined in the 1988 Multistate Loan
Agreement).
"1988 Multistate Loans" means, collectively, the loans to the Borrower
---------------------
governed prior to the Closing Date by the 1988 Multistate Loan Agreement, and
consisting of 1988 Multistate Loan A and 1988 Multistate Loan B.
"1994 Mortgage Policies" has the meaning specified in Section
----------------------
3.01(k)(xii)(B).
"1994 Mortgage Policy" has the meaning specified in Section
--------------------
3.01(k)(xii)(B).
"Obligations" means, with respect to any Person, any obligation of
-----------
such Person of any kind, including, without limitation, any liability of such
Person on any claim, whether or not the right of any creditor to payment in
respect of such claim is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, disputed, undisputed, legal, equitable, secured or
unsecured, and whether or not such claim is discharged, stayed or otherwise
affected by any proceeding referred to in Section 7.01(l) or Section 7.01(m).
Without limiting the generality of the foregoing, the Obligations of any Loan
Party under the Multistate Loan Documents include (a) the obligation of such
Loan Party to pay principal, interest, charges, expenses, fees, attorneys' fees
and disbursements, indemnities and other amounts payable by such Loan Party
under any Multistate
-23-
<PAGE>
Loan Document and (b) the obligation of such Loan Party to reimburse any amount
in respect of any of the foregoing that any Lender, may elect to pay or advance
on behalf of such Loan Party in accordance with the rights granted to any Lender
under any applicable Multistate Loan Document.
"Open Year" has the meaning specified in Section 5.01(t).
---------
"Operating Profit" has the meaning specified in the Hotel Lease.
----------------
"Original Banks" has the meaning specified in the Preliminary
--------------
Statements.
"Other Taxes" has the meaning specified in Section 2.10(b).
-----------
"Partnership Costs" means, for any period and without duplication,
-----------------
administrative and general expenses of the Borrower in connection with the
operation of the Borrower to the extent not deducted under the Hotel Lease from
Gross Revenues in calculating Operating Profit and to the extent not for
services to be provided by the Tenant under the Hotel Lease in exchange for the
Base Management Fee or the Courtyard Management Fee (each as defined in the
Hotel Lease), including, without limitation, (i) costs of postage, (ii) amounts
paid to third parties for the provision of investor services, printing of
documents for distribution to the limited partners of the Borrower, legal
services, accounting services and audits, (iii) amounts payable to Host
Marriott, its Subsidiaries and Marriott International on account of the
provision of legal services, audits, joint venture and fixed asset accounting
services and the vice president allocation for the provision of services to the
Borrower by management of Host Marriott and (iv) bank fees.
"Partnership Documents" means (a) the Amended and Restated Agreement
---------------------
of Limited Partnership of the Borrower dated August 26, 1986 and (b) the
certificates of limited partnership or foreign limited partnership of the
Borrower, filed or recorded in the appropriate Secretary of State or other
offices in the State of Delaware, State of Maryland and all States in which a
Hotel is located.
"Payment Date" means each February 1, May 1, August 1 and November 1.
------------
"Performance Operating Profit" means, for any period, (a) Operating
----------------------------
Profit of the Hotels for such period under the Hotel Lease minus (b) all rent
------
payable (whether or not deferred) under the International Ground Leases during
such period.
"Performance Operating Profit of the Remaining Hotels" has the meaning
----------------------------------------------------
specified in Section 4.04:
"Permitted Exceptions" means, as to each Hotel Property, (a) any real
--------------------
estate taxes that are not yet due and payable, (b) any Lien securing any
obligations to the Lenders under the California Loan Documents and the
Multistate Loan Documents and (c) any other matter affecting title to a Hotel
Property set forth as an exception in the respective 1994 Mortgage Policy to
which the Lenders have consented.
"Permitted Liens" means (a) easements for utilities, access or other
---------------
services that benefit or serve a Hotel Property and do not, and will not, render
title to the Hotel Property encumbered thereby unmarketable, materially
adversely affect the use of such property for its present purposes or,
individually or combined with all other easements benefiting or affecting the
Hotel Properties, have a Material Adverse Effect and (b) such of the following
as to which no enforcement, collection, execution, levy or foreclosure
proceeding shall have been commenced: (i) Liens for taxes, assessments and
governmental charges or levies to the extent not required to be paid under
Section 6.01(b) hereof; (ii) Liens imposed by law, such as materialmen's,
mechanics', carriers', workmen's and repairmen's Liens and other similar Liens
arising in the ordinary course of
-24-
<PAGE>
business securing obligations which are being contested in good faith and by
appropriate proceedings and with respect to which (A) the Borrower shall be in
compliance with the Section titled "Mechanic's and Other Liens" of the
Multistate Mortgage (including the notice requirements of such Section) covering
the property subject to such Liens or (B) if any Lien is on property of the
Borrower not covered by any Multistate Mortgage, the Borrower shall promptly
have notified the Agent of its contest of such Lien and, upon request of the
Agent, have established an escrow or posted other security acceptable to the
Agent in an amount estimated by the Agent to be adequate to cover the payment of
such Lien and a reasonable additional amount to cover possible interest, costs
and penalties; (iii) pledges or deposits to secure obligations under workers'
compensation laws or similar legislation or to secure public or statutory
obligations; and (iv) Permitted Exceptions.
"Person" means an individual, partnership, corporation (including a
------
business trust), joint stock company, trust, unincorporated association, joint
venture or other entity, or a government or any political subdivision or agency
thereof.
"Philadelphia Mortgage" means the mortgage financing agreement between
---------------------
Marriott Corporation and Marriott International, pursuant to which Marriott
International is providing first mortgage financing for the Philadelphia
Convention Center hotel to be constructed by Host Marriott, as described in the
Proxy Statement.
"Plan" means a Single Employer Plan or a Multiple Employer Plan.
----
"Potential Default" means any event that would constitute an Event of
-----------------
Default but for the requirement that notice be given or time elapse or both.
"Preferred Stock" means, with respect to any corporation, capital
---------------
stock issued by such corporation that is entitled to a preference or priority
over any other capital stock issued by such corporation upon any distribution of
such corporation's assets, whether by dividend or upon liquidation.
"Proxy Statement" means the definitive Proxy Statement distributed to
---------------
shareholders of Marriott Corporation dated June 19, 1993.
"Purchase Agreement" means the Purchase Agreement dated August 14,
-------------------
1986 between Marriott Corporation, as seller, and the Borrower, as purchaser,
pursuant to which the Borrower purchased the Hotels and the Connecticut Hotel,
as previously amended and as it may be further amended in accordance with its
terms, this Agreement and The California Loan Agreement.
"Real Property Laws" means (a) all present and future laws,
------------------
ordinances, rules, regulations and requirements, foreseen or unforeseen,
ordinary or extraordinary, of any Governmental Authority having or claiming
jurisdiction over any of the Hotel Properties or any part thereof or interest
therein, (b) all orders, rules and regulations of any national or local board of
- -fire underwriters or other body exercising similar functions, foreseen or
unforeseen, ordinary or extraordinary, (c) all building permits, restrictions of
record and agreements and (d) all requirements of policies of public liability,
fire and other insurance at any time in force with respect to the Hotel
Properties or any part thereof, that, in each case referred to in the preceding
part of this definition, are applicable to (i) any of the Hotel Properties or
any part thereof or interest therein, including to the use, condition, operation
of, or conduct of the business of, any of the Hotel Properties or any part
thereof or (ii) the owners, tenants, subtenants or occupants of the Hotel
Properties or any part thereof, whether or not any of the foregoing shall
mandate structural changes or improvements or shall interfere with the use or
enjoyment of the Hotel Properties or any part thereof.
-25-
<PAGE>
"Redeemable" means, with respect to any capital stock, Indebtedness or
----------
other right or Obligation, any such right or Obligation that (a) the issuer has
undertaken to redeem at a fixed or determinable date or dates, whether by
operation of a sinking fund or otherwise, or upon the occurrence of a condition
not solely within the control of the issuer or (b) is redeemable at the option
of the holder.
"Reference Bank" means Citibank.
--------------
"Register" has the meaning specified in section 9.07(c).
--------
"Regulation U" means Regulation U of the Board of Governors of the
------------
Federal Reserve System, as in effect from time to time.
"Related Documents" means the Hotel Lease, the Purchase Agreement and
-----------------
the Ground Leases.
"Release Price" has the meaning specified in Section 4.02(c).
-------------
"Remaining Hotels" has the meaning specified in Section 4.04.
----------------
"Reorganization" means the Asset Transfers, the Distribution and the
--------------
Exchange Offer, as described in the Reorganization Documents, pursuant to which,
among other things, (a) all the issued and outstanding shares of capital stock
of CMC were transferred by Host Marriott to Marriott International, such that
CMC became a wholly owned Subsidiary of Marriott International and (b) all the
issued and outstanding shares of capital stock of each International Ground
Lessor were transferred by a direct or indirect wholly owned Subsidiary of Host
Marriott to the direct or indirect wholly owned Subsidiary of Marriott
International set forth opposite such International Ground Lessor's name on
Schedule 9.11.
"Reorganization Documents" means the Distribution Documents and the
------------------------
Prosy Statement.
"Required Lenders" means at any time Lenders owed or holding at least
----------------
51` of the aggregate principal amount of the Multistate Advances outstanding at
such time.
"Retroactive Period" has the meaning specified in Section 2.08(c).
------------------
"Rolling Period" means, in respect of any fiscal quarter, such fiscal
--------------
quarter and the three preceding fiscal quarters.
"Scheduled Maturity Date" means, at any time of determination, June
-----------------------
15, 1997, unless the final scheduled principal payment date of the Multistate
Advances has at or prior to the time of determination been extended pursuant to
Section 2.03(a) or Section 2.03(b), in which event "Scheduled Maturity Date"
shall mean the final scheduled principal payment date then applicable to the
Multistate Advances determined in accordance with such Section.
"Single Employer Plan" of any Person means a single employer plan, as
--------------------
defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of
such Person or any of its ERISA Affiliates and no Person other than such Person
and its ERISA Affiliates or (b) was so maintained and in respect of which such
Person or any of its ERISA Affiliates could have liability under Section 4069 of
ERISA in the event such plan has been or were to be terminated.
"Solvent" and "Solvency" mean, with respect to any Person on a
------- --------
particular date, that on such date (a) the fair value of the property of such
Person is greater than the total amount of
-26-
<PAGE>
liabilities, including, without limitation, contingent liabilities, of such
Person, (b) the present fair salable value of the assets of such Person is not
less than the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured, (c) such Person does
not intend to, and does not believe that it will, incur debts or liabilities
beyond such Person's ability to pay as such debts and liabilities mature and (d)
such Person is not engaged in business or a transaction, and is not about to
engage in business or a transaction, for which such Persons property would
constitute an unreasonably small capital.
"Subordination Agreement" means the Consolidated, Subordinating
-----------------------
Amended and Restated Subordination Agreement in substantially the form of
Exhibit L, as amended from time to time in accordance with its terms.
"Subsidiary" of any Person means any corporation, partnership, joint
----------
venture, trust or estate of which (or in which) more than 50% of (a) the issued
and outstanding capital stock having ordinary voting power to elect a majority
of the Board of Directors of such corporation (irrespective of whether at the
time capital stock of any other class or classes of such corporation shall or
might have voting power upon the occurrence of any contingency), (b) the
interest in the capital or profits of such partnership or joint venture or (c)
the beneficial interest in such trust or estate is at the time directly or
indirectly owned or controlled by such Person, by such Person and one or more of
its other Subsidiaries or by one or more of such Person's other Subsidiaries.
"Sumitomo" has the meaning specified in the Preliminary Statements.
--------
"Taxes" has the meaning specified in Section 2.10(a).
-----
"Telephone Lease" means a lease to the Borrower or the Tenant of the
---------------
telephones and for other telecommunications systems and equipment located in a
Hotel.
"Tenant" means CMC and any permitted assignee thereof that shall be
------
assigned the rights and assume the duties of the Tenant pursuant to Section
18.01 of the Hotel Lease.
"Tenant Accounting Period" means each period of four consecutive weeks
------------------------
having the same beginning and ending dates as CMC's corresponding four week
accounting periods, except that the last Tenant Accounting Period in a calendar
year may be longer than four consecutive weeks when and to the extent necessary
to conform CMC's accounting system to the calendar. The first and last day of
each Tenant Accounting Period between January 1, 1994 and December 31, 1999 are
set forth on Schedule 1.01A.
"Tenant Accounting Quarter" means three (or in the case of the last
-------------------------
Tenant Accounting Period for a Tenant Fiscal Year, four) consecutive Tenant
Accounting Periods, ending on the last day of the third, sixth, ninth and last
Tenant Accounting Period in each Tenant Fiscal Year. The first and last day of
each Tenant Accounting Quarter between January 1, 1994 and December 31, 1999 are
set forth on Schedule 1.01A.
"Tenant Fiscal Year" means the 52-week or 53-week period ending at
------------------
midnight on the Friday closest to December 31 in the Tenant's Fiscal Year; the
new Tenant Fiscal Year begins on the Saturday immediately following said Friday.
The first and last day of each Tenant Fiscal Year for Tenant Fiscal Year 1994
through Tenant Fiscal Year 1999 are set forth on Schedule 1.01A.
"Third Party Ground Leases" means (a) the Sublease Agreement dated
-------------------------
April 5, 1983 between Crow-Atlanta Retail, Ltd., as sublandlord, and Marriott
Corporation, as subtenant, as assigned by Marriott Corporation to the Borrower
by an assignment dated August 19, 1986, relating to part of the Land on which
the Atlanta (Northlake), Georgia Hotel is located and (b) the Ground Lease dated
May 6, 1985, between A.E. Properties, Ltd., as landlord, and Marriott
Corporation, as
-27-
<PAGE>
tenant, as assigned by Marriott Corporation to the Borrower by an assignment
dated December 9, 1986, relating to the Land on which the San Francisco (San
Bruno), California Hotel is located.
"Third Party Ground Lessors" means A.E. Properties Inc. and Crow-
--------------------------
Atlanta Retail, Ltd. Transaction Costs. has the meaning specified in the
definition of "Excess Earnings Recapture".
"Transferred Multistate Interest" has the meaning specified in clause
-------------------------------
(i) of Section 2.01(b).
"TV System Lease" means a lease or other agreement under which the
---------------
Borrower or the Tenant leases or is otherwise provided with equipment (excluding
television sets) customarily leased in the hotel industry in the United States
and on payment terms (including amount and time of payment) not materially more
favorable to the lessor thereof than payment terms customary in the hotel
industry in the United States for similar leases for the transmission into Hotel
rooms of televised programming, regardless of whether such lease or other
agreement provides the Borrower or the Tenant with a right or option to purchase
such equipment.
"Type" refers to the distinction between Multistate Advances bearing
----
interest at the Base Rate and Multistate Advances bearing interest at the
Eurodollar Rate.
"Voting Stock" means capital stock issued by a corporation, or
------------
equivalent interests in any other Person, the holders of which are ordinarily,
in the absence of contingencies, entitled to vote for the election of directors
(or persons performing similar functions) of such Person, even though the right
so to vote has been suspended by the happening of such a contingency.
"Welfare Plan" means a welfare plan, as defined in Section 3(1) of
------------
ERISA.
SECTION 1.02. Computation of Time Periods.
---------------------------
In this Agreement in the computation of periods of time from a
specified date to a later specified date, the word "from. means "from and
including. and the words "to" and "until. each means "to but excluding".
SECTION 1.03. Accounting Terms.
----------------
All accounting terms not specifically defined herein shall be
construed in accordance with generally accepted accounting principles consistent
with those applied in the preparation of the financial statements referred to in
Section 5.01(f) ("GAAP").
ARTICLE II
AMENDMENT AND RESTATEMENT; REPAYMENT OF THE LOANS
SECTION 2.01. Amendment and Restatement Consolidation of Loans.
------------------------------------------------
(a) Column B of Schedule 2.01A sets forth opposite the name of each
1988 Lender the aggregate outstanding principal amount of the loans owing to
such 1988 Lender included in the 1988 Multistate Loans immediately prior to the
Closing Date. On the Closing Date, (i) the aggregate outstanding principal
amount of the loans owing to each 1988 Lender included in 1988 Multistate Loan A
will be ratably reduced by the amount of the Multistate Closing Payment set
forth opposite such 1988 Lender's name in Column C of Schedule 2.01A, (ii) the
Borrower will
-28-
<PAGE>
pay in satisfaction of interest accrued on the 1988 Multistate Loans (prior to
giving effect to the payment described in clause (i)) from March 18, 1994 to the
Closing Date interest at the Forbearance Agreement Rate and (iii) the loans
owing to each 1988 Lender included in 1988 Multistate Loan A (as reduced by the
payment described in clause (i)) and 1988 Multistate Loan B will be consolidated
into a single set of loans which shall remain outstanding as advances
("Multistate Advances"), consisting of a Multistate Borrowing comprised of Base
Rate Advances in a principal amount equal to the amount set forth opposite such
1988 Lender's name in Column D of Schedule 2.01A. Simultaneously with such
consolidation, each Assigning Bank is assigning to each Assuming Participant set
forth in Column E of Schedule 2.01A opposite such Assigning Bank's name the
interests in and to all of such Assigning Bank's rights and obligations under
this Agreement (including, without limitation, the Multistate Advances owing to
it) which represent the respective percentage interest set forth opposite such
Assuming Participant's name in such Column E of all outstanding rights and
obligations of the Assigning Bank under this Agreement. Each such assignment is
being effected as set forth in Section 2.01(b). Immediately after giving effect
to the payments, consolidations and assignments described in this Section
2.01(a), the aggregate outstanding principal amount of the Multistate Advances
owing to each Bank on the Closing Date will be the amount set forth opposite
such Bank's name on Schedule 2.01B.
(b) (i) Subject to the satisfaction of the conditions precedent set
forth in Article III, on and as of the Closing Date each Assigning Bank hereby
sells and assigns to each Assuming Participant set forth opposite such Assigning
Bank's name in Column E of Schedule 2.01A, and such Assuming Participant
purchases and assumes from such Assigning Bank, the interests in and to all of
the Assigning Bank's rights and obligations under this Agreement which represent
the respective percentage interest set forth opposite such Assuming
Participant's name in Column F of all outstanding rights and obligations under
this Agreement, including, without limitation, such interest in the Multistate
Advances owing to the Assigning Bank (collectively, the "Transferred Multistate
----------------------
Interest"). From and after the Closing Date, each such Assuming Participant
- --------
shall, to the extent of its Transferred Multistate Interest, have the rights and
obligations of a Lender hereunder and the Assigning Bank shall, to the extent of
the aggregate Transferred Multistate Interests sold and assigned by it,
relinquish its rights and be released from its obligations hereunder. In
consideration of the Banks entering into this Agreement, the Borrower consents
to each such sale and assignment and, without limiting such consent, agrees that
from and after the Closing Date each Assigning Bank shall, to the extent of the
aggregate Transferred Multistate Interests sold and assigned by it, be released
from its obligations under this Agreement.
(ii) On and as of the Closing Date, each Assigning Bank: (A)
represents to each Assuming Participant to whom the Assigning Bank is selling
and assigning a Transferred Multistate Interest that such Assigning Bank is the
legal and beneficial owner of the Transferred Multistate Interest being sold and
assigned to such Assuming Participant, subject only to the participation
interest in the 1988 Multistate Loan Agreement previously granted to such
Assuming Participant, and that such Transferred Multistate Interest is free and
clear of any adverse claim; (B) except for the representations and agreements of
such Assigning Bank in this Section 2.01(b), makes no representation or warranty
and assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Multistate Loan Documents or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of the Multistate Loan Documents or any other instrument or document
furnished pursuant thereto; and (C) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower or the performance or observance by the Borrower of any of its
obligations under any Multistate Loan Document or any other instrument or
document furnished pursuant thereto. In addition, on and as of the Closing Date
each Assuming Participant agrees that it will perform in accordance with their
terms all of the obligations which by the terms of this Agreement are required
to be performed by it as a Lender.
-29-
<PAGE>
(iii) Each Assuming Participant and the Assigning Bank from whom the
Assuming Participant is acquiring its Transferred Multistate Interest agree that
in consideration of the sale and assignment by the Assigning Bank the Assuming
Participant shall transfer to the Assigning Bank as of the Closing Date for
cancellation as of such date the participation interest in the 1988 Multistate
Loan Agreement previously granted to the Assuming Participant.
SECTION 2.02. Repayment.
The Borrower shall repay to the Agent for the ratable account of the
Lenders the aggregate outstanding principal amount of the Multistate Advances
(a) on or before each of the dates listed below included in each twelve (12)
month period commencing on each May 2 (beginning with May 2, 1994) and ending on
the immediately succeeding May 1, by a cumulative aggregate amount from the
beginning of such period and through such date at least equal to the amount set
forth opposite such date and (b) on June 15, 1997, subject to Section 2.03(a),
by an amount equal to the aggregate outstanding principal amount of the
Multistate Advances.
<TABLE>
<CAPTION>
Payment Date Amount
- ------------ -------------
<S> <C>
August 1, 1994 $1,510,355.74
November 1, 1994 3,020,711.48
February 1, 1995 4,531,067.22
May 1, 1995 6,041,422.96
August 1, 1995 1,510,355.74
November 1, 1995 3,020,711.48
February 1, 1996 4,531,067.22
May 1, 1996 6,041,422.96
August 1, 1996 1,510,355.74
November 1, 1996 3,020,711.48
February 1, 1997 4,531,067.22
May 1, 1997 6,041,422.96
</TABLE>
SECTION 2.03. Extensions.
----------
(a) If (i) Performance Operating Profit for the period from Tenant
Fiscal Year 1994 through Tenant Fiscal Year 1996 is at least equal to the amount
set forth on Schedule 2.03 opposite the entry "Initial Extension -- Cumulative
Performance Operating Profit. for that period or (ii) if Performance Operating
Profit for Tenant Fiscal Year 1996 is at least equal to the amount set forth on
Schedule 2.03, opposite the entry "Initial Extension -- Twelve Month Performance
Operating Profit" for that period, the Borrower may, by written notice to the
Agent no later than March 15, 1997 and subject to the provisions of Section
2.03(c), extend the date for the final scheduled principal payment of the
Multistate Advances to June 15, 1998, provided that (A) no Default shall have
--------
occurred and be continuing from the time the Borrower notifies the Agent of such
proposed extension through the final scheduled principal payment date set forth
in Section 2.02 and (B) the Borrower shall extend the date for the final
scheduled principal payment of the California Advances to June 15, 1998 pursuant
to Section 2.03(a) of the California Loan Agreement. In the event of such
extension, no payment shall be due on June 15, 1997 and the Borrower shall repay
to the Agent for the ratable account of the Lenders the aggregate outstanding
principal amount of the Multistate Advances (x) on or before each of the dates
listed below included in the period commencing on May 2, 1997 and ending on May
1, 1998, by a cumulative aggregate amount from the beginning of such period and
through such date at least equal to the amount set forth
-30-
<PAGE>
opposite such date below and (y) on June 15, 1998, subject to Section 2.03(b),
by an amount equal to the aggregate outstanding principal amount of the
Multistate Advances.
<TABLE>
<CAPTION>
Payment Date Amount
- ------------ ------
<S> <C>
August 1, 1997 $1,510,355.74
November 1, 1997 3,020,711.48
February 1, 1997 4,531,067.22
May 1, 1998 6,041,422.96
</TABLE>
(b) If (i) the date for the final scheduled principal payment of the
Multistate Advances has been extended pursuant to Section 2.03(a) and (ii) (A)
Performance Operating Profit for the period from Tenant Fiscal Year 1994 through
Tenant Fiscal Year 1997 is at least equal to the amount set forth on Schedule
2.03 opposite the entry "Second Extension -- Cumulative Performance Operating
Profit" for that period or (B) Performance Operating Profit for Tenant Fiscal
Year 1997 is at least equal to the amount set forth on Schedule 2.03(a) opposite
the entry "Second Extension Twelve Month Performance Operating Profit" for that
period, the Borrower may, by written notice to the Agent no later than March 15,
1998 and subject to the provisions of Section 2.03(c), further extend the date
for the final scheduled principal payment of the Multistate Advances to June 15,
1999, provided that (x) no Default shall have occurred and be continuing from
--------
the time the Borrower notifies the Lender of such extension through the final
scheduled principal payment date determined pursuant to Section 2.03(a) and (y)
the Borrower shall extend the date for the final scheduled payment of the
California Advances to June 15, 1999 pursuant to Section 2.03(b) of the
California Loan Agreement. In the event of such extension, no payment shall be
due on June 15, 1998 and the Borrower shall repay to the Agent for the ratable
account of the Lenders the aggregate outstanding principal amount of the
Multistate Advances (x) on or before each of the dates listed below included in
the period commencing on May 2, 1998 and ending on May 1, 1999 by a cumulative
aggregate amount from the beginning of such period and through such date at
least equal to the amount set forth opposite such date below and (y) on June 15,
1999, by an amount equal to the aggregate outstanding principal amount of the
Multistate Advances.
<TABLE>
<CAPTION>
Payment Date Amount
- ------------ ------
<S> <C>
August 1, 1998 $1,510,355.74
November 1, 1998 3,020,711.48
February 1, 1998 4,531,067.22
May 1, 1999 6,041,422.96
</TABLE>
(c) Each notice given by the Borrower pursuant to Section 2.03(a) or
2.03(b) (an "Extension Notice") shall be accompanied by (i) a certificate of an
----------------
Authorized Accounting Officer stating that no Default has occurred and is
continuing and (ii) a schedule in the form attached to Schedule 2.03 of the
computations showing the Borrower's satisfaction of the applicable Performance
Operating Profit amount described in Section 2.03(a) or Section 2.03(b), as the
case may be, entitling it to extend the date for the final scheduled principal
payment of the Multistate Advances. In addition, if the Borrower provides an
Extension Notice pursuant to Section 2.03(a) or 2.03(b), as the case may be, the
Borrower shall provide to the Agent on the date on which the final scheduled
payment of the Multistate Advances would be due but for the extension to which
such Extension Notice relates, a certificate of an Authorized Accounting Officer
stating that no Default has occurred and is continuing from the date of such
Extension Notice through such date.
(d) For purposes of Section 2.02 and Section 2.03, repayments of the
outstanding principal amount of the Multistate Advances made by the Borrower on
any date after a date
-31-
<PAGE>
specified in this Section as a date by which the aggregate outstanding principal
amount of the Multistate Advances are to be repaid as a result of the
application of Section 2.09(d) shall be credited toward the payment obligations
of the Borrower for the period ending on or before the specified date, and not
toward the payment obligations of the Borrower for a period commencing after
such specified date. In addition, for purposes of determining the Borrower's
satisfaction of its repayment obligations under Section 2.02 and Section 2.03,
prepayments of the aggregate outstanding principal amount of the Multistate
Advances shall be credited toward the Borrower's repayment obligations set forth
in such Sections to the extent such prepayments are to be applied in the order
of maturity of the Multistate Advances pursuant to Section 2.04(b)(iii).
SECTION 2.04. Prepayments. (a) Optional.
------------
The Borrower may, upon at least five (5) Business Days' notice to the
Agent in substantially the form of Exhibit B, and if such notice is given the
Borrower shall, prepay the outstanding aggregate principal amount of the
Multistate Advances comprising part of the same Multistate Borrowing in whole or
ratably in part, in an amount determined in accordance with clause (iv) below,
together with accrued interest to the date of such prepayment on the aggregate
principal amount prepaid; provided, however, that (i) the Borrower shall on the
-------- -------
same day also prepay an outstanding principal amount of the California Advances
comprising part of the same California Borrowing in whole or ratably in part
pursuant to Section 2.04(a) of the California Loan Agreement, together with
accrued interest to the date of such prepayment (determined in accordance with
the California Loan Agreement), (ii) each partial prepayment of the Combined
Advances shall be in an aggregate principal amount of $500,000 or an integral
multiple of $100,000 in excess thereof, (iii) no prepayment of a Eurodollar Rate
Advance shall be made other than on the last day of an Interest Period therefor
and (iv) the aggregate outstanding principal amount of the Multistate Advances
shall be paid by an amount equal to the product of (x) the aggregate principal
prepayment of the Combined Advances pursuant to this Section and Section 2.04(a)
of the California Loan Agreement made on such day and (y) a fraction, the
numerator of which is the aggregate outstanding principal amount of the
Multistate Advances on the date of prepayment (before giving effect to such
prepayment) and the denominator of which is the aggregate outstanding principal
amount of the Combined Advances on the date of prepayment (before giving effect
to such prepayment and the prepayment of the California Advances described in
Section 2.04(a) of the California Loan Agreement).
(b) Mandatory. (i) Subject to Section 2.04(b)(iv) below, the Borrower
---------
shall, on each Payment Date make a payment in an amount equal to (x) the product
of (1) the applicable amount set forth in clauses (A) through (D) below and (2)
a fraction, the numerator of which is the aggregate outstanding principal amount
of the Multistate Advances on the date of prepayment (before giving effect to
such prepayment) and the denominator of which is the aggregate outstanding
principal amount of the Combined Advances on the date of prepayment (before
giving effect to such prepayment and the prepayment required by Section
2.04(b)(i) of the California Loan Agreement) minus (y) the amount of interest
-----
accrued and not yet due and payable on the date of prepayment on Eurodollar Rate
Advances and California Eurodollar Advances:
(A) Whether or not either (1) a Potential Default consisting of
the nonpayment by the Borrower of any principal or interest due and payable
under this Agreement or the California Loan Agreement or (2) an Event of
Default shall have occurred and be continuing on such Payment Date, from
the Closing Date until (but not including) the Payment Date following the
Cumulative Tenant Period in which the aggregate outstanding principal
amount of the Combined Advances on the last day of such Cumulative Tenant
Period is less than or equal to $300 million, an amount equal to 100% of
Excess Earnings Recapture for the applicable Cumulative Tenant Period;
-32-
<PAGE>
(B) Unless either (1) a Potential Default consisting of the
nonpayment by the Borrower of any principal or interest due and payable
under this Agreement or the California Loan Agreement or (2) an Event of
Default shall have occurred and be continuing on such Payment Date (other
than the nonpayment on such Payment Date of the amount due on such Payment
Date under this Section 2.04(b)(i) and under Section 2.04(b)(i) of the
California Loan Agreement provided that the Borrower Operating Account
--------
contains on Such Payment Date an amount at least equal to the aggregate
amount so due), from the Payment Date following the Cumulative Tenant
Period in which the aggregate outstanding principal amount of the Combined
Advances on the last day of such Cumulative Tenant Period is less than or
equal to $300 million until (but not including) the Payment Date following
the Cumulative Tenant Period in which the aggregate outstanding principal
amount of the Combined Advances on the last day of such Cumulative Tenant
Period is less than or equal to $250 million, an amount equal to 80% of
Excess Earnings Recapture for the applicable Cumulative Tenant Period;
(C) Unless either (1) a Potential Default consisting of the
nonpayment by the Borrower of any principal or interest due and payable
under this Agreement or the California Loan Agreement or (2) an Event of
Default shall have occurred and be continuing on such Payment Date (other
than the nonpayment on such Payment Date of the amount due on such Payment
Date under this Section 2.04(b)(i) and under Section 2.04(b)(i) of the
California Loan Agreement provided that the Borrower Operating Account
contains on such Payment Date an amount at least equal to the aggregate
amount 60 due), from and after the Payment Date following the Cumulative
Tenant Period in which the aggregate outstanding principal amount of the
Combined Advances on the last day of such Cumulative Tenant Period is less
than or equal to $250 million, an amount equal to 75% of Excess Earnings
Recapture for the applicable Cumulative Tenant Period; and
(D) So long as either (1) a Potential Default consisting of the
nonpayment by the Borrower of any principal or interest due and payable under
this Agreement or the California Loan Agreement or (2) an Event of Default shall
have occurred and be continuing on such Payment Date (other than the nonpayment
on such Payment Date of the amount due on such Payment Date under this Section
2.04(b)(i) and under Section 2.04(b)(i) of the California Loan Agreement
provided that the Borrower Operating Account contains on such Payment Date an
- --------
amount at least equal to the aggregate amount so due), an amount equal to 100%
of Excess Earnings Recapture for the applicable Cumulative Tenant Period.
Amounts paid pursuant to this Section 2.04(b)(i) shall be applied first to
-----
interest due on such Payment Date pursuant to Section 2.05 and second as a
------
prepayment of the aggregate outstanding principal amount of the Multistate
Advances comprising the same Multistate Borrowings. In addition to the payment
described above, on the November 1, 1994 Payment Date the Borrower will pay to
the Agent an amount equal to the product of (y) the excess of the Estimated
Unpaid Transaction Costs over the Transaction Costs paid by the Borrower after
the Closing Date and (z) the fraction described in subclause (2) of clause (s)
of the beginning of this Section, which payment will be applied in accordance
with the Preceding sentence.
(ii) If the schedule delivered by the Borrower pursuant to Section
6.03(d)(ii) contains a calculation of the Annualized Recapture Amount for the
Tenant Fiscal Year then ended that exceeds the Aggregate Recapture Amount for
such Tenant Fiscal Year, the Borrower shall, no later than the time it delivers
such schedule, make a payment in an amount equal to (s) the product of (A) the
amount equal to (1) such excess amount multiplied by (2) the percentage
(determined in accordance with Section 2.04(b)(i)(A) through 2.04(b)(i)(D))
applicable to the payment for the fourth Cumulative Tenant Period included in
the Tenant Fiscal Year and (B) a fraction, the numerator of which is the
aggregate outstanding principal amount of the Multistate Advances on the date of
payment (before giving effect to such payment) and the denominator of which is
the aggregate outstanding principal amount of the Combined Advances on the date
of payment (before giving effect to such payment and the payment required by
Section 2.04(b)(ii) of the California Loan
-33-
<PAGE>
Agreement) minus (y) the amount of interest accrued and not yet due and payable
-----
on the Eurodollar Rate Advances on the date the Borrower makes such payment.
Amounts paid pursuant to the preceding sentence shall be applied first to
accrued and unpaid interest on the Multistate Advances other than the Eurodollar
Rate Advances with Interest Periods ending after the date the Borrower makes
such payment and second as a prepayment of the aggregate outstanding principal
------
amount of the Multistate Advances comprising the same Multistate Borrowings. If
the schedule delivered by the Borrower pursuant to Section 6.03(d)(ii) contains
a calculation of the Annualized Recapture Amount for the Tenant Fiscal Year that
is less than the Aggregate Recapture Amount for such Tenant Fiscal Year (the
excess of the Aggregate Recapture Amount over the Annualized Recapture Amount
being the "Cumulative Difference"), the Borrower shall receive a credit against
---------------------
the payments of principal of the Multistate Advances nest due under Sections
2.02, 2.03 and 2.04(b)(i) (and if such payment is less than the amount of such
credit, the unused amount of such credit shall be applied against the payments
of principal thereafter due under Sections 2.02, 2.03 and 2.04(b)(i), as the
case may be, until such credit shall be fully applied) equal to (s) the
aggregate amount that the Borrower paid under Section 2.04(b)(i) in respect of
Excess Earnings Recapture for the Cumulative Tenant Periods included in the
Tenant Fiscal Year then ended less (y) the aggregate amount that the Borrower
would have paid under Section 2.04(b)(i) if Excess Earnings Recapture for the
Cumulative Tenant Periods included in the Tenant Fiscal Year then ended were
reduced (in inverse order of payment until the Cumulative Difference shall have
been fully applied) by the Cumulative Difference. The preceding sentence shall
not affect the Borrowers obligation to make any other payment described in this
Agreement, including, without limitation, the payments of interest described in
Section 2.05. An example of the calculation of the credit described in the
second preceding sentence is set forth on Schedule 2.04(b)(ii).
(iii) All prepayments of the aggregate outstanding principal amount
of the Multistate Advances made under Section 2.04(a), Section 4.02 and Section
4.03 shall be made together with accrued and unpaid interest to the date of such
prepayment on the principal amount of the Multistate Advances prepaid. In
addition, all prepayments of the aggregate outstanding principal amount of the
Multistate Advances under this Section 2.04 and under Section 4.02 and Section
4.03 shall be applied ratably to the Multistate Advances in the inverse order of
maturity; provided that, notwithstanding the preceding portion of this sentence,
--------
such prepayments (excluding payments made under Section 2.04(b)(ii)) shall be
applied in the order of maturity during the twelve month period beginning on May
2, 1994 and ending on May 1, 1995 and during each successive twelve month period
beginning on each May 2 thereafter and ending on the immediately succeeding May
1, until such time during each such period as the Borrower shall have repaid or
prepaid the Multistate Advances in an aggregate principal amount equal to
$6,041,422.96.
(iv) Not Notwithstanding Section 2.04(b)(i), with respect to the
payments due under such Section on any Payment Date, if the Borrower reasonably
believes it will have insufficient Adjusted Operating Profit and other funds to
make the payments of interest due under this Agreement during the period
commencing after such Payment Date and ending on the immediately following
Payment Date, the Borrower may withhold from the payment otherwise due under
Section 2.04(b)(i) on such Payment Date an amount (the "Multistate Withheld
-------------------
Amount") that the Borrower believes when combined with the Borrower's
- ------
anticipated Adjusted Operating Profit will enable it to make the payments of
interest due during such period; provided that the Borrower also withholds the
--------
California Withheld Amount under Section 2.04(b)(iv) of the California Loan
Agreement. The Multistate Withheld Amount shall not exceed the interest payments
that the Borrower believes will be due and payable under this Agreement through
the next succeeding Payment Date, and the Multistate Withheld Amount shall be
used by the Borrower solely to pay interest due under this Agreement on or
before such Payment Date. In the event that the Borrower does not use the
entire Multistate Withheld Amount for such purposes on or before such Payment
Date, the Borrower shall pay the entire remaining amount to the Agent, together
with any other amount due under Section 2.04(b)(i), on such Payment Date and
such remaining amount shall be applied as set forth in Section 2.04(b)(i),
provided that in the event the Borrower then reasonably
- --------
-34-
<PAGE>
believes it will need to withhold any amounts under this Section 2.04(b)(iv) for
interest due on or before the then next succeeding Payment Date, the Borrower
may retain all or such portion of the remaining amount as is necessary toward
the new Multistate Withheld Amount. The Multistate Withheld Amount shall be
deposited in the Borrower Operating Account. Nothing in this Section 2.04(b)(iv)
shall limit the Borrower's other obligations under this Agreement, including the
Borrower's obligation to pay principal under Sections 2.02 and 2.03, interest on
each Payment Date and the Borrower's agreement to defer rent payable under the
International Ground Leases.
SECTION 2.05. Interest.
--------
(a) Ordinary Interest. The Borrower shall pay interest on the unpaid
-----------------
principal amount of each Multistate Advance owing to each Lender from the
Closing Date until such principal amount shall be paid in full, at the following
rates per annum:
(i) Eurodollar Rate Advances. During such periods as such
------------------------
Multistate Advance is a Eurodollar Rate Advance, at a rate per annum equal
at all times during each Interest Period to the sum of (A) the Eurodollar
Rate for such Interest Period for such Multistate Advance plus (B) the
Applicable Margin in effect on the first day of such Interest Period,
payable in arrears on the last day of such Interest Period or, if earlier,
on the date such Eurodollar Rate Advance shall be Converted or paid in
full. If the Borrower shall fail to select the duration of any Interest
Period for any Eurodollar Rate Advances in accordance with the provisions
contained in the definition of "Interest Period" in Section 1.01, the Agent
will forthwith so notify the Borrower and the Lenders and (1) each such
Eurodollar Rate Advance shall continue to be a Eurodollar Rate Advance with
a one month Interest Period commencing on the last day of the Interest
Period then ending, provided that, after giving effect to such new Interest
--------
Period, the aggregate principal amount of all Base Rate Advances and
Eurodollar Rate Advances having Interest Periods that end on or prior to
any principal repayment installment date shall be at least equal to the
aggregate principal amount of the Multistate Advances due and payable on or
prior to such date or (2) if the proviso in the preceding clause (1) is not
-------
satisfied, each such Eurodollar Rate Advance shall on the last day of the
then existing Interest Period therefor, Convert into a Base Rate Advance.
(ii) Base Rate Advances. During such periods as such Multistate
------------------
Advance is a Base Rate Advance, at a rate per annum equal at all times to
the sum of (i) the Base Rate in effect from time to time plus (ii) the
Applicable Margin in effect from time to time, payable quarterly in arrears
on each Payment Date and on the date such Base Rate Advance shall be
Converted or paid in full.
(b) Additional Interest. The Borrower shall pay additional interest
-------------------
("Additional Interest") as specified in this Section 2.05(b) on the adjusted
-------------------
Multistate Amount owing to each Lender from the Closing Date until such Adjusted
Multistate Amount shall be paid in full on (and only on) the first to occur of
(i) the Scheduled Maturity Date (if extended pursuant to Section 2.03(a) or
Section 2.03(b), as so extended) if the Multistate Notes, all interest thereon
and all other amounts payable under this Agreement have not been paid in full on
or before such date and (ii) the date the Multistate Notes become due and
payable under Section 7.01. Additional Interest shall be calculated at the rate
- -equal to 1/2 of one percent per annum.
(c) Default Interest. Upon the occurrence and during the continuance
----------------
of a Default, the Borrower shall pay interest on (i) the unpaid principal amount
of each Multistate Advance owing to each Lender, payable in arrears on the dates
referred to in Section 2.05(a)(i) or Section 2.05(a)(ii) above, as applicable,
at a rate per annum equal at all times to (A) during such time as such
Multistate Advance is a Eurodollar Rate Advance 3.5% above the Eurodollar Rate
for
-35-
<PAGE>
such Interest Period for such Multistate Advance and (B) during such time as
such Multistate Advance is a Base Rate Advance 2.5% per annum above the Base
Rate and (ii) the amount of any interest, fee or other amount payable hereunder
which is not paid when due (including without limitation Additional Interest),
from the date such amount shall be due until such amount shall be paid in full,
payable in arrears on the date such amount shall be paid in full and on demand,
at a rate per annum equal at all times to 2.5% per annum above the Base Rate.
(d) Limitation on Interest. No provision of this Agreement or any
----------------------
Multistate Note shall require the payment or permit the collection of interest
in excess of the maximum rate permitted by applicable usury law.
SECTION 2.06. Minimum Amount of Eurodollar Rate Advances; Maximum
---------------------------------------------------
Number of Interest Periods. The Borrower may not select the Eurodollar Rate for
- --------------------------
any Multistate Borrowing if the aggregate amount of such Multistate Borrowing
and the aggregate amount of the Corresponding California Borrowing is less than
$40,000,000. In addition, the aggregate number of different Interest Periods in
effect at any time for outstanding Eurodollar Rate Advances shall not exceed
four (for purposes of this sentence, Interest Periods of the same duration, but
commencing on different dates, shall be treated as different Interest Periods).
SECTION 2.07. Conversion of Multistate Advances. (a) Optional. The
--------------------------------- --------
Borrower may on any Business Day, upon notice given to the Agent not later than
11:00 A.M. (New York City time) on the third Business Day prior to the date of
the proposed Conversion and subject to the provisions of Section 2.08 and
paragraph (c) of the definition of Interest Period, Convert all or any portion
of the Multistate Advances of one Type comprising the same Multistate Borrowing
into Multistate Advances of the other Type; provided, however, that any
-------- -------
Conversion of Eurodollar Rate Advances into Base Rate Advances shall be made
only on the last day of an Interest Period for such Eurodollar Rate Advances and
any Conversion of Base Rate Advances into Eurodollar Rate Advances shall be in
an amount, together with the amount of the Corresponding California Borrowing,
not less than the minimum amount specified in Section 2.06 and no Conversion of
Multistate Advances shall result in a greater number of Interest Periods for
Eurodollar Rate Advances than is permitted under Section 2.06. Each such notice
of Conversion shall, within the restrictions specified above, specify (i) the
date of such Conversion, (ii) the Multistate Advances to be Converted and (iii)
if such Conversion is into Eurodollar Rate Advances, the duration of the initial
Interest Period for such Multistate Advances. Each notice of Conversion shall be
irrevocable and binding on the Borrower.
(b) Mandatory. On the date on which the sum of the aggregate
---------
outstanding principal amount of the Eurodollar Rate Advances comprising any
Multistate Borrowing and the aggregate outstanding principal amount of the
California Eurodollar Advances comprising the Corresponding California Borrowing
shall be reduced, by payment or repayment or otherwise, to less than
$40,000,000, such Eurodollar Rate Advances comprising such Multistate Borrowing
shall automatically Convert into Base Rate Advances.
SECTION 2.08. Increased Costs Etc.
-------------------
(a) Subject to Section 2.08(c), if due to either (i) the introduction
of or any change in or in the interpretation of any law or regulation or (ii)
the compliance with any guideline or request from any central bank or other
governmental authority (whether or not having the force of law), there shall be
any increase in the cost to any Lender of making, funding or maintaining
Eurodollar Rate Advances, then the Borrower shall from time to time, upon demand
by such Lender (with a copy of such demand to the Agent), pay to the Agent for
the account of such Lender additional amounts sufficient to compensate such
Lender for such increased cost; provided, however, that before making any such
-------- -------
demand, each Lender agrees to use reasonable efforts
-36-
<PAGE>
(consistent with its internal policy and legal and regulatory restrictions) to
designate a different Eurodollar Lending Office if the making of such a
designation would avoid the need for, or reduce the amount of, such increased
cost and would not, in the reasonable judgment of such Lender, be otherwise
disadvantageous to such Lender. A certificate as to the reason for and amount of
such increased cost, submitted to the Borrower by such Lender, shall be
conclusive and binding for all purposes, absent manifest error.
(b) Subject to Section 2.08(c), if any Lender determines that
compliance with any law or regulation or any guideline or request from any
central bank or other governmental authority (whether or not having the force of
law) affects or would affect the amount of capital required or expected to be
maintained by such Lender or any corporation controlling such Lender and that
the amount of such capital is increased by or based upon the existence of such
Lender's commitment to lend hereunder and other commitments of such type, then,
upon demand by such Lender (with a copy of such demand to the Agent), the
Borrower shall pay to the Agent for the account of such Lender, from time to
time as specified by such Lender, additional amounts sufficient to compensate
such Lender in the light of such circumstances, to the extent that such Lender
reasonably determines such increase in capital to be allocable to the existence
of such Lender's commitment to lend hereunder. A certificate as to the reason
for and such amounts submitted to the Borrower by such Lender, shall be
conclusive and binding for all purposes, absent manifest error.
(c) Each Lender shall notify the Borrower (with a copy of such notice
to the Agent) of any event entitling such Lender to additional compensation
under Section 2.08(a) or 2.08(b) as promptly as practicable. The Borrower shall
not be obligated to pay any additional amounts arising pursuant to Section
2.08(a) or Section 2.08(b) that are attributable to the Excluded Period with
respect to such additional amount; provided that if any applicable law,
--------
regulation, guideline or request shall be adopted, made or interpreted on any
date and shall be applicable to a period (the "Retroactive Period") prior to the
------------------
date on which such law, regulation, guideline or request is adopted, made or
interpreted, the limitation on the Borrower's obligation to pay such additional
amounts hereunder shall not apply to the additional amounts payable in respect
of such Retroactive Period.
(d) If, with respect to any Eurodollar Rate Advances, the Required
Lenders notify the Agent that the Eurodollar Rate for any Interest Period for
such Eurodollar Rate Advances will not adequately reflect the cost to such
Lenders of making, funding or maintaining the Eurodollar Rate Advances for such
Interest Period (or if the California Required Lenders provide such a notice to
the Agent under Section 2.08(d) of the California Loan Agreement in respect of
the California Eurodollar Advances comprising the Corresponding California
Borrowing), the Agent shall forthwith so notify the Borrower and the Lenders,
whereupon (i) each such Eurodollar Rate Advance will automatically, on the last
day of the then existing Interest Period therefor, Convert into a Base Rate
Advance and (ii) the obligation of the Lenders to make, or to Convert Multistate
Advances into, Eurodollar Rate Advances shall be suspended until the Agent shall
notify the Borrower that such Lenders (or California Required Lenders, if the
notice causing the Conversion was provided under Section 2.08(d) of the
California Loan Agreement) have determined that the circumstances causing such
suspension no longer exist.
(e) Notwithstanding any other provision of this Agreement, if the
introduction of or any change in or in the interpretation of any law or
regulation shall make it unlawful, or any central bank or other governmental
authority shall assert that it is unlawful, for any Lender or its Eurodollar
Lending Office to perform its obligations hereunder to make Eurodollar Rate
Advances or to continue to fund or maintain Eurodollar Rate Advances hereunder,
then, on notice thereof and demand therefor by such Lender to the Borrower
through the Agent (or on notice and demand by such Lender under Section 2.08(e)
of the California Loan Agreement in respect of California Eurodollar Advances),
(i) each Eurodollar Rate Advance will automatically, upon such demand, Convert
into a Base Rate Advance and (ii) the obligation of the Lenders to make, or to
Convert
-37-
<PAGE>
Multistate Advances into, Eurodollar Rate Advances shall be suspended until the
Agent shall notify the Borrower that the circumstances causing such suspension
no longer exist; provided, however, that before making any such demand, such
-------- -------
Lender agrees to use reasonable efforts (consistent with its internal policy and
legal and regulatory restrictions) to designate a different Eurodollar Lending
Office if the making of such a designation would allow such Lender or its
Eurodollar Lending Office to continue to perform its obligations to make
Eurodollar Rate Advances or to continue to fund or maintain Eurodollar Rate
Advances and would not, in the judgment of such Lender, be otherwise
disadvantageous to such Lender.
(f) If, with respect to any Eurodollar Rate Advances, the Reference
Bank is unable to determine the Eurodollar Rate for any Interest Period for such
Eurodollar Rate Advances, the Reference Bank shall forthwith so notify the
Borrower and the Lenders, whereupon (i) each such Eurodollar Rate Advance will
automatically, on the last day of the then existing Interest Period therefor,
Convert into a Base Rate Advance and (ii) the obligation of the Lenders to make,
or to Convert Multistate Advances into, Eurodollar Rate Advances shall be
suspended until the Agent shall notify the Borrower that the circumstances
causing such suspension no longer exist.
(g) Upon the occurrence and during the continuance of any Event of
Default, (i) each Eurodollar Rate Advance will automatically, on the last day of
the then existing Interest Period therefor, Convert into a Base Rate Advance and
(ii) the obligation of the Lenders to make, or to Convert Multistate Advances
into, Eurodollar Rate Advances shall be suspended .
(h) On each date on which a payment of interest computed by reference
to the Determined Libor Rate on the 1988 Multistate Loans with a one month
interest period (as such term is customarily used with respect to Libor loans)
ending on the Closing Date, the Borrower shall pay to the Agent for the Lenders
entitled thereto an amount of the type described in Section 2.12 of the 1988
Multistate Loan Agreement.
SECTION 2.09. Payments, Computations and Fees.
-------------------------------
(a) The Borrower shall make each payment hereunder and under the
Multistate Notes not later than 11:00 A.M. (New York City time) on the day when
due in U.S. dollars to the Agent at the Agent's Account in same day funds. The
Agent will promptly thereafter cause like funds to be distributed (i) if such
payment by the Borrower is in respect of principal, interest, commitment fees or
any other Obligation then payable hereunder and under the Multistate Notes to
more than one Lender, to such Lenders for the account of their respective
Applicable Lending Offices ratably in accordance with the amounts of such
respective Obligations then payable to such Lenders and (ii) if such payment by
the Borrower is in respect of any Obligation then payable hereunder to one
Lender, to such Lender for the account of its Applicable Lending Office, in each
case to be applied in accordance with the terms of this Agreement. Each payment
made by the Borrower to the Agent for the Lenders in same day funds shall be
distributed by the Agent to each Lender entitled thereto in an amount determined
in accordance with the preceding sentence (x) if the payment is received by the
Agent from the Borrower at or prior to 2:00 P.M. (New York City time), on the
same Business Day as received by the Agent (unless such transfer cannot be made
on the same Business Day to a Lender due to time zone differences, in which case
the Agent shall distribute the payment to such Lender on the next Business Day)
and (y) if the payment is received by the Agent from the Borrower after 2:00
P.M. (New York City time), at or prior to 2:00 P.M. (New York City time) on the
next Business Day following the Agent's receipt of such payment together with
interest on the amount distributed to such Lender, for each day from the date
the payment is received by the Agent until the date the Agent pays the amount to
such Lender, at the Federal Funds Rate. Upon its acceptance of an Assignment and
Acceptance and recording of the information contained therein in the Register
pursuant to Section 9.07(d), from and after the effective date of such
Assignment and Acceptance, the Agent shall make all payments hereunder and under
the
-38-
<PAGE>
Multistate Notes in respect of the interest assigned thereby to the Lender
assignee thereunder, and the parties to such Assignment and Acceptance shall
make all appropriate adjustments in such payments for periods prior to such
effective date directly between themselves.
(b) The Borrower hereby authorizes each Lender, if and to the extent
payment owed to such Lender is not made when due hereunder or under the
Multistate Note held by such Lender, to charge from time to time, and upon at
least one day's notice (unless the payment not made when due is not a payment of
principal or interest, in which case the applicable notice period shall be at
least five days' notice) from such Lender to the Borrower of such Lender's
intention to charge any such accounts (which notice shall specify each account
and the amount thereof to be charged), against any or all of the Borrowers
accounts with such Lender any amount so due. From and after receipt of any
notice described in the preceding sentence, the Borrower shall not make any
withdrawal or transfer, nor instruct any Lender to make any withdrawal or
transfer, from the accounts specified in such notice (and shall instruct the
authorized signatories on such accounts not to do any of the foregoing) except
in an amount not in excess of the balance of such account less the amount to be
charged, and if any withdrawal or transfer instructions are given to any Lender
contrary to this sentence, such Lender shall not be obligated to comply
therewith. Notwithstanding the second preceding sentence, no Lender (other than
the Lender, if any, that is also the Agent hereunder) may exercise any right of
set-off with respect to any payment owed by the Borrower to such Lender except
with the prior written consent of all the Lenders. Each Lender agrees promptly
to notify the Borrower after any set-off of the occurrence and amount thereof;
provided, however, that the failure to give such notice shall not affect the
- -------- -------
validity of such set-off or application of the funds thereof. Each notice
described in the first sentence of this Section shall be sent by telegraph,
telecopy, telex or cable, or delivered to the Borrower, and not sent by mail or
overnight courier.
(c) All computations of interest and fees shall be made by the Agent
on the basis of a year of 360 days, in each case for the actual number of days
(including the first day but excluding the last day) occurring in the period for
which such interest, fees or commissions are payable. Each determination by the
Agent of an interest rate or fee hereunder shall be conclusive and binding for
all purposes, absent manifest error. The Borrower shall pay to the Agent for its
own account such fees as may from time to time be agreed between the Borrower
and the Agent.
(d) Whenever any payment hereunder or under the Multistate Notes shall
be stated to be due on a day other than a Business Day, such payment shall be
made on the next succeeding Business Day, and such extension of time shall in
such case be included in the computation of payment of interest; provided,
--------
however, that if such extension would cause payment of interest on or principal
- -------
of Eurodollar Rate Advances to be made in the next following calendar month,
such payment shall be made on the next preceding Business Day.
(e) Unless the Agent shall have received notice from the Borrower
prior to the date on which any payment is due to any Lender hereunder that the
Borrower will not make such payment in full, the Agent may assume that the
Borrower has made such payment in full to the Agent on such date and the Agent
may, in reliance upon such assumption, cause to be distributed to each such
Lender on such due date an amount equal to the amount then due such Lender. If
and to the extent the Borrower shall not have so made such payment in full to
the Agent, each such Lender shall repay to the Agent forthwith on demand such
amount distributed to such Lender together with interest thereon, for each day
from the date such amount is distributed to such Lender until the date such
Lender repays such amount to the Agent, at the Federal Funds Rate.
(f) Without limiting the last sentence of Section 2.05(a)(i) and the
last sentence of Section 8.01, the Agent agrees to give each Lender by telex,
telecopier or cable, or by telephone with subsequent confirmation by telex,
telecopier, cable or in writing, notice of (i) each Interest Period selected by
the Borrower for Eurodollar Rate Advances, the aggregate principal amount of the
Eurodollar Rate Advances having such Interest Period and the applicable interest
rate under
-39-
<PAGE>
Section 2.05(a), (ii) each notice of Conversion provided by the Borrower
pursuant to Section 2.07 and the information specified therein in accordance
with Section 2.07 and (iii) each notice of prepayment submitted by the Borrower
under Section 2.04(a) in each case described in this sentence (x) if the notice
from the Borrower with respect to such matter is received by the Agent from the
Borrower at or prior to 2:00 P.M. (New York City time), on the same Business Day
as received by the Agent and (y) if the notice from the Borrower is received by
the Agent from the Borrower after 2:00 P.M. (New York City time), at or prior to
2:00 P.M. (New York City time) on the nest Business Day following the Agent's
receipt of such notice.
SECTION 2.10. Taxes.
-----
(a) Subject to the provisions of Section 2.10(e) and 2.10(g), any and
all payments by the Borrower hereunder or under the Multistate Notes shall be
made, in accordance with Section 2.09, free and clear of and without deduction
for any and all present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding, in the case
---------
of each Lender and the Agent, taxes that are based on or measured by net income
or alternative minimum taxable income that are imposed by the United States and
taxes that are based on or measured by net income or alternative minimum taxable
income or taxable assets in lieu of income that are imposed on such Lender or
the Agent by the state or foreign jurisdiction under the laws of which such
Lender or the Agent (as the case may be) is organized or any political
subdivision thereof or any state or foreign jurisdiction in which the Lender or
the Agent is subject to net income taxes or franchise taxes and, in the case of
each Lender, taxes that are based on or measured by net income or alternative
minimum taxable income or taxable assets in lieu of income that are imposed on
such Lender by the state or foreign jurisdiction of such Lender's Applicable
Lending Office or any political subdivision thereof (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If the Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder or under any
Multistate Note to any Lender or the Agent, (i) the sum payable shall be
increased as may be necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section
2.10) such Lender or the Agent (as the case may be) receives an amount equal to
the sum it would have received had no such deductions been made, (ii) the
Borrower shall make such deductions and (iii) the Borrower shall pay the full
amount deducted to the relevant taxation authority or other authority in
accordance with applicable law. Each Lender agrees to use reasonable efforts
(consistent with its internal policy and legal and regulatory restrictions) to
reduce the amount of Taxes (including the designation of a different Eurodollar
Lending Office) in respect of any sum payable hereunder or under any Multistate
Note if such efforts would not, in the reasonable judgment of such Lender, be
otherwise disadvantageous to such Lender.
(b) In addition, the Borrower shall pay any present or future stamp,
documentary, excise, property or similar taxes, charges or levies that arise
from any payment made hereunder or under the Multistate Notes or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement or the Multistate Notes (hereinafter referred to as "Other Taxes").
-----------
(c) The Borrower shall indemnify each Lender and the Agent for the
full amount of Taxes and Other Taxes, and for the full amount of taxes imposed
by any jurisdiction on amounts payable under this Section 2.10, paid by such
Lender or the Agent (as the case may be) and any liability (including penalties,
additions to tax, interest and expenses) arising therefrom or with respect
thereto. This indemnification shall be made within 30 days from the date such
Lender or the Agent (as the case may be) makes written demand therefor.
-40-
<PAGE>
(d) Within 30 days after the date of any payment of Taxes, the
Borrower shall furnish to the Agent, at its address referred to in Section 9.02,
the original receipt of payment thereof or a certified copy of such receipt. In
the case of any payment hereunder or under the Multistate Notes by the Borrower
through an account or branch outside the United States or on behalf of the
Borrower by a payor that is not a United States person, if the Borrower
determines that no Taxes are payable in respect thereof, the Borrower shall
furnish, or shall cause such payor to furnish, to the Agent, at such address, an
opinion of counsel acceptable to the Agent stating that such payment is exempt
from Taxes. For purposes of this Section 2.10(d) and 2.10(e), the terms "United
------
States" and "United States Person" shall have the meanings specified in Section
- ------ --------------------
7701 of the Internal Revenue Code.
(e) Each Lender organized under the laws of a jurisdiction outside the
United States shall, on or prior to the date of its execution and delivery of
this Agreement in the case of each Bank, and on the date of the Assignment and
Acceptance pursuant to which it became a Lender in the case of each other
Lender, and from time to time thereafter if requested in writing by the Borrower
or the Agent (but only so long thereafter as such Lender remains lawfully able
to do so), provide the Agent and the Borrower with Internal Revenue Service form
1001 or 4224, as appropriate, or any successor form prescribed by the Internal
Revenue Service, certifying that such Lender is entitled to benefits under an
income tax treaty to which the United States is a party that reduces the rate of
withholding tax on payments under this Agreement or the Multistate Notes or
certifying that the income receivable pursuant to this Agreement or the
Multistate Notes is effectively connected with the conduct of a trade or
business in the United States. If the form provided by a Lender at the time such
Lender first becomes a party to this Agreement indicates a United States
interest withholding tax rate in excess of zero, withholding tax at such rate
shall be considered excluded from Taxes unless and until such Lender provides
the appropriate form certifying that a lesser rate applies, whereupon
withholding tax at such lesser rate only shall be considered excluded from Taxes
for periods governed by such form; provided, however, that if at the date of the
-------- -------
Assignment and Acceptance pursuant to which a Lender assignee becomes a party to
this Agreement, the Lender assignor was entitled to payments under Section
2.10(a) in respect of United States withholding tax with respect to interest
paid at such date, then, to such extent, the term Taxes shall include (in
addition to withholding taxes that may be imposed in the future or other amounts
otherwise includable in Taxes) United States withholding tax, if any, applicable
with respect to the Lender assignee on such date. If any form or document
referred to in this Section 2.10(e) requires the disclosure of information,
other than information necessary to compute the tax payable and information
required on the date hereof by Internal Revenue Service form 1001 or 4224, that
the Lender reasonably considers to be confidential, the Lender shall give notice
thereof to the Borrower and shall not be obligated to include in such form or
document such confidential information.
(f) For any period with respect to which a Lender has failed to
provide the Borrower with the appropriate form described in Section 2.10(e)
(other than if such failure is due to a change in law occurring after the date
----- ----
on which a form originally was required to be provided or if such form otherwise
is not required under Section 2.10(e)), such Lender shall not be entitled to
indemnification under Section 2.10(a) or 2.10(c) with respect to Taxes imposed
by the United States; provided, however, that should a Lender become subject to
-------- -------
Taxes because of its failure to deliver a form required hereunder, the Borrower
shall take such steps as such Lender shall reasonably request to assist such
Lender to recover such Taxes.
(g) If, due to a change in law applicable to a Foreign Lender after
such Foreign Lender becomes a party to this Agreement, the Borrower would be
required to compensate such Foreign Lender for any Taxes under this Section
2.10, the Borrower shall be required to compensate such Foreign Lender for such
Taxes only to the extent to which, on account of the change in law, the Borrower
would have had an obligation to compensate the Lender from whom such Foreign
Lender's Multistate Advances originated if such Lender were a Lender at the time
the change in
-41-
<PAGE>
law became effective. As used in this Section 2.10(g), "Foreign Lender" means
--------------
any Lender that is not organized under the laws of the United States or any
State or territory thereof other than (i) a Bank or (ii) a branch or agency
located in and operating under the laws of the United States or any State or
territory hereof.
(h) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 2.10 shall survive the payment in full of principal and interest
hereunder and under the Multistate Notes.
SECTION 2.11. Sharing of Payments, Etc.
------------------------
If any Lender shall obtain at any time any payment (whether voluntary,
involuntary, through the exercise of any right of set-off, or otherwise (a) on
account of Obligations due and payable to such Lender hereunder and under the
Multistate Notes (the "Multistate Obligations") or on account of Obligations due
----------------------
and payable under the California Loan Agreement and the California Notes (the
"California Obligations", and together with the Multistate Obligations the
----------------------
"Combined Obligations") at such time in excess of its ratable share (according
--------------------
to the proportion of (i) the aggregate amount of the Combined Obligations due
and payable to such Lender at such time to (ii) the aggregate amount of the
Combined Obligations due and payable to all Lenders at such time) of payments on
account of the Combined Obligations due and payable to all Lenders at such time
obtained by all the Lenders at such time or (b) on account of Multistate
Obligations or California Obligations owing (but not due and payable) to such
Lender at such time in excess of its ratable share (according to the proportion
of (i) the amount of Combined Obligations owing (but not due and payable) to
such Lender at such time to (ii) the aggregate amount of the Combined
Obligations owing (but not due and payable) to all Lenders at such time) of
payments on account of the Combined Obligations owing (but not due and payable)
to all Lenders at such time obtained by all the Lenders at such time, such
Lender shall forthwith purchase from the other Lenders such participations in
the Multistate Obligations or the California Obligations due and payable or
owing to them, as the case may be, as shall be necessary to cause such
purchasing Lender to share the excess payment ratably with each of them in
respect of the Combined Obligations; provided, however, that if all or any
-------- -------
portion of such excess payment is thereafter recovered from such purchasing
Lender, each such purchase from each other Lender shall be rescinded and such
other Lender shall repay to the purchasing Lender the purchase price therefor to
the extent of such other Lender's ratable share (according to the proportion of
(i) the purchase price paid to such Lender for such participation to (ii) the
aggregate purchase price paid to all Lenders for participations in Multistate
Obligations (if the rescinded purchase is of a participation in the Multistate
Obligations) or for participations in the California Obligations (if the
rescinded purchase is of a participation in the California Obligations) of such
recovery together with an amount equal to such Lender's ratable share (according
to the proportion of (i) the amount of such other Lender's required repayment in
respect of such purchase to (ii) the total amount so recovered from the
purchasing Lender) of any interest or other amount paid or payable by the
purchasing Lender in respect of the total amount so recovered. The Borrower
agrees that any Lender so purchasing a participation from another Lender
pursuant to this Section 2.11 may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of set-off to the extent
permitted hereunder) with respect to such participation as fully as if such
Lender were the direct creditor of the Borrower in the amount of such
participation.
SECTION 2.12. Non-Recourse.
------------
The Lenders agree that, except as provided otherwise in the following
sentences of this Section 2.12, their recourse against the Borrower and its
partners for any default in the payment of the Borrowers Obligations under the
Multistate Loan Documents and performance of the Borrower's other obligations
under the Multistate Loan Documents, including, without
-42-
<PAGE>
limitation, the payment of the Multistate Notes, shall be limited solely to the
Multistate Collateral (without regard to whether any Lien thereon is valid or
perfected), and the Lenders shall not seek recovery therefor, whether by direct
suit, deficiency judgment in foreclosure proceeding, or otherwise, in whole or
in part, against Host Marriott, Marriott International, the Tenant, any
International Ground Lessor or any of the partners of the Borrower
(collectively, and including their respective officers, directors and employees,
the "Exculpated Parties") or any of their respective assets other than the
------------------
Multistate Collateral. The first sentence of this Section does not limit the
Lenders' recourse against the following Loan Parties or their respective assets
as follows: (i) the General Partner or the International Ground Lessors in
connection with their respective obligations under the Subordination Agreement
or (ii) Host Marriott, Marriott International or the Tenant in connection with
their respective obligations under each Multistate Loan Document, including,
without limitation, the Debt Service Guaranty, the Backup Debt Service Guaranty,
the Debt and Tenant Change Guaranty, the MI Guaranty, the Subordination
Agreement, the Hotel Lease Guaranty, the Attornment Agreement, the Host Marriott
Indemnity Agreement and the Marriott International Indemnity Agreement.
Furthermore, the first sentence of this Section also does not limit the Lenders'
right to seek any recovery (by direct suit, deficiency judgment in foreclosure
proceeding or otherwise) against the Borrower, provided that the Lenders shall
--------
not seek to execute or otherwise enforce any decision or other award so obtained
against any assets of the Borrower other than the Multistate Collateral. Nothing
in this Section shall be construed to release or otherwise impair the
Indebtedness of the Borrower evidenced by the Multistate Notes, the other
obligations of the Borrower or any other Loan Party under the Multistate Loan
Documents, the Liens securing such obligations, or (except as and to the extent
set forth in the first sentence of this Section and the proviso of the preceding
sentence) any other rights of the Lenders. In addition, nothing in this Section
shall (A) limit or be construed to limit or impair any enforcement action
against the assets of the Loan Parties comprising Multistate Collateral or any
enforcement action against any Loan Party (including, without limitation, any
successors in interest, assigns, or transferees thereof) to enable the Agent or
any Lender to obtain any Multistate Collateral, or constitute a waiver, release
or discharge of any Loan Party's obligations, (B) limit the right of the Lenders
to name any successor owner of Multistate Collateral or other Person claiming an
interest therein as a party defendant in any action under this Agreement or any
other Multistate Loan Documents so long as (except as otherwise permitted by
clauses (C) and (D)) no judgment in the nature of a deficiency or personal money
judgment shall be requested, obtained or enforced against the Exculpated
Parties, or any of them, (C) affect in any way the validity of any separate
written guaranty, letter of credit, cash, line of credit, indemnification or
other undertaking now or hereafter given by any Person (including any Exculpated
Party) to the Lenders, (D) release any Exculpated Party from any personal
liability arising from (1) misapplication of trust funds, such as insurance
proceeds or condemnation awards, that may come into the possession of such
Exculpated Party or (2) fraud by such Exculpated Party or (E) after such time as
the Lenders acquire any right (by foreclosure on the Borrowers interest in a
Related Document or otherwise) to exercise the Borrower's rights under any
Related Document, limit or be construed to limit or impair any enforcement
action or any action for damages under such Related Document against any Loan
Party on account of such Loan Party's failure to perform any of its obligations
under such Related document.
-43-
<PAGE>
ARTICLE III
CONDITIONS PRECEDENT
SECTION 3.01. Conditions Precedent.
--------------------
This amendment and restatement of the 1988 Multistate Loan Agreement
and the obligations of each Lender hereunder shall not be effective until the
date on which the following conditions precedent are satisfied and shall be
effective on and as of such date.
(a) All transfers described in Section 9.11 shall have occurred
in compliance with all material agreements and instruments relating
thereto.
(b) The Lenders shall be satisfied with (i) the corporate and
legal structure and capitalization of each Loan Party other than the
Borrower, including the terms and conditions of the charter, bylaws and
each class of capital stock of each such Person and of each agreement or
instrument relating to such structure or capitalization and (ii) the
partnership and legal structure and capitalization of the Borrower,
including the terms and conditions of the agreement of limited partnership
of the Borrower.
(c) There shall exist no action, suit, investigation, litigation
or proceeding affecting any Loan Party or any of its Subsidiaries pending
or threatened before any court, governmental agency or arbitrator that (i)
could have a Material Adverse Effect or (ii) purports to affect the
legality, validity or enforceability of the Reorganization, this Agreement.
any Multistate Note, any other Multistate Loan Document, any Related
Document or the consummation of the transactions contemplated hereby. There
shall exist no other event or condition that could have a Material Adverse
Effect.
(d) The representations and warranties contained in each
Multistate Loan Document shall be true and correct on and as of the Closing
Date, before and after giving effect to the other transactions contemplated
hereby, other than any such representations and warranties that by their
terms refer to a date other than the Closing Date, and no event shall have
occurred and be continuing (including, without limitation, any resulting
from the Reorganization) or would result from the transactions contemplated
hereby that constitutes a Default.
(e) The Tenant shall have permanently and irrevocably released
the Borrower on or prior to the Closing Date from the Borrower's obligation
to pay to the Tenant all Deferred Incentive Management Fees, the Tenant and
the Borrower shall have terminated the 1986 Management Agreement as of
January 1, 1994 and the Tenant and the Borrower shall have furnished to the
Agent evidence satisfactory to it of such release.
(f) The Borrower shall (i) have caused all funds in account
number 258-3205080-8 at Merrill Lynch Institutional Fund, c/o State Street
Bank and Trust Company, P.O. Box 8500, Boston, Massachusetts 02266-8500,
and all funds, if any, that CMC was required to but did not deposit in the
FF&E Reserve (as defined in the 1986 Management Agreement) pursuant to the
1986 Management Agreement, to be deposited in same day funds in the FF&E
Reserve Account (other than $242,756.55 of such funds, which the Borrower
will be depositing in a separate reserve for the Connecticut Hotel), (ii)
have caused the Administrative Holdback Amount, and the excess, if any, of
all other funds held by it (including funds in the Contingency Reserve (as
defined in the 1986 Management Agreement)) other than (A) all amounts paid
by it on the Closing Date as payments of principal, interest, fees and
expenses and (B) funds (in addition to those described in the
-44-
<PAGE>
second parenthetical in clause (i)) relating to the Connecticut Hotel) to
be deposited in same day funds in the Borrower Operating Account and (iii)
have furnished to the Agent evidence satisfactory to it of such deposits.
(g) The Borrower shall have paid to the Agent for the ratable
benefit of the 1988 Lenders accrued interest on the outstanding principal
amount of the 1988 Multistate Loans (prior to giving effect to the
Multistate Closing Payment) for the period from March 18, 1994 to the
Closing Date at the Forbearance Agreement Rate.
(h) The Borrower shall have paid all accrued fees and expenses of
Coopers & Lybrand and all reasonable fees and expenses of Shearman &
Sterling and of local counsel to the Lenders.
(i) This Agreement shall have been executed by the Borrower and
the Agent, and the Agent shall have been notified by each Bank that such
Bank has executed it.
(j) All conditions precedent to the effectiveness of the
California Loan Agreement shall have been satisfied.
(k) The Agent shall have received the following, each dated the
Closing Date (unless otherwise specified), in form and substance
satisfactory to the Lenders (unless otherwise specified) and (except for
the Multistate Notes, in sufficient copies for each Lender:
(i) The Multistate Notes to the order of the Tenders.
(ii) Certified copies of the resolutions of the Board of
Directors of each Loan Party (other than the Borrower) approving each
Multistate Loan Document and each Related Document to which it is or
is to be a party and the transactions contemplated hereby, and of all
documents evidencing other necessary corporate action and governmental
approvals, if any, with respect thereto.
(iii) Certified copies of the resolutions of the Board of
Directors of the General Partner approving on behalf of the Borrower
each Multistate Loan Document and each Related Document to which the
Borrower is or is to be a party and the transactions contemplated
hereby, and of all documents evidencing other necessary partnership
and corporate action and governmental approvals, if any, with respect
thereto.
(iv) (A) (1) A copy of a certificate of the Secretary of
State of the jurisdiction of incorporation of Host Marriott, the
General Partner and the Tenant, dated reasonably near the Closing
Date, listing the charter of each such Loan Party and each amendment
thereto on file in his office and certifying that (X) such amendments
are the only amendments to each such Loan Party's charter on file in
his office, (y) each such Loan Party has paid all franchise taxes to
the date of such certificate and (z) each such Loan Party is duly
incorporated and in good standing under the laws of such State and (2)
if such certificate lists for any such Loan Party any charters or
amendments that were not provided by the Borrower in connection with
the closing of the 1986 Loan Agreements, a copy of the charter of such
Loan Party and each amendment thereto certified (as of a date
reasonably near the Closing Date) by the Secretary of State of the
jurisdiction of incorporation of such Loan Party as being a true and
correct copy thereof.
-45-
<PAGE>
(B) A copy of the charter of Marriott International and
each International Ground Lessor and each amendment thereto certified
(as of a date reasonably near the Closing Date) by the Secretary of
State of the jurisdiction of incorporation of each such Loan Party as
being a true and complete copy thereof.
(C) A copy of a certificate of the Secretary of State of
the jurisdiction of incorporation of Marriott International and each
International Ground Lessor, dated reasonably near the Closing Date,
certifying that each such Loan Party has paid all franchise taxes to
the date of such certificate and is duly incorporated and in good
standing under the laws of such State.
(v) A copy of a certificate of the Secretary of State of the
State of Delaware, dated reasonably near the Closing Date, listing the
certificate of limited partnership of the Borrower and each amendment
thereto on file in his office and certifying that (A) such amendments
are the only amendments to such certificate on file in his office, (B)
the Borrower has paid all franchise taxes to the date of such
certificate and (C) the Borrower is duly organized and in good
standing under the laws of the State of Delaware.
(vi)(A) A certificate or certificates of each Loan Party
(other than the Borrower), signed on behalf of such Loan Party by a
duly authorized officer of such Loan Party, dated as of the Closing
Date (the statements made in each of which shall be true on and as of
the Closing Date), certifying as to (1) the absence of any amendments
to the charter of such Loan Party since the date of the Secretary of
State's certificate referred to in paragraph (iv) above, (2) a true
and correct copy of the bylaws of such Loan Party as in effect on the
Closing Date, (3) the due incorporation and good standing of such Loan
party as a corporation organized under the laws of the state of its
incorporation, and the absence of any proceeding for the dissolution
or liquidation of such Loan Party, (4) (x) in the case of each of the
General Partner and the Tenant, such Loan Party's qualification and
good standing as a foreign corporation in the State of Maryland and
each state in which a Hotel is located and (y) in the case of each
International Ground Lessor, such Loan Party's qualification and good
standing as a foreign corporation in each state in which such Loan
Party owns Land, and (5) (except in the case of Host Marriott and the
General Partner) to the Knowledge of such Loan Party, the absence of
any event occurring and continuing, or resulting from the transactions
contemplated by this Agreement, that constitutes a Default and (B) (1)
in the case of the General Partner and the Tenant, current good
standing certificates evidencing such Loan Party's qualification and
good standing as a foreign corporation in the State of Maryland and
each other state in which a Hotel is located and (2) in the case of
each International Ground Lessor, current good standing certificates
evidencing such Loan Party's qualification and good standing as a
foreign corporation in each state in which such Loan Party owns Land.
(vii) (A) A certificate or certificates of the Borrower,
signed on its behalf by a duly authorized officer of the General
Partner, dated the Closing Date (the statements made in each of which
shall be true on and as of the Closing Date), certifying as to (1) a
true and correct copy of the limited partnership agreement of the
Borrower (including all amendments thereto), (2) the due organization
and good standing of the Borrower as a limited partnership organized
under the laws of the State of Delaware, and the absence of any
proceeding for the dissolution or liquidation of the Borrower, (3) the
Borrower's qualification and good standing as a foreign limited
partnership in the State of Maryland and each state in which a Hotel
-46-
<PAGE>
is located and (4) current certificates of limited partnership
(including all amendments thereto) filed in the appropriate offices in
the State of Delaware and (B) (1) current good standing certificates
evidencing the Borrower's qualification and good standing as a foreign
limited partnership in the State of Maryland and each other state in
which a Hotel is located and (2) current filings of limited
partnership applications (including all amendments thereto) on file in
the appropriate offices in the State of Maryland and each state in
which a Hotel is located.
(viii) A certificate of the Secretary or an Assistant
Secretary of each Loan Party (other than the Borrower) certifying the
names and true signatures of the officers of such Loan Party
authorized to sign each Multistate Loan Document and each Related
Document to which it is or is to be a party and the other documents to
be delivered hereunder and thereunder.
(ix) A certificate of the Secretary or an Assistant
Secretary of the General Partner certifying the names and true
signatures of the officers of the General Partner authorized to sign
each Multistate Loan Document and each Related Document to which the
Borrower is or is to be a party and the other documents to be
delivered hereunder and thereunder.
(x) The Multistate Security Agreement, dated as of the
date hereof, duly executed by the Borrower, together with:
(A) executed originals of proper financing
statements, to be filed on or immediately after the Closing
Date under the Uniform Commercial Code of all jurisdictions
that the Agent may deem necessary or desirable in order to
perfect and protect the Liens created by the Multistate
Security Agreement covering the "Collateral" described in
the Multistate Security Agreement, and provision
satisfactory to the Agent for the payment of all filing,
recording and other taxes and fees applicable thereto and of
obtaining completed requests for information, listing such
financing statements and all other effective financing
statements filed in such jurisdictions that name the
Borrower as debtor, together with copies of such other
financing statements:
(B) evidence of the completion of, or procedures
satisfactory to the Agent for the completion of, all other
recordings and filings of or with respect to the Multistate
Security Agreement that the Agent or any Lender through the
Agent may reasonably deem necessary or desirable in order to
perfect and protect the Liens created thereby;
(C) original certificates of insurance evidencing
the insurance required by the terms of the Multistate
Security Agreement; and
(D) evidence that all other actions that the Agent
or any Lender through the Agent may reasonably deem
necessary or desirable in order to perfect and protect the
Liens created by the Multistate Security Agreement have been
taken.
(xi) The Marriott International Indemnity Agreement,
dated as of the date hereof, duly executed by Marriott International.
-47-
<PAGE>
(xii) Amendments to each 1986 Multistate Mortgage in
respect of each Multistate Primary Hotel in substantially the form of
Exhibits F-1 and F-2 (each a "Multistate Primary Hotel Mortgage
---------------------------------
Amendment") and in respect of each Multistate Secondary Hotel in
---------
substantially the form of Exhibit G (each a "Multistate Secondary
--------------------
Hotel Mortgage Amendment"), each dated as of the date hereof, duly
------------------------
executed by the Borrower (except that the Multistate Primary Hotel
Mortgage Amendments for each Hotel Property in Illinois and Virginia
shall also be duly executed by the respective Land Trust to which the
Borrower has conveyed its interest in such Hotel Property) and, with
respect to each such Hotel located on Land leased to the Borrower (or
any Land Trust) under an International Ground Lease, the International
Ground Lessor that is the landlord thereunder, together with:
(A) evidence that counterparts of the Multistate
Mortgage Amendments have been duly recorded on or before the
Closing Date in all filing or recording offices that the
Agent may deem necessary or
desirable in order to create a valid and subsisting first
priority Lien or second priority Lien, in each case as
specified in the applicable Multistate Mortgages, on the
property described therein in favor of the Lenders and that
all stamp, deed, filing, recording and other taxes and fees
applicable thereto have been paid (or evidence of title
insurance covering the gap, if any, between the Closing Date
and the time such documents are duly filed or recorded and
provision . satisfactory to the Agent for the payment of all
stamp, deed, filing, recording and other taxes and fees
applicable thereto);
(B) a fully paid American Land Title Association
Lender's Extended Coverage title insurance policy or
endorsements updating the title insurance policies issued in
connection with the 1988 Multistate Loan Agreement (each a
"1994 Mortgage Policy" and collectively the "1994 Mortgage
-------------------- -------------
Policies") in form and substance, with endorsements (which,
--------
in the case of updates to the title insurance policies
issued in connection with the 1988 Multistate Loan
Agreement, will consist of the endorsements on such title
insurance policies as so issued and such additional
endorsements reasonably requested by the Agent that do not
significantly increase the cost of such updates) and in
amount acceptable to the Agent, issued by Chicago Title
Insurance Company or another title insurance company
reasonably acceptable to the Agent and reinsured by title
insurers acceptable to the Agent, insuring the Multistate
Mortgages to be valid and subsisting first priority Liens or
second priority Liens, as specified in the applicable
Multistate Mortgages, on the property described therein,
free and clear of all defects (including, but not limited
to, mechanics' and materialmen's Liens) and encumbrances,
excepting only Permitted Exceptions, and providing for such
other affirmative insurance (including endorsements for
future advances under the Multistate Loan Documents and for
mechanics' and materialmen's Liens) and such coinsurance and
direct access reinsurance as the Agent may reasonably deem
necessary or desirable;
(C) (1) American Land Title Association form surveys,
dated no more than 30 days before the Closing Date,
-48-
<PAGE>
certified to the Agent and the issuer of the 1994 Mortgage
Policies in a manner satisfactory to the Agent by a land
surveyor duly registered and licensed in the State in which
the property described in such survey is located and
acceptable to the Agent, showing all buildings and other
improvements, any off-site improvements, the location of any
easements, parking spaces, rights of way, building set-back
lines and other dimensional regulations and the absence of
encroachments, either by such improvements or on to such
property, and other defects, other than encroachments and
other defects acceptable to the Agent, (2) such affidavit or
other documentation as shall be required by the title
insurer(s) insuring such 1994 Mortgage Policy in order that
the survey exception be removed from such policy or (3) such
other documentation as shall be reasonably satisfactory to
the Agent;
(D) such consents and agreements (including
subordination and attornment agreements) of lessors and
other third parties, and such estoppel letters and other
confirmations, as the Agent may deem necessary or desirable,
including, without limitation, with respect to each Third
Party Ground Lease, an estoppel letter substantially in the
form of Exhibit H, duly executed by the Third Party Ground
Lessor that is the landlord under such Third Party Ground
Lease;
(E) original certificates of insurance evidencing the
insurance required by the terms of the Multistate Mortgages;
and
(F) evidence that all other actions that the Agent or
any Lender through the Agent may reasonably deem necessary
or desirable in order to create valid first or second, as
specified in the Multistate Mortgages, and subsisting Liens
on the property described in the Multistate Mortgages have
been taken.
(xiii) For each International Ground Lease, a Ground Lease
Amendment, dated as of the date hereof, duly executed by the Borrower
(except that the Ground Lease Amendments for the Land on which each
Hotel in Illinois and Virginia (other than the Hotel in Fairfax,
Virginia referred to as Fair Oaks) is located shall be duly executed
by the respective Land Trust to which the Borrower has conveyed its
interest in such Hotel Property) and the applicable International
Ground Lessor, together with evidence that counterparts of each Ground
Lease Amendment, or an amendment to a memorandum, or short form, of
each International Ground Lease referring to such Ground Lease
Amendment (each such memorandum or short form of International Ground
Lease, as amended by such amendment, being a "Memorandum of Ground
--------------------
Lease") have been duly recorded on or before the Closing Date in all
-----
filing or recording offices that the Agent may deem necessary or
desirable in order to evidence the amendments to the International
Ground Leases governing the leasehold estates described in the
International Ground Leases and that all stamp, deed, filing,
recording and other taxes and fees applicable thereto have been paid
(or evidence of title insurance governing the gap, if any, between the
Closing Date and the time such documents are duly filed or recorded
and provision satisfactory to the Agent for the payment of all stamp,
deed, filing, recording and other taxes and fees applicable thereto).
-49-
<PAGE>
(xiv) The Debt Service Guaranty, dated as of the date
hereof, duly executed by Host Marriott.
(xv) The Backup Debt Service Guaranty, dated as of the
date hereof, duly executed by Marriott International.
(xvi) The Subordination Agreement, dated as of the date
hereof, duly executed by Host Marriott, the General Partner, Marriott
International, the Tenant, the International Ground Lessors and the
Borrower.
(xvii) The Hotel Lease, dated as of January 1, 1994, duly
executed by the Tenant, the Borrower and the Land Trusts.
(xviii)[Intentionally Omitted]
(xix) For each Hotel (other than the Hotels located in
Maryland and Virginia), a Multistate Assignment of Leases, dated as of
the date hereof, duly executed by the Borrower (except that the
Multistate Assignment of Leases for the Hotel in Illinois shall also
be duly executed by the Land Trust to which the Borrower has conveyed
its interest in such Hotel) and, in the case of each Hotel located on
Land leased to the Borrower (or any Land Trust) under an International
Ground Lease, the International Ground Lessor that is the landlord
thereunder, together with:
(A) evidence that counterparts of each Multistate
Assignment of Leases have been duly recorded on or before
the Closing Date in all filing or recording offices that the
Agent may deem necessary or desirable in order to perfect
and protect the Liens created by such Multistate Assignment
of Leases covering the Hotel Lease described therein and the
rent due the Borrower and the Land Trust thereunder, the
rent due the International Ground Lessors under the
International Ground Leases described therein and the other
Leases" and "Rents" described in such Multistate Assignment
of Leases in favor of the Lenders and that all stamp, deed,
filing, recording and other taxes and fees applicable
thereto have been paid (or evidence of title insurance
covering the gap, if any, between the Closing Date and the
time such documents are duly filed or recorded and provision
satisfactory to the Agent for the payment of all stamp,
deed, filing, recording and other taxes and fees applicable
thereto); and
(B) evidence that all other actions that the Agent or
any Lender through the Agent may reasonably deem necessary
or desirable in order to perfect and protect the Liens
created by each Multistate Assignment of Leases have been
taken.
(xx) The Attornment Agreement, dated as of the date
hereof, duly executed by the Borrower, the Tenant, the Land Trusts and
the Agent.
(xxi) The Hotel Lease Guaranty, dated as of the date
hereof, duly executed by Marriott International.
(xxii) The Host Marriott Indemnity Agreement, dated as of
the date hereof, duly executed by Host Marriott and the Borrower.
-50-
<PAGE>
(xxiii) The Debt and Tenant Change Guaranty, dated as of
the date hereof, duly executed by Marriott International.
(xxiv) The MI Guaranty, dated as of the date hereof, duly
executed by Marriott International.
(xxv) Such financial, business and other information
regarding each Loan Party and its respective Subsidiaries any Lender
through the Agent shall have reasonably requested, including, without
limitation, (A) information as to possible contingent liabilities, tax
matters or environmental matters, (B) obligations of the Borrower
under ERISA and Welfare Plans and arrangements with employees of the
Borrower and (C) financial statements as to Host Marriott, Marriott
International and the Borrower (including forecasted income statements
and cash flow statements of the Borrower, as referred to in Section
5.01(g)).
(xxvi) A letter, in form and substance satisfactory to the
Agent, from the Borrower to Arthur Andersen & Co., its independent
certified public accountants, advising such accountants that the Agent
has been authorized to exercise all rights of the Borrower to require
such accountants to disclose any and all financial statements and any
other information of any kind that they may have with respect to the
Borrower and directing such accountants to comply, subject to any
privilege that may exist between the Borrower and such accountants as
a matter of law, with any reasonable request of the Agent for such
information.
(xxvii) A favorable opinion of Christopher G. Townsend,
Esq., Deputy General Counsel of Host Marriott, counsel for the
Borrower, the General Partner and Host Marriott, in substantially the
form of Exhibit T and as to such other matters as any Lender through
the Agent may reasonably request.
(xxviii) A favorable opinion of Ward R. Cooper, Esq.,
Assistant General Counsel of Marriott International, counsel for the
Tenant, Marriott International and the International Ground Lessors,
in substantially the form of Exhibit U and as to such other matters as
any Lender through the Agent may reasonably request.
(xxix) A favorable opinion of Hogan & Hartson L.L.P.,
counsel for the Loan Parties, in substantially the form of Exhibit V.
(xxx) A favorable opinion of the law firms listed on
Schedule 3.01(k)(xxx), local counsel to the Borrower, the Tenant and
the International Ground Lessors in each state in which one or more
Hotel Properties are located as set forth on such Schedule, in
substantially the form of Exhibits W-1 through W-15 and as to such
other matters as any Lender through the Agent may reasonably request.
(xxxi) A favorable opinion of Shearman & Sterling, special
counsel to the Lenders, in substantially the form of Exhibit X and as
to such matters as any Lender through the Agent may reasonably
request.
(xxxii) Such other approvals, opinions or documents as any
Lender through the Agent may reasonably request.
-51-
<PAGE>
SECTION 3.02. Determinations under Section 3.01.
---------------------------------
For purposes of determining compliance with the conditions specified
in Section 3.01, each Lender shall be deemed to have consented to, approved or
accepted or to be satisfied with each document or other matter required
thereunder to be consented to or approved by or acceptable or satisfactory to
the Lenders unless an officer of the Agent responsible for the transactions
contemplated by the Multistate Loan Documents shall have received notice from
such Lender, prior to the Closing Date specifying its objection thereto and such
Lender shall not have withdrawn its notice on or before the Closing Date.
ARTICLE IV
RELEASE OF HOTELS
SECTION 4.01. Release.
-------
Upon satisfaction of the conditions set forth in Section 4.02 and 4.03
hereof, from and after the commencement of the first Tenant Accounting Quarter
in Tenant Fiscal Year 1995 the Agent shall execute and deliver to the Borrower a
release, in recordable form, releasing a Hotel Property from its Multistate
Mortgage, Multistate Assignment of Leases and the other Multistate Collateral
Documents encumbering such Hotel Property, provided, however, that no
-------- -------
Hotel Property shall be released that would reduce the number of Hotel
Properties then subject to Multistate Mortgages and Multistate Assignment of
Leases to less than thirty-four (34).
SECTION 4.02. Conditions to Release.
---------------------
The following conditions must be satisfied, in the reasonable judgment
of the Agent, for the release of a Hotel Property (other than a Multistate
Secondary Hotel Property):
(a) The Borrower shall have given not less than thirty (30) (or,
if such Hotel Property is proposed to be sold by the Borrower in
satisfaction of the second proviso of Section 7.01(g) or Section 7.01(h),
fifteen (15)) days' prior written notice to the Agent requesting the
release of a Hotel Property, together with a certificate of the Borrower
certifying as follows (and each of such certifications shall be true and
correct at the time the notice is given and on the proposed date of release
of the Hotel Property): (i) no Default (other than, if such Hotel Property
is proposed to be sold in satisfaction of the second proviso of Section
7.01(g) or Section 7.01(h), the Default under such Section) has occurred
and is continuing; (ii) the condition set forth in Section 4.02(b) below
has been satisfied (and incorporating a calculation (and schedules
satisfactory to the Agent showing such calculation) of Annual Loan Coverage
of the Remaining Hotels for the Current Year); and (iii) the financial
statements of the Borrower upon which the calculation referred to in clause
(ii) above is based (and which shall be delivered with such certificate)
are true, accurate and complete in all material respects and present fairly
the financial condition of Borrower and the results of Borrower's
operations for the period covered thereby;
(b) Annual Loan Coverage of the Remaining Hotels for the Current
Year shall be not less than 1.4; and
(c) The Borrower shall pay to the Agent as a payment of principal
of the aggregate outstanding principal amount of the Multistate Loans a sum
(the "Release Price") for the Hotel Property to be released in the amount
set forth below or such lower amount to which the Lenders owed or holding
at least 75 of the aggregate principal amount
-52-
<PAGE>
of the Multistate Advances outstanding at such time may agree, together
with accrued interest to the date of such prepayment on the aggregate
principal amount prepaid, and such prepayment shall be applied as specified
in Section 2.04(b)(iii):
(i) For each of the first five Hotel Properties released, a
Release Price in an amount equal to 110% of the Base Release Price for such
Hotel Property; and
(ii) For each of the next ten Hotel Properties released, a
Release Price in an amount equal to 120% of the Base Release Price for such
Hotel Property.
SECTION 4.03. Release of Multistate Secondary Hotel Properties.
------------------------------------------------
In the event any Hotel Property proposed to be released is a
Multistate Secondary Hotel Property, the conditions set forth in Section 4.01
and 4.02 of the California Loan Agreement are satisfied with respect thereto,
and the Release Price (as defined in the California Loan Agreement) exceeds the
then aggregate outstanding principal amount of the California Advances, the
Borrower shall pay such excess amount to the Agent as a prepayment of the
aggregate outstanding principal amount of the Multistate Advances, together with
accrued interest to the date of such prepayment on the aggregate principal
amount prepaid, and such prepayment shall be applied as set forth in Section
2.04(b)(iii). If there is no such excess amount, the Agent shall release such
Hotel Property from its Multistate Mortgage, Multistate Assignment of Leases and
the other Multistate Collateral Documents encumbering such Hotel Property in
connection with the release of such Multistate Secondary Hotel Property from its
California Mortgage and California Assignment of Leases pursuant to Section 4.01
and 4.02 of the California Loan Agreement.
