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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(G) OF
THE SECURITIES EXCHANGE ACT OF 1934
MUTUAL BENEFIT CHICAGO MARRIOTT SUITE HOTEL PARTNERS, L.P.
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RHODE ISLAND 05-0440218
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(STATE OF ORGANIZATION) (I.R.S. EMPLOYER
Identification Number)
10400 FERNWOOD ROAD
Bethesda, Maryland 20817
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(301) 380-2070
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(REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE)
Securities to be registered pursuant to Section 12(b) of the Act: Not
Applicable
Securities to be registered pursuant to Section 12(g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTERESTS
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(TITLE OF CLASS)
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TABLE OF CONTENTS
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Page No.
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ITEM 1. Business....................................................... 3
ITEM 2. Financial Information.......................................... 7
ITEM 3. Property....................................................... 11
ITEM 4. Security Ownership of Certain Beneficial Owners and Management. 12
ITEM 5. Directors and Executive Officers............................... 12
ITEM 6. Executive Compensation......................................... 13
ITEM 7. Certain Relationships and Related Transactions................. 13
ITEM 8. Legal Proceedings.............................................. 14
ITEM 9. Market for and Distributions on Limited Partnership Units and
Related Security Holder Matters................................ 15
ITEM 10. Recent Sales of Unregistered Securities........................ 15
ITEM 11. Description of Registrant's Securities......................... 15
ITEM 12. Indemnification of Directors and Officers...................... 19
ITEM 13. Financial Statements........................................... 20
ITEM 14. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure........................................... 37
ITEM 15. Financial Statements, Supplementary Schedule and Exhibits...... 37
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FORWARD-LOOKING STATEMENTS
Certain matters discussed herein are forward-looking statements within the
meaning of the Private Litigation Reform Act of 1995 and as such may involve
known and unknown risks, uncertainties, and other factors which may cause the
actual results, performance or achievements of the Partnership to be different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Although the Partnership believes the
expectations reflected in such forward-looking statements are based upon
reasonable assumptions, it can give no assurance that its expectations will be
attained. 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 to these forward-
looking statements that may be made to reflect any future events or
circumstances.
ITEM 1. BUSINESS
DESCRIPTION OF THE PARTNERSHIP
Mutual Benefit Chicago Marriott Suite Hotel Partners, L.P. (the "Partnership"),
a Rhode Island limited partnership, was formed in 1988 to acquire, own, lease,
mortgage and operate the Marriott Suites O'Hare Hotel (the "Hotel"), located in
the Village of Rosemont, Illinois. The Partnership leases the land underlying
the Hotel from Simon/Rosemont Developers (the "Ground Lease").
The sole general partner of the Partnership, with a 1% interest, is MOHS
Corporation (the "General Partner"), a Delaware corporation and a wholly-owned
subsidiary of Host Marriott Corporation ("Host Marriott"). The Partnership is
engaged solely in the business of owning and operating the Hotel and therefore
is engaged in one industry segment. The principal offices of the Partnership
are located at 10400 Fernwood Road, Bethesda, Maryland 20817.
The Hotel is operated by Marriott International, Inc. ("MII" and "Manager"), as
part of the Marriott Hotels, Resorts and Suites full-service hotel system under
a long-term management agreement. The Hotel has the right to use the Marriott
name pursuant to the management agreement and, if this agreement is terminated,
the Partnership will lose that right for all purposes (except as part of the
Partnership's name). See Item 7, "Certain Relationships and Related
Transactions."
Marriott Suites typically contain 250 guest suites and are targeted to short-
term upscale business and pleasure travelers who desire full-service hotel
amenities with the more spacious accommodations characteristic of all-suite
hotels. Marriott Suites are not intended to provide accommodations to heavily
discounted segments of the hotel market. Accordingly, for the past five years,
transient business has accounted for approximately 82% of the Hotel's
roomnights. The bulk of both the transient and group business has consisted of
corporate travelers. The Hotel, located only five minutes from Chicago O'Hare
International Airport, offers its guests 256 luxury suites with several
amenities, including a separate living room, wet bar with coffee/tea service,
separate dressing area with full length mirror and hair-dryer, large well-lit
work desk, and beginning in 1998, an upgraded telephone system providing a
second line for modem use. Additionally, the Hotel offers a food and beverage
outlet, a business center and approximately 2,600 square feet of meeting space.
The Hotel has been awarded the AAA Four Diamond designation for quality and has
consistently ranked among the top 5 Marriott hotels for service and product in
the midwest region in virtually all major guest satisfaction categories. The
Partnership has no current plans to acquire any new properties or sell the
Hotel. See Item 3, "Property."
ORGANIZATION OF THE PARTNERSHIP
The Partnership was formed on August 31, 1988, and operations commenced on June
12, 1989 (the "Closing Date"), pursuant to its amended and restated agreement of
limited partnership (the "Partnership Agreement"). Between September 15, 1988,
and the Closing Date, 335 limited partnership interests (the "Units"),
representing a 98% interest in the Partnership, were sold pursuant to a private
placement offering at $35,000 per Unit. At the time of Partnership formation,
there were two general partners, MOHS Corporation and MB Investment Properties,
Inc. ("MBIP"), each of which contributed $119,500 for their respective 1%
general partnership interests. On August 23, 1996, MBIP withdrew as a general
partner of the Partnership and converted its 1% general partner interest to a
limited partnership interest.
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On February 16, 1989, the Partnership executed a purchase and sale agreement
with Host Marriott to acquire the Hotel and the leasehold interest in the land
on which the Hotel is situated for $35 million. Under the purchase and sale
agreement, Host Marriott agreed to reduce the purchase price of the Hotel up to
an aggregate total of $3 million to the extent that the Hotel did not provide
cash flow, after payment of ground rent and debt service, equivalent to $1
million for each of the three years ended June 19, 1992 (the "Cash Flow
Guaranty"). A total of $2,476,000 was paid to the Partnership under the Cash
Flow Guaranty. The price adjustments have been allocated as a reduction of the
carrying value of the Partnership's property and equipment in the Partnership's
balance sheet. The total purchase price was paid from proceeds of the mortgage
financing (see "Debt Financing") and sale of the Units.
DEBT FINANCING
Mortgage Debt
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The Partnership entered into a loan agreement on June 12, 1989 with a bank to
provide non-recourse mortgage debt of $25.5 million (the "Mortgage Debt") to
finance the acquisition of the Hotel. The Mortgage Debt initially bore interest
at a floating interest rate. On August 11, 1989 the Partnership exercised its
option to fix the interest rate at 9.575% until maturity on June 12, 1996.
Interest on the Mortgage Debt was payable on the last day of March, June,
September and December of each year. No amortization of principal was required
prior to maturity or the sale or refinancing of the Hotel.
The Mortgage Debt matured on June 12, 1996 (the "Maturity Date"). On September
24, 1996 (the "Refinancing Date"), the Partnership completed a refinancing of
the Mortgage Debt (the "Amended and Restated Mortgage Debt"). The lender
granted the Partnership a forbearance of the loan for the period between the
Maturity Date and the Refinancing Date. During the forbearance period from the
Maturity Date until August 15, 1996, the Partnership continued to pay interest
at the contract rate of 9.575%. Thereafter, until the Refinancing Date, the
Partnership paid interest at a rate of 10.575%. The Amended and Restated
Mortgage Debt matures on June 12, 2001 and carries a floating interest rate of
200 basis points over the three-month London Interbank Offered Rate ("LIBOR"),
with an option to fix the interest rate during the first two years of the loan
term. The weighted average interest rate from the Refinancing Date through
December 31, 1996, was 7.62%. The weighted average interest rate for 1997 was
7.69%. The restructured loan requires minimum quarterly amortization payments
based on a 20-year schedule. Additionally, all excess cash flow after payment of
ground rent, required principal and interest payments, incentive management fee,
partnership administrative expenses and refinancing costs is to be applied
toward principal amortization. On June 24, 1997 the Partnership paid $305,000
from excess cash flow generated during 1996 toward additional principal
amortization. The Partnership expects to pay $766,000 in June 1998 from excess
cash flow generated during 1997.
The Amended and Restated Mortgage Debt is secured by the Hotel, an assignment of
the Partnership's interest under the Ground Lease, an assignment of the Hotel
management agreement, and by the grant of a security interest in the
Partnership's cash accounts and the personal property and fixtures of the Hotel.
Debt Guarantees
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No debt service guarantee was provided on the Amended and Restated Mortgage
Debt. However, the General Partner reaffirmed its guarantee to the lender that
in the event of a foreclosure, proceeds payable to the lender would be at least
$5,000,000. The General Partner believes that the chances of foreclosure are
remote.
Roof and Facade Loan
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A subsidiary of MII, Marriott International Capital Corporation ("MICC"),
provided $605,000 in available loan proceeds for the completion of the facade
and roof restoration project at the Hotel. As of December 31, 1997, $528,000
has been disbursed under the loan. The loan matures in June 2000, bears
interest at 9% and will be repaid from the Partnership's cash flow from
operations after defined priorities. Monthly payments of approximately $19,000
in principal and interest will be paid following the final disbursement of loan
proceeds, expected to occur during the second quarter of 1998.
Simultaneous with the execution of the loan agreement between the Partnership
and MICC, Host Marriott purchased a 50% participation interest in the loan from
MICC. Pursuant to the participation agreement, Host Marriott reimbursed MICC
for 50% of the loan advances made to-date and will continue to reimburse MICC
for 50% of any additional advances. Upon the
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final loan disbursement, Host Marriott will be reimbursed by MICC for 50% of the
loan repayments as they are made by the Partnership to MICC.
MATERIAL CONTRACTS
Management Agreement
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The Manager operates the Hotel pursuant to a long-term management agreement (the
"Management Agreement") which has an initial term expiring in 2008. The Manager
may renew the Management Agreement at its option, for up to five successive 10-
year terms. The Partnership may terminate the Management Agreement if specified
minimum operating results are not achieved. However, the Manager may prevent
termination by paying the Partnership the amount by which the minimum operating
results were not achieved.
The Management Agreement provides for annual payments of (i) the base management
fee equal to 3% of gross sales from the Hotel and (ii) the incentive management
fee equal to 20% of operating profit, as defined. Payment of the incentive
management fee is subordinated to the required principal and interest payments
on the Amended and Restated Mortgage Debt, ground rent and an 8% annual priority
return to the General Partner and the limited partners (collectively, the
"Partners"). For additional information see Item 7, "Certain Relationships and
Related Transactions."
Pursuant to the Management Agreement, the Hotel is operated as part of the
Marriott Hotels, Resorts and Suites full-service hotel system which at December
31, 1997 included 326 hotels with a total of 124,571 guest rooms.
Ground Lease
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In 1989, the leasehold interest in the land upon which the Hotel is located was
assigned to the Partnership by Host Marriott. The lease was created on June 16,
1986 pursuant to the Ground Lease from the landlord to Host Marriott. The
initial term of the Ground Lease expires in 2014. The Ground Lease may be
renewed at the option of the Partnership for five successive terms of ten years
each. Upon expiration or termination of the Ground Lease, title to the Hotel
and all improvements revert to the lessor. Rent expense under the Ground Lease
is calculated at an amount equal to the greater of a minimum rental of $300,000
per year or a percentage rental equal to 3% of annual gross room sales.
Under the lease, the Partnership pays all costs, expenses, taxes and assessments
relating to the land, including real estate taxes. The Ground Lease provides
that the Partnership has a first right of negotiation in the event the ground
lessor decides to sell the leased premises.
COMPETITION
Demand in the U.S. lodging industry continues to be strong as a result of an
improved economic environment and a corresponding increase in domestic business
and leisure travel. Also, the upscale full-service hotel segment has benefited
from a continued low room supply growth rate, which is attributable to several
factors including the limited availability of attractive building sites for
full-service hotels and the lack of available financing for new full-service
hotel construction. The cyclical nature of the U.S. lodging industry has been
demonstrated over the past two decades. Low hotel profitability during the
1974-1975 recession led to a prolonged slump in new construction, to high
occupancy rates, and to real price increases in the late 1970s and early 1980s.
Changes in tax and banking laws during the early 1980s precipitated a
construction boom which peaked in 1986 and created an oversupply of hotel rooms
that had not been absorbed fully by increased demand. This caused a significant
decrease in new hotel development in the early 1990s which has resulted in a
gradual U.S. hotel supply/demand imbalance.
The Partnership's Hotel competes with other major lodging brands in its region.
Competition in the region is based primarily on the level of service, quality of
accommodations, convenience of location, and room rates of each hotel. The
Partnership believes that its inclusion within the nationwide Marriott full-
service hotel system provides advantages of name recognition; centralized
reservations and advertising; system-wide marketing and promotion; and
centralized purchasing, training, and support services. Additional competitive
information is set forth in Item 3 "Property" with respect to the Hotel.
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CONFLICTS OF INTEREST
Because Host Marriott and its affiliates own and/or operate hotels other than
the one owned by the Partnership, potential conflicts of interest exist. With
respect to these potential conflicts of interest, Host Marriott and its
affiliates retain a free right to compete with the Partnership's Hotel,
including the right to develop competing hotels now and in the future, in
addition to those existing hotels which may compete directly or indirectly.
Under Rhode Island law, the General Partner has unlimited liability for
obligations of the Partnership unless those obligations are, by contract,
without recourse to the partners thereof. Under the Partnership Agreement, the
General Partner has broad management discretion over the business of the
Partnership and with regard to the operation of the Hotel. No limited partner
may take any part in the conduct or control of the Partnership's business. The
authority of the General Partner is limited in certain respects, including
acquiring hotel properties in addition to the Hotel and selling or otherwise
disposing of or consenting to the sale or disposition of the Partnership's
assets. For a discussion of limitations on the authority of the General
Partner, see Item 11, "Description of Registrant's Securities -- Authority of
the General Partner." Because certain actions taken by the General Partner or
the Partnership could expose the General Partner or its parent, Host Marriott,
to liability that is not shared by the limited partners (for example, tort
liability or environmental liability), this control could lead to a conflict of
interest. Under Rhode Island law, the General Partner has a fiduciary duty to
the Partnership and is required to exercise good faith and loyalty in all its
dealings with respect to Partnership affairs.
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 are conducted on terms which are fair to the Partnership
and which are commercially reasonable. Agreements and relationships involving
the General Partner or its affiliate and the Partnership are on terms consistent
with the terms on which the General Partner or its affiliates have dealt with
unrelated parties.
The Partnership Agreement provides that agreements, contracts or arrangements
between the Partnership and the General Partner or any of its affiliates, other
than arrangements for rendering legal, accounting, engineering, and investor
reporting services to the Partnership by the General Partner or its affiliates,
which agreements will be on commercially reasonable terms, will be subject to
the following conditions:
(a) the General Partner or any affiliate must be actively engaged in the
business of rendering such services or selling or leasing such goods;
(b) such agreements, contracts or arrangements shall be embodied in a written
contract which precisely describes the subject matter thereof and all
compensation to be paid therefor;
(c) no rebates may be received by the General Partner or any affiliate, nor may
the General Partner or any affiliate participate in any reciprocal business
arrangements which would have the effect of circumventing any of the
provisions of the Partnership Agreement;
(d) no such agreement, contract or arrangement may be amended in such manner as
to increase the fees or other compensation payable to the General Partner or
any affiliate or to decrease the responsibilities or duties of the General
Partner or any affiliate in the absence of the consent of the limited
partners holding a majority of the Units; and
(e) any such agreement, contract or arrangement which relates to or secures any
funds advanced or loaned to the Partnership by the General Partner or any
affiliate must reflect commercially reasonable terms.
EMPLOYEES
The Partnership has no employees; however, employees of the General Partner are
available to perform administrative services for the Partnership. The
Partnership reimburses the General Partner for the cost of providing such
services. See Item 6, "Executive Compensation," for information regarding
payments made to the General Partner for the cost of providing administrative
services to the Partnership.
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HOST MARRIOTT REAL ESTATE INVESTMENT TRUST
On April 17, 1998, Host Marriott, parent company of the General Partner of the
Partnership, announced that its Board of Directors has authorized Host Marriott
to reorganize its business operations to qualify as a real estate investment
trust ("REIT") to become effective as of January 1, 1999.
As part of the REIT reorganization, Host Marriott has formed an operating
partnership (the "Operating Partnership"). The Operating Partnership is
proposing to acquire by merger (the "Mergers") eight limited partnerships that
own full-service hotels in which Host Marriott or its subsidiaries are general
partners, including the Partnership. As more fully described in the
registration statement filed with the Securities and Exchange Commission on June
2, 1998, limited partners of those partnerships that participate in the Mergers
will receive either units or, at their election, unsecured notes issued by the
Operating Partnership in exchange for their partnership interests in the
Partnerships.
Consummation of the REIT reorganization is subject to significant contingencies
that are outside the control of Host Marriott, including final Board approval,
consent of shareholders, partners, bondholders, lenders, and ground lessors of
Host Marriott, its affiliates and other third parties. Accordingly, there can
be no assurance that the REIT reorganization will be completed or that it will
be effective as of January 1, 1999.
ITEM 2. FINANCIAL INFORMATION
The following selected financial data presents historical operating information
for the Partnership for the twelve weeks ended March 27, 1998 and March 28, 1997
and for each of the five years ended December 31, 1997 presented in accordance
with generally accepted accounting principles (in thousands, except per unit
amounts):
SELECTED FINANCIAL DATA
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Twelve Weeks Ended
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March 27, March 28, Year Ended December 31,
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1998 1997 1997 1996 1995 1994 1993
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Revenues (1)........... $ 1,516 $ 1,281 $ 6,568 $ 5,660 $ 4,913 $ 4,509 $ 4,311
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Net income (loss)...... $ 88 $ (11) $ 582 $ (565) $(1,655) $(1,920) $(2,031)
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Net income (loss) per
limited partner unit.. $ 257 $ (33) $ 1,701 $(1,651) $(4,839) $(5,617) $(5,941)
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Total assets........... $25,898 $25,665 $25,962 $25,701 $25,975 $27,002 $27,701
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Total liabilities...... $28,631 $29,079 $28,783 $29,104 $28,813 $28,185 $26,964
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(1) Revenues represent house profit from the Hotel since the Partnership has
delegated substantially all of the operating decisions related to the
generation of house profit of the Hotel to the Manager.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
TWELVE WEEKS ENDED MARCH 27, 1998 COMPARED TO TWELVE WEEKS ENDED MARCH 28, 1997
Revenues. First quarter revenues increased 18% or $235,000, over 1997 from $1.3
million to $1.5 million. Revenues and operating profit were impacted primarily
by growth in revenue per available room ("REVPAR") of 12% over the comparable
period in 1997 from $108 to $121. REVPAR represents the combination of the
average daily room rate charged and the average daily occupancy achieved and is
a commonly used indicator of hotel performance (although it is not a generally
accepted accounting principle measurement of revenue). REVPAR does not include
food and beverage or other ancillary revenues generated by the property. The
increase in REVPAR was the result of a 14% increase in average room rate to
$157, slightly offset by a 1.1 percentage point decrease in average occupancy to
77%. The significant increase in average room rate for the first quarter of
1998 was primarily due to the Hotel limiting the sale of discounted rooms and
maintaining its $189 corporate room rate during the slower months of the season
(January and February). Additionally, on March 1, 1998 the Hotel increased its
corporate room rate $10 to $199; this rate represents a $30 increase over the
corporate rate charged in the first quarter of 1997. The slight decrease in
occupancy was the result of decreased demand in the airport market overall of
approximately 1%.
Operating Costs and Expenses. Operating costs and expenses increased 13% to
$925,000 for the twelve weeks ended March 27, 1998 when compared to the same
period in 1997. The increase in operating costs and expenses was primarily due
to the 27% or $43,000 increase in incentive management fee and the 21% or
$40,000 increase in depreciation expense. The increase in the incentive
management fee was the result of the improvement in revenues discussed above.
The increase in depreciation expense was due to the completion of the rooms
renovation in 1997. As a percentage of revenues, operating costs and expenses
were 61% and 64% of revenues for first quarter 1998 and first quarter 1997,
respectively.
Operating Profit. As a result of the changes in revenues and operating costs
and expenses discussed above, operating profit increased $128,000 to $591,000,
or 39% of revenues, for first quarter 1998 from $463,000, or 36% of revenues,
for first quarter 1997.
Interest expense. Interest expense increased 5% for the twelve weeks ended
March 27, 1998 when compared to the same period in 1997 due primarily to
interest expense recognized on the roof and facade loan with a subsidiary of the
Manager. Disbursements under the loan began in the second quarter of 1997 and as
of March 27, 1998, $77,000 was still available under the loan commitment. The
loan, which matures in June 2000, bears interest at 9% and will be repaid from
the Partnership's cash flow from operations after defined priorities. Payments
of approximately $19,000 per month will be paid following the final disbursement
of loan proceeds, expected to occur in the second quarter of 1998.
Net income. For first quarter 1998, net income increased $99,000 to $88,000,
compared to the net loss of $11,000 for the same period in 1997. This increase
was primarily due to an increase in hotel revenues, offset by the changes in
expenses discussed above.
1997 COMPARED TO 1996
Revenues. Revenues increased $908,000 or 16%, to $6.6 million in 1997 from $5.7
million in 1996 as a result of strong growth in REVPAR of 13%. Hotel sales
increased $1.4 million, or 10%, to $14.4 million in 1997 also reflecting
improvements in REVPAR for the year. The increase in REVPAR was the result of a
14% increase in average room rate from $129 in 1996 to $147 in 1997, while
average occupancy decreased one percentage point to 83%. The decrease in
occupancy was primarily the result of the Hotel's suites refurbishment which
displaced approximately 1,000 roomnights during the first quarter of 1997.
Operating Costs and Expenses. Operating costs and expenses remained stable at
$3.9 million in 1997 compared to 1996. As a percentage of revenues, operating
costs and expenses decreased to 59% of revenues in 1997 from 69% in 1996.
Operating costs and expenses remained stable primarily due to the $399,000
decrease in depreciation expense as a result of the majority of the Hotel's
furniture and equipment becoming fully depreciated in 1996, offset by the
$171,000 increase in combined incentive and base management fees and the $33,000
increase in ground rent due to improved revenues as discussed above.
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Operating Profit. As a result of the changes in revenues and operating costs
and expenses discussed above, operating profit increased $901,000 to $2.7
million, or 41% of total revenues, in 1997 from $1.8 million, or 31% of revenues
in 1996.
Interest Expense. Interest expense decreased to $2.1 million in 1997 from $2.4
million in 1996 due to regular and additional principal amortization on the debt
totaling $886,000. Additionally, the weighted average interest rate on the
mortgage debt in 1997 decreased to 7.69% from 9.31% in 1996 due to the 1996
refinancing. See "Refinancing."
Net Income. Net income increased $1.1 million to $582,000 in 1997 over 1996 due
to the items discussed above.
1996 COMPARED TO 1995
Revenues. Revenues increased $747,000, or 15%, to $5.7 million in 1996 from
$4.9 million in 1995 as a result of strong growth in REVPAR. REVPAR increased
10% to $108 in 1996. Hotel sales increased $1.4 million, or 12%, to $13 million
in 1996 also reflecting improvements in REVPAR for the year. The increase in
REVPAR was the result of a 7% increase in average suite rate from $121 in 1995
to $129 in 1996, combined with a three percentage point increase in average
occupancy to 84%.
Operating Costs and Expenses. Operating costs and expenses decreased $237,000
to $3.9 million in 1996 from $4.1 million in 1995. As a percentage of revenues,
operating costs and expenses represented 69% of revenues in 1996 and 84% in
1995. The decrease in operating costs and expenses was primarily due to a
$410,000 decrease in depreciation expense due to the majority of the Hotel's
furniture and equipment becoming fully depreciated in early 1996.
Operating Profit. As a result of the changes in revenues and operating costs
and expenses discussed above, operating profit increased $984,000 to $1.8
million, or 31% of revenues, in 1996 from $788,000, or 16% of revenues in 1995.
Interest Expense. Interest expense was $2.4 million in 1996 and $2.5 million in
1995.
Net Loss. Net loss decreased $1.1 million to a net loss of $565,000 in 1996
over the net loss of $1.7 million in 1995 due to the items discussed above.
CAPITAL RESOURCES AND LIQUIDITY
GENERAL
The General Partner believes that cash from operations will provide adequate
funds for the operational needs of the Partnership for the foreseeable future.
PRINCIPAL SOURCES AND USES OF CASH
The Partnership's principal source of cash is from operations. Its principal
uses of cash are to fund the property improvement fund of the Hotel and to pay
required principal amortization of the mortgage debt. Additionally, the
Partnership is required to use its excess annual cash flow to pay additional
principal on the mortgage debt.
Total cash provided by operating activities for the twelve weeks ended March 27,
1998, and March 28, 1997, was $219,000 and $117,000, respectively. The increase
was primarily due to an increase in hotel revenues when compared to 1997. See
"Results of Operations" above.
Cash provided by operating activities was $1.9 million in 1997, $798,000 in 1996
and $636,000 in 1995. The $1.1 million increase in cash provided by operating
activities between 1997 and 1996 was due primarily to the $908,000 increase in
revenues, offset by $606,000 in incentive management fee paid, and $1 million in
reduced interest payments, due to the debt refinancing discussed below. The
$162,000 increase in cash provided by operating activities between 1996 and 1995
was due primarily to the $747,000 increase in revenues, offset by $465,000 in
increased interest payments. Interest payments increased primarily as a result
of the 1996 debt refinancing which resulted in one additional debt service
payment in 1996 compared to 1995.
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For the twelve weeks ended March 27, 1998 and March 28, 1997, cash used in
investing activities was $125,000 and $116,000, respectively, and consisted of
contributions and expenditures from the property improvement fund.
Cash used in investing activities was $1.1 million, $517,000 and $486,000 in
1997, 1996 and 1995, respectively. The Partnership's cash investing activities
consist primarily of contributions to the property improvement fund and capital
expenditures for improvements to the Hotel. In 1997, the Hotel completed a roof
and facade restoration project, with funds provided by the Partnership, for
which approximately $528,000 was spent. See Item 1 "Debt Financing -- Roof and
Facade Loan."
For the twelve weeks ended March 27, 1998 and March 28, 1997, cash used in
financing activities was $153,000 and $154,000, respectively, and consisted
primarily of repayments on the mortgage debt.
Cash used in financing activities was $721,000 in 1997 and $342,000 in 1996. In
1997, the Partnership's cash financing activities consisted of repayment of
mortgage debt of $886,000, $528,000 in proceeds from a loan from a subsidiary of
MII, and $363,000 in payments of financing costs related to the 1996
refinancing. The Partnership made debt principal payments of $139,000 and paid
financing costs of $203,000 in 1996. Financing activity in 1995 consisted
entirely of the $164,000 advance from, and subsequent repayment into the
property improvement fund, so that the Partnership could make its first quarter
debt service payment in 1995. Prior to the debt refinancing in 1996, no
repayments of mortgage principal were required prior to maturity. See
"Refinancing."
REFINANCING
On September 24, 1996, the Partnership successfully refinanced its $25.5 million
mortgage debt. Proceeds from the new loan were used to repay the existing
mortgage debt and pay refinancing costs. The refinanced debt bears interest at
a floating rate of 200 basis points over the three-month LIBOR rate, with an
option to fix the interest rate during the first two years of the loan term, and
requires quarterly payments of principal and interest based upon a 20-year
amortization schedule for a five-year term expiring on the maturity date of June
12, 2001. The weighted average interest rate on the Partnership's debt in 1997,
1996 and 1995 was 7.69%, 9.31% and 9.575%, respectively.
PROPERTY IMPROVEMENT FUND
The Partnership is required to maintain the Hotel in good condition. Under the
Management Agreement, the Partnership is required to make annual contributions
to the property improvement fund which provides funding for capital expenditures
and replacement of furniture, fixtures and equipment. Contributions to the fund
equaled 4% of gross Hotel sales in 1997, 1996 and 1995. The contribution amount
will remain at 4% of gross Hotel sales in 1998 and 1999. In 2000 and
thereafter, the Partnership is required to contribute 5% of gross Hotel sales to
the fund. In 1997, 1996 and 1995, the Partnership contributed $577,000,
$523,000 and $468,000, respectively, to the property improvement fund. In first
quarter 1998 and first quarter 1997, the Partnership contributed $133,000 and
$119,000, respectively, to the property improvement fund.
The General Partner expects that contributions to the property improvement fund
will provide a sufficient reserve for the future capital repair and replacement
needs of the Hotel's property and equipment.
MANAGEMENT FEES
For 1997, the Partnership paid a base management fee equal to 3% of gross Hotel
sales to the Manager. In addition, the Partnership paid an incentive management
fee of $606,000 payable from cash flow remaining after payment of ground rent,
debt service and an owner's priority return of $1,020,000. Payment of the
incentive management fee is subordinated to the required principal and interest
payments on the Amended and Restated Mortgage Debt, ground rent and an 8% annual
priority return to the Partnership. Of the remaining amount, the Partnership
pays 50% of the current year incentive management fee to the extent of cash
available. Fifty percent of any remaining cash is then applied to 50% of the
current year incentive management fee and unpaid incentive management fees from
prior years. Unpaid incentive management fees are reflected as deferred
incentive management fees due to Marriott International, Inc. in the
Partnership's balance sheet (see Item 13). The Manager waived its right to any
unpaid deferred incentive management fees which were earned during the period
from June 12, 1989 to June 14, 1991. During 1997, the Manager was paid $606,000
of current incentive
10
<PAGE>
management fees. The remaining $258,000 of incentive management fees earned were
accrued as deferred incentive management fees payable to MII. In 1996 and 1995,
incentive management fees earned and accrued as deferred incentive management
fees totaled $734,000 and $591,000, respectively. No incentive management fees
were paid prior to 1997. As of December 31, 1997 and 1996, the balance of unpaid
deferred incentive management fees was $3.6 million and $3.3 million,
respectively. During first quarter 1998 and first quarter 1997, the Manager
earned an incentive management fee of $200,000 and $157,000, respectively, and
was paid an incentive management fee of $138,000 and $0, respectively.
INFLATION
For the three fiscal years ended December 31, 1997, the rate of inflation has
been relatively low and, accordingly, has not had a significant impact on the
Partnership's revenues and net income. The Manager is generally able to pass
through increased costs to customers through higher room rates. In 1997, the
increase in average room rates at the Hotel exceeded those of direct competitors
as well as the general level of inflation. The amount of the Partnership's
interest expense under floating rate debt for a particular year will be affected
by changes in short-term interest rates.
SEASONALITY
Demand, and thus occupancy and room rates, is affected by normally recurring
seasonal patterns. Demand tends to be higher during the months of March through
November than during the remainder of the year. This seasonality tends to
affect the results of operations, increasing hotel revenues during these months.
In addition, this seasonality may also increase the liquidity of the Partnership
during these months.
ITEM 3. PROPERTY
The Partnership owns a single Hotel, which is in full operation and described
below.
LOCATION
The Marriott Suites O'Hare Hotel is a full-service Marriott suites hotel located
approximately 10 miles northwest of downtown Chicago, and two miles east of
O'Hare International Airport (the "Airport") on approximately four acres of
leased land. The Hotel is part of the 29 acre Riverway office and retail park
developed by Simon/Rosemont Developers.
DESCRIPTION
The Hotel opened in November 1988 with 256 guest suites. The Hotel has
approximately 2,600 square feet of meeting space including a 2,000 square foot
meeting room and 600 square foot board room. There is one food and beverage
outlet available in the Hotel, which includes a 94-seat restaurant, 20-seat
private dining restaurant and 33-seat lounge. Recreational amenities include an
indoor pool, a whirlpool and an exercise room. The Hotel also offers a gift
shop and parking for 272 vehicles on site. The Partnership purchased the Hotel
in 1989 for approximately $35 million.
COMPETITION
The following table provides selected data on the Hotel and its seven main
competitors in the vicinity of the Airport:
<TABLE>
<CAPTION>
Number of Year of Meeting Space
Property Rooms Opening (square footage)
- ------------------------------ --------- ------- ----------------
<S> <C> <C> <C>
O'Hare Suites 256 1988 2,600
Hyatt Regency 1,100 1971 81,600
Hilton 856 1972 33,900
O'Hare Marriott 681 1968 27,000
Westin 525 1984 38,700
Sofitel 300 1987 20,300
Sheraton Gateway Suites 297 1986 12,500
Rosemont Suites 296 1987 6,800
</TABLE>
11
<PAGE>
The O'Hare Marriott is managed by MII, and other than limited joint marketing
efforts, the Hotel and the O'Hare Marriott are direct competitors. Host
Marriott also owns a majority interest in the partnership that owns the O'Hare
Marriott. In addition, other hotels in the Chicago area also compete with the
Hotel; however, these differ in terms of size, room rates, facilities, market
orientation and/or location. None of these other hotels are operated as part of
the MII full-service hotel system. New competition is expected to open in the
area in the near future, however, it is expected to have minimal impact on the
Hotel as it appeals to a different segment of the market.
GROUND LEASE
The Hotel is located on a 4.3-acre site that is leased from an unrelated third
party for an initial term expiring in 2014. The Ground Lease may be renewed at
the option of the Partnership for five successive terms of 10 years each. The
lease provides for annual rental during its term equal to the greater of
$300,000 or 3% of annual gross room sales. Under the lease, the Partnership
pays all costs, expenses, taxes and assessments relating to the land, including
real estate taxes. The Partnership has a first right of negotiation in the
event the ground lessor decides to sell the leased premises. Upon expiration or
termination of the Ground Lease, title to the land and all improvements,
including the Hotel, reverts to the ground lessor.
SELECTED OPERATING STATISTICS
The following table shows selected operating statistics for the Hotel:
<TABLE>
<CAPTION>
For the Twelve Weeks Ended
--------------------------
March 27, March 28, Year Ended December 31,
-----------------------------------
1998 1997 1997 1996 1995
---------- ---------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C>
Average occupancy......... 77.2% 78.4% 83.2% 84.0% 81.4%
Average daily suite rate.. $157.30 $138.05 $146.83 $128.74 $120.80
REVPAR.................... $121.44 $108.23 $122.16 $108.14 $ 98.33
% REVPAR change........... 12% -- 13.0% 10.0% --
</TABLE>
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of December 31, 1997, Marriott Suite Hotel Association owned 9.49% of the
total number of limited partnership units. No other 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 does not own any limited partnership interest in the
Partnership. There are no Units owned by the executive officers and directors
of the General Partner, as a group.
The 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 Host
Marriott Real Estate Investment Trust described in Item 1.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
MOHS Corporation, the General Partner, was incorporated in Delaware in 1988 and
is a wholly owned subsidiary of Host Marriott. The General Partner was
organized solely for the purpose of acting as general partner of the
Partnership.
The Partnership has no directors, officers or employees. The business policy
making functions of the Partnership are carried out through the directors and
executive officers of the General Partner, who are listed below:
<TABLE>
<CAPTION>
Age at
Name Current Position in MOHS Corporation December 31, 1997
- ------------------------- ------------------------------------------- -----------------
<S> <C> <C>
Bruce F. Stemerman President and Director 42
Christopher G. Townsend Vice President, Secretary and Director 50
Earla L. Stowe Vice President and Chief Accounting Officer 36
Bruce D. Wardinski Treasurer 37
</TABLE>
12
<PAGE>
BUSINESS EXPERIENCE
Bruce F. Stemerman joined Host Marriott in 1989 as Director, Partnership
Services. He was promoted to Vice President, Lodging Partnerships in 1994 and
to 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, Mr. Townsend was made Assistant Secretary of Host
Marriott and in 1986 was made Assistant General Counsel. In 1993, he was made
Senior Vice President, Corporate Secretary and Deputy General Counsel of Host
Marriott. In January 1997, Mr. Townsend was named General Counsel of Host
Marriott. He also serves as a director and an officer of numerous Host Marriott
subsidiaries.
Earla L. Stowe joined Host Marriott 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. She also serves as an officer of numerous
Host Marriott subsidiaries.
Bruce D. Wardinski joined Host Marriott in 1987 as a Senior Financial Analyst of
Financial Planning & Analysis, and was named Manager in June 1988. He was
appointed Director, Financial Planning & Analysis in 1989, Director of Project
Finance in January 1990, Senior Director of Project Finance in June 1993, Vice
President, Project Finance in June 1994, and Senior Vice President of
International Development in October 1995. In June 1996, Mr. Wardinski was
named Senior Vice President and Treasurer of Host Marriott. He also serves as
an officer of numerous Host Marriott subsidiaries.
ITEM 6. EXECUTIVE COMPENSATION
The General Partner is required to devote to the Partnership such time as may be
necessary for the proper performance of its duties, but the officers and the
directors of the General Partner are not required to devote their full time to
Partnership matters. To the extent that any officer or director of the General
Partner or employee of Host Marriott does devote time to the Partnership, the
General Partner is entitled to reimbursement for the cost of providing such
services. Any such costs may include a charge for overhead, but without a
profit to the General Partner. For the fiscal years ended December 31, 1997 and
1996, administrative expenses reimbursed by the Partnership to the General
Partner totaled $59,000 and $119,000, respectively. No administrative expenses
were reimbursed to the General Partner in 1995.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As described below, the Partnership is a party to an ongoing agreement with MII
pursuant to which the Hotel is managed by MII.
The Partnership entered into a management agreement (the "Management Agreement")
with MII to manage and operate the Hotel. The initial term of the Management
Agreement expires in 2008. The Manager may renew the Management Agreement at
its option, for up to five successive 10-year terms. The Manager is paid a base
management fee equal to 3% of gross Hotel sales. In addition, the Manager is
entitled to an incentive management fee equal to 20% of Net House Profit as
defined. The incentive management fee is payable out of cash flow from
operations remaining after payment of ground rent, debt service, and an 8%
annual priority return to the Partners. Of this amount the Partnership pays 50%
of the current year incentive management fee to the extent of cash available.
Fifty percent of any remaining cash is then applied to 50% of the current year
incentive management fee and unpaid incentive management fees from prior years.
Unpaid incentive management fees are accrued as deferred incentive management
fees due to Marriott International, Inc. in the Partnership's balance sheet (see
Item 13). In accordance with the Management Agreement, in 1989 the Manager
waived its right to any unpaid deferred incentive management fees which were
earned during the period from June 12, 1989 to June 14, 1991. During 1997, the
Manager was paid $606,000 of current incentive management fees. The remaining
$258,000 of incentive management fee earned was accrued as a deferred incentive
management fee payable to MII. In 1996 and 1995, incentive management fees
earned and accrued as deferred incentive management fees totaled
13
<PAGE>
$734,000 and $591,000, respectively. No incentive management fees were paid
prior to 1997. As of December 31, 1997 and 1996, the balance of unpaid deferred
incentive management fees was $3.6 million and $3.3 million, respectively.
The Manager is required to provide certain services ("Chain Services") which are
furnished generally on a central or regional basis to all hotels in the Marriott
hotel system. The major cost components included in Chain Services are
computer, reservations, advertising, training and sales costs. Costs and
expenses incurred in providing such services are allocated among all Marriott
hotels managed, owned or leased by MII or its subsidiaries with no profit to
MII. The methods of allocating the costs and expenses are based upon one or a
combination of the following: (i) percent of sales, (ii) total number of hotel
rooms, (iii) total number of reservations booked, and (iv) total number of
management employees. In addition, the Hotel also participates in MII's
Marriott Rewards Program ("MRP") which was formerly called MII's Honored Guest
Awards Program. The cost of this program is charged to all hotels in MII's full
service hotel system based upon the MRP sales of each hotel.
The following table sets forth the amount paid to MII and affiliates for the
twelve weeks ended March 27, 1998 and March 28, 1997 and for each of the years
ended December 31, 1997, 1996 and 1995 (in thousands):
<TABLE>
<CAPTION>
Twelve Weeks Ended
------------------------
March 27, March 28, Year Ended December 31,
------------------------------------
1998 1997 1997 1996 1995
----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Chain services and MRP costs.. $ 184 $ 159 $ 783 $ 757 $ 649
Incentive management fee...... 138 -- 606 -- --
Base management fee........... 100 90 433 392 351
----- ----- ------ ------ ------
$ 422 $ 249 $1,822 $1,149 $1,000
===== ===== ====== ====== ======
</TABLE>
Pursuant to the Management Agreement, the Partnership provided the Manager with
working capital and supplies to meet the operating needs of the Hotel. This
advance bears no interest and remains the property of the Partnership throughout
the term of the Management Agreement. The Manager converts cash advanced by the
Partnership into other forms of working capital consisting primarily of
operating cash, inventories, and trade receivables and payables which are
maintained and controlled by the Manager. The Partnership is required to
advance upon request of the Manager any additional funds necessary to satisfy
the needs of the Hotel as its operations may require from time to time. Upon
termination of the Management Agreement, the Manager will return to the
Partnership any unused working capital and supplies. At December 31, 1997,
$357,000 has been advanced to the Manager for working capital and supplies.
The Management Agreement provides for the establishment of a property
improvement fund for the Hotel to cover (a) the cost of certain non-routine
repairs and maintenance to the Hotel which are normally capitalized; and (b) the
cost of replacements and renewals to the Hotel's property and equipment.
Contributions to the property improvement fund are based on a percentage of
gross sales of the Hotel. In 1997, 1996 and 1995 the Partnership contributed 4%
of gross Hotel sales to the fund. The contribution will remain at 4% of gross
Hotel sales in 1998 and 1999. In 2000 and thereafter, the Management Agreement
requires the Partnership to contribute 5% of gross Hotel sales to the fund. In
1997, 1996 and 1995, the Partnership contributed $577,000, $523,000 and
$468,000, respectively, to the property improvement fund.
The Management Agreement provides that the Partnership may terminate the
Management Agreement and remove the Manager if specified minimum operating
results are not achieved during any five consecutive years during the term of
the Agreement. The Manager may, however, prevent termination by paying to the
Partnership such amount as is necessary to achieve the above performance
standard.
ITEM 8. LEGAL PROCEEDINGS
Neither the Partnership nor the Hotel are presently subject to any material
litigation nor, to the General Partner's knowledge, is any material litigation
threatened against the Partnership or the Hotel, other than routine litigation
and administrative proceedings arising in the ordinary course of business, some
of which are expected to be covered by liability insurance and which
collectively are not expected to have a material adverse effect on the business,
financial condition or results of operations of the Partnership.
14
<PAGE>
ITEM 9. MARKET FOR AND DISTRIBUTIONS ON LIMITED PARTNERSHIP UNITS AND RELATED
SECURITY HOLDER MATTERS
There is currently no public market for the Units. Transfers of Units are
subject to approval by the General Partner and certain other restrictions
described in Item 11, "Description of Registrant's Securities." As of December
31, 1997, there were 321 holders of record of the 335 limited partnership Units.
The ability of the Partnership to make cash distributions to the limited
partners is subject to limitations contained in the Partnership Agreement that
are described in Item 11, "Description of Registrant's Securities -
Distributions and Allocations."
The Partnership made no cash distributions to its partners for any of the three
years ended December 31, 1997, 1996 or 1995.
Units held by non-affiliates of the Partnership for at least three years may be
sold without registration in accordance with the exemptions provided by Rule 144
under the Securities Act of 1933, as amended the (the "Act"). For a discussion
of the restrictions on assignment contained in the Partnership Agreement, see
Item 11, "Description of Registrant's Securities."
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
Between September 15, 1988 and the Closing Date, 335 limited partnership
interests (the "Units") were sold in a private placement offering. See Item 1,
"Business - Organization of the Partnership" for additional information
regarding the Partnership's sale of Units. As of December 31, 1997, there were
322 limited partners including the 321 holders of the 335 Units and MBIP which
holds a 1% limited partner interest. Since the inception of the Partnership,
there have been six sales by limited partners involving 6.5 Units. All of these
sales occurred within the past three years.
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES
The 335 limited partnership interests represent 98% of the interests in the
Partnership. The General Partner holds a 1% general partner interest and MBIP
holds a 1% limited partner interest. See Item 1, "Business - Organization of
the Partnership."
DISTRIBUTIONS AND ALLOCATIONS
Partnership allocations and distributions are generally made as follows:
a. Cash available for distribution for each fiscal year will be distributed at
the discretion of the General Partner, but in no event less than once in each
fiscal year, as follows: (i) 100% to the limited partners (excluding MBIP)
until they have received, with respect to such fiscal year, an 8% cumulative
preferred return on the excess of original cash contributions over cumulative
distributions of net refinancing and sales proceeds (invested capital); (ii)
to Host Marriott to repay principal and interest on advances made under the
Debt Service Guarantee, as defined in Note 5 of the financial statements
included in Item 13, if any; and (iii) remaining cash available for
distribution will be distributed as follows:
1) 100% to the General Partner and MBIP until they have received with
respect to such fiscal year an 8% cumulative preferred return on their
invested capital;
2) any remainder shall be distributed as follows: 1% to the General Partner,
1% to MBIP and 98% to the remaining limited partners until aggregate
cumulative distributions of net proceeds from capital transactions and/or
refinancing total $5,982,000; then, 10% to the General Partner, 5% to
MBIP and 85% to the remaining limited partners until cumulative
distributions of net proceeds from capital transactions and/or
refinancing total $11,964,000; then 20% to the General Partner, 10% to
MBIP and 70% to the remaining limited partners.
15
<PAGE>
b. Net proceeds from capital transactions and refinancing are generally
distributed in the following order of priority: (i) 1% to the General
Partner, 1% to MBIP and 98% to the remaining limited partners until they have
received their capital contributions to the extent not previously
distributed; (ii) then, to the limited partners (excluding MBIP) in an amount
equal to their 8% cumulative preferred return on their invested capital;
(iii) then, to the General Partner and MBIP in an amount equal to their 8%
cumulative preferred return on their invested capital; (iv) then, to Host
Marriott to repay any advances made under the Debt Service Guarantee,
together with accrued interest thereon; (v) then, to the Manager to pay any
unpaid deferred incentive management fees, as defined by the Management
Agreement; and (vi) the balance, if any, 20% to the General Partner, 10% to
MBIP and 70% to the remaining limited partners.
c. Taxable income for each fiscal year generally will be allocated as follows:
(i) in the same percentages and amounts that cash available for distribution
is distributed to such partners for such fiscal year; (ii) the balance, if
any, shall be allocated in the same manner as a.(iii)2) above. Tax losses
for each fiscal year shall be allocated 69% to the General Partner, 1% to
MBIP and 30% to the remaining limited partners. In any event, for each
fiscal year at least 1% of taxable or income or tax losses, as the case may
be, shall be allocated to each the General Partner and MBIP.
d. Taxable income from capital transactions and refinancings generally will be
allocated as follows: (i) first, to the partners whose capital accounts have
negative balances until such negative balances are brought to zero; (ii)
then, 1% to the General Partner, 1% to MBIP and 98% to the remaining limited
partners until the partners' capital accounts are equal to their initial
capital contribution less all distributions of net proceeds from capital
transactions and/or refinancings ("Adjusted Capital Contributions"); (iii)
then, to the limited partners (excluding MBIP) in an amount equal to their 8%
cumulative preferred return for such year, less any amounts previously
distributed; (iv) then, to the General Partner and MBIP in an amount equal to
their 8% cumulative preferred return for such year; and (v) the balance, if
any, 20% to the General Partner, 10% to MBIP and 70% to the remaining limited
partners.
e. Tax losses from capital transactions or refinancings shall be allocated as
follows: (i) first, to the partners with positive capital accounts, pro rata
in amounts as will result in the elimination of the positive capital accounts
of such partners; and (ii) the remainder, if any, 20% to the General Partner,
10% to MBIP and 70% to the remaining limited partners.
In any event, for each fiscal year, at least 1% of the taxable income or tax
losses from capital transactions or refinancings shall be allocated to each
the General Partner and MBIP.
f. For financial reporting purposes, profits and losses are allocated among the
Partners based on their ownership interests.
Upon dissolution of the Partnership, the General Partner shall liquidate the
assets of the Partnership. The proceeds of such liquidation shall be applied
and distributed in the following order of priority: (i) to the payment of
Partnership debt and other liabilities, including any loans or advances that may
have been made by any of the partners or the Partnership; (ii) to the payment of
the expenses of the liquidation; (iii) to the establishment, for such period
deemed reasonably necessary, of such reserves deemed reasonably necessary to
provide for contingent and unforeseen liabilities or obligations of the
Partnership; and (iv) to the General Partner and limited partners in proportion
to the net balances in their respective capital accounts.
AUTHORITY OF THE GENERAL PARTNER
Under the Partnership Agreement, the General Partner has broad management
discretion over the business of the Partnership and with regard to the operation
of the Hotel. No limited partner may take any part in the conduct or control of
the Partnership's business. The authority of the General Partner is limited in
certain respects.
Without the unanimous consent of all the limited partners, the General Partner
does not have authority to:
(i) do any act in contravention of the Partnership Agreement;
(ii) except as otherwise provided in the Partnership Agreement, voluntarily
take any action that will cause the dissolution of the Partnership;
(iii) confess a judgment against the Partnership that is material in amount
when compared to Partnership assets;
16
<PAGE>
(iv) convert property of the Partnership to its own use or assign any rights
in specific Partnership property for other than a Partnership purpose;
(v) admit any other person as a General Partner or admit a person as an
additional or substitute limited partner except as otherwise provided
in the Partnership Agreement;
(vi) knowingly perform any act that would subject any limited partner to
liability as a general partner in any jurisdiction or to any other
liability except as provided in the Rhode Island Revised Uniform
Limited Partnership Act (the "Partnership Act") or the Partnership
Agreement; or
(vii) commingle Partnership funds with those of any other Person, as defined.
Without the consent of the holders of a majority of the Units, the General
Partner does not have authority to:
(i) acquire hotel properties in addition to the Hotel;
(ii) sell or otherwise dispose of or consent to the sale or disposition of
the Partnership's assets;
(iii) effect any amendment to any agreement, contract or arrangement with the
General Partner or any affiliate which would reduce the responsibility
or duties of, or would increase the compensation payable to the General
Partner or any of its affiliates or which would otherwise adversely
affect the rights of the limited partners; or
(iv) voluntarily withdraw as General Partner, unless the General Partner
obtains the consent of the limited partners and provides an additional
or successor General Partner approved by the limited partners and the
Partnership receives an opinion of its counsel to the effect that such
withdrawal would not affect the Partnership's federal tax filing
status.
RESTRICTIONS ON ASSIGNMENTS OF UNITS
A limited partner generally has the right to assign a Unit to another person or
entity, subject to certain conditions and restrictions. An assignment of a Unit
is subject to the following restrictions: (i) no assignment may be made if,
when added to all other prior assignments and transfers of interests in the
Partnership within the preceding 12 months, such assignment would result in the
Partnership, in the opinion of legal counsel, being deemed terminated for
Federal income tax purposes; (ii) the General Partner may prohibit any
assignment that, in the opinion of legal counsel, would require the filing of a
registration statement under the Securities Act of 1933 or otherwise would
violate any Federal or state securities laws or regulations (including investor
suitability standards) applicable to the Partnership; (iii) except in the case
of a transfer of a limited partner's entire interest, no assignment may be made
that would result in either the assignor or the assignee owning a fraction of a
Unit (other than a one-half Unit), except for assignment by gift, inheritance,
or family dissolution or assignments to affiliates of the assignor; (iv) no
assignment may be made if, in the opinion of legal counsel, it would result in
the Partnership being treated as an association taxable as a corporation; (v) no
assignment may be made if, in the opinion of legal counsel, it would preclude
the Partnership from either obtaining or retaining an alcoholic beverage license
for the Hotel; and (vi) no assignment may be made if the transfer would result
in more than five percent of the total Units having been assigned during such
taxable year.
The Partnership will not recognize for any purpose any assignment of any Units
unless (i) an instrument is executed making such assignment, signed by both the
assignor and the assignee, and a duly executed application for assignment and
admission as substituted limited partner is executed indicating the written
acceptance by the assignee of all the terms and provisions of the Partnership
Agreement and (ii) the General Partner has determined that such assignment is
permitted under the Partnership Agreement. No assignee of a limited partner's
Units will be entitled to become a substituted limited partner unless: (i) the
General Partner gives written consent, (ii) the transferring limited partner
files with the Partnership a duly executed and acknowledged written assignment
that the General Partner deems necessary to effect such admission, (iii) the
assignee executes a counterpart of the Partnership Agreement and such other
documents as the General Partner may require, and (iv) the assignee pays all
reasonable expenses incurred in connection with his admission as a substituted
limited partner. An assignee only becomes a substituted limited partner when
the General Partner has reflected the admission of such person as a limited
partner in the books and records of the Partnership.
17
<PAGE>
Any person who is the assignee of any of the Units of a limited partner, but who
does not become a substituted limited partner is entitled to all the rights of
an assignee of a limited partner interest under the Partnership Act, including
the right to receive distributions from the Partnership and the share of net
profits, net losses, gain, loss and recapture income attributable to the Units
assigned to the person, but shall not be deemed to be a holder of Units for any
other purpose under the Partnership Agreement.
AMENDMENTS
Amendments to the Partnership Agreement may be made by the General Partner with
the consent of the limited partners holding a majority of the outstanding Units.
However, without the consent of the majority of the holders of the Units and the
partners to be adversely affected by the amendment, no amendment to the
Partnership Agreement may be made, which would (i) convert a limited partner's
interest into a general partner's interest; (ii) modify the limited liability of
a limited partner; or (iii) alter the interest of a partner in taxable income,
tax losses, or distributions of cash available for distribution or distributable
proceeds from capital transactions, or other cash distributions or reduce the
percentage of partners which is required to consent to any action under the
Partnership Agreement. The General Partner may make an amendment to the
Partnership Agreement, without the consent of the limited partners, if such
amendment is necessary solely to clarify the provisions of the Partnership
Agreement so long as such amendment does not adversely affect the rights of the
limited partners under the Partnership Agreement.
MEETINGS AND VOTING
The limited partners cannot participate in the management or control of the
Partnership or its business. The Partnership Agreement, however, extends to the
limited partners the right under certain conditions to vote on or approve
certain Partnership matters. Any action that is required or permitted to be
taken by the limited partners may be taken either at a meeting of the limited
partners or without a meeting if approvals in writing setting forth the action
so taken are signed by limited partners owning not less than the minimum number
of Units that would be necessary to authorize or take such action at a meeting
at which all of the limited partners were present and voted. Meetings of the
limited partners may be called by the General Partner and shall be called by the
General Partner upon receipt of a request in writing signed by holders of 10% or
more of the Units held by the limited partners. Limited partners may vote
either in person or by proxy at meetings. Limited partners holding more than
50% of the total number of all outstanding Units constitute a quorum at a
meeting of the limited partners. Matters submitted to the limited partners for
determination will be determined by the affirmative vote of the limited partners
holding a majority of the outstanding Units, except that a unanimous vote of the
limited partners will be required for certain actions requiring unanimous
consent referred to in "Authority of the General Partner."
The Partnership Agreement does not provide for annual meetings of the limited
partners and none have been held, nor does the General Partner anticipate
calling such meetings.
OTHER MATTERS
If at any time any agreement (including the Management Agreement) pursuant to
which operating management of the Hotel is vested in the General Partner or an
affiliate of the General Partner provides that the Partnership has a right to
terminate such agreement as a result of the failure of the operation to attain
economic objectives, as specifically defined, the limited partners, without the
consent of the General Partner, may, upon the affirmative vote of the holders of
a majority of the Units, take action to exercise the right of the Partnership to
terminate such agreements.
The limited partners may also, by a vote of the holders of a majority of the
Units, remove the General Partner (but only if a new general partner is elected)
if the General Partner has committed and not remedied any act of fraud, bad
faith, gross negligence or breach of fiduciary duties in carrying out its duties
as the General Partner. Notwithstanding the foregoing, however, such a removal
of the General Partner or the Manager, if exercised, would be an event of
default under the loan documentation evidencing the Mortgage Debt, and would
permit the lender or its assignee to accelerate the maturity of the loan. Thus,
the termination right could only be exercised with the consent of the lender or
its assignee.
18
<PAGE>
The Partnership Agreement provides that limited partners will not be personally
liable for the losses of the Partnership beyond the amount committed by them to
the capital of the Partnership. In the event that the Partnership is unable
otherwise to meet its obligations, the limited partners might, under applicable
law, be obligated under some circumstances to return distributions previously
received by them, with interest, to the extent such distributions constituted a
return of the capital contributions at the time when creditors had valid claims
outstanding against the Partnership.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Except as specifically provided in the Partnership Act, the General Partner is
liable for the obligations of the Partnership in the same manner as a partner
would be liable in a partnership without limited partners to persons other than
the Partnership and the other partners. Generally speaking, any such partner is
fully liable for any and all of the debts or other obligations of the
partnership as and to the extent the partnership is either unable or fails to
meet such obligations. Thus, the assets of the General Partner may be reached
by creditors of the Partnership to satisfy obligations or other liabilities of
the Partnership, other than nonrecourse liabilities, to the extent the assets of
the Partnership are insufficient to satisfy such obligations or liabilities.
The Partnership Act provides that: "Subject to such standards and restrictions,
if any, as set forth in its partnership agreement, a limited partnership may,
and shall have the power to, indemnify and hold harmless any partner or other
person from and against any and all claims and demands whatsoever." The
Partnership Agreement provides that the General Partner and its affiliates will
not be liable to the Partnership or the limited partners for any loss suffered
as a result of any act or omission of the General Partner or its affiliates
provided (i) such acts or omissions were determined by the General Partner or
its affiliates, in good faith, to be in the best interest of the Partnership and
(ii) the conduct of the General Partner or its affiliates did not constitute
negligence or misconduct.
The Partnership Agreement also provides that the General Partner and its
affiliates will be indemnified out of Partnership assets against any loss
suffered as a result of any act or omission determined by the General Partner or
its affiliates, in good faith, to be in the best interest of the Partnership so
long as such conduct did not constitute negligence or misconduct. The
Partnership, however, may indemnify the General Partner or its affiliates for
losses, judgments, liabilities and expenses incurred in successfully defending
or settling claims arising out of alleged securities laws violations only if
certain specific additional requirements are met. The Partnership Agreement
provides that any indemnification obligation shall be paid solely out of the
assets of the Partnership.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to partners and controlling persons of the registrant
pursuant to the foregoing provisions or otherwise, the registrant has been
advised that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid in the successful defense or any action, suit or proceeding) is asserted
against the registrant by such a person in connection with the securities
registered hereby, and if the Securities and Exchange Commission is still of the
same opinion, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
19
<PAGE>
ITEM 13. FINANCIAL STATEMENTS
The following financial information is included on the pages indicated:
<TABLE>
<CAPTION>
INDEX PAGE
- ----- ----
<S> <C>
Report of Independent Public Accountants...................................... 21
Statement of Operations for the Years Ended December 31, 1997, 1996 and 1995.. 22
Balance Sheet as of December 31, 1997 and 1996................................ 23
Statement of Changes in Partners' Capital (Deficit)........................... 24
Statement of Cash Flows for the Years Ended December 31, 1997, 1996 and 1995.. 25
Notes to Financial Statements................................................. 26
Condensed Statement of Operations for the
Twelve Weeks Ended March 27, 1998 and March 28, 1997 (Unaudited)........... 32
Condensed Balance Sheet as of
March 27, 1998 (Unaudited) and December 31, 1997........................... 33
Condensed Statement of Cash Flows for the
Twelve Weeks Ended March 27, 1998 and March 28, 1997 (Unaudited)........... 34
Notes to Condensed Financial Statements (Unaudited)........................... 35
</TABLE>
20
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE PARTNERS OF MUTUAL BENEFIT CHICAGO MARRIOTT SUITE HOTEL PARTNERS, L.P.:
We have audited the accompanying balance sheet of Mutual Benefit Chicago
Marriott Suite Hotel Partners, L.P. (a Rhode Island limited partnership) as of
December 31, 1997 and 1996 and the related statements of operations, changes in
partners' capital (deficit) and cash flows for the three years in the period
ended December 31, 1997. These financial statements and the schedule referred
to below are the responsibility of the General Partner's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the 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 Mutual Benefit Chicago Marriott
Suite Hotel Partners, L.P. as of December 31, 1997 and 1996 and the results of
its operations and its cash flows for the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements as a whole. The schedule listed in the index at Item 15(a)
is presented for purposes of complying with the rules of the Securities and
Exchange Commission and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in our audits of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Washington, D.C.
February 23, 1998
21
<PAGE>
STATEMENT OF OPERATIONS
MUTUAL BENEFIT CHICAGO MARRIOTT SUITE HOTEL PARTNERS, L.P.
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
REVENUES
Hotel revenues (Note 3).................... $ 6,568 $ 5,660 $ 4,913
------- ------- -------
OPERATING COSTS AND EXPENSES
Real estate taxes and other................ 1,295 1,139 1,172
Incentive management fee................... 864 734 591
Depreciation............................... 835 1,234 1,644
Base management fee........................ 433 392 351
Ground rent................................ 341 308 300
Administrative and other................... 127 81 67
------- ------- -------
3,895 3,888 4,125
------- ------- -------
OPERATING PROFIT............................ 2,673 1,772 788
Interest expense........................... (2,150) (2,406) (2,526)
Interest income............................ 59 69 83
------- ------- -------
NET INCOME (LOSS)........................... $ 582 $ (565) $(1,655)
======= ======= =======
ALLOCATION OF NET INCOME (LOSS)
General Partner............................ $ 6 $ (6) $ (17)
MBIP Interest.............................. 6 (6) (17)
Limited Partner Unit Holders............... 570 (553) (1,621)
------- ------- -------
$ 582 $ (565) $(1,655)
======= ======= =======
NET INCOME (LOSS) PER LIMITED PARTNER UNIT
(335 Units)................................ $ 1,701 $(1,651) $(4,839)
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
BALANCE SHEET
MUTUAL BENEFIT CHICAGO MARRIOTT SUITE HOTEL PARTNERS, L.P.
DECEMBER 31, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
ASSETS
Property and equipment, net............................................. $ 23,784 $ 23,640
Property improvement fund............................................... 402 329
Deferred financing costs, net........................................... 428 512
Due from Marriott International, Inc.................................... 507 487
Cash and cash equivalents............................................... 841 733
-------- --------
$ 25,962 $ 25,701
======== ========
LIABILITIES AND PARTNERS' DEFICIT
LIABILITIES
Mortgage debt........................................................... $ 24,475 $ 25,361
Deferred incentive management fees due to Marriott International, Inc... 3,587 3,329
Note payable to Marriott International, Inc............................. 528 -
Accounts payable and accrued expenses................................... 193 414
-------- --------
Total Liabilities.................................................... 28,783 29,104
-------- --------
PARTNERS' DEFICIT
General Partner
Capital contribution................................................... 120 120
Capital distributions.................................................. (23) (23)
Cumulative net losses.................................................. (107) (113)
-------- --------
(10) (16)
-------- --------
Limited Partners
Capital contribution, net of offering costs of $1,512.................. 10,249 10,249
Capital distributions.................................................. (2,819) (2,819)
Cumulative net losses.................................................. (10,241) (10,817)
-------- --------
(2,811) (3,387)
-------- --------
Total Partners' Deficit.............................................. (2,821) (3,403)
-------- --------
$ 25,962 $ 25,701
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
MUTUAL BENEFIT CHICAGO MARRIOTT SUITE HOTEL PARTNERS, L.P.
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
-------- --------- --------
<S> <C> <C> <C>
Balance, December 31, 1994........................... $ 17 $(1,200) $(1,183)
Net loss........................................... (34) (1,621) (1,655)
---- ------- -------
Balance, December 31, 1995........................... (17) (2,821) (2,838)
Transfer of MBIP 1% GP interest to 1% LP interest.. 11 (11) --
Net loss........................................... (10) (555) (565)
---- ------- -------
Balance, December 31, 1996........................... (16) (3,387) (3,403)
Net income......................................... 6 576 582
---- ------- -------
Balance, December 31, 1997........................... $(10) $(2,811) $(2,821)
==== ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
STATEMENT OF CASH FLOWS
MUTUAL BENEFIT CHICAGO MARRIOTT SUITE HOTEL PARTNERS, L.P.
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)........................................... $ 582 $ (565) $(1,655)
Noncash items:
Depreciation.............................................. 835 1,234 1,644
Deferred incentive management fees........................ 258 734 591
Amortization of deferred financing costs as interest...... 124 33 46
Deferred interest on mortgage loan........................ 63 -- --
Changes in operating accounts:
Accounts payable and accrued expenses..................... 39 (607) 30
Due from Marriott International, Inc...................... (20) (31) (20)
------- ------- -------
Cash provided by operating activities.................... 1,881 798 636
------- ------- -------
INVESTING ACTIVITIES
Additions to property and equipment, net.................... (979) (1,013) (492)
Change in property improvement fund......................... (73) 496 6
------- ------- -------
Cash used in investing activities........................ (1,052) (517) (486)
------- ------- -------
FINANCING ACTIVITIES
Repayment of mortgage debt.................................. (886) (139) --
Proceeds from note payable to Marriott International, Inc... 528 -- --
Payment of financing costs.................................. (363) (203) --
------- ------- -------
Cash used in financing activities........................ (721) (342) --
------- ------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............ 108 (61) 150
CASH AND CASH EQUIVALENTS at beginning of year.............. 733 794 644
------- ------- -------
CASH AND CASH EQUIVALENTS at end of year.................... $ 841 $ 733 $ 794
======= ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for mortgage interest............................. $ 1,947 $ 2,947 $ 2,482
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
25
<PAGE>
NOTES TO FINANCIAL STATEMENTS
MUTUAL BENEFIT CHICAGO MARRIOTT SUITE HOTEL PARTNERS, L.P.
NOTE 1. THE PARTNERSHIP
Description of the Partnership
Mutual Benefit Chicago Marriott Suite Hotel Partners, L.P. (the "Partnership"),
a Rhode Island limited partnership, was formed in 1988 to acquire and own the
256 suite Marriott Suites O'Hare Hotel (the "Hotel") located near the O'Hare
International Airport in Rosemont, Illinois. The Hotel, which opened on
November 28, 1988, is managed by Marriott International, Inc. ("MII") as part of
its full service hotel system.
In 1989, 335 limited partnership interests (the "Units"), representing a 98%
interest in the Partnership, were sold pursuant to a private placement offering
at $35,000 per Unit. Each general partner contributed $119,500 in cash for
their respective 1% general partner interests. Under the purchase and sale
agreement, Host Marriott Corporation ("Host Marriott") agreed to reduce the
purchase price of the Hotel up to an aggregate total of $3,000,000 to the extent
that the Hotel did not provide cash flow, after payment of ground rent and debt
service, equivalent to $1,000,000 for each of the three years ended June 19,
1992 (the "Cash Flow Guaranty"). A total of $2,476,000 was paid to the
Partnership under the Cash Flow Guaranty. The price adjustments were allocated
as a reduction of the carrying value of the Partnership's property and equipment
in the accompanying balance sheet.
On August 23, 1996, MB Investment Properties, Inc. ("MBIP") withdrew as a
general partner of the Partnership and converted its 1% interest to a limited
partner. At December 31, 1997 the sole general partner is MOHS Corporation
("MOHS"), a Delaware corporation and subsidiary of Host Marriott.
Partnership Allocations and Distributions
Partnership allocations and distributions are generally made as follows:
(a) Cash available for distribution is distributed (i) first, 100% to the
limited partners (excluding MBIP) until they have received an annual 8%
cumulative preferred return on their invested capital; (ii) to Host Marriott
to repay principal and interest on advances made under the Debt Service
Guarantee, as defined in Note 5, if any; and (iii) 100% to the general
partner and MBIP until they have received an annual 8% cumulative preferred
return on their invested capital. The balance, if any, shall be distributed
(i) 1% to the general partner, 1% to MBIP and 98% to the remaining limited
partners until the general partner and the limited partners (collectively,
the "Partners") have received cumulative distributions of net proceeds from
capital transactions and/or refinancing equal to $5,982,000; (ii) next, 10%
to MOHS, 5% to MBIP and 85% to the remaining limited partners until the
Partners have received cumulative distributions of net proceeds from capital
transactions and/or refinancing equal to $11,964,000; and (iii) thereafter,
20% to MOHS, 10% to MBIP and 70% to the remaining limited partners.
(b) Net proceeds from capital transactions and refinancing are generally
distributed in the following order of priority: (i) first, 1% to the
general partner, 1% to MBIP and 98% to the remaining limited partners until
the Partners have received their initial capital contribution to the extent
not previously distributed; (ii) then, to the limited partners (excluding
MBIP) in an amount equal to their 8% cumulative preferred return on their
invested capital; (iii) then, to the general partner and MBIP in an amount
equal to their 8% cumulative preferred return on their invested capital;
(iv) then, to Host Marriott to repay any advances made under the Debt
Service Guarantee, together with accrued interest thereon; (v) then, to MII
to pay any unpaid deferred incentive management fee; and (vi) the balance,
if any, 20% to MOHS, 10% to MBIP and 70% to the remaining limited partners.
(c) For financial reporting purposes, profits and losses are allocated among the
Partners based on their ownership interests.
26
<PAGE>
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 amount of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Revenues and Expenses
Revenues represent house profit from the Hotel because the Partnership has
delegated substantially all of the operating decisions related to the generation
of house profit of the Hotel to MII. House profit reflects the net revenues
flowing to the Partnership as property owner and represents hotel operating
results less property-level expenses, excluding depreciation and amortization,
base management fee, real estate taxes, ground rent, insurance and certain other
costs, which are disclosed separately in the statement of operations (see Note
3).
On November 20, 1997 the Emerging Issues Task Force ("EITF") of the Financial
Accounting Standards Board reached a consensus on EITF 97-2, "Application of
FASB Statement No. 94 and APB Opinion No. 16 to Physician Practice Management
Entities and Certain Other Entities with Contractual Management Arrangements".
EITF 97-2 addresses the circumstances in which a management entity may include
the revenues and expenses of a managed entity in its financial statements.
The Partnership is assessing the impact of EITF 97-2 on its policy of excluding
the property level revenues and operating expenses of its hotel from its
statements of operations.
Property and Equipment
Property and equipment is recorded at cost. Depreciation is computed using the
straight-line method over the useful lives of the assets as follows:
Leasehold improvements 40 years
Furniture and equipment 7 years
All property and equipment is pledged to secure the Amended and Restated
Mortgage Debt defined in Note 5.
The Partnership assesses impairment of the Hotel based on whether estimated
undiscounted future cash flows from the Hotel will be less than its net book
value. If the Hotel is impaired, its basis is adjusted to fair market value.
Deferred Financing Costs
Deferred financing costs represent the costs incurred in connection with
obtaining debt financing and are amortized over the term thereof. The original
mortgage debt (see Note 5) matured on June 12, 1996. Deferred financing costs
associated with that debt, totaling $320,000, were fully amortized at December
31, 1996 and were subsequently written off in 1997. Costs associated with the
mortgage debt refinancing (see Note 5) totaled $566,000 and will be amortized
over the term of the loan. Accumulated amortization of deferred financing costs
at December 31, 1997 and 1996 totaled $138,000 and $334,000, respectively.
Cash and Cash Equivalents
The Partnership considers all highly liquid investments with a maturity of three
months or less at date of purchase to be cash equivalents.
27
<PAGE>
Income Taxes
Provision for Federal and state income taxes has not been made in the
accompanying financial statements because the Partnership does not pay income
taxes but rather allocates profits and losses to the Partners in accordance with
the partnership agreement. Significant differences exist between the net income
for financial reporting purposes and the net income as reported on the
Partnership's tax return. These differences are due primarily to the use, for
income tax purposes, of accelerated depreciation methods and shorter depreciable
lives of the assets. As a result of these differences, the excess of the tax
basis in the net Partnership liabilities over the net Partnership liabilities
reported in the accompanying financial statements was $896,000 and $969,000,
respectively as of December 31, 1997 and 1996.
Statement of Financial Accounting Standards
In 1996, the Partnership adopted Statement of Financial Accounting Standards
("SFAS") No. 121 "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." Adoption of SFAS No. 121 did not have an
effect on its financial statements.
NOTE 3. REVENUES
Hotel revenues consist of Hotel operating results for the three years ended
December 31 (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
HOTEL SALES
<S> <C> <C> <C>
Rooms........................... $11,336 $10,224 $ 9,100
Food and beverage............... 2,588 2,337 2,092
Other........................... 505 509 497
------- ------- -------
14,429 13,070 11,689
------- ------- -------
HOTEL EXPENSES
Departmental direct costs
Rooms........................ 2,541 2,509 2,311
Food and beverage............ 2,088 1,896 1,722
Other hotel operating expenses.. 3,232 3,005 2,743
------- ------- -------
7,861 7,410 6,776
------- ------- -------
HOTEL REVENUES.................... $ 6,568 $ 5,660 $ 4,913
======= ======= =======
</TABLE>
NOTE 4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following as of December 31 (in
thousands):
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Leasehold improvements......... $ 26,453 $ 26,015
Furniture and equipment........ 8,768 8,227
-------- --------
35,221 34,242
Less accumulated depreciation.. (11,437) (10,602)
-------- --------
$ 23,784 $ 23,640
======== ========
</TABLE>
28
<PAGE>
NOTE 5. DEBT
Mortgage Debt
The Partnership entered into a loan agreement on June 12, 1989 with a bank to
provide non-recourse mortgage debt of $25.5 million (the "Mortgage Debt") to
finance the acquisition of the Hotel. The Mortgage Debt initially bore interest
at a floating interest rate. On August 11, 1989 the Partnership exercised its
option to fix the interest rate at 9.575% until maturity on June 12, 1996.
Interest on the Mortgage Debt was payable on the last day of March, June,
September and December of each year. No amortization of principal was required
prior to maturity or the sale or refinancing of the Hotel.
The Mortgage Debt matured on June 12, 1996 (the "Maturity Date"). On September
24, 1996 (the "Closing Date"), the Partnership completed a refinancing of the
Mortgage Debt (the "Amended and Restated Mortgage Debt"). The lender granted
the Partnership a forbearance of the loan for the period between the Maturity
Date and the Closing Date. During the forbearance period from the Maturity Date
until August 15, 1996 the Partnership continued to pay interest at the contract
rate of 9.575%. Thereafter, until the Closing Date, the Partnership paid
interest at a rate of 10.575%. The Amended and Restated Mortgage Debt matures
on June 12, 2001 and carries a floating interest rate of 200 basis points over
the three-month London Interbank Offered Rate ("LIBOR"), with an option to fix
the interest rate during the first two years of the loan term. The weighted
average interest rate from the Closing Date through December 31, 1996, was
7.62%. The weighted average interest rate for 1997 was 7.69%. The restructured
loan requires minimum quarterly amortization payments based on a 20-year
schedule. Additionally, all excess cash flow after payment of ground rent,
required principal and interest payments, incentive management fee, partnership
administrative expenses and refinancing costs is to be applied toward principal
amortization. On June 24, 1997 the Partnership paid $305,000 from excess cash
flow generated during 1996 toward additional principal amortization. The
Partnership expects to pay $766,000 in June 1998 from excess cash flow generated
during 1997.
As of the Closing Date, the lender deferred a $128,000 restructuring fee and
$302,000 of expenses incurred by the lender in connection with restructuring the
Mortgage Debt. On December 24, 1996, the Partnership paid $107,000 of lender's
expenses. A total of $323,000 was accrued as deferred financing costs which is
included in accounts payable and accrued expenses on the balance sheet for the
year ended December 31, 1996. This accrued liability was paid in April 1997.
Scheduled debt maturities under the Amended and Restated Mortgage Debt are as
follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1998 $ 627
1999 676
2000 728
2001 22,444
-------
$24,475
=======
</TABLE>
The Amended and Restated Mortgage Debt is secured by the Hotel, an assignment of
the Partnership's interest under the Ground Lease (as defined in Note 6), an
assignment of the Hotel management agreement, and by the grant of a security
interest in the Partnership's cash accounts and the personal property and
fixtures of the Hotel.
Debt Guarantees
No debt service guarantee was provided on the Amended and Restated Mortgage
Debt. However, MOHS reaffirmed its guarantee to the lender, that in the event
of a foreclosure, proceeds payable to the lender would be at least $5,000,000.
Roof and Facade Loan
Marriott International Capital Corporation ("MICC"), a subsidiary of MII,
provided $605,000 in available loan proceeds for the completion of the facade
and roof restoration project at the Hotel. As of December 31, 1997, $528,000
has been disbursed under the loan. The loan matures in June 2000, bears
interest at 9% and will be repaid from the Partnership's cash flow from
operations after defined priorities. Payments of approximately $19,000 in
principal and interest per month will be paid following the final disbursement
of loan proceeds, expected to occur in the second quarter of 1998.
29
<PAGE>
Simultaneous with the execution of the loan agreement between the Partnership
and MICC, Host Marriott purchased a 50% participation interest in the loan from
MICC. Pursuant to the participation agreement, Host Marriott reimbursed MICC
for 50% of the loan advances made to-date and will continue to reimburse MICC
for 50% of any additional advances. Upon the final loan disbursement, Host
Marriott will be reimbursed by MICC for 50% of the loan repayments as they are
made by the Partnership to MICC.
NOTE 6. GROUND LEASE
In 1989, the leasehold interest in the land upon which the Hotel is located was
assigned to the Partnership by Host Marriott. The lease was created on June 16,
1986 pursuant to a ground lease (the "Ground Lease") from the landlord to Host
Marriott. The initial term of the Ground Lease expires in 2014. The Ground
Lease may be renewed at the option of the Partnership for five successive terms
of ten years each. Upon expiration or termination of the Ground Lease, title to
the Hotel and all improvements revert to the lessor. Rent expense under the
Ground Lease is calculated at an amount equal to the greater of a minimum rental
of $300,000 per year or a percentage rental equal to 3% of annual gross room
sales. Ground rent expense for 1997, 1996 and 1995 was $341,000, $308,000 and
$300,000, respectively.
NOTE 7. MANAGEMENT AGREEMENT
The Partnership entered into a hotel management agreement (the "Management
Agreement") with MII (the "Manager") to manage the Hotel as part of MII's full
service hotel system. The Management Agreement has an initial term expiring in
2008. The Manager may renew the Management Agreement, at its option, for five
successive ten-year terms. The Partnership may terminate the Management
Agreement if specified minimum operating results are not achieved. However, the
Manager may prevent termination by paying the Partnership the amount by which
the minimum operating results were not achieved.
The Management Agreement provides for annual payments of (i) the base management
fee equal to 3% of gross sales from the Hotel, and (ii) the incentive management
fee equal to 20% of net house profit, as defined. Payment of the incentive
management fee is subordinated to the prior payment of required principal and
interest payments, ground rent and an 8% annual priority return to the
Partnership. Unpaid incentive management fees are reflected as deferred
incentive management fees payable to MII in the accompanying balance sheet. The
incentive management fee earned in 1997 was $864,000. Of this amount, $606,000
was paid to the Manager and $258,000 was accrued as unpaid deferred incentive
management fees. Unpaid incentive management fees earned in 1996 and 1995 were
$734,000 and $591,000, respectively. The balance of deferred incentive
management fees at December 31, 1997 and 1996 was $3.6 million and $3.3 million,
respectively.
Pursuant to the terms of the Management Agreement, the Partnership is required
to provide the Manager with working capital and supplies to meet the operating
needs of the Hotel. The Manager converts cash advanced by the Partnership into
other forms of working capital consisting primarily of operating cash,
inventories, and trade receivables and payables which are maintained and
controlled by the Manager. Upon termination of the Management Agreement, the
working capital and supplies will be returned to the Partnership. The
individual components of working capital and supplies controlled by the Manager
are not reflected in the Partnership's balance sheet. As of December 31, 1997
and 1996, $357,000 has been advanced to the Manager for working capital and
supplies and is reflected in Due from Marriott International, Inc. on the
accompanying balance sheet.
Pursuant to the terms of the Management Agreement, the Manager is required to
furnish the Hotel with certain services ("Chain Services") which are generally
provided on a central or regional basis to all hotels in MII's full service
hotel system. Chain Services include central training, advertising and
promotion, a national reservation system and such additional services, as
needed, which may be more efficiently performed on a centralized basis. Costs
and expenses incurred in providing such services are allocated among all
domestic full service hotels managed, owned or leased by MII or its
subsidiaries. In addition, the Hotel also participates in MII's Marriott's
Rewards Program ("MRP"), which was formerly called MII's Honored Guest Awards
Program. The cost of this program is charged to all hotels in MII's hotel
system based upon the MRP sales at each hotel. The total amount of Chain
Services and MRP costs charged to the Partnership was $783,000, $757,000 and
$649,000 for 1997, 1996 and 1995, respectively.
30
<PAGE>
The Management Agreement provides for the establishment of a property
improvement fund for the Hotel which provides for the replacement of furniture,
fixtures and equipment. Contributions to the property improvement fund are
based on a percentage of gross Hotel sales equal to 4% for 1995 through 1999 and
5% thereafter. Contributions to the property improvement fund for 1997, 1996
and 1995 were $577,000, $523,000 and $468,000, respectively.
NOTE 8. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of financial instruments are shown below. The
estimated fair values of financial instruments not included in this table are
estimated to be equal to their carrying amounts (in thousands):
<TABLE>
<CAPTION>
As of December 31, 1997 As of December 31, 1996
----------------------- -----------------------
Estimated Estimated
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Mortgage Debt.. $24,475 $24,700 $25,361 $25,200
</TABLE>
The estimated fair value of the Mortgage Debt is based on the expected future
debt service payments discounted at estimated market rates.
31
<PAGE>
CONDENSED STATEMENT OF OPERATIONS
MUTUAL BENEFIT CHICAGO MARRIOTT SUITE HOTEL PARTNERS, L.P.
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<TABLE>
<CAPTION>
For the Twelve Weeks Ended
----------------------------
March 27, March 28,
1998 1997
------------- -------------
<S> <C> <C>
HOTEL REVENUES (Note 2)................................. $1,516 $1,281
------ ------
OPERATING COSTS AND EXPENSES
Real estate taxes and other............................ 296 298
Depreciation........................................... 233 193
Incentive management fee............................... 200 157
Base management fee.................................... 100 90
Ground rent and administrative......................... 96 80
------ ------
925 818
------ ------
OPERATING PROFIT........................................ 591 463
Interest expense....................................... (516) (491)
Interest income........................................ 13 17
------ ------
NET INCOME (LOSS)....................................... $ 88 $ (11)
====== ======
ALLOCATION OF NET INCOME (LOSS)
General Partner........................................ $ 1 $ --
MBIP Limited Partner Interest.......................... 1 --
Limited Partner Unit Holders........................... 86 (11)
------ ------
$ 88 $ (11)
====== ======
NET INCOME (LOSS) PER LIMITED PARTNER UNIT (335 Units).. $ 257 $ (33)
====== ======
</TABLE>
See Notes to Condensed Financial Statements.
32
<PAGE>
CONDENSED BALANCE SHEET
MUTUAL BENEFIT CHICAGO MARRIOTT SUITE HOTEL PARTNERS, L.P.
(IN THOUSANDS)
<TABLE>
<CAPTION>
March 27, December 31,
1998 1997
----------- -----------
(Unaudited)
ASSETS
<S> <C> <C>
Property and equipment, net.............................................. $23,870 $23,784
Due from Marriott International, Inc..................................... 638 507
Other assets............................................................. 608 830
Cash and cash equivalents................................................ 782 841
------- -------
$25,898 $25,962
======= =======
LIABILITIES AND PARTNERS' DEFICIT
Mortgage debt........................................................... $24,322 $24,475
Deferred incentive management fees due to Marriott International, Inc... 3,649 3,587
Accounts payable and accrued expenses................................... 132 193
Note payable to Marriott International, Inc............................. 528 528
------- -------
Total Liabilities...................................................... 28,631 28,783
------- -------
PARTNERS' DEFICIT
General Partner......................................................... (9) (10)
MBIP Limited Partner Interest........................................... (9) (10)
Limited Partner Unit Holders............................................ (2,715) (2,801)
------- -------
Total Partners' Deficit................................................ (2,733) (2,821)
------- -------
$25,898 $25,962
======= =======
</TABLE>
See Notes to Condensed Financial Statements.
33
<PAGE>
CONDENSED STATEMENT OF CASH FLOWS
MUTUAL BENEFIT CHICAGO MARRIOTT SUITE HOTEL PARTNERS, L.P.
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
For the Twelve Weeks Ended
----------------------------
March 27, March 28,
1998 1997
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss)................................. $ 88 $ (11)
Noncash items..................................... 338 375
Changes in operating accounts..................... (207) (247)
----- -----
Cash provided by operating activities............ 219 117
----- -----
INVESTING ACTIVITIES
Additions to property and equipment............... (319) (234)
Change in property improvement fund............... 194 118
----- -----
Cash used in investing activities................ (125) (116)
----- -----
FINANCING ACTIVITIES
Principal repayments of mortgage debt............. (153) (141)
Payment of financing costs........................ -- (13)
----- -----
Cash used in financing activities................ (153) (154)
----- -----
DECREASE IN CASH AND CASH EQUIVALENTS.............. (59) (153)
CASH AND CASH EQUIVALENTS at beginning of period... 841 733
----- -----
CASH AND CASH EQUIVALENTS at end of period......... $ 782 $ 580
===== =====
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for mortgage interest................... $ 484 $ 481
===== =====
</TABLE>
See Notes to Condensed Financial Statements.
34
<PAGE>
NOTES TO CONDENSED FINANCIAL STATEMENTS
MUTUAL BENEFIT CHICAGO MARRIOTT SUITE HOTEL PARTNERS, L.P.
(UNAUDITED)
1. The accompanying condensed financial statements have been prepared by Mutual
Benefit Chicago Marriott Suite Hotel Partners, L.P. (the "Partnership")
without audit. Certain information and footnote disclosures normally
included in financial statements presented in accordance with generally
accepted accounting principles have been condensed or omitted from the
accompanying statements. The Partnership believes the disclosures made are
adequate to make the information presented not misleading. However, the
condensed financial statements should be read in conjunction with the
Partnership's financial statements and notes thereto for the fiscal year
ended December 31, 1997 included in the Partnership's Form 10.
In the opinion of the Partnership, the accompanying unaudited condensed
financial statements reflect all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position of
the Partnership as of March 27, 1998, and the results of operations for the
twelve weeks ended March 27, 1998 and March 28, 1997. Interim results are not
necessarily indicative of fiscal year performance because of seasonal and
short-term variations.
For financial reporting purposes, net profits and net losses of the
Partnership are allocated 1% to MOHS Corporation (the "General Partner"), a
wholly owned subsidiary of Host Marriott Corporation ("Host Marriott"), 1% to
Mutual Benefit Investment Properties ("MBIP"), a limited partner, and 98% to
the remaining limited partners. Significant differences exist between the net
profits and net losses for financial reporting purposes and the net profits
and net losses reported for Federal income tax purposes. These differences
are due primarily to the use, for income tax purposes, of accelerated
depreciation methods, shorter depreciable lives of the assets, differences in
the timing of the recognition of management fee expense and the deduction of
certain costs incurred during construction which have been capitalized in the
accompanying condensed financial statements.
2. Hotel revenues represent house profit from the Hotel since the Partnership
has delegated substantially all of the operating decisions related to the
generation of house profit of the Hotel to Marriott International, Inc. (the
"Manager"). House profit reflects hotel operating results which flow to the
Partnership as property owner and represents gross hotel sales less property-
level expenses, excluding depreciation and amortization, base and incentive
management fees, property taxes and certain other costs, which are disclosed
separately in the condensed statement of operations.
On November 20, 1997 the Emerging Issues Task Force ("EITF") of the Financial
Accounting Standards Board reached a consensus on EITF 97-2, "Application of
FASB Statement No. 94 and APB Opinion No. 16 to Physician Practice Management
Entities and Certain Other Entities with Contractual Management
Arrangements." EITF 97-2 addresses the circumstances in which a management
entity may include the revenues and expenses of a managed entity in its
financial statements.
The Partnership is assessing the impact of EITF 97-2 on its policy of
excluding the property level revenues and operating expenses of its hotel
from its statements of operations.
35
<PAGE>
Hotel revenues consist of hotel operating results for the Hotel for the
twelve weeks ended (in thousands):
<TABLE>
<CAPTION>
March 27, March 28,
1998 1997
--------- ---------
<S> <C> <C>
HOTEL SALES
Rooms........................... $2,610 $2,320
Food and beverage............... 605 556
Other........................... 110 107
------ ------
3,325 2,983
------ ------
HOTEL EXPENSES
Departmental Direct Costs
Rooms......................... 571 548
Food and beverage............. 497 449
Other hotel operating expenses.. 741 705
------ ------
1,809 1,702
------ ------
HOTEL REVENUES................... $1,516 $1,281
====== ======
</TABLE>
3. On April 17, 1998, Host Marriott, parent company of the General Partner of
the Partnership, announced that its Board of Directors has authorized Host
Marriott to reorganize its business operations to qualify as a real estate
investment trust ("REIT") to become effective as of January 1, 1999.
As part of the REIT reorganization, Host Marriott has formed an operating
partnership (the "Operating Partnership"). The Operating Partnership is
proposing to acquire by merger (the "Mergers") eight limited partnerships
that own full-service hotels in which Host Marriott or its subsidiaries are
general partners, including the Partnership. As more fully described in the
registration statement filed with the Securities and Exchange Commission on
June 2, 1998, limited partners of those partnerships that participate in the
Mergers will receive either units or, at their election, unsecured notes
issued by the Operating Partnership in exchange for their partnership
interests in the Partnerships.
Consummation of the REIT reorganization is subject to significant
contingencies that are outside the control of Host Marriott, including final
Board approval, consent of shareholders, partners, bondholders, lenders, and
ground lessors of Host Marriott, its affiliates and other third parties.
Accordingly, there can be no assurance that the REIT reorganization will be
completed or that it will be effective as of January 1, 1999.
36
<PAGE>
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
ITEM 15. FINANCIAL STATEMENTS, SUPPLEMENTARY SCHEDULE AND EXHIBITS
(a) The financial statements filed as a part of this Form 10 are
listed in Item 13.
Page
----
Supplementary Financial Statement Schedule -
Mutual Benefit Chicago Marriott Suite Hotel Partners, L.P.
III. Real Estate and Accumulated Depreciation 39
Schedules I through V inclusive, other than those listed above, are omitted
because of the absence of conditions under which they are required or because
the required information is included in the financial statements or notes
thereto.
(b) Exhibits
3.1 Amended and Restated Agreement of Limited Partnership of Mutual
Benefit Chicago Marriott Suite Hotel Partners, L.P., dated
June 12, 1989.
10.1 Management Agreement by Mutual Benefit Chicago Marriott Suite
Hotel Partners, L.P. (Partnership) and Marriott Hotels, Inc.
(Management Company) dated June 12, 1989.
10.2 Amended and Restated Assignment of Management Agreement by and
among Mutual Benefit Chicago Marriott Suite Hotel Partners, L.P.
(Borrower), Marriott International, Inc. (Manager) and National
Bank of Canada (Lender) dated September 24, 1996.
10.3 Amended and Restated Loan Agreement by and between Mutual Benefit
Chicago Marriott Suite Hotel Partners, L.P. as Borrower and
National Bank of Canada, New York Branch as Lender dated as of
September 24, 1996.
10.4 Amended and Restated Secured Promissory Note made by Mutual
Benefit Chicago Marriott Suite Hotel Partners, L.P. in favor of
National Bank of Canada dated September 24, 1996.
10.5 Amended and Restated Leasehold Mortgage dated as of September 24,
1996 from Mutual Benefit Chicago Marriott Suite Hotel Partners,
L.P. (Borrower) to National Bank of Canada (Lender).
10.6 Reaffirmation of Foreclosure Guaranty by and between MOHS
Corporation (Guarantor) and National Bank of Canada (Lender)
dated September 24, 1996.
10.7 Security Agreement as of September 24, 1996 by Mutual Benefit
Chicago Marriott Suite Hotel Partners, L.P. and National Bank of
Canada.
10.8 Loan Modification Agreement by and between National Bank of
Canada (Lender) and Mutual Benefit Chicago Marriott Suite Hotel
Partners, L.P. (Borrower) dated June 19, 1997.
10.9 Marriott Hotel Ground Lease Between Simon-Rosemont Developers
(Landlord) and Marriott Corporation (Tenant) dated June 16, 1986.
10.10 Assignment of Lease between Marriott Corporation ("Assignor") and
Mutual Benefit Chicago Marriott Suite Hotel Partners, L.P.
("Assignee") dated June 12, 1989.
37
<PAGE>
10.11 Assignment of Leases and Rents from Mutual Benefit Chicago
Marriott Suite Hotel Partners, L.P. (Borrower) to National Bank
of Canada (Lender) dated September 24, 1996.
27 Financial Data Schedule
38
<PAGE>
SCHEDULE III
MUTUAL BENEFIT CHICAGO MARRIOTT SUITE HOTEL PARTNERS, L.P.
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
Initial Costs Gross Amount at December 31, 1997
------------- ---------------------------------
Subsequent
Building & Costs Building & Accumulated
Description Debt Improvements Capitalized Improvements Depreciation
- ----------------- ------- ------------- ----------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Marriott Suites
O'Hare Hotel $24,475 $25,878 $575 $26,453 $5,359
======= ============= =========== ================ ===============
</TABLE>
<TABLE>
<CAPTION>
Date of
Completion of Date Depreciation
Construction Acquired Life
------------- -------- ------------
<S> <C> <C> <C>
Marriott Suites
O'Hare Hotel 1988 1989 40 years
</TABLE>
<TABLE>
<CAPTION>
Notes:
- ------
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
(a) Reconciliation of Real Estate:
Balance at beginning of year.......................... $25,968 $26,002 $26,015
Capital Expenditures.................................. 34 13 438
Dispositions.......................................... -- -- --
------- ------- -------
Balance at end of year................................ $26,002 $26,015 $26,453
======= ======= =======
(b) Reconciliation of Accumulated Depreciation:
Balance at beginning of year.......................... $ 3,404 $ 4,053 $ 4,704
Depreciation.......................................... 649 651 655
------- ------- -------
Balance at end of year................................ $ 4,053 $ 4,704 $ 5,359
======= ======= =======
(c) The aggregate cost of buildings and
improvements for Federal income tax purposes
is approximately $26.5 million at December 31, 1997.
</TABLE>
39
<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 to be signed on its
behalf by the undersigned, thereunto duly authorized, on this 12th day of
June 1998.
MUTUAL BENEFIT CHICAGO MARRIOTT SUITE
HOTEL PARTNERS, L.P.
BY: MOHS Corporation
General Partner
/s/ Earla L. Stowe
-------------------------------------------
Earla L. Stowe
Vice President and Chief Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
the capacities and on the date indicated above.
Signature Title
(MOHS 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
40
<PAGE>
Exhibit 3.1
MB INVESTMENT PROPERTIES, INC.
------------------------------
Certificate of Secretary
------------------------
The undersigned, Robert J. Peterson, as Vice President and Assistant
Secretary of MB Investment Properties, Inc., a corporation organized and
existing under the laws of the State of Rhode Island ("MBIP"), in which capacity
I am authorized to execute this Certificate on behalf of MBIP, for itself and as
general partner of Mutual Benefit Chicago Marriott Suite Hotel Partners, L.P., a
Rhode Island limited partnership (the "Partnership") do hereby certify that
attached hereto as Exhibit A is a true, correct and complete copy of the Amended
and Restated Agreement of Limited Partnership of Mutual Benefit Chicago Marriott
Suite Hotel Partners, L.P.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as secretary
of the Corporation this 12th day of June, 1989.
/s/ Robert J. Peterson
-----------------------------
Robert J. Peterson
<PAGE>
Exhibit A
---------
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF
MUTUAL BENEFIT CHICAGO MARRIOTT SUITE HOTEL PARTNERS, L.P.
TABLE OF CONTENTS
-----------------
Article One - Defined Terms
Article Two - Continuation, Name, Place of Business, Purpose and Term
2.01 Continuation
2.02 Name and Offices
2.03 Purpose
2.04 Term
Article Three - Partners and Capital
3.01 General Partners
3.02 Limited Partners
3.03 Capital Contributions by General Partners
3.04 Capital Contribution of the Withdrawing Initial Limited Partner
3.05 Capital Contributions of Limited Partners
3.06 Partnership Capital; Capital Accounts
3.07 Liability of Limited Partners
3.08 Obligation to Restore Negative Capital Account Balances on
Liquidation
Article Four - Allocation of Taxable Income and Tax Losses and Cash
Distributions
4.01 Allocation of Taxable Income and Tax Losses from Operations
4.02 Allocation of Taxable Income and Tax Losses from Capital
Transactions and Refinancings
4.03 Distribution of Cash Available for Distribution
4.04 Distributions of Net Proceeds from Capital Transactions and Net
Proceeds from Refinancings
4.05 Allocations Among Partners
4.06 Minimum Gain Allocation
4.07 Regulatory Allocations
4.08 Partners' Shares of Partnership Non-recourse Liabilities
4.09 Certain Special Allocations
4.10 Tax Allocations; Code Section 704(c)
4.11 Section 754 Adjustments
4.12 Section 1445 and Other Requirements
Article Five - Rights, Powers and Duties of the General Partners
5.01 Authority of the General Partners to Manage the Partnership
<PAGE>
5.02 Restrictions on Authority of the General Partners
5.03 Duties and Obligations of the General Partners
5.04 Compensation and Reimbursement of General Partners
5.05 Other Business of Partners
5.06 Limitation on Liability of General Partners; Indemnification
Article Six - Withdrawal and Removal of General Partners
6.01 Limitation on Voluntary Withdrawal
6.02 Termination of General Partner
6.03 Liability of Terminated General Partner
6.04 Removal of General Partner and Valuation of Interest of General
Partner
Article Seven - Transfer of Units
7.01 Transfer by Limited Partners
7.02 Substitute Limited Partners
7.03 Transfer on Death or Incapacity
7.04 Effective Date of Transfer
7.05 Indemnification and Terms of Admission
Article Eight - Dissolution and Liquidation of the Partnership
8.01 Events Causing Dissolution
8.02 Liquidation
Article Nine - Books and Records, Accounting, Reports, Tax Elections, Etc.
9.01 Books and Records
9.02 Accounting and Fiscal Year
9.03 Bank Accounts and Investments
9.04 Reports
9.05 Tax Depreciation and Elections
9.06 Designation of Tax Matters Partner
Article Ten - Meeting and Voting Rights of Limited Partners
10.01 Meetings
10.02 Special Voting Rights of Limited Partners
Article Eleven - Miscellaneous Provisions
11.01 Appointment of Each General Partner as Attorney-in-Fact
11.02 Amendment
11.03 Binding Provisions
11.04 Applicable Law
11.05 Counterparts
11.06 Separability of Provisions
11.07 Section Titles
Schedule I Names, Addresses, Capital Contributions and Number of Units of
Limited Partners
ii
<PAGE>
Schedule II Description of Hotel Property
Schedule III General Partners' Compensation
iii
<PAGE>
THE UNITS EVIDENCED BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR CERTAIN STATE SECURITIES LAWS. UNITS
ACQUIRED BY LIMITED PARTNERS MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE UNITS UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND SUCH STATE LAWS AS MAY BE APPLICABLE, OR DELIVERY TO THE
PARTNERSHIP OF AN OPINION OF COUNSEL SATISFACTORY TO THE GENERAL PARTNERS THAT
SUCH REGISTRATION IS NOT REQUIRED. ADDITIONAL RESTRICTIONS ON TRANSFER OF THE
UNITS ARE SET FORTH IN THIS AGREEMENT.
AMENDED AND RESTATED AGREEMENT
------------------------------
OF LIMITED PARTNERSHIP
----------------------
This Amended and Restated Agreement of Limited Partnership of Mutual
Benefit Chicago Marriott Suite Hotel Partners, L.P. (the "Partnership") dated as
of June 12 , 1989 is made and entered into by and among MB Investment
Properties, Inc., a Rhode Island corporation ("MBIP") and MOHS Corporation, a
Delaware Corporation ("MOHS"), MBIP and MOHS hereinafter sometimes being
referred to individually as a "General Partner" and collectively as the "General
Partners"), Mutual Benefit Financial Service Management Company, Inc.
("FIMSCO"), a New Jersey corporation, as the Withdrawing Initial Limited
Partner, and those additional limited partners whose names appear on Schedule I
("Limited Partners") who upon execution of this Agreement by their
attorney-in-fact are being admitted to the Partnership.
BACKGROUND
----------
On August 31, 1988 a Certificate of Limited Partnership of Mutual
Benefit Chicago Marriott Suite Hotel Partners, L.P. was filed with the Secretary
of State of the State of Rhode Island, whereby MBIP, as general partner and
FIMSCO, as initial limited partner, formed the Partnership as a limited
partnership pursuant to Rhode Island law. An Agreement of Limited Partnership
among the same parties was executed on August 31, 1988.
The Partners now desire to continue the Partnership, admit MOHS as an
additional General Partner, admit the Limited Partners as additional limited
partners, permit the withdrawal of FIMSCO as a limited partner, and amend and
restate all the terms and provisions governing the Partnership as set forth
herein.
1
<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and intending to be legally bound hereby, the parties agree to amend
and restate all the terms and provisions governing the Partnership as follows:
ARTICLE ONE
DEFINED TERMS
Section 1.01. The following terms used in this Agreement, unless the
context otherwise requires, shall have the meanings specified in this Section
1.01:
"Accountant" means Laventhol & Horwath, or such other comparable firm of
----------
independent certified public accountants as may be engaged by the Managing
General Partner for the purpose of preparing the tax returns and financial
reports for the Partnership.
"Adjusted Capital Contribution" means a Partner's Capital Contribution,
-----------------------------
less all Distributions to such Partner pursuant to Section 4.04(a) from the date
of such Partner's admission to the Partnership to such given time, but in no
event less than zero. In no event shall any Distribution arising from any Cash
Flow Guaranty Payments be considered a reduction in a Partner's Adjusted Capital
Contribution.
"Affiliate" or "Affiliated Person" means, when used with reference to a
--------------------------------
specified Person, (i) any Person that directly or indirectly through one or more
intermediaries controls or is controlled by or is under common control with the
specified Person, (ii) any Person that is an officer of, partner in or trustee
of, or serves in a similar capacity with respect to, the specified Person or of
which the specified Person is an officer, partner or trustee, or with respect to
which the specified Person serves in a similar capacity, (iii) any Person that,
directly or indirectly, is the beneficial owner of 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, (iv) any relative or spouse of the specified Person who makes his
home with that of the specified Person. Affiliate or Affiliated Person of the
Partnership or the General Partners does not include a Person who is a partner
in a partnership or a joint venture with the Partnership or any other Affiliated
Person if such Person is not otherwise an Affiliate or Affiliated Person of the
Partnership or the General Partners.
"Agreement" means this Amended and Restated Agreement of Limited
---------
Partnership, as originally executed and as amended from time to time.
2
<PAGE>
"Bankruptcy" means, with reference to any Partner:
----------
(a) the entry of an order for relief (or similar court order) against
such Partner which authorizes a case brought under Chapter 7, 11 or 13 of Title
11 of the United States Code to proceed;
(b) the commencement of a federal, state or foreign bankruptcy,
insolvency, reorganization, arrangement or liquidation proceeding by such
Partner;
(c) the commencement of a federal, state or foreign bankruptcy,
insolvency, reorganization, arrangement or liquidation proceeding against such
Partner if such proceeding is not dismissed within 60 days after the
commencement thereof;
(d) the entry of a court decree or court order which remains unstayed
and in effect for a period of 30 consecutive days:
(i) adjudging such Partner insolvent under any federal, state or
foreign law relating to bankruptcy, insolvency, reorganization,
arrangement, liquidation, receivership or the like;
(ii) approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of, or in respect of, such
Partner or his property under any federal, state or foreign law relating
to insolvency, reorganization, arrangement, liquidation, receivership or
the like;
(iii) appointing a receiver, liquidator, assignee, trustee,
conservator, or sequester (or other similar official) of such Partner,
or of all, or of a substantial part, of such Partner's property; or
(iv) ordering the winding up, dissolution or liquidation of the
affairs of such Partner;
(e) the written consent by such Partner to the institution against him
of any proceeding of the type described in subsection (a), (b), (c) and (d);
(f) the written consent by such Partner to the appointment of a
receiver, liquidator, assignee, trustee, conservator or sequester (or other
similar official) of such Partner, or of all, or of a substantial part, of his
properties;
3
<PAGE>
(g) the making by such Partner of an assignment for the benefit of
creditors;
(h) the admission in writing by such Partner of his inability to pay his
debts generally as they come due;
(i) the taking of any corporate or other action by such Partner in
furtherance of any of the foregoing; or
(j) if such Partner becomes insolvent by the taking of any act or the
making of any transfer, or otherwise, as "insolvency" is or may be defined
pursuant to the Federal Bankruptcy Code, the Federal Bankruptcy Act, the Uniform
Fraudulent Conveyances Act, any state or federal act, or the ruling of any
court.
"Book Depreciation" has the meaning set forth in Section 3.06C.
-----------------
"Book Profits and Losses" means the Taxable Income or Tax Losses of the
-----------------------
Partnership, as adjusted for purposes of determining and maintaining the
Partners' Capital Accounts as provided in Section 3.06 hereof.
"Capital Account" means, with respect to a Partner, such Partner's total
---------------
Capital Contribution, increased or decreased as provided in Section 3.06 of this
Agreement.
"Capital Contribution" means, with respect to any Partner, the total
--------------------
amount of money (prior to the deduction of any selling commissions, fees or
expenses), and the initial Gross Asset Value of any property (other than money)
contributed to the Partnership by such Partner.
"Capital Transactions" means the sale, exchange or disposition
--------------------
(including the grant of a long-term leasehold) of any Partnership property that
is not in the ordinary course of business, or casualty damage to or condemnation
of any Partnership property, or any substantial interest therein or portion
thereof.
"Cash Available for Distribution" means, with respect to any fiscal
-------------------------------
period, the cash revenues of the Partnership from all sources during such fiscal
period other than Net Proceeds from Capital Transactions or Net Proceeds from
Refinancings, less (i) all cash expenditures of the Partnership during such
fiscal period, including without limitation debt service on the First Mortgage
Loan, operating and administrative expenses, rent under the Ground Lease,
payment to the Repairs and Equipment Reserve required by Paragraph 7.02B or
7.02E of the Hotel Management
4
<PAGE>
Agreement, and any fees paid by the Partnership for management services as
required by Paragraph 5.01B of the Hotel Management Agreement and (ii) such
Reserves as may be determined by the Managing General Partner, in its sole
discretion, to be necessary to provide for the foreseeable needs of the
Partnership.
"Cash Flow Guaranty Payments" means any payments made by Marriott, or
---------------------------
its successors or assigns pursuant to Section 9.04 of the Purchase and Sale
Agreement.
"Certificate of Limited Partnership" means the Partnership's Certificate
----------------------------------
of Limited Partnership, as filed in accordance with the Partnership Act, and as
it has been, and may hereafter be, amended.
"Closing" means a closing (including the Initial Closing and any
-------
Subsequent Closings) of the sale of Units and the admission to the Partnership
of one or more Limited Partners subscribing for the Units. There may be one or
more Closings.
"Code" means the Internal Revenue Code of 1986, as amended (or any
----
corresponding provision or provisions of succeeding law) and Treasury
Regulations promulgated thereunder.
"Consent" means either (a) the consent given by vote at a meeting called
-------
and held in accordance with the provisions of Section 10.01, or (b) a prior
written consent required or permitted to be given pursuant to this Agreement or
the act granting such consent, as the context may require.
"Debt Service Guaranty" means the agreement of Marriott Corporation, an
---------------------
Affiliate of MOHS, to advance to the Partnership amounts necessary to fund the
Partnership's debt service on the First Mortgage Loan in excess of Partnership
funds available therefor, up to a maximum amount of $2,500,000 until the earlier
of (i) the date certain performance standards are achieved, or (ii) five years
from the Hotel Closing, as more fully described in the Purchase and Sale
Agreement.
"Distribution" means, when used with reference to a Partner or Partners,
------------
any cash payments by the Partnership to such Partner or Partners on account of
his or their Interests, regardless of the source of the funds used for such
payments, but not including repayment of principal and interest on any
indebtedness of the Partnership to such Partner or any payment of fees or
compensation or reimbursement of expenses to such Partner.
"8% Preferred Return" means, with respect to any period commencing on
-------------------
date of the Closing at which a Limited Partner is
5
<PAGE>
admitted and extending to any given time thereafter, the amount representing an
uncompounded yield of eight percent (8%) per annum on the Adjusted Capital
Contributions of such Limited Partner outstanding from time to time during such
period.
"8% Preferred Return Arrearage" means the cumulative amount, if any, by
-----------------------------
which the Distributions to all the Limited Partners pursuant to subsections
4.03A(a), and 4.04(b) and (c) are less than the cumulative 8% Preferred Return
computed to such given time.
"Family" means, with respect to any Partner, that Partner's brothers,
------
sisters, spouse, ancestors, and lineal descendants.
"First Crossover Point" means the first point in time when Distributions
---------------------
to the Partners pursuant to Section 4.04(a) in the aggregate equal $5,982,000.
"First Mortgage Loan" that certain first mortgage loan made or to be
-------------------
made to the Partnership by the National Bank of Canada in principal amount of
$25,500,000 and secured by a first mortgage covering the Hotel and the
Partnership's interest in the Ground Lease, and if the First Mortgage Loan is
replaced or supplemented by subsequent financing and mortgages in accordance
with this Agreement, such term shall refer to any such subsequent financing,
mortgage, or mortgages.
"Fiscal Quarter" means each of the calendar quarters comprising the
--------------
Partnership's Fiscal Year.
"Fiscal Year" means the fiscal year of the Partnership as established in
-----------
Section 9.02.
"Five Percent Test" shall have the meaning specified in Section
-----------------
7.01A(vi).
"Foreclosure Guaranty" means the guarantee of MOHS of up to $5,000,000
--------------------
of any First Mortgage Loan indebtedness remaining upon a foreclosure of the
Hotel in the event that proceeds of a foreclosure are less than $5,000,000.
"General Partners" means MOHS Corporation, a Delaware corporation, and
----------------
MB Investment Properties, Inc., a Rhode Island corporation, or any Person who
becomes an additional or successor general partner in accordance with this
Agreement, but in the event that any of such Persons is at any time no longer
acting as general partner, the term shall mean only the party or parties then
acting in such capacity.
6
<PAGE>
"General Partners' Preferred Return" means, with respect to any period
----------------------------------
commencing on the date of the Initial Closing and extending to any given time
thereafter, the amount representing an uncompounded yield of eight percent (8%)
per annum on the Adjusted Capital Contributions of the General Partners
outstanding from time to time during such period.
"General Partners' Preferred Return Arrearage" means the cumulative
--------------------------------------------
amount, if any, by which Distributions to the General Partners pursuant to
Section 4.03A(c) and 4.04(d) and (e) are less than the General Partners'
Cumulative Preferred Return computed to such given time.
"Ground Lease" means that certain land lease of the sites of the Hotel
------------
Property by and between the Partnership (as assignee of Marriott's rights as
tenant therein) and Simon-Rosemont Developers, an Illinois limited partnership,
as executed on June 16, 1986, and as it may be further amended from time to
time.
"Gross Asset Value" means, with respect to any asset, the asset's
-----------------
adjusted basis for federal income tax purposes, except as adjusted pursuant to
Section 3.06B.
"Hotel" means that certain hotel known as the Marriott Suites O'Hare,
-----
located in the Village of Rosemont, Illinois, together with the Hotel Property.
"Hotel Closing" means the date the Partnership acquires title to the
-------------
Hotel and the leasehold interest in the Ground Lease.
"Hotel Management Agreement" means the agreement to be entered into
--------------------------
between the Partnership and the Manager relating to management of the Hotel, to
be dated as of the date of the Hotel Closing and as it may be amended from time
to time.
"Hotel Property" means the real property described on Schedule II to
--------------
this Agreement.
"Incentive Management Fee" means the Incentive Management Fee payable to
------------------------
the Manager pursuant to Section 5.0lB of the Hotel Management Agreement.
"Initial Closing" means the first closing at which Limited Partners are
---------------
admitted to the Partnership.
"Interest" means the entire interest of a Partner in the Partnership at
--------
any particular time, including the right of such Partner to any and all benefits
to which a Partner may be entitled as provided in this Agreement, together with
the
7
<PAGE>
obligations of such Partner to comply with all the terms and provisions of this
Agreement. Reference to a majority or specified percentage in Interest of the
Limited Partners means Limited Partners holding Units which represent over 50%
of such specified percentage, respectively, of the aggregate number of Units
then outstanding.
"Limited Partner" means any Person listed on Schedule I hereto, and any
---------------
other Person who may be later admitted into the Partnership as an additional or
Substitute Limited Partner, and shall include a General Partner to the extent
such General Partner purchases or succeeds to the Interest of a Limited Partner
in one or more Units.
"Manager" means Marriott Hotels, Inc., a Delaware corporation, for so
-------
long as the Hotel Management Agreement remains in effect or any other Person who
may from time to time act as manager of the Hotel.
"Managing General Partner" means MBIP.
------------------------
"Marriott" means Marriott Corporation, a Delaware corporation.
--------
"Memorandum" means the Partnership's Private Offering Memorandum dated
----------
September 15, 1988 concerning the offering of the Units for sale to investors.
"Minimum Gain" means the amount determined by computing, with respect to
------------
each non-recourse liability of the Partnership, the amount of Taxable Income, if
any, that would be realized by the Partnership if it disposed of (in a taxable
transaction) the property subject to such liability in full satisfaction
thereof, and by then aggregating the amounts so computed. For purposes of
determining the amount of such Taxable Income with respect to a liability, the
adjusted basis, for federal income tax purposes, of the asset subject to the
liability shall be allocated among all the liabilities that the asset secures in
the manner set forth in Treasury Regulation l.704-lT(b)(4)(iv)(c) (or successor
provisions). If Partnership property subject to one or more non-recourse
liabilities of the Partnership is, under Treasury Regulation
l.704-l(b)(2)(iv)(d),(f), or (r), properly reflected on the books of the
Partnership at a book value that differs from the adjusted tax basis of such
property, then the determination of Minimum Gain shall be made with reference to
such book value.
"Minimum Subscription" means subscriptions for the purchase of Units
--------------------
acceptable to the General Partners for no less than 235 Units, which Units have
been sold in bona fide transactions and
8
<PAGE>
fully paid for with customer funds that have cleared the banking system.
"Net Proceeds from Capital Transactions" means all cash receipts arising
--------------------------------------
from a Capital Transaction (including cash realized upon the sale or discount of
any evidence of indebtedness received by the Partnership on account of any
Capital Transaction), less (i) the amount of cash applied by the General
Partners in their sole discretion or to the extent required by any lender to the
payment of debts and obligations of the Partnership (including the First
Mortgage Loan and nonrecourse debts related to the particular Capital
Transaction but excluding debts and obligations of the Partnership to any
---------
Partner or Affiliate of any Partner); (ii) the amount of cash paid or to be paid
by the Partnership in connection with expenses (other than expenses payable to
any Partner or Affiliate) associated with such Capital Transaction (which shall
include, with regard to damage recoveries or insurance or condemnation proceeds,
cash paid or to be paid in connection with repairs, replacements or renewals, in
the discretion of the General Partners, relating to damage to or partial
condemnation of the Property); and (iii) the amount considered appropriate by
the General Partners as Reserves.
"Net Proceeds from Refinancings" means all cash receipts arising from a
------------------------------
Refinancing, less (i) the amount of cash paid or to be paid by the Partnership
for expenses in connection with such Refinancing and for repayment of previously
incurred Partnership Debt; (ii) the amount considered appropriate by the General
Partners as Reserves; and (iii) the cost of any expansion of the Hotel deemed
appropriate by the General Partners.
"Notification" means a written notice, containing the information
------------
required by this Agreement to be communicated to any Person, sent by registered,
certified or regular mail to such Person at the last known address of such
Person; provided, however, that any communication containing such information
sent to such person and actually received by such Person shall constitute
Notification for all purposes of the Agreement.
"Partners" means, collectively, the Limited Partners as constituted from
--------
time to time and the General Partners. Reference to a "Partner" shall be to any
of the Partners.
"Partnership" means the limited partnership formed by the Certificate of
-----------
Limited Partnership, as said Partnership may from time to time be constituted.
9
<PAGE>
"Partnership Act" means the Revised Uniform Limited Partnership Act as
---------------
adopted by the State of Rhode Island.
"Partnership Debt" means any indebtedness for borrowed money incurred by
----------------
the Partnership.
"Person" means any individual, partnership, corporation, cooperative,
------
trust, estate, government (or any branch or agency thereof) or other entity.
"Purchase and Sale Agreement" means that certain purchase and sale
---------------------------
agreement between the Partnership and Marriott dated February 16, 1989.
"Refinancing" means any mortgage refinancing or borrowing, the proceeds
-----------
of which are applied to the repayment of previously incurred Partnership Debt
and includes a sale and leaseback if no taxable gain is recognized for federal
income tax purposes.
"Reimbursement Agreement" means that certain agreement between the
-----------------------
Partnership and Marriott dated of even date herewith, pursuant to which the
Partnership agrees to repay to Marriott advances made by Marriott under the Debt
Service Guaranty.
"Reserves" means, with respect to any fiscal period, the amount of funds
--------
set aside for, or amounts allocated during such period to, reserves for
contingent liabilities, working capital, repairs, replacements, renewals and to
pay taxes, insurance, debt service, or other costs or expenses incident to the
ownership or operation of the Hotel or otherwise deemed by the General Partners
as necessary to meet the current or anticipated future needs of the Partnership.
"Second Crossover Point" means the first point in time when
----------------------
Distributions to the Partners pursuant to Section 4.06(a) in the aggregate equal
$11,964,000.
"Share of Minimum Gain" means for each Partner, the excess of (i) the
---------------------
sum of (a) the aggregate non-recourse deductions (as defined below) allocated to
such Partner (and such Partner's predecessors in interest) up to that time and
(b) the aggregate Distributions to such Partner (and such Partner's predecessors
in interest) up to that time of proceeds of a non-recourse liability that are
allocable to an increase in Minimum Gain over (2) the sum of (a) such Partner's
(and such Partner's predecessors' in interest) aggregate share of the net
decrease in Minimum Gain up to that time and (b) such Partner's (and such
Partner's predecessors' in interest) aggregate share of the decreases up to that
time in Minimum Gain resulting from revaluations of
10
<PAGE>
Partnership Property subject to one or more non-recourse liabilities of the
Partnership. For this purpose, the amount of non-recourse deductions for a
Partnership taxable year equals the excess, if any, of the net increase in the
amount of Minimum Gain during such year, over the aggregate amount of any
Distributions during such year of proceeds of a non-recourse liability that are
allocable to an increase in Minimum Gain.
"Subscription Agreement" means that certain agreement executed by each
----------------------
Limited Partner to evidence his obligation to subscribe for Units.
"Subsequent Closing" means any Closing subsequent to the Initial Closing
------------------
at which time Limited Partners subscribing for Units in excess of the Minimum
Subscription up to a maximum of 335 Units are admitted to the Partnership.
"Substitute Limited Partner" means any Person admitted to the
--------------------------
Partnership as a Limited Partner pursuant to the provisions of Section 7.02
hereof.
"Syndication Expenses" means all expenditures classified as syndication
--------------------
expenses pursuant to Treasury Regulation Section 1.709-2(b). Syndication
Expenses shall be taken into account in determining and maintaining Capital
Accounts pursuant to Section 3.06A of this Agreement at the time they would be
taken into account under the Partnership's method of accounting if they were
deductible expenses.
"Tax Matters Partner" shall have the meaning set forth in Section 9.06.
-------------------
"Taxable Income" and "Tax Losses" means the Partnership's taxable income
-------------- ----------
or tax losses, respectively, for each fiscal year (or part thereof) as
determined for federal income tax purposes, and includes, where the context
requires, all items of income, gain, loss, deduction and credit which enter into
the computation thereof.
"Termination" means, when used with reference to a Partner, the death,
-----------
insanity, disability, incapacity, Bankruptcy, liquidation, dissolution,
withdrawal or resignation of such Partner, and when used with reference to a
General Partner, also includes the General Partner's breach of Section 6.01.
"Transferee" and "Transferor" shall have the meanings set forth in
---------- ----------
Section 7.01 hereof.
11
<PAGE>
"Unit" means one of the 335 Units of limited partnership interest in the
----
Partnership which are the subject of the Memorandum. Each Unit shall be equal to
every other Unit in the rights, duties and obligations appertaining thereto
other than as may be specified elsewhere herein.
"Withdrawing Initial Limited Partner" means Mutual Benefit Financial
-----------------------------------
Service Management Company, Inc. ("FIMSCO"), a New Jersey corporation.
Section 1.02 Additional Defined Terms. To the extent that terms bearing
------------------------
initial upper case letters are not defined in Section 1.01 hereof, such terms
shall have the meaning otherwise set forth in this Agreement.
ARTICLE TWO
CONTINUATION, NAME, PLACE OF BUSINESS,
PURPOSE AND TERM
Section 2.01. Continuation. The parties do hereby continue the
------------
Partnership as a limited partnership and elect to be governed and bound by the
provisions of the Partnership Act.
Section 2.02. Name and Offices. The name of the Partnership shall be
----------------
Mutual Benefit Chicago Marriott Suite Hotel Partners, L.P. The principal offices
of the Partnership shall be located at 290 Westminster Street, Providence, Rhode
Island 02903 or at such other place or places as the Managing General Partner
may from time to time determine. The address of the registered office of the
Partnership in the State of Rhode Island shall be 290 Westminster Street,
Providence, Rhode Island 02903, and the registered agent in charge thereof shall
be MB Investment Properties, Inc., 290 Westminster Street, Providence, Rhode
Island.
Section 2.03. Purpose. The purpose of the Partnership is to (i) acquire,
-------
develop, own, lease, mortgage, operate and dispose of the Hotel, and (ii) engage
in any other activities necessary, related or incidental thereto.
Section 2.04. Term. The term of the Partnership shall continue in full
----
force and effect until December 31, 2063, or until dissolution prior thereto
pursuant to the provisions of Article Eight.
Section 2.05. Title to Partnership Property. All property owned by the
-----------------------------
Partnership, whether real or personal, tangible or intangible, shall be deemed
to be owned by the Partnership as an
12
<PAGE>
entity, and no Partner, individually, shall have any ownership of such property.
