<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(G) OF
THE SECURITIES EXCHANGE ACT OF 1934
MARRIOTT DIVERSIFIED AMERICAN HOTELS, L.P.
------------------------------------------
10400 FERNWOOD ROAD
BETHESDA, MARYLAND 20817
(301) 380-2070
DELAWARE 52-1646207
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(STATE OF ORGANIZATION) (I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
10400 FERNWOOD ROAD
BETHESDA, MARYLAND 20817
-------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(301) 380-9000
--------------
(REGISTRANTS TELEPHONE NUMBER INCLUDING AREA CODE)
Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act:
LIMITED PARTNERSHIP INTERESTS
-----------------------------
(TITLE OF CLASS)
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<PAGE>
Table of Contents
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<TABLE>
<CAPTION>
Page No.
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<S> <C> <C>
ITEM 1. Business...................................................... 2
ITEM 2. Financial Information......................................... 6
ITEM 3. Properties.................................................... 9
ITEM 4. Security Ownership of Certain Beneficial Owners and Management 14
ITEM 5. Directors and Executive Officers.............................. 14
ITEM 6. Executive Compensation........................................ 15
ITEM 7. Certain Relationships and Related Transactions................ 15
ITEM 8. Legal Proceedings............................................. 16
ITEM 9. Market for and Distributions on Limited Partnership Units and
Related Security Holder Matters............................... 16
ITEM 10. Recent Sales of Unregistered Securities....................... 17
ITEM 11. Description of Registrant's Securities........................ 17
ITEM 12. Indemnification of Directors and Officers..................... 21
ITEM 13. Financial Statements and Supplementary Data................... 23
ITEM 14. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure...................................... 41
ITEM 15. Financial Statements, Supplementary Data and Exhibits......... 41
</TABLE>
1
<PAGE>
ITEM 1. BUSINESS
DESCRIPTION OF THE PARTNERSHIP
Marriott Diversified American Hotels, L.P. (the "Partnership"), a Delaware
limited partnership, was formed on October 4, 1989 to acquire, own and operate
the following hotels (the "Hotels"): (i) the 395-room Fairview Park Marriott in
Virginia; (ii) the 399-room Dayton Marriott in Ohio; (iii) the 224-room Marriott
at Research Triangle Park in North Carolina; (iv) the 226-room Detroit Marriott
Southfield in Michigan; (v) the 224-room Detroit Marriott Livonia in Michigan;
and (vi) the 224-room Fullerton Marriott in California. The sole general
partner of the Partnership, with a 1% interest, is Marriott MDAH One Corporation
(the "General Partner"), a wholly-owned subsidiary of Host Marriott Corporation
("Host Marriott").
The Partnership is engaged solely in the business of owning and operating the
Hotels and therefore is engaged in one industry segment. The principal offices
of the Partnership are located at 10400 Fernwood Road, Bethesda, Maryland 20817.
The Hotels are operated as part of the Marriott full-service Hotel system and
are managed by Marriott Hotel Services, Inc. ("MHSI"), a wholly-owned subsidiary
of Marriott International, Inc. ("MII") under a long-term management agreement.
The Hotels have the right to use the Marriott name pursuant to the management
agreement and, if this agreement is terminated, the Partnership will lose that
right for all purposes (except as part of the Partnership's name). See Item 7
"Certain Relationships and Related Transactions".
The Hotels 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 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" and Item 3, Properties.
ORGANIZATION OF THE PARTNERSHIP
Partnership operations commenced on February 8, 1990 (the "Initial Closing
Date"). Between November 14, 1989 and the Initial Closing Date, 381 limited
partnership interests (the "Units") were sold pursuant to a private placement
offering. Between the Initial Closing Date and April 23, 1990 (the "Final
Closing Date"), the offering was completed with the sale of 33 additional Units.