SECTION 4.04. Defined Terms Used in this Article.
----------------------------------
The following terms shall have the following meanings (such meanings
to be equally applicable to both the singular and plural forms of the terms
defined):
"Annual Interest Payments" means, at any time Annual Loan Coverage of
------------------------
the Remaining Hotels is to be determined, the aggregate amount of all
interest due and payable by the Borrower under this Agreement and the
California Loan Agreement during the Current Year applicable to such
determination.
"Annual Loan Coverage of the Remaining Hotels" means for any Current
--------------------------------------------
Loan Year the amount equal to (a) the Performance Operating Profit of the
Remaining Hotels divided by (b) the sum of (i) $7,000,000 and (ii) the
amount equal to the product of (A) Annual Interest Payments and (B) a
fraction, the numerator of which is the amount equal to (1) the aggregate
outstanding principal amount of the Multistate Advances and the California
Advances on the first day of such Current Year minus (2) the Base Release
Price of the Hotel to be released (or, if more than one Hotel Property is
to be released, the aggregate Base Release Prices of such Hotel
Properties), and the denominator of which is the aggregate outstanding
principal amount of the Multistate Advances and the California Advances on
the first day of such Current Year.
"Current Year" means the four consecutive Tenant Accounting Quarters,
------------
ending with (and including) the Tenant Accounting Quarter most recently
completed at any time the Borrower gives the Agent notice requesting the
release of a Hotel Property under Section 4.02(a).
"Performance Operating Profit of the Remaining Hotels" means the
----------------------------------------------------
Performance Operating Profit of the Remaining Hotels for the Current Year.
-53-
<PAGE>
"Remaining Hotels" means the Hotels, excluding the Hotel included in
----------------
the Hotel Property then proposed to be released pursuant to Article IV (or,
if more than one Hotel Property is proposed to be released, the Hotels
included in such Hotel Properties).
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.01. Representations and Warranties of the Borrower.
----------------------------------------------
On and as of the Closing Date and, with respect to the provisions of
this Section 5.01 specified in the last sentence of this Section 5.01, on and as
of the first day of each Interest Period, the Borrower represents and warrants
as follows:
(a) (i) The Borrower (A) is a limited partnership duly
organized, validly existing and in good standing under the laws of the
State of Delaware, (B) is duly qualified and in good standing as a foreign
limited partnership in each other jurisdiction in which it owns or leases
property or in which the conduct of its business requires it to so qualify
or be licensed and (C) has all requisite power and authority to own or
lease and operate its properties and to carry on its business as now
conducted and as proposed to be conducted. The general partnership interest
of the Borrower has been validly issued, is fully paid and is owned free
and clear of all Liens. The entire general partnership interest in the
Borrower is owned solely by the General Partner. The Borrower has entered
into this Agreement for its partnership business purposes and has used the
proceeds of the 1988 Multistate Loans for the purposes provided in the 1988
Multistate Loan Agreement and the 1986 Multistate Loan Agreement.
(ii) The General Partner (A) is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation, (B) is duly qualified and in good standing as a foreign
corporation in each other jurisdiction in which it owns or leases property
or in which the conduct of its business requires it to so qualify or be
licensed, and (C) has all requisite corporate power and authority to own or
lease and operate its properties and to carry on its business as now
conducted and proposed to be conducted. All of the outstanding capital
stock of the General Partner has been validly issued, is fully paid and
nonassessable and is owned free and clear of all Liens.
(b) The General Partner is a wholly owned Subsidiary of Host
Marriott. The General Partner has no Subsidiaries.
(c) The execution, delivery and performance by the Borrower and
the General Partner of this Agreement, the Multistate Notes, each other
Multistate Loan Document and each Related Document to which it is or is to
be a party and the consummation of the transactions contemplated hereby are
within the Borrower's partnership powers and the General Partner's
corporate powers, have been duly authorized by (i) in the case of the
Borrower, all necessary action by and on behalf of the partners of the
Borrower and (ii) in the case of the General Partner, all necessary
corporate action, and do not (A) in the case of the Borrower, contravene
any of the terms, conditions or provisions of the Partnership Documents,
(B) in the case of the General Partner, contravene the General Partner's
charter or by-laws, (C) violate any law (including, without limitation, the
Securities Exchange Act of 1934 and the Racketeer Influenced and Corrupt
Organizations Chapter of the Organized Crime Control Act of 1970), rule,
regulation (including, without limitation, Regulation X of the Board of
Governors of the
-54-
<PAGE>
Federal Reserve System), order, writ, judgment, injunction, decree,
determination, award, franchise or permit binding on or affecting the
Borrower or the General Partner or any of their properties, (D) conflict
with or result in the breach of, or constitute a default under, any
contract, loan agreement, deed of trust, lease or other instrument binding
on or affecting the Borrower or the General Partner or any of their
properties or (E) except for the Liens created by the Multistate Collateral
Documents and the California Collateral Documents, result in or require the
creation or imposition of any Lien upon or with respect to any of the
properties of the Borrower or the General Partner. Neither the Borrower nor
the General Partner is in violation of any such law, rule, regulation,
order, writ, judgment, injunction, decree, determination, award, franchise
or permit or in breach of any such contract, loan agreement, indenture,
mortgage, deed of trust, lease or other instrument the violation or breach
of which would be reasonably likely to have a Borrower Material Adverse
Effect.
(d) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body or
any other third party (including, without limitation, any or all of the
partners of the Borrower other than (x) the authorization of the Board of
Directors of the General Partner and (y) the General Partner's execution of
the Multistate Loan Documents and the Related Documents to which the
Borrower is or is to be a party, on the Borrower's behalf) is required for
(i) the due execution, delivery, recordation, filing or performance by the
Borrower or the General Partner of this Agreement, the Multistate Notes,
any other Multistate Loan Document or any Related Document to which the
Borrower or the General Partner is or is to be a party, or for the
consummation of the transactions contemplated hereby, (ii) the grant by the
Borrower of the Liens granted by it pursuant to the Multistate Collateral
Documents, (iii) the perfection or maintenance of the Liens in all property
of the Borrower created by the Multistate Collateral Documents (including
the validity thereof, and the respective first priority and second priority
nature thereof specified in the Multistate Collateral Documents) to which
the Borrower is or is to be a party or (iv) the exercise by the Agent or
any Lender of its rights under the Multistate Loan Documents to which the
Borrower or the General Partner is or is to be a party or the remedies in
respect of the Multistate Collateral that constitutes property of the
Borrower pursuant to the Multistate Collateral Documents to which the
Borrower is or is to be a party, except for (A) the authorizations,
approvals, actions, notices and filings to be accomplished under Article
III hereof, all of which have been duly obtained, taken, given or made and
are in full force and effect and (B) such approvals of courts and trustees
(excluding trustees for any trusts that are party to any Multistate
Mortgage or other Multistate Collateral Document) as may be necessary under
applicable state law for the Agent or any Lender to foreclose on certain
Multistate Collateral. All applicable waiting periods in connection with
the transactions contemplated hereby have expired without any action having
been taken by any competent authority restraining, preventing or imposing
materially adverse conditions upon the rights of the Borrower or the
General Partner freely to transfer or otherwise dispose of, or to create
any Lien on, any properties now owned or hereafter acquired by any of them.
(e) This Agreement has been, and each of the Multistate Notes and
each other Multistate Loan Document and Related Document to which the
Borrower or the General Partner is or is to be a party when delivered
hereunder will have been, duly executed and delivered by the Borrower or
the General Partner, as applicable. This Agreement is, and each of the
Multistate Notes and each other Multistate Loan Document and Related
Document to which the Borrower or the General Partner is or is to be a
party when delivered hereunder will be, the legal, valid and binding
obligation of the Borrower or the General Partner, as applicable,
enforceable against such Loan Party in accordance with its terms.
-55-
<PAGE>
(f) The balance sheet of the Borrower as at December 31, 1992,
and the related statement of income and cash flows of the Borrower for the
Borrower Fiscal Year then ended, accompanied by an opinion of Arthur
Andersen & Co., independent public accountants, the unaudited balance sheet
of the Borrower as at September 10, 1993, and the related unaudited
statement of income and cash flows of the Borrower for the year-to-date
period then ended, duly certified by an Authorized Accounting Officer,
copies of which have been furnished to each Lender, fairly present,
subject, in the case of said balance sheet as at September 10, 1993, and
said statement of income and cash flows for the year-to-date period then
ended, to year-end audit adjustments, the financial condition of the
Borrower as at such dates and the results of the operations of the Borrower
for the periods ended on such dates, all in accordance with generally
accepted accounting principles applied on a consistent basis, and since
December 31, 1992, there has been no Borrower Material Adverse Change.
(g) The forecasted income statements and cash flow statements of
the Borrower delivered to the Lenders pursuant to Section 3.01(k)(xxv)
(which are set forth on Schedule 5.01(g)) were prepared in good faith on
the basis of the assumptions stated therein, which assumptions were fair in
the light of conditions existing at the time of delivery of such forecasts,
and represented, at the time of delivery, the Borrower's good faith
estimate of its future financial performance.
(h) No information, exhibit or report furnished by or on behalf
of the Borrower or the General Partner to the Agent or any Lender in
connection with the negotiation of the Multistate Loan Documents or
pursuant to the terms of the Multistate Loan Documents contained any untrue
statement of a material fact or omitted to state a material fact necessary
to make the statements made therein not misleading.
(i) Except as set forth on Schedule 5.01(i), there is no action,
suit, investigation, litigation or proceeding affecting the Borrower or the
General Partner, including any Environmental Action, pending or, to the
Knowledge of the Borrower, threatened before any court, governmental agency
or arbitrator that (i) in the case of the Borrower, involves the
possibility of liability in excess of $1,000,000, (ii) could have a
Borrower Material Adverse Effect or (iii) purports to affect the legality,
validity or enforceability of this Agreement, any Multistate Note or any
other Multistate Loan Document or Related Document to which the Borrower or
the General Partner is or is to be a party or the consummation of the
transactions contemplated hereby.
(j) The Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying Margin Stock, and no
proceeds of any Multistate Advances (including the 1988 Multistate Loans)
have been used to purchase or carry any Margin Stock or to extend credit to
others for the purpose of purchasing or carrying any Margin Stock. Neither
the Borrower nor any agent acting on its behalf has taken or will take any
action that might cause this Agreement or the Multistate Notes to violate
Regulation U or Regulation X (as in effect from time to time) of the Board
of Governors of the Federal Reserve System or any other margin regulation
of the Board of Governors of the Federal Reserve System promulgated or
amended after the Closing Date that is applicable to any Lender and of
which the Agent, prior to any time this representation is made or deemed
made, shall have notified the Borrower.
(k) No proceeds of any Multistate Advances (including the 1988
Multistate Loans) have been used to acquire any equity security of a class
registered pursuant to Section 12 of the Securities Exchange Act of 1934.
(l) The Borrower does not own any Margin Stock.
-56-
<PAGE>
(m) Neither the Borrower nor any of its ERISA Affiliates has
any Plans, Multiemployer Plans, Multiple Employer Plans or Welfare Plans.
(n) None of the business or properties (including the Hotel
Properties) of the Borrower or the General Partner is affected by any fire,
explosion, accident, strike, lockout or other labor dispute, drought,
storm, hail, earthquake, embargo, act of God or of the public enemy or
other casualty (whether or not covered by insurance) that would be
reasonably likely to have a Borrower Material Adverse Effect.
(o) (i) The Hotel Properties and the other operations and
properties of the Borrower comply in all material respects with all
applicable Environmental Laws, all necessary Environmental Permits have
been obtained and are in effect for the operations and properties of the
Borrower (including Hotel Properties), the Borrower is in compliance in all
material respects with all such Environmental Permits and no circumstances
exist that could reasonably be expected to (A) form the basis of an
Environmental Action against the Borrower or the General Partner or any of
the properties described in the Multistate Mortgages that could have a
Borrower Material Adverse Effect or (B) cause any such property to be
subject to any restrictions on ownership, occupancy, use or transferability
under any Environmental Law.
(ii) The Hotel Properties are in compliance in all material
respects with all other Real Property Laws, and the Borrower and all of the
Borrower's other properties are in compliance in all material respects with
all requirements of law and all applicable rules and regulations of each
Governmental Authority.
(p) None of the Hotel Properties or any of the other properties
of the Borrower is listed or proposed for listing on the National
Priorities List under CERCLA or on the Comprehensive Environmental
Response, Compensation and Liability Information System maintained by the
Environmental Protection Agency or any analogous state list of sites
requiring investigation or cleanup, and no underground storage tanks, as
such term is defined in 42 U.S.C. (S) 6991, are located on any property of
the Borrower.
(q) Except as set forth on Schedule 5.01(q), neither the
Borrower nor the General Partner has transported or arranged for the
transportation of any Hazardous Materials to any location that is listed or
proposed for listing on the National Priorities List under CERCLA,
Hazardous Materials have not been generated, used, treated, handled, stored
or disposed of on, or released or transported to or from, any property
described in the Multistate Mortgages or, to the Borrower's Knowledge, any
adjoining property, except in quantities required in connection with the
normal operation and maintenance of such properties and used or stored at
such properties in compliance with all applicable Environmental Laws and
Environmental Permits, and all other wastes generated at any such
properties have been disposed of in compliance with all applicable
Environmental Laws and applicable Environmental Permits.
(r) Neither the Borrower nor the General Partner is a party to
or otherwise bound by any contract, loan agreement, indenture, mortgage,
deed of trust, lease or other instrument or subject to any other
restriction or any judgment, order, writ, injunction, decree,
determination, award, law, rule or regulation or subject to any charter or
corporate or partnership restriction that would be reasonably likely to
have a Borrower Material Adverse Effect.
(s) Each of the Borrower and the General Partner has filed,
caused to be filed or has been included in all tax returns (federal, state,
local and foreign) that are required to be filed and has paid all taxes
shown thereon to be due, together with
-57-
<PAGE>
applicable interest and penalties or pursuant to any assessment or notice
of tax claim or deficiency received by it. All tax liabilities of the
Borrower and the General Partner were adequately provided for at the end of
the most recent Fiscal Year of such Loan Party and are now so provided for
on the books of such Loan Party.
(t) Set forth on Schedule 5.01(t) hereto 1s a complete and
accurate list, as of the date hereof, of each taxable year of the Borrower
and the General Partner for which federal income tax returns have been
filed and for which the expiration of the applicable statute of limitations
for assessment or collection has not occurred by reason of extension or
otherwise (an "Open Year").
---------
(u) There are no unpaid amounts, as of the date hereof, of
adjustments proposed by the Internal Revenue Service to the federal income
tax liability of the Borrower with respect to Open Years. No issues have
been raised by the Internal Revenue Service in respect of Open Years that,
in the aggregate, could have a Borrower Material Adverse Effect.
(v) There are no unpaid amounts, as of the date hereof, of
adjustments to the state, local and foreign tax liability of the Borrower
proposed by any state, local or foreign taxing authorities (other than
amounts arising from adjustments to federal income tax returns). No issues
have been raised by such taxing authorities that, in the aggregate, could
have a Borrower Material Adverse Effect.
(w) Neither the Borrower nor the General Partner is an
"investment company,- or an "affiliated person" of, or "promoter. or
"principal underwriter. for, an "investment company", as such terms are
defined in the Investment Company Act of 1940, as amended. Neither the
making or maintaining of the Multistate Advances, nor the application of
the proceeds thereof by the Borrower nor the consummation of the other
transactions contemplated hereby, will violate any provision of such Act or
any rule, regulation or order of the Securities and Exchange Commission
thereunder.
(x) The Borrower is Solvent. The General Partner (i) is Solvent
and (ii) was Solvent immediately prior to, and immediately after giving
effect to, the Reorganization.
(y) Except as reflected in the Financial Statements furnished by
the Borrower pursuant to Section 3.01(k)(xxv), the Borrower has not applied
any of its funds as a distribution to its partners.
(z) Schedule 5.01(z) completely and accurately sets forth for
each Mortgaged Interest (i) whether it is a Fee Interest, a Leasehold
Interest or both and (ii) if it is a Leasehold Interest, the name of the
Ground Lessor.
(aa) The Borrower has (i) with respect to all the Hotel
Properties, (A) good and marketable title to each Hotel Property (excluding
any Land leased to the Borrower under a Ground Lease) and (B) good and
indefeasible title to the leasehold estate governed by each Ground Lease,
in each case referred to in this clause (i) subject only to the Permitted
Liens and free and clear of all Liens other than the Permitted Liens, and
(ii) good title to the FF&E (or, in the case of FF&E permitted hereunder to
be leased to the Borrower, a good and valid leasehold interest in such FF&E
subject to the interests of the lessors thereof in such FF&E) and all other
properties reflected in the most recent Financial Statements, or acquired
by the Borrower after the date of such Financial Statements (excluding,
however, personal property sold or otherwise disposed of in the ordinary
course of business of the Borrower after such date and in accordance with
the
-58-
<PAGE>
provisions of the Multistate Loan Documents), in each case referred to
in this clause (ii) free and clear of all Liens other than Liens created by
the Multistate Collateral Documents and the California Collateral
Documents. Except for the Multistate Loan Documents and the California Loan
Documents, none of the Hotel Properties, leasehold estates and fee
interests of the Borrower in any Hotel Property or any other properties of
the Borrower described above are subject to any agreement obligating the
Borrower to grant or otherwise place a Lien on, or sell and lease back,
such Hotel Properties, leasehold estates and other properties. In addition,
there is not on file in any public office, and the Borrower has not signed
or authorized any Person to sign on its behalf, any financing statement
naming the Borrower as debtor except for (x) financing statements in favor
of the Agent, (y) financing statements (none of which relate to Liens on
the Multistate Collateral other than the Purchase Agreement and the
Multistate Collateral described in Section l(c)(iii) and Section l(c)(vi)
of the Multistate Security Agreement) securing the obligations of the
Borrower under the Connecticut Hotel Documents and (z) financing statements
in favor of the equipment lessors under certain of the FF&E Leases and
Telephone Leases covering the FF&E, telephones and other telecommunications
systems and equipment leased thereunder. Schedule 5.01(aa) accurately
describes each Courtyard by Marriott hotel (other than the Connecticut
Hotel) owned by the Borrower and the Land on which each such hotel is
located. The Borrower does not own or lease any real property other than
the Motel Properties, the Connecticut Hotel and the land on which the
Connecticut Hotel is located.
(bb) None of the properties of the Borrower is held by the
Borrower as lessee under any lease, or as conditional vendee under any
conditional sales contract or other title retention agreement, except as
disclosed in the Financial Statements referred to in Section 5.01(f) and
except for the properties subject to the Ground Leases, the FF&E Leases,
the TV System Leases, the Telephone Leases and the Computer Leases.
(cc) No proceedings are pending or, to the Borrower's Knowledge,
threatened with respect to the revocation or suspension of any material
permits, licenses and approvals issued with respect to the Hotel Properties
and such permits, licenses and approvals shall not be altered or amended,
nor shall the Borrower make any attempt to alter or amend the same, in any
material respect, without the prior written consent of the Lenders.
(dd) To the Borrower's Knowledge, there is no note or notice in
any municipal or other public department that any of the Hotel Properties
violate or do not comply with any Real Property Laws.
(ee) There is no fact Known to the Borrower that has a Material
Adverse Effect that has not been set forth in this Agreement or the
Memorandum or in other documents, certificates and Financial Statements
furnished to the Lenders by or on behalf of the Borrower in connection with
the transactions contemplated hereby.
(ff) Set forth on Schedule 5.01(ff) hereto is a complete and
accurate list of all Material Contracts of the Borrower relating directly
or indirectly to the Hotels showing, in each case, as of the date hereof
the parties, subject matter and terms thereof. Each such Material Contract
has been duly authorized, executed and delivered by all parties thereto,
has not been amended or otherwise modified, is in full force and effect and
is binding upon and enforceable against the Borrower in accordance with its
terms and, to the Borrower's Knowledge, there exists no default under any
Material Contract by any party thereto.
(gg) The Borrower has paid the Deferred Payment Note in full,
including all interest due on the principal amount thereof.
-59-
<PAGE>
(hh) None of the International Ground Leases has been amended
since its respective date of execution except for the Ground Lease
Amendments and except as set forth on Schedule 5.01(hh).
(ii) The Borrower has disclosed to the Agent in connection with
the calculation of the Initial Excess Cash Amount and the other payments
and transfers of funds to be made by the Borrower on the Closing Date the
full amount and the nature of all cash, Cash Equivalents and other
investments in which the Borrower has a legal or beneficial interest,
including, to the Knowledge of the Borrower, all cash, Cash Equivalents and
other investments held by CMC and Marriott International for the Borrower
(including in accounts under their respective control) and all other
amounts held by CMC and Marriott International in connection with the
management of the Hotels by CMC under the 1986 Management Agreement and the
Hotel Lease.
(jj) The Borrower has provided to the Agent for each Land Trust
true and complete copies of the land trust agreements, deeds in trust,
trust agreements, assignments of lease and other documents setting forth
the agreement of any or all of the parties thereto with respect to the Land
Trusts and the property of such Land Trusts. There are no other trust
arrangements in effect under which the Borrower has conveyed to another
Person in trust the Borrower's interest in all or part of any Hotel
Property or any other assets of the Borrower subject or purported to be
subject to any Lien pursuant to the Multistate Collateral Documents.
(kk) To the Knowledge of the Borrower, there exists no event
occurring or continuing, or resulting from the transactions contemplated by
this Agreement, that constitutes a Default.
On the first day of each Interest Period (without the execution or delivery of
any written instrument) the Borrower shall be deemed to have made the
representations and warranties set forth in Sections 5.01(8), 5.01(b), 5.01(c)
(up to clause 5.01(c)(A)), 5.01(e), 5.01(j), 5.01(k), 5.01(1), 5.01(m) and
5.01(w) on and as of such day.
ARTICLE VI
COVENANTS OF THE BORROWER
SECTION 6.01. Affirmative Covenants.
---------------------
So long as any Multistate Advance shall remain unpaid, the Borrower
will, unless the Required Lenders shall otherwise consent in writing:
(a) Compliance with Laws, Etc. Comply in all material respects
-------------------------
with all applicable laws, rules, regulations and orders, such compliance to
include, without limitation, compliance with all Real Property Laws, ERISA
and the Racketeer Influenced and Corrupt Organizations Chapter of the
Organized Crime Control Act of 1970.
(b) Payment of Taxes, Etc. Pay and discharge before the same
---------------------
shall become delinquent (i) all taxes, assessments and governmental charges
or levies imposed upon it or upon its property, and (ii) all lawful claims
that, if unpaid, might by law become a Lien upon its property; provided,
however, that the Borrower shall not be required to pay or discharge any
such tax, assessment, charge, levy or claim that is being contested in good
faith and by proper proceedings and as to which appropriate reserves are
being
-60-
<PAGE>
maintained, unless and until any Lien resulting therefrom attaches to
its property and becomes enforceable against its other creditors.
(c) Compliance with Environmental Laws. Comply, and cause all
----------------------------------
lessees and other Persons occupying its properties to comply, in all
material respects, with all Environmental Laws and Environmental Permits
applicable to its operations and properties; obtain and renew all
Environmental Permits necessary for its operations and properties; and
conduct, or cause to be conducted, any investigation, study, sampling and
testing required by all applicable Environmental Laws, and undertake any
cleanup, removal, remedial or other action required by all applicable
Environmental Laws, to remove and clean up all Hazardous Materials from any
of its properties, in accordance with all applicable Environmental Laws;
provided, however, that the Borrower shall not be required to undertake any
-------
such cleanup, removal, remedial or other action to the extent that its
obligation to do so is being contested in good faith and by proper
proceedings and appropriate reserves are being maintained with respect to
such circumstances.
(d) Insurance. Maintain insurance with responsible and reputable
---------
insurance companies or associations in such amounts and covering such risks
as are usually covered by companies engaged in similar businesses and
owning similar properties in the same general areas in which the Borrower
operates.
(e) Evidence of Hazard Insurance, Etc. (i) In furtherance (but
---------------------------------
not in limitation) of Section 6.01(d), (A) maintain, or, if the Borrower
should fail to maintain such insurance as is required herein, the Agent may
(but shall not be obligated to) with reasonable advance notice to Borrower
given the expiration date of the policies, procure at the Borrower's
expense, policies of "all risk" insurance and other hazard insurance
(including, without limitation, except with respect to coverage by reason
of earthquake in the State of California, building collapse), covering the
Hotels (including all Equipment and Inventory, whether or not located at
the Hotels) for their full replacement cost (exclusive of the costs of
excavation and foundation), as well as business interruption (with not less
than 12 months of coverage), loss of rent and extra expense forms of
insurance, and furnish to the Agent original certificates of insurance
evidencing such insurance and (B) maintain policies of liability insurance,
including bodily injury and property damage, workers' compensation and
employer's liability insurance and such other insurance as the Required
Lenders shall reasonably request, and furnish to the Agent original
certificates of insurance evidencing such insurance. Each policy referred
to in clause (B) shall provide for all losses to be paid on behalf of the
Agent and the Borrower as their interests may appear. Each policy referred
to in clause (A) shall provide for all losses and all moneys which may
become due and payable under any such policy to be paid directly to the
Agent except as and to the extent such losses may be paid directly to the
Borrower as set forth in the Section of the Multistate Mortgages titled
"Adjustment of Loss".
(ii) All policies or certificates referred to in clauses (i)(A)
and (i)(B) above shall (A) name the Borrower and the Agent (as mortgagee)
as insured parties or loss payees, as applicable, thereunder (without any
representation or warranty by or obligation upon the Agent), as their
interests may appear, (B) contain an agreement by the insurer that any loss
under policies for which the Agent is a loss payee shall be payable to the
Agent (excluding those that may be paid directly to the Borrower as set
forth in the Section of the Multistate Mortgages titled "Adjustment of
Loss") notwithstanding any action, inaction or breach of representation or
warranty by the Borrower, (C) provide that there shall be no recourse
against the Agent for payment of premiums or other amounts with respect
thereto, (D) contain the agreement of the insurer to give not less than
thirty (30) days' (or, in the case of nonpayment of premiums, twenty (20)
days') prior written notice to the Agent of a proposed policy cancellation,
(E) be issued by companies having a then
-61-
<PAGE>
current rating by the A.M. Best Co. of not less than "B+" (Policyholders'
Rating) and not less than "X" (Financial Size Category) and (F) be in form,
substance, and amounts reasonably satisfactory to the Required Lenders. To
the extent not otherwise expressly set forth in the certificates of
insurance, all cancellation notice provisions referred to in clause (D) of
the preceding sentence will be incorporated into each insurance policy by
an endorsement, copies of which will be provided to the Agent.
(iii) Insurance proceeds shall be applied as set forth in the
Multistate Security Agreement and the Multistate Mortgages.
(f) Preservation of Existence, Etc. Preserve and maintain its
------------------------------
limited partnership existence, rights (partnership agreement and statutory)
and franchises.
(g) Inspection Rights. At any reasonable time and from time to
-----------------
time on not less than five (5) Business Days' notice, and in the case of a
visit to a Hotel Property, unless an Event of Default shall have occurred
and be continuing, in no event more than one visit (which may last more
than one day) to such Hotel Property per year, permit the Agent or any
agents or representatives thereof to examine and make copies of and
abstracts from the records and books of account of, and visit the
properties of, the Borrower, and to discuss the affairs, finances and the
accounts of the Borrower with its officers, directors and other
representatives and with its independent certified public accountants.
Unless an Event of Default shall have occurred and be continuing or such
visit is made for the preparation or updating of appraisals required by
FIRREA (in which case the Borrower shall pay the costs and expenses of the
Agent and its representatives), the Agent shall pay its costs and expenses,
and the costs and expenses of its agents and representatives, in making
such visits.
(h) Keep Books; set Aside Reserves. Keep proper books of record
------------------------------
and account, in which full and correct entries shall be made of all
financial transactions and the assets and business of the Borrower in
accordance with generally accepted accounting principles in effect from
time to time, including the setting aside on its books its earnings for
each Borrower Fiscal Year and for each Borrower Fiscal Year thereafter,
adequate reserves for depreciation, obsolescence and/or amortization of its
properties during such year, and all other proper reserves that should be
set aside from such earnings in connection with its business.
(i) Maintenance of Properties, Etc. Maintain and preserve, or
------------------------------
cause to be maintained and preserved, all of its properties (including,
without limitation, all of the Hotel Properties) that are used or useful in
the conduct of its business in good working order and condition, and from
time to time make or cause to be made all needful repairs, renewals,
replacements and improvements so that the business carried on in connection
therewith may be properly and advantageously conducted at all times.
(j) Interest Rate Hedge. (i) Purchase, within sixty (60) days
-------------------
after the Closing Date, an interest rate cap for a notional amount equal to
$250,000,000 for the period ending on June 15, 1997 protecting the Borrower
against increases of three month LIBOR (as such term is commonly used in
the derivatives market) over 8.5% per annum and (ii) on the Payment Date
immediately following such purchase pay to the Agent, together with any
other amount due under Section 2.04(b)(i), an amount equal to 86.30604209%
of the difference between (x) S2,704,019.64 minus (y) the purchase price of
such cap, which amount shall be applied as set forth in Section 2.04(b)(i).
(k) Related Documents and Third Party Ground Leases. (i)
-----------------------------------------------
Perform and observe within all applicable notice and grace periods all of
the material terms and
-62-
<PAGE>
provisions of the Purchase Agreement and each Ground Lease to be performed
or observed by it, maintain the Purchase Agreement and each Ground Lease in
full force and effect, enforce the Purchase Agreement and each Ground Lease
(in each case other than any immaterial provisions thereof) in accordance
with its respective terms, take all action to such end as may be from time
to time reasonably requested by the Agent (including, upon the request of
the Agent, the exercise of such rights and remedies as are available to the
Borrower upon a default by the other party to the Purchase Agreement or
such Ground Lease in performing its obligations thereunder), not allow any
right to renew any Ground Lease to be forfeited or canceled, promptly
notify the Agent of any default by any party of any material provision of
any Ground Lease and, upon the reasonable request of the Agent, make to
Host Marriott and each Ground Lessor such demands and requests for
information and reports or for action as the Borrower is entitled to make
under the Purchase Agreement or any Ground Lease, as the case may be.
(ii) Perform and observe within all applicable notice and grace
periods all of the Material Terms of the Hotel Lease to be performed
or observed by it, maintain the Hotel Lease in full force and effect,
enforce the Hotel Lease in accordance with its terms, take all such
action to such end as may be from time to time reasonably requested by
the Agent (including, upon the request of the Agent, the exercise of
such rights and remedies as are available to the Borrower upon a
default by the Tenant in performing its obligations thereunder),
promptly notify the Agent of any default by the Borrower or the Tenant
of any provision of the Hotel Lease, upon the request of the Agent
exercise the Borrowers right to terminate the Hotel Lease under
Section 4.03 thereof, and, upon the reasonable request of the Agent,
make to the Tenant such demands and requests for information and
reports or for action as the Borrower is entitled to make under the
Hotel Lease; provided, however, that the Borrower shall not be
-------- -------
required to perform any term or provision of the Hotel Lease that
requires it to provide funds to the Tenant for so long as (A) the
Borrower shall be challenging in good faith its obligation to provide
such funds and (B) such challenge or non-provision of funds shall not
impair the value of the interest or rights of the Borrower thereunder
or impair the rights or interests of the Agent or any Lender. Without
limiting the preceding sentence, the Borrower will cause the Tenant to
contribute to the FF&E Reserve Account the amounts required to be
deposited therein from time to time by the Tenant pursuant to Section
8.02B of the Hotel Lease.
(l) Performance of Material Contracts. Perform and observe
---------------------------------
within all applicable notice and grace periods all of the material terms
and provisions of each Material Contract to be performed or observed by it,
maintain each such Material Contract in full force and effect, enforce each
such Material Contract (other than any immaterial provisions thereof) in
accordance with its terms, take all such action to such end as may be from
time to time reasonably requested by the Agent and, upon the reasonable
request of the Agent, make to each other party to each such Material
Contract such demands and requests for information and reports or for
action as the Borrower is entitled to make under such Material Contract.
(m) Transactions with Affiliates. Except for the transactions
----------------------------
conducted pursuant to the terms of the Hotel Lease and the terms of the
other agreements listed on Schedule 6.01(m), conduct all transactions
governed by written contracts and otherwise permitted under the Multistate
Loan Documents with any of its Affiliates on terms that are fair and
reasonable and no less favorable to the Borrower than it would obtain in a
comparable arm's length transaction with a Person not an Affiliate.
-63-
<PAGE>
(n) Maintenance of Borrowers Office. Maintain an office in
-------------------------------
Bethesda, Maryland (or such other place in the United States of America as
the Borrower shall designate in writing to the Agent upon at least thirty
(30) days' prior written notice) where notices and demands to or upon the
Borrower in respect of the Multistate Loan Documents may be given or made.
(o) Continuous Operations, Etc. (i) Conduct continuously and
--------------------------
operate actively its business (subject to temporary cessation of, or other
limitations on, its activities due to strikes, lockouts, casualties, acts
of God, war, governmental regulation or control, or other causes beyond the
reasonable control of the Borrower, provided prompt written notice thereof
--------
is given to the Lenders); (ii) keep in full force and effect and existence
all rights, licenses, permits, franchises and certificates required for and
material to the use or operation of the Hotel Properties (including all
amenities), and provided that the Borrower shall not terminate, allow to
--------
terminate or allow to lapse any rights, licenses, permits, franchises or
certificates the termination or lapse of which would be reasonably likely
to result in a decrease in the Operating Profit of a Hotel; and (iii) make
all such reports and pay all such franchise and other taxes and license
fees, and do all such other things as lawfully may be required, to maintain
all such rights, licenses, powers and franchises under the laws of the
United States and of the states or jurisdictions in which it is organized
or does business.
(p) Standard of Operations. Operate continuously, or cause to be
----------------------
operated continuously, each of the Hotels as a "Courtyard by Marriott"
hotel in accordance with the standards established by Marriott
International with respect to its Courtyard by Marriott hotels; provided
--------
that if the Borrower or Tenant loses the right to operate the Hotels as
"Courtyard by Marriott" hotels (i) the Borrower shall operate continuously
each of the Hotels under the trade name by which the Hotels shall be known
following any such event in accordance with the standards established by
the owner of such tradename with respect to the hotels of such name owned
or operated by it or, if the owner of such trade name does not own or
operate any such hotels, in accordance with the standards otherwise
established by the owner for the use of such name and (ii) in any such
event the Borrower shall operate each of the Hotels in accordance with the
standards at least as high as those employed by CMC on the Closing Date
with respect to the Hotels and to any other Courtyard by Marriott hotels
CMC manages on the Closing Date.
(q) Restrictive Covenants. Comply in all material respects with
---------------------
all covenants, conditions and restrictions affecting the Hotel Properties
unless the Lenders are insured against loss, in a form satisfactory to
Agent, for such noncompliance in the applicable policy of title insurance
issued in favor of the Lenders.
(r) Easements. (i) Submit to the Agent for approval, prior to the
---------
execution thereof, all proposed easements (including those described in
clause (a) of the definition of Permitted Liens) benefiting or affecting
any Hotel Property and (ii) cause to be deposited in the Borrower Operating
Account immediately upon the Borrowers receipt thereof, the Net Cash
Proceeds, if any, paid to the Borrower in consideration of the execution of
each easement; provided, However, that the Agent's approval shall not be
-------- -------
required for the execution of any easement benefiting or serving a Hotel
Property that does not, and will not, render title to the property
encumbered thereby unmarketable, materially adversely affect the use of
such property for its present purposes or, individually or combined with
all other easements benefiting or burdening the Hotel Properties, have a
Material Adverse Effect if the Borrower delivers to the Agent at least ten
(10) days before the execution of such easement a copy of the easement.
-64-
<PAGE>
(s) Deferral of Ground Rent. Defer, or cause to be deferred,
-----------------------
from time to time through the Scheduled Maturity Date (or, if the Scheduled
Maturity Date is not a Business Day, through the Business Day immediately
following the Scheduled Maturity Date) rent payable under the International
Ground Leases, as and to the extent necessary to enable the Borrower to pay
principal, interest and its other Obligations under the Combined Loan
Documents when due and payable under the Combined Loan Documents and to
enable the Borrower to pay Partnership Costs when due and payable.
(t) UCC Search Reports. As promptly as practicable after the
------------------
Closing Date, furnish to the Agent completed requests for information
listing the financing statements referred to in Sections 3.01(k)(x)(A) and
all other effective financing statements filed in the jurisdictions
referred to therein that name the Borrower as debtor, together with copies
of such financing statements.
(u) Compliance by Land Trusts. Direct, and use its commercially
reasonable best efforts to cause, each Land Trust to comply, with respect
to such Land Trust's interest in any property or assets, with the
Borrower's covenants and other obligations under the Multistate Loan
Documents.
SECTION 6.02. Negative Covenants.
------------------
So long as any Multistate Advance shall remain unpaid, the Borrower
will not, at any time, without the written consent of the Required Lenders or,
if required under Section 9.01, of all of the Lenders (which consent in the case
of Section 6.02(i) will not be unreasonably withheld):
(a) Liens, Etc. (i) Create, incur, assume or suffer to exist
----------
any Lien on or with respect to any of its properties of any character
(including, without limitation, accounts) whether now owned or hereafter
acquired, (ii) acquire or agree to acquire any property subject to any
Lien, (iii) sign or file under the Uniform Commercial Code of any
jurisdiction, a financing statement that names the Borrower as debtor, or
sign any security agreement authorizing any secured party thereunder to
file such financing statement, or (iv) assign any accounts or other right
to receive income, excluding, however, from the operation of the foregoing
--------- -------
restrictions the following:
(A) Liens created by the Multistate Loan Documents and the
California Loan Documents;
(B) Permitted Liens;
(C) Liens created by or resulting from any legal
proceedings (including legal proceedings instituted by the
Borrower) which are being contested in good faith by appropriate
proceedings, including appeals of judgments as to which a stay of
execution shall have been issued and adequate reserves shall have
been established, provided that the aggregate Obligations secured
--------
thereby and claimed to be secured thereby shall not exceed
$5,000,000 at any time outstanding;
(D) Liens on the Connecticut Hotel and the other assets of
the Borrower on which Liens have been granted by the Borrower
pursuant to the Connecticut Hotel Documents securing Indebtedness
of the Borrower permitted under Section 6.02(b)(ix) (none of
which Liens shall be on any Multistate Collateral except for the
Purchase Agreement and the Multistate
-65-
<PAGE>
Collateral described in Section l(c)(iii) of the Multistate
Security Agreement); and
(E) Liens in favor of the equipment lessors under the
Telephone Leases, Computer Leases, TV System Leases and FF&E
Leases permitted under Section 6.02(b) on the equipment leased
under such leases and securing the Indebtedness thereunder of the
Borrower or the Tenant to the respective lessors.
(b) Indebtedness. Create, incur, assume or suffer to exist any
------------
Indebtedness other than:
(i) Indebtedness under the Multistate Loan Documents and
the California Loan Documents;
(ii) Indebtedness in respect of taxes, assessments and
governmental charges or levies and claims as and to the extent
permitted to remain unpaid and undischarged by Section 6.01(b);
(iii) Indebtedness for the deferred purchase price of
property or services secured by Liens described in clause (b)(ii) of
the definition of Permitted Liens;
(iv) Indebtedness secured by Liens specifically permitted
by paragraph (C) of Section 6.02(a);
(v) Unsecured Indebtedness to Host Marriott, arising by
reason of payment by Host Marriott of any amounts pursuant to the Debt
Service Guaranty which Indebtedness, if any, will be evidenced by the
Host Subordinated Notes and subject to the Subordination Agreement;
(vi) Unsecured Indebtedness to Marriott International,
arising by reason of payment by Marriott International of any amounts
pursuant to the Backup Debt Service Guaranty, the Debt and Tenant
Change Guaranty, and the MI Guaranty, which Indebtedness, if any, will
be evidenced by the International Subordinated Notes and subject to
the subordination Agreement;
(vii) Unsecured Indebtedness aggregating not more than
$20,000,000 at any time outstanding to Host Marriott, Marriott
International and the General Partner in addition to the unsecured
Indebtedness described in Section 6.02(b)(v) and Section 6.02(b)(vi)
which additional unsecured Indebtedness will be subject to the
Subordination Agreement; provided that for purposes of determining
--------
whether the Borrower is in compliance with the dollar limitation set
forth in this Section 6.02(b)(vii) there shall not be included in the
calculation of the Indebtedness described in this Section 6.02(b)(vii)
the liability accounting for rent due from the Borrower to the
International Ground Lessors as required by GAAP);
(viii) Unsecured Indebtedness to the Tenant arising by
reason of payment by the Tenant of any amounts pursuant to Section
5.05 of the Hotel Lease, which additional unsecured Indebtedness will
be subject to the Subordination Agreement;
(ix) Indebtedness under the Connecticut Hotel Documents;
-66-
<PAGE>
(x) Endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business;
(xi) The Telephone Leases;
(xii) The Computer Leases, the FF&E Leases and the TV
System Leases; and
(xiii) Other unsecured Indebtedness not referred to in
Section 6.02(b)(i) through Section 6.02(b)(xii) above and to Persons
other than the Loan Parties and their Affiliates, which Indebtedness
shall not exceed, in the aggregate, $10,000,000 nor have maturity
dates prior to the Scheduled Maturity Date.
(c) Lease Obligations. (i) Create, incur, assume or suffer to
exist any obligations as lessee (A) for the rental or hire of real or
personal property in connection with any sale and leaseback transaction
other than the FF&E Leases and leases relating to the Connecticut Hotel, or
(B) for the rental or hire of other real or personal property of any kind
under leases or agreements to lease (including Capitalized Leases) other
than (1) the Ground Leases, (2) the FF&E Leases (provided that the fair
---------
market value of the FF&E relating to each Hotel and leased to the Borrower
or Tenant cannot exceed at any time $200,000 in respect of such Hotel), the
TV System Leases, the Telephone Leases and the Computer Leases, (3) leases
of motor vehicles for use in connection with the operation of the Hotels
and (4) leases relating to the Connecticut Hotel.
(ii) Create, incur, assume or suffer to exist any
obligations as lessor (A) for the rental or hire of real or personal
property in connection with any sale and leaseback transaction or (B)
for the rental or hire of other real or personal property of any kind
under leases or agreements to lease (including Capitalized Leases)
other than (1) the Hotel Lease and (2) leases relating to the
Connecticut Hotel.
(d) Mergers. Merge or consolidate with any Person or permit any
-------
Person to merge into it.
(e) Sales, Etc. of Assets. Sell, lease, transfer or otherwise
---------------------
dispose of any Multistate Collateral or any substantial part of its assets
(excluding the Connecticut Hotel and assets relating solely to or arising
solely out of the operation of the Connecticut Hotel) other than Multistate
Collateral, or grant any option or other right to purchase, lease or
otherwise acquire any Multistate Collateral other than Inventory to be sold
in the ordinary course of its business, except (i) sales of Inventory in
the ordinary course of its business, (ii) dispositions of Collateral
permitted by the Multistate Security Agreement and (iii) so long as no
Default shall occur and be continuing, the grant of any option or other
right to purchase any asset in a transaction which would be permitted under
the provisions of the preceding clauses (i) or (ii).
(f) Investments in Other Persons. Make or hold any Investment
----------------------------
in any Person other than Investments in Cash Equivalents.
(g) Distributions, Etc. Pay any distributions with respect to
------------------
any general or limited partnership interest, purchase, redeem, retire,
defease or otherwise acquire for value any general or limited partnership
interest or any warrants, rights or options to acquire general or limited
partnership interest, now or hereafter outstanding, return any capital to
its general or limited partners as such, make any distribution of assets,
partnership interests, warrants, rights, options, obligations or securities
to its general or
-67-
<PAGE>
limited partners as such or issue or sell any partnership interests or any
warrants, rights or options to acquire such partnership interests, except
------
that the Borrower may make distributions to its limited partners as such
and return capital to its limited partners as such in accordance with and
to the extent permitted by Section 6.02(r)(v).
(h) Change in Nature of Business. Engage in any business other
----------------------------
than the ownership, leasing and operation of the Hotels and the Connecticut
Hotel.
(i) Charter Amendments. Amend the Partnership Documents, except
------------------
to provide for the sale of additional limited partnership interests and as
required by law.
(j) Accounting Changes. Make or permit any change in accounting
------------------
policies or reporting practices of the Borrower, except as required by
generally accepted accounting principles (including as interpreted by the
Financial Accounting Standards Board) and as required by law.
(k) Prepayments, Etc. of Indebtedness. Prepay, redeem,
---------------------------------
purchase, defease or otherwise satisfy prior to the scheduled maturity
thereof in any manner, or make any payment in violation of any
subordination terms of, any Indebtedness, other than (i) the prepayment of
the Multistate Advances in accordance with the terms of this Agreement,
(ii) the prepayment of the California Advances in accordance with the terms
of the California Loan Agreement, (iii) the prepayment of the Host
Subordinated Notes, the International Subordinated Notes and the
Indebtedness to the Tenant described in Section 6.02(b)(viii) to the extent
permitted by Section 6.02(r)(ii) through Section 6.02(r)(iv) and the
Subordination Agreement, (iv) prepayments of other Indebtedness out of
funds retained by the Tenant pursuant to Section 5.03 of the Hotel Lease
(and consistent with Section 3 of the Attornment Agreement) to the extent
permitted by the Subordination Agreement and (v) regularly scheduled or
required repayments or redemptions of Indebtedness, or amend, modify or
change any term or condition of any Indebtedness that would or could change
the amount or time of any payment of such Indebtedness.
(l) Amendment, Etc. of Related Documents and Memoranda of
-----------------------------------------------------
Related Documents. (i) Cancel or terminate the Purchase Agreement or
-----------------
consent to or accept any cancellation or termination thereof, amend, modify
or change in any manner Section 3.18 thereof or any other material term or
condition of the Purchase Agreement or give any consent, waiver or approval
thereunder other than in respect of any immaterial term or condition
thereof, waive any default under or any breach of any material term or
condition of the Purchase Agreement, agree in any manner to any other
amendment, modification or change of any material term or condition of the
Purchase Agreement or take any other action in connection with the Purchase
Agreement that would impair the value of the interest or rights of the
Borrower thereunder or that would impair the rights or interests of the
Agent or any Lender. Without limiting the preceding sentence, the Borrower
will not amend, modify or change, or give any consent, waiver or approval
in respect of, or waive any default under or breach of, any term or
condition of the Purchase Agreement directly or indirectly affecting the
calculation or timing of any amount payable to or by the Borrower
thereunder.
(ii) Cancel or terminate any Ground Lease or consent to or
accept any cancellation or termination thereof, amend, modify or change in
any manner any material term or condition of any Ground Lease or give any
consent, waiver or approval thereunder other than in respect of any
immaterial term or condition thereof, waive any default under or any breach
of any material term or condition or any Ground Lease, agree in any manner
to any other amendment, modification or change of any material term or
condition of any Ground Lease or take any other action in connection with
any Ground Lease that would
-68-
<PAGE>
impair the value of the interest or rights of the Borrower thereunder or
that would impair the rights or interests of the Agent or any Lender.
Without limiting the Preceding sentence, the Borrower will not amend,
modify or change, or give any consent, waiver or approval in respect of, or
waive any default under or breach of, any term or condition of any Ground
Lease directly or indirectly affecting the calculation or timing of any
amount payable to or by the Borrower thereunder or the right of the
Borrower to defer the payment of rent thereunder.
(iii) Cancel or terminate the Hotel Lease or consent to or
accept any cancellation or termination thereof, amend, modify or change in
any manner any Material Term or condition of the Hotel Lease or give any
consent, waiver or approval under any Material Term of the Hotel Lease
(excluding approvals of budgets and such other financial reports that the
Hotel Lease expressly provides the Borrower has the right to give in the
ordinary course of the Hotel Lease), waive any default under or any breach
of any Material Term of the Hotel Lease, agree in any manner to any other
amendment, modification or change of any term or condition of the Hotel
Lease or take any other action in connection with any Hotel Lease that
would impair the value of the interest or rights of the Borrower thereunder
or that would impair the rights or interests of the Agent or any Lender
except as permitted by the Attornment Agreement.
(iv) Cancel or terminate any Memorandum of Ground Lease or
consent to or accept any cancellation or termination thereof, amend, modify
or change in any manner any Memorandum of Ground Lease (other than
technical corrections to any Memorandum of Ground Lease that would not
impair the rights or interests of the Agent or any Lender), agree in any
manner to any other amendment, modification or change of any term or
condition of any Memorandum of Ground Lease or take any other action in
connection with any Memorandum of Ground Lease that would impair the rights
or interests of the Agent or any Lender.
(m) Amendment, Etc. of Material Contracts. Take any action in
-------------------------------------
connection with any Material Contract that would have a Material Adverse
Effect.
(n) Negative Pledge. Enter into or suffer to exist any
---------------
agreement prohibiting or conditioning the creation or assumption of any
Lien upon any of its property or assets other than any such agreement in
favor of the Agent and the Lenders and the Connecticut Hotel Documents.
(o) Partnerships. Become a general partner in any general or
------------
limited partnership.
(p) FF&E Reserve. Cause or permit any part of the FF&E Reserve
------------
to be used for any purpose other than as described in Section 8.02(A) of
the Hotel Lease.
(q) Partnership Costs. (i) Incur during any Tenant Fiscal Year
-----------------
Partnership Costs in excess of (A) for the Tenant Fiscal Year ending
December 31, 1994, $250,000 and (B) for each Tenant Fiscal Year thereafter,
the product of (1) $250,000 and (2) the CPI Adjustment Factor.
(ii) Incur during any Cumulative Tenant Period Partnership
Costs except to the extent that (A) Adjusted Operating Profit for such
Cumulative Tenant Period exceeds (B) (1) the amount of principal, interest
and other Obligations of the Borrower under the Combined Loan Documents due
and payable by the Borrower during such Cumulative Tenant Period pursuant
to the Combined Loan Documents (excluding (w) payments of principal and
interest due pursuant to Section 2.04(b)(i) hereof and of the
-69-
<PAGE>
California Loan Agreement, (X) payments of principal and interest made
pursuant to Article IV of this Agreement and the California Loan Agreement
in connection with the release of a Hotel Property, (y) during the second
Cumulative Tenant Period hereunder, the amount described in clause (iv) of
the definition of "Excess Earnings Recapture-) and (z) to the extent not
included in (X), payments made to the Agent of proceeds of sales of
Multistate Collateral to the extent such proceeds are not included in Gross
Revenues and (2) the amount of principal, interest and other Obligations of
the Borrower under the Combined Loan Documents due and payable by the
Borrower during prior Cumulative Tenant Periods to the extent not
previously paid.
(r) Payment of Current Ground Rent Host Subordinated Notes,
-------------------------------------------------------
International Subordinated Notes, Deferred Ground Rent, Certain Amounts to
--------------------------------------------------------------------------
Tenant and Distributions to Partners. Pay or permit the payment of during
------------------------------------
any Cumulative Tenant Period (including during Cumulative Tenant Periods
for which the Payment Date has not yet occurred):
(i) Current Ground Rent except in an amount not in
excess of the amount by which (A) Adjusted Operating Profit for such
Cumulative Tenant Period exceeds (B) the sum of (1) the amount of
principal, interest and other Obligations of the Borrower under the
Combined Loan Documents due and payable by the Borrower during such
Cumulative Tenant Period pursuant to the Combined Loan Documents
(excluding (w) payments of principal and interest due pursuant to
Section 2.04(b)(i) hereof and of the California Loan Agreement, (x)
payments of principal and interest made pursuant to Article IV of this
Agreement and the California Loan Agreement in connection with the
release of a Hotel Property, (y) during the second Cumulative Tenant
Period hereunder, the amount described in clause (iv) of the
definition of "Excess Earnings Recapture" and (z) to the extent not
included in (x), payments made to the Agent of proceeds of sales of
Multistate Collateral to the extent such proceeds are not included in
Gross Revenues), (2) the amount of principal, interest and other
Obligations of the Borrower under the Combined Loan Documents due and
payable by the Borrower during prior Cumulative Tenant Periods to the
extent not previously paid and (3) Partnership Costs due and payable
during such Cumulative Tenant Period; provided that payments in excess
of those permitted under this Section 6.02(r)(i) of Current Ground
Rent as a result of incorrect projections by the Tenant or the
Borrower of Adjusted Operating Profit shall not constitute a breach of
this Section 6.02(r)(i) if such overpayments are repaid to the Agent
by the International Ground Lessors in accordance with Section 4.03(b)
of the International Ground Leases; and provided further that
notwithstanding the preceding provisions of this Section 6.02(r)(i)
the Borrower may pay (or permit the Tenant to pay on its behalf)
Current Ground Rent as and when due under the International Ground
Leases from and after the date following the Scheduled Maturity Date
(or, if the Scheduled Maturity Date does not occur on a Business Day,
from and after the expiration of the Business Day immediately
following the Scheduled maturity Date);
(ii) Deferred Ground Rent and any interest thereon except
in an amount not in excess of the amount of Excess Earnings Recapture,
if any, permitted to be retained by the Borrower for such Cumulative
Tenant Period pursuant to Section 2.04(b)(i) and except as permitted
by Section 5.06 of the Hotel Lease; provided that (A) payments of
interest shall be calculated at a rate not in excess of the rate
specified in the applicable International Ground Lease and (B) no
Event of Default shall have occurred and be continuing immediately
before and after giving effect to each such payment; and provided
--------
further that notwithstanding the preceding provisions of this Section
-------
6.02(r)(ii) the Borrower may pay (or permit the
-70-
<PAGE>
Tenant to pay on its behalf) Deferred Ground Rent and interest thereon
as and when due under the International Ground Leases from and after
the date following the Scheduled Maturity Date (or, if the Scheduled
Maturity Date does not occur on a Business Day, from and after the
expiration of the Business Day immediately following the Scheduled
Maturity Date);
(iii) Principal and interest on the Host Subordinated Notes
and the International Subordinated A Notes except in an amount not in
excess of the amount of Excess Earnings Recapture, if any, permitted
to be retained by the Borrower for such Cumulative Tenant Period
pursuant to Section 2.04(b)(i) and except as permitted by Section 5.06
of the Hotel Lease; provided that (A) payments of interest shall be
calculated at a rate not in excess of the rate specified in such
promissory notes, (B) Deferred Ground Rent and interest thereon shall
have been paid in full at the time of each such payment, and (C) no
Event of Default shall have occurred and be continuing immediately
before and after giving effect to each such payment;
(iv) Payments of principal and interest on the
International Subordinated Notes (other than the International
Subordinated A Notes), payments of principal and interest on the
Indebtedness to the Tenant described in Section 6.02(b)(viii) or
refunds of any Additional Rent (as defined in the Hotel Lease and
consistent with Section 3 of the Attornment Agreement) during any
Cumulative Tenant Period except in an amount not in excess of the
amount of Excess Earnings Recapture, if any, permitted to be retained
by the Borrower for such Cumulative Tenant Period pursuant to Section
2.04(b)(i) and except as permitted by Section 5.06 of the Hotel Lease;
provided that (A) payments of interest described above shall be
calculated at a rate not in excess of the rate specified in (as
applicable) the International Subordinated Notes or Section 5.05 of
the Hotel Lease, (B) each of (1) principal and interest on the Host
Subordinated Notes and the International Subordinated A Notes and (2)
Deferred Ground Rent and interest thereon shall have been paid in full
at the time of each such payment and (C) no Event of Default shall
have occurred and be continuing immediately before and after effect to
such payment; or
(v) Distributions to its limited partners as such or
returns of capital to its limited partners as such during any
Cumulative Tenant Period, in each case except in an amount not in
excess of the amount of Excess Earnings Recapture, if any, permitted
to be retained by the Borrower for such Cumulative Tenant Period
pursuant to Section 2.04(b)(i); provided that (A) each of (1)
--------
principal and interest on the Host Subordinated Notes and the
International Subordinated A Notes and (2) Deferred Ground Rent and
interest thereon shall have been paid in full at the time of each such
distribution or return of capital and (B) no Default shall have
occurred and be continuing immediately before or after giving effect
to each such distribution or return of capital.
SECTION 6.03. Reporting Requirements.
----------------------
So long as any Multistate Advance shall remain unpaid, the Borrower
will, unless the Required Lenders shall otherwise consent in writing, furnish to
the Agent for the benefit of the Lenders the financial statements, notices and
other items described below in this Section 6.03. Whenever any financial
statement, notice or other item shall be stated to be due on a day other than a
Business Day, such financial statement, notice or other item shall be due on the
nest succeeding Business Day. All financial statements relating to earnings and
expenses shall set forth
-71-
<PAGE>
separately or otherwise identify all extraordinary and non-recurring items to
the extent required by GAAP.
(a) Borrower Quarterly Financial Statements. As soon as practicable,
---------------------------------------
and in any event within seventy-five (75) days after the end of each
Borrower Accounting Quarter (other than the last Borrower Accounting
Quarter) in each Borrower Fiscal Year, an unaudited balance sheet of the
Borrower as at the end of such Borrower Accounting Quarter and an unaudited
statement of income and cash flow of the Borrower for each such Borrower
Accounting Quarter and for that part of the Borrower Fiscal Year then
ended, all in reasonable detail and satisfactory in scone to the Required
Lenders, setting forth in each case in comparative form the corresponding
figures for the corresponding period(s) of the preceding Borrower Fiscal
Year (except that the balance sheet shall be compared to the corresponding
figures for the preceding Borrower Fiscal Year), which statements shall, as
a whole, fairly present the financial position of the Borrower as at the
end of the periods involved and the results of the operations of the
Borrower for such periods, and which shall be certified by an Authorized
Accounting Officer as having been prepared under his or her supervision in
accordance with GAAP, subject to year-end audit adjustments, and that he or
she knows of no facts inconsistent with such Financial Statements, together
with a certificate of such Authorized Accounting Officer stating that no
Default has occurred and is continuing or, if a Default has occurred and is
continuing, a statement as to the nature thereof, the period of its
existence and the action that the Borrower has taken and proposes to take
with respect thereto.
(b) Quarterly Calculations of Excess Earnings Recapture. As soon as
---------------------------------------------------
practicable, and in any event on or before each Payment Date, (i) a
schedule in the form set forth as Schedule 6.03(b) of the computations used
by the Borrower in determining Excess Earnings Recapture for the most
recently ended Cumulative Tenant Period and the amount of principal of the
Combined Advances prepaid by the Borrower pursuant to Section 2.04(b) of
this Agreement and Section 2.04(b) of the California Loan Agreement on
account thereof and the payment of any unused Multistate Withheld Amount
pursuant to Section 2.04(b)(iv) and which shall be certified by an
Authorized Accounting Officer as having been prepared under his or her
supervision, (ii) a schedule in form satisfactory to the Agent, which shall
be certified by an Authorized Accounting Officer as having been prepared
under his or her supervision, showing, for the International Ground
Lessors, the repayments of Deferred Ground Rent and interest thereon during
the most recently ended Cumulative Tenant Period and the outstanding amount
of Deferred Ground Rent owing to such International Ground Lessors at the
end of such Cumulative Tenant Period and (iii) if the Borrower will be
withholding any Multistate Withheld Amount on such Payment Date pursuant to
Section 2.04(b)(iv), a schedule of the projections and computations used by
the Borrower supporting its need for and calculation of the Multistate
Withheld Amount, which shall be certified by an Authorized Accounting
Officer as having been prepared under his or her supervision. For the
schedule due on or before the May 1, 1994 Payment Date, the August 1, 1994
Payment Date and the November 1, 1994 Payment Date, such schedule shall
also set forth the Transaction Costs (as defined in the definition of
"Excess Earnings Recapture" paid by the Borrower after the Closing Date
during the Cumulative Tenant Period relating to such Payment Date.
(c) [Intentionally omitted]
(d) Borrower Annual Financial Statements. (i) As soon as practicable,
------------------------------------
and in any event within one hundred twenty (120) days after the end of each
Borrower Fiscal Year, a balance sheet of the Borrower as at the end of such
Borrower Fiscal Year and a statement of income, partners capital/deficit
and cash flow of the Borrower for such Borrower Fiscal Year, setting forth
in each case in comparative form the corresponding
-72-
<PAGE>
figures for the preceding Borrower Fiscal Year, prepared in accordance with
GAAP, together with (A) (1) an audit report and opinion in respect of such
Financial Statements of Arthur Andersen & Co. or other independent
certified public accountants of recognized national standing selected by
the Borrower and reasonably acceptable to the Required Lenders, which
report and opinion shall be unqualified as to the scope of the audit and
reasonably satisfactory to the Required Lenders in all other respects and
(2) the written statement of the accountants described in clause (1) that,
in making the examination necessary for their report and opinion on such
Financial Statements, they have obtained no knowledge of any condition,
event or act that constitutes a Default, or, if such accountants shall have
obtained such knowledge, a statement as to the nature and status thereof,
and (B) a certificate of an Authorized Accounting Officer, stating that (1)
such Financial Statements have been prepared under his or her supervision
in accordance with GAAP and that he or she knows of no facts inconsistent
with such Financial Statements and (2) no Default has occurred and is
continuing or, if a Default has occurred and is continuing, a statement as
to the nature thereof, the period of its existence and the action that the
Borrower has taken and proposes to take with respect thereof.
(ii) No later than the time of delivery of the Financial Statements
described in Section 6.03(d)(i), (A) schedules in form and substance
satisfactory to the Agent showing for the Tenant Fiscal Year then ended the
calculation of Excess Earnings Recapture for the Tenant Fiscal Year as a
single period rather than for each Cumulative Tenant Period included in the
Tenant Fiscal Year (the "Annualized Recapture Amount") and (B) a
---------------------------
certificate of an Authorized Accounting Officer stating that such schedules
have been prepared under his or her supervision. The schedules delivered by
the Borrower shall be prepared using (w) the Financial Statements then
delivered pursuant to Section 6.03(d)(i), (X) if the beginning portion of
the Tenant Fiscal Year is included in the Borrower Fiscal Year preceding
the Borrower Fiscal Year covered by the delivered Financial Statements, the
audited Financial Statements for the preceding Borrower Fiscal Year, (y) if
the ending portion of the Tenant Fiscal Year is included in the Borrower
Fiscal Year in effect at the time of delivery of the audited Financial
Statements, unaudited Financial Statements of the Borrower covering such
period and (z) such supplemental schedules as shall be reasonably
satisfactory to the Agent identifying the location on such Financial
Statements of the items used to calculate the Annualized Recapture Amount.
(iii) Notwithstanding any provision of this Agreement to the
contrary, the Annualized Recapture Amount for Tenant Fiscal Year 1994 shall
be computed for all of such Tenant Fiscal Year, and for purposes of such
calculation, (A) "Adjusted Operating Profit. shall include all cash and
cash equivalents of the Borrower on the first day of the Tenant Fiscal Year
(including all cash held by Merrill Lynch Funds Distributor under the
Escrow Agreement among the Borrower, the Agent and Merrill Lynch Funds
Distributor executed in connection with the Forbearance Agreement) other
than (1) funds in the FF&E Reserve (as defined in the 1986 Management
Agreement, (2) the amount of funds on deposit in local checking accounts
associated with each Hotel on the Closing Date (not to exceed $490,000 in
the aggregate) and of reasonable petty cash funds at each Hotel on the
Closing Date (not to exceed $245,000 in the aggregate) and (3) funds
relating only to the Connecticut Hotel, (B) "Adjusted Operating Profit.
shall not include interest and other amounts earned by the Borrower on
funds in the FF&E Reserve (as defined in the 1986 Management Agreement)
from and after the beginning of the Tenant Fiscal Year and (C) there shall
be deducted from Adjusted Operating Profit in calculating Excess Earnings
Recapture (to the extent not otherwise deducted therefrom) (1) Transaction
Costs (as defined in the definition of "Excess Earnings Recapture", (2)
interest in respect of the 1988 Multistate Loans and the 1988 California
Loans paid by the Borrower under the Forbearance Agreement from and after
the beginning of the Tenant Fiscal Year and (3) Current Ground Rent paid by
the Borrower or CMC to the International Ground Lessors
-73-
<PAGE>
from and after the beginning of the Tenant Fiscal Year and prior to the
first Cumulative Tenant Period hereunder in accordance with the
International Ground Leases.
(e) [Intentionally omitted]
(f) Annual Operating Projections of the Mortgaged Hotels and Repairs
----------------------------------------------------------------
and Equipment Estimate. Promptly after the Borrower's receipt thereof, and
----------------------
in any event within seven (7) days after the beginning of each Tenant
Fiscal Year, (i) an annual operating projection for the Hotels, on a
consolidated basis, for such Tenant Fiscal Year prepared by the Tenant
pursuant to Section 9.03A of the Hotel Lease and including a projection of
the average annual occupancy and average annual room rate for each Hotel
for such Tenant Fiscal Year together with (ii) the Repairs and Equipment
Estimate (as defined in Section 8.02D of the Hotel Lease) prepared by the
Tenant pursuant to section 8.02D of the Hotel Lease.
(g) Annual Five-Year Projections. Promptly after the Borrower's
----------------------------
receipt thereof, copies of any projections with respect to the Hotels on a
consolidated basis for each of the five (5) Tenant Fiscal Years commencing
with the immediately following Tenant Fiscal Year that are prepared by the
Tenant pursuant to Section 9.03B of the Hotel Lease.
(h) Annual Building Estimate. Promptly after the Borrower's receipt
------------------------
thereof, and in any event within seven (7) days after the beginning of each
Tenant Fiscal Year, copies of the Building Estimate (as defined in Section
8.03A of the Hotel Lease) prepared by the Tenant pursuant to Section 8.03A
of the Hotel Lease.
(i) Annual Accounting of the Tenant. (i) Promptly after the Borrowers
-------------------------------
receipt thereof, and in any event within eighty-two (82) days after the end
of each Tenant Fiscal Year, copies of the annual accounting prepared by the
Tenant pursuant to Section 9.01 of the Hotel Lease and (ii) promptly after
the Borrowers receipt thereof, such financial information regarding the
operations of each Hotel for the period covered by the annual accounting as
is customarily prepared by the Tenant from time to time.
(j) Certificates Regarding Defaults. Within two (2) Business Days
-------------------------------
after any officer of the General Partner obtains Knowledge of any Default,
a statement of an executive officer of the General Partner, specifying the
nature of such Default, the period of existence thereof and what action the
Borrower has taken and proposes to take with respect thereto.
(k) Accountants' Reports. Promptly upon request of any Lender through
--------------------
the Agent, copies of any reports submitted to the Borrower by its
accountants in connection with any examination of the financial statements
of the Borrower made by such accountants, and copies of any other
communications received by the Borrower or the General Partner from such
accountants relative to any financial statements or audit or internal
controls and systems of the Borrower.
(l) Copies of Other Reports. Promptly upon their becoming available,
-----------------------
copies of all financial statements, reports, notices and statements sent or
made available generally by the Borrower to its limited partners, and of
all reports, registration statements and prospectuses filed by the Borrower
with any securities exchange or with the Securities and Exchange
Commission, or any governmental authority succeeding to any of its
functions.
(m) Proposed Amendments to Partnership Documents. Not less than ten
--------------------------------------------
(10) days prior to the execution thereof, a true and complete copy of any
proposed amendment
-74-
<PAGE>
to the Partnership Documents (other than amendments which merely reflect
the admission or withdrawal of limited partners).
(n) Material Adverse Change. (i) Promptly following the occurrence
-----------------------
thereof, notice of any Borrower Material Adverse Change and (ii) promptly
after the Borrower has Knowledge thereof, notice of any other Material
Adverse Change.
(o) Litigation. Promptly after the commencement thereof, notice of
----------
all actions, suits, investigations, litigation and proceedings before any
court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, (i) affecting the Borrower of the
type described in Section 5.01(i), (ii) affecting the Borrower in which
injunctive relief or other equitable remedy is sought or (iii) that may
materially and adversely affect any of the Hotels.
(p) Environmental Conditions. Promptly after the Borrower has
------------------------
Knowledge thereof, notice of any condition or occurrence on any property of
any Loan Party described in the Multistate Mortgages that could reasonably
be expected to result in a material liability under, or a material
noncompliance by any Loan Party with, any Environmental Law or
Environmental Permit or would be reasonably likely to (i) form the basis of
an Environmental Action against any Loan Party or such property that could
have a Material Adverse Effect or (ii) cause any such property to be
subject to any restrictions on ownership, occupancy, use or transferability
under any Environmental Law.
(q) Insurance Information. Promptly, and in any event within thirty
---------------------
(30) days after its receipt thereof, the certificates of insurance
(including any riders and amendments thereto) evidencing the insurance
policies described in Section 6.01(e) and required to be furnished to the
Agent thereunder.
(r) Surveys Regarding Easements. Promptly upon its becoming
---------------------------
available, a survey, and the surveyor's written descriptions, with respect
to any easement proposed to be executed by the Borrower benefiting or
affecting any Hotel Property, showing the portion of such Hotel Property
and any adjoining property affected by such easement.
(s) Rent Letters. As soon as practicable and in any event within
------------
twenty-seven (27) days after the end of each Tenant Accounting Period, the
Rent Letter (as defined in Section 5.04A of the Hotel Lease) prepared by
the Tenant for such Tenant Accounting Period pursuant to Section 5.04A of
the Hotel Lease.
(t) Executive Officers. Promptly, and in any event within fifteen
------------------
(15) days after the occurrence thereof, notice and a description of any
change in the titles of the officers of the Borrower or the General Partner
who in the ordinary course of their responsibilities handle, or will be
handling, matters relating to the operation of the Hotel Properties and the
administration of any of the Combined Loan Documents.
(u) Other Information. Such other reasonable information respecting
-----------------
the business, condition (financial or otherwise), operations, performance,
properties or prospects of the Borrower, as the Lenders, or any of them,
may from time to time reasonably request through the Agent.
-75-
<PAGE>
ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.01. Events of Default.
-----------------
Subject to the provisions of Sections 7.02 and 7.03, if any of the
following events ("Events of Default") shall occur and be continuing:
-----------------
(a) the Borrower shall fail to pay any principal of any Multistate
Advance when the same becomes due and payable (excluding any regularly
scheduled principal payments due under Section 2.02 and 2.03 prior to the
Scheduled Maturity Date (giving effect to any extensions made pursuant to
Section 2.03(a) or 2.03(b)), the Borrower's failure to pay which are
governed by Section 7.01(b)); or
(b) the Borrower shall fail to pay any principal of any Multistate
Advances not included in Section 7.01(a) or any interest on any Multistate
Advance when the same becomes due and payable and such failure shall remain
unremedied for three (3) days; or
(c) any Loan Party shall fail to make any other payment due under any
Multistate Loan Document when the same becomes due and payable and such
failure shall remain unremedied for ten (10) days after notice thereof
shall have been given to the Borrower by the Agent or any Lender; or
(d) (i) any representation, warranty or written statement made by
or on behalf of any Loan Party (or any of its officers) under or in
connection with any Multistate Loan Document (including, without
limitation, in any report, certificate, financial statement or other
instrument delivered to any Lender or the Agent prior to or after the date
hereof (other than those described in clause (ii) of this Section 7.01(d)))
shall prove to have been incorrect in any material respect when made or
(ii) any representation, or warranty made by the Borrower under the last
sentence of Article V of this Agreement shall prove to have been incorrect
in any material respect when made and the event or condition which is the
subject of such representation or warranty would be reasonably likely to
have a Material Adverse Effect; or
(e) the Borrower shall fail to perform or observe any term, covenant
or condition contained in Section 6.01(9), 6.01(k), 6.01(m) or 6.01(s) or
in Section 6.02; or
(f) the Borrower shall fail to perform or observe any term, covenant
or condition contained in Section 6.03 if such failure shall remain
unremedied for ten (10) days after written notice thereof shall have been
given to the borrower by the Agent or any Lender; or
(g) the Borrower shall fail to perform or observe any term, covenant
or agreement contained in Section 6.01 (other than those listed in Section
7.01(e)) if such failure shall remain unremedied for thirty (30) days after
written notice thereof shall have been given to the Borrower by the Agent
or any Lender, provided, however, that if such failure is not remedied
-------- -------
within such thirty (30) day period, is of such a nature that it is capable
of being cured within an additional one hundred fifty (150) day period and
is not, and does not become, a failure that the Required Lenders believe in
their reasonable judgment could have a Material Adverse Effect (by itself
or combined with any other Defaults that shall have occurred and be
continuing), such failure shall not be an Event of Default if the Borrower
shall have promptly taken appropriate actions to remedy such
-76-
<PAGE>
failure, shall diligently pursue such actions and such failure shall be
remedied before the expiration of one hundred eighty (180) days after such
notice shall have been given, and provided further that if such failure is
-------- -------
not remedied within the thirty (30) day period described in the first part
of this Section 7.01(g), is not of such a nature that it is capable of
being cured within an additional one hundred fifty (150) day period,
relates to no more than two (2) Hotel Properties and the Borrower is not
relying on this proviso or the corresponding proviso in Section 7.01(h)
with respect to any other failure involving more than two (2) Hotel
Properties (including the Hotel Property or Hotel Properties to which the
failure described in this Section 7.01(9) relates), such failure shall not
be an Event of Default if the Borrower causes the Hotel Property or Hotel
Properties to which such failure relates to be sold in accordance with the
provisions of Article IV within ninety (90) days after such written notice
shall have been given; or
(h) any Loan Party shall fail to perform any other term, covenant or
agreement contained in any Multistate Loan Document on its part to be
performed or observed, if such failure shall remain unremedied for thirty
(30) days after written notice thereof shall have been given to the
Borrower by the Agent or any Lender, provided, however, that if such
-------- -------
failure is not remedied within such thirty (30) day period, is of such a
nature that it is capable of being cured within an additional one hundred
fifty (150) day period and is not, and does not become, a failure that the
Required Lenders believe in their reasonable judgment could have a Material
Adverse Effect (by itself or combined with any other Defaults that shall
have occurred and be continuing), such failure shall not be an Event of
Default if such Loan Party shall have promptly taken appropriate actions to
remedy such failure, shall diligently pursue such actions and such failure
shall be remedied before the expiration of one hundred eighty (180) days
after such written notice shall have been given, and provided further that
-------- --------
if such failure is not remedied within the thirty (30) day period described
in the first part of this Section 7.01(h), is not of such a nature that it
is capable of being cured within an additional one hundred fifty (150) day
period, relates to no more than two (2) Hotel Properties and the Borrower
is not relying on this proviso or the corresponding proviso in Section
7.01(g) with respect to any other failure involving more than two (2) Hotel
Properties (including the Hotel Property or Hotel Properties to which the
failure described in this Section 7.01(h) relates), such failure shall not
be an Event of Default if the Borrower causes the Hotel Property or Hotel
Properties to which such failure relates to be sold in accordance with
Article IV within ninety (90) days after such written notice shall have
been given; or
(i) the Borrower or the General Partner shall fail to pay any
principal of, premium or interest on or any other amount payable in respect
of, any Indebtedness that is outstanding in a principal or notional amount
of at least $1,000,000 in the aggregate (but excluding Indebtedness
outstanding hereunder) of such Loan Party, when the same becomes due and
payable (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise), and such failure shall continue after the applicable
grace period, if any, specified in the agreement or instrument relating to
such Indebtedness; or any other event shall occur or condition shall exist
under any agreement or instrument relating to any such Indebtedness and
shall continue after the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such event or condition is to
accelerate, or to permit the acceleration of, the maturity of such
Indebtedness or otherwise to cause, or to permit the holders thereof to
cause, such Indebtedness to mature (unless and except and for so long as,
in any of the foregoing cases, the holders of such Indebtedness with at
least the amount of such Indebtedness with power under the agreement or
instrument relating thereto to waive such event or condition or recognize
that such event or condition has been cured to their satisfaction waive
such event or condition or recognize such event or condition as cured); or
any such Indebtedness shall be declared to be due and payable or required
to be prepaid or redeemed (other than by a
-77-
<PAGE>
regularly scheduled required prepayment or redemption), purchased or
defeased, or an offer to prepay, redeem, purchase or defease such
Indebtedness shall be required to be made, in each case prior to the stated
maturity thereof; or
(j) Host Marriott or any of its Material Subsidiaries shall fail to
pay any principal of, premium or interest on or other amount in respect of
any Indebtedness that is outstanding in a principal or notional amount of
at least $50,000,000 in the aggregate, when the same becomes due and
payable (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise), and such failure shall continue after the applicable
grace period, if any, specified in the agreement or instrument relating to
such Indebtedness; or any other event shall occur or condition shall exist
under any agreement or instrument relating to any such Indebtedness and
shall continue after the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such event or condition is to
accelerate, or to permit the acceleration of, the maturity of such
Indebtedness or otherwise to cause, or to permit the holder thereof to
cause, such Indebtedness to mature (unless and except and for so long as,
in any of the foregoing cases, the holders of such Indebtedness with at
least the amount of such Indebtedness with power under the agreement or
instrument relating thereto to waive such event or condition or recognize
that such event or condition has been cured to their satisfaction waive
such event or condition or recognize such event or condition as cured); or
any such Indebtedness shall be declared to be due and payable or required
to be prepaid or redeemed (other than by a regularly scheduled required
prepayment or redemption), purchased or defeased, or an offer to prepay,
redeem, purchase or defease such Indebtedness shall be required to be made,
in each case prior to the stated maturity thereof; provided, however, that
-------- -------
none of the foregoing matters with respect to any Indebtedness of Host
Marriott or any of its Material Subsidiaries shall be an Event of Default
under this Section 7.01(j) if and for so long as both (i) (A) the principal
remedy with respect to such matters under the agreements relating to such
Indebtedness and applicable law of the holders of such Indebtedness is to
foreclose upon or otherwise acquire the properties on which Host Marriott
or its Material Subsidiaries shall have granted a Lien to secure such
Indebtedness and (B) the aggregate cost or other economic impact to Host
Marriott and its Material Subsidiaries (excluding any cost or other
economic impact to the extent it shall have been reduced or eliminated by
the taking of any action by Marriott International or its Material
Subsidiaries under the agreements relating to such Indebtedness or
otherwise) of all other rights and remedies available to the holders of all
such Indebtedness with respect to such matters would not (together with the
outstanding principal or notional amount of all other Indebtedness not
covered by this proviso but described in this Section 7.01(j) for which any
matter specified in this Section 7.01(j) shall have occurred and be
continuing) exceed $50,000,000 and (ii) such matters, including the rights
and remedies available in respect of such matters, would not be reasonably
likely to have a Host Material Adverse Effect; or
(k) Marriott International or any of its Material Subsidiaries
(excluding the Tenant and any International Ground Lessor) shall fail to
pay any principal of or premium or interest on any MI Debt which is
outstanding in a principal amount of at least $50,000,000 in the aggregate,
when the same becomes due and payable (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise), and such failure
shall continue after the applicable grace period, if any, specified in the
agreement or instrument relating to such MI Debt; or any other event shall
occur or condition shall exist under any agreement or instrument relating
to any such MI Debt and shall continue after the applicable grace period,
if any, specified in such agreement or instrument, if the effect of such
event or condition is to accelerate, or to permit the acceleration of, the
maturity of such MI Debt (unless and except and for so long as, in any of
the foregoing cases, the holders of such Indebtedness with at least the
amount of such Indebtedness with power under the agreement or instrument
relating thereto to waive such event or condition or
-78-
<PAGE>
recognize that such event or condition has been cured to their satisfaction
waive such event or condition or recognize such event or condition as
cured); or any such MI Debt shall be declared to be due and payable, or
required to be prepaid (other than by a regularly scheduled required
prepayment, including, without limitation, a prepayment required in
connection with the sale of the sole asset or all assets securing such MI
Debt), redeemed, purchased or defeased, or an offer to prepay, redeem,
purchase or defease such MI Debt shall be required to be made, in each case
prior to the stated maturity thereof; provided, however, that if there is
-------- -------
acceleration or an event permitting acceleration of any MI Debt which is
included under this Section 7.01(k) solely because of a Guarantee by
Marriott International or one of its Material Subsidiaries, an Event of
Default will not exist under this Section 7.01(k) so long as Marriott
International or such Material Subsidiary, as the case may be, fully
performs its obligations in a timely manner under such Guarantee; and
provided, further, that none of the foregoing matters with respect to any
-------- -------
MI Debt shall be an Event of Default under this Section 7.01(k) if and for
so long as the only remedy with respect to such matters under the
agreements relating to such MI Debt and applicable law of the holders of
such MI Debt is to foreclose upon or otherwise acquire the properties on
which MI or its Material Subsidiaries have granted a Lien to secure such MI
Debt; or
(l) the Borrower or the General Partner shall generally not pay its
debts as such debts become due, or shall admit in writing its inability to
pay its debts generally, or shall make a general assignment for the benefit
of creditors; or any proceeding shall be instituted by or against any such
Loan Party seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors,
or seeking the entry of an order for relief or the appointment of a
receiver, trustee, or other similar official for it or for any substantial
part of its property and, in the case of any such proceeding instituted
against it (but not instituted by it) that is being diligently contested by
it in good faith, either such proceeding shall remain undismissed or
unstayed for a period of sixty (60) days, or any of the actions sought in
such proceeding (including, without limitation, the entry of an order for
relief against, or the appointment of a receiver, trustee, custodian or
other similar official for, it or any substantial part of its property)
shall occur; or any such Loan Party shall take any action to authorize any
of the actions set forth above in this subsection (1); or
(m) Host Marriott, Marriott International or any of their respective
Material Subsidiaries (excluding the Borrower, the General Partner, the
Tenant and any International Ground Lessor) shall generally not pay its
debts as such debts become due, or shall admit in writing its inability to
pay its debts generally, or shall make a general assignment for the benefit
of creditors; or any proceeding shall be instituted by or against any such
Loan Party or any of such Material Subsidiaries seeking to adjudicate it a
bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of it or its
debts under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, or other similar official for it or for
any substantial part of its property and, in the case of any such
proceeding instituted against it (but not instituted by it) that is being
diligently contested by it in good faith, either such proceeding shall
remain undismissed or unstayed for a period of sixty (60) days, or any of
the actions sought in such proceeding (including, without limitation, the
entry of an order for relief against, or the appointment of a receiver,
trustee, custodian or other similar official for, it or any substantial
part of its property) shall occur; or any such Loan Party or any such
Material Subsidiaries shall take any action to authorize any of the actions
set forth above in this subsection (m); or
-79-
<PAGE>
(n) (i) any judgment or order for the payment of money in excess of
$1,000,000 shall be rendered against the Borrower or the General Partner or
(ii) any judgment or order for the payment of money in excess of
$25,000,000 shall be rendered against Host Marriott, Marriott International
or any of their respective Material Subsidiaries (excluding the Tenant, the
General Partner and any International Ground Lessor) and in either case
described in clause (i) or clause (ii) either (A) enforcement proceedings
(excluding enforcement proceedings against (1) the Connecticut Hotel, the
parcel of land on which the Connecticut Hotel is located, all easements and
appurtenances relating to such land and other property associated only with
the Connecticut Hotel (and not the Hotel Properties) and (2) any Hotel
Property released prior to the commencement of such enforcement proceedings
from its Multistate Mortgage, Multistate Assignment of Leases and the other
Multistate Collateral Documents encumbering such Hotel Property pursuant to
Article IV) shall have been commenced by any creditor upon such judgment or
order and remain unstayed or (B) (1) in the case of any such judgment or
order against the Borrower or the General Partner, there shall be any
period of thirty (30) consecutive days during which a stay of enforcement
of such judgment or order, by reason of a pending appeal or otherwise,
shall not be in effect and (2) in the case of any judgment or order against
Host Marriott, Marriott International or any of their respective Material
Subsidiaries (excluding the Borrower, the General Partner, the Tenant and
any International Ground Lessor), from and after thirty (30) days following
such judgment or order there shall be any period of thirty (30) consecutive
days during which a stay of enforcement of such judgment or order, by
reason of a pending appeal or otherwise, shall not be in effect; or
(o) [Intentionally omitted]
(p) any Multistate Loan Document after delivery thereof pursuant to
Section 3.01 shall for any reason cease to be valid and binding on or
enforceable against any Loan Party (or Land Trust) party to it in any
material respect, or any such Loan Party (or Land Trust) shall so state in
writing; or
(q) any Multistate Collateral Document after delivery thereof pursuant
to Section 3.01 shall for any reason (other than pursuant to and then only
to the extent permitted by the terms thereof) cease to create a valid and
perfected first priority Lien on any Hotel, the Land on which any Hotel is
located or any material portion of any other Multistate Collateral
purported to be covered thereby; or
(r) (i) the Tenant shall fail to perform or observe any Material Term
contained in the Hotel Lease on its part to be performed or observed and
such failure shall not be cured (including by Marriott International under
the Hotel Lease Guaranty) within any applicable notice or grace period
specified therein, (ii) Host Marriott shall fail to perform or observe any
material term or condition contained in the Purchase Agreement on its part
to be performed or observed and such failure shall not be cured within any
applicable notice or grace period specified therein, or (iii) any party to
any Related Document or Third Party Ground Lease shall, without the prior
consent of the Required Lenders, terminate or seek to terminate such
Related Document or Third Party Ground Lease, except (A) in the case of any
Hotel Lease, in and to the extent, if any, permitted in the Attornment
Agreement and (B) in the case of any International Ground Lessor seeking to
terminate one or more International Ground Leases, for so long as an
injunction against each attempted termination shall be in effect, the
Borrower shall have promptly taken appropriate actions to contest such
attempted termination, the Borrower shall diligently pursue such actions,
and such attempted termination, if successful, would not be reasonably
likely to have a Material Adverse Effect; or
-80-
<PAGE>
(s) the General Partner shall cease to be the sole general partner of
the Borrower or the General Partner shall cease to be a direct or indirect
wholly owned Subsidiary of Host Marriott or Marriott International; or
(t) the Tenant shall cease to be a direct or indirect wholly owned
Subsidiary of Marriott International; or
(u) an "Event of Default" (as defined in the California Loan
Agreement) shall have occurred and be continuing under the California Loan
Agreement;
then, end in any such event, the Agent shall at the request, or may with the
consent, of the Required Lenders, by notice to the Borrower declare the
Multistate Notes, all interest thereon and all other amounts payable under this
Agreement and the other Multistate Loan Documents to be forthwith due and
payable, whereupon the Multistate Notes, all such interest and all such amounts
shall become and be forthwith due and payable, without presentment, demand,
protest or further notice of any kind, all of which are hereby expressly waived
by the Borrower; provided, however, that in the event of an actual or deemed
-------- -------
entry of an order for relief with respect to any Loan Party under the Bankruptcy
Code, the Multistate Notes, all such interest and all such amounts shall
automatically become and be due and payable, without presentment, demand,
protest or any notice of any kind, all of which are hereby expressly waived by
the Borrower.
SECTION 7.02. Cure of Certain Events of Default by Host Marriott and
------------------------------------------------------
Marriott International.
----------------------
(a) Notwithstanding Section 7 01(c), the failure of the Borrower to
pay any amount described in any such Section (i) shall not become an Event
of Default if, before the expiration of the applicable grace period, if
any, specified in such Section for the payment of such amount, Host
Marriott pays such amount pursuant to the Debt Service Guaranty or Marriott
International pays such amount pursuant to the Backup Debt Service Guaranty
(including in either case all interest and other amounts, if any, due on
account of the late payment of such Obligations of the Borrower) and shall
not be a Default from and after the time Host Marriott or Marriott
International so pays such amount and (ii) if clause (i) is not satisfied,
shall no longer be an Event of Default from and after such time (if the
Multistate Notes, all interest thereon and all other amounts payable under
the Multistate Loan Documents shall not have been declared or automatically
become due and payable under Section 7.01), if any, as Host Marriott pays
such amount pursuant to the Debt Service Guaranty or Marriott International
pays such amount pursuant to the Backup Debt Service Guaranty (including in
either case all interest and other amounts, if any, due on account of the
late payment of such Obligations of the Borrower).
(b) Notwithstanding Section 7.01(t), the change in the ownership of
the Tenant described therein (i) shall not become an Event of Default if
before such change, as applicable, (A) Marriott International makes the
payment described in Section 3 of the MI Guaranty and Section 2 of the Debt
and Tenant Change Guaranty or (B) Marriott International makes the payment
described in Section 2 of the Debt and Tenant Change Guaranty and the
events described in Section 5 of the MI Guaranty occur when specified in
such Section 5 in satisfaction of the obligation of Marriott International
to make the payment described in Section 3 of the MI Guaranty and (ii) if
clause (i) is not satisfied, shall cease to be an Event of Default from and
after such time (if the Multistate Notes, all interest thereon and all
other amounts payable under the Multistate Loan Documents shall not have
been declared or automatically become due and payable under Section 7.01),
as applicable, clause (A) or clause (B) of clause (i) is satisfied.
-81-
<PAGE>
SECTION 7.03. Events of Default with Respect to Marriott
------------------------------------------
International, Host Marriott and their Subsidiaries.
---------------------------------------------------
(a) Notwithstanding Section 7.01, from and after such time as Host
Marriott or Marriott International has no Obligations under any Multistate
Loan Document, no Default or Event of Default shall be deemed to have
occurred on account of any matter determined in Section 7.01, the
definition of Material Adverse Change or the definition of Material Adverse
Effect by specific reference to (a) if Host Marriott has no such
Obligations, Host Marriott or any of its Subsidiaries (including where Host
Marriott is referred to by use of the phrase "Loan Party-) and, in
furtherance hereof, the term Loan Party. therein shall be construed to
exclude Host Marriott if Host Marriott has no such Obligations, or (b) if
Marriott International has no such Obligations, Marriott International or
any of its Subsidiaries (including where Marriott International is referred
to by use of the phrase "Loan Party" and in furtherance hereof, the term
"Loan Party" therein shall be construed to exclude Marriott International
if Marriott International has no such Obligations, provided that this
---------
Section 7.03 does not apply to Section 7.01(s) or Section 7.01(t), and
provided further that this Section 7.03 shall not limit the occurrence of
----------------
any Default or Event of Default on account of any matter determined by
reference to any Loan Party that is a Subsidiary of Host Marriott or
Marriott International.
(b) Notwithstanding Section 7.01, and if the Backup Debt Service
Guaranty is in full force and effect, no Default or Event of Default shall
be deemed to have occurred on account of any matter determined in Section
7.01(l), 7.01(m) or 7.01(n), in each case by reference to Host Marriott or
any of its Material Subsidiaries (excluding the General Partner), if at the
time of the occurrence of such matter (a "Host Event", and for so long as
such Host Event shall be continuing, Marriott International shall be in
compliance with the financial covenants (including, without limitation, any
interest coverage ratio, leverage ratio, net worth test, working capital
ratio, fixed charge coverage ratio or minimum EBITDA requirement) contained
in the MI Senior Credit Facility (which financial covenants are, on the
Closing Date, contained in Sections 6.01(1), 6.01(m) and 6.01(n) of the
Closing Date MI Revolver); provided that if during all or a portion of the
-------- ----
time during which such Host Event shall have occurred and be continuing (i)
there shall be no MI Senior Credit Facility in effect or (ii) the MI Senior
Credit Facility in effect shall include no financial covenants which
Marriott International shall then be obligated to satisfy by itself or on a
Consolidated basis (whether because such MI Senior Credit Facility shall
include no such financial covenants, Marriott International's compliance
with all such financial covenants shall have been waived before or after
any acceleration hereunder or otherwise), then no Default or Event of
Default shall be deemed to have occurred on account of such Host Event
during such time if Marriott International shall be maintaining at the end
of each fiscal quarter of Marriott International commencing with the fiscal
quarter ending immediately prior to the occurrence of the Host Event, for
the Rolling Period ending at the end of each such fiscal quarter, a ratio
of Consolidated EBITDA to Consolidated Net Interest Expense of not less
than 1.5 to 1. For purposes of the preceding sentence, the terms
"Consolidated", "EBITDA". and "Net Interest Expense" (and all defined terms
used in the Closing Date MI Revolver in connection with the definition of
such terms) shall have the respective meanings specified in the Closing
Date MI Revolver (regardless of any event or occurrence with respect to the
Closing Date MI Revolver, the Amended MI Revolver or Marriott
International's obligations thereunder, including without limitation any
amendment of or waiver to the Closing Date MI Revolver, any termination of
the Closing Date MI Revolver or the Amended MI Revolver or any provision of
the Closing Date MI Revolver not being enforceable)
SECTION 7.04. Specific Performance.
--------------------
-82-
<PAGE>
Subject to the provisions of Section 2.12 hereof, in the event one or
more Events of Default shall have occurred and be continuing, the Lenders may
proceed, to the extent permitted by law, to protect and enforce their rights
either by suit in equity or by action at law, or both, whether for the specific
performance of any covenant, condition or agreement contained in this Agreement
or the Multistate Notes or in aid of the exercise of any power granted in this
Agreement or the Multistate Notes, or proceed to enforce the payment of the
Multistate Notes or to enforce any other legal or equitable right of the
Lenders.
ARTICLE VIII
THE AGENT
SECTION 8.01. Authorization and Action.
------------------------
Each Lender hereby appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers and discretion under
this Agreement and the other Multistate Loan Documents as are delegated to the
Agent by the terms hereof and thereof, together with such powers and discretion
as are reasonably incidental thereto. As to any matters not expressly provided
for by the Multistate Loan Documents (including, without limitation, enforcement
or collection of the Multistate Notes), the Agent shall not be required to
exercise any discretion or take any action, but shall be required to act or to
refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the Required Lenders, and such
instructions shall be binding upon all Lenders and all holders of Multistate
Notes; provided, however, that the Agent shall not be required to take any
-------- -------
action that exposes the Agent to personal liability or that is contrary to this
Agreement or applicable law. Without limiting the preceding provisions of this
Section 8.01, if the Agent shall acquire title to one or more Hotel Properties
on behalf of the Lenders following an Event of Default, whether pursuant to a
foreclosure sale or otherwise, the provisions of this Article VIII and Section
9.01 shall apply to the Agents ownership of the same and the Agent upon
acquiring such Hotel Properties shall be entitled to hold, lease, rent, operate,
manage or sell the same as Agent for the Lenders in any manner provided by
applicable law and, subject to Section 9.01, in accordance with the instructions
of the Required Lenders. The Agent agrees to give to each Lender prompt notice
of each notice given to it by the Borrower pursuant to the terms of this
Agreement and to distribute promptly to each Lender copies of the financial
statements, certificates, reports and other information provided to the Agent by
(a) the Borrower pursuant to Section 6.03, (b) Host Marriott pursuant to Section
6 of the Debt Service Guaranty, (c) Marriott International pursuant to Section 6
of the Backup Debt Service Guaranty, Section 8 of the MI Guaranty, Section 6 of
the Debt and Tenant Change Guaranty, Section 6 of the Hotel Lease Guaranty and
Section 6 of the MI Indemnity Agreement and (d) the Tenant pursuant to Section 8
of the Attornment Agreement.
SECTION 8.02. Agent's Reliance Etc.