The Partnership may hold any of its assets in its own name or in the name of its
nominee, which nominee may be one or more individuals, partnerships, trusts or
other entities.
ARTICLE THREE
PARTNERS AND CAPITAL
Section 3.01. General Partners. The General Partners of the Partnership
----------------
shall be MB Investment Properties, Inc., a Rhode Island corporation, having its
business address at 290 Westminster Street, Providence, Rhode Island 02903, and
MOHS Corporation, a Delaware corporation, having its business address at 10400
Fernwood Road, Bethesda, Maryland 20058.
Section 3.02. Limited Partners.
----------------
A. The name and business or residence address of each Limited Partner,
and the amount of cash contributed by, and the number of Units held by each
Limited Partner are set forth in Schedule I, attached hereto. After Limited
Partners collectively acquiring 335 Units have been admitted to the Partnership,
and except as provided in Article VII, the General Partners may admit additional
Persons as Limited Partners only with the consent of all of the Limited
Partners. Schedule I may be amended by the General Partners without the consent
of the Limited Partners from time to time to reflect the withdrawal, addition or
substitution of Limited Partners.
B. Persons subscribing for no less than the Minimum Subscription shall
be admitted to the Partnership at the Initial Closing. Thereafter, Persons
Subscribing for Units in excess of the Minimum Subscription up to a maximum of
335 Units may be admitted as Limited Partners at one or more Subsequent Closings
to occur at such time or times as the Managing General Partner deems
appropriate, provided that the final Subsequent Closing shall occur on or before
September 30, 1989. If Persons subscribing for a total of 335 Units have not
been admitted to the Partnership by September 30, 1989, the Managing General
Partner or an Affiliate of the Managing General Partner will purchase any unsold
Units, net of sales commissions attributable to such Units, as more fully
described in the Memorandum.
Section 3.03. Capital Contributions by General Partners. The General
-----------------------------------------
Partners shall make a Capital Contribution to the Partnership of $239,000 (MBIP
contributing $119,500 and MOHS contributing $119,500) on the date of the Initial
Closing.
13
<PAGE>
Section 3.04. Capital Contributions of the Withdrawing Initial Limited
--------------------------------------------------------
Partner.
- -------
Upon execution of this Agreement, the Withdrawing Limited Partner shall
withdraw from the Partnership as a limited partner, its contribution of $100 to
the capital of the Partnership shall be refunded, and its interest in the
Partnership shall be cancelled.
Section 3.05. Capital Contributions of Limited Partners.
-----------------------------------------
Except with respect to Units acquired by the General Partners or their
Affiliates, each Limited Partner shall contribute $35,000 for each Unit
acquired. Said Capital Contribution shall be paid in cash at Closing. Fractional
Units may be sold, in the sole discretion of the General Partners, provided that
the total number of purchasers of Units does not exceed the lesser of (i) the
number of purchasers permitted by Regulation D under the Securities Act of 1933
and applicable state securities laws or (ii) 499 persons. For this purpose,
"person" shall have the meaning set forth in Rule 12g5-l of the General Rules
and Regulations of the Securities and Exchange Commission.
Section 3.06. Partnership Capital; Capital Accounts.
-------------------------------------
A. A Capital Account shall be maintained on the books of the Partnership
for each Partner, which shall be (i) credited with its Capital Contributions and
the amount of any Partnership liabilities that are assumed by such Partner; (ii)
credited with its distributive share of Taxable Income and any income of the
Partnership that is exempt from federal income tax and not otherwise taken into
account in computing Taxable Income; (iii) charged with its distributive share
of Tax Losses and any nondeductible expenditures of the Partnership (including
Syndication Expenses), described in Code Section 705(a)(2)(B) or treated as Code
Section 705(a)(2)(B) expenditures pursuant to Treasury Regulation Section
1.704-1(b)(2)(iv)(i) and not otherwise taken into account under this Section
3.06A; and (iv) charged with any Distributions to the Partner.
In the case of property other than cash contributed to the Partnership
or distributed to a Partner, each Partner's Capital Account will be credited
with the Gross Asset Value of property contributed to the Partnership (net of
liabilities assumed by the Partnership and liabilities to which such contributed
property is subject) and shall be debited with the cash and the Gross Asset
Value of property distributed to him (net of liabilities assumed by such Partner
and liabilities to which such distributed property is subject). In the event the
Gross Asset Values of Partnership assets are adjusted pursuant to Section 3.06B
hereof,
14
<PAGE>
the Capital Accounts of all Partners shall be adjusted simultaneously to reflect
the aggregate net adjustment as if the Partnership recognized gain or loss equal
to the amount of such aggregate net adjustment.
Upon the sale, exchange or other transfer of an Interest, or the
assignment of such Interest to a new Partner, the Capital Account of the
Transferor shall carry over to the Transferee.
The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Treasury Regulation Section 1.704-1(b), and shall be interpreted and applied in
a manner consistent with such Regulation. In the event the General Partners
shall determine that it is prudent to modify the manner in which the Capital
Accounts, or any debits or credits thereto, are computed in order to comply with
such Regulation, the General Partners may, without the consent of any of the
Limited Partners, amend this Agreement to make such modification, provided that
it is not likely to have a material effect on the amounts distributable to any
Partner pursuant to Article VIII of this Agreement upon the dissolution of the
Partnership. The General Partners shall adjust the amounts debited or credited
to Capital Accounts with respect to (a) any property contributed to the
Partnership or distributed to the Partners, and (b) any liabilities that are
secured by such contributed or distributed property or that are assumed by the
Partnership or the Partners, in the event the General Partners shall determine
such adjustments are necessary or appropriate pursuant to Treasury Regulation
Section 1.704-1(b)(2)(iv). The General Partners also shall amend this Agreement
to make any appropriate modifications in the event unanticipated events might
otherwise cause this Agreement not to comply with Treasury Regulation Section
1.704-1(b) (2) (iv). Notwithstanding the foregoing, without the unanimous
Consent of the Limited Partners, the General Partners may not amend this
Agreement to provide for the modifications described above unless, in the
reasonable judgment of both General Partners, such amendment: (i) is for the
benefit of or not adverse to the interests of the Limited Partners; (ii) does
not materially affect the distribution of Cash Available for Distribution, Net
Proceeds from Capital Transactions, Net Proceeds from Refinancings, or the
allocation of Taxable Income or Tax Losses among the Limited Partners or between
the Limited Partners as a class and the General Partners, and (iii) does not
affect the limited liability of the Limited Partners or the status of the
Partnership as a partnership for federal income tax purposes.
B. For purposes of determining and maintaining the Partners' Capital
Accounts, the Gross Asset Value of Partnership assets shall be adjusted as
follows:
15
<PAGE>
(i) the initial Gross Asset Value of any asset contributed by
a Partner to the Partnership shall be the gross fair market value of
such asset, as determined by the contributing Partner and the
Partnership;
(ii) the Gross Asset Values of all Partnership assets shall be
adjusted to equal their respective gross fair market values, as
determined by the General Partners with reference to Section 7701(g) of
the Code, as of the following times: (a) the acquisition of an
additional Interest in the Partnership by any new or existing Partner in
exchange for more than a de minimis Capital Contribution; (b) the
-- -------
distribution by the Partnership to a Partner of more than a de minimis
-- -------
amount of Partnership property other than money, unless all Partners
receive simultaneous distribution of undivided interests in the
distributed property in proportion to their interest in the Partnership;
and (c) the termination of the Partnership for federal income tax
purposes pursuant to Code Section 708(b)(l)(B); and
(iii) if the Gross Asset Value of an asset has been determined
or adjusted pursuant to subsection (i) or (ii) of this Section 3.06B,
such Gross Asset Value shall thereafter be adjusted by the Book
Depreciation taken into account with respect to such asset for purposes
of computing Book Profits and Losses, as set forth in Section 3.06C.
C. For purposes of determining and maintaining the Partners' Capital
Accounts and the computation of Book Profits and Losses only, the following
adjustments shall be made to the calculation of Taxable Income and Tax Losses
reflected in the Partners' Capital Accounts:
(i) gain or loss resulting from any disposition of
Partnership property with respect to which gain or loss is recognized
for federal income tax purposes shall be computed by reference to the
Gross Asset Value of the property disposed of, notwithstanding that the
adjusted tax basis of such property differs from its Gross Asset Value;
(ii) in lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such Taxable Income
or Tax Losses, there shall be taken into account Book Depreciation for
such Fiscal Year or other period, computed as hereinafter set forth;
(iii) for this purpose, "Book Depreciation" means, for each
Fiscal Year or other period, an amount equal to the
16
<PAGE>
depreciation, amortization, or other cost recovery deduction allowable
with respect to an asset for such year or other period, except that if
the Gross Asset Value of an asset differs from its adjusted basis for
federal income tax purposes at the beginning of such year or other
period, Book Depreciation shall be an amount which bears the same ratio
to such beginning Gross Asset Value as the federal income tax
depreciation, amortization, or other cost recovery deductions for such
year or other period bears to such beginning adjusted tax basis; and
(iv) allocations of Book Profits and Losses among the Partners
shall be made in accordance with the provisions of Section 4.07 hereof
respecting allocations of Taxable Income and Tax Losses among Partners.
D. No interest shall be paid by the Partnership on any Capital
Contribution. Loans to the Partnership by any Partner shall not be considered
Capital Contributions. A Partner shall not be entitled to demand the return of,
or to withdraw, any part of his Capital Contribution or his Capital Account, or
to receive any Distribution, except as provided in this Agreement. Except as
otherwise provided in this Agreement, no Partner shall be liable for the return
of the Capital Contribution of any other Partner or the payment of interest
thereon. Except as otherwise provided in this Agreement, no Partner shall be
obligated to make any contributions to the capital of the Partnership other than
the Capital Contributions provided for in this Article Three.
Section 3.07. Liability of Limited Partners.
-----------------------------
Except as otherwise provided in the Partnership Act or in this
Agreement, no Limited Partner shall be liable for the debts, liabilities,
contracts or any other obligations of the Partnership. Limited Partners shall be
liable only to make their Capital Contributions and may, but shall not be
required, to lend any funds to the Partnership. Limited Partners shall not be
required to make any further Capital Contributions to the Partnership except as
provided in Section 3.08 or by the Partnership Act.
Section 3.08. Obligation to Restore Negative Capital Account Balances on
----------------------------------------------------------
Liquidation. If any Partner has a negative Capital Account balance following the
- -----------
"liquidation" of the Partnership or of that Partner's Interest in the
Partnership within the meaning of Treasury Regulation Section
1.704-1(b)(2)(ii)(g), after taking into account all Capital Account adjustments
(including adjustments arising from the liquidation) for the Partnership taxable
year during which such "liquidation" occurs, other than
17
<PAGE>
those made pursuant to this Section 3.08, that Partner shall be unconditionally
obligated to restore the amount of such negative Capital Account balance to the
Partnership by the end of such taxable year (or, if later, within 90 days after
the date of such "liquidation"). Amounts contributed to the Partnership in
respect of such obligation to restore negative Capital Account Balances shall be
paid to creditors of the Partnership or distributed to other Partners in
accordance with their positive Capital Account balances as of the date of
"liquidation". Amounts contributed to the Partnership in respect of such
obligation to restore negative Capital Account balances may be contributed to
the liquidating trust described in Section 8.02(D).
ARTICLE FOUR
Allocation of Taxable Income and Tax Losses
and Cash Distributions
Section 4.01. Allocation of Taxable Income and Tax Losses.
-------------------------------------------
Subject to the special allocations set forth in Sections 4.06 and 4.07, Taxable
Income and Tax Losses for each Fiscal Year of the Partnership (or part thereof)
other than those to be allocated pursuant to Section 4.02 hereof shall be
allocated among the Partners as follows:
(i) Such Taxable Income shall be allocated:
(a) first, to the Partners in the same percentages and
amounts that Cash Available for Distribution is distributed to such
Partners pursuant to Section 4.03 for such Fiscal Year; and
(b) the balance, if any, 98% to the Limited Partners
and 2% to the General Partners until the First Crossover Point has been
reached; 85% to the Limited Partners, 10% to MOHS, and 5% to MBIP until
the Second Crossover Point has been reached; and thereafter, 70% to the
Limited Partners, 20% to MOHS, and 10% to MBIP.
(ii) Such Tax Losses shall be allocated: 69% to MOHS, 30% to the
Limited Partners and 1% to MEIP.
(iii) In any event, for each Fiscal Year at least 1% of such
Taxable Income or Tax Losses (as the case may be) shall be allocated to each of
the General Partners.
Section 4.02 Allocation of Taxable Income and Tax Losses from Capital
--------------------------------------------------------
Transactions and Refinancings. Subject to the special allocations set forth in
- -----------------------------
Sections 4.06 and 4.07, Taxable
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Income and Tax Losses from Capital Transactions and Refinancings shall be
allocated to the Partners as follows:
(i) Taxable Income from Capital Transactions or Refinancings
shall be allocated:
(a) first, to the Partners with negative Capital
Accounts pro rata in such amounts as will result in the elimination of
the negative Capital Accounts of such Partners; provided, however, that
if Taxable Income to be allocated pursuant to this Section 4.02(i)(a) is
insufficient to eliminate all Negative Capital Accounts, such Taxable
Income will be allocated to Partners with Negative Capital Accounts in
the proportion that each such Partner's Negative Capital Account bears
to the total of all such Negative Capital Accounts;
(b) then, 98% to the Limited Partners and 2% to the
General Partners until the Partners' Capital Accounts are equal to their
Adjusted Capital Contributions;
(c) then, to the Limited Partners in an amount equal
to their 8% Preferred Return for such year less the amount previously
distributed for such year, if any, under Section 4.04(b) or Section
4.03;
(d) then, to the Limited Partners in an amount equal to
their 8% Preferred Return Arrearages;
(e) then, to the General Partners in an amount equal
to their General Partners' Preferred Return for such year, less the
amount previously allocated for such year, if any, under Section 4.04(d)
or Section 4.03;
(f) then, to the General Partners in an amount equal
to their General Partners' Preferred Return Arrearage;
(g) then the balance, if any, 70% to the Limited Partners,
20% to MOHS, and 10% to MBIP.
(ii) Tax Losses from Capital Transactions or Refinancings shall
be allocated as follows:
(a) first, to the Partners with positive Capital
Accounts, pro rata in such amounts as will result in the elimination (or
reduction to the maximum extent possible) of the positive Capital
Accounts of such Partners; and
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(b) the balance of such Tax Losses, if any, shall be
allocated 70% to the Limited Partners, 20% to MOHS, and 10% to MBIP.
(iii) Notwithstanding the foregoing provisions, if Taxable Income
to be allocated includes income treated as ordinary income for federal income
tax purposes because such Taxable Income is attributable to the recapture of
depreciation under Section 1245 or 1250 of the Code, such Taxable Income, to the
extent treated as ordinary income, shall be allocated to and reported by the
Partners in proportion to their accumulated depreciation allocations. The
Partnership shall keep records of such allocations of depreciation to the
Partners. In determining the accumulated depreciation allocations of the
Partners, depreciation deductions for each taxable year shall be deemed
allocated to the Partners in the same proportion as the Taxable Income or Tax
Losses in that particular taxable year were allocated to the Partners.
(iv) Notwithstanding anything to the contrary, in any event, for
each Fiscal Year, at least 1% of the Taxable Income or Tax Losses from Capital
Transactions or Refinancings shall be allocated to each of the General Partners.
Section 4.03 Distribution of Cash Available for Distribution.
-----------------------------------------------
A. Cash Available for Distribution shall be determined for each Fiscal
Year and shall be distributed at such time or times as the Managing General
Partner deems appropriate in its sole discretion, but in no event less than once
in each Fiscal Year, as follows:
(a) First, 100% to the Limited Partners until they have received
their 8% Preferred Return for such Fiscal Year and any 8%
Preferred Return Arrearage;
(b) Second, to pay to Marriott principal and accrued interest on any
advances made by Marriott under the Debt Service Guaranty in
accordance with the terms of the Reimbursement Agreement;
(c) Third, 100% to the General Partners until they have received the
General Partners' Preferred Return for such Fiscal Year and any
General Partners' Preferred Return Arrearage; and
(d) The balance, if any, shall be distributed to the Partners as
follows:
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(i) Until the First Crossover Point, 98% to the Limited
Partners and 2% to the General Partners;
(ii) Until the Second Crossover Point, 85% to the Limited
Partner, 10% to MOHS, and 5% to MBIP; and
(iii) After the Second Crossover Point, 70% to the Limited
Partners, 20% to MOHS, and 10% to MBIP.
B. Notwithstanding the foregoing, during Fiscal Years 1988, 1989,
1990, and 1991, provided that (i) $1,020,000 has been distributed to the
Partners pursuant to Section 4.03A for each such Fiscal Year and (ii) Cash
Available for Distribution has been applied to pay to Marriott principal and
accrued interest on any advances made by Marriott under the Debt Service
Guaranty, any remaining Cash Available for Distribution shall be applied without
interest to repay Marriott, its successors or assigns which has made any Cash
Flow Guaranty Payments, an amount equal to such Cash Flow Guaranty Payments.
Section 4.04 Distributions of Net Proceeds from Capital Transactions and
Net Proceeds from Refinancings.
Net Proceeds from Capital Transactions and Net Proceeds from
Refinancings (other than liquidating distributions pursuant to Section 8.02A)
shall be distributed in the following order of priority:
(a) First, 98% to the Limited Partners and 2% to the General Partners
until the Partners have received their Adjusted Capital Contributions;
(b) Then, to the Limited Partners in an amount equal to their 8%
Preferred Return for such year less the amount previously allocated for such
year, if any, under this Subsection 4.04(b) or Section 4.03;
(c) Then, to the Limited Partners in an amount equal to their 8%
Preferred Return Arrearage;
(d) Then, to the General Partners in an amount equal to their General
Partners' Preferred Return for such year less the amount previously allocated
for such year, if any, under this Subsection 4.04(d) or Section 4.03;
(e) Then, to the General Partners in an amount equal to their General
Partners' Preferred Return Arrearage;
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(f) Then, to repay to Marriott any advances made under the Debt Service
Guaranty, together with accrued interest thereon, in accordance with the terms
of the Reimbursement Agreement;
(g) Then, to pay to the Manager any unpaid Contingent Management Fees,
as defined in the Hotel Management Agreement, to which Manager is then entitled
pursuant to Section 5.0lB of the Hotel Management Agreement; and
(h) The balance, if any, 70% to the Limited Partners, 20% to MOHS and
10% MBIP.
B. Net Proceeds from Capital Transactions and Net Proceeds from
Refinancings shall be distributed within 90 days after the end of the Fiscal
Quarter in which such Capital Transaction or Refinancing occurs. Distributions
of Net Proceeds from Capital Transactions and Net Proceeds from Refinancings to
the Partners shall be made only after Capital Accounts have been adjusted to
reflect all previous allocations of Taxable Income and Tax Losses to the
Partners, for distributions of Cash Available for Distribution, and for any
other distributions of Net Proceeds from Capital Transactions or Net Proceeds
from Refinancings.
Section 4.05 Allocations Among Partners.
--------------------------
A. Distributions payable, and Taxable Income and Tax Losses allocable,
to the Limited Partners shall be paid and allocated among them in the same
proportion that the number of Units owned by each Limited Partner bears to the
total number of Units then owned by all Limited Partners. Notwithstanding
anything to the contrary, the amount of Taxable Income and Tax Losses with
respect to each Fiscal Year allocated to each Limited Partner shall be pro rated
based upon the period each held his Interest during the Fiscal Year as follows:
(i) If, pursuant to Section 3.02B, all Limited Partners are not
admitted concurrently, such Taxable Income and Tax Losses allocable to
the Limited Partner for such Fiscal Year shall be ratably allocated to
and among the Limited Partners in proportion to the number of Units each
holds from time to time during such Fiscal Year in accordance with Code
Section 706, using any convention permitted by law and selected by the
Managing General Partner. In such event, for purposes of determining and
maintaining Capital Accounts pursuant to Section 3.06 hereof only,
subsequent allocations of Taxable Income and Tax Losses pursuant to
Section 4.01 hereof shall be allocated (i) first, so as to offset the
Taxable Income and Tax Losses previously allocated for such Fiscal Year
or Years, and (ii) the balance, if any, to the Limited Partners in
proportion to the Units held by each.
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(ii) If a Unit is assigned during such Fiscal Year in
accordance with this Partnership Agreement, the amount of Taxable Income
or Tax Losses allocable to the Unit shall be allocated between the
assignor and assignee using any convention permitted by law and selected
by the Managing General Partner.
(iii) In the case of a Capital Transaction, Taxable Income or
Tax Losses shall be allocated among the Limited Partners who held Units
on the last day of the Fiscal Quarter in which the Capital Transaction
resulting in Taxable Income or Tax Losses occurred in proportion to the
number of Units owned by each such Limited Partner.
B. For purposes of determining the Taxable Income (or Tax Losses) or
any other items allocable to any period, Taxable Income (or Tax Losses) and any
such other items shall be determined on a daily, monthly, or other basis, as
determined by the Managing General Partner using any permissible method under
Code Section 706 and the Treasury Regulations thereunder.
C. Except as otherwise provided in this Agreement, all items of
Partnership income, gain, loss, deduction, and any other allocations, including
allocations of Book Profits and Losses, not otherwise provided for shall be
divided among the Partners in the same proportions as they share Taxable Income
and Taxable Losses, as the case may be, for such Fiscal Year.
D. The Partners are aware of the income tax consequences of the
allocations made by this Article IV and hereby agree to be bound by the
provisions of this Article IV in reporting their shares of Partnership income
and loss for income tax purposes.
Section 4.06 Minimum Gain Allocation. Notwithstanding any other
-----------------------
provisions of this Article IV, if in any year there is a net decrease in the
amount of the Partnership's Minimum Gain, each Partner will be allocated items
of Taxable Income and gain for such year (and, if necessary, for subsequent
years) in proportion to, and to the extent of, an amount equal to the greater of
(i) the portion of such Partner's share of the net decrease in Partnership
Minimum Gain during such year that is allocable to the disposition of
Partnership property subject to one or more non-recourse liabilities of the
Partnership; or (ii) the negative balance in such Partner's Capital Account at
the end of such year determined before any allocation of Partnership Taxable
Income, gain, Tax Losses, deduction or Section 705(a)(2) expenditure for such
year, and excluding from such Partner's negative Capital Account balance (a)
such Partner's Share of
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Minimum Gain, (b) any amount that such Partner is obligated to restore to the
Partnership pursuant to Section 3.08 hereof, and (c) any other amount that such
Partner is obligated to restore to the Partnership under Treasury Regulation
l.704-l(b)(ii)(c) or is deemed to be obligated to restore to the Partnership
under Treasury Regulation l.704-lT(iv)(h)(5) or otherwise under the Treasury
Regulations promulgated under Code Section 704(b).
For purposes of this Section 4.06, a Partner's Capital Account balance
shall be decreased by the amount of any allocations or distributions described
in Treasury Regulation Section l.704-1(b)(2)(ii)(d)(4), (5), or (6) that, as of
the end of the taxable year, are reasonably expected to be made to the Partner.
Further, for purposes of this Section 4.06, a Partner's share of the net
decrease in Partnership Minimum Gain during a taxable year shall be an amount
that bears the same relation to the net decrease in Minimum Gain during such
year as such Partner's Share of Minimum Gain at the end of the prior taxable
year (or, if later, the time immediately following the last time that the
Partners' Capital Accounts are increased pursuant to Treasury Regulation
l.704-l(b)(2)(iv)(f) or (r) to reflect a revaluation of Partnership property
subject to one or more Partnership non-recourse liabilities) bears to the amount
of Partnership Minimum Gain at the end of such prior taxable year (or such later
date). A Partner's share of any decrease in Partnership Minimum Gain resulting
from a revaluation of Partnership Property shall be equal to the amount of the
increase in such Partner's Capital Account attributable to such revaluation to
the extent of the reduction in Minimum Gain caused by such revaluation.
Allocations of Taxable Income and gain (hereinafter referred to as a
"Minimum Gain Chargeback") required pursuant to this Section 4.06 shall consist
first of gains recognized from the disposition of items of Partnership property
subject to one or more non-recourse liabilities of the Partnership to the extent
of the decrease in Minimum Gain attributable to the disposition of such items of
property (or if such gains exceed the amount of the Minimum Gain Chargeback
required for such taxable year, the Minimum Gain Chargeback shall consist of a
proportionate share of each such gain), and the remainder of such Minimum Gain
Chargeback shall consist of a pro-rata portion of the other items of Partnership
Taxable Income and gain for that year.
Section 4.07 Regulatory Allocations. The allocations set forth in
----------------------
Section 4.06 (the "Regulatory Allocations") are intended to comply with certain
requirements of Treasury Regulation Section 1.704-1(b). Notwithstanding any
other provision of this Article IV (other than the Regulatory Allocations), the
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Regulatory Allocations shall be taken into account in allocating other Taxable
Income, Tax Losses, and items of income, gain, loss, and deduction between the
General Partners and the Limited Partners so that to the extent possible, the
net amount of such allocations of other Taxable Income, Tax Losses, and other
items and the Regulatory Allocations to each Partner shall be equal to the net
amount that would have been allocated to each Partner if the Regulatory
Allocations had not occurred.
Section 4.08 Partners' Shares of Partnership Non-recourse Liabilities.
--------------------------------------------------------
For purposes of determining each Partner's proportionate share of the excess
non-recourse liabilities of the Partnership pursuant to Treasury Regulation
1.752-lT(e)(3)(ii)(c), the Limited Partners shall have a 70% interest in
Partnership Taxable Income or profits, MOHS shall have a 20% interest in such
Taxable Income and profits and MBIP shall have a 10% interest in such Taxable
Income and profits. For this purpose, the interest of each Partner, whether a
Limited Partner or a General Partner, in Partnership Taxable Income and profits
allocated to the class of Partners to which he belongs will be determined in
accordance with Section 4.05 hereof.
Section 4.09 Certain Special Allocations
---------------------------
A. Any Syndication Expenses paid or incurred by the Partnership in any
accounting period in respect of any Unit shall be specially allocated to and
charged to the Capital Account of the Limited Partner owning such Unit during
such accounting period.
B. Any Tax Losses attributable to (i) uninsured losses of the
Partnership or (ii) the difference between interest accrued on any unsecured
recourse debt of the Partnership or any advances by a General Partner and the
interest actually paid by the Partnership shall be specially allocated to the
General Partners.
Section 4.10 Tax Allocations: Code Section 704(c). In accordance with
------------------------------------
Code Section 704(c) and the Treasury Regulations thereunder, income, gain, loss,
and deduction with respect to any property contributed to the capital of the
Partnership shall be allocated among the Partners so as to take account of any
variation between the adjusted basis of such property to the Partnership for
federal income tax purposes and its initial Gross Asset Value (computed in
accordance with Section 3.06 hereof).
In the event the Gross Asset Value of any Partnership properties is
adjusted pursuant to Section 3.06 hereof, subsequent allocations of income,
gain, loss, and deduction with respect to such asset shall take into account any
variation between the
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adjusted basis of such asset for federal income tax purposes and its Gross Asset
Value in the same manner as under Code Section 704(c) and the Treasury
Regulations thereunder.
Any elections or other decisions relating to such allocations shall be
made by the General Partners in any manner that reasonably reflects the purpose
and intention of this Agreement. Allocations pursuant to this Section are solely
for purposes of federal, state, and local taxes and shall not affect, or in any
way be taken into account in computing, any Partner's Capital Account or share
of Book Profits and Losses, other items, or distributions pursuant to any
provision of this Agreement.
Section 4.11 Section 754 Adjustments. Appropriate adjustments may be
-----------------------
made in the allocations to the Limited Partners under this Article Four in order
to reflect adjustments in the basis of Partnership property permitted pursuant
to an election made by the Tax Matters Partner under Section 754 of the Code,
the making or not making of such election to be within the sole discretion of
the Managing General Partner. If such an election is made, the Partnership will
make the basis adjustments and calculate depreciation deductions in accordance
with such adjustments only for those Transferees who supply information to the
Partnership that enables the Partnership to determine when, and at what price,
the Transferee acquired its interest.
Section 4.12 Section 1445 and Other Requirements. In order to comply
-----------------------------------
with Section 1445 of the Code, the General Partners may request any Limited
Partner or Substitute Limited Partner to provide an affidavit or other
satisfactory evidence that such Limited Partner is not a "foreign person." If a
Substitute Limited Partner does not provide such an affidavit or other evidence
within thirty (30) days after such request, the Partnership may withhold and pay
over to the Internal Revenue Service such portion of the Substitute Limited
Partner's distribution as may be necessary to comply with Section 1445 of the
Code. Any amounts so withheld and paid over shall be treated as a distribution
to such Substitute Limited Partner at the time it is paid over to the Internal
Revenue Service. The General Partners may further require that the Limited
Partners, including any substitute Limited Partners, comply with any other
requirements of the Code relating to "foreign persons."
26
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ARTICLE FIVE
RIGHTS, POWER AND DUTIES AND OBLIGATIONS OF
THE GENERAL PARTNERS
Section 5.01. Authority of the General Partners to Manage the Partnership.
-----------------------------------------------------------
A. Subject only to the Consent of the Limited Partners where specifically
required by this Agreement, the General Partners shall have the exclusive right
and power to conduct the business and affairs of the Partnership and to do all
things necessary to carry on the business of the Partnership, and are hereby
authorized to take any action of any kind and to do anything and everything they
deem necessary or advisable in accordance with the provisions of this Agreement
and applicable law. The Limited Partners shall have no right to vote, approve or
consent to the actions of the General Partners except as expressly set out in
the Agreement or as required by law.
B. MBIP shall be the Managing General Partner and, as such, shall have
exclusive authority and responsibility to conduct the Partnership's business and
affairs, including without limitation the matters set forth in Section 5.01E,
but subject to MOHS' consent with respect to those matters set forth in Section
5.01H. Without limiting the foregoing, MBIP shall have the exclusive
responsibility and authority to administer all matters relating to oversight and
supervision of the Manager's performance of its obligations under the Hotel
Management Agreement; to communicate with the Limited Partners, including the
distribution of the reports set forth in Section 9.04; to make such elections
regarding interest rate options and other matters subject to the Partnership's
election under the First Mortgage Loan and any other Partnership financing; to
approve or disapprove transfers of Partnership interests under Article VII, and
to administer all other day-to-day affairs of the Partnership including, without
limitation, federal tax matters as further provided in Section 9.06,
administration of Partnership insurance programs, preparation of financial
statements, and keeping the Partnership's books and records as set forth in
Section 9.01. Notwithstanding the foregoing, the consent of MOHS shall be
required for all actions described in Sections 5.01H and 5.02. MBIP may request
the advice and assistance of MOHS and its Affiliates in management and
administration of Partnership affairs as it deems appropriate.
C. In the event that the General Partners do not agree with respect to a
decision concerning any matter set forth herein or
27
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otherwise affecting or arising out of the conduct of the Partnership or other
action to be taken by the General Partners, any General Partner may move to
submit the matter to arbitration. Upon the motion to submit the matter to
arbitration, the General Partners in favor of a certain course of conduct and
those opposed shall each, as a group, choose one arbitrator and the two
arbitrators so chosen shall choose a third arbitrator. The arbitrators shall
then determine what course of action is in the best interests of all the
Partners. The decision of a majority of such arbitrators shall be binding on all
the General Partners. Any arbitration proceedings shall be conducted in
accordance with the rules of the American Arbitration Association.
D. No Limited Partner (other than a Limited Partner who is also a General
Partner) shall participate in or have any control over the Partnership's
business or shall have any authority or right to act for or bind the
Partnership. The Limited Partners hereby Consent to the exercise by the General
Partners of the powers conferred on them by this Agreement.
E. Except to the extent otherwise provided herein, the General Partners,
for and in the name and on behalf of the Partnership, are hereby authorized to:
(i) execute any and all agreements (including the Hotel Management
Agreement), contracts, documents, certifications and instruments necessary or
convenient in connection with the development, financing, management,
maintenance, operation and disposition of the Partnership properties;
(ii) borrow money from themselves or others and issue evidences of
indebtedness necessary, convenient or incidental to the accomplishment of the
purposes of the Partnership and to secure the same by mortgage, pledge or other
lien on the Hotel, or other assets of the Partnership. In connection with the
borrowing of money, recourse for the payment of which is limited solely to the
property of the Partnership, no lender shall be granted or acquire, at any time
as a result of making such a loan, any direct or indirect interest in the
profits, capital or property of the Partnership other than as a secured
creditor;
(iii) prepay in whole or in part, refinance, recast, increase, modify or
extend any mortgage debt affecting or encumbering any Partnership property and
in connection therewith to execute any extensions, consolidations, modifications
or renewals of mortgages on the Hotel or other assets of the Partnership;
28
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(iv) deal with, or otherwise engage in business with, or provide
services to and receive compensation therefor from, any Person who has provided
or may in the future provide any services, lend money or sell property to or
purchase property from the General Partners or any Affiliate of the General
Partners. No such dealing, engaging in business or providing services may
involve any direct or indirect payment by the Partnership of any rebate or any
reciprocal arrangement for the purpose of circumventing any restriction set
forth herein upon dealings with the General Partners or any Affiliate of the
General Partners. The General Partners may enter into agreements to employ
agents, attorneys, accountants, engineers, appraisers, or other consultants or
contractors who may be Affiliates of the General Partners and may enter into
agreements to employ Affiliates of the General Partners to provide further or
additional management services to the Partnership, provided that any employment
of such Persons is on terms no less favorable to the Partnership than those
offered by unaffiliated persons for comparable services;
(v) engage in any kind of activity and perform and carry out
contracts of any kind necessary to, or in connection with, or incidental to the
accomplishment of the purposes of the Partnership, as may be lawfully carried on
or performed by a partnership under the laws of the State of Rhode Island and in
each state where the Partnership is then formed, has qualified or does business;
(vi) increase the number of rooms or expand the facilities and
amenities of the Hotel, provided that any such expansion shall require the prior
consent of both General Partners.
(vii) pay out of Partnership funds any and all fees and make any and
all expenditures which they, in their sole discretion, deem necessary or
appropriate in connection with the organization of the Partnership, the offering
and sale of Units, the management of the affairs of the Partnership, and the
carrying out of their obligations and responsibilities under this Agreement.
(viii) cause the Hotel to be maintained and operated in a manner which
satisfies in all respects the obligations imposed with respect to such
maintenance and operation by any mortgage encumbering the Hotel from time to
time and by any lease or rental agreement pertaining to the Hotel;
(ix) do anything which they deem necessary or appropriate for the
protection and preservation of the Partnership's assets;
29
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(x) make and revoke any election permitted to the Partnership by any
taxing authority in such manner as they decide;
(xi) admit additional and Substitute Limited Partners as provided in
this Agreement;
(xii) cause necessary and proper repairs to be made and supplies
necessary for the proper operation, maintenance and repair of the Hotel to be
purchased;
(xiii) cause to be obtained and continued in force all policies of
insurance required by any mortgage, lease or other agreement relating to the
Hotel or any part thereof, or such additional insurance as they shall in their
sole discretion determine, including general partners' liability insurance;
(xiv) cause to be paid any and all taxes, charges and assessments that
may be levied, assessed or imposed upon any of the assets of the Partnership,
unless the same are contested by the Tax Matters Partner, which it is hereby
expressly authorized to do;
(xv) cause to be paid all amounts due and payable by the Partnership
to any person or entity;
(xvi) employ such agents, employees, managers, accountants, attorneys,
consultants and other persons as are necessary or appropriate to carry out the
business and affairs of the Partnership, and to pay reasonable fees, expenses,
salaries, wages and other compensation;
(xvii) effect a Capital Transaction at such time and upon such terms as
they shall deem appropriate and in the best interest of the Partnership.
(xviii) enter into the agreements and engage in the transactions
described in the Memorandum including the payment of compensation, fees and
expense reimbursements to the General Partners and their Affiliates; and
(xix) do all other acts and things contemplated by the Memorandum.
F. Any Person dealing with the Partnership or any General Partner may rely
upon a certificate signed by the Secretary or Assistant Secretary of such
General Partner, thereunto duly authorized, as to:
30
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(i) the identity of any General Partner or any Limited Partner;
(ii) the existence or nonexistence of any fact or facts which
constitute a condition precedent to the acts by the General Partners or in any
other manner germane to the affairs of the Partnership;
(iii) the Persons who are authorized to execute and deliver any
instrument or document of the Partnership; and
(iv) any act or failure to act by the Partnership or as to any other
matter whatsoever involving the Partnership or any Partner.
G. Any agreements, contracts and arrangements (other than the Hotel
Management Agreement or any of the agreements described in the Memorandum) with
any of the General Partners or any of their Affiliates, except for those related
to the rendering of legal, accounting, engineering, and investor reporting
services by employees of any General Partner and Affiliates of any General
Partner, shall be subject to the following conditions:
(i) the General Partner or any such Affiliate must be actively
engaged in the business of rendering such services or selling or leasing such
goods, independently of its dealings with the Partnership and as an ordinary
ongoing business or must enter into and engage in such business with Marriott
system hotels generally and not exclusively with the Partnership;
(ii) such agreements, contracts or arrangements shall be embodied in
a written contract which precisely describes the subject matter thereof and all
compensation to be paid therefor;
(iii) no rebates may be received by a General Partner or any such
Affiliates, nor may the General Partner or any such Affiliate participate in any
reciprocal business arrangements which would have the effect of circumventing
any of the provisions of this Agreement;
(iv) no such agreement, contract or arrangement may be amended in
such manner as to increase the fees or other compensation payable to the General
Partner or any such Affiliate as contemplated hereunder in the absence of the
Consent contemplated by Section 5.02B (iii) or to decrease the responsibilities
or duties of the General Partner or any such Affiliate as contemplated
hereunder, except to the extent such amended agreement, contract or arrangement
complies with subparagraphs 5.01G(i), (ii), (iii), and (v) hereof; and
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(v) any such agreement, contract or arrangement which relates to or
secures any funds advanced or loaned to the Partnership by the General Partner
or any such Affiliate must reflect commercially reasonable terms, provided that
the discretion of the General Partner in determining such terms may not be upset
in the absence of a showing of bad faith on the part of the General Partner or
such Affiliate.
H. Notwithstanding anything herein to the contrary, without the Consent of
both General Partners, neither General Partner shall have the authority to:
(i) undertake any of the actions described in Section 5.02;
(ii) effect any Capital Transaction;
(iii) refinance the First Mortgage Loan or any other Partnership Debt
that is secured by the Partnership's interest in the Hotel or the Ground Lease;
or
(iv) make or cause to be made any capital expenditures of a nature
described in Section 7.03 of the Hotel Management Agreement, except such
expenditures as are included within the "Building Estimate" described in Section
7.03 of the Hotel Management Agreement.
Section 5.02. Restrictions on Authority of General Partners.
A. Without the consent of all the Limited Partners, the General Partners
shall not have authority to:
(i) do any willful act in contravention of this Agreement.
(ii) confess a judgment against the Partnership that is material in
amount when compared to Partnership assets;
(iii) convert Partnership property to their own use, or assign any
rights in specific Partnership property for other than a Partnership purpose;
(iv) admit any other Person as a General Partner;
(v) admit a Person as an additional or Substitute Limited Partner,
except as provided in this Agreement;
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(vi) knowingly perform any act that would subject any Limited Partner
to liability as a general partner in any jurisdiction or any other liability
except as provided for herein or under the Partnership Act;
(vii) commingle Partnership funds with those of any other Person; or
(viii) except as permitted by Section 8.01, voluntarily take any action
that will cause the dissolution of the Partnership.
B. Without the Consent of the holders of a majority in Interest of the
Limited Partners, the General Partners shall not have the authority to:
(i) acquire hotel properties in addition to the Hotel;
(ii) sell, exchange, lease, or otherwise dispose of the Hotel or all
or a material portion of the Partnership's assets unless (i) both General
Partners agree that such transaction is in the best interests of the Partnership
and (ii) the Partnership has received an appraisal from a qualified MAI
appraiser with experience in valuing hotel properties satisfactory to both
General Partners indicating that the Hotel's fair market value does not exceed
the sale or base price;
(iii) effect any amendment to any agreement, contract or arrangement
with the General Partners or any Affiliate increasing the compensation payable
to such General Partner or any of its Affiliates, or decreasing the
responsibilities or duties of the General Partners or any of their Affiliates,
which adversely affect the rights of the Limited Partners.
Section 5.03 Duties and Obligations of the General Partners.
----------------------------------------------
A. The General Partners shall take all actions which may be necessary or
appropriate for the development, maintenance, preservation, operation and
disposition of the properties of the Partnership in accordance with the
provisions of this Agreement and applicable laws and regulations (it being
understood and agreed, however, that the provision of day-to-day property
management services for the Hotel and other properties of the Partnership is not
an obligation of the General Partners as general partners of the Partnership).
B. The General Partners shall devote to the Partnership such time as may be
necessary for the proper performance of their duties hereunder, but the officers
and directors of the General
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Partners shall not be required to devote their full time to the performance of
such duties.
C. The General Partners shall maintain at all times a net worth at a level
sufficient to meet all present requirements of the Code and applicable
regulations, of the Internal Revenue Service, and shall make their best efforts
to meet any future net worth requirements set by Congress, the Internal Revenue
Service through its regulations, or the courts, to assure that the Partnership
will be classified for federal income tax purposes as a Partnership and not as
an association taxable as a corporation.
D. The General Partners shall take such action as may be necessary or
appropriate in order to form or qualify the Partnership under the laws of any
jurisdiction in which the Partnership is doing business or owns property or in
which such formation or qualification is necessary in order to protect the
limited liability of the Limited Partners or in order to continue in effect such
formation or qualification. The General Partners shall file or cause to be filed
for recordation in the office of the appropriate authorities of the State of
Rhode Island, and in the proper office or offices in each other jurisdiction in
which the Partnership is formed or qualified, such certificates (including
limited partnership and fictitious name certificates) and other documents as are
required, but only if required, by the applicable statutes, rules or regulations
of any such jurisdiction or as are required to reflect the identity of the
Partners and the amounts of their respective Capital Contributions, provided,
however, that, except as otherwise provided in this Agreement, the General
Partners shall not be required to promptly deliver or mail to the Limited
Partners any certificate or other documents filed under the Partnership Act or
any other applicable law.
E. Each General Partner shall at all times conduct its affairs and the
affairs of the Partnership and all of its Affiliates in such a manner that
neither the Partnership nor any Partner nor any Affiliate of any Partner will
have any personal liability on any Partnership Debt (except for the Debt Service
Guaranty), unless in the opinion of the General Partners it would be in the best
interest of the Limited Partners for a General Partner to incur such personal
liability. The General Partners shall use their best efforts, in the conduct of
the Partnership's business, to put all suppliers and other Persons with whom the
Partnership does business on notice that the Limited Partners are not liable for
Partnership obligations, and all agreements to which the Partnership is a party
shall include a statement to the effect that the Partnership is a limited
partnership organized under the Partnership Act; but the General Partners shall
not be
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liable to the Limited Partners for any failure to give such notice to such
suppliers or other Persons or for any such agreement's failure to contain such
statement.
F. The Tax Matters Partner, in consultation with MOHS, shall prepare or
cause to be prepared and shall file on or before the due date (or any extension
thereof) any federal, state or local tax returns required to be filed by the
Partnership. The General Partners shall cause the Partnership to pay any taxes
payable by the Partnership out of funds of the Partnership available for such
purpose.
G. The Managing General Partner shall obtain and keep in force, or cause
to be obtained and kept in force during the term hereof, fire and extended
coverage, worker's compensation and public liability insurance in favor of the
Partnership with such insurers and in such amounts as the General Partners shall
deem advisable, including without limitation coverage under the Marriott
self-insurance programs, so-called, but in amounts not less (and with deductible
amounts not greater) than those customarily maintained with respect to
properties comparable to the Hotel in the Marriott hotel system.
H. The General Partners shall be under a fiduciary duty to conduct the
affairs of the Partnership in accordance with the terms of this Agreement and in
a manner consistent with the purpose of the Partnership set forth in Section
2.03. The General Partners shall be under a fiduciary duty to conduct the
affairs of the Partnership in the best interest of the Partnership.
I. The General Partners shall use their best efforts to assure that the
Partnership shall not be deemed an investment company as such term is defined in
the Investment Company Act of 1940. The General Partners shall comply with all
laws and regulations and any agreement to which the Partnership is a party or by
which it may be bound.
Section 5.04 Compensation and Reimbursement of General Partners. The
--------------------------------------------------
General Partners, in their capacity as General Partners, shall not receive any
compensation, salaries, fees, profits or distributions except as described in
Article Four, Article Eight and in Schedule III. The Partnership shall reimburse
the General Partners for the cost of providing any administrative or other
services required or contemplated by this Agreement. Any such costs may include
a charge for overhead but without a profit to the General Partners.
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The General Partners or their Affiliates shall also receive the
compensation, salaries, and fees described in the Memorandum pursuant to the
agreements for services rendered and certain payment guarantees between the
General Partners or their Affiliates, as the case may be, and the Partnership
described therein.
Section 5.05 Other Business of Partners. Subject to the General
--------------------------
Partners' fiduciary obligations to the Partnership, any Partner may engage
independently or with others in other business ventures of every nature and
description. Nothing in this Agreement shall be deemed to prohibit the General
Partners or any Affiliate of the General Partners from dealing, or otherwise
engaging in business, with Persons transacting business with the Partnership or
from providing services relating to the purchase, sale, financing, management,
development or operation of hotels, motels, exhibition halls, convention
facilities, restaurants or other food and lodging facilities and receiving
compensation therefor. Neither the Partnership nor any Partner shall have any
right by virtue of this Agreement, or the partnership relationship created
hereby, in or to such other ventures or activities or to the income or proceeds
derived therefrom, and the pursuit of such ventures, even if competitive with
the business of the Partnership, shall not be deemed wrongful or improper.
Neither the General Partners nor any Affiliates of the General Partners shall be
obligated to present any particular opportunity to the Partnership even if such
opportunity is of a character which, if presented to the Partnership, could be
taken by the Partnership, and the General Partners and their Affiliates shall
have the right to take for their own account (individually or as trustee,
partner or fiduciary) or to recommend to others any such particular opportunity.
Section 5.06 Limitation on Liability of General Partners; Indemnification.
------------------------------------------------------------
A. The General Partners shall not be liable for the return of the
Capital Contributions of the Limited Partners or for any portion thereof, it
being expressly understood that any return of capital shall be made solely from
the assets of the Partnership; nor shall the General Partners be required to pay
to the Partnership or to any Limited Partner any deficit in the Capital Account
of any Partner upon dissolution or otherwise, except as provided in Section
3.08.
B. The General Partners and their Affiliates shall not have any
liability to the Partnership or to any Partner for any loss suffered by the
Partnership which arises out of any action or inaction of the General Partners
or their Affiliates if the
36
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General Partners or their Affiliates, in good faith, determined that such course
of conduct was in the best interest of the Partnership and such conduct did not
constitute negligence or misconduct of the General Partners or their Affiliates.
The General Partners and their Affiliates shall be indemnified by the
Partnership against any losses, judgments, liabilities, expenses and amounts
paid in settlement of any claims sustained by them in connection with the
Partnership, provided that the same were not the result of negligence or
misconduct on the part of the General Partners or their Affiliates.
Notwithstanding the foregoing, neither the General Partners nor their Affiliates
nor any person acting as a broker/dealer shall be indemnified for any losses,
liabilities or expenses arising from or out of an alleged violation of federal
or state securities laws unless (a) there has been a successful adjudication on
the merits of each count involving securities law violations as to the General
Partners or their Affiliates, (b) such claims have been dismissed with prejudice
on the merits by a court of competent jurisdiction as to the General Partners or
their Affiliates or (c) a court of competent jurisdiction approves a settlement
of the claims against the General Partner or its Affiliates. Any indemnity under
this Section shall be paid from, and only to the extent of, Partnership assets,
and no Partner shall have any personal liability on account thereof. In any
claim for indemnification for federal or state securities law violations, the
party seeking indemnification shall place before the court the position of the
Securities and Exchange Commission and the Massachusetts Securities Division
with respect to the issue of securities law violations. The Partnership shall
not incur the cost of that portion of any insurance, other than public liability
insurance, which insures any party against any liability as to which such party
is herein prohibited from being indemnified.
For purposes of this Section, the term "Affiliates" shall mean any person
performing services on behalf of the Partnership that: (i) directly or
indirectly controls, is controlled by, or is under common control of a General
Partner; (ii) owns or controls ten percent (10%) or more of the outstanding
voting securities of a General Partner; (iii) is an officer, director, partner
or trustee of a General Partner; or (iv) if the General Partner is an officer,
director, partner or trustee, is any company for which a General Partner acts in
any such capacity.
ARTICLE SIX
Withdrawal and Removal of General Partners
Section 6.01 Limitation on Voluntary Withdrawal. No General Partner shall
----------------------------------
voluntarily retire, withdraw or resign as a general
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partner of the Partnership (or voluntarily take any action or fail to take any
action which results in such withdrawal or retirement) or sell, transfer or
assign all or any part of its Interest as general partner unless:
(i) if such General Partner is (a) not the sole remaining General Partner,
the other General Partner shall have previously consented to such withdrawal,
retirement or resigning, the granting or denying of which consent shall be in
such other General Partner's absolute discretion; or (b) the sole remaining
General Partner, such General Partner obtains the Consent of the Limited
Partners and provides an additional or successor General Partner approved by the
Limited Partners which additional or successor General Partner is admitted to
the Partnership before or upon withdrawal of such sole remaining General
Partner; and
(ii) the Partnership receives an opinion of its counsel to the effect that
such withdrawal, retirement, resignation, assignment, transfer or other
disposition would not subject the Partnership to federal income taxation as a
Person other than a partnership, and would not cause a termination of the
Partnership for federal income tax purposes.
In the event of the withdrawal by a General Partner in violation of this
Section 6.01, such General Partner shall be liable to the Limited Partners for
all damages and loss arising therefrom.
Section 6.02 Termination of General Partner.
------------------------------
A. Except as otherwise provided in Sections 6.01 and 6.04, in the event of
the Termination of any General Partner, the General Partner shall immediately
cease to be a general partner and its Interest shall terminate; provided,
however, the terminated General Partner's right to receive Taxable Income and
Tax Losses and Distributions shall continue and shall inure to the benefit of
the terminated General Partner's estate, guardian, conservator, heirs, executor,
receiver, successors or assigns, as appropriate, and the rights and obligations
of the terminated General Partner with respect to the Partnership for all
purposes hereunder (except for any obligations as a result of a Termination in
violation of Section 6.01 or 6.04) shall be that of a limited partner. The
Termination of a General Partner shall not affect any rights or liability of
such terminated General Partner which matured prior to the Termination of such
General Partner or the value, if any, at the time of Termination of the
terminated General Partner's Interest.
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B. On the Termination of any General Partner, subject to Section 6.02C, the
remaining General Partner or General Partners, if any, may continue the business
of the Partnership, or, if there be none, all of the Limited Partners shall have
the right, within 90 days after such occurrence, to agree in writing to continue
the business of the Partnership in accordance with this Agreement and to the
appointment, effective as of the date of withdrawal of the last remaining
General Partner, of one or more general partners who agree in writing to be
bound by this Agreement.
C. The right to continue the business of the Partnership provided in
Section 6.02B shall be subject to prior receipt by the Partnership of an opinion
of counsel to the Partnership that such continuation would not result in the
Partnership being classified for federal income tax purposes as a Person other
than a partnership.
Section 6.03 Liability of Terminated General Partner. Upon Termination of a
---------------------------------------
General Partner, the terminated General Partner shall be and remain liable for
all obligations and liabilities incurred by it as General Partner prior to the
time of, and as a result of, the Termination, but it shall be free of any
obligation or liability incurred on account of the activities of the Partnership
from and after the time of such Termination.
Section 6.04 Removal of General Partner and Valuation of Interest of
-------------------------------------------------------
General Partner. In the event of the removal of a General Partner pursuant to
- ---------------
Section 10.02B, the value of the removed General Partner's Interest as general
partner in the Partnership immediately prior to such removal shall be appraised
by two independent appraisers, one selected by the removed General Partner and
one by the successor general partner(s). In the event that such two appraisers
are unable to agree on the value of the removed General Partner's Interest, they
shall jointly appoint a third independent appraiser whose determination shall be
final and binding. The Partnership shall then pay the removed General Partner
the value of its General Partner's Interest as so determined. Upon receiving
such payment, said removed General Partner shall cease to be a general partner
of the Partnership for all purposes. Any amounts received pursuant to this
Section 6.04 shall constitute complete and full discharge for all amounts owing
to the removed General Partner on account of its general partnership Interest in
the Partnership, but shall not constitute a discharge of any fees payable to
such General Partner pursuant to the terms hereof or otherwise, or a payment of
any loans made by such General Partner, which fees and loans shall remain
payable in accordance with their terms.
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ARTICLE SEVEN
TRANSFER OF LIMITED PARTNERS' INTERESTS
Section 7.01. Restrictions on Assignments.
---------------------------
A. No Limited Partner shall have the right to assign all or any part of
his Interest except with the consent of the Managing General Partner, the giving
or withholding of which is exclusively within the discretion of the Managing
General Partner, and provided further that:
(i) No assignment of any Interest may be made if the assignment is
pursuant to a sale or exchange of the Interest and if the Interest sought to be
assigned, when added to the total of all other Interests assigned within a
period of 12 consecutive months prior thereto, would, in the opinion of legal
counsel for the Partnership, result in the Partnership being deemed to have been
terminated within the meaning of Section 708 of the Code. The Managing General
Partner shall give Notification to all Limited Partners in the event that sales
or exchanges should be suspended for such reason. Any deferred sales or
exchanges shall be made (in chronological order to the extent practicable) as of
the first day of a calendar month after the end of any such 12-month period,
subject to the provisions of this Article Seven.
(ii) The Managing General Partner may require that any assignment of
an Interest in the Partnership be made only if the assignor (the "Transferor")
or assignee (the "Transferee") provides an opinion of counsel that such
assignment would not require filing of a registration statement under the
Securities Act of 1933 or would otherwise not be in violation of any federal or
state securities or Blue Sky laws (including any investment suitability
standards) applicable to the Partnership.
(iii) Except in the case of a transfer of a Limited Partner's entire
Interest, no purported assignment by a Limited Partner of any Unit after which
the assignor or the assignee would hold a fraction of a Unit (other than a
one-half Unit), will be permitted or recognized (except for assignments by gift,
inheritance or family dissolution or assignments to Affiliates of the
Transferor).
(iv) No assignment of any Interest may be made if, in the opinion of
legal counsel to the Partnership, it would result in the Partnership being
treated as an association taxable as a corporation.
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(v) No assignment, transfer, sale, or other disposition of any
Interest may be made if, in the opinion of legal counsel to the Partnership, it
would result in the Partnership not being able to obtain or continue in effect
any license permitting the service or sale of alcoholic beverages in the Hotel.
(vi) No assignment, transfer, sale, or other disposition of any
Interest may be made if the Interest sought to be assigned, transferred, sold,
or otherwise disposed of, when added to the total of all other Interests
assigned, transferred, sold, or otherwise disposed of within the same taxable
year, would result in more than five percent of the total Interests outstanding
having been assigned, transferred, sold, or otherwise disposed of during such
taxable year (the "Five Percent Test"). Notwithstanding the foregoing, the
following transfers shall be disregarded for purposes of determining compliance
with the Five Percent Test:
(a) transfers in which the basis of the Interest in the hands of
the Transferee is determined, in whole or in part, by reference to its basis in
the hands of the Transferor or is determined under Code Section 732;
(b) transfers at death;
(c) transfers between members of a Family,
(d) the issuance of Interests by the Partnership in exchange for
cash, property or services;
(e) distributions from a retirement plan qualified under Code
Section 401(a);
(f) transfers by a Partner in one or more transactions during any
thirty calendar day period of Interests representing in the aggregate more than
five percent of the total outstanding Interests; and
(g) certain other transfers that are disregarded for purposes of
Code Section 7704 pursuant to said Section 7704 and any rules and regulations
promulgated thereunder.
The Managing General Partner shall give Notification to all Limited
Partners in that event that transfers should be suspended for such reason.
B. A Transferee is not a Limited Partner, and is not entitled to vote or to
the other rights of a Limited Partner, other than the right to receive
allocations, to the extent permitted by
41
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applicable law, and Distributions, unless the Transferee is admitted as a
Limited Partner as provided in Section 7.02.
C. No transfer, sale or assignment of any Interest may be made if it would
cause the Partnership to be in violation of, or subject to greater reporting
requirements under, applicable securities laws.
D. Any Transferor must comply with the record keeping and other
requirements of Sections 6111 and 6112 of the Code, including without limitation
maintaining for seven years a list of the name, address and taxpayer
identification number of the Transferee, the date on which the Interest was
transferred, and the Partnership's name, address and tax shelter registration
number, if any, or must provide such information to the Partnership.
Section 7.02 Substitute Limited Partners. No Transferee of an Interest in
---------------------------
the Partnership shall have any right to become a Substitute Limited Partner
unless:
(i) the Transferee files with the Partnership a duly executed and
acknowledged written assignment in a form approved by the Managing General
Partner specifying the Interest being assigned and setting forth the intention
of the Transferor to grant to the Transferee such Interest;
(ii) the Transferor or the Transferee pays or reimburses the Partnership
for its expenses in connection therewith;
(iii) the Managing General Partner consents in writing to such
substitution, the granting of which shall be within the sole discretion of the
Managing General Partner and may be arbitrarily and capriciously denied; and
(iv) the Transferee executes a counterpart of this Agreement (as then in
effect) and such other documents as the General Partners may require to confirm
the Transferee's undertaking to be bound by this Agreement.
Section 7.03 Transfer Upon Termination. Subject to Section 7.02, upon the
-------------------------
termination of a Limited Partner, his successor-in-interest shall have the right
to become a Substitute Limited Partner on written notice to the Partnership
within 90 days after the appointment of such Limited Partner's legal
representative, but not later than 180 days after the termination of such
Limited Partner. If such right is not exercised, the legal representative of the
deceased or incapacitated Limited Partner shall have the same rights, subject to
the same limitations, as
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such Limited Partner would have had to sell, transfer or assign his Interest
pursuant to Section 7.01.
Section 7.04 Effective Date of Transfer.
--------------------------
A. Notwithstanding anything in this Agreement to the contrary, the
Partnership and the General Partners shall be entitled to treat the Transferor
of any Interest as the absolute owner thereof in all respects, and shall incur
no liability for any Distribution made in good faith to such Transferor, until
such time as the sale, transfer or assignment has become effective and the
Transferee admitted as a Substitute Limited Partner after compliance with this
Article Seven.
B. The Taxable Income and Tax Losses attributable to the assigned Interest
in the Partnership shall be allocated between the Transferor and Transferee as
determined by the General Partners under any method that is reasonable and
permitted by applicable law, and such determination shall be binding on the
parties.
Section 7.05 Indemnification and Terms of Admission. Each Limited Partner
--------------------------------------
shall, to the full extent permitted by law, indemnify and hold harmless the
Partnership, the General Partners, and every other Limited Partner who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of or arising from any actual misrepresentation or
misstatement of facts or omission to state facts made (or omitted to be made) by
such Limited Partner in connection with any assignment, transfer, encumbrance or
other disposition of all or any part of an Interest as a Limited Partner in the
Partnership, against expenses for which the Partnership, the General Partners,
or any other Limited Partner has not otherwise been reimbursed (including
attorneys' fees, judgments, fines and amounts paid in settlement), actually and
reasonably incurred by him in connection with such action, suit or proceeding,
provided that such indemnification shall not extend to any misrepresentation or
misstatement of facts or omission to state facts made (or omitted to be made) by
such Limited Partner in good faith or in reliance on statements or omissions of
the General Partners.
ARTICLE EIGHT
Dissolution and Liquidation of the Partnership
Section 8.01 Events Causing Dissolution.
--------------------------
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A. The Partnership shall be dissolved upon the happening of any of the
following events:
(i) the Termination or removal of the last remaining General Partner
unless the business of the Partnership is continued under Section 6.02B;
(ii) the sale or other disposition of all or substantially all of the
assets of the Partnership and distribution of the proceeds to the Partners;
(iii) the determination of the General Partners, with the Consent of
the Limited Partners, that the Partnership should be dissolved; or
(iv) the expiration of the term of the Partnership set forth in
Section 2.04.
Dissolution of the Partnership shall be effective on the day on which the event
giving rise to the dissolution occurs. Immediately upon dissolution, the General
Partners, or if none, the Limited Partners, shall proceed to wind up the affairs
of the Partnership, and upon completion of such winding up file a Certificate of
Cancellation of the Partnership's limited partnership certificate and liquidate
the Partnership's assets as provided in Section 8.02. Notwithstanding the
dissolution of the Partnership prior to the winding up of the affairs of the
Partnership as aforesaid, the business of the Partnership and the affairs of the
Partners as such, shall continue to be governed by this Agreement.
B. The Partners shall look solely to the assets of the Partnership for all
Distributions with respect to the Partnership and their Capital Contributions
thereto, and shall have no recourse therefor (upon dissolution or otherwise)
against the General Partners or any other Limited Partner.
Section 8.02 Liquidation.
-----------
A. Upon dissolution of the Partnership, the General Partners, or, if there
be no General Partner then remaining a Person designated by the Limited
Partners, shall liquidate the assets of the Partnership in such manner as the
General Partner or such Person (the "Liquidator") determines, allowing a
reasonable time in order to minimize losses attendant on liquidation. The
proceeds of such liquidation shall be applied and distributed in the following
order of priority:
44
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(i) to the payment of Partnership Debt and all other liabilities and
obligations of the Partnership (including any loans or advances that may have
been made by any of the Partners to the Partnership) and to the expenses of the
liquidation;
(ii) to the establishment, for such period deemed reasonably necessary, of
such reserves deemed reasonably necessary to provide for contingent and
unforeseen liabilities or obligations of the Partnership;
(iii) to the Partners in accordance with their Capital Account balances.
B. Notwithstanding the foregoing, in the event the Liquidator shall
determine that an immediate sale of part or all of the Partnership assets would
cause undue loss to the Partners, the Liquidator, in order to avoid such loss,
may, after having given Notification to all the Limited Partners, to the extent
not then prohibited by the limited partnership act of any jurisdiction in which
the Partnership is then formed or qualified and applicable in the circumstances,
either defer liquidation of and withhold from distribution for a reasonable time
any assets of the Partnership except those necessary to satisfy Partnership Debt
and other obligations of the Partnership, or distribute the assets of the
Partnership in kind.
C. If any assets of the Partnership are to be distributed in kind, such
assets shall be distributed on the basis of the fair market value thereof, and
any Partner entitled to any interest in such assets shall receive such interest
therein as a tenant-in-common with all other Partners so entitled. The fair
market value of such assets shall be determined by an independent appraiser to
be selected by random number from a list of three qualified appraisers obtained
by the Liquidator from the American Institute of Real Estate Appraisers. The
assets shall be treated as if sold by the Partnership and any Taxable Income or
Tax Losses shall be allocated to the Partners in accordance with Section 4.02
hereof.
D. In the event the Partnership is "liquidated" within the meaning of
Treasury Regulation Section 1.704--l(b)(2)(ii)(g), distributions shall be made
pursuant to this Article Eight by the end of the taxable year within which such
"liquidation" occurs (or, if later, within ninety (90) days after the date of
such "liquidation"). Distributions pursuant to the preceding sentence may be
distributed to a trust established for the benefit of the Partners for the
purposes of liquidating Partnership assets, collecting amounts owed to the
Partnership, and paying any contingent or unforeseen liabilities or obligations
of the
45
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Partnership arising out of or in connection with the Partnership. The assets of
any such trust shall be distributed to the Partners from time to time, in the
reasonable discretion of the Liquidator, in the same proportions as the amount
distributed to such trust by the Partnership would otherwise have been
distributed to the Partners pursuant to this Agreement.
Section 8.03. Liquidation of a Partner's Interest. In the event of a
-----------------------------------
"liquidation" of a Partner's Interest in the Partnership within the meaning of
Treasury Regulation Section 1.704-l(b)(2)(ii)(g), an amount equal to the
Partner's Capital Account balance, as determined after taking into account all
capital account adjustments for the Partnership taxable year during which the
"liquidation" occurs, shall be distributed to the Partner in respect of such
liquidated Interest by the end of the Partnership's taxable year within which
such "liquidation" occurs (or if later, within ninety (90) days after the date
of such "liquidation").
ARTICLE NINE
Books and Records, Accounting
Reports, Tax Elections, Etc.
Section 9.01. Books and Records. The books and records of the Partnership,
-----------------
including without limitation those required by Section 7-13-5 of the Partnership
Act, shall be maintained at the principal office of the Partnership and shall be
available for examination there by any Partner or such Partner's duly authorized
representatives at any and all reasonable times. Any Partner, upon paying the
costs of collection, duplication and mailing, shall be entitled, upon written
application to the Managing General Partner, to obtain:
(i) true and full information regarding the state of the business
and financial condition of the Partnership;
(ii) a copy of the Partnership's federal, state and local tax returns
and reports, if any, for each fiscal year;
(iii) a current list of the full name and last known business address
of each Partner identifying in alphabetical order the General Partners and the
Limited Partners, and a copy of this Agreement, the certificate of limited
partnership and all amendments thereto, together with executed copies of any
powers of attorney pursuant to which this Agreement, any certificates of limited
partnership, or any amendments thereto have been executed;
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(iv) copies of any Partnership financial statements; and
(v) other information regarding the affairs of the Partnership as is just
and reasonable or required by Section 7-13-5 of the Partnership Act.
Section 9.02 Accounting and Fiscal Year. The books of the Partnership will
--------------------------
be kept on the accrual income tax basis. The Partnership will report its
operations for federal income tax purposes on the accrual method. The Fiscal
Year of the Partnership shall commence on January 1 and end on December 31 of
each year.
Section 9.03. Bank Accounts and Investments. The bank accounts of the
-----------------------------
Partnership shall be maintained in such banking institutions as the Managing
General Partner shall determine and withdrawals shall be made only in the
regular course of Partnership business on such signature or signatures as the
Managing General Partner may determine. All deposits and other funds not needed
in the operation of the business or not yet invested may be invested in U.S.
government securities, securities issued or guaranteed by U.S. government
agencies, securities issued or guaranteed by states or municipalities,
certificates of deposit and time or demand deposits in commercial banks,
bankers' acceptances, savings and loan association deposits or deposits in
members of the Federal Home Loan Bank System. The funds of the Partnership shall
not be commingled with the funds of any other Person.
Section 9.04 Reports. The Managing General Partner shall deliver to each
-------
Partner the following:
A. As soon as practicable but in no event later than 75 days after the end
of each Fiscal Year of the Partnership, such information as shall be necessary
for the preparation by such Partner of a federal income tax return, and state
income or other tax returns with regard to jurisdictions in which the
Partnership owns property or conducts business. Such information shall include
computation of the distributions to such Partner and the allocation to such
Limited Partner of the Taxable Income or Tax Losses, as the case may be, during
such Fiscal Year; and
B. Within 120 days after the end of each Fiscal Year of the Partnership, a
statement prepared by the Managing General Partner in consultation with MOHS,
and audited and certified by a firm of independent public accountants selected
by the General Partners as to the items in clauses (i) and (ii) below, which
statement shall set forth the following:
47
<PAGE>
(i) a statement of assets, liabilities and Partners' capital, a statement
of income and expenses on an accrual basis and statement of sources and uses of
funds, and a statement of changes in Partners' capital, all of which may be
prepared on an income tax basis;
(ii) the balances in the Capital Accounts of the Limited Partners and of
the General Partners;
(iii) a report (which need not be audited) summarizing the fees,
commissions, compensation and other remuneration and reimbursed expenses paid by
the Partnership for such Fiscal Year to the General Partners or any Affiliates
of the General Partners and the services performed; and
(iv) a report of the activities of the Partnership during the period
covered by the report.
C. Within 75 days after the end of each Fiscal Quarter of the Partnership,
the Managing General Partner shall send to each Person who was a Partner at any
time during the Fiscal Quarter then ended (i) a balance sheet (which need not be
audited), and (ii) a profit and loss statement (which need not be audited), and
any other pertinent information regarding the Partnership and its activities
during the period covered by the report.
D. Concurrent with the report sent pursuant to Section 9.04C for the third
Fiscal Quarter of each Fiscal Year, the Tax Matters Partner will furnish the
Partners with an estimate of Taxable Income or Tax Losses per Unit for such
Fiscal Year as a whole.
E. The Managing General Partner shall maintain for a period of at least
four years a record of the information obtained to indicate that a Limited
Partner meets the suitability standards for investors established by the
Partnership and the various states' Blue Sky laws. The Managing General Partner
shall prepare and file in a timely manner all reports required to be filed
pursuant to all applicable Blue Sky laws.
F. The Managing General Partner may prepare and deliver to the Partners
from time to time in their sole discretion during each Fiscal Year, in
connection with Distributions, unaudited statements showing the results of
operations of the Partnership to date of such statement.
Section 9.05 Tax Depreciation and Elections.
------------------------------
(a) With respect to all depreciable assets of the Partnership, the
Partnership may elect any permitted method of
48
<PAGE>
depreciation which, in the judgment of the Tax Matters Partner, will be in the
best interests of the Partnership.
(b) The Tax Matters Partner may, in its sole discretion but in consultation
with MOHS, in any Fiscal Year make an election under Section 754 of the Code and
such other tax elections as it may from time to time deem necessary or
appropriate.
Section 9.06 Designation of Tax Matters Partner.
----------------------------------
A. MBIP shall act as the tax matters partner (the "Tax Matters Partner") of
the Partnership, as provided in regulations pursuant to Section 6231 of the
Code. Each Partner hereby consents to such designation and agrees to execute,
certify, acknowledge, deliver, swear to, file and record at the appropriate
public offices such documents as may be deemed necessary or appropriate to
evidence such consent.
B. To the extent and in the manner provided by applicable Code sections and
regulations thereunder, the Tax Matters Partners shall furnish the name,
address, profits, interest and taxpayer identification number of each Partner to
the IRS.
C. To the extent and in the manner provided by applicable Code sections and
regulations thereunder, the Tax Matters Partner shall inform each Partner of
administrative or judicial proceedings for the adjustment of Partnership items
required to be taken into account by a Partner for income tax purposes (such
administrative proceedings being referred to as a "tax audit" and such judicial
proceedings being referred to as "judicial review").
D. The Tax Matters Partner is authorized, but not required:
(i) to enter into any settlement with the IRS with respect to any tax
audit or judicial review, and in the settlement agreement the Tax Matters
Partner may expressly state that such agreement shall bind all Partners except
that such settlement agreement shall not bind any Partner who (within the time
prescribed pursuant to the Code and regulations thereunder) files a statement
with the IRS providing that the Tax Matters Partner shall not have the authority
to enter into a settlement agreement on behalf of such Partner;
(ii) in the event that a notice of a final administrative adjustment at
the Partnership level of any item required to be taken into account by a Partner
for tax purposes (a "final judgment") is mailed to the Tax Matters Partner, to
seek judicial review of such final adjustment, including the
49
<PAGE>
filing of a petition for readjustment with the Tax Court or the United States
Claims Court, or the filing of a complaint for refund with the District Court of
the United States for the district in which the Partnership's principal place of
business is located;
(iii) to intervene in any action brought by any other Partner for
judicial review of a final adjustment;
(iv) to file a request for an administrative adjustment with the IRS at
any time and, if any part of such request is not allowed by the IRS to file an
appropriate pleading (petition or complaint) for judicial review with respect to
such request;
(v) to enter into an agreement with the IRS to extend the period for
assessing any tax which is attributable to any item required to be taken into
account by a Partner for tax purposes, or an item affected by such item; and
(vi) to take any other action on behalf of the Partners or the
Partnership in connection with any tax audit or judicial review proceeding to
the extent permitted by applicable law or regulations.
E. The Partnership shall, to the full extent permitted by law, indemnify
and reimburse the Tax Matters Partner for all expenses, including legal and
accounting fees, claims, liability, losses and damages incurred in connection
with any tax audit or judicial review proceeding with respect to the tax
liability of the Partners, and the payment of all such expense shall be made
before the distribution of Cash Available for Distribution. Neither the General
Partners nor any Affiliate nor other person shall be obligated to provide funds
for such purpose. The taking of any action and the incurring of any expense by
the Tax Matters Partner in connection with any such proceeding, except to the
extent required by law, is a matter in the sole discretion of the Tax Matters
Partner and the provisions on limitations of liability of General Partners and
indemnification set forth in Section 5.06 of this Agreement shall be fully
applicable to the Tax Matters Partner in its capacity as such.
ARTICLE TEN
Meeting and Voting Rights of Limited Partners
Section 10.01 Meetings.
--------
A. Meetings of the Limited Partners for any purpose may be called by the
General Partners and shall be called by the General
50
<PAGE>
Partners upon receipt of a request in writing signed by holders of 10% or more
of the Units. Notification of any such meeting shall be sent to the Limited
Partners within ten business days after receipt of such a request. Such request
shall state the purpose of the proposed meeting and the matter proposed to be
acted upon thereat. Such meeting may be held at the principal office of the
Partnership or at such other location within the United States as the General
Partners may deem appropriate or desirable. In addition, the General Partners
may, and, upon receipt of a request in writing signed by holders of 10% or more
of the Units, the General Partners shall, submit any matter (upon which the
Limited Partners are entitled to act) to the Limited Partners for a vote by
written Consent without a meeting.
B. Notification of any such meeting shall be given not less than 15 days
nor more than 60 days before the date of the meeting, to each Limited Partner at
their addresses as they appear on Partnership records, or at such other address
which they may have furnished in writing to the General Partners. Such
Notification shall be in writing, and shall state the place, date, hour and
purpose of the meeting, and shall indicate that it is being issued at or by the
direction of the Partner or Partners calling the meeting. If a meeting is
adjourned to another time or place, and if any announcement of the adjournment
of time or place is made at the meeting, it shall not be necessary to give
Notification of the adjourned meeting. The presence in person or by proxy of
holders of a majority of the Units shall constitute a quorum at all meetings of
the Limited Partners; provided, however, that if there be no such quorum,
holders of a majority of the Units so present or so represented may adjourn the
meeting from time to time without further notice, until a quorum shall have been
obtained. No Notification of the time, place or purpose of any meeting of
Limited Partners need be given to any Limited Partner who attends in person or
is represented by proxy (except when a Limited Partner attends a meeting for the
express purpose of objecting at the beginning of the meeting to the transaction
of any business on the ground that the meeting is not lawfully called or
convened), or to any Limited Partner entitled to such notice who, in a writing
executed and filed with the records of the meeting, either before or after the
time thereof, waives such Notification.
C. For the purpose of determining the Limited Partners entitled to vote at
any meeting of the Partnership or any adjournment thereof, the General Partners
or the Limited Partners requesting such meeting may fix, in advance, a date as
the record date for any such determination of Limited Partners. Such date shall
be not more than 60 days nor less than 15 days before any such meeting.
51
<PAGE>
D. Limited Partners may authorize any Person to act for them by proxy in
all matters in which a Limited Partner is entitled to participate, whether by
waiving notice of any meeting, or voting or participating at a meeting. Every
proxy must be signed by the Limited Partner or the Partner's attorney-in-fact.
No proxy shall be valid after the expiration of 11 months from the date thereof
unless otherwise provided in the proxy. Every proxy shall be revocable at the
pleasure of the Limited Partner executing it.
E. At each meeting of Limited Partners, the General Partners shall appoint
such officers and adopt such rules for the conduct of such meeting as the
General Partners shall deem appropriate.
Section 10.02 Special Voting Rights of Limited Partners.
-----------------------------------------
A. If at any time any agreement (including the Hotel Management Agreement)
vests operating management of any property of the Partnership in the General
Partners or any Affiliate of the General Partners, and if pursuant to the terms
of such agreement, the Partnership has a right to terminate such agreement as a
result of the failure of the operation of such property to attain any economic
objective, the Limited Partners, without the Consent of the General Partners,
may, upon the affirmative vote of the holders of a majority of the Units, take
action to exercise the right of termination set forth in such agreement.
B. To the extent not inconsistent with applicable law, in the event that
the General Partners have committed and not remedied any act of fraud, bad
faith, gross negligence or breach of fiduciary duty in carrying out their duties
as the general partners, holders of a majority of the Units may, without the
Consent of the General Partners, vote to:
(i) amend this Agreement; provided, however, that the allocable
percentage interests of the Partners in the allocations set forth in Article
Four may not be altered, and no new material obligation may be imposed on any
Partner without such Partner's approval;
(ii) dissolve the Partnership;
(iii) remove the General Partners, provided that a new General Partner
is elected within 60 days following the effective date of such removal. A new
General Partner may be elected by holders of a majority of the Units, provided
that such new General Partner is admitted to the Partnership before or upon the
52
<PAGE>
removal or withdrawal of the last remaining General Partner, or, in the
alternative, a new General Partner must be elected by all of the Limited
Partners if such new General Partner is admitted to the Partnership after the
removal or withdrawal of the sole remaining General Partner, in which event such
admission shall be effective as of the date of removal or withdrawal of the sole
remaining General Partner; or
(iv) approve or disapprove the sale of all or substantially all of the
assets of the Partnership.
ARTICLE ELEVEN
Miscellaneous Provisions
Section 11.01 Appointment of Each General Partner as Attorney-in-Fact.
-------------------------------------------------------
A. Each Limited Partner, including each additional and Substitute Limited
Partner, by the execution and delivery of the Subscription Agreement,
irrevocably constitutes and appoints each General Partner and the President, any
Vice President, Secretary, Treasurer, Assistant Secretary, and Assistant
Treasurer of any corporate General Partner, as his true and lawful
attorney-in-fact with full power and authority in such Limited Partner's name,
place and stead to execute, acknowledge, deliver, swear to, file and record at
the appropriate public offices such documents as may be necessary or appropriate
to carry out the provisions of this Agreement, including but not limited to:
(i) all certificates and other instruments, including counterparts of
this Agreement, and any amendment or restatement thereof, which the General
Partners deem appropriate to form, qualify or continue the Partnership as a
limited partnership (or as a partnership in which the Limited Partners will have
limited liability comparable to that provided by the Partnership Act) in the
jurisdictions in which the Partnership may conduct business or in which such
formation, qualification or continuation is, in the opinion of the General
Partners, necessary or desirable to protect the limited liability of the Limited
Partners;
(ii) all amendments to this Agreement adopted in accordance with the
terms hereof and all instruments which the General Partners deem appropriate to
reflect a change or modification of the Partnership in accordance with the terms
of this Agreement;
(iii) all documents or instruments which the General Partners deem
appropriate to reflect the admission of a Limited
53
<PAGE>
Partner (including any Substitute Limited Partner), the dissolution of the
Partnership, sales or transfers of Partnership property, sales or transfers of
Partnership Interests, or the initial amount or increase or reduction in amount
of any Partner's Capital Contribution or reduction in any Partner's Capital
Account.
B. The appointment by all Limited Partners of each General Partner and the
aforesaid officers of any corporate General Partner as attorney-in-fact shall be
deemed to be a power coupled with an interest, in recognition of the fact that
each of the Partners under this Agreement will be relying upon the power of the
General Partners to act as contemplated by this Agreement in any filing and
other action by it on behalf of the Partnership, and shall survive, and not be
affected by, the Bankruptcy, death, incapacity, disability, adjudication of
incompetence or insanity, or dissolution of any Person hereby giving such power
and the transfer or assignment of all or any part of the Units such Person;
provided, however, that in the event of the transfer by a Limited Partner of all
of such Limited Partner's Units, the foregoing power of attorney of a Transferor
Limited Partner shall survive such transfer only until such time as the
Transferee shall have been admitted to the Partnership as a Substitute Limited
Partner and all required documents and instruments shall have been duly
executed, filed and recorded to effect such substitution.
C. Each General Partner and the aforesaid officers of any corporate General
Partner may exercise the power of attorney on behalf of the Limited Partners by
a facsimile signature of the General Partner or one of its officers, or by the
signature of the General Partner or one of its officers acting as attorney-in-
fact for all of the Limited Partners.
Section 11.02 Amendment.
---------
A. Each additional or Substitute Limited Partner and any successor General
Partner shall become a signatory hereof by signing such number of Subscription
Agreements and such other instrument or instruments, and in such manner, as the
General Partners shall determine. By so signing, each additional or Substitute
Limited Partner or successor General Partner, as the case may be, shall be
deemed to have adopted and to have agreed to be bound by all the provisions of
this Agreement; provided, however, that no such counterpart shall be binding
until it shall have been accepted by the General Partners.
B. In addition to the amendments otherwise authorized herein, amendments
may be made to this Agreement from time to time by
54
<PAGE>
the General Partners with the Consent of the holders of a majority of the Units;
provided, however, that without the Consent of the Partners to be adversely
affected by the amendment, this Agreement may not be amended so as to (i)
convert the Units of a Limited Partner into a general partner's interest; (ii)
modify the limited liability of a Limited Partner; or (iii) alter the Interest
of a Partner in Taxable Income, Tax Losses, Cash Available for Distribution,
Distributable Proceeds from Refinancings and Distributable Proceeds from Capital
Transactions, or other cash distributions or reduce the percentage of Units
which is required to Consent to any action hereunder.
C. In addition to any amendments otherwise authorized herein, amendments
may be made to this Agreement from time to time by the General Partners, without
the Consent of any of the Limited Partners; (i) to add to the representations,
duties or obligations of the General Partners or to surrender any right or power
granted to the General Partners herein which surrender is for the benefit of the
Limited Partners; (ii) to cure any ambiguity, to correct or supplement any
provision herein, or to make any other provisions with respect to matters or
questions arising under this Agreement which will not be inconsistent with the
provisions of this Agreement; and (iii) to delete or add any provision of this
Agreement required to be so deleted or added by the staff of the Securities and
Exchange Commission or other federal agency or by a state Blue Sky commissioner
or similar such official, which addition or deletion is deemed by such
Commission, agency, commissioner or official to be for the benefit or protection
of the Limited Partners, and (iv) to conform the provisions of this Agreement to
the requirements of any changes in the Internal Revenue Code or any Treasury
Regulations promulgated thereunder, which the General Partners shall deem to be
in the best interests of the Limited Partners; provided, however, that no
amendment shall be adopted pursuant to this Section 11.02C unless the adoption
thereof (i) is for the benefit of or not adverse to the interests of the Limited
Partners; (ii) is consistent with Section 5.01; (iii) does not materially affect
the distribution of Cash Available for Distribution or Distributable Proceeds
from Capital Transactions, or Distributable Proceeds from Refinancings or the
allocation of Taxable Income or Tax Losses, or such other allocations and
distributions as are contained in Article Four among the Limited Partners or
between the Limited Partners as a class and the General Partners; and (iv) does
not affect the limited liability of the Limited Partners or the status of the
Partnership as a partnership for federal income tax purposes.
55
<PAGE>
D. If this Agreement shall be amended as a result of substituting a Limited
Partner, the amendment to this Agreement shall be signed by the General Partners
and by the Person to be substituted or added and, if a Limited Partner is to be
substituted, by the assigning limited Partner. If this Agreement shall be
amended to reflect the withdrawal or removal of a General Partner when the
business of the Partnership is being continued, such amendment shall be signed
by the withdrawing General Partner (and the General Partner hereby so agrees)
and by any additional or successor General Partner.
E. In making any amendments, there shall be prepared and filed for
recordation by the General Partner such documents and certificates as shall be
required, but only if required, to be prepared and filed under the Partnership
Act and under the laws of the other jurisdictions under the laws of which the
Partnership is then formed or qualified, not less frequently, in the case of a
substitution of a Limited Partner, than once each calendar quarter.
Section 11.03 Binding Provisions. The covenants and agreements contained
------------------
herein shall be binding upon, and inure to the benefit of, the heirs, executors,
administrators, personal representatives, successors and assigns of the
respective parties hereto.
Section 11.04 Applicable Law. This Agreement shall be construed and
--------------
enforced in accordance with the laws of the State of Rhode Island.
Section 11.05 Counterparts. This Agreement may be executed in several
------------
counterparts, all of which together shall constitute one agreement binding on
all parties hereto, notwithstanding that all the parties have not signed the
same counterpart.
Section 11.06 Separability of Provisions. Each provision of this Agreement
--------------------------
shall be considered separable and if for any reason any provision or provisions
hereof are determined to be invalid and contrary to any existing or future law,
such invalidity shall not impair the operation of, or affect, those portions of
this Agreement which are valid.
Section 11.07 Section Titles. Section titles are for descriptive purposes
--------------
only and shall not control or alter the meaning of this Agreement as set forth
in the text.
56
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
GENERAL PARTNERS:
MB INVESTMENT PROPERTIES, INC.
By /s/ [SIGNATURE APPEARS HERE]
--------------------------------
MOHS CORPORATION
By /s/ [SIGNATURE APPEARS HERE]
--------------------------------
WITHDRAWING INITIAL LIMITED PARTNER:
Mutual Benefit Financial Service
Management Company INC.
By /s/ [SIGNATURE APPEARS HERE]
--------------------------------
LIMITED PARTNERS
(Who are named in Schedule I)
BY THEIR ATTORNEY-IN-FACT, MB
INVESTMENT PROPERTIES, INC.
By /s/ [SIGNATURE APPEARS HERE]
--------------------------------
Attorney-in-Fact
57
<PAGE>
SCHEDULE I
[Name, business address, cash contribution,
and number of Units of Limited Partners]
58
<PAGE>
SCHEDULE II
[Legal Description of Hotel Property]
59
<PAGE>
SCHEDULE III
GENERAL PARTNERS' COMPENSATION
In addition to the salaries, fees, profits or distributions set forth in
the Partnership Agreement, the General Partners shall receive the following
compensation in their capacities as General Partners. Nothing herein shall be
construed to prohibit or limit the payment of compensation to the General
Partners (or any of their Affiliates) pursuant to any agreement between one or
more of the General Partners (or any of their Affiliates) and the Partnership,
pursuant to which the General Partners (or any of their Affiliates) guarantee to
make payment on behalf of or provide services to the Partnership.
General Partner
Receiving Type of
Compensation Compensation Amount
- ------------ ------------ ------
MBIP General Partner
Supervisory Fee $ 235,000 (1)
MBIP General Partner Finan-
cial Advisory Fee 235,000 (2)
- -------------------------------
(1) Payable on Closing for services to be performed by MBIP in the
supervision of Partnership affairs during the first five years of
Partnership operations, including in particular its supervision of the
Manager during its start-up operational period.
(2) Payable on Closing for services performed in organizing and structuring
the offering of Units pursuant to the Memorandum.
60
<PAGE>
Exhibit 10.1
CHICAGO O'HARE MARRIOTT SUITES HOTEL
ROSEMONT, ILLINOIS
MANAGEMENT AGREEMENT
BY AND BETWEEN
MUTUAL BENEFIT CHICAGO MARRIOTT SUITE HOTEL PARTNERS, L.P.
AND
MARRIOTT HOTELS, INC.
<PAGE>
TABLE OF CONTENTS
Page
----
Article I -- Definition of Terms
- ---------------------------------
1.01 Definition of Terms...................................... 2
Article II -- Appointment of Management Company
- -----------------------------------------------
2.01 Appointment.............................................. 12
2.02 Delegation of Authority.................................. 12
2.03 No Covenants or Restrictions............................. 13
Article III -- Hotel
- --------------------
3.01 Ownership of Hotel....................................... 14
Article IV -- Term
- ------------------
4.01 Term..................................................... 16
Article V -- Compensation of Management Company
- -----------------------------------------------
5.01 Management Fee........................................... 17
5.02 Accounting and Interim Payment........................... 19
5.03 Allocation of Net Proceeds from Capital Trans-
actions or Net Proceeds from Refinancings............... 20
Article VI -- Working Capital, Inventories and Fixed Asset Supplies
- -------------------------------------------------------------------
6.01 Working Capital and Inventories.......................... 22
6.02 Fixed Asset Supplies..................................... 22
Article VII -- Repairs, Maintenance and Replacements
- ----------------------------------------------------
7.01 Routine Repairs and Maintenance.......................... 23
7.02 Repairs and Equipment Reserve............................ 23
7.03 Building Alterations, Improvements,
Renewals and Replacements............................. 27
7.04 Liens.................................................... 28
7.05 Ownership of Replacements................................ 28
Article VIII -- Bookkeeping and Bank Accounts
- ---------------------------------------------
8.01 Books and Records........................................ 29
8.02 Hotel Accounts, Expenditures............................. 29
8.03 Annual Operating Projection.............................. 30
8.04 Operating Losses; Credit................................. 31
i
<PAGE>
Page
----
Article IX -- Trademark and Trade Name
- --------------------------------------
9.01 Marriott Name............................................ 32
9.02 Purchase of Inventories and Fixed
Asset Supplies....................................... 33
9.03 Breach of Covenant....................................... 33
Article X -- Possession and Use of Hotel
- ----------------------------------------
10.01 Payment of Ground Rent and Other Charges................. 34
10.02 Use...................................................... 34
10.03 Chain Services........................................... 34
Article XI -- Insurance
- -----------------------
11.01 Property Insurance....................................... 36
11.02 Operational Insurance.................................... 37
11.03 Coverage................................................. 38
11.04 Cost and Expense......................................... 39
11.05 Policies and Endorsements................................ 40
11.06 Insurance Required by Mortgagee.......................... 40
Article XII -- Taxes
- --------------------
12.01 Real Estate and Personal Property Taxes.................. 41
Article XIII -- Hotel Employees
- -------------------------------
13.01 Employees................................................ 42
Article XIV -- Damage, Condemnation and Force Majeure
- -----------------------------------------------------
14.01 Damage and Repair........................................ 44
14.02 Condemnation............................................. 44
14.03 Force Majeure............................................ 45
Article XV -- Defaults
- ----------------------
15.01 Defaults................................................. 46
15.02 Remedies................................................. 46
15.03 Performance Termination.................................. 49
Article XVI -- Waiver and Partial Invalidity
- --------------------------------------------
16.01 Waiver................................................... 51
16.02 Partial Invalidity....................................... 51
ii
<PAGE>
Page
----
Article XVII -- Assignment
- --------------------------
17.01 Assignment................................................... 52
Article XVIII -- Sale of Hotel
- ------------------------------
18.01 Right of First Refusal....................................... 54
Article XIX -- Miscellaneous
- ----------------------------
19.01 Right to Make Agreement...................................... 58
19.02 Consents..................................................... 58
19.03 Agency....................................................... 59
19.04 Confidentiality.............................................. 59
19.05 Applicable Law............................................... 59
19.06 Headings..................................................... 59
19.07 Notices...................................................... 59
19.08 Limited Liability............................................ 60
19.09 Entire Agreement............................................. 61
iii
<PAGE>
MANAGEMENT AGREEMENT
This MANAGEMENT AGREEMENT (the "Agreement") is executed as of the 12th
day of June, 1989 (the "Effective Date"), by MUTUAL BENEFIT CHICAGO MARRIOTT
SUITE HOTEL PARTNERS, L.P., a Rhode Island limited partnership with its
principal offices at 290 Westminster Street, Providence, Rhode Island 02903 (the
"Partnership"), and MARRIOTT HOTELS, INC., a Delaware corporation with its
principal offices at 10400 Fernwood Road, Bethesda, Maryland 20058 (the
"Management Company").
RECITALS
WHEREAS, the Partnership has this date acquired the Marriott Suites
O'Hare Hotel located at 6155 North River Road, Rosemont, Illinois (the "Hotel");
and
WHEREAS, this Agreement is being entered into by the parties for the
purpose of providing management services for the Hotel;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties agree as follows:
<PAGE>
ARTICLE I
DEFINITION OF TERMS
-------------------
1.01 Definition of Terms
-------------------
The following terms when used in the Agreement shall have the meanings
indicated:
"Accounting Period" shall mean the four (4) week accounting periods having
-----------------
the same beginning and ending dates as Management Company's four (4) week
accounting periods, except that an Accounting Period may occasionally contain
five (5) weeks when necessary to conform Management Company's accounting system
to the calendar.
"Agreement" shall have the meaning ascribed to it in the Preamble.
---------
"Annual Operating Projection" shall have the meaning ascribed to it in
---------------------------
Section 8.03.
"Base Management Fee" shall have the meaning ascribed to it in the
-------------------
definition of "Net House Profit" set forth in this Section 1.01.
"Building Estimate" shall have the meaning ascribed to it in Section
-----------------
7.03A.
"Capital Transactions" shall mean the sale, exchange or disposition
--------------------
(including the grant of a long-term leasehold) of the Hotel or any substantial
interest therein or portion thereof that is not in the ordinary course of
business or casualty damage to or condemnation of the Hotel or any substantial
interest therein or portion thereof.
- 2 -
<PAGE>
"Chain Services" shall have the meaning ascribed to it in Section 10.03.
--------------
"Contingent Management Fees" shall mean the cumulative total of those
--------------------------
portions of any Incentive Management Fees under Section 5.01A to which Manager
has not theretofore been entitled owing to the limitations of Section 5.01B.
"Debt Service Guarantee" shall mean that certain guaranty, in the maximum
----------------------
amount of Two Million Five Hundred Thousand Dollars ($2,500,000) dated
approximately the Effective Date of this Agreement, executed by Marriott (as
guarantor) for the benefit of Lender in connection with the Original Mortgage.
"Deductions" shall have the meaning ascribed to it in the definition of
----------
"Net House Profit" set forth in this Section 1.01.
"Defaulting Party" shall have the meaning ascribed to it in Section 15.02B.
----------------
"Effective Date" shall have the meaning ascribed to it in the Preamble.
--------------
"FF&E" shall have the meaning ascribed to it in Section 7.01.
----
"Fiscal Year" shall mean Management Company's Fiscal Year of fifty-two
-----------
(52) or fifty-three (53) weeks ending at midnight on the Friday closest to
December 31st in each calendar year; the new Fiscal Year begins on the Saturday
immediately following said Friday. Any partial Fiscal Year between the Opening
Date and the commencement of the first full Fiscal Year shall be included as
part Of the first full Fiscal Year. A
- 3 -
<PAGE>
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 Management Company's Fiscal Year is changed in the
future, appropriate adjustment to the Agreements reporting and accounting
procedures shall be made; provided, however, that no such change or adjustment
shall alter the term of the Agreement or in any way reduce the distributions of
Net House Profit or other payments due Owner hereunder.
"Fixed Asset Supplies" shall mean supply items included within "Property
--------------------
and Equipment" under the Uniform System of Accounts, including linen, china,
glassware, silver, uniforms, and similar items.
"Gross Revenues" shall mean all revenues and receipts of every kind
--------------
derived from operating the Hotel and parts thereof, including, but not limited
to income (from both cash and credit transactions), before commissions and
discounts for prompt or cash payments, from rental of rooms, stores, offices,
and exhibit or sales space of every kind; license, lease, and concession fees
and rentals (not including gross receipts of licensees, lessees, and
concessionaires); income from vending machines; health club membership fees;
food and beverage sales; wholesale and retail sales of merchandise, service
charges, and proceeds, if any, from business interruption or other loss of
income insurance; provided, however, that Gross Revenues shall not include
gratuities to Hotel employees or federal, state, or
- 4 -
<PAGE>
municipal excise, sales, or use taxes or similar impositions collected directly
from patrons or guests or included as part of the sales price of any goods or
services.
"Ground Lease" shall mean that certain Ground Lease the lessee's interest
------------
in which has heretofore been assigned to Owner originally made and dated as of
June 16, 1986 by and between Marriott, as lessee, and Simon-Rosemont
Developers, as lessor, a memorandum of which was recorded on April 3, 1987 as
Document 3604964, as amended by First Amendment to Lease recorded on April 3,
1987 as Document 36049654 and as further amended by Second Amendment to Lease
recorded on February 9, 1989 as Document 89063670.
"Hotel" shall have the meaning set forth in the Recitals to this Agreement
-----
and shall include the Site, improvements, and all FF&E and supplies installed
therein.
"Impositions" shall have the meaning ascribed to it in Section 12.01.
-----------
"Incentive Management Fee" shall have the meaning ascribed to it in Section
------------------------
5.01A(2).
"Initial First Mortgage" shall mean the first mortgage loan provided by the
----------------------
Lender in the principal amount of $25,500,000.
"Initial Term" shall have the meaning ascribed to it in Section 4.01.
------------
"Inventories" shall mean "Inventories" as defined in the Uniform System of
-----------
Accounts, such as provisions in storerooms,
- 5 -
<PAGE>
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" shall mean National Bank of Canada.
------
"Limited Partnership Agreement" shall mean the Amended and Restated
-----------------------------
Agreement of Limited Partnership of Owner, as the same may be amended from time
to time.
"Loan Agreement" shall mean that certain Loan Agreement dated as of June
--------------
12, 1989 between Owner and Lender.
"Management Company" shall have the meaning ascribed to it in the Preamble.
------------------
"Marriott" shall mean Marriott Corporation, a Delaware corporation.
--------
"Net House Profit" shall mean the excess of Gross Revenues over the
----------------
following deductions ("Deductions") incurred in the ownership and operation of
the Hotel:
1. The cost of sales, including salaries, wages, fringe benefits,
payroll taxes, commissions and discounts for prompt or cash payments, and other
costs related to Hotel employees;
2. Departmental expenses, administrative and general expenses, and the
cost of Hotel advertising and business promotion, heat, light, and power, and
routine repairs, maintenance and minor alterations treated as Deductions under
Section 7.01;
- 6 -
<PAGE>
3. The cost of Inventories and Fixed Asset Supplies consumed in the
operation of the Hotel;
4. A reasonable reserve for uncollectible accounts receivable as determined
by Management Company;
5. All costs and fees of independent accountants or other parties who
perform routine services required or permitted hereunder;
6. The cost and expense of technical consultants and operational experts
for specialized services in connection with non-routine Hotel work (such cost
and expense to be approved by Owner, which approval shall not unreasonably be
withheld);
7. An amount equal to three percent (3%) of Gross Revenues (the "Base
Management Fee") as payment to Management Company for the Hotel's share of costs
and expenses incurred by Management Company or its affiliated companies for
services that benefit all Marriott hotels, are performed by personnel not
normally located at the Hotel, and are not Chain Services. Such services include
executive supervision, consulting, planning, policy-making, corporate finance,
personnel, and employee relations, in-house legal services, trademark
protection, research and development, and the services of Management Company's
technical, operational and marketing experts making routine inspection and
consultation visits to the Hotel;
8. The Hotel's pro rata share of costs and expenses incurred by Management
Company in providing Chain Services;
- 7 -
<PAGE>
9. Insurance costs and expenses as provided in Sections 11.01, 11.02, 11.04
and 11.06;
10. Taxes, if any, payable by or assessed against Management Company
related to the Agreement or to Management Company's operation of the Hotel
(exclusive of Management Company's income taxes);
11. Impositions;
12. Contributions to the Repairs and Equipment Reserve as provided in
Section 7.02B or E;
13. The cost of Building alterations, improvements, renewals, or
replacements under Section 7.03;
14. Such other costs and expenses as are specifically provided for
elsewhere in the Agreement or are otherwise reasonably necessary for the proper
and efficient operation of the Hotel.
"Net Proceeds from Capital Transactions" shall mean all cash receipts from
--------------------------------------
a Capital Transaction (including any cash realized upon the sale or discount of
any evidence of indebtedness received by Owner on account of any Capital
Transaction), less (i) the amount of cash applied by Owner to the payment of
debts and obligations of Owner (including any Qualified First Mortgage and
nonrecourse debts related to the particular Capital Transaction but excluding
debts and obligations of Owner to any partner or affiliate of any partner of
Owner); and (ii) the amount of cash paid or to be paid by Owner in connection
with expenses (other than expenses payable
- 8 -
<PAGE>
to any partner or affiliate of any partner of Owner) associated with such
Capital Transaction (which shall include, with regard to damage recoveries or
insurance or condemnation proceeds, cash paid or to be paid in connection with
repairs, replacements or renewals, in the discretion of Owner, relating to
damage or partial condemnation of the Hotel.
"Net Proceeds from Refinancings" shall mean all cash receipts arising from
------------------------------
a Refinancing less (i) the amount of cash paid or to be paid by Owner for
expenses in connection with such Refinancing and for repayment of a previously
incurred Qualified First Mortgage; and (ii) the cost of any expansion of the
Hotel approved by Management Company.
"Non-Defaulting Party" shall have the meaning ascribed to it in Section
--------------------
15.02B.
"Operating Loss" shall mean a negative Net House Profit.
--------------
"Owner" shall mean the Partnership for so long as it continues to own the
-----
Hotel or any successor owner thereof.
"Owners Capital" shall mean an amount equal to $11,964,000.
--------------
"Partnership" shall have the meaning set forth in the Preamble.
-----------
"Qualified First Mortgage" shall mean the Initial First Mortgage or any
------------------------
first mortgage securing a loan incurred for the purpose of refinancing either
the Initial First Mortgage or any successor first mortgage incurred for such
purpose.
"Refinancing" shall mean any first mortgage refinancing or borrowing the
-----------
proceeds of which are applied to the repayment of
- 9 -
<PAGE>
a Qualified First Mortgage and includes a sale and leaseback if no taxable gain
is recognized for federal income tax purposes.
"Renewal Terms" shall have the meaning ascribed to it in Section 4.01.
-------------
"Repairs and Equipment Reserve" shall have the meaning ascribed to it in
-----------------------------
Section 7.02A.
"Repairs and Equipment Estimate" shall have the meaning ascribed to it in
------------------------------
Section 7.02D.
"Reserve" shall have the meaning ascribed to it in Section 7.02A.
-------
"Site" shall have the meaning ascribed to it in Section 3.01.
----
"Standaside Amount" means the sum of (a) rental payable under the Ground
-----------------
Lease, (b) principal and interest payments actually due with respect to the
first $25,500,000 principal amount of a Qualified First Mortgage, and (c)
$1,020,000; provided, however, that (i) any principal payments under clause (b)
shall not include any "balloon" payments due on maturity nor shall any such
payments exceed amortization payments determined on a thirty-year amortization
schedule, and (ii) any prepayment of any portion of the Initial First Mortgage
shall not, for the purposes hereof, be deemed to reduce the amount otherwise
computed under clause (b).
"Termination" shall mean the expiration or sooner cessation of the
-----------
Agreement.
- 10 -
<PAGE>
"Uniform System of Accounts" shall mean the Uniform System of Accounts for
--------------------------
Hotels, Eighth Revised Edition, 1987, 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 Hotel's business including, without limitation,
amounts sufficient for the maintenance of change and petty cash funds, operating
bank accounts, receivables, payrolls, prepaid expenses, and funds required to
maintain Inventories, less accounts payable and accrued current liabilities.
END OF ARTICLE I
- 11 -
<PAGE>
ARTICLE II
APPOINTMENT OF MANAGEMENT COMPANY
---------------------------------
2.01 Appointment
-----------
Owner hereby appoints and employs Management Company as Owner's exclusive
agent to supervise, direct, and control the management of the Hotel for the term
provided in Article IV. Management Company accepts said appointment and agrees
to manage the Hotel during the term of the Agreement in accordance with the
terms and conditions hereinafter set forth. The performance of all activities by
Management Company hereunder shall be for the account of Owner.
2.02 Delegation of Authority
-----------------------
Hotel operations shall be under the exclusive supervision and control of
Management Company, which, except as otherwise specifically provided in the
Agreement, shall be responsible for the proper and efficient operation of the
Hotel. Management Company shall have discretion and control, free from
interference, interruption, or disturbance, in all matters relating to the
management and operation of the Hotel, including, without limitation, charges
for rooms and commercial space, credit policies, food and beverage services,
employment policies, granting of concessions or leasing of shops and agencies
within the Hotel, receipt, holding and disbursement of funds, maintenance of
bank accounts, procurement of
- 12 -
<PAGE>
inventories, supplies, and services, promotion and publicity, and generally, all
activities necessary for operation of the Hotel.
2.03 No Covenants or Restrictions
----------------------------
Owner warrants that there are on the Effective Date no covenants or
restrictions that would prohibit or limit Management Company, after the
necessary licenses and permits therefor have been obtained, from operating the
Hotel, including cocktail lounges, restaurants, and other facilities customarily
a part of or related to a first-class hotel. Owner agrees upon request by
Management Company to sign promptly and without charge applications for
licenses, permits, or other instruments necessary for the operation of the
Hotel.
END OF ARTICLE II
- 13 -
<PAGE>
ARTICLE III
HOTEL
-----
3.01 Ownership of Hotel
------------------
A. Owner hereby covenants that it holds good and marketable 1easehold
title to the Site and that it will have, keep and maintain good and marketable
leasehold title interest therein free and clear of any and all liens,
encumbrances, or other charges except as follows:
1. The terms and conditions of the Ground Lease.
2. Easements or other encumbrances (other than those described in
subsection 3 and 4 hereof) that do not adversely affect the operation of the
Hotel by Management Company.
3. A Qualified First Mortgage.
4. Mortgages, deeds of trust, or similar security instruments that
contain a provision 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.
5. Liens for taxes, assessments, levies or other public charges not
yet due or that are being contested in good faith.
B. Owner shall pay and discharge, on or before the due date, (i) any rental
or other payment required of the tenant under the Ground Lease and (ii) any and
all installments of
- 14 -
<PAGE>
principal and interest due and payable upon any mortgage, deed of trust, or like
instrument described in this Section 3.01 and shall indemnify Management Company
from and against all claims, litigation, and damages arising from the wrongful
failure to make such payments as and when required. Management Company shall
abide by all of the terms of the Ground Lease but shall have nc affirmative
obligations of the tenant under it.
END OF ARTICLE III
- 15 -
<PAGE>
ARTICLE IV
TERM
----
4.01 Term
----
The initial term ("Initial Term") of the Agreement shall commence with the
Effective Date and, unless sooner terminated as herein provided, shall continue
through and including the last day of Fiscal Year 2008. The term may thereafter
be renewed by Management Company, at its option (on the same terms and
conditions contained herein), for each of five (5) successive periods of ten
(10) Fiscal Years ("Renewal Terms): provided that Management Company shall have
no such right of renewal if, at that time, Owner has the right to terminate this
Agreement under Section 15.01 or 15.02. If Management Company elects to exercise
any such option to renew, it shall give Owner notice to that effect at least
twelve (12) months before the expiration of the then current term.
END OF ARTICLE IV
- 16 -
<PAGE>
ARTICLE V
COMPENSATION OF MANAGEMENT COMPANY
----------------------------------
5.01 Management Fee
--------------
A. In consideration of services to be performed during the term of this
Agreement, Management Company shall be paid the annual sum of the following as
its management fee:
1. the Base Management Fee which shall be treated as a Deduction in
the determination of any Net House Profit (or Operating Loss); plus
2. an "Incentive Management Fee" equal to twenty percent (20%) of Net
House Profit in each Fiscal Year thereof. Payment of the Incentive Management
Fee shall be subject to the provisions of Sections 5.01B, 5.02 and 5.03 below.
B. In each Fiscal Year (and in each Accounting Period within each Fiscal
Year) during the term of this Agreement, Net House Profit shall be applied in
the following sequence:
1. As to any Accounting Period after the Effective Date, all Net
House Profit shall be applied as follows:
(a) First, Net House Profit shall be retained by Owner until Owner
has received the Standaside Amount; thereafter,
(b) The remaining balance of Net House Profit shall be applied to
the repayment (to the extent of funds available) of any advances (plus
accrued interest thereon) made by Marriott or any of its affiliates
pursuant to the Debt Service Guarantee; thereafter,
- 17 -
<PAGE>
(c) The remaining balance of Net House Profit shall be paid to
Management Company, to be applied to the payment (to the extent of funds
available) of fifty percent (50%) of the amount of its Incentive Management
Fee for the then current Fiscal Year; thereafter,
(d) Up to fifty percent (50%) of the remaining balance of Net
House Profit shall be paid to Management Company, to be applied to the
payment (to the extent of funds available) of the following (in sequence):
(i) fifty percent (50%) of the amount of its Incentive Management Fee for
the then current Fiscal Year, and (ii) the balance of all Contingent
Management Fees not paid for any prior period; thereafter
(e) The remaining balance of Net House Profit shall be retained by
Owner;
provided, however, subsequent to the first full twenty-six Accounting Periods
following the Effective Date (the "Initial Period") no applications of Net House
Profit under clause (d) above will be made with respect to any unpaid Contingent
Management Fees which relate to the Initial Period and Management Company's
entitlement to any such unpaid Contingent Management Fees shall be forever
waived.
C. No Incentive Management Fees or Contingent Management Fees shall be
deemed earned or accrued until Net House Profit is available pursuant to the
terms hereof for the purpose of payment of the same. Upon Termination of the
Management
- 18 -
<PAGE>
Agreement for any reason other than by reason of (1) default by Owner or (2) a
sale of the Hotel or its damage, destruction or condemnation (which in the event
of (2) results in the availability to Owner of Net Proceeds from Capital
Transactions), Management Company shall have no right to receive any of the then
outstanding balance of the Contingent Management Fees.
5.02 Accounting and Interim Payment
------------------------------
A. Within twenty (20) days after the close of each Accounting Period,
Management Company shall submit an interim accounting to Owner showing Gross
Revenues, Deductions, Net House Profit and applications thereof. All such
interim accountings will furnish at least the level of detail shown on Exhibit
"B" hereto. Management Company shall transfer with each accounting any interim
amounts to be retained by Owner and shall pay any interim management fee due
Management Company.
B. Calculations and payments of the management fee and distributions of
Net House Profit made with respect to each Accounting Period, as described in
Section 5.OlA and B hereof, within a Fiscal Year shall be accounted for
cumulatively. Within sixty (60) days after the close of each Fiscal Year,
Management Company shall submit an accounting, as more fully described in
Section 8.01, for such Fiscal Year to Owner, which accounting shall be
controlling over the interim accountings. Any adjustments required by the 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.
- 19 -
<PAGE>
C. Throughout the term of the Debt Service Guarantee (and thereafter, at
the option of the Partnership for so long as the Partnership is the Owner),
Management Company shall withhold, from any amounts otherwise due Owner under
this Section 5.02, to the extent thereof, the amounts needed to make the regular
debt service payments due under a Qualified First Mortgage and the promissory
note (the "Note") which it secures, and Management Company shall, as Owner's
agent, forward such Debt Service Payments directly to Lender.
5.03 Allocation of Net Proceeds from Capital Transactions or Net Proceeds
--------------------------------------------------------------------
from Refinancings.
- -----------------
Net Proceeds from Capital Transactions and/or Net Proceeds from
Refinancings shall be allocated as follows:
1. First, Net Proceeds from Capital Transactions and/or Net Proceeds
from Refinancings shall be retained by Owner in an amount equal to the sum of:
(a) $11,964,000 less the cumulative amount of any prior allocations
to Owner of Net Proceeds from Refinancings or from Net Proceeds from Capital
Transactions; plus
(b) an amount equal to (i) a cumulative eight percent (8%) annual
return (non-compounded) on Owner's Capital, less (ii) the cumulative amount of
any allocation of Net House Profit theretofor retained by Owner pursuant to
Section 5.0lB(l)(a) but only with respect to the amount specified in clause (c)
of the definition of "Standaside Amount"; thereafter
- 20 -
<PAGE>
2. Second, Net Proceeds from Capital Transactions and/or Net Proceeds from
Refinancings shall be applied to the repayment (to the extent of funds
available) of any advances (plus accrued interest thereon) made by Marriott or
any of its affiliates pursuant to the Debt Service Guarantee; thereafter
3. The remaining balance of Net Proceeds from Capital Transactions and/or
Net Proceeds from Refinancings shall be paid to Management Company, to be
applied to the payment (to the extent of funds available) of the balance of all
Contingent Management Fees (other than Contingent Management Fees no longer
payable by virtue of the proviso to Section 502B) not paid in prior Fiscal Years
or prior Accounting Periods of the same Fiscal Year; thereafter
4. The remaining balance of Net Proceeds from Capital Transactions and/or
Net Proceeds from Refinancings shall be retained by Owner.
END OF ARTICLE V
- 21 -
<PAGE>
ARTICLE VI
WORKING CAPITAL, INVENTORIES AND FIXED ASSET SUPPLIES
-----------------------------------------------------
6.01 Working Capital and Inventories
-------------------------------
Owner shall, on the Effective Date, provide the funds necessary to supply
the Hotel with Working Capital and Inventories and shall from time to time
thereafter promptly advance, upon request of Management Company, any additional
funds necessary to maintain Working Capital and Inventories at levels determined
by Management Company to be necessary to satisfy the needs of the Hotel as its
operation may from time to time require. Working Capital and Inventories so
advanced shall remain the property of Owner throughout the term of the
Agreement. Upon Termination, Owner shall retain any of its unused Working
Capital and Inventories, except for Inventories purchased by Management Company
under Section 9.02.
6.02 Fixed Asset Supplies
--------------------
Owner shall provide the funds necessary to supply the Hotel with Fixed
Asset Supplies and shall from time to time thereafter promptly advance, upon
request of Management Company, any additional funds necessary to maintain Fixed
Asset Supplies at levels determined by Management Company to be necessary to
satisfy the needs of the Hotel as its operation may from time to time require.
Fixed Asset Supplies shall remain the property of Owner throughout the term of
the Agreement, except for Fixed Asset Supplies purchased by Management Company
under Section 9.02.
END OF ARTICLE VI
- 22 -
<PAGE>
ARTICLE VII
REPAIRS, MAINTENANCE, AND REPLACEMENTS
--------------------------------------
7.01 Routine Repairs and Maintenance
-------------------------------
Management Company shall 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 Net House Profit. The cost of
non-routine repairs and maintenance, either to the Hotel building or its
fixtures, furniture, furnishings, and equipment ("FF&E") shall be paid for in
the manner described in Sections 7.02 and 7.03.
7.02 Repairs and Equipment Reserve
-----------------------------
A. Management Company shall establish an escrow reserve account (the
"Repairs and Equipment Reserve" or the "Reserve") in a bank designated by
Management Company to cover the cost of:
1. Replacements and renewals to the Hotel's FF&E; and
2. Certain routine repairs and maintenance to the Hotel building that
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
- 23 -
<PAGE>
that are not major repairs, alterations, improvements, renewals, or replacements
to the Hotel building's structure or to its mechanical, electrical, heating,
ventilating, air conditioning, plumbing, or vertical transportation systems, the
cost of which are Owner's sole responsibility under Section 7.03.
B. During the period of time up to the expiration of the first full
Fiscal Year after the Effective Date, Management Company shall transfer into the
Reserve an amount equal to one percent (1%) of Gross Revenues for such period of
time; during the second full Fiscal Year after the Effective Date, Management
Company shall transfer into the Reserve an amount equal to two percent (2%) of
Gross Revenues for such Fiscal Year; during the third, fourth, and fifth full
Fiscal Years after the Effective Date, Management Company shall transfer into
the Reserve an amount equal to three percent (3%) of Gross Revenues for each of
such Fiscal Years; during the sixth through the tenth full Fiscal Years after
the Effective Date, Management Company shall transfer into the Reserve an amount
equal to four percent (4%) of Gross Revenues for each of such Fiscal Years;
commencing with the eleventh full Fiscal Year after the Effective Date and for
all Fiscal Years thereafter, subject to the provisions of section 8.02 E,
Management Company shall transfer into the Reserve an amount equal to five
percent (5%) of Gross Revenues for each of such Fiscal Years.
- 24 -
<PAGE>
C. Management Company shall from time to time make such (1) replacements
and renewals to the Hotel's FF&E, and (2) repairs to the Hotel building of the
nature described in Section 7.02A 2, as it deems necessary, up to the balance in
the Repairs and Equipment Reserve. No expenditures shall be made from the
Reserve other than as set forth in the preceding sentence. No expenditures shall
be made in excess of said balance without the approval of Owner. 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 and credited against the amount otherwise required to be deposited in
the Reserve under Section 7.02B, as shall any interest that accrues on amounts
in the Reserve.
D. Management Company shall prepare an estimate ("Repairs and Equipment
Estimate") of the expenditures necessary for (1) replacements and renewals to
the Hotel's FF&E, and (2) repairs to the Hotel building of the nature described
in Section 7.02A 2, during the ensuing Fiscal Year and shall submit such Repairs
and Equipment Estimate to Owner at the same time as it submits the Annual
Operating Projection described in Section 8.03. If Owner fails to approve the
Repairs and Equipment Estimate within thirty (30) days of its receipt,
Management Company may terminate this Agreement upon six (6) months written
notice to Owner.
- 25 -
<PAGE>
E. The contributions for the Repairs and Equipment Reserve described in
Section 7.02B are estimates based on Management Company's prior experience with
new hotels. 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 building of the nature
described in Section 7.02A 2, or which are required to maintain the Hotel as a
first-class facility. If the Repairs and Equipment Estimate prepared in good
faith by Management Company exceeds the available funds in the Repairs and
Equipment Reserve, Owner may:
1. Agree to increase the annual percentage in Section 7.02B to
provide the additional funds required, or
2. Arrange to obtain outside financing for the additional funds
required, in which event the principal and interest payments on such financing
shall constitute Deductions in determining Net House Profit.
A failure or refusal by Owner to accept either 1 or 2 above within a
sixty (60) day period after Management Company's request therefor shall entitle
Management Company to terminate the Agreement upon six (6) months' written
notice to Owner.
F. Management Company shall not, however, exercise its option to
terminate under Sections 7.02D or E unless the Parties have made reasonable
efforts to agree on the Repairs and Equipment Estimate.
- 26 -
<PAGE>
7.03 Building Alterations, Improvements, Renewals, and Replacements
--------------------------------------------------------------
A. Management Company shall prepare an annual estimate of the expenses
necessary for major repairs, alterations, improvements, renewals, and
replacements (which repairs, alterations, improvements, renewals and
replacements are not among those referred to in Section 7.02A 2) to the
structural, mechanical, electrical, heating, ventilating, air conditioning,
plumbing, and vertical transportation elements of the Hotel building (the
"Building Estimate") and shall submit such Building Estimate to Owner for its
approval at the same time the Annual Operating Projection is submitted.
Management Company shall not make any expenditures for such purposes without the
prior written consent of Owner, which consent shall not be unreasonably
withheld; provided that if major repairs, alterations, improvements, renewals,
or replacements to the Hotel are required by reason of any law, ordinance,
regulation, or order of a competent government authority, or are otherwise
required for the continued safe and orderly operation of the Hotel, Management
Company shall immediately give Owner notice thereof and shall be authorized to
take appropriate remedial action without such approval if Owner does not act.
The cost of all such repairs, alterations, improvements, renewals, or
replacements shall be borne solely by Owner. Owner may finance such cost, in
which event the principal and interest payments on such financing shall
constitute Deductions in determining Net House Profit.
-27-
<PAGE>
B. If Owner does not approve the Building Estimate as in good faith
recommended by Management Company within sixty (60) days after it has been
submitted, Management Company shall have the option of terminating the Agreement
upon six (6) months' written notice. Management Company shall not, however,
exercise this option unless the parties have made reasonable efforts to agree on
the Building Estimate.
7.04 Liens
-----
Management Company and Owner shall use their best efforts to prevent any
liens from being filed against the Hotel that arise from any maintenance,
repairs, alterations, improvements, renewals, or replacements in or to the
Hotel. They shall cooperate fully in obtaining the release of any such liens,
and the cost thereof, if the lien was not occasioned by the fault of either
party, shall be treated in the same way as the cost of the matter to which it
relates. If the lien arises as a result of the fault of either party, then the
party at fault shall bear the cost of obtaining release of the lien.
7.05 Ownership of Replacements
-------------------------
All repairs, alterations, improvements, renewals or replacements made
pursuant to Article VII shall be the property of Owner.
END OF ARTICLE VII
-28-
<PAGE>
ARTICLE VIII
BOOKKEEPING AND BANK ACCOUNTS
-----------------------------
8.01 Books and Records
-----------------
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 the Agreement. Owner may at reasonable intervals during
Management Company's normal business hours examine such records. Within sixty
(60) days following the close of each Fiscal Year, Management Company shall
furnish Owner a statement in reasonable detail summarizing the Hotel operations
for such Fiscal Year and a certificate of Management Company's chief accounting
officer certifying that such year-end statement is true and correct. Owner
shall have ninety (90) days after receipt to audit, examine, or review said
statement. If Owner raises no objections within said ninety (90) day period, the
statement shall be deemed to have been accepted by Owner as true and correct,
and Owner shall have no further right to question its accuracy; provided,
however, that either Owner or Management Company may thereafter raise any errors
or omissions not apparent from an examination of the statement itself.
8.02 Hotel Accounts, Expenditures
----------------------------
A. All funds derived from operation of the Hotel shall be deposited by
Management Company in Hotel bank accounts in a bank designated by Management
Company and approved by Owner, which approval shall not be unreasonably
withheld. Wherever
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<PAGE>
practicable such bank accounts shall be interest bearing accounts. Withdrawals
from said accounts shall be made by representatives of Management Company whose
signatures have been authorized. Reasonable petty cash funds shall be maintained
at the Hotel.
B. All payments made by Management Company hereunder shall be made from
authorized bank accounts, petty cash funds, or from Working Capital provided by
Owner under Section 6.01. Management Company shall not be required to make any
advance or payment to or for the account of Owner except out of such funds, and
Management Company shall not be obligated to incur any liability or obligation
for Owner's account without assurances that necessary funds for the discharge
thereof will be provided by Owner. Debts and liabilities incurred by Management
Company as a result of its operation and management of the Hotel under 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 Hotel.
8.03 Annual Operating Projection
---------------------------
Management Company shall submit to Owner for its review thirty (30) days
before the beginning of each Fiscal Year after the Effective Date an "Annual
Operating Projection." Such projection shall project the estimated Gross
Revenues, departmental profits, Deductions, and Net House Profit for the
forthcoming Fiscal Year for the Hotel, taking into account the
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Hotel's market area and the integration of the Hotel into the Marriott suites
hotel system. Management Company 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 that unforeseen circumstances such
as, but not limited to, the costs of labor, material, services and supplies,
casualty, operation of law, or economic and market conditions may make adherence
to the Annual Operating Projection impracticable, and Management Company shall
be entitled to depart therefrom due to causes of the foregoing nature.
Management Company shall also make available updated projections to the extent
Management Company prepares such updates.
