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Securities and Exchange Commission
Washington, D.C. 20549
Form 10-K
[X] Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1996
OR
[_] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission File Number: 0-28222
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MARRIOTT HOTEL PROPERTIES II LIMITED PARTNERSHIP
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(Exact name of registrant as specified in its charter)
Delaware 52-1604506
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10400 Fernwood Road
Bethesda, Maryland 20817
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 301-380-2070
Securities registered pursuant to Section 12(b) of the Act:
Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days: Yes ___ No ___ (Not Applicable). The Partnership became
subject to Section 13 reporting on April 17, 1996.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_] (Not Applicable)
Documents Incorporated by Reference
None
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TABLE OF CONTENTS
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PART I
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Item 1. Business 1
Item 2. Properties 8
Item 3. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of Security Holders 13
PART II
Item 5. Market For The Partnership's Limited Partnership Units and
Related Security Holder Matters 14
Item 6. Selected Financial Data 15
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 16
Item 8. Financial Statements and Supplementary Data 21
Item 9. Changes In and Disagreements With Accountants on Accounting
and Financial Disclosure 38
PART III
Item 10. Directors and Executive Officers 38
Item 11. Management Remuneration and Transactions 39
Item 12. Security Ownership of Certain Beneficial Owners and Management 39
Item 13. Certain Relationships and Related Transactions 40
PART IV
Item 14. Exhibits, Supplemental Financial Statement Schedules
and Reports on Form 8-K 44
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PART I
ITEM 1. BUSINESS
Description of the Partnership
Marriott Hotel Properties II Limited Partnership (the "Partnership"), a Delaware
limited partnership, was formed in 1989 to acquire, own and operate (i) the
1,290-room New Orleans Marriott Hotel and underlying land in New Orleans,
Louisiana (the "New Orleans Hotel"); (ii) the 999-room Marriott Rivercenter
Hotel in San Antonio, Texas (the "San Antonio Hotel"); (iii) the 368-room Bishop
Ranch Marriott Hotel in San Ramon, California (the "San Ramon Hotel")
(collectively, the "Hotels") and to acquire a 50% limited partnership interest
in the Santa Clara Marriott Hotel Limited Partnership (the "Santa Clara
Partnership"), a Delaware limited partnership, which owns the 754-room Santa
Clara Marriott Hotel in Santa Clara, California (the "Santa Clara Hotel"). The
remaining 50% interest in the Santa Clara Partnership is owned by Marriott MHP
Two Corporation, the General Partner, with a 1% interest, and an affiliate of
the General Partner, HMH Properties, Inc., a wholly-owned indirect subsidiary of
Host Marriott Corporation ("Host Marriott"), with a 49% limited partner interest
(collectively, the "Other Santa Clara Partners").
The sole general partner of the Partnership is Marriott MHP Two Corporation (the
"General Partner"), a Delaware corporation and a wholly-owned indirect
subsidiary of Host Marriott.
On December 29, 1995, Host Marriott's operations were divided into two separate
companies: Host Marriott which continued the business of owning lodging
properties and Host Marriott Services Corporation which continued the business
of concession operations at airports and toll roads. Host Marriott, when used
herein in reference to a period or date prior to October 8, 1993, means Marriott
Corporation as it existed prior to its division.
The Partnership is engaged solely in the business of owning and operating hotels
and, therefore, is engaged in one industry segment. The principal offices of
the Partnership are located at 10400 Fernwood Road, Bethesda, Maryland 20817.
The Hotels and the Santa Clara Hotel are operated as part of the Marriott
International, Inc. ("MII") full-service hotel system and are managed by MII
under long-term management agreements. In conjunction with the refinancing of
the Partnership's Mortgage Debt described in "Debt Financing" below, MII
assigned all of its interests in the management agreements to Marriott Hotel
Services, Inc. (the "Manager"), a wholly-owned subsidiary of MII. The Hotels
and the Santa Clara Hotel have the right to use the Marriott name pursuant to
the Management Agreements and the Santa Clara Management Agreement and, if these
management agreements are terminated, the Partnership and the Santa Clara
Partnership will lose the right for all purposes. See Item 7, "Certain
Relationships and Related Transactions".
The Hotels and the Santa Clara Hotel are among the premier properties in their
markets and are geographically diverse which may balance the Partnership's
exposure to local and regional economic risk. The Partnership also benefits
from the four hotels' diversity of principal market segments served, with an
overall balance between the group/convention, business traveler and leisure
traveler segments. The Partnership has no plans to acquire any new properties
or sell any of the existing properties. See "Competition" below and Item 2,
"Properties".
Historically, the Partnership's financing needs have been funded through loan
agreements with independent financial institutions. See "Debt Financing" below.
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Organization of the Partnership
On March 20, 1989 (the "Partnership Closing Date"), 745 limited partner
interests (the "Units"), representing a 99% interest in the Partnership, were
sold in a private placement. The offering price per Unit was $100,000, payable
in three annual installments through June 1, 1991 (the "Investor Notes"), or as
an alternative, $89,247 in cash on the Partnership Closing Date as full payment
of the subscription price. A total of 621 Units were purchased on an
installment basis and 124 Units were paid in full. Half Units were offered on
similar terms at proportionate prices, and consequently, there were 879 limited
partners as of December 31, 1996. On the Closing Date, the Partnership executed
purchase agreements (the "Purchase Agreements") with Host Marriott to acquire
the Hotels and the 50% limited partner interest in the Santa Clara Partnership
for $319.5 million. Of the total purchase price, $222.5 million was paid from
proceeds of the mortgage loan (see "Debt Financing" below), $43.4 million was
evidenced by a promissory note payable to Host Marriott (the "Deferred Purchase
Note"), $43.5 million was paid from a cash distribution by the Santa Clara
Partnership and the remainder from the initial payment on the sale of the Units.
The Investor Notes were fully repaid by June 1, 1991, with the exception of five
Units. As provided by the partnership agreement, the General Partner acquired
these five Units from limited partners who were in default on their Investor
Notes. The principal outstanding on the Deferred Purchase Note was fully repaid
in 1991 with the proceeds of the Investor Notes. The General Partner mad a
capital contribution of $752,525 for its 1% general partner interest.
The New Orleans Hotel, the San Antonio Hotel and the limited partnership
interest in the Santa Clara Partnership were conveyed to the Partnership on the
Partnership Closing Date. The San Ramon Hotel was conveyed upon completion of
its construction on May 31, 1989.
On June 13, 1996, MHPII Acquisition Corp. (the "Company"), a wholly-owned
subsidiary of Host Marriott, completed a tender offer for the limited
partnership Units in the Partnership. The Company purchased 377 Units for an
aggregate consideration of $56,550,000 or $150,000 per Unit. Subsequent to the
tender offer, the Company purchased an additional ten Units in the Partnership.
As a result of these transactions, the Company became the majority limited
partner in the Partnership, owning 387 Units or approximately 52% of the total
Units outstanding.
Additionally, in a Partnership vote held in conjunction with the tender offer,
the limited partners approved certain amendments to the partnership agreement
that were conditions to the tender offer. These amendments were as follows:
(1) An amendment that (i) revised the provisions limiting the voting rights of
the General Partner and its affiliates to permit the General Partner and its
affiliates (including the Company) to have full voting rights with respect to
all Units currently held by the General Partner or acquired by its affiliates
except on matters where the General Partner or its affiliates have an actual
economic interest other than as a unitholder or general partner (an "Interested
Transaction"), and (ii) modified the voting provisions with respect to Interest
Transactions to permit action to be taken if approved by limited partners
holding a majority of the outstanding Units, with all Units held by the General
Partner and its affiliates being voted in the same manner as a majority of the
Units actually voted by limited partners other than the General Partner and its
affiliates.
(2) An amendment that eliminated the provision that prohibited the transfer of
50% or more of the outstanding Units within a 12-month period, so that the
Company could acquire a greater than 50% interest in the Partnership pursuant to
the tender offer and thereafter transfer such interest.
(3) An amendment that revised the provision the permitted Unit transfers only
on the first day of a fiscal quarter, so that the transfer of Units to the
Company pursuant to the tender offer, and any subsequent
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transfer of Units by the Company, could occur on the designated closing date,
rather on the first day of a fiscal quarter.
(4) An amendment that revised the provisions relating to the allocation of
profits and losses and cash distributions, so that tendering unitholders whose
tenders were accepted received allocations of profit and loss with respect to
their Units only up to, but not beyond, the last day of the accounting period
prior to the date tenders of Units were accepted for payment under the tender
offer and did not receive cash distributions (including sale and refinancing
proceeds) made after the date tenders of Units were accepted for payment under
the tender offer.
(5) An amendment that changed the definition of "Affiliate" to make clear that
a publicly-traded entity (such as MII) will not be deemed an affiliate of the
General Partner or any of its affiliates unless a person or group of persons
directly or indirectly owns twenty percent (20%) or more of the outstanding
common stock of both the General Partner (or its affiliates) and such other
entity.
Debt Financing
Partnership Mortgage Debt
On the Partnership Closing Date, the Partnership borrowed $222.5 million from
commercial banks (the "Original Lenders") pursuant to the terms of a variable
rate mortgage loan (the "Original Mortgage Debt") to finance the acquisition of
the Hotels. The Original Mortgage Debt was nonrecourse to the Partnership and
was secured by a first mortgage on each of the Hotels and an assignment of the
Partnership's rights under the Management and Purchase Agreements. As
additional security, Host Marriott provided a debt service guarantee to the
Original Lenders of up to $22.8 million to cover debt service shortfalls. Host
Marriott was released from this obligation as of December 31, 1992 as certain
performance criteria was met. There were no amounts advanced to the Partnership
under the debt service guarantee.
The Original Mortgage Debt agreement provided for interest rate options tied to
a Eurodollar rate, an adjusted CD rate or the fluctuating corporate base rate,
with interest payable monthly. For Eurodollar or CD elections, the Partnership
paid the applicable rate plus an increment equal to 0.9 basis points. In April
1992, the Partnership entered into an interest rate swap agreement for the
entire Original Mortgage Debt with the primary lender to effectively fix the
interest rate on the Original Mortgage Debt at 7.8% per annum from May 1992
through maturity. The weighted average interest rate on the Original Mortgage
Debt for the two years in the period ended December 31, 1995 was 7.8%.
On March 21, 1996, the Original Mortgage Debt and the Original Santa Clara
Mortgage Debt matured at which time the Original Lenders granted the Partnership
and the Santa Clara Partnership an extension of the two loans for an additional
six months until replacement financing could be finalized with another lender.
Under the terms of the extension, interest accrued at the London interbank
offered rate ("LIBOR") plus 187.5 basis points for the first three months and
accrued at LIBOR plus 225.0 basis points for the second three months. No
principal amortization was required during the extension period. However, under
the terms of the extension, the Partnership applied $9.2 million accumulated in
the primary lender reserve account to pay down the principal balance of the
Original Mortgage Debt to $213.3 million and deposited $19.1 million into the
primary lender reserve account. The primary lender reserve account was
established in 1994 to provide funds for a principal paydown on the Original
Mortgage Debt at maturity. The $19.1 million deposit represented the balance
($16.8 million) from the unrestricted reserve account included in cash in the
accompanying balance sheet as of December 31, 1995, previously established by
the General Partner in 1992 (the "General Partner Reserve") and cash flow from
the Partnership for the first two periods of 1996 ($2.3 million). During the
extension period, the Partnership also was required to deposit into the primary
lender reserve account all cash flow from the Partnership's Hotels plus all the
Partnership's cash
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flow from the Santa Clara Partnership, net of (i) $500,000 per accounting
period, (ii) debt service and (iii) current incentive management fees paid. The
$500,000 per accounting period was deposited into a separate expense reserve
account which was used by the Partnership to fund administrative expenses and
refinancing costs, any owner-funded capital expenditures, as well as the
Partnership's share of any such costs incurred by the Santa Clara Partnership
during the six month extension period.
Mortgage Debt Refinancing
On September 23, 1996 (the "Closing Date"), the General Partner was successful
in refinancing the Partnership's Original Mortgage Debt, as well as the $43.5
million mortgage debt of the Santa Clara Partnership. A total of $266.0 million
was borrowed from a new third party lender, $222.5 million of which is recorded
on the Partnership's financial statements (the "Mortgage Debt"). The
Partnership's Mortgage Debt is nonrecourse to the Partnership and is secured by
first mortgages on the Hotels, as well as a pledge of its limited partner
interest in the Santa Clara Partnership. The debt bears interest at a fixed
rate of 8.22% based upon actual days over a 360 day year for an 11-year term
expiring October 11, 2007, requires payments of interest only during the first
loan year (October 1996 through September 1997) and then principal amortization
based upon a 20-year amortization schedule beginning with the second loan year.
Additionally, the refinancing substantially restricts the ability of the
Partnership to sell the Hotels during such term and prohibits the Partnership
from prepaying any debt for an extended period without paying a substantial
premium during such term. The weighted average interest rate on the Mortgage
Debt for the year ended December 31, 1996 was 7.7%.
On the Closing Date, the Partnership was required to establish certain reserves
which are held by an agent of the lender including:
. $7.0 million for various renewals and replacements and site improvements;
. $1.1 million for Americans with Disabilities Act of 1990 modifications,
deferred maintenance work and environmental remediation projects identified
during the course of the appraisals and environmental studies undertaken in
conjunction with the refinancing;
. $4.5 million debt service reserve - Based upon current forecasts, it is
expected that cash from operations will be sufficient for the required
payment terms of the Mortgage Debt. However due to the seasonality of the
four hotels' operations, the timing of debt service payments and the lender's
desire for additional security, the Partnership was required to establish a
debt service reserve for both the Partnership Mortgage Debt and the Santa
Clara Partnership mortgage debt totalling two months of debt service; and
. $155,000 ground rent reserve equal to one month of ground rent.
These reserves were funded by using $12.2 million from the General Partner
Reserve and $643,000 from the Partnership and the Santa Clara Partnership
property improvement funds.
Santa Clara Partnership Mortgage Debt
On the Partnership Closing Date, the Santa Clara Partnership borrowed $43.5
million from commercial banks pursuant to the terms of a variable rate mortgage
loan (the "Original Santa Clara Mortgage Debt") which matured on March 21, 1996
and was extended until September 21, 1996. The proceeds of the loan were
immediately distributed to the Partnership for its use in purchasing its 50%
limited partner interest in the Santa Clara Partnership. The Original Santa
Clara Mortgage Debt was nonrecourse to the Santa Clara Partnership and was
secured by a first mortgage on the Hotel and an assignment of the Santa Clara
Partnership's rights under the Santa Clara Management and Purchase Agreements.
The Original Santa Clara Mortgage Debt provide for interest rate options which
were tied to a Eurodollar rate, an adjusted CD rate or the fluctuating corporate
base rate, with interest payable on the last day of the elected interest period.
For Eurodollar or CD elections, the Partnership paid the applicable rate plus an
increment equal to 0.85
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basis points. No amortization of principal was required prior to maturity. The
Original Mortgage Debt's weighted average interest rate for the years ended
December 31, 1995 and 1994 was 7.0% and 5.4%, respectively.
On September 23, 1996 (the "Closing Date"), the General Partner refinanced the
Original Santa Clara Mortgage Debt under substantially identical terms as the
Partnership Mortgage Debt. The $43.5 million mortgage debt (the "Santa Clara
Mortgage Debt") is nonrecourse to the Santa Clara Partnership and is secured by
first mortgages on the Santa Clara Hotel, the Hotels and the Partnership's
limited partner interest in the Santa Clara Partnership. The Santa Clara
Mortgage Debt bears interest at a fixed rate of 8.22% based upon actual number
of days over a 360-day year for an 11-year term expiring October 11, 2007,
requires payments of interest only during the first loan year (October 1996
through September 1997) and the principal amortization based upon a 20-year
amortization schedule beginning with the second loan year. It matures on
October 11, 2017. Additionally, the refinancing substantially restricted the
ability of the Santa Clara Partnership to sell the Santa Clara Hotel during such
term and prohibits the Santa Clara Partnership from prepaying any debt for an
extended period without paying a substantial premium during such term. The
weighted average interest rate on the Santa Clara Mortgage Debt for the year
ended December 31, 1996 was 7.6%.
Pursuant to the terms of the Santa Clara partnership agreement, the Other Santa
Clara Partners had an obligation to fund certain debt service shortfalls.
Pursuant to the terms of the Santa Clara Partnership agreement, this obligation
expired on December 31, 1995. No amounts were advanced under this obligation.
After December 31, 1995, to the extent debt service is greater than 50% of cash
available before debt service under the Santa Clara partnership agreement, the
Partnership must make capital contributions to cover such amounts. Required
debt service has not exceeded 50% of cash available before debt service under
the Santa Clara partnership agreement, and accordingly, no advances to the Santa
Clara Partnership have been made.
Through December 31, 1995 pursuant to the terms of the Santa Clara partnership
agreement, if sale proceeds otherwise distributable to the Partnership in
connection with a sale of the Santa Clara Hotel were not sufficient to repay the
Santa Clara Mortgage Debt, then the Partnership in effect would be required to
contribute to the Santa Clara Partnership an amount equal to the amount, if any,
of the proceeds otherwise distributable to the Other Santa Clara Partners that
were applied in satisfaction of the Santa Clara Mortgage Debt.
Material Contracts
Management Agreements
The Partnership and the Santa Clara Partnership entered into long-term hotel
management agreements (collectively, the "Management Agreements") with the
Manager to manage the Hotels and the Santa Clara Hotel as part of the MII full-
service hotel system. The Management Agreements for each Hotel had an initial
term expiring on December 31, 2008. To facilitate the refinancing of the
Partnership's Mortgage Debt and the Santa Clara Mortgage Debt, the Manager
exercised its option to renew the Management Agreements for each Hotel for an
additional 10-year term. Therefore, the current terms of the Management
Agreements for each Hotel expire on December 31, 2018. This, as well as the
assignment of the Management Agreements described in "Description of the
Partnership" above, and other minor changes were documented in an amendment to
each of the Management Agreements. The Manager has the option to renew the
Management Agreements for up to three additional 10-year terms. The Management
Agreements provide the Manager with 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 such hotel's operating profit. For additional information,
see Item 13, "Certain Relationships and Related Transactions."
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Ground Leases
The Partnership and the Santa Clara Partnership lease land on which the San
Antonio, San Ramon and Santa Clara Hotels are located from unrelated third
parties. For a description of the terms of the ground leases, see Item 2,
"Properties."
Competition
Competition in the U.S. lodging industry is strong. Room sales, which are
determined by occupancy levels and room rates, have continued to increase in
1996 as the lodging industry as a whole, and the full-service hotel segment in
particular, have benefited from an improved relationship between demand and
supply of hotel rooms in the United States. The recent increase in demand
resulted from an improved economic environment and a corresponding increase in
domestic business travel. In spite of the increased demand for rooms, the room
supply growth rate in the full-service segment has greatly diminished. The
decrease in the supply growth rate is attributable to many factors including the
limited availability of attractive building sites for full-service hotels, the
lack of available financing for new full-service hotel construction and the
availability of existing full-service properties for sale at a discount to their
replacement value. The General Partner believes that room supply growth for
full-service hotels will continue to be limited over the next few years. 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 on new construction and, over time, high occupancy rates and
real estate 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 but created an oversupply of hotel rooms that has not yet been
fully absorbed by increased demand. The General Partner expects the U.S. hotel
supply/demand imbalance to improve gradually over the next few years.
The Manager believes that by emphasizing management and personnel development
and maintaining a competitive price structure, the Partnership Hotels' and the
Santa Clara Hotel's share of their individual markets will be maintained or
increased. The inclusion of the Hotels and the Santa Clara Hotel within the
nationwide MII full-service hotel system provides advantages of name
recognition, centralized reservations and advertising, system-wide marketing and
promotion, centralized purchasing and training and support services. Additional
competitive information is set forth in Item 3 "Properties", with respect to
each Hotel and the Santa Clara Hotel.
Conflicts of Interest
Because Host Marriott and its affiliates own and/or operate hotels other than
those owned by the Partnership and the Santa Clara 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 and the Santa Clara Partnership's Hotels, including the right
to develop competing hotels now and in the future, in addition to those existing
hotels which may compete directly or indirectly.
Under Delaware law, the General Partner has unlimited liability for obligations
of the Partnership and the Santa Clara Partnership, unless those obligations
are, by contract, without recourse to the partners thereof. Since the General
Partner is entitled to manage and control the business and operations of the
Partnership and the Santa Clara Partnership, and because certain actions taken
by the General Partner, the Partnership or the Santa Clara Partnership could
expose the General Partner or its parent, Host Marriott, to liability that is
not shared by the limited partners (for example, tort liability or environmental
liability), this control could lead to a conflict of interest.
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Under the Second Amended and Restated Partnership Agreement (the "Partnership
Agreement"), the General Partner generally is allocated 75% of all losses and
net losses whereas the limited partners are distributed a majority of the cash
available for distribution or sale proceeds. To the extent a course of action
would generate losses or net losses, and thus possible tax benefits for the
General Partner, rather than cash available for distribution or sale proceeds,
the General Partner would face a conflict of interest.
Policies with Respect to Conflicts of Interest
It is the policy of the General Partner that the Partnership's relationship with
the General Partner or any affiliate, or persons employed by the General Partner
are conducted on terms which are fair to the Partnership and which are
commercially reasonable. Agreements and relationships involving the General
Partner or its affiliates and the Partnership are on terms consistent with the
terms on which the General Partner or its affiliates have dealt with unrelated
partners.
The Partnership Agreement provides that agreements, contracts or arrangements
between the Partnership and the General Partner or any of its affiliates, except
for rendering legal, tax, accounting, financial, engineering, and procurement
services to the Partnership by employees of the General Partner or its
affiliates, will be on commercially reasonable terms and will be subject to the
following conditions:
. the General Partner or any such affiliate must have the ability to render
such services or to sell or lease such goods;
. such agreements, contracts or arrangements must be fair to the Partnership
and reflect commercially reasonable terms and shall be embodied in a written
contract which precisely describes the subject matter thereof and all
compensation to be paid thereof;
. no rebates or give-ups may be received by the General Partner or any such
affiliate, nor may the General Partner or any such affiliate participate in
any reciprocal business arrangements which would have the effect of
circumventing any of the provisions of the Partnership Agreement;
. no such agreement, contract or arrangement as to which the limited partners
had previously given approval may be amended in such manner as to increase
the fees or other compensation payable by the Partnership to the General
Partner or any of its affiliates or to decrease the responsibilities or
duties of the General Partner or any such affiliate in the absence of the
consent of the limited partners holding a majority of the Units (excluding
those Units held by the General Partner or certain of its affiliates); and
. 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.
The Santa Clara Partnership Agreement contains similar provisions with respect
to the Santa Clara Partnership.
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Employees
Neither the General Partner nor the Partnership has any employees. Host
Marriott provides the services of certain employees (including the General
Partner's executive officers) of Host Marriott to the Partnership and the
General Partner. The Partnership and the General Partner anticipate that each
of the executive officers of the General Partner will generally devote a
sufficient portion of his or her time to the business of the Partnership.
However, each of such executive officers also will devote a significant portion
of his or her time to the business of Host Marriott and its other affiliates.
No officer or director of the General Partner or employee of Host Marriott
devotes a significant percentage of time to Partnership matters. To the extent
that any officer, director or employee does devote time to the Partnership, the
General Partner or Host Marriott, as applicable, is entitled to reimbursement
for the cost of providing such services. See Item 11, "Management Remuneration
and Transactions", for information regarding payments made to Host Marriott or
its subsidiaries for the cost of providing administrative services to the
Partnership.
ITEM 2. PROPERTIES
As of December 31, 1996, the Partnership and the Santa Clara Partnership
properties consist of four hotels, all of which are in full operation and
described below.
New Orleans Marriott Hotel - New Orleans, Louisiana
Location
The New Orleans Hotel is a full-service Marriott hotel located on approximately
1.88 acres of fee-owned land in the central business district in downtown New
Orleans on the western boundary of the famous French Quarter. The Hotel is
situated on Canal Street, the primary commercial route through the downtown
area. It is located approximately 12 miles from the New Orleans International
Airport.
Description
The Hotel, which opened in July 1972, currently contains 1,290 guest rooms,
including 54 suites and 48 concierge-level guest rooms. The Hotel is comprised
of the original 42-story River Tower and the 20-story Quarter Tower. Designed
as part of the MII network of convention hotels, it has extensive meeting and
convention facilities, totaling 80,000 square feet, including (i) a 27,100
square foot grand ballroom, which is the largest hotel ballroom in New Orleans,
(ii) a 10,400 square foot junior ballroom, and (iii) 25 meeting rooms. Hotel
facilities also include three restaurants, three lounges, a health club, an
outdoor pool, a gift shop and a 475-space underground parking garage.
Guest Room Renovations and Replacements
The Hotel had 924 guest rooms when it originally opened in 1972. A 400-room
expansion was completed in 1979. The Hotel underwent an $11.4 million
renovation in 1988 which included reconfiguring certain guest rooms, including
54 suites and 48 concierge-level guest rooms. The completion of these two
projects has resulted in the 1,290 guest room count that the Hotel currently
holds. The 1,290 rooms were partially renovated in 1992 at a cost of $5.4
million. The renovation focused on carpeting, bedspreads, upholstery, drapes
and other similar items ("Softgoods"). The Hotel is scheduled to have a
complete refurbishment of all of its guest rooms at an estimated cost of $13.0
million in 1998 which will include replacement of the Softgoods and also the
dressers, chairs, beds and other furniture ("Casegoods").
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Competition
The primary competition for the Hotel comes from the following three first-class
convention oriented hotels in the central business district of New Orleans: (i)
the Sheraton New Orleans Hotel, (ii) the Hyatt Regency New Orleans Hotel and
(iii) the New Orleans Hilton Riverside and Towers Hotel. These three
competitors contain an aggregate of approximately 3,900 rooms and 254,000 square
feet of meeting space. In addition, other hotels in the New Orleans area also
compete with the Hotel; however, these differ from the New Orleans Hotel in
terms of size, room rates, facilities, amenities and services offered, market
orientation and/or location. None of these other hotels are operated as part of
the MII full-service system. As a major convention facility, the Hotel also
competes with similar facilities throughout the country.
No new direct competitors are expected to open in the New Orleans area in the
near-term. However, the demand in the market has created interest by a number
of parties in expanding existing properties and/or developing new full-service
hotels.
San Antonio Marriott Rivercenter Hotel - San Antonio, Texas
Location
The San Antonio Hotel is a full-service Marriott hotel located in downtown San
Antonio on a leased parcel of land of approximately 2.7 acres. The Hotel is
situated on the San Antonio Riverwalk and is located one block from the San
Antonio Convention Center and the Alamo. It is located approximately seven
miles from the San Antonio International Airport.
Description
The Hotel opened in October 1988. The Hotel contains 999 guest rooms, including
86 suites and 40 concierge-level guest rooms, in a 38-story building. Designed
as part of the MII network of convention hotels, it has extensive meeting and
convention facilities, totaling 58,300 square feet, including (i) a 40,000
square foot grand ballroom and (ii) 36 meeting rooms. Hotel facilities also
include two restaurants, two lounges, a health club, an indoor/outdoor pool, a
gift shop and a 650-space underground parking garage.
Guest Room Renovations and Replacements
During 1994 and 1995, the Hotel completed a $4.5 million Softgoods renovation
project. The Hotel is scheduled to complete a combined Softgoods and Casegoods
renovation of all of its guest rooms at an estimated cost of $11.1 million in
2000.
Competition
The primary competition for the Hotel comes from the following three first-class
hotels in downtown San Antonio: (i) the San Antonio Marriott Riverwalk Hotel,
(ii) the Hyatt Regency and (iii) the Hilton Palacio del Rio Hotel. These three
competitors contain an aggregate of approximately 1,600 rooms and 64,000 square
feet of meeting space. The San Antonio Marriott Riverwalk Hotel, which opened
in 1980 and is managed by MII, is located across the street from the San Antonio
Hotel. Other than limited joint marketing efforts to meeting and convention
planners, the San Antonio Hotel and the Marriott Riverwalk are direct
competitors. Host Marriott acquired the San Antonio Marriott Riverwalk Hotel
and another area hotel, the Plaza San Antonio Hotel in June and August 1995,
respectively. In addition, other hotels in the San Antonio area also compete
with the Hotel; however, these differ from the Hotel in terms of size, room
rates, facilities, amenities and services offered, market orientation and/or
location. None of these other hotels are operated as part of the MII full-
service hotel system.
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In February of 1997 the Residence Inn Alamo Plaza will open with 220 rooms. In
November of 1997, the Adams Mark Hotel will open on the riverwalk with 410 rooms
and 20,000 square feet of meeting space. Both hotels are in the Hotel's
immediate market area and it is expected that the Hotel will compete directly
with the Adams Mark Hotel for transient business. The downtown San Antonio area
will experience a total room increase of over 1,100 rooms by the end of 1997 of
which the only full-service property will be the Adams Mark Hotel. In addition,
the demand in this market is at a level that has created interest by a number of
parties in expanding existing properties and/or developing new full-service
hotels. Recently, a proposal passed to expand the San Antonio Convention Center
to 500,000 square feet, which would rank it as the 12th largest convention
center in the country. It is likely that the expansion to the Convention Center
will create demand for additional hotel rooms in the San Antonio market. While
it is difficult to predict the ultimate outcome of this proposal, it is likely
that hotel rooms will be added to the market and, therefore, increase the San
Antonio Hotel's competition.
Ground Lease
The San Antonio Hotel is located on a site that is leased from an unrelated
third party for an initial term expiring December 31, 2013. To facilitate the
refinancing, the Partnership exercised its option to extend the land lease for
an additional 20-year period. Therefore, the term of the San Antonio land lease
expires on December 31, 2033. The Partnership has the option to extend the term
for up to three successive terms of ten years each. The lease provides for
annual rental during the term of the lease equal to the greater of $700,000 or
3.5% of annual gross room sales.
San Ramon Marriott Hotel - San Ramon, California
Location
The San Ramon Hotel is a full-service Marriott hotel located within the Bishop
Ranch Business Park in San Ramon, California approximately 40 miles east of San
Francisco and approximately 20 miles east of Oakland. The Hotel is located on a
leased parcel of land of approximately 11.8 acres. It is located approximately
18 miles from the Oakland International Airport and 35 miles from the San
Francisco International Airport.
Description
The Hotel opened in June 1989. The Hotel contains 368 guest rooms, including
six suites and 72 concierge-level guest rooms, in a six-story building. The
Hotel has approximately 16,300 square feet of meeting and banquet space,
including (i) a 10,000 square foot main ballroom, (ii) a 5,000 square foot
junior ballroom, and (iii) six meeting rooms. Hotel facilities also include a
restaurant, a lounge, a heated outdoor pool, an exercise room, a sundry shop and
outdoor parking for over 560 cars.
Guest Room Renovations and Replacements
In January 1997, the Hotel completed a $1.2 million Softgoods renovation
project. The Hotel is scheduled to have a combined Softgoods and Casegoods
refurbishment of its six suites in 1997 at an approximate cost of $241,000. The
Hotel is scheduled to have a combined Softgoods and Casegoods refurbishment of
all of its guest rooms at an estimated cost of $2.9 million in 2001.
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Competition
The primary competition for the Hotel comes from the following three hotels: (i)
the Hilton Inn Pleasanton, (ii) the Sheraton Pleasanton and (iii) the Marriott
Residence Inn San Ramon. These three competitors contain an aggregate of
approximately 600 rooms and 21,000 square feet of meeting space. In addition,
other hotels in the San Ramon area also compete with the Hotel; however, these
differ from the Hotel in terms of size, room rates, facilities, amenities and
services offered, market orientation and/or location. None of these other
hotels are operated as part of the MII full-service hotel system. While the San
Ramon area will experience a total room increase of approximately 700 rooms in
1997 and 1998, no new direct competition is expected to open in the San Ramon
area in the near-term.
Ground Lease
The San Ramon Hotel is located on a site that is leased from an unrelated third
party for an initial term expiring May 2014. To facilitate the refinancing, the
Partnership exercised its option to extend the land lease for an additional 20-
year period. Therefore, the current term of the San Ramon land lease expires in
May 2034. The Partnership has the option to extend the term for up to three
successive terms of ten years each. The lease provides for annual rental during
the term of the lease equal to the greater of $350,000 or 3% of annual gross
sales. The minimum rent of $350,000 may be adjusted upward beginning in June
1995, and every fifth year thereafter, to an amount equal to 75% of the average
rent paid during the three years immediately preceding the applicable five-year
period. No such adjustment was necessary at that time.
Santa Clara Marriott Hotel - Santa Clara, California
Location
The Santa Clara Hotel is a full-service Marriott hotel located in Santa Clara,
California on two leased parcels of land, totalling approximately 21.9 acres.
The Hotel is situated in the center of "Silicon Valley" approximately one mile
from the Santa Clara Convention Center. It is located approximately four miles
from the San Jose International Airport and 36 miles from the San Francisco
International Airport.
Description
The Hotel opened in June 1976. The Hotel contains 754 guest rooms, including 25
suites and 76 concierge-level guest rooms. The Hotel consists of two towers
(one 13 stories and one 10 stories) and a series of two-and three-story
buildings, all of which are interconnected. The Hotel has approximately 24,000
square feet of meeting and banquet space, which includes three separate
ballrooms, with a total of 20,200 square feet, and six meeting rooms. Hotel
facilities also include two restaurants, two lounges, an indoor/outdoor pool, an
exercise room, a game room, a gift shop and outdoor parking for over 1,200 cars.
Guest Room Renovations and Replacements
Approximately 264 of the 754 rooms underwent a combined Softgoods and Casegoods
refurbishment in 1992 at an approximate cost of $1.8 million. In 1993, a
Softgoods renovation was completed in 462 rooms at an approximate cost of $1.5
million and in 1994, 248 rooms underwent a Casegoods renovation at an
approximate cost of $704,000. In 1998, the Hotel is scheduled to complete a
Softgoods renovation of 264 rooms at an approximate cost of $1.5 million and a
combined Softgoods and Casegoods refurbishment of 202 rooms at an approximate
cost of $1.4 million.
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Competition
The primary competition for the Hotel comes from the following three hotels: (i)
the Westin Santa Clara Hotel, (ii) the Red Lion San Jose and (iii) the Embassy
Suites Santa Clara Hotel. These three competitors contain an aggregate of
approximately 1,300 rooms and 46,000 square feet of meeting space. In addition,
other hotels in the Santa Clara area also compete with the Hotel; however, these
differ from the Hotel in terms of size, room rates, facilities, amenities and
services offered, market orientation and/or location. None of these other
hotels are operated as part of the MII full-service hotel system. No new
competition is expected to open in the Santa Clara area in the near-term.
Ground Lease
The Santa Clara Hotel is located on a site that is leased from two third parties
for an initial term expiring November 30, 2028. The Santa Clara Partnership has
the option to extend the term of each ground lease for up to three successive
terms of ten years each. The leases provide for aggregate annual rentals during
the term of the leases ranging from $63,700, increasing incrementally over the
term of the leases, to $100,000. The aggregate annual rent due under the leases
during the three renewal terms ranges from $116,900, increasing incrementally
over the renewal terms to $148,800.
ITEM 3. LEGAL PROCEEDINGS
The Partnership and the Partnership Hotels are involved in routine litigation
and administrative proceedings arising in the ordinary course of business, some
of which are expected to be covered by liability insurance and which
collectively are not expected to have a material adverse effect on the business,
financial conditions or results of operations of the Partnership.
On April 23, 1996, MacKenzie Patterson Special Fund 2, L.P. ("MacKenzie
Patterson"), a limited partner of the Partnership, filed a purported class-
action lawsuit in the Circuit Court for Montgomery County, Maryland, against the
Partnership, as a nominal defendant, the Company, Host, the General Partner and
the directors of the General Partner, alleging, among other things, that the
defendants had violated their fiduciary duties in connection with the tender
offer. The complaint sought certification as a class-action, to enjoin the
Offer and the Consent Solicitation, and damages. Subsequently, MacKenzie
Patterson dismissed the Montgomery County action and refiled in Delaware State
Chancery Court. In separate lawsuits, filed in April 24, 1996, in Delaware
State Chancery Court and on May 10, 1996, in the Circuit Court for Palm Beach
County, Florida, two other limited partners of the Partnership sought similar
relief. The Chancery Court consolidated the two Delaware lawsuits and on June
12, 1996, entered an order denying the Delaware plaintiffs' motion to enjoin the
Offer and Consent Solicitation. The defendants have moved to dismiss this
consolidated action and to stay discovery. Neither a briefing schedule nor a
hearing on these motions has yet been set. The defendants removed the Florida
action to federal court and filed motions to dismiss, or in the alternative, to
stay the action pending resolution of the Delaware action. The District Court
denied the motions to stay, but has not yet rendered a decision on the motions
to dismiss.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 13, 1996, MHPII Acquisition Corp. (the "Company"), a wholly-owned
subsidiary of Host Marriott, completed a tender offer for the outstanding Units
in the Partnership. The Company purchased 377 Units for an aggregate
consideration of $56,550,000 or $150,000 per unit. Subsequent to the tender
offer, the Company purchased an additional ten Units in the Partnership. As a
result of these transactions, the Company became the majority limited partner in
the Partnership, owning 387 Units or approximately 52% of the total Units
outstanding.
Additionally, in a Partnership vote held in conjunction with the tender offer,
the limited partners approved certain amendments to the Partnership Agreement
that were conditions to the tender offer. These amendments were as follows:
(1) An amendment that (i) revised the provisions limiting the voting rights of
the General Partner and its affiliates to permit the General Partner and its
affiliates (including the Company) to have full voting rights with respect to
all Units currently held by the General Partner or acquired by its affiliates
except on matters where the General Partner or its affiliates have an actual
economic interest other than as a unitholder or general partner (an "Interested
Transaction"), and (ii) modified the voting provisions with respect to Interest
Transactions to permit action to be taken if approved by limited partners
holding a majority of the outstanding Units, with all Units held by the General
Partner and its affiliates being voted in the same manner as a majority of the
Units actually voted by limited partners other than the General Partner and its
affiliates.
(2) An amendment that eliminated the provision that prohibited the transfer of
50% or more of the outstanding Units within a 12-month period, so that the
Company could acquire a greater than 50% interest in the Partnership pursuant to
the tender offer and thereafter transfer such interest.
(3) An amendment that revised the provision the permitted Unit transfers only
on the first day of a fiscal quarter, so that the transfer of Units to the
Company pursuant to the tender offer, and any subsequent transfer of Units by
the Company, could occur on the designated closing date, rather on the first day
of a fiscal quarter.
(4) An amendment that revised the provisions relating to the allocation of
profits and losses and cash distributions, so that tendering unitholders whose
tenders were accepted received allocations of profit and loss with respect to
their Units only up to, but not beyond, the last day of the accounting period
prior to the date tenders of Units were accepted for payment under the tender
offer and did not receive cash distributions (including sale and refinancing
proceeds) made after the date tenders of Units were accepted for payment under
the tender offer.
(5) An amendment that changed the definition of "Affiliate" to make clear that
a publicly-traded entity (such as MII) will not be deemed an affiliate of the
General Partner or any of its affiliates unless a person or group of persons
directly or indirectly owns twenty percent (20%) or more of the outstanding
common stock of both the General Partner (or its affiliates) and such other
entity.
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PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP UNITS AND RELATED
SECURITY HOLDER MATTERS
There is currently no established public trading market for the Units and it is
not anticipated that a public market for the Units will develop. Transfers of
Units are limited to the first day of a fiscal quarter (other than any transfer
of Units by the limited partners to the Company), and are subject to approval by
the General Partner and certain other restrictions. As of December 31, 1996,
there were 420 holders of record of the 745 Units.
In accordance with Section 4.06, 4.07 and 4.08 of the Partnership Agreement,
cash available for distribution will be distributed for each fiscal year semi-
annually to the partners as follows:
(i) first, 100% to the limited partners until the limited partners have
received with respect to such fiscal year a non-cumulative 10% preferred
distribution on their invested capital of $74,500,000;
(ii) next, 100% to the General Partner until the General Partner has received
an amount equal to 1/99th of the amount distributed to the limited
partners;
(iii) 1% to the General Partner and 99% to the limited partners until such time
as the limited partners have received their 15% preferred distribution,
plus $50,000 per Unit, payable only from sales and/or refinancing
proceeds ("Capital Receipts"), to the extent available after the payment
of such 15% preferred distribution;
(iv) thereafter, 20% to the General Partner and 80% to the limited partners.
Cash available for distribution means, with respect to any fiscal period, the
cash revenues of the Partnership from all sources, other than Capital Receipts,
during such fiscal period plus such reserves as may be determined by the General
Partner in its reasonable discretion, as no longer necessary to provide for the
foreseeable needs of the Partnership, less (i) all cash expenditures of the
Partnership during such fiscal period, including, without limitation, debt
service, repayment of advances made by the General Partner as and when such
repayments are required, any fees for management services, and administrative
expenses but excluding expenditures incurred by the Partnership in connection
with a capital transaction, and (ii) such reserves as may be determined by the
General Partner, in its reasonable discretion to be necessary to provide for the
foreseeable needs of the Partnership, including, without limitation, for the
maintenance, repair or restoration of the Hotels.
The Partnership has distributed a total of $87,997,292 ($116,936 per limited
partner Unit) since inception. The Partnership distributed $11,288,000 ($15,000
per limited partner Unit) for each of the years 1994 and 1995. In October 1996,
the Partnership made an interim distribution to its partners from 1996
operations in the amount of $15,050,000 ($20,000 per limited partner Unit). The
Partnership expects to continue to make its semi-annual cash distributions to
the partners. No distributions of Capital Receipts have been made since
inception.
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ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data presents historical operating information
for the Partnership for each of the five years ended December 31, 1996 (in
thousands, except per Unit amounts):
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues...................... $ 66,292 $ 64,002 $ 58,703 $ 57,003 $ 55,560
======== ======== ======== ======== ========
Net income.................... $ 14,811 $ 13,045 $ 8,428 $ 6,869 $ 7,133
======== ======== ======== ======== ========
Net income per limited partner
Unit (745 Units).............. $ 19,682 $ 17,336 $ 11,200 $ 9,128 $ 9,479
======== ======== ======== ======== ========
Total assets.................. $251,740 $254,113 $250,461 $254,184 $254,102
======== ======== ======== ======== ========
Total liabilities............. $235,132 $233,792 $231,897 $232,703 $227,795
======== ======== ======== ======== ========
Cash distributions per
limited partner
Unit (745 Units).............. $ 28,250 $ 15,000 $ 15,000 $ 15,000 $ 17,144
======== ======== ======== ======== ========
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CAPITAL RESOURCES AND LIQUIDITY
The Partnership's financing needs have historically been funded through loan
agreements with independent financial institutions. As a result of the
successful refinancing of the Partnership's Mortgage Debt and the Santa Clara
mortgage debt, the General Partner believes that the Partnership will have
sufficient capital resources and liquidity to continue to conduct its operations
in the ordinary course of business.
Mortgage Debt
- -------------
The Partnership was financed with Original Mortgage Debt of $222.5 million which
was nonrecourse to the Partnership. The weighted average interest rate on the
Original Mortgage Debt for the two years in the period ended December 31, 1995
was 7.8%. On March 21, 1996, the Original Mortgage Debt and the Santa Clara
mortgage debt matured at which time the lender granted the Partnership an
extension of the two loans for an additional six months until replacement
financing could be finalized with another lender. Under the terms of the
extension, interest accrued at the London interbank offered rate ("LIBOR") plus
187.5 basis points for the first three months and accrued at LIBOR plus 225.0
basis points for the second three months. No principal amortization was
required during the extension period. However, under the terms of the
extension, the Partnership applied the $9.2 million accumulated in the primary
lender reserve account to pay down the principal balance of the Original
Mortgage Debt to $213.3 million and deposited $19.1 million into the primary
lender reserve account. The primary lender reserve account was established in
1994 to provide for a principal paydown on the Original Mortgage Debt at
maturity. The $19.1 million deposit represented the balance ($16.8 million)
from the unrestricted reserve account included in cash in the accompanying
balance sheet as of December 31, 1995, previously established by the General
Partner in 1992 (the "General Partner Reserve") and cash flow from the
Partnership for the first two periods of 1996 ($2.3 million).
During the extension period, the Partnership also was required to deposit into
the primary lender reserve account all cash flow from the Partnership's Hotels
plus all the Partnership's cash flow from the Santa Clara Partnership, net of
(i) $500,000 per accounting period, (ii) debt service and (iii) current
incentive management fees paid. The $500,000 per accounting period was
deposited into a separate expense reserve account which was used by the
Partnership to fund administrative expenses and refinancing costs, any owner-
funded capital expenditures, as well as the Partnership's share of any such
costs incurred by the Santa Clara Partnership during the six month extension
period.
On September 23, 1996 (the "Closing Date"), the General Partner was successful
in refinancing the Partnership's Original Mortgage Debt, as well as the $43.5
million mortgage debt of the Santa Clara Partnership. A total of $266.0 million
was borrowed from a new third party lender, $222.5 million of which is recorded
on the Partnership's financial statements (the "Mortgage Debt"). The
Partnership's Mortgage Debt is nonrecourse to the Partnership and is secured by
first mortgages on the Hotels, as well as a pledge of its limited partner
interest in the Santa Clara Partnership. The debt bears interest at a fixed
rate of 8.22% based upon actual number of days over a 360 day year for an 11-
year term expiring October 11, 2007, requires payments of interest only during
the first loan year (October 1996 through September 1997) and then principal
amortization based upon a 20-year amortization schedule beginning with the
second loan year. Additionally, the refinancing substantially restricts the
ability of the Partnership to sell the Hotels during such term and prohibits the
Partnership from prepaying any debt for an extended period without paying a
substantial premium during such term. While Partnership debt service will
increase as a result of this refinancing when compared to 1995, the refinancing
is expected to improve the financial condition of the Partnership by reducing
the Partnership's long-term indebtedness through principal
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<PAGE>
amortization. The General Partner expects cash flow from the Partnership Hotels
and the Santa Clara Hotel will be sufficient to provide for the Partnership's
and the Santa Clara Partnership's debt service.
On the Closing Date, the Partnership was required to establish certain reserves
which are held by an agent of the lender including:
. $7.0 million for various renewals and replacements and site improvements;
. $1.1 million for Americans with Disabilities Act of 1990 modifications,
deferred maintenance work and environmental remediation projects identified
during the course of the appraisals and environmental studies undertaken in
conjunction with the refinancing;
. $4.5 million debt service reserve - Based upon current forecasts, it is
expected that cash from operations will be sufficient for the required
payment terms of the Mortgage Debt. However due to the seasonality of the
four hotels' operations, the timing of debt service payments and the lender's
desire for additional security, the Partnership was required to establish a
debt service reserve for both the Partnership Mortgage Debt and the Santa
Clara Partnership mortgage debt totalling two months of debt service; and
. $155,000 ground rent reserve equal to one month of ground rent.
These reserves were primarily funded by using $12.2 million from the General
Partner Reserve and $634,000 from the Partnership and the Santa Clara
Partnership property improvement funds. In addition, the General Partner
Reserve was used to pay transaction costs which included property appraisals,
legal expenses, bank fees, environmental studies and other transaction costs.
Capital Resources and Uses of Cash
- ----------------------------------
The Partnership's principal sources of cash are from operations and the General
Partner Reserve. Its principal uses of cash are to pay debt service on the
Partnership's Mortgage Debt, to fund the property improvement funds of the
Hotels, to establish reserves required by the lender and to make cash
distributions to the partners. Additionally, in 1996 the Partnership utilized
cash to pay financing costs incurred in connection with the refinancing of the
Partnership's Mortgage Debt and the Santa Clara Mortgage Debt. Total cash
provided from operations was $28.7 million, $27.0 million and $20.9 million for
the years ended December 31, 1996, 1995 and 1994, respectively. The General
Partner Reserve, which was established by the General Partner beginning in 1992
through 1995, provided total cash of $25.7 million for the year ended December
31, 1996. Debt service paid on the Partnership's Mortgage Debt was $17.2
million, $17.3 million and $17.4 million for the years ended December 31, 1996,
1995 and 1994, respectively. Contributions to the property improvement funds of
the Hotels were $6.6 million, $6.3 million and $5.9 million for the years ended
December 31, 1996, 1995 and 1994, respectively. Contributions to the Santa
Clara Partnership property improvement fund were $2.0 million, $1.8 million and
$1.6 million in 1996, 1995 and 1994, respectively. The various reserves
required by the lender in connection with the refinancing of the Partnership's
Mortgage Debt and the Santa Clara Mortgage Debt totaled $12.8 million for the
year ended December 31, 1996. Cash distributed to the partners was $18.5
million for the year ended December 31, 1996 and $11.3 million for each of the
years ended December 31, 1995 and 1994, respectively. Financing costs related
to the refinancing of the Partnership's Mortgage Debt and the Santa Clara
Mortgage Debt totaled $6.0 million for the year ended December 31, 1996 and
there were no financing costs paid in 1995 and 1994.
The Partnership is required to maintain the Hotels and the Santa Clara Hotel in
good condition. Under the Management Agreements, the Partnership is required to
make annual contributions to the property improvement funds which provide
funding for replacement of furniture, fixtures and equipment. Contributions to
the property improvement fund are based on a percentage of gross sales.
Contributions to the fund by property are as follows: San Antonio, 4% in 1994-
1998 and 5% thereafter; San Ramon, 4% in 1994-1998 and 5% thereafter; New
Orleans and Santa Clara 5%. A 2% increase in the contribution
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<PAGE>
percentage for the New Orleans Marriott Hotel will be made for 1997 and 1998 to
allow for adequate funding of the combined Softgoods and Casegoods refurbishment
of all rooms scheduled for 1998. This project is expected to cost approximately
$13.0 million.
The General Partner believes that cash from Hotel operations and the reserves
established in conjunction with the refinancing will continue to meet the short
and long-term operational needs of the Partnership. In addition, the General
Partner believes the property improvement funds, as adjusted in the case of the
New Orleans Hotel, and the capital reserves established in conjunction with the
refinancing will be adequate for the future capital repairs and replacement
needs of the Hotels. Including the final 1996 distribution made in April 1997,
the Partnership distributed $28,250 per limited partner units from operating
cash flow, this represents a 28.3% annual return on invested capital. In
addition, concurrent with this distribution, the General Partner will make a
distribution of $4,873 per limited partner unit. This distribution represents
the excess of the General Partner Reserve after payment of all transaction costs
related to the mortgage debt refinancing, as well as the establishment of an
additional month's debt service reserve pursuant to the loan agreement. This is
a one-time distribution and future distributions are expected to be funded by
operations.
In the first quarter of 1996, the Partnership adopted Statement of Financial
Accounting Standards ("SFAS") No. 121 "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Asset to Be Disposed of". Adoption of SFAS No.
121 did not have an effect on the Partnership's financial statements.
RESULTS OF OPERATIONS
Hotel revenues in the accompanying financial statements represent house profit
of the Partnership's Hotels since the Partnership has delegated substantially
all of the operating decisions related to the generation of house profit of the
Hotels and the Santa Clara Hotel to 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 ground
rent, insurance and other costs, which are disclosed separately in the statement
of operations.
1996 compared to 1995: For 1996 Partnership revenues increased from $64.0
million in 1995 to $66.3 million in 1996 due to a 4% increase in REVPAR. REVPAR
increased primarily due to a 5% increase in the combined average room rate to
$123 while the combined average occupancy remained stable at 81%. Net income
for 1996 increased 14% to $14.8 million in 1996 from $13.0 million in 1995.
Interest expense increased slightly due to refinancing expenses incurred with
the extension of the Original Mortgage Debt which are reflected as interest
expense in the accompanying statement of operations. The Partnership's equity
in income of the Santa Clara Partnership increased $546,000 in 1996 when
compared to 1995 due to improved operations at the Santa Clara Hotel.
The New Orleans Marriott Hotel reported a 4% increase in revenues during 1996.
This increase in revenues was due to a 3% increase in REVPAR partially offset by
a 3%, or $520,000, decrease in food and beverage revenues. REVPAR increased due
to a 4% increase in average room rate to approximately $125 while average
occupancy remained stable in the high-70's. The growth in average room rate was
achieved by increasing the average room rate during the summer months when the
New Orleans market experienced heavy demand from the group business market. In
addition, the Hotel added a United Airlines contract at an attractive average
room rate which increased the average room rate as well as total roomnights in
the contract segment. Food and beverage operating results declined due to a 10%
decrease in banquet sales primarily due to a shift in the group business market
from corporations and associations to more cost conscious groups. For the year,
the Hotel continued to hold a solid market share of the New Orleans market. The
coming year looks to be a challenge for the Hotel as there will be fewer city
wide conventions in 1997. Hotel management's strategy will be to maximize
average room rates during the high occupancy periods and drive occupancy over
the summer months when the decrease in convention business will be felt
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<PAGE>
most acutely. The Hotel has had success with such strategic rate structuring in
the past and will also employ aggressive transient advertising to achieve
positive results. No new full-service hotels opened in 1996 and none are
expected for 1997.
The Marriott Rivercenter in San Antonio reported a slight increase in revenues
when compared to 1995 results. REVPAR increased 2% primarily due to a 2%
increase in average room rate to approximately $130 partially offset by a 1.0
percentage point decline in average occupancy to the mid-80's. Food and beverage
operating results declined 7%, or $497,000. The increase in average room rate is
due to the success of aggressive pricing strategies employed by the Hotel
management. The decrease in average occupancy was due the fact that 1996 was an
off year for convention rotations and, accordingly there was a 16,000 roomnight
decline in group business when compared to 1995. The Hotel was able to replace
almost all of this shortfall with 15,500 transient roomnights through creative
marketing efforts. Food and beverage operating results declined due to the
inclusion of a high volume of catering sales attributed to one large group in
the calculation of 1995 operating results. It required 35% more groups in 1996
to achieve the same sales volume as 1995. This increase in the number of groups
led to an increase in operating costs when compared to 1995 results which eroded
food and beverage operating results. During 1996, the annual average room rate
was the highest in the Hotel's history. The Hotel continued to hold a strong
share of the San Antonio market and does not expect this to change during 1997.
Hotel management is optimistic that 1997 will be another strong year for the
Hotel but is faced with the challenge of increased competition in the market. In
February of 1997 the Residence Inn Alamo Plaza will open with 220 rooms. In
November of 1997, the Adams Mark Hotel will open on the riverwalk with 410 rooms
and 20,000 square feet of meeting space. Both hotels are in the Hotel's
immediate market area and it is expected that the Hotel will compete directly
with the Adams Mark Hotel for transient business.
Both of the Partnership's Northern California Hotels reported significant
increases in revenues during 1996. The San Ramon Marriott Hotel reported a 15%,
or $799,000, increase in revenues when compared to 1995 primarily due to an 11%
increase in REVPAR. REVPAR increased primarily due to an 8% increase in average
room rate to approximately $95 combined with a 1.8 percentage point increase in
average occupancy to the mid-80's. The increase in average room rate was
achieved primarily as a result of an increase in the corporate rate. Average
occupancy increased due to an increase in demand in both the group and transient
markets. For 1996, the Hotel was the market leader in both average room rate and
average occupancy. While the San Ramon market will experience an increase of
approximately 850 rooms in the coming year, most of the additions will not enter
the market until mid to late 1997 and will be limited-service products. No new
full-service hotels are expected to be added to the market in 1997. Hotel
management does not expect the limited-service additions to the market to
significantly impact the Hotel. In January 1997, the Hotel completed a $1.2
million renovation of 362 rooms which focused on carpeting, bedspreads,
upholstery, drapes and other similar items. A total renovation of the Hotel's
six suites will be completed during the first quarter of 1997 at an approximate
cost of $241,000.
The Santa Clara Marriott Hotel reported a 19%, or $2.8 million, increase in
revenues during 1996. This increase in revenues was primarily due to an 18%
increase in REVPAR. REVPAR increased primarily due to a 14% increase in average
room rate to approximately $120 combined with a 2.8 percentage point increase in
average occupancy to the low-80's. The increase in average room rate and average
occupancy is the result of very strong transient demand which allowed the Hotel
to maximize room rates. Transient roomnights increased by 18,000 roomnights when
compared to 1995 which allowed for a 13% increase in the transient average room
rate. Hotel management is extremely optimistic about 1997 results as demand for
rooms in the Silicon Valley is forecasted to remain high through 1997. In
response, Hotel management will continue to maximize rate by employing strategic
rate structuring and strictly limiting rate discounting. While there is not
expected to be any new competition added to the market during 1997, each of the
Hotel's primary competitors are considering expansion projects. These
discussions are in the very preliminary stages and will not impact 1997
operations.
19
<PAGE>
1995 compared to 1994: Revenues for 1995 increased to $64.0 million from $58.7
million in 1994 due to a 6.4% increase in REVPAR. REVPAR increased due to a 3%
increase in average room rate to $117 combined with a 2.4 percentage point
increase in average occupancy to 81%. Net income from 1995 increased 55% from
$8.4 million in 1994 to $13.0 million in 1995. The Partnership's equity in
income of the Santa Clara Partnership increased $904,000 in 1995 when compared
to 1994 due to a decrease in the amortization of the excess purchase price of
the Santa Clara Investment.
The Marriott Rivercenter in San Antonio reported a 15% increase in revenues
during 1995 due to a 9% increase in REVPAR combined with a 15% increase in food
and beverage sales. REVPAR increased due to a 4.6 percentage point increase in
average occupancy to the mid-80's combined with a 4% increase in average room
rate to approximately $130. The growth in food and beverage sales was due to an
increase in catering demand. The New Orleans Marriott experienced a 3% increase
in revenues during 1995. The increase was due to a 1% increase in REVPAR
combined with a significant increase in food and beverage sales. The change in
REVPAR was due to a 3% increase in average room rate to approximately $120
partially offset by a 1.3 percentage point decrease in average occupancy to the
high-70's. Total food and beverage sales increased 10% in 1995 due to
significant growth in corporate group banquet sales.
Revenues at the Northern California Hotels grew significantly in 1995. San
Ramon's revenues increased 18% in 1995 due to a 12% increase in REVPAR. The
increase in REVPAR was due to a 10.3 percentage point increase in average
occupancy to the low-80's. Revenues at the Santa Clara Hotel increased 21%
during 1995. The increase in revenues was due to a 14% increase in REVPAR
combined with a 5% increase in food and beverage sales. The increase in REVPAR
was due to a 12% increase in average room rate to approximately $100 combined
with a 1.6 percentage point increase in average occupancy to the high-70's. The
Hotel's customer rate mix shifted during the year from discounted rates to
higher rated corporate business.
Inflation
- ---------
The rate of inflation has been relatively low since inception of the Partnership
and accordingly, has not had a significant impact on operating results. However,
the Hotels' and the Santa Clara Hotel's room rates and occupancy are inflation
sensitive. The Manager is generally able to pass through increased costs to
customers through higher room rates. In 1996, the increase in average room rates
at the San Antonio, San Ramon and Santa Clara Hotels exceeded those of direct
competitors as well as the general level of inflation. As stated above, the
Mortgage Debt bears a fixed interest rate, thereby eliminating exposure to the
impact of future increases in interest rates.
Forward-Looking Statements
- --------------------------
Certain matters discussed herein are forward-looking statements within the
meaning of the Private Litigation Reform Act of 1995 and as such may involve
known and unknown risks, uncertainties, and other factors which may cause the
actual results, performance or achievements of the Partnership to be different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Although the Partnership, believes the
expectations reflected in such forward-looking statements are based upon
reasonable assumptions, it can give no assurance that its expectations will be
attained. The Partnership undertakes no obligation to publicly release the
result of any revisions to these forward-looking statements that may be made to
reflect any future events or circumstances.
20
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
Index Page
- ----- ----
<S> <C>
Report of Independent Public Accountants.... 22
Statement of Operations..................... 23
Balance Sheet............................... 24
Statement of Changes in Partners' Capital... 25
Statement of Cash Flows..................... 26
Notes to Financial Statements.................. 27
</TABLE>
21
<PAGE>
Report of Independent Public Accountants
- --------------------------------------------------------------------------------
TO THE PARTNERS OF MARRIOTT HOTEL PROPERTIES II LIMITED PARTNERSHIP:
We have audited the accompanying balance sheet of Marriott Hotel Properties II
Limited Partnership (a Delaware limited partnership) as of December 31, 1996 and
1995, and the related statements of operations, changes in partners' capital and
cash flows for each of the three years in the period ended December 31, 1996.
These financial statements and 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 Marriott Hotel Properties II
Limited Partnership as of December 31, 1996 and 1995, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index at Item
14(a)(2) is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not a required part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in our audit
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Washington, D.C.
March 13, 1997
22
<PAGE>
Statement of Operations
Marriott Hotel Properties II Limited Partnership
For the Years Ended December 31, 1996, 1995 and 1994
(in thousands, except per Unit amounts)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- --------
<S> <C> <C> <C>
REVENUES (Note 3)................................ $66,292 $64,002 $58,703
------- ------- -------
OPERATING COSTS AND EXPENSES
Interest........................................ 18,305 17,803 17,884
Depreciation and amortization................... 13,456 13,364 12,246
Incentive management fees....................... 9,813 9,412 8,507
Property taxes.................................. 5,208 5,526 5,307
Base management fees............................ 4,471 4,281 3,989
Ground rent, insurance and other................ 893 690 1,557
------- ------- -------
52,146 51,076 49,490
------- ------- -------
INCOME BEFORE EQUITY IN INCOME (LOSSES)
OF SANTA CLARA PARTNERSHIP...................... 14,146 12,926 9,213
EQUITY IN INCOME (LOSSES)
OF SANTA CLARA PARTNERSHIP...................... 665 119 (785)
------- ------- -------
NET INCOME....................................... $14,811 $13,045 $ 8,428
======= ======= =======
ALLOCATION OF NET INCOME
General Partner................................. $ 148 $ 130 $ 84
Limited Partners................................ 14,663 12,915 8,344
------- ------- -------
$14,811 $13,045 $ 8,428
======= ======= =======
NET INCOME PER LIMITED PARTNER UNIT (745 Units).. $19,682 $17,336 $11,200
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
Balance Sheet
Marriott Hotel Properties II Limited Partnership
December 31, 1996 and 1995
(in thousands)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
ASSETS
Property and equipment, net............................. $198,826 $203,990
Due from Marriott International, Inc.................... 7,447 7,275
Deferred financing and organization costs, net of
accumulated amortization............................... 5,932 114
Other assets............................................ 10,348 11,940
Restricted cash reserve................................. 12,815 9,193
Cash and cash equivalents............................... 16,372 21,601
-------- --------
$251,740 $254,113
======== ========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Mortgage debt........................................... $222,500 $222,500
Investment in Santa Clara Partnership................... 8,360 8,244
Due to Marriott International, Inc...................... 2,882 2,615
Accounts payable and accrued expenses................... 1,390 433
-------- --------
Total Liabilities...................................... 235,132 233,792
-------- --------
PARTNERS' CAPITAL
General Partner
Capital contribution, net of offering costs of $22..... 731 731
Capital distributions.................................. (811) (626)
Cumulative net income.................................. 391 243
-------- --------
311 348
-------- --------
Limited Partners
Capital contribution, net of offering costs of $8,426.. 64,689 64,689
Capital distributions.................................. (87,118) (68,779)
Cumulative net income.................................. 38,726 24,063
-------- --------
16,297 19,973
-------- --------
Total Partners' Capital................................ 16,608 20,321
-------- --------
$251,740 $254,113
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
Statement of Changes in Partners' Capital
Marriott Hotel Properties II Limited Partnership
For the Years Ended December 31, 1996, 1995 and 1994
(in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
-------- -------- --------
<S> <C> <C> <C>
Balance, December 31, 1993...................... $ 360 $ 21,121 $ 21,481
Capital distributions.......................... (113) (11,232) (11,345)
Net income..................................... 84 8,344 8,428
----- -------- --------
Balance, December 31, 1994...................... 331 18,233 18,564
Capital distributions.......................... (113) (11,175) (11,288)
Net income..................................... 130 12,915 13,045
----- -------- --------
Balance, December 31, 1995...................... 348 19,973 20,321
Capital distributions.......................... (185) (18,339) (18,524)
Net income..................................... 148 14,663 14,811
----- -------- --------
Balance, December 31, 1996...................... $ 311 $ 16,297 $ 16,608
===== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
25
<PAGE>
Statement of Cash Flows
Marriott Hotel Properties II Limited Partnership
For the Years Ended December 31, 1996, 1995 and 1994
(in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
--------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income..................................... $ 14,811 $ 13,045 $ 8,428
Noncash items:
Depreciation and amortization................. 13,456 13,364 12,246
Deferred incentive management fees............ 414 461 363
Equity in (income) losses of Santa Clara
Partnership.................................. (665) (119) 785
Amortization of deferred financing costs as
interest..................................... 206 489 489
Loss on retirement of assets.................. 27 10 113
Changes in operating accounts:
Due from Marriott International, Inc.......... (172) (426) 1,742
Accounts payable and accrued expenses......... 957 61 15
Other assets.................................. (223) -- --
Due to Marriott International, Inc............ (147) 123 (3,286)
--------- -------- --------
Cash provided by operating activities........ 28,664 27,008 20,895
--------- -------- --------
INVESTING ACTIVITIES
Additions to restricted cash reserve........... -- (6,346) (2,847)
Additions to restricted capital expenditure
reserve....................................... (8,137) -- --
Additions to property and equipment, net....... (8,300) (5,566) (6,542)
Change in property improvement funds........... 1,797 (1,341) 147
Distributions from Santa Clara Partnership..... 781 1,370 1,317
--------- -------- --------
Cash used in investing activities............ (13,859) (11,883) (7,925)
--------- -------- --------
FINANCING ACTIVITIES
Proceeds from mortgage loan.................... 222,500 -- --
Repayment of mortgage debt..................... (213,307) -- --
Capital distributions.......................... (18,524) (11,288) (11,345)
Payment of financing costs..................... (6,025) -- --
Additions to restricted debt service and
ground rent reserve........................... (4,678) -- --
--------- -------- --------
Cash used in financing activities............ (20,034) (11,288) (11,345)
--------- -------- --------
(DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS.................................... (5,229) 3,837 1,625
CASH AND CASH EQUIVALENTS at beginning of year.. 21,601 17,764 16,139
--------- -------- --------
CASH AND CASH EQUIVALENTS at end of year........ $ 16,372 $ 21,601 $ 17,764
========= ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for mortgage interest................ $ 17,173 $ 17,267 $ 17,361
========= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
26
<PAGE>
Notes to Financial Statements
Marriott Hotel Properties II Limited Partnership
December 31, 1996 and 1995
- --------------------------------------------------------------------------------
NOTE 1. THE PARTNERSHIP
Description of the Partnership
Marriott Hotel Properties II Limited Partnership (the "Partnership"), a Delaware
limited partnership, was formed to acquire, own and operate (i) the 1,290-room
New Orleans Marriott Hotel and underlying land in New Orleans, Louisiana (the
"New Orleans Hotel"); (ii) the 999-room Marriott Rivercenter Hotel in San
Antonio, Texas (the "San Antonio Hotel"); (iii) the 368-room Bishop Ranch
Marriott Hotel in San Ramon, California (the "San Ramon Hotel"); (collectively,
the "Hotels") and (iv) a 50% limited partner interest in the Santa Clara
Marriott Hotel Limited Partnership (the "Santa Clara Partnership"), a Delaware
limited partnership, which owns the 754-room Santa Clara Marriott Hotel in Santa
Clara, California (the "Santa Clara Hotel"). The remaining 50% interest in the
Santa Clara Partnership is owned by Marriott MHP Two Corporation (the "General
Partner") with a 1% interest, and HMH Properties, Inc., a wholly-owned indirect
subsidiary of Host Marriott (as defined below) with a 49% limited partner
interest.
On December 29, 1995, Host Marriott Corporation's operations were divided into
two separate companies: Host Marriott Corporation ("Host Marriott") and Host
Marriott Services Corporation. The sole general partner of the Partnership,
with a 1% interest, is MHP Two Corporation, a wholly-owned subsidiary of Host
Marriott. The General Partner made a capital contribution of $752,525 for its
1% general partner interest. On March 20, 1989 (the "Partnership Closing
Date"), 745 limited partner interests (the "Units"), representing a 99% interest
in the Partnership, were sold in a private placement. The offering price per
Unit was $100,000, payable in three annual installments through June 1, 1991
(the "Investor Notes"), or as an alternative, $89,247 in cash on the Partnership
Closing Date as full payment of the subscription price. On the Partnership
Closing Date, the Partnership executed purchase agreements (the "Purchase
Agreements") with Host Marriott to acquire the Hotels and the 50% limited
partner interest in the Santa Clara Partnership for $319.5 million. Of the
total purchase price, $222.5 million was paid from proceeds of the mortgage loan
(the "Original Mortgage Debt"), $43.4 million was evidenced by a promissory note
payable to Host Marriott (the "Deferred Purchase Note"), $43.5 million was paid
from a cash distribution by the Santa Clara Partnership and the remainder from
the initial payment on the sale of the Units. The principal outstanding on the
Deferred Purchase Note was fully repaid in 1991 with the proceeds of the
Investor Notes.
The New Orleans and San Antonio Hotels and the limited partner interest in the
Santa Clara Partnership were conveyed to the Partnership on the Partnership
Closing Date and the San Ramon Hotel was conveyed to the Partnership upon
completion of its construction on May 31, 1989. The Hotels and the Santa Clara
Hotel are managed by Marriott International, Inc. under long-term management
agreements. In conjunction with the refinancing of the Partnership's Mortgage
Debt described in Note 7, Marriott International, Inc. assigned all of its
interests in the management agreements to Marriott Hotel Services, Inc. (the
"Manager"), a wholly-owned subsidiary of Marriott International, Inc.
On June 13, 1996, MHPII Acquisition Corp. (the "Company"), a wholly-owned
subsidiary of Host Marriott, completed a tender offer for the limited
partnership Units in the Partnership. The Company purchased 377 Units for an
aggregate consideration of $56,550,000 or $150,000 per Unit. Subsequent to the
tender offer, the Company purchased an additional ten Units in the Partnership.
As a result of these transactions, the Company became the majority limited
partner in the Partnership, owning 387 Units or approximately 52% of the total
Units outstanding. Additionally, in a Partnership vote held in conjunction with
the tender offer, the limited partners approved certain amendments to the
Partnership Agreement that were conditions to the tender offer. The most
significant amendment (i) revised the provisions limiting the voting rights of
the General Partner and its affiliates to permit the General Partner and its
affiliates (including the Company) to have full voting rights with respect to
all Units currently held by the General Partner or acquired by its affiliates
except on matters where the General Partner or its affiliates have an actual
economic interest other than as a Limited Partner or General Partner
27
<PAGE>
- --------------------------------------------------------------------------------
(an "Interested Transaction"), and (ii) modified the voting provisions with
respect to Interested Transactions to permit action to be taken if approved by
limited partners holding a majority of the outstanding Units, with all Units
held by the General Partner and its affiliates being voted in the same manner as
a majority of the Units actually voted by limited partners other than the
General Partner and its affiliates. As a result of the approval of this and the
other minor amendments, the Partnership Agreement was amended and restated
effective June 14, 1996.
Partnership Allocations and Distributions
Pursuant to the terms of the Partnership Agreement, Partnership allocations, for
Federal income tax purposes, and distributions are generally made as follows:
a. Cash available for distribution is distributed for each fiscal year semi-
annually as follows: (i) 100% to the limited partners until the limited
partners have received with respect to such fiscal year a non-cumulative
10% preferred distribution on their Invested Capital, as defined; (ii) 100%
to the General Partner until the General Partner has received an amount
equal to 1/99th of the amount distributed to the limited partners; (iii) 1%
to the General Partner and 99% to the limited partners until such time as
the limited partners have received the 15% Preferred Distribution, as
defined, plus $50,000 per Unit, payable only from Capital Receipts, as
defined, to the extent available after the payment of the 15% Preferred
Distribution; and (iv) thereafter, 20% to the General Partner and 80% to
the limited partners.
b. Refinancing and sales proceeds ("Capital Receipts") available for
distribution to the partners will be distributed as follows: (i) 1% to the
General Partner and 99% to the limited partners until the limited partners
have received cumulative distributions from Capital Receipts equal to the
15% Preferred Distribution plus $100,000 per Unit; and (ii) 20% to the
General Partner and 80% to the limited partners.
c. Net profits generally will be allocated to the partners in proportion to
the distributions of cash available for distribution.
d. Net losses generally will be allocated 75% to the General Partner and 25%
to the limited partners.
e. Gains recognized by the Partnership will be allocated in the following
order of priority: (i) to all partners up to the amount necessary to bring
the limited partners' capital account balances to an amount equal to the
limited partners' 15% Preferred Distribution plus the limited partners'
Invested Capital and to bring the General Partner's capital account balance
to an amount equal to 1/99th of the capital account balance of the limited
partners; and (ii) 20% to the General Partner and 80% to the limited
partners.
For financial reporting purposes, profits and losses are generally allocated
among the partners based on their stated interests in cash available for
distribution.
28
<PAGE>
- --------------------------------------------------------------------------------
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The Partnership records are maintained on the accrual basis of accounting and
its fiscal year coincides with the calendar year.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Revenues and Expenses
Hotel revenues represent house profit of the Partnership's Hotels since the
Partnership has delegated substantially all of the operating decisions related
to the generation of house profit of the Hotels to the 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, ground rent, insurance and other costs, which are disclosed separately in
the statement of operations.
Property and Equipment
Property and equipment is recorded at cost. Depreciation is computed using the
straight-line method over the estimated useful lives as follows:
Land improvements 40 years
Building and improvements 30 to 40 years
Leasehold improvements 40 to 50 years
Furniture and equipment 3 to 10 years
All property and equipment is pledged as security against the Mortgage Debt
described in Note 7.
The Partnership assesses impairment of its real estate properties based on
whether estimated undiscounted future cash flows from such properties on an
individual hotel basis will be less than their net book value. If a property is
impaired, its basis is adjusted to fair market value.
Deferred Financing and Organization Costs
Deferred financing and organization costs consist of loan fees and legal and
accounting costs incurred in connection with obtaining Partnership financing and
the formation of the Partnership. As of December 31, 1995, the organization
costs were fully amortized and written off. Deferred financing costs totalling
$3,280,000 were fully amortized at March 21, 1996. Additional financing costs
of $6,025,000 were incurred in 1996 in connection with the refinancing of the
Partnership's mortgage loan. Financing costs are amortized using the straight-
line method, which approximates the effective interest
29
<PAGE>
- --------------------------------------------------------------------------------
method, over the 20 year loan term. At December 31, 1996 and 1995, accumulated
amortization of deferred financing and organization costs totalled $3,372,000
and $3,166,000, respectively.
Restricted Cash Reserve
In 1994 a restricted cash reserve consisting of funds generated in excess of an
annual 17.5% return on partners invested capital, as defined, was established in
an escrow account maintained by the lender. Through October of 1995, deposits
were made in conjunction with the bi-annual distributions to the limited
partners. At the time the mortgage debt matured on March 21, 1996, the
Partnership applied the balance in the reserve as of December 31, 1995,
$9,193,000, to the principal balance of the mortgage loan as a condition to the
extension of the loan agreement.
On September 23, 1996 the General Partner was successful in refinancing the
Partnership's mortgage debt. On this date, the Partnership was required to
establish certain reserves which are held by an agent of the lender including:
. $7.0 million for various renewals and replacements and site improvements;
. $1.1 million for Americans with Disabilities Act of 1990 modifications,
deferred maintenance work and environmental remediation projects identified
during the course of the appraisals and environmental studies undertaken in
conjunction with the refinancing;
. $4.5 million debt service reserve; and
. $155,000 ground rent reserve equal to one month of ground rent.
These reserves were primarily funded by using $12.2 million from the General
Partner Reserve and $634,000 from the Partnership and the Santa Clara
Partnership property improvement funds.
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.
Investment in Santa Clara Partnership
The Partnership's earnings from the Santa Clara Partnership are recorded based
on the equity method of accounting. Equity in earnings from the Santa Clara
Partnership includes 100% of the interest expense related to the debt incurred
by the Santa Clara Partnership, the proceeds of which were distributed to the
Partnership. The $28.4 million excess of the purchase price of the Santa Clara
Partnership interest over the Partnership's proportionate share of the net book
value of the assets acquired is being amortized over the related remaining lives
of those assets. Amortization is included in Equity in Income/(Losses) of Santa
Clara Partnership in the accompanying statement of operations. At December 31,
1996 and 1995, accumulated amortization of the excess purchase price of the
Santa Clara Partnership investment was $11,006,000 and $10,095,000,
respectively.
Prior to December 31, 1995, the Partnership was required to make capital
contributions to the Santa Clara Partnership if Santa Clara's debt service was
greater than its cash available for debt service, as defined. After December
31, 1995, capital contributions are required by the Partnership if Santa Clara's
debt service exceeds 50% of its cash available for debt service. No capital
contributions have been required as of December 31, 1996.
30
<PAGE>
- --------------------------------------------------------------------------------
Interest Rate Swap Agreements
As of December 31, 1995, the Partnership was a party to an interest rate swap
agreement to reduce the Partnership's exposure to floating interest rates. The
Partnership accounted for the swap arrangement as a hedge of an obligation to
pay floating rates of interest and accordingly, recorded interest expense based
upon its payment obligation at a fixed rate. This agreement terminated at the
initial maturity of the Partnership's mortgage loan on March 21, 1996.
Income Taxes
Provision for Federal and state income taxes has not been made in the
accompanying financial statements since the Partnership does not pay income
taxes but rather allocates its profits and losses to the individual partners.
Significant differences exist between the net income for financial reporting
purposes and the net income as reported in the Partnership's tax return. These
differences are due primarily to the use, for income tax purposes, of
accelerated depreciation methods and shorter depreciable lives of the assets and
differences in the timing of recognition of incentive management fee expense.
As a result of these differences, the (deficit)/excess of the net assets
reported in the accompanying financial statements over the tax basis in net
Partnership assets is $(87,918) and $38,000 as of December 31, 1996 and 1995,
respectively. Following the Company's acquisition of limited partner interests
in the Partnership in 1996, the Partnership under went a termination and
constructive liquidation for tax purposes. All partners were then deemed to
recontribute their assets to a newly reconstituted partnership. Upon
recontribution the Partnership recorded the fixed assets at their fair market
value, as represented by the Company's purchase price for limited partner units
resulting in a significant change in the 1996 tax basis when compared to the
prior year.
New Statement of Financial Accounting Standards
In the first quarter of 1996, the Partnership adopted Statement of Financial
Accounting Standards ("SFAS") No. 121 "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of". Adoption of SFAS No.
121 did not have an effect on its financial statements.
NOTE 3. REVENUES
Partnership revenues consist of the Hotels' operating results for the three
years ended December 31 (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---------- --------- --------
<S> <C> <C> <C>
HOTEL SALES
Rooms............................. $ 98,436 $ 93,292 $ 88,436
Food and beverage................. 42,427 42,198 37,972
Other............................. 8,171 7,215 6,548
-------- -------- --------
149,034 142,705 132,956
-------- -------- --------
HOTEL EXPENSES
Departmental direct costs
Rooms............................. 18,878 18,416 17,490
Food and beverage................. 30,496 28,975 26,338
Other hotel operating expenses.... 33,368 31,312 30,425
-------- -------- --------
82,742 78,703 74,253
-------- -------- --------
REVENUES........................... $ 66,292 $ 64,002 $ 58,703
======== ======== ========
</TABLE>
31
<PAGE>
- --------------------------------------------------------------------------------
NOTE 4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following as of December 31 (in
thousands):
<TABLE>
<CAPTION>
1996 1995
--------- --------
<S> <C> <C>
Land and improvements............. $ 17,091 $ 17,091
Building and improvements......... 105,382 105,374
Leasehold improvements............ 111,197 108,848
Furniture and equipment........... 61,206 55,335
-------- --------
294,876 286,648
Less accumulated depreciation..... (96,050) (82,658)
-------- --------
$198,826 $203,990
======== ========
</TABLE>
NOTE 5. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of financial instruments are shown below. The fair
values of financial instruments not included in this table are estimated to be
equal to their carrying amounts.
<TABLE>
<CAPTION>
As of December 31, 1996 As of December 31, 1995
----------------------- ------------------------
Estimated Estimated
Carrying Fair Carrying Fair
Amount Value Amount Value
--------- --------- --------- -----------
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Debt and other liabilities
Mortgage debt $ 222,500 $ 222,500 $ 222,500 $ 222,500
Incentive management fees due to Marriott
International, Inc. $ 2,578 $ 170 $ 2,164 $ 92
Other financial instruments
Interest rate swap ($222,500,000 notional amount) $ -- -- $ -- $ 581
</TABLE>
The 1996 estimated fair value of the mortgage debt obligation is based on the
expected future debt service payments discounted at risk adjusted rates.
Incentive management fees due are valued based on the expected future payments
from operating cash flow discounted at risk adjusted rates.
The fair value of the interest rate swap agreement was based on the estimated
amount the Partnership would pay to terminate the agreement.
32
<PAGE>
================================================================================
NOTE 6. SANTA CLARA PARTNERSHIP
Summarized financial information for the Santa Clara Partnership consists of the
following as of December 31:
<TABLE>
<CAPTION>
1996 1995
--------- --------
(in thousands)
<S> <C> <C>
Balance Sheet
- -------------
Property and equipment........................... $30,144 $ 28,406
Due from Marriott International, Inc............. 2,170 1,976
Other assets..................................... 1,230 1,614
Cash and cash equivalents........................ 1,933 1,614
------- --------
Total Assets.................................... $35,477 $ 33,610
======= ========
Mortgage debt.................................... $43,500 $ 43,500
Due to Marriott International, Inc............... 749 1,086
Accounts payable and accrued expenses............ 522 117
Partners' Deficit................................ (9,294) (11,093)
------- --------
Total Liabilities and Partners' Deficit......... $35,477 $ 33,610
======= ========
</TABLE>
<TABLE>
<CAPTION>
For the Years Ended December 31,
-----------------------------------
Statement of Operations 1996 1995 1994
- ----------------------- ------- ------- --------
(in thousands)
<S> <C> <C> <C>
REVENUES.................................. $17,347 $14,516 $ 12,131
------- ------- --------
OPERATING COSTS AND EXPENSES
Depreciation and amortization........... 2,927 2,765 2,359
Interest................................ 3,318 3,063 2,295
Incentive management fees............... 2,652 2,175 1,761
Base management fees.................... 1,224 1,079 967
Property taxes.......................... 499 508 501
Ground rent, insurance and other........ 264 201 270
------- ------- --------
10,884 9,791 8,153
- ------------------------------------------ ------- ------- --------
NET INCOME................................ $ 6,463 $ 4,725 $ 3,978
======= ======= ========
</TABLE>
33
<PAGE>
- --------------------------------------------------------------------------------
NOTE 7. DEBT
Mortgage Debt
As of December 31, 1995, the Partnership's debt consisted of a $222.5 million
mortgage loan (the "Original Mortgage Debt"). The Original Mortgage Debt was
nonrecourse to the Partnership and was secured by a first mortgage on each of
the Hotels including the grant of a security interest in the Partnership's
furniture, fixtures and equipment, contracts and other intangibles and an
assignment of the Partnership's rights under the Management and Purchase
Agreements.
At the option of the Partnership, the Original Mortgage Debt loan agreement
provided for interest rate options which were tied to a Eurodollar rate, an
adjusted CD rate or the fluctuating corporate base rate. For Eurodollar or CD
elections, the Partnership paid the applicable rate plus an increment equal to
0.9 basis points. In April 1992, the Partnership entered into an interest rate
swap agreement for the entire loan amount with the primary lender to effectively
fix the interest rate on the Original Mortgage Debt at 7.8% per annum from May
1992 through loan maturity. The Partnership's obligations under the swap
agreement were secured by a pledge of collateral by the General Partner. The
weighted average interest rate on the Original Mortgage Debt for the two years
in the period ended December 31, 1995 was 7.8%.
On March 21, 1996, the Original Mortgage Debt and the Santa Clara mortgage debt
matured at which time the lender granted the Partnership an extension of the two
loans for an additional six months until replacement financing could be
finalized with another lender. Under the terms of the extension, interest
accrued at the London interbank offered rate ("LIBOR") plus 187.5 basis points
for the first three months and accrued at LIBOR plus 225.0 basis points for the
second three months. No principal amortization was required during the
extension period. However, under the terms of the extension, the Partnership
applied the $9.2 million accumulated in the primary lender reserve account to
pay down the principal balance of the Original Mortgage Debt to $213.3 million
and deposited $19.1 million into the primary lender reserve account. The
primary lender reserve account was established in 1994 to provide funds for a
principal paydown on the Original Mortgage Debt at maturity. The $19.1 million
deposit represented the balance ($16.8 million) from the unrestricted reserve
account included in cash in the accompanying balance sheet as of December 31,
1995, previously established by the General Partner in 1992 (the "General
Partner Reserve") and cash flow from the Partnership for the first two periods
of 1996 ($2.3 million). During the extension period, the Partnership also was
required to deposit into the primary lender reserve account all cash flow from
the Hotels plus all the Partnership's cash flow from the Santa Clara
Partnership, net of (i) $500,000 per accounting period, (ii) debt service and
(iii) current incentive management fees paid. The $500,000 per accounting
period was deposited into a separate expense reserve account which was used by
the Partnership to fund administrative expenses and refinancing costs, any owner
funded capital expenditures, as well as the Partnership's share of any such
costs incurred by the Santa Clara Partnership during the six month extension
period.
On September 23, 1996 (the "Closing Date"), the General Partner was successful
in refinancing the Partnership's Original Mortgage Debt, as well as the $43.5
million mortgage debt of the Santa Clara Partnership. A total of $266.0 million
was borrowed from a new third party lender, $222.5 million of which is recorded
on the Partnership's financial statements (the "Mortgage Debt"). The
Partnership's Mortgage Debt is nonrecourse to the Partnership and is secured by
first mortgages on the Hotels, as well as a pledge of its limited partner
interest in the Santa Clara Partnership. The two loans are cross-defaulted.
The debt bears interest at a fixed rate of 8.22% based upon actual number of
days over a 360 day year for an 11-year term expiring October 11, 2007, requires
payments of interest only during the first loan year (October 1996 through
September 1997) and then principal amortization based upon a 20-year
amortization schedule beginning with the second loan year. Additionally, the
refinancing substantially restricts the ability of the Partnership to sell the
Hotels during such term and prohibits the Partnership from prepaying any debt
for an extended period without paying a substantial premium during
34
<PAGE>
- --------------------------------------------------------------------------------
such term. The weighted average interest rate on the Mortgage Debt for the year
ended December 31, 1996 was 7.7%. On the Closing Date, the Partnership was
required to establish certain reserves which were discussed in Note 2.
The required principal payments of the Mortgage Debt at December 31, 1996 are as
follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1997....................... $ 738
1998....................... 4,643
1999....................... 5,040
2000....................... 5,470
2001....................... 5,937
Thereafter................. 200,672
--------
$222,500
========
</TABLE>
NOTE 8. LAND LEASES
The San Antonio and San Ramon Hotels are located on sites with ground leases
from unrelated third parties. The initial lease terms expire in 2013 and 2014,
respectively. To facilitate the refinancing, the Partnership exercised its
option to extend the land leases of both properties for an additional twenty-
year period. Therefore, the current terms of the San Antonio and San Ramon land
leases expire in 2033 and 2034, respectively. The Partnership is obligated to
pay annual rent equal to the greater of a minimum rent or a percentage rent and
has the option to extend the terms for up to three successive ten-year terms
each. Ground rent on the San Antonio Hotel is equal to the greater of $700,000
or 3.5% of annual gross room sales. Ground rent on the San Ramon Hotel is equal
to the greater of $350,000 or 3% of annual gross sales for the first five years,
after which minimum rent will be adjusted upward every five years, beginning in
1989, to an amount equal to 75% of the average rent paid during the three years
immediately preceding the applicable five-year period. Ground rent expense for
the San Antonio and San Ramon Hotels totalled $1,982,000, $1,879,000 and
$1,746,000, for the years ended December 31, 1996, 1995, and 1994, respectively.
Future minimum annual rental commitments for all land leases entered into by the
Partnership, as described above, are as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal Year Land Leases
----------- -----------
<S> <C>
1997 $ 1,050
1998 1,050
1999 1,050
2000 1,050
2001 1,050
Thereafter 33,950
-------
Total Minimum Lease Payments $39,200
=======
</TABLE>
NOTE 9. MANAGEMENT AGREEMENTS
The Partnership entered into long-term hotel management agreements (the
"Management Agreements") with the Manager to manage the Hotels as part of the
Marriott International, Inc. full-service hotel system. The Management
Agreement for each Hotel has an initial term expiring on December 31, 2008. To
facilitate the refinancing, the Manager exercised its option
35
<PAGE>
- --------------------------------------------------------------------------------
to renew the Management Agreements for each Hotel for an additional 10-year
term. Therefore, the current terms of the Management Agreements for each Hotel
expire on December 31, 2018. This, as well as the assignment of the Management
Agreements described in Note 1, and other minor changes were documented in an
amendment to each of the Management Agreements. The Manager has the option to
renew the Management Agreements for up to three additional 10-year terms. The
Manager also manages the Santa Clara Hotel on behalf of the Santa Clara
Partnership. The Manager is paid a base management fee equal to 3% of gross
hotel sales. Base management fees paid in 1996, 1995 and 1994 were $4,471,000
and $4,281,000 and $3,989,000, respectively.
In addition, the Manager is entitled to an incentive management fee equal to 20%
of each Hotel's Operating Profit, as defined. The incentive management fee with
respect to each Hotel is payable only out of 55% of each Hotel's Operating
Profit after the Partnership's payment or retention for such fiscal year of the
following: (i) the Ground Rent, if any, with respect to such Hotel; (ii) the
Qualifying Debt Service, as defined, with respect to such Hotel; (iii) such
Hotel's Pro-Rata Share of Total Mortgage Debt Service Shortfall, as defined, if
any, with respect to all Hotels; (iv) the Partnership's non-cumulative 10%
Priority Return on the Adjusted Contributed Capital, as defined, with respect to
such Hotel; (v) through December 31, 1991, such Hotel's Pro-Rata Share of Total
Equity Priority Shortfall, if any, with respect to all Hotels; and (vi) through
December 31, 1992, such Hotel's pro-rata share of required repayments of any
outstanding advances and accrued interest thereon under the Debt Service
Guarantee.
Through 1991, the Manager was not entitled to accrue any unpaid incentive
management fees. Beginning in 1992, unpaid incentive management fees are
accrued without interest and are paid from cash flow available for incentive
management fees following payment of any then current incentive management fees.
Incentive management fees earned for the years ended December 31, 1996, 1995 and
1994 were $9,813,000, $9,412,000 and $8,507,000, respectively. Deferred
incentive management fees for the years ended December 31, 1996 and 1995 were
$2,578,000 and $2,164,000, respectively, and are included in Due to Marriott
International, Inc. in the accompanying balance sheet.
Pursuant to the Management Agreements, the Manager is required to furnish the
Hotels with certain services ("Chain Services") which are generally provided on
a central or regional basis to all hotels in the Manager's full-service hotel
system. Chain Services include central training, advertising and promotion, a
national reservations system, computerized payroll and accounting services and
such additional services as needed which may be more efficiently performed on a
centralized basis. Costs and expenses incurred in providing such services are
allocated among all domestic full-service hotels managed, owned or leased by the
Manager or its subsidiaries. In addition, the Hotels also participate in the
Manager's Honored Guest Awards Program ("HGA"). The cost of this program is
charged to all hotels in the Manager's full-service hotel system based upon the
HGA sales at each hotel. The total amount of Chain Services and HGA costs
charged to the Partnership for the years ended December 31, 1996, 1995 and 1994
were $5,433,000, $5,151,000 and $4,448,000, respectively, and are included in
Revenues (as defined in Note 3) in the accompanying statement of operations.
The Management Agreements provide for the establishment of a property
improvement fund for each Hotel to cover the cost of certain non-routine repairs
and maintenance to the Hotels which are normally capitalized and the cost of
replacements and renewals to the Hotels' property and improvements.
Contributions to the property improvement fund are based on a percentage of
gross sales. In the case of the San Antonio Hotel, contributions to the
property improvement fund are 4% in 1991 through 1998 and 5% thereafter.
Contributions to the property improvement fund for the San Ramon Hotel are 4% in
1994 through 1998 and 5% in 1999. Contributions to the property improvement
fund for the New Orleans Hotel are 5% each year. Commencing with fiscal year
2003, the Manager shall have the right, but not the obligation, to increase the
amount it transfers into the fund to any amount greater than 5% but not
exceeding 6% of gross sales. Total contributions
36
<PAGE>
- --------------------------------------------------------------------------------
to the property improvement fund for the years ended December 31, 1996, 1995 and
1994 were $6,622,000, $6,342,000 and $5,935,000, respectively.
Pursuant to the terms of the Management Agreements, the Partnership is required
to provide the Manager with working capital and supplies to meet the operating
needs of the Hotels. 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 any of the Management
Agreements, the working capital and supplies of the related Hotel will be
returned to the Partnership. The individual components of working capital and
supplies controlled by the Manager are not reflected in the Partnership's
balance sheet. As of December 31, 1996 and 1995, $6,633,000 has been advanced
to the Manager for working capital and supplies which is included in Due from
Marriott International, Inc. in the accompanying balance sheet. The supplies
advanced to the Manager are recorded at their estimated net realizable value.
Each of the Management Agreements also provides that the Partnership may
terminate any of the Management Agreements and remove the Manager if, during any
three consecutive fiscal years after fiscal year 1992, with respect to any
Hotel, the sum of the operating profit before real and personal property taxes,
fails to equal or exceed 8% of the sum of the original cost of the Hotel plus
certain additional hotel investments by the Partnership. The Manager may,
however, prevent termination by paying to the Partnership such amounts as are
necessary to achieve the above performance standards.
37
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership has no directors or officers. The business policy making
functions of the Partnership are carried out through the directors and executive
officers of Marriott MHP Two Corporation, the General Partner, who are listed
below:
<TABLE>
<CAPTION>
Age at
Name Current Position December 31, 1996
- --------------------------- -------------------------------- -----------------
<S> <C> <C>
Bruce F. Stemerman President and Director 41
Patricia K. Brady Vice President and Chief
Accounting Officer 35
Christopher G. Townsend Vice President, Director and
Assistant Secretary 49
Bruce D. Wardinski Treasurer 36
</TABLE>
Business Experience
Bruce F. Stemerman was elected President of the General Partner in November
1995. He has been a Director General Partner since October 1993 and was Chief
Accounting Officer of the General Partner, as well as Vice President--Finance
from October 1993 to November 1995. Mr. Stemerman joined Host Marriott in 1989
as Director--Partnership Services. He was promoted to Vice President--Lodging
Partnerships in 1994 and became Senior Vice President--Asset Management in 1996.
Prior to joining Host Marriott, Mr. Stemerman spent ten years with Price
Waterhouse. He also serves as a director and an officer of numerous Host
Marriott subsidiaries.
Patricia K. Brady was appointed to Vice President and Chief Accounting Officer
of the General Partner on October 8, 1996. Ms. Brady joined Host Marriott in
1989 as Assistant Manager--Partnership Services. She was promoted to Manager in
1990 and to Director--Partnership Services in June 1996. She also serves as an
officer of numerous Host Marriott subsidiaries.
Christopher G. Townsend has been Vice President, Director, Assistant Secretary
of the General Partner since September, 1988. Mr. Townsend joined Host
Marriott's Law Department in 1982 as a Senior Attorney. In 1984, Mr. Townsend
was made Assistant Secretary of Host Marriott and in 1986 was made Assistant
General Counsel. In 1993, he was made Senior Vice President, Corporate
Secretary and Deputy General Counsel of Host Marriott. In January 1997, he was
made General Counsel of Host Marriott. He also serves as a director and an
officer of numerous Host Marriott subsidiaries.
Bruce D. Wardinski was elected Treasurer of the General Partner in 1996. Mr.
Wardinski joined Host Marriott in 1987 as a Senior Financial Analyst of
Financial Planning & Analysis, and was named Manager in June, 1988. He was
appointed Director, Financial Planning & Analysis in 1989, Director of Project
Finance in January 1990. Senior Director of Project Finance in June, 1993, Vice
President, Project Finance in June, 1994, and Senior Vice President of
International Development in October, 1995. In June, 1996, Mr. Wardinski was
named Senior Vice President and Treasurer of Host Marriott.
38
<PAGE>
ITEM 11. MANAGEMENT REMUNERATION AND TRANSACTIONS
As noted in Item 10 above, the Partnership has no directors or officers nor does
it have any employees. Under the Partnership Agreement, however, the General
Partner has the exclusive right to conduct the business and affairs of the
Partnership subject only to the Management Agreement described in Items 1 and
13. The General Partner is required to devote to the Partnership such time as
may be necessary for the proper performance of its duties, but the officers and
the directors of the General Partner are not required to devote their full time
to the performance of such duties. No officer or director of the General
Partner devotes a significant percentage of time to Partnership matters. To the
extent that any officer or director does devote time to the Partnership, the
General Partner is entitled to reimbursement for the cost of providing such
services. Any such costs may include a charge for overhead, but without a
profit to the General Partner. For the fiscal years ending December 31, 1996,
1995 and 1994, administrative expenses reimbursed to the General Partner totaled
$225,000, $89,000 and $169,000, respectively for the cost of providing all
administrative and other services as General Partner. For information regarding
all payments made by the Partnership to Host Marriott and subsidiaries, see Item
13, "Certain Relationships and Related Transactions".
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The General Partner owns a total of 5.0 Units representing a 0.67% limited
partnership interest in the Partnership. MHPII Acquisition Corp., a wholly-
owned subsidiary of Host Marriott, owns a total of 387 Units representing a
51.9% limited partnership interest.
There are no Units owned by the executive officers and directors of the General
Partner, as a group.
There are no Units owned by the executive officers and directors of MII, as a
group.
There are no Units owned by individuals who are directors of both the General
Partner and MII.
39
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Management Agreements
The Partnership entered into long-term hotel management agreements (the
"Management Agreements") with the Manager to manage the Hotels as part of the
Marriott International, Inc. full-service hotel system. The Management
Agreement for each Hotel had an initial term expiring on December 31, 2008. To
facilitate the refinancing, the Manager exercised its option to renew the
Management Agreements for each Hotel for an additional 10-year term. Therefore,
the current terms of the Management Agreements for each Hotel expire on December
31, 2018. This, as well as the assignment of the Management Agreements
described in Item 1, "Description of the Partnership", and other minor changes
were documented in an amendment to each of the Management Agreements. The
Manager has the option to renew the Management Agreements for up to three
additional 10-year terms. The Manager also manages the Santa Clara Hotel on
behalf of the Santa Clara Partnership. The Manager is paid a base management
fee equal to 3% of gross hotel sales. Base management fees paid in 1996, 1995
and 1994 were $4,471,000 and $4,281,000 and $3,989,000, respectively.
In addition, the Manager is entitled to an incentive management fee equal to 20%
of each Hotel's Operating Profit, as defined. The incentive management fee with
respect to each Hotel is payable only out of 55% of each Hotel's Operating
Profit after the Partnership's payment or retention for such fiscal year of the
following: (i) the Ground Rent, if any, with respect to such Hotel; (ii) the
Qualifying Debt Service, as defined, with respect to such Hotel; (iii) such
Hotel's Pro-Rata Share of Total Mortgage Debt Service Shortfall, as defined, if
any, with respect to all Hotels; (iv) the Partnership's non-cumulative 10%
Priority Return on the Adjusted Contributed Capital, as defined, with respect to
such Hotel; (v) through December 31, 1991, such Hotel's Pro-Rata Share of Total
Equity Priority Shortfall, if any, with respect to all Hotels; and (vi) through
December 31, 1992, such Hotel's pro-rata share of required repayments of any
outstanding advances and accrued interest thereon under the Debt Service
Guarantee.
Through 1991, the Manager was not entitled to accrue any unpaid incentive
management fees. Beginning in 1992, unpaid incentive management fees ("Deferred
Incentive Management Fees") accrue without interest and are paid from cash flow
available for incentive management fees following payment of any then current
incentive management fees. In the event that nay Deferred Incentive Management
Fees with respect to a Hotel remains unpaid at the time of sale of such Hotel
(or interest therein), then such Deferred Incentive Management Fee is paid, pro
rata with the placement agents' disposition fee, with respect to such Hotel, out
of 55% of sale proceeds, remaining after the Partnership's repayment or
retention of the following: (i) all qualifying debt, with respect to such
Hotel, (ii) any outstanding advances and accrued interest thereon under the
Santa Clara debt service advances, (iii) the Partnership's cumulate annual 15%
priority return, with respect to such Hotel, and (iv) the adjusted contributed
capital, with respect to such Hotel. As of December 31, 1996, Deferred
Incentive Management Fees were $2,578,000.
The Manager is required to furnish the Hotels with certain services ("Chain
Services") which are generally provided on a central or regional basis to all
hotels in the Manager's full-service 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 domestic full-service 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.
40
<PAGE>
The following table sets forth the amounts paid to the Manager for the three
years ended December 31, 1996, 1995 and 1994 (in thousands). The table also
includes accrued but unpaid incentive management fees:
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Base management fees................. $ 4,471 $ 4,281 $ 3,989
Chain services and HGA costs......... 5,433 5,151 4,748
Incentive management fees............ 9,415 8,827 11,129
------- ------- -------
Total paid.......................... $19,319 $18,259 $19,866
======= ======= =======
Accrued but unpaid incentive
management fees..................... $ 414 $ 461 $ 363
======= ======= =======
</TABLE>
The Management Agreements provide for the establishment of a property
improvement fund for each Hotel to cover the cost of certain non-routine repairs
and maintenance to the Hotels which are normally capitalized and the cost of
replacements and renewals to the Hotels' property and improvements.
Contributions to the property improvement fund are based on a percentage of
gross sales. Contributions to the property improvement fund by property are as
follows: San Antonio Hotel, 4% for the period 1994 through 1998, and 5%
thereafter; San Ramon Hotel, 4% for the period 1994 through 1998 and 5%
thereafter; New Orleans, 5%. Commencing with fiscal year 2003, the Manager
shall have the right, but not the obligation, to increase the amount it
transfers into the fund to any amount greater than 5% but not exceeding 6% of
gross sales.
Pursuant to the Management Agreements, the Partnership provided the Manager with
working capital and supplies to meet the operating needs of the Hotels. This
advance bears no interest and remains the property of the Partnership throughout
the term of the Management Agreements. The Partnership is required to advance
upon the request of the Manager any additional funds necessary to maintain
working capital and supplies at levels determined by the Manager to be necessary
to satisfy the needs of the Hotels as their operations may require from time to
time. Upon termination of the Management Agreements, the Manager will return to
the Partnership any unused working capital and supplies. At the inception of
the Partnership, $6.9 million was advanced to the Manager for working capital
and supplies, of which $250,000 was returned to the Partnership in 1991.
Each of the Management Agreements also provides that the Partnership may
terminate any of the Management Agreements and remove the Manager if, during any
three consecutive fiscal years after fiscal year 1992, with respect to any
Hotel, the sum of the operating profit before real and personal property taxes,
fails to equal or exceed 8% of the sum of the original cost of the Hotel plus
certain additional hotel investments by the Partnership. The Manager may,
however, prevent termination by paying to the Partnership such amounts as are
necessary to achieve the above performance standards.
Santa Clara Hotel Management Agreement
The Santa Clara Hotel Management Agreement provides for an initial 20-year term
expiring on December 31, 2008. To facilitate the refinancing of the Santa Clara
Mortgage Debt, the Manager exercised its option to renew the Management
Agreement for an additional 10-year term. Therefore, the current term of the
Management Agreement expires on December 31, 2018. This, as well as the
assignment of the Management Agreements described in Item 1, "Description of the
Partnership", and other minor changes were documented in an amendment to the
Santa Clara Management Agreement. The Manager has the option to renew the Santa
Clara Hotel Management Agreement for up to three additional 10-year terms.
41
<PAGE>
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
Hotel operating profit. The incentive management fee is payable only out of 55%
of Hotel operating profit after payments of ground rent and 200% of each of the
following: (i) qualifying debt service; (ii) the pro-rata share of total debt
service shortfall; and (iii) the Santa Clara Partnership's 10% priority return.
Through 1991, the Manager was not entitled to any unpaid incentive management
fees. Beginning in 1992, unpaid incentive management fees ("Deferred Incentive
Management Fees") accrue without interest and are paid from cash flow available
for incentive management fees following payment of any then current incentive
management fees. Deferred Incentive Management Fees would be payable upon the
sale of the Santa Clara Hotel in a manner similar to the Partnership's payment
of Deferred Incentive Management Fees upon sale of the Hotels. Deferred
Incentive Management Fees at December 31, 1996 were $577,000.
The Manager is required to furnish the Santa Clara Hotel with Chain Services.
Costs and expenses incurred in providing the Chain Services are allocated as
described above with the Hotels.
The following table sets forth the amounts paid to the Manager for the three
years ended December 31, 1996, 1995 and 1994 (in thousands). The table also
includes accrued but unpaid incentive management fees:
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Base management fees................................. $1,755 $1,079 $ 967
Chain services and HGA costs......................... 1,224 1,537 1,354
Incentive management fees............................ 2,951 1,556 1,603
------ ------ -------
Total paid.......................................... $5,930 $4,172 $3,924
====== ====== ======
Accrued but unpaid incentive
management fees..................................... $ $ 303 $ 189
====== ====== =======
</TABLE>
The Santa Clara Hotel Management Agreement also provides for the establishment
of a property improvement fund for the Santa Clara Hotel to cover the cost of
certain non-routine repairs and maintenance to the Santa Clara Hotel which are
normally capitalized and the cost of replacements and renewals to the Santa
Clara Hotel's property and improvements. Contributions to the property
improvement fund are equal to 5% of gross Hotel sales. Commencing with fiscal
year 2003, the Manager shall have the right, but not the obligation, to increase
the amount it transfers into the fund to any amount greater than 5% but not
exceeding 6% of gross Hotel sales.
Pursuant to the terms of the Santa Clara Hotel Management Agreement, the Santa
Clara Partnership is provided the Manager with working capital to meet the
operating needs of the Hotel. This advance bears no interest and remains the
property of the Santa Clara Partnership throughout the term of the Santa Clara
Management Agreement. The Santa Clara Partnership is required to advance upon
request of the Manager any additional funds necessary to maintain working
capital and supplies at levels determined by the Manager to be necessary to
satisfy the needs of the Santa Clara Hotel as its operations may require from
time to time. Upon termination of the Santa Clara Management Agreement, the
Manager will return to the Santa Clara Partnership any unused working capital
and supplies. At its inception, the Santa Clara Partnership advanced $1.4
million the Manager for working capital and supplies.
42
<PAGE>
The Santa Clara Hotel Management Agreement provides that the Santa Clara
Partnership may terminate the Santa Clara Management Agreement and remove the
Manager if, during any three consecutive fiscal years after fiscal year 1992,
the sum of the operating profit before real and personal property taxes, fails
to equal or exceed 8% of the sum of $96 million plus certain additional Hotel
Investments by the Santa Clara Partnership. The Manager may, however, prevent
termination by paying to the Santa Clara Partnership such amounts as are
necessary to achieve the above performance standards.
43
<PAGE>
PART IV
ITEM 14. EXHIBITS, SUPPLEMENTAL FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
(a) List of Documents Filed as Part of This Report
(1) Financial Statements
All financial statements of the registrant as set forth under Item 8
of this Report on Form 10-K.
(2) Financial Statement Schedules
The following financial information is filed herewith on the pages
indicated.
III. Real Estate and Accumulated Depreciation
All other schedules are omitted because they are not applicable or the required
information is included in the consolidated financial statements or notes
thereto.
<TABLE>
<CAPTION>
(3) Exhibits
Exhibit
Number Description
================ ===================================
<S> <C>
3.1 Second Amended and Restated
Agreement of Limited Partnership
of Marriott Hotel Properties II
Limited Partnership dated June 14,
1996
10 1 Loan Agreement between Marriott
Hotel Properties II Limited
Partnership and Nomura Asset
Capital Corporation dated as of
September 23, 1996
10.2 Loan Agreement between Santa Clara
Marriott Hotel Limited Partnership
and Nomura Asset Capital
Corporation dated as of September
23, 1996
10.3 Secured Promissory Note made by
Marriott Hotel Properties II
Limited Partnership to Nomura
Asset Capital Corporation dated
September 23, 1996
10.4 Secured Promissory Note made by
Marriott Hotel Properties II
Limited Partnership to Nomura
Asset Capital Corporation dated
September 23, 1996
10.5 Secured Promissory Note made by
Marriott Hotel Properties II
Limited Partnership and Santa
Clara Marriott Hotel Limited
Partnership to Nomura Asset
Capital Corporation dated
September 23, 1996
10.6 Modification, Subordination and
Non-Disturbance Agreement,
Estoppel, Assignment and Consent
(Marriott Rivercenter Hotel, San
Antonio, Texas) between Marriott
Hotel Services, Inc., Nomura Asset
Capital Corporation and Marriott
Hotel Properties II Limited
Partnership dated as of September
23, 1996
</TABLE>
44
<PAGE>
Exibit
Number Description
- ------ -----------------------------------------------------
10.7 First Amendment to Management Agreement (San Antonio
Marriott Hotel) by Marriott Hotel Properties II
Limited Partnership and Marriott Hotel Services,
Inc. dated September 23, 1996
10.8 Deed of Trust, Assignment of Leases, Security
Agreement and Fixture Filing (San Ramon First Deed
of Trust) by Marriott Hotel Properties II Limited
Partnership in favor of Commonwealth Land Title
Insurance Company of California for the benefit of
Nomura Asset Capital Corporation dated as of
September 23, 1996 in the amount of $222,500,000
10.9 Deed of Trust, Assignment of Leases, Security
Agreement and Fixture Filing (San Ramon Second Deed
of Trust) by Marriott Hotel Properties II Limited
Partnership in favor of Commonwealth Land Title
Insurance Company of California for the benefit of
Nomura Asset Capital Corporation dated as of
September 23, 1996 in the amount of $43,500,000
10.10 Deed of Trust, Assignment of Leases, Security
Agreement and Fixture Filing (Santa Clara Deed of
Trust) by Santa Clara Marriott Hotel Limited
Partnership in favor of Commonwealth Land Title
Insurance Company of California for the benefit of
Nomura Asset Capital Corporation dated as of
September 23, 1996 in the amount of $43,500,000
10.11 Schedule Identifying Documents Omitted
(b) REPORTS ON FORM 8-K
Form 8-K dated June 24, 1996 was filed on June 24, 1996.
45
<PAGE>
SCHEDULE III
MARRIOTT HOTEL PROPERTIES II LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1996
(in thousands)
<TABLE>
<CAPTION>
Initial Costs Gross Amount at December 31, 1996
------------------------------------------ --------------------------------------
Building & Subsequent Buildings &
Land & Leasehold Costs Land & Leasehold
Encumbrances Improvements Improvements Capitalized Improvements Improvements Total
------------ ------------ ------------ ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
San Antonio -- $ 1,393 $ 83,010 $3,297 $ 2,486 $ 85,214 $ 87,700
New Orleans -- 13,574 103,326 4,928 12,560 109,268 121,828
San Ramon -- 1,991 21,174 977 2,046 22,096 24,142
-------- -------- -------- -------- -------- -------- --------
Total $222,500 $ 16,958 $207,510 $9,202 $17,092 $216,578 $233,670
======== ======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Date of
Accumulated Completion of Date Depreciation
Depreciation Construction Acquired Life
------------ ------------- -------- ------------
<S> <C> <C> <C> <C>
San Antonio $ 17,428 1988 1989 30 to 50 years
New Orleans 30,359 1972 1989 30 to 50 years
San Ramon 4,729 1989 1989 30 to 50 years
----------
Total $ 52,516
==========
</TABLE>
<TABLE>
<CAPTION>
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Notes:
(a) Reconciliation of Real Estate:
Balance at beginning of year............... $227,596 $229,754 $231,313
Capital Expenditures..................... 2,158 1,559 2,357
Dispositions............................. -- -- --
-------- -------- --------
Balance at end of year..................... $229,754 $231,313 $233,670
======== ======== ========
(b) Reconciliation of Accumulated Depreciation:
Balance at beginning of year.............. $30,808 $37,712 $44,971
Depreciation........................... 6,904 7,259 7,545
Dispositions........................... -- -- --
------- -------- --------
Balance at end of year.................... $37,712 $44,971 $52,516
======= ======= =======
</TABLE>
(c) The aggregate cost of land, building and leasehold improvements for Federal
income tax purposes is approximately $217,901 at December 31, 1996.
(d) All of the Hotels are pledged as collateral for the Partnership's mortgage
debt for $222.5 million as of December 31, 1996.
46
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has duly caused this Form 10-K to be signed on its
behalf by the undersigned, thereunto duly authorized, on March 31, 1997.
MARRIOTT HOTEL PROPERTIES II LIMITED PARTNERSHIP
By: MARRIOTT MHP TWO CORPORATION
General Partner
By: /s/ Bruce F. Stemerman
----------------------
Bruce F. Stemerman
President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on March 31, 1997.
Signature Title
- --------- -----
MARRIOTT MHP TWO CORPORATION
/s/ Bruce F. Stemerman
- ----------------------------
Bruce F. Stemerman President and Director
/s/ Patricia K. Brady
- ----------------------------
Patricia K. Brady Vice President and Chief Accounting Officer
/s/ Christopher G. Townsend
- ----------------------------
Christopher G. Townsend Vice President, Director and Assistant Secretary
/s/ Bruce D. Wardinski
- ----------------------------
Bruce D. Wardinski Treasurer
47
<PAGE>
Exhibit 3.1
SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
MARRIOTT HOTEL PROPERTIES II
LIMITED PARTNERSHIP
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE ONE--DEFINED TERMS....................................................1
ARTICLE TWO--FORMATION, NAME, PLACE OF BUSINESS, PURPOSE AND
TERM....................................................................9
Section 2.01 Formation..................................................9
Section 2.02 Name and Offices...........................................9
Section 2.03 Purposes...................................................9
Section 2.04 Term.......................................................9
Section 2.05 Registered Agent for Service of Process....................9
Section 2.06 Certificate of Limited Partnership........................10
ARTICLE THREE--PARTNERS AND CAPITAL..........................................10
Section 3.01 General Partner...........................................10
Section 3.03 Limited Partners..........................................10
Section 3.04 Capital Contributions by General Partner..................10
Section 3.05 Capital Contributions by Limited Partners.................10
Section 3.06 Partnership Capital.......................................14
Section 3.07 Additional Issuances of Units and Capital
Contributions.................................................14
Section 3.08 Liability of the Limited Partners.........................14
Section 3.09 Liability of the General Partner..........................15
Section 3.10 Initial Working Capital Reserve...........................15
ARTICLE FOUR--ALLOCATIONS OF PROFITS AND LOSSES; DISTRIBUTIONS OF CASH
AND CERTAIN PROCEEDS...................................................16
Section 4.01 Allocation of Net Profits.................................16
Section 4.02 Allocation of Net Losses..................................16
Section 4.03 Allocations of Gain and Loss..............................16
Section 4.04 Allocation Among Limited Partners of Net Profits,
Gains, Net Losses and Losses..................................17
Section 4.05 Allocation of Recapture Income............................17
Section 4.06 Distribution of Cash Available for
Distribution..................................................17
Section 4.07 Distribution of Refinancing
Proceeds......................................................18
Section 4.08 Distribution of Sale
Proceeds......................................................18
Section 4.09 Distribution Among Limited Partners of Cash Available for
Distribution, Refinancing Proceeds and Sale Proceeds..........19
Section 4.10 Section 754 Adjustments...................................19
Section 4.11 Special Allocations.......................................19
Section 4.12 Operating Rules...........................................21
Section 4.13 Minimum Interest of the General Partner...................22
ARTICLE FIVE--RIGHTS, POWERS AND DUTIES OF THE GENERAL PARTNER..............22
Section 5.01 Authority of the General Partner to Manage the
Partnership...................................................22
Section 5.02 Restrictions on Authority of the General
Partner.......................................................25
Section 5.03 Duties and Obligations of the General Partner.............28
Section 5.04 Compensation of General Partner...........................30
Section 5.05 Other Business of Partners................................30
Section 5.06 Limitation on Liability of General Partner;
Indemnification...............................................30
Section 5.07 Designation of Tax Matters Partner and Designated
Person for Purposes of Investor List..........................32
ARTICLE SIX--WITHDRAWAL AND REMOVAL OF GENERAL PARTNER.......................33
Section 6.01 Limitation on Voluntary Withdrawal........................33
Section 6.02 Bankruptcy or Dissolution of the General
Partner.......................................................34
Section 6.03 Liability of Withdrawn General Partner....................34
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Section 6.04 Removal of General Partner...............................34
Section 6.05 Continuation and Reconstitution..........................35
ARTICLE SEVEN--ASSIGNABILITY OF UNITS........................................36
Section 7.01 Restrictions on Assignments..............................36
Section 7.02 Assignees and Substituted Limited Partners...............37
ARTICLE EIGHT--DISSOLUTION AND LIQUIDATION OF THE PARTNERSHIP................39
Section 8.01 Events Causing Dissolution...............................39
Section 8.02 Liquidation..............................................40
ARTICLE NINE--BOOKS AND RECORDS, ACCOUNTING, REPORTS, TAX ELECTIONS,
ETC....................................................................41
Section 9.01 Books and Records........................................41
Section 9.02 Accounting and Fiscal Year...............................41
Section 9.03 Bank Accounts and Investments............................41
Section 9.04 Reports..................................................42
Section 9.05 Tax Depreciation and Elections...........................43
Section 9.06 Interim Closing of the Books.............................43
Section 9.07 Information from Limited Partners........................43
ARTICLE TEN--MEETINGS AND VOTING RIGHTS OF LIMITED PARTNERS..................43
Section 10.01 Meetings.................................................43
Section 10.02 Special Voting Rights of Limited Partners................44
ARTICLE ELEVEN--MISCELLANEOUS PROVISIONS.....................................46
Section 11.01 Appointment of General Partner as
Attorney-in-Fact..............................................46
Section 11.02 Amendments...............................................47
Section 11.03 General Partner Representations and
Warranties....................................................48
Section 11.04 Binding Provisions.......................................48
Section 11.05 Applicable Law...........................................48
Section 11.06 Counterparts.............................................48
Section 11.07 Separability of Provisions...............................48
Section 11.08 Article and Section Titles...............................48
Section 11.09 Short Form Filings.......................................48
Exhibit A Limited Partner Note
</TABLE>
ii
<PAGE>
SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF
MARRIOTT HOTEL PROPERTIES II LIMITED PARTNERSHIP
This Second Amended and Restated Agreement of Limited Partnership,
dated as of June 14, 1996, is made and entered into by and among Marriott MHP
Two Corporation, a Delaware corporation, as general partner (the "General
Partner"), and those Persons who have been admitted as limited partners of this
limited partnership in accordance with the provisions of the Amended and
Restated Agreement of Limited Partnership of the Partnership dated as of March
20, 1989 (the "Original Agreement") and are identified as such in the books and
records of the Partnership (the "Limited Partners").
Marriott Hotel Properties II Limited Partnership (the "Partnership")
was formed pursuant to a Certificate of Limited Partnership dated as of
September 13, 1988 and filed with the Office of the Secretary of State of the
State of Delaware on September 20, 1988. On March 20, 1989, the General Partner,
Christopher G. Townsend, as initial limited partner, and the Limited Partners
who purchased units of limited partnership interest (the "Units") in the
Partnership in the private placement effected pursuant to the Private Placement
Memorandum entered into the Original Agreement. On April 18, 1996, MHP II
Acquisition Corp., an affiliate of the General Partner, made an offer to the
Limited Partners to purchase their Units on the terms and condition set forth in
MHP II Acquisition Corp.'s Offer to Purchase for Cash All Outstanding Units of
Limited Partnership Interest, dated April 18, 1996 (the "Offer"). In connection
with, and as a condition to consummation of, the Offer, the Partners are
adopting this Second Amended and Restated Agreement of Limited Partnership. In
consideration of the mutual agreements made herein, the parties hereby agree to
continue the Partnership as a limited partnership under the Delaware Revised
Uniform Limited Partnership Act (6 Del. C. (S) 17-101, et seq.), as amended from
time to time, (the "Act") as follows:
ARTICLE ONE
Defined Terms
Section 1.01. The defined terms used in this Agreement shall, unless
the context otherwise requires, have the respective meanings specified in this
Section 1.01.
"Accounting Period" means the four-week accounting periods having the
same beginning and ending dates as the General Partner's four-week accounting
periods, except that an Accounting Period may occasionally contain up to five
weeks when necessary to conform the accounting system to the calendar year.
"Act" means the Delaware Revised Uniform Limited Partnership Act (6
Del. C. (S) 17-101, et seq.), as amended from time to time.
"Adjusted Capital Account Deficit" means, with respect to any Partner,
the deficit balance, if any, in such Partner's Capital Account as of the end of
the relevant Fiscal Year, after giving effect to the following adjustments:
(i) Credit to such Capital Account any amounts that such
Partner is obligated to restore pursuant to any provision of this
Agreement, is otherwise treated as being obligated to restore under
section 1.704-1(b)(2)(ii)(c) of the Treasury Regulations, or is deemed
to be obligated to restore pursuant to the penultimate sentences of
sections 1.704-2(g)(1) and 1.704-2(i)(5) of the Treasury regulations
(determined after taking into account any changes during such year in
Minimum Gain); and
<PAGE>
(ii) Debit to such Capital Account the items described in
sections 1.704-1(b)(2)(ii)(d)(4), (5), and (6) of the Treasury
regulations.
"Affiliate," "Affiliates" 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 or
director of, general 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, director, general partner or trustee, or with respect to which the
specified Person serves in a similar capacity, (iii) any Person for which an
officer or director of, general partner in or trustee of, or individual serving
in a similar capacity with respect to, the specified Person serves in any such
capacity, (iv) any Person that, directly or indirectly, is the beneficial owner
of 10% or more of any class of equity securities of the specified Person or of
which the specified Person is directly or indirectly the owner of 10% or more of
any class of equity securities, and (v) any relative or spouse of the specified
Person who makes his or her home with that of the specified Person.
Notwithstanding the foregoing, no corporation whose common stock is listed on a
national securities exchange or authorized for inclusion on the NASDAQ National
Market, or any subsidiary thereof, shall be an "Affiliate" of the General
Partner or any Affiliate thereof unless a Person (or Persons if such Persons
would be treated as part of the same group for purposes of Section 13(d) or
13(g) of the Securities Exchange Act of 1934) directly or indirectly owns twenty
percent (20%) or more of the outstanding common stock of the General Partner and
such other corporation.
"Agreement" means this Second Amended and Restated Agreement of Limited
Partnership, as originally executed and as hereafter amended or modified from
time to time.
"Capital Account" or "Capital Accounts" means, with respect to a
Partner, the account maintained for such Partner which is determined and
maintained in the manner provided for in Section 3.06.
"Capital Contribution" or "Capital Contributions" means, with respect
to any Partner, the total amount of money contributed or agreed to be
contributed to the Partnership (prior to the deduction of any selling
commissions or expenses) by such Partner, as the context may require; provided,
however, that in connection with the private placement (i) as and to the extent
the Placement Agents retained by the General Partner to assist in the private
placement of the Units agreed to forego any portion of their fees or selling
commissions, with a consequent reduction in the offering price of any Units so
placed, or (ii) as and to the extent any Limited Partner elected to make a
payment of $89,247 per Unit in cash ($79,247 per Unit in cash if purchased by
the General Partner, its Affiliates, or officers, directors or employees of the
General Partner or its Affiliates, or the Placement Agents) upon execution of
the subscription documents as full payment of his Capital Contribution, the
Limited Partners who purchased any such Units in the private placement
nevertheless shall be deemed to have contributed to the Partnership the full
amount of the offering price (i.e., $100,000 per Unit) without reduction on
account of such reduced purchase price.
"Capital Priority Amount" means an amount equal to the sum of (i) the
Net Invested Capital of the Limited Partners at the time of determination plus
(ii) the Limited Partners' 15% Preferred Distribution at the time of
determination.
"Capital Receipts" means Sale Proceeds and/or Refinancing Proceeds.
Capital Receipts shall not be considered to include the San Ramon Cost Refund,
if any, or the San Ramon Cash Adjustment, if any.
"Cash Available for Distribution" means, with respect to any fiscal
period, the cash revenues of the Partnership from all sources (other than
Capital Receipts, the San Ramon Cost Refund, if any, and the San Ramon Cash
Adjustment, if any) during such fiscal period (including amounts received
2
<PAGE>
pursuant to the Purchase Price Adjustments) plus such reserves as may be
determined by the General Partner in its reasonable discretion, as no longer
necessary to provide for the foreseeable needs of the Partnership, less (i) all
cash expenditures of the Partnership during such fiscal period, including,
without limitation, debt service, repayment of advances made by the General
Partner as and when such repayments are required, any fees for management
services, and administrative expenses but excluding expenditures incurred by the
Partnership in connection with a capital transaction, and (ii) such reserves as
may be determined by the General Partner, in its reasonable discretion, to be
necessary to provide for the foreseeable needs of the Partnership, including,
without limitation, for the maintenance, repair or restoration of the Hotels.
"Certificate of Limited Partnership" means the Certificate of Limited
Partnership, and any and all amendments thereto, filed on behalf of the
Partnership with the Secretary of State of the State of Delaware as required
under the Act.
"Code" means the Internal Revenue Code of 1986, as amended (or any
corresponding provision or provisions of succeeding law).
"Consent" means either (i) the approval given by vote at a meeting
called and held in accordance with the provisions of Section 10.01 prior to the
taking of any action with respect to which such Consent is given, or (ii) a
prior written approval required or permitted to be given pursuant to this
Agreement or the Act granting such approval, as the context may require. Unless
otherwise specified, "Consent of the Limited Partners" shall mean consent of the
Limited Partners holding, in their capacity as Limited Partners and not as
assignees, a majority of the outstanding Units considered present and entitled
to vote on the matter (as determined under Sections 10.01A and 10.01B);
provided, however, if the General Partner or any Affiliate of the General
Partner (other than an individual who acquires Units for his own account or a
trust or other similar entity that acquires Units for the direct benefit of an
individual) own any Units, then in the case of each matter in which the General
Partner or an Affiliate thereof has an actual economic interest (other than an
interest solely as a result of its or an Affiliate's ownership of Units or as a
result of its or an Affiliate's (and any group of which it is a part for
purposes of Section 13(d) or 13(g) of the Securities Exchange Act of 1934)
direct or indirect ownership of less than twenty percent (20%) of the
outstanding common stock of both the General Partner and a corporation whose
common stock is listed on a national securities exchange or authorized for
inclusion in the NASDAQ National Market, or any subsidiary thereof), such Units
shall be voted in the same manner as the vote of Limited Partners holding, in
their capacity as Limited Partners and not as assignees, a majority of the
outstanding Units actually voting on the matter presented (other than those
Units held by the General Partner or any of its Affiliates, except for an
individual who acquired Units for his own account or a trust or similar entity
that acquires Units for the direct benefit of an individual).
"Debt Service Guarantee" means the guarantee by Marriott of payment of
up to $22,784,000 of interest and principal payments due under the Hotel
Mortgage Debt if the Partnership was unable to make such payments. The Debt
Service Guarantee is no longer outstanding.
"Defaulting Limited Partner" means a Limited Partner who fails to pay
all or any portion of any installment of his Investor Note for a period of 20
days after the date such installment was due.
"Defaulting Limited Partner Allocations" means allocations of Net
Losses, Net Profits, Gains, Losses, and tax credits to a Defaulting Limited
Partner.
"Default Notice" means the notice given by the General Partner to the
Partnership and a Defaulting Limited Partner of the General Partner's desire to
purchase all or a portion of such Defaulting Limited Partner's Interest in the
Partnership.
3
<PAGE>
"Deferred Purchase Debt" means the indebtedness of the Partnership to
Marriott and its Affiliates of up to $51.6 million to permit the Partnership to
pay a portion of the purchase price of the deferred portion of the Hotel
Interests, with interest accruing at the lesser of 10% per annum or the maximum
rate permitted by applicable law and with principal and accrued interest due on
July 1, 1991, but required to be prepaid out of the proceeds of the installments
of the Capital Contributions paid by the Limited Partners. The Deferred Purchase
Debt has been paid in full and is no longer outstanding.
"Designated Person" means the General Partner.
"FF&E" means (i) furniture, fixtures and furnishings and equipment and
(ii) routine repairs and maintenance undertaken subsequent to the opening date
of a Hotel, the cost of which would not be expensed under generally accepted
accounting principles.
"Fiscal Quarter" means, for the respective fiscal periods in any year,
(i) the period beginning on January 1, and having the same ending date as the
General Partner's 12-week fiscal first quarter, (ii) the same period of time as
the General Partner's second fiscal quarter, (iii) the same period of time as
the General Partner's third fiscal quarter, and (iv) the period from the end of
the General Partner's third fiscal quarter through December 31 in such Fiscal
Year.
"Fiscal Year" means the fiscal year of the Partnership, which shall end
on December 31 of each year.
"Gain" or "Gains" means the gain or gains recognized by the Partnership
(or allocated to the Partnership from the Santa Clara Partnership) for Federal
income tax purposes upon the sale or disposition of Partnership (or Santa Clara
Partnership) property (plus any Section 267(d) Gain) (other than the routine
sale or disposition of used FF&E being replaced at the Hotels), as reduced by
costs of such sale or disposition.
"General Partner" means Marriott MHP Two Corporation, a Delaware
corporation and wholly owned subsidiary of Marriott Properties, Inc., in its
capacity as general partner of the Partnership and its permitted successors or
assigns and any Person admitted as a substitute general partner pursuant to
Sections 6.01 or 10.02B.
"Ground Leases" means the respective leases between the Partnership or
the Santa Clara Partnership, as tenant, and third parties, as landlords, by
which the Partnership or the Santa Clara Partnership will lease the land on
which the San Antonio, San Ramon and Santa Clara Hotels are located. Reference
to a "Ground Lease" means one of the Ground Leases.
"Ground Lessors" means the landlords under the Ground Leases.
"Hotel Interests" means the New Orleans, San Antonio and San Ramon
Hotels and the Partnership's 50% limited partnership interest in the Santa Clara
Partnership. Reference to a "Hotel Interest" means one of the three Hotels
included in the definition of "Hotel Interests" or the Partnership's interest in
the Santa Clara Partnership.
"Hotel Mortgage Debt" means the loan made to the Partnership pursuant
to the loan agreement entered into at the initial closing of the offering made
pursuant to the Private Placement Memorandum between the Partnership, as
borrower, and The First National Bank of Chicago, NCNB National Bank of North
Carolina and First Interstate Bank, Ltd., as lenders, pursuant to which the
lenders lent $222.5 million to finance a portion of the purchase price of the
New Orleans, San Antonio and San Ramon Hotels.
4
<PAGE>
"Hotel Purchase Agreements" means the purchase agreements entered into
at the initial closing of the offering made pursuant to the Private Placement
Memorandum between the Partnership and Marriott and its Affiliates providing for
the purchase by the Partnership of the New Orleans, San Antonio and San Ramon
Hotels, the land on which the New Orleans Hotel is located, the assignment of
the Ground Leases relating to the San Antonio and San Ramon Hotels and the sale
of, or assignment of a leasehold interest in, certain related materials and
personal property, including FF&E.
"Hotels" means the New Orleans Hotel, the San Antonio Hotel, the San
Ramon Hotel and the Santa Clara Hotel. Reference to a "Hotel" means any one of
the Hotels.
"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 rights
and benefits to which a Partner may be entitled as provided in this Agreement,
together with the obligations of such Partner to comply with the terms and
provisions of this Agreement.
"Interested Transaction" means any matter in which the General Partner
or its Affiliates have an actual economic interest, other than an interest
solely as a result of its or an Affiliate's ownership of Units or a general
partner interest or as a result of its or an Affiliate's (and any group of which
it is a part for purposes of Section 13(d) or 13(g) of the Securities Act of
1934) direct or indirect ownership of less than twenty percent (20%) of the
outstanding common stock of both the General Partner and a corporation whose
common stock is listed on a national securities exchange or authorized for
inclusion in the NASDAQ National Market, or any subsidiary thereof.
"Invested Capital" means the following specified amounts: for 1989,
$27,937,500; for 1990, $52,150,000; and for 1991 and thereafter, $74,500,000.
"Investor List" means that list, required by section 6112 of the Code,
identifying Persons to whom Interests in the Partnership were sold, such
Persons' addresses and taxpayer identification numbers, the dates on which the
Interests were acquired, the name and tax shelter registration number of the
Partnership, and such other information as may be required by Treasury
regulations to be included therein.
"Investor Note" or "Investor Notes" means the fully recourse,
non-interest bearing promissory notes given by the Limited Partners to evidence
their obligation to pay the deferred portion of the Capital Contributions due
with respect to their Units.
"IRS" means the Internal Revenue Service.
"Limited Partner" means the Initial Limited Partner, the Original
Limited Partners, and any Substituted Limited Partners.
"Limited Partners' 10% Preferred Distribution" means, with respect to
each Fiscal Year, an annual, non-cumulative 10% preferred return to the Limited
Partners on the weighted average outstanding Net Invested Capital during such
Fiscal Year.
"Limited Partners' 15% Preferred Distribution" means the excess of (a)
the product of (x) 15% per annum (applied using the simple interest method for
the period from the date of the admission of the Original Limited Partners
through the date for which the determination is being made on the basis of a
365/366-day year and the actual number of days elapsed) multiplied by (y) the
total daily average outstanding Net Invested Capital over (b) the sum of all
previous distributions made to the Limited Partners pursuant to Sections 4.06,
4.07(i), and 4.08A(i).
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"Loss" or "Losses" means the loss or losses recognized by the
Partnership (or allocated to the Partnership from the Santa Clara Partnership)
for Federal income tax purposes upon the sale or disposition of Partnership (or
Santa Clara Partnership) property (other than the routine sale of used FF&E
being replaced at a Hotel), taking into account costs of such sale or
disposition.
"Management Agreements" means the management agreements to be entered
into at the initial closing of the offering made pursuant to the Private
Placement Memorandum between the Partnership (or, in the case of the Santa Clara
Hotel, the Santa Clara Partnership) and the Manager pursuant to which the
Manager will manage the Hotels, as the same may be amended or supplemented from
time to time. Reference to a "Management Agreement" means any one of the
Management Agreements.
"Manager" means Marriott International, Inc., a Delaware corporation,
as manager of the Hotels and any successor manager that is an Affiliate of
Marriott International, Inc.
"Marriott" means Host Marriott Corporation, a Delaware corporation.
"MHP II Acquisition Corp." means MHP II Acquisition Corp., a Delaware
corporation and a wholly owned direct subsidiary of Marriott.
"Minimum Gain" means the amount determined by computing, with respect
to each Partner Nonrecourse Debt, the amount of Gain, if any, that would be
realized by the Partnership if it disposed of (in a taxable transaction) the
Partnership property subject to such liability in full satisfaction thereof (and
for no other consideration), and by then aggregating the amounts so computed. It
is the intent that Minimum Gain be determined in accordance with the provisions
of sections 1.704-2(d) of the Treasury regulations. Minimum Gain with respect to
any Partner Nonrecourse Debt shall be determined in a manner consistent with the
foregoing.
"Mortgage Debt" means the Hotel Mortgage Debt and the Santa Clara
Mortgage Debt.
"MPI" means Marriott Properties, Inc., a Delaware corporation, the
parent of the General Partner and wholly owned subsidiary of Marriott.
"Net Invested Capital" means Invested Capital reduced by cumulative
distributions of Capital Receipts to the Limited Partners pursuant to Sections
4.07 (ii) and 4.08A(ii). Except as specifically provided in the definition of
"Invested Capital," no adjustment shall be made in Invested Capital as a result
of any distribution pursuant to Section 3.05G as a result of the San Ramon
Termination.
"Net Profits" or "Net Losses" means, for any period, the net profits or
net losses of the Partnership (including net profits or net losses of the Santa
Clara Partnership allocated to the Partnership) for Federal income tax purposes
during such period as determined under section 702 of the Code, including gain
or loss on the routine sale or disposition of used FF&E not in connection with
the sale of a Hotel and excluding Gains and Losses and items specially allocated
under Section 4.11.
"New Orleans Hotel" means the 1,329-room New Orleans Marriott located
in New Orleans, Louisiana and the underlying land.
"Nonrecourse Liability" means any Partnership liability (or portion
thereof) for which no Partner bears (or is deemed to bear) the economic risk of
loss within the meaning of section 1.752-2 of the Treasury regulations.
"Notification" means a written notice, containing the information
required by this Agreement to be communicated to any Person, sent by registered,
express, certified or regular mail to such
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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 this Agreement.
"Original Limited Partners" means each Person purchasing Units in
connection with the initial offering of the Units made pursuant to the Private
Placement Memorandum.
"Partner Nonrecourse Debt" means any Partnership liability that is
considered nonrecourse for purposes of section 1.1001-2 of the Treasury
regulations but for which a Partner bears (or is deemed to bear) the economic
risk of loss within the meaning of section 1.752-2 of the Treasury regulations.
"Partners" means, collectively, the Limited Partners, as constituted
from time to time, and the General Partner. Reference to a "Partner" means any
of the Partners.
"Partnership" means the limited partnership formed under the Act and
continued by this Agreement by the parties hereto, as said Partnership may from
time to time be constituted.
"Partnership Debt" means any indebtedness for borrowed money incurred
by the Partnership.
"Person" means any individual, partnership, corporation, trust or other
legal entity.
"Placement Agents" means Smith Barney, Harris Upham & Co. Incorporated
and Bear, Stearns & Co. Inc.
"Private Placement Memorandum" means the Partnership's confidential
private placement memorandum dated January 9, 1989, prepared for use in
connection with the offering to investors of 745 Units of limited partnership
interests in the Partnership.
"Purchase Agreements" means the Hotel Purchase Agreements and the Santa
Clara Purchase Agreement.
"Purchase Price Adjustments" means any reductions of the aggregate
purchase price of certain Hotel Interests that occurred pursuant to the Purchase
Agreements.
"Refinancing Proceeds" means (a) the cumulative net proceeds from any
refinancing or borrowing by the Partnership, the proceeds of which are applied
to the repayment of previously incurred debt of the Partnership, or borrowed for
distributions to the Partners, including the proceeds of a sale and leaseback on
which no taxable gain is recognized for Federal income tax purposes, after
deducting (i) any expenses incurred in connection therewith, (ii) any amounts
applied by the General Partner toward the payment of any indebtedness, other
obligation, or expense of the Partnership or the creation of any reserves deemed
necessary by the General Partner, and (iii) all amounts then payable therefrom
pursuant to the Management Agreements, and (b) any comparable amount distributed
to the Partnership from the Santa Clara Partnership.
"Sale Proceeds" means (a) any net proceeds received by the Partnership
from (i) the exchange, condemnation, eminent domain taking, casualty, sale or
other disposition of all or a portion of the Partnership's assets, or (ii) the
liquidation of the Partnership's property in connection with a dissolution of
the Partnership, after deducting (A) any expenses incurred in connection
therewith, (B) any amounts applied by the General Partner toward the payment of
any indebtedness, other obligation, or expense of the Partnership or the
creation of any reserves deemed necessary by the General Partner, and (C) all
amounts payable therefrom pursuant to the Management Agreements, and (b) any
distribution to the Partnership from the Santa Clara Partnership from a
comparable transaction. Sale Proceeds shall not include the proceeds from the
routine sale of used FF&E not in connection with the disposition of a Hotel.
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"San Antonio Hotel" means the 999-room Marriott Rivercenter Hotel
located in San Antonio, Texas and a leasehold interest in the underlying land.
"San Ramon Cash Adjustment" means the amount of cash, if any, paid to
the Partnership pursuant to section 2.08(c) of the applicable Hotel Purchase
Agreement in the event that the San Ramon Termination occurs. The San Ramon
Termination did not occur, and there was no San Ramon Cash Adjustment.
"San Ramon Cost Refund" means the amount of cash, if any, paid to the
Partnership pursuant to section 2.08(b) of the applicable Hotel Purchase
Agreement in the event that the San Ramon Termination occurs. The San Ramon
Termination did not occur, and there was no San Ramon Cost Refund.
"San Ramon Hotel" means the 372-room Bishop Ranch Marriott Hotel
located at Bishop Ranch in San Ramon, California and a leasehold interest in the
underlying land.
"San Ramon Termination" means the termination of the applicable Hotel
Purchase Agreement with respect to the San Ramon Hotel in the event that the
Partnership's acquisition of the San Ramon Hotel shall not have occurred on or
before January 31, 1990 (as such date may be extended by the General Partner
pursuant to Section 5.02B (iii)). The San Ramon Termination did not occur.
"Santa Clara Debt Service Advances" means advances deemed to be made by
the partners in the Santa Clara Partnership (other than the Partnership) to the
Partnership from cash available for distribution from the Santa Clara
Partnership to such other partners to permit the Partnership to reimburse the
Santa Clara Partnership for debt service payments required on the Santa Clara
Mortgage Debt or certain specified replacement debt with respect to the Santa
Clara Hotel.
"Santa Clara Hotel" means the 754-room Santa Clara Marriott Hotel
located in Santa Clara, California and a subleasehold interest in the underlying
land.
"Santa Clara Mortgage Debt" means the loan provided to the Santa Clara
Partnership pursuant to the loan agreement entered into at the initial closing
of the offering made pursuant to the Private Placement Memorandum between the
Santa Clara Partnership, as borrower, and The First National Bank of Chicago,
NCNB National Bank of North Carolina and First Interstate Bank, Ltd., as
lenders, pursuant to which the lenders lent to the Santa Clara Partnership $43.5
million, which was distributed to MPI in payment of a portion of the purchase
price for the Santa Clara Partnership Interest.
"Santa Clara Partnership" means the Santa Clara Marriott Hotel Limited
Partnership, a limited partnership, the owner of the Santa Clara Hotel.
"Santa Clara Partnership Agreement" means the partnership agreement of
the Santa Clara Partnership.
"Santa Clara Partnership Interest" means the 50% limited partnership
interest in the Santa Clara Partnership that the Partnership will purchase
pursuant to the Santa Clara Purchase Agreement.
"Santa Clara Purchase Agreement" means the purchase agreement entered
into at the initial closing of the offering made pursuant to the Private
Placement Memorandum between the Partnership and Marriott and its Affiliates
providing for the purchase by the Partnership of the Santa Clara Partnership
Interest from MPI.
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"Section 267(d) Gain" means gain realized by the Partnership but not
recognized solely by reason of section 267(d) of the Code.
"Substituted Limited Partner" means any Person admitted to the
Partnership as a Limited Partner pursuant to the provisions of Section 7.02 and
who is listed as such in the books and records of the Partnership.
"Tax Matters Partner" means the General Partner.
"Total Partnership Distributions" means the total amount of cash and
the fair market value of any property (net of any associated liabilities)
distributed to the Partners pursuant to Sections 4.06 through 4.09.
"Unit" means the units of limited partnership interest represented by a
Capital Contribution of $100,000 (determined without reductions for purchases of
Units in circumstances where the Placement Agents elected to forego all or a
portion of the fees and commissions payable to them and/or purchases where the
full purchase price was paid in cash at the time of subscription), sold in the
private placement pursuant to the Private Placement Memorandum.
ARTICLE TWO
Formation, Name, Place of Business, Purpose and Term
Section 2.01. Formation. The parties do hereby continue the Partnership
formed as of September 20, 1988 pursuant to the provisions of the Act.
Section 2.02. Name and Offices. The name of the Partnership is and
shall be Marriott Hotel Properties II Limited Partnership. The principal offices
of the Partnership shall be located at 10400 Fernwood Road, Bethesda, Maryland
20817 or at such other place or places as the General Partner may from time to
time determine, provided that the General Partner shall give the Limited
Partners written notice thereof not later than 60 days after the effective date
of such change of address and shall, if required, amend the Certificate of
Limited Partnership in accordance with the requirements of the Act. The address
of the registered office of the Partnership in the State of Delaware is at 229
South State Street, Dover, County of Kent, Delaware 19901.
Section 2.03. Purposes. The purposes of the Partnership are to (i)
invest in, acquire, own, use, operate or manage the Hotel Interests, either as
full-service Marriott hotels or otherwise, and sell, lease, sublease, exchange
or otherwise dispose of the Hotel Interests (or any portion thereof) and (ii)
engage in any other activities related or incidental thereto as more fully set
forth in Section 5.01 hereof.
Section 2.04. Term. The term of the Partnership shall continue in full
force and effect from the date of the filing of the original Certificate of
Limited Partnership until December 31, 2088, or until dissolution and
termination prior thereto pursuant to the provisions of Article Eight.
Section 2.05. Registered Agent for Service of Process. The name and
address of the registered agent for service of process on the Partnership in the
State of Delaware is The Prentice Hall Corporation System, Inc., 229 South State
Street, Dover, County of Kent, Delaware 19901.
Section 2.06. Certificate of Limited Partnership. On September 20,
1988, the General Partner, in accordance with the Act, filed with the Secretary
of State of the State of Delaware a Certificate of Limited Partnership for the
Partnership. If the laws of any jurisdiction in which the Partnership transacts
business so require, the General Partner also shall file with the appropriate
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office in that jurisdiction a copy of the Certificate of Limited Partnership and
any other documents necessary for the Partnership to qualify to transact
business in such jurisdiction and shall use its best efforts to file with the
appropriate office in that jurisdiction a copy of other documents necessary to
establish and maintain the Limited Partners' limited liability in such
jurisdiction. The Partners further agree and obligate themselves to execute,
acknowledge, and cause to be filed for record, in the place or places and in the
manner prescribed by law, any amendments to the Certificate of Limited
Partnership as may be required, either by the Act, by the laws of a jurisdiction
in which the Partnership transacts business, or by this Agreement, to reflect
changes in the information contained therein or otherwise to comply with the
requirements of law for the continuation, preservation, and operation of the
Partnership as a limited partnership under the Act.
ARTICLE THREE
Partners and Capital
Section 3.01. General Partner. The General Partner of the Partnership
is Marriott MHP Two Corporation, a Delaware corporation and wholly owned
subsidiary of MPI, having its principal executive offices at 10400 Fernwood
Road, Bethesda, Maryland 20817, and any Person admitted as a substitute general
partner in accordance with Sections 6.01 or 10.02B.
Section 3.02. [Intentionally Omitted]
Section 3.03. Limited Partners. The names and addresses of the Limited
Partners, the amount of their Capital Contributions and the number of Units held
by them are set forth in the books and records of the Partnership. A Person
shall be deemed to be admitted as a Limited Partner when the General Partner has
accepted such Person as a Limited Partner of the Partnership, and the books and
records reflect such Person as admitted to the Partnership as a Limited Partner.
Section 3.04. Capital Contributions by General Partner. The General
Partner has made a Capital Contribution in the amount of $752,525. The General
Partner shall not be permitted to make any additional Capital Contributions
without the Consent of the Limited Partners except as required pursuant to
Section 8.02D.
Section 3.05. Capital Contributions by Limited Partners.
A. [Intentionally Omitted]
B. The Partnership offered 745 Units for sale in a private placement
pursuant to the Private Placement Memorandum and admitted as Original Limited
Partners those Persons (i) who executed and filed with the Partnership the
subscription documents specified in the Private Placement Memorandum, together
with such other documents as the General Partner deemed necessary or desirable
to effect such admission, (ii) whose subscriptions for such Units were accepted
by the General Partner (who may refuse to accept the subscription of any Person
or Persons for any reason whatsoever), and (iii) who paid the required Capital
Contributions with respect to Units for which a subscription is accepted in the
manner set forth in Section 3.05C. The number of Units subscribed for by each
Original Limited Partner is set forth in the subscription documents executed and
delivered by such Original Limited Partner. Each Original Limited Partner's
contribution in respect to the Units subscribed for was (i) in cash $20,000 per
Unit and an Investor Note of such Limited Partner payable as set forth in
Section 3.05C or (ii) in cash in the amount of $89,247 per Unit as full payment
of the subscription price ($79,247 per Unit in cash if purchased by the General
Partner, its Affiliates, or officers, directors or employees of the General
Partner or its Affiliates, or the Placement Agents). No Partner shall be paid
interest on any Capital Contribution.
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C. The Original Limited Partners made Capital Contributions totaling up
to $74.5 million, for which each such Original Limited Partner subscribed in
Units of $100,000 each unless the General Partner and the Placement Agents, in
their sole discretion, accepted subscriptions for one-half of a Unit. For each
Unit purchased, an Original Limited Partner made a Capital Contribution by
paying either (i) $89,247 per Unit in cash ($79,247 per Unit in cash if
purchased by the General Partner, its Affiliates, or officers, directors or
employees of the General Partner or its Affiliates, or the Placement Agents)
upon execution of the subscription documents as full payment of the subscription
price; or (ii) $100,000 in the following installments: (a) a first installment
in the amount of $20,000 payable upon execution of the subscription documents;
(b) a second installment in the amount of $17,500 payable on June 1, 1989; (c) a
third installment in the amount of $32,500 payable on June 1, 1990; (d) and a
fourth installment in the amount of $30,000 payable on June 1, 1991. Original
Limited Partners purchasing more or less than a full Unit were required to make
proportionate installments on the dates aforesaid. Original Limited Partners
could prepay, without any reduction in the amount thereof, the foregoing
installments, in whole or in part, at any time prior to their respective due
date.
D. The obligation of each Original Limited Partner to pay the
installments required by Section 3.05C, other than the first installment, was
evidenced by the delivery to the Partnership, concurrently with payment of the
first installment, of the Investor Note in the form of Exhibit A attached hereto
payable to the Partnership in the amount of $80,000 for each Unit purchased
($40,000 if one-half of a Unit is purchased) representing the amount of the
remaining unpaid Capital Contribution of such Limited Partner. Such Limited
Partners (i) could prepay in whole, or in part, all of the installments and (ii)
were required to prepay the outstanding balance of their Investor Notes to the
extent of any Sale Proceeds otherwise distributable to such Limited Partners
pursuant to Section 4.08 (which amounts would be withheld by the Partnership and
applied in satisfaction of such obligation); provided that in the event such
Sale Proceeds are received by the Partnership in a taxable transaction or the
distribution thereof would result in Federal taxable income to the Limited
Partners, the amount of Sale Proceeds per Unit withheld to prepay the
outstanding balance of the Limited Partners' Investor Notes would be reduced by
an amount equal to the product of (i) the maximum marginal Federal income tax
rate applicable to individuals multiplied by (ii) the Federal taxable income per
Unit realized as a result of such taxable transaction and/or distribution, as
determined by the General Partner in good faith. If an Original Limited Partner
paid $89,247 per Unit in cash ($79,247 per Unit in cash if purchased by the
General Partner, its Affiliates, or officers, directors or employees of the
General Partner or its Affiliates, or the Placement Agents) at the time he
delivered an executed subscription agreement, then there was no obligation to
deliver an Investor Note to the Partnership. That portion of such $89,247
payment, or $79,247 payment if applicable, in excess of the amount that would
have been paid upon subscription had the Original Limited Partner selected the
installment method of paying the subscription price was applied by the
Partnership at the closing of the offering made pursuant to the Private
Placement Memorandum to reduce the Deferred Purchase Debt.
E. Each Original Limited Partner electing to pay the Capital
Contributions with respect to one or more Units in installments pledged to the
Partnership his Interest (including any Units with respect to which he has
elected to pay the full Capital Contribution in cash at the time of
subscription) as security for payment of the installments payable under such
Original Limited Partner's Investor Note. Notwithstanding the pledge, each
Original Limited Partner shall continue to be a Partner. The Partnership, acting
through the General Partner, shall have all rights and remedies granted to a
secured party under the Uniform Commercial Code as adopted in Delaware with
respect to such interest, including, but not limited to, the right to sell such
Interest, and such Original Limited Partner agrees to execute such instruments,
including, without limitation, a financing statement on Form UCC-1, as the
General Partner may from time to time require to perfect such security interest.
For purposes of the Uniform Commercial Code, this Agreement shall also be deemed
to be a security agreement. In addition, the General Partner shall have the
right, at any time prior to the date of payment of the last installment of
Capital Contributions specified in
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Section 3.05C above, to have a credit check performed with respect to any
Limited Partner making payment of Capital Contributions in installments.
F. The following provisions applied in the event a Limited Partner
failed to make installment payments when due:
(i) A Limited Partner who fails to pay when due all or any
portion of any installment for a period of 20 days shall be in default
hereunder and the Defaulting Limited Partner shall be required to pay
the Partnership a late payment charge equal to five percent (5%) of
such unpaid installment or portion thereof. If a default shall continue
for more than 30 days after notice to the Defaulting Limited Partner of
such default, in addition to the aforesaid late charge, the unpaid
portion of such installment or portion thereof shall bear interest from
the date due until paid in full at a rate equal to the lesser of (a)
sixteen percent (16%) per annum or (b) the maximum rate permitted by
law. If the late charge is deemed to be interest under applicable law,
it may only be imposed to the extent it does not cause total interest
to exceed the maximum rate permitted by law. A Defaulting Limited
Partner shall have no voting rights and no right to receive any
distributions of cash (including, without limitation, Capital Receipts,
if any) or allocations of Net Profits, Gains, Losses, or Net Losses
with respect to his Interest for so long as any unpaid installments
plus any late charge or interest attributable to such unpaid
installment or portion thereof remains unpaid. The General Partner will
deduct the amount of any delinquent installments, late penalty or
interest from any cash distributions available to Defaulting Limited
Partners.
(ii) If a default shall continue for more than 30 days after
notice to the Defaulting Limited Partner, the General Partner shall
have the option of accelerating the payment of the entire unpaid
balance of the Investor Note of the Defaulting Limited Partner and the
additional option of purchasing (for the price set forth below) all or
a portion of the Defaulting Limited Partner's Interest (including the
portion of such Defaulting Limited Partner's Interest, if any, with
respect to which the Limited Partner elected to pay the full Capital
Contribution in cash at the time of subscription). Such option may be
exercised by the General Partner by giving the Partnership and the
Defaulting Limited Partner a Default Notice. The purchase price to be
paid to the Defaulting Limited Partner shall be an amount equal to the
greater of (x) 10% of the amount of Capital Contributions of the
Defaulting Limited Partner actually paid (excluding for this purpose
the unpaid portion of any Investor Note secured thereby) in respect of
the Interest being purchased less the sum of (i) the total amount of
cash distributions, if any, theretofore made to the Defaulting Limited
Partner in respect of the Interest being purchased, (ii) any reasonable
expenses incurred by the Partnership and by the General Partner in
connection with such purchase, (iii) all tax credits previously
reported by the Partnership for all Fiscal Years then ended allocable
to the Interest being purchased, and (iv) 50% of the Net Losses
previously reported by the Partnership for all Fiscal Years then ended
allocable to the Interest being purchased, or (y) three percent (3%) of
the amount of the Capital Contributions of the Defaulting Limited
Partner actually paid (excluding for this purpose the principal portion
of any Investor Note secured thereby) in respect of the Interest being
purchased. Such purchase price shall be paid in cash within 30 days
after the date of the consummation of the purchase. The General Partner
shall also pay to the Partnership an amount equal to all Capital
Contribution installments in respect of the Interest being purchased
then due and not theretofore paid by the Defaulting Limited Partner
(including the unpaid installment giving rise to the default) and shall
assume all other obligations (other than late payment charges and
interest due as a result of the default) of the Defaulting Limited
Partner in respect of the Interest being purchased, if any, to the
Partnership. At any time prior to any sale of all or any portion of the
Defaulting Limited Partner's Interest as provided in this Section
3.05F, the General Partner may but shall not be obligated to accept
full payment from the Defaulting Limited Partner of any unpaid
installment then overdue and any late payment charge plus interest.
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The acceptance of such payment by the General Partner shall extinguish
the further right (as hereafter defined) of the General Partner to
purchase the Defaulting Limited Partner's Interest.
(iii) In the event that the General Partner does not acquire
all of the Interest of a Defaulting Limited Partner and, after the
exercise of due diligence, the General Partner is unable to find a
purchaser for all or the balance of the Defaulting Limited Partner's
Interest for the price set forth in clause (ii) above, then the
Defaulting Limited Partner shall sell such Interest or the balance of
such Interest, as the case may be, on such terms and conditions as the
General Partner deems reasonable under the circumstances to any Person,
including the General Partner; provided, however, if such purchaser is
the General Partner or an Affiliate of the General Partner, it shall be
required to agree to assume the obligation of the Defaulting Limited
Partner to make payments of at least 75% of the unpaid balance of the
installments to the extent of the Interest so acquired. At the closing
of any purchase and sale pursuant to this clause (iii), the purchaser
shall pay to the Partnership the unpaid balance of the installments
then due and owing by the Defaulting Limited Partner and shall agree to
thereafter make payment of any future installments as and when the same
shall become due and payable. The Defaulting Limited Partner shall pay
all of the Partnership's and General Partner's costs and expenses
incurred in connection with any purchase and sale of a Defaulting
Limited Partner's Interest pursuant to this clause (iii).
(iv) A purchaser of all or any part of the Interest of a
Defaulting Limited Partner will receive all of the cash not yet
distributed to the Defaulting Limited Partner, including cash earned
prior to the default. All Net Profits, Net Losses, and deductions that
would otherwise be allocated in accordance with Sections 4.01, 4.02 and
4.12 to a Defaulting Limited Partner shall be allocated, from and after
the date of default to, but not including, the date, if any, on which
the Interest of such Defaulting Limited Partner shall be purchased,
among the non-Defaulting Limited Partners in proportion to the number
of Units owned by each. All Defaulting Limited Partner Allocations from
and after the date of purchase of the Defaulting Limited Partner's
Interest until the expiration of the Fiscal Year in which such purchase
date falls shall be allocated to the purchaser. In the following Fiscal
Year or Fiscal Years, all Net Profits, Net Losses, and deductions of
the Partnership allocable to the Limited Partners under Article Four
shall first be allocated until the purchaser's Capital Account balance
shall be equal in amount to the Capital Account balance of a
non-Defaulting Partner owning the same number of Units as the
purchaser.
(v) Notwithstanding the foregoing provisions of this Section
3.05F, the obligations of the Defaulting Limited Partner hereunder
shall not be extinguished by the existence of any option of the General
Partner to purchase the Interest of the Defaulting Limited Partner, or
by its exercise, or by any agreement by any person to purchase such
Interest, but only to the extent of payment of the unpaid installments
together with interest thereon made in the Defaulting Limited Partner's
stead by any purchaser of such Interest.
(vi) In addition to the other rights of the Partnership
against the Defaulting Limited Partner, the Partnership may avail
itself of appropriate legal remedies, at law or in equity, to compel
payment of any portion of the installments remaining unpaid together
with any interest thereon remaining unpaid, together with reasonable
court costs and legal fees in the event of litigation against the
Defaulting Limited Partner.
G. [Intentionally Omitted]
Section 3.06. Partnership Capital.
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A. The Capital Contribution of each Limited Partner and the General
Partner shall be credited to each such Partner's Capital Account; provided,
however, that the deemed increase in the Capital Contribution of any Limited
Partner due to (i) any relinquished selling commissions or other fees with
respect to such Limited Partner or (ii) any reduction of $10,753 per Unit for
any Limited Partner making full payment of such Limited Partner's Capital
Contribution ($20,753 for the General Partner or any of its Affiliates, or for
officers, directors or employees of the General Partner or any of its
Affiliates, or the Placement Agents) upon execution of the subscription
agreement shall not be credited to such Limited Partner's Capital Account and a
Limited Partner's obligation to make additional contributions in installments
shall not be credited to his Capital Account until the installments are actually
contributed. A Partner's Capital Account shall also be credited with the amount
of Net Profits or Gain allocable to the Partner, and shall be debited with (x)
such Partner's share of Total Partnership Distributions and (y) the amount of
Net Losses, Losses, deductions or other items allocated to such Partner. Capital
Accounts shall be maintained and adjusted in accordance with the provisions of
section 1.704-1(b)(2) (iv) of the Treasury regulations.
B. For purposes of this Section 3.06, upon a distribution in kind of
Partnership property, the Capital Accounts of the Partners will be debited or
credited as though the property had been sold for an amount equal to its fair
market value, and gain or loss which would have been recognized for Federal
income tax purposes had the property actually been sold will be allocated to the
Partners under Article Four.
C. No Partner shall be entitled to receive any interest on his
outstanding Capital Account balance. Except upon the dissolution and termination
of the Partnership or as otherwise specifically provided in this Agreement, no
Partner shall have the right to demand or to receive the return of all or any
part of the Capital Account of such Partner.
Section 3.07. Additional Issuances of Units and Capital Contributions.