---------------------
Neither the Agent nor any of its directors, officers, agents or
employees shall be liable for any action taken or omitted to be taken by it or
them under or in connection with the Multistate Loan Documents, except for its
or their own gross negligence or willful misconduct. Without limitation of the
generality of the foregoing, the Agent: (i) may treat the payee of any
Multistate Note as the holder thereof until the Agent receives and accepts an
Assignment and Acceptance entered into by the Lender that is the payee of such
Multistate Note, as assignor, and an Eligible Assignee, as assignee, as provided
in Section 9.07; (ii) may consult with legal counsel (including counsel for any
Loan Party), independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken in good faith by
it in accordance with the advice of such counsel, accountants or experts; (iii)
makes no warranty or representation to any Lender and shall not be responsible
to any Lender for any statements, warranties or representations made in or in
connection with the Multistate Loan Documents; (iv) shall not have any duty to
ascertain or to
-83-
<PAGE>
inquire as to the performance or observance of any of the terms, covenants or
conditions of any Multistate Loan Document on the part of any Loan Party or to
inspect the property (including the books and records) of any Loan Party; (v)
shall not be responsible to any Lender for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of any Multistate
Loan Document or any other instrument or document furnished pursuant hereto and
(vi) shall incur no liability under or in respect of any Multistate Loan
Document by acting upon any notice, consent, certificate or other instrument or
writing (which may be by telegram, telecopy, cable or telex) believed by it to
be genuine and signed or sent by the proper party or parties.
SECTION 8.03. Citibank and Affiliates.
-----------------------
With respect to the Multistate Notes issued to it, Citibank shall have
the same rights, powers and obligations under the Multistate Loan Documents as
any other Lender and may exercise the same and shall be responsible for the same
as though it were not the Agent; and the term "Lenders or "Lenders. shall,
unless otherwise expressly indicated, include Citibank in its individual
capacity. Citibank and its affiliates may accept deposits from, lend money to,
act as trustee under indentures of, accept investment banking engagements from
and generally engage in any kind of business with, any Loan Party, any of its
Subsidiaries and any Person who may do business with or own securities of any
Loan Party or any such Subsidiary, all as if Citibank were not the Agent and
without any duty to account therefor to the Lenders. The term "Agent" refers to
Citibank or any successor Agent in its capacity as Agent and not in its capacity
as a Lender. Citibank agrees with the Lenders that, for so long as Citibank is
the Agent, Citibank will hold, unless the Required Lenders agree to a lesser
amount, Multistate Advances in an amount at least equal to 2.67989462% of the
Multistate Advances owing to all the Lenders from time to time.
SECTION 8.04. Lender Credit Decision.
----------------------
Each Lender acknowledges that it has, independently and without
reliance upon the Agent or any other Lender, and based on the financial
statements referred to in Section 5.01(f) and such other documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Agent or any other Lender and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement.
SECTION 8.05. Indemnification.
---------------
Each Lender severally agrees to indemnify the Agent (to the extent not
promptly reimbursed by the Borrower), from and against such Lender's ratable
share of any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements, of any kind or
nature whatsoever, that may be imposed on, incurred by, or asserted against the
Agent in any way relating to or arising out of the Multistate Loan Documents or
any action taken or omitted by the Agent under the Multistate Loan Documents;
provided, however, that no Lender shall be liable for any portion of such
- -------- -------
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the Agent's gross negligence or
willful misconduct. Without limitation of the foregoing, each Lender agrees to
reimburse the Agent promptly upon demand for its ratable share of any costs and
expenses payable by the Borrower under Section 9.04, to the extent that the
Agent is not promptly reimbursed for such costs and expenses by the Borrower.
For purposes of this Section 8.05, the Lenders t respective ratable shares
(including the Lender that is also the Agent) of any amount shall be determined,
at any time, according to the aggregate principal amount of the Multistate
Advances outstanding at such time and owing to the respective Lenders. The
failure of any Lender to reimburse the Agent promptly upon demand for its
ratable share of any amount required to be paid by the Lenders to the Agent as
provided herein shall not relieve any other Lender of its obligation hereunder
to reimburse the Agent
-84-
<PAGE>
for its ratable share of such amount, but no Lender shall be responsible for the
failure of any other Lender to reimburse the Agent for such other Lender's
ratable share of such amount.
SECTION 8.06. Successor Agents.
----------------
The Agent may resign at any time with the consent of the Required
Lenders (provided that such consent shall not be required if Citibank determines
that its resignation is necessary for it to comply with any applicable law, rule
or regulation) by giving written notice thereof to the Lenders and the Borrower
and may be removed at any time with or without cause by the Required Lenders,
provided that the Agent shall also resign or be removed at the same time as
- --------
Agent. under the California Loan Agreement. Upon any such resignation or
removal, the Required Lenders shall have the right to appoint a successor Agent.
If no successor Agent shall have been so appointed by the Required Lenders and
shall have accepted such appointment, within 30 days after the retiring Agent's
giving of notice of resignation or the Required Lenders t removal of the
retiring Agent, then the retiring Agent may, on behalf of the Lenders, appoint a
successor Agent, which shall be a commercial bank organized under the laws of
the United States or of any State thereof and having a combined capital and
surplus of at least $500,000,000. Each successor Agent shall be the same
commercial bank as the successor Agent appointed pursuant to Section 8.06 of the
California Loan Agreement. Upon the acceptance of any appointment as Agent
hereunder by such a successor Agent, and upon the execution and filing or
recording of such financing statements or any amendments thereto, any such
amendments or supplements to the Multistate Mortgages and such other instruments
or notices as may be necessary or desirable, or as the Required Lenders may
request, in order to continue the perfection of the Liens granted or purported
to be grantee by the Multistate Collateral Documents, such successor Agent shall
succeed to and become vested with all the rights, powers, discretion, privileges
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations (other than its responsibility, if any, for its
actions and inactions as Agent prior to its resignation or removal hereunder as
Agent) under the Multistate Loan Documents. After any retiring Agents
resignation or removal hereunder as Agent, the provisions of this Article VIII
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent under this Agreement.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Amendments, Etc.
----------------
No amendment or waiver of any provision of this Agreement or the
Multistate Notes, nor consent to any departure by the Borrower therefrom, shall
in any event be effective unless the same shall be in writing and signed by the
Required Lenders, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided,
--------
however, that no amendment, waiver or consent shall, unless in writing and
- -------
signed by all the Lenders, do any of the following at any time: (i) waive any of
the conditions specified in Section 3.01; (ii) change the percentage of the
aggregate unpaid principal amount of the Multistate Notes, or the number of
Lenders, that shall be required for the Lenders or any of them to take any
action hereunder; (iii) amend or waive Section 6.02(e) with respect to any
Multistate Collateral or any defined term to the extent used therein with
respect thereto; (iv) amend this Section 9.01; (v) obligate the Lenders to loan
any additional amounts to the Borrower or subject the Lenders to any additional
obligations; (vi) reduce the principal of, or interest on, the Multistate Notes,
reduce the rate of interest on the Multistate Notes or otherwise payable
hereunder, reduce the amount of any required payment of principal or reduce any
fees or other amounts payable hereunder (provided that this Section 9.01(vi)
shall not apply to any reduction in (x) the rate or amount of interest described
in clause (i) of Section 2.05(c) upon the occurrence and during the continuance
of a Default if such
-85-
<PAGE>
reduction does not cause the rate or amount of interest on the unpaid principal
amount of the Eurodollar Rate Advances or the unpaid principal amount of the
Base Rate Advances to be less than the rate or amount of interest on such
Eurodollar Rate Advances or Base Rate Advances under Section 2.05(a) in the
absence of the occurrence and continuation of a Default, (y) the rate or amount
of interest described in Section 2.05(c)(ii) upon the occurrence and during the
continuance of a Default and (z) the rate or amount of Additional Interest);
(vii) postpone any date fixed for any payment of principal of, or interest on,
the Multistate Notes or any fees or other amounts payable hereunder or (viii)
amend or waive any provision of any Multistate Loan Document with the effect of
accomplishing any of the matters specifically described in Sections 9.01(i)
through 9.01(vii) above; provided further that no amendment, waiver or consent,
----------------
unless in writing and signed by the Agent in addition to the Lenders required
above to take such action, shall affect the rights or duties of the Agent under
this Agreement or any Multistate Note. In addition, no decision may be made
without the prior written consent of all the Lenders: (x) to alter materially
the Debt Service Guaranty or the Backup Debt Service Guaranty or to release all
or a substantial portion of the Multistate Collateral; (y) with respect to all
or a substantial portion of the Multistate Collateral, to accept deeds in lieu
of foreclosure for the benefit of the Lenders with respect thereto and in
connection therewith to release the parties to the applicable Multistate
Mortgages, or the respective successors to their interest in consideration of
such conveyance in lieu of foreclosure; or (z) to receive as partial payment for
the sale of a Hotel a purchase money mortgage to be held by the Agent for the
benefit of the Lenders.
SECTION 9.02. Notices. Etc.
-------------
All notices and other communications provided for hereunder shall be in
writing (including telegraphic, telecopy, telex or cable communication) and
mailed, sent by a reputable overnight courier, telegraphed, telecopied, telexed,
cabled or delivered, if to the Borrower, (a) if sent by mail, at its address at
Courtyard by Marriott Limited Partnership, c/o Host Marriott Corporation, 10400
Fernwood Road, Washington, D.C. 20058, Attention: Law Department 72/923 and (b)
otherwise, at its address at Courtyard by Marriott Limited Partnership, c/o Host
Marriott Corporation, 10400 Fernwood Road, Bethesda, Maryland 20817, Attention:
Law Department 72/923; if to any Bank, at its Domestic Lending Office specified
opposite its name on Schedule 2.01B hereto; if to any other Lender, at its
Domestic Lending Office specified in the Assignment and Acceptance pursuant to
which it became a Lender; and if to the Agent, at its address at Citibank, N.A.,
399 Park Avenue, 8th Floor, New York, New York 10043, Attention: Mr. Theodore J.
Beck and with a copy to Citicorp Real Estate, Inc., 599 Lexington Avenue, 24th
Floor, New York, New York 10043, Attention: Mr. Peter Baumann; or as to the
Borrower or the Agent, at such other address as shall be designated by such
party in a written notice to the other parties and, as to each other party, at
such other address as shall be designated by such party in a written notice to
the Borrower and the Agent. All such notices and communications shall (a) when
mailed, be effective upon receipt of the same at the applicable address
described above or upon the refusal of an employee or other agent of the
Borrower, such Bank, such other Lender or the Agent, as applicable, to accept
the same, (b) when sent by a reputable overnight courier, be effective when the
same is delivered to the applicable address described above, and (c) when
telegraphed, telecopied, telexed or cabled, be effective when the same is
telegraphed, telecopied and the telecopy is confirmed by telephone or return
telecopy, telexed and confirmed by telex answerback, or delivered to the cable
company, respectively, except that notices and communications to the Agent
pursuant to Article II, III or VIII shall not be effective until received by the
Agent.
SECTION 9.03. No Waiver; Remedies.
--------------------
No failure on the part of any Lender or the Agent to exercise, and no
delay in exercising, any right hereunder or under any Multistate Note or other
Multistate Loan Document shall operate as a waiver thereof; nor shall any single
or partial exercise of any such right preclude any other or further exercise
thereof or the exercise of any other right. The rights and remedies provided
herein, in the other Multistate Loan Documents and in the California Loan
Documents are
-86-
<PAGE>
cumulative and are not exclusive of any rights and remedies provided by law.
Without limiting the generality of the foregoing, if any Multistate Note or any
of the other obligations of the Borrower to the Lenders shall not have been paid
when due, whether at the stated maturity thereof, by acceleration or otherwise,
the Lenders shall not be required to resort to any particular Multistate
Collateral, right or remedy, or to proceed in any particular order of priority,
and the Lenders shall have the right at any time and from time to time, in any
manner and in any order, to enforce their Liens, rights and remedies, or any of
them, as the Lenders deem appropriate in the circumstances and to apply the
proceeds of the Multistate Collateral to the Obligations of the Borrower under
the Multistate Loan Documents.
SECTION 9.04. Costs and Expenses.
------------------
(a) The Borrower agrees to pay on demand (i) all costs and expenses of
the Agent in connection with the preparation, execution, delivery and
administration (excluding amounts allocable to salaries and similar
indirect overhead costs of the Agent and such other costs and expenses of
the Agent that are customarily borne by the Agent) of the Multistate Loan
Documents and the modifications and amendments of the Multistate Loan
Documents requested by the Borrower (including, without limitation in this
clause (i), (A) all due diligence, transportation, computer, duplication,
appraisal, audit, insurance, consultant, search, filing and recording fees
and expenses (including, without limitation, all search, filing and
recording fees and expenses referred to in Section 3.01(k)(x)(A)) and (B)
in addition to the fees and expenses described in Section 3.01(h) to be
paid on the Closing Date, the reasonable fees and expenses of counsel for
the Agent with respect to (1) the foregoing matters, (2) advising the Agent
as to its rights and responsibilities, or the perfection, protection or
preservation of rights or interests, under the Multistate Loan Documents,
(3) negotiations with any Loan Party or with other creditors of any Loan
Party or any of its Subsidiaries arising out of any Default, or any events
or circumstances that may give rise to a Default, and (4) presenting claims
in or otherwise participating in or monitoring any bankruptcy, insolvency
or other similar proceeding involving creditors' rights generally and any
proceeding ancillary thereto and all of which arise out of or are
connected, directly or indirectly, with any transaction contemplated by
this Agreement), (ii) all costs and expenses of the Agent in connection
with the enforcement of the Multistate Loan Documents (including, without
limitation, costs and expenses that the Agent may incur in connection with
the custody, preservation, use or operation of or the sale of, collection
from or other realization upon any Collateral (as defined in the Multistate
Security Agreement)), whether in any action, suit or litigation, or any
bankruptcy, insolvency or other similar proceeding affecting creditors'
rights generally or otherwise (including, without limitation, the
reasonable fees and expenses of counsel for the Agent with respect thereto
and (iii) all costs and expenses of the Lenders in connection with the
preparation, execution, delivery, administration, modification, amendment
and enforcement of the Multistate Loan Documents, whether in any suit or
litigation, or any bankruptcy, insolvency or other similar proceeding
affecting creditors' rights generally or otherwise, including all
reasonable fees and expenses of counsel which arise out of or are
connected, directly or indirectly, with any transaction contemplated by
this Agreement. Notwithstanding the preceding sentence, the Borrower shall
have no obligation thereunder to pay the reasonable fees and expenses of
counsel for the Agent to the extent such fees and expenses are not incurred
in the reasonable judgment of the Agent.
(b) The Borrower agrees to indemnify and hold harmless the Agent and
each Lender and each of their Affiliates, and their officers, directors,
employees, agents and advisors (each, an "Indemnified Party" from and
against any and all claims, damages, losses, liabilities and expenses
(including, without limitation, reasonable fees and expenses of counsel)
that may be incurred by, or asserted or awarded against any Indemnified
Party, in each case arising out of or in connection with or by reason of,
or in connection with the
-87-
<PAGE>
preparation for a defense of, any investigation, litigation or proceeding
arising out of, related to or in connection with (i) the Reorganization,
the ownership or operation of the Hotels and any of the other transactions
contemplated hereby or by the other Multistate Loan Documents or (ii) the
actual or alleged presence of Hazardous Materials on any property described
in the Multistate Mortgages, or any Environmental Action relating in any
way to any Loan Party or any of its Subsidiaries, in each case whether or
not such investigation, litigation or proceeding is brought by any Loan
Party, its directors, shareholders or creditors or an Indemnified Party, or
any Indemnified Party which is otherwise a party thereto, and whether or
not the transactions contemplated hereby are consummated, except to the
extent such claim, damage, loss, liability or expense is found in a final,
non-appealable judgment by a court of competent jurisdiction to have
resulted from such Indemnified Party's gross negligence or willful
misconduct. Notwithstanding the preceding sentence, the Borrower shall have
no obligation thereunder to indemnify and hold harmless any Indemnified
Party from and against any claim, damages, loss, liability or expense that
would have been incurred by, or asserted or awarded against such
Indemnified Party independently of the Multistate Loan Documents or such
Indemnified Party's participation in the transactions contemplated hereby
and thereby. The Borrower also agrees that no Indemnified Party shall have
any liability (in contract, tort or otherwise) to the Borrower arising out
of or otherwise relating to any of the transactions contemplated herein or
in any other Multistate Loan Document or the actual use of the proceeds of
the Multistate Advances except to the extent that such liability is found
in a final, non-appealable judgment by a court of competent jurisdiction to
have resulted from such Indemnified Party's gross negligence or willful
misconduct.
(c) Nothing in Section 9.04(a) or 9.04(b) shall be construed to
require the Borrower to pay any costs and expenses described in Section
9.04(a) or indemnify and hold harmless any Indemnified Party from and
against any claims, damages, losses, liabilities and expenses described in
Section 9.04(b) to the extent the foregoing relate to any of the California
Mortgages or the California Assignments of Leases.
(d) If any payment of principal of, or Conversion of, any Eurodollar
Rate Advance is made by the Borrower to or for the account of a Lender
(including as a result of distributions by the Agent of Net Cash Proceeds
of Multistate Collateral paid by the Borrower to the Agent pursuant to
Section 12 of the Multistate Security Agreement) other than on the last
day of the Interest Period for such Eurodollar Rate Advance, as a result of
a payment pursuant to Section 2.07 or 2.08(e), acceleration of the maturity
of the Multistate Notes pursuant to Section 7.01, or for any other reason,
or by an Eligible Assignee to a Lender other than on the last day of the
Interest Period for such Eurodollar Rate Advance upon an assignment of
rights and obligations under this Agreement pursuant to Section 9.07 as a
result of a demand by the Borrower pursuant to Section 9.07(a), the
Borrower shall, upon demand by such Lender (with a copy of such demand to
the Agent), pay to the Agent for the account of such Lender any amounts
required to compensate such Lender for any additional losses, costs or
expenses that it may reasonably incur as a result of such payment,
including, without limitation, any loss (including loss of anticipated
profits), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by any Lender to fund or
maintain such Eurodollar Rate Advance.
(e) If any Loan Party fails to pay when due any costs, expenses or
other amounts payable by it under any Multistate Loan Document, including,
without limitation, the fees and expenses of counsel and indemnities, such
amounts may be paid on behalf of such Loan Party by the Agent or any
Lender, in its sole discretion and such Loan Party shall, on demand by the
Agent or such Lender, reimburse the Agent or such Lender for such payment
together with interest, if any, required by the Multistate Loan Documents.
-88-
<PAGE>
SECTION 9.05. Right of Set-off.
----------------
Upon (a) the occurrence and during the continuance of any Event of
Default and (b) the making of the request or the granting of the consent
specified by Section 7.01 to authorize the Agent to declare the Multistate Notes
due and payable pursuant to the provisions of Section 7.01, each Lender and each
of its Affiliates is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and otherwise apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held, and other indebtedness at any time owing by such Lender or such Affiliate
to or for the credit or the account of the Borrower against any and all of the
Obligations of the Borrower, now or hereafter existing under this Agreement and
the Multistate Note or Notes held by such Lender, irrespective of whether such
Lender shall have made any demand under this Agreement or such Multistate Note
or Notes and although such obligations may be unmatured. Each Lender agrees
promptly to notify the Borrower after any such set-off and application of the
occurrence and amount thereof; provided, however, that the failure to give such
-------- -------
notice shall not affect the validity of such set-off and application. The rights
of each Lender and its Affiliates under this Section are in addition to other
rights and remedies (including, without limitation, other rights of set-off)
that such Lender and its Affiliates may have. Notwithstanding the preceding
sentence, (s) no Lender (other than the Lender, if any, that is also the Agent
hereunder) may exercise any right of set-off with respect to any payment owed by
the Borrower to such Lender except with the prior written consent of all the
Lenders and (y) the Lender that is also the Agent hereunder may not exercise any
right of set-off with respect to any payment owed by the Borrower to such Lender
except with the prior written consent of the Required Lenders.
SECTION 9.06. Binding Effect.
--------------
This Agreement shall become effective when and if the Closing Date
shall have occurred, and thereafter shall be binding upon and inure to the
benefit of the Borrower, the Agent and each Lender, and their respective
successors and assigns, except that the Borrower shall not have the right to
-------
assign its rights hereunder, or any interest herein or in any of the other
Multistate Loan Documents, without the prior written consent of the Lenders.
SECTION 9.07. Assignments and participations.
------------------------------
(a) Each Lender may (and, i f demanded by the Borrower in the event of
an occurrence that would require such Borrower to make a payment under
Section 2.08(a), Section 2.08(b) (each as supplemented by Section 2.08(c),
subject to Section 9.07(b)) or Section 2.10(a) or Section 2.10(c) of this
Agreement or the California Loan Agreement, or that requires the Eurodollar
Rate Advances to Convert into Base Rate Advances under Section 2.08(e), in
each case upon at least 30 days' notice to the Lender and such Agent, such
Lender will) assign to one or more banks or other entities all or a portion
of its rights and obligations under this Agreement (including, without
limitation, all or a portion of the Multistate Advances owing to it and the
Multistate Note or Notes held by it) and the California Loan Agreement;
provided, however, that (i) each such assignment shall be of a uniform, and
-------- -------
not a varying percentage of all rights and obligations under and in respect
of each of this Agreement and the California Loan Agreement and each such
assignment shall be of the same percentage of all rights and obligations
under and in respect of each of this Agreement and the California Loan
Agreement, (ii) except in the case of an assignment to a Person that,
immediately prior to such assignment, was a Lender or an assignment of all
of a Lender's rights and obligations under this Agreement and the
California Loan Agreement, the aggregate unpaid principal amount of the
Combined Advances owing to the assigning Lender being assigned pursuant to
each such assignment (determined as of the date of the Assignment and
Acceptance with respect to such assignment) shall in no event be less than
$5,000,000 and shall be an integral multiple of $1,000,000, (iii) each such
assignment shall be to an Eligible Assignee, (iv) each such assignment made
as a result of a
-89-
<PAGE>
demand by the Borrower pursuant to this Section 9.07(a) shall be arranged
by the Borrower after consultation with the Agent and shall be either an
assignment of all the rights and obligations of the assigning Lender under
this Agreement and the California Loan Agreement or an assignment of a
portion of such rights and obligations made concurrently with another such
assignment or other assignments that together cover all of the rights and
obligations of the assigning Lender under this Agreement and the California
Loan Agreement, (v) the Lender shall not be obligated to make any such
assignment as a result of a demand by the Borrower pursuant to this Section
9.07(a) unless and until such Lender shall have received one or more
payments from either the Borrower or one or more Eligible Assignees in an
aggregate amount at least equal to the aggregate outstanding principal
amount of the Multistate Advances owing to such Lender, together with
accrued interest thereon to the date of payment of such principal amount,
all other amounts payable to such Lender under this Agreement and all
amounts described in Section 9.07(a)(v) of the California Loan Agreement,
(vi) unless any matter determined in Section 7.01(1) shall have occurred
and be continuing, if a Lender proposes to assign all or a portion of its
rights and obligations to a fund described in clause (d) of the definition
of "Eligible Assignee" for a purchase price that is less than 75% of the
aggregate unpaid principal amount of the Multistate Advances owing to such
Lender proposed to be assigned, such Lender may not make such assignment
unless the Lender notifies the Borrower that such Lender proposes to make
an assignment for a purchase price that is less than 75% of such amount
(provided that the Lender shall not be required to advise the Borrower of
--------
the purchase price therefor) and obtains the Borrower's prior consent to
such assignment, which the Borrower will not unreasonably withhold, and
(vii) the parties to each such assignment shall execute and deliver to the
Agent, for its acceptance and recording in the Register, an Assignment and
Acceptance, together with any Multistate Note or Notes, subject to such
assignment and a processing and recordation fee of $2,500, which fee shall
cover the assignments under both this Agreement and the California Loan
Agreement. Upon such execution, delivery, acceptance and recording, from
and after the effective date specified in such Assignment and Acceptance,
(x) the assignee thereunder shall be a party hereto and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, have the rights and obligations of a Lender
hereunder and (y) the Lender assignor thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's
rights and obligations under this Agreement, such Lender shall cease to be
a party hereto). No assignment made by any Lender pursuant to a demand by
the Borrower described in the first parenthetical of the first sentence of
this Section 9.07(a) will relieve the Borrower from its obligation to pay
such Lender under this Agreement the payments referred to in such
parenthetical.
(b) By executing and delivering an Assignment and Acceptance, both the
Lender assignor thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility, with respect to
any statements, warranties or representations made in or in connection with
this Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or any other instrument
or document furnished pursuant hereto; (ii) such assigning Lender makes no
representation or warranty and assumes no responsibility, with respect to
the financial condition of the Borrower or the performance or observance by
the Borrower of any of its obligations under this Agreement or any other
instrument or document furnished pursuant hereto; (iii) such assignee
confirms that it has received a copy of this Agreement, together with
copies of the financial statements referred to in Section 5.01(f) and such
other documents and
-90-
<PAGE>
information as it has deemed appropriate to make its own credit analysis
and decision to enter into such Assignment and Acceptance; (iv) such
assignee will, independently and without reliance upon the Agent, such
assigning Lender or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement;
(v) such assignee confirms that it is an Eligible Assignee; (vi) such
assignee appoints and authorizes the Agent to take such action as agent on
its behalf, and to exercise such powers and discretion under this Agreement
as are delegated to the Agent by the terms hereof, together with such
powers and discretion as are reasonably incidental thereto; and (vii) such
assignee agrees that it will perform, in accordance with their terms, all
of the obligations that by the terms of this Agreement are required to be
Performed by it as a Lender.
(c) The Agent shall maintain at its address referred to in Section
9.02 a copy of each Assignment and Acceptance delivered to and accepted by
it, and a register for the recordation of the names and addresses of the
Lenders and principal amount of the Multistate Advances owing to each
Lender from time to time (the Register-). The entries in the Register shall
be conclusive and binding for all purposes, absent manifest error, and the
Borrower, the Agent and the Lenders may treat each Person whose name is
recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection and copying by
the Borrower or any Lender, at any reasonable time and from time to time,
upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an Eligible Assignee, together with any Multistate
Note or Notes subject to such assignment, the Agent shall, if such
Assignment and Acceptance has been completed and is in substantially the
form of Exhibit C hereto, (i) accept such Assignment and Acceptance, (ii)
record the information contained therein in the Register and (iii) give
prompt notice thereof to the Borrower. Within five Business Days after its
receipt of such notice, the Borrower, at its own expense, shall execute and
deliver to the Agent, in exchange for the surrendered Multistate Note or
Notes, a new Multistate Note to the order of such Eligible Assignee in an
amount equal to the aggregate unpaid amount of the Multistate Advances
assigned to it pursuant to such Assignment and Acceptance and, if the
assigning Lender has not assigned its rights hereunder in respect of the
aggregate unpaid principal amount of the Multistate Advances owing to such
Lender, a new Multistate Note to the order of the assigning Lender in an
amount equal to the aggregate unpaid amount of the Multistate Advances
retained by it. Such new Multistate Note or Notes (including any new
Multistate Note to the order of the assigning Lender) shall be in an
aggregate principal amount equal to the aggregate principal amount of the
Multistate Advances owing to the assignee Lender (determined as of the date
of the Assignment and Acceptance with respect to such assignment), shall be
dated the effective date of such Assignment and Acceptance and shall
otherwise be in substantially the form of Exhibit C hereto. If the Agent
has not remitted the surrendered Multistate Note or Notes to the Borrower
on or before the time the Borrower executes and delivers to the Agent a new
Multistate Note or Notes prepared in accordance with this Section 9.07(d),
the Agent will promptly after the delivery of such new Multistate Note or
Notes by the Borrower remit to the Borrower the surrendered Multistate Note
or Notes. Each surrendered Multistate Note or Notes shall be marked
"Canceled'' or be marked with words to the same effect.
(e) Each Lender may sell participations in or to all or a portion of
its rights and obligations under this Agreement (including, without
limitation, all or a portion of the Multistate Advances owing to it and the
Multistate Note or Notes held by it) and the California Loan Agreement;
provided, however, that (i) each such participation shall be of the same
-------- -------
percentage of such Lender's rights and obligations under each of this
Agreement
-91-
<PAGE>
and the California Loan Agreement, (ii) each such participation other than
a participation of all of a Lender's rights and obligations under this
Agreement and the California Loan Agreement, at the time such participation
is sold, shall in no event be in less than $5,000,000 aggregate principal
amount of such Lender's rights and obligations under each of this Agreement
and the California Loan Agreement, (iii) such Lender's obligations under
this Agreement shall remain unchanged, (iv) such Lender shall remain solely
responsible to the other parties hereto for the performance of such
obligations, (v) such Lender shall remain the holder of any such Multistate
Note for all purposes of this Agreement, (vi) the Borrower, the Agent and
the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement and (vii) no participant under any such participation shall have
any right to approve any amendment or waiver of any provision of any
Multistate Loan Document, or any consent to any departure by any Loan Party
therefrom or any other decision, except to the extent that such amendment,
waiver, consent or decision requires the consent of all the Lenders
pursuant to Section 9.01.
(f) Any Lender may, in connection with any assignment or participation
or proposed assignment or participation pursuant to this Section 9.07,
disclose to the assignee or participant or proposed assignee or
participant, any information relating to the Borrower furnished to such
Lender by or on behalf of the Borrower; provided, however, that prior to
-------- -------
any such disclosure, the assignee or participant or proposed assignee or
participant shall agree to preserve the confidentiality of any Confidential
Information received by it from such Lender.
(g) Notwithstanding any other provision set forth in this Agreement,
any Lender may at any time create a security interest in all or any portion
of its rights under this Agreement (including, without limitation, the
Multistate Note or Notes held by it) in favor of any Federal Reserve Bank,
in accordance with Regulation A of the Board of Governors of the Federal
Reserve System, provided that such Lender at such time also creates a
--------
security interest in the same proportion of its rights under the California
Loan Agreement in favor of such Federal Reserve Bank. Each Lender that
creates a security interest in all or a portion of its rights under this
Agreement as described in this section 9.07(g) agrees to give the Borrower
prompt written notice thereof, provided that the failure of any Lender to
--------
give such notice shall not have any effect on any such security interest.
SECTION 9.08. Obligations Several.
--------------------
The obligation of each Lender hereunder is several, and neither the
Agent nor any Lender shall be responsible for the obligation of any other Lender
hereunder, nor will the failure of any Lender to perform any of its obligations
hereunder relieve the other Lenders from the performance of their respective
obligations hereunder. Nothing contained in this Agreement or any other
Multistate Loan Document, and no action taken by the Lenders hereto or thereto,
shall be deemed to constitute the Lenders a partnership, association, joint
venture or other entity.
SECTION 9.09. Headings.
--------
Article and Section headings in this Agreement and the other Multistate
Loan Documents are included for convenience of reference only, and shall not
constitute a part of this Agreement for any other purpose.
SECTION 9.10. Severability of Provisions.
--------------------------
Any provision of this Agreement or any other Multistate Loan Document
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the
-92-
<PAGE>
extent of such prohibition or unenforceability, without invalidating the
remaining provisions hereof or thereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
SECTION 9.11. Consents of the Lenders Associated with Reorganization
------------------------------------------------------
and Amendment and Restatement.
- -----------------------------
On and as of the Closing Date, the Lenders consent (including for the
benefit of Marriott International and the Tenant) to the consummation of the
following transactions constituting part of the Reorganization: (a) the transfer
of the issued and outstanding shares of capital stock of the Tenant from Host
Marriott to Marriott International; (b) the transfer of the issued and
outstanding shares of capital stock of each International Ground Lessor, a
wholly owned direct or indirect Subsidiary of Marriott Corporation immediately
prior to the Reorganization, to Marriott International; and (c) the provision by
Marriott International of the Backup Debt Service Guaranty. In addition, the
Lenders agree that from and after the Closing Date the Obligations of the Loan
Parties in respect of the Multistate Advances shall not be governed by the Loan
Documents (as defined in the 1988 Multistate Loan Agreement) but shall be
governed by the Multistate Loan Documents.
SECTION 9.12. Agreement of Lenders Not to Object and Waiver.
---------------------------------------------
The Lenders agree that, if a voluntary or involuntary case is
commenced by or against the Borrower under the Bankruptcy Code, they will not
object to a proposed provision to the Borrower of a debtor-in-possession
financing not in excess of $2,000,000 principal amount secured by Liens on the
Multistate Collateral senior to the Liens of the Lenders. In consideration of
Borrower's conversion of the 1986 Management Agreement to the Hotel Lease; the
Lenders further waive any right, subsequent to the first to occur of (a) an
acceleration of the indebtedness due under the Multistate Notes in accordance
with the provisions of Article VII, (b) the occurrence and continuation for one
hundred eighty (180) days of a default by the Borrower in paying any principal
or interest due hereunder or (c) the date for the final scheduled principal
payment on the Multistate Notes, to seek a dismissal of any bankruptcy case
commenced by the Borrower or of any involuntary bankruptcy case consented to, or
converted by, the Borrower under the Bankruptcy Code, or the agreement of the
Borrower (however evidenced) to be subject to an involuntary case against the
Borrower, and the Lenders agree not to support such a challenge by any other
Person, on grounds that such a case was commenced in bad faith, or that Borrower
has no reasonable likelihood of rehabilitation under the Bankruptcy Code;
provided, however, that the Lenders reserve all other rights in any such
- -------- -------
proceeding, including without limitation the right (s) to seek a reduction in or
termination of any period during which the debtor would have an exclusive right
to file a plan of reorganization and (y) to seek to convert to a case under
chapter 7 of the Bankruptcy Code for any reason other than that the case was
commenced in bad faith.
SECTION 9.13. Governing Law.
-------------
This Agreement and the Multistate Notes shall be governed by, and
construed in accordance with, the laws of the State of New York.
SECTION 9.14. Execution in Counterparts.
-------------------------
This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original, and all of which taken together
shall constitute one and the same agreement. Delivery of an executed counterpart
of a signature page to this Agreement by telecopier shall be effective as
delivery of a manually executed counterpart of this Agreement. Any party hereto
that delivers an executed counterpart of a signature page to this Agreement by
telecopier shall promptly thereafter deliver to the Agent a manually executed
counterpart of this Agreement.
-93-
<PAGE>
SECTION 9.15. Confidentiality.
---------------
Neither the Agent nor any Lender shall disclose any Confidential
Information to any Person without the consent of the Borrower, other than (a) to
the Agent's or such Lender's Affiliates and their officers, directors,
employees, agents and advisors and to actual or prospective Eligible Assignees
and participants, and then only on a confidential basis, (b) as required by any
law, rule or regulation or judicial process and (c) as requested or required by
any state, federal or foreign authority or examiner regulating banks or banking.
SECTION 9.16. Consent to Jurisdiction.
-----------------------
(a) The Borrower hereby irrevocably submits to the jurisdiction of any
New York State or Federal court sitting in New York City, and any appellate
court from any thereof in any action or proceeding arising out of or
relating to this Agreement or the Multistate Notes, and the Borrower hereby
irrevocably agrees that all claims in respect of such action or proceeding
may be heard and determined in such New York State court or in such Federal
court. The Borrower hereby irrevocably waives, to the fullest extent it may
effectively do so, the defense of an inconvenient forum to the maintenance
of such action or proceeding. The Borrower irrevocably consents to the
service of any and all process in any such action or proceeding, by the
mailing of copies of such process to the Borrower at its address specified
in Section 9.02. The Borrower agrees that a final judgment in any such
action or proceeding shall be conclusive, and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by
law.
(b) Nothing in this Section 9.16 shall affect the right of any Lender
or the Agent to serve legal process in any other manner permitted by law,
or affect the right of any Lender or the Agent to bring any action or
proceeding against the Borrower or its property in the courts of other
jurisdictions.
SECTION 9.17. Release.
-------
The Borrower hereby forever releases and discharges the Agent and each
Lender, and their respective Subsidiaries, Affiliates, officers, directors,
employees and agents (including attorneys and accountants) and participants,
successors and assigns, if any (the "Releasees"), from any and all of their
Obligations under the 1986 Multistate Loan Documents and the 1988 Multistate
Loan Documents and from any and all claims, debts, demands, allegations,
actions, causes of action, suits, duties, controversies, agreements, promises,
omissions, variances, damages, judgments, costs, expenses, losses, obligations,
liabilities or rights whatsoever, known or unknown, whether in law, equity or
otherwise, absolute or contingent, determined or speculative, which the Borrower
or any of its Affiliates ever have had, may have now or in the future may, can
or shall have against any Releasee relating to, based upon or arising out of the
execution, delivery, performance, administration or enforcement of (i) the 1986
Multistate Loan Documents, the 1986 Multistate Loans and the Lenders' ownership
of the Notes (as defined in the 1986 Multistate Loan Agreement), (ii) the 1988
Multistate Loan Documents, the 1988 Multistate Loans and the Lenders' ownership
of the Notes (as defined in the 1988 Multistate Loan Agreement) and (iii) any of
the transactions contemplated thereby, any act or omission of any Releasee or
other Person in connection therewith or relating thereto, including efforts to
obtain payment thereof or thereunder.
SECTION 9.18. Waiver of One Action Rule. Etc.
--------------------------------
In consideration of the agreement of the Banks (a) to extend the
maturity date of the loans made under the 1988 Multistate Loan Agreement from
June 15, 1993 to June 15, 1997 as provided in this Agreement and (b) to
otherwise amend and restate the 1988 Multistate Loan
-94-
<PAGE>
Agreement on the terms and conditions set forth herein, as a result of which
certain "Events of Default" under and as defined in the 1988 Multistate Loan
Agreement are being waived by the Banks, and to confirm the intention of the
parties that the Lenders shall be entitled to recourse against all Multistate
Collateral, under any and all circumstances, as security for all Obligations of
the Borrower under the Multistate Loan Documents, each of the Borrower and, by
execution hereof on behalf of the Borrower, the General Partner, hereby waives
all rights, benefits and defenses under Section 726 of the California Code of
Civil Procedure and any statute or law in any other jurisdiction having similar
effect. Without limitation of the foregoing, each of the Borrower and the
General Partner agrees (i) that neither the Liens in favor of the Agent and the
Lenders with respect to any Multistate Collateral (whether granted by the
Borrower or any other Person), nor the enforceability thereof, shall be (or be
deemed to be) waived, lost, released, forfeited or otherwise impaired as a
result of (A) any "action" (within the meaning of Section 726 of the California
Code of Civil Procedure) that may be taken by the Agent, any of the Lenders or
any other Person, or that may otherwise occur, in connection with the
enforcement of such Obligations (or any Obligations of the Borrower under the
California Loan Documents) or in connection with the enforcement by any
guarantor or any other Person of rights of subrogation, reimbursement,
exoneration, contribution of indemnification against the Borrower, the General
Partner or any other Person (including, without limitation, the entry of any
judgment against the Borrower, the General Partner, any guarantor or any other
Person in connection with the enforcement of such Obligations (or any
Obligations of the Borrower under the California Loan Documents) or other
rights), or (B) any other act or omission (whether or not the same constitutes
an "action" within the meaning of Section 726 of the California Code of Civil
Procedure) by the Agent, any of the Lenders, any guarantor or any other Person,
whether in connection with the enforcement of such Obligations (or any
Obligations of the Borrower under the California Loan Documents) or other rights
or otherwise (including, without limitation, the enforcement of any rights or
Liens under any Multistate Loan Document or California Loan Document, the
commencement of any legal action by any Person, or the exercise of any right of
setoff or any other right, power or remedy, whether contractual or otherwise),
(ii) that if and to the extent that the occurrence of any of the matters
described in clause (i) above would otherwise (in the absence of this Section
9.18) give rise to (A) any claim that any of the Liens in favor of the Agent and
the Lenders with respect to any Multistate Collateral, or the enforceability
thereof, is or should be (or is deemed or should be deemed to be) waived, lost,
released, forfeited or otherwise impaired, or (B) any defense to the enforcement
of such Liens, each of the Borrower and the General Partner hereby knowingly
waives any such claim or defense, and (iii) subject to Section 2.12, that the
Agent and the Lenders shall not be required to enforce rights with respect to
any Multistate Collateral or any other security prior to obtaining a judgment
against the Borrower, the General Partner or other Person with respect to any
obligations secured thereby.
SECTION 9.19. Waiver of Jury Trial. Etc.
---------------------------
Each of the Borrower, the Agent and the Lenders hereby irrevocably
waives all right to trial by jury in any action, proceeding or counterclaim
(whether based on contract, tort or otherwise) arising out of or relating to any
of the Multistate Loan Documents, the Multistate Advances or the actions of the
Agent or any Lender in the negotiation, administration, performance or
enforcement thereof. In addition, the Borrower hereby irrevocably waives in any
such action, proceeding or counterclaim (a) any claim for consequential or
special damages or (b) the right to assert any set-off or counterclaim.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
Borrower
--------
-95-
<PAGE>
COURTYARD BY MARRIOTT LIMITED
PARTNERSHIP
By: CBM One Corporation
General Partner
By:
----------------------------------
Title:
Agent
-----
CITIBANK, N.A., as Agent
By:
----------------------------------
Title:
Banks
-----
BANKERS TRUST COMPANY
By:
----------------------------------
Title:
BANK OF AMERICA NATIONAL
TRUST & SAVINGS ASSOCIATION
By:
----------------------------------
Title:
THE BANK OF NOVA SCOTIA
By:
----------------------------------
Title:
-96-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
Borrower
--------
COURTYARD BY MARRIOTT LIMITED
PARTNERSHIP
By: CBM One Corporation
General Partner
By:
----------------------------------
Title:
Agent
-----
CITIBANK, N.A., as Agent
By:
----------------------------------
Title:
Banks
-----
BANKERS TRUST COMPANY
By:
----------------------------------
Title:
BANK OF AMERICA NATIONAL
TRUST & SAVINGS ASSOCIATION
By:
----------------------------------
Title:
THE BANK OF NOVA SCOTIA
By:
----------------------------------
Title:
-97-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
Borrower
--------
COURTYARD BY MARRIOTT LIMITED
PARTNERSHIP
By: CBM One Corporation
General Partner
By:
----------------------------------
Title:
Agent
-----
CITIBANK, N.A., as Agent
By:
----------------------------------
Title:
Banks
-----
BANKERS TRUST COMPANY
By:
----------------------------------
Title:
BANK OF AMERICA NATIONAL
TRUST & SAVINGS ASSOCIATION
By:
----------------------------------
Title:
THE BANK OF NOVA SCOTIA
By:
----------------------------------
Title:
-98-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
Borrower
--------
COURTYARD BY MARRIOTT LIMITED
PARTNERSHIP
By: CBM One Corporation
General Partner
By:
----------------------------------
Title:
Agent
-----
CITIBANK, N.A., as Agent
By:
----------------------------------
Title:
Banks
-----
BANKERS TRUST COMPANY
By:
----------------------------------
Title:
BANK OF AMERICA NATIONAL
TRUST & SAVINGS ASSOCIATION
By:
----------------------------------
Title:
THE BANK OF NOVA SCOTIA
By:
----------------------------------
Title:
CAISSE NATIONALE DE CREDIT
AGRICOLE
By:
----------------------------------
Title:
CITIBANK, N.A.
By:
----------------------------------
Title:
-99-
<PAGE>
CREDIT COMMERCIAL DE FRANCE
By:
----------------------------------
Title:
THE DAIWA BANK, LIMITED, NEW YORK
BRANCH
By:
----------------------------------
Title:
FIRST INTERSTATE BANK OF CALIFORNIA
By:
----------------------------------
Title:
THE MITSUI TRUST & BANKING CO., LTD.
By:
----------------------------------
Title:
NATIONAL WESTMINSTER BANK Plc
By:
----------------------------------
Title:
CAISSE NATIONALE DE CREDIT
AGRICOLE
By:
----------------------------------
Title:
CITIBANK, N.A.
By:
----------------------------------
Title:
CREDIT COMMERCIAL DE FRANCE
By:
----------------------------------
Title:
THE DAIWA BANK, LIMITED, NEW YORK
BRANCH
By:
----------------------------------
Title:
-100-
<PAGE>
FIRST INTERSTATE BANK OF CALIFORNIA
By:
----------------------------------
Title:
THE MITSUI TRUST & BANKING CO., LTD.
By:
----------------------------------
Title:
NATIONAL WESTMINSTER BANK Plc
By:
----------------------------------
Title:
CAISSE NATIONALE DE CREDIT
AGRICOLE
By:
----------------------------------
Title:
CITIBANK, N.A.
By:
----------------------------------
Title:
CREDIT COMMERCIAL DE FRANCE
By:
----------------------------------
Title:
THE DAIWA BANK, LIMITED, NEW YORK
BRANCH
By:
----------------------------------
Title:
FIRST INTERSTATE BANK OF CALIFORNIA
By:
----------------------------------
Title:
THE MITSUI TRUST & BANKING CO., LTD.
By:
----------------------------------
Title:
-101-
<PAGE>
NATIONAL WESTMINSTER BANK Plc
By:
----------------------------------
Title:
CAISSE NATIONALE DE CREDIT
AGRICOLE
By:
----------------------------------
Title:
CITIBANK, N.A.
By:
----------------------------------
Title:
CREDIT COMMERCIAL DE FRANCE
By:
----------------------------------
Title:
THE DAIWA BANK, LIMITED, NEW YORK
BRANCH
By:
----------------------------------
Title:
FIRST INTERSTATE BANK OF CALIFORNIA
By:
----------------------------------
Title:
THE MITSUI TRUST & BANKING CO., LTD.
By:
----------------------------------
Title:
NATIONAL WESTMINSTER BANK Plc
By:
----------------------------------
Title:
CAISSE NATIONALE DE CREDIT
AGRICOLE
-102-
<PAGE>
By:
----------------------------------
Title:
CITIBANK, N.A.
By:
----------------------------------
Title:
CREDIT COMMERCIAL DE FRANCE
By:
----------------------------------
Title:
THE DAIWA BANK, LIMITED, NEW YORK
BRANCH
By:
----------------------------------
Title:
FIRST INTERSTATE BANK OF CALIFORNIA
By:
----------------------------------
Title:
THE MITSUI TRUST & BANKING CO., LTD.
By:
----------------------------------
Title:
NATIONAL WESTMINSTER BANK Plc
By:
----------------------------------
Title:
CAISSE NATIONALE DE CREDIT
AGRICOLE
By:
----------------------------------
Title:
CITIBANK, N.A.
By:
----------------------------------
Title:
CREDIT COMMERCIAL DE FRANCE
-103-
<PAGE>
By:
----------------------------------
Title:
THE DAIWA BANK, LIMITED, NEW YORK
BRANCH
By:
----------------------------------
Title:
FIRST INTERSTATE BANK OF CALIFORNIA
By:
----------------------------------
Title:
THE MITSUI TRUST & BANKING CO., LTD.
By:
----------------------------------
Title:
NATIONAL WESTMINSTER BANK Plc
By:
----------------------------------
Title:
CAISSE NATIONALE DE CREDIT
AGRICOLE
By:
----------------------------------
Title:
CITIBANK, N.A.
By:
----------------------------------
Title:
CREDIT COMMERCIAL DE FRANCE
By:
----------------------------------
Title:
THE DAIWA BANK, LIMITED, NEW YORK
BRANCH
By:
----------------------------------
Title:
-104-
<PAGE>
FIRST INTERSTATE BANK OF CALIFORNIA
By:
----------------------------------
Title:
THE MITSUI TRUST & BANKING CO., LTD.
By:
----------------------------------
Title:
NATIONAL WESTMINSTER BANK Plc
By:
----------------------------------
Title:
NATIONSBANK OF GEORGIA, N.A.
By:
----------------------------------
Title:
NATWEST USA
By:
----------------------------------
Title:
SEATTLE FIRST NATIONAL BANK
By:
----------------------------------
Title:
SUMITOMO TRUST & BANKING COMPANY,
LTD., NEW YORK BRANCH
By:
----------------------------------
Title:
THE TOYO TRUST & BANKING CO., LTD.
By:
----------------------------------
Title:
UNIBANK A/S,
NEW YORK BRANCH
By:
----------------------------------
Title:
-105-
<PAGE>
NATIONSBANK OF GEORGIA, N.A.
By:
----------------------------------
Title:
NATWEST USA
By:
----------------------------------
Title:
SEATTLE FIRST NATIONAL BANK
By:
----------------------------------
Title:
SUMITOMO TRUST & BANKING COMPANY,
LTD., NEW YORK BRANCH
By:
----------------------------------
Title:
THE TOYO TRUST & BANKING CO., LTD.
By:
----------------------------------
Title:
UNIBANK A/S,
NEW YORK BRANCH
By:
----------------------------------
Title:
-106-
<PAGE>
NATIONSBANK BANK OF GEORGIA, N.A.
By:
----------------------------------
Title:
NATWEST USA
By:
----------------------------------
Title:
SEATTLE FIRST NATIONAL BANK
By:
----------------------------------
Title:
SUMITOMO TRUST & BANKING COMPANY,
LTD., NEW YORK BRANCH
By:
----------------------------------
Title:
THE TOYO TRUST & BANKING CO., LTD.
By:
----------------------------------
Title:
UNIBANK A/S,
NEW YORK BRANCH
By:
----------------------------------
Title:
NATIONSBANK OF GEORGIA, N.A.
By:
----------------------------------
Title:
NATWEST USA
By:
----------------------------------
Title:
SEATTLE FIRST NATIONAL BANK
By:
----------------------------------
Title:
-107-
<PAGE>
SUMITOMO TRUST & BANKING COMPANY,
LTD., NEW YORK BRANCH
By:
----------------------------------
Title:
THE TOYO TRUST & BANKING CO., LTD.
By:
----------------------------------
Title:
UNIBANK A/S,
NEW YORK BRANCH
By:
----------------------------------
Title:
NATIONSBANK OF GEORGIA, N.A.
By:
----------------------------------
Title:
NATWEST USA
By:
----------------------------------
Title:
SEATTLE FIRST NATIONAL BANK
By:
----------------------------------
Title:
SUMITOMO TRUST & BANKING COMPANY,
LTD., NEW YORK BRANCH
By:
----------------------------------
Title:
THE TOYO TRUST & BANKING CO., LTD.
By:
----------------------------------
Title:
UNIBANK A/S,
NEW YORK BRANCH
-108-
<PAGE>
By:
----------------------------------
Title:
NATIONSBANK OF GEORGIA, N.A.
By:
----------------------------------
Title:
NATWEST USA
By:
----------------------------------
Title:
SEATTLE FIRST NATIONAL BANK
By:
----------------------------------
Title:
SUMITOMO TRUST & BANKING COMPANY,
LTD., NEW YORK BRANCH
By:
----------------------------------
Title:
THE TOYO TRUST & BANKING CO., LTD.
By:
----------------------------------
Title:
UNIBANK A/S,
NEW YORK BRANCH
By:
----------------------------------
Title:
-109-
<PAGE>
NATIONSBANK OF GEORGIA, N.A.
By:
----------------------------------
Title:
NATWEST USA
By:
----------------------------------
Title:
SEATTLE FIRST NATIONAL BANK
By:
----------------------------------
Title:
SUMITOMO TRUST & BANKING COMPANY,
LTD., NEW YORK BRANCH
By:
----------------------------------
Title:
THE TOYO TRUST & BANKING CO., LTD.
By:
----------------------------------
Title:
UNIBANK A/S,
NEW YORK BRANCH
By:
----------------------------------
Title:
-110-
<PAGE>
BAYERISCHE VEREINSBANK AG,
CAYMAN ISLANDS BRANCH
By:
----------------------------------
Title:
-111-
<PAGE>
Exhibit 10.1
AMENDED AND RESTATED DEBT SERVICE GUARANTY
Dated April 7, 1994
made by
HOST MARRIOTT CORPORATION,
as Guarantor,
---------
in favor of
THE LENDERS PARTY TO THE 1994 LOAN AGREEMENTS
REFERRED TO HEREIN
and
CITIBANK, N.A.,
as Agent
-- -----
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
1. GUARANTY; LIMITATION OF LIABILITY................................... 2
2. GUARANTY ABSOLUTE................................................... 2
3. WAIVERS............................................................. 3
4. PAYMENTS FREE AND CLEAR OF TAXES, ETC............................... 5
5. REPRESENTATIONS AND WARRANTIES...................................... 6
6. AFFIRMATIVE COVENANTS............................................... 8
7. NEGATIVE COVENANTS.................................................. 10
8. AMENDMENTS, ETC..................................................... 10
9. NOTICES, ETC........................................................ 11
10. NO WAIVER; REMEDIES................................................. 11
11. WAIVER OF JURY TRIAL................................................ 11
12. CONTINUING GUARANTY; ASSIGNMENTS UNDER THE 1994 LOAN
AGREEMENTS........................................................ 11
13. GOVERNING LAW....................................................... 12
14. CONSENT TO JURISDICTION............................................. 12
15. RELEASE............................................................. 12
16. INSTRUMENT FOR PAYMENT OF MONEY ONLY................................ 12
</TABLE>
Exhibit A Form of Host Subordinated Note
-i-
<PAGE>
AMENDED AND RESTATED
DEBT SERVICE GUARANTY
AMENDED AND RESTATED DEBT SERVICE GUARANTY dated April 7, 1994 (the
"Guaranty") made by HOST MARRIOTT CORPORATION, a Delaware corporation formerly
--------
known as MARRIOTT CORPORATION (the "Guarantor"), in favor of the lenders (the
---------
"Lenders") party to the 1994 Loan Agreements (as defined below; the terms
-------
defined in the 1994 Loan Agreements and not otherwise defined herein being used
herein as therein defined) and CITIBANK, N.A. ("Citibank"), as agent (the
--------
"Agent") for the Lenders.
-----
PRELIMINARY STATEMENTS.
(1) Courtyard by Marriott Limited Partnership, a Delaware limited
partnership (the "Borrower"), Citibank, The First National Bank of Chicago
--------
("FNBC"), Bankers Trust Company, Bank of America National Trust and Savings
----
Association, The Bank of Nova Scotia, First Interstate Bank of California and
Security Pacific National Bank (such banks being the "Original Banks"), and
--------------
Citibank and FNBC as agents for the Original Banks entered into (a) a Loan
Agreement, dated as of August 14, 1986 (the "1986 Multistate Loan Agreement") in
------------------------------
which the Original Banks agreed to make loans to the Borrower in the aggregate
principal amount not in excess of $322,050,133 and (b) a Loan Agreement, dated
as of August 14, 1986 (the "1986 California Loan Agreement" and together with
------------------------------
the 1986 Multistate Loan Agreement, the "1986 Loan Agreements") in which the
--------------------
Original Banks agreed to make loans to the Borrower in the aggregate principal
amount not in excess of $51,098,867. The 1986 Loan Agreements were amended and
restated by two Amended and Restated Loan Agreements, each dated as of June 15,
1988 (the "1988 Loan Agreements").
--------------------
(2) In connection with the 1986 Loan Agreements, the Guarantor
executed and delivered a Debt Service Guaranty, dated as of August 14, 1986 (the
"1986 Debt Service guaranty"), providing for, among other things, the guaranty
--------------------------
of payments of principal and interest on the Series B Notes (as defined in the
1986 Debt Service Guaranty) issued under the 1986 Loan Agreements. The 1986
Debt Service Guaranty was amended on June 15, 1988 (the 1986 Debt Service
Guaranty as so amended being the "Amended 1986 Debt Service Guaranty") to
----------------------------------
reflect, among other things, the amendment and restatement of the 1986 Loan
Agreements by the 1988 Loan Agreements and provide for, among other things, the
continuation of the guaranty in respect of the Amended and Restated Series B
Notes (as defined in the Amended 1986 Debt Service Guaranty) issued under the
1988 Loan Agreements in replacement of the Series B Notes and evidencing 1988
Multistate Loan B and 1988 California Loan B.
(3) The Borrower did not make on the June 15, 1993 maturity date the
payments required under the 1988 Loan Agreements. The Borrower has requested
that the Banks, among other things, consent to the reorganization of Marriott
Corporation and extend the maturity date of the loans governed by the 1988 Loan
Agreements. The Banks have agreed to the Borrower's request on the terms and
conditions set forth in each of (a) that certain $304,788,924.58 Second Amended
and Restated Loan Agreement (said Agreement, as it may hereafter be amended or
otherwise modified from time to time, being the "Multistate Loan Agreement"),
-------------------------
dated as of the date hereof, among the Borrower, the Agent and the Lenders and
(b) that certain $48,360,075.42 Second Amended and Restated Loan Agreement (said
Agreement, as it may hereafter be amended or otherwise modified from time to
time, being the "California Loan Agreement" and, together with the Multistate
-------------------------
Loan Agreement, the "1994 Loan Agreements"), dated as of the date hereof, among
--------------------
the Borrower, the Agent and the Lenders.
(4) CBM One Corporation, an indirect, wholly owned Subsidiary of the
Guarantor, is the sole general partner of the Borrower. The Guarantor will
derive substantial direct and indirect benefits from the transactions
contemplated by the 1994 Loan Agreements. It is
<PAGE>
a condition precedent to the effectiveness of each 1994 Loan Agreement that the
Guarantor shall have entered into this amendment and restatement of the Amended
1986 Debt Service Guaranty.
NOW, THEREFORE, in consideration of the premises and in order to
induce the Lenders to enter into each of the Multistate Loan Agreement and the
California Loan Agreement, the Guarantor hereby agrees with the Agent for its
benefit and the ratable benefit of the Lenders that the 1986 Amended Debt
Service Guaranty is amended and restated in its entirety as follows:
SECTION 1. Guaranty; Limitation of Liability. (a) The Guarantor
---------------------------------
hereby unconditionally guarantees the punctual payment when due, whether at
stated maturity, by acceleration or otherwise, of all Obligations of the
Borrower now or hereafter existing under the Combined Loan Documents, whether
for principal, interest, fees, expenses or otherwise (such obligations being the
"Guaranteed Obligations"), and agrees to pay any and all expenses (including
----------------------
reasonable counsel fees and expenses) incurred by the Agent or the Lenders in
enforcing any rights under this Guaranty. Without limiting the generality of
the foregoing, subject to Section l(b) hereof, the Guarantor's liability shall
extend to all amounts that constitute part of the Guaranteed Obligations and
would be owed by the Borrower to the Agent or the Lenders under the Combined
Loan Documents but for the fact that they are unenforceable or not allowable due
to the existence of a bankruptcy, reorganization or similar proceeding involving
the Borrower. In addition, the Guarantor agrees that if the purchase price of
the interest rate cap described in Section 6.01(j) of the 1994 Loan Agreements
exceeds $2,704,019.64 the Guarantor will lend to the Borrower the amount in
excess of $2,704,019.64 necessary to enable the Borrower to fund such purchase.
Any amount required to be loaned pursuant to the preceding sentence shall be
included in the term "Guaranteed Obligations" for purposes of the limitation in
Section l(b) below.
(b) The liability of the Guarantor to pay the Guaranteed Obligations
under this Guaranty, together with the amounts payable by the Guarantor pursuant
to Section 4, shall not exceed in the aggregate at any time an amount equal to
the lesser of (i) $40,000,000 or (ii) (A) $40,000,000 minus (B) the sum of (1)
-----
the aggregate amount of the payments of the Guaranteed Obligations and the
payments under Section 4 (the "Host Tax Obligations") made hereunder by the
--------------------
Guarantor after the date hereof and prior to such time and (2) the aggregate
amount of the payments of the Backup Guaranteed Obligations and the MI Tax
Obligations (each as defined in the Backup Debt Service Guaranty) made under the
Backup Debt Service Guaranty by Marriott International after the date hereof and
prior to such time plus (C) the sum of (1) the aggregate amount of payments of
----
principal and interest of the Host Subordinated Notes (as defined in Section
3(e) below) after the date hereof and prior to such time and (2) the aggregate
amount of payments of principal and interest of the International Subordinated A
Notes (as defined in the Backup Debt Service Guaranty) after the date hereof and
prior to such time. All payments made hereunder shall be made on behalf of the
Borrower directly to the Agent, the Lenders or their order and, as between the
Guarantor and the Borrower, shall be deemed to be advances by the Guarantor to
the Borrower under the Host Subordinated Notes. Payments made hereunder shall
be allocated to the Obligations of the Borrower and the Host Tax Obligations by
the Agent.
SECTION 2. Guaranty Absolute. The Guarantor guarantees that the
-----------------
Guaranteed Obligations will be paid strictly in accordance with the terms of the
Combined Loan Documents, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of the Agent or the Lenders to enforce any Obligations against the
Borrower or any Loan Party other than the Guarantor. The obligations of the
Guarantor under this Guaranty are independent of the Guaranteed Obligations, and
a separate action or actions may be brought and prosecuted against the Guarantor
to enforce this Guaranty, irrespective of whether any action is brought against
the Borrower or whether the Borrower is joined in any such action or actions.
The liability of the Guarantor under this Guaranty shall be absolute and
unconditional irrespective of:
-2-
<PAGE>
(a) any lack of validity or enforceability of any Combined Loan
Document or any agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Guaranteed Obligations, or any other
amendment or waiver of or any consent to departure from any Combined Loan
Document (but subject to Section l(b) hereof) provided that with respect to
--------
any increase in the Guaranteed Obligations resulting from the extension of
additional credit to the Borrower (including amounts paid by the Agent or
any Lender that are deemed to constitute extensions of credit to the
Borrower) this clause (b) shall apply only to any increase in the
Guaranteed Obligations resulting from credit extended to protect and
preserve any Multistate Collateral or California Collateral or the Lien in
favor of the Agent and the Lenders therein;
(c) any taking, exchange, release or non-perfection of any Multistate
Collateral or California Collateral, or any taking, release or amendment or
waiver of or consent to departure from any other guaranty, for all or any
of the Guaranteed Obligations;
(d) any manner of application of Multistate Collateral or California
Collateral, or proceeds thereof, to all or any of the Guaranteed
Obligations, or any manner of sale or other disposition of any Multistate
Collateral or California Collateral for all or any of the Guaranteed
Obligations or any other assets of the Borrower;
(e) any change, restructuring or termination of the partnership
structure or existence of the Borrower or the discharge or other
modification, in bankruptcy or otherwise, of the obligations of the
Borrower;
(f) any failure of the Agent or the Lenders to disclose to the
Guarantor any information relating to the business, condition (financial or
otherwise), operations, performance, properties (including the Hotel
Properties and the respective interest of any Loan Party therein) or
prospects of any other Loan Party now or in the future known to the Agent
or any Lender (the Guarantor waiving any duty on the part of the Agent and
the Lenders to disclose such information); or
(g) any other circumstance (including, without limitation, any
statute of limitations) that might otherwise constitute a defense available
to, or a discharge of, the Borrower or a guarantor.
This Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is rescinded
or must otherwise be returned by the Agent or any Lender upon the insolvency,
bankruptcy or reorganization of the Borrower or otherwise, all as though such
payment had not been made.
SECTION 3. Waivers. (a) The Guarantor hereby waives promptness,
-------
diligence, notice of acceptance and any other notice with respect to any of the
Guaranteed Obligations and this Guaranty and any requirement that the Agent or
any Lender protect, secure, perfect or insure any Lien or any property subject
thereto or exhaust any right or take any action against the Borrower or any
other Person or any Multistate Collateral or California Collateral.
(b) The Guarantor acknowledges that the Agent may, without notice to
or demand upon the Guarantor and without affecting the liability of the
Guarantor under this Guaranty or the enforceability of this Guaranty, foreclose
any California Mortgage, California Assignment of Leases, Multistate Mortgage or
Multistate Assignment of Leases, in each case relating to the interests of one
or more Loan Parties in Hotel Properties located in the State of California (or
elsewhere) by nonjudicial Sale, and the Guarantor hereby waives any defense to
the
-3-
<PAGE>
recovery by the Lenders and the Agent against the Guarantor of any deficiency or
otherwise to the enforcement of this Guaranty after any such nonjudicial sale
and any defense or benefits that may be afforded by Sections 580a, 580d and 726
of the California Code of Civil Procedure or any statute or law in any other
jurisdiction having similar effect. Without limitation on the foregoing, the
Guarantor (i) acknowledges that following, and as a result of, the completion of
any such nonjudicial sale involving interests in real property located in the
State of California, the Guarantor may not be permitted to assert or enforce
rights of subrogation, reimbursement, exoneration, contribution or
indemnification or any other rights or remedies against the Borrower or its
direct or indirect general partners for recovery of amounts paid by the
Guarantor in respect of any Guaranteed Obligations or otherwise (including,
without limitation, the right to enforce any Host Subordinated Note (as defined
below) executed by the Borrower in favor of the Guarantor), (ii) understands
that, in the absence of the waiver set forth in clause (iii) below, the
Guarantor may have a defense to the enforcement by the Agent and the Lenders of,
and to any recovery by the Agent and the Lenders against the Guarantor under,
this Guaranty following any such nonjudicial sale, by reason of the fact that
the Agent's election to proceed with the completion of any such nonjudicial sale
may prevent the Guarantor from asserting or enforcing rights of subrogation,
reimbursement, exoneration, contribution or indemnification or other rights or
remedies as set forth in clause (i) above, (iii) hereby knowingly waives any
such defense and any similar defense that might otherwise be available to the
enforcement of, or to any recovery by the Agent and the Lenders against the
Guarantor under, this Guaranty following any such nonjudicial sale,
notwithstanding the fact that such nonjudicial sale may prevent the Guarantor
from asserting or enforcing such rights and remedies, and (iv) further knowingly
waives any claim against the Agent and the Lenders (including any claim for
recovery or on account of any payments made by the Guarantor under any of the
Combined Loan Documents) and any right to assert any setoff or counterclaim
against the Agent and the Lenders, and agrees that its obligations under the
Combined Loan Documents shall not be impaired or otherwise affected, in either
case as a result of any such loss of subrogation, contribution or reimbursement
rights or other rights or remedies for any reason.
(c) The Guarantor hereby further irrevocably waives any defense or
benefits that may be derived from California Code Sections 2808, 2809, 2810,
2815, 2819, 2845, 2849 or 2850 and comparable provisions of the laws of any
other jurisdiction and all other suretyship defenses it would otherwise have
under the laws of California or any other jurisdiction.
(d) The Guarantor hereby waives any right to revoke this Guaranty,
and acknowledges that this Guaranty is continuing in nature and applies to all
Guaranteed Obligations, whether existing now or in the future.
(e) In consideration of and in exchange for the Guarantor's waiver of
its subrogation and other rights as set forth in this Section 3, the Guarantor
agrees that upon any payment by it hereunder of any amount pursuant to Section 1
hereof or Section 4 hereof the Guarantor's sole right against the Borrower or
the General Partner will be to receive a promissory note of the Borrower in the
form of Exhibit A (a "Host Subordinated Note") in a principal amount not in
----------------------
excess of the amounts so paid by the Guarantor pursuant to Section 1 and Section
4 hereof. The Guarantor further agrees that its rights against the Borrower for
such payment shall be limited as expressly set forth in such Host Subordinated
Note and the Subordination Agreement, and as such rights may be further limited
as set forth in this Section 3.
(f) Except to the extent that the Guarantor is entitled to receive
any payment from the Borrower pursuant to the terms of any Host Subordinated
Note issued in accordance with Section 3(e) and the Subordination Agreement, the
Guarantor hereby irrevocably waives any claim or other rights that it may now or
hereafter acquire against the Borrower that arise from the existence, payment,
performance or enforcement of the Guarantor's Obligations under this Guaranty,
including, without limitation, any right of subrogation, reimbursement,
exoneration, contribution or indemnification and any right to participate in any
claim or remedy of the Agent or
-4-
<PAGE>
any Lender against the Borrower or any Multistate Collateral or California
Collateral, whether or not such claim, remedy or right arises in equity or under
contract, statute or common law, including, without limitation, the right to
take or receive from the Borrower, directly or indirectly, in cash or other
property or by set-off or in any other manner, payment or security on account of
such claim, remedy or right. The Guarantor acknowledges that it will receive
direct and indirect benefits from the financing arrangements contemplated by the
Combined Loan Documents and that the waiver set forth in this subsection is
knowingly made in contemplation of such benefits.
(g) Nothing contained in this Section 3 shall be construed as an
agreement or acknowledgment that the Guarantor's obligations under this Guaranty
shall be governed by or subject to the laws of the State of California.
SECTION 4. Payments Free and Clear of Taxes, Etc. (a) Subject to
-------------------------------------
Section 1(b), any and all payments made by the Guarantor hereunder shall be
made, in accordance with Sections 2.09 and 2.10 of each 1994 Loan Agreement,
free and clear of and without deduction for any and all present or future Taxes.
If the Guarantor shall be required by law to deduct any Taxes from or in respect
of any sum payable hereunder to any Lender or the Agent, (i) the sum payable
shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section) such Lender or the Agent, as the case may be, receives an amount
equal to the sum it would have received had no such deductions been made, (ii)
the Guarantor shall make such deductions and (iii) the Guarantor shall pay the
full amount deducted to the relevant taxation authority or other authority in
accordance with applicable law.
(b) In addition, the Guarantor agrees to pay any present or future
Other Taxes.
(c) Subject to Section 1(b), the Guarantor will indemnify each Lender
and the Agent for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section) paid by such Lender or the Agent (as the case may
be) and any liability (including penalties, interest and expenses) arising
therefrom or with respect thereto, in each case on account of payments made by
the Guarantor under this Guaranty. This payment shall be made within 30 days
from the date such lender or the Agent, as the case may be, makes written demand
therefor.
(d) Within 30 days after the date of any payment of Taxes, the
Guarantor will furnish to the Agent, at its address referred to in the 1994 Loan
Agreements, appropriate evidence of payment thereof. If no Taxes are payable in
respect of any payment hereunder by the Guarantor through an account or branch
outside the United States or on behalf of the Guarantor by a payor that is not a
United States person, the Guarantor will furnish, or will cause such payor to
furnish, to the Agent a certificate from each appropriate taxing authority or
authorities, or an opinion of counsel acceptable to the Agent, in either case
stating that such payment is exempt from or not subject to Taxes.
(e) Without prejudice to the survival of any other agreement of the
Guarantor hereunder, the agreements and obligations of the Guarantor contained
in this Section 4 shall survive the payment in full of the Guaranteed
Obligations and all other amounts payable under this Guaranty.
SECTION 5. Representations and Warranties. On and as of the Closing
------------------------------
Date, the Guarantor hereby represents and warrants as follows:
(a) The Guarantor (A) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, (B) is duly qualified and in good standing as a foreign
corporation in each other jurisdiction in which it owns or
-5-
<PAGE>
leases property or in which the conduct of its business requires it to so
qualify or be licensed, and (C) has all requisite corporation power and
authority to own or lease and operate its properties and to carry on its
business as now conducted and proposed to be conducted. All of the
outstanding capital stock of the Guarantor has been validly issued and is
fully paid and nonassessable.
(b) The General Partner is a direct or indirect wholly owned
Subsidiary of the Guarantor.
(c) The execution, delivery and performance by the Guarantor of this
Guaranty, each other Combined Loan Document and each Related Document to
which it is or is to be a party and the consummation of the Reorganization
and the other transactions contemplated hereby and by the other Combined
Loan Documents are within the Guarantor's corporate powers, have been duly
authorized by all necessary corporate action of the Guarantor, and do not
(A) contravene the Guarantor's charter or by-laws, (B) violate any law
(including, without limitation, the Securities Exchange Act of 1934 and the
Racketeer Influenced and Corrupt Organizations Chapter of the Organized
Crime Control Act of 1970), rule, regulation (including, without
limitation, Regulation X of the Board of Governors of the Federal Reserve
System), order, writ, judgment, injunction, decree, determination, award,
franchise or permit binding on or affecting the Guarantor or any of its
Subsidiaries or any of their properties, (C) conflict with or result in the
breach of, or constitute a default under, any contract, loan agreement,
deed of trust, lease or other instrument binding on or affecting the
Guarantor or any of its Subsidiaries or any of their properties except, in
the case of the Reorganization, such conflicts, breaches and defaults that
would not have a Host Material Adverse Effect or (D) except for the Liens
created by the Multistate. Collateral Documents and the California
Collateral Documents, result in or require the creation or imposition of
any Lien upon or with respect to any of the properties of the Guarantor or
any of its Subsidiaries. Neither the Guarantor nor any of its Subsidiaries
is in violation of any such law, rule, regulation, order, writ, judgment,
injunction, decree, determination, award, franchise or permit or in breach
of any such contract, loan agreement, indenture, mortgage, deed of trust,
lease or other instrument the violation or breach of which would be
reasonably likely to have a Host Material Adverse Effect. As used in this
Guaranty, "Host Material Adverse Effect" means a material adverse effect on
----------------------------
(a) the business, condition (financial or otherwise), operations,
performance, properties or prospects of Host Marriott, in each case taken
as a whole, (b) the rights and remedies of the Agent or any Lender under
any Combined Loan Document or Related Document to which Host Marriott is or
is to be a party or (c) the ability of the Guarantor to perform its
Obligations under any Combined Loan Document or Related Document to which
it is or is to be a party.
(d) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body or any other
third party is required for (i) the due execution, delivery, recordation,
filing or performance by the Guarantor of this Guaranty, any other Combined
Loan Document or any Related Document to which it is or is to be a party,
or for the consummation of the transactions contemplated hereby or thereby
or (ii) the exercise by the Agent or any Lender of its rights with respect
to the Guarantor and its assets under the Combined Loan Documents to which
the Guarantor is or is to be a party, except for (A) the authorizations,
approvals, actions, notices and filings to be accomplished under Article
III of the 1994 Loan Agreements, all of which have been duly obtained,
taken, given or made and are in full force and effect and (B) such
approvals of courts and trustees (excluding trustees for any trusts that
are party to any Multistate Mortgage or California Mortgage. All
applicable waiting periods in connection with the Reorganization and the
other transactions contemplated hereby and by the other Combined Loan
Documents have expired without any action having been taken by any
competent authority restraining, preventing or imposing materially adverse
conditions upon the
-6-
<PAGE>
Reorganization or the rights of the Guarantor freely to transfer or
otherwise dispose of, or to create any Lien on, any properties now owned or
hereafter acquired by it.
(e) This Guaranty has been, and each other Combined Loan Document and
each Related Document to which the Guarantor is or is to be a party when
delivered under the 1994 Loan Agreements will have been, duly executed and
delivered by the Guarantor. This Guaranty is, and each other Multistate
Loan Document and each Related Document to which the Guarantor is or is to
be a party when delivered under the 1994 Loan Agreements will be, the
legal, valid and binding obligation of the Guarantor, enforceable against
the Guarantor in accordance with its terms.
(f) Since December 31, 1992 there has been no Host Material Adverse
Effect as specified in clauses (a) and (c) of the definition thereof
except, and only except, for the change in the business and properties of
the Guarantor arising solely and directly from the consummation of the
Reorganization and the consummation of the transactions contemplated by the
Combined Loan Documents.
(g) No information, exhibit or report furnished by or on behalf of
the Guarantor to the Agent or any Lender in connection with the negotiation
of the Combined Loan Documents or pursuant to the terms of the Combined
Loan Documents contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements made therein not
misleading taken as a whole.
(h) Except as set forth on Schedule 5(h), there is no action, suit,
investigation, litigation or proceeding affecting the Guarantor or any of
its Subsidiaries, including any Environmental Action, pending or, to the
Knowledge of the Guarantor, threatened before any court, governmental
agency or arbitrator that (i) could have a Host Material Adverse Effect or
(ii) purports to affect the legality, validity or enforceability of this
Guaranty, any other Combined Loan Document or any Related Document to which
the Guarantor is or is to be a party, the Reorganization or the
consummation of the transactions contemplated by the 1994 Loan Agreements.
(i) None of the business or properties of the Guarantor is affected
by any fire, explosion, accident, strike, lockout or other labor dispute,
drought, storm, hail, earthquake, embargo, act of God or of the public
enemy or other casualty (whether or not covered by insurance) that would be
reasonably likely to have a Host Material Adverse Effect.
(j) Neither the Guarantor nor any of its Subsidiaries is a party to
or otherwise bound by any contract, loan agreement, indenture, mortgage,
deed of trust, lease or other instrument or subject to any other
restriction or any judgment, order, writ, injunction, decree,
determination, award, law, rule or regulation or subject to any charter or
corporate or partnership restriction that would be reasonably likely to
have a Host Material Adverse Effect.
(k) The Guarantor and each of its Subsidiaries have filed, have
caused to be filed or have been included in all tax returns (federal,
state, local and foreign) that are required to be filed and have paid all
taxes shown thereon to be due and payable, together with applicable
interest and penalties or pursuant to any assessment or notice of tax claim
or deficiency received by it, except as contested in good faith by the
Guarantor or its Subsidiaries or where the time for payment thereof without
penalty has not expired. All tax liabilities of the Guarantor were
adequately provided for at the end of the most recent Fiscal Year of the
Guarantor and are now so provided for on the books of the Guarantor except
for those contested in good faith by the Guarantor.
-7-
<PAGE>
(1) Neither the Guarantor nor any of its Subsidiaries is an
"investment company," or an "affiliated person" of, or "promoter" or
"principal underwriter" for, an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended.
(m) The Guarantor, individually and together with its Subsidiaries,
(i) is Solvent and (ii) was Solvent immediately prior to, and immediately
after giving effect to, the Reorganization.
(n) The Guarantor has, independently and without reliance upon the
Agent or any Lender and based on such documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into
this Guaranty. The Guarantor is fully familiar with each Loan Agreement
and all Combined Loan Documents related thereto. The Guarantor has
established adequate means of obtaining from the General Partner and the
Borrower on a continuing basis information pertaining to, and is now and on
a continuing basis will be completely familiar with, the business,
condition (financial or otherwise), operations, performance, properties or
prospects of the General Partner and the Borrower.
(o) The Reorganization was consummated substantially in accordance
with its terms; all transfers described in Section 9.11 of the 1994 Loan
Agreements occurred in compliance with all material agreements and
instruments relating thereto; and the Guarantor has received a ruling from
the Internal Revenue Service that the Distribution is a distribution which
fully qualifies for nonrecognition treatment pursuant to Sections 355(a)
and 355(c) of the Internal Revenue Code. All representations and
statements of fact made to the Internal Revenue Service with respect to the
request for such ruling are correct and the Reorganization and all related
transactions occurred substantially and in all material respects as
described in such ruling. Neither the Guarantor nor any of its officers
has any reason to believe that such ruling is invalid for any reason.
(p) To the Knowledge of each of the Guarantor and the General
Partner, there exists no event occurring or continuing, or resulting from
the transactions contemplated by the 1994 Loan Agreements, that constitutes
a Default.
SECTION 6. Affirmative Covenants. The Guarantor covenants and agrees
---------------------
that, so long as any part of the Guaranteed Obligations shall remain unpaid, the
Guarantor will, unless the Required Lenders under each 1994 Loan Agreement shall
otherwise consent in writing:
(a) Compliance with Laws, Etc. Comply in all material respects with
-------------------------
all applicable laws, rules, regulations and orders, such compliance to
include, without limitation, compliance with all Real Property Laws, ERISA
and the Racketeer Influenced and Corrupt Organizations Chapter of the
Organized Crime Control Act of 1970.
(b) Preservation of Corporate Existence. Preserve and maintain its
-----------------------------------
corporate existence, rights, franchises and privileges in the jurisdiction
of its incorporation, and qualify and remain qualified in good standing as
a foreign corporation in each jurisdiction where the failure to preserve
and maintain such existence, rights, franchises, privileges and
qualification would materially adversely affect the interests of the
Lenders or the Agent hereunder, or the ability of the Guarantor to perform
its obligations hereunder.
(c) Keep Books. Keep proper books of record and account, in which
----------
full and correct entries shall be made of all of financial transactions and
the assets and business of the Guarantor in accordance with generally
accepted accounting principles in effect from time to time.
-8-
<PAGE>
(d) Reporting Requirements. Furnish to the Agent for the benefit of
----------------------
the Lenders, and in the case of clause (iv)(A) only, to Marriott
International:
(i) as soon as practicable and in any event within 60 days
after the end of each of the first three quarters of each fiscal year
of the Guarantor, unaudited consolidated balance sheets of the
Guarantor and its Subsidiaries as of the end of such quarter and
consolidated statements of income and retained earnings of the
Guarantor and its Subsidiaries for the period commencing at the end of
the previous fiscal year and ending with the end of such quarter, all
in reasonable detail and certified by the principal accounting officer
of the Guarantor or designee of such officer under the supervision of
such officer as having been prepared in accordance with generally
accepted accounting principles consistently applied, subject to year-
end audit adjustments;
(ii) as soon as available and in any event within 120 days
after the end of each fiscal year of the Guarantor, consolidated
balance sheets of the Guarantor and its Subsidiaries as of the end of
such fiscal year and consolidated statements of income and retained
earnings of the Guarantor and its Subsidiaries for the period
commencing at the end of the previous fiscal year and ending with the
end of such fiscal year, all in reasonable detail and prepared in
accordance with generally accepted accounting principles consistently
applied, together with an audit report and opinion in respect of such
financial statements of Arthur Andersen & Co. or other independent
certified public accountants of recognized national standing selected
by the Guarantor and reasonably acceptable to the Required Lenders,
which report and opinion shall be unqualified as to the scope of the
audit;
(iii) as soon as possible and in any event within two Business
Days after the Guarantor obtains Knowledge of any Default under either
1994 Loan Agreement, a statement of the principal accounting officer
of the Guarantor or designee of such officer under the supervision of
such officer specifying the nature of such Default, the period of
existence thereof and what action the Guarantor has taken and proposes
to take with respect thereto;
(iv) (A) as soon as practicable and in any event within sixty
(60) days after the end of each Tenant Accounting Quarter, a statement
of the aggregate payments made by the Guarantor in respect of the
Guaranteed Obligations and the aggregate amount of principal and
interest paid by the Borrower and received by the Guarantor under all
Host Subordinated Notes and (B) within ten (10) days after receipt by
the Guarantor of the statement of Marriott International provided
pursuant to Section 6(d)(iv)(A) of the Backup Debt Service Guaranty, a
statement of the maximum aggregate amount that the Guarantor may be
called upon to pay in respect of the Guaranteed Obligations under
paragraph 1 of this Guaranty (assuming the correctness of the
information provided by Marriott International in its statement), as
at the end of such Tenant Accounting Quarter for which Marriott
International has provided such statement, each in reasonable detail
and certified by the principal accounting officer of the Guarantor or
designee of such officer under the supervision of such officer;
provided, that with respect to information provided by Marriott
--------
International, such certification shall state that to such officer's
Knowledge such information is not inaccurate;
(v) promptly upon their becoming available, copies of all
financial statements, reports, notices and statements sent or made
available generally by the Guarantor, Host Marriott Hospitality, Inc.,
the General Partner and, upon request by any Lender through the Agent,
any other Subsidiary of the Guarantor to their
-9-
<PAGE>
stockholders and bondholders and of all reports, registration
statements and prospectuses filed by the Guarantor, Host Marriott
Hospitality, Inc., the General Partner and, upon request by any Lender
through the Agent, any other Subsidiary of the Guarantor with any
securities exchange or with the Securities and Exchange Commission, or
any governmental authority succeeding to any of its functions; and
(vi) Promptly, and in any event within thirty (30) days after
the occurrence thereof, notice and a description of any change in the
designation of the positions of the officers of the Guarantor who in
the ordinary course of their responsibilities include, or will be
handling, matters relating to the operation of the Hotel Properties
and the administration of any of the Combined Loan Documents.
SECTION 7. Negative Covenants. The Guarantor covenants and agrees
------------------
that, so long as any part of the Guaranteed Obligations shall remain unpaid, the
Guarantor will not, without the prior written consent of the Required Lenders
under each 1994 Loan Agreement:
(a) Mergers. Merge or consolidate with any Person or permit any
-------
Person to merge into it except that the Guarantor may merge into or
consolidate with any other Person or permit any other Person to merge into
or consolidate with it, provided, however, that after giving effect
-------- -------
thereto, either (i) no "Default" or "Event of Default" under any credit
agreement to which the Guarantor is a party would exist or (ii) no Host
Material Adverse Effect would occur and in either case if the Guarantor is
not the surviving corporation, the successor corporation expressly assumes
the Guarantor's obligations hereunder.
(b) Change in Nature of Business; Sales of Assets. Make, or permit
---------------------------------------------
any of its Subsidiaries to make, any change in the nature of its business
as carried on at the date of this Guaranty or sell, lease, transfer or
otherwise dispose of, or permit any of its Subsidiaries to sell, lease,
transfer or otherwise dispose of, all or substantially all of its or its
Subsidiaries' assets except as would not result in a Host Material Adverse
Effect.
SECTION 8. Amendments, Etc. No amendment or waiver of any provision
---------------
of this Guaranty and no consent to any departure by the Guarantor therefrom
shall in any event be effective unless the same shall be in writing and signed
by the Agent and the Required Lenders under each 1994 Loan Agreement, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given; provided, however, that no amendment,
-------- -------
waiver or consent shall, unless in writing and signed by all the Lenders, (a)
limit the liability of the Guarantor hereunder, (b) postpone any date fixed for
payment hereunder or (c) change the number of Lenders required to take any
action hereunder.
SECTION 9. Notices, Etc. All notices and other communications
------------
provided for hereunder shall be in writing (including telegraphic, telecopy,
telex or cable communication) and mailed, sent by reputable overnight courier,
telegraphed, telecopied, telexed, cabled or delivered to it, if to the
Guarantor, addressed to it at (a), if sent by mail, 10400 Fernwood Road,
Washington, D.C. 20058, Attention: Law Department 72/923, and (b) otherwise, at
10400 Fernwood Road, Bethesda, Maryland 20817, Attention: Law Department 72/923,
if to the Agent or any Lender, at its address specified in the 1994 Loan
Agreements, or as to any party at such other address as shall be designated by
such party in a written notice to each other party. All such notices and other
communications shall (a) when mailed be effective upon receipt of the same at
the applicable address described above or upon the refusal of an employee or
other agent of the Guarantor, the Agent or such Lender, as applicable, to accept
the same, (b) when sent by a reputable overnight courier, be effective when the
same is delivered to the applicable address described above and (c) when
telegraphed, telecopied, telexed or cabled, be effective when the same is
telegraphed, telecopied and the telecopy is confirmed by telephone, telexed and
confirmed by telex answerback,
-10-
<PAGE>
or delivered to the cable company, respectively, except that notices and
communications to the Agent shall not be effective until received by the Agent.
SECTION 10. No Waiver; Remedies. No failure on the part of the Agent
-------------------
or any Lender to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 11. Waiver of Jury Trial. The Guarantor, the Agent and each
--------------------
Lender each hereby irrevocably waives all right to trial by jury in any action,
proceeding or counterclaim (whether based on contract, tort or otherwise)
arising out of or relating to any of the Combined Loan Documents, the
transactions contemplated thereby or the actions of the Agent or any Lender in
the negotiation, administration, performance or enforcement thereof.
SECTION 12. Continuing Guaranty; Assignments Under the 1994 Loan
----------------------------------------------------
Agreements. This Guaranty is a continuing guaranty and shall (a) remain in full
- ----------
force and effect until the cash payment in full of the Guaranteed Obligations
(including, without limitation, any contingent or disputed obligations) and all
other amounts payable under this Guaranty, (b) be binding upon the Guarantor,
its successors and assigns and (c) inure to the benefit of and be enforceable by
the Lenders, the Agent and their successors and transferees and assigns under
Section 9.07 of the 1994 Loan Agreements. Without limiting the generality of the
foregoing clause (c), any Lender may assign or otherwise transfer all or any
portion of its rights and obligations under the 1994 Loan Agreements (including,
without limitation, all or any portion of the Combined Advances owing to it and
the Multistate Note or Notes or California Note or Notes held by it) to any
other Person permitted by Section 9.07 of the 1994 Loan Agreements, and such
other Person shall thereupon become vested with all the benefits in respect
thereof granted to such Lender herein, under the Combined Loan Documents and
under applicable law. As used herein, the terms "Agent," "Lenders," "Combined
Loan Documents," "Multistate Note," "California Note" and "Combined Advances"
shall have the meanings set forth herein for such terms and set forth in any
documents renewing, extending, refunding and refinancing the Guaranteed
Obligations or any part thereof. This Guaranty shall remain in full force and
effect in the event of any renewal, extension, refunding or refinancing of the
Guaranteed Obligations and, without limitation, shall apply to the Obligations
of the Borrower as so renewed, extended, refunded or refinanced.
SECTION 13. Governing Law. This Guaranty shall be governed by, and
-------------
construed in accordance with, the laws of the State of New York.
SECTION 14. Consent to Jurisdiction. (a) The Guarantor hereby
-----------------------
irrevocably submits to the jurisdiction of any New York State or Federal court
sitting in New York City, and any appellate court from any thereof in any action
or proceeding arising out of or relating to this Guaranty and the Guarantor
hereby irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in such New York State court or in such
Federal court. The Guarantor hereby irrevocably waives, to the fullest extent
it may effectively do so, the defense of an inconvenient forum to the
maintenance of such action or proceeding. The Guarantor irrevocably consents to
the service of any and all process in any such action or proceeding, by the
mailing of copies of such process to the Guarantor at its address specified in
Section 9. The Guarantor agrees that a final judgment in any such action or
proceeding shall be conclusive, and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.
(b) Nothing in this Section 14 shall affect the right of any Lender
or the Agent to serve legal process in any other manner permitted by law, or
affect the right of any Lender or the
-11-
<PAGE>
Agent to bring any action or proceeding against the Guarantor or its property in
the courts of other jurisdictions.
SECTION 15. Release. The Guarantor on behalf of itself and its
-------
Subsidiaries hereby forever releases and discharges the Agent and each Lender,
and their respective Subsidiaries, Affiliates, officers, directors, employees
and agents (including attorneys and accountants) and participants, successors
and assigns, if any (the "Releases"), from any and all of their Obligations
--------
under the 1986 Multistate Loan Documents and the 1988 Multistate Loan Documents
and from any and all claims, debts, demands, allegations, actions, causes of
action, suits, duties, controversies, agreements, promises, omissions,
variances, damages, judgments, costs, expenses, losses, obligations, liabilities
or rights whatsoever, known or unknown, whether in law, equity or otherwise,
absolute or contingent, determined or speculative, which the Guarantor or any of
its Affiliates ever have had, may have now or in the future may, can or shall
have against any Releasee relating to, based upon or arising out of the
execution, delivery, performance, administration or enforcement of (i) the 1986
Multistate Loan Documents, the 1986 Multistate Loans and the Lenders' ownership
of the Notes (as defined in the l988 Multistate Loan Agreement), (ii) the 1986
Multistate Loan Documents, the 1988 Multistate Loans and the Lenders' ownership
of the Notes (as defined in the 1988 Multistate Loan Agreement) and (iii) any of
the transactions contemplated thereby, any act or omission of any Releasee or
other Person in connection therewith or relating thereto, including efforts to
obtain payment thereof or thereunder.
SECTION 16. Instrument for Payment of Money Only. The Guarantor
------------------------------------
hereby agrees and acknowledges that this Guaranty is an instrument for the
payment of money only and hereby consents that the Lenders, at their sole
option, in the event of a default by the Guarantor in the payment of any of the
amounts payable by the Guarantor hereunder, shall have the right to bring a
motion or action under New York CPLR Section 3213.
-12-
<PAGE>
IN WITNESS WHEREOF, the Guarantor and the Agent have caused this
Guaranty to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
HOST MARRIOTT CORPORATION
By:
--------------------------------
Title: Vice President
-----------------------------
CITIBANK, N.A., as Agent
By:
--------------------------------
Title: Vice President
-----------------------------
-13-
<PAGE>
EXHIBIT A
Form of Host Subordinated Note
<PAGE>
EXHIBIT A
PROMISSORY NOTE
(HOST SUBORDINATED NOTE)
THE INDEBTEDNESS EVIDENCED BY THIS INSTRUMENT IS SUBORDINATED TO THE PRIOR
PAYMENT IN FULL IN CASH OF THE SENIOR OBLIGATIONS (AS DEFINED IN THE 1994
SUBORDINATION AGREEMENT HEREINAFTER REFERRED TO) PURSUANT TO, AND TO THE EXTENT
PROVIDED IN, THE 1994 SUBORDINATION AGREEMENT. UNDER THE 1994 SUBORDINATION
AGREEMENT, NO ACTION MAY BE BROUGHT IN RESPECT OF THIS NOTE PRIOR TO THE PAYMENT
IN FULL IN CASH OF THE SENIOR OBLIGATIONS.
$_____________________________ Dated: ___________, 199__
FOR VALUE RECEIVED, the undersigned, COURTYARD BY MARRIOTT LIMITED
PARTNERSHIP, a Delaware limited partnership (the "Borrower"), HEREBY PROMISES TO
--------
PAY to the order of Host Marriott Corporation (the "Payee") on
-----
__________________________ * or such earlier date following the date that the
Senior Obligations are paid in full in cash (the "Payment Date") the principal
------------
sum of $_______________________ or, if less, the then unpaid principal amount
hereof.
The Borrower promises to pay interest on the unpaid principal amount
hereof from the date hereof until such principal amount is paid in full, at the
Base Rate.
This Promissory Note may, at the option of the Borrower, be prepaid at
any time in whole or in part, without penalty or premium, together with accrued
interest at the Base Rate to the date of such prepayment on the principal amount
prepaid, to the extent such prepayments are permitted under the 1994
Subordination Agreement (including payments under Section 5.06 of the Hotel
Lease permitted by the 1994 Subordination Agreement).
"Base Rate" means the fluctuating interest rate per annum in effect
---------
from time to time equal to the rate of interest announced by The First National
Bank of Chicago, in Chicago, Illinois from time to time as its base rate.
Both principal and interest are payable in lawful money of the United
States of America to the Payee at [Citibank, N.A., 399 Park Avenue, New York,
New York 10043], Account No. __________________ in same day funds. All payments
of principal hereof shall be recorded by the Payee and, prior to any transfer
hereof, endorsed on the grid attached hereto, which is a part of this Promissory
Note.
No amendment or waiver of any provision of this Promissory Note, nor
consent to any departure by the Borrower therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Payee, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given.
No failure on the part of the Payee to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof, nor shall a
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right.
- ------------------------
* Insert a date no earlier than June 16, 1999.
<PAGE>
This Promissory Note shall be binding on and inure to the benefit of
the Payee and the Borrower and their respective successors and assigns.
This Promissory Note is one of the Host Subordinated Notes referred to
in, and is entitled to the benefits of and is subject to the subordination and
other provisions in, the Consolidated Amended and Restated Subordination
Agreement dated as of April __, 1994 (as it may hereafter be amended or
otherwise modified from' time to time, the "1994 Subordination Agreement") made
----------------------------
by the Borrower, Marriott International, Inc., the Payee, Host Restaurants,
Inc., Casa Maria of Maryland, Inc., Newark Properties, Inc., Essex House
Condominium Corporation and CBM One Corporation in favor of the Lenders referred
to therein and Citibank, N.A., as agent under the Multistate Loan Agreement and
the California Loan Agreement (both referred to therein). Among other things,
the 1994 Subordination Agreement contains provisions (1) prohibiting the
payment, except under certain circumstances, of this Promissory Note until the
Senior Obligations are paid in full in cash and (2) restricting the amendment of
and assignment of this Promissory Note until the Senior Obligations (as defined
therein) shall be paid in full in cash.