8.04 Operating Losses; Credit
------------------------
A. To the extent there is an Operating Loss, additional funds in the amount
thereofsuch deficiency shall be provided by Owner within ten (10) days after
Management Company has given written notice to Owner of such Operating Loss.
B. In no event shall either party borrow money in the name of or pledge the
credit of the other.
END OF ARTICLE VIII
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ARTICLE IX
TRADEMARK AND TRADE NAME
------------------------
9.01 Marriott Name
-------------
Management Company represents and warrants that, pursuant to written
agreement with Marriott Corporation, it has the right to use the "Marriott"
name in connection with management of the Hotel hereunder. Accordingly, during
the term of the Agreement, the Hotel shall be known as a "Marriott" hotel, with
such additional identification as may be necessary to provide local
identification. If the name of the Marriott suites hotel system is changed,
Management Company shall have the right to change the name of the Hotel to
conform thereto. The name "Marriott" when used alone or in connection with
another word or words and the Marriott trademarks, trade names, symbols, logos,
and designs shall in all events remain the exclusive property of Marriott, and
nothing contained herein shall confer on Owner the right to use the Marriott
name, trademarks, trade names, symbols, logos, or designs otherwise than in
strict accordance with the terms of the Agreement. Except as provided in Section
9.02, upon Termination, any use of or right to use the Marriott name,
trademarks, trade names, symbols, logos, or designs by Owner shall cease
forthwith and Owner shall promptly remove from the Hotel any signs or similar
items that contain the Marriott name, trademarks, trade names, symbols, logos,
or designs.
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9.02 Purchase of Inventories and Fixed Asset Supplies
------------------------------------------------
Upon Termination, Management Company 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 Marriott name or any Marriott trademark, trade name, symbol,
logo, or design. Should the removal of any such items result in damage to other
Hotel property, Management Company shall be responsible for repairing such harm.
In the event Management Company does not exercise its purchase option, Owner
agrees that it will use any such items not so purchased exclusively in
connection with the Hotel until they are consumed.
9.03 Breach of Covenant
------------------
Management Company and/or its affiliated companies shall be entitled, in
case of any breach of the covenants of Article IX by Owner or others claiming
through it, to injunctive relief and to any other right or remedy available at
law. Article IX shall survive Termination.
END OF ARTICLE IX
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ARTICLE X
POSSESSION AND USE OF HOTEL
---------------------------
10.01 Payment of Ground Rent and Other Charges
----------------------------------------
Owner covenants to promptly pay and discharge (i) any and all rentals due
and owing pursuant to the Ground Lease, and (ii) any payments and charges
necessary to assure continued operation of the Hotel by the Management Company.
10.02 Use
---
A. Management Company shall use the Hotel solely for the operation of a
suite hotel under standards comparable to those prevailing in the Marriott suite
hotel system and for all activities in connection therewith that are customary
and usual to such an operation.
B. Management Company shall have the option to terminate the Agreement at
any time upon sixty (60) days' written notice to Owner in the event of a
withdrawal or revocation, by any lawful governing body having jurisdiction
thereof, of any material license or permit required for Management Company's
performance hereunder where such withdrawal or revocation is due to
circumstances beyond Management Company's control.
10.03 Chain Services
--------------
Management Company shall, commencing with the Opening Date and thereafter
during the term of this Agreement, cause to be furnished to the Hotel certain
services ("Chain Services") that are furnished generally on a central or
regional basis to other
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hotels in the Marriott suite hotel chain and that benefit the Hotel as a
participant in the chain. Chain Services shall include: (i) national sales
office services; central training services, central advertising and promotion
(including direct and image media and advertising administration); the Marriott
national reservations system and the Marriott computer payroll and accounting
services; and (ii) such additional central or regional services as may from time
to time be furnished for the benefit of the Hotels or in substitution for
services now performed at the Hotels that may be more efficiently performed on a
group basis. Costs and expenses incurred in the providing of such services shall
be allocated on a fair and equitable basis among all Marriott hotels (whether or
not suite hotels) owned, leased, or managed by Management Company in the United
States receiving the same.
END OF ARTICLE X
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<PAGE>
ARTICLE XI
INSURANCE
---------
11.01 Property Insurance
------------------
A. Management Company shall, commencing with the Effective Date and during
the term of the Agreement, procure and maintain, using funds deducted from Gross
Revenues, with insurance companies reasonably acceptable to Owner and licensed
to do business in the State of Illinois, 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 Management Company at the other hotels it leases or manages under the
Marriott name in the United States, all in an amount not less than ninety
percent (90%) of the replacement cost thereof;
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 Paragraphs ll.0lA 1 and 2, of a type and in amounts and
with such deductible limits as are generally established by
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Management Company at the other hotels it leases or manages under the Marriott
name in the United States.
B. All policies of insurance required under Paragraphs 11.01A 1, 2, and 3
shall be carried in the name of Owner and the holder of the first-lien
permanent mortgage on the Hotel; any losses thereunder shall be payable to the
parties as their respective interests may appear.
C. Any mortgage on the Hotel shall contain provisions to the effect that
proceeds of the insurance policies required to be carried under Section 11.01
shall be available for repair and restoration of the Hotel.
11.02 Operational Insurance
---------------------
Management Company shall, commencing with the Opening Date and during the
term of the Agreement, procure and maintain, using funds deducted from Gross
Revenues, either with insurance companies reasonably acceptable to Owner and
licensed to do business in the State of Illinois, or by legally qualifying as a
self insurer therein, the following insurance:
A. Workers' compensation and employer's liability insurance as may be
required under applicable laws covering all of Management Company's employees at
the Hotel, with such deductible limits or self-insured retentions as are
generally established by Management Company at the other hotels it leases or
manages under the Marriott name in the United States;
B. Fidelity bonds, with reasonable limits and deductibles to be determined
by Management Company, covering
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<PAGE>
its employees in job classifications normally bonded in the other hotels it
leases or manages under the Marriott name in the United States or as otherwise
required by law, and comprehensive crime insurance to the extent Management
Company and Owner mutually agree it is necessary for the Hotel;
C. Comprehensive general public 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 one hundred million dollars
($100,000,000) for each occurrence for personal injury, death, and property
damage, with such deductible limits or self-insured retentions as are generally
established by Management Company at the other hotels it leases or manages under
the Marriott name in the United States;
D. Such other insurance in amounts as Management Company in its reasonable
judgment deems advisable for protection against claims, liabilities, and losses
arising out of or connected with the operation of the Hotel.
11.03 Coverage
--------
All insurance described in Sections 11.01 and 11.02 may be obtained by
Management Company by endorsement or equivalent means under its blanket
insurance policies, provided that such blanket policies substantially fulfill
the requirements specified herein. Deductible limits and self-insured
retentions shall be as provided in the blanket policies
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<PAGE>
covering the hotels leased or managed by Management Company under the Marriott
name in the United States. In addition, Management Company may (if it has
legally qualified to do so) self-insure or otherwise retain such risks or
portions thereof as it does with respect to other hotels it leases or manages
under the Marriott name in the United States.
11.04 Cost and Expense
----------------
Insurance premiums and any costs or expenses with respect to the insurance
described in Sections 11.01 and 11.02, including insurance reinsured by a
subsidiary of Management Company, shall be Deductions in determining Net House
Profit. Premiums on policies for more than one year shall be charged pro rata
against Gross Revenues over the period of the policies. The expenses incurred in
maintaining Management Company'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, or fall within
deductible limits or self-insured retentions, shall be treated as a cost of
insurance and shall be Deductions in determining Net House Profit. Upon
Termination, an escrow fund in an amount acceptable to Owner and Management
Company shall be established from Gross Revenues (or, if Gross Revenues are not
sufficient, with funds provided by Owner) to cover the amount of any deductible
limits or self-insured retentions and all other costs that will eventually have
to be paid by either Owner or Management
- 39 -
<PAGE>
Company with respect to pending or contingent claims, including those that arise
after Termination for causes arising during the term of the Agreement.
11.05 Policies and Endorsements
-------------------------
A. Where permitted, all insurance provided under Article XI shall name
Management Company and Owner as named insureds. The party procuring such
insurance shall deliver to the other party certificates of insurance with
respect to all policies so 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 this Article XI shall, to
the extent obtainable, have attached thereto an endorsement that such policy
shall not be cancelled or materially changed without at least thirty (30) days'
prior written notice to Owner and Management Company.
11.06 Insurance Required by Mortgagee
-------------------------------
For so long as the Partnership is the Owner and to the extent that the
mortgagee under any Qualified First Mortgage shall require, in accordance with
usual practice in the lending industry, any insurance coverages or amounts in
excess of that otherwise required by this Article XI, the Management Company, as
agent for Owner, shall use its reasonable best efforts to obtain such insurance,
the cost of which shall be paid for by the Owner and be a Deduction.
END OF ARTICLE XI
- 40 -
<PAGE>
ARTICLE XII
TAXES
-----
12.01 Real Estate and Personal Property Taxes
---------------------------------------
A. All real estate and personal property taxes, levies, assessments, and
similar charges on or relating to the Hotel ("Impositions") during the term of
the Agreement shall be paid by Owner, at its sole expense, before any fine,
penalty, or interest is added thereto or lien placed upon the Hotel or the
Agreement, unless payment thereof is in good faith being contested and
enforcement thereof is stayed. Owner shall, within the earlier of thirty (30)
days of payment or three (3) days following written demand by Management
Company, furnish Management Company with copies of official tax bills and
assessments and evidence of payment or contest thereof.
B. For so long as the Partnership is the Owner, the Management Company
will, at the option and request of the Partnership and as the agent of the
Partnership, cause the timely payment of any Impositions using funds available
from Gross Revenues for such purpose or as may otherwise be provided by the
Partnership for such purpose. In no event shall the Management Company have any
personal liability for the payment of any Impositions.
END OF ARTICLE XII
<PAGE>
ARTICLE XIII
HOTEL EMPLOYEES
---------------
13.01 Employees
---------
A. All personnel employed at the Hotel shall at all times be the employees
of Management Company. Management Company shall have absolute discretion to
hire, 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. Management Company shall decide, in accordance with standards
established for the operation of the Marriott full-service hotel system, which,
if any, of the Hotel's employees shall reside at the Hotel, and shall be
permitted to provide free accommodations and amenities to its employees and
representatives living at or visiting the Hotel in connection with its
management or operation. No person shall otherwise be given gratuitous
accommodations or services without prior joint approval of Owner and Management
Company, except in accordance with usual practices of the hotel and travel
industry.
C. Upon Termination, other than because of (i) default of Management
Company, (ii) the expiration of the Initial or any Renewal Term, or (iii) the
provisions of Sections 14.02, 14.03, or 18.01, an escrow fund shall be
established from Gross Revenues (or, if Gross Revenues are not sufficient, with
funds provided by Owner) to reimburse Management Company for all
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<PAGE>
costs and expenses incurred by Management Company such as reasonable transfer
costs, severance pay, unemployment compensation, and other employee liability
costs arising out of either the transfer or termination of employment of
Management Company's employees at the Hotel, as the case may be.
END OF ARTICLE XIII
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<PAGE>
ARTICLE XIV
DAMAGE, CONDEMNATION AND FORCE MAJEURE
--------------------------------------
14.01 Damage and Repair
-----------------
A. If during the term hereof, the Hotel is 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 the
Hotel to the same condition as existed previously. Owner's obligation to repair
or replace shall, however, be limited to the amount of insurance proceeds
available for such purpose plus the amount of any funds in the Reserve.
B. In the event damage or destruction to the Hotel from any cause
materially and adversely affects the operation of the Hotel and Owner fails to
promptly commence and complete the repairing, rebuilding, or replacement of the
same so that the Hotel shall be substantially the same as it was prior to such
damage or destruction, Management Company may, at its option, elect either to
undertake such work for the account of Owner or terminate the Agreement upon
sixty (60) days written notice.
14.02 Condemnation
------------
A. In the event all or substantially all of the Hotel shall be taken in any
eminent domain, condemnation, compulsory acquisition, or similar proceeding by
any competent authority for any public or quasi-public use or purpose, or in
the event a portion of the Hotel shall be so taken, but the result is that it is
unreasonable to continue to operate the Hotel, the
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<PAGE>
Agreement shall terminate and Owner and Management Company shall each have the
right to initiate such proceedings as they deem advisable to recover any damages
to which they may be entitled.
B. In the event a portion of the Hotel shall be taken by the events
described in Section 14.02A, or the entire Hotel is affected but on a temporary
basis, and the result is not to make it unreasonable to continue to operate the
Hotel, the Agreement shall not terminate. However, so much of any award for any
such partial taking or condemnation as shall be necessary to render the Hotel
equivalent to its condition prior to such event shall be used for such purpose;
the balance of such award, if any, shall be fairly and equitably apportioned
between Owner, and Management Company in accordance with their respective
interests.
14.03 Force Majeure
-------------
If acts of God, acts of war, civil disturbance, governmental action,
including the revocation of any license or permit necessary for the operation
contemplated in the Agreement where such revocation is not due to Management
Company's fault, or any other causes beyond the control of Management Company
shall, in Management Company's reasonable opinion, have a significant adverse
effect upon operations of the Hotel, then Management Company shall be entitled
to terminate the Agreement upon sixty (60) days written notice.
END OF ARTICLE XIV
- 45 -
<PAGE>
ARTICLE XV
DEFAULTS
--------
15.01 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 of the Agreement 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 the Agreement,
and the continuance of such default for a period of thirty (30) days after
notice of said failure.
C. The filing by either party of a petition for liquidation under chapter
VII of the bankruptcy laws, or the filing of such a petition against either
party and such party fails to have such petition vacated within ninety (90)
days.
15.02 Remedies.
--------
A. It is the intention of the parties that the Agreement shall be
terminable under Section 15.OlA or B only in the event of a material default.
For this purpose, a material default shall be deemed to exist where the alleged
default involves willful misconduct or where the defaulting party, by reason of
its past conduct, has demonstrated an unwillingness or
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<PAGE>
inability to discharge its obligations under the Agreement satisfactorily.
B. If either party alleges that the other party has committed an act of
default under Section l5.OlA or B, the party alleging such default (the
"Non-Defaulting Party") shall first serve notice and demand upon the other
party (the "Defaulting Party") outlining the facts and circumstances of the
alleged default and requesting performance under the Agreement, damages,
termination, or such other relief as the Non-Defaulting Party deems
appropriate. The Defaulting Party shall have ten (10) days within which to reply
and may either (i) accede to the demand or (ii) dispute the same in whole or in
part.
C. If the Defaulting Party admits the existence of default, it shall:
1. In the event of a non-monetary default, promptly and with all due
diligence cure such default within thirty (30) days, or if such default is not
susceptible of being cured within thirty (30) days, proceed immediately to cure
such default in the shortest possible time, or
2. In the event of a monetary default, pay the amount demanded within
ten (10) days.
If the Defaulting Party fails to cure the default within the time specified
in this Paragraph 15.02C (and in the case of a default that is not susceptible
of being cured within thirty (30) days within a reasonable time after the
expiration of such
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<PAGE>
thirty (30) day period), a material default shall be deemed to have occurred,
and the Non-Defaulting Party may, at its option, terminate the Agreement
effective as of the date of default and/or seek damages and/or such other
remedies available at law or in equity.
D. If the Defaulting Party disputes the claim or demand of the
Non-Defaulting Party within said ten (10) days period, and if the parties are
unable to reconcile such dispute within the following thirty (30) days, the
existence or nonexistence of a default shall be determined by arbitration in
accordance with the then rules of the American Arbitration Association, with
such arbitration to take place in Chicago, Illinois. The arbitrator shall be
bound by the terms and conditions of the Agreement and, except as hereinafter
specifically provided, shall be limited to deciding (i) whether or not a default
has occurred and (ii) if a default is determined to have occurred, whether or
not such default is a material default. If the arbitrator determines that the
default is not material, the provisions of Paragraph 15.02C shall apply. If the
arbitrator determines that a material default has occurred, the Non-Defaulting
Party may, at its option, terminate the Agreement effective as of the date of
default and/or seek damages, specific performance, or such other remedies as may
be available to it at law or in equity.
E. If the Defaulting Party neither accedes to nor disputes the demand, the
Defaulting Party shall be deemed to
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<PAGE>
have admitted the existence of a material default and the Non-Defaulting party
may, at its option, terminate the Agreement, seek damages, specific performance,
and/or such other remedies as may be available to it at law or in equity.
15.03 Performance Termination
-----------------------
A. If the average Net House Profit of the Hotel during any five (5)
consecutive full Fiscal Years during the term of this Agreement (not including
any period of time before the expiration of the third (3rd) full Fiscal Year
following the Effective Date) fails to exceed the sum of two million five
hundred sixty thousand dollars ($2,560,000) plus eight percent (8%) of the
aggregate costs incurred by Owner in any subsequent expansion, rehabilitation,
or re-equipping of the Hotel (including any capitalized interest, real estate
taxes, or other amounts that under generally accepted accounting principles
would be included as part of the cost of the Hotel), Owner shall, subject to the
conditions of Section 15.02B, have the option to end the term of the Agreement.
Such option shall be exercisable by serving written notice of Owner's election
to end the term of the Agreement on Management Company not later than ninety
(90) days after receipt of the annual accounting for such fifth consecutive
Fiscal Year. Such notice shall state the basis on which Owner asserts the right
of termination and shall show all mathematical calculations on which such
assertion is made.
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<PAGE>
B. On receipt of Owner's written notice under Section 15.03A, Management
Company 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 15.03A and that constituted the basis for said notice. If Management
Company does not exercise its option to make the payment permitted by this
Section 15.03B, then the term of this Agreement shall end upon the expiration of
the aforesaid thirty (30) day option period as though the term hereof had
expired without renewal.
END OF ARTICLE XV
- 50 -
<PAGE>
ARTICLE XVI
WAIVER AND PARTIAL INVALIDITY
-----------------------------
16.01 Waiver
------
The failure of either party to insist upon a strict performance of any of
the terms or provisions of the Agreement, or to exercise any option, right, or
remedy herein contained, shall not be construed as a waiver or as a
relinquishment for the future of such term, provision, option, right or remedy,
but the same shall continue and remain in full force and effect. No waiver by
either party of any term or provision hereof shall be deemed to have been made
unless expressed in writing and signed by such party.
16.02 Partial Invalidity
------------------
If any portion of the Agreement shall be declared invalid by order, decree
or judgment of a court, the Agreement shall be construed as if such portion had
not been inserted herein except when such construction would operate as an undue
hardship on Management Company or Owner or constitute a substantial deviation
from the general intent and purpose of said parties as reflected in the
Agreement.
END OF ARTICLE XVI
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<PAGE>
ARTICLE XVII
ASSIGNMENT
----------
17.01 Assignment
----------
A. Neither party shall assign or transfer or permit the assignment or
transfer of the Agreement without the prior written consent of the other;
provided, however, that Management Company shall have the right, without such
consent, to (1) assign its interest in the Agreement to any of its affiliated
companies in the same line of business as Management Company, and any such
assignee shall be deemed to be the Management Company for the purposes of the
Agreement, and (2) 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 the
Agreement; and, provided further, that the Partnership shall have the right,
without such consent, to assign its interest in the Agreement to any partnership
in which Marriott or an affiliate is a general partner. Nothing contained herein
shall prevent (i) the conditional assignment of the Agreement as security for
any mortgage that Management Company approves on the Hotel; (ii) the transfer of
the Agreement in connection with a merger or consolidation or a sale of all or
substantially all of the assets of either party or their respective affiliated
companies; or (iii) an assignment of the Agreement in connection with an
approved sale of the Hotel pursuant to Section 18.O1A 2.
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<PAGE>
B. In the event 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 Owner or
Management Company of its interest in the Agreement shall not relieve Owner or
Management Company, 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.
END OF ARTICLE XVII
- 53 -
<PAGE>
ARTICLE XVIII
SALE OF HOTEL
-------------
18.01 Right of First Refusal
----------------------
A. If Owner receives a bona fide written offer to purchase or lease the
Hotel and desires to accept such offer, Owner shall give written notice thereof
to Management Company stating the name of the prospective purchaser or tenant,
as the case may be, the price or rental and the terms and conditions of such
proposed sale or lease, together with all other information requested by
Management Company and reasonably available to Owner. Within ninety (90) days
after the date of receipt of Owner's written notice and such other information,
Management Company shall elect, by written notice to Owner, one of the following
alternatives:
1. To purchase or lease the Hotel at the same price or rental and
upon the same terms and conditions as those set forth in the written notice from
Owner to Management Company or upon other terms acceptable to Owner, in which
event Owner and Management Company shall promptly enter into an agreement for
such sale or lease and shall finalize the same.
2. To consent to such sale or lease and to the assignment of the
Agreement to such purchaser or tenant, provided that concurrently with the
finalization thereof the purchaser or tenant, as the case may be, shall, by
appropriate instrument in form satisfactory to Management Company, assume all of
Owner's obligations hereunder. Such consent shall not
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<PAGE>
relieve Owner from its obligations under the Agreement unless the purchaser or
tenant has a net worth of not less than ten million dollars ($10,000,000), as
adjusted to reflect increases in the consumer price index. An executed copy of
such assumption agreement shall be delivered to Management Company.
3. To terminate the Agreement by written notice to Owner, which
notice will set an effective date for such Termination not earlier than thirty
(30) days, nor more than one hundred and twenty (120) days, following the date
of the giving of such notice. Management Company shall have the right to change
such effective date of Termination to coincide with the date of the finalization
of the proposed sale or lease. Said notice of Termination shall not be effective
if such sale or lease is not finalized. Management Company may only exercise the
option granted in this Paragraph 3 if the proposed purchaser or tenant of the
Hotel (i) is not of good moral character; (ii) is controlled by persons as to
whom Management Company has a reasonable basis for believing either that they
are engaged in criminal activities or that they are associates or agents of
criminals; (iii) directly or indirectly operates or manages hotels, restaurants
or other businesses significantly in competition with Management Company; or
(iv) is not financially responsible, is insolvent, or has a net worth of less
than ten million dollars ($10,000,000), as adjusted to reflect increases in the
consumer price index.
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<PAGE>
B. If Management Company shall fail to elect any of the above alternatives
within said ninety (90) day period, the same shall be conclusively deemed to
constitute an election and consent under Paragraph A 2 above, and the provisions
thereof shall prevail as if Management Company had consented in writing thereto.
Any proposed sale or lease of which notice has been given by Owner to Management
Company hereunder must be finalized within one hundred eighty (180) days
following the giving of such notice, unless Management Company has exercised
its option under subsection 1 above to purchase or lease the Hotel. Failing such
finalization, such notice, and any response thereto given by Management Company,
shall be null and void and all of the provisions of Section 18.01A must again be
complied with before Owner shall have the right to finalize a sale or lease of
the Hotel upon the terms contained in said notice, or otherwise.
C. Any sale, assignment. transfer, or other disposition, for value or
otherwise, voluntary or involuntary, of the controlling interest in Owner (i.e ,
the possession directly or indirectly of the power to direct or cause the
direction of the management and policies of Owner, whether through the ownership
of voting securities, or by contract, or otherwise) other than to an affiliate
of Owner shall be deemed a sale or lease of the Hotel under Section 18.01A and
shall be subject to the provisions thereof. Owner, from time to time, upon
written
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<PAGE>
request of Management Company, shall furnish Management Company with a list of
the names and addresses of the owners of capital stock, partnership interest, or
other proprietary interest in Owner.
END OF ARTICLE XVIII
- 57 -
<PAGE>
ARTICLE XIX
MISCELLANEOUS
-------------
19.01 Right to Make Agreement
-----------------------
Each party warrants, with respect to itself, that neither the execution of
the Agreement nor the finalization of the transactions contemplated hereby shall
violate any provision of law or 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 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 the Agreement and
any extensions thereof, the full right to enter into the Agreement and perform
its obligations hereunder.
19.02 Consents
--------
Wherever in the Agreement the consent or approval of Owner or Management
Company is required, such consent or approval shall not be unreasonably
withheld, shall be in writing and shall be executed by a duly authorized officer
or agent of the party granting such consent or approval. If either Owner or
Management Company fails to respond within thirty (30) days to a request by the
other party for a consent or approval, such consent or approval shall be deemed
to have been given.
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<PAGE>
19.03 Agency
------
The relationship of Owner and Management Company shall be that of principal
and agent, and nothing contained in the Agreement shall be construed to create a
partnership or joint venture between them or their successors in interest.
Management Company's agency established by the Agreement is coupled with an
interest and may not be terminated by Owner until the expiration of the term of
the Agreement, except as provided in Articles XIV or XV.
19.04 Confidentiality
---------------
The parties agree that the matters set forth in the Agreement are strictly
confidential and each party will make every effort to ensure that the
information is not disclosed (other than as required by law) to any outside
person or entities (including the press) without the written consent of the
other party.
19.05 Applicable Law
--------------
The Agreement shall be construed under and shall be governed by the laws of
Illinois.
19.06 Headings
--------
Headings of articles and sections are inserted only for convenience and are
in no way to be construed as a limitation on the scope of the particular
articles or sections to which they refer.
19.07 Notices
-------
Notices, statements and other communications to be given under the terms of
the Agreement shall be in writing and
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<PAGE>
delivered by hand against receipt or sent by certified or registered mail,
postage prepaid, return receipt requested:
To Owner:
--------
Mutual Benefit Chicago Marriott Suite Hotel Partners L.P.
290 Westminster Street
Providence, Rhode Island 02903
With copies to:
--------------
To Management Company:
---------------------
Marriott Hotels, Inc.
10400 Fernwood Road
Bethesda, Maryland 20058
Attention: Law Department
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 be deemed to
have been served as of five (5) days after said posting for purposes of
establishing that the sending party complied with the applicable time
limitations set forth herein, but shall not be binding on the addressee until
actually received.
19.0.8 Limited Liability
-----------------
Management Company agrees that no limited partner of Owner, if any, shall
have any personal liability hereunder in excess of such limited partner's
contribution to the capital of Owner and that Management Company shall have
recourse hereunder for the faithful performance by Owner of its obligations
under the Agreement only to the assets of Owner.
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<PAGE>
19. 09 Entire Agreement
----------------
The Agreement, together with other writings signed by the parties
expressly stated to be supplemental hereto and together with any instruments to
be executed and delivered pursuant to the Agreement, constitutes the entire
agreement between the parties and supersedes all prior understandings and
writings, and may be changed only by a writing signed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused the Agreement to be
executed as of the day and year first written above.
MARRIOTT HOTELS, INC.
(SEAL) By: /s/ Matthew J. Hart
--------------------------------
Vice President
MUTUAL BENEFIT CHICAGO MARRIOTT
SUITE HOTEL PARTNERS, L.P.
By MB Investment Properties, Inc.
General Partner
By: /s/ [SIGNATURE APPEARS HERE]
--------------------------------
Vice President
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<PAGE>
EXHIBIT A
THE LAND:
THAT PART OF THE WEST 1/2 OF SECTION 3, TOWNSHIP 40 NORTH, RANGE 12 EAST OF THE
THIRD PRINCIPAL MERIDIAN DESCRIBED AS FOLLOWS: BEGINNING AT THE INTERSECTION OF
THE SOUTH LINE OF THE NORTH WEST 1/4 OF SAID SECTION 3 WITH THE EASTERLY LINE OF
RIVER ROAD AS WIDENED BY CONDEMNATION IN CASE NO. 59C 16022 AND) SHOWN ON PLAT
RECORDED AS DOCUMENT NO. 19251267; THENCE NORTH 05 DEGREES 11 MINUTES 36 SECONDS
EAST ALONG SAID EASTERLY LINE OF RIVER ROAD AS WIDENED, 395.35 FEET; THENCE
NORTH 79 DEGREES 26 MINUTES 12 SECONDS WEST, 0.91 FEET TO THE EASTERLY LINE OF
RIVER ROAD, BEING A LINE 33.00 FEET, AS MEASURED AT RIGHT ANGLES, EASTERLY OF
AND PARALLEL WITH THE CENTER LINE OF SAID ROAD; THENCE NORTH 10 DEGREES 38
MINUTES 35 SECONDS EAST ALONG SAID EASTERLY LINE OF RIVER ROAD, 69.50 FEET;
THENCE NORTH 68 DEGREES 08 MINUTES 35 SECONDS EAST, 56.73 FEET; THENCE NORTH 85
DEGREES 38 MINUTES 35 SECONDS EAST, 47.90 FEET TO A POINT OF CURVATURE; THENCE
NORTHEASTERLY ALONG A CURVED LINE CONVEX SOUTHEASTERLY, HAVING A RADIUS OF
300.00 FEET AND BEING TANGENT TO SAID LAST DESCRIBED LINE AT SAID LAST DESCRIBED
POINT, AN ARC DISTANCE OF 113.14 FEET TO A POINT OF TANGENCY (THE CHORD OF SAID
ARC BEARS NORTH 74 DEGREES 5O MINUTES 21 SECONDS EAST, 112.47 FEET); THENCE
NORTH 64 DEGREES 02 MINUTES 07 SECONDS EAST ALONG A LINE TANGENT TO SAID LAST
DESCRIBED CURVED LINE AT SAID LAST DESCRIBED POINT, 7.87 FEET; THENCE SOUTH 34
DEGREES 21 MINUTES 25 SECONDS EAST, 169.84 FEET; THENCE SOUTH 10 DEGREES 38
MINUTES 35 SECONDS WEST, 3.41 FEET; THENCE SOUTH 79 DEGREES 21 MINUTES 25
SECONDS EAST, 25.00 FEET; THENCE SOUTH 10 DEGREES 38 MINUTES 35 SECONDS WEST,
3.50 FEET; THENCE SOUTH 79 DEGREES 21 MINUTES 25 SECONDS EAST, 24.58 FEET;
THENCE SOUTH 10 DEGREES 38 MINUTES 35 SECONDS WEST, 14.00 FEET; THENCE SOUTH 79
DEGREES 21 MINUTES 25 SECONDS EAST, 15.00 FEET; THENCE SOUTH 10 DEGREES 38
MINUTES 35 SECONDS WEST, 373.67 FEET; THENCE NORTH 79 DEGREES 21 MINUTES 25
SECONDS WEST, 92.50 FEET; THENCE SOUTH 10 DEGREES 38 MINUTES 35 SECONDS WEST,
9.47 FEET; THENCE SOUTH 55 DEGREES 38 MINUTES 35 SECONDS WEST, 178.09 FEET;
THENCE NORTHWESTERLY ALONG A CURVED LINE CONVEX NORTHEASTERLY AND HAVING A
RADIUS OF 355.00 FEET, AN ARC DISTANCE OF 50.35 FEET TO A POINT OF TANGENCY (THE
CHORD OF SAID ARC BEARS NORTH 45 DEGREES 22 MINUTES 25 SECONDS WEST, 50.31
FEET); THENCE NORTH 49 DEGREES 26 MINUTES 12 SECONDS WEST ALONG A LINE TANGENT
TO SAID LAST DESCRIBED CURVED LINE AT SAID LAST DESCRIBED POINT, 101.24 FEET TO
THE EASTERLY LINE OF RIVER ROAD AS WIDENED BY CONDEMNATION IN CASE NO. 59C 16022
AND SHOWN ON PLAT RECORDED AS DOCUMENT NO. 19251267; THENCE NORTH 10 DEGREES 33
MINUTES 48 SECONDS EAST ALONG SAID EASTERLY LINE OF RIVER ROAD AS WIDENED, 11.86
FEET TO THE PLACE OF BEGINNING, IN COOK COUNTY, ILLINOIS.
PARCEL 2:
NON-EXCLUSIVE EASEMENTS IN FAVOR OF THE LEASEHOLD ESTATE DESCRIBED AS PARCEL 1
HEREIN FOR: (A) INGRESS AND EGRESS FOR PEDESTRIAN AND VEHICULAR TRAFFIC IN, OVER
AND THROUGH THE COMMON AREAS LOCATED ON THE ADJACENT TRACT (AS DEFINED BELOW);
(B) INGRESS AND EGRESS FOR
- 1 -
<PAGE>
PEDESTRIAN TRAFFIC IN, OVER AND THROUGH THE ENCLOSED WALKWAY ON THE ADJACENT
TRACT (AS DEFINED BELOW), AND (C) THE LOCATION, INSTALLATION, MAINTENANCE AND
REPAIR OF SATELLITE AND TELECOMMUNICATIONS EQUIPMENT ON THE ADJACENT TRACT (AS
DEFINED BELOW), ALL AS CREATED BY LEASE DATED JUNE 16, 1986, A MEMORANDUM OF
WHICH WAS FILED APRIL 3, 1987 AS DOCUMENT LR3604964, AND RECORDED NOVEMBER 18,
1988 AS DOCUMENT 88535338, MADE BY AND BETWEEN SIMON-ROSEMONT DEVELOPERS AND
MARRIOTT CORPORATION; AND FOR (D) MINOR ENCROACHMENTS OF TENANT'S IMPROVEMENTS
ONTO THE ADJACENT TRACT (AS DEFINED BELOW) DUE TO ENGINEERING ERRORS, ERRORS IN
ORIGINAL CONSTRUCTION, CONSTRUCTION, RECONSTRUCTION, REPAIR, SETTLEMENT OR
SHIFTING OR MOVING OF THE TENANT'S IMPROVEMENTS; (E) INGRESS AND EGRESS OVER THE
ADJACENT TRACT AS REASONABLY NECESSARY FOR THE RECONSTRUCTION, MAINTENANCE,
OPERATION AND REPAIR OF TENANT'S IMPROVEMENTS, AS CREATED BY FIRST AMENDMENT
DATED MARCH 11, 1987 AND FILED APRIL 3, 1987 AS DOCUMENT LR3604965, AND RECORDED
NOVEMBER 18, 1988 AS DOCUMENT 88535337, MADE BY AND BETWEEN SIMON-ROSEMONT
DEVELOPERS AND MARRIOTT CORPORATION.
ADJACENT TRACT:
THAT PART OF THE WEST 1/2 OF SECTION 3, TOWNSHIP 40 NORTH, RANGE 12 EAST OF THE
THIRD PRINCIPAL MERIDIAN, DESCRIBED AS FOLLOWS:
BEGINNING AT THE INTERSECTION OF THE EAST LINE OF THE NORTH WEST 1/4 OF SAID
SECTION 3 WITH THE SOUTHWESTERLY LINE OF HIGGINS ROAD AS MONUMENTED AND
OCCUPIED, BEING A LINE 50.00 FEET, AS MEASURED AT RIGHT ANGLES, SOUTHWESTERLY OF
AND PARALLEL WITH THE CENTER LINE OF SAID ROAD; THENCE SOUTH 01 DEGREES, 51
MINUTES, 13 SECONDS WEST ALONG THE EAST LINE OF THE NORTH WEST 1/4 OF SECTION 3,
375.17 FEET TO THE CENTER OF SAID SECTION 3; THENCE SOUTH 33 DEGREES, 22
MINUTES, 30 SECONDS WEST, 430.74 FEET TO A POINT IN A LINE 357.44 FEET SOUTH OF
AND PARALLEL WITH THE NORTH LINE OF LOT "A" IN BROWN'S SUBDIVISION OF PART OF
SECTION 3, AFORESAID, ACCORDING TO THE PLAT THEREOF RECORDED NOVEMBER 1, 1894 AS
DOCUMENT NO. 2126709, SAID POINT BEING 300 FEET, AS MEASURED ALONG SAID PARALLEL
LINE, WEST OF THE CENTER OF THE DES PLAINES RIVER, (SAID LAST DESCRIBED LINE
BEARING SOUTH 33 DEGREES, 22 MINUTES, 30 SECONDS WEST BEING ALSO THE
SOUTHEASTERLY LINE AND SAID SOUTHEASTERLY LINE EXTENDED NORTHEASTERLY, OF
ROSEMONT INDUSTRIAL CENTER, BEING A SUBDIVISION OF PARTS OF LOTS "A" AND "B" IN
THE SUBDIVISION OF LOTS 18, 19 AND 40 IN ASSESSOR'S SUBDIVISION OF SECTION 3,
AFORESAID, ACCORDING TO THE PLAT OF SAID ROSEMONT INDUSTRIAL CENTER RECORDED
FEBRUARY 17, 1967 AS DOCUMENT NO. 20066369); THENCE SOUTH 12 DEGREES, 10
MINUTES, 59 SECONDS WEST ALONG THE EASTERLY LINE OF SAID ROSEMONT INDUSTRIAL
CENTER, 424.43 FEET TO THE SOUTHEAST CORNER OF LOT 5 IN SAID ROSEMONT INDUSTRIAL
CENTER; THENCE NORTH 62 DEGREES, 21 MINUTES, 00 SECONDS WEST ALONG THE SOUTHERLY
LINE OF SAID LOT 5, 14.88 FEET; THENCE NORTH 00 DEGREES, 06 MINUTES, 04 SECONDS
EAST ALONG A LINE THAT FORMS AN ANGLE OF 62 DEGREES, 27 MINUTES, 04 SECONDS, AS
MEASURED FROM NORTHWEST TO NORTH, WITH THE SOUTHERLY LINE OF SAID LOT 5, 123.48
FEET; THENCE NORTH 89 DEGREES, 53 MINUTES, 56 SECONDS WEST ALONG A LINE AT RIGHT
ANGLES TO SAID LAST DESCRIBED LINE, 44.00 FEET;
- 2 -
<PAGE>
THENCE SOUTH 00 DEGREES, 06 MINUTES, 04 SECONDS WEST ALONG A LINE AT RIGHT
ANGLES TO SAID LAST DESCRIBED LINE, 100.52 FEET TO A POINT ON THE SOUTHERLY LINE
OF SAID LOT 5, 64.50 FEET, AS MEASURED ALONG SAID SOUTHERLY LINE, NORTHWESTERLY
OF THE SOUTHEASTERLY CORNER OF SAID LOT 5; THENCE NORTH 62 DEGREES, 21 MINUTES,
00 SECONDS WEST ALONG THE SOUTHERLY LINE OF LOTS 1, 2 AND 5 IN SAID ROSEMONT
INDUSTRIAL CENTER, 380.62 FEET TO A CORNER OF SAID LOT 1; THENCE CONTINUING
NORTH 62 DEGREES, 21 MINUTES, 00 SECONDS WEST ALONG THE NORTHEASTERLY LINE OF
THE PROPERTY CONVEYED TO THE ILLINOIS STATE TOLL HIGHWAY COMMISSIONERS, 98.07
FEET TO A CORNER OF SAID LOT 1; THENCE CONTINUING NORTH 62 DEGREES, 21 MINUTES,
00 SECONDS WEST ALONG THE SOUTHERLY LINE OF SAID LOT 1, 56.13 FEET TO AN ANGLE
POINT iN SAID LINE; THENCE NORTH 56 DEGREES, 26 MINUTES, 14 SECONDS WEST ALONG
THE SOUTHERLY LINE OF SAID LOT 1, 332.64 FEET TO A SOUTHWEST CORNER OF SAID LOT
1; THENCE NORTH 10 DEGREES, 33 MINUTES, 48 SECONDS EAST ALONG THE WESTERLY LINE
OF SAID LOT 1 AND SAID WESTERLY LINE EXTENDED NORTHERLY, SAID LINE BEING ALSO
THE EASTERLY LINE OF RIVER ROAD AS WIDENED BY CONDEMNATION IN CASE NO. 59C16022
AND SHOWN ON PLAT RECORDED AS DOCUMENT NO. 19251267, 308.05 FEET TO AN ANGLE
POINT IN SAID LINE; THENCE NORTH 05 DEGREES, 11 MINUTES, 36 SECONDS EAST ALONG
SAID EASTERLY LINE OF RIVER ROAD AS WIDENED, 395.35 FEET; THENCE NORTH 79
DEGREES, 26 MINUTES, 12 SECONDS WEST, 0.91 OF A FOOT TO THE EASTERLY LINE OF
RIVER ROAD, BEING A LINE 33.00 FEET, AS MEASURED AT RIGHT ANGLES, EASTERLY OF
AND PARALLEL WITH THE CENTER LINE OF SAID ROAD; THENCE NORTH 10 DEGREES, 38
MINUTES, 35 SECONDS EAST ALONG SAID EASTERLY LINE OF RIVER ROAD, 359.40 FEET TO
AN INTERSECTION WITH THE SOUTHERLY LINE OF LAND TAKEN IN CONDEMNATION CASE NO.
76L17220 AND CASE NO. 76L17222; THE FOLLOWING THREE COURSES ARE ALONG THE
SOUTHERLY, EASTERLY AND NORTHERLY LINE OF LAND TAKEN ITN CONDEMNATION CASE NO.
76L17220 AND CASE NO. 76L17222; THENCE SOUTH 79 DEGREES, 21 MINUTES, 25 SECONDS
EAST, 42.00 FEET; THENCE NORTH 10 DEGREES, 38 MINUTES, 35 SECONDS EAST, 75.00
FEET; THENCE NORTH 79 DEGREES, 21 MINUTES, 25 SECONDS WEST, 37.00 FEET TO AN
INTERSECTION WITH THE EASTERLY LINE OF RIVER ROAD AS PER DOCUMENT NO. 23630528,
BEING A LINE 38.00 FEET, AS MEASURED AT RIGHT ANGLES, EASTERLY OF AND PARALLEL
WITH THE CENTER LINE OF SAID ROAD; THENCE NORTH 10 DEGREES, 38 MINUTES, 35
SECONDS EAST ALONG SAID EAST LINE OF RIVER ROAD, 230.51 FEET; THENCE NORTH 67
DEGREES, 54 MINUTES, 21 SECONDS EAST, 15.62 FEET TO A POINT ON THE SOUTHWESTERLY
LINE OF HIGGINS ROAD AS PER DOCUMENT NO. 11045055, BEING A LINE 50.00 FEET, AS
MEASURED RADIALLY, SOUTHWESTERLY OF AND CONCENTRIC WITH THE CENTER LINE OF SAID
ROAD; THENCE SOUTHEASTERLY ALONG SAID SOUTHWESTERLY LINE OF HIGGINS ROAD. BEING
A CURVED LINE CONVEX NORTHERLY AND HAVING A RADIUS OF 5679.65 FEET, AN ARC
DISTANCE OF 582.99 FEET TO A POINT OF TANGENCY IN SAID LINE (THE CHORD OF SAID
ARC BEARS SOUTH 51 DEGREES, 23 MINUTES, 22 SECONDS EAST, 582.73 FEET); THENCE
SOUTH 48 DEGREES, 26 MINUTES, 56 SECONDS EAST ALONG THE SOUTHWESTERLY LINE OF
SAID HIGGINS ROAD, BEING A LINE TANGENT TO SAID LAST DESCRIBED CURVED LINE AT
SAID LAST DESCRIBED POINT, 73.57 FEET TO A POINT OF CURVATURE IN SAID
SOUTHWESTERLY LINE OF HIGGINS ROAD; THENCE SOUTHEASTERLY ALONG THE SOUTHWESTERLY
LINE OF HIGGINS ROAD, BEING A CURVED LINE CONVEX SOUTHERLY, HAVING A RADIUS OF
1482.69 FEET AND BEING TANGENT TO SAID LAST DESCRIBED LINE AT SAID LAST
DESCRIBED POINT, AN ARC DISTANCE OF 441.26 FEET TO A POINT OF TANGENCY IN SAID
SOUTHWESTERLY LINE (THE
- 3 -
<PAGE>
CHORD OF SAID ARC BEARS SOUTH 56 DEGREES, 58 MINUTES, 29 SECONDS EAST,
439.63 FEET); THENCE SOUTH 65 DEGREES, 30 MINUTES, 02 SECONDS EAST
ALONG THE SOUTHERLY LINE OF HIGGINS ROAD, BEING A LINE TANGENT TO SAID LAST
DESCRIBED CURVED LINE AT SAID LAST DESCRIBED POINT, 37.54 FEET TO THE PLACE OF
BEGINNING, EXCEPTING FROM THE AFOREDESCRIBED TRACT ALL THAT PART THEREOF
DESCRIBED AS FOLLOWS:
BEGINNING AT THE INTERSECTION OF ThE SOUTH LINE OF THE NORTH WEST 1/4 OF SAID
SECTION 3 WITH THE EASTERLY LINE OF RIVER ROAD AS WIDENED BY CONDEMNATION IN
CASE NO. 59C16022 AND SHOWN ON PLAT RECORDED AS DOCUMENT NO. 19251267; THENCE
NORTH 05 DEGREES, 11 MINUTES, 36 SECONDS EAST ALONG SAID EASTERLY LINE OF RIVER
ROAD AS WIDENED, 395.35 FEET; THENCE NORTH 79 DEGREES, 26 MINUTES, 12 SECONDS
WEST, 0.91 OF A FOOT TO THE EASTERLY LINE OF RIVER ROAD, BEING A LINE 33.00
FEET, AS MEASURED AT RIGHT ANGLES, EASTERLY OF AND PARALLEL WITH THE CENTER LINE
OF SAID ROAD; THENCE NORTH 10 DEGREES, 38 MINUTES, 35 SECONDS EAST ALONG SAID
EASTERLY LINE OF RIVER ROAD, 69.50 FEET; THENCE NORTH 68 DEGREES, 08 MINUTES, 35
SECONDS EAST, 56.73 FEET; THENCE NORTH 85 DEGREES, 38 MINUTES, 35 SECONDS EAST,
47.90 FEET TO A POINT OF CURVATURE; THENCE NORTHEASTERLY ALONG A CURVED LINE
CONVEX SOUTHEASTERLY, HAVING A RADIUS OF 300.00 FEET AND BEING TANGENT TO SAID
LAST DESCRIBED LINE AT SAID LAST DESCRIBED POINT, AN ARC DISTANCE OF 113.14 FEET
TO A POINT OF TANGENCY (THE CHORD OF SAID ARC BEARS NORTH 74 DEGREES, 50
MINUTES, 21 SECONDS, EAST, 112.47 FEET); THENCE NORTH 64 DEGREES, 02 MINUTES, 07
SECONDS EAST ALONG A LINE TANGENT TO SAID LAST DESCRIBED CURVED LINE AT SAID
LAST DESCRIBED POINT, 7.87 FEET; THENCE SOUTH 34 DEGREES, 21 MINUTES, 25 SECONDS
EAST, 169.84 FEET; THENCE SOUTH 10 DEGREES, 38 MINUTES, 35 SECONDS WEST, 3.41
FEET; THENCE SOUTH 79 DEGREES, 21 MINUTES, 25 SECONDS EAST, 25.00 FEET; THENCE
SOUTH 10 DEGREES, 38 MINUTES, 35 SECONDS WEST, 3.50 FEET; THENCE SOUTH 79
DEGREES, 21 MINUTES, 25 SECONDS EAST, 24.58 FEET; THENCE SOUTH 10 DEGREES, 38
MINUTES, 35 SECONDS WEST, 14.00 FEET; THENCE SOUTH 79 DEGREES, 21 MINUTES, 25
SECONDS EAST, 15.00 FEET; THENCE SOUTh 10 DEGREES, 38 MINUTES, 35 SECONDS WEST,
373.67 FEET; THENCE NORTH 79 DEGREES, 21 MINUTES, 25 SECONDS WEST, 92.50 FEET;
THENCE SOUTH 10 DEGREES, 38 MINUTES, 35 SECONDS WEST, 9.47 FEET; THENCE SOUTH 55
DEGREES, 38 MINUTES, 35 SECONDS WEST, 178.09 FEET; THENCE NORTHWESTERLY ALONG A
CURVED LINE CONVEX NORTHEASTERLY AND HAVING A RADIUS OF 355.00 FEET, AN ARC
DISTANCE OF 50.35 FEET TO A POINT OF TANGENCY (THE CHORD OF SAID ARC BEARS NORTH
45 DEGREES, 22 MINUTES, 25 SECONDS WEST, 50.31 FEET); THENCE NORTH 49 DEGREES,
26 MINUTES, 12 SECONDS WEST ALONG A LINE TANGENT TO SAID LAST DESCRIBED CURVED
LINE AT SAID LAST DESCRIBED POINT, 101.24 FEET TO THE EASTERLY LINE OF RIVER
ROAD AS WIDENED BY CONDEMNATION IN CASE NO. 59C16022 AND SHOWN ON PLAT RECORDED
AS DOCUMENT NO. 19251267; THENCE NORTH 10 DEGREES, 33 MINUTES, 48 SECONDS EAST
ALONG SAID EASTERLY LINE OF RIVER ROAD AS WIDENED, 11.86 FEET TO THE PLACE OF
BEGINNING, IN COOK COUNTY, ILLINOIS
- 4 -
<PAGE>
PARCEL 3:
EASEMENT IN FAVOR OF THE LEASEHOLD ESTATE DESCRIBED AS PARCEL 1 HEREIN, AS
CREATED IN SECOND AMENDMENT TO LEASE RECORDED FEBRUARY 9, 1989 AS DOCUMENT
89063670, MADE BY AND BETWEEN LA SALLE NATIONAL BANK, AS TRUSTEE UNDER TRUST
AGREEMENT DATED FEBRUARY 1, 1988 AND KNOWN AS TRUST NUMBER 113000,
SIMON-ROSEMONT DEVELOPERS, AN ILLINOIS LIMITED PARTNERSHIP, AND MARRIOTT
CORPORATION, A DELAWARE CORPORATION, FOR A 5 INCH AT-GRADE EASEMENT FOR
ACCOMODATING TILE AS-BUILT CONDITION OF THE HOTEL GARDEN WALL, OVER THE
FOLLOWING LEGAL DESCRIPTION:
THAT PART OF THE WEST 1/2 OF SECTION 3, TOWNSHIP 40 NORTH, RANGE 12, EAST OF THE
THIRD PRINCIPAL MERIDIAN, DESCRIBED AS FOLLOWS: COMMENCING AT THE INTERSECTION
OF THE SOUTH LINE OF THE NORTH WEST 1/4 OF SAID SECTION 3 WITH THE EASTERLY LINE
OF RIVER ROAD AS WIDENED BY CONDEMNATION IN CASE NO. 59C16022 AND SHOWN ON PLAT
RECORDED AS DOCUMENT NO. 19251267; THENCE NORTH 05 DEGREES 11 MINUTES 36 SECONDS
EAST ALONG SAID EASTERLY LINE OF RIVER ROAD AS WIDENED, 395.35 FEET; THENCE
NORTH 79 DEGREES 26 MINUTES 12 SECONDS WEST, 0.91 FEET TO THE EASTERLY LINE OF
RIVER ROAD, BEING A LINE 33.00 FEET, AS MEASURED AT RIGHT ANGLES, EASTERLY OF
AND PARALLEL WITH THE CENTER LINE OF SAID ROAD; THENCE NORTH 10 DEGREES 38
MINUTES 35 SECONDS EAST ALONG SAID EASTERLY LINE OF RIVER ROAD, 69.50 FEET;
THENCE NORTH 68 DEGREES 08 MINUTES 35 SECONDS EAST, 56.73 FEET; THENCE NORTH 83
DEGREES 38 MINUTES 35 SECONDS EAST, 47.90 FEET TO A POINT OF CURVATURE; THENCE
NORTHEASTERLY ALONG A CURVED LINE CONVEX SOUTHEASTERLY, HAVING A RADIUS OF
300.00 FEET AND BEING TANGENT TO SAID LAST DESCRIBED LINE AT SAID LAST DESCRIBED
POINT, AN ARC DISTANCE OF 113.14 FEET TO A POINT OF TANGENCY (THE CHORD OF SAID
ARC BEARS NORTH 74 DEGREES 50 MINUTES 21 SECONDS EAST, 112.47 FEET); THENCE
NORTH 64 DEGREES 02 MINUTES 07 SECONDS EAST ALONG A LINE TANGENT TO SAID LAST
DESCRIBED CURVED LINE AT SAID LAST DESCRIBED POINT, 7.87 FEET; THENCE SOUTH 34
DEGREES 21 MINUTES 25 SECONDS EAST, 169.84 FEET; THENCE SOUTH 10 DEGREES 38
MINUTES 35 SECONDS WEST, 3.41 FEET; THENCE SOUTH 79 DEGREES 21 MINUTES 25
SECONDS EAST, 25.00 FEET; THENCE SOUTH 10 DEGREES 38 MINUTES 35 SECONDS WEST,
3.50 FEET; THENCE SOUTH 79 DEGREES 21 MINUTES 25 SECONDS EAST, 24.58 FEET;
THENCE SOUTH 10 DEGREES 38 MINUTES 35 SECONDS WEST, 14.00 FEET; THENCE SOUTH 79
DEGREES 21 MINUTES 25 SECONDS EAST, 15.00 FEET; THENCE SOUTH 10 DEGREES 38
MINUTES 35 SECONDS WEST, 8.50 FEET TO A POINT FOR A PLACE OF BEGINNING; THENCE
CONTINUING SOUTH 10 DEGREES 38 MINUTES 35 SECONDS WEST, 353.17 FEET; THENCE
SOUTH 79 DEGREES 21 MINUTES 25 SECONDS EAST, 0.40 FEET; THENCE NORTh 10 DEGREES
38 MINUTES 35 SECONDS EAST, 353.17 FEET; THENCE NORTH 79 DEGREES 21 MINUTES 25
SECONDS WEST, 0.40 FEET TO THE PLACE OF BEGINNING, LYING ABOVE A HORIZONTAL
PLANE OF ELEVATION 628.70 FEET ABOVE U. S. G. S. DATUM AND LYING BELOW A
HORIZONTAL PLANE OF ELEVATION 633.75 FEET ABOVE U. S. G. S. DATUM, IN COOK
COUNTY, ILLINOIS.
PARCEL 4:
EASEMENT IN FAVOR OF THE LEASEHOLD ESTATE DESCRIBED AS PARCEL 1 HEREIN, AS
CREATED IN SECOND AMENDMENT TO LEASE RECORDED FEBRUARY 9, 1989 AS DOCUMENT
89063670, MADE BY AND BETWEEN LA SALLE NATIONAL BANK, AS TRUSTEE UNDER TRUST
AGREEMENT DATED FEBRUARY 1, 1988 AND KNOWN AS
-5-
<PAGE>
TRUST NUMBER 113000, SIMON-ROSEMONT DEVELOPERS, AN ILLINOIS LIMITED PARTNERSHIP,
AND MARRIOTT CORPORATION, A DELAWARE CORPORATION, FOR A 8 INCH BELOW-GRADE
EASEMENT FOR FOUNDATIONS OF THE GARDEN WALL, OVER THE FOLLOWING LEGAL
DESCRIPTION:
THAT PART OF THE WEST 1/2 OF SECTION 3, TOWNSHIP 40 NORTH, RANGE 12, EAST OF THE
THIRD PRINCIPAL MERIDIAN, DESCRIBED AS FOLLOWS: COMMENCING AT THE INTERSECTION
OF THE SOUTH LINE OF THE NORTH WEST 1/4 OF SAID SECTION 3 WITH THE EASTERLY LINE
OF RIVER ROAD AS WIDENED BY CONDEMNATION IN CASE NO. 59C16022 AND SHOWN ON PLAT
RECORDED AS DOCUMENT NO. 19251267; THENCE NORTH 05 DEGREES 11 MINUTES 36 SECONDS
EAST ALONG SAID EASTERLY LINE OF RIVER ROAD AS WIDENED, 393.35 FEET; THENCE
NORTH 79 DEGREES 26 MINUTES 12 SECONDS WEST, 0.91 FEET TO THE EASTERLY LINE OF
RIVER ROAD, BEING A LINE 33.00 FEET, AS MEASURED AT RIGHT ANGLES, EASTERLY OF
AND PARALLEL WITH THE CENTER LINE OF SAID ROAD; THENCE NORTH 10 DEGREES 38
MINUTES 35 SECONDS EAST ALONG SAID EASTERLY LINE OF RIVER ROAD, 69.50 FEET;
THENCE NORTH 68 DEGREES 08 MINUTES 35 SECONDS EAST, 56.73 FEET; THENCE NORTH 85
DEGREES 38 MINUTES 35 SECONDS EAST, 47.90 FEET TO A POINT OF CURVATURE; THENCE
NORTHEASTERLY ALONG A CURVED LINE CONVEX SOUTHEASTERLY, HAVING A RADIUS OF
300.00 FEET AND BEING TANGENT TO SAID LAST DESCRIBED LINE AT SAID LAST DESCRIBED
POINT, AN ARC DISTANCE OF 113.14 FEET TO A POINT OF TANGENCY (THE CHORD OF SAID
ARC BEARS NORTH 74 DEGREES 50 MINUTES 21 SECONDS EAST, 112.47 FEET); THENCE
NORTH 64 DEGREES 02 MINUTES 07 SECONDS EAST ALONG A LINE TANGENT TO SAID LAST
DESCRIBED CURVED LINE AT SAID LAST DESCRIBED POINT, 7.87 FEET; THENCE SOUTH 34
DEGREES 21 MINUTES 23 SECONDS EAST, 169.84 FEET; THENCE SOUTH 10 DEGREES 38
MINUTES 33 SECONDS WEST, 3.41 FEET; THENCE SOUTH 79 DEGREES 21 MINUTES 23
SECONDS EAST, 23.00 FEET; THENCE SOUTH 10 DEGREES 38 MINUTES 33 SECONDS WEST,
3.50 FEET; THENCE SOUTH 79 DEGREES 21 MINUTES 23 SECONDS EAST, 24.58 FEET;
THENCE SOUTH 10 DEGREES 38 MINUTES 35 SECONDS WEST, 14.00 FEET; THENCE SOUTH 79
DEGREES 21 MINUTES 25 SECONDS EAST, 15.00 FEET; THENCE SOUTH 10 DEGREES 38
MINUTES 35 SECONDS WEST, 8.50 FEET TO A POINT FOR A PLACE OF BEGINNING; THENCE
CONTINUING SOUTH 10 DEGREES 38 MiNUTES 35 SECONDS WEST, 353.17 FEET; THENCE
SOUTH 79 DEGREES 21 MINUTES 25 SECONDS EAST, 0.67 FEET; THENCE NORTH 10 DEGREES
38 MINUTES 35 SECONDS EAST, 353.17 FEET; THENCE NORTH 79 DEGREES 21 MINUTES 25
SECONDS WEST, 0.67 FEET TO THE PLACE OF BEGINNING, LYING BELOW A HORIZONTAL
PLANE OF ELEVATION 628.70 FEET ABOVE U. S. G. S. DATUM, IN COOK COUNTY,
ILLINOIS.
-6-
<PAGE>
EXHIBIT B
---------
<TABLE>
<CAPTION>
WEST 32 7P3 FORMAT 90 PAGE 6,619
ROSEMONT SUITE DIVISION 32 DISTRICT
PD 05 YR 09 -----------------------P E R I O D---------------- ----------------Y E A R T O D A T E-----------------
SALES $ACTUAL% $BUDGET% $LAST YEAR% $ACTUAL% $BUDGET% $LAST YEAR%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ROOMS 641,229 79.3 723,600 85.3 2,722,574 77.1 3,049,300 85.0
TELEPHONE 23,397 3.6 23,600 2.0 122,205 3.5 103,800 2.9
GIFT SHOP 2,624 .3 3,800 .3 11,991 .3 16,500 .5
RESTAURANT 138,655 17.1 90,200 10.7 685,867 19.4 411,400 11.5
TOT FOOD & BEV 138,655 17.1 90,200 10.7 685,867 19.4 411,400 11.5
OTHER INC. RENTS 1,761 .2 1,800 .2 9,622 .3 7,900 .2
TRADEOUT 4,641- .6- 20,556 .6-
TOTAL SALES 800,523 100.0 843,000 100.0 3,531,703 100.0 3,588,900 100.0
ROOMS 505,315 78.8 576,338 79.7 2,075,285 76.2 2,353,390 77.3
TELEPHONE 20,846 72.1 11,000 46.6 79,886 65.4 47,200 45.5
GIFT SHOP 435 16.6 1,200 31.6 3,731 31.1 3,100 30.9
RESTAURANT 22,160 16.0 10,400- 11.5- 98,377 14.3 66,100- 16.1-
TOT FOOD & BEV 22,160 16.0 10,400- 11.5- 98,377 14.3 66,100- 16.1-
RECREATION 544- 8.00- 1,948- 3,900-
OTHER INC. RENTS 1,761 100.0 1,800 100.0 9,622 100.0 7,900 100.0
TRADEOUT 4,641 100.0 20,556- 100.0
TOT DEPT PROFIT 545,532 67.5 579,338 68.7 2,244,397 63.5 2,348,590 65.4
LOCAL G & A 30,513 3.8 33.638 4.0 178,928 5.1 168,890 4.7
CR CARD DIS. EXP 18,857 2.3 19,600 2.3 85,056 2.4 83,400 2.3
HEAT, LIGHT, POWER 23,350 2.9 25,100 3.0 106,068 3.0 132,100 3.7
REPAIRS & MAINT 39,625 4.9 35,100 4.2 181,662 5.1 170,600 4.8
OJT 3,900 .5 3,900 .5 19,500 .6 19,500 .5
ACCIDENTS 9,828 1.2 8,600 1.0 40,050 1.1 39,300 1.1
SALES PROMOTION 25,685 3.2 26,300 3.1 119,161 3.4 120,700 3.4
LOCAL ADV & BROCH 4,731 .6 3,000 .4 10,655 .3 15,000 .4
NATIONAL ADV ALOC 3,234 .4 3,300 .4 14,127 .4 14,100 .4
NATIONAL SLS ALOC 7,872 1.0 800 .1 10,595 .3 3,600 .1
TOTAL DEDUCT 167,595 20.7 159,338 18.9 765,802 21.7 767,190 21.4
HOUSE PROFIT 377,937 46.7 420,000 49.8 1,478,595 41.9 1,581,400 44.1
TOTAL INV FACTORS 78,059 9.7 392,400 46.5 395,772 11.2 1,479,300 41.2
PROFIT CONTRS 299,878 37.1 27,600 3.3 1,082,823 30.7 102,100 2.8
PRE-OPENING 1 1
OPERATING PROFIT 299,877 37.1 27,600 3.3 1,002,822 30.7 102,100 2.8
OVERHEAD 24,256 3.0 25,290 3.0 105,951 3.0 107,667 3.0
PROFIT BFR TAX 275,621 34.1 2,310 .3 976,871 27.7 5,567- .2-
PROFIT AFT TAX 137,811 17.0 1,155 .1 488,436 13.8 2,784- .1-
NET TOTAL OCCPNCY 79.6 88.1 72.5 77.4
NET AVAIL OCCPNCY 80.3 73.9
NET RK RATES% CHG 112.38 114.55 104.72 109.92
MAN HRS &% CHANGE 17,170 16,104 86,549 80,442
SLS/M-H &% CHANGE 47.09 52.35 40.81 44.61
F/R TOTAL OCCPNCY 78.9 88.0 72.0 77.2
F/R AVAIL OCCPNCY 79.5 73.4
F/R RM RATE&% CHG 113.26 114.71 105.33 110.10
FROM PD 04-22-89 TO 05-19-B9 UNIT 32 7P3
TO YTD 12-31-88 TO 05-19-09 ROSEMONT SUITE
PD 05 YR 89
</TABLE>
<PAGE>
Exhibit 10.2
AMENDED AND RESTATED
--------------------
ASSIGNMENT OF MANAGEMENT AGREEMENT
----------------------------------
This Amended and Restated Assignment of Management Agreement (the
"Assignment") is made as of September 24, 1996 by and among MUTUAL BENEFIT
CHICAGO MARRIOTT SUITE HOTEL PARTNERS, L.P., a Rhode Island limited partnership
("Borrower"), MARRIOTT INTERNATIONAL, INC., a Delaware corporation ("Manager"),
and NATIONAL BANK OF CANADA ("Lender").
R E C I T A L S:
- - - - - - - -
A. Borrower and Manager are parties to that certain Management Agreement
(the "Management Agreement") dated as of June 12, 1989 pursuant to which Manager
manages the hotel commonly known as the Chicago O'Hare Marriott Suites Hotel
situated in Rosemont, Illinois (the "Hotel").
B. Borrower and Lender previously entered into that certain Loan
Agreement dated as of June 12, 1989 whereby Lender made a loan (the "Original
Loan") to Borrower as evidenced by that certain Promissory Note Secured by
Mortgage dated as of June 12, 1989, and having a maturity date of June 12, 1996
(the "Original Note").
C. The Original Note was secured, in part, by that certain Leasehold
Mortgage, Security Agreement and Assignment of Rents (the "Original Mortgage")
granted by Borrower to Lender and recorded in the Recorder's Office for Cook
County, Illinois (the "Recorder's Office") as Document No. 89266493, which
Original Mortgage covered, among other security, Borrower's interest in the
Hotel and Borrower's leasehold estate in the land under the Ground Lease.
D. In order to induce Lender to make the Original Loan to Borrower,
Manager entered into that certain Assignment of Management Agreement dated as of
June 12, 1989 by and among Manager, Borrower and Lender.
E. In accordance with that certain Amended and Restated Loan Agreement
(the "Loan Agreement") of even date herewith between Borrower and Lender, Lender
has made a loan to Borrower which is evidenced by an Amended and Restated
Secured Promissory Note (the "Note") in the principal sum of Twenty Five Million
Five Hundred Thousand and 00/100 Dollars ($25,500,000.00; sometimes referred to
herein as the "Loan") with a scheduled maturity date of June 12, 2001.
F. The Note is secured, in part, by that certain Amended and Restated
Leasehold Mortgage (the "Mortgage") dated of even date herewith granted by
Borrower to Lender and
<PAGE>
recorded on ____________, 1996 in the Recorder's Office as Document No.
____________, which Mortgage covers, among other security, Borrower's interest
in the Hotel and Borrower's leasehold estate in the land under the Ground Lease.
G. Manager desires that Lender make the Loan to Borrower and, as an
inducement thereto, is willing to duly execute and deliver, and perform its
obligations under, this Assignment.
H. All capitalized terms used herein without definition shall have the
meanings ascribed to them in the Loan Agreement.
NOW THEREFORE, in consideration of the above-recited matters and the mutual
agreements herein, the parties hereto agree as follows:
1. Assignment. Borrower hereby grants, transfers, and assigns to Lender
----------
all of its right, title, and interest in, to and under the Management Agreement.
2. Purpose of Assignment. This Assignment is made for the purpose of
---------------------
securing:
(a) payment of all indebtedness evidenced by the Note;
(b) performance of and compliance with all of the terms, covenants,
and conditions set forth herein, in the Note, the Mortgage, the Loan
Agreement and the other Loan Documents (as defined in the Loan Agreement);
(c) payment of further advances, and interest thereon, which may be
made by Lender to Borrower, whether or not Lender is obligated to make such
advances; and
(d) payment of all other sums agreed to be paid by Borrower herein or
in the Note, the Mortgage, the Loan Agreement or any of the other Loan
Documents.
3. Security Agreement. This Assignment shall constitute a security
------------------
agreement within the meaning of the Illinois Uniform Commercial Code, and
Borrower hereby grants to Lender a security interest in the Management
Agreement.
4. Borrower's Covenants. Borrower hereby covenants and agrees as
--------------------
follows:
(a) Borrower shall perform each and every obligation, covenant, and
agreement of the Management Agreement to be performed by Borrower
thereunder.
2
<PAGE>
(b) Borrower shall, at no cost or expense to Lender, enforce or secure
the performance of each and every obligation, covenant, condition and
agreement of the Management Agreement by the other parties thereto to be
performed.
(c) Borrower shall not modify, extend, or in any way alter the terms
of the Management Agreement or accept a surrender or termination thereof,
or waive, excuse, condone, or in any manner release or discharge any party
thereto of or from the obligations, covenants, conditions, and agreements
by such party to be performed thereunder, in the manner and at the place
and time specified therein. Borrower hereby expressly releases,
relinquishes, and surrenders unto Lender all its right, power, and
authority, to amend, modify, cancel, terminate, or in any way alter the
terms or provisions of the Management Agreement without the prior written
consent of Lender.
(d) Borrower shall not consent to any change of the name of the Hotel
(except in connection with a change of the name of the Marriott Suites
Hotel system) without the prior written consent of Lender.
(e) At no cost or expense to Lender, Borrower shall appear in and
defend any action or proceeding arising under, growing out of, or in any
manner connected with the Management Agreement or the obligations, duties,
or liabilities of any party thereto, and shall pay all costs and expenses
of Lender, including attorneys' fees in any action or proceeding concerning
the Management Agreement in which Lender may appear.
(f) If Borrower fails to make any payment or to do any act as herein
provided, then Lender shall have the right but without the obligation so to
do and without notice to or demand on Borrower, and without releasing
Borrower from any obligation hereof, to make such payment or do such act in
such manner and to such extent as Lender may deem necessary to protect the
security hereof, including, without limiting the generality of the
foregoing, the right to appear in and defend any action or proceeding
purporting to affect the security hereof or the rights or powers of Lender,
to perform and discharge each and every obligation, covenant, and agreement
of Borrower contained in the Management Agreement and in the exercise of
any such rights or powers to pay necessary costs and expenses, employ
counsel and incur and pay reasonable attorneys' fees.
(g) Borrower shall pay all sums expended by Lender under the authority
hereof, as provided in Section 12.4 of the Loan Agreement.
(h) Upon Lender's request, Borrower shall transfer and assign to
Lender any and all subsequent agreements that are entered into pursuant to,
in replacement of or to serve substantially the same purpose as the
Management Agreement upon the same or substantially the same terms and
conditions as are contained in this Assignment, and to
3
<PAGE>
make, execute, and deliver to Lender, upon demand, any and all instruments
that may be necessary therefor.
5. Status of Management Agreement. Each of Manager and Borrower
------------------------------
represents and warrants that the Management Agreement has not been amended or
modified and that no default exists under the Management Agreement and that no
event has occurred or exists that, with notice or lapse of time or both, would
constitute a default under the Management Agreement.
6. Limited License. As long as no Event of Default has occurred under
---------------
the Note, the Mortgage, the Loan Agreement or any of the other Loan Documents,
Borrower shall have the right to (a) exercise all of its rights under the
Management Agreement, other than its rights to (i) amend, modify, cancel,
terminate, or in any way alter the terms of the Management Agreement, or (ii)
consent to a change of the name of the Hotel, and (b) collect all sums due under
the Management Agreement, provided that any sums collected by Borrower or on
Borrower's behalf shall be treated as Gross Revenues for purposes of the Loan
Agreement and Borrower's rights with respect thereto shall be subject to Section
8 of the Loan Agreement and the other provisions of the Loan Documents.
7. Lender's Rights and Remedies. Upon or at any time after any Event of
----------------------------
Default under the Note, the Mortgage, the Loan Agreement, or any of the other
Loan Documents, Lender may exercise Borrower's rights to amend, modify or
enforce the Management Agreement, exercise any of Borrower's rights or remedies
thereunder and do any acts that Lender deems proper to protect the security
hereof, in its own name sue for or otherwise collect and receive amounts due and
payable to Borrower under the Management Agreement, including those past due and
unpaid and apply the same, less costs and expenses of operation and collection,
including reasonable attorneys' fees, to any indebtedness secured hereby, and in
such order as Lender may determine. The exercise of any of the foregoing rights
or remedies or the collection of such amounts and the application thereof as
aforesaid, shall not cure or waive any default under the Note, the Mortgage, the
Loan Agreement, or any of the other Loan Documents. Lender may exercise its
rights under this Assignment as often as any Event of Default may occur. The
exercise of such rights shall not constitute a waiver of any other remedies of
Lender under the Note, the Mortgage, the Loan Agreement, or any of the other
Loan Documents or law.
8. Limited Obligations of Lender. Lender shall not be obligated to
-----------------------------
Borrower or, unless Lender assumes Borrower's obligations under the Management
Agreement, to Manager to perform or discharge, nor does it hereby undertake to
perform or discharge, any obligation, duty, or liability under the Management
Agreement or under or by reason of this Assignment, and Borrower shall and does
hereby agree to indemnify and to hold Lender harmless of and from any and all
liability, loss, or damage that it might incur under the Management Agreement or
under or by reason of this Assignment and of and from any and all claims and
demands whatsoever that may be asserted against it by reason of any alleged
obligation or undertaking upon its part to
4
<PAGE>
perform or discharge any of the terms, covenants, or agreements contained in the
Management Agreement; provided, however, that such indemnification shall exclude
any such liability, loss, damage, claim or demand arising out of any wrongful or
negligent act or omission of Lender, its agents or employees. Should Lender
incur any such liability, loss, or damage under the Management Agreement or
under or by reason of this Assignment, or in the defense of any such claim or
demand, the amount thereof, including costs, expenses, and attorneys' fees,
shall be secured hereby, and Borrower shall reimburse Lender therefor
immediately upon demand.
9. Recognition/Nondisturbance of Management Agreement. So long as the
--------------------------------------------------
Management Agreement remains in effect, (a) Lender's right to enter and take
physical possession of the Hotel, collect rents from the Hotel, assemble or sell
any personalty located at or used in connection with the Hotel shall be subject
to the terms of the Management Agreement and shall not otherwise interfere with
the use or operation of the Hotel by Manager pursuant to the Management
Agreement, and (b) Lender shall permit Manager to withdraw funds from the "Main
Disbursing Account", the "General Investment Account" and the "FF&E Account" (as
such terms are defined in the Loan Agreement) in accordance with the terms of
the Management Agreement for the operation of the Hotel and other payments due
and owing to Manager under the terms of the Management Agreement,
notwithstanding the pledge of the foregoing accounts to Lender as security for
the Loan.
10. Notice to Lender. Manager shall deliver to Lender a copy of any
----------------
default notice given to Borrower under the Management Agreement
contemporaneously with the delivery of any such notice to Borrower.
11. Lender's Right to Cure. Manager grants to Lender the right, but not
----------------------
the obligation, to cure any default of Borrower under the Management Agreement
before termination by Manager of the Management Agreement. Lender may cure such
default within the grace period, if any, allowed to Borrower; provided, however,
that in addition to such grace periods, if any, Lender shall have 30 days to
cure monetary defaults and 60 days to cure non-monetary defaults; provided,
further that if any such default is incapable of being cured, Manager will not
terminate the Management Agreement as to Lender by reason of such default if
Lender shall:
(a) within 90 days after receipt of notice from Manager of such
default, institute foreclosure of the Mortgage or otherwise enforce
Lender's remedies thereunder and diligently prosecute such foreclosure or
enforcement to conclusion; and
(b) have cured and continue to cure respectively:
(i) in a prompt manner all other defaults that may have arisen
under the provisions of the Management Agreement before
Lender institutes such foreclosure and enforcement remedies;
and
5
<PAGE>
(ii) within the cure periods provided to Borrower in the
Management Agreement, all defaults that arise during the
pendency of such foreclosure and enforcement of remedies.
12. Acceptance of Lender's Performance. Manager agrees to accept any
----------------------------------
payment or act from Lender with the same effect as if made or performed by
Borrower provided such performance and payment is accomplished by Lender within
the time periods required by the Management Agreement, as affected by Section 11
hereof.
13. Attornment Following Foreclosure. Unless Borrower or Manager shall
--------------------------------
have theretofore terminated the Management Agreement, and provided that Lender
shall have assumed and performed all of Borrower's obligations and shall have
cured all of Borrower's defaults under the Management Agreement pursuant to
Section 11 hereof, Manager shall attorn to and recognize Lender as successor to
Borrower under the Management Agreement if Lender shall succeed Borrower in
title to the Hotel through foreclosure or delivery of a deed in lieu of
foreclosure, and Manager shall, in such event, continue to perform for Lender
under, and be bound in all respects to Lender by, the Management Agreement.
14. Estoppel Certificates. Manager shall, no later than 15 days after its
---------------------
receipt of a written request of Lender, execute an estoppel letter stating that:
(a) the Management Agreement is in full force and effect and has not
been modified, amended or assigned;
(b) neither Manager nor, to the best of Manager's knowledge, Borrower
is in default under any of the terms, covenants or provisions of the
Management Agreement and Manager knows of no event that with the passage of
time, the giving of notice, or both, would constitute a default under the
Management Agreement;
(c) Manager has not commenced any action or given or received any
notice for the purpose of terminating the Management Agreement; and
(d) all sums due and payable to the Manager under the Management
Agreement have been paid in full;
or identifying such modification, amendment, assignment, default, event, action,
notice or delinquency.
15. Termination of Assignment. This Assignment is executed and delivered
-------------------------
as collateral security and the execution and delivery hereof shall not in any
way impair or diminish any obligation of Borrower under the Management Agreement
and shall not impose any of such
6
<PAGE>
obligations on Lender. Upon the payment in full of all indebtedness secured
hereby, this Assignment shall terminate, but the certificate of any officer of
Lender showing any part of such indebtedness remaining unpaid shall be and
constitute conclusive evidence of the validity, effectiveness, and continuing
force of this Assignment, and any person may and is hereby authorized to rely
thereon.
16. Successors and Assigns. This Assignment shall be binding upon and
----------------------
inure to the benefit of Borrower and Lender and their successors and assigns;
provided that Borrower shall not be permitted to assign its rights or
obligations under this Assignment and any such purported assignment shall be
void. The term "Management Agreement" as used herein means the Management
Agreement hereby assigned and any extension or renewal thereof or any agreements
entered into pursuant to, in replacement of or to serve substantially the same
purpose as, the Management Agreement provided that Manager agrees that (i) the
Management Agreement shall not be amended without the prior written consent of
Lender, and (ii) the term "Management Agreement" shall not include any
amendments entered into without such prior written consent of Lender.
17. Notices. All notices, requests and demands to or upon the respective
-------
parties hereto, to be effective, shall be in writing and shall be delivered by
hand or sent by (x) mail (certified or registered, postage prepaid, return
receipt requested), (y) by a nationally recognized overnight courier service, or
(z) by facsimile transmission (provided that the original of any notice sent by
facsimile transmission shall be sent by a nationally recognized overnight
courier service) and unless otherwise expressly provided herein, shall be deemed
to have been duly given or made when delivered if delivered by hand, or three
Business Days (as defined in the Loan Agreement) following deposit if sent by
certified or registered mail, or on the next Business Day following deposit with
a nationally recognized overnight courier service, or upon receipt if sent by
facsimile with an original by nationally recognized overnight courier service
(provided that if said facsimile was received after 5:00 p.m. in the local time
zone of the recipient on any Business Day, said notice shall not be deemed to
have been received until the following Business Day), addressed in each case as
follows, or to such address or other address as may be hereafter notified by
such parties:
Borrower: Mutual Benefit Chicago Marriott Suite Hotel
Partners, L.P.
Host Marriott Corporation
10400 Fernwood Drive
Bethesda, Maryland 20817
Attention: Law Department
Facsimile No.: (301) 380-6332
7
<PAGE>
Lender: National Bank of Canada
New York Branch
125 West 55th Street
New York, New York 10022
Attention: LoriAnn Curnyn
Facsimile No.: (212) 632-8775
Manager: Marriott International, Inc.
10400 Fernwood Road
Bethesda, Maryland 20058
Attention: Law Department/Hotel Operations
Facsimile No. : (301) 380-6727
with a copy to: Marriott Suites Hotel
6155 North River Road
Rosemont, Illinois 60018
Attention: General Manager
Facsimile No.: (847) 696-2122
18. Governing Law. This Assignment is governed by and shall be construed
-------------
in accordance with the laws of the State of Illinois except to the extent
preempted by United States federal law.
19. Counterparts. This Assignment may be executed in any number of
------------
counterparts, each of which shall constitute an original but all of which, taken
together, shall constitute one and the same instrument.
8
<PAGE>
IN WITNESS WHEREOF, each party hereto has duly executed and delivered this
Assignment as of the day and year first above written.
BORROWER:
--------
MUTUAL BENEFIT CHICAGO MARRIOTT SUITE HOTEL
PARTNERS, L.P., a Rhode Island limited partnership
By: MOHS CORPORATION, a Delaware corporation, its
General Partner
By: /s/ Bruce D. Wardinski
-----------------------------------------
Its: Vice President
-------------------------------------
MANAGER:
-------
MARRIOTT INTERNATIONAL, INC., a Delaware
corporation
By: /s/ Robert B. Morris
----------------------------------------------
Its: Vice President
------------------------------------------
LENDER:
------
NATIONAL BANK OF CANADA
By: /s/ Lori Ann Curnyn
----------------------------------------------
Its: Vice President
------------------------------------------
9
<PAGE>
Exhibit 10.3
AMENDED AND RESTATED LOAN AGREEMENT
By and Between
MUTUAL BENEFIT CHICAGO MARRIOTT SUITE HOTEL PARTNERS, L.P.
As Borrower
And
NATIONAL BANK OF CANADA
(New York Branch)
As Lender
Dated as of
September 24, 1996
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE PAGE
- ------- ----
1 INCORPORATION OF RECITALS AND EXHIBITS; APPLICATION OF
AGREEMENT............................................................... 2
1.1 Incorporation of Recitals and Exhibits............................ 2
1.2 Application of Agreement.......................................... 2
2 CERTAIN DEFINITIONS..................................................... 2
2.1 Accounting Period................................................. 2
2.2 Accrual Rate Interest............................................. 2
2.3 Additional Accrued Interest....................................... 2
2.4 Annual Operating Projection....................................... 2
2.5 Affiliated Party.................................................. 2
2.6 Asbestos.......................................................... 3
2.7 Asbestos-Containing Construction Materials........................ 3
2.8 Assignment of Management Agreement................................ 3
2.9 Assignment of Rents............................................... 3
2.10 Bankruptcy Code................................................... 3
2.11 Base Management Fee............................................... 3
2.12 Base Rate Interest................................................ 3
2.13 Business Day...................................................... 3
2.14 Capital Improvements.............................................. 3
2.15 Cash Collateral................................................... 3
2.16 Consultant's Fee.................................................. 3
2.17 Contract Rate..................................................... 3
2.18 Contract Rate Interest............................................ 3
2.19 Conversion Date................................................... 4
2.20 Cumulative NOI Threshold Amount................................... 4
2.21 Debt Service Agreement............................................ 4
2.23 Default Rate...................................................... 4
2.24 Dollars........................................................... 4
2.25 Environmental Claims.............................................. 4
2.26 Environmental Conditions.......................................... 4
2.27 Environmental Expenses............................................ 5
2.28 Environmental Laws................................................ 5
2.29 Environmental Noncompliance....................................... 5
2.30 Event of Default.................................................. 5
2.31 Excess Cash Flow.................................................. 6
2.32 Excess Cash Flow Payments......................................... 6
i
<PAGE>
ARTICLE PAGE
- ------- ----
2.33 Fiscal Year....................................................... 6
2.34 Foreclosure Guaranty.............................................. 6
2.35 General Partner................................................... 6
2.36 Gross Revenues.................................................... 6
2.37 Ground Lease...................................................... 6
2.38 Hazardous Materials............................................... 6
2.39 Host Marriott..................................................... 7
2.40 Hotel............................................................. 7
2.41 Improvements...................................................... 7
2.42 Indebtedness...................................................... 7
2.43 Land.............................................................. 7
2.44 Legal Requirements................................................ 7
2.45 Lender's Expenses................................................. 7
2.46 Loan.............................................................. 7
2.47 Loan Documents.................................................... 7
2.48 Management Agreement.............................................. 7
2.49 Manager........................................................... 7
2.50 Marriott.......................................................... 7
2.51 Maturity Date..................................................... 7
2.52 Maximum Amount.................................................... 7
2.53 Mortgage.......................................................... 7
2.54 Net House Profit.................................................. 8
2.55 NOI Threshold Amount.............................................. 8
2.56 NOI Shortfall Year................................................ 8
2.57 Note.............................................................. 8
2.58 Permitted Encumbrances............................................ 8
2.59 Person............................................................ 8
2.60 Personal Property Inventory....................................... 8
2.61 Prime Rate........................................................ 8
2.62 Property.......................................................... 9
2.63 Reaffirmation of Environmental Indemnification Agreement.......... 9
2.64 Reference Rate.................................................... 9
2.66 Responsible Officer............................................... 9
2.67 Scheduled Principal Payment....................................... 9
2.68 Security Agreement................................................ 9
3 THE LOAN................................................................ 9
3.1 Consolidation, Amendment and Restatement of Obligations........... 9
3.2 Loan Documents.................................................... 10
ii
<PAGE>
ARTICLE PAGE
- ------- ----
3.3 Interest Rates and Payments....................................... 11
3.4 Term of the Loan.................................................. 11
3.5 Prepayments....................................................... 11
3.6 Bankruptcy Stipulations........................................... 11
3.7 Waiver and Release................................................ 15
3.8 Restructuring Fee................................................. 15
3.9 Lender's Expenses................................................. 16
4 CONDITIONS PRECEDENT.................................................... 16
4.1 Condition to Closing.............................................. 16
(a) Loan Documents............................................. 16
(b) Borrower Organizational Documents.......................... 16
(c) Partner Organizational Documents........................... 17
(d) Host Marriott Organizational Documents..................... 17
(e) Property Documents......................................... 18
(f) Opinions of Counsel........................................ 19
(g) Filing and Recordation..................................... 20
(h) Additional Information..................................... 20
(i) Representations and Warranties............................. 20
5 REPRESENTATIONS AND WARRANTIES.......................................... 20
5.1 Representations and Warranties.................................... 20
(a) Formation and Power........................................ 20
(b) Due Execution.............................................. 20
(c) Due Authorization.......................................... 20
(d) No Conflicts or Defaults................................... 21
(e) Ownership of Property...................................... 21
(f) Accuracy of Financial Information.......................... 21
(g) Litigation................................................. 21
(h) Legal Requirements......................................... 21
(i) No Usury................................................... 21
(j) Zoning..................................................... 21
(k) Availability of Service.................................... 22
(l) Binding Effect of Loan Documents........................... 22
(m) Subdivision................................................ 22
(n) Environmental.............................................. 22
(o) Sewage..................................................... 22
(p) Utilities.................................................. 23
(q) Governmental Approvals..................................... 23
iii
<PAGE>
ARTICLE PAGE
- ------- ----
(r) Leases..................................................... 23
(s) Truth of Financial Statements.............................. 23
(t) Change in Financial Condition.............................. 23
(u) Regulation U............................................... 23
(v) ERISA...................................................... 23
(w) Truth of Recitals.......................................... 23
(x) Freedom from Default....................................... 24
(y) Trade Name................................................. 24
(z) Principal Business Address................................. 24
(aa) Foreign Person............................................. 24
(ab) Transactions with Affiliated Parties....................... 24
(ac) Employees.................................................. 24
(ad) Other Indebtedness......................................... 24
5.2 Nature of Representations and Warranties.......................... 24
6 ANNUAL BUSINESS PLAN AND BUDGET; LENDER'S CONSULTANT;
NOI COVENANT............................................................ 25
6.1 .................................................................... 25
6.2 .................................................................... 25
6.3 .................................................................... 25
7 FINANCIAL STATEMENTS.................................................... 26
8 BANK ACCOUNTS AND APPLICATION OF GROSS REVENUES......................... 28
8.1 Establishment of Bank Accounts.................................... 28
8.2 Deposits to Bank Accounts; Withdrawal of Funds.................... 28
8.3 Payment of Deductions............................................. 29
8.4 Application of Net House Profit................................... 29
8.5 Application of Excess Cash Flow............................. 30
9 GENERAL COVENANTS OF BORROWER........................................... 31
9.1 Maintenance of Existence.......................................... 31
9.2 Conduct of Business............................................... 31
9.3 Maintenance of Property........................................... 31
9.4 Maintenance of Records............................................ 31
9.5 Maintenance of Insurance.......................................... 31
9.6 Compliance with Legal Requirements................................ 31
9.7 Right of Inspection............................................... 32
9.8 .................................................................. 32
iv
<PAGE>
ARTICLE PAGE
- ------- ----
(a) Notice of Events of Default................................ 32
(b) General Information........................................ 32
(c) General Partner............................................ 32
9.9 Liens............................................................. 32
9.10 Leasehold Interest................................................ 32
(a) Performance of Ground Lease................................ 32
(b) No Amendments.............................................. 33
9.11 Environmental Compliance.......................................... 33
9.12 Documents of Further Assurance.................................... 33
9.13 Furnishing Reports................................................ 33
9.14 Leases............................................................ 33
9.15 Management Agreement and Other Contracts.......................... 33
9.16 Furnishing Notices................................................ 34
9.17 Indebtedness...................................................... 34
9.18 Prohibition Against Cash Distributions............................ 34
9.19 Transactions with Affiliated Parties.............................. 34
9.20 Appraisals........................................................ 34
9.21 Maintenance of Existence.......................................... 35
9.22 ERISA............................................................. 35
9.23 Trade Name........................................................ 35
9.24 Principal Place of Business....................................... 35
9.25 Information and Approvals with respect to Management
Agreement......................................................... 35
10 DEFAULTS................................................................ 36
10.1 Events of Default................................................. 36
(a) Failure to Pay............................................. 36
(b) Voluntary Bankruptcy....................................... 36
(c) Involuntary Bankruptcy..................................... 36
(d) Insolvency................................................. 36
(e) Inability to Pay........................................... 37
(f) Existence.................................................. 37
(g) Amendment of Entity Documents.............................. 37
(h) Transfer of Property....................................... 37
(i) Attachment................................................. 37
(j) Breach of Representations and Warranties................... 37
(k) Failure to Deliver Funds or Instruments.................... 38
(l) Encroachment............................................... 38
(m) Filing of Liens............................................ 38
(n) Damage to Improvements..................................... 38
v
<PAGE>
ARTICLE PAGE
- ------- ----
(o) Injunction Against Performance............................. 38
(p) Lapse of Permits or Services............................... 38
(q) Condemnation............................................... 39
(r) Compliance with Law........................................ 39
(s) Management Agreement....................................... 39
(t) Ground Lease............................................... 39
(u) Environmental Noncompliance................................ 39
(v) Handling of Funds and Bank Accounts........................ 39
(w) Partnership Distributions.................................. 39
(x) Change in Financial Condition of Property.................. 39
(y) Breach of Other Covenants.................................. 39
(z) Other Loan Documents....................................... 40
11 LENDER'S REMEDIES IN EVENT OF DEFAULT................................... 40
11.1 Remedies Conferred Upon Lender.................................... 40
11.2 Non-Waiver of Remedies............................................ 41
11.3 Availability of Remedies.......................................... 41
11.4 Application of Proceeds........................................... 42
12 GENERAL PROVISIONS...................................................... 43
12.1 No Waiver; Lender's Action for Its Own Protection Only............ 43
12.2 No Third Parties Benefitted....................................... 43
12.3 Notices........................................................... 43
12.4 Expenses.......................................................... 44
12.5 Actions........................................................... 44
12.6 Commissions and Brokerage Fees.................................... 44
12.7 Governing Law..................................................... 45
12.8 Heirs, Successors and Assigns..................................... 45
12.9 Time.............................................................. 45
12.10 Supplements Mortgage.............................................. 45
12.11 Severability...................................................... 45
12.12 Attorneys' Fees................................................... 45
12.13 Usury Limitation.................................................. 46
12.14 Section Headings.................................................. 46
12.15 Notice of Future Proceedings or Events............................ 46
12.16 Amendment......................................................... 46
12.17 Assignment and Participations..................................... 47
12.18 Indemnity......................................................... 47
12.19 Survival.......................................................... 48
vi
<PAGE>
ARTICLE PAGE
- ------- ----
12.20 Environmental Matters............................................. 48
(a) Environmental Indemnification by Borrower.................. 48
(b) Borrower's Covenants Regarding Environmental Matters....... 49
12.21 Non-recourse...................................................... 50
(a) Extent of Non-recourse..................................... 50
(b) Borrower's Liability for Damages or Misapplication
of Funds................................................... 50
(c) Liability of General Partners.............................. 51
12.22 Consent to Jurisdiction and Service of Process; Waiver
of Jury Trial..................................................... 51
12.23 Confidentiality................................................... 51
12.24 Counterparts...................................................... 52
EXHIBITS
A -- Legal Description
B -- Form of Note
C -- Form of Mortgage
D -- Form of Assignment of Rents
E -- Form of Security Agreement
F -- Form of Assignment of Management Agreement
G-1, G-2,
G-3, G-4 -- Forms of Pledge Agreements
H -- Environmental Reports
I -- Annual Operating Projection and Repairs and Equipment
Estimate for Fiscal Year 1996
J -- Form of Rent Letter
K -- Equipment Leases
L -- Permitted Investments
vii
<PAGE>
AMENDED AND RESTATED LOAN AGREEMENT
-----------------------------------
THIS AMENDED AND RESTATED LOAN AGREEMENT (which, together with any
subsequent amendments or supplements, is referred to herein as the "Agreement")
is made and entered into as of September 24, 1996, by and between MUTUAL BENEFIT
CHICAGO MARRIOTT SUITE HOTEL PARTNERS, L.P., a Rhode Island limited partnership
("Borrower"), and NATIONAL BANK OF CANADA, New York, a duly licensed branch of
National Bank of Canada, a Canadian bank ("Lender").
R E C I T A L S:
- - - - - - - -
A. Lender has previously made a loan in the principal amount of Twenty-
Five Million Five Hundred Thousand Dollars ($25,500,000.00) (the "Original
Loan") to Borrower pursuant to a Loan Agreement (the "Original Loan Agreement")
dated as of June 12, 1989. The Loan was evidenced or secured by certain
instruments referred to collectively in the Original Loan Agreement as the "Loan
Documents," which instruments (including the Original Loan Agreement) are
referred to herein collectively as the "Original Loan Documents."
B. The Original Loan matured on June 12, 1996 and has not been repaid.
Borrower hereby confirms to Lender that Borrower is indebted to Lender as set
forth in the Original Loan Documents with respect to the $25,500,000 principal
amount outstanding with respect to the Original Loan plus interest accrued and
accruing thereon and costs and expenses incurred by Lender in connection
therewith, including attorneys' fees.
C. In lieu of exercising its rights and remedies with respect to
Borrower's failure to repay the Original Loan when due, Lender has agreed with
Borrower to amend and restate all of the terms, conditions, covenants and
provisions of the Original Loan Documents on the terms set forth herein. The
Original Loan Documents, as so amended and restated, are referred to herein
collectively as the "Loan Documents." The Original Loan, as amended and
restated pursuant to the Loan Documents, is referred to herein as the "Loan."
AGREEMENT
---------
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants and promises herein, Borrower and Lender agree as follows:
<PAGE>
ARTICLE 1
---------
INCORPORATION OF RECITALS AND
-----------------------------
EXHIBITS; APPLICATION OF AGREEMENT
----------------------------------
1.1 Incorporation of Recitals and Exhibits. The foregoing Recitals and
--------------------------------------
all exhibits hereto are hereby made a part of this Agreement.
1.2 Application of Agreement. This Agreement and the other Loan
------------------------
Documents collectively supersede in all respects the Original Loan Documents.
ARTICLE 2
---------
CERTAIN DEFINITIONS
-------------------
2.1 Accounting Period. Each Accounting Period shall commence at 12:01
-----------------
a.m. local time on a Saturday and shall end at midnight on the Friday that is
the twenty-eighth (28th) day of said Accounting Period. Each Accounting Period
shall commence immediately following the last day of the previous Accounting
Period. The first Accounting Period of each Fiscal Year shall commence on the
first day of said Fiscal Year and the last Accounting Period of each Fiscal Year
shall end on the last day of said Fiscal Year. As stated above, each Accounting
Period shall contain twenty-eight (28) days; provided, however, that in certain
Fiscal Years one of the Accounting Periods shall contain thirty-five (35) days
if necessary in order to cause the last day of the last Accounting Period to
coincide with the last day of the Fiscal Year in question.
2.2 Accrual Rate Interest. "Accrual Rate Interest" has the meaning set
---------------------
forth in the Note.
2.3 Additional Accrued Interest. "Additional Accrued Interest" has the
---------------------------
meaning set forth in the Note.
2.4 Annual Operating Projection. "Annual Operating Projection" has the
---------------------------
meaning set forth in Section 6.1 hereof.
2.5 Affiliated Party. (i) Any member, shareholder, partner, officer,
----------------
director, agent or fiduciary of or for Borrower, (ii) any Person that controls,
is controlled by or is under common control with Borrower, (iii) any Person that
owns, directly or indirectly, 10% or more of the legal or beneficial interests
in Borrower, and (iv) any Person in which Borrower or any member, shareholder,
partner, officer, director, agent or fiduciary of or for Borrower owns 10% or
more of the legal or beneficial interests. For purposes of this definition,
"control", when used with respect to any specified Person, means the power to
direct the management and policies of such
2
<PAGE>
Person, whether through the ownership of voting securities, by contract or
otherwise. The term "controlled" has a meaning correlative to the foregoing.
2.6 Asbestos. "Asbestos" means fibrous forms of various hydrated
--------
minerals, including chrysotile (fibrous serpentine), crocidolite (fibrous
reibecktite), amosite (fibrous cummingtonite-grunerite), fibrous tremolite,
fibrous actinolite, and fibrous anthophyllite.
2.7 Asbestos-Containing Construction Materials. "Asbestos-Containing
------------------------------------------
Construction Materials" means any manufactured construction material that
contains more than one-tenth of one percent Asbestos by weight.
2.8 Assignment of Management Agreement. "Assignment of Management
----------------------------------
Agreement" has the meaning set forth in Section 3.2 hereof.
2.9 Assignment of Rents. "Assignment of Rents" shall have the meaning
-------------------
set forth in Section 3.2 hereof.
2.10 Bankruptcy Code. "Bankruptcy Code" means the Bankruptcy Reform Act
---------------
of 1978, as amended or any future federal legislation relating to the same
general subject matter.
2.11 Base Management Fee. The "Base Management Fee," in an amount equal
-------------------
to three percent (3%) of Gross Revenues, payable to the Manager by Borrower
pursuant to the Management Agreement.
2.12 Base Rate Interest. "Base Rate Interest" has the meaning set forth
------------------
in the Note.
2.13 Business Day. "Business Day" shall mean a day on which national
------------
banks are open for business in New York, New York and on which major American
money center banks are also dealing in Dollar deposits in the London interbank
market.
2.14 Capital Improvements. "Capital Improvements" means any and all
--------------------
repairs, replacements or improvements to the Property which are capital in
nature in accordance with the Uniform System of Accounts (as such term is
defined in the Management Agreement).
2.15 Cash Collateral. As defined in Section 3.6(b) hereof.
---------------
2.16 Consultant's Fee. "Consultant's Fee" shall have the meaning set
----------------
forth in Section 6.3 hereof.
2.17 Contract Rate. As defined in the Note.
-------------
3
<PAGE>
2.18 Contract Rate Interest. As defined in the Note.
----------------------
2.19 Conversion Date. As defined in the Note.
---------------
2.20 Cumulative NOI Threshold Amount. "Cumulative NOI Threshold Amount"
-------------------------------
means, as of any given date, the sum of the respective NOI Threshold Amounts
applicable to each Fiscal Year or portion thereof falling within the period from
and after the date hereof, through and including the date in question.
2.21 Debt Service Agreement. "Debt Service Agreement" means that certain
----------------------
Debt Service Agreement dated as of June 12, 1989 by and between Borrower,
Marriott and MBIP for the benefit of Lender.
2.22 Deductions. Shall have the meaning ascribed thereto in the
----------
Management Agreement.
2.23 Default Rate. If the Conversion Date has not yet occurred, (i) three
------------
percent (3%) per annum plus the Base Rate through and including the last day of
----
the then current Interest Period, and (ii) at all times thereafter, three
percent per annum plus the Reference Rate determined by Lender from time to
----
time. If the Conversion Date has occurred, three percent (3%) per annum plus
----
the Base Rate that became effective as of the Conversion Date.
2.24 Dollars. "Dollar(s)," whether or not capitalized, and the sign "$"
-------
shall mean lawful money of the United States of America.
2.25 Environmental Claims. "Environmental Claims" means claims, demands,
--------------------
suits, causes of action for personal injury or property damage (including any
depreciation of property values), lost use of property or consequential damages
arising directly or indirectly out of Environmental Conditions or Environmental
Noncompliance, including, without limitation, actual or threatened damages to
natural resources, claims for the recovery of response costs, or administrative
or judicial orders directing the performance of investigations, response or
remedial actions under any Environmental Laws, a requirement to implement
"corrective action" pursuant to any order or permit issued pursuant to RCRA or
similar provisions of Illinois law, claims for restitution, contribution or
equitable indemnity from third parties or any governmental agency, fines,
penalties, liens of any kind against property, claims for injunctive relief or
other orders or notices of violation from federal, state or local agencies or
courts, and, with regard to any present or former employees, exposure to or
injury from Environmental Conditions.
2.26 Environmental Conditions. "Environmental Conditions" means
------------------------
conditions of the environment, including natural resources (including flora and
fauna), soil, surface water, ground water, any present or potential drinking
water supply, subsurface strata or ambient air, relating
4
<PAGE>
to or arising out of the use, handling, storage, treatment, recycling,
generation, transportation, release, spilling, leaking, pumping, pouring,
emptying, discharging, injecting, escaping, leaching, disposal, dumping or
threatened release of Hazardous Materials by Borrower or Borrower's predecessors
or successors in interest (including specifically, for these purposes, any prior
owners of the Land or the Improvements), agents, representatives, employees or
independent contractors. With respect to Claims by third parties, Environmental
Conditions also include the exposure of persons to Hazardous Materials within a
workplace on the Property or the exposure of persons or property to Hazardous
Materials migrating from or otherwise emanating from or located on the Land or
the Property.
2.27 Environmental Expenses. "Environmental Expenses" means any
----------------------
liability, loss, cost or expense incurred in compliance with any Environmental
Laws or in response to Environmental Conditions, including, without limitation,
costs of investigation, cleanup, remedial, corrective or response action, the
costs associated with posting financial assurances for the completion of
response, remedial or corrective actions, the preparation of any closure or
other necessary or required plans or analyses, or other reports or analyses
submitted to or prepared by regulating agencies, including the costs of health
assessments, epidemiological or other medical studies, retention of engineers
and other expert consultants, legal counsel, capital improvements, operation and
maintenance testing and monitoring costs, power and utility costs and pumping
taxes or fees, and administrative costs incurred by governmental agencies.
2.28 Environmental Laws. "Environmental Laws" means the Comprehensive
------------------
Environmental Response, Compensation and Liability Act of 1980, as amended; the
Toxic Substances Control Act, as amended; the Hazardous Materials Transportation
Act, as amended; the Resource Conservation and Recovery Act of 1976, as amended;
the Federal Water Pollution Control Act, as amended; the Safe Drinking Water
Act, as amended; the Clean Air Act, as amended; the Illinois Environmental
Protection Act, as amended; the Illinois Solid Waste Management Act, as amended;
federal and state statutes and regulations concerning occupational safety and
health relating to Environmental Conditions, and the plans, rules, regulations
or ordinances adopted, or other criteria and guidelines promulgated pursuant to
the preceding laws or other similar laws, regulations, rules or ordinances now
or hereafter in effect.
2.29 Environmental Noncompliance. "Environmental Noncompliance" means,
---------------------------
but is not limited to: (a) the release or threatened release of any Hazardous
Materials into the environment, any storm drain, sewer, septic system or
publicly owned treatment works, in violation of any effluent or emission
limitations, standards or other criteria or guidelines established by
Environmental Laws; (b) any noncompliance of physical structure, equipment,
process or facility with any Environmental Laws; (c) any facility operations,
procedures or designs that do not conform to the requirements of any
Environmental Laws; and (d) the failure to have obtained permits, variances or
other authorizations necessary under any Environmental Laws for the legal
operation of any equipment, process, facility or any other activity.
5
<PAGE>
2.30 Event of Default. "Event of Default" has the meaning set forth in
----------------
Article 10 hereof.
2.31 Excess Cash Flow. "Excess Cash Flow" has the meaning set forth in
----------------
Section 8.5 hereof.
2.32 Excess Cash Flow Payments. "Excess Cash Flow Payments" has the
-------------------------
meaning set forth in the Note.
2.33 Fiscal Year. A period of thirteen (13) Accounting Periods, ending at
-----------
midnight on the Friday closest to December 31st in each calendar year; the new
Fiscal Year begins on the Saturday immediately following said Friday. A partial
Fiscal Year during the term of this Note shall, for purposes of this Note,
constitute a separate Fiscal Year.
2.34 Foreclosure Guaranty. "Foreclosure Guaranty" means that certain
--------------------
Foreclosure Guaranty dated as of June 12, 1989, by and between General Partner
and Lender, as reaffirmed pursuant to a certain Reaffirmation of Foreclosure
Guaranty dated as of the date hereof.
2.35 General Partner. "General Partner" means MOHS Corporation, a
---------------
Delaware corporation, and, to the extent that the transfer of such party's
interests in the Borrower is permitted pursuant to this Agreement, any such
permitted successor. Any references in the Loan Documents to the "Managing
General Partner" shall be deemed to refer to the General Partner.
2.36 Gross Revenues. Shall have the meaning ascribed thereto in the
--------------
Management Agreement.
2.37 Ground Lease. "Ground Lease" means the Ground Lease, the lessee's
------------
interest in which has heretofore been assigned to Borrower, originally made and
dated as of June 16, 1986 by and between Marriott, as lessee, and Simon-Rosemont
Developers, as lessor, a memorandum of which was recorded on April 3, 1987 as
Document 3604964, as amended by First Amendment to Lease recorded on April 3,
1987 as Document 36049654, and as further amended by Second Amendment to Lease
recorded on February 9, 1989 as Document 89063670, and as further supplemented
and amended by those documents identified on Exhibit E to the Mortgage.
2.38 Hazardous Materials. "Hazardous Materials" means hazardous wastes,
-------------------
hazardous substances, hazardous constituents, toxic substances or related
materials, whether solids, liquids or gases, substances defined as "hazardous
wastes," "hazardous substances," "toxic substances," "pollutants,"
"contaminants," "radioactive materials," or any other similar substances,
constituents or wastes subject to regulation under the Environmental Laws. By
way of example only, the term "Hazardous Materials" includes but is not limited
to (1) Asbestos; (2) petroleum and petroleum distillates or by-products;
(3) waste oil or waste vehicle fuel; (4) radionucleides; and (5) methane.
6
<PAGE>
2.39 Host Marriott. "Host Marriott" means Host Marriott Corporation, a
-------------
Delaware corporation, formerly known as Marriott Corporation.
2.40 Hotel. "Hotel" means that certain hotel located on the Property and
-----
known as the Chicago Marriott Suites O'Hare Hotel.
2.41 Improvements. "Improvements" means the improvements located on the
------------
Land.
2.42 Indebtedness. "Indebtedness" means, in the aggregate, all
------------
obligations of Borrower, of any kind or nature, evidenced or secured by one or
more of the Loan Documents.
2.43 Land. "Land" means the real property legally described on Exhibit A
----
attached hereto and by this reference made a part hereof.
2.44 Legal Requirements. "Legal Requirements" shall mean any and all
------------------
judicial or administrative decisions, statutes, rulings, directions, rules,
regulations, permits, certificates or ordinances of any governmental authority
applicable to Borrower or the Property or Improvements, including, without
limitation, the ownership, division, use, occupancy, possession, operation,
maintenance, alteration, repair or reconstruction thereof.
2.45 Lender's Expenses. As defined in Section 3.9 hereof.
-----------------
2.46 Loan. "Loan" has the meaning set forth in the Recitals.
----
2.47 Loan Documents. "Loan Documents" has the meaning set forth in
--------------
Section 3.2 hereof.
2.48 Management Agreement. "Management Agreement" means that certain
--------------------
Management Agreement dated as of June 12, 1989 between Borrower (as owner) and
Manager.
2.49 Manager. "Manager" means Marriott International, Inc., a Delaware
-------
corporation.
2.50 Marriott. "Marriott" means Marriott Corporation, a Delaware
--------
corporation, now known as Host Marriott Corporation.
2.51 Maturity Date. "Maturity Date" has the meaning set forth in the
-------------
Note.
2.52 Maximum Amount. "Maximum Amount" has the meaning set forth in
--------------
Section 12.14 hereof.
7
<PAGE>
2.53 Mortgage. "Mortgage" has the meaning set forth in Section 3.2
--------
hereof.
2.54 Net House Profit. Shall have the meaning ascribed thereto in the
----------------
Management Agreement, provided however that in determining Net House Profit,
there shall be no double counting, either in terms of including a single item
more than once in the deductions made in determining Net House Profit, or in
terms of excluding an item from Gross Revenues and, at the same time, deducting
said item in determining Net House Profit. Furthermore, notwithstanding the
fact that the definitions of Gross Revenues, Deductions and Net House Profit
under this Agreement have the same meanings as are set forth in the Management
Agreement, if the amount characterized by Manager as constituting Net House
Profit for the purposes of Section 5.01(B)(1) of the Management Agreement for
any given period of time is, for any reason, greater than the amount that might
otherwise be derived by the application of said definitions, and if said
greater amount has been agreed to or acquiesced in by Borrower for purposes of
the Management Agreement, then said greater amount shall constitute Net House
Profit for the period in question for the purposes of this Agreement and the
other Loan Documents; provided, that the adjustments made pursuant to this
sentence shall not be made, as to any given Fiscal Year, until the final
accounting statements for said Fiscal Year have been furnished in accordance
with clause (iii) of Article 7 of this Agreement.
2.55 NOI Threshold Amount. "NOI Threshold Amount" shall mean, with
--------------------
respect to each Fiscal Year or portion thereof during the term of this
Agreement, the respective amount set forth on Exhibit A to the Note opposite the
listing of said Fiscal Year. Said amount shall be prorated for periods of less
than the full period contemplated in said exhibit based upon the number of days
in the period in question, divided by the number of days in the full period
contemplated in said exhibit.
2.56 NOI Shortfall Year. NOI Shortfall Year means any Fiscal Year with
------------------
respect to which Net House Profit is less than the NOI Threshold Amount.
2.57 Note. "Note" has the meaning set forth in Section 3.2 hereof.
----
2.58 Permitted Encumbrances. "Permitted Encumbrances" has the meaning set
----------------------
forth in the Mortgage.
2.59 Person. "Person" means an individual, corporation, partnership,
------
trust or unincorporated organization, or a government or any agency or political
subdivision thereof.
2.60 Personal Property Inventory. A description of the current contents
---------------------------
of the furniture, fixtures and equipment of the guest rooms at the Hotel.
8
<PAGE>
2.61 Prime Rate. "Prime Rate" at any time shall mean the rate of interest
----------
per annum then most recently announced by Lender at its New York branch as its
prime rate. The Prime Rate is a reference rate and does not necessarily
represent the lowest or best rate actually charged to any customer of Lender.
Lender may make commercial loans or other loans at rates of interest at, above
or below the Prime Rate. A certificate of Lender as to its Prime Rate in effect
on any day shall be conclusive (in the absence of manifest error) for purposes
hereof as to the Prime Rate in effect on such day. If Lender shall not announce
such a rate at its New York branch, or shall not have a New York branch, then
the term "Prime Rate" shall mean the prime rate or base rate from time to time
announced by an American money center bank designated by Lender.
2.62 Property. "Property" means, collectively, the Improvements, the
--------
related personal property and Borrower's leasehold interest in the Land.
2.63 Reaffirmation of Environmental Indemnification Agreement.
--------------------------------------------------------
"Reaffirmation of Environmental Indemnification Agreement" means that certain
Reaffirmation of Environmental Indemnification Agreement of even date herewith
by and between Host Marriott and Lender.
2.64 Reference Rate. "Reference Rate" at any time shall mean the Prime
--------------
Rate plus one (1) percent per annum.
2.65 Repairs and Equipment Estimate shall have the meaning set forth in
------------------------------
Section 6.1 hereof.
2.66 Responsible Officer. "Responsible Officer" means, with respect to
-------------------
any corporation, the President or any Vice President.
2.67 Scheduled Principal Payment. "Scheduled Principal Payment" has the
---------------------------
meaning set forth in the Note.
2.68 Security Agreement. "Security Agreement" has the meaning set forth
------------------
in Section 3.2 hereof.
ARTICLE 3
---------
THE LOAN
--------
3.1 Consolidation, Amendment and Restatement of Obligations. Borrower
-------------------------------------------------------
acknowledges the validity and enforceability of the Original Loan Documents.
Borrower and Lender confirm that the current principal amount of the Original
Loan (prior to giving effect to this Agreement) is $25,500,000, that accrued
interest in the amount of $149,812.49 was due and owing in respect thereof as of
the date hereof and that said accrued interest is being paid to Lender
9
<PAGE>
by Borrower concurrently with, and as a condition to, the execution and delivery
of this Agreement. Upon the making of said interest payment in said amount, all
accrued interest under the Original Loan Documents shall have been paid in full.
Borrower's obligation to pay the principal indebtedness referred to hereinabove,
together with Lender's Expenses and the Restructuring Fee, shall be evidenced
and secured by an Amended and Restated Secured Promissory Note dated as of the
date hereof, made by Borrower to the order of Lender in the face principal
amount of $25,500,000 (the "Note"), by this Agreement and by the other Loan
Documents.
3.2 Loan Documents. In furtherance of the agreements set forth in
--------------
Section 3.1, on the date hereof, Borrower is delivering to Lender the following
(collectively, together with this Agreement, referred to herein as the "Loan
Documents"), all dated as of the date hereof:
(a) The Note, executed by Borrower, which shall be in the form
attached hereto as Exhibit B;
(b) An Amended and Restated Leasehold Mortgage executed by Borrower
(the "Mortgage"), in the form attached hereto as Exhibit C;
(c) An Assignment of Rents executed by Borrower (the "Assignment of
Rents"), in the form attached hereto as Exhibit D;
(d) A Security Agreement executed by Borrower (the "Security
Agreement"), in the form attached hereto as Exhibit E;
(e) UCC-3 financing statements executed by Borrower (the "Financing
Statements"), in form and substance reasonably satisfactory to Lender;
(f) An Amended and Restated Assignment of Management Agreement,
executed by Borrower and Manager (the "Assignment of Management
Agreement"), in the form attached hereto as Exhibit F;
(g) Four (4) separate Deposit, Pledge and Security Agreements,
executed by Borrower and acknowledged, respectively, by the depositary
institutions identified therein (each a "Pledge Agreement"), in the form
attached hereto as Exhibits G-1, G-2, G-3 and G-4;
(h) A Reaffirmation of the Foreclosure Guaranty (the "Foreclosure
Guaranty Reaffirmation") executed by the General Partner, in form and
substance reasonably satisfactory to Lender;
10
<PAGE>
(i) Reaffirmation of Environmental Indemnification Agreement,
executed by Host Marriott (the "Reaffirmation of Environmental
Indemnification Agreement"), in form and substance reasonably satisfactory
to Lender; and
(j) Such other instruments and documents as may be required by this
Agreement or as Lender many reasonably require.
3.3 Interest Rates and Payments. The Loan will bear interest at the
---------------------------
Contract Rate in effect from time to time as set forth in the Note, and, in
addition, the Loan shall bear Additional Accrued Interest as set forth in the
Note. Interest on the Loan shall be computed on the principal balance of the
Loan from time to time on a basis of a 360-day year, but shall be charged for
the actual number of days within the period elapsed. From and after the earlier
to occur of (i) any Event of Default or (ii) Maturity, the interest rate under
the Loan shall be at the Default Rate. The Contract Rate shall be determined
from time to time by Lender in the manner set forth in the Note and, absent
manifest error, such determination shall be conclusive and binding on Borrower.
Borrower shall make payments of interest and principal (including without
limitation, all regularly scheduled payments of Base Rate Interest, all
Scheduled Principal Payments and Excess Cash Flow Payments, and all payments of
Accrual Rate Interest and Additional Accrued Interest) at the time and in the
manner set forth in the Note; provided, however, that Lender hereby agrees to
waive payment of Additional Accrued Interest if (i) Borrower repays the
Indebtedness in full on or before the Maturity Date (with the exception of any
payment made following the acceleration of the Indebtedness by Lender consequent
to any Event of Default) or (ii) (x) Net House Profit for the period from
June 13, 2000 through and including June 12, 2001 is greater than or equal to
the NOI Threshold Amount for said period and (y) the cumulative Net House Profit
for the period from the date hereof through and including June 12, 2001 is
greater than or equal to the Cumulative NOI Threshold Amount for said period.
3.4 Term of the Loan. The entire Indebtedness and all other sums due and
----------------
payable under the Note or the other Loan Documents, if not sooner paid (and
subject to the provisions of the Loan Documents by which the Loan may be
accelerated by Lender), shall be due and payable by Borrower to Lender on
June 12, 2001 (the "Maturity Date").
3.5 Prepayments. Borrower may prepay the Loan in full or in part solely
-----------
in accordance with Section 2.8 of the Note.
3.6 Bankruptcy Stipulations. Borrower, for itself and its successors and
-----------------------
assigns, hereby agrees to the following limitations and waivers of certain
rights and protections that might otherwise be available to Borrower or its
successors and assigns under the Bankruptcy Code. Except as otherwise expressly
stated herein, all agreements and stipulations of Borrower in regard to
bankruptcy and related matters shall be applicable at all times following the
execution of this Agreement, whether before, on, or after the Maturity Date.
BORROWER, TO THE FULLEST
11
<PAGE>
EXTENT PERMITTED BY APPLICABLE LAW, EXPRESSLY ACKNOWLEDGES THAT (I) "CAUSE"
EXISTS FOR PURPOSES OF SECTION 362(D) OF THE BANKRUPTCY CODE FOR RELIEF FROM THE
AUTOMATIC STAY UNDER THE CIRCUMSTANCES DESCRIBED IN PARAGRAPH (a) OF THIS
SECTION, AND (II) THE AGREEMENTS, STIPULATIONS, AND ACKNOWLEDGEMENTS BEING MADE
BY BORROWER UNDER THIS SECTION, INCLUDING BUT NOT LIMITED TO THE AGREEMENT IN
PARAGRAPH (a) THAT LENDER WILL BE ENTITLED TO RELIEF FROM THE AUTOMATIC STAY
UNDER THE CIRCUMSTANCES DESCRIBED BELOW, HAVE CONSTITUTED A MATERIAL INDUCEMENT
TO LENDER TO ENTER INTO THE RESTRUCTURING TRANSACTION EVIDENCED HEREBY AND AN
ESSENTIAL BASIS ON WHICH LENDER IS AGREEING TO OTHERWISE MODIFY THE ORIGINAL
LOAN DOCUMENTS ON THE TERMS SET FORTH HEREIN FOR THE BENEFIT OF BORROWER, AND
LENDER HAS CHANGED, AND WILL CONTINUE TO CHANGE, ITS POSITION IN RELIANCE
THEREON. BORROWER HAS BEEN REPRESENTED BY LEGAL COUNSEL, INCLUDING COUNSEL
SOPHISTICATED IN BANKRUPTCY MATTERS, AND HAS KNOWINGLY AND VOLUNTARILY AGREED TO
THE PROVISIONS OF THIS SECTION.
(a) In the event of a bankruptcy filing following any Event of
Default on or prior to the Maturity Date arising by reason of any of the
following:
(i) failure to pay interest on the Loan (Base Rate Interest,
Accrual Rate Interest or Additional Accrued Interest), any Scheduled
Principal Payment, any Excess Cash Flow Payment or any other payment
due under the Loan Documents;
(ii) application of any Gross Revenues for purposes other
than those permitted pursuant to the Loan Documents, or the
misapplication of any insurance proceeds, condemnation proceeds, or
other funds arising from the Hotel that may come into the hands of
Borrower;
(iii) failure by Borrower to furnish to Lender the financial
reports and information required to be provided under Article 7
hereof when required or within the period for cure of such default;
or
(iv) any material misrepresentation or fraud by Borrower or
any Affiliated Party in connection with the Loan, the Hotel, or the
transactions contemplated by this Agreement;
then, Lender, to the fullest extent permitted by applicable law, will be
- ----
immediately entitled to relief from the automatic stay imposed by Section 362 of
the Bankruptcy Code, to permit Lender to exercise any and all rights and
remedies available to Lender under the Loan Documents or applicable non-
bankruptcy law.
12
<PAGE>
(b) Any attempt by Borrower to use any "Cash Collateral" (i.e., any
funds, proceeds, or property that constitutes "cash collateral" under
Section 363 of the Bankruptcy Code or otherwise expressly designated as
"cash collateral" in the Loan Documents) shall be subject to the prior
entry of an order pursuant to Section 363 of the Bankruptcy Code (a "Cash
Collateral Order") which specifically incorporates, without change or
modification, the provisions of this Agreement and the Pledge Agreements
respecting the use and application of such Cash Collateral. The Cash
Collateral Order shall also require that Borrower deposit and retain in a
segregated account all tenant security deposits under then existing leases
and all advance room receipts or deposits. Borrower shall not use, or seek
to use, Cash Collateral except as provided above, nor contest the entry of
a Cash Collateral Order in accordance with the above. Borrower's right to
the use and application of Cash Collateral shall terminate 120 days after
entry of the Cash Collateral Order, or earlier upon the appointment of a
trustee or examiner, the dismissal of the bankruptcy case or its conversion
to a Chapter 7 case, or the entry of an order of the bankruptcy court
lifting the automatic stay or terminating Borrower's rights to use the Cash
Collateral. The terms of the Cash Collateral Order as described herein do
not constitute a comprehensive listing of all provisions and conditions
that the Cash Collateral order may contain, but any additional provisions
shall not diminish the protections of Lender's interests with respect to
Cash Collateral that are intended by the provisions of this Agreement and
the Pledge Agreements. Either party shall be entitled to petition the court
to extend the Cash Collateral Order, provided that such extension (x) shall
contain all of the terms described in this Agreement and in the Pledge
Agreements and (y) shall not diminish the protections of Lender's interests
with respect to Cash Collateral that are intended by the provisions in this
Agreement and the Pledge Agreements. All amounts paid to Lender pursuant to
the Pledge Agreements shall be deemed applicable first to fees, expenses,
and other charges payable or reimbursable to Lender under the Loan
Documents, then to interest, and then principal; provided, that to the
extent Lender is determined in any bankruptcy to be undersecured, payments
that would otherwise have been applied to interest (including Contract Rate
Interest and Additional Accrued Interest) and/or expenses shall be deemed
to have been applied instead to principal, and all payments applied to
principal shall be deemed applicable first to the unsecured portion of
Borrower's indebtedness to Lender.