A. No Units except those Units issued by the Partnership in connection
with the offering pursuant to the Private Placement Memorandum shall be offered
for sale or issued by the Partnership without the written consent of the General
Partner and the Consent of the Limited Partners.
B. No Partner shall be required or allowed to make any Capital
Contribution, except as specifically set forth in Sections 3.04, 3.05 and 8.02D
or in connection with an issuance of additional Units permitted under Section
3.07A.
Section 3.08. Liability of the Limited Partners. Except as otherwise
described in the Act, no Limited Partner shall be liable for any debts,
liabilities, contracts or any other obligations of the Partnership. Except as
otherwise described in the Act, a Limited Partner has no liability in excess of
his Capital Contribution and his share of the Partnership's assets and
undistributed profits, and shall not be required to lend any funds to the
Partnership or, after his Capital Contribution has been paid, to make any
further Capital Contributions to the Partnership or to pay to the Partnership,
any Partner or to any creditor of the Partnership any portion or all of any
negative balance of his Capital Account.
Section 3.09. Liability of the General Partner. Except as provided in
the Act, the General Partner has the liabilities of a partner in a partnership
without limited partners to Persons other than the Partnership and the other
Partners. Except as provided in the Act or herein, the General Partner has the
liabilities of a general partner in a partnership without limited partners to
the Partnership and to the other Partners. This Agreement shall not be amended
to limit such liability of the General Partner.
Section 3.10. Initial Working Capital Reserve.
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A. The General Partner, as a third party and not as a Partner,
guaranteed to the Partnership that the initial working capital reserves of the
Partnership following the admission of the Original Limited Partners, determined
after the payment of all Organization, Offering and Acquisition Expenses (the
"Initial Working Capital Reserve"), would be equal to $1,971,000. In the event
that the Initial Working Capital Reserve was less than $1,971,000, the General
Partner, as a third party and not as a Partner, would pay such difference to the
Partnership in cash. In consideration of the foregoing, the General Partner, as
a third party and not as a Partner, would be entitled to receive as a payment
from the Partnership any amount by which the Initial Working Capital Reserve
exceeds $1,971,000. As used herein, "Organization, Offering and Acquisition
Expenses" means expenses incurred by the Partnership in connection with the
offering of the Units as set forth in the Private Placement Memorandum
(including, without limitation, all amounts payable to the Placement Agents),
the admission of the Original Limited Partners, the purchase of the Hotel
Interests (including all expenses to be incurred in connection with the purchase
of the San Ramon Hotel) (excluding interest payable on the Deferred Purchase
Debt) and the funding of the Mortgage Debt (including expenses to be incurred in
connection with funding the portion of the Mortgage Debt to be incurred to
finance the acquisition of the San Ramon Hotel). No payments pursuant to this
Section 3.10A shall be reflected in Capital Accounts or otherwise treated as
payments to or from a Partner in the Partnership.
B. No more than $971,000 of the Initial Working Capital Reserve was
permitted to be applied to pay or provide for Partnership administrative
expenses with respect to any Fiscal Year through December 31, 1991. To the
extent not required to pay or provide for Partnership administrative expenses or
other liabilities of the Partnership, amounts in the Initial Working Capital
Reserve could be made available for distribution to the Partners. Any amount
from the Initial Working Capital Reserve determined, for purposes of the
Purchase Agreements, to be available for distribution and thus resulting in a
reduction of any required Purchase Price Adjustment would be included in Cash
Available for Distribution for the Fiscal Year with respect to which such
determination is made.
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ARTICLE FOUR
Allocations Of Profits And Losses;
Distributions Of Cash And Certain Proceeds
Section 4.01. Allocation of Net Profits. Subject to the provisions of
Sections 3.05F(iv) and 4.11, Net Profits with respect to each Fiscal Year will
be allocated as follows: (i) first, through and including the end of the
Accounting Period during which the Partners have received cumulative
distributions of Capital Receipts pursuant to Sections 4.07 (ii) and 4.08A(ii)
equal to $37,626,263, 1% to the General Partner and 99% to the Limited Partners;
and (ii) thereafter, 20% to the General Partner and 80% to the Limited Partners.
Section 4.02. Allocation of Net Losses. Subject to the provisions of
Sections 3.05F(iv) and 4.11, Net Losses for each Fiscal Year shall be allocated
75% to the General Partner and 25% to the Limited Partners.
Section 4.03. Allocations of Gain and Loss.
A. Subject to the provisions of Section 4.11, Gain recognized by the
Partnership shall be allocated (after giving effect to the allocations referred
to in Sections 4.01 and 4.02 and all distributions other than distributions
pursuant to Section 4.08) with respect to any Fiscal Year in the following order
of priority:
(i) first, to all Partners whose Capital Accounts have
negative balances, in the ratio of such negative balances until such
negative balances are brought to zero;
(ii) second, to the Limited Partners in the amount necessary
to bring their respective Capital Account balances to an amount equal
to the Capital Priority Amount and to the General Partner in the amount
necessary to bring its Capital Account balance to an amount equal to
1/99 multiplied by the Limited Partners' Capital Priority Amount;
provided, however, that if there is insufficient Gain to bring such
balances to such levels, then (a) Gain first shall be allocated so as
to cause the ratio of the Limited Partners' Capital Account balances to
the General Partner's Capital Account balance to be 99 to 1 and (b) any
remaining Gain allocable pursuant to this subsection (ii) shall be
allocated 99% to the Limited Partners and 1% to the General Partner;
and
(iii) thereafter, any remaining Gain shall be allocated among
the Partners so that, to the extent possible, the ratio of (A) the
aggregate balance in the Capital Account of the Limited Partners in
excess of the Capital Priority Amount to (B) the balance in the General
Partner's Capital Account in excess of 1/99 of the Limited Partners'
Capital Priority Amount, is 80 to 20.
B. Subject to the provisions of Section 4.11, Losses recognized by the
Partnership shall be allocated (after giving effect to the allocations referred
to in Sections 4.01 and 4.02 and all distributions other than distributions
pursuant to Section 4.08) with respect to any Fiscal Year in the following order
of priority:
(i) first, Losses shall be allocated to the Partners with
positive Capital Account balances until all positive balances in the
Partners' Capital Account balances shall have been eliminated with such
allocation being made in proportion to the outstanding positive Capital
Account balances; and
(ii) second, all remaining Losses shall be allocated 25% to
the Limited Partners and 75% to the General Partner.
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Section 4.04. Allocation Among Limited Partners of Net Profits, Gains,
Net Losses and Losses. Any Net Profits or Net Losses for any Fiscal Year
allocable to the Limited Partners shall be allocated among the Limited Partners
pro rata in accordance with the number of Units owned by each as of the end of
such Fiscal Year; provided that if any Unit is assigned during the Fiscal Year
in accordance with this Agreement, (a) the Net Profits or Net Losses that are so
allocable to such Unit shall be allocated between the assignor and assignee of
such Unit according to the number of Accounting Periods in such Fiscal Year each
owned such Unit, and (b) any Gains or Losses allocable to the Limited Partners
shall be allocated among the Limited Partners who held Units on the last day of
the Accounting Period in which the sale or disposition giving rise to such Gains
or Losses occurred, pro rata in accordance with the number of Units owned by
each such Limited Partner. If any Unit is purported to be assigned by a Limited
Partner other than on the first day of a Fiscal Quarter (in contravention of
this Agreement), then the Partnership shall not recognize such assignment for
the purposes of allocating Net Profits, Gains, Net Losses, or Losses or for any
other purpose unless the assignment is permitted by Section 7.01 hereof and then
only as of the first day of the next Fiscal Quarter commencing after the
expiration of 15 days from the receipt by the Partnership of an application for
such assignment. The preceding sentence shall not apply to the Units transferred
by Limited Partners to MHP II Acquisition Corp. pursuant to MHP II Acquisition
Corp.'s Offer to Purchase for Cash All Outstanding Units of Limited Partnership
Interest, dated April 18, 1996, which transfers shall be considered to be in
accordance with this Agreement, shall be deemed to occur on the first day of the
Accounting Period in which the transfer of such Units occurs and shall be
governed by the first sentence of this Section 4.04.
Section 4.05. Allocation of Recapture Income. "Recapture income," if
any, realized by the Partnership pursuant to section 1245 or section 1250 of the
Code directly, or allocated to the Partnership from the Santa Clara Partnership,
and allocated to the Partners under Sections 4.01, 4.02 or 4.03 shall be
allocated, to the extent possible, to the Partners to whom (or to whose
predecessors in interest) the prior corresponding depreciation deductions were
allocated, such allocations to be made pro rata to the Partners in accordance
with the manner in which such depreciation deductions were allocated.
Section 4.06. Distribution of Cash Available for Distribution.
A. Cash Available for Distribution with respect to each Fiscal Year
shall be distributed at least semi-annually, not later than October 31st of each
Fiscal Year and April 15th of each succeeding Fiscal Year, as follows:
(i) first, 100% to the Limited Partners until the Limited
Partners shall have received with respect to such Fiscal Year an amount
equal to the Limited Partners' 10% Preferred Distribution;
(ii) second 100% to the General Partner until the General
Partner shall have received with respect to such Fiscal Year an amount
equal to 1/99 multiplied by the amount distributed to the Limited
Partners pursuant to Section 4.06A(i) with respect to such Fiscal Year;
and
(iii) third, through and including the end of the Accounting
Period during which the General Partner and the Limited Partners have
received cumulative distributions of Capital Receipts pursuant to
Sections 4.07 (ii) and 4.08A(ii) equal to $37,626,263 (of which the
Limited Partners' portion would equal $50,000 per Unit), 1% to the
General Partner and 99% to the Limited Partners, and thereafter, 20% to
the General Partner and 80% to the Limited Partners.
B. In determining the amount of the distribution to be made on or
before October 31st of each Fiscal Year, the General Partner shall estimate the
Cash Available for Distribution with respect
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to such Fiscal Year as a result of the first nine Accounting Periods of such
Fiscal Year (for 1989, the actual number of Accounting Periods ending prior to
September 15) and shall reduce such amount by such reserves as the General
Partner reasonably determines are necessary to provide for the doing operation
of the Partnership. The amount of the distribution to be made on or before April
15th of the succeeding Fiscal Year shall be the Cash Available for Distribution
for the prior Fiscal Year, reduced by the amount of the distribution made with
respect to such Fiscal Year pursuant to the preceding sentence.
C. The Limited Partners' 10% Preferred Distribution for 1989 was
pro-rated, based upon the number of days in the Fiscal Year from the date of the
closing of the offering pursuant to the Private Placement Memorandum. For
purposes of Sections 4.06A(i) and (ii), distributions made within 105 days after
the end of a Fiscal Year shall be deemed made with respect to such Fiscal Year.
Section 4.07. Distribution of Refinancing Proceeds. Refinancing
Proceeds shall, unless the General Partner, in its reasonable discretion, shall
determine to retain any such amounts in the Partnership, be distributed as
follows:
(i) first, until the Limited Partners shall have received
cumulative distributions of Capital Receipts pursuant to this Section
4.07(i) equal to the then outstanding Limited Partners' 15% Preferred
Distribution, 1% to the General Partner and 99% to the Limited
Partners;
(ii) second, until the Limited Partners shall have received
cumulative distributions of Capital Receipts pursuant to this Section
4.07(ii) and Section 4.08A(ii) below equal to the Limited Partners'
Invested Capital, 1% to the General Partner and 99% to the Limited
Partners; and
(iii) thereafter, 20% to the General Partner and 80% to the
Limited Partners.
Section 4.08. Distribution of Sale Proceeds.
A. Sale Proceeds from the sale or other disposition of less than
substantially all of the assets of the Partnership shall, unless the General
Partner, in its reasonable discretion, shall determine to retain any such
amounts in the Partnership, be distributed as follows:
(i) first, until the Limited Partners shall have received
cumulative distributions pursuant to this Section 4.08A(i) equal to the
then outstanding Limited Partners' 15% Preferred Distribution, 1% to
the General Partner and 99% to the Limited Partners;
(ii) second, until the Limited Partners shall have received
cumulative distributions of Capital Receipts pursuant to this Section
4.08A(ii) and Section 4.07(ii) above equal to the Limited Partners'
Invested Capital, 1% to the General Partner and 99% to the Limited
Partners; and
(iii) thereafter, 20% to the General Partner and 80% to the
Limited Partners.
B. As provided in Section 8.02, Sale Proceeds from the sale or other
disposition (or from a related series of sales or dispositions) of all or
substantially all of the remaining assets of the Partnership will be distributed
to the Partners in accordance with their Capital Account balances, as adjusted
to take into account Gain or Loss resulting from such sale or sales.
Section 4.09. Distribution Among Limited Partners of Cash Available for
Distribution, Refinancing Proceeds and Sale Proceeds. The distribution of Cash
Available for Distribution distributable with respect to any Fiscal Quarter to
the Limited Partners pursuant to Section 4.06,
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shall be distributed to the Limited Partners of record as of the end of the
Fiscal Quarter prior to the date of distribution, pro rata in accordance with
the number of Units owned by each as of the end of such Fiscal Quarter, after
any deduction pursuant to Section 3.05F(i). Capital Receipts distributable to
the Limited Partners pursuant to Section 4.07 or Section 4.08A shall be
distributed to the Limited Partners pro rata in accordance with the number of
Units owned by each such Limited Partner on the day of the Fiscal Quarter in
which the transaction giving rise to such proceeds was completed. If a Unit is
purported to be assigned by a Limited Partner other than on the first day of a
Fiscal Quarter (in contravention of this Agreement), then the Partnership shall
not recognize such assignment for the purpose of distributing amounts pursuant
to Sections 4.06, 4.07 and 4.08 or for any other purpose unless the assignment
is permitted by Section 7.01 hereof, and then only as of the first day of the
next Fiscal Quarter commencing after the expiration of 15 days from the receipt
by the Partnership of an application for such assignment. The preceding sentence
shall not apply to the Units transferred by Limited Partners to MHP II
Acquisition Corp. pursuant to MHP II Acquisition Corp.'s Offer to Purchase for
Cash All Outstanding Units of Limited Partnership Interest, dated April 18,
1996, which transfers shall be considered to be in accordance with this
Agreement, shall be deemed to occur on the date of transfer of such Units for
purposes of Sections 4.06, 4.07 and 4.08 (which shall result in MHP II
Acquisition Corp. becoming the Limited Partner of record on such date of
transfer), and, notwithstanding the first sentence of this Section 4.09, any
distributions pursuant to Section 4.06 with respect to such transferred Units
made after such date of transfer but before the first day of the first Fiscal
Quarter commencing after such date of transfer shall be made to MHP II
Acquisition Corp.
Section 4.10. Section 754 Adjustments. For income tax purposes (but not
for purposes of adjusting the Capital Accounts of the Partnership, except as
otherwise provided in section 1.704-1(b)(2)(iv) of the Treasury regulations),
appropriate adjustments shall be made in the information furnished to affected
Limited Partners with respect to allocations under this Article Four in order to
reflect adjustments in the basis of Partnership property permitted pursuant to
any election under Section 754 of the Code if the General Partner, in its sole
discretion, makes such election. If such an election is made, the Partnership
shall make the basis adjustments and calculate depreciation deductions in
accordance with such adjustments for those transferee Limited Partners who
advise the Partnership of this obligation and provide sufficient information to
enable the Partnership to determine when, and at what price, such transferee
Limited Partners acquired Units. In the case of a transferee Limited Partner who
does not advise the Partnership of such information, the Partnership will
attempt to supply such Limited Partner with reasonably available information
that will permit such Limited Partner to make the required basis adjustment
calculation.
Section 4.11. Special Allocations. The following provisions shall apply
notwithstanding the provisions of Sections 4.01, 4.02, 4.03 and 4.04. In the
event that there is a conflict between any of the following provisions, the
earlier listed provision shall govern.
A. If there is a net decrease in the Minimum Gain attributable to
Nonrecourse Liabilities during any Fiscal Year, each Partner shall be specially
allocated items of Partnership income and gain for such year (and, if necessary,
for subsequent years) in proportion to, and to the extent of, an amount equal to
such Partner's share of the net decrease in such Minimum Gain during such year
(as such share is determined pursuant to section 1.704-2(g)(2) of the Treasury
regulations). It is intended that items to be so allocated shall be determined
and the allocations made only to the extent of the minimum gain chargeback
requirement of section 1.704-2(f) of the Treasury regulations, and this Section
4.11A shall be interpreted consistently therewith.
B. If there is a net decrease in the Minimum Gain attributable to
Partner Nonrecourse Debts during any Fiscal Year, each Partner who has a share
of the Minimum Gain (determined in accordance with section 1.704-2(i)(5) of the
Treasury regulations) attributable to such Partner Nonrecourse Debts as of the
beginning of such year shall be specially allocated items of Partnership income
and gain for such year (and, if necessary, for subsequent years) in proportion
to, and to the
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extent of, an amount equal to such Partner's share of the net decrease in such
Minimum Gain. It is intended that items to be so allocated shall be determined
and the allocations made in accordance with the minimum gain chargeback
requirement of section 1.704-2(i)(4) of the Treasury regulations, and this
Section 4.11B shall be interpreted consistently therewith.
C. In the event a Partner unexpectedly receives in any taxable year any
adjustments, allocations or distributions described in Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6) of the Treasury regulations that cause or
increase an Adjusted Capital Account Deficit of such Partner, items of
Partnership income and gain shall be specially allocated to such Partner in such
taxable year (and, if necessary, in subsequent taxable years) in an amount and
manner sufficient to eliminate, to the extent required by the Treasury
regulations, the Adjusted Capital Account Deficit of such Partner as quickly as
possible. It is intended that items to be so allocated shall be determined and
the allocations made in accordance with the "qualified income offset"
requirement of Section 1.704-1(b)(2)(ii)(d), and this Section 4.11C shall be
interpreted consistently therewith.
D. No Net Losses, Losses, or Partnership deductions for any Fiscal Year
shall be allocated to any Limited Partner to the extent such allocation would
cause or increase an Adjusted Capital Account Deficit with respect to such
Partner, and such Net Losses, Losses, or Partnership deductions instead shall be
allocated to the General Partner.
E. If in any Fiscal Year there is a net increase during such year in
the amount of Minimum Gain attributable to a Partner Nonrecourse Debt, any
Partner bearing the economic risk of loss with respect to such debt (within the
meaning of section 1.752-2 of the Treasury regulations) shall be specially
allocated items of Partnership loss or deduction in an amount equal to the
excess of (i) such Partner's share of the amount of such net increase, over (ii)
the aggregate amount of any distributions during such year to such Partner of
the proceeds of such debt that are allocable to such increase in Minimum Gain.
It is intended that items to be so allocated shall be determined and the
allocations made in accordance with the required allocation of "partner
nonrecourse deductions" pursuant to section 1.704-2(i)(1) and (2) of the
Treasury regulations and this Section 4.11E shall be interpreted consistently
therewith.
F. If in any Fiscal Year items of Partnership loss or deduction are
specially allocated to the General Partner pursuant to Section 4.11E, the
General Partner shall be specially allocated in such year (and, if necessary,
subsequent years) items of Partnership gross income in an amount equal to the
amount of such specially allocated loss or deduction.
G. Selling commissions and similar fees that are "syndication
expenses," as described in the Treasury regulations under section 709 of the
Code, paid or incurred by the Partnership in any Fiscal Quarter 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 Fiscal Quarter. In this regard,
there shall be charged to the Capital Account of each Unit sold by the Placement
Agents (other than Units sold to the General Partner, its Affiliates, or
officers, directors or employees of the General Partner or its Affiliates or to
the Placement Agents) an amount of up to $10,000 per Unit. Any other such
syndication expenses shall be allocated to and charged to the Capital Accounts
of the Partners in the following manner: 99% to the Limited Partners and 1% to
the General Partner.
H. Deductions for interest expense on the Deferred Purchase Debt
incurred in each Fiscal Year shall be allocated solely to the Limited Partners
owning the Units during such Fiscal Year with respect to which Capital
Contributions are being paid in installments; provided, however, that the total
allocation under this Section 4.11H with respect to any Unit since the formation
of the Partnership shall not exceed $10,753.
I. In the event that any fees, interest, or other amounts paid to a
Partner or an Affiliate of a Partner pursuant to this Agreement, the Management
Agreements, or any other agreement between
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the Partnership and such Partner or Affiliate providing for the payment of such
amounts, and deducted by the Partnership, whether in reliance upon section 162,
163, 707(a) or 707(c) of the Code or otherwise, are disallowed as deductions to
the Partnership on its federal income tax return for the Fiscal Year in or with
respect to which such amounts are paid and are treated instead as Partnership
distributions, then:
(i) the Net Profits or Net Losses, as the case may be, for
the Fiscal Year in or with respect to which such fees, interest, or
other amounts were paid shall be increased or decreased, as the case
may be, by the amount of such fees, interest, or other amounts that are
disallowed and treated as Partnership distributions; and
(ii) there shall be allocated to the Partner who received (or
whose Affiliate received) such payments an amount of gross income for
the Fiscal Year in or with respect to which such fees, interest or
other amounts were paid equal to the amount of such fees, interest or
other amounts that are so disallowed and treated as Partnership
distributions.
J. If the Partnership acquires property by purchase or exchange from a
transferor who, on the transaction, sustained a loss not allowable in whole or
in part as a deduction by reason of section 267(a)(1) of the Code, and the
Partnership subsequently realizes an amount of gain on the sale or other
disposition of the property which is not recognized by reason of section 267(d),
then
(i) the amount of Gain allocated under Section 4.03A to the
Partner or Partners related to such transferor shall be deemed to
consist of the Section 267(d) Gain to the extent of the lesser of the
amount of the Section 267(d) Gain or the amount of Gain allocated to
such Partner(s) pursuant to Section 4.03A; and
(ii) if the amount of the Section 267(d) Gain exceeds the
amount of Gain allocated to the Partner or Partners related to such
transferor pursuant to Section 4.03A, the amounts of Gain allocated to
the other Partners under Section 4.03A shall be deemed to consist pro
rata of such excess Section 267(d) Gain.
Section 4.12 Operating Rules.
A. Solely for purposes of determining a Partner's proportionate share
of "excess nonrecourse liabilities" of the Partnership within the meaning of
section 1.752-3(a)(3) of the Treasury regulations, the General Partner's
interest in Partnership profits shall equal 20% and the Limited Partners'
aggregate interest in Partnership profits shall equal 80%. Each Limited
Partner's share of Partnership profits shall be the product of 80% times a
fraction, the numerator of which is the total number of Units owned by such
Limited Partner as of the time as of which the determination of such Limited
Partner's share is being made and the denominator of which is the total number
of Units as of such time.
B. Except as otherwise specifically provided in this Agreement, the
distributive share of a Partner of each specific deduction and item of income,
loss, and credit of the Partnership for Federal income tax purposes shall be the
same as such Partner's share of Net Profits, Gains, Net Losses, or Losses, as
the case may be, for such Fiscal Year.
C. For purposes of this Agreement, any amount of taxes required to be
withheld by the Partnership to any Partner or required to be paid by the
Partnership in respect of any Partner's tax obligation shall be deemed to be a
distribution or payment to such Partner and shall reduce the amount otherwise
distributable to such Partner pursuant to this Agreement.
D. In the event of a sale or other disposition of less than
substantially all of the assets of the Partnership, (i) for purposes of
determining the balances in the Capital Accounts of the Partners in
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order to allocate Gain or Loss recognized from such sale or disposition pursuant
to Sections 4.03 and 4.04, each Partner's Capital Account balance shall be
deemed to include any amount that such Partner is deemed to be obligated to
restore pursuant to the penultimate sentence of sections 1.704-2(g)(1) and
1.704-2(i)(5) of the Treasury regulations (determined after taking into account
any changes during such year in Minimum Gain, including changes in Minimum Gain
resulting from such sale or other disposition); and (ii) for purposes of
determining the Capital Accounts in order to allocate Loss recognized from such
sale or disposition pursuant to Sections 4.03 and 4.04, each Partner's Capital
Account shall be reduced by the items described in sections 1.704-
1(b)(2)(ii)(d)(4), (5), and (6).
Section 4.13 Minimum Interest of the General Partner" The interest of
the General Partner in each item of the Partnership's income, gain, loss,
deduction and credit shall at all times during the existence of the Partnership
be equal to at least 1% of each such item.
ARTICLE FIVE
RIGHTS, POWERS AND DUTIES OF
THE GENERAL PARTNER
Section 5.01 Authority of the General Partner to Manage the
Partnership.
A. The General Partner 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 in accordance with the
provisions of this Agreement and applicable law, and is hereby authorized to
take any action of any kind and to do anything and everything it deems necessary
or appropriate in accordance with the provisions of this Agreement and
applicable law. Except as expressly provided herein, the authority to conduct
the business of the Partnership shall be exercised only by the General Partner.
Subject to Section 5.01E, the General Partner may appoint, contract, or
otherwise deal with any Person, including employees of its Affiliates, to
perform any acts or services for the Partnership necessary or appropriate for
the conduct of the business and affairs of the Partnership.
B. No Limited Partner shall participate in or have any control
whatsoever over the Partnership's business or have any authority or right to act
for or bind the Partnership. The Limited Partners hereby unanimously Consent to
the exercise by the General Partner of the powers conferred on it by this
Agreement, subject to the restrictions and limitations set forth in this
Agreement or the Act.
C. Except to the extent otherwise provided herein, the General Partner
is hereby authorized, without Consent of the Limited Partners, to:
(i) execute any and all agreements (including the Purchase
Agreements and the Management Agreements, which agreements shall be
deemed to satisfy all requirements of this Agreement), contracts,
documents, certifications and instruments necessary or convenient in
connection with the acquisition, development, financing, management,
maintenance, operation, sale or other disposition of the Partnership's
properties and assets except as otherwise limited by this Agreement;
(ii) borrow money from itself or others (including Affiliates
of any general partner of the Partnership) 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 assets of the Partnership, such borrowing
and security to be only with respect to the following: (a) the Deferred
Purchase Debt, (b) any amounts advanced by the General Partner or an
Affiliate of the General Partner (which
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amounts may or may not be secured) or any other lender to enable the
Partnership to satisfy its obligations arising in the normal course of
its business, to make payments of principal, interest, premium or
penalty on any debt of the Partnership or to make capital repairs,
improvements and expansions, provided any required Consent of the
Limited Partners is obtained, (c) the Mortgage Debt, (d) amounts
incurred exclusively for the purpose of a distribution to the Partners,
(e) any indebtedness the incurrence of which has been specifically
consented to by the Limited Partners under Section 5.02B, (f) any
indebtedness incurred to refinance (and thereafter further refinance as
often as shall be necessary) the unamortized portion of any of the
foregoing from time to time and any expenses of such refinancing, or
(g) any indebtedness that the General Partner otherwise has determined,
in accordance with its fiduciary duties as a general partner, is in the
best interests of the Partnership and the Limited Partners; provided,
however, that in connection with the borrowing of money on a
nonrecourse basis, no lender shall, unless permitted pursuant to
Section 5.02B, 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 (to the extent
permitted by clause (ii) above), fix the interest rate on, recast,
modify or extend any debt affecting or encumbering any of the
Partnership's property and in connection therewith to execute any
extensions, consolidations, modifications or renewals of mortgages on
any assets of the Partnership;
(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 Partner or
any Affiliate of the General Partner. No such dealing, engaging in
business or providing of 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 Partner or any Affiliate of the General
Partner. The General Partner may on behalf of the Partnership enter
into agreements to employ agents, attorneys, accountants, engineers,
appraisers, or other consultants or contractors who may be Affiliates
of the General Partner and may enter into agreements to employ
Affiliates of the General Partner to provide further or additional
services to the Partnership; provided that any employment of such
Persons will be subject to Section 5.01E and will be on terms not less
favorable to the Partnership than those offered by persons who are not
Affiliates of the General Partner 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 limited partnership
under the laws of the State of Delaware, the states where the Hotels
are located, and in each state where the Partnership has been qualified
to do business;
(vi) if such sale would be permitted under Section 5.02C,
either sell the Partnership's interest in the Santa Clara Partnership
or vote the Partnership's interest in the Santa Clara Partnership to
permit a sale of the Santa Clara Hotel;
(vii) take such actions (including, but not limited to,
amending this Agreement) as the General Partner determines are
advisable or necessary, based upon advice of counsel to the
Partnership, and will not result in any material adverse effect on the
economic position of holders of a majority of the Units, to (a)
preserve the tax status of the Partnership as a partnership for Federal
income tax purposes, (b) to conform this Agreement to (i) the Act for
the purpose of preserving the tax status of the Partnership as a
partnership for Federal income tax purposes, or (ii) provisions of the
Code or the Treasury regulations relating to
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taxation of partners and partnerships, including, without limitation,
any changes thereto, or (c) in the event that any provision of the Code
or the Treasury regulations causes the terms of this Agreement to
differ to the detriment of the Limited Partners from the terms as
contemplated by the Partners (as reflected in the Private Placement
Memorandum), to modify this Agreement in a manner designed to
ameliorate such difference; or
(viii) take any action on behalf of the Partnership
authorized, required, or permitted to be taken by the Partnership under
the Santa Clara Partnership Agreement.
D. Any Person dealing with the Partnership or the General Partner may
rely upon a certificate signed by the Secretary or Assistant Secretary of the
General Partner, thereunto duly authorized, as to:
(i) the identity of the General Partner or any Limited
Partner;
(ii) the existence or non-existence of any fact or facts
which constitute a condition precedent to the acts by the General
Partner 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.
E. Any agreements, contracts and arrangements between either the
Partnership or the Santa Clara Partnership and the General Partner or any of its
Affiliates, except for rendering legal, tax, financial, accounting, procurement
and engineering services by employees of the General Partner and Affiliates of
the General Partner, which agreements shall be on commercially reasonable terms,
shall be subject to the following additional conditions:
(i) such services, goods, or materials must be reasonably
necessary to the prudent operation of the business of the Partnership;
(ii) the General Partner or any such Affiliate must have the
ability to render such services;
(iii) such agreements, contracts or arrangements must be fair
to the Partnership and reflect commercially reasonable terms and shall
be embodied in a written contract which precisely describes the subject
matter thereof and all compensation to be paid therefor;
(iv) no rebates or give-ups may be received by the General
Partner or any such Affiliate, nor may the General Partner or any such
Affiliate participate in any reciprocal business arrangements which
would have the effect of circumventing any of the provisions of this
Agreement; and
(v) no such agreement, contract or arrangement as to which
the Limited Partners had previously given Consent may be amended in
such manner as to increase the fees or other compensation payable to
the General Partner or any such Affiliate or to decrease the
responsibilities or duties of the General Partner or any such Affiliate
in the absence of the Consent contemplated by Section 5.02B(iii).
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Section 5.02 Restrictions on Authority of the General Partner.
A. Without an amendment to this Agreement, which amendment shall
require the unanimous Consent of all the Limited Partners, the General Partner
shall not have authority on behalf of the Partnership to:
(i) do any act in contravention of this Agreement;
(ii) except as otherwise provided in this Agreement, do any
act which would make it impossible to carry on the ordinary business of
the Partnership;
(iii) confess a judgment in excess of $250,000 against the
Partnership;
(iv) convert property of the Partnership to its own use, or
possess or assign any rights in specific property of the Partnership
for other than a purpose of the Partnership;
(v) admit a Person as a Limited Partner or as a General
Partner, except as provided in this Agreement;
(vi) 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 Act;
(vii) list, recognize, or facilitate the trading of the
Interests (or any interests therein) on any "established securities
market" within the meaning of section 7704 of the Code, or permit any
of its Affiliates (or to the extent the General Partner has rights with
respect thereto, the selling agents or any of their Affiliates) to take
such actions, if as a result thereof the Partnership would be taxed for
Federal income tax purposes as an association taxable as a corporation;
or
(viii) create for the Interests (or any interest therein) a
"secondary market" (or the substantial equivalent thereof) within the
meaning of section 7704 of the Code or otherwise permit, recognize or
facilitate the trading of the Interests (or any interest therein) on
any such market, or permit any of its Affiliates (or to the extent the
General Partner has rights with respect thereto, selling agents or any
of their Affiliates) to take such actions, if as a result thereof the
Partnership would be taxed for Federal income tax purposes as an
association taxable as a corporation.
B. Without an amendment to this Agreement, which amendment shall
require the Consent of the Limited Partners, the General Partner shall not have
the authority on behalf of the Partnership to:
(i) have the Partnership acquire interests in other hotel
properties, or in other entities owning hotels, in addition to the
Hotel Interests or in other assets not reasonably related to the
conduct of the Partnership's business as set forth in Section 2.03;
(ii) sell or otherwise dispose of or consent to the sale or
disposition of any Hotel or the Partnership's interest in the Santa
Clara Partnership (except as permitted in Section 5.02C below), or any
interest in any of the foregoing, provided, however, that if it is
proposed that the Partnership sell any Hotels or interests therein to
the General Partner or an Affiliate of the General Partner, the Consent
of the Limited Partners must be obtained after the following procedures
are followed: (a) the General Partner shall give not less than 30 days'
notice of the proposed sale to the Limited Partners, which notice shall
set forth the price and other material terms and conditions on which
the proposed transaction is to be
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effected; (b) the Partnership shall obtain three appraisals of the fair
market sales value of the Hotel or Hotels to be sold, such appraisals
to be prepared by independent, nationally recognized appraisers
experienced in the valuation of hotel properties selected by the
General Partner (the cost of all such appraisals to be borne by the
General Partner or its Affiliate); (c) such appraiser shall not have,
directly or indirectly, any material interest in or material business
or professional relationship with the General Partner or any of its
Affiliates and the compensation of each such appraiser shall be
determined and embodied in a written contract before such appraisal is
prepared; (d) the price at which the sale is effected shall not be less
than the average of the three amounts determined by the three
appraisers, disregarding entirely any appraisal that differs by more
than 20% from the amount determined by the appraiser whose
determination is between the highest and lowest of the amounts
determined by the three appraisers (in the case of a purchase pursuant
to the right of first refusal granted to the Manager, the price shall
not be less than the higher of such average or the price offered to the
Partnership by a third party); (e) the purchase price must be payable
in cash; (f) no real estate commission may be paid by the Partnership
in connection with such sale; and (g) the General Partner shall include
copies of such appraisals with the aforesaid notice to the Limited
Partners;
(iii) effect any amendment to any agreement, contract or
arrangement with the General Partner or any of its Affiliates
(including, without Limitation, the Purchase Agreements and, if the
Manager is an Affiliate of the General Partner, the Management
Agreements) which reduces the responsibilities or duties of the General
Partner as a general partner of the Partnership or any of its
Affiliates under this Agreement or any other agreement, contract or
arrangement, or which increases the compensation payable to the General
Partner or any of its Affiliates, or which adversely affects the rights
of the Limited Partners;
(iv) incur debt of the Partnership except as set forth in
Section 5.01C(ii);
(v) agree to the addition of transient guest rooms at any
Hotel unless (a) the Hotel has had an average occupancy rate of at
least 70% for a consecutive period of at least 12 months immediately
prior to commencement of construction of the addition; and (b) the
Partnership has obtained debt financing to finance the costs of the
addition on a nonrecourse basis as to all the Partners and the
Partnership (including the General Partner), except as provided in
Section 5.02B(viii);
(vi) make any election to continue beyond its term,
discontinue or dissolve the Partnership;
(vii) voluntarily withdraw as a General Partner;
(viii) permit or cause the Partnership to incur any debt in
excess of $250,000 (other than the Mortgage Debt, the Deferred Purchase
Debt, and liabilities to Marriott and its Affiliates with respect to
the Debt Service Guarantee or the Santa Clara Debt Service Advances)
otherwise permitted to be incurred pursuant to the terms of this
Agreement if such debt would not constitute in its entirety both
"qualified nonrecourse financing" within the meaning of section
465(b)(6)(B) of the Code and the applicable Treasury regulations and a
Nonrecourse Liability, unless (a) the General Partner, in accordance
with its fiduciary duties as a general partner and taking into
consideration the tax consequences to the Limited Partners, determines
that such action is not detrimental to the best interests of the
Limited Partners, or (b) the General Partner shall have obtained the
Consent of the Limited Partners to such action;
(ix) cause the Partnership to merge or consolidate with any
other entity;
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(x) cause the Partnership to borrow any funds from the
General Partner or any Affiliate of the General Partner unless such
borrowing is in accordance with Section 5.01E and Section 5.06C;
(xi) cause the Partnership to acquire any property from the
General Partner and any Affiliate of the General Partner in exchange
for Interests in the Partnership; or
(xii) cause the Partnership to incur any debt that would
result in Refinancing Proceeds, unless such Refinancing Proceeds are
distributed to the Partners in the same taxable year in which the
Partnership incurred such liability.
C. Except as specifically set forth in this Section 5.02C, the General
Partner shall have the power (i) to consent to any action by the Santa Clara
Partnership requiring the consent of the Partnership under the Santa Clara
Partnership Agreement and (ii) to take any action permitted to be taken by the
Partnership under the Santa Clara Partnership Agreement. The General Partner
shall not consent to any action by the Santa Clara Partnership requiring the
consent of the Partnership under the Santa Clara Partnership Agreement (or vote
the Partnership's interest in the Santa Clara Partnership to permit any such
action) if such action, were it to be taken directly by the Partnership, would
require an amendment to this Agreement with a specified Consent of the Limited
Partners (or otherwise would have been prohibited) pursuant to Section 5.02A or
Section 5.02B unless and until such an amendment, with the specified Consent,
shall have been obtained. Conversely, the Limited Partners shall be permitted to
amend this Agreement to cause the Partnership to take any action permitted by
the Partnership under the Santa Clara Partnership Agreement if such action, were
it to be taken with respect to the Partnership, could be taken through an
amendment to this Agreement by a specified Consent of the Limited Partners
pursuant to Section 6.05B or Section 10.02 without the approval of the General
Partner. Notwithstanding the foregoing or any provision of Section 5.02B, the
General Partner shall be permitted to consent to a sale of the Santa Clara
Hotel, or cause the Partnership to dispose of its entire interest in the Santa
Clara Partnership, without the Consent of the Limited Partners, so long as the
following conditions are satisfied:
(i) such sale or disposition is to a Person other than the
General Partner or an Affiliate thereof (other than an Affiliate solely
by reason of the fact that the General Partner and/or its Affiliates
have an interest equal to one percentage point or less in the acquiring
Person);
(ii) such sale is part of a transaction involving a sale of
the Santa Clara Partnership's entire interest in the Santa Clara Hotel
or a sale of either all or all but up to one percentage point of the
aggregate interest of the other partners (other than the Partnership)
in the Santa Clara Partnership (the "Other Santa Clara Partners");
(iii) if the Manager is an Affiliate of the General Partner,
the changes, if any, in the terms and conditions (including the
compensation payable) under the Management Agreement with respect to
the Santa Clara Hotel that will occur as a result of or in connection
with such sale cannot, in the aggregate, be materially more beneficial
to the Manager and its Affiliates than those in effect prior to the
sale; and
(iv) the total amount payable to the Other Santa Clara
Partners and any Affiliates thereof in connection with or as a result
of such sale, irrespective of how denominated (including, without
limitation, compensation for services to be rendered other than
pursuant to the Management Agreement, if the Manager is an Affiliate of
the General Partner), and the terms on which such payments are to be
made, shall be identical in all material respects to the total amount
payable to the Partnership (and the terms on which such payments are to
be made), subject to (a) repayment of the Santa Clara Mortgage Debt
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(or certain specified replacement debt with respect to the Santa Clara
Hotel), Santa Clara Debt Service Advances, advances under the Debt
Service Guarantee, and any other obligations of the Partnership
required to be paid in connection with or as a result of such sale, (b)
any adjustments necessary to reflect the retention by the Other Santa
Clara Partners of up to a one percentage point interest in the event of
a sale of their interest in the Santa Clara Partnership, and (c)
payment of any amounts payable under the Management Agreement in
connection with or as a result of such sale.
For purposes of this Section 5.02C, an interest of the General Partner or any
Affiliate of any entity shall be considered to satisfy the "one percentage
point" limitation set forth above only if the interest of the General Partner
and/or its Affiliates in any cash, property, and tax attributes (or any items or
portion thereof) of such entity in question can never exceed one percentage
point under any circumstances.
Section 5.03 Duties and Obligations of the General Partner.
A. The General Partner shall take all action which may be necessary or
appropriate for the acquisition, development, maintenance, preservation and
operation of the properties and assets of the Partnership in accordance with the
provisions of this Agreement and applicable laws and regulations (it being
understood and agreed, however, that the General Partner shall be permitted to
cause the Partnership to contract with other Persons for the direct performance
of day-to-day management or operational services for the Hotels and other
properties of the Partnership) and that the General Partner shall have no
obligation to perform such services itself, the General Partner's obligation
with respect thereto being limited to using its best efforts to cause the
Partnership to locate and employ a manager or operator to perform such services.
B. The General Partner shall not (i) directly or through a subsidiary
engage in any business other than that of acting as a partner of the Partnership
and the Santa Clara Partnership, (ii) pay dividends or make other distributions
or payments on its stock or incur any obligations if, as a result, its net worth
would be reduced below the requirement of Section 5.03D, (iii) merge or
consolidate with another corporation except Marriott or a wholly owned direct or
indirect subsidiary of Marriott, (iv) voluntarily dissolve, or (v) borrow any
funds or become liable for any obligations of third parties except to the extent
that any such borrowings or liabilities are directly related to meeting the
financial needs of the Partnership and the Santa Clara Partnership. MPI and the
General Partner agree that so long as the General Partner is the general partner
of the Partnership, its parent company, MPI, will not transfer its stock of the
General Partner except to a wholly owned, direct or indirect, subsidiary of
Marriott, and Marriott and the General Partner agree that so long as the General
Partner is the general partner of the Partnership, Marriott will not sell the
stock of MPI unless the stock of the General Partner is thereafter owned by
Marriott or a wholly owned, direct or indirect, subsidiary of Marriott.
C. The General Partner shall devote to the Partnership and the Santa
Clara Partnership such time as may be necessary for the proper performance of
its duties hereunder, but the officers and directors of the General Partner
shall not be required to devote their full time to the performance of duties of
the General Partner.
D. The General Partner shall use its reasonable best efforts to
maintain at all times a net worth of $7.6 million in excess of its investment in
the Partnership and the Santa Clara Partnership.
E. The General Partner 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. If required by law, the General Partner shall file
or cause to be filed for recordation in
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the office of the appropriate authorities of the State of Delaware, 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 by the
applicable statutes, rules or regulations of any such jurisdiction or as are
necessary to reflect the identity of the Partners and the amounts of their
respective Capital Contributions.
F. The General Partner shall be obligated to use its best efforts to
remove any General Partner or Affiliate guarantee or personal liability with
respect to any Partnership debt that was permitted under Section 5.02B(viii)
hereof when such action was incurred, but that subsequently results or will
result in material adverse tax consequences to the Limited Partners if (i) such
guarantee or personal liability would no longer be permitted if such debt were
first being incurred at the time of such adverse consequences and (ii) the
removal of such guarantee or personal liability would substantially mitigate the
material adverse tax consequences to the Limited Partners.
G. Except as otherwise permitted in Section 5.02B(viii), the 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.
H. The General Partner 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 Partner
shall cause the Partnership to pay any taxes payable by the Partnership, whether
by way of withholding from distributions to the Partners or otherwise.
I. The General Partner shall be under a duty to conduct the affairs of
the Partnership in good faith and in accordance with the terms of this Agreement
and in a manner consistent with the purposes set forth in Section 2.03. Nothing
contained in this Agreement is intended or shall be construed to contract away
the fiduciary duty of the General Partner to the Limited Partners.
J. The General Partner shall use its 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.
K. The General Partner shall monitor the transfers of Interests to
determine (i) if such Interests are being traded on an "established securities
market" or a "secondary market" (or the substantial equivalent thereof) within
the meaning of section 7704 of the Code, and (ii) whether additional transfers
of Interests would result in the Partnership being unable to qualify for at
least one of the "safe harbors" set forth in IRS Notice 88.75 (or such other
guidance subsequently published by the IRS setting forth safe harbors under
which Interests will not be treated as "readily tradable on a secondary market"
(or the substantial equivalent thereof) within the meaning of section 7704 of
the Code) (the "Safe Harbors"). The General Partner shall take (and cause its
Affiliates to take) all steps reasonably necessary or appropriate to prevent any
trading of Interests or any recognition by the Partnership of transfers made on
such markets and, except as otherwise provided herein, to ensure that at least
one of the Safe Harbors is met.
L. The General Partner shall maintain or cause to be maintained the
subscription documents obtained from the Original Limited Partners to
demonstrate that they meet the suitability standards employed in connection with
the offering of Units pursuant to the Private Placement Memorandum and shall
obtain a commitment from the Placement Agents to maintain the same record of
information required of the General Partner.
M. The General Partner shall make an advance to the Partnership in an
amount equal to the amount, if any, that the Partnership is required to pay to
the Santa Clara Partnership pursuant to its obligation to restore any deficit in
its capital account balance under the Santa Clara Partnership Agreement. Any
such advance shall bear interest at a rate equal to the Prime Rate plus
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one percentage point (or the highest lawful rate under the laws of the State of
Delaware, whichever is less). Any such advance and all interest accrued thereon
will be repaid as follows: (i) out of Cash Available for Distribution for any
Fiscal Year to the extent the amount thereof exceeds the amount distributable to
the Limited Partners with respect to such Fiscal Year pursuant to Section
4.06A(i); (ii) out of any Capital Receipts prior to a distribution thereof to
the Partners; and (iii) in any event, ten (10) years from the date of such
advance.
Section 5.04 Compensation of General Partner The General Partner as
general partner of the Partnership shall not in such capacity receive any
salary, fees, profits or distributions except for such allocations,
distributions or payments to which it may be entitled under Article Three,
Article Four, Article Five or Article Eight. Notwithstanding the foregoing,
however, the Partnership shall reimburse the General Partner or its Affiliates
for the cost of providing any administrative or other services required or
contemplated by this Agreement.
Section 5.05 Other Business of Partners Any Limited 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 any Affiliate
of the General Partner 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, 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 Partner nor any Affiliate of the General
Partner 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 any Affiliate of the
General Partner shall have the right to take for its own account (individually
or as a trustee, partner or fiduciary) or to recommend to others any such
particular opportunity.
Section 5.06 Limitation on Liability of General Partner;
Indemnification.
A. Other than pursuant to Section 5.07, the General Partner shall not
be liable to the Partnership or any Limited Partner because any taxing authority
disallows or adjusts any deductions or credits in the Partnership income tax
returns unless such action by the taxing authority is due to the negligence of
the General Partner. The indemnification under this subsection is not broader
than any other indemnification contained in this Section 5.06. Subject to this
Section 5.06, the General Partner 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 Partner 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 otherwise provided in
Section 8.02D.
B. The General Partner shall have no liability, responsibility or
accountability in damages or otherwise to any other Partner or to the
Partnership for, and the Partnership agrees to indemnify, pay, protect and hold
harmless the General Partner (on the demand of and to the reasonable
satisfaction of the General Partner and to the extent permitted by law) from and
against any and all liabilities, losses, judgments and expenses of any kind or
nature whatsoever (including, without limitation, all costs and expenses of
defense, appeal and settlement of any and all claims and any and all suits,
actions or proceedings instituted against the General Partner or the Partnership
and all costs of investigations in connection therewith) which may be imposed
on, incurred by, or assessed against the General Partner or the Partnership in
any way relating to or arising out of, or alleged to relate to or arise out of,
any action or inaction on the part of the Partnership, or on the part of the
General Partner as the general partner of the Partnership including any action
or
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or inaction in connection with the General Partner acting as Tax Matters Partner
or Designated Person under Section 5.07, if, but only if, (i) the action or
inaction of the General Partner giving rise thereto was determined by the
General Partner, in good faith, to be in the best interests of the Partnership
and such action or inaction shall have been within the scope of the authority
granted to it by this Agreement or by law or by the Limited Partners in
accordance with this Agreement; and (ii) the General Partner and its Affiliates
were not guilty of negligence, fraud, misconduct, or breach of fiduciary duty to
the Partnership or any Partner. The satisfaction of the obligations of the
Partnership under this Section 5.06 shall be from and limited to the assets of
the Partnership and no Limited Partner shall have any personal liability on
account thereof. The provisions of this indemnification shall also extend to any
Person performing services for the Partnership on behalf of the General Partner,
within the scope of its authority as the General Partner of the Partnership, who
is an Affiliate of the General Partner, so long as such Person satisfied the
requirements of clauses (i) and (ii) above. Notwithstanding any other provision
of this Agreement, the Partnership shall not incur any cost in excess of the
cost of insuring the Partnership itself in respect of any liability insurance
that insures the General Partner or any other Person for any liability with
respect to which indemnity would be prohibited under this Section 5.06B.
C. The General Partner shall have no liability or responsibility
hereunder to make loans, advances or additional Capital Contributions to the
Partnership except as specified in Sections 3.04, 5.03M and 8.02D and except as
may otherwise be provided as a matter of law or under the Mortgage Debt.
However, except for advances made pursuant to the Debt Service Guarantee, the
Santa Clara Debt Service Advances, or Section 5.03M which advances will be
repaid in accordance with the terms of such Guarantee, the terms of the Santa
Clara Partnership Agreement, or the terms of Section 5.03M, as the case may be,
to the extent the General Partner or any of its Affiliates advances any funds,
to meet any liabilities or obligations of the Partnership, any such advances
shall be deemed loans to the Partnership by the General Partner and shall accrue
interest per annum at one percentage point in excess of the Prime Rate (or the
highest lawful rate under the laws of the State of Delaware, whichever is less)
payable in arrears on the first day of each Fiscal Quarter and such amounts
shall be due and payable upon that date which is the tenth anniversary of the
date on which any such advances were made; provided, however, that any and all
such advances shall be paid prior to distributions to Partners out of any Cash
Available for Distribution to the Partners, upon the liquidation or dissolution
of the Partnership, or the sale of a Hotel and the receipt by the Partnership of
the proceeds of such sale. No advance may be made by the General Partner or any
of its Affiliates under this Section 5.06C that is directly or indirectly used
(i) to permit the Partnership to make a required debt service payment with
respect to the Hotel Mortgage Debt (and any replacement financing therefor)
unless and to the extent such payment is in excess of the amount then available
to the Partnership under the Debt Service Guarantee, or (ii) to permit the
payment of a required debt service payment with respect to the Santa Clara
Mortgage Debt (and any replacement financing therefor) unless and to the extent
that such payment is in excess of the Cash Flow Available for Santa Clara
Mortgage Debt Service (as defined in the Santa Clara Partnership Agreement), or
(iii) to permit the Partnership to restore any deficit in its capital account
balance under the Santa Clara Partnership Agreement. Any advance made pursuant
to the preceding sentence shall be repaid with the proceeds of an advance
pursuant to the Debt Service Guarantee or the Santa Clara Debt Service Advances,
as the case may be, as soon as such an advance would be permitted.
D. Notwithstanding the foregoing, neither the General Partner nor any
other Person specified in Section 5.06B nor any Person acting as an underwriter
or broker-dealer on behalf of the Partnership shall be indemnified by the
Partnership for liabilities arising under Federal and state securities laws
unless (i) there has been a successful adjudication in favor of the indemnitee
on the merits of each count involving alleged securities law violations, or such
claims against the indemnitee have been dismissed with prejudice on the merits
by a court of competent jurisdiction, and, in either case, indemnification of
litigation costs is approved by a court of competent jurisdiction, or (ii) a
court of competent jurisdiction approves a settlement of the claims against a
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particular indemnitee and finds that indemnification of the settlement and
related costs should be made. In any claim for indemnification for Federal or
state securities law violations, the party seeking indemnification shall place
before the court the position, if available, of the Securities and Exchange
Commission, the Massachusetts Securities Division, the Pennsylvania Securities
Commission and any of the state securities commissions that require such actions
with respect to the issue of indemnification for securities law violations.
Notwithstanding any other provision of this Agreement, the Partnership shall not
incur the cost of any liability insurance that insures the General Partner or
any other Person for any liability with respect to which indemnity would be
prohibited under this Section 5.06D.
E. The Partnership may not advance funds for expenses or other costs
incurred by the General Partner (or any other Person described in Section 5.06B)
in defending any threatened or pending action, suit or proceeding subject to
this Section 5.06.
Section 5.07 Designation of Tax Matters Partner and Designated Person
for Purposes of Investor List.
A. The General Partner shall act as the Tax Matters Partner of the
Partnership, as provided in Treasury regulations pursuant to section 6231 of the
Code and as the Designated Person for purposes of maintaining the Investor List.
Each Partner hereby approves of 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 approval.
B. To the extent and in the manner provided by applicable Code sections
and regulations thereunder, the Tax Matters Partner shall furnish the name,
address, profits interest and taxpayer identification number of each Partner (or
assignee) to the IRS.
C. To the extent and in the manner provided by applicable Code sections
and Treasury 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:
(a) 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
Treasury 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 or (ii) who
is a "notice partner" (as defined in section 6231 of the Code) or a
member of a "notice group" (as defined in section 6223(b) (2));
(b) 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 adjustment") is
mailed to the Tax Matters Partner, to seek judicial review of such
final adjustment, including the 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;
(c) to intervene in any action brought by any other Partner
for judicial review of a final adjustment;
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(d) 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;
(e) 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
(f) 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. Notwithstanding any other provision of this Agreement, but subject
to Sections 5.06B and 5.06D of this Agreement, the Partnership shall indemnify
and reimburse, to the full extent provided by law, the Tax Matters Partner for
all expenses, including legal and accounting fees (as such fees are incurred),
claims, liabilities, losses and damages incurred in connection with any tax
audit or judicial review proceeding with respect to the tax liability of the
Partners, the payment of all such expenses to be made before the distribution of
Cash Available for Distribution to the Partners. Neither the General Partner nor
any of its Affiliates nor any other Person shall be obligated to provide funds
for such purpose.
F. 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 the General Partner 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 SIX
WITHDRAWAL AND REMOVAL
OF GENERAL PARTNER
Section 6.01. Limitation on Voluntary Withdrawal Except as permitted in
Section 5.02B, the General Partner shall not have the right (but shall have the
power) to retire or withdraw voluntarily from the Partnership. Prior to any
voluntary withdrawal, the General Partner shall give the Limited Partners notice
of its intention to withdraw at least 90 days in advance of such withdrawal and
the Limited Partners may, by Consent of the Limited Partners, elect a substitute
General Partner. If a substitute General Partner is elected, it shall be
admitted immediately prior to the withdrawal of the General Partner and shall
continue the business of the Partnership without dissolution. The General
Partner shall not sell, transfer or assign its entire general partnership
Interest or any portion thereof other than as provided below. The General
Partner shall be permitted to assign its rights to up to 80% of its interest in
the Net Profits, Net Losses, Losses, Gains, Cash Available for Distribution,
Capital Receipts and other allocations and distributions only to a wholly owned
Affiliate, subject to the following conditions: (i) the General Partner shall
not be permitted to assign such rights unless the General Partner receives an
opinion of counsel that such assignment shall not cause any adverse tax
consequences to the Partnership or the Limited Partners or cause a default on
any Partnership debt obligation; and (ii) notwithstanding anything to the
contrary set forth in this Agreement and notwithstanding such assignment by the
General Partner of its Interest in the Net Profits, Net Losses, Gains, Losses,
Cash Available for Distribution, or Capital Receipts as provided above, upon any
such assignment (A) the General Partner shall not cease to be a general partner
of the Partnership, and shall continue to be a general partner of the
Partnership,
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and (B) the General Partner shall not cease to have any and all rights and
powers of a general partner under this Agreement and the Act and the power to
exercise any and all rights and powers of a general partner under this Agreement
and the Act and shall continue to have any and all such rights and powers and
the assignee shall not acquire any such rights and powers of a general partner.
Section 6.02 Bankruptcy or Dissolution of the General Partner In the
event of the bankruptcy of the General Partner or other event that causes the
General Partner to cease to be a General Partner under sections 17-402(6), (7),
(8), (9) or (10) of the Act, the General Partner shall immediately cease to be
the General Partner and its Interest shall terminate; provided, however, that
such termination shall not affect any rights or liabilities of the General
Partner which matured prior to such event, or the value, if any, at the time of
such event of the Interest of the General Partner.
Section 6.03 Liability of Withdrawn General Partner. If the General
Partner shall cease to be General Partner of the Partnership, it shall be and
remain liable for all obligations and liabilities incurred by it as General
Partner prior to the time such withdrawal shall have become effective, but it
shall be free of any obligation or liability incurred on account of the
activities of the Partnership from and after the time such withdrawal shall have
become effective. If the General Partner withdraws in violation of this
Agreement, (i) the General Partner's Interest as General Partner in the
Partnership shall be treated as the Interest of a removed General Partner under
Section 6.04, shall be reduced by 50%, and shall be subject to purchase in the
same manner as the interest of a removed General Partner; and (ii) the
Partnership shall be entitled to recover from the withdrawn General Partner
damages for breach of this Agreement and offset such damages against the amount,
if any, otherwise distributable to it in addition to any remedies otherwise
available under applicable law. Such reduction of the General Partner's interest
is not a penalty.
Section 6.04 Removal of General Partner In the event of the removal of
the General Partner pursuant to Section 10.02B, the removed General Partner's
Interest as General Partner in the Partnership shall be reduced by fifty percent
(50%) and shall become a limited partner interest but without any voting or
consensual rights which other Limited Partners may have, except the right to
continue the business of the Partnership and to appoint one or more general
partners as provided in Section 6.05A. Such reduction of the General Partner's
interest is not a penalty. In the event of the removal of the General Partner
pursuant to Section 10.02B, then the Partnership shall have the right (but not
the obligation) to purchase the removed General Partner's interest in the
Partnership (determined after giving effect to the preceding sentence) within 60
days of such removal (or if later, upon the determination of the "fair market
value" of such interest as set forth below) at the "fair market value" of such
interest. For purposes of the preceding sentence, the "fair market value" of the
removed General Partner's Interest in the Partnership shall be the amount agreed
to between the Partnership and the removed General Partner or, in the absence of
such an agreement, the amount determined by an independent appraiser selected by
the Partnership and the removed General Partner (provided that, if the parties
cannot agree upon such an appraiser, then each party shall select an appraiser
and the two appraisers selected by the parties shall select a third appraiser,
with the "fair market value" of the removed General Partner's Interest to be
determined by the average of the amounts determined by the three appraisers,
disregarding entirely any appraisal that differs by more than twenty percent
(20%) from the amount determined by the appraiser whose determination is between
the highest and lowest of the amounts determined by the three appraisers).
Payment of the purchase price for the removed General Partner's Interest may be
made, at the election of the Partnership, in cash or by a promissory note
bearing interest at the Prime Rate (but not higher than the maximum lawful rate)
and providing for payment of principal in five equal annual installments. The
expense of all appraisals pursuant to this Section 6.04 shall be borne equally
by the Partnership and the removed General Partner.
Section 6.05 Continuation and Reconstitution.
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A. Upon the occurrence of an event described in Section 8.01A(ii),
(iii), or (iv), any remaining General Partner and any substitute General Partner
shall be obligated to continue the business of the Partnership without
dissolution. In the event that, upon the occurrence of such an event, there is
no remaining General Partner or substitute General Partner or the sole remaining
or substitute General Partner fails to continue the business of the Partnership
in breach of this Agreement, then the Partnership shall be dissolved and its
affairs shall be wound up unless, within 90 days after the occurrence of such
event, all Partners agree in writing to continue the business of the Partnership
and to the appointment, effective as of the date of such event, of one or more
additional general partners.
B. If, upon the occurrence of an event described in Section 8.01A(ii),
(iii), or (iv) at a time when there is no remaining or substitute General
Partner or the sole remaining or substitute General Partner fails to continue
the business of the Partnership in breach of this Agreement, the Partnership is
not continued in accordance with Section 6.05A, then, within an additional 90
days after the period referred to above, the Limited Partners, by Consent of the
Limited Partners, may elect to reconstitute the Partnership and continue its
business on the same terms and conditions set forth in this Agreement by forming
a new limited partnership on terms identical to those set forth in this
Agreement (except to the extent that such terms are amended by Consent of the
Limited Partners in order to reflect the interests, allocations, fees, benefits,
rights, duties, and obligations of the successor general partner) and having as
a general partner a Person approved by a Consent of the Limited Partners. Except
as amended by Consent of the Limited Partners as aforesaid, the successor
general partner shall have all of the rights, duties, and obligations of the
former General Partner and shall have a 1% interest in the Net Profits, Net
Losses, Gains, Losses, Cash Available for Distribution, Capital Receipts, and
other allocations and distributions. Upon any such Consent of the Limited
Partners, all Partners shall be bound thereby and shall be deemed to have
approved thereof. Unless such an election is made within 180 days after the
occurrence of an event described in such Section, the Partnership shall continue
only activities necessary to wind up its affairs. If such an election is so made
within 180 days after the occurrence of such an event, then:
(i) the reconstituted Partnership shall continue until the end
of the term set forth in Section 2.04 unless earlier dissolved in
accordance with the terms of this Agreement;
(ii) if the successor general partner is not the former
General Partner, then, subject to Section 6.04, the interest of the
former General Partner shall be treated thenceforth as a limited
partner interest; and
(iii) all necessary steps shall be taken to cancel this
Agreement and the Certificate of Limited Partnership and to enter into
a new partnership agreement and certificate of limited partnership, and
the successor general partner may for this purpose exercise the powers
of attorney granted the General Partner pursuant to this Agreement;
provided that the right of the Limited Partners, by Consent of the Limited
Partners, to approve a successor general partner and to reconstitute and to
continue the business of the Partnership, as provided in this Section 6.05B,
shall be void ab initio if prior to or within 15 days after such vote either:
(A) the Partnership shall have received an opinion of counsel, satisfactory to
the Limited Partners as provided in Section 10.02C, that such action may not be
effected without adversely affecting the liability of the Limited Partners under
the Act or a court having jurisdiction over the matter shall have entered a
judgment subject to no further appeal to such effect; or (B) the Partnership
shall have received an opinion of counsel, satisfactory to the Limited Partners
as provided in Section 10.02C, that such action may not be effected without
changing the Partnership's status as a partnership for Federal income tax
purposes, or a court having jurisdiction over the
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matter shall have entered a judgment subject to no further appeal to such effect
or the IRS shall have issued a ruling to such effect.
ARTICLE SEVEN
ASSIGNABILITY OF UNITS
Section 7.01 Restrictions on Assignments After the admission to the
Partnership of the Limited Partners, a Limited Partner shall have the right to
assign any Interest, subject to the following limitations:
A. No assignment of any Interest may be made other than on the first
day of a Fiscal Quarter; provided, however, that this restriction on the timing
of assignment shall not apply to (i) any transfer of Units by Limited Partners
to MHP II Acquisition Corp. pursuant to MHP II Acquisition Corp.'s Offer to
Purchase for Cash All Outstanding Units of Limited Partnership Interest, dated
April 18, 1996 or (ii) any subsequent assignment of any Units by MHP II
Acquisition Corp.
B. The General Partner may prohibit any assignment of an Interest in
the Partnership if, in the opinion of legal counsel to the Partnership, such
assignment would require filing of a registration statement under the Securities
Act of 1933, as amended, or would otherwise violate any Federal or state
securities or Blue Sky laws (including any investment suitability standards) or
regulations applicable to the Partnership or the Units. With respect to any
proposed assignment within one year of the admission of any Limited Partner
whose Unit is to be transferred, the General Partner will require an opinion
from counsel of the assignee of the Interest to the effect that no such filing
would be required and that no such violation would occur as a result of such
assignment.
C. 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
one-half of a Unit), will be permitted or recognized.
D. No transfer or assignment on any date of any Interest may be made to
any Person if (i) in the opinion of legal counsel to the Partnership, it would
result in the Partnership being treated as an association taxable as a
corporation, or (ii) such transfer is effectuated through an "established
securities market" or a "secondary market" (or the substantial equivalent
thereof) within the meaning of section 7704 of the Code.
E. No assignment of any Interest may be made to any Person unless such
Person agrees in writing that such Person will not, directly or indirectly,
create for the Units, or facilitate the trading of Units on, a "secondary
market" (or the substantial equivalent thereof), within the meaning of section
7704 of the Code.
F. No assignment of any Interest may be made if, in the opinion of
legal counsel to the Partnership, it would result in the Partnership or the
Santa Clara Partnership not being able to obtain or continue in effect any
license permitting the service or sale of alcoholic beverages in a Hotel.
G. No assignment of any Interest may be made to any Person who is not a
"United States person" within the meaning of section 7701(a)(30) of the Code.
H. No assignment of any Interest may be made to any Person generally
exempt from Federal income tax under section 501 of the Code or otherwise.
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No purported transfer or assignment shall be of any effect unless all
of the foregoing conditions have been satisfied. The General Partner is
authorized to impose any other limitations or restrictions on the assignment of
Interests to the extent that it, in the exercise of its reasonable discretion
and based upon the advice of counsel to the Partnership, determines such further
limitations or restrictions are necessary or advisable to protect the
Partnership from being considered a "publicly traded partnership" within the
meaning of section 7704 of the Code. The General Partner shall, from time to
time, review the limitations and restrictions on the assignment of Interests set
forth in Section 7.01D and Section 7.01E or imposed pursuant to the preceding
sentence and the Federal income tax law, regulations, and rulings applicable
thereto, and shall eliminate or modify any such limitation or restriction to
make it less restrictive on assignment of Interests if the Partnership shall
have received an opinion of counsel that such elimination or modification may be
made without causing the Partnership to be considered either a "publicly traded
partnership," within the meaning of section 7704 of the Code, or an association
taxable as a corporation under the applicable federal income tax laws.
Section 7.02 Assignees and Substituted Limited Partners.
A. If a Limited Partner dies, the executor, administrator or trustee,
or if a Limited Partner is adjudicated incompetent or insane, the committee,
guardian or conservator, or, if a Limited Partner becomes bankrupt, the trustee
or receiver of the estate, shall have all the rights of a Limited Partner for
the purpose of settling or managing the estate and such power as the decedent or
incompetent possessed to assign all or any part of the Units and to join with
the assignee thereof in satisfying conditions precedent to such assignee
becoming a Substituted Limited Partner. The death, dissolution, adjudication of
incompetence or bankruptcy of a Limited Partner in and of itself shall not
dissolve the Partnership.
B. Except for an assignment permitted by the proviso to Section 7.01A,
the Partnership will not recognize for any purpose any assignment of any
Interest unless there shall have been filed with the Partnership not less than
15 days prior to the first day of the next Accounting Period commencing
following such filing, a duly executed and acknowledged counterpart of the
instrument making such assignment signed by both the assignor and the assignee
and such instrument evidences the written acceptance by the assignee of all of
the terms and provisions of this Agreement and represents that such assignment
was made in accordance with all applicable laws and regulations (including
investment suitability requirements). Irrespective of whether or not any
successor to a Limited Partner or an assignee of a Limited Partner's Interest
hereunder provides the aforesaid instruments, any such Person shall be bound by
the terms and provisions of this Agreement. As a condition to any voluntary
assignment of an Interest, the General Partner may require that the assignor or
the assignee of the Interest or their representatives provide to the Partnership
information sufficient to permit counsel to the Partnership to determine that
the assignment is not prohibited by this Article Seven.
C. Subject to the provisions of this Section 7.02C, no assignee of a
Limited Partner's Interest shall be entitled to become a Substituted Limited
Partner unless: (i) the General Partner shall have given its written consent
thereto, which consent may be withheld in its absolute discretion; (ii) the
transferring Limited Partner and the assignee shall have executed and
acknowledged such other instrument or instruments as the General Partner may
deem necessary or desirable to effect such admission; (iii) the assignee shall
have accepted, adopted and approved in writing all of the terms and provisions
of this Agreement, as the same may have been amended, and executed a power of
attorney similar to the power of attorney granted in this Agreement; and (iv)
the assignee shall pay or obligate itself to pay, as the General Partner may
require, all reasonable expenses incurred in connection with his admission as a
Substituted Limited Partner. An assignee of a Limited Partner's Interest shall
become a Substituted Limited Partner only when the General Partner has reflected
the admission of such Person as a Limited Partner in the books and records of
the Partnership. The General Partner shall take action once each Fiscal Quarter
to reflect in the books and records all
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Persons, if any, admitted to the Partnership as Substituted Limited Partners
since the last such action.
D. Limited Partners who shall have assigned all of their Interests in
accordance with the provisions of this Article Seven shall cease to be Limited
Partners of the Partnership with respect to such Interests as of the date that
such assignment is given effect by the Partnership in accordance with the terms
of this Article Seven. A purported assignment of an Interest not in accordance
with the provisions of this Article Seven shall not be given effect for any
purpose.
E. Any Person who is the assignee of the Interest of a Limited Partner
in accordance with the terms of this Article Seven, and who has satisfied the
requirements of Sections 7.01, 7.02B, and 7.02C shall become a Substituted
Limited Partner when the General Partner has accepted such Person as a Limited
Partner and the books and records of the Partnership reflect such Person as
admitted to the Partnership as a Limited Partner and when such Person shall have
satisfied the conditions of Section 11.02A and shall have paid all reasonable
legal fees and filing costs in connection with the substitution as a Limited
Partner; provided, however, that the General Partner's Consent to the
substitution of any assignee of an Interest as a Substituted Limited Partner may
be granted or withheld in its sole discretion.
F. Any Person who is the assignee of any of the Interest of a Limited
Partner in accordance with the terms of this Article Seven, but who does not
become a Substituted Limited Partner shall be entitled to all the rights of an
assignee of a limited partner interest under the Act, including the right to
receive distributions from the Partnership and the share of Net Profits, Gain,
Net Losses, Loss, and any specially allocated items attributable to the
Partnership Interests assigned to such Person, but shall not be deemed to be a
holder of Units for any other purpose under this Agreement. In the event any
such Person desires to make a further assignment of any such Interests, such
Person shall be subject to all the provisions of this Article Seven to the same
extent and in the same manner as any Limited Partner desiring to make an
assignment of the Interests.
G. Any Limited Partner who assigns or exchanges all or any portion of a
Unit must notify the Partnership of such assignment or exchange. Such
notification must be in writing and must be within fifteen days of the exchange.
Such notification must include the names and addresses of the transferor and
transferee, the taxpayer identification numbers of the transferor and the
transferee, the date of the assignment or exchange, and any other information
required by the General Partner.
H. There shall be no restrictions on the assignments of Interests
except as provided in Article Six or this Article Seven.
ARTICLE EIGHT
DISSOLUTION AND LIQUIDATION
OF THE PARTNERSHIP
Section 8.01 Events Causing Dissolution.
A. The Partnership shall be dissolved and its affairs wound up on the
first to occur of the following events:
(i) the bankruptcy of the Partnership; or
(ii) the withdrawal (whether or not in accordance with this
Agreement) or removal of the General Partner, unless there is, at the
time of the occurrence of such event, a remaining or substitute General
Partner that continues the business of the
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Partnership pursuant to its obligation under Section 6.05A or the
Partnership is continued pursuant to Section 6.05A; or
(iii) the bankruptcy of the General Partner, unless there is,
at the time of the occurrence of such event, a remaining or substitute
General Partner that continues the business of the Partnership pursuant
to its obligation under Section 6.05A or the Partnership is continued
pursuant to Section 6.05A; or
(iv) the occurrence of any event listed in sections 17-402
(6), (7), (8), (9), or (10) of the Act where the General Partner shall
cease to be a general partner unless there is, at the time of the
occurrence of such event, a remaining or substitute General Partner
that continues the business of the Partnership pursuant to its
obligation under Section 6.05A or the Partnership is continued pursuant
to Section 6.05A; or
(v) the sale or other disposition of all or substantially all
of the property of the Partnership; or
(vi) action of the Limited Partners pursuant to Section
10.02B(ii); or
(vii) the expiration of the term of the Partnership; or
(viii) any event that makes it unlawful for the business of
the Partnership to be carried on or for the Partners to carry it on in
a limited partnership.
Dissolution of the Partnership shall be effective on the day on which the event
occurs giving rise to dissolution. The Partnership shall not terminate until the
assets of the Partnership shall have been liquidated as provided in Section 8.02
and all proceeds therefrom have been collected and distributed. Notwithstanding
the dissolution of the Partnership, prior to the termination 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. Except as otherwise provided in Section 8.02D, the Partners shall
look solely to the assets of the Partnership for all distributions with respect
to the Partnership and their Capital Contribution thereto, and shall have no
recourse therefor (upon dissolution or otherwise) against the General Partner or
any other Limited Partner.
Section 8.02 Liquidation Liquidation.
A. Upon dissolution of the Partnership and the failure to reconstitute
the Partnership as provided in Section 6.05B, the General Partner (or if the
dissolution is caused by the withdrawal, retirement, bankruptcy, dissolution, or
removal of the General Partner, then the Person designated as "liquidating
trustee" by the Consent of the Limited Partners, which "liquidating trustee"
shall have all of the powers of the General Partner under this Agreement for
purposes of liquidating and winding up the affairs of the Partnership) (the term
"General Partner" as used in this Section 8.02 shall be deemed to mean the
"liquidating trustee" where appropriate) shall liquidate the assets of the
Partnership and the proceeds of such liquidation shall be applied and
distributed in the following order of priority:
(i) to the payment of the expenses of the liquidation;
(ii) in satisfaction of Partnership Debt and all other
liabilities of the Partnership (whether by payment or making reasonable
provision for payment thereof) owing to creditors of the Partnership
other than Partners who are creditors;
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(iii) in satisfaction of any liabilities of the Partnership
(whether by payment or making reasonable provision for payment thereof)
owing to Partners who are creditors of the Partnership; and
(iv) to the General Partner and to the Limited Partners, in
proportion to the net balances in their respective Capital Accounts
(after the adjustments required pursuant to Article Four of this
Agreement in respect of Net Profits, Net Losses, Gains, and Losses have
been reflected therein), to reduce any net balances then existing in
the Capital Accounts of the Partners.
B. Notwithstanding the foregoing, in the event the General Partner
shall determine that an immediate sale of all or part of the Partnership's
assets would cause undue loss to the Partners, the General Partner, in order to
avoid such loss, 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, may defer liquidation of and withhold from distribution
for a reasonable time (not to exceed three years) any assets of the Partnership
except those necessary to satisfy the Partnership's debts and obligations.
C. The General Partner shall cause the liquidation and distribution of
all the Partnership's assets and shall cause the cancellation of the
Partnership's certificate of limited partnership upon completion of winding up
the business of the Partnership.
D. Upon the dissolution and termination of the Partnership or a
liquidation of the Interest of the General Partner, if, after giving effect to
Sections 8.02A through 8.02C hereof for the Fiscal Year in which such
dissolution or liquidation occurs, there shall be a deficit in the Capital
Account of the General Partner, while there is a positive balance in the Capital
Account of any other Partner, the General Partner shall contribute to the
Partnership (in cash) the amount of such deficit, which thereupon shall be
distributed by the Partnership pro rata to any Partners possessing positive
balances in their respective Capital Accounts. Such contribution by the General
Partner is to be made to the Partnership not later than the close of the taxable
year in which the dissolution or liquidation (as defined in section
1.704.1(b)(2)(ii)(g) of the Treasury regulations) occurs.
ARTICLE NINE
BOOKS AND RECORDS, ACCOUNTING,
REPORTS, TAX ELECTIONS, ETC.
Section 9.01 Books and Records.
A. The books and records of the Partnership shall be maintained by the
General Partner in accordance with applicable law at the principal office of the
Partnership and shall be available for examination at such location by any
Partner or such Partner's duly authorized representatives at any and all
reasonable times for any purpose reasonably related to the Partner's Interest in
the Partnership.
B. Each Limited Partner, and each such Limited Partner's duly
authorized representative, shall have the right, at reasonable times and at such
Limited Partner's own expense, upon prior written notice to the General Partner
(which notice shall be given a reasonable length of time in advance in light of
the scope of such request, but which need not be given more than five business
days in advance), and only for any purpose reasonably related to the Partner's
Interest in the Partnership, (i) to have true and full information regarding the
status of the business and financial condition of the Partnership as is
possessed by the General Partner; (ii) to inspect and copy the books
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of the Partnership and other reasonably available records and information as is
possessed by the General Partner concerning the operation of the Partnership,
including copies of the Federal, state, and local income tax returns of the
Partnership; (iii) to have a current list of the name and last known business,
residence, or mailing address of each Partner mailed to such Limited Partner or
representatives; (iv) to have true and full information regarding the amount of
cash and a description and statement of the value of any property or services
contributed to the Partnership as of the date upon which each Partner became a
Partner; and (v) to have a copy of this Agreement, the Certificate of Limited
Partnership and all amendments or certificates of amendment, as the case may be,
thereto, together with copies of any powers of attorney pursuant to which any
such amendment or certificate of amendment has been executed.
Section 9.02. Accounting and Fiscal Year. The books of the Partnership
will be kept in accordance with generally accepted accounting principles. The
Partnership will report its operations for tax purposes on the accrual method.
The Fiscal Year of the Partnership shall end December 31 in each year.
Section 9.03. Bank Accounts and Investments. The bank accounts of the
Partnership shall be maintained in such banking institutions as the General
Partner shall determine, and withdrawals shall be made only in the regular
course of Partnership business on such signature or signatures as the 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. Except as expressly permitted pursuant to the Management
Agreement, the funds of the Partnership shall not be commingled with the funds
of any other Person.
Section 9.04. Reports. The 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 the jurisdictions in which
the Hotels are located. Such information shall include computation of the
distributions to such Partner and the allocation to such Partner of the Net
Profits or Net Losses, as the case may be, and any Gain or Loss, as the case may
be, recognized by or allocated to the Partnership on the sale of a Hotel or
other Partnership properties during such Fiscal Year; and
B. Within 120 days after the end of each Fiscal Year of the
Partnership, a report prepared by the General Partner which report shall set
forth the following:
(i) a statement of assets, liabilities and Partners' capital,
a statement of income and expenses on an accrual basis and a statement
of cash flow and a statement of changes in Partners' capital, prepared
by the General Partner on the accrual basis of accounting, in
accordance with generally accepted accounting principles, which
statements are to be audited and reported on by a firm of independent
public accountants selected by the General Partner, setting forth its
opinion as to the items in this clause (i);
(ii) the balances in the Capital Accounts of the Limited
Partners in the aggregate and of the General Partner and the identity
and amount of all sources of cash distributed or to be distributed to
the Partners in respect of such Fiscal Year;
(iii) a report (which need not be audited) summarizing the
fees, commissions, compensation and other remuneration and reimbursed
expenses paid by the Partnership for
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such Fiscal Year to the General Partner or any Affiliate of the
General Partner and the services performed for the Partnership in
connection therewith;
(iv) a report of the activities of the Partnership for such
Fiscal Year; and
(v) a budget (which need not be audited) setting forth the
expected Net Profits or Net Losses per Unit, for the current Fiscal
Year.
C. Within 75 days after the end of each of the first three Fiscal
Quarters of each Fiscal Year of the Partnership, the General Partner shall send
to each Person who was a Limited Partner at any time during the Fiscal Quarter
then ended (i) a balance sheet (which need not be audited); (ii) a profit and
loss statement (which need not be audited) (all of the foregoing statements to
be prepared in accordance with generally accepted accounting principles); and
(iii) 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 Partners will be furnished an
estimate of Net Profits or Net Losses per Unit for such Fiscal Year.
E. The General Partner may prepare and deliver to the Limited Partners
from time to time in its sole discretion during each Fiscal Year, in connection
with cash distributions or otherwise, unaudited statements showing the results
of operations of the Partnership to the date of such statement.
F. The General Partner shall prepare and file such registration
statements, annual reports, quarterly reports, current reports, proxy statements
and other documents, if any, as may be required under the Securities Exchange
Act of 1934 and the rules and regulations of the Securities and Exchange
Commission thereunder.
Section 9.05 Tax Depreciation and Elections.
A. With respect to all depreciable assets of the Partnership, the
General Partner may, in its sole discretion, elect to use such depreciation
method for Federal tax purposes as it deems appropriate and in the best interest
of the Partners generally.
B. The General Partner shall be permitted in any Fiscal Year to make an
election under section 754 of the Code and such other tax elections under
Federal, state or local law as it may from time to time deem necessary or
appropriate.
Section 9.06 Interim Closing of the Books There shall be an interim
closing of the books of account of the Partnership (i) at the date of the
admission to the Partnership of Original Limited Partners, (ii) at any time a
taxable year of the Partnership ends pursuant to the Code and (iii) at such
other times as the General Partner shall determine are required by good
accounting practice or may be appropriate under the circumstances.
Section 9.07 Information from Limited Partners" The Limited Partners
shall, within 30 days of a written request by the General Partner, furnish to
the General Partner such information or execute such forms or certificates as
the General Partner shall reasonably require for the purpose of complying with
Federal, state or other tax requirements.
ARTICLE TEN
42
<PAGE>
MEETINGS 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 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 Limited
Partners. Such request and any notification from the General Partner shall state
the purpose of the proposed meeting and the matters proposed to be acted upon
thereat. If the meeting is called pursuant to such request, notification of any
such meeting shall be sent to the Limited Partners by certified mail within ten
business days after receipt of such a request and any such meeting shall be held
on a date not less than 15 nor more than 60 days after receipt of such request.
Any meeting may be held at the principal office of the Partnership or at such
other location within the United States as the General Partner may deem
appropriate or desirable. In addition, the General Partner may, and, upon
receipt of a request in writing signed by holders of 25% or more of the Units
held by Limited Partners, the General Partner shall submit any matter (upon
which the Limited Partners are entitled to act by Consent of the Limited
Partners) to the Limited Partners for a vote by written Consent without a
meeting. For purposes of determining whether the requisite approval has been
obtained on any matter upon which the Limited Partners are entitled to act by
written Consent without a meeting, a majority of the Units held by Limited
Partners (which, in the case of an Interested Transaction, must include a
majority of the Units held by Limited Partners other than the General Partner
and its Affiliates) shall be considered to constitute the Limited Partners
"present and entitled to vote on the matter" for purposes of the definition of
"Consent of the Limited Partners."
B. Notification of any such meeting shall be given not less than 10
days nor more than 60 days before the date of the meeting, to the Limited
Partners at their record addresses, or at such other address which they may have
furnished in writing to the General Partner. 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 held by Limited Partners (which, in the case of an Interested Transaction,
must include a majority of the Units held by Limited Partners other than the
General Partner and its Affiliates) shall constitute a quorum at all meetings of
the Limited Partners (which shall, for purposes of the definition of "Consent of
the Limited Partners," be considered to constitute the Limited Partners "present
and entitled to vote on the matter"); provided, however, that if there be no
such quorum, holders of a majority of the Units held by Limited Partners 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 disapproving at the
beginning of the meeting 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, or entitled to
Consent to any matter upon which the Limited Partners are entitled to act by
written Consent without a meeting, the General Partner may fix, in advance, a
date as the record date for any such determination of Limited Partners. Such
date
43
<PAGE>
shall be not more than 60 days nor less than 10 days before any such meeting or
any such solicitation of written Consents without a meeting.
D. The 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 beyond the period permitted by law.
Every proxy shall be revocable at the pleasure of the Limited Partner executing
it.
E. At each meeting of Limited Partners, the General Partner shall
appoint such officers and adopt such rules for the conduct of such meeting as
the General Partner shall deem appropriate.
F. As and to the extent that the Securities Exchange Act of 1934 is
applicable to the procedural rules governing any meeting of Limited Partners
(including any proxies or proxy statement related thereto), the provisions of
such act shall take precedence over any provision of this Section 10.01 which
may be inconsistent therewith.
Section 10.02 Special Voting Rights of Limited Partners.
A. If at any time any agreement (including the Management Agreements,
if the Manager is an Affiliate of the General Partner), pursuant to which
operating management of any property of the Partnership (or the Santa Clara
Partnership) is vested in the General Partner or an Affiliate of the General
Partner, provides that the Partnership (or the Santa Clara 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 or as a result of a default of
the General Partner or such Affiliate thereunder, the Limited Partners, without
the Consent of the General Partner, may by an amendment to this Agreement, which
amendment shall require the Consent of the Limited Partners, require the
Partnership (or the Santa Clara Partnership) to terminate such agreement. If the
Partnership (or the Santa Clara Partnership) terminates any such agreement, the
duties previously performed by the General Partner or its Affiliate under the
agreement may only thereafter be performed by the General Partner or any of its
Affiliates if the Partnership Agreement is thereafter amended with the Consent
of the Limited Partners, to permit such performance.
B. To the extent not inconsistent with the Act or other applicable law,
in the event that the General Partner (i) has committed a material breach of its
obligations under Section 5.03 and not, within 30 days thereafter, remedied such
breach, (ii) has breached the restrictions under Section 5.02 (provided that in
case of Section 5.02B(x), such breach must be material and not have been
remedied within 30 days thereafter), (iii) has committed any act of fraud, (iv)
has committed and not, within 30 days, remedied any act of bad faith, gross
negligence or breach of fiduciary duty of loyalty, or (v) has committed a breach
of any other provision of this Agreement and not remedied the same within 30
days after receipt of notice thereof, in carrying out its duties as the general
partner, the Limited Partners may, by Consent of the Limited Partners without
the Consent of the General Partner, vote to:
(i) amend this Agreement; provided, however, that (a) 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, and (b) the provisions of Section 2.03 may not be altered
without the consent of the General Partner;
(ii) dissolve the Partnership;
(iii) remove the General Partner, such removal to be effective
upon the date set forth in the resolution adopted by such Consent of
the Limited Partners, provided that any
44
<PAGE>
such action for removal must also provide for the appointment of a
substitute General Partner (such substitute General Partner to be
admitted as a general partner immediately prior to the effective date
of removal of the General Partner to be removed and such substitute,
together with any then remaining general partners, to continue the
business of the Partnership without dissolution); provided further,
however, that if prior to or within 15 days after such vote either: (A)
the Partnership shall have received an opinion of counsel, satisfactory
to the Limited Partners as provided in Section 10.02C, that such action
may not be effected without adversely affecting the liability of the
Limited Partners under the Act or a court having jurisdiction over the
matter shall have entered a judgment subject to no further appeal to
such effect; or (B) the Partnership shall have received an opinion of
counsel, satisfactory to the Limited Partners as provided in Section
10.02C, that such action may not be effected without changing the
Partnership's status as a partnership for Federal income tax purposes,
or a court having jurisdiction over the matter shall have entered a
judgment subject to no further appeal to such effect, or the IRS shall
have issued a ruling to such effect, then such vote shall be void ab
initio; or
(iv) elect a substitute General Partner as provided in
Section 6.01 or reconstitute and continue the Partnership as provided
in Section 6.05.
C. For the purposes of Sections 6.05B and 10.02B(iii), counsel shall be
deemed to be satisfactory to the Limited Partners if (i) such counsel is not
counsel for the General Partner or any Affiliate of the General Partner and (ii)
either (a) such counsel shall have been proposed by the General Partner and
affirmatively approved within 45 days by Consent of the Limited Partners, (b)
such counsel shall have been proposed for such purposes by the holders of 10% or
more of the Units held by Limited Partners, or (c) Consent of the Limited
Partners to any action pursuant to Sections 6.05B or 10.02B shall have been
obtained without the proposal or selection of any counsel. The existence of an
opinion of counsel, court judgment, or IRS ruling to the effect described in
Section 6.05B or 10.02B with respect to a particular contemplated action shall
not affect the rights of Limited Partners to vote on other future actions or the
existence of such rights.
ARTICLE ELEVEN
MISCELLANEOUS PROVISIONS
Section 11.01 Appointment of General Partner as Attorney-in-Fact.
A. Each Limited Partner, including each Substituted Limited Partner,
irrevocably constitutes and appoints the 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 counterparts of this Agreement, and any amendment or
restatement thereof, including all certificates and instruments, which
the General Partner deems appropriate to form, qualify or continue the
Partnership as a limited partnership (or a partnership in which the
Limited Partners will have limited liability comparable to that
provided by the 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 Partner, necessary or
desirable to protect the limited liability of the Limited Partners;
45
<PAGE>
(ii) all amendments to this Agreement adopted in accordance
with the terms hereof and all instruments which the General Partner
deems appropriate to reflect a change or modification of the Agreement
in accordance with the terms hereof;
(iii) all documents or instruments which the General Partner
deems appropriate to reflect the admission of a Limited Partner
(including any Substituted Limited Partner), in accordance with this
Agreement, the dissolution of the Partnership (including a certificate
of cancellation), 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 in accordance with the terms
of this Agreement;
(iv) any instrument or document requested by the Partnership
or any purchaser of the Interest of a Defaulting Limited Partner under
the provisions of Section 3.05 of this Agreement;
(v) all documents, including but not limited to financing
statements, necessary or appropriate to perfect and continue the
Partnership's security interest in such Limited Partner's Interest; and
(vi) any instrument, certificate or document to implement the
provisions of Section 5.01C(vii).
B. The appointment by all Limited Partners of the 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 Partner 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 subsequent 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
or Interest of such Person; provided, however, that in the event of the transfer
by a Limited Partner of all of such Limited Partner's Interest, the forgoing
power of attorney of a transferor Partner shall survive such transfer only until
such time as the transferee shall have been admitted to the Partnership as a
Substituted Limited Partner and all required documents and instruments shall
have been duly executed, filed and recorded to effect such substitution.
Section 11.02 Amendments.
A. Subject to the provisions of Section 7.02, each Limited Partner,
each Substituted Limited Partner and any successor General Partner, whether or
not such Person becomes a signatory hereof shall be deemed, solely by reason of
having become a Partner, to have adopted, and to have agreed to be bound by all
the provisions of this Agreement. Without limiting the forgoing, each Limited
Partner, Substituted Limited Partner and any successor General Partner shall
take any action requested by the General Partner (including, without Limitation,
executing this Agreement or such other instrument or instruments as the General
Partner shall determine) to reflect such Person's adoption of, and agreement to
be bound by all the provisions of, this Agreement.
B. In addition to the amendments otherwise authorized herein,
amendments may be made to this Agreement from time to time by the General
Partner with the Consent of the Limited Partners; provided, however, that
without the Consent of all Partners, this Agreement may not be amended so as to
(i) convert the Interest of a Limited Partner into a general partner's Interest;
(ii) adversely affect the liability of a Limited Partner; (iii) except for the
General Partner's right to assign up to 80% of its interest in allocations and
distributions, alter the Interest of a Partner in Net
46
<PAGE>
Profits, Net Losses, or Gain or Loss or distributions of Cash Available for
Distribution, Sale Proceeds, or Refinancing Proceeds or reduce the percentage of
Partners which is required to consent to any action hereunder; (iv) limit in any
manner the liability of the General Partner as provided in Section 3.09; (v)
permit the General Partner to take any action prohibited by Section 5.02A; (vi)
cause the Partnership to be taxed for Federal income tax purposes as an
association taxable as a corporation; or (vii) effect any amendment or
modification to this Section 11.02B.
C. If this Agreement shall be amended to reflect the withdrawal,
removal, or bankruptcy of the General Partner or any event described in section
17-402(6), (7), (8), (9) or (10) of the Act where the General Partner shall
cease to be 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 agrees to do so) and by the successor General
Partner.
D. In making any amendments, there shall be prepared and filed for
recordation by the General Partner such documents and certificates as shall be
required to be prepared and filed, no such filing being required solely by
reason of this Agreement, under the 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.
E. The General Partner may, without the Consent of the Limited
Partners, make any amendment to this Agreement (i) as is necessary to clarify
the provisions thereof so long as such amendment does not adversely affect the
rights of the Limited Partners under this Agreement; or (ii) is expressly
permitted by Section 5.01C(vii).
Section 11.03 General Partner Representations and Warranties. The
General Partner represents that, except to the extent expressly permitted by
Section 5.06B, the Partnership shall not incur the cost of any insurance which
insures any party against any liability as to which such party is prohibited
from being indemnified under this Agreement.
Section 11.04 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 11.05 Applicable Law. Notwithstanding the place where this
Agreement may be executed by any of the parties hereto, this Agreement, the
rights and obligations of the parties hereto, and any claims and disputes
relating thereto shall be subject to and governed by the Act and the other laws
of the State of Delaware as applied to agreements among Delaware residents to be
entered into and performed entirely within the State of Delaware, and such laws
shall govern all aspects of this Agreement, including, without limitation, the
limited partnership aspects of this Agreement.
Section 11.06 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 11.07 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 11.08 Article and Section Titles. Article and section titles
are for descriptive purposes only and shall not control or alter the meaning of
this Agreement as set forth in the text.
47
<PAGE>
Section 11.09 Short Form Filings. The General Partner shall have
authority to sign any short-form Certificate of Limited Partnership or restated
or amended Certificate of Limited Partnership meeting the requirement of
applicable law which reflects this Agreement, as same may be amended.
48
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
General Partner:
MARRIOTT MHP TWO CORPORATION
By: /s/Bruce F. Stemerman
--------------------------------------
Bruce F. Stemerman
President
Limited Partners:
All Limited Partners now and hereafter
admitted to the Partnership as limited
partners of the Partnership, pursuant to
powers of attorney now and hereafter
executed in favor of and delivered to
the General Partner.
MARRIOTT MHP TWO CORPORATION, as
Attorney-in-Fact for all the Limited Partners
By: /s/Bruce F. Stemerman
-------------------------------------------
Bruce F. Stemerman
President
Solely for the purposes of the obligations contained in Section 5.03B
and, in the case of Host Marriott Corporation only, Section 3.05G(iv), the
undersigned have executed this Agreement as of the date first above written.
HOST MARRIOTT CORPORATION
By: /s/Christopher G. Townsend
-------------------------------------------
Name: Christopher G. Townsend
-----------------------------------------
Title: Senior Vice President
----------------------------------------
MARRIOTT PROPERTIES, INC.
By: /s/Christopher G. Townsend
-------------------------------------------
Name: Christopher G. Townsend
-----------------------------------------
Title: Vice President
----------------------------------------
49
<PAGE>
Exhibit A
Second Amended and Restated
Agreement of Limited Partnership
$80,000 per Unit ,1989
_______ Units
MARRIOTT HOTEL PROPERTIES II LIMITED PARTNERSHIP
LIMITED PARTNER NOTE
FOR VALUE RECEIVED, the undersigned promises to pay to the order of
MARRIOTT HOTEL PROPERTIES II LIMITED PARTNERSHIP, a Delaware limited partnership
(the "Partnership"), at its offices at 10400 Fernwood Road, Bethesda, Maryland
20817, or at such other place as the holder hereof from time to time shall
designate in writing to the undersigned, the principal sum of Eighty Thousand
Dollars ($80,000) per unit of limited partnership interest in the Partnership
("Unit") for the number of Units set forth above, without interest, in the
following installments per Unit at the following times:
<TABLE>
Due Date Amount
- -------- ------
<S> <C>
June 1, 1989................................ $17,500 per Unit for the number of Units set forth above
June 1, 1990 ............................... $32,500 per Unit for the number of Units set forth above
June 1, 1991................................ $30,000 per Unit for the number of Units set forth above
</TABLE>
In the event the undersigned fails to pay in lawful money of the United
States of America any amount which he is required to pay to the Partnership on
or before the 20th day following the date when such amount is due and payable, a
late payment fee of five percent (5%) of the amount of the overdue payment shall
be added to the amount due. If default shall continue beyond 30 days after
notice thereof to the undersigned, in addition to the aforesaid late charge, the
unpaid portion of such installment shall bear interest from the due date of such
installment until paid in full at a rate equal to the lesser of sixteen percent
(16%) per annum or the maximum rate permitted by law. In no event may the late
charge, if deemed to be interest under law, when added to any interest exceed
the rate permitted by law. If the default continues beyond 30 days after notice
thereof to the undersigned, the general partner of the Partnership (the "General
Partner") shall have the option of accelerating the payment of the entire unpaid
balance of this note.
The undersigned shall have the right to prepay, in whole or in part, at
any time, the unpaid principal balance of this note.
This note may not be modified orally, and shall be governed by,
enforced, determined and construed in accordance with the laws of the State of
Delaware. The undersigned hereby consents to the non-exclusive jurisdiction and
venue of the courts of the State of Delaware and of the United States for the
District of Delaware in connection with the collection of this note or any
matter relating thereto and hereby irrevocably appoints the General Partner as
its agent to receive service of process in the State of Delaware in connection
with any such matter.
In the event of default, the undersigned agrees to pay the costs of
collection, including, without limitation, reasonable attorneys' fees and
disbursements and court costs.
50
<PAGE>
The undersigned waives presentment, demand for payment, notice of
dishonor, notice of protest, protest and all other notices or demands in
connection with the delivery, acceptance, performance, default, endorsement or
guaranty of this instrument, except as set forth in the Partnership Agreement.
No failure or delay by the holder of this note in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise thereof or course of dealing preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
To secure repayments of the outstanding amounts hereunder, the
undersigned has, pursuant to Section 3.05E of the Amended and Restated Agreement
of Limited Partnership of the Partnership (the "Partnership Agreement"), granted
to the Partnership a security interest in all of the undersigned's right, title
and interest in the undersigned's limited partnership interest in the
Partnership. Reference is made to Sections 3.05E and 3.05F of the Partnership
Agreement for the rights of the Partnership (and any other holder of this note)
with respect to such security interest and the remedies available with respect
thereto in the event of a default under this note. In the event that this note
is negotiated, endorsed, assigned, transferred and/or pledged, all references to
the Partnership in this note and in the provisions of the Partnership Agreement
regarding the rights of the Partnership in connection with the security interest
granted thereunder shall apply to the one which receives the Partnership's
interest as if that one instead of the Partnership was named as the original
payee under this note.
If any part of this note is determined by any court to be invalid or
unenforceable, the remaining portions of this note will remain in effect. Any
ambiguity or uncertainty in the note will be construed in favor of the
Partnership.
The terms of this note shall be binding upon and inure to the benefit
of the respective successors and assigns of the Partnership and the undersigned.
51
<PAGE>
<TABLE>
<S> <C>
If Subscriber is an individual:
- ----------------------------------- -----------------------------------
Print Name of Subscriber Signature of Subscriber
- ----------------------------------- -----------------------------------
Print Name of Co-Subscriber (if any) Signature of Co-Subscriber (if any)
If Subscriber is a corporation, partnership or trust:
- --------------------------------------------------------------------------------
Print Name of Subscribing Entity
By: ------------------------------- -----------------------------------
Print Name of Authorized Officer, Signature of Authorized Officer,
Partner or Trustee Partner or Trustee
- -----------------------------------
Print Title of Authorized Officer
- ----------------------------------- -----------------------------------
Print Name of Co-Trustee Signature of Co-Trustee
(if required by trust instrument) (if required by trust instrument)
</TABLE>
52
<PAGE>
Exhibit 10.1
FINAL EXECUTED
LOAN AGREEMENT
between
MARRIOTT HOTEL PROPERTIES II LIMITED PARTNERSHIP
and
NOMURA ASSET CAPITAL CORPORATION
Dated as of September 23, 1996
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS ................................................................ 2
Section 1.1 Definitions ........................................... 2
ARTICLE II
PROVISIONS CONCERNING THE ACCOUNTS AND PLEDGED PROPERTY .................... 19
Section 2.1 Cash Management Procedures ............................ 19
Section 2.2 Right to Contest ...................................... 19
Section 2.3 Defeasance ............................................ 20
Section 2.4 Sale of all the MHP Properties and the SC
Property .............................................. 24
Section 2.5 Change of Control ..................................... 25
Section 2.6 Partial Release after the Optional Prepayment Date .... 25
ARTICLE III
PAYMENTS ................................................................... 26
Section 3.1 Payments on the MHP Notes ............................. 26
Section 3.2 Interest Rate ......................................... 26
Section 3.3 Payments without Deduction, etc. ...................... 27
Section 3.4 Periodic Payments ..................................... 27
ARTICLE IV
DEFAULT; REMEDIES; ENFORCEMENT ............................................. 28
Section 4.1A Events of Default ..................................... 28
Section 4.1B Event of Default Cure ................................. 31
Section 4.2 Remedies .............................................. 32
Section 4.3 Remedies Cumulative; Delay or Omission
Not a Waiver .......................................... 33
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS .................................. 33
Section 5.1 Representations and Warranties of MHP ................. 33
Section 5.2 Affirmative Covenants ................................. 41
Section 5.3 Negative Covenants .................................... 47
Section 5.4 Further Assurances .................................... 50
Section 5.5 Representations, Warranties and Covenants
of NACC ............................................... 50
Section 5.6 Other. ................................................ 51
i
<PAGE>
ARTICLE VI
SECURITIZATION ............................................................. 52
Section 6.1 Securitization ........................................ 52
ARTICLE VII
PAYMENT OF FEES AND EXPENSES; INDEMNIFICATION .............................. 55
Section 7.1 Fees and Expenses ..................................... 55
Section 7.2 Indemnification ....................................... 56
ARTICLE VIII
IMMUNITY ................................................................... 58
Section 8.1 Partners, Employees and Agents of MHP
Immune from Liability .................................. 58
ARTICLE IX
MISCELLANEOUS PROVISIONS ................................................... 58
Section 9.1 Notices ............................................... 58
Section 9.2 Benefit of Agreement .................................. 59
Section 9.3 Governing Law ......................................... 59
Section 9.4 Counterparts .......................................... 60
Section 9.5 Table of Contents, Descriptive Headings ............... 60
Section 9.6 Amendment or Waiver; Integration ...................... 60
Section 9.7 Survival of Representations and
Warranties; Reliance .................................. 60
Section 9.8 Returned Payments ..................................... 60
Section 9.9 Jurisdiction and Service; Waiver of Jury
Trial ................................................. 61
Section 9.10 Enforceability ........................................ 61
Section 9.11 Conflicting Terms ..................................... 62
Section 9.12 Relationship of Parties ............................... 62
Exhibit A - ADA Compliance Work and Deferred Maintenance
and Other Work
Exhibit B - Cash Management Procedures
Exhibit C - Environmental Remediation Work
Exhibit D - Permitted Investments
Exhibit E - Release Price
Exhibit F - Organizational Structure of MHP
Exhibit G - Operating Budget
Exhibit H - Capital Budget
Exhibit I - Financial Statements
Exhibit J - Rehabilitation Work
Schedule 1 - Disclosure Schedule
Schedule 2 - Ground Leases
ii
<PAGE>
LOAN AGREEMENT, dated as of September 23, 1996, between Marriott Hotel
Properties II Limited Partnership, a Delaware limited partnership ("MHP"), and
---
Nomura Asset Capital Corporation ("NACC") (together with its assigns and
successors, the "Lender").
------
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, MHP wishes to obtain a loan (the "MHP Loan") from the Lender
--------
in the principal amount of Two Hundred Twenty Two Million Five Hundred Thousand
Dollars ($222,500,000) to, among other things, (i) satisfy all existing debt
secured by the MHP Properties (as hereinafter defined) and (ii) to the extent of
any remaining proceeds, (a) provide initial funding for reserves for deferred
maintenance, environmental remediation, compliance with the Americans With
Disabilities Act of 1990, replacement of furniture, fixtures and equipment and
capital improvements, (b) pay the costs of completing the transactions
contemplated hereby, (c) provide working capital to MHP and (d) for such other
purposes as MHP shall deem necessary or desirable, and the Lender is willing to
make the MHP Loan on the terms and conditions hereinafter set forth;
WHEREAS, the MHP Loan is to be evidenced by the MHP Notes (as
hereinafter defined) and secured by, inter alia, the MHP Mortgages (as
----- ----
hereinafter de fined);
WHEREAS, on the date hereof the Lender has made a loan (the "SC Loan")
-------
to Santa Clara Marriott Hotel Limited Partnership, a Delaware limited
partnership ("SC"), in which MHP owns a 50% limited partnership interest,
evidenced by the MHP/SC Note (as hereinafter defined) and secured by, inter
-----
alia, the SC Mortgage (as hereinafter defined); and
- ----
WHEREAS, MHP and the Lender intend that (a) the MHP Properties shall be
collateral for the SC Loan and that the SC Property (as hereinafter defined)
shall not be collateral for the MHP Loan and (b) an "SC Event of Default" under
the SC Loan shall be an "Event of Default" under the MHP Loan and an "Event of
Default" under the MHP Loan shall be an "SC Event of Default" under the SC Loan;
and
WHEREAS, MHP has pledged its limited partnership interest in SC to the
Lender to secure the MHP Loan;
NOW, THEREFORE, in consideration of the above-mentioned prem ises and
the agreements, representations and warranties hereafter set forth, MHP and the
Lender agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. For all purposes of this Agreement, except as
-----------
otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Section have the meanings assigned to
them in this Section, and include the plural as well as the singular;
(b) the words "herein," "hereof," "hereto" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision;
(c) all references to any agreement or instrument shall be to that
agreement or instrument as in effect from time to time, including any
amendments, consolidations, replacements, restatements, modifications and
supplements thereto;
(d) all terms defined in this Section with reference to the Cash
Management Procedures shall continue in effect after the termination of such
Cash Management Procedures in accordance with the terms thereof;
(e) all references to "Section(s)" and "Exhibit(s)" shall mean the
Section(s) of and Exhibit(s) annexed to this Agreement unless expressly stated
to be Section(s) or Exhibit(s) of the Cash Management Procedures; and
(f) certain terms defined in this Section appear only in this Agreement
and not in the Cash Management Procedures.
"Accounting Period" means, initially, each accounting period of four
-----------------
consecutive weeks having the same beginning and ending dates as the Manager's
corresponding four week accounting periods, except that the last Accounting
Period in a Fiscal Year may be longer than four consecutive weeks when and to
the extent necessary to conform the accounting system to the calendar, or if the
accounting year on the basis of which the MHP Properties are operated is changed
to a calendar year or a conventional 365-day fiscal year, "Accounting Period"
shall mean each calendar month in such fiscal year.
"Accounting Quarter" means, initially, three (or, in the case of the
------------------
last Accounting Quarter in any Fiscal Year, four) consecutive Accounting
Periods, ending on the last day of the third, sixth, ninth and last Accounting
Period in each Fiscal Year, or, if the accounting year on the basis of which the
MHP Properties are operated is changed to a calendar year or a conventional
365-
2
<PAGE>
day fiscal year, "Accounting Quarter" shall mean each of the fiscal quarters
in such fiscal year (i.e., there shall be four consecutive Accounting Quarters
----
of three months each).
"Action" means any action, suit, claim, arbitration, governmental
------
investigation or other proceeding.
"ADA Compliance Work" means repairs, improvements and replacements to
-------------------
the MHP Properties to be made to comply with the Americans with Disabilities Act
of 1990, as amended from time to time, in the amounts more particularly
described on Exhibit A annexed hereto.
---------
"Additional Capital Expenditures" has the meaning set forth in Section
-------------------------------
8.3 of the Cash Management Procedures.
"Adjusted Rate" means the rate determined on the Optional Prepayment
-------------
Date and on each anniversary thereof as the greater of (xx) 10.22% and (yy) the
yield, calculated by linear interpolation (rounded to three decimal places), of
the yields of United States Treasury Constant Maturities with the terms (one
longer and one shorter) most nearly approximating those of U.S. Obligations
having maturities as close as possible to the tenth anniversary of the Optional
Prepayment Date, as determined by the Lender on the basis of Federal Reserve
Statistical Release H.15-Selected Interest Rates under the heading U.S.
Governmental Security/Treasury Constant Maturities, or other recognized source
of financial market information selected by the Lender in each case on the last
Business Day of the week immediately prior to the Optional Prepayment Date and
each subsequent anniversary thereof, as the case may be, plus 3.52% per annum.
"Affiliate" means, with respect to any Person, any individual, corpo-
---------
ration, partnership, limited liability company, trust or other entity of
whatever nature which controls, is controlled by or is under common control
with, such Person, including, without limita tion, (a) any officer or director
of any of the foregoing and (b) any partner, member or shareholder that controls
any of the foregoing, and "con trol" shall mean ownership of more than
twenty-five percent (25%) of all of the voting stock of a corporation or more
than twenty-five percent (25%) of all of the legal and beneficial interests in
any other entity or the possession of the power, directly or indi rectly, to
direct or cause the direction of the management and policy of a corporation or
other entity, whether through the ownership of voting securities, common
directors or officers, the contractual right to manage the business affairs of
such entity, or otherwise.
"Agreement" means this Loan Agreement.
---------
"Annual Plan" has the meaning set forth in Section 5.2(d)(vi).
-----------
3
<PAGE>
"Bankruptcy Custodian" has the meaning set forth in Section 4.1A(g)(A).
--------------------
"Base Rate" means 8.22% per annum.
---------
"Base Rate Interest" means interest on the MHP Notes at the Base Rate
------------------
or the Default Rate, as applicable, then due and payable for the applicable Debt
Service Period.
"Best Knowledge" means with respect to any provision, knowledge of
--------------
information obtained by MHP or any officer or director of the General Partner.
"Business Day" means a day on which banks and foreign exchange markets
------------
are open for business in New York, New York.
"Capital Budget" has the meaning set forth in Section 5.2(d)(vi).
--------------
"Capital Expenditure and FF&E Reserve Account" means the account
--------------------------------------------
established pursuant to Section 8.1 of the Cash Management
Procedures.
"Capital and FF&E Expenditures" means the expenditures of amounts for
-----------------------------
the purpose of the Repairs and Equipment Reserve, as such term in defined in
each applicable Management Agreement.
"Cash Collateral Account" means the account established and held by the
-----------------------
Servicer pursuant to Section 4.1 of the Cash Management Procedures.
"Cash Management Procedures" means the provisions of Exhibit B.
-------------------------- ---------
"Change of Control" means any transfer of (i) an equity interest in the
-----------------
General Partner, (ii) the General Partner's interest in MHP or (iii) any
interest of a limited partner in MHP such that as a result of such transfer and
any other transfers of limited partnership interests prior to the date of
determination, Host Marriott, directly or indirectly, holds less than 51% of the
limited partnership interests in MHP.
"Closing Date" means the date of execution and delivery of this
------------
Agreement.
"Condemnation Proceeds" has the meaning set forth in the applicable MHP
---------------------
Mortgage.
"CPI Percentage" means the percentage by which the "Consumer Price
--------------
Index for All Urban Consumers (CPI-U); U.S. City Average, 1982-84 = 100, All
Items" (or appropriate substitute index if such index is no longer published)
(the "CPI") for November of the
4
<PAGE>
preceding Fiscal Year exceeds the CPI for August 1996.
"DCR" means Duff & Phelps Credit Rating Co.
---
"Debt Service Coverage Ratio" means, as of any given date, the ratio of
---------------------------
(i) Net Operating Income for the 13 full Accounting Periods for which financial
statements are required to be furnished to the Lender pursuant to Section
5.2(d)(ii) immediately preceding the date of calculation for the MHP Property or
MHP Properties regarding which the calculation is being made (or 12 Accounting
Periods in the case of a calendar year or 365 day Fiscal Year) to (ii) Debt
Service Expense in respect of the 13 full Accounting Periods next succeeding
such date (or 12 Accounting Periods in the case of a calendar year or 365 day
Fiscal Year).
"Debt Service Expense" means, in respect of any fiscal period, the
--------------------
aggregate amount of scheduled interest and principal payable on (i) the MHP
Notes, (ii) Subordinate Debt and (iii) Indebtedness covered by Purchase Money
Security Interests for such period. For the purpose of the calculation of Debt
Service Expense for any period subsequent to the Optional Prepayment Date, the
amount set forth in clause (i) above shall be computed based on the Monthly Debt
Service Payment.
"Debt Service Payment Date" means the 11th day of each calendar month
-------------------------
or the next Business Day immediately thereafter.
"Debt Service Period" means the period from and including the eleventh
-------------------
(11th) day of the calendar month immediately preceding each Debt Service Payment
Date to and including the tenth (10th) day of the calendar month in which such
Debt Service Payment Date occurs.
"Debt Service Reserve Account" has the meaning set forth in Section 5.1
----------------------------
of the Cash Management Procedures.
"Default Rate" means a rate per annum equal to the lesser of (aa) two
------------
percent (2%) above the Base Rate or Adjusted Rate, as applicable, and (bb) the
maximum rate allowed by law.
"Defeasance Collateral" has the meaning set forth in Section
---------------------
2.3(a)(iv)(A).
"Defeasance Debt Service Coverage Ratio" has the meaning set forth in
--------------------------------------
Section 2.3(f).
"Defeasance Deposit" has the meaning set forth in Section 2.3(f).
------------------
"Defeasance Security Agreement" has the meaning set forth in Section
-----------------------------
2.3(a)(iv)(A).
5
<PAGE>
"Deferred Maintenance and Other Work" means the repairs, improvements
-----------------------------------
and replacements to the MHP Properties in the amounts more particularly
described on Exhibit A hereto.
---------
"Disclosure Schedule means the schedule annexed hereto as Schedule 1.
------------------- ----------
"Eligible Account" means either (i) an account maintained with a
----------------
federal or state chartered depository institution or trust company, (a) if the
funds therein are to be retained for more than 30 days, the long-term unsecured
debt obligations of which (or, in the case of a depository institution or trust
company that is the principal subsidiary of a holding company, the long-term
unsecured debt obligations of the holding company of which) are rated by each
Rating Agency in one of its two highest rating categories (or such other ratings
as will not result in the rating of any of the Securities being reduced below
their respective ratings on the date determination is to be made and as to which
the Rating Agencies may otherwise agree) at the time of the deposit therein, or
(b) if the funds therein are to be retained for less than 30 days, the
short-term unsecured debt obligations of such depository institution or trust
company (or, in the case of a depository institution or trust company that is
the principal subsidiary of a holding company, the long-term unsecured debt
obligations of the holding company of which), as the case may be, are rated not
lower than A-1+ by S&P or the equivalent rating of the other Rating Agencies, or
(ii) a segregated trust account maintained with the trust department of a
federal or state chartered depository institution or trust company acting in its
fiduciary capacity provided that such account is subject to fiduciary funds on
deposit regulations (or internal guidelines) substantially similar to 12 C.F.R.
ss.9.10(b), or (iii) after the Securitization, an account in any other insured
depository institution reasonably acceptable to the Servicer and the Trustee, so
long as prior to the establishment of an account in any such other depository
institution each of the Rating Agencies shall have delivered a Rating Comfort
Letter with respect thereto.
"Emergency Expenditures" means expenditures arising in the event of an
----------------------
emergency arising out of a fire or other casualty at a Hotel, or other events,
circumstances or conditions which give rise to safety or life threatening
situations, to the extent such expenditures are necessary to protect the safety
or welfare of guests and employees or to protect against further property damage
to the Hotel.
"Entities" has the meaning set forth in Section 6.1(b).
--------
"Environmental Indemnity Agreement" means the environmental indemnity
---------------------------------
agreement, dated the Closing Date, from MHP to NACC.
"Environmental Remediation Work" means the actions taken with respect
------------------------------
to the MHP Properties set forth on Exhibit C.
---------
6
<PAGE>
"Equipment Leases" means, with respect to each MHP Property, the leases
----------------
of furniture, fixtures and equipment used in connection with the MHP Properties.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, and the rules and regula tions promulgated
thereunder.
"ERISA Affiliate" means all members of a controlled group of
---------------
corporations and all trades and businesses (whether or not incor porated) under
common control and all other entities which, together with MHP, are treated as a
single employer under any or all of Sections 414(b), (c), (m) or (o) of the IRC.
"Event of Default" has the meaning set forth in Section 4.1A.
----------------
"Excess Cash Flow" means, for the period of determination, the
----------------
difference between (i) Net Operating Income and (ii) the sum of (A) the Monthly
Debt Service Payments, (B) other MHP Debt then due and payable to the Lender
(other than payments required under Section 3.4(d)), (C) withdrawals from the
Cash Collateral Account applied for the purposes set forth in clauses (G), (H)
and (I) of Section 4.4 of the Cash Management Procedures or, if Section 7.10 of
the Cash Management Procedures is applicable, clauses (C), (D) and (E) thereof
and (D) an amount for each Fiscal Year equal to the lesser of (i) the aggregate
amount of payments for, or reserves created for payment for, administrative
expenses of MHP with respect to such Fiscal Year; or (ii) $500,000 for Fiscal
Year 1996, which amount shall be increased by the CPI Percentage for each Fiscal
Year thereafter.
"Expense Deposit" has the meaning set forth in Section 7.1(c).
---------------
"Fiscal Year" means January 1 of each year through and including
-----------
December 31 of such year except that, for purposes of calculating the Debt
Service Coverage Ratio or any other calculation requiring reference to Gross
Revenues, Net Operating Income or other amounts calculated with reference to the
Accounting Periods, "Fiscal Year" shall mean the fiscal year of the Manager, as
defined in the Management Agreements.
"GAAP" means generally accepted accounting principles in the United
----
States of America (as such principles may change from time to time) applied on a
consistent basis (except for changes in application in which MHP's independent
certified public accountants concur), both as to classification of items and
amounts.
"General Partner" means Marriott MHP Two Corporation, a Delaware
---------------
corporation.
"Governmental Authority" means any court, agency, authority, board
----------------------
(including, without limitation, environmental protection,
7
<PAGE>
planning and zoning) bureau, commission, department, office or instrumentality
of any nature whatsoever of any governmental or quasi-governmental unit of the
United States or the state, county or city where each MHP Property is located or
any political subdivision of any of the foregoing, whether now or hereafter in
existence, or any officer or official thereof, having jurisdiction over MHP or
the General Partner or any of the MHP Properties or any portion thereof.
"Grant" means to issue, grant, sell, remise, convey, assign, and/or
-----
transfer.
"Gross Revenues" means, for any period, all revenues and receipts of
--------------
every kind derived from or otherwise relating to the MHP Properties and all
departments and parts thereof during such period, including, but not limited to:
income (from both cash and credit transactions) from rental of rooms, stores,
offices, 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; excluding, however, (i) gratuities to employees of the Hotels,
(ii) federal, state or municipal use, 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; (but only to the extent such gratuities and taxes are
not included in Management Expenses), (iii) net Condemnation Proceeds, (iv)
receipts of Tenants (as defined in the MHP Mortgages), if any, not an Affiliate
of MHP (except to the extent paid to MHP as rent, percentage rents or
otherwise), (v) sums and credits received in settlement of claims for loss or
damage to property, (vi) income from the sale of furnishings, fixtures or
equipment, (vii) Insurance Proceeds, (viii) charges or payments collected from
patrons or guests for telephone, telegraph or other communication systems that
are remitted to the provider thereof, (ix) proceeds from the sale or refinancing
of the MHP Properties and (x) any refunds, rebates, discounts and credits of a
similar nature, given, paid or returned in the course of obtaining Gross
Revenues or components thereof.
"Ground Leases" means the leases described in Schedule 2 hereto
-------------
relating to the MHP Properties as the same may be amended, modified,
supplemented or replaced from time to time in compliance with the Transaction
Documents.
"Ground Rent" means the rental payments payable under the Ground
-----------
Leases.
"Ground Rent Reserve Account" has the meaning set forth in Section 5.2
---------------------------
of the Cash Management Procedures.
8
<PAGE>
"HMH" means HMH Properties, Inc.
---
"HMH SC Debt Service Advance" has the meaning attributable to such term
---------------------------
in the SC Loan Agreement.
"Host Marriott" means Host Marriott Corporation, a Delaware
-------------
corporation.
"Hotel" means the hotel and the hotel operations located at an MHP
-----
Property and "Hotels" means any two or more of the foregoing.
"Hotel Expansion" has the meaning set forth in Section 5.6(c).
---------------
"Impositions" has the meaning set forth in the applicable MHP Mortgage.
-----------
"Indebtedness" means for any Person (a) obligations for borrowed money
------------
(including, without limitation, in the case of MHP the MHP Debt), (b)
obligations under letters of credit, (c) obli ga tions relating to Purchase
Money Security Interests, (d) obligations, whether or not as sumed, secured by
Liens or payable out of the proceeds or production from prop erty now owned by
such Person, (e) obligations for trade credit or acceptances incurred in the
ordi nary course of business which are 60 days past due, and (f) obligations of
another Person of the type set forth in clauses (a) through (e) above which such
Person has guaranteed or in respect of which such Person is liable, contingently
or otherwise, in cluding, without limitation, by way of agreement to pur chase
property or services, to provide funds to or otherwise invest in such other
Person, or otherwise to assure a creditor of such other Person against loss.
"Indemnified Parties" shall have the meaning set forth in Section
-------------------
7.2(a).
"Independent Director" means a person who is not, and has not within
--------------------
the past five years been, (i) an officer, director, employee, partner,
stockholder or beneficial-interest holder of the General Partner or MHP; (ii) an
officer, director, employee, partner, member, beneficial-interest holder or
stockholder of any Affiliate (as defined below) of the General Partner or MHP;
(iii) a customer or supplier of MHP or any Affiliate thereof (other than a hotel
guest or a customer or supplier that does not derive more than 10% of its
revenues from its activities with MHP or any Affiliate thereof); or (iv) a
spouse, parent, sibling, or child of any person described in (i), (ii), or
(iii); provided, however, that a person shall not be deemed to be a director of
-------- -------
an Affiliate solely by reason of such person being a director of a
single-purpose entity. For the purpose of this definition alone, "Affiliate"
means any person or entity other than the General Partner (i) which owns
beneficially, directly or indirectly, more than 10 percent of the outstanding
shares of the common stock of
9
<PAGE>
the General Partner or which is otherwise in control of the General Partner,
(ii) of which more than 10% of the outstanding voting securities are owned
beneficially, directly or indirectly, by any person or entity described in
clause (i) above, or (iii) which is controlled by, or under common control with,
any person or entity described in clause (i) above; the terms "control" and
"controlled by" shall have the meanings assigned to them in Rule 405 under the
Securities Act of 1933.
"Individual Material Adverse Effect" means a material adverse effect on
----------------------------------
the condition (financial or otherwise), business, prospects, assets,
liabilities, management, financial position or results of operations of any MHP
Property.
"Initial Debt Service Coverage Ratio" means 1.7:1.
-----------------------------------
"Insolvency Law" has the meaning set forth in Section 4.1A(g)(A).
--------------
"Insurance Proceeds" has the meaning set forth in the applicable MHP
------------------
Mortgage.
"Insurance Requirements" means all terms of any insurance policy
----------------------
required by the applicable MHP Mortgage covering or applicable to a particular
MHP Property or any part thereof and all requirements of the insurance carrier,
all as more fully described in such MHP Mortgage.
"IRC" means the Internal Revenue Code of 1986, as amended from time to
---
time, and the rules and regulations promulgated thereunder, or any successor
statute(s).
"Leases" means the respective written or unwritten agreements pursuant
------
to which lessees, tenants or other third parties are occu pying any portion of
the MHP Properties excluding, however, the letting of rooms and other facilities
to hotel guests in the ordinary course of business.
"Legal Requirements" has the meaning set forth in the applicable MHP
------------------
Mortgage.
"Lender" means Nomura Asset Capital Corporation and its assigns and
------
successors.
"Lien" means any security interest, mortgage, pledge, lien, restriction
----
on transferability, claim, charge, encumbrance, title retention agreement or
anal ogous instrument, in, of or on the MHP Properties or any of them.
"Local Account" has the meaning set forth in Section 7.3.2 of the Cash
-------------
Management Procedures.
10
<PAGE>
"Lockbox Account" has the meaning set forth in Section 7.2.2 of the
---------------
Cash Management Procedures.
"Lockbox Event" has the meaning set forth in Section 7 of the Cash
-------------
Management Procedures.
"Lockbox Period" has the meaning set forth in Section 7 of the Cash
--------------
Management Procedures.
"Management Agreements" means (a) each of the Management Agreements,
---------------------
operative as of March 21, 1989 by MHP, the Manager (successor to the former
Marriott Hotels, Inc.) and Marriott Corporation with respect to the MHP
Properties located in San Antonio, Texas, and New Orleans, Louisiana and (b) the
Management Agreement, operative as of May 30, 1989 by MHP, the Manager and
Marriott Corporation with respect to the MHP Property located in San Ramon,
California, in each case as amended by amendments thereto, dated the Closing
Date, and by the Modification, Subordination and Non-Disturbance Agreements,
Estoppels, Assignments and Consents, dated as of the Closing Date, among the
Manager, MHP and the Lender, and any other management agreement entered into by
MHP as required or permitted herein.
"Management Expenses" means, for any Hotel, (a) the cost of sales
-------------------
including salaries, wages (including accruals for year-end bonuses to key
management employees), fringe benefits, payroll taxes and other costs related to
Hotel employees; (b) departmental expenses, administrative and general expenses
and the cost of hotel marketing, advertising and business promotion expenses,
heat, light and power, and routine repairs, maintenance and minor alterations
treated as Deductions under Section 8.01 of the applicable Management Agreement;
(c) the cost of Inventories and Fixed Asset Supplies (as such terms are defined
in the applicable Management Agreement) consumed in the operation of the Hotel;
(d) a reasonable reserve for uncollectible accounts receivable as determined by
the Manager; (e) all costs and fees of independent accountants or other third
parties who perform services required or permitted hereunder; (f) the cost and
expense of technical consultants and operational experts, including Affiliates
of the Manager, for specialized services in connection with non-routine Hotel
work; (g) the Base Management Fee under Section 5.01 of the applicable
Management Agreement; (h) the Hotel's pro rata share of costs and expenses
incurred by the Manager in providing Chain Services (as defined in the
applicable Management Agreement); (i) insurance costs and expenses under
Sections 12.02, 12.03 and 12.05 of the applicable Management Agreement; (j) any
amounts transferred into the Repairs and Equipment Reserve under Section 8.02B
of the applicable Management Agreement; (k) taxes, if any, payable by or
assessed against the Manager related to the applicable Management Agreement or
to the Manager's operation of the Hotel (exclusive of the Manager's income
taxes) including any Impositions; (l) rent payable under any telephone or
equipment leases; and (m) such other costs
11
<PAGE>
and expenses as are specifically provided for as Deductions in the applicable
Management Agreement or are otherwise reasonable necessary for the proper and
efficient operation of the Hotel.
"Manager" means Marriott Hotel Services, Inc. or any property manager
-------
appointed as permitted herein.
"Manager's Account" has the meaning set forth in Section 1.1 of the
-----------------
Cash Management Procedures.
"Material Adverse Effect" means a material adverse effect on (a) MHP's
-----------------------
ability to enter into or fulfill its material obliga tions under the Transaction
Documents or to effect the transactions contemplated thereby or (b) a material
adverse effect on the condition (financial or other wise), business, prospects,
assets, liabilities, management, financial position or results of operations
of MHP or the MHP Properties.
"Maturity Date" shall mean the earliest to occur of (1) October 11,
-------------
2017 or (2) such date to which the maturity of the MHP Debt may be accelerated
upon an Event of Default or as otherwise provided in any Transaction Document.
"MHP" means Marriott Hotel Properties II Limited Partnership.
---
"MHP Debt" means the obligations of MHP under the Transaction
--------
Documents, together with all interest thereon, and all other sums, including,
without limitation, fees, expenses, commissions, premiums and indemnities, which
may or shall become due under any of the Transacti on Documents, including the
costs and expenses of enforcing any provision thereof that may be reimbursable
thereunder.
"MHP Loan" means the loan evidenced by the MHP Notes.
--------
"MHP Mortgage(s)" means, with regard to each MHP Property, the
---------------
mortgage, deed of trust or other security instrument creating a first mortgage
lien on such MHP Property, dated as of the Closing Date, from MHP to or for the
benefit of the Lender.
"MHP Notes" means (a) that certain Secured Promissory Note, dated the
---------
Closing Date, from MHP to the Lender in the principal amount of $195,405,904 and
(b) that certain Secured Promissory Note, dated the Closing Date, from MHP to
the Lender in the principal amount of $27,094,096.
"MHP Property" or "MHP Properties" means the fee or leasehold estate
------------ --------------
owned by MHP in any or all of those 3 Marriott hotels in San Antonio, Texas, New
Orleans, Louisiana, and San Ramon, California, in each case including all
improvements thereon, fixtures thereto, direct interests therein, and personal
property related thereto or in cluded therein; provided, however, that "MHP
-------- -------
Property" or "MHP
12
<PAGE>
Property" or "MHP Properties" shall not include (i) any property owned by
tenants, guests, licensees or concessionaires of or to such MHP Property or MHP
Properties, or (ii) any MHP Property or MHP Properties released from the Lien of
the Security Documents pursuant to the provisions of Section 2.3 or 2.6 of this
Agreement or any Security Document.
"MHP Property Agreements" means all material agreements, contracts and
-----------------------
other documents not specifically referred to herein relating to the operation of
the Hotels other than agreements for services performed by third parties which
services are generally available from other third parties and which agreements
can be terminated on not more than 30 days' prior notice without payment of any
damages, fees, or penalty.
"MHP Share" has the meaning set forth in Section 4.3 of the SC Cash
---------
Management Procedures.
"MHP/SC Note" means that certain Secured Promissory Note, dated the
-----------
Closing Date, from SC and MHP to the Lender in the principal amount of
$43,500,000.
"MII" means Marriott International, Inc., a Delaware corporation.
---
"MII Cash Management Conditions" means the following conditions: (i)
------------------------------
each of the MHP Properties is managed by a manager under the Management
Agreements and (ii) the Manager is MII or a wholly owned, direct or indirect,
subsidiary of MII.
"MII Debt" has the meaning set forth in Section 6 of the Cash
--------
Management Procedures.
"Monthly Debt Service Payment" has the meaning set forth in Section
----------------------------
4.3(B)(i) of the Cash Management Procedures, as modified by Section 12.6 of the
Cash Management Procedures.
"NACC" means Nomura Asset Capital Corporation.
----
"Net Operating Income" means, in respect of any fiscal period, Gross
--------------------
Revenues less the sum of, without duplication, (A) Management Expenses and (B)
any Ground Rent, Impositions or insurance premiums paid or reserved for payment
with respect to the MHP Properties.
"Non-Recourse" means, with respect to the MHP Debt, that the MHP Debt
------------
is limited in recourse solely to the Pledged Property and is not guaranteed
directly or indirectly by any Partner or the Manager and no Partner or the
Manager or any shareholder, member, director, officer, employee or agent of any
Partner or the Manager, either directly or indirectly, shall be personally
liable in any respect (except to the extent of their respective interests in the
Pledged Property) for (i) the payment of any MHP Debt, (ii) the performance of
any covenant or obligation under any Transaction
13
<PAGE>
Document or (iii) monetary damages for the breach of performance of any covenant
or obligation contained in any Transaction Document; provided, however, that in
-------- -------
the event of any fraud, material misrepresentation or misappropriation of funds
under any Transaction Document or under any Management Agreement, nothing herein
or in such other documents shall estop the Lender from prosecuting an Action
against the party or parties committing such fraud, misappropriation or material
misrepresentation, or the recipient or beneficiary of such fraud, material
misrepresentation or misappropriation, whether or not such party, recipient or
beneficiary is MHP or a Partner or the Manager, to the extent of losses relating
to or arising from such fraud, material misrepresentation or misappropriation of
funds under any Transaction Document; provided, further, that MHP's obligations
-------- -------
in respect of the Environmental Indemnity Agreement and the covenants,
indemnities, representations and warranties relating to environmental matters
contained in any Transaction Document shall not be Non-Recourse to MHP (but
shall be Non-Recourse to its Partners other than the General Partner). The
foregoing provisions shall not (a) prevent recourse to the Pledged Property or
constitute a waiver, release or discharge of any MHP Debt, and the same shall
continue until paid or discharged, (b) limit the right of any Person, if
required by applicable law, to name MHP or any successor or assign of MHP as a
party defendant in any Action in the exercise of any remedy under any
Transaction Document, so long as no judgment seeking the performance of any act
requiring the expenditure of money shall be sought against MHP or any such
successor or assign and so long as any monetary judgment seeking the expenditure
of money is payable only from the Pledged Property or (c) impair any right of
the Lender to obtain a deficiency judgment against MHP or any such successor or
assign in any Action where necessary as a matter of law to preserve the rights
and remedies of the Lender against the Pledged Property, provided that such
deficiency judgment may only be enforced against the Pledged Property.
Notwithstanding the foregoing, under no circumstances shall the MHP Debt be
recourse to any limited partner of MHP in its capacity as such.
"NSI" has the meaning set forth in Section 7.1(a).
---
"Officer's Certificate" means a certificate signed by any officer of
---------------------
the General Partner who is authorized to act hereunder on behalf of MHP.
"Operating Account" has the meaning set forth in Section 7.9 of the
-----------------
Cash Management Procedures.
"Operating Budget" has the meaning set forth in Section 5.2(d)(vi).
----------------
"Operating Profit" has the meaning set forth in the Management
----------------
Agreements.
14
<PAGE>
"Operating Profit Payment Date" means the last Business Day of the
-----------------------------
third week in each Accounting Period.
"Operational Agreements" means the Management Agreements, the MHP
----------------------
Property Agreements, the Equipment Leases, the Ground Leases, the Leases, if
any, and any assignments and assumption agreements or other agreements related
thereto.
"Optional Prepayment Date" means October 11, 2007.
------------------------
"Partners" means the limited partners of MHP as constituted from time
--------
to time and the General Partner, in their capacities as such.
"Permits" means all permits, licenses, certificates, approvals,
-------
authorizations and other documents necessary for the construction, use,
operation or maintenance of the Hotels and the MHP Properties.
"Permitted Exceptions" has the meaning set forth in the MHP Mortgages.
--------------------
"Permitted Investments" has the meaning set forth in Exhibit D hereto.
---------------------
"Person" means any individual, corporation, partnership, limited
------
liability partnership, joint venture, association, limited liability company,
joint stock company, estate, trust, unincorporated organization or other
business entity or Governmental Authority.
"Plan(s)" means an employee benefit or other plan established or
-------
maintained by MHP or any ERISA Affiliate or to which MHP or any ERISA Affiliate
makes or is obligated to make contributions and which is covered by Title IV of
ERISA or Section 302 of ERISA or Section 412 of the IRC.
"Pledge Agreement" means the Pledge Agreement, dated the Closing Date,
----------------
by and among SC, MHP and the Lender.
"Pledged Property" means the MHP Properties and the other collateral in
----------------
which a security interest is being granted pursuant to the Security Documents.
"Potential Event of Default" means an event which, with the giving of
--------------------------
any applicable notice and/or lapse of any applicable time period, would become
an Event of Default.
"Principal Payment" means the difference between the Monthly Debt
-----------------
Service Payment and the Base Rate Interest paid for the applicable Debt Service
Period.
15
<PAGE>
"Purchase Money Security Interest" means purchase money mortgages or
--------------------------------
security interests, conditional sale arrangements and other similar security
interests on furniture, fixtures or equipment acquired by MHP in the ordinary
course of business (and not inconsistent with customary industry practices),
with the proceeds of the indebtedness secured thereby; provided, however, that
-------- -------
(i) any Purchase Money Security Interest shall attach only to the furniture,
fixtures or equipment acquired in such transaction (and any proceeds, as defined
in the Uniform Commercial Code, thereof), and (ii) such indebtedness shall not
exceed the cost of such furniture, fixtures or equipment.
"Rating Agencies" means one or more of S&P, Fitch Investors Services
---------------
Inc., DCR and Moody's Investors Service, Inc. that are, at the time of
determination, selected by NACC to rate the Securities.
"Rating Comfort Letter" means a letter from each Rating Agency pursuant
---------------------
to which it confirms that the taking of the action referred to therein will not
result in a withdrawal, qualification or downgrade of the then existing ratings
of the Securities.
"Rehabilitation Account" has the meaning set forth in Section 8.5 of
----------------------
the Cash Management Procedures.
"Rehabilitation Work" means the improvements to be made to the MHP
-------------------
Properties in the amounts more particularly described on Exhibit J hereto.
---------
"Release Date" has the meaning set forth in Section 2.3(a)(i).
------------
"Release Price" means the amount of the proceeds of the MHP Loan
-------------
allocated to each MHP Property as set forth in Exhibit E. Release Prices for the
---------
MHP Properties will be adjusted as follows: If the principal amount of the MHP
Notes is prepaid as a result of (i) the release of an MHP Property pursuant to
Section 2.6, (ii) the application of U.S. Obligations pursuant to Section 2.3,
or (iii) optional prepayment pursuant to the last sentence of Section 3.1, the
Release Price for each MHP Property that will be subject to the lien of any MHP
Mortgage immediately after such repayment shall equal the product of (x) a
fraction the numerator of which is the Release Price of such MHP Property
immediately before such adjustment and the denominator of which is the aggregate
Release Prices for all MHP Properties, the lien of which is not being released,
immediately before such adjustment, times (y) the outstanding principal amount
of the MHP Notes immediately after such adjustment.
"REMIC" has the meaning set forth in Section 2.3(a).
-----
"S&P" means Standard & Poor's Rating Services.
---
"SC" means Santa Clara Marriott Hotel Limited Partnership.
--
16
<PAGE>
"SC Cash Collateral Account" has the meaning attributed to "Cash
--------------------------
Collateral Account" in the SC Loan Agreement.
"SC Cash Management Procedures" has the meaning attributed to "Cash
-----------------------------
Management Procedures" in the SC Loan Agreement.
"SC Debt" means the obligations of SC under the SC Transaction
-------
Documents, together with all interest thereon, and all other sums, including,
without limitation, fees, expenses, commissions, premiums and indemnities, which
may or shall become due under any of the SC Transacti on Documents, including
the costs and expenses of enforcing any provision thereof that may be
reimbursable thereunder.
"SC Event of Default" has the meaning attributed to "Event of Default"
-------------------
in the SC Loan Agreement.
"SC Loan Agreement" means the Loan Agreement, dated as of the date
-----------------
hereof, between SC and the Lender.
"SC Mortgage" means, with regard to the SC Property, the deed of trust
-----------
creating a first mortgage lien thereon, dated as of the Closing Date, from SC to
or for the benefit of the Lender.
"SC Property" has the meaning set forth in the SC Loan Agreement.
-----------
"SC Security Documents" has the meaning attributed to "Security
---------------------
Documents" in the SC Loan Agreement.
"SC Transaction Documents" has the meaning attributed to "Transaction
------------------------
Documents" in the SC Loan Agreement.
"Securities" has the meaning set forth in Section 6.1.
----------
"Securities Act" means the Securities Act of 1933, as amended from time
--------------
to time, and the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
"Securitization" has the meaning set forth in Section 6.1.
--------------
"Security Documents" means (a) the MHP Mortgages, (b) the collateral
------------------
assignment of documents and property rights, dated as of the Closing Date, by
MHP to the Lender, (c) the assignments of leases, rents and profits, dated as of
the Closing Date, by MHP to the Lender given in connection with the MHP
Mortgages, (d) the collateral account agreement, dated as of the Closing Date,
between MHP and the Lender, (e) the Pledge Agreement, (f) the Environmental
Indemnity Agreement, (g) all Uniform Commercial Code financing statements
relating to the MHP Debt and (h) any other documents securing the MHP Debt.
17
<PAGE>
"Servicer" means any nationally recognized servicer of commercial
--------
mortgage loans selected by the Lender and acceptable to the Rating Agencies.
"Servicing Expenses" has the meaning set forth in Section 4.3(B)(i) of
------------------
the Cash Management Procedures.
"SNDA" means the Modification, Subordination and Non-Disturbance
----
Agreements, Estoppels, Assignments and Consents, dated as of the Closing Date,
among the Manager, MHP and the Lender.
"Subordinate Debt" means Indebtedness incurred by MHP after September
----------------
23, 1998 that is expressly subordinate in right of payment to the MHP Debt
pursuant to the provisions of the applicable MHP Mortgage and with respect to
which evidence is provided satisfactory to the Lender that the pro forma Debt
--- -----
Service Coverage Ratio of the MHP Properties on its date of issuance is at least
2.25:1 and as to which the Rating Agencies deliver a Rating Comfort Letter. For
the purpose of calculating such Debt Service Coverage Ratio, Debt Service
Expense shall be the difference between (i) the aggregate amount of scheduled
interest and principal payable on the proposed subordinate indebtedness and any
other Indebtedness other than Indebtedness evidenced by the MHP/SC Note secured
by any assets of MHP and (ii) the payments received from or with respect to U.S.
Obligations purchased by the Lender with the Defeasance Deposits paid to it by
MHP pursuant to Section 2.3 and then held as security for the MHP Notes.
"Substantive Consolidation Opinion" has the meaning set forth in
---------------------------------
Section 6.1(b).
"Successor Entity" has the meaning set forth in Section 2.3(e).
----------------
"Third Party Payors" has the meaning set forth in Section 2.1 of the
------------------
Cash Management Procedures.
"Transaction Documents" means this Agreement, the Security Documents,
---------------------
the MHP Notes and all other documents executed and delivered by MHP in favor of
the Lender in connection with the MHP Loan, including, without limitation, all
agreements, instruments and documents pursuant to which the Pledged Property is
assigned, collaterally assigned and/or pledged to the Lender hereunder.
"Transition Period" has the meaning set forth in Section 7.3 of the
-----------------
Cash Management Procedures.
"Trustee" means the trustee to which NACC assigns its interest in the
-------
Transaction Documents in connection with a Securitization.
"Uncontrollable Circumstances" means circumstances causing delay due to
----------------------------
acts of God, governmental restrictions (other than
18
<PAGE>
arising from MHP's failure to comply with applicable law), enemy acts, civil
commotion or other causes beyond the reasonable control of MHP.
"United States" means the United States of America (including the
-------------
States and the District of Columbia), its territories, its possessions and other
areas subject to its jurisdiction.
"U.S. Obligations" has the meaning set forth in Section 2.3(f).
----------------
"Welfare Plan" means an employee welfare benefit plan, as defined in
------------
Section 3(1) of ERISA.
"Work" has the meaning set forth in Section 8.1 of the Cash Management
----
Procedures.
"Yield Maintenance Premium" shall mean an amount in cash that would be
-------------------------
necessary to purchase U.S. Obligations in an amount that would be sufficient,
together with U.S. Obligations that could be purchased with the principal of and
interest on the MHP Notes paid to the Lender upon an acceleration of the MHP
Notes pursuant to Section 4.2, to provide the payments due on or prior to, but
as close as possible to, all successive Debt Service Payment Dates after the
receipt of such amount in respect of (i) the remaining Monthly Debt Service
Payments that would be required under the MHP Notes through and including
October 11, 2007 and (ii) a balloon payment of the outstanding principal balance
of the MHP Notes and accrued and unpaid interest as of such date as if such
balloon payment were then due and payable.
ARTICLE II
PROVISIONS CONCERNING THE ACCOUNTS AND PLEDGED PROPERTY
Section 2.1 Cash Management Procedures
--------------------------
The provisions of Exhibit B are incorporated herein by reference.
---------
Section 2.2 Right to Contest. To the extent consistent with the MHP
----------------
Mortgages, MHP at its expense may contest, by appropriate Action conducted in
good faith and with due diligence, the amount or validity or application, in
whole or in part, of any Imposition or Lien therefor or any Legal Requirement or
Insurance Requirement or the application of any instrument of record affecting
the Pledged Property or any part thereof or any claims or judgments of
mechanics, materialmen, suppliers or vendors or Liens therefor, and may direct
the Manager or the Servicer, as the case may be, to withhold payment of the same
pending such Action if
19
<PAGE>
permitted by law; provided, however, that (a) in the case of any Impositions or
-------- -------
Liens therefor or any claims or judgments of mechanics, materialmen, suppliers
or vendors or Liens therefor, such Action shall suspend the enforcement thereof
and the accrual of penalties thereon from MHP, the Manager, the Servicer and the
Pledged Property, (b) neither the Pledged Property nor any part thereof or
interest therein could be in any danger of being sold, forfeited or lost if MHP
pays the amount or satisfies the condition being contested, and MHP would have
the opportunity to so pay or satisfy if MHP fails to prevail in the contest and
(c) in the case of an Insurance Requirement, the failure of MHP to comply
therewith shall not impair the validity of any insurance required to be
maintained by MHP under the applicable MHP Mortgage or the right to full payment
of any claims thereunder.
Section 2.3 Defeasance.
----------
(a) At any time after the date which is the earlier of (x) two years
after the "startup day," within the meaning of Section 860G(a)(9) of the IRC, of
a "real estate mortgage investment conduit," within the meaning of Section 860D
of the IRC (a "REMIC"), that holds the MHP Notes (if the MHP Notes have been
-----
transferred to a REMIC prior to September 23, 1998) and (y) September 23,
2000, but prior in either case to the Optional Prepayment Date, MHP may defease
such Lien to cause the release of one or more of the MHP Properties from such
Lien by providing the Lender with funds in an amount equal to the Defeasance
Deposit for that portion of the MHP Notes which MHP wishes to defease, upon the
satisfaction of the following conditions:
(i) not less than 30 days' notice to the Lender specifying a Debt
Service Payment Date (the "Release Date") on which the Defeasance Deposit is to
be made;
(ii) the payment to the Lender of interest accrued and unpaid on
the principal balance of the MHP Notes and all other MHP Debt due through and
including the Release Date;
(iii) the payment to the Lender of the Defeasance Deposit; and
(iv) the delivery to the Lender of:
(A) a security agreement (the "Defeasance Security
-------------------
Agreement"), in form and substance satisfactory to the
---------
Lender, creating a first priority perfected security
interest in favor of the Lender in the Defeasance Deposit
and the U.S. Obligations purchased with the Defeasance
Deposit in accordance with this subsection (a) (together,
the "Defeasance
----------
20
<PAGE>
Collateral");
----------
(B) form(s) of release of the MHP Property(ies) to be released
from the Lien of the Security Documents (for execution by
the Lender) appropriate for the jurisdiction(s) in which
such MHP Property(ies) are located;
(C) an Officer's Certificate certifying that the requirements
set forth in subsections (a) (ii)-(iv) have been
satisfied;
(D) an opinion of counsel for MHP (which may be a "reasoned"
opinion), in form and substance satisfactory to the
Lender, that (i) the transfer of the Defeasance Collateral
in exchange for release(s) of the MHP Property(ies) to be
released will not constitute an avoidable preference under
Section 547 of the United States Bankruptcy Code in the
event of a filing of a petition for relief under the
United States Bankruptcy Code for or against MHP, (ii) the
Defeasance Collateral has been duly and validly
transferred and assigned to the Trustee for the benefit of
the holders of the Securities, (iii) the Trustee holds a
first priority perfected security interest in the
Defeasance Collateral for the benefit of such holders,
(iv) such transfer will not result in a deemed exchange of
the Securities pursuant to Section 1001 of the IRC, (v)
such transfer will not, by itself, adversely affect the
status of the Securities as indebtedness for federal
income tax purposes and (vi) such transfer will not
adversely affect the status of the entity holding the MHP
Debt as a REMIC (assuming for such purposes that such
entity otherwise qualifies as a REMIC and that the
applicable MHP Note(s) was transferred to such REMIC not
later than two years prior to the Release Date);
(E) a certificate of a certified public accountant acceptable
to the Lender that the Defeasance Collateral complies with
the requirements set forth in subsection (b) below;
(F) such other certificates, documents or instruments as the
Lender may reasonably request;
21
<PAGE>
(G) evidence satisfactory to the Lender that the Defeasance
Debt Service Coverage Ratio will be maintained for the
twelve full months commencing immediately after the
Release Date at the greater of (x) the Initial Debt
Service Coverage Ratio and (y) the ratio of the Net
Operating Income for the thirteen (13) full Accounting
Periods next preceding the Release Date divided by the
difference between (i) Debt Service Expense for such
period and (ii) the payments received for such period from
or with respect to U.S. Obligations purchased by the
Lender with the Defeasance Deposits paid to it by MHP
pursuant to this Section 2.3(a) and then held as security
for the MHP Notes for such period; and
(H) If the defeasance is made after the Securitization, the
Rating Agencies deliver a Rating Comfort Letter.
(b) If, following the release of the subject MHP Property(ies), less
than all of the MHP Properties and the SC Property shall have been released, the
Lender shall use the Defeasance Deposit to purchase U.S. Obligations that
provide payments on or prior to, but as close as possible to, all successive
Debt Service Payment Dates after the Release Date that would be required with
respect to an assumed promissory note in a principal amount equal to 125% of the
Release Price of the MHP Property(ies) to be released from the Lien of the
Security Documents on such Release Date. Such assumed promissory note shall be
in the same form (including with respect to term and interest rate) as the MHP
Notes but shall provide for a mandatory prepayment thereof on the Optional
Prepayment Date, including through the application by the Servicer of U.S.
Obligations pursuant to the provisions of subsection (g) of this Section 2.3. In
order to secure the release, in addition to the U.S. Obligations referred to in
the preceding sentence, MHP may, at its election, purchase U.S. Obligations for
delivery to the Servicer that provide additional payments of the type referred
to herein in order to satisfy the Defeasance Debt Service Coverage Ratio. If any
MHP Property is released pursuant to this Section 2.3 as a result of a
condemnation or casualty, the payments provided for in this subsection (b) shall
be equal to the greater of (A) the Release Price and (B) the lesser of (x) the
Defeasance Deposit and (y) the net Condemnation Proceeds or the net Insurance
Proceeds received on account of such MHP Property. The Lender shall deliver such
U.S. Obligations to the Servicer for application pursuant to Sections 4.3(B) and
7.9.3(A) of the Cash Management Procedures.
(c) If, as a result of the release of the subject MHP Property(ies),
all of the MHP Properties and the SC Property shall have been released, the
22
<PAGE>
Lender shall use the Defeasance Deposit to purchase U.S. Obligations that
provide, together with any U.S. Obligations purchased in connection with any
prior releases of MHP Properties, payments on or prior to, but as close as
possible to, all successive Debt Service Payment Dates after the Release Date
that would be required with respect to an assumed promissory note in a principal
amount equal to the aggregate outstanding principal balance of the MHP Notes and
accrued and unpaid interest thereon on the Release Date. Such assumed promissory
note shall be in the same form (including with respect to term and interest
rate) as the MHP Notes but shall provide for the mandatory prepayment thereof on
the Optional Prepayment Date, including through the application by the Servicer
of U.S. Obligations pursuant to the provisions of subsection (g) of this Section
2.3. The Lender shall deliver such U.S. Obligations to the Servicer for
application pursuant to Sections 4.3(B) and 7.9.3(A) of the Cash Management
Conditions.
(d) Upon compliance with the requirements of this Section 2.3, the MHP
Property(ies) to be released shall be released from the Lien of the Security
Documents and the SC Security Documents and shall not be deemed an MHP Property
hereunder; the U.S. Obligations shall constitute substitute collateral which,
together with the Security Documents applicable to the remaining MHP Properties,
shall secure the MHP Debt.
(e) If all the MHP Properties and the SC Property have been released
pursuant to the provisions of Section 2.3 of the SC Loan Agreement, MHP may
assign its obligations under the MHP Notes together with the U.S. Obligations
relating thereto to a successor entity (the "Successor Entity") designated by
----------------
NACC and thereupon be released fully from all obligations relating to the MHP
Debt. In such event the opinion of counsel provided for in clause (a)(iv)(D) of
this Section 2.3 shall provide that upon such assignment, the Defeasance
Collateral will not be part of the estate of MHP under Section 541 of the United
States Bankruptcy Code. NACC shall retain its obligation to designate a
Successor Entity notwithstanding the transfer of the MHP Notes and the SC Note
unless such obligation is specifically assumed by the transferee. In
consideration for the payment of $1,000 by MHP, the Successor Entity shall
assume MHP's obligations under the MHP Notes and the Defeasance Security
Agreement, MHP shall be relieved of its obligations thereunder and the MHP Debt
and the SC Debt shall not be deemed outstanding for any purpose of this
Agreement. If required by the applicable Rating Agencies, MHP shall also deliver
or cause to be delivered a Substantive Consolidation Opinion with respect to the
Successor Entity in form and substance satisfactory to the Lender and the
applicable Rating Agencies.
(f) For purposes of this Section 2.3, "Defeasance Deposit" shall mean
------------------
an amount in cash necessary to purchase U.S. Obligations whose cash flows are in
an amount sufficient (i) to make the payments required under subsections (b) or
(c), as the case may be,
23
<PAGE>
plus any costs and expenses incurred or to be incurred in making such purchase
and (ii) to make the additional monthly payments necessary to cause the
Defeasance Debt Service Coverage Ratio to be satisfied; "U.S. Obligations" shall
----------------
mean obligations or securities not subject to prepayment, call or early
redemption which are direct obligations of, or obligations fully guaranteed as
to timely payment by, the United States of America or any agency or
instrumentality of the United States of America, the obligations of which are
backed by the full faith and credit of the United States of America; and
"Defeasance Debt Service Coverage Ratio" shall mean, in respect of any fiscal
--------------------------------------
period, the ratio of (i) Net Operating Income of the MHP Properties for such
period remaining after a defeasance pursuant to this Section 2.3 to (ii) the
difference between (x) Debt Service Expense for such period and (y) the payments
to be received from or with respect to U.S. Obligations then held as security
for the MHP Notes for such period, including, without limitation, U.S.
Obligations purchased by MHP pursuant to the second sentence of subsection (b)
above.
(g) If the payment of accrued and unpaid interest and principal of the
MHP Notes and any other MHP Debt has not been made in full by the Optional
Prepayment Date, payments from or with respect to U.S. Obligations then held by
the Lender and such payments received by the Lender thereafter shall be applied
on the date such payment is received (i) first, to payment of accrued and unpaid
interest on each of the MHP Notes, pro rata; and (ii) second, to prepayment of
--- ----
the Principal Payments of each of the MHP Notes, pro rata, in inverse order of
maturity.
(h) Notwithstanding the provisions of subsection (a) of this Section
2.3 setting forth the time period during which an MHP Property may be defeased,
MHP may defease the Lien of the Security Documents and the SC Security Documents
to cause the release of an MHP Property for the purpose set forth in clause (e)
of Section 4.1A prior to the date set forth in such subsection (a) if it
provides to the Lender an opinion in form and substance, and from a firm,
acceptable to the Lender, in the exercise of its sole discretion, that such
release will not adversely affect the status of the entity holding the MHP Debt
as a REMIC (assuming for such purpose that such entity otherwise qualifies as a
REMIC).
Section 2.4 Sale of all the MHP Properties and the SC Property.
--------------------------------------------------
Provided that no Event of Default has occurred and is continuing, upon at least
60 days' notice to the Lender, MHP has the right to sell all the MHP Properties
and SC has the right to sell the SC Property, as a group, subject to the MHP
Security Documents and the SC Security Documents, as the case may be, to any
Person so long as such Person is approved by NACC, and, after the
Securitization, by the Lender, such approval not to be unreasonably withheld,
and the Rating Agencies deliver a Rating Comfort Letter. It is understood that
the Rating Agencies may require, as a
24
<PAGE>
condition to such delivery, matters equivalent to those contained in clauses (i)
and (ii) of Section 2.5. Upon such approval and delivery, the Lender shall
deliver to MHP for execution and delivery such instruments as may be reasonably
required to effect an assignment and assumption of the MHP Debt and a release of
the obligations of MHP under the Transaction Documents, including, without
limitation, new MHP Notes as to which the purchaser of the MHP Properties shall
be the obligor, in an aggregate principal amount equal to the then outstanding
principal amount of the MHP Notes.
Section 2.5 Change of Control. There shall be no Change of Control;
-----------------
provided, however, that if no Event of Default has occurred and is continuing
- -------- -------
there can be a Change of Control if (i) MHP submits to the Lender an opinion in
form and substance and from a firm satisfactory to the Lender, with respect to
the requested Change of Control, to the same effect as the Substantive
Consolidation Opinion, (ii) the organizational documents of the Person involved
in the requested Change of Control are approved by the Lender and (iii) after
the Securitization, the Rating Agencies deliver a Rating Comfort Letter.
Section 2.6 Partial Release after the Optional Prepayment Date. On any
--------------------------------------------------
Debt Service Payment Date after the Optional Prepayment Date, upon the sale by
MHP of any MHP Property to any Person, MHP may cause the release of such MHP
Property from the Lien of the Security Documents upon the satisfaction of the
following conditions:
(a) not less than 30 days' notice to the Lender specifying a Debt
Service Payment Date on which the amount set forth in clause (c) below is to be
provided to the Servicer, which notice shall be accompanied by an Officer's
Certificate to the effect that no Potential Event of Default or Event of Default
has occurred and is continuing (or in the case of a Potential Event of Default
or Event of Default that shall be cured or avoided by the release of the
affected MHP Property describing the nature of, and certifying that, such
Potential Default or Event of Default shall be cured by such release and that no
other Potential Event of Default or Event of Default has occurred and is
continuing and that such Release will comply with all applicable requirements of
this Section 2.6;
(b) the payment to the Lender of interest accrued and unpaid on the
principal balance of the MHP Notes and all other sums due under the Transaction
Documents, through and including such Debt Service Payment Date;
(c) the payment to the Lender, to be applied to prepayment of the
Principal Payments in inverse order of maturity, of an amount equal to 125% of
the Release Price of such MHP Property; provided,
--------
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however, that (A) if an MHP Property is released pursuant to this Section 2.6 as
- -------
a result of a condemnation or casualty (and MHP in accordance with the
applicable MHP Mortgage determines in good faith that such MHP Property cannot
be restored to substantially the condition that existed prior to the
condemnation or casualty), such payment shall be an amount equal to the greater
of (a) and (b), in which (a) is the Release Price for such MHP Property and (b)
is the lesser of (x) 125% of such Release Price and (y) the net Condemnation
Proceeds or net Insurance Proceeds received on account of such MHP Property;
(d) delivery to the Lender for execution of forms of release of such
MHP Property from the Lien of the Security Documents appropriate for the
jurisdiction in which such MHP Property is located; and
(e) delivery to the Lender of evidence satisfactory to the Lender that
the ratio of (i) Net Operating Income for the thirteen full Accounting Periods
immediately succeeding the release date to (ii) the difference between (y) the
Debt Service Expense for such Accounting Periods and (z) the payments to be
received for such Accounting Periods from or with respect to U.S. Obligations
then held as security for the MHP Notes will be maintained at the greater of (x)
the Initial Debt Service Coverage Ratio and (y) the ratio of (i) the Net
Operating Income for the thirteen full Accounting Periods next preceding the
release date to (ii) the difference between (y) the Debt Service Expense for
such Accounting Periods and (z) the payments received for such Accounting
Periods from or with respect to U.S. Obligations then held as security for the
MHP Notes.
ARTICLE III
PAYMENTS
Section 3.1 Payments on the MHP Notes. All payments made on the MHP
-------------------------
Notes shall be made in the manner, and subject to the conditions, provided in
this Agreement and the MHP Notes. The MHP Notes shall not be prepayable except
as expressly provided for in this Section 3.1, Section 2.3 hereof, Section 2.6
hereof and Sections 4.4(I) and 7.10(F) of the Cash Management Procedures. In
addition, on the Optional Prepayment Date and each Debt Service Payment Date
thereafter, the MHP Notes may be prepaid, at the option of MHP, in full or in
part, without penalty or premium.
Section 3.2 Interest Rate.
-------------
(a) Except as set forth in Sections 3.4(b) and 3.4(d), the MHP Debt
shall bear interest for each Debt Service Period at the Base Rate.
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(b) Calculations of interest shall be made on the basis of a 360-day
year and actual days elapsed during each Debt Service Period.
Section 3.3 Payments without Deduction, etc. All payments of the MHP
-------------------------------
Debt to the Lender shall be absolute and uncon dition al, shall be paid strictly
in accor dance with the terms of the Transaction Documents without being subject
to any claim, set-off, de fense or other right which MHP may have against the
Lender or any other Person, whether in con nec tion with this Agreement, the
trans actions contemplated herein or any other circumstance or happening whatso
ever. MHP shall make such payments to the Lender free and clear of, and without
deduction for, any and all present or future taxes, levies, imposts, deduc
tions, charges, penalties or withholdings, and any lia bili ties with respect
thereto, by whomever imposed, other than present or future taxes on the income
of the Lender or franchise taxes imposed on the Lender as a result of its
conducting business in specific jurisdictions. MHP shall pay and indemnify and
hold the Lender harmless from and against any present or future claim for
liability for United States, state or local taxes or assessments on the
ownership by the Lender of the debt ob liga tions of MHP evidenced by the MHP
Notes, the MHP Mortgages or on the princi pal, in ter est, fees or other amounts
payable under any Transaction Document or other wise in re spect of the MHP Debt
(other than income or franchise taxes imposed on the Lender or its Affiliates by
any jurisdiction). The obligations of MHP hereunder shall survive repayment of
the MHP Debt and termination of the Transaction Documents.
Section 3.4 Periodic Payments.
-----------------
(a) On October 11, 1996, MHP shall pay to the Lender interest on each
of the MHP Notes at the Base Rate for the period beginning on the date hereof
and ending on October 10, 1996. On each Debt Service Payment Date thereafter
through and including October 11, 1997, MHP shall pay to the Lender interest on
each of the MHP Notes at the Base Rate then due and payable for each Debt
Service Period.