The Payee, by accepting this Promissory Note, and the Borrower each
hereby (i) irrevocably submits to the nonexclusive jurisdiction of any Maryland
State or Federal court, and any appellate court from any thereof in any action
or proceeding arising out of or relating to this Promissory Note, and (ii)
irrevocably agrees that all claims in respect of such action or proceeding may
be heard and determined in such Maryland State court or in such Federal court.
This Promissory Note shall be governed by, and construed in accordance
with, the laws of the State of Maryland.
COURTYARD BY MARRIOTT
LIMITED PARTNERSHIP
By: CBM ONE CORPORATION,
its General Partner
By:
--------------------------------
Title:
--------------------------------
<PAGE>
Payments of Principal
<TABLE>
<CAPTION>
Amount of Amount of Principal
Date Advance Paid or Prepaid Unpaid Principal Balance Notation Made by
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Exhibit 10.m
MANAGEMENT AGREEMENT
between
COURTYARD BY MARRIOTT LIMITED PARTNERSHIP
and
COURTYARD MANAGEMENT CORPORATION
January 4, 1997
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Article I - Definition of Terms
- -------------------------------
1.01 Definition of Terms...............................................2
1.02 Terms Defined in Other Sections..................................21
Article II - Appointment of Management Company
- ----------------------------------------------
2.01 Termination of Operating Lease...................................23
2.02 Appointment......................................................23
2.03 Delegation of Authority..........................................23
2.04 No Covenants or Restrictions.....................................24
2.05 Non-Discrimination...............................................24
Article III - Ownership of Hotels
- ---------------------------------
3.01 Ownership of Hotels..............................................25
3.02 Subordination, Nondisturbance, and Attornment....................26
Article IV - Term
- -----------------
4.01 Term.............................................................28
4.02 Termination Fee..................................................29
4.03 Performance Termination..........................................32
4.04 Actions to be Taken Upon Termination.............................33
Article V - Compensation of Management Company
- ----------------------------------------------
5.01 Management Fees..................................................39
5.02 Use of Available Cash Flow.......................................40
5.03 Accounting and Interim Payment...................................42
5.04 Working Capital Loans............................................43
5.05 Reimbursement of Manager.........................................43
Article VI - Pre-Opening
- ------------------------
Intentionally Omitted
Article VII - Working Capital and Fixed Asset Supplies
- ------------------------------------------------------
7.01 Working Capital; Inventories and Fixed Asset Supplies............46
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Article VIII - Repairs, Maintenance and Replacements
- ----------------------------------------------------
<S> <C>
8.01 Repairs and Maintenance..........................................47
8.02 Repairs and Equipment Reserve....................................47
8.03 Building Alterations, Improvements, Renewals, and Replacements...54
8.04 Liens............................................................57
8.05 Ownership of Replacements........................................57
Article IX - Bookkeeping and Bank Accounts
- ------------------------------------------
9.01 Books and Records................................................58
9.02 Hotel Accounts, Expenditures.....................................59
9.03 Annual Operating Projection......................................60
9.04 Operating Losses: Credit........................................61
Article X - Trademark and Trade Name
- ------------------------------------
10.01 Courtyard by Marriott Name.......................................62
10.02 Purchase of Inventories and Fixed Asset Supplies.................63
10.03 Breach of Covenant...............................................63
10.04 Computer Software and Equipment..................................63
Article XI - Hotels
- -------------------
11.01 Payment of Ground Rental and Other Charges.......................65
11.02 Management of Hotels.............................................65
11.03 Chain Services...................................................66
11.04 Owner's Right to Inspect.........................................67
Article XII - Insurance
- -----------------------
12.01 Property Insurance...............................................68
12.02 Operational Insurance............................................69
12.03 Coverage.........................................................70
12.04 Cost and Expense.................................................70
12.05 Policies and Endorsements........................................71
Article XIII - Taxes
- --------------------
13.01 Real Estate and Personal Property Taxes..........................72
Article XIV - Hotel Employees
- -----------------------------
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
14.01 Employees....................................... 73
Article XV - Damage, Condemnation and Force Majeure
- ---------------------------------------------------
15.01 Damage and Repair............................... 74
15.02 Condemnation.................................... 74
15.03 Force Majeure................................... 75
Article XVI - Defaults
- ----------------------
16.01 Defaults........................................ 77
16.02 Remedies........................................ 78
Article XVII - Waiver and Partial Invalidity
- --------------------------------------------
17.01 Waiver.......................................... 80
17.02 Partial Invalidity.............................. 80
Article XVIII - Assignment
- --------------------------
18.01 Assignment...................................... 81
18.02 Collateral Assignment........................... 82
Article XIX - Sale of Hotels
- ----------------------------
19.01 Right of Sale by Owner.......................... 84
19.02 Rights of Manager Upon Sale of Hotels........... 84
Article XX - Right of Substitution
- ----------------------------------
INTENTIONALLY OMITTED
Article XXI - Miscellaneous
- ---------------------------
21.01 Right to Make Agreement......................... 88
21.02 Consents........................................ 88
21.03 Agency.......................................... 88
21.04 Confidentiality................................. 89
21.05 Applicable Law.................................. 90
21.06 Other Operations................................ 90
21.07 Headings........................................ 91
21.08 Notices......................................... 91
21.09 Environmental Matters........................... 92
21.10 Offerings....................................... 93
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C> <C>
21.11 Memorandum of Management Agreement.............. 94
21.12 Entire Agreement................................ 95
EXHIBIT "A" - List of Hotels................................... 96
EXHIBIT "B" - List of Hotels' Adjusted Sales Price/Base
Price........................................... 98
</TABLE>
iv
<PAGE>
MANAGEMENT AGREEMENT
--------------------
This Management Agreement ("Agreement") is executed as of January 4, 1997
("Effective Date"), by COURTYARD BY MARRIOTT LIMITED PARTNERSHIP ("Owner"), a
Delaware limited partnership with a mailing address at 10400 Fernwood Road,
Bethesda, Maryland 20817 and COURTYARD MANAGEMENT CORPORATION ("Manager"), a
Delaware corporation, with a mailing address at 10400 Fernwood Road, Bethesda,
Maryland 20817.
R E C I T A L S :
A. Owner owns fifty (50) Courtyard by Marriott Hotels as further listed
in Exhibit "A" attached hereto.
B. On or about August 14, 1986, Owner and Manager entered into that
certain management agreement whereunder Manager managed and operated the Hotels.
Effective January 1, 1994, Owner and Manager terminated the August 14, 1986
management agreement and entered into a lease agreement whereunder Manager, as
tenant, leased and operated the Hotels, (excluding the Hartford/Windsor,
Connecticut Courtyard by Marriott Hotel) from Owner, as landlord.
C. Effective January 1, 1994, Owner and Manager terminated the August 14,
1986 management agreement relating to the Hartford/Windsor, Connecticut
Courtyard by Marriott Hotel and entered into a lease agreement whereunder
Manager, as tenant, leased and operated the Hartford/Windsor, Connecticut
Courtyard by Marriott Hotel from Owner, as landlord. The lease
1
<PAGE>
agreements set forth in Recital B above and this Recital C being hereinafter
collectively referred to as the "1994 Operating Lease."
D. Owner and Manager now wish to terminate the 1994 Operating Lease and
Owner desires to have Manager manage and operate the Hotels and Manager is
willing to perform such services for the account of Owner on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITION OF TERMS
-------------------
1.01 Definition of Terms
-------------------
The following terms when used in this Agreement shall have the meanings
indicated:
"Accounting Period" shall mean the four (4) week accounting periods having
-----------------
the same beginning and ending dates as Manager's four (4) week accounting
periods, except that an Accounting Period may occasionally contain five (5)
weeks when necessary to conform Manager's accounting system to the calendar.
"Adjusted Sales Proceeds" shall mean, for each Hotel, the amount shown on
-----------------------
Exhibit B for the applicable Hotel.
"Affiliate," "Affiliates" or "Affiliated Person" shall mean, when used with
----------------------------------------------
reference to a specified person, (i) any Person that directly or indirectly
through one or more intermediaries controls or is controlled by or is under
common control with the specified Person, (ii) any Person that is an officer of,
partner in or trustee of, or serves in a similar capacity with respect to, the
specified Person or of which the specified Person is an officer, partner or
trustee, or with respect
2
<PAGE>
to which the specified Person serves in a similar capacity, (iii) any Person
that, directly or indirectly, is the beneficial owner of 10% or more of any
class of equity securities of the specified Person or of which the specified
Person is directly or indirectly the owner of 10% or more of any class of equity
securities, and (iv) any relative or spouse of the specified Person who makes
his or her home with that of the specified Person. Affiliate, Affiliates or
Affiliated Person of Owner or the general partner of Owner does not include a
Person who is a partner in a partnership or joint venture with Owner or any
other Affiliated Person if such Person is not otherwise an Affiliate or
Affiliated Person of Owner or the general partner of Owner. Notwithstanding the
foregoing, in no event shall Marriott International, Inc., the Manager, or any
of their subsidiaries constitute an Affiliate of (a) Host Marriott Corporation
or (b) any entity directly or indirectly controlled by Host Marriott Corporation
(including, without limitation, Owner and its general partner).
"Amendment of Ground Leases" means the Second Amendment of Ground Leases
--------------------------
dated as of the Closing Date among the Marriott Ground Lessors and Owner, which
amends each of the Marriott Ground Leases.
"Available Cash Flow" shall mean, in each Fiscal Year (or other period with
-------------------
respect to which a determination is made hereunder) the sum of (i) Operating
Profit plus (ii) during the period there is any indebtedness due under the Loan
Agreement or any Qualified Refinancing, the Current Ground Rent due for such
Fiscal Year under the Marriott Ground Leases plus, (iii) during the period
there is any indebtedness due under the Loan Agreement or any Qualified
Refinancing, the Secondary Courtyard Management Fee, plus (iv) during the period
there is any indebtedness due under the Loan Agreement or any Qualified
Refinancing, any Subordinated
3
<PAGE>
FF&E Contribution less (v) Qualifying Debt Service.
"Bankruptcy Code" means the U.S. Bankruptcy Code, 11 U.S.C. (S)(S)101 et
---------------
seq., together with all amendments, modifications and replacements as the same
may exist on any relevant date.
"Base Management Fee" means Manager's fee for the following services
-------------------
hereunder: corporate planning and policy services, financial planning and
corporate financial services, risk planning and insurance services, corporate
executive management, legislative and governmental representation, in-house
legal services, and protection of the "Marriott" trade name and trademark. Such
amount shall equal, during each Fiscal Year, three percent (3%) of Gross
Revenues.
"Base Price" shall mean, as to each Hotel, the amount set forth opposite
----------
the name of the Hotel as shown on Exhibit B attached hereto.
"Cash Flow Available for Incentive Management Fee", in each Fiscal Year,
------------------------------------------------
shall equal Operating Profit less the sum of (a) Qualifying Debt Service plus
(b) the Owner's Priority Return.
"Chain Services" shall mean those certain services furnished to each Hotel
--------------
which are furnished generally on a central or regional basis to other hotels in
the Courtyard by Marriott System. Chain Services shall include: (i) national
and central sales office services; central operational support for rooms, food
and beverage and engineering; central training services; career development;
relocation of central management personnel; central safety and loss prevention
services; central advertising and promotion (including direct and image media
and advertising administration); centralized consumer affairs; to the extent not
charged or allocated
4
<PAGE>
directly to the Hotel as a Deduction, the national and regional reservations
system service and inventory and revenue management services; centralized
computer payroll and accounting services; centralized computer system
development, support and operating costs; central monitoring and management
support from "line management" personnel such as area managers; (ii) such
additional services are or may be, from time to time, furnished centrally or
regionally for the benefit of hotels in the Courtyard by Marriott System or in
substitution for services now performed at individual hotels which may be more
efficiently performed on a group basis; provided, however, that services not
currently included in Chain Services pursuant to (i) and (ii) above shall only
be added to "Chain Services" if, and to the extent that, such services: (a) are
not services included in the definition of Courtyard Management Fees or Base
Management Fees; (b) are not services relating to non-routine work (it being
understood that the cost and expense of such non-routine services shall be
Deductions as set forth in Paragraph 6 of the definition of Operating Profit;
and (c) are either (x) new services (i.e., not previously performed at or for
the Hotels) or (y) services which theretofore had been performed at the Hotels,
but which can be performed more efficiently and economically on a centralized,
regional or other bases.
"Closing Date" shall mean the date Owner receives loan proceeds pursuant to
------------
the financing contemplated in the Loan Agreement.
"Collateral Assignment" means the Collateral Assignment of Management
---------------------
Agreement and Subordination Agreement dated as of the Closing Date among
Manager, Owner, and Lehman Brothers Holdings Inc.
"Computer Lease" shall mean a lease or other agreement under which computer
--------------
equipment located in one or more Hotels is leased to Owner or Manager, as agent
for Owner
5
<PAGE>
(including the license, if any, of operating software therefor).
"CPI" means the Consumer Price Index, all items for All Urban Consumers,
---
U.S. City Average and (a) using 1982-1984 as the standard reference base period
equal to 100 or (b) if the CPI ceases to be issued with the reference base
period referred to in clause (a) for any time period for which the CPI is to be
determined hereunder, using for the CPI for the time period for which such
reference base period is not used the standard reference base period for such
time period times a conversion factor that will convert such CPI to a value
corresponding to a 1982-1984 base period equal to 100.
"Courtyard by Marriott System" shall mean, the Hotels managed and operated
----------------------------
by Manager from time to time, which Hotels are operated, as of the Effective
Date, under the trade name "Courtyard by Marriott".
"Courtyard Management Fee" shall mean Manager's fee for the following
------------------------
services hereunder: divisional executive management, divisional financial
services, product planning and development, employee planning, protection of the
"Courtyard" trade name and trademark, food service product development, and the
services of Manager's technical and operational experts making periodic
inspection and consultation visits to the Hotels. During each Fiscal Year, such
amount shall consist of the sum of the Primary Courtyard Management Fee plus the
Secondary Courtyard Management Fee.
"Cumulative Capital" shall mean at any time Ninety Million Seven Hundred
------------------
Ninety Thousand Dollars ($90,790,000) (which is the amount of money or agreed
value of real or personal property (other than evidences of indebtedness)
actually invested by Owner in the Hotels) less the sum of (i) cumulative Net
Sales Proceeds up to an amount not to exceed the
6
<PAGE>
aggregate Adjusted Sales Proceeds for all Hotels distributed to Owner subsequent
to March, 1997, and (ii) less Net Refinancing Proceeds distributed to Owner (not
including any distribution of proceeds from the debt evidenced in the Loan
Agreement). For purposes of Severance Management Agreements, Cumulative Capital
shall be an amount equal to (a) if the new Owner for such Hotel(s) purchased the
Hotel(s), the amount of the difference between the purchase price paid by such
new Owner to acquire the Hotel(s) and the principal amount of any indebtedness
allocated to such Hotel(s), or (b) if the new Owner acquired the Hotel(s) by
means of a deed in lieu of Foreclosure, an amount equal to the remainder of (i)
the sum of the Base Price of the Hotel(s) subject to the Severance Management
Agreement less (z) the principal amount of indebtedness allocated to such
Hotel(s) of the loan which was foreclosed or to which the Hotel(s) was subject.
"Current Ground Rent" shall mean, for any Fiscal Year or other period, the
-------------------
total ground rent payable under all Marriott Ground Leases affecting any of the
Hotels during such Fiscal Year or other period, whether paid in accordance with
Section 5.02 hereof or deferred pursuant to the Ground Lease Rental
Subordination Agreement.
"Deferred Ground Rent" shall be the aggregate of all "Deferred Rent" as
--------------------
that term is defined under the Ground Lease Rental Subordination Agreement.
"Deferred Incentive Management Fees" shall be an amount equal to Six
----------------------------------
Million Five Hundred Thousand Dollars ($6,500,000) less amounts distributed to
Manager as payment of Deferred Incentive Management Fees from Cash Flow
Available for Incentive Management Fees pursuant to Section 5.02. The Deferred
Incentive Management Fee along with the payment made in Section 2.01 represent a
negotiated amount in settlement of deferred amounts owed Manager
7
<PAGE>
as of the Effective Date pursuant to the 1994 Operating Lease.
"Environmental Laws" shall mean any federal, state or local law, rule or
------------------
regulation (both present and future) dealing with the use, generation,
treatment, storage, disposal or abatement of Hazardous Materials, including, but
not limited to, (i) the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. Section 9601 et seq., as amended, and (ii) the
-- ---
regulations promulgated thereunder, from time to time.
"Equipment Leases" means all or any FF&E Leases, Telephone Leases, Computer
----------------
Leases, TV System Leases, and motor vehicle leases.
"FF&E" shall mean (i) furniture, fixtures and furnishings and equipment and
----
(ii) FF&E Replacements.
"FF&E Lease" means a lease of any FF&E located in one or more Hotels other
----------
than a TV System Lease, a Telephone Lease, a Computer Lease or a lease of a
motor vehicle used primarily for transporting Hotel guests.
"FF&E Replacements" shall mean the items enumerated in paragraphs (1) and
-----------------
(2) of Section 8.02A.
"Fiscal Year" shall mean Manager's Fiscal Year which now ends at midnight
-----------
on the Friday closest to December 31 in each calendar year; the new Fiscal Year
begins on the Saturday immediately following said Friday. A partial Fiscal Year
between the end of the last full Fiscal Year and the Termination of this
Agreement shall, for purposes of this Agreement, constitute a separate Fiscal
Year. If Manager's Fiscal Year is changed in the future, appropriate adjustment
to this Agreement's reporting and accounting procedures shall be made; provided,
however, that no such change or adjustment shall alter the term of this
Agreement or in any way reduce or
8
<PAGE>
materially delay the distributions of Operating Profit or other payments due
Owner or Manager hereunder. When a Fiscal Year is identified with a calender
year (e.g., "Fiscal Year 2007"), such reference shall mean the Fiscal Year most
closely corresponding to such calendar year.
"Fixed Asset Supplies" shall mean supply items including linen, china,
--------------------
glassware, silver, and similar items.
"Gross Revenues" shall mean for each Fiscal Year all revenue and income of
--------------
any kind derived from the Hotels and all departments and parts thereof,
including rentals or other payments from lessees, licensees or concessionaires,
in the Hotels (but not including gross receipts of any such lessees, licensees
or concessionaires, except as may be received by or on behalf of Owner as rent),
the proceeds of business interruption insurance and telephone charges and
receipts for food, beverage or other services, all determined in accordance with
generally accepted accounting principles, excluding all refunds, rebates,
discounts and credits of a similar nature, given, paid or returned by Owner or
Manager in the course of obtaining such revenue and income. However, any
amounts received, recognized or realized in the nature of the following shall
not be included as Gross Revenues: (i) applicable sales, use and excise taxes
or similar governmental charges collected directly from patrons or guests or as
part of the sales price of any goods, services or displays (including, without
limitation, occupancy, gross receipts, admission, cabaret or similar equivalent
taxes); (ii) gratuities; (iii) Net Sale Proceeds, Net Refinancing Proceeds; (iv)
proceeds from the sale of FF&E no longer necessary to the operation of the
Hotel, which proceeds shall be deposited in the FF&E Reserve as set forth in
Section 8.02; and (v) interest earned on any reserves including the Repairs and
Equipment Reserve.
"Ground Lease Advances" shall mean those advances that may be made by
---------------------
Marriott
9
<PAGE>
Ground Lessors pursuant to the Marriott Ground Leases.
"Ground Lease Rental Subordination Agreement" means the Marriott Ground
-------------------------------------------
Lease Rental Subordination Agreement dated as of the Closing Date among the
Marriott Ground Lessors, Owner and Lehman Brothers Holdings Inc.
"Hazardous Materials" shall mean any substance or material containing one
-------------------
or more of any of the following: "hazardous material", "hazardous waste",
"hazardous substance", "regulated substance", "petroleum", "pollutant",
"contaminant", or "asbestos", as such terms are defined in any applicable
Environmental Law, in such concentration(s) or amount(s) as may impose clean-up,
removal, monitoring or other responsibility under any applicable Environmental
Law, or which may present a significant risk of harm to guests, invitees or
employees of any Hotel.
"Hotel" or "Hotels" shall refer individually or collectively to the fifty
----- ------
(50) hotels which are located as set forth on Exhibit A. The term "Hotel" or
"Hotels" shall incorporate not only the Owner's legal interest in the real
estate (either fee or leasehold) but all easement or other appurtenant rights
along with the Owner's right, title and estate in all improvements constructed
or to be constructed thereon and all fixtures, furniture, furnishings, equipment
and supplies installed therein.
"Incentive Management Fee" shall mean the payments which shall be made to
------------------------
Manager, as compensation (in addition to the Base Management Fee and the
Courtyard Management Fee) to Manager for its services under this Agreement, in
the amount of fifty percent (50%) of the Cash Flow Available for Incentive
Management Fee in each Fiscal Year (or proration thereof); provided, however,
that the Incentive Management Fee received by Manager, with respect to
10
<PAGE>
each Fiscal Year of the Term shall not exceed fifteen percent (15%) of Operating
Profit for each Fiscal Year.
"Inventories" shall mean "Inventories" as defined in the Uniform System of
-----------
Accounts, such as provisions in storerooms, refrigerators, pantries and
kitchens; beverages in wine cellars and bars; other merchandise intended for
sale; fuel; mechanical supplies; stationery; and other expensed supplies and
similar items.
"Lenders" shall mean (a) Lehman Brothers Holdings Inc., the lender under
-------
the Loan Agreement and its successors and assigns or (b) the lender or lenders
under any Qualified Debt.
"Loan Agreement" shall mean the Loan Agreement, dated as of the Closing
--------------
Date between Owner and Lehman Brothers Holdings Inc., doing business as Lehman
Capital, a division of Lehman Brothers Holdings Inc., pursuant to which debt
financing for the Hotels will be provided in the amount of Three Hundred Twenty
Five Million Dollars ($325,000,000), which will be secured by Mortgages on all
Hotels, and which may be assigned, along with such mortgages and certain other
documents, as part of a securitization of the debt to a trustee.
"Management Fees" shall mean Base Management Fee, Courtyard Management Fee
---------------
and Incentive Management Fee.
"Marriott Ground Lease" shall mean any ground lease (as amended by
---------------------
amendments as may be agreed to by Owner and the applicable Landlord from time to
time) from a Marriott Ground Lessor to the Owner affecting the land on which a
Hotel is located.
"Marriott Ground Lessors" shall mean Essex House Condominium Corporation,
-----------------------
Host Restaurants, Inc., Newark Properties, Inc., and Casa Maria of Maryland,
Inc., as landlords under the Marriott Ground Leases, and their respective
successors and assigns.
11
<PAGE>
"Net Refinancing Proceeds" shall mean the cumulative proceeds from any
------------------------
refinancing or borrowing made by Owner subsequent to March, 1997, the proceeds
of which, net of refinancing costs, are applied to the repayment of previously
incurred debt of Owner, or borrowed for distributions to the partners of Owner,
including the proceeds of a sale and leaseback on which no taxable gain is
recognized for Federal income tax purposes excluding proceeds under the Loan
Agreement or any previous loans.
"Net Sales Proceeds" shall mean the cumulative proceeds in excess of the
------------------
outstanding indebtedness under any Qualified Debt and other liabilities of
Owner (such as reasonable transaction costs in connection with a sale, funds
used to establish the escrow of funds required in this Management Agreement in
connection with a sale or termination, or in the case of insurance proceeds or
condemnation or taking awards, funds used to pay all costs of repairing or
restoring the Hotel(s))received by Owner from (i) the exchange, condemnation,
eminent domain taking, casualty, sale, or other disposition of all or a portion
of the Hotels, or (ii) the liquidation of Owner's property interest in the
Hotels in connection with a dissolution of Owner. Net Sales Proceeds shall not
include the proceeds from the routine sale of used FF&E not in connection with
the disposition of a Hotel.
"Opening Date" shall mean the opening date of each Hotel, as set forth on
------------
Exhibit A.
"Operating Loss" shall mean in each Accounting Period (or other period with
--------------
respect to which a determination is made hereunder) a negative Operating Profit.
"Operating Profit" shall mean in each Accounting Period (or other period
----------------
with respect to which a determination is made hereunder) the excess of Gross
Revenues over the following deductions ("Deductions"), without duplication,
incurred in operating the Hotels:
12
<PAGE>
1. The cost of sales including salaries, wages, fringe benefits,
payroll taxes and other costs related to Hotel employees;
2. Departmental expenses, administrative and general expenses, heat,
light and power, advertising and promotional expense, relocation expense, and
routine repairs, maintenance and minor alterations that are treated as
Deductions under Section 8.01;
3. The cost of Inventories and Fixed Asset Supplies consumed in the
operation of the Hotels;
4. A deduction for uncollectible accounts receivable;
5. All costs and fees of independent accountants or other third
parties who perform services required or permitted hereunder;
6. The cost and expense of technical consultants and operational
experts (including employees of Manager or its Affiliate) for specialized
services in connection with non-routine Hotel work;
7. The Base Management Fee;
8. The Courtyard Management Fee;
9. The costs and expenses incurred by Manager in providing Chain
Services to the Hotels as allocated in Section 11.03;
10. Insurance costs and expenses as provided in Article XII;
11. Taxes, if any, payable by or assessed against Manager related to
this Agreement or to Manager's operation of the Hotels (exclusive of Manager's
income taxes or if in lieu of income taxes a jurisdiction imposes a gross
receipts tax on Management Fees, the gross receipts tax);
13
<PAGE>
12. The Repairs and Equipment Reserve contribution required pursuant
to Section 8.02;
13. Ground rent payable under any ground lease on which any of the
Hotels are located;
14. Impositions;
15. At Manager's option, lease payments pursuant to leases of any
FF&E and motor vehicles to the extent such payments are not made out of the
Reserve and provided, however, that Manager shall be entitled to treat such
lease payments as Deductions only to the extent the indebtedness incurred under
such leases does not exceed Thirty-five Thousand Dollars ($35,000) per Hotel per
Fiscal Year in the case of Hotels having only one vehicle and Sixty Thousand
Dollars ($60,000) per Hotel per Fiscal Year in the case of Hotels having more
than one vehicle (which amounts shall be adjusted upward each Fiscal Year to
reflect the percentage increase in the CPI as announced for November of the
immediately preceding Fiscal Year over the CPI announced for November 1996,
provided that if such percentage increase is a negative number in any given
Fiscal Year, then there shall be no increase in such amount over the previous
Fiscal Year); and for purposes of this Item 15, "indebtedness incurred" shall
mean the fair market value at the time of leasing of the FF&E and vehicles
covered by such leases.
16. Such other costs and expenses incurred by Manager on behalf of
Owner as are specifically provided for elsewhere in this Agreement or are
otherwise reasonably necessary for the proper and efficient operation of the
Hotels.
"Owners Priority Return" shall mean an amount equal to an annual non-
----------------------
cumulative priority return to Owner equal to ten percent (10%) of the sum of (a)
Cumulative Capital, plus (b)
14
<PAGE>
any amounts requested by Manager that Owner funds under Section 8.03A2 for
building alterations and related expenses, plus (c) any amounts that Owner funds
under Section 15.01A for the costs of replacements or repairs not covered by
insurance, plus (d) any additional Working Capital advances resulting in Working
Capital being in excess of Three Million Two Hundred Thirteen Thousand Dollars
($3,213,000). Amounts funded under clauses (b), (c) and (d) above shall be added
on a pro rata basis (with respect to the Fiscal Year or Fiscal Years during
which such expenditure(s) occurred), beginning with the first full Accounting
Period after such expenditures occurred.
"Person" shall mean any individual, partnership, corporation, limited
------
liability company, trust or other legal entity.
"Primary Courtyard Management Fee" shall mean, for any period, an amount
--------------------------------
equal to two percent (2%) of Gross Revenues for such period.
"Prime Rate" shall mean the "prime rate" as published in the "Money Rates"
----------
section of The Wall Street Journal from time to time; and the average of such
-----------------------
rates if more than one is published; however, if such rate is, at any time
during the Term, no longer so published, the term "Prime Rate" shall mean the
average of the prime interest rates which are announced, from time to time, by
the three (3) largest banks (by assets) headquartered in the United States which
publish a "prime rate."
"Qualified Debt" means all amounts owed from time to time under (a) the
--------------
loan set forth in the Loan Agreement and (b) any Refinancing.
"Qualified Modification" means any modification, renewal, or extension of
----------------------
any Senior Obligation, other than (i) any such modification, renewal, or
extension that creates or extends the
15
<PAGE>
scheduled final maturity of such obligation to a date later than April 10, 2022,
or (ii) to the extent that such modification, renewal, or extension (A)
increases the aggregate outstanding principal amount of all Senior Obligations
(except by way of the capitalization of interest and other charges) or (B)
requires regularly scheduled debt service payments that would result in the
indebtedness affected thereby being Paid in Full (as defined in Section 5.1.2 of
the Collateral Assignment) prior to the date on which the last scheduled payment
of principal of such Senior Obligation was due immediately prior to such
modification, renewal, or extension (without giving effect to any acceleration
of maturity thereof by reason of a default thereunder); provided that any
modification, renewal, or extension of a Senior Obligation pursuant to an order
entered in a bankruptcy proceeding of the Borrower shall be deemed to be a
Qualified Modification.
"Qualified Refinancing" means any Indebtedness (as defined in the Loan
---------------------
Agreement) incurred to refinance any Senior Obligation, other than (i) any such
Indebtedness that has a scheduled final maturity of later than April 10, 2022 or
(ii) any principal amount of Indebtedness incurred to refinance any Senior
Obligation to the extent (but only to the extent) (A) such Indebtedness does not
increase the aggregate outstanding principal amount of all Senior Obligations to
an amount in excess of the aggregate principal amount of Senior Obligations
outstanding immediately prior to incurring such Indebtedness, other than by way
of the capitalization of interest and other charges or the financing of
reasonable costs of such refinancing (provided that the aggregate amount of such
refinancing costs added to the principal amount of the Senior Obligations is not
in excess of three percent (3%) of the principal amount of the Senior
Obligations being refinanced) or (B) such Indebtedness requires regularly
scheduled debt service payments that would result in the indebtedness affected
thereby being
16
<PAGE>
Paid in Full (as defined in Section 5.1.2 of the Collateral Assignment) prior to
the date on which the last scheduled payment of principal of such Senior
Obligation was due immediately prior to such refinancing (without giving effect
to any acceleration of maturity of the Senior Obligations being refinanced by
reason of a default thereunder); provided that any refinancing of a Senior
Obligation pursuant to an order entered in a bankruptcy proceeding of the
Borrower shall be deemed to be a Qualified Refinancing.
"Qualifying Debt Service" means, without duplication, for each Fiscal Year:
-----------------------
(a) the amount of interest, principal, prepayment premiums, and all other
payments due and payable from time to time on (i) any Qualified Debt except for
the amounts required to be remitted to Lender subsequent to the Scheduled
Maturity Date (as defined in the Loan Agreement) pursuant to Sections 4.4I,
4.4J,4.4 N and 6.10H, 6.10I and 6.10M of Schedule 5.11 of the Loan Agreement,
(ii) any indebtedness incurred to fund the cost of any expansion of any of the
Hotels, (iii) any indebtedness incurred to fund the cost of any repairs or
replacements not covered by insurance proceeds under Section 15.01A hereof, (iv)
any indebtedness incurred to fund the cost of any building alterations and
related expenses under Section 8.03A1, and (v) any indebtedness incurred to fund
any reasonable business need of Owner with respect to any of the Hotels subject
to this Agreement; provided, however with respect to each of clauses (i) through
(v) of subpart (a) no such payments shall be included that constitute a balloon
payment of principal at the maturity of any Qualified Debt;
(b) the reasonable fees and pass-through administrative costs of any
Lender, including without limitation, such Lender's successors, agents,
servicers and assigns, reasonable agent's fees for any Refinancing involving a
lender agent and costs incurred by any Lender in
17
<PAGE>
exercising rights under any applicable loan documents, including without
limitation, advances made by Lender to cure any defaults by the borrower under
such loan documents, under this Agreement, or any other agreement necessary to
the operation of the Hotels and the protection of the value of any security for
the loan and the validity and priority of the Lender's lien thereon, costs of
enforcement and collection, and other costs incurred by the Lender in good faith
in the administration of the applicable loan; plus
(c) as to clauses (ii) and (iv) of subpart (a) above, any refinancing
of such loans but only as it relates to those Hotels, the Hotel Term of
which has not been terminated.
(d) Qualifying Debt Service during the period from the Effective Date
through the Closing Date shall be an amount equal to ______________.
"Refinancing" means any refinancing of all or any part of any indebtedness
-----------
under the Loan Agreement (or any successive refinancings thereof), together with
indebtedness incurred to finance the reasonable cost of any Refinancing but not
in excess of three percent (3%) of the principal amount of any Refinancing of
the indebtedness under the Loan Agreement so long as the principal amount of any
Refinancing, when added to the amount of indebtedness under the applicable loan
documents, if any, that will not be paid off as part of such Refinancing shall
not exceed Three Hundred Twenty-five Million Dollars ($325,000,000) less any Net
Sales Proceeds. distributed to Owner and, the amortization schedule of the
payments under such Refinancing shall be no less than twenty (20) years.
"Secondary Courtyard Management Fee" means, for any Accounting Period, an
----------------------------------
amount equal to one percent (1%) of Gross Revenues for such Accounting Period.
18
<PAGE>
"Senior Obligations" means all obligations requiring the payment of money,
------------------
liabilities, and indebtedness of the Owner under (i) the Loan Agreement, (ii)
any Qualified Refinancing of the foregoing, and (iii) any Qualified Modification
of the foregoing.
"Severance Management Agreement" shall mean a new management agreement
------------------------------
covering one or more Hotels transferred to a new owner in a transaction in which
less than all of the Hotels are transferred but pursuant to which Manager or one
of its Affiliates remains as manager of the Hotels so transferred (each, a
"Severance Hotel"). Each Severance Management Agreement shall commence
immediately upon the Termination of the Hotel Term(s) of this Agreement as to
the Severance Hotel(s) and shall continue for a period equal to the then
remaining period of the Hotel Term that would otherwise have been applicable to
the Severance Hotels, including any Renewal Terms. Subject to the exceptions
stated herein, each Severance Management Agreement shall be upon the same terms,
covenants, and conditions as contained in this Agreement with such additional
prorations, adjustments, allocations, and changes as are appropriate, in the
determination of the applicable "Owner" and Manager, both acting reasonably, to
reflect the number and value of the Severance Hotels and taking into
consideration the prorations, adjustments, allocations, and changes being made
to this Agreement as a result of the transfer of the Severance Hotels.
"Subordinated FF&E Contribution" shall mean the aggregate amount of (a)
-------------------------------
that portion of the annual FF&E contribution required pursuant to Section 8.02
in any Fiscal Year that exceeds five percent (5%) of Gross Revenues for such
Fiscal Year, which shall be made only after Qualifying Debt Service due in such
Fiscal Year has been made, plus (b) that portion of the annual FF&E contribution
required pursuant to Section 8.02 from previous Fiscal Years that was
19
<PAGE>
not paid because there was not sufficient cash flow after paying Qualifying Debt
Service in any previous Fiscal Year to make such contribution to the Repairs and
Equipment Reserve.
"Telephone Leases" means any lease of the telephones and/or other
----------------
telecommunication systems and equipment located in one or more Hotels.
"Termination" shall mean the expiration or sooner cessation of this
-----------
Agreement with respect to a given Hotel or Hotels.
"Third Party Ground Leases" means (a) the Sublease Agreement dated April 5,
-------------------------
1983 between Crow-Atlanta Retail, Ltd., as sublandlord, and Marriott
Corporation, as subtenant, as assigned by Marriott Corporation to the Owner by
an assignment dated August 19, 1986, relating to the Hotel in Atlanta/Northlake,
Georgia and (b) the Ground Lease dated May 6, 1985, between A. E. Properties,
Ltd., as Landlord, and Marriott Corporation, as tenant, as assigned by Marriott
Corporation to the Owner by an assignment dated December 9, 1986 relating to the
Hotel in San Francisco/San Bruno, California.
"TV System Leases" means a lease or other agreement under which equipment
----------------
(excluding television sets) for the transmission into Hotel rooms of televised
programming is leased or otherwise provided, regardless of whether such lease or
other agreement contains a right or option to purchase such equipment.
"Uniform System of Accounts" shall mean the Uniform System of Accounts for
--------------------------
Hotels, Eighth Revised Edition, 1986, as published by the Hotel Association of
New York City, Inc.
"Working Capital" shall mean funds that are reasonably necessary for the
---------------
day-to-day operation of the business of the Hotels, including, without
limitation, amounts sufficient for the maintenance of change and petty cash
funds, operating bank accounts, accounts receivable,
20
<PAGE>
payrolls, prepaid expenses and funds required to maintain Inventories, less
accounts payable and accrued current liabilities.
1.02 Terms Defined in Other Sections
-------------------------------
The following terms when used in this Agreement shall have the meanings
described in this Agreement as indicated below:
"1994 Operating Lease" - Preamble.
--------------------
"Affected Hotel" - Section 4.04B1.
--------------
"Agreement" - Preamble.
---------
"Annual Operating Projection" - Section 9.03.
---------------------------
"Building Estimate" - Section 8.03A.
-----------------
"Deductions" - Section 1.01 in definition of Operating Profit.
----------
"Deferred Secondary Courtyard Management Fee" - Section 5.01C.
-------------------------------------------
"Economic Gain" - Section 4.02C.
-------------
"Effective Date" - Preamble.
--------------
"Hotel Term" - Section 4.01B.
----------
"Impositions" - Section 13.01.
-----------
"Initial Term" - Section 4.01A.
------------
"Licenses and Contracts" - Section 4.04A4.
----------------------
"Manager" - Preamble.
-------
"Marriott" - Section 2.05.
--------
"Owner" - Preamble.
-----
"Renewal Term(s)" - Section 4.01B.
---------------
21
<PAGE>
"Repairs and Equipment Reserve" - Section 8.02A.
-----------------------------
"Repairs and Equipment Estimate" - Section 8.02D.
------------------------------
"Reserve" - Section 8.02A.
-------
"Severance Hotel" - Section 1.01 within definition of Severance Management
---------------
Agreement.
"Supplemental Repairs and Equipment Estimate" - Section 8.02C.
-------------------------------------------
"Supplemental Building Estimate" - Section 8.03.
------------------------------
"Termination Fee" - Section 4.02A.
---------------
"Working Capital Loan" - Section 5.07.
--------------------
END OF ARTICLE I
22
<PAGE>
ARTICLE II
TERMINATION OF OPERATING LEASE[S]
APPOINTMENT OF MANAGEMENT COMPANY
---------------------------------
2.01 Termination of Operating Lease.
------------------------------
Owner and Manager hereby agree that upon receipt by Manager of Four Million
Two Hundred Thousand Dollars ($4,200,000), which represents the refund of
Additional Rent as defined in the Operating Leases, the 1994 Operating Leases
shall terminate and the term of this Agreement shall begin.
2.02 Appointment
-----------
Owner hereby appoints and employs Manager as Owner's exclusive agent to
supervise, direct and control the management and operation of the Hotels for the
Hotel Term applicable to each such Hotel. Manager accepts said appointment and
agrees to manage the Hotels during their respective Hotel Terms in accordance
with the terms and conditions hereinafter set forth in a manner consistent with
the standard generally applicable to the Courtyard by Marriott System. The
performance of all activities by Manager hereunder shall be as agent for Owner.
Manager may not delegate its duties hereunder except to one of its Affiliates.
2.03 Delegation of Authority
-----------------------
Hotel operations shall be under the supervision and control of Manager
which, except as otherwise specifically provided in this Agreement, shall be
responsible for the proper and efficient operation of the Hotels. Manager shall
have discretion in all matters relating to management and operation of each
Hotel, including, without limitation: charges for rooms and commercial space;
credit policies; food and beverage prices and services; employment policies;
23
<PAGE>
granting of concessions or leasing of shops and agencies within each Hotel;
receipt, holding and disbursement of funds; maintenance of bank accounts;
procurement of Inventories, supplies and services; marketing plans and programs
and, generally, all activities, services, and amenities necessary for operation
of the Hotels.
2.04 No Covenants or Restrictions
----------------------------
Owner warrants that it has not nor will it allow any covenants or
restrictions to be placed on the Hotels, without Manager's prior approval, which
would prohibit or limit Manager, after the Manager obtains all necessary
licenses and permits, from operating any Hotel, including the operation at
individual Hotels of cocktail lounges, restaurants and other facilities
customarily a part of or related to Courtyard by Marriott Hotels. Owner agrees
upon request by Manager to sign promptly and without charge applications for
licenses, permits, or other instruments necessary for operation of the Hotels.
2.05 Non-Discrimination
------------------
The parties recognize that Manager or its Affiliates acts as manager of
certain other hotels, some of which may be owned by Manager, the parent of
Manager, Marriott International, Inc. ("Marriott"), or their Affiliates or by
other third parties. Certain of these hotels, now or in the future, may be
located within the general geographical area of one or more of the Hotels.
Manager shall institute reasonable internal controls and procedures to ensure
that no favoritism shall be accorded to such other hotels on the basis of the
ownership thereof. At all times, Manager will operate the various hotels under
its management, including the Hotels, in a non-discriminatory manner. Manager
shall have no liability under the preceding sentence unless it can be shown that
it has acted in willful disregard of this provision..
END OF ARTICLE II
24
<PAGE>
ARTICLE III
OWNERSHIP OF HOTELS
-------------------
3.01 Ownership of Hotels
-------------------
A. Owner covenants that it has, and will, keep and maintain, fee or
leasehold title to each of the Hotels free and clear of any and all liens,
encumbrances or other charges, except as follows:
1. Easements or other encumbrances (other than those described in
subsection 2 through 6 hereof) that do not adversely affect the operation of any
Hotel by Manager;
2. Mortgages, deeds of trust or similar security instruments that
contain a provision acceptable to Manager's counsel that this Agreement will not
be subject to forfeiture or Termination other than in accordance with the terms
hereof (or other terms agreed to in writing by Manager), notwithstanding a
default under such mortgage, deed of trust or security instrument;
3. Liens for taxes, assessments, levies or other public charges not
yet due (or that are due but not yet delinquent) or that are being contested in
good faith.
4. The terms and conditions of any ground leases (as amended and in
effect as of the Effective Date) for the land on which any of the Hotels are
located.
5. Liens, encumbrances, or other charges resulting from Manager's
acts.
6. Mortgages, deeds of trust, security agreements or similar
security instruments securing the Loan described in the Loan Agreement and any
Qualified Refinancing.
B. Owner shall pay and discharge, on or before the due date, (i) any and
all
25
<PAGE>
installments of principal and interest due and payable upon any mortgage, deed
of trust or like instrument described in this Section 3.01 and shall indemnify
Manager from and against all claims and litigation and damages (other than
damages representing Manager's lost profits) arising from Owner's failure to
make such payments as and when required and (ii) any and all charges for capital
expenditures assessed pursuant to any covenants, conditions and restrictions
affecting the Hotels.
C. Owner agrees that, in the event it acquires fee title to the land
underlying any of the Hotels that are subject to a Third Party Ground Lease or a
Marriott Ground Lease, any resultant merger of its interest under any such
ground lease into its newly-acquired fee title shall not result in a termination
of this Agreement.
3.02 Subordination, Nondisturbance, and Attornment
---------------------------------------------
A. Manager agrees that this Agreement, and any extensions, renewals,
replacements or modifications to it, and all right and interest of Manager in
and to the Hotels shall, at the option of any mortgagee pursuant to any
Refinancing, be subject and subordinate to such mortgage provided that such
mortgagee agrees in writing, in an instrument recordable in each jurisdiction in
which a Hotel is located that is reasonably acceptable to Manager's counsel and
has been previously approved in writing by Manager's counsel, that in the event
the mortgagee or any other party comes into possession of any of the Hotels by
virtue of a foreclosure, deed or assignment in lieu of foreclosure or other
transfer pursuant to such mortgage, Manager shall not be disturbed in its rights
hereunder so long as Manager is not in material default hereunder.
B. Provided that such mortgagee has delivered to Manager the recordable
instrument described in subsection A above, in the event that such mortgagee or
any other party comes into
26
<PAGE>
possession of any of the Hotels by virtue of a foreclosure, deed or assignment
in lieu of foreclosure, or other transfer pursuant to such mortgage, Manager
shall be obligated to such mortgagee or such third party to perform all of the
terms and conditions of this Agreement for the balance of the remaining Hotel
Term applicable to the Hotels covered by such mortgage but subject to Manager's
rights to terminate pursuant to Section 19.02B2 hereof.
END OF ARTICLE III
27
<PAGE>
ARTICLE IV
TERM
----
4.01 Term
----
A. The term of this Agreement shall be from the Effective Date, to the
expiration of the Hotel Term (as defined in subsection B below) for the last
Hotel to which this Agreement applies.
B. With respect to each Hotel, the "Hotel Term" shall consist of the
"Initial Term" and the "Renewal Term(s)". The "Initial Term" for all Hotels
shall begin on the Effective Date, and, unless sooner terminated as herein
provided, shall continue until 11:59 p.m. of the last day of Fiscal Year 2017.
The Initial Term will be renewed automatically, without notice, for each Hotel
that is covered by this Agreement as of the end of the Initial Term (on the same
terms and conditions contained herein), for each of four (4) successive periods
of ten (10) Fiscal Years ("Renewal Terms"), provided that Manager is not then in
default hereunder. Manager's renewal shall be effective only with respect to a
particular Hotel if at the commencement of the Renewal Term, Manager is not in
default under this Agreement with respect to such Hotel, or if Manager is in
default, such default is being cured as provided in Section 16.02. If Manager
elects not to renew the term of this Agreement as to any Hotel following
expiration of the then current Hotel Term, it shall nevertheless continue to
manage the Hotel(s) in question hereunder until the earlier to occur of (i) the
three year anniversary of the date on which notice of non-renewal was given,
(ii) three years after the expiration of the then current term, or (iii) such
time as Owner effects a sale of the Hotel(s) or secures a new manager but, in
any such case, not earlier than the expiration of the then current term of the
Management Agreement. Manager may, at its option,
28
<PAGE>
elect to renew for more than one Renewal Term with respect to any one (1) or
more of the Hotels at any given time. Notwithstanding any provision to the
contrary but subject to the preceding sentence, Manager has no obligation to
manage any of the Hotels beyond the applicable Hotel Term.
C. Notwithstanding anything in Section 4.01B to the contrary, the Hotel
Term with respect to each of the Hotels subject to a ground lease shall not
extend beyond the expiration or earlier involuntary termination of any
applicable ground lease unless Owner acquires the fee interest in the land
underlying such Hotel. Owner agrees that, with respect to any ground lease that
is about to expire, it will deliver a written notice to Manager no later than
ninety (90) days prior to the last day on which Owner can elect to renew the
term of said ground lease, informing Manager of the impending expiration of the
ground lease and whether Owner wishes to renew the ground lease for said
applicable renewal period. If Owner informs Manager that it wishes to renew such
ground lease, Manager will then notify Owner no later than sixty (60) days
before the last day on which Owner can make its election to renew whether
Manager elects to extend the Hotel Term for the next Renewal Term.
4.02 Termination Fee
---------------
A. If the Hotel Term applicable to a particular Hotel is terminated prior
to the natural expiration (and assuming the exercise of all Renewal Terms)
thereof due to either (i) the provisions of Section 15.01 or 15.02 with respect
to a casualty or condemnation, or (ii) the provisions of Article XIX with
respect to a sale of such Hotel, then Manager shall receive from Owner a
termination fee (the "Termination Fee") in the amount determined under Section
4.02B below. The purpose of the Termination Fee is to compensate Manager for
the loss of anticipated
29
<PAGE>
future Incentive Management Fees due to a premature termination of this
Agreement as to a particular Hotel or Hotels.
B. The Termination Fee shall be an amount equal to the net present value,
as computed by Manager, of the reasonably anticipated Incentive Management Fees
which would be earned by the Manager pursuant to Article V over the next ensuing
forty (40) years or if the then remaining term of this Agreement for the Hotel
for which the calculation is made (assuming the exercise of all Renewal Terms)
is less than forty (40) years, such lesser period. The discount rate to be
employed in making such computation shall be a percentage equal to the sum of
(i) three percentage points plus (ii) the then Prime Rate. Such fee computation
shall not be binding on Owner unless the firm of independent auditors regularly
employed by Owner has reported on the mathematical accuracy of the computation
and that the forecast used as the basis for computing such anticipated Incentive
Management Fees was prepared using assumptions that are reasonable as a basis
for forecasting anticipated Incentive Management Fees over the period in
question. However, the Termination Fee shall in no event exceed the percentage
set forth in the table below, of the "Economic Gain," as defined in Section
4.02C, applicable for the year after such Hotel's Opening Date (as set forth on
Exhibit A) in which the right to a Termination Fee accrues:
<TABLE>
<CAPTION>
Year of Termination
calculated from
Opening Date Percentage
- ------------------- ----------------------------------------------------------
<C> <S>
1-15 50%
16-50 49% in year 16, declining by one percentage point per year
thereafter
</TABLE>
30
<PAGE>
C. For purposes hereof, "Economic Gain," as to any Hotel as to which a
Termination Fee is owed in accordance with Section 4.02A, shall mean the
proceeds of any condemnation award, insurance settlement or sale reduced by (a)
any costs involved in the realization of such proceeds, plus (b) 113% (123% in
the 21st and subsequent years following the Opening Date of the applicable
Hotel) of the sum of (i) Owner's original cost basis of such Hotel and FF&E when
Owner acquired such Hotel (as shown on Exhibit A) plus (ii) the cost of any FF&E
Replacements, repairs, maintenance, building improvements, alterations or
replacements or other costs incurred with respect to such Hotel after the date
such Hotel was acquired plus (iii) the cost in excess of insurance or
condemnation proceeds of any structural repairs or replacements to such Hotel
necessitated by such condemnation or casualty.
D. If the Termination Fee exceeds the available Net Sale Proceeds, the
amount, if any, of such excess shall not be due.
E. The Termination Fee due under subsection A above shall be paid in full
by Owner to Manager upon the later to occur of (i) the termination of this
Agreement with respect to that Hotel or (ii) the date on which the Net Sales
Proceeds, insurance proceeds or condemnation award become available to Owner. In
the event of any Net Sale Proceeds represented by evidences of indebtedness,
Owner shall assign to Manager, without recourse or warranty, all or such portion
of the principal amount thereof (and any interest accruing thereon) as equals
the portion of the Termination Fee that is not otherwise paid. Any such
assignment shall be deemed payment of the Termination Fee to the extent of the
principal amount so assigned.
F. Any dispute between the Owner and the Manager with respect to the
Termination Fee or the obligation of the Owner or Manager thereunder shall, at
the request of either party, be
31
<PAGE>
submitted to arbitration under the commercial rules of the American Arbitration
Association.
4.03 Performance Termination
-----------------------
1. A. If the average of the Operating Profit during any three (3)
consecutive Fiscal Years during the term of this Agreement fails to equal
or exceed (i) Forty Million One Hundred Ninety Eight Thousand Dollars
($40,198,000) plus (ii) eight percent (8%) of the sum of expenditures made
by Owner pursuant to Section 8.03A for building alterations, improvements,
renewals or replacements and any subsequent expansions, thereof, Owner
shall, subject to the conditions of Section 4.03B, have the option to
terminate this Agreement. Such option may be exercised by serving written
notice of Owner's election to terminate this Agreement on Manager not later
than one hundred and twenty (120) days after receipt of the annual
accounting pursuant to Section 9.01 for such third consecutive Fiscal Year.
Such notice shall state the basis upon which Owner asserts the right of
termination and shall show all mathematical calculations constituting the
basis therefor. If the provisions of this Agreement no longer apply to a
Hotel, the amount set forth in the first sentence of this Section 4.03A
shall be reduced proportionately by the amount attributed to such Hotel on
Exhibit A divided by the total amount attributed to all the Hotels as set
forth on Exhibit A.
B. Upon receipt of Owner's written notice of termination under Section
4.03A, Manager shall have the option, to be exercised within thirty (30) days
after receipt of said notice, to pay to Owner the amount of any deficiency
described in Section 4.03A. If Manager does not exercise its option to make the
payment permitted by this Section 4.03B, then this Agreement shall be terminated
upon the expiration of the aforesaid thirty (30) day option period as though
32
<PAGE>
the term hereof had expired without renewal. In the event of such termination,
Manager may elect that the effective date thereof may be a date that is not
later than an additional forty-five (45) days beyond the expiration of the
aforesaid thirty (30) day option period.
4.04 Actions to be Taken Upon Termination
------------------------------------
A. Termination as to All Hotels
----------------------------
Upon Termination of this Agreement as to all Hotels, the following shall be
applicable:
1. Manager shall, within ninety (90) days after Termination of this
Agreement, prepare and deliver to Owner with respect to the Hotels a final
accounting statement of the kind described in Section 9.01 hereof, stated as of
the Termination Date, along with a statement of any sums due as of such date
from Owner to Manager or from Manager to Owner pursuant hereto. Within ninety
(90) days after the receipt by Owner of such final accounting statement, the
parties will make such cash adjustments as are necessary to ensure that each
party has been paid all amounts owed to such party under this Agreement through
the Termination Date, subject to Section 4.04A2. The cost of preparing such
final accounting statement and the cost of compliance with Section 4.04A2 shall
be a Deduction from Gross Revenues attributable to the final Fiscal Year of the
term, unless the Termination occurs as a result of a default by either party of
its obligations hereunder, in which case the defaulting party shall pay such
cost. Manager and Owner acknowledge that there may be certain adjustments for
which sufficient information will not be available at the time of the final
accounting to make all appropriate adjustments, and the parties agree to
readjust such amounts and make the necessary cash adjustments when such
information becomes available; provided, however, that all accounts shall be
deemed final two (2) years after termination.
33
<PAGE>
2. Within thirty (30) days after the Termination Date, Manager shall
release and transfer to Owner any of Owner's funds which are held or controlled
by Manager with respect to the Hotels except (a) funds that Manager in good
faith believes it will need to settle all accounts (including amounts owed to
Manager), (b) funds to be held in escrow pursuant to Sections 12.04 and 14.01C,
(c) funds necessary to repay any Working Capital Loan made by Manager pursuant
to Section 7.01, (d) funds necessary to reimburse Manager pursuant to Section
5.04 and (e) funds needed to reimburse Manager for any Operating Losses funded
by Manager pursuant to Section 9.04, (f) funds necessary to repay Manager any
amounts of indebtedness owed by Owner to Manager pursuant to Section 19.02.D and
(g) other amounts owed to Manager in accordance herewith. Within the thirty
(30) days after the end of the first ninety (90) day period described in Section
4.04A1 Manager shall release and transfer to Owner any of Owner's funds that are
held or controlled by Manager with respect to the Hotels except (i) funds to be
held in escrow pursuant to Sections 12.04 and 14.01C, (ii) funds necessary to
repay any Working Capital Loans made by Manager pursuant to Section 7.01, (iii)
funds necessary to pay any unpaid Deferred Management Fees pursuant to Section
5.03 (iv) funds needed to reimburse Manager for any Operating Losses funded by
Manager pursuant to Section 9.04, funds necessary to repay Manager pursuant to
Section 19.02D and otherwise in accordance herewith.
34
<PAGE>
3. Manager shall make available to Owner all books and records
respecting the Hotels, including hard copies of any such records that are
electronically stored, for the Fiscal Year in question as will be needed by
Owner to prepare accounting statements, in accordance with the Uniform System of
Accounts, for the Hotels for the year in which the Termination occurs and, upon
Owner's written request, all such books and records respecting the Hotels,
including hard copies of any such records that are electronically stored, for at
least the prior three (3) Fiscal Years (and for such other Fiscal Years for
which such records are available, subject to Manager's reasonable records
retention policies) as needed by Owner to make comparisons to prior Fiscal
Years.
4. Manager shall (to the extent permitted by law or by applicable
agreement) (i) assign to Owner or to the new manager all leases, subleases,
concession agreements, maintenance contracts, operating contracts, operating
licenses and permits for the Hotels, (together, the "Licenses and Contracts"),
to the extent they have been issued in Manager's name or in the name of the
Hotel and (ii) cooperate with Owner in effecting the assignment, renewal or
reissuance of all other Licenses and Contracts (including liquor and restaurant
licenses, if any); provided that if Manager has expended any of its own funds in
the acquisition of any such licenses or permits, Owner shall reimburse Manager
therefor if it has not done so already.
5. Various other actions shall be taken, as described in this
Agreement, including, but not limited to, the actions described in Sections 4.02
(if applicable), 7.01, 10.02, 10.04C, 12.04, 14.01C and 19.02D.
6. Manager shall peacefully vacate and surrender the Hotels to
Owner.
B. Termination as to Less than All Hotels
--------------------------------------
35
<PAGE>
Upon Termination of the Hotel Term of one or more but less than all Hotels
prior to Termination of this Agreement, the parties shall, subject to the
exceptions stated herein, make such prorations, adjustments, allocations, and
changes to this Agreement as are appropriate (including any prorations,
adjustments, allocations, and changes needed to appropriately reflect any such
Termination that occurs during, as opposed to on the last day of, any Fiscal
Year) in the determination of Owner and Manager, both acting reasonably, to
reflect the number and value of the Hotels remaining subject to this Agreement,
and the following shall be applicable:
1. If Manager will not continue operating the Hotel(s) being
terminated (each, an "Affected Hotel"), then:
a. Manager shall release and transfer to Owner that portion of
Owner's funds properly allocable to the Affected Hotel(s) which are held or
controlled by Manager with respect to the Affected Hotels with the exception of
funds to be held in escrow pursuant to Sections 12.04 and 14.01C, funds
necessary to compensate Manager pursuant to Section 7.01, funds necessary to
reimburse Manager pursuant to Section 9.04, and otherwise in accordance
herewith;
b. Manager shall (to the extent permitted by law or by
applicable agreement) assign to Owner or to the new manager all Licenses and
Contracts for the Hotel(s) which have been issued in Manager's name or in the
name of the Affected Hotel(s) (including liquor and restaurant licenses, if any)
and (ii) cooperate with Owner in effecting the assignment, renewal or reissuance
of such documents; provided that if Manager has expended any of its own funds in
the acquisition of any of such licenses or permits, Owner shall reimburse
Manager therefor if it has not done so already;
36
<PAGE>
c. Various other actions to be taken, as described in this
Agreement, including, but not limited to, the actions described in Sections 4.02
(if applicable), 7.01, 10.02, 10.04C, 12.04, 14.01C, and, if applicable, 19.02E;
and
d. Manager shall peacefully vacate and surrender the Affected
Hotel(s) to Owner on the date specified in the applicable provisions of this
Agreement; or
2. If Manager will continue to operate the Hotel(s) terminated
(each, a "Severance Hotel"), then:
a. Manager and the new owner shall enter into a Severance
Management Agreement as to the Severance Hotel(s). To the extent permitted by
law, each Severance Management Agreement and this covenant shall automatically
be superior to all rights, liens and interests intervening between the date of
this Agreement and the recordation of a memorandum or short form of each such
Severance Management Agreement. The provisions of this Section 4.04B2.a shall
be self-executing, and the new owner shall execute one or more Severance
Management Agreements as herein provided and a memorandum or short form of such
Severance Management Agreement(s) in form reasonably satisfactory to both
parties and any other documents reasonably requested by Manager to evidence the
creation of Manager's rights under the Severance Management Agreement(s). If
either the new owner or Manager shall fail to enter into a Severance Management
Agreement upon the occurrence of the events described herein, the Severance
Management Agreement shall nonetheless be and shall be construed to be in full
force and effect, the parties' actually entering into said Severance Management
Agreement in such instance constituting merely evidentiary confirmation of such
Severance Management Agreement and not a condition precedent to the
effectiveness thereof.
37
<PAGE>
There shall be no provision in any Severance Management Agreement similar to
Section 5.01C hereof providing for deferral of any Courtyard Management Fees
accruing after the effective date of the Severance Management Agreement,
however, any Deferred Secondary Courtyard Management Fees allocated to the
Severance Management Agreement pursuant to Section 5.01D shall be paid as set
forth in Section 5.02A.
b. Within ninety (90) days after the Termination Date, Manager
shall release and transfer to the selling Owner that portion of Owner's funds
that are properly allocable to the Severance Hotel(s) which are held or
controlled by Manager with respect to the Severance Hotels, so long as the new
owner of the Severance Hotels has transferred corresponding amounts to Manager,
net of amounts owed by Owner to Manager with respect to funds to be held in
escrow pursuant to Sections 12.04 and 14.01C, funds necessary to compensate
Manager pursuant to Section 7.01, funds necessary to reimburse Manager pursuant
to Section 9.04, and otherwise in accordance herewith.
c. Various other actions shall be taken, as described in this
Agreement, including, but not limited to, the actions described in Sections
7.01, 10.02, 10.04C, 12.04, 14.01C, and, if applicable, 19.02E.
C. The provisions of this Section 4.04 shall survive Termination of this
Agreement.
END OF ARTICLE IV
38
<PAGE>
ARTICLE V
COMPENSATION OF MANAGEMENT COMPANY
----------------------------------
5.01 Management Fees
---------------
A. In consideration of services to be performed during the term of this
Agreement and subject to the further provisions of this Article V, Manager
shall be paid the annual sum of the following as its Management Fee:
(1) the Base Management Fee; plus
(2) the Courtyard Management Fee; plus
(3) the Incentive Management Fee.
B. The Base Management Fee and Primary Courtyard Fee shall, for all
Fiscal Years, be paid out of Gross Revenues as Deductions before payment of
Qualifying Debt Service or any items listed in Section 5.02.
C. During the period from the Effective Date through the date the
indebtedness under the Loan Agreement or any Qualified Refinancing, is "Paid in
Full" or deemed to be "Paid in Full" pursuant to the provisions of the
Collateral Assignment, the Secondary Courtyard Management Fee shall be paid out
of Available Cash Flow in accordance with the priorities of payment set forth in
Section 5.02 and any portion of the Secondary Courtyard Management Fee that is
not paid because there is not sufficient Available Cash Flow in any Fiscal Year
to pay all amounts of the Secondary Courtyard Management Fee shall be deferred
("Deferred Secondary Courtyard Management Fee") and shall be paid out of
Available Cash Flow in a future Fiscal Year in accordance with the priorities of
payment in Section 5.02. Deferred Secondary Courtyard Management Fees shall not
accrue interest. Notwithstanding the foregoing, the full
39
<PAGE>
amount of any Secondary Courtyard Management Fee shall be treated as a Deduction
for purposes of calculating Operating Profit in the Fiscal Year in which it is
earned and not the Fiscal Year actually paid. For each Fiscal Year after the
period set forth above, the Secondary Courtyard Management Fee shall be paid out
of Gross Revenues.
D. Any Deferred Incentive Management Fee or Deferred Secondary Courtyard
Management Fee remaining upon termination of this Agreement with respect to the
last of the Hotels to be subject to this Agreement shall not be payable. Owner
shall not be required to pay Deferred Incentive Management Fees or Deferred
Secondary Courtyard Management Fees out of any Net Refinancing Proceeds or Net
Sales Proceeds. Upon termination of this Agreement as to each Severance Hotel,
the Severance Hotel's Deferred Incentive Management Fee or Deferred Secondary
Courtyard Management Fee shall be the product of the Deferred Incentive
Management Fee or the Deferred Secondary Courtyard Management Fee, as
applicable, multiplied by a fraction, the numerator being the Gross Revenues of
the Severance Hotel for the last full thirteen (13) Accounting Periods and the
denominator being the Gross Revenues of all Hotels for the last full thirteen
(13) Accounting Periods.
E. For each Fiscal Year, the Incentive Management Fee shall be paid only
out of Available Cash Flow in accordance with Section 5.02, and any portion of
the Incentive Management Fee that is not paid hereunder due to a deficiency in
Available Cash Flow shall not be deferred and shall not be paid to Manager.
5.02 Use of Available Cash Flow
--------------------------
In each Fiscal Year during the term of this Agreement, Available Cash Flow
shall be applied, to the extent available, in the following manner and in the
following order of priority:
40
<PAGE>
A. First until such time as all amounts owing under the Loan Agreement or
any Qualified Refinancing are paid in full, (or deemed paid in full pursuant to
the Collateral Assignment) an amount equal to the sum of the Secondary Courtyard
Management Fee plus Deferred Secondary Courtyard Management Fee shall be
retained by Manager.
B. Second, until such time as all amounts owing under the Loan Agreement
or any Qualified Refinancing are paid in full, (or deemed paid in full pursuant
to the Collateral Assignment) an amount equal to the Current Ground Rent under
all MI Ground Leases shall be paid (prorata, if necessary ) to the Marriott
Ground Lessors;
C. Third, until such time as all amounts owing under the Loan Agreement
or any Qualified Refinancing are paid in full, (or deemed paid in full pursuant
to the Collateral Assignment), an amount equal to the then outstanding balance
of any Subordinated FF&E Contribution which was not paid in the current or
previous Fiscal Years shall be deposited into the Reserve.
D. Fourth, an amount equal to any Working Capital Loans made by Manager
pursuant to Section 5.04 shall be retained by Manager;
E. Fifth, until such time as all amounts owing under the Loan Agreement
or any Qualified Refinancing are paid in full, (or deemed paid in full pursuant
to the Collateral Assignment) an amount equal to the then outstanding balance of
any Deferred Ground Rent shall be paid (prorata if necessary) to the Marriott
Ground Lessors;
F. Sixth, an amount equal to the then outstanding balance of any Ground
Lease Advances shall be paid (prorata if necessary) to the Marriott Ground
Lessors;
G. Seventh, an amount equal to the Owner's Priority Return shall be
distributed to
41
<PAGE>
Owner;
H. Eighth, an amount equal to the Incentive Management Fee, shall be
retained by Manager;
I. Ninth, an amount shall be retained by Manager for the reduction of any
remaining Deferred Incentive Management Fees in an amount up to the remainder of
fifty percent (50%) of Cash Flow Available for Incentive Management Fee less the
amount retained for the Incentive Management Fee; and
J. Tenth, any Available Cash Flow remaining after the payments described
above shall be distributed to Owner.
5.03 Accounting and Interim Payment
------------------------------
A. Within twenty (20) days after the close of each Accounting Period,
Manager shall submit an interim accounting to Owner showing Gross Revenues,
Deductions, Operating Profit, Available Cash Flow, and the application thereof
under Section 5.02. Manager shall transfer with each accounting any interim
amounts to be paid to Owner and shall retain any interim Management Fees,
Deferred Incentive Management Fee, and other amounts due Manager.
B. Calculations and payments of the Secondary Courtyard Management Fee,
the Incentive Management Fee, the Deferred Management Fees, and other amounts
due Manager. and amounts due the Marriott Ground Lessors and applications of
Available Cash Flow made with respect to each Accounting Period shall be
accounted for cumulatively within each Fiscal Year. Within seventy-five (75)
days after the close of each Fiscal Year, Manager shall submit an accounting, as
more fully described in Section 9.01, for such Fiscal Year to Owner, which
accounting shall be controlling over the interim accountings. Any adjustments
required by the
42
<PAGE>
Fiscal Year accounting shall be made promptly by the parties. No adjustment
shall be made for any Operating Loss in a preceding or subsequent Fiscal Year.
5.04 Working Capital Loans
---------------------
Manager shall have the right, but not the obligation, to advance funds
needed for additional Hotel Working Capital. Any such advances shall be deemed
a loan by Manager to Owner in such amount (each, a "Working Capital Loan"),
shall bear annual interest at one percent (1%) above the Prime Rate, and shall
be repayable by Owner out of Available Cash Flow in the priority set forth in
Section 5.02. Owner shall evidence any such loan by executing a promissory note
payable to Manager in the principal amount of each such advance and bearing
interest as aforesaid. Each such note shall be payable upon the earlier of (i)
fifteen (15) years from the date of the advance thereunder, or (ii) the sale of
substantially all of the Hotels; and during the term of this Agreement, shall be
payable out of Available Cash Flow, and Manager shall be entitled to reimburse
itself for such loans in accordance with Section 5.02.
5.05 Reimbursement of Manager
------------------------
In the event that there is an Operating Loss or the Owner has insufficient
funds at any time for the Manager to pay all Deductions then due and to remit to
Owner funds sufficient to pay Qualifying Debt Service as it comes due, Manager
may, in its sole discretion, elect to pay, from its own funds, some or all of
the unpaid Deductions then due (other than Management Fees, Current Ground Rent
or Subordinated FF&E Contributions), in an aggregate amount not to exceed the
average Deductions for one (1) Accounting Period during the preceding thirteen
(13) full Accounting Periods enabling Manger to remit to Owner funds in excess
of the amount the Manager is otherwise then required to remit (provided that
such excess remittance shall not be
43
<PAGE>
greater than the amount of Deductions so paid by the Manager). Owner shall be
obligated to reimburse Manager for payment of any Deductions so paid, upon
demand by Manager together with interest thereon at the rate that would have
been payable to the applicable creditor paid by the Manager or, at the election
of the Manager at a rate equal to the Prime Rate plus one percent (1%) per
annum, computed from the date the Manager paid the applicable Deduction from its
own funds to the date of such repayment. The Manager shall be entitled to retain
subsequent Gross Revenues of Owner as reimbursement for making payments pursuant
to this Section 5.05. Manager shall be entitled to receive such payment or
reimbursement only to the extent the funds to be remitted by Manager to Owner
since the last payment date under the Loan Agreement (or other applicable
Qualified Debt) are sufficient to pay the next scheduled payment of Qualifying
Debt Service.
END OF ARTICLE V
44
<PAGE>
ARTICLE VI
INTENTIONALLY OMITTED
---------------------
45
<PAGE>
ARTICLE VII
WORKING CAPITAL AND FIXED ASSET SUPPLIES
----------------------------------------
7.01 Working Capital, Inventories and Fixed Asset Supplies
-----------------------------------------------------
From time to time during the term of this Agreement Owner will advance,
within fifteen (15) days after receipt of Manager's request, any additional
funds necessary to maintain Working Capital, Inventories, and Fixed Asset
Supplies at levels determined by Manager to be necessary to satisfy the needs of
the Hotels as their operation may then require. In the event Owner fails to
advance additional Working Capital within said fifteen-day period, Manager may,
in addition to any other rights or remedies available to it at law or in equity,
(i) retain the required amounts from any portion of Operating Profit payable to
Owner or others on Owner's behalf, (ii) make a Working Capital Loan to Owner in
accordance with Section 5.04, or (iii) terminate this Agreement upon thirty (30)
days' notice to Owner. Manager shall use Working Capital so advanced on behalf
of Owner for the purposes of this Agreement. With the exception of the
outstanding balance of all Working Capital Loans as of the Termination of this
Agreement (the amount of which outstanding balance shall be retained by
Manager), Working Capital, Inventories and Fixed Asset Supplies shall remain the
property of Owner throughout the term of this Agreement. Upon Termination,
Manager shall return to Owner the Working Capital and any unused Inventories and
Fixed Asset Supplies, except for Inventories and Fixed Asset Supplies purchased
by Manager under Section 10.02.
END OF ARTICLE VII
46
<PAGE>
ARTICLE VIII
REPAIRS, MAINTENANCE AND REPLACEMENTS
-------------------------------------
8.01 Repairs and Maintenance
-----------------------
Manager shall maintain each Hotel in good repair and condition and in
conformity with applicable laws and regulations and shall make or cause to be
made such routine maintenance, repairs and minor alterations, the cost of which
can be expensed under generally accepted accounting principles, as it, from time
to time, deems necessary for such purposes. The cost of such maintenance,
repairs and alterations shall be paid from Gross Revenues and shall be treated
as a Deduction in determining Operating Profit.
8.02 Repairs and Equipment Reserve
-----------------------------
A. Manager shall establish and maintain, on a consolidated basis, an
escrow reserve account ("Repairs and Equipment Reserve" or the "Reserve") in a
bank designated by Owner and reasonably satisfactory to Manager (or in a liquid
investment account such as a money market account, as determined by Manager in
its reasonable judgment after consulting with Owner) to cover the cost of FF&E
Replacements consisting of:
1. Replacements and renewals to the FF&E of a Hotel (including
communication systems and computer systems), and
2. Certain routine repairs and maintenance to the building
structures of a Hotel the cost of which is normally capitalized under generally
accepted accounting principles such as exterior and interior repainting,
resurfacing building walls, floors, roofs and parking areas, and replacing
folding walls and the like, but which are not alterations, improvements,
renewals or replacements to the structure of the building or to its mechanical,
electrical, heating,
47
<PAGE>
ventilating, air conditioning, plumbing or vertical transportation systems, the
cost of which are Owner's sole responsibility under Section 8.03.
3. Lease payments for any FF&E and motor vehicles that are leased
instead of purchased and not treated as Deductions pursuant to paragraph 15 of
the definition of Operating Profit.
B. As of the Closing Date Seven Million Six Hundred Ninety Thousand Six
Hundred Eighty Dollars ($7,690,680) is held by Manager in the Reserve. On the
Closing Date, an additional Seven Million Dollars ($7,000,000.00) will be added
by Owner to the amount already in the Reserve. No deduction and transfer into
the Reserve will be required to the extent that such deduction, when added to
amounts already in the Reserve, would make the then balance exceed the gross
amount of the transfers for the previous eight (8) Fiscal Years (except no such
calculation will include the contribution to the Reserve made on the Closing
Date). Any amounts held in the Reserve may be allocated as between the Hotels
and may be applied as set forth in this Article VIII without regard to the
source of such amounts. Any interest which accrues on any amounts held in the
Reserve shall be retained therein without reduction of Owner's obligation to
contribute thereto.
C. Manager shall from time to time make (1) such replacements and
renewals to each Hotel's FF&E, and (2) such repairs to each Hotel building of
the nature described in Section 8.02A2, as it deems necessary, up to the balance
in the Reserve. No expenditures will be made other than expenditures for
approved or deemed approved FF&E Replacements pursuant to
48
<PAGE>
Section 8.02D (or Section 8.03) and, except as provided in Section 8.02E, no
expenditures shall be made in excess of the balance in the Reserve without the
prior approval of Owner; provided, however, that (i) Manager may effect
emergency repairs necessary to prevent further loss or damage without such
approval, and (ii) Manager may, in its sole discretion, expend up to Ten
Thousand Dollars ($10,000) per Hotel (as adjusted upward each Fiscal Year to
reflect the percentage increase in the Consumer Price Index announced for
November of the immediately preceding Fiscal Year over the Consumer Price Index
announced for November 1996, provided that if such percentage increase is a
negative number in any given Fiscal Year, then there shall be no increase or
decrease in such amount over the previous Fiscal Year) in each Fiscal Year with
respect to matters not contemplated in the Repairs and Equipment Estimate. At
the end of each Fiscal Year, any amounts remaining in the Repairs and Equipment
Reserve shall be carried forward to the next Fiscal Year. Proceeds from the sale
of FF&E no longer necessary to the operation of the Hotel shall be deposited in
the Reserve without reduction of Owner's obligation to contribute thereto. Upon
the termination of a particular Hotel Term prior to Termination of this
Agreement as to all Hotels, Manager shall disburse to Owner from the Reserve the
amount held in the Reserve that is properly allocable to the Affected Hotel or
Severance Hotel, as applicable, after payment by Manager of all charges properly
payable out of the Reserve with respect to the particular Affected Hotel or
Severance Hotel (unless Manager will continue operating such Hotel, in which
case Manager shall transfer the amount held in the Reserve properly allocable to
such Hotel to a new account for the benefit of the new owner of the Hotel). Upon
Termination of this Agreement as to all Hotels and after payment by Manager of
all charges properly payable out of the Reserve, Manager shall pay to Owner all
amounts held in the
49
<PAGE>
Reserve unless Manager will continue operating some or all of the Hotels, in
which case Manager shall transfer all amounts held in the Reserve properly
allocable to the Hotels Manager will continue operating, to one or more new
accounts for the benefit of the new owner(s) of such Hotels. If for any reason
Manager is prohibited, in contradiction to the terms stated above, from
transferring such Reserve funds to one or more new accounts for the benefit of
the new owner(s), then Manager shall be entitled, in addition to the transfers
into the Reserve provided in Section 8.02B, to transfer from Gross Revenues into
the new Reserve account an amount equal to Twenty-One Thousand, Six Hundred
Dollars ($21,600) (as adjusted upward each Fiscal Year to reflect the percentage
increase in the Consumer Price Index announced for November 1996, provided that
if such percentage increase is a negative number in any given Fiscal Year, then
there shall be no increase or decrease in such amount over the previous Fiscal
Year) for each Hotel that Manager will continue to manage for such new owner(s).
Manager, in its reasonable discretion, and subject to the exceptions stated
below, shall decide whether to purchase or lease any Replacement FF&E or motor
vehicles used in transporting Hotel guests, in each case only if such items are
approved or deemed approved FF&E Replacements pursuant to Section 8.02D unless
the fair market value of same, together with all other expenditures made under
subpart (2) above, does not exceed in the aggregate the limit set forth for any
Hotel in subpart (2) above. If Manager enters into any lease of Replacement FF&E
or motor vehicles used in transporting Hotel guests, it shall do so on Owner's
behalf and as Owner's agent; or, upon Manager's recommendation and request,
Owner shall directly enter into such leases. Notwithstanding the foregoing,
Manager shall not and shall not require Owner to enter into any lease other than
(i) Telephone Leases, (ii) Computer Leases, (iii) TV System Leases, (iv) FF&E
Leases, and (v)
50
<PAGE>
leases of vehicles used in transporting Hotel guests. With respect to FF&E
Leases only, Manager shall be required to obtain Owner's prior written approval
before entering into or requesting that Owner enter into any FF&E Lease, if (a)
the fair market value of the FF&E with respect to all FF&E Leases relating to
each Hotel (including those being entered into) would exceed at any time Two
Hundred Thousand Dollars ($200,000) (as adjusted upward each Fiscal Year to
reflect the percentage increase in the Consumer Price Index announced for
November, 1996, provided that if such percentage increase is a negative number
in any given Fiscal Year, then there shall be no increase or decrease in such
amount over the previous Fiscal Year) in respect of such Hotel, (b) the FF&E to
be covered by such FF&E Lease is FF&E that is not customarily leased in the
hotel industry in the United States, or (c) such FF&E Lease is on payment terms
(including the amounts and schedule of payments) that would be materially more
favorable to the lessor thereof than payment terms customary in the hotel
industry in the United States for similar leases. With respect to TV System
Leases only, Manager shall be required to obtain Owner's prior written approval
before entering into or requesting the Owner enter into any TV System Lease, if
(a) the equipment to be covered by such TV System Lease is not customarily
leased in the hotel industry in the United States or (b) such TV System Lease is
on payment terms (including the amounts and schedule of payments) that would be
materially more favorable to the lessor thereof than payment terms customary in
the hotel industry in the United States for similar leases. In cases described
in the preceding two sentences, Owner's approval shall not be unreasonably
withheld; provided, however, that the failure of any Lender to approve such
leasing proposal shall justify Owner in withholding its approval.
D. Manager shall annually prepare a written estimate ("Repairs and
Equipment
51
<PAGE>
Estimate") of the FF&E Replacements that Manager in good faith believes to be
necessary during the current Fiscal Year and shall submit such Repairs and
Equipment Estimate to Owner at the same time it submits the Annual Operating
Projection described in Section 9.03. Additionally, Manager may, at any time and
from time to time, prepare and submit to Owner a supplemental Repairs and
Equipment Estimate (each, a "Supplemental Repairs and Equipment Estimate"). The
Repairs and Equipment Estimate (and, if applicable, any Supplemental Repairs and
Equipment Estimate") shall be prepared on a consolidated basis showing proposed
expenditures as to each Hotel and the Hotels collectively. Such Repairs and
Equipment Estimate and any Supplemental Repairs and Equipment Estimate shall
also indicate the estimated time schedule for the making of such replacements
and renewals. Owner shall review the Repairs and Equipment Estimate and
Supplemental Repairs and Equipment Estimate submitted in good faith by Manager.
If Owner shall fail to notify Manager within sixty (60) days of receipt of
either or any thereof of its disapproval of any item in the proposed Repairs and
Equipment Estimate or Supplemental Repairs and Equipment Estimate, as
applicable, for any Hotel, then the Repairs and Equipment Estimate or
Supplemental Repairs and Equipment Estimate, as applicable, for each such Hotel
shall be deemed approved. If Owner shall disapprove such Repairs and Equipment
Estimate or Supplemental Repairs and Equipment Estimate, as applicable, or any
particular FF&E Replacement described in any such estimate, as to one or more or
all of the Hotels within sixty (60) days of the receipt thereof, then,
notwithstanding any such disapproval, Manager shall be entitled to make those
FF&E Replacements described in any such estimate that are required to enable
each Hotel to be or remain in substantial compliance with Manager's standards
generally employed for Courtyard by Marriott hotels, taking into account, among
other
52
<PAGE>
factors, any new standards being rolled out by Manager at substantially all
Courtyard by Marriott Hotels; and such required FF&E Replacements shall be
deemed approved by Owner for all purposes hereunder.
E. Manager shall transfer into the Reserve an amount equal to five
percent (5%) of Gross Revenues during each Fiscal Year. These percentage
contributions for the Repairs and Equipment Reserve are estimates. As the
Hotels age, these percentages may not be sufficient to keep the Reserve at the
levels necessary to make the replacements and renewals to one or more or all of
the Hotels' FF&E, or to make the repairs to the Hotel buildings of the nature
described in Section 8.02A2, which are required to maintain the Hotels in
accordance with Manager's standards for Courtyard by Marriott hotels. If the
approved or deemed approved Repairs and Equipment Estimate and Supplemental
Repairs and Equipment Estimate or, if not the whole of any such estimate but any
particular FF&E Replacement described in any such estimate, prepared in good
faith by Manager exceeds the available funds in the Repairs and Equipment
Reserve, Manager shall have the right to increase the contribution to the
Reserve in Fiscal Years 1999 and 2000 up to an amount equal to six percent (6%)
of Gross Revenues, and to increase the contribution to the Reserve in Fiscal
Years 2001 and thereafter to seven percent (7%) of Gross Revenues. If
additional monies are needed Owner will:
1. Agree to increase the annual percentage in this Section 8.02 to
provide the additional funds required, or
2. Provide outside financing for the additional funds required, in
which event the principal and interest payments on such financing shall
constitute Deductions; or
3. Provide the additional funds required itself (in which case such
lump-sum
53
<PAGE>
contribution plus interest (at the Prime Rate plus one percentage point (1%) per
annum), shall be reimbursed to Owner from Gross Revenues in equal installments
over the period of the next five (5) calendar years beginning as of the date of
such contribution, and such installment repayments shall be Deductions).
A failure or refusal by Owner to agree to either 1, 2, or 3 above within a
sixty (60) day period after Manager's request therefor shall entitle Manager,
within sixty (60) days after such failure or refusal, to notify Owner that it
will terminate this Agreement as to all Hotels then subject to this Agreement as
of a date six (6) month's after the date of Manager's written notice to Owner.
If Manager does not so notify Owner, it shall continue to manage the Hotels in
question as provided under this Agreement without the increase in the percentage
contribution to the Reserve. If Owner agrees to 2 or 3 above but fails to
provide the additional funds as to any Hotel within thirty (30) days after
requested by Manager, then Manager may, at its option, terminate this Agreement
as to any Hotel for which funds were not provided as of a date six (6) months
after the date of Manager's notice, reduce Owner's share of Available Cash Flow
by such amount and apply such funds to the approved or deemed approved FF&E
Replacements or continue to manage the Hotels without making such FF&E
Replacements. Until such time as all amounts owing under the Loan Agreement or
Qualified Refinancing are paid in full (or deemed paid in full pursuant to the
Collateral Assignment), the portions of the annual contribution transferred into
the Reserve in excess of five percent (5%) of Gross Revenues in any Fiscal Year
shall be subordinated to payment of Qualifying Debt Service, during such Fiscal
Year and subsequently paid into the Reserve pursuant to Section 5.02.
8.03 Building Alterations, Improvements, Renewals, and Replacements
--------------------------------------------------------------
54
<PAGE>
A. Manager shall prepare an annual estimate of aggregate expenditures
necessary for alterations (including major repairs), improvements, renewals, and
replacements (which alterations, improvements, renewals and replacements are not
among those referred to in Section 8.02A2) to the structural, mechanical,
electrical, heating, ventilating, air conditioning, plumbing, and vertical
transportation elements of each of the Hotel buildings (the "Building Estimate")
and shall submit such Building Estimate to Owner for its approval at the same
time the Annual Operating Projection is submitted. Additionally, Manager may,
at any time and from time to time, prepare and submit to Owner a Supplemental
Building Estimate (each, a "Supplemental Building Estimate"). The Building
Estimate (and, if applicable any Supplemental Building Estimate) shall be
prepared on a consolidated basis showing proposed expenditures as to each Hotel
and the Hotels collectively. Manager shall not make any expenditures for such
purposes until Owner approves or is deemed to have approved the Building
Estimate or Supplemental Building Estimate, or any particular item described in
any such estimate; provided that if such alterations, improvements, renewals, or
replacements to the Hotels are required by reason of any law, ordinance,
regulation or order of a competent governmental authority, or are otherwise
required for the continued orderly operation of the Hotels, Manager shall give
Owner notice thereof and shall be authorized to take appropriate remedial action
without such approval if Owner does not act. Owner shall bear the cost of all
such alterations, improvements, renewals or replacements by either:
1. Providing outside financing for the additional funds required, in
which event the principal and interest payments on such financing shall
constitute Qualifying Debt Service, or
55
<PAGE>
2. Providing the additional funds required itself.
B. If Owner shall fail to notify Manager within sixty (60) days of
receipt of the proposed Building Estimate or any Supplemental Building Estimate
of its disapproval of the proposed Building Estimate or any Supplemental
Building Estimate or Supplemental Building Estimate, as applicable, for any
Hotel, then the Building Estimate for each such Hotel shall be deemed approved.
If Owner shall disapprove the Building Estimate or any Supplemental Building
Estimate or any particular item described in any such estimate as to one or more
or all of the Hotels within sixty (60) days after it has been submitted, then,
notwithstanding any such disapproval, Manager shall be entitled to make those
alterations, improvements, renewals, and replacements that are required to
enable each Hotel to be or remain in substantial compliance with Manager's
standards generally employed for Courtyard by Marriott hotels, taking into
account, among other factors, any new standards being rolled out by Manager, and
such required alterations, improvements, renewals, and replacements shall be
deemed approved by Owner for all purposes hereunder. If Owner shall fail to
provide funds for expenditures that were approved or deemed approved within
thirty (30) days after requested by Manager, then Manager may, at its option,
terminate this Agreement as to any Hotel for which funds were not provided as of
a date six (6) months after the date of Manager's notice, use funds from the
Reserve to make the approved or deemed approved alterations, improvements,
renewals, and replacements, or continue to manage the Hotel or Hotels without
making such alterations, improvements, renewals, and replacements. If Owner
does not approve the Building Estimate or any Supplemental Building Estimate as
to one (1) or more or all of the Hotels within sixty (60) days after it has been
submitted, Manager shall have the option of terminating this Agreement as to
56
<PAGE>
those Hotels as to which agreement was not reached upon giving thirty (30) days
written notice to Owner as of a date six (6) months after the date of such
notice.
8.04 Liens
-----
Manager and Owner severally shall use their best efforts to prevent any
mechanics and materialmen liens from being filed against any Hotel which arise
from any such alterations, improvements, renewals or replacements in or to such
Hotel. They shall cooperate fully in obtaining the release of any such liens,
and the cost thereof, if the lien was not occasioned by the fault of either
party, shall be paid for by the Owner. If the lien arises as a result of the
fault of either party, then the party at fault shall bear the cost of obtaining
the lien release.
8.05 Ownership of Replacements
-------------------------
All alterations, improvements, renewals or replacements made pursuant to
Article VIII shall be the property of Owner.
END OF ARTICLE VIII
57
<PAGE>
ARTICLE IX
BOOKKEEPING AND BANK ACCOUNTS
-----------------------------
9.01 Books and Records
-----------------
A. Books of control and account shall be kept on the accrual basis and
in material respects in accordance with the Uniform System of Accounts, with the
exceptions provided in this Agreement. Owner may at reasonable intervals upon
five (5) business day's notice during Manager's normal business hours examine
such records. Within seventy-five (75) days following the close of each Fiscal
Year, Manager shall furnish Owner a statement in reasonable detail summarizing
Hotel operations for such Fiscal Year and a certificate of Manager's chief
accounting officer or his designee certifying that such year-end statement is
true and correct. The parties shall promptly by cash payment make any
adjustments in the amounts paid one another for such Fiscal Year needed because
of the final figures set forth in such statement with a reduction in the amount
of any adjustments to be made by Manager in the amount of any Paid Over Amounts
with respect thereto. If Owner desires at its own expense to audit such
statement and supporting records, Owner shall begin such audit within ninety
(90) days following its receipt of such statement and complete such audit within
ninety (90) days thereafter. If Owner does not make such an audit, then such
statement shall be deemed to be conclusively accepted by Owner as being correct,
and Owner shall have no right thereafter, except in the event of fraud by
Manager or as provided in Section 9.01.B, to question or examine the same. If
any audit by Owner discloses an understatement of any amounts due Owner, Manager
shall immediately pay Owner such amounts found to be due plus interest thereon
at the Prime Rate plus one (1)
58
<PAGE>
percentage point. If, however, the audit discloses that Manager has not received
any amounts due it, Owner shall pay Manager such amounts plus interest thereon
at the Prime Rate plus one (1) percentage point. Any dispute concerning the
correctness of an audit shall be settled by arbitration in accordance with
Section 16.02.
B. If Owner's audit discloses an error in total payment of amounts due
Owner for any Fiscal Year so audited that is in excess of five percent (5%),
Manager shall pay for the cost of Owner's audit. In addition, in such event,
Owner may audit the statement of Hotel operations and supporting records for the
two (2) preceding Fiscal Years. Owner shall bear the cost of such audit, except
for the cost for any such Fiscal Year in which the audit discloses an error in
excess of five percent (5%) in the payment of amounts due Owner. Any error or
dispute shall be handled as set forth in Section 9.01A.
C. All statements shall be prepared on a consolidated basis rather than
on an individual Hotel basis, except that Manager will provide on request
unaudited summary statements on a per Hotel basis in a format typically prepared
by Manager. In addition, Manager shall furnish such reports on consolidated
groups of Hotels as Owner's Lenders may reasonably request and such reports as
may be required under any ground leases for the Hotels.
9.02 Hotel Accounts, Expenditures
----------------------------
A. All funds derived from operation of the Hotels shall be deposited in
one or more banks and in one or more accounts approved by Owner. Withdrawals
from said accounts shall be made only by representatives of Manager whose
signatures have been authorized. Reasonable petty cash funds shall be
maintained at each Hotel.
B. All payments made by Manager hereunder shall be made from authorized
bank
59
<PAGE>
accounts, petty cash funds, or from Working Capital provided by Owner pursuant
to Section 7.01. Manager shall not be required to make any advance or payment to
or for the account of Owner except out of such funds, and Manager shall not be
obligated to incur any liability or obligation for Owner's account without
assurances that necessary funds for the discharge thereof will be provided by
Owner. Debts and liabilities incurred by Manager as a result of its operation
and management of the Hotels pursuant to the terms hereof, whether asserted
before or after the Termination of this Agreement, will be paid by Owner to the
extent funds are not available for that purpose from the operation of the
Hotels.
9.03 Annual Operating Projection
---------------------------
A. Manager shall submit to Owner for its review no later than January 15
of each Fiscal Year an "Annual Operating Projection." Such projection shall
project, on a consolidated basis, the estimated Gross Revenues, Deductions, and
Operating Profit for the forthcoming Fiscal Year for the Hotels, taking into
account the applicable market areas and the integration of the Hotels into the
Courtyard by Marriott hotel system. Manager shall use its best efforts to
adhere to the Annual Operating Projection. It is understood, however, that the
Annual Operating Projection is an estimate only and unforeseen circumstances
such as, but not limited to, those relating to costs of labor, material,
services and supplies, casualty, operation of law, economic and market
conditions and Acts of God may make adherence to the Annual Operating Projection
impracticable and therefore Manager shall have the right to depart therefrom for
such causes or other similar causes.
B. If Owner intends to sell or finance one or more of the Hotels, Manager
shall upon request, provide a forecast for such Hotels for the next five (5)
Fiscal Years.
60
<PAGE>
9.04 Operating Losses: Credit
-------------------------
A. To the extent there is an Operating Loss for any Accounting Period,
additional funds in the amount of any such deficiency shall be provided by Owner
within ten (10) days if Manager gives written notice to Owner of such Operating
Loss. To the extent Manager elects not to so collect or Owner does not so
forward upon request, such additional funds may be withheld from distributions
of Operating Profit otherwise payable to Owner.
B. In no event shall either party borrow money in the name of or pledge
the credit of the other.
END OF ARTICLE IX
61
<PAGE>
ARTICLE X
TRADEMARK AND TRADE NAME
------------------------
10.01 Courtyard by Marriott Name
--------------------------
A. During the term of this Agreement, each Hotel shall be known as a
Courtyard by Marriott, with such additional identification as may be necessary
to provide local identification. If the name of the Courtyard by Marriott hotel
system is changed, Manager shall have the right to change the name of the Hotel
to conform thereto. The names "Marriott" and "Courtyard by Marriott" when used
alone or in connection with another word or words and the Marriott or Courtyard
trademarks, trade names, symbols, logos and designs shall in all events remain
the exclusive property of Marriott or its subsidiaries or Affiliates and its or
their successors or assigns, and nothing contained herein shall confer on Owner
the right to use the Marriott or Courtyard names, trademarks, trade names,
symbols, logos or designs otherwise than in strict accordance with the terms of
this Agreement. Except as provided in Section 10.02, upon Termination, any use
of or right to use the Marriott or Courtyard names, trademarks, trade names,
symbols, logos or designs by Owner shall cease forthwith and Owner shall
promptly remove from each Hotel at Owner's cost any signs or similar items that
contain the Marriott or Courtyard names, trademarks, trade names, symbols,
logos, or designs.
B. Included under the terms of this Article are all trademarks, service
marks, trade names, symbols, logos, or designs used in conjunction with the
Hotels, including, but not limited to, restaurant names, lounge names, etc.,
whether or not the marks contain the "Marriott" or "Courtyard" name. All use of
such marks by Owner under this Agreement inures to the benefit of Manager
whether or not the marks are registered and regardless of the source of the
mark.
62
<PAGE>
10.02 Purchase of Inventories and Fixed Asset Supplies
------------------------------------------------
A. Upon Termination, either of this entire Agreement or for a given
Hotel, Manager shall have the option, to be exercised within thirty (30) days
after Termination, to purchase, at their then book value, any items of such
Hotel's Inventories and Fixed Asset Supplies as may be marked with the Marriott,
Courtyard by Marriott, or Courtyard names or any Marriott or Courtyard
trademark, trade name, symbol, logo or design. If Manager does not exercise
such option, Owner will use any items not so purchased exclusively in connection
with the Hotel in which they are located until they are consumed.