(c) To the extent deemed to be property of Borrower's bankruptcy
estate, all existing and future revenues, accounts, deposits, or
instruments payable to or held by or for the benefit of Borrower (including
but not limited to all of the rents,room rents, issues, profits and
proceeds of the Hotel) shall constitute Cash Collateral and shall be
subject to Lender's liens and security interests, which Borrower
acknowledges and agrees are and shall be present, perfected, first priority
liens and security interests. Borrower agrees that the foregoing shall
constitute cash collateral (in addition to all other collateral of Lender)
13
<PAGE>
for Lender's secured claims under Section 506 of the Bankruptcy Code and
shall be entitled to adequate protection.
As minimum requirements for (but without limiting what may be required
in order to provide Lender with) adequate protection for Borrower's use of
such Cash Collateral, (i) Lender shall be deemed to have, and shall
automatically be granted, a continuing, perfected post-bankruptcy lien and
security interest in all rents, room rents, lease, license agreements,
contracts, deposits, and other receipts and revenues from the Hotel,
whether received or entered into before or after the filing of the
bankruptcy petition, and (ii) Borrower shall at all times maintain all
insurance coverages in the forms and amounts required under the Loan
Documents. In the event that such adequate protection as is required proves
to be insufficient, the amount of such insufficiency shall constitute an
administrative expense claim having priority over other kinds of
administrative expenses in accordance with Section 364(c)(1) of the
Bankruptcy Code.
(d) To the extent that any of the rights granted under any of the
Loan Documents are, or are deemed to be, security interests or liens,
during the pendency of Borrower's bankruptcy they shall be perfected and
deemed perfected without the necessity of filing any documents or
commencement of any proceedings otherwise required for the perfection of
such security interests or liens.
(e) Borrower and any other representative of Borrower's bankruptcy
estate hereby waive any right to seek a surcharge of Lender's collateral
under Section 506(c) of the Bankruptcy Code or other applicable law, unless
prior to making or incurring any obligation or making any expenditure that
may become the subject of such a surcharge, Borrower obtains Lender's
agreement that such expenditure or obligation will be a surcharge against
Lender's collateral for purposes of Section 506(c) of the Bankruptcy Code.
(f) In any circumstance (and only during the period) in which
Lender is entitled to relief from the automatic stay under paragraph (a)
above, but where the bankruptcy court does not grant such relief, Borrower,
to the fullest extent permitted by applicable law, hereby waives its right
to the exclusivity period provided under Section 1121 of the Bankruptcy
Code and agrees that (i) "cause" exists for termination of the exclusivity
period and (ii) Borrower will not oppose any motion by Lender to terminate
the exclusivity period.
(g) In any circumstance (and only during the period) in which
Lender is entitled to relief from the automatic stay under paragraph (a)
above, but where the bankruptcy court does not grant such relief, Borrower,
to the fullest extent permitted by applicable law, hereby waives any right
to seek an order under Sections 363, 364, 1129, or any other
14
<PAGE>
provision of the Bankruptcy Code to impose liens or security interests of
senior or equal priority with the liens and security interests of Lender in
the Hotel, the Cash Collateral, or other collateral or security for the
Loan.
(h) Borrower agrees, to the fullest extent permitted by applicable
law, that in no event shall Cash Collateral be used to pay counsel for
Borrower or for the debtor-in-possession, except that fees and expenses of
counsel incurred in the course of the operation, leasing, maintenance and
management of the Hotel vis-a-vis third parties shall be permitted, subject
---------
to the budgetary approval requirements set forth herein.
(i) Borrower stipulates (i) that it is a "single-asset real estate"
entity within the meaning of Section 101(51B) of the Bankruptcy Code, or
would constitute such an entity if Section 101(51B) were amended to include
entities with noncontingent, liquidated secured debts in an amount
exceeding $4,000,000 and that all provisions of the Bankruptcy Code, now or
hereinafter enacted, applicable to single-asset real estate entities are
applicable to Borrower, and (ii) for purposes of Section 552 of the
Bankruptcy Code, that all rents, room rents and revenues derived from the
Hotel constitute rents, profits or proceeds of property in which Lender has
a perfected security interest.
(j) Nothing in the foregoing agreements and stipulations, or
elsewhere in the Loan Documents, shall be deemed to limit or restrict
Lender's rights to seek in the bankruptcy court any relief or remedy that
Lender would otherwise be entitled to obtain, including dismissal or
conversion of the bankruptcy case, the appointment of a trustee or
examiner, or relief from the automatic stay.
3.7 Waiver and Release. As additional consideration for, and as an
------------------
inducement to Lender's entering into this Agreement and consummating the loan
modification, Borrower, on behalf of itself and all parties claiming by, through
or under Borrower, does hereby release, remise, acquit, waive, relinquish and
forever discharge Lender and its agents, employees, directors, officers,
attorneys, affiliates, shareholders, parents, subsidiaries, participants,
predecessors, successors and assigns, and all persons, firms, corporations and
organizations in its behalf (the "Lender's Parties") of and from all damage,
loss, claims, demands, liabilities, obligations, defenses, rights of setoffs,
claims, actions and causes of action whatsoever which Borrower may now have or
claim to have against Lender or Lender's Parties, directly or indirectly,
arising out of, based upon or in any manner connected with any "Prior Related
Event" (as hereinafter defined), whether known or unknown. The term "Prior
Related Event" means any transaction, event, circumstance, action, failure to
act, or occurrence of any sort or type, whether known or unknown, which are
current, existed, was taken, permitted or begun prior to the execution of this
Agreement in accordance with, pursuant to or by virtue of, any of the terms of
the Loan Documents, or which was related or connected in any manner, directly or
indirectly, to the Loan Documents, Original Loan Documents, the obligations
under the Original Loan or any
15
<PAGE>
part thereof or the Property. In addition, Borrower acknowledges and agrees that
it has no defenses, setoffs, claims, counterclaims or causes of action of any
kind or nature whatsoever in connection with the Loan, Original Loan, the Loan
Documents or the Original Loan Documents, or the administration or funding
thereof or the Property.
3.8 Restructuring Fee. Borrower shall pay to Lender an amount equal to
-----------------
$191,250 as a fee for restructuring the Original Loan in accordance with the
Loan Documents (the "Restructuring Fee"). The Restructuring Fee shall be payable
solely from Net House Profit in accordance with Section 8.4 hereof; provided
that Borrower is paying a portion of the Restructuring Fe, in the amount of
$63,750, to Lender concurrently with the execution and delivery of this
Agreement.
3.9 Lender's Expenses. The fees, costs and expenses incurred by Lender
-----------------
in connection with the restructuring of the Original Loan, including without
limitation (i) Borrower's failure to repay the Original Loan prior to maturity
(including all such amounts incurred by Lender in anticipation of Borrower's
failure to repay the Original Loan prior to maturity) or (ii) the negotiation,
preparation and execution of the Loan Documents and all term sheets or
agreements preliminary thereto, are referred to herein as "Lender's Expenses."
Borrower shall cause Lender's Expenses, to be repaid from Net House Profit in
the manner provided in Section 8.4 hereof. Lender shall notify Borrower, within
sixty (60) days following the date hereof, as to the amount of Lender's
Expenses. Concurrently herewith, Lender has advised Borrower as to the amount of
Lender's Expenses as estimated by Lender.
ARTICLE 4
---------
CONDITIONS PRECEDENT
--------------------
4.1 Condition to Closing. Lender's obligations under this Agreement are
--------------------
subject to the fulfillment of each of the following conditions, subject,
however, to the right of Lender to waive any one or more of such conditions in
whole or in part.
(a) Loan Documents. Lender shall have received, at Borrower's sole
--------------
cost and expense, the Loan Documents, in form and substance reasonably
satisfactory to Lender:
(b) Borrower Organizational Documents. Lender shall have received,
---------------------------------
at Borrower's sole cost and expense, the following documents, in form and
substance reasonably satisfactory to Lender:
(i) a copy of Borrower's Certificate of Limited Partnership
certified as of a recent date by the Secretary of State of Rhode
Island;
16
<PAGE>
(ii) a Certificate of Existence issued by the Secretary of
State of Rhode Island with respect to Borrower, dated not more than
thirty (30) days prior to the date hereof;
(iii) a copy of the Amended and Restated Agreement of Limited
Partnership certified by the Managing General Partner as of the date
hereof; and
(iv) a certificate of the Secretary of State of Illinois
dated as of a recent date certifying that Borrower is duly qualified
as a foreign limited partnership to transact business in Illinois;
and
(v) evidence of the withdrawal of MB Investment Properties,
Inc., a Rhode Island corporation as a general partner of the Borrower
and that the General Partner is currently the sole general partner of
the Borrower.
(c) Partner Organizational Documents. Lender shall have received,
--------------------------------
at Borrower's sole cost and expense, the following documents, in form and
substance reasonably satisfactory to Lender:
(i) a copy of the Certificate of Incorporation of each
General Partner and all amendments thereto certified as of a recent
date by the Secretary of State of the state of incorporation of such
General Partner;
(ii) a certificate of the Secretary of State of the state of
incorporation of each General Partner dated as of a date reasonably
near the date hereof confirming the due incorporation, filing of
annual reports and payment of franchise taxes of such General
Partner;
(iii) a certificate from the Secretary of State of the state
of incorporation of each General Partner confirming as of the date
hereof the good standing of such General Partner;
(iv) a certificate of the Secretary of State of Illinois
dated as of a date reasonably near the date hereof certifying that
each General Partner is in good standing and duly qualified as a
foreign corporation to transact business in Illinois; and
(v) a copy of the Certificate of Incorporation and by-laws
of each General Partner, a copy of the resolutions or other corporate
action taken by the board of directors of each General Partner
authorizing the transactions contemplated hereby and a list and
specimen signatures of incumbent officers of
17
<PAGE>
each General Partner signing any Loan Documents, each certified by the
Secretary of such General Partner as of the date hereof.
(d) Host Marriott Organizational Documents. Lender shall have
--------------------------------------
received at Borrower's sole cost and expense, the following documents, in
form and substance reasonably satisfactory to Lender:
(i) a copy of the Certificate of Incorporation of Host
Marriott and all amendments thereto certified as of a recent date by
the Secretary of State of Delaware;
(ii) a certificate of the Secretary of State of Delaware, dated
as of a date reasonably near the date hereof, confirming the due
incorporation, filing of annual reports and payment of franchise taxes
by Host Marriott;
(iii) a certificate from the Secretary of State of Delaware
dated as of the Closing Date confirming the good standing of Host
Marriott;
(iv) a copy of the Certificate of Incorporation and by-laws of
Host Marriott, evidence of authority for the execution of the
Reaffirmation of Environmental Indemnification Agreement, and a list
and specimen signatures of incumbent officers of Host Marriott signing
any Loan Documents, certified by the Secretary of Host Marriott as of
the date hereof; and
(v) A copy of a change-of-name certificate confirming that
Marriott's name was changed to Host Marriott.
(e) Property Documents. Lender shall have received, at Borrower's
------------------
sole cost and expense, the following documents, in form and substance
reasonably satisfactory to Lender:
(i) a copy of the Ground Lease and all amendments thereto,
certified by Managing General Partner as of the Closing Date;
(ii) a certificate of the landlord under the Ground Lease as to
the absence of defaults under the Ground Lease and such other matters
as Lender may request;
(iii) an update, dated not more than thirty (30) days prior to
the date hereof, of that certain plat of survey dated July 29, 1996,
prepared by Edward J.
18
<PAGE>
Molloy & Associates, Ltd., as job no. 960577 (the "Original Survey")
certifying to Lender and the title insurer that there have been no
changes therefrom;
(iv) the evidence of insurance referred to in the Mortgage;
(v) ALTA 1990 Loan Policy of Title Insurance dated as of the
closing date for the restructured loan subject to no additional title
exceptions and confirming the continued first priority of the loan
documents, including all endorsements previously obtained and, in
addition, endorsements re (i) deletion of creditors' rights, (ii) no
joint venture, (iii) usury and (iv) "participation interest."
(vi) current Uniform Commercial Code searches made in the
Office of the Secretary of State of the State of Illinois, the Office
of the County Recorder for Cook County, Illinois, the Office of the
Secretary of State of Maryland, the Office of the Secretary of State
of Rhode Island and such other places as Lender may specify, covering
Borrower and the General Partners showing no filings relating to, or
which could relate to, the Improvements other than those made
hereunder or under the Original Loan;
(vii) copies of all Governmental Approvals, environmental
permits and licenses, building permits, certificates of occupancy,
liquor licenses and other licenses and permits relating to the
Property;
(viii) The Personal Property Inventory or similar listing of all
the personal property located at the Property;
(ix) An estoppel certificate from the Manager (the "Manager's
Estoppel");
(x) An estoppel certificate from the ground lessor under the
Ground Lease, dated not more than seven (7) days prior to the date
hereof (the "Ground Lessor Estoppel");
(xi) A Reaffirmation of the Foreclosure Guaranty (the
"Foreclosure Guaranty Reaffirmation") executed by the General Partner;
(xii) A Reaffirmation of Environmental Indemnification
Agreement, executed by Host Marriott (the "Reaffirmation of
Environmental Indemnification Agreement");
19
<PAGE>
(xiii) A letter from Host Marriott, in form reasonably
satisfactory to Lender that the Debt Service Agreement has expired,
that no sums are owing by the Borrower in connection therewith and
that no mortgages or other security have been furnished by the
Borrower to Host Marriott in connection therewith with respect to the
Property; and
(xiv) Such other notices, filings, tax returns and other
instruments as shall be necessary to record or give notice of the
liens, security interest and assignments contemplated herein.
(f) Opinions of Counsel. Lender shall have received opinions of
-------------------
counsel for Borrower and an opinion of counsel for Host Marriott all dated
as of the date hereof, satisfactory to Lender and relating to such matters
with respect to this Agreement, the Loan Documents and the transactions
contemplated hereby as Lender may request.
(g) Filing and Recordation. The Mortgage, the Assignment of Rents,
----------------------
the Financing Statements and any of the other documents listed above whose
recording and/or filing is required by Lender shall have been properly
recorded and/or filed in the appropriate offices.
(h) Additional Information. Borrower shall have provided such other
----------------------
information and documents as Lender may reasonably require.
(i) Representations and Warranties. The representations and
------------------------------
warranties of Borrower contained in this Agreement and in the other Loan
Documents shall be true and correct in all material respects as of the date
hereof.
ARTICLE 5
---------
REPRESENTATIONS AND WARRANTIES
------------------------------
5.1 Representations and Warranties. As a material inducement to Lender to
------------------------------
enter into this Agreement and to amend and restate the Original Loan as set
forth in the Loan Documents, Borrower unconditionally represents and warrants as
follows:
(a) Formation and Power. Borrower is a limited partnership, duly
-------------------
formed and validly existing under the laws of the State of Rhode Island and
duly qualified to do business in and in good standing in the State of
Illinois, with requisite power and authority to (i) incur the indebtedness
evidenced by the Note; (ii) execute this Agreement and the other Loan
Documents, and (iii) enter into any other instruments executed and
delivered to Lender concurrently herewith.
20
<PAGE>
(b) Due Execution. This Agreement, the Note, and all the other Loan
-------------
Documents were executed in accordance with the requirements of law and in
accordance with the requirements of Borrower's certificate of limited
partnership and partnership agreement and any amendments thereto.
(c) Due Authorization. The execution of this Agreement, the Note, and
-----------------
all the other Loan Documents, and the full and complete performance of the
provisions thereof, are authorized by Borrower's certificate of limited
partnership and partnership agreement.
(d) No Conflicts or Defaults. The execution of this Agreement, the
------------------------
Note, and all other Loan Documents, and the full and complete performance
of the provisions thereof, will not result in any material breach of, or
constitute a material default under, or result in the creation of any lien,
charge or encumbrance (other than those contained in any of the Loan
Documents) upon any property or assets of Borrower under any indenture,
mortgage, deed of trust, bank loan or credit agreement or other instrument
or agreement to which Borrower is a party or by which Borrower or the
Property is bound.
(e) Ownership of Property. Borrower is the sole legal and beneficial
---------------------
owner of the Property free and clear, to the best of Borrower's knowledge,
of all claims, liens and encumbrances other than the Permitted
Encumbrances.
(f) Accuracy of Financial Information. Any and all balance sheets,
---------------------------------
statements of income or loss, reconciliation of surplus and financial data
of any other kind heretofore furnished Lender by or on behalf of Borrower
are true and correct in all material respects, have been prepared on a
federal tax basis and fully and accurately present the financial condition
of the subjects thereof as of the dates thereof and no material adverse
change has occurred in the financial condition reflected therein since the
dates of the most recent thereof.
(g) Litigation. There are no actions, suits or proceedings of a
----------
material nature pending or, to the knowledge of Borrower threatened,
against or adversely affecting Borrower or the Property, including any
Environmental Claims, and no event has occurred that will violate, be in
conflict with, result in the breach of or constitute (with due notice or
lapse of time, or both) a default under, any Legal Requirement, or result
in the creation or imposition of any lien, charge or encumbrance of any
nature whatsoever on the Property other than the liens and security
interests created by, or otherwise permitted by, the Loan Documents.
(h) Legal Requirements. Borrower has complied with all Legal
------------------
Requirements the non-compliance with which would have a material adverse
affect on Borrower or the Property.
21
<PAGE>
(i) No Usury. The Loan is a business loan within the meaning of
--------
Paragraph 6404(1)(d) of Chapter 17 of Illinois Revised Statutes, 815 ILCS
205/4 (1992), the Loan is an exempted transaction under the Truth In
Lending Act, 12 U.S.C. Section 1601 et seq. and the Loan does not violate
-- ---
the provisions of the Illinois usury laws, any consumers credit laws or the
usury laws of any state which may have jurisdiction over this transaction,
Borrower or any property securing the Loan.
(j) Zoning. The use and occupancy of the Property and Improvements
------
comply with all Legal Requirements except where non-compliance with such
Legal Requirement would not have a material adverse affect on the Borrower
or the Property. Except for Permitted Encumbrances, no portion of the
Improvements are constructed over areas subject to easements or set-back
restrictions. Neither the zoning nor any other right to construct or to use
the Improvements is to any extent dependent upon or related to any real
estate other than the Property except to the extent that the use of the
Improvements is limited by the terms of the Ground Lease or under one or
more of the Permitted Encumbrances. All approvals, licenses, permits,
certifications, filings, and other actions normally accepted as proof of
compliance with the Legal Requirements by prudent lending institutions that
make investments secured by real estate in the general area of the
Property, to the extent available as of the date hereof, have been duly
made, issued, or taken.
(k) Availability of Service. All streets, easements, utilities and
-----------------------
related services necessary for the construction of the Improvements and the
operation thereof for their intended purpose are available to the Property,
including potable water, storm and sanitary sewer, gas, electric and
telephone facilities and garbage removal.
(l) Binding Effect of Loan Documents. Each Loan Document constitutes
--------------------------------
a legal and binding obligation of, and is valid and enforceable against,
Borrower, all other persons (other than Lender) obligated thereunder (if
any) and the Property and Improvements (as the case may be) in accordance
with the terms thereof (except as such enforceability is limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws,
or by equitable principles, applicable to the rights of creditors
generally) and is not subject to any defenses or setoffs.
(m) Subdivision. The Property is not in violation of any Illinois
-----------
law or local ordinance relating to the division or transfer of land and no
such violation has occurred or will occur by reason of a transfer or
mortgage of the Property, that, in either case, would affect the validity
or enforceability of any subsequent conveyance or encumbrance of any
interest in the Property.
(n) Environmental. To Borrower's actual knowledge, without having
-------------
undertaken any investigation other than the environmental reports
identified in Exhibit H,
22
<PAGE>
(i) no Hazardous Materials exist on, over, under or about the Property or
the Land and (ii) there have been no actual or claimed violations of any
Environmental Laws with respect to the Property or the Land, other than as
set forth in environmental reports identified on Exhibit H.
(o) Sewage. To Borrower's actual knowledge, the storm and sanitary
------
sewage disposal system, water system and all mechanical systems of the Land
and the Property comply with all applicable laws, statutes, ordinances,
rules and regulations, including, without limitation, all Environmental
Laws. The applicable environmental protection agency, pollution control
board and/or other governmental agencies having jurisdiction of the Land
and the Property have issued their permits for the construction, tap-on and
operation of those systems.
(p) Utilities. To Borrower's actual knowledge, all utility, parking,
---------
access (including curb-cuts and highway access), construction, recreational
and other permits and easements required for the construction and use of
the Property have been granted and issued.
(q) Governmental Approvals. To Borrower's actual knowledge, no
----------------------
authorization, approval or license from, filing with or notice to, and no
other action by, any Governmental Authority (each, a "Governmental
Approval") is required in connection with the due execution, delivery and
performance by Borrower of any Loan Document.
(r) Leases. Borrower has not entered into any lease or other
------
arrangement for occupancy of space within the Property. Borrower is not
holding any security deposits with respect to any leases or occupancy
agreements for space within the Property, and Borrower has not received any
prepayments of rent more than one month in advance under any such leases or
occupancy agreements.
(s) Truth of Financial Statements. All financial statements and other
-----------------------------
reports furnished to Lender by Borrower or any Affiliated Party are true,
correct and complete in all material respects and do not fail to state any
material fact necessary to make the statements made not misleading.
(t) Change in Financial Condition. No material adverse change in the
-----------------------------
operations or financial condition of Borrower or Host Marriott has occurred
since the respective effective dates of their financial statements most
recently submitted to Lender.
(u) Regulation U. The Loan was not made for the purpose of
------------
purchasing or carrying "margin stock" within the meaning of Regulation G,
T, U or X issued by the Board of Governors of the Federal Reserve System,
and Borrower agrees to execute all
23
<PAGE>
instruments necessary to comply with all the requirements of Regulation U
of the Federal Reserve System.
(v) ERISA. The assets of Borrower are not "plan assets" of any
-----
employee benefit plan covered by ERISA or Section 4975 of the Internal
Revenue Code.
(w) Truth of Recitals. All statements set forth in the Recitals are
-----------------
true and correct.
(x) Freedom from Default. No Default or Event of Default has occurred
--------------------
or is continuing, other than the failure of the Borrower to repay the
Original Loan upon the maturity thereof.
(y) Trade Name. Neither the Borrower nor the General Partner uses
----------
any trade name other than its actual name set forth herein.
(z) Principal Business Address. The principal place of business of
--------------------------
Borrower and the General Partner are located at the address provided in
Section 12.3 hereof for the furnishing of notices to Borrower.
(aa) Foreign Person. Borrower is not a "foreign person" within the
--------------
meaning of Sections 1445 or 7701 of the Internal Revenue Code.
(bb) Transactions with Affiliated Parties. Borrower has not
------------------------------------
purchased, acquired or leased any property from, or sold, transferred or
leased any property to, or loaned or advanced any money to, or borrowed any
obligation of, or acquired any stock, obligations or securities of, or
entered into any merger or consolidation agreement or any management or
similar agreement with, any Affiliated Party, or entered into any other
transaction or arrangement with or made any payment to or otherwise dealt
with, in the ordinary course of business or otherwise any Affiliated Party,
other than the Management Agreement and any payments made pursuant thereto
and other than Host Marriott.
(cc) Employees. Borrower has no employees.
---------
(dd) Other Indebtedness. Borrower has no indebtedness other than (i)
------------------
the Indebtedness, (ii) any deferred Incentive Management Fees owing to
Manager under the Management Agreement, which deferred amounts are not in
excess of $3,061,998 as of the date hereof and (iii) any accounts payable
to trade creditors in the ordinary course of the operation of the Hotel,
which accounts payable do not exceed $220,209 as of the date hereof and, to
Borrower's knowledge, Borrower is not in default to any such trade
creditors.
24
<PAGE>
(ee) No Distributions. Borrower has made no distributions to any of
-----------------
its constituent partners in the twelve (12) month period ending with the
date hereof.
5.2 Nature of Representations and Warranties. As of the date hereof, all
----------------------------------------
representations and warranties made in this Agreement and in any other Loan
Document are true and correct in all material respects and do not contain untrue
statements of a material fact or omit any material fact necessary to make such
representations and warranties not misleading. Such representations and
warranties shall survive so long as any of Borrower's obligations hereunder have
not been satisfied or the Loan or any part thereof shall remain outstanding, and
for any applicable statute of limitations period thereafter. All
representations and warranties made in this Agreement or in any certificate or
other document delivered to Lender by or on behalf of Borrower or Host Marriott,
or any General Partner pursuant to or in connection with this Agreement shall be
deemed to have been relied upon by Lender notwithstanding any investigation
heretofore or hereafter made by Lender or on its behalf. Except as specifically
provided hereinabove to the contrary, the representations and warranties
contained herein that are made to the best knowledge and belief of Borrower have
been made after diligent inquiry calculated to ascertain the truth and accuracy
of the subject matter of each of such representations and warranties.
ARTICLE 6
---------
ANNUAL BUSINESS PLAN AND BUDGET; LENDER'S CONSULTANT;
-----------------------------------------------------
NOI COVENANT
------------
6.1 Not less than twenty-five (25) days prior to the end of each Fiscal
Year, Borrower shall provide Lender with an Annual Operating Projection and a
Repairs and Equipment Estimate (as such terms are defined in the Management
Agreement) for the Property for the following Fiscal Year which shall include
(i) a proposed operating budget for the Hotel prepared in accordance with the
Management Agreement showing the estimated Gross Revenues, departmental profits,
Deductions and other authorized deductions, and the projected Net House Profit
for the forthcoming Fiscal Year and (ii) a proposed Capital Improvements budget
for such Fiscal Year prepared in accordance with the Management Agreement. To
the extent that the proposed budget for each Fiscal Year is broken down into
thirteen (13) Accounting Periods, at any time during any Fiscal Year, Borrower
shall promptly furnish Lender with a copy of said breakdown. A copy of the
Annual Operating Projection and the Repairs and Equipment Estimate for Fiscal
Year 1996 is attached hereto as Exhibit I.
6.2 Borrower shall arrange for Manager to meet with Lender at the Hotel on
a semi-annual basis at a mutually agreeable time to discuss the performance of
the Hotel and the applic able (or proposed) Annual Operating Projection and
Repairs and Equipment Estimate. Borrower
25
<PAGE>
and Lender shall meet with Manager to discuss the reallocation of certain
expenses between the Hotel and the nearby Marriott Hotel to more accurately
reflect the costs and benefits of certain services between such hotels. This
discussion shall include the van service and reservation expenses between the
foregoing hotels.
6.3 Lender shall have the right to engage one or more consultants to whom
Lender may provide, following the execution by each such consultant of a
confidentiality agreement in form and substance reasonably satisfactory to
Borrower, copies of all budgets, business plans, financial statements and other
information pertaining to the Hotel. As Lender's agent such consultant (i) shall
have the right to review and inspect the books and records of the Borrower and
visit the Hotel upon reasonable prior notice and (ii) shall have the right to
attend the semi-annual meetings with representatives of the Manager and the
Borrower described in Section 6.2 above. The consultant's fee (the "Consultant's
Fee") shall be paid for by the Lender; provided, however that Borrower shall be
liable for the Consultant's Fee (limited to $10,000) only for any NOI Shortfall
Year.
ARTICLE 7
---------
FINANCIAL STATEMENTS
--------------------
Financial Statements. Borrower agrees to furnish to Lender, at Borrower's
--------------------
expense:
(i) as soon as practicable, but in any event not later than
forty-five (45) days after the end of each Accounting Period, Smith
Travel Research's STAR Report for the Hotel (to the extent provided by
the Manager) together with an unaudited balance sheet for the Hotel,
as of the end of such accounting period and the related unaudited
"rent letter" of Manager (together with Manager's so-called "Format
90" or its equivalent) in the form of Exhibit J hereto for such
Accounting Period and for the portion of the calendar year through the
last day of said Accounting Period, setting forth in each case in
comparative form the figures for the previous year and the figures
under the Annual Operating Projection for the period or periods in
question, and setting forth the actual Capital Improvement expenditure
for the period, certified by a Responsible Officer of the General
Partner, each such financial statement to be complete and correct in
all material respects and prepared in reasonable detail. The
financial statements shall also set forth the monthly balance of the
FF&E Account. If the Manager supplies other financial information or
similar reports, the Borrower shall supply copies of such to Lender.
26
<PAGE>
(ii) as soon as available and in any event within 90 days after
the end of each of the first three quarters of each Fiscal Year of
Borrower, a balance sheet of Borrower as of the end of such quarter
and an income statement and statement of changes in cash flows and
statement of changes in equity, of Borrower 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 stating in com parative form the
respective figures for the corresponding date and period in the
previous Fiscal Year and all prepared on a federal tax basis (or in
accordance with generally accepted accounting principles applied on a
consistent basis if such "GAAP" financial statements become available
subsequent to the date hereof) and certified by a Responsible Officer
of the General Partner;
(iii) annually, within 120 days after the close of each of
Borrower's Fis cal Years, consolidated operating statement for the
Property for said Fiscal Year and a financial statement for such
Fiscal Year, consisting of a balance sheet and profit and loss
statement, in such reasonable detail as Lender may request, setting
forth the financial condition and the income and expenses of both
Borrower and of the Property for such Fiscal Year and a certificate
executed by Borrower certi fying that such financial statement has
been prepared on a federal tax basis (or in accordance with generally
accepted accounting principles applied on a consistent basis if such
"GAAP" financial statements become available subsequent to the date
hereof) and fairly presents Borrower's financial condition as of the
date thereof and the results of Borrower's operations for the period
covered thereby. Such financial statement shall be audited at
Borrower's expense by a certified public accountant selected by
Borrower and satisfactory to Lender;
(iv) upon Lender's request, Borrower shall also furnish to
Lender, at Borrower's expense, such unaudited interim balance sheets
and profit and loss statements as Borrower shall have otherwise
prepared. Upon Lender's request, Borrower shall furnish Lender with
convenient facilities and all books and records necessary for an audit
of such statements. At any time and from time to time, Borrower shall
deliver to Lender such other financial data as Lender reasonably shall
request with respect to ownership, maintenance, use and operation of
the Property. Borrower shall notify Lender immediately of any
material adverse change in its financial condition or business
prospects;
(v) Borrower shall use its best efforts to furnish Lender with
copies of the 10Q and 10K reports for Host Marriott within thirty (30)
days after the filing thereof, provided that Borrower's failure to
furnish said copies within said time period shall not constitute an
Event of Default hereunder.
27
<PAGE>
Lender shall require the auditor furnishing such financial statements to
furnish an opinion to Borrower as to the amount of Excess Cash Flow for the
year in question, and the amount of any Excess Cash Flow Payments so that
the payments required to be made pursuant to Section 2.3 of the Note may be
verified. The auditor providing such financial statements shall be subject
to the prior written approval of the Lender. Lender acknowledges that it
has currently approved Arthur Andersen, L.L.P. as said auditor, and that
Lender shall approve any other "Big 6" accounting firm as said auditor,
provided that prior written notice of said selection is provided to Lender.
Approval of any auditor may be withdrawn upon prior written notice from the
Lender if Lender believes that there has been a material adverse change in
the ability of said auditor to adequately perform the work contemplated
under this Article 7.
ARTICLE 8
---------
BANK ACCOUNTS AND APPLICATION OF GROSS REVENUES
-----------------------------------------------
8.1 Establishment of Bank Accounts. Borrower shall not commingle or
------------------------------
permit to be commingled the Gross Revenues with any monies or funds of any
Affiliated Party or with any revenues from any properties other than the
Property. Borrower shall establish four separate bank accounts, referred to
herein as the "Main Disbursing Account," the "General Investment Account," the
"FF&E Account" and the "Operating Account" (collectively, the "Bank Accounts").
Each Bank Account shall be pledged to Lender as security for the performance of
Borrower's obligations under the Loan Documents pursuant to a separate deposit,
pledge and security agreement in substantially the form of the Pledge
Agreements. As of the date hereof, the Bank Accounts are as follows:
(a) The Main Disbursing Account has been established at First
National Bank of Chicago as Account No. 58-06704. As of September 17, 1996,
the balance of said account was $549,492.57.
(b) The General Investment Account has been established at Merrill
Lynch & Company as Account No. 3214638-5. As of September 17, 1996, the
balance of said account was $66,842.96.
(c) The FF&E Account has been established at Merrill Lynch & Company
as Account No. 3206060-7. As of September 17, 1996, the balance of said
account was $929,822.31.
28
<PAGE>
(d) The Operating Account has been established at Merrill Lynch &
Company as Account No. 258-3213916-9. As of September 17, 1996, the
balance of said account was $515,005.29.
Borrower shall not at any time during the term of the Loan close any of the Bank
Accounts or open or maintain any accounts at any other financial institution
without the prior written consent of Lender. Each of the Bank Accounts shall be
an interest-bearing account, and the proceeds of each account shall be invested
solely in the types of investments identified on Exhibit L attached hereto,
unless Lender's prior written approval shall first be obtained. Borrower agrees
that it shall include all earnings on the Bank Accounts as income of Borrower
for all applicable federal and state tax purposes.
8.2 Deposits to Bank Accounts; Withdrawal of Funds.
----------------------------------------------
(a) Borrower shall deposit or cause to be deposited all Gross
Revenues in the Main Disbursing Account upon Manager's receipt thereof.
Manager shall have signature authority with respect to the Main Disbursing
Account, provided that (i) Manager shall be authorized to withdraw funds
therefrom solely in accordance with the terms of the Management Agreement
and (ii) Manager shall be authorized to withdraw funds for the purpose of
transferring such funds to the General Investment Account. Borrower shall
cause Manager, not later than the 20th day following the end of each
Accounting Period, to transfer from the Main Disbursing Account into the
Operating Account an amount equal to the Net House Profit for such
Accounting Period.
(b) Manager shall have signature authority with respect to the
General Investment Account, provided Manager shall not cause any funds to
be disbursed therefrom other than for the purpose of transferring said
funds to the Main Disbursing Account for the payment of costs and expenses
which, pursuant to Section 8.2(a) hereinabove, are authorized to be
disbursed from the Main Disbursing Account.
(c) Borrower shall deposit or cause to be deposited in the FF&E
Account within twenty (20) days following the close of each Accounting
Period, an amount equal to (i) four percent (4%) of the Gross Revenues for
said period, if said period falls within calendar years 1996, 1997, 1998 or
1999, and (ii) five percent (5%) of the Gross Revenues for said period, if
said period occurs on or after January 1, 2000. Borrower and Manager shall
have signature authority with respect to the FF&E Account, provided that
neither Borrower nor Manager shall cause any funds to be withdrawn
therefrom other than to pay for Capital Improvements in accordance with the
Management Agreement.
(d) Borrower shall have signature authority with respect to the
Operating Account, provided that Borrower hereby agrees not to withdraw any
funds therefrom other
29
<PAGE>
than for the purposes for which Borrower is permitted or required to apply
Net House Profit pursuant to Sections 8.4 and 8.5 hereinbelow.
(e) Notwithstanding the foregoing, Borrower shall not have the right
to withdraw any funds from any Bank Account during the continuation of any
Event of Default or any event which, with the passage of time or the giving
of notice, would constitute an Event of Default.
8.3 Payment of Deductions. Borrower (or Manager, pursuant to the
---------------------
Management Agreement and as agent for Borrower) shall cause Gross Revenues to be
applied first to the payment of all Deductions which are then payable.
Deductions shall, as provided above, be paid from the Main Disbursing Account.
8.4 Application of Net House Profit. The balance of Gross Revenues
-------------------------------
remaining after the payment of Deductions (i.e., Net House Profit) shall be
applied by Borrower as follows:
(i) First, to the payment of rent and other charges then due and
payable to the ground lessor under the Ground Lease;
(ii) Second, to the payment of Base Rate Interest then due and
payable;
(iii) Third, to the payment of Scheduled Principal Payments then due
and payable;
(iv) Fourth, to the payment of any Incentive Management Fee or
Contingent Management Fees then due and payable to Manager in accordance
with Article V of the Management Agreement;
(v) Fifth, to the payment of actual out-of-pocket expenses incurred
by Borrower to parties that are not Affiliated Parties and are not
employees of Borrower or any Affiliated Party (with the exception of Host
Marriott, but only to the extent that the compensation paid to Host
Marriott does not exceed the amounts that would be payable at arm's-length)
in connection with the administration of Borrower's limited partnership
structure, provided that said amount shall not include overhead not
specifically attributable to the Borrower entity and shall not exceed
$75,000 in any given calendar year (which amount shall be ratably adjusted
for partial Fiscal Years during the term hereof based upon the number of
days in said Fiscal year that fall within the term hereof);
(vi) Sixth, to the payment of any Lender's Expenses not previously
repaid;
30
<PAGE>
(vii) Seventh, to the payment of any portion of the Restructuring Fee
not previously repaid;
(viii) Eighth, to the payment of any Consultant's Fees incurred by
Lender in any year in which there is an NOI Shortfall; and
(ix) Ninth, to the payment of any "Permitted Payments" (as such term
is defined in the Subordination Agreement of even date herewith between
Lender and Manager) payable to Manager from time to time by Borrower.
8.5 Application of Excess Cash Flow. The balance of Net House Profit
-------------------------------
remaining after application to the costs and expenses described in Section 8.4
hereinabove as referred to herein as "Excess Cash Flow." All Excess Cash Flow
shall be applied in accordance with the terms of Section 2.3 of the Note. The
items in clauses (vi), (vii) and (viii) above shall be paid to Lender by
Borrower concurrently with the making of the Excess Cash Flow Payments pursuant
to Section 2.3 of the Note.
ARTICLE 9
---------
GENERAL COVENANTS OF BORROWER
-----------------------------
So long as any of Borrower's obligations hereunder have not been satisfied
or the Loan or any part thereof shall remain outstanding Borrower shall:
9.1 Maintenance of Existence. Preserve and maintain its partnership
------------------------
existence and good standing in the jurisdiction of its formation, and qualify
and remain qualified in each jurisdiction in which such qualification is
required. Without the prior written consent of Lender, Borrower shall not
permit or suffer any amendment or modification of its partnership agreement, the
withdrawal of the General Partner or the admission of a new General Partner.
9.2 Conduct of Business. Operate the Hotel as a first class Hotel at all
-------------------
times.
9.3 Maintenance of Property. Maintain, keep and preserve all of the
-----------------------
Property (tangible and intangible) that is necessary or useful in the operation
of the Property and the conduct of Borrower's business in good working order and
condition, ordinary wear and tear excepted; provided, however, that so long as
no Event of Default is then continuing, Borrower may dispose of any worn out or
obsolete items of personal property no longer useful or necessary to the
operation of the Hotel and may replace items of personal property so long as the
replacement property is of quality, value and utility at least equal to that of
the property being replaced at the time it was placed in service. All such
Property shall be owned by Borrower and not leased and shall be kept free and
clear of all chattel mortgages, conditional vendor's liens, and
31
<PAGE>
all other liens, encumbrances and security interests of any kind other than
liens in favor of Lender, with the exception of the equipment leases identified
on Exhibit K attached hereto, and equipment leases of a similar scope or nature
entered into in the future, to the extent consistent with the customary
standards for the operation of a first class hotel facility.
9.4 Maintenance of Records. Keep adequate records and books of account,
----------------------
in which complete entries will be made reflecting all financial transactions
concerning the Property.
9.5 Maintenance of Insurance. Maintain such insurance as is required by
------------------------
the Mortgage.
9.6 Compliance with Legal Requirements. Comply in all respects with all
----------------------------------
Legal Requirements unless such noncompliance does not materially adversely
affect the Property or Borrower; provided, however, that Borrower may contest in
good faith the validity or applicability to Borrower or to the Property of any
Legal Requirement by appropriate proceedings in a manner that does not, in the
judgment of Lender, materially and adversely affect Lender's rights or the first
priority of its lien against the Property.
9.7 Right of Inspection. From time to time upon reasonable prior notice
-------------------
permit Lender or any agent or representative thereof, during normal business
hours, to examine and make copies and abstracts from the records and books of
account of, and visit the Property; provided, however, that in cases of
emergency no such notice shall be required.
9.8
(a) Notice of Events of Default. At its expense, furnish to Lender as
---------------------------
soon as possible and in any event within 10 days after Borrower becomes
aware of the occurrence of any Event of Default or event that, with notice
or lapse of time or both, would become an Event of Default, a written
notice setting forth the details of such Event of Default or event and the
action that is proposed to be taken by Borrower with respect thereto.
(b) General Information. At its expense, furnish to Lender such other
-------------------
information respecting the condition or operations, financial or otherwise,
of Borrower as Lender may from time to time reasonably request.
(c) General Partner. Upon request by Lender, Borrower shall provide
---------------
to Lender any and all financial statements and other documents and
information with respect to the General Partner described in such request,
to the extent that such statements, documents and information exist and are
available.
32
<PAGE>
Upon Lender's request, Borrower shall furnish Lender with convenient
facilities and all books and records necessary for an audit of such
statements. At any time and from time to time, Borrower shall deliver to
Lender such other financial data as Lender reasonably shall request with
respect to ownership, maintenance, use and operation of the Property.
Borrower shall notify Lender immediately of any material adverse change in
its financial condition or business prospects.
9.9 Liens. Save and except for taxes and assessments that are to be paid
-----
by Borrower as specified in the Mortgage, not create or suffer or permit to be
created or to exist, subsequent to the date hereof, any lien or encumbrance upon
the Property that shall be or may become superior to the lien of the Mortgage.
9.10 Leasehold Interest.
------------------
(a) Performance of Ground Lease. At all times fully perform and
---------------------------
comply with all agreements, covenants, terms and conditions imposed upon or
assumed by it under the Ground Lease and permit Lender, if Borrower shall
fail so to do, to take any action Lender deems necessary or desirable to
prevent or to cure any default by Borrower in the performance of or
compliance with any of Borrower's covenants or obligations under the Ground
Lease.
(b) No Amendments. Not surrender the leasehold estate and interest
-------------
under, nor terminate or cancel the Ground Lease nor, without the express
written consent of Lender, modify, change, supplement, alter or amend the
Ground Lease either orally or in writing.
9.11 Environmental Compliance. Except for Hazardous Materials used in the
------------------------
ordinary course of the hotel and restaurant business, Borrower will not, and
will not permit any other Person to, use, manufacture, process, store, dispose
of or otherwise handle Hazardous Materials on the Property.
9.12 Documents of Further Assurance. Borrower shall, from time to time,
------------------------------
upon Lender's request, execute, deliver, record and furnish such documents as
Lender may reasonably deem necessary or desirable to (i) perfect, and maintain
perfected as valid liens upon the Property, the liens granted by Borrower
pursuant to the Mortgage and the assignments and other security interests
granted by Borrower to Lender under the other Loan Documents as contemplated by
this Agreement, (ii) correct any errors of a typographical nature which may be
contained in any of the Loan Documents, and (iii) consummate fully the
transactions contemplated under this Agreement.
9.13 Furnishing Reports. Upon Lender's reasonable request, Borrower shall
------------------
provide Lender promptly after receipt with copies of all inspections, reports,
test results and other
33
<PAGE>
information received by Borrower from time to time from its employees, agents,
representatives, architects, engineers, contractors, and any other parties
heretofore or hereafter involved in the operation of the Property which in any
way relate to the Property (or any part thereof).
9.14 Leases.
------
(a) Borrower shall not enter into any lease of space in the Property
without the prior written consent of Lender (any lease that is so approved
being referred to herein as an "Approved Lease"). Borrower shall not
modify, amend, waive any material pro vision of, terminate or cancel any
Approved Lease of space in the Property for more than 2,000 square feet
without the prior written consent of Lender. Nothing in this Section 9.14,
or in Section 9.16, however, shall detract from the rights of the Manager
under the Management Agreement.
(b) Borrower shall deliver copies of all Approved Leases to Lender
promptly following execution.
9.15 Management Agreement and Other Contracts.
----------------------------------------
(a) Borrower shall not amend, modify, waive any provision of,
terminate or cancel the Management Agreement. In the event that the Manager
is no longer the property manager of the Property, the selection of a
successor property manager (including the material terms of such manager's
employment) shall be subject to Lender's prior written approval.
(b) Borrower shall not enter into, amend, modify, waive any provision
of, terminate or cancel any other management contracts for the Property or
agreements with leasing agents or brokers.
9.16 Furnishing Notices. Borrower shall deliver to Lender copies of all
------------------
notices received or given by Borrower (or its agents or representatives) under
any of the Approved Leases within three (3) days after such notice is given or
received, as the case may be. Borrower shall also provide Lender with copies of
all notices pertaining to the Property or any part thereof received by Borrower
(or their respective agents or representatives) from any Governmental Authority
or from any insurance company providing insurance in respect of the Property,
within three (3) days after such notice is received.
9.17 Indebtedness. Borrower shall not incur any indebtedness (whether
------------
personal or non-recourse, secured or unsecured) other than customary trade
payables paid within sixty (60) days after they are incurred, or equipment
leases permitted pursuant to Section 9.3 hereof.
34
<PAGE>
9.18 Prohibition Against Cash Distributions. No cash flow from the
--------------------------------------
Property shall be distributed to any partners of Borrower or applied other than
as provided in Article 8.
9.19 Transactions with Affiliated Parties. Borrower shall not purchase,
------------------------------------
acquire or lease any property from, or sell, transfer or lease any property to,
or loan or advance any money to, or borrow any money from, or guarantee any
obligation of, or acquire any stock, obligations or securities of, or enter into
any merger or consolidation agreement or any management or similar agreement
with, any Affiliated Party, or enter into any other transaction or arrangement
or make any payment to or otherwise deal with, in the ordinary course of
business or otherwise, any Affiliated Party on terms other than arm's-length
commercially reasonable terms other than the management arrangements
contemplated by the Management Agreement or in connection with the
administration of Borrower's limited partnership structure.
9.20 Appraisals and Certain Legal Expenses. Lender shall have the right to
-------------------------------------
obtain appraisals of the Property from time to time from an appraiser
satisfactory to Lender. Borrower shall provide such appraiser access to the
Property, Borrower's books and records relating to the Property and such other
information as is customarily required in order to allow an appraiser to perform
its appraisal. Borrower shall pay, within thirty (30) days after Lender's
request, the cost of such appraisals as follows: Borrower shall pay such costs,
not to exceed (i) $10,000, in connection with any one appraisal performed at
Lender's request in 1996; and (ii) $50,000 in connection with any appraisal
performed by Lender after March 1, 2001 and any legal expenses incurred by
Lender after March 1, 2001, if (x) Borrower shall have failed to repay the Loan
in full prior to such date or (y) Borrower shall have failed to deliver to
Lender a notice of its intention to repay the Loan in full on or before June 12,
2001, accompanied by a written binding commitment from a third party lender or a
sales contract from a third party purchaser which commitment or sales contract
(as the case may be) demonstrates to the Lender's reasonable satisfaction that
the Loan will be repaid in full on or before the Maturity Date or (z) the
Borrower delivers to the Lender a commitment or sales contract which is approved
by the Lender but Borrower thereafter fails to repay the Loan in full by the
Maturity Date. The agreement of Borrower to reimburse certain appraisal costs
and legal expenses pursuant to clause (ii) of the preceding sentence shall
supersede any limitations in Section 5 of the Note and shall not limit the right
of Lender to reimbursement from Borrower for the expenses of appraisers and
legal counsel otherwise provided under the Note or this Agreement.
9.21 Maintenance of Existence. Borrower shall at all times preserve and
------------------------
maintain in full force and effect all rights, privileges and franchises
necessary in the normal conduct of owning and operating a first-class hotel.
9.22 ERISA. Borrower shall comply with any applicable provisions of ERISA,
-----
and not (i) engage in any transaction which could cause the Loan (or the
exercise by Borrower of any rights under the Mortgage or the other Loan
Documents) to be a non-exempt prohibited transaction
35
<PAGE>
under ERISA or the Internal Revenue Code, to be in violation of any requirement
applicable to or restriction on any ERISA plan, (ii) allow underlying assets of
any Borrower to become "plan assets," as defined under ERISA, or (iii) maintain,
---- ------
sponsor, contribute to or become obligated to contribute to any ERISA plan which
is subject to Title IV of ERISA or Section 302 of ERISA or Section 412 of the
Internal Revenue Code.
9.23 Trade Name. Borrower shall not use any trade name other than its
----------
actual name set forth herein.
9.24 Principal Place of Business. Borrower shall not change its principal
---------------------------
place of business without giving Lender at least thirty (30) days prior written
notice thereof.
9.25 Information and Approvals with respect to Management Agreement.
--------------------------------------------------------------
Borrower shall promptly deliver to Lender a copy of any written information or
written notice given to Borrower by Manager in connection with the Management
Agreement. Borrower agrees that, without the prior written consent of Lender,
Borrower shall not exercise any rights of consent or approval with respect to
budgets or any other matter as to which Borrower has consent or approval rights
under the Management Agreement, to the extent that said matter could reasonably
be projected to result in a material increase in Deductions and/or a material
reduction in Excess Cash Flow.
ARTICLE 10
----------
DEFAULTS
--------
10.1 Events of Default. Any of the following shall constitute an "Event of
-----------------
Default" hereunder:
(a) Failure to Pay. The failure of Borrower to make any payment
--------------
required hereunder or under the Note or any of the other Loan Documents,
whether such payment is required to be made to Lender or to some other
person or entity, within five (5) days after the due date thereof.
(b) Voluntary Bankruptcy. The filing of any petition or the
--------------------
commencement of any case or proceeding by Borrower or any general partner
of Borrower under any provision or chapter of the Federal Bankruptcy Code
or any other federal or state law relating to insolvency, bankruptcy,
rehabilitation, liquidation or reorganization, or an adjudication that
Borrower or any such general partner is insolvent or bankrupt, or the entry
of an order for relief under the Federal Bankruptcy Code with respect to
Borrower or any such general partner.
36
<PAGE>
(c) Involuntary Bankruptcy. The filing of any petition or the
----------------------
commencement of any case or proceeding described in Section 10.1(b) hereof
against Borrower or any general partner of Borrower, or against the assets
of any such persons or entities, unless such petition and the case or
proceeding initiated thereby are dismissed within 60 days from the date of
such filing; the filing of an answer by Borrower, or any such general
partner, admitting the allegations of any such petition; or the appointment
of, or the taking of possession by, a custodian, trustee, agent or receiver
for all or any assets of Borrower, or any such general partner, unless such
appointment is vacated or dismissed or such possession is terminated within
60 days from the date of such appointment or commencement of such
possession, but not later than five days before the proposed sale of any
assets of Borrower, or any such general partner, by such custodian,
trustee, agent or receiver, other than in the ordinary course of the
business of Borrower or such general partner.
(d) Insolvency. The insolvency of Borrower or any general partner of
----------
Borrower; or the execution by Borrower or any such general partner of an
assignment for the benefit of creditors; or the convening by Borrower or
any such general partner of a meeting of its creditors, or any class
thereof, for purposes of effecting a moratorium upon or extension or
composition of its debts; or the failure of Borrower or of any such general
partner to pay its debts as they mature; or if Borrower or any such general
partner is generally not paying its debts as they mature.
(e) Inability to Pay. The admission in writing by Borrower or any
----------------
general partner of Borrower that it is unable to pay its debts as they
mature or that it is generally not paying its debts as they mature.
(f) Existence. The liquidation, termination or dissolution of
---------
Borrower or any general partner of Borrower. A merger of either general
partner into an entity that is directly or indirectly wholly owned by the
same ultimate parent as such general partner shall not constitute a
liquidation, termination or dissolution of such general partner.
(g) Amendment of Entity Documents. The amendment or modification in
-----------------------------
any manner that would adversely affect Lender without the prior written
consent of Lender of the articles of incorporation, bylaws, articles of
partnership or limited partnership agreement, certificate of partnership or
other charter or enabling documents of Borrower or Borrower's general
partners, or the termination, by operation of law or otherwise of any of
the foregoing.
(h) Transfer of Property. The sale, lease, exchange, conveyance,
--------------------
transfer, mortgage, assignment, pledge or encumbrance, either voluntarily
or involuntarily, without the prior written consent of Lender, or the
agreement by Borrower to do so, without the
37
<PAGE>
prior written consent of Lender (unless all obligations of Borrower under
such agreement are conditioned upon such consent or upon prepayment of the
Loan in accordance with the provisions of the Note, this Agreement and the
other Loan Documents) of (i) any right, title or interest of Borrower or of
any successor to Borrower in and to all or any portion of the Property,
other than (A) utility easements not adversely affecting the value of the
Property to the extent otherwise permitted under the Mortgage or (B)
dispositions or replacements of items of personal property permitted under
Section 9.3 hereof or (C) a taking pursuant to eminent domain or
condemnation powers; (ii) any general partnership interest in Borrower,
except for transfers of general partnership interest to a transferee that
is directly or indirectly wholly owned by the same ultimate parent as the
transferor; or (iii) any beneficial ownership interests in either General
Partner, except for transfers of beneficial ownership interests to a
transferee that is directly or indirectly wholly owned by the same ultimate
parent as the transferor.
(i) Attachment. The levy, attachment or seizure pursuant to court
----------
order ("Order") of (i) any right, title or interest of Borrower or of any
successor to Borrower, in and to all or any portion of the Property or (ii)
any general partnership interest in Borrower if such Order is not vacated
and the proceeding in which it was entered is not dismissed or bonded over
to Lender's satisfaction within 60 days of the entry of such Order.
(j) Breach of Representations and Warranties. The materially false or
----------------------------------------
misleading nature of any representation or warranty contained herein or in
any of the other Loan Documents or the materially false or misleading
nature of any representation to Lender concerning the financial condition
or credit standing of Borrower or any general partner of Borrower.
(k) Failure to Deliver Funds or Instruments. The failure of Borrower
---------------------------------------
to make any deposit of funds or instruments required hereunder or under the
Mortgage within the time period provided herein or in the Mortgage, or, if
no time period has been provided hereunder or under the Mortgage, within
five days after written demand therefor from Lender.
(l) Encroachment. The existence of any material encroachment that has
------------
occurred without the approval of Lender and that is not removed or
corrected or as to which Borrower has not made other arrangements
reasonably satisfactory to Lender within 60 days after the earlier of (i)
Lender's written notice to Borrower of the existence thereof, or (ii)
Borrower's discovery thereof.
(m) Filing of Liens. Subject to Borrower's right to contest the
---------------
assertion of any claims, liens or encumbrances in accordance with the
provisions of the Mortgage, the filing
38
<PAGE>
of any claim of lien or encumbrance against the Property, or the
Improvements or any part thereof, or any interest or right made appurtenant
thereto if such claim of lien or encumbrance has not been dismissed or
vacated within 30 days after such claim was filed.
(n) Damage to Improvements. Subject to the provisions of Sections 10,
----------------------
11 and 12 of the Mortgage, the demolition, destruction, or substantial
damage of the Improvements so that in Lender's reasonable judgment they
cannot be restored or rebuilt with available funds (including insurance
proceeds, as and to the extent the same are made available pursuant to the
Mortgage) to a profitable condition within a reasonable time.
(o) Injunction Against Performance. The obtaining by any person of an
------------------------------
order or decree in any court enjoining or prohibiting Borrower, any
Affiliated Party, or Lender or either of them from performing this
Agreement or any of the other Loan Documents, which order or decree is not
vacated and which proceedings are not discontinued within 60 days after the
granting of such order or decree.
(p) Lapse of Permits or Services. The neglect, failure, or refusal of
----------------------------
Borrower to keep in full force and effect any permit, license, consent or
approval required under Section 9.6 hereof or the curtailment in
availability to the Property or Improvements of utilities or other public
services necessary for the full occupancy and utilization of the
Improvements.
(q) Condemnation. The commencement of proceedings by any public or
------------
quasi-public body of competent jurisdiction to acquire the Property, or any
portion thereof or any interest therein (other than a portion that, in
Lender's reasonable judgment, does not materially adversely affect the
operations of the Property) pursuant to eminent domain or condemnation
powers, and (i) such proceedings are not dismissed within 30 days, or (ii)
Borrower fails to make a deposit with Lender in an amount sufficient to
protect Lender's security under the Mortgage.
(r) Compliance with Law. The failure of Borrower or the Property or
-------------------
improvements to comply with any present or future Legal Requirement if such
non compliance materially adversely affects Borrower or the Property.
(s) Management Agreement. The existence of an unwaived or uncured
--------------------
"event of default" as defined in the Management Agreement, or the
termination of the Management Agreement.
(t) Ground Lease. The occurrence of an "Event of Default" by Borrower
------------
as defined in the Ground Lease or the subordination of the Ground Lease to
the lien of any
39
<PAGE>
mortgage of the fee interest in the Land, or the occurrence of any actual
or purported surrender, termination or modification of the Ground Lease.
(u) Environmental Noncompliance. At the option of Lender and except
---------------------------
as set forth on Exhibit H hereto, if any other property owned by Borrower
becomes subject to any claim, notice or action of a nature constituting an
Environmental Condition or Environmental Noncompliance.
(v) Handling of Funds and Bank Accounts. The failure by Borrower to
-----------------------------------
deposit or cause to be deposited in the Main Disbursing Account all Gross
Revenues, the closing or transfer by Borrower or Manager of any Bank
Account other than as permitted under this Agreement, or the withdrawal by
Borrower of any funds from any Bank Account, except to the extent and for
the purposes permitted under this Agreement.
(w) Partnership Distributions. The making by Borrower of any
-------------------------
distribution to any partner in Borrower.
(x) Change in Financial Condition of Property. If Borrower causes,
-----------------------------------------
suffers or permits any materially adverse financial change to occur in the
operation or financial condition of the Property.
(y) Breach of Other Covenants. The failure of Borrower to perform in
-------------------------
any material respect any covenant or agreement hereunder if such failure
(i) would not, with the giving of notice or the lapse of time or both,
constitute an Event of Default under any other provision of this Article 10
and (ii) is not cured within 30 days after such failure has occurred or, if
the failure is such that it cannot reasonably be cured within such 30-day
period, if Borrower fails to commence the cure of such failure within such
30-day period or thereafter fails to diligently pursue such efforts to
completion, provided, however, that in no event shall the amount of time
permitted for any such cure exceed 90 days after such failure shall occur;
(z) Other Loan Documents. The occurrence of an Event of Default under
--------------------
any of the other Loan Documents.
ARTICLE 11
----------
LENDER'S REMEDIES IN EVENT OF DEFAULT
-------------------------------------
11.1 Remedies Conferred Upon Lender. Upon the occurrence of any Event of
------------------------------
Default, Lender shall, in addition to all remedies conferred upon Lender by law
and by the terms of the
40
<PAGE>
Note, the Mortgage and the other Loan Documents, have the right but not the
obligation to pursue any one or more of the following remedies concurrently or
successively, it being the intent hereof that all such remedies shall be
cumulative and that no such remedy shall be to the exclusion of any other:
(a) Take any action whatever which, in Lender's sole judgment, is
necessary to fulfill the covenants, agreements and obligations of Borrower
under this Agreement and the other Loan Documents, including the right to
(i) avail itself of and procure performance of existing contracts and
subcontracts, and (ii) let any contracts with the same contractors and
subcontractors or others and to employ watchmen to protect the Property
from injury. Without restricting the generality of the foregoing, and for
the purpose aforesaid, Borrower hereby appoints and constitutes Lender its
lawful attorney-in-fact, coupled with an interest and with full power of
substitution in the Property, and agrees that Lender shall be entitled to
(A) use unadvanced funds which may be reserved, escrowed or set aside for
any purpose whatever at any time, to perform obligations that Borrower
shall have failed to perform, (B) advance funds in excess of the face
amount of the Note, (C) retain or employ such project developers,
construction managers, general contractors, subcontractors, architects,
engineers and inspectors as may be required for such purposes, (D) pay,
settle or compromise all existing bills and claims the non-payment of which
might result in liens or security interests on the Property, or prevent
such bills and claims from resulting in liens against the Property or
security interests against fixtures, furnishings, furniture or equipment or
other property, or as may be necessary or desirable for performing any
repairs or other work upon the Property, equipping and furnishing of the
Property, or for the clearance of title, (E) execute all applications and
certificates which may be required by any of the Loan Documents, (F)
prosecute and defend all actions or proceedings connected with or relating
to the Property, (G) take such action and require such performance as
Lender deems necessary under any payment or performance bonds furnished
under this Agreement, and make settlements and compromises with the surety
or sureties thereunder, and, in connection therewith, execute instruments
of release and satisfaction, (H) take possession of and operate the
Property, and (I) do any and every act which borrower might do in its own
behalf; it being understood and agreed that the foregoing power of attorney
shall be a power coupled with an interest and cannot be revoked;
(b) Declare the Note and the entire Indebtedness (including without
limitation all accrued and unpaid Contract Rate Interest and Additional
Accrued Interest and all principal) to be immediately due and payable;
(c) Use and apply any monies in the Bank Accounts and any monies
deposited by Borrower with Lender, regardless of the purpose for which the
same was deposited to
41
<PAGE>
cure any such default or to apply on account of any Indebtedness under this
Agreement which is due and owing to Lender; and
(d) Exercise or pursue any other right or remedy permitted under this
Agreement or any other Loan Document or conferred upon Lender by operation
of law, including without limitation, the remedies of foreclosure and/or
appointment of a receiver in accordance with the terms of the Mortgage or
as otherwise permitted pursuant to applicable law.
11.2 Non-Waiver of Remedies. No waiver of any breach or default hereunder
----------------------
shall constitute or be construed as a waiver by Lender of any subsequent breach
or default or of any breach or default of any other provision of this Agreement.
11.3 Availability of Remedies. All of the remedies set forth herein and/or
------------------------
provided by law or equity shall be equally available to Lender, and the choice
by Lender of one such alternative over another shall not be subject to question
or challenge by Borrower or any other Person, nor shall any such choice be
asserted as a defense, setoff, or failure to mitigate damages in any action,
proceeding, or counteraction by Lender to recover or seeking any other remedy
under this Agreement or any of the other Loan Documents, nor shall such choice
preclude Lender from subsequently electing to exercise a different remedy. The
parties have agreed to the alternative remedies hereof specified in part because
they recognize that the choice of remedies in the event of a failure will
necessarily be and should properly be a matter of business judgment, which the
passage of time and events may or may not prove to have been the best choice to
maximize recovery by Lender at the lowest cost to Borrower. It is the intention
of the parties that such choice by Lender be given conclusive effect regardless
of such subsequent developments. At any sale of the security or collateral for
the Loan or any part thereof whether by foreclosure or otherwise, Lender may in
its discretion purchase all or any part of such collateral so sold or offered
for sale for its own account and may apply against the balance due Lender
pursuant to the terms of the Note the amount bid therefor.
11.4 Application of Proceeds. The proceeds received by Lender in respect
-----------------------
of any sale of, collection from or other realization upon all or any part of the
Property pursuant to the exercise by Lender of its remedies provided in this
Agreement, any other Loan Document or by law, and any insurance and/or
condemnation proceeds which are applied to the Indebtedness pursuant to the
terms of the Mortgage shall be applied, together with any other sums then held
by Lender, as follows:
FIRST, to the payment of all costs and expenses, fees, commissions and
-----
taxes of such sale, collection or other realization, including amounts
payable pursuant to Section 2.12 of the Note, Lender's Expenses, the
Restructuring Fee and Lender's reasonable attorneys' fees, and all expenses
or advances made by Lender in connection
42
<PAGE>
therewith, together with interest on each such amount at the Default Rate
then in effect, from and after the date such amount is due, owing or unpaid
until paid in full;
SECOND, to the indefeasible payment in full in cash of all accrued and
------
unpaid Contract Rate Interest and any and all other accrued and unpaid
interest (other than Additional Accrued Interest) owing by Borrower under
or in connection with this Agreement or the other Loan Documents, together
with interest on each such amount at the Default Rate then in effect, from
and after the date such amount is due, owing and unpaid until paid in full.
THIRD, to the indefeasible payment in full in cash of all accrued and
-----
unpaid Additional Accrued Interest, together with interest on each such
amount at the Default Rate from and after the date such amount is due,
owing or unpaid until paid in full;
FOURTH, to the indefeasible payment in full in cash of principal owing
------
by Borrower under or in connection with this Agreement or the other Loan
Documents, together with interest on each such amount at the Default Rate
then in effect, from and after the date such amount is due, owing or unpaid
until paid in full; and
FIFTH, any surplus then remaining from such proceeds shall be paid to
-----
Borrower, or its successor or assigns, or to whomever may be lawfully
entitled to receive such proceeds or as a court of competent jurisdiction
may direct.
ARTICLE 12
----------
GENERAL PROVISIONS
------------------
12.1 No Waiver; Lender's Action for Its Own Protection Only. No waiver of
------------------------------------------------------
any Event of Default or breach by Borrower hereunder shall be implied from any
omission by Lender to take action on account of such Event of Default, and no
express waiver shall affect any Event of Default other than the Event of Default
specified in the waiver and the waiver shall be operative only for the time and
to the extent therein stated. Waivers of any covenant, term or condition
contained herein shall not be construed as a waiver of any subsequent breach of
the same covenant, term, or condition. The consent or approval by Lender to or
of any act by Borrower requiring further consent or approval shall not be deemed
to waive or render unnecessary the consent or approval to or of any subsequent
similar act. The authority herein conferred upon Lender, and any action taken
by Lender, including, without limitation, actions to inspect the Property, to
approve leases and all other documents and instruments submitted to Lender,
shall be exercised and taken by Lender and by Lender's consultants, advisors or
representatives for their own protection only and may not be relied upon by
Borrower or any other Person for any purposes
43
<PAGE>
whatever; and neither Lender nor Lender's agents, employees, consultants,
advisors, or representatives shall have any liability for or with respect to the
proper construction of improvements on the Property, performance of contracts,
subcontracts or purchase orders by any contractor, subcontractor or material
supplier, prevention of mechanics' liens rom being claimed or asserted against
any of the Property or performance under any lease or other agreement.
12.2 No Third Parties Benefitted. This Agreement is made and entered into
---------------------------
for the sole protection and benefit of Lender and Borrower, their successors and
assigns, and no other person or persons shall have any right to action hereon or
rights to the Loan funds at any time.
12.3 Notices. All notices, requests and demands to or upon the respective
-------
parties hereto, to be effective, shall be in writing and shall be delivered by
hand or sent by (x) mail (certified or registered, postage prepaid, return
receipt requested), (y) by a nationally recognized overnight courier service, or
(z) by facsimile transmission (provided that the original of any notice sent by
facsimile transmission shall be sent by a nationally recognized overnight
courier service) and unless otherwise expressly provided herein, shall be deemed
to have been duly given or made when delivered if delivered by hand, or three
Business Days following deposit if sent by certified or registered mail, or on
the next Business Day following deposit with a nationally recognized overnight
courier service, or upon receipt if sent by facsimile with an original by
nationally recognized overnight courier service (provided that if said facsimile
was received after 5:00 p.m. in the local time zone of the recipient on any
Business Day, said notice shall not be deemed to have been received until the
following Business Day), addressed in each case as follows, or to such address
or other address as may be hereafter notified by such parties:
Borrower: Mutual Benefit Chicago Marriott Suite Hotel
Partners, L.P.
Host Marriott Corporation
10400 Fernwood Drive
Bethesda, Maryland 20817
Attention: Law Department
Facsimile No. : (301) 380-6332
Lender: National Bank of Canada
New York Branch
125 West 55th Street
New York, New York 10022
Attention: LoriAnn Curnyn
Facsimile No. : (212) 632-8775
12.4 Expenses. Borrower shall pay promptly upon demand by Lender therefor,
--------
44
<PAGE>
all costs, charges and expenses incurred by Lender in connection with the Loan,
including without limitation the negotiation, drafting and preparation of the
Loan documents and any amendments thereto and waivers thereof and the
administration and enforcement thereof (whether or not the transactions
contemplated therein shall be consummated) including, without limitation, title
charges, tax and lien service charges, costs of inspection, recording fees,
appraisal fees, attorneys' fees and insurance premiums and all other costs,
charges and expenses that are payable by Borrower pursuant to this Agreement or
the other Loan Documents. All amounts payable under this Section 12.4 that are
reimbursements for amounts actually paid by Lender shall bear interest
retroactively from the date Lender makes demand for payment to the date such
amounts are paid to Lender at the lesser of (a) the Default Rate or (b) the
maximum rate then permitted by law (if any such maximum is applicable) unless
Borrower pays such amounts to Lender within ten Business Days of Lender's demand
therefor. Notwithstanding anything to the contrary herein contained, any item of
expense within the scope of this Section 12.4 incurred by Lender through and
including the date hereof shall be included in Lender's Expenses and shall be
payable by Borrower solely as provided elsewhere in the Loan Documents.
12.5 Actions. Lender shall have the right to commence, appear in or defend
-------
any action or proceeding purporting to affect the rights, duties, or liabilities
of the parties hereunder, the disbursement of any funds, or in any way relating
to or arising out of the Loan. In connection therewith, Lender may incur and
pay costs and expenses, including without limitation reasonable attorneys' fees.
Borrower shall pay to Lender on demand all such expenses.
12.6 Commissions and Brokerage Fees. Borrower hereby agrees to indemnify
------------------------------
Lender from any responsibility and/or liability for the payment of any
commission, charge or brokerage fees to anyone which may be payable by Borrower
or any Affiliated Parties in connection with the purchase or refinance of the
Loan (other than any sale of participations or assignments contemplated in
Section 12.17 hereof), it being understood that any such commission, charge, or
brokerage fees will be paid directly by Borrower or said Affiliated Parties to
the party or parties entitled thereto.
12.7 Governing Law. This Agreement and the other Loan Documents shall be
-------------
governed by and construed in accordance with the laws of the State of Illinois
except to the extent preempted by United States federal law.
12.8 Heirs, Successors and Assigns. This Agreement shall be binding upon
-----------------------------
and inure to the benefit of the heirs, successors, assigns and personal
representatives of the parties hereto; provided, however, that Borrower shall
not assign its rights hereunder, under the Note or under any other Loan Document
in whole or in part. Any such assignments shall be void.
12.9 Time. Time is of the essence of this Agreement and all of the other
----
Loan Documents and each provision hereof and thereof of which time is an
element.
45
<PAGE>
12.10 Supplements Mortgage. The provisions of this Agreement are not
--------------------
intended to supersede the provisions of the Mortgage and the other Loan
Documents but shall be construed as supplemental thereto. In the event of any
inconsistency between the provisions hereof and of the Mortgage or the Note, it
is intended that this Agreement shall be controlling. Notwithstanding anything
to the contrary herein contained, Borrower and Lender acknowledge that although
this Agreement is binding as between Borrower and Lender, nothing herein shall
be construed as modifying or detracting from the rights of Manager with respect
to Lender pursuant to Section 9 of the Assignment of Management Agreement.
12.11 Severability. If any provision of this Agreement or any of the
------------
other Loan Documents or the application thereof to any person or situation
shall, to any extent, be held invalid or unenforceable, the remaining provisions
of this Agreement and the other Loan Documents, and the application of such
provision to persons or situations other than those to which it shall have been
held invalid or unenforceable, shall not be affected thereby, but shall continue
to be valid and enforceable to the fullest extent permitted by law unless the
invalid or unenforceable provision is of such a material nature to either or
both of the parties that such party or parties would not have entered into this
Agreement and the other Loan Documents if this Agreement or the other Loan
Documents had not contained such provision.
12.12 Attorneys' Fees. If at any time hereafter prior to repayment of the
---------------
Loan in full, Lender employs counsel for advice or other representation (whether
or not any suit has been or shall be filed and whether or not other legal
proceedings have been or shall be instituted and, if such suit is filed or legal
proceedings instituted, through all administrative, trial, and appellate levels)
with respect to the Loan, the Property or any part thereof, this Agreement or
any of the other Loan Documents or to protect, collect, lease, sell, take
possession of, or liquidate any of the Property, or to attempt to enforce any
security interest or lien on any of the Property, or to enforce any rights of
Lender or any of Borrower's obligations hereunder or those of any other person,
firm or corporation which may be obligated to Lender by virtue of this Agreement
or any other agreement, instrument or document heretofore or hereafter delivered
to Lender by or for the benefit of Borrower, then, in any such event, all of the
attorneys' fees and expenses, costs and charges relating thereto, shall be paid
by Borrower on demand and if Borrower fails to pay such fees, costs and
expenses, payment thereof by Lender shall constitute additional indebtedness of
Borrower, payable on demand and secured by the Mortgage and other Loan Documents
(whether or not the indebtedness evidenced by the Note after and including such
disbursement shall exceed the face amount of the Note).
12.13 Usury Limitation. All agreements between Borrower and Lender are
----------------
expressly limited so that in no contingency or event whatsoever, whether by
reason of: errors of fact or law, prepayment or advancement of the proceeds of
the Loan, acceleration of maturity of the unpaid balance of the Note, or
otherwise, shall the amount paid or agreed to be paid to Lender for the use,
forbearance or retention of the money to be advanced hereunder, including any
fees or
46
<PAGE>
charges collected or made in connection with the Loan that may be treated as
interest under applicable law, if any, exceed the maximum legal limit (if any
such limit is applicable) under United States federal law or state law (to the
extent not preempted by federal law, if any), now or hereafter governing the
interest payable in connection with such agreements (the "Maximum Amount"). If,
from any circumstances whatsoever, fulfillment of any provision hereof or of any
of the other Loan Documents, at the time performance of such provision shall be
due, shall involve transcending the limit of validity (if any) prescribed by law
that a court of competent jurisdiction may deem applicable hereto, then ipso
facto, the obligation to be fulfilled shall be reduced to the limit of such
validity, and if from any circumstances Lender shall ever receive as interest an
amount that would exceed the maximum legal limit (if any such limit is
applicable), such amount that would be excessive interest shall be applied to
the reduction of the unpaid principal balance due under the Note and not to the
payment of interest or, if necessary, rebated to Borrower. This provision shall
control every other provision of all agreements between Borrower and Lender.
12.14 Section Headings. Section headings are provided herein for
----------------
convenience only and shall not serve as a basis for interpretation or
construction of this Agreement, nor as evidence of the intention of the parties
hereto.
12.15 Notice of Future Proceedings or Events. During the term of the
--------------------------------------
Loan, Borrower shall promptly furnish to Lender written notice of any action,
suit, or proceeding or any event the existence or occurrence of which would make
the provisions of Section 5.1(g) hereof untrue as of the date of any such
action, suit, proceeding or event.
12.16 Amendment. No alteration or amendment of this Agreement or any of
---------
the other Loan Documents shall be effective unless in writing and signed by the
parties sought to be charged or bound thereby.
12.17 Assignment and Participations. This Agreement shall be binding
-----------------------------
upon, and shall inure to the benefit of, Borrower, Lender and their respective
successors and assigns, except that Borrower may not assign or transfer its
rights or obligations hereunder. Lender may assign or sell participations in
all or any part of the Loan to another bank or financial institution, in which
event in the case of an assignment, upon notice thereof by Lender to Borrower,
the assignee shall have, to the extent of such assignment (unless otherwise
provided therein), the same rights, benefits and obligations as it would have if
it were Lender hereunder. All participants with respect to the Loan shall
furthermore be treated as if they were Lender and receive the benefits of Lender
under the Note in any circumstances in which Lender is entitled to receive such
benefits. Lender may furnish any information concerning Borrower in the
possession of Lender from time to time to assignees and participants (including
prospective assignees and participants); provided that Lender shall require any
such prospective assignee or such participant (prospective or otherwise) to
agree in writing to be bound by the provisions of Section 12.23 hereof.
47
<PAGE>
12.18 Indemnity. Borrower shall indemnify and defend Lender against, and
---------
shall hold Lender harmless from, any and all losses, damages (whether general,
punitive or otherwise), liabilities, claims, causes of action (whether legal,
equitable or administrative), judgments, court costs and legal or other expenses
(including the fees, costs and expenses of all attorneys, paralegals and
consultants engaged by Lender) which Lender may suffer or incur as a direct or
indirect consequence of: (i) Lender's performance of this Agreement or any of
the other Loan Documents, including without limitation Lender's exercise or
failure to exercise any rights, remedies or powers in connection with this
Agreement or any of the other Loan Documents; (ii) Borrower's failure to perform
any of Borrower's obligations as and when required by this Agreement or any of
the other Loan Documents, including, without limitation, any failure of any
representation or warranty of Borrower to be true and correct and any failure by
Borrower to satisfy any condition; (iii) any claim or cause of action of any
kind by any person or entity to the effect that Lender is in any way responsible
or liable for any act or omission by Borrower, whether on account of any theory
of derivative liability or otherwise; (iv) any act or omission by Borrower, any
contractor, subcontractor or material supplier, engineer, architect or other
person or entity, except Lender, with respect to any of the Property or
Improvements; or (v) any claim or cause of action of any kind by any person or
entity which would have the effect of denying Lender the full benefit or
protection of any provision of this Agreement or any of the other Loan
Documents. Lender's rights of indemnity shall not be directly or indirectly
limited, prejudiced, impaired or eliminated in any way by any finding or
allegation that Lender's conduct is active, passive or subject to any other
classification or that Lender is directly or indirectly responsible under any
theory of any kind, character or nature for any act or omission by Borrower or
any other person or entity except Lender. Notwithstanding the foregoing,
Borrower shall not be obligated to indemnify Lender with respect to any
intentional tort or act of gross negligence which Lender is personally
determined by the judgment of a court of competent jurisdiction (sustained on
appeal, if any) to have committed. Borrower shall pay any indebtedness arising
under said indemnity to Lender immediately upon demand by Lender. This indemnity
shall survive the payment of all amounts payable pursuant to, and secured by,
the Loan Documents. Payment by Lender shall not be a condition precedent to the
obligations of Borrower under this indemnity.
12.19 Survival. This Agreement and the other Loan Documents shall survive
--------
until all amounts evidenced and secured by the Loan Documents have been paid
indefeasibly to Lender.
12.20 Environmental Matters.
---------------------
(a) Environmental Indemnification by Borrower.
-----------------------------------------
(i) Borrower agrees to indemnify, defend by counsel acceptable to
Lender, and hold harmless Lender, its subsidiaries, affiliates,
successors and assigns and their respective directors, officers,
employees, shareholders, representatives and agents, from and
against and in respect of any and all
48
<PAGE>
Environmental Claims that may be imposed upon or incurred by Lender or
asserted against Lender by any other party or parties (including any
governmental entities), in connection with any Environmental
Conditions or the remediation of any Environmental Conditions, or in
connection with any Environmental Noncompliance arising out of,
resulting from, or attributable to, the Land, the Property or the
business or operations of Borrower or any successor in interest of
Borrower, including, without limitation, any Environmental Claims and
Environmental Expenses resulting from the alleged exposure of any
person to Environmental Conditions, regardless of whether or not such
Environmental Conditions or exposure resulted from activities of
Borrower or Borrower's successors in interest or the breach of any of
Borrower's covenants, representations and warranties set forth herein
relating to Environmental Conditions or Environmental Noncompliance
but excluding (i) any such Environmental Claims arising solely out of,
resulting solely from, or attributable solely to the acts or failures
to act of Lender at the Land or the Property as a successor in
interest of Borrower and (ii) any such Environmental Claims arising
solely out of, resulting solely from, or attributable solely to the
operations of Host Marriott or any predecessor in interest of Host
Marriott at the Land or the Property, but only (in the case of this
clause (ii)) to the extent that Host Marriott does not dispute Host
Marriott's obligations, under the Reaffirmation of Environmental
Indemnification Agreement or otherwise, to indemnify Lender and the
other parties named above in connection therewith. Borrower's
obligations pursuant to this Section 12.20(a) shall exist regardless
of whether Lender is alleged or held to be strictly or jointly and
severally liable; and
(ii) All costs incurred by Lender in connection with any
Environmental Claims or Environmental Expenses that are within the
indemnification set forth in Section 12.20(a)(i) shall be paid by
Borrower to Lender within 10 days after demand from Lender.
(b) Borrower's Covenants Regarding Environmental Matters.
----------------------------------------------------
(i) With respect to any Environmental Noncompliance or
Environmental Condition within the indemnification set forth in
Section 12.20(a), and without in any way limiting the scope of
Borrower's obligations under the provisions of this Section 12.20, as
between Lender and Borrower, Borrower will be responsible for all
investigations, studies, cleanup, corrective action or response or
remedial action with respect to the Land or the Property required by
any Environmental Laws or Environmental Claims.
(ii) As between Lender and Borrower, Borrower will pay all costs
in connection with any investigations, studies, cleanup, repair, and
remedial action
49
<PAGE>
relating to any Environmental Noncompliance and any Environmental
Condition within the indemnification set forth in Section 12.20(a),
including, without limitation, all capital improvements, installation,
operation, maintenance, testing, monitoring, preparation of plans,
designs, applications, studies and reports by or for governmental
entities or other regulating agencies, the preparation of closure or
other required plans, the retention of legal counsel, engineers, and
other expert consultants.
(iii) As between Lender and Borrower, Borrower shall have the
responsibility, right and duty to participate in the management and
control of all investigations and any environmental cleanup,
remediation, or other similar activities relating to any Environmental
Noncompliance and any Environmental Condition within the
indemnification set forth in Section 12.20(a) hereof. Borrower,
however, shall provide written notice to Lender before fulfilling,
settling or contesting any requirements or Environmental Claims. If
Environmental Conditions are discovered at the Land or the Property
subsequent to the date hereof, Borrower shall promptly notify Lender
of such condition.
(iv) If any Environmental Noncompliance within the scope of the
indemnification set forth in Section 12.20(a) hereof is discovered to
exist at the Land or the Property subsequent to the date hereof,
Borrower will remedy as soon as practicable, at no cost or expense to
Lender, the conditions that constitute such Environmental
Noncompliance. If any Environmental Noncompliance that is not within
the scope of the indemnification set forth in Section 12.20(a) hereof
is discovered to exist at the Land or the Property subsequent to the
date hereof, Borrower shall be obligated hereunder to remedy the
conditions that constitute such Environmental Noncompliance only if
Host Marriott disputes in good faith Host Marriott's obligation to
effect such remedy whether pursuant to the Reaffirmation of
Environmental Indemnification Agreement or otherwise. Borrower shall
promptly provide written notice to Lender of any such Environmental
Noncompliance and a description of the resolution thereof.
12.21 Non-recourse.
------------
(a) Extent of Non-recourse. Anything in this Agreement to the
----------------------
contrary notwithstanding, Lender shall have no personal recourse against
either Borrower, the General Partner, any limited partner of Borrower, or
any Affiliated Party nor any officer, director, employee or agent of any of
the foregoing for the repayment of any of the principal of or interest on
the Loan or for any deficiency judgment that Lender may obtain after
foreclosure of the liens securing such repayment, or, subject to the
provisions of Section 12.21(b) hereof, for any deficiency, loss or damage
suffered by Lender as a result
50
<PAGE>
of the failure by Borrower or the General Partner to comply with any of the
terms or conditions of this Agreement or any of the other Loan Documents
and, subject to the provisions of Section 12.21(b) hereof, Lender agrees not
to seek recourse against any of the foregoing for any such deficiency, loss
or damage. The foregoing limitations are limitations on Lender's right of
recourse against Borrower and shall not impair the validity or
enforceability of the indebtedness evidenced by the Note or any of the other
obligations of Borrower under the Loan Documents secured by the Property or
the lien of or security interest in or the right of Lender as mortgagee or
secured party to foreclose and/or enforce its rights in the Property after
default by Borrower or the General Partner.
(b) Borrower's Liability for Damages or Misapplication of Funds. The
-----------------------------------------------------------
provisions of Section 12.21(a) hereof to the contrary notwithstanding,
Borrower and the General Partner shall be fully liable (i) for any damages
attributable to fraud or material misrepresentation in any Loan Document or
in any written communication by Borrower in connection with the Loan or in
connection with the Original Loan; (ii) for the retention of any rental
income or other income arising with respect to all or any part of the
Property covered by the Mortgage after Lender has given to Borrower any
notice that Borrower is in default hereunder or under the other Loan
Documents and that Lender has exercised its option to accelerate maturity
of the Note, foreclose or require the foreclosure of the liens securing
payment thereof, receive or collect such rental income or other income or
exercise its rights under the Loan Documents (to the full extent of the
rental income or other income retained after the giving of any such
notice); (iii) for any Gross Revenues distributed to any partners in
Borrower subsequent to the date hereof; (iv) for any Gross Revenues, Net
House Profits or Excess Cash Flow not applied as required pursuant to
Article 8 hereof; (v) for the misapplication of (A) proceeds paid prior to
any such foreclosure under any insurance policies by reason of damage, loss
or destruction to any portion of the property covered by the Mortgage (to
the full extent of such proceeds), or (B) any proceeds or awards resulting
from the condemnation, prior to any such foreclosure, of all or any part of
the property covered by the Mortgage (to the full extent of such proceeds
or awards); and (v) for damages arising from the breach of any
representation, warranty, covenant or other obligation concerning
Environmental Claims, Environmental Conditions or Environmental
Noncompliance (except for matters set forth on Exhibit H hereto, including
without limitation the indemnification provisions of Section 12.20 hereof;
provided, however, that the recourse liability of the General Partner in
connection with the matters set forth in this clause (v) shall not extend
to conditions present in the Land prior to the date on which Borrower
acquired the leasehold interest under the Ground Lease, except to the
extent that such recourse liability is otherwise applicable to the General
Partner pursuant to clause (i) hereinabove.
(c) Liability of General Partners. To the extent of personal
-----------------------------
liability of Borrower under Section 12.21(b) hereof, the General Partner of
Borrower hereby agrees
51
<PAGE>
to be liable therefor and waives any requirement of law that in the event
of a default hereunder Lender must proceed against Borrower or exhaust any
assets of Borrower before proceeding against the General Partner or the
General Partner's assets; provided, however, that in no event shall any
limited partner of Borrower, any Affiliated Party (other than the General
Partner) or any officer, director, employee or agent of any partner of
Borrower or of any Affiliated Party have any liability under Section
12.21(c) hereof, and Lender agrees that it shall not seek recovery from any
party that is excluded from liability pursuant to this sentence.
12.22 Consent to Jurisdiction and Service of Process; Waiver of Jury
--------------------------------------------------------------
Trial. All judicial proceedings brought against arising out of or relating to
- -----
this Agreement, the Note or any other Loan Documents may be brought in any state
or federal court in the State of New York or the State of Illinois. Borrower
accepts for itself and its properties, generally and unconditionally, the
nonexclusive jurisdiction of such courts, waives any defense of forum non
conveniens, and irrevocably agrees to be bound by any judgment rendered thereby
in connection with this Agreement, the Note, or any other Loan Document. All
parties to this Agreement irrevocably waive all right to trial by jury in any
judicial proceeding arising out of or relating to this Agreement, the Note, or
any other Loan Document.
12.23 Confidentiality. Provided that no Event of Default has occurred,
---------------
Lender shall not disclose (and shall not permit any participant to disclose) to
any third party any information obtained solely from Borrower pursuant to this
Agreement or any of the Loan Documents and that has not otherwise been publicly
disclosed; provided, however, that nothing in this Section 12.23 shall prevent
Lender from disclosing such information (i) to any assignee or participant as
contemplated by Section 12.17 hereof, or to any employees, agents, attorneys, or
accountants of such assignee or participant; (ii) upon request or demand, to any
regulatory agency or authority having jurisdiction over the foregoing; (iii)
upon subpoena or order, to any court or administrative agency; or (iv) pursuant
to the ordinary course of Lender's business in providing credit references in
accordance with The Code of Ethics for the Exchange of Credit Information
published by The Robert Morris Associates.
12.24 Counterparts. This Agreement may be executed in any number of
------------
counterparts and each such counterpart shall be deemed to be an original; all
such counterparts shall constitute but one and the same instrument and shall be
enforceable against all parties hereto, notwithstanding that they are not all
signatories to the same counterpart.
52
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the day and year first above written.
MUTUAL BENEFIT CHICAGO MARRIOTT
SUITE HOTEL PARTNERS, L.P., a Rhode Island
limited partnership
By: MOHS CORPORATION, a Delaware
corporation, its sole General Partner
By: /s/ Bruce D. Wardinski
-----------------------------------------
Name: Bruce D. Wardinski
---------------------------------------
Title: Vice President
--------------------------------------
NATIONAL BANK OF CANADA
By: /s/ Lori Ann Curnyn
-----------------------------------------------
Name: Lori Ann Curnyn
---------------------------------------------
Title: Vice President
--------------------------------------------
53
<PAGE>
EXHIBIT A
---------
LEGAL DESCRIPTION
-----------------
PARCEL 1:
LOT 14 IN RIVERWAY SUBDIVISION-PHASE II, BEING A RESUBDIVISION IN THE WEST 1/2
OF SECTION 3, TOWNSHIP 40 NORTH, RANGE 12, EAST OF THE THIRD PRINCIPAL MERIDIAN,
ACCORDING TO THE PLAT RECORDED MARCH 11, 1992 AS DOCUMENT 92157888, IN COOK
COUNTY, ILLINOIS.
PARCEL 2:
NON-EXCLUSIVE EASEMENTS IN FAVOR OF THE LEASEHOLD ESTATE DESCRIBED AS PARCEL 1
HEREIN FOR:
(A) INGRESS AND EGRESS FOR PEDESTRIAN AND VEHICULAR TRAFFIC IN, OVER AND THROUGH
THE COMMON AREAS LOCATED ON THE ADJACENT TRACT (AS DEFINED BELOW), AS CREATED BY
LEASE DATED JUNE 16, 1986, A MEMORANDUM OF WHICH WAS FILED APRIL 3, 1987 AS
DOCUMENT LR3604964, AND RECORDED NOVEMBER 18, 1988 AS DOCUMENT 88535338, MADE
BY AND BETWEEN SIMON-ROSEMONT DEVELOPERS AND MARRIOTT CORPORATION;
(B) INGRESS AND EGRESS FOR PEDESTRIAN TRAFFIC IN, OVER AND THROUGH THE ENCLOSED
WALKWAY ON THE ADJACENT TRACT (AS DEFINED BELOW), AS CREATED BY LEASE DATED JUNE
16, 1986, A MEMORANDUM OF WHICH WAS FILED APRIL 3, 1987 AS DOCUMENT LR3604964,
AND RECORDED NOVEMBER 18, 1988 DOCUMENT 88535338, MADE BY AND BETWEEN
SIMON-ROSEMONT DEVELOPERS AND MARRIOTT CORPORATION;
(C) THE LOCATION, INSTALLATION, MAINTENANCE AND REPAIR OF SATELLITE AND
TELECOMMUNICATIONS EQUIPMENT ON THE ADJACENT TRACT (AS DEFINED BELOW), ALL AS
CREATED BY LEASE DATED JUNE 16, 1986, A MEMORANDUM OF WHICH WAS FILED APRIL 3,
1987 AS DOCUMENT LR3604964, AND RECORDED NOVEMBER 18, 1988 AS DOCUMENT 88535338,
MADE BY AND BETWEEN SIMON-ROSEMONT DEVELOPERS AND MARRIOTT CORPORATION;
(D) MINOR ENCROACHMENTS OF TENANT'S IMPROVEMENTS ONTO THE ADJACENT TRACT (AS
DEFINED BELOW) DUE TO ENGINEERING ERRORS, ERRORS IN ORIGINAL CONSTRUCTION,
CONSTRUCTION, RECONSTRUCTION, REPAIR, SETTLEMENT OR SHIFTING OR MOVING OF THE
TENANT'S IMPROVEMENTS, AS CREATED BY FIRST AMENDMENT DATED MARCH 11, 1987 AND
FILED APRIL 3, 1987 AS DOCUMENT LR3604965, AND RECORDED NOVEMBER 18, 1988 AS
DOCUMENT 88535337, MADE BY AND BETWEEN SIMON-ROSEMONT DEVELOPERS AND MARRIOTT
CORPORATION; AND
(E) INGRESS AND EGRESS OVER THE ADJACENT TRACT AS REASONABLY NECESSARY FOR THE
RECONSTRUCTION, MAINTENANCE, OPERATION AND REPAIR OF TENANT'S IMPROVEMENTS, AS
CREATED BY FIRST AMENDMENT DATED MARCH 11, 1987 AND FILED APRIL 3, 1987 AS
DOCUMENT LR3604965, AND RECORDED NOVEMBER 18, 1988 AS DOCUMENT 88535337, MADE BY
AND BETWEEN SIMON-ROSEMONT DEVELOPERS AND MARRIOTT CORPORATION.
A-1
<PAGE>
ADJACENT TRACT:
LOTS 1 TO 8 IN RIVERWAY SUBDIVISION-PHASE I, BEING A RESUBDIVISION IN THE WEST
1/2 OF SECTION 3, TOWNSHIP 40 NORTH, RANGE 12, EAST OF THE THIRD PRINCIPAL
MERIDIAN, ACCORDING TO THE PLAT RECORDED JUNE 3, 1988 AS DOCUMENT 88241319 AND
FILED AS DOCUMENT LR3713139, IN COOK COUNTY, ILLINOIS.
AND ALSO,
LOTS 9 TO 13 AND LOTS 15 TO 17 IN RIVERWAY SUBDIVISION-PHASE II, BEING A
RESUBDIVISION IN THE WEST 1/2 OF SECTION 3, TOWNSHIP 40 NORTH, RANGE 12, EAST OF
THE THIRD PRINCIPAL MERIDIAN, ACCORDING TO THE PLAT RECORDED MARCH 11, 1992 AS
DOCUMENT 92157888, IN COOK COUNTY, ILLINOIS.
PARCEL 3:
EASEMENT IN FAVOR OF THE LEASEHOLD ESTATE DESCRIBED AS PARCEL 1 HEREIN, AS
CREATED IN SECOND AMENDMENT TO LEASE RECORDED FEBRUARY 9, 1989 AS DOCUMENT
89063670, MADE BY AND BETWEEN LASALLE NATIONAL BANK, AS TRUSTEE UNDER TRUST
AGREEMENT DATED FEBRUARY 1, 1988 AND KNOWN AS TRUST NUMBER 11300, SIMON-ROSEMONT
DEVELOPERS, AN ILLINOIS LIMITED PARTNERSHIP, AND MARRIOTT CORPORATION, A
DELAWARE CORPORATION, FOR A 5 INCH AT-GRADE EASEMENT FOR ACCOMODATING THE
AS-BUILT CONDITION OF THE HOTEL GARDEN WALL, OVER THE FOLLOWING LEGAL
DESCRIPTION:
THAT PART OF THE WEST 1/2 OF SECTION 3, TOWNSHIP 40 NORTH, RANGE 12, EAST OF THE
THIRD PRINCIPAL MERIDIAN, DESCRIBED AS FOLLOWS:
COMMENCING AT THE INTERSECTION OF THE SOUTH LINE OF THE NORTHWEST 1/4 OF SAID
SECTION 3 WITH THE EASTERLY LINE OF RIVER ROAD AS WIDENED BY CONDEMNATION IN
CASE NO. 59C16022 AND SHOWN ON PLAT RECORDED AS DOCUMENT NUMBER 19251267; THENCE
NORTH 05 DEGREES 11 MINUTES 36 SECONDS EAST ALONG SAID EASTERLY LINE OF RIVER
ROAD AS WIDENED, 395.35 FEET; THENCE NORTH 79 DEGREES 26 MINUTES 12 SECONDS
WEST, 0.91 FEET TO THE EASTERLY LINE OF RIVER ROAD, BEING A LINE 33.00 FEET, AS
MEASURED AT RIGHT ANGLES, EASTERLY OF AND PARALLEL WITH THE CENTER LINE OF SAID
ROAD; THENCE NORTH 10 DEGREES 38 MINUTES 35 SECONDS EAST ALONG SAID EASTERLY
LINE OF RIVER ROAD, 69.50 FEET; THENCE NORTH 68 DEGREES 08 MINUTES 35 SECONDS,
EAST 56.73 FEET; THENCE NORTH 85 DEGREES 38 MINUTES 35 SECONDS EAST, 47.90 FEET
TO A POINT OF CURVATURE; THENCE NORTHEASTERLY ALONG A CURVED LINE CONVEX
SOUTHEASTERLY, HAVING A RADIUS OF 300.00 FEET AND BEING TANGENT TO SAID LAST
DESCRIBED LINE AT SAID LAST DESCRIBED POINT, AN ARC DISTANCE OF 113.14 FEET TO A
POINT OF TANGENCY (THE CHORE OF SAID ARC BEARS NORTH 74 DEGREES 50 MINUTES 21
SECONDS EAST, 112.47 FEET); THENCE NORTH 64 DEGREES 02 MINUTES 07 SECONDS EAST
ALONG A LINE TANGENT TO SAID LAST DESCRIBED CURVED LINE AT SAID LAST DESCRIBED
POINT, 7.87 FEET; THENCE SOUTH 34 DEGREES 21 MINUTES 25 SECONDS EAST, 169.84
FEET; THENCE SOUTH 10 DEGREES 38 MINUTES 35 SECONDS WEST, 3.41 FEET; THENCE
SOUTH 79 DEGREES 21 MINUTES 25 SECONDS EAST, 25.00 FEET; THENCE SOUTH 10 DEGREES
38 MINUTES 35 SECONDS WEST, 3.50 FEET; THENCE SOUTH 79 DEGREES 21 MINUTES 25
SECONDS EAST, 24.58 FEET; THENCE SOUTH 10 DEGREES 38 MINUTES 35 SECONDS WEST,
14.00 FEET; THENCE SOUTH 79 DEGREES 21 MINUTES 25 SECONDS EAST, 15.00 FEET;
THENCE SOUTH 10 DEGREES 38 MINUTES 35 SECONDS WEST, 8.50 FEET TO A POINT FOR A
PLACE OF BEGINNING; THENCE CONTINUING SOUTH 10 DEGREES 38 MINUTES 35 SECONDS
WEST, 353.17 FEET; THENCE
A-2
<PAGE>
SOUTH 79 DEGREES 21 MINUTES 25 SECONDS EAST, 0.40 FEET; THENCE NORTH 10 DEGREES
38 MINUTES 35 SECONDS EAST, 353.17 FEET; THENCE NORTH 79 DEGREES 21 MINUTES 25
SECONDS WEST, 0.40 FEET TO THE PLACE OF BEGINNING, LYING ABOVE A HORIZONTAL
PLANE OF ELEVATION 628.70 FEET ABOVE U.S.G.S. DATUM AND LYING BELOW A HORIZONTAL
PLANE OF ELEVATION 633.75 FEET ABOVE U.S.G.S. DATUM, IN COOK COUNTY, ILLINOIS.
PARCEL 4:
EASEMENT IN FAVOR OF THE LEASEHOLD ESTATE DESCRIBED AS PARCEL 1 HEREIN, AS
CREATED IN SECOND AMENDMENT TO LEASE RECORDED FEBRUARY 9, 1989 AS DOCUMENT
89063670, MADE BY AND BETWEEN LASALLE NATIONAL BANK, AS TRUSTEE UNDER TRUST
AGREEMENT DATED FEBRUARY 1, 1988 AND KNOWN AS TRUST NUMBER 113000,
SIMON-ROSEMONT DEVELOPERS, AN ILLINOIS LIMITED PARTNERSHIP, AND MARRIOTT
CORPORATION, A DELAWARE CORPORATION, FOR AN 8 INCH BELOW-GRADE EASEMENT FOR
FOUNDATIONS OF THE GARDEN WALL, OVER THE FOLLOWING LEGAL DESCRIPTION:
THAT PART OF THE WEST 1/2 OF SECTION 3, TOWNSHIP 40 NORTH, RANGE 12, EAST OF THE
THIRD PRINCIPAL MERIDIAN, DESCRIBED AS FOLLOWS:
COMMENCING AT THE INTERSECTION OF THE SOUTH LINE OF THE NORTHWEST 1/4 OF SAID
SECTION 3 WITH THE EASTERLY LINE OF RIVER ROAD AS WIDENED BY CONDEMNATION IN
CASE NO. 59C16022 AND SHOWN ON PLAT RECORDED AS DOCUMENT NUMBER 19251267; THENCE
NORTH 05 DEGREES 11 MINUTES 36 SECONDS EAST ALONG SAID EASTERLY LINE OF RIVER
ROAD AS WIDENED, 395.35 FEET; THENCE NORTH 79 DEGREES 26 MINUTES 12 SECONDS
WEST, 0.91 FEET TO THE EASTERLY LINE OF RIVER ROAD, BEING A LINE 33.00 FEET, AS
MEASURED AT RIGHT ANGLES, EASTERLY OF AND PARALLEL WITH THE CENTER LINE OF SAID
ROAD; THENCE NORTH 10 DEGREES 38 MINUTES 35 SECONDS EAST ALONG SAID EASTERLY
LINE OF RIVER ROAD, 69.50 FEET; THENCE NORTH 68 DEGREES 08 MINUTES 35 SECONDS
EAST, 56.73 FEET; THENCE NORTH 85 DEGREES 38 MINUTES 35 SECONDS EAST, 47.90 FEET
TO A POINT OF CURVATURE; THENCE NORTHEASTERLY ALONG A CURVED LINE CONVEX
SOUTHEASTERLY, HAVING A RADIUS OF 300.00 FEET AND BEING TANGENT TO SAID LAST
DESCRIBED LINE AT SAID LAST DESCRIBED POINT, AN ARC DISTANCE OF 113.14 FEET TO A
POINT OF TANGENCY (THE CHORD OF SAID ARC BEARS NORTH 74 DEGREES 50 MINUTES 21
SECONDS EAST, 112.47 FEET) THENCE NORTH 64 DEGREES 02 MINUTES 07 SECONDS EAST
ALONG A LINE TANGENT TO SAID LAST DESCRIBED CURVED LINE AT SAID LAST DESCRIBED
POINT, 7.87 FEET; THENCE SOUTH 34 DEGREES 21 MINUTES 25 SECONDS EAST, 169.84
FEET; THENCE SOUTH 10 DEGREES 38 MINUTES 35 SECONDS WEST, 3.41 FEET; THENCE
SOUTH 79 DEGREES 21 MINUTES 25 SECONDS EAST, 25.00 FEET; THENCE SOUTH 10 DEGREES
38 MINUTES 35 SECONDS WEST, 3.50 FEET; THENCE SOUTH 79 DEGREES 21 MINUTES 25
SECONDS EAST, 24.58 FEET; THENCE SOUTH 10 DEGREES 38 MINUTES 35 SECONDS WEST,
14.00 FEET; THENCE SOUTH 79 DEGREES 21 MINUTES 25 SECONDS EAST, 15.00 FEET;
THENCE SOUTH 10 DEGREES 38 MINUTES 35 SECONDS WEST, 8.50 FEET TO A POINT FOR A
PLACE OF BEGINNING; THENCE CONTINUING SOUTH 10 DEGREES 38 MINUTES 35 SECONDS
WEST, 353.17 FEET; THENCE SOUTH 79 DEGREES 21 MINUTES 25 SECONDS EAST, 0.67
FEET; THENCE NORTH 10 DEGREES 38 MINUTES 35 SECONDS EAST, 353.17 FEET; THENCE
NORTH 79 DEGREES 21 MINUTES 25 SECONDS WEST 0.67 FEET TO THE PLACE OF BEGINNING,
LYING BELOW A HORIZONTAL PLANE OF ELEVATION 628.70 FEET ABOVE U.S.G.S. DATUM, IN
COOK COUNTY, ILLINOIS.
A-3
<PAGE>
PARCEL 5:
NON-EXCLUSIVE EASEMENTS IN FAVOR OF THE LEASEHOLD ESTATE DESCRIBED AS PARCEL 1
HEREIN AS SHOWN ON PLAT OF RIVERWAY SUBDIVISION - PHASE I RECORDED JUNE 3, 1998
AS DOCUMENT 88241321 AND FILED JUNE 3, 1998 AS DOCUMENT LR 3713139.
PARCEL 6:
NON-EXCLUSIVE EASEMENTS IN FAVOR OF THE LEASEHOLD ESTATE DESCRIBED AS PARCEL 1
HEREIN AS SHOWN ON PLAT OF RIVERWAY SUBDIVISION - PHASE II RECORDED MARCH 11,
1992 AS DOCUMENT 92157888.
COMMON ADDRESS
- --------------
6155 North River Road
Rosemont, Illinois
PIN
- ---
12-03-103-015
A-4
<PAGE>
EXHIBIT B
---------
FORM OF NOTE
------------
Amended and Restated Secured Promissory Note dated September 24, 1996 made by
Mutual Benefit Chicago Marriott Suite Hotel Partners, L.P. in favor of National
Bank of Canada appears here.
B-1
<PAGE>
EXHIBIT C
---------
FORM OF MORTGAGE
----------------
Amended and Restated Leasehold Mortgage dated September 24, 1996 from Mutual
Benefit Chicago Marriott Suite Hotel Partners, L.P. to National Bank of Canada
appears here.
C-1
<PAGE>
EXHIBIT D
---------
FORM OF ASSIGNMENT OF RENTS
---------------------------
Assignment of Leases and Rents made as of September 24, 1996 from Mutual Benefit
Chicago Marriott Suite Hotel Partners, L.P. to National Bank of Canada appears
here.
D-1
<PAGE>
EXHIBIT E
---------
FORM OF SECURITY AGREEMENT
--------------------------
Security Agreement made as of September 24, 1996 by Mutual Benefit Chicago
Marriott Suite Hotel Partners, L.P. and National Bank of Canada appears here.
E-1
<PAGE>
EXHIBIT F
---------
FORM OF ASSIGNMENT OF MANAGEMENT AGREEMENT
------------------------------------------
Amended and Restated Assignment of Management Agreement made as of September 24,
1996 by and among Mutual Benefit Chicago Marriott Suite Hotel Partners, L.P. and
National Bank of Canada appears here.
F-1
<PAGE>
EXHIBIT G-1
-----------
FORM OF PLEDGE AGREEMENT
------------------------
Deposit, Pledge and Security Agreement for General Investment Account appears
here.
G-1-1
<PAGE>
EXHIBIT G-2
-----------
FORM OF PLEDGE AGREEMENT
------------------------
Deposit, Pledge and Security Agreement for FF&E Account appears here.
G-2-1
<PAGE>
EXHIBIT G-3
-----------
FORM OF PLEDGE AGREEMENT
------------------------
Deposit, Pledge and Security Agreement for Operating Account appears here.
G-3-1
<PAGE>
EXHIBIT G-4
-----------
FORM OF PLEDGE AGREEMENT
------------------------
Deposit, Pledge and Security Agreement for Main Disbursing Account appears here.
G-4-1
<PAGE>
EXHIBIT H
---------
ENVIRONMENTAL REPORTS
---------------------
1. Report entitled "Hydraulic and Hydrologic Considerations of the
Office-Hotel Complex, Higgins-River Road Properties, Rosemont, Illinois",
prepared by Harza Engineering Company, 1560 South Walker Drive, Chicago,
Illinois 60606, dated July 18, 1985, prepared for Hawthorn Realty Group, Inc.
2. Report entitled "Report of Preliminary Geotechnical Investigation of
Marriott Suite Hotel Site, Higgins and Des Plaines River Road, Rosemont,
Illinois", prepared by Oosterbaan Associates, P.C., Engineering and Geotechnic
Consultants, 7911 MacArthur Boulevard, Box 73, Cabin John, Maryland 20818-0073,
dated January 7, 1986, prepared for Marriott Corporation.
3. Report entitled "Site Contamination Assessment, Marriott Rosemont
Suites Hotel, Rosemont, Illinois", prepared by SCS Engineers, Stearns, Conrad
and Schmidt, Consulting Engineers, Inc., 11260 Roger Bacon Drive, Reston,
Virginia 22090-5282, dated April 15, 1986, prepared for Hawthorn Realty Group.
4. Report entitled "Environmental Assessment of the Riverway Site,
Rosemont, Illinois", prepared by Roy F. Weston, Inc., Designers/Consultants,
Bannockburn, Illinois, dated June, 1986, prepared for Marriott Corporation.
5. Letter dated February 19, 1987 from Robert Finke, Vice President,
Hawthorn Realty Group to James M. Barkley, Assistant General Counsel, Melvin
Simon & Associates (5 pages).
6. Letter dated December 11, 1986 from Michael W. McLaughlin, Vice
President, SCS Engineers to Jeffrey S. Degen, RA, Design Manager, Marriott
Corporation (3 pages).
7. Report entitled "Summary and Evaluation of Measures Taken to Mitigate
Environmental Concerns, Marriott Rosemont Suites Hotel", prepared by SCS
Engineers, 11260 Roger Bacon Drive, Reston, Virginia 22090, dated October 18,
1988 prepared for Mutual Benefit Chicago Marriott Suite Hotel Partners.
H-1
<PAGE>
EXHIBIT I
---------
ANNUAL OPERATING PROJECTION AND REPAIRS AND
EQUIPMENT ESTIMATE FOR FISCAL YEAR 1996
---------------------------------------
I-1
<PAGE>
EXHIBIT J
---------
FORM OF RENT LETTER
-------------------
J-1
<PAGE>
EXHIBIT K
---------
EQUIPMENT LEASES
----------------
DEBTOR: MUTUAL BENEFIT CHICAGO MARRIOTT SUITE HOTEL PARTNERS, L.P.,
a Rhode Island limited partnership
SECURED PARTY: NATIONAL BANK OF CANADA
======================================================================
Total Remaining
Lessor Description Term Payments
======================================================================
Eastman Kodak Copier 6/93 - 5/98 $25,200.00
- ----------------------------------------------------------------------
GE Capital Two (2) Vans 12/95 - 11/99 $45,475.60
- ----------------------------------------------------------------------
GE Capital Two (2) Vans 9/94 - 8/98 $23,689.75
- ----------------------------------------------------------------------
GE Capital Two (2) Vans 10/92 - 9/96 $ 1,869.40
- ----------------------------------------------------------------------
GE Capital One (1) Van 11/92 - 10/96 $ 2,164.89
- ----------------------------------------------------------------------
GE Capital One (1) Van 10/96 - 9/00 $17,294.40
- ----------------------------------------------------------------------
GE Capital One (1) Van 10/96 - 9/00 $18,561.60
======================================================================
K-1
<PAGE>
EXHIBIT L
---------
PERMITTED INVESTMENTS
---------------------
1. Direct obligations of the United States of America for the payment of
which the full faith and credit of the United States of America is pledged, or
obligations issued by a Person controlled or supervised by and acting as an
instrumentality of the United States of America, the payment of the principal
of, premium, if any, and interest on which is fully and unconditionally
guaranteed as full faith and credit obligations by the United States of America
(collectively, "Government Obligations"):
2. Certificates of deposit issued by the Lender;
3. Commerical Paper rated A1 by Standard & Poor's Corporation or P1 by
Moody's Investors Service, Inc. ("Commercial Paper");
4. Repurchase agreements of United States national or state banks having
capital reserves in excess of $500,000,000 having terms of one year or less or
any repurchase agreement that is collateralized to the extent of not less than
100% of the principal amount thereby by Government Obligations (collectively
"Repos");
5. Any money market or mutual fund purchased on behalf of the Borrower by
the Lender or any of its Affiliates and comprised entirely of Government
Obligations, Commercial Paper or Repos;
6. Any other investment purchased on behalf of the Borrower by the Lender
or any of its Affiliates having similar investment quality as any of the
foregoing investments in the reasonable judgement of the Lender; and
7. Such other investments as are acceptable to the Lender.
L-1
<PAGE>
Exhibit 10.4
AMENDED AND RESTATED
SECURED PROMISSORY NOTE
$25,500,000 Chicago, Illinois
September 24, 1996
THIS AMENDED AND RESTATED SECURED PROMISSORY NOTE AMENDS AND RESTATES
COMPLETELY THAT CERTAIN PROMISSORY NOTE SECURED BY MORTGAGE DATED JUNE 12, 1989
MADE BY MUTUAL BENEFIT CHICAGO MARRIOTT SUITE HOTEL PARTNERS, L.P., A RHODE
ISLAND LIMITED PARTNERSHIP, IN FAVOR OF NATIONAL BANK OF CANADA IN THE FACE
PRINCIPAL AMOUNT OF $25,500,000. THIS AMENDED AND RESTATED SECURED PROMISSORY
NOTE IS SECURED BY, AMONG OTHER INSTRUMENTS, THE "MORTGAGE", THE "ASSIGNMENT OF
RENTS", AND THE "SECURITY AGREEMENT", AS SUCH TERMS ARE HEREINAFTER DEFINED.
FOR VALUE RECEIVED, MUTUAL BENEFIT CHICAGO MARRIOTT SUITE HOTEL PARTNERS,
L.P., a Rhode Island limited partnership ("Borrower"), hereby promises to pay to
the order of NATIONAL BANK OF CANADA, New York, a duly licensed branch of
National Bank of Canada, a Canadian bank ("Lender"), in the manner provided
hereinafter, the principal sum of TWENTY-FIVE MILLION FIVE HUNDRED THOUSAND AND
00/100 DOLLARS ($25,500,000) with interest thereon, as follows:
1. Certain Definitions. As used herein, the following terms shall have
-------------------
the indicated meanings, and all capitalized terms not otherwise defined herein
shall have the meanings ascribed thereto in the Loan Agreement:
1.1 Accounting Period. Each Accounting Period shall commence at 12:01
-----------------
a.m. local time on a Saturday and shall end at midnight on the Friday that
is the twenty-eighth (28th) day of said Accounting Period. Each Accounting
Period shall commence immediately following the last day of the previous
Accounting Period. The first Accounting Period of each Fiscal Year shall
commence on the first day of said Fiscal Year and the last Accounting
Period of each Fiscal Year shall end on the last day of said Fiscal Year.
As stated above, each Accounting Period shall contain twenty-eight (28)
days; provided, however, that in certain Fiscal Years one of the Accounting
Periods shall contain thirty-five (35) days if necessary in order to cause
the last day of the last Accounting Period to coincide with the last day of
the Fiscal Year in question.
1.2 Accrual Rate. The respective rates of interest per annum set
------------
forth below with respect to the calendar years set forth below:
<PAGE>
Accrual Rate
per Annum Calendar Year
-------------- -------------
0.0% 1996
0.25% 1997
0.25% 1998
0.50% 1999
1.00% 2000
1.50% 2001
; provided, however, that (i) the Accrual Rate for calendar year 2000 shall
be reduced to 0.50% (retroactive to January 1, 2000) (the "Reduced Year
2000 Accrual Rate") if Borrower repays the Indebtedness in full (other than
following an acceleration of the Indebtedness by Lender following an Event
of Default) on or before December 31, 2000 and (ii) the Accrual Rate for
calendar year 2001 shall be reduced to 0.75% (retroactive to January 1,
2001) (the "Reduced Year 2001 Accrual Rate") if Borrower repays the
Indebtedness in full (other than following an acceleration of the
Indebtedness by Lender following an Event of Default) on or before June 11,
2001. If an Interest Period falls partially within one calendar year and
partially within the next calendar year, the Accrual Rate for said Interest
Period shall be adjusted (as of the first day of the new calendar year) in
accordance with the schedule of Accrual Rates set forth above.
1.3 Accrual Rate Interest. As defined in Section 2.1 hereinbelow.
---------------------
1.4 Additional Accrued Interest. As defined in Section 2.1(c)
---------------------------
hereinbelow.
1.5 Affiliated Party. (i) Any member, shareholder, partner, officer,
----------------
director, agent or fiduciary of or for Borrower, (ii) any Person that
controls, is controlled by or is under common control with Borrower, (iii)
any Person that owns, directly or indirectly, 10% or more of the legal or
beneficial interests in Borrower, and (iv) any Person in which Borrower or
any member, shareholder, partner, officer, director, agent or fiduciary of
or for Borrower owns 10% or more of the legal or beneficial interests. For
purposes of this definition, "control", when used with respect to any
specified Person, means the power to direct the management and policies of
such Person, whether through the ownership of voting securities, by
contract or otherwise. The term "controlled" has a meaning correlative to
the foregoing.
2
<PAGE>
1.6 Annual Operating Projection. As defined in the Loan Agreement.
---------------------------
1.7 Assignment of Rents. As such term is defined in the Loan
-------------------
Agreement.
1.8 Business Day. A day on which banks are open for business in New
------------
York, New York and on which major American money banks are also dealing in
Dollar deposits in the London Interbank Market.
1.9 Base Rate. The rate of interest per annum determined as follows:
---------
(a) If the Fixed Rate Election is not duly exercised by Borrower
in accordance with the terms hereof, the Base Rate for each Interest
Period during the term hereof shall be equal to the LIBOR Based Rate;
and
(b) If the Fixed Rate Election is duly exercised by Borrower in
accordance with the terms hereof, then:
(i) The Base Rate for each Interest Period commencing prior
to the Conversion Date shall be equal to the LIBOR Based Rate;
and
(ii) The Base Rate applicable during the term hereof from
and after the Conversion Date shall be equal to the Fixed Rate.
1.10 Base Management Fee. The "Base Management Fee," in an amount
-------------------
equal to three percent (3%) of Gross Revenues, payable to the Manager by
Borrower pursuant to the Management Agreement.
1.11 Base Rate Interest. As defined in Section 2.1(a) hereinbelow.
------------------
1.12 Consultant's Fee. As defined in the Loan Agreement.
----------------
1.13 Contingent Management Fees. Shall have the meaning ascribed
--------------------------
thereto in Management Agreement.
1.14 Contract Rate. With respect to each Interest Period, the rate
-------------
of interest per annum equal to the Base Rate plus the Accrual Rate, as the
same shall be in effect with respect to said Interest Period.
1.15 Contract Rate Interest. As defined in Section 2.1(a)
----------------------
hereinbelow.
3
<PAGE>
1.16 Conversion Date. If Borrower shall have duly given the Fixed
---------------
Rate Election Notice in accordance with Section 2.4(b) hereinbelow, the
------
"Conversion Date" shall be the date from and after which the Base Rate is
equal to the Fixed Rate.
1.17 Cost of Funds Quote. As defined in Section 2.4(a) hereinbelow.
-------------------
1.18 Cost of Funds Quote Request. As defined in Section 2.4(b)
---------------------------
hereinbelow.
1.19 Cumulative NOI Threshold Amount. "Cumulative NOI Threshold
-------------------------------
Amount" means, as of any given date, the sum of the respective NOI
Threshold Amounts applicable to each Fiscal Year or portion thereof falling
within the period from and after the date hereof, through and including the
date in question.
1.20 Deductions. Shall have the meaning ascribed thereto in the
----------
Management Agreement.
1.21 Default Rate. If the Conversion Date has not yet occurred, (i)
------------
three percent (3%) per annum plus the Base Rate through and including the
----
last day of the then current Interest Period, and (ii) at all times
thereafter, three percent per annum plus the Reference Rate determined by
----
Lender from time to time. If the Conversion Date has occurred, three
percent (3%) per annum plus the Base Rate that became effective as of the
----
Conversion Date.
1.22 Deferred Prepayment Interest. Collectively, all Deferred Year
----------------------------
2000 Prepayment Interest and Deferred Year 2001 Prepayment Interest.
1.23 Deferred Year 2000 Prepayment Interest. As defined in Section
--------------------------------------
2.8(d) hereinbelow.
1.24 Deferred Year 2001 Prepayment Interest. As defined in Section
--------------------------------------
2.8(e) hereinbelow.
1.25 Dollars. "Dollar(s)," whether or not capitalized, and the sign
-------
"$" shall mean lawful money of the United States of America.
1.26 Excess Cash Flow. With respect to any given period of time,
----------------
Excess Cash Flow shall mean the Net House Profit with respect to said
period of time, to the extent remaining after application to the following
to the extent that said items are then due and payable (Borrower hereby
acknowledging that pursuant to the Loan Agreement, Borrower is obligated to
cause Net House Profit to be applied in said order of priority and to apply
the remainder (i.e., the Excess Cash Flow) as provided in Section 2.3
hereof):
4
<PAGE>
(a) rent and other charges then due and payable to the ground
lessor under the Ground Lease;
(b) Base Rate Interest;
(c) Scheduled Principal Payments;
(d) any Incentive Management Fee or Contingent Management Fees
due and payable to Manager in accordance with Article V of the
Management Agreement.
(e) actual out-of-pocket expenses incurred by Borrower to parties
that are not Affiliated Parties and are not employees of Borrower or
any Affiliated Party (with the exception of Host Marriott Corporation,
but only to the extent that the compensation paid to Host Marriott
Corporation does not exceed the amounts that would be payable at
arm's-length) in connection with the administration of Borrower's
limited partnership structure, provided that said amount shall not
include overhead not specifically attributable to the Borrower entity
and shall not exceed $75,000 in any given Fiscal Year (which amount
shall be ratably adjusted for partial Fiscal Years during the term
hereof based upon the number of days in said Fiscal Year that fall
within the term hereof);
(f) any Lender's Expenses not previously repaid;
(g) any portion of the Restructuring Fee not previously repaid;
(h) any Consultant's Fees incurred by Lender in an NOI Shortfall
Year; and
(i) any "Permitted Payments" (as such term is defined in the
Subordination Agreement of even date herewith between Lender and
Manager) payable to Manger from time to time by Borrower.
1.27 Excess Cash Flow Payments. As defined in Section 2.3
-------------------------
hereinbelow.
1.28 FF&E Account. As defined in the Loan Agreement.
------------
1.29 Fiscal Year. A period of thirteen (13) Accounting Periods,
-----------
ending at midnight on the Friday closest to December 31st in each calendar
year; the new Fiscal Year begins on the Saturday immediately following said
Friday. A partial Fiscal Year
5
<PAGE>
during the term of this Note shall, for purposes of this Note, constitute a
separate Fiscal Year.
1.30 Fixed Rate. The rate of interest per annum equal to Lender's
----------
Cost of Funds, determined on the Conversion Date in the manner provided in
this Note, plus 2.5% per annum, computed on the basis of a 360-day year and
the actual number of days elapsed.
1.31 Fixed Rate Election. As defined in Section 2.4(b) hereinbelow.
-------------------
1.32 Fixed Rate Election Notice. As defined in Section 2.4(b)
--------------------------
hereinbelow.
1.33 Full Prepayment. As defined in Section 2.8 hereinbelow.
---------------
1.34 Gross Revenues. Shall have the meaning ascribed thereto in the
--------------
Management Agreement.
1.35 Ground Lease. The Ground Lease, the lessee's interest in which
------------
has heretofore been assigned to Borrower, originally made and dated as of
June 16, 1986 by and between Marriott Corporation, a Delaware corporation,
as lessee, and Simon-Rosemont Developers, as lessor, a memorandum of which
was recorded on April 3, 1987 as Document 3604964, as amended by First
Amendment to Lease recorded on April 3, 1987 as Document 36049654, as
further amended by Second Amendment to Lease recorded on February 9, 1989
as Document 89063670, and as further supplemented and amended by those
documents identified on Exhibit E to the Mortgage.