The offering price per Unit was $100,000; $15,000 payable at subscription with
the balance due in three annual installments through June 20, 1992, or,
alternatively, $88,396 in cash at closing as full payment of the subscription
price. As of the Final Closing Date, 348.5 Units were purchased on the
installment basis, and 65.5 Units were paid in full. The limited partners'
obligation to make the installment payments is evidenced by promissory notes
(the "Investor Notes") payable to the Partnership and secured by the Units. The
General Partner contributed $418,182 in cash on the Initial Closing Date for its
1% general partnership interest.
On the Initial Closing Date, the Partnership executed a purchase agreement with
Host Marriott and certain of its affiliates to acquire the Hotels and the
Hotels' working capital and supplies for $157 million. Of the total purchase
price, $131.4 million was paid in cash from the proceeds of mortgage financing
and the initial installment on the sale of the Units with the remaining $25.6
million evidenced by a promissory note (the "Deferred Purchase Debt") payable to
Host Marriott.
DEBT FINANCING
Mortgage Debt
- -------------
On June 30, 1993, the General Partner completed a restructuring of the
Partnership's first mortgage (the "Mortgage Debt"). Pursuant to the terms of the
restructuring, the original Mortgage Debt of $128 million was divided into two
notes, Note A with a principal balance of $85 million and Note B with a
principal balance of $43 million, which mature on December 15, 1999. In
addition, interest rate swap termination costs of $9.3 million relating to the
original Mortgage Debt were established as Note C with a maturity date of
December 15, 2010. The Partnership paid $12.3 million to the lender which was
applied as follows: $7.6 million to the interest due through closing, $3.0
million to fund a new debt service reserve (the "Reserve"), $1.0 million as a
loan extension fee, and $700,000 to principal. The 1992 purchase price
adjustment made by Host Marriott to the
2
<PAGE>
Partnership was applied toward the scheduled interest payment and to partially
fund the Reserve. The remainder of the payment was funded by a $2.0 million
loan from the General Partner and from the Partnership's operating cash. The
loan from the General Partner bears interest at the prime lending rate plus 1%
and matures on June 30, 2008.
Interest on Note A accrues at a floating rate, as elected by the Partnership,
equal to one percentage point over either the one, two, three or six-month
London Interbank Offered Rate ("LIBOR"). Principal amortization of $600,000 was
required in 1993 escalating annually to $1 million in 1998. To the extent that
operating profit is not sufficient to fund required Note A interest and
principal, then necessary funds will be drawn from the Reserve. The weighted-
average effective interest rate on Note A was 6.7% and 6.2% for 1997 and 1996,
respectively. Interest on Note B accrues at LIBOR. To the extent that
operating profit is not sufficient to fund Note B interest in any fiscal year,
then Note B interest is limited to cash available after payment of Note A
principal and interest. Unpaid Note B interest for any fiscal year is forgiven.
The weighted-average effective interest rate on Note B was 5.7% and 5.5% for
1997 and 1996, respectively. In addition, to the extent that there was cash
available after payment of principal and interest on Note A and interest on Note
B, then such remaining cash was split 50% to the Partnership, and 50% to a
mortgage escrow account (the "Mortgage Escrow"). The Mortgage Escrow was
applied annually 50% to the payment of additional principal on Note A, and 50%
to the principal on Note B, until the Partnership received a cumulative amount
equal to $7,352,000. The Partnership reached this cumulative amount in
September 1996. Thereafter, 100% of remaining cash flow is reserved in the
Mortgage Escrow, 25% to Note A and 75% to Note B. Note C bears no interest and
has no required principal amortization prior to its maturity.
The Mortgage Debt is secured by first mortgages on each of the Hotels, the
Partnership's interest in the Fullerton Hotel ground lease, the land on which
the remaining Hotels are located, the Partnership's interest in the Fairview
Park Hotel parking garage lease, a security interest in all of the personal
property associated with each Hotel, a security interest in the Partnership's
rights under the management and purchase agreement and a security interest in
the Partnership's deposit accounts.