B. During the term of this Agreement and thereafter, for so long as
Owner is known as Courtyard by Marriott Limited Partnership, Owner and its
Affiliates whose names incorporate the name "Courtyard" or "Marriott" may use
such names to the extent necessary on their legal or business documents. Upon
Termination of this Agreement as to all Hotels, Owner shall not use or cause its
Affiliates to use the words "Courtyard" or "Marriott" on any stationery,
advertising or other means of identification except as used in the name
"Courtyard by Marriott Limited Partnership" unless specifically agreed to in a
written agreement.
10.03 Breach of Covenant
------------------
Manager and/or Affiliates shall have the right, in case of any breach of
covenants of Article X by Owner or others claiming through it, to injunctive
relief and to any other right or remedy available at law. This Article X shall
survive Termination.
10.04 Computer Software and Equipment
-------------------------------
A. Any computer software (including upgrades and replacements) that is
owned by Manager, Marriott International, Inc., any Affiliate of Marriott,
International Inc., or the licensor
63
<PAGE>
of any of them and that is located at any of the Hotels, is proprietary to
Manager, Marriott, International, Inc., such Marriott International, Inc.
Affiliate, or the licensor of any of them, whichever is applicable, and shall in
all events remain the exclusive property of Manager, Marriott International,
Inc., such Marriott International, Inc. Affiliates, or the licensor of any of
them, as the case may be, and nothing contained in this Agreement shall confer
on Owner the right to use any such software.
B. Upon Termination as to any particular Hotel and upon Termination of
this Agreement, Manager shall have the right to remove from the Hotel or Hotels,
as applicable, without compensation to Owner, (1) any computer software
(including upgrades and replacements), including without limitation, the PMS,
MARSHA, Passport, RMS, and certain sales package software, owned by Manager,
Marriott International, Inc., any Affiliate of Marriott International, Inc., or
the licensor of any of them, and (2) any computer equipment utilized as part of
a centralized reservation system or owned by a party other than Owner, except
any computer equipment leased to Owner pursuant to a financing lease as provided
for in Article VIII.
C. Manager shall, upon Termination as to any particular Hotel Term and
upon Termination of this Agreement, provide Owner with a hard copy of the data
stored in the software described in Section 10.04A.
END OF ARTICLE X
64
<PAGE>
ARTICLE XI
HOTELS
------
11.01 Payment of Ground Rent and Other Charges
----------------------------------------
Owner covenants to properly pay and discharge (i) any ground rent due under
any ground leases (including any Marriott Ground Leases but taking into account
any provisions therein or in any other document to which the Marriott Ground
Lessors are parties for deferral or subordination of ground rent) applicable to
any of the Hotels, and (ii) any payments and charges in the ordinary course of
the business of the Hotels necessary to ensure continued operation of the Hotels
by the Manager; provided, however, that Owner irrevocably directs Manager to pay
and discharge all payments and charges as set forth in clauses (i) and (ii) and
Manager agrees to make such payment (a) to the extent of availability of Gross
Revenues after payments of or accrual for all other Deductions in the case of
any ground lease other than an Marriott Ground Lease and payments due and
charges incurred under (ii) above, and (b) to the extent of the availability of
Available Cash Flow and according to the order of disbursement of Available Cash
Flow pursuant to Section 5.02 in the case of the Marriott Ground Leases.
11.02 Management of Hotels
--------------------
A. Manager shall manage the Hotels under standards comparable to those
prevailing for other Courtyard by Marriott hotels and for all activities in
connection therewith that are customary and usual to such an operation.
B. Manager shall have the option to terminate this Agreement with
respect to a given Hotel at any time upon one hundred twenty (120) days' written
notice to Owner in the event of a withdrawal or revocation, by any lawful
governing body having jurisdiction thereof, of any
65
<PAGE>
license or permit that materially affects the operation of the Hotel provided
(i) such withdrawal or revocation is not the fault of Manager, but is due to
circumstances beyond Manager's reasonable control; and (ii) all applicable
appeals to higher governmental authorities regarding such withdrawal or
revocation have been exhausted, and Manager has made every reasonable effort to
obtain a substitute license or permit that would allow for the continued
operation of the Hotel as a first-class facility.
11.03 Chain Services
--------------
A. Manager shall, beginning with the Effective Date and thereafter
during the Term of this Agreement, cause Chain Services to be furnished to each
Hotel.
B. Costs and expenses incurred in the providing of Chain Services shall
be allocated on a fair and equitable basis among all Courtyard by Marriott
hotels owned, leased, operated or managed by Manager in the United States which
benefit from these services. Such allocation shall be made without regard to
any "caps" or other limitations on the amount which Manager may charge to a
given hotel, pursuant to agreements which Manager may have with the owner of
such hotel. Any excess of that portion of such costs and expenses which is
fairly allocated to a given hotel over the "cap" which may be in effect with
regard to that hotel shall be paid by Manager from its own funds and shall not
be a Deduction. Manager shall make no profit from amounts paid for Chain
Services. In no event will the total charge for all of the Chain Services which
are described in the definition of Chain Services in Section 1.01 (exclusive of
reservation system services), for any given Fiscal Year, exceed five percent
(5%) of Gross Revenues for such Fiscal Year. The parties hereby stipulate that
the limitation set forth in the preceding sentence is intended to apply only to
the services which are currently listed (as of the Effective Date) in the
66
<PAGE>
definition of Chain Services in Section 1.01; accordingly, if there are types of
expenditures which were originally treated as Deductions (other than pursuant to
Paragraph 9 of the definition of "Operating Profit" in Section 1.01), but which
are later determined to be more properly treated as Chain Services, such
expenditures shall be treated as Deductions pursuant to said Paragraph 9 of the
definition of "Deductions" without regard to the aforesaid limitation. If
services currently provided as Chain Services are subsequently determined to be
appropriately charged as Deductions, the cost of the services will continue to
be considered as a Chain Service cost in determining the total charge allowed
under the "cap" of five percent (5%) of Gross Revenues.
11.04 Owner's Right to Inspect
------------------------
Owner, its mortgagees, and their respective agents shall have access to any
Hotel at any and all reasonable times for the purpose of protecting the same
against fire or other casualty, prevention of damage to such Hotel, inspection,
making repairs, or showing such Hotel to prospective purchasers, tenants, or
mortgagees.
END OF ARTICLE XI
67
<PAGE>
ARTICLE XII
INSURANCE
---------
12.01 Property Insurance
------------------
A. Manager shall, commencing with the applicable Initial Term of each
Hotel under Section 4.01 and thereafter during the applicable Hotel Term,
procure and maintain, with insurance companies of recognized responsibility
approved by Owner in its reasonable discretion, a minimum of the following
insurance:
1. Insurance on each Hotel (including contents) against loss or
damage by all perils included in "all risk" (as such term is commonly used in
the insurance industry) coverage, in an amount not less than one hundred percent
(100%) (exclusive of excavation and foundations) of the replacement cost
thereof, except that if such 100% replacement cost coverage is not available on
reasonable rates and terms, then such insurance shall be in an amount not less
than ninety percent (90%) of the replacement cost of each Hotel;
2. Earthquake and flood insurance, if available on reasonable rates
and terms;
3. Insurance against loss or damage from explosion of boilers,
pressure vessels, pressure pipes, and sprinklers, to the extent applicable,
installed in each Hotel; and
4. Business interruption insurance covering loss of profits and
necessary continuing expenses for interruptions caused by any occurrence covered
by the insurance referred to in Sections 12.01.A.1, 2, and 3 for a period of not
less than one (1) year after the occurrence.
B. All policies of insurance required under Section 12.01.A shall be
carried in the name of Manager; Owner shall be named as an additional insured;
the holder of all mortgages on a Hotel shall be named as mortgagees or loss
payees; any losses thereunder shall be payable to
68
<PAGE>
the parties as their respective interests may appear.
12.02 Operational Insurance
---------------------
Manager shall, commencing with the applicable Initial Term of each Hotel
under Section 4.01 and thereafter during the Term, procure and maintain, with
insurance companies of recognized responsibility approved by Owner in its
reasonable discretion or by legally qualifying as a self insurer in the state
where the Hotel is located, the following insurance:
A. Workers' compensation and employer's liability insurance as may be
required under applicable laws covering all of Manager's employees at each
Hotel;
B. Fidelity bonds, with reasonable limits to be determined by Manager,
covering its employees in job classifications normally bonded in the other
hotels it operates under the Courtyard by Marriott name in the United States or
as otherwise required by law, and comprehensive crime insurance to the extent
Manager and Owner mutually agree it is necessary for each Hotel;
C. Comprehensive general public liability insurance, including liquor
liability insurance if available on reasonable rates and terms, against claims
for personal injury, death, and property damage occurring on, in, or about each
Hotel, and automobile insurance on vehicles operated in conjunction with each
Hotel, with a combined single limit of not less than One Hundred Million Dollars
($100,000,000) for each occurrence for personal injury, death, and property
damage, except that if such $100,000,000 of coverage is no longer available on
reasonable rates and terms, the combined single limit for each occurrence shall
be not less than Fifty Million Dollars ($50,000,000); and
D. Such other insurance in amounts as Owner or Manager in their
reasonable
69
<PAGE>
judgment deems advisable for protection against claims, liabilities, and losses
arising out of or connected with the operation of the Hotels or as reasonably
required by Owner's lenders holding first mortgages on the Hotels.
12.03 Coverage
--------
All insurance described in Sections 12.01 and 12.02 may be obtained by
Manager by endorsement or equivalent means under its blanket insurance policies,
provided that such blanket policies substantially fulfill the requirements
specified herein. Deductible limits and retentions shall be as provided in the
blanket policies covering the hotels operated by Manager under the Courtyard by
Marriott name in the United States. Manager and its Affiliates may (if they
have legally qualified to do so) self-insure or otherwise retain such risks.
All insurance shall be of a type and in amounts and with such deductible limits
and self-insured retentions as are generally established at the other hotels
Manager and its Affiliates own or operate under the Courtyard by Marriott name
in the United States.
12.04 Cost and Expense
----------------
Insurance premiums and any costs or expenses (including any deductibles)
with respect to the insurance described in Sections 12.01 and 12.02 shall be
Deductions in determining Operating Profit. Premiums on policies for more than
one (1) year shall be charged pro rata over the period of the policies. The
expenses incurred in maintaining Manager's self-insurance program shall be
charged on an equitable basis to the hotels participating in such programs. Any
reserves, losses, costs, damages, or expenses that are uninsured shall be
treated as a cost of insurance and shall be Deductions in determining Operating
Profit. Upon Termination, an escrow fund in a reasonable amount acceptable to
Manager and Owner shall be established from
70
<PAGE>
Gross Revenues (or, if Gross Revenues are not sufficient, with funds provided by
Owner) to cover the amount of any deductible limits or self-insured retentions
and all other costs that might eventually have to be paid by Manager with
respect to pending or contingent claims, including those that arise after
Termination for causes arising during the term of this Agreement.
12.05 Policies and Endorsements
-------------------------
A. Where permitted, all insurance provided under Sections 12.01 and
12.02 shall name Owner, Manager, any landlord, and any lender or mortgagee
designated by Owner as additional insureds as their interests may appear.
Manager shall deliver to Owner or, upon Owner's request, to any landlord,
lender, or mortgagee certificates of insurance with respect to all policies so
procured, including existing, additional and renewal policies.
B. All certificates of insurance provided for under this Article shall,
to the extent obtainable, state that the insurance shall not be canceled or
materially changed without at least thirty (30) days' prior written notice to
the certificate holder.
END OF ARTICLE XII
71
<PAGE>
ARTICLE XIII
TAXES
-----
13.01 Real Estate and Personal Property Taxes
---------------------------------------
A. All real estate and personal property taxes, levies, assessments and
similar charges on or relating to each Hotel (the "Impositions") during the term
of this Agreement, including any such amounts which shall be required to be paid
pursuant to ground leases, shall be paid by Manager from Gross Revenues, before
any fine, penalty, or interest is added thereto or lien placed upon any Hotel or
this Agreement, unless payment thereof is in good faith being contested and
enforcement thereof is stayed. Any such payments shall be a Deduction in
determining Operating Profit. Owner shall, within five (5) days of receipt,
furnish Manager with copies of any official tax bills and assessments which it
may receive with respect to any of the Hotels. Owner or Manager may initiate
proceedings to contest any Imposition, and all reasonable costs of such contest
shall be paid from Gross Revenues and treated as a Deduction.
END OF ARTICLE XIII
72
<PAGE>
ARTICLE XIV
HOTEL EMPLOYEES
---------------
14.01 Employees
---------
A. All personnel employed at each Hotel shall at all times be the
employees of or otherwise provided by the Manager. Manager shall have absolute
discretion to hire, fire, promote, supervise, direct and train all employees at
each Hotel, to fix their compensation and, generally, establish and maintain all
policies relating to employment.
B. Manager shall be permitted to provide free accommodations and
amenities to its employees and representatives living at or visiting each Hotel
in connection with its management or operation. No person shall otherwise be
given gratuitous accommodations or services without prior joint approval of
Owner and Manager except in accordance with usual practices of the hotel and
travel industry.
C. At Termination, either of this entire Agreement or with respect to a
given Hotel, other than (i) by reason of a default of Manager hereunder, (ii) at
Manager's option (except as a result of Owner's default) or (iii) upon the
expiration of all Renewal Terms, an escrow fund shall be established from Gross
Revenues (or, if Gross Revenues are not sufficient, with funds provided by
Owner) to reimburse Manager for all costs and expenses incurred by Manager in
terminating its employees at the affected Hotels, such as reasonable transfer
costs, or severance pay, unemployment compensation and other employee liability
costs arising out of the termination of employment of Manager's employees at
such Hotel or of all the Hotels, as the case may be.
END OF ARTICLE XIV
73
<PAGE>
ARTICLE XV
DAMAGE, CONDEMNATION AND FORCE MAJEURE
--------------------------------------
15.01 Damage and Repair
-----------------
A. If, during the term hereof, any of the Hotels are damaged or
destroyed by fire, casualty or other cause, Owner shall, at its cost and expense
and with all reasonable diligence, repair or replace the damaged or destroyed
portion of such Hotel to the same condition as existed previously. To the extent
available, proceeds from the insurance described in Section 12.01 shall be
applied to such repairs or replacements. In the event that a Hotel is so damaged
or destroyed that Owner reasonably determines that it cannot be repaired or
replaced within 12 months of the fire, casualty or other cause, Owner shall have
the option, upon sixty (60) days' written notice to Manager, to terminate this
Agreement with respect to such Hotel, and the Manager shall be entitled to the
Termination Fee provided by Section 4.02.
B. If damage or destruction to any Hotel from any cause materially and
adversely affects the operation of such Hotel and Owner fails to promptly
commence and complete the repairing, rebuilding or replacement of the same
(other than with respect to a Hotel as to which a termination is effected under
Section 15.01A above) so that such Hotel shall be substantially the same as it
was prior to such damage or destruction, Manager may elect to terminate this
Agreement with respect to such Hotel upon sixty (60) days' written notice,
whereupon Manager shall be entitled to the Termination Fee provided by Section
4.02.
15.02 Condemnation
------------
A. If all or substantially all of any Hotel shall be taken in any
eminent domain, condemnation, compulsory acquisition, or similar proceeding by
any competent authority for any
74
<PAGE>
public or quasi-public use or purpose, or in the event a portion of such Hotel
shall be so taken, but the result is that if Owner deems it unreasonable in its
reasonable judgment to continue to operate such Hotel, this Agreement shall
terminate and Manager shall be entitled to the Termination Fee provided by
Section 4.02. In order to provide funds with which to pay the Termination Fee,
Owner shall initiate such proceedings against the condemning authorities to
recover any damages to which it may be entitled. Manager shall have no
independent right to bring any action claiming damages or an award as a result
of a condemnation.
B. If a portion of any Hotel shall be taken as a result of one of the
events described in Section 15.02A, or an entire Hotel is affected on a
temporary basis, and as a result it is not unreasonable to continue to operate
such Hotel, this Agreement shall not terminate. However, so much of any award
for any such partial taking or condemnation as shall be necessary to render such
Hotel equivalent to its condition prior to such event shall be used to such
purpose; the balance of such award, if any, shall be retained by Owner.
15.03 Force Majeure
-------------
A. If Acts of God, acts of war, civil disturbance, or governmental
action make it impractical for either Owner or Manager to perform any of its
respective obligations hereunder, such obligation shall be suspended until it is
again possible for the affected party to perform it. In addition, if such an
event makes, in Manager's reasonable judgment, continued operation of a Hotel
impractical for more than a temporary period, then Manager may terminate this
Agreement as to such Hotel on sixty (60) days' written notice to Owner.
75
<PAGE>
B. The provisions of Section 15.03A shall not apply to the specific
provisions of this Agreement regarding (i) damage or destruction, (ii)
condemnation, and (iii) withdrawal or revocation of licenses or permits.
END OF ARTICLE XV
76
<PAGE>
ARTICLE XVI
DEFAULTS
--------
16.01 Defaults
--------
The following shall constitute "events of default" to the extent permitted
by applicable law:
A. The failure of either party to make any payment required to be made
in accordance with the terms hereof within ten (10) days after written notice
that such payment has not been made; or
B. The failure of either party to perform, keep or fulfill any of the
other covenants, undertakings, obligations or conditions set forth in this
Agreement, and the continuance of such default for a period of thirty (30) days
after notice of said failure or, if such default is not susceptible of being
cured within thirty (30) days, the failure to commence said cure within thirty
(30) days and thereafter to complete said cure within a commercially reasonable
time; or
C. If by order of a court of competent jurisdiction a receiver or
liquidator of the property of either party shall be appointed and shall not be
dismissed within sixty (60) days after such appointment; or
D. If either party shall be liquidated or dissolved (other than a
technical dissolution of Owner as a result of an event such as the withdrawal of
a general partner or the naming of a new general partner of Owner) or if either
party shall file a voluntary bankruptcy seeking liquidation or dissolution or if
a petition or an answer proposing the liquidation or dissolution of either party
under the Federal Bankruptcy Code or any similar law, federal or state, shall be
filed in, and approved by, any court; or
77
<PAGE>
E. If any of the creditors of either party shall file a petition to
liquidate or dissolve such party pursuant to the Federal Bankruptcy Code or any
similar law, federal or state, and if such petition shall not be discharged or
denied within sixty (60) days after the date on which such petition was filed.
16.02 Remedies
--------
A. It is the intention of the parties that this Agreement shall be non-
terminable in the event of a default hereunder unless it can be shown that any
other remedy afforded by law or equity is inadequate. Accordingly, if either
party alleges that the other party has committed an act of default hereunder,
the party alleging such default shall first serve a notice and demand upon the
other party outlining the facts of the alleged default and requesting specific
performance, damages or other appropriate relief. Such other party shall have
ten (10) days within which to reply and may either accede to the demand or
dispute the same in whole or in part.
B. If the party alleged to be in default accedes to the other party's
demand, it shall:
1. In the event of a non-monetary default, cure the default within
thirty (30) days, or, if such default is not susceptible of being cured within
thirty (30) days, promptly commence to cure the default and thereafter
diligently pursue such effort to completion; or
2. In the event of a monetary default, pay the amount demanded
within ten (10) days.
C. Except for an event of default occurring under Section 16.01C, D or E,
if the party alleged to be in default disputes the claim or demand of the party
claiming the default within said ten (10) days and if the parties are unable to
reconcile such dispute within the following thirty
78
<PAGE>
(30) days, or if the party alleged to be in default acknowledges the default but
fails to cure same within the applicable time period, then the matter shall be
settled by arbitration in accordance with the rules then obtaining of the
American Arbitration Association. Any decision rendered therein shall be final
and binding upon all parties. Judgment may be entered upon such award in any
court having jurisdiction thereunder. Nothing herein shall grant any arbitrator
authority to amend or modify this Agreement.
D. If the party alleged to be in default neither accedes to nor
disputes the demand, such party shall be deemed to have admitted the default and
the appropriateness of the requested relief.
END OF ARTICLE XVI
79
<PAGE>
ARTICLE XVII
WAVIER AND PARTIAL INVALIDITY
-----------------------------
17.01 Waiver
------
Failure of either party to insist upon strict performance of any of the
terms or provisions of this Agreement, or to exercise any option, right or
remedy herein contained, shall not be construed as a waiver or relinquishment
for the future of such term, provision, option, right or remedy, but the same
shall continue and remain in full force and effect. No waiver by either party
of any term or provision hereof shall be deemed to have been made unless
expressed in writing and signed by such party.
17.02 Partial Invalidity
------------------
If any portion of this Agreement shall be declared invalid by order, decree
or judgment of a court, this Agreement shall be construed as if such portion had
not been inserted herein except when such construction would operate as an undue
hardship on Manager or Owner or constitute a substantial deviation from the
general intent and purpose of said parties as reflected in this Agreement.
END OF ARTICLE XVII
80
<PAGE>
ARTICLE XVIII
ASSIGNMENT
----------
18.01 Assignment
----------
A. Neither party shall assign or transfer or permit the assignment or
transfer of this Agreement without the prior written consent of the other,
except as follows:
1. Manager may assign its interest in this Agreement to any of its
Affiliates that directly or indirectly through one or more intermediaries (i)
owns a majority interest in Manager, (ii) a majority interest of which or the
managing member or general partner of which is owned by Manager, or (iii) a
majority of which or the general partner of which is owned by or is under common
control with Manager, and any such assignee shall be deemed to be the Manager
for the purposes of this Agreement;
2. Manager may sublease shops or grant concessions at the Hotel so
long as the terms of any such subleases or concessions do not exceed the term of
this Agreement;
3. Manager may transfer or assign its interest in this Agreement
without such consent in connection with a merger, consolidation, or sale of all
or substantially all of the assets of Marriott International, Inc.; and
4. Owner may assign or transfer its interest in this Agreement
without such consent in connection with an approved sale of all of the Hotels
(i) under Section 19.02B2 or (ii) to any wholly-owned Affiliate or Subsidiary of
Owner which assumes all the rights, duties and obligations of Owner pursuant to
this Agreement.
B. If either party consents to an assignment of this Agreement by the
other, no further assignment shall be made without the express consent in
writing of such party, unless
81
<PAGE>
such assignment may otherwise be made without such consent pursuant to the terms
of this Agreement. An assignment by either Owner or Manager of its interest in
this Agreement shall not relieve Owner or Manager, as the case may be, from
their respective obligations under this Agreement, and shall inure to the
benefit of, and be binding upon, their respective successors, heirs, legal
representatives, or assigns.
18.02 Collateral Assignment
---------------------
Owner may from time-to-time collaterally assign its interest under this
Agreement to secure indebtedness under the Loan Agreement or under any
extensions, modifications, replacements or refinancings of such indebtedness.
In connection with any such collateral assignment, the Manager shall, on request
of any Lender or Lenders under the Loan Agreement or Qualified Refinancing,
enter into such supplemental agreements as may obligate Manager to (i) comply
with any reasonable reporting requirements of the Lender; (ii) provide such
Lenders with notice of any default by Owner hereunder and thereafter permit such
Lenders to effect a cure thereof within a reasonable period; (iii) supply such
Lender with copies of any notices or other communications contemplated by this
Agreement from Manager to Owner; (iv) subordinate the Manager's interest in this
Agreement to the rights of such Lenders upon foreclosure of any mortgage, deed
of trust, security agreement or like instrument against the Hotels or by a deed
in lieu of foreclosure so long as such Lenders enter into the written
nondisturbance agreement described in Section 3.02; (v) attorn to and recognize
such Lenders or their assignees as being the Owner, according to the terms set
forth in Section 3.02B, hereunder upon conveyance of title to the Hotels to such
Lenders or assignees, whether such conveyance is upon foreclosure of a mortgage,
deed of trust, security agreement or like instrument or by a deed
82
<PAGE>
in lieu of foreclosure; and (vi) containing such other provisions as are
customary for the protection of Owner and Lenders.
END OF ARTICLE XVIII
83
<PAGE>
ARTICLE XIX
SALE OF HOTELS
--------------
19.01 Right of Sale by Owner
----------------------
A. Owner reserves the right at all times and from time-to-time to sell
any one or more or all of the Hotels subject, however, in each such case, to the
rights of the Manager provided by Section 19.02. Upon any such proposed sale,
the Owner shall send a notice thereof to the Manager at least thirty (30) days
prior to the date on which such sale is proposed to close. Such notice shall set
forth: (i) the name, address and business of the proposed purchaser, (ii) the
proposed sales price or method by which such price is to be determined and (iii)
whether or not it is proposed that the provisions of this Agreement remain in
effect.
19.02 Rights of Manager Upon Sale of Hotels
-------------------------------------
A. Except as provided in Sections 19.02B and 19.02C, this Agreement
will terminate as to a particular Hotel upon the conveyance of title of the
Hotel or Hotels in question and the simultaneous payment to the Manager of its
Termination Fee as provided in Section 4.02.
B. In the event the Owner sells a Hotel, such sale will be, at Owner's
election, either:
1. Free and clear of this Agreement, in which event this Agreement
shall terminate as to such Hotel and the Manager shall be entitled to payment of
its Termination Fee as provided in Section 4.02 simultaneously with conveyance
of title to such Hotels; provided, however, that Owner may not prior to December
31, 2001 sell more than fifteen (15) Hotels free and clear of this Agreement; or
2. Subject to the continuation in effect of management by Manager
under a Severance Management Agreement to Manager, in which event the Manager
may either
84
<PAGE>
(a) consent to the continuation in effect of such management or (b) cause the
termination of this Agreement as to such Hotel and require the payment of a
Termination Fee as provided in Section 4.02 simultaneously with the conveyance
of title to the Hotels if, in its sole discretion, Manager reasonably believes
and so notifies the Owner within thirty (30) days after notice of the proposed
closing of sale, that any one or more of the following is true: (i) the proposed
purchaser is a competitor of Manager or any Affiliate of the Manager, (ii) the
business character and reputation of the proposed purchaser has not been firmly
established or (iii) the financial condition and prospects of the proposed
purchaser may not be adequate to the discharge of the obligations of Owner
pursuant to this Agreement;
C. Notwithstanding the provisions of Section 4.02 hereof and this
Section 19.02, no Termination Fee shall be due or payable in the event a Hotel
or Hotels are sold, condemned or destroyed and the Manager or an Affiliate
thereof continues to manage such Hotel or Hotels, whether or not pursuant to
this Agreement.
D. In the event this Agreement is terminated in its entirety upon a
sale of all of the Hotels, Owner shall repay to Manager simultaneously with the
conveyance of title to such Hotels, any and all indebtedness, if any, owing by
Owner to Manager excepting, however, any Deferred Incentive Management Fees and
any Deferred Secondary Courtyard Management Fee.
E. If this Agreement is terminated in part only with respect to the
sale of one or more Hotels, Owner shall, as a condition to the effectiveness of
such termination, repay to Manager simultaneously with the conveyance of title
to such Hotels, that fraction of any indebtedness (other than any Deferred
Incentive Management Fee which shall continue to be owing in accordance with the
terms of this Agreement), if any, owing to Manager of which the numerator
85
<PAGE>
is the Gross Revenues attributable to the Hotel or Hotels being sold for the
most recently concluded Fiscal Year, and the denominator of which is the Gross
Revenues attributable to all the Hotels for such Fiscal Year.
END OF ARTICLE XIX
86
<PAGE>
ARTICLE XX
INTENTIONALLY OMITTED
---------------------
87
<PAGE>
ARTICLE XXI
MISCELLANEOUS
-------------
21.01 Right to Make Agreement
-----------------------
Each party warrants, with respect to itself, that neither the execution of
this Agreement nor the finalization of the transactions contemplated hereunder
shall violate any provision of law or any judgment, writ, injunction, order or
decree of any court or governmental authority having jurisdiction over it;
result in or constitute a breach or default under any indenture, contract, other
commitment or restriction to which it is a party or by which it is bound; or
require any consent, vote or approval which has not been given or taken, or at
the time of the transaction involved shall not have been given or taken. Each
party covenants that it has and will continue to have throughout the term of
this Agreement and any extensions thereof, the full right to enter into this
Agreement and perform its obligations hereunder.
21.02 Consents
--------
Wherever in this Agreement the consent or approval of Owner or Manager is
required, such consent or approval shall not be unreasonably withheld,
conditioned or delayed, shall be in writing and shall be executed by a duly
authorized officer or agent of the party granting such consent or approval.
Except as otherwise provided, if either Owner or Manager fails to respond within
thirty (30) days to a request by the other party for a consent or approval, such
consent or approval shall be deemed to have been given.
21.03 Agency
------
The relationship of Owner and Manager shall be that of principal and agent,
and nothing contained in this Agreement shall be construed to create a
partnership or joint venture between
88
<PAGE>
them or their successors in interest. Manager's agency established by this
Agreement is coupled with an interest and may not be terminated by Owner until
the expiration of the term of this Agreement, except as provided herein.
21.04 Confidentiality
---------------
The parties agree that matters set forth in and all information, budgets
and reports generated as a result of this Agreement are strictly confidential
and each party will make every effort to ensure that the information is not
disclosed to any outside person or entities (including the press) without the
written consent of the other party except as may be reasonably necessary (i) to
obtain licenses, permits and other public approvals necessary for the
refurbishment or operation of the Hotels, (ii) in connection with Owner's
financing of the Hotels or any sale of any Hotel, (iii) in connection with a
sale of a controlling interest in Owner, Manager, or Marriott International,
Inc., (iv) in connection with an audit or other investigation conducted pursuant
to this Agreement or the Owner's or Manager's interest in any of the Hotels, (v)
in connection with a foreclosure sale on Owner's interest in the Hotels, or (vi)
as required by any law, rule, regulation or judicial process, or by any
regulatory or supervisory authority having jurisdiction over the parties or
their Affiliates. Notwithstanding, the parties may give such confidential
information to their accountants, lawyers, consultants, advisors, so long as all
such information sent to such parties is marked with a confidentiality notice
reasonably acceptable to Manager. No confidential information shall be given to
prospective purchasers or prospective lenders, unless such persons agree to keep
such information confidential. Provided, however, that (i) Owner, shall
implement procedures to restrict the dissemination of information to the Lenders
concerning revenues per available rooms, Gross Revenues, Operating Profit, and
occupancy and
89
<PAGE>
room rate statistics of individual Hotels to the extent reasonably practicable,
giving due regard to the desire of Lenders to have access to such information
and to the requirements of applicable securities laws, and (ii) any disclosure
of information in any offering memorandum, prospectus, or registration statement
or other filing which is accessible to the general public required under
applicable law or to any prospective holder of the Securities concerning
revenues per available rooms, Gross Revenues, Operating Profit, occupancy and
room rate statistics of individual Hotels shall be made in Regions to be
-------------
specified in a format with no identification as to which information applies to
- ---------
which Hotel, but which may refer to the Hotels on a Property by Property basis
under which each Hotel is identified by a code (e.g., "Property A", "Property
B", etc.) and by its region. Notwithstanding the foregoing, any such offering
memorandum, prospectus, registration or other filing required under applicable
law or given to any prospective Lender or holder of Securities related to a loan
secured by Hotel(s), may identify a Hotel (without coding) by specific location,
number of rooms, date of opening, appraised value, average occupancy, average
daily room rate, and revenue per available rooms, and such other information as
is required by applicable securities laws.
21.05 Applicable Law
--------------
This Agreement shall be construed under and shall be governed by the laws
of the State of Maryland (without reference to choice of law doctrine), and the
parties irrevocably submit to the non-exclusive jurisdiction of the courts of
the State of Maryland.
21.06 Other Operations
----------------
Nothing herein contained shall be construed to prohibit, limit or restrict
Manager or any of its affiliated companies from developing, owning, operating,
managing, leasing or franchising,
90
<PAGE>
either directly or indirectly, any Marriott hotel, Marriott Suites, Marriott
Inn, Courtyard by Marriott, Fairfield Inn, Residence Inn, Towneplace Suites, or
any other lodging or related facility of any kind or nature, including without
limitation, conference centers, timeshares and vacation clubs, in the market
area where any of the Hotels are located.
21.07 Headings
--------
Headings of articles and sections are inserted only for convenience and are
not to be construed as a limitation on the scope of the particular articles or
sections to which they refer.
21.08 Notices
-------
Notices, statements and other communications to be given under the terms of
this Agreement shall be in writing and delivered by hand against receipt or sent
by certified mail, registered mail, or Express Mail service, postage prepaid,
return receipt requested:
To Owner:
--------
Courtyard by Marriott Limited Partnership
c/o Host Marriott Corporation
10400 Fernwood Road
Bethesda, Maryland 20817
Attention: Law Department 923
with copies to:
--------------
Courtyard by Marriott Limited Partnership
c/o Host Marriott Corporation
10400 Fernwood Road
Bethesda, Maryland 20817
Attention: Asset Management Department /908
To Management Company:
---------------------
Courtyard Management Corporation
c/o Marriott International, Inc.
10400 Fernwood Road
91
<PAGE>
Bethesda, Maryland 20817
Attention: Law Department/Lodging Operations 52/923
with copies to:
--------------
Courtyard Management Corporation
c/o Marriott International, Inc.
10400 Fernwood Road
Bethesda, Maryland 20817
Attention: Chief Financial Officer, Dept. 51/933.15
or at such other address as is from time to time designated by the party
receiving the notice. Any such notice which is properly mailed shall for
purposes of establishing that the sending party complied with the applicable
time limitations set forth herein be deemed to have been served as of five (5)
days after said posting, but shall not be binding on the addressee until
received.
21.09 Environmental Matters
---------------------
A. Manager shall indemnify, defend and hold Owner and its Affiliates (and
their respective directors, officers, shareholders, employees and agents)
harmless from and against all loss, cost, liability and damage (including,
without limitation, engineers' and attorneys' fees and expenses, and the cost of
litigation) arising from the placing, discharge, leakage, use or storage of
Hazardous Materials, in violation of applicable Environmental Laws, on the land
underlying any Hotel by Manager's employees, representatives or agents during
the term of this Agreement. Regardless of whether or not a given Hazardous
Material is permitted on such land under applicable Environmental Law, Manager
shall only bring on such land such Hazardous Materials as are needed in the
normal course of business of the Hotel.
B. In the event of the discovery of Hazardous Materials on any portion of
the land underlying any Hotel or in a Hotel during the Term of this Agreement,
Owner shall (except to the extent such removal is Manager's responsibility
pursuant to Section 21.09A) promptly remove (if
92
<PAGE>
required by applicable Environmental Laws) such Hazardous Materials, together
with all contaminated soil and containers, and shall otherwise remedy the
problem in accordance with all Environmental Laws. Owner shall (except to the
extent that the removal of such Hazardous Materials is Manager's responsibility
pursuant to Section 21.09A) indemnify, defend and hold Manager and its
Affiliates (and their respective directors, officers, shareholders, employees
and agents) harmless from and against all loss, cost, liability and damage
(including, without limitation, engineers' and attorneys' fees and expenses, and
the cost of litigation related thereto) arising from the presence of Hazardous
Materials on the land underlying any Hotel and in any Hotel.
C. All costs and expenses of the removal of Hazardous Materials from the
land underlying any Hotel or in any Hotel pursuant to Section 21.09B, and of the
aforesaid compliance with all Environmental Laws, and any amounts paid to
Manager pursuant to the indemnity set forth in the last sentence of Section
21.09B, shall be paid by Owner from its own funds, not as a Deduction nor from
the FF&E Reserve, and shall be treated as an expenditure by Owner pursuant to
Section 8.03.
21.10 Offerings
---------
No reference to Manager or to any of its Affiliates will be made in any
prospectus, private placement memorandum, offering circular or offering
documentation related thereto (herein collectively referred to as the
"Prospectus"), issued by Owner or one of its Affiliates, which is designed to
interest potential investors (debt or equity) in one or more or all of the
Hotels, unless Manager has previously received a copy of all such references.
However, regardless of whether Manager does or does not so receive a copy of all
such references, neither Manager nor any of its Affiliates will be deemed an
issuer or obligor or guarantor in respect of any securities described in the
Prospectus, nor will it have any responsibility for the Prospectus, and the
Prospectus will so state. Unless Manager agrees in advance, the Prospectus will
not include: (i) any proprietary marks of Manager or any of its
93
<PAGE>
Affiliates; or (ii) except as required by applicable securities laws, the text
of this Agreement. Owner shall be entitled, however, to include in the
Prospectus an accurate summary of this Agreement. With respect to any offering
not registered under any federal or state securities law, if there are no legal
requirements pursuant to which such information must be publicly disclosed,
appropriate measures shall be taken to ensure that entities or individuals
receiving such Prospectus shall acknowledge the confidentiality of such
information. Owner shall indemnify, defend and hold Manager and its Affiliates
(and their respective directors, officers, shareholders, employees and agents)
harmless from and against all loss, costs, liability and damage (including
attorneys' fees and expenses, and the cost of litigation related thereto)
arising out of any Prospectus or the offering described therein.
21.11 Memorandum of Management Agreement
----------------------------------
Owner and Manager shall, simultaneously with the execution of this
Agreement, execute memoranda or short forms of this Agreement containing the
names of the parties, legal descriptions for the land on which the Hotels are
located, the term of this Agreement, and such other provisions as either party
may require in such forms as may be required for recording purposes in each
jurisdiction in which a Hotel is located. The cost and expense of recording the
memoranda, short forms or, where necessary, a duplicate original of this
Agreement shall be borne by Owner. Each party agrees that it will not record
this Agreement in its entirety unless such a recording is required to protect
the rights of either party or unless required by applicable
94
<PAGE>
law.
21.12 Entire Agreement
----------------
This Agreement, with other writings signed by the parties stated to be
supplemental thereto and instruments to be executed and delivered pursuant to
the Agreement, constitute the entire agreement between the parties, supersede
all prior understandings and writings, and may be changed only by writings
signed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
Attest: COURTYARD BY MARRIOTT LIMITED
PARTNERSHIP
BY: CBM ONE CORPORATION,
General Partner
By:
- -------------------------------- ---------------------------------
Assistant Secretary Vice President
Attest: COURTYARD MANAGEMENT
CORPORATION
By:
- -------------------------------- ---------------------------------
Assistant Secretary Vice President
95
<PAGE>
EXHIBIT A
---------
THE PARTNERSHIP'S COURTYARD BY MARRIOTT HOTELS
WITH OPENING DATES
<TABLE>
<CAPTION>
Opening
Property # Property Name State Date
- ----------- -------------------------------- ----------- ----------
<S> <C> <C> <C>
1A1 ATLANTA - WINDY HILL GA 10/22/83
1A2 ATLANTA - PEACHTREE DUNWOODY GA 10/15/83
1A3 ATLANTA - NORTHLAKE GA 01/28/84
1A4 AUGUSTA GA 03/30/84
1A5 COLUMBUS GA 06/30/84
1A6 ATLANTA - PEACHTREE CORNERS GA 06/01/85
1A8 SAVANNAH GA 12/21/85
1AB RALEIGH - WAKE FOREST ROAD NC 12/30/86
1B2 MONTGOMERY AL 12/20/86
1B5 ATLANTA EXECUTIVE PARK GA 04/18/87
1B6 ATLANTA - DELK ROAD GA 12/20/86
1B7 NASHVILLE/BRENTWOOD TN 10/04/86
1B8 MEMPHIS PARK AVE EAST TN 11/01/86
1B9 WEST MELBOURNE FL 03/06/87
1C2 CHARLOTTE/ARROWOOD NC 05/16/87
1C3 TALLAHASSEE FL 08/01/87
1C7 MIAMI AIRPORT - WEST FL 12/20/87
1D1 ROCKVILLE MD 07/25/87
1D2 LANDOVER - NEW CARROLLTON MD 01/02/86
1D3 FAIR OAKS VA 04/19/86
1D4 GREENBURGH - TARRYTOWN NY 01/06/88
1D5 HERNDON - RESTON VA 05/05/87
1D6 VIRGINIA BEACH VA 12/28/86
1D8 BALTIMORE - HUNT VALLEY MD 11/03/86
1D9 BROOKFIELD - RICHMOND VA 12/30/86
1E1 HARTFORD - WINDSOR CT 05/30/87
1E2 HAMPTON VA 08/10/87
1E3 VALLEY FORGE PA 07/11/87
1G3 DETROIT WARREN MI 04/26/86
1G4 DETROIT TROY MI 06/14/86
1G7 DETROIT SOUTHFIELD MI 07/19/86
1G8 COLUMBUS - DUBLIN OH 11/29/86
1G9 CINCINNATI BLUE ASH OH 11/15/86
1H1 DETROIT DEARBORN MI 12/06/86
1H2 CHICAGO NAPERVILLE IL 12/20/86
1H5 COLUMBUS - CROSSWOODS OH 05/25/87
1J1 PLEASANTON CA 09/27/86
</TABLE>
96
<PAGE>
<TABLE>
<CAPTION>
Opening
Property # Property Name State Date
- ----------- -------------------------------- ----------- ----------
<S> <C> <C> <C>
1J3 SACREMENTO - RANCHO CORDOVA CA 12/06/86
1J4 SAN FRANCISCO AIRPORT CA 12/20/86
1J7 FREMONT CA 03/14/87
1J8 BUENA PARK CA 12/30/86
1J9 SANTA ANA CA 08/29/87
1K3 PHOENIX AIRPORT AZ 05/26/87
1M1 ARLINGTON TX 03/20/87
1M2 DALLAS - LAS COLINAS TX 04/18/87
1M3 DALLAS ADDISON TX 05/12/87
1M4 LBJ NORTHWEST TX 06/27/87
1M5 BEDFORD TX 06/06/87
1M6 SAN ANTONIO MED CENTER TX 06/22/87
1M7 SAN ANTONIO AIRPORT TX 07/25/87
</TABLE>
97
<PAGE>
EXHIBIT B
---------
COURTYARD BY MARRIOTT LIMITED PARTNERS
ADJUSTED SALES PROCEEDS/BASE PRICES
EXHIBIT B
<TABLE>
<CAPTION>
Adjusted Base
Property # Property Name State Sale Proceeds Prices
- ---------- ---------------------------------- ----- ------------- ------
<S> <C> <C> <C> <C>
1B2 MONTGOMERY AL $1,424,494 $6,952,174
1K3 PHOENIX AIRPORT AZ 1,566,700 9,043,478
1J4 SAN FRANCISCO AIRPORT CA 2,257,677 6,782,610
1J1 PLEASANTON CA 2,352,278 7,856,522
1J3 SACRAMENTO - RANCHO CORDOVA CA 2,333,844 6,217,391
1J7 FREMONT CA 2,097,440 8,534,783
1J8 BUENO PARK CA 1,633,347 4,917,391
1J9 SANTA ANA CA 1,939,637 4,352,174
1E1 HARTFORD-WINDSOR CT 2,030,187 6,613,043
1B9 WEST MELBOURNE FL 1,329,892 4,239,130
1C7 MIAMI AIRPORT - WEST FL 1,283,503 4,973,913
1C3 TALLAHASSEE FL 1,514,639 7,630,435
1A2 ATLANTA - PEACHTREE DUNWOODY GA 1,991,698 4,917,391
1A1 ATLANTA - WINDY HILL GA 1,726,328 5,256,522
1A6 ATLANTA - PEACHTREE CORNERS GA 2,181,509 5,539,130
1A5 COLUMBUS GA 1,650,363 4,804,348
1B6 ATLANTA - DELK ROAD GA 1,548,265 6,330,435
1A8 SAVANNAH GA 1,612,279 5,595,652
1A4 AUGUSTA GA 2,010,943 4,069,565
1A3 ATLANTA - NORTHLAKE GA 1,820,929 4,578,261
1B5 ATLANTA EXECUTIVE PARK GA 1,660,289 8,365,217
1H2 CHICAGO NAPERVILLE IL 1,842,604 6,952,174
1D2 LANDOVER - NEW CARROLLTON MD 2,181,307 3,673,913
1D1 ROCKVILLE MD 1,403,629 8,026,087
1D8 BALTIMORE - HUNT VALLEY MD 1,687,434 4,634,783
1H1 DETROIT DEARBORN MI 2,105,949 8,082,609
1G3 DETROIT WARREN MI 1,992,103 6,952,174
1G7 DETROIT SOUTHFIELD MI 1,954,425 6,613,043
1G4 DETROIT TROY MI 2,280,162 6,839,130
1AB RALEIGH - WAKE FOREST ROAD NC 2,110,609 6,556,522
1C2 CHARLOTTE/ARROWOOD NC 1,879,878 5,426,087
1D4 GREENBURGH-TARRYTOWN NY 3,249,272 9,269,565
1G8 COLUMBUS - DUBLIN OH 1,422,063 7,347,826
1H5 COLUMBUS - CROSSWOODS OH 1,612,076 7,800,000
1G9 CINCINNATI BLUE ASH OH 2,238,230 7,743,478
1E3 VALLEY FORGE PA 1,571,359 8,082,610
1B8 MEMPHIS PARK AVE EAST TN 1,424,290 5,482,609
1B7 NASHVILLE/BRENTWOOD TN 1,287,149 5,991,304
1M6 SAN ANTONIO MED CENTER TX 1,516,664 4,747,826
1M3 DALLAS ADDISON TX 1,338,198 7,065,217
1M2 DALLAS - LAS COLINAS TX 2,420,140 7,291,304
1M4 LBJ NORTHWEST TX 1,308,824 7,856,522
1M5 BEDFORD TX 1,589,186 7,630,435
1M7 SAN ANTONIO AIRPORT TX 1,552,115 6,047,826
1M1 ARLINGTON TX 2,002,232 8,986,957
1E2 HAMPTON VA 1,953,412 5,313,043
1D6 VIRGINIA BEACH VA 2,063,612 4,917,391
1D5 HERNDON - RESTON VA 1,568,928 7,856,522
1D3 FAIR OAKS VA 1,613,697 6,047,826
1D9 BROOKFIELD - RICHMOND VA 1,654,212 8,195,652
--------------- --------------
$90,790,000 $325,000,000
=============== ==============
</TABLE>
98
<PAGE>
Exhibit 10.n
LOAN AGREEMENT
by and between
COURTYARD BY MARRIOTT LIMITED PARTNERSHIP,
as Borrower,
and
LEHMAN BROTHERS HOLDINGS INC.,
doing business as Lehman Capital, a
division of Lehman Brothers Holdings Inc.,
as Lender
Dated as of March 21, 1997
$325,000,000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. DEFINITIONS AND REFERENCES........................................................................2
1.1. Defined Terms.............................................................................2
1.2. Definitions Incorporated by Reference.....................................................23
1.3. Other Definitional Provisions.............................................................24
2. THE LOAN..........................................................................................24
2.1. Making the Loan...........................................................................24
2.2. Mortgage Note.............................................................................25
2.3. Use of Loan Proceeds......................................................................25
2.4. Payment of Principal and Interest.........................................................25
2.5. Prepayment Restrictions; Defeasance.......................................................28
2.6. Partial Release in Connection with a Casualty, Taking or Default before Defeasance Period.33
2.7. Partial Release after Defeasance Period...................................................34
2.8. Yield Maintenance.........................................................................35
2.8.1.................................................................................35
2.8.2.................................................................................35
3. REPRESENTATIONS AND WARRANTIES....................................................................36
3.1. Organization and Power of Borrower........................................................36
3.2. Due Authorization and Execution...........................................................37
3.3. No Consents Required; No Contravention....................................................37
3.4. Title to Properties.......................................................................38
3.5. Ground Leases.............................................................................38
3.6. Utilities.................................................................................39
3.7. No Violations.............................................................................40
3.8. Other Agreements..........................................................................40
3.9. Payment of Taxes..........................................................................40
3.10. Litigation...............................................................................41
3.11. Regulation U.............................................................................41
3.12. Investment Company Act...................................................................41
3.13. Transactions with Affiliates.............................................................41
3.14. Non-Subordination........................................................................42
3.15. Permits and Licenses.....................................................................42
3.16. Patents and Trademarks...................................................................42
3.17. Insurance................................................................................42
3.18. ERISA....................................................................................42
3.19. No Notice of Non-Compliance..............................................................42
3.20. Compliance With Laws.....................................................................43
3.21. Compliance with Environmental Laws.......................................................43
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
3.22. Environmental Indemnification by Borrower................................................43
3.23. Concerning Mortgaged Properties; Financial Statements....................................43
3.24. Access...................................................................................44
3.25. No Liens.................................................................................44
3.26. Accuracy of Information..................................................................45
3.27. Mortgages and Security Interests.........................................................45
3.28. Assignments of Leases and Rents..........................................................45
3.29. Foreign Person...........................................................................46
3.30. No Defaults..............................................................................46
3.31. No Fraudulent Conveyance.................................................................46
4. CLOSING; CONDITIONS PRECEDENT.....................................................................46
4.1. Representations, Warranties and Covenants.................................................46
4.2. Borrower's Actions........................................................................47
4.3. Delivery of Documents.....................................................................47
4.3.1.................................................................................47
4.3.2.................................................................................47
4.3.3.................................................................................48
4.3.4.................................................................................48
4.3.5.................................................................................48
4.3.6.................................................................................48
4.3.7.................................................................................49
4.3.8.................................................................................49
4.3.9.................................................................................49
4.3.10................................................................................49
4.3.11................................................................................50
4.3.12................................................................................50
4.3.13................................................................................50
4.3.14................................................................................51
4.3.15................................................................................51
4.3.16................................................................................51
4.3.17................................................................................51
4.3.18................................................................................51
4.4. Evidence of Authorization; Related Documents..............................................51
4.4.1.................................................................................51
4.4.2.................................................................................51
4.4.3.................................................................................52
4.5. Closing Certificate.......................................................................52
4.6. Management Agreement......................................................................52
4.7. Existing Debt.............................................................................52
4.8. Payment of Lender Costs and Origination Fee...............................................52
4.9. FF&E Reserve Account......................................................................52
4.10. General Partner Organizational Documents.................................................53
5. AFFIRMATIVE COVENANTS.............................................................................53
5.1. Timely Payment of Amounts Due.............................................................53
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
5.2. Proceeds of the Loan......................................................................53
5.3. Management Agreement; Ground Leases.......................................................53
5.4. Financial and Other Information...........................................................56
5.4.1. Quarterly Financial Statements.................................................56
5.4.2. Borrower's Annual Financial Statements.........................................56
5.4.3. Budgets........................................................................57
5.4.4. Hotel Operating Statistics.....................................................57
5.4.5. Certificates Regarding Defaults................................................58
5.4.6. Proposed Amendments to Partnership Agreement...................................58
5.4.7. Environmental Conditions.......................................................58
5.4.8. Evidence of Tax Payments.......................................................58
5.4.9. Change in MII Cash Management Conditions.......................................58
5.5. Maintenance of Existence, Etc.............................................................58
5.6. Compliance with Applicable Laws...........................................................59
5.7. Maintenance of Books; Inspection of Properties and Books..................................59
5.8. Notice of Litigation; Disputes............................................................59
5.9. Mortgaged Property Operations; Maintenance................................................60
5.10. Separate Existence.......................................................................60
5.11. Cash Management..........................................................................61
5.12. Independent Director.....................................................................62
6. NEGATIVE COVENANTS................................................................................62
6.1. Limitation on Indebtedness................................................................62
6.2. Limitation on Liens.......................................................................62
6.3. Merger or Consolidation; Permitted Reorganization.........................................63
6.4. Single Purpose............................................................................68
6.5. Amendments to Agreements..................................................................69
6.5.1.................................................................................69
6.5.2.................................................................................69
6.6. Distributions.............................................................................69
6.7. Permitted Transfers.......................................................................70
7. EVENTS OF DEFAULT.................................................................................70
7.1. Default; an Event of Default..............................................................70
7.1.1.................................................................................70
7.1.2.................................................................................70
7.1.3.................................................................................70
7.1.4.................................................................................71
7.1.5.................................................................................71
7.1.6.................................................................................71
7.1.7.................................................................................71
7.1.8.................................................................................72
7.1.9.................................................................................73
7.1.10................................................................................73
7.1.11................................................................................73
7.1.12................................................................................73
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C>
7.1.13................................................................................73
7.1.14................................................................................73
7.1.15................................................................................74
7.2. Remedies..................................................................................74
7.2.1.................................................................................74
7.2.2.................................................................................74
7.2.3.................................................................................74
7.2.4.................................................................................75
7.3. Remedies Cumulative.......................................................................75
7.4. Default Interest..........................................................................75
7.5. Default Indemnity.........................................................................75
8. INSURANCE.........................................................................................76
8.1. Maintenance of Insurance..................................................................76
8.2. Payment and Application of Insurance Proceeds.............................................76
8.3. Earthquake Insurance......................................................................76
8.4. Environmental Insurance...................................................................77
9. SECURITIZATION....................................................................................78
9.1. Securitization............................................................................78
9.2. No Assignment by Borrower.................................................................79
9.3. Method of Payment.........................................................................79
10. ASSIGNMENT AND PARTICIPATION.....................................................................79
11. MISCELLANEOUS....................................................................................79
11.1. Limitation on Liability..................................................................79
11.2. Entire Agreement, Amendments.............................................................80
11.3. Notices..................................................................................81
11.4. No Waiver; Cumulative Remedies...........................................................82
11.5. Waiver of Jury Trial.....................................................................82
11.6. Governing Law; Consent to Jurisdiction...................................................82
11.7. Payment of Expenses......................................................................83
11.7.1. ..............................................................................83
11.7.2. ..............................................................................83
11.8. Severability.............................................................................83
11.9. Gender, Etc..............................................................................84
11.10. Headings................................................................................84
11.11. Counterparts; Facsimiles................................................................84
11.12. No Third Party Beneficiary..............................................................84
11.13. No Liability of Lender..................................................................84
</TABLE>
-iv-
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") is entered into as of March 21,
1997, by and between COURTYARD BY MARRIOTT LIMITED PARTNERSHIP, a Delaware
limited partnership having its principal office at 10400 Fernwood Road,
Bethesda, Maryland 20817 ("Borrower" or the "Borrower"), and LEHMAN BROTHERS
HOLDINGS INC., a Delaware corporation, doing business as Lehman Capital, a
division of Lehman Brothers Holdings Inc., having its principal office at 3
World Financial Center, New York, New York 10285 ("Lender" or the "Lender").
WHEREAS, the Borrower has requested the Lender to make a loan (the
"Loan") to the Borrower, and the Lender has agreed to make the Loan to the
Borrower, for the purposes and on the terms and conditions described herein;
WHEREAS, the Loan is evidenced by that certain Mortgage Note dated as
of the date hereof by the Borrower to the order of the Lender and its successors
and assigns in the principal amount of Three Hundred Twenty-Five Million and
No/100 Dollars ($325,000,000), which is to be secured by, among other things,
first-priority liens on the Borrower's assets, consisting primarily of 50
Courtyard by Marriott Hotels and related assets;
WHEREAS, the parties hereto desire to set forth their agreement
regarding the making of the Loan and the terms and conditions upon which the
Loan shall be made and repaid;
WHEREAS, without limiting any other rights that the Lender has to
assign the Mortgage Note and the other Loan Documents (as hereinafter defined),
the Lender may assign the Mortgage Note and the other Loan Documents, together
with mortgage loans made to other borrowers, to, among others, a Trustee (as
hereinafter defined) for the benefit of the Holders (as hereinafter defined),
who may appoint a Servicer (as hereinafter defined) and, following such
assignment, all rights of the Lender hereunder will inure to the benefit of the
Trustee, for the benefit of the Trust (as hereinafter defined), and to the
Servicer, on behalf of the Trustee, and the term "Lender" as used herein, shall,
following such assignment, include the Trustee and the Servicer, on behalf of
the Trustee; and
WHEREAS, unless otherwise defined herein, capitalized terms used
herein shall have the meanings ascribed to them in Section 1.1 hereof;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
<PAGE>
1. DEFINITIONS AND REFERENCES
1.1. Defined Terms
Unless the context otherwise requires, capitalized terms used herein
shall have the respective meanings specified in this Section 1.1 (such
definitions to be equally applicable to both the singular and plural forms of
the terms defined).
"Account" means any Local Account, the Manager's Account, any Lockbox
Account, the FF&E Reserve Account, the Cash Collateral Account, the Operating
Account, or any subaccount of any of them, as described in the Cash Management
Procedures attached as Schedule 5.11 hereto.
-------------
"Accounting Period" means (a) initially, each accounting period of
four consecutive weeks having the same beginning and ending dates as the
Manager's corresponding four week accounting periods, except that the last
Accounting Period in a Fiscal Year may be longer than four consecutive weeks
when and to the extent necessary to conform the accounting system to the
Manager's Fiscal Year or to the calendar year, or (b) if the accounting year on
the basis of which the Mortgaged Properties are operated is changed to a
calendar year or a conventional 365-day fiscal year, "Accounting Period" shall
mean each calendar month in such calendar or fiscal year.
"Accounting Quarter" means (a) initially, three (or, in the case of
the last Accounting Quarter in any Fiscal Year, four) consecutive Accounting
Periods, ending on the last day of the third, sixth, ninth and last Accounting
Periods in each Fiscal Year, or (b) if the accounting year on the basis of which
the Mortgaged Properties are operated is changed to a calendar year or a
conventional 365-day fiscal year, "Accounting Quarter" shall mean each of the
fiscal quarters in such calendar or fiscal year (i.e., there shall be four
----
consecutive Accounting Quarters of three months each).
"Adjusted Interest Rate" means the rate determined on the Scheduled
Maturity Date as the greater of (i) 9.865% and (ii) the sum of (A) two
percentage points (2%) and (B) the average, calculated by linear interpolation
(rounded to three decimal places), of the yields of the United States Treasury
Constant Maturities with the terms (one longer and one shorter) most nearly
approximating those of U.S. Obligations having maturities as close as possible
to the fifteenth anniversary of the Scheduled Maturity Date, as determined by
the Lender on the basis of Federal Reserve Statistical Release H.15-Selected
Interest rates under the heading U.S. Governmental Security/Treasury Constant
Maturities, or such other recognized source of financial market information as
may reasonably be selected by the Lender, in each case on the last Business Day
of the week immediately prior to the Scheduled Maturity Date.
"Adjusted Operating Expenses" means, for any Reference Period, all
Deductions (as such term is defined in the Management Agreement) incurred or
accrued in the operation of the Mortgaged Properties during such Reference
Period; provided that Adjusted Operating Expenses shall not include any
Subordinated Obligations.
"Affiliate" means, as to any Person, (a) any Person directly or
indirectly owning, controlling, or holding power to vote ten percent (10%) or
more of the outstanding
-2-
<PAGE>
equity securities as to the Person in question; (b) any Person ten percent (10%)
or more of whose outstanding voting securities are directly or indirectly owned,
controlled, or held with power to vote by the Person in question; (c) any Person
directly or indirectly controlling, controlled by, or under common control with
the Person in question; (d) if the Person in question is a corporation or
limited liability company, any executive officer, director, member or manager of
the Person in question or of any corporation or limited liability company
directly or indirectly controlling, controlled by, or under common control with
the Person in question; and (e) if the Person in question is a partnership, any
general partner of such partnership. As used in this definition of "Affiliate,"
the term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract, or otherwise.
"Agreement" means this Loan Agreement, as it may be amended,
supplemented or modified from time to time.
"Allocated Loan Amount" means the portion of the Loan that is
allocated to a particular Mortgaged Property, as set forth on Schedule 2.4.1
--------------
hereof.
"Assignments of Leases and Rents" means those certain Assignments of
Leases and Rents dated as of the date hereof made by Borrower to the Lender with
respect to each Hotel.
"Authorized Accounting Officer" means the officer of the General
Partner who has primary responsibility for accounting matters, or one of his or
her duly authorized representatives who, as set forth in a written notice of
such officer to the Lender, is duly authorized to act on behalf of such officer
in connection with this Agreement and the other Loan Documents.
"Award" has the meaning ascribed to it in any applicable Mortgage or
Mortgages.
"Bank Debt" has the meaning ascribed to it in Section 2.3(a) hereof.
"Bankruptcy Law" means title 11, United States Code, or any similar
federal, state or foreign law for the relief of creditors.
"Base Rate" means 7.865% per annum.
"Base Rate Interest" means interest on the Mortgage Note at the Base
Rate.
"Borrower" means (a) Courtyard by Marriott Limited Partnership, a
Delaware limited partnership, or (b) any Person that acquires the Hotels and
succeeds to or assumes the obligations of Courtyard by Marriott Limited
Partnership hereunder and under the other Loan Documents pursuant to a Permitted
Reorganization.
"Borrower Documents" has the meaning ascribed to it in Section 3.26
hereof.
-3-
<PAGE>
"Business Day" means a day other than (i) a Saturday or a Sunday or
(ii) a day on which federally insured depository institutions in New York State
are required or authorized by law, governmental decree or executive order to be
closed.
"CBMLP" means Courtyard by Marriott Limited Partnership, a Delaware
limited partnership.
"CBM One" means CBM One Corporation, a Delaware corporation that is a
wholly owned subsidiary of Host Marriott and is the general partner of Borrower.
"CPI Percentage" means, for any Fiscal Year, the percentage by which
the "Consumer Price Index for All Urban Consumers (CPI-U); U.S. City Average,
1982-84 = 100, All Items" (or appropriate substitute index if such index is no
longer published) (the "CPI") for December of the preceding Fiscal Year exceeds
the CPI for December 1996.
"Cash Collateral Account" has the meaning specified in Section 4 of
the Cash Management Procedures attached as Schedule 5.11 hereto.
-------------
"Cash Management Procedures" means the provisions of Schedule 5.11
-------------
hereto.
"Casualty" has the meaning ascribed to it in any applicable Mortgage.
"Certificates" has the meaning ascribed to it in Section 9.1 hereof.
"Closing" has the meaning ascribed to it in the first paragraph of
Section 4 hereof.
"Closing Date" means March 21, 1997.
"Code" means the Internal Revenue Code of 1986, as the same may be
amended from time to time, and any successor statute of similar import, and the
regulations thereunder, in each case as in effect from time to time. References
to sections of the Code shall be construed also to refer to any successor
sections and all related regulations.
"Collateral" means the "Property" (as defined in each of the
Mortgages, whether individually or taken as a group, as the context may
require), together with such other collateral or property as may be pledged,
liened or encumbered from time to time as security for the Loan under any other
Security Documents.
"Collateral Assignment of Management Agreement" means that certain
Collateral Assignment of Management Agreement and Subordination Agreement, dated
as of the Closing Date, by and among the Borrower, the Manager, and the Lender
in favor of the Lender.
"Consolidated DSCR" means the ratio of (x) the Net Operating Income
for the applicable Reference Period to (y) the aggregate amount of principal and
interest scheduled to be payable on the Mortgage Note during such Reference
Period and on any
-4-
<PAGE>
existing or proposed Parent Debt during the 13 full Accounting Periods next
following the date of determination.
"Consolidated Loan to Value Ratio" means the ratio of (x) the sum of
the aggregate principal balance of the Mortgage Note and any existing Parent
Debt or proposed Parent Debt on the date of determination divided by (y) the
aggregate appraised values of the Mortgaged Properties as of a date no more than
12 months prior to the date of determination, which appraisals shall be prepared
on a basis that assumes the Borrower holds a fee simple estate in all Mortgage
Properties that are subject to a Marriott Ground Lease, and shall be reviewed by
an MAI appraiser from a nationally recognized appraisal firm with at least
fifteen years experience appraising similar type properties and otherwise
reasonably acceptable to the Lender, and certified by such MAI appraiser as
having been prepared in accordance with the requirements of the Standards of
Professional Practice of the Appraisal Institute and the Uniform Standards of
Professional Appraisal Practice of the Appraisal Foundation.
"Cooperation Agreement" means that certain Cooperation Agreement dated
as of the Closing Date, by and among the Borrower, Host Marriott, the Manager
and the Lender.
"DCR" means Duff & Phelps Credit Rating Co.
"Debt" means the obligations of the Borrower under the Loan Documents,
together with all interest thereon, and all other sums, including, without
limitation, fees, expenses, commissions, premiums and indemnities, which may or
shall become due under any of the Loan Documents, including the costs and
expenses of enforcing any provision of the Loan Documents that may be
reimbursable hereunder.
"Debt Service Period" means the period commencing on (and including)
the tenth (10th) day of each calendar month (or with respect to the first Debt
Service Period, the period commencing on (and including) the Closing Date) and
ending on (and excluding) the tenth (10th) day of the next succeeding calendar
month.
"Debt Service Release Conditions" means, with respect to any proposed
Release, the following conditions:
(1) If the Post-Release DSCR for the Reference Period applicable to
the proposed Release is less than 2.60:1, the Post-Release DSCR
for the Reference Period applicable to the proposed Release
cannot be less than the greater of (a) 1.935:1 and (b) the Pre-
Release DSCR for such Reference Period; or
(2) If the Post-Release DSCR for the Reference Period applicable to
the proposed Release is greater than or equal to 2.60:1, the
following conditions are satisfied:
(x) the Pre-Release DSCR with respect to the proposed Release
shall not have exceeded the Post-Release DSCR with respect
to the proposed Release by more than .05:1; and
-5-
<PAGE>
(y) (i) the sum of the Pre-Release DSCRs with respect to the
proposed Release and the respective Pre-Release DSCRs with
respect to each Prior Reference Period Release during the
Reference Period applicable to the proposed Release shall
not have exceeded (ii) the sum of the Post-Release DSCR with
respect to the proposed Release and the respective Post-
Release DSCRs with respect to each Prior Reference Period
Release by more than .05:1.
In connection with any Release, the Borrower shall perform the foregoing
calculations and provide the Lender with a certificate that the applicable
conditions are satisfied.
"Default" has the meaning ascribed to it in Section 7.1 hereof.
"Default Interest" means (i) interest accruing on any overdue
principal amount of the Mortgage Note at a rate per annum equal to the
difference between the Default Interest Rate minus the Interest Rate, and (ii)
interest accruing on any overdue interest and any other overdue payments under
any Loan Documents at the Default Interest Rate.
"Default Interest Rate" has the meaning ascribed to it in Section 7.4
hereof.
"Defeasance Collateral" has the meaning ascribed to it in Section
2.5(a)(iv)(A) hereof.
"Defeasance Deposit" has the meaning ascribed to it in Section 2.5(g)
hereof.
"Defeasance Period" has the meaning ascribed to it in Section 2.5(a)
hereof.
"Defeasance Security Agreement" has the meaning ascribed to it in
Section 2.5(a)(iv)(A) hereof.
"Defeased Note" has the meaning ascribed to it in Section
2.5(a)(iv)(D) hereof.
"Deferred Incentive Management Fees" means the unpaid balance from
time to time of the Deferred Incentive Management Fees (as defined in the
Management Agreement) following any payments thereof to the Manager pursuant to
Section 5.02 of the Management Agreement; such fees (before payment of the
amount described in Section 2.3(b) hereof) total $6,500,000 as of the Closing
Date.
"Deferred Interest" means the difference between (i) interest accrued
and unpaid on the Mortgage Note (other than any Defeased Note if such Defeased
Note is prepaid in full within ten (10) business days after the Scheduled
Maturity Date) calculated at the Adjusted Interest Rate and (ii) interest paid
on the Mortgage Note (other than any Defeased Note if such Defeased Note is
prepaid in full within ten (10) business days after the Scheduled Maturity Date)
at the Base Rate.
-6-
<PAGE>
"Due Date" means the tenth (10th) day of each calendar month, or, if
in any calendar month the tenth (10th) day is not a Business Day, the Business
Day immediately preceding the tenth (10th) day.
"ERISA" means the Employee Retirement Income Security Act of 1974
(together with all rules and regulations promulgated thereunder), as amended,
supplemented, or modified from time to time.
"ERISA Affiliate" means any trade or business under common control (as
it is defined in Section 414(b) or 414(c) of the Code or Section 4001(b)(1) of
ERISA) with Borrower.
"Earthquake Casualty Reserve Account" has the meaning ascribed to it
in Section 8.3 hereof.
"Election" has the meaning ascribed to it in Section 5.3 hereof.
"Eligible Account" means either (i) an account maintained with a
federal or state chartered depository institution or trust company, (a) if the
funds therein are to be retained for more than 40 days, the long-term unsecured
debt obligations of which (or, in the case of a depository institution or trust
company that is the principal subsidiary of a holding company, the long-term
unsecured debt obligations of the holding company of which) are rated by each
Rating Agency in one of its two highest rating categories (or such other ratings
as will not result in the rating of any of the Certificates being reduced below
their respective ratings on the date determination is to be made and as to which
the Rating Agencies may otherwise agree) at the time of the deposit therein, or
(b) if the funds therein are to be retained for less than 40 days, the short-
term unsecured debt obligations of such depository institution or trust company
(or, in the case of a depository institution or trust company that is the
principal subsidiary of a holding company, the long-term unsecured debt
obligations of the holding company of which), as the case may be, are rated not
lower than A-1+ by the applicable Rating Agencies, or (ii) a segregated trust
account maintained with the trust department of a federal or state chartered
depository institution or trust company acting in its fiduciary capacity
provided that such account is subject to fiduciary funds on deposit regulations
(or internal guidelines) substantially similar to 12 C.F.R. (S)9.10(b), or (iii)
an account in any other insured depository institution reasonably acceptable to
the Lender, so long as prior to the establishment of an account in any such
other depository institution each of the Rating Agencies shall have delivered a
Rating Comfort Letter with respect thereto.
"Engineering Surveys" means those reports of recent date prior to the
Closing Date prepared by Building Evaluation Services & Technology, Inc.
concerning the physical condition of the Hotels.
"Environmental Indemnity Agreement" means the Environmental Indemnity
Agreement, dated as of the date hereof among the Borrower, the General Partner
and the Lender.
"Environmental Laws" has the meaning ascribed to it in the definition
of "Hazardous Materials" herein.
-7-
<PAGE>
"Event of Default" has the meaning ascribed to it in Section 7.1
hereof.
"Excess Cash Flow" means, for any Accounting Period, the difference
between (i) Net Operating Income and (ii) the sum of (A) the Monthly Debt
Service Payments, (B) other Debt then due and payable to the Lender pursuant to
this Agreement or any of the other Loan Documents (other than Default Interest,
Deferred Interest and payments required under Section 2.4.4(d) hereof), and (C)
to the extent not duplicative of the foregoing, withdrawals from the Cash
Collateral Account applied for the purposes set forth in clauses (B) through (N)
of Section 4.4 of the Cash Management Procedures or, if Section 6.10 of the Cash
Management Procedures is applicable, clauses (B) through (M) thereof.
"FF&E" means (i) furniture, fixtures, furnishings and equipment and
(ii) FF&E Replacements.
"FF&E Replacements" has the meaning ascribed to such term in the
Management Agreement and, to the extent agreed by the Manager, also includes
alterations (including major repairs), improvements, renewals, and replacements
to the structural, mechanical, electrical, heating, ventilating, air
conditioning, plumbing, and vertical transportation elements of a Hotel.
"FF&E Reserve Account" has the meaning specified in Section 7 of the
Cash Management Procedures attached as Schedule 5.11 hereto.
-------------
"FF&E Reserve Contribution" means the contribution required to be made
pursuant to Section 8.02 of the Management Agreement.
"Final Maturity Date" means April 10, 2017.
"Financial Statements" means the financial statements of the Borrower
furnished to the Lender from time to time pursuant to Section 5.4 hereof.
"Fiscal Year" means the period beginning January 1 of each year
through and including December 31 of such year; provided, however, that, for
purposes of calculating (a) any amount attributable to any Reference Period or
(b) other amounts calculated with reference to the fiscal accounting periods of
the Manager, "Fiscal Year" shall mean the fiscal year of the Manager, as defined
in the Management Agreement.
"Fixed Asset Supplies" means supply items, including linen, china,
glassware, tableware and similar items relating to the Mortgaged Properties.
"Force Majeure" means acts of God, acts of war, civil disturbance, or
governmental action, excluding any casualty customarily covered by insurance.
"GAAP" means generally accepted accounting principles in the United
States of America (as such principles may change from time to time) applied on a
consistent basis (except for changes in application as to which Borrower's
independent certified public accountants concur), both as to classification of
items and amounts, within any applicable period and as to prior periods.
-8-
<PAGE>
"GP Certificate" means the Restated Certificate of Incorporation of
CBM One.
"General Partner" means CBM One, in its capacity as general partner of
the Borrower, or a Person that becomes the general partner of the Borrower in
connection with a Permitted Reorganization (or the managing member of the
Borrower, if the Borrower is a limited liability company following such
Permitted Reorganization) and enters into the Joinder By General Partner
included following the signature pages of this Agreement.
"Governmental Authority" means any nation, government, state, or
political subdivision of any thereof, including any court or any other entity
exercising executive, legislative, regulatory, judicial, or administrative
functions of, or pertaining to, government.
"Gross Revenues" means with respect to a Mortgaged Property or
Mortgaged Properties, for any period, all revenue and income of any kind derived
from the Mortgaged Property or Mortgaged Properties and all departments and
parts thereof, including rentals or other payments from lessees, licensees, or
concessionaires in the Mortgaged Property or Mortgaged Properties (but not
including gross receipts of any such lessees, licenses, or concessionaires
except as may be received by or on behalf of the Borrower as rent), the proceeds
of business interruption insurance and telephone, food and beverage charges, all
determined in accordance with GAAP, excluding all refunds, rebates, discounts,
and credits of a similar nature, given, paid, or returned by the Borrower or the
Manager in the course of obtaining such revenue and income. Nevertheless, any
amounts received, recognized, or realized in the nature of the following shall
not be included as Gross Revenues: (i) applicable sales, use, and excise taxes
or similar governmental charges collected directly from patrons or guests, or as
part of the sales price of any goods, services, or displays (including
occupancy, gross receipts, admission, cabaret, or similar or equivalent taxes);
(ii) gratuities; (iii) Net Sales Proceeds; and (iv) interest earned on any
reserves, including, without limitation, the FF&E Reserve Account.
"Ground Leases" means the leases of Land on which 32 of the Mortgaged
Properties (and a portion of one other Mortgaged Property) are located (31 of
which are Marriott Ground Leases), which ground leases are more fully described
on Schedule B attached hereto and incorporated herein, as the same may be
----------
amended or extended from time to time in accordance with the terms hereof.
"Ground Lease Rental Subordination Agreement" means the Marriott
Ground Lease Rental Subordination Agreement, dated as of the Closing Date, by
the Marriott Ground Lessors in favor of the Lender.
"Ground Lessor" means a Third Party Ground Lessor or a Marriott Ground
Lessor.
"Hazardous Materials" means any substances, materials, or wastes,
whether solids, liquids or gases, that are defined as "hazardous wastes,"
"hazardous substances," "toxic substances," "radioactive materials," or other
substantially similar designations in, or otherwise subject to regulation under,
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, ("CERCLA"), as
-9-
<PAGE>
amended by the Superfund Amendments and Reauthorization Act of 1986 ("SARA"), 42
U.S.C. (S) 9601 et seq.; the Toxic Substance Control Act ("TSCA"), 15 U.S.C. (S)
2601 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. (S) 1802 et
seq.; the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. (S) 9601 et
seq.; the Clean Water Act ("CWA"), 33 U.S.C. (S) 1251 et seq.; the Safe Drinking
Water Act, 42 U.S.C. (S) 300f et seq.; the Clean Air Act ("CAA"), 42 U.S.C. (S)
7401 et seq.; or other applicable Laws pertaining to the regulation of
hazardous, toxic or dangerous materials or wastes or the protection of the
environment, including any plans, rules, regulations, orders or ordinances
adopted, or other criteria and guidelines promulgated, pursuant to such laws,
whether now or hereafter in effect (collectively referred to herein as
"Environmental Laws"). Hazardous Materials includes, but is not limited to,
polychlorinated biphenyls (PCBs), petroleum and petroleum products and
byproducts, and asbestos.
"High Yield Lender" means one or more institutional lenders or issuers
of debt securities, including, without limitation, a trustee on behalf of
holders of debt securities, that advance Parent Debt.
"Holders" means the holders of record from time to time of the
Certificates.
"Host Marriott" means Host Marriott Corporation, a Delaware
corporation and the corporate parent of CBM One.
"Hotel" means the hotel operated on any one of the Mortgaged
Properties (or each of them, as the context may require) and "Hotels" means any
two or more of the Mortgaged Properties (or all of them, as the context may
require).
"Improvements" means all buildings, structures, paving, sidewalks,
parking areas, curbing, landscaping, signage, lighting, utilities and other
improvements from time to time located on all or any part of the Land
(including, without limitation, the buildings that are operated as the Hotels),
and any modifications, additions, restorations or replacements of the whole or
any part thereof.
"Impositions" has the meaning ascribed to it in the Mortgages.
"Incentive Management Fees" means the fees designated as "Incentive
Management Fees" under the Management Agreement.
"Indebtedness" of any Person means (a) any liabilities and obligations
of such Person, contingent or otherwise, (i) in respect of borrowed money
(whether or not the recourse of the lender is to the whole of the assets of such
Person or only to a portion thereof), (ii) evidenced by bonds, notes,
debentures, or similar instruments, (iii) representing the balance deferred and
unpaid of the purchase price of any property or services, except those incurred
in the ordinary course of such Person's business that would constitute
ordinarily a trade payable to trade creditors, (iv) representing the
Subordinated Obligations that remain unpaid, (v) evidenced by bankers'
acceptances, (vi) for the payment of money relating to a capitalized lease
obligation or sale/leaseback obligation (but excluding any obligations under any
Ground Lease in existence on the Closing Date that may be a capitalized lease
obligation), or (vii) evidenced by a letter of credit or a reimbursement
obligation of such person with respect to any letter of credit or (b) any
liabilities and obligations of others of the kind described in the preceding
clause (a) that
-10-
<PAGE>
such Person has guaranteed or that are otherwise its legal liability or which
are secured by any assets or property of such Person, including, without
limitation, any obligations to purchase, redeem, or acquire any capital stock or
similar interests.
"Independent Director" means a person who is not, and has not within
the past five years been, (i) an officer, director, employee, partner, member,
stockholder or beneficial-interest holder of the General Partner or the
Borrower; (ii) an officer, director, employee, partner, member, beneficial-
interest holder or stockholder of any "Affiliate" (as defined below) of the
General Partner or the Borrower; (iii) a customer or supplier of the Borrower or
any Affiliate thereof (other than a hotel guest or a customer or supplier that
does not derive more than 10% of its revenues from its activities with the
Borrower or any Affiliate thereof); or (iv) a spouse, parent, sibling, or child
of any person described in (i), (ii), or (iii); provided, however, that a person
shall not be deemed to be a director of an Affiliate solely by reason of such
person being a director of a single-purpose entity that would otherwise be
deemed to be an Affiliate because they are under common control. For the
purpose of this definition alone, "Affiliate" means any person or entity (i)
which owns beneficially, directly or indirectly, more than 10% of the
outstanding shares of common stock of the General Partner or which is otherwise
in control of the General Partner, (ii) of which more than 10% of the
outstanding voting securities are owned beneficially, directly or indirectly, by
any person or entity described in clause (i) above, or (iii) which is controlled
by, or under common control with, any person or entity described in clause (i)
above; the terms "control" and "controlled by" shall have the meanings assigned
to them in Rule 405 under the Securities Act of 1933.
"Information" has the meaning ascribed to it in Section 5.4 hereof.
"Insurance Proceeds" has the meaning ascribed to it in any applicable
Mortgage.
"Interest Rate" means (i) prior to the Scheduled Maturity Date, the
Base Rate and (ii) from and after the Scheduled Maturity Date, the Adjusted
Interest Rate.
"Involuntary Hotel Default" means a Default or Event of Default of the
kind described in Section 7.1.3 or Section 7.1.9 hereof that affects or pertains
to one or more (but not all) of the Hotels then subject to the Lien of any
Mortgage, that is not susceptible of cure after reasonable efforts to cure, is
not caused by the Manager or the Borrower, was not known to the Manager or the
Borrower on or prior to the Closing Date, and either (a) is caused by (i) a
defect in title to the Land underlying the applicable Hotels, (ii) the presence
on, under or adjacent to any Hotel, or the Land on which any Hotel is situated,
of Hazardous Materials, or (iii) violation at any Hotel or the Land on which any
Hotel is situated of any Environmental Law, in each case caused by actions of
third parties or migration of Hazardous Materials from neighboring lands or that
otherwise arises out of conditions beyond Borrower's reasonable ability to
control, or (b) is caused by a change in Law after the date hereof that renders
Borrower's ability to comply with the covenants contained herein and in the
other Loan Documents commercially impracticable.
"Land" means the parcels of land on which the Mortgaged Properties are
located, as more fully described on Schedule A attached hereto.
----------
-11-
<PAGE>
"Laws" means any statute or law, or any rules, regulations, orders or
determinations made by any applicable Governmental Authority, including as to
real property, but without limitation, any applicable Environmental Laws and any
zoning, building, subdivision or land use laws, rules, or ordinances.
"Leasehold Hotel" means any Hotel located on Land that is leased by
the Borrower under a Ground Lease, as set forth on Schedule B attached hereto.
----------
"Leases" has the meaning ascribed to it in Section 3.23 hereof.
"Lender" means Lehman Brothers Holdings Inc., a Delaware corporation,
doing business as Lehman Capital, a division of Lehman Brothers Holdings Inc.,
together with its successors and assigns, including, without limitation,
following the assignment and transfer contemplated by Section 9.1 hereof, (a)
the Trustee, on behalf of the Trust, or any of its successors and assigns, and
(b) the Servicer, on behalf of the Trustee.
"Lender Costs" means all of the costs and expenses of the Lender of
the kind described in Section 11.7.1 hereof.
"Lien" means any mortgage, deed of trust, deed to secure debt, lien,
claim, option, security interest, pledge, preference, priority, hypothecation,
installment sale agreement, repurchase agreement or other encumbrance or
security arrangement of any kind or nature whatsoever, including, without
limitation, any conditional sale or title retention arrangement, and any
assignment, deposit arrangement, lease or other arrangement intended as, or
having the effect, of security.
"Limited Partners" means the limited partners from time to time of the
Borrower, as duly admitted pursuant to the terms of the Partnership Agreement.
"Loan" means the loan made by the Lender to the Borrower pursuant to
Section 2.1 hereof.
"Loan Amount" means Three Hundred and Twenty-Five Million and No/100
Dollars ($325,000,000).
"Loan Documents" means this Agreement, the Mortgage Note, the
Environmental Indemnity Agreement, the Security Agreement, each of the
Mortgages, and all of the other Security Documents, and any and all other
documents, agreements, certificates, notes or other instruments delivered
pursuant to, or in connection with, the Loan.
"Local Account" has the meaning specified in Section 3 of the Cash
Management Procedures attached as Schedule 5.11 hereto.
-------------
"Lockbox Account" has the meaning specified in Section 6 of the Cash
Management Procedures attached as Schedule 5.11 hereto.
-------------
"Management Agreement" means that certain Management Agreement dated
as of January 4, 1997 by and between the Borrower, as "Owner" and Courtyard
-12-
<PAGE>
Management Corporation, a Delaware corporation, as "Manager" (the "Manager"),
with respect to the management of the 50 Hotels.
"Management Leases" means, collectively (i) that certain Lease
Agreement dated as of January 1, 1994 by and between Borrower, as landlord, and
Courtyard Management Corporation, a Delaware corporation, as tenant, with
respect to the management of all the Hotels excluding the Hotel located in
Hartford/Windsor, Connecticut and (i) that certain Lease Agreement dated as of
January 1, 1994 by and between Borrower, as landlord, and Courtyard Management
Corporation, a Delaware corporation, as tenant, with respect to the Hotel
located in Hartford/Windsor, Connecticut.
"Manager" has the meaning ascribed to it in the definition of
"Management Agreement" herein, or any successor thereto, or any other Person who
becomes the manager of one or more of the Hotels in compliance with this
Agreement.
"Manager's Account" has the meaning specified in Section 1.2 of the
Cash Management Procedures attached as Schedule 5.11 hereto.
-------------
"Marriott Ground Lease" means each of the Ground Leases underlying the
31 Mortgaged Properties described in part A of Schedule B attached hereto.
----------
"Marriott Ground Lessor" means Essex House Condominium Corporation,
Host Restaurants, Inc., Casa Maria of Maryland, Inc. or Newark Properties, Inc.
(each of which is an Affiliate of MII), as lessor under a Marriott Ground Lease,
or any successors or assigns of any thereof.
"Marriott Ground Lease Obligations" means the obligations of the
Borrower to pay rent under the Marriott Ground Leases.
"Master Account" has the meaning ascribed to it in Section 1.2 of the
Cash Management Procedures attached as Schedule 5.11 hereto.
-------------
"MII" means Marriott International, Inc., a Delaware corporation.
"MII Cash Management Conditions" means the following conditions: (i)
the Mortgaged Properties from which Gross Revenues are to be deposited in the
Manager's Account are managed by the Manager under the Management Agreement,
(ii) the Manager is a wholly owned, direct or indirect, subsidiary of MII, and
(iii) the long-term senior unsecured debt of MII has a credit rating assigned by
S&P of at least BBB+ and a credit rating assigned by DCR of at least BBB.
"Monthly Debt Service Payment" has the meaning ascribed to it in
Section 2.4.4 hereof.
"Mortgage Note" means the promissory note described in Section 2.2
hereof; provided, however, that if the principal amount of such promissory note
shall be divided at any time into one or more Defeased Notes and one or more
Undefeased Notes pursuant to Section 2.5(a)(iv)(D) hereof, "Mortgage Note" shall
mean, collectively, all such Undefeased Note(s) and Defeased Note(s).
-13-
<PAGE>
"Mortgaged Properties" means the 50 Courtyard by Marriott Hotels owned
by Borrower, including, without limitation, the Borrower's fee or leasehold
interest in the land on which the Hotels are located, the Borrower's ownership
interest in all Improvements, and all FF&E related to the hotel operations
thereon, which Hotels are identified on Schedule 4.3.2 attached hereto.
--------------
"Mortgages" means (a) those certain Indentures (or Fee and Leasehold
Indentures) of Mortgage, Open-End Mortgage, Deed to Secure Debt, Assignment of
Rents and Leases, Security Agreement and Fixture Filing, (b) those certain Deeds
of Trust (or Fee and Leasehold Deeds of Trust), Assignment of Rents and Leases,
Security Agreement and Fixture Filing, or (c) any individual variations thereof
in any state, executed by the Borrower (and, in the case of any Mortgaged
Property that is located on Land that is subject to a Marriott Ground Lease, by
the applicable Marriott Ground Lessor), or, if the Mortgaged Property is owned
by the trustee under a land trust, by such trustee, and delivered to the Lender
or certain trustees for the benefit of the Lender with respect to each of the
Mortgaged Properties, which are to be recorded in the land records of the
jurisdictions in which such Mortgaged Properties are located, as security for
the Loan, (and each of the foregoing shall be referred to herein individually as
a "Mortgage").
"Net Loan Proceeds" has the meaning ascribed to it in Section 2.1
hereof.
"Net Operating Income" means, for any Reference Period (or Accounting
Period, as applicable), the Gross Revenues for such Reference Period (or
Accounting Period, as applicable) minus the Adjusted Operating Expenses for such
Reference Period (or Accounting Period, as applicable).
"Net Sales Proceeds" means the aggregate amount of cash received by
the Borrower in respect of the sale of any Mortgaged Property and related assets
less (i) the sum of all reasonable and customary out-of-pocket payments, fees,
commissions and expenses, plus interest thereon, if applicable (including,
without limitation, fees, commissions and expenses of legal counsel and
investment bankers) paid or payable to third parties and incurred in connection
with such sale, including, without limitation, the Lender, the Trustee (if any),
and the Servicer (if any), and (ii) the amount (estimated reasonably and in good
faith by the Borrower) of income, franchise, sales and other applicable taxes
required to be paid by the Borrower in connection with such sale.
"New Note" has the meaning ascribed to it in Section 2.2 hereof.
"Operating Account" has the meaning specified in Section 6 of the Cash
Management Procedures attached as Schedule 5.11 hereto.
--------------
"Operating Profit Payment Date" means the last Business Day of the
third week in each Accounting Period.
"Origination Fee" means a fee equal to $2,843,750 to be paid by
Borrower to the Lender on the Closing Date.
"Parent" means any Person that directly own, as a partner in or
member[s] of the Borrower, at least 95% of the equity interests in the Borrower.
-14-
<PAGE>
"Parent Debt" means Indebtedness for borrowed money in the form of
debt securities or institutional debt from a High Yield Lender incurred by the
Parent of Borrower following a Permitted Reorganization described in clause (i),
(ii) or (iii) of the definition of Permitted Reorganization.
"Parent Debt Intercreditor Agreement" means an Intercreditor Agreement
to be entered into between Lender and any High Yield Lender, at the request of
such High Yield Lender, substantially in the form attached hereto as Exhibit
-------
C-1.
- ---
"Partnership Agreement" means the Amended and Restated Agreement of
Limited Partnership of the Borrower dated as of August 20, 1986 between CBM One
and the Limited Partners, or, the agreement of limited partnership of Borrower
following a Permitted Reorganization.
"Payment Differential" has the meaning ascribed to it in Section 2.8.2
hereof.
"Permitted Debt" means, as to Borrower:
(i) if no Default or Event of Default has occurred and is
continuing, purchase money Indebtedness and capitalized lease
obligations up to an aggregate amount not in excess of $4 million
outstanding at any one time, in each case, for the purchase or lease
of FF&E in the ordinary course of business (and not inconsistent with
customary industry practices), which Indebtedness may be secured by a
first priority lien on the goods and equipment that have been so
purchased or leased;
(ii) Indebtedness in respect of Subordinated Management
Agreement Obligations pursuant to the Management Agreement or deferred
ground rent payments payable to the Marriott Ground Lessors pursuant
to the Marriott Ground Leases, in each case provided such Indebtedness
is unsecured and subordinated to the Loan pursuant to the Collateral
Assignment of Management Agreement or the Ground Lease Rental
Subordination Agreement, as applicable;
(iii) if no Event of Default has occurred and is continuing,
Indebtedness solely in respect of surety and appeal bonds, performance
bonds and other obligations of a like nature (to the extent that such
incurrence does not result in the incurrence of any obligation to
repay any obligation relating to borrowed money of others), all in the
ordinary course of business in accordance with customary industry
practices; and
(iv) Indebtedness under the promissory note in the original
principal amount of $7,340,744 attached as Exhibit D hereto, under
---------
which no additional advances may be made to the Borrower after amounts
thereunder have been repaid.
"Permitted Debt Intercreditor Agreement" means an Intercreditor
Agreement to be entered into between Lender and a lender of Permitted Debt of
the kind
-15-
<PAGE>
described in clause (iv) of the definition thereof, substantially in the form
attached hereto as Exhibit C-2.
-----------
"Permitted Hazardous Substances" means prepackaged office supplies,
cleaning materials, personal grooming items and other items sold for consumer
use or typically used in the operation, maintenance and repair of hotel
properties and other commercial operations in the vicinity of the Mortgaged
Property and heating oil for the Mortgaged Property and fuel for shuttle vans
used in the operation of the Mortgaged Property, which are stored, handled,
transported and disposed of in compliance with applicable Requirements of
Environmental Law.
"Permitted Investments" means any one or more of the following
obligations or securities which are payable on demand or available for
withdrawal, in each case without penalty, or which have a scheduled maturity on
or prior to the Business Day preceding the following Due Date, and having at all
times the required ratings, if any, provided for in this definition, unless each
Rating Agency shall have confirmed in writing to the Lender that a lower rating
would not, in and of itself, result in the withdrawal, downgrading or
qualification of the ratings initially assigned to the Certificates (and
investments will not be disqualified as "Permitted Investments" solely because
they are issued by Lender or an Affiliate of Lender):
(i) direct obligations of, or obligations guaranteed as to
full and timely payment of principal and interest by, the United
States or any agency or instrumentality thereof, provided that such
obligations are backed by the full faith and credit of the United
States of America, and such obligations have a predetermined fixed
amount of principal due at maturity which cannot vary or change;
(ii) direct obligations of, or obligations guaranteed as to
timely payment of principal and interest by, FHLMC, FNMA or the
Federal Farm Credit System, provided that any such obligation is
qualified by each Rating Agency as an investment of funds backing
securities having a long-term unsecured debt rating of "AAA", and such
obligations have a predetermined fixed amount of principal due at
maturity which cannot vary or change;
(iii) demand and time deposits in, or demand notes of, or
certificates of deposit of, or bankers' acceptances having maturities
of not more than 365 days issued by, any bank or trust company,
savings and loan association or savings bank, provided that the
commercial paper or long-term unsecured debt obligations of such
depository institution or trust company (or in the case of the
principal depository institution in a holding company system, the
commercial paper or long-term unsecured debt obligations of such
holding company) are then rated not lower than the highest rating
category of each Rating Agency, in the case of commercial paper, or in
the highest category in the case of long-term debt obligations, or
such lower categories as will not result (as evidenced in writing by
each Rating Agency) in the withdrawal, downgrading or qualification of
the rating then assigned (or, prior to the Securitization, proposed to
be assigned) to the Certificates by
-16-
<PAGE>
each Rating Agency, or, in the case of short-term debt obligations
which have maturities of 30 days or less, a rating of "A-1";
(iv) general obligations of, or obligations guaranteed by, any
state of the United States or the District of Columbia receiving long-
term debt ratings by each Rating Agency equal to the highest rating
then assigned (or, prior to the Securitization, proposed to be
assigned) to any Class of Certificates by such Rating Agency or such
lower category as will not result in the withdrawal, downgrading, or
qualification of the rating then assigned (or, prior to the
Securitization, proposed to be assigned) to the Certificates by each
Rating Agency (as evidenced in writing by each Rating Agency), and
such obligations have a predetermined fixed amount of principal due at
maturity which cannot vary or change;
(v) commercial or finance company paper (including both non-
interest-bearing discount obligations and interest-bearing obligations
payable on demand or on a specified date not more than one year after
the date of issuance thereof) that is rated by each Rating Agency in
its highest short-term unsecured rating category, and is issued by a
corporation the outstanding senior debt obligations of which are then
rated by each Rating Agency in its highest short-term unsecured rating
category or its highest long-term unsecured rating category, as
applicable;
(vi) guaranteed reinvestment agreements maturing in 365 days or
less from the date of investment issued by any bank, insurance
company, or other corporation rated in the highest rating category by
each Rating Agency (or, if not rated by each Rating Agency, then any
two nationally recognized rating agencies), provided that any such
agreement must by its terms provide that it is terminable by the
purchaser without penalty in the event any such rating is at any time
lower than such level;
(vii) repurchase obligations maturing in 365 days or less from
the date of investment with respect to any security described in
clause (i) or (ii) above entered into with a depository institution or
trust company (acting as principal) meeting the rating standards
described in (iii) above;
(viii) securities (other than stripped bonds or stripped coupons)
maturing in 365 days or less from the date of investment bearing
interest or sold at a discount that are issued by any corporation
incorporated under the laws of the United States of America or any
state thereof and rated by each Rating Agency in its highest long-term
unsecured rating category; provided, however, that securities issued
by any such corporation will not be Permitted Investments to the
extent that investment therein would cause the outstanding principal
amount of securities issued by such corporation that are then held as
part of any Account, to exceed 20% of the aggregate principle amount
of all Permitted Investments then held in the Accounts;
(ix) any money market funds rated "AAAm" or "AAAm-G" (or
equivalent); and
-17-
<PAGE>
(x) such other obligations as are acceptable as Permitted
Investments to each Rating Agency, as evidenced in writing by each
Rating Agency;
provided, however, that each such instrument continues to qualify as a "cash
flow investment" pursuant to Code Section 860G(a)(6) earning a passive return in
the nature of interest and that no instrument or security shall be a Permitted
Investment if (i) such instrument or security evidences a right to receive only
interest payments or (ii) the right to receive principal and interest payments
derived from the underlying investment provides a yield to maturity in excess of
120% of the yield to maturity at par of such underlying investment; and
provided, further, that (a) variable interest on any such investment shall be
based on a single index and vary proportionally with such index, and no such
instrument or investment shall have a rating by the Rating Agencies with the "r"
symbol (or equivalent symbol) attached.