1.36 Incentive Management Fee. Shall have the meaning ascribed
------------------------
thereto in the Management Agreement.
1.37 Indebtedness. "Indebtedness" means, in the aggregate, all
------------
obligations of Borrower, of any kind or nature, evidenced or secured by one
or more of the Loan Documents.
1.38 Interbank Market. Any interbank market, whether located in
----------------
London, England or in any other location satisfactory to Lender, where
Lender, or any branch, subsidiary, parent or affiliate of Lender, may
purchase or sell deposits of U.S. dollars to other banks for fixed periods.
1.39 Interest Period. Each Interest Period shall commence on the
---------------
24th day of a calendar month and shall continue through and including the
23rd day of the calendar month that is three (3) months thereafter. The
first Interest Period shall commence on
6
<PAGE>
September 24, 1996 and end on December 23, 1996. Each successive Interest
Period shall commence on the date following the expiration of the previous
Interest Period. Notwithstanding the foregoing, the final Interest Period
shall end on the Maturity Date and may, accordingly, be a shorter period of
time than the other Interest Periods.
1.40 Lender's Cost of Funds.
----------------------
(a) For the purposes of this definition, the term "Cost of Funds,"
with respect to Lender or any of its Participants, considered separately,
shall mean the rate of interest per annum equivalent to the yield to
maturity at which said party can effectively borrow funds in a wholesale
market selected by said party in an amount equal to the then outstanding
balance of principal under this Note therein (or, in the case of a
Participant, each Participant's respective percentage thereof) for a period
of time equivalent to the scheduled term remaining under this Note from and
after the proposed Conversion Date. In determining said yield, effect shall
be given to (i) all commissions that would be incurred or payable in
connection with the sale of said party's obligations, and (ii) the
effective cost to said party of any then existing reserve requirement
(including, but not limited to, all basic supplemental, marginal and other
reserves and taking into account any transitional adjustments or other
scheduled changes in reserve requirements during such period) which is
imposed under Regulation D for determining reserve requirements applicable
to obligations of said party of the type in question or any other then
applicable regulation of the Board of Governors of the Federal Reserve
System, which prescribes reserve requirements applicable to obligations of
said party of the type in question. The utilization of the foregoing
definition in determining said party's Cost of Funds shall not obligate
said party to actually borrow funds in order to determine any rate of
interest based on said party's Cost of Funds. As employed above, the term
"then outstanding balance of principal" shall mean the principal balance
under this Note that is reasonably projected by Lender to be outstanding as
of the first day of the next Interest Period.
(b) As employed herein, the term "Lender's Cost of Funds," determined
as of any given time, shall mean either (i) the Cost of funds of Lender
determined as of said time, if Lender has no Participants in the Loan, or
(ii) the weighted average (based upon their relative percentage interests
in the Loan) of Lender's Cost of Funds and each of its Participant's
respective Cost of Funds.
(c) The "Cost of Funds Quote," the "Final Cost Quote" and the "Rate
Set Notice" (as such terms are employed in Section 2.4 hereinbelow) shall
be conclusive (in the absence of manifest error) in establishing Lender's
Cost of Funds at the time or times in question.
7
<PAGE>
1.41 Lender's Expenses. The fees, costs and expenses incurred by
-----------------
Lender in connection with the restructuring of the Original Loan, including
without limitation (i) Borrower's failure to repay the Original Loan prior
to maturity (including all such amounts incurred by Lender in anticipation
of Borrower's failure to repay the Original Loan prior to maturity) or (ii)
the negotiation, preparation and execution of the Loan Documents and all
term sheets or agreements preliminary thereto, are referred to herein as
"Lender's Expenses." Pursuant to the Loan Agreement, Lender shall notify
Borrower, within sixty (60) days following the date hereof, as to the
amount of Lender's Expenses. Concurrently herewith, Lender has advised
Borrower as to the amount of Lender's Expenses as estimated by Lender.
1.42 LIBOR. For each Interest Period, the interest rate quoted by
-----
Lender (or money center reference banks selected by Lender) as the rate of
interest per annum (computed on the basis of a three hundred sixty (360)-
day year) at which a deposit in Dollars in a sum equal to the then
outstanding balance of principal under this Note is offered to Lender (or
said money center reference banks selected by Lender) in the Interbank
Market at approximately 11:00 a.m. (London time) on the date that is two
(2) Business Days prior to the first date of said Interest Period for the
term of said Interest Period. The use of such offered interest rate to
define the LIBOR Based Rate shall not obligate Lender (or any money center
reference bank) to accept a deposit in order to charge interest at the
LIBOR Based Rate. As employed above, the term "then outstanding balance of
principal" shall mean the principal balance under this Note that is
reasonably projected by Lender to be outstanding as of the first day of the
Interest Period in question.
1.43 LIBOR Based Rate. For any given Interest Period, the sum of (1)
----------------
the quotient of (a) LIBOR for said Interest Period (determined as provided
hereinabove) divided by (b) one minus the Reserve Requirement, if required
by present or future regulations (expressed as a decimal and rounded
upward, if necessary, to the next higher .001%, plus (2) 2.0% per annum,
computed on the basis of a three hundred sixty (360)-day year and the
actual number of days elapsed. Although Lender shall have no obligation to
furnish such a certificate, a certificate of Lender as to the LIBOR Based
Rate in effect with respect to any given Interest Period shall be
conclusive (in the absence of manifest error) for the purposes of this Note
and the other Loan Documents as to the LIBOR Based Rate in effect for any
given Interest Period.
1.44 Loan. The loan evidenced by this Note and secured by the Loan
----
Documents hereinafter described.
1.45 Loan Agreement. The Amended and Restated Loan Agreement of even
--------------
date herewith between Borrower and Lender.
8
<PAGE>
1.46 Loan Documents. As defined in the Loan Agreement.
--------------
1.47 Management Agreement. The Management Agreement by and between
--------------------
the Borrower and the Manager dated as of June 12, 1989.
1.48 Manager. Marriott International, Inc., a Delaware corporation.
-------
1.49 Maturity. The date that is the earlier to occur of (i) the
--------
Maturity Date, (ii) the date upon which the Indebtedness shall be
accelerated by Lender, or (iii) the date of any Permitted Prepayment. All
references herein to payment "at Maturity" shall mean payment on the date
on which Maturity occurs, and all references herein to an amount becoming
due and payable "at Maturity" shall mean that said amount is due and
payable on the date on which Maturity occurs.
1.50 Maturity Date. June 12, 2001.
-------------
1.51 Maximum Amount. As such term is defined in Section 9
--------------
hereinbelow.
1.52 Mortgage. As defined in the Loan Agreement.
--------
1.53 Net House Profit. Shall have the meaning ascribed thereto in
----------------
the Management Agreement, provided however that in determining Net House
Profit, there shall be no double counting, either in terms of including a
single item more than once in the deductions made in determining Net House
Profit, or in terms of excluding an item from Gross Revenues and, at the
same time, deducting said item in determining Net House Profit.
Furthermore, notwithstanding the fact that the definitions of Gross
Revenues, Deductions and Net House Profit under this Note have the same
meanings as are set forth in the Management Agreement, if the amount
characterized by Manager as constituting Net House Profit for the purposes
of Section 5.01(B)(1) of the Management Agreement for any given period of
time is, for any reason, greater than the amount that might otherwise be
derived by the application of said definitions, and if said greater amount
has been agreed to or acquiesced in by Borrower for purposes of the
Management Agreement, then said greater amount shall constitute Net House
Profit for the period in question for the purposes of this Note and the
other Loan Documents; provided that the adjustments made pursuant to this
sentence shall not be made, as to any given Fiscal Year, until the final
accounting statements for said Fiscal Year have been furnished in
accordance with clause (iii) of Article 7 of the Loan Agreement.
1.54 NOI Threshold Amount. "NOI Threshold Amount" shall mean, with
--------------------
respect to each Fiscal Year or portion thereof during the term of this
Note, the respective amount set forth on Exhibit A attached hereto opposite
the listing of said Fiscal Year. Said
9
<PAGE>
amount shall be prorated for periods of less than the full period
contemplated in Exhibit A based upon the number of days in the period in
question, divided by the number of days in the full period contemplated in
Exhibit A.
1.55 NOI Shortfall Year. NOI Shortfall Year means any Fiscal Year or
------------------
portion thereof falling during the term of this Note with respect to which
Net House Profits are less than the NOI Threshold Amount.
1.56 Original Loan. As defined in the Loan Agreement.
-------------
1.57 Partial Prepayment. As defined in Section 2.8 hereinbelow.
------------------
1.58 Participant. Any holder from time to time of a participation
-----------
interest in the Loan, as contemplated pursuant to Section 12.17 of the Loan
Agreement.
1.59 Payment Date. The day immediately following the last day of
------------
each Interest Period. Notwithstanding the foregoing, whenever any payment
on this Note is due on a day that is not a Business Day, such payment shall
be made on the next succeeding Business Day and such extension of time
shall be included in the computation of the payment of interest on this
Note; provided, however, that if the day on which payment is due is not a
-------- -------
Business Day but is a day of the month after which no further Business Day
occurs in such month, then the due date thereof shall be the next preceding
Business Day.
1.60 Permitted Prepayment. As defined in Section 2.8 hereinbelow.
--------------------
1.61 Person. "Person" means an individual, corporation, partnership,
------
trust or unincorporated organization, or a government or any agency or
political subdivision thereof.
1.62 Prepayment. As defined in Section 2.8 hereinbelow.
----------
1.63 Prime Rate. "Prime Rate" at any time shall mean the rate of
----------
interest per annum then most recently announced by Lender at its New York
branch as its prime rate. The Prime Rate is a reference rate and does not
necessarily represent the lowest or best rate actually charged to any
customer of Lender. Lender may make commercial loans or other loans at
rates of interest at, above or below the Prime Rate. A certificate of
Lender as to its Prime Rate in effect on any day shall be conclusive (in
the absence of manifest error) for purposes hereof as to the Prime Rate in
effect on such day. If Lender shall not announce such a rate at its New
York branch, or shall not have a New York branch, then the term "Prime
Rate" shall mean the prime rate or base rate from time to time announced by
an American money center bank designated by Lender.
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1.64 Property. The Borrower's leasehold interest in certain real
--------
property pursuant to the Ground Lease, and the Borrower's ownership
interest in the improvements thereto and the personal property associated
therewith, all referred to collectively in the Loan Agreement as the
"Property."
1.65 Rate Set Notice. As defined in Section 2.4(c) hereinbelow.
---------------
1.66 Reduced Year 2000 Accrual Rate. As defined in the definition of
------------------------------
Accrual Rate.
1.67 Reduced Year 2001 Accrual Rate. As defined in the definition of
------------------------------
Accrual Rate.
1.68 Reference Rate. "Reference Rate" at any time shall mean the
--------------
Prime Rate plus one (1) percent per annum.
1.69 Regulation D. Regulation D of the Board of Governors of the
------------
Federal Reserve System from time to time in effect, and 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.
1.70 Regulatory Change. "Regulatory Change" means any change after
-----------------
the date hereof in the United States federal, state, or municipal laws or
regulations or foreign laws or regulations (including Regulation D)
applying to a class of banks including Lender, or the adoption or making
after the date of this Note of any interpretations, directives or requests
under any such United States, federal, state, or municipal laws or
regulations or any foreign laws or regulations (whether or not having the
force of law) applying to a class of banks including Lender by any court or
governmental or monetary authority charged with the interpretation or
administration thereof.
1.71 Reserve Requirement. With respect to any Interest Period, the
-------------------
daily average during such Interest Period of the maximum aggregate reserve
requirement (including, but not limited to, all basic supplemental,
marginal and other reserves and taking into account any transitional
adjustments or other scheduled changes in reserve requirements during such
period) which is imposed under Regulation D for determining reserve
requirements applicable to "Eurocurrency Liabilities" of Lender pursuant to
Regulation D or any other then applicable regulation of the Board of
Governors of the Federal Reserve System, which prescribes reserve
requirements applicable to "Eurocurrency Liabilities" as presently defined
in Regulation D.
11
<PAGE>
1.72 Restructuring Fee. An amount equal to $191,250, as described
-----------------
more fully in the Loan Agreement.
1.73 Security Agreement. As defined in the Loan Agreement.
------------------
1.74 Scheduled Principal Payments. As defined in Section 2.2
----------------------------
hereinbelow.
2. Principal and Interest.
----------------------
Section 2.1 Interest.
--------
(a) From and after the date hereof, the unpaid principal balance of
this Note shall bear interest prior to Maturity at the Contract Rate. Said
interest is referred to herein as "Contract Rate Interest." That portion
of the Contract Rate Interest consisting of interest accruing from time to
time at the Base Rate on the unpaid principal balance of this Note, is
referred to herein as "Base Rate Interest." Borrower shall pay to Lender
all accrued and unpaid Base Rate Interest in arrears on each Payment Date,
in addition to the Scheduled Principal Payments required to be paid by
Borrower pursuant to Section 2.2 hereinbelow.
(b) All accrued and unpaid Contract Rate Interest in excess of the
Base Rate Interest shall not be required to be paid pursuant to Section
2.1(a), shall be referred to herein as "Accrual Rate Interest," and shall
be due and payable by Borrower in accordance with Section 2.6 hereof.
(c) In addition to Base Rate Interest and Accrual Rate Interest,
additional interest (collectively, "Additional Accrued Interest") shall
accrue with respect to the Loan, in an amount equal to fifty percent (50%)
of the Excess Cash Flow for each NOI Shortfall Year. Additional Accrued
Interest shall not be payable pursuant to Sections 2.1, 2.2, or 2.3, but
all accrued and unpaid Additional Accrued Interest shall be due and payable
in accordance with Section 2.6 hereof.
(d) All accrued and unpaid Contract Rate Interest and Additional
Accrued Interest shall be due and payable at Maturity.
(e) Notwithstanding anything to the contrary herein contained,
pursuant to the Loan Agreement, Lender has agreed to waive payment of
Additional Accrued Interest if (i) Borrower repays the Indebtedness in full
on or before the Maturity Date (with the exception of any payment made
following the acceleration of the Indebtedness by Lender consequent to any
Event of Default) or (ii) (x) Net House Profit for the period from June 13,
2000 through and including June 12, 2001 is greater than or equal to the
NOI
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<PAGE>
Threshold Amount for said period and (y) the cumulative Net House Profit
for the period from the date hereof through and including June 12, 2001 is
greater than or equal to the Cumulative NOI Threshold Amount for said
period.
From and after the earlier to occur of (a) any Event of Default (as hereinafter
defined); or (b) Maturity, whether by acceleration or otherwise, interest shall
accrue on the amount of the principal balance outstanding hereunder at the
Default Rate and shall be payable upon demand. All interest under this Note
shall accrue on the actual number of days that funds are outstanding and shall
be calculated on the basis of a 360-day year.
Section 2.2 Scheduled Payments of Principal. In addition to the payments
-------------------------------
of Base Rate Interest required to be made by Borrower pursuant to Section 2.1
above, on each Payment Date, Borrower shall make a mandatory payment to Lender
(each such payment being referred to herein as a "Scheduled Principal Payment")
in the amount set forth on Exhibit B attached hereto opposite the listing of
said Payment Date. Each Scheduled Principal Payment shall be applied to the
unpaid principal balance of this Note. The amount of each Scheduled Principal
Payment has been calculated by determining the amount of principal that would be
required to be paid on each Payment Date in order to fully amortize the Loan
over a term of twenty (20) years, utilizing an interest rate equal to the Base
Rate in effect as of the date hereof, rather than the Contract Rate. The level
of said Scheduled Principal Payments shall not be subject to adjustment for any
reason whatsoever, including changes in the Base Rate, or any Partial
Prepayment. Borrower and Lender specifically acknowledge and agree that (i)
unless so elected by Lender during the continuation of an Event of Default, no
portion of any Scheduled Principal Payment shall be applied in reduction of
Accrual Rate Interest or Additional Accrued Interest, and (ii) Borrower's
payment of the Scheduled Principal Payments in accordance with the terms of this
Note will not cause the principal balance of the Note to have been fully
amortized as of the Maturity Date and a substantial payment of principal will be
due and payable by Borrower at Maturity, pursuant to Section 2.6 hereinbelow.
Section 2.3 Excess Cash Flow Payments. Borrower shall, at the times
-------------------------
provided below, pay all Excess Cash Flow to Lender. Said payments, which are
referred to herein as "Excess Cash Flow Payments", shall be in addition to the
payments of Base Rate Interest required to be made pursuant to Section 2.1 of
this Note and the Scheduled Principal Payments required to be made pursuant to
Section 2.2 of this Note. Each Excess Cash Flow Payment shall be applied first
to the payment of any amounts required to be paid by Borrower pursuant to
Section 2.12 hereinbelow in connection with said Excess Cash Flow Payment and
then to the reduction of the outstanding principal balance of this Note; any
such reduction of principal shall be in addition to the reduction of principal
effectuated pursuant to the Scheduled Principal Payments. Unless so elected by
Lender during the continuation of an Event of Default, the Excess Cash Flow
Payments shall not be applied to the payment of Accrual Rate Interest or
Additional Accrued Interest. Borrower shall make Excess Cash Flow Payments to
Lender at the following times only:
13
<PAGE>
(a) On the first Payment Date following October 31 of each Fiscal Year
or portion thereof during the term of this Note, Borrower shall pay to
Lender all Excess Cash Flow for the first ten (10) Accounting Periods (or
portions thereof during the term of this Note) during the then current
Fiscal Year, said Excess Cash Flow to be determined on the basis of the
accounting statements required to be furnished by Borrower for such Fiscal
Year on or before said Payment Date pursuant to clauses (i) and (ii) of
Article 7 of the Loan Agreement, subject to any adjustments that may be
required based on the accounting statements required to be furnished by
Borrower for such Fiscal Year pursuant to clause (iii) of Article 7 of the
Loan Agreement, which adjustments shall be incorporated in the payment
required to be made by Borrower pursuant to Section 2.3(b) hereinbelow.
(b) On the first Payment Date following May 31 of each year during the
term of this Note, Borrower shall pay to Lender all Excess Cash Flow for
the preceding Fiscal Year (or portion thereof during the term of this
Note), to the extent not previously paid.
Borrower shall advise Lender, not less than three (3) Business Days prior to the
date on which any Excess Cash Flow Payment is required to be made pursuant to
Section 2.3(a) or 2.3(b) hereinabove, of the amount of any such Excess Cash Flow
Payment that will be made by Borrower. If the information and materials
furnished to Lender by Borrower pursuant to Article 7 of the Loan Agreement
disclose that the amount of any payment made by Borrower pursuant to this
Section 2.3 was less than required, then without limitation of Lender's other
rights and remedies under the Loan Documents, Borrower shall pay the amount of
said deficiency to Lender concurrently with the furnishing of said information
and materials to Lender. Notwithstanding anything to the contrary herein
contained, the Excess Cash Flow Payments required to be made by Borrower from
and after the date hereof with respect to Fiscal Year 1996 shall be based on the
Excess Cash Flow for the entirety of Fiscal Year 1996, rather than merely that
portion of said Excess Cash Flow attributable to the period from and after the
date of this Note; provided, that (i) for the portion of Fiscal Year 1996
occurring prior to the date hereof, the deduction in subsection (b) of the
definition of Excess Cash Flow shall be based on interest accrued and paid with
respect to the Original Loan during said period, and the deduction in subsection
(c) shall be disregarded as being inapplicable, (ii) in determining Excess Cash
Flow for Fiscal Year 1996, the category of deduction set forth in subsection (e)
of the definition of Excess Cash Flow shall be expanded to include, in addition,
the Borrower's costs and expenses in closing the restructuring of the Loan in
accordance with the Loan Documents, to the extent paid to parties that are not
Affiliated Parties and are not employees of Borrower or any Affiliated Party,
provided that the aggregate limit of all the deductions pursuant to said clause
(e) in Fiscal Year 1996 shall not exceed $75,000.
Section 2.4 Fixed Rate Election.
-------------------
14
<PAGE>
(a) Prior to the second anniversary of the date hereof, not more often
than once during any given Interest Period and provided that there then
exists no Event of Default and no event which, with the giving of notice or
the lapse of time or both, would constitute an Event of Default, Borrower
shall have the right, on or before the date that is ten (10) Business Days
prior to the expiration of the then current Interest Period, to furnish
written notice (a "Cost of Funds Quote Request") to Lender requesting that
Lender identify Lender's Cost of Funds. If Borrower shall have furnished a
Cost of Funds Quote Request to Lender in accordance with the foregoing,
Lender shall furnish Borrower a written notice (a "Cost of Funds Quote")
identifying Lender's Cost of Funds, determined as of the date that is five
(5) Business Days prior to the first day of the next Interest Period. If
either the Lender or any of its Participants, in determining their
respective Cost of Funds, is subject to a forward rate lock process under
which said party's Cost of Funds would be finally set a specified number of
days (not to exceed two (2) Business Days) prior to the Conversion Date,
Lender shall, concurrently with furnishing the Cost of Funds Quote, notify
Borrower of the earliest such date that is applicable to the final setting
of the respective Costs of Funds by Lender or any of its Participants,
which date is referred to herein as the "Final Cost Quote Date."
(b) At any time prior to the second anniversary of the date hereof,
Borrower may make an election (a "Fixed Rate Election") on a one-time only
basis, to convert the Base Rate to the Fixed Rate from the LIBOR Based Rate
for the remaining term of the Loan, by giving Lender a written notice (a
"Fixed Rate Election Notice") indicating that Borrower has elected to
exercise the Fixed Rate Election and specifying the proposed Conversion
Date, which shall be the first day of the next Interest Period.
Notwithstanding the foregoing, a Fixed Rate Election Notice shall not be
effective unless:
(i) it is received by Lender at least four (4) Business Days
before the proposed Conversion Date and said proposed Conversion Date
falls on or before the second anniversary of the date hereof;
(ii) at the time such Fixed Rate Election Notice is given, no
Event of Default exists and no event has occurred which, with the
giving of notice or the lapse of time or both, would constitute an
Event of Default;
(c) If Borrower furnishes the Fixed Rate Election Notice in accordance
with Section 2.4(b) hereinabove, then from and after the Conversion Date,
through and including the Maturity Date, the Base Rate shall be equal to
the Fixed Rate, which shall be based on a determination made by Lender, on
or before the Conversion Date, as to Lender's Cost of Funds.
Notwithstanding anything to the contrary herein contained, if Lender has
furnished a Cost of Funds Quote to Borrower during the Interest Period
immediately prior to the Conversion Date and if Lender's Cost of Funds,
determined by
15
<PAGE>
Lender on the Final Cost Quote Date, shall be greater than Lender's Cost of
Funds as set forth in said Cost of Funds Quote, then Lender shall notify
Borrower thereof on or before 9:30 a.m. Eastern time on the Final Cost
Quote Date (said notice being referred to herein as a "Final Cost Quote")
and Borrower may revoke the Fixed Rate Election by furnishing a notice to
Lender by facsimile in the manner provided in Section 11 hereinbelow on or
before 10:00 a.m. Eastern time on the Final Cost Quote Date. If Borrower
has duly revoked the Fixed Rate Election in accordance herewith, then the
Base Rate shall continue to be determined in accordance with Section 2.5
hereinbelow as though the Fixed Rate Election had not been made; provided,
however that the Base Rate for the Interest Period commencing on what would
have been the Conversion Date shall be a floating rate equal to the
Reference Rate determined by Lender from time to time until such time as
Lender is capable of determining the LIBOR Based Rate for the remainder of
said Interest Period. Borrower hereby acknowledges that (i) although Lender
and/or one or more of its Participants will finally determine their
respective Costs of Funds as of the Final Cost Quote Date, one or more of
said parties may not finally determine their respective Costs of Funds
until a later date that is nevertheless on or before the Conversion Date
and (ii) changes in circumstances occurring after the date on which the
Cost of Funds Quote is furnished or after the Final Cost Quote Date, as the
case may be, may cause Lender's Cost of Funds as finally determined for
purposes of establishing the Fixed Rate, to differ from Lender's Cost of
Funds as set forth in the Cost of Funds Quote or the Final Cost Quote. On
or after the Conversion Date, Lender shall furnish Borrower with a written
notice (the "Rate Set Notice") identifying the amount of the Fixed Rate.
(d) If a Fixed Rate is, in the determination of Lender, unavailable,
Lender shall give Borrower prompt notice thereof and the applicable Base
Rate for each remaining Interest Period shall continue to be the LIBOR
Based Rate applicable from time to time.
(e) Delivery of a Fixed Rate Election Notice by Borrower shall
constitute a representation by Borrower that at the time such Fixed Rate
Election Notice is given, no Event of Default exists and no event has
occurred that, with the giving of notice or the lapse of time or both,
would constitute an Event of Default.
Section 2.5 Resetting the LIBOR Based Rate. Until such time as the Fixed
------------------------------
Rate Election has been duly made in accordance with this Note, the Base Rate
shall be the LIBOR Based Rate, which shall be determined by Lender for each
Interest Period as of the date that is two (2) Business Days prior to the first
date of said Interest Period.
Section 2.6 Maturity. Subject to Section 2.1(e) hereinabove, the entire
--------
outstanding principal balance of the Loan, together with all accrued but unpaid
interest thereon (including without limitation all Contract Rate Interest and
Additional Accrued Interest) and any other sums
16
<PAGE>
due hereunder or under any of the Loan Documents, shall be due and payable at
Maturity or on such earlier date as may be required by the terms of this Note or
any other Loan Document.
Section 2.7 Payment. All payments of principal and interest on this Note
-------
are payable in Dollars at Lender's office at 125 West 55th Street, New York, New
York by wired federal funds or other immediately available funds on or before
11:00 a.m. Eastern Time on the date such payment is due to ABA No. 026005487, or
at such other place within the United States as Lender may specify by notice to
Borrower.
Section 2.8 Prepayment. Any payment, prior to the time when said amount
----------
shall be due and payable pursuant to the terms hereof, of all or any portion of
the then outstanding balance of principal under this Note is referred to herein
as a "Prepayment." Any Prepayment of less than the entire balance of principal
then outstanding under this Note is referred to herein as a "Partial
Prepayment." Any Prepayment of the entire balance of principal then outstanding
under this Note is referred to herein as a "Full Prepayment." Borrower shall
have the right to make Prepayments only as follows (any Prepayment that is made
in accordance with the terms hereof being referred to herein as a "Permitted
Prepayment"):
(a) Borrower shall notify Lender not less than three (3) Business
Days prior to making any Prepayment. Any Prepayment (regardless of whether
said Prepayment is a Partial Prepayment or a Full Prepayment) shall be
accompanied by Borrower's payment to Lender of the entire amount of
Lender's Expenses and the entire amount of the Restructuring Fee, to the
extent that said amounts have not previously been repaid pursuant to the
Loan Agreement.
(b) Any Partial Prepayment shall be accompanied by Borrower's
payment to Lender of all accrued and unpaid Base Rate Interest attributable
to the portion of principal that is being prepaid.
(c) Any Partial Prepayment made on or before December 31, 1999
shall be accompanied by Borrower's payment to Lender of all accrued and
unpaid Accrual Rate Interest attributable to the portion of principal that
is being prepaid .
(d) Any Partial Prepayment made after January 1, 2000 and on or
before December 31, 2000 shall be accompanied by Borrower's payment to
Lender of all accrued and unpaid Accrual Rate Interest attributable to the
portion of principal that is being prepaid; provided, however, that, solely
for the purposes of determining the payment required to be made by Borrower
pursuant to this subsection (d), the amount of said Accrual Rate Interest
accrued during calendar year 2000 with respect to the portion of principal
that is being prepaid shall be determined as though the Accrual Rate for
calendar year 2000 were the Reduced Year 2000 Accrual Rate. The difference
between the interest
17
<PAGE>
accrued on said prepaid amount during calendar year 2000 computed at the
Accrual Rate and the interest accrued on said prepaid amount during
calendar year 2000 computed at the Reduced Year 2000 Accrual Rate is
referred to herein as the "Deferred Year 2000 Prepayment Interest."
(e) Any Partial Prepayment made on or after January 1, 2001 and on
or before June 11, 2001 shall be accompanied by Borrower's payment to
Lender of (i) all Deferred year 2000 Prepayment Interest, if any, and (ii)
all accrued and unpaid Accrual Rate Interest attributable to the portion of
principal that is being prepaid; provided, however, that, solely for the
purpose of determining the payment required to be made by Borrower pursuant
to clause (ii) of this subsection (e), the amount of said Accrual Rate
Interest accrued during calendar year 2001 with respect to the portion of
principal that is being prepaid shall be determined as though the Accrual
Rate for calendar year 2001 were the Reduced Year 2001 Accrual Rate. The
difference between the interest accrued on said prepaid amount during
calendar year 2001 computed at the Accrual Rate and the interest accrued on
said prepaid amount during calendar year 2001 computed at the Reduced Year
2001 Accrual Rate is referred to herein as the "Deferred Year 2001
Prepayment Interest."
(f) A Full Prepayment shall be accompanied by Borrower's payment
of all accrued and unpaid Contract Rate Interest, Additional Accrued
Interest (subject, however, to Section 2.1(e) hereof) and all other
components of the Indebtedness.
(g) If the Fixed Rate Election has not theretofore been made in
accordance with this Note, then any Prepayment may be made on any Payment
Date without the payment of any charge or amount other than as set forth
above in this Section 2.8; provided, however, that in connection with any
Prepayment made on a day other than a Payment Date, and in connection with
any Prepayment (regardless of whether said Prepayment is made on a Payment
Date) following the making of the Fixed Rate Election in accordance with
this Note, Borrower shall pay to Lender, on the day that such Prepayment is
made, in addition to the amounts otherwise payable pursuant to this Section
2.8, all amounts required to be paid by Borrower under Section 2.12 hereof
with respect to such Prepayment as though Lender had made demand for such
amount.
(h) Borrower shall not have the right to make any Prepayments
during the continuation of any Event of Default.
It is specifically acknowledged that the amount of Contract Rate Interest
or Accrual Rate Interest, as the case may be, that is outstanding at any time
shall specifically include any unpaid Deferred Prepayment Interest; provided
that Lender agrees (i) to waive collection of Deferred Year 2000 Prepayment
Interest at such time, if any, as the Accrual Rate for calendar year 2000 shall
have been converted to the Reduced Year 2000 Accrual Rate by operation of the
definition
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<PAGE>
of Accrual Rate under the Note, and (ii) to waive collection of Deferred Year
2001 Prepayment Interest at such time, if any, as the Accrual Rate for calendar
year 2001 shall have been converted to the Reduced Year 2001 Accrual Rate by
operation of the definition of Accrual Rate under this Note.
Section 2.9 Late Charge. If Borrower fails to make any payment due under
-----------
this Note on or before the date that is five (5) days after the same shall
become due, whether by acceleration or prepayment or otherwise, Lender, in
addition to its rights set forth elsewhere in this Note, may at its option:
(a) charge interest on such payment, from the date on which it
was due to the date on which it actually is paid, at the Default Rate; or
(b) charge a late payment fee in an amount equal to three percent
of the amount of such payment;
provided, however, that if any such charge is deemed to be interest in excess of
the Maximum Amount, then the amount actually collected by Lender in excess of
such lawful amount shall be applied in accordance with the provisions of Section
9 hereof.
Section 2.10 Yield Protection.
----------------
(a) Borrower shall pay to Lender from time to time on demand such
amounts as Lender may determine to be necessary to compensate it for any
additional costs that Lender determines are attributable to its making or
maintaining the Loan, or any reduction in any amount receivable by Lender
hereunder or under any other Loan Document (such increases in costs and
reductions in amounts receivable being herein called "Additional Costs"),
resulting from any Regulatory Change that: (i) changes the basis of
taxation of any amounts payable to Lender under this Note or under any
other Loan Document (other than taxes imposed on Lender under any laws,
rules or regulations or any interpretation, directive or requirement
pertaining to the assessment or imposition of any income tax or tax on
assets in lieu of income tax); or (ii) imposes or modifies any reserve,
special deposit, deposit insurance or assessment, minimum capital, capital
ratio or similar requirements relating to any extensions of credit or other
assets of, or any deposits with or other liabilities of Lender; or (iii)
imposes any other similar condition affecting this Note or any other Loan
Document (or any of such extensions of credit or liabilities); provided
that Lender notifies Borrower of any event occurring after the date of this
Note that will entitle Lender to compensation pursuant to this Section 2.10
within ten days following Lender's actual knowledge of such event pursuant
to Lender's receipt of any written publication regarding such event from
the official regulatory agency responsible for the relevant Regulatory
Change. If, by its terms, the relevant Regulatory Change has
19
<PAGE>
retroactive effect, then such compensation shall include any Additional
Costs that arise by reason of such retroactive effect, as provided in the
preceding sentence, with respect to the relevant Regulatory Change.
(b) Without limiting the effect of the foregoing provisions of
this Section 2.10, if by reason of any Regulatory Change, Lender (i) incurs
Additional Costs based on or measured by the excess above a specified level
of the amount of a category of deposits or other liabilities, including
deposits by reference to which the Base Rate is determined as provided in
this Note, or a category of extensions of credit or other assets of Lender
that includes this Loan and Borrower does not pay such Additional Costs on
demand or (ii) becomes subject to restrictions on the amount of such a
category of liabilities or assets which it may hold, then, if Lender so
elects by notice to Borrower, the obligation of Lender to determine the
Base Rate in such manner of such type shall be suspended until the date
such Regulatory Change ceases to be in effect and during said period the
Base Rate shall be a floating rate of interest equal to the Reference Rate
determined by Lender from time to time.
(c) Without limiting the effect of the foregoing provisions of
this Section 2.10 (but without duplication), Borrower shall pay to Lender
from time to time on demand such amounts as Lender may determine to be
necessary to compensate Lender for any costs that it determines are
attributable to the maintenance by it or any of its affiliates, pursuant to
any law or regulation of any jurisdiction or any interpretation, directive
or request (whether or not having the force of law) of any court or
governmental or monetary authority, whether in effect on the date of this
Note or thereafter, of capital in respect of the Loan (such compensation to
include, without limitation, an amount equal to any reduction in return on
assets or equity of Lender to a level below that which it could have
achieved but for such law, regulation, interpretation, directive or
request). Lender will notify Borrower of any event occurring after the date
of this Agreement that will entitle Lender to compensation pursuant to this
Section 2.10 as promptly as practicable, and in no event later than 60
days, after it determines to request such compensation.
(d) Determinations and allocations by Lender for purposes of this
Section 2.10 of the effect of any Regulatory Change pursuant to subsections
(a) or (b), or of the effect of capital maintenance requirements pursuant
to subsection (c), on its costs of making or maintaining the Loan or on
amounts receivable by, or the rate of return to, it in respect of the Loan,
and of the additional amounts required to compensate Lender under this
Section 2.10, shall be conclusive, provided that such determinations and
allocations are made on a reasonable basis. Upon Borrower's request, Lender
shall deliver to Borrower a summary of the calculations by which any such
determinations or allocations are made by Lender.
20
<PAGE>
(e) If and as practicable, Lender shall use its reasonable best
efforts to take such action as it determines to be appropriate to reduce
amounts payable by Borrower under this Section 2.10, provided that Borrower
pays any costs or expense of Lender in taking any such action.
Section 2.11 Illegality. Any other provision in this Note to the contrary
----------
notwithstanding, if the Base Rate is equal to the LIBOR Based Rate and it
becomes unlawful for Lender to honor its obligation to make available or
maintain the Base Rate at the LIBOR Base Rate, then Lender shall promptly notify
Borrower thereof and from and after the date specified by Lender in said notice,
the Base Rate shall be a floating rate of interest equal to the Reference Rate
determined by Lender from time to time, provided that prior to the second
anniversary of the date hereof, Borrower shall retain the right to make the
Fixed Rate Election, if Borrower would otherwise be permitted to make the Fixed
Rate Election, under Section 2.4 of this Note.
Section 2.12 Certain Compensation.
--------------------
(a) If the Fixed Rate Election has not theretofore been made in
accordance with this Note, Borrower shall pay to Lender, upon demand, such
amount or amounts as shall be sufficient (in the reasonable opinion of
Lender) to compensate Lender for any loss, cost or expense that Lender
determines is attributable to any payment of interest or principal under
this Note on a date other than a Payment Date (whether by reason of
acceleration, the making of a Permitted Prepayment or otherwise). Without
limiting the foregoing, such compensation shall include the amount, if any,
by which (i) the amount of interest that otherwise would have accrued on
the principal amount so paid for the period from and including the date of
such payment through and including the next Payment Date at the Contract
Rate exceeds (ii) the amount of interest (as reasonably determined by
Lender) Lender would have bid in a wholesale market selected by Lender for
Dollar deposits for amounts comparable to such principal amount and
maturities comparable to the period in question.
(b) If the Fixed Rate Election has theretofore been made in
accordance with this Note, Borrower shall pay to Lender, upon demand, such
amount or amounts as shall be sufficient (in the reasonable opinion of
Lender) to compensate Lender and any Participants for any loss, cost or
expense that Lender or said Participants determines is attributable to any
payment of interest or principal under this Note (whether by reason of
acceleration, the making of a Permitted Prepayment, the making of an Excess
Cash Flow Payment or otherwise) prior to the Maturity Date other than (x)
the payment of Base Rate Interest pursuant to Section 2.1(a) hereinabove
and (y) the making of any Scheduled Principal Payment pursuant to Section
2.2 hereinabove. Without limiting the foregoing, such compensation shall
include the following, determined separately with respect to Lender and
each of the Participants: (A) the amount, if any, by which (i) the amount
of interest that
21
<PAGE>
otherwise would have accrued on the principal amount so paid for the period
from and including the date of such payment through and including the
Maturity Date at the Contract Rate exceeds (ii) the amount of interest (as
reasonably determined by Lender or said Participant, as the case may be)
Lender (or said Participant) would have bid in a wholesale market selected
by Lender (or said Participant) for Dollar deposits for amounts comparable
to such principal amount and maturities comparable to the period in
question; or (B) in the discretion of Lender or said Participant, if said
party shall have entered into a "swap", "hedge" or other agreement with a
counterparty (each, a "Counterparty Agreement") in connection with the
furnishing of the Fixed Rate, all damages, termination fees and other
costs, expenses and penalties incurred by Lender or by said Participant in
connection with the termination, principal reduction or prepayment of said
Counterparty Agreement as a consequence of the payment in question.
(c) Determinations by Lender as to the amounts payable pursuant to
this Section 2.12 shall be conclusive, absent manifest error, and provided
that such determinations are made on a reasonable basis. Upon Borrower's
request, Lender shall deliver to Borrower a summary of the calculations by
which any such determinations are made by Lender.
3. Events of Default. Any of the following shall constitute an "Event of
-----------------
Default" under this Note:
(i) the failure of Borrower to make any payment
required under this Note, whether such payment is required to be
made to Lender or to some other person or entity, within five (5)
days following the date the same shall become due; or
(ii) the failure of Borrower to perform in any material
respect any other covenant or agreement hereunder if such failure
remains uncured for a period of thirty (30) days after such failure
has occurred or, if the failure is such that it cannot reasonably
be cured within such 30-day period, if Borrower fails to commence
the cure of such failure within such 30-day period or thereafter
fails to diligently pursue such efforts to completion, provided,
however, that in no event shall the amount of time permitted for
any such cure exceed 90 days after such failure shall occur; or
(iii) the occurrence of any Events of Default under the
Mortgage, the Loan Agreement or any other Loan Document or if the
right to foreclose the Mortgage shall accrue to Lender;
22
<PAGE>
then, at any time thereafter, at the election of the holder or holders hereof
and without further notice to Borrower, the principal sum remaining unpaid
hereon, together with accrued interest thereon (including without limitation
Contract Rate Interest and Additional Accrued Interest), shall become at once
due and payable at the place of payment as aforesaid, and Lender may proceed to
foreclose the Mortgage, to exercise any other rights and remedies available to
Lender under the Mortgage and the other Loan Documents and to exercise any other
rights and remedies against Borrower or with respect to this Note which Lender
may have at law, in equity or otherwise.
From and after the occurrence of an Event of Default, Lender is expressly
authorized to apply payments made under this Note as Lender may elect against
any or all amounts, or portions thereof, then due and payable hereunder or under
the Mortgage or any other Loan Document, the outstanding principal balance due
under this Note, the unpaid and accrued interest under this Note (including
without limitation Contract Rate Interest and Additional Accrued Interest), or
any combination of the foregoing.
4. Remedies Cumulative. The remedies of Lender, as provided herein or in
-------------------
the Mortgage or any other Loan Document, shall be cumulative and concurrent, and
may be pursued singularly, successively or together, at the sole discretion of
Lender, and may be exercised as often as occasion therefor shall arise. Failure
of Lender, for any period of time or on more than one occasion, to exercise its
option to accelerate the Maturity of this Note shall not constitute a waiver of
the right to exercise the same at any time thereafter or in the event of any
subsequent Event of Default. No act of omission or commission of Lender,
including specifically any failure to exercise any right, remedy or recourse,
shall be deemed to be a waiver or release of the same; any such waiver or
release is to be effected only through a written document executed by Lender and
then only to the extent specifically recited therein. A waiver or release with
reference to any one event shall not be construed as a waiver or release of any
subsequent event or as a bar to any subsequent exercise of Lender's rights or
remedies hereunder. Except as otherwise specifically required herein, notice of
the exercise of any right or remedy granted to Lender by this Note is not
required to be given.
5. Attorneys' Fees, Accountants' Fees, Consultants' Fees. If: (i) this
-----------------------------------------------------
Note or any Loan Document is placed in the hands of an attorney for collection
or enforcement or is collected or enforced through any legal proceeding; (ii) an
attorney is retained to represent Lender in any bankruptcy, reorganization,
receivership or other proceedings affecting creditors' rights and involving a
claim under this Note or any Loan Document; (iii) an attorney is retained to
protect or enforce the lien of the Mortgage or any other Loan Document; (iv) an
attorney is retained to represent Lender in connection with (or in anticipation
of) any other proceedings or matters whatsoever in connection with this Note,
the Mortgage, any of the other Loan Documents or any property subject thereto;
or (v) an Event of Default shall be continuing, then Borrower shall pay to
Lender all reasonable attorneys' fees, costs and expenses incurred in connection
therewith, in addition to all other amounts due hereunder. If Lender retains an
accountant or business
23
<PAGE>
consultant to advise Lender in connection with the Loan during the continuation
of any Event of Default or in connection with any of the proceedings or matters
described above, then Borrower shall pay to Lender all reasonable fees, costs
and expenses incurred by Lender in connection therewith, in addition to all
other amounts due hereunder.
6. Waiver. Borrower, each guarantor hereof, if any, and any and all
------
others who are now or may become liable for all or part of the obligations of
Borrower, under this Note (all of the foregoing being referred to collectively
herein as "Obligors") agree to be jointly and severally bound hereby and jointly
and severally: (i) to the fullest extent allowed by law, waive and renounce any
and all redemption and exemption rights and the benefit of all valuation and
appraisement privileges against the indebtedness evidenced by this Note or by
any extension or renewal hereof; (ii) waive presentment and demand for payment,
notices of nonpayment and of dishonor, protest of dishonor, and notice of
protest; (iii) waive all notices in connection with the delivery and acceptance
hereof and all other notices in connection with the performance, default or
enforcement of the payment hereof or hereunder (except as otherwise expressly
provided herein); (iv) waive any and all lack of diligence and delays in the
enforcement of the payment hereof; (v) agree that the liability of each of the
Obligors shall be unconditional and without regard to the liability of any other
person or entity for the payment hereof, and shall not be affected in any manner
by any indulgence or forbearance granted or consented to by Lender to any of
them with respect hereto; (vi) consent to any and all extensions of time,
renewals, waivers or modifications that may be granted by Lender with respect to
the payment or other provisions hereof, and to the release of any security at
any time given for the payment hereof, or any part thereof, with or without
substitution, and to the release of any person or entity liable for the payment
hereof; and (vii) consent to the addition of any and all other makers,
indorsers, guarantors and other Obligors for the payment hereof, and to the
acceptance of any and all other security for the payment hereof, and agree that
the addition of any such Obligors or security shall not affect the liability of
any of the Obligors for the payment hereof. Time is of the essence hereof.
7. Governing Law and Other Agreements. Borrower agrees that: (i) this
----------------------------------
instrument and the rights and obligations of all parties hereunder shall be
governed by and construed under the substantive laws of the State of Illinois,
without reference to the conflicts of laws principles of such state; (ii) the
obligation evidenced by this Note is an exempted transaction under the Truth In
Lending Act, 15 U.S.C. { 1601 et seq.; (iii) said obligation constitutes a
-- ----
business loan within the purview of Ill. Rev. Stat. ch. 17, para. 6404 (1987),
815 ILCS 205/4 (1992); and (iv) the proceeds of the indebtedness evidenced by
this Note will not be used for the purchase of registered equity securities
within the purview of Regulation "U" issued by the Board of Governors of the
Federal Reserve System.
8. Interpretation. The parties hereto intend and believe that each
--------------
provision in this Note comports with all applicable law. However, if any
provision in this Note is found by a court
24
<PAGE>
of law to be in violation of any applicable law, and if such court should
declare such provision of this Note to be unlawful, void or unenforceable as
written, then it is the intent of all parties hereto that such provision shall
be given full force and effect to the fullest possible extent that it is legal,
valid and enforceable, that the remainder of this Note shall be construed as if
such unlawful, void or unenforceable provision were not contained therein, and
that the rights, obligations and interests of the Borrower and the holder hereof
under the remainder of this Note shall continue in full force and effect;
provided, however, that if any provision of this Note which is found to be in
violation of any applicable law concerns the imposition of interest hereunder,
the rights, obligations and interests of Borrower and Lender with respect to the
imposition of interest hereunder shall be governed and controlled by the
provisions of the following paragraph.
9. Excess Interest. All agreements between Borrower and Lender are
---------------
expressly limited so that in no contingency or event whatsoever, whether by
reason of: errors of fact or law, prepayment or advancement of the proceeds of
the Loan, acceleration of maturity of the unpaid balance of this Note, or
otherwise, shall the amount paid or agreed to be paid to Lender for the use,
forbearance or retention of the money to be advanced hereunder, including any
fees or charges collected or made in connection with the Loan that may be
treated as interest under applicable law, if any, exceed the maximum legal limit
(if any such limit is applicable) under United States federal law or state law
(to the extent not preempted by federal law, if any), now or hereafter governing
the interest payable in connection with such agreements (the "Maximum Amount").
If, from any circumstances whatsoever, fulfillment of any provision hereof or of
any of the other Loan Documents, at the time performance of such provision shall
be due, shall involve transcending the limit of validity (if any) prescribed by
law that a court of competent jurisdiction may deem applicable hereto, then ipso
facto, the obligation to be fulfilled shall be reduced to the limit of such
validity, and if from any circumstances Lender shall ever receive as interest an
amount that would exceed the maximum legal limit (if any such limit is
applicable), such amount that would be excessive interest shall be applied to
the reduction of the unpaid principal balance due under this Note and not to the
payment of interest or, if necessary, rebated to Borrower. This provision shall
control every other provision of all agreements between Borrower and Lender.
10. Successors and Assigns. Upon any endorsement, assignment or other
----------------------
transfer of this Note by Lender or by operation of law, the term "Lender," as
used herein, shall mean such endorsee, assignee or other transferee or successor
to Lender then becoming the holder of this Note. This Agreement shall be
binding upon and inure to the benefit of the heirs, successors, assigns and
personal representatives of the parties hereto; provided, however, that Borrower
shall not assign its rights hereunder, under the Note or under any other Loan
Document in whole or in part. Any such assignments by Borrower shall be void.
11. Notices. All notices, requests and demands to or upon the respective
-------
parties hereto, to be effective, shall be in writing and shall be delivered by
hand or sent by (x) mail (certified or registered, postage prepaid, return
receipt requested), (y) by a nationally recognized overnight
25
<PAGE>
courier service, or (z) by facsimile transmission (provided that the original of
any notice sent by facsimile transmission shall be sent by a nationally
recognized overnight courier service) and unless otherwise expressly provided
herein, shall be deemed to have been duly given or made when delivered if
delivered by hand, or three Business Days following deposit if sent by certified
or registered mail, or on the next Business Day following deposit with a
nationally recognized overnight courier service, or upon receipt if sent by
facsimile with an original by nationally recognized overnight courier service
(provided that if said facsimile was received after 5:00 p.m. in the local time
zone of the recipient on any Business Day, said notice shall not be deemed to
have been received until the following Business Day), addressed in each case as
follows, or to such address or other address as may be hereafter notified by
such parties:
if to Lender: National Bank of Canada
New York Branch
125 West 55th Street
New York, New York 10019
Attention: LoriAnn Curnyn
Facsimile No.: (212) 632-8775
if to Borrower: Mutual Benefit Chicago Marriott Suite Hotel
Partners, L.P.
Host Marriott Corporation
10400 Fernwood Drive
Bethesda, Maryland 20817-1109
Attention: Law Department
Facsimile No.: (301) 380-6332
12. Relationship of Parties. Borrower and Lender intend that the
-----------------------
relationship created under this Note and under the other Loan Documents be
solely that of debtor and creditor or mortgagor and mortgagee, as the case may
be. Nothing herein or in the other Loan Documents is intended to create a joint
venture, partnership, tenancy-in-common, or joint tenancy relationship between
Borrower and Lender, nor to grant Lender any interest in the Property other than
that of creditor or mortgagee. In particular, no participation by Lender in the
profit from operations of, appreciation in value of, or profit from the sale or
any further encumbrance of the Property shall constitute a partnership, joint
venture, tenancy-in-common, or joint tenancy between Borrower and Lender.
Borrower covenants and agrees that it will not take any action or assert or
maintain any position at any time inconsistent with the foregoing.
13. Non-recourse.
------------
26
<PAGE>
(a) Extent of Non-recourse. Anything in this Note to the contrary
----------------------
notwithstanding, Lender shall have no personal recourse against either
Borrower, the General Partner, any limited partner of Borrower, or any
Affiliated Party nor any officer, director, employee or agent of any of the
foregoing for the repayment of any of the principal of or interest on the
Loan or for any deficiency judgment that Lender may obtain after
foreclosure of the liens securing such repayment, or, subject to the
provisions of Section 13(b) hereof, for any deficiency, loss or damage
suffered by Lender as a result of the failure by Borrower or the General
Partner to comply with any of the terms or conditions of this Note or any
of the other Loan Documents and, subject to the provisions of Section 13(b)
hereof, Lender agrees not to seek recourse against any of the foregoing for
any such deficiency, loss or damage. The foregoing limitations are
limitations on Lender's right of recourse against Borrower and shall not
impair the validity or enforceability of the indebtedness evidenced by this
Note or any of the other obligations of Borrower under the Loan Documents
secured by the Property or the lien of or security interest in or the right
of Lender as mortgagee or secured party to foreclose and/or enforce its
rights in the Property after default by Borrower or the General Partner.
(b) Borrower's Liability for Damages or Misapplication of Funds. The
-----------------------------------------------------------
provisions of Section 13(a) hereof to the contrary notwithstanding,
Borrower and the General Partner shall be fully liable (i) for any damages
attributable to fraud or material misrepresentation in any Loan Document or
in any written communication by Borrower in connection with the Loan or in
connection with the Original Loan; (ii) for the retention of any rental
income or other income arising with respect to all or any part of the
Property covered by the Mortgage after Lender has given to Borrower any
notice that Borrower is in default hereunder or under the other Loan
Documents and that Lender has exercised its option to accelerate maturity
of the Note, foreclose or require the foreclosure of the liens securing
payment thereof, receive or collect such rental income or other income or
exercise its rights under the Loan Documents (to the full extent of the
rental income or other income retained after the giving of any such
notice); (iii) for any Gross Revenues distributed to any partners in
Borrower subsequent to the date hereof; (iv) for any Gross Revenues, Net
House Profits or Excess Cash Flow not applied as required pursuant to
Article 8 of the Loan Agreement; (v) for the misapplication of (A) proceeds
paid prior to any such foreclosure under any insurance policies by reason
of damage, loss or destruction to any portion of the property covered by
the Mortgage (to the full extent of such proceeds), or (B) any proceeds or
awards resulting from the condemnation, prior to any such foreclosure, of
all or any part of the property covered by the Mortgage (to the full extent
of such proceeds or awards); and (v) for damages arising from the breach of
any representation, warranty, covenant or other obligation concerning
"Environmental Claims", "Environmental Conditions" or "Environmental
Noncompliance" (as such terms are defined in the Loan Agreement and except
for matters set forth on Exhibit H of the Loan Agreement), including
without limitation the indemnification provisions of
27
<PAGE>
Section 12.20 of the Loan Agreement; provided, however, that the recourse
liability of the General Partner in connection with the matters set forth
in this clause (v) shall not extend to conditions present in the Land prior
to the date on which Borrower acquired the leasehold interest under the
Ground Lease, except to the extent that such recourse liability is
otherwise applicable to the General Partner pursuant to clause (i)
hereinabove.
(c) Liability of General Partners. To the extent of personal
-----------------------------
liability of Borrower under Section 13(b) hereof, the General Partner of
Borrower hereby agrees to be liable therefor and waives any requirement of
law that in the event of a default hereunder Lender must proceed against
Borrower or exhaust any assets of Borrower before proceeding against the
General Partner or the General Partner's assets; provided, however, that in
no event shall any limited partner of Borrower, any Affiliated Party (other
than the General Partner), or any officer, director, employee or agent of
any partner of Borrower or of any Affiliated Party have any liability under
Section 13(c) hereof, and Lender agrees that it shall not seek recovery
from any party that is excluded from liability pursuant to this sentence.
IN WITNESS WHEREOF, the undersigned, through their duly authorized
officers, have executed this Note as of the day and year first above written.
MUTUAL BENEFIT CHICAGO MARRIOTT
SUITE HOTEL PARTNERS, L.P., a Rhode Island
limited partnership
By: MOHS CORPORATION, a Delaware
corporation, its sole General Partner
By: /s/ Christopher G. Townsend
----------------------------------------
Name: Christopher G. Townsend
--------------------------------------
Title: Vice President
-------------------------------------
Schedule of Exhibits
- --------------------
Exhibit A - NOI Threshold Amounts
Exhibit B - Scheduled Principal Payments
28
<PAGE>
EXHIBIT A
---------
NOI THRESHOLD AMOUNTS
---------------------
Fiscal Year NOI Threshold Amount
----------- --------------------
1996 $3,317,186
1997 $3,264,637
1998 $3,406,320
1999 $3,379,011
2000 $3,228,127
2001 $3,199,132
A-1
<PAGE>
EXHIBIT B
---------
SCHEDULED PRINCIPAL PAYMENTS
----------------------------
DATE PAYMENT PRINCIPAL
12/24/96 1 $138,759.12
03/24/97 2 $141,382.53
06/24/97 3 $144,055.54
09/24/97 4 $146,779.09
12/24/97 5 $149,554.14
03/24/98 6 $152,381.64
06/24/98 7 $155,262.61
09/24/98 8 $158,198.04
12/24/98 9 $161.188.97
03/24/99 10 $164,236.45
06/24/99 11 $167,341.55
09/24/99 12 $170,505.35
12/24/99 13 $173,728.97
03/24/00 14 $177,013.53
06/24/00 15 $180,360.19
09/24/00 16 $183,770.13
12/24/00 17 $187,244.53
03/24/01 18 $190,784.62
06/12/01 19 $22,557,453.00
B-1
<PAGE>
Exhibit 10.5
AMENDED AND RESTATED LEASEHOLD MORTGAGE
---------------------------------------
THIS AMENDED AND RESTATED LEASEHOLD MORTGAGE ("Mortgage"), dated as of
September 24, 1996, from MUTUAL BENEFIT CHICAGO MARRIOTT SUITE HOTEL PARTNERS,
L.P., a Rhode Island limited partnership, having an address at Host Marriott
Corporation, 10400 Fernwood Drive, Bethesda, Maryland 20817 ("Borrower") to
NATIONAL BANK OF CANADA, having an address at 125 West 55th Street, New York, NY
10019 ("Lender").
W I T N E S S E T H:
-------------------
A. Reference is made to that certain Marriott Hotel Ground Lease dated as
of June 16, 1986 by and between Marriott Corporation, as lessee,and Simon-
Rosemont Developers (together with any successors from time to time,
"Landlord"), as lessor (a full description of which Marriott Hotel Ground Lease
and all amendments thereto is shown on Exhibit E attached hereto; the "Ground
Lease"), relating to a parcel of real property more particularly described in
Exhibit A attached hereto and made a part hereof (the "Land") and all buildings
and improvements presently located thereon. Marriott Corporation assigned all
of its right, title and interest as lessee under the Ground Lease to Borrower in
that certain Notice of Assignment of Lease dated as of June 12, 1989 and
recorded on June 13, 1989 as Document No. 89266492.
This Mortgage was prepared by
and after recording return to:
Rudnick & Wolfe
203 North LaSalle Street
Suite 1800
Chicago, Illinois 60601
Attn: John T. Cusack, Esq.
<PAGE>
B. Borrower and Lender have previously entered into that certain Loan
Agreement dated as of June 12, 1989 (the "Original Loan Agreement") whereby
Lender made a Loan (the "Loan") to Borrower as evidenced by that certain
Promissory Note Secured by Mortgage dated as of June 12, 1989, bearing such
interest as stated in such Promissory Note Secured by Mortgage and having a
maturity date of June 12, 1996 (the "Original Note").
C. The Original Note was secured in part by, among other things, that
certain Lease hold Mortgage, Security Agreement and Assignment of Rents granted
by Borrower to Lender and dated as of June 12, 1989 and recorded June 13, 1989
in the Recorder's Office for Cook County, Illinois as Document No. 89266493 (the
"Original Mortgage"), which Original Mortgage encumbered the Land and certain
related rights and interests of Borrower.
D. In accordance with that certain Amended and Restated Loan Agreement
(the "Loan Agreement") of even date herewith between Borrower and Lender,
Borrower has issued to Lender a certain Amended and Restated Secured Promissory
Note in the principal sum of Twenty Five Million Five Hundred Thousand and
00/100 Dollars ($25,500,000.00) with a scheduled maturity date of June 12, 2001,
amending and restating the Original Note in its entirety (together with any
replacement therefor which may be issued from time to time pursuant to the Loan
Agreement, the "Note").
E. Borrower and Lender desire to amend and restate the Original Mortgage
in its entirety in order to conform to the terms and conditions set forth in the
Loan Agreement.
F. This Mortgage amends and restates completely the Original Mortgage.
G. All capitalized terms used herein without definition shall have the
meanings ascribed thereto in the Loan Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals, which are
incorporated into the operative provisions of this instrument by reference and
for other good and valuable consideration, the receipt and adequacy of which are
hereby conclusively acknowledged, Borrower hereby represents and warrants to and
covenants and agrees with Lender as follows:
In order to secure the payment of the principal indebtedness under the Note
and interest (including, without limitation, Base Rate Interest, Accrual Rate
Interest and Additional Accrued Interest) and premiums on the principal
indebtedness under the Note (and all replacements, renewals and extensions
thereof, in whole or in part) according to its tenor, and to secure the payment
of all other sums (including, without limitation, Lender's Expenses, the
Restructuring Fee and any compensation required to be paid to Lender under
Section 2.12 of the Note) which may be at any time due under the Note, this
Mortgage or any of the other Loan Documents (as that term is defined in Exhibit
B attached hereto and made a part hereof; the terms and provisions of the Loan
Documents are hereby incorporated herein by this reference as fully and with the
same
2
<PAGE>
effect as if set forth herein at length) (collectively, such sums are sometimes
referred to herein as "Indebtedness"); and to secure the performance and
observance of all the covenants, agreements and provisions contained in this
Mortgage, the Note and the other Loan Documents; and to charge the properties,
interests and rights hereinafter described with such payment, performance and
observance, and for other valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, Borrower DOES HEREBY MORTGAGE AND CONVEY unto
Lender, its successors and assigns forever, the following described property,
rights and interests (which are referred to herein as the "Premises"), all of
which property, rights and interests are hereby pledged primarily and on a
parity with Borrower's interest in the Land and not secondarily:
Borrower's leasehold interest in the Land under the Ground Lease;
TOGETHER WITH all improvements of every nature whatsoever now or hereafter
situated on the Land, and all fixtures and personal property of every nature
whatsoever now or hereafter owned by Borrower and on, or used or intended to be
used in connection with the Land or the improvements, or in connection with any
construction thereon, including all extensions, additions, improvements,
betterments, renewals, substitutions and replacements to any of the foregoing
and all of the right, title and interest of Borrower in and to any such personal
property or fixtures together with the benefit of any deposits or payments now
or hereafter made on such personal property or fixtures by Borrower or on its
behalf (the "Improvements");
TOGETHER WITH all modifications, extensions and renewals of the Ground
Lease, all credits, deposits, options, privileges and rights of Borrower as
tenant thereunder, including, without limitation, the right, if any, to renew or
extend the Ground Lease for a succeeding term or terms;
TOGETHER WITH all easements, rights of way, gores of land, streets, ways,
alleys, passages, sewer rights, waters, water courses, water rights and powers,
and all estates, rights, titles, interests, privileges, liberties, tenements,
hereditaments and appurtenances whatsoever, in any way now or hereafter
belonging, relating or appertaining to the Land, and the reversions, remainders,
rents, issues and profits thereof, and all the estate, right, title, interest,
property, possession, claim and demand whatsoever, at law as well as in equity,
of Borrower of, in and to the same;
TOGETHER WITH all income from the Premises to be applied against the
Indebtedness; provided, however, that Borrower, so long as no Event of Default
has occurred hereunder and is continuing, may collect income as it becomes due,
pursuant to the terms of the Loan Agreement;
TOGETHER WITH all interest of Borrower in all leases now or hereafter on
the Premises, whether written or oral (the "Leases"), together with all security
therefor and all monies payable thereunder, subject, however, to the conditional
permission hereinabove given to Borrower to collect the rentals under any such
Lease;
3
<PAGE>
TOGETHER WITH Borrower's right, title and interest in all fixtures and
articles of personal property now or hereafter forming a part of or used in
connection with the Land or the Improvements, including, but without limitation,
any and all accounts, accounts receivable, air conditioners, antennae,
appliances, apparatus, awnings, basins, bathtubs, bidets, boilers, bookcases,
building materials, cabinets, carpets, chattel paper, contract rights, coolers,
curtains, dehumidifiers, disposals, documents, doors, drapes, drafts, dryers,
ducts, dynamos, elevators, engines, equipment, escalators, fans, fittings, floor
coverings, furnaces, furnishings, furniture, general intangibles, hardware,
heaters, humidifiers, incinerators, instruments, insurance policies, insurance
and condemnation awards and proceeds, inventory, letters of credit, lighting,
machinery, motors, notes, ovens, pipes, plans and specifications, plumbing,
pumps, radiators, ranges, recreational facilities, refrigerators, rents, issues
and profits, screens, security systems, service marks, shades, shelving, sinks,
sound systems, sprinklers, stokers, stoves, televisions, toilets, trade names,
trademarks, unearned premiums on insurance policies, ventilators, wall
coverings, washers, windows, window coverings, wiring, and all renewals or
replacements thereof or articles in substitution therefor, whether or not the
same are or shall be attached to the Land or the Improvements in any manner; it
being mutually agreed that all of the aforesaid property owned by Borrower and
placed on the Land or the Improvements, so far as permitted by law, shall be
deemed to be fixtures, a part of the realty, and security for the Indebtedness;
notwithstanding the agreement hereinabove expressed that certain articles of
property form a part of the realty covered by this Mortgage and be appropriated
to its use and deemed to be realty, to the extent that such agreement and
declaration may not be effective and that any of said articles may constitute
goods (as said term is used in the Uniform Commercial Code), this instrument
shall constitute a security agreement, creating a security interest in such
goods, as collateral, in Lender as a secured party and Borrower as Debtor, all
in accordance with said Uniform Commercial Code as more particularly set forth
in Paragraph 15 hereof; and
TOGETHER WITH all proceeds of the foregoing, including, without limitation,
all judgments, awards of damages and settlements hereafter made resulting from
condemnation proceeds or the taking of the Premises or any portion thereof under
the power of eminent domain, any proceeds of any policies of insurance,
maintained with respect to the Premises or proceeds of any sale, option or
contract to sell the Premises or any portion thereof; and Borrower hereby
appoints Lender its attorney-in-fact and authorizes Lender, at its option, on
behalf of Borrower, or the successors or assigns of Borrower, to adjust,
compromise, claim, collect and receive such proceeds, to give proper
acquittances therefor and, after deducting expenses of collection, to apply the
net proceeds as a credit upon any portion, as selected by Lender, of the
Indebtedness, notwithstanding the fact that the same may not then be due or that
the Indebtedness is otherwise adequately secured.
TO HAVE AND TO HOLD the Premises, unto Lender, its successors and assigns,
forever, for the purposes and upon the uses herein set forth together with all
right to possession of the Premises after the occurrence of any Event of Default
as hereinafter defined; Borrower hereby RELEASING AND WAIVING all rights under
and by virtue of the homestead exemption laws of the State of Illinois.
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<PAGE>
BORROWER COVENANTS that it holds a leasehold interest in the Land, that the
same is unencumbered (except for the title exceptions referenced in Exhibit C
hereto), and that it has good right, full power and lawful authority to convey
and mortgage its leasehold interest in the same, and that it will warrant and
forever defend its interest in the Land and the quiet and peaceful possession of
the same against the lawful claims of all persons whomsoever.
PROVIDED, NEVERTHELESS, that if Borrower shall pay in full when due the
Indebtedness and shall timely perform and observe all of the provisions herein
and in the Note and the other Loan Documents provided to be performed and
observed by Borrower, then the lien of this Mortgage and the interest of Lender
in the Premises shall be released at the cost of Borrower but shall otherwise
remain in full force.
BORROWER FURTHER REPRESENTS, WARRANTS, COVENANTS AND AGREES AS FOLLOWS:
1. Ground Lease.
------------
1.1 Leasehold Estate.
----------------
1.1.1 That the Ground Lease is in full force and effect and
unmodified;
1.1.2 That all rents (including additional rents and other
charges) reserved in said Ground Lease have been paid to the extent
they were payable prior to the date hereof;
1.1.3 That Lender shall have quiet and peaceful possession of
the Premises following Lender's foreclosure of its security interests
herein, and Borrower further agrees to defend the leasehold estate
created under the Ground Lease for so long as any of the Indebtedness
remains outstanding, against all and every person or persons lawfully
claiming, or who may claim the same or any part thereof, subject to
the payment of the rents in the Ground Lease reserved and subject to
the performance and observance of all of the terms, covenants,
conditions and warranties thereof;
1.1.4 That there is no uncured default on the part of the
Borrower, as lessee, or Landlord, as lessor, under the Ground Lease or
in the performance of any of the terms, covenants, conditions or
warranties thereof on the part of the lessee to be observed and
performed. Further, no state of facts exist under the Ground Lease
which, with the lapse of time or giving of notice, or both, would
constitute a default thereunder.
1.2 Payment of Ground Lease Expenses. Borrower shall pay or cause to
--------------------------------
be paid all rents, additional rents, taxes, assessments, water rates, sewer
rents, and other
5
<PAGE>
charges and impositions payable by the lessee under the Ground Lease for
which provision has not otherwise been made in this Mortgage, when and as
often as the same shall become due and payable. Borrower in every case will
deliver, or cause to be delivered to Lender, a proper receipt for any such
item so paid, within ten (10) days after Lender's request for a copy of any
such receipt.
1.3 Borrower's Covenants with Respect to Ground Lease.
-------------------------------------------------
1.3.1 Borrower at all times promptly and faithfully shall keep
and perform, or cause to be kept and performed, all the covenants and
conditions contained in the Ground Lease by the lessee under the
Ground Lease to be kept and performed and in all material respects
conform to and comply with the terms and conditions of the Ground
Lease, and Borrower further covenants that it shall not do or permit
anything which will impair or tend to impair the security of this
Mortgage or will be grounds for declaring a forfeiture of the Ground
Lease, and upon any such failure aforesaid, Borrower shall be subject
to all of the rights and remedies granted Lender in this Mortgage.
1.3.2 Without the prior written consent of Lender, which consent
shall not be unreasonably withheld, Borrower shall not modify, extend
or in any way alter the terms of the Ground Lease or cancel or
surrender the Ground Lease, or waive, execute, condone or in any way
release or discharge the lessor thereunder of or from the obligations,
covenants, conditions and agreements by said lessor to be done and
performed; and Borrower does expressly release, relinquish and
surrender unto Lender all of its rights, power and authority to
cancel, surrender, amend, modify or alter in any way the terms and
provisions of the Ground Lease and any attempt on the part of Borrower
to exercise any such right without the written approval and consent of
Lender thereto being first had and obtained shall constitute an Event
of Default under the terms hereof and the entire Indebtedness, at the
option of Lender, shall become due and payable forthwith.
1.3.3 Borrower shall not subordinate or consent to the
subordination of the Ground Lease to any mortgage, security deed, deed
of trust, lease or other interest in all or any part of the Premises
without the written consent of Lender.
1.3.4 Borrower shall give immediate notice to Lender of any
default under the Ground Lease or of the receipt by it of any notice
of default or of the exercise of any remedies relating to defaults or
breach of the Ground Lease from the Landlord, and shall deliver copies
of any and all such notices to Lender within five (5) days after the
receipt thereof. Borrower also shall furnish Lender with any and all
information that Lender may reasonably request concerning the Ground
Lease including, but not limited to, Borrower's or Landlord's
performance under the Ground Lease that is reasonably available to
Borrower.
6
<PAGE>
1.3.5 Lender shall be entitled to take all actions necessary or
desirable to cure any default by Borrower under the Ground Lease
within the time provided by the terms of the Ground Lease for such
purpose. Upon receipt by Lender from the Landlord of any written
notice of default by Borrower under the Ground Lease, (i) Lender may
rely thereon and take any action to cure such default even though the
existence of such default or the nature thereof is questioned or
denied by Borrower or by any party on behalf of Borrower, and (ii)
Borrower hereby expressly grants to Lender, and agrees that Lender
shall have, the absolute and immediate right to enter in and upon the
Premises or any part thereof to such extent and as often as Lender, in
its sole discretion, deems necessary or desirable in order to prevent
or to cure any such default by Borrower. Lender may pay and expend
such sums of money as Lender in its sole discretion deems necessary
for any such purpose, and Borrower hereby agrees to pay to Lender,
immediately and without demand, all such sums so paid and expended by
Lender, together with interest thereon from the date of such payment
at the Default Rate. All sums so paid and expended by Lender and the
interest thereon shall be added to and be secured by the lien of this
Mortgage.
1.3.6 Borrower shall notify Lender of any acquisition of the fee
title to the Land by Borrower. If Borrower obtains any further
interest in the property covered by the Ground Lease, including such
fee title, such interest shall be covered by this Mortgage and
Borrower shall execute and deliver to Lender such additional documents
as are reasonably necessary to perfect Lender's interest therein.
1.3.7 No release or forbearance of any of Borrower's obligations
under the Ground Lease, pursuant to the Ground Lease or otherwise,
shall release Borrower from any obligations under this Mortgage,
including, without limitation, release from the obligations with
respect to the payment of rent as provided for in the Ground Lease and
the performance of all of the terms, provisions, covenants, conditions
and agreements contained in the Ground Lease, to be kept, performed
and complied with by Borrower as provided therein.
1.3.8 The provisions hereof shall be deemed to be obligations of
Borrower in addition to Borrower's obligations under the Ground Lease;
provided, however, that nothing in this Mortgage shall be construed as
requiring the taking of or the committing to take any action by
Borrower or Lender that would cause a default under the Ground Lease.
The inclusion in this Mortgage of any covenants and agreements
relating to similar matters under which Borrower is obligated under
the Ground Lease shall not restrict or limit Borrower's duties and
obligations to keep and perform promptly all of its covenants,
agreements and obligations under the Ground Lease.
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<PAGE>
1.3.9 Notwithstanding any of the rights of Lender respecting the
Ground Lease as contained in this Paragraph 1 or otherwise in this
Mortgage, Lender shall have no responsibility or obligation under the
Ground Lease as a consequence of the acts or obligations of Borrower
thereto or otherwise.
1.4 Merger. So long as any of the Indebtedness shall remain unpaid,
------
unless Lender shall consent otherwise in writing, the fee title to the Land
and the leasehold estate under the Ground Lease shall not merge but shall
always be kept separate and distinct, notwithstanding the union of said
estates either in the lessor or in the lessee, or in a third party, by
purchase or otherwise; and Borrower covenants and agrees that, if it shall
acquire the fee title, or any other estate, title or interest in the
Premises covered by the Ground Lease, such estate shall be considered as
mortgaged, assigned or conveyed to Lender and the lien hereof spread to
cover such estate with the same force and effect as though specifically
herein mortgaged, assigned or conveyed and spread. The provisions of this
paragraph shall not apply if the holder of the Note acquires the fee of the
Premises unless Lender shall so elect.
2. Payment of Indebtedness and Performance of Covenants. Borrower shall
----------------------------------------------------
(a) pay the Indebtedness when due; and (b) punctually perform and observe all of
the requirements of the Note, this Mortgage and the other Loan Documents.
Borrower shall have the privilege of making prepayments on the principal of the
Note (in addition to the required payments thereunder) in accordance with the
terms and conditions set forth in the Note, but not otherwise.
3. Maintenance, Repair, Compliance with Law, Use, etc. Borrower shall
--------------------------------------------------
(a) keep the Premises in good condition and free from waste; (b) pay all
operating costs of the Premises; (c) complete, within a reasonable time, any
Improvements at any time in the process of erection upon the Premises; (d)
comply with all requirements of law relating to the Premises or any part thereof
by any governmental authority; (e) refrain from any action and correct any
condition which would increase the risk of fire or other hazards to the
Improvements; (f) comply with any restrictions of record with respect to the
Premises and the use thereof; and observe and comply with any conditions
necessary to preserve and extend any and all rights, licenses, permits
(including, without limitation, zoning variances, special exceptions and
nonconforming uses), privileges, franchises and concessions that are applicable
to the Premises or its use and occupancy; and (g) cause the Premises to be
managed in a competent and professional manner. Without the prior written
consent of Lender, Borrower shall not cause, suffer or permit any (i) material
alterations of the Premises except as required by law or except as permitted or
required to be made by the terms of any Leases approved by Lender; (ii) change
in the intended use or occupancy of the Premises for which the Improvements were
constructed; (iii) change in the identity of the person or firm responsible for
managing the Premises (other than as may be effected by the Manager (as defined
in the Loan Agreement) without the requirement of obtaining the consent of
Borrower pursuant to the terms of the Management Agreement (as defined in the
Loan Agreement)); (iv) zoning reclassification with respect to the Premises; (v)
unlawful use of, or nuisance to exist upon, the Premises; or (vi) granting of
any easements, licenses, covenants,
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<PAGE>
conditions or declarations of use against the Premises, other than use
restrictions contained or provided for in Leases approved by Lender to the
extent such approval is required pursuant to the Loan Documents.
4. Liens.
-----
4.1 Prohibition. Subject to the provisions of Paragraph 5 hereof,
-----------
Borrower shall not create or suffer or permit any encumbrance to attach to
or be filed against the Premises or any part thereof, excepting only (i)
the lien of real estate taxes and assessments not due, (ii) any liens and
encumbrances of Lender, and (iii) any other lien or encumbrance permitted
by the terms hereof.
4.2 Contest of Mechanics' Liens Claims. Notwithstanding the
----------------------------------
foregoing prohibition against encumbrances, Borrower may in good faith and
with reasonable diligence contest or cause to be contested the validity or
amount of any mechanics' lien and defer payment and discharge thereof
during the pendency of such contest, provided that:
4.2.1 Such contest shall not subject the Premises or any part
thereof, or any interest therein, to sale or forfeiture to satisfy
such mechanics' lien;
4.2.2 Within ten (10) days after Borrower has been notified of
the filing of such mechanics' lien, Borrower shall have notified
Lender in writing of Borrower's intention to contest or cause to be
contested such mechanics' lien; and
4.2.3 Borrower shall have either obtained or cause to be
obtained a title insurance endorsement over such mechanics' lien
insuring Lender against loss by reason of the mechanics' lien or
obtained or caused to be obtained a surety bond (with no rights of
subrogation with respect thereto) that is sufficient to release such
mechanics' lien and that is otherwise acceptable to Lender.
5. Taxes.
-----
5.1 Payment. Borrower shall pay when due, all taxes, assessments and
-------
charges of every kind levied or assessed against the Premises or any
interest therein or any obligation or instrument secured hereby, and all
installments thereof (all herein generally called "Taxes"), whether or not
assessed against Borrower, and Borrower shall furnish to Lender receipts
therefor upon Lender's request for copies of the same; and shall discharge
any claim or lien relating to taxes upon the Premises, other than matters
expressly permitted by the terms hereof.
5.2 Contest. Notwithstanding the provisions of Paragraph 5.1, so
-------
long as no Event of Default has occurred, Borrower may contest such Taxes
provided Borrower gives Lender written notice before the commencement of
such contest, diligently pursues such
9
<PAGE>
contest, provides for adequate reserves for payment of such contested
Taxes, pays all amounts customarily or required by law to be paid in
connection with such contest and provides Lender with such security as
Lender deems necessary or sufficient to assure Lender that Lender will not
suffer any loss or damage whatsoever by reason of such contest and that the
lien of this Mortgage will not be impaired.
6. Change in Tax Laws. If, by the laws of the United States of America,
------------------
or of any state or municipality having jurisdiction over Lender, Borrower or the
Premises, any tax is imposed or becomes due in respect of the issuance of the
Note or the recording of this Mortgage, Borrower shall pay such tax in the
manner required by such law. In the event that any law, statute, rule,
regulation, order or court decree has the effect of deducting from the value of
the Premises for the purpose of taxation any lien thereon, or imposing upon
Lender the payment of the whole or any part of the taxes required to be paid by
Borrower, or changing in any way the laws relating to the taxation of mortgages
or debts secured by mortgages or the interest of Lender in the Premises, or the
manner of collection of taxes, so as to affect this Mortgage, the Indebtedness
or Lender, then Borrower, upon demand by Lender, shall pay such taxes, or
reimburse Lender therefor on demand, unless Lender determines, in Lender's
exclusive judgment, that such payment or reimbursement by Borrower is unlawful;
in which event the Indebtedness shall be due within thirty (30) days after
written demand by Lender to Borrower. Nothing in this Paragraph 6 shall require
Borrower to pay any income, franchise or excise tax imposed upon Lender,
excepting only such which may be levied against the income of Lender as a
complete or partial substitute for taxes required to be paid by Borrower
pursuant hereto.
7. Insurance Coverage. Borrower will insure or cause to be insured the
------------------
Premises against such perils and hazards, and in such amounts and with such
limits, as Lender may reasonably require from time to time, and in any event,
will continuously maintain the following described policies of insurance (the
"Insurance Policies"):
7.1 Casualty insurance against loss and damage by all risks of
physical loss or damage, including fire, windstorm, flood (to the extent
available through the National Flood Insurance Program), earthquake (to the
extent available and as described in Paragraph 7.5(iii) below) and other
risks covered by the so-called extended coverage endorsement in amounts not
less than ninety percent (90%) of the full insurable replacement value of
all Improvements, fixtures and equipment from time to time on the Premises
and bearing a replacement cost agreed amount endorsement;
7.2 Comprehensive public liability insurance against death, bodily
injury and property damage in an amount not less than Forty Million and
00/100 Dollars ($40,000,000.00) for bodily injury per person per occurrence
and not less than Three Million and 00/100 Dollars ($3,000,000.00) for
property damage liability per occurrence;
7.3 [INTENTIONALLY LEFT BLANK];
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<PAGE>
7.4 Rental or business interruption insurance in amounts not less
than twelve (12) months anticipated gross rental income;
7.5 Such other insurance in such amounts as Lender shall reasonably
require from time to time including, without limitation, (i) flood
insurance (including surface waters) if the Federal Insurance
Administration (FIA) has designated the Premises to be in a special flood
hazard area and has designated the community in which the Premises are
located eligible for sale of subsidized insurance through the National
Flood Insurance Program, first and second layer flood insurance when and as
available; (ii) builder's risk insurance; (iii) insurance against
earthquakes (including subsidence) to the extent the same is commonly
available from recognized insurance companies and prudent owners of
premises similarly situated or procuring such insurance (it being
understood that the company or companies providing such coverage for the
Premises must also be providing such coverage for other hotels in the
"Marriott" system); and (iv) if available at commercially reasonably terms,
insurance against risks of war and nuclear explosion, if such occurrences
are commonly insured against by prudent owners of premises similarly
situated, due regard being given to the site and type of the building, and
the construction, location, utilities and occupancy or any replacements or
substitutions therefor. In addition, upon the occurrence of any material
change in the use, operation or value of the Premises, or in the
availability of insurance in the area in which the Premises is located,
Borrower shall, within thirty (30) days after demand by Lender, obtain such
additional amounts and/or such other types of insurance as Lender may
reasonably require.
8. Insurance Policies. All Insurance Policies shall be in form,
------------------
companies and amounts reasonably satisfactory to Lender; provided, however, that
all Insurance Policies shall be deemed reasonably satisfactory to Lender if such
Insurance Policies contain such provisions and are in such form and are issued
by such insurance companies licensed to do business in the State of Illinois,
with a rating of "B" or better as established by Best's Rating (provided,
further, that if any of such Insurance Policies is issued by a company with a
"B" rating as established by Best's Rating, such company must also be providing
similar coverage for other hotels in the "Marriott" system). All Insurance
Policies shall (i) include, when available, non-contributing Lender endorsements
in favor of and with loss payable to Lender, (ii) include standard waiver of
subrogation endorsements, (iii) provide that the coverage shall not be
terminated or materially modified without thirty (30) days' advance written
notice to Lender, (iv) provide that no claims shall be paid thereunder without
ten (10) days' advance written notice to Lender, and (v) provide that no act or
thing done by Lender shall invalidate the policy against Lender. Borrower will
deliver all certificates of insurance to Lender, and will deliver renewal or
replacement certificates of insurance at least fifteen (15) days prior to the
date of expiration of any policy. The requirements of the preceding sentence
shall apply to any separate policies of insurance taken out by Borrower
concurrent in form or contributing in the event of loss with the Insurance
Policies. Insurance Policies maintained by tenants under the Leases, if in
conformity with the requirements of this Mortgage and if reasonably approved by
Lender, may be presented to Lender in satisfaction of Borrower's obligation to
provide the insurance coverages provided by those Insurance Policies.
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<PAGE>
9. [INTENTIONALLY LEFT BLANK]
10. Proceeds of Insurance.
---------------------
10.1 In the event of damage or destruction to the Premises or any
portion thereof, whether insured or uninsured, Borrower promptly shall give
written notice thereof to Lender and promptly shall commence and diligently
shall continue to perform repair, restoration and rebuilding of the portion
of the Premises so damaged or destroyed (hereinafter referred to as the
"Work") to restore the Premises in full compliance with all Legal
Requirements (as defined in the Loan Agreement) and so that the Premises
shall be at least equal in value and quality and general utility as it was
before the damage or destruction, and if the Work to be done is structural
or if the cost of the Work as estimated by Lender shall exceed the sum of
$500,000 (hereinafter referred to as "Major Work"), then Borrower shall,
prior to the commencement of the Work, furnish or cause to be furnished to
Lender: (i) complete plans and specifications for the Work (approved by all
governmental authorities whose approval is required), for Lender's
approval, which approval shall not be unreasonably withheld; which plans
and specifications shall bear the signed approval thereof by an architect
satisfactory to Lender (hereinafter referred to as the "Architect") and
shall be accompanied by the Architect's signed estimate, bearing the
Architect's seal, of the entire cost of completing the Work; (ii) certified
or photostatic copies of all permits and approvals required by law in
connection with the commencement and conduct of the Work; and (iii) a
"fixed price" construction contract executed by a contractor approved by
Lender, together with an assignment thereof to Lender consented to by such
contractor, all for Lender's approval, which approval shall not be
unreasonably withheld.
10.2 Borrower shall not commence any of the Work until Borrower shall
have complied with the applicable requirements referred to in Paragraph
10.1 hereof, and after commencing the Work, Borrower shall perform the Work
diligently in a good and workmanlike manner and in good faith in accordance
with the plans and specifications referred to in Paragraph 10.1(i) hereof,
if applicable, and in compliance with all applicable laws.
11. Disbursement of Insurance Proceeds.
----------------------------------
11.1 Each casualty insurance policy shall provide that the proceeds
thereof shall be paid in accordance with the provisions hereof. Borrower
promptly shall deliver to Lender any proceeds that are paid directly to
Borrower by the casualty insurance carrier. All proceeds delivered to
Lender, together with all proceeds paid directly to Lender on account of
damage or destruction to the Premises, less the cost, if any, to Lender of
such recovery and of paying out such proceeds (including, without
limitation, reasonable attorneys' fees and all costs allocable to
inspecting the Work and reviewing the plans and specifications therefor),
in Lender's discretion, upon the written request of Borrower and
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<PAGE>
subject to the provisions of Paragraphs 10 and 11 hereof, may be applied by
Lender to the payment of the cost of the Work referred to in Paragraph 10.1
hereof and shall be paid out from time to time on behalf of Borrower
directly to the contractor, subcontractors, materialmen, laborers,
engineers, architects and other persons rendering services or materials in
connection with the Work, as such Work progresses, except as otherwise
hereinafter provided, but subject to the following conditions, any of which
Lender may waive:
11.1.1 If the Work to be done is structural or if it is Major
Work, as determined by Lender, the Architect shall be in charge of the
Work.
11.1.2 Each request for payment shall be made at least ten days
before the requested date of disbursement and shall be accompanied by
a certificate of the Architect, if the Work is structural or Major
Work, as determined by Lender, or a certificate of an officer of the
General Partner of Borrower, if the Work is not structural or Major
Work, stating that (1) all of the Work completed has been done in a
good and workmanlike manner and in compliance with the approved plans
and specifications, if any be required under Paragraph 10.1(i) hereof,
and in accordance with all provisions of law; (2) the sum requested is
justly required to reimburse Borrower for payments by Borrower to, or
is justly due to, the contractor, subcontractors, materialmen,
laborers, engineers, architects or other persons rendering services or
materials in connection with the Work (giving a brief description of
such services and materials), that the requested sum and such Work
have not been included in any other request for payment made by
Borrower hereunder, and that when added to all sums previously paid
out by Lender, if any, does not exceed the value of the Work done to
the date of such certificate; and (3) the amount of proceeds remaining
in the hands of Lender together with other funds otherwise available
to Borrower, will be sufficient on completion of the Work to pay for
the same in full (giving, in such reasonable detail as Lender may
require, an estimate of the cost of such completion and if such other
funds are required, including a certificate of a financial officer of
Borrower, as to the sources of such funds).
11.1.3 Each request for payment shall be accompanied by waivers
or releases of liens, satisfactory to Lender, covering that part of
the Work previously paid for, if any, and by a search prepared by a
title company or by other evidence satisfactory to Lender, that there
has not been filed with respect to the Premises or any part thereof,
any mechanic's lien, security interest or other lien or instrument for
the retention of title not discharged of record (by bonding or
otherwise) in respect of any part of the Work and that there exist no
encumbrances on or affecting the Premises or any part thereof, other
than those that may have been approved by Lender.
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<PAGE>
11.1.4 The Ground Lease shall not have been cancelled, nor
contain any still exercisable right to cancel, due to such damage or
destruction.
11.1.5 There shall be no Event of Default.
11.1.6 Before commencement of any Work and at any time during
such Work, if the estimated cost of such Work, as determined by
Lender, exceeds the amount of proceeds theretofore received by Lender
with respect to such Work which has not been disbursed, the amount of
such excess shall be paid by Borrower to Lender, upon demand, to be
added to the funds to be disbursed for the Work.
11.1.7 Lender may retain ten percent of the requested funds to
be used for the Work until such Work is fully completed.
11.1.8 The request for any payment after the Work has been
completed shall be accompanied by a copy of any certificate or
certificates required by law to render occupancy and operation of the
Premises legal.
11.2 Upon completion of the Work and payment in full therefor, or
upon failure on the part of Borrower promptly to commence or diligently to
continue the Work, or at any time upon request by Borrower, Lender may
apply the amount of any proceeds then or thereafter in the hands of Lender
to the payment of the Indebtedness in which event said amounts shall be
applied in the manner set forth in Section 2.8 of the Note with respect to
"Prepayments" (as such term is defined in the Note), provided, however,
that nothing herein contained shall prevent Lender from applying at any
time the whole or any part of such proceeds to the Indebtedness after the
occurrence of any Event of Default in the order set forth in Paragraph 21
hereunder. Nothing contained in this Paragraph 11 shall be construed to
limit Borrower's right to prepay the Loan in accordance with the terms of
the Loan Agreement using the proceeds to the extent available.
11.3 If the Work to be done is not structural and is not Major Work,
both as determined by Lender, then the proceeds may be paid to Borrower to
be applied toward the cost of the Work, subject to the provisions of
Paragraphs 10 and 11 hereof, other than those applicable to structural or
Major Work.
11.4 If within 120 days after the occurrence of any damage or
destruction to the Premises or any portion thereof requiring structural
work or Major Work in order to restore the Premises, Borrower shall not
have submitted to Lender and received Lender's approval of plans and
specifications for the repair, restoration and rebuilding of the Premises
so damaged or destroyed, as approved by the Architect and by all
governmental authorities whose approval is required, or if, after such
plans and specifications are approved by all such governmental authorities,
other parties and Lender, Borrower shall fail promptly to commence such
repair, restoration and rebuilding, or if thereafter
14
<PAGE>
Borrower fails diligently to continue such repair, restoration and
rebuilding or is delinquent in the payment to mechanics, materialmen or
others of the costs incurred in connection with such Work, or, in the case
of any damage or destruction to the Premises or any part thereof requiring
neither structural work nor Major Work in order to restore the Premises, as
determined by Lender, if Borrower shall fail promptly to repair, restore
and rebuild the Premises so damaged or destroyed, or if Borrower in any
other respect fails to comply with its restoration obligations under
Paragraphs 10 and 11, then, in addition to all other rights herein set
forth, and after giving Borrower ten days' written notice of the
nonfulfillment of one or more of the foregoing conditions, Lender, or any
lawfully appointed receiver of the Premises, may, at their respective
options, perform or cause to be performed such repair, restoration and
rebuilding, and may take such other steps as they deem advisable to perform
such Work; provided, however, that Lender shall be permitted to give such
shorter notice (and in such manner) as is reasonably practical in the case
of emergency or other special circumstances. Borrower hereby waives, for
Borrower and all others holding under Borrower, any claim against Lender
and such receiver arising out of anything done by Lender or such receiver
pursuant to this Paragraph 11.4 and Lender may apply all or a portion of
the proceeds (without the need to fulfill any other requirements of this
Paragraph 11) to reimburse Lender, and/or such receiver, for all amounts
expended or incurred by them, respectively, in connection with the
performance of such Work, and any excess costs shall be paid by Borrower to
Lender upon demand.
12. Condemnation and Eminent Domain.
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12.1 If all or any part of the Premises valued at greater than
$500,000 shall be damaged, diminished in value or taken through
condemnation proceedings, or if a consent settlement is entered or a
transfer is made under threat of such proceedings, either temporarily or
permanently, Lender shall be entitled to all compensation, awards and other
payments or relief therefor to which Borrower is entitled and is hereby
authorized, at its option, to commence, appear in and prosecute, in its own
or Borrower's name, any action or proceeding relating to any condemnation,
and to settle or compromise any claim in connection therewith. All such
compensation, awards, damages, claims, rights, actions and proceedings, and
the right thereto, are hereby assigned by Borrower to Lender. After
deducting from such condemnation proceeds all of its expenses incurred in
the collection and administration of such sums, including attorneys' fees,
Lender shall apply the net proceeds to the reconstruction, restoration and
repair of the Premises if the conditions of Paragraphs 10.1 and 11.1 hereof
are met or to the payment of the Indebtedness outstanding at the time. Any
such proceeds actually received by Lender and not required to reconstruct
the Premises or to satisfy the conditions set forth in Paragraphs 10.1 and
11.1 hereof shall be kept by Lender after expiration of the lien period for
the work of reconstruction for application to the Indebtedness outstanding
at such time, in which event said amounts shall be applied in the manner
set forth in Section 2.8 of the Note with respect to Prepayments; provided,
however, that nothing herein contained shall prevent Lender from applying
at any time the whole or any part of such proceeds to the Indebtedness
after the occurrence
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of any Event of Default, in the order set forth in Paragraph 21
hereinbelow. Borrower agrees to execute such further assignments of any
compensation, awards, damages, claims, rights, actions and proceedings as
Lender may require. Lender shall not be held responsible for any failure to
collect any amount in connection with any such proceeding regardless of the
cause of such failure.
12.2 If any part of the Premises valued at less than $500,000 is
damaged, diminished in value or taken through condemnation proceedings, or
if a consent settlement for such amount less than $500,000 is entered or a
transfer is made under threat of such proceedings, either temporarily or
permanently, then, provided an Event of Default shall not have occurred,
Borrower shall be entitled to receive all such compensation, awards and
other payments or relief therefor to which Borrower is entitled, and to
commence, appear in and prosecute any action or proceeding relating to any
such condemnation, and to settle or compromise any such claim in connection
therewith.
13. Assignment of Rents, Leases and Profits. To further secure the
---------------------------------------
Indebtedness, Borrower hereby assigns unto Lender all of the rents, leases and
income now or hereafter due under any Leases, it being the intention hereby to
establish an absolute transfer and assignment of all such Leases, rents and
income thereunder, to Lender. Borrower hereby irrevocably appoints Lender its
attorney-in-fact (this power of attorney and any other powers of attorney
granted herein are powers coupled with an interest and cannot be revoked,
modified or altered without the written consent of Lender) with or without
taking possession of the Premises as provided in Paragraph 19 hereof, to lease
any portion of the Premises to any party upon such terms as Lender shall
determine, and to collect all rents due under each of the Leases, with the same
rights and powers and subject to the same immunities, exoneration of liability
and rights of recourse and indemnity as Lender would have upon taking possession
pursuant to the provisions of Paragraph 19 hereof. Borrower represents that
(other than customary advance deposits) no rent has been paid by any person in
possession of any portion of the Premises for more than one installment in
advance and that no payment of the rents for any portion of the Premises has
been or will be waived, reduced or otherwise discharged or compromised by
Borrower. Borrower waives any rights of set-off against any person in
possession of any portion of the Premises. Borrower agrees that it will not
assign any of the rents or profits of the Premises, except to a purchaser or
grantee of the Premises. Nothing herein contained shall be construed as
constituting Lender a mortgagee in possession in the absence of the taking of
actual possession of the Premises by Lender pursuant to Paragraph 19 hereof.
Borrower expressly waives all liability of Lender in the exercise of the powers
herein granted Lender. Borrower shall assign to Lender all future leases upon
any part of the Premises and shall execute and deliver, at the request of
Lender, all such further assurances and assignments in the Premises as Lender
shall require from time to time. Although the assignment contained in this Para
graph is a present assignment, Lender shall not exercise any of the powers
conferred upon it by this Paragraph until an Event of Default shall exist under
this Mortgage. Provided that no Event of Default exists and no event has
occurred that with notice, or lapse of time or both would constitute an Event of
Default, Borrower shall have the right under a license granted hereby and Lender
hereby grants to Borrower a license to collect all of the rents arising from or
out of the
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Leases or any renewals or extensions thereof, or from or out of the Premises or
any part thereof, but only as trustee for the benefit of Lender. So long as no
Event of Default exists and no event has occurred that with notice, or lapse of
time or both would constitute an Event of Default, Borrower may use the rents in
any manner not inconsistent with the Loan Documents. The license granted hereby
shall be revoked automatically upon the occurrence of an Event of Default or any
event that with notice, or lapse of time or both would constitute an Event of
Default. Within thirty (30) days of Lender's written demand, Borrower will
furnish Lender with executed copies of each of the Leases and with estoppel
letters from each tenant in a form reasonably satisfactory to Lender. If Lender
requires that Borrower execute and record a separate assignment of rents or
separate assignments of any of the Leases to Lender, the terms of those
assignments shall control in the event of a conflict with the terms of this
Mortgage.
14. Observance of Lease Assignment. Borrower agrees that Borrower shall
------------------------------
not terminate or modify any of the Major Leases without Lender's prior written
consent; or if Borrower shall suffer such event to occur then such event shall
constitute an Event of Default and at the option of Lender, and upon notice to
Borrower, the Indebtedness shall become due as in the case of other Events of
Default.
15. Security Agreement. Borrower and Lender agree that this Mortgage
------------------
shall constitute a Security Agreement within the meaning of the Illinois Uniform
Commercial Code (hereinafter referred to as the "Code") with respect to (i) all
sums at any time on deposit for the benefit of Lender or held by the Lender
(whether deposited by or on behalf of Borrower or anyone else) pursuant to any
of the provisions of the Mortgage or the other Loan Documents and (ii) with
respect to any personal property included in the granting clauses of this
Mortgage, which personal property may not be deemed to be affixed to the
Premises or may not constitute a "fixture" (within the meaning of Section 9-313
of the Code) (which property is hereinafter referred to as "Personal Property"),
and all replacements of, substitutions for, additions to, and the proceeds
thereof (all of said Personal Property and the replacements, substitutions and
additions thereto and the proceeds thereof being sometimes hereinafter
collectively referred to as the "Collateral"), and that a security interest in
and to the Collateral is hereby granted to the Lender, and the Collateral and
all of Borrower's right, title and interest therein are hereby assigned to
Lender, all to secure payment of the Indebtedness. All of the provisions
contained in this Mortgage pertain and apply to the Collateral as fully and to
the same extent as to any other property comprising the Premises; and the
following provisions of this Paragraph shall not limit the applicability of any
other provision of this Mortgage but shall be in addition thereto. Subject to
the rights of Borrower pursuant to the last sentence of Section 9.3 of the Loan
Agreement:
15.1 Borrower (being the Debtor as that term is used in the Code) is
and will be the true and lawful owner of the Collateral, subject to no
liens, charges or encumbrances other than the lien hereof, other liens and
encumbrances benefitting Lender and no other party, and liens and
encumbrances, if any, expressly permitted by the other Loan Documents.
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15.2 The Collateral is to be used by Borrower solely for business
purposes.
15.3 The Collateral will be kept at the Land and, except for Obsolete
Collateral (as hereinafter defined), will not be removed therefrom without
the consent of Lender (being the Secured Party as that term is used in the
Code). The Collateral may be affixed to the Land but will not be affixed to
any other real estate.
15.4 The only persons having any interest in the Premises are
Landlord, Borrower, Lender and holders of interests, if any, expressly
permitted hereby.
15.5 No Financing Statement (other than Financing Statements showing
Lender as the sole secured party, or with respect to liens or encumbrances,
if any, expressly permitted hereby) covering any of the Collateral or any
proceeds thereof is on file in any public office except pursuant hereto;
and Borrower, at its own cost and expense, upon demand, will furnish to
Lender such further information and will execute and deliver to Lender such
financing statements and other documents in form satisfactory to Lender and
will do all such acts as Lender may request at any time or from time to
time or as may be necessary or appropriate to establish and maintain a
perfected security interest in the Collateral as security for the
Indebtedness, subject to no other liens or encumbrances, other than liens
or encumbrances benefitting Lender and no other party and liens and
encumbrances (if any) expressly permitted hereby; and Borrower will pay the
cost of filing or recording such financing statements or other documents,
and this instrument, in all public offices wherever filing or recording is
deemed by Lender to be desirable.
15.6 Upon an Event of Default hereunder, Lender shall have the
remedies of a secured party under the Code, including, without limitation,
the right to take immediate and exclusive possession of the Collateral, or
any part thereof, and for that purpose, so far as Borrower can give
authority therefor, with or without judicial process, may enter (if this
can be done without breach of the peace) upon any place which the
Collateral or any part thereof may be situated and remove the same
therefrom (provided that if the Collateral is affixed to real estate, such
removal shall be subject to the conditions stated in the Code); and Lender
shall be entitled to hold, maintain, preserve and prepare the Collateral
for sale, until disposed of, or may propose to retain the Collateral
subject to Borrower's right of redemption upon satisfaction of Borrower's
obligations, as provided in the Code. Lender may render the Collateral
unusable without removal and may dispose of the Collateral on the Premises.
Lender may require Borrower to assemble the Collateral and make it
available to Lender for its possession at a place to be designated by
Lender which is reasonably convenient to both parties. Lender will give
Borrower at least twenty (20) days' notice of the time and place of any
public sale of the Collateral or of the time after which any private sale
or any other intended disposition thereof is made. The requirements of
reasonable notice shall be met if such notice is mailed, by certified
United States mail or equivalent, postage prepaid, to the address of
Borrower hereinafter set forth at least twenty (20) days before the time of
the sale or disposition. Lender may buy the Collateral
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at any public sale. Lender may buy at private sale if the Collateral is of
a type customarily sold in a recognized market or is of a type which is the
subject of widely distributed standard price quotations. Any such sale may
be held in conjunction with any foreclosure sale of the Premises. If Lender
so elects, the Collateral and Borrower's leasehold interest in the Land may
be sold as one lot. The net proceeds realized upon any such disposition,
after deduction for the expenses of retaking, holding, preparing for sale,
selling and the reasonable attorneys' fees and legal expenses incurred by
Lender, shall be applied against the Indebtedness in such order or manner
as Lender shall select. Lender will account to Borrower for any surplus
realized on such disposition.
15.7 The terms and provisions contained in this Paragraph 15, unless
the context otherwise requires, shall have the meanings and be construed as
provided in the Code.
15.8 This Mortgage is intended to be a financing statement within the
purview of Section 9-402(6) of the Code with respect to the Collateral and
the goods described herein, which goods are or may become fixtures relating
to the Premises. The addresses of Borrower (Debtor) and Lender (Secured
Party) are hereinabove set forth. This Mortgage is to be filed for
recording with the Recorder of Deeds of the county or counties where the
Premises are located. Borrower is the owner of a leasehold interest in the
Land and is the owner of the balance of the Premises.
15.9 To the extent permitted by applicable law, the security interest
created hereby is specifically intended to cover all Leases between
Borrower or its agents as lessor, and various tenants named therein, as
lessee, including all extended terms and all extensions and renewals of the
terms thereof, as well as any amendments to or replacement of said Leases,
together with all of the right, title and interest of Borrower, as lessor
thereunder.
15.10 If Lender requires that Borrower execute and record a separate
security agreement, the terms of that security agreement shall control in
the event of a conflict with the terms of this Mortgage.
16. Restrictions on Transfer. (a) Borrower, without the prior written
------------------------
consent of Lender, shall not effect, suffer or permit any "Prohibited Transfer"
(as defined herein). Subject to Section 9.1 of the Loan Agreement, any
conveyance, sale, assignment, transfer, lien, pledge, mortgage, security
interest or other encumbrance or alienation (or any agreement to do any of the
foregoing) of any of the following properties or interests shall constitute a
"Prohibited Transfer":
16.1 The Premises or any personal property or any part thereof or
interest therein, excepting only (i) sales or other dispositions of
Collateral (herein called "Obsolete Collateral") no longer useful in
connection with the operation of the Premises, provided that prior to the
sale or other disposition thereof, such Obsolete Collateral has been
replaced by Collateral of at least equal value and utility which is subject
to the lien hereof
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with the same priority as with respect to the Obsolete Collateral, and (ii)
the granting of utility easements not adversely affecting the value of the
Premises to the extent otherwise permitted under this Mortgage;
16.2 Any shares of capital stock of a corporation which is a general
partner in Borrower, or a corporation which is the owner (directly or
through intervening entities) of substantially all of the capital stock of
any corporation which is a general partner of Borrower (other than to a
transferee that is directly or indirectly wholly owned by the same ultimate
parent as the transferor, and further excepting the transfer of shares of
capital stock of a corporation whose stock is publicly traded on a national
securities exchange or on the National Association of Securities Dealers'
Automated Quotation System);
16.3 All or any part of any general partnership interest in Borrower
or any beneficial ownership interests (directly or indirectly) in any
general partner of Borrower excepting, however, transfers of such general
partnership interests or such beneficial ownership interests to a
transferee that is directly or indirectly wholly owned by the same ultimate
parent as the transferor;
in each case whether any such conveyance, sale, assignment, transfer, lien,
pledge, mortgage, security interest, encumbrance or alienation is effected
directly, indirectly (including the nominee agreement), voluntarily or
involuntarily, by operation of law or otherwise; provided, however, that the
foregoing provisions of this Paragraph 16 shall not apply (i) to liens of Lender
securing the Indebtedness, (ii) to the lien of current taxes and assessments not
in default, or (iii) to any transfers of the Premises, or part thereof, or
interest therein, or any beneficial interests, or shares of stock or partnership
or joint venture interests, as the case may be, by or on behalf of an owner
thereof who is deceased or declared judicially incompetent, to such owner's
heirs, legatees, devisees, executors, administrators, estate or personal
representatives.
(b) In determining whether or not to amend and restate the loan secured
hereby, Lender evaluated the background and experience of Borrower and the
general partners thereof in owning and operating property such as the Premises,
found it acceptable and relied and continues to rely upon same as the means of
maintaining the value of the Premises which is Lender's security for the Note.
Borrower and its general partners are well experienced in borrowing money and
owning and operating property such as the Premises, were ably represented by a
licensed attorney at law in the negotiation and documentation of the loan
secured hereby and bargained at arm's length and without duress of any kind for
all of the terms and conditions of the loan, including this provision. Borrower
recognizes that Lender is entitled to keep its loan portfolio at current
interest rates by either making new loans at such rates or collecting assumption
fees and/or increasing the interest rate on a loan, the security for which is
purchased by a party other than the original Borrower. Borrower further
recognizes that any secondary junior financing placed upon the Premises, (a) may
divert funds which would otherwise be used to pay the Note secured hereby; (b)
could result in acceleration and foreclosure by any such junior encumbrancer
which would force Lender to take measures and incur expenses to protect its
security; (c) would detract from the value of the
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Premises should Lender come into possession thereof with the intention of
selling same; and (d) would impair Lender's right to accept a deed in lieu of
foreclosure, as a foreclosure by Lender would be necessary to clear the title to
the Premises. In accordance with the foregoing and for the purposes of (i)
protecting Lender's security, both of repayment and of value of the Premises;
(ii) giving Lender the full benefit of its bargain and contract with Borrower;
(iii) allowing Lender to raise the interest rate and collect assumption fees;
and (iv) keeping the Premises free of subordinate financing liens, Borrower
agrees that if this Paragraph 16 is deemed a restraint on alienation, that it is
a reasonable one.
17. Events of Default. If one or more of the following events (herein
-----------------
called "Events of Default") shall occur:
17.1 If any default is made in the payment of the monies required
under the Note, under this Mortgage or under the other Loan Documents
within five (5) days after the due date thereof;
17.2 Except as provided under Paragraphs 17.3, 17.4 and 17.5 hereof,
if default shall exist for any reason other than the non-payment of money
hereunder or under any other document or instrument regulating, evidencing,
securing or guarantying any of the Indebtedness, including, but not limited
to, any of the Loan Documents, and in each case after the expiration of the
applicable cure period or if no express cure period is provided, then in
each case, if such default shall continue for thirty (30) days after notice
thereof by Lender to Borrower; provided, however, that if such default is
such that it cannot reasonably be cured within such 30-day period, then an
Event of Default shall occur if Borrower fails to commence the cure of such
default within such 30-day period or thereafter fails to diligently pursue
such efforts to completion, provided, further, that in no event shall the
amount of time permitted for any such cure exceed 90 days after such
failure shall occur.
17.3 The occurrence of a Prohibited Transfer;
17.4 If any of the information contained in any documentation
provided to Lender by Borrower in conjunction with the Indebtedness shall
not be true, accurate and complete in all material respects;
17.5 If or upon, as the case may be, (and for the purpose of this
subparagraph 17.5 only, the term Borrower shall mean not only Borrower, but
also any general partner of Borrower which is a partnership and each person
who, as guarantor, co-maker or otherwise, shall be or become liable for or
obligated upon all or any part of the Indebtedness or any of the covenants
or agreements contained herein):
17.5.1 Borrower shall file a voluntary petition in bankruptcy or
for relief under the federal Bankruptcy Act or any similar state or
federal law;
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17.5.2 Borrower shall file a pleading in any proceeding
admitting insolvency;
17.5.3 Within sixty (60) days after the filing against Borrower
of any involuntary proceeding under the federal Bankruptcy Act or
similar state or federal law, such proceedings shall not have been
vacated;
17.5.4 A substantial part of Borrower's assets are attached,
seized, subjected to a writ or distress warrant, or are levied upon,
unless such attachment, seizure, writ, warrant or levy is vacated
within sixty (60) days;
17.5.5 Borrower shall make an assignment for the benefit of
creditors or shall consent to the appointment of a receiver or trustee
or liquidator of all or the major part of its property, or the
Premises; or
17.5.6 Any order appointing a receiver, trustee or liquidator of
Borrower or all or a major part of Borrower's property or the Premises
is not vacated within sixty (60) days following the entry thereof;
17.5.7 The admission in writing by Borrower that it is unable to
pay its debts as they mature or that it is generally not paying its
debts as they mature;
17.5.8 The liquidation, termination or dissolution of Borrower;
provided, however, that a merger of either general partner of Borrower
into an entity that is directly or indirectly controlled by the same
ultimate parent as such general partner shall not constitute a
liquidation, termination, or dissolution of such general partner;
17.5.9 The amendment or modification in any manner of the
articles of incorporation, bylaws, articles of partnership,
certificate of partnership or other charter or enabling documents of
Borrower that would adversely affect Lender and which is without
Lender's prior written consent;
17.6 The failure of Borrower to make any deposit of funds or
instruments required under this Mortgage or under any of the other Loan
Documents, within the time period provided, or if no time period has been
provided, within five (5) days after written demand therefor from Lender;
17.7 The existence of any material encroachment onto the Premises
which (a) has occurred without the prior written consent of Lender, and (b)
is not removed or corrected to Lender's reasonable satisfaction within
sixty (60) days after the earlier to occur of (i) Lender's written notice
to Borrower of the existence thereof, or (ii) Borrower's discovery thereof;
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17.8 Subject to Borrower's rights as provided in Paragraph 4 hereof,
the filing of any claim of lien or encumbrance against the Premises, or any
part thereof, if such claim of lien or encumbrance has not been vacated or
dismissed within thirty (30) days after such claim was filed.
17.9 Subject to the provisions of Paragraphs 10, 11 and 12 hereof the
demolition, destruction, or substantial damage of the Premises such that,
in Lender's reasonable judgment, the Premises cannot be restored or rebuilt
with available funds (including insurance proceeds which Borrower has the
right to use under the terms of this Mortgage for such purpose) to a
profitable condition within a reasonable time;
17.10 The obtaining by any person or entity of an order or decree in
any court enjoining or prohibiting Borrower or Lender from performing the
Loan Agreement, which order or decree is not vacated and which proceedings
are not discontinued within sixty (60) days after the granting of such
order or decree;
17.11 The neglect, failure, or refusal of Borrower to keep in full
force and effect any permit, license, consent or approval required for the
full occupancy, operation and utilization of the Premises or the
curtailment in availability to the Premises of utilities or other public
services necessary for the full occupancy, operation and utilization of the
Premises;
17.12 The commencement of proceedings by any public or quasi-public
body of competent jurisdiction to acquire the Premises, or any portion
thereof or any interest therein (other than a portion that, in Lender's
judgment, renders the remaining portion of the Premises a complete economic
unit having equivalent value to the Premises as it existed prior to the
taking) pursuant to eminent domain or condemnation powers, and (i) such
proceedings are not dismissed within thirty (30) days, or (ii) Borrower
fails to make a deposit with Lender in an amount sufficient to protect
Lender's security under this Mortgage;
17.13 The occurrence of an "Event of Default" by Borrower as defined
in the Ground Lease or the subordination of the Ground Lease to the lien of
any mortgage of the fee interest in the Land;
17.14 The occurrence of an Event of Default under any of the other
Loan Documents.
then Lender, at its option and without affecting the lien hereby created or
the priority of said lien or any other right of Lender hereunder, may
declare, without further notice, all Indebtedness immediately due with
interest thereon at the Default Rate, whether or not such Event of Default
is thereafter remedied by Borrower, and Lender may immediately
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proceed to foreclose this Mortgage and to exercise any right provided by
this Mortgage, the Note, the other Loan Documents or otherwise.
18. Foreclosure. Upon the occurrence of an Event of Default, Lender shall
-----------
have the right to foreclose the lien hereof in accordance with the Illinois
Mortgage Foreclosure Act, Ill. Rev. Stat. ch. 110, para. 15-1101 (1987), 735
ILCS 5/15-1101 (1992), et seq. (the "Act") and to exercise any other remedies of
-- ---
Lender provided in the Note, this Mortgage, the other Loan Documents, or which
Lender may have at law, in equity or otherwise. In any suit to foreclose the
lien hereof, there shall be allowed and included as additional Indebtedness in
the decree of sale, all expenditures and expenses which may be paid or incurred
by or on behalf of Lender for attorneys' fees, appraisers' fees, outlays for
documentary and expert evidence, stenographers' charges, publication costs,
costs (which may be estimated as to items to be expended after entry of the
decree) of procuring all such abstracts of title, title searches and
examinations, title insurance policies, and similar data and assurance with
respect to title as Lender may deem reasonably necessary either to prosecute
such suit or to evidence to bidders at sales which may be had pursuant to such
decree the true conditions of the title to or the value of the Premises, and any
other expenses and expenditures which may be paid or incurred by or on behalf of
Lender and permitted by the Act to be included in such decree. All expenditures
and expenses of the nature mentioned in this Paragraph, and such other expenses
and fees as may be incurred in the protection of the Premises and rents and
income therefrom and the maintenance of the lien of this Mortgage, including the
fees of any attorney employed by Lender in any litigation or proceedings
affecting this Mortgage, the Note or the Premises, including probate and
bankruptcy proceedings, or in preparation of the commencement or defense of any
proceedings or threatened suit or proceeding, or otherwise in dealing
specifically therewith, shall be so much additional Indebtedness and shall be
immediately due and payable by Borrower, with interest thereon at the Default
Rate until paid.
19. Right of Possession. Upon the occurrence of an Event of Default,
-------------------
Borrower shall surrender to Lender, forthwith upon demand of Lender, and Lender
shall be entitled to be placed in possession of the Premises as provided in the
Act, and Lender, in its discretion and pursuant to court order, may enter upon
and take and maintain possession of all or any part of the Premises, together
with all documents, books, records, papers and accounts of Borrower or the then
owner of the Premises and the owner of the leasehold interest in the Land
relating thereto, and may exclude Borrower, such owner, and any agents and
servants thereof wholly therefrom and, on behalf of Borrower or such owner, or
in its own name as Lender and under the powers herein granted may:
19.1 hold, operate, manage and control all or any part of the
Premises and conduct the business, if any, thereof, either personally or by
its agents, with full power to use such measures, legal or equitable, as
Lender may deem necessary to collect and enforce the payment of the rents,
issues, deposits, profits and avails of the Premises, including, without
limitation, to bring actions for recovery of rent, in forcible detainer,
and in distress for rent, all without notice to Borrower;
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19.2 cancel or terminate any Lease or sublease of all or any part of
the Premises for any cause or on any ground that would entitle Borrower or
Lender to cancel the same;
19.3 elect to disaffirm and terminate any Lease or sublease of all or
any part of the Premises made subsequent to this Mortgage without Lender's
prior written consent;
19.4 extend or modify any then existing Leases and make new Leases of
all or any part of the Premises, which extensions, modifications, and new
Leases may provide for terms, or for options to extend or renew terms, to
expire on dates beyond the maturity date of the loan evidenced by the Note
and the issuance of a deed to a purchaser at a foreclosure sale, it being
understood and agreed that any such Leases, and the options or other such
provisions to be contained therein, shall be binding upon Borrower, all
persons whose interests in the Premises are subject to the lien hereof, and
the purchaser at any foreclosure sale, notwithstanding any redemption from
sale, reinstatement, discharge of the Indebtedness, satisfaction of any
foreclosure decree, or issuance of any certificate of sale or deed to any
such purchaser;
19.5 make all necessary or proper repairs, decoration renewals,
replacements, alterations, additions, betterments and improvements in
connection with the Premises as may seem judicious to Lender, to insure and
reinsure the Property and all risks incidental to Lender's possession,
operation, and management thereof, and to receive all rents, issues,
deposits, profits and avails therefrom; and
19.6 apply the net income, after allowing a reasonable fee for the
collection thereof and for the management of the Premises, to the payment
of Taxes, Premiums and other charges applicable to the Premises, or in
reduction of the Indebtedness in such order and manner as Lender shall
select.
Without limiting the generality of the foregoing, Lender shall have all power,
authority and duties as provided in the Act. Nothing herein contained shall be
construed as constituting Lender a mortgagee in possession in the absence of the
actual taking of possession of the Premises by Lender.
20. Receiver. Upon the occurrence of an Event of Default or at any time
--------
thereafter, Lender, at Lender's sole option, may seek and petition the court for
the appointment of a receiver of the Premises pursuant to the Act. Such
appointment may be made either before or after sale, without notice, without
regard to solvency or insolvency of Borrower at the time of application for such
receiver, and without regard to the then value of the Premises or whether or not
the same shall be then occupied as a homestead; and Lender hereunder or any
employee or agent thereof may be appointed as such receiver. Such receiver shall
have all powers and duties prescribed by the Act, including, but not limited to,
the power to make leases to be binding upon all parties, including the
mortgagor, the purchaser at a sale pursuant to a judgment of foreclosure and any
person acquiring an interest in the Premises after entry of a judgment of
foreclosure, all as
25
<PAGE>
provided in the Act. In addition, such receiver shall also have the power to
extend or modify any then existing leases, which extensions and modifications
may provide for terms to expire, or for options to lessees to extend or renew
terms to expire, beyond the maturity date of the Note and beyond the date the
issuance of a deed or deeds to a purchaser or purchasers at a foreclosure sale,
it being understood and agreed that any such leases, and the options or other
provisions to be contained therein, shall be binding on Borrower and all the
persons whose interest in the Premises are subject to the lien hereof and upon
the purchaser or purchasers at any foreclosure sale, notwithstanding any
redemption, reinstatement, discharge of the Indebtedness, satisfaction of any
foreclosure judgment, or issuance of any certificate of sale or deed to any
purchaser. In addition, such receiver shall have the power to collect the rents,
issues and profits of the Premises during the pendency of such foreclosure suit
and, in case of a sale and deficiency, during the full statutory period of
redemption, if any, whether or not there is a redemption, as well as during any
further times when Borrower, except for the intervention of such receiver, would
be entitled to collection of such rents, issues and profits, and such receiver
shall have all other powers which may be necessary or are usual in such cases
for the protection, possession, control, management and operation of the
Premises during the whole of said period. The court, from time to time, may
authorize the receiver to apply the net income from the Premises in payment in
whole or in part of: (a) the Indebtedness or the indebtedness secured by a
decree foreclosing this Mortgage, or any tax, special assessment, or other lien
which may be or become superior to the lien hereof or of such decree, provided
such application is made prior to the foreclosure sale; or (b) the deficiency in
case of a sale and deficiency.
21. Distribution of Proceeds of Foreclosure Sale. Except to the extent
--------------------------------------------
otherwise required by the Act and except as provided in the Ground Lease, the
proceeds of any foreclosure sale of the Premises (and any condemnation or
insurance proceeds which are applied to the Indebtedness following the
occurrence of an Event of Default) shall be distributed and applied in the
following order of priority:
FIRST, to the payment of all costs and expenses, fees, commissions and
-----
taxes of such sale, collection or other realization, including any amounts
owed to Lender pursuant to Section 2.12 of the Note, any portion of the
Lender's Expenses or the Restructuring Fee (to the extent not previously
paid), compensation to Lender's agents, and Lender's reasonable attorneys'
fees, and all expenses or advances made by Lender in connection therewith,
together with interest on each such amount at the Default Rate then in
effect, from and after the date such amount is due, owing or unpaid until
paid in full;
SECOND, to the indefeasible payment in full in cash of all accrued and
------
unpaid Contract Rate Interest and any and all other accrued and unpaid
interest (other than Additional Accrued Interest) owing by Borrower under
or in connection with this Mortgage or the other Loan Documents, together
with interest on each such amount at the Default Rate then in effect, from
and after the date such amount is due, owing and unpaid until paid in full.
26
<PAGE>
THIRD, to the indefeasible payment in full in cash of all accrued and
-----
unpaid Additional Accrued Interest, together with interest on each such
amount at the Default Rate from and after the date such amount is due,
owing or unpaid until paid in full;
FOURTH, to the indefeasible payment in full in cash of principal owing
------
by Borrower under or in connection with this Mortgage or the other Loan
Documents, together with interest on each such amount at the Default Rate
then in effect, from and after the date such amount is due, owing or unpaid
until paid in full; and
FIFTH, any surplus then remaining from such proceeds shall be paid to
-----
Borrower, or its successor or assigns, or to whomever may be lawfully
entitled to receive such proceeds or as a court of competent jurisdiction
may direct.
22. Insurance Proceeds Prior to Foreclosure Sale. All rights and powers
--------------------------------------------
of Lender under Paragraphs 10 and 11 hereof, from and after the entry of
judgment of foreclosure, shall continue in the Lender as decree creditor until
confirmation of sale. In case of an insured loss after foreclosure proceedings
have been instituted, the proceeds of any Insurance Policy, if not applied in
rebuilding or restoring the Improvements, in accordance with Paragraphs 10 and
11 hereof, shall be used to pay the amount due in accordance with any decree of
foreclosure that may be entered in any such proceedings, and the balance, if
any, shall be paid as the court may direct. The foreclosure decree may provide
that the mortgagee's clause attached to each of the casualty Insurance Policies
may be cancelled and that the decree creditor may cause a new loss clause to be
attached to each of said casualty Insurance Policies making the loss thereunder
payable to said decree creditors. In the event of foreclosure sale, Lender,
without the consent of Borrower, may assign any Insurance Policies to the
purchaser at the sale, or take such other steps as Lender may deem advisable to
protect the interest of such purchaser.