(b) On each Debt Service Payment Date occurring after October 11, 1997,
MHP shall pay $1,891,658.45 to the Lender. Such amount shall be applied (i)
first, to the payment of the Base Rate Interest on each of the MHP Notes, pro
---
rata, then due and payable for the applicable Debt Service Period, and (ii)
- ----
next, to the Principal Payment of each of the MHP Notes, pro rata, in the amount
--- ----
of the difference between the Monthly Debt Service Payment and the Base Rate
Interest paid pursuant to sub-clause (i) above. Following the Maturity Date and
while an Event of Default has occurred and is continuing, the Monthly Debt
Service Payment shall be increased to reflect payment of interest at the Default
Rate; provided, however, that for the purposes of this sentence, an Event
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of Default shall be considered to have occurred and be continuing until such
Event of Default has been cured, including, without limitation, pursuant to the
provisions of Section 4.1B.
(c) If any Principal Payment or a portion thereof is prepaid on any
Debt Service Payment Date by the application by the Servicer of payments
received (i) from or with respect to U.S. Obligations held by the Servicer on
the Optional Prepayment Date as a result of a release of any MHP Property from
the Lien of the Security Documents pursuant to Section 2.3, (ii) from the
release of an MHP Property from the Lien of the Security Documents pursuant to
Section 2.6, or (iii) on and after the Optional Prepayment Date, pursuant to the
last sentence of Section 3.1 hereof, the Monthly Debt Service Payment payable on
each Debt Service Payment Date thereafter shall be reduced in an amount equal to
the percentage reduction in the principal amount payable under each of the MHP
Notes effected by such prepayment.
(d) Subsequent to the Optional Prepayment Date and in accordance with
the provisions of the Cash Management Procedures, MHP shall pay to the Lender on
each Debt Service Payment Date (without duplication) any Excess Cash Flow and
the MHP Share (as such term is defined in the SC Cash Management Procedures) for
all Accounting Periods ending during the Debt Service Period immediately
preceding such Debt Service Payment Date, which payments shall be applied (A)
first, to prepayment of each Principal Payment required to be made on each Debt
Service Payment Date, pro rata, in inverse order of maturity until the principal
--- ----
of each of the MHP Notes has been paid in full, and (B) next, to payment of the
difference, if any, between (y) the sum of (i) interest accrued and unpaid on
each MHP Note calculated at the Adjusted Rate and (ii) interest on such accrued
and unpaid amount at the Adjusted Rate and (z) the Base Rate Interest paid on
each Debt Service Payment Date, in the case of each payment described in this
clause (B)), pro rata.
--- ----
ARTICLE
DEFAULT; REMEDIES; ENFORCEMENT
Section 4.1A Events of Default. Any of the following shall constitute a
-----------------
default under this Agreement (an "Event of Default"):
----------------
(a) failure by MHP to pay on the due date any interest or principal due
and payable on any MHP Note as set forth therein; or
(b) failure by MHP to make any other payment due under any Transaction
Document within ten (10) days after demand therefor shall have been made; or
(c) any representation or warranty of MHP contained in any
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Transaction Document shall have been untrue or incorrect when made in any
respect that may have a Material Adverse Effect; provided, however, that for the
-------- -------
purpose of this clause (c) the words "To its Best Knowledge" shall be deleted,
where used, from the provisions of each representation and warranty contained in
Section 5.1 (other than Sections 5.1(e), 5.1(f), 5.1(aa) and 5.1(an); or
(d) failure by MHP to perform its covenants in Section 5.2(d), and such
failure continues unremedied for ten days after notice thereof by the Lender to
MHP requiring the same to be remedied; or
(e) failure by MHP to perform or observe any other of its (i) covenants
under any Transaction Document (other than the covenant contained in Section
5.3(n)) that has a Material Adverse Effect, or (ii) covenant contained in such
Section, and in each case such failure continues unremedied for 30 days after
notice thereof by the Lender to MHP requiring the same to be remedied or such
shorter period as shall be provided in such Transaction Document; provided,
--------
however, that it shall not be an Event of Default if (a) such failure is curable
- -------
but is not reasonably capable of being cured within such 30-day period and MHP
shall have commenced to cure such failure within such 30-day period and
thereafter shall diligently pursue such cure to completion, but in no event
later than 180 days after the date on which MHP received such notice from the
Lender or (b) such failure affects one or more but not all of the MHP Properties
and MHP, within thirty (30) days after its receipt of such notice from the
Lender, gives notice to the Lender of its intent to release such MHP
Property(ies) from the Lien of the Security Documents pursuant to the provisions
of Section 2.3 or 2.6 and, thereafter diligently pursues efforts to take such
action and, within 180 days after the date on which it received such notice from
the Lender, effects such release pursuant to the provisions of Section 2.3 or
2.6, as the case may be; or
(f) an order (that has not been vacated or stayed within 60 days from
the entry thereof) is made for, or the Partners take any action with regard to,
the winding up of MHP or the General Partner except a winding up for the purpose
of a merger, restructuring or contribution, the terms of which have previously
been consented to by the Lender; or
(g) (A) MHP or the General Partner shall commence any Action (1) under
any existing or future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors (collectively,
"Insolvency Law") seeking to have an order for relief entered with respect to
--------------
it, or seeking to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to it or its debts, or (2) seeking
appointment of a receiver, trustee, custodian or other similar official (each a
"Bankruptcy Custodian") for it or for all
--------------------
29
<PAGE>
or substantially all of its assets, or MHP or the General Partner shall make a
general assignment for the benefit of its creditors; or (B) there shall be
commenced against MHP or the General Partner any Action of a nature referred to
in clause (A) above which (1) results in the entry of any order for relief or
any such adjudication or appointment and (2) remains undismissed, undischarged
or unbonded for a period of 60 days; or (C) there shall be commenced against MHP
or the General Partner any Action seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or substantially all of its
assets which results in the entry of an order for any such relief that shall not
have been vacated, discharged, stayed, satisfied or bonded pending appeal within
60 days from the entry thereof; or (D) MHP or the General Partner shall
generally not, or shall be unable to, or shall admit in writing its inability
to, pay its debts as they become due; or
(h) Unless (a) MHP, after obtaining any consents or waivers from the
ground lessor under the applicable Ground Lease, causes all of the MHP
Properties then owned by MHP to come under management by another nationally
recognized hotel operator acceptable to the Lender, in the exercise of its
reasonable discretion, (b) such MHP Properties are operated as part of a
comparable nationally recognized hotel system acceptable to the Lender and (c)
each of the Rating Agencies delivers to the Lender a Rating Comfort Letter with
respect thereto: (A) the Manager shall commence any Action (y) under any
Insolvency Law seeking to have an order for relief entered with respect to it,
or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to it or its debts, or (z) seeking appointment of a
Bankruptcy Custodian for it or for all or substantially all of its assets, or
the Manager shall make a general assignment for the benefit of its creditors; or
(B) there shall be commenced against the Manager any Action of a nature referred
to in clause (A) above which (y) results in the entry of any order for relief or
any such adjudication or appointment and (z) remains undismissed, undischarged
or unbonded for a period of 60 days; or (C) there shall be commenced against the
Manager any Action seeking issuance of a warrant of attachment, execution,
distraint or similar process against all or substantially all of its assets
which results in the entry of an order for any such relief that shall not have
been vacated, discharged, stayed, satisfied or bonded pending appeal within 60
days from the entry thereof; or (D) the Manager shall generally not, or shall be
unable to, or shall admit in writing its inability to, pay its debts as they
become due; or
(i) one or more judgments or decrees, not covered by insurance, in an
aggregate amount exceeding $2,000,000 in the case of MHP and $2,000,000 in the
case of the General Partner, shall be entered against MHP or the General
Partner, as the case may be, and
30
<PAGE>
such judgments or decrees shall not have been vacated, discharged, stayed,
satisfied or bonded pending appeal within 60 days from the entry thereof;
(j) there is a Change of Control, unless permitted under Section 2.5;
(k) an SC Event of Default occurs; or
(l) any representation or warranty of HMH, Marriott Proper ties, Inc.
or MHP II Acquisition Corp. shall have been untrue or incorrect on the date
hereof, or any breach by any of such entities of the covenants, in each case
relating to the "factual state ments," within the meaning of Paragraph 5 of
those certain certificates of Christopher Townsend and Bruce Wardinski, in each
case dated the date hereof, with respect to the substantive consol idation
opinion referred to therein; provided, however, that (i) for the purposes of
this clause (l) the phrase "to the best of his knowledge after due inquiry" set
forth in each such paragraph shall be deemed deleted and (ii)(A) in the case of
such representation or warranty, MHP does not take such action as may be
required within 30 days after notice of the untruth or inaccuracy thereof by the
Lender to MHP to "cure" such failure such that such representation or warranty
would not have been untrue or incorrect if such "cure" had been in effect on the
date hereof and (B) in the case of such breach, such breach continues unremedied
for 30 days after notice thereof by the Lender to MHP; provided, however,
further that if such breach is curable but is not reasonably capable of being
cured within such 30-day period and MHP shall have commenced to cure such
failure within such 30-day period and thereafter shall diligently pursue such
cure to completion, but in no event later than 90 days after the date on which
SC received such notice from the Lender, such breach shall not be an Event of
Default.
Section 4.1B Event of Default Cure. None of the foregoing shall
---------------------
constitute an Event of Default if after the occurrence thereof and after the
expiration or waiver of the rights, if any, of any ground lessor under a Ground
Lease to purchase the underlying MHP Note and MHP Mortgage, MHP tenders a cure
for such Event of Default or a plan to cure such Event of Default and the Lender
accepts such tender, such acceptance to contain such conditions as the Lender,
in the exercise of its sole discretion, may require. If MHP tenders to the
Lender all sums, the non-payment of which constituted an Event of Default under
clauses (a) or (b) of Section 4.1A, and the Lender accepts such sums, such
non-payment shall not constitute an Event of Default. If the Lender does not
accept any such payment or tender by MHP, the Event of Default shall be
continuing. The Lender shall be deemed to have accepted a tender of cash if the
Lender does not return such cash to MHP within 10 Business Days of its receipt
thereof. Except as contemplated by the preceding sentence, if the Lender fails
to
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<PAGE>
respond to MHP within 30 days of its receipt of such tender, it shall be deemed
to be rejected.
Section 4.2 Remedies. If an Event of Default shall have occurred and be
--------
continuing, the Lender shall have the right, in its sole discretion, by notice
to MHP (with a copy to the Manager) (except upon the occurrence of an Event of
Default under clauses (f) or (g) of Section 4.1A, in which case all principal
and accrued interest thereon will be immediately due and payable on the MHP
Notes without any declaration or other act on the part of the Lender) to take
one or more of the following actions:
(a) To declare the principal of and all amounts accrued but unpaid
under the MHP Notes and the Transaction Documents, together with the Yield
Maintenance Premium if the Event of Default occurs and is continuing prior to
the Optional Prepayment Date, to be immediately due and payable, and such
amounts shall thereupon become immediately due and payable, without presentment,
demand, protest or notice of any kind, other than any notice specifically
required by this Section 4.2, all of which are hereby expressly waived by MHP;
(b) Pursue such rights and remedies against MHP, or otherwise, as are
provided under and pursuant to the MHP Mortgages or any of the other Transaction
Documents and as may be available to the Lender at law or in equity, including,
without limitation, during such time as the Lender may be considering a tender
of a cure or a plan pursuant to Section 4.1B; provided, however, that the Lender
-------- -------
shall not initiate foreclosure proceedings unless five (5) Business Days' prior
notice of such intention is given MHP and the tender of a cure or a plan
therefor shall not have been accepted by the Lender pursuant to the provisions
of Section 4.1B before the end of such 5 Business Day period; and
(c) If the Event of Default involves MHP's failure to pay any
Imposition or to comply with the Insurance Requirements, or to perform or
observe any other covenant, condition or term in any Transaction Document or in
any Management Agreement, the Lender may, at its option, without waiving or
affecting any of its rights or remedies hereunder, pay, perform or observe the
same, and, in connection therewith, the Lender shall be entitled to rely on any
representations and statements of the Manager under any Management Agreement in
regard to alleged breaches or violations thereof, and all payments made or costs
or expenses incurred by the Lender in connection therewith shall be repaid by
MHP to the Lender within fifteen (15) days after demand therefor, and shall be
added to and become a part of the MHP Debt. The Lender is hereby empowered to
enter and to authorize others to enter upon any MHP Property for the purpose of
performing or observing any such defaulted covenant, condition or term, without
thereby becoming liable to MHP or any Person in possession holding under MHP.
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Section 4.3 Remedies Cumulative; Delay or Omission Not a Waiver. To the
---------------------------------------------------
extent permitted by law, every remedy given hereunder or in any other
Transaction Document to the Lender shall not be exclusive of any other remedy or
remedies, and every such remedy shall be cumulative and in addition to every
remedy provided by statute, law, equity or otherwise. The Lender may exercise
all or any of the powers, rights or remedies given to it hereunder or which may
be now or hereafter given by statute, law, equity or otherwise, in its absolute
discretion. No course of dealing between MHP and the Lender or any delay or
omission of the Lender to exercise any power, right or remedy accruing upon any
Event of Default shall impair any power, right or remedy or shall be construed
to be a waiver of any such Event of Default or acquiescence therein, and every
power, right and remedy given by each Transaction Document to the Lender may, to
the extent permitted by law, be exercised from time to time and as often as may
be deemed expedient by the Lender.
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 5.1 Representations and Warranties of MHP.
-------------------------------------
MHP represents and warrants to, and covenants with the Lender, that, as
of the Closing Date, except as set forth on the Disclosure Schedule:
(a) Exhibit F hereto sets forth MHP's organizational structure, and its
---------
equity interests and holders thereof. MHP is a limited partnership validly
existing and in good standing under the laws of the State of Delaware and is
qualified to do business in each jurisdiction where the nature of its business
or location of the MHP Properties requires it to be so qualified, including
Texas, Louisiana and California. The General Partner is a corporation validly
existing and in good standing under the laws of the State of Delaware and is
qualified to do business in each jurisdiction where the nature of its business
or location of the MHP Properties requires it to be so qualified. Neither the
General Partner nor MHP has engaged in any business unrelated to the ownership
of the MHP Properties and their respective partnership interests in SC. Neither
the General Partner nor MHP has assets other than those related to the MHP
Properties and their respective partnership interests in SC.
(b) MHP has, and at relevant times has had, the requisite power and
authority to own its assets and conduct its business, to execute and deliver
each of the Transaction Documents and the Operational Agreements to which it is
a party and to carry out the transactions contemplated thereby.
33
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(c) MHP's execution, delivery and performance of each of the
Transaction Documents and the Operational Agreements to which it is a party have
been duly and validly authorized by all necessary actions and proceedings on its
part and the part of the General Partner, and no further approvals or filings of
any kind, including, without limitation, any approval of or filing with any
Governmental Authority, are required as a condition thereof.
(d) Neither the execution and delivery of each of the Transaction
Documents and the Operational Agreements to which MHP is a party, nor the
fulfillment of or compliance with the terms and conditions thereof:
(i) will conflict with or result in any breach or violation of
any law, rule or regulation issued by any Governmental
Authority, or any judgment or order applicable to MHP or the
General Partner, or to which MHP or the General Partner or
any of the MHP Properties are subject;
(ii) will conflict with or result in any breach or violation of,
or constitute a default under, any of the provisions of MHP's
Second Amended and Restated Agreement of Limited Partnership,
the Restated Certificate of Incorporation of the General
Partner, or any agreement or instrument to which MHP or the
General Partner is a party or to which MHP or the General
Partner or any of the MHP Properties is subject; or
(iii) will result in or require the creation of any Lien on any of
the MHP Properties, except Permitted Exceptions.
(e) Each of the Transaction Documents and the Operational Agreements to
which MHP is a party has been duly executed and delivered by MHP and, to MHP's
Best Knowledge, the other parties thereto and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with the terms thereof
subject to the effects of bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally and
general equitable principles (whether considered in a proceeding in equity or at
law). To MHP's Best Knowledge, each of the Operational Agreements to which it is
not a party has been duly executed and delivered by the parties thereto.
(f) There is no Action pending to which either MHP or the General
Partner is a party or to which any of the MHP Properties is subject, directly or
indirectly, and, to its Best Knowledge and, based on a certification to MHP by
the Manager, the Manager is a party, no such Action is threatened or
contemplated by any Person,
34
<PAGE>
in each case, other than an Action that does not involve an amount in
controversy in excess of $25,000.
(g) It has not received notice of, and does not have any knowledge of,
any violations of any Legal Requirements affecting the MHP Properties or the
construction, development, use, operation, maintenance or management thereof,
except as set forth in the Exhibits and Schedules to this Agreement.
(h) Neither MHP nor the General Partner has any subsidiaries, except
that MHP and the General Partner hold a 50% limited partnership interest and a
1% general partnership interest, respectively, in SC and the General Partner
holds five limited partnership units in MHP.
(i) Except for the MHP Debt and the SC Debt, since March 20, 1989, it
has not incurred any Indebtedness other than Purchase Money Security Interests.
(j) MHP has no employees.
(k) The MHP Property located in New Orleans, Louisiana, is owned by MHP
in fee simple and is not subject to any ground or underlying leases other than
the leases identified in Schedule 2 hereto. A true and complete copy of each
----------
Ground Lease (including all amendments, agreements, side letters and documents
relating thereto) has been delivered to NACC. Each such Ground Lease is
unmodified and in full force and effect and there is no default by it thereunder
nor, to MHP's Best Knowledge, by the lessor thereunder, and, to MHP's Best
Knowledge, no event has occurred and is continuing which, with the passage of
time and/or the giving of notice, would constitute a default or event of default
under any such Ground Lease.
(l) True and complete copies of the Operational Agreements relating to
the MHP Properties (including all amendments, agreements, side letters and all
other material documents relating thereto other than those effected in the
ordinary course of business and which individually or in the aggregate do not
have an Individual Material Adverse Effect) have been made available to the
Lender; each such agreement is unmodified and in full force and effect; to its
Best Knowledge, there is no default by any party thereunder and no event has
occurred and is continuing which, with the passage of time and/or the giving of
notice, would constitute a default or event of default by it thereunder in such
circumstances that such default or event of default might have an Individual
Material Adverse Effect. All necessary consents to the transactions described
in the Transaction Documents required by such agreements have been obtained.
Since its inception, neither MHP nor the General Partner has entered into any
agreements or obligations other than the Transaction Documents to which it is a
party and the Operational Agreements relating to the MHP
35
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Properties.
(m) All necessary governmental consents, if any, to the transactions
described in the Transaction Documents have been obtained.
(n) The Operating Budget annexed hereto as Exhibit G contains all
---------
anticipated operating expenses for the MHP Properties for the year ending
December 31, 1996. The preliminary Capital Budget annexed hereto as Exhibit H
---------
contains all presently anticipated Capital and FF&E Expenditures for the MHP
Properties for the year ending December 31, 1997.
(o) All Permits material to the operations of each of the MHP
Properties have been obtained, are in full force and effect and are in MHP's
name or available for its use.
(p) Each of the MHP Properties has available to it adequate parking to
comply with all Legal Requirements and to permit the operation of such MHP
Property as a first class full service hotel in the case of the Hotel located in
San Ramon, California, and first class full service convention hotels in the
case of the Hotels located in San Antonio, Texas, and New Orleans, Louisiana, in
each case operated in compliance with Marriott standards and the applicable
Management Agreement.
(q) MHP is not subject to any United States or state income,
unincorporated business, capital, franchise or similar gross income or income
based taxes.
(r) (i) Neither MHP nor any ERISA Affiliate maintains, sponsors,
contributes to or is obligated to contribute to, or during
the five (5) years ending on the date of the execution and
delivery of this Agreement, has maintained, sponsored,
contributed to or was obligated to contribute to, any Plan.
(ii) MHP does not, and is not obligated to, maintain, sponsor or
contribute to any Welfare Plan.
(iii) MHP's assets are not nor are they deemed "plan assets",
whether by operation of law or under regulations promulgated
under ERISA.
(s) MHP has not entered into any Transaction Document with the actual
intent to hinder, delay, or defraud any creditor. MHP has received reasonably
equivalent value in exchange for MHP's obligations under the Transaction
Documents. The fair saleable value of MHP's assets is and immediately after the
execution and delivery of the Transaction Documents will be greater than MHP's
probable liabilities, including the maximum amount of MHP's contingent
liabilities or MHP's debts as such debts become absolute
36
<PAGE>
and matured. MHP's assets do not and immediately after the execution and
delivery of the Transaction Documents will not constitute unreasonably small
capital to carry out MHP's business as conducted or as proposed to be conducted.
MHP does not intend to, and does not believe that MHP will, incur debts and
liabilities (including, without limitation, contingent liabilities and other
commitments) beyond MHP's ability to pay such debts as they mature (taking into
account the timing and amounts to be payable on or in respect of MHP's
obligations).
(t) MHP has not sustained any loss or interference with its business
from fire, explosion, flood or other calamity, or from any labor dispute or
governmental action, order or decree, nor has there been any material adverse
change, nor any other development or event that, in each case, may have an
Individual Material Adverse Effect.
(u) The Security Documents, when duly executed and delivered, and (to
the extent required or contemplated) filed or recorded, will create a valid and
enforceable first priority perfected security interest in MHP's right, title and
interest in and to the rights and properties described therein, as to which
perfection may be effected by such filing or recording, for the benefit of the
Lender, subject only to Permitted Exceptions.
(v) MHP is not (1) an "investment company" or a company "controlled" by
an "investment company," within the meaning of the Investment Company Act of
1940, as amended, (2) a "holding company" or a "subsidiary company" of a
"holding company" or an "affiliate" of either a "holding company" or a
"subsidiary company" within the meaning of the Public Utility Holding Company
Act of 1935, as amended, nor (3) subject to any other federal or state law or
regulation which purports to restrict or regulate its ability to borrow money.
(w) There exists no Event of Default or Potential Event of Default.
(x) To MHP's Best Knowledge, no representation or warranty made by it
in any Transaction Document, and no schedule, exhibit, certificate, written
statement, list, document or other material furnished or to be furnished to the
Lender pursuant to or in connection with any such Transaction Document or any of
the transactions contemplated thereby contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading.
(y) There is no offset, defense, counterclaim or right to rescission
with respect to the MHP Notes or the other Transaction Documents.
37
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(z) All Ground Rent, taxes and governmental assessments currently due
and owing in respect of, and affecting, the MHP Properties, have been paid, or
an escrow of funds in an amount sufficient to cover such assessments has been
established with the Servicer or title insurance company.
(aa) There is no Action pending, or, to MHP's Best Knowledge,
threatened, for the total or partial condemnation of any of the MHP Properties,
and except for ADA Compliance Work, Deferred Maintenance and Other Work,
Environmental Remediation Work and Rehabilitation Work, each of the MHP
Properties is in good repair and free and clear of any damage that could affect
materially and adversely the value of such MHP Property as security for the MHP
Notes or the use for which such MHP Property was intended.
(ab) Insurance required to be maintained pursuant the Insurance
Requirements is in effect; and the MHP Properties and the use and operation
thereof constitute a legal use under applicable zoning regulations and comply in
all respects with all applicable Legal Requirements.
(ac) To MHP's Best Knowledge, the amounts deposited in the Capital
Expenditure and FF&E Reserve Accounts for ADA Compliance Work, Deferred
Maintenance and Other Work, Environmental Remediation Work and in the
Rehabilitation Accounts for Rehabilitation Work are sufficient for their
intended purposes.
(ad) None of the MHP Properties is listed in, or, to MHP's Best
Knowledge and, based on a certification to it by the Manager, of the Manager,
proposed for listing in, the United States Environmental Protection Agency's
National Priorities List of sites or any other comparable list of sites
maintained by any state or local governmental agency.
(ae) None of the MHP Properties is subject to any Lien or claim for
Lien in favor of any Governmental Authority or any other Person as a result of
any Hazardous Substance (as such term is defined in the Environmental Indemnity
Agreement) on, in or affecting the MHP Property.
(af) None of the MHP Properties is subject to any collective bargaining
or other union contracts.
(ag) Each of MHP and the General Partner has (a) not sought or
consented to any dissolution, winding up, liquidation, consolidation, merger or
sale of all or substantially all of its assets, (b) not failed to correct any
known misunderstanding regarding its separate identity, (c) maintained its
accounts, books and records separate from those of any other Person (except
that, for accounting and reporting purposes, MHP or the General Partner may be
included in the consolidated financial statements of Host Marriott in accordance
with generally accepted accounting
38
<PAGE>
principles), (d) maintained its books, records, resolutions and agreements as
official records, (e) not commingled its funds or other assets with those of any
other Person (except as specifically contemplated by the Cash Management
Procedures) and has held its assets in its own name, (f) conducted its business
in its name (except that the MHP Properties are operated under the name
"Marriott" and MHP or the General Partner may have registered "doing business"
names in certain states), (g) maintained its financial statements, accounting
records and other entity documents separate from those of any other Person
(except that, for accounting and reporting purposes, MHP or the General Partner
may be included in the consolidated financial statements of HMC in accordance
with generally accepted accounting principles), (h) except as contemplated by
that certain Interest Rate Lock Agreement, dated August 1, 1996, with NACC, paid
its own liabilities out of its own funds and other assets, (i) observed all
partnership and corporate formalities, as the case may be, (j) not assumed or
guaranteed or become obligated for the debts of any other Person or held out its
credit as being available to satisfy the obligations of any other Person (other
than as permitted by the Transaction Documents), (k) not acquired obligations or
securities of its partners or shareholders, as the case may be (other than, with
respect to the General Partner, a note of its corporate parent, Marriott
Properties, Inc.), (l) allocated fairly and reasonably any and all overhead
expenses and other common expenses for facilities, goods or services provided
jointly to multiple entities and used separate stationery, invoices and checks
from those of any other Person, (m) not pledged any of its assets for the
benefit of any other Person other than the Lender (except for Purchase Money
Security Interests or as otherwise permitted by the Transaction Documents), (n)
held and identified itself as a separate and distinct entity under its own name
and not as a division or part of any other Person (i.e., an integral component
----
of such other Person, as distinguished from a separate entity), but the
operations of the Borrower and the General Partner are consolidated with those
of HMC and its affiliates as described in clause (c) above, (o) not made any
loans to any other Person (other than, with respect to the General Partner, any
HMH SC Debt Service Advances), (p) not identified its partners or shareholders,
as the case may be, or any of its Affiliates as a division or part of it (i.e.,
----
an integral component of such entity, as distinguished from a separate entity),
(q) not entered into or become a party to any transaction with its partners or
shareholders, as the case may be, or any of its Affiliates except in the
ordinary course of its business and on terms which are fair and are no less
favorable to it than would be obtained in a comparable arms' length transaction
with an unrelated third party, (r) not filed a bankruptcy or insolvency petition
or otherwise instituted insolvency proceedings with respect to itself or to any
other entity in which it has a direct or indirect legal or beneficial ownership
interest (and with respect to the General Partner, without the affirmative vote
of all of its directors, including the Independent Director), (s)
39
<PAGE>
maintained adequate capital in light of its contemplated business operations,
(t) not engaged in any business activity other than as stated in Section 2.03 of
the Second Amended and Restated Agreement of Limited Partnership of MHP and
Article THIRD of the Restated Certificate of Incorporation of the General
Partner, as the case may be, and (u) maintained an arms' length relationship
with partners, affiliates and any other party furnishing services to it;
provided, however, that (A) separate financial statements for the General
- -------- -------
Partner have not previously been produced on a regular basis, but the financial
records of the General Partner have been and will remain adequate to permit
production of such separate financial statements (including a balance sheet and
statements of income and changes in financial position) for past periods if it
hereafter becomes necessary to produce such financial statements, and separate
financial statements for the General partner will hereafter be prepared on a
quarterly basis; (B) because of the limited nature of the General Partner's
operations it has not previously maintained separate deposit accounts in its own
name, but, effective immediately, it will establish and maintain such accounts,
consistent with the representations, warranties and covenants contained in this
Section 5.1(ag) and Section 5.2(z); (C) as disclosed to the limited partners of
MHP in connection with MHP's recent tender offer, the offer price and other
terms and conditions of such tender were not arrived at through arm's-length
negotiations between HMC and MHP but were supported by a fairness opinion of
American Appraisal Associates, Inc. and (D) certain transaction and overhead
costs incurred by HMC, MHP and/or the General Partner may not heretofore have
been fully allocated among HMC, MHP and/or the General Partner but such costs
hereafter will be fairly and reasonably allocated.
(ah) The Permitted Exceptions do not materially and adversely affect
(1) MHP's ability to pay in full the principal and interest on the MHP Notes in
a timely manner or (2) the use of any of the MHP Properties for the use
currently being made thereof, the operation of any of the MHP Properties as
currently being operated or the value of any of the MHP Properties.
(ai) [Intentionally omitted]
(aj) To MHP's Best Knowledge, it has no material contingent
liabilities.
(ak) MHP has no material financial obligation under any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which it is a party or by which it or any of the MHP Properties is bound, other
than obligations (i) incurred in the ordinary course of the operation of the MHP
Properties and (ii) under the Transaction Documents.
(al) MHP has not borrowed or received debt financing that has not been
heretofore or contemporaneously herewith repaid in full,
40
<PAGE>
other than Purchase Money Security Interests permitted by the provisions of this
Agreement.
(am) To MHP's Best Knowledge, none of its principals, or the General
Partner, or officer authorized to execute and deliver an Officer's Certificate,
has ever been indicted and/or convicted of a felony under any federal, state or
foreign laws.
(an) There are no pending or, to MHP's Best Knowledge, proposed,
special or other assessments for public improvements or otherwise affecting any
of the MHP Properties, nor, to MHP's Best Knowledge and, based on a
certification to it by the Manager, to the knowledge of the Manager, are there
any contemplated improvements to any of the MHP Properties that may result in
such special or other assessment.
(ao) All of the rooms at each of MHP's Hotels are in service, except
for rooms that are temporarily out of service for routine maintenance and
repair.
(ap) MHP has or anticipates that it will have sufficient funds
available to it for implementing its reasonably anticipated Capital and FF&E
Expenditures.
Section 5.2 Affirmative Covenants. So long as any of the MHP Debt and
---------------------
the SC Debt remains outstanding as an obligation of MHP or SC, as the case may
be, MHP shall:
(a) do all things necessary to keep in full force and effect its valid
existence as a limited partnership and to qualify to do business in each
jurisdiction in which such qualification is necessary to the conduct of MHP's
business or to protect the validity and enforceability of the Transaction
Documents;
(b) do all things necessary to enable MHP to comply with all applicable
legal, fiscal and accounting rules and regulations;
(c) keep proper books of account and records in which full, true and
correct entries in accordance with GAAP shall be made of all transactions in
relation to its business and activities; allow the Lender access to such books
of account and records at all reasonable times during normal business hours upon
reasonable notice; and permit the Lender to discuss its affairs, finances and
accounts with any of the management employees of the General Partner;
(d) furnish to the Lender:
(i) not later than 120 days after the end of each Fiscal Year,
audited financial statements (including MHP's balance sheet,
income statement and statement of cash flows), prepared in
41
<PAGE>
accordance with GAAP consistently applied, audited by a "Big
Six" accounting firm;
(ii) not later than 27 days after the end of each Accounting
Period (i) unaudited financial statements substantially in
the form of Exhibit I (1) attached hereto/1/, covering such
-------------
Accounting Period and the annual amount for the period to
date showing in detail for each Hotel separately, among other
things, a breakdown of sales revenues and operating expenses
and the calculation of house profit, average room and average
occupancy rates, each of the foregoing with a comparison to
budget and prior year, (ii) an unaudited profit and loss
statement and escrow analysis on a consolidated basis in the
form of Exhibit I (2) attached hereto, and (iii) unaudited
-------------
periodic and year-to-date reports detailing for each MHP
Property the calculation of Operating Profit substantially in
the form of Exhibit I (3) attached hereto;
-------------
(iii) not later than 60 days after the end of each Accounting
Quarter, quarterly and year-to-date unaudited financial
statements (including, without limitation, MHP's balance
sheets, income statements, statements of cash flows and such
other quarterly financial information as is provided to the
limited partners of MHP);
(iv) such other reports and other documents as shall be
replacements of the foregoing, which reports and other
documents shall not contain less detail than that provided
for in clauses (i), (ii) and (iii) above;
(v) together with the financial statements provided for in
clauses (ii) and (iii) above and not later than 27 days after
the end of each Fiscal Year, an Officer's Certificate of a
senior executive of the General Partner stating that such
financial statements fairly present the financial position
and results of operations of MHP and stating whether or not
the signer thereof knows of any Event of Default;
(vi) on or before January 20 of each year commencing on January
20, 1997, an annual plan (the "Annual Plan") for such year
-----------
for each of the MHP Properties which annual Plan shall
include a detailed
- ---------------------
/1/Format 90, Rent Letters and Rent Letter Detail.
42
<PAGE>
operating budget (an "Operating Budget") and a detailed
----------------
capital expenditure budget (a "Capital Budget"), reflecting
--------------
the Manager's best good faith estimate of its anticipated
results of operations, including revenues from all sources,
all operating expenses, management fees, Management Expenses,
and Capital and FF&E Expenditures. The Annual Plan shall
contain provisions for deposit into the Capital Expenditure
and FF&E Reserve Account of an aggregate amount equal to at
least 4% or 5% of projected Gross Revenues for each year, the
specific percentage to be determined by the requirements for
such purpose of the Management Agreement relating to each of
the MHP Properties.
(vii) copies of all rent letters, rent letter detail, Format 90s
and other monthly reports prepared by the Manager relating to
the MHP Properties promptly upon receipt thereof; and
(viii) such other information and reports as shall be reasonably
requested by the Lender or the Rating Agencies.
(e) (i) if MHP has the right under any Management Agreement to
approve any aspect of each Annual Operating Projection or the
Repairs and Equipment Estimate (as such terms are defined in
such Management Agreement) or any other budget, submit each
of the foregoing to the Lender for its approval;
(ii) submit to the Lender for its approval the Building
Estimate (as such term is defined in each Management
Agreement); and
(iii) the Lender's review and approval of each of the
foregoing shall not be unreasonably withheld or delayed.
(f) take all reasonable actions necessary so that MHP is not required
to register as an investment company under the Investment Company Act of 1940,
as amended;
(g) promptly inform the Lender in writing of the following:
(i) MHP becoming aware of the commencement of any rule making
or disciplinary proceeding or the promulgation of any
proposed or final rule affecting MHP or any of the MHP
Properties (other than a rule or proceeding which has general
applicability to Persons including MHP and is not likely to
have a Material Adverse Effect);
43
<PAGE>
(ii) MHP becoming aware of the commencement of any Action by
or against MHP or with respect to any of the MHP Properties
before any Governmental Authority or arbitration board, or
the written threat of any such Action;
(iii) the receipt of written notice from any Governmental
Authority that (1) MHP is being placed under regulatory
supervision, (2) any Permit material to the conduct of its
business is to be suspended or revoked or (3) MHP is to cease
and desist any practice, procedure or policy it employs in
the conduct of its business;
(iv) the receipt of written notice from the Manager that MHP
has not complied with any of its obligations under any
Management Agreement or altering in any material respect the
rules, standards and requirements of the Manager thereunder;
and
(v) MHP becoming aware of any facts or circumstances which
with the giving of notice or the lapse of time or both would
give rise to a default under any Ground Lease and all written
notices, from any ground lessor with respect to a default,
potential default or event of default under any Ground Lease.
(h) generally pay its debts as they become due;
(i) do or cause to be done all things necessary to establish, perfect,
maintain and continue the perfection and first priority (subject to Permitted
Exceptions) of the security interest of the Lender in the Pledged Property and
pay the costs and expenses of all filings and recordings and all searches
necessary to establish and determine the validity and the priority of such
security interest;
(j) subject to Section 2.2, pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, all taxes, assessments and
governmental charges levied or imposed upon MHP or upon its income, profits or
property (including the MHP Properties);
(k) subject to Section 2.2, pay or cause to be paid all operating
expenses and all other costs and expenses associated with the operation and
maintenance of the MHP Properties in accordance with the Annual Operating
Projections, Repairs and Equipment Estimate, and Building Estimate in accordance
with the provisions of the applicable Management Agreement;
(l) complete all items of Deferred Maintenance and Other Work, ADA
Compliance Work and Capital and FF&E Expenditures as set
44
<PAGE>
forth in the preliminary Capital Budget for the year ended December 31, 1997
attached hereto as Exhibit H (as such Capital Budget may be amended pursuant to
---------
the provisions of Section 5.2(d)(vi)), from funds deposited in the Capital
Expenditure and FF&E Reserve Accounts prior to the dates specified in Exhibit H
---------
and, to the extent necessary for such completion, from Excess Cash Flow;
(m) pay over to the Servicer for application pursuant to the applicable
MHP Mortgage, Insurance Proceeds and Condemnation Proceeds (except as otherwise
provided in the MHP Mortgages);
(n) complete as promptly as possible all Deferred Maintenance and Other
Work, ADA Compliance Work, Environmental Remediation Work and Rehabilitation
Work (under the supervision of a licensed architect or engineer, if the item of
work requires the expenditure of at least $100,000 or if such supervision is
required by Legal Requirements), and in a good and workmanlike manner, using
materials comparable in quality to the original installation and all items of
Capital and FF&E Expenditures as set forth in the preliminary Capital Budget for
the year ending December 31, 1997 attached hereto as Exhibit H (as such Capital
---------
Budget may be amended pursuant to the provisions of Section 5.2(d)(vi)) and the
then effective Annual Operating Projection, Building Estimate, or Repairs and
Equipment Estimate (as such terms are defined in the Management Agreement) under
the supervision of a licensed architect or engineer or comparable professional,
as appropriate, and in all events, complete all such work as required under the
Management Agreement applicable to each of the MHP Properties and this Agreement
and any additional work that shall be necessary to maintain standards at least
as high as those standards that apply generally to first class full service
hotels in the case of the Hotel located in San Ramon, California, and first
class full service convention hotels in the case of the Hotels located in New
Orleans, Louisiana and San Antonio, Texas, in each case in compliance with
Marriott standards and the applicable Management Agreement. Any work to be
completed in accordance with this provision shall be completed despite the
insufficiency, if any, of funds in the Capital Expenditure and FF&E Reserve
Accounts to complete such work;
(o) promptly on request, furnish to the Lender copies of all material
contracts, bills of sale, statements, receipted vouchers and agreements in MHP's
possession or control under which MHP claims title to any materials, fixtures or
articles of personal property used in construction at or operation of the MHP
Properties;
(p) cause the Manager to operate the MHP Properties as hotels open for
business under the applicable Management Agreement;
(q) promptly on request, from time to time, deliver to the Lender a
statement setting forth all of the accounts MHP or the
45
<PAGE>
Manager maintains with respect to MHP's Hotels and the MHP Properties, the
purposes of such accounts and the balances thereof;
(r) maintain or cause to be maintained each of the Transaction
Documents and Operational Agreements relating to each of the MHP Properties to
which it is a party in full force and effect, and observe and perform or cause
to be observed or performed all of its obligations thereunder;
(s) maintain or cause to be maintained each of the liquor licenses and
all other Permits in connection with MHP's Hotels in full force and effect (and
replace any thereof that may be cancelled or otherwise lapsed), and observe and
perform or cause to be observed or performed all of MHP's obligations
thereunder;
(t) comply with and cause each of the MHP Properties to be in
compliance with all Legal Requirements and all Insurance Requirements;
(u) give the Lender prompt notice upon the discovery, to MHP's Best
Knowledge, of the occurrence of any Potential Event of Default or Event of
Default;
(v) give the Lender prompt notice of any Change of Control;
(w) ensure that the Manager pays all trade indebtedness within 60 days
of the date incurred except for such trade indebtedness that is subject to a
bona fide dispute;
- ---- ----
(x) ensure that the General Partner shall have an Independent Director
acceptable to the Lender at all times, or if the Independent Director has
resigned, shall not take any action which may not be taken pursuant to the
organizational documents of the General Partner without the consent of the
Independent Director;
(y) provide to the Lender not less than (10) days prior to the
execution thereof, a true and complete copy of any proposed amendment to MHP's
Second Amended and Restated Agreement of Limited Partnership (other than
amendments of a ministerial nature that will not have any adverse impact on the
Lender, the value of the Pledged Property, the validity or priority of the
Lender's security interest therein, or any of the Lender's rights or remedies
under the Transaction Documents);
(z) ensure that the representations and warranties contained in Section
5.1(a) and 5.1(ag) remain true and accurate at all times;
(aa) shall operate each of the MHP Properties in accordance with the
then effective Annual Plan; provided, however, that MHP may make Emergency
Expenditures not reflected in the then effective Annual Plan if it gives the
Lender prompt notice of any such
46
<PAGE>
Emergency Expenditures; and
(ab) comply with the terms and provisions of each of the Ground Leases.
Section 5.3 Negative Covenants. So long as any portion of the MHP Debt
------------------
and SC Debt shall remain outstanding, except as expressly permitted in this
Agreement, MHP shall not, without the prior consent of the Lender,
(a) purchase any real properties other than the MHP Properties, have
any assets or liabilities other than assets or liabilities derived from or
related to the MHP Properties or its limited partner interest in SC, or engage
in any business or undertake any activity other than as permitted herein,
including, without limitation, the operation, as a lessee or otherwise, of any
property other than the MHP Properties;
(b) have any interest in any Person except SC;
(c) amend, supplement or otherwise modify MHP's Second Amended and
Restated Agreement of Limited Partnership in any way that would cause a breach
of the covenants in this Agreement;
(d) Grant any of the Pledged Property other than as permitted in the
Transaction Documents and pursuant to the Permitted Exceptions; provided,
--------
however, that MHP may sell or otherwise dispose of personalty or fixtures from
- -------
time to time constituting portions of any MHP Property so long as such
personalty or fixtures are replaced by personalty or fixtures of equal or better
quality to those sold or otherwise disposed of and except for immaterial amounts
of personalty disposed of in the ordinary course of business and items that need
not be replaced to continue the then existing level of quality of operation;
(e) dissolve, liquidate, merge or consolidate with any Person (and MHP
agrees that upon any dissolution, liquidation, merger or consolidation in breach
of this clause (e), the Pledged Property shall continue to be held under and
otherwise subject to the Lien of the Security Documents until the MHP Debt is
paid in full);
(f) permit the validity or effectiveness of any of the Transaction
Documents or, unless replaced with other necessary agreements that do not have
an Individual Material Adverse Effect, any of the Operational Agreements to
which it is a party to be impaired or permit the Lien of the Security Documents
to be amended, hypothecated, subordinated, terminated or discharged or permit
any Liens to be created on or extend to or otherwise arise upon or burden the
Pledged Property or any part thereof or any interest therein or the proceeds
thereof (other than any Permitted Exceptions);
47
<PAGE>
(g) take any action if such action is likely to interfere with the
enforcement of any rights of the Lender under the agreements or instruments
relating to any of the Pledged Property;
(h) incur any Indebtedness other than (a) the MHP Debt and the SC Debt,
(b) Subordinate Debt, (c) Indebtedness incurred in connection with the Hotel
Expansion pursuant to Section 5.6(c), (d) unsecured Indebtedness incurred (i) in
connection with capitalized equipment leases as expressly permitted by Section
8.02C of each Management Agreement or (ii) to provide (a) working capital
(including loans for such purpose that may be made by the Manager and/or the
General Partner), in an aggregate amount, which when added to the outstanding
balance of previous indebtedness incurred and outstanding for such purpose,
shall not exceed the average amount of its Management Expenses for each
Accounting Period during the preceding full 13 Accounting Periods and (b) funds
(including loans for such purpose that may be made by the Manager and/or the
General Partner) to the Servicer where required to pay the Monthly Debt Service
Payment and other amounts permitted under the Cash Management Procedures;
provided, however, that in the case of indebtedness incurred pursuant to clause
- -------- -------
(ii) the payee of such indebtedness shall agree not to assert any remedies with
respect to the non-payment thereof so long as the MHP Debt and the SC Debt is
outstanding or (e) Indebtedness covered by Purchase Money Security Interests, in
an aggregate amount not to exceed $4,182,331 outstanding at any time; provided,
however, that if any MHP Property is released from the Lien of the Security
Documents pursuant to Section 2.3 or 2.6, such aggregate amount shall be reduced
by an amount equal to the percentage reduction in the aggregate Release Prices
effected by such release;
(i) enter into any Equipment Lease other than solely with the supplier
of the furnishings, fixtures or equipment subject to such lease or sell any such
furnishings, fixtures, or equipment to any third party under a "Sale Leaseback"
arrangement;
(j) terminate, amend or modify any Operational Agreements to which it
is a party if the same would have an Individual Material Adverse Effect;
(k) (a) maintain, sponsor, contribute to or become obligated to
contribute to, or suffer or permit any ERISA Affiliate to maintain, sponsor,
contribute to or become obligated to contribute to, any Plan or any Welfare Plan
or (b) permit its assets to become "plan assets," whether by operation of law or
under regulations promulgated under ERISA;
(l) engage in any transactions with its Affiliates except, on terms at
least as favorable to it as those obtainable from unrelated third parties acting
in their own best interests and without duress and which, taken singly or in the
aggregate, would not reasonably be expected to have an Individual Material
Adverse
48
<PAGE>
Effect;
(m) (A) cancel, release, terminate or surrender its Management
Agreement(s) or permit any cancellation, release, termination or surrender
thereof or (B) amend, modify or alter the terms of the Management Agreements in
any material respect; provided, however, that MHP may cancel, release,
-------- -------
terminate, surrender, amend, modify or alter the Management Agreement(s) in
connection with the replacement of the Manager if, before the date on which the
Manager ceases to be the Manager of any Hotel, (i) it causes such Hotel to come
under management by a nationally recognized hotel operator acceptable to the
Lender, in the exercise of its reasonable discretion, (ii) such Hotel continues
to be part of a comparable nationally recognized hotel system acceptable to the
Lender, and (iii) each of the Rating Agencies delivers to the Lender a Rating
Comfort Letter;
(n) Modify, amend or waive any terms or provisions of any of the Ground
Leases other than to cure any ambiguity or to effect any other ministerial
change therein; provided, however, that such action shall not adversely affect
the interests of the Lender;
(o) permit the ground lessor under any of the Ground Leases to make
payments on the MHP Debt;
(p) permit the General Partner to amend its Restated Certificate of
Incorporation (other than amendments of a ministerial nature that will not have
an adverse impact on the Lender, the value of any of the MHP Properties or its
obligations under this Agreement or the other Transaction Documents); or
(q) make any distributions of cash to its partners, except as expressly
contemplated by the Cash Management Procedures, if in the reasonable judgment of
the General Partner such funds will be necessary for expenses to be borne by MHP
pursuant to Section 8.03 of each Management Agreement or for expenses
contemplated by Section 8.02 of each Management Agreement for which funds are
not available in the applicable Capital Expenditure and FF&E Reserve Account.
(r) take any action in furtherance of, or stating its consent to,
approval of, or acquiescence in, any of the acts set forth above.
Section 5.3A. So long as any portion of the MHP Debt and SC Debt shall
remain outstanding, the General Partner shall not (a) inucur any Indebtedness
except in its capacity as the general partner of MHP and SC or withdraw as a
general partner of MHP or SC unless the remaining or substitute general partner
satisfies the single purpose entity criteria of the Rating Agencies and the
Rating Agencies have delivered a Rating Comfort Letter.
49
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Section 5.4 Further Assurances. MHP shall execute and deliver or cause
------------------
to be executed and delivered, all such additional instruments, and do, or cause
to be done, all such additional acts as (i) may be necessary or proper, to carry
out the purposes of this Agreement and to make subject to the Lien of the
Security Documents any property intended so to be subject, including, without
limitation, the delivery of such instruments and documents, including
confirmatory and corrective mortgages, financing statements and continuation
statements under the Uniform Commercial Code of each applicable jurisdiction,
and the delivery of such updated mortgagee's title insurance policies or
endorsements (or commitments therefor) in favor of the Lender as may be
reasonably required to confirm and/or secure continued coverage under the title
policies issued to the Lender in respect of the MHP Properties or the MHP
Mortgages, including payment of all fees and title insurance premiums required
to maintain such continuity of title insurance coverage, (ii) may be necessary
or proper to transfer, in whole or in part, to any assignee of the Lender the
estate, powers, instruments and funds held in trust hereunder and to confirm the
Security Documents (including, without limitation, any documents necessary to
sever and modify the Transaction Documents in the event of an assignment of the
MHP Mortgages covering the MHP Properties located in either San Antonio, Texas,
or San Ramon, California as provided in Paragraph 61 of either one of said
mortgages), or (iii) the Lender may reasonably request in connection with the
MHP Loan; provided, however, that such instruments shall contain express
unconditional exculpations of the Partners and MHP's officers, employees or
agents and any of their successors or assigns exculpating such Persons from any
liability arising under or by reason of their obligations, covenants,
representations, warranties and agreements contained in such instruments,
subject to the exceptions set forth in the definition of Non-Recourse. If, in
connection with the Securitization, MHP is required to furnish newly issued
title policies with respect to the MHP Properties, the Lender shall bear the
cost thereof.
Section 5.5 Representations, Warranties and Covenants of NACC. NACC
-------------------------------------------------
represents and warrants to, and agrees with MHP, that, as of the Closing Date:
(i) it has the power and authority to perform its obligations under this
Agreement and the other Transaction Documents, (ii) this Agreement and the other
Transaction Documents have been duly authorized, executed and delivered by NACC,
and constitute valid and legally binding instruments enforceable against NACC in
accordance with their respective terms, subject to the effects of bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally and general equitable principles (whether
considered in a proceeding in equity or at law), and (iii) it has such
knowledge, sophistication and experience in financial and business matters as to
be capable of evaluating the merits and risks of an investment in the MHP Notes,
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is able to bear the economic risk of an investment in the MHP Notes and is an
"accredited investor" within the meaning of Section 2(15) of the Securities Act
and (iv) no part of the MHP Loan shall be deemed "plan assets" within the
meaning of ERISA.
Section 5.6 Other.
-----
(a) Neither MHP nor any Person acting on behalf of MHP has dealt with
any broker or any other Person entitled to a fee or commission in connection
with the MHP Loan and MHP shall indemnify and hold NACC and its Affiliates
harmless from and against any claims or commissions, finder's fee and other
payments, no matter how described, and against any and all costs and expenses
including, without limitation, reasonable attorneys' fees relating to any such
claim.
(b) Notwithstanding anything in any of the Management Agreements, MHP,
the Lender, the Servicer and the Trustee may disclose information regarding such
agreements and the operation of the Hotels, and provide copies of such
agreements and any financial statements or reports delivered by the Manager
pursuant to such agreements or the requirements of Section 5.2(d) to holders of
the MHP Loan or the Securities, and any counsel to or agents, officers,
employees, and representatives of any such holder, and may disclose and describe
the terms hereof and thereof in any offering memorandum, prospectus, or
registration statement or other filing required under applicable law, provided,
--------
however, that the Servicer, the Lender, and the Trustee shall implement
- -------
procedures that comply with the agreements contained in Section 14 of each
applicable SNDA.
(c) MHP has informed the Lender of its desire to consider the expansion
of one or more of the Hotels ("Hotel Expansion"). MHP may undertake the Hotel
Expansion upon delivery to the Lender of:
(i) an Officer's Certificate stating that the Hotel Expansion is
not likely to have a material adverse effect on (x) MHP's ability to
enter into or fulfill its material obligations under the Transaction
Documents or to effect the transactions contemplated thereby or (y) the
condition (financial or otherwise), business, prospects, assets,
liabilities, management, financial position or results of operations of
such Hotel;
(ii) documentation reasonably satisfactory to the Lender that the
Hotel Expansion is not being financed by MHP with secured or unsecured
indebtedness except to the extent permitted by the Transaction
Documents or specifically permitted in the Rating Comfort Letter
delivered to the Lender pursuant to clause (vi) below;
51
<PAGE>
(iii) updated surveys and endorsements to the applicable title
policies indicating that the Hotel Expansion will be constructed
entirely within the boundaries of the applicable MHP Property, and will
become part of such MHP Property encumbered by the lien of the
applicable MHP Mortgage and the other Security Documents;
(iv) an Officer's Certificate stating that there will be no Change
in Control due to the Hotel Expansion or an updated Substantive
Consolidation Opinion if a Change in Control may occur from an issuance
or transfer of equity interests in MHP related thereto;
(v) such insurance, construction bonds, completion guaranties and
other documentation and assurances that the Lender the may reasonably
require to protect the collateral and security interests granted to the
Lender under the Transaction Documents during the construction of the
Hotel Expansion; and
(vi) a Rating Comfort Letter with respect to the Hotel Expansion.
It is understood that a Hotel Expansion may include the elimination of
a portion of the existing guest rooms and the placing of a portion of other
guest rooms out of service during construction. While the Lender does not and
cannot commit at this time to provide any such financing, the Lender agrees to
use good faith efforts to assist MHP in structuring the financing required for
the Hotel Expansion and in obtaining the Rating Comfort Letter required for the
Hotel Expansion. MHP shall pay all costs and expenses incurred by the Lender in
connection with the Hotel Expansion.
ARTICLE VI
SECURITIZATION
Section 6.1 Securitization. MHP and the General Partner shall use
--------------
commercially reasonable best efforts to cooperate with NACC in its activities in
connection with the sale of the MHP Loan as a whole loan or any securitization
of the MHP Loan (the "Securitization"), including obtaining ratings by the
--------------
Rating Agencies. The Securitization will involve the issuance of rated single-
or multi-class securities secured by or evidencing ownership interests in the
Transaction Documents (the "Securities"). Such cooperation shall include,
----------
without limitation, the obligation to:
(a) maintain the ownership of the MHP Properties in an entity that
permits it to comply with its obligations under clauses (x) and (z) of Section
5.2;
52
<PAGE>
(b) to the extent permitted under MHP's Second Amended and Restated
Agreement of Limited Partnership without the consent of its limited partners, in
the case of MHP, structure and maintain its organizational, operational and
financial affairs and the affairs of the General Partner (collectively, the
"Entities") to enable its counsel to render a reasoned opinion if requested by
--------
the Rating Agencies in form and substance customary or required for rating the
Securities (the "Substantive Consolidation Opinion") that upon a petition for
---------------------------------
bankruptcy under the United States Bankruptcy Code, neither Host Marriott as a
debtor in possession nor its bankruptcy trustees nor creditors should cause a
court to order the substantive consolidation of MHP's assets and liabilities or
those of the General Partner with those of Host Marriott, which counsel and
which opinion shall be satisfactory to NACC and the Rating Agencies;
(c) provide such financial and other information with respect to it and
each of the MHP Properties as may be requested by the Rating Agencies or as may
be reasonably requested by NACC, including, without limitation, audits or
agreed-upon procedures of operating cash flow and Net Operating Income on an
individual and aggregate MHP Property basis, occupancy statistics, and average
rents and quarterly and annual financial statements for each MHP Property
(reviewed and in the case of annual financial statements audited) by a firm of
certified public accountants acceptable to NACC and the Rating Agencies to the
extent customarily given in similar transactions;
(d) prepare and deliver such agreements and instruments relating to the
MHP Notes, the Securities, the MHP Properties and the Entities, including (A)
agreements to indemnify the Rating Agencies, NACC and any servicer or trustee,
to the extent customarily given in commercial mortgage-backed securities
transactions, and (B) amendments of any of the Transaction Documents that are
necessary to effect the Securitization, in form and scope satisfactory to the
Rating Agencies and reasonably satisfactory to NACC;
(e) perform or permit to be performed such appraisals, surveys, site
inspections, market studies, current environmental reviews and reports (Phase
I's, including, without limitation, testing for asbestos, lead paint or radon
gas and Phase II's and other environmental investigations recommended by
environmental consultants), structural engineering reports (which shall include
an analysis of requirements for deferred maintenance and ongoing capital
expenditure and furniture, fixtures and equipment reserve requirements), reviews
of property, casualty, business interruption, earthquake, flood, liability and
title insurance and other due diligence items customarily requested by
nationally recognized underwriters in connection with the origination and
securitization of comparably sized commercial real estate loans or by the Rating
Agencies in connection with rating the MHP Loan or
53
<PAGE>
the Securities; provided, however, NACC shall use its best efforts to limit the
-------- -------
circumstances under which MHP or the General Partner will be required to
duplicate its efforts or third party costs in complying with its obligations
under this clause (e);
(f) provide business plans and budgets relating to the MHP Properties
as may be requested by the Rating Agencies;
(g) cause its counsel to render opinions (which may be reasoned
opinions) with respect to the MHP Properties, the Entities, and the Transaction
Documents as to bankruptcy remoteness and other matters customary in
securitization transactions, which may be requested by the Rating Agencies in
form and substance customary or required for rating the Securities which counsel
and which opinion shall be satisfactory to the Rating Agencies and reasonably
satisfactory to NACC; provided, however, that if the Rating Agencies request
-------- -------
opinions subsequent to the Closing Date in connection with the Securitization
that are materially different from the opinions delivered on the Closing Date,
the Lender shall bear the fees and expenses incurred by counsel in rendering
such opinions;
(h) make such representations and warranties with respect to the MHP
Properties, the Entities, and the Transaction Documents as are customary in
securitization transactions and as may be requested by the Rating Agencies and
reasonably requested by NACC and consistent with the facts covered by such
representations and warranties as they exist on the date thereof, including the
representations and warranties made in the Transaction Documents;
(i) cooperate with the Lender in providing to the Rating Agencies such
information as is customarily provided in connection with annual reviews
conducted in commercial mortgage backed securities transactions similar to the
Securitization;
(j) cooperate with NACC in the preparation, at NACC's cost, of a
private placement memorandum, prospectus, prospectus supplement or other
disclosure document to be used by NSI or any of its Affiliates to privately
place or publicly distribute the MHP Loan as a whole loan or the Securities in a
manner and to the extent that the same satisfy the requirements of the
Securities Act and applicable state securities laws; and
(k) subject to the provisions of Section 5.6(b), permit NACC to provide
to the Rating Agencies, potential investors in the Securities and others as may
be required to effect the Securitization or the sale of the MHP Loan as a whole
loan, the information provided to NACC by MHP and the Manager and their
respective Affiliates in connection with the transactions contemplated by this
Agreement.
Any and all due diligence materials (including without
54
<PAGE>
limitation appraisals, engineering reports and environmental reports) shall be
addressed to and shall run to the benefit of NACC and its successors and
assigns, the Rating Agencies and MHP, and shall, upon delivery, become the
property of NACC, its successors and assigns and MHP.
ARTICLE VII
PAYMENT OF FEES AND EXPENSES; INDEMNIFICATION
Section 7.1 Fees and Expenses.
-----------------
(a) MHP shall pay or reimburse NACC and after the Securitization, NACC
and the Lender (in each case, without duplication) , on demand, without set-off,
withholding or deduction, for the payment of all of the reasonable fees, costs
and expenses incurred by NACC in connection with the underwriting, negotiation,
documentation and closing of the MHP Loan, including, without limitation, the
finder's fee due to Nomura Securities International, Inc. ("NSI") as provided
---
for in that certain Finder's Fee Agreement, dated July 10, 1996, between MHP, SC
and NSI, and the fees, costs and expenses of the following:
(i) title insurance, transfer taxes (if any), mortgage taxes and
recording fees;
(ii) counsel and local counsel to MHP;
(iii) counsel and local counsel to NACC, which shall be reasonable;
(iv) due diligence activities of NACC including, without
limitation, auditors, lien searches, surveys, appraisals,
environmental reports, engineering reports, insurance reviews
and site inspections;
(v) bank charges relating to the operation of the Lockbox Accounts,
the Capital Expenditure and FF&E Reserve Accounts, the Tax and
Insurance Accounts, the Cash Collateral Accounts, the Debt
Service Reserve Account, the Ground Rent Reserve Account and
the Operating Accounts; and
(vi) initial and ongoing activity of any special servicer incurred
as a result of an Event of Default; and
(vii) the Rating Agencies (for the annual ratings reviews).
(b) The Lender shall pay the initial and regular ongoing fees
55
<PAGE>
of the Servicer and the Trustee and, except as set forth in Section 7.1(a), the
costs of any Securitization.
(c) MHP has provided $500,000 to NACC for deposit in an interest
bearing account(the "Expense Deposit") for the payment of the fees, costs and
---------------
expenses payable pursuant to (i) Section 7.1(a) of this Agreement and (ii)
Section 7.1(a) of the SC Loan Agreement. If any portion of the Expense Deposit
remains after payment of such fees, costs and expenses, NACC shall pay such
portion to MHP within 30 days after the closing of the MHP Loan. The
establishment of the Expense Deposit shall not limit MHP's obligations to pay
the fees, costs and expenses described in Section 7.1(a).
Section 7.2 Indemnification.
---------------
(a) MHP, for itself and all those claiming under or through MHP, to the
fullest extent permitted by law, hereby releases and shall defend, hold harmless
and indemnify NACC and after the Securitization, NACC and the Lender, and its
respective directors, officers, agents and employees, (together, the
"Indemnified Parties") from and against any and all liabilities, claims, costs,
-------------------
charges, losses, expenses or damages of any kind or nature, including reasonable
attorneys' fees and disbursements, which may arise in connection with (i) the
performance or non-performance by MHP of any of the Transaction Documents, or SC
of any of the SC Transaction Documents, or MHP's operation of the MHP Properties
or SC's operation of the SC Property and (ii) any breach or failure by MHP to
comply with any representation, warranty or covenant it makes in any document it
furnished in connection with the transactions contemplated by the Transaction
Documents and (iii) any breach or failure by SC to comply with any
representation, warranty or covenant it makes in the SC Loan Agreement or in any
other document it furnished in connection with the transactions contemplated by
the SC Transaction Documents, in each case, except to the extent caused by the
willful acts or omissions, the gross negligence or bad faith of any Indemnified
Party. It is understood that if MHP performs its obligations set forth in the
Transaction Documents and it performs its obligations under the SC Transaction
Documents, as the case may be, strictly in accordance with the terms and
provisions thereof, the provisions of clause (i) of the foregoing sentence in so
far as they relate to the performance by MHP of any of the Transaction Documents
or SC of any of the SC Transaction Documents, shall not be applicable. MHP shall
appear in and defend any Action that might in any way in the good faith judgment
of the Lender affect the value of the MHP Properties or the SC Property, title
to the MHP Properties or the SC Property, the priority of the MHP Mortgages or
the SC Mortgage or the rights and powers of the Lender. Any sums due under this
Section 7.2 shall be payable by MHP within 10 days of demand therefor with
evidence of the amount due and, if not paid within such 10-
56
<PAGE>
day period, shall bear interest from the date of demand to the date of payment
at the Default Rate. MHP shall pay the cost of suit, cost of evidence of title
and reasonable attorneys' fees and disbursements in any Action brought by the
Lender to foreclose any MHP Mortgage or the SC Mortgage, including trial and any
appeal with respect to any such Action.
(b) MHP hereby indemnifies and holds NACC and its controlling persons
and Affiliates, including, without limitation, NSI, harmless against all costs,
expenses and damages incurred by NACC and its controlling persons and affiliates
(including, without limitation, all liabilities under all applicable federal and
state securities laws) as a direct result of any untrue statement of a material
fact contained in the offering documents used in connection with the
Securitization based on information provided by MHP or the Manager, which
describes MHP, SC, the Manager, the MHP Properties or the SC Property (and the
management thereof) or any aspect of the MHP Loan or the SC Loan or the parties
directly involved therein, or as a result of any untrue statement of a material
fact in any of the financial statements of MHP or those of the Manager
incorporated into such offering documents or the failure to include in such
financial statements or in such offering documents any material fact relating to
MHP, SC, the Manager, the MHP Properties or the SC Property (and the management
thereof) and any aspect of the MHP Loan necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided that MHP shall have had an opportunity to review,
comment on and approve the relevant portions of such offering documents. MHP
shall act reasonably and promptly in connection with its approval of the
relevant portions of the offering documents. MHP shall not indemnify NACC for
any cost, expense or damage incurred as a result of the inclusion of any
erroneous or misleading information in such offering documents, or the omission
of material information from the offering documents, provided that MHP or its
counsel shall have previously indicated to NACC or its counsel the erroneous or
misleading nature of such information or the omission of material information,
as the case may be. At the time of the use of such offering documents, NACC
shall execute and deliver to MHP an instrument (in form and substance reasonably
satisfactory to MHP) indemnifying and holding MHP, the General Partner (and the
officers and directors thereof), and its agents and employees harmless against
all costs, expenses and damages (other than costs and expenses specifically
agreed by MHP to be borne by it) incurred by them (including, without
limitation, all liabilities under all applicable federal and state securities
laws) caused by and directly relating to the offering described in such Offering
Documents; provided, however, that such indemnification shall not apply if any
such costs, expenses or damages arise out of or are based upon an untrue
statement of a material fact or an omission to state a material fact in such
offering documents or in the
57
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financial statements for which MHP is providing indemnification as provided
above.
(c) The obligations of MHP under this Section 7.2 shall survive
termination of this Agreement.
(d) The provisions of the sixth and seventh paragraphs of that certain
Commitment Letter, dated July 10, 1996 are incorporated herein by reference to
the extent such provisions impose indemnification obligations on MHP and NACC
that are more burdensome than those contained in this Section 7.2.
ARTICLE VIII
IMMUNITY
Section 8.1 Partners, Employees and Agents of MHP Immune from
-------------------------------------------------
Liability. Notwithstanding anything to the contrary herein, including, without
- ---------
limitation, Article Seven, the obligations under each Transaction Document shall
be Non-Recourse.
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 9.1 Notices. All notices, requests, demands, consents, reports
-------
or other communications, including, without limitation, a tender of a cure
pursuant to Section 4.1B, to or upon the respective parties hereto shall be in
writing and be deemed to have been duly given or made when received, addressed
to the party to which such notice, request, demand, consent, report or other
communication is being given at its address set forth below, or at such other
address as any of the parties hereto may hereafter notify the others by notice
given hereunder:
If to NACC:
Nomura Asset Capital Corporation
2 World Financial Center, Building B
New York, New York 10281
Attention: Daniel S. Abrams, Director
Telecopier: (212) 667-1022
With a copy to:
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
Attention: Robert I. Fisher, Esq.
Telecopier: (212) 940-8776
58
<PAGE>
and:
Nomura Asset Capital Corporation
2 World Financial Center, Building B
New York, New York 10281
Attention: Sheryl McAfee
Telecopier: (212) 667-1206
If to MHP:
Marriott Hotel Properties II Limited Partnership
c/o Host Marriott Corporation
10400 Fernwood Road
Bethesda, Maryland 20817
Attention: Law Department 923
Deputy General Counsel
Telecopier: (301) 380-6332
With a copy to:
Marriott Hotel Properties II Limited Partnership
c/o Host Marriott Corporation
10400 Fernwood Road
Bethesda, Maryland 20817
Attention: Asset Management Department 908
Telecopier: (301) 380-8260
Evidence of such receipt shall include personal delivery, electronic
confirmation (hard copy to be sent by regular mail) and the failure to accept a
communication sent by registered or certified U.S. mail, postage prepaid.
Section 9.2 Benefit of Agreement. This Agreement shall be binding upon,
--------------------
inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto; provided, however, that MHP may assign or
transfer any of its rights or obligations hereunder without the consent of the
Lender which may be withheld in the sole discretion of the Lender. Except as
expressly provided otherwise in this Agreement, any such assignment or transfer
shall not release MHP from any obligations or liabilities hereunder. The
Lender's interests under the Transaction Documents shall be freely assignable
and transferrable in whole or in part. No party other than the parties hereto
and their permitted assigns shall be deemed to have any benefits or obligations
under this Agreement.
Section 9.3 Governing Law. This Agreement and the rights and
-------------
obligations of the parties under the Transaction Documents (except for the MHP
Mortgages and the assignments of leases, rents and profits, dated the Closing
Date, from MHP to the Lender which
59
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shall be governed by the law of the jurisdiction in which the MHP Property
covered thereby is located) shall be governed by the internal laws of the State
of New York.
Section 9.4 Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which when so executed and delivered shall be an
original, but all of which shall together constitute one and the same
instrument.
Section 9.5 Table of Contents, Descriptive Headings. The Table of
---------------------------------------
Contents to this Agreement and the descriptive headings of the several Sections
and Articles of this Agreement are inserted for convenience only and shall not
in any way affect the meaning or construction of any provision of this
Agreement. In the preparation of the Transaction Documents indistinguishable
contributions were made by representatives of NACC and MHP, and each of the
Lender and MHP waives any and all rights, either at law or in equity, to have
the provisions of any Transaction Document interpreted in favor of one over the
other based on a claim that representatives of one or the other were the
principal draftsmen thereof.
Section 9.6 Amendment or Waiver; Integration. No provision of this
--------------------------------
Agreement may be amended, changed, waived, discharged or terminated orally, but
only by an instrument in writing signed by the party against whom enforcement of
the amendment, change, waiver, discharge or termination is sought. This
Agreement and the other Transaction Documents set forth the entire agreement and
understanding of the parties with respect to the subject matter hereof and
thereof, and supersede any and all prior agreements and understandings of the
parties hereto with respect to the subject matter hereof and thereof including,
without limitation, that certain Finder's Fee Agreement and Commitment Letter,
each of which is dated July 10, 1996 and is between MHP, SC and NACC or NSI,
which prior agreements and understandings are terminated in all respects.
Section 9.7 Survival of Representations and Warranties; Reliance. All
----------------------------------------------------
representations and warranties contained in this Agreement and the
indemnification provisions hereof shall survive the execution and delivery of
this Agreement and the making of the MHP Loan and shall be considered to have
been relied upon by the Lender regardless of any investigation made by or on
behalf of it.
Section 9.8 Returned Payments. If after receipt of any payment of all
-----------------
or any part of the MHP Debt, the Lender is for any reason compelled to surrender
such payment to any Person because
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such payment is determined to be void or voidable as a preference, an
impermissible set-off, a diversion of trust funds or for any other reason, this
Agreement shall continue in full force, and MHP shall be liable to, and shall
indemnify and hold the Lender harmless for, the amount of such payment
surrendered until the Lender shall have been finally and irrevocably paid in
full. The provisions of the foregoing sentence shall be and remain effective
notwithstanding any contrary action which may have been taken by the Lender in
reliance upon such payment, and any such contrary action so taken shall be
without prejudice to the Lender's rights under this Agreement and shall be
deemed to have been conditioned upon such payment having become final and
irrevocable.
SECTION 9.9 JURISDICTION AND SERVICE; WAIVER OF JURY TRIAL. EACH OF THE
----------------------------------------------
GENERAL PARTNER AND MHP HEREBY (I) IRREVOCABLY CONSENTS AND SUBMITS ITSELF AND
ACKNOWLEDGES AND RECOGNIZES THE JURISDICTION OF THE COURTS OF THE STATE OF NEW
YORK LOCATED IN NEW YORK COUNTY AND THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK FOR PURPOSES OF ANY ACTION ARISING OUT OF, UNDER,
OR IN CONNECTION WITH, RELATING TO, OR BASED UPON ANY TRANSACTION DOCUMENT OR
THE SUBJECT MATTER THEREOF, (II) AGREES THAT SUCH COURTS SHALL BE THE SOLE AND
EXCLUSIVE COURTS AND FORUMS FOR THE PURPOSE OF ANY SUCH ACTION AND (III) WAIVES
AND AGREES NOT TO ASSERT, AS A DEFENSE OR OTHERWISE, IN ANY SUCH ACTION, ANY
CLAIM THAT SUCH COURTS DO NOT HAVE JURISDICTION OVER IT OR THAT SUCH ACTION IS
BROUGHT IN AN INCONVENIENT FORUM; PROVIDED, HOWEVER, THAT NOTHING CONTAINED
HEREIN SHALL LIMIT, IN ANY MANNER, THE RIGHT OF NACC TO INSTITUTE OR TAKE ANY
ACTION IN ANY COURT IN ANY JURISDICTION FOR THE PURPOSE OF PROTECTING,
PRESERVING OR REALIZING UPON ANY COLLATERAL, IF ANY, SECURING THE MHP DEBT OR
ENFORCING ANY JUDGMENT OBTAINED BY IT IN CONNECTION WITH ANY TRANSACTION
DOCUMENT OR THE SUBJECT MATTER THEREOF. EACH OF THE GENERAL PARTNER, MHP AND
NACC HEREBY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION ARISING OUT OF,
UNDER, OR IN CONNECTION WITH, RELATING TO, OR BASED UPON ANY TRANSACTION
DOCUMENT OR THE SUBJECT MATTER THEREOF, AND AGREES THAT PROCESS IN ANY SUCH
ACTION, IN ADDITION TO ANY OTHER METHOD PERMITTED BY LAW, MAY BE SERVED UPON IT
BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO THE
GENERAL PARTNER OR MHP OR NACC AT THE ADDRESS SET FORTH IN SECTION 9.1 OR AT
SUCH OTHER ADDRESS AS THE GENERAL PARTNER OR MHP OR NACC MAY DESIGNATE BY
NOTICE, AND SUCH SERVICE SHALL BE DEEMED EFFECTIVE AS IF PERSONAL SERVICE HAD
BEEN MADE UPON IT WITHIN NEW YORK COUNTY.
Section 9.10 Enforceability. Any provision of this Agreement which is
--------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the
61
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extent permitted by applicable law, MHP hereby waives any provision of law which
renders any provision hereof prohibited or unenforceable in any respect.
Section 9.11 Conflicting Terms. In the event of any direct conflict
-----------------
between any provision of this Agreement and any provision of any other
Transaction Document, this Agreement shall govern; provided, however, that (a)
notwithstanding the foregoing, the remedies contained in the MHP Mortgages and
any other Transaction Document shall govern in the event of any direct conflict
with any remedy contained in this Agreement, and (b) the parties intend that the
terms and provisions of each of the Transaction Documents be given full effect,
and, accordingly, the provisions of the other Transaction Documents, to the
fullest extent possible, shall be construed to be additional and supplementary
to, and not in conflict with or in derogation of, the provisions of this
Agreement.
Section 9.12 Relationship of Parties. The relationship of MHP to the
-----------------------
Lender is strictly and solely that of borrower and lender and mortgagor and
mortgagee and nothing contained in any Transaction Document is intended to
create, or shall in any event or under any circumstance be construed as
creating, a partnership, joint venture, tenancy-in-common, joint tenancy or
other relationship of any nature whatsoever between MHP and the Lender other
than as borrower and lender and mortgagor and mortgagee. MHP acknowledges that
(a) NACC engages in the business of real estate financings and other real estate
transactions and investments which may be viewed as adverse to or competitive
with the business of MHP or its Affiliates, (b) it is represented by competent
counsel and has consulted counsel before executing this Agreement and (c) it
shall rely solely on its own judgement and advisors in entering into the
transactions contemplated hereby without relying in any manner on any
statements, representations or recommendations of NACC or any Affiliate of NACC
except as set forth in Section 5.5.
(Signature page follows)
62
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IN WITNESS WHEREOF, MHP and NACC have caused this Agreement to be
signed and delivered, all as of the day and year first above written.
NOMURA ASSET CAPITAL CORPORATION
By: /s/ Daniel S. Abrams
------------------------
Name: Daniel S. Abrams
Title: Director
MARRIOTT HOTEL PROPERTIES II LIMITED
PARTNERSHIP
By: Marriott MHP Two Corporation,
General Partner
By: /s/ Douglas W. Henry
------------------------
Name: Douglas W. Henry
Title: Vice President
63
<PAGE>
Exhibit 10.2
FINAL EXECUTED
LOAN AGREEMENT
between
SANTA CLARA MARRIOTT HOTEL LIMITED PARTNERSHIP
and
NOMURA ASSET CAPITAL CORPORATION
Dated as of September 23, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
<S> <C> <C> <C>
DEFINITIONS....................................................................2
Section 1.1 Definitions.........................................2
ARTICLE II
PROVISIONS CONCERNING THE ACCOUNTS AND PLEDGED PROPERTY.......................18
Section 2.1 Cash Management Procedures.........................18
Section 2.2 Right to Contest...................................18
Section 2.3 Defeasance.........................................19
Section 2.4 Sale of the SC Property and all of the MHP
Properties.........................................23
Section 2.5 Change of Control..................................24
Section 2.6 Release after the Optional Prepayment Date.........24
ARTICLE III
PAYMENTS......................................................................26
Section 3.1 Payments on the SC Note............................26
Section 3.2 Interest Rate......................................26
Section 3.3 Payments without Deduction, etc....................26
Section 3.4 Periodic Payments..................................26
ARTICLE IV
DEFAULT; REMEDIES; ENFORCEMENT................................................27
Section 4.1A Events of Default..................................27
Section 4.1B Event of Default Cure..............................30
Section 4.2 Remedies...........................................31
Section 4.3 Remedies Cumulative; Delay or Omission Not a
Waiver.............................................32
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS.....................................32
Section 5.1 Representations and Warranties of SC...............32
Section 5.2 Affirmative Covenants..............................40
Section 5.3 Negative Covenants.................................45
Section 5.4 Further Assurances.................................48
Section 5.5 Representations, Warranties and Covenants of NACC..49
Section 5.6 Other..............................................49
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
ARTICLE VI
<S> <C> <C> <C>
SECURITIZATION................................................................51
Section 6.1 Securitization.....................................51
ARTICLE VII
PAYMENT OF FEES AND EXPENSES; INDEMNIFICATION.................................53
Section 7.1 Fees and Expenses..................................53
Section 7.2 Indemnification....................................54
ARTICLE VIII
IMMUNITY......................................................................56
Section 8.1 Partners, Employees and Agents of SC Immune from
Liability..........................................56
ARTICLE IX
MISCELLANEOUS PROVISIONS......................................................56
Section 9.1 Notices............................................56
Section 9.2 Benefit of Agreement...............................57
Section 9.3 Governing Law......................................58
Section 9.4 Counterparts.......................................58
Section 9.5 Table of Contents, Descriptive Headings............58
Section 9.6 Amendment or Waiver; Integration...................58
Section 9.7 Survival of Representations and Warranties;
Reliance...........................................58
Section 9.8 Returned Payments..................................59
Section 9.9 Jurisdiction and Service; Waiver of Jury Trial.....59
Section 9.10 Enforceability.....................................60
Section 9.11 Conflicting Terms..................................60
Section 9.12 Relationship of Parties............................60
Exhibit A - ADA Compliance Work and Deferred Maintenance
and Other Work
Exhibit B - Cash Management Procedures
Exhibit C - Environmental Remediation Work
Exhibit D - Permitted Investments
Exhibit E - Release Price
Exhibit F - Organizational Structure of SC
Exhibit G - Operating Budget
Exhibit H - Capital Budget
Exhibit I - Financial Statements
Exhibit J - Omitted
Schedule 1 - Disclosure Schedule
Schedule 2 - Ground Lease
</TABLE>
ii
<PAGE>
LOAN AGREEMENT, dated as of September 23, 1996, between Santa Clara
Marriott Hotel Limited Partnership, a Delaware limited partnership ("SC"), and
--
Nomura Asset Capital Corporation ("NACC") (together with its assigns and
successors, the "Lender").
------
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, SC wishes to obtain a loan (the "SC Loan") from the Lender in
-------
the principal amount of Forty Three Million Five Hundred Thousand Dollars
($43,500,000) to, among other things, (i) satisfy all existing debt secured by
the SC Property (as hereinafter defined) and (ii) to the extent of any remaining
proceeds, (a) provide initial funding for reserves for deferred maintenance,
environmental remediation, compliance with the Americans With Disabilities Act
of 1990, replacement of furniture, fixtures and equipment and capital
improvements, (b) pay the costs of completing the transactions contemplated
hereby, (c) provide working capital to SC and (d) for such other purposes as SC
shall deem necessary or desirable, and the Lender is willing to make the SC Loan
on the terms and conditions hereinafter set forth;
WHEREAS, the SC Loan is to be evidenced by the SC Note (as hereinafter
defined) and secured by, inter alia, the SC Mortgage (as hereinafter de fined);
----- ----
WHEREAS, on the date hereof the Lender has made a loan (the "MHP Loan")
to Marriott Hotel Properties II Limited Partnership, a Delaware limited
partnership ("MHP"), evidenced by the MHP Notes (as hereinafter defined) and
secured by, inter alia, the MHP Mortgages (as hereinafter de fined); and
----- ----
WHEREAS, SC and the Lender intend that (a) the SC Property shall be
collateral for the SC Loan and that the SC Property (as hereinafter defined)
shall not be collateral for the MHP Loan and (b) an "Event of Default" under the
SC Loan shall be an "MHP Event of Default" under the MHP Loan and an "MHP Event
of Default" under the MHP Loan shall be an "Event of Default" under the SC Loan;
NOW, THEREFORE, in consideration of the above-mentioned premises and
the agreements, representations and warranties hereafter set forth, SC and the
Lender agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. For all purposes of this Agreement, except as
-----------
otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Section have the meanings assigned to
them in this Section, and include the plural as well as the singular;
(b) the words "herein," "hereof," "hereto" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision;
(c) all references to any agreement or instrument shall be to that
agreement or instrument as in effect from time to time, including any
amendments, consolidations, replacements, restatements, modifications and
supplements thereto;
(d) all terms defined in this Section with reference to the Cash
Management Procedures shall continue in effect after the termination of such
Cash Management Procedures in accordance with the terms thereof;
(e) all references to "Section(s)" and "Exhibit(s)" shall mean the
Section(s) of and Exhibit(s) annexed to this Agreement unless expressly stated
to be Section(s) or Exhibit(s) of the Cash Management Procedures; and
(f) certain terms defined in this Section appear only in this Agreement
and not in the Cash Management Procedures.
"Accounting Period" means, initially, each accounting period of four
-----------------
consecutive weeks having the same beginning and ending dates as the Manager's
corresponding four week accounting periods, except that the last Accounting
Period in a Fiscal Year may be longer than four consecutive weeks when and to
the extent necessary to conform the accounting system to the calendar, or if the
accounting year on the basis of which the SC Property is operated is changed to
a calendar year or a conventional 365-day fiscal year, "Accounting Period" shall
mean each calendar month in such fiscal year.
"Accounting Quarter" means, initially, three (or, in the case of the
------------------
last Accounting Quarter in any Fiscal Year, four) consecutive Accounting
Periods, ending on the last day of the third, sixth, ninth and last Accounting
Period in each Fiscal Year, or, if the accounting year on the basis of which the
SC Property is operated is changed to a calendar year or a conventional 365-day
2
<PAGE>
fiscal year, "Accounting Quarter" shall mean each of the fiscal quarters in such
fiscal year (i.e., there shall be four consecutive Accounting Quarters of three
months each).
"Action" means any action, suit, claim, arbitration, governmental
------
investigation or other proceeding.
"ADA Compliance Work" means repairs, improvements and replacements to
-------------------
the SC Property to be made to comply with the Americans with Disabilities Act of
1990, as amended from time to time, in the amounts more particularly described
on Exhibit A annexed hereto.
---------
"Additional Capital Expenditures" has the meaning set forth in Section
-------------------------------
8.3 of the Cash Management Procedures.
"Adjusted Rate" means the rate determined on the Optional Prepayment
-------------
Date and on each anniversary thereof as the greater of (xx) 10.22% and (yy) the
yield, calculated by linear interpolation (rounded to three decimal places), of
the yields of United States Treasury Constant Maturities with the terms (one
longer and one shorter) most nearly approximating those of U.S. Obligations
having maturities as close as possible to the tenth anniversary of the Optional
Prepayment Date, as determined by the Lender on the basis of Federal Reserve
Statistical Release H.15-Selected Interest Rates under the heading U.S.
Governmental Security/Treasury Constant Maturities, or other recognized source
of financial market information selected by the Lender in each case on the last
Business Day of the week immediately prior to the Optional Prepayment Date and
each subsequent anniversary thereof, as the case may be plus 3.52% per annum.
"Affiliate" means, with respect to any Person, any individual,
---------
corporation, partnership, limited liability company, trust or other entity of
whatever nature which controls, is controlled by or is under common control
with, such Person, including, without limitation, (a) any officer or director
of any of the foregoing and (b) any partner, member or shareholder that controls
any of the foregoing, and "control" shall mean ownership of more than
twenty-five percent (25%) of all of the voting stock of a corporation or more
than twenty-five percent (25%) of all of the legal and beneficial interests in
any other entity or the possession of the power, directly or indirectly, to
direct or cause the direction of the management and policy of a corporation or
other entity, whether through the ownership of voting securities, common
directors or officers, the contractual right to manage the business affairs of
such entity, or otherwise.
"Agreement" means this Loan Agreement.
---------
"Annual Plan" has the meaning set forth in Section 5.2(d)(vi).
-----------
3
<PAGE>
"Bankruptcy Custodian" has the meaning set forth in Section 4.1A(g)(A).
--------------------
"Base Rate" means 8.22% per annum.
---------
"Base Rate Interest" means interest on the SC Note at the Base Rate or
------------------
the Default Rate, as applicable, then due and payable for the applicable Debt
Service Period.
"Best Knowledge" means with respect to any provision, knowledge of
--------------
information obtained by SC or any officer or director of the General Partner.
"Business Day" means a day on which banks and foreign exchange markets
------------
are open for business in New York, New York.
"Capital Budget" has the meaning set forth in Section 5.2(d)(vi).
--------------
"Capital Expenditure and FF&E Reserve Account" means the account
--------------------------------------------
established pursuant to Section 8.1 of the Cash Management Procedures.
"Capital and FF&E Expenditures" means the expenditures of amounts for
-----------------------------
the purpose of the Repairs and Equipment Reserve, as such term in defined in the
Management Agreement.
"Cash Collateral Account" means the account established and held by the
-----------------------
Servicer pursuant to Section 4.1 of the Cash Management Procedures.
"Cash Management Procedures" means the provisions of Exhibit B.
-------------------------- ---------
"Change of Control" means any transfer of (i) an equity interest in the
-----------------
General Partner, (ii) the General Partner's interest in SC or (iii) any interest
of a limited partner in SC such that as a result of such transfer and any other
transfers of limited partnership interests prior to the date of determination,
(A) Host Marriott, directly or indirectly, holds less than 50% of the limited
partnership interests in SC or (B) an entity other than HMH holds more than 49%
of such limited partnership interests.
"Closing Date" means the date of execution and delivery of this
------------
Agreement.
"Condemnation Proceeds" has the meaning set forth in the SC Mortgage.
---------------------
"CPI Percentage" means the percentage by which the "Consumer Price
--------------
Index for All Urban Consumers (CPI-U); U.S. City Average, 1982-84 = 100, All
Items" (or appropriate substitute index if such
4
<PAGE>
index is no longer published) (the "CPI") for November of the preceding Fiscal
Year exceeds the CPI for August 1996.
"DCR" means Duff & Phelps Credit Rating Co.
---
"Debt Service Coverage Ratio" means, as of any given date, the ratio of
---------------------------
(i) Net Operating Income for the 13 full Accounting Periods for which financial
statements are required to be furnished to the Lender pursuant to Section
5.2(d)(ii) immediately preceding the date of calculation (or 12 Accounting
Periods in the case of a calendar year or 365 day Fiscal Year) to (ii) Debt
Service Expense in respect of the 13 full Accounting Periods next succeeding
such date (or 12 Accounting Periods in the case of a calendar year or 365 day
Fiscal Year).
"Debt Service Expense" means, in respect of any fiscal period, the
--------------------
aggregate amount of scheduled interest and principal payable on (i) the SC Note,
(ii) Subordinate Debt and (iii) Indebtedness covered by Purchase Money Security
Interests for such period. For the purpose of the calculation of Debt Service
Expense for any period subsequent to the Optional Prepayment Date, the amount
set forth in clause (i) above shall be computed based on the Monthly Debt
Service Payment.
"Debt Service Payment Date" means the 11th day of each calendar month
-------------------------
or the next Business Day immediately thereafter.
"Debt Service Period" means the period from and including the eleventh
-------------------
(11th) day of the calendar month immediately preceding each Debt Service Payment
Date to and including the tenth (10th) day of the calendar month in which such
Debt Service Payment Date occurs.
"Debt Service Reserve Account" has the meaning set forth in Section 5.1
----------------------------
of the Cash Management Procedures.
"Default Rate" means a rate per annum equal to the lesser of (aa) two
------------
percent (2%) above the Base Rate or Adjusted Rate, as applicable, and (bb) the
maximum rate allowed by law.
"Defeasance Collateral" has the meaning set forth in Section
---------------------
2.3(a)(iv)(A).
"Defeasance Debt Service Coverage Ratio" has the meaning set forth in
--------------------------------------
Section 2.3(f).
"Defeasance Deposit" has the meaning set forth in Section 2.3(f).
------------------
"Defeasance Security Agreement" has the meaning set forth in Section
-----------------------------
2.3(a)(iv)(A).
5
<PAGE>
"Deferred Maintenance and Other Work" means the repairs, improvements
-----------------------------------
and replacements to the SC Property in the amounts more particularly described
on Exhibit A hereto.
---------
"Disclosure Schedule means the schedule annexed hereto as Schedule 1.
------------------- ----------
"Eligible Account" means either (i) an account maintained with a
----------------
federal or state chartered depository institution or trust company, (a) if the
funds therein are to be retained for more than 30 days, the long-term unsecured
debt obligations of which (or, in the case of a depository institution or trust
company that is the principal subsidiary of a holding company, the long-term
unsecured debt obligations of the holding company of which) are rated by each
Rating Agency in one of its two highest rating categories (or such other ratings
as will not result in the rating of any of the Securities being reduced below
their respective ratings on the date determination is to be made and as to which
the Rating Agencies may otherwise agree) at the time of the deposit therein, or
(b) if the funds therein are to be retained for less than 30 days, the
short-term unsecured debt obligations of such depository institution or trust
company (or, in the case of a depository institution or trust company that is
the principal subsidiary of a holding company, the long-term unsecured debt
obligations of the holding company of which), as the case may be, are rated not
lower than A-1+ by S&P or the equivalent rating of the other Rating Agencies, or
(ii) a segregated trust account maintained with the trust department of a
federal or state chartered depository institution or trust company acting in its
fiduciary capacity provided that such account is subject to fiduciary funds on
deposit regulations (or internal guidelines) substantially similar to 12 C.F.R.
ss.9.10(b), or (iii) after the Securitization, an account in any other insured
depository institution reasonably acceptable to the Servicer and the Trustee, so
long as prior to the establishment of an account in any such other depository
institution each of the Rating Agencies shall have delivered a Rating Comfort
Letter with respect thereto.
"Emergency Expenditures" means expenditures arising in the event of an
----------------------
emergency arising out of a fire or other casualty at a Hotel, or other events,
circumstances or conditions which give rise to safety or life threatening
situations, to the extent such expenditures are necessary to protect the safety
or welfare of guests and employees or to protect against further property damage
to the Hotel.
"Entities" has the meaning set forth in Section 6.1(b).
--------
"Environmental Indemnity Agreement" means the environmental indemnity
---------------------------------
agreement, dated the Closing Date, from SC to NACC.
"Environmental Remediation Work" means the actions taken with respect
------------------------------
to the SC Property set forth on Exhibit C.
---------
6
<PAGE>
"Equipment Leases" means, with respect to each SC Property, the leases
----------------
of furniture, fixtures and equipment used in connection with the SC Property.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, and the rules and regulations promulgated
thereunder.
"ERISA Affiliate" means all members of a controlled group of
---------------
corporations and all trades and businesses (whether or not incorporated) under
common control and all other entities which, together with SC, are treated as a
single employer under any or all of Sections 414(b), (c), (m) or (o) of the IRC.
"Event of Default" has the meaning set forth in Section 4.1A.
----------------
"Expense Deposit" has the meaning set forth in Section 7.1(c).
---------------
"Fiscal Year" means January 1 of each year through and including
-----------
December 31 of such year except that, for purposes of calculating the Debt
Service Coverage Ratio or any other calculation requiring reference to Gross
Revenues, Net Operating Income or other amounts calculated with reference to the
Accounting Periods, "Fiscal Year" shall mean the fiscal year of the Manager, as
defined in the Management Agreement.
"GAAP" means generally accepted accounting principles in the United
----
States of America (as such principles may change from time to time) applied on a
consistent basis (except for changes in application in which SC's independent
certified public accountants concur), both as to classification of items and
amounts.
"General Partner" means Marriott MHP Two Corporation, a Delaware
---------------
corporation.
"Governmental Authority" means any court, agency, authority, board
----------------------
(including, without limitation, environmental protection, planning and zoning)
bureau, commission, department, office or instrumentality of any nature
whatsoever of any governmental or quasi-governmental unit of the United States
or the state, county or city where each SC Property is located or any political
subdivision of any of the foregoing, whether now or hereafter in existence, or
any officer or official thereof, having jurisdiction over SC or the General
Partner or any of the SC Property or any portion thereof.
"Grant" means to issue, grant, sell, remise, convey, assign, and/or
-----
transfer.
"Gross Revenues" means, for any period, all revenues and receipts of
--------------
every kind derived from or otherwise relating to the SC Property and all
departments and parts thereof during such period,
7
<PAGE>
including, but not limited to: income (from both cash and credit transactions)
from rental of rooms, stores, offices, 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; excluding, however, (i) gratuities to
employees of the Hotels, (ii) federal, state or municipal use, 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; (but only to the
extent such gratuities and taxes are not included in Management Expenses), (iii)
net Condemnation Proceeds, (iv) receipts of Tenants (as defined in the SC
Mortgage), if any, not an Affiliate of SC (except to the extent paid to SC as
rent, percentage rents or otherwise), (v) sums and credits received in
settlement of claims for loss or damage to property, (vi) income from the sale
of furnishings, fixtures or equipment, (vii) Insurance Proceeds, (viii) charges
or payments collected from patrons or guests for telephone, telegraph or other
communication systems that are remitted to the provider thereof, (ix) proceeds
from the sale or refinancing of the SC Property and (x) any refunds, rebates,
discounts and credits of a similar nature, given, paid or returned in the course
of obtaining Gross Revenues or components thereof.
"Ground Lease" means the lease described in Schedule 2 hereto relating
------------ ----------
to the SC Property as the same may be amended, modified, supplemented or
replaced from time to time in compliance with the Transaction Documents.
"Ground Rent" means the rental payments payable under the Ground Lease.
-----------
"Ground Rent Reserve Account" has the meaning set forth in Section 5.2
---------------------------
of the Cash Management Procedures.
"HMH" means HMH Properties, Inc.
---
"HMH SC Debt Service Advance" has the meaning attributable to such term
---------------------------
in Section 4.3 of the Cash Management Procedures.
"Host Marriott" means Host Marriott Corporation, a Delaware
-------------
corporation.
"Hotel" means the hotel and the hotel operations located at the SC
-----
Property.
"Hotel Expansion" has the meaning set forth in Section 5.6(c).
---------------
"Impositions" has the meaning set forth in the SC Mortgage.
-----------
8
<PAGE>
"Indebtedness" means for any Person (a) obligations for borrowed money
------------
(including, without limitation, the SC Debt), (b) obligations under letters of
credit, (c) obligations relating to Purchase Money Security Interests, (d)
obligations, whether or not assumed, secured by Liens or payable out of the
proceeds or production from property now owned by such Person, (e) obligations
for trade credit or acceptances incurred in the ordinary course of business
which are 60 days past due, and (f) obligations of another Person of the type
set forth in clauses (a) through (e) above which such Person has guaranteed or
in respect of which such Person is liable, contingently or otherwise,
including, without limitation, by way of agreement to purchase property or
services, to provide funds to or other wise invest in such other Person, or
otherwise to assure a creditor of such other Person against loss.
"Indemnified Parties" shall have the meaning set forth in Section
-------------------
7.2(a).
"Independent Director" means a person who is not, and has not within
--------------------
the past five years been, (i) an officer, director, employee, partner,
stockholder or beneficial-interest holder of the General Partner or SC; (ii) an
officer, director, employee, partner, member, beneficial-interest holder or
stockholder of any Affiliate (as defined below) of the General Partner or SC;
(iii) a customer or supplier of SC or any Affiliate thereof (other than a hotel
guest or a customer or supplier that does not derive more than 10% of its
revenues from its activities with SC or any Affiliate thereof); or (iv) a
spouse, parent, sibling, or child of any person described in (i), (ii), or
(iii); provided, however, that a person shall not be deemed to be a director of
-------- -------
an Affiliate solely by reason of such person being a director of a
single-purpose entity. For the purpose of this definition alone, "Affiliate"
means any person or entity other than the General Partner (i) which owns
beneficially, directly or indirectly, more than 10 percent of the outstanding
shares of the common stock of the General Partner or which is otherwise in
control of the General Partner, (ii) of which more than 10% of the outstanding
voting securities are owned beneficially, directly or indirectly, by any person
or entity described in clause (i) above, or (iii) which is controlled by, or
under common control with, any person or entity described in clause (i) above;
the terms "control" and "controlled by" shall have the meanings assigned to them
in Rule 405 under the Securities Act of 1933.
"Individual Material Adverse Effect" means a material adverse effect on
----------------------------------
the condition (financial or otherwise), business, prospects, assets,
liabilities, management, financial position or results of operations of the SC
Property.
"Initial Debt Service Coverage Ratio" means 1.7:1.
-----------------------------------
"Insolvency Law" has the meaning set forth in Section
--------------
9
<PAGE>
4.1A(g)(A).
"Insurance Proceeds" has the meaning set forth in the SC Mortgage.
------------------
"Insurance Requirements" means all terms of any insurance policy
----------------------
required by the SC Mortgage covering or applicable to the SC Property or any
part thereof and all requirements of the insurance carrier, all as more fully
described in the SC Mortgage.
"IRC" means the Internal Revenue Code of 1986, as amended from time to
---
time, and the rules and regulations promulgated thereunder, or any successor
statute(s).
"Leases" means the respective written or unwritten agreements pursuant
------
to which lessees, tenants or other third parties are occupying any portion of
the SC Property excluding, however, the letting of rooms and other facilities to
hotel guests in the ordinary course of business.
"Legal Requirements" has the meaning set forth in the SC Mortgage.
------------------
"Lender" means Nomura Asset Capital Corporation and its assigns and
------
successors.
"Lien" means any security interest, mortgage, pledge, lien, restriction
----
on transferability, claim, charge, encumbrance, title retention agreement or
analogous instrument, in, of or on the SC Property.
"Local Account" has the meaning set forth in Section 7.3.2 of the Cash
-------------
Management Procedures.
"Lockbox Account" has the meaning set forth in Section 7.2.2 of the
---------------
Cash Management Procedures.
"Lockbox Event" has the meaning set forth in Section 7 of the Cash
-------------
Management Procedures.
"Lockbox Period" has the meaning set forth in Section 7 of the Cash
--------------
Management Procedures.
"Management Agreement" means the Management Agreement, operative as of
--------------------
March 21, 1989 by SC, the Manager (successor to the former Marriott Hotels,
Inc.) and Marriott Corporation with respect to the SC Property, as amended by an
amendment, dated the Closing Date, and by the Modification, Subordination and
Non-Disturbance Agreement, Estoppel, Assignment and Consent, dated as of the
Closing Date, among the Manager, SC and the Lender, and any other management
agreement entered into by SC as required or permitted herein.
10
<PAGE>
"Management Expenses" means (a) the cost of sales including salaries,
-------------------
wages (including accruals for year-end bonuses to key management employees),
fringe benefits, payroll taxes and other costs related to Hotel employees; (b)
departmental expenses, administrative and general expenses and the cost of hotel
marketing, advertising and business promotion expenses, heat, light and power,
and routine repairs, maintenance and minor alterations treated as Deductions
under Section 8.01 of the Management Agreement; (c) the cost of Inventories and
Fixed Asset Supplies (as such terms are defined in the Management Agreement)
consumed in the operation of the Hotel; (d) a reasonable reserve for
uncollectible accounts receivable as determined by the Manager; (e) all costs
and fees of independent accountants or other third parties who perform services
required or permitted hereunder; (f) the cost and expense of technical
consultants and operational experts, including Affiliates of the Manager, for
specialized services in connection with non-routine Hotel work; (g) the Base
Management Fee under Section 5.01 of the Management Agreement; (h) the Hotel's
pro rata share of costs and expenses incurred by the Manager in providing Chain
Services (as defined in the Management Agreement); (i) insurance costs and
expenses under Sections 12.02, 12.03 and 12.05 of the Management Agreement; (j)
any amounts transferred into the Repairs and Equipment Reserve under Section
8.02B of the Management Agreement; (k) taxes, if any, payable by or assessed
against the Manager related to the Management Agreement or to the Manager's
operation of the Hotel (exclusive of the Manager's income taxes) including any
Impositions; (l) rent payable under any telephone or equipment leases; and (m)
such other costs and expenses as are specifically provided for as Deductions in
the Management Agreement or are otherwise reasonable necessary for the proper
and efficient operation of the Hotel.
"Manager" means Marriott Hotel Services, Inc. or any property manager
-------
appointed as permitted herein.
"Manager's Account" has the meaning set forth in Section 1.1 of the
-----------------
Cash Management Procedures.
"Material Adverse Effect" means a material adverse effect on (a) SC's
-----------------------
ability to enter into or fulfill its material obligations under the Transaction
Documents or to effect the transactions contemplated thereby or (b) a material
adverse effect on the condition (financial or other wise), business, prospects,
assets, liabilities, management, financial position or results of operations
of SC or the SC Property.
"Maturity Date" shall mean the earliest to occur of (1) October 11,
-------------
2017 or (2) such date to which the maturity of the SC Debt may be accelerated
upon an Event of Default or as otherwise provided in any Transaction Document.
"MHP" means Marriott Hotel Properties II Limited Partnership.
---
11
<PAGE>
"MHP Cash Collateral Account" has the meaning attributed to "Cash
---------------------------
Collateral Account" in the MHP Loan Agreement.
"MHP Cash Management Procedures" has the meaning attributed to "Cash
------------------------------
Management Procedures" in the MHP Loan Agreement.
"MHP Debt" means the obligations of MHP under the MHP Transaction
--------
Documents, together with all interest thereon, and all other sums, including,
without limitation, fees, expenses, commissions, premiums and indemnities, which
may or shall become due under any of the MHP Transaction Documents, including
the costs and expenses of enforcing any provision thereof that may be
reimbursable thereunder.
"MHP Debt Service Expense" has the meaning attributed to "Debt Service
------------------------
Expense" in the MHP Loan Agreement.
"MHP Event of Default" has the meaning attributed to "Event of Default"
--------------------
in the MHP Loan Agreement.
"MHP Loan" means the loan evidenced by the MHP Notes.
--------
"MHP Loan Agreement" means the Loan Agreement, dated as of the date
------------------
hereof, between MHP and the Lender.
"MHP Mortgage(s)" means, with regard to each MHP Property, the
---------------
mortgage, deed of trust or other security instrument creating a first mortgage
lien on such MHP Property, dated as of the Closing Date, from MHP to or for the
benefit of the Lender.
"MHP Net Operating Income" has the meaning attributed to "Net Operating
------------------------
Income" in the MHP Loan Agreement.
"MHP Notes" means those certain Secured Promissory Notes, dated the
---------
Closing Date, from MHP to the Lender in the principal amounts of $195,405,904
and $27,094,096, respectively.
"MHP Principal Payments" has the meaning attributed to "Principal
----------------------
Payments" in the MHP Loan Agreement.
"MHP Properties" has the meaning set forth in the MHP Loan Agreement.
--------------
"MHP Security Documents" has the meaning attributed to "Security
----------------------
Documents" in the MHP Loan Agreement.
"MHP Share" has the meaning set forth in Section 4.3(H) of the Cash
---------
Management Procedures.
"MHP Transaction Documents" has the meaning attributed to "Transaction
-------------------------
Documents" in the MHP Loan Agreement.
12
<PAGE>
"MII" means Marriott International, Inc., a Delaware corporation.
---
"MII Cash Management Conditions" means the following conditions: (i)
------------------------------
the SC Property is managed by a manager under the Management Agreement and (ii)
the Manager is MII or a wholly owned, direct or indirect, subsidiary of MII.
"MII Debt" has the meaning set forth in Section 6 of the Cash
--------
Management Procedures.
"Monthly Debt Service Payment" has the meaning set forth in Section
----------------------------
4.3(B)(i) of the Cash Management Procedures, as modified by Section 12.6 of the
Cash Management Procedures.
"NACC" means Nomura Asset Capital Corporation.
----
"Net Operating Income" means, in respect of any fiscal period, Gross
--------------------
Revenues less the sum of, without duplication, (A) Management Expenses and (B)
any Ground Rent, Impositions or insurance premiums paid or reserved for payment
with respect to the SC Property.
"Non-Recourse" means, with respect to the SC Debt, that the SC Debt is
------------
limited in recourse solely to the Pledged Property and is not guaranteed
directly or indirectly by any Partner or the Manager and no Partner or the
Manager or any shareholder, member, director, officer, employee or agent of any
Partner or the Manager, either directly or indirectly, shall be personally
liable in any respect (except to the extent of their respective interests in the
Pledged Property) for (i) the payment of any SC Debt, (ii) the performance of
any covenant or obligation under any Transaction Document or (iii) monetary
damages for the breach of performance of any covenant or obligation contained in
any Transaction Document; provided, however, that in the event of any fraud,
-------- -------
material misrepresentation or misappropriation of funds under any Transaction
Document or under any Management Agreement, nothing herein or in such other
documents shall estop the Lender from prosecuting an Action against the party or
parties committing such fraud, misappropriation or material misrepresentation,
or the recipient or beneficiary of such fraud, material misrepresentation or
misappropriation, whether or not such party, recipient or beneficiary is SC or
a Partner or the Manager, to the extent of losses relating to or arising from
such fraud, material misrepresentation or misappropriation of funds under any
Transaction Document; provided, further, that SC's obligations in respect of the
-------- -------
Environmental Indemnity Agreement and the covenants, indemnities,
representations and warranties relating to environ mental matters contained in
any Transaction Document shall not be Non-Recourse to SC (but shall be Non-
Recourse to its Partners other than the General Partner). The foregoing
provisions shall not (a) prevent recourse to the Pledged Property or constitute
a waiver, re lease or discharge of any SC Debt, and the same shall continue
13
<PAGE>
until paid or discharged, (b) limit the right of any Person, if required by
applicable law, to name SC or any successor or assign of SC as a party defendant
in any Action in the exercise of any remedy under any Transaction Document, so
long as no judgment seeking the performance of any act requiring the
expenditure of money shall be sought against SC or any such successor or assign
and so long as any monetary judgment seeking the expenditure of money is payable
only from the Pledged Property or (c) impair any right of the Lender to obtain a
deficiency judgement against SC or any such successor or assign in any Action
where necessary as a matter of law to preserve the rights and remedies of the
Lender against the Pledged Property, provided that such deficiency judgment may
only be enforced against the Pledged Property. Notwithstanding the foregoing,
under no circumstances shall the SC Debt be recourse to any limited partner of
SC in its capacity as such.
"NSI" has the meaning set forth in Section 7.1(a).
---
"Officer's Certificate" means a certificate signed by any officer of
---------------------
the General Partner who is authorized to act hereunder on behalf of SC.
"Operating Account" has the meaning set forth in Section 7.9 of the
-----------------
Cash Management Procedures.
"Operating Budget" has the meaning set forth in Section 5.2(d)(vi).
----------------
"Operating Profit" has the meaning set forth in the Management
----------------
Agreement.
"Operating Profit Payment Date" means the last Business Day of the
-----------------------------
third week in each Accounting Period.
"Operational Agreements" means the Management Agreement, the SC
----------------------
Property Agreements, the Equipment Leases, the Ground Lease, the Leases, if any,
and any assignments and assumption agreements or other agreement related
thereto.
"Optional Prepayment Date" means October 11, 2007.
------------------------
"Partners" means the limited partners of SC as constituted from time to
--------
time and the General Partner, in their capacities as such.
"Permits" means all permits, licenses, certificates, approvals,
-------
authorizations and other documents necessary for the construction, use,
operation or maintenance of the Hotel and the SC Property.
"Permitted Exceptions" has the meaning set forth in the SC
--------------------
14
<PAGE>
Mortgage.
"Permitted Investments" has the meaning set forth in Exhibit D hereto.
--------------------- ---------
"Person" means any individual, corporation, partnership, limited
------
liability partnership, joint venture, association, limited liability company,
joint stock company, estate, trust, unincorporated organization or other
business entity or Governmental Authority.
"Plan(s)" means an employee benefit or other plan established or
-------
maintained by SC or any ERISA Affiliate or to which SC or any ERISA Affiliate
makes or is obligated to make contributions and which is covered by Title IV of
ERISA or Section 302 of ERISA or Section 412 of the IRC.
"Pledge Agreement" means the Pledge Agreement, dated the Closing Date,
----------------
by and among SC, MHP and the Lender.
"Pledged Property" means the SC Property and the other collateral in
----------------
which a security interest is being granted pursuant to the Security Documents.
"Potential Event of Default" means an event which, with the giving of
--------------------------
any applicable notice and/or lapse of any applicable time period, would become
an Event of Default.
"Principal Payment" means the difference between the Monthly Debt
-----------------
Service Payment and the Base Rate Interest paid for the applicable Debt Service
Period.
"Purchase Money Security Interest" means purchase money mortgages or
--------------------------------
security interests, conditional sale arrangements and other similar security
interests on furniture, fixtures or equipment acquired by SC in the ordinary
course of business (and not inconsistent with customary industry practices),
with the proceeds of the indebtedness secured thereby; provided, however, that
-------- -------
(i) any Purchase Money Security Interest shall attach only to the furniture,
fixtures or equipment acquired in such transaction (and any proceeds, as defined
in the Uniform Commercial Code, thereof), and (ii) such indebtedness shall not
exceed the cost of such furniture, fixtures or equipment.
"Rating Agencies" means one or more of S&P, Fitch Investors Services
---------------
Inc., DCR and Moody's Investors Service, Inc. that are, at the time of
determination, selected by NACC to rate the Securities.
"Rating Comfort Letter" means a letter from each Rating Agency pursuant
---------------------
to which it confirms that the taking of the action referred to therein will not
result in a withdrawal, qualification or downgrade of the then existing ratings
of the Securities.
15
<PAGE>
"Release Date" has the meaning set forth in Section 2.3(a)(i).
------------
"Release Price" means the amount set forth in Exhibit E.
------------- ---------
"REMIC" has the meaning set forth in Section 2.3(a).
-----
"S&P" means Standard & Poor's Rating Services.
---
"SC" means Santa Clara Marriott Hotel Limited Partnership.
--
"SC Debt" means the obligations of SC under the Transaction Documents,
-------
together with all interest thereon, and all other sums, including, without
limitation, fees, expenses, commissions, premiums and indemnities, which may or
shall become due under any of the Transactions on Documents, including the costs
and expenses of enforcing any provision thereof that may be reimbursable
thereunder.
"SC Loan" means the loan evidenced by the SC Note.
-------
"SC Mortgage" means the deed of trust creating a first mortgage lien on
-----------
the SC Property dated as of the Closing Date, from SC to or for the benefit of
the Lender.
"SC Note" means that certain Secured Promissory Note, dated the Closing
-------
Date, from MHP and SC to the Lender in the principal amount of $43,500,000.
"SC Property" means the leasehold estate owned by SC in the Marriott
-----------
hotel in Santa Clara, California, including all improvements thereon, fixtures
thereto, direct interests therein, and personal property related thereto or
included therein; provided, however, that the "SC Property" shall not include
any property owned by tenants, guests, licensees or concessionaires of or to the
SC Property.
"SC Property Agreements" means all material agreements, contracts and
----------------------
other documents not specifically referred to herein relating to the operation of
the Hotel other than agreements for services performed by third parties which
services are generally available from other third parties and which agreements
can be terminated on not more than 30 days' prior notice without payment of any
damages, fees, or penalty.
"Securities" has the meaning set forth in Section 6.1.
----------
"Securities Act" means the Securities Act of 1933, as amended from time
--------------
to time, and the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
"Securitization" has the meaning set forth in Section 6.1.
--------------
16
<PAGE>
"Security Documents" means (a) the SC Mortgage, (b) the collateral
------------------
assignment of documents and property rights, dated as of the Closing Date, by SC
to the Lender, (c) the assignment of leases, rents and profits, dated as of the
Closing Date, by SC to the Lender given in connection with the SC Mortgage, (d)
the collateral account agreement, dated as of the Closing Date, between SC and
the Lender, (e) the Environmental Indemnity Agreement, (f) all Uniform
Commercial Code financing statements relating to the SC Debt, (g) the Other
Mortgages (as such term is defined in the SC Mortgage) and the related
assignments of leases, rents and profits and (h) any other documents securing
the SC Debt.
"Servicer" means any nationally recognized servicer of commercial
--------
mortgage loans selected by the Lender and acceptable to the Rating Agencies.
"Servicing Expenses" has the meaning set forth in Section 4.3(B)(i) of
------------------
the Cash Management Procedures.
"SNDA" means the Modification, Subordination and Non-Disturbance
----
Agreement, Estoppel, Assignment and Consent, dated as of the Closing Date, among
the Manager, SC and the Lender.
"Subordinate Debt" means Indebtedness incurred by SC after September
----------------
23, 1998 that is expressly subordinate in right of payment to the SC Debt
pursuant to the provisions of the SC Mortgage and with respect to which evidence
is provided satisfactory to the Lender that the pro forma Debt Service Coverage
--- -----
Ratio on its date of issuance is at least 2.25:1 and as to which the Rating
Agencies deliver a Rating Comfort Letter. For the purpose of calculating such
Debt Service Coverage Ratio, Debt Service Expense shall be the aggregate amount
of scheduled interest and principal payable on the proposed subordinate
indebtedness and any other Indebtedness secured by any assets of SC.
"Substantive Consolidation Opinion" has the meaning set forth in
---------------------------------
Section 6.1(b).
"Successor Entity" has the meaning set forth in Section 2.3(e).
----------------
"Third Party Payors" has the meaning set forth in Section 2.1 of the
------------------
Cash Management Procedures.
"Transaction Documents" means this Agreement, the Security Documents,
---------------------
the SC Note and all other documents executed and delivered by SC in favor of the
Lender in connection with the SC Loan, including, without limitation, all
agreements, instruments and documents pursuant to which the Pledged Property is
assigned, collaterally assigned and/or pledged to the Lender hereunder.
"Transition Period" has the meaning set forth in Section
-----------------
17
<PAGE>
7.3 of the Cash Management Procedures.
"Trustee" means the trustee to which NACC assigns its interest in the
-------
Transaction Documents in connection with a Securitization.
"Uncontrollable Circumstances" means circumstances causing delay due to
----------------------------
acts of God, governmental restrictions (other than arising from SC's failure to
comply with applicable law), enemy acts, civil commotion or other causes beyond
the reasonable control of SC.
"United States" means the United States of America (including the
-------------
States and the District of Columbia), its territories, its possessions and other
areas subject to its jurisdiction.
"U.S. Obligations" has the meaning set forth in Section 2.3(f).
----------------
"Welfare Plan" means an employee welfare benefit plan, as defined in
------------
Section 3(1) of ERISA.
"Work" has the meaning set forth in Section 8.1 of the Cash Management
----
Procedures.
"Yield Maintenance Premium" shall mean an amount in cash that would be
-------------------------
necessary to purchase U.S. Obligations in an amount that would be sufficient,
together with U.S. Obligations that could be purchased with the principal of and
interest on the SC Note paid to the Lender upon an acceleration of the SC Note
pursuant to Section 4.2, to provide the payments due on or prior to, but as
close as possible to, all successive Debt Service Payment Dates after the
receipt of such amount in respect of (i) the remaining Monthly Debt Service
Payments that would be required under the SC Note through and including October
11, 2007 and (ii) a balloon payment of the outstanding principal balance of the
SC Note and accrued and unpaid interest as of such date as if such balloon
payment were then due and payable.
ARTICLE II
PROVISIONS CONCERNING THE ACCOUNTS AND PLEDGED PROPERTY
Section 2.1 Cash Management Procedures
--------------------------
The provisions of Exhibit B are incorporated herein by reference.
---------
Section 2.2 Right to Contest. To the extent consistent with the SC
----------------
Mortgage, SC at its expense may contest, by appropriate
18
<PAGE>
Action conducted in good faith and with due diligence, the amount or validity or
application, in whole or in part, of any Imposition or Lien therefor or any
Legal Requirement or Insurance Requirement or the application of any instrument
of record affecting the Pledged Property or any part thereof or any claims or
judgments of mechanics, materialmen, suppliers or vendors or Liens therefor, and
may direct the Manager or the Servicer, as the case may be, to withhold payment
of the same pending such Action if permitted by law; provided, however, that (a)
-------- -------
in the case of any Impositions or Liens therefor or any claims or judgments of
mechanics, materialmen, suppliers or vendors or Liens therefor, such Action
shall suspend the enforcement thereof and the accrual of penalties thereon from
SC, the Manager, the Servicer and the Pledged Property, (b) neither the Pledged
Property nor any part thereof or interest therein could be in any danger of
being sold, forfeited or lost if SC pays the amount or satisfies the condition
being contested, and SC would have the opportunity to so pay or satisfy if SC
fails to prevail in the contest and (c) in the case of an Insurance Requirement,
the failure of SC to comply therewith shall not impair the validity of any
insurance required to be maintained by SC under the applicable SC Mortgage or
the right to full payment of any claims thereunder.
Section 2.3 Defeasance.
----------
(a) At any time after the date which is the earlier of (x) two years
after the "startup day," within the meaning of Section 860G(a)(9) of the IRC, of
a "real estate mortgage investment conduit," within the meaning of Section 860D
of the IRC (a "REMIC"), that holds the SC Note (if the SC Note has been
-----
transferred to a REMIC prior to September 23, 1998) and (y) September 23, 2000,
but prior in either case to the Optional Prepayment Date, SC may defease such
Lien to cause the release of the SC Property from such Lien by providing the
Lender with funds in an amount equal to the Defeasance Deposit upon the
satisfaction of the following conditions:
(i) not less than 30 days' notice to the Lender specifying a Debt
Service Payment Date (the "Release Date") on which the Defeasance Deposit is to
------------
be made;
(ii) the payment to the Lender of interest accrued and unpaid on
the principal balance of the SC Note and all other SC Debt due through and
including the Release Date;
(iii) the payment to the Lender of the Defeasance Deposit; and
(iv) the delivery to the Lender of:
(A) a security agreement (the "Defeasance Security
-------------------
19
<PAGE>
Agreement"), in form and substance satisfactory to the
---------
Lender, creating a first priority perfected security
interest in favor of the Lender in the Defeasance Deposit
and the U.S. Obligations purchased with the Defeasance
Deposit in accordance with this subsection (a) (together,
the "Defeasance Collateral");
---------------------
(B) form of release of the SC Property (for execution by the
Lender) appropriate for the jurisdiction in which the SC
Property is located;
(C) an Officer's Certificate certifying that the requirements
set forth in subsections (a) (ii)-(iv) have been satisfied;
(D) an opinion of counsel for SC (which may be a "reasoned"
opinion), in form and substance satisfactory to the Lender,
that (i) the transfer of the Defeasance Collateral in
exchange for release of the SC Property will not constitute
an avoidable preference under Section 547 of the United
States Bankruptcy Code in the event of a filing of a
petition for relief under the United States Bankruptcy Code
for or against SC, (ii) the Defeasance Collateral has been
duly and validly transferred and assigned to the Trustee
for the benefit of the holders of the Securities, (iii) the
Trustee holds a first priority perfected security interest
in the Defeasance Collateral for the benefit of such
holders, (iv) such transfer will not result in a deemed
exchange of the Securities pursuant to Section 1001 of the
IRC, (v) such transfer will not, by itself, adversely
affect the status of the Securities as indebtedness for
federal income tax purposes and (vi) such transfer will not
adversely affect the status of the entity holding the SC
Debt as a REMIC (assuming for such purposes that such
entity otherwise qualifies as a REMIC and that the SC Note
was transferred to such REMIC not later than two years
prior to the Release Date);
(E) a certificate of a certified public accountant acceptable
to the Lender that the Defeasance Collateral complies with
the requirements set forth in subsection (b) below;
20
<PAGE>
(F) such other certificates, documents or instruments as the
Lender may reasonably request;
(G) evidence satisfactory to the Lender that the Defeasance
Debt Service Coverage Ratio will be maintained for the
twelve full months commencing immediately after the Release
Date at the greater of (x) the Initial Debt Service
Coverage Ratio and (y) the ratio of the MHP Net Operating
Income for the thirteen (13) full Accounting Periods next
preceding the Release Date divided by the difference
between (i) the MHP Debt Service Expense for such period
and (ii) the payments received for such period from or with
respect to U.S. Obligations then held as security for the
MHP Notes; and
(H) If the defeasance is made after the Securitization, the
Rating Agencies deliver a Rating Comfort Letter.
(b) If, following the release of the SC Property, less than all of the
MHP Properties shall have been released, the Lender shall use the Defeasance
Deposit to purchase U.S. Obligations that provide payments on or prior to, but
as close as possible to, all successive Debt Service Payment Dates after the
Release Date that would be required with respect to an assumed promissory note
in a principal amount equal to the lesser of (A) 125% of the Release Price and
(B) the greater of (i) 100% of the outstanding principal amount of the SC Note
and interest accrued and unpaid thereon or (ii) the sale proceeds or other cash
distributable to MHP pursuant to Section 4.06 of the Amended and Restated
Agreement of Limited Partnership of SC (which Section, together with Section
7.03 thereof, SC shall not amend without the prior consent of the Lender). Such
assumed promissory note shall be in the same form (including with respect to
term and interest rate) as the SC Note but shall provide for a mandatory
prepayment thereof on the Optional Prepayment Date, including through the
application by the Servicer of U.S. Obligations pursuant to the provisions of
subsection (g) of this Section 2.3. In order to secure the release, in addition
to the U.S. Obligations referred to in the preceding sentence, SC may, at its
election, purchase U.S. Obligations for delivery to the Servicer that provide
additional payments of the type referred to herein in order to satisfy the
Defeasance Debt Service Coverage Ratio. If the SC Property is released pursuant
to this Section 2.3 as a result of a condemnation or casualty, the payments
provided for in this subsection (b) shall be equal to the greater of (A) the
Release Price and (B) the lesser of (x) 125% of the Release Price and (y) the
net Condemnation Proceeds or the net Insurance Proceeds received on
21
<PAGE>
account of the SC Property. The Lender shall deliver such U.S. Obligations to
the Servicer for application pursuant to Sections 4.3(B) and 7.9.3(A) of the
Cash Management Procedures.
(c) If, as a result of the release of the SC Property, all of the MHP
Properties and the SC Property shall have been released, the Lender shall use
the Defeasance Deposit to purchase U.S. Obligations that provide, together with
any U.S. Obligations purchased in connection with any prior releases of the MHP
Properties, payments on or prior to, but as close as possible to, all successive
Debt Service Payment Dates after the Release Date that would be required with
respect to an assumed promissory note in a principal amount equal to the
outstanding principal balance of the SC Note and accrued and unpaid interest
thereon on the Release Date. Such assumed promissory note shall be in the same
form (including with respect to term and interest rate) as the SC Note but shall
provide for a mandatory prepayment thereof on the Optional Prepayment Date,
including through the application by the Servicer of U.S. Obligations pursuant
to the provisions of subsection (g) of this Section 2.3. The Lender shall
deliver such U.S. Obligations to the Servicer for application pursuant to
Sections 4.3(B) and 7.9.3(A) of the Cash Management Conditions.
(d) Upon compliance with the requirements of this Section 2.3, the SC
Property and each of the MHP Properties shall be released from the Lien of the
Security Documents; the U.S. Obligations shall constitute substitute collateral
which shall secure the SC Debt.
(e) If the SC Property has been released and the MHP Properties have
been released pursuant to the provisions of Section 2.3 of the MHP Loan
Agreement, SC may assign its obligations under the SC Note together with the
U.S. Obligations relating thereto to a successor entity (the "Successor Entity")
----------------
designated by NACC and thereupon be released fully from all obligations relating
to the SC Debt. In such event the opinion of counsel provided for in clause
(a)(iv)(D) of this Section 2.3 shall provide that upon such assignment, the
Defeasance Collateral will not be part of the estate of SC under Section 541 of
the United States Bankruptcy Code. NACC shall retain its obligation to designate
a Successor Entity notwithstanding the transfer of the SC Note unless such
obligation is specifically assumed by the transferee. In consideration for the
payment of $1,000 by SC, the Successor Entity shall assume SC's obligations
under the SC Note and the Defeasance Security Agreement, SC shall be relieved of
its obligations thereunder and the SC Debt shall not be deemed outstanding for
any purpose of this Agreement. If required by the applicable Rating Agencies, SC
shall also deliver or cause to be delivered a Substantive Consolidation Opinion
with respect to the Successor Entity in form and substance satisfactory to the
Lender and the applicable Rating Agencies.
22
<PAGE>
(f) For purposes of this Section 2.3, "Defeasance Deposit" shall mean
------------------
an amount in cash necessary to purchase U.S. Obligations whose cash flows are in
an amount sufficient (i) to make the payments required under subsections (b) or
(c), as the case may be, plus any costs and expenses incurred or to be incurred
in making such purchase and (ii) to make the additional monthly payments
necessary to cause the Defeasance Debt Service Coverage Ratio to be satisfied;
"U.S. Obligations" shall mean obligations or securities not subject to
----------------
prepayment, call or early redemption which are direct obligations of, or
obligations fully guaranteed as to timely payment by, the United States of
America or any agency or instrumentality of the United States of America, the
obligations of which are backed by the full faith and credit of the United
States of America; and "Defeasance Debt Service Coverage Ratio" shall mean, in
--------------------------------------
respect of any fiscal period, the ratio of (i) the MHP Net Operating Income for
such period to (ii) the difference between (x) the MHP Debt Service Expense for
such period and (y) the payments to be received for such period from or with
respect to U.S. Obligations then held as security for the MHP Notes.
(g) If the payment of accrued and unpaid interest and principal of the
SC Note and any other SC Debt or of the MHP Notes and any other MHP Debt has not
been made in full by the Optional Prepayment Date, payments from or with respect
to U.S. Obligations then held by the Lender and such payments received by the
Lender thereafter shall be applied on the date such payment is received (i)
first, to payment of accrued and unpaid interest on the SC Note; (ii) second, to
prepayment of the Principal Payments of the SC Note, pro rata, in inverse order
--- ----
of maturity; (iii) third, to payment of accrued and unpaid interest on the MHP
Notes, pro rata; and (iv) fourth, to prepayment of the MHP Principal Payments,
--- ----
pro rata, in inverse order of maturity.
- --- ----
(h) Notwithstanding the provisions of subsection (a) of this Section
2.3 setting forth the time period during which the SC Property may be defeased,
SC may defease the Lien of the Security Documents to cause the release of the SC
Property for the purpose set forth in clause (e) of Section 4.1A prior to the
date set forth in such subsection (a) if it provides to the Lender an opinion in
form and substance, and from a firm, acceptable to the Lender, in the exercise
of its sole discretion, that such release will not adversely affect the status
of the entity holding the SC Debt as a REMIC (assuming for such purpose that
such entity otherwise qualifies as a REMIC).
(i) Upon the release of any MHP Property from the lien of any of the
MHP Security Documents pursuant to Section 2.3 of the MHP Loan Agreement, such
MHP Property shall simultaneously be released by the Lender from the Lien of the
Security Documents.
Section 2.4 Sale of the SC Property and all of the MHP
------------------------------------------
23
<PAGE>
Properties. Provided that no Event of Default has occurred and is continuing,
- ----------
upon at least 60 days' notice to the Lender, SC has the right to sell the SC
Property and MHP has the right to sell the MHP Properties, as a group, subject
to the Security Documents and the MHP Security Documents, as the case may be, to
any Person so long as such Person is approved by NACC, and, after the
Securitization, by the Lender, such approval not to be unreasonably withheld,
and the Rating Agencies deliver a Rating Comfort Letter. It is understood that
the Rating Agencies may require, as a condition to such delivery, matters
equivalent to those contained in clauses (i) and (ii) of Section 2.5. Upon such
approval and delivery, the Lender shall deliver to SC for execution and delivery
such instruments as may be reasonably required to effect an assignment and
assumption of the SC Debt and a release of the obligations of SC under the
Transaction Documents, including, without limitation, a new SC Note as to which
the purchaser of the SC Property shall be the obligor, in an aggregate principal
amount equal to the then outstanding principal amount of the SC Note.
Section 2.5 Change of Control. There shall be no Change of Control;
-----------------
provided, however, that if no Event of Default has occurred and is continuing
- -------- -------
there can be a Change of Control if (i) SC submits to the Lender an opinion in
form and substance and from a firm satisfactory to the Lender, with respect to
the requested Change of Control, to the same effect as the Substantive
Consolidation Opinion, (ii) the organizational documents of the Person involved
in the requested Change of Control are approved by the Lender and (iii) after
the Securitization, the Rating Agencies deliver a Rating Comfort Letter.
Section 2.6 Release after the Optional Prepayment Date. On any Debt
------------------------------------------
Service Payment Date after the Optional Prepayment Date, upon the sale by SC of
the SC Property to any Person, SC may cause the release of the SC Property from
the Lien of the Security Documents upon the satisfaction of the following
conditions:
(a) not less than 30 days' notice to the Lender specifying a Debt
Service Payment Date on which the amount set forth in clause (c) below is to be
provided to the Servicer, which notice shall be accompanied by an Officer's
Certificate to the effect that no Potential Event of Default or Event of Default
has occurred and is continuing (or in the case of a Potential Event of Default
or Event of Default that shall be cured or avoided by the release of the
affected SC Property describing the nature of, and certifying that, such
Potential Default or Event of Default shall be cured by such release and that no
other Potential Event of Default or Event of Default has occurred and is
continuing and that such Release will comply with all applicable requirements of
this Section 2.6;
(b) the payment to the Lender of interest accrued and unpaid
24
<PAGE>
on the principal balance of the SC Note and all other sums due under the
Transaction Documents, through and including such Debt Service Payment Date;
(c) the payment to the Lender, to be applied first, to prepayment of
the Principal Payments in inverse order of maturity and second, to prepayment of
the MHP Principal Payments in inverse order of maturity, pro rata, of an amount
--- ----
equal to the lesser of (A) 125% of the Release Price and (B) the greater of (i)
the Release Price and (ii) the sale proceeds or other cash distributable to MHP
pursuant to Section 4.06 of the Amended and Restated Agreement of Limited
Partnership of SC; provided, however, that (A) if the SC Property is released
-------- -------
pursuant to this Section 2.6 as a result of a condemnation or casualty (and SC
in accordance with the SC Mortgage determines in good faith that the SC Property
cannot be restored to substantially the condition that existed prior to the
condemnation or casualty), such payment shall be an amount equal to the greater
of (a) and (b), in which (a) is the Release Price and (b) is the lesser of (x)
125% of the Release Price and (y) the net Condemnation Proceeds or net Insurance
Proceeds received on account of the SC Property and (B) if SC sells the SC
Property, such amount shall be equal to the lesser of (x) 125% of the Release
Price and (y) the sum of the Release Price and the amount of the proceeds of
such sale distributable to MHP pursuant to Section 4.06(B) of the Amended and
Restated Agreement of Limited Partnership of SC;
(d) delivery to the Lender for execution of forms of release of the SC
Property from the Lien of the Security Documents appropriate for California;
(e) delivery to the Lender of evidence satisfactory to the Lender that
the ratio of (i) the MHP Net Operating Income for the 13 full Accounting Periods
immediately succeeding the release date to (ii) the difference between (y) the
MHP Debt Service Expense for such Accounting Periods and (z) the payments to be
received for such Accounting Periods from or with respect to U.S. Obligations
then held as security for the MHP Notes will be maintained for such Accounting
Periods at the greater of (x) the Initial Debt Service Coverage Ratio and (y)
the ratio of the MHP Net Operating Income for the thirteen full Accounting
Periods next preceding the release date divided by the difference between (i)
the MHP Debt Service Expense for such Accounting Periods and (ii) the payments
received for such Accounting Periods from or with respect to U.S. Obligations
then held as security for the MHP Notes; and
(f) Upon the release of any MHP Property from the lien of any of the
MHP Security Documents pursuant to Section 2.6 of the MHP Loan Agreement, such
MHP Property shall simultaneously be released by the Lender from the Lien of the
Security Documents.
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ARTICLE III
PAYMENTS
Section 3.1 Payments on the SC Note. All payments made on the SC Note
-----------------------
shall be made in the manner, and subject to the conditions, provided in this
Agreement and the SC Note. The SC Note shall not be prepayable except as
expressly provided for in this Section 3.1, Section 2.3 hereof, Section 2.6
hereof and Sections 4.4 and 7.10 of the Cash Management Procedures. In addition,
on the Optional Prepayment Date and each Debt Service Payment Date thereafter,
the SC Note may be prepaid, at the option of SC, in full or in part, without
penalty or premium.
Section 3.2 Interest Rate.
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(a) Except as set forth in Sections 3.4(b) and 3.4(d), the SC Debt
shall bear interest for each Debt Service Period at the Base Rate.
(b) Calculations of interest shall be made on the basis of a 360-day
year and actual days elapsed during each Debt Service Period.
Section 3.3 Payments without Deduction, etc. All payments of the SC
-------------------------------
Debt to the Lender shall be absolute and unconditional, shall be paid strictly
in accordance with the terms of the Transaction Documents without being subject
to any claim, set-off, defense or other right which SC may have against the
Lender or any other Person, whether in connection with this Agreement, the trans
actions contemplated herein or any other circumstance or happening whatsoever.
SC shall make such payments to the Lender free and clear of, and without
deduction for, any and all present or future taxes, levies, imposts, deductions,
charges, penalties or withholdings, and any lia bili ties with respect thereto,
by whomever imposed, other than present or future taxes on the income of the
Lender or franchise taxes imposed on the Lender as a result of its conducting
business in specific jurisdictions. SC shall pay and indemnify and hold the
Lender harmless from and against any present or future claim for liability for
United States, state or local taxes or assessments on the ownership by the
Lender of the debt obligations of SC evidenced by the SC Note, the SC Mortgage
or on the principal, interest, fees or other amounts payable under any
Transaction Document or otherwise in respect of the SC Debt (other than income
or franchise taxes imposed on the Lender or its Affiliates by any jurisdiction).
The obligations of SC hereunder shall survive repayment of the SC Debt and
termination of the Transaction Documents.
Section 3.4 Periodic Payments.
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(a) On October 11, 1996, SC shall pay to the Lender interest on the SC
Note at the Base Rate for the period beginning on the date hereof and ending on
October 10, 1996. On each Debt Service Payment Date thereafter through and
including October 11, 1997, SC shall pay to the Lender interest on the SC Note
at the Base Rate then due and payable for each Debt Service Period.
(b) On each Debt Service Payment Date occurring after October 11, 1997,
SC shall pay $369,829.85 to the Lender. Such amount shall be applied (i) first,
to the payment of the Base Rate Interest on the SC Note, then due and payable
for the applicable Debt Service Period, and (ii) next, to the Principal Payment
of the SC Note, in the amount of the difference between the Monthly Debt Service
Payment and the Base Rate Interest paid pursuant to sub-clause (i) above.
Following the Maturity Date and while an Event of Default has occurred and is
continuing, the Monthly Debt Service Payment shall be increased to reflect
payment of interest at the Default Rate; provided, however, that for the
purposes of this sentence, an Event of Default shall be considered to have
occurred and be continuing until such Event of Default has been cured,
including, without limitation, pursuant to the provisions of Section 4.1B.
(c) If any Principal Payment or a portion thereof is prepaid on any
Debt Service Payment Date by the application by the Servicer of payments
received (i) from or with respect to U.S. Obligations held by the Servicer on
the Optional Prepayment Date as a result of a release of the SC Property from
the Lien of the Security Documents pursuant to Section 2.3, (ii) from the
release of the SC Property from the Lien of the Security Documents pursuant to
Section 2.6, or (iii) on and after the Optional Prepayment Date, pursuant to the
last sentence of Section 3.1 hereof, the Monthly Debt Service Payment payable on
each Debt Service Payment Date thereafter shall be reduced in an amount equal to
the percentage reduction in the principal amount payable under the SC Note
effected by such prepayment.
(d) Subsequent to the Optional Prepayment Date, on each Debt Service
Payment Date SC shall pay to the Lender the MHP Share for all Accounting Periods
ending during the Debt Service Period immediately preceding such Debt Service
Payment Date, which payment shall be applied to prepay the SC Note and the MHP
Notes, pro rata, in the manner contemplated by Section 4.4 and 7.10, as
applicable, of the MHP Cash Management Procedures.
ARTICLE IV
DEFAULT; REMEDIES; ENFORCEMENT
Section 4.1A Events of Default. Any of the following shall constitute a
-----------------
default under this Agreement (an "Event of Default"):
----------------
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(a) failure by SC to pay on the due date any interest or principal due
and payable on the SC Note as set forth therein; or
(b) failure by SC to make any other payment due under any Transaction
Document within ten (10) days after demand therefor shall have been made; or
(c) any representation or warranty of SC contained in any Transaction
Document shall have been untrue or incorrect when made in any respect that may
have a Material Adverse Effect; provided, however, that for the purpose of this
clause (c) the words "To its Best Knowledge" shall be deleted, where used, from
the provisions of each representation and warranty contained in Section 5.1
(other than Sections 5.1(e), 5.1(f), 5.1(aa) and 5.1(an); or
(d) failure by SC to perform its covenants in Section 5.2(d), and such
failure continues unremedied for ten days after notice thereof by the Lender to
SC requiring the same to be remedied; or
(e)failure by SC to perform or observe any other of its (i) covenants
under any Transaction Document (other than the covenant contained in Section
5.3(n)) that has a Material Adverse Effect, or (ii) covenant contained in such
Section, and in each case such failure continues unremedied for 30 days after
notice thereof by the Lender to SC requiring the same to be remedied or such
shorter period as shall be provided in such Transaction Document; provided,
--------
however, that it shall not be an Event of Default if (a) such failure is curable
- -------
but is not reasonably capable of being cured within such 30-day period and SC
shall have commenced to cure such failure within such 30-day period and
thereafter shall diligently pursue such cure to completion, but in no event
later than 180 days after the date on which SC received such notice from the
Lender or (b) within thirty (30) days after its receipt of such notice from the
Lender, SC gives notice to the Lender of its intent to release the SC Property
from the Lien of the Security Documents pursuant to the provisions of Section
2.3 or 2.6 and, thereafter diligently pursues efforts to take such action and,
within 180 days after the date on which it received such notice from the Lender,
effects such release pursuant to the provisions of Section 2.3 or 2.6, as the
case may be; or
(f) an order (that has not been vacated or stayed within 60 days from
the entry thereof) is made for, or the Partners take any action with regard to,
the winding up of SC or the General Partner except a winding up for the purpose
of a merger, restructuring or contribution, the terms of which have previously
been consented to by the Lender; or
(g) (A) SC or the General Partner shall commence any Action (1) under
any existing or future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors (collectively,
"Insolvency Law") seeking to have
--------------
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an order for relief entered with respect to it, or seeking to adjudicate it a
bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with respect
to it or its debts, or (2) seeking appointment of a receiver, trustee, custodian
or other similar official (each a "Bankruptcy Custodian") for it or for all or
--------------------
substantially all of its assets, or SC or the General Partner shall make a
general assignment for the benefit of its creditors; or (B) there shall be
commenced against SC or the General Partner any Action of a nature referred to
in clause (A) above which (1) results in the entry of any order for relief or
any such adjudication or appointment and (2) remains undismissed, undischarged
or unbonded for a period of 60 days; or (C) there shall be commenced against SC
or the General Partner any Action seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or substantially all of its
assets which results in the entry of an order for any such relief that shall not
have been vacated, discharged, stayed, satisfied or bonded pending appeal within
60 days from the entry thereof; or (D) SC or the General Partner shall generally
not, or shall be unable to, or shall admit in writing its inability to, pay its
debts as they become due; or
(h) Unless (a) SC, after obtaining any consents or waivers from the
ground lessor under the applicable Ground Lease, causes the SC Property to come
under management by another nationally recognized hotel operator acceptable to
the Lender, in the exercise of its reasonable discretion, (b) the SC Property is
operated as part of a comparable nationally recognized hotel system acceptable
to the Lender and (c) each of the Rating Agencies delivers to the Lender a
Rating Comfort Letter with respect thereto: (A) the Manager shall commence any
Action (y) under any Insolvency Law seeking to have an order for relief entered
with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts, or (z)
seeking appointment of a Bankruptcy Custodian for it or for all or substantially
all of its assets, or the Manager shall make a general assignment for the
benefit of its creditors; or (B) there shall be commenced against the Manager
any Action of a nature referred to in clause (A) above which (y) results in the
entry of any order for relief or any such adjudication or appointment and (z)
remains undismissed, undischarged or unbonded for a period of 60 days; or (C)
there shall be commenced against the Manager any Action seeking issuance of a
warrant of attachment, execution, distraint or similar process against all or
substantially all of its assets which results in the entry of an order for any
such relief that shall not have been vacated, discharged, stayed, satisfied or
bonded pending appeal within 60 days from the entry thereof; or (D) the Manager
shall generally not, or shall be unable to, or shall admit in writing its
inability to, pay its debts as they become due; or
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(i) one or more judgments or decrees, not covered by insurance, in an
aggregate amount exceeding $1,000,000 in the case of SC and $2,000,000 in the
case of the General Partner, shall be entered against SC or the General Partner,
as the case may be, and such judgments or decrees shall not have been vacated,
discharged, stayed, satisfied or bonded pending appeal within 60 days from the
entry thereof;
(j) there is a Change of Control, unless permitted under Section 2.5;
(k) an MHP Event of Default occurs; or
(l) any representation or warranty of HMH, Marriott Proper ties, Inc.
or MHP II Acquisition Corp. shall have been untrue or incorrect on the date
hereof, or any breach by any of such entities of the covenants, in each case
relating to the "factual state ments," within the meaning of Paragraph 5 of
those certain certificates of Christopher Townsend and Bruce Wardinski, in each
case dated the date hereof, with respect to the substantive consol idation
opinion referred to therein; provided, however, that (i) for the purposes of
this clause (l) the phrase "to the best of his knowledge after due inquiry" set
forth in each such paragraph shall be deemed deleted and (ii)(A) in the case of
such representation or warranty, SC does not take such action as may be required
within 30 days after notice of the untruth or inaccuracy thereof by the Lender
to SC to "cure" such failure such that such representation or warranty would not
have been untrue or incorrect if such "cure" had been in effect on the date
hereof and (B) in the case of such breach, such breach continues unremedied for
30 days after notice thereof by the Lender to SC; provided, however, further
that if such breach is curable but is not reasonably capable of being cured
within such 30-day period and SC shall have commenced to cure such failure
within such 30-day period and thereafter shall diligently pursue such cure to
completion, but in no event later than 90 days after the date on which SC
received such notice from the Lender, such breach shall not be an Event of
Default.
Section 4.1B Event of Default Cure. None of the foregoing shall
---------------------
constitute an Event of Default if after the occurrence thereof and after the
expiration or waiver of the rights, if any, of ground lessor under the Ground
Lease to purchase the SC Note and SC Mortgage, SC tenders a cure for such Event
of Default or a plan to cure such Event of Default and the Lender accepts such
tender, such acceptance to contain such conditions as the Lender, in the
exercise of its sole discretion, may require. If SC tenders to the Lender all
sums, the non-payment of which constituted an Event of Default under clauses (a)
or (b) of Section 4.1A, and the Lender accepts such sums, such non-payment shall
not constitute an Event of Default. If the Lender does not accept any such
payment or tender by SC, the Event of Default shall be continuing. The Lender
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shall be deemed to have accepted a tender of cash if the Lender does not return
such cash to SC within 10 Business Days of its receipt thereof. Except as
contemplated by the preceding sentence, if the Lender fails to respond to SC
within 30 days of its receipt of such tender, it shall be deemed to be rejected.
Section 4.2 Remedies. If an Event of Default shall have occurred and be
--------
continuing, the Lender shall have the right, in its sole discretion, by notice
to SC (with a copy to the Manager) (except upon the occurrence of an Event of
Default under clauses (f) or (g) of Section 4.1A, in which case all principal
and accrued interest thereon will be immediately due and payable on the SC Note
without any declaration or other act on the part of the Lender) to take one or
more of the following actions:
(a) To declare the principal of and all amounts accrued but unpaid
under the SC Note and the Transaction Documents, together with the Yield
Maintenance Premium if the Event of Default occurs and is continuing prior to
the Optional Prepayment Date, to be immediately due and payable, and such
amounts shall thereupon become immediately due and payable, without presentment,
demand, protest or notice of any kind, other than any notice specifically
required by this Section 4.2, all of which are hereby expressly waived by SC;
(b) Pursue such rights and remedies against SC, or otherwise, as are
provided under and pursuant to the SC Mortgage or any of the other Transaction
Documents and as may be available to the Lender at law or in equity, including,
without limitation, during such time as the Lender may be considering a tender
of a cure or a plan pursuant to Section 4.1B; provided, however, that the Lender
-------- -------
shall not initiate foreclosure proceedings unless five (5) Business Days' prior
notice of such intention is given SC and the tender of a cure or a plan therefor
shall not have been accepted by the Lender pursuant to the provisions of Section
4.1B before the end of such 5 Business Day period; and
(c) If the Event of Default involves SC's failure to pay any Imposition
or to comply with the Insurance Requirements, or to perform or observe any other
covenant, condition or term in any Transaction Document or in the Management
Agreement, the Lender may, at its option, without waiving or affecting any of
its rights or remedies hereunder, pay, perform or observe the same, and, in
connection therewith, the Lender shall be entitled to rely on any
representations and statements of the Manager under the Management Agreement in
regard to alleged breaches or violations thereof, and all payments made or costs
or expenses incurred by the Lender in connection therewith shall be repaid by SC
to the Lender within fifteen (15) days after demand therefor, and shall be added
to and become a part of the SC Debt. The Lender is hereby empowered to enter and
to authorize others to enter upon the SC Property for the
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purpose of performing or observing any such defaulted covenant, condition or
term, without thereby becoming liable to SC or any Person in possession holding
under SC.
Section 4.3 Remedies Cumulative; Delay or Omission Not a Waiver. To the
---------------------------------------------------
extent permitted by law, every remedy given hereunder or in any other
Transaction Document to the Lender shall not be exclusive of any other remedy or
remedies, and every such remedy shall be cumulative and in addition to every
remedy provided by statute, law, equity or otherwise. The Lender may exercise
all or any of the powers, rights or remedies given to it hereunder or which may
be now or hereafter given by statute, law, equity or otherwise, in its absolute
discretion. No course of dealing between SC and the Lender or any delay or
omission of the Lender to exercise any power, right or remedy accruing upon any
Event of Default shall impair any power, right or remedy or shall be construed
to be a waiver of any such Event of Default or acquiescence therein, and every
power, right and remedy given by each Transaction Document to the Lender may, to
the extent permitted by law, be exercised from time to time and as often as may
be deemed expedient by the Lender.
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 5.1 Representations and Warranties of SC.
------------------------------------
SC represents and warrants to, and covenants with the Lender, that, as
of the Closing Date, except as set forth on the Disclosure Schedule:
(a) Exhibit F hereto sets forth SC's organizational structure, and its
---------
equity interests and holders thereof. SC is a limited partnership validly
existing and in good standing under the laws of the State of Delaware and is
qualified to do business in each jurisdiction where the nature of its business
or location of the SC Property requires it to be so qualified, including
California. The General Partner is a corporation validly existing and in good
standing under the laws of the State of Delaware and is qualified to do business
in each jurisdiction where the nature of its business or location of the SC
Property requires it to be so qualified. Neither the General Partner nor SC has
engaged in any business unrelated to the ownership of the SC Property and the
General Partner's partnership interest in MHP. Neither the General Partner nor
SC has assets other than those related to the SC Property and the General
Partner's partnership interests in MHP.
(b) SC has, and at relevant times has had, the requisite power and
authority to own its assets and conduct its business, to
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execute and deliver each of the Transaction Documents and the Operational
Agreements to which it is a party and to carry out the transactions contemplated
thereby.
(c) SC's execution, delivery and performance of each of the Transaction
Documents and the Operational Agreements to which it is a party have been duly
and validly authorized by all necessary actions and proceedings on its part and
the part of the General Partner, and no further approvals or filings of any
kind, including, without limitation, any approval of or filing with any
Governmental Authority, are required as a condition thereof.
(d) Neither the execution and delivery of each of the Transaction
Documents and the Operational Agreements to which SC is a party, nor the
fulfillment of or compliance with the terms and conditions thereof:
(i) will conflict with or result in any breach or violation of any
law, rule or regulation issued by any Governmental Authority,
or any judgment or order applicable to SC or the General
Partner, or to which SC or the General Partner or the SC
Property are subject;
(ii) will conflict with or result in any breach or violation of, or
constitute a default under, any of the provisions of SC's
Amended and Restated Agreement of Limited Partnership, the
Restated Certificate of Incorporation of the General Partner,
or any agreement or instrument to which SC or the General
Partner is a party or to which SC or the General Partner or the
SC Property is subject; or
(iii) will result in or require the creation of any Lien on the SC
Property, except Permitted Exceptions.
(e) Each of the Transaction Documents and the Operational Agreements to
which SC is a party has been duly executed and delivered by SC and, to SC's Best
Knowledge, the other parties thereto and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with the terms thereof
subject to the effects of bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally and
general equitable principles (whether considered in a proceeding in equity or at
law). To SC's Best Knowledge, each of the Operational Agreements to which it is
not a party has been duly executed and delivered by the parties thereto.
(f) There is no Action pending to which either SC or the General
Partner is a party or to which the SC Property is subject,
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directly or indirectly, and, to its Best Knowledge and, based on a certification
to SC by the Manager, the Manager is a party, no such Action is threatened or
contemplated by any Person, in each case, other than an Action that does not
involve an amount in controversy in excess of $25,000.
(g) It has not received notice of, and does not have any knowledge of,
any violations of any Legal Requirements affecting the SC Property or the
construction, development, use, operation, maintenance or management thereof,
except as set forth in the Exhibits and Schedules to this Agreement.
(h) Neither SC nor the General Partner has any subsidiaries, except
that the General Partner owns a 1% general partnership interest and five limited
partnership units in MHP.
(i) Except for the SC Debt, since March 20, 1989, SC has not incurred
any Indebtedness other than Purchase Money Security Interests.
(j) SC has no employees.
(k) The SC Property is subject to the Ground Lease. A true and complete
copy of the Ground Lease (including all amendments, agreements, side letters and
documents relating thereto) has been delivered to NACC. The Ground Lease is
unmodified and in full force and effect and there is no default by it thereunder
nor, to SC's Best Knowledge, by the lessor thereunder, and, to SC's Best
Knowledge, no event has occurred and is continuing which, with the passage of
time and/or the giving of notice, would constitute a default or event of default
under the Ground Lease.
(l) True and complete copies of the Operational Agreements relating to
the SC Property (including all amendments, agreements, side letters and all
other material documents relating thereto other than those effected in the
ordinary course of business and which individually or in the aggregate do not
have an Individual Material Adverse Effect) have been made available to the
Lender; each such agreement is unmodified and in full force and effect; to its
Best Knowledge, there is no default by any party thereunder and no event has
occurred and is continuing which, with the passage of time and/or the giving of
notice, would constitute a default or event of default by it thereunder in such
circumstances that such default or event of default might have an Individual
Material Adverse Effect. All neces sary consents to the transactions described
in the Transaction Documents required by such agreements have been obtained.
Since its inception, neither SC nor the General Partner has entered into any
agreements or obligations other than the Transaction Documents to which it is a
party and the Operational Agreements relating to the SC Property.
(m) All necessary governmental consents, if any, to the
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transactions described in the Transaction Documents have been obtained.
(n) The Operating Budget annexed hereto as Exhibit G contains all
---------
anticipated operating expenses for the SC Property for the year ending December
31, 1996. The preliminary Capital Budget annexed hereto as Exhibit H contains
---------
all presently anticipated Capital and FF&E Expenditures for the SC Property for
the year ending December 31, 1997.
(o) All Permits material to the operations of the SC Property have been
obtained, are in full force and effect and are in SC's name or available for its
use.
(p) The SC Property has available to it adequate parking to comply with
all Legal Requirements and to permit its operation as a first class full service
hotel operated in compliance with Marriott standards and the Management
Agreement.
(q) SC is not subject to any United States or state income,
unincorporated business, capital, franchise or similar gross income or income
based taxes.
(r) (i) Neither SC nor any ERISA Affiliate maintains, sponsors,
contributes to or is obligated to contribute to, or during the
five (5) years ending on the date of the execution and delivery
of this Agreement, has maintained, sponsored, contributed to or
was obligated to contribute to, any Plan.
(ii) SC does not, and is not obligated to, maintain, sponsor or
contribute to any Welfare Plan.
(iii) SC's assets are not nor are they deemed "plan assets",
whether by operation of law or under regulations promulgated
under ERISA.
(s) SC has not entered into any Transaction Document with the actual
intent to hinder, delay, or defraud any creditor. SC has received reasonably
equivalent value in exchange for SC's obligations under the Transaction
Documents. The fair saleable value of SC's assets is and immediately after the
execution and delivery of the Transaction Documents will be greater than SC's
probable liabilities, including the maximum amount of SC's contingent
liabilities or SC's debts as such debts become absolute and matured. SC's assets
do not and immediately after the execution and delivery of the Transaction
Documents will not constitute unreasonably small capital to carry out SC's
business as conducted or as proposed to be conducted. SC does not intend to, and
does not believe that SC will, incur debts and liabilities (including, without
limitation, contingent liabilities and other commitments) beyond SC's ability to
pay such debts as they mature
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(taking into account the timing and amounts to be payable on or in respect of
SC's obligations).
(t) SC has not sustained any loss or interference with its business
from fire, explosion, flood or other calamity, or from any labor dispute or
governmental action, order or decree, nor has there been any material adverse
change, nor any other development or event that, in each case, may have an
Individual Material Adverse Effect.
(u) The Security Documents, when duly executed and delivered, and (to
the extent required or contemplated) filed or recorded, will create a valid and
enforceable first priority perfected security interest in SC's right, title and
interest in and to the rights and properties described therein, as to which
perfection may be effected by such filing or recording, for the benefit of the
Lender, subject only to Permitted Exceptions.
(v) SC is not (1) an "investment company" or a company "controlled" by
an "investment company," within the meaning of the Investment Company Act of
1940, as amended, (2) a "holding company" or a "subsidiary company" of a
"holding company" or an "affiliate" of either a "holding company" or a
"subsidiary company" within the meaning of the Public Utility Holding Company
Act of 1935, as amended, nor (3) subject to any other federal or state law or
regulation which purports to restrict or regulate its ability to borrow money.
(w) There exists no Event of Default or Potential Event of Default.
(x) To SC's Best Knowledge, no representation or warranty made by it in
any Transaction Document, and no schedule, exhibit, certificate, written
statement, list, document or other material furnished or to be furnished to the
Lender pursuant to or in connection with any such Transaction Document or any of
the transactions contemplated thereby contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading.
(y) There is no offset, defense, counterclaim or right to rescission
with respect to the SC Note or the other Transaction Documents.
(z) All Ground Rent, taxes and governmental assessments currently due
and owing in respect of, and affecting, the SC Property, have been paid, or an
escrow of funds in an amount sufficient to cover such assessments has been
established with the Servicer or title insurance company.
(aa) There is no Action pending, or, to SC's Best Knowledge,
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threatened, for the total or partial condemnation of any of the SC Property, and
except for ADA Compliance Work, Deferred Maintenance and Other Work, and
Environmental Remediation Work, the SC Property is in good repair and free and
clear of any damage that could affect materially and adversely the value of the
SC Property as security for the SC Note or the use for which the SC Property was
intended.
(ab) Insurance required to be maintained pursuant the Insurance
Requirements is in effect; and the SC Property and the use and operation thereof
constitute a legal use under applicable zoning regulations and comply in all
respects with all applicable Legal Requirements.
(ac) To SC's Best Knowledge, the amounts deposited in the Capital
Expenditure and FF&E Reserve Account for ADA Compliance Work, Deferred
Maintenance and Other Work, and Environmental Remediation Work are sufficient
for their intended purposes.
(ad) The SC Property is not listed in, or, to SC's Best Knowledge and,
based on a certification to it by the Manager, of the Manager, proposed for
listing in, the United States Environmental Protection Agency's National
Priorities List of sites or any other comparable list of sites maintained by any
state or local governmental agency.
(ae) The SC Property is not subject to any Lien or claim for Lien in
favor of any Governmental Authority or any other Person as a result of any
Hazardous Substance (as such term is defined in the Environmental Indemnity
Agreement) on, in or affecting the SC Property.
(af) The SC Property is not subject to any collective bargaining or
other union contracts.
(ag) Each of SC and the General Partner has (a) not sought or consented
to any dissolution, winding up, liquidation, consolidation, merger or sale of
all or substantially all of its assets, (b) not failed to correct any known
misunderstanding regarding its separate identity, (c) maintained its accounts,
books and records separate from those of any other Person (except that, for
accounting and reporting purposes, SC or the General Partner may be included in
the consolidated financial statements of Host Marriott in accordance with
generally accepted accounting principles), (d) maintained its books, records,
resolutions and agreements as official records, (e) not commingled its funds or
other assets with those of any other Person (except as specifically contemplated
by the Cash Management Procedures) and has held its assets in its own name, (f)
conducted its business in its name (except that the SC Property is operated
under the name "Marriott" and SC or the General Partner may have registered
"doing business" names in certain states), (g) maintained its financial
statements,
37
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accounting records and other entity documents separate from those of any other
Person (except that, for accounting and reporting purposes, SC or the General
Partner may be included in the consolidated financial statements of Host
Marriott in accordance with generally accepted accounting principles), (h)
except as contemplated by that certain Interest Rate Lock Agreement, dated
August 1, 1996, with NACC, paid its own liabilities out of its own funds and
other assets, (i) observed all partnership and corporate formalities, as the
case may be, (j) not assumed or guaranteed or become obligated for the debts of
any other Person or held out its credit as being available to satisfy the
obligations of any other Person (other than as permitted by the Transaction
Documents), (k) not acquired obligations or securities of its partners or
shareholders, as the case may be (other than, with respect to the General
Partner, a note of its corporate parent, Marriott Properties, Inc.), (l)
allocated fairly and reasonably any and all overhead expenses and other common
expenses for facilities, goods or services provided jointly to multiple entities
and used separate stationery, invoices and checks from those of any other
Person, (m) not pledged any of its assets for the benefit of any other Person
other than the Lender (except for Purchase Money Security Interests or as
otherwise permitted by the Transaction Documents), (n) held and identified
itself as a separate and distinct entity under its own name and not as a
division or part of any other Person (i.e., an integral component of such other
Person, as distinguished from a separate entity), but the operations of SC and
the General Partner are consolidated with those of HMC and its affiliates as
described in clause (c) above, (o) not made any loans to any other Person (other
than, with respect to the General Partner, any HMH SC Debt Service Advances),
(p) not identified its partners or shareholders, as the case may be, or any of
its Affiliates as a division or part of it (i.e., an integral component of such
entity, as distinguished from a separate entity), (q) not entered into or become
a party to any transaction with its partners or shareholders, as the case may
be, or any of its Affiliates except in the ordinary course of its business and
on terms which are fair and are no less favorable to it than would be obtained
in a comparable arms' length transaction with an unrelated third party, (r) not
filed a bankruptcy or insolvency petition or otherwise instituted insolvency
proceedings with respect to itself or to any other entity in which it has a
direct or indirect legal or beneficial ownership interest (and with respect to
the General Partner, without affirmative vote of all of its directors, including
the Independent Director), (s) maintained adequate capital in light of its
contemplated business operations, (t) not engaged in any business activity other
than as stated in Section 2.03 of the Amended and Restated Agreement of Limited
Partnership of SC and Article THIRD of the Restated Certificate of Incorporation
of the General Partner, as the case may be, and (u) maintained an arms' length
relationship with partners, affiliates and any other party furnishing services
to it; provided, however, that (A) separate financial statements for the General
-------- -------
Partner have
38
<PAGE>
not previously been produced on a regular basis, but the financial records of
the General Partner have been and will remain adequate to permit production of
such separate financial statements (including a balance sheet and statements of
income and changes in financial position) for past periods if it hereafter
becomes necessary to produce such financial statements, and separate financial
statements for the General partner will hereafter be prepared on a quarterly
basis; (B) because of the limited nature of the General Partner's operations it
has not previously maintained separate deposit accounts in its own name, but,
effective immediately, it will establish and maintain such accounts, consistent
with the representations, warranties and covenants contained in Sections 5.1(ag)
and 5.2(z) of the Loan Agreements and (C) certain transaction and overhead costs
incurred by HMC, SC and/or the General Partner may not heretofore have been
fully allocated among HMC, SC and/or the General Partner but such costs
hereafter will be fairly and reasonably allocated.
(ah) The Permitted Exceptions do not materially and adversely affect
(1) SC's ability to pay in full the principal and interest on the SC Note in a
timely manner or (2) the use of any of the SC Property for the use currently
being made thereof, the operation of the SC Property as currently being operated
or the value of the SC Property.
(ai) [Intentionally omitted]
(aj) To SC's Best Knowledge, it has no material contingent liabilities.