"Permitted Liens" has the meaning ascribed to it in Section 6.2
hereof.
"Permitted Reorganization" means a transaction, satisfying the
requirements of Section 6.3, as a result of which any one or more of the
following occurs: (i) as the result of a merger described in Section 6.3.1, a
new limited partner is admitted to Borrower that, together with the General
Partner of Borrower, which may be a new general partner, holds 100% of the
partnership interests in Borrower; or (ii) a new general partner, replacing the
existing General Partner, is admitted to Borrower; or (iii) the Mortgaged
Properties are transferred to a newly created limited partnership or limited
liability company (in which CBMLP shall hold (directly or indirectly) at least
95% of the outstanding equity interests therein), subject to the Loan Documents,
and such transferee assumes the obligations of Borrower under the Loan
Documents; or (iv) the Borrower enters into a lease, as lessor, of the Mortgaged
Properties that satisfies the requirements of Section 6.3.4.
"Person" means an individual, a partnership, a corporation, a trust,
an unincorporated organization, a joint venture or other business entity, a
limited liability company, or a government or any department, agency or
political subdivision thereof.
"Plan" means any plan, program or arrangement, whether or not written,
that is or was an "employee benefit plan" as it is defined in ERISA and (a) that
was or is established or maintained by Borrower or any ERISA Affiliate; (b)
under which Borrower or any ERISA Affiliate has contributed or has been
obligated to contribute or to fund or provide benefits, or under which Borrower
or any ERISA Affiliate has any liability; or (c) that provides or promises
benefits to any person who performs or has performed services for Borrower or
any ERISA Affiliate who, because of such services, is or was a participant
therein or entitled to benefits thereunder.
"Post-Release Debt Service" means, with respect to any proposed
Release, the aggregate amount of principal and interest scheduled to be payable
on the Mortgage Note (other than any Defeased Note) during the applicable
Reference Period, after giving effect to the reduction in the principal balance
of the Mortgage Note that is proposed to occur as a result of such Release, as
if such reduction in principal balance had occurred on the first day of such
Reference Period.
-18-
<PAGE>
"Post-Release DSCR" means, with respect to any proposed Release, the
ratio of (x) the Net Operating Income for the applicable Reference Period,
calculated on a pro forma basis after giving effect to the proposed Release as
if the proposed Release had occurred on the first day of such Reference Period,
to (y) the Post-Release Debt Service for such Reference Period.
"Pre-Release Debt Service" means, with respect to any proposed
Release, the aggregate amount of principal and interest scheduled to be payable
on the Mortgage Note (other than any Defeased Note) during the applicable
Reference Period, without giving effect to the proposed Release (or other
Releases being made on the date as of which the proposed Release is to be made).
"Pre-Release DSCR" means, with respect to any proposed Release, the
ratio of (x) Net Operating Income for the applicable Reference Period, to (y)
the Pre-Release Debt Service for such Reference Period.
"Prepayment Date" means the date on which any voluntary or involuntary
prepayment of principal (excluding scheduled payments of principal under Section
2.4.4 hereof) is made or required to be made.
"Prime Rate" means the rate that is published from time to time as the
"prime rate" in the Wall Street Journal listing of "Money Rates" and shall be
the average of all such rates in effect at any one time if more than one rate is
quoted. If this index ceases to be published in the Wall Street Journal, an
alternate index of similar nature will be selected by Lender in its reasonable
discretion.
"Prior Reference Period Release" means any Release of a Mortgaged
Property that occurred during a Reference Period with respect to which any
determination is made hereunder.
"Qualified Insurance Companies" means an insurer satisfying the
following requirements:
All primary insurers providing insurance coverage required in Section
1.7.1 of the Mortgages must be authorized to issue insurance in the states in
which the insured Mortgaged Property is located. The insurance described in
clause (i) of Section 1.7.1 of the Mortgages and the insurance coverage
described in clause (iii) and (v) of Section 1.7.1 of the Mortgages, will be
maintained with one or more primary insurers having a claims-paying ability
(published or unpublished) rated by Standard and Poor's Ratings Services of not
less than "AA". If permitted by the laws of the state in which the Hotel is
located, the insurance required by clause (vi) of Section 1.7.1 of the Mortgages
may be provided by a state approved and regulated employer's self-insurance
fund. All primary insurance coverage required by other clauses of Section 1.7.1
of the Mortgages (other than flood insurance and workers' compensation
insurance) shall be provided by one or more insurers having an Alfred M. Best
Company, Inc. rating of "A-/10" or better or "B/5" or better for earthquake
insurers, and the primary insurer for the issuer of the primary insurance
required by clause (ii) of such Section 1.7.1 shall be rated by Standard and
Poor's Ratings Services not less than "A."
"REMIC" has the meaning ascribed to it in Section 2.5 hereof.
-19-
<PAGE>
"REVPAR" has the meaning ascribed to it in Section 5.4.4 hereof.
"Rating Agencies" shall mean (i) prior to the Securitization, Standard
& Poor's Ratings Services, a division of the McGraw-Hill Companies, Inc., and
Moody's Investors Services, Inc. (except that, where a particular provision in
any Loan Document specifies one or more Rating Agencies by name, "Rating
Agencies" shall mean the rating agency or rating agencies so specified) and (ii)
after the Securitization, such of the following as actually rate the securities
issued in connection with the Securitization: Standard & Poor's Ratings
Services, a division of the McGraw-Hill Companies, Inc., Moody's Investors
Service, Inc., Duff & Phelps Credit Rating Co., Fitch Investors Service, L.P.,
or any other nationally recognized statistical rating agency selected by Lender.
"Rating Comfort Letter" with respect to any event or proposed course
of action or inaction, means a written confirmation from the Rating Agencies
that no rating assigned by such Rating Agencies to any of the Certificates will
be downgraded, qualified or withdrawn, or placed on a credit watch with negative
implications, as a result of such event or proposed action or inaction; provided
that if the Securitization has not taken (or as certified by Lender, will not
take) the form of a transaction rated by the Rating Agencies, then "Rating
Comfort Letter" shall instead mean that the matter in question shall be subject
to the prior approval of the Lender, which approval shall not be unreasonably
withheld, conditioned or delayed.
"Reference Period" means the 13 full consecutive Accounting Periods
(or 12 full consecutive calendar months, if the Fiscal Year is based on four
calendar quarters) ended immediately preceding the date as of which any
determination with respect to a Reference Period is made hereunder and for which
internal financial statements of the Borrower are available. As used herein,
the Reference Period "applicable" to any sale of a Mortgaged Property, Release,
or other event shall mean the Reference Period immediately preceding such event
for which internal financial statements of the Borrower are available.
"Reinvestment Yield" has the meaning ascribed to it in Section 2.8.2
hereof.
"Release" has the meaning ascribed to it in Section 2.5 hereof and
"Released" shall have a correlative meaning.
"Release Date" has the meaning ascribed to it in Section 2.5(a)(i)
hereof.
"Release Price" means, with respect to a specified Hotel, 125% of the
Allocated Loan Amount for such Hotel, less an amount equal to (x) all Scheduled
Principal Payments paid by Borrower multiplied by (y) a fraction, the numerator
-------------
of which shall be the Allocated Loan Amount for such Hotel and the denominator
of which is the Allocated Loan Amount of all of the Hotels; provided, however,
that in no event shall the Release Price for a Hotel be greater than the then
outstanding aggregate principal amount of the Loan.
"Remaining Mortgaged Properties" means the Mortgaged Properties that
will remain subject to the Lien of any Mortgage following a Release or several
Releases to be made on the same day.
-20-
<PAGE>
"Requirements of Environmental Law" means, with respect to any
Mortgaged Property, all requirements of Environmental Laws or any other
environmental or ecological laws or regulations related to such Mortgaged
Property, or any portion thereof, including all requirements imposed by any law,
rule, order, or regulation of any federal or state executive, legislative,
judicial, regulatory, or administrative agency, board, or authority, which
relate to (i) pollution or protection of the air, surface water, ground water,
or land; (ii) generation, treatment, storage, disposal, or transportation of
Hazardous Substances; (iii) exposure to Hazardous Substances; or (iv) regulation
of the manufacture, processing, distribution in commerce, use, or storage of
Hazardous Substances.
"Restoration" has the meaning ascribed to it in any applicable
Mortgage.
"S&P" means Standard & Poor's Ratings Services, a division of the
McGraw-Hill Companies, Inc.
"SEC" means the Securities and Exchange Commission of the United
States of America.
"Scheduled Maturity Date" means April 10, 2012.
"Scheduled Principal Payment" means the amount designated on Schedule
--------
2.4.4 attached hereto as the payment of principal that is due on a particular
- -----
Due Date, which amount shall be adjusted in accordance with Section 2.4.4(c) in
connection with a prepayment or a Release.
"Securitization" has the meaning ascribed to it in Section 9.1 hereof.
"Security Agreement" means that certain Security Agreement dated as of
even date herewith between Borrower and the Lender.
"Security Documents" means, collectively or individually, as the
context may require, the Mortgages, the Collateral Assignment of Management
Agreement, the Assignments of Leases and Rents, the Security Agreement, the
Ground Lease Rental Subordination Agreement, and such other documents as are
executed and delivered by any Person to grant additional security for the
repayment of the Loan.
"Servicer" has the meaning ascribed to it in Section 9.1 hereof.
"Single Purpose" means, with respect to a Person, that such Person,
(A) at all times since its formation, except as otherwise permitted in or
contemplated by the Loan Documents (i) has been a duly formed and existing
limited partnership, limited liability company, or corporation, as the case may
be; (ii) has observed all customary formalities regarding its partnership,
limited liability company or corporate existence; (iii) has maintained financial
statements, accounting records, and other partnership, limited liability
company, or corporate documents separate from those of any other Person
(provided that nothing shall prohibit such Person from being included in the
consolidated financial statements or tax group of another Person); (iv) has not
commingled its assets with those of any other Person; (v) has paid its own
liabilities out of its own funds, including funds contributed to its capital by
its respective equity holders, and all such capital contributions have been
reflected properly in its books and records; (vi) has
-21-
<PAGE>
allocated fairly and reasonably any overhead for shared office expenses; (vii)
has identified itself in all dealings with the public, under its own name and as
a separate and distinct entity (provided that nothing shall prohibit such Person
from engaging an agent to represent such Person with respect to tenants,
vendors, and other parties, in accordance with standard industry practice);
(viii) has not identified itself as being a division or part of any other
Person; (ix) has not identified any other Person as being a division or part of
such Person; (x) has corrected any known misunderstanding regarding their
separate identities.(xi) has been adequately capitalized in light of the nature
of its business; (xii) has not assumed or guaranteed the obligations of any
other Person (other than by virtue of being a general partner of such other
Person but only if such other Person is the Borrower and provided, that this
clause shall not be deemed to be violated by reason of joint and several
liabilities arising as a matter of law); and (xiii) has not engaged in any other
business other than as permitted by the Loan Documents (provided, that nothing
shall prohibit a General Partner from acquiring, owning, and disposing of
limited partner interests in any limited partnership, non-managing membership
interests in a limited liability company, or debt securities issued by any
Person, or the stock of a corporation that is not engaged in any activities
other than such activities provided no liabilities or other obligations on the
part of the holder of such investments will arise as a result of such
investments and the only rights of the holder of such investment are the right
to receive payments and the right to vote); (B) such Person agrees to covenants
substantially to the effect of Sections 5.10, 5.12, 6.1, 6.3.1, 6.3.5, 6.4, and
6.5 hereof; and (C) such Person's organizational documents contain restrictions
similar to those contained in Articles THIRD, NINTH, TENTH and ELEVENTH of the
GP Certificate as in effect on the date hereof.
"Subordinated Management Agreement Obligations" means the management
fees or other obligations defined in the Management Agreement as "Secondary
Courtyard Management Fees," "Incentive Management Fees," "Deferred Secondary
Courtyard Management Fees," "Deferred Incentive Management Fees," or
"Termination Fees," or any "Subordinated FF&E Contribution."
"Subordinated Obligations" means all "Subordinated Management
Agreement Obligations," as that term is defined in the Collateral Assignment of
Management Agreement, and all "Subordinated Rental Obligations," as that term is
defined in the Ground Lease Rental Subordination Agreement, as applicable.
"Substantive Non-Consolidation Opinion" means an opinion of counsel
substantially similar to the provisions of the opinion of Borrower's counsel
delivered on the Closing Date to the effect that the assets and liabilities of
the Borrower or the General Partner will not be substantively consolidated with
those of Host Marriott in the event that Host Marriott were to become the
subject of bankruptcy or insolvency proceedings (with such changes as are
necessary to reflect the identity and operations of the parties addressed in
such Substantive Non-Consolidation Opinion).
"Successor Entity" has the meaning ascribed to it in Section 2.5(f)
hereof.
"Taking" has the meaning ascribed to it in any applicable Mortgage.
-22-
<PAGE>
"Third Party Ground Lease" means the Ground Lease underlying the
Mortgaged Property that is listed in part B of Schedule B attached hereto and
----------
the Ground Lease of a portion of the Land underlying the Mortgaged Property that
is listed in part C of said Schedule B.
----------
"Third Party Ground Lessor" means a ground lessor under a Third Party
Ground Lease.
"Title Company" has the meaning ascribed to it in Section 4.3.2
hereof.
"Title Insurance Policy" and "Title Insurance Policies" have the
meanings ascribed to such terms in Section 4.3.2 hereof.
"Treasury Rate" has the meaning ascribed to it in Section 2.8.2
hereof.
"Trust" has the meaning ascribed to it in Section 9.1 hereof.
"Trust Fund" has the meaning ascribed to it in Section 11.7.2 hereof.
"Trust and Servicing Agreement" has the meaning ascribed to it in
Section 9.1 hereof.
"Trustee" has the meaning ascribed to it in Section 9.1 hereof.
"U.C.C." or "Uniform Commercial Code" means the Uniform Commercial
Code as in effect in the State of New York or, in the case of any particular
item of real or tangible personal property, in the State in which such property
is located.
"U.S. Obligations" means obligations or securities evidencing an
obligation to pay principal and interest in a full and timely manner not subject
to prepayment, call or early redemption which are direct obligations of, or
obligations fully guaranteed as to timely payment by, the United States of
America or any agency or instrumentality of the United States of America, the
obligations of which are backed by the full faith and credit of the United
States of America, or principal-only strips and interest-only strips of
noncallable obligations issued by the U.S. Treasury stripped by an issuer rated
"AAA" (or the equivalent) by the applicable Rating Agencies and REFCORP
securities stripped by the Federal Reserve Bank of New York.
"Undefeased Note" has the meaning ascribed to it in Section
2.5(a)(iv)(D) hereof.
"Yield Maintenance Payment" has the meaning ascribed to it in Section
2.8.1 hereof.
1.2. Definitions Incorporated by Reference
Any term defined in Section 1.1 by reference to another agreement,
instrument or other document shall mean such agreement, instrument or document
as it may be amended, supplemented or modified from time to time, but only to
the extent such amendment, supplement or modification is permitted by the terms
hereof. If any such
-23-
<PAGE>
agreement, instrument or other document shall be replaced or superseded in
accordance with the terms hereof (for example, if the Management Agreement is
replaced by an agreement with another manager acceptable to the Lender in
accordance with Sections 7.1.4 or 7.1.8 hereof), the definition incorporated by
reference in Section 1.1 to such agreement, instrument or other document shall
thereafter have the meaning established under the replaced or superseded
document, with any such changes as (a) shall be necessary to conform to the
replacement or superseding agreement, instrument or document or (b) are
otherwise agreed to by the Lender in writing.
1.3. Other Definitional Provisions
The terms defined in Section 1.1 hereof may not comprise all of the
defined terms contained in this Agreement. Capitalized terms not defined in
Section 1.1 hereof shall have the meanings ascribed to them elsewhere herein.
Accounting terms used in this Agreement but not defined herein shall have the
respective meanings given to them under GAAP. The words "hereof," "herein" and
"hereunder" and words of similar character when used in this Agreement shall
refer to this Agreement as a whole and shall not be limited to any particular
provision of this Agreement.
As a matter of convenience herein, rating categories are generally
stated in the nomenclature of Standard & Poor's Ratings Services, it being
understood that, unless otherwise expressly stated to the contrary on Schedule
--------
1.3 attached hereto, the category indicated will instead be deemed to be the
- ---
actual category of the applicable Rating Agencies; provided that if a specified
rating (or its equivalent) from the applicable Rating Agencies is required
hereunder with respect to an issuer or a security, and Fitch Investors Service,
L.P., as one of the applicable Rating Agencies in connection with a
Securitization, does not rate the issuer or security in question, then such
requirement hereunder shall nevertheless be deemed satisfied so long as Standard
& Poor's Ratings Services and Moody's Investors Services, Inc. rate such issuer
or security at or greater than the required rating level.
2. THE LOAN
2.1. Making the Loan
In reliance upon the representations, warranties, covenants and
agreements of Borrower contained herein and in the other Loan Documents, and
upon full satisfaction by Borrower of the terms and conditions precedent set
forth in Article 4 of this Agreement, the Lender agrees to make a loan (the
"Loan") to Borrower, which Loan shall be advanced to Borrower in a single
advance of immediately available funds equal to the Loan Amount less the Lender
Costs and the Origination Fee (the "Net Loan Proceeds"). The Net Loan Proceeds
shall be used solely for the purposes described in Section 2.3 hereof. The Loan
will be secured by, among other things, Mortgages encumbering the Mortgaged
Properties and granting a lien on and security interest in certain other
Collateral under the Mortgages and other Security Documents effecting and
granting a lien on and security interest in such other Collateral, and shall
bear interest at the rates per annum specified in Section 2.4 hereof.
Notwithstanding that Borrower will receive an advance only of the
-24-
<PAGE>
Net Loan Proceeds, Borrower shall be required to repay the full Loan Amount in
the manner described herein.
2.2. Mortgage Note
The obligation of Borrower to repay the full Loan Amount, together
with interest thereon, and Yield Maintenance Payments, Defeasance Deposits and
other charges, if any, related thereto, shall be evidenced by that certain
Mortgage Note made by Borrower as of the Closing Date to the order of the Lender
(the "Mortgage Note"), substantially in the form of Exhibit A attached hereto
---------
and incorporated herein, in the original principal amount of Three Hundred
Twenty-Five Million and No/100 Dollars ($325,000,000).
The Borrower hereby irrevocably appoints the Lender and its
successors and assigns, with full power of substitution, as its attorney-in-
fact, solely for the purpose, from time to time in connection with a foreclosure
on any Mortgaged Property following an Event of Default and/or acceleration of
the maturity of the Loan, of executing two or more promissory notes (each, a
"New Note") substantially in the form of Exhibit A, with an aggregate face
---------
principal balance equal to the principal amount then outstanding under the
Mortgage Note (with a notation on each such New Note as to the outstanding
principal amount of the Loan allocated to each such New Note) and marking each
promissory note that is to be replaced with such New Notes (whether the original
Mortgage Note or any Defeased Note or Undefeased Note) "REPLACED" or
"SUPERSEDED." Such power of attorney is a limited power of attorney coupled with
an interest.
2.3. Use of Loan Proceeds
Borrower agrees that the Net Loan Proceeds shall be used solely for
the purpose of:
(a) repaying all existing mortgage indebtedness of the Borrower,
which is secured by mortgages on the Hotels (the "Bank Debt"); and
(b) paying Deferred Incentive Management Fees to the Manager at
Closing in an amount not to exceed $4,200,000; and
(c) funding the FF&E Reserve Account in the aggregate amount of
$7,000,000.00 in excess of the balance in the FF&E Reserve Account immediately
prior to the Closing Date; and
(d) paying any transaction costs required to be paid by Borrower
pursuant to Section 11.7.1 hereof.
The balance of the Net Loan Proceeds may be used by the Borrower for any purpose
whatsoever, including, without limitation, making distributions to its Partners.
2.4. Payment of Principal and Interest
-25-
<PAGE>
Section 2.4.1 Payments on the Mortgage Note. All payments made on the
-----------------------------
Mortgage Note shall be made in the manner, and subject to the conditions,
provided in this Agreement and the Mortgage Note. The Mortgage Note shall not
be prepayable except as expressly provided for in this Section 2.4.1, and
Sections 2.5 and 2.6 hereof. On any Due Date occurring on or after the date
that is six (6) months prior to the Scheduled Maturity Date, the Mortgage Note
may be prepaid, at the option of the Borrower, in full or in part, without
penalty or premium. To the extent not previously paid, the entire Debt shall be
due and payable on the Final Maturity Date.
Section 2.4.2 Interest.
--------
(a) Except as set forth in Sections 2.4.4(b) with respect to
interest accruing at the Default Interest Rate, the Debt shall bear interest for
each Debt Service Period at the applicable Interest Rate then in effect and
shall be payable as provided herein.
(b) Calculations of interest shall be made on the basis of a 360-
day year and the actual number of days elapsed during each Debt Service Period.
Section 2.4.3 Payments without Deduction, etc. All payments of the Debt
--------------------------------
to the Lender shall be absolute and unconditional, shall be paid strictly in
accordance with the terms of the Loan Documents without being subject to any
claim, set-off, defense or other right which the Borrower may have against the
Lender or any other Person, whether in connection with this Agreement, the
transactions contemplated herein or any other circumstance or happening
whatsoever. The Borrower shall pay such payments to the Lender free and clear
of, and without deduction for, any and all present or future taxes, levies,
imposts, deductions, charges, penalties or withholdings, and any liabilities
with respect thereto, by whomever imposed, other than present or future taxes on
the income of the Lender or franchise taxes imposed on the Lender as a result of
its conducting business in specific jurisdictions. The Borrower shall pay and
indemnify and hold the Lender harmless from and against, any present or future
claim or liability for United States, state or local taxes or assessments on the
ownership by the Lender of the debt obligations of the Borrower evidenced by the
Mortgage Note, or on the principal, interest, fees or other amounts payable
under any Loan Documents or otherwise in respect of the Debt (other than income
or franchise taxes imposed on the Lender or its Affiliates by any jurisdiction).
The obligations of the Borrower hereunder shall survive repayment of the Debt
and termination of the Loan Documents.
Section 2.4.4 Periodic Payments.
-----------------
(a) On the Closing Date, the Borrower shall pay to the Lender
interest on the Mortgage Note at the Base Rate for the period beginning on and
including the Closing Date and ending on but excluding April 10, 1997.
(b) On May 9, 1997 and on each Due Date thereafter, the Borrower
shall pay (i) interest on the outstanding principal of the Mortgage Note at the
Base Rate for the prior Debt Service Period and (ii) the Scheduled Principal
Payment due on the applicable Due Date, subject however to adjustment pursuant
to Section 2.4.4(c) hereof (together, the "Monthly Debt Service Payment").
-26-
<PAGE>
At any time while an Event of Default has occurred and is continuing,
the Borrower shall, in addition to the Monthly Debt Service Payment and other
amounts due hereunder, be liable for the payment of interest at the Default
Interest Rate (rather than the Interest Rate) (which interest is payable both
before and after Lender has obtained a judgment with respect to the Loan);
provided, however, that for the purposes of this sentence, an Event of Default
shall be considered to have occurred and be continuing only until such Event of
Default has been cured, including, without limitation, pursuant to the
provisions of Section 7.1.3 hereof, if applicable. The priority of payment of
Default Interest shall be (i) up to and including the Scheduled Maturity Date,
as set forth in Section 4.3 of the Cash Management Procedures attached as
Schedule 5.11 hereto (or, if applicable, Section 6.9 thereof) and (ii) after the
- -------------
Scheduled Maturity Date, as set forth in Section 4.4 of the Cash Management
Procedures attached as Schedule 5.11 hereto (or, if applicable, Section 6.10
-------------
thereof). Payment or acceptance of the increased rates provided for in this
Section 2.4.4(b) is not a permitted alternative to timely payment or full
performance by the Borrower and shall not constitute a waiver of any Default or
Event of Default or an amendment to this Agreement or any other Loan Document
and shall not otherwise prejudice or limit any rights or remedies of Lender.
(c) If any portion of the principal balance of the Loan is prepaid
(i) on or about the Scheduled Maturity Date by the application of payments
received from or with respect to U.S. Obligations held by the Lender on the
Scheduled Maturity Date as a result of a Release of any Mortgaged Property from
the Lien of the Security Documents pursuant to Section 2.5 or, (ii) on or after
the last day of the Defeasance Period, pursuant to the second to last sentence
of Section 2.4.1 hereof, the Scheduled Principal Payment payable on each Due
Date thereafter shall be reduced by a percentage equal to the percentage
reduction in the outstanding principal amount payable under the Mortgage Note
resulting from such prepayment; provided, however, that the Scheduled Principal
Payments due on each Due Date shall in no event be reduced to an amount less
than the amount necessary to fully repay the Loan on or before the date on
which, determined as of the Scheduled Maturity Date (taking into account the
prepayment of the Loan to be made on such date pursuant to Section 2.5 hereof),
the Loan would have been repaid had such prepayment and adjustment not occurred.
(d) In addition to the payments required to be made under Section
2.4.4(b) above, subsequent to the Scheduled Maturity Date and in accordance with
the Cash Management Procedures, the Borrower shall pay to the Lender on each Due
Date (without duplication), until the entire Debt is repaid in full, Excess Cash
Flow for all Accounting Periods for which the Operating Profit Payment Date
occurred during the Debt Service Period relating to such Due Date, which
payments shall be applied in the manner contemplated by clause (N) of Section
4.4 of the Cash Management Procedures (or, if applicable clause (M) of Section
6.10 thereof).
2.4.5 Insufficient Payments
---------------------
In the event that the Borrower fails to pay all amounts due and
payable on the Mortgage Note on any date (including payments from the proceeds
of any sale of Collateral pursuant to any of the Loan Documents or payments from
the Debt Service Reserve maintained pursuant to of the Cash Management
Procedures attached as
-27-
<PAGE>
Schedule 5.11 hereto), unless otherwise determined by Lender, all cash paid by
- -------------
the Borrower on such date shall be applied in the following order of priority to
the extent of the cash so paid:
FIRST: to pay (a) all amounts that are due and unpaid under Section
11.7.1 hereof and under Section 7.5 hereof, if applicable (b) all costs, if
any, incurred by the Lender in acting on behalf of Borrower as provided in
the Loan Documents and (c), if applicable, all costs and expenses incurred
by the Lender in enforcing this Loan Agreement and any of the other Loan
Documents, including all costs and expenses of the foreclosure and/or sale
of the Collateral or any part thereof or any interest therein, and all
costs and expenses of entering upon, taking possession of, removing,
holding, constructing improvements on, and operating and managing the
Collateral or any part thereof, and all costs and expenses of repairs,
renewals, replacements, additions, betterments, and improvements to the
Collateral, in each case in accordance with the Loan Documents, and all
reasonable attorneys' and accountants' fees and disbursements, including
any appraisals that may reasonably be required by Lender, incurred in
connection with any of the foregoing, together with any compensation
payable under Section 4.3 of any Mortgage;
SECOND: to pay interest at the Base Rate then due and payable on the
Mortgage Note;
THIRD: to pay all amounts of principal due and payable on the
Mortgage Note (whether at maturity, on a date fixed for any payment or
prepayment thereof, upon acceleration, or otherwise), until the principal
balance has been reduced to zero;
FOURTH: to pay any Yield Maintenance Payments then due and payable;
FIFTH: to pay any Default Interest then due and payable; and
SIXTH: to pay Deferred Interest, if any (plus interest thereon at
the Adjusted Rate).
2.5. Prepayment Restrictions; Defeasance
(a) At any time during the period commencing on (i) the first Business
Day after the date that is the earlier of (A) two years after the "startup day,"
within the meaning of Section 860G(a)(9) of the Code, of a "real estate mortgage
investment conduit," within the meaning of Section 860D of the Code (a "REMIC"),
that holds the Mortgage Note and (B) three years after the Closing Date, and
ending on (ii) the date that is six (6) months prior to the Scheduled Maturity
Date (such period being sometimes referred to herein as the "Defeasance
Period"), and provided no Event of Default has occurred and is continuing (other
than an Event of Default that will be cured by the release of a Mortgaged
Property or Mortgaged Properties from the Lien of the Security Documents
pursuant to the provisions of Section 7.1.3 hereof) the Borrower may, subject to
the provisions of Section 2.7 below, defease the Lien of the Security Documents
to cause the release of one or more Mortgaged Properties from such Lien (each, a
"Release") by providing the Lender
-28-
<PAGE>
with funds in an amount equal to the Defeasance Deposit for that portion of the
Mortgage Note that the Borrower wishes to defease, upon the satisfaction of the
following conditions:
(i) not less than 30 days' notice to the Lender specifying a Due
Date (the "Release Date") on which the Defeasance Deposit is to be made;
(ii) the payment to the Lender of interest accrued and unpaid on the
principal balance of the Mortgage Note and all other Debt due through and
including the Release Date;
(iii) the payment to the Lender of the Defeasance Deposit; and
(iv) the delivery to the Lender of:
(A) a security agreement (the "Defeasance Security
Agreement"), in form and substance satisfactory to the
Lender, creating a first priority perfected security
interest in favor of the Lender in the Defeasance Deposit
and the U.S. Obligations purchased with the Defeasance
Deposit in accordance with Section 2.5(b) (together, the
"Defeasance Collateral");
(B) form(s) of release of the Mortgaged Property or Mortgaged
Properties to be released from the Lien of the Security
Documents (for execution by the Lender) appropriate for
the jurisdiction(s) in which each such Mortgaged Property
is located;
(C) a certificate of the Borrower and the General Partner
signed by a duly authorized officer of the General
Partner certifying that the requirements set forth in
subsections (a) (ii)-(iv) have been satisfied;
(D) in the event only a portion of the Loan evidenced by the
Mortgage Note is the subject of the defeasance, the
Borrower shall execute and deliver all documents
necessary to replace the Mortgage Note with two
substitute promissory notes: one promissory note having a
principal balance equal to the portion of the then-
existing Mortgage Note that is to be defeased by payment
of the Defeasance Deposit (the "Defeased Note") and the
other promissory note having a principal balance equal to
the portion of such Mortgage Note that is not to be
defeased (the "Undefeased Note"). The Mortgage Note in
effect immediately prior to such defeasance shall be
marked "SUPERSEDED AND REPLACED" and will be returned to
the Borrower simultaneously with the issuance of the
Defeased Note and the Undefeased Note. The Defeased Note
and the Undefeased Note shall have exactly the same terms
as the original Mortgage Note (and the Defeased Note
shall be cross-defaulted with the Undefeased Note),
except for the principal
-29-
<PAGE>
balance thereof. A Defeased Note cannot be the subject of
any further defeasance. The Undefeased Note may be the
subject of a further defeasance in accordance with the
terms of this Section 2.5;
(E) an opinion of counsel for the Borrower (which in the case
of clauses (i) and (iv)(c) below, may be a "reasoned"
opinion), in form and substance satisfactory to the
Lender, that (i) the transfer of the Defeasance
Collateral in exchange for release(s) of the Mortgaged
Property or Mortgaged Properties to be released will not
constitute an avoidable preference under Section 547 of
the United States Bankruptcy Code in the event of a
filing of a petition for relief under the United States
Bankruptcy Code for or against the Borrower, (ii)
assuming the taking of certain specified actions by the
Lender which the Lender has the power to take, the
Defeasance Collateral has been duly and validly
transferred and assigned to the Lender, (iii) assuming
the taking of certain specified actions by Lender which
the Lender has the power to take, the Lender holds a
first priority perfected security interest in the
Defeasance Collateral, and (iv) if the Securitization has
occurred, (a) such transfer will not result in a deemed
exchange of the Certificates pursuant to Section 1001 of
the Code, (b) such transfer will not, by itself,
adversely affect the status of the Certificates as
indebtedness for federal income tax purposes and (c) such
transfer will not adversely affect the status of the
entity holding the Mortgage Note as a REMIC (assuming for
such purposes that such entity otherwise qualifies as a
REMIC and that the Mortgage Note was transferred to such
REMIC not later than two years prior to the Release
Date);
(F) a certificate of a "Big 6" certified public accounting
firm acceptable to the Lender that the Defeasance
Collateral complies with the requirements set forth in
subsection (b) below;
(G) such other certificates, documents or instruments as the
Lender may reasonably request;
(H) evidence satisfactory to the Lender that the Debt Service
Release Conditions have been satisfied;
(I) payment by the Borrower of all reasonable costs and
expenses of Lender incurred in connection with the
defeasance, including any costs and expenses associated
with a release of the Lien of the Security Documents and
reasonable attorneys' fees and expenses; and
-30-
<PAGE>
(J) if the defeasance is made after the Securitization, each of
the Rating Agencies that requires issuance of a Rating
Comfort Letter in connection with a defeasance delivers a
Rating Comfort Letter.
(b) If, following the Release of the subject Mortgaged Property or
Mortgaged Properties, less than all of the Mortgaged Properties shall have been
released, the Lender shall use the Defeasance Deposit to purchase U.S.
Obligations that provide payments on or prior to, but as close as possible to,
all successive Due Dates after the Release Date that would be required with
respect to an assumed promissory note in a principal amount equal to (except as
provided in the last sentence of this paragraph) the Release Price(s) of the
Mortgaged Property or Mortgaged Properties to be released from the Lien of the
Security Documents on such Release Date. Such assumed promissory note shall be
in the same form (including with respect to term, interest rate and scheduled
amortization) as the Mortgage Note but shall provide for a mandatory prepayment
thereof in full on the Scheduled Maturity Date, including through the
application by the Lender of U.S. Obligations pursuant to the provisions of
Section 2.5(h) hereof. In order to secure the Release, in addition to the U.S.
Obligations referred to in the preceding sentence, the Borrower may, at its
election, purchase U.S. Obligations for delivery to the Lender that provide
additional payments of the type referred to herein in order to satisfy the Debt
Service Release Conditions. If any Mortgaged Property is released pursuant to
this Section 2.5 as a result of a Casualty or a Taking subsequent to a the first
day of the Defeasance Period, the payments provided for in this subsection (b)
shall be equal to the greater of (A) the Allocated Loan Amount and (B) the
lesser of (x) the Release Price that would otherwise be required to secure a
Release of the Mortgaged Property and (y) the sum of the Net Sales Proceeds
received by Borrower from the sale of the Mortgaged Property or the part thereof
that remains following the Casualty or Taking plus the remaining Award or
Insurance Proceeds not previously applied to repayment of the Loan or
Restoration.
(c) If, as a result of the Release of the subject Mortgaged Property or
Mortgaged Properties, all of the Mortgaged Properties shall have been released,
the Lender shall use the Defeasance Deposit to purchase U.S. Obligations that
provide, together with any U.S. Obligations purchased in connection with any
prior Releases of Mortgaged Properties, payments on or prior to, but as close as
possible to, all successive Due Dates after the Release Date that would be
required with respect to an assumed promissory note in a principal amount equal
to the aggregate outstanding principal balance of the Mortgage Note and accrued
and unpaid interest thereon as of the Release Date. Such assumed promissory
note shall be in the same form (including with respect to term and interest
rate) as the Mortgage Note but shall provide for a mandatory prepayment thereof
in full on the Scheduled Maturity Date, including through the application by the
Servicer of U.S. Obligations pursuant to the provisions of Section 2.5(h)
hereof.
(d) The Borrower, pursuant to the Defeasance Security Agreement or other
appropriate document, shall irrevocably authorize and direct that the payments
received from the U.S. Obligations may be made directly to the Lender and
applied to satisfy the obligations of Borrower under the Mortgage Note. In
connection with any total defeasance of the Loan, any portion of the Defeasance
Deposit that exceeds the amount necessary to purchase U.S. Obligations required
by Section 2.5(c) shall be remitted to the Borrower reasonably promptly
following the purchase of such U.S. Obligations. In connection with
-31-
<PAGE>
any partial defeasance of the Loan, any portion of the Defeasance Deposit that
exceeds the amount necessary to purchase the U.S. Obligations required by
Section 2.5(b) shall be retained by Lender in an Eligible Account as additional
collateral for the Loan, and shall be invested in Permitted Investments,
Borrower hereby granting to Lender a security interest in such account and in
such Permitted Investments.
(e) Upon compliance with the requirements of this Section 2.5, each
Mortgaged Property to be Released shall be Released from the Lien of the
Security Documents and shall not be deemed a Mortgaged Property hereunder, and
the U.S. Obligations shall constitute substitute collateral, which, together
with the Collateral covered by all other Security Documents applicable to the
remaining Mortgaged Properties, shall secure the Debt.
(f) If all the Mortgaged Properties have been Released, the Borrower may
assign its obligations under the Mortgage Note, together with the U.S.
Obligations, to a successor entity (the "Successor Entity") designated by the
Lender and shall thereupon be released fully from all of its obligations under
the Loan Documents except that the Borrower shall continue to be liable (i) for
damages caused by any material inaccuracy in any of the representations and
warranties made in Article 3 of this Agreement (which shall survive, as of the
date made or deemed made, for so long as any portion of the Debt is
outstanding), (ii) under Sections 7.5, Sections 11.5, 11.6 and 11.7.1 (provided,
however, that such Sections shall survive only as to matters arising out of
circumstances in existence before such assumption by the Successor Entity),
(iii) under the Environmental Indemnity Agreement (which shall terminate only in
accordance with its terms) and (iv) under the Cooperation Agreement (which shall
terminate only in accordance with its terms). In such event, the opinion of
counsel provided for in clause (a)(iv)(E) of this Section 2.5 shall provide
that, upon such assignment, the Defeasance Collateral will not be part of the
estate of the Borrower under Section 541 of the United States Bankruptcy Code.
In consideration of the payment of $1,000 by the Borrower, such Successor Entity
shall assume the Borrower's obligations under the Mortgage Note and the
Defeasance Security Agreement, the Borrower shall be relieved of its obligations
thereunder, and the Debt shall not be deemed outstanding for any purpose of this
Agreement. If required by the applicable Rating Agencies, the Borrower shall
also deliver or cause to be delivered a Substantive Consolidation Opinion with
respect to the Successor Entity in form and substance satisfactory to the Lender
and the applicable Rating Agencies.
(g) For purposes of this Section 2.5, "Defeasance Deposit" shall mean an
amount in cash equal to the sum of (x) (i) with respect to a Release referred to
in Section 2.5(c), all costs and expenses (including the purchase price)
incurred or to be incurred in the purchase of U.S. Obligations necessary to make
the payments required under Section 2.5(c); or (ii) with respect to a partial
release referred to in Section 2.5(b), the sum of (A) the Release Price of the
Mortgaged Property or Mortgaged Properties (or, if applicable, such lesser
amount as is due under the last sentence of Section 2.5(b)) being released plus
----
(B) all costs and expenses (including the purchase price) incurred or to be
incurred in the purchase of U.S. Obligations necessary to make the payments
required under Section 2.5(b), to the extent the amount in clause (A) is
insufficient for such purpose; plus (C) all costs and expenses (including the
----
purchase price) incurred or to be incurred in the purchase of such additional
U.S. Obligations as may be required to make additional monthly payments
sufficient to cause the Debt Service Release Conditions to be satisfied,
-32-
<PAGE>
and (y) in all cases, any revenue, documentary stamp or intangible taxes or any
other tax or charge due in connection with the transfer of the Mortgage Note,
the creation of the Defeased Note and the Undefeased Note if applicable, any
transfer of the Defeased Note, or otherwise required to accomplish the
agreements of Section 2.5(a)(iv)(I).
(h) If the payment of accrued and unpaid interest and principal of the
Mortgage Note and any other Debt has not been made in full by the Scheduled
Maturity Date, payments from or with respect to U.S. Obligations then held by
the Lender and such payments received by the Lender thereafter shall be applied
on the Scheduled Maturity Date, or, if later, on the date such payment is
received (i) first, to payment of accrued and unpaid interest (other than
Default Interest) on the Mortgage Note, (ii) second, to prepayment of the
Scheduled Principal Payments due on each Due Date, in the inverse order of their
scheduled maturities, and (iii) third, to payment of Default Interest, if any.
(i) Notwithstanding the provisions of Section 2.5(a) setting forth the
time period during which a Mortgaged Property may be defeased, but subject to
Section 2.6, the Borrower may defease the Lien of the Security Documents to
cause the release of a Mortgaged Property for the purpose set forth in Section
7.1.3 prior to the date set forth in such Section 2.5(a) if it provides to the
Lender an opinion in form and substance, and from a firm, acceptable to the
Lender in the exercise of its sole discretion, that such release will not
adversely affect the status of the entity holding the interest in the Mortgage
Note as a REMIC (assuming for such purpose that such entity otherwise qualifies
as a REMIC).
2.6. Partial Release in Connection with a Casualty, Taking or Default
before Defeasance Period
In the event that, prior to (a) the first day of the Defeasance Period, a
Mortgaged Property has suffered a total or substantial Taking or Casualty (in
each case, as to which Restoration is not required or permitted under the
applicable Mortgage) or (b) a Securitization, a Default of the type described in
Section 7.1.3 occurs that can be cured by a Release of a Mortgaged Property from
the lien of the Security Documents, the Borrower shall cause the Release of such
Mortgaged Property from the Lien of the Security Documents upon the satisfaction
of the following conditions:
(a) the Borrower shall provide not less than 30 days' notice to the
Lender specifying a Due Date on which the amount set forth in clause (c) below
is to be provided to the Lender, which notice shall be accompanied by a
certificate of the Borrower and the General Partner, signed by a duly authorized
officer of the General Partner, to the effect that no Default or Event of
Default has occurred and is continuing (or, in the case of a Default or Event of
Default that shall be cured or avoided by the Release of the affected Mortgaged
Property, describing the nature of such Default or Event of Default, and
certifying that such Default or Event of Default shall be cured by such Release)
and that such Release will comply with all applicable requirements of this
Section 2.6;
(b) the Borrower shall pay to the Lender all interest that is accrued and
unpaid on the principal balance of the Mortgage Note and all other sums due
under the Loan Documents, through and including such Due Date, including,
without limitation, all reasonable costs and expenses of Lender incurred in
connection with the prepayment,
-33-
<PAGE>
including any costs and expenses associated with a release of the Lien of the
Security Documents and reasonable attorneys' fees and expenses;
(c) the Borrower shall pay to the Lender, to be applied to prepayment of
the Scheduled Principal Payments due on each Due Date, in the inverse order of
their scheduled maturities, an amount equal to (1) in the case of a prepayment
pursuant to clause (b) of the first paragraph of this Section 2.6, the Release
Price and the Yield Maintenance Payment for such Mortgaged Property or (2) in
the case of a Release pursuant to clause (a) of the first paragraph of this
Section 2.6, an amount equal to the greater of (a) and (b), in which (a) is the
Allocated Loan Amount for such Mortgaged Property and (b) is the lesser of (x)
the Release Price for such Mortgaged Property and (y) the sum of the Net Sales
Proceeds received by Borrower from the sale of the Mortgaged Property or the
part thereof that remains following the Taking or Casualty, plus the remaining
Award or Insurance Proceeds not previously applied to repayment of the Loan or
Restoration;
(d) the Borrower shall deliver to the Lender, for execution, forms of
release of such Mortgaged Property from the Lien of the Security Documents
appropriate for the jurisdiction in which such Mortgaged Property is located;
and
(e) if the Release is being requested in order to avoid an Event of
Default pursuant to Section 7.1.3 hereof, the Borrower shall deliver to the
Lender evidence reasonably satisfactory to the Lender that the Debt Service
Release Conditions have been satisfied.
2.7. Partial Release after Defeasance Period
On any Due Date occurring on or after the last day of the Defeasance
Period, upon the sale of any Mortgaged Property to any Person, the Borrower may
cause the Release of such Mortgaged Property from the Lien of the Security
Documents upon the satisfaction of the following conditions:
(a) the Borrower shall provide not less than 30 days' notice to the Lender
specifying a Due Date on which the amount set forth in clause (c) below is to be
provided to the Lender, which notice shall be accompanied by a certificate of
the Borrower and the General Partner, signed by a duly authorized officer of the
General Partner, to the effect that no Default or Event of Default has occurred
and is continuing (or, in the case of a Default or Event of Default that shall
be cured or avoided by the Release of the affected Mortgaged Property,
describing the nature of such Default or Event of Default, and certifying that
such Default or Event of Default shall be cured by such Release) and that such
Release will comply with all applicable requirements of this Section 2.7;
(b) the Borrower shall pay to the Lender all interest that is accrued and
unpaid on the principal balance of the Mortgage Note and all other sums due
under the Loan Documents, through and including such Due Date;
(c) the Borrower shall pay to the Lender, to be applied to prepayment of
the Scheduled Principal Payments due on each Due Date, in the inverse order of
their scheduled maturities, an amount equal to the Release Price of such
Mortgaged Property; provided, however, that (A) if a Mortgaged Property is
released pursuant to this
-34-
<PAGE>
Section 2.7 as a result of a Casualty or a Taking as to which Restoration is not
required or permitted under the applicable Mortgage, such payment shall be an
amount equal to the greater of (a) and (b), in which (a) is the Allocated Loan
Amount for such Mortgaged Property and (b) is the lesser of (x) the Release
Price for such Mortgaged Property and (y) the sum of the Net Sales Proceeds
received by Borrower from the sale of the Mortgaged Property or the part thereof
that remains following the Taking or Casualty plus the remaining Award or
Insurance Proceeds not previously applied to repayment of the Loan or
Restoration;
(d) the Borrower shall deliver to the Lender, for execution, forms of
release of such Mortgaged Property from the Lien of the Security Documents
appropriate for the jurisdiction in which such Mortgaged Property is located;
and
(e) unless the Release is being made in connection with a Casualty or
Taking (as to which Restoration is not required or permitted under the
applicable Mortgage), the Borrower shall deliver to the Lender evidence
reasonably satisfactory to the Lender that the Debt Service Release Conditions
have been satisfied.
Sales of personal property at a Mortgaged Property in the ordinary
course of business may be made pursuant to Section 1.23 of the applicable
Mortgage without regard to Sections 2.5, 2.6 or 2.7 hereof.
2.8. Yield Maintenance
2.8.1.
If all or any part of the principal amount of the Loan is prepaid
after the Closing Date but prior to the last day of the Defeasance Period as a
result of the acceleration of the maturity of the Mortgage Note after an Event
of Default or if a Mortgaged Property is released for the purpose set forth in
Section 7.1.3 after the Closing Date but prior to the Securitization, Borrower
shall be required to pay a prepayment premium (the "Yield Maintenance Payment")
on the Mortgage Note equal to the greater of (A) 1% of the amount of the
principal prepayment that is to be applied to the Mortgage Note and (B) the
present value as of the end of the applicable Debt Service Period, discounted at
the Reinvestment Yield, of a series of payments each equal to the Payment
Differential on each of the remaining Due Dates prior to and including the
Scheduled Maturity Date, after giving effect to the regularly scheduled payment
of principal that is to be made on the Prepayment Date. No Yield Maintenance
Payment shall be required in connection with prepayments made on or after the
last day of the Defeasance Period.
2.8.2.
Promptly following such a prepayment, the Lender shall notify Borrower
of the amount and basis of determination of the applicable Yield Maintenance
Payment promptly upon determining the Treasury Rate, as contemplated below.
Absent manifest error, the Borrower shall not dispute Lender's calculations
hereunder.
For purposes of this Section 2.8, the following terms shall have the
meanings ascribed to them below:
-35-
<PAGE>
"Payment Differential" means, an amount equal to (x) the Base Rate,
minus the Reinvestment Yield, divided by (y) 12, and multiplied by (z) the
amount of the principal prepayment.
"Reinvestment Yield" is the Treasury Rate converted to a monthly
compounded nominal annual yield.
"Treasury Rate" is equal to the lesser of (A) the annual yield on the
United States Treasury issue (primary issue) with a maturity date closest
to the Final Maturity Date and (B) the yield on the United States Treasury
issue (primary issue) with a maturity equal to the remaining average life
of the Mortgage Note, with each such yield being based on the bid price for
such issue as published in The Wall Street Journal on the date that is 14
-----------------------
days prior to (x) the applicable Prepayment Date set forth in the notice of
prepayment provided by the Borrower or (y) the date of acceleration by the
Lender (or if such bid price is not published on that date, the next
preceding date on which such bid price is so published).
3. REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement and the other Loan
Documents and to make the Loan to Borrower, Borrower makes the following
representations and warranties:
3.1. Organization and Power of Borrower
Borrower (i) is (and at all relevant times has been) duly organized
and validly existing as a limited partnership in good standing under the laws of
the State of Delaware, (ii) has full power and authority to enter into, execute,
deliver and perform the Management Agreement, the Ground Leases, this Agreement,
the Mortgage Note, and the other Loan Documents and to consummate the
transactions contemplated hereby and thereby, (iii) has full power and authority
to mortgage or assign all of its right, title and interest in and to the
Mortgaged Properties and the other Collateral, (iv) has full power and authority
to transact the business in which it is now engaged, or proposes to engage, (v)
has power and authority and is duly qualified to transact such business as a
foreign limited partnership under the laws of all jurisdictions in which the
Mortgaged Properties are located, and in all jurisdictions where the nature of
Borrower's business or the character of properties owned, leased, operated or
otherwise held by Borrower makes such qualification necessary and (vi) is a
special purpose entity established for the sole purpose of owning and operating
the Mortgaged Properties or causing the Mortgaged Properties to be operated.
All of the partnership interests in the Borrower have been duly and validly
authorized and issued and are owned as follows: the General Partner owns a 1.3%
limited partner interest and a 5% general partner interest in the Borrower and
the Limited Partners (other than the General Partner) own a 93.8% limited
partner interest in the Borrower, in each case, free and clear of any liens,
encumbrances, equities or claims. The General Partner (i) is duly organized and
validly existing as a corporation in good standing under the laws of the State
of Delaware, (ii) has full power and authority to execute, deliver, and perform
this Agreement and the other Loan Documents to which it is a party, whether for
itself or on behalf of Borrower, (iii) is duly qualified to transact business as
a
-36-
<PAGE>
foreign corporation in good standing under the laws of each jurisdiction which
requires such qualification, except when the failure to be so qualified,
considering all such failures in the aggregate, would not be reasonably likely
to have a material adverse effect on the financial condition, business or
results of operations of the General Partner or the Borrower or on the
ownership, use or value of any of the Hotels and (iv) is not engaged in any
business other than acting as the general partner of the Borrower. Borrower has
its principal place of business, principal office and office where it keeps its
records and other documents and instruments relating to the Hotels (except for
certain records, documents and instruments kept at the Hotels) at its address
set forth in Section 11.3.
3.2. Due Authorization and Execution
The execution, delivery and performance by the Borrower and the
General Partner of this Agreement and each of the other Loan Documents has been
duly authorized by all requisite actions by and on behalf of Borrower and the
General Partner and are within the partnership or corporate power of the
Borrower and the General Partner, as the case may be, and this Agreement and all
other Loan Documents executed and delivered by Borrower or the General Partner
have been duly executed by the Borrower and the General Partner and constitute
the valid and binding obligations of the Borrower and the General Partner,
enforceable against the Borrower and the General Partner in accordance with
their respective terms, subject to the effects of applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium, and similar laws
relating to or affecting creditors' rights generally and general principles of
equity (whether considered in a proceeding in equity or at law).
3.3. No Consents Required; No Contravention
Except for consents and approvals that have already been obtained
and are in full force and effect, no consent, license, approval or authorization
of, or registration or declaration with, any Governmental Authority, commission,
bureau, agency or other Person is required in connection with the execution,
delivery and performance of this Agreement, the Mortgage Note, or any of the
other Loan Documents or the consummation of the transactions contemplated hereby
and thereby. Neither the execution and delivery by the Borrower or the General
Partner of this Agreement nor of the other Loan Documents, the consummation of
the transactions contemplated hereby or thereby, nor the fulfillment by the
Borrower or the General Partner of, or compliance by the Borrower or the General
Partner with, the terms and conditions of this Agreement or the Loan Documents:
(a) will result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any Laws or any judgment, decree
or order binding on Borrower or the General Partner or their respective
properties or assets;
(b) will conflict with or result in any breach or violation of any
of the terms, conditions or provisions of the organizational documents of the
Borrower or the General Partner; or
(c) will result in a breach or violation of or constitute a default
under any existing material agreement or instrument to which the Borrower or the
General Partner
-37-
<PAGE>
or their respective assets are a party or by which the Borrower or the General
Partner are bound (except under agreements relating to the Bank Debt that will
be terminated, released or fulfilled at or prior to the Closing).
3.4. Title to Properties
Borrower has, and shall continue to have, good and marketable title
to the Mortgaged Properties, including good and marketable fee simple or
leasehold title, as applicable, in and to the Land, and good and marketable
title in and to the Improvements located thereon, in each case free and clear of
all Liens except for Permitted Liens, and Borrower has, and shall continue to
have, good title to its interest in all other assets that serve as Collateral
for the Loan (which, in the case of assets leased by Borrower, shall mean a good
and valid leasehold interest in such assets), free and clear of all Liens except
Permitted Liens. The Permitted Liens do not and will not materially and
adversely affect (i) the ability of Borrower to pay in full the principal and
interest when due on the Mortgage Note or (ii) the use of the Mortgaged
Properties for the use currently being made thereof or the operation of the
Mortgaged Properties as they currently are being operated. Borrower has no
interest in real property other than the Mortgaged Properties, including the
Land and Improvements related thereto. Each Hotel constitutes one or more
separate tax lots that do not share tax liability with other real property
except property that is (a) owned in full by Borrower or a Ground Lessor and (b)
encumbered by a Lien in favor of the Lender securing the Loan.
3.5. Ground Leases
(i) The Ground Leases have been duly executed by, and are in full
force and effect as between the parties thereto.
(ii) Borrower is not in default under any Ground Lease and, to the
best of Borrower's knowledge, there are no defaults by any
other party thereunder.
(iii) The Borrower and the General Partner further represent and
warrant that (i) a true and complete copy of each Ground Lease
and all amendments and supplements thereto has been delivered
to the Lender, (ii) no such Ground Lease has been supplemented
or modified in any way except as set forth in Schedule 3.5A
-------------
attached hereto, and each Ground Lease constitutes the entire
agreement with the landlord thereunder such that there are no
understandings, representations, warranties or promises not
fully set forth therein, (iii) to the best of its knowledge,
there is no existing default or event which with the passage
of time and/or the giving of notice would constitute a default
under any of the Ground Leases by any party thereto, (iv) the
continuation, validity and enforceability of the Ground Leases
will not be affected by the transactions contemplated by this
Agreement or the other Loan Documents, (v) each such Ground
Lease is either superior to any mortgage encumbering the fee
interest in such Hotel or there is an existing and effective
nondisturbance agreement in place with any holder of such fee
-38-
<PAGE>
mortgage that would have the effect of causing such Ground
Lease to remain superior to such fee mortgage upon its
foreclosure, and (vi) except as set forth on Schedule 3.5B, the
-------------
landlord under such Ground Lease has no right or option to
purchase the tenant's leasehold estate or to purchase any
leasehold mortgagee's interest in such Hotel.
(iv) Each Ground Lease or a memorandum thereof has been duly
recorded.
(v) Each Ground Lease permits the interest of the Borrower as
lessee thereunder to be encumbered by the related Mortgage.
(vi) The Borrower's interest in each Ground Lease may be subjected
to a leasehold mortgage.
(vii) Except as set forth in Schedule 3.5C, each Ground Lease
-------------
requires the lessor thereunder to give notice of any default by
the Borrower, as lessee, to the mortgagee under any leasehold
mortgage relating to such Ground Lease (including the Mortgage)
and provides the mortgagee a reasonable opportunity (including,
where necessary, sufficient time to gain possession of the
interest of Borrower thereunder) to cure any default under such
Ground Lease that is curable after the receipt of notice of any
such default, before the lessor thereunder may terminate such
Ground Lease.
(viii) The term of each Ground Lease (including all renewal options of
the Borrower, as lessee) extends to a date not earlier than
April 10, 2022.
(ix) Except as set forth in Schedule 3.5D, each Ground Lease
-------------
permits the Borrower, as lessee, to apply all Insurance
Proceeds either (A) to the repair or restoration of all or part
of the related Mortgaged Property, and the Lender, or its
designee, to hold and disburse such Insurance Proceeds as the
repair or restoration progresses, or (B) to the prepayment or
defeasance of the Mortgage Note.
3.6. Utilities
(i) All utility services and facilities (including water, sanitary
sewer, storm sewer, gas and electrical services and facilities) necessary for
the present and proposed use of the Hotels are available to the Hotels and,
except as shown on the surveys or title reports for the Hotels, enter the Hotels
either through adjoining public streets or through private lands pursuant to
valid, unsubordinated, perpetual, enforceable and recorded public or private
easements; (ii) all utility connections for the Hotels have been completed,
installed and paid for; (iii) except as shown on the surveys or title reports
for the Hotels and except for encroachments that would not reasonably be
expected to materially and adversely affect the operation of the applicable
Mortgaged Property, no Improvements on the Land are located upon any public
utility lines or upon any private utility lines serving property other than the
Hotels, or encroach upon any property adjoining the Hotels or
-39-
<PAGE>
encroach upon any utility easements or rights-of-way; and (iv) neither Borrower
nor the General Partner has received any notice from any utility that any
utility services utilized by the Hotels will be revoked or otherwise terminated.
3.7. No Violations
No notices of any material violation of law or municipal ordinances or
of federal, state, county or municipal or other governmental agency regulations,
orders or requirements relating to the Collateral have been entered against or
received by the Borrower or, to Borrower's knowledge, the Manager, and the
Borrower has no reason to believe that any such notice may or will be entered or
received.
3.8. Other Agreements
Neither the Borrower, nor the General Partner is a party to any
agreement, instrument, indenture, or other contract or subject to any charter or
other restriction that could materially adversely affect, or threaten to
materially adversely affect, its business, operations, prospects, properties,
assets or condition (financial or otherwise). No material default by Borrower
or the General Partner has occurred or is continuing (nor has there occurred any
continuing event which, with giving of notice or the passage of time or both,
would constitute such a default) under any material contracts, material
agreements or material orders to which the Borrower, or the General Partner, as
the case may be, is a party or by which it is bound and, to the knowledge of
Borrower, no material default by a third party has occurred or is continuing
(nor has there occurred any continuing event which, with the giving of notice or
the passage of time, or both, would constitute such a default) under any such
contracts, agreements or orders. No holder of any indebtedness of Borrower or
the General Partner has given notice of any default thereunder, and no
liquidation or dissolution of Borrower, or the General Partner, and no
receivership, insolvency, bankruptcy, reorganization or other similar
proceedings relative to Borrower, or the General Partner or any of their
properties, is pending or, to the knowledge of Borrower or the General Partner,
threatened against them or their properties.
3.9. Payment of Taxes
(i) Borrower and the General Partner have filed or have caused to be
filed all federal, state, local, and foreign income, excise, property and other
tax returns with respect to their operations, that are required to be filed,
(ii) all such returns are true and correct in all material respects, and (iii)
Borrower and the General Partner have paid or caused to be paid in full all
taxes as shown on such returns or on any assessment received by them, to the
extent that such taxes have become due. Except as so disclosed, the amounts
reserved as a liability for income and other taxes that may become payable are
sufficient for the payment of all such unpaid taxes of Borrower or the General
Partner, whether or not disputed, for which Borrower or the General Partner may
be liable in its own right or as a transferee of the assets of, or as successor
to, any other person or entity.
-40-
<PAGE>
3.10. Litigation
There is no legal or governmental action, suit or proceeding
(including any condemnation proceeding) pending to which the Borrower or the
General Partner is a party or of which any property of the Borrower or the
General Partner is subject which, if determined adversely to the Borrower or the
General Partner, as the case may be, would individually or in the aggregate have
a material adverse effect on the Mortgaged Properties, or on the financial
position, business or results of operations of the Borrower or the General
Partner or that might affect in any material respect the transactions
contemplated by this Agreement and, to the knowledge of the Borrower and the
General Partner, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others.
3.11. Regulation U
Neither Borrower, nor the General Partner is engaged principally, or
as one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying any "margin stock" within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System, as now and
from time to time hereafter in effect, and no proceeds of the Loan will be used
for any purpose (and neither Borrower nor the General Partner acting on its
behalf has taken or will take any action, which might cause this Agreement or
any Loan Document to violate said Regulation U or any other regulation of the
Board of Governors of the Federal Reserve System (in each case as in effect on
the date hereof or as the same may hereinafter be in effect)).
3.12. Investment Company Act
Neither Borrower, nor the General Partner is an "investment company"
or a company "controlled" by an "investment company," as such terms are defined
in the Investment Company Act of 1940, as amended and none is an open-ended
investment company, unit trust or face-amount certificate company that is or is
required to be registered under Section 8 of the Investment Company Act.
3.13. Transactions with Affiliates
Excluding all transactions contemplated by the Loan Documents, no
officer of Borrower, and no other Affiliate of Borrower or of any such officer,
is currently a party to any transaction with Borrower, including any contract,
agreement or other arrangement providing for the employment of, furnishing of
advisory or other services by, purchase or lease of real or personal property
from, or otherwise requiring payments to, any such officer or Affiliate, except
on terms that are fair and reasonable and no less favorable to Borrower than
would be expected in arms-length transactions with third parties where neither
party is under duress or under any extraordinary compulsion to enter into such
contract, agreement or arrangement.
-41-
<PAGE>
3.14. Non-Subordination
The obligations of Borrower under this Agreement, the Mortgage Note,
and each of the other Loan Documents, and the indebtedness evidenced by the
Mortgage Note, are not subordinated in right of payment or otherwise to any
other obligation of Borrower or to any rights of others.
3.15. Permits and Licenses
No proceedings are pending or, to the best of Borrower's and the
General Partner's knowledge, threatened seeking the revocation or suspension of
any permits, licenses or approvals issued with respect to the Hotels the
revocation of which might reasonably be expected to result in any material
adverse change in the business, operations, prospects, properties, assets or
condition (financial or otherwise) of Borrower or any of the Hotels. No such
permits, licenses or approvals shall be altered or amended, nor shall Borrower
or the General Partner make any attempt to alter or amend the same, in any
materially adverse respect, without the prior written consent of the Lender.
The Borrower and the General Partner have all material permits, licenses and
authorizations necessary to conduct their respective businesses in the same
manner as currently conducted and currently planned to be conducted.
3.16. Patents and Trademarks
Borrower owns or possesses the right to use all patents, trademarks,
service marks, trade names, copyrights, licenses, franchises, permits and rights
with respect to the foregoing, necessary to own and operate its properties and
to carry on its business as presently conducted and presently planned to be
conducted without conflict with any rights of others.
3.17. Insurance
Borrower has obtained all insurance policies required by Section 8
hereof and by each of the Mortgages, in each case with Qualified Insurance
Companies and all such policies are in full force and effect.
3.18. ERISA
Neither Borrower nor the General Partner has any employees, and
neither Borrower nor the General Partner maintains or sponsors any Plan.
Neither Borrower nor the General Partner is obligated to make contributions on
behalf of the employees of any Person to any Plan.
3.19. No Notice of Non-Compliance
Neither the Borrower nor the General Partner nor, to the Borrower's
knowledge, the Manager has received any notice from any insurance company which
has issued a policy with respect to the Hotels or from any State Board of Fire
Underwriters (or any other body exercising similar functions) requiring the
performance of any repairs,
-42-
<PAGE>
alterations or other work, which repairs, alterations or other work have not
been completed at the Hotels. Neither Borrower nor the General Partner has
received any notice of default or breach which has not been cured under any
covenant, condition, restriction, right-of-way, reciprocal easement agreement or
other easement or agreement affecting the Hotels which is to be performed or
complied with by it.
3.20. Compliance With Laws
Borrower and each Hotel is in compliance with all Laws, except for
such non-compliance as would not reasonably be expected, singly or in the
aggregate, to materially and adversely affect any Hotel or the business,
operations, prospects, assets, properties or condition (financial or otherwise)
of Borrower.
3.21. Compliance with Environmental Laws
To the best of Borrower's and the General Partner's knowledge, there
are no Hazardous Materials other than Permitted Hazardous Substances present at
any of the Mortgaged Properties, and Borrower and each of the Mortgaged
Properties is in compliance in all material respects with, all applicable
Environmental Laws, except for such matters as may be described in the Phase I
environmental reports delivered to Lender prior to the Closing Date (and, in the
case of the Mortgaged Property in San Antonio, Texas, the Phase II environmental
report delivered to Lender) prior to the Closing Date. There are not pending
(and, to the best of Borrower's knowledge, there are not threatened), any
actions, suits, claims, legal proceedings or any other proceedings claiming or
involving the presence on, at or under the Mortgaged Properties, or any part
thereof, of any Hazardous Materials or claiming violation of Environmental Laws
relating to the Mortgaged Properties or any part thereof, and neither the
Borrower nor, to its knowledge, the Manager has received, directly or
indirectly, formal or informal notice of any complaint, order directive,
citation, notice of responsibility, notice of potential responsibility, or
information request from any Governmental Authority or any other person or
entity relating to the foregoing.
3.22. Environmental Indemnification by Borrower
Borrower and the General Partner agree to execute in favor of the
Lender, its successors and assigns, the Environmental Indemnity Agreement. No
Person, other than the Lender and its successors and assigns (including a
purchaser at foreclosure or grantee of an assignment or deed in lieu thereof),
shall have any rights under, or be considered a beneficiary of, the
Environmental Indemnity Agreement.
3.23. Concerning Mortgaged Properties; Financial Statements
(a) All certifications, permits, licenses and approvals required for
the legal use, occupancy and operation of each Hotel as a hotel including any
applicable liquor license, certificate of completion and occupancy permit, have
been obtained and are in full force and effect; (b) Engineering Surveys have
been performed for each of the Hotels and, except as set forth in the
Engineering Surveys, the Hotels and other Improvements are in sound condition
and repair consistent with the conditions required of them under the Management
Agreement and neither Borrower nor the General Partner has knowledge
-43-
<PAGE>
that any such Engineering Survey contains any material inaccuracy or omission;
(c) there are no proceedings pending or, to the best of Borrower's or the
General Partner's knowledge, threatened for the total or partial condemnation of
or affecting, any Hotel; (d) the Hotels are not subject to any leases, licenses
or other use or occupancy agreements other than the Ground Leases and leases of
equipment in the ordinary course of business that would not cause the
limitations on leasing contained in the Management Agreement or in any of the
Loan Documents to be violated (the "Leases"); (e) other than the Manager
pursuant to the Management Agreement and hotel guests from time to time, no
Person has any possessory interest in any Hotel or right to occupy any portion
thereof except under and pursuant to the provisions of the Leases; (f) Borrower
does 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 Borrower
and which, in Borrower's opinion, are reasonably likely to result in a material
adverse effect on the Hotels or the operation thereof, except as referred to or
reflected or provided for in the financial statements heretofore furnished to
the Lender or as otherwise disclosed to the Lender herein; (g) since the last
date of such financial statements, (i) Borrower has not entered into any
material transaction or incurred any material liability or obligation,
contingent or otherwise, other than in the ordinary course of business, except
as disclosed to the Lender and (ii) there has not been any material adverse
change in the condition (financial or otherwise), business, net worth or results
of operations of the Borrower or the condition (financial or otherwise) of the
Hotels; and (h) except as described on Schedule 3.23 attached hereto, no
-------------
Mortgaged Property is located in a flood hazard area as defined by the Federal
Insurance Administration (and all Mortgaged Properties described in Schedule
--------
3.23 are covered by flood insurance satisfying the requirements of the
- ----
applicable Mortgage).
3.24. Access
Each Hotel has access and is contiguous to publicly dedicated streets,
roads or highways, or if not so contiguous, access to and from each Hotel and
publicly dedicated streets, roads or highways is available through private lands
pursuant to valid, perpetual, enforceable and recorded public or private
easements or rights-of-way; and pedestrian and vehicular access to and from each
Hotel via the easements or rights-of-way is not limited or restricted in any
unreasonable manner (except that with respect to the Leasehold Hotels only, the
duration of any such easements may not be perpetual but are at least coterminous
with the terms of the applicable Ground Leases, including all renewal options
whether or not presently exercised).
3.25. No Liens
There are no Liens of any type with respect to any of the Hotels,
except the Liens created by the Loan Documents and the Permitted Liens. There
has been no construction or other activities at any of the Hotels within such
periods of time as would permit the imposition of any mechanics' or
materialmen's Liens on any of the Hotels except as set forth on Schedule 3.25.
-------------
-44-
<PAGE>
3.26. Accuracy of Information
To the best knowledge of the Borrower and the General Partner, neither
the Loan Documents nor any document, agreements, instrument, schedule,
certificates, statements, or cash flow schedules (collectively, the "Borrower
Documents") furnished by the Borrower, MII, the Manager, the General Partner or
Host Marriott to the Lender contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements
contained therein, in light of the circumstances under which they were made, not
misleading. Since the furnishing of the Borrower Documents, there has been no
change nor any development or event involving a prospective change known to the
Borrower or the General Partner which would render any of the Borrower Documents
untrue or misleading in any material respect.
3.27. Mortgages and Security Interests
When executed and delivered, and, if necessary under applicable laws,
recorded, the Mortgages will create valid mortgage, deed of trust, or similar
Liens upon the Mortgaged Properties, the Land underlying them (which, in the
case of Land leased under a Third Party Ground Lease, will be a Lien on the
Borrower's leasehold interest in the Land, in all other cases, will be a Lien on
the Borrower's or Marriott Ground Lessor's, as applicable, fee simple interest
in the Land and, in the case of Land leased under a Marriott Ground Lease, will
also be a Lien on the Borrower's leasehold interest in the Land), and the
Improvements and valid security interests in the fixtures located thereon, and
the Mortgages and accompanying financing statements (if any) will be recorded
and filed in such places as may be required and, where appropriate, applicable
mortgage, transfer, recording and UCC taxes and fees will be paid, such that the
Mortgages will constitute valid first priority mortgage, deed of trust, or
similar Liens on the Land and Mortgaged Properties and will create valid
perfected first priority security interests of record with respect to the
respective Mortgaged Property and related Collateral (except Collateral as to
which a security interest cannot be created and perfected by a Mortgage or the
filing of a financing statement under the U.C.C.), subject only to the Permitted
Liens.
When executed and delivered, and, if necessary under applicable laws,
when appropriate filings of financing statements are made, the Security
Agreement by and between the Borrower and the Lender will create valid first
priority security interests with respect to the Collateral named therein, which
security interests shall be perfected to the extent that security interests in
such Collateral can be perfected by the filing of a financing statement under
the U.C.C.
3.28. Assignments of Leases and Rents
When executed and delivered by the Borrower and the other parties
thereto, the Assignments of Leases and Rents will create a valid assignment of
the Collateral described therein. The Assignments of Leases and Rents, and
accompanying financing statements (if any) will be recorded by the Title Company
and filed in such places as may be required so that all such documents will
create valid assignments of record with respect to the Collateral described
therein, subject only to the Permitted Liens.
-45-
<PAGE>
3.29. Foreign Person
The Borrower is not a "foreign person" as defined in Section 1445 of
the Internal Revenue Code of 1986 and any regulations promulgated thereunder
(including temporary or proposed regulations).
3.30. No Defaults
No Default or Event of Default exists hereunder or under the other
Loan Documents.
3.31. No Fraudulent Conveyance
Borrower (i) is entering into this Agreement and the other Loan
Documents and the transactions contemplated hereby and thereby in good faith and
with no actual intent to disturb, hinder, delay, or defraud any present or
future creditor of the Borrower, the General Partner or any other Person, and
(ii) has received reasonably equivalent value in exchange for its obligations
under the Loan Documents. After giving effect to the transactions contemplated
by the Loan Documents, the fair salable value of the Borrower's assets exceeds
and will, immediately following the execution and delivery of the Loan
Documents, exceed the Borrower's total liabilities, including subordinated,
unliquidated, disputed or contingent liabilities known to the Borrower. The
fair salable value of the Borrower's assets is and will, immediately following
the execution and delivery of the Loan Documents, be greater than the Borrower's
probable liabilities, including the maximum amount of its contingent liabilities
known to the Borrower or its debts as such debts become absolute and matured.
The Borrower's assets do not and, immediately following the execution and
delivery of the Loan Documents will not, constitute unreasonably small capital
to carry out its business as conducted or as proposed to be conducted. The
Borrower does not intend to, and does not believe it will, incur debts and
liabilities (including contingent liabilities and other commitments) beyond its
ability to pay such debts as they mature (taking into account the timing and
amounts to be payable on or in respect of obligations of the Borrower).
4. CLOSING; CONDITIONS PRECEDENT
The Loan shall be made at a closing (the "Closing") on the Closing
Date. Without limiting the foregoing, the obligation of the Lender to make the
Loan to Borrower and to proceed with the Closing is subject to the satisfaction
on or before the Closing Date of each and all of the following conditions (and
the occurrence of the Closing shall be conclusive evidence that all such
conditions have been satisfied in full or knowingly waived):
4.1. Representations, Warranties and Covenants
The representations and warranties of the Borrower and its General
Partner made in this Agreement or in any other Loan Document shall have been
true and correct in all material respects when made, and shall be true and
correct in all material respects on the Closing Date, with the same effect as if
such representations and warranties were
-46-
<PAGE>
made on the Closing Date. As of the Closing Date, the Borrower and the General
Partner shall each have performed and complied in all material respects with all
covenants and agreements required by this Agreement or by any other Loan
Document to be performed or complied with by the Borrower and the General
Partner as of such date.
4.2. Borrower's Actions
The Borrower shall have taken all actions under the laws of any
state having jurisdiction over the Borrower necessary to effectuate the
transactions contemplated by this Agreement and by the other Loan Documents.
4.3. Delivery of Documents
The Borrower shall have delivered to the Lender the following
documents, instruments and agreements, each of which shall be in form and
substance reasonably satisfactory to the Lender:
4.3.1.
All Loan Documents, fully executed by the Borrower and, as
applicable, the General Partner, including the following;
(i) This Agreement;
(ii) The Mortgage Note;
(iii) Each of the Mortgages;
(iv) The Environmental Indemnity Agreement;
(v) The Collateral Assignment of Management Agreement (and
the Manager's consent to same);
(vi) The Security Agreement;
(vii) Each of the Assignments of Leases and Rents; and
(viii) The Cooperation Agreement.
4.3.2.
Mortgagee's forms of title insurance policies (each a "Title
Insurance Policy" and, collectively, the "Title Insurance Policies"), or marked-
up commitments evidencing such policies, each in form and content reasonably
acceptable to the Lender, and each in an amount not less than the Allocated Loan
Amount applicable to the particular Mortgaged Property (as specified in part A
of Schedule 4.3.2 attached hereto), with premiums fully paid, insuring that (i)
--------------
each Mortgage constitutes a valid first priority mortgage or similar lien on,
and security interest in, the Land and the Improvements and all rights
appurtenant thereto described therein, in each case free and clear of all
defects
-47-
<PAGE>
and encumbrances other than as set forth in Exhibit B to the applicable
---------
Mortgage, and containing, to the extent such coverage is available in the state
in which the particular Mortgaged Property is located, (A) full coverage (by
affirmative insurance) against liens of mechanics, materialmen, laborers, and
any other Persons who might claim statutory or other common law liens relating
to services performed prior to Closing; (B) no survey exceptions other than
those set forth in Exhibit B to each Mortgage; (C) such other endorsements as
---------
the Lender may deem reasonably necessary to insure that any off-site easements
benefiting any of the Mortgaged Properties are valid and enforceable in
accordance with their terms; (D) a "tie-in" endorsement aggregating the
insurance amount indicated for the applicable Mortgaged Property with the
amounts indicated for other Mortgaged Properties; and (E) such other
endorsements as listed for the state in which the applicable Mortgaged Property
is located in part B of Schedule 4.3.2 attached hereto. Such Title Insurance
--------------
Policies shall be issued by Commonwealth Land Title Insurance Company or any
other nationally recognized title insurance company (the "Title Company")
reasonably satisfactory to the Lender.
4.3.3.
Evidence reasonably satisfactory to the Lender that the requirements
set forth in Sections 8.1 and 8.3 hereof have been complied with and that all
policies of insurance required by Section 8.1 and 8.3 are in full force and
effect;
4.3.4.
Evidence reasonably satisfactory to the Lender that funds necessary
to pay all taxes related to the Mortgages and all other recording and filing
fees and other expenses necessary in connection with the recordation of the
Mortgages and the perfection of the security interests under all of the other
Security Documents have been paid to the Title Company, or to other Persons
reasonably satisfactory to the Lender, for payment to the applicable taxing
authorities or recording officials;
4.3.5.
A certificate of the Borrower, dated as of the Closing Date
(together with copies of the documents referred to therein) certifying that: (i)
attached thereto is a true and complete copy of the Partnership Agreement,
together with all amendments thereto, (ii) the Partnership Agreement has not
been amended since the date of the last amendment attached to the certificate,
and (iii) the Partnership Agreement is in full force and effect;
4.3.6.
A certified copy of the GP Certificate, certified as of a date no
more than two weeks before the Closing Date by the Delaware Secretary of State
as being a true and complete copy of such certificate, as on file in such State,
and a certificate of a duly authorized officer of the General Partner, dated as
of the Closing Date (together with copies of the documents referred to therein)
certifying that: (i) attached thereto is a true and complete copy of the GP
Certificate, together with all amendments, if any, thereto, (ii) attached
thereto is a true and complete copy of the General Partners' bylaws, together
with all amendments, if any, thereto, (iii) the GP Certificate organizational
documents and bylaws have not been amended since the date of the last amendment
attached to such
-48-
<PAGE>
officer's certificate, (iv) the GP Certificate and bylaws are in full force and
effect and (v) attached thereto are currently effective resolutions of the
General Partner's board of directors authorizing the consummation of the
transactions contemplated hereby by the General Partner on its own behalf and as
the sole general partner of Borrower.
4.3.7.
A certified copy of the certificate of limited partnership of the
Borrower, certified as of a date no more than two weeks prior to the Closing
Date by the Delaware Secretary of State as being a true and complete copy of
such certificate as on file in such state, and a certificate of a duly
authorized officer of the General Partner of Borrower, dated as of the Closing
Date (together with copies of the documents referred to therein) certifying
that: (i) attached thereto are true and complete copies of the Borrower's
certificate of limited partnership, together with all amendments thereto, (ii)
the certificate of limited partnership has not been amended since the date of
the last amendment attached to the certificate, and (iii) the certificate of
limited partnership is in full force and effect;
4.3.8.
Original fictitious name certificates, certificates of existence
and, if available, certificates of good standing for the Borrower, the Manager,
and the General Partner from the Secretary of State's office (or equivalent) in
each state in which a Mortgaged Property is located, to the extent qualification
of such Person to do business in such state is necessary to lawfully operate the
Mortgaged Properties therein, each dated as of a date recent to the Closing
Date.
4.3.9.
Certificates of each of the Borrower and the Manager (which may be
included in the Collateral Assignment of Management Agreement), each dated as of
the Closing Date (together with copies of the documents referred to therein)
certifying that: (i) attached thereto is a true and complete copy of the
Management Agreement, together with all amendments thereto, (ii) the Management
Agreement has not been amended since the date of the last amendment attached to
the certificate, (iii) the Management Agreement is in full force and effect,
(iv) no notice of default under the Management Agreement has been given or
received by such party, and neither such party nor, to the best knowledge of
such party, the other party is in default with respect to any obligation under
the Management Agreement, (v) such party does not claim to have any defense,
counterclaim or right of offset with respect to any of its obligations under the
Management Agreement, (vi) the term of the Management Agreement, exclusive of
renewal rights, ends on the last day of the Manager's 2017 fiscal year, (vii)
the number and length of renewal options is as set forth therein, and (viii) the
full amount of any deferred payments owing thereunder is as set forth therein.
4.3.10.
As-built surveys for each Hotel that conform to the 1992 Minimum
Standard Detail Requirements for ALTA/ACSM Land Title Surveys and that meet the
accuracy standards of an Urban Land Survey, each such survey to be prepared by a
surveyor
-49-
<PAGE>
registered in the state in which the Hotel shown on the survey is located, and
to contain a certificate from the surveyor to the Lender and the Title Company,
dated within 90 days immediately preceding the Closing Date, in form and content
reasonably acceptable to the Lender and the Title Company. Each survey shall
show (i) the boundaries of the applicable Land, (ii) the location and dimension
of all Improvements located on the Land, (iii) the location and identity of all
visible or recorded easements and rights-of-way across or serving the Land, (iv)
that the Improvements comply with all setback requirements and zoning
restrictions, except for violations that do not materially adversely affect the
Hotels or as to which the Lender is affirmatively insured under the applicable
Title Insurance Policy, (v) that the Improvements do not encroach on adjoining
property or on any easement or right of way, except for encroachments that do
not materially adversely affect the Hotels or as to which the Lender is
affirmatively insured under the applicable Title Insurance Policy, (vi) that
there are no encroachments on the Land, except for encroachments that do not
materially adversely affect the Hotels or as to which the Lender is
affirmatively insured under the applicable Title Insurance Policy, (vii) that
the Land is not located within any flood plain area (unless flood insurance
reasonably satisfactory to the Lender is provided), and (viii) any other matters
that the Lender may reasonably require;
4.3.11.
A report of the Title Company or a professional records-search firm
stating that a search of the public records in each state and county in which a
Hotel is located, disclosed no conditional sales contracts, chattel mortgages,
leases of personalty, financing statements or title retention agreements, that
affect any Hotel or Land or any other Collateral assigned or pledged to the
Lender, except such matters as may be listed in such report, and such matters
must be reasonably acceptable to the Lender;
4.3.12.
A copy of the certificate of occupancy for each Hotel and the
Improvements located on each parcel of Land, or evidence satisfactory to the
Lender that no certificate of occupancy is required by applicable Laws, and a
copy of all licenses and permits required for the legal operation of each Hotel
and all other Improvements located on each parcel of Land, or evidence
satisfactory to the Lender that no other licenses or permits are required by
applicable Laws or that the absence of particular licenses or permits will not
have a materially adverse effect on the business, properties, prospects, assets
or condition (financial or otherwise) of the Hotels;
4.3.13.
The Engineering Surveys for all of the Hotels, which shall show that
no material defects or conditions affect any of the Hotels, other than defects
or conditions as to which reserves reasonably acceptable to the Lender have been
established, and as to which remedial action reasonably acceptable to the Lender
will be performed in due course;
-50-
<PAGE>
4.3.14.
Seismic studies showing probable maximum loss with respect to each
Mortgaged Property located in California;
4.3.15.
Current reports prepared by an environmental surveying firm
reasonably satisfactory to the Lender and in form and scope reasonably
satisfactory to the Lender;
4.3.16.
An appraisal satisfactory to the Lender prepared with respect to
each Hotel by an appraiser acceptable to Lender showing the appraised values for
the Hotels;
4.3.17.
Estoppel certificates from the Third Party Ground Lessors; and
4.3.18.
Letters from the holders of the Bank Debt showing the amounts
necessary to pay such indebtedness in full as of the Closing Date, together with
evidence that the Title Company has received into escrow from such holders all
instruments of release, in recordable form, necessary to release any Liens
securing such debt immediately following the Closing.
4.4. Evidence of Authorization; Related Documents
The Lender shall also have received:
4.4.1.
A certificate of the corporate secretaries of the Manager the
General Partner and each Marriott Ground Lessor certifying as to the incumbency
and genuine signature of each officer of such corporation executing any of the
Loan Documents or other statements, reports, certificates and documents called
for by the terms of the Loan Documents and who will otherwise act under the Loan
Documents for and on behalf of Borrower or any such corporation, including
specimen signatures of each individual that will be signing any of the Loan
Documents on behalf of the Borrower or the General Partner, which specimen
signatures shall be certified by an appropriate officer to be a true specimen
thereof (and the signature, authority and incumbency of the certifying officer
shall be similarly certified).
4.4.2.
One or more written opinions addressed to the Lender, dated as of
the Closing Date, from Hogan & Hartson L.L.P., special counsel to the Borrower
and the General Partner, in form and substance reasonably acceptable to the
Lender;
-51-
<PAGE>
4.4.3.
A favorable written opinion addressed to the Lender, dated as of the
Closing Date, from local counsel to the Borrower in each state in which one or
more of the Hotels is located, substantially to the effect set forth in Exhibit
-------
B attached hereto.
- -
4.5. Closing Certificate
The Lender shall have received a certificate of Borrower and the
General Partner signed by a duly authorized officer of the General Partner,
dated as of even date herewith, stating that:
(i) The representations and warranties of Borrower and the General
Partner contained in each of the Loan Documents to which Borrower or the General
Partner is a party, and in all certificates, documents and instruments delivered
by Borrower or the General Partner pursuant to the Loan Documents are true and
correct in all material respects on and as of the Closing Date; and
(ii) All conditions precedent to be performed by the Borrower or the
General Partner have been satisfied as of the Closing Date.
4.6. Management Agreement
The Management Leases shall have been terminated and the Management
Agreement shall be in full force and effect.
4.7. Existing Debt
All actions necessary to repay the Bank Debt, and to release all
mortgages or other Liens relating thereto, shall have been taken, and the Lender
shall have received evidence reasonably satisfactory to the Lender to that
effect.
4.8. Payment of Lender Costs and Origination Fee
The Lender shall pay, out of the gross proceeds of the Loan at the
Closing, (i) the Origination Fee and (ii) all Lender Costs, the amounts of which
are known to the Lender at such time, or withhold a reasonable amount of funds
from the Loan Amount at Closing to pay Lender Costs after the Closing. In the
event that the amounts paid or withheld by the Lender at the Closing are
insufficient to pay all such Lender Costs, the Borrower shall promptly, upon
demand, provide additional funds to the Lender to pay such Lender Costs.
4.9. FF&E Reserve Account
The FF&E Reserve Account shall have been funded on the Closing Date
in the amount of $7,000,000 in excess of the balance therein immediately prior
to the Closing.
-52-
<PAGE>
4.10. General Partner Organizational Documents
The GP Certificate shall have been amended in a manner satisfactory
to Lender and there shall have been duly elected to the Board of Directors of
the General Partner an Independent Director.
5. AFFIRMATIVE COVENANTS
Borrower agrees that, so long as any amount of principal, interest,
Yield Maintenance Payment, or any other charges relating to the Loan shall be
outstanding, or so long as there exist any other charges owing on or under this
Agreement, the Mortgage Note, or any other Loan Document, Borrower shall:
5.1. Timely Payment of Amounts Due
Duly pay or cause to be paid, when due, the principal of, interest
on, Yield Maintenance Payments, if any, and other amounts payable under or in
connection with this Agreement, the Mortgage Note and each other Loan Document
in accordance with the terms hereof and thereof, at the times and places and in
the manner provided herein or therein.
5.2. Proceeds of the Loan
Apply the Net Loan Proceeds solely for the purposes set forth in
Section 2.3 hereof.
5.3. Management Agreement; Ground Leases
Duly and punctually pay all sums required to be paid by Borrower
under the Management Agreement and each Ground Lease and otherwise perform in
all material respects the obligations contemplated to be performed by it under
the Management Agreement and each Ground Lease, subject to the provisions of the
Collateral Assignment of Management Agreement and the Ground Lease Rental
Subordination Agreement, and will, with due diligence and in a reasonable and
prudent manner, enforce its rights under the Management Agreement and each
Ground Lease to the extent failure to perform or protect its rights thereunder
might materially and adversely affect the business, operations, prospects,
assets, properties or condition (financial or otherwise) of Borrower. Without
limiting the foregoing, Borrower agrees that:
(a) Borrower shall at all times promptly and faithfully keep,
perform and comply with, or cause to be kept, performed and complied with,
prior to the expiration of any applicable grace period, the provisions of
the Management Agreement and of each Ground Lease to be complied with by
it.
(b) Borrower shall give the Lender prompt notice of any notice of
default given to or received from the Manager under the Management
Agreement or the lessor under any Ground Lease, which notice shall include
a copy of such notice whether or not the Lender may be entitled to such
notice directly from the Manager
-53-
<PAGE>
or such lessor. Borrower shall promptly furnish to the Lender upon the
Lender's reasonable request any and all information concerning the
performance by it of the provisions of the Management Agreement and of any
Ground Lease and shall permit the Lender or its representative at all
reasonable times to make investigation or examination concerning the
performance by it of the provisions of the Management Agreement and of each
Ground Lease. Within ten (10) days after receipt by Borrower, Borrower
shall deliver to the Lender a copy of any notice, communication, plan,
specification or other instrument or document received or given by it in
any way relating to or affecting the Management Agreement or any Ground
Lease which may materially concern or affect the rights of the Borrower
under the Management Agreement or the rights or estate of the lessor or the
lessee in or under a Ground Lease or the Land leased thereby.
(c) If any legal action or proceeding shall be instituted to
terminate the Management Agreement or to evict Borrower under, or
terminate, any Ground Lease, or for any other purpose materially affecting
the Management Agreement or any Ground Lease, Borrower will, promptly upon
service thereof on or to it, deliver to the Lender a copy of each petition,
summons, complaint, notice of motion, order to show cause and of all other
provisions, pleadings and papers, however designated, served in any such
action or proceeding. Borrower will consult with the Lender before
instituting suit against the Manager or any lessor under a Ground Lease.
(d) Notwithstanding any other provision of this Agreement, of the
Management Agreement, or of any Ground Lease, if Borrower shall fail so to
do, the Lender may (but shall not be obligated to) take any such action as
the Lender reasonably deems required to prevent, mitigate or cure, in whole
or in part, any default by Borrower under the Management Agreement or any
Ground Lease, provided that the Lender shall have first given the Borrower
prior written notice of the Lender's intent so to act and a reasonable time
for the Borrower to act to prevent or cure such default and the Borrower
shall have failed so to act, unless the Lender, in its reasonable judgment
determines that there is inadequate time for either such notice or delay in
order to protect the Lender's interest in its security in the Management
Agreement or any such Ground Lease; and upon the receipt by the Lender from
the Borrower, the Manager, or a lessor under a Ground Lease of any written
notice of default by the Borrower under the Management Agreement or any
Ground Lease, the Lender may rely thereon, and such notice shall constitute
full authority and protection to the Lender for any action taken by the
Lender or its agents in good faith reliance thereon (provided the Lender
shall have given the notice of intent to take such action as required in
this paragraph (d)). All expenses, including reasonable attorneys' fees,
incurred by the Lender to prevent, mitigate or cure any such default, or to
sustain the Lien of the Lender on or security interest in the Management
Agreement or the applicable Mortgaged Property, or the priority thereof,
together with interest thereon at the Default Interest Rate, shall be
deemed secured by the Security Documents and shall be payable within
fifteen (15) days after demand. Nothing in this paragraph (d) shall limit
the Borrower's right under the Management Agreement or any Ground Lease to
contest issues concerning requirements of law or other similar matters to
the extent permitted by the Management Agreement or any Ground Lease.
Without limiting the foregoing, the Lender shall, upon ten (10) days' prior
written notice to Borrower (except in the case
-54-
<PAGE>
of an emergency) have the absolute and immediate right (but shall not be
obligated) to enter in and upon the Mortgaged Properties or any part
thereof to such extent and as often as the Lender, in its reasonable
judgment, deems necessary or desirable to prevent or cure any such default
or condition reasonably believed by the Lender to constitute a material
default by the Borrower.
(e) Borrower shall give the Lender prompt notice of the commencement
of, and consult with the Lender in connection with the conduct of, any
arbitration or appraisal proceeding under and pursuant to the provisions of
the Management Agreement or any Ground Lease.
(f) Borrower shall do, or cause to be done, all things necessary to
preserve and keep unimpaired its rights under the Management Agreement and
its rights as lessee under each Ground Lease and will enforce the material
obligations of the Manager under the Management Agreement and of each
lessor under a Ground Lease to the end that it may enjoy all of the rights
granted to it thereunder.
(g) Borrower or the Manager shall establish and maintain with the
Lender, on a consolidated basis with respect to all of the Mortgaged
Properties, the FF&E Reserve Account, and from time to time, in accordance
with Section 8.02B of the Management Agreement, contribute to the FF&E
Reserve Account with respect to each of the Mortgaged Properties the
amounts required by the Management Agreement (subject to the terms of the
Collateral Assignment of Management Agreement). The FF&E Reserve Account
shall be administered in accordance with Section 7 of the Cash Management
Procedures attached as Schedule 5.11 hereto.
-------------
(h) Borrower acknowledges that, pursuant to Section 365 of the
Bankruptcy Code, it is possible (although not intended hereby) that a
trustee in bankruptcy of the lessor under a Ground Lease (or the lessor
under a Ground Lease as a debtor-in-possession) could reject a Ground
Lease, in which case Borrower as lessee under such Ground Lease could have
the election described in Section 365(h) of the Bankruptcy Code (which
election, as it may be amended or revised from time to time, and together
with any comparable right under any other state or federal law relating to
bankruptcy, reorganization or other relief for debtors, whether now or
hereafter in effect, is called the "Election") to treat such Ground Lease
as terminated by such rejection or, in the alternative, to remain in
possession for the balance of the term of such Ground Lease and any renewal
or extension thereof that is enforceable by the lessee under such Ground
Lease under applicable non-bankruptcy law. Borrower shall not terminate or
permit termination of a Ground Lease by exercise of the Election without
the prior written consent of the Lender and any such Election (without the
prior written consent of the Lender) shall be null and void. Because the
Ground Leases are a significant part of the Lender's security for the Loan,
the Lender does not anticipate that it would consent to termination of any
Ground Lease and shall not under any circumstances be obliged to give such
consent. Borrower acknowledges and agrees that the Election is in the
nature of a remedy and is not a property interest which can exist separate
from the Ground Lease. Therefore, it agrees that exercise of the Election
in favor of preserving the right to possession under any Ground Lease shall
not be deemed to constitute a
-55-
<PAGE>
taking or sale of the affected Mortgaged Property or Mortgaged Properties
by the Lender and shall not entitle the Borrower to any credit against the
Lender.
5.4. Financial and Other Information
Furnish to the Lender the Financial Statements, notices, and other
items described below in this Section 5.4 (the "Information") at the times
indicated. Whenever any Financial Statements, notice or other item shall be
stated to be due on a day other than a Business Day, such Financial Statement,
notice or other item shall be due on the next succeeding Business Day. All
Financial Statements relating to earnings and expenses shall set forth
separately, or otherwise identify all extraordinary and non-recurring items to
the extent required by GAAP. The Borrower will furnish the Lender, at least
once each year, a schedule of the dates on which each Accounting Period in such
Fiscal Year ends, and will notify Lender promptly of any changes in such
Accounting Periods.