23. Waiver of Right of Redemption and Other Rights. To the full extent
----------------------------------------------
permitted by law, Borrower agrees that it will not at any time or in any manner
whatsoever take any advantage of any stay, exemption or extension law or any so-
called "Moratorium Law" now or at any time hereafter in force, nor take any
advantage of any law now or hereafter in force providing for the valuation or
appraisement of the Premises, or any part thereof, prior to any foreclosure sale
thereof to be made pursuant to any provisions herein contained, or to any
decree, judgment or order of any court of competent jurisdiction; or claim or
exercise any rights under any statute now or hereafter in force to redeem the
Premises or any part thereof, or relating to the marshalling thereof, on
foreclosure sale or other enforcement hereof. To the full extent permitted by
law, Borrower hereby expressly waives any and all rights it may have to require
that the Premises be sold as separate tracts or units in the event of
foreclosure. To the full extent permitted by law, Borrower hereby expressly
waives any and all rights to redemption and reinstatement under the Act, on its
own behalf, on behalf of all persons claiming or having an interest (direct or
indirect) by, through or under Borrower and on behalf of each and every person
acquiring any interest in or title to the Premises subsequent to the date
hereof, it being the intent hereof that any and all such rights of redemption of
Borrower and such other persons are and shall
27
<PAGE>
be deemed to be hereby waived to the full extent permitted by applicable law. To
the full extent permitted by law, Borrower agrees that, by invoking or utilizing
any applicable law or laws or otherwise, it will not hinder, delay or impede the
exercise of any right, power or remedy herein or otherwise granted or delegated
to Lender, but will permit the exercise of every such right, power and remedy as
though no such law or laws have been or will have been made or enacted. To the
full extent permitted by law, Borrower hereby agrees that no action for the
enforcement of the lien or any provision hereof shall be subject to any defense
which would not be good and valid in an action at law upon the Note. If the
Borrower is a trustee, Borrower represents that the provisions of this Paragraph
23 (including the waiver of redemption rights) were made at the express
direction of Borrower's beneficiaries and the persons having the power of
direction over Borrower and are made on behalf of the trust estate of Borrower
and all beneficiaries of Borrower, as well as all other persons named above.
Borrower acknowledges that the Premises do not constitute agricultural real
estate as defined in Section 15-1201 of the Act or residential real estate as
defined in Section 15-1219 of the Act.
24. Lender's Performance of Borrower's Obligations. In case of an Event
----------------------------------------------
of Default, either before or after acceleration of the Indebtedness or the
foreclosure of the lien hereof, Lender may, but shall not be required to, make
any payment or perform any act herein required of Borrower (whether or not
Borrower is personally liable therefor) in any manner deemed expedient to
Lender. Lender may, but shall not be required to, complete construction,
furnishing and equipping of the Improvements and rent, operate and manage the
Premises and the Improvements and pay operating costs, including management
fees, of every kind in connection therewith, so that the Premises shall be
useable for their intended purposes. All such monies paid and expenses incurred,
including attorneys' fees, shall be so much additional Indebtedness, whether or
not the Indebtedness, as a result thereof, shall exceed the face amount of the
Note, and shall become immediately due with interest thereon at the Default
Rate. Inaction of Lender shall never be considered as a waiver of any right
accruing to it on account of any Event of Default nor shall the provisions of
this Paragraph or any exercise by Lender of its rights hereunder prevent any
default from constituting an Event of Default. Lender, in making any payment
hereby authorized (a) relating to Taxes, may do so according to any bill,
statement or estimate, without inquiry into the validity of any tax, assessment,
sale, forfeiture, tax lien or title or claim thereof; (b) for the purchase,
discharge, compromise or settlement of any lien, may do so without inquiry as to
the validity or amount of any claim for lien which may be asserted; or (c) in
connection with the completion of construction, furnishing or equipping of the
Premises or the rental, operation or management of the Premises or the payment
of operating costs thereof, may do so in such amounts and to such persons as
Lender may deem appropriate in its good faith business judgment. Nothing
contained herein shall be construed to require Lender to advance monies for any
purpose.
25. Rights Cumulative. Each right herein or in any of the other Loan
-----------------
Documents conferred upon Lender is cumulative and in addition to every other
right provided by law or in equity, and Lender may exercise each such right in
any manner deemed expedient to Lender. Lender's exercise or failure to exercise
any right shall not be deemed a waiver of that right or any
28
<PAGE>
other right or a waiver of any default. Except as otherwise specifically
required herein, Lender is not required to give notice of its exercise of any
right given to it by this Mortgage.
26. Landlord's Option to Purchase Mortgage. Notwithstanding anything to
--------------------------------------
the contrary contained herein, if an Event of Default has occurred or any other
act, condition or event has occurred that would permit Lender to declare all or
part of the Indebtedness due and payable, Lender shall serve notice in writing
on Landlord in accordance with Section 6.04 of the Ground Lease of its intent to
commence foreclosure proceedings. Landlord shall have thirty (30) days after
the giving of such notice by Lender to exercise its option to purchase the Loan
and this Mortgage as provided in Section 6.04 of the Ground Lease.
27. Successors and Assigns.
----------------------
27.1 Holder of the Note. This Mortgage and each provision hereof
------------------
shall be binding upon Borrower and its successors and assigns (including,
without limitation, each and every owner from time to time of the leasehold
interest in the Premises or any other person having an interest therein),
and shall inure to the benefit of Lender and its successors and assigns.
Wherever herein Lender is referred to, such reference shall be deemed to
include the holder from time to time of the Note; and each such holder of
the Note shall have all of the rights afforded hereby, and may enforce the
provisions hereof, as fully as if Lender had designated such holder of the
Note herein by name.
27.2 Covenants Run With Land; Successor Owners. All of the covenants
-----------------------------------------
of this Mortgage shall run with the Land and be binding on any successor
owners of the leasehold interest in the Land. If the ownership of Premises
or the leasehold interest in the Land any portion thereof becomes vested in
a person other than Borrower, Lender, without notice to Borrower, may deal
with such person with reference to this Mortgage and the Indebtedness in
the same manner as with Borrower without in any way releasing Borrower from
its obligations hereunder. Borrower will give immediate written notice to
Lender of any conveyance, transfer or change of ownership of the Premises
or of the leasehold interest in the Land, but nothing in this Paragraph
shall vary the effectiveness of the provisions of Paragraph 16 hereof.
Notwithstanding anything to the contrary herein contained, Borrower shall
not assign its rights or obligations hereunder, under the Note or under any
other Loan Document except as permitted in Paragraph 16 hereto. Any such
assignments by Borrower shall be void.
28. Effect of Extensions and Amendments. If the payment of the
-----------------------------------
Indebtedness, or any part thereof, is extended or varied, or if any part of the
security or guarantees therefor are released, all persons now or at any time
hereafter liable therefor, or interested in the Premises, shall be held to
assent to such extension, variation or release, and their liability, and the
lien, and all provisions hereof, shall continue in full force and effect. Any
person, firm or corporation taking a junior mortgage, or other lien upon
the Premises or any part thereof or any interest therein, shall take said lien
subject to the rights of Lender to amend, modify, extend or release the Note,
this
29
<PAGE>
Mortgage or any other Loan Document, in each case without obtaining the consent
of the holder of such junior lien and without the lien of this Mortgage losing
its priority over the rights of any such junior lien.
29. [INTENTIONALLY LEFT BLANK]
30. Future Advances. At all times, regardless of whether any loan
---------------
proceeds have been disbursed, this Mortgage secures as part of the Indebtedness
the payment of all loan commissions, service charges, liquidated damages,
attorneys' fees, expenses and advances due to or incurred by Lender in
connection with the Indebtedness, all in accordance with the Note, this
Mortgage, and the other Loan Documents; provided, however, that in no event
shall the total amount of the Indebtedness, including loan proceeds disbursed
plus any additional charges, exceed two hundred percent (200%) of the face
amount of the Note.
31. Execution of Separate Security Agreements, Financing Statements, etc.;
----------------------------------------------------------------------
Estoppel Letter. Borrower will do, execute, acknowledge and deliver all such
- ---------------
further acts, conveyances, notes, mortgages, security agreements, financing
statements and assurances as Lender shall require for the better assuring,
conveying, mortgaging, assigning and confirming unto Lender all property
mortgaged hereby or property intended so to be, whether now owned by Borrower or
hereafter acquired. Without limitation of the foregoing, Borrower will assign
to Lender, upon request, as further security for the Indebtedness, its interests
in all agreements, contracts, licenses and permits affecting the Premises, such
assignments to be made by instru instruments satisfactory to Lender, but no such
assignment shall be construed as a consent by the Lender to any agreement,
contract, license or permit or to impose upon Lender any obligations with
respect thereto. From time to time, Borrower will furnish within five (5) days
after Lender's request a written and duly acknowledged statement of the
Indebtedness and whether any alleged offsets or defenses exist against the
Indebtedness.
32. Subrogation. If any part of the Indebtedness is used directly or
-----------
indirectly to satisfy, in whole or in part, any prior encumbrance upon the
Premises or any part thereof, then Lender shall be subrogated to the rights of
the holder thereof in and to such other encumbrance and any additional security
held by such holder, and shall have the benefit of the priority of the same.
33. Option to Subordinate. At the option of Lender, this Mortgage shall
---------------------
become subject and subordinate, in whole or in part (but not with respect to
priority of entitlement to insurance proceeds or any award in condemnation) to
any and all leases of all or any part of the Premises upon the execution by
Lender and recording thereof, at any time hereafter, in the Office of the
Recorder of Deeds for the county wherein the Premises are situated, of a
unilateral declaration to that effect.
34. Governing Law. This Mortgage shall be construed and enforced
-------------
according to the laws of the State of Illinois, without reference to the
conflicts of law principles of that State. If
30
<PAGE>
any provision in this Mortgage shall be inconsistent with any provision of the
Act, the provisions of the Act shall take precedence over the provisions of this
Mortgage, but shall not invalidate or render unenforceable any other provision
of this Mortgage that can be construed in a manner consistent with the Act. If
any provision of this Mortgage shall grant to Lender any rights or remedies upon
default of the Borrower which are more limited than the rights that would
otherwise be vested in Lender under the Act in the absence of said provision,
Lender shall be vested with the rights granted in the Act to the full extent
permitted by law.
35. Business Loan. The proceeds of the Original Note were used for the
-------------
purposes specified in Ill. Rev. Stat. ch. 17, para. 6404 (1987), 815 ILCS 205/4
(1992), and the principal obligation secured hereby constitutes a "business
loan" coming within the definition and purview of said section.
36. Inspection of Premises and Records. Borrower shall keep full and
----------------------------------
correct books and records showing in detail the income and expenses of the
Premises. Lender and its agents shall have the right to inspect the Premises
and all books, records and documents relating thereto at all reasonable times.
37. [INTENTIONALLY LEFT BLANK]
38. No Joint Ventures. No participation by Lender in profit from
-----------------
operations of, appreciation in value of, or profit from the sale or any further
encumbrance of, the mortgaged Premises shall constitute a partnership, joint
venture, tenancy in common or joint tenancy between the Borrower and the Lender,
it being intended that the only relationship created by the Note and this
Mortgage shall be that of Borrower and Lender. Borrower hereby covenants and
agrees that it shall not take any action or assert or maintain any position at
any time that is inconsistent with the terms of this Paragraph 38.
39. Time of the Essence. Time is of the essence of the Note, this
-------------------
Mortgage, and the other Loan Documents.
40. Captions and Pronouns. The captions and headings of the various
---------------------
sections of this Mortgage are for convenience only, and are not to be construed
as confining or limiting in any way the scope or intent of the provisions
hereof. Whenever the context requires or permits, the singular shall include
the plural, the plural shall include the singular, and the masculine, feminine
and neuter shall be freely interchangeable.
41. Separability. If all or any portion of any provision of this Mortgage
-------------
or the other Loan Documents shall be held to be invalid, illegal or
unenforceable in any respect, then such invalidity, illegality or
unenforceability shall not affect any other provision hereof or thereof, and
such provision shall be limited and construed in such jurisdiction as if such
invalid, illegal or unenforceable provision or portion thereof were not
contained herein or therein.
31
<PAGE>
42. Notices. All notices, requests and demands to or upon the respective
-------
parties hereto, to be effective, shall be in writing and shall be delivered by
hand or sent by (x) mail (certified or registered, postage prepaid, return
receipt requested), (y) by a nationally recognized overnight courier service, or
(z) by facsimile transmission (provided that the original of any notice sent by
facsimile transmission shall be sent by a nationally recognized overnight
courier service) and unless otherwise expressly provided herein, shall be deemed
to have been duly given or made when delivered if delivered by hand, or three
Business Days following deposit if sent by certified or registered mail, or on
the next Business Day following deposit with a nationally recognized overnight
courier service, or upon receipt if sent by facsimile with an original by
nationally recognized overnight courier service (provided that if said facsimile
was received after 5:00 p.m. in the local time zone of the recipient on any
Business Day, said notice shall not be deemed to have been received until the
following Business Day), addressed in each case as follows, or to such address
or other address as may be hereafter notified by such parties:
Borrower: Mutual Benefit Chicago Marriott Suite Hotel
Partners, L.P.
Host Marriott Corporation
10400 Fernwood Drive
Bethesda, Maryland 20817
Attention: Law Department
Facsimile No. :(301) 380-6332
Lender: National Bank of Canada
New York Branch
125 West 55th Street
New York, New York 10022
Attention: LoriAnn Curnyn
Facsimile No. :(212) 632-8775
43. Anti-forfeiture. Borrower hereby expressly represents and warrants to
---------------
Lender that there has not been committed by Borrower or, to the best of
Borrower's knowledge, any other person involved with the Premises any act or
omission affording the federal government or any state or local government the
right of forfeiture as against the Premises or any part thereof or any monies
paid in performance of its obligations under the Note, Mortgage or under any of
the other Loan Documents, and Borrower hereby covenants and agrees not to
commit, permit or suffer to exist any act or omission affording such right of
forfeiture. In furtherance thereof, Borrower agrees to indemnify, defend with
counsel reasonably acceptable to Lender (at Borrower's sole cost) and hold
Lender harmless from and against any claim or other cost (including, without
limitation, reasonable attorneys' fees and costs incurred by Lender), damage,
liability or injury by reason of the breach of the covenants and agreements or
the warranties and representations set forth in the preceding sentence. Without
limiting the generality of the foregoing, the filing of formal charges or the
commencement of proceedings against Borrower, the Lender or all or any part of
the Premises under any federal or state law in which forfeiture of the Premises
or any part
32
<PAGE>
thereof or of any monies paid in performance of Borrower's obligations under the
Loan Documents is a potential result, at the election of Lender, shall
constitute an Event of Default hereunder without notice or opportunity to cure.
44. Jury Trial Waiver. Borrower waives, to the extent permitted by law,
-----------------
trial by jury in any actions brought by either Borrower or Lender in connection
with the Indebtedness.
45. No Merger. It is the desire and intention of the parties hereto that
---------
this Mortgage and the lien hereof shall not merge in fee simple title to the
Premises, unless a contrary intent is ever manifested by Lender as evidenced by
an express statement to that effect in an appropriate document duly recorded.
Therefore, it is hereby understood and agreed that should Lender acquire any
additional or other interests in or to the Premises or the ownership thereof,
then this Mortgage and the lien hereof shall not merge in the fee simple title,
toward the end that this Mortgage may be foreclosed as if owned by a stranger to
the fee simple title.
46. Non-Recourse.
------------
46.1 Extent of Non-recourse. Anything in this Mortgage to the
----------------------
contrary notwithstanding, Lender shall have no personal recourse against
either Borrower, any General Partner, any limited partner of Borrower, or
any Affiliated Party nor any officer, director, employee or agent of any of
the foregoing for the repayment of any of the principal of or interest on
the Loan or for any deficiency judgment that Lender may obtain after
foreclosure of the liens securing such repayment, or, subject to the
provisions of Paragraph 46.2 hereof, for any deficiency, loss or damage
suffered by Lender as a result of the failure by Borrower or any General
Partner to comply with any of the terms or conditions of this Mortgage or
any of the other Loan Documents and, subject to the provisions of Paragraph
46.2 hereof, Lender agrees not to seek recourse against any of the
foregoing for any such deficiency, loss or damage. The foregoing
limitations are limitations on Lender's right of recourse against Borrower
and shall not impair the validity or enforceability of the indebtedness
evidenced by the Note or any of the other obligations of Borrower under the
Loan Documents secured by the Premises or the lien of or security interest
in or the right of Lender as mortgagee or secured party to foreclose and/or
enforce its rights in the Premises after default by Borrower or any General
Partner.
46.2 Borrower's Liability for Damages or Misapplication of Funds.
-----------------------------------------------------------
The provisions of Paragraph 46.1 hereof to the contrary notwithstanding,
Borrower and its General Partner shall be fully liable (i) for any damages
attributable to fraud or material misrepresentation in any Loan Document or
in any written communication by Borrower in connection with the Loan or in
connection with the Original Loan; (ii) for the retention of any rental
income or other income arising with respect to all or any part of the
Premises covered by the Mortgage after Lender has given to Borrower any
notice that Borrower is in default hereunder or under the other Loan
Documents and that Lender has exercised its option to accelerate maturity
of the Note, foreclose or require the foreclosure of the liens
33
<PAGE>
securing payment thereof, receive or collect such rental income or other
income or exercise its rights under the Loan Documents (to the full extent
of the rental income or other income retained after the giving of any such
notice); (iii) for any Gross Revenues distributed to any partners in
Borrower subsequent to the date hereof; (iv) for any Gross Revenues, Net
House Profits or Excess Cash Flow not applied as required pursuant to
Article 8 of the Loan Agreement; (v) for the misapplication of (A) proceeds
paid prior to any such foreclosure under any insurance policies by reason
of damage, loss or destruction to any portion of the Premises (to the full
extent of such proceeds), or (B) any proceeds or awards resulting from the
condemnation, prior to any such foreclosure, of all or any part of the
Premises (to the full extent of such proceeds or awards); and (v) for
damages arising from the breach of any representation, warranty, covenant
or other obligation concerning Environmental Claims, Environmental
Conditions or Environmental Noncompliance (except for matters set forth in
Exhibit D attached hereto), including without limitation the
indemnification provisions of Section 12.20 of the Loan Agreement.
46.3 Liability of General Partners. To the extent of personal
-----------------------------
liability of Borrower under Paragraph 46.2 hereof, the General Partner of
Borrower hereby agrees to be jointly and severally liable therefor and
waives any requirement of law that in the event of a default hereunder
Lender must proceed against Borrower or exhaust any assets of Borrower
before proceeding against such General Partner or such General Partner's
assets; provided, however, that in no event shall any limited partner of
Borrower, any Affiliated Party (other than the General Partner) or any
officer, director, employee or agent of any partner (including any officer,
director, employee or agent of the General Partner) have any liability
under Paragraph 46.3 hereof, and Lender agrees that it shall not seek
recovery from any party that is excluded from liability pursuant to this
sentence.
IN WITNESS WHEREOF, Borrower has caused this Mortgage to be duly signed,
sealed and delivered the day and year first above written.
BORROWER:
MUTUAL BENEFIT CHICAGO
MARRIOTT SUITE HOTEL PARTNERS,
L.P., a Rhode Island limited partnership
By: MOHS CORPORATION, a Delaware
corporation, its General Partner
By: /s/ Bruce D. Wardinski
-------------------------------
Name: Bruce D. Wardinski
---------------------------
Title: Vice President
--------------------------
34
<PAGE>
STATE OF MARYLAND
SS
COUNTY OF MONTGOMERY
I, Abbi J. Weisman, a Notary Public, in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that Bruce D. Wardinski, Vice President of MOHS
CORPORATION, a Delaware corporation, personally known to me to be the same
person whose name is subscribed to the foregoing instrument as such Vice
President appeared before me this day in person and acknowledged that he/she
signed and delivered said instrument as his/her own free and voluntary act and
as the free and voluntary act of said corporation in its capacity as General
Partner of Mutual Benefit Chicago Marriott Suite Hotel Partners, L.P., for the
uses and purposes therein set forth.
GIVEN under my hand and Notarial Seal, this 24th day of September, 1996.
/s/ Abbi J. Weisman
-----------------------------------
Notary Public
My Commission expires: 12/5/97
-------------
35
<PAGE>
EXHIBIT A
---------
LEGAL DESCRIPTION
-----------------
PARCEL 1:
LOT 14 IN RIVERWAY SUBDIVISION-PHASE II, BEING A RESUBDIVISION IN THE WEST 1/2
OF SECTION 3, TOWNSHIP 40 NORTH, RANGE 12, EAST OF THE THIRD PRINCIPAL MERIDIAN,
ACCORDING TO THE PLAT RECORDED MARCH 11, 1992 AS DOCUMENT 92157888, IN COOK
COUNTY, ILLINOIS.
PARCEL 2:
NON-EXCLUSIVE EASEMENTS IN FAVOR OF THE LEASEHOLD ESTATE DESCRIBED AS PARCEL 1
HEREIN FOR:
(A) INGRESS AND EGRESS FOR PEDESTRIAN AND VEHICULAR TRAFFIC IN, OVER AND THROUGH
THE COMMON AREAS LOCATED ON THE ADJACENT TRACT (AS DEFINED BELOW), AS CREATED BY
LEASE DATED JUNE 16, 1986, A MEMORANDUM OF WHICH WAS FILED APRIL 3, 1987 AS
DOCUMENT LR3604964, AND RECORDED NOVEMBER 18, 1988 AS DOCUMENT 88535338, MADE
BY AND BETWEEN SIMON-ROSEMONT DEVELOPERS AND MARRIOTT CORPORATION;
(B) INGRESS AND EGRESS FOR PEDESTRIAN TRAFFIC IN, OVER AND THROUGH THE ENCLOSED
WALKWAY ON THE ADJACENT TRACT (AS DEFINED BELOW), AS CREATED BY LEASE DATED JUNE
16, 1986, A MEMORANDUM OF WHICH WAS FILED APRIL 3, 1987 AS DOCUMENT LR3604964,
AND RECORDED NOVEMBER 18, 1988 DOCUMENT 88535338, MADE BY AND BETWEEN
SIMON-ROSEMONT DEVELOPERS AND MARRIOTT CORPORATION;
(C) THE LOCATION, INSTALLATION, MAINTENANCE AND REPAIR OF SATELLITE AND
TELECOMMUNICATIONS EQUIPMENT ON THE ADJACENT TRACT (AS DEFINED BELOW), ALL AS
CREATED BY LEASE DATED JUNE 16, 1986, A MEMORANDUM OF WHICH WAS FILED APRIL 3,
1987 AS DOCUMENT LR3604964, AND RECORDED NOVEMBER 18, 1988 AS DOCUMENT 88535338,
MADE BY AND BETWEEN SIMON-ROSEMONT DEVELOPERS AND MARRIOTT CORPORATION;
(D) MINOR ENCROACHMENTS OF TENANT'S IMPROVEMENTS ONTO THE ADJACENT TRACT (AS
DEFINED BELOW) DUE TO ENGINEERING ERRORS, ERRORS IN ORIGINAL CONSTRUCTION,
CONSTRUCTION, RECONSTRUCTION, REPAIR, SETTLEMENT OR SHIFTING OR MOVING OF THE
TENANT'S IMPROVEMENTS, AS CREATED BY FIRST AMENDMENT DATED MARCH 11, 1987 AND
FILED APRIL 3, 1987 AS DOCUMENT LR3604965, AND RECORDED NOVEMBER 18, 1988 AS
DOCUMENT 88535337, MADE BY AND BETWEEN SIMON-ROSEMONT DEVELOPERS AND MARRIOTT
CORPORATION; AND
(E) INGRESS AND EGRESS OVER THE ADJACENT TRACT AS REASONABLY NECESSARY FOR THE
RECONSTRUCTION, MAINTENANCE, OPERATION AND REPAIR OF TENANT'S IMPROVEMENTS, AS
CREATED BY FIRST AMENDMENT DATED MARCH 11, 1987 AND FILED APRIL 3, 1987 AS
DOCUMENT LR3604965, AND RECORDED NOVEMBER 18, 1988 AS DOCUMENT 88535337, MADE BY
AND BETWEEN SIMON-ROSEMONT DEVELOPERS AND MARRIOTT CORPORATION.
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<PAGE>
ADJACENT TRACT:
LOTS 1 TO 8 IN RIVERWAY SUBDIVISION-PHASE I, BEING A RESUBDIVISION IN THE WEST
1/2 OF SECTION 3, TOWNSHIP 40 NORTH, RANGE 12, EAST OF THE THIRD PRINCIPAL
MERIDIAN, ACCORDING TO THE PLAT RECORDED JUNE 3, 1988 AS DOCUMENT 88241319 AND
FILED AS DOCUMENT LR3713139, IN COOK COUNTY, ILLINOIS.
AND ALSO,
LOTS 9 TO 13 AND LOTS 15 TO 17 IN RIVERWAY SUBDIVISION-PHASE II, BEING A
RESUBDIVISION IN THE WEST 1/2 OF SECTION 3, TOWNSHIP 40 NORTH, RANGE 12, EAST OF
THE THIRD PRINCIPAL MERIDIAN, ACCORDING TO THE PLAT RECORDED MARCH 11, 1992 AS
DOCUMENT 92157888, IN COOK COUNTY, ILLINOIS.
PARCEL 3:
EASEMENT IN FAVOR OF THE LEASEHOLD ESTATE DESCRIBED AS PARCEL 1 HEREIN, AS
CREATED IN SECOND AMENDMENT TO LEASE RECORDED FEBRUARY 9, 1989 AS DOCUMENT
89063670, MADE BY AND BETWEEN LASALLE NATIONAL BANK, AS TRUSTEE UNDER TRUST
AGREEMENT DATED FEBRUARY 1, 1988 AND KNOWN AS TRUST NUMBER 11300, SIMON-ROSEMONT
DEVELOPERS, AN ILLINOIS LIMITED PARTNERSHIP, AND MARRIOTT CORPORATION, A
DELAWARE CORPORATION, FOR A 5 INCH AT-GRADE EASEMENT FOR ACCOMODATING THE
AS-BUILT CONDITION OF THE HOTEL GARDEN WALL, OVER THE FOLLOWING LEGAL
DESCRIPTION:
THAT PART OF THE WEST 1/2 OF SECTION 3, TOWNSHIP 40 NORTH, RANGE 12, EAST OF THE
THIRD PRINCIPAL MERIDIAN, DESCRIBED AS FOLLOWS:
COMMENCING AT THE INTERSECTION OF THE SOUTH LINE OF THE NORTHWEST 1/4 OF SAID
SECTION 3 WITH THE EASTERLY LINE OF RIVER ROAD AS WIDENED BY CONDEMNATION IN
CASE NO. 59C16022 AND SHOWN ON PLAT RECORDED AS DOCUMENT NUMBER 19251267; THENCE
NORTH 05 DEGREES 11 MINUTES 36 SECONDS EAST ALONG SAID EASTERLY LINE OF RIVER
ROAD AS WIDENED, 395.35 FEET; THENCE NORTH 79 DEGREES 26 MINUTES 12 SECONDS
WEST, 0.91 FEET TO THE EASTERLY LINE OF RIVER ROAD, BEING A LINE 33.00 FEET, AS
MEASURED AT RIGHT ANGLES, EASTERLY OF AND PARALLEL WITH THE CENTER LINE OF SAID
ROAD; THENCE NORTH 10 DEGREES 38 MINUTES 35 SECONDS EAST ALONG SAID EASTERLY
LINE OF RIVER ROAD, 69.50 FEET; THENCE NORTH 68 DEGREES 08 MINUTES 35 SECONDS,
EAST 56.73 FEET; THENCE NORTH 85 DEGREES 38 MINUTES 35 SECONDS EAST, 47.90 FEET
TO A POINT OF CURVATURE; THENCE NORTHEASTERLY ALONG A CURVED LINE CONVEX
SOUTHEASTERLY, HAVING A RADIUS OF 300.00 FEET AND BEING TANGENT TO SAID LAST
DESCRIBED LINE AT SAID LAST DESCRIBED POINT, AN ARC DISTANCE OF 113.14 FEET TO A
POINT OF TANGENCY (THE CHORE OF SAID ARC BEARS NORTH 74 DEGREES 50 MINUTES 21
SECONDS EAST, 112.47 FEET); THENCE NORTH 64 DEGREES 02 MINUTES 07 SECONDS EAST
ALONG A LINE TANGENT TO SAID LAST DESCRIBED CURVED LINE AT SAID LAST DESCRIBED
POINT, 7.87 FEET; THENCE SOUTH 34 DEGREES 21 MINUTES 25 SECONDS EAST, 169.84
FEET; THENCE SOUTH 10 DEGREES 38 MINUTES 35 SECONDS WEST, 3.41 FEET; THENCE
SOUTH 79 DEGREES 21 MINUTES 25 SECONDS EAST, 25.00 FEET; THENCE SOUTH 10 DEGREES
38 MINUTES 35 SECONDS WEST, 3.50 FEET; THENCE SOUTH 79 DEGREES 21 MINUTES 25
SECONDS EAST, 24.58 FEET; THENCE SOUTH 10 DEGREES 38 MINUTES 35 SECONDS WEST,
14.00 FEET; THENCE SOUTH 79 DEGREES 21 MINUTES 25 SECONDS EAST, 15.00 FEET;
THENCE SOUTH 10 DEGREES 38 MINUTES 35 SECONDS WEST, 8.50 FEET TO A POINT FOR A
PLACE OF BEGINNING; THENCE CONTINUING SOUTH 10 DEGREES 38 MINUTES 35 SECONDS
WEST, 353.17 FEET; THENCE
A-2
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SOUTH 79 DEGREES 21 MINUTES 25 SECONDS EAST, 0.40 FEET; THENCE NORTH 10 DEGREES
38 MINUTES 35 SECONDS EAST, 353.17 FEET; THENCE NORTH 79 DEGREES 21 MINUTES 25
SECONDS WEST, 0.40 FEET TO THE PLACE OF BEGINNING, LYING ABOVE A HORIZONTAL
PLANE OF ELEVATION 628.70 FEET ABOVE U.S.G.S. DATUM AND LYING BELOW A HORIZONTAL
PLANE OF ELEVATION 633.75 FEET ABOVE U.S.G.S. DATUM, IN COOK COUNTY, ILLINOIS.
PARCEL 4:
EASEMENT IN FAVOR OF THE LEASEHOLD ESTATE DESCRIBED AS PARCEL 1 HEREIN, AS
CREATED IN SECOND AMENDMENT TO LEASE RECORDED FEBRUARY 9, 1989 AS DOCUMENT
89063670, MADE BY AND BETWEEN LASALLE NATIONAL BANK, AS TRUSTEE UNDER TRUST
AGREEMENT DATED FEBRUARY 1, 1988 AND KNOWN AS TRUST NUMBER 113000,
SIMON-ROSEMONT DEVELOPERS, AN ILLINOIS LIMITED PARTNERSHIP, AND MARRIOTT
CORPORATION, A DELAWARE CORPORATION, FOR AN 8 INCH BELOW-GRADE EASEMENT FOR
FOUNDATIONS OF THE GARDEN WALL, OVER THE FOLLOWING LEGAL DESCRIPTION:
THAT PART OF THE WEST 1/2 OF SECTION 3, TOWNSHIP 40 NORTH, RANGE 12, EAST OF THE
THIRD PRINCIPAL MERIDIAN, DESCRIBED AS FOLLOWS:
COMMENCING AT THE INTERSECTION OF THE SOUTH LINE OF THE NORTHWEST 1/4 OF SAID
SECTION 3 WITH THE EASTERLY LINE OF RIVER ROAD AS WIDENED BY CONDEMNATION IN
CASE NO. 59C16022 AND SHOWN ON PLAT RECORDED AS DOCUMENT NUMBER 19251267; THENCE
NORTH 05 DEGREES 11 MINUTES 36 SECONDS EAST ALONG SAID EASTERLY LINE OF RIVER
ROAD AS WIDENED, 395.35 FEET; THENCE NORTH 79 DEGREES 26 MINUTES 12 SECONDS
WEST, 0.91 FEET TO THE EASTERLY LINE OF RIVER ROAD, BEING A LINE 33.00 FEET, AS
MEASURED AT RIGHT ANGLES, EASTERLY OF AND PARALLEL WITH THE CENTER LINE OF SAID
ROAD; THENCE NORTH 10 DEGREES 38 MINUTES 35 SECONDS EAST ALONG SAID EASTERLY
LINE OF RIVER ROAD, 69.50 FEET; THENCE NORTH 68 DEGREES 08 MINUTES 35 SECONDS
EAST, 56.73 FEET; THENCE NORTH 85 DEGREES 38 MINUTES 35 SECONDS EAST, 47.90 FEET
TO A POINT OF CURVATURE; THENCE NORTHEASTERLY ALONG A CURVED LINE CONVEX
SOUTHEASTERLY, HAVING A RADIUS OF 300.00 FEET AND BEING TANGENT TO SAID LAST
DESCRIBED LINE AT SAID LAST DESCRIBED POINT, AN ARC DISTANCE OF 113.14 FEET TO A
POINT OF TANGENCY (THE CHORD OF SAID ARC BEARS NORTH 74 DEGREES 50 MINUTES 21
SECONDS EAST, 112.47 FEET) THENCE NORTH 64 DEGREES 02 MINUTES 07 SECONDS EAST
ALONG A LINE TANGENT TO SAID LAST DESCRIBED CURVED LINE AT SAID LAST DESCRIBED
POINT, 7.87 FEET; THENCE SOUTH 34 DEGREES 21 MINUTES 25 SECONDS EAST, 169.84
FEET; THENCE SOUTH 10 DEGREES 38 MINUTES 35 SECONDS WEST, 3.41 FEET; THENCE
SOUTH 79 DEGREES 21 MINUTES 25 SECONDS EAST, 25.00 FEET; THENCE SOUTH 10 DEGREES
38 MINUTES 35 SECONDS WEST, 3.50 FEET; THENCE SOUTH 79 DEGREES 21 MINUTES 25
SECONDS EAST, 24.58 FEET; THENCE SOUTH 10 DEGREES 38 MINUTES 35 SECONDS WEST,
14.00 FEET; THENCE SOUTH 79 DEGREES 21 MINUTES 25 SECONDS EAST, 15.00 FEET;
THENCE SOUTH 10 DEGREES 38 MINUTES 35 SECONDS WEST, 8.50 FEET TO A POINT FOR A
PLACE OF BEGINNING; THENCE CONTINUING SOUTH 10 DEGREES 38 MINUTES 35 SECONDS
WEST, 353.17 FEET; THENCE SOUTH 79 DEGREES 21 MINUTES 25 SECONDS EAST, 0.67
FEET; THENCE NORTH 10 DEGREES 38 MINUTES 35 SECONDS EAST, 353.17 FEET; THENCE
NORTH 79 DEGREES 21 MINUTES 25 SECONDS WEST 0.67 FEET TO THE PLACE OF BEGINNING,
LYING BELOW A HORIZONTAL PLANE OF ELEVATION 628.70 FEET ABOVE U.S.G.S. DATUM, IN
COOK COUNTY, ILLINOIS.
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PARCEL 5:
NON-EXCLUSIVE EASEMENTS IN FAVOR OF THE LEASEHOLD ESTATE DESCRIBED AS PARCEL 1
HEREIN AS SHOWN ON PLAT OF RIVERWAY SUBDIVISION - PHASE I RECORDED JUNE 3, 1998
AS DOCUMENT 88241321 AND FILED JUNE 3, 1998 AS DOCUMENT LR 3713139.
PARCEL 6:
NON-EXCLUSIVE EASEMENTS IN FAVOR OF THE LEASEHOLD ESTATE DESCRIBED AS PARCEL 1
HEREIN AS SHOWN ON PLAT OF RIVERWAY SUBDIVISION - PHASE II RECORDED MARCH 11,
1992 AS DOCUMENT 92157888.
COMMON ADDRESS
- --------------
6155 North River Road
Rosemont, Illinois
PIN
- ---
12-03-103-015
A-4
<PAGE>
EXHIBIT B
---------
TO
MORTGAGE
--------
THE LOAN DOCUMENTS
------------------
The term "Loan Documents," as used in this Mortgage, means the following
documents and any other documents previously, now, or hereafter given to
evidence, secure or govern the disbursement of the Indebtedness, including any
and all extensions, renewals, amendments, modifications and supplements thereof
or thereto:
1. The Loan Agreement;
2. The Note;
3. The following security documents:
(a) this Mortgage;
(b) a Reaffirmation of Foreclosure Guaranty;
(c) an Assignment of Leases and Rents;
(d) a Security Agreement;
(e) certain Uniform Commercial Code Financing Statement Form UCC-1's
and 2's;
(f) an Amended and Restated Assignment of Management Agreement;
(g) the separate Deposit, Pledge and Security Agreements respecting
each of the following accounts:
(i) the Main Disbursing Account at First National Bank of
Chicago, Account No. 58-06704.
(ii) the General Investment Account at Merrill Lynch & Company,
Account No. 3214638-5.
B-1
<PAGE>
(iii) the FF&E Account at Merrill Lynch & Company, Account No.
3206060-7
(iv) the Operating Account at Merrill Lynch & Company, Account
No. 258-3213916-9.
(h) a Reaffirmation of Environmental Indemnification Agreement.
B-2
<PAGE>
EXHIBIT C
---------
TITLE EXCEPTIONS
----------------
1. GENERAL TAXES NOT YET DUE AND PAYABLE.
TAX NO.: 12-03-103-015 VOL NO.: 063
2. DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS AND OF CERTAIN
RECIPROCAL RIGHTS AND EASEMENTS DATED MAY 19, 1988 AND RECORDED JUNE 3, 1988 AS
DOCUMENT 88241321 AND FILED JUNE 3, 1988 AS DOCUMENT LR3713141, AND THE TERMS
AND PROVISIONS THEREOF.
3. EASEMENTS AS SHOWN ON PLAT OF RIVERWAY SUBDIVISION - PHASE I RECORDED JUNE
3, 1988 AS DOCUMENT 88241319 AND FILED JUNE 3, 1988 AS DOCUMENT LR 3713139:
A) RESERVATION BY LASALLE NATIONAL BANK, AS TRUSTEE UNDER TRUST NUMBER 113000
("OWNER") OF RIGHT AND AUTHORITY TO CONSTRUCT, RECONSTRUCT, REPAIR MAINTAIN, AND
OPERATE LANDSCAPING, IRRIGATION SYSTEMS, PARKING LOTS, ACCESS ROADS, PEDESTRIAN
PATHWAYS, FACILITIES USED IN CONNECTION WITH THE UNDERGROUND TRANSMISSION OF
ELECTRICITY, SOUNDS AND SIGNALS, DEVICES FOR THE RECEPTION AND TRANSMISSION OF
ELECTROMAGNETIC OR OPTICAL SIGNALS, DRAINAGE PIPES AND OTHER FACILITIES OVER THE
EASEMENTS GRANTED THEREIN, ALONG WITH THE RIGHT TO GRANT ADDITIONAL PUBLIC OR
PRIVATE BENEFIT UTILITY OR ACCESS EASEMENTS OVER THE EASEMENTS GRANTED THEREIN.
B) PEDESTRIAN PATHWAY AND MAINTENANCE EASEMENT RESERVED TO OWNER.
C) PUBLIC UTILITY EASEMENT TO VILLAGE OF ROSEMONT ACROSS LOT 6.
D) PUBLIC UTILITY EASEMENT TO NORTHERN ILLINOIS GAS COMPANY ACROSS LOT 6.
E) PUBLIC UTILITY EASEMENT TO CENTRAL TELEPHONE COMPANY OF ILLINOIS ACROSS LOT
6.
F) PUBLIC UTILITY EASEMENT TO COMMONWEALTH EDISON EASEMENT ACROSS LOT 6.
G) SATELLITE SIGNAL EASEMENT ACROSS LOT 6 RESERVED TO OWNER.
(AFFECTS PARCELS 2 AND 5)
4. EASEMENTS SHOWN ON PLAT OF RIVERWAY SUBDIVISION - PHASE II RECORDED MARCH
11, 1992 AS DOCUMENT NO. 92157888
A) RESERVATION BY LASALLE NATIONAL BANK, AS TRUSTEE UNDER TRUST NUMBER 113000
("OWNER") OF RIGHT AND AUTHORITY TO CONSTRUCT, RECONSTRUCT, REPAIR, MAINTAIN,
AND OPERATE LANDSCAPING, IRRIGATION SYSTEMS, PARKING LOTS, ACCESS ROADS,
PEDESTRIAN PATHWAYS, FACILITIES USED IN CONNECTION WITH THE UNDERGROUND
TRANSMISSION OF ELECTRICITY, SOUNDS AND SIGNALS, DEVICES FOR THE RECEPTION AND
TRANSMISSION OF ELECTROMAGNETIC OR OPTICAL SIGNALS, DRAINAGE PIPES AND OTHER
FACILITIES OVER THE EASEMENTS GRANTED THEREIN, ALONG WITH THE RIGHT TO GRANT
ADDITIONAL PUBLIC OR PRIVATE BENEFIT UTILITY OR ACCESS EASEMENTS OVER THE
EASEMENTS GRANTED THEREIN.
B) GENERAL RESERVATION OF EASEMENTS TO OWNER ACROSS LOTS 9, 10, 11, 12, 13, 15
AND 16.
C) PEDESTRIAN PATHWAY AND MAINTENANCE EASEMENT RESERVED TO OWNER ACROSS LOTS 9,
10 AND 17.
D) PUBLIC UTILITY EASEMENT TO VILLAGE OF ROSEMONT ACROSS LOTS 11, 13, 15 AND 16.
E) PUBLIC UTILITY EASEMENT TO CENTRAL TELEPHONE COMPANY OF ILLINOIS ACROSS LOTS
11, 13, 15 AND 16.
F) PUBLIC UTILITY EASEMENT TO NORTHERN ILLINOIS GAS COMPANY ACROSS LOTS 11, 13,
15 AND 16.
G) PUBLIC UTILITY EASEMENT TO COMMONWEALTH EDISON EASEMENT ACROSS LOTS 11, 13,
15 AND 16.
H) SATELLITE SIGNAL EASEMENT ACROSS LOTS 9, 10 AND 11 RESERVED TO OWNER.
I) THE PLAT CONTAINS APPROVAL BY THE ILLINOIS DEPARTMENT OF TRANSPORTATION WITH
RESPECT TO ROADWAY ACCESS.
J) THE PLAT STATES THAT PORTIONS OF THE PROPERTY IN THE SUBDIVISION ARE ADJACENT
TO WILLOW-HIGGINS CREEK. FLOOD HAZARDS ARE DESCRIBED IN A MAP PUBLISHED BY THE
NATIONAL FLOOD INSURANCE PROGRAM. ALL LAND WITHIN LOTS 9, 10, 12, 13, 14, 15 AND
16 HAS BEEN RAISED ABOVE THE 100 YEAR FLOOD ELEVATIONS. THE 100 YEAR FLOOD
ELEVATIONS. THE 100 YEAR FLOOD WATERS FROM WILLOW-HIGGINS CREEK ARE CONFINED
EXCLUSIVELY TO LOT 11.
K) EASEMENT DEPICTED ON LOT 11 OF THE PLAT FOR THE CONVEYANCE OF THE DRAINAGE
WATERS OF WILLOW-HIGGINS CREEK, ACCORDING TO FLOOD PLAIN MAPS PUBLISHED BY U.S.
GOVERNMENT THE WATER SURFACE ELEVATION OF THE 100 YEAR FLOOD VARIES FROM 629.8
U.S.G.S TO 627.0 U.S.G.S.
L) EASEMENT FOR TWO ROADWAY CULVERTS DEPICTED ON LOT 11 OF THE PLAT.
(AFFECTS PARCELS 2 AND 6)
5. 6 FOOT FIRE LANE EASEMENT, CREATED BY AMENDMENT TO LEASE BY SIMON-ROSEMONT
DEVELOPERS AND MARRIOTT CORPORATION RECORDED NOVEMBER 18, 1988 AS DOCUMENT
88535337 AND FILED APRIL 3, 1987 AS DOCUMENT LR3604965, AS SHOWN ON SURVEY BY
EDWARD J. MOLLOY & ASSOCIATES, LTD. DATED JULY 29, 1996 AS ORDER NO. 960577.
(AFFECTS PARCEL 1)
6. 15 FOOT WATER MAIN EASEMENT, AS SHOWN ON THE AFORESAID SURVEY.
(AFFECTS PARCEL 1)
7. 15 FOOT STORM SEWER EASEMENT, AS SHOWN ON THE AFORESAID SURVEY.
(AFFECTS PARCEL 1)
8. 10 FOOT COMMONWEALTH EDISON COMPANY EASEMENT, AS SHOWN ON THE AFORESAID
SURVEY.
(AFFECTS PARCEL 1)
9. NATURAL GAS PIPELINE EASEMENT OVER THE WESTERLY LINE OF THE LAND, AS
DISCLOSED BY THE AFORESAID SURVEY.
(AFFECTS PARCELS 2 AND 6)
10. INFORMATION AND DISCLOSURES CONTAINED IN ENVIRONMENTAL DISCLOSURE DOCUMENT
FOR TRANSFER OF REAL PROPERTY RECORDED DECEMBER 20, 1993 AS DOCUMENT 03040838.
11. RIGHTS OF LAND OWNERS OF THE ADJOINING PROPERTIES IN AND TO THE FREE AND
UNOBSTRUCTED FLOW OF THE WATERS OF HIGGINS-WILLOW CREEK, WHICH RIGHTS DO NOT
EXTEND BEYOND THE BANKS OF THE CREEK AS SHOWN ON SURVEY MADE BY EDWARD J. MOLLOY
& ASSOCIATES, LTD. DATED JULY 29, 1996 AS ORDER NO. 960577.
(AFFECTS PARCELS 2 AND 6)
12. THE RIGHTS OF TENANTS, AS TENANTS ONLY UNDER THOSE CERTAIN LEASES DESCRIBED
IN EXHIBIT ___ TO THIS __________________________________.
13. GRANT OF EASEMENT FROM PARKWAY BANK AND TRUST COMPANY OF CHICAGO, A
CORPORATION OF ILLINOIS, AS TRUSTEE UNDER TRUST AGREEMENT DATED MAY 15, 1979 AND
KNOWN AS TRUST NUMBER 4927 TO THE METROPOLITAN SANITARY DISTRICT OF GREATER
CHICAGO, A MUNICIPAL CORPORATION DATED DECEMBER 26, 1980 AND RECORDED JUNE 15,
1981 A DOCUMENT 25904107 GRANTING THE RIGHT, PRIVILEGE, AND AUTHORITY TO
CONSTRUCT, RECONSTRUCT, REPAIR, MAINTAIN AND OPERATE A TUNNEL SYSTEM.
(AFFECTS PARCELS 2, 5 AND 6)
14. EASEMENT GRANT DATED AUGUST 14, 1978 AND FILED FEBRUARY 14, 1979 AS
DOCUMENT LR3075942 FROM ANNA WAGNER, TO THE METROPOLITAN SANITARY DISTRICT OF
GREATER CHICAGO, A MUNICIPAL CORPORATION ITS SUCCESSORS AND ASSIGNS, OF A
PERPETUAL EASEMENT, RIGHT, PERMISSION, AND AUTHORITY TO CONSTRUCT, RECONSTRUCT,
REPAIR, REPLACE, OPERATE AND MAINTAIN THE CONVEYANCE FACILITIES UNDER AND
THROUGH THE FOLLOWING DESCRIBED PROPERTY, REFERRED TO AS PARCEL A - PERMANENT
SUBTERRANEAN EASEMENT.
PARCEL A: PERMANENT SUBTERRANEAN EASEMENT.
THE PROPERTY AND SPACE LYING BETWEEN ELEVATIONS 82.0 FEET AND 157.0 FEET
(CHICAGO CITY DATUM) AND ALSO LYING WITHIN THE BOUNDARIES, PROJECTED VERTICALLY
DOWNWARD FROM THE SURFACE OF THE EARTH, OF THAT PART OF THE NORTH 157.20 FEET OF
LOT `A' WEST OF THE CENTER OF ROAD AND INCLUDING THAT PART OF DES PLAINES RIVER
LYING IN THE SOUTHWEST 1/4 OF SECTION 3 AND IN SAID LOT 19 IN THE ASSESSOR'S
DIVISION OF SAID SECTION 3, TOWNSHIP 40 NORTH, RANGE 12, EAST OF THE THIRD
PRINCIPAL MERIDIAN, IN COOK COUNTY, ILLINOIS, DESCRIBED AS FOLLOWS:
COMMENCING AT A POINT IN THE NORTH LINE OF SAID LOT `A', 165.50 FEET WEST OF THE
CENTER OF DES PLAINES RIVER (SAID POINT BEING THE CENTER OF SAID SECTION 3)
THENCE SOUTH 31 DEGREES 40 MINUTES 33 SECONDS WEST ALONG A LINE (SAID LINE
EXTENDING FROM THE POINT OF COMMENCEMENT TO A POINT WHICH IS 357.44 FEET SOUTH
OF THE NORTH LINE OF SAID LOT A AND 300 FEET WEST OF THE CENTER OF SAID DES
PLAINES RIVER) FOR A DISTANCE OF 163.75 FEET TO THE POINT OF BEGINNING; THENCE
CONTINUING SOUTH 31 DEGREES 40 MINUTES 33 SECONDS WEST ALONG SAID LINE FOR A
DISTANCE OF 25.76 FEET TO THE NORTHEAST CORNER OF LOT 4 IN ROSEMONT INDUSTRIAL
CENTER SUBDIVISION; THENCE SOUTH 87 DEGREES 48 MINUTES 17 SECONDS WEST ALONG THE
NORTH LINE OF SAID LOT 4, SAID NORTH LINE ALSO BEING THE SOUTH LINE OF THE NORTH
157.20 FEET OF SAID LOT `A', FOR A DISTANCE OF 24.5 FEET; THENCE NORTH 05
DEGREES 13 MINUTES 30 SECONDS WEST FOR A DISTANCE OF 157.42 FEET TO THE NORTH
LINE OF SAID LOT `A'; THENCE NORTH 87 DEGREES 48 MINUTES 17 SECONDS EAST ALONG
THE NORTH LINE OF SAID LOT A FOR A DISTANCE OF 40.06 FEET; THENCE SOUTH 05
DEGREES 13 MINUTES 30 SECONDS EAST FOR A DISTANCE OF 135.00 FEET TO THE POINT OF
BEGINNING, AND ALL THE COVENANTS, CONDITIONS AND AGREEMENTS THEREIN CONTAINED.
(AFFECTS PARCELS 2, 5 AND 6)
15. EASEMENT FOR INGRESS AND EGRESS, AND FOR THE PUBLIC UTILITIES, ALONG THE
EAST 10 FEET OF LOT 2, AND THE WEST 10 FEET OF LOT 3, IN ROSEMONT INDUSTRIAL
CENTER AFORESAID, AS SHOWN ON THE PLAT OF SAID SUBDIVISION RECORDED FEBRUARY 17,
1967, AS DOCUMENT 20066369, AND FILED JANUARY 17, 1967, AS DOCUMENT LR2312390.
(AFFECTS PARCELS 2 AND 5)
16. EASEMENT FOR PUBLIC UTILITIES ALONG:
THE NORTH 10 FEET OF LOT 3 EAST OF THE WEST 10 FEET THEREOF;
THE SOUTH 10 FEET OF LOT 4; AND
THE WEST 10 FEET OF LOT 5;
ALL IN ROSEMONT INDUSTRIAL CENTER AFORESAID; AS SHOWN ON THE PLAT OF SAID
SUBDIVISION RECORDED FEBRUARY 17, 1967, AS DOCUMENT 20066369 AND FILED JANUARY
17, 1967 AS DOCUMENT LR2312390.
(AFFECTS PARCELS 2 AND 5)
17. EASEMENT OVER:
THE EAST 10 FEET OF LOT 2;
THE WEST 10 FEET AND THE NORTH 10 FEET OF LOT 3;
THE SOUTH 10 FEET OF LOT 4; AND
THE WEST 10 FEET OF LOT 5;
ALL IN ROSEMONT INDUSTRIAL CENTER AFORESAID;
FOR THE PURPOSE OF INSTALLING AND MAINTAINING ALL EQUIPMENT NECESSARY TO SERVE
THE SUBDIVISION AND OTHER LAND WITH TELEPHONE AND ELECTRIC SERVICE, TOGETHER
WITH THE RIGHT TO OVERHANG AERIAL SERVICE WIRES AND THE RIGHT OF ACCESS TO SUCH
WIRES, AS CREATED BY GRANT TO THE ILLINOIS BELL TELEPHONE COMPANY AND THE
COMMONWEALTH EDISON COMPANY AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS, AND AS
SHOWN ON THE PLAT OF SUBDIVISION RECORDED FEBRUARY 17, 1967 AS DOCUMENT
20066369, AND FILED JANUARY 17, 1967 AS DOCUMENT LR2312390.
(AFFECTS PARCELS 2 AND 5)
18. EASEMENT OVER:
THE EAST 10 FEET OF LOT 2;
THE WEST 10 FEET AND THE NORTH 10 FEET OF LOT 3;
THE SOUTH 10 FEET OF LOT 4; AND
THE WEST 10 FEET OF LOT 5;
ALL IN ROSEMONT INDUSTRIAL CENTER AFORESAID;
FOR THE INSTALLATION, MAINTENANCE, RELOCATION, RENEWAL AND REMOVAL OF GAS MAINS
AND APPURTENANCES, RESERVED FOR AND GRANTED TO NORTHERN ILLINOIS GAS COMPANY,
ITS SUCCESSORS AND ASSIGNS AND SET FORTH ON THE PLAT OF SUBDIVISION RECORDED
FEBRUARY 17, 1967 AS DOCUMENT 20066369, AND FILED JANUARY 17, 1967 AS DOCUMENT
LR2312390.
(AFFECTS PARCELS 2 AND 5)
19. EASEMENT ALONG THE WEST 10 FEET, MEASURED AT RIGHT ANGLES TO THE
WESTERNMOST LOT LINE, OF THAT PART OF LOT 4 IN ROSEMONT INDUSTRIAL CENTER
AFORESAID LYING NORTH OF THE NORTH LINE OF EVENHOUSE AVENUE. FOR THE
CONSTRUCTION, OPERATION, MAINTENANCE AND REPAIR OF A STORM SEWER, AS CREATED BY
GRANT MADE BY AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, AS TRUSTEE
UNDER TRUST NUMBER 24620, TO THE VILLAGE OF ROSEMONT, RECORDED SEPTEMBER 27,
1967 AS DOCUMENT 20274024.
(AFFECTS PARCELS 2 AND 5)
20. EASEMENT ALONG THE NORTH 10 FEET, MEASURED AT RIGHT ANGLES TO THE NORTH
LOT LINE, OF LOT 4 IN ROSEMONT INDUSTRIAL CENTER AFORESAID, FOR THE
CONSTRUCTION, OPERATION, MAINTENANCE AND REPAIR OF A STORM SEWER, AS CREATED BY
GRANT MADE BY AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, AS TRUSTEE
UNDER TRUST NUMBER 24620, TO THE VILLAGE OF ROSEMONT, RECORDED JANUARY 12, 1968,
AS DOCUMENT 20377727.
(AFFECTS PARCELS 2 AND 5)
21. PROPOSED LOCATION OF SUBTERRANEAN TARP TUNNEL, AS INDICATED ON THE
METROPOLITAN SANITARY DISTRICT OF GREATER CHICAGO TARP AND FLOOD CONTROL ATLAS
OF 1981 AND AS SHOWN ON THE SURVEY PREPARED BY EDWARD J. MOLLOY AND ASSOCIATES,
LTD, PAGE 1 OF 2.
(AFFECTS PARCELS 2 AND 5)
22. INTENTIONALLY LEFT BLANK
23. (A) TERMS, PROVISIONS, CONDITIONS, LIMITATIONS AND EASEMENTS AS CONTAINED
IN THE INSTRUMENTS CREATING THE EASEMENTS DESCRIBED IN PARCELS 2, 3, 4, 5 AND 6
AND AFORESAID.
(B) RIGHTS OF ADJOINING OWNERS OF THE CONCURRENT USE OF THE EASEMENT SET FORTH
IN PARCELS 2, 5 AND 6.
24. FINANCING STATEMENT EVIDENCING AN INDEBTEDNESS FROM MUTUAL BENEFIT CHICAGO
MARRIOTT SUITE HOTEL PARTNERS, L.P., DEBTOR, TO NATIONAL BANK OF CANADA, SECURED
PARTY, FILED ON JUNE 22, 1994 AS NUMBER 94U09566.
CONTINUATION FILED JUNE 22, 1994 AS DOCUMENT 94U09567.
AMENDMENT TO CONTINUATION FILED JUNE 22, 1994 AS DOCUMENT 94U09568.
AMENDMENT FILED SEPTEMBER 20, 1994 AS DOCUMENT 94U13909.
C-1
<PAGE>
EXHIBIT D
---------
TO
MORTGAGE
--------
LIST OF ENVIRONMENTAL REPORTS
-----------------------------
1. Report entitled "Hydraulic and Hydrologic Considerations of the
Office-Hotel Complex, Higgins-River Road Properties, Rosemont, Illinois",
prepared by Harza Engineering Company, 1560 South Walker Drive, Chicago,
Illinois 60606, dated July 18, 1985, prepared for Hawthorn Realty Group, Inc.
2. Report entitled "Report of Preliminary Geotechnical Investigation of
Marriott Suite Hotel Site, Higgins and Des Plaines River Road, Rosemont,
Illinois", prepared by Oosterbaan Associates, P.C., Engineering and Geotechnic
Consultants, 7911 MacArthur Boulevard, Box 73, Cabin John, Maryland 20818-0073,
dated January 7, 1986, prepared for Marriott Corporation.
3. Report entitled "Site Contamination Assessment, Marriott Rosemont
Suites Hotel, Rosemont, Illinois", prepared by SCS Engineers, Stearns, Conrad
and Schmidt, Consulting Engineers, Inc., 11260 Roger Bacon Drive, Reston,
Virginia 22090-5282, dated April 15, 1986, prepared for Hawthorn Realty Group.
4. Report entitled "Environmental Assessment of the Riverway Site,
Rosemont, Illinois", prepared by Roy F. Weston, Inc., Designers/Consultants,
Bannockburn, Illinois, dated June, 1986, prepared for Marriott Corporation.
5. Letter dated February 19, 1987 from Robert Finke, Vice President,
Hawthorn Realty Group to James M. Barkley, Assistant General Counsel, Melvin
Simon & Associates (5 pages).
6. Letter dated December 11, 1986 from Michael W. McLaughlin, Vice
President, SCS Engineers to Jeffrey S. Degen, RA, Design Manager, Marriott
Corporation (3 pages).
7. Report entitled "Summary and Evaluation of Measures Taken to Mitigate
Environmental Concerns, Marriott Rosemont Suites Hotel", prepared by SCS
Engineers, 11260 Roger Bacon Drive, Reston, Virginia 22090, dated October 18,
1988 prepared for Mutual Benefit Chicago Marriott Suite Hotel Partners.
D-1
<PAGE>
EXHIBIT E
---------
TO
MORTGAGE
--------
AMENDMENTS TO GROUND LEASE
--------------------------
The Ground Lease: That certain Marriott Hotel Ground Lease dated as of
June 16, 1986 by and between Simon-Rosemont Developers (defined as "Developers"
for purposes of this Exhibit E only), as landlord and Marriott Corporation
(defined as "Marriott" for purposes of this Exhibit E only), as tenant, as
amended, modified and supplemented by:
1. Memorandum of Lease filed on April 3, 1987, in the Recorder's Office
of Cook County, Illinois (the "Recorder's Office") as Document No. 3604964;
2. Letter of Agreement dated February 19, 1986 [sic] [should be 1987] by
and between Developers and Marriott;
3. Letter Agreement dated June 13, 1986 by and between Developers and
Marriott;
4. Letter Agreement dated June 16, 1986 by and between Developers and
Marriott;
5. Letter Agreement dated December 3, 1986 by and between Developers and
Marriott;
6. First Amendment to Lease dated March 11, 1987 by and between
Developers and Marriott recorded in the Recorder's Office on April 3, 1987 as
Document No. 36049654;
7. Subordination and Attornment Agreement dated March 11, 1987 by and
between Marriott and Chemical Bank;
8. Letter Agreement dated March 31, 1987 between Developers and Marriott;
9. Deed dated February 1, 1988 between Developers and LaSalle National
Bank in its capacity as Trustee ("Trustee") under Trust Agreement dated February
1, 1988 and known as Trust No. 11300, whereby Developers transferred its
interest in the Ground Lease to a trust under which Developers is the sole
beneficiary;
10. Second Amendment to Lease dated as of December 28, 1988 by and between
Trustee and Marriott recorded in the Recorder's Office on February 9, 1989 as
Document No. 89063670;
E-1
<PAGE>
11. Certificate dated June 8, 1989 by and between Trustee, Developers and
Marriott memorializing the "Lease Commencement Date", the "Opening Date", and
the "Initial Term", all as defined in the Ground Lease;
12. Notice of Assignment of Lease dated as of June 12, 1989 between
Marriott, as assignor, and Borrower, as assignee; and
13. Letter Agreement dated November 10, 1993 between Developers and the
Borrower.
E-2
<PAGE>
Exhibit 10.6
REAFFIRMATION OF FORECLOSURE GUARANTY
-------------------------------------
THIS REAFFIRMATION OF FORECLOSURE GUARANTY (the "Reaffirmation") is made
and entered into as of September 24, 1996, by and between MOHS CORPORATION, a
Delaware corporation ("Guarantor"), and NATIONAL BANK OF CANADA ("Lender").
R E C I T A L S
---------------
A. Lender previously made a loan in the principal amount of Twenty-Five
Million Five Hundred Thousand Dollars ($25,500,000.00) (the "Original Loan") to
Mutual Benefit Chicago Marriott Suite Hotel Partners, L.P., a Rhode Island
limited partnership ("Borrower").
B. Guarantor is the general partner of Borrower.
C. As a condition precedent to Lender making the Original Loan to
Borrower, Guarantor executed and delivered that certain Foreclosure Guaranty
dated as of June 12, 1988 in favor of and for the benefit of Lender (the
"Guaranty"; a copy of such Guaranty is attached hereto as Exhibit A).
D. The Original Loan matured on June 12, 1996 and has not been repaid.
In lieu of exercising its rights and remedies with respect to Borrower's failure
to repay the Original Loan when due, Lender agreed with Borrower to amend and
restate the various terms, conditions, covenants and provisions of the Original
Loan and its related documents. The Original Loan, as so amended and restated,
is hereinafter referred to as the "Amended and Restated Loan".
E. Lender has agreed to amend and restate the Original Loan on the
condition that Guarantor duly execute and deliver this Reaffirmation in favor of
and for the benefit of Lender.
A G R E E M E N T
-----------------
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants and promises herein and for other good and valuable consideration, the
receipt and adequacy of which are hereby conclusively acknowledged, Lender and
Guarantor agree as follows:
1. Guarantor hereby reaffirms the terms and provisions of the Guaranty.
2. Guarantor hereby covenants and agrees that, notwithstanding the
amendment and restatement of the Original Loan, the Guaranty shall remain in
full force and effect and guarantor's obligations thereunder shall apply to the
Amended and Restated Loan to the same extent as to the Original Loan.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Reaffirmation as of the day and year first above written.
MOHS CORPORATION, a Delaware corporation
By: /s/ Bruce D. Wardinski
------------------------------
Name: Bruce D. Wardinski
--------------------------
Title: Vice President
-------------------------
NATIONAL BANK OF CANADA
By: /s/ Lori Ann Curnyn
------------------------------
Name: Lori Ann Curnyn
--------------------------
Title: Vice President
-------------------------
2
<PAGE>
EXHIBIT A
---------
FORECLOSURE GUARANTY
--------------------
THIS GUARANTY, is made this 12th day of June, 1988, by MOHS CORPORATION, a
Delaware corporation ("Guarantor"), to NATIONAL BANK OF CANADA (the, "Lender").
To induce Lender to lend to Mutual Benefit Chicago Marriott Suite Hotel
Partners, L.P. ("Borrower"), a Rhode Island limited partnership, the sum of
$25,500,000 ("Mortgage Debt") for the finance the purchase of a Marriott Suite
Hotel in Rosemont, Illinois (the "Hotel"), the undersigned Guarantor represents,
warrants and covenants to Lender as follows:
1. Guarantor unconditionally guaranties to Lender an amount up to five
million dollars ($5,000,000) upon a foreclosure on the Hotel by the Lender. Such
Guaranty is payable to the lender (i) only upon a foreclosure by the Lender and
(ii) only in the event the proceeds from the foreclosure were five million
dollars ($5,000,000) or less. Under such circumstances, the Guarantor would pay
to the Lender the difference between such proceeds and five million dollars
($5,000,000).
2. No delay on Lender's part in exercising any right, power or privilege
under this Guaranty or any other document executed by Guarantor or Borrower to
Lender shall operate as a waiver of any such privilege, power or right.
3. This Guaranty shall be interpreted, construed and enforced in
accordance with the laws of the State of Illinois.
GUARANTOR
MOHS CORPORATION,
a Delaware corporation
By: /s/ [SIGNATURE APPEARS HERE]
-----------------------------
Vice President
(Corporate Seal)
A-1
<PAGE>
Exhibit 10.7
SECURITY AGREEMENT
------------------
This Security Agreement (hereinafter referred to as the "Agreement") is
made as of the 24th day of September, 1996, by MUTUAL BENEFIT CHICAGO MARRIOTT
SUITE HOTEL PARTNERS, L.P., a Rhode Island limited partnership having an address
at c/o Host Marriott Corporation, 10400 Fernwood Drive, Bethesda, Maryland 20817
("Debtor"), and NATIONAL BANK OF CANADA, having an address at 125 West 55th
Street, New York, NY 10019 ("Secured Party").
R E C I T A L S:
- - - - - - - -
A. Debtor and Secured Party previously entered into that certain Loan
Agreement dated as of June 12, 1989 whereby Secured Party made a loan (the
"Original Loan') to Debtor as evidenced by that certain Promissory Note Secured
by Mortgage dated as of June 12, 1989, and having a maturity date of June 12,
1996 (the "Original Note").
B. The Original Note was secured in part by, among other things, that
certain Leasehold Mortgage, Security Agreement and Assignment of Rents granted
by Debtor to Secured Party and dated as of June 12, 1989 and recorded June 13,
1989 in the Recorder's Office for Cook County, Illinois (the "Recorder's
Office") as Document No. 89266493, granting Secured Party a security interest
in, among other things, the collateral described therein and located on the real
property described on Exhibit A hereto (the "Land").
C. In accordance with that certain Amended and Restated Loan Agreement
(the "Loan Agreement") of even date herewith between Debtor and Secured Party,
Debtor has issued to Secured Party a certain Amended and Restated Secured
Promissory Note in the principal sum of Twenty Five Million Five Hundred
Thousand and 00/100 Dollars ($25,500,000.00; the "Loan") with a scheduled
maturity date of June 12, 2001, amending and restating the Original Note in its
entirety (together with any replacement therefor which may be issued from time
to time pursuant to the Loan Agreement, the "Note").
D. The Note is secured by, among other things, that certain Amended and
Restated Leasehold Mortgage (the "Mortgage") dated of even date herewith granted
by Debtor to Secured Party and recorded on ______________, 1996 in the
Recorder's Office as Document No. _________.
E. Debtor owns the leasehold interest in the Land and owns all buildings
and improvements located thereon (said buildings and improvements together with
Debtor's leasehold interest in the Land are hereinafter collectively referred to
as the "Premises").
<PAGE>
F. Pursuant to the Loan Agreement, Debtor has agreed to grant to Secured
Party a security interest in all the property, whether presently owned by Debtor
or hereafter acquired, described as the "Collateral" in Exhibit B attached
hereto.
G. The Collateral is or will be located on the Premises.
H. All capitalized terms used herein without definition shall have the
meanings ascribed to them in the Loan Agreement.
NOW, THEREFORE, with reference to the above recitals, and in reliance
thereon, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Creation of Security Interest. Debtor hereby grants to Secured Party a
-----------------------------
security interest in, and does hereby collaterally assign, pledge, mortgage,
convey and set over unto the Secured Party, the Collateral and all of Debtor's
present and hereafter acquired right, title and interest in and to the
Collateral, for the purpose of securing payment of all indebtedness, obligations
and liabilities of Debtor to Secured Party arising under or in connection with
the Note, the Mortgage, the Loan Agreement, and the other Loan Documents (as
defined in the Loan Agreement and the Mortgage) and performance of all
agreements, covenants, terms and conditions contained in the foregoing documents
and instruments.
2. Warranties, Representations and Covenants of Debtor. Debtor hereby
---------------------------------------------------
warrants, represents and covenants to the Secured Party as follows:
(a) Debtor is and will be the sole owner of the Collateral, free from
any lien, security interest, encumbrance or adverse claim of any kind
(except for those matters listed on Exhibit C hereto). Debtor will not
permit any financing statement to be filed with respect to the Collateral
or any portion thereof except in favor of Secured Party. Debtor will
notify Secured Party of, and will defend the Collateral against, all claims
and demands of all persons at any time claiming the same or any interest
therein.
(b) The Collateral will not be used and was not purchased for
personal, family or household purposes.
(c) Subject to the terms of subparagraph 2(e) hereof, the Collateral
will be kept on the Premises, and Debtor will not remove the Collateral
from the Premises without the prior written consent of Secured Party.
(d) At the request of Secured Party, Debtor has or will join Secured
Party in executing one or more financing statements identifying the
Collateral and evidencing the
2
<PAGE>
security interest of Secured Party in the Collateral pursuant to the
requirements of the Uniform Commercial Code and in form satisfactory to
Secured Party. Debtor will pay the cost of filing the same in all public
offices wherever filing is deemed by Secured Party to be necessary or
desirable.
(e) Except as otherwise expressly permitted under the Loan Agreement,
without the prior written consent of Secured Party, Debtor will not sell,
exchange, dispose of, lease, offer to sell or otherwise transfer or
otherwise deal with the Collateral or any portion or interest therein,
unless simultaneously therewith new items of Collateral, which items may be
similar to those proposed to be disposed of and which shall be of equal or
greater value, are substituted therefor. Together with the information
delivered to Secured Party pursuant to clause (i) of Article 7 of the Loan
Agreement, Debtor shall file with the Secured Party a certificate signed by
Debtor describing such portion of the Collateral consisting of furniture,
fixtures and/or equipment as has been disposed of during the Accounting
Period (as defined in the Loan Agreement) covered by said information and
stating that the same has become obsolete, worn out, damaged, destroyed,
sold, transferred or exchanged, as the case may be, and that said
furniture, fixtures and/or equipment has been replaced. Such certificate
likewise shall certify as to the reasonable and equivalent value of the
property so acquired in replacement or substitution. All after-acquired
property of the Debtor located on the Premises and all additions or
replacements acquired pursuant to the provisions of this paragraph shall
immediately be and become, without any other act on the part of the Debtor,
subject to the security interest and lien of this Security Agreement, which
security interest shall be prior to any other security interest or lien on
such property. Unless expressly recited or provided to the contrary in
this Security Agreement or in the other Loan Documents, Debtor may not
hereafter acquire any property subject to prior security interests. If the
Collateral or any part thereof is sold, transferred, exchanged, or
otherwise disposed of, the security interest of Secured Party shall extend
to the proceeds of such sale, transfer, exchange or other disposition.
(f) Subject to the Insurance Coverage provisions in the Mortgage,
Debtor shall cause the Collateral at all times to be kept insured at its
own expense under one or more policies with such companies, for such
periods and amounts, against such risks and liabilities, and in such form
as are reasonably satisfactory to Secured Party, with Secured Party as a
named insured and with loss payable and mortgagee clauses attached to all
policies in favor of and in form satisfactory to Secured Party. Such
insurance policies shall provide for at least thirty (30) days prior
written notice to Secured Party of cancellation, termination, lapse,
reduction in amount or material change in the coverage of such policies,
and certificates thereof shall be delivered to and held by Secured Party.
Debtor will promptly notify Secured Party of any loss or damage to the
Collateral and will not adjust or settle such or any loss without the
written consent of the Secured Party. In the event of foreclosure or sale
under this Agreement, all right, title and interest of the Debtor
3
<PAGE>
in and to any insurance policies then in force shall pass to the purchaser
at any sale, and Secured Party is hereby appointed attorney-in-fact for
Debtor to assign and transfer said policies.
In the event of damage or casualty resulting in a loss payable under
any of the aforementioned insurance policies, Secured Party is authorized
(i) to adjust and settle any claim under the appropriate policy pursuant to
which right Secured Party is hereby appointed attorney-in-fact for Debtor
to make proof of loss, or (ii) on behalf of and in the name and stead of
Debtor to adjust and settle any such claim. In either case, Secured Party
is authorized to collect and give receipt for any such insurance proceeds
paid pursuant to the settlement and such authorization is hereby deemed an
assignment to Secured Party by Debtor of its rights to any such proceeds.
Anything in the foregoing to the contrary notwithstanding, Debtor is hereby
authorized to adjust and settle any claim and to collect and give receipt
for the proceeds thereof so long as such claim does not exceed Twenty-Five
Thousand Dollars ($25,000.00), and all such claims so adjusted and settled
in any one (1) Fiscal Year do not exceed the aggregate amount of Seventy-
Five Thousand Dollars ($75,000.00).
(g) Debtor will keep the Collateral free from any lien, security
interest or encumbrance and in good condition and repair. From time to
time and at the request of Secured Party, Debtor will make necessary or
desirable repairs, replacements, renewals and additions to the Collateral
which may be required by reason of use, wear, obsolescence, damage or
destruction, however caused, to the end that the efficiency of the business
conducted on the Premises shall not be impaired. Debtor will not misuse,
abuse, allow to deteriorate, waste or destroy the Collateral or any part
thereof, except for ordinary wear and tear in the course of its normal and
expected use. Debtor will not use the Collateral in violation of any
statute or governmental rule, regulation or ordinance.
(h) Debtor will pay prior to delinquency all taxes and assessments
assessed against the Collateral, imposed on account of its use or operation
or imposed upon the Note (collectively, "Impositions") and shall deliver to
Secured Party, within ten (10) days after Secured Party's request therefor,
a receipt or other evidence satisfactory to Secured Party, of the payment
thereof.
(i) At the Secured Party's request, Debtor will execute and/or procure
any document and will do all other acts which from the character or use of
the Collateral may be reasonably necessary to protect the Collateral
against the rights, claims or interests of third persons, and will
otherwise preserve the Collateral as security hereunder.
(j) Debtor shall furnish promptly to Secured Party such information
concerning the Collateral as Secured Party may from time to time reasonably
request. Debtor shall
4
<PAGE>
permit and hereby authorizes Secured Party to examine and inspect the
Collateral and any portion thereof wherever the same may be located. Debtor
shall, at the request of Secured Party, assemble all documents and records
pertaining to the Collateral at such place as Secured Party may designate.
3. Preservation of Collateral by Secured Party. Should Debtor fail or
-------------------------------------------
refuse to make any payment, perform or observe any other covenant, condition or
obligation, or take any other action required by the terms of this Agreement or
the Loan Agreement at the time or in the manner provided, then Secured Party
may, at Secured Party's sole discretion, without notice to or demand upon
Debtor, and without releasing Debtor from any obligation, covenant or condition
hereof, make, perform, observe, take or do the same in such manner and to such
extent as Secured Party may deem necessary to protect its security interest in
or the value of the Collateral. Furthermore, upon Debtor's failure to do so,
Secured Party may commence, defend, appeal or otherwise participate in any
action or proceeding purporting to affect its security interest in or the value
of the Collateral. Debtor hereby agrees to reimburse Secured Party on demand
for any payment made, or any expense incurred by, Secured Party pursuant to the
foregoing authorization (including court costs and reasonable attorneys' fees
and disbursements), and agrees further to pay interest thereon from the date of
said payment or expenditure at the rate specified in the Note as the Default
Rate.
4. Use of Collateral by Debtor. Until the occurrence of an Event of
---------------------------
Default hereunder, Debtor may have possession of the Collateral and use it in
any lawful manner contemplated in the Loan Agreement and consistent with this
Agreement and any policy of insurance affecting the Collateral.
5. Event of Default. The occurrence of any of the following shall
----------------
constitute an Event of Default ("Event of Default") hereunder:
(a) If an Event of Default shall occur under the Loan Agreement and be
continuing or if Debtor fails to observe or perform any term, covenant or
condition of the Note, the Mortgage or any of the other Loan Documents and
such default is not cured within the time period expressly established
therefor, if any; or
(b) If any writ or any distress warrant shall be issued against or
levied on the Collateral, or any part thereof; or if the Debtor shall sell
or assign or attempt to sell or assign the Collateral, or any interest
therein in violation of subparagraph 2(e) hereof; or
(c) If Debtor defaults under this Agreement, which default is not
corrected or cured by Debtor within thirty (30) days after notice thereof
by Secured Party; provided, however, that if such default is such that it
cannot reasonably be cured within such 30-day period, then an Event of
Default shall occur if Debtor fails to commence the cure of such
5
<PAGE>
default within such 30-day period or thereafter fails to diligently pursue
such efforts to completion, provided, further, that in no event shall the
amount of time permitted for any such cure exceed 90 days after such
failure shall occur; or
(d) If the Collateral or any part thereof is removed or transferred,
or attempted to be removed or transferred, from the Premises, or sold or
disposed of, in violation of the terms of subparagraphs 2(c) and 2(e); or
(e) If any representation or warranty made by Debtor herein, or in any
other instrument, agreement or written statement in any way related hereto,
to the Collateral or any portion thereof, or to the Loan, shall prove to
have been false or incorrect in any material respect on or after the date
when made.
6. Remedies upon Event of Default. Upon the occurrence of an Event of
------------------------------
Default, Secured Party may, in addition to exercising those remedies specified
in the Loan Agreement or in any of the Loan Documents, at any time, at its
election, without further notice, and to the extent permitted by law pursue any
one or more of the following remedies concurrently or successively, it being the
intent hereof that none of such remedies shall be to the exclusion of any
others:
(a) Foreclose this Agreement and the security interest granted hereby,
as provided herein, or in any manner permitted by law, either personally,
through agents or by means of a court appointed receiver, and take
possession of all or any of the Collateral and exclude therefrom Debtor and
all others claiming through or under Debtor, and exercise any and all of
the rights and remedies conferred upon Secured Party by this Agreement, the
Note, the Mortgage, the Loan Agreement, and the other Loan Documents or by
applicable law, either concurrently or in such order as Secured Party may
determine. Secured Party may sell, lease or otherwise dispose of, or cause
to be sold, leased or otherwise disposed of in such order as Secured Party
may determine, as a whole or in such parcels as Secured Party may
determine, (i) the Collateral, and/or (ii) the Premises described in the
Mortgage; or exercise any of the other rights conferred upon the Secured
Party by this Agreement, the Note, the Mortgage, the Loan Agreement or
other Loan Documents without affecting in any way the rights or remedies
to which Secured Party may be entitled under any other Loan Document;
(b) Make such payments and do such acts as Secured Party may deem
necessary to protect its security interest in the Collateral, including
without limitation, paying, purchasing, contesting or compromising any
encumbrance, charge, claim or lien which is prior to or superior to the
security interest granted hereunder, and, in exercising any such powers or
authority, pay all expenses incurred in connection therewith, and all funds
expended by Secured Party in protecting its security interest shall be
deemed additional indebtedness secured by this Agreement;
6
<PAGE>
(c) To the extent any of the Collateral has been stored at a location
other than the Premises, require Debtor to assemble such Collateral, or any
portion thereof, at the Premises, and promptly to deliver such Collateral
to Secured Party, or an agent or representative designated by it;
(d) Publicly or privately sell, lease or otherwise dispose of the
Collateral, without necessarily having the Collateral at the place of sale,
lease or disposition, and upon terms and in such manner as Secured Party
may determine. Secured Party may be a purchaser of the Collateral at any
public sale. Unless the Collateral is perishable or threatens to decline
speedily in value or is of a type customarily sold on a recognized market,
Secured Party will give Debtor reasonable notice of the time and place of
any public sale thereof or of the time after which any private sale or any
other intended disposition thereof is to be made, and such notice, if given
to the Debtor pursuant to the provisions of Paragraph 8 hereof at least
twenty (20) days prior to the date of any public sale or disposition or the
date after which any private sale or disposition may occur, shall
constitute reasonable notice of such sale, lease or other disposition;
(e) Notify any account debtor or any other party obligated on or with
respect to any of the Collateral to make payment to Secured Party or its
nominee of any amounts due or to become due thereunder or with respect
thereto and otherwise perform its obligations with respect to the
Collateral on behalf of and for the benefit of Secured Party. Secured
Party may enforce collection and performance with respect to any of the
Collateral by suit or otherwise, in its own name or in the name of Debtor
or a nominee, and surrender, release or exchange all or any part thereof;
and compromise, extend or renew (whether or not for longer than the
original period) or transfer, assign or endorse for collection or
otherwise, any indebtedness or obligation with respect to the Collateral,
or evidenced thereby, and upon request of Secured Party, Debtor will, at
its own expense, notify any person obligated on or with respect to any of
the Collateral to make payment and performance directly to, in the name of,
and on behalf of Secured Party of any amounts or performance due or to
become due thereunder or with respect thereto; and
(f) Exercise any remedies of a Secured Party under the Uniform
Commercial Code or any other applicable law.
To effectuate the foregoing, Debtor hereby agrees that if the Secured
Party demands or attempts to take possession of the Collateral or any
portion thereof in exercise of its rights and remedies hereunder and under
any other Loan Document, Debtor will immediately turn over and deliver
possession thereof to Secured Party, and Debtor authorizes, to the extent
Debtor may now or hereafter lawfully grant such authority, Secured Party,
its employees and agents, and potential bidders or purchasers to enter upon
any or all of the premises where the Collateral or any portion thereof may
at the time be
7
<PAGE>
located (or believed to be located) and Secured Party may (i) remove the
same therefrom or render the same inoperable (with or without removal from
such location), (ii) repair, operate, use or manage the Collateral or any
portion thereof, (iii) maintain, repair or store the Collateral or any
portion thereof, (iv) view, inspect and prepare for sale, lease or
disposition the Collateral or any portion thereof, (v) sell, lease, dispose
of or consume the same or bid thereon or (vi) incorporate the Collateral or
any portion thereof into the Premises.
Debtor hereby agrees to indemnify, defend, protect and hold harmless
Secured Party and its employees, officers and agents from and against any
and all damages, liabilities, claims and obligations which may be incurred,
asserted or imposed upon them or any of them as a result of or in
connection with any use, operation, lease or consumption of any of the
Collateral or as a result of Secured Party's seeking to obtain performance
of any of the obligations due with respect to the Collateral, except from
such damages, liabilities, claims or obligations as result from gross
negligence or intentional misconduct of Secured Party, its employees,
officers or agents.
The proceeds of any sale under this Paragraph 6 shall be applied first
to the payment of any sums owing to Secured Party pursuant to the
provisions of the Note, the Mortgage, this Agreement, or any of the other
Loan Documents in such manner as Secured Party may elect, with any funds
remaining after payment of the foregoing to be paid to Debtor or such other
party whom at law may be entitled thereto.
Secured Party shall have the right to enforce one or more remedies
hereunder, successively or concurrently, and such action shall not operate
to estop or prevent Secured Party from pursuing any further remedy which it
may have, and any repos session or retaking or sale of the Collateral
pursuant to the terms hereof shall not operate to release Debtor until full
payment of any deficiency has been made in cash.
7. Other Remedies. The Mortgage and this Agreement shall be construed
--------------
together as a single instrument and in any case in which the Secured Party is
authorized to proceed in the manner set forth in Paragraph 6 hereof, Secured
Party may, at its sole option and in lieu of proceeding under Paragraph 6
hereof, proceed as to both the Premises and the Collateral in accordance with
Secured Party's rights and remedies with respect to the Premises under the
Mortgage. Any receiver appointed in any proceedings to foreclose said Mortgage,
upon taking possession of the Premises, shall have full power to take immediate
possession of, manage and control the Collateral and use the same in the
operation of a business upon the Premises. Any and all remedies herein
expressly conferred upon Secured Party shall be deemed cumulative with, and not
exclusive of, any other remedy conferred hereby or by law or equity on Secured
Party, and the exercise of any one remedy shall not preclude the exercise of any
other. Except as otherwise
8
<PAGE>
specifically required herein, notice of the exercise of any right, remedy or
power granted to Secured Party by this Agreement is not required to be given.
8. Notices. All notices, requests and demands to or upon the respective
-------
parties hereto, to be effective, shall be in writing and shall be delivered by
hand or sent by (x) mail (certified or registered, postage prepaid, return
receipt requested), (y) by a nationally recognized overnight courier service, or
(z) by facsimile transmission (provided that the original of any notice sent by
facsimile transmission shall be sent by a nationally recognized overnight
courier service) and unless otherwise expressly provided herein, shall be deemed
to have been duly given or made when delivered if delivered by hand, or three
Business Days (as defined in the Loan Agreement) following deposit if sent by
certified or registered mail, or on the next Business Day following deposit with
a nationally recognized overnight courier service, or upon receipt if sent by
facsimile with an original by nationally recognized overnight courier service
(provided that if said facsimile was received after 5:00 p.m. in the local time
zone of the recipient on any Business Day, said notice shall not be deemed to
have been received until the following Business Day), addressed in each case as
follows, or to such address or other address as may be hereafter notified by
such parties:
Debtor: Mutual Benefit Chicago Marriott Suite Hotel
Partners, L.P.
Host Marriott Corporation
10400 Fernwood Drive
Bethesda, Maryland 20817
Attention: Law Department
Facsimile No.: (301) 380-6332
Secured Party: National Bank of Canada
New York Branch
125 West 55th Street
New York, New York 10022
Attention: LoriAnn Curnyn
Facsimile No.: (212) 632-8775
9. Waiver. By exercising or failing to exercise any of its rights,
------
options or elections hereunder, Secured Party shall not be deemed to have waived
any breach or default on the part of Debtor or to have released Debtor from any
of its obligations hereunder, unless such waiver or release is in writing and
signed by Secured Party. In addition, the waiver by Secured Party of any breach
hereof or default in payment of any amounts due under the Note, the Loan
Agreement, the Mortgage or this Agreement shall not be deemed to constitute a
waiver of any succeeding breach or default.
9
<PAGE>
10. Affixed Collateral. The inclusion in this Security Agreement of any
------------------
Collateral which may now be, or hereafter become, affixed or in any manner
attached to the Premises shall be without prejudice to any claim at any time
made by Secured Party that such Collateral is, or has become, a part of the
Premises, a fixture or an accession to the Premises.
11. Binding Agreement. This Agreement and all provisions hereof shall be
-----------------
binding upon Debtor, its successors, assigns, executors, administrators and
legal representatives and all other persons or entities claiming under or
through Debtor, and the word "Debtor," when used herein, shall include all such
persons or entities and any others liable for the payment of the indebtedness
secured hereby or any part thereof, whether or not they have executed the Note
or this Agreement. The word "Secured Party," when used herein, shall include
Secured Party's successors, assigns and legal representatives, including all
other holders, from time to time, of the Note.
12. Governing Law; Interpretation. This Security Agreement shall be
-----------------------------
governed by the laws of the State of Illinois. Wherever possible, each
provision of this Security Agreement shall be interpreted in such a manner as to
be effective and valid under applicable law, but if any provision of this
Security Agreement shall be prohibited by or invalid under such 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 Security Agreement. Time is of the essence in this Security Agreement.
13. Miscellaneous. Neither this Security Agreement nor any provision
-------------
hereof may be amended, modified, waived, discharged or terminated, nor may any
of the Collateral be released, except by an instrument in writing duly signed by
or on behalf of Secured Party hereunder. The Section headings are used herein
for convenience of reference only and shall not define or limit the provisions
of this Security Agreement. As used in this Security Agreement, the singular
shall include the plural, and the plural shall include the singular, and
masculine, feminine and neuter pronouns shall be fully interchangeable, where
the context so requires.
14. Non-Recourse.
------------
(a) Extent of Non-recourse. Anything in this Agreement to the
----------------------
contrary notwithstanding, Secured Party shall have no personal recourse
against either Debtor, any General Partner (as defined in the Loan
Agreement), any limited partner of Debtor, or any Affiliated Party (as
defined in the Loan Agreement) nor any officer, director, employee or agent
of any of the foregoing for the repayment of any of the principal of or
interest on the Loan or for any deficiency judgment that Secured Party may
obtain after foreclosure of the liens securing such repayment, or, subject
to the provisions of Section 14(b) hereof, for any deficiency, loss or
damage suffered by Secured Party as a result of the failure by Debtor or
any General Partner to comply with any of the terms or conditions of this
10
<PAGE>
Agreement or any of the other Loan Documents and, subject to the provisions
of Section 14(b) hereof, Lender agrees not to seek recourse against any of
the foregoing for any such deficiency, loss or damage. The foregoing
limitations are limitations on Secured Party's right of recourse against
Debtor and shall not impair the validity or enforceability of the
indebtedness evidenced by the Note or any of the other obligations of
Debtor under the Loan Documents secured by the Property (as defined in the
Loan Agreement) or the lien of or security interest in or the right of
Secured Party as mortgagee or secured party to foreclose and/or enforce its
rights in the Property after default by Debtor or any General Partner.
(b) Borrower's Liability for Damages or Misapplication of Funds. The
-----------------------------------------------------------
provisions of Section 14(a) hereof to the contrary notwithstanding, Debtor
and its General Partner shall be fully liable (i) for any damages
attributable to fraud or material misrepresentation in any Loan Document or
in any written communication by Debtor in connection with the Loan or in
connection with the Original Loan; (ii) for the retention of any rental
income or other income arising with respect to all or any part of the
Property covered by the Mortgage after Secured Party has given to Debtor
any notice that Debtor is in default hereunder or under the other Loan
Documents and that Secured Party has exercised its option to accelerate
maturity of the Note, foreclose or require the foreclosure of the liens
securing payment thereof, receive or collect such rental income or other
income or exercise its rights under the Loan Documents (to the full extent
of the rental income or other income retained after the giving of any such
notice); (iii) for any Gross Revenues (as defined in the Loan Agreement)
distributed to any partners in Debtor subsequent to the date hereof; (iv)
for any Gross Revenues, Net House Profits (as defined in the Loan
Agreement) or Excess Cash Flow (as defined in the Loan Agreement) not
applied as required pursuant to Article 8 of the Loan Agreement; (v) for
the misapplication of (A) proceeds paid prior to any such foreclosure under
any insurance policies by reason of damage, loss or destruction to any
portion of the property covered by the Mortgage (to the full extent of such
proceeds), or (B) any proceeds or awards resulting from the condemnation,
prior to any such foreclosure, of all or any part of the property covered
by the Mortgage (to the full extent of such proceeds or awards); and (v)
for damages arising from the breach of any representation, warranty,
covenant or other obligation concerning Environmental Claims, Environmental
Conditions or Environmental Noncompliance (except for matters set forth on
Exhibit H to the Loan Agreement), including without limitation the
indemnification provisions of Section 12.20 of the Loan Agreement.
(c) Liability of General Partners. To the extent of personal
-----------------------------
liability of Debtor under Section 14(b) hereof, the General Partner of
Debtor hereby agrees to be jointly and severally liable therefor and waives
any requirement of law that in the event of a default hereunder Secured
Party must proceed against Debtor or exhaust any assets of Debtor before
proceeding against such General Partner or such General Partner's assets;
provided,
11
<PAGE>
however, that in no event shall any limited partner of Debtor, any
Affiliated Party (other than the General Partner) or any officer, director,
employee or agent of any partner of Debtor or of any Affiliated Party
(including any officer, director, employee or agent of the General Partner)
have any liability under Section 14(c) hereof, and Secured Party agrees
that it shall not seek recovery from any party that is excluded from
liability pursuant to this sentence.
15. Rights of Manager. Debtor and Secured Party acknowledge that although
-----------------
this Agreement is binding as between Debtor and Secured Party, nothing herein
shall be construed as modifying or detracting from the rights of Manager with
respect to Secured Party pursuant to the terms of Section 9 of the Assignment of
Management Agreement.
16. This Agreement may be executed in any number of counterparts, each of
which shall constitute an original but all of which, taken together, shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
BORROWER:
MUTUAL BENEFIT CHICAGO MARRIOTT
SUITE HOTEL PARTNERS, L.P., a
Rhode Island limited partnership
(SEAL)
ATTEST: By: MOHS CORPORATION, a Delaware corporation,
its General Partner
By: /s/ David E. Reichmann By: /s/ Bruce D. Wardinski
-------------------------- --------------------------
Name: Assistant Secretary Name: Bruce D. Wardinski
--------------------- ------------------------
Title: Vice President
-----------------------
12
<PAGE>
SECURED PARTY:
(SEAL) NATIONAL BANK OF CANADA
ATTEST:
By: /s/ Lori Ann Curnyn
---------------------------------
By: /s/ Joseph M. Triscoli Name: Lori Ann Curnyn
------------------------------- ----------------------------
Name: Joseph M. Triscoli Title: Vice President
-------------------------- ---------------------------
Title: Assistant Vice President
-------------------------
13
<PAGE>
EXHIBIT A
---------
LEGAL DESCRIPTION
-----------------
PARCEL 1:
LOT 14 IN RIVERWAY SUBDIVISION-PHASE II, BEING A RESUBDIVISION IN THE WEST 1/2
OF SECTION 3, TOWNSHIP 40 NORTH, RANGE 12, EAST OF THE THIRD PRINCIPAL MERIDIAN,
ACCORDING TO THE PLAT RECORDED MARCH 11, 1992 AS DOCUMENT 92157888, IN COOK
COUNTY, ILLINOIS.
PARCEL 2:
NON-EXCLUSIVE EASEMENTS IN FAVOR OF THE LEASEHOLD ESTATE DESCRIBED AS PARCEL 1
HEREIN FOR:
(A) INGRESS AND EGRESS FOR PEDESTRIAN AND VEHICULAR TRAFFIC IN, OVER AND THROUGH
THE COMMON AREAS LOCATED ON THE ADJACENT TRACT (AS DEFINED BELOW), AS CREATED BY
LEASE DATED JUNE 16, 1986, A MEMORANDUM OF WHICH WAS FILED APRIL 3, 1987 AS
DOCUMENT LR3604964, AND RECORDED NOVEMBER 18, 1988 AS DOCUMENT 88535338, MADE
BY AND BETWEEN SIMON-ROSEMONT DEVELOPERS AND MARRIOTT CORPORATION;
(B) INGRESS AND EGRESS FOR PEDESTRIAN TRAFFIC IN, OVER AND THROUGH THE ENCLOSED
WALKWAY ON THE ADJACENT TRACT (AS DEFINED BELOW), AS CREATED BY LEASE DATED JUNE
16, 1986, A MEMORANDUM OF WHICH WAS FILED APRIL 3, 1987 AS DOCUMENT LR3604964,
AND RECORDED NOVEMBER 18, 1988 DOCUMENT 88535338, MADE BY AND BETWEEN
SIMON-ROSEMONT DEVELOPERS AND MARRIOTT CORPORATION;
(C) THE LOCATION, INSTALLATION, MAINTENANCE AND REPAIR OF SATELLITE AND
TELECOMMUNICATIONS EQUIPMENT ON THE ADJACENT TRACT (AS DEFINED BELOW), ALL AS
CREATED BY LEASE DATED JUNE 16, 1986, A MEMORANDUM OF WHICH WAS FILED APRIL 3,
1987 AS DOCUMENT LR3604964, AND RECORDED NOVEMBER 18, 1988 AS DOCUMENT 88535338,
MADE BY AND BETWEEN SIMON-ROSEMONT DEVELOPERS AND MARRIOTT CORPORATION;
(D) MINOR ENCROACHMENTS OF TENANT'S IMPROVEMENTS ONTO THE ADJACENT TRACT (AS
DEFINED BELOW) DUE TO ENGINEERING ERRORS, ERRORS IN ORIGINAL CONSTRUCTION,
CONSTRUCTION, RECONSTRUCTION, REPAIR, SETTLEMENT OR SHIFTING OR MOVING OF THE
TENANT'S IMPROVEMENTS, AS CREATED BY FIRST AMENDMENT DATED MARCH 11, 1987 AND
FILED APRIL 3, 1987 AS DOCUMENT LR3604965, AND RECORDED NOVEMBER 18, 1988 AS
DOCUMENT 88535337, MADE BY AND BETWEEN SIMON-ROSEMONT DEVELOPERS AND MARRIOTT
CORPORATION; AND
(E) INGRESS AND EGRESS OVER THE ADJACENT TRACT AS REASONABLY NECESSARY FOR THE
RECONSTRUCTION, MAINTENANCE, OPERATION AND REPAIR OF TENANT'S IMPROVEMENTS, AS
CREATED BY FIRST AMENDMENT DATED MARCH 11, 1987 AND FILED APRIL 3, 1987 AS
DOCUMENT LR3604965, AND RECORDED NOVEMBER 18, 1988 AS DOCUMENT 88535337, MADE BY
AND BETWEEN SIMON-ROSEMONT DEVELOPERS AND MARRIOTT CORPORATION.
A-1
<PAGE>
ADJACENT TRACT:
LOTS 1 TO 8 IN RIVERWAY SUBDIVISION-PHASE I, BEING A RESUBDIVISION IN THE WEST
1/2 OF SECTION 3, TOWNSHIP 40 NORTH, RANGE 12, EAST OF THE THIRD PRINCIPAL
MERIDIAN, ACCORDING TO THE PLAT RECORDED JUNE 3, 1988 AS DOCUMENT 88241319 AND
FILED AS DOCUMENT LR3713139, IN COOK COUNTY, ILLINOIS.
AND ALSO,
LOTS 9 TO 13 AND LOTS 15 TO 17 IN RIVERWAY SUBDIVISION-PHASE II, BEING A
RESUBDIVISION IN THE WEST 1/2 OF SECTION 3, TOWNSHIP 40 NORTH, RANGE 12, EAST OF
THE THIRD PRINCIPAL MERIDIAN, ACCORDING TO THE PLAT RECORDED MARCH 11, 1992 AS
DOCUMENT 92157888, IN COOK COUNTY, ILLINOIS.
PARCEL 3:
EASEMENT IN FAVOR OF THE LEASEHOLD ESTATE DESCRIBED AS PARCEL 1 HEREIN, AS
CREATED IN SECOND AMENDMENT TO LEASE RECORDED FEBRUARY 9, 1989 AS DOCUMENT
89063670, MADE BY AND BETWEEN LASALLE NATIONAL BANK, AS TRUSTEE UNDER TRUST
AGREEMENT DATED FEBRUARY 1, 1988 AND KNOWN AS TRUST NUMBER 11300, SIMON-ROSEMONT
DEVELOPERS, AN ILLINOIS LIMITED PARTNERSHIP, AND MARRIOTT CORPORATION, A
DELAWARE CORPORATION, FOR A 5 INCH AT-GRADE EASEMENT FOR ACCOMODATING THE
AS-BUILT CONDITION OF THE HOTEL GARDEN WALL, OVER THE FOLLOWING LEGAL
DESCRIPTION:
THAT PART OF THE WEST 1/2 OF SECTION 3, TOWNSHIP 40 NORTH, RANGE 12, EAST OF THE
THIRD PRINCIPAL MERIDIAN, DESCRIBED AS FOLLOWS:
COMMENCING AT THE INTERSECTION OF THE SOUTH LINE OF THE NORTHWEST 1/4 OF SAID
SECTION 3 WITH THE EASTERLY LINE OF RIVER ROAD AS WIDENED BY CONDEMNATION IN
CASE NO. 59C16022 AND SHOWN ON PLAT RECORDED AS DOCUMENT NUMBER 19251267; THENCE
NORTH 05 DEGREES 11 MINUTES 36 SECONDS EAST ALONG SAID EASTERLY LINE OF RIVER
ROAD AS WIDENED, 395.35 FEET; THENCE NORTH 79 DEGREES 26 MINUTES 12 SECONDS
WEST, 0.91 FEET TO THE EASTERLY LINE OF RIVER ROAD, BEING A LINE 33.00 FEET, AS
MEASURED AT RIGHT ANGLES, EASTERLY OF AND PARALLEL WITH THE CENTER LINE OF SAID
ROAD; THENCE NORTH 10 DEGREES 38 MINUTES 35 SECONDS EAST ALONG SAID EASTERLY
LINE OF RIVER ROAD, 69.50 FEET; THENCE NORTH 68 DEGREES 08 MINUTES 35 SECONDS,
EAST 56.73 FEET; THENCE NORTH 85 DEGREES 38 MINUTES 35 SECONDS EAST, 47.90 FEET
TO A POINT OF CURVATURE; THENCE NORTHEASTERLY ALONG A CURVED LINE CONVEX
SOUTHEASTERLY, HAVING A RADIUS OF 300.00 FEET AND BEING TANGENT TO SAID LAST
DESCRIBED LINE AT SAID LAST DESCRIBED POINT, AN ARC DISTANCE OF 113.14 FEET TO A
POINT OF TANGENCY (THE CHORE OF SAID ARC BEARS NORTH 74 DEGREES 50 MINUTES 21
SECONDS EAST, 112.47 FEET); THENCE NORTH 64 DEGREES 02 MINUTES 07 SECONDS EAST
ALONG A LINE TANGENT TO SAID LAST DESCRIBED CURVED LINE AT SAID LAST DESCRIBED
POINT, 7.87 FEET; THENCE SOUTH 34 DEGREES 21 MINUTES 25 SECONDS EAST, 169.84
FEET; THENCE SOUTH 10 DEGREES 38 MINUTES 35 SECONDS WEST, 3.41 FEET; THENCE
SOUTH 79 DEGREES 21 MINUTES 25 SECONDS EAST, 25.00 FEET; THENCE SOUTH 10 DEGREES
38 MINUTES 35 SECONDS WEST, 3.50 FEET; THENCE SOUTH 79 DEGREES 21 MINUTES 25
SECONDS EAST, 24.58 FEET; THENCE SOUTH 10 DEGREES 38 MINUTES 35 SECONDS WEST,
14.00 FEET; THENCE SOUTH 79 DEGREES 21 MINUTES 25 SECONDS EAST, 15.00 FEET;
THENCE SOUTH 10 DEGREES 38 MINUTES 35 SECONDS WEST, 8.50 FEET TO A POINT FOR A
PLACE OF BEGINNING; THENCE CONTINUING SOUTH 10 DEGREES 38 MINUTES 35 SECONDS
WEST, 353.17 FEET; THENCE
A-2
<PAGE>
SOUTH 79 DEGREES 21 MINUTES 25 SECONDS EAST, 0.40 FEET; THENCE NORTH 10 DEGREES
38 MINUTES 35 SECONDS EAST, 353.17 FEET; THENCE NORTH 79 DEGREES 21 MINUTES 25
SECONDS WEST, 0.40 FEET TO THE PLACE OF BEGINNING, LYING ABOVE A HORIZONTAL
PLANE OF ELEVATION 628.70 FEET ABOVE U.S.G.S. DATUM AND LYING BELOW A HORIZONTAL
PLANE OF ELEVATION 633.75 FEET ABOVE U.S.G.S. DATUM, IN COOK COUNTY, ILLINOIS.
PARCEL 4:
EASEMENT IN FAVOR OF THE LEASEHOLD ESTATE DESCRIBED AS PARCEL 1 HEREIN, AS
CREATED IN SECOND AMENDMENT TO LEASE RECORDED FEBRUARY 9, 1989 AS DOCUMENT
89063670, MADE BY AND BETWEEN LASALLE NATIONAL BANK, AS TRUSTEE UNDER TRUST
AGREEMENT DATED FEBRUARY 1, 1988 AND KNOWN AS TRUST NUMBER 113000,
SIMON-ROSEMONT DEVELOPERS, AN ILLINOIS LIMITED PARTNERSHIP, AND MARRIOTT
CORPORATION, A DELAWARE CORPORATION, FOR AN 8 INCH BELOW-GRADE EASEMENT FOR
FOUNDATIONS OF THE GARDEN WALL, OVER THE FOLLOWING LEGAL DESCRIPTION:
THAT PART OF THE WEST 1/2 OF SECTION 3, TOWNSHIP 40 NORTH, RANGE 12, EAST OF THE
THIRD PRINCIPAL MERIDIAN, DESCRIBED AS FOLLOWS:
COMMENCING AT THE INTERSECTION OF THE SOUTH LINE OF THE NORTHWEST 1/4 OF SAID
SECTION 3 WITH THE EASTERLY LINE OF RIVER ROAD AS WIDENED BY CONDEMNATION IN
CASE NO. 59C16022 AND SHOWN ON PLAT RECORDED AS DOCUMENT NUMBER 19251267; THENCE
NORTH 05 DEGREES 11 MINUTES 36 SECONDS EAST ALONG SAID EASTERLY LINE OF RIVER
ROAD AS WIDENED, 395.35 FEET; THENCE NORTH 79 DEGREES 26 MINUTES 12 SECONDS
WEST, 0.91 FEET TO THE EASTERLY LINE OF RIVER ROAD, BEING A LINE 33.00 FEET, AS
MEASURED AT RIGHT ANGLES, EASTERLY OF AND PARALLEL WITH THE CENTER LINE OF SAID
ROAD; THENCE NORTH 10 DEGREES 38 MINUTES 35 SECONDS EAST ALONG SAID EASTERLY
LINE OF RIVER ROAD, 69.50 FEET; THENCE NORTH 68 DEGREES 08 MINUTES 35 SECONDS
EAST, 56.73 FEET; THENCE NORTH 85 DEGREES 38 MINUTES 35 SECONDS EAST, 47.90 FEET
TO A POINT OF CURVATURE; THENCE NORTHEASTERLY ALONG A CURVED LINE CONVEX
SOUTHEASTERLY, HAVING A RADIUS OF 300.00 FEET AND BEING TANGENT TO SAID LAST
DESCRIBED LINE AT SAID LAST DESCRIBED POINT, AN ARC DISTANCE OF 113.14 FEET TO A
POINT OF TANGENCY (THE CHORD OF SAID ARC BEARS NORTH 74 DEGREES 50 MINUTES 21
SECONDS EAST, 112.47 FEET) THENCE NORTH 64 DEGREES 02 MINUTES 07 SECONDS EAST
ALONG A LINE TANGENT TO SAID LAST DESCRIBED CURVED LINE AT SAID LAST DESCRIBED
POINT, 7.87 FEET; THENCE SOUTH 34 DEGREES 21 MINUTES 25 SECONDS EAST, 169.84
FEET; THENCE SOUTH 10 DEGREES 38 MINUTES 35 SECONDS WEST, 3.41 FEET; THENCE
SOUTH 79 DEGREES 21 MINUTES 25 SECONDS EAST, 25.00 FEET; THENCE SOUTH 10 DEGREES
38 MINUTES 35 SECONDS WEST, 3.50 FEET; THENCE SOUTH 79 DEGREES 21 MINUTES 25
SECONDS EAST, 24.58 FEET; THENCE SOUTH 10 DEGREES 38 MINUTES 35 SECONDS WEST,
14.00 FEET; THENCE SOUTH 79 DEGREES 21 MINUTES 25 SECONDS EAST, 15.00 FEET;
THENCE SOUTH 10 DEGREES 38 MINUTES 35 SECONDS WEST, 8.50 FEET TO A POINT FOR A
PLACE OF BEGINNING; THENCE CONTINUING SOUTH 10 DEGREES 38 MINUTES 35 SECONDS
WEST, 353.17 FEET; THENCE SOUTH 79 DEGREES 21 MINUTES 25 SECONDS EAST, 0.67
FEET; THENCE NORTH 10 DEGREES 38 MINUTES 35 SECONDS EAST, 353.17 FEET; THENCE
NORTH 79 DEGREES 21 MINUTES 25 SECONDS WEST 0.67 FEET TO THE PLACE OF BEGINNING,
LYING BELOW A HORIZONTAL PLANE OF ELEVATION 628.70 FEET ABOVE U.S.G.S. DATUM, IN
COOK COUNTY, ILLINOIS.
A-3
<PAGE>
PARCEL 5:
NON-EXCLUSIVE EASEMENTS IN FAVOR OF THE LEASEHOLD ESTATE DESCRIBED AS PARCEL 1
HEREIN AS SHOWN ON PLAT OF RIVERWAY SUBDIVISION - PHASE I RECORDED JUNE 3, 1998
AS DOCUMENT 88241321 AND FILED JUNE 3, 1998 AS DOCUMENT LR 3713139.
PARCEL 6:
NON-EXCLUSIVE EASEMENTS IN FAVOR OF THE LEASEHOLD ESTATE DESCRIBED AS PARCEL 1
HEREIN AS SHOWN ON PLAT OF RIVERWAY SUBDIVISION - PHASE II RECORDED MARCH 11,
1992 AS DOCUMENT 92157888.
COMMON ADDRESS
- --------------
6155 North River Road
Rosemont, Illinois
PIN
- ---
12-03-103-015
A-4
<PAGE>
EXHIBIT B
---------
DEBTOR: MUTUAL BENEFIT CHICAGO MARRIOTT SUITE HOTEL PARTNERS, L.P.,
a Rhode Island limited partnership
SECURED PARTY: NATIONAL BANK OF CANADA
DESCRIPTION OF COLLATERAL
-------------------------
Subject to those matters listed on Exhibit C, all of the following property
now or at any time hereafter owned by Debtor or in which the Debtor may now or
at anytime hereafter have any interest or rights, together with all of Debtor's
right, title and interest therein:
1. All fixtures and personal property now or hereafter owned by Debtor and
attached to or contained in and used or useful in connection with the Premises
or any of the improvements now or hereafter located thereon, including, without
limitation, any and all air conditioners, building materials, antennae,
appliances, apparatus, awnings, basins, bathtubs, bidets, boilers, bookcases,
cabinets, carpets, coolers, curtains, dehumidifiers, disposals, doors, drapes,
dryers, ducts, dynamos, elevators, engines, equipment, escalators, fans,
fittings, floor coverings, furnaces, furnishings, furniture, hardware, heaters,
humidifiers, incinerators, inventory, kitchen equipment and utensils, lighting,
machinery, motors, ovens, pipes, plumbing, pumps, radiators, ranges,
recreational facilities, refrigerators, screens, security systems, shades,
shelving, sinks, sound systems, sprinklers, stokers, stoves, televisions,
toilets, ventilators, wall coverings, washers, windows, window coverings,
wiring, all renewals or replacements thereof or articles in substitution
therefor and all property owned by Debtor and now or hereafter used for similar
purposes in or on the "Premises" (as described on Exhibit A hereto);
2. Articles or parts now or hereafter affixed to the property described
in Paragraph 1 of this Exhibit or used in connection with such property, any and
all replacements for such property and all other property of a similar type or
used for similar purposes now or hereafter in or on the Premises or any of the
improvements now or hereafter located thereon;
3. Debtor's right, title, and interest in all personal property used or
to be used in connection with the operation of the Premises or the conduct of
business thereon, including, without limitation, business equipment and
inventories located on the Premises or elsewhere, together with files, books of
account and other records, wherever located;
B-1
<PAGE>
4. Debtor's right, title and interest in and to any and all contracts now
or hereafter relating to the Premises executed by any architects, engineers or
contractors, including all amendments, supplements and revisions thereof,
together with all Debtor's rights and remedies thereunder and the benefit of all
covenants and warranties thereon, and also together with all drawings, designs,
estimates, layouts, surveys, plats, plans, specifications and test results
prepared by any architect, engineer or contractor, including any amendments,
supplements and revisions thereof and the right to use and enjoy the same, as
well as all building permits, environmental permits, approvals and licenses and
other governmental or administrative permits, licenses, agreements and rights
relating to construction on the Premises;
5. Debtor's right, title and interest in and to any and all contracts and
contract rights now or hereafter relating to the operation of the Premises or
the conduct of business thereon, including, without limitation, all management
and other service contracts, the books and records and the right to appropriate
and use any and all trade names used or to be used in connection with such
business;
6. Debtor's right, title and interest in the rents, issues, deposits
(including security deposits and utility deposits) and profits in connection
with all leases, contracts and other agreements made or agreed to by any person
or entity (including, without limitation, Debtor and Secured Party under the
powers granted by the Security Agreement made between Debtor and Secured Party
and the other Loan Documents therein described) with any person or entity
pertaining to all or any part of the Premises, whether such agreements have been
heretofore or are hereafter made;
7. Debtor's right, title and interest in all sale contracts, chattel
paper, documents, drafts, letters of credit, notes, service marks, trade names,
trademarks, unearned premiums on insurance policies, earnest money deposits,
proceeds of sale contracts, accounts, accounts receivable, instruments,
insurance policies and general intangibles relating to the Premises;
8. All rights in and proceeds from all fire and hazard, loss-of-income
and other non-liability insurance policies now or hereafter covering
improvements now or hereafter located on the Premises or described in the
Security Agreement between Debtor and Secured Party or in the Amended and
Restated Leasehold Mortgage between Debtor and Secured Party, the use or
occupancy thereof or the business conducted thereon;
9. All awards or payments, including interest thereon, that may be made
with respect to the Premises, whether from the right of the exercise of eminent
domain (including any transfer made in lieu of the exercise of said right) or
for any other injury to or decrease in volume of the Premises; and
B-2
<PAGE>
10. All proceeds from the sale, transfer or pledge of any or all of the
foregoing property.
B-3
<PAGE>
EXHIBIT C
---------
LEASED EQUIPMENT
----------------
DEBTOR: MUTUAL BENEFIT CHICAGO MARRIOTT SUITE HOTEL PARTNERS, L.P.,
a Rhode Island limited partnership
SECURED PARTY: NATIONAL BANK OF CANADA
<TABLE>
<CAPTION>
=========================================================================
Total Remaining
Lessor Description Term Payments
=========================================================================
<S> <C> <C> <C>
Eastman Kodak Copier 6/93 - 5/98 $25,200.00
- -------------------------------------------------------------------------
GE Capital Two (2) Vans 12/95 - 11/99 $45,475.60
- -------------------------------------------------------------------------
GE Capital Two (2) Vans 9/94 - 8/98 $23,689.75
- -------------------------------------------------------------------------
GE Capital Two (2) Vans 10/92 - 9/96 $ 1,869.40
- -------------------------------------------------------------------------
GE Capital One (1) Van 11/92 - 10/96 $ 2,164.89
- -------------------------------------------------------------------------
GE Capital One (1) Van 10/96 - 9/00 $17,294.40
- -------------------------------------------------------------------------
GE Capital One (1) Van 10/96 - 9/00 $18,561.60
=========================================================================
</TABLE>
C-1
<PAGE>
Exhibit 10.8
This Document Prepared By
And After Recording Return To:
Rudnick & Wolfe
203 North LaSalle Street
Suite 1800
Chicago, Illinois 60601
Attn: Ross Green, Esq.
LOAN MODIFICATION AGREEMENT
---------------------------
THIS LOAN MODIFICATION AGREEMENT (this or the "Agreement") is made and
entered into as of June 19, 1997, by and between NATIONAL BANK OF CANADA, New
York, a duly licensed branch of National Bank of Canada, a Canadian bank
("Lender"), and MUTUAL BENEFIT CHICAGO MARRIOTT SUITE HOTEL PARTNERS, L.P., a
Rhode Island limited partnership ("Borrower").
R E C I T A L S:
---------------
A. Lender has previously made a loan in the principal amount of Twenty-
Five Million Five Hundred Thousand Dollars ($25,500,000) (the "Loan") to
Borrower pursuant to the terms of a certain Amended and Restated Loan Agreement
dated as of September 24, 1996 by and between Borrower and Lender. The Loan is
evidenced by a certain Amended and Restated Secured Promissory Note dated
September 24, 1996 made by Borrower to Lender in the principal amount of Twenty-
Five Million Five Hundred Thousand Dollars ($25,500,000) (the "Note"), and the
Loan is secured by (i) a certain Amended and Restated Leasehold Mortgage dated
as of September 24, 1996 (the "Mortgage") constituting a lien in favor of Lender
on Borrower's leasehold estate under a certain lease between Borrower, as
tenant, and Simon-Rosemont Developers, as landlord (the "Landlord"), relating to
certain real property legally described in Exhibit A attached hereto and by this
reference made a part hereof, said lease being referred to in the Loan Agreement
as the "Ground Lease" and more fully described in Exhibit E thereof, (ii) a
certain Assignment of Leases and Rents, dated as of September 24, 1996 (the
"Assignment of Rents") made by Borrower in favor of Lender, and (iii) certain
other documents and instruments which, together with the Loan Agreement, the
Note, the Mortgage and the Assignment of Rents, are referred to herein and in
the Loan Agreement as the "Loan Documents." The Mortgage was recorded in the
Office of the Recorder of Deeds of Cook County, Illinois on September 25, 1996
<PAGE>
as Document No. 96733025 and the Assignment of Rents was recorded in the Office
of the Recorder of Deeds of Cook County, Illinois on September 25, 1996 as
Document No. 96733026.
B. All capitalized terms not otherwise defined herein shall have the
meanings ascribed thereto in the Loan Agreement.
C. Borrower and Lender desire to amend the Loan Documents in order to
modify certain provisions therein relating to the timing of Excess Cash Flow
Payments, as set forth hereinbelow.
AGREEMENT:
---------
NOW, THEREFORE, in consideration of the foregoing, and in consideration of
the mutual covenants set forth hereinbelow, the Borrower and Lender hereby agree
as follows:
1. Amendments to Note.
------------------
(a) With respect to Excess Cash Flow Payments that are attributable
to Excess Cash Flow for Fiscal Year 1997 and subsequent Fiscal Years,
subsections (a) and (b) of Section 2.3 of the Note are hereby deleted in
their entirety and the following language is hereby substituted in lieu
thereof:
"On June 24, 1998 and on June 24 of each year thereafter during
the term of this Note, Borrower shall pay to Lender an amount
equal to all Excess Cash Flow attributable to the preceding
Fiscal Year. All Scheduled Principal Payments and other items
referred to in clauses (a) through (i) of Section 1.26 of this
Note which are accrued and paid in any given Fiscal Year shall
be deducted from Net House Profit for the Fiscal Year in which
they are accrued and paid, for the purpose of determining
Excess Cash Flow and Excess Cash Flow Payments attributable to
said Fiscal Year; any such items which are paid after the close
of said Fiscal Year shall not be deducted in determining Excess
Cash Flow and Excess Cash Flow Payments attributable to said
Fiscal Year, unless said items are accrued during the Fiscal
Year for which the Excess Cash Flow Payment is being
determined. All such amounts that are accrued during a given
Fiscal Year, but are not paid during said Fiscal Year, shall be
identified in the financial information required to be
furnished pursuant to Article 7 of the Loan Agreement. At no
time will an Excess Cash Flow Payment that is made during any
given Fiscal Year be deducted in determining Excess Cash Flow
attributable to the Fiscal Year during which said Excess Cash
Flow
2
<PAGE>
Payment is made. By way of illustration only, an example
of such a calculation is attached hereto as Schedule 1."
(b) With respect to Excess Cash Flow Payments attributable to
Fiscal Year 1996, Borrower and Lender hereby agree and stipulate that, in
payments made to Lender on December 24, 1996 and April 11, 1997,
respectively, Borrower paid in full to Lender the Restructuring Fee and
Lender's Expenses, with the exception of certain Lender's Expenses in the
amount of $11,357.50 (the "Additional Lender's Expenses"). Borrower and
Lender acknowledge and agree that based upon the audited financial
statements submitted to Lender with respect to Fiscal Year 1996, the Excess
Cash Flow Payment that would be required to be paid by Borrower to Lender
on June 24, 1997, but for the Additional Lender's Expenses, would be
$315,949. Borrower hereby agrees to pay $315,949 to Lender on June 24,
1997, in addition to the Scheduled Principal Payment and the payment of
Base Rate Interest due on said date, and Borrower and Lender hereby agree
that said payment shall be applied as follows:
(i) $11,357.50 shall be applied by Lender as satisfaction in
full of the Additional Lender's Expenses; and
(ii) The remainder, in the amount of $304,591.50, shall be
applied by Lender as an Excess Cash Flow Payment in
reduction of the principal balance of the Loan.
2. Loan Agreement. Lender hereby acknowledges that Lender has received
--------------
the materials required to be delivered by Borrower pursuant to clause (iii) of
Article 7 of the Loan Agreement. Lender hereby waives any default based upon
Borrower's failure to deliver said information and materials within the time
period specified in said clause (iii). Lender's waiver of said time period,
however, shall be limited to the timing and delivery of the information and
materials relating to Fiscal Year 1996 and shall not apply with respect to or
affect the obligations of Borrower under Article 7 of the Loan Agreement to
deliver to Lender information and materials related to Fiscal Years subsequent
to Fiscal Year 1996 or to any other obligations of Borrower to Lender under
Article 7 of the Loan Agreement for each and every Fiscal Year hereunder,
including Fiscal Year 1996.
3. Cross References in Loan Documents. The Loan Agreement and each of
----------------------------------
the other Loan Documents (including without limitation the Mortgage and the
Assignment of Rents) is hereby modified and amended so that (i) the term "Loan
Documents" shall include this Agreement and (ii) all references in any Loan
Document (including without limitation the Mortgage and the Assignment of Rents)
to the Note or the Loan Agreement shall be deemed to be refer to the Note, or
the Loan Agreement, as the case may be, as modified pursuant to this Agreement.
3
<PAGE>
4. Waiver of Default. Lender hereby waives any and all defaults (and any
-----------------
corresponding right to collect default interest) in connection with the timing
and amounts of any payments made by Borrower from the date of the Note through
the date of this Agreement.
5. Lender's Modification Expenses. Borrower shall, promptly on demand by
------------------------------
Lender, pay to Lender all expenses (including but not limited to attorneys' fees
and expenses) incurred by Lender and its participants as a result of the
modification of the Loan pursuant to this Agreement (said expenses being
referred to herein as "Lender's Modification Expenses"). To the extent that
Lender's Modification Expenses are less than or equal to $6,500, Borrower's
payment of Lender's Modification Expenses shall be classified in the category of
expenses set forth in Section 1.26(e) of the Note with respect to Fiscal Year
1997 and shall be charged against the limit on such expenses as set forth in
Section 1.26(e) of the Note; to the extent that Lender's Modification Expenses
exceed $6,500, the amount of such excess shall be treated, for the purposes of
determining Excess Cash Flow, as though said amount were a Lender's Expense.