(ak) SC has no material financial obligation under any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which it is a party or by which it or the SC Property is bound, other than
obligations (i) incurred in the ordinary course of the operation of the SC
Property and (ii) under the Transaction Documents.
(al) SC has not borrowed or received debt financing that has not been
heretofore or contemporaneously herewith repaid in full, other than Purchase
Money Security Interests permitted by the provisions of this Agreement.
(am) To SC's Best Knowledge, none of its principals, or the General
Partner, or officer authorized to execute and deliver an Officer's Certificate,
has ever been indicted and/or convicted of a felony under any federal, state or
foreign laws.
(an) There are no pending or, to SC's Best Knowledge, proposed, special
or other assessments for public improvements or otherwise affecting the SC
Property, nor, to SC's Best Knowledge and, based on a certification to it by the
Manager, to the knowledge of the Manager, are there any contemplated
improvements
39
<PAGE>
to the SC Property that may result in such special or other assessment.
(ao) All of the rooms at the Hotel are in service, except for rooms
that are temporarily out of service for routine maintenance and repair.
(ap) SC has or anticipates that it will have sufficient funds available
to it for implementing its reasonably anticipated Capital and FF&E Expenditures.
Section 5.2 Affirmative Covenants. So long as any of the SC Debt
---------------------
remains outstanding, SC shall:
(a) do all things necessary to keep in full force and effect its valid
existence as a limited partnership and to qualify to do business in each
jurisdiction in which such qualification is necessary to the conduct of SC's
business or to protect the validity and enforceability of the Transaction
Documents;
(b) do all things necessary to enable SC to comply with all applicable
legal, fiscal and accounting rules and regulations;
(c) keep proper books of account and records in which full, true and
correct entries in accordance with GAAP shall be made of all transactions in
relation to its business and activities; allow the Lender access to such books
of account and records at all reasonable times during normal business hours upon
reasonable notice; and permit the Lender to discuss its affairs, finances and
accounts with any of the management employees of the General Partner;
(d) furnish to the Lender:
(i) not later than 120 days after the end of each Fiscal Year,
audited financial statements (including SC's balance sheet,
income statement and statement of cash flows), prepared in
accordance with GAAP consistently applied, audited by a "Big
Six" accounting firm;
(ii) not later than 27 days after the end of each Accounting Period
(i) unaudited financial statements substantially in the form of
Exhibit I(1) attached hereto/1/, covering such Accounting
------------
Period and the annual amount for the period to date showing in
detail for the Hotel, among other things, a breakdown of sales
revenues and operating expenses and the calculation of house
profit,
- -------------------------
/1/ Format 90, Rent Letters and Rent Letter Detail.
40
<PAGE>
average room and average occupancy rates, each of the
foregoing with a comparison to budget and prior year, (ii) an
unaudited profit and loss statement and escrow analysis on a
consolidated basis in the form of Exhibit I(2) attached hereto,
------------
and (iii) unaudited periodic and year-to-date reports detailing
for the SC Property the calculation of Operating Profit
substantially in the form of Exhibit I(3) attached hereto;
------------
(iii) not later than 60 days after the end of each Accounting
Quarter, quarterly and year-to-date unaudited financial
statements (including, without limitation, SC's balance sheets,
income statements, statements of cash flows and such other
quarterly financial information as is provided to the limited
partners of SC);
(iv) such other reports and other documents as shall be
replacements of the foregoing, which reports and other
documents shall not contain less detail than that provided for
in clauses (i), (ii) and (iii) above;
(v) together with the financial statements provided for in clauses
(ii) and (iii) above and not later than 27 days after the end
of each Fiscal Year, an Officer's Certificate of a senior
executive of the General Partner stating that such financial
statements fairly present the financial position and results of
operations of SC and stating whether or not the signer thereof
knows of any Event of Default;
(vi) on or before January 20 of each year commencing on January 20,
1997, an annual plan (the "Annual Plan") for such year for the
-----------
SC Property which annual Plan shall include a detailed
operating budget (an "Operating Budget") and a detailed capital
----------------
expenditure budget (a "Capital Budget"), reflecting the
--------------
Manager's best good faith estimate of its anticipated results
of operations, including revenues from all sources, all
operating expenses, management fees, Management Expenses, and
Capital and FF&E Expenditures. The Annual Plan shall contain
provisions for deposit into the Capital Expenditure and FF&E
Reserve Account of an aggregate amount equal to at least 4% or
5% of projected Gross Revenues for each year, the specific
percentage to be determined by the requirements for such
purpose of the Management Agreement relating to the SC
Property.
41
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(vii) copies of all rent letters, rent letter detail, Format 90s and
other monthly reports prepared by the Manager relating to the
SC Property promptly upon receipt thereof; and
(viii) such other information and reports as shall be reasonably
requested by the Lender or the Rating Agencies.
(e) (i) if SC has the right under the Management Agreement to
approve any aspect of each Annual Operating Projection or the
Repairs and Equipment Estimate (as such terms are defined in
the Management Agreement) or any other budget, submit each of
the foregoing to the Lender for its approval;
(ii) submit to the Lender for its approval the Building Estimate
(as such term is defined in the Management Agreement); and
(iii) the Lender's review and approval of each of the foregoing
shall not be unreasonably withheld or delayed.
(f) take all reasonable actions necessary so that SC is not required to
register as an investment company under the Investment Company Act of 1940, as
amended;
(g) promptly inform the Lender in writing of the following:
(i) SC becoming aware of the commencement of any rule making or
disciplinary proceeding or the promulgation of any proposed or
final rule affecting SC or the SC Property (other than a rule
or proceeding which has general applicability to Persons
including SC and is not likely to have a Material Adverse
Effect);
(ii) SC becoming aware of the commencement of any Action by or
against SC or with respect to the SC Property before any
Governmental Authority or arbitration board, or the written
threat of any such Action;
(iii) the receipt of written notice from any Governmental Authority
that (1) SC is being placed under regulatory supervision, (2)
any Permit material to the conduct of its business is to be
suspended or revoked or (3) SC is to cease and desist any
practice, procedure or policy it employs in the conduct of its
business;
(iv) the receipt of written notice from the Manager that
42
<PAGE>
SC has not complied with any of its obligations under the
Management Agreement or altering in any material respect the
rules, standards and requirements of the Manager thereunder;
and
(v) SC becoming aware of any facts or circumstances which with
the giving of notice or the lapse of time or both would give
rise to a default under the Ground Lease and all written
notices, from the ground lessor with respect to a default,
potential default or event of default under the Ground Lease.
(h) generally pay its debts as they become due;
(i) do or cause to be done all things necessary to establish, perfect,
maintain and continue the perfection and first priority (subject to Permitted
Exceptions) of the security interest of the Lender in the Pledged Property and
pay the costs and expenses of all filings and recordings and all searches
necessary to establish and determine the validity and the priority of such
security interest;
(j) subject to Section 2.2, pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, all taxes, assessments and
governmental charges levied or imposed upon SC or upon its income, profits or
property (including the SC Property);
(k) subject to Section 2.2, pay or cause to be paid all operating
expenses and all other costs and expenses associated with the operation and
maintenance of the SC Property in accordance with the Annual Operating
Projections, Repairs and Equipment Estimate, and Building Estimate in accordance
with the provisions of the Management Agreement;
(l) complete all items of Deferred Maintenance and Other Work, ADA
Compliance Work and Capital and FF&E Expenditures as set forth in the
preliminary Capital Budget for the year ended December 31, 1997, attached hereto
as Exhibit H (as such Capital Budget may be amended pursuant to the provisions
---------
of Section 5.2(d)(vi)), from funds deposited in the Capital Expenditure and FF&E
Reserve Account prior to the dates specified in Exhibit H and, to the extent
---------
necessary for such completion, from remaining cash flow;
(m) pay over to the Servicer for application pursuant to the SC
Mortgage, Insurance Proceeds and Condemnation Proceeds (except as otherwise
provided in the SC Mortgage);
(n) complete as promptly as possible all Deferred Maintenance and Other
Work, ADA Compliance Work, and Environmental Remediation Work (under the
supervision of a licensed architect or engineer, if the item of work requires
the expenditure of at least $100,000 or
43
<PAGE>
if such supervision is required by Legal Requirements), and in a good and
workmanlike manner, using materials comparable in quality to the original
installation and all items of Capital and FF&E Expenditures as set forth in the
preliminary Capital Budget for the year ending December 31, 1997 attached hereto
as Exhibit H (as such Capital Budget may be amended pursuant to the provisions
---------
of Section 5.2(d)(vi)) and the then effective Annual Operating Projection,
Building Estimate, or Repairs and Equipment Estimate (as such terms are defined
in the Management Agreement) under the supervision of a licensed architect or
engineer or comparable professional, as appropriate, and in all events, complete
all such work as required under the Management Agreement and this Agreement and
any additional work that shall be necessary to maintain standards at least as
high as those standards that apply generally to first class full service hotels
in compliance with Marriott standards and the Management Agreement. Any work to
be completed in accordance with this provision shall be completed despite the
insufficiency, if any, of funds in the Capital Expenditure and FF&E Reserve
Account to complete such work;
(o) promptly on request, furnish to the Lender copies of all material
contracts, bills of sale, statements, receipted vouchers and agreements in SC's
possession or control under which SC claims title to any materials, fixtures or
articles of personal property used in construction at or operation of the SC
Property;
(p) cause the Manager to operate the SC Property as a hotel open for
business under the Management Agreement;
(q) promptly on request, from time to time, deliver to the Lender a
statement setting forth all of the accounts SC or the Manager maintains with
respect to the Hotel and the SC Property, the purposes of such accounts and the
balances thereof;
(r) maintain or cause to be maintained each of the Transaction
Documents and Operational Agreements relating to the SC Property to which it is
a party in full force and effect, and observe and perform or cause to be
observed or performed all of its obligations thereunder;
(s) maintain or cause to be maintained each of the liquor licenses and
all other Permits in connection with the Hotel in full force and effect (and
replace any thereof that may be cancelled or otherwise lapsed), and observe and
perform or cause to be observed or performed all of SC's obligations thereunder;
(t) comply with and cause the SC Property to be in compliance with all
Legal Requirements and all Insurance Requirements;
(u) give the Lender prompt notice upon the discovery, to SC's Best
Knowledge, of the occurrence of any Potential Event of Default or Event of
Default;
44
<PAGE>
(v) give the Lender prompt notice of any Change of Control;
(w) ensure that the Manager pays all trade indebtedness within 60 days
of the date incurred except for such trade indebtedness that is subject to a
bona fide dispute;
- ---- ----
(x) ensure that the General Partner shall have an Independent Director
acceptable to the Lender at all times or, if the Independent Director has
resigned, shall not take any action which may not be taken pursuant to the
organizational documents of the General Partner without the consent of the
Independent Director;
(y) provide to the Lender not less than (10) days prior to the
execution thereof, a true and complete copy of any proposed amendment to SC's
Amended and Restated Agreement of Limited Partnership (other than amendments of
a ministerial nature that will not have any adverse impact on the Lender, the
value of the Pledged Property, the validity or priority of the Lender's security
interest therein, or any of the Lender's rights or remedies under the
Transaction Documents);
(z) ensure that the representations and warranties contained in Section
5.1(a) and 5.1(ag) remain true and accurate at all times;
(aa) shall operate the SC Property in accordance with the then
effective Annual Plan; provided, however, that SC may make Emergency
Expenditures not reflected in the then effective Annual Plan if it gives the
Lender prompt notice of any such Emergency Expenditures; and
(ab) comply with the terms and provisions of the Ground Lease.
Section 5.3 Negative Covenants. So long as any portion of the SC Debt
------------------
shall remain outstanding, except as expressly permitted in this Agreement, SC
shall not, without the prior consent of the Lender,
(a) purchase any real properties other than the SC Property, have any
assets or liabilities other than assets or liabilities derived from or related
to the SC Property, or engage in any business or undertake any activity other
than as permitted herein, including, without limitation, the operation, as a
lessee or otherwise, of any property other than the SC Property;
(b) have any interest in any Person;
(c) amend, supplement or otherwise modify its Amended and Restated
Agreement of Limited Partnership in any way that would cause a breach of the
covenants in this Agreement;
45
<PAGE>
(d) Grant any of the Pledged Property other than as permitted in the
Transaction Documents and pursuant to the Permitted Exceptions; provided,
--------
however, that SC may sell or otherwise dispose of personalty or fixtures from
- -------
time to time constituting portions of the SC Property so long as such personalty
or fixtures are replaced by personalty or fixtures of equal or better quality to
those sold or otherwise disposed of and except for immaterial amounts of
personalty disposed of in the ordinary course of business and items that need
not be replaced to continue the then existing level of quality of operation;
(e) dissolve, liquidate, merge or consolidate with any Person (and SC
agrees that upon any dissolution, liquidation, merger or consolidation in breach
of this clause (e), the Pledged Property shall continue to be held under and
otherwise subject to the Lien of the Security Documents until the SC Debt is
paid in full);
(f) permit the validity or effectiveness of any of the Transaction
Documents or, unless replaced with other necessary agreements that do not have
an Individual Material Adverse Effect, any of the Operational Agreements to
which it is a party to be impaired or permit the Lien of the Security Documents
to be amended, hypothecated, subordinated, terminated or discharged or permit
any Liens to be created on or extend to or otherwise arise upon or burden the
Pledged Property or any part thereof or any interest therein or the proceeds
thereof (other than any Permitted Exceptions);
(g) take any action if such action is likely to interfere with the
enforcement of any rights of the Lender under the agreements or instruments
relating to any of the Pledged Property;
(h) incur any Indebtedness other than (a) the SC Debt, (b) Subordinate
Debt, (c) Indebtedness incurred in connection with the Hotel Expansion pursuant
to Section 5.6(c), (d) unsecured Indebtedness incurred (i) in connection with
capitalized equipment leases as expressly permitted by Section 8.02C of the
Management Agreement or (ii) to provide (a) working capital (including loans for
such purpose that may be made by the Manager and/or the General Partner), in an
aggregate amount, which when added to the outstanding balance of previous
indebtedness incurred and outstanding for such purpose, shall not exceed the
average amount of its Management Expenses for each Accounting Period during the
preceding full 13 Accounting Periods and (b) funds (including loans for such
purpose that may be made by the Manager and/or the General Partner) to the
Servicer where required to pay the Monthly Debt Service Payment and other
amounts permitted under the Cash Management Procedures; provided, however, that
-------- -------
in the case of indebtedness incurred pursuant to clause (ii) the payee of such
indebtedness shall agree not to assert any remedies with respect to the
non-payment thereof so long as the MHP Debt and the SC Debt is outstanding or
(e) Indebtedness covered by Purchase Money Security
46
<PAGE>
Interests, in an aggregate amount not to exceed $817,669 outstanding at any
time;
(i) enter into any Equipment Lease other than solely with the supplier
of the furnishings, fixtures or equipment subject to such lease or sell any such
furnishings, fixtures, or equipment to any third party under a "Sale Leaseback"
arrangement;
(j) terminate, amend or modify any Operational Agreements to which it
is a party if the same would have an Individual Material Adverse Effect;
(k) (a) maintain, sponsor, contribute to or become obligated to
contribute to, or suffer or permit any ERISA Affiliate to maintain, sponsor,
contribute to or become obligated to contribute to, any Plan or any Welfare Plan
or (b) permit its assets to become "plan assets," whether by operation of law or
under regulations promulgated under ERISA;
(l) engage in any transactions with its Affiliates except, on terms at
least as favorable to it as those obtainable from unrelated third parties acting
in their own best interests and without duress and which, taken singly or in the
aggregate, would not reasonably be expected to have an Individual Material
Adverse Effect;
(m) (A) cancel, release, terminate or surrender the Management
Agreement or permit any cancellation, release, termination or surrender thereof
or (B) amend, modify or alter the terms of the Management Agreement in any
material respect; provided, however, that SC may cancel, release, terminate,
-------- -------
surrender, amend, modify or alter the Management Agreement in connection with
the replacement of the Manager if, before the date on which the Manager ceases
to be the Manager of the Hotel, (i) it causes such Hotel to come under
management by a nationally recognized hotel operator acceptable to the Lender,
in the exercise of its reasonable discretion, (ii) the Hotel continues to be
part of a comparable nationally recognized hotel system acceptable to the
Lender, and (iii) each of the Rating Agencies delivers to the Lender a Rating
Comfort Letter;
(n) Modify, amend or waive any terms or provisions of the Ground Lease
other than to cure any ambiguity or to effect any other ministerial change
therein; provided, however, that such action shall not adversely affect the
interests of the Lender;
(o) permit the ground lessor under the Ground Lease to make payments on
the SC Debt;
(p) permit the General Partner to amend its Restated Certificate of
Incorporation (other than amendments of a ministerial nature that will not have
an adverse impact on the
47
<PAGE>
Lender, the value of the SC Property or its obligations under this Agreement or
the other Transaction Documents); or
(q) make any distributions of cash to its partners, except as expressly
contemplated by the Cash Management Procedures if in the reasonable judgment of
the General Partner such funds will be necessary for expenses to be borne by SC
pursuant to Section 8.03 of the Management Agreement or for expenses
contemplated by Section 8.02 of the Management Agreement for which funds are not
available in the Capital Expenditure and FF&E Reserve Account.
(r) take any action in furtherance of, or stating its consent to,
approval of, or acquiescence in, any of the acts set forth above.
Section 5.3A. So long as any portion of the MHP Debt and SC Debt shall
remain outstanding, the General Partner shall not (a) incur any Indebtedness
except in its capacity as the general partner of MHP and SC or withdraw as a
general partner of MHP or SC unless the remaining or substitute general partner
satisfies the single purpose entity criteria of the Rating Agencies and the
Rating Agencies have delivered a Rating Comfort Letter.
Section 5.4 Further Assurances. SC shall execute and deliver or cause
------------------
to be executed and delivered, all such additional instruments, and do, or cause
to be done, all such additional acts as (i) may be necessary or proper, to carry
out the purposes of this Agreement and to make subject to the Lien of the
Security Documents any property intended so to be subject, including, without
limitation, the delivery of such instruments and documents, including
confirmatory and corrective mortgages, financing statements and continuation
statements under the Uniform Commercial Code of each applicable jurisdiction,
and the delivery of such updated mortgagee's title insurance policies or
endorsements (or commitments therefor) in favor of the Lender as may be
reasonably required to confirm and/or secure continued coverage under the title
policies issued to the Lender in respect of the SC Property or the SC Mortgage,
including payment of all fees and title insurance premiums required to maintain
such continuity of title insurance coverage, (ii) may be necessary or proper to
transfer, in whole or in part, to any assignee of the Lender the estate, powers,
instruments and funds held in trust hereunder and to confirm the Security
Documents, or (iii) the Lender may reasonably request in connection with the SC
Loan; provided, however, that such instruments shall contain express
unconditional exculpations of the Partners and SC's officers, employees or
agents and any of their successors or assigns exculpating such Persons from any
liability arising under or by reason of their obligations, covenants,
representations, warranties and agreements contained in such instruments,
subject to the exceptions set forth in the definition
48
<PAGE>
of Non-Recourse. If, in connection with the Securitization, SC is required to
furnish newly issued title policies with respect to the SC Property, the Lender
shall bear the cost thereof.
Section 5.5 Representations, Warranties and Covenants of NACC. NACC
-------------------------------------------------
represents and warrants to, and agrees with SC, that, as of the Closing Date:
(i) it has the power and authority to perform its obligations under this
Agreement and the other Transaction Documents, (ii) this Agreement and the other
Transaction Documents have been duly authorized, executed and delivered by NACC,
and constitute valid and legally binding instruments enforceable against NACC in
accordance with their respective terms, subject to the effects of bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally and general equitable principles (whether
considered in a proceeding in equity or at law), and (iii) it has such
knowledge, sophistication and experience in financial and business matters as to
be capable of evaluating the merits and risks of an investment in the SC Note,
is able to bear the economic risk of an investment in the SC Note and is an
"accredited investor" within the meaning of Section 2(15) of the Securities Act
and (iv) no part of the SC Loan shall be deemed "plan assets" within the meaning
of ERISA.
Section 5.6 Other.
-----
(a) Neither SC nor any Person acting on behalf of SC has dealt with any
broker or any other Person entitled to a fee or commission in connection with
the SC Loan and SC shall indemnify and hold NACC and its Affiliates harmless
from and against any claims or commissions, finder's fee and other payments, no
matter how described, and against any and all costs and expenses including,
without limitation, reasonable attorneys' fees relating to any such claim.
(b) Notwithstanding anything in the Management Agreement, SC, the
Lender, the Servicer and the Trustee may disclose information regarding such
agreements and the operation of the Hotels, and provide copies of such
agreements and any financial statements or reports delivered by the Manager
pursuant to such agreements or the requirements of Section 5.2(d) to holders of
the SC Loan or the Securities, and any counsel to or agents, officers,
employees, and representatives of any such holder, and may disclose and describe
the terms hereof and thereof in any offering memorandum, prospectus, or
registration statement or other filing required under applicable law, provided,
--------
however, that the Servicer, the Lender, and the Trustee shall implement
- -------
procedures that comply with the agreements contained in Section 14 of the SNDA.
(c) SC has informed the Lender of its desire to consider the
49
<PAGE>
expansion of the Hotel ("Hotel Expansion"). SC may undertake the Hotel Expansion
upon delivery to the Lender of:
(i) an Officer's Certificate stating that the Hotel Expansion is
not likely to have a material adverse effect on (x) SC's ability to
enter into or fulfill its material obligations under the Transaction
Documents or to effect the transactions contemplated thereby or (y) the
condition (financial or otherwise), business, prospects, assets,
liabilities, management, financial position or results of operations of
the Hotel;
(ii) documentation reasonably satisfactory to the Lender that the
Hotel Expansion is not being financed by SC with secured or unsecured
indebtedness except to the extent permitted by the Transaction Documents
or specifically permitted in the Rating Comfort Letter delivered to the
Lender pursuant to clause (vi) below;
(iii) updated surveys and endorsements to the applicable title
policies indicating that the Hotel Expansion will be constructed
entirely within the boundaries of the SC Property, and will become part
of the SC Property encumbered by the lien of the applicable SC Mortgage
and the other Security Documents;
(iv) an Officer's Certificate stating that there will be no Change
in Control due to the Hotel Expansion or an updated Substantive
Consolidation Opinion if a Change in Control may occur from an issuance
or transfer of equity interests in SC related thereto;
(v) such insurance, construction bonds, completion guaranties and
other documentation and assurances that the Lender the may reasonably
require to protect the collateral and security interests granted therein
to the Lender under the Transaction Documents during the construction of
the Hotel Expansion; and
(vi) a Rating Comfort Letter with respect to the Hotel Expansion.
It is understood that the Hotel Expansion may include the elimination
of a portion of the existing guest rooms and the placing of a portion of the
guest rooms out of service during construction. While the Lender does not and
cannot commit at this time to provide any such financing, the Lender agrees to
use good faith efforts to assist SC in structuring the financing required for
the Hotel Expansion and in obtaining the Rating Comfort Letter required for the
Hotel Expansion. SC shall pay all costs and expenses incurred by the Lender in
connection with the Hotel Expansion.
50
<PAGE>
ARTICLE
SECURITIZATION
Section 6.1 Securitization. SC and the General Partner shall use
--------------
commercially reasonable best efforts to cooperate with NACC in its activities in
connection with the sale of the SC Loan as a whole loan or any securitization of
the SC Loan (the "Securitization"), including obtaining ratings by the Rating
--------------
Agencies. The Securitization will involve the issuance of rated single- or
multi-class securities secured by or evidencing ownership interests in the
Transaction Documents (the "Securities"). Such cooperation shall include,
----------
without limitation, the obligation to:
(a) maintain the ownership of the SC Property in an entity that permits
it to comply with its obligations under clauses (x) and (z) of Section 5.2;
(b) to the extent permitted under SC's Amended and Restated Agreement
of Limited Partnership without the consent of its limited partners, structure
and maintain its organizational, operational and financial affairs and the
affairs of the General Partner (collectively, the "Entities") to enable its
--------
counsel to render a reasoned opinion if requested by the Rating Agencies in form
and substance customary or required for rating the Securities (the "Substantive
-----------
Consolidation Opinion") that upon a petition for bankruptcy under the United
- ---------------------
States Bankruptcy Code, neither Host Marriott as a debtor in possession nor its
bankruptcy trustees nor creditors should cause a court to order the substantive
consolidation of SC's assets and liabilities or those of the General Partner
with those of Host Marriott, which counsel and which opinion shall be
satisfactory to NACC and the Rating Agencies;
(c) provide such financial and other information with respect to it and
the SC Property as may be requested by the Rating Agencies or as may be
reasonably requested by NACC, including, without limitation, audits or
agreed-upon procedures of operating cash flow and Net Operating Income,
occupancy statistics, and average rents and quarterly and annual financial
statements for the SC Property (reviewed and in the case of annual financial
statements audited) by a firm of certified public accountants acceptable to NACC
and the Rating Agencies to the extent customarily given in similar transactions;
(d) prepare and deliver such agreements and instruments relating to the
SC Note, the Securities, the SC Property and the Entities, including (A)
agreements to indemnify the Rating Agencies, NACC and any servicer or trustee,
to the extent customarily given in commercial mortgage-backed securities
transactions, and (B) amendments of any of the Transaction Documents that are
necessary to effect the Securitization, in form
51
<PAGE>
and scope satisfactory to the Rating Agencies and reasonably satisfactory to
NACC;
(e) perform or permit to be performed such appraisals, surveys, site
inspections, market studies, current environmental reviews and reports (Phase
I's, including, without limitation, testing for asbestos, lead paint or radon
gas and Phase II's and other environmental investigations recommended by
environmental consultants), structural engineering reports (which shall include
an analysis of requirements for deferred maintenance and ongoing capital
expenditure and furniture, fixtures and equipment reserve requirements), reviews
of property, casualty, business interruption, earthquake, flood, liability and
title insurance and other due diligence items customarily requested by
nationally recognized underwriters in connection with the origination and
securitization of comparably sized commercial real estate loans or by the Rating
Agencies in connection with rating the SC Loan or the Securities; provided,
--------
however, NACC shall use its best efforts to limit the circumstances under which
- -------
SC or the General Partner will be required to duplicate its efforts or third
party costs in complying with its obligations under this clause (e);
(f) provide business plans and budgets relating to the SC Property as
may be requested by the Rating Agencies;
(g) cause its counsel to render opinions (which may be reasoned
opinions) with respect to the SC Property, the Entities, and the Transaction
Documents as to bankruptcy remoteness and other matters customary in
securitization transactions, which may be requested by the Rating Agencies in
form and substance customary or required for rating the Securities which counsel
and which opinion shall be satisfactory to the Rating Agencies and reasonably
satisfactory to NACC; provided, however, that if the Rating Agencies request
-------- -------
opinions subsequent to the Closing Date in connection with the Securitization
that are materially different from the opinions delivered on the Closing Date,
the Lender shall bear the fees and expenses incurred by counsel in rendering
such opinions;
(h) make such representations and warranties with respect to the SC
Property, the Entities, and the Transaction Documents as are customary in
securitization transactions and as may be requested by the Rating Agencies and
reasonably requested by NACC and consistent with the facts covered by such
representations and warranties as they exist on the date thereof, including the
representations and warranties made in the Transaction Documents;
(i) cooperate with the Lender in providing to the Rating Agencies such
information as is customarily provided in connection with annual reviews
conducted in commercial mortgage backed securities transactions similar to the
Securitization;
52
<PAGE>
(j) cooperate with NACC in the preparation, at NACC's cost, of a
private placement memorandum, prospectus, prospectus supplement or other
disclosure document to be used by NSI or any of its Affiliates to privately
place or publicly distribute the SC Loan as a whole loan or the Securities in a
manner and to the extent that the same satisfy the requirements of the
Securities Act and applicable state securities laws; and
(k) subject to the provisions of Section 5.6(b), permit NACC to provide
to the Rating Agencies, potential investors in the Securities and others as may
be required to effect the Securitization or the sale of the SC Loan as a whole
loan, the information provided to NACC by SC and the Manager and their
respective Affiliates in connection with the transactions contemplated by this
Agreement.
Any and all due diligence materials (including without limitation
appraisals, engineering reports and environmental reports) shall be addressed to
and shall run to the benefit of NACC and its successors and assigns, the Rating
Agencies and SC, and shall, upon delivery, become the property of NACC, its
successors and assigns and SC.
ARTICLE VII
PAYMENT OF FEES AND EXPENSES; INDEMNIFICATION
Section 7.1 Fees and Expenses.
-----------------
(a) SC shall pay or reimburse NACC and after the Securitization, NACC
and the Lender (in each case, without duplication) , on demand, without set-off,
withholding or deduction, for the payment of all of the reasonable fees, costs
and expenses incurred by NACC in connection with the underwriting, negotiation,
documentation and closing of the SC Loan, including, without limitation, the
finder's fee due to Nomura Securities International, Inc. ("NSI") as provided
---
for in that certain Finder's Fee Agreement, dated July 10, 1996, between MHP, SC
and NSI, and the fees, costs and expenses of the following:
(i) title insurance, transfer taxes (if any), mortgage taxes and
recording fees;
(ii) counsel and local counsel to SC;
(iii) counsel and local counsel to NACC, which shall be reasonable;
(iv) due diligence activities of NACC including, without
limitation, auditors, lien searches, surveys, appraisals,
environmental reports, engineering
53
<PAGE>
reports, insurance reviews and site inspections;
(v) bank charges relating to the operation of the Lockbox Account,
the Capital Expenditure and FF&E Reserve Account, the Tax and
Insurance Account, the Cash Collateral Account, the Debt
Service Reserve Account, the Ground Rent Reserve Account and
the Operating Account; and
(vi) initial and ongoing activity of any special servicer incurred
as a result of an Event of Default; and
(vii) the Rating Agencies (for the annual ratings reviews).
(b) The Lender shall pay the initial and regular ongoing fees of the
Servicer and the Trustee and, except as set forth in Section 7.1(a), the costs
of any Securitization.
(c) SC has provided $500,000 to NACC for deposit in an interest bearing
account(the "Expense Deposit") for the payment of the fees, costs and expenses
---------------
payable pursuant to (i) Section 7.1(a) of this Agreement and (ii) Section 7.1(a)
of the SC Loan Agreement. If any portion of the Expense Deposit remains after
payment of such fees, costs and expenses, NACC shall pay such portion to SC
within 30 days after the closing of the SC Loan. The establishment of the
Expense Deposit shall not limit SC's obligations to pay the fees, costs and
expenses described in Section 7.1(a).
Section 7.2 Indemnification.
---------------
(a) SC, for itself and all those claiming under or through SC, to the
fullest extent permitted by law, hereby releases and shall defend, hold harmless
and indemnify NACC and after the Securitization, NACC and the Lender, and its
respective directors, officers, agents and employees, (together, the
"Indemnified Parties") from and against any and all liabilities, claims, costs,
-------------------
charges, losses, expenses or damages of any kind or nature, including reasonable
attorneys' fees and disbursements, which may arise in connection with (i) the
performance or non-performance by SC of any of the Transaction Documents, or
SC's operation of the SC Property and (ii) any breach or failure by SC to comply
with any representation, warranty or covenant it makes in any document it
furnished in connection with the transactions contemplated by the Transaction
Documents, in each case, except to the extent caused by the willful acts or
omissions, the gross negligence or bad faith of any Indemnified Party. It is
understood that if SC performs its obligations set forth in the Transaction
Documents strictly in accordance with the terms and provisions thereof, the
provisions
54
<PAGE>
of clause (i) of the foregoing sentence in so far as they relate to the
performance by SC of any of the Transaction Documents shall not be applicable.
SC shall appear in and defend any Action that might in any way in the good faith
judgment of the Lender affect the value of the SC Property, the priority of the
SC Mortgage or the rights and powers of the Lender. Any sums due under this
Section 7.2 shall be payable by SC within 10 days of demand therefor with
evidence of the amount due and, if not paid within such 10-day period, shall
bear interest from the date of demand to the date of payment at the Default
Rate. SC shall pay the cost of suit, cost of evidence of title and reasonable
attorneys' fees and disbursements in any Action brought by the Lender to
foreclose the SC Mortgage including trial and any appeal with respect to any
such Action.
(b) SC hereby indemnifies and holds NACC and its controlling persons
and Affiliates, including, without limitation, NSI, harmless against all costs,
expenses and damages incurred by NACC and its controlling persons and affiliates
(including, without limitation, all liabilities under all applicable federal and
state securities laws) as a direct result of any untrue statement of a material
fact contained in the offering documents used in connection with the
securitization based on information provided by SC or the Manager, which
describes SC, the Manager and the SC Property (and the management thereof) or
any aspect of the SC Loan or the parties directly involved therein, or as a
result of any untrue statement of a material fact in any of the financial
statements of SC or those of the Manager incorporated into such offering
documents or the failure to include in such financial statements or in such
offering documents any material fact relating to SC, the Manager or the SC
Property (and the management thereof) and any aspect of the SC Loan necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading; provided that SC shall have had an opportunity
to review, comment on and approve the relevant portions of such offering
documents. SC shall act reasonably and promptly in connection with its approval
of the relevant portions of the offering documents. SC shall not indemnify NACC
for any cost, expense or damage incurred as a result of the inclusion of any
erroneous or misleading information in such offering documents, or the omission
of material information from the offering documents, provided that SC or its
counsel shall have previously indicated to NACC or its counsel the erroneous or
misleading nature of such information or the omission of material information,
as the case may be. At the time of the use of such offering documents, NACC
shall execute and deliver to SC an instrument (in form and substance reasonably
satisfactory to SC) indemnifying and holding SC, the General Partner (and the
officers and directors thereof), and its agents and employees harmless against
all costs, expenses and damages (other than costs and expenses specifically
agreed by SC to be borne by it)
55
<PAGE>
incurred by them (including, without limitation, all liabilities under all
applicable federal and state securities laws) caused by and directly relating to
the offering described in such Offering Documents; provided, however, that such
indemnification shall not apply if any such costs, expenses or damages arise out
of or are based upon an untrue statement of a material fact or an omission to
state a material fact in such offering documents or in the financial statements
for which SC is providing indemnification as provided above.
(c) The obligations of SC under this Section 7.2 shall survive
termination of this Agreement.
(d) The provisions of the sixth and seventh paragraphs of that certain
Commitment Letter, dated July 10, 1996 are incorporated herein by reference to
the extent such provisions impose indemnification obligations on SC and NACC
that are more burdensome than those contained in this Section 7.2.
ARTICLE VIII
IMMUNITY
Section 8.1 Partners, Employees and Agents of SC Immune from Liability.
----------------------------------------------------------
Notwithstanding anything to the contrary herein, including, without limitation,
Article Seven, the obligations under each Transaction Document shall be
Non-Recourse.
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 9.1 Notices. All notices, requests, demands, consents, reports
-------
or other communications, including, without limitation, a tender of a cure
pursuant to Section 4.1B, to or upon the respective parties hereto shall be in
writing and be deemed to have been duly given or made when received, addressed
to the party to which such notice, request, demand, consent, report or other
communication is being given at its address set forth below, or at such other
address as any of the parties hereto may hereafter notify the others by notice
given hereunder:
If to NACC:
Nomura Asset Capital Corporation
2 World Financial Center, Building B
New York, New York 10281
Attention: Daniel S. Abrams, Director
Telecopier: (212) 667-1022
56
<PAGE>
With a copy to:
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
Attention: Robert I. Fisher, Esq.
Telecopier: (212) 940-8776
and:
Nomura Asset Capital Corporation
2 World Financial Center, Building B
New York, New York 10281
Attention: Sheryl McAfee
Telecopier: (212) 667-1206
If to SC:
Santa Clara Marriott Hotel Limited Partnership
c/o Host Marriott Corporation
10400 Fernwood Road
Bethesda, Maryland 20817
Attention: Law Department 923
Deputy General Counsel
Telecopier: (301) 380-6332
With a copy to:
Santa Clara Marriott Hotel Limited Partnership
c/o Host Marriott Corporation
10400 Fernwood Road
Bethesda, Maryland 20817
Attention: Asset Management Department 908
Telecopier: (301) 380-8260
Evidence of such receipt shall include personal delivery, electronic
confirmation (hard copy to be sent by regular mail) and the failure to accept a
communication sent by registered or certified U.S. mail, postage prepaid.
Section 9.2 Benefit of Agreement. This Agreement shall be binding upon,
--------------------
inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto; provided, however, that SC may assign or transfer
any of its rights or obligations hereunder without the consent of the Lender
which may be withheld in the sole discretion of the Lender. Except as expressly
provided otherwise in this Agreement, any such assignment or transfer shall not
release SC from any obligations or liabilities hereunder. The Lender's interests
under the Transaction Documents shall be freely assignable and transferrable in
whole or in part. No party other than the parties hereto and
57
<PAGE>
their permitted assigns shall be deemed to have any benefits or obligations
under this Agreement.
Section 9.3 Governing Law. This Agreement and the rights and
-------------
obligations of the parties under the Transaction Documents (except for the SC
Mortgage and the assignment of leases, rents and profits, dated the Closing
Date, from SC to the Lender which shall be governed by the law of the
jurisdiction in which the SC Property is located) shall be governed by the
internal laws of the State of New York.
Section 9.4 Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which when so executed and delivered shall be an
original, but all of which shall together constitute one and the same
instrument.
Section 9.5 Table of Contents, Descriptive Headings. The Table of
---------------------------------------
Contents to this Agreement and the descriptive headings of the several Sections
and Articles of this Agreement are inserted for convenience only and shall not
in any way affect the meaning or construction of any provision of this
Agreement. In the preparation of the Transaction Documents indistinguishable
contributions were made by representatives of NACC and SC, and each of the
Lender and SC waives any and all rights, either at law or in equity, to have the
provisions of any Transaction Document interpreted in favor of one over the
other based on a claim that representatives of one or the other were the
principal draftsmen thereof.
Section 9.6 Amendment or Waiver; Integration. No provision of this
--------------------------------
Agreement may be amended, changed, waived, discharged or terminated orally, but
only by an instrument in writing signed by the party against whom enforcement of
the amendment, change, waiver, discharge or termination is sought. This
Agreement and the other Transaction Documents set forth the entire agreement and
understanding of the parties with respect to the subject matter hereof and
thereof, and supersede any and all prior agreements and understandings of the
parties hereto with respect to the subject matter hereof and thereof including,
without limitation, that certain Finder's Fee Agreement and Commitment Letter,
each of which is dated July 10, 1996 and is between SC, MHP and NACC or NSI,
which prior agreements and understandings are terminated in all respects.
Section 9.7 Survival of Representations and Warranties; Reliance. All
----------------------------------------------------
representations and warranties contained in this Agreement and the
indemnification provisions hereof shall survive
58
<PAGE>
the execution and delivery of this Agreement and the making of the SC Loan and
shall be considered to have been relied upon by the Lender regardless of any
investigation made by or on behalf of it.
Section 9.8 Returned Payments. If after receipt of any payment of all
-----------------
or any part of the SC Debt, the Lender is for any reason compelled to surrender
such payment to any Person because such payment is determined to be void or
voidable as a preference, an impermissible set-off, a diversion of trust funds
or for any other reason, this Agreement shall continue in full force, and SC
shall be liable to, and shall indemnify and hold the Lender harmless for, the
amount of such payment surrendered until the Lender shall have been finally and
irrevocably paid in full. The provisions of the foregoing sentence shall be and
remain effective notwithstanding any contrary action which may have been taken
by the Lender in reliance upon such payment, and any such contrary action so
taken shall be without prejudice to the Lender's rights under this Agreement and
shall be deemed to have been conditioned upon such payment having become final
and irrevocable.
SECTION 9.9 JURISDICTION AND SERVICE; WAIVER OF JURY TRIAL. EACH OF THE
----------------------------------------------
GENERAL PARTNER AND SC HEREBY (I) IRREVOCABLY CONSENTS AND SUBMITS ITSELF AND
ACKNOWLEDGES AND RECOGNIZES THE JURISDICTION OF THE COURTS OF THE STATE OF NEW
YORK LOCATED IN NEW YORK COUNTY AND THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK FOR PURPOSES OF ANY ACTION ARISING OUT OF, UNDER,
OR IN CONNECTION WITH, RELATING TO, OR BASED UPON ANY TRANSACTION DOCUMENT OR
THE SUBJECT MATTER THEREOF, (II) AGREES THAT SUCH COURTS SHALL BE THE SOLE AND
EXCLUSIVE COURTS AND FORUMS FOR THE PURPOSE OF ANY SUCH ACTION AND (III) WAIVES
AND AGREES NOT TO ASSERT, AS A DEFENSE OR OTHERWISE, IN ANY SUCH ACTION, ANY
CLAIM THAT SUCH COURTS DO NOT HAVE JURISDICTION OVER IT OR THAT SUCH ACTION IS
BROUGHT IN AN INCONVENIENT FORUM; PROVIDED, HOWEVER, THAT NOTHING CONTAINED
HEREIN SHALL LIMIT, IN ANY MANNER, THE RIGHT OF NACC TO INSTITUTE OR TAKE ANY
ACTION IN ANY COURT IN ANY JURISDICTION FOR THE PURPOSE OF PROTECTING,
PRESERVING OR REALIZING UPON ANY COLLATERAL, IF ANY, SECURING THE SC DEBT OR
ENFORCING ANY JUDGMENT OBTAINED BY IT IN CONNECTION WITH ANY TRANSACTION
DOCUMENT OR THE SUBJECT MATTER THEREOF. EACH OF THE GENERAL PARTNER, SC AND NACC
HEREBY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION ARISING OUT OF, UNDER,
OR IN CONNECTION WITH, RELATING TO, OR BASED UPON ANY TRANSACTION DOCUMENT OR
THE SUBJECT MATTER THEREOF, AND AGREES THAT PROCESS IN ANY SUCH ACTION, IN
ADDITION TO ANY OTHER METHOD PERMITTED BY LAW, MAY BE SERVED UPON IT BY
REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO THE GENERAL
PARTNER OR SC OR NACC AT THE ADDRESS SET FORTH IN SECTION 9.1 OR AT SUCH OTHER
ADDRESS AS THE GENERAL PARTNER OR SC OR NACC MAY DESIGNATE BY NOTICE, AND SUCH
SERVICE SHALL BE DEEMED EFFECTIVE AS IF PERSONAL SERVICE HAD BEEN MADE UPON IT
WITHIN NEW YORK COUNTY.
59
<PAGE>
Section 9.10 Enforceability. Any provision of this Agreement which is
--------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, SC hereby waives any provision of law which renders any
provision hereof prohibited or unenforceable in any respect.
Section 9.11 Conflicting Terms. In the event of any direct conflict
-----------------
between any provision of this Agreement and any provision of any other
Transaction Document, this Agreement shall govern; provided, however, that (a)
notwithstanding the foregoing, the remedies contained in the SC Mortgage and any
other Transaction Document shall govern in the event of any direct conflict with
any remedy contained in this Agreement, and (b) the parties intend that the
terms and provisions of each of the Transaction Documents be given full effect,
and, accordingly, the provisions of the other Transaction Documents, to the
fullest extent possible, shall be construed to be additional and supplementary
to, and not in conflict with or in derogation of, the provisions of this
Agreement.
Section 9.12 Relationship of Parties. The relationship of SC to the
-----------------------
Lender is strictly and solely that of borrower and lender and mortgagor and
mortgagee and nothing contained in any Transaction Document is intended to
create, or shall in any event or under any circumstance be construed as
creating, a partnership, joint venture, tenancy-in-common, joint tenancy or
other relationship of any nature whatsoever between SC and the Lender other than
as borrower and lender and mortgagor and mortgagee. SC acknowledges that (a)
NACC engages in the business of real estate financings and other real estate
transactions and investments which may be viewed as adverse to or competitive
with the business of SC or its Affiliates, (b) it is represented by competent
counsel and has consulted counsel before executing this Agreement and (c) it
shall rely solely on its own judgement and advisors in entering into the
transactions contemplated hereby without relying in any manner on any
statements, representations or recommendations of NACC or any Affiliate of NACC
except as set forth in Section 5.5.
(Signature page follows)
60
<PAGE>
IN WITNESS WHEREOF, SC and NACC have caused this Agreement to be signed
and delivered, all as of the day and year first above written.
NOMURA ASSET CAPITAL CORPORATION
By: /s/ Daniel S. Abrams
----------------------------------
Name: Daniel S. Abrams
Title: Director
SANTA CLARA MARRIOTT HOTEL LIMITED
PARTNERSHIP
By: Marriott MHP Two Corporation,
General Partner
By: /s/ Douglas W. Henry
-----------------------------
Name: Douglas W. Henry
Title: Vice President
61
<PAGE>
EXHIBIT 10.3
================================================================================
================================================================================
SECURED PROMISSORY NOTE
made by
MARRIOTT HOTEL PROPERTIES II LIMITED PARTNERSHIP
(the "Maker")
-----
- to -
NOMURA ASSET CAPITAL CORPORATION
(the "Payee")
-----
Dated: September 23, 1996
================================================================================
<PAGE>
SECURED PROMISSORY NOTE
$195,405,904 New York, New York
September 23, 1996
FOR VALUE RECEIVED, MARRIOTT HOTEL PROPERTIES II LIMITED PARTNERSHIP, a
Delaware limited partnership (the "Maker"), promises to pay to NOMURA ASSET
-----
CAPITAL CORPORATION, a Delaware corporation (together with its successors and
assigns, the "Payee"), or order, the principal amount of ONE HUNDRED NINETY FIVE
-----
MILLION FOUR HUNDRED FIVE THOUSAND NINE HUNDRED FOUR DOLLARS ($195,405,904) (the
"Loan"), in the manner set forth herein; together with interest on the un paid
----
principal amount of this Note at the Base Rate (as adjusted pursuant to
Paragraph 4(e) hereof) or Default Rate, as applicable; together with payments
with respect to amortization of principal as described in Paragraph 4 hereof;
together with the Yield Maintenance Premium, if any, due and payable under the
Loan Agreement; and together with all other amounts due (including, without
limitation, all items of Debt) hereunder or under any of the other Transaction
Documents.
1. Definitions. For the purposes of this Note, each of the following
-----------
terms shall have the meaning specified with respect thereto:
(a) "Accounting Period" has the meaning set forth in the Loan
-----------------
Agreement.
(b) "Adjusted Rate" means the Base Rate adjusted in accordance with
-------------
paragraph 4(e) of this Note.
(c) "Base Rate" means 8.22% per annum.
---------
(d) "Business Day" means a day on which banks and foreign exchange
------------
markets are open for business in New York, New York.
(e) "Debt" has the meaning ascribed to the term "MHP Debt" in the
----
Loan Agreement. It is the intention of the parties hereto that the Debt is
evidenced by this Note and the Other MHP Note on a pro rata basis. All
--- ----
references to Debt in this Note shall be deemed to mean the proportionate amount
of Debt evidenced by this Note.
(f) "Debt Service Payment Date" means the 11th day of each month.
-------------------------
(g) "Debt Service Period" means the period from and including the
-------------------
eleventh (11th) day of the calendar month immediately
<PAGE>
preceding each Debt Service Payment Date to and including the tenth (10th) day
of the calendar month in which such Debt Service Payment Date occurs.
(h) "Default Rate" means a rate per annum equal to the lesser of
------------
(aa) two percent (2%) above the Base Rate or Adjusted Rate, as applicable, and
(bb) the maximum rate allowed by law.
(i) "Event of Default" has the meaning set forth in the Loan
---------------
Agreement.
(j) "Excess Cash Flow" has the meaning set forth in the Loan
----------------
Agreement.
(k) "Loan Agreement" means that certain Loan Agreement, dated as of
--------------
the date hereof, between the Maker and the Payee.
(l) "Maturity Date" shall mean the earliest to occur of:
-------------
(1) October 11, 2017; or
(2) such date to which the maturity of the Debt may be
accelerated upon an Event of Default or as otherwise provided in any
Transaction Document.
(m) "Monthly Debt Service Payment" means the constant monthly
----------------------------
payment set forth in Paragraph 4(b) hereof, as such payment may be adjusted as
set forth in Paragraph 4(c) hereof.
(n) "Non-Recourse" has the meaning set forth in the Loan Agreement.
------------
(o) "Optional Prepayment Date" means October 11, 2007.
------------------------
(p) "Other MHP Note" means that certain Secured Promissory Note
--------------
dated as of the date hereof from Maker to Payee in the principal amount of
$27,094,096.
(q) "Transaction Documents" has the meaning set forth in the Loan
---------------------
Agreement.
(r) "Yield Maintenance Premium" has the meaning set forth in the
-------------------------
Loan Agreement.
Certain additional terms are defined in the particular provisions of
this Note to which they pertain or in which they are initially used.
2. Payment of Debt.
---------------
The Maker shall punctually pay the Debt at the time and in the
manner pro vided for its payment in this Note and the other
2
<PAGE>
Transaction Documents. It is expressly agreed that the entire Debt may, at the
Payee's election (or automatically upon the occurrence of the events described
in clauses (f) and (g) of Section 4.1A of the Loan Agreement) become immediately
due and payable upon the occurrence of an Event of Default, as set forth in the
Loan Agreement.
3. Interest Rate.
-------------
(a) Except as set forth below, including Paragraph 4(b) hereof,
the Debt shall bear interest for each Debt Service Period at the Base Rate.
(b) Following the Maturity Date and for each Debt Service Period
or portion thereof occurring from the date of the occurrence of an Event of
Default and while it is continuing, or, if later, the date the Payee has given
notice to the Maker pursuant to Section 4.2 of the Loan Agreement, if such
notice is required, the Debt shall bear interest at the Default Rate.
(c) Calculations of interest shall be made on the basis of a
360-day year and actual days elapsed during each Debt Service Period.
4. Periodic Payments.
-----------------
(a) On October 11, 1996, the Maker shall pay to the Payee interest
on the Note at the Base Rate for the period beginning on the date hereof and
ending on October 10, 1996. On each Debt Service Payment Date thereafter through
and including October 11, 1997, the Maker shall pay to the Payee interest on
this Note at the Base Rate then due and payable for each Debt Service Period.
(b) On each Debt Service Payment Date occurring after October 11,
1997, the Maker shall pay to the Payee an amount equal to $1,661,308.90, being
the constant monthly payment applicable to this Note up to the Maturity Date.
Such amount shall be applied (i) first, to the payment of interest (the "Base
----
Rate Interest") on this Note at the Base Rate or the Default Rate, as
- -------------
applicable, then due and payable for the applicable Debt Service Period, and
(ii) next, to the payment of principal on this Note in reduction of such
principal in the amount of the difference between the Monthly Debt Service
Payment and the Base Rate Interest paid pursuant to sub-clause (i) above (each,
a "Principal Payment"). Following the Maturity Date and while an Event of
-----------------
Default has occurred and is continuing, the constant monthly payment set forth
in the first sentence of this Paragraph 4(b) shall be increased to reflect
payment of interest at the Default Rate.
3
<PAGE>
(c) If any Principal Payment or a portion thereof is prepaid on
any Debt Service Payment Date by the application by the Payee of payments
received (i) from or with respect to U.S. Obligations held by the Payee on the
Optional Prepayment Date as a result of a release of any MHP Property by the
Maker pursuant to Section 2.3 of the Loan Agreement, (ii) from the release of an
MHP Property by the Maker from the Lien of the Security Documents (as such terms
are defined in the Loan Agreement) pursuant to Section 2.6 of the Loan
Agreement, or (iii) on and after the Optional Prepayment Date, pursuant to the
last sentence of Section 3.1 of the Loan Agreement, the Monthly Debt Service
Payment payable on each Debt Service Payment Date thereafter shall be reduced in
an amount equal to the percentage reduction in the principal amount payable
under this Note effected by such prepayment.
(d) On the Maturity Date, the Maker shall pay to the Payee an
amount equal to the then outstanding principal balance of the Loan, plus
interest accrued and unpaid thereon and any other Debt then due and payable.
(e) (i) On the Optional Prepayment Date and on each anniversary
thereof, the interest rate applicable to the Debt shall be set at the greater of
(xx) 10.22% and (yy) the yield, calculated by linear interpolation (rounded to
three decimal places), of the yields of United States Treasury Constant
Maturities with the terms (one longer and one shorter) most nearly approximating
those of noncallable United States Treasury obligations having maturities as
close as possible to the tenth anniversary of the Optional Prepayment Date, as
determined by the Payee on the basis of Federal Reserve Statistical Release
H.15-Selected Interest Rates under the heading U.S. Governmental
Security/Treasury Constant Maturities, or other recognized source of financial
market information selected by the Payee on the last Business Day of the week
immediately prior to the Optional Prepayment Date, and each anniversary thereof,
as the case may be, plus 3.52% per annum (any such increased rate being
hereinafter referred to as the "Adjusted Rate"). The Maker shall thereafter pay
-------------
to the Payee the Monthly Debt Service Payment on each Debt Service Payment Date
in the manner and at the place established pursuant to this Note. Such Monthly
Debt Service Payment shall be applied (i) first, to the payment of interest on
this Note at the Base Rate then due and payable for the applicable Debt Service
Period and (ii) next, to the payment of the Principal Payment then due and
payable.
(ii) Additionally, subsequent to the Optional Prepayment Date,
the Maker shall pay to the Payee on each Debt Service Payment Date any Excess
Cash Flow (determined in accordance with the provisions of the Cash Management
Procedures) for all Accounting Periods ending during the Debt Service Period
immediately preceding such Debt Service Payment Date, which Excess Cash Flow
payments shall be applied (A) first, to prepayment of each Principal Payment
required to be made on each Debt Service
4
<PAGE>
Payment Date in inverse order of maturity until the principal of this Note has
been paid in full, and (B) next, to payment of the difference, if any, between
(y) the sum of (i) interest accrued and unpaid on this Note calculated at the
Adjusted Rate and (ii) interest on such accrued and unpaid amount at the
Adjusted Rate and (z) the Base Rate Interest paid on each Debt Service Payment
Date.
(f) All payments (including prepayments) to be made by the Maker
or the Servicer (as such term is defined in the Loan Agreement) on account of
principal, interest and all other amounts pay able with respect to the Debt,
shall be made by wire transfer to the Payee without set-off or counterclaim, in
lawful money of the United States of America and in immediately avail able
funds, not later than 2 p.m. (New York time) on the dates such payments are due,
by payment to:
Mellon Bank, Pittsburgh, PA
ABA # 043000261
NACC (Clearance Account)
Account #109-2525
Reference: Lance Haberin
(Clearance Account)
or at such other place as the Payee may, from time to time, designate in
writing.
(g) If any payment hereunder becomes due and pay able on a day
other than a Business Day, the due date thereof shall be ex tended to the next
succeeding Business Day and, with respect to payments of princi pal, interest
(at the applicable rate hereunder) thereon shall be pay able during such exten
sion. Any pay ments received after 2 p.m. (New York time) shall be deemed re
ceived on the following Busi ness Day.
5. Prepayments.
-----------
(a) The Maker shall have the right to prepay the unpaid principal
amount of this Note on a Debt Service Payment Date to the extent set forth in
the last sentence of Section 3.1 of the Loan Agreement.
(b) If the Maturity Date occurs as a result of an Event of Default
and the Maker tenders payment of the Debt or any part thereof to the Payee, such
tender shall require the payment by the Maker of all sums required pursuant to
Section 4.2 of the Loan Agreement, including, without limitation, the Yield
Maintenance Premium.
6. Cost of Collection. The Maker shall pay all costs of collection
------------------
when incurred, including, without limitation, the
5
<PAGE>
reasonable attorneys' fees and disbursements of the Payee's counsel and court
costs, which costs may be added to the indebtedness evidenced hereby and must be
paid within fifteen (15) days after written demand. Such costs shall bear
interest at the Base Rate from the date of incurrence and interest at the
Default Rate from and after delivery of written demand.
7. Usury. It is the intent of the Payee and the Maker to comply at
-----
all times with applicable usury laws. If at any time such laws would render
usurious any amounts called for under this Note, then it is the Maker's and the
Payee's express intention that such excess amount be immediately credited on the
principal balance of this Note (or, if this Note has been fully paid, promptly
refunded by the Payee to the Maker, and the Maker shall accept such refund), and
the provisions hereof be immedi ate ly deemed to be reformed and the amounts
thereafter collectible hereunder reduced to comply with the then applicable
laws, with out the necessity of the execution of any further documents, but so
as to permit the recovery of the fullest amount otherwise called for hereunder.
To the extent permitted by law, any such crediting or refund shall not cure or
waive any default by the Maker under this Note. If at any time following any
such reduction in the inter est rate payable by the Maker, there remains unpaid
any prin cipal amounts under this Note and the maximum interest rate permitted
by applicable law is increased or eliminated, then the interest rate payable
hereunder shall be readjusted, to the extent per mitted by applicable law, so
that the total dollar amount of interest payable hereunder shall be equal to the
dollar amount of interest which would have been paid by the Maker without giving
ef fect to the reduction in interest resulting from compliance with the
applicable usury laws theretofore in effect. The Maker agrees, however, that in
determining whether or not any interest payable under this Note exceeds the
highest rate permitted by law, any non-principal payment (except payments
specifically stated in this Note to be "interest"), in cluding, without
limitation, prepayment fees and late charges, shall be deemed to the extent
permitted by law, to be an expense, fee or premium rather than interest.
8. Applicable Law. This Note has been executed, made and delivered
--------------
in the Borough of Manhattan, City, County and State of New York. THIS NOTE SHALL
BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE
OF NEW YORK.
9. Waivers; Security.
-----------------
(a) The Maker and any endorsers, sureties and guarantors hereof
or hereon, and all parties now or hereafter liable with re spect to this Note,
hereby jointly and severally waive presentment for payment, demand, protest,
notice of non-payment or dishonor and
6
<PAGE>
of protest, and agree to remain bound until the Debt is paid in full
notwithstanding any extensions of time for payment which may be granted even
though the period of extension be indefinite, and notwithstanding any inaction
by, or failure to assert any legal right available to, the Payee.
(b) The Maker and any endorsers, sureties and guarantors hereof
or hereon, and all parties now or hereafter liable with re spect to this Note,
further expressly agree that any waiver by the Payee, other than a waiver in
writing signed by the Payee, of any term or provision hereof or of any of the
other Transaction Documents or of any right, remedy or option under this Note or
any of the other Transaction Documents shall not be controlling, nor shall it
prevent or estop the Payee from thereafter enforcing such term, provision,
right, remedy or option, and the failure or refusal of the Payee to insist in
any one or more instances upon the strict performance of any of the terms or
provisions of this Note or any of the other Transaction Documents shall not be
construed as a waiver or relinquishment for the future of any such term or
provision, but the same shall continue in full force and effect, it being
understood and agreed that the Payee's rights, remedies and options under this
Note and the other Transaction Documents are and shall be cumulative and are in
addition to all other rights, remedies and options of the Payee in law or in
equity or under any other agreement.
(c) The Maker and the Payee hereby irrevocably waive all rights
to trial by jury in any action or other proceeding arising out of or relating to
this Note and the Maker also waives the right in such action or other proceeding
to interpose any counterclaims (except to the extent such counterclaims are
compulsory and may not be brought in a separate action) or set-offs of any kind
or description.
(d) This Note is secured by, among other things, certain MHP
Mortgages (as defined in the Loan Agreement) made by the Maker in favor of the
Payee encumbering certain MHP Properties (as defined in the Loan Agreement).
10. Non-Recourse. The obligations of the Maker under this Note shall
------------
be Non-Recourse.
11. Miscellaneous.
-------------
(a) This Note may not be changed, waived, modified, discharged or
terminated orally, but only by an agreement in writing, signed by the party
against whom enforcement of any such change, waiver, modification, discharge or
termination is sought.
7
<PAGE>
(b) The term the "Payee" shall mean the then holder of this Note,
from time to time, and its successors and assigns.
(c) If any provision of this Note or the application thereof to
the Maker or any circumstance in any jurisdiction governing this Note shall, to
any extent, be invalid or unenforceable under any applicable statute, regulation
or rule of law, then such provision shall be deemed inoperative to the extent
that it may conflict therewith and shall be deemed modified to conform to such
statute, regulation or rule of law, and the remainder of this Note and the
application of any such invalid or unenforceable provision to parties,
jurisdictions or circumstances other than to whom or to which it is held invalid
or unenforceable shall not be affected thereby nor shall the same affect the
validity or enforceability of any other provision of this Note.
(d) Time is of the essence as to all dates set forth in this
Note, subject to any applicable notice or grace period provided herein or in any
other Transaction Document.
(e) The Maker hereby agrees to perform and comply with each of
the terms, covenants and provisions contained in this Note and in any instrument
evidencing or securing the indebtedness evidenced by this Note on the part of
the Maker to be observed and/or performed hereunder and thereunder. No release
of any security for the principal amount due under this Note, or of any portion
thereof, and no alteration, amendment or waiver of any provision of this Note or
of any such instrument (including the Transaction Documents) made by agreement
between the Payee and any other person shall release, discharge, modify, change
or affect the liability of the Maker under this Note or under such instrument.
(f) No act of commission or omission of any kind or at any time
upon the part of the Payee in respect of any matter whatsoever shall in any way
impair the rights of the Payee to enforce any right, power or benefit under this
Note and no set-off, counterclaim, reduction or diminution of any obligation or
any defense of any kind or nature which the Maker has against the Payee shall be
available hereunder to the Maker.
(g) All notices and other communications given here under shall
not be deemed to have been duly given or made unless given or made in the manner
provided for in the Loan Agreement.
(h) The captions preceding the text of the various paragraphs
contained in this Note are provided for convenience only and shall not be deemed
to in any way affect or limit the meaning or construction of any of the
provisions hereof.
(Signature page follows)
8
<PAGE>
IN WITNESS WHEREOF, the Maker has caused this Note to be executed as of
the day and year first above written.
MARRIOTT HOTEL PROPERTIES II LIMITED
PARTNERSHIP, a Delaware limited
partnership
By: Marriott MHP Two Corporation,
General Partner
By: /s/ Douglas W. Henry
---------------------------
Name: Douglas W. Henry
Title: Vice President
<PAGE>
Exhibit 10.4
San Ramon
================================================================================
================================================================================
SECURED PROMISSORY NOTE
made by
MARRIOTT HOTEL PROPERTIES II LIMITED PARTNERSHIP
(the "Maker")
-----
- to -
NOMURA ASSET CAPITAL CORPORATION
(the "Payee")
-----
Dated: September 23, 1996
================================================================================
<PAGE>
SECURED PROMISSORY NOTE
$27,094,096 New York, New York
September 23, 1996
FOR VALUE RECEIVED, MARRIOTT HOTEL PROPERTIES II LIMITED PARTNERSHIP, a
Delaware limited partnership (the "Maker"), promises to pay to NOMURA ASSET
-----
CAPITAL CORPORATION, a Delaware corporation (together with its successors and
assigns, the "Payee"), or order, the principal amount of TWENTY SEVEN MILLION
-----
NINETY FOUR THOUSAND AND NINETY SIX DOLLARS ($27,094,096) (the "Loan"), in the
----
manner set forth herein; together with interest on the un paid principal amount
of this Note at the Base Rate (as adjusted pursuant to Paragraph 4(e) hereof) or
Default Rate, as applicable; together with payments with respect to amortization
of principal as described in Paragraph 4 hereof; together with the Yield
Maintenance Premium, if any, due and payable under the Loan Agreement; and
together with all other amounts due (including, without limitation, all items of
Debt) hereunder or under any of the other Transaction Documents.
1. Definitions. For the purposes of this Note, each of the following
-----------
terms shall have the meaning specified with respect thereto:
(a) "Accounting Period" has the meaning set forth in the Loan
-----------------
Agreement.
(b) "Adjusted Rate" means the Base Rate adjusted in accordance with
-------------
paragraph 4(e) of this Note.
(c) "Base Rate" means 8.22% per annum.
---------
(d) "Business Day" means a day on which banks and foreign exchange
------------
markets are open for business in New York, New York.
(e) "Debt" has the meaning ascribed to the term "MHP Debt" in the
----
Loan Agreement. It is the intention of the parties hereto that the Debt is
evidenced by this Note and the Other MHP Note on a pro rata basis. All
--- ----
references to Debt in this Note shall be deemed to mean the proportionate amount
of Debt evidenced by this Note.
(f) "Debt Service Payment Date" means the 11th day of each month.
-------------------------
(g) "Debt Service Period" means the period from and including the
-------------------
eleventh (11th) day of the calendar month immediately preceding each Debt
Service Payment Date to and including the tenth (10th) day of the calendar month
in which
<PAGE>
such Debt Service Payment Date occurs.
(h) "Default Rate" means a rate per annum equal to the lesser of
------------
(aa) two percent (2%) above the Base Rate or Adjusted Rate, as applicable, and
(bb) the maximum rate allowed by law.
(i) "Event of Default" has the meaning set forth in the Loan
----------------
Agreement.
(j) "Excess Cash Flow" has the meaning set forth in the Loan
----------------
Agreement.
(k) "Loan Agreement" means that certain Loan Agreement, dated as of
--------------
the date hereof, between the Maker and the Payee.
(l) "Maturity Date" shall mean the earliest to occur of:
-------------
(1) October 11, 2017; or
(2) such date to which the maturity of the Debt may
be accelerated upon an Event of Default or as otherwise provided in any
Transaction Document.
(m) "Monthly Debt Service Payment" means the constant monthly
----------------------------
payment set forth in Paragraph 4(b) hereof, as such payment may be adjusted as
set forth in Paragraph 4(c) hereof.
(n) "Non-Recourse" has the meaning set forth in the Loan Agreement.
------------
(o) "Optional Prepayment Date" means October 11, 2007.
------------------------
(p) "Other MHP Note" means that certain Secured Promissory Note
--------------
dated as of the date hereof from Maker to Payee in the principal amount of
$195,405,904.
(q) "San Ramon Mortgage" means that certain mortgage and/or deed of
------------------
trust, dated as of the date hereof, made by Maker, for the benefit of Payee, as
the same may be supplemented, amended, or modified from time to time.
(r) "Transaction Documents" has the meaning set forth in the Loan
---------------------
Agreement.
(s) "Yield Maintenance Premium" has the meaning set forth in the
-------------------------
Loan Agreement.
Certain additional terms are defined in the particular provisions of
this Note to which they pertain or in which they are initially used.
2
<PAGE>
2. Payment of Debt.
---------------
The Maker shall punctually pay the Debt at the time and in the
manner pro vided for its payment in this Note and the other Transaction
Documents. It is expressly agreed that the entire Debt may, at the Payee's
election (or automatically upon the occurrence of the events described in
clauses (f) and (g) of Section 4.1A of the Loan Agreement) become immediately
due and payable upon the occurrence of an Event of Default, as set forth in the
Loan Agreement.
3. Interest Rate.
-------------
(a) Except as set forth below, including Paragraph 4(b) hereof, the
Debt shall bear interest for each Debt Service Period at the Base Rate.
(b) Following the Maturity Date and for each Debt Service Period or
portion thereof occurring from the date of the occurrence of an Event of Default
and while it is continuing, or, if later, the date the Lender has given notice
to the Maker pursuant to Section 4.2(a) of the Loan Agreement, if such notice is
required, the Debt shall bear interest at the Default Rate.
(c) Calculations of interest shall be made on the basis of a
360-day year and actual days elapsed during each Debt Service Period.
4. Periodic Payments.
-----------------
(a) On October 11, 1996, the Maker shall pay to the Payee interest
on the Note at the Base Rate for the period beginning on the date hereof and
ending on October 10, 1996. On each Debt Service Payment Date thereafter through
and including October 11, 1997, the Maker shall pay to the Payee interest on
this Note at the Base Rate then due and payable for each Debt Service Period.
(b) On each Debt Service Payment Date occurring after October 11,
1997, the Maker shall pay to the Payee an amount equal to $230,349.55, being the
constant monthly payment applicable to this Note up to the Maturity Date. Such
amount shall be applied (i) first, to the payment of interest (the "Base Rate
---------
Interest") on this Note at the Base Rate or the Default Rate, as applicable,
- --------
then due and payable for the applicable Debt Service Period, and (ii) next, to
the payment of principal on this Note in reduction of such principal in the
amount of the difference between the Monthly Debt Service Payment and the Base
Rate Interest paid pursuant to sub-clause (i) above (each, a "Principal
---------
Payment"). Following the Maturity Date and while an
- -------
<PAGE>
Event of Default has occurred and is continuing, the constant monthly payment
set forth in the first sentence of this Paragraph 4(b) shall be increased to
reflect payment of interest at the Default Rate.
(c) If any Principal Payment or a portion thereof is prepaid on any
Debt Service Payment Date by the application by the Payee of payments received
(i) from or with respect to U.S. Obligations held by the Payee on the Optional
Prepayment Date as a result of a release of any MHP Property by the Maker
pursuant to Section 2.3 of the Loan Agreement, (ii) from the release of an MHP
Property by the Maker from the Lien of the Security Documents (as such terms are
defined in the Loan Agreement) pursuant to Section 2.6 of the Loan Agreement, or
(iii) on and after the Optional Prepayment Date, pursuant to the last sentence
of Section 3.1 of the Loan Agreement, the Monthly Debt Service Payment payable
on each Debt Service Payment Date thereafter shall be reduced in an amount equal
to the percentage reduction in the principal amount payable under this Note
effected by such prepayment.
(d) On the Maturity Date, the Maker shall pay to the Payee an
amount equal to the then outstanding principal balance of the Loan, plus
interest accrued and unpaid thereon and any other Debt then due and payable.
(e) (i) On the Optional Prepayment Date and on each anniversary
thereof, the interest rate applicable to the Debt shall be set at the greater of
(xx) 10.22% and (yy) the yield, calculated by linear interpolation (rounded to
three decimal places), of the yields of United States Treasury Constant
Maturities with the terms (one longer and one shorter) most nearly approximating
those of noncallable United States Treasury obligations having maturities as
close as possible to the tenth anniversary of the Optional Prepayment Date, as
determined by the Payee on the basis of Federal Reserve Statistical Release
H.15-Selected Interest Rates under the heading U.S. Governmental
Security/Treasury Constant Maturities, or other recognized source of financial
market information selected by the Payee on the last Business Day of the week
immediately prior to the Optional Prepayment Date, and each anniversary thereof,
as the case may be, plus 3.52% per annum (any such increased rate being
hereinafter referred to as the "Adjusted Rate"). The Maker shall thereafter pay
-------------
to the Payee the Monthly Debt Service Payment on each Debt Service Payment Date
in the manner and at the place established pursuant to this Note. Such Monthly
Debt Service Payment shall be applied (i) first, to the payment of interest on
this Note at the Base Rate then due and payable for the applicable Debt Service
Period and (ii) next, to the payment of the Principal Payment then due and
payable.
4
<PAGE>
(ii) Additionally, subsequent to the Optional Prepayment Date,
the Maker shall pay to the Payee on each Debt Service Payment Date any Excess
Cash Flow (determined in accordance with the provisions of the Cash Management
Procedures) for all Accounting Periods ending during the Debt Service Period
immediately preceding such Debt Service Payment Date, which Excess Cash Flow
payments shall be applied (A) first, to prepayment of each Principal Payment
required to be made on each Debt Service Payment Date in inverse order of
maturity until the principal of this Note has been paid in full, and (B) next,
to payment of the difference, if any, between (y) the sum of (i) interest
accrued and unpaid on this Note calculated at the Adjusted Rate and (ii)
interest on such accrued and unpaid amount at the Adjusted Rate and (z) the Base
Rate interest paid on each Debt Service Payment Date.
(f) All payments (including prepayments) to be made by the Maker on
account of principal, interest and all other amounts pay able with respect to
the Debt, shall be made by wire transfer to the Payee without set-off or
counterclaim, in lawful money of the United States of America and in immediately
avail able funds, not later than 2 p.m. (New York time) on the dates such
payments are due, by payment to:
Mellon Bank, Pittsburgh, PA
ABA # 043000261
NACC (Clearance Account)
Account #109-2525
Reference: Lance Haberin
(Clearance Account)
or at such other place as the Payee may, from time to time, designate in
writing.
(g) If any payment hereunder becomes due and pay able on a day
other than a Business Day, the due date thereof shall be ex tended to the next
succeeding Business Day and, with respect to payments of principal, interest
(at the applicable rate hereunder) thereon shall be pay able during such
extension. Any payments received after 2 p.m. (New York time) shall be deemed
received on the following Business Day.
5. Prepayments.
-----------
(a) The Maker shall have the right to prepay the unpaid principal
amount of this Note on a Debt Service Payment Date to the extent set forth in
the last sentence of Section 3.1 of the Loan Agreement.
(b) If the Maturity Date occurs as a result of an Event of Default
and the Maker tenders payment of the Debt or any
<PAGE>
part thereof to the Payee, such tender shall require the payment by the Maker of
all sums required pursuant to Section 4.2 of the Loan Agreement, including,
without limitation, the Yield Maintenance Premium.
(c) If the Fee Owner (as such term is defined in the San Ramon
Mortgage) exercises its right under Paragraph 61 of the San Ramon Mortgage to
purchase such leasehold mortgage for the principal amount of $27,094,096,
together with the other costs and expenses as set forth in Paragraph 61 of the
San Ramon Mortgage, then in such event notwithstanding the application of any
principal payments provided for in Sections 4 and 5 of this Note, the principal
amount of this Note shall be restored to $27,094,096 and the aggregate amount of
such principal payments less the Yield Maintenance Premium attributable to
$27,094,096 shall be deemed to be a principal payment of the unpaid principal
amount of the Other MHP Note.
6. Cost of Collection. The Maker shall pay all costs of collection
------------------
when incurred, including, without limitation, the reasonable attorneys' fees and
disbursements of the Payee's counsel and court costs, which costs may be added
to the indebtedness evidenced hereby and must be paid within fifteen (15) days
after written demand. Such costs shall bear interest at the Base Rate from the
date of incurrence and interest at the Default Rate from and after delivery of
written demand.
7. Usury. It is the intent of the Payee and the Maker to comply at all
-----
times with applicable usury laws. If at any time such laws would render usurious
any amounts called for under this Note, then it is the Maker's and the Payee's
express intention that such excess amount be immediately credited on the
principal balance of this Note (or, if this Note has been fully paid, refunded
by the Payee to the Maker, and the Maker shall accept such refund), and the
provisions hereof be immediately deemed to be reformed and the amounts
thereafter collectible hereunder reduced to comply with the then applicable
laws, with out the necessity of the execution of any further documents, but so
as to permit the recovery of the fullest amount otherwise called for hereunder.
To the extent permitted by law, any such crediting or refund shall not cure or
waive any default by the Maker under this Note. If at any time following any
such reduction in the inter est rate payable by the Maker, there remains unpaid
any principal amounts under this Note and the maximum interest rate permitted
by applicable law is increased or eliminated, then the interest rate payable
hereunder shall be readjusted, to the extent permitted by applicable law, so
that the total dollar amount of interest payable hereunder shall be equal to the
dollar amount of interest which would have been paid by the Maker without giving
effect to the reduction in interest resulting from compliance with the
applicable usury laws theretofore in effect.
6
<PAGE>
The Maker agrees, however, that in determining whether or not any interest
payable under this Note exceeds the highest rate permitted by law, any non-
principal payment (except payments specifically stated in this Note to be
"interest"), including, without limitation, prepayment fees and late charges,
shall be deemed to the extent permitted by law, to be an expense, fee or premium
rather than interest.
8. Applicable Law. This Note has been negotiated, executed, made and
delivered in the Borough of Manhattan, City, County and State of New York. THIS
NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF
THE STATE OF NEW YORK, WITH OUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
9. Waivers; Security.
-----------------
(a) The Maker and any endorsers, sureties and guarantors hereof or
hereon, and all parties now or hereafter liable with respect to this Note,
hereby jointly and severally waive presentment for payment, demand, protest,
notice of non-payment or dishonor and of protest, and agree to remain bound
until the Debt is paid in full notwithstanding any extensions of time for
payment which may be granted even though the period of extension be indefinite,
and notwithstanding any inaction by, or failure to assert any legal right
available to, the Payee.
(b) The Maker and any endorsers, sureties and guarantors hereof or
hereon, and all parties now or hereafter liable with respect to this Note,
further expressly agree that any waiver by the Payee, other than a waiver in
writing signed by the Payee, of any term or provision hereof or of any of the
other Transaction Documents or of any right, remedy or option under this Note or
any of the other Transaction Documents shall not be controlling, nor shall it
prevent or estop the Payee from thereafter enforcing such term, provision,
right, remedy or option, and the failure or refusal of the Payee to insist in
any one or more instances upon the strict performance of any of the terms or
provisions of this Note or any of the other Transaction Documents shall not be
construed as a waiver or relinquishment for the future of any such term or
provision, but the same shall continue in full force and effect, it being
understood and agreed that the Payee's rights, remedies and options under this
Note and the other Transaction Documents are and shall be cumulative and are in
addition to all other rights, remedies and options of the Payee in law or in
equity or under any other agreement.
(c) The Maker and the Payee hereby irrevocably waive all rights to
trial by jury in any action or other proceeding arising out of or relating to
this Note and the Maker also waives the right in such action or other proceeding
to interpose any
7
<PAGE>
counterclaims (except to the extent such counterclaims are compulsory and may
not be brought in a separate action) or set-offs of any kind or description.
(d) This Note is secured by, among other things, certain MHP
Mortgages (as defined in the Loan Agreement) made by the Maker in favor of the
Payee encumbering certain MHP Properties (as defined in the Loan Agreement).
10. Non-Recourse. The obligations of the Maker under this Note shall be
------------
Non-Recourse.
11. Miscellaneous.
-------------
(a) This Note may not be changed, waived, modified, discharged or
terminated orally, but only by an agreement in writing, signed by the party
against whom enforcement of any such change, waiver, modification, discharge or
termination is sought.
(b) The term the "Payee" shall mean the then holder of this Note,
from time to time, and its successors and assigns.
(c) If any provision of this Note or the application thereof to the
Maker or any circumstance in any jurisdiction governing this Note shall, to any
extent, be invalid or unenforceable under any applicable statute, regulation or
rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform to such
statute, regulation or rule of law, and the remainder of this Note and the
application of any such invalid or unenforceable provision to parties,
jurisdictions or circumstances other than to whom or to which it is held invalid
or unenforceable shall not be affected thereby nor shall the same affect the
validity or enforceability of any other provision of this Note.
(d) Time is of the essence as to all dates set forth in this Note,
subject to any applicable notice or grace period provided herein or in any other
Transaction Document.
(e) The Maker hereby agrees to perform and comply with each of the
terms, covenants and provisions contained in this Note and in any instrument
evidencing or securing the indebtedness evidenced by this Note on the part of
the Maker to be observed and/or performed hereunder and thereunder. No release
of any security for the principal amount due under this Note, or of any portion
thereof, and no alteration, amendment or waiver of any provision of this Note or
of any such instrument (including the Transaction Documents) made by agreement
between the Payee and any other person shall release, discharge, modify,
8
<PAGE>
change or affect the liability of the Maker under this Note or under such
instrument.
(f) No act of commission or omission of any kind or at any time
upon the part of the Payee in respect of any matter whatsoever shall in any way
impair the rights of the Payee to enforce any right, power or benefit under this
Note and no set-off, counterclaim, reduction or diminution of any obligation or
any defense of any kind or nature which the Maker has against the Payee shall be
available hereunder to the Maker.
(g) All notices and other communications given here under shall not
be deemed to have been duly given or made unless given or made in the manner
provided for in the Loan Agreement.
(h) The captions preceding the text of the various paragraphs
contained in this Note are provided for convenience only and shall not be deemed
to in any way affect or limit the meaning or construction of any of the
provisions hereof.
(Signature page follows)
9
<PAGE>
IN WITNESS WHEREOF, the Maker has caused this Note to be executed as of
the day and year first above written.
MARRIOTT HOTEL PROPERTIES II
LIMITED PARTNERSHIP, a Delaware
limited partnership
By: Marriott MHP Two Corporation,
General Partner
By: /s/ Douglas W. Henry
Name: Douglas W. Henry
Title: Vice President
10
<PAGE>
Exhibit 10.5
================================================================================
================================================================================
SECURED PROMISSORY NOTE
made by
MARRIOTT HOTEL PROPERTIES II LIMITED PARTNERSHIP
SANTA CLARA MARRIOTT HOTEL LIMITED PARTNERSHIP
(together, the "Maker")
-----
- to -
NOMURA ASSET CAPITAL CORPORATION
(the "Payee")
-----
Dated: September 23, 1996
================================================================================
<PAGE>
EXHIBIT 10.5
SECURED PROMISSORY NOTE
$43,500,000 New York, New York
September 23, 1996
FOR VALUE RECEIVED, MARRIOTT HOTEL PROPERTIES II LIMITED PARTNERSHIP, a
Delaware limited partnership and SANTA CLARA MARRIOTT HOTEL LIMITED
PARTNERSHIP, a Delaware limited partnership ("SC"), jointly and severally
(together, the "Maker"), promises to pay to NOMURA ASSET CAPITAL CORPORATION, a
-----
Delaware corporation (together with its successors and assigns, the "Payee"), or
-----
order, the principal amount of FORTY THREE MILLION FIVE HUNDRED THOUSAND DOLLARS
($43,500,000) (the "Loan"), in the manner set forth herein; together with
----
interest on the un paid principal amount of this Note at the Base Rate (as
adjusted pursuant to Paragraph 4(e) hereof) or Default Rate, as applicable;
together with payments with respect to amortization of principal as described in
Paragraph 4 hereof; to gether with the Yield Maintenance Premium, if any, due
and payable under the Loan Agreement; and together with all other amounts due
(including, without limitation, all items of Debt) hereunder or under any of the
other Transaction Documents.
1. Definitions. For the purposes of this Note, each of the following
-----------
terms shall have the meaning specified with respect thereto:
(a) "Accounting Period" has the meaning set forth in the Loan
-----------------
Agreement.
(b) "Adjusted Rate" means the Base Rate adjusted in accordance
-------------
with paragraph 4(e) of this Note.
(c) "Base Rate" means 8.22% per annum.
---------
(d) "Business Day" means a day on which banks and foreign exchange
------------
markets are open for business in New York, New York.
(e) "Debt" has the meaning ascribed to the term "SC Debt" in the
----
Loan Agreement.
(f) "Debt Service Payment Date" means the 11th day of each month.
-------------------------
(g) "Debt Service Period" means the period from and including the
-------------------
eleventh (11th) day of the calendar month immediately preceding each Debt
Service Payment Date to and including the tenth (10th) day of the calendar month
in which such Debt Service Payment Date occurs.
<PAGE>
(h) "Default Rate" means a rate per annum equal to the lesser of
------------
(aa) two percent (2%) above the Base Rate or Adjusted Rate, as applicable, and
(bb) the maximum rate allowed by law.
(i) "Event of Default" has the meaning set forth in the Loan
----------------
Agreement.
(j) "Loan Agreement" means that certain Loan Agreement, dated as
--------------
of the date hereof, between SC and the Payee.
(k) "Maturity Date" shall mean the earliest to occur of:
-------------
(1) October 11, 2017; or
(2) such date to which the maturity of the Debt may be
accelerated upon an Event of Default or as otherwise provided in any
Transaction Document.
(l) "Monthly Debt Service Payment" means the constant monthly
----------------------------
payment set forth in Paragraph 4(b) hereof, as such payment may be adjusted as
set forth in Paragraph 4(c) hereof.
(m) "Non-Recourse" has the meaning set forth in the Loan
------------
Agreement.
(n) "Optional Prepayment Date" means October 11, 2007.
------------------------
(o) "Transaction Documents" has the meaning set forth in the Loan
---------------------
Agreement.
(p) "Yield Maintenance Premium" has the meaning set forth in the
-------------------------
Loan Agreement.
Certain additional terms are defined in the particular provisions of
this Note to which they pertain or in which they are initially used.
2. Payment of Debt.
---------------
The Maker shall punctually pay the Debt at the time and in the
manner provided for its payment in this Note and the other Transaction
Documents. It is expressly agreed that the entire Debt may, at the Payee's
election (or automatically upon the occurrence of the events described in
clauses (f) and (g) of Section 4.1A of the Loan Agreement) become immediately
due and payable upon the occurrence of an Event of Default, as set forth in the
Loan Agreement.
2
<PAGE>
3. Interest Rate.
-------------
(a) Except as set forth below, including Paragraph 4(b) hereof,
the Debt shall bear interest for each Debt Service Period at the Base Rate.
(b) Following the Maturity Date and for each Debt Service Period
or portion thereof occurring from the date of the occurrence of an Event of
Default and while it is continuing, or, if later, the date the Payee has given
notice to the Maker pursuant to Section 4.2 of the Loan Agreement, if such
notice is required, the Debt shall bear interest at the Default Rate.
(c) Calculations of interest shall be made on the basis of a
360-day year and actual days elapsed during each Debt Service Period.
4. Periodic Payments.
-----------------
(a) On October 11, 1996, the Maker shall pay to the Payee interest
on the Note at the Base Rate for the period beginning on the date hereof and
ending on October 10, 1996. On each Debt Service Payment Date thereafter through
and including October 11, 1997, the Maker shall pay to the Payee interest on
this Note at the Base Rate then due and payable for each Debt Service Period.
(b) On each Debt Service Payment Date occurring after October 11,
1997, the Maker shall pay to the Payee an amount equal to $369,829.85, being the
constant monthly payment applicable to this Note up to the Maturity Date. Such
amount shall be applied (i) first, to the payment of interest (the "Base Rate
---------
Interest") on this Note at the Base Rate or the Default Rate, as applicable,
- --------
then due and payable for the applicable Debt Service Period, and (ii) next, to
the payment of principal on this Note in reduction of such principal in the
amount of the difference between the Monthly Debt Service Payment and the Base
Rate Interest paid pursuant to sub-clause (i) above (each, a "Principal
---------
Payment"). Following the Maturity Date and while an Event of Default has
- -------
occurred and is continuing, the constant monthly payment set forth in the first
sentence of this Paragraph 4(b) shall be increased to reflect payment of
interest at the Default Rate.
(c) If any Principal Payment or a portion thereof is prepaid on
any Debt Service Payment Date by the application by the Payee of payments
received (i) from or with respect to U.S. Obligations held by the Payee on the
Optional Prepayment Date as a result of a release of the SC Property by the
Maker pursuant to Section 2.3 of the Loan Agreement, (ii) from the release of
the SC Property by the Maker from the Lien of the Security Documents (as such
terms are defined in the Loan Agreement) pursuant to Section
3
<PAGE>
2.6 of the Loan Agreement, or (iii) on and after the Optional Prepayment Date,
pursuant to the last sentence of Section 3.1 of the Loan Agreement, the Monthly
Debt Service Payment payable on each Debt Service Payment Date thereafter shall
be reduced in an amount equal to the percentage reduction in the principal
amount payable under this Note effected by such prepayment.
(d) On the Maturity Date, the Maker shall pay to the Payee an
amount equal to the then outstanding principal balance of the Loan, plus
interest accrued and unpaid thereon and any other Debt then due and payable.
(e) (i) On the Optional Prepayment Date and on each anniversary
thereof, the interest rate applicable to the Debt shall be set at the greater of
(xx) 10.22% and (yy) the yield, calculated by linear interpolation (rounded to
three decimal places), of the yields of United States Treasury Constant
Maturities with the terms (one longer and one shorter) most nearly approximating
those of noncallable United States Treasury obligations having maturities as
close as possible to the tenth anniversary of the Optional Prepayment Date, as
determined by the Payee on the basis of Federal Reserve Statistical Release
H.15-Selected Interest Rates under the heading U.S. Governmental
Security/Treasury Constant Maturities, or other recognized source of financial
market information selected by the Payee on the last Business Day of the week
immediately prior to the Optional Prepayment Date, and each anniversary thereof,
as the case may be, plus 3.52% per annum (any such increased rate being
hereinafter referred to as the "Adjusted Rate"). The Maker shall thereafter pay
-------------
to the Payee the Monthly Debt Service Payment on each Debt Service Payment Date
in the manner and at the place established pursuant to this Note. Such Monthly
Debt Service Payment shall be applied (i) first, to the payment of interest on
this Note at the Base Rate then due and payable for the applicable Debt Service
Period and (ii) next, to the payment of the Principal Payment then due and
payable.
(ii) Additionally, subsequent to the Optional Prepayment Date,
the Maker shall pay to the Payee on each Debt Service Payment Date the MHP Share
(as defined in, and determined in accordance with, the provisions of the Cash
Management Procedures including, without limitation, Sections 4.4(J) and 7.10(F)
thereof) for all Accounting Periods ending during the Debt Service Period
immediately preceding such Debt Service Payment Date, which shall be applied in
accordance with the terms of the MHP Cash Management Procedures (as such term is
defined in the Loan Agreement) and Sections 4.4(J) and 7.10(F) thereof.
(f) All payments (including prepayments) to be made by the Maker
or the Servicer (as such term is defined in the Loan Agreement) on account of
principal, interest and all other amounts pay able with respect to the Debt,
shall be made by wire transfer to the Payee without set-off or counterclaim, in
lawful money of the United States of America and in immediately available funds,
not
4
<PAGE>
later than 2 p.m. (New York time) on the dates such payments are due, by payment
to:
Mellon Bank, Pittsburgh, PA
ABA # 043000261
NACC (Clearance Account)
Account #109-2525
Reference: Lance Haberin
(Clearance Account)
or at such other place as the Payee may, from time to time, designate in
writing.
(g) If any payment hereunder becomes due and payable on a day
other than a Business Day, the due date thereof shall be ex tended to the next
succeeding Business Day and, with respect to payments of princi pal, interest
(at the applicable rate hereunder) thereon shall be payable during such
extension. Any payments received after 2 p.m. (New York time) shall be deemed
received on the following Business Day.
5. Prepayments.
-----------
(a) The Maker shall have the right to prepay the unpaid principal
amount of this Note on a Debt Service Payment Date to the extent set forth in
the last sentence of Section 3.1 of the Loan Agreement.
(b) If the Maturity Date occurs as a result of an Event of Default
and the Maker tenders payment of the Debt or any part thereof to the Payee, such
tender shall require the payment by the Maker of all sums required pursuant to
Section 4.2 of the Loan Agreement, including, without limitation, the Yield
Maintenance Premium.
6. Cost of Collection. The Maker shall pay all costs of collection when
------------------
incurred, including, without limitation, the reasonable attorneys' fees and
disbursements of the Payee's counsel and court costs, which costs may be added
to the indebtedness evidenced hereby and must be paid within fifteen (15) days
after written demand. Such costs shall bear interest at the Base Rate from the
date of incurrence and interest at the Default Rate from and after delivery of
written demand.
7. Usury. It is the intent of the Payee and the Maker to comply at all
-----
times with applicable usury laws. If at any time such laws would render usurious
any amounts called for under this Note, then it is the Maker's and the Payee's
express intention that such excess amount be immediately credited on the
principal balance of this Note (or, if this Note has been fully paid, promptly
refunded by the Payee to the Maker, and the Maker shall accept such
5
<PAGE>
refund), and the provisions hereof be immediately deemed to be reformed and
the amounts thereafter collectible hereunder reduced to comply with the then
applicable laws, with out the necessity of the execution of any further
documents, but so as to permit the recovery of the fullest amount otherwise
called for hereunder. To the extent permitted by law, any such crediting or
refund shall not cure or waive any default by the Maker under this Note. If at
any time following any such reduction in the interest rate payable by the
Maker, there remains unpaid any principal amounts under this Note and the
maximum interest rate permitted by applicable law is increased or eliminated,
then the interest rate payable hereunder shall be readjusted, to the extent
permitted by applicable law, so that the total dollar amount of interest payable
hereunder shall be equal to the dollar amount of interest which would have been
paid by the Maker without giving effect to the reduction in interest resulting
from compliance with the applicable usury laws theretofore in effect. The Maker
agrees, however, that in determining whether or not any interest payable under
this Note exceeds the highest rate permitted by law, any non-principal payment
(except payments specifically stated in this Note to be "interest"), including,
without limitation, prepayment fees and late charges, shall be deemed to the
extent permitted by law, to be an expense, fee or premium rather than interest.
8. Applicable Law. This Note has been executed, made and delivered in
--------------
the Borough of Manhattan, City, County and State of New York. THIS NOTE SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
NEW YORK.
9. Waivers; Security.
-----------------
(a) The Maker and any endorsers, sureties and guarantors hereof or
hereon, and all parties now or hereafter liable with respect to this Note,
hereby jointly and severally waive presentment for payment, demand, protest,
notice of non-payment or dishonor and of protest, and agree to remain bound
until the Debt is paid in full notwithstanding any extensions of time for
payment which may be granted even though the period of extension be indefinite,
and notwithstanding any inaction by, or failure to assert any legal right
available to, the Payee.
(b) The Maker and any endorsers, sureties and guarantors hereof or
hereon, and all parties now or hereafter liable with re spect to this Note,
further expressly agree that any waiver by the Payee, other than a waiver in
writing signed by the Payee, of any term or provision hereof or of any of the
other Transaction Documents or of any right, remedy or option under this Note or
any of the other Transaction Documents shall not be controlling, nor shall it
prevent or stop the Payee from thereafter enforcing such term, provision, right,
remedy or option, and the failure or refusal of the Payee to insist in any one
or more instances upon the strict performance of any of the terms or provisions
of this
6
<PAGE>
Note or any of the other Transaction Documents shall not be construed as a
waiver or relinquishment for the future of any such term or provision, but the
same shall continue in full force and effect, it being understood and agreed
that the Payee's rights, remedies and options under this Note and the other
Transaction Documents are and shall be cumulative and are in addition to all
other rights, remedies and options of the Payee in law or in equity or under any
other agreement.
(c) The Maker and the Payee hereby irrevocably waive all rights to
trial by jury in any action or other proceeding arising out of or relating to
this Note and the Maker also waives the right in such action or other proceeding
to interpose any counterclaims (except to the extent such counterclaims are
compulsory and may not be brought in a separate action) or set-offs of any kind
or description.
(d) This Note is secured by, among other things, the SC Mortgage
(as defined in the Loan Agreement) made by the Maker in favor of the Payee
encumbering the SC Property (as defined in the Loan Agreement).
10. Non-Recourse. The obligations of the Maker under this Note shall be
------------
Non-Recourse.
11. Miscellaneous.
-------------
(a) This Note may not be changed, waived, modified, discharged or
terminated orally, but only by an agreement in writing, signed by the party
against whom enforcement of any such change, waiver, modification, discharge or
termination is sought.
(b) The term the "Payee" shall mean the then holder of this Note,
from time to time, and its successors and assigns.
(c) If any provision of this Note or the application thereof to
the Maker or any circumstance in any jurisdiction governing this Note shall, to
any extent, be invalid or unenforceable under any applicable statute, regulation
or rule of law, then such provision shall be deemed inoperative to the extent
that it may conflict therewith and shall be deemed modified to conform to such
statute, regulation or rule of law, and the remainder of this Note and the
application of any such invalid or unenforceable provision to parties,
jurisdictions or circumstances other than to whom or to which it is held invalid
or unenforceable shall not be affected thereby nor shall the same affect the
validity or enforceability of any other provision of this Note.
(d) Time is of the essence as to all dates set forth in this Note,
subject to any applicable notice or grace period provided herein or in any other
Transaction Document.
7
<PAGE>
(e) The Maker hereby agrees to perform and comply with each of the
terms, covenants and provisions contained in this Note and in any instrument
evidencing or securing the indebtedness evidenced by this Note on the part of
the Maker to be observed and/or performed hereunder and thereunder. No release
of any security for the principal amount due under this Note, or of any portion
thereof, and no alteration, amendment or waiver of any provision of this Note or
of any such instrument (including the Transaction Documents) made by agreement
between the Payee and any other person shall release, discharge, modify, change
or affect the liability of the Maker under this Note or under such instrument.
(f) No act of commission or omission of any kind or at any time
upon the part of the Payee in respect of any matter whatsoever shall in any way
impair the rights of the Payee to enforce any right, power or benefit under this
Note and no set-off, counterclaim, reduction or diminution of any obligation or
any defense of any kind or nature which the Maker has against the Payee shall be
available hereunder to the Maker.
(g) All notices and other communications given here under shall
not be deemed to have been duly given or made unless given or made in the manner
provided for in the Loan Agreement.
(h) The captions preceding the text of the various paragraphs
contained in this Note are provided for convenience only and shall not be deemed
to in any way affect or limit the meaning or construction of any of the
provisions hereof.
(Signature page follows)
8
<PAGE>
IN WITNESS WHEREOF, the Maker has caused this Note to be executed as of
the day and year first above written.
MARRIOTT HOTEL PROPERTIES II LIMITED
PARTNERSHIP, a Delaware limited partnership
By: Marriott MHP Two Corporation,
General Partner
By: /s/ Douglas W. Henry
------------------------------------------
Name: Douglas W. Henry
Title: Vice President
SANTA CLARA MARRIOTT HOTEL LIMITED PARTNERSHIP,
a Delaware limited partnership
By: Marriott MHP Two Corporation,
General Partner
By: /s/ Douglas W. Henry
------------------------------------------
Name: Douglas W. Henry
Title: Vice President
<PAGE>
Exhibit 10.6
MODIFICATION, SUBORDINATION AND NON-DISTURBANCE AGREEMENT,
---------------------------------------------------------
ESTOPPEL, ASSIGNMENT AND CONSENT
--------------------------------
[Marriott Rivercenter Hotel, San Antonio, Texas]
This Agreement (this "Agreement"), dated as of September 23, 1996,
---------
among MARRIOTT HOTEL SERVICES, INC., a Delaware corporation ("Manager"), having
-------
an office at 10400 Fernwood Road, Bethesda, Maryland 20817, NOMURA ASSET CAPITAL
CORPORATION (the "Lender"), having an address at 2 World Financial Center,
------
Building B, New York, New York 10281, and MARRIOTT HOTEL PROPERTIES II LIMITED
PARTNERSHIP, a Delaware limited partnership (the "Borrower"), having an office
at 10400 Fernwood Road, Bethesda, Maryland 20817.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS:
A. Pursuant to the provisions of that certain Loan Agreement, dated as
of the date hereof, between Borrower and Lender (as the same may hereafter be
modified, amended or supplemented from time to time, the "Borrower Loan
-------------
Agreement"), Borrower is executing and delivering to Lender its promissory notes
- ---------
in the aggregate principal amount of $222,500,000 (collectively, as the same may
hereafter be modified, amended or supplemented from time to time, the "Borrower
--------
Note"); and
- ----
B. Pursuant to the provisions of that certain Loan Agreement, dated as
of the date hereof, between Santa Clara Marriott Hotel Limited Partnership (the
"Santa Clara Partnership") and Lender (as the same may hereafter be modified,
-----------------------
amended or supplemented from time to time, the "Santa Clara Loan Agreement"; the
--------------------------
Borrower Loan Agreement and the Santa Clara Loan Agreement being referred to
collectively as the "Loan Agreements"), the Santa Clara Partnership and Borrower
---------------
are executing and delivering to Lender their promissory note in the principal
amount of $43,500,000 (as the same may hereafter be modified, amended or
supplemented from time to time, the "Santa Clara Note"); and
----------------
C. The Borrower Note will be secured by, among other things, (i) a deed
of trust, dated as of the date hereof (as the same may hereafter be modified,
amended or supplemented from time to time, the "Deed of Trust"), from Borrower
-------------
to Lender, which Deed of Trust creates a lien on the hotel property more
particularly described in Exhibit A annexed hereto (the "San Antonio Property"),
--------- --------------------
(ii) mortgages or deed of trust (collectively, as the same may hereafter be
modified, amended or supplemented from time to time, the "Other Mortgages"),
---------------
from
<PAGE>
Borrower to Lender, which Other Mortgages create liens on the hotel
properties more particularly described in Exhibits B and C annexed hereto (the
----------------
"Other Borrower Properties"), (iii) a pledge of Borrower's 50% limited
-------------------------
partnership interest in the Santa Clara Partnership (the "Santa Clara Pledge"),
------------------
and (iv) certain other documents executed and delivered in connection with the
Deed of Trust, the Other Mortgages, and the Santa Clara Pledge (together with
the Borrower Loan Agreement, the Borrower Note, the Deed of Trust, the Other
Mortgages, and the Santa Clara Pledge, and any other documents executed and
delivered by Borrower in connection with the Borrower Note and the loan
evidenced thereby, as the same may be modified, amended, restated, consolidated,
replaced or supplemented from time to time, the "Borrower Loan Documents"); and
-----------------------
D. The Santa Clara Note will be secured by, among other things, (i) a
deed of trust, dated as of the date hereof (as the same may hereafter be
modified, amended or supplemented from time to time, the "Santa Clara Deed of
----------------
Trust"), from the Santa Clara Partnership to Lender, which Deed of Trust creates
a lien on the hotel property more particularly described in Exhibit D annexed
---------
hereto (the "Santa Clara Property"), (ii) mortgages or deeds of trust of the San
--------------------
Antonio Property and the Other Borrower Properties (collectively, as the same
may hereafter be modified, amended or supplemented from time to time, the
"Collateral Mortgages"), and (iii) certain other documents executed and
--------------------
delivered in connection with the Santa Clara Deed of Trust (together with the
Santa Clara Loan Agreement, the Santa Clara Note, the Santa Clara Deed of Trust,
the Collateral Mortgages, and any other documents executed and delivered in
connection with the Santa Clara Note and the loan evidenced thereby, as the same
may be modified, amended, restated, consolidated, replaced or supplemented from
time to time, the "Santa Clara Loan Documents"); and
--------------------------
E. The obligations of Borrower under the Borrower Loan Documents and
the Santa Clara Partnership under the Santa Clara Loan Documents are
cross-defaulted; and
F. Manager has agreed, pursuant to a certain Management Agreement dated
as of March 20, 1989 between Marriott International, Inc. and Borrower (as
amended by that certain First Amendment to Management Agreement dated as of the
date hereof, as assigned by Marriott International, Inc. to Manager by an
Assignment and Assumption of Management Agreement dated as of the date hereof,
and as further amended or modified from time to time, the "Management
----------
Agreement") to manage the hotel located on the San Antonio Property; and
- ---------
G. Manager has agreed, pursuant to the Management Agreements described
in Exhibit N annexed hereto (collectively, as the same may hereafter be
---------
modified, amended or supplemented from time to time, the "Other Management
----------------
Agreements") to manage
- -----------
2
<PAGE>
the Other Borrower Properties and the Santa Clara Property; and
H. Pursuant to the Collateral Assignment of Documents and Property
Rights, dated as of the date hereof (the "Collateral Assignment of Documents"),
----------------------------------
Borrower is assigning its rights under, among other things, the Management
Agreement to Lender; and
I. It is a condition precedent to Lender making the Loans (as
hereinafter defined) that Manager execute and deliver to Lender this Agreement.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Definitions.
------------
(a) Capitalized terms used in this Agreement and not otherwise
defined in this Agreement shall have the respective meanings ascribed to them in
the Management Agreement.
(b) References in this Agreement to "Cash Management Procedures"
shall mean the Cash Management Procedures in effect as of the date hereof (as
set forth in Exhibit E annexed hereto) and any modifications thereto approved by
---------
Lender, Borrower and Manager in writing.
(C) As used herein:
(1) "Adjusted Rate" shall mean the Base Rate adjusted in
---------------
accordance with paragraph 4(e) of the Borrower Note, as such paragraph is
in effect as of the date hereof. A copy of paragraph 4(e) of the Borrower
Note is annexed hereto as Exhibit K.
----------
(2) "Base Rate" shall mean 8.19% per annum.
---------
(3) "Business Day" shall mean a day on which banks and foreign
------------
exchange markets are open for business in New York, New York.
(4) "Capital Expenditure and FF&E Reserve Account" shall have the
--------------------------------------------
meaning set forth in the Cash Management Procedures.
(5) "Cash Collateral Account" shall have the meaning set forth in
-----------------------
the Cash Management Procedures.
(6) "Cure Notice" shall mean a written notice delivered to
-----------
Manager by Lender acknowledging that an Event
3
<PAGE>
of Default has been cured (and such cure has been accepted by Lender) or
waived, which notice Lender agrees to deliver promptly upon any such cure
(if accepted by Lender) or waiver.
(7) "Debt Service Payment Date" shall mean the 11th day of each
-------------------------
calendar month or, if such date is not a Business Day, the next Business
Day immediately thereafter.
(8) "Deed in Lieu of Foreclosure" shall mean an instrument
---------------------------
transferring title to all or a portion of a Property from Borrower (or
the Santa Clara Partnership, as the case may be) to Lender or a Lender
Affiliate or from Borrower (or the Santa Clara Partnership, as the case
may be) to a third party as the result of an Event of Default under the
Borrower Loan Documents or the Santa Clara Loan Documents.
(9) "Default Interest Rate" shall mean a rate per annum equal to
---------------------
the lesser of (a) two percent (2%) above the Base Rate or Adjusted Rate,
as applicable, and (b) the maximum rate allowed by law.
(10) "Default Notice" shall mean any notice of a Payment Event of
--------------
Default or Non-Payment Event of Default from Lender or the Servicer to
Manager.
(11) "Deferred Fees" shall mean, collectively, (a) the Deferred
-------------
Incentive Management Fees payable as of the last day of Fiscal Year 1995,
as set forth in Exhibit G annexed hereto, and (b) the cumulative total
---------
(which shall not bear interest) of those portions of any Incentive
Management Fees for each Fiscal Year (or portion thereof) thereafter,
which are not paid to Manager on a current basis owing to the limitations
set forth (i) in Section 5.03 of the Management Agreement or (ii) this
Agreement.
(12) "Defeasance Deposits" shall have the meaning set forth in
-------------------
Section 2.3(f) of the Borrower Loan Agreement, as in effect as of the
date hereof, as set forth in Schedule II to the Cash Management
Procedures.
(13) "Event of Default" shall have the meaning set forth in
----------------
Section 4.1A of the Borrower Loan Agreement.
(14) "Excess Cash Flow" shall have the meaning set forth in the
----------------
Cash Management Procedures.
(15) "Excess Contributions" shall have the meaning set forth in
--------------------
Section 3(h) hereof.
4
<PAGE>
(16) "Financial Information" shall have the meaning set forth in
---------------------
Section 3(m) hereof.
(17) "General Partner" shall mean Marriott MHP Two Corporation,
---------------
the general partner of the Borrower and Santa Clara Partnership.
(18) "Lender Affiliate" shall mean a nominee or designee
----------------
controlled by Lender which shall acquire a Property on behalf of Lender
at a foreclosure sale or by Deed in Lieu of Foreclosure.
(19) "Loans" shall mean the loans evidenced by the Notes.
-----
(20) "Marriott" shall mean Marriott International, Inc., the
--------
corporate parent of Manager.
(21) "Marriott Affiliate" shall mean any corporation of which
------------------
Marriott, either directly or indirectly through one or more intermediary
corporations, owns fifty one percent (51%) or more of the voting stock.
Notwithstanding the foregoing and for purposes of this Agreement, in no
event shall Host Marriott Corporation or any entity directly or
indirectly controlled by Host Marriott Corporation (including, without
limitation, Borrower, the Santa Clara Partnership or the General Partner)
constitute a Marriott Affiliate.
(22) "Monthly Debt Service Payments" shall mean interest at the
-----------------------------
Base Rate or Default Interest Rate, as applicable, then due and payable
under the Notes, and principal then due and payable under the Notes, as
the same may be adjusted pursuant to paragraph 4(c) of the Notes as such
paragraph is in effect as of the date hereof. A copy of paragraph 4(c) of
each of the Notes is annexed hereto as Exhibit L, and a schedule of
---------
Monthly Debt Service Payments is annexed hereto as Exhibit I.
---------
(23) "Mortgages" shall mean, collectively, the Deed of Trust, the
---------
Other Mortgages, the Santa Clara Deed of Trust, and the Collateral
Mortgages and "Mortgage" means any one of the aforesaid.
(24) "Non-Payment Event of Default" shall mean any Event of
----------------------------
Default other than a Payment Event of Default.
(25) "Notes" shall mean, collectively, the Borrower Note and the
-----
Santa Clara Note.
(26) "Operating Account" shall have the meaning set forth in the
-----------------
Cash Management Procedures.
5
<PAGE>
(27) "Optional Prepayment Date" shall have the meaning set forth
------------------------
in the Cash Management Procedures.
(28) "Paid in Full" shall mean, with respect to the Notes, that
------------
all indebtedness evidenced by the Notes has been paid, provided, however,
that the Notes shall be deemed to have been Paid in Full for purposes of
this Agreement (but not for purposes of the Transaction Documents) at
such time as all of the Properties have been transferred to Lender or a
Lender Affiliate, or to one or more third party purchasers, through
foreclosure or Deeds in Lieu of Foreclosure, it being understood that the
Notes shall not be deemed to have been Paid in Full (unless all
indebtedness evidenced by the Notes shall actually have been paid) so
long as any Property remains subject to the lien of a Mortgage.
(29) "Payment Blockage Period" shall have the meaning set forth
-----------------------
in Section 8(d) hereof.
(30) "Payment Event of Default" shall mean any Event of Default
------------------------
resulting from a default in payment required under any of the Transaction
Documents.
(31) "Properties" shall mean, collectively, the San Antonio
----------
Property, the Other Borrower Properties, and the Santa Clara Property.
"Property" shall mean any one of the aforesaid.
(32) "Rating Agency" shall mean one or more of Standard & Poor's
-------------
Rating Services, Fitch Investors Services Inc., Duff & Phelps Credit
Rating Co., and Moody's Investor Service, Inc. that are, at the time of
determination, selected by Lender to rate the Securities.
(33) "Rating Comfort Letter" shall mean a letter from each Rating
---------------------
Agency pursuant to which it confirms that the taking of the action
referred to therein will not result in a withdrawal, qualification or
downgrade of the then existing ratings of the Securities.
(34) "Refinancing Debt" shall mean any refinancing in an amount
----------------
not to exceed the balance of the Secured Obligations at the time of such
refinancing after reduction of such balance resulting from liquidations
of all U.S. Obligations purchased with Defeasance Deposits, together with
indebtedness incurred to finance the reasonable costs of any such
refinancing (but not in excess of three percent (3%) of the principal
amount of any simultaneous refinancing), so long as the amount refinanced
does not exceed $266,000,000.
6
<PAGE>
(35) "Release Prices" means the amount of the proceeds of the
--------------
Loans allocated to the San Antonio Property and the Other Borrower
Properties as set forth in Exhibit J annexed hereto. Release Prices will
---------
be adjusted as follows: If the principal amount of the Borrower Note is
prepaid as a result of (i) the release of a Property (other than the
Santa Clara Property) pursuant to Section 2.6 of the Borrower Loan
Agreement, (ii) the application of U.S. Obligations pursuant to Section
2.3 of the Borrower Loan Agreement, or (iii) optional prepayment pursuant
to the last sentence of Section 3.1 of the Borrower Loan Agreement, the
Release Price for each such Property (other than the Santa Clara
Property) shall equal the product of (x) a fraction the numerator of
which is the Release Price of such Property immediately before such
adjustment and the denominator of which is the aggregate Release Prices
for all Properties (other than the Santa Clara Property) immediately
before such adjustment, times (y) the outstanding principal amount of the
Borrower Note immediately after such adjustment that will be subject to
the lien of the Deed of Trust or any Other Mortgage immediately after
such repayment.
(36) "Secured Obligations" shall mean all payments of debt
-------------------
service under the Transaction Documents, including, without limitation,
(A) Monthly Debt Service Payments, (B) the application of Excess Cash
Flow after the Optional Prepayment Date to the reduction of the principal
amount of the Notes (as provided for in the Cash Management Procedures),
(C) balloon payments, whether payable on the Optional Prepayment Date,
the Maturity Date, or in connection with the acceleration of the Notes,
(D) Yield Maintenance Premiums, and (E) default interest as set forth in
Paragraph 3(b) of each of the Notes as the same is in effect as of the
date hereof.
(37) "Securities" shall have the meaning set forth in Section 13
----------
hereof.
(38) "Securitization" shall have the meaning set forth in Section
--------------
13 hereof.
(39) "Servicer" shall mean any nationally recognized servicer of
--------
commercial mortgage loans selected by Lender.
(40) "Subordinated Fees" shall mean, collectively, all Incentive
-----------------
Management Fees and all Deferred Fees.
(41) "Successor Owner" shall mean, with respect to any Property,
---------------
any purchaser at a foreclosure sale (including, without limitation,
Lender or a Lender Affiliate, if applicable) or other sale under any
Mortgage or any transferee by Deed in Lieu of Foreclosure (including,
7
<PAGE>
without limitation, Lender or a Lender Affiliate, if applicable), and
their successors in interest and assigns.
(42) "Trade Names" shall mean the name "Marriott" and the other
-----------
words, trademarks, trade names, symbols, logos, designs, referred to in
Section 10.01A of the Management Agreement.
(43) "Transaction Documents" shall mean, collectively, the
---------------------
Borrower Loan Documents and the Santa Clara Loan Documents.
(44) "Trustee" shall have the meaning set forth in Section 12
-------
hereof.
(45) "U.S. Obligations" shall have the meaning set forth in
----------------
Section 2.3(f) of the Loan Agreements, as set forth in Schedule II to the
Cash Management Procedures.
(46) "Yield Maintenance Premiums" shall mean an amount in cash
--------------------------
that would be necessary to purchase U.S. Obligations in an amount that
would be sufficient, together with U.S. Obligations that could be
purchased with the unpaid principal of and accrued interest on the Notes
paid to Lender upon an acceleration of the Notes pursuant to Section 4.2
of each of the Loan Agreements, to provide the payments due on or prior
to, but as close as possible to, all successive Debt Service Payment
Dates after the receipt of such amount in respect of (1) the remaining
Monthly Debt Service Payments that would be required under the Notes
through and including October 11, 2007, and (2) a balloon payment of the
outstanding principal balance of the Notes and accrued and unpaid
interest as of such date as if such balloon payment were then due and
payable. A copy of Section 4.2 of each of the Loan Agreements is annexed
hereto as Exhibit M.
---------
2. Cash Management Procedures.
(a) So long as (i) the Notes have not been Paid in Full, or (ii)
Lender or a Lender Affiliate shall hold title to any Property as the result of a
foreclosure or Deed in Lieu of Foreclosure, Lender (and Servicer on its behalf),
Borrower and Manager shall comply at all times with the Cash Management
Procedures, whether or not such provisions are consistent with provisions of the
Management Agreement, and whether or not specific reference to such provisions
is made in this Agreement. At such time as (x) the Notes have been Paid in Full,
and (y) Lender or a Lender Affiliate no longer holds title to any Property as
the result of a foreclosure or Deed in Lieu of Foreclosure, all funds then held
by Lender or Servicer with respect to the Properties shall be turned over to
Manager to be held, applied or disbursed in accordance with the terms of the
8
<PAGE>
Management Agreement.
(b) Notwithstanding the provisions of Section 2(a), Manager shall
not be required to comply with the Cash Management Procedures unless and until
Servicer and each succeeding Servicer has agreed in writing for the benefit of
Manager to be bound by the terms of the Cash Management Procedures.
(c) If, after the initial Securitization, the Loans are sold as a
whole loan and thereafter, so long as the Loans are no longer subject to a
Securitization, the Cash Management Procedures will no longer apply to Manager.
(d) Section 7.12 of the Cash Management Procedures shall not apply
to Manager.
(e) Borrower and Manager agree that notwithstanding the priority of
payments set forth in Sections 4.3, 4.4, 7.9.3 and 7.10 of the Cash Management
Procedures, the calculation and payment of Incentive Management Fees, Manager
Loans and Deferred Fees shall be made pursuant to the Management Agreement,
except that if the amounts distributed to Manager pursuant to such Sections are
insufficient to pay on a current basis the amount owed Manager pursuant to such
calculation, then any unpaid Incentive Management Fees shall become a Deferred
Fee and any Manager Loans shall continue to be outstanding.
(f) Notwithstanding the terms of the Cash Management Procedures,
Lender agrees that, in the event Manager withdraws funds from that certain
Supplemental Cash Reserve (as defined in and to be established pursuant to the
terms of that certain Cash Management Supplemental Agreement for the New
Orleans, San Antonio Rivercenter, San Ramon, and Santa Clara Marriott Hotels,
dated as of the date hereof, between Borrower and Manager (the "Cash Management
---------------
Supplemental Agreement")) or makes any Manager Loan to Borrower, Manager shall
- ----------------------
not be required, at any time, to deposit either such funds into the Manager's
Account, the Lockbox Account, the Cash Collateral Account (as such terms are
defined in the Cash Management Procedures), or any other account held or
controlled by the Servicer, but shall be entitled, instead, to deposit and
maintain such funds in the Operating Account (as defined in the Cash Management
Procedures) to be used as additional Working Capital pursuant to the Management
Agreement. Further, notwithstanding the terms of the Cash Management Procedures,
Manager shall be entitled, without the need to obtain any consent from Lender,
to redeposit into the Supplemental Cash Reserve funds withdrawn from such
Supplemental Cash Reserve at such time, if any, as the Working Capital becomes
adequate again.
3. Modification of Management Agreement. Borrower and Manager hereby
------------------------------------
acknowledge and agree that so long as (i) the Notes have not been Paid in Full,
or (ii) (except as to sub-parts (d), (e), (f), (g), (l), (m), (n), (p) and (q)
of this Section
9
<PAGE>
3), Lender or a Lender Affiliate shall hold title to the San Antonio Property as
the result of a foreclosure or a Deed in Lieu of Foreclosure:
(a) All Chain Services shall be performed at Manager's cost, without
mark-up or profit, it being understood that Manager's cost includes both
Manager's out-of-pocket expenditures and allocations, determined on a fair and
equitable basis, in Manager's reasonable judgment, of Manager's, Marriott's, and
any Marriott Affiliate's overhead costs related to providing Chain Services.
(b) Notwithstanding anything to the contrary contained in the
Management Agreement, all accounting shall be done under generally accepted
accounting principles in the United States of America (as such principles may
change from time to time) applied on a consistent basis, both as to
classification of items and amounts.
(c) All third party transactions entered into by Manager in
connection with the San Antonio Property shall reflect arms' length terms that
are competitive with terms available from reputable and reliable contractors and
suppliers.
(d) Lender shall have the right, at any time, in the place and stead
of Borrower, to exercise the termination rights of Borrower under Section 4.02
and 16.02 of the Management Agreement, and shall have the right at any time
following the occurrence of an Event of Default and delivery of a Default Notice
with respect thereto and until a Cure Notice has been received by Manager with
respect to such Event of Default, to exercise any termination rights of Borrower
under the Management Agreement (including, without limitation, those set forth
in Section 4.02 and 16.02 thereof), it being agreed, however, that the rights of
Manager to manage the Property under the Management Agreement shall not be
terminated other than in accordance with the terms thereof.
(e) In calculating "Net Sales Proceeds", all payments to Lender,
including, without limitation, Defeasance Deposits, Release Prices, and Yield
Maintenance Premiums, shall be deducted from cumulative net proceeds received by
Borrower as the result of the events described in the definition of Sales
Proceeds in the Management Agreement.
(f) Following notice from Lender to Manager that Borrower has failed
to provide to Lender any Repairs and Equipment Estimates, Building Estimates or
Annual Operating Projections that Manager has provided to Borrower or was
obligated to provide to Borrower under the Management Agreement, Manager shall
promptly provide copies of the same to Lender.
(g) Following the occurrence of an Event of Default
10
<PAGE>
and delivery of a Default Notice with respect thereto, and until a Cure Notice
has been received by Manager with respect to such Event of Default, Manager
shall promptly provide to Lender copies of all Repairs and Equipment Estimates,
Building Estimates and Annual Operating Projections as and when the same are
required to be submitted to Borrower under the Management Agreement.
(h) Notwithstanding the provisions of Section 8.02E of the
Management Agreement, Manager shall not reduce the percentage contributions to
the Capital Expenditure and FF&E Reserve Account to less than the applicable
percentages of Gross Revenues specified in Section 8.02B of the Management
Agreement without the prior written consent of Lender, nor increase the
percentage contributions for the Capital Expenditure and FF&E Reserve Account to
more than 5% of Gross Revenues without the prior written consent of Lender,
provided, however, that from and after the Fiscal Year commencing on or about
January 1, 2003, Manager may increase the percentage contributions for the
Capital Expenditure and FF&E Reserve Account to not more than 6% of Gross
Revenues (or a greater percentage, provided that any contribution in excess of
6% (the "Excess Contributions") shall be subordinate to the Secured Obligations)
--------------------
in accordance with the provisions of Section 7(c) of this Agreement.
(i) To the extent that Manager in its good faith discretion
ascertains that amounts on deposit in the Capital Expenditure and FF&E Reserve
Account are in excess of the amounts anticipated to be necessary (taking into
account anticipated future deposits into the Capital Expenditure and FF&E
Reserve Account) for present or future replacements, renewals and other items
provided for in Section 8.02 of the Management Agreement, Manager will use such
excess amounts in the Capital Expenditure and FF&E Reserve Account for repairs
approved (or deemed approved) by Borrower under Section 8.03 of the Management
Agreement.
(j) Any assignment of the Management Agreement by Manager pursuant
to Section 18.01 thereof shall be subject to the prior receipt by Lender of (i)
a Rating Comfort Letter, and any such assignment in the absence of such Rating
Comfort Letter shall be void, and (ii) a guarantee by Marriott International,
Inc. of the obligations of the assignee in form reasonably satisfactory to
Lender.
(k) Following the occurrence of a Payment Event of Default and
delivery of a Default Notice with respect thereto and until receipt of a Cure
Notice with respect thereto, the following provisions shall apply:
(i) (aa) Manager shall submit to Lender for its approval (which
approval shall not be unreasonably withheld, conditioned or delayed), at
least thirty (30) days prior to the beginning of each such Fiscal Year, a
11
<PAGE>
proposed Annual Operating Projection for such Fiscal Year prepared by
Manager in good faith. Additionally, with respect to any Fiscal Year
during which Manager receives, on or prior to June 30, a Default Notice
regarding a Payment Event of Default, Lender shall have the right to
approve (which approval shall not be unreasonably withheld, conditioned
or delayed) the Annual Operating Projection applicable to such Fiscal
Year as it relates to the remainder of such Fiscal Year. Lender's
approval shall be deemed to have been given if Manager has received no
notice from Lender to the contrary within thirty (30) days after Lender's
receipt of any such proposed or then existing Annual Operating Projection
(it being understood that upon receipt of a Default Notice containing a
request for the then-current Annual Operating Projection, Manager shall
promptly send to Lender a copy of the then current Annual Operating
Projection). Any notice of disapproval delivered by Lender shall specify
the items listed in the proposed (or then existing) Annual Operating
Projection of which Lender, in good faith, disapproves. Any items not so
specified shall be deemed approved. In preparing the Annual Operating
Projection for each Fiscal Year, Manager's goal will be the maximization
of the long-term and short-term Operating Profit of the Hotel, in keeping
with Manager's standards for full service first-class Marriott hotels,
taking into account, among other factors, any new standards being
established by Manager for such hotels. Manager agrees to take reasonable
steps to ensure that, at Lender's request, qualified personnel from
Manager's staff are available to discuss with Lender any proposed Annual
Operating Projection and the Annual Operating Projection applicable to
the Fiscal Year in which the Payment Event of Default occurs. A meeting
(or meetings) for such purpose shall be held, at Lender's request, within
a reasonable period of time after Lender's request. Manager will at all
times give good faith consideration to Lender's suggestions regarding any
such proposed (or then existing) Annual Operating Projection.
(bb) Lender shall not be entitled to withhold its approval of
any item in any proposed (or then existing) Annual Operating Projection
based on its objection to: (w) Manager's reasonable projections of either
Gross Revenues or the components thereof, (x) projected costs and
expenses that are "system charges" (that is, costs and expenses that are
generally uniform among the Marriott hotels operated by Manager, Marriott
and any Marriott Affiliate, such as: the charges for Chain Services, and
employee benefits and other compensation programs); (y) costs and
expenses that are
12
<PAGE>
not within the control of Borrower, Lender or Manager, such as
Impositions and the cost of utilities; or (z) increases in projected
costs and expenses of operating the Hotel, which increases are primarily
attributable to projected increases in occupancy at the Hotel. The
approval of Lender (as set forth in Section 3(k)(i)(aa) above) shall not
be required if, and to the extent that, the proposed (or then existing)
Annual Operating Projection for a given Fiscal Year is, in all material
respects, the same as the Annual Operating Projection for the preceding
Fiscal Year with adjustments for inflation. If Lender and Manager fail to
mutually agree on any item in any proposed (or then existing) Annual
Operating Projection within the thirty (30) day period described in the
first or second sentence of Section 3(k)(i)(aa), as applicable, Lender
shall have the right to submit to arbitration (in accordance with Section
3(k)(iii) below) the issue of whether or not the Lender's disapproval of
the contested item in the proposed (or then existing) Annual Operating
Projection is reasonable, given, among other factors, the goals set forth
in the sixth sentence of Section 3(k)(i)(aa). While such arbitration
proceedings are pending, Manager shall operate the Hotel, as to the items
approved or deemed approved, in accordance with the proposed (or then
existing) Annual Operating Projection and, as to the items that were
disapproved, in accordance with the Annual Operating Projection for the
preceding Fiscal Year, with adjustments for inflation and changes in
occupancy. If Lender fails to notify Manager within ten (10) days after
expiration of the above-stated thirty (30) day period that it is
submitting a specific contested item to arbitration, then Lender shall be
deemed to have rescinded its disapproval of such contested item and such
item shall be deemed approved. The proposed (or then existing) Annual
Operating Projection shall be considered final with respect to all items
approved or deemed approved pursuant to Section 3(k)(i)(aa) and this
Section 3(k)(i)(bb) or in accordance with the decision of the arbitrators
in accordance with Section 3(k)(iii).
(cc) Each Annual Operating Projection will constitute a
standard to which Manager shall use its reasonable best efforts to
adhere. 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, materials, services and supplies,
casualty, operation of law, or economic and market conditions may make
adherence to the Annual Operating Projection impracticable, and Manager
shall be entitled to reasonable departures therefrom for such reasons and
consistent with the goal
13
<PAGE>
of maximizing long-term and short-term Operating Profit, in keeping with
Manager's standards for full service first-class Marriott hotels, taking
into account, among other factors, any new standards being established by
Manager for such hotels; provided, however, that nothing herein shall be
deemed to authorize Manager to take any action prohibited by this
Agreement or the Management Agreement nor to reduce Manager's other
rights or obligations hereunder or thereunder.
(dd) Manager shall notify Lender of any significant variations
from the Annual Operating Projection promptly after Manager learns of the
same but in no event later than the date on which Manager is required to
deliver the interim accounting statement (pursuant to Section 5.05A of
the Management Agreement) covering the period in which such variation
occurs. Lender and Manager shall, at Lender's request, meet to review
such variations and their cause and to discuss appropriate action with
respect to correcting the variations or preventing or minimizing their
occurrence or effect.
(ii) (aa) Manager shall submit to Lender for its approval (which
approval shall not be unreasonably withheld, conditioned or delayed), at
the same time as submission of the proposed Annual Operating Projection,
a proposed Repairs and Equipment Estimate prepared by Manager in good
faith. Lender's approval shall be deemed to have been given if Manager
has received no notice from Lender to the contrary within thirty (30)
days after Lender's receipt of such proposed Repairs and Equipment
Estimate. Any notice of disapproval delivered by Lender shall specify the
items shown on the proposed Repairs and Equipment Estimate of which
Lender, in good faith, disapproves. Any items not so specified shall be
deemed approved. Manager agrees to take reasonable steps to ensure that,
at Lender's request, qualified personnel from Manager's staff are
available to discuss the proposed Repairs and Equipment Estimate with
Lender. A meeting (or meetings) for such purpose shall be held, at
Lender's request, within a reasonable period of time after the submission
to Lender of the proposed Repairs and Equipment Estimate. Manager will at
all times give good faith consideration to Lender's suggestions regarding
any such proposed Repairs and Equipment Estimate that Manager is required
to submit to Lender.
(bb) Lender shall not be entitled to withhold its approval of
any particular item described in any proposed Repairs and Equipment
Estimate if such
14
<PAGE>
item is reasonably required to enable the Hotel to be or remain in
compliance with Manager's standards for full service first-class Marriott
hotels, taking into account, among other factors, any new standards being
established by Manager for such hotels. If Lender and Manager fail to
mutually agree on any particular item in the proposed Repairs and
Equipment Estimate within thirty (30) days after the submission to Lender
of the proposed Repairs and Equipment Estimate described in the first
sentence of Section 3(k)(ii)(aa), Lender shall have the right to submit
to arbitration (in accordance with Section 3(k)(iii) below) the issue of
whether or not the contested item in the Repairs and Equipment Reserve is
reasonably required to enable the Hotel to be or remain in compliance
with Manager's standards for full service first-class Marriott hotels,
taking into account, among other factors, any new standards being
established by Manager for such hotels. While such arbitration
proceedings are pending, Manager shall be entitled to make the repairs
and replacements described in the proposed Repairs and Equipment Estimate
to which Lender did not timely object, but it shall not make any of the
repairs or replacements described in the proposed Repairs and Equipment
Estimate to which Lender timely objected. If Lender fails to notify
Manager within ten (10) days after expiration of the above-stated thirty
(30) day period that it is submitting a specific contested item to
arbitration, then Lender shall be deemed to have rescinded its
disapproval of such contested item and such item shall be deemed
approved. The proposed Repairs and Equipment Estimate shall be considered
final with respect to all items approved or deemed approved pursuant to
Section 3(k)(ii)(aa) and this Section 3(k)(ii)(bb) or in accordance with
the decision of the arbitration in accordance with Section 3(k)(iii).
(iii) (aa) Disputes described in Sections 3(k)(i)(bb) and
3(k)(ii)(bb) above 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.
(bb) Lender and Manager shall each appoint, within twenty (20)
days after receipt by Manager of Lender's notice that it is submitting a
specific contested item to arbitration, a reputable, fit and impartial
person as arbitrator who shall have had at least ten (10) years' recent
professional experience in hotel management or hotel management
consulting who is not at such time employed by any competitor of Manager
15
<PAGE>
or by Manager or any of its Affiliates. Notice of such appointment shall
be sent 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 submitted,
shall appoint a third arbitrator. If either Lender or Manager shall fail
to appoint an arbitrator, as 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 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 the 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 the same qualifications as
described above. The costs and fees of the arbitrators and the
arbitration shall be paid out of Gross Revenues and shall constitute a
Deduction in the year in which the arbitration is completed, provided,
however, that the fees of respective counsel engaged by the parties and
the costs and 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.
(cc) The decision of the arbitrators shall be rendered within
thirty (30) days after appointment of the third arbitrator. Such decision
shall be in writing and in duplicate, one counterpart thereof to be
delivered to Lender and one to Manager and shall be final and binding on
the parties.
(dd) If in Manager's good faith judgment the decision of the
arbitrators would require the Manager to operate the Hotel at a standard
that is materially below Manager's standards generally applied with
respect to full service first-class Marriott hotels, taking into account,
among other factors, any new standards being established by Manager for
such hotels, Manager shall be entitled to terminate the Management
Agreement as of a date three (3) months after the date of Manager's
notice of termination to Lender and Borrower.
(l) Following (i) notice from Lender to Manager that Borrower has failed
to provide to Lender any information that Borrower has obtained or could have
obtained from an inspection of Manager's books and records (as they relate to
the San Antonio
16
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Property), or (ii) the occurrence of an Event of Default and delivery of a
Default Notice with respect thereto (unless and until a Cure Notice has been
received by Manager with respect to such Event of Default), Lender and its
agents shall have the same rights to inspect Manager's books and records (as
they relate to the San Antonio Property) and to the receipt of information
regarding the San Antonio Property from Manager as are afforded to Borrower
under the Management Agreement.
(m) Following (i) notice from Lender to Manager that Borrower has
failed to provide the financial information ("Financial Information") to Lender
---------------------
that Borrower is entitled to receive under the Management Agreement at the times
specified in the Management Agreement, or (ii) the occurrence of an Event of
Default and delivery of a Default Notice with respect thereto, and until a Cure
Notice has been received by Manager with respect to such Event of Default,
Manager shall promptly provide Financial Information to Lender, as and when the
same is required to be submitted to Borrower under the Management Agreement.
(n) Lender and its agents and designees shall have the right to inspect
the San Antonio Property at reasonable times on reasonable advance notice.
(o) Manager will provide to Lender, upon thirty (30) days' prior written
notice, a written estoppel certificate (A) stating whether or not the following
statements are correct, indicating in reasonable detail, where applicable, the
circumstances causing any of the statements not to be correct:
(i) the Management Agreement and this Agreement are in full force
and effect;
(ii) Manager is not aware of any default under the Management
Agreement or this Agreement, or any event which, with the giving of
notice, the passage of time, or both, would constitute an event of
default thereunder, nor has Manager commenced any action or served any
notice for the purpose of terminating the Management Agreement; and
(iii) all sums then due and payable to Manager under the Management
Agreement or under this Agreement have been paid in full; and
(B) setting forth a schedule of all Deferred Fees.
(p) Without the prior written consent of Lender in each instance, Manager
shall not (i) terminate (except as specifically permitted in the Management
Agreement or under this Agreement) or consent to the cancellation or surrender
of the Management Agreement, or (ii) modify the Management Agreement so as to
shorten the unexpired term thereof, or change any renewal
17
<PAGE>
option therein, or in any other material respect, or subject to the provisions
of the last sentence of this Section 3(p), in any manner impair the title to the
San Antonio Property or the validity or priority of the Deed of Trust or any
other Transaction Document. Any purported modification, amendment, termination
(except as specifically permitted in the Management Agreement or under this
Agreement), cancellation, surrender or impairment made without the prior written
consent of Lender in each instance shall be null and void as against Lender at
its option. Notwithstanding the foregoing, Manager shall not have any obligation
to expend its own funds to prevent or cure any impairment of the title to the
San Antonio Property or the validity or priority of the Deed of Trust or other
Transaction Documents, unless such impairment was caused by the acts or
omissions of Manager that were outside of the scope of its obligations under the
Management Agreement or resulted directly from the breach by Manager of its
obligations under the Management Agreement.
(q) If any act or omission by Borrower or any other act, condition or
event would give Manager the right, immediately or after notice or lapse of time
or both, to cancel or terminate the Management Agreement, Manager will not
exercise any such right and no notice of cancellation shall be effective until
(i) Manager has given written notice of such act or omission to Lender
(referring to the provisions of this Section 3(q) and the obligation to respond
thereto within the time periods hereinafter provided) and Lender has received
such notice, and (ii) a time period for remedying such act or omission equal to
(A) 60 days for any act or omission under Section 8.02 or 8.03 of the Management
Agreement, (B) 15 days for any failure to supply additional Working Capital or
cure any monetary default (except as provided in clause (A) of this Section
3(q)), (C) 45 days as to any nonmonetary act, omission, condition or event
which, in the reasonable judgment of Manager (as set forth in such notice) will,
if not cured, have a material and adverse impact on Manager's ability to operate
the Hotel in the manner required by the Management Agreement (as modified by
Sections 2 and 3 of this Agreement), and (D) 90 days for any nonmonetary act,
omission, condition or event other than as set forth in clause (C) of this
Section 3(q), shall have elapsed, which period (whether under clause (A), (B),
(C), or (D) of this Section 3(q)) shall commence on a date which shall be the
later of (x) the date of expiration of the cure period available to Borrower
under the Management Agreement, or (y) the date of Lender's receipt of the
notice referred to in Section 3(q)(i). Lender shall, within ten (10) days after
its receipt of Manager's notice of an act or omission referred to in clause (B)
above, or within thirty (30) days of its receipt of any other Manager's notice,
give Manager notice of its intention to, and with reasonable diligence
thereafter commence and continue to, remedy such act or omission or to cause the
same to be remedied. If, after delivery of such notice, Lender fails to remedy
the act or omission that it undertook in
18
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such notice to remedy, Lender shall have no liability of any kind under such
notice for such failure and Manager's sole right against Lender under this
Section 3(q), or in respect of such notice, shall be to exercise its rights
under the Management Agreement as if such notice had never been delivered. It is
recognized that Lender does not have the ability to cure the following defaults
by Borrower: bankruptcy, assignment for the benefit of creditors, or the
appointment of a receiver or trustee. Therefore, foreclosure of (or the exercise
of the power of sale pursuant to or acceptance of a Deed in Lieu of Foreclosure
thereof) the Deed of Trust or any Other Mortgage covering the San Antonio
Property shall constitute cure of such default under the Management Agreement,
and Lender shall have a reasonable period (not to exceed one (1) year) to effect
the same. Manager shall promptly give Lender copies of all notices of default
given to Borrower under the Management Agreement, but the failure of Manager to
comply with the provisions of this sentence shall not affect the efficacy of any
notice to Borrower and shall not constitute a default hereunder.
(r) Manager will not enter into any leases of FF&E other than in
accordance with the parameters set forth in Section 8.02C of the Management
Agreement.
(s) Manager shall make no Manager Loans that, when added to the
outstanding balance of previous Manager Loans, would cause the total outstanding
balance of Manager Loans to exceed the sum of (i) average amount of Deductions
for each Accounting Period during the preceding full 13 Accounting Periods, and
(ii) an amount equal to the Hotel's pro-rata share of one Monthly Debt Service
Payment then in effect (pro-rata share based on the proportion of the Hotel's
Qualifying Mortgage Debt to the amount of the Permanent Loan).
(t) References in the Management Agreement to the Debt Service Guaranty
shall be of no force and effect.
(u) The provisions of the last sentence of Section 4.01 and the last
sentence of Section 9.01(A) and (B) of the Management Agreement shall be of no
force and effect.
(v) The words "subject to the provisions of any mortgage of the Hotel"
shall be deemed added to the end of Section 15.02(B) of the Management
Agreement.
4. Assignment; Consents of Manager.
-------------------------------
(a) Manager hereby acknowledges that Borrower has, pursuant to the
Collateral Assignment of Documents, assigned and pledged its right, title and
interest in, to and under the Management Agree ment to Lender. Manager
acknowledges and consents to the express terms of the Collateral Assignment of
Documents as it relates to the Management Agreement.
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(b) To effectuate the rights set forth in Section 3(d) of this Agreement
as they relate to Section 4.02 of the Management Agreement, Borrower hereby
presently and absolutely grants, assigns, transfers and sets over unto Lender
Borrower's rights to terminate the Management Agreement under Section 4.02
thereof, until such time as the Notes are Paid in Full.
(c) Manager hereby consents to the assignment set forth in Section 4(b)
hereof.
(d) Manager hereby consents to the Secured Obligations and agrees that
both the Secured Obligations and any Refinancing Debt shall constitute
indebtedness on which all [or a portion] of the payments constitute Qualifying
Debt Service for the purposes of Section 3.01A(2)(i) and subpart (ii)(a) of
Section 18.02 of the Management Agreement, and that all conditions set forth in
Sections 3.01 and 18.02 of the Management Agreement are deemed satisfied by the
Permanent Loan.
5. Certifications, Representations and Agreements of Manager. Manager
---------------------------------------------------------
hereby certifies, represents and agrees to and with Lender as of the date
hereof, as follows:
(a) Manager is the manager under the Management Agreement, pursuant
to which the San Antonio Property is operated as a full service first-class
Marriott hotel.
(b) Annexed hereto as Exhibit F is a true and correct copy of the
---------
Management Agreement. The Management Agreement and this Agreement constitute the
entire agreement between Manager and Borrower with respect to the San Antonio
Property, other than the Cash Management Supplemental Agreement, which agreement
does not affect the rights of Lender under this Agreement or under the Cash
Management Procedures. The Management Agreement is in full force and effect as
against Manager and has not been amended or modified in any way, except as
otherwise stated in this Section 5(b) or Sections 2 or 3 of this Agreement.
(c) Manager is not aware of any default under the Management Agreement,
or any event which, with the giving of notice, the passage of time or both,
would constitute an event of default thereunder, nor has Manager commenced any
action or served any notice for the purpose of terminating the Management
Agreement. Unless earlier terminated or extended as provided therein, the
Management Agreement will terminate on December 28, 2018.
(d) All fees currently payable under the Management Agreement have
been paid in full through the last day of the eighth (8th) Accounting Period of
Fiscal Year 1996. Except as otherwise set forth in Exhibit G there are no
---------
Deferred Fees outstanding.
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(e) Except as otherwise set forth in Exhibit H annexed hereto, as of
---------
the date hereof, the San Antonio Property complies with all operating standards
and, to the best of Manager's knowledge, all property condition standards,
generally employed by Manager for full service first-class Marriott hotels.
(f) There are no property condition and operating standards generally
employed by Manager for full service first-class Marriott hotels as of the date
hereof which are not already satisfied or reflected in work provided for in the
Repairs and Equipment Estimate for Fiscal Year 1996 unless the same are
otherwise set forth in Exhibit H annexed hereto.
---------
(g) Manager has the right to use the Trade Names in connection with the
management and operation of the Hotel.
(h) To the best of Manager's knowledge, all interim and annual
accounting statements given by Manager to Borrower with respect to the San
Antonio Property are true and complete in all material respects and do not
contain any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(i) The Owner has no remaining obligations under Article VI of the
Management Agreement.
(j) Any assignment of the Management Agreement shall be subject to (i)
the provisions of Section 3(j) of this Agreement, and (ii) the assumption in
writing of the terms of this Agreement by the assignee.
6. Obligations of Lender to Provide Notices to Manager.
---------------------------------------------------
(a) Lender shall promptly give Manager copies of all Default Notices,
and Borrower acknowledges that Manager may, for purposes of this Agreement, rely
on any Default Notices.
(b) None of the provisions of this Agreement that become effective on an
Event of Default shall apply until Lender has delivered a Default Notice with
respect thereto to Manager.
(c) Lender shall give Manager copies of any material modifications to
the Borrower Loan Documents.
(d) Lender shall give Manager notice of all adjustments to the Release
Prices.
(e) The failure of Lender to comply with the provisions of this
Section 6 shall not affect the efficacy of any notice or documents as to
Borrower.
7. Subordination.
-------------
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(a) The Management Agreement and all right, title and interest of
Manager in and to the San Antonio Property and the Hotel are and shall be
subject and subordinate to the lien of the Deed of Trust and any Other Mortgage
covering the San Antonio Property; provided, however, that, notwithstanding the
foregoing subordination, neither Lender nor any successor or assignee thereof
shall name or join Manager as a party defendant in any foreclosure or otherwise
in any suit, action or proceeding commenced or maintained for the purpose of
foreclosure of the Deed of Trust or any Other Mortgage covering the San Antonio
Property or to recover possession of the San Antonio Property unless Manager or
any person claiming through or under Manager is deemed a necessary party under
the law of the applicable jurisdiction or by the court, in which event such
party may be so named or joined but such naming or joinder shall not otherwise
be in derogation of the rights of Manager set forth in this Agreement, and the
Management Agreement shall not be subject to forfeiture or termination, other
than in accordance with the terms thereof, by reason of any such suit, action or
proceeding or any judgment rendered therein, provided that nothing contained in
this Section 7(a) shall impair the exercise of any remedies by Lender under the
Borrower Loan Documents, at law or in equity, or by statute, including, without
limitation, the right to foreclose and the right to appointment of a receiver.
Should the exercise of any such remedies impair, by events not within the
control of Lender (such as operation of law or actions taken by a receiver other
than at the request of Lender), the rights of Manager under this Section 7(a) or
Section 9 hereof, Lender shall have no liability or obligation to Manager
(subject, however, to the rights of Manager under Section 9 of this Agreement
once Lender or a Successor Owner has obtained possession of the San Antonio
Property).
(b) Manager agrees that payment of all Subordinated Fees is hereby
subordinated to the Secured Obligations and, except as set forth in Section 8,
Manager will not take, retain, or receive from Borrower any Gross Revenues or
other funds of Borrower by setoff or in any other manner, in payment of the
whole or in part of the Subordinated Fees, nor any security for any of the
foregoing, unless and until the Notes have been Paid in Full and the Cash
Management Procedures are no longer operative.
(c) Manager agrees that payment of all Excess Contributions is
hereby subordinated to the Secured Obligations, and Manager will not take,
retain, or receive from Borrower any Gross Revenues or other funds of Borrower
by setoff or in any other manner (other than funds advanced by Borrower from
sources other than Gross Revenues or Operating Profit, or funds payable to
Borrower under the Cash Management Procedures), in payment of the whole or in
part of the Excess Contributions, nor any security for any of the foregoing,
unless and until the Notes have been Paid in Full and the Cash Management
Procedures are no
22
<PAGE>
longer operative.
(d) Upon the foreclosure or conveyance by Deed in Lieu of
Foreclosure of the San Antonio Property, the payment of any Subordinated Fees
(including, without limitation, any Deferred Fees) and any obligation of
Borrower to repay Manager Loans shall be deemed to have been waived as to
Lender, any Lender Affiliate, and any Successor Owner, and as to the San Antonio
Property, but shall not be deemed to have been waived as to Borrower.
8. Payment of Subordinated Fees and Manager Loans.
----------------------------------------------
(a) Subject to the provisions of this Section 8, Manager, shall,
for any period prior to the earlier to occur of (i) the occurrence of an Event
of Default and receipt by Manager of a Default Notice, or (ii) the Optional
Prepayment Date, be entitled to accept from Borrower, Lender or Servicer (as
applicable), repayment of Manager Loans and accrued interest thereon, and
payments of Subordinated Fees, each of which shall be payable (in the order of
priority set forth in and to the extent payable under Section 5.03 of the
Management Agreement) solely from funds (if any) payable to Manager under
Section 4.3(G) or 7.9.3(C) (whichever is then applicable) of the Cash Management
Procedures.
(b) Following the Optional Prepayment Date, Manager shall not be
entitled to and shall not accept from Borrower, Lender or Servicer (as
applicable), repayment of Manager Loans or accrued interest thereon or payments
of any Subordinated Fees (other than (i) repayment of Manager Loans and accrued
interest thereon, provided that for such purpose the principal balance of any
Manager Loan shall be amortized on a five year straight line basis, from the
later of (x) the date funds were advanced, or (y) the Optional Prepayment Date,
and (ii) payment of Incentive Management Fees for the then current Fiscal Year),
which shall be payable (in the order of priority set forth in and to the extent
payable under Section 5.03 of the Management Agreement) solely from funds (if
any) payable to Manager under Section 4.4(G) or 7.10(C) (whichever is then
applicable) of the Cash Management Procedures).
(c) Upon the occurrence of any Payment Event of Default and
receipt by Manager of a Default Notice with respect thereto, Manager shall not
be entitled to and shall not accept from Borrower, Lender or Servicer (as
applicable), repayments of Manager Loans or accrued interest thereon, or
payments of any Subordinated Fees, unless and until a Cure Notice in respect of
such Payment Event of Default shall have been received by Manager, after which
Manager shall again, subject to all of the other terms and conditions of this
Agreement, be entitled to repayments of Manager Loans and accrued interest
thereon and payments in respect of Subordinated Fees (excluding Deferred Fees,
if subsequent to the Optional Prepayment Date), including
23
<PAGE>
any such payments not previously made for the period commencing with the giving
of the Default Notice and ending with the giving of the Cure Notice, each of
which shall be payable (in the order of priority set forth in and to the extent
payable under Section 5.03 of the Management Agreement) solely from funds (if
any) payable to Manager under Section 4.3(G), 7.9.3(C), 4.4(G) or 7.10(C)
(whichever is then applicable) of the Cash Management Procedures.
(d) Upon any Non-Payment Event of Default and receipt by Manager
of a Default Notice with respect thereto, Manager shall not be entitled to and
shall not accept from Borrower, Lender or Servicer (as applicable), repayment of
any Manager Loans or accrued interest thereon, or payments of any Subordinated
Fees, for a period (a "Payment Blockage Period") commencing on the date of the
-----------------------
receipt by Manager of such Default Notice and ending upon the earliest of the
date (x) 180 days thereafter, (y) the date on which a Cure Notice with respect
to such Non-Payment Event of Default shall have been received by Manager, or (z)
such Payment Blockage Period shall have been terminated by notice to Manager
from Lender, after which Manager shall again, subject to all of the other terms
and conditions of this Agreement, be entitled to repayments of Manager Loans and
accrued interest thereon and payments in respect of the Subordinated Fees
(excluding Deferred Fees if subsequent to the Optional Prepayment Date),
including any such payments not previously made during the Payment Blockage
Period, each of which shall be payable (in the order of priority set forth in
and to the extent payable under Section 5.03 of the Management Agreement) solely
from funds (if any) payable to Manager under Section 4.3(G), 7.9.3(C), 4.4(G) or
7.10(C) (whichever is then applicable) of the Cash Management Procedures.
(e) No Non-Payment Event of Default under any Secured Obligation
that existed on the date of the commencement of any Payment Blockage Period
shall be made the basis for the commencement of a second Payment Blockage
Period, but the occurrence of a similar Non-Payment Event of Default (such as,
for example, the failure by Borrower or the Santa Clara Partnership, as the case
may be, to comply, on a second occasion, with the same obligation as gave rise
to the initial Non-Payment Event of Default) shall be the basis for the
commencement of a second Payment Blockage Period.
(f) Notwithstanding anything in Section 8(d) hereof to the
contrary, in the event that the maturity of any Secured Obligation is
accelerated by Lender, or Lender commences an action (judicial or nonjudicial)
to foreclose on any of the Mortgages as a result of an Event of Default, or
Lender commences an action or proceeding for the appointment of a receiver or
receivers with respect to all or any portion of any Property as the result of an
Event of Default, then any Non-Payment Event of Default shall, for purposes of
this Section 8, be deemed to have
24
<PAGE>
the effect of a Payment Event of Default, in which event the payment or non-
payment of Manager Loans and accrued interest thereon and Subordinated Fees
shall be governed by Section 8(c) hereof, provided, however, that if all such
receivers are discharged prior to the time at which (A) the maturity of any
Secured Obligation is accelerated by Lender or (B) Lender commences an action
(judicial or nonjudicial) to foreclose on any of the Mortgages, then upon the
discharge of all such receivers (and until such time as the maturity of any
Secured Obligation is accelerated by Lender, or Lender commences an action
(judicial or nonjudicial) to foreclose on any of the Mortgages) Manager shall
again, subject to all of the other terms and conditions of this Agreement, be
entitled to repayments of Manager Loans and accrued interest thereon and
payments in respect of the Subordinated Fees (excluding Deferred Fees if
subsequent to the Optional Prepayment Date), including any such payments not
previously made during the Payment Blockage Period, each of which shall be
payable (in the order of priority set forth in and to the extent payable under
Section 5.03 of the Management Agreement) solely from funds (if any) payable to
Manager under Section 4.3(G), 7.9.3(C), 4.4(G) or 7.10(C) (whichever is then
applicable) of the Cash Management Procedures.
(g) In the event that there are insufficient funds available to
make permitted repayment of all Manager Loans and accrued interest thereon and
permitted payments of all Subordinated Fees, payment shall be made in the
following order of priority: (i) accrued interest on Manager Loans, (ii) the
outstanding principal balance of Manager Loans, (iii) current Incentive
Management Fees, and (iv) Deferred Fees, if applicable.
(h) If Manager is entitled under Sections 8(a), (b), (c), (d) or
(f) hereof to repayment of Manager Loans and accrued interest thereon or
payments of Subordinated Fees, Borrower (or the Servicer on its behalf) shall
make such payments from available cash subject to, and in accordance with, the
Cash Management Procedures.
(i) In the event that, notwithstanding the foregoing, Borrower,
Lender or Servicer, as applicable, shall make any payment to Manager to which
Manager is not entitled by this Section 8 or the Cash Management Procedures,
then such payment shall be received in trust by the Manager and paid over and
delivered forthwith by the Manager to Lender for deposit into the Cash
Collateral Account.
9. Non-Disturbance and Attornment.
------------------------------
(a) If, at any time, a Successor Owner shall succeed to the rights
of Borrower under the Management Agreement or otherwise obtain possession of the
San Antonio Property as a result of the exercise of Lender's rights upon the
occurrence of an Event of Default (whether voluntary, involuntary or by
25
<PAGE>
operation of law) prior to the expiration date of the Management Agreement,
Lender agrees (which agreement shall be binding on all Successor Owners) that
the terms of the Management Agreement shall be binding on each Successor Owner
if, at the time such Successor Owner succeeds to the rights of Borrower (1)
Manager is in compliance with the terms and provisions of this Agreement in all
material respects, the Management Agreement is in full force and effect (or has
been terminated as a result of Borrower's bankruptcy or the actions of a
receiver, and such Successor Owner has or is in the process of obtaining a new
Management Agreement pursuant to the provisions of Section 9(b) hereof) and
Manager is not then in default in any material respect under the Management
Agreement beyond any applicable grace periods provided for therein, or (2) if
the provisions of clause (1) above are not satisfied but the Successor Owner
nevertheless waives such provisions in writing, then (i) all Successor Owners
shall recognize the rights of Manager under the Management Agreement, (ii)
Manager shall not be disturbed in its right to manage the San Antonio Property
pursuant to the Management Agreement, (iii) the Management Agreement shall not
terminate as a result of Lender's actions (or if terminated as set forth in
clause (1) above, shall, subject to the provisions of Section 9(b) hereof, be
reinstated), (iv) Manager shall attorn to and recognize the Successor Owner as
the "Owner" under the Management Agreement, and (v) the Successor Owner shall
accept such attornment and recognize Manager as the manager of the San Antonio
Property under the Management Agreement. Upon such attornment and recognition,
the Management Agreement shall continue in full force and effect as, or as if it
were, a direct Management Agreement between the Successor Owner and Manager upon
and subject to all of the then executory terms, conditions and covenants as are
set forth in the Management Agreement (as amended by Sections 2 and 3 of this
Agreement, if the Successor Owner is Lender or a Lender Affiliate) and which
shall be applicable to the San Antonio Property after such attornment and
recognition. Manager further agrees that the following shall apply following a
foreclosure of the San Antonio Property or a Deed in Lieu of Foreclosure:
(i) No Successor Owner shall be liable for any act or
omission of Borrower under the Management Agreement;
(ii) No Successor Owner shall be subject to any offsets,
defenses or counterclaims accruing prior to the date or dates of
foreclosure or delivery of a Deed in Lieu of Foreclosure that Manager
might have against Borrower under the Management Agreement;
(iii) No Successor Owner, in its capacity as Successor
Owner, shall be liable for payment of any Deferred Fees or Manager Loans
or accrued interest thereon accruing or made prior to the date on which
such Successor Owner acquires title to the San Antonio Property;
26
<PAGE>
(iv) No Successor Owner shall be bound by any amendment or
modification of the Management Agreement or by any waiver or forbearance
on the part of Borrower under the Management Agreement requiring the
consent of Lender made or given without the prior written consent of
Lender;
(v) Except as set forth in Section 9(a)(vi) hereof, and
except with respect to the obligations of Lender (or the Servicer, on
Lender's behalf) under the Cash Management Procedures, neither Lender nor
any Lender Affiliate shall in any event or at any time be personally
liable for the payment or performance of the obligations required by or
permitted of the Owner under the Management Agreement or in any document
executed in connection with the Management Agreement by Lender or such
Lender's Affiliate, and the sole recourse of Manager shall be against the
interest of Lender or such Lender Affiliate in the Management Agreement
or the San Antonio Property (or portion thereof so acquired), and no
attachment, execution, writ or other process for enforcement of a
judgment for damages shall be initiated by or on behalf of Manager
against Lender or such Lender Affiliate personally (other than such
interest as Lender or Lender Affiliate may have in the Management
Agreement or the San Antonio Property) as a result of any such breach or
default;
(vi) Lender and any Lender Affiliate shall be bound by the
covenants and agreements contained in the Management Agreement on the
part of the Owner only with respect to the period beginning with the date
of the transfer of the Owner's interest in the Management Agreement to
Lender or such Lender Affiliate and ending on the date of its subsequent
transfer of such interest to its successors;
(vii) No Successor Owner shall be bound by the covenants
and agreements contained in the Management Agreement on the part of the
Owner for any period following its subsequent transfer of the Owner's
interest to its successors;
(viii) No Successor Owner shall have any liability for a
breach by Borrower (but not by any prior Successor Owner) or Manager of
the Cash Management Procedures, provided that this provision shall not in
any way release Lender or Servicer of their respective obligations under
the Cash Management Procedures; and
(ix) No Successor Owner shall have any liability or
obligation for any application or transfer fee in connection with the
substitution of such party as Owner under the Management Agreement.
(b) If the Management Agreement shall be rejected or
27
<PAGE>
disaffirmed pursuant to any bankruptcy law or any other law affecting creditors'
rights, or suspended or terminated by the actions of a receiver, Lender or any
Successor Owner and Manager shall, within sixty (60) days after such Successor
Owner obtains possession of the San Antonio Property or portion thereof, enter
into a new agreement for the management thereof on the same terms and conditions
as are contained in the Management Agreement (as amended to reflect the
provisions of Sections 3 and 10 hereof, if such Successor Owner is Lender or a
Lender Affiliate), and other applicable provisions of this Agreement for the
remainder of the term of the Management Agreement, provided, however, that (i)
neither Lender nor any Successor Owner shall have such obligation if the
conditions set forth in Section 9(a) hereof have not been satisfied by Manager,
and (ii) neither Lender nor any Successor Owner nor Manager shall have such
obligation as to the San Antonio Property if Lender or the Successor Owner shall
not have obtained possession of the San Antonio Property within one (1) year
after the date of termination or suspension of the Management Agreement. Neither
Lender nor any Successor Owner shall have any liability or obligation for any
application or transfer fee in connection with such new agreement.
10. Modifications Following Foreclosure:
-----------------------------------
(a) The restrictions in Section 19.01 of the Management Agreement
shall not apply to any acquisition of the Hotel at a foreclosure sale or by Deed
in Lieu of Foreclosure by Lender or a Lender Affiliate.
(b) The provisions of Section 19.02 of the Management Agreement
(giving Manager a right of first refusal to purchase the Hotel) shall not apply
to any foreclosure sale in connection with the Deed of Trust or any Other
Mortgage covering the San Antonio Property, any Deed in Lieu of Foreclosure, or
any sale of the Hotel by Lender or a Lender Affiliate.
11. No Litigation, No Bankruptcy Filings. Manager agrees not to
------------------------------------
bring any action against Borrower nor to cause the filing of a petition in
bankruptcy against Borrower for non-payment to Manager of any Base Management
Fee, Incentive Management Fee, Deferred Fee, Manager Loans or accrued interest
thereon or other amounts payable to Manager under the Management Agreement until
the Notes have been Paid in Full, and (as to the filing of a petition in
bankruptcy) the expiration of a period equal to the applicable preference period
under the Federal Bankruptcy Code (Title 11 of the United States Code) plus ten
(10) days following the date on which the Notes have been Paid in Full. The
foregoing shall not in any way affect the rights of Manager to bring an action
against Lender or the Servicer, or Lender to bring an action against Manager,
for breach of their respective obligations under this Agreement.
12. Assignment by Lender. Manager acknowledges that Lender
--------------------
28
<PAGE>
may assign all (but not less than all) of its right, title and interest in, to
and under this Agreement in connection with a sale or assignment of the Notes
and the other Transaction Documents to a third party, including, without
limitation, to an agent for one or more participants, or a trustee (the
"Trustee") for the benefit of holders (the "Holders") of the Securities, and
------- -------
Manager agrees that all of the covenants and agreements made by Manager in this
Agreement (and in the Management Agreement if Lender succeeds to the rights of
the Owner thereunder) are also for the benefit of, and that all of the rights of
Lender hereunder shall inure to the benefit of, the successors and assigns of
the Lender in connection with any such sale or assignment of the Notes and other
Borrower Loan Documents and Santa Clara Loan Documents, including, without
limitation, a Trustee and any Holders. Except as set forth above, Lender shall
not assign its rights hereunder without Manager's prior written consent, which
consent shall not be unreasonably withheld, conditioned or delayed.
13. Securitization.
--------------
(a) Manager shall use commercially reasonable efforts to cooperate
with Lender in its activities in connection with the sale of the Loans as a
whole loan or any securitization of the Loans (the "Securitization"), including
--------------
obtaining ratings of the Loans or the Securities by the Rating Agencies and
annual rating reviews of the Loans or the Securities by the Rating Agencies. The
Securitization will involve the issuance of rated single- or multi-class
securities secured by or evidencing ownership interests in the Transaction
Documents (the "Securities"). Such cooperation shall include, without
----------
limitation, the obligation to cooperate with Lender in providing to the Rating
Agencies such information as is customarily provided by a property manager on
behalf of a borrower in connection with annual reviews conducted in commercial
mortgage backed securities transactions similar to the Securitization, provided,
however, that in no event shall Manager be required to cooperate in any request
for Manager, Marriott or any Marriott Affiliate to be rated by any Rating Agency
that, as of the date hereof, does not rate Manager, Marriott, or any Marriott
Affiliate.