5.4.1. Quarterly Financial Statements
Within 15 days after the filing thereof by Borrower, copies of the
reports, if any, filed by Borrower on Form 10-Q for so long as Borrower is
subject, without exemption, to financial reporting obligations under Section 13
of the Securities Exchange Act of 1934, as amended. For any Accounting Quarter
for which Borrower is not subject to such reporting obligations, Borrower shall
furnish to Lender, as soon as practicable, and in any event within 60 days after
the end of each Accounting Quarter (other than the last Accounting Quarter in
any Fiscal Year), an unaudited consolidated balance sheet of Borrower as at the
end of such Accounting Quarter and unaudited consolidated statement of income
and expense of Borrower for each such Accounting Quarter, and for that part of
the Fiscal Year to date, and an unaudited consolidated statement of cash flow of
the Borrower for that part of the Fiscal Year to date, all in the form that
would be required of Borrower if Borrower were required to file quarterly
reports with the SEC on Form 10-Q, setting forth in each case, in comparative
form, the corresponding figures for the corresponding period(s) of the preceding
Borrower Fiscal Year, which statements shall, as a whole, fairly present the
financial position of Borrower as at the end of the periods indicated and the
results of the operations of Borrower for such periods and which shall be
certified by an Authorized Accounting Officer as having been prepared under his
or her supervision in accordance with GAAP, subject to year-end audit
adjustments, and stating that such Authorized Accounting Officer knows of no
facts inconsistent with such Financial Statements and that such Financial
Statements, as a whole, fairly present the financial position of Borrower as of
the end of the periods indicated and the results of the operations of Borrower
for such periods. Any financial statements furnished pursuant to this Section
shall be accompanied by a certificate of an Authorized Accounting Officer
stating that, to his or her knowledge, no Default or Event of Default has
occurred and is continuing or, if a Default or Event of Default has occurred and
is continuing, a statement as to the nature thereof, the period of its
existence, and the action that Borrower has taken or proposes to take with
respect thereto.
5.4.2. Borrower's Annual Financial Statements
Within 15 days after the filing thereof by Borrower, copies of the
reports, if any, filed by Borrower on Form 10-K for so long as Borrower is
subject, without exemption, to financial reporting obligations under Section 13
of the Securities Exchange Act of 1934,
-56-
<PAGE>
as amended. For any Fiscal Year for which Borrower is not subject to such
reporting obligations, Borrower shall furnish to Lender, as soon as practicable,
and in any event within 120 days after the end of each Fiscal Year of Borrower,
a consolidated balance sheet of Borrower as at the end of such Fiscal Year and a
consolidated statement of income, partners' capital or deficit and consolidated
cash flow of Borrower for such Fiscal Year, setting forth in each case, in
comparative form, the corresponding figures for the preceding Fiscal Year,
prepared in accordance with GAAP, and in the form that would be required of
Borrower if Borrower were required to file annual reports with the SEC on Form
10-K. Such Financial Statements or reports on Form 10-K, as the case may be,
shall be accompanied by (A) (1) an audit report and opinion in respect of such
Financial Statements of Arthur Andersen & Co., L.L.P. or other independent
certified public accountants of recognized national standing selected by
Borrower and reasonably acceptable to the Lender, which report and opinion shall
be unqualified as to the scope of the audit and reasonably satisfactory to the
Lender, and (2) the written statement of the accountants described in clause (1)
that, in making the examination necessary for their report and opinion on such
Financial Statements, they have obtained no knowledge of any condition, event or
act that constitutes a Default or Event of Default, or, if such accountants
shall have obtained such knowledge, a statement as to the nature and status
thereof, and (B) a certificate of an Authorized Accounting Officer, stating that
(1) such Financial Statements have been prepared under his or her supervision in
accordance with GAAP and that he or she knows of no facts inconsistent with such
Financial Statements and (2) to his or her knowledge, no Default or Event of
Default has occurred is continuing or, if a Default or Event of Default has
occurred and is continuing, a statement as to the nature thereof, the period of
its existence, and the action that Borrower has taken or proposes to take with
respect thereto.
5.4.3. Budgets
The consolidated annual itemized operating budget for the combined
Mortgaged Properties and a capital expenditure budget for each Mortgaged
Property, each in the form generally prepared by the Manager, promptly following
agreement with the Manager on each such budget, and quarterly and year-to-date
comparisons of actual and budgeted income and expenses, concurrently with the
delivery of the related Financial Statements.
5.4.4. Hotel Operating Statistics
(a) On or before the date that is 30 days after the end of each
Accounting Period, (i) with respect to any Accounting Period ending on or before
the earlier of a Securitization or the end of Fiscal Year 1997, a detailed
profit and loss statement for each Hotel for such Accounting Period and for the
period from the beginning of the current Fiscal Year to the end of such
Accounting Period; and (ii) with respect to all Accounting Periods, statements
setting forth (x) the gross sales and Net Operating Income for each Hotel for
the immediately preceding 13 Accounting Periods; and (y) occupancy rates,
average daily room rates and revenues-per-available-room ("REVPAR") for each
Hotel for such Accounting Period and the immediately preceding 13 Accounting
Periods; and
(b) On a quarterly basis, on or before the date that is 60 days
after the date of each Accounting Quarter (other than the last Accounting
Quarter in any Fiscal
-57-
<PAGE>
Year), (i) detailed profit and loss statements, which shall include the average
occupancy rates, average daily room rates and REVPAR, for each Hotel for the
period from the beginning of the current Fiscal Year to the end of such
Accounting Quarter; and (ii) the balance of the Reserve as of the end of such
Accounting Quarter, and
(c) On an annual basis, within 120 days following the end of each
Fiscal Year, (i) detailed profit and loss statements, which shall include the
average occupancy rates, average daily room rates and REVPAR, for each Hotel for
such Fiscal Year ; and (ii) the balance of the Reserve as of the end of such
Fiscal Year.
5.4.5. Certificates Regarding Defaults
Within five (5) Business Days after any officer of the General
Partner obtains knowledge of any Default or Event of Default, a statement of
such officer specifying the nature of such Default or Event of Default, the
period of existence thereof, and the action that Borrower has taken or proposes
to take with respect thereto.
5.4.6. Proposed Amendments to Partnership Agreement
Not less than ten (10) days prior to the execution thereof, a true
and complete copy of any proposed amendment to the Partnership Agreement (other
than amendments of a ministerial nature that will not have any adverse impact on
the Lender, the value of the Collateral, the validity or priority of the
Lender's security interest therein, or any of the Lender's rights or remedies
under the Loan Documents).
5.4.7. Environmental Conditions
Within five (5) Business Days after any officer of the General
Partner obtains knowledge of or discovers any occurrence or condition on any
real property adjoining or in the vicinity of any Hotel that might reasonably be
expected to cause such Hotel or the Land on which it is located to be subject to
any investigation or cleanup pursuant to any Environmental Law which could
reasonably be expected to lead or result in a material adverse effect upon the
business, operations, prospects, assets, properties or condition (financial or
otherwise) of Borrower or any Hotel, written notice thereof describing the
nature thereof and the actions, if any, that Borrower proposes to take to
address it.
5.4.8. Evidence of Tax Payments
Concurrently with the delivery of Financial Statements required by
Sections 5.4.1 and 5.4.2, Borrower shall provide to the Lender evidence of the
payment of all real estate taxes that were due and payable on the Mortgaged
Properties during the preceding Accounting Quarter.
5.4.9. Change in MII Cash Management Conditions
The Borrower will notify the Lender within 5 Business Days after it
learns that any MII Cash Management Condition is no longer satisfied.
-58-
<PAGE>
5.5. Maintenance of Existence, Etc.
At all times (a) maintain its principal place of business, principal
office, and office where it keeps its records and other documents and
instruments, relating to the Mortgaged Properties (except for certain records,
documents and instruments kept at the Mortgaged Properties) at its address set
forth in Section 11.3 hereof or such other address of which the Lender may be
given written notice not less than thirty (30) days prior to the date on which a
change of location is to occur; (b) obtain and maintain in full force and effect
all authorizations, consents, approvals, licenses, exemptions and other actions
by, and all registrations, qualifications, designations, declarations and other
filings, if any, with, any governmental or administrative board, body,
commission, authority, bureau, or agency necessary (i) in connection with the
execution and delivery of this Agreement, the Mortgage Note, and the other Loan
Documents, the consummation of the transactions contemplated herein or therein,
and the performance of or compliance with the terms and conditions thereof, or
(ii) to ensure the legality, validity and enforceability hereof or thereof; and
(c) maintain in effect its existence pursuant to the Partnership Agreement
(other than as a result of a Permitted Reorganization) and cause the General
Partner to (and by signing this Agreement on behalf of Borrower the General
Partner agrees to) (x) maintain its corporate, partnership or other existence in
effect and in good standing (other than as a result of a Permitted
Reorganization) and (y) comply with all requirements of Law material to the
conduct of its business (including continuing to be qualified to engage in
business in each jurisdiction where such qualification is required) and the
performance of the obligations of Borrower or the General Partner under the Loan
Documents to which Borrower or the General Partner is a party.
5.6. Compliance with Applicable Laws
Comply in all material respects with all requirements of Law
applicable to the conduct of its business (including continuing to be registered
or qualified to do business in each jurisdiction where such registration or
qualification is required), the operation of the Mortgaged Properties, and the
performance of the obligations of Borrower under the Loan Documents to which
Borrower is a party, including Environmental Laws, rules, regulations and orders
of any governmental authority.
5.7. Maintenance of Books; Inspection of Properties and Books
Keep and maintain adequate and proper records and books of account,
in which complete entries are made in accordance with GAAP and in accordance
with all applicable laws and regulations, and permit authorized representatives
of the Lender to discuss the business, operations, prospects, assets, properties
and condition (financial or otherwise) of Borrower with its officers and
employees and, at reasonable times and on reasonable notice (except during the
existence of an Event of Default, in which case no notice shall be required) to
examine its books of account and other records and make copies thereof or
extracts therefrom, all at such reasonable times as the Lender may request.
-59-
<PAGE>
5.8. Notice of Litigation; Disputes
Give written notice to the Lender within five (5) Business Days after
learning of:
(i) Any action, suit or proceeding instituted against Borrower or
any action, suit or proceeding instituted by Borrower in any federal or state
court or before any commission or other regulatory body (federal, state or
local, domestic or foreign), or any such proceedings threatened against Borrower
(including (i) any proceeding initiated by any party with respect to the
presence or release, or alleged presence or release, of any Hazardous Materials
at, on, under, from or about any Hotel or the Land on which any Hotel is located
and (ii) any claim made or threatened by any third party against Borrower or any
such Hotel or Land relating to any loss or injury resulting from any Hazardous
Materials) an adverse determination of which could reasonably be expected to
lead to or result in a material adverse effect upon the business, operations,
prospects, assets, properties or condition (financial or otherwise) of Borrower
or any Hotel, in each case containing the details thereof;
(ii) The filing, recording or assessment of any Federal, state or
local tax lien against it, or any of its assets, an adverse determination of
which could reasonably be expected to lead to or result in a material adverse
effect upon the business, operations, prospects, assets, properties or condition
(financial or otherwise) of Borrower or any Hotel;
(iii) Any dispute between Borrower and any Governmental Authority
or other Person which, if adversely determined, could reasonably be expected to
materially interfere with the normal business operations of Borrower or any
Mortgaged Property.
Borrower shall permit the Lender to join and participate as a party,
if the Lender so elects, in any legal proceedings or actions initiated with
respect to any Mortgaged Property or the Land on which any Mortgaged Property is
located in connection with any Environmental Law or Hazardous Materials.
5.9. Mortgaged Property Operations; Maintenance
At all times, (a) conduct continuously and operate actively its
business at the Mortgaged Properties (subject to temporary cessation of, or
other limitations on, its activities due to strikes, lockouts, casualties,
events of Force Majeure, or other causes beyond the reasonable control of the
Borrower, provided prompt written notice thereof is given to the Lender); (b)
keep in full force and effect and existence all rights, licenses, permits and
franchises required for the use or operation of the Mortgaged Properties; (c)
operate each of the Mortgaged Properties in a manner consistent with the quality
of operations, from time to time, of hotels in the Courtyard by Marriott hotel
system managed by the Manager or its Affiliates; (d) maintain the Mortgaged
Properties in good and clean order and condition such that the utility and
operation of the Mortgaged Properties will not be affected in any material and
adverse respect, subject to ordinary wear and tear and damage caused by fire or
other Casualty; (e) make or cause to be made all necessary or appropriate
repairs, replacements and renewals to the Mortgaged Properties in the manner and
within the periods required by the Management Agreement and the applicable
-60-
<PAGE>
Mortgages; and (iii) not commit or permit any waste to the Mortgaged Properties
or any part thereof.
5.10. Separate Existence
Borrower and the General Partner shall each (i) maintain their books
and records and bank accounts separate from any other person or entity (except
that, for accounting and reporting purposes, the General Partner (and, if Host
Marriott should acquire a sufficient direct or indirect ownership interest in
the Borrower to require consolidation under GAAP, the Borrower) may be included
in the consolidated financial statements of Host Marriott in accordance with
generally accepted accounting principles); (ii) maintain an arm's length
relationship with their partners, Affiliates and any other party furnishing
services to either of them; (iii) maintain its books, records, resolutions and
agreements as official records; (iv) conduct their business in their own name
and through their own authorized officers and agents (except that all of the
Properties are operated and are expected to continue to be operated under the
name "Courtyard by Marriott," which is a trademark of MII); (v) prepare and
maintain their financial statements, accounting records and other corporation or
partnership documents separate from those of any other Person (except for
inclusion of the General Partner (and, if Host Marriott should acquire a
sufficient direct or indirect ownership interest in the Borrower to require
consolidation under GAAP, the Borrower) in consolidated financial statements of
Host Marriott); (vi) pay their own liabilities out of their own funds and other
assets; (vii) observe all partnership or corporate formalities, as applicable,
necessary to maintain their identities as entities separate and distinct from
one another and from Host Marriott and all other Affiliates; (viii) participate
in the fair and reasonable allocation of any and all overhead expenses and other
common expenses for facilities, goods or services provided to multiple entities;
(ix) use its own stationery, invoices and checks (except when acting in a
representative capacity); (x) hold and identify itself as a separate and
distinct entity under its own name and not as a division or part of any other
Person (except for inclusion of the General Partner (and, if Host Marriott
should acquire a sufficient direct or indirect ownership interest in the
Borrower to require consolidation under GAAP, the Borrower) in consolidated
financial statements of Host Marriott); and (xi) hold its assets in its own
name.
5.11. Cash Management
Borrower will comply with, and will direct the Manager to comply with,
the provisions of the Cash Management Procedures attached as Schedule 5.11
-------------
hereto, which shall govern the collection and application of Gross Revenues,
Awards, and Insurance Proceeds and the administration of the Local Accounts, the
Manager's Account, the Cash Collateral Account, the Operating Account, and the
Lockbox Account (and, by making the Loan, the Lender agrees that it shall
administer the Cash Collateral Account, the Operating Account, the Lockbox
Account and, after a Lockbox Event (as described in the Cash Management
Procedures) has occurred, the Manager's Account, in accordance with the
provisions of the Cash Management Procedures attached as Schedule 5.11 hereto).
-------------
-61-
<PAGE>
5.12. Independent Director
Borrower shall ensure that the General Partner shall have an
Independent Director acceptable to the Lender at all times, or if the
Independent Director has resigned, that the General Partner shall not take any
action which may not be taken pursuant to the organizational documents of the
General Partner without the consent of the Independent Director.
6. NEGATIVE COVENANTS
Borrower agrees that, so long as this Agreement shall remain in
effect, or so long as there exists any principal, interest or Yield Maintenance
Payment due or outstanding under the Mortgage Note, or any other unpaid charges
or amounts under this Agreement or under any other Loan Document, then:
6.1. Limitation on Indebtedness
Borrower, General Partner and the Parent (if any) shall not incur,
create or assume any Indebtedness of any kind, provided that Borrower or the
General Partner may incur, create or assume any Permitted Debt and the Parent
may incur, create or assume Parent Debt, provided that the Borrower, the General
Partner or the Parent (as applicable) and the High Yield Lender (in the case of
Parent Debt) or the lender of the Indebtedness (in the case of Permitted Debt)
comply with the "Appointment of Advisor" requirements set forth in Section 4 of
Exhibit C-1 attached hereto, as applicable. The Parent may incur, create or
- -----------
assume Parent Debt only to the extent that, immediately after the incurrence of
such Parent Debt, the Consolidated DSCR for the preceding 13 full Accounting
Periods for which financial statements are then available, calculated on a pro
forma basis to give effect to the incurrence of such Parent Debt, would be at
least 1.35 to 1.0 and the Consolidated Loan to Value Ratio would be no greater
than 79.0%. In the case of Parent Debt, at the High Yield Lender's request, the
Lender shall enter into a Parent Debt Intercreditor Agreement substantially in
the form attached hereto as Exhibit C-1, and in the case of Permitted Debt of
-----------
the kind referred to in clause (iv) of the definition thereof, the Lender shall
enter into a Permitted Debt Intercreditor Agreement substantially in the form
attached hereto as Exhibit C-2.
-----------
6.2. Limitation on Liens
Borrower shall not create, assume or suffer to exist, any Lien of any
kind, upon any of its properties, assets or Collateral, whether now owned or
hereafter acquired, except: (i) the Liens of the Mortgages and other Security
Documents; (ii) Liens for taxes, assessments and other governmental charges not
yet due and payable or due and payable, but not yet delinquent, or that are
being contested in good faith by appropriate proceedings and as to which
adequate deposits have been made with the Lender as required by this Section
6.2; (iii) deposits or pledges to secure the payment of workmen's compensation,
unemployment insurance or other social security benefits or obligations, or to
secure the performance of trade contracts, leases, public or statutory
obligations, surety or appeal bonds or other obligations of a like general
nature incurred in the ordinary course of business; (iv) landlords', mechanics',
materialmen's, warehousemen's, carriers', or other like Liens arising in the
ordinary course of business securing obligations which are not
-62-
<PAGE>
overdue for a period longer than 30 days, or which are being contested in good
faith by appropriate proceedings which are being diligently pursued (with
deposits having been made with the Lender as required by this Section 6.2) or as
to which the Liens are bonded to the satisfaction of the Lender; (v) easements,
rights of way, zoning, similar restrictions, and other similar encumbrances or
title defects that, singly or in the aggregate, do not in any case materially
detract from the value of the property subject thereto (as such property is used
by the Borrower); (vi) Liens arising by operation of law in connection with
judgments, only to the extent, for an amount, and for a period not resulting in
an Event of Default; (vii) Liens securing capitalized lease obligations insofar
as such Liens cover assets acquired pursuant to such capitalized lease
obligations and such capitalized lease obligations constitute Permitted Debt;
and (vii) Liens securing assets acquired pursuant to purchase money
Indebtedness, which Indebtedness constitutes Permitted Debt (each a "Permitted
Lien" and collectively "Permitted Liens").
In the event Borrower contests the payment of a tax, assessment or
other governmental charge pursuant to clause (ii) above or contests a
landlords', mechanics', materialmen's, warehousemen's, carriers', or other like
Lien pursuant to clause (iv) above, Borrower, prior to the commencement of such
contest and prior to the date such payment would otherwise be due and payable,
shall deposit with the Lender (or, following the assignment contemplated by
Section 9.1 hereof, deposit with the Servicer) an amount equal to 125% of the
amount of the contested payment, to be held in a segregated subaccount of the
Cash Collateral Account. Upon the conclusion of such contest and upon written
request by Borrower accompanied by supporting documentation, the Lender (or the
Servicer) shall disburse from the deposit made by Borrower with the Lender (or
the Servicer) any amounts required to be paid by Borrower and shall remit the
excess to Borrower, all as contemplated by Section 5.11 hereof. Notwithstanding
the foregoing, the Lender (or the Servicer) may pay over to the appropriate
Person any or all of the funds on deposit with the Lender (or the Servicer)
when, in the Lender's (or the Servicer's) reasonable judgment, the entitlement
of such Person to such funds is firmly established or if necessary to avoid the
foreclosure of a Lien that secures the contested payment.
6.3. Merger or Consolidation; Permitted Reorganization
Neither Borrower nor the General Partner shall be a party to any
merger or consolidation, except in connection with a Permitted Reorganization
that satisfies the requirements of this Section 6.3 (and the General Partner in
each of the Permitted Reorganizations described in this Section 6.3 (or in
connection with the Permitted Reorganization contemplated by Section 6.3.4
hereof, the lessee's general partner or managing member) shall be at least 95%
owned, directly or indirectly, by Host Marriott, except that the General Partner
may be controlled directly or indirectly by another Person if, but only if, (a)
such Person is a nationally recognized hotel operator acceptable to Lender and
(b) each of the Rating Agencies delivers a Rating Comfort Letter with respect
thereto).
6.3.1 With respect to a Permitted Reorganization of the kind
described in clause (i) of the definition thereof, Borrower shall be entitled to
merge with a newly formed Single Purpose entity that has never conducted any
business, holds no assets, and has no liabilities, provided that:
(i) Borrower is the surviving entity in such merger;
-63-
<PAGE>
(ii) the General Partner shall be either CBM One or a newly formed
Single Purpose entity that has never conducted any business,
holds no assets other than its partnership interests in Borrower
(and other assets permitted by the proviso following clause
(xiii) of the definition of "Single Purpose") and has no
liabilities other than those arising out of its general partner
interest in Borrower and liabilities arising under the
Partnership Agreement and any liabilities of CBM One, arising
prior to the consummation of such merger, that it has assumed or
for which it has agreed to indemnify CBM One that relate solely
to CBM One being the general partner of Borrower;
(iii) following the consummation of such merger, all of the
partnership interests in Borrower are held by the Parent and the
General Partner;
(iv) counsel to Borrower shall have provided to Lender, and, if the
Securitization has occurred, the applicable Rating Agencies, an
opinion to the effect that, upon the bankruptcy of the Parent or
any Person that owns, directly or indirectly, a 50% or more
equity interest in the Parent or the General Partner, a court
would not have valid legal grounds to order the substantive
consolidation of the assets and liabilities of Borrower or the
General Partner with those of the Parent or such other parties,
which opinion shall be similar in form and substance to the
Substantive Non-Consolidation Opinion delivered to Lender on the
Closing Date;
(v) prior to and following the consummation of such merger, no
Default or Event of Default shall have occurred and be
continuing; and
(vi) following the consummation of such merger, the Borrower shall be
a Single Purpose entity.
6.3.2 The Borrower shall be entitled to engage in a Permitted
Reorganization of the kind described in clause (ii) of the definition thereof,
provided that:
(i) the new General Partner shall be a newly formed Single Purpose
entity that has never conducted any business, holds no assets
other than its partnership interests in Borrower (and other
assets permitted by the proviso following clause (xiii) of the
definition of "Single Purpose") and has no liabilities other
than those arising out of its general partner interest in
Borrower and liabilities arising under the Partnership Agreement
and any liabilities of CBM One (or other predecessor General
Partner), arising prior to the consummation of such transaction,
that it has assumed or for which it has agreed to indemnify CBM
One (or such other predecessor) and that relate solely to CBM
One or such other predecessor General Partner being the general
partner of Borrower;
(ii) counsel to Borrower shall have provided to Lender, and, if the
Securitization has occurred, the applicable Rating Agencies an
opinion to the effect that, upon the bankruptcy of the Parent or
any Person that
-64-
<PAGE>
owns directly or indirectly a 50% or more equity interest in the
Parent or the General Partner, a court would not have valid
legal grounds to order the substantive consolidation of the
assets and liabilities of Borrower or the General Partner with
those of the Parent or such other parties, which opinion shall
be similar in form and substance to the Substantive Non-
Consolidation Opinion delivered to Lender on the Closing Date;
and
(iii) prior to and following the consummation of such transaction, no
Default or Event of Default shall have occurred and be
continuing.
6.3.3 CBMLP shall be entitled to engage in a Permitted Reorganization
of the kind described in clause (iii) of the definition thereof, provided that:
(i) all of the Mortgaged Properties then owned by CBMLP are
transferred to a newly created Single Purpose entity that has
never engaged in any business and prior to such Permitted
Reorganization has no assets other than cash and no liabilities,
which transferee shall be the Borrower following such Permitted
Reorganization;
(ii) the transferee of the Mortgaged Properties shall have assumed,
by a writing reasonably satisfactory in form and substance to
the Lender, all of the obligations of Borrower under this
Agreement and the other Loan Documents;
(iii) counsel to CBMLP and such transferee shall have delivered to
Lender an opinion of counsel, substantially similar in scope and
substance to the opinion delivered pursuant to Section 4.4.2,
modified as appropriate to reflect the consummation of the
Permitted Reorganization and the change in the Borrower and
General Partner;
(iv) local counsel to such transferee in each state in which a Hotel
is then located shall have delivered an opinion to Lender
substantially to the effect set forth in the opinions delivered
pursuant to Section 4.4.3, modified as appropriate to reflect
the consummation of the Permitted Reorganization and the change
in the Borrower and General Partner;
(v) such transferee shall have delivered Title Insurance Policies to
Lender satisfying the requirements of Section 4.3.2;
(vi) such transferee shall have provided evidence reasonably
satisfactory to the Lender that all policies of insurance
required by Sections 8.1 and 8.3 are in full force and effect;
(vii) such transferee and the new General Partner (or managing member
of such transferee if it is a limited liability company) shall
have furnished to the Lender the certificates and documents
required by Sections 4.3.4 through 4.3.8;
-65-
<PAGE>
(viii)prior to and following the consummation of such Permitted
Reorganization, no Default or Event of Default shall have
occurred and be continuing; and
(ix) following the consummation of such Permitted Reorganization, the
General Partner (or managing member of such transferee if it is
a limited liability company) shall be a Single Purpose entity
that holds no assets other than its partnership interest in
Borrower (and other assets permitted by the proviso following
clause (xiii) of the definition of "Single Purpose").
6.3.4 CBMLP shall be entitled to engage in a Permitted Reorganization
of the kind described in clause (iv) of the definition thereof, provided that:
(i) the lessee of the Mortgaged Properties leased in such
transaction shall be a newly created Single Purpose entity that
has never engaged in any business and prior to such Permitted
Reorganization has no assets other than cash and no liabilities,
and shall be controlled by a Person with substantial experience
in the ownership or operation of lodging facilities;
(ii) the general partner of the lessee, if it is a partnership, or
managing member of the lessee, if it is a limited liability
company, shall be a newly formed Single Purpose entity that has
never conducted any business, has no assets other than its
general partner interest in the lessee (and other assets
permitted by the proviso following clause (xiii) of the
definition of "Single Purpose") and has no liabilities other
than those arising out of its general partner interest in the
lessee, if it is a partnership;
(iii) such lease shall provide rental payments that are sufficient to
pay all scheduled monthly installments of principal and interest
hereunder; and shall be a triple net lease requiring the lessee
to fund all real estate taxes, insurance, expenses of operating
the Mortgaged Properties, and deposits into the FF&E Reserve
Account, shall terminate, at the election of the Lender, if the
Loan is not repaid in full on or before the Scheduled Maturity
Date, shall provide that, in the event of termination as a
result of an Event of Default or failure of the Borrower to
repay the Loan on or before the Scheduled Maturity Date, the
Mortgaged Properties and all FF&E used in connection therewith
shall be surrendered to the Borrower, shall require that the
lessee continue to be a Single Purpose entity, and shall contain
covenants on the part of the lessee substantially similar to
those set forth in Sections 5.3 (as it applies to the Management
Agreement), 5.6, 5.7, 5.8, 5.9, 5.10, 5.11 (with respect to the
procedures for administering the Gross Revenues from the
Mortgaged Properties subject to the lease), 5.12, 6.1, 6.2, 6.3,
6.4 and 6.5 hereof, to the extent applicable to the lessee;
-66-
<PAGE>
(iv) the lessee shall assume the obligations of Borrower under the
Management Agreement and the Manager shall agree to attorn to
the lessor if the lease is terminated;
(v) the rights of the lessee under the lease shall be expressly
subordinate to the Loan and any refinancing thereof and, at the
election of any purchaser of the Mortgaged Properties following
an Event of Default and foreclosure under any Mortgage, any
refinancings thereof;
(vi) the obligations of the lessee under such lease shall be secured
by security interests in all personal property, tangible and
intangible, of the lessee (including all FF&E and Fixed Asset
Supplies and Gross Revenues received by such lessee) on terms
substantially identical to those in the Security Documents;
(vii) the lessee shall have granted to the Borrower a right to
purchase, at fair market value, all FF&E and Fixed Asset
Supplies used in the Mortgaged Properties;
(viii)the Borrower shall have assigned all of its rights under such
lease and related security instruments to the Lender as
additional collateral for the obligations of Borrower hereunder;
(ix) counsel to such lessee shall have delivered to Lender an opinion
of counsel, substantially similar in scope and substance to the
opinion delivered pursuant to Section 4.4.2, modified as
appropriate to reflect the terms of the Permitted
Reorganization;
(x) counsel to such lessee shall have provided to Lender, and, if
the Securitization has occurred, the applicable Rating Agencies
an opinion to the effect that, upon the bankruptcy of the parent
of the lessee's general partner (or managing member) or upon the
bankruptcy of any partner or member of lessee that is not a
Single Purpose entity, a court would not have valid legal
grounds to order the substantive consolidation of the assets and
liabilities of the lessee or its general partner (or managing
member) with those of such parent or other entity, which opinion
shall be similar in form and substance to the Substantive Non-
Consolidation Opinion delivered to Lender on the Closing Date;
(xi) prior to and following the consummation of such Permitted
Reorganization, no Default or Event of Default shall have
occurred and be continuing; and
(xii) the Rating Agencies shall have delivered a Rating Comfort
Letter.
6.3.5 At all times after the consummation of a Permitted
Reorganization, the General Partner and, in the case of a Permitted
Reorganization described in Section 6.3.4, the general partner or managing
member of the lessee of the Mortgaged Properties, as applicable, shall have at
least one director who is an Independent Director,
-67-
<PAGE>
other than as a result of the resignation or removal of an Independent Director,
so long as the General Partner or such general partner or managing member, as
the case may be, is then diligently searching for a new Independent Director.
6.4. Single Purpose
Borrower shall not have or create any subsidiaries other than pursuant
to a Permitted Reorganization. The General Partner shall not engage in any
business or operate for any purpose other than as a general or limited partner
of the Borrower (provided that the General Partner may hold assets permitted by
the proviso following clause (xiii) of the definition of "Single Purpose") and
shall at all times be a Single Purpose entity; provided, however, that it is
understood that, notwithstanding the provisions of clauses (ii), (iii), (v) and
(vi) of the definition of "Single Purpose" contained herein (as such clauses
relate to the period from the date of formation of the General Partner and the
Borrower, as applicable, to the date hereof), (A) separate financial statements
for the General Partner have not heretofore been produced on a regular basis,
but the financial records of the General Partner have been and will remain
adequate to permit production of such separate financial statements (including
balance sheets and statements of income and changes in financial position) for
past periods if it hereafter becomes necessary to produce such financial
statements, and separate financial statements for the General Partner will
hereafter be prepared on an annual basis; (B) because of the limited nature of
the General Partner's operations it has not at all times heretofore maintained
separate deposit accounts in its own name, but it has recently established and
will maintain such accounts, consistent with the covenants contained in Section
5.10(i) hereof; (C) certain transaction and overhead costs incurred by the
Borrower, the General Partner and/or Host Marriott may not heretofore have been
allocated, but such costs hereafter will be fairly allocated; (D) except for (1)
obligations of the Borrower for which it is liable in its capacity as General
Partner and (2) any accrued obligations to Affiliates in connection with the
allocation of costs for shared overhead and office expenses, the General Partner
neither has nor expects to have any debt obligations, and (E) prior to 1989, the
Borrower was not able to make all payments required under the Bank Debt as they
became due, and the Borrower incurred approximately $13 million in liability to
Host Marriott in connection with (or in lieu of) advances by Host Marriott under
a guaranty of the Bank Debt, for which the Borrower remains liable and which
constitutes Permitted Debt of the kind referred to in clause (iv) of the
definition of that term herein. Neither Borrower nor the General Partner will:
(i) seek or consent to any dissolution, winding up, liquidation, consolidation,
merger or sale of all or substantially all of its assets; (ii) fail to correct
any known misunderstanding regarding its separate identity; (iii) commingle its
funds or other assets with those of any other Person (except as specifically
contemplated by the Cash Management Procedures); (iv) assume or guarantee or
become obligated for the debts of any other Person or hold out its credit as
being available to satisfy the obligations of any other Person (other than as
permitted by the Loan Documents); (v) acquire obligations or securities of its
partners or shareholders, as the case may be; (vi) pledge any of its assets for
the benefit of any other Person other than the Lender (except for purchase money
security interests or as otherwise permitted by the Loan Documents); (vii) make
any loans to any other Person (except advances of Permitted Debt by the General
Partner or its Affiliates to the Borrower); (viii) identify its partners or
shareholders, as the case may be, or any of its Affiliates as a division or part
of it (except for inclusion of the Borrower and the General Partner in
consolidated financial statements of Host Marriott); (ix) engage (either as
transferor or transferee) in any
-68-
<PAGE>
material transaction with any Affiliate other than for fair value and on terms
similar to those obtainable in arms-length transactions with unaffiliated
parties, or engage in any transaction with any Affiliate involving any intent to
hinder, delay or defraud any entity; (x) engage in any business activity or
operate for any purpose other than as stated in Section 2.03 of its Partnership
Agreement and Article THIRD of the GP Certificate, as applicable, in each case
as in effect on the date hereof or (xi) without the consent of all its directors
or all the directors of its General Partner, as applicable, including the
consent of an Independent Director, file a bankruptcy or insolvency petition or
otherwise institute bankruptcy proceedings. Borrower will not acquire any assets
not related to the business and operation of the Hotels.
6.5. Amendments to Agreements
6.5.1.
Borrower shall not, without the consent of the Lender, (i) amend,
modify or alter the terms of the Partnership Agreement in any manner that would
violate the restrictions set forth in Section 6.4 above, (ii) admit a General
Partner other than pursuant to a Permitted Reorganization, (iii) cancel,
release, terminate or surrender the Management Agreement or any Ground Lease, or
permit any cancellation, release, termination or surrender of the Management
Agreement or any Ground Lease or (iv) amend, modify or alter the terms of the
Management Agreement or any Ground Lease in any material respect; provided that
Borrower shall be entitled to cancel, release, terminate, surrender, amend,
modify or alter the Management Agreement in connection with the replacement of
the Manager if, before the date on which the Manager ceases to be the Manager of
any Hotel, (a) Borrower causes such Hotel to come under management by a
nationally recognized hotel operator acceptable to the Lender, (b) such Hotel
continues to be part of a comparable nationally recognized hotel system
acceptable to the Lender, and (c) if the Securitization has occurred, each of
the Rating Agencies delivers to the Lender a Rating Comfort Letter with respect
thereto; and provided further that Borrower may cancel, release, terminate,
surrender, amend, modify or alter any Ground Lease (x) in connection with the
sale of the Hotel situated on the Land that is subject to such Ground Lease and
(y) in compliance with the Loan Documents.
6.5.2.
Neither Borrower nor the General Partner shall enter into or consent
to any termination, amendment, waiver or supplement of any of the provisions of
the General Partner's organizational or governing documents without the consent
of the Lender (other than in connection with a Permitted Reorganization).
6.6. Distributions
Borrower shall make no distributions of cash or other assets to the
General Partner or the Limited Partners if an Event of Default has occurred and
is continuing under Section 7.1.1 hereof.
-69-
<PAGE>
6.7. Permitted Transfers
Borrower shall not transfer, pledge, hypothecate or assign any of the
Mortgaged Properties except (a) to the Lender, (b) in connection with a
Permitted Reorganization or (c) in connection with the simultaneous Release of
such Mortgaged Property pursuant to Section 2.5, Section 2.6 or Section 2.7
hereof.
7. EVENTS OF DEFAULT
7.1. Default; an Event of Default
The occurrence of any of the following events beyond any applicable
notice and cure period set forth in this Section 7.1 shall be an "Event of
Default" hereunder (and the occurrence of any of the following which, with the
giving of notice or the passage of time, or both, would become an Event of
Default shall, prior to the giving of such notice or the passage of such time,
be a "Default" hereunder).
7.1.1.
Borrower shall fail to pay, when due, any principal or interest on the
Mortgage Note or any Yield Maintenance Payment or Defeasance Deposit that may be
due.
7.1.2.
Borrower shall fail to pay, when due, any other amount due under or
pursuant to the Mortgage Note, this Agreement, or any of the other Loan
Documents (other than principal, interest, and any Yield Maintenance Payments or
Defeasance Deposits).
7.1.3.
Borrower shall fail to perform or observe in any material and adverse
respect any of the covenants and agreements of Borrower set forth in this
Agreement, or any representation and warranty made by the Borrower in this
Agreement or in any of the other Loan Documents shall fail to have been true in
any material and adverse respect when made and, in either case, such failure
shall continue uncured, following the Borrower's receipt of written notice
thereof from the Lender, for a period of more than (i) 10 days with respect to
any failure or breach of covenant relating to the payment of taxes or the
maintenance of insurance, or (ii) 30 days, with respect to all other such
failures or breaches; provided that, with respect to clause (ii) above, it shall
not be an Event of Default hereunder if (a) such failure is curable but is not
reasonably capable of being cured within such 30-day cure period and Borrower
shall have promptly commenced to cure such failure (including by consummation of
a sale of the affected Hotel(s) and the payment of the applicable Release Price,
Defeasance Deposit and Yield Maintenance Payment, if any) and thereafter shall
diligently pursue such cure to completion, but in no event later than 180 days
after the date on which the Borrower received such written notice from the
Lender.
-70-
<PAGE>
7.1.4.
The Manager shall cease to be Manager of all of the Hotels then owned
by Borrower or the Management Agreement shall terminate with respect to one or
more Hotels then owned by the Borrower, unless, before the date on which the
Manager ceases to be the Manager of any such Hotel, or the Management Agreement
terminates with respect to any such Hotel, (a) Borrower causes such Hotel to
come under management by a nationally recognized hotel operator acceptable to
the Servicer, (b) such Hotel continues to be part of a comparable nationally
recognized hotel system acceptable to the Servicer, and (c) if the
Securitization has occurred, each of the Rating Agencies delivers to the Lender
a Rating Comfort Letter with respect thereto and the foregoing does not result
in a default under any Parent Debt.
7.1.5.
Borrower or the General Partner shall default in its payment of any
Indebtedness with an aggregate principal amount in excess of $3,500,000.
7.1.6.
If at any one time there shall be any final nonappealable judgment or
judgments rendered by any court or Governmental Authority not covered by
insurance aggregating in excess of $7,500,000 against Borrower or the General
Partner, which shall not have been satisfied, fully stayed or bonded within 60
days after the entry thereof.
7.1.7.
Either of the following shall occur with respect to the Borrower or
the General Partner or, if applicable, a lessee after a Permitted Reorganization
contemplated by Section 6.3.4:
(a) a decree, judgment, or order by a court of competent
jurisdiction shall have been entered adjudicating the Borrower or the
General Partner or such lessee or the general partner of such lessee
as bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization of the Borrower or the General Partner or such
lessee or the general partner of such lessee under any Bankruptcy Law,
and such decree or order shall have continued undischarged and
unstayed for a period of 60 consecutive days; or a decree, judgment or
order of a court of competent jurisdiction appointing a receiver,
liquidator, trustee, or assignee in bankruptcy or insolvency for the
Borrower or the General Partner or such lessee or the general partner
of such lessee, or any substantial part of the property of the
Borrower or the General Partner or such lessee or the general partner
of such lessee, or for the winding up or liquidation of the affairs of
the Borrower or the General Partner or such lessee or the general
partner of such lessee, shall have been entered, and such decree,
judgment, or order shall have remained in force undischarged and
unstayed for a period of 60 days; or
-71-
<PAGE>
(b) the Borrower or the General Partner or such lessee or the
general partner of such lessee shall institute proceedings to be
adjudicated a voluntary bankrupt, or shall consent to the filing of a
bankruptcy proceeding against it, or shall file a petition or answer
or consent seeking reorganization under any Bankruptcy Law, or shall
consent to the filing of any such petition, or shall consent to the
appointment of a custodian, receiver, liquidator, trustee, or assignee
in bankruptcy or insolvency of it or any substantial part of its
assets or property, or shall make a general assignment for the benefit
of creditors, or shall admit in writing its inability to pay its debts
generally as they become due, or shall, within the meaning of any
Bankruptcy Law, become insolvent, fail generally to pay its debts as
they become due, or shall, within the meaning of any Bankruptcy Law,
become insolvent, fail generally to pay its debts as they become due,
or take any corporate action in furtherance of or to facilitate,
conditionally or otherwise, any of the foregoing.
7.1.8.
Unless (a) the Borrower causes all of the Hotels then owned by the
Borrower to come under management by another nationally recognized hotel
operator acceptable to the Lender, and (b) such Hotels are operated as part of a
comparable nationally recognized hotel system acceptable to the Lender, and (c)
if the Securitization has occurred, each of the Rating Agencies delivers to the
Lender a Rating Comfort Letter with respect thereto:
(a) a decree, judgment, or order by a court of competent
jurisdiction shall have been entered adjudicating the Manager as
bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization of the Manager under any Bankruptcy Law, and
such decree or order shall have continued undischarged and unstayed
for a period of 60 consecutive days; or a decree, judgment or order of
a court of competent jurisdiction appointing a receiver, liquidator,
trustee, or assignee in bankruptcy or insolvency for the Manager, or
any substantial part of the property of the Manager, or for the
winding up or liquidation of the affairs of the Manager shall have
been entered, and such decree, judgment, or order shall have remained
in force undischarged and unstayed for a period of 60 days; or
(b) the Manager shall institute proceedings to be adjudicated a
voluntary bankrupt, or shall consent to the filing of a bankruptcy
proceeding against it, or shall file a petition or answer or consent
seeking reorganization under any Bankruptcy Law, or shall consent to
the filing of any such petition, or shall consent to the appointment
of a custodian, receiver, liquidator, trustee, or assignee in
bankruptcy or insolvency of it or any substantial part of its assets
or property, or shall make a general assignment for the benefit of
creditors, or shall admit in writing its inability to pay its debts
generally as they become due, or shall, within the meaning of any
Bankruptcy Law, become insolvent, fail generally to pay its debts as
they become due, or take any corporate action in furtherance of or to
facilitate, conditionally or otherwise, any of the foregoing.
-72-
<PAGE>
7.1.9.
An Event of Default shall occur under any other Loan Document.
7.1.10.
If a Securitization has not yet occurred, Borrower shall default in a
material respect under the Cooperation Agreement after the giving of any
required notice and/or the expiration of any required cure period.
7.1.11.
The General Partner (i) shall cease to be the general partner of
Borrower (other than in connection with a Permitted Reorganization), (ii) so
long as it shall be the General Partner of Borrower, shall fail to have at least
one director who is an Independent Director, other than as a result of the
resignation or removal of an Independent Director, so long as the General
Partner is then diligently searching for a new Independent Director, (iii)
shall terminate, liquidate or dissolve (other than in connection with a
Permitted Reorganization), or shall cease to be controlled by Host Marriott or
one or more other Persons with substantial experience in the ownership and
operation of hotels (including any successor to a substantial portion of the
lodging business of Host Marriott), (iv) shall engage, directly or indirectly,
in any business or activity except serving as general partner of Borrower
(provided that the acquisition, ownership, and disposition of assets of the kind
permitted by the proviso following clause (xiii) of the definition of "Single
Purpose" shall not be an Event of Default) or (v) shall not be at least 95%
owned, directly or indirectly, by Host Marriott, except that it shall not be an
Event of Default under this Section 7.1.11(v) if the General Partner (a) is at
least 95% owned by a nationally recognized hotel operator acceptable to Lender
and (b) each of the Rating Agencies delivers a Rating Comfort Letter with
respect thereto).
7.1.12.
Borrower acquires any assets not related to the business and operation
of the Hotels (other than a direct or indirect interest in a residual class
certificate issued pursuant to the Securitization).
7.1.13.
The declaration by any Marriott Ground Lessor of its intent to
terminate any Marriott Ground Lease as a result of any event of default
thereunder or the occurrence of an event of default under any Ground Lease other
than a Marriott Ground Lease.
7.1.14.
A holder of Permitted Debt described in clause (iv) of the definition
of Permitted Debt holds any assets other than any Permitted Debt, incurs any
liabilities other than (a) liabilities for administrative expenses incurred in
the ordinary course of business and (b) liabilities for income taxes or
otherwise fails to be a Single Purpose entity.
-73-
<PAGE>
7.1.15.
An event of default occurs under the lease created pursuant to Section
6.3.4.
7.2. Remedies
If an Event of Default shall have occurred and be continuing, the
Lender shall have the right, in its sole discretion, by written notice to the
Borrower (except upon the occurrence of an Event of Default under Section 7.1.7
affecting Borrower, in which case all principal and accrued interest thereon
will be immediately due and payable on the Mortgage Note without any declaration
or other act on the part of the Lender) to take one or more of the following
actions:
7.2.1.
To declare the principal of and all amounts accrued but unpaid under
the Mortgage Note, this Agreement and the other Loan Documents, together with
any associated Yield Maintenance Payment, to be immediately due and payable, and
such amounts shall thereupon become immediately due and payable, without
presentment, demand, protest or notice of any kind, other than any notice
specifically required by this Section 7.2, all of which are hereby expressly
waived by Borrower.
7.2.2.
Pursue such rights and remedies against the Borrower, or otherwise, as
are provided under and pursuant to this Agreement, the Mortgages or any of the
other Loan Documents and as may be available to the Lender at law or in equity;
provided, however, that the Lender shall not be entitled to initiate foreclosure
proceedings unless five (5) Business Days' prior written notice of such
intention is given to Borrower and the Manager and, where applicable, the
Marriott Ground Lessors.
7.2.3.
If the Event of Default involves the Borrower's failure to pay any
tax, assessment, encumbrance or other imposition binding on the Borrower or any
of the Collateral or to perform its obligation to furnish insurance hereunder,
or to perform or observe any other covenant, condition or term in any Loan
Document or in the Management Agreement or any Ground Lease, the Lender may, at
its option, without waiving or affecting any of its other rights or remedies
hereunder, pay, perform or observe the same, and, in connection therewith, the
Lender shall be entitled to rely on any representations and statements of the
ground lessor under any such Ground Lease or of the Manager under the Management
Agreement in regard to alleged breaches or violations thereof, and all payments
made or costs or expenses incurred by the Lender in connection therewith shall
be repaid by Borrower to the Lender within fifteen (15) days after demand
therefor, together with interest at the Default Interest Rate, and shall be
added to and become a part of the Indebtedness secured by the Mortgages and
other Security Documents. The Lender is hereby empowered to enter and to
authorize others to enter upon any Land and all Improvements located on any Land
for the purpose of performing or
-74-
<PAGE>
observing any such defaulted covenant, condition or term, without thereby
becoming liable to Borrower or any Person in possession holding under Borrower.
7.2.4.
Appoint as a matter of right, without notice, to the fullest extent
permitted under applicable law, a receiver for the Borrower or for all or any
part of the Collateral, whether such receivership be incidental to a proposed
sale of the Collateral or otherwise. All disbursements made by the receiver and
the expenses of receivership, shall be added to and be a part of the principal
amount of the obligations secured by the Security Documents, and, whether or not
said principal sum, including such disbursements and expenses, exceeds the
indebtedness originally intended to be secured thereby, the entire amount of
said sum, including such disbursements and expenses, shall bear interest at the
Default Interest Rate, be secured by the Security Documents and shall be due and
payable within fifteen (15) days after demand therefor.
7.3. Remedies Cumulative
Each of the rights, powers, and remedies provided herein are intended
and are hereby deemed to be cumulative, concurrent and in addition to, and not
in limitation of, those rights, powers, and remedies provided elsewhere
hereunder or in any other Loan Document or now or hereafter existing at law or
in equity or by statute or otherwise. No waiver of any Event of Default in one
instance shall constitute a waiver of any other or any succeeding Event of
Default, except to the extent provided in such waiver.
7.4. Default Interest
In addition to the provisions of Section 2 hereof, if Borrower shall
fail to make payment when and as due of any amounts due hereunder (whether at
the stated date for payment, or earlier upon an acceleration hereunder),
Borrower shall pay, to the fullest extent permitted by applicable law, interest
to the Lender on such past due amounts beginning on the date such payment
becomes past due at a per annum rate of interest (the "Default Interest Rate")
equal to the greater of (a) the Interest Rate in effect from time to time plus
two percentage points (2%) and (b) the Prime Rate. The Borrower acknowledges
that its obligation to pay Default Interest may be separated from the other
obligations of the Borrower hereunder, and may be held or transferred separately
from the other obligations of the Borrower hereunder.
7.5. Default Indemnity
Borrower hereby agrees to, and shall, indemnify and hold harmless the
Lender, against the reasonable out-of-pocket costs and expenses (including
reasonable attorneys' fees and expenses) which they may sustain or incur as a
consequence of any Default or Event of Default hereunder and in the enforcement
of the Lender's rights and remedies in connection therewith. Lender shall
provide to Borrower a satisfactory statement, signed by an officer of Lender and
supported, where applicable, by documentary evidence, explaining the amount of
all such costs or expenses. Any amounts that Borrower must pay to Lender under
this Section 7.5 shall bear interest at the Default Interest Rate
-75-
<PAGE>
and shall be due fifteen (15) days after demand therefor accompanied by
documentation sufficient to establish the amount of Borrower's liability, and
shall be added to and become a part of the Indebtedness secured by the Mortgages
and other Security Documents.
8. INSURANCE
8.1. Maintenance of Insurance
Borrower shall maintain at all times with Qualified Insurance
Companies (a) comprehensive general liability insurance, including broad form
property damage, blanket contractual liability coverage, and coverage for
personal injuries (including death resulting therefrom) containing minimum
limits per occurrence of not less than $20,000,000 (including umbrella
coverage), which insurance shall name the Lender, as an additional insured and
(b) all policies of insurance required under each of the Mortgages, which
policies shall name the Lender, as an additional insured or loss payee, as
applicable, as their interests may appear. Each policy of insurance required
hereunder shall require the insurer to give not less than thirty (30) days'
prior written notice to the Lender in the event of cancellation of such policy
for any reason whatsoever (ten (10) days in the case of non-payment of premium)
and, with respect to property insurance, shall provide that the interest of the
additional insureds or loss payees thereunder shall not be impaired or
invalidated by any act or neglect of Borrower or the owner of any of the insured
property or by the occupation of the premises wherein such property is located
for purposes more hazardous than are permitted by such policy. If Borrower
fails to provide and pay for such insurance, the Lender may, at Borrower's
expense, procure the same, but shall not be required to do so, and any amounts
reasonably expended by the Lender to do so, together with interest at the
Default Interest Rate shall become part of the debt secured by the Security
Documents.
8.2. Payment and Application of Insurance Proceeds
Insurance proceeds payable with respect to damage to or destruction of
any Mortgaged Property or the Improvements related thereto, including damage by
earthquake, if covered by the policy described in clause (a) of Section 8.3
hereof, if in effect, shall be applied in accordance with the terms of the
applicable Mortgage. All other insurance proceeds shall be payable in
accordance with the provisions of the applicable policy.
8.3. Earthquake Insurance
With respect to the Mortgaged Properties located in California,
Borrower agrees to purchase by June 1, 1997, from a Qualified Insurance Company,
a blanket policy of insurance (which policy may also provide coverage for hotels
managed by MII and its Affiliates other than the Mortgaged Properties), if
available at commercially reasonable rates, insuring all of such Mortgaged
Properties against damage by earthquake in an aggregate insured amount not less
than $10,000,000 and having a deductible of not more than five percent (5%) of
the total insured value or as commonly carried by operators of similar
properties and to maintain such insurance in effect thereafter. Pending the
initial
-76-
<PAGE>
purchase of such insurance, Borrower shall, no later than April 1, 1997,
establish an escrow account, as a subaccount of the Cash Collateral Account, in
the amount of $1,000,000, which shall be returned to the Borrower at such time
as the required policy is procured (or applied to cover losses from earthquake
if any Mortgaged Property located in California is damaged by earthquake prior
to the time such policy is procured). If such insurance is not available on
commercially reasonable terms, or at any time hereafter is no longer available
on commercially reasonable terms, is canceled by the insurer, or otherwise is
not in effect , the Borrower will promptly obtain from a qualified seismic
engineering firm, with respect to the Mortgaged Properties located in
California, a 100-year study, using reasonable efforts to obtain such report
prior to expiration of the applicable insurance, of the probable maximum loss
(with a scope at least as broad as those performed and delivered in connection
with the Closing pursuant to Section 4.3.14) from earthquakes, which firm and
the scope of which study shall be reasonably acceptable to the Rating Agencies
and the Lender, and promptly upon the issuance of the report of such firm
deposit into a segregated reserve account maintained with the Lender, which
shall be a subaccount of the Cash Collateral Account (the "Earthquake Casualty
Reserve Account"), an amount of cash equal to the aggregate probable maximum
losses at all of the Mortgaged Properties located in California, as stated in
such report, (i) which deposit shall be retained by the Lender for distribution
to Borrower to repair uninsured damage caused by earthquake at any one or more
of the California Mortgaged Properties or for application to repayment of the
Loan, in the same manner and on the same conditions as if the amounts on deposit
from time in the Earthquake Casualty Reserve Account constituted Insurance
Proceeds on deposit in the Insurance Proceeds Subaccount and the necessary
repairs constituted "Restoration" under Section 1.8 of the applicable Mortgage.
All amounts on deposit in the Earthquake Casualty Reserve Account shall be
returned to Borrower upon payment in full of all amounts due under the Loan
Documents or at such time as Borrower obtains the earthquake insurance required
by this Section 8.3.
8.4. Environmental Insurance
With respect to the Mortgaged Property located in San Antonio, Texas,
environmental insurance with limits and coverage reasonably acceptable to Lender
from an insurance company having a minimum A.M. Best Rating of B+/VIII and an
S&P rating of not less than "AA," for an initial period of not less than ten
(10) years after the Closing Date, which shall be renewed annually so as to
remain in effect for the full term of the Loan; provided, however, that if such
insurance is not available from an insurer having an S&P rating of "AA" then
such insurance shall be obtained from an Insurer having the highest S&P rating
available among insurers that issue such insurance; and provided further that,
if such insurance is at any time not available at commercially reasonable rates,
the Borrower may cease carrying such coverage if, but only if, each of the
Rating Agencies shall have delivered a Rating Comfort Letter.
-77-
<PAGE>
9. SECURITIZATION
9.1. Securitization
The Borrower and the General Partner shall use commercially
reasonable best efforts to cooperate with the Lender in its activities in
connection with the sale of the Loan as a whole loan or any securitization of
the Loan (the "Securitization"), including obtaining ratings by the Rating
Agencies. The Securitization will involve the issuance of rated single- or
multi-class securities secured by or evidencing ownership interests in the Loan
Documents (the "Certificates"). The Borrower acknowledges and agrees that, in
connection with the Securitization, (a) this Agreement, the Mortgage Note, the
Security Documents and the other Loan Documents may be assigned, pursuant to the
assignment, to a trustee (the "Trustee"), as trustee under a trust and servicing
agreement (the "Trust and Servicing Agreement") in form substantially similar to
those commonly used in rated commercial mortgage-backed securities offerings and
(b) pursuant to the Trust and Servicing Agreement, a professional loan servicer
of recognized standing (the "Servicer") would be appointed to service the Loan,
this Agreement and the Loan Documents as provided therein. The addresses of the
Trustee and the Servicer will be provided to the Borrower and the Ground Lessors
in writing before the Securitization is consummated. Upon such assignment, the
Trustee shall for all purposes be the sole Lender hereunder and the sole
mortgagee or beneficiary under the Mortgages (and all references herein to the
"Lender" shall be deemed to refer to the Trustee) and shall, together with the
Servicer, among other things, (i) have the sole and exclusive benefit of and the
right and power to exercise, or to direct the exercise of, all the rights and
remedies of the Lender hereunder and under the Security Documents, including the
right to inspect the Collateral, to receive notices and financial information,
to grant or withhold consents or approvals, to benefit from indemnities, to
receive, hold and apply proceeds or any other amount or property provided by the
Borrower hereunder, and, upon the occurrence and during the continuation of an
Event of Default, to take any action required or permitted of the Lender with
respect thereto, all in the Trustee's own name, and to exercise all other rights
and remedies of the Lender hereunder and under the Security Documents, and (ii)
be bound by all the terms hereof which apply to the Lender. The Borrower hereby
acknowledges the foregoing and agrees to be bound to the Trustee, upon such
assignment, recognizing the Trustee as the Lender hereunder as if the Trustee
were named in this Agreement as the Lender, recognizing that the Servicer shall
be entitled to act on behalf of the Trustee and the Holders under and as
provided in the Trust and Servicing Agreement and shall be entitled to and shall
receive all notices, financial and other information, agreements and other
documents to be delivered to the Lender or the Trustee hereunder or under any of
the other Loan Documents and accepting and agreeing to all of the terms
reasonably set forth in the Trust and Servicing Agreement and the exhibits
thereto, all of which shall be secured under the Security Documents. Upon such
assignment, the Borrower's obligations to the Lender specified in this Agreement
shall be satisfied by the Borrower's tendering full and timely payment or
performance thereof to the Trustee or, if directed by the Trustee, to the
Servicer. With respect to the delivery of documents and other written material,
the Trustee and the Servicer shall have only the obligations expressly required
of the Lender herein or in the other Loan Documents or of the Trustee or the
Servicer in the Trust and Servicing Agreement. All rights and remedies of the
Trustee as the Lender hereunder, including all indemnities running to the
Lender, shall also operate for the benefit of the Servicer and the Holders, as
provided in the Trust and Servicing Agreement, and shall be
-78-
<PAGE>
exercised by the Trustee and the Servicer in accordance with and subject to the
terms and conditions set forth in the Trust and Servicing Agreement. The
Borrower acknowledges and agrees that, until the Borrower has received notice
from the Trustee to the contrary, and subject to the terms and conditions set
forth in the Trust and Servicing Agreement to the contrary, all deliveries and
notifications to be made by the Borrower to the Trustee, as Lender, pursuant to
this Agreement or any other Loan Document shall be made to the Servicer only and
not to the Trustee.
9.2. No Assignment by Borrower
The rights and obligations of Borrower under this Agreement are
personal to Borrower and, accordingly, Borrower shall not assign this Agreement
or any other Loan Document or any other right, interest, or obligation of
Borrower hereunder or thereunder, either in whole or in part, to any Person
whatsoever, other than in connection with a Permitted Reorganization.
9.3. Method of Payment
Following the assignment contemplated by Section 9.1 hereof, Borrower
shall make or cause to be made all payments under the Mortgage Note, and any
other payments required to be made by the Borrower to or on behalf of the Lender
hereunder or pursuant to any other Loan Document, to the Servicer by application
of the provisions of the Cash Management Procedures attached as Schedule 5.11
-------------
hereto or by wire transfer through the Federal Reserve Bank of New York of
immediately available funds in lawful tender of the United States of America, in
accordance with instructions provided by the Servicer, which payments shall be
held and applied by the Servicer in accordance with the Trust and Servicing
Agreement.
10. ASSIGNMENT AND PARTICIPATION
Notwithstanding anything to the contrary set forth herein or in any
other Loan Document, Lender and any assignee of Lender shall have the right at
any time and from time to time to (a) assign (and thereafter, at any time and
from time to time, repurchase) all or any portion of its rights and obligations
with respect the Loan, including, without limitation, all or any portion of the
outstanding principal balance of the Loan and thereafter be released from its
rights and obligations as Lender in respect of such portion of the Loan (except
to the extent such portion of the Loan is repurchased by the Lender or such
assignee), and (b) sell participations in the Loan. If requested by Lender,
Borrower shall execute and deliver a written acknowledgment acknowledging the
assignment of all or a portion of the Loan to an assignee.
11. MISCELLANEOUS
11.1. Limitation on Liability
Notwithstanding any contrary provision in any of the Loan Documents,
it is hereby expressly agreed that, except as otherwise provided in this Section
11 or in any
-79-
<PAGE>
Section of any Loan Document that is substantially similar to this Section 11,
there shall be no recourse to the assets of Borrower or any of its Partners
(other than against the Collateral and any other property given as security for
the payment of the Mortgage Note) for (i) the payment of principal, interest,
Yield Maintenance Payments or other charges under this Agreement or the Mortgage
Note or for any other amount that is or may become due and owing to the Lender
by Borrower under this Agreement or any of the other Loan Documents or (ii) the
performance or discharge of any covenant or undertaking hereunder or under the
other Loan Documents, and in the event of any Event of Default hereunder or
thereunder, the Lender agrees to proceed solely against the Collateral and any
other property given as security for payment of the Mortgage Note, and the
Lender shall not seek or claim recourse against Borrower or the General Partner
(other than against the Collateral and any other property given as security for
payment of the Mortgage Note) for any deficiency or for any personal judgment
after a foreclosure of the lien of any of the Mortgages or other Security
Documents or for the performance or discharge of any covenants or undertakings
of Borrower hereunder or under any of the other Loan Documents (except that
Borrower may be made a party to a proceeding to the extent legally necessary for
the conduct of a foreclosure or the exercise of other similar remedies under the
Mortgages or other Security Documents). Notwithstanding the foregoing, nothing
contained in this Section 11 shall relieve Borrower or the General Partner of
any personal liability for any loss, cost, expense, damage or liability arising
or resulting from (A) any breach of any representation or warranty made in this
Agreement that was materially incorrect when made and that was made with
fraudulent intent, (B) any amount paid or distributed to the General Partner,
the Limited Partners, the Manager or any Affiliate of any of them in violation
of the provisions of the Loan Documents, (C) fraud or breach of trust, including
misapplication of Loan proceeds or any Insurance Proceeds or Awards or other
sums that are part of the Collateral that may come into the possession or
control of Borrower or the General Partner or any Affiliate of any of them or
(D) liability of such Person under the Environmental Indemnity Agreement. It is
hereby expressly agreed that neither the General Partner nor any director,
officer, shareholder, partner or employee of Borrower or the General Partner,
nor the legal or personal representative, successor or assign of any of the
foregoing, nor any other principal of Borrower or the General Partner, whether
disclosed or undisclosed, shall have any personal liability under this Agreement
or any of the other Loan Documents, except as personal liability may be
specifically imposed upon the General Partner in accordance with clauses (A),
(B), (C) and (D) of this Section 11, and in no event shall any limited partner
of Borrower have any liability whatsoever with respect to the Loan or any
monetary obligations with respect thereto, or any of the matters described in
clause (A), (B), (C) or (D) above. It is the intention of the parties hereto
that this Section 11 shall govern every other provision of the Loan Documents
and that the absence of explicit reference to this Section 11 in any provision
of the Loan Documents or the absence of any Section similar to this Section 11
in any Loan Document shall not be construed to deny the application of this
Section 11 to such provision, notwithstanding the presence of explicit reference
to this Section 11 in other provisions of the Loan Documents.
11.2. Entire Agreement, Amendments
This Agreement, including the Schedules and Exhibits hereto and the
other instruments and documents referred to herein or delivered pursuant hereto,
contains the entire agreement among the parties with respect to the subject
matter hereof and
-80-
<PAGE>
supersedes all prior oral or written agreements, commitments or understandings
with respect to such matters. No amendment, modification or discharge of this
Agreement shall be valid or binding unless set forth in writing and duly
executed by both parties.
11.3. Notices
All notices, requests and demands to or upon the respective parties
hereto shall be in writing (except as is otherwise specifically provided in this
Agreement) and shall be deemed to have been duly given or made when received (or
when delivery thereof is refused by the intended recipient) if mailed by first-
class registered or certified mail, return receipt requested, postage prepaid,
or sent by facsimile transmission, with confirmation of receipt or delivery, or
sent by nationally recognized overnight courier, delivery charges prepaid or
delivered by hand, in each case addressed or directed as follows (or to such
other address or facsimile transmission number as may be hereafter designated in
writing by the respective parties hereto):
If to Borrower: Courtyard By Marriott Limited Partnership
c/o Host Marriott Corporation
10400 Fernwood Road
Bethesda, Maryland 20817
Dept. 923
Attention: Law Dept.
Fax No.: (301) 380-6332
with a copy to:
Courtyard by Marriott Limited Partnership
c/o Host Marriott Corporation
10400 Fernwood Road
Bethesda, Maryland 20817
Dept. 908
Attention: Asset Management
Fax No.: (301) 380-8260
with a copy to:
c/o Marriott International, Inc.
10400 Fernwood Road
Bethesda, Maryland 20817
Dept. 52/293
Attention: Assistant General Counsel,
Development
Fax No.: (301) 380-6727
-81-
<PAGE>
If to Lender: Lehman Brothers Holdings Inc.
doing business as Lehman Capital, a
division of Lehman Brothers Holdings Inc.
3 World Financial Center
New York, New York 10285
Attention: Commercial Mortgage Loan Surveillance
Fax: (212) 528-6659
11.4. No Waiver; Cumulative Remedies
No delay or failure on the part of any party hereto in exercising any
right, power or privilege under this Agreement or under any other instrument or
document given in connection with or pursuant to this Agreement shall impair any
such right, power or privilege or be construed as a waiver of any default or any
acquiescence therein. No single or partial exercise of any such right, power or
privilege shall preclude the further exercise of such right, power or privilege,
or the exercise of any other right, power or privilege. No waiver shall be
valid against any party hereto unless made in writing and signed by the party
against whom enforcement of such waiver is sought and then only to the extent
expressly specified therein. The rights and remedies herein provided are
cumulative and not exclusive of any rights or remedies provided by law.
11.5. Waiver of Jury Trial
Each of the parties hereto (i) covenants and agrees not to elect
trial by jury of any issue triable of right by a jury and (ii) waives any rights
to trial by jury to the full extent that any such right shall now or hereafter
exist. This waiver of right to trial by jury is separately given, knowingly and
voluntarily, by each party hereto, and this waiver is intended to encompass
individually each instance and each issue as to which the right to a jury trial
would otherwise accrue. The parties are hereby authorized to submit this
Agreement to any court having jurisdiction over the subject matter so as to
serve as conclusive evidence of the other party's herein contained waiver of the
right to jury trial. Further, each party hereto certifies that no representative
of the other party (including such other party's counsel) has represented,
expressly or otherwise, to that party, that the other party will not seek to
enforce this waiver by the such certifying party of the right to a jury trial.
11.6. Governing Law; Consent to Jurisdiction
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York (but not including the choice of law rules
thereof). In the event of any litigation arising out of this Loan Agreement,
Borrower agrees that the substantive law of the State of New York shall apply.
Borrower hereby consents to jurisdiction within the State of New York for
purposes of such litigation and agrees that service of process may be made, and
personal jurisdiction over Borrower obtained, by serving a copy of the summons
and complaint upon Borrower, at the notice address set forth herein, in
accordance with the applicable laws of the State of New York. Nothing herein
contained, however, shall prevent any owner or holder of the Mortgage Note from
bringing any action or exercising any right against any security or against
Borrower,
-82-
<PAGE>
personally, or against any property of Borrower, within any other jurisdiction
or state. Initiating such proceeding or taking such action in any other
jurisdiction or state shall not, however, constitute a waiver of the agreement
contained herein that the laws of the State of New York shall govern the rights
and obligations of the parties hereunder.
11.7. Payment of Expenses
11.7.1.
Borrower shall pay all expenses incurred by Lender in connection with
this Agreement and in the preparation for, and consummation of, the transactions
provided for herein and in connection with the enforcement hereof, and Borrower
shall pay all costs of conveyances, initial Servicer fee and Trustee fee,
initial rating fees and ongoing activity of any special Servicer incurred as a
result of an Event of Default, bank charges relating to the operation of the
Operating Account, the Lockbox Account, the FF&E Reserve Account, the Cash
Collateral Account, the Manager's Account and any Local Account, after the
Securitization has occurred, its proportionate share of initial and annual
surveillance fees, if any, of the Rating Agencies, any processing fees,
reasonable attorney's fees and disbursements, auditor's fees, costs of
appraisals, environmental reports, and engineering reports, all title insurance
premiums, all notary fees, all filing and application fees to any federal, state
or local agencies, all sales, stamp, documentary, transfer, and other taxes and
fees applicable to the transactions contemplated by this Agreement and the
instruments and documents called for hereunder and all other costs and charges
incurred by the parties in connection with such transactions. In addition, the
Borrower shall reimburse the Lender for any expenses incurred by the Lender to
the extent provided in Section 4.8 hereof.
11.7.2.
Except as provided in Section 11.7.1, if the Securitization occurs,
the Servicer Fee (as defined in the Trust and Servicing Agreement) and the
Trustee Fee (as defined in the Trust and Servicing Agreement) and any other
amounts required to be paid to the Servicer or the Trustee under the Trust and
Servicing Agreement in reimbursement of expenses of the Servicer or the Trustee
shall be paid by the Lender or the Trust Fund (the "Trust Fund") created under
the Trust and Servicing Agreement.
11.8. Severability
In the event that any term or provision of this Agreement or of any
other Loan Document or the application thereof to any Person or circumstance
shall, to any extent, be held to be invalid or unenforceable, the remainder of
such term or provision or the application thereof to Persons or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each term and provision of this Agreement shall be valid
and shall be enforced to the fullest extent permitted by law.
-83-
<PAGE>
11.9. Gender, Etc.
Whenever used herein and where the context so requires, the singular
shall include the plural, the plural shall include the singular, and the use of
the masculine, feminine or neuter gender shall include all genders; and the word
"including" shall mean "including, without limitation."
11.10. Headings
The Article, Section and Subsection headings of this Agreement are
for convenience of reference only, and shall not limit or otherwise affect any
of the terms hereof.
11.11. Counterparts; Facsimiles
This Agreement may be executed in separate counterparts, none of
which need contain the signatures of all parties, each of which shall be deemed
to be an original, and all of which taken together shall constitute one and the
same instrument. It shall not be necessary in making proof of this Agreement to
produce or account for more than the number of counterparts containing the
respective signatures of, or on behalf of, all of the parties hereto. In the
event the parties hereto exchange signature pages of this Agreement by
facsimile, they agree to send the original executed counterparts of this
Agreement to one another by overnight delivery service, but the facsimile
signatures shall in any event be binding.
11.12. No Third Party Beneficiary
The parties do not intend the benefits of this Agreement to inure to
any third party other than the Trust (and the Servicer and Trustee on behalf of
the Trust), upon assignment hereof by the Lender to the Trustee, on behalf of
the Trust, as contemplated by Section 9.1 hereof. Notwithstanding anything
contained herein or in the Mortgage Note or any other Loan Document to the
contrary, or any conduct or course of conduct by any or all of the parties
hereto, before or after signing this Agreement or any of the other Loan
Documents, nothing herein shall be construed as creating any right, claim or
cause of action against the Lender, or any of the Lender's officers, directors,
agents or employees, in favor of any materialman, supplier, contractor,
subcontractor, purchaser or lessee of any property owned by Borrower any other
person or entity other than Borrower.
11.13. No Liability of Lender
The relationship between Borrower and the Lender is, and shall at
all times remain, solely that of borrower and lender, and the Lender will not
undertake or assume any responsibility or duty to Borrower to review, inspect,
supervise, pass judgment upon, or inform Borrower of any matter in connection
with any phase of Borrower's business, operations, or condition, financial or
otherwise. Borrower shall rely entirely upon its own judgment with respect to
such matters, and any review, inspection, supervision, exercise of judgment, or
information supplied to Borrower by the Lender in connection with any such
-84-
<PAGE>
matter is for the protection of the Lender, and neither Borrower nor any third
party is entitled to rely thereon.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
have caused this Agreement to be executed on their behalf as of the day and year
first above written.
BORROWER:
COURTYARD BY MARRIOTT LIMITED
PARTNERSHIP
ATTEST: By: CBM One Corporation,
general partner
By: By:
--------------------------- ----------------------
Its: Its:
-------------------------- ---------------------
[SEAL] LENDER:
ATTEST: LEHMAN BROTHERS HOLDINGS INC.,
doing business as Lehman Capital, a division
of Lehman Brothers Holdings Inc.
By: By:
--------------------------- ----------------------
Its: Its:
-------------------------- ---------------------
[SEAL]
-85-
<PAGE>
JOINDER BY GENERAL PARTNER
IN SEPARATENESS COVENANTS
As an inducement to the Lender named in the foregoing Loan Agreement
to make the loan contemplated therein CBM One Corporation, a Delaware
corporation and the general partner of Courtyard By Marriott Limited
Partnership, hereby agrees to comply with the requirements of Sections 5.10,
5.12, 6.1, 6.3, 6.4, and 6.5 of the Loan Agreement and agrees, following the
assignment of the Loan Agreement by the Lender named therein to the Trustee
named therein, such Trustee will be entitled to enforce the obligations of the
undersigned under such Sections 5.10, 6.1, 6.4, and 6.5 of the Loan Agreement.
IN WITNESS WHEREOF, the undersigned has caused this instrument to be
executed by its duly authorized officer.
Dated: ___________ __, 1997 CBM ONE CORPORATION
By:
-----------------------
Name:
Title:
-86-
<PAGE>
LIST OF SCHEDULES
Schedule A Description of the Land
Schedule B Ground Leases
Schedule 1.3 Rating Categories
Schedule 2.4.1 Allocated Loan Amounts
Schedule 2.4.4 Amortization of Loan
Schedule 3.5A Modifications of Ground Leases
Schedule 3.5B Options to Purchase Under Ground Leases
Schedule 3.5C Notices of Default Under Ground Leases
Schedule 3.5D Application of Insurance Proceeds
Schedule 3.23 Flood Hazard Areas
Schedule 3.25 Liens
Schedule 4.3.2 Hotels; Title Insurance Amounts; Endorsements
Schedule 5.11 Cash Management Procedures
-87-
<PAGE>
LIST OF EXHIBITS
Exhibit A Form of Mortgage Note
Exhibit B Form of Local Counsel Opinion
Exhibit C-1 Form of Parent Debt Intercreditor Agreement
Exhibit C-2 Form of Permitted Debt Intercreditor Agreement
Exhibit D Form of Permitted Debt Note
-88-
<PAGE>
Exhibit 10.O
FIRST AMENDMENT TO LOAN AGREEMENT
THIS FIRST AMENDMENT TO LOAN AGREEMENT (this "First Amendment") is
entered into as of March 21, 1997 by and between COURTYARD BY MARRIOTT LIMITED
PARTNERSHIP, a Delaware limited partnership having its principal office at 10400
Fernwood Road, Bethesda, Maryland 20817 ("Borrower"), and LEHMAN BROTHERS
HOLDINGS INC., a Delaware corporation, doing business as Lehman Capital, a
division of Lehman Brothers Holdings Inc., having its principal office at 3
World Financial Center, New York, New York 10285 ("Lender").
WHEREAS, Borrower and Lender entered into that certain Loan Agreement
dated as of March 21, 1997 (the "Loan Agreement"), pursuant to which Lender
agreed to make a loan to Borrower in the principal amount of Three Hundred
Twenty-Five Million and No/100 Dollars ($325,000,000.00) (the "Loan"); and
WHEREAS, Lender wishes to securitize the Loan and in connection
therewith and pursuant to that certain Mortgage Loan Cooperation Agreement dated
as of March 21, 1997 between Borrower and Lender, Borrower has agreed to modify
certain provisions of the Loan Agreement to facilitate the securitization;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Amendment and Integration. The Loan Agreement is amended in the
-------------------------
following respects as of March 21, 1997 with the same effect as if the following
amendments were initially incorporated therein:
a. The definition of "Eligible Accounts" in Section 1.1 of the Loan
Agreement is hereby amended in its entirety to read as follows:
" `Eligible Account' means either (i) an account maintained with a
federal or state chartered depository institution or trust company,
(a) if the funds therein are to be retained for more than 30 days, the
long-term unsecured debt obligations of which (or, in the case of a
depository institution or trust company that is the principal
subsidiary of a holding company, the long-term unsecured debt
obligations of the holding company of which) are rated by each Rating
Agency in one of its two highest rating categories (or are assigned
such other ratings as will not result in the rating of any of the
Certificates being reduced
<PAGE>
below their respective ratings on the date determination is to be made
and as to which the Rating Agencies may otherwise agree), or (b) if
the funds therein are to be retained for less than 30 days, the short-
term unsecured debt obligations of such depository institution or
trust company (or, in the case of a depository institution or trust
company that is the principal subsidiary of a holding company, the
long-term unsecured debt obligations of the holding company of which),
as the case may be, are rated not lower than "A-1+" by the applicable
Rating Agencies, or (ii) a segregated trust account maintained with
the trust department of a federal or state chartered depository
institution or trust company acting in its fiduciary capacity provided
that such account is subject to fiduciary funds on deposit regulations
(or internal guidelines) substantially similar to 12 C.F.R.
(S)9.10(b), or (iii) an account in any other insured depository
institution reasonably acceptable to the Lender, so long as prior to
the establishment of an account in any such other depository
institution each of the Rating Agencies shall have delivered a Rating
Comfort Letter with respect thereto."
b. The definition of "Permitted Investments" in Section 1.1 of the
Loan Agreement is hereby amended in its entirety to read as follows:
" `Permitted Investments' means any one or more of the following
obligations or securities which are payable on demand or available for
withdrawal, in each case without penalty, and having at all times the
required ratings, if any, provided for in this definition, unless each
Rating Agency shall have confirmed in writing to the Lender that a
lower rating would not, in and of itself, result in the withdrawal,
downgrading or qualification of the ratings assigned to the
Certificates (and investments will not be disqualified as "Permitted
Investments" solely because they are issued by Lender or an Affiliate
of Lender):
(i) direct obligations of, or obligations guaranteed as to full and
timely payment of principal and interest by, the United States or any
agency or instrumentality thereof, having maturities of not more than
365 days from the date of investment provided that such obligations
are backed by the full faith and credit of the United States of
America, and such obligations have a predetermined fixed amount of
principal due at maturity which cannot vary or change;
(ii) direct obligations of, or obligations guaranteed as to timely
payment of principal and interest by, FHLMC, FNMA or the Federal Farm
Credit System, having maturities of not more than 365 days from the
date of investment, provided that any such obligation is
2
<PAGE>
qualified by each Rating Agency as an investment of funds backing
securities having a long-term unsecured debt rating of "AAA" or
better, and such obligations have a predetermined fixed amount of
principal due at maturity which cannot vary or change;
(iii) demand and time deposits in, or demand notes of, or
certificates of deposit of, or bankers' acceptances having maturities
of not more than 365 days from the date of investment, issued by, any
bank or trust company, savings and loan association or savings bank,
provided that the commercial paper or long-term unsecured debt
obligations of such depository institution or trust company (or in the
case of the principal depository institution in a holding company
system, the commercial paper or long-term unsecured debt obligations
of such holding company) are then rated not lower than the highest
rating category of each Rating Agency, in the case of commercial
paper, or in the highest category in the case of long-term debt
obligations, or such lower categories as will not result (as evidenced
in writing by each Rating Agency) in the withdrawal, downgrading or
qualification of the rating then assigned (or, prior to the
Securitization, proposed to be assigned) to the Certificates by each
Rating Agency, or, in the case of short-term debt obligations which
have maturities of 30 days or less, a rating of "A-1+" and such
obligations have a predetermined fixed amount of principal due at
maturity which cannot vary or change;
(iv) commercial or finance company paper (including both non-interest-
bearing discount obligations and interest-bearing obligations payable
on demand or on a specified date not more than one year after the date
of investment) that is rated by each Rating Agency in its highest
short-term unsecured rating category, and is issued by a corporation
the outstanding senior debt obligations of which are then rated by
each Rating Agency in its highest short-term unsecured rating category
or its highest long-term unsecured rating category, as applicable, and
such obligations have a predetermined fixed amount of principal due at
maturity which cannot vary or change;
(v) repurchase obligations maturing not more than 365 days from the
date of investment with respect to any security described in clause
(i) or (ii) above entered into with a depository institution or trust
company (acting as principal) meeting the rating standards described
in (iii) above;
(vi) securities (other than stripped bonds or stripped coupons)
maturing not more than 365 days from the date of investment bearing
3
<PAGE>
interest or sold at a discount that are issued by any corporation
incorporated under the laws of the United States of America or any
state thereof and rated by each Rating Agency in its highest long-term
unsecured rating category, which securities have a predetermined fixed
amount of principal due at maturity which cannot vary or change;
provided, however, that the total amount of Permitted Investments of
-------- -------
the kind described in this clause (vi) is limited to the amount of the
Monthly Debt Service Payment next coming due, and provided, further,
that securities issued by any such corporation will not be Permitted
Investments to the extent that investment therein would cause the
outstanding principal amount of securities issued by such corporation
that are then held as part of any Account, to exceed 20% of the
aggregate principle amount of all Permitted Investments then held in
the Accounts;
(vii) any money market funds rated "AAAm" or "AAAm-G" by S&P (or
equivalent); and
(viii) such other obligations as are acceptable as Permitted
Investments to each Rating Agency, as evidenced in writing by each
Rating Agency;
provided, however, that each such instrument continues to qualify as a
"cash flow investment" pursuant to Code Section 860G(a)(6) earning a
passive return in the nature of interest and that no instrument or
security shall be a Permitted Investment if (i) such instrument or
security evidences a right to receive only interest payments; (ii) the
right to receive principal and interest payments derived from the
underlying investment provides a yield to maturity in excess of 120%
of the yield to maturity at par of such underlying investment; or
(iii) such instrument or security may be liquidated prior to its
maturity; and provided, further, that (a) variable interest on any
such investment shall be based on a single index and vary
proportionally with such index, and no such instrument or investment
shall have a rating by the Rating Agencies with the "r" symbol (or
equivalent symbol) attached.' "
c. The definition of "U.S. Obligations" in Section 1.1 of the Loan
Agreement is hereby amended in its entirety to read as follows:
" `U.S. Obligations' means obligations or securities evidencing an
obligation to pay principal and interest in a full and timely manner
not subject to prepayment, call or early redemption which are direct
4
<PAGE>
obligations of, or obligations fully guaranteed as to timely payment
by, the United States of America or any agency or instrumentality of
the United States of America, the obligations of which are backed by
the full faith and credit of the United States of America."
d. Permitted Reorganization. The following provision is hereby added
------------------------
as subsection 6.3.1(vii), subsection 6.3.2(iv) and subsection 6.3.3(x)
of the Loan Agreement:
"The Rating Agencies shall have delivered a Rating Comfort Letter with
respect thereto."
e. The following provision is hereby added as Section 8.5 of the Loan
Agreement:
"8.5 Business Interpretation Insurance. Borrower shall maintain at
---------------------------------
all times with Qualified Insurance Companies, business interruption
insurance for an amount equal to at least one year's profits and
necessary continuing expenses from the applicable Hotel (on an "actual
loss sustained basis") covering the same risks as are covered by the
policies described in Section 1.7.1(i) of the Mortgages, and, to the
extent such insurance coverage is available on commercially reasonable
terms, for an amount equal to eighteen months' profits and necessary
continuing expenses from the applicable Hotel (on an "actual loss
sustained basis")."
2. No Other Amendments. Except as amended hereby, the Loan Agreement
-------------------
is unmodified and unamended and remains in full force and effect.
3. Binding Effect. It is understood and agreed that this First
--------------
Amendment shall not be binding until both Borrower and Lender shall have
executed and delivered the same.
4. Capitalized Terms. Capitalized terms used herein and not
-----------------
otherwise defined herein shall have the respective meanings ascribed thereto in
the Loan Agreement. Whenever there is a conflict between this First Amendment
and the Loan Agreement, the provisions of this First Amendment shall take
precedence and the Loan Agreement shall be construed accordingly.
5. Counterparts; Facsimile. This First Amendment may be executed in
-----------------------
separate counterparts, none of which need contain the signatures of all parties,
each of which shall be deemed to be an original, and all of which taken together
shall constitute one and the same instrument. It shall not be necessary in
making proof of this First Amendment to produce or account for more than the
5
<PAGE>
number of counterparts containing the respective signatures of, or on behalf of,
all of the parties hereto. In the event the parties hereto exchange signature
pages of this First Amendment by facsimile, they agree to send the original
executed counterparts of this First Amendment to one another by overnight
delivery service, but the facsimile signatures shall in any event be binding.
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment or have caused this First Amendment to be executed on their behalf as
of the day and year first above written.
BORROWER:
COURTYARD BY MARRIOTT LIMITED
PARTNERSHIP
ATTEST: By: CBM One Corporation,
general partner
By: By:
-------------------------- -----------------------
Its: Its:
------------------------- ----------------------
[SEAL] LENDER:
ATTEST: LEHMAN BROTHERS HOLDINGS INC.,
doing business as Lehman Capital,
a division of Lehman Brothers
Holdings Inc.
By: By:
-------------------------- ---------------------------
Its: Its:
------------------------- --------------------------
[SEAL]
6
<PAGE>
Exhibit 10.P
MORTGAGE NOTE
--------------
$325,000,000.00 March 21, 1997
FOR VALUE RECEIVED, the undersigned, COURTYARD BY MARRIOTT LIMITED
PARTNERSHIP, a Delaware limited partnership ("Maker"), promises to pay to the
order of LEHMAN BROTHERS HOLDINGS INC., a Delaware corporation, doing business
as Lehman Capital, a division of Lehman Brothers Holdings Inc., its successors
and assigns ("Holder"), at such place as Holder may from time to time designate
in writing, the principal sum of THREE HUNDRED TWENTY-FIVE MILLION AND NO/100
DOLLARS ($325,000,000.00) in lawful money of the United States of America,
together with interest thereon, to be computed and paid as specified in Section
1 below.
Except as otherwise defined or limited herein, capitalized terms used
herein shall have the meanings ascribed to them in that certain Loan Agreement
(the "Loan Agreement") dated as of the date hereof by and between Maker and
Holder. This is the Mortgage Note referred to in the Loan Agreement.
1. Payments of Principal and Interest.
1.1. Scheduled Payments of Principal and Interest
The outstanding principal balance hereof from time to time shall bear
interest (a) prior to April 10, 2012 (the "Scheduled Maturity Date"), at a rate
per annum equal to seven and 865/1000ths percent (7.865%) (the "Base Rate") and
(b) from and after April 10, 2012, at a rate per annum (the "Adjusted Interest
Rate") equal to the greater of (i) nine and 865/1000ths percent (9.865%) and
(ii) the sum of (A) two percentage points (2%) and (B) the average, calculated
by linear interpolation (rounded to three decimal places), of the yields of the
United States Treasury Constant Maturities with the terms (one longer and one
shorter) most nearly approximating those of U.S. Obligations having maturities
as close as possible to the fifteenth anniversary of the Scheduled Maturity
Date, as determined by the Lender on the basis of Federal Reserve Statistical
Release H.15-Selected Interest rates under the heading U.S. Governmental
Security/Treasury Constant Maturities, or such other recognized source of
financial market information as may reasonably be selected by the Lender, in
each case on the last Business Day of the week immediately prior to the
Scheduled Maturity Date. Interest accrued from the date hereof to (but
excluding) April 10, 1997 shall be due and payable, in advance, on the date
hereof. Thereafter, payments of interest and other amounts to be paid hereunder
shall be made, in arrears, on the tenth (10th) day of each calendar month, or,
if in any calendar month the tenth (10th) day is not a Business Day, the
Business Day immediately preceding the tenth (10th) day, commencing May 9, 1997
(each, a "Due Date") for the period (the "Debt Service Period") beginning on
(and including) the tenth (10th) day of the calendar month immediately preceding
the month in which such Due Date occurs, through (but excluding) the Due Date.
<PAGE>
Interest shall be computed on the basis of a 360 day year and the actual number
of days elapsed in each Debt Service Period.
The principal amount hereof shall be payable in two-hundred forty
(240) monthly payments, due and payable on each Due Date, in the principal
amount set forth for each such Due Date in Schedule A attached hereto (the
----------
"Scheduled Principal Payments"), plus accrued and unpaid interest on the
outstanding principal balance hereof for the Debt Service Period ending
immediately prior to such Due Date, through April 10, 2017 (the "Final Maturity
Date"). In addition to the Scheduled Principal Payments required to be made
above, subsequent to the Scheduled Maturity Date and in accordance with the Cash
Management Procedures, the Maker shall pay to the Holder on each Due Date
(without duplication), until the entire Debt is repaid in full, Excess Cash Flow
for all Accounting Periods for which the Operating Profit Payment Date occurred
during the Debt Service Period relating to such Due Date.
Pursuant to the Cash Management Procedures, each monthly payment of
principal and interest made by Maker under this Mortgage Note after the
Scheduled Maturity Date shall be applied first, to the payment of interest
computed at the Base Rate, with the remainder of such payment being applied to
the reduction of the outstanding principal balance of this Mortgage Note.
Payment of all interest accruing in respect of this Mortgage Note after the
Scheduled Maturity Date in the amount equal to the difference between the amount
that accrues at the Adjusted Interest Rate and the amount that is paid at the
Base Rate ("Accrued Interest") shall be (a)deferred, (b) added to the principal
amount of this Mortgage Note, and(c) to the extent permitted by applicable law,
accrue interest at the Adjusted Interest Rate. If not sooner paid, all Accrued
Interest shall be due and payable in full on the Final Maturity Date.
If any portion of the principal balance of the Loan is prepaid (i) on
or about the Scheduled Maturity Date by the application of payments received
from or with respect to U.S. Obligations held by the Holder on the Scheduled
Maturity Date as a result of a Release of any Mortgaged Property from the Lien
of the Security Documents pursuant to Section 2.5 of the Loan Agreement or (ii)
on or after the last day of the Defeasance Period, pursuant to the first
sentence of Section 1.2 hereof, the Scheduled Principal Payment payable on each
Due Date thereafter shall be reduced in the manner proved in Section 2.4.4(c) of
the Loan Agreement.
1.2. Prepayment Restrictions
On any Due Date occurring on or after the date that is six (6) months
prior to the Scheduled Maturity Date, all or any portion of the principal
balance hereof may be prepaid, at Maker's option, in full or in part, without
penalty or premium; provided, however, that the requirements of Section 2.7 of
the Loan Agreement shall have been satisfied (including, without limitation, the
satisfaction of any applicable Debt Service Conditions). In addition, a portion
of the principal
-2-
<PAGE>
amount hereof may be prepaid (a) prior to the date on which the Securitization
described in Section 9.1 of the Loan Agreement occurs, upon payment of a Yield
Maintenance Payment and satisfaction of the conditions set forth in Section 2.6
of the Loan Agreement, in connection with a Release of a Mortgaged Property to
avoid an Event of Default under Section 7.1.3 of the Loan Agreement and (b)
prior to the first day of the Defeasance Period, upon satisfaction of the
conditions in Section 2.6 of the Loan Agreement but without payment of a Yield
Maintenance Payment, in connection with a Casualty or Taking (provided that the
applicable Mortgage does not require a Restoration of such Mortgaged Property).
Neither Holder nor, following the Securitization, the Trustee or the Servicer
shall be required to accept or apply any prepayment requiring payment of a Yield
Maintenance Payment, as provided in this paragraph or in Section 1.3 hereof,
unless such prepayment is accompanied by the payment of such Yield Maintenance
Payment, and if any legal and other expenses are due and owing to Holder,
Trustee or Servicer in connection with such prepayment under the terms of the
Trust and Servicing Agreement or any Loan Document, neither Holder nor the
Servicer shall be required to accept or apply any prepayment unless the
prepayment also is accompanied by the amount that is due and payable to Holder,
Trustee or Servicer with respect to such expenses. Any prepayment of principal
shall be applied to reduce the scheduled installments of principal set forth on
Schedule A in the inverse order of their scheduled maturities. Except as
- ----------
provided above, this Mortgage Note may not be prepaid.
1.3. Yield Maintenance
If (i) all or any part of the principal amount of the Loan is prepaid
after the Closing Date but prior to the last day of the Defeasance Period as a
result of the acceleration of the maturity of the Mortgage Note after an Event
of Default or (ii) a Mortgaged Property is released for the purpose set forth in
Section 7.1.3 of the Loan Agreement after the Closing Date but prior to the date
on which the Securitization occurs, Maker shall be required to pay a Yield
Maintenance Payment equal to the greater of (A) 1% of the amount of the
principal prepayment that is to be applied to the outstanding principal balance
hereof and (B) the present value as of the end of the applicable Debt Service
Period, discounted at the Reinvestment Yield, of a series of payments each equal
to the Payment Differential on each of the remaining Due Dates prior to and
including the Scheduled Maturity Date, after giving effect to the regularly
scheduled payment of principal that is to be made on the Prepayment Date. No
Yield Maintenance Payment shall be required in connection with prepayments made
on or after the last day of the Defeasance Period.
Promptly following such a prepayment, the Holder shall notify Maker
of the amount and basis of determination of the Yield Maintenance Payment
promptly upon determining the Treasury Rate, as contemplated below. Absent
manifest error, the Maker shall not dispute Holder's calculations hereunder.
For purposes of this Section 1.3, the following terms shall have the
meanings ascribed to them below:
-3-
<PAGE>
"Payment Differential" means, an amount equal to (x) the Base Rate,
minus the Reinvestment Yield, divided by (y) 12, and multiplied by (z) the
amount of the principal prepayment.
"Reinvestment Yield" is the Treasury Rate converted to a monthly
compounded nominal annual yield.
"Treasury Rate" is equal to the lesser of (A) the annual yield on the
United States Treasury issue (primary issue) with a maturity date closest
to the Final Maturity Date and (B) the yield on the United States Treasury
issue (primary issue) with a maturity equal to the remaining average life
of this Mortgage Note with each such yield being based on the bid price for
such issue as published in The Wall Street Journal on the date that is 14
-----------------------
days prior to (x) the applicable Prepayment Date set forth in the notice of
prepayment provided by the Maker or (y) the date of acceleration by the
Holder (or if such bid price is not published on that date, the next
preceding date on which such bid price is so published).
For purposes of calculating the Payment Differential, all regularly scheduled
payments of principal due on any Prepayment Date that is a Due Date will be
deemed to have been made before the prepayment is made.
1.4. Method of Payment; Payments Absolute
All payments due hereunder shall be made in legal currency of the
United States of America in immediately available federal funds by credit to the
Holder's account in the United States as announced by the Holder from time to
time in writing to Maker. If any payment is due on a day that is not a Business
Day, the date for payment thereof shall be extended to the next Business Day,
without additional interest, except that, if the Final Maturity Date is not a
Business Day, the date for payment of the amount, if any, that is due on the
Final Maturity Date shall be extended to the next succeeding Business Day, and
any interest payable thereon shall accrue and be payable for such extension of
time at the Adjusted Interest Rate.
The terms of this Mortgage Note are hereby supplemented in full by the
terms of the Loan Agreement and the other Loan Documents.
2. Security for the Loan.
This Mortgage Note is secured by, among other things, 50 Mortgaged
Properties owned by Maker, including all assets of Maker related thereto,
pursuant to Mortgages encumbering the Land, the Hotels located thereon and other
Improvements relating to such Hotels and granting a lien on and security
interest in certain other Property described therein, and by other Security
Documents effecting and granting a lien on and security interest in other
Collateral, including
-4-
<PAGE>
but not limited to, the Security Agreement, the Assignments of Rents and Leases,
and the Collateral Assignment of Management Agreement.