6. Conditions Precedent to Modification. Notwithstanding anything to the
------------------------------------
contrary contained herein, the modification of the Loan Documents pursuant to
this Agreement shall be subject to the satisfaction of the following conditions
precedent:
(a) Borrower shall have executed and delivered to Lender this
Agreement, as joined in by the General Partner and Host Marriott for the
sole purposes set forth in the respective Joinders attached hereto;
(b) This Agreement shall have been recorded in the Office of the
Recorder of Deeds of Cook County, Illinois; and
(c) Lender shall have received, at Borrower's sole cost and
expense, an endorsement dated the date of recordation of this Agreement, in
form and substance acceptable to Lender, to the First American Title
Insurance Company Policy of Title Insurance No. LP 3212867 dated September
25, 1996, subject to no additional title exceptions from such policy and
confirming that the validity and first priority of the lien of the Mortgage
and the Assignment of Rents has been unaffected by the execution and
delivery of this Agreement.
7. Further Assurances. Borrower hereby agrees to execute and deliver to
------------------
Lender, as and when requested by Lender, such UCC-3 Financing Statements, and
such letters to depositary institutions, as may be required by Lender following
the execution and delivery of this Agreement, in order to continue unmodified
the priority and perfection of the liens, pledges and other security interests
in favor of Lender under the Loan Documents.
8. Representations and Warranties of Borrower. Borrower hereby
------------------------------------------
represents and warrants to Lender as follows:
4
<PAGE>
(a) There have been no modifications or amendments to Borrower's
Amended and Restated Agreement of Limited Partnership (the "Partnership
Agreement") other than as certified by the General Partner on September 24,
1996;
(b) Borrower is in good standing under the laws of Rhode Island and
is duly qualified as a foreign limited partnership to transact business in
Illinois;
(c) The General Partner is in good standing in the State of Delaware
and has approved the execution and delivery of this Agreement by the
Borrower;
(d) This Agreement has been duly authorized, executed and delivered
in accordance with the requirements of law and in accordance with the
requirements of Borrower's Certificate of Limited Partnership and the
Partnership Agreement and any amendments thereto; and
(e) The Ground Lease is in full force and effect, Borrower is not in
default thereunder and there have been no modifications or amendments to
the Ground Lease except as noted in the Certificate of the General Partner
relating to the Ground Lease dated as of September 24, 1996.
9. Miscellaneous.
-------------
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Illinois except to the extent preempted by
United States federal law.
(b) Borrower and Lender each acknowledge that there are no other
understandings, agreements or representations, either oral or written,
express or implied, that are not embodied in the Loan Documents and this
Agreement, which collectively represent a complete integration of all prior
and contemporaneous agreements and understandings of Borrower and Lender;
and that all such prior understandings, agreements and representations are
hereby modified as set forth in this Agreement. Except as expressly
modified hereby, the terms of the Loan Documents are and remain unmodified
and in full force and effect.
(c) This Agreement may be executed in any number of counterparts and
each such counterpart shall be deemed to be an original. All such
counterparts shall constitute one and the same instrument and shall be
enforceable against all parties hereto, notwithstanding that they are not
all signatories to the same counterpart.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
MUTUAL BENEFIT CHICAGO MARRIOTT
SUITE HOTEL PARTNERS, L.P., a Rhode Island
limited partnership
By: MOHS CORPORATION, a Delaware
corporation, its sole General Partner
By: /s/ Earla L. Stowe
-------------------------------------
Name: Earla L. Stowe
-----------------------------------
Title: Vice President
----------------------------------
NATIONAL BANK OF CANADA
By: /s/ E. Lynn Forgosh /s/ J. Michael Smith
-------------------------------------------
Name: E. Lynn Forgosh J. Michael Smith
-----------------------------------------
Title: Vice President Vice President
----------------------------------------
6
<PAGE>
JOINDER
-------
The undersigned, MOHS Corporation, hereby joins in the attached Loan
Modification Agreement dated June 19, 1997, for the sole purposes of (i)
consenting to the execution thereof by the Borrower, (ii) reaffirming the terms
and provisions of the Foreclosure Guaranty, and (iii) agreeing that,
notwithstanding the execution, delivery and recordation of the Loan Modification
Agreement, the Foreclosure Guaranty shall remain in full force and effect in
accordance with its terms.
MOHS CORPORATION, a Delaware
corporation
By: /s/ Earla L. Stowe
-------------------------------------
Name: Earla L. Stowe
-----------------------------------
Title: Vice President
----------------------------------
7
<PAGE>
JOINDER
-------
The undersigned, Host Marriott Corporation, a Delaware corporation, hereby
joins in the attached Loan Modification Agreement dated June 19, 1997 for the
sole purposes of (i) reaffirming the terms and provisions of the Environmental
Indemnification Agreement dated June 12, 1989 made by Host Mariott Corporation,
formerly known as Marriott Corporation, in favor of Lender, and (ii) agreeing
that, notwithstanding the execution, delivery and recordation of the Loan
Modification Agreement, said Environmental Indemnification Agreement shall
remain in full force and effect in accordance with its terms.
HOST MARRIOTT CORPORATION, a
Delaware corporation
By: /s/ Bruce D. Wardinski
-------------------------------------
Name: Bruce D. Wardinski
-----------------------------------
Title: Senior VP and Treasurer
----------------------------------
8
<PAGE>
STATE OF MARYLAND
SS
COUNTY OF MONTGOMERY
I, Susan Levenson, a Notary Public, in and for said County, in
the State aforesaid, DO HEREBY CERTIFY that Earla L. Stowe,
Vice President of MOHS CORPORATION, a Delaware corporation,
personally known to me to be the same person whose name is subscribed to the
foregoing instrument as such Vice President appeared before me this day in
person and acknowledged that he/she signed and delivered said instrument as
his/her own free and voluntary act and as the free and voluntary act of said
corporation in its capacity as General Partner of Mutual Benefit Chicago
Marriott Suite Hotel Partners, L.P., for the uses and purposes therein set
forth.
GIVEN under my hand and Notarial Seal, this 20th day of June, 1997.
/s/ Susan Levenson
------------------------------------
Notary Public
My Commission expires:______________
SUSAN LEVENSON
NOTARY PUBLIC STATE OF MARYLAND
My Commission Expires October 18, 1998
<PAGE>
STATE OF NEW YORK
SS
COUNTY OF NEW YORK
I, Una Teresa Finn, a Notary Public, in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that E. Lynn Forgosh and J. Michael Smith, Vice
Presidents of NATIONAL BANK OF CANADA, New York, a duly licensed branch of
National Bank of Canada, a Canadian bank, personally known to me to be the same
person whose name is subscribed to the foregoing instrument as such Vice
Presidents appeared before me this day in person and acknowledged that he/she
signed and delivered said instrument as his/her own free and voluntary act and
as the free and voluntary act of said bank, for the uses and purposes therein
set forth.
GIVEN under my hand and Notarial Seal, this 19 day of June, 1997.
/s/ Una Teresa Finn
------------------------------------
Notary Public
UNA TERESA FINN
Notary Public, State of New York
No. 01-F15056871
Qualified in Queens County
Commission Expires March 11, 1998
My Commission expires:
--------------
<PAGE>
STATE OF MARYLAND
SS
COUNTY OF MONTGOMERY
I, Susan Levenson, a Notary Public, in and for said County, in
the State aforesaid, DO HEREBY CERTIFY that Bruce D. Wardinski,
Senior Vice President of HOST MARRIOTT CORPORATION, a Delaware
corporation, personally known to me to be the same person whose name is
subscribed to the foregoing instrument as such Sr. Vice President appeared
before me this day in person and acknowledged that he/she signed and delivered
said instrument as his/her own free and voluntary act and as the free and
voluntary act of said corporation, for the uses and purposes therein set forth.
GIVEN under my hand and Notarial Seal, this 23 day of June,
1997.
/s/ Susan Levenson
------------------------------------
Notary Public
My Commission expires: _____________
SUSAN LEVENSON
NOTARY PUBLIC STATE OF MARYLAND
MY COMMISSION EXPIRES OCTOBER 18, 1998
<PAGE>
Exhibit 10.9
MARRIOTT HOTEL
GROUND LEASE
BETWEEN
SIMON-ROSEMONT DEVELOPERS LANDLORD
AND
MARRIOTT CORPORATION
TENANT
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE ONE -- DEFINITIONS
- --------------------------
1.01 Definition of Terms------------------------------- 2
ARTICLE TWO -- CONDITIONS
- -------------------------
2.01 Lease of Premises--------------------------------- 13
2.02 Title--------------------------------------------- 13
2.03 Economic Feasibility------------------------------ 17
2.04 Zoning and Public Approvals----------------------- 18
2.05 Water and Soil Conditions------------------------- 19
2.06 Hotel Construction Documents---------------------- 20
2.07 Building Permit, Construction--------------------- 23
2.08 Lease Commencement Date--------------------------- 23
2.09 Construction of Tenant Improvements--------------- 24
2.10 Landlord Responsibilities------------------------- 25
2.11 Methane Gas--------------------------------------- 28
2.12 Soil Toxicity------------------------------------- 28
ARTICLE THREE -- TERM
- ---------------------
3.01 Initial Term-------------------------------------- 31
3.02 Extensions of Term-------------------------------- 31
3.03 Notice of Termination----------------------------- 33
ARTICLE FOUR -- RENTALS
- -----------------------
4.01 Rentals------------------------------------------- 34
4.02 Payment of Rental Commencing with Opening Date---- 35
4.03 Place for Payment of Rentals---------------------- 36
4.04 Records, Reports of Sales------------------------- 36
4.05 Rental Abatement---------------------------------- 38
ARTICLE FIVE -- USE AND OCCUPANCY
- ---------------------------------
5.01 Quiet Possession---------------------------------- 39
5.02 Use----------------------------------------------- 39
5.03 Signs--------------------------------------------- 40
5.04 Easements----------------------------------------- 42
5.05 Improvements; Personal Property------------------- 45
5.06 Liens--------------------------------------------- 48
5.07 Operational Licenses and Permits------------------ 49
5.08 Maintenance--------------------------------------- 50
5.09 Compliance with Laws------------------------------ 52
5.10 Impositions--------------------------------------- 52
i
<PAGE>
Page
----
5.11 Right to Contest Impositions---------------------- 54
5.12 Landlord's Right to Pay Taxes--------------------- 56
5.13 Utility Payments---------------------------------- 56
5.14 Change in Use------------------------------------- 57
5.15 Restrictions on Adjacent Tract-------------------- 61
5.16 Failure to Make Payments-------------------------- 62
ARTICLE SIX -- LEASEHOLD MORTGAGES
- ----------------------------------
6.01 Leasehold Mortgage-------------------------------- 64
6.02 Mortgage Fees and Expenses------------------------ 76
6.03 Equipment Leasing--------------------------------- 77
6.04 Landlord's Right to Purchase Leasehold Mortgage--- 78
6.05 Amendment of Lease-------------------------------- 83
6.06 Financing by Landlord----------------------------- 83
ARTICLE SEVEN -- INSURANCE -- DAMAGE AND DESTRUCTION
- ----------------------------------------------------
7.01 Construction Insurance---------------------------- 87
7.02 Public Liability and Workers' Compensation
Insurance---------------------------------------- 88
7.03 Hazard Insurance---------------------------------- 89
7.04 Sale of Alcoholic Beverages----------------------- 90
7.05 Business Interruption Insurance------------------- 91
7.06 Coverage and Certificates------------------------- 91
7.07 Indemnity----------------------------------------- 94
7.08 Damage or Destruction----------------------------- 95
7.09 Damage Within Five Years of End of Term----------- 96
7.10 Mortgagee's Application of Proceeds--------------- 97
7.11 No Abatement of Rent------------------------------ 98
ARTICLE EIGHT -- CONDEMNATION
- -----------------------------
8.01 Definitions--------------------------------------- 99
8.02 Notice of Taking; Representation------------------ 101
8.03 Total Taking-------------------------------------- 102
8.04 Substantial Taking-------------------------------- 104
8.05 Partial Taking------------------------------------ 104
8.06 Temporary Taking---------------------------------- 105
8.07 Disputes in Division of Award--------------------- 105
8.08 Separate Claims----------------------------------- 106
8.09 Mortgagee's Applications of Awards---------------- 106
8.10 Leasehold Mortgagee Holding of Awards------------- 106
ii
<PAGE>
Page
----
ARTICLE NINE -- ARBITRATION
- ---------------------------
9.01 Arbitration--------------------------------------- 108
ARTICLE TEN -- DEFAULT
- ----------------------
10.01 Events of Default--------------------------------- 111
10.02 Landlord's Rights Upon an Event of Default-------- 112
10.03 Tenant's Rights on Default------------------------ 113
10.04 Implied Waiver------------------------------------ 113
ARTICLE ELEVEN -- ASSIGNMENT AND SUBLETTING
- -------------------------------------------
11.01 Binding Effect------------------------------------ 114
11.02 Marriott Assignment------------------------------- 114
11.03 Other Assignment---------------------------------- 117
11.04 Subletting---------------------------------------- 119
11.05 Assignment and Subletting Upon Default
Under Leasehold Mortgage------------------------ 119
ARTICLE TWELVE -- COMMON AREA
- -----------------------------
12.01 Right to Use Common Area and
Design Approval--------------------------------- 124
12.02 Maintenance of the Common Area-------------------- 124
12.03 Rules and Regulations----------------------------- 126
12.04 Changes in the Common Area------------------------ 128
12.05 Temporary Closings-------------------------------- 128
12.06 Covenant to Pay Common Area
Maintenance Costs------------------------------- 129
12.07 Common Area Maintenance Costs--------------------- 129
12.08 Calculation of Common Area Charge----------------- 132
12.09 Budget-------------------------------------------- 133
12.10 Operator------------------------------------------ 133
ARTICLE THIRTEEN -- MISCELLANEOUS PROVISIONS
- --------------------------------------------
13.01 Trade Name and Trademarks------------------------- 135
13.02 Tenant's Right of First Negotiation--------------- 136
13.03 Purchase of Hotel by Landlord--------------------- 138
13.04 Landlord's Right of First Negotiation------------- 141
13.05 Brokers' Fees------------------------------------- 142
13.06 Gender and Number--------------------------------- 143
13.07 Notices------------------------------------------- 143
13.08 Construction-------------------------------------- 144
13.09 Applicable Law------------------------------------ 144
13.10 Partial Invalidity-------------------------------- 144
13.11 Authority to Execute------------------------------ 144
iii
<PAGE>
Page
----
13.12 Recording----------------------------------------- 144
13.13 Headings------------------------------------------ 145
13.14 Binding Effect------------------------------------ 145
13.15 No Partnership------------------------------------ 145
13.16 Estoppel Certificates----------------------------- 146
13.17 Holding Over-------------------------------------- 147
13.18 Tenant's and Landlord's
Limited Liability------------------------------- 147
13.19 Attorneys' Fees----------------------------------- 149
13.20 Entire Agreement; Merger-------------------------- 149
EXHIBIT A - Legal Description of Leased Premises
EXHIBIT B - Permitted Exceptions
EXHIBIT C - Adjacent Tract
EXHIBIT D - Common Area
EXHIBIT D-1 - Adjacent Common Area
EXHIBIT D-2 - Common Area (Tenant Maintenance Responsibility)
EXHIBIT D-3 - Common Area (Landlord Maintenance Responsibility)
EXHIBIT D-4 - Common Area Maintenance Costs
EXHIBIT E - Master Plan
EXHIBIT F-1 - Common Area Improvements
EXHIBIT F-2 - Commercial Space
EXHIBIT F-3 - Enclosed Passageway
EXHIBIT G - Signage
EXHIBIT H - Parking
EXHIBIT I - Adjacent Facility Area
iv
<PAGE>
0066f
GROUND LEASE
------------
THIS LAND LEASE ("Lease") is executed as of the 16 day of June, 1986
("Effective Date") by SIMON-ROSEMONT DEVELOPERS, an Illinois limited
partnership as successor to Simon-Solters Developers with Higgins-Manheim
Properties, an Illinois general partnership, and BNW-Rosemont Properties, an
Illinois limited partnership, as general partners, with a mailing address c/o
Hawthorn Realty Group, 8 East Heron Street, Chicago, Illinois 60611 ("Landlord")
and MARRIOTT CORPORATION, a Delaware corporation, with a mailing address at
10400 Fernwood Road, Bethesda, Maryland 20058 ("Tenant").
R E C I T A L S
Landlord is the holder of fee title to the Leased Premises, as described in
Section 1.01. Landlord is willing to lease to Tenant and Tenant is willing to
lease from Landlord the Leased Premises for the term and upon the conditions set
forth herein.
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
herein contained, and for other good and valuable considerations, the
sufficiency and receipt of which are hereby expressly acknowledged and
confirmed, Landlord and Tenant agree as follows:
<PAGE>
ARTICLE ONE
DEFINITIONS
-----------
1.01 Definition of Terms
-------------------
As used in the Lease, the following terms shall have the meanings indicated
below:
"Additional Rental" shall have the meaning ascribed to it in Section
-----------------
5.14(c).
"Adjacent Tract" shall have the meaning ascribed to it in Section 5.15.
--------------
"Affiliate" shall mean any individual, corporation, partner, partnership,
---------
trust or entity which owns or controls or is owned or controlled in whole or in
part by Tenant or any successor Tenant or their respective subsidiary(ies) or
parent (s).
"Anniversary Date" shall have the meaning ascribed to it in Section
----------------
5.14(b)(i).
"Annual Gross Room Sales" shall mean the annual gross receipts determined
-----------------------
on an accrual basis, including credit charges (minus credit charges written off
as bad debts, plus bad debts written off and subsequently recovered), received
by or for the benefit of Tenant, during each Fiscal Year (and Partial Fiscal
Year), from the rental of Hotel guest rooms upon the Leased Premises, but shall
not include (i) receipts from telephone, laundry, gift shops, room service,
parking or valet services, recreation facilities, rental of space
- 2 -
<PAGE>
(including meeting rooms, ballrooms and banquet facilities) other than Hotel
guest rooms intended for overnight accommodations, any food or beverage sales or
any other receipts received by Tenant other than receipts from the sale of guest
rooms, (ii) gratuities to employees, nor (iii) any federal, state and municipal
sales, excise, use or similar taxes collected from patrons or guests.
"Award " shall have the meaning ascribed to it in Section 8.01(f).
-----
"Bona Fide Institutional Lender" shall mean (i) a federal or state
------------------------------
chartered bank, trust company, savings and loan association or building loan
association (whether acting individually or in any fiduciary capacity), (ii) an
insurance company, (iii) an educational institution, (iv) a profit-sharing or
employees' pension trust or fund or the like, (v) a real estate investment
trust, or (vi) a federal, state or local government or quasi-governmental
department, agency or other subdivision thereof.
"Common Area" means all exterior areas within the boundaries of the
-----------
Adjacent Tract and Leased Premises which are to be made available for the
non-exclusive general use, convenience and benefit of Landlord, Tenant, the
occupants of Landlord's improvements on the Adjacent Tract, and their respective
guests and invitees. The Common Area in the. Adjacent Tract and Leased Premises
is generally as shown on Exhibit "D" attached hereto. Among other things, Common
Area
- 3 -
<PAGE>
includes (a) landscaped and planted areas, (b) all pools and fountains, (c) all
outdoor courtyards, promenades, sidewalks (covered and uncovered), stairways and
walkways, located in any portion of the Adjacent Tract and Leased Premises to be
made available for the non-exclusive general use, convenience and benefit of
Landlord or Tenant, (d) all utility facilities exclusively for the Common Area,
and (e) all driveways, roadways, surface parking, curbs and lighting standards,
and traffic directional signs located within the Common Area. The Common Area
shall not include retail areas, other commercial areas or any other area within
any building on the Adjacent Tract or Leased Premises.
"Common Area Budget" shall have the meaning set forth in Section 12.09
------------------
hereof.
"Common Area Charge" shall have the meaning set forth in Section 12.08
------------------
hereof.
"Common Area Improvements" means all improvements to be constructed as part
------------------------
of the Common Area on the Adjacent Tract.
"Common Area Maintenance Costs" shall have the meaning set forth in Section
-----------------------------
12.07 hereof.
"Construction Commencement Date" shall mean the date the foundation permit
------------------------------
(or such other permit which provides for the commencement of foundation work) is
issued by the Village of Rosemont Director of Public Works.
"Conversion Date" shall have the meaning ascribed to it in Section 5.14(a).
---------------
- 4 -
<PAGE>
"Default Percentage Rental" shall have the meaning ascribed to it in
-------------------------
Section 6.0l(b)(iii).
"Effective Date" shall have the meaning ascribed to it in the preamble.
--------------
"Equipment Lessor" shall have the meaning ascribed to it in Section 6.03.
----------------
"Equipment Sublessor" shall have the meaning ascribed to it in Section
-------------------
6.03.
"Event(s) of Default" shall have the meaning ascribed to it in Section
-------------------
10.01.
"Extended Term" shall mean each of the successive periods of ten (10)
-------------
Fiscal Years following the expiration of the Initial Term for which the Lease
may be extended in accordance with Section 3.02.
"Feasibility Period" shall have the meaning ascribed to it in Section
------------------
2.03(a).
"Fee Mortgage(s)" shall have the meaning ascribed to it in Section 6.06.
---------------
"Fiscal Year" shall mean the same period as Tenant's Fiscal Year, which now
-----------
begins at 12:01 a.m. on the first Saturday following the Friday closest to
December 31 of each calendar year and shall consist of thirteen (13) Accounting
Periods, thus providing a Fiscal Year of fifty-two (52) weeks, except that when
appropriate (every five or six years), a Fiscal Year shall contain fifty-three
(53) weeks. The first full Fiscal Year shall begin on the Saturday following the
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Friday closest to the first December 31st following the Opening Date. Any period
between the Opening Date and the beginning of the first full Fiscal Year of the
Initial Term, as well as any period between the last full Fiscal Year and the
expiration or termination of the Lease, shall be considered a "Partial Fiscal
Year." If Tenant's Fiscal Year is changed in the future, appropriate adjustments
in the Lease's accounting and reporting procedures shall be made; provided,
however, that no such change or adjustments shall in any way alter the Term of
the Lease or in any way reduce or diminish the Rentals due Landlord.
"Hotel" shall mean the hotel building of approximately two hundred sixty
(260) guest rooms, and having meeting rooms, restaurants, coffee shops, cocktail
lounges, parking and related support and service facilities and areas ancillary
thereto, and all fixtures, furniture, furnishings, equipment and supplies
installed therein which Tenant intends to develop on the Leased Premises.
"Hotel Construction Documents" shall have the meaning ascribed to it in
Section 2.06.
"Hotel Development Costs" shall mean the total dollar cost incurred by or
on behalf of Tenant in designing, planning, furnishing, equipping and supplying
the Hotel and all parts and departments thereof, including the cost of all
labor, materials and services; all professional fees, including those of
architects and engineers, whether paid to third parties or
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incurred by Tenant's personnel, real estate taxes, utilities and other carrying
charges incurred during construction, including, without limitation,
construction period interest, whether actual or imputed; public liability and
property damage insurance; any required bonds securing work against liens for
labor and material; accounting and attorneys fees; charges and premiums for
searching and securing title; any amounts paid or payable by or on behalf of
Tenant for sewer assessments, sidewalks and/or streets or street approaches;
advertising costs; pre-opening expenses incurred in promoting, marketing,
staffing and testing the Hotel; the cost of initial inventories of supplies,
equipment and working capital required for the proper operation of the Hotel;
building use, occupancy and operations licenses and permits; and costs incurred
in connection with financing the Hotel, including commitment, standby and
similar fees, printing and duplicating expenses, documentary, transfer and tax
stamps, mortgage taxes, recording charges and lenders' counsel, and consultants'
fees.
"Hotel Schematic Documents" shall have the meaning ascribed to it in
Section 2.06.
"Impositions" shall mean real estate taxes, ad valorem property taxes,
assessments, water and sewer rates and charges and other governmental charges,
general and special, ordinary and extraordinary, and all payments in lieu of
same, which are assessed, levied, confirmed or imposed on the Leased Premises
and/or the Hotel.
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"Initial Term" shall mean the period of time commencing with the Lease
Commencement Date and running for the three (3) time segments set forth in
Section 3.01.
"Investor" shall have the meaning ascribed to it in Section 11.02(d).
"Landlord" shall have the meaning ascribed to it in the preamble.
"Landlord's Option" shall have the meaning ascribed to it in Section
6.04(a).
"Lease Commencement Date" shall have the meaning ascribed to it in Section
2.08.
"Lease Interest Rate" shall have the meaning ascribed to it in Section
4.04.
"Leased Premises" shall mean the parcel of land located at Rosemont, County
of Cook, in the State of Illinois consisting of approximately four and nineteen
hundredths (4.19) acres, as the same is more fully described in Exhibit "A",
together with all of the rights, easements and appurtenances thereto.
"Leasehold Mortgage" shall have the meaning ascribed to it in Section 6.01.
"Leasehold Mortgagee" shall have the meaning ascribed to it in Section
6.01.
"Leasehold Mortgagee's Notice" shall have the meaning ascribed to it in
Section 6.04(a).
"Master Plan" shall mean that master plan approved by the parties as
shown on Exhibit "E" for the mixed--use development
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of the Hotel on the Leased Premises, Common Areas, and certain of Landlord's
improvements on the Adjacent Tract. Neither party shall make any change or
modification to the Master Plan without the prior written consent of the other
party.
"Minimum Rental" shall mean the Rental payable under Section 4.0l(b)(l).
"Mortgage" shall mean any Mortgage referred to in Article Six constituting
a lien upon the interest of Tenant in the Lease and the leasehold estate hereby
created and/or the Leased Premises and shall include an indenture of mortgage or
a deed of trust.
"Mortgagee" shall mean the holder of a Mortgage.
"Notice of Intended Taking" shall have the meaning ascribed to it in
Section 8.01(e).
"Opening Date" shall be the date on which the Hotel officially opens for
business by admitting paying guests, but shall not be later than ninety (90)
days following the date upon which construction of the Hotel has been
substantially completed. The Opening Date shall be set forth in a certificate of
completion in recordable form executed by Landlord and Tenant within sixty (60)
days after such date.
"Partial Fiscal Year" shall have the meaning ascribed to it in the
definition of Fiscal Year.
"Partial Taking" shall have the meaning ascribed to it in Section 8.01(d).
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<PAGE>
"Percentage Rental" shall mean the Rental payable in accordance with the
provisions of Section 4.0l(b)(2).
"Permitted Exceptions" shall have the meaning set forth in Section 2.02(a).
"Personal Property" shall have the meaning ascribed to it in Section
5.05(c).
"Price Index" shall mean the most recent Consumer Price Index for Urban
Wage Earners and Clerical Workers for the statistical metropolitan area in which
the Leased Premises is located, prepared and published by the Bureau of Labor
Statistics of the Department of Labor of the Government of the United States
(1967=100) (or any comparable index then prepared and published by an agency of
the Government of the United States, if the aforesaid Consumer Price Index is
not at that time so prepared and published), appropriately adjusted for changes
in the manner in which such index is prepared and/or the year upon which such
index is based.
"Public Approvals" shall mean all licenses and permits required for the
construction and operation of the Hotel issued by all governmental authorities,
whether local, state or federal, having jurisdiction over the Hotel and its
operation, including but not limited to zoning, site plan approval,
environmental approvals, building permits, hotel operating permits, and licenses
for the sale of food and alcoholic beverages.
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"Rental" shall mean, collectively, both Minimum Rental and Percentage
Rental.
"Rental Commencement Date" shall mean the date on which Rental begins to
accrue under Section 4.01.
"Subsequent Anniversary Date(s)" shall have the meaning ascribed to it in
Section 5.14(b)(ii).
"Substantial Taking" shall have the meaning ascribed to it in Section
8.01(c).
"Suite" shall mean with respect to guest room a three (3) room product
incorporating a living room, bedroom and bath.
"Survey" shall have the meaning ascribed to it in Section 2.02(b)(i).
"Taking" shall have the meaning ascribed to it in Section 8.01(a).
"Tax Parcel" shall have the meaning ascribed to it in Section 5.10(a).
"Tenant" shall have the meaning ascribed to it in the preamble.
"Tenant's Investment" shall have the meaning ascribed to it in Section
5.05(a).
"Term" shall mean the term of the Lease as set forth in Article Three and
shall include the Initial Term and any Extended Term.
"Title Commitment" shall have the meaning ascribed to it in Section
2.02(c)(ii).
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"Title Company" shall mean Chicago Title Insurance Company or such other
title company mutually approved by Landlord and Tenant.
"Title Exceptions" shall have the meaning ascribed to it in Section
2.02(a).
"Total Taking" shall have the meaning ascribed to it in Section 8.01(b).
"Trade Equipment" shall have the meaning ascribed to it in Section 6.03.
"Unavoidable Delay" shall mean any delay due to such causes as: strikes;
lockouts; acts of God; inability to obtain labor, materials, equipment or
supplies; governmental restrictions; a war or enemy action or invasion; civil
commotion; insurrection; a riot; mob violence; malicious mischief or sabotage;
an unusual failure of transportation; fire or any other casualty; adverse
weather conditions; a condemnation; any litigation or any law, order or
regulation of any governmental, quasi-governmental, judicial or military
authority; or other similar causes beyond the reasonable control of Tenant, any
of which has the effect of delaying either party's performance of its
obligations hereunder, provided that the party claiming Unavoidable Delay (i)
shall have notified the other party by notice given not later than thirty (30)
days after the party providing notice has knowledge of the occurrence thereof,
and (ii) shall use reasonable efforts to minimize the effects thereof.
END OF ARTICLE ONE
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ARTICLE TWO
CONDITIONS
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2.01 Lease of Premises
-----------------
In consideration of the Rentals to be paid hereunder and the mutual
covenants, agreements, terms and conditions herein contained, Landlord hereby
grants and leases to Tenant and Tenant hereby takes and leases from Landlord the
Leased Premises, upon the terms and conditions herein contained.
2.02 Title
-----
(a) Landlord represents and warrants that it owns marketable fee title to
the Leased Premises and that the title thereto is free and clear of all third
party interests, including, but not limited to, all easements, liens,
restrictions, rights-of-way, covenants, reservations and all other title
exceptions (collectively, "Title Exceptions") except for those matters set forth
on Exhibit "B" (collectively, "Permitted Exceptions").
(b) Landlord shall not, at any time after the Effective Date and during
the term of the Lease, place or permit any Title Exceptions (except the
Permitted Exceptions) to be placed upon the Leased Premises unless the prior
written approval of Tenant has been obtained.
(c) Promptly after the Effective Date, Landlord, at its cost, shall
furnish Tenant with:
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(i) A reproducible copy of a current survey ("Survey") (a topographical
survey was provided by Landlord and is suitable for Tenant's needs) of the
Leased Premises showing the legal description, the site area, the exact location
of any encroachments, easements, area rights-of-way, and all other matters
relating to the Leased Premises which are normally shown on detailed surveys,
and otherwise prepared in accordance with the minimum standard requirements
adopted by the American Land Title Association, which survey shall be prepared
by a registered surveyor and shall be certified to Tenant and to the Title
Company; and
(ii) A preliminary commitment ("Title Commitment") by the Title Company.
The Title Commitment shall set forth the state of title to the Leased Premises,
together with all exceptions or conditions to such title, including, but not
limited to, all easements, restrictions, rights-of-way, covenants,
reservations, and all other encumbrances affecting the Leased Premises which
would appear in an owner's tit1e policy, if issued. The Title Commitment shall
contain the express commitment of the Title Company to issue a title insurance
policy on ALTA Owner's Policy Form B-1970 (the "Title Policy"), insuring
Landlord's and Tenant's interest in the Leased Premises. Tenant shall have the
right to require such other endorsements to the Title Policy, such as contiguity
and access endorsements, and such "insuring over" of title encumbrances and
exceptions by the Title Company as
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Tenant's counsel may reasonably request. At such time as Landlord causes the
Title Commitment to be furnished to Tenant, Landlord shall further cause to be
furnished to Tenant true, correct and legible copies of all instruments referred
to in the Title Commitment as conditions or exceptions to title to the Leased
Premises, including liens. On the Lease Commencement Date, Landlord shall cause
the Title Policy, on ALTA's Owner's Policy Form B-1970, to be furnished to
Tenant. The Tit1e Policy shall be issued in the amount set forth below and shall
insure fee simple, indefeasible title to the Leased Premises in Landlord, as
well as the marketability of such title, and shall insure Tenant's interest in
the Leased Premises. The Title Policy may contain the Permitted Exceptions, but
shall contain no other exceptions to title to the Leased Premises, other than
the preprinted Schedule of Exclusions from Coverage contained in the foregoing
ALTA form of Title Policy not otherwise insured by the endorsements (the Title
Policy shall insure over (1) the rights or claims of parties in possession but
not shown in public records, (2) easements or claims of easements not shown by
the public records, (3) adverse claims created by artificial means, and (4)
riparian right-of-way). Title insurance premiums in respect of the Title
Policy insuring Tenant's interest in the Leased Premises, including Mortgagee's
coverage, if any, shall be payable by Landlord for a value up to Three Million
Dollars ($3, 000,000).
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(c) Tenant shall have sixty (60) days from the last to be received of the
Survey, the Title Commitment and legible copies of the full text of all
instruments relating to the Title Exceptions and/or referred to in the Title
Commitment to determine whether the state of facts revealed by the Survey and
any of the Title Exceptions will, in Tenant's judgment, presently or in the
future adversely affect title to the Leased Premises or the development and
operation of the Hotel on a timely, economical and efficient basis. If, within
such sixty (60) days, Tenant objects to any state of facts revealed by the
Survey or to Title Exceptions (except the Permitted Exceptions) disclosed by the
Title Commitment or by Tenant's independent title investigation, Tenant shall
notify Landlord, and Landlord shall have sixty (60) days after the receipt of
such notice to remove any state of facts or the Title exceptions objected to by
Tenant. If Landlord does not correct the state of facts or the Title Exceptions
objected to by Tenant within such sixty (60) days, Tenant will have the option,
to be exercised within thirty (30) days following the expiration of such period,
to (x) give Landlord additional time to correct the state of facts or eliminate
the Title Exceptions objected to by Tenant, (y) waive Tenant's objections to
said state of facts or Title Exception, or (z) terminate the Lease without
further liability to either party.
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2.03 Economic Feasibility
(a) Tenant shall, for one hundred fifty (150) days (or such other period
where indicated below for a particular matter) after the Effective Date
("Feasibility Period"), conduct such investigations as Tenant deems necessary or
appropriate to determine, in Tenant's sole discretion, whether construction and
operation of the Hotel is economically and operationally feasible. During the
Feasibility Period Tenant shall have the right to satisfy itself regarding all
matters bearing on the feasibility of the Hotel construction and operation,
including but not limited to:
(i) Applicable laws, regulations and ordinances, including, without
limitation, zoning laws and ordinances, which may have an impact upon the
construction and operation of the Hotel;
(ii) Ingress and egress to and from the Leased Premises and other
matters relating to vehicular traffic flow and control;
(iii) Water, soil and other conditions (including, but not limited
to, potential methane and toxicity problems) affecting the Leased Premises; and
(iv) Estimates of Hotel Development Costs (thirty (30) days after
Landlord's approval of Hotel Schematic Documents as set forth in Section 2.06).
(b) If Tenant determines during the Feasibility Period that the
construction and operation of the Hotel is not
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feasible, Tenant shall give Landlord written notice to that effect, and the
Lease shall automatically terminate without further liability to either party.
If such notice is not given by the last day of the Feasibility Period (or such
other period where specified above, if any, for a particular matter),
development of the Hotel shall be deemed feasible, and Tenant's right to
terminate the Lease for the reasons set forth in this Section 2.03 shall lapse
and expire.
2.04 Zoning and Public Approvals
(a) Landlord represents that the Leased Premises are presently zoned such
that the development and operation of the Hotel is permitted by such zoning
laws. Tenant shall, during the Feasibility Period, satisfy itself that the
applicable zoning ordinances will permit construction and operation of a hotel
having up to two hundred sixty (260) guest rooms with a height of up to seven
hundred eighty (780) feet above mean sea level and total parking requirements of
two hundred ninety-five (295) spaces and that Tenant will be able to obtain all
required Public Approvals when properly applied for. If Tenant is not so
satisfied within such period, Tenant shall have the option to terminate the
Lease pursuant to Section 2.03(b) without further liability to either party. If
Tenant does not so notify Landlord within said period, Tenant's right under this
Section to terminate the Lease shall be waived; provided, however, that if, due
to causes beyond
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Tenant's reasonable control, the zoning for the Leased Premises or the
requirements for the Public Approvals are subsequently changed after the end of
the Feasibility Period so as to prevent, limit or materially restrict the
development or operation of the Hotel as initially contemplated by Landlord and
Tenant, Tenant may terminate the Lease without further liability to Landlord.
(b) Landlord shall, upon Tenant's request, take such action and execute
and deliver such instruments as may be necessary or appropriate to permit Tenant
to obtain all Public Approvals and easements or similar items which in Tenant's
judgment may be necessary or desirable to permit development and operation of
the Hotel upon the Leased Premises on an orderly, efficient, timely and
economical basis. Tenant shall indemnify and hold Landlord harmless from and
against any costs and liabilities incurred by Landlord resulting from Landlord's
execution of such instruments for the Leased Premises as Tenant shall request.
2.05 Water and Soil Conditions
(a) Landlord represents that to the best of its knowledge there are no
water, soil or other conditions, including hazardous wastes, affecting the
Leased Premises which would prevent the economical construction or operation of
the Hotel.
(b) During the Feasibility Period, Tenant will, with all due diligence,
within the one hundred fifty (150) day time
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limit set therefor in Section 2.03(a), proceed to obtain a soils study of the
Leased Premises to determine if soil and other physical conditions (including,
but not limited to, the presence of methane and soil toxicity) of the Leased
Premises are such as to permit the construction of the Hotel thereon on an
economically feasible basis. Tenant shall hold Landlord harmless from any
liability that may arise due to such study. If Tenant determines after the
receipt of such soils study that there are water, soil or other conditions on
the Leased Premises that would prevent Tenant's intended use or will cause
development of the Hotel to be economically not feasible, Tenant shall so notify
Landlord in accordance with Section 2.03(b).
2.06 Hotel Construction Documents
Within thirty (30) days after the provisions of Section 2.02, 2.03, 2.04
and 2.05 have been fulfilled or waived by Tenant, and provided Tenant has not
terminated the Lease, Tenant shall proceed (if Tenant has not yet proceeded)
with due diligence to develop, or cause to be developed, schematic documents for
the design of the Hotel ("Hotel Schematic Documents") in accordance with the
Master Plan; provided, however, that Landlord is diligently proceeding with the
design of its first office building on the Adjacent Tract. The Hotel Schematic
Documents and the aesthetic treatment of exterior surfaces shall be subject to
Landlord's approval,
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such approval not to be unreasonably withheld or delayed; provided, however,
Landlord shall be deemed to have consented to brick, glass reinforced concrete
and precast concrete for the exterior surfaces of the Hotel (including the
enclosed passageway identified on Exhibit F-3). If Landlord shall reasonably
disapprove of any part or portion of the Hotel Schematic Documents, Landlord
shall so notify Tenant in writing within thirty (30) days after receipt of the
Hotel Schematic Documents, specifying in detail the items disapproved by
Landlord, the reasons for such disapproval, and any requested changes. In the
event Landlord disapproves of the Hotel Schematic Documents, Tenant shall revise
same and resubmit them to Landlord for Landlord's approval within thirty (30)
days after receipt of Landlord's notice of disapproval in accordance with the
provisions of this Section 2.06. In the event Landlord fails to notify Tenant
within said thirty (30) day period, Landlord shall have been deemed to approve
the Hotel Schematic Documents. After the approval of the Hotel Schematic
Documents, Tenant shall develop, or cause to be developed, architectural
designs, plans and specifications for the final design, constructing, furnishing
and equipping of the Hotel ("Hotel Construction Documents") which shall be in
substantial accordance with the approved Hotel Schematic Documents. In the event
there is a material change in the Hotel Construction Documents of an item
previously approved by Landlord as part of its approval of the
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Hotel Schematic Documents, such change shall be subject to the provisions of
this Section 2.06, and Tenant shall secure the approval of Landlord to such
change in the same manner and to the same extent provided for in the approval of
the Hotel Schematic Documents originally approved. As soon as the Hotel
Construction Documents are complete Tenant will evaluate competitive bids for
the Hotel Development Costs of construction of the Hotel, with the objective of
obtaining such bids within forty-five (45) days. If after receiving said bids
Tenant determines that the Hotel Development Costs for the Hotel will exceed
Tenant's original estimate determined during the Feasibility Period, Tenant will
have the option to terminate the Lease; provided, however, if Tenant elects to
terminate this Lease solely because of the provisions of this Section 2.06
following the end of the Feasibility Period, Tenant shall pay Landlord as
liquidated damages and not as a penalty the sum of Two Hundred Thousand Dollars
($200,000), provided further that such liquidated damages shall not be paid if a
substantial portion of the cost increase is attributable in whole or in part to
causes which are not under Tenant's reasonable control. If Tenant does not so
exercise its option to terminate the Lease for the reasons set forth in this
Section, such right to terminate shall be waived.
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2.07 Building Permit, Construction
Promptly after completion of the Hotel Construction Documents and provided
that Landlord has obtained the required approvals pursuant to Section 2.10(d),
but no later than forty-five (45) days after such completion provided that
Landlord has obtained the required approvals pursuant to Section 2.10(d)
(subject to Unavoidable Delay), Tenant shall proceed to file an application for
a building permit for the Hotel with the appropriate public office having
jurisdiction over such matters and diligently pursue the issuance of such
permit. If the permit is not issued within ninety (90) days after it has been
properly applied for or if such permit is issued subject to terms and conditions
not anticipated by Tenant, the effect of either of which would result in
Tenant's original estimate of the Hotel Development Costs being exceeded, Tenant
shall have the option to terminate the Lease by giving Landlord written notice
to such effect; provided, however, that Tenant shall pay Landlord liquidated
damages and not as a penalty the sum of Two Hundred Thousand Dollars ($200,000)
unless the failure to obtain the permit is due to causes beyond the reasonable
control of Tenant.
2.08 Lease Commencement Date
If all of the provisions and conditions of Sections 2.02 through 2.05 have
been fulfilled or waived by Tenant, Landlord shall promptly deliver possession
of the Leased Premises at
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rough grade with no structures thereon to Tenant and the date of such delivery
shall be the "Lease Commencement Date". The Lease Commencement Date will be
evidenced in a certificate in recordable form executed by Landlord and Tenant
and shall be promptly recorded by Tenant.
2.09 Construction of Tenant Improvements
(a) After the Lease Commencement Date, and provided that Landlord has
commenced construction of its first office building on the Adjacent Tract,
Tenant shall mobilize or cause to be mobilized the contractors, subcontractors,
suppliers and materialmen to commence construction of the Hotel. If such
commencement of construction is delayed due to Unavoidable Delay for more than
one hundred twenty (120) days after the issuance of the building permit and such
delays will cause Tenant's original estimate of the Hotel Development Costs to
be exceeded, Tenant shall have the right to terminate the Lease by giving
Landlord written notice to such effect within such one hundred twenty (120)
days; provided, however, that Tenant shall pay Landlord as liquidated damages
and not as a penalty the sum of Two Hundred Thousand Dollars ($200,000).
Tenant's failure to give Landlord such notice shall be deemed a waiver by Tenant
of its rights to terminate the Lease for the reasons specified in this Section.
(b) After Tenant has commenced construction of the Hotel and provided that
Landlord is proceeding with all due
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diligence to construct and complete its first office building and the Common
Area in accordance with Section 2.l0(b)(i), Tenant agrees that it shall
substantially complete the Hotel and all attendant improvements on the Leased
Premises in accordance with the Hotel Construction Documents and all applicable
laws, codes and ordinances, and shall install its Trade Equipment therein and
shall open the Hotel for business within eighteen (18) months from the
commencement of construction, subject to the occurrence of Unavoidable Delays.
The Hotel will, when completed, comply with all applicable laws and regulations,
federal, state and municipal, and upon such completion Tenant will obtain and
deliver to Landlord a photocopy of each temporary certificate of occupancy and
of the final certificate of occupancy before the Hotel shall be occupied by
Tenant, except that if a temporary certificate of occupancy shall be issued,
Tenant may occupy the Leased Premises under the provisions of such certificate
and except further that if a certificate for any part of the Hotel shall be
issued, Tenant may occupy the part so certified under the provisions of such
certificate.
2.10 Landlord Responsibilities
(a) Landlord agrees, at its sole cost and expense, to bring water, storm
and sanitary sewer, electric, gas and telephone utility lines of adequate size
and capacity to serve the Leased Premises as reasonably determined by Tenant to
the
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property line of the Leased Premises at locations as Tenant shall reasonably
request. Landlord shall complete its obligations under this Section 2.10(a) no
later than the Construction Commencement Date.
(b) Landlord agrees, at its sole cost and expense, to complete (i) that
portion of the Common Area, including the landscaping thereof, identified on
Exhibit "F-1", (ii) the structure for the commercial space located adjacent to
the Hotel as identified on Exhibit "F-2", and (iii) the enclosed passageway as
identified on Exhibit "F-3", on or before the completion of the Hotel and in
accordance with the Master Plan. Landlord agrees that any subsequent tenant
construction in the area identified as the commercial space on Exhibit "F-2"
(or any other area on the Adjacent Tract) shall be performed in such a manner as
to minimize disruption to the operation of the Hotel and in accordance with
Section 2.10(c).
(c) Landlord agrees that all construction on the Adjacent Tract shall be
performed in a safe and responsible manner and no hazardous condition or
physical nuisance will be created or allowed to exist on the Adjacent Tract.
Landlord agrees that no area set forth in the Master Plan shall be utilized in
any of its construction on the Adjacent Tract, including the roadways or other
areas for the staging of construction material, from and after the Opening Date.
Landlord further agrees that it will construct or cause to be constructed
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separate construction roads for use by all construction vehicles for all
construction development on the Adjacent Tract. Additionally, Landlord shall
erect and maintain during the course of construction one or more construction
barricades or other protective devices to provide adequate protection to, and
screening for, the public, and Landlord agrees to maintain the same until
completion of construction. The barricades or other protective devices shall be
painted to provide a neat appearance and shall be properly maintained in good
repair. Notwithstanding anything to the contrary, Landlord shall make all
reasonable efforts to minimize disruption to the operations of the Hotel from
any construction on the Adjacent Tract from and after the Opening Date.
(d) Notwithstanding any other provisions of the Lease to the contrary,
Landlord agrees that it shall be responsible for obtaining all necessary zoning,
specific site approvals, FAA approvals, Metropolitan Sanitation District
approvals, Environmental Protection Agency approvals, and Illinois Department of
Transportation approvals for all curb cuts in accordance with the Master Plan.
Landlord shall obtain and provide proof of such approvals to Tenant on or before
the end of the Feasibility Period. In the event Landlord is unable to obtain the
aforementioned approvals by the end of the Feasibility Period, Tenant, at its
option, may grant Landlord additional time to obtain such approvals or terminate
the Lease upon fifteen (15) days' prior written notice without liability to
Landlord or Tenant.
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2.11 Methane Gas
-----------
Landlord and Tenant acknowledge that their preliminary soil tests have
disclosed the existence of methane gas in subsurface areas on both the Leased
Premises and the Adjacent Tract. Landlord and Tenant further acknowledge that
their respective construction activities on the Leased Premises and Adjacent
Tract may cause the migration of methane gas between the Leased Premises and the
Adjacent Tract. Therefore, Landlord and Tenant agree that their construction
activities on the Adjacent Tract and Leased Premises, respectively, shall be
performed in a manner which minimizes the possible migration of methane gas
between the Adjacent Tract and Leased Premises in accordance with sound
engineering practices.
2.12 Soil Toxicity
-------------
(a) Landlord and Tenant recognize that preliminary soils reports
indicate the presence of certain toxic substances on the Adjacent Tract.
Although the preliminary soils reports indicate that such levels are below
maximum allowable governmental limits, the specific nature and extent of such
conditions are not sufficiently established at this time. In the event Landlord
reasonably determines, based on soils analysis and sound engineering principles,
that the additional cost to Landlord to correct and meet applicable governmental
requirements with respect to toxic substances present on the Adjacent Tract
exceeds Five Million Dollars ($5,000,000),
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Landlord may elect to terminate its project on the Adjacent Tract and, if so,
the Lease, upon fifteen (15) days' prior notice to Tenant. In the event Landlord
has (i) not provided such notice on or before one hundred fifty (150) days after
the Effective Date, or (ii) delivered the Leased Premises to Tenant, Landlord
shall be deemed to have waived this right of termination. Landlord agrees to
notify Tenant as soon as reasonably practicable whether or not it will elect to
waive this condition and proceed. Notwithstanding the foregoing, Tenant shall
not be obligated to comply with the provisions of Section 2.06 unless Landlord
waives this right of termination. In the event Landlord elects to terminate the
Lease in accordance with the provisions of this Section, Landlord agrees to
reimburse Tenant for all reasonable out-of-pocket costs incurred by Tenant
from and after the Effective Date to the date of such termination.
(b) Landlord and Tenant recognize that both parties have certain rights
to terminate the Lease as elsewhere provided herein for soil toxicity problems.
However, in the event neither party elects to terminate the Lease, both parties
agree to take whatever corrective action or other action that may be required to
meet all applicable governmental regulations in the construction of their
respective improvements. However, in the event corrective action is required by
applicable governmental authorities with respect to toxic substances located on
the Leased Premises after the
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Lease Commencement Date, Landlord agrees to bear a proportionate share of the
cost of any such corrective work required to meet the then existing applicable
governmental regulations with respect to toxic substances. Such proportionate
share shall be a percentage of the reasonable cost of such corrective action,
the numerator of which percentage shall equal the period of time between the
Lease Commencement Date to the date such corrective action is completed, and the
denominator of which shall equal the Initial Term; provided, further, that to
the extent Tenant has not provided notice of termination pursuant to Section
3.03, the denominator shall be increased to the end of the then current Extended
Term.
END OF ARTICLE TWO
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ARTICLE THREE
TERM
----
3.01 Initial Term
------------
The Lease shall be effective as of the Effective Date. The Initial Term
shall begin on the Lease Commencement Date and continue thereafter for a period
comprised of the following three (3) time segments:
(a) The period of time beginning on the Lease Commencement Date and
continuing up to (but not including) the Opening Date;
(b) Any Partial Fiscal Year that may occur between and commencing with
the Opening Date and the first day of Tenant's first full Fiscal Year commencing
after the Opening Date; and
(c) Twenty-five (25) Fiscal Years thereafter beginning on the first day
of the first full Fiscal Year commencing after the Opening Date.
3.02 Extensions of Term
------------------
(a) If Tenant has not given notice of its intention to terminate
pursuant to Section 3.03 or the Lease has not been sooner terminated, the Term
of the Lease shall automatically be extended on the same terms and conditions as
set forth herein for each of five (5) consecutive Extended Terms. In addition,
provided no notice of termination has been given pursuant to Section 3.03,
Tenant, by notice delivered to
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Landlord no later than thirty (30) days before the expiration of the then
current Term of the Lease, may elect to extend the Term of the Lease for more
than one (1) Extended Term, subject to the provisions of Section 3.02(b).
(b) The maximum Term Of the Lease shall be seventy-five (75) full
Fiscal Years, plus the time that shall have elapsed between the Effective Date
and the first day of the first full Fiscal Year commencing after the Opening
Date.
(c) If Tenant shall elect that the Term of the Lease not be extended,
Tenant shall so notify Landlord in accordance with Section 3.03 (and such notice
shall reference this Section and Landlord's obligation to provide notice to
holders of Leasehold Mortgages as hereinafter set forth). Landlord shall give
notice to the holders of all Leasehold Mortgages as herein provided of the
election not to extend the Term of the Lease, and such election not to extend
shall be suspended until sixty (60) days after said notice. Any such holder of a
Leasehold Mortgage may, before the expiration of said sixty (60) day period,
cancel such election not to extend, either as attorney-in-fact for Tenant or
in the name of such holder or in the name of such holder's nominee, and
thereupon the Term of the Lease shall be deemed renewed and extended in favor of
Tenant or such holder or its nominee, as shall be specified in said notice,
without necessity for the execution or delivery of any further instrument, and
if such holder has specified itself or its nominee, at the request of Landlord
or
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<PAGE>
such holder or its nominee, Landlord and such holder or its nominee shall
thereupon enter into a new lease for said extended Term in accordance with the
terms and conditions of Section 6.01(b)(vi).
3.03 Notice of Termination
---------------------
Tenant may terminate the Lease at the end of the Initial Term or at the
end of any Extended Term upon written notice given pursuant to Section 13.07 not
less than twenty-four (24) calendar months prior to the expiration of the then
current Lease Term.
END OF ARTICLE THREE
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<PAGE>
ARTICLE FOUR
RENTALS
-------
4.01 Rentals
The Rental Commencement Date shall be the Construction Commencement Date,
subject to the provisions of Section 4.05. Tenant covenants to pay Landlord
Rental for the Leased Premises during the Initial Term and each Extended Term as
follows:
(a) Subject to the provisions of Section 4.05, commencing with the
Construction Commencement Date and continuing to the Opening Date, a Rental
equal to One Hundred Fifty Thousand Dollars ($150,000) per Fiscal Year payable
in thirteen (13) equal installments on the first day of each Accounting Period.
Rental for any Partial Accounting Period between the Construction Commencement
Date and the beginning of Tenant's first full Accounting Period thereafter will
be prorated and paid on the first day of the first full Accounting Period.
(b) Subject to the provisions of Section 4.05, commencing with the
Opening Date and continuing to the end of the Lease Term, Rentals shall be paid
in an amount equal to the greater of:
(1) A minimum rental ("Minimum Rental") equal to Three Hundred Thousand
Dollars ($300,000) per Fiscal Year for each Fiscal Year; or
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(2) Percentage rental ("Percentage Rental") equal to three percent (3%) of
Annual Gross Room Sales.
4.02 Payment of Rental Commencing with Opening Date
(a) Annual Minimum Rental shall be paid in thirteen (13) equal
installments of Twenty-three Thousand Seventy-six Dollars and Ninety-two
Cents ($23,076.92) on the first day of each Accounting Period commencing with
the first Accounting Period immediately after the Opening Date. Minimum Rental
for any Partial Accounting Period between the Opening Date and the beginning of
Tenant's first full Accounting Period thereafter will be prorated and paid on
the first day of the first full Accounting Period, and Minimum Rental for any
Partial Fiscal Year shall be computed by multiplying the annual Minimum Rental
by a fraction, the numerator of which is the number of days in such Partial
Fiscal Year and the denominator of which is three hundred and sixty-five (365).
Payments for any Partial Fiscal Year shall be made during such Partial Fiscal
Year in the same manner and at the same times as payments are to be made during
a full Fiscal Year as provided in this Section.
(b) Percentage Rental, if any, shall be paid four (4) times each Fiscal
Year by the twentieth (20th) day following the end of the Accounting Periods
which end closest to the 1st day of March, June, September and December of each
calendar year. Any payments of Minimum Rental paid to the date of the
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payment of the Percentage Rental shall be credited to the amount of Percentage
Rental then due.
4.03 Place for Payment of Rentals
----------------------------
All Rental payments shall be made in lawful money of the United States of
America and shall be paid to Landlord at Landlord's address as set forth in the
first paragraph of the Lease or to such other parties and/or to such other
address as Landlord may from time to time designate in writing to Tenant.
4.04 Records, Reports of Sales
-------------------------
(a) Tenant shall keep at its principal business office records of the
Annual Gross Room Sales for a period of not less than three (3) years after the
expiration of the Fiscal Year to which such records relate and upon request
shall furnish Landlord true and accurate statements thereof. Within ninety (90)
days following the close of each Fiscal Year after the Opening Date, Tenant
shall deliver to Landlord a statement of Tenant's chief accounting officer,
certifying the Hotel's Annual Gross Room Sales for the Partial Fiscal Year or
the Fiscal Year ended, as the case may be. The parties shall promptly, by cash
payment, make any adjustments in the total Rental paid in respect of any Fiscal
Year or Partial Fiscal Year necessary in view of the final Annual Gross Room
Sales figures set forth in such statement.
(b) If Landlord desires at its own expense to audit the statement of
such Annual Gross Room Sales and supporting
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records and data, Landlord shall cause such audit to commence within ninety (90)
days following delivery of such statement to Landlord and to be completed within
ninety (90) days thereafter. If Landlord does not so audit, then such statement
shall be deemed to be conclusively accepted by Landlord as being correct, and
Landlord shall have no right thereafter to question or examine the same. If the
audit discloses an understatement of Annual Gross Room Sales, Tenant shall
immediately pay Landlord the additional Rental found to be due plus interest
thereon calculated from the date Rental should have been paid at the then prime
rate of the Bankers Trust Company of New York City, New York (the "Lease
Interest Rate"). However, if the audit discloses Rental has been overpaid by
Tenant, the excess plus interest thereon calculated from the date such excess
Rental was paid at the Lease Interest Rate shall be applied to any amounts then
due Landlord by Tenant, and the balance, if any, shall be refunded to Tenant. If
Landlord's audit discloses an error in total payment of Rental for any Fiscal
Year so audited which is in excess of three percent (3%), Tenant shall pay for
the reasonable cost of Landlord's audit.
(c) Landlord shall keep all information regarding Annual Gross Room Sales
in strict confidence and shall not divulge such information to third parties
except Landlord's mortgagees, prospective purchasers or as may be required by
applicable law.
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4.05 Rental Abatement
----------------
Notwithstanding the fact that the Construction Commencement Date has
occurred, the Rental Commencement Date shall be delayed until Landlord has (i)
received the foundation permit (or such other permit which provides for the
commencement of foundation work) from the Village of Rosemont Director of Public
Works necessary for the construction of its first office building, and (ii)
commenced construction on its first office building and Common Area [in
accordance with Section 2.l0(b)(i)] on the Adjacent Tract in accordance with the
Master Plan. In the event that Landlord commences construction but fails to
diligently pursue such construction to completion, subject to Unavoidable
Delays, Rental shall be abated for such period; provided, however, Tenant has
notified Landlord of Landlord's failure to diligently pursue such construction
to completion in accordance with the provisions of Section 13.07 and such
failure continues for a period of ten (10) days after receipt of notice thereof,
and provided further that Tenant need not provide Landlord with the aforesaid
notice and opportunity to cure more than two (2) times.
END OF ARTICLE FOUR
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ARTICLE FIVE
USE AND OCCUPANCY
-----------------
5.01 Quiet Possession
----------------
(a) Landlord warrants that the physical condition of the Leased Premises as
of the Lease Commencement Date will be substantially identical to its physical
condition as of the Effective Date, and Landlord will not undertake any
improvements or demolitions on the Leased Premises (other than to rough grade
the Leased Premises and provide the Hotel utilities pursuant to Section 2.10)
prior to the Lease Commencement Date without the written approval of Tenant.
(b) Possession of the Leased Premises will be delivered to Tenant on the
Lease Commencement Date, and beginning on the Lease Commencement Date, Tenant
shall, subject to an Event of Default, quietly hold, occupy and enjoy the Leased
Premises throughout the Initial Term and any Extended Term without any
hindrance, ejection or molestation by Landlord or anyone claiming under or
through Landlord.
5.02 Use
---
(a) Promptly after the Lease Commencement Date and providing that Landlord
has commenced construction of its first office building and is diligently
proceeding to complete such office building, Tenant shall commence construction
of the Hotel and shall complete the same with all due diligence
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subject, however, to Unavoidable Delay and except as otherwise provided in
Section 2.09. Prior to the Opening Date, Tenant shall use and occupy the Leased
Premises solely for the purpose of constructing the Hotel in accordance with the
provisions of Article Two.
(b) Upon the Opening Date Tenant shall use the Leased Premises for the
operation and maintenance of an all-suite hotel (including ancillary uses) of
the kind and character at least comparable to other suite hotels operated or
managed by Tenant under the trade name "Marriott" (if any) and for no other uses
or purposes except as expressly permitted under the terms of this Lease for a
period of eight (8) years after the Lease Commencement Date, subject to the
rights of any Leasehold Mortgagee and assignee pursuant to Sections 11.02(d) and
11.03. Tenant will use and occupy the Leased Premises only for lawful purposes,
and in accordance with Section 5.09.
5.03 Signs
-----
(a) At Tenant's request, Landlord shall join in or consent to any
application for sign permits in which Landlord's consent may be necessary.
Landlord recognizes and agrees that Tenant's signage will be generally in
accordance with signage that Tenant utilizes on other properties owned, leased
or managed by Tenant.
(b) Tenant agrees not to place signage on the east side of the Hotel
building (except directional and identification
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signage below the second floor of the Hotel which identifies an entrance to the
Hotel and does not exceed thirteen (13) inches in height), or construct signage
attached to the highest horizontal surface of the Hotel building which is at a
greater height than the highest vertical surface of the Hotel building, without
the prior written approval of Landlord. Any directional signage which Tenant may
erect on the Leased Premises (as opposed to the Hotel building) shall be
compatible with the remainder of the improvements on the Leased Premises.
(c) Landlord agrees that it will construct and maintain, at its cost and
expense, prior to the Opening Date, "monument" type signs in the two locations
(one of which will be at the entrance to Higgins Road and one of which will be
at the entrance to River Road) in accordance with Exhibit "G" hereto and include
Tenant on such signage in as prominent a manner as any other entity identified
on such signage. The design of said signage will be subject to Tenant's prior
approval, such approval not to be unreasonably withheld or delayed. In the event
Landlord fails to construct such signage including Tenant as aforesaid, Landlord
agrees to grant Tenant, within fifteen (15) days of Tenant's request, an
easement on the Adjacent Tract at such location or locations (but no more than
two locations) as Tenant shall request to erect the signage. In addition, Tenant
may also erect such other signage as it deems reasonably necessary on the Leased
Premises for
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directional purposes. When constructed, such signage shall be reasonably
compatible with Landlord's signage on the Adjacent Tract, to the extent Landlord
has established criteria for such signage.
(d) Nothing contained in this Section 5.03 will abrogate the provisions of
Section 13.01.
5.04 Easements
---------
(a) Landlord and Tenant will grant or join in granting and, if necessary,
modifying or abandoning such rights-of-way, easements and other interests as
may be reasonably required to provide the Leased Premises and the Adjacent Tract
with ingress and egress, and electric, telephone, gas, water, sewer and other
public utilities useful or necessary to the proper economic development and
operation of the Hotel and the Improvements on the Adjacent Tract, provided that
the locations of any such easement areas are approved by both Landlord and
Tenant, such approvals not to be unreasonably withheld or delayed.
(b) Landlord hereby grants Tenant, its agents, employees and invitees an
irrevocable, perpetual and non-exclusive easement for ingress and egress for
pedestrian and vehicular traffic in, over and through the Common Areas located
on the Adjacent Tract, as appropriate, and an easement for ingress and egress
for pedestrian traffic in, over and through the enclosed walkway on the Adjacent
Tract between the Hotel
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building and Landlord's first office building in accordance with the Master Plan
and all commercial and retail areas as shall be developed on the Adjacent Tract.
The burden of this easement shall run with and bind title to the Adjacent Tract
and upon each person from time to time holding such title of record. The benefit
of this easement shall run with and only with the title to the Leased Premises
and with each person from time to time holding such title of record. If
requested by either party, Landlord and Tenant shall execute a separate
agreement, in recordable form, evidencing the easement granted herein.
(c) Tenant hereby grants Landlord, its agents, employees and invitees an
irrevocable, perpetual and non-exclusive easement for ingress and egress for
pedestrian and vehicular traffic in, over and through the Common Areas located
on the Leased Premises. The burden of this easement shall run with and bind
title to the Leased Premises and upon each person from time to time holding such
title of record. The benefit of this easement shall run with and only with the
title to the Adjacent Tract and with each person from time to time holding such
title of record. Notwithstanding the foregoing, in the event vehicular traffic
created by the improvements or the use thereof on the Adjacent Tract or Leased
Premises results in insufficient parking spaces being available respectively on
the Leased Premises or Adjacent Tract as reasonably determined by Tenant or
Landlord, as appropriate, either party, after
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consultation with the other party, may erect such barriers or other impediments
and/or establish other controls (including, but not limited to, metering) as it
deems appropriate to prevent or limit the flow of vehicular traffic between the
Hotel parking lot and parking areas to the south of the Hotel parking as shown
on Exhibit "H".
(d) Landlord and Tenant have agreed that there will be a common location
for satellite and telecommunications equipment for the Hotel and Landlord's
improvements on the Adjacent Tract. Accordingly, Landlord hereby grants Tenant a
perpetual and non-exclusive easement for the Term of this Lease in, over and
through the Adjacent Tract at such location or locations mutually and reasonably
agreed to by Landlord and Tenant for the location, installation, maintenance and
repair of such satellite and telecommunications equipment and all related
equipment including, but not limited to, conduit and signal amplification
equipment. The burden of this easement shall run with and bind title to the
Adjacent Tract during the Term of this Lease and upon each person from time to
time holding such title of record. The benefit of this easement shall run with
and only with the title to the Leased Premises and with each person from time to
time holding such title of record. If requested by either party, Landlord and
Tenant shall execute a separate agreement, in recordable form, evidencing the
easement granted herein.
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<PAGE>
5.05 Improvements; Personal Property
-------------------------------
(a) Tenant shall have the right, subject to full compliance with
applicable law and subject, further, to the provisions of Section 5.02, at any
time and from time to time during the Term of the Lease, to construct, alter,
repair, remodel and/or replace any and all improvements on the Leased Premises
and to demolish, raze or otherwise remove the same, provided that within
twenty-four (24) months from the removal of the Hotel building there shall be
erected in the place thereof improvements having facilities equal to or better
than the building removed, or such other improvements as Tenant may elect to
construct pursuant to Section 5.14. If the estimated cost of such construction,
alteration, repair or replacement (i) is Three Million Dollars ($3,000,000) or
more (as such amount shall be increased by the Price Index from the Opening Date
to the anticipated date of the start of such construction), or (ii) alters the
exterior treatment of the improvement, Landlord shall have the same approval
rights and obligations with respect to such construction, alteration, repair or
replacement as are contained in Section 2.06. Notwithstanding the foregoing,
Tenant shall not be obligated to re-erect any outbuildings, recreational
facilities, service buildings, maintenance sheds or the like. All such
improvements and any and all subsequent alterations, modifications,
enlargements, additions and replacements made by Tenant during the Initial Term
and any Extended Term
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<PAGE>
(including furniture, furnishings, Trade Equipment, inventories and any other
items of personal property (as further described in subsection (b) of this
Section) used on or in connection with the Leased Premises) shall be
collectively referred to as "Tenant's Investment." Tenant's Investment shall be
and remain the property of Tenant throughout the Initial and any Extended Terms
of the Lease, and Tenant shall be entitled to claim depreciation or amortization
of all leasehold improvements and tax credits arising from ownership thereof.
Landlord agrees to execute reasonable documentation evidencing same promptly
upon Tenant's request. Tenant's Investment shall be considered a part of
Tenant's leasehold interest for purposes of Article Eight. Subject to the
provisions of subsection (c) of this Section 5.05, upon termination or
expiration of Term of the Lease, title to that portion of Tenant's Investment
consisting of permanent improvements, and building structures, including all
alterations, modifications, enlargements, additions and replacements (but not
any furnishings, furniture, Trade Equipment, inventories, and any other items of
personal property described in subsection (c) of this Section 5.05, shall be
deemed to be and become part of the realty and the sole and absolute property of
Landlord as of expiration or termination of the Lease and shall be surrendered
to Landlord at that time in a good and reasonably clean condition, free and
clear of the liens of mortgages, deeds of trust, liens of
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mechanics, laborers or materialmen, and all other liens and encumbrances other
than any such liens and encumbrances incurred by or agreed to by Landlord (other
than a Leasehold Mortgage permitted pursuant to Article Six).
(b) Title to Tenant's Investment shall not vest in Landlord if a new lease
is given to a Leasehold Mortgagee (or its nominee or designee) as provided for
in Section 6.0l(b)(vi), and the Leasehold Mortgagee (or its nominee or
designee), its successors or assigns shall have the right to claim depreciation
or amortization of all leasehold improvements and tax credits arising from
ownership of Tenant's Investment, but title to Tenant's Investment shall vest in
Landlord upon termination of such new lease.
(c) All items of furnishings, Trade Equipment, inventories and other items
of personal property purchased by Tenant for use on the Leased Premises shall
remain the property of Tenant regardless of termination of the Lease or
expiration of its Term. Tenant shall remove from the Leased Premises all such
personal property within twenty-five (25) days after the termination or
expiration of the Lease and shall repair at Tenant's cost any damage to the
Leased Premises caused by such removal. The phrase "Personal Property" shall
include, but not be limited to, the following, regardless of their
characterization under local law: (i) all Trade Equipment, notwithstanding the
fact that the same may be nailed or screwed or otherwise attached or affixed to
the real
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property, and (ii) any signs or other items containing the name "Marriott" or
any Marriott trade name, trademark, symbol, logo or design, regardless of
whether they are attached or affixed to the real property.
5.06 Liens
-----
If at any time during the Initial Term or Extended Terms, whether during
the period of construction or reconstruction of buildings, or at any other time,
any liens of mechanics, laborers or materialmen shall be filed against the
Leased Premises or any part thereof relating to work authorized or approved by
Tenant or anyone claiming by or under Tenant in respect of the Leased Premises,
Tenant shall, at its expense, cause the same to be discharged, by payment,
bonding or otherwise as provided by law, within thirty (30) days after Tenant
receives notice that the lien was filed, except for such liens that may have
been incurred by Landlord arising from Landlord's actions. Nothing herein
contained shall in any way prejudice the rights of Tenant to contest to final
judgment or decree any such lien prior to payment thereof. Tenant, upon
reasonable notice and request in writing from Landlord, shall also defend for
Landlord, at Tenant's expense, any action, suit or proceeding which may be
brought on or for the enforcement of any such lien and shall pay damages and
satisfy and discharge any judgment entered in such action, suit or proceeding
and save Landlord harmless from any
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liability, claim, or damages resulting therefrom where such lien, judgment, suit
or proceeding arises from the action of Tenant, its agents, employees and
independent contractors in constructing or operating the Hotel. In the event
such lien has been incurred by Landlord or arises from Landlord's action or by
anyone claiming by or under Landlord, Landlord shall have the same obligations
as are required of Tenant pursuant to the provisions of this Section, and
Landlord, upon reasonable notice and request in writing from Tenant, shall then
defend Tenant, at Landlord's expense, from any action, suit or proceeding which
may be brought on or for the enforcement of any such lien and shall pay damages
and satisfy and discharge any judgment entered in such action, suit or
proceeding and save Tenant harmless from any liability, claim, or damages
resulting therefrom.
5.07 Operational Licenses and Permits
--------------------------------
Tenant shall apply for hotel, restaurant and alcoholic beverage licenses
and any other permits or licenses necessary for the operation of the Hotel as
soon as such applications can appropriately be made. If it is determined that
any of such licenses or permits, after being timely and properly applied for,
cannot be obtained by Tenant for any reason beyond Tenant's control and the
failure to obtain such licenses or permits adversely affects the operation of
the Hotel as determined by Tenant in Tenant's reasonable judgment,
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Tenant may terminate the Lease by giving written notice thereof to Landlord at
any time, notwithstanding the occurrence of the Lease Commencement Date.
Landlord agrees upon request of Tenant to sign promptly and without a charge
therefor any applications for such licenses and permits as may be required by
Tenant for the construction, conduct or operation on the Leased Premises of the
Hotel and the business contemplated by the Lease, including, without limitation,
applications for licenses and permits for the sale of alcoholic beverages and
any other licenses where the signature of Landlord or owner is required by
applicable laws in force at the time, or as may be reasonably desired by Tenant.
The cost of obtaining any such licenses and permits shall be borne by Tenant.
Tenant shall indemnify and hold Landlord harmless from all liability, claims,
costs and expenses which Landlord may incur by reason of having signed any such
application or applications, other than liabilities, claims costs and expenses
occasioned by Landlord's gross negligence or willful misconduct.
5.08 Maintenance
-----------
(a) Tenant shall, throughout the Term of the Lease, at its sole cost and
expense, keep the Leased Premises and all buildings and improvements now or at
any time erected thereon and all Personal Property and Trade Fixtures installed
therein in first-class order and repair and in a safe, clean and
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sanitary condition, ordinary wear and tear excepted, and shall make all
necessary repairs and replacements, whether structural or non-structural,
interior and exterior, ordinary or extraordinary, foreseen or unforeseen, to all
improvements, buildings, Trade Fixtures and Personal Property located on the
Leased Premises.
(b) Landlord shall not be obligated to make any of the repairs,
replacements, renewals or substitutions of any kind or nature to the Leased
Premises or any buildings, improvements, Personal Property or Trade Fixtures now
or hereafter located thereon except for repairs, replacements, renewals or
substitutions due to damage caused by the negligent acts or omissions of
Landlord or Landlord's officers, agents, or employees; provided, however, in the
event such damage is covered and compensated by the insurance policy Tenant is
required to maintain hereunder, such repair, replacement, renewal or
substitution shall be made by Tenant from the proceeds of such insurance policy
(it being understood that Landlord shall be responsible for the payment of any
deductible or other damage not compensated by such insurance policy).
(c) The Leased Premises, together with all improvements and buildings
located thereon, together with all alterations, additions, substitutions and
replacements thereof, shall be surrendered to Landlord upon the expiration or
termination of the Term of the Lease in first-class order and condition,
reasonable wear and tear excepted.
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5.09 Compliance with Laws
--------------------
(a) Tenant shall, throughout the Term of the Lease, at its sole cost and
expense, promptly comply with all laws and regulations of governmental entities
having jurisdiction over the Leased Premises, and all policies of insurance
applicable to the Leased Premises.
(b) Tenant may, after written notice to Landlord, by appropriate
proceedings conducted promptly at Tenant's expenses, in Tenant's name, and/or
wherever necessary in Landlord's name, contest in good faith the validity or
enforcement of any such law or regulation, and Tenant may defer compliance with
the same during such contest, provided Tenant diligently prosecutes such contest
to a final determination by the authority having jurisdiction thereof, and
providing such contest and deferment do not subject Landlord to any fine,
penalty or other civil or criminal liability. Tenant shall indemnify and hold
Landlord harmless from all fines, penalties, suits, costs and expenses arising
out of Tenant's contest of any such law or regulation.
5.10 Impositions
-----------
(a) Commencing with the Rental Commencement Date, all Impositions which
shall thereafter be properly made, levied, assessed, or imposed by a
governmental authority directly and solely upon the Leased Premises or any
improvements
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constructed thereon for the Term of the Lease shall be the responsibility of,
and paid by, Tenant; and Tenant shall save Landlord harmless from any charges,
costs, expenses and/or liability therefor. Payment of Impositions shall be made
directly to the taxing authority making such levy, and, if Impositions may be
paid in installments, Tenant may do so. Upon request, Tenant shall deliver to
Landlord copies of the official receipts of such taxing authorities or other
proof evidencing timely satisfaction of Tenant's obligation to pay Impositions.
Impositions attributable to the Leased Premises for the period prior to the
Rental Commencement Date and after the Term of the Lease shall be the sole
responsibility of Landlord. Landlord shall use its best efforts to cause the
Leased Premises to be assessed as a separate and distinct tax lot and shall
forward or cause to be forwarded any tax bills or tax-related correspondence to
Tenant in a prompt and timely manner. In the event the Leased Premises and/or
the Hotel are not separately assessed but are part of a single "Tax Parcel",
Tenant shall pay a proportionate share of all Impositions which may be levied or
assessed by the lawful taxing authorities against the land, buildings and all
other improvements within the Tax Parcel, which proportionate share shall be (i)
the Impositions levied with respect to such tax year against the land comprising
the Tax Parcel multiplied by a fraction, the numerator of which shall be the
number of acres in the Leased Premises and the denominator of which
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shall be the number of acres in the Tax Parcel, plus (ii) if the Hotel is not
separately assessed and if the parties are unable to obtain an "assessor's
certificate" as described below, then from and after the date the Hotel shall
first be assessed for tax purposes, the Impositions levied or assessed against
improvements located upon the Tax Parcel, multiplied by a fraction of which the
numerator shall be the number of gross square feet in the Hotel and of which the
denominator shall be the number of gross square feet of all buildings within the
Tax Parcel as of the last day of the calendar year in which such taxes are due
and payable; provided, however, that the parties shall request the taxing
authority to issue an assessor's certificate showing the allocation of the
improvement assessment for the Tax Parcel attributable to the Hotel which, if
issued, shall be utilized along with the applicable tax rate to determine
Tenant's liability for Impositions attributable to the Hotel. The term "Tax
Parcel" as used herein shall mean any land greater in size for which a tax bill
is issued by the appropriate governmental agency and which includes the Leased
Premises.
(b) Anything in the Lease to the contrary notwithstanding, Tenant shall not
be required to pay any Imposition in the nature of an income, estate, or
inheritance tax imposed because of Landlord's receipt of Rental payments from
Tenant or because of Landlord's ownership of the fee title to the Leased
Premises or because of Landlord's interest in the Lease.
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5.11 Right to Contest Impositions
----------------------------
Tenant may, at any time, in good faith and upon reasonable grounds, dispute
or contest the validity of the whole or any part of any Impositions or penalties
and claims with respect thereto, upon the Leased Premises and any improvements,
buildings, Trade Fixtures or Personal Property located thereon, defend against
the same, and may in good faith diligently conduct any necessary proceedings to
prevent and avoid the same. Tenant shall not, in the event of and during the
bona fide and diligent prosecution of such proceeding, be taken to be in default
in respect to the subject matter of such proceeding so long as Tenant complies
with the provisions of this Section. Tenant further agrees that any such contest
shall be prosecuted to a final conclusion as speedily as is reasonably possible.
Landlord agrees to render to Tenant any and all reasonable assistance, at no
cost to Tenant, in contesting the validity or amount of any Impositions,
including (if required) joining in the signing of any protests or pleadings
which Tenant may reasonably deem advisable to file. During any such contest,
Tenant shall (by payment or bonding of such disputed Impositions, if necessary):
prevent any foreclosure of, or any divesting thereby of Landlord's interest in
the Leased Premises; prevent the public sale or foreclosure of any lien for any
Impositions; and take whatever action is necessary to prevent Landlord from
incurring or
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being exposed to any criminal or civil liability with respect to any
Impositions. Tenant agrees to pay any final judgment rendered against it by a
court of competent jurisdiction. Landlord shall promptly reimburse Tenant for
any such payment made by Tenant for Impositions attributable to the Leased
Premises which are the responsibility of Landlord hereunder, including any
payments applicable to any period subsequent to termination of the Lease.
5.12 Landlord's Right to Pay Taxes
-----------------------------
Tenant agrees that if Tenant has not given Landlord notice of contest
pursuant to Section 5.11 and if Tenant fails to comply with any provision of
Section 5.10, Landlord may, during the Term of the Lease:
(a) Pay any Impositions or other charges made a lien upon the Leased
Premises and any improvements, buildings, Trade Fixtures or Personal Property
located thereon after such Impositions or other charges become delinquent;
(b) Redeem the Leased Premises from any sale that may be made of the same
for any Impositions.
Landlord need not inquire into the validity of any Impositions, or other
charges, or any tax sale, before making payment as provided in this Section. In
the event Landlord makes any payments in accordance with this Section, Landlord
shall have the remedies set forth in Section 5.16.
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5.13 Utility Payments
----------------
Tenant shall, commencing with the Rental Commencement Date and continuing
throughout the Lease Term, pay or cause to be paid all charges, assessments or
taxes for gas, electricity, water, sewer, telephone, and other utility service
incurred in connection with Tenant's use and occupancy of the Leased Premises.
5.14 Change in Use
-------------
(a) Subject to the provisions of Section 13.03, Tenant, and the holder of a
Leasehold Mortgage, its designee or nominee or a purchaser at foreclosure which
acquires possession and control over the Leased Premises, shall have the right,
at any time and from time to time during the Term of the Lease, to demolish the
Hotel and replace it with improvements of a similar or different type (e.g.,
office buildings, apartments, etc., as permitted under local regulations), and
the election to do so will not diminish or affect its renewal rights under
Section 3.02, provided that Tenant (as opposed to a Leasehold Mortgagee) shall
in no event cause or permit a change in use which competes with the then
existing office building improvements on the Adjacent Tract for a period of
eight (8) years after the Lease Commencement Date. If Tenant intends to demolish
the Hotel, it shall so notify Landlord no later than ninety (90) days before the
commencement of demolition. If a casualty occurs which causes
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substantial destruction or damage to the Hotel and Tenant thereupon decides to
convert the Leased Premises to a non-hotel use, Tenant shall so notify Landlord
within one hundred eighty (180) days after the date of such casualty. The date
upon which such notice is received by Landlord shall be hereinafter referred to
as the "Conversion Date". Landlord shall have the same rights and obligations
with respect to the approval of plans and specifications for the proposed
improvements as are set forth in Section 2.06.
(b) If Tenant elects to use all or a portion of the improvements on the
Leased Premises other than as a hotel, then from and after the Conversion Date,
in lieu of the Minimum Rental and Percentage Rental provided for in the Lease,
Tenant shall pay a fixed rental for each Accounting Period equal to the average
rental for each Accounting Period (both Minimum and Percentage Rental) which was
paid during the twenty-six (26) Accounting Periods which immediately preceded
the Conversion Date. The fixed rental rate so determined shall thereafter be
subject to increase as follows:
(i) If, on the fifth anniversary of the Conversion Date
("Anniversary Date") the Price Index shall be more than the Price Index for the
Accounting Period during which the Conversion Date occurs, the Minimum Rental
payable hereunder as of the commencement of such Anniversary Date (subject,
however, to the provisions of subsection (c) of this Section) shall be increased
by seventy-five percent (75%) of a
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fraction, whose numerator is the difference between the Price Index in respect
of the Anniversary Date and the Price Index in respect of the Accounting Period
in which the Conversion Date occurred and whose denominator is the latter. The
Minimum Rental as so increased shall be payable from and after the Anniversary
Date and until increased pursuant hereto.
(ii) Similarly, if on the quinquennial of the Anniversary Date or at
the end of any quinquennium thereafter ("Subsequent Anniversary Date(s)") the
Price Index shall exceed both the Price Index on the Anniversary Date and the
Price Index at the end of the immediately preceding quinquennial period, then
the Minimum Rental otherwise payable hereunder from and after the commencement
of such quinquennium (subject to the provisions of subsection (c) of this
Section) shall be increased in the manner provided in Section 5.14(b)(i) above.
(iii) The aforesaid computations shall be made at the earliest
possible date after the Price Index for the applicable Anniversary Date or
Subsequent Anniversary Date, as the case may be, is published or otherwise made
available. Landlord shall give Tenant written notice of any increase in the
rental payable by reason of the application of this subsection (b).
(c) Any amounts due pursuant to subsection (b) of this Section, as
Minimum Rental in excess of the original Minimum Rental payable immediately
after the Conversion Date
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("Additional Rental"), may be deferred by Tenant as hereinafter provided. If for
the thirteen (13) Accounting Periods immediately preceding the Anniversary Date
or applicable quinquennial period, as the case may be, the aggregate "net cash
flow" (as hereinafter defined) realized from the operation of the Leased
Premises shall be less than the amount of such Additional Rental, Tenant may pay
on account of such Additional Rental an amount equal to the "net cash flow" so
available, if any; and the time for payment of the balance of such Additional
Rental shall be deferred until the termination or expiration of the Lease or
upon the earlier sale or other transfer of the interest of Tenant in the Lease,
to the extent of the proceeds in respect of such sale or other transfer. In the
event of such sale or other transfer, the aggregate amount of Additional Rental
which had been so deferred shall be paid out of, and shall be a first charge
against, any proceeds received in respect of such sale or transfer, and before
payment or application of any portion of such proceeds toward payment of any
debt secured by a Leasehold Mortgage on the Leased Premises. For the purposes of
this Section, the term "net cash flow" shall mean the net income (or loss) from
operations of the building at the Leased Premises, plus all depreciation and
non-cash items deducted in the calculation of net income (or loss) during the
period, but less debt service and Minimum Rental paid during the period, all
determined in accordance with generally accepted
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accounting principles consistently applied. Landlord may elect to audit Tenant's
computation of "net cash flow" in accordance with, and subject to the terms and
conditions of, Section 4.04(b) herein with respect to audits of Annual Gross
Room Sales.
5.15 Restrictions on Adjacent Tract
------------------------------
Landlord owns the "Adjacent Tract" as shown on Exhibit "C" annexed hereto.
Landlord agrees that any improvements made on the Adjacent Tract shall be
compatible in terms of quality, design and use with first-class office
buildings or such other improvements as are presently being built in the
Chicago, Illinois area, and that no hotels, motels, lodging facilities, or other
facilities comparable to Tenant's business on the Leased Premises shall be
constructed or operated on the Adjacent Tract during the Term of the Lease;
provided, however, that the restriction herein contained shall not be deemed to
prohibit cafeterias or restaurants on the Adjacent Tract where the theme or
character of such food facilities does not duplicate the theme of any food
facilities in the existing Hotel; provided, further, that to the extent the
theme or character of any food facilities in the Hotel is changed by Tenant,
Landlord shall not be obligated to change or modify any food facilities then
existing on the Adjacent Tract. Any dispute as to duplication of a restaurant
theme or character shall be decided by arbitration in accordance with
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the provisions of Article Nine. Notwithstanding the foregoing, all facilities in
the area identified on Exhibit "I" shall be of first-class quality consistent
with the quality of the Hotel and shall in no event include a fast food
restaurant, video arcade, cafeteria, bowling alley or a vendor of pornographic
material. Notwithstanding the foregoing, Landlord may permit the operation of a
quality, sit-down restaurant (which may include a lounge for the sale of
alcoholic beverages) in the area identified as Exhibit "I". Notwithstanding the
foregoing, the restriction of hotels, motels and lodging facilities on the
Adjacent Tract shall not be effective to the extent there is a change in use
pursuant to Section 5.14 and there is no hotel, motel or lodging facility on the
Leased Premises. Landlord agrees that Tenant's Hotel guests and invitees shall
have access to all of the improvements on the Adjacent Tract, including, but not
limited to, restaurants, shops and health club facilities, on a
non-discriminatory basis, but subject to Landlord's (or the owner of such
improvements') reasonable rules and regulations.
5.16 Failure to Make Payments
------------------------
If Tenant fails to pay any Impositions, utilities or payments of principal
and interest on any Leasehold Mortgage described in Article Six, insurance
premiums described in Article Seven, pay for any of the repairs or the cost of
any maintenance required to be made by Tenant pursuant to the
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Lease or pay any other charges, costs or expenses required to be paid under the
Lease, Landlord shall have the right, but not the obligation, to make all such
payments. Landlord shall have the option of requiring Tenant to repay Landlord
the amount of such payments on demand or treating the amount of such payments as
additional Rental to be paid on the next day for the payment of Rental falling
after the date of such payments, and if Tenant does not make any such payment
Landlord shall have the same rights and remedies with respect thereto as
Landlord has for the nonpayment of Rental. All such payments shall bear interest
at the Lease Interest Rate from the date on which the same are incurred by
Landlord.
END OF ARTICLE FIVE
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ARTICLE SIX
LEASEHOLD MORTGAGES
-------------------
6.01 Leasehold Mortgage
------------------
(a) Tenant, and any successor or assign of Tenant, may, without Landlord's
consent, from time to time pledge, mortgage or encumber Tenant's interest in the
Lease and/or the leasehold estate demised hereunder. Any such pledge, deed of
trust, mortgage or encumbrance upon the Lease or the leasehold estate demised
hereunder, as the same may be extended, modified, amended or replaced, is herein
referred to as a "Leasehold Mortgage." There shall be no limitation or
restriction upon (i) the number of separate Leasehold Mortgages Tenant may place
on the Lease and/or the leasehold estate demised hereunder, or (ii) the
principal amount and other sums secured by any such Leasehold Mortgage;
provided, however, that the aggregate principal amounts of all Leasehold
Mortgages outstanding at any one time during the Term shall in no event exceed
seventy-five percent (75%) of the fair market value of the Hotel with respect
to the Hotel. Such principal amount or other sums may also be secured by other
mortgages, deeds of trust or security agreements. Without limiting the
generality of the foregoing, any Leasehold Mortgage may secure loans and
advances other than for the construction on the Leased Premises of the
improvements herein contemplated; and
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the Leasehold Mortgage may secure loans and advances for the construction and
improvement of other properties in other locations. Any Leasehold Mortgage shall
by its terms be made expressly subject and subordinate to all of the provisions,
covenants, conditions, exceptions and reservations herein contained. Landlord
shall not be bound to recognize any Leasehold Mortgagee unless such Leasehold
Mortgagee or Tenant shall have notified Landlord of the existence of such
Leasehold Mortgage and of the name and address of such Leasehold Mortgagee.
(b) Landlord hereby agrees with and for the benefit of each Leasehold
Mortgagee and the heirs, personal representatives, successors and assigns of
each Leasehold Mortgagee:
(i) When giving notice to Tenant with respect to any default under
the Lease or any exercise of any right to terminate the Lease, Landlord will
also give a copy of such notice by registered or certified mail to each
Leasehold Mortgagee at the address of each Leasehold Mortgagee furnished to
Landlord; provided, however, Landlord shall not at any time be required to give
a copy of such notice to more than three (3) Leasehold Mortgagees under not more
than three (3) Leasehold Mortgages, nor shall Landlord be required to give a
copy of such notice to more than one Leasehold Mortgagee with respect to any one
Leasehold Mortgage. No such notice to Tenant shall be deemed to have been duly
given, nor shall such
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notice be effective unless such notice is also given in said manner to each such
Leasehold Mortgagee as aforesaid.
(ii) In case Tenant shall default in respect of any of the provisions of
the Lease, any Leasehold Mortgagee shall have the right, but not the obligation,
to cure such default within the period provided for herein whether the same
consists of the failure to pay Rental or the failure to perform any other matter
or thing which Tenant is required to do or perform under the Lease, and Landlord
shall accept performance by or on behalf of such Leasehold Mortgagee(s) as
though, and with the same effect as if, the same had been done or performed by
Tenant. A Leasehold Mortgagee will have a period of time after the service of
such notice upon it within which to cure the default specified in such notice,
or cause it to be cured, which is the same period for cure, if any, as is given
to Tenant under the Lease in respect of the specified default after the giving
of such notice to Tenant, plus an additional period of thirty (30) days. In the
event of a default (or in the event that Landlord is seeking to terminate the
Lease by reason of a default) which cannot reasonably be cured within said
period, the period of time for cure shall be extended for so long as any
Leasehold Mortgagee is diligently proceeding to attempt to cure such default,
provided that the Leasehold Mortgagee has begun proceedings to cure the default
within the said period. In no event shall a default due to a failure to pay
Minimum Rental (or other sums payable by Tenant
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hereunder to Landlord) be deemed a default which cannot be reasonably cured
within such additional period of thirty (30) days.
(iii) If any default by Tenant under the Lease is of such a nature that a
Leasehold Mortgagee must first obtain possession of the Leased Premises in order
to effect a cure, Landlord shall have no right, and shall take no action, to
effect a termination of the Lease until the Leasehold Mortgagee has had a
reasonable opportunity either (a) to cure such default, if the default is
reasonably susceptible of being cured by Leasehold Mortgagee after Leasehold
Mortgagee obtains possession of the Leased Premises by appointment of a
receiver, institution of foreclosure proceedings or otherwise, or (b) to
institute and with reasonable diligence complete foreclosure or other
appropriate proceedings to acquire possession of and control over Tenant's
leasehold estate in the Lease, if the default is not reasonably susceptible of
being cured by Leasehold Mortgagee even after it obtains possession; but upon
condition that the Leasehold Mortgagee shall deliver to Landlord, no later than
sixty (60) days after the expiration of the aforesaid grace period applicable to
Leasehold Mortgagee as to the particular default, a recordable instrument by
which Leasehold Mortgagee undertakes that (x) during the pendency of any such
foreclosure or other proceedings with respect to Tenant's interest in the Lease
and until the interest of Tenant in the Lease shall terminate and
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possession of and control over the Leased Premises shall be obtained by
Leasehold Mortgagee, Leasehold Mortgagee will pay or cause to be paid to
Landlord, when and as it shall become due (but without giving effect to any
right of acceleration of Rentals in the event of default), the greater of (A)
Minimum Rental provided for in the Lease, or (B) Default Percentage Rental (as
such term is hereafter in this subsection (iii) of Section 6.01(b) defined) and
(y) when, as and if possession of and control over the Leased Premises shall be
obtained by Leasehold Mortgagee, or its nominee or designee, whether
voluntarily, as a result of foreclosure proceedings, or otherwise, Leasehold
Mortgagee shall (A) thereafter perform or cause its nominee to perform all the
covenants of the Lease on Tenant's part to be performed to the extent that
Tenant shall have failed to perform such covenants prior to the date on which
such possession and control by Leasehold Mortgagee is obtained, except for those
covenants which are not reasonably susceptible of being performed by Leasehold
Mortgagee or its nominee, except for payment of Percentage Rental, other than
Default Percentage Rental and (B) pay all Percentage Rental, if any, accruing
thereafter. The term "Default Percentage Rental" shall mean for all Accounting
Periods which shall commence after the date on which all Leasehold Mortgagees
first received written notice from Landlord of the occurrence of an event of
default under the Lease and until a Leasehold Mortgagee shall obtain possession
of and control over the
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Leased Premises, either (aa) the actual Percentage Rental payable in respect of
such Accounting Period(s) if Leasehold Mortgagee is able to obtain sufficient
information as to Annual Gross Room Sales or (bb) if Leasehold Mortgagee cannot,
after using reasonable and diligent efforts, obtain sufficient information and
records as to Annual Gross Room Sales, the average Percentage Rental paid by
Tenant during the last twenty-four (24) Accounting Periods [or the actual number
of Accounting Periods which have elapsed from the Opening Date if less than
twenty-four (24)] which ended immediately prior to the giving of such default
notice by Landlord. If and when such information and records shall be obtained,
appropriate adjustments, if required, shall be made and Leasehold Mortgagee
shall pay to Landlord the difference between actual Percentage Rental and
Default Percentage Rental theretofore paid by the Leasehold Mortgagee or
Landlord shall promptly refund said difference to the extent Default Percentage
Rental exceeds Percentage Rental. If prior to the sale in any foreclosure
proceeding instituted by a Leasehold Mortgagee, or if prior to the date on which
Tenant's interest in the Lease and the Leased Premises shall otherwise be
extinguished, the default in respect of which Landlord shall have given any
notice contemplated by this subsection (iii) of Section 6.01(b) shall have been
cured and possession of the Leased Premises shall have been restored to Tenant,
the undertaking of Leasehold Mortgagee provided for in this subsection (iii)
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of Section 6.01(b) shall automatically terminate and be without further force
and effect. No Leasehold Mortgagee shall be required to commence or continue any
foreclosure or other proceedings or to obtain or continue possession of the
Leased Premises.
(iv) Anything in this subsection (iii) of Section 6.01(b) to the contrary
notwithstanding, any default of Tenant under any provision of the Lease which is
not reasonably susceptible of being cured by a Leasehold Mortgagee shall be
deemed to have been waived by Landlord upon completion of foreclosure
proceedings or when Leasehold Mortgagee, or its nominee or another shall
otherwise acquire title to Tenant's interest in the Lease. Any default which is
reasonably susceptible of being cured after such completion or acquisition shall
thereafter be cured within thirty (30) days or such additional time as may
reasonably be necessary to cure any such default so long as Leasehold Mortgagee,
its nominee or another shall commence to cure within the thirty (30) day period
and diligently pursue the same to completion. Without limiting the generality of
the foregoing, as used in this subsection (iv) of Section 6.01(b), a default or
an event of default, or unfulfilled obligation, not "reasonably susceptible" of
being cured or performed by a Leasehold Mortgagee, its nominee or designee, or a
new tenant shall include: (a) the failure to pay Percentage Rental in respect of
any period of time prior to the date on which all Leasehold
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Mortgagees first received written notice from Landlord that a default or Event
of Default has occurred; (b) the failure by Tenant to keep books and records and
deliver statements as required by the Lease (except to the extent of information
in Leasehold Mortgagee's, its nominees or designees', or such new tenant's
possession); (c) the failure of Tenant to comply with the time requirements of
any term or provision of the Lease; (d) any bankruptcy, insolvency or
receivership or similar event related to Tenant; or (e) failure of Tenant to
give any required notices or certificates to Landlord.
(v) A Leasehold Mortgagee (or its designee or nominee) may become the
legal owner and holder of the interest of Tenant under the Lease, including,
without limitation, the interest of Tenant in all improvements erected by Tenant
on the Leased Premises, by foreclosure or other enforcement proceedings, or by
obtaining an assignment of the Lease in lieu of foreclosure or through
settlement of or arising out of any pending or threatened foreclosure
proceeding, without Landlord's consent and without any obligation to assume any
personal obligations which Tenant may have had under the Lease, but subject
always to all of the terms and provisions of the Lease. In such event, Leasehold
Mortgagee (or its designee or nominee) shall have the right thereafter to assign
the Lease, without any requirement for prior notice to or consent by Landlord,
but subject to the applicable terms and provisions of the Lease. Upon the
delivery to Landlord of a
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duplicate original of an instrument of assignment containing the assignee's
assumption of the Lease, such assignee of Leasehold Mortgagee shall become
Tenant, and shall be substituted for the Leasehold Mortgagee as the owner and
holder of the Lease for all purposes, as of the effective date of such
assignment; and from and after the effective date of such assignment Leasehold
Mortgagee (or its designee or nominee) shall be released from all liability
under the Lease thereafter arising (it being understood that nothing herein
shall be deemed to create any personal liability on the part of Leasehold
Mortgagee (or its designee or nominee) if the Lease does not provide for any
such personal liability).
(vi) In the event of the termination of the Lease or of any new lease made
pursuant to the provisions of this subsection (vi) of Section 6.01(b) prior to
its stated expiration date, Landlord will notify Leasehold Mortgagee and certify
in writing to Leasehold Mortgagee all amounts then due to Landlord under the
Lease (or such new lease), and Landlord will enter into a new lease of the
Leased Premises with Leasehold Mortgagee (or its designee or nominee) for the
remainder of the Term, to commence as of the date of the termination of the
Lease (or any new lease) at the Minimum Rental and Percentage Rental and upon
all of the other terms, provisions, covenants and agreements in the Lease
contained, including all renewal options not then exercised and any other rights
and options then remaining, upon condition that (a)
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Leasehold Mortgagee shall make written request to Landlord for such new
lease not later than forty (40) days from the date such notice by Landlord is
given to Leasehold Mortgagee, (b) Leasehold Mortgagee shall pay to Landlord at
the time of the execution and delivery of said new lease all sums which, as at
the date of execution and delivery of such new lease, were past due and owing
under the Lease, but without giving effect to any provision permitting
acceleration of Rentals upon termination of the Lease of amounts not otherwise
then due; and (c) such new lease shall require the tenant thereunder to perform
any obligation of Tenant under the Lease not then performed, but only if such
obligation is reasonably susceptible of being performed by the new tenant. There
shall be excluded from the amounts payable to Landlord under the new lease any
net income which Landlord shall have received from the Leased Premises after the
termination of the Lease. Upon the execution and delivery of such new lease, all
subleases or concession agreements which previously had been assigned and
transferred to Landlord shall thereupon be reassigned and retransferred without
recourse by Landlord to the new tenant together with (i) all sums of money held
by Landlord as security for the performance by any subtenant or other occupant
of its respective obligations under its sublease or concession agreement, and
(ii) such other funds, if any, held by Landlord to which Tenant under the Lease
would have been entitled but for the termination of the Lease, and to which a
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successor in interest of Tenant would be legally entitled. A tenant named in any
such new lease may assign its rights thereunder without Landlord's consent, but
subject to the applicable terms and provisions of the Lease, including without
limitation the applicable provisions of Article Eleven. Upon such assignment and
assumption the assignor shall, without the necessity of any further instrument,
be released from any and all further liability or responsibility under the Lease
and the new lease, and such new lease may be further so assigned, and neither
assignor nor assignee shall personally be responsible for payment or performance
of any obligations of Tenant thereunder.
(vii) Anything in this subsection (b) of Section 6.01 contained to the
contrary notwithstanding, the provisions of this subsection (b) shall only be
for the benefit of the holders of Leasehold Mortgages which shall be,
respectively, a first, second and third lien. If the holders of more than one
such Leasehold Mortgage shall make written requests upon Landlord for a new
lease in accordance with the provisions hereof, the new lease shall be entered
into pursuant to the request of the holder whose Leasehold Mortgage shall be
prior in lien thereto and thereupon the written requests for a new lease of each
holder of a leasehold mortgage junior in lien shall be and be deemed to be void
and of no force or effect.
(viii) The holder of any purchase money Mortgage which may be given to a
Leasehold Mortgagee (or its designee
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or nominee) in connection with the assignment of the Lease or any new lease made
pursuant to subsection (vi) of this Section 6.01(b), or the sale of the
leasehold estate created hereunder or thereunder, shall enjoy all of the rights,
powers and privileges granted in the Lease to Leasehold Mortgagees.
(ix) If Tenant fails to observe or perform any of its obligations under
the Lease, Leasehold Mortgagee may, but shall not be obligated to, observe or
perform such obligations for and on behalf of Tenant, whether or not Tenant
shall be in default under the Lease.
(x) Any rights granted to Tenant in the Lease for the Term of the Lease
shall continue during the term of the new lease provided for in subsection (vi)
of Section 6.01(b).
(c) Any notice or other communication which Landlord shall desire or is
required to give to or serve upon Leasehold Mortgagee shall be in writing and
shall be served by registered or certified mail, addressed to such holder at his
address as set forth in the notice to Landlord, or in the last assignment
thereof delivered to Landlord pursuant to Section 6.01(a), or at such other
address as shall be designated from time to time by such holder by notice in
writing given to Landlord by registered or certified mail. Any notice or other
communication which any Leasehold Mortgagee shall desire or is required to give
to or serve upon Landlord shall be deemed to have been given or served if sent
by registered or certified mail addressed to Landlord at Landlord's address as
set forth
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in the provisions of the Lease providing for notices to Landlord or at such
other address as shall be designated from time to time by Landlord by notice in
writing given to such Leasehold Mortgagee by registered or certified mail.
(d) Landlord will not modify, amend, cancel or accept a surrender of the
Lease, nor shall the Lease be terminated by Tenant (including a termination
pursuant to the express provisions hereof), nor shall Tenant elect any option
granted to it under the Lease, without the prior written consent of all
Leasehold Mortgagees. Any such modification, amendment, cancellation, surrender,
termination or option election without the written consent of all Leasehold
Mortgagees shall be void and of no force or effect.
(e) No union of the interests of Landlord and Tenant shall result in a
merger of the Lease and the fee interests in the Leased Premises without the
prior written consent of all Leasehold Mortgagees.
6.02 Mortgage Fees and Expenses
--------------------------
Tenant shall pay all fees and expenses of every character and description
incurred in connection with the procurement of any Leasehold Mortgages pursuant
to Section 6.01, including the premium for mortgagee title insurance except as
provided in Section 2.02(c)(ii).
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6.03 Equipment Leasing
-----------------
Some of the equipment, trade fixtures and furniture (collectively
designated herein as "Trade Equipment") now or hereafter installed and used by
Tenant on the Leased Premises may or will be directly financed by a third party
lender or otherwise be subjected to a security interest or owned by an equipment
rental company or vendor ("Equipment Lessor") and leased to Tenant either
directly from the Equipment Lessor or by way of equipment sublease or assignment
of equipment lease from an equipment sublessor ("Equipment Sublessor"), and
Landlord hereby agrees to recognize the rights therein of any such third-party
lender or Equipment Lessor or Sublessor (or their respective assignees).
Landlord agrees that all such items of financed or leased Trade Equipment
installed or to be installed on the Leased Premises shall be and remain personal
property and not real property, notwithstanding the fact that the same may be
nailed or screwed or otherwise attached or affixed to the Leased Premises or any
of Tenant's buildings or improvements, and further agrees to recognize the
rights therein of any such Equipment Lessor or Sublessor (or their respective
assignees). Tenant shall have the right at any time, whether or not Tenant is in
default hereunder, to remove or replace any or all Trade Equipment, whether or
not financed or leased, regardless of whether attached or affixed to the Leased
Premises, and to the extent of their respective interests therein such
third-party lender or Equipment Lessor
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of Sublessor (or their respective assignees) shall also have such a right. Any
damage to the Leased Premises caused by such a removal shall be repaired by and
at the expense of Tenant or other party causing such removal. Landlord
subordinates its right of distraint in or to the financed or leased Trade
Equipment or to Trade Equipment and agrees that any third-party lender or
Equipment Lessor or Sublessor (or their respective assignees) may remove and
dispose of the same without reference to, and free and clear of, any or other
demand of Landlord, and that such disposal or sale may be made on the Leased
Premises.
6.04 Landlord's Right to Purchase Leasehold Mortgage
-----------------------------------------------
(a) If any default by Tenant has occurred under the first Leasehold
Mortgage, or any act, condition or event has occurred which would permit the
first Leasehold Mortgagee to declare all or part of the indebtedness secured by
the Leasehold Mortgage to be immediately due and payable, then Landlord shall
have thirty (30) days after the date on which the first Leasehold Mortgagee
shall serve notice upon Landlord in writing ("Leasehold Mortgagee's Notice")
that the first Leasehold Mortgagee intends to commence proceedings to foreclose
the Leasehold Mortgage (stating the calculation of the purchase price pursuant
to subsection (c)(i) of this Section), during which thirty (30) day period
Landlord shall have the right and option ("Landlord's Option") to purchase
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from all Leasehold Mortgagees their Leasehold Mortgages, upon the terms and
subject to the conditions contained in this Section.
(b) Landlord's Option shall be exercised by written notice, by certified or
registered mail, served upon Tenant and all Leasehold Mortgagees within such
thirty (30) day period accompanied by Landlord's forfeitable deposit of Five
Hundred Thousand Dollars ($500,000) on account of the purchase price. Time shall
be of the essence as to the exercise of Landlord's Option. If Landlord's Option
is duly and timely exercised, Landlord shall purchase and all Leasehold
Mortgagees shall assign their Leasehold Mortgages to Landlord (or its designee)
on the date which is sixty (60) days after the date on which Leasehold
Mortgagee's Notice is served upon Landlord (or if such sixtieth (60th) day is
not a business day, on the next succeeding business day). The closing shall take
place at a mutually convenient time and place.
(c) The purchase price payable by Landlord shall be an amount equal to the
higher of (i) the then fair market value of the leasehold estate under the Lease
and "Tenant's Investment" as herein defined, or (ii) the outstanding principal
amount of, plus accrued and unpaid interest on, (x) all notes or bonds secured
by the Leasehold Mortgage(s) which were given to evidence loan advances made to
provide funds intended for the acquisition of, construction of improvements on,
the refurbishing of, the purchase of furnishings,
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furniture, equipment, fixtures and other items of personal property to be
installed on or used at, or otherwise to be used in connection with the business
to be conducted from, the Leased Premises and (y) that portion (allocated in
accordance with the provisions of subsection (d) of this Section of any other
note or notes which represent a capitalization or funding of any interest
accrued on the notes or bonds referred to in clause (x) above, and (z) the
amount of all advances made by Leasehold Mortgagee(s) to cure defaults by Tenant
under the Lease or otherwise made to protect the security interest of Leasehold
Mortgagee(s) in the Leased Premises, plus all accrued and unpaid interest on
such advances, all to be calculated as of the closing date of the purchase. The
purchase price shall be paid in full at closing by wire transfer or other
immediately available funds. Notwithstanding the foregoing, in the event there
is only a single Leasehold Mortgagee which does not secure loans and advances
other than for the construction on the Leased Premises of the improvements
thereon, the price payable by Landlord shall be an amount calculated in
accordance with (ii) above.
(d) If capitalized or funded interest (and the interest thereon) shall not
have been allocated separately by a Leasehold Mortgagee in its records to the
Leased Premises when such interest was capitalized or funded, such capitalized
or funded interest (and the interest thereon) shall be deemed
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allocated among each of the properties as to which any of such interest was
capitalized or funded (including the Leased Premises) by multiplying the total
amount of outstanding capitalized or funded interest (and interest thereon) by
the ratio of the fair market value of the Hotel to the fair market value of all
properties in respect of which any of such interest was capitalized or funded,
and allocating the resulting sum to the Leased Premises.
(e) The purchase price shall be paid by Landlord to each respective
Leasehold Mortgagee, to be applied by the Leasehold Mortgagee to the
indebtedness secured by the Leasehold Mortgage held by such Leasehold Mortgagee,
subject to the priorities of lien of such Leasehold Mortgages.
(f) Tenant agrees that the purchase price paid by Landlord to Leasehold
Mortgagees, which was occasioned by a default by Tenant under a Leasehold
Mortgage or other act or event mentioned in Leasehold Mortgagee's Notice, shall
be, and be deemed, a non-recourse loan by Landlord to Tenant secured by the
Leasehold Mortgages to be assigned to Landlord against payment of such purchase
price. Such non-recourse loan so secured shall be payable by Tenant to Landlord
on demand with interest at the highest rate which lawfully may be charged under
the laws of the state where the Leased Premises are located, on a loan to the
then Tenant.
(g) At the closing and upon payment in full of the purchase price each
Leasehold Mortgagee shall assign its
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Leasehold Mortgage to Landlord, together with any security interest held by it
in Tenant's leasehold estate, without recourse, representations, covenants or
warranties of any kind, provided that such Leasehold Mortgages and security
interests shall be deemed modified to secure the amount of the aggregate
purchase price paid by Landlord to all Leasehold Mortgagees (rather than the
indebtedness theretofore secured thereby) payable on demand, with interest and
upon the other items referred to in subsection (g) of this Section. Each such
assignment shall be in form for recordation or filing, as the case may be.
Landlord shall be responsible for paying any taxes payable to any governmental
authority upon such assignment. Such assignment shall be made subject to such
state of title of the Leased Premises as shall exist at the date of exercise of
Landlord's Option. Tenant shall retain title to and each Leasehold Mortgagee
shall retain its security interest in any Personal Property which Tenant would
be entitled to remove at the expiration of the Lease not included in Tenant's
Investment.
(h) Any Leasehold Mortgage shall contain provisions which obligate the
holder of the Leasehold Mortgage to comply with the provisions of this Section.
(i) Landlord shall have the right to receive all notices of default under
any Leasehold Mortgage, but Landlord shall not have the right to cure any
default under any Leasehold Mortgage, except to the extent provided in this
Section.
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6.05 Amendment of Lease
------------------
Landlord agrees that it will promptly make such reasonable amendments or
modifications of the Lease as are requested by any Leasehold Mortgagee, provided
that there will be no adverse change in any of the substantive rights and
benefits of Landlord. For the purposes of this Section 6.05, a change in the
substantive rights and benefits of Landlord shall include, but not be limited
to, a change in the calculation or payment of Rental, a change in the Term, a
change to Landlord's rights to purchase the Hotel as set forth in Section 13.03,
a change to Sections 5.02(b), 7.08 or 8.05 (with all such sections subject to
the rights of a Leasehold Mortgagee as otherwise set forth in the Lease), or a
change in Landlord's approval rights of Tenant's actions as set forth in the
Lease. The preceding sentence will be in effect regardless of the fact that such
Mortgagee may make such a request prior to the execution of the applicable
Mortgage; in such event said amendments or modifications will become effective
as of the execution of the Mortgage.
6.06 Financing by Landlord
---------------------
This Lease and any new lease made pursuant to Article Six and any easement
granted to Tenant pursuant to or in connection with this Lease and any Leasehold
Mortgage, and all renewals, modifications, extensions or replacements of any
thereof shall be senior and superior to the lien of any
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mortgage or mortgages now or hereafter made affecting all or any part of the fee
title to the land or Leased Premises or the premises affected by such easement
or any part thereof, as the same may be modified, extended, consolidated or
renewed from time to time (the "Fee Mortgage(s)"). Landlord agrees that each
such Fee Mortgage shall provide, and shall not be effective unless it so
provides, that:
(a) Landlord's interest in this Lease is collaterally assigned to the
holder of the Fee Mortgage;
(b) The payment or disposition of proceeds of fire or extended insurance
coverage, and any other property damage insurance provided for in this Lease,
and the payment and disposition of any condemnation award, shall be made and
applied in the manner provided for in this Lease;
(c) The Fee Mortgage is subject and subordinate to this Lease, any such
easement and all modifications then or thereafter made to this Lease or such
easement, and that if the holder of such Fee Mortgage or its nominee shall
become the owner of the fee of the Leased Premises or premises burdened by such
easement it will acquire the Leased Premises or such premises subject to all the
terms, covenants and conditions of this Lease or such easement and all
modifications then made to this Lease or such easement, and shall accept
performance of the obligation on Tenant's part to be performed under this Lease
or such easement from Tenant or in default thereof from any Leasehold Mortgagee;
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(d) In addition to and not in limitation of the foregoing, in any case in
which (1) the Lease or such easement shall be terminated, rejected or annulled
by any trustee appointed for Landlord's assets in debtor relief proceedings and
not as a result of any default under the Lease or such easement by Tenant or
other provision for termination herein prescribed, (2) Tenant shall not elect to
remain in possession of the Leased Premises or such easement premises, and (3)
the holder of the Fee Mortgage shall become the owner of the fee interest in the
Leased Premises or such easement premises, then the holder of the Fee Mortgage,
upon payment to it by Tenant, or by any Leasehold Mortgagee or others, of any
rent or other sums then payable under the Lease or such easement will execute
and deliver, upon request made within forty (40) days after the later to occur
of (y) the date of such termination, rejection or annulment of the Lease or such
easement, or (z) the date on which the holder of the Fee Mortgage shall become
the owner of the fee interest in the Leased Premises or the premises burdened by
such easement, a new lease (or easement) in substitution for the Lease (or such
easement) wherein the fee mortgagee or its nominee is lessor (or grantor) and
the holder of the interest of Tenant or the Leasehold Mortgagee is lessee (or
grantee) at the rent and upon all of the other covenants expressed in the Lease
(or such easement) and will accept the attornment of Tenant of the
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Lease (or such easement) or the Leasehold Mortgagee under such substitute ground
lease (or easement).
END OF ARTICLE SIX
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ARTICLE SEVEN
INSURANCE - DAMAGE AND DESTRUCTION
----------------------------------
7.01 Construction Insurance
----------------------
During the course of construction of the Hotel, Tenant, at its sole cost,
will carry or cause to be carried the following types and amounts of insurance
coverage:
(a) Worker's compensation and occupational disease insurance in accordance
with the laws of the State of Illinois, including employer's liability insurance
to the limit of $100,000.
(b) Comprehensive general or manufacturer's and contractor's liability
insurance, excluding "automobile liability" against bodily injury, including
death resulting therefrom, and personal injury and completed operations (for at
least two years following completion) in the limits of not less than $3,000,000
for any one (1) occurrence and property damage in the limits of $1,000,000 for
any one (1) occurrence or a combined single limit policy of $3,000,000.
(c) Comprehensive automobile insurance, including "non-owned"
automobiles, against bodily injury, including death resulting therefrom, in the
limits of $1,000,000 for any one (1) occurrence and $500,000 property damage or
a combined single limit of $1,000,000.
(d) Builder's risk insurance including fire and extended coverage plus
coverage for other perils generally included in
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so-called "all risk" coverage. Such insurance shall provide coverage until the
construction is complete, whether the Hotel is occupied or not. This "all risk"
coverage shall be in the amount of ninety percent (90%) of the completed
insurance value of the Hotel, excluding the foundation.
7.02 Public Liability and Workers' Compensation Insurance
----------------------------------------------------
(a) Tenant shall carry, during the Initial Term and each Extended Term, at
its cost, comprehensive public liability insurance including contractual
liability insurance with limits of not less than the greater of (i) such amounts
as Tenant customarily carries for other similar hotels in its hotel chain, or
(ii) Fifty Million Dollars ($50,000,000), for each occurrence for bodily injury
and death and for property damage (combined single limits), for claims for
injuries or death sustained by persons or damage to property while on the Leased
Premises, which insurance shall contain such further limits and terms as shall
be mutually agreeable to Tenant and Landlord. Tenant shall, in connection with
any construction of the Leased Premises and in the operation of the Hotel and
related facilities, comply with the applicable workers' compensation laws and
protect Landlord against any liability under such laws. The aforesaid minimum
coverage limits shall be subject to adjustment as Landlord and Tenant shall
mutually agree. Notwithstanding the foregoing, if Marriott Corporation or any
Affiliate of Marriott Corporation is not the Tenant or
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the operator of the improvements on the Leased Premises, the comprehensive
public liability limits set forth above shall be the greater of (i) $75,000,000,
or (ii) the amount of liability insurance coverage maintained by similar
improvements being operated in the same geographic area as the Leased Premises.
(b) Landlord shall carry, during the Initial Term and each Extended Term,
at its cost, comprehensive public liability insurance including contractual
liability insurance with limits reasonably acceptable to Tenant, for claims for
injuries or death sustained by persons or damage to property while on the
Adjacent Tract.
7.03 Hazard Insurance
----------------
Tenant shall, during the Initial Term and each Extended Term, keep the
Hotel and Trade Equipment on the Leased Premises continuously insured against
loss or damage by fire and all other risks covered by standard extended coverage
endorsements, in amounts not less than ninety percent (90%) of replacement cost
and sufficient to satisfy the requirements of any Leasehold Mortgagee of Tenant.
The policies shall provide coverage for the additional loss sustained in
demolishing any undamaged portion of the Hotel, provided such demolition is
required by any law or ordinance. The policies shall provide that any insurance
proceeds shall be payable to Tenant, Landlord and the Leasehold Mortgagee as
their interests may
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appear; provided, however, that so long as there is any Leasehold Mortgage, any
loss payable under any hazard insurance policy will be adjusted solely by Tenant
with the consent of the first Leasehold Mortgagee and the proceeds of such
insurance shall be paid to the first Leasehold Mortgagee rather than to Landlord
or Tenant. First Leasehold Mortgagee shall hold, apply and make available the
proceeds of such insurance as, under the circumstances and to the extent,
provided in the Lease. If notwithstanding such provision any such insurance
proceeds are made payable to Landlord or Tenant rather than the first Leasehold
Mortgagee, Landlord and Tenant hereby agree to transfer any such payment to the
first Leasehold Mortgagee.
7.04 Sale of Alcoholic Beverages
---------------------------
In the event of the sale, merchandising, transfer or exchange or giving
away of alcoholic liquors (within the meaning of the Illinois Liquor Control
Law, as now or hereafter amended or under any future similar law, statute or
ordinance of the State of Illinois or any other governmental authority having
jurisdiction), upon or from the Leased Premises or the Hotel, Tenant shall
maintain insurance to the extent required by applicable law and shall indemnify
Landlord, Mortgagees (if requested by Landlord or Tenant) and Tenant against any
and all liability by virtue of the Illinois Liquor Control Law, any amendments
or supplements thereto, or
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under any future similar law, statute or ordinance of the State of Illinois or
other governmental authority having or claiming jurisdiction. Any insurance
shall provide coverage not less than statutory limits under applicable law.
7.05 Business Interruption Insurance
-------------------------------
Tenant shall maintain business interruption insurance to cover loss, total
or partial, of the use of the Hotel as a result of any fire or other risk now or
hereafter usually covered by the term "extended coverage".
7.06 Coverage and Certificates
-------------------------
(a) All insurance described in Sections 7.01, 7.02, 7.03, 7.04 and 7.05
shall be effective under valid and enforceable policies issued by insurers of
recognized responsibility. The insurance to be obtained by Tenant thereunder may
be obtained by Tenant by endorsement or equivalent means under its blanket
insurance policies, provided such blanket policies substantially fulfill the
requirements specified therein. Any such blanket policy shall indicate the
amounts of coverage applicable to the Hotel. Tenant may retain such risks or
portion thereof as Tenant does with respect to other Hotels it owns, operates,
leases or manages under the Marriott name in the United States; provided,
however, that in no event shall the deductible limits (but not self-insured
retentions) of any such policy of insurance described in Section 7.03 exceed One
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Hundred Thousand Dollars ($100,000) as indexed by the Price Index or such other
amount approved by Landlord, such approval not to be unreasonably withheld.
(b) Tenant shall, from time to time at Landlord's request, furnish Landlord
with certificates showing the insurance required to be obtained by Tenant under
Sections 7.01, 7.02, 7.03, 7.04 and 7.05 to be in effect. All such insurance
shall be at the cost and expense of Tenant. Such certificates shall include a
provision for thirty (30) days' advance written notice by the insurer to
Landlord and any Leasehold Mortgagee in the event of any pending change or
cancellation of such insurance.
(c) All policies of insurance required to be maintained hereunder shall, to
the extent that it shall be possible from time to time to obtain such
provisions, contain provisions waiving or having the effect of waiving any right
of subrogation of the insurance company or companies issuing such policies to
any claim Tenant might have against Landlord on account of damage to the
property covered by such policies resulting from any act or failure to act of
Landlord except Landlord's gross negligence or willful misconduct, and similar
provisions waiving or having the effect of waiving any right of subrogation of
such insurance company or companies to any claim Landlord might have against
Tenant on account of damage to the property covered by such policies resulting
from any
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act or failure to act of Tenant except Tenant's gross negligence or willful
misconduct.
(d) Landlord shall, from time to time at Tenant's request, furnish Tenant
with certificates showing the insurance required under Section 7.02(b) to be in
effect. All such insurance shall be at the cost and expense of Landlord. Such
certificates shall include a provision for thirty (30) days' advance written
notice by the insurer to Tenant in the event of any pending change or
cancellation of such insurance. In addition, the policies shall, to the extent
that it shall be possible from time to time to obtain such provisions, contain
provisions waiving or having the effect of waiving any right of subrogation of
the insurance company or companies issuing such policies to any claim Landlord
might have against Tenant on account of damage to the property covered by such
policies resulting from any act or failure to act of Tenant except Tenant's
gross negligence or willful misconduct, and similar provisions waiving or having
the effect of waiving any right of subrogation of such insurance company or
companies to any claim Tenant might have against Landlord or on account of
damage to the property covered by such policies resulting from any act or
failure to act of Landlord except Landlord's gross negligence or willful
misconduct.