(b) Lender shall indemnify, defend and hold Manager, Marriott and
all Marriott Affiliates (and their respective directors, officers, shareholders,
employees and agents) harmless from and against all loss, costs, liability and
damage, including attorneys' fees and expenses, and the costs of litigation
related thereto (collectively "Losses") to which any such persons may become
------
subject under the Securities Act of 1933, as amended, or otherwise, insofar as
the Losses arise out of or are based upon any untrue statement of material fact
contained in the offering documents used in the offering of the Securities or
any other securities issued by Lender with respect to the Loans or arise out of
or are based upon the omission or alleged omission to
29
<PAGE>
state in such offering documents a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading; provided, however, that the
-------- -------
indemnification contained herein shall not be operative if such untrue statement
or omission was made in reliance upon any information given by Manager to
Borrower or the Santa Clara Partnership.
14. Disclosure. Borrower, Lender, the Servicer, and the Trustee may
----------
disclose information regarding the Management Agreement and this Agreement and
the operation of the Hotel, and provide copies of the Management Agreement, this
Agreement, and any financial statements or reports delivered by Manager pursuant
to the Management Agreement or this Agreement to Lender, the Trustee and
Servicer or any holder of the Securities, and any counsel to or agents,
officers, employees, and representatives of any such Person, and may disclose
and describe the terms hereof and of the Management Agreement in any offering
memorandum, prospectus, or registration statement or other filing required under
applicable law, provided, however, that (i) Borrower, the Servicer, Lender, and
-------- -------
the Trustee, shall implement procedures to restrict the dissemination of
information to the holders of the Loan or the Securities concerning revenues per
available rooms, Gross Revenues, Operating Profit, and occupancy and room rate
statistics of the Hotel to the extent reasonably practicable, giving due regard
to the desire of holders of the Securities to have access to such information
and to the requirements of applicable securities laws and (ii) any disclosure of
information in any offering memorandum, prospectus, or registration statement,
or other filing which is accessible to the general public ("disclosure
document") required under applicable law or to any prospective holder of the
Securities concerning revenue per available rooms, Gross Revenues, Operating
Profit, occupancy and room rate statistics shall be made in the following
format: (A) such information (excluding Operating Profit) may be disclosed in a
narrative description in the text of a disclosure document, on a property by
property basis identifying the San Antonio Property and each of the Other
Properties by name, but only for the thirteen (13) Accounting Periods
immediately preceding the disclosure, and (B) such information (including
Operating Profit) may be disclosed in tabular form in an exhibit to a disclosure
document that is not immediately adjacent to the foregoing narrative description
(in the case of a prospectus, the degree of separation between exhibit and
narrative description will be substantially similar to that in the Prospectus
Supplement dated March 25, 1996, for Nomura Asset Securities Corporation,
Commercial Mortgage Pass-Through Certificates, Series 1996-MD V), on a property
by property basis referring to the Property and each of the Other Properties by
use of codes so that the actual identity is not disclosed (e.g. "Property A",
"Property B", "Property C" and "Property D"), but only for the preceding two
Fiscal Years.. Notwithstanding the foregoing, any such offering memorandum,
prospectus, registration or other
30
<PAGE>
filing required under applicable law or given to any prospective holder of the
Securities, may identify the Hotel by specific location, number of rooms, date
of opening, appraised value, average occupancy, average daily room rate, and
revenue per available rooms, and such other information as is required by
applicable securities laws.
15. Default by Manager. A failure by Manager (i) to make good faith
------------------
efforts to comply with all material provisions of the Cash Management Procedures
that are within the control of Manager, which failure shall continue for more
than ten (10) days after written notice thereof from Lender or the Servicer (it
being understood that Manager's obligation to make transfers of Operating Profit
is conditioned on the Servicer's compliance in all material respects with its
obligation to transfer funds to Manager in accordance with the requirements of
the Cash Management Procedures) or (ii) to comply in all material respects with
the provisions of Sections 3(l), 3(m), 3(n) or 13 of this Agreement, which
failure shall continue for more than thirty (30) days after written notice
thereof from Lender or the Servicer, shall be deemed by Borrower and Manager to
constitute an "event of default" of Manager under the Management Agreement and
an Event of Default under the Loan Agreements. In addition, a purported
assignment by Manager of the Management Agreement without receipt of the Rating
Comfort Letter referred to in Section 3(j) of this Agreement shall be deemed an
"event of default" of Manager under the Management Agreement and an Event of
Default under the Loan Agreements if either Manager or the purported assignee of
the Management Agreement claims that such assignment is valid.
16. Miscellaneous.
-------------
(a) Nothing contained in this Agreement shall in any way impair or
affect the lien created by the Deed of Trust or any Other Mortgage covering the
San Antonio Property. The provisions of this Section 16(a) are not intended to
modify the rights of Manager under Sections 7, 8 and 9 hereof.
(b) Manager and Borrower each acknowledge that nothing contained
in the Management Agreement shall be deemed an amendment to the Borrower Loan
Documents, or to constitute a waiver by Lender of any provisions thereof.
(c) Manager shall have no obligation to perform the obligations of
Borrower under the Borrower Loan Documents, except to the extent such
obligations constitute obligations of Manager under the Management Agreement or
this Agreement. In no event shall Manager have any liability for payment of the
Secured Obligations (but the provisions of this sentence shall not affect the
obligations of Manager under the Cash Management Procedures).
(d) This Agreement shall bind and inure to the benefit
31
<PAGE>
of the parties hereto, and every reference herein to the parties shall be deemed
to refer to each of those parties and their respective successors in interest
and assigns as permitted hereunder and under the Management Agreement.
Notwithstanding the provisions of the immediately preceding sentence, in the
event of the assignment or transfer of the interest of Lender in and to all of
the Borrower Loan Documents, all obligations and liabilities of Lender under
this Agreement shall terminate, and thereupon all obligations and liabilities
shall be the sole responsibility of the party to whom the interest of Lender has
been assigned or transferred, which assignee shall be deemed to have assumed all
of the obligations and liabilities of Lender hereunder. Acceptance of any such
assignment shall be deemed an acknowledgement by the assignee that it has so
assumed all of the obligations and liabilities of Lender hereunder.
Notwithstanding the foregoing, there shall be no termination of obligations and
liabilities incurred prior to the assignment by or termination of a Servicer
with respect to the obligations of such Servicer under the Cash Management
Procedures.
(e) Manager agrees that this Agreement satisfies any condition or
requirement in the Management Agreement relating to the granting of a
non-disturbance agreement (including, without limitation, Section 18.02 thereof)
from the holder of the Deed of Trust or any Other Mortgage covering the San
Antonio Property.
(f) All notices and other communications hereunder (including,
without limitation, notices that Lender is obligated to give to Manager under
Section 6 hereof) shall be in writing and shall be delivered by recognized
overnight courier service or mailed by certified or registered mail, return
receipt requested, postage prepaid, and shall be deemed to have been duly given
or made when received (or when delivery is refused), addressed to each of the
parties at the following addresses (provided, however, such addresses may be
changed by giving like notice for such purpose to the other parties):
If to Lender:
Nomura Asset Capital Corporation
2 World Financial Center, Building B
New York, New York 10281
Att:Daniel S. Abrams, Director
With a copy to:
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
Att:Robert I. Fisher, Esq.
and
32
<PAGE>
Nomura Asset Capital Corporation
2 World Financial Center, Building B
New York, New York 10281
Att:Sheryl McAfee
If to Manager:
Marriott Hotel Services, Inc.
10400 Fernwood Road
Bethesda, Maryland 20817
Att:Law Department - Dept. 52.923/Lodging Operations
With a copy to:
Marriott International, Inc.
10400 Fernwood Road
Bethesda, Maryland 20817
Att:Lodging Finance - Dept. 51.911.01
If to Borrower:
Marriott Hotel Properties II Limited Partnership
c/o Host Marriott Corporation
10400 Fernwood Road
Bethesda, Maryland 20817
Att:Law Department 923/Deputy General Counsel
With a copy to:
Marriott Hotel Properties II Limited Partnership
c/o Host Marriott Corporation
10400 Fernwood Road
Bethesda, Maryland 20817
Att:Asset Management Department 908
(g) The provisions of this Agreement shall be self-operative and no
further instrument shall be necessary to effect the aforementioned
non-disturbance, attornment, recognition and subordination. Nevertheless, in
confirmation thereof, Manager or Lender shall execute and deliver appropriate
certificates to confirm such non-disturbance, attornment, recognition and
subordination upon request of the other.
(h) The parties hereto will, from time to time upon the request of
any other party, execute all reasonable instruments of further assurance and all
such reasonable supplemental instruments with respect to this Agreement as the
other may specify.
(i) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO NEW
YORK'S PRINCIPLES OF
33
<PAGE>
CONFLICTS OF LAW). NOTWITHSTANDING THE FOREGOING, NOTHING HEREIN SHALL AFFECT
THE CHOICE OF LAW PROVI SIONS OF THE TRANSACTION DOCUMENTS.
(j) No amendment, modification, supplement, termination or waiver of
or to any provi sion of this Agreement, or consent to any departure by Manager
there from, shall be effective unless in writing and signed by Lender or its
successors and assigns and Manager. Any amendment, modification or supplement of
or to any provision of this Agree ment, any waiver of any provision of this
Agreement, and any consent to any departure by Manager from the terms of any
provi sion of this Agreement shall be effec tive only in the specific instance
and for the specific purpose for which made or given.
(k) This Agreement and any amendments, waivers, consents or
supplements hereto may be exe cu ted in any number of counterparts and by
different parties here to in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original, but all such
counterparts shall constitute one and the same agreement.
(l) TO THE EXTENT PERMITTED BY LAW, THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY SUIT, ACTION, OR PROCEEDING
ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT OR THE SUBJECT
MATTER HEREOF.
(m) Wherever there is any conflict or inconsistency between any
terms or provisions of this Agreement and the Management Agreement, the terms
and provisions of this Agreement shall control.
(n) Manager and Borrower each acknowledge that Lender is relying on
the matters contained herein.
(o) Any party to this Agreement may cause a short form or memorandum
hereof, in form reasonably satisfactory to all parties (or the Agreement in its
entirety, if required by applicable law) to be recorded in the land records of
the jurisdiction in which the San Antonio Property is located.
(p) At such time as the Deed of Trust and any Other Mortgage
covering the San Antonio Property is released pursuant to the provisions of
Section 2.3 or 2.6 of the Borrower Loan Agreement, the security interest in the
Management Agreement granted to Lender under the Collateral Assignment of
Documents and the rights granted to Lender by this Agreement shall be
terminated, and all obligations of Manager hereunder owed to the Lender shall
terminate and Lender shall, on Manager's request, deliver a written instrument
in recordable form acknowledging such termination.
(q) In consideration for and as an inducement to
34
<PAGE>
Lender entering into this Agreement, Marriott International, Inc. (i) represents
that Manager is its wholly owned subsidiary and is controlled by Marriott
International, Inc., and (ii) guarantees to Lender and any Lender Affiliate, and
their respective successors and assigns, the full performance and observance of
all of the covenants, conditions and agreements of Manager contained in this
Agreement and in the Management Agreement, as each may, from time to time, be
amended (whether or not notice of such amendment is delivered to Marriott
International, Inc.).
(Signature page follows)
35
<PAGE>
IN WITNESS WHEREOF, we have set our hands as of the day and year first
above written.
MARRIOTT HOTEL SERVICES, INC., a
Delaware corporation
Attest:
__________________ By: /s/ James L. Best
--------------------------------------
Name: James L. Best
Title: Vice President
NOMURA ASSET CAPITAL CORPORATION, a
Delaware corporation
Attest:
___________________ By: /s/ Daniel S. Abrams
--------------------------------------
Name: Daniel S. Abrams
Title: Director
MARRIOTT HOTEL PROPERTIES II LIMITED
PARTNERSHIP, a Delaware limited
partnership
By: Marriott MHP Two Corporation,
General Partner
Attest:
____________________ By: /s/ Douglas W. Henry
-------------------------------
Name: Douglas W. Henry
Title: Vice President
For the purposes of Section 16(q) hereof:
MARRIOTT INTERNATIONAL, INC., a Delaware
corporation
By: /s/ James L. Best
Name: James L. Best
Title: Vice President
This document was prepared by/after recording return to:
Stephen R. Senie
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
36
<PAGE>
STATE OF MARYLAND )
) ss:
COUNTY OF MONTGOMERY )
Know all men by these presents that before me, the below-named Notary
Public in and for the State and County named above duly commissioned to take
acknowledgments, there personally appeared James L. Best who is personally known
to me to be a person named in and who signed the legal instrument to which this
acknowledgment is attached and which was produced to me in the State and County
aforesaid, and being by me first duly sworn did acknowledge, depose and say to
me that he resides at Montgomery County, Maryland, that he is a Vice President
of Marriott Hotel Services, Inc., a Delaware corporation and one of the parties
to the aforementioned legal instrument; that after being duly informed of the
contents and import of such legal instrument he had signed such legal instrument
as the Vice President of such entity indicated above; that he had signed the
same in the name of and on behalf of such entity by the authority, order and
resolution thereof; that he had signed his name thereto on behalf of said entity
by like order; that the execution of said legal instrument was his free and
voluntary act and deed of said entity for the consideration, purposes, and uses
set forth in such legal instrument; that he had delivered such legal instrument
to the other parties thereto as such; and that on behalf of said entity he had
received a true copy of such legal instrument without charge.
IN WITNESS WHEREOF, I have signed and imprinted my official notarial
seal on this acknowledgment in the State and County named above on the 13th day
of November, 1996.
/s/ Laila E. Skoftleland
------------------------
Notary Public
My commission expires: November 1, 1998
----------------
Notary Seal
Print Name: Laila E. Skofteland
-------------------
37
<PAGE>
STATE OF MARYLAND )
) ss:
COUNTY OF MONTGOMERY )
Know all men by these presents that before me, the below-named Notary
Public in and for the State and County named above duly commissioned to take
acknowledgments, there personally appeared James L. Best who is personally known
to me to be a person named in and who signed the legal instrument to which this
acknowledgment is attached and which was produced to me in the State and County
aforesaid, and being by me first duly sworn did acknowledge, depose and say to
me that he resides at Montgomery County, Maryland, that he is a Vice President
of Marriott International, Inc., a Delaware corporation, the general partner of
Marriott Hotel Properties II Limited Partnership, a Delaware limited
partnership, and one of the parties to the aforementioned legal instrument; that
after being duly informed of the contents and import of such legal instrument he
had signed such legal instrument as the Vice President of such entity indicated
above; that he had signed the same in the name of and on behalf of such entity
by the authority, order and resolution thereof; that he had signed his name
thereto on behalf of said entity by like order; that the execution of said legal
instrument was his free and voluntary act and deed of said entity for the
consideration, purposes, and uses set forth in such legal instrument; that he
had delivered such legal instrument to the other parties thereto as such; and
that on behalf of said entity he had received a true copy of such legal
instrument without charge.
IN WITNESS WHEREOF, I have signed and imprinted my official notarial
seal on this acknowledgment in the State and County named above on the 13th day
of November, 1996.
/s/ Laila E. Skoftleland
------------------------
Notary Public
My commission expires: November 1, 1998
----------------
Notary Seal
Print Name: Laila E. Skofteland
-------------------
38
<PAGE>
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
Before me, Robert E. Zalin, Notary Public on this day personally
appeared Daniel S. Abrams, know to me (or proved to me on his oath) to be the
person whose name is subscribed to the foregoing instrument, and know to me to
be a director of Nomura Asset Capital Corporation, a Delaware corporation, and
acknowledged to me that he executed said instrument for the purposes and
consideration therein expressed, and as the act of said corporation. Given under
my hand and official seal this 23rd day of September, 1996, A.D.
/s/ Robert E. Zalin
------------------------
Notary Public
My commission expires: April 15, 1998
--------------
Notary Seal
Print Name: Robert E. Zalin
---------------
39
<PAGE>
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
Before me, Robert E. Zalin, Notary Public on this day personally
appeared Douglas W. Henry, know to me (or proved to me on his oath) to be the
person whose name is subscribed to the foregoing instrument, and know to me to
be a Vice President of MHP Two Corporation, a Delaware corporation which is the
general partner of Marriott Hotel Properties II Limited Partnership, a Delaware
limited partnership, and acknowledged to me that he executed said instrument for
the purposes and consideration therein expressed, and as the act of said limited
partnership. Given under my hand and official seal this 23rd day of September,
1996, A.D.
/s/ Robert E. Zalin
------------------------
Notary Public
My commission expires: April 15, 1998
--------------
Notary Seal
Print Name: Robert E. Zalin
---------------
40
<PAGE>
Exhibits
A - Legal Description (San Antonio)
B - Legal Description (New Orleans)
C - Legal Description (San Ramon)
D - Legal Description (Santa Clara)
E - Cash Management Procedures
F- Management Agreement and Amendments
G - Outstanding Deferred Fees
H - Non-compliance by Property with current Marriott Hotel standards
I - Monthly Debt Service Payments (Schedule)
J - Release Prices
K - Paragraph 4(e) of Borrower Note (text)
L - Paragraph 4(c) of Notes (text)
M - Section 4.2 of Loan Agreements (text)
N - Other Management Agreements
41
<PAGE>
Exhibit 10.7
FIRST AMENDMENT TO MANAGEMENT AGREEMENT
SAN ANTONIO RIVERCENTER MARRIOTT HOTEL
This Amendment ("Amendment") is effective as of the 23rd day of
September, 1996 ("Amendment Date") by MARRIOTT HOTEL PROPERTIES II LIMITED
PARTNERSHIP ("Owner"), a Delaware limited partnership, with a mailing address at
10400 Fernwood Road, Bethesda, Maryland 20817 and MARRIOTT HOTEL SERVICES, INC.
("Management Company") a Delaware corporation, with a mailing address at 10400
Fernwood Road, Bethesda, Maryland 20817.
WHEREAS, Owner, Marriott Hotels, Inc. (renamed Marriott International,
Inc.) and Marriott Corporation entered into that certain Management Agreement
("Management Agreement") executed as of March 20, 1989, which was assigned to
Management Company by that certain Assignment and Assumption of Agreements of
even date herewith, whereby Management Company has agreed to manage Owner's
hotel known as the San Antonio Rivercenter Marriott Hotel in San Antonio, Texas
("Hotel");
WHEREAS, Owner has entered into a Loan Agreement of even date herewith
with Nomura Asset Capital Corporation ("NACC") to refinance the Permanent Loan
on the Hotel; and
WHEREAS, the parties desire to modify the Management Agreement in
connection with such refinancing.
NOW, THEREFORE, the parties agree to amend the Management Agreement as
follows:
1. The first paragraph of the Management Agreement is amended to replace
"MARRIOTT CORPORATION" with "MARRIOTT INTERNATIONAL, INC."
2. Section 1.01, "Definition of Terms," is amended as follows:
a. The following definitions are added:
"Cash Management Procedures" shall mean the procedures set
--------------------------
forth in the exhibit entitled "Cash Management Procedures",
which is an exhibit to that certain Modification,
Subordination and Non-Disturbance Agreement, Estoppel,
Assignment and Consent Among Manager, Owner, and NACC dated as
of the Amendment Date.
"Computer Lease" shall mean a lease or other agreement under
--------------
which computer equipment located in the Hotel is leased to
Owner or to Manager, as agent for Owner (including the
license, if any, of operating software therefor).
<PAGE>
"Debt Service Reserve Account" shall have the meaning ascribed
----------------------------
to it in the Cash Management Procedures.
"Equipment Leases" shall mean all or any FF&E Leases,
----------------
Telephone Leases, Computer Leases, TV System Leases and leases
of motor vehicles used primarily for transporting Hotel
guests.
"FF&E Lease" shall mean a lease of any FF&E located in the
----------
Hotel other than a TV System Lease, a Telephone Lease, a
Computer Lease, or a lease of a motor vehicle used primarily
for transporting Hotel guests.
"Manager Loans" shall have the meaning ascribed to it in
-------------
Section 5.10 (which is added to this Management Agreement by
this Amendment).
"Servicer" shall have the meaning ascribed to it in the Cash
--------
Management Procedures.
"Telephone Lease" means any lease of the telephones and/or
---------------
other telecommunication systems and equipment located in the
Hotel.
"TV System Lease" means a lease or other agreement under which
---------------
equipment (excluding television sets) for the transmission
into Hotel rooms or televised programming is leased or
otherwise provided, regardless of whether such lease or other
agreement contains a right or option to purchase such
equipment.
b. The definition of "Permanent Loan," is amended in its entirety
to read as follows:
"Permanent Loan" shall mean the first mortgage indebtedness
--------------
secured by the Hotel, the New Orleans Marriott Hotel, and the
San Ramon Marriott Hotel to be provided to Owner by NACC
pursuant to a Loan Agreement dated as of even date herewith,
secured by mortgages of even date herewith in an initial
amount not to exceed the principal amount of $222,500,000.00.
c. The definition of "Santa Clara Mortgage Debt" is amended in
its entirety to read as follows:
"Santa Clara Mortgage Debt" shall mean the first mortgage
-------------------------
indebtedness secured by the Santa Clara Marriott Hotel to be
provided to the Santa Clara Hotel Limited Partnership by NACC
pursuant to a Loan Agreement dated as of even date herewith,
secured by mortgages of even date herewith in an initial
amount not to exceed the principal amount of $43,500,000.00.
<PAGE>
2. Section 4.01, "Term," is amended as follows:
a. In the first sentence, "December 31, 2008" is replaced with
"December 31, 2018."
b. In the second sentence, "four (4) successive periods" is
replaced with "three (3) successive periods."
3. Section 5.03, "Payment of Incentive Management Fee and Deferred
Incentive Management Fee from Operating Profit," paragraph D, is
amended to add the following at the end thereof:
less the amount of any outstanding Manager Loans, which amount
shall be paid to Manager for repayment of such loans out of
the amount otherwise being retained by Owner pursuant to this
paragraph D.
4. Section 5.04, "Payment of Deferred Incentive Management Fee from Excess
Net Sale Proceeds," is amended by inserting the following at the end of
the first sentence:
; provided, however, that such amount retained by Owner shall
be less the amount of any outstanding Manager Loans, which
amount shall be paid by Owner to Manager out of the amount
otherwise being retained by Owner pursuant to this sentence.
5. Section 5.08 is amended by inserting "Manager Loans," before "Incentive
Management Fees" in the last sentence.
6. A new Section 5.10 is added as follows:
5.10 Manager Loans.
-------------
Manager shall have the right, but not the obligation,
at any time and from time to time, to advance funds reasonably
needed for additional Working Capital, or to provide funds to
the Servicer for its use in making any payments or funding any
reserves, escrows or accounts provided for under the Cash
Management Procedures, or to make deposits into the Operating
Account for the above purposes. No Manager Loan shall be in an
amount which, when added to the outstanding balance of
previous such advances, would exceed the sum of (i) the
average amount of the Deductions for each Accounting Period
during the preceding full thirteen (13) Accounting Periods,
and (ii) an amount equal to the Hotel's pro rata share of one
Monthly Debt Service Payment then in effect (pro rata share
based on the proportion of the Hotel's Qualifying Mortgage
Debt to the amount of the Permanent Loan). Any such advances
shall be deemed a loan by Manager to Owner in such amount
(each, a "Manager Loan"), shall bear interest at one percent
(1%) above the Prime Rate, and shall be repayable by Owner out
of Operating Profit in the priority set forth
3
<PAGE>
in Section 5.03, and Net Sales Proceeds and Net Refinancing
Proceeds in the priority set forth in Section 5.04, and as
provided in Section 5.08, or out of other funds available to
Owner. Owner shall evidence any such loan by executing a
promissory note payable to Manager in the principal amount of
each such loan and bearing interest as aforesaid. Each such
note shall be payable upon the earlier of (i) ten (10) years
from the date of such advance (or as otherwise provided in the
Cash Management Procedures), or (ii) the sale of the Hotel;
and, during the term of this Agreement, shall be payable out
of Operating Profit, and Net Sales Proceeds, and as provided
in Section 5.08.
7. Section 7.01, "Working Capital and Inventories," is amended by deleting
the third sentence through the end of the provision, and replacing it
with the following:
Owner shall from time to time after the Amendment Date advance
within fifteen (15) days after receipt of Manager's written
request any additional funds necessary to maintain Working
Capital and Inventories at levels determined by Manager to be
necessary to satisfy the needs of the Hotel as its operations
may from time to time require. In the event Owner fails to
advance additional Working Capital within said fifteen (15)
day period, Manager may, in addition to any other rights or
remedies available to it at law or in equity: (i) retain the
required amounts from any portion of Operating Profit
otherwise to be retained by Owner (consistent with the Cash
Management Procedures, if applicable), (ii) make a Manager
Loan to Owner in accordance with Section 5.10, or (iii)
terminate this Agreement upon not less than thirty (30) days
written notice to Owner. With the exception of the outstanding
balance of all Working Capital advances made as Manager Loans,
Working Capital and Inventories advanced by Owner shall remain
the property of Owner throughout the term of this Agreement.
Upon Termination, Manager shall return to Owner any unused
Working Capital and Inventories except for Inventories
purchased by Manager pursuant to Section 10.02, and except for
the outstanding balance of all Working Capital advances by
Manager made as Manager Loans.
8. Section 8.02, "Repairs and Equipment Reserve," is amended as follows:
a. Paragraph B is amended by inserting the following immediately
before the last sentence:
Commencing with Fiscal Year 2003, Manager shall have
the right, but not the obligation, to increase the
amount it transfers into the Repairs and Equipment
Reserve to any amount greater than five percent (5%)
but not exceeding six percent (6%) of Gross Revenues
for such Fiscal Year and successive Fiscal Years
thereafter if, based upon a review of FF&E
Replacements requirements for the Hotel, such
increase is necessary in Manager's reasonable
judgement to fund future FF&E Replacements that
4
<PAGE>
would be necessary to maintain the Hotel as a first-
class Marriott full-service hotel.
b. Paragraph C is amended by inserting the following at the end
thereof:
Manager, in its reasonable discretion, and subject to
the exceptions stated below, shall decide whether to
purchase or lease any FF&E Replacements or motor
vehicles used in transporting Hotel guests. If
Manager enters into any lease of FF&E Replacements or
motor vehicles used in transporting Hotel guests, it
shall do so on Owner's behalf and as Owner's agent;
or, upon Manager's recommendation and request, Owner
shall directly enter into such leases.
Notwithstanding the foregoing, Manager shall not and
shall not require Owner to enter into any lease other
than: (i) Telephone Leases, (ii) Computer Leases,
(iii) TV System Leases, (iv) FF&E Leases, and (v)
leases of motor vehicles used in transporting Hotel
guests. With respect to FF&E Leases only, Manager
shall be required to obtain Owner's prior written
approval before entering into or requesting that
Owner enter into any FF&E Lease, if (a) the fair
market value of the FF&E with respect to all FF&E
Leases relating to the Hotel (including those being
entered into) would exceed at any time Nine Hundred
Thousand Dollars ($900,000) (as increased each Fiscal
Year after Fiscal Year 1996 by the CPI Percentage),
(b) the FF&E to be covered by such FF&E Lease is FF&E
that is not customarily leased in the hotel industry
in the United States, or (c) such FF&E Lease is on
payment terms (including the amounts and schedule of
payments) that would be materially more favorable to
the lessor thereof than payment terms customary in
the hotel industry in the United States for similar
leases. With respect to TV System Leases only,
Manager shall be required to obtain Owner's prior
written approval before entering into or requesting
the Owner enter into any TV System Lease, if (a) the
equipment to be covered by such TV System Lease is
not customarily leased in the hotel industry in the
United States or (b) such TV System Lease is on
payment terms (including the amounts and schedule of
payments) that would be materially more favorable to
the lessor thereof than payment terms customary in
the hotel industry in the United States for similar
leases. In cases described in the preceding two
sentences, Owner's approval shall not be unreasonably
withheld; provided, however, that the failure of any
Lender to approve such leasing proposal shall justify
Owner in withholding its approval. Payments under the
leases described in this paragraph shall be made from
the Repairs and Equipment Reserve.
c. Paragraph E is amended by inserting the following at the end
thereof:
If Owner agrees to obtain outside financing or
provide additional funding as
5
<PAGE>
described in Subsection 2 or 3 above but fails to
deposit such funds into the Repairs and Equipment
Reserve within sixty (60) days after such agreement,
then, in addition to any other remedies to which it
is entitled, Manager shall be entitled to (i) notify
Owner that it will terminate this Agreement as of a
date three (3) months after the date of Manager's
notice, or (ii) continue to manage the Hotel without
making such alterations, improvements, renewals, or
replacements.
9. Section 8.03, "Building Alterations, Improvements, Renewals, and
Replacements," paragraph B, is amended by inserting the following at
the end thereof:
If Owner approves the Building Estimate but fails to deliver
funds required by such Building Estimate within sixty (60)
days after such approval, then Manager may, at its option and
in addition to any other remedies available to it, (i) notify
Owner that it will terminate this Agreement as of a date three
(3) months after the date of Manager's notice, (ii) use funds
from the Repairs and Equipment Reserve to pay for the
expenditures in the approved Building Estimate, or (iii)
continue to manage the Hotel without making such alterations,
improvements, renewals or replacements.
11. Section 19.01, "Restriction on Sale or Lease," is amended by inserting
"Manager Loans," before "current Incentive Management Fees" in the last
sentence.
12. Section 20.04, "Confidentiality," is amended in its entirety to read as
follows:
20.04 Confidentiality
---------------
The parties agree that matters set forth in and all
information, budgets and reports generated as a result of this
Agreement are strictly confidential and each party will make
every effort to ensure that the information is not disclosed
to any outside person or entities (including the press), other
than such parties' lenders, equity holders, bona fide
prospective investors or purchasers, and their respective
accountants, counsel and other consultants or advisors, and
other than the holders of any securities to be issued by Owner
or by any lender pursuant to a securitization of the notes
evidencing the obligation of Owner (so long as all such
information sent to such holders is marked with a
confidentiality notice that refers to the provisions of this
Section 20.04 and directs such holders to comply with the
provisions hereof reasonably acceptable to Manager), without
the written consent of the other party except as may be
reasonably necessary (i) to obtain licenses, permits and other
public approvals necessary for the refurbishment or operation
of the Hotel, (ii) in connection with Owner's financing of the
Hotel or any sale of the Hotel (subject to the limitations
above with respect to a securitization), (iii) in connection
with a sale of a controlling interest in Owner, Manager, or
Marriott, (iv) in connection with an audit or other
investigation conducted pursuant to this Agreement or the
Owner's or
6
<PAGE>
Manager's interest in the Hotel, (v) in connection with a
foreclosure sale on Owner's interest in the Hotel, or (vi) as
required by any law, rule, regulation or judicial process, or
by any regulatory or supervisory authority having jurisdiction
over the parties or their Affiliates.
13. A new Section 20.10 is added as follows:
20.10 Offerings
---------
No reference to Manager, Marriott, or to any Marriott
Affiliate will be made in any prospectus, private placement
memorandum, offering circular or offering documentation
related thereto (herein collectively referred to as the
"Prospectus"), issued by Owner or one of its affiliates or
lenders, which is designed to interest potential investors
(debt or equity) in Hotel, or securities secured by the Hotel,
unless Manager has previously received a copy of all such
references. However, regardless of whether Manager does or
does not so receive a copy of all such references, neither
Manager, Marriott, nor any Marriott Affiliate will be deemed
an issuer or obligor or guarantor in respect of any securities
described in the Prospectus, nor will it have any
responsibility for the Prospectus, and Owner will not issue or
approve any Prospectus that does not so state. Unless Manager
agrees in advance, the Prospectus will not include: (i) any
proprietary marks of Manager, Marriott, or any Marriott
Affiliate; or (ii) except as required by applicable securities
laws, the text of this Agreement. Owner shall be entitled,
however, to include in the Prospectus an accurate summary of
this Agreement. With respect to any offering not registered
under any federal or state securities law, if there are no
legal requirements pursuant to which such information must be
publicly disclosed, appropriate measures shall be taken to
ensure that entities or individuals receiving such Prospectus
shall acknowledge the confidentiality of such information.
Owner shall indemnify, defend and hold Manager, Marriott, and
all Marriott Affiliates (and their respective directors,
officers, shareholders, employees and agents) harmless from
and against all loss, costs, liability and damage (including
reasonable attorneys' fees and expenses, and the cost of
litigation related thereto) arising out of any Prospectus or
the offering described therein for which Owner or any of its
affiliates is an issuer or sponsor. Owner shall, prior to
distribution of any Prospectus by any of its lenders, use
commercially reasonable best efforts to obtain such an
indemnification for the benefit of Manager, Marriott, and all
Marriott Affiliates from such lender.
14. All other terms of the Management Agreement shall remain in full force
and effect.
15. Any term capitalized in this Amendment and not defined herein shall
have the meaning given to it in the Management Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed
7
<PAGE>
as of the date and year first written above.
WITNESS: OWNER:
MARRIOTT HOTEL PROPERTIES II
LIMITED PARTNERSHIP
("Owner")
By: MARRIOTT MHP TWO
CORPORATION,
a Delaware corporation,
General Partner
________________________ By________________________
Douglas W. Henry
Name: __________________ Vice President
WITNESS: MANAGER:
MARRIOTT HOTEL SERVICES, INC.
("Manager")
________________________ By____________________________
James L. Best
Name:___________________ Vice President
8
<PAGE>
Exhibit 10.8
RECORDING REQUESTED BY
WHEN RECORDED MAIL TO
Name Michael Peskowitz, Esq.
Rosenman & Colin LLP
Mailing Address 575 Madison Avenue
City, State, New York, New York 10022
Zip Code
- --------------------------------------------------------------------------------
SPACE ABOVE THIS LINE RESERVED FOR RECORDERS' USE
San Ramon Deed of Trust
================================================================================
================================================================================
DEED OF TRUST, ASSIGNMENT OF LEASES, SECURITY AGREEMENT
AND FIXTURE FILING
MARRIOTT HOTEL PROPERTIES II LIMITED PARTNERSHIP ("Grantor")
-------
- to -
COMMONWEALTH LAND TITLE INSURANCE COMPANY OF CALIFORNIA
("Trustee"), as Trustee
-------
For the benefit of
NOMURA ASSET CAPITAL CORPORATION ("Beneficiary")
-----------
Dated: As of September 23, 1996
in the amount of
$222,500,000.00
Relating to Premises located in
County of Contra Costa, State of California
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Paragraph Page
- --------- ----
<S> <C>
GRANTING CLAUSES........................................................... 2
HABENDUM................................................................... 7
REPRESENTATAIONS, WARRANTIES, COVENANTS, AGREEMENTS AND
CONDITIONS............................................................ 8
1. Payment of Debt....................................................... 8
2. Warranty of Title..................................................... 8
3. Further Mortgages and Liens........................................... 10
4. Representations and Warranties........................................ 15
5. Covenants of Grantor as to Performance and Other Matters.............. 18
6. Due on Sale or Encumbrance............................................ 20
7. Hazardous Substances.................................................. 21
8. Insurance............................................................. 26
9. Payment of Impositions and Utility Charges............................ 27
10. Escrow Fund........................................................... 28
11. Leases and Rents...................................................... 29
12. Maintenance of the Mortgaged Property; Changes........................ 32
13. Damage to and Destruction of the Mortgaged Property................... 35
14. Condemnation Proceedings.............................................. 38
15. Compliance With Agreements, Laws, etc................................. 41
16. Contest of Impositions, Legal Requirements and Liens.................. 42
17. Cure of Defaults by Beneficiary....................................... 43
</TABLE>
B-i
<PAGE>
18. Indemnity........................................................... 45
19. Events of Default................................................... 46
20. Default Rate........................................................ 48
21. Remedies............................................................ 48
22. Authorization to Execute Deeds; Adjournments........................ 54
23. Proceeds of Foreclosure Sale........................................ 54
24. Purchase of the Mortgaged Property by Beneficiary................... 55
25. Security Agreement; Uniform Commercial Code......................... 56
26. Certificate as to No Default, etc.; Information..................... 57
27. Books and Records; Financial Statements............................. 58
28. Application of Proceeds............................................. 58
29. Terms Subject to Applicable Law; Severability....................... 58
30. Further Acts, etc................................................... 58
31. Limitation of Liability of Beneficiary and Trustee.................. 59
32. Documentary Stamps.................................................. 59
33. Cumulative Remedies of Beneficiary; No Waiver....................... 59
34. Filing of Deed of Trust, etc........................................ 59
35. Usury Laws.......................................................... 60
36. Marshalling......................................................... 60
37. Waiver of Notice.................................................... 60
38. Recovery of Sums Required To Be Paid................................ 61
39. Other Mortgages; Cross Collateralization; Cross Default............. 61
B-ii
<PAGE>
<TABLE>
<S> <C>
40. No Oral Change.................................................. 62
41. Notices......................................................... 62
42. Joint and Several Liability..................................... 63
43. Headings, etc................................................... 63
44. Successors and Assigns.......................................... 63
45. Survival of Assignment.......................................... 63
46. Construction; Counterparts...................................... 64
47. Governing Law................................................... 64
48. Expenses of Enforcement......................................... 65
49. Waivers; Sale Bar Against Foreclosure........................... 65
50. No Claim of Credit for Impositions.............................. 66
51. Sole Discretion of Beneficiary; Reasonableness.................. 66
52. Modification by Beneficiary..................................... 67
53. Assignment; Participations...................................... 67
54. No Merger....................................................... 68
55. Running with the Land........................................... 68
56. True Copy....................................................... 68
57. Waiver of Jury Trial............................................ 68
58. After-Acquired Property......................................... 68
59. Non-Recourse.................................................... 69
60. Regarding Trustee............................................... 69
61. Right of Fee Owner to Purchase Deed of Trust.................... 70
</TABLE>
B-iii
<PAGE>
<TABLE>
<S> <C>
62. Variable Rate on Interest....................................... 71
63. Additional Ground Lease Provisions.............................. 73
Exhibits
A Legal Description.................................................
B Schedule of Other Mortgages.......................................
Schedules
1 Description of Ground Lease.......................................
X Insurance.........................................................
</TABLE>
B-iv
<PAGE>
DEED OF TRUST, ASSIGNMENT OF LEASES, SECURITY AGREEMENT
AND FIXTURE FILING
DEED OF TRUST, ASSIGNMENT OF LEASES, SECURITY AGREEMENT AND FIXTURE
FILING (this "Deed of Trust"), dated as of September 23, 1996, by MARRIOTT HOTEL
-------------
PROPERTIES II LIMITED PARTNERSHIP, a Delaware limited partnership, having its
principal office at 10400 Fernwood Road, Bethesda, Maryland 20817 ("Grantor") in
-------
favor of COMMONWEALTH LAND TITLE INSURANCE COMPANY OF CALIFORNIA, a California
corporation, having an address at 1855 Gateway Boulevard, Suite 270, Concord,
California 94520 ("Trustee"), as trustee for the use and benefit of NOMURA ASSET
-------
CAPITAL CORPORATION, a Delaware corporation, having its principal office at Two
World Financial Center, Building B, 21st Floor, New York, New York 10281-1198
("Beneficiary").
-----------
W I T N E S E T H :
- - - - - - - - -
WHEREAS:
A. Pursuant to that certain lease, dated June 30, 1986 between Sunset
Development Company, formerly known as Granada Sales, Inc., as landlord
(including any successors and assigns thereof, "Fee Owner"), and Grantor,
---------
successor in interest to Marriott Corporation, now known as Host Marriott
Corporation ("Host Marriott"), as tenant (such lease being more particularly
-------------
described on Schedule 1 annexed hereto, and as the same may hereafter be
----------
modified, amended, restated, consolidated, replaced or supplemented from time to
time, the "Ground Lease"), Fee Owner demised and leased to Grantor all that
------------
certain parcel of real property (the "Land") located in the County of Contra
----
Costa, State of California (the "State"), as more particularly described in
-----
Exhibit A annexed hereto;
- ---------
B. Host Marriott constructed on the Land a building and other
improvements that are currently operated as a Marriott hotel (which, together
with all other buildings and other improvements now or hereafter located on such
parcel of Land are hereinafter referred to as the "Improvements"; the Ground
------------
Lease and the leasehold estate created thereby, together with such Improvements,
being hereinafter collectively referred to as the "Premises");
--------
C. Pursuant to that certain Loan Agreement (the "Loan Agreement"),
--------------
dated as of the date hereof between Grantor and Beneficiary, Beneficiary is
making a loan in the original principal amount of $222,500,000.00 to Grantor;
D. The Loan is evidenced by those certain Secured Promissory Notes
dated as of the date hereof, made by Grantor in favor of Beneficiary, in the
original principal amounts of $195,405,904.00 and $27,094,096.00 (such Secured
Promissory Notes, together with all extensions, renewals, substitutions,
restatements, severances, splitters, consolidations, amendments and
modifications thereof being hereinafter referred to collectively as the
"Notes");
-----
<PAGE>
E. The Notes are secured by, inter alia, this Deed of Trust and certain
----- ----
other mortgages, deeds of trust and security deeds (collectively, the "Other
-----
Mortgages") on other real property owned or leased by Grantor, which Other
- ---------
Mortgages are more particularly described in Exhibit B annexed hereto;
---------
F. To induce Beneficiary to make the Loan and to secure payment of the
Notes, together with interest thereon, Grantor has agreed to the execution and
delivery of this Deed of Trust; and
G. Beneficiary accepts the benefits of this Deed of Trust.
GRANTING CLAUSES
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein contained and other good and valuable consideration, the receipt
and legal sufficiency whereof are hereby acknowledged, and as an inducement to
Beneficiary to make the Loan, and to secure the payment of the aggregate
principal amount of the Notes of TWO HUNDRED TWENTY TWO MILLION FIVE HUNDRED
THOUSAND AND 00/100 DOLLARS ($222,500,000), or so much thereof as may have been
advanced to Grantor together with all interest thereon, additional amounts
payable under the Loan Agreement, including without limitation, the Yield
Maintenance Premium (as such term is defined in the Loan Agreement), if any, and
all other sums which may or shall become due hereunder or under the Notes or any
of the other documents evidencing, securing or executed by Grantor in connection
with the Loan (such other documents, including, without limitation, the Loan
Agreement, the Other Mortgages and that certain Assignment of Leases, Rents and
Profits of even date herewith given by Grantor to Beneficiary with respect to
the Premises (as such assignment may, from time to time, be modified, amended,
extended, restated, severed, split, consolidated or supplemented, the
"Assignment") and similar Assignments of Leases, Rents and Profits given in
----------
connection with the Other Mortgages, together with the Notes and this Deed of
Trust (as any of the same may, from time to time, be modified, amended,
extended, restated, severed, split, consolidated or supplemented) being
hereinafter collectively referred to as the "Transaction Documents") and
---------------------
including the costs and expenses of enforcing any provision of the Notes, this
Deed of Trust or any of the other Transaction Documents (all such sums being
hereinafter collectively referred to as the "Debt"), and in order to charge with
----
such performance and with such payments the Premises and other property
hereinafter described and the rents, revenues, issues, income and profits
thereof, Grantor has created a security interest in and DOES HEREBY WARRANT,
PLEDGE, TRANSFER, SET OVER, ASSIGN, HYPOTHECATE, GIVE, GRANT, ALIEN, ENFEOFF,
BARGAIN, SELL, CONVEY AND CONFIRM UNTO TRUSTEE, AND ITS SUCCESSORS AND ASSIGNS,
IN TRUST WITH POWER OF SALE, FOR THE BENEFIT OF BENEFICIARY, all right, title,
estate and interest of Grantor now owned, or hereafter acquired, in and to the
Premises,
TOGETHER WITH all right, title, estates and interest of Grantor, if
any, now owned, or hereafter acquired, in and to the following property, rights
and interests (the Premises, together
2
<PAGE>
with such property, rights and interests, being hereinafter collectively
referred to as the "Mortgaged Property"):
------------------
(a) all easements, rights-of-way, strips and gores of land,
streets, ways, alleys, passages, sewer rights, waters, water courses,
water rights and powers, and all estates, rights, title, interests,
privileges, liberties, tenements, hereditaments, and appurtenances of
any nature whatsoever, in any way belonging, relating or pertaining to
the Premises (including, without limitation, gas, oil and mineral
rights, air rights, development rights and any other rights, however
denominated, to construct floor area on the Land), and all right, title
and interest of Grantor in, including any right to use and occupy, any
land adjacent to the Land, and any land lying in the bed of any street,
road or avenue, open, vacated or proposed, in front of or adjoining the
Land, and any and all sidewalks, drives, curbs, passageways, streets,
spaces and alleys adjacent to or used in connection with the Premises;
(b) all machinery, apparatus, equipment, fittings, fixtures and
other property of every kind and nature whatsoever owned by Grantor, or
in which Grantor has or shall have an interest (to the extent same can
be mortgaged or an interest therein can be granted if not owned by
Grantor), now or hereafter located upon the Premises or any portion
thereof, or appurtenances thereto, and used in connection with the
present or future operation and occupancy of the Premises or any
portion thereof, and all building equipment, materials and supplies of
any nature whatsoever owned by Grantor, or in which Grantor has or
shall have an interest (to the extent same can be mortgaged or an
interest therein can be granted if not owned by Grantor), now or
hereafter located in or upon the Premises or any portion thereof, and
any building equipment, materials and supplies obtained for use in
connection with the Premises or any portion thereof, and all additions,
replacements, modifications and alterations of any of the foregoing,
including, but without limiting the generality of the foregoing, all
heating, lighting, incinerating, waste removal and power equipment,
engines, pipes, tanks, motors, conduits, switchboards, radio,
television, security and alarm systems, plumbing, lifting, cleaning,
fire prevention, fire extinguishing, refrigerating, ventilating, and
communications apparatus, air cooling and air conditioning apparatus,
escalators, elevators, ducts and compressors (collectively, the
"Equipment"), which Equipment shall be deemed to be part and parcel of
---------
the real estate and appropriated to the use of the real estate and,
whether or not affixed or annexed to the Premises, shall for the
purpose of this Deed of Trust be deemed conclusively to be real estate
and mortgaged hereby;
(c) all other furniture, furnishings, decorations, fixtures and
equipment owned by Grantor and now or hereafter installed in, affixed
to, placed upon or used in connection with the Premises or the business
conducted by Grantor thereon, including, without limitation,
communication systems, computer systems, hardware and software,
furniture, carpeting, art work, lighting fixtures, millwork, draperies,
kitchen, restaurant, bar and lounge equipment, laundry equipment, cash
registers, safes, safety deposit boxes, office furniture, athletic and
pool equipment, gift shop equipment, employees' lockers, coat racks,
linens, blankets, pillows and uniforms (to the extent each of the
foregoing shall
3
<PAGE>
exist), all present and future "accounts", "equipment", "inventory" and
"general intangibles" (as such terms are defined in the Uniform
Commercial Code as enacted and in effect in the State (the "Code")
----
relating to the hotel and hotel operations at the Premises, excluding,
---------
however, (xx) all property subject to written leases between the
-------
owner/installer of such equipment, as lessor, and Grantor as lessee, as
permitted pursuant to the provisions of the Loan Agreement, and (yy) to
the extent not assignable or mortgageable under State or local law,
alcoholic beverages and licenses to serve alcoholic beverages at the
Premises (collectively, the "Personal Property ");
-----------------
(d) all awards or payments, and any interest paid or payable with
respect thereto, which may be made with respect to all or any portion
of the Premises, whether from the exercise of right of condemnation,
eminent domain or similar proceedings (including any transfer made in
lieu of the exercise of said right), or from any taking for public use,
or for any other injury to or decrease in the value of all or any
portion of the Premises (including, without limitation, any awards
resulting from a change of grade of streets and awards for severance
damages), all of the foregoing to be held, applied and paid in
accordance with the provisions of this Deed of Trust (collectively, the
"Condemnation Proceeds");
---------------------
(e) all proceeds of, and any unearned premiums on, the Policies (as
hereinafter defined) and any other insurance policies covering all or
any portion of the Premises, the Equipment, the Personal Property
and/or the Rents (as hereinafter defined), including, without
limitation, the right to receive and apply the proceeds of any
insurance, judgments, or settlements made in lieu thereof, for damage
to all or any portion of the Premises, the Equipment and/or the
Personal Property, and any interest actually paid with respect thereto,
all of the foregoing to be held, applied and paid in accordance with
the provisions of this Deed of Trust (collectively, the "Insurance
---------
Proceeds");
--------
(f) all refunds or rebates of Impositions (as hereinafter defined),
and interest paid or payable with respect thereto (collectively, the
"Refunds");
-------
(g) all leases and other agreements, if any, affecting the use or
occupancy of all or any portion of the Premises now in effect or
hereafter entered into (including, without limitation, subleases,
licenses, concessions, tenancies and other occupancy agreements
covering or encumbering all or any portion of the Premises), together
with any guarantees, supplements, amendments, modifications, extensions
and renewals of the same, and all additional remainders, reversions,
and other rights and estates appurtenant thereto (collectively, the
"Leases") and absolutely and presently all rents, revenues which
------
Grantor generates from the collection of room rates in the course of
its hotel operations, additional rents, percentage rents, revenues,
issues, profits, cash collateral, royalties, income, bonuses, rights
and benefits due and other benefits now or in the future payable under
the Leases, and all security deposits, advance rentals and payments of
similar nature (subject to the rights of lessees or depositors thereof)
held by Grantor in connection with the Leases, if any, and all proceeds
from any and all concessions and license agreements (including, without
limitation, receivables, revenues, rentals and receipts from guest
4
<PAGE>
rooms, meeting rooms, other public facilities, food and beverage
facilities, vending machines, telephone systems, guest laundry and
other items of revenue, receipts, or income identified in the Uniform
Systems of Accounts for Hotels, 8th Revised Edition, International
Association of Hospitality Accountants and Hotel Association of New
York) and all other fees, charges, accounts, payments, income, issues,
proceeds, product, offspring, profits and benefits of any nature
arising from the possession, use, occupancy or enjoyment of the
Mortgaged Property as defined under Section 552(b) of the federal
bankruptcy code (as amended from time to time, and including any
successor legislation thereto, the "Bankruptcy Code"), of any nature
---------------
arising from the possession, use, occupancy or enjoyment of the
Mortgaged Property (collectively, the "Rents"), together with the
-----
right, but not the obligation, following an Event of Default (as
hereinafter defined) by Grantor under this Deed of Trust or any of the
other Transaction Documents, to exercise options, to give consents and
to collect, receive and receipt for the Rents and apply the Rents to
the payment of the Debt and to demand, sue for and recover the Rents
when due and payable;
(h) all contract rights relating to the Mortgaged Property,
including, without limitation, and to the extent permitted by
applicable law, all permits, licenses, certificates, consents,
approvals, authorizations and other documents obtained or to be
obtained in connection with the demolition, construction, use,
operation or maintenance of the Premises or any portion thereof
(collectively, "Permits"), all reciprocal easement, restrictive
-------
covenants and similar agreements (collectively, "REAs"), all
----
appurtenances and utility rights pertaining to the Premises or any
portion thereof, all zoning, land use, air rights and development
agreements, all operating contracts, management agreements, service
contracts, supply and maintenance contracts, equipment leases,
warranties, guaranties and all other agreements affecting the Premises
or any part thereof or used in connection with the management or
operation thereof (to the extent assignable pursuant to the provisions
of the applicable instrument or agreement creating or conferring such
rights or benefits or pursuant to applicable law) together with all of
the rights, reversions or equities now or hereafter appurtenant thereto
(such Permits, REAs and other appurtenances, rights, contracts and
agreements collectively, the "Agreements");
----------
(i) all of the right, title and interest of Grantor in and to any
other property, whether real or personal, tangible or intangible, owned
or held in connection with the Premises or the business conducted by
Grantor thereon, including, without limitation, appraisals,
architectural and engineering plans, specifications and studies
(subject to the proprietary rights of others therein), soil,
environmental and other reports relating to the Premises (subject to
the proprietary rights of others therein), license and contract rights,
accounts receivable, warranties, guaranties, catalogues, tenant lists
(but excluding proprietary guest list information), advertising
materials relating to the Premises or the business conducted by Grantor
thereon, telephone exchange numbers as identified in such materials,
trade names, trademarks and logos relating to the Premises or the
business conducted by Grantor thereon (subject to the rights of
franchisors or licensors) and goodwill relating to the Premises or the
business conducted by Grantor thereon;
5
<PAGE>
(j) all rights of Grantor in and to the Management Agreement (as
defined in the Loan Agreement) applicable to the Premises and any other
similar agreement or license affecting the management or operation of
any part of the Premises, (subject in each case to the provisions
thereof and any limitations set forth therein);
(k) all rights of Grantor in any owner's or member's association or
similar group having responsibility for managing or operating any part
of the Premises;
(l) all claims against any person or entity with respect to any
damage to or loss of the Mortgaged Property, including, without
limitation, damage arising from any defect in or with respect to the
design or construction of the Improvements or the Equipment and any
damage resulting therefrom and all the right to appear in and defend
any action or proceeding brought with respect to the Mortgaged Property
and to commence any action or proceeding to protect the interest of
Beneficiary in the Mortgaged Property;
(m) all deposits or other security or advance payments, including
rental payments made by or on behalf of Grantor to others, with respect
to utility services, cleaning, maintenance, repair and similar
services, refuse removal and sewer service, parking and similar
services and rights, and rental of Equipment relating to or otherwise
used in the operation of the Mortgaged Property;
(n) all options in connection with the purchase, lease, encumbrance
or other disposition of the Mortgaged Property or any interest therein;
and
(o) any and all other, further or additional rights, title, estates
and interests which Grantor may now own or hereafter acquire, in and to
the Premises and/or the Mortgaged Property, (including without
limitation any right, title , estate or interest Grantor may now have
or hereafter acquire in the fee title to the Land or the lessor's
interests under the Ground Lease) and all renewals, substitutions and
replacements of and all additions and appurtenances to the Premises
and/or the Mortgaged Property constructed, assembled or placed by
Grantor on the Premises, and all conversions of the security
constituted thereby which, immediately upon such acquisition,
construction, assembling, placement or conversion, as the case may be,
and in each such case without any further mortgage, conveyance,
assignment or other act by Grantor, shall become subject to the lien of
this Deed of Trust as fully and completely, and with the same effect,
as though now owned by Grantor, Grantor expressly agreeing that if
Grantor shall at any time acquire any other right, title, estate or
interest in and to the Premises and/or the Mortgaged Property
(including without limitation any right, title , estate or interest
Grantor may now have or hereafter acquire in the fee title to the Land
or the lessor's interests under the Ground Lease), the lien of this
Deed of Trust shall automatically attach to and encumber such other
right, title, estate or interest as a lien thereon.
(p) all appurtenances in respect of or otherwise relating to the
Ground Lease, including, but not limited to, renewal options and
expansion rights, and all the estates and
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rights of Grantor of, in and to (i) all modifications, extensions and
renewals of the Ground Lease and all rights to renew or extend the term
thereof, (ii) all credits to and deposits of Grantor under the Ground
Lease (other than tenant security deposits), (iii) all other options,
privileges and rights granted and demised to Grantor under the Ground
Lease, (iv) all the right or privilege of Grantor to terminate, cancel,
abridge, surrender, merge, modify or amend the Ground Lease and (v) any
and all possessory rights of Grantor and other rights and/or privileges
of possession, including, without limitation, Grantor's right to elect
to remain in possession of the Premises and the leasehold estate
created by the Ground Lease pursuant to Section 365(h)(1) of the
Bankruptcy Code;
(q) all of Grantor's claims and rights to damages and any other
remedies in connection with or arising from the rejection of the Ground
Lease by Fee Owner or any trustee, custodian or receiver pursuant to
the Bankruptcy Code in the event that there shall be filed by or
against Fee Owner any petition, action or proceeding under the
Bankruptcy Code or under any other similar federal or state law now or
hereafter in effect (collectively, "Fee Owner's Bankruptcy").
----------------------
AND, as additional security, Grantor hereby grants to Beneficiary a
security interest in (1) the Equipment, (2) the Personal Property, (3) the
Condemnation Proceeds, (4) the Insurance Proceeds, (5) the Refunds, (6) the
Leases, (7) the Rents, (8) the Agreements, and (9) to the extent mortgages may
lawfully grant the same, all other components of the Mortgaged Property,
described in clauses (a) through (q) immediately preceding, and (10) all
proceeds of the foregoing collateral described in clauses (1) through (9)
(collectively, the "Security Interest Property"), and this Deed of Trust shall
--------------------------
be effective as a security agreement pursuant to the Code.
HABENDUM
TO HAVE AND TO HOLD the Mortgaged Property, the rights and privileges
hereby conveyed or assigned, or intended so to be, unto Trustee and its
successors and substitutes in trust hereunder for the benefit of Beneficiary,
its successors and assigns, and with the possession and right of possession
thereof, for the uses and purposes herein set forth.
PROVIDED ALWAYS, and these presents are upon the express condition,
that if Grantor shall well and truly pay to Beneficiary the Debt and shall well
and truly abide by and comply with each and every covenant and condition set
forth herein, in the Notes and in the other Transaction Documents, then these
presents and the estate hereby granted shall cease, determine and be void.
PROVIDED FURTHER, that provided no Event of Default has occurred and is
continuing, if Grantor shall exercise its right pursuant to and in accordance
with the Loan Agreement, Grantor shall be entitled to obtain the release by
Beneficiary of this Deed of Trust and the Mortgaged Property and, upon the
giving of such release, this Deed of Trust and these presents and the estate
hereby granted shall cease, determine and be void.
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This Deed of Trust is one of a number of mortgages and deeds of trust
(all of which mortgages and deeds of trust, other than this Deed of Trust, are
referred to in Exhibit B) given pursuant to the Loan Agreement. Each and every
term and provision of all of the Transaction Documents signed by Grantor,
including the rights, remedies, obligations, covenants, conditions, agreements,
indemnities, representations and warranties of all parties thereto are hereby
incorporated by reference herein as though set forth in full and shall be
considered a part of this Deed of Trust. Terms used in this Deed of Trust which
are not defined herein or which are not defined by reference to the Loan
Agreement shall have the meanings assigned to them in the Loan Agreement.
REPRESENTATIONS, WARRANTIES, COVENANTS,
AGREEMENTS AND CONDITIONS
THIS DEED OF TRUST FURTHER WITNESSETH the following representations,
warranties, covenants, agreements and conditions:
1. Payment of Debt.
---------------
(a) Grantor shall punctually pay the Debt at the time and in the
manner provided for its payment in the Notes. The maturity date of the
Notes (the "Maturity Date") is the earliest to occur of:
(i) October 11, 2017; and
(ii) such earlier date to which the maturity of the Debt may
be accelerated upon an Event of Default as otherwise provided in any
Transaction Document.
(b) All payments of principal and interest accrued thereon shall be
made without demand therefor, or presentation or surrender of the Notes, to the
extent permitted by applicable law.
2. Warranty of Title; Provisions of Ground Lease.
---------------------------------------------
(a) Grantor specially warrants that it has good and marketable
title to the Mortgaged Property and owns the Mortgaged Property free and clear
of all liens, claims, charges, restrictions, encumbrances, security interests
and other matters, subject only to the lien of this Deed of Trust and of the
other Transaction Documents, the matters set forth as exceptions to the policies
of title insurance (the "Title Policies") relating to the Mortgaged Property
--------------
issued by Commonwealth Land Title Insurance Company and Lawyers Title Insurance
Corporation in connection with the Loan; easements and other rights in the
Mortgaged Property granted by Grantor in the ordinary course of business which
will not, individually or in the aggregate, violate the Ground Lease or
materially and adversely affect (xx) the Premises, (yy) Grantor's hotel
operations thereon, or (zz) the value or validity of Beneficiary's lien on and
security interest in the Mortgaged Property, (iv) any easements and other rights
in the Mortgaged Property granted
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<PAGE>
by Fee Owner in accordance with the Ground Lease, (v) any financings permitted
pursuant to Paragraph 3 of this Deed of Trust, and (vi) such other matters to
-----------
which Beneficiary shall have consented to in writing (collectively, the
"Permitted Exceptions"). All items set forth hereunder as Permitted Exceptions
--------------------
are subject to the additional representations and warranties set forth in
Paragraph 4(e) hereof. Grantor represents and warrants that no interest in all
- --------------
or any part of the development rights appurtenant to the Premises have been
granted, transferred or assigned by Grantor.
(b) Grantor, at its sole cost and expense, covenants and agrees to
defend its title to the Mortgaged Property and the priority of this Deed of
Trust against all claims and demands of parties claiming or to claim by, through
or under Grantor, subject to the Permitted Exceptions and will maintain and
preserve such priority as long as the Loan Agreement remains in effect or the
Debt (or any portion thereof) remains outstanding.
(c) With respect to the Ground Lease, Grantor represents and
warrants as follows:
(i) Grantor is the sole owner and holder of the leasehold
estate created by the Ground Lease;
(ii) the Ground Lease or a memorandum thereof has been duly
recorded in the official records of the County of Contra Costa,
State of California and has not been materially amended or modified
since such recordation;
(iii) the Ground Lease is in full force and effect and no
default by Grantor or, to Grantor's knowledge, by Fee Owner has
occurred under the Ground Lease and to Grantor's knowledge there is
no existing condition which, but for the passage of time or the
giving of notice or both, would result in a default under the Ground
Lease;
(iv) the Ground Lease permits the interest of the tenant
thereunder to be encumbered by this Deed of Trust;
(v) the tenant's interest in the Ground Lease is assignable
to Beneficiary, without the consent of the Fee Owner, as security
for a leasehold mortgage pursuant to the Ground Lease, including
sections 6.01 and 11.06 thereof, and is further assignable by
Beneficiary and its successors and assigns by obtaining an
assignment of the Ground Lease in foreclosure or by deed in lieu of
foreclosure without the consent of the Fee Owner, subject to the
potential rights of the Fee Owner (x) to approve the Manager of the
Premises and (y) to exercise its rights of first negotiation to
purchase Grantor's leasehold interest in the Ground Lease pursuant
to section 11.08 of the Ground Lease;
(vi) the Ground Lease requires the Fee Owner to give written
notice of any default by Grantor or any exercise of any right to
terminate the Ground Lease to
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<PAGE>
Beneficiary and provides that no such notice delivered to Grantor
will be effective against the Beneficiary unless and until a copy of
the notice has been delivered to the Beneficiary;
(vii) the Ground Lease requires the Fee Owner to afford the
Beneficiary a reasonable opportunity to cure any default under the
Ground Lease, which is reasonably susceptible of being cured by
Beneficiary after the receipt of notice of any default before the
Fee Owner may terminate the Ground Lease;
(viii) the Ground Lease requires the Fee Owner to enter into a
new lease with Beneficiary and its successors and assigns on the
same terms as the Ground Lease, upon the termination of the Ground
Lease for any reason, including without limitation, the rejection of
the Ground Lease in a bankruptcy or insolvency proceeding;
(x) the Ground Lease has a term which extends not less than
ten (10) years beyond the Maturity Date;
(xi) the Ground Lease does not allow either the Fee Owner or
Borrower to cancel the Ground Lease while this Deed of Trust is
outstanding without the consent of Beneficiary, including
cancellation for damage or destruction of the Mortgaged Property,
and permits the Beneficiary, as first leasehold mortgagee, to
participate in the settlement of any Insurance Proceeds or
Condemnation Proceeds and to hold and disburse any Insurance
Proceeds or Condemnation Proceeds to be applied to the repair and
restoration of the Mortgaged Property or to the repayment of the
Debt if Grantor is in default under this Deed of Trust;
(xii) the Fee Owner has been, or promptly following the
execution and delivery of this Deed of Trust, will be, given the
required notice, together with a photocopy of the recorded Deed of
Trust, for Beneficiary to be recognized as the holder of a leasehold
mortgage entitled to the rights and privileges afforded a leasehold
mortgagee under the Ground Lease.
3. Further Mortgages and Liens.
---------------------------
(a) This Deed of Trust is and will be maintained by Grantor as a
valid and enforceable mortgage lien on and security interest in the Mortgaged
Property subject only to the Permitted Exceptions. Except for (I) that certain
deed of trust of even date herewith from Grantor to Trustee for the benefit of
Beneficiary (the "SC Mortgage") intended to be recorded in the official records
-----------
of the County of Contra Costa, State of California immediately after the
recordation of this Deed of Trust securing the obligations of Grantor and Santa
Clara Marriott Hotel Limited Partnership ("SCLP") under that certain Secured
----
Promissory Note in the original principal amount of $43,500,000 delivered to
Beneficiary pursuant to that certain loan agreement of even date herewith
between SCLP and Beneficiary (the "SC Loan Agreement") and (II) Permitted
-----------------
Subordinate Mortgages (as hereinafter defined), Grantor shall not, directly or
indirectly,
10
<PAGE>
create or suffer, or permit to be created or suffered, against the Mortgaged
Property or any part thereof, including, without limitation, the Rents or the
Leases, and Grantor will promptly discharge or bond over, any mortgage, lien
(including the liens of mechanics and materialmen), pledge, conditional sale or
other title retention agreement, easement or other covenant, attachment,
security interest, encumbrance or charge which may affect the Mortgaged Property
or any part thereof or interest therein, except (i) the Permitted Exceptions,
------
(ii) Permitted Subordinate Mortgages and (iii) matters being contested in good
faith and by appropriate proceedings in the manner permitted by Paragraph 16
------------
of this Deed of Trust. If any mortgage, other lien or encumbrance not permitted
hereunder is filed, Grantor will cause the same to be discharged within thirty
(30) days after recordation thereof and will exhibit to Beneficiary, upon
request, evidence of discharge or other disposition satisfactory to Beneficiary.
(b) Notwithstanding anything to the contrary contained in
Paragraph 3(a), but subject to the requirements set forth in Paragraph 3(c)
- -------------- --------------
and (d), Grantor may grant one or more mortgages or deeds of trust on the
---
Mortgaged Property, each subordinate to the lien of this Deed of Trust and the
lien of the SC Mortgage (each such mortgage or deed of trust being referred to
individually as a "Permitted Subordinate Mortgage" and collectively as the
------------------------------
"Permitted Subordinate Mortgages").
-------------------------------
(c) With respect to each Permitted Subordinate Mortgage, but not
with respect to an FF&E Financing (as hereinafter defined) (for which the
requirements of Paragraph 3(e) (including the provisions cross-referenced
--------------
therein) shall apply), in addition to the requirements set forth in
Paragraph 3(d), the following shall apply:
- --------------
(i) no Permitted Subordinate Mortgage shall be permitted to
be granted prior to the date which is two (2) years from the date
hereof;
(ii) each Permitted Subordinate Mortgage shall at all times
be held by a savings bank, savings and loan association, commercial
bank or trust company, insurance company, investment banking
institution or a union, federal, state, municipal or secular employee's
welfare, benefit, pension or retirement fund;
(iii) the Debt Service Coverage Ratio (as defined in the Loan
Agreement) requirement set forth in the Loan Agreement with respect to
maintenance of a Debt Service Coverage Ratio of at least 2.25:1 shall
be satisfied; and
(iv) the Rating Agencies (as defined in the Loan Agreement)
shall confirm that the existence of such Permitted Subordinate Mortgage
and the debt secured thereby will not result in a withdrawal,
qualification or downgrade of any then existing ratings given by any
such Rating Agencies with respect to the Securities (as defined in the
Loan Agreement), if applicable.
(d) The granting of any Permitted Subordinate Mortgage shall be
subject to the following additional requirements:
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<PAGE>
(i) Grantor shall not then be in default of its obligations
under this Deed of Trust, the Notes, or any of the Transaction
Documents beyond any applicable cure period;
(ii) Grantor shall give Beneficiary written notice (the
"Permitted Subordinate Mortgage Notice") of Grantor's intention to
-------------------------------------
enter into a Permitted Subordinate Mortgage not less than thirty (30)
days prior to the placement thereof, such notice to be accompanied by a
copy of the proposed Permitted Subordinate Mortgage or term sheet
setting forth the terms thereof, and shall promptly thereafter deliver
to Beneficiary copies of the proposed Permitted Subordinate Mortgage,
when available (if not theretofore delivered), and modifications of the
proposed Permitted Subordinate Mortgage and of said term sheet;
(iii) each Permitted Subordinate Mortgage shall be expressly
subject and subordinate in lien to this Deed of Trust and all of the
other Transaction Documents, and any agreement now or hereafter given
as additional security for the Notes or this Deed of Trust, and to all
of the terms, covenants and conditions of this Deed of Trust and the
other Transaction Documents and said agreements and all extensions,
renewals, modifications, supplements, consolidations, spreaders or
replacements thereof (each, a "Renewal") and any other action permitted
-------
or contemplated by this Deed of Trust or any other Transaction Document
(including, without limitation, increases in the amount of the Loan for
accrued and unpaid interest, additional interest, prepayment premiums
or charges, Yield Maintenance Premiums, if any, and other fees and
charges, and increases in the amount of the Debt resulting from
protective advances made by Trustee or Beneficiary pursuant to the
Transaction Documents, including without limitation, advances made for
taxes, insurance premiums, and maintenance of the Premises which are
secured by this Deed of Trust or any other Transaction Document;
(iv) each Permitted Subordinate Mortgage shall provide that
the holder thereof shall furnish the holder of this Deed of Trust with
a copy of any notice of default or legal process sent to Grantor
simultaneously with the transmittal thereof to Grantor;
(v) each Permitted Subordinate Mortgage, and any other
document evidencing or securing the debt which such Permitted
Subordinate Mortgage secures, shall provide that it is expressly
subject and subordinate to any and all advances of the Loan, in
whatever amounts and whenever made, with interest thereon, and to any
expenses, charges and fees incurred, including any and all such
advances, interest, expenses, charges and fees which may increase the
indebtedness secured by this Deed of Trust and any other mortgages and
deeds of trust given in connection with the Loan above the original
principal amount thereof;
(vi) each Permitted Subordinate Mortgage shall provide that
(A) if any action or proceeding is brought for the foreclosure thereof,
the rents from the Mortgaged Property shall be collected only by a
receiver appointed by a court or referee after notice of the
application for the appointment of such receiver shall have been given
to the then
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<PAGE>
holder of this Deed of Trust (B) all monies collected by such receiver
shall be applied first to the payment of all sums then due which are
secured by this Deed of Trust and the balance, if any, may then be
applied to the payment of any sums then due which are secured by said
Permitted Subordinate Mortgage and (C) if, during the pendency of any
such foreclosure action or proceedings, an action or proceeding shall
be brought by the then holder or holders of this Deed of Trust for the
foreclosure of this Deed of Trust and an application is made by the
then holder or holders of this Deed of Trust for an extension of such
receivership for the benefit of the then holder or holders of this Deed
of Trust all such rents held by such receiver, as of the date of such
application, shall be applied by the receiver solely for the benefit of
the then holder or holders of this Deed of Trust (including, without
limitation, the outstanding principal balance of the Loan, or any
portion thereof, if payment of the same is accelerated, and any late
charges, or other charges and fees that may be payable, from time to
time, in connection with the Loan or any portion thereof) before the
holder of such Permitted Subordinate Mortgage shall be entitled to any
portion thereof;
(vii) each Permitted Subordinate Mortgage shall provide that
if any action or proceeding shall be brought to foreclose said
Permitted Subordinate Mortgage, no tenant of any portion of the
Mortgaged Property will be named as a party defendant in any such
foreclosure action or proceeding, nor will any other action be taken
with respect to any tenant of any portion of the Mortgaged Property the
effect of which would be to terminate any lease without the written
consent of the then holder or holders of this Deed of Trust;
(viii) no holder of a Permitted Subordinate Mortgage shall
acquire by subrogation, contract or otherwise, any lien upon any other
estate, right or interest in the Mortgaged Property, including, but not
limited to, any which may arise with respect to real estate taxes,
assessments or other governmental charges which are or may be prior in
right to this Deed of Trust or any other Transaction Document, or any
Renewal of this Deed of Trust or any other Transaction Document, unless
within sixty (60) days following written notice of such intention to
acquire such other estate, right or interest from the mortgagee
thereunder, or its successors or assigns, the then holder of this Deed
of Trust shall fail or refuse to purchase or acquire, by subrogation or
otherwise, such prior lien, estate, right or interest, or shall fail,
within such period, to commence and thereafter proceed diligently to
purchase or acquire the same;
(ix) each Permitted Subordinate Mortgage shall provide that
the mortgagee thereunder, its successors or assigns, or any other legal
holder thereof, shall agree to assign and release unto the legal holder
of this Deed of Trust (A) all of its right, title, interest or claim,
if any, in and to Insurance Proceeds for application upon the
indebtedness secured by, or other disposition thereof in accordance
with the provisions of, this Deed of Trust and (B) all of its right,
title and interest, and interest of claim, if any, in and to all
Condemnation Proceeds for application upon the indebtedness secured by,
or other disposition thereof in accordance with the provisions of, this
Deed of Trust;
13
<PAGE>
(x) each Permitted Subordinate Mortgage shall provide that
so long as this Deed of Trust and any other mortgages or deeds of trust
given in connection with the Loan shall remain upon the Mortgaged
Property or any part thereof, the mortgagee thereunder, its successors
or assigns or any other legal holder thereof, shall execute,
acknowledge and deliver, upon demand, at any time or times, any and all
further subordinations or other instruments, in recordable form,
reasonably sufficient for that purpose, or that Grantor or Beneficiary,
their respective successors or assigns or other legal holder of this
Deed of Trust, may hereafter reasonably require for carrying out the
true purpose and intent of the foregoing covenant;
(xi) each Permitted Subordinate Mortgage (and any underlying
note or obligation) shall be nonrecourse, except for misappropriation
of funds, material misrepresentation, fraud and environmental
liabilities;
(xii) a default under any Permitted Subordinate Mortgage as
and when declared by the holder thereof shall constitute a default
under this Deed of Trust; a default under any Permitted Subordinate
Mortgage not cured within the applicable cure period, if any, shall
constitute an Event of Default under this Deed of Trust; provided that
Beneficiary shall not accelerate the Debt secured by this Deed of Trust
or commence to foreclose the lien of this Deed of Trust unless and
until the holder of the Permitted Subordinate Mortgage then in default
accelerates the debt secured thereby or commences to foreclose the lien
secured by its Permitted Subordinate Mortgage;
(xiii) if a Permitted Subordinate Mortgage is not executed and
delivered within sixty (60) days after delivery to Beneficiary of the
Permitted Subordinate Mortgage Notice then no such Permitted
Subordinate Mortgage may be placed against the Mortgaged Property or
any portion thereof unless Grantor again complies with all of the
provisions of this Paragraph 3;
-----------
(xiv) a true copy of each Permitted Subordinate Mortgage shall
be furnished to Beneficiary promptly after the execution and delivery
thereof;
(xv) Grantor shall pay to Beneficiary Beneficiary's
reasonable attorneys' fees and other reasonable out-of-pocket costs
incurred in connection with review and approval of the documentation;
and
(xvi) In no event shall any Permitted Subordinate Mortgage
provide for the accrual of all or any portion of the interest payable
thereunder (other than normal accruals, not to exceed ninety (90) days
in any event), and in no event shall any Permitted Subordinate Mortgage
provide for debt service which is dependent upon the amount of cash
flow or other proceeds generated from the Premises.
(e) Grantor may enter into one or more purchase money financings,
not secured by a lien on real property, in connection with the purchase of
furniture, fixtures and/or equipment for the Premises (each, an "FF&E
----
Financing"); provided that each FF&E Financing secures a
- ---------
14
<PAGE>
principal balance not in excess of $4,500,000 (whether individually or when
aggregated with all other FF&E Financing pursuant to this Deed of Trust or the
Other Mortgages existing at the time of such aggregation but not more than
$500,000 with respect to the Mortgaged Property). The FF&E Financing granted
from time to time by Grantor, if any, need not comply with the provisions of
sub-clauses (i), (ii), (iii) or (iv) of Paragraph 3(c) or the provisions of
--------------
Paragraph 3(d) other than clause (i) of such Paragraph 3(d).
- -------------- --------------
4. Representations and Warranties. To induce Beneficiary to accept the
------------------------------
Notes and this Deed of Trust, and to make the Loan evidenced by the Notes and
secured by this Deed of Trust, Grantor represents and warrants to Beneficiary
that:
(a) The covenants in this Deed of Trust and in the other
Transaction Documents have been observed and performed in all material
respects to the extent applicable on and as of the date hereof. The
representations and warranties in this Deed of Trust and in the other
Transaction Documents are true and correct in all material respects on
and as of the date hereof. All such covenants, representations and
warranties are hereby incorporated by reference.
(b) The granting of this Deed of Trust, the consummation of the
transactions herein contemplated and the execution and delivery of, and
the performance and observance of Grantor's obligations under this Deed
of Trust, the other Transaction Documents and other instruments herein
mentioned to which Grantor is a party and which have been executed and
delivered in connection with the transactions contemplated in the
Transaction Documents have been duly authorized by all necessary action
on the part of Grantor and its general partner and, to the Best
Knowledge of Grantor (as such term is defined in Paragraph 46(a)
---------------
hereof), no other consent, license, permit, approval or authorization
of, exemption by, notice or report to, or registration, filing or
declaration with, any Governmental Authority (as hereinafter defined)
(collectively, "Approvals") is required which has not been obtained by
---------
Grantor in connection with the execution, delivery or performance by
Grantor of this Deed of Trust, the other Transaction Documents and
other instruments herein mentioned to which Grantor is a party. For the
purposes hereof, "Governmental Authority" shall mean any court, agency,
----------------------
authority, board (including, without limitation, environmental
protection, planning and zoning), bureau, commission, department,
office or instrumentality of any nature whatsoever of any governmental
or quasi-governmental unit of the United States or the State or the
county or city where the Premises are located or any political
subdivision of any of the foregoing, whether now or hereafter in
existence, or any officer or official thereof, having jurisdiction over
Grantor or the Mortgaged Property or any portion thereof.
(c) This Deed of Trust and each of the other Transaction Documents
have been duly authorized, executed and delivered on behalf of Grantor
by its general partner, and this Deed of Trust constitutes, and each of
the other Transaction Documents and other instruments mentioned herein
to which Grantor is a party constitute, a legal, valid and binding
obligation of Grantor, enforceable against Grantor in accordance with
its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, moratorium,
15
<PAGE>
reorganization or other similar laws affecting the enforcement of
creditors' rights generally or by principles of equity or public policy
(whether asserted in equity or in proceedings at law).
(d) This Deed of Trust constitutes a valid mortgage lien on, and,
to the extent permitted by applicable law, security interest in, the
Mortgaged Property, subject to no liens, charges or encumbrances other
than the Permitted Exceptions. There are no defenses, counterclaims or
offsets to Grantor's obligation to pay the Debt pursuant to this Deed
of Trust, the Notes or any of the other Transaction Documents. To the
Best Knowledge of Grantor, there are no defenses, counterclaims or
offsets to any of Grantor's other obligations pursuant to this Deed of
Trust, the Notes or any of the other Transaction Documents.
(e) The Permitted Exceptions do not and will not materially and
adversely interfere with (i) the ability of Grantor to pay in full the
Debt in the manner required by the Notes or (ii) the use of the
Mortgaged Property for the use currently being made thereof, the
operation of the Mortgaged Property as currently being operated for
hotel purposes or the value of the Mortgaged Property.
(f) Except as set forth on the "Disclosure Schedule" (as defined in
-------------------
the Loan Agreement) applicable to the Mortgaged Property and approved
by Beneficiary in writing, there are no Leases (other than the Ground
Lease) affecting the Mortgaged Property. To the extent that the
Disclosure Schedule lists any leases affecting the Mortgaged Property,
to the Best Knowledge of Grantor, except as expressly disclosed on the
Disclosure Schedule (i) no tenant under any of the Leases is entitled
to any rent concession, (ii) Grantor has not accepted any prepayment of
any rent, additional rent or other sums due under any of the Leases,
except a payment of rent or additional rent one (1) month in advance or
a prepayment in the nature of security for the performance of
obligations of the tenant under any of the Leases and (iii) no tenant
has any defense, set-off or counterclaim against Grantor or to the
payment of any rent, additional rent or other sums payable pursuant to
its Lease or to the performance of any obligations of the tenant
thereunder. No tenant under any of the Leases has any right or option
relating to the sale or other disposition of any of the Mortgaged
Property.
(g) The copies of the Leases, if any, previously delivered by
Grantor to Beneficiary are true, correct and complete copies of those
documents, and contain the entire agreement between the parties thereto
with respect to the subject matter thereof.
(h) Except as set forth in the Disclosure Schedule applicable to
the Mortgaged Property, Grantor has obtained or has caused Manager to
obtain (i) where required by applicable law, a valid, permanent
Certificate of Occupancy for the Improvements which permits the uses to
which the Premises are put and the uses permitted under any applicable
Lease, and in such instances where relevant, such Certificate of
Occupancy is in full force and effect, and (ii) all Permits of all
Governmental Authorities required with respect to the use, operation,
ownership and maintenance of the Mortgaged Property, and
16
<PAGE>
all of the same are in full force and effect and the Improvements
comply in all material respects therewith.
(i) Grantor has all easements, appurtenances or other rights and
interests, including those for use, maintenance, and access (by
pedestrians, automobiles and trucks) necessary or appropriate for the
full and proper operation, repair, maintenance, occupancy and use of
every portion of the Mortgaged Property as a full-service, first-class
Marriott hotel and in compliance with the Loan Agreement. To the Best
Knowledge of Grantor, all utility services necessary for the operation
and occupancy of the Mortgaged Property for such purposes are available
at the Mortgaged Property and will continue to be operational and
adequate.
(j) Grantor's possession of the Premises has been peaceable and
undisturbed and Grantor's title thereto has never been disputed or
questioned and, except for the Permitted Exceptions Grantor does not
know of any facts by reason of which any adverse claim to any part of
the Mortgaged Property or to any undivided interest therein might be
made.
(k) Except as disclosed on the Title Policies or set forth on the
Disclosure Schedule applicable to the Premises and approved in writing
by Beneficiary, no condemnation or eminent domain proceedings or other
exercise of the right of eminent domain or conveyance in lieu of
condemnation (hereinafter collectively called "Condemnation
------------
Proceedings") have been commenced and remain ongoing with respect to
-----------
the Mortgaged Property or any portion thereof and, to the Best
Knowledge of Grantor, no Condemnation Proceedings are pending, nor has
Grantor received written notice of any threatened Condemnation
Proceedings.
(l) All costs arising from the construction of the Improvements
have been fully paid. All Equipment, Personal Property and all other
fixtures and articles of personalty attached to the Premises, or usable
in connection with the operation and maintenance thereof (xx) have been
fully paid for other than for purchase money financing in de minimis
amounts not exceeding $50,000.00 in the aggregate for the Premises and
the properties encumbered by the Other Mortgages, (yy) are the property
of Grantor and (zz) except for property subject to the foregoing
purchase money financings, are not subject to any conditional bills of
sale, chattel mortgages or any other title retention agreement of a
similar nature or to any other liens or encumbrances other than those
created by the Transaction Documents or otherwise specifically
permitted hereunder, except for:
----------
(i) such matters as are set forth on the Disclosure Schedule
applicable to the Premises and approved in writing by Beneficiary,
which shall include existing purchase money equipment arrangements;
(ii) such matters which, pursuant to the Loan Agreement, or
as defined in this Paragraph 4(l), as de minimis and not required
-------------- -- -------
to be disclosed;
17
<PAGE>
(iii) Equipment or Personal Property subject to written leases
between the owner/installer of such Equipment and/or Personal
Property, as lessor, and Grantor, as lessee, to the extent permitted
in the Loan Agreement; and
(iv) Equipment or Personal Property, if any, that is owned by
tenants or guests at the Premises.
(m) Grantor is not a "national" of a "designated foreign country"
(or a person defined as a "designated foreign country") as such quoted
terms are defined in the Foreign or Cuban Assets Control Regulations of
the United States Treasury Department, 31 CFR, Subtitle B, Chapter V,
as amended, or any regulation or ruling issued thereunder.
(n) Grantor, pursuant to the Title Policies, or an irrevocable
commitment therefor, effective as of the date of the closing of the
Loan has caused to be issued to Beneficiary an ALTA Lender's title
insurance policy insuring a valid first lien on the Premises, subject
only to the Permitted Exceptions which Title Policies are in full force
and effect and are freely assignable to and will inure to the benefit
of any trustee or servicer selected by Beneficiary in connection with a
Securitization (as defined in the Loan Agreement).
(o) To the Best Knowledge of Grantor, no representation or
information contained herein or in any other Transaction Document, nor
any written statement or other instrument furnished, or to be
furnished, to Beneficiary or any other person entitled thereto under
the terms of the Transaction Documents executed by Grantor or its
general partner taken as a whole contains, or will contain, any untrue
statement of a material fact, or omits, or will omit, to state a
material fact necessary to make the statements contained herein or
therein not materially misleading.
5. Covenants of Grantor as to Performance and Other Matters.
--------------------------------------------------------
(a) Grantor shall duly perform and observe all of the agreements,
covenants, conditions and obligations imposed by the provisions of this Deed of
Trust, the Notes, the other Transaction Documents or imposed upon or assumed by
Grantor by virtue of the provisions of the Permitted Exceptions or any deed,
conveyance, agreement, statute or ordinance pursuant to which Grantor or any
predecessor in title of the Mortgaged Property acquired the Mortgaged Property
or any right or privileges appurtenant thereto or for the benefit thereof.
(b) Grantor shall, so long as Grantor is the owner of the Mortgaged
Property, do all things necessary to preserve and keep in full force and effect
the existence, rights and privileges of Grantor under the laws of the state of
its incorporation and the State in which the Premises are located.
(c) Grantor shall not, without the prior written consent of
Beneficiary, which consent shall not be unreasonably withheld, conditioned or
delayed, institute, join in, execute or consent to any change in any covenant,
condition, restriction, easement, declaration, zoning
18
<PAGE>
ordinance, or other public or private restriction limiting, defining or
otherwise controlling construction on or use(s) of all or any part of the
Mortgaged Property.
(d) Except as expressly permitted in the Loan Agreement or any
other Transaction Document, Grantor shall not, without the prior written consent
of Beneficiary, which consent shall not be unreasonably withheld, conditioned or
delayed, enter into, amend or modify any agreements relating to the management
of the Mortgaged Property or the operation of the hotel or hotel operations
thereon.
(e) Except as expressly permitted in the Loan Agreement, Grantor
shall not, without the prior written consent of Beneficiary, enter into, amend
or modify any agreements relating to the Mortgaged Property or the operation of
the hotel or hotel operations thereon with any "Affiliate" (as defined in the
---------
Loan Agreement) of Grantor except on terms that are no less favorable to Grantor
than would be contained in similar arrangements on arms length terms with
independent third parties consistent with any provisions of the Loan Agreement.
All such agreements shall to the extent required under the Transaction Documents
be fully and expressly subject and subordinate in all respects to the Debt, this
Deed of Trust, and the Transaction Documents and to any and all extensions,
renewals, additions, modifications, increases, consolidations, spreaders,
amendments, replacements, restatements and substitutions hereof and thereof.
(f) Grantor shall obtain all Approvals, if any, required in
connection with the execution, delivery or performance by Grantor of this Deed
of Trust, the other Transaction Documents and the other instruments herein
mentioned to which Grantor is a party.
(g) Grantor shall cause all Permits and Certificates of Occupancy
required with respect to the use, operation, ownership and maintenance of the
Mortgaged Property to remain in full force and effect at all times during the
term hereof, and Grantor shall not permit or suffer to exist a violation of any
such Permit or Certificate of Occupancy, or enter into any Lease which causes or
permits the violation thereof.
(h) Grantor shall, within five (5) business days after receipt from
or delivery to Fee Owner of any notice of default or any other material notice,
demand, complaint or request made by or given to Fee Owner with respect to the
Premises or the Ground Lease, deliver a true copy thereof to Beneficiary.
Beneficiary may, upon receipt by Beneficiary of any notice of default on the
part of Grantor under the Ground Lease, rely thereon and may, upon notice to
Grantor, take such action as Beneficiary shall deem necessary or desirable
notwithstanding that the existence of such default or the nature thereof may be
questioned or denied by or on behalf of Grantor.
(i) Grantor shall pay the rent and other charges and all other sums
due or payable at any time and from time to time pursuant to the terms of the
Ground Lease as and when such sums shall become due or payable. If any default
shall be made in the payment of any sum when due or payable by Grantor under the
Ground Lease, Beneficiary shall have the right, but shall have no obligation, to
pay any such sum.
19
<PAGE>
(j) Grantor shall give Beneficiary written notice of each and every
option to extend or renew the term of the Ground Lease, and notice of its
intention to exercise each such option, at least twenty (20) but not more than
sixty (60) days prior to the expiration of the time to exercise such option
under the terms of the Ground Lease. Grantor shall exercise any extension and/or
renewal option in respect of the Ground Lease upon Beneficiary's demand if
Beneficiary reasonably determines that the exercise of such option is necessary
to protect Beneficiary's security for the Loan. If Grantor intends to extend or
renew the term of the Ground Lease, Grantor shall deliver to Beneficiary,
together with the notice of such decision, a copy of the notice of extension or
renewal delivered to Fee Owner. If the term of the Ground Lease does not extend
at least ten (10) years beyond the Maturity Date, Beneficiary may, at its
option, exercise the option to extend or renew in the name and on behalf of
Grantor. For such limited and specific purpose, Grantor hereby irrevocably
appoints Beneficiary as its true and lawful attorney-in-fact (which appointment
shall be deemed coupled with an interest) to execute and deliver, for and in the
name of Grantor, all instruments and agreements necessary under the Ground Lease
or otherwise to cause such an extension of the term of the Ground Lease.
(k) Grantor shall not (i) terminate (or exercise any option it may
have to terminate) or cancel the Ground Lease, surrender all or any part of the
Premises to Fee Owner, modify, abridge or amend any material provision of the
Ground Lease, or suffer or permit any of the foregoing to occur, or (ii) consent
to the subordination of the Ground Lease or any amendment or modification
thereof to any mortgage encumbering the fee title to all or any portion of the
Premises.
(l) Grantor shall fully and timely observe, perform and comply in
all material respects with all of the terms, covenants and provisions contained
in the Ground Lease in such a manner so as to preserve and keep unimpaired its
rights under the Ground Lease and to prevent the occurrence of a default
thereunder.
(m) Grantor shall execute and deliver to Beneficiary, within five
(5) days after request, such instruments as may be required to permit
Beneficiary to cure any default under the Ground Lease or permit Beneficiary to
take such other action required to enable Beneficiary to cure or remedy the
matter in default and preserve the interest of Beneficiary in the Mortgaged
Property.
(n) Except as specifically provided in the Ground Lease, Grantor
shall first obtain the consent or approval of Fee Owner in all instances where
the consent or approval of Beneficiary under this Deed of Trust requires such
consent under the Ground Lease.
6. Due on Sale or Encumbrance.
--------------------------
(a) Grantor acknowledges that the continuous ownership, operation
and management of the Mortgaged Property by Grantor (directly, or through the
Manager) is of a material nature to this transaction and the making of the Loan
evidenced and secured by this Deed of Trust and the other Transaction Documents.
Grantor hereby covenants and agrees that Grantor shall not, without the written
consent of Beneficiary, directly or indirectly, voluntarily
20
<PAGE>
or involuntarily or by operation of law, (i) dissolve, or terminate or amend the
terms of the existence of the Grantor or its general partner in any respect that
is not expressly permitted by the Transaction Documents, or (ii) sell, convey,
assign, mortgage, encumber (except by the Permitted Exceptions), hypothecate or
otherwise transfer, alienate or dispose of, including, without limitation, any
lease of the Premises as a whole or substantially as a whole, any interest in
the Mortgaged Property or any legal or beneficial interest in the Grantor or its
general partner, except as expressly permitted by the Transaction Documents.
(b) If Beneficiary shall not consent in writing to a sale,
conveyance, assignment, mortgaging, encumbering or other transfer, alienation or
disposition prohibited by subparagraph 6.(a) hereof, and Grantor nevertheless
------------------
proceeds with such sale, conveyance, assignment, mortgaging, encumbering or
other transfer, alienation or disposition, then Beneficiary may, at its option,
and without limiting any other right or remedy available to Beneficiary
hereunder, at law or in equity, (but subject to Grantor's right pursuant to and
in accordance with the Loan Agreement to obtain the release by Beneficiary of
the Mortgaged Property) in its sole and absolute discretion and without regard
to the adequacy of its security, declare the Notes, in whole or in part,
immediately due and payable.
(c) The giving of written consent by Beneficiary to the transfer,
alienation or disposition of all or any part of the Mortgaged Property or any
interest in the Mortgaged Property or Grantor or its general partner in any one
or more instances shall not limit or be deemed a waiver of the requirement for
such consent in any other or subsequent instances. Except as otherwise expressly
provided to the contrary in any Transaction Document, if any mortgage,
encumbrance or other lien shall be placed on the Mortgaged Property or any
portion thereof (other than this Deed of Trust) without the prior written
consent of Beneficiary, such prohibited lien shall be deemed to be null and void
ab initio.
- ---------
7. Hazardous Substances.
--------------------
(a) As used herein:
(i) "Environment" shall mean soil, surface waters, ground
-----------
waters, land, stream, sediments, surface or subsurface strata and
ambient air.
(ii) "Environmental Laws" shall mean all Federal, state
------------------
and local environmental, health or safety laws, regulations,
ordinances, orders, actions, policies and rules of common law (whether
now existing or hereafter enacted or promulgated), of all Governmental
Authorities and all applicable judicial and administrative and
regulatory decrees, judgments and orders, including common law rulings
and determinations, relating to injury to, or the protection of, human
health or the Environment, including, without limitation, all
requirements pertaining to reporting, licensing, permitting,
investigation, remediation and removal of emissions, discharges,
releases or threatened releases of Hazardous Substances, into the
Environment, or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous
Substances.
21
<PAGE>
(iii) "Environmental Report" shall mean the environmental
--------------------
reports (described in the Disclosure Schedule) applicable to the
Premises or any update thereof or supplement thereto.
(iv) "Hazardous Substances" shall mean any chemical,
--------------------
material, gas, vapor, energy, radiation or substance the presence of
which requires or may hereafter require notification, investigation or
remediation under any applicable Environmental Law, which is or becomes
defined as a "hazardous waste", "hazardous material" or "hazardous
substance" or "controlled industrial waste" or "pollutant" or
"contaminant" under any present or future Environmental Laws, which is
toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic or otherwise hazardous and is or becomes
regulated by any Governmental Authority, the presence of which on the
Mortgaged Property poses a hazard to the Mortgaged Property or to the
health or safety of persons or property on or about the Mortgaged
Property, without limitation, which contains gasoline, diesel fuel or
other petroleum hydrocarbons or volatile organic compounds, without
limitation, which contains PCBs or asbestos or urea formaldehyde foam
insulation, or without limitation, which contains or emits radioactive
particles, waves or material, including radon gas in amounts the
presence of which poses or threatens to pose a hazard to the Mortgaged
Property or to the health or safety of persons or property on or about
the Mortgaged Property.
(b) Grantor hereby represents and warrants as of the date hereof as
follows:
(i) Except as set forth in the applicable Environmental
Report:
(A) neither Grantor nor, to the Best Knowledge of
Grantor, any prior owner, occupant or user of the Mortgaged Property
nor any other person (each, a "Prior User") has engaged in or
----------
permitted any operations or activities upon, or any use or occupancy
of the Mortgaged Property, or any portion thereof, for the purpose
of or in any way involving the handling, manufacture, treatment,
storage, use, generation, release, discharge, refining, dumping or
disposal of any Hazardous Substances (whether legal or illegal,
accidental or intentional) on, under, in or about the Mortgaged
Property, except to the extent commonly used in the day-to-day
operation of the Mortgaged Property and in such case substantially
in compliance with all Environmental Laws;
(B) neither Grantor nor, to the Best Knowledge of
Grantor, any Prior User, has transported any Hazardous Substances
to, from or across the Mortgaged Property, except substantially in
compliance with all Environmental Laws;
(C) to the Best Knowledge of Grantor, no Hazardous
Substances have migrated from other properties upon, about or
beneath the Mortgaged Property; and
22
<PAGE>
(D) to the Best Knowledge of Grantor, there are no
Hazardous Substances presently deposited, stored, or otherwise
included in or located on, under, in or about the Mortgaged
Property, except Hazardous Substances stored and used in amounts
reasonably related to the normal operation of the Mortgaged Property
for hotel operations and in such case substantially in compliance
with all Environmental Laws.
(ii) Except as set forth in the applicable Environmental
Report, the Mortgaged Property and the use, maintenance and operation
of the Mortgaged Property, and all activities and conduct of business
related thereto, substantially comply and to the Best Knowledge of
Grantor have at all relevant times substantially complied with all
Environmental Laws, and no activity on or condition of the Property has
been alleged in writing to Grantor to be a material nuisance with
respect to any third party.
(iii) Grantor has obtained any or all permits, licenses and
authorizations necessary to Grantor's operation of the Mortgaged
Property under applicable Environmental Laws, including laws relating
to emissions, discharges, releases or threatened releases of Hazardous
Substances into the Environment or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Substances. To the Best
Knowledge of Grantor, Grantor and the Mortgaged Property are
substantially in compliance with all terms and conditions of any
required permits, licenses and authorizations.
(iv) Except as set forth in the applicable Environmental
Report, neither Grantor nor, to the Best Knowledge of Grantor, any
Prior User has received notice or other communication from a
Governmental Authority having jurisdiction over the Grantor the
Mortgaged Property or any such Prior User concerning any alleged
violation of or liability under any Environmental Laws with respect to
the Mortgaged Property. Additionally, Grantor has not received notice
or other communication from a Governmental Authority concerning any
alleged material violation or material liability under any
Environmental Laws by Grantor, or relating in whole or in part to the
Mortgaged Property, or with respect to the real property adjacent to
the Mortgaged Property, it being understood that the term "adjacent"
shall refer to real property within the relevant radius for the
violation of applicable Environmental Laws as set forth in the
applicable Environmental Report. Except as set forth in the applicable
Environmental Report, there exists no writ, injunction, decree, order
or judgment outstanding, nor any lawsuit, claim, proceeding, citation,
directive, summons or investigation, pending or, to the Best Knowledge
of Grantor, threatened, relating to the ownership, use, maintenance or
operation of the Mortgaged Property by any person or entity, or related
to any alleged violation of Environmental Laws, or any suspected
presence of Hazardous Substances thereon.
(v) Except to the extent set forth in the applicable
Environmental Report, Grantor has not placed, nor to Grantor's Best
Knowledge has there been constructed, placed, deposited, stored,
disposed of or located on the Mortgaged Property
23
<PAGE>
any PCB nor any transformer, capacitor, ballast, or other equipment
which contains dielectric fluid containing PCBs in concentrations that
exceed federal standards, nor any asbestos or asbestos-containing
materials nor any insulating material containing urea formaldehyde or
any radon gas in amounts the presence of which poses or threatens to
pose a hazard to the Mortgaged Property or to the health or safety of
persons or property on or about the Mortgaged Property. To the Best
Knowledge of Grantor, except to the extent set forth in the
Environmental Report or as may have been removed in accordance with
Environmental Laws, no underground improvements, including, but not
limited to, treatment or storage tanks, or water, gas or oil wells, are
located on the Mortgaged Property.
(c) Grantor hereby covenants and agrees that Grantor shall not,
unless Beneficiary shall otherwise consent in writing:
(i) Cause or, to the best of Grantor's ability to prevent
such activity, permit or suffer any Hazardous Substance to be brought
upon, treated, kept, stored, disposed of, discharged, released,
produced, manufactured, generated, refined or used upon, about or
beneath the Mortgaged Property or any portion thereof by Grantor, its
agents, employees, contractors, invitees, tenants, or any other person,
except to the extent commonly used in the ordinary operation of the
Mortgaged Property or in any such contractor's ordinary course of
trade, and in each case in compliance with applicable Environmental
Laws. The foregoing shall not apply to any Hazardous Substances that
may have migrated or leached onto the Mortgaged Property from any other
property.
(ii) Cause, permit or suffer the existence or the commission
by Grantor, its agents, employees, or contractors of a violation of any
Environmental Laws upon, about or beneath the Mortgaged Property or any
portion thereof and Grantor shall use commercially reasonable efforts
to prevent any such violation of any Environmental Laws by any invitees
or any other person on the Mortgaged Property. Any removal or
encapsulation of or other remedial action taken by or on behalf of
Grantor in connection with any Hazardous Substance located on the
Mortgaged Property (including, without limitation, subsequent disposal
thereof) shall be performed in accordance with all applicable
Environmental Laws and other Legal Requirements (as defined in
Paragraph 15 hereof).
------------
(iii) Subject to the provisions of Paragraph 16 hereof
------------
relating to permitted contests, create, or to the best of Grantor's
ability to prevent such encumbrances, suffer to exist with respect to
the Mortgaged Property, or permit any of its agents to create or suffer
to exist, any lien, security interest or other charge or encumbrance of
any kind under any Environmental Laws, including, without limitation,
any lien imposed pursuant to section 107(l) of the Superfund Amendments
and Reauthorization Act of 1986 (42 U.S.C. Section 9607(1)) or any
similar state statute.
(d) Grantor hereby covenants and agrees that Grantor will at all
times comply with the following requirements:
24
<PAGE>
(i) Grantor shall, at its sole cost and expense, but without
waiver or limitation of any rights or remedies Grantor may have against
anyone other than Beneficiary, promptly take all actions required of
Grantor or any Affiliate of Grantor by any Governmental Authority which
arise from the presence upon, about or beneath the Mortgaged Property
of a Hazardous Substance or a violation of Environmental Laws. Such
action shall include, but not be limited to, the investigation of the
environmental condition of the Mortgaged Property, the preparation of
any feasibility studies, reports or remedial plans, and the performance
of any clean-up, remediation, containment, operation, maintenance,
monitoring or restoration work, whether on or off the Mortgaged
Property, to the extent required by applicable Environmental Laws.
Grantor shall take all actions necessary to restore the Mortgaged
Property to a condition that complies with any standard of remediation
required under applicable Environmental Law. Grantor shall proceed
continuously and diligently with all such required investigatory and
remedial actions, provided that in all cases such actions shall be in
accordance with all applicable Environmental Laws. Any such actions
shall be performed in a good, safe and workmanlike manner and shall, to
the extent practicable, minimize any impact on the business conducted
at the Mortgaged Property. Grantor shall pay all costs in connection
with such investigatory and remedial activities, including, but not
limited to, all power and utility costs, and any and all taxes or fees
that may be applicable to such activities. Grantor shall promptly
provide to Beneficiary copies of testing results and reports that are
generated in connection with the above activities. If required by
applicable Environmental Law, promptly upon completion of such
investigation and remediation, Grantor shall permanently seal or cap
all monitoring wells and test holes in compliance with applicable Legal
Requirements and industry standards, remove all associated equipment,
and restore the applicable Property, which shall include, without
limitation, the repair of any surface damage, including paving, caused
by such investigation or remediation. Nothing in this subsection shall
preclude the performance of any action required by any Governmental
Authority, as described above, by anyone other than Grantor or
Beneficiary. In such event, Grantor shall take all appropriate measures
to ensure that such action is performed in accordance with all
applicable Environmental Laws, and is consistent with the terms of this
Deed of Trust.
(ii) If Grantor shall become aware of or receive actual
notice concerning any actual, alleged or suspected violation of or
liability under any Environmental Laws, or a substantial risk that any
such Environmental Law will be violated with respect to the Premises,
or that any representation of Grantor contained herein relating to
Hazardous Substance is not or is no longer accurate in any material
respect, including but not limited to actual notice or other written
communication concerning any actual or threatened investigation,
inquiry, lawsuit, claim, citation, directive, summons, proceeding,
complaint, notice, order, writ or injunction, relating to same, and
including without limitation any notice or other communication by
Grantor, then Grantor shall deliver to Beneficiary, (x) within ten (10)
days after receipt of such notice, a written description of said
violation, liability, investigation or actual or threatened event or
condition, together with copies of any documents evidencing same and
(y) within thirty (30) days after receipt of such notice, a written
description of the corrective action, if any, proposed by Grantor in
25
<PAGE>
response thereto. Receipt of such notices by Beneficiary shall not be
deemed to create any obligation on the part of Beneficiary to defend or
otherwise respond to any such notification.
(iii) Beneficiary shall have the right (but not the
obligation) to enter upon the Mortgaged Property, from time to time at
reasonable times and upon reasonable notice, and in its sole and
absolute discretion, to conduct inspections of the Mortgaged Property
and the activities conducted thereon to determine compliance with all
Environmental Laws, the presence of Hazardous Substances and the
existence of any potential damages as a result of the condition of the
Mortgaged Property. In furtherance thereof, Grantor hereby grants to
Beneficiary, and its agents, employees, and qualified consultants and
contractors, the right to enter upon the Mortgaged Property and to
perform such tests on the Mortgaged Property as are reasonably
necessary to make such determination. Beneficiary shall conduct such
inspections and tests at reasonable times, shall use its best efforts
to minimize interference with the operation of the Mortgaged Property
and agrees to restore the condition of the Mortgaged Property to
substantially the same condition as existed immediately before such
tests were performed, and Beneficiary shall not be liable for any
interference caused thereby unless due to the gross negligence or
willful misconduct or omission of Beneficiary.
8. Insurance. (a) The insurance requirements set forth on Schedule X
--------- ----------
annexed hereto are incorporated by reference herein and are made a part of this
Deed of Trust. At Grantor's expense, Grantor shall maintain continuously during
the term of this Deed of Trust policies of insurance (collectively, the
"Policies") in form and in amounts and issued by companies, associations or
--------
organizations satisfactory to Beneficiary and meeting the requirements set forth
in Schedule X.
----------
(b) When and if required by the applicable insurance company,
Grantor shall furnish Beneficiary with an appraisal satisfactory to Beneficiary
showing the full replacement value of the Improvements, the Equipment and the
Personal Property.
(c) At the request of Beneficiary, Grantor shall assign the
Policies to Beneficiary for the benefit of Beneficiary as collateral and further
security for the payment of the Debt. In the event of a foreclosure of this Deed
of Trust, the purchaser of the Mortgaged Property shall succeed to all the
rights of Grantor to the extent permissible under the Policies and applicable
law, including any right to unearned premiums, in and to all Policies assigned
or delivered to Beneficiary pursuant to this Paragraph.
---------
(d) If Grantor fails to maintain the insurance required to be
maintained hereunder or on Schedule X or fails to deliver evidence of insurance
----------
Beneficiary may, but shall not be obligated to on not less than five (5)
Business Days' written notice to Grantor (or sooner, if required to replace any
insurance before it expires), obtain insurance and pay the premiums therefor on
behalf of Grantor if Grantor does not immediately obtain such insurance, and
Grantor shall reimburse Beneficiary, on written demand, for all sums advanced
and expenses incurred in connection therewith. Such sums and expenses, together
with interest thereon at the Default Rate
26
<PAGE>
(as defined in Paragraph 20), shall be deemed part of the Debt and secured by
------------
the lien of this Deed of Trust.
(e) Nothing contained in this Paragraph 8 or elsewhere in this Deed
-----------
of Trust shall relieve Grantor of its duty to maintain, repair, replace or
restore the Improvements, the Equipment or the Personal Property or rebuild the
Improvements, from time to time, as required by the Transaction Documents,
following damage thereto or destruction thereof whether or not sufficient
proceeds of insurance are available to defray the cost of such repairs or
restoration, and following any condemnation of all or any portion of the
Mortgaged Property, and nothing contained in this Paragraph 8 or elsewhere in
-----------
this Deed of Trust shall relieve Grantor of its duty to pay the Debt, which
shall be absolute, regardless of the occurrence of damage to or destruction of
or condemnation of all or any portion of the Mortgaged Property.
(f) In the event that prior to payment in full of the Debt, any
claim under any Policy has not been paid and distributed in accordance with the
terms of this Deed of Trust, and any such claim shall be paid after foreclosure
of this Deed of Trust or other transfer of title to the Mortgaged Property shall
have resulted in extinguishing the Debt for an amount less than the total of the
unpaid principal balance together with accrued interest and the Yield
Maintenance Premium, plus costs and disbursements at the time of the
extinguishment of the Debt, and such insurance claim is thereafter paid, then
and in that event that portion of the payment in satisfaction of the claim which
is equal to the aforesaid deficiency shall belong to and be the property of
Beneficiary and shall be paid to Beneficiary, and Grantor hereby assigns,
transfers and sets over to Beneficiary all of Grantor's right, title and
interest in and to said sums. The balance, if any, shall be promptly paid to, or
as directed by, Grantor. Notwithstanding the above, Grantor shall retain an
interest in the Policies above described during any redemption period. The
provisions of this Paragraph 8(f) shall survive the termination of this Deed of
--------------
Trust by foreclosure or otherwise as a consequence of the exercise of any rights
and remedies of Beneficiary hereunder after an Event of Default.
9. Payment of Impositions and Utility Charges.
-------------------------------------------
(a) Except as specifically provided in the cash management
procedures set forth in the Loan Agreement or the Exhibits thereto
(collectively, the "Cash Management Procedures") and subject to the provisions
--------------------------
of Paragraph 16 hereof, Grantor shall pay or cause to be paid, before any
------------
interest or penalty for non-payment attaches thereto, all taxes, assessments,
water rates, sewer rents, vault charges, permit fees, user fees, ground rents,
maintenance charges and other governmental charges, and other charges of any
kind or nature whatsoever, general or special, ordinary or extraordinary, now or
hereafter levied, assessed or imposed upon or which constitute a lien upon or
against the Mortgaged Property or any portion thereof, or upon the Rents derived
from the Mortgaged Property or arising in respect of the occupancy, use or
possession thereof (collectively, the "Impositions"). If Grantor shall fail to
-----------
pay or cause to be paid any Impositions before any interest or penalty for
non-payment attaches thereto, Beneficiary shall have the right, but shall not be
obligated (except as specifically provided under the Cash Management
Procedures), to pay such Impositions upon not less than five (5) Business Days'
prior written notice to Grantor (subject to the provisions of the next
succeeding sentence), and Grantor shall
27
<PAGE>
repay to Beneficiary, within ten (10) days after written demand, any amount so
paid by Beneficiary, with interest thereon (xx) at the regular Base Rate
provided for in the Notes from the date of Beneficiary's payment up to the date
of demand for repayment by Beneficiary, and (yy) at the Default Rate from and
including the date of such demand by Beneficiary to the date of repayment by
Grantor, and such amount, together with such interest, shall constitute a
portion of the Debt secured by the lien of this Deed of Trust. If an Escrow Fund
(as defined in Paragraph 10) is in effect with respect to the Loan, Beneficiary
------------
shall not be required to give Grantor prior written notice of payments from such
Escrow Fund with respect to Impositions and the provisions of Paragraph 10 of
------------
this Deed of Trust and any Collateral Account Agreement or similar agreement
with respect to such Escrow Funds shall apply. In the case of any assessment
payable in installments, each installment thereof shall be paid prior to or on
the date on which such installment becomes due and payable without imposition of
any fine, penalty, interest or cost. Grantor shall not be entitled to any credit
on the Notes, or any other sums which may become payable under the terms thereof
or hereof, or otherwise, by reason of the payment of the Impositions.
(b) Grantor shall promptly deliver to Beneficiary, upon request,
receipted bills, canceled checks or other evidence reasonably satisfactory to
Beneficiary evidencing the payment of the Impositions. The certificate, advice
or bill of the appropriate official designated by law to make or issue the same
or to receive payment of such Imposition shall be prima facie evidence that such
Imposition is due and unpaid at the time of the making or issuance of such
certificate, advice or bill. If Grantor shall fail to provide Beneficiary with
such evidence evidencing the payment of Impositions within thirty (30) days
after notice, Grantor shall pay Beneficiary, on written demand, all charges,
payments, fees, costs or expenses reasonably incurred by Beneficiary in
connection with obtaining evidence satisfactory to Beneficiary that payment of
all Impositions is current and that there are no Impositions due and owing or
which have become a lien on the Mortgaged Property or any portion thereof or any
appurtenances thereto.
(c) Grantor shall timely pay or cause to be paid all charges for
electricity, power, gas, water and other utilities used in connection with the
Mortgaged Property and, upon the written request of Beneficiary, Grantor shall
promptly deliver to Beneficiary receipted bills, canceled checks or other
evidence reasonably satisfactory to Beneficiary evidencing the payment of such
charges.
10. Escrow Fund.
-----------
(a) Grantor shall, at the option of Beneficiary to be exercised by
written notice at any time after the occurrence of an Event of Default, or as
otherwise required by the Cash Management Procedures, pay to Beneficiary (or, if
applicable, any servicer named in or named pursuant to the Loan Agreement for
the benefit of Beneficiary) the amount required in connection with the Escrow
Fund under the Cash Management Procedures, if any, on or before the date
required by the Cash Management Procedures. If at any time such Cash Management
Procedures are not in effect, on the Debt Service Payment Date (as defined in
the Notes), Grantor shall, at the option of Beneficiary to be exercised by
written notice after the occurrence of an Event of Default deposit with
Beneficiary an amount (hereinafter referred to as the "Escrow Fund") which
-----------
28
<PAGE>
amount, at the option of Beneficiary, shall be the amount which would have been
required by the Cash Management Procedures, if any, including Paragraph 6.1
-------------
thereof, had the Cash Management Procedures been in effect, or, at Beneficiary's
option, an amount equal to one-twelfth (1/12th) of the amount which would be
sufficient to pay the Impositions and all premiums on the Policies payable, or
estimated by Beneficiary to be payable, during the ensuing twelve (12) months.
Such deposits shall not be, nor be deemed to be, trust funds and shall be held
by Beneficiary in a segregated sub-account of the Cash Collateral Account (as
defined in the Loan Agreement) (the "Tax and Insurance Account") and invested in
-------------------------
Permitted Investments (as hereinafter defined) (except as otherwise required by
any Legal Requirement) which shall be free of any liens or claims on the part of
creditors of Grantor.
(b) Beneficiary will apply monies in the Escrow Fund, if any, (and
any earnings inuring thereon) to the payment when due of Impositions and
premiums on the Policies which are required to be paid by Grantor pursuant to
the provisions of the Cash Management Procedures, or if such Cash Management
Procedures are not in effect, this Deed of Trust. If the amount of the Escrow
Fund shall exceed the amount of the Impositions and premiums on the Policies
payable by Grantor pursuant to the provisions of this Deed of Trust, Beneficiary
shall, in its sole discretion (i) return any excess to Grantor or (ii) credit
such excess against future payments to be made to the Escrow Fund. In allocating
such excess, Beneficiary may deal with the person shown on the records of
Beneficiary to be the owner of the Mortgaged Property. If the Escrow Fund is not
sufficient to pay the Impositions and premiums on the Policies as the same
become due and payable, Grantor shall pay to Beneficiary an amount which
Beneficiary shall estimate as sufficient to make up the deficiency.
(c) Until expended or applied as above provided, any amounts in the
Escrow Fund shall constitute additional security for the Debt. If this Deed of
Trust is sold or assigned, Beneficiary shall transfer to the assignee the amount
then held by Beneficiary under this Paragraph, and upon delivery to the Grantor
---------
of evidence of such assignment and transfers, together with a written
acknowledgement of receipt by the transferee, the transferring Beneficiary shall
not have any further obligation to Grantor with respect to such amount. If at
any time Grantor tenders to Beneficiary full payment of the entire Debt,
including any applicable premium or penalty, and Beneficiary has no further
obligation under the Loan Agreement to make Advances, Beneficiary shall credit
to the account of Grantor any balance remaining in the Escrow Fund accumulated
by Beneficiary under this Paragraph, including interest earned thereon. Upon
---------
the occurrence and during the continuation of an Event of Default, Beneficiary
shall be authorized and empowered (but not required) to apply the balance
remaining in the Escrow Fund in the manner set forth in Paragraph 23 hereof
------------
and shall give Grantor prompt notice thereof.
11. Leases and Rents.
----------------
(a) Grantor hereby grants and assigns to Beneficiary the right to
enter the Mortgaged Property for the purpose of enforcing its interest in the
Leases, if any, and collecting the Rents, this Deed of Trust constituting a
present, absolute assignment of the Leases and Rents. Notwithstanding the
foregoing, but subject to the terms and conditions of this Paragraph,
---------
Beneficiary hereby grants to Grantor a revocable license to operate and manage
the Mortgaged
29
<PAGE>
Property and to collect the Rents. Grantor shall hold the Rents, or an amount
sufficient to discharge all current sums due on the Debt, in trust for use in
payment of the Debt. The license herein granted to Grantor to collect the Rents
and enforce its interests in the Leases may be revoked by Beneficiary following
an Event of Default under this Deed of Trust or any of the other Transaction
Documents, by giving written notice of such revocation to Grantor. Following
such notice, Beneficiary may collect, retain and apply the Rents toward payment
of the Debt in such priority and proportions as Beneficiary, in its sole
discretion, shall deem proper, or to the operation, maintenance and repair of
the Mortgaged Property. In addition to the rights which Beneficiary may have
herein, Beneficiary, at its option, may require Grantor to pay, monthly in
advance, to Beneficiary, or any receiver appointed to collect the Rents, the
fair and reasonable rental value for the use and occupation of such part of the
Premises as may be in the possession of Grantor for its own use (it being
understood that for such purpose Grantor shall not be deemed to be in possession
of a hotel room unless Grantor or its affiliates is using the same), other than
such portions of the Premises used for the operation of the Hotel. Upon default
in any such payment, Grantor will vacate and surrender possession of such
portions of the Premises to Beneficiary, or to such receiver and, in default
thereof, Grantor may be evicted from such portions of the Premises by summary
proceedings or otherwise. Nothing contained in this Paragraph shall be construed
---------
as imposing on Beneficiary any of the obligations of the lessor under the
Leases. The provisions of this Paragraph shall be in addition to, and not in
---------
lieu of, the provisions of the Assignment, and, if any conflict or inconsistency
exists between the provisions of this Deed of Trust and the provisions of the
Assignment with respect to the Leases or Rents, the provisions of the Assignment
shall control, except to the extent that this Deed of Trust shall impose greater
burdens upon Grantor, shall further restrict rights of Grantor or shall give
Beneficiary greater rights. Beneficiary shall be entitled to all the rights and
benefits of the applicable laws of the State. It shall never be necessary for
Beneficiary to institute legal proceedings of any kind whatsoever to enforce the
provisions of this Paragraph 11(a). The rights of Trustee hereunder in the
---------------
Leases and Rents shall be subject to (i) the rights of Beneficiary in the Leases
and Rents, and (ii) the rights of Beneficiary in the Leases and Rents and
revenues created under the Assignment.
(b) Except as otherwise provided in the Loan Agreement, Grantor
shall not, without the prior written consent of Beneficiary, enter into any
Material Lease with respect to the Premises. For purposes of this Deed of Trust
and all of the Transaction Documents, the term "Material Lease" shall mean (xx)
a lease demising 5% or more of the Floor Area of the Premises regardless of the
term of such lease or (yy) a lease demising any room or suite in the Premises
for a period in excess of 365 calendar days (including so-called seasonal leases
aggregating to a time period in excess of 365 days whether or not such days run
consecutively). All new Leases (including Material Leases) shall be with tenants
unaffiliated with Grantor, shall be on arms-length terms and conditions and
shall be at annual rents at least comparable to the market rents then being paid
for comparable premises in the vicinity of the Premises.
(c) Any Lease entered into by Grantor from and after the date
hereof and each renewal of an existing Lease (excluding, however, a renewal
pursuant to an option contained in an existing Lease) shall provide:
30
<PAGE>
(i) that such Lease is and shall be subject and subordinate
in all respects to this Deed of Trust and the lien created hereby, and
to any renewals thereof, including any increase in the principal amount
secured by this Deed of Trust, and any increase in the interest rates
set forth in the Notes and to each and all of the rights of Beneficiary
or any holder thereof; (ii) that such provision shall be self-
operative;
(iii) that, in confirmation of such subordination, each tenant
under a Lease (each, a "Tenant" and, collectively, the "Tenants")
------ -------
shall promptly execute and deliver following Beneficiary's written
request such commercially reasonable agreement of subordination that
Beneficiary may request; and
(iv) that the Tenant shall execute and deliver estoppel
certificates (each, a "Tenant Estoppel Certificate") addressed to
---------------------------
Beneficiary certifying as to the following information:
(A) an identification of the Lease and all modifications
by date, parties, and space;
(B) the commencement date and expiration dates of the
original term and any renewal periods of such Lease;
(C) the base rent and additional rent then payable under
such Lease;
(D) that such Lease is in full force and effect;
(E) that, to the best knowledge of such Tenant, Grantor
is not in default of any of the terms of such Lease (or, if in
default, specifying the default);
(F) that, to the best knowledge of such Tenant, it has
no rights of offset, defenses or counterclaims under the Lease (or,
if it has any, specifying the same); and
(G) the last day to which base rent under the Lease has
been paid.
(d) Grantor, promptly after obtaining actual knowledge thereof,
shall notify Beneficiary of the termination of any Material Lease, the receipt
of any notice of default under any Material Lease, and of any notice, action or
proceeding regarding any Material Lease which may, in Grantor's reasonable
judgment, materially and adversely affect the Mortgaged Property.
31
<PAGE>
(e) Grantor shall at all times perform and comply with, or cause to
be performed and complied with in all material respects, all of the terms,
covenants and conditions of the Leases to be performed or complied with by
Grantor thereunder.
(f) Upon written notice, but not more frequently than annually,
Grantor shall deliver to Beneficiary, on request, if applicable, a rent roll and
schedule of the Leases then in existence, certified by Grantor to be true and
complete, together with a counterpart original or a copy of every Lease and any
amendments with respect to which a counterpart original or copy has not
previously been furnished to Beneficiary, and containing such other information
as Beneficiary may reasonably request. In addition, Grantor, upon Beneficiary's
reasonable request, shall use reasonable efforts to obtain from each tenant at
the Premises a Tenant Estoppel Certificate.
(g) All security or other deposits, if any, of Tenants held by
Grantor (collectively, "Security Deposits") shall be treated as trust funds of
-----------------
Grantor and shall be deposited in a tenant's security account maintained by
Grantor at a commercial bank, savings bank or savings and loan association,
identified to Beneficiary.
(h) The provisions in subparagraphs 11(b), (c) and (f) of this
--------------------------------
Paragraph shall not apply to any nightly rentals or other arrangements for
- ---------
occupancy of individual hotel rooms or suites at the Premises in the ordinary
course of the operation of Grantor's hotel business, provided that any such
nightly rentals or other arrangements for occupancy are not effected pursuant to
Material Leases.
12. Maintenance of the Mortgaged Property; Changes.
----------------------------------------------
(a) Grantor agrees to keep, operate and maintain the Mortgaged
Property as a first-class, full-service Marriott hotel and in compliance in all
material respects with the Ground Lease, the Loan Agreement and the Management
Agreement, subject to Uncontrollable Circumstances (as defined in the Loan
Agreement), Temporary Takings (as defined in Paragraph 14(d) hereof) and
---------------
temporary closures for repairs in the ordinary course of Grantor's business
(provided that such temporary closures shall not in any event affect the entire
hotel or a material part thereof and shall not last longer than thirty (30)
consecutive days) and further subject to the effects of casualty and
condemnation provided that Grantor is using diligent efforts to mitigate the
effects of any such event to the extent required by, and in compliance with, the
provisions of Paragraph 13 hereof, with respect to the effects of casualty, and
------------
Paragraph 14 hereof, with respect to the effects of any Condemnation
- ------------
Proceedings. Without limitation, Grantor agrees:
(i) not to desert or abandon all or any portion of the
Mortgaged Property;
(ii) to keep, or cause to be kept, the Mortgaged Property,
the sidewalks and the curbs adjoining the Mortgaged Property in good,
safe and insurable condition and as required by Legal Requirements
(whether or not a violation has been noted or issued therefor);
32
<PAGE>
(iii) to maintain, or cause to be maintained or replaced, all
Improvements, Equipment and Personal Property in substantially the same
or better condition as they exist on the date hereof;
(iv) not to commit or suffer waste;
(v) not make or permit to be made, except as permitted by
the Transaction Documents, any structural or non-structural alterations
in or additions to the Improvements (collectively, "Changes") or
-------
demolish the Improvements or any portion thereof, except in accordance
with the provisions of the Ground Lease and the Transaction Documents
and with the prior written consent of Beneficiary, which consent shall
not be unreasonably conditioned, withheld or delayed, except (x) as may
otherwise be permitted by the provisions of this Deed of Trust
(including the provisions of Paragraph 12(b)), or (y) as may be
---------------
required by any Governmental Authority, subject to the provisions of
Paragraph 13 hereof;
------------
(vi) except as otherwise provided in Paragraph 13 hereof,
------------
to promptly repair, replace, restore or rebuild, or cause to be
promptly repaired, replaced, restored or rebuilt, all Improvements now
or hereafter constituting a part of the Mortgaged Property which may
become damaged or destroyed, with materials and workmanship of as good
quality as existed before such damage or destruction;
(vii) to refrain from impairing or diminishing the value of
the Mortgaged Property or the security value of this Deed of Trust; and
(viii) not to remove any of the Equipment or Personal Property
without the prior written consent of Beneficiary, except for
substitution or replacement in the ordinary course of business of any
component of Equipment or Personal Property with items of equivalent
value and utility, provided, however, that Grantor shall not be
-------- -------
required to replace any Personal Property or Equipment if the same
shall be obsolete or if Grantor shall no longer have any use for any
such Equipment or Personal Property.
Notwithstanding anything to the contrary contained in this Paragraph 12(a),
---------------
nothing herein shall preclude Grantor's right to decide, in the exercise of its
good business judgment, the manner, methodology and extent of Grantor's
maintenance or repair of the Mortgaged Property, provided that the Mortgaged
Property and Grantor shall at all times comply with all Legal Requirements, and
that the Premises continuously (except during periods of Uncontrollable
Circumstances, restoration or repair) operates as a first-class, full-service
Marriott hotel and at all times in compliance in all material respects with the
Ground Lease, the Loan Agreement and the Management Agreement.
(b) Notwithstanding anything to the contrary contained in
Paragraph 12(a), the prior consent of Beneficiary shall not be required with
- ---------------
respect to those Changes which are either (i) approved by Beneficiary pursuant
to the Loan Agreement, including any amounts disbursed from any account provided
for in the Loan Agreement or the Cash Management Procedures or
33
<PAGE>
disbursed pursuant to any applicable budget described in the Loan Agreement, or
(ii) which (xx) are non-structural, (yy) will not adversely affect any building
system and (zz) which in the good faith estimate of Grantor will not, with
respect to any single Change or related set of Changes, cost in excess of
$50,000.00.
(c) In giving consent to any Changes or other demolitions or
alterations to the Improvements, Beneficiary, in the exercise of its reasonable
consent right as set forth in Paragraph 12(a) shall take into account evidence
---------------
provided by Grantor that the completion of such Changes, demolition or other
alterations will not adversely affect Grantor's financial condition, the value
of the Mortgaged Property or the Net Operating Income (as defined in the Loan
Agreement) therefrom. If the cost of any proposed Changes is in excess of the
amount provided in Paragraph 12(b), Beneficiary, in the exercise of its
---------------
reasonable consent right, may require the Grantor to post collateral in the
amount of the estimated cost of any such Change or to take such other steps to
ensure completion of the Changes as may be prudent for a mortgage lender in
similar circumstances considering all of the factors of Grantor's operation of
the Premises and the continuation of Net Operating Income therefrom.
(d) All Changes shall be performed lien-free (subject to the
provisions for bonding of liens and contests set forth in Paragraph 16 hereof),
------------
in a good and workmanlike manner, and in compliance with all Legal Requirements.
No material part of the Improvements shall be demolished in connection with any
Changes and the hotel operations at the Premises shall not be suspended as a
consequence thereof. Promptly upon completion of any material structural
Changes, as-built plans and evidence reasonably satisfactory to Beneficiary of
lien-free construction shall be delivered to Beneficiary.
(e) Beneficiary, and its agents or designated representatives,
shall, upon reasonable prior notice to Grantor and at reasonable times, have the
right of entry and free access to the Mortgaged Property to inspect any work
authorized by Beneficiary and the work done, labor performed, materials
furnished or Changes to the Mortgaged Property. Grantor shall make the officers
and directors of the general partner of Grantor and such regional supervisors as
are primarily charged with responsibility over such matters available for
Beneficiary to discuss Grantor's affairs, finances and accounts relating to any
work done, labor performed, materials furnished or Changes to the Mortgaged
Property and will cooperate with, and request that its contractors and any
subcontractors cooperate with, Beneficiary or any of its designated
representatives to enable them to perform these functions, at all reasonable
times and as often as Beneficiary may reasonably request.
(f) Grantor, in connection with its obligations hereunder to
maintain the Mortgaged Property as a first-class, full-service Marriott hotel,
represents and warrants to Beneficiary that: the Mortgaged Property has adequate
rights of access to public ways and is served by adequate water, sewer, sanitary
sewer and storm drain facilities; all public utilities necessary to the
continued use and enjoyment of the Mortgaged Property as presently used and
enjoyed are located in the public right-of-way abutting the Mortgaged Property
or in easements benefitting the Premises, and all such utilities are connected
so as to serve the Mortgaged Property without passing over other real property
(except as covered by such easement benefitting
34
<PAGE>
the Premises); all roads necessary for the full utilization of the Mortgaged
Property for its current purpose have been completed and dedicated to public use
and accepted by all Governmental Authorities or are the subject of access
easements for the benefit of the Mortgaged Property; except as described in the
Disclosure Schedule the Mortgaged Property is not located in a flood hazard area
as defined by the Federal Insurance Administration; and except as disclosed in
the Title Policies with respect to the Premises, there are no pending or, to the
Best Knowledge of Grantor, proposed special or other assessments for public
improvements or otherwise affecting the Mortgaged Property, nor, to the Best
Knowledge of Grantor, are there any contemplated improvements to the Mortgaged
Property that may result in such special or other assessments.
13. Damage to and Destruction of the Mortgaged Property.
---------------------------------------------------
(a) In the event that the Mortgaged Property shall be damaged
or destroyed, in whole or in part, by fire or other casualty, whether insured or
uninsured, Grantor shall give prompt written notice thereof to Beneficiary,
together with Grantor's best estimate of the cost of restoration (the
"Restoration Cost"). Subject to the provisions of this Paragraph 13, Grantor
---------------- ------------
shall restore the Premises to the standard required by Paragraph 12(a)(vi) of
------------------
this Deed of Trust. Grantor shall timely file all claims or proofs of claim so
as not to prejudice any claim and, if the Restoration Cost is equal to or
greater than an amount (the "Restoration Benchmark") equal to the lesser of (xx)
---------------------
$500,000.00 and (yy) 5% of the Release Price attributed to the Premises in the
Loan Agreement, or, irrespective of the Restoration Cost, if an Event of Default
exists as of the date of submission of any claims or proofs of claim, and until
the Debt has been paid in full, Grantor shall submit all claims or proofs of
claim and other submissions to Beneficiary for the written approval of
Beneficiary prior to any such filing, which approval shall not be unreasonably
withheld, conditioned or delayed.
(b) Provided that no Event of Default exists at the time of
settlement, Grantor shall have the right to settle any insurance claim with
respect to any casualty where the Restoration Cost is less than the Restoration
Benchmark, but shall give prompt written notice of any such claim and settlement
to Beneficiary. In such event, Grantor shall apply the Insurance Proceeds
relating to such casualty to restoration, replacement, rebuilding or repair
(hereinafter collectively referred to as "Restoration") of the damage to the
-----------
standard required by Paragraph 12(a)(vi) hereof.
------------------
(c) If the Restoration Cost equals or exceeds the Restoration
Benchmark, and unless Grantor has obtained the release of this Deed of Trust as
a Casualty Event Release (as hereinafter defined) in accordance with the Loan
Agreement, Beneficiary shall have the right to participate in the settlement of
all insurance claims relating to such casualty, and all Insurance Pro ceeds
relating to such casualty shall be paid directly to Beneficiary, and, after
settlement of the claim(s) and subject to Paragraph 13(d) hereof, such Insurance
--------------
Proceeds shall be deposited in the subaccount for Insurance Proceeds (as
described in Section 4.2 of the Cash Management Procedures) of the Cash
Collateral Account (as defined in the Loan Agreement) and advanced to Grantor
from time to time (subject to the conditions set forth below) in reimbursement
for amounts expended by Grantor or as direct payments to contractors in
Restoration of the Mortgaged Property. Upon completion of the entire Restoration
and provided no uncured Event
35
<PAGE>
of Default exists at the time of payment, Beneficiary shall pay the remaining
amount of the Insurance Proceeds, if any, to Grantor; provided, however, that
-------- -------
nothing herein contained shall prevent Beneficiary from applying at any time the
whole or any part of the Insurance Proceeds to the curing of any default under
any Transaction Document or to the payment of the Debt in the circumstances set
forth in Paragraph 13(d). Advances of Insurance Proceeds shall be made
---------------
available to Grantor, no less frequently than monthly, in accordance with the
general procedures employed at the time by Beneficiary in connection with the
disbursement of loan proceeds in general by Beneficiary (including, without
limitation, an endorsement to the title insurance policy of Beneficiary as to
the Premises insuring the continued first priority lien of this Deed of Trust
against mechanics' liens that may arise out of the Restoration and appro priate
certifications from a licensed architect or engineer selected by Grantor subject
to the reasonable approval of Beneficiary (each, an "Architect") that the
---------
requested payment is for work completed in accordance with plans and
specifications approved by Beneficiary and that the balance of funds held on
deposit after such payment will be sufficient to pay the cost of completing the
Restoration (provided, however, that if the cost of the Restoration is or is
estimated to be less than $250,000.00, Beneficiary will accept a certificate of
the officer of the general partner of Grantor certifying to this effect), and
evidence satisfactory to Bene ficiary that no liens have been filed for the
labor and materials used in connection therewith and that the requested payment
will be received in trust, to be applied first to the payment for such labor and
materials in amounts which are equal to the percentage of completion attained at
the time of such advance, less, in the case of any Restoration in which the
original estimated cost or actual cost is $250,000.00 or more, all amounts
previously advanced and a holdback of 10% (or such lesser amount as may be
customary in the trade in such location or as may be required under the
applicable restoration contract, but in no event less than 5% for any contact
where a holdback is required), which remaining amounts will be advanced upon
full completion of the Restoration as due under the applicable Restoration
contract. All Insurance Proceeds and other sums deposited with Beneficiary
pursuant to this Paragraph, until expended or applied as provided in this
---------
Paragraph, shall constitute additional security for the Debt and shall be
- ---------
invested in Permitted Investments (as such term is defined in the Loan
Agreement) with income thereon inuring to the benefit of Grantor in accordance
with the Loan Agreement.
(d) Notwithstanding the foregoing, if an Event of Default exists or
if, in Beneficiary's reasonable judgment based on professional consultation:
(i) the Restoration of the Improvements cannot be completed
(A) so as to constitute an economically viable building or (B) at least
six (6) months prior to the Maturity Date; or
(ii) the amount of business interruption insurance is
insufficient to cover all fixed and operating expenses of the Premises,
including such portion of debt service on the Loan as is reasonably
allocable to the Premises, during Restoration and until the operation
of Grantor's business at the Premises is resumed; or
36
<PAGE>
(iii) the amount of Insurance Proceeds equals or exceeds the
amount of the outstanding principal balance of the Loan and the loan
secured by the SC Mortgage; or
(iv) Restoration of the Mortgaged Property cannot be
completed except at a cost which exceeds the amount of available
Insurance Proceeds and Grantor shall not have deposited with
Beneficiary, within ninety (90) days following Beneficiary's receipt of
such Insurance Proceeds and delivery to Grantor of notice of a
deficiency, an amount, in cash or cash equivalent, equal to the excess
of the estimated cost of the Restoration as determined by an Architect
over the amount of such Insurance Proceeds;
then Beneficiary shall have the option to apply Insurance Proceeds to the
payment of the Notes, interest accrued and unpaid thereon, and the Yield
Maintenance Premium, if any, and other unpaid amounts of the Debt, all in such
order as Beneficiary shall designate in accordance with the Transaction
Documents, provided, however, that, except as otherwise provided in the Loan
-------- -------
Agreement, any such application shall in no event affect the payments to be made
in respect of the Notes.
(e) Grantor shall, promptly after the occurrence of a
casualty, commence and thereafter with reasonable diligence prosecute to
completion any Restoration of the Mortgaged Property or part thereof to the
standard required by Paragraph 12(a)(vi) hereof. Any such Restoration shall be
------------------
undertaken and completed in accordance with this Paragraph 13, subject to the
------------
final provision of this Paragraph 13(e). All Restoration shall be in a good and
---------------
workmanlike manner with reasonable diligence, and in compliance with all Legal
Requirements. Seasonality or weather permitting, if Grantor fails to commence
Restoration within thirty (30) days following Beneficiary's receipt of Insurance
Proceeds or fails to prosecute the Restoration to completion, Beneficiary may
upon ten (10) days' notice to Grantor, but shall not be obligated to, perform
the Restoration, and may use any of the Insurance Proceeds and Grantor's funds
deposited pursuant to Paragraph 13(c) or 13(d) of this Paragraph in payment
------------------------ ---------
therefor. Grantor shall pay to Beneficiary, within ten (10) days after written
demand, the amount of any deficiency between funds available for the Restoration
and the cost thereof (including funds deposited by Grantor pursuant to Paragraph
---------
13(c) or 13(d) of this Paragraph) together with interest thereon at the Default
- -------------- ---------
Rate from such tenth (10th) day through and including the date of payment to
Beneficiary. Notwithstanding the foregoing provisions of this Paragraph 13(e) or
---------------
anything else contained in this Paragraph 13, if Grantor has obtained the
------------
release of the Premises and the lien of this Deed of Trust in accordance with
the Loan Agreement by payment of the applicable Release Price and other amounts
due, if any, to obtain a release under the Loan Agreement, and the taking of any
other actions required by the Loan Agreement with respect thereto (the payment
of such amounts and the taking of such actions being collectively called a
"Casualty Event Release"), then Grantor shall not be required to undertake the
- ------------------------
Restoration described herein. As set forth in the Loan Agreement, the payment of
amounts with respect to a Casualty Event Release shall not require the payment
of a Yield Maintenance Premium, and any Insurance Proceeds paid to Beneficiary
shall be credited against payments of the Release Price and any other amounts
due with respect to a Casualty Event Release required to be paid by the
provisions of the Loan Agreement.
37
<PAGE>
(f) It is intended that, anything contained herein to the contrary
notwithstanding, no trust or fiduciary relationship shall be created by the
receipt by Beneficiary of any Insurance Proceeds, but only a debtor-creditor
relationship between Beneficiary, on the one hand, and Grantor, on the other,
and only to the extent of the Insurance Proceeds.
(g) If any Insurance Proceeds are not paid until after the
extinguishment of the Debt, whether by foreclosure or otherwise, and Beneficiary
shall not have received the entire amount of the Debt outstanding at the time of
such extinguishment, then such Insurance Proceeds, to the extent of the amount
of the Debt not so received, shall be paid to Beneficiary and be the property of
Beneficiary; and Grantor hereby assigns, transfers and sets over to Beneficiary
all of Grantor's right, title and interest in and to such proceeds. The balance
of such Insurance Proceeds, if any, shall be paid to and be the property of
Grantor. The provisions of this Paragraph shall survive the termination of this
---------
Deed of Trust by foreclosure or otherwise as a consequence of the rights and
remedies of Beneficiary hereunder after an Event of Default.
(h) Subject to the provisions of Paragraph 13(d) or 13(e), as
------------------------
applicable, nothing herein contained shall be deemed to excuse Grantor from
repairing or maintaining the Mortgaged Property as provided in this Deed of
Trust or restoring all damage or destruction to the Mortgaged Property,
regardless of the sufficiency or availability of Insurance Proceeds, and the
application or release by Beneficiary of Insurance Proceeds shall not be deemed,
in and of itself, to cure or waive any default or Event of Default or notice of
default. Notwithstanding any casualty, Grantor shall continue to pay the Debt at
the time and in the manner provided for its payment in this Deed of Trust and
the Notes and the Debt shall not be reduced until any Insurance Proceeds shall
have been actually received by Beneficiary and applied to the discharge of the
Debt or payments with respect to a Casualty Event Release.
(i) Beneficiary, to the extent that Beneficiary has not been
reimbursed therefor by Grantor, shall be entitled as a first priority out of any
Insurance Proceeds, to reimbursement for all actual costs, fees, reimbursements
and expenses of Beneficiary incurred in the determination and collection of any
such proceeds.
14. Condemnation Proceedings.
------------------------
(a) In the event that the Mortgaged Property, or any part thereof,
shall be taken pursuant to Condemnation Proceedings, Beneficiary shall, as
hereinafter set forth, have certain consent rights with respect to settlement of
any such Condemnation Proceedings, but shall not participate in any such
Condemnation Proceedings except as expressly provided herein, and any
Condemnation Proceedings that may be made or any proceeds thereof are hereby
assigned to Beneficiary and shall be received and deposited into the subaccount
for Condemnation Proceeds (as described in Section 4.2 of the Cash Management
Procedures) of the Cash Collateral Account and held and distributed by
Beneficiary in the manner herein set forth. Grantor will give Beneficiary prompt
notice of the actual commencement of any Condemnation Proceedings affecting the
Mortgaged Property or of any threatened condemnation of which Grantor becomes
aware, including proceedings for severance and change in grade of streets, and
will deliver to Beneficiary copies of any and all papers served in connection
with any Condemnation
38
<PAGE>
Proceedings. Beneficiary is hereby authorized to commence, appear in, and
prosecute in its own name or Grantor's name any action or proceeding relating to
any Condemnation Proceedings, upon not less than ten (10) Business Days' prior
written notice to Grantor, if Grantor has not commenced any such action or
proceeding. Grantor may not settle or compromise any claim in connection with
any Condemnation Proceeding, whether involving a Total Taking, Partial Taking or
Temporary Taking, which claim equals or exceeds, or, at the outset of any such
Condemnation Proceedings, appears to involve a sum which is likely to equal or
exceed, in Beneficiary's reasonable judgment based on professional consultation,
the Restoration Benchmark, without the prior written consent of Beneficiary in
each instance, which consent shall not be unreasonably withheld, conditioned or
delayed, and Beneficiary shall have the right to settle or compromise any claim
in connection therewith (irrespective of amount), without the consent of Grantor
after the occurrence of an Event of Default. Grantor agrees to execute any and
all further documents that may be reasonably required in order to facilitate the
collection of any Condemnation Proceeds and the making of any such deposit and
Grantor hereby appoints Beneficiary its attorney-in-fact for the limited purpose
of executing any such documents after the occurrence of an Event of Default,
such power being coupled with an interest and irrevocable.
(b) If, at any time during the term of the Loan, there occurs
a Total Taking (as hereinafter defined), Beneficiary shall collect any
Condemnation Proceeds, and apply the same, after payment of Beneficiary's
reasonable costs of collection thereof, including reasonable attorneys' fees and
disbursements, to payment of the Debt (but no Yield Maintenance Premium shall be
due), all in such order as Beneficiary shall designate, provided, however, that
-------- -------
except as otherwise provided in the Loan Agreement, any such application shall
in no event affect the payments to be made in respect of the Notes. Any portion
of any Condemnation Proceeds remaining after the payment in full of the Debt
shall be released by Beneficiary to Grantor. For the purposes of this Paragraph,
---------
a "Total Taking" shall mean any taking or any constructive taking of Grantor's
------------
title to the Premises in Condemnation Proceedings or by agreement by Grantor
which shall, in the reasonable opinion of Beneficiary, render it impracticable
to restore, within six (6) months prior to the Maturity Date, the portion of the
Premises not subject to such taking to a complete architectural unit of
substantially the same economic viability and for the same purposes and uses as
existed immediately prior to the date of the commencement of the Condemnation
Proceedings.
(c) If, at any time during the term of the Loan, there occurs
a taking which is less than a Total Taking (a "Partial Taking"), then, provided
--------------
that no Event of Default exists as of the date of submission of Grantor's claim
in the Condemnation Proceeding with respect to such Partial Taking, Grantor
shall have the right to settle any such claim with respect to any Partial Taking
where the Restoration Cost is less than the Restoration Benchmark, but shall
give prompt written notice of any such claim and settlement to Beneficiary. If
the Restoration Cost equals or exceeds, or, at the outset of such Condemnation
Proceedings, appears to involve a sum which is likely to equal or exceed, in
Beneficiary's reasonable judgment based on professional consultation, the
Restoration Benchmark, then, unless Grantor has obtained the release of this
Deed of Trust as a Condemnation Event Release (as hereinafter defined) in
accordance with the Loan Agreement, Beneficiary shall have the right to
participate in the settlement of such claim and all Condemnation Proceeds
relating to such Partial Taking shall be held by Beneficiary and shall be
released to pay the costs of restoration of the Improvements (a "Condemnation
------------
39
<PAGE>
Restoration") subject to and upon satisfaction of the conditions set forth in
- -----------
Paragraphs 13(c) and 13(d) hereof as if such Condemnation Proceeds constituted
- -------------------------
Insurance Proceeds and the balance, if any, shall be paid to Grantor; unless, in
------
Beneficiary's reasonable judgment based on professional consultation, the
Condemnation Restoration cannot be completed in accordance with the conditions
of Paragraphs 13(c) and 13(d). In the event that there exists an Event of
-------------------------
Default, or (xx) any of such conditions shall not have been met, or (yy) the
Condemnation Restoration cannot be completed, in Beneficiary's reasonable
judgment based on professional consultation, prior to a date which is at least
six (6) months prior to the Maturity Date, regardless of compliance with all of
the other conditions of Paragraphs 13(c) and 13(d), or (zz) if the Condemnation
--------------------------
Proceeds exceed the cost of the Condemnation Restoration, Beneficiary, at the
discretion of Beneficiary, shall apply the Condemnation Proceeds, or balance
thereof, to payment of the Debt, (but no Yield Maintenance Premium shall be
due), all in such order as Beneficiary shall designate, provided, however, that,
-------- -------
except as otherwise provided in the Loan Agreement, any such application shall
in no event affect the schedule of payments to be made in respect of the Notes.
If there is any balance of any Condemnation Proceeds remaining in the hands of
Beneficiary after any payment of the Debt in full, such balance shall be
released to Grantor. In the event that the costs of any permitted Condemnation
Restoration, as estimated reasonably by Beneficiary at any time, shall exceed
the net Condemnation Proceeds received by Beneficiary, Grantor shall deposit
such deficiency with Beneficiary.
(d) In the event of any taking of all or any portion of the
Mortgaged Property for temporary use or occupancy ("Temporary Taking"), any
----------------
Condemnation Proceeds with respect to such Temporary Taking shall be treated as
Gross Revenues (as defined in the Loan Agreement) and shall be distributed and
applied in the manner contemplated in the Loan Agreement (but only to the extent
that any such Condemnation Proceeds have not been used for Condemnation
Restoration).
(e) Except as otherwise provided in this Paragraph 14(e),
---------------
nothing contained in this Paragraph 14 shall relieve Grantor of its duty to
------------
maintain, repair, replace or restore the Improvements or the Equipment or
rebuild the Improvements, from time to time, following any Condemnation
Proceedings with respect to a Partial Taking or Temporary Taking and nothing in
this Paragraph 14 shall relieve Grantor of its duty to pay the Debt, which shall
------------
be absolute, regardless of any such occurrence with respect to all or any
portion of the Mortgaged Property. Notwithstanding any taking, whether a Total
Taking, a Partial Taking or a Temporary Taking, Grantor shall continue to pay
the Debt at the time and in the manner provided for its payment in this Deed of
Trust and the Notes, and the Debt shall not be reduced until any award or
payment therefor shall have been actually received by Beneficiary and applied to
the discharge of the Debt. Notwithstanding the foregoing provisions of this
Paragraph 14(e) or anything else contained in this Paragraph 14, if Grantor has
- --------------- ------------
obtained the release of the Premises and the lien of this Deed of Trust in
accordance with the Loan Agreement by payment of the applicable Release Price
and other amounts, if any, due to obtain a release under the Loan Agreement, and
the taking of any other actions required by the Loan Agreement with respect
thereto (the payment of such amounts and the taking of such actions being, with
respect to any Condemnation Proceeding(s), being collectively called a
"Condemnation Event Release"), then Grantor shall not be required to undertake
--------------------------
the Condemnation Restoration described herein. As set forth in the
40
<PAGE>
Loan Agreement, the payment of amounts with respect to a Condemnation Event
Release shall not require the payment of a Yield Maintenance Premium, and any
Condemnation Proceeds paid to Beneficiary shall be credited against payments of
the Release Price and any other amounts due with respect to a Condemnation Event
Release required to be paid by the provisions of the Loan Agreement. It is
recognized that, with respect to a Partial Taking or a Total Taking, depending
on the amount of the award from the Governmental Authority available to pay the
Release Price and any other amounts due under the Loan Agreement, that Grantor
may have to pay to Beneficiary monies in addition to the total available amount
of the Condemnation Proceeds to obtain a Condemnation Event Release.
(f) If a claim under any Condemnation Proceedings arising during
the term of this Deed of Trust is not paid until after the extinguishment of the
Debt, whether by foreclosure or otherwise, and Beneficiary shall not have
received the entire amount of the Debt outstanding at the time of such
extinguishment, then the Condemnation Proceeds relating to any such Condemnation
Proceedings, to the extent of the amount of the Debt not so received, shall be
paid to Beneficiary and be the property of Beneficiary; and Grantor hereby
assigns, transfers and sets over to Beneficiary all of Grantor's right, title
and interest in and to such Condemnation Proceeds. The balance of such
Condemnation Proceeds, if any, shall be paid to and be the property of Grantor.
The provisions of this Paragraph shall survive the termination of this Deed of
---------
Trust by foreclosure or otherwise as a consequence of the rights and remedies of
Beneficiary hereunder after an Event of Default.
(g) All Condemnation Proceeds and other sums deposited with
Beneficiary pursuant to this Paragraph, until expended or applied as provided
---------
in this Paragraph, shall constitute additional security for the Debt and shall
---------
be invested in Permitted Investments with income thereon inuring to the benefit
of Grantor.
15. Compliance With Agreements, Laws, etc. Subject to the provisions of
-------------------------------------
Paragraph 16 hereof relating to permitted contests, Grantor agrees to perform
and comply, and instruct the tenants under any Leases to comply, with all
covenants, agreements and restrictions affecting Grantor, the Mortgaged Property
or any portion thereof, the nonperformance of which would materially impair
Grantor's ability to meet its obligations under any of the Transaction Documents
or would impair the substantial realization by Beneficiary of the benefits and
rights conferred hereunder or under any of the Transaction Documents, and with
all Legal Requirements, whether the same be directed to the erection, repair,
manner of use or structural alteration of the Improvements or otherwise and to
procure and maintain all licenses or other authorizations required for the
proper use, maintenance and operation of the Mortgaged Property. For the
purposes hereof, "Legal Requirements" shall mean all of the following, whether
------------------
or not a note or notice of violation has been entered, issued or received as a
consequence of non-compliance therewith:
(a) statutes, laws, rules, rulings, orders, regulations, ordinances,
judgments, decrees and injunctions of any Governmental Authority
(including, without limitation, Environmental Laws, the Americans with
Disabilities Act (P.L. 101-336, 42 U.S.C. (s) 12,101 et seq.), and fire,
-- ---
health, handicapped access, sanitation, ecological, historic,
41
<PAGE>
landmark, zoning, wetlands and building laws and codes) in any way
applicable to Grantor or the Mortgaged Property or any portion thereof,
or to the ownership, use, development, improvement, occupancy,
possession, operation or maintenance of the Improvements;
(b) requirements of the local Board of Fire Underwriters or
similar body acting in and for the locality in which the Premises are
situated;
(c) requirements of each insurance policy covering or
applicable to all or any portion of the Mortgaged Property or the
ownership, use, development, improvement, occupancy, possession,
operation or maintenance thereof and all requirements of the issuer of
each such policy;
(d) requirements of each Permit; and
(e) the Ground Lease, all REAs and all covenants, agreements,
regulations, restrictions and other encumbrances contained in any
instrument either of record or known to Grantor at any time affecting
the Mortgaged Property or any portion thereof or the ownership, use,
development, improvement, occupancy, possession, operation or
maintenance thereof, in each case whether now or hereafter enacted or
in force. Grantor agrees to enforce all material provisions of the
Ground Lease and all REAs in accordance with their terms and to comply
with all reasonable requests from Beneficiary with respect to such
enforcement.
16. Contest of Impositions, Legal Requirements and Liens.
----------------------------------------------------
Notwithstanding anything to the contrary contained in this Deed of Trust,
Grantor shall have the right to contest, at its own expense, by appropriate
legal proceedings conducted in good faith and with due diligence, the amount or
validity (or the applicability to Grantor or the Mortgaged Property or to the
Notes or this Deed of Trust) of any Impositions or encumbrances referred to
herein (other than this Deed of Trust and the other Transaction Documents) or
any Legal Requirements, provided that (a) Grantor gives Beneficiary timely
-------- ----
notice of its intention to contest the same and keeps Beneficiary regularly
advised as to the status of such proceedings, (b) the commencement of such
proceedings shall suspend the collection or enforcement of the matter under
contest, (c) there shall be no impairment of the lien of this Deed of Trust or
undue interference with the normal conduct of business at the Mortgaged
Property, (d) neither the Mortgaged Property, nor any Rents therefrom, nor any
part thereof or interest therein, would be in any immediate danger of being
sold, forfeited, attached, condemned, vacated or lost, (e) neither Grantor nor
Beneficiary would be potentially subject to criminal liability or be in imminent
danger of civil liability for failure to comply therewith pending the outcome of
such proceedings, (f) in the case of an Imposition, Grantor shall have either
(i) paid the amount in dispute prior to instituting such contest, in which event
the notice requirement of clause (a) of this Paragraph shall be satisfied by
--------- ---------
giving notice prior to initiating such contest rather than prior to making
payment, (ii) set aside on its books such reserves with respect thereto as may
be required by sound accounting principles or, at Beneficiary's request,
furnished security in an amount equal to 125% of the disputed amount, in rated
securities, cash or bond, to Beneficiary during the pendency of such
proceedings,
42
<PAGE>
and (g) if such contest be finally resolved against Grantor, Grantor shall
promptly pay the amount required to be paid, together with all interest and
penalties accrued thereon, and otherwise comply with the applicable requirement,
which payment may be made from the security, if any, furnished to Beneficiary
pursuant to clause (ii), and any excess thereof following payment in full of the
applicable imposition shall be returned to Grantor. Grantor shall indemnify and
save Beneficiary harmless from and against any liability, loss, damage, cost or
expense of any kind that may be imposed upon Beneficiary in connection with any
such contest and any determination resulting therefrom. If an Event of Default
under this Deed of Trust or any other Transaction Document shall occur and be
continuing during any such proceeding, Grantor shall pay or cause to be paid to
Beneficiary all refunds resulting from such proceeding which shall be applied to
the payment of the Debt in such order and priority as Beneficiary shall
determine in its sole discretion consistent with the Transaction Documents.
Following the occurrence of an Event of Default and until the Debt has been paid
in full, and on five (5) days' prior written notice to Grantor (so long as no
time period for seeking reductions passes or lapses in such 5-day period, but
otherwise on such shorter notices as will not allow any such time period to pass
or lapse) Grantor hereby appoints Beneficiary as its attorney-in-fact to seek
reductions in the assessed valuation of the Mortgaged Property for real property
tax purposes or for other purposes and to prosecute any action or proceeding in
connection therewith. This power of attorney is a power coupled with an interest
and is irrevocable.
17. Cure of Defaults by Beneficiary. If Grantor shall:
-------------------------------
(a) default in the payment of any Impositions as herein
required (subject to the provisions of Paragraph 16 relating to
------------
permitted contests);
(b) fail to keep in any material respect the Improvements,
Equipment and Personal Property in good repair and such failure
shall not be cured within any applicable grace period;
(c) fail or refuse to insure the Mortgaged Property as herein
required;
(d) fail to pay and satisfy liens or encumbrances against the
Mortgaged Property in accordance with the terms of this Deed of
Trust (subject to the provisions of Paragraph 16 relating to
------------
permitted contests);
(e) fail to pay any other sum or make any other deposit
elsewhere in this Deed of Trust required to be paid or deposited
and such failure shall not be cured within any applicable grace
period; or
(f) otherwise fail to make any payment or fail in any material
respect to perform any act required to be made or performed
hereunder, and such failure shall not be cured within any
applicable grace period; then Beneficiary, following not less than
five (5) Business Days' prior written notice to Grantor (or such
shorter notice as shall be reasonable under the circumstances,
including no notice in the case of an emergency in
43
<PAGE>
which no notice may feasibly be given) and without waiving or releasing
Grantor from any obligation or default hereunder, may (without having
any obligation to do so):
(i) pay such Impositions or redeem the Mortgaged
Property from any tax sale or forfeiture or purchase any tax
title obtained, or that shall be obtained, thereon without
inquiring into the validity or invalidity of any such
Impositions or tax deed;
(ii) make repairs to the Mortgaged Property;
(iii) procure such insurance and pay such insurance
premium charges; it being agreed that the power of attorney
---------------
granted by Grantor to Beneficiary pursuant to the final clause
of this Paragraph 17 shall apply to the matters set forth in
------------
the immediately preceding sub-clauses (i), (ii) and (iii);
and, additionally, in accordance with and consistent with the
provisions of this Paragraph 17 and the contractual agreements between
------------
Grantor and Beneficiary set forth in the Transaction Documents
generally, but without the right to utilize the power of attorney set
forth in the final clause of this Paragraph 17, Beneficiary may:
------------
(iv) pay or settle any and all suits or claims for
such liens or satisfy any such encumbrances or any other
claims that may be made against the Mortgaged Property or any
part thereof;
(v) pay any other sum or make any other deposit
herein required to be paid or made by Grantor; or
(vi) pay any such sum or perform any such act for the
account and at the expense of Grantor, and enter upon the
Mortgaged Property upon reasonable notice and at reasonable
times for any such purpose and take all such action thereon
as, in the reasonable opinion of Beneficiary, may be necessary
or appropriate therefor.
All monies paid for any of the purposes set forth in this Deed of Trust
and all expenses paid or incurred in connection therewith, including
reasonable attorneys' fees and disbursements and any other monies
disbursed or advanced by Beneficiary to protect the lien of this Deed
of Trust, or expended pursuant to any of sub-clause (i) through (vi)
above, shall be due and payable by Grantor to Beneficiary within ten
(10) days after written demand therefor and, if not paid within such
ten (10) day period, shall bear inter est, from and including the date
of disbursement or advance to and including the date of repayment by
Grantor, at the Default Rate, and to the extent that such amounts and
costs paid by Beneficiary shall constitute payment of (A) Impositions,
(B) insurance premiums, (C) expenses incurred in connection with
upholding the lien of this Deed of Trust, includ ing, without
limitation, the expenses of any litigation to prosecute or defend the
rights and liens created by this Deed of Trust, or (D) any amounts,
costs or charges to which Bene-
44
<PAGE>
ficiary becomes subrogated, upon payment, whether under recognized
principles of law or equity or express statutory authority; then, and
in each such event, such amounts, costs and charges and interest
thereon shall be added to the Debt and be secured by this Deed of Trust
and the Other Mortgages. For the purpose of carrying out the provisions
and exercising the rights, powers and privileges granted by sub-clauses
(i) or (ii) or (iii) of this Paragraph, Grantor hereby irrevocably
---------
constitutes and appoints Beneficiary, following an Event of Default,
its true and lawful attorney-in-fact to execute, acknowledge and
deliver any instruments and do and perform any acts such as are
referred to in this Paragraph, in the name and on behalf of Grantor,
---------
with full power of substitution vested in Beneficiary to designate
another entity or entities to exercise any power and perform any
function which Beneficiary could perform pursuant to the foregoing
grant. This power of attorney is a power coupled with an interest and
is irrevocable.