Scheduled amortization and maturities of the Mortgage Debt at December 31, 1997
are (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1998.............. $ 1,000
1999.............. 111,678
2000.............. 0
2001.............. 0
2002.............. 0
Thereafter........... 9,336
--------
$122,014
========
</TABLE>
As of December 31, 1993, Host Marriott's debt service guarantee on the original
Mortgage Debt totaling $13 million was fully exhausted. Advances under the
guarantee bear interest at the prime lending rate plus one-half percentage
point. For 1997 and 1996, the weighted-average effective interest rate was 8.9%
and 8.8%, respectively. These advances will be repaid from available cash flow
after payments of ground rent, Mortgage Debt Service, Partnership administrative
expenses in excess of Partnership interest income and retention by the
Partnership of an amount equal to 10% of the partners' contributed capital, as
defined. During 1997, no amounts were repaid to Host Marriott pursuant to the
debt service guarantees. In addition, the General Partner has provided a
foreclosure guarantee to the lender in the amount of $25 million. Pursuant to
the terms of the foreclosure guarantee, amounts would be payable only upon a
foreclosure on the Hotels and only to the extent that the gross proceeds from
the foreclosure sale were less than $25 million.
MATERIAL CONTRACTS
Management Agreement
- --------------------
The Partnership entered into a hotel management agreement (the "Management
Agreement") on the Initial Closing Date with MII to manage the Hotels for an
initial 20-year term expiring December 31, 2009. During 1996, MII assigned all
of its interest in the Management Agreement to MHSI. MHSI has the option to
renew the Management Agreement on one or more of the Hotels for up to five
successive 10-year terms (four successive 10-year terms for the Fullerton
Hotel). MHSI earns a base management fee equal to 3% of gross sales.
3
<PAGE>
In connection with the 1993 loan restructuring, the Management Agreement was
modified. During the restructured loan term, no incentive management fees will
be accrued by the Partnership or be considered earned by MHSI until the entire
mortgage principal balance, together with accrued interest, is paid in full. No
incentive management fees have been paid to MHSI since the inception of the
Partnership.
Pursuant to the Management Agreement, the Hotels are managed and operated as
part of the Marriott full-service hotel system. The Marriott full-service hotel
system consists of Hotels, resorts and suites operated under the Marriott name.
At December 31, 1997, the Marriott full-service hotel system included 326
Marriott Hotels, Resorts and Suites located in 41 states, the District of
Columbia and 33 foreign countries with a total of 124,571 guest rooms.
Most full-service hotels operated by MII contain from 300 to 500 rooms.
However, the 19 convention hotels (18,500 rooms) operated by MII are larger and
contain up to 1,900 rooms. Marriott full-service hotel facilities typically
include swimming pools, gift shops, convention and banquet facilities, a variety
of restaurants and lounges and parking facilities. The 35 Marriott Resort
hotels (15,000 rooms) have additional recreational facilities, such as tennis
courts and golf courses. MII operates 10 full-service suite hotels (2,600
suites). Marriott Suites typically have about 250 suites, each consisting of a
living room, bedroom and bathroom. These properties have only limited meeting
space.
For additional information, see Item 7, Certain Relationship and Related
Transactions.
Ground Leases
- -------------
The Partnership leases the land on which the Fullerton Hotel is located. The
initial term expires in 2019 with four successive 10-year renewals at the
Partnership's option. The lease provides for percentage rental equal to 2% of
gross room sales for each year, which increased to 4% in October 1995. Ground
rent expense incurred for this lease for the years ended December 31, 1997, 1996
and 1995 was $199,000, $185,000 and $99,000, respectively. The Partnership also
leases the land on which the Fairview Park Hotel parking garage is located. The
lease expires in 2085 and requires a nominal rental of $1 per year.
COMPETITION
The full-service segments of the lodging industry continue to benefit from a
favorable cyclical imbalance in the supply/demand relationship in which room
demand growth has exceeded supply growth, which has remained fairly limited.
The lodging industry posted strong gains in revenues and profits in 1997 as
demand growth continued to outpace additions to supply. The General Partner
believes that full-service hotel room supply growth will remain limited through
at least 1998. Accordingly, the General Partner believes this supply/demand
imbalance will result in improved room rates which should result in improved
REVPAR, or revenue per available room, and operating profit.