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7.07 Indemnity
---------
(a) Tenant shall defend and hold Landlord (and its officers, employees,
partners, shareholders and directors) harmless against any and all claims,
damages, liabilities, expenses (including reasonable attorneys' fees), suits or
cause of action for damages arising after the commencement of the Term and any
orders, decrees or judgments which may be entered therein, brought for damages
or alleged damages resulting from any injury to person or property or from loss
of life sustained on the Leased Premises and the buildings and improvements
thereon. It is the intention and agreement that Landlord shall not be liable for
any personal injuries or damage to Tenant or its officers, agents, employees and
invitees or to any other persons or to any occupant of any part of the Leased
Premises; provided, however, that the foregoing indemnity shall not encompass
any willful or negligent act of Landlord or its agents, employees and invitees.
(b) Landlord shall defend and hold Tenant (and its officers, employees,
partners, shareholders and directors) harmless against any and all claims,
damages, liabilities, expenses (including reasonable attorneys' fees), suits or
cause of action for damages arising after the commencement of the Term and any
orders, decrees or judgments which may be entered therein, brought for damages
or alleged damages resulting from any injury to person or property or from loss
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of life sustained on the Adjacent Tract and the buildings and improvements
thereon. It is the intention and agreement that Tenant shall not be liable for
any personal injuries or damage to Landlord or its officers, agents, employees
and invitees or to any other persons or to any occupant of any part of the
Adjacent Tract; provided, however, that the foregoing indemnity shall not
encompass any willful or negligent act of Tenant or its agents, employees and
invitees.
7.08 Damage or Destruction
---------------------
Subject to the provisions of Sections 5.14 and 7.09, if during the Initial
Term or any Extended Term, any of Tenant's improvements or buildings on the
Leased Premises or any part thereof shall be damaged or destroyed by fire or any
other casualty, Tenant shall, at its cost, repair or restore the same to a state
equal to or better than the condition of such buildings or improvements
immediately prior to the casualty. Subject to Unavoidable Delay, such repair or
restoration shall be commenced within one hundred eighty (180) days after the
casualty occurs and shall be completed with due diligence. All insurance
proceeds collected for such damage or destruction shall be applied by the holder
thereof to the cost of such repairs or restoration, subject to the rights of a
Leasehold Mortgagee as otherwise provided in the Lease. If the insurance
proceeds shall be insufficient for said purpose, Tenant shall make up the
deficiency out of Tenant's funds. In
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the event Tenant fails to comply with the provisions of this Section 7.08,
Landlord may, subject to the rights of a Leasehold Mortgagee, terminate this
Lease upon thirty (30) days' prior written notice unless Tenant commences such
repair or restoration within such thirty (30) day period and thereafter
diligently pursues the same to completion, in which event such notice will be of
no further force or effect.
7.09 Damage Within Five Years of End of Term
---------------------------------------
(a) Notwithstanding anything contained in Section 7.08 to the contrary, if
during the last five (5) years of the Initial Term or of each of the first two
(2) Extended Terms or at any time thereafter, Tenant's improvements shall be
damaged by fire or other casualty so that the cost of repairing or replacing the
same shall equal or exceed thirty percent (30%) of the fair market value of
Tenant's Investment immediately preceding such fire or other casualty as
reasonably estimated by Tenant and by Tenant's insurance company and reasonably
agreed to by Landlord, Tenant shall have the option, upon written notice given
within thirty (30) days after such casualty,
(i) To repair or restore such damaged improvements, or
(ii) To terminate the Lease by written notice thereof to Landlord.
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(b) Tenant's option to terminate the Lease shall be conditioned upon
Tenant's safeguarding the portion of the improvements not damaged from further
damage because of the effects of such casualty, or, at Landlord's election,
removing all such improvements and restoring the Leased Premises to
substantially the same condition it was in on the Lease Commencement Date at no
cost to Landlord. The Lease shall terminate upon receipt by Landlord of Tenant's
notice of termination and satisfactory evidence that any Mortgage has been paid
and released and payment by Tenant to Landlord of all Rentals and other amounts
owing to Landlord under the Lease to the date of termination. The Leased
Premises and all improvements remaining on the Leased Premises shall be
surrendered to Landlord.
(c) In the event Landlord and Tenant are unable to agree within one hundred
eighty (180) days whether the cost of repairing and replacing the damaged
improvements shall equal or exceed thirty percent (30%) of the fair market value
of Tenant's Investment immediately preceding such fire or other casualty, the
matter shall be determined by an arbitration conducted in the manner provided in
Article Nine.
7.10 Mortgagee's Application of Proceeds
-----------------------------------
In the event Tenant is in default under any Leasehold Mortgage described in
Section 6.01, or if any act, condition or event has occurred which would permit
any Leasehold
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Mortgagee to declare all or any portion of the indebtedness secured by the
Leasehold Mortgage immediately due and payable, if the Leasehold Mortgagee
elects, any insurance proceeds (except demolition proceeds) collected for damage
to Tenant's Investment by fire or other casualty shall be allocated as follows:
The Leasehold Mortgagee shall receive the balance due on any Leasehold Mortgage
(if more than one Leasehold Mortgage exists, each Leasehold Mortgagee shall
receive the balance due on its Leasehold Mortgage in order of priority which
corresponds to the lien priority of its Leasehold Mortgage), and Tenant shall
receive the balance.
7.11 No Abatement of Rent
--------------------
Subject to the provisions of Sections 5.14 and 7.09, no destruction of or
damage to Tenant's improvements or Trade Equipment or other personal property on
the Leased Premises or any part thereof by fire or other casualty whatsoever,
whether such damage or destruction be partial or total, shall permit Tenant to
surrender or terminate the Lease or relieve Tenant from its obligation to pay in
full the Rental and other sums and charges payable by Tenant hereunder or from
any other obligation under the Lease.
END OF ARTICLE SEVEN
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ARTICLE EIGHT
CONDEMNATION
8.01 Definitions
-----------
The following definitions apply in construing provisions of the Lease
relating to a taking of or damage to all or any part of the Leased Premises or
improvements or any interest in them by eminent domain or condemnation.
(a) "Taking" means taking or damaging, including severance damage, by
------
eminent domain or by condemnation or for any public or quasi-public use under
any statute, whether the transfer of title results from (i) the recording of a
final order in condemnation or (ii) a voluntary transfer or conveyance to the
condemning agency or entity under threat of condemnation, either (x) in
avoidance of an exercise of eminent domain, or (y) while condemnation
proceedings are pending. The Taking shall be considered to occur as of the later
of the date actual physical possession is taken by the condemnor, or the date on
which the right to compensation and damages accrues under the law applicable to
the Leased Premises.
(b) "Total Taking" means the Taking of the fee title to all the Leased
------------
Premises and title to Tenant's Investment, which shall be considered to include
any improvements on the Leased Premises or any offsite improvements developed by
Tenant to serve the Leased Premises.
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(c) "Substantial Taking" means the Taking of the fee title to a portion of
------------------
the Leased Premises or title to Tenant's Investment, or both, if the following
conditions result:
(i) such Taking, in the reasonable judgment of Tenant, materially
prevents or impedes Tenant in the conduct of its business on the Leased Premises
in substantially the same manner as before the Taking, and in the case of a
Taking of access points to and from the Leased Premises or parking in the Leased
Premises, Landlord does not provide equivalent access or parking in locations
reasonably satisfactory to Tenant (without interruption of such access or loss
of parking at any time), and
(ii) the cost of repairing or replacing the improvements shall exceed
thirty percent (30%) of the fair market value of Tenant's Investment immediately
preceding such Taking as reasonably estimated by Tenant.
In the event Landlord and Tenant are unable to agree whether a Taking is a
Substantial Taking within ninety (90) days following the Taking, the matter
shall be determined by an arbitration conducted in the manner provided in
Article Nine.
(d) "Partial Taking" means any Taking of the fee title to the Leased
--------------
Premises or title to Tenant's Investment that is not either a Total or a
Substantial Taking.
(e) "Notice of Intended Taking" means any notice or notification on which a
-------------------------
reasonably prudent person would rely
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and which he would interpret as expressing an existing intention of Taking, as
distinguished from a mere preliminary inquiry or proposal. It includes but is
not limited to the service of a condemnation summons and complaint on a party to
the Lease. The Notice of Intended Taking is considered to have been received
when a party to the Lease receives from the condemning agency or entity a notice
of intent to take, in writing, containing a description or map of the Taking
reasonably defining the extent of the Taking.
(f) "Award" means compensation paid for the Taking whether pursuant to
-----
judgment or by agreement or otherwise.
8.02 Notice of Taking; Representation
--------------------------------
(a) The party receiving any notice of the kinds specified below shall
promptly give the other party notice of the receipt, contents and date of the
notice received:
(i) Notice of Intended Taking;
(ii) Service of any legal process relating to condemnation of the
Leased Premises or improvements located thereon;
(iii) Notice in connection with any proceedings or negotiations with
respect to such a condemnation; or
(iv) Notice of intent or willingness to make or negotiate a private
purchase, sale, or transfer in lieu of condemnation.
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(b) Landlord, Tenant and all persons and entities holding under Tenant,
shall each have the right to represent their respective interest in each
proceeding or negotiation with respect to a Taking or intended Taking and to
make full proof of such parties' claims. No agreement, settlement, sale, or
transfer to or with the condemning authority shall be made without the consent
of Landlord, Tenant, and any Leasehold Mortgagees. Landlord and Tenant each
agree to execute and deliver to the other any instruments that may be required
to effectuate or facilitate the provisions of the Lease relating to
condemnation.
8.03 Total Taking
------------
Upon the occurrence of a Total Taking, the Lease shall terminate as of the
date Tenant is deprived of possession of the Leased Premises and the Award,
whether separately granted or as part of a unit award, shall be allocated as
follows:
(a) In the event the Leased Premises are encumbered by a Leasehold Mortgage
described in Section 6.01, Landlord shall receive that portion of the Award
which constitutes compensation for the fair market value of the Leased Premises
as of the date of the Taking as vacant and unimproved land subject to the Lease
(without giving effect to any renewal terms not then exercised); the Leasehold
Mortgagee shall then receive the balance due on the Leasehold Mortgage (if more
than one Leasehold Mortgage exists, each Leasehold Mortgagee
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shall receive the balance due on its Leasehold Mortgage in order of priority
which corresponds to the lien priority of its Leasehold Mortgage); and the
balance shall go to Tenant.
(b) In the event the Leased Premises are not encumbered by a Leasehold
Mortgage described in Section 6.01, the Award shall go first to Landlord in an
amount equal to the fair market value of the Leased Premises as of the date of
the Taking as vacant and unimproved land subject to the Lease (without giving
effect to any renewal terms not then exercised), and Landlord's reversionary
interest in any improvement, and the balance of the Award shall go to Tenant
(after first deducting therefrom the amount of any rents and other charges owed
by Tenant to Landlord as of the date of the Taking); provided, however, should a
first Leasehold Mortgagee (or its nominee or designee) have succeeded to the
position of Tenant under the Lease, or should a new lease have been entered into
with such first Leasehold Mortgagee (or its nominee or designee) as provided in
Section 6.0l(b)(vi), it or its successor shall be entitled to receive the unpaid
principal amount of, plus accrued and unpaid interest on, the first Leasehold
Mortgage [determined as provided in Sections 6.04(c) and (d)] at the time of
acquiring the interest of Tenant under the Lease (or entering into such new
lease), before any portion of the Award is paid to Landlord.
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8.04 Substantial Taking
------------------
Upon the occurrence of a Substantial Taking, Tenant shall have the option
to terminate the Lease by giving written notice thereof to Landlord not later
than sixty (60) days after the date of the Taking. If Tenant does not elect to
terminate the Lease, such Taking shall be deemed a Partial Taking. If Tenant
elects to terminate the Lease, the Award shall be allocated in the same manner
and priority set forth in Section 8.03(a) or (b), as the case may be.
8.05 Partial Taking
--------------
In the event of a Partial Taking, the Lease shall terminate only as to the
part of the Leased Premises so taken and shall continue in full force and effect
with respect to the part not taken without abatement, reduction or other effect
upon the Term of the Lease or the obligation of Tenant to pay in full
Impositions and other sums to be paid by Tenant except that the Minimum Rental
shall be reduced by the ratio the area of the taken portion of the Leased
Premises bears to the entire Leased Premises prior to the Taking. Any Award for
a Partial Taking shall be first paid to Tenant to repair and restore such
portion of the Hotel or other improvements not taken so that the same will be in
good repair for the uses intended by the Lease. The balance of any Award, in the
event there is a Leasehold Mortgage on the Leased Premises, shall be allocated
in the manner described in Section 8.03(a);
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otherwise, the balance shall be allocated in the manner described in Section
8.03(b).
8.06 Temporary Taking
----------------
If less than the fee title of all or any portion of the Leased Premises are
taken for temporary use or occupancy, the Lease shall continue in full force and
effect without reduction or abatement of Rental. Tenant shall be entitled to
make claim for, recover and retain any Awards in the form of Rental or payments
in lieu thereof recoverable in respect to such Taking, except that if such
Taking shall be for a period extending beyond the expiration of the Term of the
Lease as the Lease may be extended, Landlord shall be entitled to receive such
portion of the Award as shall be attributable to the portion of such period
occurring after expiration of the Term.
8.07 Disputes in Division of Award
-----------------------------
In case the respective portions of any Award to be received by Landlord,
Tenant and any Leasehold Mortgagee shall not be fixed in the proceedings for
such Taking and if Landlord, Tenant and any Mortgagee shall not agree in writing
on such respective portions within thirty (30) days after the date of the final
determination of the amount of such Award, the amounts of such respective
portions shall be determined by arbitration in the manner provided in Article
Nine. Upon the
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completion of such arbitration proceeding, such Award or Awards shall be paid to
Landlord, Tenant and any Leasehold Mortgagee in accordance with the
determination of the arbitrators.
8.08 Separate Claims
---------------
Nothing contained in this Article shall prevent either Landlord, Tenant or
any Leasehold Mortgagee from filing or prosecuting separately their respective
claims pursuant to this Article for an Award or payment on account of the
Takings to which this Article applies.
8.09 Mortgagee's Applications of Award
---------------------------------
In the event that Tenant is in default under any Leasehold Mortgage
described in Section 6.01, or if any act, condition or event has occurred which
would permit any Leasehold Mortgagee to declare all or any portion of the
indebtedness secured by the Leasehold Mortgage immediately due and payable, if
the Leasehold Mortgagee elects, any Award received on account of a Substantial,
Partial or Temporary Taking shall be allocated in the same manner and priority
set forth in Section 8.03(a).
8.10 Leasehold Mortgagee Holding of Awards
-------------------------------------
If the Lease shall not be terminated in the event of a Taking, the
condemnation award shall be paid to the first
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Leasehold Mortgagee which shall hold, apply and make available the condemnation
award as provided in the Lease.
END OF ARTICLE EIGHT
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ARTICLE NINE
ARBITRATION
9.01 Arbitration
-----------
(a) In the event of a dispute between Landlord and Tenant with respect to
any issue of fact specifically mentioned herein as a matter to be decided by
arbitration, such dispute shall be determined by arbitration as provided in this
Section.
(b) Disputes relating to any construction required or permitted under the
Lease shall be resolved in accordance with the Construction Industry Arbitration
Rules of the American Arbitration Association then pertaining and all other
disputes shall be resolved in accordance with the Commercial Arbitration Rules
of the American Arbitration Association then pertaining. The decision of the
arbitrators shall be binding, final and conclusive on the parties.
(c) Landlord and Tenant shall each appoint and pay all fees of a fit and
impartial person as arbitrator who shall have had at least ten (10) years'
experience in the State of Illinois in a calling connected with the subject
matter of the dispute. Such appointment shall be signed in writing by each party
to the other, and the arbitrators so appointed, in the event of their failure to
agree within thirty (30) days after the appointment of the second arbitrator
upon the matter so submitted, shall appoint a third arbitrator. If either
Landlord or Tenant shall fail to appoint an arbitrator, as
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aforesaid, for a period of twenty (20) days after written notice from the other
party to make such appointment, then the arbitrator appointed by the party
having made such appointment shall appoint a second arbitrator (subject,
however, to the rights of any Mortgagee under Section 9.01(f)) and the two so
appointed shall, in the event of their failure to agree upon any decision within
thirty (30) days thereafter, appoint a third arbitrator. If such arbitrators
fail to agree upon a third arbitrator within forty-five (45) days after
appointment of the second arbitrator, then such third arbitrator shall be
appointed by the American Arbitration Association from its qualified panel of
arbitrators, and shall be a person having at least ten (10) years' recent
experience as to the subject matter in question. The fees of the third
arbitrator and the expenses incident to the proceedings shall be borne equally
between Landlord and Tenant. The fees of respective counsel engaged by the
parties, and the fees of expert witnesses and other witnesses called for the
parties, shall be paid by the respective party engaging such counsel or calling
or engaging such witnesses.
(d) The decision of the arbitrators shall be rendered within thirty (30)
days after appointment of the third arbitrator, and such decision shall be in
writing and in duplicate, one counterpart thereof to be delivered each to
Landlord and Tenant. A judgment of a court of competent jurisdiction may be
entered upon the award of the arbitrators
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in accordance with the rules and statutes applicable thereto then obtaining.
(e) If a dispute shall be submitted to arbitration, notice of appointment
of the arbitrators shall be given to any Mortgagee who prior thereto shall have
given Landlord a written notice specifying the name and address of such
Mortgagee who shall then have the right to participate in the arbitration
proceedings; provided, however, that in the case of a Leasehold Mortgagee such
participation shall be in association with Tenant and shall neither be deemed to
entitle such Leasehold Mortgagee to participate in the appointment of Tenant's
arbitrator nor to appoint an additional arbitrator, nor to enlarge Tenant's
rights in such arbitration proceeding.
(f) If under any provision of the Lease a matter shall be submitted to
arbitration under a procedure requiring the appointment of an arbitrator by
Tenant and Tenant shall fail to appoint an arbitrator, the senior Leasehold
Mortgagee, if any, shall be entitled to appoint an arbitrator to represent the
interests of Tenant.
END OF ARTICLE NINE
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ARTICLE TEN
DEFAULT
10.01 Events of Default
-----------------
The following shall constitute "Events of Default":
(a) Tenant shall fail to pay any Rental or Impositions when due, and such
failure shall continue for a period of twenty (20) days following written notice
from Landlord both to Tenant and to any Leasehold Mortgagee; provided, however,
Landlord shall not at any time be required to give a copy of such notice to more
than three (3) Leasehold Mortgagees under not more than three (3) Leasehold
Mortgages, nor shall Landlord be required to give a copy of such notice to more
than one Leasehold Mortgagee with respect to any one Leasehold Mortgage, nor
shall Landlord be required to give a copy of such notice to any Leasehold
Mortgagee if Landlord has not received notice of the existence of such Leasehold
Mortgagee or otherwise has no knowledge of such Leasehold Mortgage's existence;
or
(b) Tenant or Landlord shall fail to observe or perform any of the other
covenants, terms or conditions contained in the Lease, or a warranty made by
either Tenant or Landlord shall fail to be accurate and complete, and such
failure shall continue and not be cured for a period of thirty (30) days after
written notice by the other party to the defaulting party (and to all
Mortgagees, if Tenant is the defaulting
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party), provided that if the default is not reasonably susceptible of being
cured within thirty (30) days, an Event of Default shall only occur if the
defaulting party fails to promptly commence such cure within said thirty (30)
day period or fails thereafter to diligently pursue such efforts to completion.
10.02 Landlord's Rights upon an Event of Default
------------------------------------------
Upon the occurrence of an Event of Default by Tenant, or at any time
thereafter during the continuance of such default, in addition to (and not by
way of limitation of) any other remedies Landlord may have under the Lease,
Landlord may elect to terminate the Lease by giving no less than thirty (30)
days' prior written notice thereof to Tenant and to all Leasehold Mortgagees,
and upon such termination Landlord may then or at any time thereafter:
(a) Re-enter and take possession of the Leased Premises or any part
thereof and all improvements thereon, and may expel or remove Tenant from the
Leased Premises without resort to any legal proceedings and without being deemed
guilty of any trespass or becoming liable for any loss or damage which may be
occasioned thereby; or
(b) Bring an action for summary possession of the Leased Premises or any
part thereof as provided by law.
Landlord's remedies under the Lease shall be cumulative, and no remedy
expressly provided for herein shall be deemed to
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exclude any other remedy allowed by other provisions of the Lease.
10.03 Tenant's Rights on Default
--------------------------
Upon the occurrence of an Event of Default by Landlord, or at any time
thereafter during the continuance of such default, Tenant's remedies under the
Lease shall include, without limitation, an action for damages or specific
performance. Tenant's remedies under the Lease shall be cumulative, and no
remedy expressly provided for herein shall be deemed to exclude any other remedy
allowed by law or equity or by other provisions of the Lease.
10.04 Implied Waiver
--------------
The failure of Landlord or Tenant to insist upon strict performance of any
of the covenants or conditions of the Lease, or to exercise any option herein
conferred in any one or more instances shall not be construed as a waiver or
relinquishment for the future of any such covenant, condition, or option, but
the same shall be and remain in full force and effect. Acceptance by Landlord of
Rental from Tenant with knowledge of the existence of a breach of the Lease by
Tenant shall not constitute a waiver of such breach, nor a waiver of the right
of Landlord to insist upon Tenant's curing such breach or default.
END OF ARTICLE TEN
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ARTICLE ELEVEN
ASSIGNMENT AND SUBLETTING
-------------------------
11.01 Binding Effect
--------------
The Lease shall be binding upon and shall inure to the benefit of the
parties hereto and their respective heirs, personal representatives, successors,
and assigns and, except as provided in Sections 11.02 and 11.03, Tenant shall
not assign nor sublet its interest in the Lease without the written consent of
Landlord, which consent shall not be unreasonably withheld or delayed. Upon
completion of any assignment described in this Article Eleven, Tenant shall give
Landlord written notification of the same specifying the name of the assignee
and its notice address (if different from that specified in Section 13.07).
11.02 Marriott Assignment
-------------------
Marriott Corporation, as Tenant, shall have the right, without Landlord's
consent, to assign the Lease:
(a) To any subsidiary corporation or Affiliate of Marriott Corporation,
(b) To any Bona Fide Institutional Lender as security for any Leasehold
Mortgage permitted under the Lease,
(c) In connection with a merger, consolidation or other corporate
reorganization of Marriott, including the sale of all or a substantial portion
of its assets, or
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(d) To an institution or third-party investor, including a joint venture or
partnership, whether limited or general, in which Marriott, a Marriott Affiliate
and/or a Bona Fide Institutional Lender is a venturer or partner, as the case
may be ("Investor"), pursuant to a sale and leaseback transaction or to a
transaction by which Marriott Corporation or a Marriott Affiliate operates the
Hotel, or other improvements permitted pursuant to Section 5.14, pursuant to a
management agreement or lease as agent, independent contractor or tenant of the
Investor if (i) the Investor either (x) has a net worth, determined in
accordance with generally accepted accounting principles consistently applied,
consisting of at least Five Million Dollars ($5,000,000), (y) at the time of
assignment invests equity in or purchases an equity interest for an amount not
less than Five Hundred Thousand Dollars ($500,000) in the Hotel or other
improvements permitted pursuant to Section 5.14, the Investor is a partnership,
one of whose general partners is either (A) Marriott Corporation or (B) a Bona
Fide Institutional Lender, (ii) the Investor becomes tenant of Landlord and
assumes all of Tenant's obligations under the Lease (thereby relieving Marriott
Corporation of any further obligations hereunder), and (iii) the operating
agreement or lease relating to the operation of the Hotel or other improvements
permitted pursuant to Section 5.14 as agent, independent contractor or tenant of
the Investor is subject and subordinate to the Lease. Upon
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compliance with the foregoing, Marriott Corporation shall be released from any
obligations accruing under the Lease subsequent to the date of such assignment.
The Investor shall have the right to terminate such operating agreement or
lease, provided the Investor continues to comply with all of its obligations
under the Lease (including the payment of all Rental) and within a reasonable
period of time (not to exceed 180 days) engages an experienced hotel operator of
established reputation to operate the Hotel or in the event use of the Leased
Premises has been modified pursuant to Section 5.14 an operator skilled in
management and operation of the then present use, which operator shall be
subject to the prior approval of Landlord (which approval shall not be
unreasonably withheld or delayed). For the purposes of this Section 11.02(d),
Hyatt, Hilton, Holiday Inn (Embassy Suite), Sheraton, Omni/Dunfey, Marriott,
Westin, Four Seasons or any subsidiaries or successors thereto shall be deemed
to be acceptable operators for which approval will not be required, although
Tenant agrees to notify Landlord of the selected operator. Landlord and/or
Tenant may request additions or deletions to such list, subject to the
reasonable approval of the other party; provided, however, in no event shall
there be fewer than four (4) operators on such list at any one time.
An assignment under (a), (b) or (c) above shall not (subject to the
provisions of Section 13.18 herein which shall
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be for the benefit of Tenant and Marriott Corporation) relieve Marriott
from its obligations hereunder.
11.03 Other Assignment
----------------
Any Tenant hereunder, if not Marriott or any subsequent Tenant, shall have
the right to assign the Lease to:
(a) Any subsidiary corporation or Affiliate of Tenant, or
(b) A party of good moral character which is either an experienced,
competent and nationally recognized hotel chain operator who enters into a lease
or operating agreement with an experienced, competent and nationally recognized
hotel chain operator; or, in the event use of the Leased Premises have been
modified pursuant to Section 5.14, an owner of similar properties who is either
an operator skilled in management and operation of the then present use or who
enters into a lease or operating agreement with an operator skilled in
management and operation of the then present use.
(c) A third party Investor, or
(d) A Bona Fide Institutional Lender as security for any Mortgage of
Tenants.
Provided any of the foregoing in (b) and (c) either (i) has a net worth,
determined in accordance with generally accepted accounting principles
consistently applied, equal to or greater than Five Million Dollars ($5,000,000)
or (ii) at the time of assignment invests equity in or purchases an
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equity interest for an amount not less than Five Hundred Thousand Dollars
($500,000) in the Hotel or other improvements permitted pursuant to Section
5.14; and, provided further, that any assignee pursuant to this Section becomes
Tenant of Landlord and assumes all of Tenant's obligations under the Lease and
enters into an operating agreement or lease to be approved by Landlord with a
party to be approved by Landlord (neither of such approvals to be unreasonably
withheld or delayed and with the understanding that for the purposes of this
Section 11.03 Hyatt, Hilton, Holiday Inn (Embassy Suite), Sheraton, Omni/Dunfey,
Marriott, Westin, Four Seasons or any subsidiaries thereof or successors thereto
shall be deemed to be acceptable operators for which approval will not be
required, although Tenant agrees to notify Landlord of the selected operator.
Landlord and/or Tenant may request additions or deletions to such list, subject
to the reasonable approval of the other party; provided, however, in no event
shall there be fewer than four (4) operators on such list at any one time) which
provides that it shall be subordinate to the Lease, and upon such assignment and
compliance with the provisions of this Section Tenant shall be released from any
obligations accruing under the Lease subsequent to the date of such assignment.
Notwithstanding the foregoing, any assignment pursuant to Section 11.02(b) or
(c) shall be subject to Section 13.04.
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<PAGE>
11.04 Subletting
----------
Tenant shall be entitled, without Landlord's consent, to sublease or grant
concessions of the Leased Premises for hotel-related business purposes such as
barber and beauty shops, airline ticket counters, car rental agencies,
newsstands, and gift shops (or for business purposes reasonably related to the
then current use following modification of use pursuant to Section 5.14),
provided that the term of any such sublease or concession shall not extend
beyond the Term of the Lease and provided further that any such sublease or
concession agreement shall be subordinate to the Lease and shall recognize
Landlord's option to terminate such sublease or concession in the event the
Lease is terminated.
11.05 Assignment and Subletting Upon Default Under Leasehold Mortgage
---------------------------------------------------------------
Landlord agrees that (x) so long as the Lease shall be in effect, then from
and after the occurrence of any default by the then Tenant under any Leasehold
Mortgage, or of any act, condition or event which would permit any Leasehold
Mortgagee to declare all or any part of the indebtedness secured by such
Leasehold Mortgage to be immediately due and payable, or (y) if the Lease shall
have terminated, then at all times that any new (or substitute new) lease made
pursuant to the provisions of Section 6.0l(b)(vi) shall be in effect:
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(a) Tenant may assign the Lease and/or the leasehold estate hereby created
without the consent of Landlord on condition that (i) such assignment shall be
in a writing duly executed and acknowledged by the assignee in proper form for
recording; and (ii) a duplicate original of such assignment shall be delivered
to Landlord, together with an assumption agreement [except as otherwise provided
in Section 6.0l(b)(vi)] properly executed by the assignee in form for recording,
pursuant to which the assignee shall assume all of the terms, covenants and
conditions of the Lease to be performed by Tenant from and after the date of
such assignment. An assignment of the Lease by Tenant shall not release or
discharge Tenant from any obligation or liability under the Lease.
(b) Tenant may sublet, underlet or license all or part of the Leased
Premises, provided that such sublease, underlease or license shall be subject
and subordinate to the terms and provisions of the Lease and that in case of a
sublease or underlease of all or substantially all of the Leased Premises, a
copy of such sublease or underlease shall be delivered to Landlord.
(c) Tenant may assign the Lease or sublease, underlease or license
substantially all of the Leased Premises as may elsewhere be provided in the
Lease, in addition to the rights granted in this Section.
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<PAGE>
(d) Subject to the provisions of Section 5.14, Tenant need only operate the
Leased Premises as a hotel facility (which may include restaurant, bar, business
meeting, banquet or other related facilities), without any requirement for
operation as a "Marriott Hotel", or other specified type, name or chain of
hotel, "first class" hotel, or any other such restrictions or limitations on
hotel use, nor shall Landlord's consent be required as to the identity of the
operator of the Hotel, provided that:
1. Anyone who at any time shall operate the Hotel shall be a person,
firm or entity which (a) now or at such time owns or operates one or more of the
hotels or hotel chains set forth, or constituting one of the hotels for which no
approval is required pursuant to Section 11.02(d), or (b) at such time is an
experienced operator of one or more hotels of at least similar size and
facilities as the hotel then operated at the Leased Premises, or (c) controls,
is controlled by, or is under common control with, one or more of the present or
then owners or operators referred to in (a) or (b) above; for this purpose,
"control" shall mean the right, directly or indirectly, to direct or cause the
direction of the management and policies of such other person, firm or entity,
whether through ownership interests, by contract or otherwise.
2. The provisions of this Section 11.05(d) need not be complied with
for a period of one hundred eighty (180) days
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after the expiration or termination of the operation of the Leased Premises by
the previous operator.
3. If Landlord objects to any such new operator or proposed new
operator, it shall so notify Tenant and the Leasehold Mortgagee (or tenant under
a new lease) in writing within fifteen (15) days after Tenant or the Leasehold
Mortgagee (or the tenant under a new lease) shall have advised Landlord of the
identity of such new operator or proposed new operator. If Landlord shall not
have given such notice within such time, it shall be deemed conclusively to have
consented to the new operator or proposed new operator. If Landlord shall
dispute the right of Tenant to change the operator of the Hotel pursuant to the
provisions of this Section 11.05(d) or the operator selected, the operator
selected may operate the Hotel pending final judicial determination of such
dispute, but if it is determined that Landlord was correct, a default shall not
be deemed to have occurred under this Lease or the new lease unless the operator
selected shall not be replaced within thirty (30) days after the date upon which
such judicial determination becomes final (so that any time for appeal shall
have expired).
4. Tenant may change the operator of the Hotel as may elsewhere be
provided in the Lease, in addition to the rights granted in this Section.
5. The operator of the Leased Premises may be the then Tenant or a
manager pursuant to a management agreement,
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or a subtenant pursuant to a sublease, provided that the management agreement or
sublease is subordinate to this Lease.
END OF ARTICLE ELEVEN
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ARTICLE TWELVE
COMMON AREA
-----------
12.01 Right to Use Common Area and Design Approval
--------------------------------------------
Tenant, its agents, employees, guests and invitees shall have a
non-exclusive right, in accordance with the provisions of this Article Twelve,
to use the Common Area set forth in Exhibit "D" for its intended purposes in
common with Landlord and its tenants and subtenants and the employees, agents,
and invitees of same. In addition, Tenant shall have the right to approve the
general design of the Common Area and any changes thereto in the area set forth
in Exhibit "D-1", such approval not to be unreasonably withheld or delayed.
Landlord, its agents, employees, guests and invitees shall have a non-exclusive
right, in accordance with the provisions of this Article Twelve, to use the
Common Area set forth in Exhibit "D-2" for its intended purposes in common with
Tenant and its tenants and subtenants and the employees, agents, and invitees of
same.
12.02 Maintenance of the Common Area
------------------------------
(a) Landlord shall operate, manage, equip, light, repair and maintain that
portion of the Common Area set forth in Exhibit "D-3" and all utility systems
serving such Common Area in a first-class manner for their intended purposes
and, as appropriate, in an aesthetically pleasing condition consistent
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and harmonious with the Hotel and Landlord's first-class improvements on the
Adjacent Tract. Additionally, Landlord shall provide security for such Common
Area. In the event Landlord fails to maintain such Common Area in accordance
with the provisions of this Article Twelve, Tenant may, upon three (3) days'
notice to Landlord, correct such conditions at Landlord's cost and expense, (and
offset such cost and expense against any sums due Landlord pursuant to the
Lease), provided that no such notice need be given to correct an emergency
condition. Tenant hereby grants Landlord an easement over that portion of the
Common Area set forth in Exhibit "D-3" which is on the Leased Premises to the
extent reasonably necessary for Landlord to comply with its obligations pursuant
to this Section 12.02(a).
(b) Tenant shall operate, manage, equip, light, repair and maintain that
portion of the Common Area set forth in Exhibit "D-2" and all utility systems
serving such Common Area in a first-class manner for their intended purposes
and, as appropriate, in an aesthetically pleasing condition consistent and
harmonious with the Hotel and Tenant's first-class improvements on the Adjacent
Tract. Additionally, Tenant shall provide security for such Common Area. In the
event Tenant fails to maintain such Common Area in accordance with the
provisions of this Article Twelve, Landlord may, upon three (3) days' notice to
Tenant, correct such conditions at Tenant's cost and expense provided that no
such notice need be given to correct an emergency condition.
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(c) Nothing herein shall prevent Landlord and Tenant from agreeing to
changes in maintenance responsibilities for certain portions of the Common Area.
In the event of such changes, the obligations and rights of the party previously
maintaining such area as set forth herein with respect to such area shall be
deemed to be the obligations and rights of the party agreeing to maintain such
area and the obligations and rights of the party agreeing to maintain such area
shall be deemed to be the obligations and rights of the party previously
maintaining such area. The Common Area Charge shall be equitably adjusted as
agreed by the parties within thirty (30) days of the date that the party
agreeing to maintain such area assumes the obligations of the party previously
maintaining such area with respect to such area. In the event the parties are
unable to agree on an equitable adjustment, the matter shall be decided by
arbitration pursuant to the provisions of Article Nine.
12.03 Rules and Regulations
---------------------
(a) Landlord may adopt such reasonable rules and regulations as it may from
time to time determine to impose on the use of the Common Area set forth in
Exhibit "D-3"; provided, however, such rules and regulations shall (i) be
uniformly applied to all occupants of the Adjacent Tract and Tenant, (ii) not
discriminate against Tenant, or (iii) affect the easements in the Common Area
providing for ingress and egress as set forth in Section 5.04 hereof. If any
rule or
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regulation shall be inconsistent with the terms and provisions of this Lease,
the terms and provisions of this Lease shall prevail. In the event that Tenant
disputes a rule or regulation as not uniformly applied or as discriminatory or
as inconsistent with the terms and provisions of this Lease, the matter shall be
submitted to arbitration in accordance with the provisions of Article Nine
hereof and such rule or regulation shall be suspended until the resolution of
the dispute through arbitration.
(b) Tenant may adopt such reasonable rules and regulations as it may from
time to time determine to impose on the use of the Common Area set forth in
Exhibit "D-2"; provided, however, such rules and regulations shall (i) be
uniformly applied to all occupants of the Adjacent Tract and Landlord, (ii) not
discriminate against Landlord, or (iii) affect the easements in the Common Area
providing for ingress and egress as set forth in Section 5.04 hereof. If any
rule or regulation shall be inconsistent with the terms and provisions of this
Lease, the terms and provisions of this Lease shall prevail. In the event that
Landlord disputes a rule or regulation as not uniformly applied or as
discriminatory or as inconsistent with the terms and provisions of this Lease,
the matter shall be submitted to arbitration in accordance with the provisions
of Article Nine hereof and such rule or regulation shall be suspended until the
resolution of the dispute through arbitration.
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12.04 Changes in the Common Area
--------------------------
Either Landlord or Tenant may, with respect to the Common Area each is
obligated to maintain, at any time and from time to time, increase, reduce or
change the number, type, size, location, elevation, nature and use of any of
such Common Area, and make installations therein, move or remove the same,
provided that no such change will be made with respect to ingress and egress for
which an easement is given without the prior written consent of Tenant, and no
substantial change will be made by Landlord or Tenant with respect to the Common
Area identified on Exhibits D-2 and D-3 hereof without the prior written
consent of the other party, such consent not to be unreasonably withheld or
delayed.
12.05 Temporary Closings
------------------
Either Landlord or Tenant may, with respect to the Common Area each is
obligated to maintain, as required, temporarily close any portion of the Common
Area to effect construction, repairs or changes within such areas which are not
prohibited pursuant to this Lease; provided, however, such construction,
repairs, changes or closings shall be conducted in such a manner as shall not
prohibit access or substantially interfere with ingress to or egress from or to
the Leased Premises or the Adjacent Tract and shall be performed in such a
manner to minimize disruption to Hotel operations and Landlord's operations on
the Adjacent Tract and inconvenience to Hotel
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guests and Landlord's invitees. Either Landlord or Tenant, as appropriate, may
close a portion of the Common Area to prevent a dedication thereof to public
use.
12.06 Covenant to Pay Common Area Maintenance Costs
---------------------------------------------
Commencing with the Fiscal Year in which the Opening Date occurs, Tenant
shall pay to Landlord Tenant's proportionate share of the aggregate amount of
Common Area Maintenance Costs expended by Landlord in such Fiscal Year (or
portion thereof) in the operation and maintenance of that portion of the Common
Area set forth in Exhibit "D-4". Tenant's portion of such Common Area
Maintenance Costs shall be referred to as "Common Area Charges" and shall be
calculated as provided in Section 12.08. Common Area Charges shall accrue and be
paid to Landlord each Accounting Period as provided herein.
12.07 Common Area Maintenance Costs
-----------------------------
(a) For the purposes of this Lease, Common Area Maintenance Costs shall
mean all reasonable monies paid by or on behalf of Landlord for the security,
operation, maintenance and repair of that portion of the Common Area set forth
in Exhibit "D-4" including all such costs and expenses actually incurred and
reasonably allocated to any of the following items as they relate solely to the
Common Area set forth in Exhibit "D-4":
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(1) Gardening, landscaping, planting, replanting, and replacement of
flowers and shrubbery;
(2) The total cost and expense for insurance covering the Common Area set
forth in Exhibit "D-4";
(3) All Impositions covering or allocable to the Common Area set forth in
Exhibit "D-4" and costs of permitted contests relating thereto;
(4) Costs in connection with utilities facilities used in connection with
the Common Area set forth in Exhibit "D-4", including electricity used for
lighting and all costs of maintaining lighting fixtures in the Common Area;
(5) All rental charges for equipment and costs of small tools and supplies
reasonably allocable to the Common Area set forth in Exhibit "D-4";
(6) All acquisition or replacement costs of maintenance equipment
reasonably allocable to the Common Area set forth in Exhibit "D-4";
(7) Policing, security protection, traffic direction, control and
regulation of the Common Area set forth in Exhibit "D-4";
(8) All costs for cleaning and removal of rubbish, dirt and debris from the
Common Area set forth in Exhibit "D-4";
(9) The cost of the annual audit of Common Area Maintenance Costs by an
independent certified public accountant;
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(10) Costs for the repair and replacement of paving, curbs and walkways in
the Common Area set forth in Exhibit "D-4";
(11) Costs of heating, ventilating and air conditioning enclosed Common
Area set forth in Exhibit "D-4", if any;
(12) Replacement, restoration and reconstruction work of Common Area set
forth in Exhibit "D-4" as shall be required under the terms and provisions of
this Lease in order to preserve the usefulness of the Common Area set forth in
Exhibit "D-4".
(13) The cost of personnel (direct salaries and reasonable overhead
allocations) to implement all the aforementioned, and a reasonable allocation of
wages or salaries paid to Landlord's management or supervisory personnel as such
allocations shall be mutually agreed to by Landlord and Tenant.
(b) Common Area maintenance costs shall not include the cost incurred by
Landlord in creating or developing any part of the Common Area, including any
financing charge. Additionally, Common Area costs and expenses shall exclude or
have deducted from them, as the case may be:
(1) Capital expenses and expenses incurred for constructing, upgrading
and/or restoring the Common Area set forth in Exhibit "D-4", or any part
thereof, as distinguished from expenses for repairing or maintaining the Common
Area set
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forth in Exhibit "D-4" which would have otherwise been included in Common Area
Maintenance Costs.
(2) Amounts received through proceeds of insurance to the extent they
are compensation for sums previously included in Common Area Maintenance Costs.
(3) Costs for repairs incurred by reason of fire or other casualty or
condemnation to the extent there is compensation therefor by the proceeds of
insurance.
(4) Advertising and promotional expenses.
(5) Amounts expended for cleaning any space leased to any tenant or
amounts expended for repairs for any tenant for which Landlord is reimbursed by
such tenant.
(6) Depreciation other than of items of equipment purchased for Common
Area maintenance which are not customarily expensed.
12.08 Calculation of Common Area Charge
---------------------------------
Landlord and Tenant have agreed that Tenant's fair and proportionate
share shall equal a percentage of the total Common Area Maintenance Cost for
that portion of the Common Area set forth in Exhibit "D-4" ("Common Area
Charge"). The percentage equals the gross square footage of the Hotel (or other
improvement if there is a change in use pursuant to Section 5.14) divided by the
sum of the gross square footage of the Hotel (or other improvement if there is a
change in use pursuant to Section 5.14) and all existing buildings or other
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structures on the Adjacent Tract which contain leaseable floor area; provided,
however, in no event shall such percentage exceed thirty percent (30%). The pro
rata portion of the Common Area Charge will be paid each Accounting Period based
on the approved Common Area Budget, subject to adjustment as set forth in
Section 12.09.
12.09 Budget
------
Within sixty (60) days prior to the start of each Fiscal Year, Landlord
shall submit to Tenant the anticipated budget for that portion of the Common
Area set forth in Exhibit "D-4" for Tenant's review and reasonable approval
("Common Area Budget"). The Common Area Budget shall be in such detail as Tenant
shall reasonably request. In the event there is a dispute over the Common Area
Budget, the matter shall be decided by arbitration pursuant to Article Nine.
Landlord shall provide Tenant with a certified audited statement of Common Area
Maintenance Costs by an independent certified public accountant for the previous
Fiscal Year, if requested by Tenant. Any adjustments between the actual amount
expended for Common Area Maintenance Costs and the amounts paid by Tenant shall
be made annually in such manner as the parties shall agree.
12.10 Operator
--------
Notwithstanding any other provisions contained in this Section, either
Landlord or Tenant may enter into an agreement
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with an unrelated third party operating entity mutually approved by Landlord and
Tenant, such approvals not to be unreasonably withheld or delayed, for the
operation and maintenance of that portion of the Common Area each is obligated
to maintain in accordance with the provisions of this Article Twelve.
END OF ARTICLE TWELVE
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ARTICLE THIRTEEN
MISCELLANEOUS PROVISIONS
------------------------
13.01 Trade Name and Trademarks
-------------------------
During the Term of the Lease (and any extensions or renewals thereof) the
Hotel and any additions thereto shall be known as a Marriott Hotel so long as
Marriott Corporation or one of its Affiliates is Tenant or so long as Marriott
Corporation or one of its Affiliates is subtenant, operator or manager of the
Hotel. If the name of the Marriott hotel system is changed or if Marriott is no
longer tenant, subtenant, operator or manager of the Hotel, Tenant shall have
the right to change the name of the Hotel to conform thereto. The name
"Marriott" when used alone or in connection with another word or words and the
Marriott trade names and trademarks shall in all events remain the exclusive
property of Marriott Corporation, although Tenant agrees that Landlord may
advertise the Hotel and utilize the name "Marriott" in any advertising or
promotional material covering the Leased Premises and the Adjacent Tract with
the prior written approval of Marriott Corporation. Nothing contained herein
shall confer upon Landlord the right to use said name, trade names or
trademarks. Upon expiration or other termination of the Lease, Tenant shall have
the right to remove from the Leased Premises said name, trade names and
trademarks and their use in respect of the Leased Premises shall immediately
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end. In no event shall Landlord, or any party claiming through Landlord, use
such name, trade names or trademarks. However, upon termination of the Lease,
any designs, architectural schemes, or related items that are an integral part
of the design of the Hotel but which do not use the Marriott name, trade names
or trademarks, shall become the property of Landlord, and Landlord shall have
the right to continue the use thereof even though such items may be patented or
copyrighted by Marriott Corporation or any of its subsidiaries or associated
with the Marriott name, provided that such use is confined solely to the Hotel
and any additions thereto. Tenant shall be entitled, in case of any breach of
this provision by Landlord or anyone claiming through Landlord, to damages
and/or injunctive relief and to any other right or remedy provided by law or
equity. This provision shall be deemed to survive the expiration or other
termination of the Lease.
13.02 Tenant's Right of First Negotiation
-----------------------------------
(a) If Landlord decides to sell (or assign) the Leased Premises to a third
party, Landlord will give Tenant notice of such decision and afford Tenant a
reasonable period of time as specified in such notice, but in no event more than
seventy-five (75) days, in which to attempt to negotiate a mutually
satisfactory agreement for purchase of the Leased Premises. For purposes of this
Section a sale to a third
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party shall not include any transfer, sale or assignment to an institutional
lender or to trustees for such lender to secure a loan, nor to a sale at
foreclosure under a Fee Mortgage. If after expiration of seventy-five (75) days
following the date of Landlord's notice of its desire to sell the Leased
Premises Landlord and Tenant are not able or willing to enter into a mutually
acceptable agreement for purchase of the Leased Premises, Landlord shall be free
to sell the Leased Premises to a third party on terms and conditions not more
favorable to such third party than Landlord was willing to sell the Leased
Premises to Tenant and subject to the following further conditions: Landlord
shall give Tenant notice of the proposed sale of the Leased Premises, which
notice shall disclose the identity of the proposed purchaser and all information
regarding such purchaser and all information regarding the terms and conditions
of such sale. If the proposed purchaser, in the opinion of Tenant, is not a
financially responsible or solvent party having sufficient assets to fulfill the
obligations of Landlord hereunder, or is a party which has itself been
convicted, or is either controlled by persons known to be engaged in criminal
activities, or known as an associate or agent of criminals, or such party
directly or indirectly operates or manages hotels or restaurants in competition
with Tenant (other than Hawthorne Realty Group or entities controlled by one or
more of the principals of Hawthorne Realty Group, Tenant acknowledges that said
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principals have an interest in the initial Landlord hereunder), then Tenant
shall have the right to terminate the Lease, such termination to be effective
upon transfer of title of the Leased Premises from Landlord to the third party
purchaser. Tenant shall notify Landlord of its election to terminate for this
reason, and shall specify the reasons for its making such election, within
thirty (30) days after receipt by Tenant of notice of any such proposed sale of
the Leased Premises. For the purposes of this Section, a financial institution
or investor shall not be engaged in competition with Tenant by virtue of its
mere ownership of, or investment in, other hotels and restaurants.
(b) For the purposes of this Section a sale or transfer of a controlling
interest in Landlord shall be deemed to be a sale of the Leased Premises, except
a sale or transfer among partners. Furthermore, the provisions of this Section
shall not apply to a sale or transfer to an affiliate or subsidiary or Landlord
or one of its partners, provided that Landlord (or such assignor) shall not be
released from any obligation under this Lease and shall remain fully liable for
such affiliate or subsidiary.
13.03 Purchase of Hotel by Landlord
-----------------------------
(a) If at any time during the Initial Term or any Extended Term Landlord is
notified of a proposed change of use in accordance with the provisions of
Section 5.14 hereof,
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Landlord may elect to purchase the Hotel and all attendant improvements,
equipment and furnishings on the Leased Premises, and upon such purchase,
terminate the Lease. Landlord's election to purchase the improvements shall be
exercised by written notice within thirty (30) days after receipt of the
aforementioned Landlord's notice, by certified or registered mail in accordance
with the provisions of Section 13.07, and shall specify a closing date which is
not less than thirty (30) days or more than ninety (90) days from the date of
Landlord's notice. The closing of Landlord's purchase shall take place at a
mutually convenient place and time of day.
(b) The purchase price payable by Landlord shall be an amount equal to the
greater of (i) the outstanding principal amount of, plus accrued and unpaid
interest on, all Leasehold Mortgages, notes or bonds secured by the Leased
Premises, or (ii) the "fair market value" of the Hotel and the Tenant
improvements, equipment and furnishings. In order to determine the fair market
value, Landlord and Tenant shall each select and designate a qualified MAI (or
equivalent) real estate appraiser to determine the fair market value of the
Hotel and attendant improvements at such time, and shall notify the other of
such choice and designation. The two (2) appraisers so chosen and designated
shall choose a third appraiser as soon as possible, but no later than thirty
(30) days following their selection. The three (3) appraisers so
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chosen shall independently appraise the fair market value of the Hotel and
improvements, completing same and rendering their reports to each other and to
Landlord and Tenant within thirty (30) days following their respective
appointments. Upon said appraisals being completed and reports rendered as
aforesaid, the appraisers shall confer in an effort to reach agreement. The fair
market value of the Hotel and improvements, as determined and agreed to by no
less than a majority of the appraisers and a final appraisal report signed by
all or a majority of the appraisers, shall be binding upon Landlord and Tenant.
Such parties will each pay for the services of the appraiser chosen by it, and
the charges of the third appraiser will be borne equally. Said final appraisal
report will be dated and shall be sent to Landlord and Tenant by certified or
registered mail, return receipt requested. Should either Landlord or Tenant fail
or refuse to designate an appraiser within thirty (30) days following written
request of the other party, the requesting party shall give the other party
notice of such failure and if such other party shall fail or refuse to designate
an appraiser within ten (10) days after said second notice, the fair market
value of the Hotel and improvements will be determined by the appraiser timely
designated by the requesting party. The purchase price, as thus determined,
shall be paid in full at closing by wire transfer or other immediately available
funds.
(c) At the closing and upon payment in full of the purchase price, Tenant
shall deliver to Landlord (i) an
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agreement, in form for recordation or filing, terminating the Lease, and (ii) a
Special Warranty Deed in which Tenant conveys to Landlord its interest in the
Hotel and attendant improvements free and clear of all liens and encumbrances
but otherwise subject to such state of title of the Hotel (including the lien or
lease of the Trade Equipment) as shall exist at the date of Landlord's election
to purchase the improvements, and (iii) a bill of sale, with warranties of
title, conveying Tenant's interest to Landlord in the Trade Equipment (subject
to the provisions of Section 5.05). In addition, Tenant shall cause to be
delivered to Landlord concurrently with the closing a full and complete release
of each and every Leasehold Mortgage which is suitable for filing or
recordation, as the case may be.
(d) Any Leasehold Mortgage shall contain provisions which obligate the
holder of the Leasehold Mortgage to comply with the provisions of this Section.
13.04 Landlord's Right of First Negotiation
-------------------------------------
If Tenant decides to assign the Leased Premises to a third party pursuant
to Section 11.03(b) and (c) hereof, or Section 11.02(d) and Marriott or a
Marriott Affiliate ceases to own any interest in such assignee, Tenant will give
Landlord notice of such decision and afford Landlord a reasonable period of time
as specified in such notice, but in no event more than seventy-five (75) days,
in which to attempt to
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negotiate a mutually satisfactory agreement for purchase of the Leased Premises.
For purposes of this Section, a sale to a third party shall not include any
transfer, sale or assignment to a Bona Fide Institutional Lender or to trustees
to such lender to secure a loan or to a sale at foreclosure under any Leasehold
Mortgage. If after expiration of seventy-five (75) days following the date of
Tenant's notice of its decision to sell the Leased Premises Landlord and Tenant
are not able or willing to enter into a mutually acceptable agreement for
purchase of the Leased Premises, Tenant shall be free to sell the Leased
Premises to a third party at a sales price and upon financing arrangements, if
any, no more favorable to such third party than Tenant was willing to sell the
Leased Premises to Landlord, and such assignment shall, in any event, be subject
to the terms and provisions of Sections 11.02 and 11.03, as appropriate.
13.05 Brokers' Fees
-------------
Tenant shall hold Landlord harmless against the claim of any real estate
broker or agent claiming to have acted on behalf of Tenant, and Landlord shall
hold Tenant harmless against the claim of any other real estate broker or agent
claiming to have acted on behalf of Landlord.
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13.06 Gender and Number
-----------------
Words of any gender used in the Lease shall be held to include any other
gender, and words in the singular shall be held to include the plural, when the
sense requires.
13.07 Notices
-------
Notices, statements and other communications to be given under the terms of
the Lease shall be in writing and delivered by hand against receipt or sent by
certified or registered mail, return receipt requested and addressed as follows:
If to Landlord:
--------------
Hawthorne Realty Group
8 East Huron Street
Chicago, Illinois 60611
with copy to:
Simon-Rosemont, Inc.
Merchant Plaza
115 West Washington
P.O. Box 7033
Indianapolis, Indiana 46207
Attention: Vice President - Development
If to Tenant:
------------
Marriott Corporation
10400 Fernwood Road
Bethesda, Maryland 20058
Attn: Law Department
With copies to:
Tenant's Leasehold Mortgagee(s)
or at such other address as from time to time designated by the party receiving
the notice. The date of service of such
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notices shall be the date such notices are delivered to the party to whom the
notice is given.
13.08 Construction
------------
Each term and provision of the Lease shall be construed to be both a
covenant and a condition.
13.09 Applicable Law
--------------
The laws of the State of Illinois shall govern the validity, performance
and enforcement of the Lease.
13.10 Partial Invalidity
------------------
If any provision of the Lease shall be invalid or unenforceable it shall
not affect the validity of any other provision of the Lease.
13.11 Authority to Execute
--------------------
The officers of Tenant and Landlord individually and severally are duly
authorized to execute the Lease on behalf of their respective principals.
13.12 Recording
---------
Landlord and Tenant will execute for purposes of recordation in the
appropriate recording office a memorandum or short form of the Lease containing
the names of the parties, a description of the Leased Premises, the Term of the
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Lease, and such other provisions as either party may require. The cost and
expenses of recording the memorandum or short form of the Lease shall be borne
by the party asking for the memorandum to be recorded. Each party agrees that it
will not record the Lease in its entirety unless such a recording is required to
protect the rights of Landlord and Tenant hereunder or unless required by any
Mortgagee or applicable law.
13.13 Headings
--------
Headings as to contents of particular sections herein are inserted only for
convenience, and are in no way to be construed as a part of the Lease or as a
limitation on the scope of the particular section to which they refer.
13.14 Binding Effect
--------------
The covenants, conditions and agreements contained in the Lease shall bind,
apply to and inure to the benefit of the parties hereto and their respective
successors.
13.15 No Partnership
--------------
Notwithstanding that the Lease provides for the payment of rent based upon
percentage of Annual Gross Room Sales, it is expressly understood that Landlord
shall not be construed or held to be a partner or associate of Tenant in the
conduct of Tenant's business and that the relationship between the
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parties hereto is and shall at all times remain that of landlord and tenant.
13.16 Estoppel Certificates
---------------------
Landlord and Tenant will, at any time and from time to time within fifteen
(15) days of the request of the other party or a Mortgagee or a prospective
Mortgagee, execute, acknowledge, and deliver to the other party and such
Mortgagee, if any, a certificate certifying:
(a) That the Lease is unmodified and in full force and effect (or, if there
have been modifications, that the same are in full force and effect as modified
and stating such modifications);
(b) The dates, if any, to which the annual Minimum Rental, Percentage
Rental, any Additional Rental and other sums and charges specifically required
by the provisions of the Lease have been paid;
(c) Whether there are any existing defaults by which the other party to
the knowledge of the party making such certification specifying the nature of
such defaults, if any;
(d) Whether the Lease Commencement Date has occurred and, if so, the date;
(e) Whether the Leasehold Mortgagee (or prospective Leasehold Mortgagee) is
entitled to the protection afforded a Leasehold Mortgagee under Section 6.01 of
the Lease; and
(f) Such other matters as may be reasonably requested.
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Any such certificate may be relied upon by any party to whom the
certificate is directed.
13.17 Holding Over
------------
The Lease shall terminate without further notice at expiration of the Term.
Any holding over by Tenant after expiration shall not constitute a renewal or
extension or give Tenant any rights in or to the Leased Premises except as
otherwise expressly provided in the Lease.
13.18 Tenant's and Landlord's Limited Liability
-----------------------------------------
(a) Notwithstanding any provisions in this Lease to the contrary, Tenant,
its successors and assigns, and their respective partners (general or limited),
shareholders, directors, officers, agents and employees shall be under no
personal liability with respect to any of the provisions of the Lease, nor shall
Landlord have any cause of action against them to enforce the terms, covenants,
conditions, warranties and obligations of Tenant under the Lease, nor to obtain
or seek monetary damages or a deficiency decree under the Lease, and if Tenant
is in breach or default with respect to its obligations or otherwise under the
Lease, Landlord shall look solely to the estate of Tenant in the Leased
Premises, and Landlord's sole remedy in the event of any such breach or default
by Tenant hereunder shall be to terminate Tenant's interest in the Leased
Premises, subject to the terms and
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conditions herein contained. It is the intention of the Lease that this Section
13.18 shall govern over every other provision of the Lease with respect to the
liability of Tenant (including Tenant's successors, assigns, partners,
shareholders, directors, officers, agents and employees) and that the absence of
any reference to this Section 13.18 shall not limit the application of the
provisions of this Section 13.18, notwithstanding any other references to this
Section 13.18 elsewhere in the Lease. Notwithstanding the foregoing, the
provisions of this section shall not apply to Tenant's obligations pursuant to
Sections 2.09 and 2.11 hereof.
(b) Notwithstanding any provision in this Lease to the contrary, Landlord's
liability to Tenant hereunder shall be limited to the greater of (1) the sum of
Six Hundred Thousand Dollars ($600,000), or (2) Landlord's interest in the Hotel
site and Leased Premises, and all improvements now or hereafter situated
thereon; and upon an Event of Default by Landlord, Tenant will not be entitled
to recover from Landlord any monetary judgment in excess of the greater of (w)
Six Hundred Thousand Dollars ($600,000), or (x) the value of Landlord's interest
in the Hotel site and Leased Premises and all improvements now or hereafter
situated thereon. No personal liability or personal responsibility is assumed
by, nor shall at any time be asserted or enforceable against Landlord or its
agents, beneficiaries, employees, or their respective successors or assigns on
account of this Lease or
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on account of any covenant, undertaking, or agreement of Landlord contained
herein in excess of the foregoing limitation; provided, however, the foregoing
limitation shall not apply with respect to (y) any obligation or duty of
Landlord incurred or arising prior to the Opening Date, or (z) Sections 2.02(a)
(except to the extent Tenant may recover under any title insurance policy),
2.02(b), 2.10(b), 2.10(c), 2.11, soil toxicity, 5.01(b), 5.15 and 6.06 hereof.
Nothing herein contained shall be deemed to limit or deny any remedies or rights
which Tenant may have hereunder which do not involve the personal liability of
Landlord.
13.19 Attorneys' Fees
---------------
If legal action be brought in a court of competent jurisdiction by either
party hereto arising out of or concerning the Lease or the rights of any party
hereto, the prevailing party in said action shall be awarded reasonable
attorneys' fees and court costs from the nonprevailing party.
13.20 Entire Agreement; Merger
------------------------
The Lease contains all the agreements and conditions made between the
parties hereto with respect to the matters contained herein and may not be
modified orally or in any other manner than by an agreement in writing signed by
all the parties hereto or their respective successors. All prior written and
oral understandings and agreements shall be deemed
- 149 -
<PAGE>
to have merged into the Lease and have no further force and effect.
IN WITNESS WHEREOF, the parties hereto have duly executed the Lease as of
the date and year first hereinabove written.
SIMON-ROSEMONT DEVELOPERS, an
Illinois limited partnership as
successor to Simon-Soteras Developers
By: HIGGINS-MANHEIM PROPERTIES, an
Illinois general partnership
By: SIMON-ROSEMONT, INC., an
Illinois corporation,
general partner
By: /s/ Herbert Simon
-----------------------------
Herbert Simon, President
By: BNW-ROSEMONT PROPERTIES, an
Illinois limited partnership,
general partner
By: /s/ Joseph Beal
-----------------------------
Joseph Beal, general partner
By: /s/ Cary Nieman
-----------------------------
Cary Nieman, general partner
By: /s/ Philip Wilhelm
-----------------------------
Philip Wilhelm,
general partner
ATTEST: MARRIOTT CORPORATION
/s/ Christopher G. Townsend By: [SIGNATURE APPEARS HERE]
- --------------------------- -------------------------------
Assistant Secretary Vice President
- 150 -
<PAGE>
STATE OF Indiana )
--------------)
) ss.
County of Marion )
--------------)
The foregoing instrument was acknowledged before me the 28th day of
March, 1986, by Herbert Simon, general partner, on behalf of SIMON-ROSEMONT,
INC., an Illinois corporation, as general partner of HIGGINS-MANHEIM PROPERTIES,
an Illinois general partnership, which is a general partner of SIMON-ROSEMONT
DEVELOPERS, an Illinois limited partnership.
/s/ Nancy A. Ryan
-----------------------------------
Title:
-----------------------------
[STAMP OF NOTARY PUBLIC
APPEARS HERE]
STATE OF Illinois )
--------------)
) ss.
County of Cook )
--------------)
The foregoing instrument was acknowledged before me the 31st day of
March, 1986, by JOSEPH BEALE, on behalf of BNW-ROSEMONT PROPERTIES,
an Illinois limited partnership, which is a general partner of SIMON-ROSEMONT
DEVELOPERS, an Illinois limited partnership.
/s/ Jane B. Rodah
-----------------------------------
Title: Notary Public
-----------------------------
STATE OF Illinois )
--------------)
) ss.
County of Cook )
--------------)
The foregoing instrument was acknowledged before me the 31st day of
March, 1986, by CARY NIEMAN on behalf of BNW-ROSEMONT PROPERTIES,
an Illinois limited partnership, which is a general partner of SIMON-ROSEMONT
DEVELOPERS, an Illinois limited partnership.
/s/ Jane B. Rodah
-----------------------------------
Title: Notary Public
-----------------------------
- 151 -
<PAGE>
STATE OF Illinois )
--------------)
) ss.
County of Cook )
--------------)
The foregoing instrument was acknowledged before me the 31st day of
March, 1986, by PHILIP WILHELM, on behalf of BNW-ROSEMONT PROPERTIES,
an Illinois limited partnership, which is a general partner of SIMON-ROSEMONT
DEVELOPERS, an Illinois limited partnership.
/s/ Jane B. Rodah
-----------------------------------
Title: Notary Public
-----------------------------
STATE OF Maryland )
--------------)
) ss.
County of Montgomery )
--------------)
The foregoing instrument was acknowledged before me the 16th day of
June, 1986, by Ronald E. Eastman, Vice President of MARRIOTT CORPORATION, a
Delaware corporation, on behalf of the corporation.
/s/ Johanna P. Jackson
-----------------------------------
Title: Notary Public
-----------------------------
My commission expires 7/1/90
- 152 -
<PAGE>
NOTE: This brief is not intended to summarize all points covered in the
underlying document and care should be taken to read such document carefully in
its entirety. All captilized terms used herein are defined in the Ground Lease
BRIEF
Ground Lease for the Rosemont Marriott Suite Hotel
--------------------------------------------------
Landlord : SIMON-ROSEMONT DEVELOPERS, HIGGINS~MANHEIM PROPERTIES and BNW-
ROSEMONT PROPERTIES.
Tenant: Marriott Corporation
Leased Approximately 4.19 acres located at Rosemont, Cook County,
Premises: Illinois, more fully described in Exhibit A of the Ground
Lease.
Title: Landlord, at its cost, shall furnish Tenant with a current
survey and a preliminary Title Commitment. Tenant shall have 60
days to review.
Economic Tenant shall have 150 days ("Feasibility Period"), to determine
Feasibility: whether construction and operation of the Hotel is economically
feasible.
Hotel
Construction: Tenant shall develop the "Hotel Schematic Documents" in
accordance of the Master Plan. The documents and the aesthetic
treatment of exterior surfaces shall be subject to Landlord's
approval. If tenant determines that the Hotel will exceed
Tenant's original estimate costs, Tenant will have the option
to terminate the lease and pay liquidated damages to Landlord.
Building
Permit,
Construction: Tenant shall apply for a building permit. If permit is not
issued within 90 days, or issued subject to unanticipated terms
and conditions, the effect of which would increase Tenant's
expected costs, Tenant may terminate the lease. and pay
liquidated damages to Landlord.
Lease When all of the provisions and conditions concerning title,
Commencement zoning, water and soil conditions have been fulfilled or waived
Date: by Tenant, Landlord shall deliver the Leased Premises to
Tenant. This date shall be the "Lease Commencement Date.
<PAGE>
Construction Tenant must begin construction within 120 days of the issuance
of Tenant of the building permit. If an Unavoidable Delay for more than
Improvements: 120 days after issuance of the building permit causes Tenant's
original estimate to increase, Tenant shall have the right to
terminate the Lease. Tenant shall pay liquidated damages to
Landlord.
Soil If the additional cost to Landlord to correct and meet
Toxicity: applicable governmental requirements with respect to toxic
substances present on the Adjacent Tract exceeds Five Million
Dollars ($5,000,000), the Landlord may terminate its project on
the Adjacent Tract and the Lease with Tenant, subject to
certain provisions provided for in (S)2.12 of the Lease.
Initial Beginning on the Opening Date, extending for a twenty-five
Term: year term, with five automatic ten-year extensions; unless
Tenant gives notice of termination twenty-four (24) months
prior to the expiration of the then current Lease Term.
Rentals: Rental payments shall commence with the start of construction
but shall be delayed until Landlord has (i) received the
foundation permit and (ii) commenced construction on its first
office building and Common Area on the Adjacent Tract in
accordance with the Master Plan. The Rental Payment is as
follows:
1) From Construction Commencement Date to
Opening Date: $150,000 per Fiscal Year;
2) From Opening Date to end of lease term:
(a) Minimum Rental of $300,000 per Fiscal Year; or
(b) Percentage Rental equal to 3% of Annual Gross
Room Sales.
Leasehold Tenant and any successor or assign of Tenant may, without
Mortgage: Landlord's consent, mortgage Tenant's interest in the lease
and/or the Leasehold estate. The aggregate of all leasehold
mortgages may not exceed 75% of the Fair Market Value of the
Hotel. Cross default is permitted but not cross
collateralization.
<PAGE>
Assignment: Tenant has a right, without Landlord's consent, to assign this
Lease: to a subsidiary of Tenant; to a Bona Fide Institutional
Lender as security for any Leasehold Mortgage; in connection
with a merger or corporate reorganization; or to an institution
or third-party investor subject to certain limitations.
Restrictions No lodging facilities are permitted for the term of the Lease
On Adjacent and all office buildings must be first-class. Restaurants are
Tract: permitted as long as the theme or character of such facility
does not duplicate the theme of any restaurant in the Hotel.
Easements: Landlord and Tenant will grant easements for ingress egress of
pedestrian and vehicular traffic in the Common areas. Landlord
and Tenant agree that there will be a common location for
satellite and telecommunications equipment.
Fee Landlord may mortgage the fee, however any Lease and any
Mortgage: Leasehold Mortgage shall be superior to any lien placed by
Landlord.
Tenant's
Right of
First
Negotiation: Landlord shall give Tenant first right of refusal to purchase
the property.
LandLord' s
Right of
Negotiation: Tenant proposes a change of use of purchase the property,
Landlord has the right to purchase the Hotel and terminate the
Lease. If Tenant decides to assign the Leased Premises to a
permitted 3rd party (pursuant to the Assignment Restrictions in
section 11.03), Landlord shall have the right of first refusal
to purchase the Leased Premises from Tenant.
Recourse: Ground Lease is non-recourse except for Tenant's completion
guarantee. Tenant agrees that the purchase price paid by
Landlord to Leasehold Mortgagee, in the event of Tenant's
default to Leasehold Mortgagee, shall be a non-recourse loan by
Landlord to Tenant payable by Tenant to Landlord on demand with
interest.
<PAGE>
Exhibit 10.10
ASSIGNMENT OF LEASE
-------------------
THIS AGREEMENT is entered into as of the 12th day of June, 1989, by and
between Marriott Corporation, a Delaware Corporation ("Assignor") and Mutual
Benefit Chicago Marriott Suite Hotel Partners, L.P., a Rhode Island limited
partnership of which MB Investment Properties, Inc., a Rhode Island corporation,
and MOHS Corporation, a Delaware corporation, are the general partners
("Assignee").
WITNESSETH:
----------
WHEREAS, The Assignor is the lessee under that certain Ground
Lease,*(the"Ground Lease"), dated June 16, 1986, executed by and between the
Assignor, as lessee, and Simon-Rosemont Developers, an Illinois limited
partnership of which Higgins-Manheim Properties is the general partner, as
lessor (the "Original Lessor"); and
WHEREAS, a memorandum of the Ground Lease was filed on April 3, 1987 as
Document #LR3604964 and recorded November 18, 1988 as Document #88535338, as
amended of record; and
WHEREAS, the Original Lessor has transferred all of its right, title and
interest under the Ground Lease to the LaSalle National Bank in its capacity as
the Trustee under a Trust Agreement, dated February 1, 1988 and known as Trust
Number 113000 (the "Lessor"); and
WHEREAS, Assignor holds all of the right, title and interest as lessee in
and to the Ground Lease and has constructed certain buildings and improvements
on the premises leased under the Ground Lease including a Marriott all suites
hotel containing 256 guest rooms and other amenities and facilities (the "Hotel
improvements"); and
WHEREAS, Assignor desires to transfer, assign and convey all its right,
title and interest as lessee in and to the Ground Lease and the Hotel
Improvements to Assignee, and Assignee desires to accept the assignment,
transfer and conveyance thereof.
NOW, THEREFORE, in consideration of the promises and conditions
contained herein, the parties hereby agree as follows:
1. Assignor hereby transfers, assigns and conveys to Assignee all of its
right, title and interest in and to the Ground Lease. Assignor does further
give, grant, transfer and
- -------------
* including any and all amendments thereto as hereinafter provided
<PAGE>
convey to the Assignee, with warranty covenants, the Hotel Improvements and all
other buildings and improvements associated therewith or located upon or forming
a part of the Leased Premises (as that term is defined in the Ground Lease).
2. Assignor warrants and represents to the Assignee that:
(a) The Ground Lease is the only lease affecting the Leased Premises
and the Hotel Improvements constructed thereon and that the Ground Lease has not
been amended or modified except for the amendments listed on Exhibit A attached
---------
hereto.
(b) The Ground Lease is current and in full force and effect, and there
exist no defaults thereunder, nor any facts or circumstances which with the
passage of time, or the giving of notice, or both, could give rise to or
constitute any form of default thereunder, on the part of the Assignor or the
Lessor thereunder.
(c) As of the date hereof the Assignor is the present owner and holder
of all of the lessee's right, title and interest in and to the Ground Lease, and
is the owner of the Hotel Improvements and all other buildings and improvements
located on or forming a part of the Leased Premises, the same not having been
assigned, transferred or conveyed to any other party.
(d) The Assignor has the power and authority to make the within
assignment without the consent or approval of the Lessor.
(e) The Assignor has obtained all necessary consents and approvals of
the Original Lessor and the Lessor and any other party required under the terms
of the Ground Lease in connection with the construction of the Hotel
Improvements.
3. Assignor hereby agrees to indemnify and hold Assignee harmless from and
against any and all claims, demands, actions, causes of action, costs,
liabilities, damages or other expenses including, without limitation, reasonable
attorneys' fees, arising out of: (i) any failure of performance of any
obligation of the Assignor that was to have been performed under the Ground
Lease prior to the date hereof; (ii) any incident or action which occurred prior
to the date hereof; (iii) any causes of action or facts giving rise to any cause
of action arising or occurring prior to the date hereof; and (iv) any breach of
any representation, warranty or covenant contained herein.
2
<PAGE>
4. Except as otherwise set forth herein, Assignee hereby assumes all of the
Assignor's obligations under the Ground Lease and agrees to indemnify and hold
Assignor harmless from and against any and all claims, demands, actions, causes
of action, costs, liabilities, damages or other expenses including, without
limitation, reasonable attorneys' fees, arising out of a failure of performance
of any obligation of the Assignor that was to have been performed under the
Ground Lease after the date hereof or arising out of any action or incident
which occurs subsequent to the date hereof. The Assignee shall not be deemed to
have assumed any liability or obligation of the Assignor covered by the
indemnification provisions of paragraph 3 hereof.
5. This Agreement shall be binding on and inure to the benefit of the
parties hereto, their heirs, executors, administrators, successors and assigns.
IN WITNESS WHEREOF, the Assignor and Assignee have executed this Agreement
as a sealed instrument.
Witness: ASSIGNOR:
MARRIOTT CORPORATION
[SIGNATURE APPEARS HERE] By: /s/ Matthew J. Hart
- --------------------------------- -----------------------------
Title: Asst. Treasurer
-----------------------
ASSIGNEE:
MUTUAL BENEFIT CHICAGO MARRIOTT
SUITE HOTEL PARTNERS, L.P., BY
ITS GENERAL PARTNERS,
MB INVESTMENT PROPERTIES, INC.
[SIGNATURE APPEARS HERE] By: /s/ [SIGNATURE APPEARS HERE]
- --------------------------------- -----------------------------
Title: Vice President
-----------------------
MOHS CORPORATION
[SIGNATURE APPEARS HERE] By: /s/ [SIGNATURE APPEARS HERE]
- --------------------------------- -----------------------------
Vice President
3
<PAGE>
STATE OF MARYLAND
COUNTY OF MONTGOMERY
The foregoing instrument was acknowledged before me this 12th day of June,
1989, by Matthew J. Hart on behalf of Marriott Corporation, a Delaware
corporation.
/s/ R. Louise Slaton
---------------------------
Notary Public
My Commission expires:
R. LOUISE SLATON
My Commission Expires July 1, 1990
STATE OF ILLINOIS
COUNTY OF COOK
The foregoing instrument was acknowledged before me this 12th day of June,
1989, by Robert J. Peterson on behalf MB Investment Properties, Inc., in its
capacity as general partner of Mutual Benefit Chicago Marriott Suite Hotel
Partners, L.P.
----------------------------------
"OFFICIAL SEAL" BARBARA E. BURKE /s/ Barbara E. Burke
NOTARY PUBLIC, STATE OF ILLINOIS ---------------------------
MY COMMISSION EXPIRES 7/12/92 Notary Public
----------------------------------
My Commission expires:
7/12/92
---------------------
STATE OF ILLINOIS
COUNTY OF COOK
The foregoing instrument was acknowledged before me this 12th day of June,
1989, by Douglas H. S. Greene on behalf MOHS Corporation, in its capacity as
general partner of Mutual Benefit Chicago Marriott Suite Hotel Partners, L.P.
/s/ Barbara E. Burke
---------------------------
---------------------------------- Notary Public
"OFFICIAL SEAL" BARBARA E. BURKE
NOTARY PUBLIC, STATE OF ILLINOIS My Commission expires:
MY COMMISSION EXPIRES 7/12/92 7/12/92
---------------------------------- ---------------------
4
<PAGE>
The Ground Lease: That certain Ground Lease (the "Lease") dated as of June
----------------
16, 1986 by and between Simon-Rosemont Developers ("Simon-Rosemont"), as
landlord, and Marriott Corporation ("Marriott"), as tenant, as amended,
modified, and supplemented by:
1. Memorandum of the Lease filed on April 3, 1987, in the office of the
Registrar of Titles of Cook County, Illinois, as document LR3604964;
2. Letter Agreement dated February 19, 1986 by and between Simon-Rosemont
and Marriott;
3. Letter Agreement dated June 13, 1986 by and between Simon-Rosemont and
Marriott;
4. Letter Agreement dated June 16, 1986 by and between Simon-Rosemont and
Marriott;
5. Letter Agreement dated December 3, 1986 by and between Simon-Rosemont
and Marriott;
6. First Amendment to the Lease dated March 11, 1987 by and between
Simon-Rosemont and Marriott;
7. Subordination and Attornment Agreement dated March 11, 1987 by and
between Marriott and Chemical Bank;
8. Letter Agreement dated March 31, 1987 between Simon-Rosemont and
Marriott;
9. Deed dated February 1, 1988 between Simon-Rosemont and LaSalle
National Bank in its capacity as Trustee ("Trustee") under Trust Agreement dated
February 1, 1988 and known as Trust No. 113000 whereby Simon-Rosemont
transferred its interest in the Ground Lease to a trust under which Simon-
Rosemont is the sole beneficiary;
10. Second Amendment to the Lease dated as of December 28, 1988 by and
between Trustee and Marriott; and
11. Certificate dated June 8, 1989 by and between Trustee, Simon-Rosemont
and Marriott memorializing the "Lease Commencement Date," the "Opening Date,"
and the "Initial Term," all as defined in the Lease.
<PAGE>
Exhibit 10.11
ASSIGNMENT OF LEASES AND RENTS
------------------------------
This Assignment of Leases and Rents ("Assignment") is made as of the 24th
day of September 1996, from MUTUAL BENEFIT CHICAGO MARRIOTT SUITE HOTEL
PARTNERS, L.P., a Rhode Island limited partnership having an address at c/o Host
Marriott Corporation, 10400 Fernwood Drive, Bethesda, Maryland 20817
("Borrower") to NATIONAL BANK OF CANADA, having an address at 125 West 55th
Street, New York, New York 10019 ("Lender");
R E C I T A L S:
---------------
A. Borrower and Lender previously entered into that certain Loan Agreement
dated as of June 12, 1989 whereby Lender made a loan (the "Original Loan") to
Borrower as evidenced by that certain Promissory Note Secured by Mortgage dated
as of June 12, 1989, and having a maturity date of June 12, 1996 (the "Original
Note").
B. The Original Note was secured in part by, among other things, that
certain Leasehold Mortgage, Security Agreement and Assignment of Rents granted
by Borrower to
This Assignment was prepared by and after recording return to:
Rudnik & Wolfe
203 North LaSalle Street
Suite 1800
Chicago, Illinois 60601
Attn: John T. Cusak, Esq.
<PAGE>
Lender and dated as of June 12, 1989 and recorded June 13, 1989 in the
Recorder's Office for Cook County, Illinois (the "Recorder's Office") as
Document No. 89266493, assigning to Lender, among other things, certain leases
and rents described therein and located on the real property described on
Exhibit A hereto (the "Land").
C. In accordance with that certain Amended and Restated Loan Agreement
(the "Loan Agreement") of even date herewith between Borrower and Lender, Lender
has made a loan to Borrower in the principal sum of Twenty Five Million Five
Hundred Thousand and 00/100 Dollars ($25,500,000.00) with a scheduled maturity
date of June 12, 2001 (the "Loan"), which Loan is evidenced by a certain Amended
and Restated Secured Promissory Note, amending and restating the Original Note
in its entirety (-such Amended and Restated Secured Promissory Note, together
with any replacement therefor which may be issued from time to time pursuant to
the Loan Agreement, the "Note").
D. The Note is secured by, among other things, that certain Amended and
Restated Leasehold Mortgage (the "Mortgage") dated of even date herewith granted
by Borrower to Lender and recorded on ______________, 1996 in the Recorder's
Office as Document No. ________________.
E. Borrower owns the leasehold interest in the Land and owns all buildings
and improvements located thereon (said buildings and improvements together with
Borrower's leasehold interest in the Land are hereinafter collectively referred
to as the "Premises").
F. Pursuant to the Loan Agreement, Borrower is required to enter into this
Assignment for the purposes hereinafter set forth.
G. All capitalized terms used herein without definition shall have the
meanings ascribed to them in the Loan Agreement.
NOW, THEREFORE, Borrower, for and in consideration of these presents and
the mutual agreements herein contained and for other good and valuable
consideration, the receipt of which is hereby acknowledged, and as further and
additional security for payment of the Note; the principal sum, interest,
premiums and other indebtedness evidenced thereby; any amendments, extensions or
renewals of the Note; any other indebtedness or obligation secured or guaranteed
by the Mortgage; payment of all other sums with interest thereon becoming due
and payable to Lender under the provisions of this Assignment; and the
performance and discharge of each and every obligation, covenant and agreement
of Borrower contained in this Assignment, the Note, the Mortgage, the Loan
Agreement or any of the other Loan Documents (as defined in the Loan Agreement),
does hereby sell, assign and transfer unto Lender its interest in (i) the
Identified Leases, if any, shown on Schedule I attached hereto; (ii) all leases,
licenses or tenancies (specifically including concessions and leases or
agreements for the use or occupancy of guest
2
<PAGE>
rooms or suites) of the Premises or any part thereof, or any letting of or
agreement for the use or occupancy of the Premises or any part thereof, whether
written or oral, heretofore or hereafter made or agreed to by any party,
including without limitation, Lender in the exercise of the powers herein
conferred or otherwise; and (iii) any and all extensions, renewals and
replacements of any of the foregoing (all of the leases, tenancies, agreements
and rights described above are herein referred to as the "Leases" and each Lease
having a term of continuous occupancy of not less than one (1) year and annual
rental of not less than Twenty Thousand and 00/100 Dollars ($20,000.00) is
herein referred to as a "Major Lease"), together with all the rents, room rents,
income, issues and profits now due and which may hereafter become due under or
by virtue of the Leases, together with all guaranties of any of the foregoing,
it being the intention hereby to establish an absolute transfer and assignment
of all of the foregoing to Lender.
To protect and further the security of this Assignment, Borrower agrees as
follows:
1. Agreements Regarding Leases. Borrower represents and warrants unto
---------------------------
Lender as follows:
(a) Borrower is the sole owner of the entire interest of the landlord
in and to the Leases; without Lender's prior written consent, Borrower will
not transfer, sell, assign, pledge, encumber or grant a security interest
in any of the Leases; without Lender's prior written consent, Borrower will
not consent to, suffer or permit the assignment or subletting of any
leasehold estate created thereunder; any attempted assignment or subletting
without Lender's written consent, whether by Borrower or by a tenant, shall
be null and void;
(b) [INTENTIONALLY LEFT BLANK]
(c) Borrower will promptly notify Lender of any default or alleged
default by landlord or tenant under the Major Leases of which it becomes
aware;
(d) if any Lease provides for the abatement of rent during repair of
the premises demised thereunder by reason of fire or other casualty,
Borrower shall furnish rental insurance to Lender in an amount and form and
written by insurance companies as shall be satisfactory to Lender;
(e) Borrower shall not hereafter permit any Lease to become
subordinate to any lien other than the lien of the Mortgage and any liens
to which the Mortgage is now, or may pursuant to its terms become,
subordinate, nor terminate, modify or amend any of the Major Leases or any
of the terms thereof without the prior written consent of Lender, and any
attempted termination, modification or amendment of any of the Major Leases
without such written consent shall be null and void;
3
<PAGE>
(f) no payment of rent has been or will be made by any tenant or by
any person in possession of any portion of the Premises for more than one
month's installment in advance;
(g) no payment of rent has been or will be waived, released, reduced
or discounted, or otherwise discharged or compromised by Borrower;
(h) Borrower hereby waives any right of set-off against any tenant or
any person in possession of any portion of the Premises; Borrower has not
made and will not make any other or further assignment of the rents,
issues, income or profits of the Pre mises or of the Leases except
subsequent to or in connection with the release of this Assignment with
respect to such portion of the Premises so released;
(i) Borrower shall perform all of its covenants and agreements under
the Major Leases and shall not suffer or permit any release of liability
of, or right to withhold payment of rent by, the tenants therein;
(j) Borrower shall not commence or continue proceedings to evict,
remove or dispossess any tenant under any Major Lease or to terminate any
Major Lease without prior written consent of Lender;
(k) the Identified Leases, if any, and all other existing Leases are
valid and unmodified and in full force and effect, except as indicated
herein, and neither the landlord nor any of the tenants thereunder are in
default under any of the terms, covenants or conditions thereof, no event
or condition has occurred or presently exists which would, but for the
passage of time, the giving of notice, or both, constitute a default by
either the landlord or any of the tenants thereunder, and none of the
tenants thereunder has any rights of set-off or counterclaim or any defense
to full performance of such tenant's obligations thereunder;
(l) Borrower shall not waive, cancel, release, modify, excuse,
condone, discount, set-off, compromise or in any manner release or
discharge any tenant under any of the Major Leases from any obligation,
covenant, condition or requirement of said Major Leases, without prior
written consent of Lender;
(m) Borrower shall enforce, or secure in the name of Lender, the
performance of each and every obligation, term, covenant, condition and
agreement of a Major Lease to be performed by any tenant or any guarantor
thereof;
(n) Borrower shall (i) appear in and prosecute and/or defend any
action or proceeding arising under, occurring out of or in any manner
connected with any Major
4
<PAGE>
Lease or the obligations, duties or liabilities of Borrower or any tenant
thereunder, (ii) do so in the name and on the behalf of Lender, upon the
request of Lender, but at the expense of Borrower, and (iii) pay all costs
and expenses of Lender, including reasonable attorneys' fees and
disbursements, in any such action or proceeding; and
(o) Borrower shall deliver to Lender executed copies of all existing
and future Major Leases when executed.
Any amounts received by Borrower or its agents for performance of any actions
prohibited by the terms of this Assignment, including any amounts received in
connection with any cancellation, modification or amendment of any of the
Leases prohibited by the terms of this Assignment and any amounts received by
Borrower as rents, income, issues or profits from the Premises from and after
the date of any Event of Default (as defined in the Loan Agreement) under the
Loan Agreement or under any of the Loan Documents, which default shall not have
been cured within the time periods, if any, expressly established therefor,
shall be held by Borrower as trustee for Lender and all such amounts shall be
accounted for to Lender and shall not be commingled with other funds of
Borrower. Any person acquiring or receiving all or any portion of such trust
funds shall acquire or receive the same in trust for Lender as if such person
had actual or constructive notice that such funds were impressed with a trust in
accordance herewith; by way of example and not of limitation, such notice may be
given by an instrument recorded with the Recorder of Deeds of the county in
which the Premises are located stating that Borrower has received or will
receive such amounts in trust for Lender. Nothing in subsections (f) and (g) of
this Paragraph 1 shall be deemed to limit Borrower's ability to operate the
Premises in accordance with the commercially reasonable standards for a
comparable first-class hotel.
2. Waiver of Liability. Nothing herein contained shall be construed as
-------------------
constituting Lender a "mortgagee in possession" in the absence of the taking of
actual possession of the Premises by Lender pursuant to the provisions
hereinafter contained. In the exercise of the powers granted by this
Assignment, no liability shall be asserted or enforced against Lender, all such
liability being expressly waived and released by Borrower.
3. Further Assurances and Assignments. Borrower further agrees to
----------------------------------
execute and deliver immediately upon the request of Lender, all such further
assurances and assignments concerning the Leases or the Premises as Lender shall
from time to time require, it being understood that all such Leases shall be
automatically assigned by Borrower to Lender pursuant to this Assignment.
4. Exercise of Remedies. In any case in which, under the provisions of
--------------------
the Mortgage, Lender has a right to institute foreclosure proceedings, whether
before or after insti tution of legal proceedings to foreclose the lien thereof
or before or after sale thereunder, upon demand of Lender, Borrower agrees to
surrender to Lender and Lender shall be entitled to take actual
5
<PAGE>
possession of the Premises or any part thereof personally, or by its agents or
attorneys, and Lender in its discretion may, with or without force or notice and
with or without process of law, enter upon and take and maintain possession of
all or any part of the Premises, together with all the documents, books,
records, papers and accounts of Borrower or successor to Borrower's interest in
the Premises relating thereto, and may exclude Borrower, its agents, or
servants, wholly therefrom and may as attorney-in-fact or agent of Borrower, or
in its own name as mortgagee and under the powers herein granted, hold, operate,
manage and control the Premises and conduct the business, if any, thereof either
personally or by its agents, with full power to use such measures, legal or
equitable, as in its discretion may be deemed proper or necessary to enforce all
obligations under the Leases together with the payment of rents, income, issues
and profits of the Premises, including actions for the recovery of rent, actions
in forcible detainer and actions in distress of rent, hereby granting full power
and authority to exercise each of the rights, privileges and powers herein
granted at any and all times hereafter, and with full power to cancel or
terminate any Lease or sublease for any cause or on any ground which would
entitle Borrower to cancel the same, to elect to disaffirm or terminate any
Lease or sublease made subsequent to the Mortgage or subordinated to the lien
thereof, to make all necessary or proper repairs, decorating, renewals,
replacements, alterations, additions, betterments and improvements to the
Premises that may seem judicious, in its discretion, to insure and reinsure the
same for all risks incidental to Lender's possession, operation and management
thereof and to receive all such rents, income, issues and profits.
5. Indemnity. Lender shall not at any time (regardless of any exercise
---------
by Lender, or right of Lender to exercise, any powers herein conferred) be
obligated to perform or discharge, nor does it hereby undertake to perform or
discharge, any obligation, duty or liability under any Leases or rental
agreements relating to the Premises, and Borrower shall and does hereby agree to
indemnify and hold Lender harmless of and from any and all liability, loss or
damage which Lender may or might incur under or by reason of (a) any Leases, (b)
the as signment thereof, (c) any action taken by Lender or its agents hereunder,
unless constituting willful misconduct or gross negligence, or (d) claims and
demands which may be asserted against it by reason of any alleged obligations or
undertakings on its part to (or to cause Borrower to) perform or discharge any
of the terms, covenants or agreements contained in the Leases.
6. Application of Proceeds. Lender, in the exercise of the rights and
-----------------------
powers conferred upon it by this Assignment, shall have full power to use and
apply the rents, income, issues and profits of the Premises to the payment of or
on account of the following, in such order as Lender may determine:
(a) operating expenses of the Premises, including costs of management
and leasing thereof (including reasonable compensation to Lender's agents
and Lender's attorneys' fees, and lease commissions and other compensation
and expenses of seeking and procuring tenants and entering into Leases),
establishing any claims for damages, and
6
<PAGE>
premiums on insurance hereinabove authorized; it being expressly understood
and agreed that Lender in the exercise of such powers may so pay any claims
purporting to be for any operating expenses of the Premises, without
inquiry into, and without respect to, the validity thereof and whether such
claims are in fact for operating expenses of the Premises;
(b) taxes and special assessments now due or which may hereafter
become due on the Premises;
(c) the costs of all repairs, decorating, renewals, replacements,
alterations, additions or betterments, and improvements of the Premises,
including, without limitation, the cost from time to time of installing or
replacing such fixtures, furnishings and equipment therein, and of placing
the Premises in such condition as will, in the reasonable judgment of
Lender, make it readily rentable;
(d) any indebtedness secured or guaranteed by the Mortgage or any
deficiency which may result from any foreclosure sale, including without
limitation the amounts set forth in Paragraph 21 of the Mortgage.
7. Power of Attorney. Borrower does hereby appoint irrevocably the
-----------------
Lender as its true and lawful attorney in its name and stead and hereby
authorizes Lender, with or without taking possession of the Premises, to rent,
lease or let all or any portion of the Premises to any party or parties at such
rental and upon such terms, in its discretion as it may determine, and to
collect all of said rents, income, issues and profits now or hereafter arising
from or accruing or due under the Leases with the same rights and powers and
subject to the same immunities, exoneration of liability and rights of recourse
and indemnity as Lender would have upon taking possession of the Premises
pursuant to the provisions hereinafter set forth. Powers of attorney conferred
upon Lender pursuant to this Assignment are powers coupled with an interest and
cannot be revoked, modified or altered without the written consent of Lender.
8. Borrower's Limited License. Notwithstanding anything to the contrary
--------------------------
contained herein, provided that no Event of Default exists and no event has
occurred that with notice or lapse of time or both would constitute an Event of
Default, Borrower shall have the right under a license granted hereby and Lender
hereby grants to Borrower, a license to collect, but not more than one month in
advance, all of the amounts arising from or out of the Leases or any renewals or
extensions thereof, or from or out of the Premises or any part thereof, but only
as trustee for the benefit of Lender. So long as no Event of Default exists and
no event has occurred that with notice, or lapse or time or both would
constitute an Event of Default, Borrower may use the amounts in any manner not
inconsistent with the Loan Documents. The license granted hereby shall be
revoked automatically upon the occurrence of an Event of Default or an event
that with notice, or lapse of time or both would constitute an Event of Default.
7
<PAGE>
9. Instruction to Tenants. Borrower further specifically and irrevocably
----------------------
authorizes and instructs each and every present and future tenant or tenant
under any Lease of the whole or any part of the Premises to pay all unpaid
rental agreed upon in any Lease or other agreement for occupancy of any part of
the Premises to Lender upon receipt of demand from Lender so to pay the same,
without the need for any inquiry as to whether or not said demand is made in
compliance with the immediately preceding paragraph hereof and in such event
Borrower hereby waives any and all rights to make any claim against each and
every such tenant with respect thereto. Lender has not received or been
transferred any security deposit with respect to any Lease, and assumes no
responsibility for any such security deposit until such time such security
deposit (specified as such with specific reference to the Lease pursuant to
which deposited) may be transferred to Lender and accepted by Lender by written
notice to the tenant under said Lease.
10. Election of Remedies. The provisions set forth in this Assignment
--------------------
shall be deemed a special remedy given to Lender, and shall not be deemed
exclusive of any of the remedies granted in the Note or the Mortgage, but shall
be deemed an additional remedy and shall be cumulative with the remedies therein
and elsewhere granted Lender, all of which remedies shall be enforceable
concurrently or successively. No exercise by Lender of any of its rights
hereunder shall cure, waive or affect any default hereunder or Event of Default
under the Note or the Mortgage. No inaction or partial exercise of rights by
Lender shall be construed as a waiver of any of its such rights and remedies,
and no waiver by Lender of any such rights and remedies shall be construed as a
waiver by Lender of any of its other rights and remedies.
11. Continual Effectiveness. No judgment or decree which may be entered
-----------------------
on any debt or other obligation secured or intended to be secured under this
Assignment for the benefit of Lender shall operate to abrogate or lessen the
effect of this instrument, but the same shall continue in full force and effect
until the payment, discharge and performance of any and all indebtedness and
obligations evidenced by the Note or secured or guaranteed by the Mortgage, in
whatever form, and until all bills incurred by virtue of the authority herein
contained have been fully paid, or until such time as this instrument shall be
voluntarily released. This instrument shall also remain in full force and
effect during the pendency of any foreclosure proceedings, both before and after
sale, until the issuance of a deed pursuant to a foreclosure decree, unless all
indebtedness evidenced by the Note and secured by the Mortgage and the other
Loan Documents (as defined in the Loan Agreement) is fully satisfied before the
expiration of any period of redemption.
12. Bankruptcy. In the event any tenant under the Leases should be the
----------
subject of any proceeding under the Federal Bankruptcy Code, as amended from
time to time, or any other federal, state or local statute which provides for
the possible termination or rejection of the Leases assigned hereby, Borrower
covenants and agrees that if any of the Leases is so terminated or rejected, no
settlement for damages shall be made without the prior written consent of
Lender, and any check or other method of payment in payment of damages for
termination or rejection of any
8
<PAGE>
such Lease will be made or made payable both to Borrower and Lender. Borrower
hereby assigns any such payment to Lender and further covenants and agrees that
upon the request of Lender, it will duly endorse to the order of Lender any such
check, the proceeds of which will be applied to whatever portion of the
Indebtedness (as defined in the Mortgage) Lender may elect.
13. [INTENTIONALLY OMITTED]
-----------------------
14. Notices. All notices, requests and demands to or upon the respective
-------
parties hereto, to be effective, shall be in writing and shall be delivered by
hand or sent by (x) mail (certified or registered, postage prepaid, return
receipt requested), (y) by a nationally recognized overnight courier service, or
(z) by facsimile transmission (provided that the original of any notice sent by
facsimile transmission shall be sent by a nationally recognized overnight
courier service) and unless otherwise expressly provided herein, shall be deemed
to have been duly given or made when delivered if delivered by hand, or three
Business Days (as defined in the Loan Agreement) following deposit if sent by
certified or registered mail, or on the next Business Day following deposit with
a nationally recognized overnight courier service, or upon receipt if sent by
facsimile with an original by nationally recognized overnight courier service
(provided that if said facsimile was received after 5:00 p.m. in the local time
zone of the recipient on any Business Day, said notice shall not be deemed to
have been received until the following Business Day), addressed in each case as
follows, or to such address or other address as may be hereafter notified by
such parties:
Borrower: Mutual Benefit Chicago Marriott Suite Hotel
Partners, L.P.
Host Marriott Corporation
10400 Fernwood Drive
Bethesda, Maryland 20817
Attention: Law Department
Facsimile No.: (301) 380-6332
Lender: National Bank of Canada
New York Branch
125 West 55th Street
New York, NY 10022
Attention: LoriAnn Curnyn
Facsimile No.: (212) 632-8775
15. Binding Agreements. This Assignment and all provisions hereof shall
------------------
be binding upon Borrower, its successors, assigns, executors, administrators and
legal representatives and all other persons or entities claiming under or
through them, or either of them, and the word "Borrower," when used herein,
shall include all such persons and entities and any others liable
9
<PAGE>
for the payment of the indebtedness secured hereby or any part thereof, whether
or not they have executed the Note or this Assignment; provided, however, that
Borrower shall not be entitled to assign its rights and obligations hereunder
and any such assignment shall be void. The word "Lender," when used herein,
shall include Lender's successors, assigns and legal representatives, including
all other holders, from time to time, of the Note.
16. Governing Law; Interpretation. This Assignment shall be governed by
-----------------------------
the laws of the State of Illinois. Wherever possible, each provision of this
Assignment shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provi sion of this Assignment shall be
prohibited by or be invalid under such 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 Assignment.
Time is of the essence of this Assignment.
17. Miscellaneous. Neither this Assignment nor any provision hereof may
-------------
be amended, modified, waived, discharged or terminated orally. The Section
headings used herein are for convenience of reference only and shall not define
or limit the provisions of this Assignment. As used in this Assignment, the
singular shall include the plural and the plural shall include the singular, and
masculine, feminine, and neuter pronouns shall be fully interchangeable, where
the context so requires.
18. Non-Recourse.
------------
(a) Extent of Non-recourse. Anything in this Assignment to the
----------------------
contrary notwithstanding, Lender shall have no personal recourse against
either Borrower, any General Partner (as defined in the Loan Agreement),
any limited partner of Borrower, or any Affiliated Party (as defined in the
Loan Agreement) nor any officer, director, employee or agent of any of the
foregoing for the repayment of any of the principal of or interest on the
Loan or for any deficiency judgment that Lender may obtain after
foreclosure of the liens securing such repayment, or, subject to the
provisions of Paragraph 18(b) hereof, for any deficiency, loss or damage
suffered by Lender as a result of the failure by Borrower or any General
Partner to comply with any of the terms or conditions of this Agreement or
any of the other Loan Documents and, subject to the provisions of Paragraph
18(b) hereof, Lender agrees not to seek recourse against any of the
foregoing for any such deficiency, loss or damage. The foregoing
limitations are limitations on Lender's right of recourse against Borrower
and shall not impair the validity or enforceability of the indebtedness
evidenced by the Note or any of the other obligations of Borrower under the
Loan Documents secured by the Premises or the lien of or security interest
in or the right of Lender as mortgagee or secured party to foreclose and/or
enforce its rights in the Premises after default by Borrower or any General
Partner.
10
<PAGE>
(b) Borrower's Liability for Damages or Misapplication of Funds. The
-----------------------------------------------------------
provisions of Paragraph 18(a) hereof to the contrary notwithstanding,
Borrower and its General Partner shall be fully liable (i) for any damages
attributable to fraud or material misrepresentation in any Loan Document or
in any written communication by Borrower in connection with the Loan or in
connection with the Original Loan; (ii) for the retention of any rental
income or other income arising with respect to all or any part of the
Premises covered by the Mortgage after Lender has given to Borrower any
notice that Borrower is in default hereunder or under the other Loan
Documents and that Lender has exercised its option to accelerate maturity
of the Note, foreclose or require the foreclosure of the liens securing
payment thereof, receive or collect such rental income or other income or
exercise its rights under the Loan Documents (to the full extent of the
rental income or other income retained after the giving of any such
notice); (iii) for any Gross Revenues (as defined in the Loan Agreement)
distributed to any partners in Borrower subsequent to the date hereof; (iv)
for any Gross Revenues, Net House Profits (as defined in the Loan
Agreement) or Excess Cash Flow (as defined in the Loan Agreement) not
applied as required pursuant to Article 8 of the Loan Agreement; (v) for
the misapplication of (A) proceeds paid prior to any such foreclosure under
any insurance policies by reason of damage, loss or destruction to any
portion of the property covered by the Mortgage (to the full extent of such
proceeds), or (B) any proceeds or awards resulting from the condemnation,
prior to any such foreclosure, of all or any part of the property covered
by the Mortgage (to the full extent of such proceeds or awards); and (v)
for damages arising from the breach of any representation, warranty,
covenant or other obligation concerning Environmental Claims, Environmental
Conditions or Environmental Noncompliance (except for matters set forth in
Exhibit H to the Loan Agreement), including without limitation the
indemnification provisions of Section 12.20 of the Loan Agreement.
(c) Liability of General Partners. To the extent of personal
-----------------------------
liability of Borrower under Paragraph 18(b) hereof, the General Partner of
Borrower hereby agrees to be jointly and severally liable therefor and
waives any requirement of law that in the event of a default hereunder
Lender must proceed against Borrower or exhaust any assets of Borrower
before proceeding against such General Partner or such General Partner's
assets; provided, however, that in no event shall any limited partner of
Borrower, any Affiliated Party (other than the General Partner) or any
officer, director, employee or agent of any partner of Borrower or of any
Affiliated Party (including any officer, director, employee or agent of the
General Partner) have any liability under Paragraph 18(b) hereof, and
Lender agrees that it shall not seek recovery from any party that is
excluded from liability pursuant to this sentence.
19. Rights of Manager. Borrower and Lender acknowledge that although this
-----------------
Assignment is binding as between Borrower and Lender, nothing herein shall be
construed as
11
<PAGE>
modifying or detracting from the rights of Manager with respect to Lender
pursuant to Section 9 of the Assignment of Management Agreement.
20. This Assignment may be executed in any number of counterparts, each of
which shall constitute an original but all of which, taken together, shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have caused this Assignment to be
executed as of the day and year first above written.
BORROWER:
(SEAL) MUTUAL BENEFIT CHICAGO
MARRIOTT SUITE HOTEL
ATTEST: PARTNERS, L.P., a Rhode Island limited
partnership
By: MOHS CORPORATION, a Delaware
By: /s/ David E. Reichmann corporation, its General Partner
---------------------------
Name: David E. Reichmann
--------------------
Title: Asst. SEC.
------------------- By: /s/ Bruce D. Wardinski
-----------------------------
Name: Bruce D. Wardinski
---------------------
Title: Vice President
---------------------
LENDER:
(SEAL)
NATIONAL BANK OF CANADA
ATTEST:
By: /s/ Joseph M. Triscoli By: /s/ Lori Ann Curnyn
---------------------------- /s/ Joseph A. Klopkowski
Name: Joseph M. Triscoli --------------------------------------
--------------------- Name: Lori Ann Curnyn
Title: Asst. VP Joseph A. Klopkowski
-------------------- --------------------------------
Title: Vice President
Asst. Vice Pres.
--------------------------------
12
<PAGE>
STATE OF MARYLAND
SS
COUNTY OF MONTGOMERY
I, Abbi J. Weismann, a Notary Public, in and for said County, in the
State aforesaid, DO HEREBY CERTIFY that Bruce D. Wardinski, Vice President of
MOHS CORPORATION, a Delaware corporation, personally known to me to be the same
person whose name is subscribed to the foregoing instrument as such Vice
President appeared before me this day in person and acknowledged that he/she
signed and delivered said instrument as his/her own free and voluntary act and
as the free and voluntary act of said corporation in its capacity as General
Partner of Mutual Benefit Chicago Marriott Suite Hotel Partners, L.P., for the
uses and purposes therein set forth.
GIVEN under my hand and Notarial Seal, this 24th day of September,
1996.
/s/ Abbi J. Weisman
--------------------------------------
Notary Public
ABBI J. WEISMAN
NOTARY PUBLIC STATE OF MARYLAND
My Commission Expires December 5, 1997
<PAGE>
STATE OF NEW YORK
SS
COUNTY OF NEW YORK
I, Una Teresa Finn, a Notary Public, in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that Lori Ann Curnyn and Joseph A. Klopkowski, Vice
President and Asst. Vice President of NATIONAL BANK OF CANADA, a Canadian Bank,
personally known to me to be the same person whose name is subscribed to the
foregoing instrument as such they appeared before me this day in person and
acknowledged that he/she signed and delivered said instrument as his/her own
free and voluntary act and as the free and voluntary act of said Canadian Bank
in its capacity as Vice President and Asst. V.P. of National Bank of Canada for
the uses and purposes therein set forth.
GIVEN under my hand and Notarial Seal, this 23 day of September, 1996.
/s/ Una Teresa Finn
------------------------------------
Notary Public
My Commission expires: 3/11/98
--------------
<PAGE>
SCHEDULE I
THE IDENTIFIED LEASES
None
<PAGE>
EXHIBIT A
---------
LEGAL DESCRIPTION
-----------------
PARCEL 1:
LOT 14 IN RIVERWAY SUBDIVISION-PHASE II, BEING A RESUBDIVISION IN THE WEST 1/2
OF SECTION 3, TOWNSHIP 40 NORTH, RANGE 12, EAST OF THE THIRD PRINCIPAL MERIDIAN,
ACCORDING TO THE PLAT RECORDED MARCH 11, 1992 AS DOCUMENT 92157888, IN COOK
COUNTY, ILLINOIS.
PARCEL 2:
NON-EXCLUSIVE EASEMENTS IN FAVOR OF THE LEASEHOLD ESTATE DESCRIBED AS PARCEL 1
HEREIN FOR:
(A) INGRESS AND EGRESS FOR PEDESTRIAN AND VEHICULAR TRAFFIC IN, OVER AND THROUGH
THE COMMON AREAS LOCATED ON THE ADJACENT TRACT (AS DEFINED BELOW), AS CREATED BY
LEASE DATED JUNE 16, 1986, A MEMORANDUM OF WHICH WAS FILED APRIL 3, 1987 AS
DOCUMENT LR3604964, AND RECORDED NOVEMBER 18, 1988 AS DOCUMENT 88535338, MADE
BY AND BETWEEN SIMON-ROSEMONT DEVELOPERS AND MARRIOTT CORPORATION;
(B) INGRESS AND EGRESS FOR PEDESTRIAN TRAFFIC IN, OVER AND THROUGH THE ENCLOSED
WALKWAY ON THE ADJACENT TRACT (AS DEFINED BELOW), AS CREATED BY LEASE DATED JUNE
16, 1986, A MEMORANDUM OF WHICH WAS FILED APRIL 3, 1987 AS DOCUMENT LR3604964,
AND RECORDED NOVEMBER 18, 1988 DOCUMENT 88535338, MADE BY AND BETWEEN
SIMON-ROSEMONT DEVELOPERS AND MARRIOTT CORPORATION;
(C) THE LOCATION, INSTALLATION, MAINTENANCE AND REPAIR OF SATELLITE AND
TELECOMMUNICATIONS EQUIPMENT ON THE ADJACENT TRACT (AS DEFINED BELOW), ALL AS
CREATED BY LEASE DATED JUNE 16, 1986, A MEMORANDUM OF WHICH WAS FILED APRIL 3,
1987 AS DOCUMENT LR3604964, AND RECORDED NOVEMBER 18, 1988 AS DOCUMENT 88535338,
MADE BY AND BETWEEN SIMON-ROSEMONT DEVELOPERS AND MARRIOTT CORPORATION;
(D) MINOR ENCROACHMENTS OF TENANT'S IMPROVEMENTS ONTO THE ADJACENT TRACT (AS
DEFINED BELOW) DUE TO ENGINEERING ERRORS, ERRORS IN ORIGINAL CONSTRUCTION,
CONSTRUCTION, RECONSTRUCTION, REPAIR, SETTLEMENT OR SHIFTING OR MOVING OF THE
TENANT'S IMPROVEMENTS, AS CREATED BY FIRST AMENDMENT DATED MARCH 11, 1987 AND
FILED APRIL 3, 1987 AS DOCUMENT LR3604965, AND RECORDED NOVEMBER 18, 1988 AS
DOCUMENT 88535337, MADE BY AND BETWEEN SIMON-ROSEMONT DEVELOPERS AND MARRIOTT
CORPORATION; AND
(E) INGRESS AND EGRESS OVER THE ADJACENT TRACT AS REASONABLY NECESSARY FOR THE
RECONSTRUCTION, MAINTENANCE, OPERATION AND REPAIR OF TENANT'S IMPROVEMENTS, AS
CREATED BY FIRST AMENDMENT DATED MARCH 11, 1987 AND FILED APRIL 3, 1987 AS
DOCUMENT LR3604965, AND RECORDED NOVEMBER 18, 1988 AS DOCUMENT 88535337, MADE BY
AND BETWEEN SIMON-ROSEMONT DEVELOPERS AND MARRIOTT CORPORATION.
A-1
<PAGE>
ADJACENT TRACT:
LOTS 1 TO 8 IN RIVERWAY SUBDIVISION-PHASE I, BEING A RESUBDIVISION IN THE WEST
1/2 OF SECTION 3, TOWNSHIP 40 NORTH, RANGE 12, EAST OF THE THIRD PRINCIPAL
MERIDIAN, ACCORDING TO THE PLAT RECORDED JUNE 3, 1988 AS DOCUMENT 88241319 AND
FILED AS DOCUMENT LR3713139, IN COOK COUNTY, ILLINOIS.
AND ALSO,
LOTS 9 TO 13 AND LOTS 15 TO 17 IN RIVERWAY SUBDIVISION-PHASE II, BEING A
RESUBDIVISION IN THE WEST 1/2 OF SECTION 3, TOWNSHIP 40 NORTH, RANGE 12, EAST OF
THE THIRD PRINCIPAL MERIDIAN, ACCORDING TO THE PLAT RECORDED MARCH 11, 1992 AS
DOCUMENT 92157888, IN COOK COUNTY, ILLINOIS.
PARCEL 3:
EASEMENT IN FAVOR OF THE LEASEHOLD ESTATE DESCRIBED AS PARCEL 1 HEREIN, AS
CREATED IN SECOND AMENDMENT TO LEASE RECORDED FEBRUARY 9, 1989 AS DOCUMENT
89063670, MADE BY AND BETWEEN LASALLE NATIONAL BANK, AS TRUSTEE UNDER TRUST
AGREEMENT DATED FEBRUARY 1, 1988 AND KNOWN AS TRUST NUMBER 11300, SIMON-ROSEMONT
DEVELOPERS, AN ILLINOIS LIMITED PARTNERSHIP, AND MARRIOTT CORPORATION, A
DELAWARE CORPORATION, FOR A 5 INCH AT-GRADE EASEMENT FOR ACCOMODATING THE
AS-BUILT CONDITION OF THE HOTEL GARDEN WALL, OVER THE FOLLOWING LEGAL
DESCRIPTION:
THAT PART OF THE WEST 1/2 OF SECTION 3, TOWNSHIP 40 NORTH, RANGE 12, EAST OF THE
THIRD PRINCIPAL MERIDIAN, DESCRIBED AS FOLLOWS:
COMMENCING AT THE INTERSECTION OF THE SOUTH LINE OF THE NORTHWEST 1/4 OF SAID
SECTION 3 WITH THE EASTERLY LINE OF RIVER ROAD AS WIDENED BY CONDEMNATION IN
CASE NO. 59C16022 AND SHOWN ON PLAT RECORDED AS DOCUMENT NUMBER 19251267; THENCE
NORTH 05 DEGREES 11 MINUTES 36 SECONDS EAST ALONG SAID EASTERLY LINE OF RIVER
ROAD AS WIDENED, 395.35 FEET; THENCE NORTH 79 DEGREES 26 MINUTES 12 SECONDS
WEST, 0.91 FEET TO THE EASTERLY LINE OF RIVER ROAD, BEING A LINE 33.00 FEET, AS
MEASURED AT RIGHT ANGLES, EASTERLY OF AND PARALLEL WITH THE CENTER LINE OF SAID
ROAD; THENCE NORTH 10 DEGREES 38 MINUTES 35 SECONDS EAST ALONG SAID EASTERLY
LINE OF RIVER ROAD, 69.50 FEET; THENCE NORTH 68 DEGREES 08 MINUTES 35 SECONDS,
EAST 56.73 FEET; THENCE NORTH 85 DEGREES 38 MINUTES 35 SECONDS EAST, 47.90 FEET
TO A POINT OF CURVATURE; THENCE NORTHEASTERLY ALONG A CURVED LINE CONVEX
SOUTHEASTERLY, HAVING A RADIUS OF 300.00 FEET AND BEING TANGENT TO SAID LAST
DESCRIBED LINE AT SAID LAST DESCRIBED POINT, AN ARC DISTANCE OF 113.14 FEET TO A
POINT OF TANGENCY (THE CHORE OF SAID ARC BEARS NORTH 74 DEGREES 50 MINUTES 21
SECONDS EAST, 112.47 FEET); THENCE NORTH 64 DEGREES 02 MINUTES 07 SECONDS EAST
ALONG A LINE TANGENT TO SAID LAST DESCRIBED CURVED LINE AT SAID LAST DESCRIBED
POINT, 7.87 FEET; THENCE SOUTH 34 DEGREES 21 MINUTES 25 SECONDS EAST, 169.84
FEET; THENCE SOUTH 10 DEGREES 38 MINUTES 35 SECONDS WEST, 3.41 FEET; THENCE
SOUTH 79 DEGREES 21 MINUTES 25 SECONDS EAST, 25.00 FEET; THENCE SOUTH 10 DEGREES
38 MINUTES 35 SECONDS WEST, 3.50 FEET; THENCE SOUTH 79 DEGREES 21 MINUTES 25
SECONDS EAST, 24.58 FEET; THENCE SOUTH 10 DEGREES 38 MINUTES 35 SECONDS WEST,
14.00 FEET; THENCE SOUTH 79 DEGREES 21 MINUTES 25 SECONDS EAST, 15.00 FEET;
THENCE SOUTH 10 DEGREES 38 MINUTES 35 SECONDS WEST, 8.50 FEET TO A POINT FOR A
PLACE OF BEGINNING; THENCE CONTINUING SOUTH 10 DEGREES 38 MINUTES 35 SECONDS
WEST, 353.17 FEET; THENCE
A-2
<PAGE>
SOUTH 79 DEGREES 21 MINUTES 25 SECONDS EAST, 0.40 FEET; THENCE NORTH 10 DEGREES
38 MINUTES 35 SECONDS EAST, 353.17 FEET; THENCE NORTH 79 DEGREES 21 MINUTES 25
SECONDS WEST, 0.40 FEET TO THE PLACE OF BEGINNING, LYING ABOVE A HORIZONTAL
PLANE OF ELEVATION 628.70 FEET ABOVE U.S.G.S. DATUM AND LYING BELOW A HORIZONTAL
PLANE OF ELEVATION 633.75 FEET ABOVE U.S.G.S. DATUM, IN COOK COUNTY, ILLINOIS.
PARCEL 4:
EASEMENT IN FAVOR OF THE LEASEHOLD ESTATE DESCRIBED AS PARCEL 1 HEREIN, AS
CREATED IN SECOND AMENDMENT TO LEASE RECORDED FEBRUARY 9, 1989 AS DOCUMENT
89063670, MADE BY AND BETWEEN LASALLE NATIONAL BANK, AS TRUSTEE UNDER TRUST
AGREEMENT DATED FEBRUARY 1, 1988 AND KNOWN AS TRUST NUMBER 113000,
SIMON-ROSEMONT DEVELOPERS, AN ILLINOIS LIMITED PARTNERSHIP, AND MARRIOTT
CORPORATION, A DELAWARE CORPORATION, FOR AN 8 INCH BELOW-GRADE EASEMENT FOR
FOUNDATIONS OF THE GARDEN WALL, OVER THE FOLLOWING LEGAL DESCRIPTION:
THAT PART OF THE WEST 1/2 OF SECTION 3, TOWNSHIP 40 NORTH, RANGE 12, EAST OF THE
THIRD PRINCIPAL MERIDIAN, DESCRIBED AS FOLLOWS:
COMMENCING AT THE INTERSECTION OF THE SOUTH LINE OF THE NORTHWEST 1/4 OF SAID
SECTION 3 WITH THE EASTERLY LINE OF RIVER ROAD AS WIDENED BY CONDEMNATION IN
CASE NO. 59C16022 AND SHOWN ON PLAT RECORDED AS DOCUMENT NUMBER 19251267; THENCE
NORTH 05 DEGREES 11 MINUTES 36 SECONDS EAST ALONG SAID EASTERLY LINE OF RIVER
ROAD AS WIDENED, 395.35 FEET; THENCE NORTH 79 DEGREES 26 MINUTES 12 SECONDS
WEST, 0.91 FEET TO THE EASTERLY LINE OF RIVER ROAD, BEING A LINE 33.00 FEET, AS
MEASURED AT RIGHT ANGLES, EASTERLY OF AND PARALLEL WITH THE CENTER LINE OF SAID
ROAD; THENCE NORTH 10 DEGREES 38 MINUTES 35 SECONDS EAST ALONG SAID EASTERLY
LINE OF RIVER ROAD, 69.50 FEET; THENCE NORTH 68 DEGREES 08 MINUTES 35 SECONDS
EAST, 56.73 FEET; THENCE NORTH 85 DEGREES 38 MINUTES 35 SECONDS EAST, 47.90 FEET
TO A POINT OF CURVATURE; THENCE NORTHEASTERLY ALONG A CURVED LINE CONVEX
SOUTHEASTERLY, HAVING A RADIUS OF 300.00 FEET AND BEING TANGENT TO SAID LAST
DESCRIBED LINE AT SAID LAST DESCRIBED POINT, AN ARC DISTANCE OF 113.14 FEET TO A
POINT OF TANGENCY (THE CHORD OF SAID ARC BEARS NORTH 74 DEGREES 50 MINUTES 21
SECONDS EAST, 112.47 FEET) THENCE NORTH 64 DEGREES 02 MINUTES 07 SECONDS EAST
ALONG A LINE TANGENT TO SAID LAST DESCRIBED CURVED LINE AT SAID LAST DESCRIBED
POINT, 7.87 FEET; THENCE SOUTH 34 DEGREES 21 MINUTES 25 SECONDS EAST, 169.84
FEET; THENCE SOUTH 10 DEGREES 38 MINUTES 35 SECONDS WEST, 3.41 FEET; THENCE
SOUTH 79 DEGREES 21 MINUTES 25 SECONDS EAST, 25.00 FEET; THENCE SOUTH 10 DEGREES
38 MINUTES 35 SECONDS WEST, 3.50 FEET; THENCE SOUTH 79 DEGREES 21 MINUTES 25
SECONDS EAST, 24.58 FEET; THENCE SOUTH 10 DEGREES 38 MINUTES 35 SECONDS WEST,
14.00 FEET; THENCE SOUTH 79 DEGREES 21 MINUTES 25 SECONDS EAST, 15.00 FEET;
THENCE SOUTH 10 DEGREES 38 MINUTES 35 SECONDS WEST, 8.50 FEET TO A POINT FOR A
PLACE OF BEGINNING; THENCE CONTINUING SOUTH 10 DEGREES 38 MINUTES 35 SECONDS
WEST, 353.17 FEET; THENCE SOUTH 79 DEGREES 21 MINUTES 25 SECONDS EAST, 0.67
FEET; THENCE NORTH 10 DEGREES 38 MINUTES 35 SECONDS EAST, 353.17 FEET; THENCE
NORTH 79 DEGREES 21 MINUTES 25 SECONDS WEST 0.67 FEET TO THE PLACE OF BEGINNING,
LYING BELOW A HORIZONTAL PLANE OF ELEVATION 628.70 FEET ABOVE U.S.G.S. DATUM, IN
COOK COUNTY, ILLINOIS.
A-3
<PAGE>
PARCEL 5:
NON-EXCLUSIVE EASEMENTS IN FAVOR OF THE LEASEHOLD ESTATE DESCRIBED AS PARCEL 1
HEREIN AS SHOWN ON PLAT OF RIVERWAY SUBDIVISION - PHASE I RECORDED JUNE 3, 1998
AS DOCUMENT 88241321 AND FILED JUNE 3, 1998 AS DOCUMENT LR 3713139.
PARCEL 6:
NON-EXCLUSIVE EASEMENTS IN FAVOR OF THE LEASEHOLD ESTATE DESCRIBED AS PARCEL 1
HEREIN AS SHOWN ON PLAT OF RIVERWAY SUBDIVISION - PHASE II RECORDED MARCH 11,
1992 AS DOCUMENT 92157888.
COMMON ADDRESS
- --------------
6155 North River Road
Rosemont, Illinois
PIN
- ---
12-03-103-015
A-4
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<PAGE>
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MUTUAL
BENEFIT CHICAGO MARRIOTT SUITE HOTEL PARTNERS, L.P. FORM 10 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1997
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<BONDS> 24,475
0
0
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