18. Indemnity. Subject to the Non-Recourse provisions of the final
---------
sentence of this Paragraph 18, Grantor hereby indemnifies Beneficiary and its
------------
directors, officers, agents and employees (collectively the "Indemnified
-----------
Parties"), and saves each of them harmless from and against all liabilities
- -------
(other than tax liability imposed on Beneficiary for any income earned by reason
of the Notes or any other Transaction Document) claims, demands, actions,
proceedings, suits, causes of action, injuries, obligations, loss, actual
damages (including, without limitation, Beneficiary's costs and expenses related
thereto and any applicable Yield Maintenance Premium), fines, penalties,
judgments, costs, expenses (including, without limitation, reasonable
architects', engineers', accountants', consultants' and attorneys' fees and
disbursements) expenses of bonding liens, and other litigation expenses,
incurred by, imposed upon or asserted against the Indemnified Parties (except as
a result of the willful, wrongful acts or omissions or gross negligence of the
applicable Indemnified Party) in connection with or arising out of:
(a) Beneficiary's or Trustee's interest in this Deed of Trust,
the Assignment, the Notes, any other Transaction Document, or any other
document or instrument hereafter executed by Grantor and delivered to
Beneficiary in connection with the Debt or any restructuring thereof;
(b) any acts or omissions of Beneficiary or Trustee in
connection with the reasonable exercise by Beneficiary or Trustee of
any right, power or remedy available to Beneficiary or Trustee under
this Deed of Trust or any other Transaction Document, including,
without limitation, any action or proceeding to protect the lien of
this Deed of Trust or to foreclose this Deed of Trust;
(c) any failure by Grantor to comply with any terms, conditions or
other provisions set forth in this Deed of Trust or any other
Transaction Document;
(d) any use, non-use, possession, occupancy, alteration,
repair, condition (patent or latent), operation, maintenance, or
management of the Mortgaged Property or any portion thereof;
45
<PAGE>
(e) any accident, injury (including death), or damage to any
person or property occurring in, on or about the Mortgaged Property or
any part thereof, whether resulting from any act, omission or
negligence of Grantor, its agents, employees, contractors, lessees,
sublessees, licensees, invitees, or otherwise;
(f) any misrepresentation by Grantor, or its general partner
contained in this Deed of Trust or in any other Transaction Document;
(g) any claim for any premium or other charge or any brokerage
commission or other compensation by any person acting as such with
respect to the Loan and this Deed of Trust and claiming through Grantor
but not through Beneficiary;
(h) any capital improvements or other work or thing done in,
on or about the Mortgaged Property or any part thereof (except any of
the foregoing that are directed by Beneficiary);
(i) any past, current and/or future offer for the purchase or
sale of equity interests in Grantor, including, without limitation,
liabilities under any applicable securities or blue sky laws; or
(j) any tax attributable to the ownership, assignment,
execution, delivery, filing, recording or enforcement of any of the
Transaction Documents.
Nothing contained in this Paragraph 18, however, shall impose upon Grantor the
------------
costs of the Securitization which are, pursuant to the Loan Agreement, to be
paid by Beneficiary. All sums payable to any of the Indemnified Parties under
this Paragraph 18 shall be deemed a part of the Debt, shall be paid by Grantor
------------
to the applicable Indemnified Party within ten (10) days after written demand
(unless another period is expressly set forth in this Deed of Trust or another
Transaction Document) and, if not paid within such ten (10) day or other
specified period, shall accrue interest at the Default Rate from and including
the date of disbursement or advance by the applicable Indemnified Party to and
including the date of repayment by Grantor. Grantor's obligations under this
Paragraph 18 shall, until the expiration of all applicable statutes and periods
- ------------
of limitation, if any, survive payment in full of the Notes and any discharge,
release or satisfaction of this Deed of Trust, any complete or partial
foreclosure of this Deed of Trust and/or the delivery of one or more deeds in
lieu of any such foreclosure. Grantor's obligations under this Paragraph 18
------------
shall be Non-Recourse (as such term is defined in the Loan Agreement); provided
that nothing contained herein shall be deemed to be in derogation of any right
or remedy of Beneficiary and/or Trustee under any Transaction Document which, by
its express terms, is a right or remedy which is not Non-Recourse as to Grantor.
19. Events of Default.
-----------------
(a) Each of the following events shall constitute an "Event of
--------
Default" hereunder:
-------
46
<PAGE>
(i) an "Event of Default", as such term is defined in the
Loan Agreement;
(ii) failure of Grantor to pay on the due date any payment
due under the Notes;
(iii) failure by Grantor to perform or observe in any material
respect any other covenant, obligation, condition or provision
hereunder or under any of the Other Mortgages which failure continues
unremedied for a period of thirty (30) days after writ ten notice
thereof to Grantor requiring the same to be remedied; provided,
--------
however, that if such failure is susceptible of cure but cannot be
-------
cured within such thirty (30) day period and provided Grantor has
within such thirty (30) day period commenced and is diligently
prosecuting such cure, such thirty (30) day period shall be extended to
not later than one hundred eighty (180) days after the date on which
Grantor received such written notice;
(iv) any event which, pursuant to clause (xii) of Paragraph
---------
3(d), constitutes an Event of Default with respect to a Permitted
----
Subordinate Mortgage (provided, however, that Beneficiary's remedies
shall be exercised in accordance with such clause (xii)) or any default
beyond any applicable grace period under any lien or deed of trust
encumbering any part of the Mortgaged Property, whether senior or
junior in lien to this Deed of Trust and whether now or hereafter held
by Beneficiary or any other party;
(v) if a default beyond any applicable notice and/or grace
period occurs under any fee mortgage in respect of the Land and if
Beneficiary shall be made a party in any action or proceeding in
connection with any such fee mortgage, including, without limitation, a
foreclosure or similar proceeding, unless the holder of such fee
mortgage has agreed not to disturb Grantor or Grantor provides evidence
to the satisfaction of Beneficiary that such fee mortgage is
subordinate to the Ground Lease and this Deed of Trust and the SC
Mortgage in accordance with applicable local law;
(vi) if an event of default or an event which with the giving
of notice or passage of time or both would constitute an event of
default occurs under the Ground Lease or if the Ground Lease terminates
for any reason whatsoever;
(vii) if any provision of this Deed of Trust or any other
Transaction Documents conflicts with any provision of the Ground Lease
and the Fee Owner or any other party having rights under the Ground
Lease materially hinders or prevents Trustee or Beneficiary from
exercising its rights, remedies and privileges under this Deed of Trust
or other Transaction Documents, including, without limitation, its
rights under Paragraph 13(d) and Paragraph 14(c) hereof; or
--------------- ---------------
(viii) an Event of Default under the SC Loan Agreement and/or
SC Mortgage.
47
<PAGE>
(b) Upon the occurrence of an Event of Default, Beneficiary
may, at its option, declare the entire unpaid balance of the Debt to be
forthwith due and payable, and thereupon such balance shall become so due and
payable without presentment, protest or further demand or notice of any kind,
all of which are hereby expressly waived, and Grantor will forthwith pay to
Beneficiary the entire Debt, including principal of and interest accrued on the
Notes and, to the extent permitted by law, the Yield Maintenance Premium, and
all other premiums and charges, if any, provided in the Notes, this Deed of
Trust and the other Transaction Documents; provided, however, that if at any
-------- -------
time prior to the Maturity Date the balance of the Debt shall become so due and
payable, and all arrears of interest and other charges of any kind due as part
of the Debt (with interest so far as may be lawful on any overdue installments
of interest at the Default Rate) shall be paid, and all defaults (other than the
payment of principal hereunder which has been so declared due and payable) shall
have been cured or the cure thereof secured to the sole satisfaction of
Beneficiary or other provision deemed by Beneficiary to be adequate shall be
made therefor, then and in such case Beneficiary, in its sole discretion, and by
written notice delivered to Grantor, may waive such Event of Default and its
consequences and rescind or annul such declaration, but no such waiver shall
extend to or affect any subsequent default, or impair any right consequent
thereon.
(c) To the extent that a default under this Deed of Trust, any
of the Other Mortgages or any of the other Transaction Documents is not cured
within the applicable notice and cure period, if any, specified herein or
therein, the same shall not constitute an Event of Default hereunder or
thereunder, as the case may be, if such default is subsequently cured and such
cure is accepted in writing by Beneficiary or if such default is subsequently
waived in writing by Beneficiary and any rights or remedies available to
Beneficiary or Trustee hereunder or under any of the other Transaction Documents
on account of any such Event of Default so cured and accepted or waived shall
thereupon terminate (but such remedies shall continue to be available in
connection with any subsequent or other Events of Default, whether of like or
unlike nature).
20. Default Rate. Upon an Event of Default, Beneficiary shall be
------------
entitled to receive and Grantor shall pay interest on the entire unpaid
principal sum (including, without limitation and to the extent permitted by law,
any accrued and unpaid interest thereon) at the "Default Rate" (as defined in
------------
the Notes) for the duration of such default (unless Beneficiary has, at its
option, declared the entire unpaid balance of the Debt to be forthwith due and
payable in which case interest shall continue to be paid at the Default Rate
until the Debt has been paid in full). In no event shall the Default Rate exceed
the maximum rate allowed by law. Any interest that accrues under any of the
Transaction Documents at the Default Rate shall be payable whether accruing
before or after entry of any judgment.
21. Remedies. If any one or more of the Events of Default shall
--------
occur, then and in any such event Beneficiary shall have the right of
acceleration and all other remedies provided in this Deed of Trust or in the
Notes or otherwise provided in any Transaction Document, by law or statute or in
equity, all of which rights and remedies shall, to the fullest extent permitted
by law, be cumulative. To the extent the laws of the State limit or deny (i) the
availability of the exercise of any of the remedies set forth below, including
without limitation, the remedies
48
<PAGE>
involving a power of sale on the part of the Beneficiary and terms of this Deed
of Trust, or (ii) the enforcement of waivers and indemnities made by Grantor,
such remedies, waivers or indemnities shall be exercisable or enforceable, any
provisions in this Deed of Trust to the contrary notwithstanding, if, and only
to the extent, permitted by the laws of the State in force at the time of the
exercise of such remedies or the enforcement of such waivers or indemnities
without regard to the enforceability of such remedies, waivers or indemnities at
the time of execution and delivery of this Deed of Trust. Such rights and
remedies of Beneficiary and Trustee shall include, without limitation, the
following:
(a) Possession, Management and Income. Grantor, upon written
---------------------------------
demand of Beneficiary, shall forthwith surrender to Beneficiary or
Trustee, or both of them, the actual possession of the Mortgaged
Property, and Beneficiary or Trustee and such officers or agents as
either may appoint, (i) may enter and take possession of the Mortgaged
Property together with the books, papers and accounts of Grantor
relating thereto, (ii) may dispossess Grantor, its agents and servants
and all other persons therefrom (excluding bona fide hotel guests),
(iii) may hold, operate and manage the Mortgaged Property and from time
to time make all necessary repairs and such alterations, additions,
advances and improvements as Beneficiary shall deem prudent, (iv) may
receive the Rents thereof and exercise all rights and powers of Grantor
with respect to the Mortgaged Property and the Improvements, whether in
the name of Grantor or otherwise, including, without limitation, the
right to make, cancel, enforce or modify Leases, obtain and evict
tenants (in accordance with applicable law), and demand, sue for,
collect and receive all Rents and may pay therefrom all costs and
expenses of so taking, holding and managing the Mortgaged Property,
including, without limitation, reasonable compensation to Beneficiary's
or Trustee's, or both's, agents and attorneys, all prior or coordinate
liens and encumbrances, all Impositions and other assessments and other
charges then due or thereafter accruing, and all expenses of such
repairs, alterations, additions, improvements and other disbursements
made by Beneficiary or Trustee pursuant to the terms hereof, and
Beneficiary may apply the remainder of the monies so received by it to
the payment of the unpaid principal of, and interest on, the Notes, the
Yield Maintenance Premium and other items of the Debt then due and
payable, and (v) may succeed to all the rights of Grantor, including
any rights to unearned premiums, in and to any insurance policies
covering all or any portion of the Premises, the Improvements, the
Personal Property and/or the Equipment, including the right to receive
Refunds, Insurance Proceeds and Condemnation Proceeds which would
otherwise be payable to Grantor pursuant to this Deed of Trust.
Beneficiary and Trustee shall not be subject to any liability for, or
by reason of, any such entry, taking possession, exclusion, holding,
operation or management, except for willful, wrongful acts or omissions
or gross negligence of Beneficiary or Trustee or their officers,
directors, agents, contractors or employees;
(b) Partial Foreclosure. Beneficiary, at its option, may upon
-------------------
five (5) days' notice or such longer notice period as may be required
by statute institute proceedings for the complete or partial
foreclosure of this Deed of Trust or take such steps to protect and
enforce its rights whether by action, suit or proceeding in equity or
at law for the specific performance of any covenant, condition or
agreement in the Notes or in this Deed of
49
<PAGE>
Trust (without being required to foreclose this Deed of Trust), or in
aid of the execution of any power herein granted, or for any
foreclosure hereunder, or for the enforcement of any other appropriate
legal or equitable remedy or otherwise as Beneficiary shall elect,
including, without limitation, to direct Trustee to foreclose this Deed
of Trust for any portion of the Debt which is then due and payable;
provided, however, that if a partial foreclosure sale is made, such
sale shall be subject to the continuing lien of the Transaction
Documents for the unmatured part of the Debt; and such sale shall not
in any manner affect the unmatured part of the Debt, but as to such
unmatured part thereof, and the lien thereon, the same shall remain in
full force and effect as though no foreclosure had occurred. Several
foreclosure sales may be made pursuant to partial foreclosures without
exhausting the right of full or partial foreclosure sale for any
unmatured part of the Debt, it being the purpose to provide for a
partial foreclosure sale of the Debt for any matured portion of the
Debt without exhausting the power to foreclose and to sell the
Mortgaged Property pursuant to such partial foreclosure for any other
part of the Debt, whether matured at the time or subsequently maturing,
and without exhausting any right of acceleration and full foreclosure.
Notwithstanding the filing of any partial foreclosure or entry of a
decree of sale therein, Beneficiary may elect at any time prior to a
foreclosure sale pursuant to such decree to discontinue such partial
foreclosure and to accelerate the Debt by reason of any uncured Event
of Default upon which such partial foreclosure was predicated or by
reason of any other Events of Default and proceed with full foreclosure
proceedings;
(c) Suits. To the extent permitted by law, Beneficiary, at its
-----
option, may, either with or without first taking possession, direct
Trustee to proceed by suit or suits in equity and/or at law, or by any
other appropriate remedy or proceeding, to protect and enforce
Beneficiary's and/or Trustee's rights hereunder whether for the
specific performance (to the extent permitted by law) of any covenant
or agreement contained herein or in the Notes or for an injunction
against the violation of any of the terms hereof or thereof or in aid
of the exercise of any right, power or remedy granted to Beneficiary
herein or therein, or to enforce the payment of the Notes, or to
foreclose the lien and security interest of this Deed of Trust against
the Mortgaged Property or any part thereof and to have all of the
Mortgaged Property or any part thereof sold in one or more sales (as an
entirety or in parcels) under the judgment or decree of a court of
competent jurisdiction or otherwise. All rights of action under this
Deed of Trust or in respect of the Notes may be enforced by Beneficiary
or Trustee, without the production of the Notes and without the
possession thereof (to the extent Beneficiary or its agent gives a bona
fide lost note affidavit in compliance with local law) at any trial or
other proceeding relative thereto to the extent permitted by law;
(d) Receiver. To the extent permitted by law and without the
--------
necessity to prove the value or occupancy of the security or the
solvency or insolvency of any person then legally or equitably liable
for payment of the Debt, Beneficiary shall be entitled as a matter of
right, ex parte and without notice, to the appointment of a receiver to
-- -----
enter upon and take possession of the Mortgaged Property, perform all
acts necessary or useful for the operation, use and maintenance of the
Mortgaged Property and to collect all Rents
50
<PAGE>
thereof and apply the same and to exercise such other powers as are
permitted by applicable law and the court making such appointment may
direct and Grantor hereby consents to the appointment of such receiver.
The expenses, including receiver's fees, reasonable attorneys' fees,
costs and disbursements and agent's compensation, incurred pursuant to
the powers herein contained shall be secured by this Deed of Trust. The
right to enter and take possession of and to manage and operate the
Mortgaged Property, and to collect the Rents, whether by a receiver or
otherwise, shall be cumulative to any other right or remedy hereunder
or afforded by law, and may be exercised concurrently therewith or
independently thereof. Beneficiary shall be liable to account only for
such Rents actually received by Beneficiary, whether received pursuant
to this subparagraph 21(d) or subparagraph 21(a). Notwithstanding the
------------------ ------------------
appointment of any receiver or other custodian, Beneficiary shall be
entitled as pledgee to the possession and control of any cash,
deposits, or instruments at the time held by or payable or deliverable
under the terms of this Deed of Trust to Beneficiary. Without limiting
any of Beneficiary's rights hereunder, Beneficiary or Trustee shall be
entitled, as a matter of strict right, without notice and upon ex parte
application, and without regard to the value or occupancy of the
security, or the solvency of Grantor, or the adequacy of the Mortgaged
Property or other collateral as security for the Notes, to have a
receiver appointed to enter upon and take possession of the Mortgaged
Property, collect the Rents and revenues and apply the same as the
court may direct, such receiver to have all the rights and powers
permitted under the laws of the jurisdiction in which the Mortgaged
Property is located. Grantor hereby waives any requirements on the
receiver or Beneficiary to post any surety or other bond. Beneficiary
or the receiver may also take possession of, and for these purposes
use, any and all personalty which is a part of the Mortgaged Property
and used by Grantor in the rental or leasing thereof or any part
thereof. The expense (including the receivers fees, counsel fees, costs
and agents compensation) incurred pursuant to the powers herein
contained shall be secured by this Deed of Trust. To the extent not
prohibited by applicable law, Beneficiary shall (after payment of all
costs and expenses incurred) apply such Rents and revenues received by
it in the order set forth in Paragraph 23 of this Deed of Trust. The
------------
right to enter and take possession of the Mortgaged Property, to manage
and operate the same, and to collect the Rents and revenues, whether by
receiver or otherwise, shall be cumulative to any other right or remedy
hereunder or afforded by law, and may be exercised concurrently
therewith or independently thereof. Beneficiary shall be liable to
account only for such Rents and revenues actually received by
Beneficiary.
(e) Sale in One Parcel. In the event of a sale, the Mortgaged
------------------
Property may be sold in one parcel. Grantor hereby waives its rights,
if any, to require that the Mortgaged Property be sold as separate
units, tracts or estates;
(f) Security Interest. In addition to the rights and remedies
-----------------
of Beneficiary and Trustee set forth herein and in the Notes and the
other Transaction Documents, and not in lieu thereof, Beneficiary shall
have all of the rights and remedies of a holder of a security interest
under the Code, or under other applicable law with respect to the
Security Interest Property and all rights and remedies provided or
referred to herein and therein, shall, to the fullest extent permitted
by applicable law, be cumulative;
51
<PAGE>
(g) Foreclosure. Beneficiary, at its option, may direct
-----------
Trustee to institute an action to foreclose this Deed of Trust upon
five (5) days' notice or such longer period for notice required by
statute, or take such other action as may be permitted and available to
Beneficiary, at law or in equity, for the enforcement of the
Transaction Documents and the realization on the Mortgaged Property or
any other security held by Beneficiary, and proceed thereon through to
final judgment and execution thereon for the Debt, including, without
limitation, the Yield Maintenance Premium, all accrued and unpaid
interest and all costs of enforcement. In furtherance thereof, to the
extent permitted by applicable law, Beneficiary and/or Trustee shall
have the full power and right to sell the Mortgaged Property and all
estate, claim, demand, right, title and interest of Grantor therein and
right of redemption thereof pursuant to an assent to a decree or
otherwise, at one or more sales, as an entirety or in parcels, at such
time and place, upon such terms and after such notice thereof as may be
required or permitted by law or statute or in equity, it being agreed
that in the event of a sale, by foreclosure or otherwise, of less than
all of the Mortgaged Property, the Transaction Documents shall continue
as a lien on the remaining portion of the Mortgaged Property. Grantor
hereby assents to the passage of a decree for the sale of the Mortgaged
Property upon the occurrence of an Event of Default by any court having
jurisdiction; and
(h) Power of Sale. To the extent permitted by applicable law,
-------------
Trustee may sell, release and convey the Premises at public sale and
execute and deliver to the purchasers at such sale, good and sufficient
deeds of the conveyance and shall render any surplus funds, after
payment in full of the Debt and the expenses of such sale, including
reasonable attorneys' fees as provided by law, to Grantor. Without
limiting any of Beneficiary's rights hereunder, Beneficiary or Trustee
may cause the Mortgaged Property and all estate, right, title and
interest, claim and demand therein, or any part thereof to be sold as
follows:
(i) Beneficiary may proceed as if all of the
Mortgaged Property were real property, in accordance with (iv)
below, or Beneficiary may elect to treat any of the Mortgaged
Property which consists of a right in action or which is
property that can be severed from the Premises without causing
structural damage thereto as if the same were personal
property, and dispose of the same in accordance with (iii)
below, separate and apart from the sale of real property, with
the remainder of the Mortgaged Property being treated as real
property;
(ii) Beneficiary may cause any such sale or other
disposition to be conducted immediately following the
expiration of any grace period, if any, herein provided (or
required by law) or Beneficiary may delay any such sale or
other disposition for such period of time as Beneficiary deems
to be in its best interest. Should Beneficiary desire that
more than one such sale or other disposition be conducted,
Beneficiary may, at its option, cause the same to be conducted
simultaneously, or successively on the same day, or at such
different days or times and in such order as Beneficiary may
deem to be in its best interest;
52
<PAGE>
(iii) should Beneficiary elect to cause any of the
Mortgaged Property to be disposed of as personal property as
permitted by (i) above, it may dispose of any part thereof in
any manner now or hereafter permitted by Division 9 of the
Code or in accordance with any other remedy provided by law.
Both Grantor and Beneficiary shall be eligible to purchase any
part or all of such property at any such disposition. Any such
disposition may be either public or private as Beneficiary may
so elect, subject to the provisions of the Code. Beneficiary
shall give Grantor at least five (5) days' prior written
notice of the time and place of any public sale or other
disposition of such property or of the time at or after which
any private sale or any other intended disposition is to be
made, and if such notice is sent to Grantor it shall
constitute reasonable notice to Grantor;
(iv) should Beneficiary elect to sell the Mortgaged
Property which is real property or which Beneficiary has
elected to treat as real property, upon such election
Beneficiary or Trustee shall give such notice of default and
election to sell as may then be required by law. Thereafter,
upon the expiration of such time and the giving of such notice
of sale as may then be required by law, Trustee, at the time
and place specified in the notice of sale, shall sell such
Mortgaged Property, or any portion thereof specified by
Beneficiary, at public auction to the highest bidder for cash
in lawful money of the United States, subject, however, to the
provisions of (v) below. Beneficiary may, from time to time,
postpone the sale by public announcement thereof at the time
and place noticed therefor. If the Mortgaged Property consists
of several lots or parcels, Beneficiary may designate the
order in which such lots or parcels may be offered for sale or
sold, and may direct that such property be sold in one parcel,
as an entirety, or in such parcels as Beneficiary, in its sole
discretion, may elect. Grantor expressly waives any right
which it may have to direct the order in which any of the
Mortgaged Property shall be sold, and its rights, if any, to
require that the Mortgaged Property be sold as separate
tracts, lots, units or parcels. Any person, including Grantor,
Trustee or Beneficiary, may purchase at the sale. Upon any
sale, Trustee shall execute and deliver to the purchaser or
purchasers a deed or deeds conveying the property so sold, but
without any covenant or warranty whatsoever, express or
implied, whereupon such purchaser or purchasers shall be let
into immediate possession;
(v) upon any sale of the Mortgaged Property,
whether made under a power of sale herein granted or pursuant
to judicial proceedings, if the holder of the Notes is a
purchaser at such sale, it shall be entitled to use and apply
all or any portion of the indebtedness then secured hereby for
or in settlement or payment of all or any portion of the
purchase price of the property purchased; and
(vi) in the event of a sale or other disposition of
any such Mortgaged Property or any part thereof, and the
execution of a deed or other conveyance pursuant thereto, the
recitals in the deed or deeds of facts (such as of a default,
the giving of notice of default and notice of sale, demand
that such sale should be
53
<PAGE>
made, postponement of sale, terms of sale, sale, purchaser,
payment of purchase money, and any other fact affecting the
regularity or validity of such sale or disposition) shall be
conclusive proof of the truth of such facts; and any such deed
or conveyance shall be conclusive against all persons as to
such facts recited therein.
Trustee shall be entitled, in its sole discretion, to exercise all or
any of the rights and remedies provided herein or in any of the other
Transaction Documents or which may be given by statute, at law or in
equity, or otherwise in such order and manner as Trustee shall elect,
without impairing Beneficiary's or Trustee's rights under any of the
Transaction Documents and without affecting the liability of any
person, firm, corporation, or other entity for the sums secured by the
Transaction Documents.
22. Authorization to Execute Deeds; Adjournments.
(a) Grantor irrevocably appoints Beneficiary as its true and
lawful attorney-in-fact, which appointment is coupled with an interest, for the
purpose, following an Event of Default and the establishment of the maturity of
the Debt (in accordance with the provisions of this Deed of Trust or by a court
of competent jurisdiction), of effectuating, to the extent permitted by
applicable law of the State, any sale, assignment, transfer or delivery of the
Mortgaged Property or any part thereof or any interest therein for the
enforcement of this Deed of Trust as Beneficiary may consider reasonably
necessary or appropriate, with full power of substitution.
(b) Beneficiary may adjourn, or direct Trustee to adjourn, from
time to time, in accordance with applicable law, any sale to be made by it under
or by virtue of this Deed of Trust by announcement at the time and place
appointed for such sale or for such adjourned sale or sales and, except as
otherwise provided by any applicable provision of law, Beneficiary, without
further notice or publication, may make such sale at the time and place to which
the same shall be so adjourned.
(c) In the event that Beneficiary has proceeded with the
enforcement of any right under this Deed of Trust by foreclosure sale or
otherwise and such proceedings shall have been discontinued or abandoned for any
reason or shall have been determined adversely, then, in every such case,
Grantor and Beneficiary shall be restored to their respective former positions
and rights hereunder with respect to the Mortgaged Property, subject to the lien
hereof.
23. Proceeds of Foreclosure Sale. In any foreclosure of this Deed
----------------------------
of Trust there shall be allowed and included in the decree of sale, to be paid,
in the following order, out of the rents, revenues, issues, income, products and
profits derived from the Mortgaged Property or the proceeds of such sale:
First: All court costs, allowances authorized or permitted by
-----
statute or a court, Trustee's fees and charges, fees and expenses of
receivers, reasonable attorneys' fees and disbursements (which may
include reasonable, actual billed costs, if any, of any attorney
54
<PAGE>
in the employ of Beneficiary or Trustee and fees for services
performed by legal assistants and other non-lawyers), appraisers'
fees, costs of environmental audits and reports, expenditures for
documentary and expert evidence, stenographers' charges, publication
costs and costs of procuring all abstracts of title, title searches
and examinations, title policies and similar data with respect to
title which Beneficiary or Trustee may reasonably incur and any other
expenses of the foreclosure proceeding (all of which may be estimated
as to items to be expended after the entry of the decree), with
interest thereon (to the extent permitted by law), from the date of
any such advance until paid to Beneficiary, computed at the Default
Rate;
Second: All other amounts (including, without limitation, all
------
Impositions other than taxes subject to which the Mortgaged Property
was sold and all direct and indirect costs and expenses incurred by or
on behalf of Beneficiary in the operation and maintenance of the
Mortgaged Property, the collection of Rents and the enforcement of any
of their remedies under the Transaction Documents or by applicable
law) advanced or paid by Beneficiary pursuant to the Notes, this Deed
of Trust or any other Transaction Document, with interest thereon (to
the extent permitted by law), from the date of any such advance until
paid to Beneficiary, computed at the Default Rate;
Third: Any indebtedness secured by this Deed of Trust and at the
-----
time due and payable (whether by acceleration or otherwise), including
all principal amounts, the Yield Maintenance Premium, if any, and
interest at the time due and payable under the Notes, and interest (to
the extent permitted by law) at the Default Rate on any overdue
principal and (to the extent permitted by law) any other sum
constituting a portion of the Debt in such order and priority as
Beneficiary shall in its sole discretion determine; and
Fourth: All other amounts required to be paid by Grantor pursuant
------
to any provision of any Transaction Document.
Subject to the provisions of Paragraph 39 hereof, any surplus of the proceeds of
------------
such sale shall be paid promptly to the person or entity legally entitled
thereto. In the event Trustee cannot determine the person or persons to whom the
surplus should be paid or Trustee concludes that a controversy exists with
respect to the surplus, Trustee may pay the surplus into a court of competent
jurisdiction in an interpleader action and all expenses of such action,
including legal fees incurred by Beneficiary and Trustee, shall be paid from the
surplus or, if the surplus is insufficient, by Grantor.
24. Purchase of the Mortgaged Property by Beneficiary. Beneficiary
-------------------------------------------------
may be a purchaser of the Mortgaged Property or any part thereof or any interest
therein at any sale thereof, whether pursuant to foreclosure or power of sale or
otherwise, and may apply the amount of the Debt outstanding (or such portion
thereof as the Beneficiary or Trustee shall determine in its sole discretion),
and the expenses of the sale and costs of the action and any other sums which
Beneficiary or Trustee is authorized to charge under this Deed of Trust or under
applicable law toward the purchase price thereof.
55
<PAGE>
25. Security Agreement; Uniform Commercial Code.
-------------------------------------------
(a) This Deed of Trust constitutes a security agreement under the
Code and a fixture filing for the purposes of Division 9 of the Code and a
security interest shall be deemed, and hereby is, granted by Grantor to
Beneficiary and attached to the Security Interest Property for the benefit of
Beneficiary as additional security for the Debt.
(b) To the extent permitted by law, Grantor hereby authorizes
Beneficiary to file financing and continuation statements to continue such lien
with respect to the Security Interest Property without the signature of Grantor
and, upon reasonable request, Grantor shall promptly execute financing and
continuation statements in form satisfactory to Beneficiary to secure
Beneficiary's interest in the Security Interest Property. Grantor shall further,
from time to time, upon the written demand of Beneficiary, execute, acknowledge
and deliver any financing statement, renewal, affidavit, certificate,
continuation statement or other document as Beneficiary may request in order to
perfect, preserve, continue, extend or maintain the security interest and
priority of this Deed of Trust or such other security instrument as a first lien
subject to the Permitted Exceptions. Grantor hereby irrevocably appoints
Beneficiary as attorney-in-fact (which appointment shall be deemed to be coupled
with an interest) for the limited purpose of executing and filing such financing
and continuation statements. Grantor agrees to pay to Beneficiary, on written
demand, all costs and expenses (including reasonable attorneys' fees and
disbursements) incurred by Beneficiary in connection with the preparation,
execution, acknowledgment, recording, filing and refiling of any such instrument
or document, including, without limitation, the charges for examining title
which amounts, as well as any other amounts required to be paid to Beneficiary
pursuant to this Paragraph, together with interest thereon at the Default Rate
---------
from the date of any such expenditure by Beneficiary until repayment, and such
sum, together with such interest, shall constitute a portion of the Debt secured
by the lien of this Deed of Trust. Neither a request of Beneficiary hereunder
nor the failure of Beneficiary to make such a request shall be construed as a
release of any portion of the Mortgaged Property from the lien of this Deed of
Trust, this covenant and any such security agreement or other similar security
instrument delivered to Beneficiary being cumulative and additional security for
payment of the Debt.
(c) Upon the occurrence of any Event of Default, Beneficiary shall
have all of the rights and remedies of a secured party under the Code with
respect to the Security Interest Property, or other applicable law, and all
rights and remedies provided for herein and in the Notes, all of which rights
and remedies are cumulative to those provided elsewhere in this Deed of Trust or
otherwise available to Beneficiary. Upon the occurrence and continuance of any
Event of Default, Beneficiary shall have the option of directing Trustee to
proceed as to both real and personal property in accordance with its rights and
remedies in respect of the real property, in which event the default provisions
of the Code shall not apply. The parties agree that in the event Beneficiary
elects to proceed with respect to the Security Interest Property separately from
the real property, Grantor will assemble the Security Interest Property (other
than those items of Equipment which are affixed to the Improvements and not
removable without material damage to such items or the Improvements) and make
the Security Interest Property available to Beneficiary at a place or places
reasonably convenient to Beneficiary. Any notice of sale, disposition or other
intended action by Beneficiary, sent to Grantor at the address of Grantor
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specified for notices herein at least fifteen (15) days prior to such action,
shall constitute reasonable notice to Grantor and the method of sale or
disposition or other intended action set forth in such notice shall conclusively
be deemed to be commercially reasonable within the meaning of the Code unless
objected to in writing by Grantor within ten (10) days after receipt by Grantor
of such notice.
(d) All replacements, renewals and additions to the Equipment and
the Personal Property shall become and be immediately subject to the security
interest herein of Beneficiary and be covered by this Deed of Trust as part of
the Mortgaged Property. Grantor warrants and represents that all Security
Interest Property now is, and that all replacements thereof, substitutions
therefor and additions thereto, will be, owned by Grantor free and clear of
liens, encumbrances or security interests of others except for the Permitted
Exceptions.
(e) Neither the provisions of this Paragraph nor the filing of any
---------
separate security agreement or financing statement, with respect to
Beneficiary's security interest in the Security Interest Property, shall be
construed as in any way derogating or impairing the intention of the parties
hereto that the Security Interest Property shall, at all times and for all
purposes and in all proceedings, both legal and equitable, be regarded as a part
of the Mortgaged Property. A CARBON, PHOTOGRAPHIC OR OTHER REPRODUCTION OF THIS
DEED OF TRUST OR ANY FINANCING STATEMENT RELATING TO THIS DEED OF TRUST SHALL BE
SUFFICIENT AS A FINANCING STATEMENT.
26. Certificate as to No Default, etc.; Information.
-----------------------------------------------
(a) Grantor will deliver to Beneficiary, within thirty (30) days
after written request, a written statement duly acknowledged by an authorized
representative of Grantor stating (i) the outstanding amount of the Debt (ii)
whether to the Best Knowledge of Grantor any offsets or defenses exist against
the Debt, and (iii) whether to the Best Knowledge or Grantor, there exists no
default, condition or event which, with the giving of notice or lapse of time or
both, would constitute a default in the performance or observance of any of the
terms of this Deed of Trust or any of the other Transaction Documents, or if any
such default exists, specifying to the nature and period of existence thereof
and what action Grantor is taking or proposes to take with respect thereto.
(b) In addition to the information provided for in paragraph (a)
above, Grantor will deliver to Beneficiary, within thirty (30) days after
written request, such further information with respect to the Ground Lease and
Mortgaged Property as Beneficiary may, from time to time, reasonably request,
Grantor will direct all Tenants under the Leases and lessors under the Equipment
Leases (as defined in the Loan Agreement) to deliver to Beneficiary such
information requested by Beneficiary to the extent required to be furnished
under such Lease or Equipment Lease, and Grantor will use its reasonable efforts
to cause such Tenants or lessors to deliver to Beneficiary such information to
the extent not so required to be furnished under such Lease or Equipment Lease.
Each such request for additional information of Grantor or any such Tenant or
lessor may be made by Beneficiary, from time to time, for any reasonable
business purpose.
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27. Books and Records; Financial Statements. Beneficiary or its
---------------------------------------
designated representatives shall, upon reasonable prior notice to Grantor, have
(a) the right of entry and free access to the Premises (subject to the rights of
hotel guests) during business hours to inspect the Mortgaged Property and (b)
the right at reasonable times and upon not less than five (5) Business Days'
notice, to inspect all books, contracts and records of Grantor relating to the
Mortgaged Property. Grantor shall make the officers, directors of its general
partners, and its regional supervisors and retained professionals knowledgeable
of such matters available for Beneficiary or its designated representatives to
discuss Grantor's affairs, finances and accounts relating to the Mortgaged
Property and Grantor will cooperate with, and request that each of the foregoing
individuals cooperate with, Beneficiary and its designated representative to
enable them to perform these functions, at all reasonable times and as often as
Beneficiary may reasonably request.
28. Application of Proceeds. Any sum which by the terms of this Deed of
-----------------------
Trust is to be applied to the Loan or the Notes shall be applied by Beneficiary
in such order and priority as is set forth herein or in any other Transaction
Document.
29. Terms Subject to Applicable Law; Severability. All rights, powers
---------------------------------------------
and remedies provided herein are intended to be limited to the extent necessary
so that they will not render this Deed of Trust invalid, unenforceable or not
entitled to be recorded, registered or filed under any applicable law. If any
term of this Deed of Trust shall be held to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the other terms
hereof shall in no way be affected thereby.
30. Further Acts, etc. Grantor shall, at its sole cost and expense, and
------------------
without expense to Beneficiary or Trustee, do, execute, acknowledge and deliver
all and every such further acts, deeds, conveyances, mortgages, assignments,
notices of assignments, transfers, assurances as Beneficiary or Trustee shall,
from time to time, reasonably require for better assuring, conveying, assigning,
transferring and confirming unto Beneficiary the property and rights hereby
mortgaged or intended now or hereafter so to be, or which Grantor may be or may
hereafter become bound to convey or assign to Beneficiary, or for carrying out
the intention or facilitating the performance of the terms of this Deed of Trust
(including, without limitation, any severance, splitting, restatement,
replacement, amendment or modification to this Deed of Trust, the Notes or the
other Transaction Documents deemed necessary by Beneficiary or Trustee to
effectuate or confirm the obligations of Beneficiary and Trustee under Paragraph
---------
61 hereof) or filing, registering or recording this Deed of Trust and, on
- --
written demand, will execute and deliver one or more financing statements to
evidence more effectively the lien hereof upon the Mortgaged Property except
that Grantor shall have no obligation to comply with the foregoing if any such
action would increase Grantor's liability hereunder or increase Beneficiary's
rights hereunder. Grantor will reimburse Beneficiary and/or Trustee, on written
demand, for any sums (including reasonable attorneys' fees and disbursements)
reasonably expended by Beneficiary or Trustee in preparing, executing,
acknowledging, filing, registering and recording such instruments, certificates
and documents.
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31. Limitation of Liability of Beneficiary and Trustee. Neither this
--------------------------------------------------
Deed of Trust nor any action or inaction on the part of Beneficiary or Trustee
shall, without such party's written consent, constitute an assumption on such
party's part of any obligation under any of the Leases or any other agreement
affecting the Mortgaged Property, nor shall Beneficiary or Trustee have any
obligation to make any payment to be made by Grantor under the Leases or any
such other agreement, or to present or file any claim, or to take any other
action to collect or enforce the payment of any amounts which have been assigned
to Beneficiary and/or Trustee or to which Beneficiary and/or Trustee may be
entitled hereunder at any time or times. No action or inaction on the part of
Beneficiary or Trustee shall adversely affect or limit in any way the rights of
Beneficiary or Trustee hereunder or under the Leases or the Notes or the
Assignment.
32. Documentary Stamps. If at any time any Governmental Authority shall
------------------
require revenue or other stamps to be affixed to the Notes or this Deed of
Trust, Grantor will pay for the same, with interest and penalties thereon, if
any. The provisions of the final sentence of Paragraph 34 shall apply to any
------------
failure of Grantor to make any such payment.
33. Cumulative Remedies of Beneficiary; No Waiver. No legal, equitable
---------------------------------------------
or contractual right, power or remedy of Beneficiary shall be exclusive of any
other, but rather, each right, power or remedy shall be separate, cumulative and
concurrent and shall be in addition to every right, power or remedy now or
hereafter existing at law or in equity. No delay in the exercise of, or omission
to exercise, any right, power or remedy accruing on any default shall impair any
such right, power or remedy or be construed to be a waiver of any such default
or acquiescence therein, nor shall it affect any subsequent default of the same
or a different nature. Every such right, power or remedy may be exercised
concurrently or independently, and when and as often as may be deemed expedient,
by Beneficiary. Beneficiary may resort for the payment of the Debt to the
Mortgaged Property and to any other security held by Beneficiary in such order
and manner as Beneficiary, in its sole discretion, consistent with the
Transaction Documents, may elect. Beneficiary may take action to recover the
Debt, or any portion thereof, or to enforce any covenant hereof without
prejudice to the right of Beneficiary thereafter to foreclose this Deed of Trust
or sell the Mortgaged Property pursuant to the power of sale, if any, contained
herein. No act of Beneficiary shall be construed as an election to proceed under
any one provision herein to the exclusion of any other provision.
34. Filing of Deed of Trust, etc. Grantor forthwith upon the execution
----------------------------
and delivery of this Deed of Trust and thereafter, from time to time, as
reasonably required or requested by Beneficiary, will cause this Deed of Trust,
the Assignment, and any security instrument or Transaction Document creating a
lien or evidencing the lien hereof upon the Mortgaged Property and each
instrument of further assurance, and each supplement to any of the foregoing and
each modification to any of the foregoing, to be filed, registered or recorded
in such manner and in such places as may be required by any present or future
law in order to publish notice of and fully to protect the lien hereof upon, and
the interests of Beneficiary in the Mortgaged Property. Grantor will pay all
filing, registration or recording fees, and all reasonable expenses incident to
the execution and acknowledgment of this Deed of Trust, any mortgage or deed of
trust supplemental hereto, any security instrument with respect to the Mortgaged
Property and any instrument of further assurance, and all Federal, state, county
and municipal taxes, duties,
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imposts, assessments and charges arising out of or in connection with the
execution and delivery of this Deed of Trust, any mortgage or deed of trust
supplemental hereto, any security instrument with respect to the Mortgaged
Property or any instrument of further assurance. In the event that Grantor shall
fail to make any such payment, Beneficiary shall have the right, but not the
obligation, to pay at the direction of Beneficiary the amount due and shall
notify Grantor of such payment and Grantor shall reimburse Beneficiary therefor,
upon written demand, with interest thereon at the Default Rate from the date of
demand by Beneficiary to the date of repayment, and such amount, together with
such interest, shall constitute a portion of the Debt secured by the lien of
this Deed of Trust.
35. Usury Laws. It is the intent of Grantor and Beneficiary to comply
----------
at all times with applicable usury laws. If at any time such laws would render
usurious any amounts called for under the Notes or any of the Transaction
Documents, then it is Grantor's and Beneficiary's express intention that such
excess amount be immediately credited on the principal balance of the Notes (or,
if the Notes has been fully paid, and Beneficiary has no further obligation
under the Loan Agreement to make Advances, refunded by Beneficiary to Grantor
and Grantor shall accept such refund), and the provisions hereof and thereof be
immediately deemed to be reformed to comply with the then applicable laws,
without the necessity of the execution of any further documents, but so as to
permit the recovery of the fullest amount otherwise called for hereunder and
thereunder. Any such crediting or refund shall not cure or waive any default by
Grantor under the Notes or under any of the other Transaction Documents. If, at
any time following any such reduction in the interest rate payable by Grantor,
there remains unpaid any principal amounts under the Notes and the maximum
interest rate permitted by applicable law is increased or eliminated, then the
interest rate payable hereunder shall be readjusted, to the extent permitted by
applicable law, so that the total dollar amount of interest payable hereunder
shall be equal to the dollar amount of interest which would have been paid by
Grantor without giving effect to the applicable usury laws theretofore in
effect. Grantor agrees, however, that in determining whether or not any interest
payable under the Notes or any of the other Transaction Documents exceeds the
highest rate permitted by law, any non-principal payment (except payments
specifically stated in the Notes or in any other Transaction Document to be
"interest"), including, without limitation, prepayment fees and late charges,
shall be deemed, to the extent permitted by law, to be an expense, fee or
premium rather than interest.
36. Marshalling. Grantor waives and releases any right to have the
-----------
Mortgaged Property marshalled.
37. Waiver of Notice. Grantor shall not be entitled to any notices of
----------------
any nature whatsoever from Beneficiary or Trustee except with respect to matters
for which this Deed of Trust, the Loan Agreement or the Notes specifically and
expressly provides for the giving of notices by Beneficiary or Trustee to
Grantor, and Grantor hereby expressly waives the right to receive any notice
from Beneficiary or Trustee with respect to any matter for which this Deed of
Trust, the Loan Agreement or the Notes does not specifically and expressly
provide for the giving of notice by Beneficiary or Trustee to Grantor. Grantor
hereby requests that a copy of any notice of default and every notice of sale
hereunder be mailed to it as provided by law at Grantors address set forth in
Paragraph 41.
- ------------
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38. Recovery of Sums Required To Be Paid. Beneficiary shall have the
------------------------------------
right from time to time to take action or direct Trustee to take action to
recover any sum or sums which constitute a part of the Debt as the same become
due, without regard to whether or not the balance of the Debt shall be due, and
without prejudice to the right of Beneficiary or Trustee to thereafter bring an
action of foreclosure, or any other action, for a default or defaults by Grantor
existing at the time such earlier action was commenced.
39. Other Mortgages; Cross Collateralization; Cross Default.
-------------------------------------------------------
(a) Grantor acknowledges that this Deed of Trust along with the
Other Mortgages secure the Debt. Grantor agrees that the lien of this Deed of
Trust shall be absolute and unconditional and shall not in any manner be
affected or impaired by any acts or omissions whatsoever of Beneficiary or
Trustee and, without limiting the generality of the foregoing, the lien hereof
shall not be impaired by any acceptance by Beneficiary of any other security for
any of the Debt, or by any failure, neglect or omission on the part of
Beneficiary or Trustee to realize upon or protect any of the Debt or any
collateral security therefor including, without limitation, the Other Mortgages.
The lien of this Deed of Trust shall not in any manner be impaired or affected
by any release (except as to the property released), sale, pledge, surrender,
compromise, settlement, renewal, extension, indulgence, alteration, changing,
modification or disposition of any of the Debt or of any of the collateral
security therefor, including, without limitation, the Other Mortgages, and
Beneficiary may foreclose, or direct Trustee to foreclose, or exercise any other
remedy available to Beneficiary under the Other Mortgages without first
exercising or enforcing any of its remedies under this Deed of Trust and any
exercise of the rights or remedies of Beneficiary hereunder shall not in any
manner impair the Debt or the lien of this Deed of Trust or the liens of the
Other Mortgages or any of Beneficiary's rights and remedies thereunder.
(b) Grantor specifically consents and agrees that Beneficiary or
Trustee may exercise their rights and remedies hereunder and under the Other
Mortgages separately or concurrently and in any order that they may deem
appropriate and Grantor waives any rights of subrogation. Without limiting the
generality of the foregoing, Grantor agrees that if an Event of Default is
continuing (i) Beneficiary or Trustee shall have the right, to the extent
permitted by applicable law, to pursue all of its rights and remedies in one
proceeding, or separately and independently in separate proceedings from time to
time, as Beneficiary, in its sole and absolute discretion, shall determine from
time to time, (ii) neither Beneficiary nor Trustee is required to either
marshall assets, sell the Mortgaged Property or properties encumbered by the
Other Mortgages in any inverse order of alienation, or be subject to any "one
action" or "election of remedies" law or rule, (iii) the exercise by Beneficiary
or Trustee of any remedies against the Mortgaged Property or properties
encumbered by the Other Mortgages will not impede Beneficiary or Trustee from
subsequently or simultaneously exercising remedies against any other properties
encumbered by the Other Mortgages or this Deed of Trust, and (iv) all liens and
other rights, remedies or privileges provided to Beneficiary or Trustee shall
remain in full force and effect until Beneficiary and Trustee have exhausted all
of their remedies against the Mortgaged Property and all of the properties
encumbered by the Other Mortgages and this Deed of Trust have been foreclosed,
sold and/or otherwise realized upon in satisfaction of the Debt or the Debt has
been paid in full.
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(c) It is the intent of the parties hereto that this Deed of Trust
be cross-defaulted and cross-collateralized with the Other Mortgages only to the
extent that this Deed of Trust and each of the Other Mortgages continue to be
held and owned by the same Person (as defined in the Loan Agreement). Therefore,
notwithstanding any provisions contained in this Deed of Trust or the other
Transaction Documents to the contrary, Grantor and Beneficiary agree that the
provisions of this Paragraph 39 and any other references in this Deed of Trust
------------
and the other Transaction Documents to the "Other Mortgages" shall be
automatically deleted and shall have no further force and effect from and after
the date this Deed of Trust is assigned to any Person that is not concurrently
the holder of all Other Mortgages, including the Fee Owner pursuant to Paragraph
---------
61 hereof. Grantor shall upon the written request of Beneficiary or Trustee
- --
execute, acknowledge, deliver and record any modification, severance, splitter,
restatement or substitution of this Deed of Trust and the other Transaction
Documents deemed necessary by Beneficiary or Trustee to effectuate or confirm
that this Deed of Trust will, following such an assignment, no longer be subject
to the cross-default and cross-collateralization provisions contained herein.
Grantor hereby irrevocably appoints Beneficiary as its attorney-in-fact (which
appointment shall be deemed to be coupled with an interest) for the purpose of
executing and recording any such modification, severance, splitter, restatement
or substitution of this Deed of Trust and the other Transaction Documents
following the occurrence of an Event of Default. Grantor agrees to pay to
Beneficiary, on written demand, all costs and expenses (including reasonable
attorneys' fees and disbursements) incurred by Beneficiary in connection with
the preparation, execution, acknowledgment, recording and filing of such
documents and instruments, together with interest thereon at the then applicable
interest rate for the Debt, including the Default Rate as provided for herein,
from the date of such expenditure by Beneficiary until repayment and such sum,
together with such interest, shall constitute a portion of the Debt secured by
the lien of this Deed of Trust.
40. No Oral Change. This Deed of Trust may only be modified or amended
--------------
by an agreement in writing signed by Grantor and Beneficiary, and may only be
released, discharged or satisfied of record by an instrument in writing signed
by Beneficiary.
41. Notices. Except as otherwise specified herein, all notices,
-------
requests, demands, consents, reports or other communications, including, without
limitation, a tender of cure pursuant to Paragraph 19 (c), to or upon the
---------------
respective parties hereto shall be in writing and be deemed to have been duly
given or made when received, if personally delivered by messenger or national
overnight courier service, or if sent by registered or certified U.S. mail,
postage prepaid, return receipt requested, if sent by telecopier with electronic
confirmation of receipt (hard copy to be sent by regular mail), addressed to the
party to which such notice, request, demand, consent, report or other
communication is being given at its address set forth below, or at such other
address as any of the parties hereto may hereafter notify the others by notice
given hereunder:
Beneficiary: Nomura Asset Capital Corporation
Two World Financial Center
Bldg. B, 21st Floor
New York, New York 10281-1198
Att: Daniel S. Abrams, Director
Fax: (212) 667-1022
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with a copy to: Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
Att: Michael Peskowitz, Esq.
Fax: (212) 940-8776
Grantor: Marriott Hotel Properties II Limited Partnership
c/o Host Marriott Corporation
10400 Fernwood Road
Bethesda, Maryland 20817
Att: Law Department 923/Deputy General Counsel
Fax: (301) 380-6332
with a copy to: Marriott Hotel Properties II Limited Partnership
c/o Host Marriott Corporation
10400 Fernwood Road
Bethesda, Maryland 20817
Att: Asset Management Department 908
Fax: (301) 380-8260
Trustee: Commonwealth Land Title Insurance Company of California
1855 Gateway Boulevard
Suite 270
Concord, California 94520
Attention: Office Manager
42. Joint and Several Liability. If Grantor consists of more than one
---------------------------
person, the obligations and liability of each such person hereunder shall be
joint and several.
43. Headings, etc. The headings and captions of the paragraphs of this
-------------
Deed of Trust are for convenience of reference only and are not to be construed
as defining or limiting, in any way, the scope or intent of the provisions
hereof.
44. Successors and Assigns. The provisions of this Deed of Trust shall
----------------------
be binding upon Grantor and Beneficiary, and their respective successors and
assigns, and all persons claiming under or through Grantor or Beneficiary or any
such successor or assign, and shall inure to the benefit of, and be enforceable
by, Beneficiary and its respective successors and assigns.
45. Survival of Assignment. Notwithstanding anything to the contrary
----------------------
contained in this Deed of Trust, the assignment, pledge and mortgaging of the
Condemnation Proceeds, the Insurance Proceeds and the Refunds, and the right to
apply any of the foregoing in accordance with the terms of this Deed of Trust,
shall survive any foreclosure of the lien of this Deed of Trust.
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46. Construction; Counterparts.
---------------------------
(a) Unless the context clearly indicates a contrary intent or
unless otherwise specifically provided herein, words used in this Deed of Trust
shall be used interchangeably in singular or plural form, the word "Grantor"
shall mean each Grantor and any subsequent owners of the Mortgaged Property or
any part thereof or interest therein, the word "Beneficiary" shall mean each
Beneficiary and any subsequent holder of any of the Notes, the word "Trustee"
shall mean Trustee and any Successor Trustee (hereinafter defined), and the word
"person" shall include an individual, corporation, partnership, limited
liability company, limited liability partnership, trust, unincorporated
association, government, governmental authority, or other entity. References to
"this Paragraph" shall mean the paragraph commencing with an Arabic numeral in
which the affected phrase or sentence is contained. The phrase "Best Knowledge
of Grantor" shall mean knowledge after appropriate and proper inquiry obtained
by Grantor or any officer or director of Grantor or any regional supervisor of
Grantor charged with primary responsibility as to such matters in connection
with operation of the Mortgaged Property. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural and vice versa. The terms "herein", "hereof" or "hereunder" or similar
terms used in this Deed of Trust refer to this entire Deed of Trust and not to
the particular provision in which the term is used.
(b) It is acknowledged and agreed that in the preparation of this
Deed of Trust and the other Transaction Documents indistinguishable
contributions were made by representatives of both Grantor and Beneficiary, and
that Grantor and Beneficiary each waives any and all rights, either at law or in
equity, to have the provisions of this Deed of Trust or any part thereof or the
provisions of any other Transaction Document interpreted in favor of one over
the other based on a claim that representatives of one or the other were the
principal draftsmen of any such document.
(c) In the event that the provisions of this Deed of Trust directly
conflict with any provision of the Loan Agreement, the provisions of the Loan
Agreement shall govern, except the provisions of the Deed of Trust with respect
to Beneficiary's perfection of a security interest or lien on the Mortgaged
Property, and the enforcement thereof shall be governed by the terms and
provisions of the Deed of Trust.
(d) This Deed of Trust may be executed in any number of duplicate
originals and each such duplicate original shall be deemed to constitute but one
and the same instrument.
47. Governing Law. IN ALL RESPECTS, INCLUDING, WITHOUT LIMITATION,
-------------
MATTERS OF CONSTRUCTION AND VALIDITY, THIS DEED OF TRUST AND THE OBLIGATIONS
ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THE
STATE (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS OR COMITY) AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
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NOTWITHSTANDING THE FOREGOING, THE NOTES AND LOAN AGREEMENT ARE GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK.
48. Expenses of Enforcement. All reasonable costs and expenses of
-----------------------
Beneficiary or Trustee in the enforcement of any covenant of Grantor or any
right or remedy afforded Beneficiary or Trustee pursuant to this Deed of Trust
or any other Transaction Document or in connection with any proceedings,
including probate and bankruptcy proceedings, to which Beneficiary shall be a
party, either as plaintiff, claimant or defendant, by reason of this Deed of
Trust or any indebtedness hereby secured or in connection with preparations for
the commencement of any suit for the foreclosure hereof after accrual of such
right to foreclose, whether or not actually commenced shall be paid by Grantor
within ten (10) days after written demand by Beneficiary and/or Trustee, and, to
the extent permitted by law, shall bear interest, at the Default Rate from ten
(10) days after the date of demand until the actual date of repayment by
Grantor, and shall be deemed a part of the Debt and secured by this Deed of
Trust and the Other Mortgages. As used herein, "reasonable costs and expenses"
shall include, without limitation, actual expenses incurred by Beneficiary, fees
and expenses of Beneficiary's and/or Trustee's agents, reasonable attorneys fees
and expenses (which may include reasonable, actual billed costs, if any, of any
attorney in the employ of Beneficiary and/or Trustee and fees for services
performed by legal assistants and other non-lawyers), court costs and filing
fees, allowances authorized or permitted by statute or of a court, fees and
expenses of receivers, appraisers fees, costs of environmental audits and
reports, expenditures for documentary and expert evidence, stenographers
charges, publication costs and the cost of procuring abstracts of title, title
searches and examinations, title policies and similar data with respect to title
which Beneficiary and/or Trustee may deem reasonably necessary and all other
expenses of the foreclosure or similar enforcement proceeding, all of which may
be estimated as to items to be expended after the entry of the decree.
49. Waivers; Sale Bar Against Foreclosure.
-------------------------------------
(a) Grantor hereby expressly waives the pleading of any statute of
limitations or other bar to an action based on the passage of time as a defense
to any obligations secured by the Transaction Documents to the full extent
permitted by law.
(b) In any action to foreclose the lien or liens of this Deed of
Trust, including a partial foreclosure, no defense, counterclaim or setoff shall
be available to Grantor other than one which denies the existence or sufficiency
of the facts upon which the action is grounded or which raises an issue
concerning the priority of liens. If any defense, counterclaim or setoff, other
than one permitted by this Paragraph is timely raised in such foreclosure
---------
action, such defense, counterclaim or setoff shall be dismissed; provided,
--------
however, if such defense, counterclaim or setoff is based on a claim which could
- -------
be tried in an action for money damages, such claim may be brought in a separate
action which shall not thereafter be consolidated with such foreclosure action.
The bringing of such separate action for money damages shall not be deemed to
afford any grounds for staying the foreclosure action.
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(c) Grantor hereby expressly waives for itself and all who may
claim through or under it, and to the fullest extent Grantor may do so under
applicable law, any and all rights of redemption in the event of a foreclosure
sale, and the sale of the Mortgaged Property, or any part thereof, or any
interest therein, whether pursuant to foreclosure or partial foreclosure or
otherwise, any such foreclosure or partial foreclosure sale under this Deed of
Trust shall be a perpetual bar against Grantor.
(d) Notwithstanding anything to the contrary contained in this Deed
of Trust, Grantor hereby agrees that, to the extent permitted by applicable law,
Grantor shall not at any time:
(i) insist upon, plead or in any manner whatever
claim or take any benefit or advantage of any stay, extension
or moratorium law or an exemption from execution or sale of
the Mortgaged Property or any part thereof, wherever enacted,
now or at any time hereafter in force, which may affect the
covenants and terms of performance of this Deed of Trust or
any other Transaction Document;
(ii) claim, take or insist upon any benefit or
advantage of any law now or hereafter in force providing for
the valuation or appraisal of the Mortgaged Property, or any
part thereof, prior to any sale or sales thereof which may be
made pursuant to any provision hereof or pursuant to the
decree, judgment or order of any court of competent
jurisdiction or upon execution of any judgment recovered for
all or any portion of the Debt; or
(iii) avail itself of any benefits that might accrue
to it by virtue of any present or future laws excepting the
Mortgaged Property, or any proceeds arising from the sale
thereof, from attachment, levy, or sale under execution from
civil process, or extension of time for payment.
50. No Claim of Credit for Impositions. Grantor will not make deduction
----------------------------------
from or claim credit on the principal or interest secured by this Deed of Trust
by reason of any governmental taxes, assessments or charges. Grantor will not
claim any deduction from the taxable value of the Mortgaged Property by reason
of this Deed of Trust.
51. Sole Discretion of Beneficiary; Reasonableness.
----------------------------------------------
(a) Wherever pursuant to the provisions of this Deed of Trust,
Beneficiary exercises any right given to it to approve or disapprove, or any
arrangement or term is to be satisfactory to Beneficiary, in Beneficiary's
opinion, judgment or discretion, then the decision of Beneficiary to approve or
disapprove or to decide that arrangements or terms are satisfactory or not
satisfactory shall be in Beneficiary's sole discretion, and shall be final and
conclusive.
(b) In the event the consent or approval of Beneficiary is required
to be reasonable under any provision in this Deed of Trust or any other
Transaction Document and Grantor believes that such consent or approval was
withheld or delayed in violation of such
66
<PAGE>
standard, then Grantor's sole remedy in such case shall be either to seek the
release of the Mortgaged Property and this Deed of Trust in accordance with the
Loan Agreement, or to seek injunctive relief or specific performance, and if the
court determines, without right to further appeal, that such approval or consent
was withheld in violation of the applicable standard, then the consent or
approval shall be deemed granted, Beneficiary shall deliver prompt written
confirmation of such consent or approval, the granting of such consent or
approval shall be the only remedy available to Grantor, neither Beneficiary nor
its officers or agents shall have any liability for having withheld or delayed
such consent or approval, and Grantor's obligations under the Transaction
Documents shall not be diminished in any way.
52. Modification by Beneficiary. Grantor agrees that, without affecting
---------------------------
the liability of Grantor or any other person (except any person expressly
released in writing) liable for payment of the Debt or for performance of any
obligation contained herein or affecting the lien and security interest of this
Deed of Trust upon the Mortgaged Property or any part thereof, Beneficiary may,
at any time and from time to time, regardless of consideration, without notice
to or obtaining the consent of any person release any person liable for payment
of any indebtedness secured hereby or for performance of any obligation, extend
the time or agree to alter the terms of payment of any such indebtedness,
including, without limitation, modifying the interest rate, the amortization
period or any other provision of the Notes, modify or waive any obligation (to
the extent same does not increase Grantor's obligations), subordinate, modify or
otherwise deal with the lien and security interest hereof, release the whole or
any part of the Mortgaged Property or any other security, accept additional
security of any kind, consent to the making of any map or plat of the Mortgaged
Property, the creating of any easements thereon or any covenants restricting use
or occupancy thereof, or exercise, refrain from exercising or waive any right
Beneficiary may have without in any manner impairing or affecting the
Transaction Documents, as so extended, modified and supplemented, or the lien or
priority thereof unless expressly released or discharged from such obligation by
Beneficiary in writing.
53. Assignment; Participations.
--------------------------
(a) Beneficiary shall have the right in its sole discretion and at
its sole cost and expense, except to the extent expressly provided to the
contrary in the Loan Agreement, at any time during the term of the Loan to sell,
assign, syndicate, securitize or otherwise transfer or dispose of its interest
in all or any portion of the Loan, provided, however, that all of the provisions
hereof shall continue in full force and effect following any such sale,
assignment, syndication, securitization or other transfer, except as otherwise
provided in Paragraph 39(c) hereof.
---------------
(b) Beneficiary may at any time grant to one or more banks, life
insurance companies or other financial institutions (each a "Participant")
-----------
participating interests in all or a portion of Beneficiary's interest in the
Loan, provided that, in the event of any such grant by Beneficiary of a
participating interest to a Participant, whether or not upon notice to Grantor,
Beneficiary shall remain responsible for the performance of its obligations
hereunder, and Grantor shall continue to deal solely and directly with the
Beneficiary named herein in connection with
67
<PAGE>
Beneficiary's rights and obligations under this Deed of Trust. Beneficiary shall
give Grantor written notice of any such grant by Beneficiary of such a
participating interest to a Participant.
54. No Merger. If both the landlord's and the tenant's estates under
---------
any Lease shall at any time become vested in one owner, or if Grantor's,
Beneficiary's and Trustee's estates under this Deed of Trust shall at any time
become vested in one owner, including, without limitation, upon the delivery of
a deed to Beneficiary in lieu of a foreclosure sale, or upon a purchase of the
Mortgaged Property by Beneficiary in a foreclosure sale, this Deed of Trust and
the lien created hereby shall not be destroyed or terminated by the application
of the doctrine of merger and in such event Beneficiary shall continue to have
and enjoy all of the rights and privileges of Beneficiary as to the separate
estates; and, as a consequence thereof, upon the foreclosure of the lien created
by this Deed of Trust any Leases or subleases then existing and created by
Grantor shall not be destroyed or terminated by application of the law of merger
or as a result of such foreclosure unless Beneficiary or any purchaser at any
such foreclosure sale shall so elect. No act by or on behalf of Beneficiary or
any such purchaser shall constitute a termination of any Lease or sublease
unless Beneficiary or such purchaser shall give written notice thereof to the
Tenant or sublessee thereunder. In the event Grantor acquires the estate of Fee
Owner under the Ground Lease (i) there shall be no merger between such acquired
estate and the estate of Grantor under the Ground Lease unless all parties
(including Beneficiary) having an interest in the Ground Lease shall consent
thereto in writing and (ii) the lien of this Deed of Trust shall, ipso facto,
----------
without the necessity of any further conveyance, simultaneously with such
acquisition be spread to cover such acquired estate and as so spread shall be
prior to the lien of any mortgage placed on the acquired estate subsequent to
the date of this Deed of Trust.
55. Running with the Land. All covenants contained in this Deed of
---------------------
Trust shall run with the land of the Mortgaged Property.
56. True Copy. GRANTOR ACKNOWLEDGES HAVING RECEIVED A TRUE COPY OF THIS
---------
DEED OF TRUST WITHOUT CHARGE.
57. Waiver of Jury Trial. GRANTOR, AND BENEFICIARY BY ITS ACCEPTANCE OF
--------------------
THIS DEED OF TRUST, EACH HEREBY EXPRESSLY WAIVES TRIAL BY JURY IN ANY ACTION OR
PROCEEDING BROUGHT BY EITHER PARTY HERETO AGAINST THE OTHER, OR IN ANY MATTERS
WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS DEED OF TRUST, THE
NOTES, THE ASSIGNMENT OR ANY OF THE OTHER TRANSACTION DOCUMENTS TO THE FULL
EXTENT PERMITTED BY LAW.
58. After-Acquired Property. If, after the date of this Deed of Trust,
-----------------------
Grantor acquires any property located on and used in connection with the
Mortgaged Property and that by the terms of this Deed of Trust is required or
intended to be encumbered by this Deed of Trust, the property shall become
subject to the lien and security interest of this Deed of Trust immediately upon
its acquisition by Grantor and without any further mortgage, conveyance,
assignment or transfer. Nevertheless, upon Beneficiary's reasonable request,
from time to time, Grantor will execute, acknowledge and deliver any additional
instruments and assurances of title
68
<PAGE>
and will do or cause to be done anything further that is reasonably necessary
for carrying out the intent of this Deed of Trust.
59. Non-Recourse. The obligations of Grantor hereunder are
------------
"Non-Recourse" as such term is defined in the Loan Agreement.
60. Regarding Trustee.
-----------------
(a) Trustee may resign by an instrument in writing addressed to
Beneficiary or be removed at any time with or without cause by instrument in
writing duly executed by Beneficiary. In case of the death, resignation or
removal of Trustee, a successor (each, a "Successor Trustee") may be appointed
-----------------
by Beneficiary by instrument of substitution complying with any applicable
requirements of law, and in the absence of any such requirement without other
formality than appointment and designation in writing recorded in the county in
which this Deed of Trust is recorded. Such appointment and designation shall be
full evidence of the right and authority to make the same and of all facts
therein recited, and upon the making of any such appointment and designation
this conveyance shall vest in the Successor Trustee all the estate and title of
its predecessor in all the Mortgaged Property, and such Successor Trustee shall
thereupon succeed to all the rights, powers, privileges, immunities and duties
hereby conferred upon the prior Trustee.
(b) Trustee may rely and shall be protected in acting upon any
notice, request, consent, demand, statement, note or other paper or document
believed by them to be genuine and to have been signed by the party or parties
purporting to sign same. Trustee shall not be liable for any error of judgment,
nor for any act done or step taken or omitted, nor for any mistakes of law or
fact, nor for anything which Trustee may do or refrain from doing in good faith,
nor generally shall Trustee have any liability except for gross negligence or
willful misconduct. Trustee may act and may sell or otherwise dispose of the
Mortgaged Property or any part hereof as herein provided, although Trustee has
been, may now be or may hereafter be, attorneys, officers, agents or employees
of Beneficiary, in respect of any matter of business whatsoever. In any event,
Trustee shall be indemnified and forever held harmless by Beneficiary for any
acts which Trustee may take pursuant to and in reliance upon the written
instructions of Beneficiary.
(c) All money received by Trustee shall, until used or applied as
herein provided, be held in trust, but need not be segregated (except to the
extent required by law and the other Transaction Documents), and Trustee shall
not be liable for interest thereon.
(d) If there be more than one Trustee, any Trustee, individually,
may exercise all powers granted to the Trustees collectively without the
necessity of the joinder of any other Trustee.
(e) Trustee shall be entitled to reasonable compensation for all
services rendered or expenses incurred in the administration or execution of the
trust hereby created and Grantor hereby agrees to pay same.
69
<PAGE>
61. Right of Fee Owner to Purchase Deed of Trust.
--------------------------------------------
(a) In accordance with the provisions of Section 6.04 of the Ground
Lease, Beneficiary agrees as follows:
(i) If an Event of Default has occurred, Fee Owner shall have
thirty (30) days from the date on which Beneficiary serves upon Fee
Owner notice in writing, at the address specified for Fee Owner in
the Ground Lease or at such address as Fee Owner has provided in
written notice to Beneficiary ("Landlord's Notice") that the
-----------------
Beneficiary is proceeding to foreclose the Deed of Trust, and
stating the Purchase Price (as defined in subsection (iii) below),
during which thirty (30) day period Fee Owner shall have the right
and option ("Landlord's Option") to purchase from the Beneficiary
-----------------
its interest in Deed of Trust and the Landlord's Note (as defined
in subsection (iv) below) upon the terms and subject to the
conditions contained in this Paragraph 61.
------------
(ii) Landlord's Option must be exercised by written notice, by
certified mail, registered mail, or express mail service, return
receipt requested, served upon Grantor and Beneficiary within such
thirty (30) day period accompanied by Fee Owner's forfeitable
deposit on account of the purchase price to the Beneficiary of the
lesser of One Hundred Thousand Dollars ($100,000.00) or ten percent
(10%) 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, Fee Owner shall purchase and the Beneficiary
shall assign the Deed of Trust and the Landlord's Note to Fee Owner
(or its designee), on the date which is thirty (30) days after the
date on which Fee Owner has exercised Landlord's Option (or if such
thirtieth (30th) day is not a business day, on the next succeeding
business day). The closing shall take place at the Premises or such
other location as is mutually agreeable to Fee Owner and the
Beneficiary.
(iii) The purchase price ("Purchase Price") payable by Fee
--------------
Owner shall be (x) if the Mortgaged Property is the sole security
for the Loan under the Loan Agreement, an amount equal to the
outstanding Debt secured by this Deed of Trust and (y) except as
otherwise provided in clause (x) above, an amount equal to
Twenty-Seven Million Ninety Four Thousand Ninety Six and no/100
Dollars ($27,094,096.00) ("Base Release Price") plus all accrued
------------------
and unpaid interest on such Base Release Price and any advances
made by Beneficiary or Trustee for the protection of the Mortgaged
Property.
(iv) Immediately prior to Fee Owner's purchase of the Deed of
Trust, Beneficiary and Grantor shall, if necessary, amend the Notes
to provide such separate note or notes ("Landlord's Note")
---------------
evidencing solely the Purchase Price and shall, if necessary, amend
the Deed of Trust to secure solely the Landlord's Note. At the
closing and upon payment in full of the Purchase Price, the
70
<PAGE>
Beneficiary shall assign this Deed of Trust and Landlord's Note to
Fee Owner, without recourse, representations, covenants or
warranties of any kind. Each such assignment shall be in form for
recordation or filing, as the case may be. Notwithstanding the
foregoing, neither the Beneficiary nor Grantor shall be responsible
or liable to Fee Owner for any other party's failure to complete
its obligation to perform the foregoing; however, Fee Owner's duty
to purchase the Deed of Trust after exercise of Landlord's Option
is expressly conditioned upon Fee Owner's receipt of the
assignments and amendments described in this Paragraph 61. Fee
------------
Owner shall be responsible for paying any taxes payable to any
governmental authority upon such assignments, and such assignments
shall be made subject to such state of title of the Mortgaged
Property as shall exist at the date such assignment.
(v) Fee Owner shall not have the right to receive any notices
of default under this Deed of Trust, nor shall Fee Owner have the
right to cure any default under this Deed of Trust, except to the
extent provided in this Paragraph 61.
------------
(b) Grantor agrees and acknowledges that the Purchase Price set
forth in Paragraph 61 shall apply only to the assignment of this Deed of Trust
------------
to Fee Owner pursuant to this Paragraph 61 and shall not serve to describe,
------------
limit or restrict the amount of indebtedness secured by this Deed of Trust or to
describe, limit or restrict the rights, powers, benefits and privileges
otherwise granted to Beneficiary under this Deed of Trust and the other
Transaction Documents with respect to the Mortgaged Property. Grantor further
agrees and acknowledges that the assignment of this Deed of Trust to Fee Owner
pursuant to this Paragraph 61 shall not be deemed a cure or waiver of any Event
------------
of Default in the absence of a writing from Beneficiary expressly accepting a
cure or waiving such Event of Default. Beneficiary may, in its sole discretion,
exercise such rights and remedies as are available to Beneficiary under the
Other Mortgages and Transaction Documents in connection with such Event of
Default following the assignment of this Deed of Trust pursuant to Paragraph
---------
61(a) above.
- -----
(c) This Deed of Trust is expressly subject to all of Landlord's
rights under the provisions, covenants, conditions, exceptions and reservations
contained in the Ground Lease. Notwithstanding any provision contained herein to
the contrary, this Deed of Trust does not encumber the Fee Owner's fee simple
title or interest under the Ground Lease.
62. Additional Ground Lease Provisions.
----------------------------------
(a) In the event the Ground Lease shall be terminated by reason of a
default thereunder by Grantor and Beneficiary shall acquire from Fee Owner a new
ground lease, Grantor hereby waives any right, title or interest in and to such
new ground lease or the leasehold estate created thereby, waiving all rights of
redemption now or hereafter operable under any law.
(b) Grantor shall not elect to treat the Ground Lease as terminated,
canceled or surrendered pursuant to the applicable provisions of the Bankruptcy
Code (including, but not
71
<PAGE>
limited to, Section 365(h)(1) thereof) without Beneficiary's prior written
consent in the event of Fee Owner's Bankruptcy. In addition, Grantor shall, in
the event of Fee Owner's Bankruptcy, reaffirm and ratify the legality, validity,
binding effect and enforceability of the Ground Lease and shall remain in
possession of the Premises and the leasehold estate created by the Ground Lease,
notwithstanding any rejection thereof by Fee Owner or any trustee, custodian or
receiver.
(c) Grantor shall give Beneficiary not less than thirty (30) days prior
written notice of the date on which Grantor shall apply to any court or other
governmental authority for authority and permission to reject the Ground Lease
in the event that there shall be filed by or against Grantor any petition,
action or proceeding under the Bankruptcy Code or under any other similar
federal or state law now or hereafter in effect and if Grantor determines to
reject the Ground Lease, Beneficiary shall have the right, but not the
obligation, to serve upon Grantor within such thirty (30) day period a notice
stating that (i) Beneficiary demands that Grantor assume and assign the Ground
Lease to Beneficiary subject to and in accordance with the Bankruptcy Code and
(ii) Beneficiary covenants to cure or provide reasonably adequate assurance
thereof with respect to all defaults reasonably susceptible of being cured by
Beneficiary and of future performance under the Ground Lease. If Beneficiary
serves upon Grantor the notice described above, Grantor shall not seek to reject
the Ground Lease and shall comply with the demand provided for in clause (i)
above within fifteen (15) days after the notice shall have been given by
Beneficiary.
(d) To the extent permitted by law, Grantor hereby assigns to
Beneficiary all of Grantor's rights, powers or privileges with respect to
rejection of the Ground Lease as lessor or lessee thereunder, all pursuant to
Section 365 of the Bankruptcy Code.
(e) Beneficiary, upon notice to Grantor, shall have the right, but not
the obligation, to proceed in its own name or in the name of Grantor in respect
of any claim, suit, action or proceeding relating to the rejection of the Ground
Lease by Fee Owner as a result of Fee Owner's Bankruptcy, including, but not
limited to, the right to file and prosecute, to the exclusion of Grantor, any
and all proofs of claims, complaints, notices and other documents in any case in
respect of Fee Owner under and pursuant to the Bankruptcy Code.
(f) In the event of any arbitration under or pursuant to the Ground
Lease in which Beneficiary elects to participate, Grantor hereby irrevocably
appoints Beneficiary as its true and lawful attorney-in-fact (which appointment
shall be deemed coupled with an interest) to exercise all right, title and
interest of Grantor in connection with such arbitration, including, without
limitation, the right to appoint arbitrators and to conduct arbitration
proceedings on behalf of Grantor and Beneficiary. All costs and expenses
incurred by Beneficiary in connection with such arbitration and the settlement
thereof shall be borne solely by Grantor, including, without limitation,
reasonable attorneys' fees and disbursements. Nothing contained in this Section
shall obligate Beneficiary to participate in any such arbitration.
72
<PAGE>
63. Variable Rate on Interest; Additional Interest.
-----------------------------------------------
On the Optional Prepayment Date (as such term is defined in the Loan Agreement)
and on each anniversary thereof, the interest rate on the Notes secured by this
Deed of Trust will be adjusted to be equivalent to the Adjusted Rate (as such
term is determined in accordance with the Notes and the Loan Agreement.) During
the period following the Optional Prepayment Date it is possible that some or
all of the additional interest may be unpaid and may be accruing until the
Maturity Date.
GRANTOR HEREBY EXPRESSLY (i) WAIVES ANY RIGHTS IT MAY HAVE UNDER
CALIFORNIA LAW TO REPAY THE NOTES, IN WHOLE OR IN PART, WITHOUT PENALTY, UPON
------- -------
ACCELERATION OF THE NOTES, AND (II) AGREES THAT IF, FOR ANY REASON, A PREPAYMENT
OF ALL OR ANY PORTION OF THE PRINCIPAL AMOUNT OF THE NOTES IS MADE INCLUDING
WITHOUT LIMITATION UPON OR FOLLOWING ANY ACCELERATION OF THE NOTES BY
BENEFICIARY OR TRUSTEE ON ACCOUNT OF ANY DEFAULT BY GRANTOR INCLUDING, WITHOUT
LIMITATION, ANY TRANSFER, DISPOSITION, OR FURTHER ENCUMBRANCE PROHIBITED OR
RESTRICTED BY THIS DEED OF TRUST, THEN GRANTOR HEREBY DECLARES THAT (1) EACH OF
THE FACTUAL MATTERS SET FORTH IN THIS PARAGRAPH IS TRUE AND CORRECT, (2)
BENEFICIARYS AGREEMENT TO MAKE THE LOAN EVIDENCED BY THE NOTES CONSTITUTES
ADEQUATE CONSIDERATION FOR THIS WAIVER AND AGREEMENT, AND HAS BEEN GIVEN
INDIVIDUAL WEIGHT BY GRANTOR AND BENEFICIARY, (3) GRANTOR IS A SOPHISTICATED AND
KNOWLEDGEABLE REAL ESTATE INVESTOR WITH COMPETENT AND INDEPENDENT LEGAL COUNSEL
AND (4) GRANTOR FULLY UNDERSTANDS THE EFFECT OF THIS WAIVER AND AGREEMENT.
----------------------------
GRANTOR INITIALS
IN WITNESS WHEREOF, Grantor has duly executed and sealed this Deed of
Trust as of the day and year first above written.
SIGNATURE PAGES FOLLOW
73
<PAGE>
MARRIOTT HOTEL PROPERTIES II LIMITED PARTNERSHIP
By: Marriott MHP Two Corporation, its sole
general partner
By: /s/ Douglas W. Henry
-------------------------
Name: Douglas W. Henry
Title: Vice President
74
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK)
On this 23rd of September, in the year 1996, before me, Robert E. Zain,
a Notary Public of said State, duly commissioned and sworn, personally appeared
Dougals W. Henry, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person that executed the within instrument as
Vice President of Marriott MHP Two Corporation, a Delaware corporation, which is
the general partner of Marriott Hotel Properties II Limited Partnership, a
Delaware limited partnership, and acknowledged tome that he executed said
instrument on behalf of said limited partnership.
In Witness Whereof, I have hereunto set my hand and affixed my official
seal the day and year in this certificate above written.
/s/ Robert E. Zalin
---------------------------------
Notary Public
My commission expires:April 15, 1998
-------------------------
Notary Seal
Print Name: Robert E. Zalin
--------------------------------
75
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
All of that certain tract or parcel of land and premises, situate,
lying and being in Contra Costa County, State of California, more particularly
described as follows:
A-1
<PAGE>
EXHIBIT B
SCHEDULE OF OTHER MORTGAGES
1. Deed of Trust, Assignment of Leases, Security Agreement and Fixture
Filing of even date from Marriott Hotel Properties II Limited
Partnership, as Grantor, to Commonwealth Land Title Insurance Company
of California, as Trustee, for the benefit of Nomura Asset Capital
Corporation, as Beneficiary encumbering certain hotel premises in San
Ramon, California and, intended to be recorded simultaneously herewith
in the official records of County of Santa Clara, State of California.
2. Deed of Trust, Assignment of Leases, Security Agreement and Fixture
Filing of even date from Marriott Hotel Properties II Limited
Partnership, as Grantor, to Commonwealth Land Title Insurance Company
as Trustee, for the benefit of Nomura Asset Capital Corporation, as
Beneficiary encumbering certain hotel premises in San Antonio, Texas
and intended to be recorded simultaneously herewith in the official
records of County of Bexar, State of Texas.
3. Act of Multiple Indebtedness, Mortgage, Security Agreement, Pledge
and Collateral Assignment of Leases and Rents and Insurance Proceeds of
even date from Marriott Hotel Properties II Limited Partnership, as
Mortgagor, to Nomura Asset Capital Corporation, as Mortgagee
encumbering certain hotel premises in New Orleans, Louisiana and,
intended to be recorded simultaneously herewith in the official records
of Orleans Parish, State of Louisiana.
B-1
<PAGE>
Exhibit 10.9
RECORDING REQUESTED BY
WHEN RECORDED MAIL TO
Name Michael Peskowitz, Esq.
Rosenman & Colin LLP
Mailing Address 575 Madison Avenue
City, State, New York, New York 10022
Zip Code
- --------------------------------------------------------------------------------
SPACE ABOVE THIS LINE RESERVED FOR RECORDERS' USE
San Ramon Deed of Trust
(Second Deed of Trust)
===============================================================================
===============================================================================
DEED OF TRUST, ASSIGNMENT OF LEASES, SECURITY AGREEMENT
AND FIXTURE FILING
MARRIOTT HOTEL PROPERTIES II LIMITED PARTNERSHIP ("Grantor")
-------
- to -
COMMONWEALTH LAND TITLE INSURANCE COMPANY OF CALIFORNIA
("Trustee"), as Trustee
-------
For the benefit of
NOMURA ASSET CAPITAL CORPORATION ("Beneficiary")
-----------
Dated: As of September 23, 1996
in the amount of
$43,500,000
Relating to Premises located in
County of Contra Costa, State of California
===============================================================================
After recording return to:
ROSENMAN & COLIN LLP
575 Madison Avenue
New York, New York 10022
Attention: Michael Peskowitz, Esq.
<PAGE>
DEED OF TRUST, ASSIGNMENT OF LEASES, SECURITY AGREEMENT
AND FIXTURE FILING
DEED OF TRUST, ASSIGNMENT OF LEASES, SECURITY AGREEMENT AND FIXTURE
FILING (this "Deed of Trust"), dated as of September 23, 1996, by MARRIOTT HOTEL
-------------
PROPERTIES II LIMITED PARTNERSHIP, a Delaware limited partnership, having its
principal office at 10400 Fernwood Road, Bethesda, Maryland 20817 ("Grantor") in
-------
favor of COMMONWEALTH LAND TITLE INSURANCE COMPANY OF CALIFORNIA, a California
corporation, having an address at 1855 Gateway Boulevard, Suite 270, Concord,
California 94520 ("Trustee"), as trustee for the use and benefit of NOMURA ASSET
-------
CAPITAL CORPORATION, a Delaware corporation, having its principal office at Two
World Financial Center, Building B, 21st Floor, New York, New York 10281-1198
("Beneficiary").
-----------
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS:
A. Pursuant to that certain lease, dated June 30, 1986 between
Sunset Development Company, formerly known as Granada Sales, Inc., as landlord
(including any successors and assigns thereof, "Fee Owner"), and Grantor,
---------
successor in interest to Marriott Corporation, now known as Host Marriott
Corporation ("Host Marriott"), as tenant (such lease being more particularly
-------------
described on Schedule 1 annexed hereto, and as the same may hereafter be
----------
modified, amended, restated, consolidated, replaced or supplemented from time to
time, the "Ground Lease"), Fee Owner demised and leased to Grantor all that
------------
certain parcel of real property (the "Land") located in the County of Contra
----
Costa, State of California (the "State"), as more particularly described in
-----
Exhibit A annexed hereto;
- ---------
B. Host Marriott constructed on the Land a building and other
improvements that are currently operated as a Marriott hotel (which, together
with all other buildings and other improvements now or hereafter located on such
parcel of Land are hereinafter referred to as the "Improvements"; the Ground
------------
Lease and the leasehold estate created thereby, together with such Improvements,
being hereinafter collectively referred to as the "Premises");
--------
C. Pursuant to that certain Loan Agreement (the "Loan Agreement"),
--------------
dated as of the date hereof between Santa Clara Marriott Hotel Limited
Partnership ("SCLP") and Beneficiary, Beneficiary is making a loan in the
----
original principal amount of $43,500,000.00 to SCLP (the "SC Loan");
-------
D. Grantor is the owner of 50% of the limited partnership interests
in SCLP and derives substantial benefit from the SC Loan;
E. The SC Loan is evidenced by that certain Secured Promissory Note
dated as of the date hereof, made by Grantor and SCLP in favor of Beneficiary in
the original principal amount
<PAGE>
of $43,500,000.00 (together with all extensions, renewals, substitutions,
restatements, severances, splitters, consolidations, amendments and
modifications thereof being hereinafter referred to as the "Note");
----
F. The Note is secured by, inter alia, this Deed of Trust and certain
----------
other mortgages, deeds of trust and security deeds (collectively, the "Other SC
--------
Mortgages") on other real property owned or leased by Grantor or SCLP, which
- ---------
Other SC Mortgages are more particularly described in Exhibit B annexed hereto;
---------
G. The rights of Beneficiary and the obligations of Grantor under
this Deed of Trust are expressly subject to, and not in duplication of, the
rights and obligations of the parties to that certain Deed of Trust of even date
herewith given by Grantor to Trustee for the benefit of Beneficiary (the "MHP
---
Mortgage") to secure the obligations of Grantor under those certain Secured
- --------
Promissory Notes made to the order of Beneficiary in the original principal
amounts of $195,405,904 and $27,094,096 pursuant to that certain loan agreement
of even date herewith between Grantor, as borrower, and Beneficiary, as lender
(the "MHP Loan Agreement"). The MHP Mortgage is intended to be recorded in the
------------------
official records of the County of Contra Costa, State of California immediately
prior to the recordation of this Deed of Trust. Beneficiary acknowledges that
there shall be no duplication of payment, collection or any other action
permitted to be taken by Beneficiary hereunder or under the other SC Transaction
Documents (as hereinafter defined) with any payment, collection or other action
permitted to be taken by the beneficiary from time to time under the MHP
Mortgage and the other MHP Transaction Documents (such term as used herein being
identical to the term "Transaction Documents" as used in the MHP Mortgage) with
respect to the Mortgaged Property (as hereinafter defined);
H. To induce Beneficiary to make the SC Loan and to secure payment of
the Note, together with interest thereon, Grantor has agreed to the execution
and delivery of this Deed of Trust; and
I. Beneficiary accepts the benefits of this Deed of Trust.
GRANTING CLAUSES
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein contained and other good and valuable consideration, the receipt
and legal sufficiency whereof are hereby acknowledged, and as an inducement to
Beneficiary to make the SC Loan, and to secure the payment of the aggregate
principal amount of the Note of FORTY THREE MILLION FIVE HUNDRED THOUSAND AND
00/100 DOLLARS ($43,500,000), or so much thereof as may have been advanced to
SCLP, together with all interest thereon, additional amounts payable under the
Loan Agreement, including without limitation, the Yield Maintenance Premium (as
such term is defined in the Loan Agreement), if any, and all other sums which
may or shall become due hereunder or under the Note or any of the other
documents evidencing, securing or executed in connection with the SC Loan (such
other documents, including, without limitation, the Loan Agreement, the Other SC
Mortgages and that certain Assignment of Leases, Rents and Profits of
2
<PAGE>
even date herewith given by Grantor to Beneficiary with respect to the Premises
(as such assignment may, from time to time, be modified, amended, extended,
restated, severed, split, consolidated or supplemented, the "Assignment") and
----------
similar Assignments of Leases, Rents and Profits given in connection with the
Other SC Mortgages, together with the Note and this Deed of Trust (as any of the
same may, from time to time, be modified, amended, extended, restated, severed,
split, consolidated or supplemented) being hereinafter collectively referred to
as the "SC Transaction Documents") and including the costs and expenses of
------------------------
enforcing any provision of the Note, this Deed of Trust or any of the other SC
Transaction Documents (all such sums being hereinafter collectively referred to
as the "Debt"), and in order to charge with such performance and with such
----
payments the Premises and other property hereinafter described and the rents,
revenues, issues, income and profits thereof, Grantor has created a security
interest in and DOES HEREBY WARRANT, PLEDGE, TRANSFER, SET OVER, ASSIGN,
HYPOTHECATE, GIVE, GRANT, ALIEN, ENFEOFF, BARGAIN, SELL, CONVEY AND CONFIRM UNTO
TRUSTEE, AND ITS SUCCESSORS AND ASSIGNS, IN TRUST WITH POWER OF SALE, FOR THE
BENEFIT OF BENEFICIARY, all right, title, estate and interest of Grantor now
owned, or hereafter acquired, in and to the Premises,
TOGETHER WITH all right, title, estates and interest of Grantor, if
any, now owned, or hereafter acquired, in and to the following property, rights
and interests (the Premises, together with such property, rights and interests,
being hereinafter collectively referred to as the "Mortgaged Property"):
------------------
(a) all easements, rights-of-way, strips and gores of land,
land, streets, ways, alleys, passages, sewer rights, waters, water
courses, water rights and powers, and all estates, rights, title,
interests, privileges, liberties, tenements, hereditaments, and
appurtenances of any nature whatsoever, in any way belonging, relating
or pertaining to the Premises (including, without limitation, gas, oil
and mineral rights, air rights, development rights and any other
rights, however denominated, to construct floor area on the Land), and
all right, title and interest of Grantor in, including any right to use
and occupy, any land adjacent to the Land, and any land lying in the
bed of any street, road or avenue, open, vacated or proposed, in front
of or adjoining the Land, and any and all sidewalks, drives, curbs,
passageways, streets, spaces and alleys adjacent to or used in
connection with the Premises;
(b) all machinery, apparatus, equipment, fittings, fixtures and
other property of every kind and nature whatsoever owned by Grantor, or
in which Grantor has or shall have an interest (to the extent same can
be mortgaged or an interest therein can be granted if not owned by
Grantor), now or hereafter located upon the Premises or any portion
thereof, or appurtenances thereto, and used in connection with the
present or future operation and occupancy of the Premises or any
portion thereof, and all building equipment, materials and supplies of
any nature whatsoever owned by Grantor, or in which Grantor has or
shall have an interest (to the extent same can be mortgaged or an
interest therein can be granted if not owned by Grantor), now or
hereafter located in or upon the Premises or any portion thereof, and
any building equipment, materials and supplies obtained for use in
connection with the Premises or any portion thereof, and all
3
<PAGE>
additions, replacements, modifications and alterations of any of the
foregoing, including, but without limiting the generality of the
foregoing, all heating, lighting, incinerating, waste removal and power
equipment, engines, pipes, tanks, motors, conduits, switchboards,
radio, television, security and alarm systems, plumbing, lifting,
cleaning, fire prevention, fire extinguishing, refrigerating,
ventilating, and communications apparatus, air cooling and air
conditioning apparatus, escalators, elevators, ducts and compressors
(collectively, the "Equipment"), which Equipment shall be deemed to be
---------
part and parcel of the real estate and appropriated to the use of the
real estate and, whether or not affixed or annexed to the Premises,
shall for the purpose of this Deed of Trust be deemed conclusively to
be real estate and mortgaged hereby;
(c) all other furniture, furnishings, decorations, fixtures and
equipment owned by Grantor and now or hereafter installed in, affixed
to, placed upon or used in connection with the Premises or the business
conducted by Grantor thereon, including, without limitation,
communication systems, computer systems, hardware and software,
furniture, carpeting, art work, lighting fixtures, millwork, draperies,
kitchen, restaurant, bar and lounge equipment, laundry equipment, cash
registers, safes, safety deposit boxes, office furniture, athletic and
pool equipment, gift shop equipment, employees' lockers, coat racks,
linens, blankets, pillows and uniforms (to the extent each of the
foregoing shall exist), all present and future "accounts", "equipment",
"inventory" and "general intangibles" (as such terms are defined in the
Uniform Commercial Code as enacted and in effect in the State (the
"Code") relating to the hotel and hotel operations at the Premises,
----
excluding, however, (xx) all property subject to written leases between
--------- -------
the owner/installer of such equipment, as lessor, and Grantor as
lessee, as permitted pursuant to the provisions of the Loan Agreement,
and (yy) to the extent not assignable or mortgageable under State or
local law, alcoholic beverages and licenses to serve alcoholic
beverages at the Premises (collectively, the "Personal Property");
-----------------
(d) all awards or payments, and any interest paid or payable
with respect thereto, which may be made with respect to all or any
portion of the Premises, whether from the exercise of right of
condemnation, eminent domain or similar proceedings (including any
transfer made in lieu of the exercise of said right), or from any
taking for public use, or for any other injury to or decrease in the
value of all or any portion of the Premises (including, without
limitation, any awards resulting from a change of grade of streets and
awards for severance damages), all of the foregoing to be held, applied
and paid in accordance with the provisions of this Deed of Trust
(collectively, the "Condemnation Proceeds");
---------------------
(e) all proceeds of, and any unearned premiums on, the Policies
(as hereinafter defined) and any other insurance policies covering all
or any portion of the Premises, the Equipment, the Personal Property
and/or the Rents (as hereinafter defined), including, without
limitation, the right to receive and apply the proceeds of any
insurance, judgments, or settlements made in lieu thereof, for damage
to all or any portion of the Premises, the Equipment and/or the
Personal Property, and any interest actually paid with
4
<PAGE>
respect thereto, all of the foregoing to be held, applied and paid in
accordance with the provisions of this Deed of Trust (collectively, the
"Insurance Proceeds");
------------------
(f) all refunds or rebates of Impositions (as hereinafter
defined), and interest paid or payable with respect thereto
(collectively, the "Refunds");
-------
(g) all leases and other agreements, if any, affecting the use
or occupancy of all or any portion of the Premises now in effect or
hereafter entered into (including, without limitation, subleases,
licenses, concessions, tenancies and other occupancy agreements
covering or encumbering all or any portion of the Premises), together
with any guarantees, supplements, amendments, modifications, extensions
and renewals of the same, and all additional remainders, reversions,
and other rights and estates appurtenant thereto (collectively, the
"Leases") and absolutely and presently all rents, revenues which
------
Grantor generates from the collection of room rates in the course of
its hotel operations, additional rents, percentage rents, revenues,
issues, profits, cash collateral, royalties, income, bonuses, rights
and benefits due and other benefits now or in the future payable under
the Leases, and all security deposits, advance rentals and payments of
similar nature (subject to the rights of lessees or depositors thereof)
held by Grantor in connection with the Leases, if any, and all proceeds
from any and all concessions and license agreements (including, without
limitation, receivables, revenues, rentals and receipts from guest
rooms, meeting rooms, other public facilities, food and beverage
facilities, vending machines, telephone systems, guest laundry and
other items of revenue, receipts, or income identified in the Uniform
Systems of Accounts for Hotels, 8th Revised Edition, International
Association of Hospitality Accountants and Hotel Association of New
York) and all other fees, charges, accounts, payments, income, issues,
proceeds, product, offspring, profits and benefits of any nature
arising from the possession, use, occupancy or enjoyment of the
Mortgaged Property as defined under Section 552(b) of the federal
bankruptcy code (as amended from time to time, and including any
successor legislation thereto, the "Bankruptcy Code"), of any nature
---------------
arising from the possession, use, occupancy or enjoyment of the
Mortgaged Property (collectively, the "Rents"), together with the
-----
right, but not the obligation, following an Event of Default (as
hereinafter defined) by Grantor under this Deed of Trust or any of the
other SC Transaction Documents, to exercise options, to give consents
and to collect, receive and receipt for the Rents and apply the Rents
to the payment of the Debt and to demand, sue for and recover the Rents
when due and payable;
(h) all contract rights relating to the Mortgaged Property,
including, without limitation, and to the extent permitted by
applicable law, all permits, licenses, certificates, consents,
approvals, authorizations and other documents obtained or to be
obtained in connection with the demolition, construction, use,
operation or maintenance of the Premises or any portion thereof
(collectively, "Permits"), all reciprocal easement, restrictive
-------
covenants and similar agreements (collectively, "REAs"), all
----
appurtenances and utility rights pertaining to the Premises or any
portion thereof, all zoning, land use, air rights and development
agreements, all operating contracts, management agreements, service
contracts, supply and maintenance contracts, equipment leases,
warranties,
5
<PAGE>
guaranties and all other agreements affecting the Premises or any part
thereof or used in connection with the management or operation thereof
(to the extent assignable pursuant to the provisions of the applicable
instrument or agreement creating or conferring such rights or benefits
or pursuant to applicable law) together with all of the rights,
reversions or equities now or hereafter appurtenant thereto (such
Permits, REAs and other appurtenances, rights, contracts and agreements
collectively, the "Agreements");
----------
(i) all of the right, title and interest of Grantor in and to
any other property, whether real or personal, tangible or intangible,
owned or held in connection with the Premises or the business conducted
by Grantor thereon, including, without limitation, appraisals,
architectural and engineering plans, specifications and studies
(subject to the proprietary rights of others therein), soil,
environmental and other reports relating to the Premises (subject to
the proprietary rights of others therein), license and contract rights,
accounts receivable, warranties, guaranties, catalogues, tenant lists
(but excluding proprietary guest list information), advertising
materials relating to the Premises or the business conducted by Grantor
thereon, telephone exchange numbers as identified in such materials,
trade names, trademarks and logos relating to the Premises or the
business conducted by Grantor thereon (subject to the rights of
franchisors or licensors) and goodwill relating to the Premises or the
business conducted by Grantor thereon;
(j) all rights of Grantor in and to the Management Agreement (as
defined in the Loan Agreement) applicable to the Premises and any other
similar agreement or license affecting the management or operation of
any part of the Premises, (subject in each case to the provisions
thereof and any limitations set forth therein);
(k) all rights of Grantor in any owner's or member's association
or similar group having responsibility for managing or operating any
part of the Premises;
(l) all claims against any person or entity with respect to any
damage to or loss of the Mortgaged Property, including, without
limitation, damage arising from any defect in or with respect to the
design or construction of the Improvements or the Equipment and any
damage resulting therefrom and all the right to appear in and defend
any action or proceeding brought with respect to the Mortgaged Property
and to commence any action or proceeding to protect the interest of
Beneficiary in the Mortgaged Property;
(m) all deposits or other security or advance payments,
including rental payments made by or on behalf of Grantor to others,
with respect to utility services, cleaning, maintenance, repair and
similar services, refuse removal and sewer service, parking and similar
services and rights, and rental of Equipment relating to or otherwise
used in the operation of the Mortgaged Property;
(n) all options in connection with the purchase, lease,
encumbrance or other disposition of the Mortgaged Property or any
interest therein; and
6
<PAGE>
(o) any and all other, further or additional rights, title,
estates and interests which Grantor may now own or hereafter acquire,
in and to the Premises and/or the Mortgaged Property, (including
without limitation any right, title , estate or interest Grantor may
now have or hereafter acquire in the fee title to the Land or the
lessor's interests under the Ground Lease) and all renewals,
substitutions and replacements of and all additions and appurtenances
to the Premises and/or the Mortgaged Property constructed, assembled or
placed by Grantor on the Premises, and all conversions of the security
constituted thereby which, immediately upon such acquisition,
construction, assembling, placement or conversion, as the case may be,
and in each such case without any further mortgage, conveyance,
assignment or other act by Grantor, shall become subject to the lien of
this Deed of Trust as fully and completely, and with the same effect,
as though now owned by Grantor, Grantor expressly agreeing that if
Grantor shall at any time acquire any other right, title, estate or
interest in and to the Premises and/or the Mortgaged Property
(including without limitation any right, title , estate or interest
Grantor may now have or hereafter acquire in the fee title to the Land
or the lessor's interests under the Ground Lease), the lien of this
Deed of Trust shall automatically attach to and encumber such other
right, title, estate or interest as a lien thereon.
(p) all appurtenances in respect of or otherwise relating to the
Ground Lease, including, but not limited to, renewal options and
expansion rights, and all the estates and rights of Grantor of, in and
to (i) all modifications, extensions and renewals of the Ground Lease
and all rights to renew or extend the term thereof, (ii) all credits to
and deposits of Grantor under the Ground Lease (other than tenant
security deposits), (iii) all other options, privileges and rights
granted and demised to Grantor under the Ground Lease, (iv) all the
right or privilege of Grantor to terminate, cancel, abridge, surrender,
merge, modify or amend the Ground Lease and (v) any and all possessory
rights of Grantor and other rights and/or privileges of possession,
including, without limitation, Grantor's right to elect to remain in
possession of the Premises and the leasehold estate created by the
Ground Lease pursuant to Section 365(h)(1) of the Bankruptcy Code;
(q) all of Grantor's claims and rights to damages and any other
remedies in connection with or arising from the rejection of the Ground
Lease by Fee Owner or any trustee, custodian or receiver pursuant to
the Bankruptcy Code in the event that there shall be filed by or
against Fee Owner any petition, action or proceeding under the
Bankruptcy Code or under any other similar federal or state law now or
hereafter in effect (collectively, "Fee Owner's Bankruptcy").
----------------------
AND, as additional security, Grantor hereby grants to Beneficiary a
security interest in (1) the Equipment, (2) the Personal Property, (3) the
Condemnation Proceeds, (4) the Insurance Proceeds, (5) the Refunds, (6) the
Leases, (7) the Rents, (8) the Agreements, and (9) to the extent mortgages may
lawfully grant the same, all other components of the Mortgaged Property,
described in clauses (a) through (q) immediately preceding, and (10) all
proceeds of the foregoing collateral described in clauses (1) through (9)
(collectively, the "Security Interest Property"), and this Deed of Trust shall
--------------------------
be effective as a security agreement pursuant to the Code.
3054893.06 7
<PAGE>
HABENDUM
TO HAVE AND TO HOLD the Mortgaged Property, the rights and privileges
hereby conveyed or assigned, or intended so to be, unto Trustee and its
successors and substitutes in trust hereunder for the benefit of Beneficiary,
its successors and assigns, and with the possession and right of possession
thereof, for the uses and purposes herein set forth.
PROVIDED ALWAYS, and these presents are upon the express condition,
that if Grantor and/or SCLP shall well and truly pay to Beneficiary the Debt and
shall well and truly abide by and comply with each and every covenant and
condition set forth herein, in the Note and in the other SC Transaction
Documents to which it is a party, then these presents and the estate hereby
granted shall cease, determine and be void.
PROVIDED FURTHER, that provided no Event of Default has occurred and is
continuing, if SCLP shall exercise the right pursuant to and in accordance with
the Loan Agreement, or Grantor shall exercise the right to release the Mortgaged
Property from the lien of the MHP Mortgage pursuant to the MHP Loan Agreement,
Grantor shall be entitled to obtain the release by Beneficiary of this Deed of
Trust and the Mortgaged Property and, upon the giving of such release, this Deed
of Trust and these presents and the estate hereby granted shall cease, determine
and be void.
This Deed of Trust is one of a number of mortgages and deeds of trust
(all of which mortgages and deeds of trust, including this Deed of Trust, are
referred to in Exhibit B) given pursuant to the Loan Agreement. Each and every
---------
term and provision of all of the SC Transaction Documents signed by Grantor
and/or SCLP, including the rights, remedies, obligations, covenants, conditions,
agreements, indemnities, representations and warranties of all parties thereto
are hereby incorporated by reference herein as though set forth in full and
shall be considered a part of this Deed of Trust. Terms used in this Deed of
Trust which are not defined herein or which are not defined by reference to the
Loan Agreement shall have the meanings assigned to them in the Loan Agreement.
REPRESENTATIONS, WARRANTIES, COVENANTS,
AGREEMENTS AND CONDITIONS
THIS DEED OF TRUST FURTHER WITNESSETH the following representations,
warranties, covenants, agreements and conditions:
1. Payment of Debt.
---------------
(a) Grantor and SCLP shall punctually pay the Debt at the time
and in the manner provided for its payment in the Note. The maturity date of the
Note (the "Maturity Date") is the earliest to occur of:
-------------
(i) October 11, 2017; and
3054893.06 8
<PAGE>
(ii) such earlier date to which the maturity of the Debt
may be accelerated upon an Event of Default as otherwise provided in
any SC Transaction Document.
(b) All payments of principal and interest accrued thereon shall
be made without demand therefor, or presentation or surrender of the Note, to
the extent permitted by applicable law.
2. Warranty of Title; Provisions of Ground Lease.
---------------------------------------------
(a) Grantor specially warrants that it has good and marketable
title to the Mortgaged Property and owns the Mortgaged Property free and clear
of all liens, claims, charges, restrictions, encumbrances, security interests
and other matters, subject only to the lien of the MHP Mortgage and the MHP
Transaction Documents, this Deed of Trust and of the other SC Transaction
Documents, the matters set forth as exceptions to the policies of title
insurance (the "Title Policies") relating to the Mortgaged Property issued by
--------------
Commonwealth Land Title Insurance Company and Lawyers Title Insurance
Corporation in connection with the Loan; easements and other rights in the
Mortgaged Property granted by Grantor in the ordinary course of business which
will not, individually or in the aggregate, violate the Ground Lease or
materially and adversely affect (xx) the Premises, (yy) Grantor's hotel
operations thereon, or (zz) the value or validity of Beneficiary's lien on and
security interest in the Mortgaged Property, (iv) any easements and other rights
in the Mortgaged Property granted by Fee Owner in accordance with the Ground
Lease, (v) any financing permitted pursuant to Paragraph 3 of the MHP Mortgage
-----------
and this Deed of Trust, and (vi) such other matters to which Beneficiary shall
have consented to in writing (collectively, the "Permitted Exceptions"). All
--------------------
items set forth hereunder as Permitted Exceptions are subject to the additional
representations and warranties set forth in Paragraph 4(e) hereof. Grantor
--------------
represents and warrants that no interest in all or any part of the development
rights appurtenant to the Premises have been granted, transferred or assigned by
Grantor.
(b) Grantor, at its sole cost and expense, covenants and agrees
to defend its title to the Mortgaged Property and the priority of this Deed of
Trust against all claims and demands of parties claiming or to claim by, through
or under Grantor, subject to the Permitted Exceptions and will maintain and
preserve such priority as long as the Loan Agreement remains in effect or the
Debt (or any portion thereof) remains outstanding.
(c) With respect to the Ground Lease, Grantor represents and
and warrants as follows:
(i) Grantor is the sole owner and holder of the leasehold
estate created by the Ground Lease;
(ii) the Ground Lease or a memorandum thereof has been duly
recorded in the official records of the County of Contra Costa,
State of California and has not been materially amended or
modified since such recordation;
3054893.06 9
<PAGE>
(iii) the Ground Lease is in full force and effect and no
default by Grantor or, to Grantor's knowledge, by Fee Owner has
occurred under the Ground Lease and to Grantor's knowledge there
is no existing condition which, but for the passage of time or the
giving of notice or both, would result in a default under the
Ground Lease;
(iv) the Ground Lease permits the interest of the tenant
thereunder to be encumbered by this Deed of Trust;
(v) the tenant's interest in the Ground Lease is assigned to
Beneficiary, without the consent of the Fee Owner, as security for
a leasehold mortgage pursuant to the Ground Lease, including
sections 6.01 and 11.06 thereof, and is further assignable by
Beneficiary and its successors and assigns by obtaining an
assignment of the Ground Lease in foreclosure or by deed in lieu
of foreclosure without the consent of the Fee Owner, subject to
the potential rights of the Fee Owner (x) to approve the Manager
of the Premises and (y) to exercise its rights of first
negotiation to purchase Grantor's leasehold interest in the Ground
Lease pursuant to section 11.08 of the Ground Lease;
(vi) the Ground Lease requires the Fee Owner to give written
notice of any default by Grantor or any exercise of any right to
terminate the Ground Lease to Beneficiary and provides that no
such notice delivered to Grantor will be effective against the
Beneficiary unless and until a copy of the notice has been
delivered to the Beneficiary;
(vii) the Ground Lease requires the Fee Owner to afford the
Beneficiary a reasonable opportunity to cure any default under the
Ground Lease, which is susceptible of being cured by Beneficiary
after the receipt of notice of any default before the Fee Owner
may terminate the Ground Lease;
(viii) the Ground Lease requires the Fee Owner to enter into
a new lease with the leasehold mortgagee with highest priority who
makes the request and its successors and assigns on the same terms
as the Ground Lease and having the same priority as the Ground
Lease, upon the termination of the Ground Lease for any reason,
including without limitation, the rejection of the Ground Lease in
a bankruptcy proceeding, provided that Beneficiary has cured all
defaults that are susceptible of being cured by Beneficiary;
(x) the Ground Lease has a term which extends not less than
ten (10) years beyond the Maturity Date;
(xi) the Ground Lease does not allow either the Fee Owner or
Borrower to cancel the Ground Lease while this Deed of Trust is
outstanding without the consent of Beneficiary, including
cancellation for damage or destruction of the Mortgaged Property,
and permits the Beneficiary, as first leasehold mortgagee
3054893.06 10
<PAGE>
under the MHP Mortgage (as hereinafter defined), to participate in
the settlement of any Insurance Proceeds or Condemnation Proceeds
and to hold and disburse any Insurance Proceeds or Condemnation
Proceeds to be applied to the repair and restoration of the
Mortgaged Property or to the repayment of the Debt if Grantor is
in default under this Deed of Trust;
(xii) the Fee Owner has been, or promptly following the
execution and delivery of this Deed of Trust, will be, given the
required notice, together with a photocopy of the recorded Deed of
Trust, for Beneficiary to be recognized as the holder of a
leasehold mortgage entitled to the rights and privileges afforded
a leasehold mortgagee under the Ground Lease.
3. Further Mortgages and Liens.
---------------------------
This Deed of Trust is and will be maintained by Grantor as a valid
and enforceable mortgage lien on and security interest in the Mortgaged Property
subject only to the Permitted Exceptions. Except for (I) the MHP Mortgage and
(II) Permitted Subordinate Mortgages and FF&E Financings (as such terms are
defined in the MHP Mortgage), Grantor shall not, directly or indirectly, create
or suffer, or permit to be created or suffered, against the Mortgaged Property
or any part thereof, including, without limitation, the Rents or the Leases, and
Grantor will promptly discharge or bond over, any mortgage, lien (including the
liens of mechanics and materialmen), pledge, conditional sale or other title
retention agreement, easement or other covenant, attachment, security interest,
encumbrance or charge which may affect the Mortgaged Property or any part
thereof or interest therein, except (i) the Permitted Exceptions, (ii) Permitted
------
Subordinate Mortgages and (iii) matters being contested in good faith and by
appropriate proceedings in the manner permitted by Paragraph 16 of this Deed of
------------
Trust. If any mortgage, other lien or encumbrance not permitted hereunder is
filed, Grantor will cause the same to be discharged within thirty (30) days
after recordation thereof and will exhibit to Beneficiary, upon request,
evidence of discharge or other disposition satisfactory to Beneficiary.
4. Representations and Warranties. To induce Beneficiary to accept
------------------------------
the Note and this Deed of Trust, and to make the SC Loan evidenced by the Note
and secured by this Deed of Trust, Grantor represents and warrants to
Beneficiary that:
(a) The covenants in this Deed of Trust and in the other SC
Transaction Documents signed by Grantor have been observed and
performed in all material respects to the extent applicable on and as
of the date hereof. The representations and warranties in this Deed of
Trust and in the other SC Transaction Documents signed by Grantor are
true and correct in all material respects on and as of the date hereof.
All such covenants, representations and warranties are hereby
incorporated by reference.
(b) The granting of this Deed of Trust, the consummation
of the transactions herein contemplated and the execution and delivery
of, and the performance and observance of Grantor's obligations under
this Deed of Trust, the other SC Transaction Documents signed by
Grantor and other instruments herein mentioned to which Grantor
3054893.06 11
<PAGE>
is a party and which have been executed and delivered in connection
with the transactions contemplated in the SC Transaction Documents have
been duly authorized by all necessary action on the part of Grantor and
its general partner and, to the Best Knowledge of Grantor (as such term
is defined in Paragraph 46(a) hereof), no other consent, license,
---------------
permit, approval or authorization of, exemption by, notice or report
to, or registration, filing or declaration with, any Governmental
Authority (as hereinafter defined) (collectively, "Approvals") is
---------
required which has not been obtained by Grantor in connection with the
execution, delivery or performance by Grantor of this Deed of Trust,
the other SC Transaction Documents signed by Grantor and other
instruments herein mentioned to which Grantor is a party. For the
purposes hereof, "Governmental Authority" shall mean any court, agency,
----------------------
authority, board (including, without limitation, environmental
protection, planning and zoning), bureau, commission, department,
office or instrumentality of any nature whatsoever of any governmental
or quasi-governmental unit of the United States or the State or the
county or city where the Premises are located or any political
subdivision of any of the foregoing, whether now or hereafter in
existence, or any officer or official thereof, having jurisdiction over
Grantor or the Mortgaged Property or any portion thereof.
(c) This Deed of Trust and each of the other SC Transaction
Documents signed by Grantor have been duly authorized, executed and
delivered on behalf of Grantor by its general partner, and this Deed of
Trust constitutes, and each of the other SC Transaction Documents
signed by Grantor and other instruments mentioned herein to which
Grantor is a party constitute, a legal, valid and binding obligation of
Grantor, enforceable against Grantor in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy,
insolvency, moratorium, reorganization or other similar laws affecting
the enforcement of creditors' rights generally or by principles of
equity or public policy (whether asserted in equity or in proceedings
at law).
(d) This Deed of Trust constitutes a valid mortgage lien on,
and, to the extent permitted by applicable law, security interest in,
the Mortgaged Property, subject to no liens, charges or encumbrances
other than the Permitted Exceptions. There are no defenses,
counterclaims or offsets to Grantor's obligation to pay the Debt
pursuant to this Deed of Trust, the Note or any of the other SC
Transaction Documents signed by Grantor. To the Best Knowledge of
Grantor, there are no defenses, counterclaims or offsets to any of
Grantor's other obligations pursuant to this Deed of Trust, the Note or
any of the other SC Transaction Documents signed by Grantor.
(e) The Permitted Exceptions do not and will not materially and
adversely interfere with (i) the ability of Grantor and SCLP to pay in
full the Debt in the manner required by the Note or (ii) the use of the
Mortgaged Property for the use currently being made thereof, the
operation of the Mortgaged Property as currently being operated for
hotel purposes or the value of the Mortgaged Property.
(f) Except as set forth on the "Disclosure Schedule" (as defined
-------------------
in the MHP Loan Agreement) applicable to the Mortgaged Property and
approved by Beneficiary in
3054893.06 12
<PAGE>
writing, there are no Leases (other than the Ground Lease) affecting
the Mortgaged Property. To the extent that the Disclosure Schedule
lists any leases affecting the Mortgaged Property, to the Best
Knowledge of Grantor, except as expressly disclosed on the Disclosure
Schedule (i) no tenant under any of the Leases is entitled to any rent
concession, (ii) Grantor has not accepted any prepayment of any rent,
additional rent or other sums due under any of the Leases, except a
payment of rent or additional rent one (1) month in advance or a
prepayment in the nature of security for the performance of obligations
of the tenant under any of the Leases and (iii) no tenant has any
defense, set-off or counterclaim against Grantor or to the payment of
any rent, additional rent or other sums payable pursuant to its Lease
or to the performance of any obligations of the tenant thereunder. No
tenant under any of the Leases has any right or option relating to the
sale or other disposition of any of the Mortgaged Property.
(g) The copies of the Leases, if any, previously delivered by
Grantor to Beneficiary are true, correct and complete copies of those
documents, and contain the entire agreement between the parties thereto
with respect to the subject matter thereof.
(h) Except as set forth in the Disclosure Schedule applicable to
the Mortgaged Property, Grantor has obtained or has caused Manager to
obtain where required by applicable law, a valid, permanent Certificate
of Occupancy for the Improvements which permits the uses to which the
Premises are put and the uses permitted under any applicable Lease, and
in such instances where relevant, such Certificate of Occupancy is in
full force and effect, and all Permits of all Governmental Authorities
required with respect to the use, operation, ownership and maintenance
of the Mortgaged Property, and all of the same are in full force and
effect and the Improvements comply in all material respects therewith.
(i) Grantor has all easements, appurtenances or other rights and
interests, including those for use, maintenance, and access (by
pedestrians, automobiles and trucks) necessary or appropriate for the
full and proper operation, repair, maintenance, occupancy and use of
every portion of the Mortgaged Property as a full-service, first-class
Marriott hotel and in compliance with the Loan Agreement. To the Best
Knowledge of Grantor, all utility services necessary for the operation
and occupancy of the Mortgaged Property for such purposes are available
at the Mortgaged Property and will continue to be operational and
adequate.
(j) Grantor's possession of the Premises has been peaceable and
undisturbed and Grantor's title thereto has never been disputed or
questioned and, except for the Permitted Exceptions Grantor does not
know of any facts by reason of which any adverse claim to any part of
the Mortgaged Property or to any undivided interest therein might be
made.
(k) Except as disclosed on the Title Policies or set forth on
the Disclosure Schedule applicable to the Premises and approved in
writing by Beneficiary, no condemnation or eminent
3054893.06 13
<PAGE>
domain proceedings or other exercise of the right of eminent domain or
conveyance in lieu of condemnation (hereinafter collectively called
"Condemnation Proceedings") have been commenced and remain ongoing with
------------------------
respect to the Mortgaged Property or any portion thereof and, to the
Best Knowledge of Grantor, no Condemnation Proceedings are pending, nor
has Grantor received written notice of any threatened Condemnation
Proceedings.
(l) All costs arising from the construction of the Improvements
have been fully paid. All Equipment, Personal Property and all other
fixtures and articles of personalty attached to the Premises, or usable
in connection with the operation and maintenance thereof, have been
fully paid for except as described in the MHP Mortgage and are the
property of Grantor and are not subject to any conditional bills of
sale, chattel mortgages or any other title retention agreement of a
similar nature or to any other liens or encumbrances other than
permitted by the MHP Transaction Documents.
(m) Grantor is not a "national" of a "designated foreign
country" (or a person defined as a "designated foreign country") as
such quoted terms are defined in the Foreign or Cuban Assets Control
Regulations of the United States Treasury Department, 31 CFR, Subtitle
B, Chapter V, as amended, or any regulation or ruling issued
thereunder.
(n) Grantor, pursuant to the Title Policies, or an irrevocable
commitment therefor, effective as of the date of the closing of the SC
Loan has caused to be issued to Beneficiary an ALTA Lender's title
insurance policy insuring a valid lien on the Premises, subject only to
the Permitted Exceptions which Title Policies are in full force and
effect and are freely assignable to and will inure to the benefit of
any trustee or servicer selected by Beneficiary in connection with a
Securitization (as defined in the Loan Agreement).
(o) To the Best Knowledge of Grantor, no representation or
information contained herein or in any other SC Transaction Document,
nor any written statement or other instrument furnished, or to be
furnished, to Beneficiary or any other person entitled thereto under
the terms of the SC Transaction Documents executed by Grantor or its
general partner taken as a whole contains, or will contain, any untrue
statement of a material fact, or omits, or will omit, to state a
material fact necessary to make the statements contained herein or
therein not materially misleading.
5. Covenants of Grantor as to Performance and Other Matters.
--------------------------------------------------------
(a) Grantor shall duly perform and observe all of the
agreements, covenants, conditions and obligations imposed by the provisions of
this Deed of Trust, the Note, the other SC Transaction Documents signed by
Grantor or imposed upon or assumed by Grantor by virtue of the provisions of the
Permitted Exceptions or any deed, conveyance, agreement, statute or ordinance
pursuant to which Grantor or any predecessor in title of the Mortgaged Property
acquired the Mortgaged Property or any right or privileges appurtenant thereto
or for the benefit thereof.
3054893.06 14
<PAGE>
(b) Grantor shall, so long as Grantor is the owner of the
Mortgaged Property, do all things necessary to preserve and keep in full force
and effect the existence, rights and privileges of Grantor under the laws of the
state of its incorporation and the State in which the Premises are located.
(c) Grantor shall not, without the prior written consent of
Beneficiary, which consent shall not be unreasonably withheld, conditioned or
delayed, institute, join in, execute or consent to any change in any covenant,
condition, restriction, easement, declaration, zoning ordinance, or other public
or private restriction limiting, defining or otherwise controlling construction
on or use(s) of all or any part of the Mortgaged Property.
(d) Except as expressly permitted in the Loan Agreement or any
other SC Transaction Document, Grantor shall not, without the prior written
consent of Beneficiary, which consent shall not be unreasonably withheld,
conditioned or delayed, enter into, amend or modify any agreements relating to
the management of the Mortgaged Property or the operation of the hotel or hotel
operations thereon.
(e) Except as expressly permitted in the Loan Agreement, Grantor
shall not, without the prior written consent of Beneficiary, enter into, amend
or modify any agreements relating to the Mortgaged Property or the operation of
the hotel or hotel operations thereon with any "Affiliate" (as defined in the
---------
Loan Agreement) of Grantor except on terms that are no less favorable to Grantor
than would be contained in similar arrangements on arms length terms with
independent third parties consistent with any provisions of the Loan Agreement.
All such agreements shall to the extent required under the SC Transaction
Documents be fully and expressly subject and subordinate in all respects to the
Debt, this Deed of Trust, and the SC Transaction Documents and to any and all
extensions, renewals, additions, modifications, increases, consolidations,
spreaders, amendments, replacements, restatements and substitutions hereof and
thereof.
(f) Grantor shall obtain all Approvals, if any, required in
connection with the execution, delivery or performance by Grantor of this Deed
of Trust, the other SC Transaction Documents and the other instruments herein
mentioned to which Grantor is a party.
(g) Grantor shall cause all Permits and Certificates of
Occupancy required with respect to the use, operation, ownership and maintenance
of the Mortgaged Property to remain in full force and effect at all times during
the term hereof, and Grantor shall not permit or suffer to exist a violation of
any such Permit or Certificate of Occupancy, or enter into any Lease which
causes or permits the violation thereof.
(h) Grantor shall, within five (5) business days after receipt
from or delivery to Fee Owner of any notice of default or any other material
notice, demand, complaint or request made by or given to Fee Owner with respect
to the Premises or the Ground Lease, deliver a true copy thereof to Beneficiary.
Beneficiary may, upon receipt by Beneficiary of any notice of default on the
part of Grantor under the Ground Lease, rely thereon and may, upon notice to
Grantor, take such action as Beneficiary shall deem necessary or desirable
notwithstanding that
15
<PAGE>
the existence of such default or the nature thereof may be questioned or denied
by or on behalf of Grantor.
(i) Grantor shall pay the rent and other charges and all other
sums due or payable at any time and from time to time pursuant to the terms of
the Ground Lease as and when such sums shall become due or payable. If any
default shall be made in the payment of any sum when due or payable by Grantor
under the Ground Lease, Beneficiary shall have the right, but shall have no
obligation, to pay any such sum.
(j) Grantor shall give Beneficiary written notice of each and
every option to extend or renew the term of the Ground Lease, and notice of its
intention to exercise each such option, at least twenty (20) but not more than
sixty (60) days prior to the expiration of the time to exercise such option
under the terms of the Ground Lease. Grantor shall exercise any extension and/or
renewal option in respect of the Ground Lease upon Beneficiary's demand if
Beneficiary reasonably determines that the exercise of such option is necessary
to protect Beneficiary's security for the Loan. If Grantor intends to extend or
renew the term of the Ground Lease, Grantor shall deliver to Beneficiary,
together with the notice of such decision, a copy of the notice of extension or
renewal delivered to Fee Owner. If the term of the Ground Lease does not extend
at least ten (10) years beyond the Maturity Date, Beneficiary may, at its
option, exercise the option to extend or renew in the name and on behalf of
Grantor. For such limited and specific purpose, Grantor hereby irrevocably
appoints Beneficiary as its true and lawful attorney-in-fact (which appointment
shall be deemed coupled with an interest) to execute and deliver, for and in the
name of Grantor, all instruments and agreements necessary under the Ground Lease
or otherwise to cause such an extension of the term of the Ground Lease.
(k) Grantor shall not (i) terminate (or exercise any option it
may have to terminate) or cancel the Ground Lease, surrender all or any part of
the Premises to Fee Owner, modify, abridge or amend any material provision of
the Ground Lease, or suffer or permit any of the foregoing to occur, or (ii)
consent to the subordination of the Ground Lease or any amendment or
modification thereof to any mortgage encumbering the fee title to all or any
portion of the Premises.
(l) Grantor shall fully and timely observe, perform and comply
in all material respects with all of the terms, covenants and provisions
contained in the Ground Lease in such a manner so as to preserve and keep
unimpaired its rights under the Ground Lease and to prevent the occurrence of a
default thereunder.
(m) Grantor shall execute and deliver to Beneficiary, within
five (5) days after request, such instruments as may be required to permit
Beneficiary to cure any default under the Ground Lease or permit Beneficiary to
take such other action required to enable Beneficiary to cure or remedy the
matter in default and preserve the interest of Beneficiary in the Mortgaged
Property.
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<PAGE>
(n) Except as specifically provided in the Ground Lease, Grantor
shall first obtain the consent or approval of Fee Owner in all instances where
the consent or approval of Beneficiary under this Deed of Trust requires such
consent under the Ground Lease.
6. Due on Sale or Encumbrance.
--------------------------
(a) Grantor acknowledges that the continuous ownership,
operation and management of the Mortgaged Property by Grantor (directly, or
through the Manager) is of a material nature to this transaction and the making
of the SC Loan evidenced and secured by this Deed of Trust and the other SC
Transaction Documents. Grantor hereby covenants and agrees that Grantor shall
not, without the written consent of Beneficiary, directly or indirectly,
voluntarily or involuntarily or by operation of law, (i) dissolve, or terminate
or amend the terms of the existence of the Grantor or its general partner in any
respect that is not expressly permitted by the MHP Transaction Documents, or
(ii) sell, convey, assign, mortgage, encumber (except by the Permitted
Exceptions), hypothecate or otherwise transfer, alienate or dispose of,
including, without limitation, any lease of the Premises as a whole or
substantially as a whole, any interest in the Mortgaged Property or any legal or
beneficial interest in the Grantor or its general partner, except as expressly
permitted by the MHP Transaction Documents.
(b) If Beneficiary shall not consent in writing to a sale,
conveyance, assignment, mortgaging, encumbering or other transfer, alienation or
disposition prohibited by subparagraph 6.(a) hereof, and Grantor nevertheless
------------------
proceeds with such sale, conveyance, assignment, mortgaging, encumbering or
other transfer, alienation or disposition, then Beneficiary may, at its option,
and without limiting any other right or remedy available to Beneficiary
hereunder, at law or in equity, (but subject to Grantor's right pursuant to and
in accordance with the Loan Agreement to obtain the release by Beneficiary of
the Mortgaged Property) in its sole and absolute discretion and without regard
to the adequacy of its security, declare the Note, in whole or in part,
immediately due and payable.
(c) The giving of written consent by Beneficiary to the
transfer, alienation or disposition of all or any part of the Mortgaged Property
or any interest in the Mortgaged Property or Grantor or its general partner in
any one or more instances shall not limit or be deemed a waiver of the
requirement for such consent in any other or subsequent instances. Except as
otherwise expressly provided to the contrary in any MHP Transaction Document, if
any mortgage, encumbrance or other lien shall be placed on the Mortgaged
Property or any portion thereof (other than this Deed of Trust) without the
prior written consent of Beneficiary, such prohibited lien shall be deemed to be
null and void ab initio.
-- ------
7. Hazardous Substances.
--------------------
(a) As used herein:
(i) "Environment" shall mean soil, surface waters, ground
-----------
waters, land, stream, sediments, surface or subsurface strata and
ambient air.
17
<PAGE>
(ii) "Environmental Laws" shall mean all Federal, state and
------------------
local environmental, health or safety laws, regulations, ordinances, orders,
actions, policies and rules of common law (whether now existing or hereafter
enacted or promulgated), of all Governmental Authorities and all applicable
judicial and administrative and regulatory decrees, judgments and orders,
including common law rulings and determinations, relating to injury to, or the
protection of, human health or the Environment, including, without limitation,
all requirements pertaining to reporting, licensing, permitting, investigation,
remediation and removal of emissions, discharges, releases or threatened
releases of Hazardous Substances, into the Environment, or relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances.
(iii) "Environmental Report" shall mean the environmental
--------------------
reports (described in the Disclosure Schedule) applicable to the Premises or any
update thereof or supplement thereto.
(iv) "Hazardous Substances" shall mean any chemical,
--------------------
material, gas, vapor, energy, radiation or substance (A) the presence of which
requires or may hereafter require notification, investigation or remediation
under any applicable Environmental Law, (B) which is or becomes defined as a
"hazardous waste", "hazardous material" or "hazardous substance" or "controlled
industrial waste" or "pollutant" or "contaminant" under any present or future
Environmental Laws, (C) which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous and is
or becomes regulated by any Governmental Authority, (D) the presence of which on
the Mortgaged Property poses a hazard to the Mortgaged Property or to the health
or safety of persons or property on or about the Mortgaged Property, (E) without
limitation, which contains gasoline, diesel fuel or other petroleum hydrocarbons
or volatile organic compounds, (F) without limitation, which contains PCBs or
asbestos or urea formaldehyde foam insulation, or (G) without limitation, which
contains or emits radioactive particles, waves or material, including radon gas
in amounts the presence of which poses or threatens to pose a hazard to the
Mortgaged Property or to the health or safety of persons or property on or about
the Mortgaged Property.
(b) Grantor hereby represents and warrants as of the date hereof
as follows:
(i) Except as set forth in the applicable Environmental
Report:
(A) neither Grantor nor, to the Best Knowledge of
Grantor, any prior owner, occupant or user of the Mortgaged
Property nor any other person (each, a "Prior User") has engaged
----------
in or permitted any operations or activities upon, or any use or
occupancy of the Mortgaged Property, or any portion thereof, for
the purpose of or in any way involving the handling, manufacture,
treatment, storage, use, generation, release, discharge, refining,
dumping or disposal of any Hazardous Substances (whether legal or
illegal, accidental or intentional) on, under, in or about the
Mortgaged Property, except to the extent commonly used
18
<PAGE>
in the day-to-day operation of the Mortgaged Property and in such
case substantially in compliance with all Environmental Laws;
(B) neither Grantor nor, to the Best Knowledge of
Grantor, any Prior User, has transported any Hazardous Substances
to, from or across the Mortgaged Property, except substantially in
compliance with all Environmental Laws;
(C) to the Best Knowledge of Grantor, no Hazardous
Substances have migrated from other properties upon, about or
beneath the Mortgaged Property; and
(D) to the Best Knowledge of Grantor, there are no
Hazardous Substances presently deposited, stored, or otherwise
included in or located on, under, in or about the Mortgaged
Property, except Hazardous Substances stored and used in amounts
reasonably related to the normal operation of the Mortgaged
Property for hotel operations and in such case substantially in
compliance with all Environmental Laws.
(ii) Except as set forth in the applicable Environmental
Report, the Mortgaged Property and the use, maintenance and operation of the
Mortgaged Property, and all activities and conduct of business related thereto,
substantially comply and to the Best Knowledge of Grantor have at all relevant
times substantially complied, with all Environmental Laws, and no activity on or
condition of the, Property has been alleged in writing to Grantor to be a
material nuisance with respect to any third party.
(iii) Grantor has obtained any or all permits, licenses and
authorizations necessary to Grantor's operation of the Mortgaged Property under
applicable Environmental Laws, including laws relating to emissions, discharges,
releases or threatened releases of Hazardous Substances into the Environment or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Substances. To the Best
Knowledge of Grantor, Grantor and the Mortgaged Property are substantially in
compliance with all terms and conditions of any required permits, licenses and
authorizations.
(iv) Except as set forth in the applicable Environmental
Report, neither Grantor nor, to the Best Knowledge of Grantor, any Prior User
has received notice or other communication from a Governmental Authority having
jurisdiction over the Grantor the Mortgaged Property or any such Prior User
concerning any alleged violation of or liability under any Environmental Laws
with respect to the Mortgaged Property. Additionally, Grantor has not received
notice or other communication from a Governmental Authority concerning any
alleged material violation or material liability under any Environmental Laws by
Grantor, or relating in whole or in part to the Mortgaged Property, or with
respect to the real property adjacent to the Mortgaged Property, it being
understood that the term "adjacent" shall refer to real property within
19
<PAGE>
the relevant radius for the violation of applicable Environmental Laws
as set forth in the applicable Environmental Report. Except as set
forth in the applicable Environmental Report, there exists no writ,
injunction, decree, order or judgment outstanding, nor any lawsuit,
claim, proceeding, citation, directive, summons or investigation,
pending or, to the Best Knowledge of Grantor threatened, relating to
the ownership, use, maintenance or operation of the Mortgaged Property
by any person or entity, or related to any alleged violation of
Environmental Laws, or any suspected presence of Hazardous Substances
thereon.
(v) Except to the extent set forth in the applicable
Environmental Report, Grantor has not placed, nor to Grantor's Best
Knowledge has there been constructed, placed, deposited, stored,
disposed of or located on the Mortgaged Property any PCB nor
transformer, capacitor, ballast, or other equipment which contains
dielectric fluid containing PCBs in concentrations that exceed federal
standards, nor any asbestos or asbestos-containing materials nor any
insulating material containing urea formaldehyde or any radon gas in
amounts the presence of which poses or threatens to pose a hazard to
the Mortgaged Property or to the health or safety of persons or
property on or about the Mortgaged Property. To the Best Knowledge of
Grantor, except to the extent set forth in the Environmental Report or
as may have been removed in accordance with Environmental Laws, no
underground improvements, including, but not limited to, treatment or
storage tanks, or water, gas or oil wells, are located on the Mortgaged
Property.
(c) Grantor hereby covenants and agrees that Grantor shall not,
unless Beneficiary shall otherwise consent in writing:
(i) Cause or, to the best of Grantor's ability to prevent
such activity, permit or suffer any Hazardous Substance to be brought
upon, treated, kept, stored, disposed of, discharged, released,
produced, manufactured, generated, refined or used upon, about or
beneath the Mortgaged Property or any portion thereof by Grantor, its
agents, employees, contractors, invitees, tenants, or any other person,
except to the extent commonly used in the ordinary operation of the
Mortgaged Property or in any such contractor's ordinary course of
trade, and in each case in compliance with applicable Environmental
Laws. The foregoing shall not apply to any Hazardous Substances that
may have migrated or leached onto the Mortgaged Property from any other
property.
(ii) Cause, permit or suffer the existence or the commission
by Grantor, its agents, employees, or contractors of a violation of any
Environmental Laws upon, about or beneath the Mortgaged Property or any
portion thereof and Grantor shall use commercially reasonable efforts
to prevent any such violation of any Environmental Laws by any invitees
or any other person on the Mortgaged Property. Any removal or
encapsulation of or other remedial action taken by or on behalf of
Grantor in connection with any Hazardous Substance located on the
Mortgaged Property (including, without limitation, subsequent disposal
thereof) shall be performed in accordance with all
20
<PAGE>
applicable Environmental Laws and other Legal Requirements (as defined
in Paragraph 15 hereof).
------------
(iii) Subject to the provisions of Paragraph 16 hereof
------------
relating to permitted contests, create, or to the best of Grantor's
ability to prevent such encumbrances, suffer to exist with respect to
the Mortgaged Property, or permit any of its agents to create or suffer
to exist, any lien, security interest or other charge or encumbrance of
any kind under any Environmental Laws, including, without limitation,
any lien imposed pursuant to section 107(l) of the Superfund Amendments
and Reauthorization Act of 1986 (42 U.S.C. Section 9607(1)) or any
similar state statute.
(d) Grantor hereby covenants and agrees that Grantor will at all
times comply with the following requirements:
(i) Grantor shall, at its sole cost and expense, but without
waiver or limitation of any rights or remedies Grantor may have against
anyone other than Beneficiary, promptly take all actions required of
Grantor or any Affiliate of Grantor by any Governmental Authority which
arise from the presence upon, about or beneath the Mortgaged Property
of a Hazardous Substance or a violation of Environmental Laws. Such
action shall include, but not be limited to, the investigation of the
environmental condition of the Mortgaged Property, the preparation of
any feasibility studies, reports or remedial plans, and the performance
of any clean-up, remediation, containment, operation, maintenance,
monitoring or restoration work, whether on or off the Mortgaged
Property, to the extent required by applicable Environmental Laws.
Grantor shall take all actions necessary to restore the Mortgaged
Property to a condition that complies with any standard of remediation
required under applicable Environmental Law. Grantor shall proceed
continuously and diligently with all such required investigatory and
remedial actions, provided that in all cases such actions shall be in
accordance with all applicable Environmental Laws. Any such actions
shall be performed in a good, safe and workmanlike manner and shall, to
the extent practicable, minimize any impact on the business conducted
at the Mortgaged Property. Grantor shall pay all costs in connection
with such investigatory and remedial activities, including, but not
limited to, all power and utility costs, and any and all taxes or fees
that may be applicable to such activities. Grantor shall promptly
provide to Beneficiary copies of testing results and reports that are
generated in connection with the above activities. If required by
applicable Environmental Law, promptly upon completion of such
investigation and remediation, Grantor shall permanently seal or cap
all monitoring wells and test holes in compliance with applicable Legal
Requirements and industry standards, remove all associated equipment,
and restore the applicable Property, which shall include, without
limitation, the repair of any surface damage, including paving, caused
by such investigation or remediation. Nothing in this subsection shall
preclude the performance of any action required by any Governmental
Authority, as described above, by anyone other than Grantor or
Beneficiary. In such event, Grantor shall take all appropriate measures
to ensure that such action is performed in accordance with all
applicable Environmental Laws, and is consistent with the terms of this
Deed of Trust.
21
<PAGE>
(ii) If Grantor shall become aware of or receive actual
notice concerning any actual, alleged or suspected violation of or
liability under any Environmental Laws, or a substantial risk that any
such Environmental Law will be violated with respect to the Premises,
or that any representation of Grantor contained herein relating to
Hazardous Substance is not or is no longer accurate in any material
respect, including but not limited to actual notice or other written
communication concerning any actual or threatened investigation,
inquiry, lawsuit, claim, citation, directive, summons, proceeding,
complaint, notice, order, writ or injunction, relating to same, and
including without limitation any notice or other communication by
Grantor, then Grantor shall deliver to Beneficiary, (x) within ten (10)
days after receipt of such notice, a written description of said
violation, liability, investigation or actual or threatened event or
condition, together with copies of any documents evidencing same and
(y) within thirty (30) days after receipt of such notice, a written
description of the corrective action, if any, proposed by Grantor in
response thereto. Receipt of such notices by Beneficiary shall not be
deemed to create any obligation on the part of Beneficiary to defend or
otherwise respond to any such notification.
(iii) Beneficiary shall have the right (but not the
obligation) to enter upon the Mortgaged Property, from time to time at
reasonable times and upon reasonable notice, and in its sole and
absolute discretion, to conduct inspections of the Mortgaged Property
and the activities conducted thereon to determine compliance with all
Environmental Laws, the presence of Hazardous Substances and the
existence of any potential damages as a result of the condition of the
Mortgaged Property. In furtherance thereof, Grantor hereby grants to
Beneficiary, and its agents, employees, and qualified consultants and
contractors, the right to enter upon the Mortgaged Property and to
perform such tests on the Mortgaged Property as are reasonably
necessary to make such determination. Beneficiary shall conduct such
inspections and tests at reasonable times, shall use its best efforts
to minimize interference with the operation of the Mortgaged Property
and agrees to restore the condition of the Mortgaged Property to
substantially the same condition as existed immediately before such
tests were performed, and Beneficiary shall not be liable for any
interference caused thereby unless due to the gross negligence or
willful misconduct or omission of Beneficiary.
8. Insurance. (a) The insurance requirements set forth on Schedule X
--------- ----------
annexed hereto are incorporated by reference herein and are made a part of this
Deed of Trust. At Grantor's expense, Grantor shall maintain continuously during
the term of this Deed of Trust policies of insurance (collectively, the
"Policies") in form and in amounts and issued by companies, associations or
--------
organizations satisfactory to Beneficiary and meeting the requirements set forth
in Schedule X.
----------
(b) When and if required by the applicable insurance company,
Grantor shall furnish Beneficiary with an appraisal satisfactory to Beneficiary
showing the full replacement value of the Improvements, the Equipment and the
Personal Property.
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<PAGE>
(c) At the request of Beneficiary, Grantor shall assign the
Policies to Beneficiary for the benefit of Beneficiary as collateral and further
security for the payment of the Debt. In the event of a foreclosure of this Deed
of Trust, the purchaser of the Mortgaged Property shall succeed to all the
rights of Grantor to the extent permissible under the Policies and applicable
law, including any right to unearned premiums, in and to all Policies assigned
or delivered to Beneficiary pursuant to this Paragraph.
---------
(d) If Grantor fails to maintain the insurance required to be
maintained hereunder or on Schedule X or fails to deliver evidence of insurance,
----------
Beneficiary may, but shall not be obligated to on not less than five (5)
Business Days' written notice to Grantor (or sooner, if required to replace any
insurance before it expires), obtain insurance and pay the premiums therefor on
behalf of Grantor if Grantor does not immediately obtain such insurance, and
Grantor shall reimburse Beneficiary, on written demand, for all sums advanced
and expenses incurred in connection therewith. Such sums and expenses, together
with interest thereon at the Default Rate (as defined in Paragraph 20), shall be
------------
deemed part of the Debt and secured by the lien of this Deed of Trust.
(e) Nothing contained in this Paragraph 8 or elsewhere in this
-----------
Deed of Trust shall relieve Grantor of its duty to maintain, repair, replace or
restore the Improvements, the Equipment or the Personal Property or rebuild the
Improvements, from time to time, as required by the Transaction Documents,
following damage thereto or destruction thereof whether or not sufficient
proceeds of insurance are available to defray the cost of such repairs or
restoration, and following any condemnation of all or any portion of the
Mortgaged Property, and nothing contained in this Paragraph 8 or elsewhere in
-----------
this Deed of Trust shall relieve Grantor of its duty to pay the Debt, which
shall be absolute, regardless of the occurrence of damage to or destruction of
or condemnation of all or any portion of the Mortgaged Property.
(f) In the event that prior to payment in full of the Debt,
any claim under any Policy has not been paid and distributed in accordance with
the terms of this Deed of Trust, and any such claim shall be paid after
foreclosure of this Deed of Trust or other transfer of title to the Mortgaged
Property shall have resulted in extinguishing the Debt for an amount less than
the total of the unpaid principal balance together with accrued interest and the
Yield Maintenance Premium, plus costs and disbursements at the time of the
extinguishment of the Debt, and such insurance claim is thereafter paid, then
and in that event that portion of the payment in satisfaction of the claim which
is equal to the aforesaid deficiency shall belong to and be the property of
Beneficiary and shall be paid to Beneficiary, and Grantor hereby assigns,
transfers and sets over to Beneficiary all of Grantor's right, title and
interest in and to said sums. The balance, if any, shall be promptly paid to, or
as directed by, Grantor. Notwithstanding the above, Grantor shall retain an
interest in the Policies above described during any redemption period. The
provisions of this Paragraph 8(f) shall survive the termination of this Deed of
--------------
Trust by foreclosure or otherwise as a consequence of the exercise of any rights
and remedies of Beneficiary hereunder after an Event of Default.
23
<PAGE>
9. Payment of Impositions and Utility Charges.
------------------------------------------
(a) Subject to the provisions of the cash management procedures
set forth in the MHP Loan Agreement or the Exhibits thereto (collectively, the
"MHP Cash Management Procedures"), the MHP Mortgage and the provisions of
- -------------------------------
Paragraph 16 hereof, Grantor shall pay or cause to be paid, before any interest
or penalty for non-payment attaches thereto, all taxes, assessments, water
rates, sewer rents, vault charges, permit fees, user fees, ground rents,
maintenance charges and other governmental charges, and other charges of any
kind or nature whatsoever, general or special, ordinary or extraordinary, now or
hereafter levied, assessed or imposed upon or which constitute a lien upon or
against the Mortgaged Property or any portion thereof, or upon the Rents derived
from the Mortgaged Property or arising in respect of the occupancy, use or
possession thereof (collectively, the "Impositions"). If Grantor shall fail to
-----------
pay or cause to be paid any Impositions before any interest or penalty for
non-payment attaches thereto, Beneficiary shall have the right, but shall not be
obligated (except as specifically provided under the MHP Cash Management
Procedures), to pay such Impositions upon not less than five (5) Business Days'
prior written notice to Grantor (subject to the provisions of the next
succeeding sentence), and Grantor shall repay to Beneficiary, within ten (10)
days after written demand, any amount so paid by Beneficiary, with interest
thereon (xx) at the regular Base Rate provided for in the Note from the date of
Beneficiary's payment up to the date of demand for repayment by Beneficiary, and
(yy) at the Default Rate from and including the date of such demand by
Beneficiary to the date of repayment by Grantor, and such amount, together with
such interest, shall constitute a portion of the Debt secured by the lien of
this Deed of Trust. If an Escrow Fund (as defined in Paragraph 10 of the MHP
------------
Mortgage) is in effect with respect to the SC Loan, Beneficiary shall not be
required to give Grantor prior written notice of payments from such Escrow Fund
with respect to Impositions and the provisions of Paragraph 10 of the MHP
------------
Mortgage and any collateral account agreement or similar agreement with respect
to such Escrow Funds shall apply. In the case of any assessment payable in
installments, each installment thereof shall be paid prior to or on the date on
which such installment becomes due and payable without imposition of any fine,
penalty, interest or cost. Grantor shall not be entitled to any credit on the
Note, or any other sums which may become payable under the terms thereof or
hereof, or otherwise, by reason of the payment of the Impositions.
(b) Grantor shall promptly deliver to Beneficiary, upon request,
receipted bills, canceled checks or other evidence reasonably satisfactory to
Beneficiary evidencing the payment of the Impositions. The certificate, advice
or bill of the appropriate official designated by law to make or issue the same
or to receive payment of such Imposition shall be prima facie evidence that such
Imposition is due and unpaid at the time of the making or issuance of such
certificate, advice or bill. If Grantor shall fail to provide Beneficiary with
such evidence evidencing the payment of Impositions within thirty (30) days
after notice, Grantor shall pay Beneficiary, on written demand, all charges,
payments, fees, costs or expenses reasonably incurred by Beneficiary in
connection with obtaining evidence satisfactory to Beneficiary that payment of
all Impositions is current and that there are no Impositions due and owing or
which have become a lien on the Mortgaged Property or any portion thereof or any
appurtenances thereto.
24
<PAGE>
(c) Grantor shall timely pay or cause to be paid all charges for
electricity, power, gas, water and other utilities used in connection with the
Mortgaged Property and, upon the written request of Beneficiary, Grantor shall
promptly deliver to Beneficiary receipted bills, canceled checks or other
evidence reasonably satisfactory to Beneficiary evidencing the payment of such
charges.
10. Escrow Fund.
-----------
(a) Subject to the provisions of the MHP Mortgage and the MHP
Cash Management Procedures, Grantor shall, at the option of Beneficiary to be
exercised by written notice at any time after the occurrence of an Event of
Default, or as otherwise required by the MHP Cash Management Procedures, pay to
Beneficiary (or, if applicable, any servicer named in or named pursuant to the
MHP Loan Agreement for the benefit of Beneficiary) the amount required in
connection with the Escrow Fund under the MHP Cash Management Procedures, if
any, on or before the date required by the MHP Cash Management Procedures. If at
any time such Cash Management Procedures are not in effect, on the Debt Service
Payment Date (as defined in the Note), Grantor shall, at the option of
Beneficiary to be exercised by written notice after the occurrence of an Event
of Default deposit with Beneficiary an amount (hereinafter referred to as the
"Escrow Fund") which amount, at the option of Beneficiary, shall be the amount
-----------
which would have been required by the MHP Cash Management Procedures, if any,
including Paragraph 6.1 thereof, had the Cash Management Procedures been in
-------------
effect, or, at Beneficiary's option, an amount equal to one-twelfth (1/12th) of
the amount which would be sufficient to pay the Impositions and all premiums on
the Policies payable, or estimated by Beneficiary to be payable, during the
ensuing twelve (12) months. Such deposits shall not be, nor be deemed to be,
trust funds and shall be held by Beneficiary in a segregated subaccount of the
Cash Collateral Account (as defined in the Loan Agreement) (the "Tax and
-------
Insurance Account") and invested in Permitted Investments (as hereinafter
- -----------------
defined) (except as otherwise required by any Legal Requirement) which shall be
free of any liens or claims on the part of creditors of Grantor.
(b) Beneficiary will apply monies in the Escrow Fund, if any,
(and any earnings inuring thereon) to the payment when due of Impositions and
premiums on the Policies which are required to be paid by Grantor pursuant to
the provisions of the MHP Cash Management Procedures, or if such MHP Cash
Management Procedures are not in effect, this Deed of Trust. If the amount of
the Escrow Fund shall exceed the amount of the Impositions and premiums on the
Policies payable by Grantor pursuant to the provisions of this Deed of Trust,
Beneficiary shall, in its sole discretion (i) return any excess to Grantor or
(ii) credit such excess against future payments to be made to the Escrow Fund.
In allocating such excess, Beneficiary may deal with the person shown on the
records of Beneficiary to be the owner of the Mortgaged Property. If the Escrow
Fund is not sufficient to pay the Impositions and premiums on the Policies as
the same become due and payable, Grantor shall pay to Beneficiary an amount
which Beneficiary shall estimate as sufficient to make up the deficiency.
(c) Until expended or applied as above provided, any amounts in
the Escrow Fund shall constitute additional security for the Debt. If this Deed
of Trust is sold or assigned,
25
<PAGE>
Beneficiary shall transfer to the assignee the amount then held by Beneficiary
under this Paragraph, and upon delivery to the Grantor of evidence of such
---------
assignment and transfers, together with a written acknowledgement of receipt by
the transferee, the transferring Beneficiary shall not have any further
obligation to Grantor with respect to such amount. If at any time Grantor
tenders to Beneficiary full payment of the entire Debt, including any applicable
premium or penalty, and Beneficiary has no further obligation under the Loan
Agreement to make Advances, Beneficiary shall credit to the account of Grantor
any balance remaining in the Escrow Fund accumulated by Beneficiary under this
Paragraph, including interest earned thereon. Upon the occurrence and during the
- ---------
continuation of an Event of Default, Beneficiary shall be authorized and
empowered (but not required) to apply the balance remaining in the Escrow Fund
in the manner set forth in Paragraph 23 hereof and shall give Grantor prompt
------------
notice thereof.
11. Leases and Rents.
----------------
(a) Grantor hereby grants and assigns to Beneficiary the right
to enter the Mortgaged Property for the purpose of enforcing its interest in the
Leases, if any, and collecting the Rents, this Deed of Trust constituting a
present, absolute assignment of the Leases and Rents. Notwithstanding the
foregoing, but subject to the provisions of the MHP Mortgage and the terms and
conditions of this Paragraph, Beneficiary hereby grants to Grantor a revocable
---------
license to operate and manage the Mortgaged Property and to collect the Rents.
Grantor shall hold the Rents, or an amount sufficient to discharge all current
sums due on the Debt, in trust for use in payment of the Debt. The license
herein granted to Grantor to collect the Rents and enforce its interests in the
Leases may be revoked by Beneficiary following an Event of Default by Grantor
under this Deed of Trust or any of the other SC Transaction Documents, by giving
written notice of such revocation to Grantor. Following such notice, Beneficiary
may collect, retain and apply the Rents toward payment of the Debt in such
priority and proportions as Beneficiary, in its sole discretion, shall deem
proper, or to the operation, maintenance and repair of the Mortgaged Property.
In addition to the rights which Beneficiary may have herein, Beneficiary, at its
option, may require Grantor to pay, monthly in advance, to Beneficiary, or any
receiver appointed to collect the Rents, the fair and reasonable rental value
for the use and occupation of such part of the Premises as may be in the
possession of Grantor for its own use (it being understood that for such purpose
Grantor shall not be deemed to be in possession of a hotel room unless Grantor
or its affiliates is using the same), other than such portions of the Premises
used for the operation of the Hotel. Upon default in any such payment, Grantor
will vacate and surrender possession of such portions of the Premises to
Beneficiary, or to such receiver and, in default thereof, Grantor may be evicted
from such portions of the Premises by summary proceedings or otherwise. Nothing
contained in this Paragraph shall be construed as imposing on Beneficiary any of
---------
the obligations of the lessor under the Leases. The provisions of this Paragraph
---------
shall be in addition to, and not in lieu of, the provisions of the Assignment,
and, if any conflict or inconsistency exists between the provisions of this Deed
of Trust and the provisions of the Assignment with respect to the Leases or
Rents, the provisions of the Assignment shall control, except to the extent that
this Deed of Trust shall impose greater burdens upon Grantor, shall further
restrict rights of Grantor or shall give Beneficiary greater rights. Beneficiary
shall be entitled to all the rights and benefits of the applicable laws of the
State. It shall never be necessary for Beneficiary to institute legal
proceedings of any kind whatsoever to enforce the
26
<PAGE>
provisions of this Paragraph 11(a). The rights of Trustee hereunder in the
---------------
Leases and Rents shall be subject to (i) the rights of Beneficiary in the Leases
and Rents, and (ii) the rights of Beneficiary in the Leases and Rents and
revenues created under the Assignment.
(b) Except as otherwise provided in the Loan Agreement, Grantor
shall not, without the prior written consent of Beneficiary, enter into any
Material Lease with respect to the Premises. For purposes of this Deed of Trust
and all of the SC Transaction Documents, the term "Material Lease" shall mean
(xx) a lease demising 5% or more of the Floor Area of the Premises regardless of
the term of such lease or (yy) a lease demising any room or suite in the
Premises for a period in excess of 365 calendar days (including so-called
seasonal leases aggregating to a time period in excess of 365 days whether or
not such days run consecutively). All new Leases (including Material Leases)
shall be with tenants unaffiliated with Grantor, shall be on arms-length terms
and conditions and shall be at annual rents at least comparable to the market
rents then being paid for comparable premises in the vicinity of the Premises.
(c) Any Lease entered into by Grantor from and after the date
hereof and each renewal of an existing Lease (excluding, however, a renewal
pursuant to an option contained in an existing Lease) shall provide:
(i) that such Lease is and shall be subject and subordinate
in all respects to this Deed of Trust and the lien created hereby, and
to any renewals thereof, including any increase in the principal amount
secured by this Deed of Trust, and any increase in the interest rates
set forth in the Note and to each and all of the rights of Beneficiary
or any holder thereof;
(ii) that such provision shall be self-operative;
(iii) that, in confirmation of such subordination, each
tenant under a Lease (each, a "Tenant" and, collectively, the
------
"Tenants") shall promptly execute and deliver following Beneficiary's
-------
written request such commercially reasonable agreement of subordination
that Beneficiary may request; and
(iv) that the Tenant shall execute and deliver estoppel
certificates (each, a "Tenant Estoppel Certificate") addressed to
---------------------------
Beneficiary certifying as to the following information:
(A) an identification of the Lease and all
modifications by date, parties, and space;
(B) the commencement date and expiration dates of the
original term and any renewal periods of such Lease;
(C) the base rent and additional rent then payable
under such Lease;
27
<PAGE>
(D) that such Lease is in full force and effect;
(E) that, to the best knowledge of such Tenant, Grantor
is not in default of any of the terms of such Lease (or, if in default,
specifying the default);
(F) that, to the best knowledge of such Tenant, it has
no rights of offset, defenses or counterclaims under the Lease (or, if
it has any, specifying the same); and
(G) the last day to which base rent under the Lease has
been paid.
(d) Grantor, promptly after obtaining actual knowledge thereof,
shall notify Beneficiary of the termination of any Material Lease, the receipt
of any notice of default under any Material Lease, and of any notice, action or
proceeding regarding any Material Lease which may, in Grantor's reasonable
judgment, materially and adversely affect the Mortgaged Property.
(e) Grantor shall at all times perform and comply with, or cause
to be performed and complied with in all material respects, all of the terms,
covenants and conditions of the Leases to be performed or complied with by
Grantor thereunder.
(f) Upon written notice, but not more frequently than annually,
Grantor shall deliver to Beneficiary, on request, if applicable, a rent roll and
schedule of the Leases then in existence, certified by Grantor to be true and
complete, together with a counterpart original or a copy of every Lease and any
amendments with respect to which a counterpart original or copy has not
previously been furnished to Beneficiary, and containing such other information
as Beneficiary may reasonably request. In addition, Grantor, upon Beneficiary's
reasonable request, shall use reasonable efforts to obtain from each tenant at
the Premises a Tenant Estoppel Certificate.
(g) All security or other deposits, if any, of Tenants held by
Grantor (collectively, "Security Deposits") shall be treated as trust funds of
-----------------
Grantor and shall be deposited in a tenant's security account maintained by
Grantor at a commercial bank, savings bank or savings and loan association,
identified to Beneficiary.
(h) The provisions in subparagraphs 11(b), (c) and (f) of this
--------------------------------
Paragraph shall not apply to any nightly rentals or other arrangements for
- ---------
occupancy of individual hotel rooms or suites at the Premises in the ordinary
course of the operation of Grantor's hotel business, provided that any such
nightly rentals or other arrangements for occupancy are not effected pursuant to
Material Leases.
28
<PAGE>
12. Maintenance of the Mortgaged Property; Changes.
----------------------------------------------
(a) Grantor agrees to keep, operate and maintain the Mortgaged
Property as a full-service, first-class Marriott hotel and in compliance in all
material respects with the Ground Lease, the Loan Agreement and the Management
Agreement, subject to Uncontrollable Circumstances (as defined in the Loan
Agreement), Temporary Takings (as defined in Paragraph 14(d) hereof) and
---------------
temporary closures for repairs in the ordinary course of Grantor's business
(provided that such temporary closures shall not in any event affect the entire
hotel or a material part thereof and shall not last longer than thirty (30)
consecutive days) and subject to the effects of casualty and condemnation
provided that Grantor is using diligent efforts to mitigate the effects of any
such event to the extent required by, and in compliance with, the provisions of
Paragraph 13 hereof, with respect to the effects of casualty, and Paragraph 14
- ------------ ------------
hereof, with respect to the effects of any Condemnation Proceedings. Without
limitation, Grantor agrees:
(i) not to desert or abandon all or any portion of the
Mortgaged Property;
(ii) to keep, or cause to be kept, the Mortgaged Property,
the sidewalks and the curbs adjoining the Mortgaged Property in good,
safe and insurable condition and as required by Legal Requirements
(whether or not a violation has been noted or issued therefor);
(iii) to maintain, or cause to be maintained or replaced,
all Improvements, Equipment and Personal Property in substantially the
same or better condition as they exist on the date hereof;
(iv) not to commit or suffer waste;
(v) not to make or permit to be made, except as permitted
by the Transaction Documents, any structural or non-structural
alterations in or additions to the Improvements (collectively,
"Changes") or demolish the Improvements or any portion thereof, except
-------
in accordance with the provisions of the Ground Lease and the
Transaction Documents and with the prior written consent of
Beneficiary, which consent shall not be unreasonably conditioned,
withheld or delayed, except (x) as may otherwise be permitted by the
provisions of this Deed of Trust (including the provisions of Paragraph
---------
12(b)), or (y) as may be required by any Governmental Authority,
-----
subject to the provisions of Paragraph 13 hereof;
------------
(vi) except as otherwise provided in Paragraph 13 hereof, to
------------
promptly repair, replace, restore or rebuild, or cause to be promptly
repaired, replaced, restored or rebuilt, all Improvements now or
hereafter constituting a part of the Mortgaged Property which may
become damaged or destroyed, with materials and workmanship of as good
quality as existed before such damage or destruction;
29
<PAGE>
(vii) to refrain from impairing or diminishing the value of
the Mortgaged Property or the security value of this Deed of Trust; and
(viii) not to remove any of the Equipment or Personal
Property without the prior written consent of Beneficiary, except for
substitution or replacement in the ordinary course of business of any
component of Equipment or Personal Property with items of equivalent
value and utility, provided, however, that Grantor shall not be
-------- -------
required to replace any Personal Property or Equipment if the same
shall be obsolete or if Grantor shall no longer have any use for any
such Equipment or Personal Property.
Notwithstanding anything to the contrary contained in this Paragraph 12(a),
---------------
nothing herein shall preclude Grantor's right to decide, in the exercise of its
good business judgment, the manner, methodology and extent of Grantor's
maintenance or repair of the Mortgaged Property, provided that the Mortgaged
Property and Grantor shall at all times comply with all Legal Requirements, and
that the Premises continuously (except during periods of Uncontrollable
Circumstances, restoration or repair) operates as a full-service, first-class
Marriott hotel and at all times in compliance in all material respects with the
Ground Lease, the Loan Agreement and the Management Agreement.