Following a period of significant overbuilding in the mid to late 1980s, the
lodging industry experienced a severe downturn. Since 1991, new full-service
hotel construction has been modest. Due to an increase in travel and an
improving economy, hotel occupancy has grown steadily over the past several
years, and room rates have improved. The General Partner believes that room
demand for full-service properties will remain stable over the next few years.
The Hotels compete with other major lodging brands in the regions in which they
operate. Competition in the regions is based primarily on the level of service,
quality of accommodations, convenience of locations, and room rates of each
hotel. The inclusion of the Hotels within the Marriott 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.
CONFLICTS OF INTEREST
Because Host Marriott and its affiliates own and/or operate hotels other than
those owned by the Partnership, potential conflicts of interest exist. With
respect to these potential conflicts of interest, Host Marriott and its
affiliates retain a free right to compete with the Partnership's 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.
4
<PAGE>
Under Delaware law, the General Partner has unlimited liability for obligations
of the Partnership unless those obligations are, by contract, without recourse
to the partners thereof. Under the Partnership Agreement, the General Partner
has broad management discretion over the business of the Partnership and with
regard to the operation of the Hotel. No limited partner may take part in the
conduct or control of the Partnership's business. The authority of the General
Partner is limited in certain respects, including acquiring an interest in other
hotel properties or other Partnerships and selling or otherwise disposing of the
Fairview Park Hotel or any other interest therein or more than two of the other
Hotels or any interest therein or incurring debt of the Partnership except as
set forth in the Partnership Agreement. For a discussion of limitations on the
authority of the General Partner, see Item 11, "Description of Registrant's
Securities -- Authority of the General Partner." Because certain actions taken
by the General Partner or the Partnership could expose the General Partner or
its parent, Host Marriott, to liability that is not shared by the limited
partners (for example, tort liability or environmental liability), this control
could lead to a conflict of interest. Under Delaware law, the General Partner
has a fiduciary duty to the Partnership and is required to exercise good faith
and loyalty in all its dealings with respect to Partnership affairs.
POLICIES WITH RESPECT TO CONFLICTS OF INTEREST
It is the policy of the General Partner that the Partnership's relationship with
the General Partner 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 affiliate 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, other than arrangements for
rendering legal, tax, accounting, financial, engineering, and procurement
services to the Partnership by the General Partner or its affiliates, which
agreements will be on commercially reasonable terms, will be subject to the
following conditions:
(a) the services, goods or materials must be reasonably necessary to the
operation of the business of the Partnership;
(b) the General Partner or any affiliate must have the ability to render such
services or to sell or lease such goods;
(c) any such agreement, contract or arrangement 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;
(d) no rebates or give-ups may be received by the General Partner or any
affiliate, nor may the General Partner or any affiliate participate in any
reciprocal business arrangements which would have the effect of
circumventing any of the provisions of the Partnership Agreement;
(e) 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 to the General Partner or any
affiliate or to decrease the responsibilities or duties of the General
Partner or any affiliate in the absence of the limited partners holding a
majority of the Units (excluding those Units held by the General Partner or
certain of its affiliates).
EMPLOYEES
The Partnership has no employees; however, employees of the General Partner are
available to perform administrative services for the Partnership. The
Partnership reimburses the General Partner for the cost of providing such
services. See Item 6, "Executive Compensation", for information regarding
payments made to the General Partner for the cost of providing administrative
services to the Partnership.
HOST MARRIOTT CORPORATION REAL ESTATE INVESTMENT TRUST
On April 17, 1998, Host Marriott, parent company of the General Partner of the
Partnership, announced that its Board of Directors has authorized Host Marriott
to reorganize its business operations to qualify as a real estate investment
trust ("REIT") to become effective as of January 1, 1999.