3. Events of Default.
The entire outstanding principal balance of this Mortgage Note,
together with all accrued and unpaid interest thereon and all other sums due
hereunder or under any of the Loan Documents (all such sums, collectively, the
"Debt"), or any portion thereof, shall without notice, except such notice as is
required under the terms of any Loan Document, become immediately due and
payable at the option of Holder: (a) if payments of principal, interest and
premium, if any, due hereunder are not made when due or (b) an Event of Default
shall have occurred and be continuing under the Loan Agreement (each of the
foregoing, an "Event of Default"). In the event that Holder retains counsel to
collect all or any part of the Debt, or to protect or foreclose the security
provided in connection herewith, Maker agrees to pay reasonable costs of
collection incurred by Holder, including reasonable attorneys' fees.
4. Default Interest.
Maker does hereby agree that, if any amount due hereunder is not paid
when due, including, without limitation, Maker's failure to pay the Debt in full
on the Maturity Date or on the date set for acceleration following an Event of
Default, Holder shall be entitled to receive, and Maker shall pay, to the extent
permitted by applicable law, interest to Holder on such past due amounts
beginning on the date such payment becomes past due at a rate of interest equal
to the lesser of (a) the greater of (i) the Base Rate or Adjusted Interest Rate,
as applicable, in effect from time to time plus two percentage points (2%) and
(ii) the Prime Rate, and (b) the maximum rate of interest allowed to be
collected under applicable law.
5. Limitations on Recourse.
Notwithstanding any contrary provision in this Mortgage Note or any of
the Loan Documents, it is hereby expressly agreed that, except as otherwise
provided in this Section 5 or in any section of any Loan Document that is
substantially similar to this Section 5, there shall be no recourse to the
assets of Maker or any of its Partners (other than against the Collateral and
any other property given as security for the payment of this Mortgage Note) for
(i) the payment of principal, interest, Defeasance Deposits, Yield Maintenance
Payments or other charges hereunder or for any other amount that is or may
become due and owing to Holder by Maker under this Mortgage Note or any of the
other Loan Documents or (ii) the performance or discharge of any covenant or
undertaking hereunder or under the other Loan Documents, and in the event of any
Event of Default hereunder or thereunder, Lender agrees to proceed solely
against the Collateral and any other property given as security for payment of
this Mortgage
-5-
<PAGE>
Note, and Lender shall not seek or claim recourse against Maker or either
Partner (other than against the Collateral and any other property given as
security for payment of this Mortgage Note) for any deficiency or for any
personal judgment after a foreclosure of the lien of any of the Mortgages or
other Security Documents or for the performance or discharge of any covenants or
undertakings of Maker hereunder or under any other Loan Documents (except that
Maker and the General Partner, as necessary, may be made a party to a proceeding
to the extent legally necessary for the conduct of a foreclosure or the exercise
of other similar remedies under the Mortgages or other Security Documents).
Notwithstanding the foregoing, nothing contained in this Section 5 shall relieve
Maker or the General Partner of any personal liability for any loss, cost,
expense, damage or liability arising or resulting from (A) any breach of any
representation or warranty made in the Loan Agreement that was materially
incorrect when made and that was made with fraudulent intent, (B) any amount
paid or distributed to the Partners, the Manager or any Affiliate of any of them
in violation of the provisions of the Loan Documents, (C) fraud or breach of
trust, including but not limited to misapplication of Loan proceeds or any
Insurance Proceeds or Awards or other sums that are part of the Collateral that
may come into the possession or control of Maker or a Partner or any Affiliate
of any of them or (D) liability of any party under the Environmental Indemnity
Agreement. It is hereby expressly agreed that neither any Partner of Maker nor
any director, officer, shareholder, partner or employee of Maker or any Partner,
nor the legal or personal representative, successor or assign of any of the
foregoing, nor any other principal of Maker or any Partner, whether disclosed or
undisclosed, shall have any personal liability under the Loan Agreement or any
of the other Loan Documents, except as personal liability may be specifically
imposed upon the General Partner in accordance with clauses (A), (B), (C) and
(D) of this Section 5, and in no event shall any limited partner of Maker have
any liability whatsoever with respect to the Loan or any monetary obligations
with respect thereto, or any of the matters described in clause (A), (B), (C) or
(D) above. It is the intention of the parties hereto that this Section 5 shall
govern every other provision of the Loan Documents and that the absence of
explicit reference to this Section 5 in any provision of the Loan Documents or
the absence of any Section similar to this Section 5 in any Loan Document shall
not be construed to deny the application of this Section 5 to such provision,
notwithstanding the presence of explicit reference to this Section 5 in other
provisions of the Loan Documents.
6. No Usury.
It is expressly stipulated and agreed to be the intent of Maker and
Holder at all times to comply with applicable state law and with applicable
United States federal law (to the extent that it permits Holder to contract for,
charge, take, reserve, or receive a greater amount of interest than under state
law) and that this Section shall control every other covenant and agreement in
this Mortgage Note and the other Loan Documents. If the applicable law (state
or federal) is ever judicially interpreted so as to render usurious any amount
called for under this Mortgage
-6-
<PAGE>
Note or under any of the other Loan Documents, or contracted for, charged,
taken, reserved, or received with respect to the Debt, or if Holder's exercise
of the option to accelerate the maturity of this Mortgage Note, or if any
prepayment by Maker results in Maker having paid any interest in excess of that
permitted by applicable law, then it is Maker's and Holder's express intent that
all excess amounts theretofore collected by Holder shall be credited to the
principal balance hereof and all other debt in the order specified above (or, if
this Mortgage Note and all other Debt have been or would thereby be paid in
full, shall be refunded to Maker), and the provisions of this Mortgage Note and
the other Loan Documents shall immediately and automatically be deemed to be
reformed, and the amounts thereafter collectible hereunder and thereunder
reduced, without the necessity of the execution of any new documents, so as to
comply with the applicable law, but so as to permit the recovery of the fullest
amount otherwise called for hereunder or thereunder. All sums paid or agreed to
be paid to Holder for the use, forbearance, or detention of the Debt shall, to
the fullest extent permitted by applicable law, be amortized, prorated,
allocated, and spread throughout the full stated term of the Debt until payment
in full so that the rate or amount of interest on account of the Debt does not
exceed the maximum lawful rate from time to time in effect and applicable to the
Debt for so long as the Debt is outstanding. Notwithstanding anything to the
contrary contained herein or in any of the other Loan Documents, it is not the
intention of Holder to accelerate the maturity of any interest that has not
accrued at the time of such acceleration or to collect unearned interest at the
time of such acceleration, it being agreed and acknowledged by the Maker that
the Yield Maintenance Payment is intended to compensate Holder for the loss of
the benefit of its bargain in respect of the agreed upon interest payments
relative to available reinvestment at the time of a voluntary or involuntary
prepayment hereunder.
7. Authority.
Maker represents that Maker has full power, authority and legal right
to execute and deliver this Mortgage Note and to perform its obligations
hereunder, and that this Mortgage Note constitutes the valid and binding
obligation of Maker, enforceable against Maker in accordance with its terms,
except as enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting the
enforcement of creditors' rights generally and (ii) general principles of
equity, regardless of whether considered in proceedings at law or in equity.
8. Notices.
All notices or other communications required or permitted to be given
pursuant hereto shall be given in the manner specified in the Loan Agreement
directed to the parties at their respective addresses as provided therein.
-7-
<PAGE>
9. WAIVER OF JURY TRIAL.
MAKER, AND BY ACCEPTANCE HEREOF, HOLDER, EACH (1) COVENANTS AND AGREES
NOT TO ELECT TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY A JURY, AND (2)
WAIVES ANY RIGHTS TO TRIAL BY JURY TO THE FULL EXTENT THAT ANY SUCH RIGHT SHALL
NOW OR HEREAFTER EXIST. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY
GIVEN, KNOWINGLY AND VOLUNTARILY, BY EACH PARTY HERETO, AND THIS WAIVER IS
INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE
RIGHT TO A JURY TRIAL WOULD OTHERWISE ACCRUE. THE PARTIES ARE HEREBY AUTHORIZED
TO SUBMIT THIS MORTGAGE NOTE TO ANY COURT HAVING JURISDICTION OVER THE SUBJECT
MATTER TO BE TRIED SO AS TO SERVE AS CONCLUSIVE EVIDENCE OF THE OTHER PARTY'S
HEREIN CONTAINED WAIVER OF THE RIGHT TO JURY TRIAL. FURTHER, EACH PARTY HERETO
CERTIFIES THAT NO REPRESENTATIVE OF THE OTHER PARTY (INCLUDING SUCH OTHER
PARTY'S COUNSEL) HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO THAT PARTY, THAT
THE OTHER PARTY WILL NOT SEEK TO ENFORCE THIS WAIVER BY SUCH CERTIFYING PARTY OF
THE RIGHT TO A JURY TRIAL.
10. Governing Law.
This Mortgage Note shall be governed by and construed under and in
accordance with the laws of the State of New York, excluding the choice of law
rules thereof.
11. Miscellaneous.
(a) No release of any security for the Debt or any person liable for
payment of the Debt, no extension of time for payment of this Mortgage Note or
any installment hereof, and no alteration, amendment or waiver of any provision
of the Loan Documents made by agreement between Holder and any other person or
party shall release, modify, amend, waive, extend, change, discharge, terminate
or affect the liability of Maker or any other person or party who might be or
become liable for the payment of all or any part of the Debt, under the Loan
Documents.
(b) Maker and all others who may become liable for the payment of all
or any part of the Debt do hereby severally waive presentment and demand for
payment, notice of dishonor, protest, notice of protest, notice of non-payment,
and notice of intent to accelerate the maturity hereof and of acceleration.
(c) This Mortgage Note may not be modified, amended, waived, extended,
changed, discharged or terminated orally or by any act or failure to act on the
part of Maker or Holder, but only by an agreement in writing signed by the
-8-
<PAGE>
party against whom enforcement of any modification, amendment, waiver,
extension, change, discharge or termination is sought.
(d) Whenever used, the singular number shall include the plural, the
plural the singular, and the words "Holder" and "Maker" shall include their
respective successors, assigns, heirs, executors and administrators.
[SIGNATURE ON NEXT PAGE]
-9-
<PAGE>
IN WITNESS WHEREOF, Maker has duly executed or has caused its duly
authorized officers to execute this Mortgage Note on its behalf, as of the day
and year first above written.
MAKER:
COURTYARD BY MARRIOTT
LIMITED PARTNERSHIP
:
ATTEST: BY: CBM ONE CORPORATION, ITS
GENERAL PARTNER
BY: BY:
------------------------- ----------------------------
ITS: ITS:
------------------------ ---------------------------
-10-
<PAGE>
Exhibit 10.q
THIS SECURITY AND ANY COMMON STOCK ISSUED ON CONVERSION HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
This Note is subject to a pledge under, and is registered in the name
of Lehman Brothers Holdings Inc. (the "Pledgee") or a nominee of the Pledgee,
pursuant to, an Intercreditor Agreement, dated as of March 21, 1997, between CBM
One Holdings, Inc. and the Pledgee. Unless this Note is presented by an
authorized representative of the Pledge or its agent for registration of
transfer, exchange or payment, and any Note issued is registered in the name of
the Pledgee or such other name as requested by an authorized representative of
the Pledgee, ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY
A PERSON IS WRONGFUL since the registered owner hereof, the Pledgee, has an
interest herein.
COURTYARD BY MARRIOTT LIMITED PARTNERSHIP
PROMISSORY NOTE
$7,340,744.00**** Date: March 21, 1997
COURTYARD BY MARRIOTT LIMITED PARTNERSHIP, a Delaware limited
partnership (the "Partnership"), promises to pay to the order of the Holder the
principal sum of Seven Million Three Hundred Forty Thousand Seven Hundred Forty-
Four Dollars ($7,340,744.00) (the "Principal") on April 11, 2023 (the "Maturity
Date") upon presentation and surrender of this Note, together with interest on
the unpaid Principal, payable at the rates, in the manner and at the times
specified below, and Deferred Interest (as defined herein). The Holder on the
date of issuance of this Note (the "Issuance Date") is Host Marriott
Corporation, a Delaware corporation ("Host").
This Note has been issued to evidence the indebtedness of the
Partnership to Host arising from certain payments made by Host pursuant to a
Debt Service Guarantee, dated as of August 14, 1986, as amended, by Marriott
Corporation (the predecessor of Host) in favor of Citibank, N.A. and The First
National Bank of Chicago and the several other lenders named therein, of certain
indebtedness of the Partnership. As of the date hereof, the aggregate amounts
paid by Host pursuant to such guarantee equal $7,340,744.00. The Partnership is
obligated to reimburse Host for the amount of such advances, together with
interest at the Prime Rate (as defined herein) per annum. As of the date
hereof, the aggregate amount of accrued and unpaid interest owing to Host in
respect of such advances is $5,764,804.00 (the "Deferred Interest"), the
obligation to pay which amount is evidenced by this Note.
<PAGE>
Section 1. Interest.
The Partnership promises to pay, from the Issuance Date until the
date on which the Principal is paid in full, interest on the unpaid Principal at
a rate per annum equal to the Prime Rate in effect from time to time. Interest
shall accrue and be payable on the Maturity Date, or such earlier date provided
for herein. All interest hereunder will be computed on the basis of a 365/366-
day year.
As used herein, the "Prime Rate" shall mean the base rate of
interest announced from time to time by The First National Bank of Chicago.
Section 2. Application of Payments.
Payments on this Note shall be applied first to Deferred Interest,
then to accrued and unpaid interest, and then to repayment of the Principal.
Section 3. Prepayment.
This Note may be voluntarily prepaid, in whole or in part, at any
time and from time to time. The Partnership shall be obligated to prepay the
Principal, Deferred Interest, and accrued and unpaid interest owing hereon in
full on the date that is one year and one day after the later of (x) the date
all amounts owing under the Loan Agreement (as defined herein) are paid in full
or (y) the date all amounts owing under any Qualified Refinancing (as such term
is defined in the Collateral Assignment of Management Agreement referred to in
the Loan Agreement) of the Loan Agreement are paid in full.
Section 4. Limitation on Indebtedness.
Holder agrees that, in the event that this Note becomes due and
payable at any time at which any indebtedness remains outstanding under that
certain Loan Agreement dated as of March 21, 1997 between the Partnership and
Lehman Brothers Holdings Inc. (as amended, modified, or extended from time to
time, the "Loan Agreement"), it will not be entitled to assert a claim hereunder
for any amount in excess of $16,250,000 (the "Cap Amount") and the amount of
indebtedness evidenced by this Note during such period shall not exceed the Cap
Amount. Notwithstanding the foregoing, in the event that the sum of the
Principal plus Deferred Interest plus accrued and unpaid interest shall exceed
the Cap Amount at any time, the Partnership shall not be entitled to discharge
its obligations hereunder by making a prepayment in an amount equal to the Cap
Amount, unless the maturity of this Note shall have been accelerated by reason
of the occurrence of an Event of Default.
Section 5. Covenants.
Until all of the Partnership's obligations hereunder have been fully
satisfied and discharged (and in the case of Section 5(b), until such later time
as provided in Section 5(b)), the Partnership covenants as follows:
2
<PAGE>
5(a) The Partnership shall pay the Principal, Deferred Interest and
interest on this Note, and such other amounts required to be paid hereunder, as
and when the same shall be due and payable in accordance with the terms hereof.
5(b) To the fullest extent that it may lawfully do so, the
Partnership will not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension law or any
usury law or other statutory or common law right, including any equitable
remedy, which would prohibit or forgive the Partnership from paying all or any
portion of any amount hereunder, now or at any time hereafter in force, or which
may affect the covenants or the performance of this Note. To the fullest extent
that it may lawfully do so, the Partnership hereby expressly waives all benefit
or advantage of any such law, right or remedy and covenants that it will not
hinder, delay or impede the execution of any power granted to the Holder herein
or by law, but will suffer and permit the execution of every such power as
though no such law, right or remedy existed.
Section 6. Assigns and Transfers.
6(a) This Note shall be binding upon the Partnership and its
successors and shall inure to the benefit of the Holder and its assigns.
6(b) Without prejudice to the effectiveness of any other method of
transferring legal or beneficial title hereto, this Note shall be negotiable and
accordingly, title hereto shall pass by delivery together with the endorsement
or written instrument of transfer by the transferor.
6(c) The Holder may at any time sell, convey, dispose of, assign or
otherwise transfer (collectively, "Transfer") all or any part of its rights
hereunder.
6(d) The issuance of this Note has not been registered under the
Securities Act of 1933, as amended, or any state securities laws. No sale,
assignment, or other disposition of this Note may be made except in compliance
with applicable federal and state securities laws.
6(e) Until such time as a change of the registered owner of this
Note is made pursuant to this Section 6, the Partnership shall be entitled to
treat the Person in whose name this Note is registered as the Holder for all
purposes hereof, including payments and notices. Such treatment by the
Partnership shall not prejudice the status of the Holder as such or in any way
prejudice the rights of the Holder with respect to the Person in whose name this
Note is registered.
6(f) The Partnership shall cause to be kept at its principal office
a register in which the Partnership shall provide for the registration of this
Note. The effect of registration shall be to create, as to the Partnership, an
irrefutable presumption that the Person in whose name this Note is registered is
the Holder, but the failure of any Holder to cause registration in such Holder's
name shall not otherwise prejudice such Holder's rights and status as the
Holder.
3
<PAGE>
6(g) Upon surrender for registration of transfer of this Note, duly
endorsed or accompanied by an instrument of transfer in the manner prescribed by
Section 7(b), at the principal office of the Partnership, the Partnership shall
promptly execute and deliver, in the name of the designated transferee, a new
Note of a like aggregate principal amount and shall register the new Note in the
transferee's name.
6(h) The Note issued upon any registration of transfer shall be the
valid obligation of the Partnership, evidencing the same Indebtedness, and
entitled to the same benefits under this Note, as the Note surrendered upon such
registration of transfer.
6(i) The Note presented or surrendered for registration of transfer
shall be duly endorsed, or be accompanied by a written instrument of transfer in
form satisfactory to the Partnership, duly executed by the Holder thereof or his
attorney duly authorized in writing.
6(j) No service charge shall be made for any registration of
transfer of the Note.
Section 7. Events of Default.
An "Event of Default" occurs if:
7(a) the Partnership defaults in the payment of the
Principal, Deferred Interest, accrued and unpaid interest, and any
other amounts owing hereunder when the same becomes due at the
Maturity Date, or otherwise; or
7(b) the entry by a court having jurisdiction in the premises
of (i) a decree or order for relief in respect of the Partnership in
an involuntary case or proceeding under any applicable federal,
state or foreign bankruptcy, insolvency, reorganization or other
similar law or (ii) a decree or order adjudging the Partnership a
bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of or
in respect of the Partnership under any applicable federal, state or
foreign law, or appointing a custodian, receiver, liquidator,
assignee, trustee, sequestrator or other similar official of the
Partnership or of any substantial part of its property, or ordering
the winding up or liquidation of its affairs, and the continuance of
any such decree or order for relief or any such other decree or
order for a period of 60 days; or
7(c) the commencement by the Partnership of a voluntary case
or proceeding under any applicable federal, state or foreign
bankruptcy, insolvency, reorganization or other similar law or of
any other case or proceeding to be adjudicated a bankrupt or
insolvent, or the consent by the Partnership to the entry of a
decree or order for relief in respect of the Partnership in an
involuntary case or proceeding under any applicable federal, state
or foreign bankruptcy, insolvency, reorganization or other similar
law or to the commencement of any bankruptcy or insolvency case or
proceeding against it, or the filing by the Partnership of a
petition or answer
4
<PAGE>
or consent seeking reorganization or relief under any applicable
federal, state or foreign law, or the consent by the Partnership to
the filing of such petition or the appointment of or taking
possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or similar official of the Partnership, or of any
substantial part of its property, or the making by it of any
assignment for the benefit of creditors, or the admission by the
Partnership, in writing of its inability to pay its debts generally
as they become due, or the taking of partnership action by the
Partnership in furtherance of or to facilitate, conditionally or
otherwise, any such action.
Upon any of the Events of Default, the entire Principal will
immediately become due and payable without notice or further action by the
Holder. At any time after an acceleration hereunder and before a judgment or
decree for payment of the money due has been obtained by the Holder, the Holder
by notice to the Partnership may rescind and annul such acceleration or
declaration and its consequences. No such rescission shall affect any
subsequent Default or impair any right consequent thereon or any rights of the
Holder with respect to the Default which gave rise to the acceleration that was
rescinded.
Section 8. Amendments and Supplements to this Note.
No amendment or supplement to this Note may be effected without the
prior consent of the Holder and the Partnership.
Section 9. Costs.
Upon an Event of Default, the Partnership shall reimburse the Holder
for all costs and expenses reasonably incurred by the Holder in connection with
the preservation or enforcement of the Holder's rights under this Note
(including the reasonable fees and expenses of counsel).
Section 10. Subordination.
Following transfer of this Note by Host to CBM One Holdings, Inc.
("Holdings") on the Issuance Date, and execution and delivery by Holdings of an
Intercreditor Agreement dated as of March 21, 1997 between Holdings and the
Senior Creditor named therein (the "Intercreditor Agreement"), the indebtedness
evidenced by this Note will be, to the extent provided in such Intercreditor
Agreement, subordinate and junior in right of payment to the prior payment in
full of all Senior Indebtedness (as defined therein). Each Holder of this Note,
by accepting the same, agrees to and shall be bound by such provisions. Each
Holder hereof, by its acceptance hereof, hereby waives all notice of the
acceptance of the subordination provisions contained in the Intercreditor by
each holder of Senior Indebtedness, whether now outstanding or hereafter
incurred, and waives reliance by each such Holder upon said provisions.
Section 11. Obligations of the Partnership Unconditional.
Nothing contained in this Note or elsewhere (i) is intended to or
shall impair, as between the Partnership and the Holder, the Partnership's
obligations, which are
5
<PAGE>
absolute and unconditional, to pay to or for the account of the Holder the
Principal, Deferred Interest and interest on this Note, and such other amounts
required to be paid hereunder, as and when the same shall become due and payable
in accordance with the terms hereof, or (ii) is intended to or shall (a) affect
the relative rights of the Holder and the Partnership's creditors or (b) prevent
the Holder from exercising all remedies otherwise permitted by applicable law
upon an Event of Default. The Partnership shall make all payments required
hereunder without any right of setoff, counterclaim, recoupment, abatement,
suspension, limitation or defense (other than payment) that the Partnership may
have against the Holder or any prior Holder and the Partnership agrees not to
assert any right of setoff, counterclaim, recoupment, abatement, suspension,
limitation or defense (other than payment) that it may have against the Holder
or any prior Holder.
Section 12. Waivers, Remedies Cumulative.
12(a) No failure to exercise and no delay in exercising on the part
of the Holder, any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege preclude any other or further exercise thereof, or the exercise of any
other right, power or privilege. No waiver by the Holder shall be effective
unless it is in writing.
12(b) The rights and remedies herein provided are cumulative and
not exclusive of any rights or remedies provided by law.
Section 13. Severability.
If any term or other provision of this Note is invalid, illegal or
incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Note shall nevertheless remain in full force
and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any party. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Note so as to effect the original intent of the parties as closely
as possible in an acceptable manner to the end that transactions contemplated
hereby are fulfilled to the greatest extent possible.
Section 14. Non-Recourse.
Notwithstanding anything contained herein to the contrary, no
recourse under or upon any obligation, covenant or agreement contained in this
Note or for any claim based hereof shall be had any partner in the Partnership
or against any past, present or future shareholder, officer, director or
partner, as such, of the Partnership or any partner therein or of any successor
thereof, under any statute or constitutional provision or by the enforcement of
any assessment or by any legal or equitable proceeding or otherwise, all such
liability being expressly waived and released by the acceptance of this Note.
6
<PAGE>
Section 15. Entire Agreement.
This Note constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, between the parties hereto
with respect to the subject matter hereof.
Section 16. Governing Law.
This Note shall be governed by, and construed in accordance with,
the laws of the State of Maryland.
IN WITNESS WHEREOF the Partnership has caused this Promissory Note
to be executed as of the date set forth above.
ATTEST: COURTYARD BY MARRIOTT LIMITED PARTNERSHIP, a
Delaware limited partnership
By: CBM One Corporation, its general partner
By:
- -------------------------- -------------------------------------------
Name:
Title:
7
<PAGE>
ENDORSEMENT
The undersigned hereby assigns the attached Note of Courtyard by
Marriott Limited Partnership, dated March 21, 1997 to ______________________,
with full power to register the transfer of such Note on the records of the
Partnership named therein.
Dated: March 21, 1997 Signed: CBM ONE HOLDINGS, INC.
By:
-------------------------------
Name:
Title:
<PAGE>
ASSIGNMENT OF PROMISSORY NOTE
The undersigned hereby assigns to CBM One Holdings, Inc., a Delaware
corporation ("the Assignee"), all of its right, title, and interest in and to
that certain Promissory Note, dated March 21, 1997, issued by Courtyard by
Marriott Limited Partnership, a Delaware limited partnership, in the principal
amount of $7,340,744.00 (the "Note"), as consideration for the issuance of 100
shares of Common Stock of the Assignee.
IN WITNESS WHEREOF the undersigned has caused this instrument to be
duly executed on its behalf.
March 21, 1997 HOST MARRIOTT CORPORATION
By:
-----------------------
Name:
Title:
<PAGE>
Exhibit 10.r
INTERCREDITOR AGREEMENT
-----------------------
INTERCREDITOR AGREEMENT, dated as of March 21, 1997 (this "Agreement"), by
---------
and between LEHMAN BROTHERS HOLDINGS INC., DOING BUSINESS AS LEHMAN CAPITAL, A
DIVISION OF LEHMAN BROTHERS HOLDINGS INC., a Delaware corporation, together with
its successors and assigns ("Senior Lender"), and CBM One Holdings, Inc., a
-------------
Delaware corporation ("Junior Lender").
-------------
WHEREAS, Senior Lender has agreed to provide certain financing to an
affiliate of Junior Lender, Courtyard by Marriott Limited Partnership, a
Delaware limited partnership ("Borrower"), in the approximate aggregate amount
--------
of $325,000,000.00 (the "Senior Loan") and secured primarily by 50 Courtyard by
-----------
Marriott Hotels, including the fee and/or leasehold interest in the land on
which the Hotels are located and related assets, on the terms set forth in the
Loan Agreement, dated as of the date hereof (as modified or amended from time to
time, the "Senior Loan Agreement"), between Borrower and Senior Lender, and the
---------------------
other Loan Documents (as defined in the Senior Loan Agreement), which documents
evidence and/or govern the Senior Loan (the Senior Loan Agreement, collectively
with such other Loan Documents, as such documents may be amended or modified
from time to time, the "Senior Loan Documents");
---------------------
WHEREAS, Junior Lender is a wholly-owned subsidiary of Host Marriot
Corporation, a Delaware corporation ("Host"), the parent corporation of the sole
general partner of Borrower, and has outstanding as of the date hereof
approximately $13,000,000 of unsecured, subordinated loans to Borrower (the
"Junior Loan"), which Junior Loan is evidenced by a promissory note, dated March
-----------
21, 1997, made by Borrower to the order of Junior Lender (the "Junior Note");
-----------
and
WHEREAS, as a material inducement to, and a condition of, Senior Lender's
agreement to originate the Senior Loan to Borrower, Senior Lender has required
that Junior Lender enter into this Agreement to govern the respective rights of
Senior Lender and Junior Lender with respect to the Borrower (including Junior
Lender's undertaking to pledge to Senior Lender the Junior Note and to assign
and deliver immediately to Senior Lender the Junior Note and all of Junior
Lender's rights thereunder and under the Junior Loan as security for Junior
Lender's obligations hereunder);
NOW THEREFORE, in consideration of the mutual promises and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. Certain Definitions. When used herein, the following
-------------------
capitalized terms shall have the following meanings:
<PAGE>
"Agreement" has the meaning set forth in the first paragraph of this
---------
Agreement.
"Borrower" has the meaning set forth in the recitals.
--------
"Host" has the meaning set forth in the recitals.
----
"Junior Lender" has the meaning set forth in the first paragraph of
-------------
this Agreement.
"Junior Loan" has the meaning set forth in the recitals.
-----------
"Junior Loan Documents" means the Junior Notes, and any and all other
---------------------
documents, agreements, certificates, notes or other instruments delivered
pursuant to, or in connection with, the Junior Loan.
"Junior Note" has the meaning set forth in the recitals.
-----------
"Person" means an individual, a partnership, a corporation, a trust,
------
an unincorporated organization, a joint venture or other business entity, a
limited liability company, or a government or any department, agency, or
political subdivision thereof.
"Senior Lender" has the meaning set forth in the first paragraph of
-------------
this Agreement.
"Senior Loan" means the indebtedness outstanding under the Senior Loan
-----------
Documents.
"Senior Loan Agreement" has the meaning set forth in the recitals.
---------------------
"Senior Loan Documents" has the meaning set forth in the recitals.
---------------------
"Senior Note" means the note evidencing the Senior Loan, as such note
-----------
may be amended, modified, restated or otherwise supplemented from time to
time.
"Single Purpose" means, with respect to a person, that such Person,
--------------
(A) at all times since its formation, (i) has been a duly formed and
existing limited partnership, limited liability company or corporation, as
the case may be; (ii) has observed all customary formalities regarding its
partnership, limited liability company, or corporate existence; (iii) has
maintained financial statements, accounting records, and other partnership,
limited liability company, or corporate documents separate from those of
any other Person (provided, that nothing shall prohibit such Person from
being included in the consolidated financial statements or tax group of
another Person); (iv) has not commingled its assets with those of any other
Person; (v) has paid its own liabilities out of its own funds, including
funds contributed to its capital by its respective equity holders, and all
such capital contributions have been reflected properly in its books and
-2-
<PAGE>
records; (vi) has allocated fairly and reasonably any overhead for shared
office expenses; (vii) has identified itself in all dealings with the
public under its own name and as a separate and distinct entity; (viii) has
not identified itself as being a division or part of any other Person; (ix)
has not identified any other Person as being a division or part of such
Person; (x) has corrected any known misunderstandings regarding its
separate identity; (xi) has been adequately capitalized in light of the
nature of its business; (xii) has not assumed or guaranteed the obligations
of any other Person; and (xiii) has not engaged in any other business other
than holding the Junior Notes; and (B) has and covenants to maintain
customary "single purpose" provisions in its organizational documents.
"Termination Date" means that date that is one year and one day after
----------------
the Senior Loan is repaid in full (including interest on, principal of
and any other amounts owing with respect to the Senior Loan).
Section 2. Subordination.
-------------
(a) Notwithstanding anything to the contrary contained herein or in
the Junior Loan Documents, Junior Lender agrees that until the Termination Date,
Junior Lender will not (A) initiate any judicial or other remedial proceeding
(including, without limitation, bankruptcy or insolvency proceedings) against
the Borrower or against any of Borrower's rights, interests, assets or
properties to collect any moneys due under the Junior Loan Documents or any
agreement, instrument or document relating or incidental thereto or (B) directly
or indirectly, exercise or enforce any rights or remedies against the Borrower
or against any of Borrower's rights, interests, assets or properties of any
nature whatsoever, whether at law or in equity, that Junior Lender might have
under, pursuant to or as a result of the Junior Note or any Junior Loan Document
or otherwise, in connection with or as a result of any default or event of
default thereunder.
(b) Junior Lender agrees that (i) all indebtedness under the Junior
Note is hereby expressly made subject, subordinate and junior in right of
payment to the prior payment in full of all indebtedness due and payable on the
Senior Loan and (ii) all liens and security interests of Junior Lender (if any),
whether now or hereafter arising and however existing, in any assets of the
Borrower or any assets securing the Senior Loan now owned or hereafter acquired,
shall be and hereby are subordinated to any rights and interests of Senior
Lender in those assets. Junior Lender also hereby agrees that, regardless of
whether the Senior Loan is secured or unsecured, following the occurrence of an
event of default under any Senior Loan Document, Senior Lender shall be
subrogated for Junior Lender with respect to Junior Lender's claims against the
Borrower and Junior Lender's rights, liens and security interests, if any, in
any of the Borrower's assets and the proceeds thereof until the Senior Loan
shall have been fully paid and satisfied and all financing and security
arrangements between the Borrower and the Senior Lender under the Senior Loan
Documents have been terminated. Junior Lender further agrees that it will not
challenge the liens and security interests of Senior Lender securing payment of
Senior Lender under the Senior Loan and that as between Senior Lender and Junior
Lender, the terms of this Section 2 shall govern even if part or all of the
Senior
-3-
<PAGE>
Loan or the liens or security interests securing payment thereof are avoided,
disallowed, set aside or otherwise invalidated in any judicial proceeding or
otherwise.
(c) In the event of (i) any payment being required to be made by the
Borrower on, under or in respect of the Junior Loan (except payment by the
Borrower prior to the Scheduled Maturity Date (as defined in the Senior Loan
Agreement) to the Junior Lender from, and only to the extent of, amounts
distributed to the Borrower pursuant to the Senior Loan Agreement), either in
accordance with the terms of such Junior Loan or upon any declaration of
acceleration thereof, (ii) any dissolution, winding-up, total or partial
liquidation or reorganization of the Borrower, whether voluntary or involuntary
and whether or not involving bankruptcy, insolvency, receivership or other
similar proceedings, or (iii) any assignment for the benefit of or other
arrangement with creditors, any other marshalling of assets and liabilities of
the Borrower or any sale or other disposition of all or substantially all of the
assets of the Borrower, then (x) all amounts then due and payable in respect of
----
the Senior Loan shall first be paid in full in cash before any payment is made
on, under or in respect of the Junior Loan by or on behalf of the Borrower or
out of its property or from any other source, directly or indirectly, and (y)
any payment or distribution of assets of the Borrower of any kind or character,
whether in cash, instruments, securities or other property, by set-off or
otherwise, to which Junior Lender would be entitled but for the provisions
hereof, shall be paid by the Borrower or by any receiver, trustee in bankruptcy,
liquidating trustee, agency or other person making such payment or distribution,
directly to Senior Lender to the extent necessary to pay all amounts then due
and payable to Senior Lender under the Senior Loan in full, in cash, before any
payment or distribution is made in respect of the Junior Loan. In furtherance
of the foregoing, in the event that the Borrower shall file or have filed
against it a petition under any bankruptcy or other insolvency law or be
adjudicated a bankrupt thereunder, with the result that the Borrower is excused
from the obligation to pay all or any part of the interest otherwise payable in
respect of the Senior Loan during the period subsequent to the commencement of
any such proceedings thereunder, Junior Lender agrees that all or such part of
such interest then due and payable on the Senior Loan, as the case may be, shall
be payable in full in money out of, and to that extent diminish and be at the
expense of, reorganization, dividends or other payments in respect to the Junior
Loan.
(d) In order to enable Senior Lender to enforce its rights hereunder
in any action or proceeding described in Section 2(c)(ii) or (iii) above, Senior
Lender is irrevocably authorized and empowered, in its discretion, to make and
present for and on behalf of Junior Lender such proofs of claims against the
Borrower on account of the Junior Loan or other motions or pleadings as Senior
Lender may deem expedient or proper and to vote and take such other actions, in
the name of Junior Lender or Senior Lender or otherwise, as Senior Lender may
deem necessary or advisable. Junior Lender further agrees not to object to,
interfere with or oppose any efforts by the Senior Lender to obtain relief from
the automatic stay under Section 362 of the United States Bankruptcy Code or any
of Senior Lender's other bankruptcy-related actions. In furtherance of the
foregoing, Junior Lender agrees to execute and deliver to Senior Lender such
powers of attorney, assignments and other instruments or documents as may be
requested by Senior Lender in order to enable Senior Lender to file and enforce
any and all claims upon or with respect to the Junior Loan.
-4-
<PAGE>
(e) In the event that any payment or distribution of assets of the
Borrower of any kind or character, whether in cash, instruments, securities or
other property, shall be received by Junior Lender in respect of the Junior Loan
from any source, directly or indirectly, such payment or distribution shall be
held for the benefit of, and shall be immediately paid over and delivered to,
Senior Lender to the extent necessary to pay all amounts then due and payable to
Senior Lender.
(f) No right of Senior Lender to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Borrower or by any act or failure to act by
Senior Lender or by any noncompliance by the Borrower with the terms, provisions
and covenants contained in the Senior Loan Agreement, regardless of any
knowledge thereof which such person may have or be otherwise charged with.
Further, Senior Lender may (without affecting the priority of the Senior Loan)
modify, supplement, refinance, waive, consolidate, extend, replace, restate or
amend the terms of the Senior Loan or modify, supplement, replace, restate or
amend any Senior Loan Document, as the case may be, or any security therefor and
sell or exchange such security and otherwise deal freely with the Borrower, all
without Senior Lender obtaining consent of Junior Lender and without affecting
the liabilities and obligations of Junior Lender under this Section 2.
(g) The provisions of this Section 2 shall continue to be effective
if at any time any payment of any part of the Senior Loan is rescinded or must
otherwise be returned by the Senior Lender upon the insolvency, bankruptcy or
reorganization of the Borrower or otherwise, all as though such payment had not
been made.
(h) The provisions of this Agreement relating to the subordination of
the Junior Loan to the Senior Loan are intended to benefit Senior Lender and
until the Senior Loan is repaid in full and all financing arrangements between
Borrower and Senior Lender have been terminated, neither the Borrower nor Junior
Lender shall amend, supplement, waive or modify, or agree to the amendment,
supplementation, waiver or modification of any term or provision of the Junior
Note or other Junior Loan Documents without the prior written consent of Senior
Lender and any such amendment, supplementation, waiver or modification shall be
void ab initio and without effect unless such consent is given. No waiver of
any provisions of this Section 2 shall be deemed to be made by Senior Lender of
any of its rights hereunder unless the same shall be in writing signed by Senior
Lender. Each waiver, if any, by Senior Lender shall be a waiver only with
respect to the specific instance involved and shall in no way impair the rights
of Senior Lender in any other respect at any other time.
(i) Any instrument evidencing the Junior Loan or any portion thereof,
including, without limitation, the Junior Note, which has been or is hereafter
executed by the Borrower will, on the date hereof or the date of execution, be
inscribed with a legend conspicuously indicating that payment thereof is
subordinated to the claims of the Senior Lender pursuant to the terms of this
Agreement.
(j) Junior Lender shall take such actions and deliver such
instruments, in addition to the actions and instruments specifically provided
for herein, as may be requested or required to effectuate the subordination of
the Junior Loan in accordance with this Section 2.
-5-
<PAGE>
Section 3. Additional Covenants of Junior Lender. Junior Lender covenants
-------------------------------------
and agrees, that unless Senior Lender shall otherwise consent in writing, from
and after the date hereof until the date that this Agreement is terminated in
accordance with its terms:
(a) No additional advances of principal are permitted under the
Junior Loan. Any amounts repaid to Junior Lender under the Junior Loan may not
be reborrowed. Junior Lender shall not make any loans (or otherwise extend
credit) to Borrower other than the Junior Loan.
(b) No portion of the outstanding principal amount of the Junior Loan
nor any interest thereon shall be due prior to the Termination Date.
(c) No portion of the Junior Loan shall be secured by any of the
Borrower's rights, interests, assets or properties (including, without
limitation, all or any portion of the Mortgaged Properties (as defined in the
Senior Loan Agreement)).
(d) The Borrower may pay accrued interest on, and prepay the
outstanding principal of, the Junior Loan from, and only to the extent of
amounts distributed to Borrower pursuant to the Cash Management Procedures (as
defined in the Senior Loan Agreement) and only prior to and including the
Scheduled Maturity Date (as defined in the Senior Loan Agreement).
Notwithstanding the foregoing, no portion of the Junior Loan (nor any other
amount) shall be payable by the Borrower to the Junior Lender upon the
occurrence of a default or event of default under the Senior Loan.
(e) The Junior Loan shall not be assignable or otherwise
transferrable except to a Person that (i) is a wholly-owned subsidiary of Host
and (ii) is a Single Purpose entity.
- ---
Section 4. Representations and Warranties of Junior Lender. Junior Lender
-----------------------------------------------
represents and warrants to, and covenants with, Senior Lender as follows:
(a) Junior Lender is a corporation duly organized, validly existing
and in good standing under the laws of the state of Delaware and is duly
licensed or qualified to do business in all jurisdictions in which it is
currently doing business and the nature of such business requires such license
or qualifications.
(b) Junior Lender has the requisite power and authority to execute
and deliver this Agreement and to carry out the transactions contemplated by
this Agreement.
(c) The execution, delivery and performance of this Agreement by
Junior Lender have been duly authorized by all necessary action and proceedings,
and no further approvals or filings of any kind, including, without limitation,
any approval of or filing with any agency or body, are required as a condition
to the valid execution, delivery and performance by Junior Lender of this
Agreement.
(d) Neither the execution and delivery of this Agreement nor the
fulfillment or compliance with the terms and conditions of this Agreement:
-6-
<PAGE>
(i) will result in any breach or violation of any law, rule or
regulation issued by any administrative agency or other authority having
jurisdiction over Junior Lender or its properties or assets, or any
judgment, or order applicable to Junior Lender or to which Junior Lender or
its properties or assets are subject; or
(ii) will conflict with or result in any breach or violation of,
or constitute a default under, any of the terms, conditions, or provisions
of Junior Lender's organizational documents or any existing agreement or
instrument to which Junior Lender is a party or to which any of its
property is subject.
(e) There is no pending or threatened action, proceeding or
investigation before any court, governmental agency or arbitrator against or
affecting Junior Lender or its property, or action or proceeding before any of
the foregoing which, if decided adversely to Junior Lender, would materially and
adversely affect the financial condition of Junior Lender or would materially
and adversely affect the ability of Junior Lender to perform its obligations
under this Agreement.
(f) This Agreement has been duly executed and delivered by Junior
Lender, and constitutes the valid and legally binding obligation of Junior
Lender, enforceable against Junior Lender in accordance with its terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles; and
(g) as of the date hereof, the outstanding balance (including
principal and accrued interest) of the Junior Loan is approximately $13,000,000.
Section 5. Pledge of Junior Note; Assignment of Junior Loan.
------------------------------------------------
(a) Grant of Security Interest. For good and valuable consideration
--------------------------
received and to induce the Senior Lender to originate the Senior Loan to the
Borrower, Junior Lender hereby grants to Senior Lender, as security for the due
performance by Junior Lender of its obligations under this Agreement, a security
interest in the following property (collectively, the "Collateral"): (i) Junior
Note; and (ii) the products, proceeds and accessions of the foregoing and all
rights relating thereto.
(b) Delivery of Junior Note. Simultaneously with the execution of
-----------------------
this Agreement, Junior Lender has delivered the Junior Note to Senior Lender
endorsed in blank.
(c) Remedies. Following the occurrence of any breach by Junior
--------
Lender of any of Junior Lender's obligations hereunder, Senior Lender shall have
all of the following rights and remedies with respect to the Collateral, each of
which may be exercised with or without further notice to Junior Lender:
a. To notify any obligors on the Junior Note that the Junior
Note has been assigned to Senior Lender and/or that all payments on the Junior
Note are to be made directly to Senior Lender (and Junior Lender hereby
covenants that on the request of Senior
-7-
<PAGE>
Lender, Junior Lender will in writing confirm to any and all obligors on the
Junior Note that all payments on the Junior Note are to be made to Senior
Lender);
b. To settle, compromise or release on terms acceptable to
Senior Lender, in whole or in part, any amounts owing on the Junior Note;
c. To enforce payment and prosecute any action or proceeding
with respect to the Junior Note;
d. To extend the time of payment, make allowances and
adjustments and issue credits with respect to the Junior Note, in Senior
Lender's name or in the name of Junior Lender.
e. To foreclose the liens and security interests created under
this Agreement or under any other agreement relating to any Collateral by any
available judicial procedure or without judicial process;
f. To sell, assign, lease or otherwise dispose of the Collateral
or any part thereof, either at public or private sale, in lots or in bulk, for
cash, on credit, or otherwise, with or without representations or warranties,
and upon such terms as shall be acceptable to Senior Lender, all at Senior
Lender's sole option and as Senior Lender may deem advisable in its sole
discretion; and
g. To exercise any and all other rights and remedies that Senior
Len der may have in any jurisdiction where enforcement of this Agreement is
sought, including without limitation all rights and remedies of a secured party
under any applicable section of the Uniform Commercial Code of the State of New
York. Senior Lender shall have the right to enforce one or more of Senior
Lender's remedies successively or concurrently, and such action shall neither
estop nor prevent Senior Lender from pursuing any and all further remedies that
it may have. No failure on the part of Senior Lender to exercise, and no delay
in exercising, any right or remedy shall operate as a waiver thereof or of any
default, nor shall any single or partial exercise of any right or remedy
preclude any other or further exercise thereof or the exercise of any other
right or remedy.
(d) Sale of Collateral. The following shall apply with respect to
------------------
any sale, assignment or other disposition of the Collateral by Senior Lender
pursuant to this Agreement.
a. Senior Lender shall give Junior Lender no less than 5 days'
prior written notice of any such sale, assignment, lease or other disposition.
Junior Lender agrees that such notice is commercially reasonable and Senior
Lender hereby waives all other notices, demands and advertisements of any kind.
b. Senior Lender may bid or purchase at any such sale, if public,
free from any right or redemption that Junior Lender may have, which right of
redemption is hereby waived, and Senior Lender may restrict the prospective
bidders or purchasers at any such sale to persons who will represent and warrant
that they are acquiring the Collateral for
-8-
<PAGE>
their own account and otherwise in compliance with the federal Securities Act of
1933, as amended, as now or hereafter in effect, or any similar statute
hereafter enacted analogous in purpose or effect (such act and any such similar
statute as from time to time in effect being hereinafter called the "Federal
Securities Laws"). -------
- ---------------
c. Because of present or future circumstances, a question may arise
under the Federal Securities Laws with respect to any disposition of the
Collateral. Junior Lender acknowledges that compliance with the Federal
Securities Laws may strictly limit Senior Lender's course of conduct in
disposing of all or any part of the Collateral and may also limit the extent to
which or the manner in which any subsequent transferee of the Collateral may
dispose of the same, and that there may be other legal restrictions or
limitations affecting Senior Lender in any attempts to dispose of all or any
part of the Collateral under applicable "Blue Sky" or other state securities
laws or similar laws analogous in purpose or effect.
Section 6. Governing Law. THIS AGREEMENT WAS NEGOTIATED IN THE STATE
-------------
OF NEW YORK, AND IN ALL RESPECTS, INCLUDING MATTERS OF CONSTRUCTION, VALIDITY
AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK. TO THE FULLEST EXTENT PERMITTED BY LAW, EACH OF SENIOR LENDER AND JUNIOR
LENDER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT
THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS AGREEMENT, AND THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK PURSUANT TO (S) 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
Section 7. Submission to Jurisdiction. ANY LEGAL SUIT, ACTION
--------------------------
ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE INSTITUTED IN ANY FEDERAL
OR STATE COURT IN NEW YORK, NEW YORK, PURSUANT TO (S) 5-1402 OF THE NEW YORK
GENERAL OBLIGATIONS LAW, AND JUNIOR LENDER WAIVES ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING
AND HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY
SUIT, ACTION OR PROCEEDING.
Section 8. Waiver of Jury Trial. JUNIOR LENDER HEREBY AGREES NOT TO
--------------------
ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY
RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR
HEREAFTER EXIST WITH REGARD TO THIS AGREEMENT, OR ANY CLAIM, COUNTERCLAIM OR
OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY
JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY JUNIOR LENDER, AND IS INTENDED TO
ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A
TRIAL BY JURY WOULD OTHERWISE ACCRUE. SENIOR LENDER IS HEREBY AUTHORIZED TO
FILE A COPY OF THIS SECTION IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS
WAIVER BY JUNIOR LENDER.
-9-
<PAGE>
Section 9. Notices. All notices, requests, demands and other
-------
communications required under the terms and provisions hereof shall be in
writing and shall become effective when delivered by hand or received by
telecopier, telegram, certified or registered airmail, postage prepaid, or an
established overnight delivery service, addressed as follows:
If to Senior Lender:
Lehman Brothers Holdings Inc., doing business as Lehman Capital, a
division of Lehman Brothers Holdings Inc.
3 World Financial Center
New York, New York 10285
Attention: Commercial Mortgage Loan Surveillance
Fax: (212) 528-6659
with a copy to:
If to Junior Lender:
CBM One Holdings, Inc.
c/o Host Marriott Corporation
10400 Fernwood Drive
Bethesda, Maryland 20817
Dept. 923
Attention: Law Department
Fax: (301)380-6332
with a copy to:
Host Marriott Corporation
10400 Fernwood Road
Bethesda, Maryland 20817
Dept. 908
Attention: Asset Management
Fax: (301) 380-8260
or to such other address (and such additional addressees, not to exceed two (2)
in number for each party hereto) as the party to receive the notice shall
designate by notice to the other parties.
Section 10. Rules of Construction. The headings used in this
---------------------
Agreement are for convenience only and constitute no part of this Agreement, and
references herein to articles, sections, subsections or clauses are to this
Agreement unless otherwise specified. Unless otherwise specified, the words
"hereof", "herein" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. The words "includes", "including" and similar
-10-
<PAGE>
terms shall be construed as if followed by the words "without limitation."
Unless otherwise specified, all meanings attributed to defined terms herein
shall be equally applicable to both the singular and plural forms of the terms
so defined. Whenever in this Agreement any person is referred to, such
reference shall be deemed to include the legal representatives, successors and
assigns of such person.
Section 11. Counterparts. This Agreement may be executed in
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
Section 12. Modification, Waiver in Writing. No modification,
-------------------------------
amendment, extension, discharge, termination or waiver of any provision of this
Agreement, nor consent to any departure by Junior Lender therefrom, shall in any
event be effective unless the same shall be in a writing signed by the party
against whom enforcement is sought, and then such waiver or consent shall be
effective only in the specific instance, and for the purpose, for which given.
Except as otherwise expressly provided herein, no notice to, or demand on Junior
Lender, shall entitle Junior Lender to any other or future notice or demand in
the same, similar or other circumstances. Any failure or delay by Senior Lender
in insisting upon strict performance of any term, condition, covenant or
agreement, or exercising any right, power, remedy or privilege hereunder, shall
operate as or constitute a waiver thereof, nor shall a single or partial
exercise thereof preclude any other future exercise, or the exercise of any
other right, power, remedy or privilege.
Section 13. Severability. Wherever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
Section 14. No Third Party Beneficiaries. This Agreement is solely
----------------------------
for the benefit of the parties hereto, and nothing contained herein shall be
deemed to confer upon other Person any right to insist upon or to enforce the
performance or observance of any of the obligations contained herein.
Section 15. Headings. Section headings herein are for the
--------
convenience of reference only, and shall not govern the interpretation of any
provisions hereof.
Section 16. Termination. The term of this Agreement shall commence
-----------
on the date hereof, and such term and this Agreement shall terminate on the
Termination Date. Upon such termination, no party shall have any further
obligations or liabilities hereunder; provided, that such termination shall not
relieve any party from liability for any breach of this Agreement prior to such
termination.
Section 17. Further Assurances. Junior Lender shall execute and
------------------
deliver such further instruments and documents as Senior Lender may reasonably
request to further effectuate the intentions of the parties hereto.
-11-
<PAGE>
Section 18. Successors and Assigns. The provisions of this Agreement
----------------------
shall be binding on and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. Senior Lender may freely transfer
and assign its rights hereunder to the same extent that Senior Lender may
transfer and assign the Senior Loan pursuant to the terms of the Senior Loan
Agreement.
[SIGNATURES APPEAR ON FOLLOWING PAGES]
-12-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first hereinabove set forth.
SENIOR LENDER:
LEHMAN BROTHERS HOLDINGS INC., DOING BUSINESS AS LEHMAN
CAPITAL, A DIVISION OF LEHMAN BROTHERS HOLDINGS INC.
By:
-------------------------
Name:
Title:
JUNIOR LENDER:
CBM ONE HOLDINGS, INC.
By:
-------------------------
Name:
Title:
-13-
<PAGE>
Exhibit 10.S
SECOND AMENDMENT OF GROUND LEASES
THIS SECOND AMENDMENT OF GROUND LEASES (this "Amendment") is entered
into as of this 21st day of March, 1997, by and among COURTYARD BY MARRIOTT
LIMITED PARTNERSHIP, a Delaware limited partnership with its principal address
at 10400 Fernwood Road, Bethesda, Maryland 20817 ("Tenant"), HOST RESTAURANTS,
INC., a Delaware corporation with its principal address at 10400 Fernwood Road,
Bethesda, Maryland 20817 ("HRI"), NEWARK PROPERTIES, INC., a Delaware
corporation with its principal address at 10400 Fernwood Road, Bethesda,
Maryland 20817 ("Newark"), CASA MARIA OF MARYLAND, INC., a California
corporation with its principal address at 10400 Fernwood Road, Bethesda,
Maryland 20817 ("Casa Maria") and ESSEX HOUSE CONDOMINIUM CORPORATION, a
Delaware corporation with its principal address at 10400 Fernwood Road,
Bethesda, Maryland 20817 ("Essex House") (HRI, Newark, Casa Maria and Essex
House are sometimes each referred to herein, with respect only to the Leases
described herein to which such corporation is a party, as "Landlord" and
collectively as "Landlords").
RECITALS:
A. HRI is the landlord and Tenant is the legal or beneficial tenant
under the ground lease agreements identified in part I of Exhibit A attached
---------
hereto, Newark is the landlord and Tenant is the tenant under the ground lease
agreements identified in part II of Exhibit A attached hereto, Casa Maria is the
----------
landlord and Tenant is the tenant under the ground lease agreements identified
in part III of Exhibit A attached hereto, and Essex House is the landlord and
----------
Tenant is the tenant under the ground lease agreements identified in part IV of
Exhibit A attached hereto (such ground lease agreements listed in parts I, II,
- ----------
III and IV of said Exhibit A being hereinafter referred to each as a "Lease" and
---------
collectively as the "Leases," and the land that is subject to each Lease, as
described on Exhibit B attached hereto being hereinafter referred to as the
---------
"Leased Premises").
B. The Leased Premises and the Courtyard by Marriott hotels located
thereon (the "Hotels") are subject to certain mortgage indebtedness of Tenant
(the "Existing Debt") in the original principal amount of $350,000,000, which
had an outstanding principal balance immediately prior to the date hereof of
approximately $282,000,000. The Existing Debt is, on the date hereof, being
refinanced through a loan (the "Loan") by Lehman Brothers Holdings Inc., doing
business as Lehman Capital, a division of Lehman Brothers Holdings Inc.
("Lender") to Tenant in the original principal amount of approximately Three
Hundred Twenty-Five Million Dollars ($325,000,000).
<PAGE>
C. The Loan is being made pursuant to that certain Loan Agreement
dated as of the date hereof by and between Tenant, as borrower, and Lender, as
lender (the "Loan Agreement").
D. All of Lender's rights under the Loan Agreement and all other Loan
Documents (as defined below), including, without limitation, the Mortgages (as
defined below), may be assigned by Lender, along with mortgage loans made to
other borrowers, to, among others, an institutional trustee (the "Trustee"), as
trustee for the benefit of the holders from time to time of certain commercial
mortgage-backed certificates (the "Certificates") pursuant to Section 9 of the
Loan Agreement, and may be serviced by a professional loan servicing company
selected by Lender (the "Servicer") on behalf of the Trustee. Upon assignment
of the Loan Documents to the Trustee, the term "Lender" as used herein will mean
the Trustee and the Servicer (on behalf of the Trustee), as applicable.
E. The Loan will be secured by, among other things, mortgage, deed of
trust, or similar liens on each of the Leased Premises and the Hotels located
thereon, including, without limitation, (a) those certain Mortgages (or Fee and
Leasehold Mortgages), Open-End Mortgage, Deed to Secure Debt, Assignment of
Leases and Rentals, Security Agreement and Fixture Filing and (b) those certain
Deeds of Trust (or Fee and Leasehold Deeds of Trust), Assignment of Leases and
Rentals, Security Agreement and Fixture Filing, dated as of even date herewith
by Tenant to or for the benefit of Lender, as to Tenant's leasehold interest in
the Leased Premises and its ownership interest in the Improvements (as defined
in each applicable Lease) thereon, and by Landlord, to or for the benefit of
Lender, as to Landlord's fee simple interest in the Leased Premises and its
reversionary interest, if any, in the Improvements thereon (each a "Mortgage"
and collectively the "Mortgages").
F. Pursuant to the Subordination Agreement (as hereafter defined),
Landlord has agreed to subordinate to payment of the "Senior Obligations" (as
hereinafter defined) its right to receive certain payments of "Rental" and
"Deferred Rental" (as defined in any applicable Lease) in the manner described
in the Subordination Agreement (as hereinafter defined).
G. Except for provisions regarding the payment of Rental, as
reflected on Schedule A to the various Leases, the terms and conditions of the
----------
Leases are substantially identical in all material respects.
H. The parties hereto desire to clarify certain provisions of each of
the Leases, and to amend certain other provisions thereof, as more fully set
forth herein.
2
<PAGE>
NOW THEREFORE, in consideration of these premises, and for other good
and valuable consideration, the receipt and sufficiency of which each of the
parties acknowledges, the parties agree as follows:
ARTICLE 1. Amendments to and Clarifications of Leases
Each Landlord is entering into this Amendment only as to the Leases to
which it is a party, and any future amendments to any Lease shall be required to
be executed in writing only between Tenant and Landlord from time to time under
such Lease, without the need for any other "Landlord" hereunder that is not a
party to such Lease to join therein or to consent thereto. A representative
form of one of the Leases is attached hereto as Exhibit C. The amendments
---------
herein sometimes refer to particular sections of Exhibit C. If the Section
---------
numbering in any Lease differs from the Section numbering in Exhibit C, the
---------
amendments herein shall be deemed to be amendments to the corresponding sections
of such other Lease. From and after the date hereof, each of the Leases shall
be deemed to be amended and clarified in the following respects.
1.1 Certain Definitions
Certain definitions contained in each Lease shall be deemed amended or
modified as follows (and all definitions defined in this Amendment shall be
deemed to be incorporated into each Lease, with the same effect as if set forth
in full therein):
"Affiliates" has the meaning ascribed to it in the Loan Agreement.
"Amendment" shall mean this Second Amendment of Ground Leases.
"Allocated Loan Amount" means, for the Hotel that is located on the
Leased Premises that is subject to any applicable Lease, the amount set forth
for such Hotel on Exhibit D attached hereto.
---------
"Applicable Percentages" as to the Hotel located on the Leased
Premises described in any applicable Lease, means the quotient of (a) the
Allocated Loan Amount, as of the date hereof, of such Hotel divided by (b) the
Allocated Loan Amounts, as of the date hereof, of all Hotels that are subject to
the lien of any Mortgage on the date such calculation is to be made (ignoring
any Hotels that Tenant intends to have released from the lien of a Mortgage as
of such date).
"Bona Fide Institutional Lender" shall be deemed to include, in
addition to the types of entities described in the definitions described in each
Lease, (1) Lender and its Affiliates and any of their respective successors and
assigns, (2) the Trustee, and its successors and assigns, (3) the Servicer, on
behalf of the Trustee, and its successors, sub-servicers and assigns, (4) any
entity or trust that is
3
<PAGE>
qualified under the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder, as a "Real Estate Mortgage Investment
Conduit" or "REMIC", (5) public or private bondholders or certificate holders
represented by an institutional trustee that have made a loan to Tenant or have
purchased a loan made to Tenant, and (6) any Affiliate of Tenant that is formed
for the purpose of making a loan to Tenant that will be assigned
contemporaneously with the making thereof to another Bona Fide Institutional
Lender.
"Certificates" has the meaning set forth in Recital D hereof.
"Collateral Assignment" means that certain Collateral Assignment of
Management Agreement and Subordination Agreement dated as of the date hereof by
and among Tenant, Lender, and the Manager relating to the Management Agreement.
"Defeasance Period" has the meaning ascribed to it in Section 2.5(a)
of the Loan Agreement.
"Defeased Note" has the meaning ascribed to it in Section
2.5(a)(iv)(D) of the Loan Agreement.
"Deferred Ground Rent" means any payment of Rental or Deferred Rental
under any Lease that is not paid when due as a result of the subordination
provisions of the Subordination Agreement.
"Existing Debt" has the meaning set forth in Recital B hereof.
"Fee Mortgage" shall mean the applicable Mortgage and any other
mortgage, deed of trust, deed to secure debt or similar lien instrument signed
by a Landlord for the purpose of granting a lien on Landlord's interest in the
Leased Premises to secure indebtedness of Tenant.
"Foreclosure" means a foreclosure of any applicable Mortgage
(including, without limitation, a Fee Mortgage), a sale of the property and
assets that are encumbered thereby under a power of sale contained therein, any
similar procedure under which Lender or a third party becomes owner of the
Leased Premises in complete or partial satisfaction of the debt secured by a
Mortgage (including, without limitation, a Fee Mortgage) or any conveyance in
lieu of any of the foregoing.
"Foreclosure Purchaser" means any transferee of a Lease pursuant to a
Foreclosure and, if such transferee is Lender, the Trustee or an affiliate of
either, the next subsequent transferee that is not an affiliate of Lender or the
Trustee.
4
<PAGE>
"General Partner" means CBM One Corporation, a Delaware corporation,
which is the general partner of Tenant.
"Gross Revenues" shall have the meaning ascribed to it in the
Management Agreement, as it exists on the date hereof, so long as the Leased
Premises are operated as a hotel. At such time as the Leased Premises are no
longer operated as a hotel, the definition of "Gross Revenues" contained in each
applicable Lease (ignoring this Amendment) will again be operative.
"Hotel," as used in any applicable Lease, means the Improvements
(which are currently operated as Courtyard by Marriott hotels).
"Hotels" has the meaning set forth in Recital B hereof.
"Improvements" has the meaning ascribed to it in each applicable
Lease.
"Lease" has the meaning set forth in Recital A hereof.
"Leased Premises" has the meaning set forth in Recital A hereof.
"Leasehold Mortgage," as defined in each Lease, shall be deemed to
include, without limitation, the applicable Mortgage.
"Leasehold Mortgage Amount" shall include, without limitation, the
amount of all principal, interest, yield maintenance premiums, if any, release
premiums, if any, defeasance deposits, if any, trustee fees, servicer fees,
costs of administration and enforcement and other amounts payable under the Loan
Agreement and the Mortgage Note.
"Leasehold Mortgagee," as defined in each Lease, shall be deemed to
include, without limitation, Lender, as the mortgagee or beneficiary under the
applicable Mortgage, and its successors and assigns thereunder.
"Lender" means the lender from time to time under the Loan Agreement,
including, without limitation, Lehman Brothers Holdings Inc., doing business as
Lehman Capital, a division of Lehman Brothers Holdings Inc., the Trustee (as the
assignee of Lender), and the Servicer (acting on behalf of the Trustee).
"Loan" means the $325,000,000 loan evidenced by the Mortgage Note and
made pursuant to the Loan Agreement.
"Loan Agreement" has the meaning ascribed to in Recital C hereof.
5
<PAGE>
"Loan Documents" means the Loan Agreement, the Mortgage Note, each of
the Mortgages, and all other documents relating to, securing, or delivered in
connection with the Loan Agreement.
"Management Agreement" means that certain Management Agreement dated
as of January 4, 1997 by and between Tenant, as owner of 50 Hotels, and the
Manager, as manager thereof.
"Manager" means Courtyard Management Corporation, a Delaware
corporation, and its permitted successors and assigns.
"Mortgage" and "Mortgages" have the meanings set forth in Recital E
hereof. The use of the term "Mortgage" in any applicable Lease shall mean the
Mortgage that encumbers the Leased Premises that is subject to that Lease.
"Mortgage Note" means the promissory note described in Section 2.2 of
the Loan Agreement; provided, however, that if the principal amount of such
-------- -------
promissory note shall be divided at any time into one or more Defeased Notes and
one or more Undefeased Notes pursuant to Section 2.5 of the Loan Agreement,
"Mortgage Note" shall mean, collectively, all such Undefeased Note[s] and
Defeased Note[s].
"Mortgagee" means the mortgagee or beneficiary from time to time under
the applicable Mortgage or any other Fee Mortgage or Leasehold Mortgage
affecting the applicable Leased Premises.
"Opening Date" for any Hotel that is subject to a Lease, shall mean
the date set forth for such Hotel on Exhibit E as the Opening Date.
---------
"Payment Priorities" has the meaning ascribed to it in Section 1.4
hereof.
"Refinancing" has the meaning ascribed to it in the Management
Agreement.
"Release Price" has the meaning ascribed to it in the Loan Agreement.
"Rent Commencement Date" shall mean for any Hotel that is subject to a
Lease, the date set forth for such Hotel on Exhibit E as the Rent Commencement
---------
Date.
"Senior Obligations" has the meaning ascribed to it in the
Subordination Agreement.
6
<PAGE>
"Servicer" has the meaning set forth in Recital D hereof.
"Subordination Agreement" means that certain Marriott Ground Lease
Rental Subordination Agreement of even date herewith entered into by Landlords
for the benefit of the holders from time to time of the Senior Obligations.
"Trustee" has the meaning set forth in Recital D hereof.
"Undefeased Note" has the meaning ascribed to it in Section
2.5(a)(iv)(D) of the Loan Agreement.
1.2 Other Capitalized Terms
Capitalized terms that are used herein and are not defined in Section
1.1 hereof shall have the meanings ascribed to them (a) where such capitalized
terms are introduced in bold face and placed in quotation marks herein or (b) in
the documents to which reference is made herein for ascertaining the definition
thereof.
1.3 Tenant Owns Improvements
The Improvements (as defined in the applicable Lease) are the sole
property of Tenant, subject only to Landlord's reversionary interest, if any, in
any Improvements.
1.4 Amendment to Section 3.03
Tenant's obligation under Section 3.03 of any Lease to safeguard the
Improvements and to restore the Leased Premises to an unimproved condition upon
the termination of such Lease in the events described in said Section 3.03 shall
be (A) limited to the amount by which (i) the aggregate amount of net insurance
proceeds or net Awards available to Tenant exceeds (ii) the Allocated Loan
Amount required to be paid to Lender under the Loan Agreement upon a
condemnation or casualty affecting the applicable Hotel, plus accrued interest
on the Loan, and (B) limited to the amount necessary to eliminate any hazardous
condition on the Leased Premises or to prevent imminent and substantial physical
deterioration of the Improvements thereon ("Stabilization"). If Tenant does
not, in fact, pay for the costs of Stabilization, the reasonable cost to
Landlord to effect such Stabilization shall be deemed to be additional Rental of
the kind referred to in Section 5.13 of the Lease, as modified by Section 1.9
hereof, which shall be paid only in accordance with the applicable payment
priorities set forth in Section 5.02 of the Management Agreement and the
provisions of the Subordination Agreement (the "Payment Priorities"). The
obligation to remove Improvements under Section 3.03 shall not apply to any
Foreclosure Purchaser. Landlord shall in all events have the right to
7
<PAGE>
safeguard the Improvements if (a) Landlord believes such action is necessary or
desirable to avoid liability on the part of Landlord and its Affiliates and (b)
if Tenant or the Foreclosure Purchaser does not do so. Any amounts reasonably
expended by Landlord in so doing shall be considered additional Rental of the
kind referred to in Section 5.13 of the Lease, as modified by Section 1.9
hereof, which shall be paid only in accordance with the Payment Priorities.
1.5 Amendment to Section 4.05
(a) So long as the Manager is an Affiliate of Landlord, Landlord
agrees that delivery by Tenant to Landlord of the reports delivered by the
Manager to Tenant pursuant to the third sentence of Section 9.01 of the
Management Agreement will satisfy Tenant's obligations under the second sentence
of Section 4.05(a) of any such Lease.
(b) Section 4.05(a) is further modified to provide that: "If, at any
time, Landlord and Manager are not Affiliates, Tenant shall deliver to Landlord
all such financial reports and statements concerning the operations of the
Leased Premises as Landlord shall reasonably request, including without
limitation, such reports as are necessary for Landlord to determine whether
there are sufficient revenues from the operation of the Leased Premises to pay
Rental, Deferred Rental, Deferred Ground Rent, and other sums then owing to
Landlord."
(c) At any time that the Manager is an Affiliate of Landlord, the
first sentence of Section 4.05(b) shall be deemed to be omitted in its entirety
and the penultimate sentence of Section 4.05(b) shall be deemed to be amended to
read in its entirety as follows: "Landlord shall bear the cost of all such
audits."
1.6 Amendment to Section 5.01(b)
So long as the Mortgage or any other Fee Mortgage signed by Landlord
to secure the obligations of Tenant in respect of Qualified Debt (as defined in
the Management Agreement) shall be in effect, the first sentence of Section
5.01(b) shall be deemed to be amended in its entirety to read as follows:
"During the term of each applicable Lease, Landlord agrees that it
shall not assign, transfer, pledge, convey, mortgage or encumber, or permit the
assignment, transfer, pledge, conveyance, mortgaging or encumbrance of any or
all of Landlord's Interest (each a "Transfer"), other than pursuant to a written
instrument (1) which provides that such Transfer is both subject and subordinate
to the Lease, the applicable Mortgage and the Subordination Agreement (2)
whereby the transferee assumes Landlord's obligations under the Subordination
Agreement with respect to the Lease which is to be the subject of the Transfer,
and (3) whereby Landlord confirms that it will remain liable to make any payment
required under Section 2.4 of the Subordination Agreement in the event that the
transferee fails to
8
<PAGE>
do so; provided, however, that the foregoing shall not apply to, and nothing in
-------- -------
this Section 5.01 shall prohibit, sales or transfers of equity interests in
Landlord or any transfer which may occur, by operation of law or otherwise, as
part of a "Reorganization" as defined in Section 368 of the Internal Revenue
Code of 1986, as amended."
1.7 Amendment to Section 5.05
Section 5.05 of each Lease is amended in the following respect:
Tenant shall not have the right under Section 5.05(a) of such Lease to replace
any Improvements or to demolish, raze, or otherwise remove the same unless it
shall first have paid to the Landlord the amount that would be payable by Tenant
under Section 1.16 if Tenant were assigning its interest in such Lease. The
immediately preceding sentence shall not apply to Lender or to a Foreclosure
Purchaser. As to any Foreclosure Purchaser (other than Lender or an affiliate
thereof), the following shall apply instead: Any Foreclosure Purchaser (other
than Lender or an affiliate thereof) that becomes the "Tenant" under any Lease
shall not have the right under Section 5.05(a) of the applicable Lease to
replace any Improvements or to demolish, raze, or otherwise remove the same
unless it shall have paid to Landlord all amounts due and owing under the Lease
from and after the date on which such Foreclosure Purchaser first became the
"Tenant" under the Lease.
1.8 Amendment to Section 5.10
The following is added to each Lease as Sections 5.10(d) and 5.10(e):
"(d) In the event any Affiliate of Landlord shall cease to be
the manager of the Improvements, Tenant agrees to establish a reserve
or reserves with Landlord for the payment, prior to delinquency, of
all real property taxes and assessments, and all other taxes and
assessments of any kind or nature whatsoever (all of which taxes,
assessments and other charges are hereinafter referred to as
"Impositions") as follows: Tenant shall pay to Landlord, on each day
installments of Rental are payable under this Lease, an amount equal
to one-thirteenth (1/13th) of (i) the amount Landlord reasonably
estimates will be needed to pay the annual Impositions, and (ii) the
annual premiums for insurance required to be maintained pursuant to
Article VII of this Lease. Tenant agrees to cause all bills,
statements or other documents relating to Impositions or insurance to
be sent or mailed directly to Landlord upon request. Upon receipt of
such bills, statements or other documents,
9
<PAGE>
and provided Tenant has deposited sufficient funds with Landlord,
Landlord shall pay such amounts as may be due thereunder out of the
funds so deposited. If at any time and for any reason the funds
deposited with Landlord are or will be insufficient to pay such
amounts as may then or subsequently be due, Landlord shall notify
Tenant and Tenant shall immediately deposit an amount equal to such
deficiency with Landlord. Nothing contained herein shall cause
Landlord to be obligated to pay any amounts in excess of the amount of
funds deposited with Landlord. Should Tenant fail to deposit with
Landlord sufficient sums to pay fully any Imposition or insurance
premium before it becomes delinquent, Landlord may, at Landlord's
election, but without any obligation so to do, advance any amounts
required to make up the deficiency. All such advances that are made in
connection with any Lease that is subject to the Subordination
Agreement shall be treated as additional Rental of the kind referred
to in Section 5.13 of the Lease, as modified by Section 1.9 hereof,
which shall be paid only in accordance with the Payment Priorities.
(e) Landlord agrees that the provisions of Section 5.10(d) shall
be deemed satisfied if reserves to pay Impositions and insurance
premiums are established by Tenant with any Leasehold Mortgagee."
10
<PAGE>
1.9 Amendment to Section 5.13
Notwithstanding anything in Section 5.13 of the Lease or elsewhere
therein to the contrary, Landlord shall not make any payment under the Lease
that would cause the unpaid amount of all additional Rental payable at any time
under Section 5.13 of all of the Leases that are subject to the Subordination
Agreement, taken in the aggregate, to exceed $10 million at any time.
Landlord agrees, for the benefit of Tenant and any Leasehold
Mortgagee, that, if Landlord at any time redeems the Leased Premises from a
foreclosure sale for the non-payment of any Impositions or other charges, as
permitted by Section 5.13(c) of each Lease the liens of each Leasehold Mortgage
in effect immediately prior to such foreclosure, and the respective priorities
thereof, shall be reinstated, provided, that Landlord is reimbursed for the cost
-------- ----
of the redemption upon the earlier of (a) 12 months following payment thereof by
Landlord or (b) prior to a subsequent foreclosure by the applicable Leasehold
Mortgagee. Landlord further agrees, at the cost and expense of Tenant or the
applicable Leasehold Mortgagees, to execute such further documentation as shall
be reasonably necessary to give full effect to the intention of this Section
1.9.
11
<PAGE>
1.10 Amendment of Section 6.01
(a) The following is added to each lease as Section 6.01A: "6.01A
Fee Subordination. If requested by Tenant, Landlord shall, to the extent of
- --- -------------
Landlord's right, title, and interest in the fee simple estate of the Leased
Premises, join with Tenant in the execution and delivery of one or more first
mortgages, first deeds of trust, or other proper instruments in the nature
thereof (each of which is designated hereinafter as a "Fee Mortgage," and the
holder of the debt secured thereby, or such holder's designee or nominee, is
referred to as the "Fee Mortgagee") mortgaging or pledging Landlord's fee simple
estate and reversionary interest in the Leased Premises to or for the benefit of
the Fee Mortgagee, and its successors and assigns; provided, however:
(i) Landlord shall have no personal liability for the repayment of
any loan secured by any loan documents described in this Section, nor shall it
have any liability as to any other covenants of such loan documents, and it
shall not be required to execute any loan documents that would subject Landlord
to personal liability to pay any indebtedness, or portion thereof, secured by
such loan documents or to comply with any other covenants of such loan
documents.
(ii) Landlord shall not be required to execute any Fee Mortgage or
other instrument encumbering Landlord's Interest, other than (i) the Mortgage
and (ii) a Fee Mortgage that pertains to a Qualified Refinancing (as defined in
the Management Agreement) that secures debt that matures (including extensions
thereof upon any exercise of extension options available under the applicable
loan documents) no later than April 10, 2022; provided, however, that if any
-------- -------
such debt is not repaid by April 10, 2022, the lien of such Fee Mortgage on
Landlord's Interest shall not terminate but shall continue during the pendency
of any forbearance, "work out," or foreclosure period or proceedings.
(iii) Any loan to which this Section applies shall be obtained only
from a Bona Fide Institutional Lender other than Tenant or an Affiliate of
Tenant.
(iv) Any Fee Mortgage shall be a lien on Tenant's interest in this
Lease and the Leased Premises to the same extent it is a lien on Landlord's
interest.
(v) Any Fee Mortgage shall contain a provision that should there be
an uncured default under the Fee Mortgage, the Fee Mortgagee shall not have the
right to commence any foreclosure action thereunder, until the expiration of
thirty (30) days after delivery to Landlord pursuant to Section 12.03 of the
Lease of written notice of such default and the Fee Mortgagee's intent to
foreclose.
(vi) If any Fee Mortgage is foreclosed and if the proceeds of the
foreclosure sale exceed the unpaid principal and interest due on the Fee
Mortgage
12
<PAGE>
and the expenses of foreclosure, Landlord shall receive such excess, and the Fee
Mortgage shall protect this right of Landlord.
(vii) If any Fee Mortgage is foreclosed, the sale shall be of either
(A) the leasehold interest of the Tenant only, subject to this Lease, or (B) the
entire fee simple title to the mortgaged property, inclusive of the entire
interest of the Tenant and Landlord therein, but not the interest of Landlord
--- ---
only.
(viii) All costs and expenses, including, without limitation,
reasonable attorney's fees, incurred by Landlord in connection with the
transactions described in this Section 6.01A shall be paid by Tenant.
Any Fee Mortgage delivered in connection with this Section 6.01A shall
be treated as a Fee Mortgage and not a Leasehold Mortgage."
So long as the Leased Premises shall be subject to a Fee Mortgage that
is entitled to the benefits of the Subordination Agreement, the words "unpaid
principal and interest due on the Fee Mortgage" in Section 6.01A(vi) are deleted
and replaced with the following words: "full amount of all Senior Obligations
then owing."
1.11 Amendment to Section 6.02
The provisions of Section 6.02(d)(1) of each Lease, requiring the
Leasehold Mortgagee to pay Rental to Landlord as it becomes due, are subject to
the provisions of the Subordination Agreement, and any Rental that is not paid
because of the insufficiency of Available Cash Flow (as defined in the
Management Agreement) as of the date such Rental is due shall become Deferred
Ground Rent, and shall be payable only in accordance with the Payment
Priorities.
1.12 Lender Entitled to Benefits of Article VI
The "Mortgagee" or "Beneficiary", as the case may be, from time to
time under the Mortgage, including, without limitation, Lender, shall be
entitled to all of the rights of a "Leasehold Mortgagee" under Article VI of
each Lease.
1.13 Amendment to Section 6.03
The requirements of Section 6.03(a)(2) that Leasehold Mortgagee pay
Landlord past due Rental and other sums shall not apply to the Leasehold
Mortgagee or any Foreclosure Purchaser, but all such sums which are not then
paid by the Leasehold Mortgagee or any Foreclosure Purchaser shall continue to
be treated as Deferred Ground Rent and shall be repaid in accordance with the
Payment Priorities.
13
<PAGE>
1.14 Amendment of Section 7.05
Notwithstanding anything in Section 7.05 of any Lease to the contrary,
in the event of a damage to the Leased Premises by fire or other casualty at a
time when the Mortgage shall remain in effect, any applicable casualty insurance
proceeds shall be paid as follows: (1) first, to the applicable Mortgagee, in
an amount equal to the Allocated Loan Amount (as then calculated pursuant to the
applicable Mortgage), plus accrued and unpaid interest thereon, (or, if the
casualty occurs during the Defeasance Period, an amount equal to the applicable
"Defeasance Deposit" (as defined in the Loan Agreement) calculated as if the
Defeased Note were equal to the Allocated Loan Amount) (2) second, to Landlord
in an amount equal to the costs reasonably incurred by Landlord to eliminate any
hazardous condition on the Leased Premises or Improvements caused by such
casualty or to prevent imminent and substantial physical deterioration of the
Leased Premises or the Improvements, (3) third, to the applicable Mortgagee, up
to an amount which, when added to the amount paid to such Mortgagee pursuant to
clause (1) above, equals the Release Price (or, if such payment is made during
the Defeasance Period, in an amount when added to the amount paid to such
Mortgagee pursuant to clause (1) above, equals the balance of the applicable
Defeasance Deposit) and (4) the balance, if any, to the Borrower; Section 7.05
shall be deemed to be amended accordingly.
1.15 Satisfaction of Article VII Requirements
(a) The words "twenty five million dollars ($25,000,000) (which amount
shall be adjusted every three (3) years in accordance with the Price Index)"
that appear in Section 7.01 of any Lease are hereby deleted and replaced with
the following words: "Twenty-Five million ($25,000,000) (which amount shall be
adjusted every three (3) years in accordance with the Price Index) or, so long
as the Manager is the manager of the Hotel, such lesser amount as is customarily
carried by the Manager with respect to hotels that it manages"; provided,
--------
however, that if the Leased Premises ceases to be managed as a hotel by the
- -------
existing Manager or one of its Affiliates, the original wording of Section 7.01
shall be restored.
(b) Landlord agrees that satisfaction by Tenant, as "Mortgagor" or
"Grantor", as applicable, under the Mortgage, of the requirements of Section 1.7
of the Mortgage will be deemed to be satisfaction of all of the requirements of
Section 7.02 of such Lease. Tenant shall not be required to carry earthquake
insurance except (i) if customarily carried by the Manager on behalf of
substantially all of the other hotels that it manages in the area in which the
Hotel is located or (ii) if required by Lender.
14
<PAGE>
(c) So long as the Mortgage is in effect, Landlord shall have no right
to join in the adjustment of any insurance claim under the policies required
under Section 7.02 of such Lease or Section 1.7 of the Mortgage.
1.16 Restrictions on Tenant's Right to Assign or Terminate
Lease or Change the Use of the Lease Premises
Tenant shall not be entitled to exercise any right Tenant may have (x)
to assign or terminate any Lease, or (y) to change the use of the Leased
Premises, unless on or prior to the date such assignment, termination, or change
in use is to take effect, Tenant pays to Landlord an amount equal to the
Applicable Percentage of the aggregate amount of Deferred Ground Rent then owing
under the Leases then in effect; provided, however, that this provision shall
-------- -------
not apply to an assignment or termination of such Lease in connection with a
Foreclosure or a change in use of the Leased Premises following a Foreclosure;
and provided, further, however, that neither the applicable Mortgagee, nor any
-------- -------
Foreclosure Purchaser nor any replacement tenant succeeding to the interests
thereof under any applicable Lease shall be permitted to take any of the actions
described in clauses (x) or (y) above unless on or prior to the date such
assignment, termination, or change in use is to take effect, such party pays to
Landlord an amount equal to the aggregate amount of Rental and Deferred Rental
owing under such Lease to the extent arising from and after the date such party
became the "Tenant" under such Lease. Notwithstanding the foregoing, the
provisions of the second proviso in the immediately preceding sentence shall not
apply to Lender or any Foreclosure Purchaser that is an affiliate of Lender.
1.17 Amounts Owing upon Release of Lender Mortgage
The amount specified in Section 1.16 hereof shall also be due and
owing to Landlord upon a release of the lien of any applicable Mortgage.
1.18 Amendment of Section 8.03
Notwithstanding anything in Section 8.03(a) of any Lease to the
contrary, in the event of a Total Taking (as defined in the Lease) of the Leased
Premises at a time when the Mortgage shall remain in effect, any applicable
Award (as defined in the Lease) shall be paid as follows: (1) first, to the
applicable Mortgagee, in an amount equal to the Allocated Loan Amount (as then
calculated pursuant to the applicable Mortgage), plus accrued and unpaid
interest thereon, (or, if the Taking (as defined in the Lease) occurs during the
Defeasance Period, an amount equal to the applicable "Defeasance Deposit" (as
defined in the Loan Agreement) calculated as if the Defeased Note were equal to
the Allocated Loan Amount) (2) second, to Landlord in an amount equal to the
costs reasonably incurred by Landlord to eliminate any hazardous condition on
the Leased Premises or Improvements caused by such casualty or to prevent
imminent and substantial
15
<PAGE>
physical deterioration of the Leased Premises or the Improvements, (3) third, to
the applicable Mortgagee, up to an amount which, when added to the amount paid
to such Mortgagee pursuant to clause (1) above, equals the Release Price (or, if
such payment is made during the Defeasance Period, in an amount when added to
the amount paid to such Mortgagee pursuant to clause (1) above, equals the
balance of the applicable Defeasance Deposit) and (4) the balance, if any, to
the Lender in accordance with Loan Documents. Section 8.03(a) shall be deemed to
be amended accordingly. For purposes of this Agreement, the Senior Obligations
will be deemed to have been "paid in full" on such date as all of the conditions
set forth in clauses (i) and (ii) of Section 2.1.2 of the Subordination
Agreement shall have been satisfied.
1.19 Amendment to Section 10.01
Landlord shall not declare an Event of Default under any Lease as a
result of non-payment of Rental under Section 10.01(a) that is not payable
because of the provisions of the Subordination Agreement, as long as such unpaid
Rental is paid when permitted in accordance with the Payment Priorities. So
long as (a) Tenant is an Affiliate of Host Marriott Corporation and (b) Landlord
is Marriott International, Inc. or an Affiliate thereof, notices of non-payment
of Rental under Section 10.01(a) shall be sent to each Mortgagee. If the
Manager is not an Affiliate of Landlord, a late charge equal to 3% of the amount
past due shall be imposed on all payments of Rental that are not paid when due
(subject to any extension of the due date pursuant to the terms of the
Subordination Agreement). All such late charges shall be deemed to be a part of
"Rental" for purposes of the Subordination Agreement.
1.20 Amendment of Section 12.13
Section 12.13 of each Lease is hereby amended in its entirety to read
as follows:
"Except as set forth in this Section 12.13, Landlord agrees to
look solely to Tenant's interest in the Improvements and the Leased
Premises for payment of any Minimum Rental, Percentage Rental, Rental,
Deferred Rental, Deferred Ground Rent or other amounts which may
become due and payable hereunder. Except for events or matters
described in clause (iii) (A) through (F) below, no other property of
Tenant or any partner, officer, director, shareholder or member of
Tenant shall be subject to levy, execution or enforcement for the
payment of the foregoing amounts or the satisfaction of Landlord's
remedies under this Lease; provided, however, that the foregoing
-------- -------
provisions of this Section 12.13 shall not (i)
16
<PAGE>
prevent the failure to pay when due any amounts under this Lease, or
the failure to comply with any other covenants under this Lease, from
constituting a default under this Lease, (ii) except as expressly
limited hereby, limit or impair Landlord's enforcement of its remedies
under this Lease, or (iii) constitute a waiver by Landlord of any
rights to damages, other monetary relief, or any other remedy at law
or in equity, that Landlord may have against Tenant, or any other
party liable under this Lease (but in no event Lender or any affiliate
thereof), by reason of or in connection with any of the following: (A)
any fraud on the part of Tenant or intentional misrepresentation by
Tenant to Landlord, (B) failure of Tenant to apply any insurance
proceeds or condemnation awards in the manner required by this Lease
or any applicable Mortgage, (C) at any time that the Leased Premises
are not managed by an Affiliate of Landlord, failure by Tenant to
obtain and maintain any insurance coverage required by this Lease, (D)
the indemnities set forth in Section 5.02(c) of this Lease pertaining
to environmental conditions, (E) violation by Tenant of the terms of
Section 1.7 of the Amendment, or (F) the indemnities set forth in
Section 5.02(d) of this Lease regarding claims or actions brought
against Landlord in violation of Section 4.12 or 5.12 (Limitation of
Liability), as the case may be, of the applicable Mortgage. Tenant
(but in no event Lender or any affiliate thereof) shall indemnify,
defend and hold harmless Landlord from and against all claims,
demands, obligations and liabilities arising from or relating to the
matters set forth in clause (iii) above, including reasonable
attorneys' fees and expenses, whether or not suit is brought with
respect to such matters."
In no event shall Landlord have recourse to any limited partners,
officers, directors or shareholders of Tenant for any obligations or liabilities
of Tenant. Notwithstanding anything in this Section 12.13 to the contrary, no
Landlord shall be entitled to seek recourse against Lender or any affiliate
thereof that may become the "Tenant" under any Lease for any of the matters
described in this Section 12.13 or elsewhere in this Lease.
1.21 Additional Sections
17
<PAGE>
(a) The following is added as Section 5.02(c) to each Lease:
"Tenant agrees to indemnify and hold harmless Landlord from and
against any and all claims, suits, actions, debts, damages, costs,
losses, obligations, judgments, charges and expenses incurred by
Landlord (collectively, "Claims") resulting from a discharge on the
Leased Premises of hazardous substances or materials (a "Discharge"),
except that Tenant shall not be required to indemnify Landlord for
Claims relating to any such Discharges that occur during any period in
which the Leased Premises are under Management by an Affiliate of
Landlord and are not caused by Tenant or its officers, directors,
employees or agents (other than the Manager, or its officers,
directors, employees, or agents)."
(b) The following is added as Section 5.02(d) to each Lease:
"Tenant agrees to indemnify and hold harmless Landlord from any
Claims resulting from any actions, causes of action, suits,
proceedings or claims brought or asserted against Landlord in
violation of the provisions of Section 5.12 of the Mortgage."
1.22 Notices
The addresses for notices of the parties contained in Section 12.03 of
each Lease shall be amended to read as follows:
If to Landlord:
--------------
c/o Marriott International, Inc.
10400 Fernwood Road
Law Department: 52/923
Bethesda, Maryland 20817
Attention: Assistant General Counsel, Courtyard Operations
Fax No.: (301) 380-6727
If to Tenant:
------------
18
<PAGE>
Courtyard By Marriott Limited Partnership
c/o Host Marriott Corporation
10400 Fernwood Road
Bethesda, Maryland 20817
Dept. 923
Attention: Law Dept
Fax No.: (301) 380-6332
19
<PAGE>
with a copy to:
Courtyard by Marriott Limited Partnership
c/o Host Marriott Corporation
10400 Fernwood Road
Bethesda, Maryland 20817
Dept. 908
Attention: Asset Management
Fax No.:(301) 380-8260
If to Mortgagee
---------------
Lehman Brothers Holdings Inc.
3 World Financial Center
New York, New York 10285
Attention: Commercial Mortgage Loan Surveillance
Fax No.: (212) 528-6659
1.23 Certain Provisions Temporary
The provisions of Sections 1.4, 1.6, 1.10(d) and (e), 1.11 and 1.18
shall remain operative as to any Lease only so long as such Lease is subject to
the Subordination Agreement.
ARTICLE 2: Miscellaneous
2.1 First Amendment No Longer Effective; Leases Otherwise
In Effect
The terms of each First Amendment to Lease Agreement referred to in
Exhibit A attached hereto are terminated and of no force and effect from and
- ---------
after the date hereof. Except as specifically amended hereby, each of the
Leases is unmodified and is in full force and effect.
2.2 Construction
No term or provision of any Lease or of this Amendment shall be
construed more strictly against one party hereto or thereto than against any
other party hereto or thereto. The parties hereto have been represented by
competent counsel and all played an equal role in the negotiation and drafting
hereof.
20
<PAGE>
2.3 Headings
Headings of particular sections are inserted only for the convenience
of the parties and are in no way to be construed as a part of this Amendment or
as a limitation on the scope of the particular section to which they refer.
2.4 Applicable Law
The laws of the state in which the Leased Premises are situated shall
govern the validity, performance, and enforcement hereof.
2.5 Counterparts
This Amendment may be executed in several counterparts, each of which
shall be an original and all of which shall constitute one and the same
instrument.
ARTICLE 3: ESTOPPEL AND CONSENT OF LANDLORD
Each Landlord hereby consents to the granting of the Mortgage as to
the Leased Premises under each Lease to which it is a party and certifies, with
respect to each such Lease, for the benefit of Tenant, Lender and the successors
and assigns of each of them that:
(a) Each such Lease is in full force and effect, and has not been
amended or supplemented, except as amended hereby, and constitutes the entire
agreement between Landlord and Tenant with respect to the Land.
(b) The original commencement date and expiration date of the initial
term of each such Lease is correctly set forth on Exhibit E attached hereto.
---------
(c) Rental currently payable under such Lease is correctly set forth
on Exhibit E attached hereto.
---------
(d) As of the date hereof, there are no outstanding abatements of any
rent (including any fixed, percentage or additional rent) due under such Lease.
(e) To the best of such Landlord's knowledge, such Landlord has
completed all of its construction obligations (if any) under such Lease with
respect to the Leased Premises.
(f) Such Landlord is not insolvent and is able to pay its debts as
they mature; to the best of such Landlord's knowledge, there are no actions,
voluntary or otherwise, pending or threatened against such Landlord under any
bankruptcy, reorganization, insolvency or similar federal or state law.
21
<PAGE>
(g) All fixed rent, additional rent and other charges required to be
paid under such Lease have been paid through March 28, 1997, and no rental has
been prepaid more than 31 days in advance.
(h) Such Landlord is not aware of the existence of (i) any material
default by Tenant or such Landlord under such Lease, (ii) any event or condition
which, with the passage of time, the giving of notice, or both, would constitute
a material default by Tenant or such Landlord under such Lease, or (iii) any
dispute, action, suit, claim or right of set-off pending or, to such Landlord's
knowledge, threatened with respect to such Lease.
(i) Except pursuant to the Mortgages, such Landlord has not assigned,
conveyed, transferred, sold, encumbered or mortgaged its interest in the Lease
or the Hotel and there are no mortgages, deeds of trust or other security
instruments encumbering Landlord's fee interest in the Hotel.
(j) Upon written notice to such Landlord that the Loan has been
assigned to the Trustee, specifying the name and address of the Trustee, such
Landlord will recognize the Trustee as a "Leasehold Mortgagee" under such Lease
entitled to all rights and privileges accorded a "Leasehold Mortgagee" under
such Lease.
22
<PAGE>
IN WITNESS WHEREOF, this Second Amendment of Ground Leases has been
duly executed and delivered by the parties hereto as of the day and year first
above written.
TENANT:
COURTYARD BY MARRIOTT LIMITED
PARTNERSHIP
By: CBM One Corporation,
general partner
By:
---------------------------
Name: Douglas H.S. Greene
Title: Vice President
[SIGNATURES CONTINUED ON NEXT PAGE]
23
<PAGE>
LANDLORDS:
HOST RESTAURANTS, INC.
By:
-----------------------------
Name: James L. Best
Title: Vice President
NEWARK PROPERTIES, INC.
By:
-----------------------------
Name: James L. Best
Title: Vice President
ESSEX HOUSE CONDOMINIUM
CORPORATION,
By:
-----------------------------
Name: James L. Best
Title: Vice President
CASA MARIA OF MARYLAND, INC.
By:
-----------------------------
Name: James L. Best
Title: Vice President
24
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ANNUAL REPORT 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000813807
<NAME> COURTYARD BY MARRIOTT LIMITED PARTNERSHIP
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1.00
<CASH> 12,709
<SECURITIES> 0
<RECEIVABLES> 5,325
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 11,536
<PP&E> 508,989
<DEPRECIATION> (208,050)
<TOTAL-ASSETS> 330,509
<CURRENT-LIABILITIES> 47,889
<BONDS> 301,950
0
0
<COMMON> 0
<OTHER-SE> (19,330)
<TOTAL-LIABILITY-AND-EQUITY> 330,509
<SALES> 0
<TOTAL-REVENUES> 90,300
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 53,317
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,529
<INCOME-PRETAX> 13,454
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,454
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