(b) Notwithstanding anything to the contrary contained in
Paragraph 12(a), the prior consent of Beneficiary shall not be required with
- ---------------
respect to those Changes which are either (i) approved by Beneficiary pursuant
to the MHP Loan Agreement, including any amounts disbursed from any account
provided for in the MHP Loan Agreement or the MHP Cash Management Procedures or
disbursed pursuant to any applicable budget described in the MHP Loan Agreement
or (ii) which (xx) are non-structural, (yy) will not adversely affect any
building system and (zz) which in the good faith estimate of Grantor will not,
with respect to any single Change or related set of Changes, cost in excess of
$50,000.00.
(c) In giving consent to any Changes or other demolitions or
alterations to the Improvements, Beneficiary, in the exercise of its reasonable
consent right as set forth in Paragraph 12(a) shall take into account evidence
---------------
provided by Grantor that the completion of such Changes, demolition or other
alterations will not adversely affect Grantor's financial condition, the value
of the Mortgaged Property or the Net Operating Income (as defined in the MHP
Loan Agreement) therefrom. If the cost of any proposed Changes is in excess of
the amount provided in Paragraph 12(b), Beneficiary, in the exercise of its
---------------
reasonable consent right, may require the Grantor to post collateral in the
amount of the estimated cost of any such Change or to take such other steps to
ensure completion of the Changes as may be prudent for a mortgage lender in
similar circumstances considering all of the factors of Grantor's operation of
the Premises and the continuation of Net Operating Income therefrom.
(d) All Changes shall be performed lien-free (subject to the
provisions for bonding of liens and contests set forth in Paragraph 16 hereof),
------------
in a good and workmanlike manner, and in compliance with all Legal Requirements.
No material part of the Improvements shall be demolished in connection with any
Changes and the hotel operations at the Premises shall not be suspended as a
consequence thereof. Promptly upon completion of any material structural
30
<PAGE>
Changes, as-built plans and evidence reasonably satisfactory to Beneficiary of
lien-free construction shall be delivered to Beneficiary.
(e) Beneficiary, and its agents or designated representatives,
shall, upon reasonable prior notice to Grantor and at reasonable times, have the
right of entry and free access to the Mortgaged Property to inspect any work
authorized by Beneficiary and the work done, labor performed, materials
furnished or Changes to the Mortgaged Property. Grantor shall make the officers
and directors of the general partner of Grantor and such regional supervisors as
are primarily charged with responsibility over such matters available for
Beneficiary to discuss Grantor's affairs, finances and accounts relating to any
work done, labor performed, materials furnished or Changes to the Mortgaged
Property and will cooperate with, and request that its contractors and any
subcontractors cooperate with, Beneficiary or any of its designated
representatives to enable them to perform these functions, at all reasonable
times and as often as Beneficiary may reasonably request.
(f) Grantor, in connection with its obligations hereunder to
maintain the Mortgaged Property as a full-service, first-class Marriott hotel,
represents and warrants to Beneficiary that: the Mortgaged Property has adequate
rights of access to public ways and is served by adequate water, sewer, sanitary
sewer and storm drain facilities; all public utilities necessary to the
continued use and enjoyment of the Mortgaged Property as presently used and
enjoyed are located in the public right-of-way abutting the Mortgaged Property
or in easements benefitting the Premises, and all such utilities are connected
so as to serve the Mortgaged Property without passing over other real property
(except as covered by such easement benefitting the Premises); all roads
necessary for the full utilization of the Mortgaged Property for its current
purpose have been completed and dedicated to public use and accepted by all
Governmental Authorities or are the subject of access easements for the benefit
of the Mortgaged Property; except as described in the Disclosure Schedule the
Mortgaged Property is not located in a flood hazard area as defined by the
Federal Insurance Administration; and except as disclosed in the Title Policies
with respect to the Premises, there are no pending or, to the Best Knowledge of
Grantor, proposed special or other assessments for public improvements or
otherwise affecting the Mortgaged Property, nor, to the Best Knowledge of
Grantor, are there any contemplated improvements to the Mortgaged Property that
may result in such special or other assessments.
13. Damage to and Destruction of the Mortgaged Property.
---------------------------------------------------
(a) In the event that the Mortgaged Property shall be damaged or
destroyed, in whole or in part, by fire or other casualty, whether insured or
uninsured, Grantor shall give prompt written notice thereof to Beneficiary,
together with Grantor's best estimate of the cost of restoration (the
"Restoration Cost"). Subject to the provisions of the MHP Mortgage and this
----------------
Paragraph 13, Grantor shall restore the Premises to the standard required by
- ------------
Paragraph 12(a)(vi) of this Deed of Trust. Grantor shall timely file all claims
- -------------------
or proofs of claim so as not to prejudice any claim and, if the Restoration Cost
is equal to or greater than an amount (the "Restoration Benchmark") equal to the
---------------------
lesser of (xx) $500,000.00 and (yy) 5% of the Release Price attributed to the
Premises in the MHP Loan Agreement, or, irrespective of the Restoration Cost, if
an Event of Default and until the Debt has been paid in full exists as of the
date of
31
<PAGE>
submission of any claims or proofs of claim, and until the Debt has been paid in
full, Grantor shall submit all claims or proofs of claim and other submissions
to Beneficiary for the written approval of Beneficiary prior to any such filing,
which approval shall not be unreasonably withheld, conditioned or delayed.
(b) Provided that no Event of Default exists at the time of
settlement, Grantor shall have the right to settle any insurance claim with
respect to any casualty where the Restoration Cost is less than the Restoration
Benchmark, but shall give prompt written notice of any such claim and settlement
to Beneficiary. In such event, Grantor shall apply the Insurance Proceeds
relating to such casualty to restoration, replacement, rebuilding or repair
(hereinafter collectively referred to as "Restoration") of the damage to the
-----------
standard required by Paragraph 12(a)(vi) hereof.
-------------------
(c) Subject to the provisions of the MHP Mortgage, if the
Restoration Cost equals or exceeds the Restoration Benchmark, and unless Grantor
has obtained the release of this Deed of Trust as a Casualty Event Release (as
hereinafter defined) in accordance with the Loan Agreement, Beneficiary shall
have the right to participate in the settlement of all insurance claims relating
to such casualty, and all Insurance Pro ceeds relating to such casualty shall be
paid directly to Beneficiary, and, after settlement of the claim(s) and subject
to Paragraph 13(d) hereof, such Insurance Proceeds shall be deposited in the
---------------
subaccount for Insurance Proceeds (as defined in Section 4.2 of the MHP Cash
Management Procedures) of the Cash Collateral Account (as defined in the MHP
Loan Agreement) and advanced to Grantor from time to time (subject to the
conditions set forth below) in reimbursement for amounts expended by Grantor or
as direct payments to contractors in Restoration of the Mortgaged Property. Upon
completion of the entire Restoration and provided no uncured Event of Default
exists at the time of payment, Beneficiary shall pay the remaining amount of the
Insurance Proceeds, if any, to Grantor; provided, however, that nothing herein
-------- -------
contained shall prevent Beneficiary from applying at any time the whole or any
part of the Insurance Proceeds to the curing of any default under any SC
Transaction Document or to the payment of the Debt in the circumstances set
forth in Paragraph 13(d). Advances of Insurance Proceeds shall be made available
---------------
to Grantor, no less frequently than monthly, in accordance with the general
procedures employed at the time by Beneficiary in connection with the
disbursement of loan proceeds in general by Beneficiary (including, without
limitation, an endorsement to the title insurance policy of Beneficiary as to
the Premises insuring the continued priority of the lien of this Deed of Trust
against mechanics' liens that may arise out of the Restoration and appro priate
certifications from a licensed architect or engineer selected by Grantor subject
to the reasonable approval of Beneficiary (each, an "Architect") that the
---------
requested payment is for work completed in accordance with plans and
specifications approved by Beneficiary and that the balance of funds held on
deposit after such payment will be sufficient to pay the cost of completing the
Restoration (provided, however, that if the cost of the Restoration is or is
estimated to be less than $250,000.00, Beneficiary will accept a certificate of
the officer of the general partner of Grantor certifying to this effect), and
evidence satisfactory to Bene ficiary that no liens have been filed for the
labor and materials used in connection therewith and that the requested payment
will be received in trust, to be applied first to the payment for such labor and
materials in amounts which are equal to the percentage of completion attained at
the time of such advance, less, in the case of any Restoration in which the
original
32
<PAGE>
estimated cost or actual cost is $250,000.00 or more, all amounts previously
advanced and a holdback of 10% (or such lesser amount as may be customary in the
trade in such location or as may be required under the applicable restoration
contract, but in no event less than 5% for any contact where a holdback is
required), which remaining amounts will be advanced upon full completion of the
Restoration as due under the applicable Restoration contract. All Insurance
Proceeds and other sums deposited with Beneficiary pursuant to this Paragraph,
---------
until expended or applied as provided in this Paragraph, shall constitute
---------
additional security for the Debt and shall be invested in Permitted Investments
(as such term is defined in the MHP Loan Agreement) with income thereon inuring
to the benefit of Grantor in accordance with the MHP Loan Agreement.
(d) Notwithstanding the foregoing, if an Event of Default exists
or if, in Beneficiary's reasonable judgment based on professional consultation:
(i) the Restoration of the Improvements cannot be completed
(A) so as to constitute an economically viable building or (B) at least
six (6) months prior to the Maturity Date; or
(ii) the amount of business interruption insurance is
insufficient to cover all fixed and operating expenses of the Premises,
including such portion of debt service on the Loan as is reasonably
allocable to the Premises, during Restoration and until the operation
of Grantor's business at the Premises is resumed; or
(iii) the amount of Insurance Proceeds equals or exceeds the
amount of the outstanding principal balance of the MHP Loan and the SC
Loan; or
(iv) Restoration of the Mortgaged Property cannot be
completed except at a cost which exceeds the amount of available
Insurance Proceeds and Grantor shall not have deposited with
Beneficiary, within ninety (90) days following Beneficiary's receipt of
such Insurance Proceeds and delivery to Grantor of notice of a
deficiency, an amount, in cash or cash equivalent, equal to the excess
of the estimated cost of the Restoration as determined by an Architect
over the amount of such Insurance Proceeds;
then Beneficiary shall have the option to apply Insurance Proceeds to the
payment of the Note, interest accrued and unpaid thereon, and the Yield
Maintenance Premium, if any, and other unpaid amounts of the Debt, all in such
order as Beneficiary shall designate in accordance with the MHP Transaction
Documents, provided, however, that except as otherwise provided in the Loan
-------- -------
Agreement, any such application shall in no event affect the payments to be made
in respect of the Note.
(e) Grantor shall, promptly after the occurrence of a casualty,
commence and thereafter with reasonable diligence prosecute to completion any
Restoration of the Mortgaged Property or part thereof to the standard required
by Paragraph 12(a)(vi) hereof. Any such Restoration shall be undertaken and
-------------------
completed in accordance with this Paragraph 13, subject to the final provision
------------
of this Paragraph 13(e). All Restoration shall be in a good and workmanlike
---------------
manner with reasonable diligence, and in compliance with all Legal Requirements.
Seasonality
33
<PAGE>
or weather permitting, if Grantor fails to commence Restoration within thirty
(30) days following Beneficiary's receipt of Insurance Proceeds or fails to
prosecute the Restoration to completion, Beneficiary may upon ten (10) days'
notice to Grantor, but shall not be obligated to, perform the Restoration, and
may use any of the Insurance Proceeds and Grantor's funds deposited pursuant to
Paragraph 13(c) or 13(d) of this Paragraph in payment therefor. Grantor shall
- ------------------------ ---------
pay to Beneficiary, within ten (10) days after written demand, the amount of any
deficiency between funds available for the Restoration and the cost thereof
(including funds deposited by Grantor pursuant to Paragraph 13(c) or 13(d) of
------------------------
this Paragraph) together with interest thereon at the Default Rate from such
---------
tenth (10th) day through and including the date of payment to Beneficiary.
Notwithstanding the foregoing provisions of this Paragraph 13(e) or anything
---------------
else contained in this Paragraph 13, if Grantor has obtained the release of the
------------
Premises from the lien of this Deed of Trust and the MHP Mortgage in accordance
with the MHP Loan Agreement and the Loan Agreement by payment of the applicable
Release Price and other amounts due, if any, to obtain a release under the MHP
Loan Agreement and the Loan Agreement, and the taking of any other actions
required by the MHP Loan Agreement and the Loan Agreement with respect thereto
(the payment of such amounts and the taking of such actions being collectively
called a "Casualty Event Release"), then Grantor shall not be required to
----------------------
undertake the Restoration described herein. As set forth in the MHP Loan
Agreement and the Loan Agreement, the payment of amounts with respect to a
Casualty Event Release shall not require the payment of a Yield Maintenance
Premium, and any Insurance Proceeds paid to Beneficiary shall be credited
against payments of the Release Price and any other amounts due with respect to
a Casualty Event Release required to be paid by the provisions of the MHP Loan
Agreement and/or the Loan Agreement.
(f) It is intended that, anything contained herein to the
contrary notwithstanding, no trust or fiduciary relationship shall be created by
the receipt by Beneficiary of any Insurance Proceeds, but only a debtor-creditor
relationship between Beneficiary, on the one hand, and Grantor, on the other,
and only to the extent of the Insurance Proceeds.
(g) If any Insurance Proceeds are not paid until after the
extinguishment of the Debt, whether by foreclosure or otherwise, and Beneficiary
shall not have received the entire amount of the Debt outstanding at the time of
such extinguishment, then such Insurance Proceeds, to the extent of the amount
of the Debt not so received, shall be paid to Beneficiary and be the property of
Beneficiary; and Grantor hereby assigns, transfers and sets over to Beneficiary
all of Grantor's right, title and interest in and to such proceeds. The balance
of such Insurance Proceeds, if any, shall be paid to and be the property of
Grantor. The provisions of this Paragraph shall survive the termination of this
---------
Deed of Trust by foreclosure or otherwise as a consequence of the rights and
remedies of Beneficiary hereunder after an Event of Default.
(h) Subject to the provisions of Paragraph 13(d) or 13(e), as
------------------------
applicable, nothing herein contained shall be deemed to excuse Grantor from
repairing or maintaining the Mortgaged Property as provided in this Deed of
Trust or restoring all damage or destruction to the Mortgaged Property,
regardless of the sufficiency or availability of Insurance Proceeds, and the
application or release by Beneficiary of Insurance Proceeds shall not be deemed,
in and of itself, to cure or waive any default or Event of Default or notice of
default. Notwithstanding any
34
<PAGE>
casualty, Grantor and SCLP shall continue to pay the Debt at the time and in the
manner provided for its payment in this Deed of Trust and the Note and the Debt
shall not be reduced until any Insurance Proceeds shall have been actually
received by Beneficiary and applied to the discharge of the Debt or payments
with respect to a Casualty Event Release.
(i) Beneficiary, to the extent that Beneficiary has not been
reimbursed therefor by Grantor, shall be entitled as a first priority out of any
Insurance Proceeds, to reimbursement for all actual costs, fees, reimbursements
and expenses of Beneficiary incurred in the determination and collection of any
such proceeds.
14. Condemnation Proceedings.
------------------------
(a) Subject to the provisions of the MHP Mortgage, in the event
that the Mortgaged Property, or any part thereof, shall be taken pursuant to
Condemnation Proceedings, Beneficiary shall, as hereinafter set forth, have
certain consent rights with respect to settlement of any such Condemnation
Proceedings, but shall not participate in any such Condemnation Proceedings
except as expressly provided herein, and any Condemnation Proceedings that may
be made or any proceeds thereof are hereby assigned to Beneficiary and shall be
received and deposited into the subaccount for Condemnation Proceeds (as defined
in Section 4.2 of the MHP Cash Management Procedures) of the Cash Collateral
Account and held and distributed by Beneficiary in the manner herein set forth.
Grantor will give Beneficiary prompt notice of the actual commencement of any
Condemnation Proceedings affecting the Mortgaged Property or of any threatened
condemnation of which Grantor becomes aware, including proceedings for severance
and change in grade of streets, and will deliver to Beneficiary copies of any
and all papers served in connection with any Condemnation Proceedings.
Beneficiary is hereby authorized to commence, appear in, and prosecute in its
own name or Grantor's name any action or proceeding relating to any Condemnation
Proceedings, upon not less than ten (10) Business Days' prior written notice to
Grantor, if Grantor has not commenced any such action or proceeding. Grantor may
not settle or compromise any claim in connection with any Condemnation
Proceeding, whether involving a Total Taking, Partial Taking or Temporary
Taking, which claim equals or exceeds, or, at the outset of any such
Condemnation Proceedings, appears to involve a sum which is likely to equal or
exceed, in Beneficiary's reasonable judgment based on professional consultation,
the Restoration Benchmark, without the prior written consent of Beneficiary in
each instance, which consent shall not be unreasonably withheld, conditioned or
delayed, and Beneficiary shall have the right to settle or compromise any claim
in connection therewith (irrespective of amount), without the consent of Grantor
after the occurrence of an Event of Default. Grantor agrees to execute any and
all further documents that may be reasonably required in order to facilitate the
collection of any Condemnation Proceeds and the making of any such deposit and
Grantor hereby appoints Beneficiary its attorney-in-fact for the limited purpose
of executing any such documents after the occurrence of an Event of Default,
such power being coupled with an interest and irrevocable.
(b) Subject to the provisions of the MHP Mortgage, if, at any
time during the term of the SC Loan, there occurs a Total Taking (as hereinafter
defined), Beneficiary shall collect any Condemnation Proceeds, and apply the
same, after payment of Beneficiary's
35
<PAGE>
reasonable costs of collection thereof, including reasonable attorneys' fees and
disbursements, to payment of the Debt (but no Yield Maintenance Premium shall be
due), all in such order as Beneficiary shall designate, provided, however, that
-------- -------
except as otherwise provided in the Loan Agreement any such application shall in
no event affect the payments to be made in respect of the Note. Any portion of
any Condemnation Proceeds remaining after the payment in full of the Debt shall
be released by Beneficiary to Grantor. For the purposes of this Paragraph, a
---------
"Total Taking" shall mean any taking or any constructive taking of Grantor's
------------
title to the Premises in Condemnation Proceedings or by agreement by Grantor
which shall, in the reasonable opinion of Beneficiary, render it impracticable
to restore, within six (6) months prior to the Maturity Date, the portion of the
Premises not subject to such taking to a complete architectural unit of
substantially the same economic viability and for the same purposes and uses as
existed immediately prior to the date of the commencement of the Condemnation
Proceedings.
(c) If, at any time during the term of the Loan, there occurs a
taking which is less than a Total Taking (a "Partial Taking"), then, provided
--------------
that no Event of Default exists as of the date of submission of Grantor's claim
in the Condemnation Proceeding with respect to such Partial Taking, Grantor
shall have the right to settle any such claim with respect to any Partial Taking
where the Restoration Cost is less than the Restoration Benchmark, but shall
give prompt written notice of any such claim and settlement to Beneficiary. If
the Restoration Cost equals or exceeds, or, at the outset of such Condemnation
Proceedings, appears to involve a sum which is likely to equal or exceed, in
Beneficiary's reasonable judgment based on professional consultation, the
Restoration Benchmark, then, unless Grantor has obtained the release of this
Deed of Trust as a Condemnation Event Release (as hereinafter defined) in
accordance with the MHP Loan Agreement and/or the Loan Agreement, Beneficiary
shall have the right to participate in the settlement of such claim and all
Condemnation Proceeds relating to such Partial Taking shall be held by
Beneficiary and shall be released to pay the costs of restoration of the
Improvements (a "Condemnation Restoration") subject to and upon satisfaction of
------------------------
the conditions set forth in Paragraphs 13(c) and 13(d) hereof as if such
--------------------------
Condemnation Proceeds constituted Insurance Proceeds and the balance, if any,
shall be paid to Grantor; unless, in Beneficiary's reasonable judgment based on
------
professional consultation, the Condemnation Restoration cannot be completed in
accordance with the conditions of Paragraphs 13(c) and 13(d). In the event that
--------------------------
there exists an Event of Default, or (xx) any of such conditions shall not have
been met, or (yy) the Condemnation Restoration cannot be completed, in
Beneficiary's reasonable judgment based on professional consultation, prior to a
date which is at least six (6) months prior to the Maturity Date, regardless of
compliance with all of the other conditions of Paragraphs 13(c) and 13(d), or
--------------------------
(zz) if the Condemnation Proceeds exceed the cost of the Condemnation
Restoration, Beneficiary, at the discretion of Beneficiary, shall apply the
Condemnation Proceeds, or balance thereof, to payment of the Debt, (but no Yield
Maintenance Premium shall be due), all in such order as Beneficiary shall
designate, provided, however, that except as otherwise provided in the Loan
-------- -------
Agreement, any such application shall in no event affect the schedule of
payments to be made in respect of the Note. If there is any balance of any
Condemnation Proceeds remaining in the hands of Beneficiary after any payment of
the Debt in full, such balance shall be released to Grantor. In the event that
the costs of any permitted Condemnation Restoration, as estimated reasonably by
Beneficiary at any time, shall exceed the net Condemnation Proceeds received by
Beneficiary, Grantor shall deposit such deficiency with Beneficiary.
36
<PAGE>
(d) In the event of any taking of all or any portion of the
Mortgaged Property for temporary use or occupancy ("Temporary Taking"), any
----------------
Condemnation Proceeds with respect to such Temporary Taking shall be treated as
Gross Revenues (as defined in the MHP Loan Agreement) and shall be distributed
and applied in the manner contemplated in the MHP Loan Agreement (but only to
the extent that any such Condemnation Proceeds have not been used for
Condemnation Restoration).
(e) Except as otherwise provided in this Paragraph 14(e),
---------------
nothing contained in this Paragraph 14 shall relieve Grantor of its duty to
------------
maintain, repair, replace or restore the Improvements or the Equipment or
rebuild the Improvements, from time to time, following any Condemnation
Proceedings with respect to a Partial Taking or Temporary Taking and nothing in
this Paragraph 14 shall relieve Grantor of its duty to pay the Debt, which shall
------------
be absolute, regardless of any such occurrence with respect to all or any
portion of the Mortgaged Property. Notwithstanding any taking, whether a Total
Taking, a Partial Taking or a Temporary Taking, Grantor and SCLP shall continue
to pay the Debt at the time and in the manner provided for its payment in this
Deed of Trust and the Note, and the Debt shall not be reduced until any award or
payment therefor shall have been actually received by Beneficiary and applied to
the discharge of the Debt. Notwithstanding the foregoing provisions of this
Paragraph 14(e) or anything else contained in this Paragraph 14, if Grantor has
- --------------- ------------
obtained the release of the Premises and the lien of this Deed of Trust and the
MHP Mortgage in accordance with the MHP Loan Agreement and the Loan Agreement by
payment of the applicable Release Price and other amounts, if any, due to obtain
a release under the MHP Loan Agreement and the Loan Agreement, and the taking of
any other actions required by the MHP Loan Agreement and the Loan Agreement with
respect thereto (the payment of such amounts and the taking of such actions
being, with respect to any Condemnation Proceeding(s), being collectively called
a "Condemnation Event Release"), then Grantor shall not be required to undertake
--------------------------
the Condemnation Restoration described herein. As set forth in the MHP Loan
Agreement and the Loan Agreement, the payment of amounts with respect to a
Condemnation Event Release shall not require the payment of a Yield Maintenance
Premium, and any Condemnation Proceeds paid to Beneficiary shall be credited
against payments of the Release Price and any other amounts due with respect to
a Condemnation Event Release required to be paid by the provisions of the MHP
Loan Agreement and the Loan Agreement. It is recognized that, with respect to a
Partial Taking or a Total Taking, depending on the amount of the award from the
Governmental Authority available to pay the Release Price and any other amounts
due under the MHP Loan Agreement and/or the Loan Agreement, that Grantor may
have to pay to Beneficiary monies in addition to the total available amount of
the Condemnation Proceeds to obtain a Condemnation Event Release.
(f) If a claim under any Condemnation Proceedings arising during
the term of this Deed of Trust is not paid until after the extinguishment of the
Debt, whether by foreclosure or otherwise, and Beneficiary shall not have
received the entire amount of the Debt outstanding at the time of such
extinguishment, then the Condemnation Proceeds relating to any such Condemnation
Proceedings, to the extent of the amount of the Debt not so received, shall be
paid to Beneficiary and be the property of Beneficiary; and Grantor hereby
assigns, transfers and sets over to Beneficiary all of Grantor's right, title
and interest in and to such Condemnation Proceeds. The balance of such
Condemnation Proceeds, if any, shall be paid to and be the
37
<PAGE>
property of Grantor. The provisions of this Paragraph shall survive the
---------
termination of this Deed of Trust by foreclosure or otherwise as a consequence
of the rights and remedies of Beneficiary hereunder after an Event of Default.
(g) All Condemnation Proceeds and other sums deposited with
Beneficiary pursuant to this Paragraph, until expended or applied as provided in
---------
this Paragraph, shall constitute additional security for the Debt and shall be
---------
invested in Permitted Investments with income thereon inuring to the benefit of
Grantor.
15. Compliance With Agreements, Laws, etc. Subject to the provisions
--------------------------------------
of Paragraph 16 hereof relating to permitted contests, Grantor agrees to perform
------------
and comply, and instruct the tenants under any Leases to comply, with all
covenants, agreements and restrictions affecting Grantor, the Mortgaged Property
or any portion thereof, the nonperformance of which would materially impair
Grantor's ability to meet its obligations under any of the SC Transaction
Documents executed by Grantor or would impair the substantial realization by
Beneficiary of the benefits and rights conferred hereunder or under any of the
SC Transaction Documents executed by Grantor, and with all Legal Requirements,
whether the same be directed to the erection, repair, manner of use or
structural alteration of the Improvements or otherwise and to procure and
maintain all licenses or other authorizations required for the proper use,
maintenance and operation of the Mortgaged Property. For the purposes hereof,
"Legal Requirements" shall mean all of the following, whether or not a note or
------------------
notice of violation has been entered, issued or received as a consequence of
non-compliance therewith:
(a) statutes, laws, rules, rulings, orders, regulations,
ordinances, judgments, decrees and injunctions of any Governmental
Authority (including, without limitation, Environmental Laws, the
Americans with Disabilities Act (P.L. 101-336, 42 U.S.C. ss. 12,101
et seq.), and fire, health, handicapped access, sanitation, ecological,
-- ---
historic, landmark, zoning, wetlands and building laws and codes) in
any way applicable to Grantor or the Mortgaged Property or any portion
thereof, or to the ownership, use, development, improvement, occupancy,
possession, operation or maintenance of the Improvements;
(b) requirements of the local Board of Fire Underwriters or
similar body acting in and for the locality in which the Premises are
situated;
(c) requirements of each insurance policy covering or applicable
to all or any portion of the Mortgaged Property or the ownership, use,
development, improvement, occupancy, possession, operation or
maintenance thereof and all requirements of the issuer of each such
policy;
(d) requirements of each Permit; and
(e) the Ground Lease, all REAs and all covenants, agreements,
regulations, restrictions and other encumbrances contained in any
instrument either of record or known to Grantor at any time affecting
the Mortgaged Property or any portion thereof or the
38
<PAGE>
ownership, use, development, improvement, occupancy, possession,
operation or maintenance thereof, in each case whether now or hereafter
enacted or in force. Grantor agrees to enforce all material provisions
of the Ground Lease and all REAs in accordance with their terms and to
comply with all reasonable requests from Beneficiary with respect to
such enforcement.
16. Contest of Impositions, Legal Requirements and Liens.
----------------------------------------------------
Notwithstanding anything to the contrary contained in this Deed of Trust,
Grantor shall have the right to contest, at its own expense, by appropriate
legal proceedings conducted in good faith and with due diligence, the amount or
validity (or the applicability to Grantor or the Mortgaged Property or to the
Note or this Deed of Trust) of any Impositions or encumbrances referred to
herein (other than this Deed of Trust and the other SC Transaction Documents) or
any Legal Requirements, provided that (a) Grantor gives Beneficiary timely
-------- ----
notice of its intention to contest the same and keeps Beneficiary regularly
advised as to the status of such proceedings, (b) the commencement of such
proceedings shall suspend the collection or enforcement of the matter under
contest, (c) there shall be no impairment of the lien of this Deed of Trust or
undue interference with the normal conduct of business at the Mortgaged
Property, (d) neither the Mortgaged Property, nor any Rents therefrom, nor any
part thereof or interest therein, would be in any immediate danger of being
sold, forfeited, attached, condemned, vacated or lost, (e) neither Grantor nor
Beneficiary would be potentially subject to criminal liability or be in imminent
danger of civil liability for failure to comply therewith pending the outcome of
such proceedings, (f) in the case of an Imposition, Grantor shall have either
(i) paid the amount in dispute prior to instituting such contest, in which event
the notice requirement of clause (a) of this Paragraph shall be satisfied by
---------- ---------
giving notice prior to initiating such contest rather than prior to making
payment, (ii) set aside on its books such reserves with respect thereto as may
be required by sound accounting principles or, at Beneficiary's request,
furnished security in an amount equal to 125% of the disputed amount, in rated
securities, cash or bond, to Beneficiary during the pendency of such
proceedings, and (g) if such contest be finally resolved against Grantor,
Grantor shall promptly pay the amount required to be paid, together with all
interest and penalties accrued thereon, and otherwise comply with the applicable
requirement, which payment may be made from the security furnished to
Beneficiary pursuant to clause (ii), and any excess thereof following payment in
full of the applicable imposition shall be returned to Grantor. Grantor shall
indemnify and save Beneficiary harmless from and against any liability, loss,
damage, cost or expense of any kind that may be imposed upon Beneficiary in
connection with any such contest and any determination resulting therefrom. If
an Event of Default under this Deed of Trust or any other Transaction Document
shall occur and be continuing during any such proceeding, Grantor shall pay or
cause to be paid to Beneficiary all refunds resulting from such proceeding which
shall be applied to the payment of the Debt in such order and priority as
Beneficiary shall determine in its sole discretion consistent with the SC
Transaction Documents. Following the occurrence of an Event of Default and until
the Debt has been paid in full, and on five (5) days' prior written notice to
Grantor (so long as no time period for seeking reductions passes or lapses in
such 5-day period, but otherwise on such shorter notices as will not allow any
such time period to pass or lapse) Grantor hereby appoints Beneficiary as its
attorney-in-fact to seek reductions in the assessed valuation of the Mortgaged
Property for real property tax purposes or for other purposes and to prosecute
any
39
<PAGE>
action or proceeding in connection therewith. This power of attorney is a
power coupled with an interest and is irrevocable.
17. Cure of Defaults by Beneficiary. If Grantor shall:
-------------------------------
(a) default in the payment of any Impositions as herein required
(subject to the provisions of Paragraph 16 relating to permitted
------------
contests);
(b) fail to keep in any material respect the Improvements,
Equipment and Personal Property in good repair and such failure shall
not be cured within any applicable grace period;
(c) fail or refuse to insure the Mortgaged Property as herein
required;
(d) fail to pay and satisfy liens or encumbrances against the
Mortgaged Property in accordance with the terms of this Deed of Trust
(subject to the provisions of Paragraph 16 relating to permitted
------------
contests);
(e) fail to pay any other sum or make any other deposit
elsewhere in this Deed of Trust required to be paid or deposited and
such failure shall not be cured within any applicable grace period; or
(f) otherwise fail to make any payment or fail in any material
respect to perform any act required to be made or performed hereunder,
and such failure shall not be cured within any applicable grace period;
then Beneficiary, following not less than five (5) Business Days' prior
written notice to Grantor (or such shorter notice as shall be
reasonable under the circumstances, including no notice in the case of
an emergency in which no notice may feasibly be given) and without
waiving or releasing Grantor from any obligation or default hereunder,
may (without having any obligation to do so):
(i) pay such Impositions or redeem the Mortgaged Property
from any tax sale or forfeiture or purchase any tax title
obtained, or that shall be obtained, thereon without inquiring
into the validity or invalidity of any such Impositions or tax
deed;
(ii) make repairs to the Mortgaged Property;
(iii) procure such insurance and pay such insurance premium
charges; it being agreed that the power of attorney granted by
---------------
Grantor to Beneficiary pursuant to the final clause of this
Paragraph 17 shall apply to the matters set forth in the
------------
immediately preceding sub-clauses (i), (ii) and (iii);
and, additionally, in accordance with and consistent with the
provisions of this Paragraph 17 and the contractual agreements between
------------
Grantor and Beneficiary set forth in the
40
<PAGE>
SC Transaction Documents generally, but without the right to utilize
the power of attorney set forth in the final clause of this
Paragraph 17, Beneficiary may:
------------
(iv) pay or settle any and all suits or claims for such
liens or satisfy any such encumbrances or any other claims that
may be made against the Mortgaged Property or any part thereof;
(v) pay any other sum or make any other deposit herein
required to be paid or made by Grantor; or
(vi) pay any such sum or perform any such act for the
account and at the expense of Grantor, and enter upon the
Mortgaged Property upon reasonable notice and at reasonable times
for any such purpose and take all such action thereon as, in the
reasonable opinion of Beneficiary, may be necessary or appropriate
therefor.
All monies paid for any of the purposes set forth in this Deed of Trust
and all expenses paid or incurred in connection therewith, including
reasonable attorneys' fees and disbursements and any other monies
disbursed or advanced by Beneficiary to protect the lien of this Deed
of Trust, or expended pursuant to any of sub-clause (i) through (vi)
above, shall be due and payable by Grantor to Beneficiary within ten
(10) days after written demand therefor and, if not paid within such
ten (10) day period, shall bear inter est, from and including the date
of disbursement or advance to and including the date of repayment by
Grantor, at the Default Rate, and to the extent that such amounts and
costs paid by Beneficiary shall constitute payment of (A) Impositions,
(B) insurance premiums, (C) expenses incurred in connection with
upholding the lien of this Deed of Trust, includ ing, without
limitation, the expenses of any litigation to prosecute or defend the
rights and liens created by this Deed of Trust, or (D) any amounts,
costs or charges to which Bene ficiary becomes subrogated, upon
payment, whether under recognized principles of law or equity or
express statutory authority; then, and in each such event, such
amounts, costs and charges and interest thereon shall be added to the
Debt and be secured by this Deed of Trust and the Other SC Mortgages.
For the purpose of carrying out the provisions and exercising the
rights, powers and privileges granted by sub-clauses (i) or (ii) or
(iii) of this Paragraph, Grantor hereby irrevocably constitutes and
---------
appoints Beneficiary, following an Event of Default, its true and
lawful attorney-in-fact to execute, acknowledge and deliver any
instruments and do and perform any acts such as are referred to in this
Paragraph, in the name and on behalf of Grantor, with full power of
---------
substitution vested in Beneficiary to designate another entity or
entities to exercise any power and perform any function which
Beneficiary could perform pursuant to the foregoing grant. This power
of attorney is a power coupled with an interest and is irrevocable.
18. Indemnity. Subject to the Non-Recourse provisions of the final
---------
sentence of this Paragraph 18, Grantor hereby indemnifies Beneficiary and its
------------
directors, officers, agents and employees (collectively the "Indemnified
-----------
Parties"), and saves each of them harmless from and against all liabilities
- -------
(other than tax liability imposed on Beneficiary for any income earned by
41
<PAGE>
reason of the Note or any other SC Transaction Document) claims, demands,
actions, proceedings, suits, causes of action, injuries, obligations, loss,
actual damages (including, without limitation, Beneficiary's costs and expenses
related thereto and any applicable Yield Maintenance Premium), fines, penalties,
judgments, costs, expenses (including, without limitation, reasonable
architects', engineers', accountants', consultants' and attorneys' fees and
disbursements) expenses of bonding liens, and other litigation expenses,
incurred by, imposed upon or asserted against the Indemnified Parties (except as
a result of the willful, wrongful acts or omissions or gross negligence of the
applicable Indemnified Party) in connection with or arising out of:
(a) Beneficiary's or Trustee's interest in this Deed of Trust,
the Assignment, the Note, any other SC Transaction Document, or any
other document or instrument hereafter executed by Grantor and
delivered to Beneficiary in connection with the Debt or any
restructuring thereof;
(b) any acts or omissions of Beneficiary or Trustee in
connection with the reasonable exercise by Beneficiary or Trustee of
any right, power or remedy available to Beneficiary or Trustee under
this Deed of Trust or any other SC Transaction Document, including,
without limitation, any action or proceeding to protect the lien of
this Deed of Trust or to foreclose this Deed of Trust;
(c) any failure by Grantor to comply with any terms, conditions
or other provisions set forth in this Deed of Trust or any other SC
Transaction Document;
(d) any use, non-use, possession, occupancy, alteration, repair,
condition (patent or latent), operation, maintenance, or management of
the Mortgaged Property or any portion thereof;
(e) any accident, injury (including death), or damage to any
person or property occurring in, on or about the Mortgaged Property or
any part thereof, whether resulting from any act, omission or
negligence of Grantor, its agents, employees, contractors, lessees,
sublessees, licensees, invitees, or otherwise;
(f) any misrepresentation by Grantor, or its general partner
contained in this Deed of Trust or in any other SC Transaction
Document;
(g) any claim for any premium or other charge or any brokerage
commission or other compensation by any person acting as such with
respect to the SC Loan and this Deed of Trust and claiming through
Grantor but not through Beneficiary;
(h) any capital improvements or other work or thing done in, on
or about the Mortgaged Property or any part thereof (except any of the
foregoing that are directed by Beneficiary);
42
<PAGE>
(i) any past, current and/or future offer for the purchase or
sale of equity interests in Grantor, including, without limitation,
liabilities under any applicable securities or blue sky laws; or
(j) any tax attributable to the ownership, assignment,
execution, delivery, filing, recording or enforcement of any of the SC
Transaction Documents.
Nothing contained in this Paragraph 18, however, shall impose upon Grantor the
------------
costs of the Securitization which are, pursuant to the Loan Agreement, to be
paid by Beneficiary. All sums payable to any of the Indemnified Parties under
this Paragraph 18 shall be deemed a part of the Debt, shall be paid by Grantor
------------
to the applicable Indemnified Party within ten (10) days after written demand
(unless another period is expressly set forth in this Deed of Trust or another
SC Transaction Document) and, if not paid within such ten (10) day or other
specified period, shall accrue interest at the Default Rate from and including
the date of disbursement or advance by the applicable Indemnified Party to and
including the date of repayment by Grantor. Grantor's obligations under this
Paragraph 18 shall, until the expiration of all applicable statutes and periods
- ------------
of limitation, if any, survive payment in full of the Note and any discharge,
release or satisfaction of this Deed of Trust, any complete or partial
foreclosure of this Deed of Trust and/or the delivery of one or more deeds in
lieu of any such foreclosure. Grantor's obligations under this Paragraph 18
------------
shall be Non-Recourse (as such term is defined in the Loan Agreement); provided
that nothing contained herein shall be deemed to be in derogation of any right
or remedy of Beneficiary and/or Trustee under any SC Transaction Document which,
by its express terms, is a right or remedy which is not Non-Recourse as to
Grantor.
19. Events of Default.
-----------------
(a) Each of the following events shall constitute an "Event of
--------
Default" hereunder:
- -------
(i) an "Event of Default", as such term is defined in the
Loan Agreement;
(ii) failure of Grantor to pay on the due date any payment
due under the Note;
(iii) failure by Grantor to perform or observe in any
material respect any other covenant, obligation, condition or provision
hereunder or under any of the Other SC Mortgages which failure
continues unremedied for a period of thirty (30) days after writ ten
notice thereof to Grantor requiring the same to be remedied; provided,
--------
however, that if such failure is susceptible of cure but cannot be
-------
cured within such thirty (30) day period and provided Grantor has
within such thirty (30) day period commenced and is diligently
prosecuting such cure, such thirty (30) day period shall be extended to
not later than one hundred eighty (180) days after the date on which
Grantor received such written notice;
43
<PAGE>
(iv) any default beyond any applicable grace period under
any lien or deed of trust encumbering any part of the Mortgaged
Property, whether senior or junior in lien to this Deed of Trust and
whether now or hereafter held by Beneficiary or any other party;
(v) if a default beyond any applicable notice and/or grace
period occurs under any fee mortgage in respect of the Land and if
Beneficiary shall be made a party in any action or proceeding in
connection with any such fee mortgage, including, without limitation, a
foreclosure or similar proceeding, unless the holder of such fee
mortgage has agreed not to disturb Grantor or Grantor provides evidence
to the satisfaction of Beneficiary that such fee mortgage is
subordinate to the Ground Lease and this Deed of Trust and the MHP
Mortgage in accordance with applicable local law;
(vi) if an event of default or an event which with the
giving of notice or passage of time or both would constitute an event
of default occurs under the Ground Lease or if the Ground Lease
terminates for any reason whatsoever;
(vii) if any provision of this Deed of Trust or any other
SC Transaction Documents conflicts with any provision of the Ground
Lease and the Fee Owner or any other party having rights under the
Ground Lease materially hinders or prevents Trustee or Beneficiary from
exercising its rights, remedies and privileges under this Deed of Trust
or other SC Transaction Documents, including, without limitation, its
rights under Paragraph 13(d) and Paragraph 14(c) hereof; or
--------------- ---------------
(viii) an Event of Default under the MHP Loan Agreement
and/or MHP Mortgage.
(b) Upon the occurrence of an Event of Default, Beneficiary
may, at its option, declare the entire unpaid balance of the Debt to be
forthwith due and payable, and thereupon such balance shall become so due and
payable without presentment, protest or further demand or notice of any kind,
all of which are hereby expressly waived, and Grantor or SCLP will forthwith pay
to Beneficiary the entire Debt, including principal of and interest accrued on
the Note and, to the extent permitted by law, the Yield Maintenance Premium, and
all other premiums and charges, if any, provided in the Note, this Deed of Trust
and the other SC Transaction Documents; provided, however, that if at any time
-------- -------
prior to the Maturity Date the balance of the Debt shall become so due and
payable, and all arrears of interest and other charges of any kind due as part
of the Debt (with interest so far as may be lawful on any overdue installments
of interest at the Default Rate) shall be paid, and all defaults (other than the
payment of principal hereunder which has been so declared due and payable) shall
have been cured or the cure thereof secured to the sole satisfaction of
Beneficiary or other provision deemed by Beneficiary to be adequate shall be
made therefor, then and in such case Beneficiary, in its sole discretion, and by
written notice delivered to Grantor, may waive such Event of Default and its
consequences and rescind or annul such declaration, but no such waiver shall
extend to or affect any subsequent default, or impair any right consequent
thereon.
44
<PAGE>
(c) To the extent that a default under this Deed of Trust, any
of the Other SC Mortgages or any of the other SC Transaction Documents is not
cured within the applicable notice and cure period, if any, specified herein or
therein, the same shall not constitute an Event of Default hereunder or
thereunder, as the case may be, if such default is subsequently cured and such
cure is accepted in writing by Beneficiary or if such default is subsequently
waived in writing by Beneficiary and any rights or remedies available to
Beneficiary or Trustee hereunder or under any of the other SC Transaction
Documents on account of any such Event of Default so cured and accepted or
waived shall thereupon terminate (but such remedies shall continue to be
available in connection with any subsequent or other Events of Default, whether
of like or unlike nature).
20. Default Rate. Upon an Event of Default, Beneficiary shall be
------------
entitled to receive and Grantor and SCLP shall pay interest on the entire unpaid
principal sum (including, without limitation and to the extent permitted by law,
any accrued and unpaid interest thereon) at the "Default Rate" (as defined in
------------
the Note) for the duration of such default (unless Beneficiary has, at its
option, declared the entire unpaid balance of the Debt to be forthwith due and
payable in which case interest shall continue to be paid at the Default Rate
until the Debt has been paid in full). In no event shall the Default Rate exceed
the maximum rate allowed by law. Any interest that accrues under any of the SC
Transaction Documents at the Default Rate shall be payable whether accruing
before or after entry of any judgment.
21. Remedies. If any one or more of the Events of Default shall
--------
occur, then and in any such event Beneficiary shall have the right of
acceleration and all other remedies provided in this Deed of Trust or in the
Note or otherwise provided in any SC Transaction Document, by law or statute or
in equity, all of which rights and remedies shall, to the fullest extent
permitted by law, be cumulative. To the extent the laws of the State limit or
deny (i) the availability of the exercise of any of the remedies set forth
below, including without limitation, the remedies involving a power of sale on
the part of the Beneficiary and terms of this Deed of Trust, or (ii) the
enforcement of waivers and indemnities made by Grantor, such remedies, waivers
or indemnities shall be exercisable or enforceable, any provisions in this Deed
of Trust to the contrary notwithstanding, if, and only to the extent, permitted
by the laws of the State in force at the time of the exercise of such remedies
or the enforcement of such waivers or indemnities without regard to the
enforceability of such remedies, waivers or indemnities at the time of execution
and delivery of this Deed of Trust. Such rights and remedies of Beneficiary and
Trustee shall include, without limitation, the following:
(a) Possession, Management and Income. Grantor, upon written
---------------------------------
demand of Beneficiary, shall forthwith surrender to Beneficiary or
Trustee, or both of them, the actual possession of the Mortgaged
Property, and Beneficiary or Trustee and such officers or agents as
either may appoint, (i) may enter and take possession of the Mortgaged
Property together with the books, papers and accounts of Grantor
relating thereto, (ii) may dispossess Grantor, its agents and servants
and all other persons therefrom (excluding bona fide hotel guests),
(iii) may hold, operate and manage the Mortgaged Property and from time
to time make all necessary repairs and such alterations, additions,
advances and improvements as Beneficiary shall deem prudent, (iv) may
receive the Rents thereof and
45
<PAGE>
exercise all rights and powers of Grantor with respect to the Mortgaged
Property and the Improvements, whether in the name of Grantor or
otherwise, including, without limitation, the right to make, cancel,
enforce or modify Leases, obtain and evict tenants (in accordance with
applicable law), and demand, sue for, collect and receive all Rents and
may pay therefrom all costs and expenses of so taking, holding and
managing the Mortgaged Property, including, without limitation,
reasonable compensation to Beneficiary's or Trustee's, or both's,
agents and attorneys, all prior or coordinate liens and encumbrances,
all Impositions and other assessments and other charges then due or
thereafter accruing, and all expenses of such repairs, alterations,
additions, improvements and other disbursements made by Beneficiary or
Trustee pursuant to the terms hereof, and Beneficiary may apply the
remainder of the monies so received by it to the payment of the unpaid
principal of, and interest on, the Note, the Yield Maintenance Premium
and other items of the Debt then due and payable, and (v) may succeed
to all the rights of Grantor, including any rights to unearned
premiums, in and to any insurance policies covering all or any portion
of the Premises, the Improvements, the Personal Property and/or the
Equipment, including the right to receive Refunds, Insurance Proceeds
and Condemnation Proceeds which would otherwise be payable to Grantor
pursuant to this Deed of Trust. Beneficiary and Trustee shall not be
subject to any liability for, or by reason of, any such entry, taking
possession, exclusion, holding, operation or management, except for
willful, wrongful acts or omissions or gross negligence of Beneficiary
or Trustee or their officers, directors, agents, contractors or
employees;
(b) Partial Foreclosure. Beneficiary, at its option, may upon
-------------------
five (5) days' notice or such longer notice period as may be required
by statute institute proceedings for the complete or partial
foreclosure of this Deed of Trust or take such steps to protect and
enforce its rights whether by action, suit or proceeding in equity or
at law for the specific performance of any covenant, condition or
agreement in the Note or in this Deed of Trust (without being required
to foreclose this Deed of Trust), or in aid of the execution of any
power herein granted, or for any foreclosure hereunder, or for the
enforcement of any other appropriate legal or equitable remedy or
otherwise as Beneficiary shall elect, including, without limitation, to
direct Trustee to foreclose this Deed of Trust for any portion of the
Debt which is then due and payable; provided, however, that if a
-------- -------
partial foreclosure sale is made, such sale shall be subject to the
continuing lien of the SC Transaction Documents for the unmatured part
of the Debt; and such sale shall not in any manner affect the unmatured
part of the Debt, but as to such unmatured part thereof, and the lien
thereon, the same shall remain in full force and effect as though no
foreclosure had occurred. Several foreclosure sales may be made
pursuant to partial foreclosures without exhausting the right of full
or partial foreclosure sale for any unmatured part of the Debt, it
being the purpose to provide for a partial foreclosure sale of the Debt
for any matured portion of the Debt without exhausting the power to
foreclose and to sell the Mortgaged Property pursuant to such partial
foreclosure for any other part of the Debt, whether matured at the time
or subsequently maturing, and without exhausting any right of
acceleration and full foreclosure. Notwithstanding the filing of any
partial foreclosure or entry of a decree of sale therein, Beneficiary
may elect at any time prior to a foreclosure sale pursuant to such
decree to discontinue such partial
46
<PAGE>
foreclosure and to accelerate the Debt by reason of any uncured Event
of Default upon which such partial foreclosure was predicated or by
reason of any other Events of Default and proceed with full foreclosure
proceedings;
(c) Suits. To the extent permitted by law, Beneficiary, at its
-----
option, may, either with or without first taking possession, direct
Trustee to proceed by suit or suits in equity and/or at law, or by any
other appropriate remedy or proceeding, to protect and enforce
Beneficiary's and/or Trustee's rights hereunder whether for the
specific performance (to the extent permitted by law) of any covenant
or agreement contained herein or in the Note or for an injunction
against the violation of any of the terms hereof or thereof or in aid
of the exercise of any right, power or remedy granted to Beneficiary
herein or therein, or to enforce the payment of the Note, or to
foreclose the lien and security interest of this Deed of Trust against
the Mortgaged Property or any part thereof and to have all of the
Mortgaged Property or any part thereof sold in one or more sales (as an
entirety or in parcels) under the judgment or decree of a court of
competent jurisdiction or otherwise. All rights of action under this
Deed of Trust or in respect of the Note may be enforced by Beneficiary
or Trustee, without the production of the Note and without the
possession thereof (to the extent Beneficiary or its agent gives a bona
----
fide lost note affidavit in compliance with local law) at any trial or
----
other proceeding relative thereto to the extent permitted by law;
(d) Receiver. Subject to the provisions of the MHP Mortgage, to
--------
the extent permitted by law and without the necessity to prove the
value or occupancy of the security or the solvency or insolvency of any
person then legally or equitably liable for payment of the Debt,
Beneficiary shall be entitled as a matter of right, ex parte and
without notice, to the appointment of a receiver to enter upon and take
possession of the Mortgaged Property, perform all acts necessary or
useful for the operation, use and maintenance of the Mortgaged Property
and to collect all Rents thereof and apply the same and to exercise
such other powers as are permitted by applicable law and the court
making such appointment may direct and Grantor hereby consents to the
appointment of such receiver. The expenses, including receiver's fees,
reasonable attorneys' fees, costs and disbursements and agent's
compensation, incurred pursuant to the powers herein contained shall be
secured by this Deed of Trust. The right to enter and take possession
of and to manage and operate the Mortgaged Property, and to collect the
Rents, whether by a receiver or otherwise, shall be cumulative to any
other right or remedy hereunder or afforded by law, and may be
exercised concurrently therewith or independently thereof. Beneficiary
shall be liable to account only for such Rents actually received by
Beneficiary, whether received pursuant to this subparagraph 21(d) or
------------------
subparagraph 21(a). Notwithstanding the appointment of any receiver or
------------------
other custodian, Beneficiary shall be entitled as pledgee to the
possession and control of any cash, deposits, or instruments at the
time held by or payable or deliverable under the terms of this Deed of
Trust to Beneficiary. Without limiting any of Beneficiary's rights
hereunder, but subject to the rights of the holder of the MHP Mortgage,
Beneficiary or Trustee shall be entitled, as a matter of strict right,
without notice and upon ex parte application, and without regard to the
-- -----
value or occupancy of the security, or the solvency of Grantor, or the
adequacy of the
47
<PAGE>
Mortgaged Property or other collateral as security for the Note, to
have a receiver appointed to enter upon and take possession of the
Mortgaged Property, collect the Rents and revenues and apply the same
as the court may direct, such receiver to have all the rights and
powers permitted under the laws of the jurisdiction in which the
Mortgaged Property is located. Grantor hereby waives any requirements
on the receiver or Beneficiary to post any surety or other bond.
Beneficiary or the receiver may also take possession of, and for these
purposes use, any and all personalty which is a part of the Mortgaged
Property and used by Grantor in the rental or leasing thereof or any
part thereof. The expense (including the receivers fees, counsel fees,
costs and agents compensation) incurred pursuant to the powers herein
contained shall be secured by this Deed of Trust. To the extent not
prohibited by applicable law, Beneficiary shall (after payment of all
costs and expenses incurred) apply such Rents and revenues received by
it in the order set forth in Paragraph 23 of this Deed of Trust. The
------------
right to enter and take possession of the Mortgaged Property, to manage
and operate the same, and to collect the Rents and revenues, whether by
receiver or otherwise, shall be cumulative to any other right or remedy
hereunder or afforded by law, and may be exercised concurrently
therewith or independently thereof. Beneficiary shall be liable to
account only for such Rents and revenues actually received by
Beneficiary.
(e) Sale in One Parcel. In the event of a sale, the Mortgaged
------------------
Property may be sold in one parcel. Grantor hereby waives its rights,
if any, to require that the Mortgaged Property be sold as separate
units, tracts or estates;
(f) Security Interest. In addition to the rights and remedies of
-----------------
Beneficiary and Trustee set forth herein and in the Note and the other
SC Transaction Documents, and not in lieu thereof, Beneficiary shall
have all of the rights and remedies of a holder of a security interest
under the Code, or under other applicable law with respect to the
Security Interest Property and all rights and remedies provided or
referred to herein and therein, shall, to the fullest extent permitted
by applicable law, be cumulative;
(g) Foreclosure. Beneficiary, at its option, may direct Trustee
-----------
to institute an action to foreclose this Deed of Trust upon five (5)
days' notice or such longer period for notice required by statute, or
take such other action as may be permitted and available to
Beneficiary, at law or in equity, for the enforcement of the SC
Transaction Documents and the realization on the Mortgaged Property or
any other security held by Beneficiary, and proceed thereon through to
final judgment and execution thereon for the Debt, including, without
limitation, the Yield Maintenance Premium, all accrued and unpaid
interest and all costs of enforcement. In furtherance thereof, to the
extent permitted by applicable law, Beneficiary and/or Trustee shall
have the full power and right to sell the Mortgaged Property and all
estate, claim, demand, right, title and interest of Grantor therein and
right of redemption thereof pursuant to an assent to a decree or
otherwise, at one or more sales, as an entirety or in parcels, at such
time and place, upon such terms and after such notice thereof as may be
required or permitted by law or statute or in equity, it being agreed
that in the event of a sale, by foreclosure or otherwise, of less than
all of the Mortgaged Property, the SC Transaction Documents shall
continue as a lien on
48
<PAGE>
the remaining portion of the Mortgaged Property. Grantor hereby assents
to the passage of a decree for the sale of the Mortgaged Property upon
the occurrence of an Event of Default by any court having jurisdiction;
and
(h) Power of Sale. To the extent permitted by applicable law,
-------------
Trustee may sell, release and convey the Premises at public sale and
execute and deliver to the purchasers at such sale, good and sufficient
deeds of the conveyance and shall render any surplus funds, after
payment in full of the Debt and the expenses of such sale, including
reasonable attorneys' fees as provided by law, to Grantor. Without
limiting any of Beneficiary's rights hereunder, Beneficiary or Trustee
may cause the Mortgaged Property and all estate, right, title and
interest, claim and demand therein, or any part thereof to be sold as
follows:
(i) Beneficiary may proceed as if all of the Mortgaged
Property were real property, in accordance with (iv) below, or
Beneficiary may elect to treat any of the Mortgaged Property which
consists of a right in action or which is property that can be
severed from the Premises without causing structural damage
thereto as if the same were personal property, and dispose of the
same in accordance with (iii) below, separate and apart from the
sale of real property, with the remainder of the Mortgaged
Property being treated as real property;
(ii) Beneficiary may cause any such sale or other
disposition to be conducted immediately following the expiration
of any grace period, if any, herein provided (or required by law)
or Beneficiary may delay any such sale or other disposition for
such period of time as Beneficiary deems to be in its best
interest. Should Beneficiary desire that more than one such sale
or other disposition be conducted, Beneficiary may, at its option,
cause the same to be conducted simultaneously, or successively on
the same day, or at such different days or times and in such order
as Beneficiary may deem to be in its best interest;
(iii) should Beneficiary elect to cause any of the Mortgaged
Property to be disposed of as personal property as permitted by
(i) above, it may dispose of any part thereof in any manner now or
hereafter permitted by Division 9 of the Code or in accordance
with any other remedy provided by law. Both Grantor and
Beneficiary shall be eligible to purchase any part or all of such
property at any such disposition. Any such disposition may be
either public or private as Beneficiary may so elect, subject to
the provisions of the Code. Beneficiary shall give Grantor at
least five (5) days' prior written notice of the time and place of
any public sale or other disposition of such property or of the
time at or after which any private sale or any other intended
disposition is to be made, and if such notice is sent to Grantor
it shall constitute reasonable notice to Grantor;
(iv) should Beneficiary elect to sell the Mortgaged Property
which is real property or which Beneficiary has elected to treat
as real property, upon such election Beneficiary or Trustee shall
give such notice of default and election to sell
49
<PAGE>
as may then be required by law. Thereafter, upon the expiration of
such time and the giving of such notice of sale as may then be
required by law, Trustee, at the time and place specified in the
notice of sale, shall sell such Mortgaged Property, or any portion
thereof specified by Beneficiary, at public auction to the highest
bidder for cash in lawful money of the United States, subject,
however, to the provisions of (v) below. Beneficiary may, from
time to time, postpone the sale by public announcement thereof at
the time and place noticed therefor. If the Mortgaged Property
consists of several lots or parcels, Beneficiary may designate the
order in which such lots or parcels may be offered for sale or
sold, and may direct that such property be sold in one parcel, as
an entirety, or in such parcels as Beneficiary, in its sole
discretion, may elect. Grantor expressly waives any right which it
may have to direct the order in which any of the Mortgaged
Property shall be sold, and its rights, if any, to require that
the Mortgaged Property be sold as separate tracts, lots, units or
parcels. Any person, including Grantor, Trustee or Beneficiary,
may purchase at the sale. Upon any sale, Trustee shall execute and
deliver to the purchaser or purchasers a deed or deeds conveying
the property so sold, but without any covenant or warranty
whatsoever, express or implied, whereupon such purchaser or
purchasers shall be let into immediate possession;
(v) upon any sale of the Mortgaged Property, whether made
under a power of sale herein granted or pursuant to judicial
proceedings, if the holder of the Note is a purchaser at such
sale, it shall be entitled to use and apply all or any portion of
the indebtedness then secured hereby for or in settlement or
payment of all or any portion of the purchase price of the
property purchased; and
(vi) in the event of a sale or other disposition of any such
Mortgaged Property or any part thereof, and the execution of a
deed or other conveyance pursuant thereto, the recitals in the
deed or deeds of facts (such as of a default, the giving of notice
of default and notice of sale, demand that such sale should be
made, postponement of sale, terms of sale, sale, purchaser,
payment of purchase money, and any other fact affecting the
regularity or validity of such sale or disposition) shall be
conclusive proof of the truth of such facts; and any such deed or
conveyance shall be conclusive against all persons as to such
facts recited therein.
Trustee shall be entitled, in its sole discretion, to exercise all or
any of the rights and remedies provided herein or in any of the other
SC Transaction Documents or which may be given by statute, at law or in
equity, or otherwise in such order and manner as Trustee shall elect,
without impairing Beneficiary's or Trustee's rights under any of the SC
Transaction Documents and without affecting the liability of any
person, firm, corporation, or other entity for the sums secured by the
SC Transaction Documents.
50
<PAGE>
22. Authorization to Execute Deeds; Adjournments.
--------------------------------------------
(a) Grantor irrevocably appoints Beneficiary as its true and
lawful attorney-in-fact, which appointment is coupled with an interest, for the
purpose, following an Event of Default and the establishment of the maturity of
the Debt (in accordance with the provisions of this Deed of Trust or by a court
of competent jurisdiction), of effectuating, to the extent permitted by
applicable law of the State, any sale, assignment, transfer or delivery of the
Mortgaged Property or any part thereof or any interest therein for the
enforcement of this Deed of Trust as Beneficiary may consider reasonably
necessary or appropriate, with full power of substitution.
(b) Beneficiary may adjourn, or direct Trustee to adjourn, from
time to time, in accordance with applicable law, any sale to be made by it under
or by virtue of this Deed of Trust by announcement at the time and place
appointed for such sale or for such adjourned sale or sales and, except as
otherwise provided by any applicable provision of law, Beneficiary, without
further notice or publication, may make such sale at the time and place to which
the same shall be so adjourned.
(c) In the event that Beneficiary has proceeded with the
enforcement of any right under this Deed of Trust by foreclosure sale or
otherwise and such proceedings shall have been discontinued or abandoned for any
reason or shall have been determined adversely, then, in every such case,
Grantor and Beneficiary shall be restored to their respective former positions
and rights hereunder with respect to the Mortgaged Property, subject to the lien
hereof.
23. Proceeds of Foreclosure Sale. In any foreclosure of this Deed of
----------------------------
Trust there shall be allowed and included in the decree of sale, to be paid, in
the following order, out of the rents, revenues, issues, income, products and
profits derived from the Mortgaged Property or the proceeds of such sale:
First: All court costs, allowances authorized or permitted by
-----
statute or a court, Trustee's fees and charges, fees and expenses of
receivers, reasonable attorneys' fees and disbursements (which may
include reasonable, actual billed costs, if any, of any attorney in the
employ of Beneficiary or Trustee and fees for services performed by
legal assistants and other non-lawyers), appraisers' fees, costs of
environmental audits and reports, expenditures for documentary and
expert evidence, stenographers' charges, publication costs and costs of
procuring all abstracts of title, title searches and examinations,
title policies and similar data with respect to title which Beneficiary
or Trustee may reasonably incur and any other expenses of the
foreclosure proceeding (all of which may be estimated as to items to be
expended after the entry of the decree), with interest thereon (to the
extent permitted by law), from the date of any such advance until paid
to Beneficiary, computed at the Default Rate;
Second: All other amounts (including, without limitation, all
------
Impositions other than taxes subject to which the Mortgaged Property
was sold and all direct and indirect costs and expenses incurred by or
on behalf of Beneficiary in the operation and
51
<PAGE>
maintenance of the Mortgaged Property, the collection of Rents and the
enforcement of any of their remedies under the SC Transaction Documents
or by applicable law) advanced or paid by Beneficiary pursuant to the
Note, this Deed of Trust or any other SC Transaction Document, with
interest thereon (to the extent permitted by law), from the date of any
such advance until paid to Beneficiary, computed at the Default Rate;
Third: Any indebtedness secured by this Deed of Trust and at the
-----
time due and payable (whether by acceleration or otherwise), including
all principal amounts, the Yield Maintenance Premium, if any, and
interest at the time due and payable under the Note, and interest (to
the extent permitted by law) at the Default Rate on any overdue
principal and (to the extent permitted by law) any other sum
constituting a portion of the Debt in such order and priority as
Beneficiary shall in its sole discretion determine; and
Fourth: All other amounts required to be paid by Grantor pursuant
------
to any provision of any SC Transaction Document.
Subject to the provisions of Paragraph 39 hereof, any surplus of the proceeds of
------------
such sale shall be paid promptly to the person or entity legally entitled
thereto. In the event Trustee cannot determine the person or persons to whom the
surplus should be paid or Trustee concludes that a controversy exists with
respect to the surplus, Trustee may pay the surplus into a court of competent
jurisdiction in an interpleader action and all expenses of such action,
including legal fees incurred by Beneficiary and Trustee, shall be paid from the
surplus or, if the surplus is insufficient, by Grantor.
24. Purchase of the Mortgaged Property by Beneficiary. Beneficiary
-------------------------------------------------
may be a purchaser of the Mortgaged Property or any part thereof or any interest
therein at any sale thereof, whether pursuant to foreclosure or power of sale or
otherwise, and may apply the amount of the Debt outstanding (or such portion
thereof as the Beneficiary or Trustee shall determine in its sole discretion),
and the expenses of the sale and costs of the action and any other sums which
Beneficiary or Trustee is authorized to charge under this Deed of Trust or under
applicable law toward the purchase price thereof.
25. Security Agreement; Uniform Commercial Code.
-------------------------------------------
(a) This Deed of Trust constitutes a security agreement under
the Code and a fixture filing for the purposes of Division 9 of the Code and a
security interest shall be deemed, and hereby is, granted by Grantor to
Beneficiary and attached to the Security Interest Property for the benefit of
Beneficiary as additional security for the Debt.
(b) To the extent permitted by law, Grantor hereby authorizes
Beneficiary to file financing and continuation statements to continue such lien
with respect to the Security Interest Property without the signature of Grantor
and, upon reasonable request, Grantor shall promptly execute financing and
continuation statements in form satisfactory to Beneficiary to secure
Beneficiary's interest in the Security Interest Property. Grantor shall further,
from time to time, upon the written demand of Beneficiary, execute, acknowledge
and deliver any financing
52
<PAGE>
statement, renewal, affidavit, certificate, continuation statement or other
document as Beneficiary may request in order to perfect, preserve, continue,
extend or maintain the security interest and priority of this Deed of Trust or
such other security instrument as a valid lien subject to the Permitted
Exceptions. Grantor hereby irrevocably appoints Beneficiary as attorney-in-fact
(which appointment shall be deemed to be coupled with an interest) for the
limited purpose of executing and filing such financing and continuation
statements. Grantor agrees to pay to Beneficiary, on written demand, all costs
and expenses (including reasonable attorneys' fees and disbursements) incurred
by Beneficiary in connection with the preparation, execution, acknowledgment,
recording, filing and refiling of any such instrument or document, including,
without limitation, the charges for examining title which amounts, as well as
any other amounts required to be paid to Beneficiary pursuant to this Paragraph,
---------
together with interest thereon at the Default Rate from the date of any such
expenditure by Beneficiary until repayment, and such sum, together with such
interest, shall constitute a portion of the Debt secured by the lien of this
Deed of Trust. Neither a request of Beneficiary hereunder nor the failure of
Beneficiary to make such a request shall be construed as a release of any
portion of the Mortgaged Property from the lien of this Deed of Trust, this
covenant and any such security agreement or other similar security instrument
delivered to Beneficiary being cumulative and additional security for payment of
the Debt.
(c) Upon the occurrence of any Event of Default, Beneficiary
shall have all of the rights and remedies of a secured party under the Code with
respect to the Security Interest Property, or other applicable law, and all
rights and remedies provided for herein and in the Note, all of which rights and
remedies are cumulative to those provided elsewhere in this Deed of Trust or
otherwise available to Beneficiary. Upon the occurrence and continuance of any
Event of Default, Beneficiary shall have the option of directing Trustee to
proceed as to both real and personal property in accordance with its rights and
remedies in respect of the real property, in which event the default provisions
of the Code shall not apply. The parties agree that in the event Beneficiary
elects to proceed with respect to the Security Interest Property separately from
the real property, Grantor will assemble the Security Interest Property (other
than those items of Equipment which are affixed to the Improvements and not
removable without material damage to such items or the Improvements) and make
the Security Interest Property available to Beneficiary at a place or places
reasonably convenient to Beneficiary. Any notice of sale, disposition or other
intended action by Beneficiary, sent to Grantor at the address of Grantor
specified for notices herein at least fifteen (15) days prior to such action,
shall constitute reasonable notice to Grantor and the method of sale or
disposition or other intended action set forth in such notice shall conclusively
be deemed to be commercially reasonable within the meaning of the Code unless
objected to in writing by Grantor within ten (10) days after receipt by Grantor
of such notice.
(d) All replacements, renewals and additions to the Equipment
and the Personal Property shall become and be immediately subject to the
security interest herein of Beneficiary and be covered by this Deed of Trust as
part of the Mortgaged Property. Grantor warrants and represents that all
Security Interest Property now is, and that all replacements thereof,
substitutions therefor and additions thereto, will be, owned by Grantor free and
clear of liens, encumbrances or security interests of others except for the
Permitted Exceptions.
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(e) Neither the provisions of this Paragraph nor the filing of
---------
any separate security agreement or financing statement, with respect to
Beneficiary's security interest in the Security Interest Property, shall be
construed as in any way derogating or impairing the intention of the parties
hereto that the Security Interest Property shall, at all times and for all
purposes and in all proceedings, both legal and equitable, be regarded as a part
of the Mortgaged Property. A CARBON, PHOTOGRAPHIC OR OTHER REPRODUCTION OF THIS
DEED OF TRUST OR ANY FINANCING STATEMENT RELATING TO THIS DEED OF TRUST SHALL BE
SUFFICIENT AS A FINANCING STATEMENT.
26. Certificate as to No Default, etc.; Information.
-----------------------------------------------
(a) Grantor will deliver to Beneficiary, within thirty (30) days
after written request, a written statement duly acknowledged by an authorized
representative of Grantor stating (i) the outstanding amount of the Debt (ii)
whether to the Best Knowledge of Grantor any offsets or defenses exist against
the Debt, and (iii) whether to the Best Knowledge or Grantor, there exists no
default, condition or event which, with the giving of notice or lapse of time or
both, would constitute a default in the performance or observance of any of the
terms of this Deed of Trust or any of the other SC Transaction Documents, or if
any such default exists, specifying to the nature and period of existence
thereof and what action Grantor is taking or proposes to take with respect
thereto.
(b) In addition to the information provided for in paragraph (a)
above, (i) Grantor will deliver to Beneficiary, within thirty (30) days after
written request, such further information with respect to the Ground Lease and
Mortgaged Property as Beneficiary may, from time to time, reasonably request,
(ii) Grantor will direct all Tenants under the Leases and lessors under the
Equipment Leases (as defined in the Loan Agreement) to deliver to Beneficiary
such information requested by Beneficiary to the extent required to be furnished
under such Lease or Equipment Lease, and (iii) Grantor will use its reasonable
efforts to cause such Tenants or lessors to deliver to Beneficiary such
information to the extent not so required to be furnished under such Lease or
Equipment Lease. Each such request for additional information of Grantor or any
such Tenant or lessor may be made by Beneficiary, from time to time, for any
reasonable business purpose.
27. Books and Records; Financial Statements. Beneficiary or its
---------------------------------------
designated representatives shall, upon reasonable prior notice to Grantor, have
(a) the right of entry and free access to the Premises (subject to the rights of
hotel guests) during business hours to inspect the Mortgaged Property and (b)
the right at reasonable times and upon not less than five (5) Business Days'
notice, to inspect all books, contracts and records of Grantor relating to the
Mortgaged Property. Grantor shall make the officers, directors of its general
partners, and its regional supervisors and retained professionals knowledgeable
of such matters available for Beneficiary or its designated representatives to
discuss Grantor's affairs, finances and accounts relating to the Mortgaged
Property and Grantor will cooperate with, and request that each of the foregoing
individuals cooperate with, Beneficiary and its designated representative to
enable them to perform these functions, at all reasonable times and as often as
Beneficiary may reasonably request.
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28. Application of Proceeds. Any sum which by the terms of this Deed
-----------------------
of Trust is to be applied to the SC Loan or the Note shall be applied by
Beneficiary in such order and priority as is set forth herein or in any other SC
Transaction Document.
29. Terms Subject to Applicable Law; Severability. All rights, powers
---------------------------------------------
and remedies provided herein are intended to be limited to the extent necessary
so that they will not render this Deed of Trust invalid, unenforceable or not
entitled to be recorded, registered or filed under any applicable law. If any
term of this Deed of Trust shall be held to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the other terms
hereof shall in no way be affected thereby.
30. Further Acts, etc. Grantor shall, at its sole cost and expense,
-----------------
and without expense to Beneficiary or Trustee, do, execute, acknowledge and
deliver all and every such further acts, deeds, conveyances, mortgages,
assignments, notices of assignments, transfers, assurances as Beneficiary or
Trustee shall, from time to time, reasonably require for better assuring,
conveying, assigning, transferring and confirming unto Beneficiary the property
and rights hereby mortgaged or intended now or hereafter so to be, or which
Grantor may be or may hereafter become bound to convey or assign to Beneficiary,
or for carrying out the intention or facilitating the performance of the terms
of this Deed of Trust (including, without limitation, any severance, splitting,
restatement, replacement, amendment or modification to this Deed of Trust, the
Note or the other SC Transaction Documents deemed necessary by Beneficiary or
Trustee to effectuate or confirm the obligations of Beneficiary and Trustee
under Paragraph 61 hereof) or filing, registering or recording this Deed of
------------
Trust and, on written demand, will execute and deliver one or more financing
statements to evidence more effectively the lien hereof upon the Mortgaged
Property except that Grantor shall have no obligation to comply with the
foregoing if any such action would increase Grantor's liability hereunder or
increase Beneficiary's rights hereunder. Grantor will reimburse Beneficiary
and/or Trustee, on written demand, for any sums (including reasonable attorneys'
fees and disbursements) reasonably expended by Beneficiary or Trustee in
preparing, executing, acknowledging, filing, registering and recording such
instruments, certificates and documents.
31. Limitation of Liability of Beneficiary and Trustee. Neither this
--------------------------------------------------
Deed of Trust nor any action or inaction on the part of Beneficiary or Trustee
shall, without such party's written consent, constitute an assumption on such
party's part of any obligation under any of the Leases or any other agreement
affecting the Mortgaged Property, nor shall Beneficiary or Trustee have any
obligation to make any payment to be made by Grantor under the Leases or any
such other agreement, or to present or file any claim, or to take any other
action to collect or enforce the payment of any amounts which have been assigned
to Beneficiary and/or Trustee or to which Beneficiary and/or Trustee may be
entitled hereunder at any time or times. No action or inaction on the part of
Beneficiary or Trustee shall adversely affect or limit in any way the rights of
Beneficiary or Trustee hereunder or under the Leases or the Note or the
Assignment.
32. Documentary Stamps. If at any time any Governmental Authority
------------------
shall require revenue or other stamps to be affixed to the Note or this Deed of
Trust, Grantor will pay for the
55
<PAGE>
same, with interest and penalties thereon, if any. The provisions of the final
sentence of Paragraph 34 shall apply to any failure of Grantor to make any such
------------
payment.
33. Cumulative Remedies of Beneficiary; No Waiver. No legal,
---------------------------------------------
equitable or contractual right, power or remedy of Beneficiary shall be
exclusive of any other, but rather, each right, power or remedy shall be
separate, cumulative and concurrent and shall be in addition to every right,
power or remedy now or hereafter existing at law or in equity. No delay in the
exercise of, or omission to exercise, any right, power or remedy accruing on any
default shall impair any such right, power or remedy or be construed to be a
waiver of any such default or acquiescence therein, nor shall it affect any
subsequent default of the same or a different nature. Every such right, power or
remedy may be exercised concurrently or independently, and when and as often as
may be deemed expedient, by Beneficiary. Beneficiary may resort for the payment
of the Debt to the Mortgaged Property and to any other security held by
Beneficiary in such order and manner as Beneficiary, in its sole discretion,
consistent with the SC Transaction Documents, may elect. Beneficiary may take
action to recover the Debt, or any portion thereof, or to enforce any covenant
hereof without prejudice to the right of Beneficiary thereafter to foreclose
this Deed of Trust or sell the Mortgaged Property pursuant to the power of sale,
if any, contained herein. No act of Beneficiary shall be construed as an
election to proceed under any one provision herein to the exclusion of any other
provision.
34. Filing of Deed of Trust, etc. Grantor forthwith upon the execution
----------------------------
and delivery of this Deed of Trust and thereafter, from time to time, as
reasonably required or requested by Beneficiary, will cause this Deed of Trust,
the Assignment, and any security instrument or SC Transaction Document creating
a lien or evidencing the lien hereof upon the Mortgaged Property and each
instrument of further assurance, and each supplement to any of the foregoing and
each modification to any of the foregoing, to be filed, registered or recorded
in such manner and in such places as may be required by any present or future
law in order to publish notice of and fully to protect the lien hereof upon, and
the interests of Beneficiary in the Mortgaged Property. Grantor will pay all
filing, registration or recording fees, and all reasonable expenses incident to
the execution and acknowledgment of this Deed of Trust, any mortgage or deed of
trust supplemental hereto, any security instrument with respect to the Mortgaged
Property and any instrument of further assurance, and all Federal, state, county
and municipal taxes, duties, imposts, assessments and charges arising out of or
in connection with the execution and delivery of this Deed of Trust, any
mortgage or deed of trust supplemental hereto, any security instrument with
respect to the Mortgaged Property or any instrument of further assurance. In the
event that Grantor shall fail to make any such payment, Beneficiary shall have
the right, but not the obligation, to pay at the direction of Beneficiary the
amount due and shall notify Grantor of such payment and Grantor shall reimburse
Beneficiary therefor, upon written demand, with interest thereon at the Default
Rate from the date of demand by Beneficiary to the date of repayment, and such
amount, together with such interest, shall constitute a portion of the Debt
secured by the lien of this Deed of Trust.
35. Usury Laws. It is the intent of Grantor and Beneficiary to comply
----------
at all times with applicable usury laws. If at any time such laws would render
usurious any amounts called for under the Note or any of the SC Transaction
Documents, then it is Grantor's and
56
<PAGE>
Beneficiary's express intention that such excess amount be immediately credited
on the principal balance of the Note (or, if the Note has been fully paid, and
Beneficiary has no further obligation under the Loan Agreement to make Advances,
refunded by Beneficiary to Grantor and Grantor shall accept such refund), and
the provisions hereof and thereof be immediately deemed to be reformed to comply
with the then applicable laws, without the necessity of the execution of any
further documents, but so as to permit the recovery of the fullest amount
otherwise called for hereunder and thereunder. Any such crediting or refund
shall not cure or waive any default by Grantor under the Note or under any of
the other SC Transaction Documents. If, at any time following any such reduction
in the interest rate payable by Grantor, there remains unpaid any principal
amounts under the Note and the maximum interest rate permitted by applicable law
is increased or eliminated, then the interest rate payable hereunder shall be
readjusted, to the extent permitted by applicable law, so that the total dollar
amount of interest payable hereunder shall be equal to the dollar amount of
interest which would have been paid by Grantor without giving effect to the
applicable usury laws theretofore in effect. Grantor agrees, however, that in
determining whether or not any interest payable under the Note or any of the
other SC Transaction Documents exceeds the highest rate permitted by law, any
non-principal payment (except payments specifically stated in the Note or in any
other SC Transaction Document to be "interest"), including, without limitation,
prepayment fees and late charges, shall be deemed, to the extent permitted by
law, to be an expense, fee or premium rather than interest.
36. Marshalling. Grantor waives and releases any right to have the
-----------
Mortgaged Property marshalled.
37. Waiver of Notice. Grantor shall not be entitled to any notices of
----------------
any nature whatsoever from Beneficiary or Trustee except with respect to matters
for which this Deed of Trust, the Loan Agreement or the Note specifically and
expressly provides for the giving of notices by Beneficiary or Trustee to
Grantor, and Grantor hereby expressly waives the right to receive any notice
from Beneficiary or Trustee with respect to any matter for which this Deed of
Trust, the Loan Agreement or the Note does not specifically and expressly
provide for the giving of notice by Beneficiary or Trustee to Grantor. Grantor
hereby requests that a copy of any notice of default and every notice of sale
hereunder be mailed to it as provided by law at Grantors address set forth in
Paragraph 41.
- ------------
38. Recovery of Sums Required To Be Paid. Beneficiary shall have the
------------------------------------
right from time to time to take action or direct Trustee to take action to
recover any sum or sums which constitute a part of the Debt as the same become
due, without regard to whether or not the balance of the Debt shall be due, and
without prejudice to the right of Beneficiary or Trustee to thereafter bring an
action of foreclosure, or any other action, for a default or defaults by Grantor
existing at the time such earlier action was commenced.
39. Other Mortgages; Cross Collateralization; Cross Default.
-------------------------------------------------------
(a) Grantor acknowledges that this Deed of Trust along with the
Other SC Mortgages secure the Debt. Grantor agrees that the lien of this Deed of
Trust shall be absolute and unconditional and shall not in any manner be
affected or impaired by any acts or
57
<PAGE>
omissions whatsoever of Beneficiary or Trustee and, without limiting the
generality of the foregoing, the lien hereof shall not be impaired by any
acceptance by Beneficiary of any other security for any of the Debt, or by any
failure, neglect or omission on the part of Beneficiary or Trustee to realize
upon or protect any of the Debt or any collateral security therefor including,
without limitation, the Other SC Mortgages. The lien of this Deed of Trust shall
not in any manner be impaired or affected by any release (except as to the
property released), sale, pledge, surrender, compromise, settlement, renewal,
extension, indulgence, alteration, changing, modification or disposition of any
of the Debt or of any of the collateral security therefor, including, without
limitation, the Other SC Mortgages, and Beneficiary may foreclose, or direct
Trustee to foreclose, or exercise any other remedy available to Beneficiary
under the Other SC Mortgages without first exercising or enforcing any of its
remedies under this Deed of Trust and any exercise of the rights or remedies of
Beneficiary hereunder shall not in any manner impair the Debt or the lien of
this Deed of Trust or the liens of the Other Mortgages or any of Beneficiary's
rights and remedies thereunder.
(b) Grantor specifically consents and agrees that Beneficiary
or Trustee may exercise their rights and remedies hereunder and under the Other
SC Mortgages separately or concurrently and in any order that they may deem
appropriate and Grantor waives any rights of subrogation. Without limiting the
generality of the foregoing, Grantor agrees that if an Event of Default is
continuing (i) Beneficiary or Trustee shall have the right, to the extent
permitted by applicable law, to pursue all of its rights and remedies in one
proceeding, or separately and independently in separate proceedings from time to
time, as Beneficiary, in its sole and absolute discretion, shall determine from
time to time, (ii) neither Beneficiary nor Trustee is required to either
marshall assets, sell the Mortgaged Property or properties encumbered by the
Other SC Mortgages in any inverse order of alienation, or be subject to any "one
action" or "election of remedies" law or rule, (iii) the exercise by Beneficiary
or Trustee of any remedies against the Mortgaged Property or properties
encumbered by the Other SC Mortgages will not impede Beneficiary or Trustee from
subsequently or simultaneously exercising remedies against any other properties
encumbered by the Other SC Mortgages or this Deed of Trust, and (iv) all liens
and other rights, remedies or privileges provided to Beneficiary or Trustee
shall remain in full force and effect until Beneficiary and Trustee have
exhausted all of their remedies against the Mortgaged Property and all of the
properties encumbered by the Other SC Mortgages and this Deed of Trust have been
foreclosed, sold and/or otherwise realized upon in satisfaction of the Debt or
the Debt has been paid in full.
(c) It is the intent of the parties hereto that this Deed of
Trust be cross-defaulted and cross-collateralized with the Other SC Mortgages
only to the extent that this Deed of Trust and each of the Other SC Mortgages
continue to be held and owned by the same Person (as defined in the Loan
Agreement). Therefore, notwithstanding any provisions contained in this Deed of
Trust or the other SC Transaction Documents to the contrary, Grantor and
Beneficiary agree that the provisions of this Paragraph 39 and any other
------------
references in this Deed of Trust and the other SC Transaction Documents to the
"Other SC Mortgages" shall be automatically deleted and shall have no further
force and effect from and after the date this Deed of Trust is assigned to any
Person that is not concurrently the holder of all Other SC Mortgages, including
the Fee Owner pursuant to Paragraph 61 hereof. Grantor shall upon the written
------------
request of Beneficiary
58
<PAGE>
or Trustee execute, acknowledge, deliver and record any modification, severance,
splitter, restatement or substitution of this Deed of Trust and the other SC
Transaction Documents deemed necessary by Beneficiary or Trustee to effectuate
or confirm that this Deed of Trust will, following such an assignment, no longer
be subject to the cross-default and cross-collateralization provisions contained
herein. Grantor hereby irrevocably appoints Beneficiary as its attorney-in-fact
(which appointment shall be deemed to be coupled with an interest) for the
purpose of executing and recording any such modification, severance, splitter,
restatement or substitution of this Deed of Trust and the other SC Transaction
Documents following the occurrence of an Event of Default. Grantor agrees to pay
to Beneficiary, on written demand, all costs and expenses (including reasonable
attorneys' fees and disbursements) incurred by Beneficiary in connection with
the preparation, execution, acknowledgment, recording and filing of such
documents and instruments, together with interest thereon at the then applicable
interest rate for the Debt, including the Default Rate as provided for herein,
from the date of such expenditure by Beneficiary until repayment and such sum,
together with such interest, shall constitute a portion of the Debt secured by
the lien of this Deed of Trust.
40. No Oral Change. This Deed of Trust may only be modified or amended
--------------
by an agreement in writing signed by Grantor and Beneficiary, and may only be
released, discharged or satisfied of record by an instrument in writing signed
by Beneficiary.
41. Notices. Except as otherwise specified herein, all notices,
-------
requests, demands, consents, reports or other communications, including, without
limitation, a tender of cure pursuant to Paragraph 19 (c), to or upon the
----------------
respective parties hereto shall be in writing and be deemed to have been duly
given or made when received, if personally delivered by messenger or national
overnight courier service, or if sent by registered or certified U.S. mail,
postage prepaid, return receipt requested, if sent by telecopier with electronic
confirmation of receipt (hard copy to be sent by regular mail), addressed to the
party to which such notice, request, demand, consent, report or other
communication is being given at its address set forth below, or at such other
address as any of the parties hereto may hereafter notify the others by notice
given hereunder:
Beneficiary: Nomura Asset Capital Corporation
Two World Financial Center
Bldg. B, 21st Floor
New York, New York 10281-1198
Att: Daniel S. Abrams, Director
Fax: (212) 667-1022
with a copy to: Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
Att: Michael Peskowitz, Esq.
Fax: (212) 940-8776
59
<PAGE>
Grantor: Marriott Hotel Properties II Limited Partnership
c/o Host Marriott Corporation
10400 Fernwood Road
Bethesda, Maryland 20817
Att: Law Department 923/Deputy General Counsel
Fax: (301) 380-6332
with a copy to: Marriott Hotel Properties II Limited Partnership
c/o Host Marriott Corporation
10400 Fernwood Road
Bethesda, Maryland 20817
Att: Asset Management Department 908
Fax: (301) 380-8260
Trustee: Commonwealth Land Title Insurance Company of California
1855 Gateway Boulevard
Suite 270
Concord, California 94520
Att: Office Manager
42. Joint and Several Liability. If Grantor consists of more than one
---------------------------
person, the obligations and liability of each such person hereunder shall be
joint and several.
43. Headings, etc. The headings and captions of the paragraphs of this
-------------
Deed of Trust are for convenience of reference only and are not to be construed
as defining or limiting, in any way, the scope or intent of the provisions
hereof.
44. Successors and Assigns. The provisions of this Deed of Trust shall
----------------------
be binding upon Grantor and Beneficiary, and their respective successors and
assigns, and all persons claiming under or through Grantor or Beneficiary or any
such successor or assign, and shall inure to the benefit of, and be enforceable
by, Beneficiary and its respective successors and assigns.
45. Survival of Assignment. Notwithstanding anything to the contrary
----------------------
contained in this Deed of Trust, the assignment, pledge and mortgaging of the
Condemnation Proceeds, the Insurance Proceeds and the Refunds, and the right to
apply any of the foregoing in accordance with the terms of this Deed of Trust,
shall survive any foreclosure of the lien of this Deed of Trust.
46. Construction; Counterparts.
--------------------------
(a) Unless the context clearly indicates a contrary intent or
unless otherwise specifically provided herein, words used in this Deed of Trust
shall be used interchangeably in
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singular or plural form, the word "Grantor" shall mean each Grantor and any
subsequent owners of the Mortgaged Property or any part thereof or interest
therein, the word "Beneficiary" shall mean each Beneficiary and any subsequent
holder of the Note, the word "Trustee" shall mean Trustee and any Successor
Trustee (hereinafter defined), and the word "person" shall include an
individual, corporation, partnership, limited liability company, limited
liability partnership, trust, unincorporated association, government,
governmental authority, or other entity. References to "this Paragraph" shall
mean the paragraph commencing with an Arabic numeral in which the affected
phrase or sentence is contained. The phrase "Best Knowledge of Grantor" shall
mean knowledge after appropriate and proper inquiry obtained by Grantor or any
officer or director of Grantor or any regional supervisor of Grantor charged
with primary responsibility as to such matters in connection with operation of
the Mortgaged Property. Whenever the context may require, any pronouns used
herein shall include the corresponding masculine, feminine or neuter forms, and
the singular form of nouns and pronouns shall include the plural and vice versa.
The terms "herein", "hereof" or "hereunder" or similar terms used in this Deed
of Trust refer to this entire Deed of Trust and not to the particular provision
in which the term is used.
(b) It is acknowledged and agreed that in the preparation of
this Deed of Trust and the other SC Transaction Documents indistinguishable
contributions were made by representatives of both Grantor and Beneficiary, and
that Grantor and Beneficiary each waives any and all rights, either at law or in
equity, to have the provisions of this Deed of Trust or any part thereof or the
provisions of any other SC Transaction Document interpreted in favor of one over
the other based on a claim that representatives of one or the other were the
principal draftsmen of any such document.
(c) In the event that the provisions of this Deed of Trust
directly conflict with any provision of the Loan Agreement, the provisions of
the Loan Agreement shall govern, except the provisions of the Deed of Trust with
respect to Beneficiary's perfection of a security interest or lien on the
Mortgaged Property, and the enforcement thereof shall be governed by the terms
and provisions of the Deed of Trust.
(d) This Deed of Trust may be executed in any number of
duplicate originals and each such duplicate original shall be deemed to
constitute but one and the same instrument.
47. Governing Law. IN ALL RESPECTS, INCLUDING, WITHOUT LIMITATION,
-------------
MATTERS OF CONSTRUCTION AND VALIDITY, THIS DEED OF TRUST AND THE OBLIGATIONS
ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THE
STATE (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS OR COMITY) AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. NOTWITHSTANDING THE FOREGOING,
THE NOTE AND LOAN AGREEMENT ARE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
48. Expenses of Enforcement. All reasonable costs and expenses of
-----------------------
Beneficiary or Trustee in the enforcement of any covenant of Grantor or any
right or remedy afforded
61
<PAGE>
Beneficiary or Trustee pursuant to this Deed of Trust or any other SC
Transaction Document or in connection with any proceedings, including probate
and bankruptcy proceedings, to which Beneficiary shall be a party, either as
plaintiff, claimant or defendant, by reason of this Deed of Trust or any
indebtedness hereby secured or in connection with preparations for the
commencement of any suit for the foreclosure hereof after accrual of such right
to foreclose, whether or not actually commenced shall be paid by Grantor within
ten (10) days after written demand by Beneficiary and/or Trustee, and, to the
extent permitted by law, shall bear interest, at the Default Rate from ten (10)
days after the date of demand until the actual date of repayment by Grantor, and
shall be deemed a part of the Debt and secured by this Deed of Trust and the
Other SC Mortgages. As used herein, "reasonable costs and expenses" shall
include, without limitation, actual expenses incurred by Beneficiary, fees and
expenses of Beneficiary's and/or Trustee's agents, reasonable attorneys fees and
expenses (which may include reasonable, actual billed costs, if any, of any
attorney in the employ of Beneficiary and/or Trustee and fees for services
performed by legal assistants and other non-lawyers), court costs and filing
fees, allowances authorized or permitted by statute or of a court, fees and
expenses of receivers, appraisers fees, costs of environmental audits and
reports, expenditures for documentary and expert evidence, stenographers
charges, publication costs and the cost of procuring abstracts of title, title
searches and examinations, title policies and similar data with respect to title
which Beneficiary and/or Trustee may deem reasonably necessary and all other
expenses of the foreclosure or similar enforcement proceeding, all of which may
be estimated as to items to be expended after the entry of the decree.
49. Waivers; Sale Bar Against Foreclosure.
-------------------------------------
(a) Grantor hereby expressly waives the pleading of any statute
of limitations or other bar to an action based on the passage of time as a
defense to any obligations secured by this Deed of Trust and the SC Transaction
Documents to the full extent permitted by law.
(b) In any action to foreclose the lien or liens of this Deed of
Trust, including a partial foreclosure, no defense, counterclaim or setoff shall
be available to Grantor other than one which denies the existence or sufficiency
of the facts upon which the action is grounded or which raises an issue
concerning the priority of liens. If any defense, counterclaim or setoff, other
than one permitted by this Paragraph is timely raised in such foreclosure
---------
action, such defense, counterclaim or setoff shall be dismissed; provided,
--------
however, if such defense, counterclaim or setoff is based on a claim which could
- -------
be tried in an action for money damages, such claim may be brought in a separate
action which shall not thereafter be consolidated with such foreclosure action.
The bringing of such separate action for money damages shall not be deemed to
afford any grounds for staying the foreclosure action.
(c) Grantor hereby expressly waives for itself and all who may
claim through or under it, and to the fullest extent Grantor may do so under
applicable law, any and all rights of redemption in the event of a foreclosure
sale, and the sale of the Mortgaged Property, or any part thereof, or any
interest therein, whether pursuant to foreclosure or partial foreclosure or
otherwise, any such foreclosure or partial foreclosure sale under this Deed of
Trust shall be a perpetual bar against Grantor.
62
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(d) Notwithstanding anything to the contrary contained in this
Deed of Trust, Grantor hereby agrees that, to the extent permitted by applicable
law, Grantor shall not at any time:
(i) insist upon, plead or in any manner whatever claim or
take any benefit or advantage of any stay, extension or moratorium law
or an exemption from execution or sale of the Mortgaged Property or any
part thereof, wherever enacted, now or at any time hereafter in force,
which may affect the covenants and terms of performance of this Deed of
Trust or any other SC Transaction Document;
(ii) claim, take or insist upon any benefit or advantage of
any law now or hereafter in force providing for the valuation or
appraisal of the Mortgaged Property, or any part thereof, prior to any
sale or sales thereof which may be made pursuant to any provision
hereof or pursuant to the decree, judgment or order of any court of
competent jurisdiction or upon execution of any judgment recovered for
all or any portion of the Debt; or
(iii) avail itself of any benefits that might accrue to it
by virtue of any present or future laws excepting the Mortgaged
Property, or any proceeds arising from the sale thereof, from
attachment, levy, or sale under execution from civil process, or
extension of time for payment.
50. No Claim of Credit for Impositions. Grantor will not make
----------------------------------
deduction from or claim credit on the principal or interest secured by this Deed
of Trust by reason of any governmental taxes, assessments or charges. Grantor
will not claim any deduction from the taxable value of the Mortgaged Property by
reason of this Deed of Trust.
51. Sole Discretion of Beneficiary; Reasonableness.
----------------------------------------------
(a) Wherever pursuant to the provisions of this Deed of Trust,
Beneficiary exercises any right given to it to approve or disapprove, or any
arrangement or term is to be satisfactory to Beneficiary, in Beneficiary's
opinion, judgment or discretion, then the decision of Beneficiary to approve or
disapprove or to decide that arrangements or terms are satisfactory or not
satisfactory shall be in Beneficiary's sole discretion, and shall be final and
conclusive.
(b) In the event the consent or approval of Beneficiary is
required to be reasonable under any provision in this Deed of Trust or any other
SC Transaction Document and Grantor believes that such consent or approval was
withheld or delayed in violation of such standard, then Grantor's sole remedy in
such case shall be either(i) to seek the release of the Mortgaged Property and
this Deed of Trust in accordance with the Loan Agreement, or(ii) to seek
injunctive relief or specific performance, and if the court determines, without
right to further appeal, that such approval or consent was withheld in violation
of the applicable standard, then(A) the consent or approval shall be deemed
granted,(B) Beneficiary shall deliver prompt written confirmation of such
consent or approval,(C) the granting of such consent or approval shall be the
only remedy available to Grantor,(D) neither Beneficiary nor its officers or
agents shall have
63
<PAGE>
any liability for having withheld or delayed such consent or approval, and
Grantor's obligations under the SC Transaction Documents shall not be diminished
in any way.
52. Modification by Beneficiary. Grantor agrees that, without
---------------------------
affecting the liability of Grantor or any other person (except any person
expressly released in writing) liable for payment of the Debt or for performance
of any obligation contained herein or affecting the lien and security interest
of this Deed of Trust upon the Mortgaged Property or any part thereof,
Beneficiary may, at any time and from time to time, regardless of consideration,
without notice to or obtaining the consent of any person(a) release any person
liable for payment of any indebtedness secured hereby or for performance of any
obligation,(b) extend the time or agree to alter the terms of payment of any
such indebtedness, including, without limitation, modifying the interest rate,
the amortization period or any other provision of the Note,(c) modify or waive
any obligation (to the extent same does not increase Grantor's obligations),
(d)subordinate, modify or otherwise deal with the lien and security interest
hereof,(e) release the whole or any part of the Mortgaged Property or any other
security,(f) accept additional security of any kind,(g) consent to the making of
any map or plat of the Mortgaged Property, the creating of any easements thereon
or any covenants restricting use or occupancy thereof, or(h) exercise, refrain
from exercising or waive any right Beneficiary may have without in any manner
impairing or affecting the SC Transaction Documents, as so extended, modified
and supplemented, or the lien or priority thereof unless expressly released or
discharged from such obligation by Beneficiary in writing.
53. Assignment; Participations.
--------------------------
(a) Beneficiary shall have the right in its sole discretion and
at its sole cost and expense, except to the extent expressly provided to the
contrary in the Loan Agreement, at any time during the term of the SC Loan to
sell, assign, syndicate, securitize or otherwise transfer or dispose of its
interest in all or any portion of the SC Loan, provided, however, that all of
the provisions hereof shall continue in full force and effect following any such
sale, assignment, syndication, securitization or other transfer, except as
otherwise provided in Paragraph 39(c) hereof.
---------------
(b) Beneficiary may at any time grant to one or more banks, life
insurance companies or other financial institutions (each a "Participant")
-----------
participating interests in all or a portion of Beneficiary's interest in the SC
Loan, provided that, in the event of any such grant by Beneficiary of a
participating interest to a Participant, whether or not upon notice to Grantor,
Beneficiary shall remain responsible for the performance of its obligations
hereunder, and Grantor shall continue to deal solely and directly with the
Beneficiary named herein in connection with Beneficiary's rights and obligations
under this Deed of Trust. Beneficiary shall give Grantor written notice of any
such grant by Beneficiary of such a participating interest to a Participant.
54. No Merger. If both the landlord's and the tenant's estates under
---------
any Lease shall at any time become vested in one owner, or if Grantor's,
Beneficiary's and Trustee's estates under this Deed of Trust shall at any time
become vested in one owner, including, without limitation, upon the delivery of
a deed to Beneficiary in lieu of a foreclosure sale, or upon a
64
<PAGE>
purchase of the Mortgaged Property by Beneficiary in a foreclosure sale, this
Deed of Trust and the lien created hereby shall not be destroyed or terminated
by the application of the doctrine of merger and in such event Beneficiary shall
continue to have and enjoy all of the rights and privileges of Beneficiary as to
the separate estates; and, as a consequence thereof, upon the foreclosure of the
lien created by this Deed of Trust any Leases or subleases then existing and
created by Grantor shall not be destroyed or terminated by application of the
law of merger or as a result of such foreclosure unless Beneficiary or any
purchaser at any such foreclosure sale shall so elect. No act by or on behalf of
Beneficiary or any such purchaser shall constitute a termination of any Lease or
sublease unless Beneficiary or such purchaser shall give written notice thereof
to the Tenant or sublessee thereunder. In the event Grantor acquires the estate
of Fee Owner under the Ground Lease (i) there shall be no merger between such
acquired estate and the estate of Grantor under the Ground Lease unless all
parties (including Beneficiary) having an interest in the Ground Lease shall
consent thereto in writing and (ii) the lien of this Deed of Trust shall, ipso
----
facto, without the necessity of any further conveyance, simultaneously with such
- -----
acquisition be spread to cover such acquired estate and as so spread shall be
prior to the lien of any mortgage placed on the acquired estate subsequent to
the date of this Deed of Trust.
55. Running with the Land. All covenants contained in this Deed of
---------------------
Trust shall run with the land of the Mortgaged Property.
56. True Copy. GRANTOR ACKNOWLEDGES HAVING RECEIVED A TRUE COPY OF
----------
THIS DEED OF TRUST WITHOUT CHARGE.
57. Waiver of Jury Trial. GRANTOR, AND BENEFICIARY BY ITS ACCEPTANCE
--------------------
OF THIS DEED OF TRUST, EACH HEREBY EXPRESSLY WAIVES TRIAL BY JURY IN ANY ACTION
OR PROCEEDING BROUGHT BY EITHER PARTY HERETO AGAINST THE OTHER, OR IN ANY
MATTERS WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS DEED OF
TRUST, THE NOTE, THE ASSIGNMENT OR ANY OF THE OTHER SC TRANSACTION DOCUMENTS TO
THE FULL EXTENT PERMITTED BY LAW.
58. After-Acquired Property. If, after the date of this Deed of Trust,
-----------------------
Grantor acquires any property located on and used in connection with the
Mortgaged Property and that by the terms of this Deed of Trust is required or
intended to be encumbered by this Deed of Trust, the property shall become
subject to the lien and security interest of this Deed of Trust immediately upon
its acquisition by Grantor and without any further mortgage, conveyance,
assignment or transfer. Nevertheless, upon Beneficiary's reasonable request,
from time to time, Grantor will execute, acknowledge and deliver any additional
instruments and assurances of title and will do or cause to be done anything
further that is reasonably necessary for carrying out the intent of this Deed of
Trust.
59. Non-Recourse. The obligations of Grantor hereunder are
------------
"Non-Recourse" as such term is defined in the Loan Agreement.
------------
65
<PAGE>
60. Regarding Trustee.
-----------------
(a) Trustee may resign by an instrument in writing addressed to
Beneficiary or be removed at any time with or without cause by instrument in
writing duly executed by Beneficiary. In case of the death, resignation or
removal of Trustee, a successor (each, a "Successor Trustee") may be appointed
-----------------
by Beneficiary by instrument of substitution complying with any applicable
requirements of law, and in the absence of any such requirement without other
formality than appointment and designation in writing recorded in the county in
which this Deed of Trust is recorded. Such appointment and designation shall be
full evidence of the right and authority to make the same and of all facts
therein recited, and upon the making of any such appointment and designation
this conveyance shall vest in the Successor Trustee all the estate and title of
its predecessor in all the Mortgaged Property, and such Successor Trustee shall
thereupon succeed to all the rights, powers, privileges, immunities and duties
hereby conferred upon the prior Trustee.
(b) Trustee may rely and shall be protected in acting upon any
notice, request, consent, demand, statement, note or other paper or document
believed by them to be genuine and to have been signed by the party or parties
purporting to sign same. Trustee shall not be liable for any error of judgment,
nor for any act done or step taken or omitted, nor for any mistakes of law or
fact, nor for anything which Trustee may do or refrain from doing in good faith,
nor generally shall Trustee have any liability except for gross negligence or
willful misconduct. Trustee may act and may sell or otherwise dispose of the
Mortgaged Property or any part hereof as herein provided, although Trustee has
been, may now be or may hereafter be, attorneys, officers, agents or employees
of Beneficiary, in respect of any matter of business whatsoever. In any event,
Trustee shall be indemnified and forever held harmless by Beneficiary for any
acts which Trustee may take pursuant to and in reliance upon the written
instructions of Beneficiary.
(c) All money received by Trustee shall, until used or applied
as herein provided, be held in trust, but need not be segregated (except to the
extent required by law and the other SC Transaction Documents), and Trustee
shall not be liable for interest thereon.
(d) If there be more than one Trustee, any Trustee,
individually, may exercise all powers granted to the Trustees collectively
without the necessity of the joinder of any other Trustee.
(e) Trustee shall be entitled to reasonable compensation for all
services rendered or expenses incurred in the administration or execution of the
trust hereby created and Grantor hereby agrees to pay same.
61. Right of Fee Owner to Purchase Deed of Trust.
--------------------------------------------
(a) In accordance with the provisions of Section 6.04 of the
Ground Lease, Beneficiary agrees as follows:
66
<PAGE>
(i) If an Event of Default has occurred, Fee Owner shall
shall have thirty (30) days from the date on which Beneficiary
serves upon Fee Owner notice in writing, at the address specified
for Fee Owner in the Ground Lease or at such address as Fee Owner
has provided in written notice to Beneficiary ("Landlord's
----------
Notice") that the Beneficiary is proceeding to foreclose the Deed
------
of Trust, and stating the Purchase Price (as defined in subsection
(iii) below) during which thirty (30) day period Fee Owner shall
have the right and option ("Landlord's Option") to purchase from
-----------------
the Beneficiary its interest in Deed of Trust and the Landlord's
Note (as defined in subsection (iv) below) upon the terms and
subject to the conditions contained in this Paragraph 61. Provided
------------
that Beneficiary is concurrently proceeding to foreclose this Deed
of Trust and the MHP Mortgage, Landlord's Option hereunder is
contingent upon Fee Owner also exercising its similar option with
respect to the MHP Mortgage.
(ii) Landlord's Option must be exercised by written notice,
by certified mail, registered mail, or express mail service,
return receipt requested, served upon Grantor and Beneficiary
within such thirty (30) day period accompanied by Fee Owner's
forfeitable deposit on account of the purchase price to the
Beneficiary of the lesser of One Hundred Thousand Dollars
($100,000.00) or ten percent (10%) 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, Fee Owner shall
purchase and the Beneficiary shall assign the Deed of Trust and
the Landlord's Note to Fee Owner (or its designee), on the date
which is thirty (30) days after the date on which Fee Owner has
exercised Landlord's Option (or if such thirtieth (30th) day is
not a business day, on the next succeeding business day). The
closing shall take place at the Premises or such other location
mutually agreeable to Fee Owner and the Beneficiary.
(iii) The purchase price ("Purchase Price") payable by Fee
--------------
Owner shall be (x) if the Mortgaged Property is the sole security
for the SC Loan under the Loan Agreement, an amount equal to the
outstanding Debt secured by this Deed of Trust and (y) except as
otherwise provided in clause (x) above, an amount equal to the
difference between (A) Twenty-Seven Million Ninety Four Thousand
Ninety Six and no/100 Dollars ($27,094,096.00) ("Base Release
------------
Price") plus all accrued and unpaid interest on such Base Release
-----
Price and any advances made by Beneficiary or Trustee for the
protection of the Mortgaged Property and (B) the purchase price
paid by the Fee Owner to Beneficiary with respect to the MHP
Mortgage.
(iv) Immediately prior to Fee Owner's purchase of the Deed
of Trust, Beneficiary and Grantor shall, if necessary, amend the
Note to provide such separate note ("Landlord's Note") evidencing
---------------
solely the Purchase Price and shall, if necessary, amend the Deed
of Trust to secure solely the Landlord's Note. At the closing and
upon payment in full of the Purchase Price, the Beneficiary shall
67
<PAGE>
assign this Deed of Trust and Landlord's Note to Fee Owner,
without recourse, representations, covenants or warranties of any
kind. Each such assignment shall be in form for recordation or
filing, as the case may be. Notwithstanding the foregoing, neither
the Beneficiary nor Grantor shall be responsible or liable to Fee
Owner for any other party's failure to complete its obligation to
perform the foregoing; however, Fee Owner's duty to purchase the
Deed of Trust after exercise of Landlord's Option is expressly
conditioned upon Fee Owner's receipt of the assignments and
amendments described in this Paragraph 61. Fee Owner shall be
------------
responsible for paying any taxes payable to any governmental
authority upon such assignments, and such assignments shall be
made subject to such state of title of the Mortgaged Property as
shall exist at the date of such assignment.
(v) Fee Owner shall not have the right to receive any
notices of default under this Deed of Trust, nor shall Fee Owner
have the right to cure any default under this Deed of Trust,
except to the extent provided in this Paragraph 61.
------------
(b) Grantor agrees and acknowledges that the Purchase Price set
forth in Paragraph 61 shall apply only to the assignment of this Deed of Trust
------------
to Fee Owner pursuant to this Paragraph 61 and shall not serve to describe,
------------
limit or restrict the amount of indebtedness secured by this Deed of Trust or to
describe, limit or restrict the rights, powers, benefits and privileges
otherwise granted to Beneficiary under this Deed of Trust and the other SC
Transaction Documents with respect to the Mortgaged Property. Grantor further
agrees and acknowledges that the assignment of this Deed of Trust to Fee Owner
pursuant to this Paragraph 61 shall not be deemed a cure or waiver of any Event
------------
of Default in the absence of a writing from Beneficiary expressly accepting a
cure or waiving such Event of Default. Beneficiary may, in its sole discretion,
exercise such rights and remedies available to Beneficiary under the Other SC
Mortgages and SC Transaction Documents in connection with such Event of Default
following the assignment of this Deed of Trust pursuant to Paragraph 61(a)
---------------
above.
(c) This Deed of Trust is expressly subject to all of Landlord's
rights under the provisions, covenants, conditions, exceptions and reservations
contained in the Ground Lease. Notwithstanding any provision contained herein to
the contrary, this Deed of Trust does not encumber the Fee Owner's fee simple
title or interest under the Ground Lease.
62. Additional Ground Lease Provisions.
----------------------------------
(a) In the event the Ground Lease shall be terminated by reason of a
default thereunder by Grantor and Beneficiary shall acquire from Fee Owner a new
ground lease, Grantor hereby waives any right, title or interest in and to such
new ground lease or the leasehold estate created thereby, waiving all rights of
redemption now or hereafter operable under any law.
(b) Grantor shall not elect to treat the Ground Lease as terminated,
canceled or surrendered pursuant to the applicable provisions of the Bankruptcy
Code (including, but not limited to, Section 365(h)(1) thereof) without
Beneficiary's prior written consent in the event of
68
<PAGE>
Fee Owner's Bankruptcy. In addition, Grantor shall, in the event of Fee Owner's
Bankruptcy, reaffirm and ratify the legality, validity, binding effect and
enforceability of the Ground Lease and shall remain in possession of the
Premises and the leasehold estate created by the Ground Lease, notwithstanding
any rejection thereof by Fee Owner or any trustee, custodian or receiver.
(c) Grantor shall give Beneficiary not less than thirty (30) days
prior written notice of the date on which Grantor shall apply to any court or
other governmental authority for authority and permission to reject the Ground
Lease in the event that there shall be filed by or against Grantor any petition,
action or proceeding under the Bankruptcy Code or under any other similar
federal or state law now or hereafter in effect and if Grantor determines to
reject the Ground Lease, Beneficiary shall have the right, but not the
obligation, to serve upon Grantor within such thirty (30) day period a notice
stating that (i) Beneficiary demands that Grantor assume and assign the Ground
Lease to Beneficiary subject to and in accordance with the Bankruptcy Code and
(ii) Beneficiary covenants to cure or provide reasonably adequate assurance
thereof with respect to all defaults reasonably susceptible of being cured by
Beneficiary and of future performance under the Ground Lease. If Beneficiary
serves upon Grantor the notice described above, Grantor shall not seek to reject
the Ground Lease and shall comply with the demand provided for in clause (i)
above within fifteen (15) days after the notice shall have been given by
Beneficiary.
(d) To the extent permitted by law, Grantor hereby assigns to
Beneficiary all of Grantor's rights, powers or privileges with respect to
rejection of the Ground Lease as lessor or lessee thereunder, all pursuant to
Section 365 of the Bankruptcy Code.
(e) Beneficiary, upon notice to Grantor, shall have the right, but not
the obligation, to proceed in its own name or in the name of Grantor in respect
of any claim, suit, action or proceeding relating to the rejection of the Ground
Lease by Fee Owner as a result of Fee Owner's Bankruptcy, including, but not
limited to, the right to file and prosecute, to the exclusion of Grantor, any
and all proofs of claims, complaints, notices and other documents in any case in
respect of Fee Owner under and pursuant to the Bankruptcy Code.
(f) In the event of any arbitration under or pursuant to the Ground
Lease in which Beneficiary elects to participate, Grantor hereby irrevocably
appoints Beneficiary as its true and lawful attorney-in-fact (which appointment
shall be deemed coupled with an interest) to exercise all right, title and
interest of Grantor in connection with such arbitration, including, without
limitation, the right to appoint arbitrators and to conduct arbitration
proceedings on behalf of Grantor and Beneficiary. All costs and expenses
incurred by Beneficiary in connection with such arbitration and the settlement
thereof shall be borne solely by Grantor, including, without limitation,
reasonable attorneys' fees and disbursements. Nothing contained in this
Paragraph shall obligate Beneficiary to participate in any such arbitration.
63. Variable Rate on Interest; Additional Interest. On the Optional
----------------------------------------------
Prepayment Date (as such term is defined in the Loan Agreement) and on each
anniversary thereof the interest rate on the Note secured by this Deed of Trust
will be adjusted to be equivalent to the Adjusted
69
<PAGE>
Rate (as such term is determined in accordance with the Note and the Loan
Agreement). During the period following the Optional Prepayment Date it is
possible that some or all of the additional interest may be unpaid and may be
accruing until the Maturity Date.
64. Right of Prior Lender.
---------------------
The recitals of this Deed of Trust, including without limitation
recital G, are incorporated by reference herein with the same effect as if they
were set forth in full among the operative provisions of this Deed of Trust. The
rights of Beneficiary under this Deed of Trust, including without limitation the
right to effect certain cures, to receive certain monies and to take certain
actions, including without limitation the rights of Beneficiary set forth in
Paragraphs 5, 9, 10, 11, 12, 13, 14, 16, 17, 18, 21, 22, 23, 25, 33 and 62 and
Schedule X of this Deed of Trust, are subject to the rights of the beneficiary
from time to time under the MHP Mortgage, and such rights may not be enforceable
by Beneficiary under this Deed of Trust if such rights are exercised by the
beneficiary under the MHP Mortgage.
GRANTOR HEREBY EXPRESSLY (i) WAIVES ANY RIGHTS IT MAY HAVE UNDER
CALIFORNIA LAW TO REPAY THE NOTE, IN WHOLE OR IN PART, WITHOUT PENALTY, UPON
------- -------
ACCELERATION OF THE NOTE, AND (II) AGREES THAT IF, FOR ANY REASON, A PREPAYMENT
OF ALL OR ANY PORTION OF THE PRINCIPAL AMOUNT OF THE NOTE IS MADE INCLUDING
WITHOUT LIMITATION UPON OR FOLLOWING ANY ACCELERATION OF THE NOTE BY BENEFICIARY
OR TRUSTEE ON ACCOUNT OF ANY DEFAULT BY GRANTOR INCLUDING, WITHOUT LIMITATION,
ANY TRANSFER, DISPOSITION, OR FURTHER ENCUMBRANCE PROHIBITED OR RESTRICTED BY
THIS DEED OF TRUST, THEN GRANTOR HEREBY DECLARES THAT (1) EACH OF THE FACTUAL
MATTERS SET FORTH IN THIS PARAGRAPH IS TRUE AND CORRECT, (2) BENEFICIARYS
AGREEMENT TO MAKE THE LOAN EVIDENCED BY THE NOTE CONSTITUTES ADEQUATE
CONSIDERATION FOR THIS WAIVER AND AGREEMENT, AND HAS BEEN GIVEN INDIVIDUAL
WEIGHT BY GRANTOR AND BENEFICIARY, (3) GRANTOR IS A SOPHISTICATED AND
KNOWLEDGEABLE REAL ESTATE INVESTOR WITH COMPETENT AND INDEPENDENT LEGAL COUNSEL
AND (4) GRANTOR FULLY UNDERSTANDS THE EFFECT OF THIS WAIVER AND AGREEMENT.
----------------
GRANTOR INITIALS
SIGNATURE PAGE FOLLOWS
70
<PAGE>
IN WITNESS WHEREOF, Grantor has duly executed and sealed this Deed of
Trust as of the day and year first above written.
MARRIOTT HOTEL PROPERTIES II LIMITED
PARTNERSHIP
By: Marriott MHP Two Corporation, its sole general
partner
By: /s/ Douglas W. Henry
---------------------------------------
Name: Douglas W. Henry
Title: Vice President
71
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 23rd of September, in the year 1996, before me, Robert E. Zain,
a Notary Public of said State, duly commissioned and sworn, personally appeared
Dougals W. Henry, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person that executed the within instrument as
Vice President of Marriott MHP Two Corporation, a Delaware corporation, which is
the general partner of Marriott Hotel Properties II Limited Partnership, a
Delaware limited partnership, and acknowledged tome that he executed said
instrument on behalf of said limited partnership.
In Witness Whereof, I have hereunto set my hand and affixed my official
seal the day and year in this certificate above written.
/s/ Robert E. Zalin
--------------------------------------
Notary Public
My commission expires: April 15, 1998
------------------
Notary Seal
Print Name: Robert E. Zalin
-------------------------------------
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
All of that certain tract or parcel of land and premises, situate,
lying and being in Contra Costa County, State of California, more particularly
described as follows:
A-1
<PAGE>
EXHIBIT B
SCHEDULE OF OTHER SC MORTGAGES
1. Deed of Trust, Assignment of Leases, Security Agreements and Fixture
Filing of even date in the principal amount of $43,500,000.00 from
Santa Clara Marriott Hotel Limited Partnership, as Grantor, to
Commonwealth Land Title Insurance Company of California, as Trustee,
for the benefit of Nomura Asset Capital Corporation, as Beneficiary,
encumbering certain hotel premises in Santa Clara, California and
intended to be recorded simultaneously herewith in the official records
of Santa Clara County, State of California.
2. Deed of Trust, Assignment of Leases, Security Agreement and Fixture
Filing of even date in the principal amount of $43,500,000.00 from
Marriott Hotel Properties II Limited Partnership, as Grantor, to
Commonwealth Land Title Insurance Company, as Trustee, for the benefit
of Nomura Asset Capital Corporation, as Beneficiary encumbering certain
hotel premises in San Antonio, Texas and intended to be recorded
simultaneously herewith in the official records of County of Bexar,
State of Texas.
3. Act of Multiple Indebtedness, Mortgage, Security Agreement, Pledge
and Collateral Assignment of Leases and Rents and Insurance Proceeds of
even date in the principal amount of $43,500,000.00 from Marriott Hotel
Properties II Limited Partnership, as Mortgagor, to Nomura Asset
Capital Corporation, as Mortgagee encumbering certain hotel premises in
New Orleans, Louisiana and, intended to be recorded simultaneously
herewith in the official records of Orleans Parish, State of Louisiana.
B-1
<PAGE>
Exhibit 10.10
RECORDING REQUESTED BY
WHEN RECORDED MAIL TO
Name Michael Peskowitz, Esq.
Rosenman & Colin LLP
Mailing Address 575 Madison Avenue
City, State, New York, New York 10022
Zip Code
- --------------------------------------------------------------------------------
SPACE ABOVE THIS LINE RESERVED FOR RECORDERS' USE
Santa Clara Deed of Trust
================================================================================
================================================================================
DEED OF TRUST, ASSIGNMENT OF LEASES, SECURITY AGREEMENT
AND FIXTURE FILING
SANTA CLARA MARRIOTT HOTEL LIMITED PARTNERSHIP ("Grantor")
-------
- to -
COMMONWEALTH LAND TITLE INSURANCE COMPANY OF CALIFORNIA
("Trustee"), as Trustee
-------
For the benefit of
NOMURA ASSET CAPITAL CORPORATION ("Beneficiary")
-----------
Dated: As of September 23, 1996
in the amount of
$43,500,000
Relating to Premises located in
County of Santa Clara, State of California
================================================================================
After recording return to:
ROSENMAN & COLIN LLP
575 Madison Avenue
New York, New York 10022
Attention: Michael Peskowitz, Esq.
<PAGE>
DEED OF TRUST, ASSIGNMENT OF LEASES, SECURITY AGREEMENT
AND FIXTURE FILING
DEED OF TRUST, ASSIGNMENT OF LEASES, SECURITY AGREEMENT AND FIXTURE
FILING (this "Deed of Trust"), dated as of September 23, 1996, by SANTA CLARA
-------------
MARRIOTT HOTEL LIMITED PARTNERSHIP, a Delaware limited partnership, having its
principal office at 10400 Fernwood Road, Bethesda, Maryland 20817 ("Grantor") in
-------
favor of COMMONWEALTH LAND TITLE INSURANCE COMPANY OF CALIFORNIA, a California
corporation, having an address at 333 West Santa Clara Street, Suite 110, San
Jose, California 95113 ("Trustee"), as trustee for the use and benefit of NOMURA
-------
ASSET CAPITAL CORPORATION, a Delaware corporation, having its principal office
at Two World Financial Center, Building B, 21st Floor, New York, New York
10281-1198 ("Beneficiary").
-----------
W I T N E S S E T H :
---------------------
WHEREAS:
A. Pursuant to those two (2) certain leases, each dated November 2,
1973 between (i) Dorcich Farms, as successor to Stephen and Mary Dorcich,
husband and wife, as landlord, in one instance, and (ii) Stephen Dorcich,
individually, and as a successor trustee of Dorcich Living Trust, dated August
15, 1968, as landlord, in the other instance (including any successors and
assigns thereof, collectively, the "Fee Owner"), and Grantor, successor in
---------
interest to Marriott Corporation ("Host Marriott"), now known as Host Marriott
-------------
Corporation, as tenant (such leases being more particularly described on
Schedule 1 annexed hereto, and as the same may hereafter be modified, amended,
restated, consolidated, replaced or supplemented from time to time,
collectively, the "Ground Lease"), Fee Owner demised and leased to Grantor all
------------
those certain parcels of real property (collectively, the "Land") located in the
----
County of Santa Clara, State of California (the "State"), as more particularly
-----
described in Exhibit A annexed hereto;
---------
B. Host Marriott constructed on the Land a building and other
improvements that are currently operated as a Marriott hotel (which, together
with all other buildings and other improvements now or hereafter located on such
parcel of Land are hereinafter referred to as the "Improvements"; the Ground
------------
Lease and the leasehold estate created thereby, together with such Improvements,
being hereinafter collectively referred to as the "Premises");
--------
C. Pursuant to that certain Loan Agreement (the "Loan Agreement"),
--------------
dated as of the date hereof between Grantor and Beneficiary, Beneficiary is
making a loan in the original principal amount of $43,500,000 to Grantor (the
"SC Loan");
-------
D. The SC Loan is evidenced by that certain Secured Promissory Note
dated as of the date hereof, made by Grantor and Marriott Hotel Properties II
Limited Partnership ("MHP II"), jointly and severally, in favor of Beneficiary
------
in the original principal amount of $43,500,000
<PAGE>
(together with all extensions, renewals, substitutions, restatements,
severances, splitters, consolidations, amendments and modifications thereof,
collectively, the "Note");
----
E. The Note is secured by, inter alia, this Deed of Trust and certain
----- ----
other mortgages, deeds of trust and security deeds (collectively, the "Other SC
--------
Mortgages") on other real property owned or leased by MHP II, which Other SC
- ---------
Mortgages are more particularly described as Documents 1 through 3 on Exhibit B
---------
annexed hereto;
F. To induce Beneficiary to make the SC Loan and to secure payment of
the Note, together with interest thereon, Grantor has agreed to the execution
and delivery of this Deed of Trust; and
G. Beneficiary accepts the benefits of this Deed of Trust.
GRANTING CLAUSES
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein contained and other good and valuable consideration, the receipt
and legal sufficiency whereof are hereby acknowledged, and as an inducement to
Beneficiary to make the SC Loan, and to secure the payment of the principal
amount of the Note of FORTY THREE MILLION FIVE HUNDRED THOUSAND AND 00/00
DOLLARS ($43,500,000), together with all interest thereon, additional amounts
payable under the Loan Agreement, including without limitation, the Yield
Maintenance Premium (as such term is defined in the Loan Agreement), if any, and
all other sums which may or shall become due hereunder or under the Note or any
of the other documents evidencing, securing or executed in connection with the
SC Loan (such other documents, including, without limitation, the Loan
Agreement, the Other SC Mortgages and that certain Assignment of Leases, Rents
and Profits of even date herewith given by Grantor to Beneficiary with respect
to the Premises (as such assignment may, from time to time, be modified,
amended, extended, restated, severed, split, consolidated or supplemented, the
"Assignment") and similar Assignments of Leases, Rents and Profits given in
----------
connection with the Other SC Mortgages, together with the Note and this Deed of
Trust (as any of the same may, from time to time, be modified, amended,
extended, restated, severed, split, consolidated or supplemented) being
hereinafter collectively referred to as the "SC Transaction Documents") and
------------------------
including the costs and expenses of enforcing any provision of the Note, this
Deed of Trust or any of the other SC Transaction Documents (all such sums being
hereinafter collectively referred to as the "Debt"), and in order to charge with
----
such performance and with such payments the Premises and other property
hereinafter described and the rents, revenues, issues, income and profits
thereof, Grantor has created a security interest in and DOES HEREBY WARRANT,
PLEDGE, TRANSFER, SET OVER, ASSIGN, HYPOTHECATE, GIVE, GRANT, ALIEN, ENFEOFF,
BARGAIN, SELL, CONVEY AND CONFIRM UNTO TRUSTEE, AND ITS SUCCESSORS AND ASSIGNS,
IN TRUST WITH POWER OF SALE, FOR THE BENEFIT OF BENEFICIARY, all right, title,
estate and interest of Grantor now owned, or hereafter acquired, in and to the
Premises,
2
<PAGE>
TOGETHER WITH all right, title, estates and interest of Grantor, if
any, now owned, or hereafter acquired, in and to the following property, rights
and interests (the Premises, together with such property, rights and interests,
being hereinafter collectively referred to as the "Mortgaged Property"):
------------------
(a) all easements, rights-of-way, strips and gores of land,
streets, ways, alleys, passages, sewer rights, waters, water courses,
water rights and powers, and all estates, rights, title, interests,
privileges, liberties, tenements, hereditaments, and appurtenances of
any nature whatsoever, in any way belonging, relating or pertaining to
the Premises (including, without limitation, gas, oil and mineral
rights, air rights, development rights and any other rights, however
denominated, to construct floor area on the Land), and all right, title
and interest of Grantor in, including any right to use and occupy, any
land adjacent to the Land, and any land lying in the bed of any street,
road or avenue, open, vacated or proposed, in front of or adjoining the
Land, and any and all sidewalks, drives, curbs, passageways, streets,
spaces and alleys adjacent to or used in connection with the Premises;
(b) all machinery, apparatus, equipment, fittings, fixtures and
other property of every kind and nature whatsoever owned by Grantor, or
in which Grantor has or shall have an interest (to the extent same can
be mortgaged or an interest therein can be granted if not owned by
Grantor), now or hereafter located upon the Premises or any portion
thereof, or appurtenances thereto, and used in connection with the
present or future operation and occupancy of the Premises or any
portion thereof, and all building equipment, materials and supplies of
any nature whatsoever owned by Grantor, or in which Grantor has or
shall have an interest (to the extent same can be mortgaged or an
interest therein can be granted if not owned by Grantor), now or
hereafter located in or upon the Premises or any portion thereof, and
any building equipment, materials and supplies obtained for use in
connection with the Premises or any portion thereof, and all additions,
replacements, modifications and alterations of any of the foregoing,
including, but without limiting the generality of the foregoing, all
heating, lighting, incinerating, waste removal and power equipment,
engines, pipes, tanks, motors, conduits, switchboards, radio,
television, security and alarm systems, plumbing, lifting, cleaning,
fire prevention, fire extinguishing, refrigerating, ventilating, and
communications apparatus, air cooling and air conditioning apparatus,
escalators, elevators, ducts and compressors (collectively, the
"Equipment"), which Equipment shall be deemed to be part and
---------
parcel of the real estate and appropriated to the use of the real
estate and, whether or not affixed or annexed to the Premises, shall
for the purpose of this Deed of Trust be deemed conclusively to be real
estate and mortgaged hereby;
(c) all other furniture, furnishings, decorations, fixtures and
equipment owned by Grantor and now or hereafter installed in, affixed
to, placed upon or used in connection with the Premises or the business
conducted by Grantor thereon, including, without limitation,
communication systems, computer systems, hardware and software,
furniture, carpeting, art work, lighting fixtures, millwork, draperies,
kitchen, restaurant, bar and lounge equipment, laundry equipment, cash
registers, safes, safety deposit boxes,
3
<PAGE>
office furniture, athletic and pool equipment, gift shop equipment,
employees' lockers, coat racks, linens, blankets, pillows and uniforms
(to the extent each of the foregoing shall exist), all present and
future "accounts", "equipment", "inventory" and "general intangibles"
(as such terms are defined in the Uniform Commercial Code as enacted
and in effect in the State (the "Code") relating to the hotel and hotel
----
operations at the Premises, excluding, however, (xx) all property
--------- -------
subject to written leases between the owner/installer of such
equipment, as lessor, and Grantor as lessee, as permitted pursuant to
the provisions of the Loan Agreement, and (yy) to the extent not
assignable or mortgageable under State or local law, alcoholic
beverages and licenses to serve alcoholic beverages at the Premises
(collectively, the "Personal Property");
-----------------
(d) all awards or payments, and any interest paid or payable with
respect thereto, which may be made with respect to all or any portion
of the Premises, whether from the exercise of right of condemnation,
eminent domain or similar proceedings (including any transfer made in
lieu of the exercise of said right), or from any taking for public use,
or for any other injury to or decrease in the value of all or any
portion of the Premises (including, without limitation, any awards
resulting from a change of grade of streets and awards for severance
damages), all of the foregoing to be held, applied and paid in
accordance with the provisions of this Deed of Trust (collectively, the
"Condemnation Proceeds");
---------------------
(e) all proceeds of, and any unearned premiums on, the Policies (as
hereinafter defined) and any other insurance policies covering all or
any portion of the Premises, the Equipment, the Personal Property
and/or the Rents (as hereinafter defined), including, without
limitation, the right to receive and apply the proceeds of any
insurance, judgments, or settlements made in lieu thereof, for damage
to all or any portion of the Premises, the Equipment and/or the
Personal Property, and any interest actually paid with respect thereto,
all of the foregoing to be held, applied and paid in accordance with
the provisions of this Deed of Trust (collectively, the "Insurance
---------
Proceeds");
--------
(f) all refunds or rebates of Impositions (as hereinafter defined),
and interest paid or payable with respect thereto (collectively, the
"Refunds");
-------
(g) all leases and other agreements, if any, affecting the use or
occupancy of all or any portion of the Premises now in effect or
hereafter entered into (including, without limitation, subleases,
licenses, concessions, tenancies and other occupancy agreements
covering or encumbering all or any portion of the Premises), together
with any guarantees, supplements, amendments, modifications, extensions
and renewals of the same, and all additional remainders, reversions,
and other rights and estates appurtenant thereto (collectively, the
"Leases") and absolutely and presently all rents, revenues which
------
Grantor generates from the collection of room rates in the course of
its hotel operations, additional rents, percentage rents, revenues,
issues, profits, cash collateral, royalties, income, bonuses, rights
and benefits due and other benefits now or in the future payable under
the Leases, and all security deposits, advance rentals and payments of
similar nature (subject to the rights of lessees or depositors thereof)
held by Grantor in connection with the
4
<PAGE>
Leases, if any, and all proceeds from any and all concessions and
license agreements (including, without limitation, receivables,
revenues, rentals and receipts from guest rooms, meeting rooms, other
public facilities, food and beverage facilities, vending machines,
telephone systems, guest laundry and other items of revenue, receipts,
or income identified in the Uniform Systems of Accounts for Hotels, 8th
Revised Edition, International Association of Hospitality Accountants
and Hotel Association of New York) and all other fees, charges,
accounts, payments, income, issues, proceeds, product, offspring,
profits and benefits of any nature arising from the possession, use,
occupancy or enjoyment of the Mortgaged Property as defined under
Section 552(b) of the federal bankruptcy code, (as amended from time to
time and including any successor legislation thereto the "Bankruptcy
----------
Code") of any nature arising from the possession, use, occupancy or
----
enjoyment of the Mortgaged Property (collectively, the "Rents"),
-----
together with the right, but not the obligation, following an Event of
Default (as hereinafter defined) by Grantor under this Deed of Trust or
any of the other Transaction Documents, to exercise options, to give
consents and to collect, receive and receipt for the Rents and apply
the Rents to the payment of the Debt and to demand, sue for and recover
the Rents when due and payable;
(h) all contract rights relating to the Mortgaged Property,
including, without limitation, and to the extent permitted by
applicable law, all permits, licenses, certificates, consents,
approvals, authorizations and other documents obtained or to be
obtained in connection with the demolition, construction, use,
operation or maintenance of the Premises or any portion thereof
(collectively, "Permits"), all reciprocal easement, restrictive
-------
covenants and similar agreements (collectively, "REAs"), all
----
appurtenances and utility rights pertaining to the Premises or any
portion thereof, all zoning, land use, air rights and development
agreements, all operating contracts, management agreements, service
contracts, supply and maintenance contracts, equipment leases,
warranties, guaranties and all other agreements affecting the Premises
or any part thereof or used in connection with the management or
operation thereof (to the extent assignable pursuant to the provisions
of the applicable instrument or agreement creating or conferring such
rights or benefits or pursuant to applicable law) together with all of
the rights, reversions or equities now or hereafter appurtenant thereto
(such Permits, REAs and other appurtenances, rights, contracts and
agreements collectively, the "Agreements");
----------
(i) all of the right, title and interest of Grantor in and to any
other property, whether real or personal, tangible or intangible, owned
or held in connection with the Premises or the business conducted by
Grantor thereon, including, without limitation, appraisals,
architectural and engineering plans, specifications and studies
(subject to the proprietary rights of others therein), soil,
environmental and other reports relating to the Premises (subject to
the proprietary rights of others therein), license and contract rights,
accounts receivable, warranties, guaranties, catalogues, tenant lists
(but excluding proprietary guest list information), advertising
materials relating to the Premises or the business conducted by Grantor
thereon, telephone exchange numbers as identified in such materials,
trade names, trademarks and logos relating to the Premises or the
business
5
<PAGE>
conducted by Grantor thereon (subject to the rights of franchisors or
licensors) and goodwill relating to the Premises or the business
conducted by Grantor thereon;
(j) all rights of Grantor in and to the Management Agreement (as
defined in the Loan Agreement) applicable to the Premises and any other
similar agreement or license or similar agreement affecting the
management or operation of any part of the Premises, (subject in each
case to the provisions thereof and any limitations set forth therein);
(k) all rights of Grantor in any owner's or member's association or
similar group having responsibility for managing or operating any part
of the Premises;
(l) all claims against any person or entity with respect to any
damage to or loss of the Mortgaged Property, including, without
limitation, damage arising from any defect in or with respect to the
design or construction of the Improvements or the Equipment and any
damage resulting therefrom and all the right to appear in and defend
any action or proceeding brought with respect to the Mortgaged Property
and to commence any action or proceeding to protect the interest of
Beneficiary in the Mortgaged Property;
(m) all deposits or other security or advance payments, including
rental payments made by or on behalf of Grantor to others, with respect
to utility services, cleaning, maintenance, repair and similar
services, refuse removal and sewer service, parking and similar
services and rights, and rental of Equipment relating to or otherwise
used in the operation of the Mortgaged Property;
(n) all options in connection with the purchase, lease, encumbrance
or other disposition of the Mortgaged Property or any interest therein;
and
(o) any and all other, further or additional rights, title, estates
and interests which Grantor may now own or hereafter acquire, in and to
the Premises and/or the Mortgaged Property, (including without
limitation any right, title , estate or interest Grantor may now have
or hereafter acquire in the fee title to the Land or the lessor's
interests under the Ground Lease) and all renewals, substitutions and
replacements of and all additions and appurtenances to the Premises
and/or the Mortgaged Property constructed, assembled or placed by
Grantor on the Premises, and all conversions of the security
constituted thereby which, immediately upon such acquisition,
construction, assembling, placement or conversion, as the case may be,
and in each such case without any further mortgage, conveyance,
assignment or other act by Grantor, shall become subject to the lien of
this Deed of Trust as fully and completely, and with the same effect,
as though now owned by Grantor, Grantor expressly agreeing that if
Grantor shall at any time acquire any other right, title, estate or
interest in and to the Premises and/or the Mortgaged Property
(including without limitation any right, title , estate or interest
Grantor may now have or hereafter acquire in the fee title to the Land
or the lessor's
6
<PAGE>
interests under the Ground Lease), the lien of this Deed of Trust shall
automatically attach to and encumber such other right, title, estate or
interest as a lien thereon.
(p) all appurtenances in respect of or otherwise relating to the
Ground Lease, including, but not limited to, renewal options and
expansion rights, and all the estates and rights of Grantor of, in and
to (i) all modifications, extensions and renewals of the Ground Lease
and all rights to renew or extend the term thereof, (ii) all credits to
and deposits of Grantor under the Ground Lease (other than tenant
security deposits), (iii) all other options, privileges and rights
granted and demised to Grantor under the Ground Lease, (iv) all the
right or privilege of Grantor to terminate, cancel, abridge, surrender,
merge, modify or amend the Ground Lease and (v) any and all possessory
rights of Grantor and other rights and/or privileges of possession,
including, without limitation, Grantor's right to elect to remain in
possession of the Premises and the leasehold estate created by the
Ground Lease pursuant to Section 365(h)(1) of the Bankruptcy Code;
(q) all of Grantor's claims and rights to damages and any other
remedies in connection with or arising from the rejection of the Ground
Lease by Fee Owner or any trustee, custodian or receiver pursuant to
the Bankruptcy Code in the event that there shall be filed by or
against Fee Owner any petition, action or proceeding under the
Bankruptcy Code or under any other similar federal or state law now or
hereafter in effect (collectively, "Fee Owner's Bankruptcy").
----------------------
AND, as additional security, Grantor hereby grants to Beneficiary a
security interest in (1) the Equipment, (2) the Personal Property, (3) the
Condemnation Proceeds, (4) the Insurance Proceeds, (5) the Refunds, (6) the
Leases, (7) the Rents, (8) the Agreements, and (9) to the extent mortgages may
lawfully grant the same, all other components of the Mortgaged Property,
described in clauses (a) through (q) immediately preceding, and (10) all
proceeds of the foregoing collateral described in clauses (1) through (9)
(collectively, the "Security Interest Property"), and this Deed of Trust shall
--------------------------
be effective as a security agreement pursuant to the Code.
HABENDUM
TO HAVE AND TO HOLD the Mortgaged Property, the rights and privileges
hereby conveyed or assigned, or intended so to be, unto Trustee and its
successors and substitutes in trust hereunder for the benefit of Beneficiary,
its successors and assigns, and with the possession and right of possession
thereof, for the uses and purposes herein set forth.
PROVIDED ALWAYS, and these presents are upon the express condition,
that if Grantor shall well and truly pay to Beneficiary the Debt and shall well
and truly abide by and comply with each and every covenant and condition set
forth herein, in the Note and in the other Transaction Documents, then these
presents and the estate hereby granted shall cease, determine and be void.
7
<PAGE>
PROVIDED FURTHER, that provided no Event of Default has occurred and is
continuing, if Grantor shall exercise its right pursuant to and in accordance
with the Loan Agreement, Grantor shall be entitled to obtain the release by
Beneficiary of this Deed of Trust and the Mortgaged Property and, upon the
giving of such release, this Deed of Trust and these presents and the estate
hereby granted shall cease, determine and be void.
This Deed of Trust is one of a number of mortgages and deeds of trust
(all of which mortgages and deeds of trust, other than this Deed of Trust, are
described in Exhibit B) given pursuant to the Loan Agreement. Each and every
---------
term and provision of all of the SC Transaction Documents, including the rights,
remedies, obligations, covenants, conditions, agreements, indemnities,
representations and warranties of all parties thereto are hereby incorporated by
reference herein as though set forth in full and shall be considered a part of
this Deed of Trust. Terms used in this Deed of Trust which are not defined
herein or which are not defined by reference to the Loan Agreement shall have
the meanings assigned to them in the Loan Agreement.
REPRESENTATIONS, WARRANTIES, COVENANTS,
AGREEMENTS AND CONDITIONS
THIS DEED OF TRUST FURTHER WITNESSETH the following representations,
warranties, covenants, agreements and conditions:
1. Payment of Debt.
---------------
(a) Grantor shall punctually pay the Debt at the time and in the
manner provided for its payment in the Note. The maturity date of the Note (the
"Maturity Date") is the earliest to occur of:
(i) October 11, 2017; and
(ii) such earlier date to which the maturity of the Debt may be
accelerated upon an Event of Default as otherwise provided in any SC
Transaction Document.
(b) All payments of principal and interest accrued thereon shall be
made without demand therefor, or presentation or surrender of the Note, to the
extent permitted by applicable law.
2. Warranty of Title; Provisions of Ground Lease.
---------------------------------------------
(a) Grantor specially warrants that it has good and marketable title
to the Mortgaged Property and owns the Mortgaged Property free and
clear of all liens, claims, charges, restrictions, encumbrances,
security interests and other matters, subject only to (i) the lien of
this Deed of Trust and of the other Transaction Documents, (ii) the
matters set forth as exceptions
8
<PAGE>
to the policies of title insurance (the "Title Policies") relating to
--------------
the Mortgaged Property issued by Commonwealth Land Title Insurance
Company and Lawyers Title Insurance Corporation in connection with the
Loan; easements and other rights in the Mortgaged Property granted by
Grantor in the ordinary course of business which will not, individually
or in the aggregate, violate the Ground Lease or materially and
adversely affect (xx) the Premises, (yy) Grantor's hotel operations
thereon, or (zz) the value or validity of Beneficiary's lien on and
security interest in the Mortgaged Property, (iv) any easements and
other rights in the Mortgaged Property granted by Fee Owner in
accordance with the Ground Lease, (v) any financing permitted pursuant
to Paragraph 3 of this Deed of Trust, and (vi) such other matters to
-----------
which Beneficiary shall have consented to in writing (collectively, the
"Permitted Exceptions"). All items set forth hereunder as Permitted
--------------------
Exceptions are subject to the additional representations and warranties
set forth in Paragraph 4(e) hereof. Grantor represents and warrants
--------------
that no interest in all or any part of the development rights
appurtenant to the Premises have been granted, transferred or assigned
by Grantor.
(b) Grantor, at its sole cost and expense, covenants and agrees to
defend its title to the Mortgaged Property and the priority of this
Deed of Trust against all claims and demands of parties claiming or to
claim by, through or under Grantor, subject to the Permitted Exceptions
and will maintain and preserve such priority as long as the Loan
Agreement remains in effect or the Debt (or any portion thereof)
remains outstanding.
(c) With respect to the Ground Lease, Grantor represents and
warrants as follows:
(i) Grantor is the sole owner and holder of the leasehold estate
created by the Ground Lease;
(ii) the Ground Lease or a memorandum thereof has been duly
recorded in the official records of the County of Santa Clara, State
of California and has not been materially amended or modified since
the Second Amendment to Lease and the Third Amendment to Lease
described on Schedule 1 hereto, as recorded or intended to be
----------
recorded immediately preceding the recordation of this Deed of
Trust;
(iii) the Ground Lease is in full force and effect and no
default by Grantor or, to Grantor's knowledge, by Fee Owner has
occurred under the Ground Lease and to Grantor's knowledge there is
no existing condition which, but for the passage of time or the
giving of notice or both, would result in a default under the Ground
Lease;
(iv) the Ground Lease permits the interest of the tenant
thereunder to be encumbered by this Deed of Trust;
9
<PAGE>
(v) the tenant's interest in the Ground Lease is assignable to
Beneficiary without the consent of the Fee Owner and is further
assignable by Beneficiary and its successors and assigns;
(vi) the Ground Lease requires the Fee Owner to give written
notice of any default by Grantor to Beneficiary and provides that
any notice of termination given under the Ground Lease will not be
effective against the Beneficiary unless a copy of the notice has
been delivered to the Beneficiary;
(vii) the Ground Lease requires the Fee Owner to afford the
Beneficiary a reasonable opportunity to cure any default under the
Ground Lease, which is susceptible of being cured by Beneficiary
after the receipt of notice of any default before the Fee Owner may
terminate the Ground Lease;
(viii) the Ground Lease requires the Fee Owner to enter into a
new lease with Beneficiary and its successors and assigns on the
same terms as the Ground Lease and having the same priority as the
Ground Lease, upon the termination of the Ground Lease for any
reason, including without limitation, the rejection of the Ground
Lease in a bankruptcy proceeding, provided that Beneficiary has
cured all defaults that are susceptible of being cured by
Beneficiary;
(x) the Ground Lease has a term which extends not less than ten
(10) years beyond the Maturity Date;
(xi) the Ground Lease permits the Beneficiary or an appointed
trustee to hold and disburse any Insurance Proceeds to be applied
either to the repair and restoration of the Mortgaged Property or
the repayment of the Debt;
(xii) the Fee Owner has been, or promptly following the execu
tion and delivery of this Deed of Trust will be, given the required
notice for Beneficiary to be recognized as the holder of a leasehold
mortgage entitled to the rights and privileges afforded a leasehold
mortgagee under the Ground Lease.
3. Further Mortgages and Liens.
---------------------------
(a) This Deed of Trust is and will be maintained by Grantor as a
valid and enforceable mortgage lien on and security interest in the
Mortgaged Property subject only to the Permitted Exceptions. Except for
Permitted Subordinate Mortgages (as hereinafter defined), Grantor shall
not, directly or indirectly, create or suffer, or permit to be created
or suffered, against the Mortgaged Property or any part thereof,
including, without limitation, the Rents or the Leases, and Grantor
will promptly discharge or bond over, any mortgage, lien (including the
liens of mechanics and materialmen), pledge, conditional sale or other
title retention agreement, easement or other covenant, attachment,
security interest, encumbrance or charge which may affect the Mortgaged
Property or any part thereof or interest therein, except (i) the
------
Permitted Exceptions, (ii) Permitted Subordinate Mortgages and (iii)
matters being contested in good faith
10
<PAGE>
and by appropriate proceedings in the manner permitted by Paragraph 16
------------
of this Deed of Trust. If any mortgage, other lien or encumbrance not
permitted hereunder is filed, Grantor will cause the same to be
discharged within thirty (30) days after recordation thereof and will
exhibit to Beneficiary, upon request, evidence of discharge or other
disposition satisfactory to Beneficiary.
(b) Notwithstanding anything to the contrary contained in Paragraph
---------
3(a), but subject to the requirements set forth in Paragraph 3(c) and
---- --------------
(d), Grantor may grant one or more mortgages or deeds of trust on the
---
Mortgaged Property, each subordinate to the lien hereof (each such
mortgage or deed of trust being referred to individually as a
"Permitted Subordinate Mortgage" and collectively as the "Permitted
------------------------------ ---------
Subordinate Mortgages").
---------------------
(c) With respect to each Permitted Subordinate Mortgage, but not
with respect to an FF&E Financing (as hereinafter defined) (for which
the requirements of Paragraph 3(e) (including the provisions
cross-referenced therein) shall apply), in addition to the requirements
set forth in Paragraph 3(d), the following shall apply:
--------------
(i) no Permitted Subordinate Mortgage shall be permitted to be
granted prior to the date which is two (2) years from the date
hereof;
(ii) each Permitted Subordinate Mortgage shall at all times be
held by a savings bank, savings and loan association, commercial
bank or trust company, insurance company, investment banking
institution or a union, federal, state, municipal or secular
employee's welfare, benefit, pension or retirement fund;
(iii) the Debt Service Coverage Ratio (as defined in the Loan
Agreement) requirement set forth in the Loan Agreement with respect
to maintenance of a Debt Service Coverage Ratio of at least 2.25:1
shall be satisfied; and
(iv) the Rating Agencies (as defined in the Loan Agreement)
shall confirm that the existence of such Permitted Subordinate
Mortgage and the debt secured thereby will not result in a
withdrawal, qualification or downgrade of any then existing ratings
given by any such Rating Agencies with respect to the Securities (as
defined in the Loan Agreement), if applicable.
(d) The granting of any Permitted Subordinate Mortgage shall be
subject to the following additional requirements:
(i) Grantor shall not then be in default of its obligations
under this Deed of Trust, the Note, or any of the SC Transaction
Documents beyond any applicable cure period;
(ii) Grantor shall give Beneficiary written notice (the
"Permitted Subordinate Mortgage Notice") of Grantor's intention to
-------------------------------------
enter into a Permitted Subordinate Mortgage not less than thirty
(30) days prior to the placement thereof, such notice to be
accompanied by a copy of the proposed Permitted Subordinate Mortgage
or
11
<PAGE>
term sheet setting forth the terms thereof, and shall promptly
thereafter deliver to Beneficiary copies of the proposed Permitted
Subordinate Mortgage, when available (if not theretofore delivered),
and modifications of the proposed Permitted Subordinate Mortgage and
of said term sheet;
(iii) each Permitted Subordinate Mortgage shall be expressly
subject and subordinate in lien to this Deed of Trust and all of the
other SC Transaction Documents, and any agreement now or hereafter
given as additional security for the Note or this Deed of Trust, and
to all of the terms, covenants and conditions of this Deed of Trust
and the other SC Transaction Documents and said agreements and all
extensions, renewals, modifications, supplements, consolidations,
spreaders or replacements thereof (each, a "Renewal") and any other
action permitted or contemplated by this Deed of Trust or any other
SC Transaction Document (including, without limitation, increases in
the amount of the SC Loan for accrued and unpaid interest,
additional interest, prepayment premiums or charges, Yield
Maintenance Premiums, if any, and other fees and charges,and
increases in the amount of the Debt resulting from protective
advances made by Trustee or Beneficiary pursuant to the SC
Transaction Documents, including without limitation, advances made
for taxes, insurance premiums, and maintenance of the Premises which
are secured by this Deed of Trust or any other SC Transaction
Document;
(iv) each Permitted Subordinate Mortgage shall provide that the
holder thereof shall furnish the holder of this Deed of Trust with a
copy of any notice of default or legal process sent to Grantor
simultaneously with the transmittal thereof to Grantor;
(v) each Permitted Subordinate Mortgage, and any other document
evidencing or securing the debt which such Permitted Subordinate
Mortgage secures, shall provide that it is expressly subject and
subordinate to any and all advances of the SC Loan, in whatever
amounts and whenever made, with interest thereon, and to any
expenses, charges and fees incurred, including any and all such
advances, interest, expenses, charges and fees which may increase
the indebtedness secured by this Deed of Trust above the original
principal amount thereof;
(vi) each Permitted Subordinate Mortgage shall provide that (A)
if any action or proceeding is brought for the foreclosure thereof,
the rents from the Mortgaged Property shall be collected only by a
receiver appointed by a court or referee after notice of the
application for the appointment of such receiver shall have been
given to the then holder of this Deed of Trust (B) all monies
collected by such receiver shall be applied first to the payment of
all sums then due which are secured by this Deed of Trust and the
balance, if any, may then be applied to the payment of any sums then
due which are secured by said Permitted Subordinate Mortgage and (C)
if, during the pendency of any such foreclosure action or
proceedings, an action or proceeding shall be brought by the then
holder or holders of this Deed of Trust for the foreclosure of this
Deed of Trust and an application is made by the then holder or
holders of this Deed of Trust for an extension of such receivership
for the benefit of the then holder or holders of this Deed of Trust
all such rents held by such receiver, as of the date of such
application, shall be
12
<PAGE>
applied by the receiver solely for the benefit of the then holder or
holders of this Deed of Trust (including, without limitation, the
outstanding principal balance of the SC Loan, or any portion
thereof, if payment of the same is accelerated, and any late
charges, or other charges and fees that may be payable, from time to
time, in connection with the SC Loan or any portion thereof) before
the holder of such Permitted Subordinate Mortgage shall be entitled
to any portion thereof;
(vii) each Permitted Subordinate Mortgage shall provide that if
any action or proceeding shall be brought to foreclose said
Permitted Subordinate Mortgage, no tenant of any portion of the
Mortgaged Property will be named as a party defendant in any such
foreclosure action or proceeding, nor will any other action be taken
with respect to any tenant of any portion of the Mortgaged Property
the effect of which would be to terminate any lease without the
written consent of the then holder or holders of this Deed of Trust;
(viii) no holder of a Permitted Subordinate Mortgage shall acquire
by subrogation, contract or otherwise, any lien upon any other
estate, right or interest in the Mortgaged Property, including, but
not limited to, any which may arise with respect to real estate
taxes, assessments or other governmental charges which are or may be
prior in right to this Deed of Trust or any other SC Transaction
Document, or any Renewal of this Deed of Trust or any other SC
Transaction Document, unless within sixty (60) days following
written notice of such intention to acquire such other estate, right
or interest from the mortgagee thereunder, or its successors or
assigns, the then holder of this Deed of Trust shall fail or refuse
to purchase or acquire, by subrogation or otherwise, such prior
lien, estate, right or interest, or shall fail, within such period,
to commence and thereafter proceed diligently to purchase or acquire
the same;
(ix) each Permitted Subordinate Mortgage shall provide that the
mortgagee thereunder, its successors or assigns, or any other legal
holder thereof, shall agree to assign and release unto the legal
holder of this Deed of Trust (A) all of its right, title, interest
or claim, if any, in and to Insurance Proceeds for application upon
the indebtedness secured by, or other disposition thereof in
accordance with the provisions of, this Deed of Trust and (B) all of
its right, title and interest, and interest of claim, if any, in and
to all Condemnation Proceeds for application upon the indebtedness
secured by, or other disposition thereof in accordance with the
provisions of, this Deed of Trust;
(x) each Permitted Subordinate Mortgage shall provide that so
long as this Deed of Trust shall remain upon the Mortgaged Property
or any part thereof, the mortgagee thereunder, its successors or
assigns or any other legal holder thereof, shall execute,
acknowledge and deliver, upon demand, at any time or times, any and
all further subordinations or other instruments, in recordable form,
reasonably sufficient for that purpose, or that Grantor or
Beneficiary, their respective successors or assigns or other legal
holder of this Deed of Trust, may hereafter reasonably require for
carrying out the true purpose and intent of the foregoing covenant;
13
<PAGE>
(xi) each Permitted Subordinate Mortgage (and any underlying
note or obligation) shall be nonrecourse, except for
misappropriation of funds, material misrepresentation, fraud, and
environmental liabilities;
(xii) a default under any Permitted Subordinate Mortgage as and
when declared by the holder thereof shall constitute a default under
this Deed of Trust; a default under any Permitted Subordinate
Mortgage not cured within the applicable cure period, if any, shall
constitute an Event of Default under this Deed of Trust; provided
that Beneficiary shall not accelerate the Debt secured by this Deed
of Trust or commence to foreclose the lien of this Deed of Trust
unless and until the holder of the Permitted Subordinate Mortgage
then in default accelerates the debt secured thereby or commences to
foreclose the lien secured by its Permitted Subordinate Mortgage;
(xiii) if a Permitted Subordinate Mortgage is not executed and
delivered within sixty (60) days after delivery to Beneficiary of
the Permitted Subordinate Mortgage Notice then no such Permitted
Subordinate Mortgage may be placed against the Mortgaged Property or
any portion thereof unless Grantor again complies with all of the
provisions of this Paragraph 3;
-----------
(xiv) a true copy of each Permitted Subordinate Mortgage shall
be furnished to Beneficiary promptly after the execution and
delivery thereof;
(xv) Grantor shall pay to Beneficiary Beneficiary's reasonable
attorneys' fees and other reasonable out-of-pocket costs incurred in
connection with review and approval of the documentation; and
(xvi) In no event shall any Permitted Subordinate Mortgage
provide for the accrual of all or any portion of the interest
payable thereunder (other than normal accruals, not to exceed ninety
(90) days in any event), and in no event shall any Permitted
Subordinate Mortgage provide for debt service which is dependent
upon the amount of cash flow or other proceeds generated from the
Premises.
(e) Grantor may enter into one or more purchase money financings,
not secured by a lien on real property, in connection with the purchase of
furniture, fixtures and/or equipment for the Premises (each, an "FF&E
----
Financing"); provided that each FF&E Financing secures a principal balance not
- ---------
in excess of $1,000,000.00. The FF&E Financing granted from time to time by
Grantor, if any, need not comply with the provisions of sub-clauses (i), (ii),
(iii) or (iv) of Paragraph 3(c) or the provisions of Paragraph 3(d) other than
-------------- --------------
clause (i) of such Paragraph 3(d).
--------------
4. Representations and Warranties. To induce Beneficiary to accept the
------------------------------
Note and this Deed of Trust, and to make the SC Loan evidenced by the Note and
secured by this Deed of Trust, Grantor represents and warrants to Beneficiary
that:
14
<PAGE>
(a) The covenants in this Deed of Trust and in the other SC
Transaction Documents have been observed and performed in all material
respects to the extent applicable on and as of the date hereof. The
representations and warranties in this Deed of Trust and in the other
SC Transaction Documents are true and correct in all material respects
on and as of the date hereof. All such covenants, representations and
warranties are hereby incorporated by reference.
(b) The granting of this Deed of Trust, the consummation of the
transactions herein contemplated and the execution and delivery of, and
the performance and observance of Grantor's obligations under this Deed
of Trust, the other SC Transaction Documents and other instruments
herein mentioned to which Grantor is a party and which have been
executed and delivered in connection with the transactions contemplated
in the SC Transaction Documents have been duly authorized by all
necessary action on the part of Grantor and its general partner and, to
the Best Knowledge of Grantor (as such term is defined in Paragraph
---------
46(a) hereof), no other consent, license, permit, approval or
-----
authorization of, exemption by, notice or report to, or registration,
filing or declaration with, any Governmental Authority (as hereinafter
defined) (collectively, "Approvals") is required which has not been
---------
obtained by Grantor in connection with the execution, delivery or
performance by Grantor of this Deed of Trust, the other SC Transaction
Documents and other instruments herein mentioned to which Grantor is a
party. For the purposes hereof, "Governmental Authority" shall mean any
----------------------
court, agency, authority, board (including, without limitation,
environmental protection, planning and zoning), bureau, commission,
department, office or instrumentality of any nature whatsoever of any
governmental or quasi-governmental unit of the United States or the
State or the county or city where the Premises are located or any
political subdivision of any of the foregoing, whether now or hereafter
in existence, or any officer or official thereof, having jurisdiction
over Grantor or the Mortgaged Property or any portion thereof.
(c) This Deed of Trust and each of the other SC Transaction
Documents have been duly authorized, executed and delivered on behalf
of Grantor by its general partner, and this Deed of Trust constitutes,
and each of the other SC Transaction Documents and other instruments
mentioned herein to which Grantor is a party constitute, a legal, valid
and binding obligation of Grantor, enforceable against Grantor in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, moratorium, reorganization or other
similar laws affecting the enforcement of creditors' rights generally
or by principles of equity or public policy (whether asserted in equity
or in proceedings at law).
(d) This Deed of Trust constitutes a valid mortgage lien on, and, to
the extent permitted by applicable law, security interest in, the
Mortgaged Property, subject to no liens, charges or encumbrances other
than the Permitted Exceptions. There are no defenses, counterclaims or
offsets to Grantor's obligation to pay the Debt pursuant to this Deed
of Trust, the Note or any of the other SC Transaction Documents. To the
Best Knowledge of Grantor, there are no defenses, counterclaims or
offsets to any of Grantor's
15
<PAGE>
other obligations pursuant to this Deed of Trust, the Note or any of
the other SC Transaction Documents.
(e) The Permitted Exceptions do not and will not materially and
adversely interfere with (i) the ability of Grantor to pay in full the
Debt in the manner required by the Note or (ii) the use of the
Mortgaged Property for the use currently being made thereof, the
operation of the Mortgaged Property as currently being operated for
hotel purposes or the value of the Mortgaged Property.
(f) Except as set forth on the "Disclosure Schedule" (as defined in
-------------------
the Loan Agreement) applicable to the Mortgaged Property and approved
by Beneficiary in writing, there are no Leases (other than the Ground
Lease) affecting the Mortgaged Property. To the extent that the
Disclosure Schedule lists any leases affecting the Mortgaged Property,
to the Best Knowledge of Grantor, except as expressly disclosed on the
Disclosure Schedule, no tenant under any of the Leases is entitled to
any rent concession, Grantor has not accepted any prepayment of any
rent, additional rent or other sums due under any of the Leases, except
a payment of rent or additional rent one (1) month in advance or a
prepayment in the nature of security for the performance of obligations
of the tenant under any of the Leases and no tenant has any defense,
set-off or counterclaim against Grantor or to the payment of any rent,
additional rent or other sums payable pursuant to its Lease or to the
performance of any obligations of the tenant thereunder. No tenant
under any of the Leases has any right or option relating to the sale or
other disposition of any of the Mortgaged Property.
(g) The copies of the Leases, if any, previously delivered by
Grantor to Beneficiary are true, correct and complete copies of those
documents, and contain the entire agreement between the parties thereto
with respect to the subject matter thereof.
(h) Except as set forth in the Disclosure Schedule applicable to the
Mortgaged Property, Grantor has obtained or caused Manager to obtain
where required by applicable law, a valid, permanent Certificate of
Occupancy for the Improvements which permits the uses to which the
Premises are put and the uses permitted under any applicable Lease, and
in such instances where relevant, such Certificate of Occupancy is in
full force and effect, and all Permits of all Governmental Authorities
required with respect to the use, operation, ownership and maintenance
of the Mortgaged Property, and all of the same are in full force and
effect and the Improvements comply in all material respects therewith.
(i) Grantor has all easements, appurtenances or other rights and
interests, including those for use, maintenance, and access (by
pedestrians, automobiles and trucks) necessary or appropriate for the
full and proper operation, repair, maintenance, occupancy and use of
every portion of the Mortgaged Property as a full-service, first-class
Marriott hotel and in compliance with the Loan Agreement. To the Best
Knowledge of Grantor, all utility services necessary for the operation
and occupancy of the Mortgaged Property
16
<PAGE>
for such purposes are available at the Mortgaged Property and will
continue to be operational and adequate.
(j) Grantor's possession of the Premises has been peaceable and
undisturbed and Grantor's title thereto has never been disputed or
questioned and, except for the Permitted Exceptions Grantor does not
know of any facts by reason of which any adverse claim to any part of
the Mortgaged Property or to any undivided interest therein might be
made.
(k) Except as disclosed on the Title Policies or set forth on the
Disclosure Schedule applicable to the Premises and approved in writing
by Beneficiary, no condemnation or eminent domain proceedings or other
exercise of the right of eminent domain or conveyance in lieu of
condemnation (hereinafter collectively called "Condemnation
------------
Proceedings") have been commenced and remain ongoing with respect to
-----------
the Mortgaged Property or any portion thereof and, to the Best
Knowledge of Grantor, no Condemnation Proceedings are pending, nor has
Grantor received written notice of any threatened Condemnation
Proceedings.
(l) All costs arising from the construction of the Improvements have
been fully paid. All Equipment, Personal Property and all other
fixtures and articles of personalty attached to the Premises, or usable
in connection with the operation and maintenance thereof (xx) have been
fully paid for other than purchase money financing in de minimis
amounts not exceeding $50,000.00 in the aggregate for the Premises and
the properties encumbered by the Other SC Mortgages, (yy) are the
property of Grantor and (zz) except for property subject to the
foregoing purchase money financings, are not subject to any conditional
bills of sale, chattel mortgages or any other title retention agreement
of a similar nature or to any other liens or encumbrances other than
those created by the SC Transaction Documents or otherwise specifically
permitted hereunder, except for:
----------
(i) such matters as are set forth on the Disclosure Schedule
applicable to the Premises and approved in writing by Beneficiary,
which shall include existing purchase money equipment arrangements;
(ii) such matters which, pursuant to the Loan Agreement, or
defined in this Paragraph 4(l) as de minimis and not required to be
-------------- -- -------
disclosed;
(iii) Equipment or Personal Property subject to written leases
between the owner/installer of such Equipment and/or Personal
Property, as lessor, and Grantor, as lessee, to the extent permitted
in the Loan Agreement; and
(iv) Equipment or Personal Property, if any, that is owned by
tenants or guests at the Premises.
(m) Grantor is not a "national" of a "designated foreign country"
(or a person defined as a "designated foreign country") as such quoted
terms are defined in the Foreign
17
<PAGE>
or Cuban Assets Control Regulations of the United States Treasury
Department, 31 CFR, Subtitle B, Chapter V, as amended, or any
regulation or ruling issued thereunder.
(n) Grantor, pursuant to the Title Policies, or an irrevocable
commitment therefor, effective as of the date of the closing of the SC
Loan has caused to be issued to Beneficiary an ALTA Lender's title
insurance policy insuring a valid first lien on the Premises, subject
only to the Permitted Exceptions which Title Policies are in full force
and effect and are freely assignable to and will inure to the benefit
of any trustee or servicer selected by Beneficiary in connection with a
Securitization (as defined in the Loan Agreement).
(o) To the Best Knowledge of Grantor, no representation or
information contained herein or in any other SC Transaction Document,
nor any written statement or other instrument furnished, or to be
furnished, to Beneficiary or any other person entitled thereto under
the terms of the SC Transaction Documents executed by Grantor or its
general partner taken as a whole contains, or will contain, any untrue
statement of a material fact, or omits, or will omit, to state a
material fact necessary to make the statements contained herein or
therein not materially misleading.
5. Covenants of Grantor as to Performance and Other Matters.
--------------------------------------------------------
(a) Grantor shall duly perform and observe all of the agreements,
covenants, conditions and obligations imposed by the provisions of this Deed of
Trust, the Note, the other SC Transaction Documents or imposed upon or assumed
by Grantor by virtue of the provisions of the Permitted Exceptions or any deed,
conveyance, agreement, statute or ordinance pursuant to which Grantor or any
predecessor in title of the Mortgaged Property acquired the Mortgaged Property
or any right or privileges appurtenant thereto or for the benefit thereof.
(b) Grantor shall, so long as Grantor is the owner of the Mortgaged
Property, do all things necessary to preserve and keep in full force and effect
the existence, rights and privileges of Grantor under the laws of the state of
its incorporation and the State in which the Premises are located.
(c) Grantor shall not, without the prior written consent of
beneficiary which consent shall not be unreasonably withheld, conditioned or
delayed, institute, join in, execute or consent to any change in any covenant,
condition, restriction, easement, declaration, zoning ordinance, or other public
or private restriction limiting, defining or otherwise controlling construction
on or use(s) of all or any part of the Mortgaged Property.
(d) Except as expressly permitted in the Loan Agreement or any other
SC Transaction Document, Grantor shall not, without the prior written consent of
Beneficiary which consent shall not be unreasonably withheld, conditioned or
delayed, enter into, amend or modify any agreements relating to the management
of the Mortgaged Property or the operation of the hotel or hotel operations
thereon.
18
<PAGE>
(e) Except as expressly permitted in the Loan Agreement, Grantor
shall not, without the prior written consent of Beneficiary, enter
into, amend or modify any agreements relating to the Mortgaged Property
or the operation of the hotel or hotel operations thereon with any
"Affiliate" (as defined in the Loan Agreement) of Grantor except on
---------
terms that are no less favorable to Grantor than would be contained in
similar arrangements on arms length terms with independent third
parties consistent with any provisions of the Loan Agreement. All such
agreements shall to the extent required under the SC Transaction
Documents be fully and expressly subject and subordinate in all
respects to the Debt, this Deed of Trust, and the SC Transaction
Documents and to any and all extensions, renewals, additions,
modifications, increases, consolidations, spreaders, amendments,
replacements, restatements and substitutions hereof and thereof.
(f) Grantor shall obtain all Approvals, if any, required in
connection with the execution, delivery or performance by Grantor of
this Deed of Trust, the other SC Transaction Documents and the other
instruments herein mentioned to which Grantor is a party.
(g) Grantor shall cause all Permits and Certificates of Occupancy
required with respect to the use, operation, ownership and maintenance
of the Mortgaged Property to remain in full force and effect at all
times during the term hereof, and Grantor shall not permit or suffer to
exist a violation of any such Permit or Certificate of Occupancy, or
enter into any Lease which causes or permits the violation thereof.
(h) Grantor shall, within five (5) business days after receipt from
or delivery to Fee Owner of any notice of default or any other material
notice, demand, complaint or request made by or given to Fee Owner with
respect to the Premises or the Ground Lease, deliver a true copy
thereof to Beneficiary. Beneficiary may, upon receipt by Beneficiary of
any notice of default on the part of Grantor under the Ground Lease,
rely thereon and may, upon notice to Grantor, take such action as
Beneficiary shall deem necessary or desirable notwithstanding that the
existence of such default or the nature thereof may be questioned or
denied by or on behalf of Grantor.
(i) Grantor shall pay the rent and other charges and all other sums
due or payable at any time and from time to time pursuant to the terms
of the Ground Lease as and when such sums shall become due or payable.
If any default shall be made in the payment of any sum when due or
payable by Grantor under the Ground Lease, Beneficiary shall have the
right, but shall have no obligation, to pay any such sum.
(j) Grantor shall give Beneficiary written notice of each and every
option to extend or renew the term of the Ground Lease, and notice of
its intention to exercise each such option, at least twenty (20) but
not more than sixty (60) days prior to the expiration of the time to
exercise such option under the terms of the Ground Lease. Grantor shall
exercise any extension and/or renewal option in respect of the Ground
Lease upon Beneficiary's demand if Beneficiary reasonably determines
that the exercise of such option is necessary to protect Beneficiary's
security for the Loan. If Grantor intends to extend or renew the term
of the Ground Lease, Grantor shall deliver to Beneficiary, together
with the notice of such decision, a
19
<PAGE>
copy of the notice of extension or renewal delivered to Fee Owner. If the term
of the Ground Lease does not extend at least ten (10) years beyond the Maturity
Date, Beneficiary may, at its option, exercise the option to extend or renew in
the name and on behalf of Grantor. For such limited and specific purpose,
Grantor hereby irrevocably appoints Beneficiary as its true and lawful attorney-
in-fact (which appointment shall be deemed coupled with an interest) to execute
and deliver, for and in the name of Grantor, all instruments and agreements
necessary under the Ground Lease or otherwise to cause such an extension of the
term of the Ground Lease.
(k) Grantor shall not (i) terminate (or exercise any option it may
have to terminate) or cancel the Ground Lease, surrender all or any part of the
Premises to Fee Owner, modify, abridge or amend any material provision of the
Ground Lease, or suffer or permit any of the foregoing to occur, or (ii) consent
to the subordination of the Ground Lease or any amendment or modification
thereof to any mortgage encumbering the fee title to all or any portion of the
Premises.
(l) Grantor shall fully and timely observe, perform and comply in
all material respects with all of the terms, covenants and provisions contained
in the Ground Lease in such a manner so as to preserve and keep unimpaired its
rights under the Ground Lease and to prevent the occurrence of a default
thereunder.
(m) Grantor shall execute and deliver to Beneficiary, within five
(5) days after request, such instruments as may be required to permit
Beneficiary to cure any default under the Ground Lease or permit Beneficiary to
take such other action required to enable Beneficiary to cure or remedy the
matter in default and preserve the interest of Beneficiary in the Mortgaged
Property.
(n) Except as specifically provided in the Ground Lease, Grantor
shall first obtain the consent or approval of Fee Owner in all instances where
the consent or approval of Beneficiary under this Deed of Trust requires such
consent under the Ground Lease.
6. Due on Sale or Encumbrance.
--------------------------
(a) Grantor acknowledges that the continuous ownership, operation
and management of the Mortgaged Property by Grantor (directly, or through the
Manager) is of a material nature to this transaction and the making of the Loan
evidenced and secured by this Deed of Trust and the other SC Transaction
Documents. Grantor hereby covenants and agrees that Grantor shall not, without
the written consent of Beneficiary, directly or indirectly, voluntarily or
involuntarily or by operation of law, (i) dissolve, or terminate or amend the
terms of the existence of the Grantor or its general partner in any respect that
is not expressly permitted by the SC Transaction Documents, or (ii) sell,
convey, assign, mortgage, encumber (except by the Permitted Exceptions),
hypothecate or otherwise transfer, alienate or dispose of, including, without
limitation, any lease of the Premises as a whole or substantially as a whole,
any interest in the Mortgaged Property or any legal or beneficial interest in
the Grantor or its general partner, except as expressly permitted by the SC
Transaction Documents.
20
<PAGE>
(b) If Beneficiary shall not consent in writing to a sale,
conveyance, assignment, mortgaging, encumbering or other transfer, alienation or
disposition prohibited by subparagraph 6.(a) hereof, and Grantor nevertheless
------------------
proceeds with such sale, conveyance, assignment, mortgaging, encumbering or
other transfer, alienation or disposition, then Beneficiary may, at its option,
and without limiting any other right or remedy available to Beneficiary
hereunder, at law or in equity, (but subject to Grantor's right pursuant to and
in accordance with the Loan Agreement to obtain the release by Beneficiary of
the Mortgaged Property) in its sole and absolute discretion and without regard
to the adequacy of its security, declare the Note, in whole or in part,
immediately due and payable.
(c) The giving of written consent by Beneficiary to the transfer,
alienation or disposition of all or any part of the Mortgaged Property or any
interest in the Mortgaged Property or Grantor or its general partner in any one
or more instances shall not limit or be deemed a waiver of the requirement for
such consent in any other or subsequent instances. Except as otherwise expressly
provided to the contrary in any SC Transaction Document, if any mortgage,
encumbrance or other lien shall be placed on the Mortgaged Property or any
portion thereof (other than this Deed of Trust) without the prior written
consent of Beneficiary, such prohibited lien shall be deemed to be null and void
ab initio.
- -- ------
7. Hazardous Substances.
--------------------
(a) As used herein:
(i) "Environment" shall mean soil, surface waters, ground
-----------
waters, land, stream, sediments, surface or subsurface strata and
ambient air.
(ii) "Environmental Laws" shall mean all Federal, state and
------------------
local environmental, health or safety laws, regulations, ordinances,
orders, actions, policies and rules of common law (whether now
existing or hereafter enacted or promulgated), of all Governmental
Authorities and all applicable judicial and administrative and
regulatory decrees, judgments and orders, including common law
rulings and determinations, relating to injury to, or the protection
of, human health or the Environment, including, without limitation,
all requirements pertaining to reporting, licensing, permitting,
investigation, remediation and removal of emissions, discharges,
releases or threatened releases of Hazardous Substances, into the
Environment, or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Substances.
(iii) "Environmental Report" shall mean the environmental
--------------------
reports (described in the Disclosure Schedule) applicable to the
Premises or any update thereof or supplement thereto.
(iv) "Hazardous Substances" shall mean any chemical, material,
--------------------
gas, vapor, energy, radiation or substance the presence of which
requires or may hereafter require notification, investigation or
remediation under any applicable Environmental Law,
21
<PAGE>
(B) which is or becomes defined as a "hazardous waste", "hazardous material" or
"hazardous substance" or "controlled industrial waste" or "pollutant" or
"contaminant" under any present or future Environmental Laws, which is toxic,
explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
mutagenic or otherwise hazardous and is or becomes regulated by any Governmental
Authority, the presence of which on the Mortgaged Property poses or a hazard to
the Mortgaged Property or to the health or safety of persons or property on or
about the Mortgaged Property, without limitation, which contains gasoline,
diesel fuel or other petroleum hydrocarbons or volatile organic compounds,
without limitation, which contains PCBs or asbestos or urea formaldehyde foam
insulation, or without limitation, which contains or emits radioactive
particles, waves or material, including radon gas in amounts the presence of
which poses or threatens to pose a hazard to the Mortgaged Property or to the
health or safety of persons or property on or about the Mortgaged Property.
(b) Grantor hereby represents and warrants as of the date hereof as
follows:
(i) Except as set forth in the applicable Environmental Report:
(A) neither Grantor nor, to the Best Knowledge of Grantor,
any prior owner, occupant or user of the Mortgaged Property nor
any other person (each, a "Prior User") has engaged in or
----------
permitted any operations or activities upon, or any use or
occupancy of the Mortgaged Property, or any portion thereof, for
the purpose of or in any way involving the handling,
manufacture, treatment, storage, use, generation, release,
discharge, refining, dumping or disposal of any Hazardous
Substances (whether legal or illegal, accidental or intentional)
on, under, in or about the Mortgaged Property, except to the
extent commonly used in the day-to-day operation of the
Mortgaged Property and in such case substantially in compliance
with all Environmental Laws;
(B) neither Grantor nor, to the Best Knowledge of Grantor,
any Prior User, has transported any Hazardous Substances to,
from or across the Mortgaged Property, except substantially in
compliance with all Environmental Laws;
(C) to the Best Knowledge of Grantor, no Hazardous
Substances have migrated from other properties upon, about or
beneath the Mortgaged Property; and
(D) to the Best Knowledge of Grantor, there are no Hazardous
Substances presently deposited, stored, or otherwise included in
or located on, under, in or about the Mortgaged Property, except
Hazardous Substances stored and used in amounts reasonably
related to the normal operation of the Mortgaged Property for
hotel operations and in such case substantially in compliance
with all Environmental Laws.
22
<PAGE>
(ii) Except as set forth in the applicable Environmental Report,
the Mortgaged Property and the use, maintenance and operation of the Mortgaged
Property, and all activities and conduct of business related thereto,
substantially comply and to the Best Knowledge of Grantor have at all relevant
times substantially complied with all Environmental Laws, and no activity on or
condition of the Property has been alleged in writing to Grantor to be a
material nuisance with respect to any third party.
(iii) Grantor has obtained any or all permits, licenses and
authorizations necessary to Grantor's operation of the Mortgaged Property under
applicable Environmental Laws, including laws relating to emissions, discharges,
releases or threatened releases of Hazardous Substances into the Environment or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Substances. To the Best
Knowledge of Grantor, Grantor and the Mortgaged Property are substantially in
compliance with all terms and conditions of any required permits, licenses and
authorizations.
(iv) Except as set forth in the applicable Environmental Report,
neither Grantor nor, to the Best Knowledge of Grantor, any Prior User has
received notice or other communication from a Governmental Authority having
jurisdiction over the Grantor, the Mortgaged Property or any such Prior User
concerning any alleged violation of or liability under any Environmental Laws
with respect to the Mortgaged Property. Additionally, Grantor has not received
notice or other communication from a Governmental Authority concerning any
alleged material violation or material liability under any Environmental Laws by
Grantor, or relating in whole or in part to the Mortgaged Property, or with
respect to the real property adjacent to the Mortgaged Property, it being
understood that the term "adjacent" shall refer to real property within the
relevant radius for the violation of applicable Environmental Laws as set forth
in the applicable Environmental Report. Except as set forth in the applicable
Environmental Report, there exists no writ, injunction, decree, order or
judgment outstanding, nor any lawsuit, claim, proceeding, citation, directive,
summons or investigation, pending or, to the Best Knowledge of Grantor,
threatened, relating to the ownership, use, maintenance or operation of the
Mortgaged Property by any person or entity, or related to any alleged violation
of Environmental Laws, or any suspected presence of Hazardous Substances
thereon.
(v) Except to the extent set forth in the applicable
Environmental Report, Grantor has not placed, nor to Grantor's Best Knowledge
has there been constructed, placed, deposited, stored, disposed of or located on
the Mortgaged Property any PCB nor any transformer, capacitor, ballast, or other
equipment which contains dielectric fluid containing PCBs in concentrations that
exceed federal standards, nor any asbestos or asbestos-containing materials nor
any insulating material containing urea formaldehyde or any radon gas in amounts
the presence of which poses or threatens to pose a hazard to the Mortgaged
Property or to the health or safety of persons or property on or about the
Mortgaged Property. To the Best Knowledge of Grantor, except to the extent set
forth in the Environmental Report or as may have been removed in accordance
23
<PAGE>
with Environmental Laws, no underground improvements, including, but
not limited to, treatment or storage tanks, or water, gas or oil
wells, are located on the Mortgaged Property.
(c) Grantor hereby covenants and agrees that Grantor shall not,
unless Beneficiary shall otherwise consent in writing:
(i) Cause or, to the best of Grantor's ability to prevent
such activity, permit or suffer any Hazardous Substance to be
brought upon, treated, kept, stored, disposed of, discharged,
released, produced, manufactured, generated, refined or used upon,
about or beneath the Mortgaged Property or any portion thereof by
Grantor, its agents, employees, contractors, invitees, tenants, or
any other person, except to the extent commonly used in the ordinary
operation of the Mortgaged Property or in any such contractor's
ordinary course of trade, and in each case in compliance with
applicable Environmental Laws. The foregoing shall not apply to any
Hazardous Substances that may have migrated or leached onto the
Mortgaged Property from any other property.
(ii) Cause, permit or suffer the existence or the
commission by Grantor, its agents, employees, or contractors of a
violation of any Environmental Laws upon, about or beneath the
Mortgaged Property or any portion thereof and Grantor shall use
commercially reasonable efforts to prevent any such violation of any
Environmental Laws by any invitees or any other person on the
Mortgaged Property. Any removal or encapsulation of or other
remedial action taken by or on behalf of Grantor in connection with
any Hazardous Substance located on the Mortgaged Property
(including, without limitation, subsequent disposal thereof) shall
be performed in accordance with all applicable Environmental Laws
and other Legal Requirements (as defined in Paragraph 15 hereof).
------------
(iii) Subject to the provisions of Paragraph 16 hereof
------------
relating to permitted contests, create, or to the best of Grantor's
ability to prevent such encumbrances, suffer to exist with respect
to the Mortgaged Property, or permit any of its agents to create or
suffer to exist, any lien, security interest or other charge or
encumbrance of any kind under any Environmental Laws, including,
without limitation, any lien imposed pursuant to section 107(l) of
the Superfund Amendments and Reauthorization Act of 1986 (42 U.S.C.
Section 9607(1)) or any similar state statute.
(d) Grantor hereby covenants and agrees that Grantor will at all
times comply with the following requirements:
(i) Grantor shall, at its sole cost and expense, but
without waiver or limitation of any rights or remedies Grantor may
have against anyone other than Beneficiary, promptly take all
actions required of Grantor or any Affiliate of Grantor by any
Governmental Authority which arise from the presence upon, about or
beneath the Mortgaged Property of a Hazardous Substance or a
violation of Environmental Laws. Such action shall include, but not
be limited to, the investigation of the environmental
24
<PAGE>
condition of the Mortgaged Property, the preparation of any feasibility studies,
reports or remedial plans, and the performance of any clean-up, remediation,
containment, operation, maintenance, monitoring or restoration work, whether on
or off the Mortgaged Property, to the extent required by applicable
Environmental Laws. Grantor shall take all actions necessary to restore the
Mortgaged Property to a condition that complies with any standard of remediation
required under applicable Environmental Law. Grantor shall proceed continuously
and diligently with all such required investigatory and remedial actions,
provided that in all cases such actions shall be in accordance with all
applicable Environmental Laws. Any such actions shall be performed in a good,
safe and workmanlike manner and shall, to the extent practicable, minimize any
impact on the business conducted at the Mortgaged Property. Grantor shall pay
all costs in connection with such investigatory and remedial activities,
including, but not limited to, all power and utility costs, and any and all
taxes or fees that may be applicable to such activities. Grantor shall promptly
provide to Beneficiary copies of testing results and reports that are generated
in connection with the above activities. If required by applicable Environmental
Law, promptly upon completion of such investigation and remediation, Grantor
shall permanently seal or cap all monitoring wells and test holes in compliance
with applicable Legal Requirements and industry standards, remove all associated
equipment, and restore the applicable Property, which shall include, without
limitation, the repair of any surface damage, including paving, caused by such
investigation or remediation. Nothing in this subsection shall preclude the
performance of any action required by any Governmental Authority, as described
above, by anyone other than Grantor or Beneficiary. In such event, Grantor shall
take all appropriate measures to ensure that such action is performed in
accordance with all applicable Environmental Laws, and is consistent with the
terms of this Deed of Trust.
(ii) If Grantor shall become aware of or receive actual notice
concerning any actual, alleged or suspected violation of or liability under any
Environmental Laws, or a substantial risk that any such Environmental Law will
be violated with respect to the Premises, or that any representation of Grantor
contained herein relating to Hazardous Substance is not or is no longer accurate
in any material respect, including but not limited to actual notice or other
written communication concerning any actual or threatened investigation,
inquiry, lawsuit, claim, citation, directive, summons, proceeding, complaint,
notice, order, writ or injunction, relating to same, and including without
limitation any notice or other communication by Grantor, then Grantor shall
deliver to Beneficiary, (x) within ten (10) days after receipt of such notice, a
written description of said violation, liability, investigation or actual or
threatened event or condition, together with copies of any documents evidencing
same and (y) within thirty (30) days after receipt of such notice, a written
description of the corrective action, if any, proposed by Grantor in response
thereto. Receipt of such notices by Beneficiary shall not be deemed to create
any obligation on the part of Beneficiary to defend or otherwise respond to any
such notification.
(iii) Beneficiary shall have the right (but not the obligation) to
enter upon the Mortgaged Property, from time to time at reasonable times and
upon reasonable
25
<PAGE>
notice, and in its sole and absolute discretion, to conduct
inspections of the Mortgaged Property and the activities conducted
thereon to determine compliance with all Environmental Laws, the
presence of Hazardous Substances and the existence of any potential
damages as a result of the condition of the Mortgaged Property. In
furtherance thereof, Grantor hereby grants to Beneficiary, and its
agents, employees, and qualified consultants and contractors, the
right to enter upon the Mortgaged Property and to perform such tests
on the Mortgaged Property as are reasonably necessary to make such
determination. Beneficiary shall conduct such inspections and tests
at reasonable times, shall use its best efforts to minimize
interference with the operation of the Mortgaged Property and agrees
to restore the condition of the Mortgaged Property to substantially
the same condition as existed immediately before such tests were
performed, and Beneficiary shall not be liable for any interference
caused thereby unless due to the gross negligence or willful
misconduct or omission of Beneficiary.
8. Insurance. (a) The insurance requirements set forth on Schedule X
--------- ----------
annexed hereto are incorporated by reference herein and are made a part of this
Deed of Trust. At Grantor's expense, Grantor shall maintain continuously during
the term of this Deed of Trust policies of insurance (collectively, the
"Policies") in form and in amounts and issued by companies, associations or
--------
organizations satisfactory to Beneficiary and meeting the requirements set forth
in Schedule X.
----------
(b) When and if required by the applicable insurance company,
Grantor shall furnish Beneficiary with an appraisal satisfactory to
Beneficiary showing the full replacement value of the Improvements, the
Equipment and the Personal Property.
(c) At the request of Beneficiary, Grantor shall assign the Policies
to Beneficiary for the benefit of Beneficiary as collateral and further
security for the payment of the Debt. In the event of a foreclosure of
this Deed of Trust, the purchaser of the Mortgaged Property shall
succeed to all the rights of Grantor to the extent permissible under
the Policies and applicable law, including any right to unearned
premiums, in and to all Policies assigned or delivered to Beneficiary
pursuant to this Paragraph.
---------
(d) If Grantor fails to maintain the insurance required to be
maintained hereunder or on Schedule X or fails to deliver evidence of
----------
insurance, Beneficiary may, but shall not be obligated to, on not less
than five (5) Business Days' written notice to Grantor (or sooner, if
required to replace any insurance before it expires), obtain insurance
and pay the premiums therefor on behalf of Grantor if Grantor does not
immediately obtain such insurance, and Grantor shall reimburse
Beneficiary, on written demand, for all sums advanced and expenses
incurred in connection therewith. Such sums and expenses, together with
interest thereon at the Default Rate (as defined in Paragraph 20),
------------
shall be deemed part of the Debt and secured by the lien of this Deed
of Trust.
(e) Nothing contained in this Paragraph 8 or elsewhere in this Deed
-----------
of Trust shall relieve Grantor of its duty to maintain, repair, replace
or restore the Improvements, the Equipment or the Personal Property or
rebuild the Improvements, from time to time, as required
26
<PAGE>
by the Transaction Documents, following damage thereto or destruction thereof
whether or not sufficient proceeds of insurance are available to defray the cost
of such repairs or restoration, and following any condemnation of all or any
portion of the Mortgaged Property, and nothing contained in this Paragraph 8 or
-----------
elsewhere in this Deed of Trust shall relieve Grantor of its duty to pay the
Debt, which shall be absolute, regardless of the occurrence of damage to or
destruction of or condemnation of all or any portion of the Mortgaged Property.
(f) In the event that prior to payment in full of the Debt, any
claim under any Policy has not been paid and distributed in accordance with the
terms of this Deed of Trust, and any such claim shall be paid after foreclosure
of this Deed of Trust or other transfer of title to the Mortgaged Property shall
have resulted in extinguishing the Debt for an amount less than the total of the
unpaid principal balance together with accrued interest and the Yield
Maintenance Premium, plus costs and disbursements at the time of the
extinguishment of the Debt, and such insurance claim is thereafter paid, then
and in that event that portion of the payment in satisfaction of the claim which
is equal to the aforesaid deficiency shall belong to and be the property of
Beneficiary and shall be paid to Beneficiary, and Grantor hereby assigns,
transfers and sets over to Beneficiary all of Grantor's right, title and
interest in and to said sums. The balance, if any, shall be promptly paid, or as
directed by, to Grantor. Notwithstanding the above, Grantor shall retain an
interest in the Policies above described during any redemption period. The
provisions of this Paragraph 8(f) shall survive the termination of this Deed of
--------------
Trust by foreclosure or otherwise as a consequence of the exercise of any rights
and remedies of Beneficiary hereunder after an Event of Default.
9. Payment of Impositions and Utility Charges.
------------------------------------------
(a) Except as specifically provided in the cash management
procedures set forth in the Loan Agreement or the Exhibits thereto
(collectively, the "Cash Management Procedures") and subject to the provisions
of Paragraph 16 hereof, Grantor shall pay or cause to be paid, before any
------------
interest or penalty for non-payment attaches thereto, all taxes, assessments,
water rates, sewer rents, vault charges, permit fees, user fees, ground rents,
maintenance charges and other governmental charges, and other charges of any
kind or nature whatsoever, general or special, ordinary or extraordinary, now or
hereafter levied, assessed or imposed upon or which constitute a lien upon or
against the Mortgaged Property or any portion thereof, or upon the Rents derived
from the Mortgaged Property or arising in respect of the occupancy, use or
possession thereof (collectively, the "Impositions"). If Grantor shall fail to
-----------
pay or cause to be paid any Impositions before any interest or penalty for non-
payment attaches thereto, Beneficiary shall have the right, but shall not be
obligated (except as specifically provided under the Cash Management
Procedures), to pay such Impositions upon not less than five (5) Business Days'
prior written notice to Grantor (subject to the provisions of the next
succeeding sentence), and Grantor shall repay to Beneficiary, within ten (10)
days after written demand, any amount so paid by Beneficiary, with interest
thereon (xx) at the regular Base Rate provided for in the Note from the date of
Beneficiary's payment up to the date of demand for repayment by Beneficiary, and
(yy) at the Default Rate from and including the date of such demand by
Beneficiary to the date of repayment by Grantor, and such amount, together with
such interest, shall constitute a portion of
27
<PAGE>
the Debt secured by the lien of this Deed of Trust. If an Escrow Fund (as
defined in Paragraph 10) is in effect with respect to the Loan, Beneficiary
------------
shall not be required to give Grantor prior written notice of payments from such
Escrow Fund with respect to Impositions and the provisions of Paragraph 10 of
------------
this Deed of Trust and any Collateral Account Agreement or similar agreement
with respect to such Escrow Funds shall apply. In the case of any assessment
payable in installments, each installment thereof shall be paid prior to or on
the date on which such installment becomes due and payable without imposition of
any fine, penalty, interest or cost. Grantor shall not be entitled to any credit
on the Note, or any other sums which may become payable under the terms thereof
or hereof, or otherwise, by reason of the payment of the Impositions.
(b) Grantor shall promptly deliver to Beneficiary, upon request,
receipted bills, canceled checks or other evidence reasonably satisfactory to
Beneficiary evidencing the payment of the Impositions. The certificate, advice
or bill of the appropriate official designated by law to make or issue the same
or to receive payment of such Imposition shall be prima facie evidence that such
Imposition is due and unpaid at the time of the making or issuance of such
certificate, advice or bill. If Grantor shall fail to provide Beneficiary with
such evidence evidencing the payment of Impositions within thirty (30) days
after notice, Grantor shall pay Beneficiary, on written demand, all charges,
payments, fees, costs or expenses reasonably incurred by Beneficiary in
connection with obtaining evidence satisfactory to Beneficiary that payment of
all Impositions is current and that there are no Impositions due and owing or
which have become a lien on the Mortgaged Property or any portion thereof or any
appurtenances thereto.
(c) Grantor shall timely pay or cause to be paid all charges for
electricity, power, gas, water and other utilities used in connection with the
Mortgaged Property and, upon the written request of Beneficiary, Grantor shall
promptly deliver to Beneficiary receipted bills, canceled checks or other
evidence reasonably satisfactory to Beneficiary evidencing the payment of such
charges.
10. Escrow Fund.
-----------
(a) Grantor shall, at the option of Beneficiary to be exercised by
written notice at any time after the occurrence of an Event of Default, or as
otherwise required by the Cash Management Procedures, pay to Beneficiary (or, if
applicable, any servicer named in or named pursuant to the Loan Agreement for
the benefit of Beneficiary) the amount required in connection with the Escrow
Fund under the Cash Management Procedures, if any, on or before the date
required by the Cash Management Procedures. If at any time such Cash Management
Procedures are not in effect, on the Debt Service Payment Date (as defined in
the Note), Grantor shall, at the option of Beneficiary to be exercised by
written notice after the occurrence of an Event of Default deposit with
Beneficiary an amount (hereinafter referred to as the "Escrow Fund") which
-----------
amount, at the option of Beneficiary, shall be the amount which would have been
required by the Cash Management Procedures, if any, including Paragraph 6.1
thereof, had the Cash Management Procedures been in effect, or, at Beneficiary's
option, an amount equal to one-twelfth (1/12th) of the amount which would be
sufficient to pay the Impositions and all premiums on the Policies payable, or
estimated by Beneficiary to be payable, during the ensuing twelve (12) months.
Such
28
<PAGE>
deposits shall not be, nor be deemed to be, trust funds and shall be held by
Beneficiary in a segregated sub-account of the Cash Collateral Account (as
defined in the Loan Agreement) (the "Tax and Insurance Account") and invested in
-------------------------
Permitted Investments (as hereinafter defined) (except as otherwise required by
any Legal Requirement) which shall be free of any liens or claims on the part of
creditors of Grantor.
(b) Beneficiary will apply monies in the Escrow Fund, if any, (and
any earnings inuring thereon) to the payment when due of Impositions and
premiums on the Policies which are required to be paid by Grantor pursuant to
the provisions of the Cash Management Procedures, or if such Cash Management
Procedures are not in effect, this Deed of Trust. If the amount of the Escrow
Fund shall exceed the amount of the Impositions and premiums on the Policies
payable by Grantor pursuant to the provisions of this Deed of Trust, Beneficiary
shall, in its sole discretion (i) return any excess to Grantor or (ii) credit
such excess against future payments to be made to the Escrow Fund. In allocating
such excess, Beneficiary may deal with the person shown on the records of
Beneficiary to be the owner of the Mortgaged Property. If the Escrow Fund is not
sufficient to pay the Impositions and premiums on the Policies as the same
become due and payable, Grantor shall pay to Beneficiary an amount which
Beneficiary shall estimate as sufficient to make up the deficiency.
(c) Until expended or applied as above provided, any amounts in the
Escrow Fund shall constitute additional security for the Debt. If this Deed of
Trust is sold or assigned, Beneficiary shall transfer to the assignee the amount
then held by Beneficiary under this Paragraph, and upon delivery to the Grantor
---------
of evidence of such assignment and transfers, together with a written
acknowledgment of receipt by the transferee, the transferring Beneficiary shall
not have any further obligation to Grantor with respect to such amount. If at
any time Grantor tenders to Beneficiary full payment of the entire Debt,
including any applicable premium or penalty, and Beneficiary has no further
obligation under the Loan Agreement to make Advances, Beneficiary shall credit
to the account of Grantor any balance remaining in the Escrow Fund accumulated
by Beneficiary under this Paragraph, including interest earned thereon. Upon the
---------
occurrence and during the continuation of an Event of Default, Beneficiary shall
be authorized and empowered (but not required) to apply the balance remaining in
the Escrow Fund in the manner set forth in Paragraph 23 hereof and shall give
------------
Grantor prompt notice thereof.
11. Leases and Rents.
----------------
(a) Grantor hereby grants and assigns to Beneficiary the right to
enter the Mortgaged Property for the purpose of enforcing its interest in the
Leases, if any, and collecting the Rents, this Deed of Trust constituting a
present, absolute assignment of the Leases and Rents. Notwithstanding the
foregoing, but subject to the terms and conditions of this Paragraph,
---------
Beneficiary hereby grants to Grantor a revocable license to operate and manage
the Mortgaged Property and to collect the Rents. Grantor shall hold the Rents,
or an amount sufficient to discharge all current sums due on the Debt, in trust
for use in payment of the Debt. The license herein granted to Grantor to collect
the Rents and enforce its interests in the Leases may be revoked by Beneficiary
following an Event of Default under this Deed of Trust or any of the other
Transaction Documents, by giving written notice of such revocation to Grantor.
Following
29
<PAGE>
such notice, Beneficiary may collect, retain and apply the Rents toward payment
of the Debt in such priority and proportions as Beneficiary, in its sole
discretion, shall deem proper, or to the operation, maintenance and repair of
the Mortgaged Property. In addition to the rights which Beneficiary may have
herein, Beneficiary, at its option, may require Grantor to pay, monthly in
advance, to Beneficiary, or any receiver appointed to collect the Rents, the
fair and reasonable rental value for the use and occupation of such part of the
Premises as may be in the possession of Grantor for its own use (it being
understood that for such purpose Grantor shall not be deemed to be in possession
of a hotel room unless Grantor or its affiliates is using the same), other than
such portions of the Premises used for the operation of the Hotel. Upon default
in any such payment, Grantor will vacate and surrender possession of such
portions of the Premises to Beneficiary, or to such receiver and, in default
thereof, Grantor may be evicted from such portions of the Premises by summary
proceedings or otherwise. Nothing contained in this Paragraph shall be construed
---------
as imposing on Beneficiary any of the obligations of the lessor under the
Leases. The provisions of this Paragraph shall be in addition to, and not in
---------
lieu of, the provisions of the Assignment, and, if any conflict or inconsistency
exists between the provisions of this Deed of Trust and the provisions of the
Assignment with respect to the Leases or Rents, the provisions of the Assignment
shall control, except to the extent that this Deed of Trust shall impose greater
burdens upon Grantor, shall further restrict rights of Grantor or shall give
Beneficiary greater rights. Beneficiary shall be entitled to all the rights and
benefits of the applicable laws of the State. It shall never be necessary for
Beneficiary to institute legal proceedings of any kind whatsoever to enforce the
provisions of this Paragraph 11(a). The rights of Trustee hereunder in the
---------------
Leases and Rents shall be subject to (i) the rights of Beneficiary in the Leases
and Rents, and (ii) the rights of Beneficiary in the Leases and Rents and
revenues created under the Assignment.
(b) Except as otherwise provided in the Loan Agreement, Grantor
shall not, without the prior written consent of Beneficiary, enter into any
Material Lease with respect to the Premises. For purposes of this Deed of Trust
and all of the SC Transaction Documents, the term "Material Lease" shall mean
(xx) a lease demising 5% or more of the Floor Area of the Premises regardless of
the term of such lease or (yy) a lease demising any room or suite in the
Premises for a period in excess of 365 calendar days (including so-called
seasonal leases aggregating to a time period in excess of 365 days whether or
not such days run consecutively). All new Leases (including Material Leases)
shall be with tenants unaffiliated with Grantor, shall be on arms-length terms
and conditions and shall be at annual rents at least comparable to the market
rents then being paid for comparable premises in the vicinity of the Premises.
(c) Any Lease entered into by Grantor from and after the date
hereof and each renewal of an existing Lease (excluding, however, a renewal
pursuant to an option contained in an existing Lease) shall provide:
(i) that such Lease is and shall be subject and subordinate in
all respects to this Deed of Trust and the lien created hereby, and to any
renewals thereof, including any increase in the principal amount secured
by this Deed of Trust, and any increase in the interest rates set forth in
the Note and to each and all of the rights of Beneficiary or any holder
thereof;
30
<PAGE>
(ii) that such provision shall be self-operative;
(iii) that, in confirmation of such subordination, each tenant
under a Lease (each, a "Tenant" and, collectively, the "Tenants")
------ -------
shall promptly execute and deliver following Beneficiary's written
request such commercially reasonable agreement of subordination
that Beneficiary may request; and
(iv) that the Tenant shall execute and deliver estoppel
certificates (each, a "Tenant Estoppel Certificate") addressed to
---------------------------
Beneficiary certifying as to the following information:
(A) an identification of the Lease and all modifications by
date, parties, and space;
(B) the commencement date and expiration dates of the
original term and any renewal periods of such Lease;
(C) the base rent and additional rent then payable under
such Lease;
(D) that such Lease is in full force and effect;
(E) that, to the best knowledge of such Tenant, Grantor is
not in default of any of the terms of such Lease (or, if in
default, specifying the default);
(F) that, to the best knowledge of such Tenant, it has no
rights of offset, defenses or counterclaims under the Lease (or,
if it has any, specifying the same); and
(G) the last day to which base rent under the Lease has
been paid.
(d) Grantor, promptly after obtaining actual knowledge thereof,
shall notify Beneficiary of the termination of any Material Lease, the
receipt of any notice of default under any Material Lease, and of any
notice, action or proceeding regarding any Material Lease which may, in
Grantor's reasonable judgment, materially and adversely affect the
Mortgaged Property.
(e) Grantor shall at all times perform and comply with, or cause to
be performed and complied with in all material respects, all of the
terms, covenants and conditions of the Leases to be performed or
complied with by Grantor thereunder.
(f) Upon written notice, but not more frequently than annually,
Grantor shall deliver to Beneficiary, on request, if applicable, a rent
roll and schedule of the Leases then in existence, certified by Grantor
to be true and complete, together with a counterpart original or
31
<PAGE>
a copy of every Lease and any amendments with respect to which a counterpart
original or copy has not previously been furnished to Beneficiary, and
containing such other information as Beneficiary may reasonably request. In
addition, Grantor, upon Beneficiary's reasonable request, shall use reasonable
efforts to obtain from each tenant at the Premises a Tenant Estoppel
Certificate.
(g) All security or other deposits, if any, of Tenants held by
Grantor (collectively, "Security Deposits") shall be treated as trust funds
-----------------
of Grantor and shall be deposited in a tenant's security account maintained by
Grantor at a commercial bank, savings bank or savings and loan association,
identified to Beneficiary.
(h) The provisions in subparagraphs 11(b), (c) and (f) of this
--------------------------------
Paragraph shall not apply to any nightly rentals or other arrangements for
- ---------
occupancy of individual hotel rooms or suites at the Premises in the ordinary
course of the operation of Grantor's hotel business, provided that any such
nightly rentals or other arrangements for occupancy are not effected pursuant to
Material Leases.
12. Maintenance of the Mortgaged Property; Changes.
----------------------------------------------
(a) Grantor agrees to keep, operate and maintain the Mortgaged
Property as a first-class, full-service Marriott hotel and in compliance in all
material respects with the Ground Lease, the Loan Agreement and the Management
Agreement, subject to Uncontrollable Circumstances (as defined in the Loan
Agreement), Temporary Takings (as defined in Paragraph 14(d) hereof) and
---------------
temporary closures for repairs in the ordinary course of Grantor's business
(provided that such temporary closures shall not in any event affect the entire
hotel or a material part thereof and shall not last longer than thirty (30)
consecutive days) and further subject to the effects of casualty and
condemnation provided that Grantor is using diligent efforts to mitigate the
effects of any such event to the extent required by, and in compliance with, the
provisions of Paragraph 13 hereof, with respect to the effects of casualty, and
------------
Paragraph 14 hereof, with respect to the effects of any Condemnation
- ------------
Proceedings. Without limitation, Grantor agrees:
(i) not to desert or abandon all or any portion of the
Mortgaged Property;
(ii) to keep, or cause to be kept, the Mortgaged Property, the
sidewalks and the curbs adjoining the Mortgaged Property in good, safe and
insurable condition and as required by Legal Requirements (whether or not a
violation has been noted or issued therefor);
(iii) to maintain, or cause to be maintained or replaced, all
Improvements, Equipment and Personal Property in substantially the same or
better condition as they exist on the date hereof;
(iv) not to commit or suffer waste;
32
<PAGE>
(v) not to make or permit to be made, except as permitted by
the SC Transaction Documents, any structural or non-structural alterations in or
additions to the Improvements (collectively, "Changes") or demolish the
-------
Improvements or any portion thereof, except in accordance with the provisions of
the Ground Lease and the SC Transaction Documents and with the prior written
consent of Beneficiary, which consent shall not be unreasonably conditioned,
withheld or delayed, except (x) as may otherwise be permitted by the provisions
of this Deed of Trust (including the provisions of Paragraph 12(b)), or (y) as
--------------
may be required by any Governmental Authority, subject to the provisions of
Paragraph 13 hereof;
- ------------
(vi) except as otherwise provided in Paragraph 13 hereof, to
------------
promptly repair, replace, restore or rebuild, or cause to be promptly repaired,
replaced, restored or rebuilt, all Improvements now or hereafter constituting a
part of the Mortgaged Property which may become damaged or destroyed, with
materials and workmanship of as good quality as existed before such damage or
destruction;
(vii) to refrain from impairing or diminishing the value of the
Mortgaged Property or the security value of this Deed of Trust; and
(viii) not to remove any of the Equipment or Personal Property
without the prior written consent of Beneficiary, except for substitution or
replacement in the ordinary course of business of any component of Equipment or
Personal Property with items of equivalent value and utility, provided, however,
-------- -------
that Grantor shall not be required to replace any Personal Property or Equipment
if the same shall be obsolete or if Grantor shall no longer have any use for any
such Equipment or Personal Property.
Notwithstanding anything to the contrary contained in this Paragraph 12(a),
---------------
nothing herein shall preclude Grantor's right to decide, in the exercise of its
good business judgment, the manner, methodology and extent of Grantor's
maintenance or repair of the Mortgaged Property, provided that the Mortgaged
Property and Grantor shall at all times comply with all Legal Requirements, and
that the Premises continuously (except during periods of Uncontrollable
Circumstances, restoration or repair) operates as a first-class, full-service
Marriott hotel and at all times in compliance in all material respects with the
Ground Lease, the Loan Agreement and the Management Agreement.
(b) Notwithstanding anything to the contrary contained in Paragraph
---------
12(a), the prior consent of Beneficiary shall not be required with respect to
- ----
those Changes which are either (i) approved by Beneficiary pursuant to the Loan
Agreement, including any amounts disbursed from any account provided for in the
Loan Agreement or the Cash Management Procedures or disbursed pursuant to any
applicable budget described in the Loan Agreement, or (ii) which (xx) are non-
structural, (yy) will not adversely affect any building system and (zz) which in
the good faith estimate of Grantor will not, with respect to any single Change
or related set of Changes, cost in excess of $50,000.00.
33
<PAGE>
(c) In giving consent to any Changes or other demolitions or
alterations to the Improvements, Beneficiary, in the exercise of its reasonable
consent right as set forth in Paragraph 12(a) shall take into account evidence
--------------
provided by Grantor that the completion of such Changes, demolition or other
alterations will not adversely affect Grantor's financial condition, the value
of the Mortgaged Property or the Net Operating Income (as defined in the Loan
Agreement) therefrom. If the cost of any proposed Changes is in excess of the
amount provided in Paragraph 12(b), Beneficiary, in the exercise of its
---------------
reasonable consent right, may require the Grantor to post collateral in the
amount of the estimated cost of any such Change or to take such other steps to
ensure completion of the Changes as may be prudent for a mortgage lender in
similar circumstances considering all of the factors of Grantor's operation of
the Premises and the continuation of Net Operating Income therefrom.
(d) All Changes shall be performed lien-free (subject to the
provisions for bonding of liens and contests set forth in Paragraph 16 hereof),
------------
in a good and workmanlike manner, and in compliance with all Legal Requirements.
No material part of the Improvements shall be demolished in connection with any
Changes and the hotel operations at the Premises shall not be suspended as a
consequence thereof. Promptly upon completion of any material structural
Changes, as-built plans and evidence reasonably satisfactory to Beneficiary of
lien-free construction shall be delivered to Beneficiary.
(e) Beneficiary, and its agents or designated representatives,
shall, upon reasonable prior notice to Grantor and at reasonable times, have the
right of entry and free access to the Mortgaged Property to inspect any work
authorized by Beneficiary and the work done, labor performed, materials
furnished or Changes to the Mortgaged Property. Grantor shall make the officers
and directors of the general partner of Grantor and such regional supervisors as
are primarily charged with responsibility over such matters available for
Beneficiary to discuss Grantor's affairs, finances and accounts relating to any
work done, labor performed, materials furnished or Changes to the Mortgaged
Property and will cooperate with, and request that its contractors and any
subcontractors cooperate with, Beneficiary or any of its designated
representatives to enable them to perform these functions, at all reasonable
times and as often as Beneficiary may reasonably request.
(f) Grantor, in connection with its obligations hereunder to
maintain the Mortgaged Property as a first-class, full-service Marriott hotel,
represents and warrants to Beneficiary that: the Mortgaged Property has adequate
rights of access to public ways and is served by adequate water, sewer, sanitary
sewer and storm drain facilities; all public utilities necessary to the
continued use and enjoyment of the Mortgaged Property as presently used and
enjoyed are located in the public right-of-way abutting the Mortgaged Property
or in easements benefitting the Premises, and all such utilities are connected
so as to serve the Mortgaged Property without passing over other real property
(except as covered by such easement benefitting the Premises); all roads
necessary for the full utilization of the Mortgaged Property for its current
purpose have been completed and dedicated to public use and accepted by all
Governmental Authorities or are the subject of access easements for the benefit
of the Mortgaged Property; except as described in the Disclosure Schedule the
Mortgaged Property is not located in a flood hazard area as defined by the
Federal Insurance Administration; and except as disclosed in the
34
<PAGE>
Title Policies with respect to the Premises, there are no pending or, to the
Best Knowledge of Grantor, proposed special or other assessments for public
improvements or otherwise affecting the Mortgaged Property, nor, to the Best
Knowledge of Grantor, are there any contemplated improvements to the Mortgaged
Property that may result in such special or other assessments.
13. Damage to and Destruction of the Mortgaged Property.
---------------------------------------------------
(a) In the event that the Mortgaged Property shall be damaged or
destroyed, in whole or in part, by fire or other casualty, whether insured or
uninsured, Grantor shall give prompt written notice thereof to Beneficiary,
together with Grantor's best estimate of the cost of restoration (the
"Restoration Cost"). Subject to the provisions of this Paragraph 13, Grantor
---------------- ------------
shall restore the Premises to the standard required by Paragraph 12(a)(vi) of
------------------
this Deed of Trust. Grantor shall timely file all claims or proofs of claim so
as not to prejudice any claim and, if the Restoration Cost is equal to or
greater than an amount (the "Restoration Benchmark") equal to the lesser of (xx)
---------------------
$1,000,000.00 and (yy) 5% of the Release Price attributed to the Premises in the
Loan Agreement, or, irrespective of the Restoration Cost, if an Event of Default
exists as of the date of submission of any claims or proofs of claim, and until
the Debt has been paid in full, Grantor shall submit all claims or proofs of
claim and other submissions to Beneficiary for the written approval of
Beneficiary prior to any such filing, which approval shall not be unreasonably
withheld, conditioned or delayed.
(b) Provided that no Event of Default exists at the time of
settlement, Grantor shall have the right to settle any insurance claim with
respect to any casualty where the Restoration Cost is less than the Restoration
Benchmark, but shall give prompt written notice of any such claim and settlement
to Beneficiary. In such event, Grantor shall apply the Insurance Proceeds
relating to such casualty to restoration, replacement, rebuilding or repair
(hereinafter collectively referred to as "Restoration") of the damage to the
-----------
standard required by Paragraph 12(a)(vi) hereof.
------------------
(c) If the Restoration Cost equals or exceeds the Restoration
Benchmark, and unless Grantor has obtained the release of this Deed of Trust as
a Casualty Event Release (as hereinafter defined) in accordance with the Loan
Agreement, Beneficiary shall have the right to participate in the settlement of
all insurance claims relating to such casualty, and all Insurance Proceeds
relating to such casualty shall be paid directly to Beneficiary, and, after
settlement of the claim(s) and subject to Paragraph 13(d) hereof, such Insurance
--------------
Proceeds shall be deposited in the subaccount for Insurance Proceeds (as
described in Section 4.2 of the Cash Management Procedures) of the Cash
-----------
Collateral Account (as defined in the Loan Agreement) and advanced to Grantor
from time to time (subject to the conditions set forth below) in reimbursement
for amounts expended by Grantor or as direct payments to contractors in
Restoration of the Mortgaged Property. Upon completion of the entire Restoration
and provided no uncured Event of Default exists at the time of payment,
Beneficiary shall pay the remaining amount of the Insurance Proceeds, if any, to
Grantor; provided, however, that nothing herein contained shall prevent
-------- -------
Beneficiary from applying at any time the whole or any part of the Insurance
Proceeds to the curing of any default under any Transaction Document or to the
payment of the Debt in the circumstances set forth in Paragraph 13(d). Advances
--------------
of Insurance Proceeds shall be made
35
<PAGE>
available to Grantor, no less frequently than monthly, in accordance with the
general procedures employed at the time by Beneficiary in connection with the
disbursement of loan proceeds in general by Beneficiary (including, without
limitation, an endorsement to the title insurance policy of Beneficiary as to
the Premises insuring the continued first priority lien of this Deed of Trust
against mechanics' liens that may arise out of the Restoration and appropriate
certifications from a licensed architect or engineer selected by Grantor subject
to the reasonable approval of Beneficiary (each, an "Architect") that the
---------
requested payment is for work completed in accordance with plans and
specifications approved by Beneficiary and that the balance of funds held on
deposit after such payment will be sufficient to pay the cost of completing the
Restoration (provided, however, that if the cost of the Restoration is or is
estimated to be less than $250,000.00, Beneficiary will accept a certificate of
the officer of the general partner of Grantor certifying to this effect), and
evidence satisfactory to Beneficiary that no liens have been filed for the
labor and materials used in connection therewith and that the requested payment
will be received in trust, to be applied first to the payment for such labor and
materials in amounts which are equal to the percentage of completion attained at
the time of such advance, less, in the case of any Restoration in which the
original estimated cost or actual cost is $250,000.00 or more, all amounts
previously advanced and a holdback of 10% (or such lesser amount as may be
customary in the trade in such location or as may be required under the
applicable restoration contract, but in no event less than 5% for any contact
where a holdback is required), which remaining amounts will be advanced upon
full completion of the Restoration as due under the applicable Restoration
contract. All Insurance Proceeds and other sums deposited with Beneficiary
pursuant to this Paragraph, until expended or applied as provided in this
---------
Paragraph, shall constitute additional security for the Debt and shall be
- ---------
invested in Permitted Investments (as such term is defined in the Loan
Agreement) with income thereon inuring to the benefit of Grantor in accordance
with the Loan Agreement.
(d) Notwithstanding the foregoing, if an Event of Default exists or
if, in Beneficiary's reasonable judgment based on professional consultation:
(i) the Restoration of the Improvements cannot be completed (A)
so as to constitute an economically viable building or (B) at least six
(6) months prior to the Maturity Date; or
(ii) the amount of business interruption insurance is
insufficient to cover all fixed and operating expenses of the Premises,
including such debt service on the SC Loan, during Restoration and until
the operation of Grantor's business at the Premises is resumed; or
(iii) the amount of Insurance Proceeds equals or exceeds the
amount of the outstanding principal balance of the SC Loan and the loan
advanced to MHP II under that certain loan agreement of even date
herewith between MHP II and Beneficiary (the "MHP Loan Agreement"); or
------------------
(iv) Restoration of the Mortgaged Property cannot be completed
except at a cost which exceeds the amount of available Insurance
Proceeds and Grantor shall not
36
<PAGE>
have deposited with Beneficiary, within ninety (90) days following
Beneficiary's receipt of such Insurance Proceeds and delivery to Grantor
of notice of a deficiency, an amount, in cash or cash equivalent, equal
to the excess of the estimated cost of the Restoration as determined by
an Architect over the amount of such Insurance Proceeds;
then Beneficiary shall have the option to apply Insurance Proceeds to the
payment of the Note, interest accrued and unpaid thereon, and the Yield
Maintenance Premium, if any, and other unpaid amounts of the Debt, all in such
order as Beneficiary shall designate in accordance with the SC Transaction
Documents, provided, however, that, except as otherwise provided in the Loan
-------- -------
Agreement, any such application shall in no event affect the payments to be made
in respect of the Note.
(e) Grantor shall, promptly after the occurrence of a casualty,
commence and thereafter with reasonable diligence prosecute to completion any
Restoration of the Mortgaged Property or part thereof to the standard required
by Paragraph 12(a)(vi) hereof. Any such Restoration shall be undertaken and
------------------
completed in accordance with this Paragraph 13, subject to the final provision
------------
of this Paragraph 13(e). All Restoration shall be in a good and workmanlike
--------------
manner with reasonable diligence, and in compliance with all Legal Requirements.
Seasonality or weather permitting, if Grantor fails to commence Restoration
within thirty (30) days following Beneficiary's receipt of Insurance Proceeds or
fails to prosecute the Restoration to completion, Beneficiary may upon ten (10)
days' notice to Grantor, but shall not be obligated to, perform the Restoration,
and may use any of the Insurance Proceeds and Grantor's funds deposited pursuant
to Paragraph 13(c) or 13(d) of this Paragraph in payment therefor. Grantor shall
----------------------- ---------
pay to Beneficiary, within ten (10) days after written demand, the amount of any
deficiency between funds available for the Restoration and the cost thereof
(including funds deposited by Grantor pursuant to Paragraph 13(c) or 13(d) of
-------------- ----
this Paragraph) together with interest thereon at the Default Rate from such
---------
tenth (10th) day through and including the date of payment to Beneficiary.
Notwithstanding the foregoing provisions of this Paragraph 13(e) or anything
--------------
else contained in this Paragraph 13, if Grantor has obtained the release of the
------------
Premises and the lien of this Deed of Trust in accordance with the Loan
Agreement by payment of the applicable Release Price and other amounts due, if
any, to obtain a release under the Loan Agreement, and the taking of any other
actions required by the Loan Agreement with respect thereto (the payment of such
amounts and the taking of such actions being collectively called a "Casualty
--------
Event Release"), then Grantor shall not be required to undertake the Restoration
- -------------
described herein. As set forth in the Loan Agreement, the payment of amounts
with respect to a Casualty Event Release shall not require the payment of a
Yield Maintenance Premium, and any Insurance Proceeds paid to Beneficiary shall
be credited against payments of the Release Price and any other amounts due with
respect to a Casualty Event Release required to be paid by the provisions of the
Loan Agreement.
(f) It is intended that, anything contained herein to the contrary
notwithstanding, no trust or fiduciary relationship shall be created by the
receipt by Beneficiary of any Insurance Proceeds, but only a debtor-creditor
relationship between Beneficiary, on the one hand, and Grantor, on the other,
and only to the extent of the Insurance Proceeds.
37
<PAGE>
(g) If any Insurance Proceeds are not paid until after the
extinguishment of the Debt, whether by foreclosure or otherwise, and Beneficiary
shall not have received the entire amount of the Debt outstanding at the time of
such extinguishment, then such Insurance Proceeds, to the extent of the amount
of the Debt not so received, shall be paid to Beneficiary and be the property of
Beneficiary; and Grantor hereby assigns, transfers and sets over to Beneficiary
all of Grantor's right, title and interest in and to such proceeds. The balance
of such Insurance Proceeds, if any, shall be paid to and be the property of
Grantor. The provisions of this Paragraph shall survive the termination of this
---------
Deed of Trust by foreclosure or otherwise as a consequence of the rights and
remedies of Beneficiary hereunder after an Event of Default.
(h) Subject to the provisions of Paragraph 13(d) or 13(e), as
------------------------
applicable, nothing herein contained shall be deemed to excuse Grantor from
repairing or maintaining the Mortgaged Property as provided in this Deed of
Trust or restoring all damage or destruction to the Mortgaged Property,
regardless of the sufficiency or availability of Insurance Proceeds, and the
application or release by Beneficiary of Insurance Proceeds shall not be deemed,
in and of itself, to cure or waive any default or Event of Default or notice of
default. Notwithstanding any casualty, Grantor shall continue to pay the Debt at
the time and in the manner provided for its payment in this Deed of Trust and
the Note and the Debt shall not be reduced until any Insurance Proceeds shall
have been actually received by Beneficiary and applied to the discharge of the
Debt or payments with respect to a Casualty Event Release.
(i) Beneficiary, to the extent that Beneficiary has not been
reimbursed therefor by Grantor, shall be entitled as a first priority out of any
Insurance Proceeds, to reimbursement for all actual costs, fees, reimbursements
and expenses of Beneficiary incurred in the determination and collection of any
such proceeds.
14. Condemnation Proceedings.
------------------------
(a) In the event that the Mortgaged Property, or any part thereof,
shall be taken pursuant to Condemnation Proceedings, Beneficiary shall, as
hereinafter set forth, have certain consent rights with respect to settlement of
any such Condemnation Proceedings, but shall not participate in any such
Condemnation Proceedings except as expressly provided herein, and any
Condemnation Proceedings that may be made or any proceeds thereof are hereby
assigned to Beneficiary and shall be received and deposited into the subaccount
for Condemnation Proceeds (as described in Section 4.2 of the Cash Management
-----------
Procedures) of the Cash Collateral Account and held and distributed by
Beneficiary in the manner herein set forth. Grantor will give Beneficiary prompt
notice of the actual commencement of any Condemnation Proceedings affecting the
Mortgaged Property or of any threatened condemnation of which Grantor becomes
aware, including proceedings for severance and change in grade of streets, and
will deliver to Beneficiary copies of any and all papers served in connection
with any Condemnation Proceedings. Beneficiary is hereby authorized to commence,
appear in, and prosecute in its own name or Grantor's name any action or
proceeding relating to any Condemnation Proceedings, upon not less than ten (10)
Business Days' prior written notice to Grantor, if Grantor has not commenced any
such action or proceeding. Grantor may not settle or compromise any claim in
connection with any Condemnation Proceeding, whether involving a Total Taking,
Partial Taking
38
<PAGE>
or Temporary Taking, which claim equals or exceeds, or, at the outset of any
such Condemnation Proceedings, appears to involve a sum which is likely to equal
or exceed, in Beneficiary's reasonable judgment based on professional
consultation, the Restoration Benchmark, without the prior written consent of
Beneficiary in each instance, which consent shall not be unreasonably withheld,
conditioned or delayed, and Beneficiary shall have the right to settle or
compromise any claim in connection therewith (irrespective of amount), without
the consent of Grantor after the occurrence of an Event of Default. Grantor
agrees to execute any and all further documents that may be reasonably required
in order to facilitate the collection of any Condemnation Proceeds and the
making of any such deposit and Grantor hereby appoints Beneficiary its attorney-
in-fact for the limited purpose of executing any such documents after the
occurrence of an Event of Default, such power being coupled with an interest and
irrevocable.
(b) If, at any time during the term of the SC Loan, there occurs a
Total Taking (as hereinafter defined), Beneficiary shall collect any
Condemnation Proceeds, and apply the same, after payment of Beneficiary's
reasonable costs of collection thereof, including reasonable attorneys' fees and
disbursements, to payment of the Debt (but no Yield Maintenance Premium shall be
due), all in such order as Beneficiary shall designate, provided, however, that,
-------- -------
except as otherwise provided in the Loan Agreement, any such application shall
in no event affect the payments to be made in respect of the Note. Any portion
of any Condemnation Proceeds remaining after the payment in full of the Debt
shall be released by Beneficiary to Grantor. For the purposes of this Paragraph,
---------
a "Total Taking" shall mean any taking or any constructive taking of Grantor's
------------
title to the Premises in Condemnation Proceedings or by agreement by Grantor
which shall, in the reasonable opinion of Beneficiary, render it impracticable
to restore, within six (6) months prior to the Maturity Date, the portion of the
Premises not subject to such taking to a complete architectural unit of
substantially the same economic viability and for the same purposes and uses as
existed immediately prior to the date of the commencement of the Condemnation
Proceedings.
(c) If, at any time during the term of the SC Loan, there occurs a
taking which is less than a Total Taking (a "Partial Taking"), then, provided
--------------
that no Event of Default exists as of the date of submission of Grantor's claim
in the Condemnation Proceeding with respect to such Partial Taking, Grantor
shall have the right to settle any such claim with respect to any Partial Taking
where the Restoration Cost is less than the Restoration Benchmark, but shall
give prompt written notice of any such claim and settlement to Beneficiary. If
the Restoration Cost equals or exceeds, or, at the outset of such Condemnation
Proceedings, appears to involve a sum which is likely to equal or exceed, in
Beneficiary's reasonable judgment based on professional consultation, the
Restoration Benchmark, then, unless Grantor has obtained the release of this
Deed of Trust as a Condemnation Event Release (as hereinafter defined) in
accordance with the Loan Agreement, Beneficiary shall have the right to
participate in the settlement of such claim and all Condemnation Proceeds
relating to such Partial Taking shall be held by Beneficiary and shall be
released to pay the costs of restoration of the Improvements (a "Condemnation
------------
Restoration") subject to and upon satisfaction of the conditions set forth in
- -----------
Paragraphs 13(c) and 13(d) hereof as if such Condemnation Proceeds constituted
- --------------------------
Insurance Proceeds and the balance, if any, shall be paid to Grantor; unless, in
------
Beneficiary's reasonable judgment based on professional consultation, the
Condemnation Restoration cannot be completed in accordance with
39
<PAGE>
the conditions of Paragraphs 13(c) and 13(d). In the event that there exists an
-------------------------
Event of Default, or (xx) any of such conditions shall not have been met, or
(yy) the Condemnation Restoration cannot be completed, in Beneficiary's
reasonable judgment based on professional consultation, prior to a date which is
at least six (6) months prior to the Maturity Date, regardless of compliance
with all of the other conditions of Paragraphs 13(c) and 13(d), or (zz) if the
--------------- ----
Condemnation Proceeds exceed the cost of the Condemnation Restoration,
Beneficiary, at the discretion of Beneficiary, shall apply the Condemnation
Proceeds, or balance thereof, to payment of the Debt, (but no Yield Maintenance
Premium shall be due), all in such order as Beneficiary shall designate,
provided, however, that, except as otherwise provided in the Loan Agreement, any
- -------- -------
such application shall in no event affect the schedule of payments to be made in
respect of the Note. If there is any balance of any Condemnation Proceeds
remaining in the hands of Beneficiary after any payment of the Debt in full,
such balance shall be released to Grantor. In the event that the costs of any
permitted Condemnation Restoration, as estimated reasonably by Beneficiary at
any time, shall exceed the net Condemnation Proceeds received by Beneficiary,
Grantor shall deposit such deficiency with Beneficiary.
(d) In the event of any taking of all or any portion of the
Mortgaged Property for temporary use or occupancy ("Temporary Taking"), any
----------------
Condemnation Proceeds with respect to such Temporary Taking shall be treated as
Gross Revenues (as defined in the Loan Agreement) and shall be distributed and
applied in the manner contemplated in the Loan Agreement (but only to the extent
that any such Condemnation Proceeds have not been used for Condemnation
Restoration).
(e) Except as otherwise provided in this Paragraph 14(e), nothing
--------------
contained in this Paragraph shall relieve Grantor of its duty to maintain,
---------
repair, replace or restore the Improvements or the Equipment or rebuild the
Improvements, from time to time, following any Condemnation Proceedings with
respect to a Partial Taking or Temporary Taking and nothing in this Paragraph
---------
shall relieve Grantor of its duty to pay the Debt, which shall be absolute,
regardless of any such occurrence with respect to all or any portion of the
Mortgaged Property. Notwithstanding any taking, whether a Total Taking, a
Partial Taking or a Temporary Taking, Grantor shall continue to pay the Debt at
the time and in the manner provided for its payment in this Deed of Trust and
the Note, and the Debt shall not be reduced until any award or payment therefor
shall have been actually received by Beneficiary and applied to the discharge of
the Debt. Notwithstanding the foregoing provisions of this Paragraph 14(e) or
--------------
anything else contained in this Paragraph 14, if Grantor has obtained the
------------
release of the Premises and the lien of this Deed of Trust in accordance with
the Loan Agreement by payment of the applicable Release Price and other amounts,
if any, due to obtain a release under the Loan Agreement, and the taking of any
other actions required by the Loan Agreement with respect thereto (the payment
of such amounts and the taking of such actions being, with respect to any
Condemnation Proceeding(s), being collectively called a "Condemnation Event
------------------
Release"), then Grantor shall not be required to undertake the Condemnation
- -------
Restoration described herein. As set forth in the Loan Agreement, the payment of
amounts with respect to a Condemnation Event Release shall not require the
payment of a Yield Maintenance Premium, and any Condemnation Proceeds paid to
Beneficiary shall be credited against payments of the Release Price and any
other amounts due with respect to a Condemnation Event Release required to be
paid by the provisions of the Loan Agreement.
40
<PAGE>
It is recognized that, with respect to a Partial Taking or a Total Taking,
depending on the amount of the award from the Governmental Authority available
to pay the Release Price and any other amounts due under the Loan Agreement,
that Grantor may have to pay to Beneficiary monies in addition to the total
available amount of the Condemnation Proceeds to obtain a Condemnation Event
Release.
(f) If a claim under any Condemnation Proceedings arising during
the term of this Deed of Trust is not paid until after the extinguishment of the
Debt, whether by foreclosure or otherwise, and Beneficiary shall not have
received the entire amount of the Debt outstanding at the time of such
extinguishment, then the Condemnation Proceeds relating to any such Condemnation
Proceedings, to the extent of the amount of the Debt not so received, shall be
paid to Beneficiary and be the property of Beneficiary; and Grantor hereby
assigns, transfers and sets over to Beneficiary all of Grantor's right, title
and interest in and to such Condemnation Proceeds. The balance of such
Condemnation Proceeds, if any, shall be paid to and be the property of Grantor.
The provisions of this Paragraph shall survive the termination of this Deed of
---------
Trust by foreclosure or otherwise as a consequence of the rights and remedies of
Beneficiary hereunder after an Event of Default.
(g) All Condemnation Proceeds and other sums deposited with
Beneficiary pursuant to this Paragraph, until expended or applied as provided in
---------
this Paragraph, shall constitute additional security for the Debt and shall be
---------
invested in Permitted Investments with income thereon inuring to the benefit of
Grantor.
15. Compliance With Agreements, Laws, etc. Subject to the provisions of
--------------------------------------
Paragraph 16 hereof relating to permitted contests, Grantor agrees to perform
- ------------
and comply, and instruct the tenants under any Leases to comply, with all
covenants, agreements and restrictions affecting Grantor, the Mortgaged Property
or any portion thereof, the nonperformance of which would materially impair
Grantor's ability to meet its obligations under any of the Transaction Documents
or would impair the substantial realization by Beneficiary of the benefits and
rights conferred hereunder or under any of the Transaction Documents, and with
all Legal Requirements, whether the same be directed to the erection, repair,
manner of use or structural alteration of the Improvements or otherwise and to
procure and maintain all licenses or other authorizations required for the
proper use, maintenance and operation of the Mortgaged Property. For the
purposes hereof, "Legal Requirements" shall mean all of the following, whether
------------------
or not a note or notice of violation has been entered, issued or received as a
consequence of non-compliance therewith:
(a) statutes, laws, rules, rulings, orders, regulations,
ordinances, judgments, decrees and injunctions of any Governmental
Authority (including, without limitation, Environmental Laws, the
Americans with Disabilities Act (P.L. 101-336, 42 U.S.C. (s) 12,101 et
--
seq.), and fire, health, handicapped access, sanitation, ecological,
---
historic, landmark, zoning, wetlands and building laws and codes) in
any way applicable to Grantor or the Mortgaged Property or any portion
thereof, or to the ownership, use, development, improvement, occupancy,
possession, operation or maintenance of the Improvements;
41
<PAGE>
(b) requirements of the local Board of Fire Underwriters or similar
body acting in and for the locality in which the Premises are situated;
(c) requirements of each insurance policy covering or applicable to
all or any portion of the Mortgaged Property or the ownership, use,
development, improvement, occupancy, possession, operation or
maintenance thereof and all requirements of the issuer of each such
policy;
(d) requirements of each Permit; and
(e) the Ground Lease, all REAs and all covenants, agreements,
regulations, restrictions and other encumbrances contained in any
instrument either of record or known to Grantor at any time affecting
the Mortgaged Property or any portion thereof or the ownership, use,
development, improvement, occupancy, possession, operation or
maintenance thereof, in each case whether now or hereafter enacted or
in force. Grantor agrees to enforce all material provisions of the
Ground Lease and all REAs in accordance with their terms and to comply
with all reasonable requests from Beneficiary with respect to such
enforcement.
16. Contest of Impositions, Legal Requirements and Liens.
-----------------------------------------------------
Notwithstanding anything to the contrary contained in this Deed of Trust,
Grantor shall have the right to contest, at its own expense, by appropriate
legal proceedings conducted in good faith and with due diligence, the amount or
validity (or the applicability to Grantor or the Mortgaged Property or to the
Note or this Deed of Trust) of any Impositions or encumbrances referred to
herein (other than this Deed of Trust and the other Transaction Documents) or
any Legal Requirements, provided that (a) Grantor gives Beneficiary timely
-------- ----
notice of its intention to contest the same and keeps Beneficiary regularly
advised as to the status of such proceedings, (b) the commencement of such
proceedings shall suspend the collection or enforcement of the matter under
contest, (c) there shall be no impairment of the lien of this Deed of Trust or
undue interference with the normal conduct of business at the Mortgaged
Property, (d) neither the Mortgaged Property, nor any Rents therefrom, nor any
part thereof or interest therein, would be in any immediate danger of being
sold, forfeited, attached, condemned, vacated or lost, (e) neither Grantor nor
Beneficiary would be potentially subject to criminal liability or be in imminent
danger of civil liability for failure to comply therewith pending the outcome of
such proceedings, (f) in the case of an Imposition, Grantor shall have either
(i) paid the amount in dispute prior to instituting such contest, in which event
the notice requirement of clause (a) of this Paragraph shall be satisfied by
------ ---------
giving notice prior to initiating such contest rather than prior to making
payment, (ii) set aside on its books such reserves with respect thereto as may
be required by sound accounting principles or, at Beneficiary's request,
furnished security in an amount equal to 125% of the disputed amount, in rated
securities, cash or bond, to Beneficiary during the pendency of such
proceedings, and (g) if such contest be finally resolved against Grantor,
Grantor shall promptly pay the amount required to be paid, together with all
interest and penalties accrued thereon, and otherwise comply with the applicable
requirement, which payment may be made from the security, if any, furnished to
Beneficiary pursuant to clause (ii), and any excess thereof following payment in
full of the applicable imposition shall be returned to Grantor. Grantor shall
indemnify and save Beneficiary
42
<PAGE>
harmless from and against any liability, loss, damage, cost or expense of any
kind that may be imposed upon Beneficiary in connection with any such contest
and any determination resulting therefrom. If an Event of Default under this
Deed of Trust or any other SC Transaction Document shall occur and be continuing
during any such proceeding, Grantor shall pay or cause to be paid to Beneficiary
all refunds resulting from such proceeding which shall be applied to the payment
of the Debt in such order and priority as Beneficiary shall determine in its
sole discretion consistent with the SC Transaction Documents. Following the
occurrence of an Event of Default and until the Debt has been paid in full, and
on five (5) days' prior written notice to Grantor (so long as no time period for
seeking reductions passes or lapses in such 5-day period, but otherwise on such
shorter notices as will not allow any such time period to pass or lapse) Grantor
hereby appoints Beneficiary as its attorney-in-fact to seek reductions in the
assessed valuation of the Mortgaged Property for real property tax purposes or
for other purposes and to prosecute any action or proceeding in connection
therewith. This power of attorney is a power coupled with an interest and is
irrevocable.
17. Cure of Defaults by Beneficiary. If Grantor shall:
-------------------------------
(a) default in the payment of any Impositions as herein required
(subject to the provisions of Paragraph 16 relating to permitted
------------
contests);
(b) fail to keep in any material respect the Improvements,
Equipment and Personal Property in good repair and such failure shall
not be cured within any applicable grace period;
(c) fail or refuse to insure the Mortgaged Property as herein
required;
(d) fail to pay and satisfy liens or encumbrances against the
Mortgaged Property in accordance with the terms of this Deed of Trust
(subject to the provisions of Paragraph 16 relating to permitted
------------
contests);
(e) fail to pay any other sum or make any other deposit elsewhere
in this Deed of Trust required to be paid or deposited and such failure
shall not be cured within any applicable grace period; or
(f) otherwise fail to make any payment or fail in any material
respect to perform any act required to be made or performed hereunder,
and such failure shall not be cured within any applicable grace period;
then Beneficiary, following not less than five (5) Business Days' prior
written notice to Grantor (or such shorter notice as shall be
reasonable under the circumstances, including no notice in the case of
an emergency in which no notice may feasibly be given) and without
waiving or releasing Grantor from any obligation or default hereunder,
may (without having any obligation to do so):
(i) pay such Impositions or redeem the Mortgaged Property from
any tax sale or forfeiture or purchase any tax title obtained,
43
<PAGE>
or that shall be obtained, thereon without inquiring into the
validity or invalidity of any such Impositions or tax deed;
(ii) make repairs to the Mortgaged Property;
(iii) procure such insurance and pay such insurance premium
charges; it being agreed that the power of attorney granted by
---------------
Grantor to Beneficiary pursuant to the final clause of this
Paragraph 17 shall apply to the matters set forth in the
------------
immediately preceding sub-clauses (i), (ii) and (iii);
and, additionally, in accordance with and consistent with the
provisions of this Paragraph 17 and the contractual agreements between
------------
Grantor and Beneficiary set forth in the SC Transaction Documents
generally, but without the right to utilize the power of attorney set
forth in the final clause of this Paragraph 17, Beneficiary may:
------------
(iv) pay or settle any and all suits or claims for such liens
or satisfy any such encumbrances or any other claims that may be
made against the Mortgaged Property or any part thereof;
(v) pay any other sum or make any other deposit herein required
to be paid or made by Grantor; or
(vi) pay any such sum or perform any such act for the account
and at the expense of Grantor, and enter upon the Mortgaged
Property upon reasonable notice and at reasonable times for any
such purpose and take all such action thereon as, in the reasonable
opinion of Beneficiary, may be necessary or appropriate therefor.
All monies paid for any of the purposes set forth in this Deed of Trust
and all expenses paid or incurred in connection therewith, including
reasonable attorneys' fees and disbursements and any other monies
disbursed or advanced by Beneficiary to protect the lien of this Deed
of Trust, or expended pursuant to any of sub-clause (i) through (vi)
above, shall be due and payable by Grantor to Beneficiary within ten
(10) days after written demand therefor and, if not paid within such
ten (10) day period, shall bear interest, from and including the date
of disbursement or advance to and including the date of repayment by
Grantor, at the Default Rate, and to the extent that such amounts and
costs paid by Beneficiary shall constitute payment of (A) Impositions,
(B) insurance premiums, (C) expenses incurred in connection with
upholding the lien of this Deed of Trust, including, without
limitation, the expenses of any litigation to prosecute or defend the
rights and liens created by this Deed of Trust, or (D) any amounts,
costs or charges to which Beneficiary becomes subrogated, upon payment,
whether under recognized principles of law or equity or express
statutory authority; then, and in each such event, such amounts, costs
and charges and interest thereon shall be added to the Debt and be
secured by this Deed of Trust and the Other SC Mortgages. For the
purpose of carrying out the provisions and exercising the rights,
powers and privileges granted by sub-clauses
44
<PAGE>
(i) or (ii) or (iii) of this Paragraph, Grantor hereby irrevocably
---------
constitutes and appoints Beneficiary, following an Event of Default,
its true and lawful attorney-in-fact to execute, acknowledge and
deliver any instruments and do and perform any acts such as are
referred to in this Paragraph, in the name and on behalf of Grantor,
---------
with full power of substitution vested in Beneficiary to designate
another entity or entities to exercise any power and perform any
function which Beneficiary could perform pursuant to the foregoing
grant. This power of attorney is a power coupled with an interest and
is irrevocable.
18. Indemnity. Subject to the Non-Recourse provisions of the final
---------
sentence of this Paragraph 18, Grantor hereby indemnifies Beneficiary and its
------------
directors, officers, agents and employees (collectively the "Indemnified
-----------
Parties"), and saves each of them harmless from and against all liabilities
- -------
(other than tax liability imposed on Beneficiary for any income earned by reason
of the Note or any other SC Transaction Document) claims, demands, actions,
proceedings, suits, causes of action, injuries, obligations, loss, actual
damages (including, without limitation, Beneficiary's costs and expenses related
thereto and any applicable Yield Maintenance Premium), fines, penalties,
judgments, costs, expenses (including, without limitation, reasonable
architects', engineers', accountants', consultants' and attorneys' fees and
disbursements) expenses of bonding liens, and other litigation expenses,
incurred by, imposed upon or asserted against the Indemnified Parties (except as
a result of the willful, wrongful acts or omissions or gross negligence of the
applicable Indemnified Party) in connection with or arising out of:
(a) Beneficiary's or Trustee's interest in this Deed of Trust, the
Assignment, the Note, any other SC Transaction Document, or any other
document or instrument hereafter executed by Grantor and delivered to
Beneficiary in connection with the Debt or any restructuring thereof;
(b) any acts or omissions of Beneficiary or Trustee in connection
with the reasonable exercise by Beneficiary or Trustee of any right,
power or remedy available to Beneficiary or Trustee under this Deed of
Trust or any other SC Transaction Document, including, without
limitation, any action or proceeding to protect the lien of this Deed
of Trust or to foreclose this Deed of Trust;
(c) any failure by Grantor to comply with any terms, conditions or
other provisions set forth in this Deed of Trust or any other SC
Transaction Document;
(d) any use, non-use, possession, occupancy, alteration, repair,
condition (patent or latent), operation, maintenance, or management of
the Mortgaged Property or any portion thereof;
(e) any accident, injury (including death), or damage to any person
or property occurring in, on or about the Mortgaged Property or any
part thereof, whether resulting from any act, omission or negligence of
Grantor, its agents, employees, contractors, lessees, sublessees,
licensees, invitees, or otherwise;
45
<PAGE>
(f) any misrepresentation by Grantor, or its general partner
contained in this Deed of Trust or in any other SC Transaction
Document;
(g) any claim for any premium or other charge or any brokerage
commission or other compensation by any person acting as such with
respect to the SC Loan and this Deed of Trust and claiming through
Grantor but not through Beneficiary;
(h) any capital improvements or other work or thing done in, on or
about the Mortgaged Property or any part thereof (except any of the
foregoing that are directed by Beneficiary);
(i) any past, current and/or future offer for the purchase or sale
of equity interests in Grantor, including, without limitation,
liabilities under any applicable securities or blue sky laws; or
(j) any tax attributable to the ownership, assignment, execution,
delivery, filing, recording or enforcement of any of the SC Transaction
Documents.
Nothing contained in this Paragraph 18, however, shall impose upon Grantor the
------------
costs of the Securitization which are, pursuant to the Loan Agreement, to be
paid by Beneficiary. All sums payable to any of the Indemnified Parties under
this Paragraph 18 shall be deemed a part of the Debt, shall be paid by Grantor
------------
to the applicable Indemnified Party within ten (10) days after written demand
(unless another period is expressly set forth in this Deed of Trust or another
SC Transaction Document) and, if not paid within such ten (10) day or other
specified period, shall accrue interest at the Default Rate from and including
the date of disbursement or advance by the applicable Indemnified Party to and
including the date of repayment by Grantor. Grantor's obligations under this
Paragraph 18 shall, until the expiration of all applicable statutes and periods
- ------------
of limitation, if any, survive payment in full of the Note and any discharge,
release or satisfaction of this Deed of Trust, any complete or partial
foreclosure of this Deed of Trust and/or the delivery of one or more deeds in
lieu of any such foreclosure. Grantor's obligations under this Paragraph 18
------------
shall be Non-Recourse (as such term is defined in the Loan Agreement); provided
that nothing contained herein shall be deemed to be in derogation of any right
or remedy of Beneficiary and/or Trustee under any Transaction Document which, by
its express terms, is a right or remedy which is not Non-Recourse as to Grantor.
19. Events of Default.
-----------------
(a) Each of the following events shall constitute an "Event of
--------
Default" hereunder:
- -------
(i) an "Event of Default", as such term is defined in the Loan
Agreement;
(ii) failure of Grantor to pay on the due date any payment due
under the Note;
46
<PAGE>
(iii) failure by Grantor to perform or observe in any material
respect any other covenant, obligation, condition or provision
hereunder or under any of the Other SC Mortgages which failure
continues unremedied for a period of thirty (30) days after written
notice thereof to Grantor requiring the same to be remedied;
provided, however, that if such failure is susceptible of cure but
-------- -------
cannot be cured within such thirty (30) day period and provided
Grantor has within such thirty (30) day period commenced and is
diligently prosecuting such cure, such thirty (30) day period shall
be extended to not later than one hundred eighty (180) days after
the date on which Grantor received such written notice;
(iv) any event which, pursuant to clause (xii) of Paragraph
---------
3(d), constitutes an Event of Default with respect to a Permitted
----
Subordinate Mortgage (provided, however, that Beneficiary's
remedies shall be exercised in accordance with such clause (xii))
or any default beyond any applicable grace period under any lien or
deed of trust encumbering any part of the Mortgaged Property,
whether senior or junior in lien to this Deed of Trust and whether
now or hereafter held by Beneficiary or any other party;
(v) if a default beyond any applicable notice and/or grace
period occurs under any fee mortgage in respect of the Land and if
Beneficiary shall be made a party in any action or proceeding in
connection with any such fee mortgage, including, without
limitation, a foreclosure or similar proceeding, unless the holder
of such fee mortgage has agreed not to disturb Grantor or Grantor
provides evidence to the satisfaction of Beneficiary that such fee
mortgage is subordinate to the Ground Lease and this Deed of Trust
in accordance with applicable local law;
(vi) if an event of default or an event which with the giving
of notice or passage of time or both would constitute an event of
default occurs under the Ground Lease or if the Ground Lease
terminates for any reason whatsoever;
(vii) if any provision of this Deed of Trust or any other SC
Transaction Documents conflicts with any provision of the Ground
Lease and the Fee Owner or any other party having rights under the
Ground Lease materially hinders or prevents Trustee or Beneficiary
from exercising its rights, remedies and privileges under this Deed
of Trust or other SC Transaction Documents, including, without
limitation, its rights under Paragraph 13(d) and Paragraph 14(c)
--------------- ---------------
hereof; or
(viii) an Event of Default under the MHP Loan Agreement.
(b) Upon the occurrence of an Event of Default, Beneficiary may, at
its option, declare the entire unpaid balance of the Debt to be forthwith due
and payable, and thereupon such balance shall become so due and payable without
presentment, protest or further demand or notice of any kind, all of which are
hereby expressly waived, and Grantor will forthwith pay to Beneficiary the
entire Debt, including principal of and interest accrued on the Note and, to the
extent permitted by law, the Yield Maintenance Premium, and all other premiums
and charges,
47
<PAGE>
if any, provided in the Note, this Deed of Trust and the other SC Transaction
Documents; provided, however, that if at any time prior to the Maturity Date the
-------- -------
balance of the Debt shall become so due and payable, and all arrears of interest
and other charges of any kind due as part of the Debt (with interest so far as
may be lawful on any overdue installments of interest at the Default Rate),
shall be paid and all defaults (other than the payment of principal hereunder
which has been so declared due and payable) shall have been cured or the cure
thereof secured to the sole satisfaction of Beneficiary or other provision
deemed by Beneficiary to be adequate shall be made therefor, then and in such
case Beneficiary, in its sole discretion, and by written notice delivered to
Grantor, may waive such Event of Default and its consequences and rescind or
annul such declaration, but no such waiver shall extend to or affect any
subsequent default, or impair any right consequent thereon.
(c) To the extent that a default under this Deed of Trust, any of
the Other SC Mortgages or any of the other SC Transaction Documents is not cured
within the applicable notice and cure period, if any, specified herein or
therein, the same shall not constitute an Event of Default hereunder or
thereunder, as the case may be, if such default is subsequently cured and such
cure is accepted in writing by Beneficiary or if such default is subsequently
waived in writing by Beneficiary and any rights or remedies available to
Beneficiary or Trustee hereunder or under any of the other SC Transaction
Documents on account of any such Event of Default so cured and accepted or
waived shall thereupon terminate (but such remedies shall continue to be
available in connection with any subsequent or other Events of Default, whether
of like or unlike nature).
20. Default Rate. Upon an Event of Default, Beneficiary shall be
------------
entitled to receive and Grantor shall pay interest on the entire unpaid
principal sum (including, without limitation and to the extent permitted by law,
any accrued and unpaid interest thereon) at the "Default Rate" (as defined in
the Note) for the duration of such default (unless Beneficiary has, at its
option, declared the entire unpaid balance of the Debt to be forthwith due and
payable in which case interest shall continue to be paid at the Default Rate
until the Debt has been paid in full). In no event shall the Default Rate exceed
the maximum rate allowed by law. Any interest that accrues under any of the
Transaction Documents at the Default Rate shall be payable whether accruing
before or after entry of any judgment.
21. Remedies. If any one or more of the Events of Default shall occur,
--------
then and in any such event Beneficiary shall have the right of acceleration and
all other remedies provided in this Deed of Trust or in the Note or otherwise
provided in any SC Transaction Document, by law or statute or in equity, all of
which rights and remedies shall, to the fullest extent permitted by law, be
cumulative. To the extent the laws of the State limit or deny (i) the
availability of the exercise of any of the remedies set forth below, including
without limitation, the remedies involving a power of sale on the part of the
Beneficiary and terms of this Deed of Trust, or (ii) the enforcement of waivers
and indemnities made by Grantor, such remedies, waivers or indemnities shall be
exercisable or enforceable, any provisions in this Deed of Trust to the contrary
notwithstanding, if, and only to the extent, permitted by the laws of the State
in force at the time of the exercise of such remedies or the enforcement of such
waivers or indemnities without regard to the enforceability of such remedies,
waivers or indemnities at the time of
48
<PAGE>
execution and delivery of this Deed of Trust. Such rights and remedies of
Beneficiary and Trustee shall include, without limitation, the following:
(a) Possession, Management and Income. Grantor, upon written demand
---------------------------------
of Beneficiary, shall forthwith surrender to Beneficiary or Trustee, or
both of them, the actual possession of the Mortgaged Property, and
Beneficiary or Trustee and such officers or agents as either may
appoint, (i) may enter and take possession of the Mortgaged Property
together with the books, papers and accounts of Grantor relating
thereto, (ii) may dispossess Grantor, its agents and servants and all
other persons therefrom (excluding bona fide hotel guests), (iii) may
hold, operate and manage the Mortgaged Property and from time to time
make all necessary repairs and such alterations, additions, advances
and improvements as Beneficiary shall deem prudent, (iv) may receive
the Rents thereof and exercise all rights and powers of Grantor with
respect to the Mortgaged Property and the Improvements, whether in the
name of Grantor or otherwise, including, without limitation, the right
to make, cancel, enforce or modify Leases, obtain and evict tenants (in
accordance with applicable law), and demand, sue for, collect and
receive all Rents and may pay therefrom all costs and expenses of so
taking, holding and managing the Mortgaged Property, including, without
limitation, reasonable compensation to Beneficiary's or Trustee's, or
both's, agents and attorneys, all prior or coordinate liens and
encumbrances, all Impositions and other assessments and other charges
then due or thereafter accruing, and all expenses of such repairs,
alterations, additions, improvements and other disbursements made by
Beneficiary or Trustee pursuant to the terms hereof, and Beneficiary
may apply the remainder of the monies so received by it to the payment
of the unpaid principal of, and interest on, the Note, the Yield
Maintenance Premium and other items of the Debt then due and payable,
and (v) may succeed to all the rights of Grantor, including any rights
to unearned premiums, in and to any insurance policies covering all or
any portion of the Premises, the Improvements, the Personal Property
and/or the Equipment, including the right to receive Refunds, Insurance
Proceeds and Condemnation Proceeds which would otherwise be payable to
Grantor pursuant to this Deed of Trust. Beneficiary and Trustee shall
not be subject to any liability for, or by reason of, any such entry,
taking possession, exclusion, holding, operation or management, except
for willful, wrongful acts or omissions or gross negligence of
Beneficiary or Trustee or their officers, directors, agents,
contractors or employees;
(b) Partial Foreclosure. Beneficiary, at its option, may upon five
-------------------
(5) days' notice or such longer notice period as may be required by
statute institute proceedings for the complete or partial foreclosure
of this Deed of Trust or take such steps to protect and enforce its
rights whether by action, suit or proceeding in equity or at law for
the specific performance of any covenant, condition or agreement in the
Note or in this Deed of Trust (without being required to foreclose this
Deed of Trust), or in aid of the execution of any power herein granted,
or for any foreclosure hereunder, or for the enforcement of any other
appropriate legal or equitable remedy or otherwise as Beneficiary shall
elect, including, without limitation, to direct Trustee to foreclose
this Deed of Trust for any portion of the Debt which is then due and
payable; provided, however, that if a partial foreclosure sale is made,
-------- -------
such sale shall be subject to the continuing lien of the
49
<PAGE>
Transaction Documents for the unmatured part of the Debt; and such sale
shall not in any manner affect the unmatured part of the Debt, but as
to such unmatured part thereof, and the lien thereon, the same shall
remain in full force and effect as though no foreclosure had occurred.
Several foreclosure sales may be made pursuant to partial foreclosures
without exhausting the right of full or partial foreclosure sale for
any unmatured part of the Debt, it being the purpose to provide for a
partial foreclosure sale of the Debt for any matured portion of the
Debt without exhausting the power to foreclose and to sell the
Mortgaged Property pursuant to such partial foreclosure for any other
part of the Debt, whether matured at the time or subsequently maturing,
and without exhausting any right of acceleration and full foreclosure.
Notwithstanding the filing of any partial foreclosure or entry of a
decree of sale therein, Beneficiary may elect at any time prior to a
foreclosure sale pursuant to such decree to discontinue such partial
foreclosure and to accelerate the Debt by reason of any uncured Event
of Default upon which such partial foreclosure was predicated or by
reason of any other Events of Default and proceed with full foreclosure
proceedings;
(c) Suits. To the extent permitted by law, Beneficiary, at its
-----
option, may, either with or without first taking possession, direct
Trustee to proceed by suit or suits in equity and/or at law, or by any
other appropriate remedy or proceeding, to protect and enforce
Beneficiary's and/or Trustee's rights hereunder whether for the
specific performance (to the extent permitted by law) of any covenant
or agreement contained herein or in the Note or for an injunction
against the violation of any of the terms hereof or thereof or in aid
of the exercise of any right, power or remedy granted to Beneficiary
herein or therein, or to enforce the payment of the Note, or to
foreclose the lien and security interest of this Deed of Trust against
the Mortgaged Property or any part thereof and to have all of the
Mortgaged Property or any part thereof sold in one or more sales (as an
entirety or in parcels) under the judgment or decree of a court of
competent jurisdiction or otherwise. All rights of action under this
Deed of Trust or in respect of the Note may be enforced by Beneficiary
or Trustee, without the production of the Note and without the
possession thereof (to the extent Beneficiary or its agent gives a bona
----
fide lost note affidavit in compliance with local law) at any trial or
----
other proceeding relative thereto to the extent permitted by law;
(d) Receiver. To the extent permitted by law and without the
--------
necessity to prove the value or occupancy of the security or the
solvency or insolvency of any person then legally or equitably liable
for payment of the Debt, Beneficiary shall be entitled as a matter of
right, ex parte and without notice, to the appointment of a receiver to
-- -----
enter upon and take possession of the Mortgaged Property, perform all
acts necessary or useful for the operation, use and maintenance of the
Mortgaged Property and to collect all Rents thereof and apply the same
and to exercise such other powers as are permitted by applicable law
and the court making such appointment may direct and Grantor hereby
consents to the appointment of such receiver. The expenses, including
receiver's fees, reasonable attorneys' fees, costs and disbursements
and agent's compensation, incurred pursuant to the powers herein
contained shall be secured by this Deed of Trust. The right to enter
and take possession of and to manage and operate the Mortgaged
Property, and
50
<PAGE>
to collect the Rents, whether by a receiver or otherwise, shall be
cumulative to any other right or remedy hereunder or afforded by law,
and may be exercised concurrently therewith or independently thereof.
Beneficiary shall be liable to account only for such Rents actually
received by Beneficiary, whether received pursuant to this subparagraph
------------
21(d) or subparagraph 21(a). Notwithstanding the appointment of any
----- ------------------
receiver or other custodian, Beneficiary shall be entitled as pledgee
to the possession and control of any cash, deposits, or instruments at
the time held by or payable or deliverable under the terms of this Deed
of Trust to Beneficiary. Without limiting any of Beneficiary's rights
hereunder, Beneficiary or Trustee shall be entitled, as a matter of
strict right, without notice and upon ex parte application, and without
regard to the value or occupancy of the security, or the solvency of
Grantor, or the adequacy of the Mortgaged Property or other collateral
as security for the Note, to have a receiver appointed to enter upon
and take possession of the Mortgaged Property, collect the Rents and
revenues and apply the same as the court may direct, such receiver to
have all the rights and powers permitted under the laws of the
jurisdiction in which the Mortgaged Property is located. Grantor hereby
waives any requirements on the receiver or Beneficiary to post any
surety or other bond. Beneficiary or the receiver may also take
possession of, and for these purposes use, any and all personalty which
is a part of the Mortgaged Property and used by Grantor in the rental
or leasing thereof or any part thereof. The expense (including the
receivers fees, counsel fees, costs and agents compensation) incurred
pursuant to the powers herein contained shall be secured by this Deed
of Trust. To the extent not prohibited by applicable law, Beneficiary
shall (after payment of all costs and expenses incurred) apply such
Rents and revenues received by it in the order set forth in Paragraph
---------
23 of this Deed of Trust. The right to enter and take possession of the
--
Mortgaged Property, to manage and operate the same, and to collect the
Rents and revenues, whether by receiver or otherwise, shall be
cumulative to any other right or remedy hereunder or afforded by law,
and may be exercised concurrently therewith or independently thereof.
Beneficiary shall be liable to account only for such Rents and revenues
actually received by Beneficiary.
(e) Sale in One Parcel. In the event of a sale, the Mortgaged
------------------
Property may be sold in one parcel. Grantor hereby waives its rights,
if any, to require that the Mortgaged Property be sold as separate
units, tracts or estates;
(f) Security Interest. In addition to the rights and remedies of
-----------------
Beneficiary and Trustee set forth herein and in the Note and the other
Transaction Documents, and not in lieu thereof, Beneficiary shall have
all of the rights and remedies of a holder of a security interest under
the Code, or under other applicable law with respect to the Security
Interest Property and all rights and remedies provided or referred to
herein and therein, shall, to the fullest extent permitted by
applicable law, be cumulative;
(g) Foreclosure. Beneficiary, at its option, may direct Trustee to
-----------
institute an action to foreclose this Deed of Trust upon five (5) days'
notice or such longer period for notice required by statute, or take
such other action as may be permitted and available to Beneficiary, at
law or in equity, for the enforcement of the SC Transaction Documents
and the realization on the Mortgaged Property or any other security
held by Beneficiary,
51
<PAGE>
and proceed thereon through to final judgment and execution thereon for
the Debt, including, without limitation, the Yield Maintenance Premium,
all accrued and unpaid interest and all costs of enforcement. In
furtherance thereof, to the extent permitted by applicable law,
Beneficiary and/or Trustee shall have the full power and right to sell
the Mortgaged Property and all estate, claim, demand, right, title and
interest of Grantor therein and right of redemption thereof pursuant to
an assent to a decree or otherwise, at one or more sales, as an
entirety or in parcels, at such time and place, upon such terms and
after such notice thereof as may be required or permitted by law or
statute or in equity, it being agreed that in the event of a sale, by
foreclosure or otherwise, of less than all of the Mortgaged Property,
the SC Transaction Documents shall continue as a lien on the remaining
portion of the Mortgaged Property. Grantor hereby assents to the
passage of a decree for the sale of the Mortgaged Property upon the
occurrence of an Event of Default by any court having jurisdiction; and
(h) Power of Sale. To the extent permitted by applicable law,
-------------
Trustee may sell, release and convey the Premises at public sale and
execute and deliver to the purchasers at such sale, good and sufficient
deeds of the conveyance and shall render any surplus funds, after
payment in full of the Debt and the expenses of such sale, including
reasonable attorneys' fees as provided by law, to Grantor. Without
limiting any of Beneficiary's rights hereunder, Beneficiary or Trustee
may cause the Mortgaged Property and all estate, right, title and
interest, claim and demand therein, or any part thereof to be sold as
follows:
(i) Beneficiary may proceed as if all of the Mortgaged Property
were real property, in accordance with (iv) below, or Beneficiary
may elect to treat any of the Mortgaged Property which consists of
a right in action or which is property that can be severed from the
Premises without causing structural damage thereto as if the same
were personal property, and dispose of the same in accordance with
(iii) below, separate and apart from the sale of real property,
with the remainder of the Mortgaged Property being treated as real
property;
(ii) Beneficiary may cause any such sale or other disposition
to be conducted immediately following the expiration of any grace
period, if any, herein provided (or required by law) or Beneficiary
may delay any such sale or other disposition for such period of
time as Beneficiary deems to be in its best interest. Should
Beneficiary desire that more than one such sale or other
disposition be conducted, Beneficiary may, at its option, cause the
same to be conducted simultaneously, or successively on the same
day, or at such different days or times and in such order as
Beneficiary may deem to be in its best interest;
(iii) should Beneficiary elect to cause any of the Mortgaged
Property to be disposed of as personal property as permitted by (i)
above, it may dispose of any part thereof in any manner now or
hereafter permitted by Division 9 of the Code or in accordance with
any other remedy provided by law. Both Grantor and Beneficiary
shall be eligible to purchase any part or all of such property at
any
52
<PAGE>
such disposition. Any such disposition may be either public or
private as Beneficiary may so elect, subject to the provisions of
the Code. Beneficiary shall give Grantor at least five (5) days'
prior written notice of the time and place of any public sale or
other disposition of such property or of the time at or after which
any private sale or any other intended disposition is to be made,
and if such notice is sent to Grantor it shall constitute
reasonable notice to Grantor;
(iv) should Beneficiary elect to sell the Mortgaged Property
which is real property or which Beneficiary has elected to treat as
real property, upon such election Beneficiary or Trustee shall give
such notice of default and election to sell as may then be required
by law. Thereafter, upon the expiration of such time and the giving
of such notice of sale as may then be required by law, Trustee, at
the time and place specified in the notice of sale, shall sell such
Mortgaged Property, or any portion thereof specified by
Beneficiary, at public auction to the highest bidder for cash in
lawful money or the United States, subject, however, to the
provisions of (v) below. Beneficiary may, from time to time,
postpone the sale by public announcement thereof at the time and
place noticed therefor. If the Mortgaged Property consists of
several lots or parcels, Beneficiary may designate the order in
which such lots or parcels may be offered for sale or sold, and may
direct that such property be sold in one parcel, as an entirety, or
in such parcels as Beneficiary, in its sole discretion, may elect.
Grantor expressly waives any right which it may have to direct the
order in which any of the Mortgaged Property shall be sold, and its
rights, if any, to require that the Mortgaged Property be sold as
separate tracts, lots, units or parcels. Any person, including
Grantor, Trustee or Beneficiary, may purchase at the sale. Upon any
sale, Trustee shall execute and deliver to the purchaser or
purchasers a deed or deeds conveying the property so sold, but
without any covenant or warranty whatsoever, express or implied,
whereupon such purchaser or purchasers shall be let into immediate
possession;
(v) upon any sale of the Mortgaged Property, whether made under
a power of sale herein granted or pursuant to judicial proceedings,
if the holder of the Note is a purchaser at such sale, it shall be
entitled to use and apply all or any portion of the indebtedness
then secured hereby for or in settlement or payment of all or any
portion of the purchase price of the property purchased; and
(vi) in the event of a sale or other disposition of any such
Mortgaged Property or any part thereof, and the execution of a deed
or other conveyance pursuant thereto, the recitals in the deed or
deeds of facts (such as of a default, the giving of notice of
default and notice of sale, demand that such sale should be made,
postponement of sale, terms of sale, sale, purchaser, payment of
purchase money, and any other fact affecting the regularity or
validity of such sale or disposition) shall be conclusive proof of
the truth of such facts; and any such deed or conveyance shall be
conclusive against all persons as to such facts recited therein.
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Trustee shall be entitled, in its sole discretion, to exercise all or
any of the rights and remedies provided herein or in any of the other
SC Transaction Documents or which may be given by statute, at law or in
equity, or otherwise in such order and manner as Trustee shall elect,
without impairing Beneficiary's or Trustee's rights under any of the SC
Transaction Documents and without affecting the liability of any
person, firm, corporation, or other entity for the sums secured by the
SC Transaction Documents.
22. Authorization to Execute Deeds; Adjournments.
--------------------------------------------
(a) Grantor irrevocably appoints Beneficiary as its true and lawful
attorney-in-fact, which appointment is coupled with an interest, for the
purpose, following an Event of Default and the establishment of the maturity of
the Debt (in accordance with the provisions of this Deed of Trust or by a court
of competent jurisdiction), of effectuating, to the extent permitted by
applicable law of the State, any sale, assignment, transfer or delivery of the
Mortgaged Property or any part thereof or any interest therein for the
enforcement of this Deed of Trust as Beneficiary may consider reasonably
necessary or appropriate, with full power of substitution.
(b) Beneficiary may adjourn, or direct Trustee to adjourn, from
time to time, in accordance with applicable law, any sale to be made by it under
or by virtue of this Deed of Trust by announcement at the time and place
appointed for such sale or for such adjourned sale or sales and, except as
otherwise provided by any applicable provision of law, Beneficiary, without
further notice or publication, may make such sale at the time and place to which
the same shall be so adjourned.
(c) In the event that Beneficiary has proceeded with the
enforcement of any right under this Deed of Trust by foreclosure sale or
otherwise and such proceedings shall have been discontinued or abandoned for any
reason or shall have been determined adversely, then, in every such case,
Grantor and Beneficiary shall be restored to their respective former positions
and rights hereunder with respect to the Mortgaged Property, subject to the lien
hereof.
23. Proceeds of Foreclosure Sale. In any foreclosure of this Deed of
----------------------------
Trust there shall be allowed and included in the decree of sale, to be paid, in
the following order, out of the rents, revenues, issues, income, products and
profits derived from the Mortgaged Property or the proceeds of such sale:
First: All court costs, allowances authorized or permitted by
-----
statute or a court, Trustee's fees and charges, fees and expenses of
receivers, reasonable attorneys' fees and disbursements (which may
include reasonable, actual billed costs, if any, of any attorney in the
employ of Beneficiary or Trustee and fees for services performed by
legal assistants and other non-lawyers), appraisers' fees, costs of
environmental audits and reports, expenditures for documentary and
expert evidence, stenographers' charges, publication costs and costs of
procuring all abstracts of title, title searches and examinations,
title policies and similar data with respect to title which Beneficiary
or Trustee may reasonably incur and any other expenses of the
foreclosure proceeding (all of which may be estimated
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as to items to be expended after the entry of the decree), with
interest thereon (to the extent permitted by law), from the date of any
such advance until paid to Beneficiary, computed at the Default Rate;
Second: All other amounts (including, without limitation, all
------
Impositions other than taxes subject to which the Mortgaged Property
was sold and all direct and indirect costs and expenses incurred by or
on behalf of Beneficiary in the operation and maintenance of the
Mortgaged Property, the collection of Rents and the enforcement of any
of their remedies under the SC Transaction Documents or by applicable
law) advanced or paid by Beneficiary pursuant to the Note, this Deed of
Trust or any other SC Transaction Document, with interest thereon (to
the extent permitted by law), from the date of any such advance until
paid to Beneficiary, computed at the Default Rate;
Third: Any indebtedness secured by this Deed of Trust and at the
-----
time due and payable (whether by acceleration or otherwise), including
all principal amounts, the Yield Maintenance Premium, if any, and
interest at the time due and payable under the Note, and interest (to
the extent permitted by law) at the Default Rate on any overdue
principal and (to the extent permitted by law) any other sum
constituting a portion of the Debt in such order and priority as
Beneficiary shall in its sole discretion determine; and
Fourth: All other amounts required to be paid by Grantor pursuant
------
to any provision of any SC Transaction Document.
Any surplus of the proceeds of such sale shall be paid promptly to the person or
entity legally entitled thereto. In the event Trustee cannot determine the
person or persons to whom the surplus should be paid or Trustee concludes that a
controversy exists with respect to the surplus, Trustee may pay the surplus into
a court of competent jurisdiction in an interpleader action and all expenses of
such action, including legal fees incurred by Beneficiary and Trustee, shall be
paid from the surplus or, if the surplus is insufficient, by Grantor.
24. Purchase of the Mortgaged Property by Beneficiary. Beneficiary may
-------------------------------------------------
be a purchaser of the Mortgaged Property or any part thereof or any interest
therein at any sale thereof, whether pursuant to foreclosure or power of sale or
otherwise, and may apply the amount of the Debt outstanding (or such portion
thereof as the Beneficiary or Trustee shall determine in its sole discretion),
and the expenses of the sale and costs of the action and any other sums which
Beneficiary or Trustee is authorized to charge under this Deed of Trust or under
applicable law toward the purchase price thereof.
25. Security Agreement; Uniform Commercial Code.
-------------------------------------------
(a) This Deed of Trust constitutes a security agreement under the
Code and a fixture filing for the purposes of Division 9 of the Code
and a security interest shall be deemed, and hereby is, granted by
Grantor to Beneficiary and attached to the Security Interest Property
for the benefit of Beneficiary as additional security for the Debt.
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<PAGE>
(b) To the extent permitted by law, Grantor hereby authorizes
Beneficiary to file financing and continuation statements to continue such lien
with respect to the Security Interest Property without the signature of Grantor
and, upon reasonable request, Grantor shall promptly execute financing and
continuation statements in form satisfactory to Beneficiary to secure
Beneficiary's interest in the Security Interest Property. Grantor shall further,
from time to time, upon the written demand of Beneficiary, execute, acknowledge
and deliver any financing statement, renewal, affidavit, certificate,
continuation statement or other document as Beneficiary may request in order to
perfect, preserve, continue, extend or maintain the security interest and
priority of this Deed of Trust or such other security instrument as a first lien
subject to the Permitted Exceptions. Grantor hereby irrevocably appoints
Beneficiary as attorney-in-fact (which appointment shall be deemed to be coupled
with an interest) for the limited purpose of executing and filing such financing
and continuation statements. Grantor agrees to pay to Beneficiary, on written
demand, all costs and expenses (including reasonable attorneys' fees and
disbursements) incurred by Beneficiary in connection with the preparation,
execution, acknowledgment, recording, filing and refiling of any such instrument
or document, including, without limitation, the charges for examining title
which amounts, as well as any other amounts required to be paid to Beneficiary
pursuant to this Paragraph, together with interest thereon at the Default Rate
---------
from the date of any such expenditure by Beneficiary until repayment, and such
sum, together with such interest, shall constitute a portion of the Debt secured
by the lien of this Deed of Trust. Neither a request of Beneficiary hereunder
nor the failure of Beneficiary to make such a request shall be construed as a
release of any portion of the Mortgaged Property from the lien of this Deed of
Trust, this covenant and any such security agreement or other similar security
instrument delivered to Beneficiary being cumulative and additional security for
payment of the Debt.
(c) Upon the occurrence of any Event of Default, Beneficiary shall
have all of the rights and remedies of a secured party under the Code with
respect to the Security Interest Property, or other applicable law, and all
rights and remedies provided for herein and in the Note, all of which rights and
remedies are cumulative to those provided elsewhere in this Deed of Trust or
otherwise available to Beneficiary. Upon the occurrence and continuance of any
Event of Default, Beneficiary shall have the option of directing Trustee to
proceed as to both real and personal property in accordance with its rights and
remedies in respect of the real property, in which event the default provisions
of the Code shall not apply. The parties agree that in the event Beneficiary
elects to proceed with respect to the Security Interest Property separately from
the real property, Grantor will assemble the Security Interest Property (other
than those items of Equipment which are affixed to the Improvements and not
removable without material damage to such items or the Improvements) and make
the Security Interest Property available to Beneficiary at a place or places
reasonably convenient to Beneficiary. Any notice of sale, disposition or other
intended action by Beneficiary, sent to Grantor at the address of Grantor
specified for notices herein at least fifteen (15) days prior to such action,
shall constitute reasonable notice to Grantor and the method of sale or
disposition or other intended action set forth in such notice shall conclusively
be deemed to be commercially reasonable within the meaning of the Code unless
objected to in writing by Grantor within ten (10) days after receipt by Grantor
of such notice.
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<PAGE>
(d) All replacements, renewals and additions to the Equipment and
the Personal Property shall become and be immediately subject to the security
interest herein of Beneficiary and be covered by this Deed of Trust as part of
the Mortgaged Property. Grantor warrants and represents that all Security
Interest Property now is, and that all replacements thereof, substitutions
therefor and additions thereto, will be, owned by Grantor free and clear of
liens, encumbrances or security interests of others except for the Permitted
Exceptions.
(e) Neither the provisions of this Paragraph nor the filing of any
---------
separate security agreement or financing statement, with respect to
Beneficiary's security interest in the Security Interest Property, shall be
construed as in any way derogating or impairing the intention of the parties
hereto that the Security Interest Property shall, at all times and for all
purposes and in all proceedings, both legal and equitable, be regarded as a part
of the Mortgaged Property. A CARBON, PHOTOGRAPHIC OR OTHER REPRODUCTION OF THIS
DEED OF TRUST OR ANY FINANCING STATEMENT RELATING TO THIS DEED OF TRUST SHALL BE
SUFFICIENT AS A FINANCING STATEMENT.
26. Certificate as to No Default, etc.; Information.
-----------------------------------------------
(a) Grantor will deliver to Beneficiary, within thirty (30) days
after written request, a written statement duly acknowledged by an authorized
representative of Grantor stating (i) the outstanding amount of the Debt (ii)
whether to the Best Knowledge of Grantor any offsets or defenses exist against
the Debt, and (iii) whether to the Best Knowledge or Grantor, there exists no
default, condition or event which, with the giving of notice or lapse of time or
both, would constitute a default in the performance or observance of any of the
terms of this Deed of Trust or any of the other Transaction Documents, or if any
such default exists, specifying to the nature and period of existence thereof
and what action Grantor is taking or proposes to take with respect thereto.
(b) In addition to the information provided for in paragraph (a)
above, Grantor will deliver to Beneficiary, within thirty (30) days after
written request, such further information with respect to the Ground Lease and
Mortgaged Property as Beneficiary may, from time to time, reasonably request,
Grantor will direct all Tenants under the Leases and lessors under the Equipment
Leases (as defined in the Loan Agreement) to deliver to Beneficiary such
information requested by Beneficiary to the extent required to be furnished
under such Lease or Equipment Lease, and Grantor will use its reasonable efforts
to cause such Tenants or lessors to deliver to Beneficiary such information to
the extent not so required to be furnished under such Lease or Equipment Lease.
Each such request for additional information of Grantor or any such Tenant or
lessor may be made by Beneficiary, from time to time, for any reasonable
business purpose.
27. Books and Records; Financial Statements. Beneficiary or its
---------------------------------------
designated representatives shall, upon reasonable prior notice to Grantor, have
(a) the right of entry and free access to the Premises (subject to the rights of
hotel guests) during business hours to inspect the Mortgaged Property and (b)
the right at reasonable times and upon not less than five (5) Business Days'
notice, to inspect all books, contracts and records of Grantor relating to the
Mortgaged
57
<PAGE>
Property. Grantor shall make the officers, directors of its general partners,
and its regional supervisors and retained professionals knowledgeable of such
matters available for Beneficiary or its designated representatives to discuss
Grantor's affairs, finances and accounts relating to the Mortgaged Property and
Grantor will cooperate with, and request that each of the foregoing individuals
cooperate with, Beneficiary and its designated representative to enable them to
perform these functions, at all reasonable times and as often as Beneficiary may
reasonably request.
28. Application of Proceeds. Any sum which by the terms of this Deed of
-----------------------
Trust is to be applied to the SC Loan or the Note shall be applied by
Beneficiary in such order and priority as is set forth herein or in any other SC
Transaction Document.
29. Terms Subject to Applicable Law; Severability. All rights, powers
---------------------------------------------
and remedies provided herein are intended to be limited to the extent necessary
so that they will not render this Deed of Trust invalid, unenforceable or not
entitled to be recorded, registered or filed under any applicable law. If any
term of this Deed of Trust shall be held to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the other terms
hereof shall in no way be affected thereby.
30. Further Acts, etc. Grantor shall, at its sole cost and expense, and
-----------------
without expense to Beneficiary or Trustee, do, execute, acknowledge and deliver
all and every such further acts, deeds, conveyances, mortgages, assignments,
notices of assignments, transfers, assurances as Beneficiary or Trustee shall,
from time to time, reasonably require for better assuring, conveying, assigning,
transferring and confirming unto Beneficiary the property and rights hereby
mortgaged or intended now or hereafter so to be, or which Grantor may be or may
hereafter become bound to convey or assign to Beneficiary, or for carrying out
the intention or facilitating the performance of the terms of this Deed of Trust
or filing, registering or recording this Deed of Trust and, on written demand,
will execute and deliver one or more financing statements to evidence more
effectively the lien hereof upon the Mortgaged Property except that Grantor
shall have no obligation to comply with the foregoing if any such action would
increase Grantor's liability hereunder or increase Beneficiary's rights
hereunder. Grantor will reimburse Beneficiary and/or Trustee, on written demand,
for any sums (including reasonable attorneys' fees and disbursements) reasonably
expended by Beneficiary or Trustee in preparing, executing, acknowledging,
filing, registering and recording such instruments, certificates and documents.
31. Limitation of Liability of Beneficiary and Trustee. Neither this
--------------------------------------------------
Deed of Trust nor any action or inaction on the part of Beneficiary or Trustee
shall, without such party's written consent, constitute an assumption on such
party's part of any obligation under any of the Leases or any other agreement
affecting the Mortgaged Property, nor shall Beneficiary or Trustee have any
obligation to make any payment to be made by Grantor under the Leases or any
such other agreement, or to present or file any claim, or to take any other
action to collect or enforce the payment of any amounts which have been assigned
to Beneficiary and/or Trustee or to which Beneficiary and/or Trustee may be
entitled hereunder at any time or times. No action or inaction on the part of
Beneficiary or Trustee shall adversely affect or limit in any way the rights of
Beneficiary or Trustee hereunder or under the Leases or the Note or the
Assignment.
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<PAGE>
32. Documentary Stamps. If at any time any Governmental Authority shall
------------------
require revenue or other stamps to be affixed to the Note or this Deed of Trust,
Grantor will pay for the same, with interest and penalties thereon, if any. The
provisions of the final sentence of Paragraph 34 shall apply to any failure of
------------
Grantor to make any such payment.
33. Cumulative Remedies of Beneficiary; No Waiver. No legal, equitable
---------------------------------------------
or contractual right, power or remedy of Beneficiary shall be exclusive of any
other, but rather, each right, power or remedy shall be separate, cumulative and
concurrent and shall be in addition to every right, power or remedy now or
hereafter existing at law or in equity. No delay in the exercise of, or omission
to exercise, any right, power or remedy accruing on any default shall impair any
such right, power or remedy or be construed to be a waiver of any such default
or acquiescence therein, nor shall it affect any subsequent default of the same
or a different nature. Every such right, power or remedy may be exercised
concurrently or independently, and when and as often as may be deemed expedient,
by Beneficiary. Beneficiary may resort for the payment of the Debt to the
Mortgaged Property and to any other security held by Beneficiary in such order
and manner as Beneficiary, in its sole discretion, consistent with the SC
Transaction Documents, may elect. Beneficiary may take action to recover the
Debt, or any portion thereof, or to enforce any covenant hereof without
prejudice to the right of Beneficiary thereafter to foreclose this Deed of Trust
or sell the Mortgaged Property pursuant to the power of sale, if any, contained
herein. No act of Beneficiary shall be construed as an election to proceed under
any one provision herein to the exclusion of any other provision.
34. Filing of Deed of Trust, etc. Grantor forthwith upon the execution
----------------------------
and delivery of this Deed of Trust and thereafter, from time to time, as
reasonably required or requested by Beneficiary, will cause this Deed of Trust,
the Assignment, and any security instrument or SC Transaction Document creating
a lien or evidencing the lien hereof upon the Mortgaged Property and each
instrument of further assurance, and each supplement to any of the foregoing and
each modification to any of the foregoing, to be filed, registered or recorded
in such manner and in such places as may be required by any present or future
law in order to publish notice of and fully to protect the lien hereof upon, and
the interests of Beneficiary in the Mortgaged Property. Grantor will pay all
filing, registration or recording fees, and all reasonable expenses incident to
the execution and acknowledgment of this Deed of Trust, any mortgage or deed of
trust supplemental hereto, any security instrument with respect to the Mortgaged
Property and any instrument of further assurance, and all Federal, state, county
and municipal taxes, duties, imposts, assessments and charges arising out of or
in connection with the execution and delivery of this Deed of Trust, any
mortgage or deed of trust supplemental hereto, any security instrument with
respect to the Mortgaged Property or any instrument of further assurance. In the
event that Grantor shall fail to make any such payment, Beneficiary shall have
the right, but not the obligation, to pay at the direction of Beneficiary the
amount due and shall notify Grantor of such payment and Grantor shall reimburse
Beneficiary therefor, upon written demand, with interest thereon at the Default
Rate from the date of demand by Beneficiary to the date of repayment, and such
amount, together with such interest, shall constitute a portion of the Debt
secured by the lien of this Deed of Trust.
59
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35. Usury Laws. It is the intent of Grantor and Beneficiary to comply
----------
at all times with applicable usury laws. If at any time such laws would render
usurious any amounts called for under the Note or any of the SC Transaction
Documents, then it is Grantor's and Beneficiary's express intention that such
excess amount be immediately credited on the principal balance of the Note (or,
if the Note has been fully paid, and Beneficiary has no further obligation under
the Loan Agreement to make Advances, refunded by Beneficiary to Grantor and
Grantor shall accept such refund), and the provisions hereof and thereof be
immediately deemed to be reformed to comply with the then applicable laws,
without the necessity of the execution of any further documents, but so as to
permit the recovery of the fullest amount otherwise called for hereunder and
thereunder. Any such crediting or refund shall not cure or waive any default by
Grantor under the Note or under any of the other SC Transaction Documents. If,
at any time following any such reduction in the interest rate payable by
Grantor, there remains unpaid any principal amounts under the Note and the
maximum interest rate permitted by applicable law is increased or eliminated,
then the interest rate payable hereunder shall be readjusted, to the extent
permitted by applicable law, so that the total dollar amount of interest payable
hereunder shall be equal to the dollar amount of interest which would have been
paid by Grantor without giving effect to the applicable usury laws theretofore
in effect. Grantor agrees, however, that in determining whether or not any
interest payable under the Note or any of the other SC Transaction Documents
exceeds the highest rate permitted by law, any non-principal payment (except
payments specifically stated in the Note or in any other SC Transaction Document
to be "interest"), including, without limitation, prepayment fees and late
charges, shall be deemed, to the extent permitted by law, to be an expense, fee
or premium rather than interest.
36. Marshalling. Grantor waives and releases any right to have the
-----------
Mortgaged Property marshalled.
37. Waiver of Notice. Grantor shall not be entitled to any notices of
----------------
any nature whatsoever from Beneficiary or Trustee except with respect to matters
for which this Deed of Trust, the Loan Agreement or the Note specifically and
expressly provides for the giving of notices by Beneficiary or Trustee to
Grantor, and Grantor hereby expressly waives the right to receive any notice
from Beneficiary or Trustee with respect to any matter for which this Deed of
Trust, the Loan Agreement or the Note does not specifically and expressly
provide for the giving of notice by Beneficiary or Trustee to Grantor. Grantor
hereby requests that a copy of any notice of default and every notice of sale
hereunder be mailed to it as provided by law at Grantors address set forth in
Paragraph 41.
- ------------
38. Recovery of Sums Required To Be Paid. Beneficiary shall have the
------------------------------------
right from time to time to take action or direct Trustee to take action to
recover any sum or sums which constitute a part of the Debt as the same become
due, without regard to whether or not the balance of the Debt shall be due, and
without prejudice to the right of Beneficiary or Trustee to thereafter bring an
action of foreclosure, or any other action, for a default or defaults by Grantor
existing at the time such earlier action was commenced.
39. Other SC Mortgages; Cross Collateralization; Cross Default.
----------------------------------------------------------
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(a) Grantor acknowledges that the Debt secured by this Deed of
Trust is also secured by the Other SC Mortgages. Grantor agrees that the lien of
this Deed of Trust shall be absolute and unconditional and shall not in any
manner be affected or impaired by any acts or omissions whatsoever of
Beneficiary or Trustee and, without limiting the generality of the foregoing,
the lien hereof shall not be impaired by any acceptance by Beneficiary of any
other security for any of the Debt, or by any failure, neglect or omission on
the part of Beneficiary or Trustee to realize upon or protect any of the Debt or
any collateral security therefor including, without limitation, the Other SC
Mortgages. The lien of this Deed of Trust shall not in any manner be impaired or
affected by any release (except as to the property released), sale, pledge,
surrender, compromise, settlement, renewal, extension, indulgence, alteration,
changing, modification or disposition of any of the Debt or of any of the
collateral security therefor, including, without limitation, the Other SC
Mortgages, and Beneficiary may foreclose, or direct Trustee to foreclose, or
exercise any other remedy available to Beneficiary under the Other SC Mortgages
without first exercising or enforcing any of its remedies under this Deed of
Trust and any exercise of the rights or remedies of Beneficiary hereunder shall
not in any manner impair the Debt or the lien of this Deed of Trust or the liens
of the Other SC Mortgages or any of Beneficiary's rights and remedies
thereunder.
(b) Grantor specifically consents and agrees that Beneficiary or
Trustee may exercise their rights and remedies hereunder and under the Other SC
Mortgages separately or concurrently and in any order that they may deem
appropriate and Grantor waives any rights of subrogation. Without limiting the
generality of the foregoing, Grantor agrees that if an Event of Default is
continuing (i) Beneficiary or Trustee shall have the right, to the extent
permitted by applicable law, to pursue all of its rights and remedies in one
proceeding, or separately and independently in separate proceedings from time to
time, as Beneficiary, in its sole and absolute discretion, shall determine from
time to time, (ii) neither Beneficiary nor Trustee is required to either
marshall assets, sell the Mortgaged Property or properties encumbered by the
Other SC Mortgages in any inverse order of alienation, or be subject to any "one
action" or "election of remedies" law or rule, (iii) the exercise by Beneficiary
or Trustee of any remedies against the Mortgaged Property or properties
encumbered by the Other SC Mortgages will not impede Beneficiary or Trustee from
subsequently or simultaneously exercising remedies against any other properties
encumbered by the Other SC Mortgages or this Deed of Trust, and (iv) all liens
and other rights, remedies or privileges provided to Beneficiary or Trustee
shall remain in full force and effect until Beneficiary and Trustee have
exhausted all of their remedies against the Mortgaged Property and all of the
properties encumbered by the Other SC Mortgages and this Deed of Trust have been
foreclosed, sold and/or otherwise realized upon in satisfaction of the Debt or
the Debt has been paid in full.
(c) Notwithstanding any provision herein to the contrary, this Deed
of Trust shall not secure obligations of MHP II arising under the MHP Loan
Agreement or any other Transaction Documents (as such term is defined in the MHP
Loan Agreement) but shall be limited to providing security for and limited to
the obligations of the Grantor and/or MHP II under this Deed of Trust, the Note,
and the SC Transaction Documents.
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40. No Oral Change. This Deed of Trust may only be modified or amended
--------------
by an agreement in writing signed by Grantor and Beneficiary, and may only be
released, discharged or satisfied of record by an instrument in writing signed
by Beneficiary.
41. Notices. Except as otherwise specified herein, all notices,
-------
requests, demands, consents, reports or other communications, including without
limitation a tender of cure pursuant to Paragraph 19(c) to or upon the
respective parties hereto shall be in writing and be deemed to have been duly
given or made when received, if personally delivered by messenger or national
overnight courier service, or if sent by registered or certified U.S. mail,
postage prepaid, return receipt requested, if sent by telecopier with electronic
confirmation of receipt (hard copy to be sent by regular mail), addressed to the
party to which such notice, request, demand, consent, report or other
communication is being given at its address set forth below, or at such other
address as any of the parties hereto may hereafter notify the others by notice
given hereunder:
Beneficiary: Nomura Asset Capital Corporation
Two World Financial Center
Bldg. B, 21st Floor
New York, New York 10281-1198
Att: Daniel S. Abrams, Director
Fax: (212) 667-1022
with a copy to: Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
Att: Michael Peskowitz, Esq.
Fax: (212) 940-8776
Grantor: Marriott Hotel Properties II Limited Partnership
c/o Host Marriott Corporation
10400 Fernwood Road
Bethesda, Maryland 20817
Att: Law Department 923/Deputy General Counsel
Fax: (301) 380-6332
with a copy to: Marriott Hotel Properties II Limited Partnership
c/o Host Marriott Corporation
10400 Fernwood Road
Bethesda, Maryland 20817
Att: Asset Management Department 908
Fax: (301) 380-8260
Trustee: Commonwealth Land Title Insurance Company of California
333 West Santa Clara Street
Suite 110
San Jose, California 95113
Attention: Office Manager
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42. Joint and Several Liability. If Grantor consists of more than one
---------------------------
person, the obligations and liability of each such person hereunder shall be
joint and several.
43. Headings, etc. The headings and captions of the paragraphs of this
-------------
Deed of Trust are for convenience of reference only and are not to be construed
as defining or limiting, in any way, the scope or intent of the provisions
hereof.
44. Successors and Assigns. The provisions of this Deed of Trust shall
----------------------
be binding upon Grantor and Beneficiary, and their respective successors and
assigns, and all persons claiming under or through Grantor or Beneficiary or any
such successor or assign, and shall inure to the benefit of, and be enforceable
by, Beneficiary and its respective successors and assigns.
45. Survival of Assignment. Notwithstanding anything to the contrary
----------------------
contained in this Deed of Trust, the assignment, pledge and mortgaging of the
Condemnation Proceeds, the Insurance Proceeds and the Refunds, and the right to
apply any of the foregoing in accordance with the terms of this Deed of Trust,
shall survive any foreclosure of the lien of this Deed of Trust.
46. Construction; Counterparts.
--------------------------
(a) Unless the context clearly indicates a contrary intent or
unless otherwise specifically provided herein, words used in this Deed of Trust
shall be used interchangeably in singular or plural form, the word "Grantor"
shall mean each Grantor and any subsequent owners of the Mortgaged Property or
any part thereof or interest therein, the word "Beneficiary" shall mean each
Beneficiary and any subsequent holder of any of the Note, the word "Trustee"
shall mean Trustee and any Successor Trustee (hereinafter defined), and the word
"person" shall include an individual, corporation, partnership, limited
liability company, limited liability partnership, trust, unincorporated
association, government, governmental authority, or other entity. References to
"this Paragraph" shall mean the paragraph commencing with an Arabic numeral in
which the affected phrase or sentence is contained. The phrase "Best Knowledge
of Grantor" shall mean knowledge after appropriate and proper inquiry obtained
by Grantor or any officer or director of Grantor or any regional supervisor of
Grantor charged with primary responsibility as to such matters in connection
with operation of the Mortgaged Property. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural and vice versa. The terms "herein", "hereof" or "hereunder" or similar
terms used in this Deed of Trust refer to this entire Deed of Trust and not to
the particular provision in which the term is used.
(b) It is acknowledged and agreed that in the preparation of this
Deed of Trust and the other SC Transaction Documents indistinguishable
contributions were made by representatives of both Grantor and Beneficiary, and
that Grantor and Beneficiary each waives any and all rights, either at law or in
equity, to have the provisions of this Deed of Trust or any part thereof or the
provisions of any other SC Transaction Document interpreted in favor of one
63
<PAGE>
over the other based on a claim that representatives of one or the other were
the principal draftsmen of any such document.
(c) In the event that the provisions of this Deed of Trust directly
conflict with any provision of the Loan Agreement, the provisions of the Loan
Agreement shall govern, except the provisions of the Deed of Trust with respect
to Beneficiary's perfection of a security interest or lien on the Mortgaged
Property, and the enforcement thereof shall be governed by the terms and
provisions of the Deed of Trust.
(d) This Deed of Trust may be executed in any number of duplicate
originals and each such duplicate original shall be deemed to constitute but one
and the same instrument.
47. Governing Law. IN ALL RESPECTS, INCLUDING, WITHOUT LIMITATION,
-------------
MATTERS OF CONSTRUCTION AND VALIDITY, THIS DEED OF TRUST AND THE OBLIGATIONS
ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THE
STATE (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS OR COMITY) AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. NOTWITHSTANDING THE FOREGOING,
THE NOTE AND LOAN AGREEMENT ARE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
48. Expenses of Enforcement. All reasonable costs and expenses of
-----------------------
Beneficiary or Trustee in the enforcement of any covenant of Grantor or any
right or remedy afforded Beneficiary or Trustee pursuant to this Deed of Trust
or any other SC Transaction Document or in connection with any proceedings,
including probate and bankruptcy proceedings, to which Beneficiary shall be a
party, either as plaintiff, claimant or defendant, by reason of this Deed of
Trust or any indebtedness hereby secured or in connection with preparations for
the commencement of any suit for the foreclosure hereof after accrual of such
right to foreclose, whether or not actually commenced shall be paid by Grantor
within ten (10) days after written demand by Beneficiary and/or Trustee, and, to
the extent permitted by law, shall bear interest, at the Default Rate from ten
(10) days after the date of demand until the actual date of repayment by
Grantor, and shall be deemed a part of the Debt and secured by this Deed of
Trust and the Other SC Mortgages. As used herein, "reasonable costs and
expenses" shall include, without limitation, actual expenses incurred by
Beneficiary, fees and expenses of Beneficiary's and/or Trustee's agents,
reasonable attorneys fees and expenses (which may include reasonable, actual
billed costs, if any, of any attorney in the employ of Beneficiary and/or
Trustee and fees for services performed by legal assistants and other
non-lawyers), court costs and filing fees, allowances authorized or permitted by
statute or of a court, fees and expenses of receivers, appraisers fees, costs of
environmental audits and reports, expenditures for documentary and expert
evidence, stenographers charges, publication costs and the cost of procuring
abstracts of title, title searches and examinations, title policies and similar
data with respect to title which Beneficiary and/or Trustee may deem reasonably
necessary and all other expenses of the foreclosure or similar enforcement
proceeding, all of which may be estimated as to items to be expended after the
entry of the decree.
64
<PAGE>
49. Waivers; Sale Bar Against Foreclosure.
-------------------------------------
(a) Grantor hereby expressly waives the pleading of any statute of
limitations or other bar to an action based on the passage of time as a defense
to any obligations secured by the SC Transaction Documents to the full extent
permitted by law.
(b) In any action to foreclose the lien or liens of this Deed of
Trust, including a partial foreclosure, no defense, counterclaim or setoff shall
be available to Grantor other than one which denies the existence or sufficiency
of the facts upon which the action is grounded or which raises an issue
concerning the priority of liens. If any defense, counterclaim or setoff, other
than one permitted by this Paragraph is timely raised in such foreclosure
---------
action, such defense, counterclaim or setoff shall be dismissed; provided,
--------
however, if such defense, counterclaim or setoff is based on a claim which could
- -------
be tried in an action for money damages, such claim may be brought in a separate
action which shall not thereafter be consolidated with such foreclosure action.
The bringing of such separate action for money damages shall not be deemed to
afford any grounds for staying the foreclosure action.
(c) Grantor hereby expressly waives for itself and all who may
claim through or under it, and to the fullest extent Grantor may do so under
applicable law, any and all rights of redemption in the event of a foreclosure
sale, and the sale of the Mortgaged Property, or any part thereof, or any
interest therein, whether pursuant to foreclosure or partial foreclosure or
otherwise, any such foreclosure or partial foreclosure sale under this Deed of
Trust shall be a perpetual bar against Grantor.
(d) Notwithstanding anything to the contrary contained in this Deed
of Trust, Grantor hereby agrees that, to the extent permitted by applicable law,
Grantor shall not at any time:
(i) insist upon, plead or in any manner whatever claim or take
any benefit or advantage of any stay, extension or moratorium law or an
exemption from execution or sale of the Mortgaged Property or any part
thereof, wherever enacted, now or at any time hereafter in force, which
may affect the covenants and terms of performance of this Deed of Trust
or any other SC Transaction Document;
(ii) claim, take or insist upon any benefit or advantage of any
law now or hereafter in force providing for the valuation or appraisal
of the Mortgaged Property, or any part thereof, prior to any sale or
sales thereof which may be made pursuant to any provision hereof or
pursuant to the decree, judgment or order of any court of competent
jurisdiction or upon execution of any judgment recovered for all or any
portion of the Debt; or
(iii) avail itself of any benefits that might accrue to it by
virtue of any present or future laws excepting the Mortgaged Property,
or any proceeds arising from the sale thereof, from attachment, levy,
or sale under execution from civil process, or extension of time for
payment.
65
<PAGE>
50. No Claim of Credit for Impositions. Grantor will not make deduction
----------------------------------
from or claim credit on the principal or interest secured by this Deed of Trust
by reason of any governmental taxes, assessments or charges. Grantor will not
claim any deduction from the taxable value of the Mortgaged Property by reason
of this Deed of Trust.
51. Sole Discretion of Beneficiary; Reasonableness.
----------------------------------------------
(a) Wherever pursuant to the provisions of this Deed of Trust,
Beneficiary exercises any right given to it to approve or disapprove, or any
arrangement or term is to be satisfactory to Beneficiary, in Beneficiary's
opinion, judgment or discretion, then the decision of Beneficiary to approve or
disapprove or to decide that arrangements or terms are satisfactory or not
satisfactory shall be in Beneficiary's sole discretion, and shall be final and
conclusive.
(b) In the event the consent or approval of Beneficiary is required
to be reasonable under any provision in this Deed of Trust or any other
Transaction Document and Grantor believes that such consent or approval was
withheld or delayed in violation of such standard, then Grantor's sole remedy in
such case shall be either to seek the release of the Mortgaged Property and this
Deed of Trust in accordance with the Loan Agreement, or to seek injunctive
relief or specific performance, and if the court determines, without right to
further appeal, that such approval or consent was withheld in violation of the
applicable standard, then the consent or approval shall be deemed granted,
Beneficiary shall deliver prompt written confirmation of such consent or
approval, the granting of such consent or approval shall be the only remedy
available to Grantor, neither Beneficiary nor its officers or agents shall have
any liability for having withheld or delayed such consent or approval, and
Grantor's obligations under the SC Transaction Documents shall not be diminished
in any way.
52. Modification by Beneficiary. Grantor agrees that, without affecting
---------------------------
the liability of Grantor or any other person (except any person expressly
released in writing) liable for payment of the Debt or for performance of any
obligation contained herein or affecting the lien and security interest of this
Deed of Trust upon the Mortgaged Property or any part thereof, Beneficiary may,
at any time and from time to time, regardless of consideration, without notice
to or obtaining the consent of any person release any person liable for payment
of any indebtedness secured hereby or for performance of any obligation, extend
the time or agree to alter the terms of payment of any such indebtedness,
including, without limitation, modifying the interest rate, the amortization
period or any other provision of the Note, modify or waive any obligation (to
the extent same does not increase Grantor's obligations), subordinate, modify or
otherwise deal with the lien and security interest hereof, release the whole or
any part of the Mortgaged Property or any other security, accept additional
security of any kind, consent to the making of any map or plat of the Mortgaged
Property, the creating of any easements thereon or any covenants restricting use
or occupancy thereof, or exercise, refrain from exercising or waive any right
Beneficiary may have without in any manner impairing or affecting the SC
Transaction Documents, as so extended, modified and supplemented, or the lien or
priority thereof unless expressly released or discharged from such obligation by
Beneficiary in writing.
66
<PAGE>
53. Assignment; Participations.
--------------------------
(a) Beneficiary shall have the right in its sole discretion and at
its sole cost and expense, except to the extent expressly provided to the
contrary in the Loan Agreement, at any time during the term of the SC Loan to
sell, assign, syndicate, securitize or otherwise transfer or dispose of its
interest in all or any portion of the SC Loan, provided, however, that all of
the provisions hereof shall continue in full force and effect following any such
sale, assignment, syndication, securitization or other transfer.
(b) Beneficiary may at any time grant to one or more banks, life
insurance companies or other financial institutions (each a "Participant")
-----------
participating interests in all or a portion of Beneficiary's interest in the
Loan, provided that, in the event of any such grant by Beneficiary of a
participating interest to a Participant, whether or not upon notice to Grantor,
Beneficiary shall remain responsible for the performance of its obligations
hereunder, and Grantor shall continue to deal solely and directly with the
Beneficiary named herein in connection with Beneficiary's rights and obligations
under this Deed of Trust. Beneficiary shall give Grantor written notice of any
such grant by Beneficiary of such a participating interest to a Participant.
54. No Merger. If both the landlord's and the tenant's estates under
---------
any Lease shall at any time become vested in one owner, or if Grantor's,
Beneficiary's and Trustee's estates under this Deed of Trust shall at any time
become vested in one owner, including, without limitation, upon the delivery of
a deed to Beneficiary in lieu of a foreclosure sale, or upon a purchase of the
Mortgaged Property by Beneficiary in a foreclosure sale, this Deed of Trust and
the lien created hereby shall not be destroyed or terminated by the application
of the doctrine of merger and in such event Beneficiary shall continue to have
and enjoy all of the rights and privileges of Beneficiary as to the separate
estates; and, as a consequence thereof, upon the foreclosure of the lien created
by this Deed of Trust any Leases or subleases then existing and created by
Grantor shall not be destroyed or terminated by application of the law of merger
or as a result of such foreclosure unless Beneficiary or any purchaser at any
such foreclosure sale shall so elect. No act by or on behalf of Beneficiary or
any such purchaser shall constitute a termination of any Lease or sublease
unless Beneficiary or such purchaser shall give written notice thereof to the
Tenant or sublessee thereunder. In the event Grantor acquires the estate of Fee
Owner under the Ground Lease (i) there shall be no merger between such acquired
estate and the estate of Grantor under the Ground Lease unless all parties
(including Beneficiary) having an interest in the Ground Lease shall consent
thereto in writing and (ii) the lien of this Deed of Trust shall, ipso facto,
----------
without the necessity of any further conveyance, simultaneously with such
acquisition be spread to cover such acquired estate and as so spread shall be
prior to the lien of any mortgage placed on the acquired estate subsequent to
the date of this Deed of Trust.
55. Running with the Land. All covenants contained in this Deed of
---------------------
Trust shall run with the land of the Mortgaged Property.
56. True Copy. GRANTOR ACKNOWLEDGES HAVING RECEIVED A TRUE COPY OF THIS
---------
DEED OF TRUST WITHOUT CHARGE.
67
<PAGE>
57. Waiver of Jury Trial. GRANTOR, AND BENEFICIARY BY ITS ACCEPTANCE OF
--------------------
THIS DEED OF TRUST, EACH HEREBY EXPRESSLY WAIVES TRIAL BY JURY IN ANY ACTION OR
PROCEEDING BROUGHT BY EITHER PARTY HERETO AGAINST THE OTHER, OR IN ANY MATTERS
WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS DEED OF TRUST, THE
NOTE, THE ASSIGNMENT OR ANY OF THE OTHER SC TRANSACTION DOCUMENTS TO THE FULL
EXTENT PERMITTED BY LAW.
58. After-Acquired Property. If, after the date of this Deed of Trust,
-----------------------
Grantor acquires any property located on and used in connection with the
Mortgaged Property and that by the terms of this Deed of Trust is required or
intended to be encumbered by this Deed of Trust, the property shall become
subject to the lien and security interest of this Deed of Trust immediately upon
its acquisition by Grantor and without any further mortgage, conveyance,
assignment or transfer. Nevertheless, upon Beneficiary's reasonable request,
from time to time, Grantor will execute, acknowledge and deliver any additional
instruments and assurances of title and will do or cause to be done anything
further that is reasonably necessary for carrying out the intent of this Deed of
Trust.
59. Non-Recourse. The obligations of Grantor hereunder are
------------
"Non-Recourse" as such term is defined in the Loan Agreement.
------------
60. Regarding Trustee.
-----------------
(a) Trustee may resign by an instrument in writing addressed to
Beneficiary or be removed at any time with or without cause by instrument in
writing duly executed by Beneficiary. In case of the death, resignation or
removal of Trustee, a successor (each, a "Successor Trustee") may be appointed
-----------------
by Beneficiary by instrument of substitution complying with any applicable
requirements of law, and in the absence of any such requirement without other
formality than appointment and designation in writing recorded in the county in
which this Deed of Trust is recorded. Such appointment and designation shall be
full evidence of the right and authority to make the same and of all facts
therein recited, and upon the making of any such appointment and designation
this conveyance shall vest in the Successor Trustee all the estate and title of
its predecessor in all the Mortgaged Property, and such Successor Trustee shall
thereupon succeed to all the rights, powers, privileges, immunities and duties
hereby conferred upon the prior Trustee.
(b) Trustee may rely and shall be protected in acting upon any
notice, request, consent, demand, statement, note or other paper or document
believed by them to be genuine and to have been signed by the party or parties
purporting to sign same. Trustee shall not be liable for any error of judgment,
nor for any act done or step taken or omitted, nor for any mistakes of law or
fact, nor for anything which Trustee may do or refrain from doing in good faith,
nor generally shall Trustee have any liability except for gross negligence or
willful misconduct. Trustee may act and may sell or otherwise dispose of the
Mortgaged Property or any part hereof as herein provided, although Trustee has
been, may now be or may hereafter be, attorneys, officers, agents or employees
of Beneficiary, in respect of any matter of business whatsoever.
68
<PAGE>
In any event, Trustee shall be indemnified and forever held harmless by
Beneficiary for any acts which Trustee may take pursuant to and in reliance upon
the written instructions of Beneficiary.
(c) All money received by Trustee shall, until used or applied as
herein provided, be held in trust, but need not be segregated (except to the
extent required by law and the other SC Transaction Documents), and Trustee
shall not be liable for interest thereon.
(d) If there be more than one Trustee, any Trustee, individually,
may exercise all powers granted to the Trustees collectively without the
necessity of the joinder of any other Trustee.
(e) Trustee shall be entitled to reasonable compensation for all
services rendered or expenses incurred in the administration or execution of the
trust hereby created and Grantor hereby agrees to pay same.
61. Intentionally Omitted.
---------------------
62. Additional Ground Lease Provisions.
----------------------------------
(a) In the event the Ground Lease shall be terminated by reason of
a default thereunder by Grantor and Beneficiary shall acquire from Fee Owner a
new ground lease, Grantor hereby waives any right, title or interest in and to
such new ground lease or the leasehold estate created thereby, waiving all
rights of redemption now or hereafter operable under any law.
(b) Grantor shall not elect to treat the Ground Lease as
terminated, canceled or surrendered pursuant to the applicable provisions of the
Bankruptcy Code (including, but not limited to, Section 365(h)(1) thereof)
without Beneficiary's prior written consent in the event of Fee Owner's
Bankruptcy. In addition, Grantor shall, in the event of Fee Owner's Bankruptcy,
reaffirm and ratify the legality, validity, binding effect and enforceability of
the Ground Lease and shall remain in possession of the Premises and the
leasehold estate created by the Ground Lease, notwithstanding any rejection
thereof by Fee Owner or any trustee, custodian or receiver.
(c) Grantor shall give Beneficiary not less than thirty (30) days
prior written notice of the date on which Grantor shall apply to any court or
other governmental authority for authority and permission to reject the Ground
Lease in the event that there shall be filed by or against Grantor any petition,
action or proceeding under the Bankruptcy Code or under any other similar
federal or state law now or hereafter in effect and if Grantor determines to
reject the Ground Lease, Beneficiary shall have the right, but not the
obligation, to serve upon Grantor within such thirty (30) day period a notice
stating that (i) Beneficiary demands that Grantor assume and assign the Ground
Lease to Beneficiary subject to and in accordance with the Bankruptcy Code and
(ii) Beneficiary covenants to cure or provide reasonably adequate assurance
thereof with respect to all defaults reasonably susceptible of being cured by
Beneficiary and of future performance under the Ground Lease. If Beneficiary
serves upon Grantor the notice described above, Grantor shall not seek to reject
the Ground Lease and shall comply with the
69
<PAGE>
demand provided for in clause (i) above within fifteen (15) days after the
notice shall have been given by Beneficiary.
(d) To the extent permitted by law, Grantor hereby assigns to
Beneficiary all of Grantor's rights, powers or privileges with respect to
rejection of the Ground Lease as lessor or lessee thereunder, all pursuant to
Section 365 of the Bankruptcy Code.
(e) Beneficiary, upon notice to Grantor, shall have the right, but
not the obligation, to proceed in its own name or in the name of Grantor in
respect of any claim, suit, action or proceeding relating to the rejection of
the Ground Lease by Fee Owner as a result of Fee Owner's Bankruptcy, including,
but not limited to, the right to file and prosecute, to the exclusion of
Grantor, any and all proofs of claims, complaints, notices and other documents
in any case in respect of Fee Owner under and pursuant to the Bankruptcy Code.
(f) In the event of any arbitration under or pursuant to the Ground
Lease in which Beneficiary elects to participate, Grantor hereby irrevocably
appoints Beneficiary as its true and lawful attorney-in-fact (which appointment
shall be deemed coupled with an interest) to exercise all right, title and
interest of Grantor in connection with such arbitration, including, without
limitation, the right to appoint arbitrators and to conduct arbitration
proceedings on behalf of Grantor and Beneficiary. All costs and expenses
incurred by Beneficiary in connection with such arbitration and the settlement
thereof shall be borne solely by Grantor, including, without limitation,
reasonable attorneys' fees and disbursements. Nothing contained in this Section
shall obligate Beneficiary to participate in any such arbitration.
63. Variable Rate on Interest; Additional Interest. On the Optional
----------------------------------------------
Prepayment Date (as such term is defined in the Loan Agreement) and on each
anniversary thereof, the interest rate on the Note secured by this Deed of Trust
will be adjusted to be equivalent to the Adjusted Rate (as such term is
determined in accordance with the Note and the Loan Agreement). During the
period following the Optional Prepayment Date it is possible that some or all of
the additional interest may be unpaid and may be accruing until the Maturity
Date.
GRANTOR HEREBY EXPRESSLY (i) WAIVES ANY RIGHTS IT MAY HAVE UNDER
CALIFORNIA LAW TO REPAY THE NOTE, IN WHOLE OR IN PART, WITHOUT PENALTY, UPON
---------------
ACCELERATION OF THE NOTE, AND (II) AGREES THAT IF, FOR ANY REASON, A PREPAYMENT
OF ALL OR ANY PORTION OF THE PRINCIPAL AMOUNT OF THE NOTE IS MADE INCLUDING
WITHOUT LIMITATION UPON OR FOLLOWING ANY ACCELERATION OF THE NOTE BY BENEFICIARY
OR TRUSTEE ON ACCOUNT OF ANY DEFAULT BY GRANTOR INCLUDING, WITHOUT LIMITATION,
ANY TRANSFER, DISPOSITION, OR FURTHER ENCUMBRANCE PROHIBITED OR RESTRICTED BY
THIS DEED OF TRUST, THEN GRANTOR HEREBY DECLARES THAT (1) EACH OF THE FACTUAL
MATTERS SET FORTH IN THIS PARAGRAPH IS TRUE AND CORRECT, (2) BENEFICIARYS
AGREEMENT TO MAKE THE SC LOAN EVIDENCED BY THE NOTE CONSTITUTES ADEQUATE
CONSIDERATION FOR THIS
70
<PAGE>
WAIVER AND AGREEMENT, AND HAS BEEN GIVEN INDIVIDUAL WEIGHT BY GRANTOR AND
BENEFICIARY, (3) GRANTOR IS A SOPHISTICATED AND KNOWLEDGEABLE REAL ESTATE
INVESTOR WITH COMPETENT AND INDEPENDENT LEGAL COUNSEL AND (4) GRANTOR FULLY
UNDERSTANDS THE EFFECT OF THIS WAIVER AND AGREEMENT.
--------------------
GRANTOR INITIALS
IN WITNESS WHEREOF, Grantor has duly executed and sealed this Deed of Trust as
of the day and year first above written.
SIGNATURE PAGES FOLLOW
71
<PAGE>
SANTA CLARA MARRIOTT HOTEL
LIMITED PARTNERSHIP
By: Marriott MHP Two Corporation, its sole
general partner
By: /s/ Douglas W. Henry
----------------------
Name: Douglas W. Henry
Title: Vice President
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 23rd of September, in the year 1996, before me, Robert E. Zain,
a Notary Public of said State, duly commissioned and sworn, personally appeared
Dougals W. Henry, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person that executed the within instrument as
Vice President of Marriott MHP Two Corporation, a Delaware corporation, which is
the general partner of Marriott Hotel Properties II Limited Partnership, a
Delaware limited partnership, and acknowledged tome that he executed said
instrument on behalf of said limited partnership.
In Witness Whereof, I have hereunto set my hand and affixed my official
seal the day and year in this certificate above written.
/s/ Robert E. Zalin
-------------------
Notary Public
My commission expires: April 15, 1998
--------------
Notary Seal
Print Name: Robert E. Zalin
---------------
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
All of that certain tract or parcel of land and premises, situate,
lying and being in Santa Clara County, State of California, more particularly
described as follows:
A-1
<PAGE>
EXHIBIT B
SCHEDULE OF OTHER SC MORTGAGES
1. Deed of Trust, Assignment of Leases, Security Agreement and Fixture
Filing of even date in the principal amount of $43,500,000.00 from
Marriott Hotel Properties II Limited Partnership, as Grantor, to
Commonwealth Land Title Insurance Company of California, as Trustee,
for the benefit of Nomura Asset Capital Corporation, as Beneficiary
encumbering certain hotel premises in San Ramon, California and,
intended to be recorded simultaneously herewith in the official records
of the County of Contra Costa, State of California.
2. Deed of Trust, Assignment of Leases, Security Agreement and Fixture
Filing of even date in the principal amount of $43,500,000.00 from
Marriott Hotel Properties II Limited Partnership, as Grantor, to
Commonwealth Land Title Insurance Company, as Trustee, for the benefit
of Nomura Asset Capital Corporation, as Beneficiary encumbering certain
hotel premises in San Antonio, Texas and, intended to be recorded
simultaneously herewith in the official records of the County of Bexar,
State of Texas.
3. Act of Mulitiple Indebtedness, Mortgage, Security Agreement, Pledge
and Collateral Assignment of Leases and Rents and Insurance Proceeds of
even date in the principal amount of $43,500,000.00 from Marriott Hotel
Properties II Limited Partnership, as Mortgagor, to Nomura Asset
Capital Corporation, as Mortgagee encumbering certain hotel premises in
New Orleans, Louisiana and, intended to be recorded simultaneously
herewith in the official records of Parish of Orleans, State of
Louisiana.
B-1
<PAGE>
Exhibit 10.11
Schedule Identifying Documents Omitted
The following documents were omitted from Form 10-K dated March 31, 1997 filed
on March 31, 1997:
<TABLE>
<CAPTION>
Item Document
- ------ ------------------------------------------------------------------------
<S> <C>
1) Modification, Subordination and Non-Disturbance Agreement, Estoppel,
Assignment and Consent (Marriott Hotel, New Orleans, Louisiana) between
Marriott Hotel Services, Inc., Nomura Asset Capital Corporation and
Marriott Hotel Properties II Limited Partnership dated as of September
23, 1996
2) Modification, Subordination and Non-Disturbance Agreement, Estoppel,
Assignment and Consent (Marriott Hotel, San Ramon, California) between
Marriott Hotel Services, Inc., Nomura Asset Capital Corporation and
Marriott Hotel Properties II Limited Partnership dated as of September
23, 1996
3) Modification, Subordination and Non-Disturbance Agreement, Estoppel,
Assignment and Consent (Santa Clara Marriott Hotel, Santa Clara,
California) between Marriott Hotel Services, Inc., Nomura Asset Capital
Corporation and Santa Clara Marriott Hotel Limited Partnership dated as
of September 23, 1996
. These documents differ from the document submitted in that the
document submitted is for the Marriott Rivercenter, San Antonio Texas
whereas the other three are for the following properties: Marriott
Hotel, New Orleans, Louisiana; Marriott Hotel, San Ramon, California;
and the Santa Clara Marriott Hotel, Santa Clara, California. Therefore
all references to the specific hotel made in one of the four documents
will vary accordingly.
. In addition, the document filed is between Nomura Asset Capital
Corporation (the "Lender") and Marriott Hotel Properties II Limited
Partnership with all references to the mortgage loan in the exhibit
filed being to the $222.5 million loan on the MHP Properties, as
defined; whereas Item 3) above is between the Lender and Santa Clara
Marriott Hotel Limited Partnership with all references being to the
$43.5 mortgage loan on that property.
. Finally, Item 2) above differs from the document filed in that Section
3(h) of the agreement contemplates a contribution in excess of 5% of
Gross Revenues for 1997 where the document filed does not contemplate
such an increase for that year.
4) First Amendment to Management Agreement (San Antonio Rivercenter Marriott
Hotel) by Marriott Hotel Properties II Limited Partnership and Marriott
Hotel Services, Inc. dated September 23, 1996
5) First Amendment to Management Agreement (San Ramon Marriott Hotel) by
Marriott Hotel Properties II Limited Partnership and Marriott Hotel
Services, Inc. dated September 23, 1996
6) First Amendment to Management Agreement (Santa Clara Marriott Hotel) by
Santa Clara Marriott Hotel Limited Partnership and Marriott Hotel
Services, Inc. dated September 23, 1996
. These documents differ from the document submitted in that the
document submitted is for the San Antonio Marriott Hotel whereas the
other three are for the following properties: New Orleans Marriott
Hotel, San Ramon Marriott Hotel, and the Santa Clara Marriott Hotel.
Therefore all references made to the specific hotel in one of the four
documents will vary accordingly.
</TABLE>
<PAGE>
. In addition, the document filed is between the Marriott Hotel
Properties II Limited Partnership and Marriott Hotel Services, Inc.
("Management Company"); whereas Item 6) above is between Santa Clara
Marriott Hotel Limited Partnership and the Management Company. Also,
the exhibit filed and the San Antonio and New Orleans documents (items
4 & 5 above) define the $222.5 million mortgage loan and the $43.5
million Santa Clara mortgage loan as the "Permanent Loan" and the
"Santa Clara Mortgage Debt", respectively; whereas Item 6) above
defines these loans as the "Hotel Partnership Permanent Loan" and the
"Owner Mortgage Debt", respectively.
<TABLE>
<CAPTION>
<S> <C>
7) Deed of Trust, Assignment of Leases, Security Agreement and Fixture Filing
(Texas First Deed of Trust) by Marriott Hotel Properties II Limited
Partnership in favor of Commonwealth Land Title Insurance Company of
California for the benefit of Nomura Asset Capital Corporation dated as of
September 23, 1996 in the amount of $222,500,000
8) Deed of Trust, Assignment of Leases, Security Agreement and Fixture Filing
(Texas Second Deed of Trust) by Marriott Hotel Properties II Limited
Partnership in favor of Commonwealth Land Title Insurance Company of
California for the benefit of Nomura Asset Capital Corporation dated as of
September 23, 1996 in the amount of $43,500,000
9) Deed of Trust, Assignment of Leases, Security Agreement and Fixture Filing
(Louisiana First Deed of Trust) by Marriott Hotel Properties II Limited
Partnership in favor of Commonwealth Land Title Insurance Company of
California for the benefit of Nomura Asset Capital Corporation dated as of
September 23, 1996 in the amount of $222,500,000
10) Deed of Trust, Assignment of Leases, Security Agreement and Fixture Filing
(Louisiana Second Deed of Trust) by Marriott Hotel Properties II Limited
Partnership in favor of Commonwealth Land Title Insurance Company of
California for the benefit of Nomura Asset Capital Corporation dated as of
September 23, 1996 in the amount of $43,500,000
</TABLE>
. The first and second deeds of trust noted above differ from the first
and second deeds of trust submitted in that the deeds submitted are for
the San Ramon Property whereas Items 7) & 8) above are for the San
Antonio Marriott Hotel and Items 9) & 10) are for the New Orleans
Marriott Hotel. Therefore all references to the specific hotel made in
one of the six documents will vary accordingly. In addition, there are
minor variances made in Items 7 through 10 above to make the document
comply with the specific state's law which are necessary to make the
document enforceable in the applicable state.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000845240
<NAME> MARRIOTT HOTEL PROPERTIES II L.P.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 29,187
<SECURITIES> 16,280<F1>
<RECEIVABLES> 7,447
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 52,914
<PP&E> 294,876
<DEPRECIATION> (96,050)
<TOTAL-ASSETS> 251,740
<CURRENT-LIABILITIES> 12,632
<BONDS> 222,500
0
0
<COMMON> 0
<OTHER-SE> 16,608
<TOTAL-LIABILITY-AND-EQUITY> 251,740
<SALES> 0
<TOTAL-REVENUES> 66,957<F2>
<CGS> 0
<TOTAL-COSTS> 33,841
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,305
<INCOME-PRETAX> 14,811
<INCOME-TAX> 0
<INCOME-CONTINUING> 14,811
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,811
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>THIS IS OTHER ASSETS
<F2>THIS INCLUDES EQUITY IN INCOME OF SANTA CLARA PSHIP
</FN>
</TABLE>