5
<PAGE>
As part of the REIT reorganization, Host Marriott has formed an operating
partnership (the "Operating Partnership"). The Operating Partnership is
proposing to acquire by merger (the "Mergers") eight limited partnerships that
own full-service hotels in which Host Marriott or its subsidiaries are general
partners, including the Partnership. As more fully described in the
registration statement filed with the Securities and Exchange Commission on June
2, 1998, limited partners of those partnerships that participate in the Mergers
will receive either units or, at their election, unsecured notes issued by the
Operating Partnership in exchange for their partnership interests in the
Partnerships.
Consummation of the REIT reorganization is subject to significant contingencies
that are outside the control of Host Marriott, including final Board approval,
consent of shareholders, partners, bondholders, lenders, and ground lessors of
Host Marriott, its affiliates and other third parties. Accordingly, there can
be no assurance that the REIT reorganization will be completed or that it will
be effective as of January 1, 1999.
ITEM 2. FINANCIAL INFORMATION
The following selected financial data presents historical operating information
for the Partnership for the quarters ended March 27, 1998 and March 28, 1997 and
for each of the five years ended December 31, 1997:
MARRIOTT DIVERSIFIED AMERICAN HOTELS, L.P.
Selected financial Data
(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<TABLE>
<CAPTION>
Quarter Ended
March 27, March 28, Year Ended December 31
1998 1997 1997 1996 1995 1994 1993
------------- --------- -------- ---------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues......................................... $ 6,877 $ 5,524 $ 26,699 $ 22,374 $ 19,715 $ 17,020 $ 15,148
======== ======== ======== ======== ======== ======== ========
Net income (loss)................................ $ 2,484 $ 863 $ 6,986 $ 3,418 $ 393 $ (1,982) $ 4,152
======== ======== ======== ======== ======== ======== ========
Net income (loss) per limited partner unit
(414 Units)..................................... $ 5,940 $ 2,063 $ 16,705 $ 8,174 $ 940 $ (4,739) $ 9,928
======== ======== ======== ======== ======== ======== ========
Total assets..................................... $132,338 $130,796 $129,831 $129,918 $130,360 $133,073 $137,310
======== ======== ======== ======== ======== ======== ========
Total liabilities................................ $146,333 $152,016 $146,310 $152,001 $153,948 $155,181 $156,032
======== ======== ======== ======== ======== ======== ========
Cash distributions per limited partnership unit
(414 Units)..................................... $ -- $ -- $ 3,304 $ 4,575 $ 4,481 $ 3,427 $--
======== ======== ======== ======== ======== ======== ========
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
FORWARD-LOOKING STATEMENTS
Certain matters discussed herein are forward-looking statements within the
meaning of the Private Litigation Reform Act of 1995 and as such may involve
known and unknown risks, uncertainties, and other factors which may cause the
actual results, performance or achievements of the Partnership to be different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Although 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.
6
<PAGE>
CAPITAL RESOURCES AND LIQUIDITY
The Partnership's financing needs have been historically funded through loan
agreements with independent financial institutions. The General Partner
believes that the Partnership will have sufficient capital resources and
liquidity to conduct its operations in the ordinary course of business.
The Partnership is required to maintain the Hotels in good condition. The hotel
management agreement provides for the establishment of a property improvement
fund for each Hotel. Contributions to the property improvement fund are equal
to a percentage of gross Hotel sales. Contributions to the fund for the
Fairview Park, Southfield, Livonia and Fullerton Hotels were 3% for the years
1995 through 1999 and 4% for the year 2000 and thereafter. The Dayton Hotel
will contribute 4% annually. Annual contributions at the Research Triangle Park
Hotel were 3% through 1997 and will be 4% in 1998 and thereafter.
For 1997, the Partnership paid a base management fee equal to 3% of gross sales.
No incentive management fees will be accrued by the Partnership or be considered
earned by the manager until the entire mortgage principal balance, together with
accrued interest, is paid in full. No incentive management fees have been
earned by or paid to MHSI since the inception of the Partnership.
PRINCIPAL SOURCES AND USES OF CASH
The Partnership's principal source of cash is from Hotel operations. Its
principal uses of cash are to pay debt service, fund the property improvement
fund and, until September 1996, make distributions to partners. Cash provided
by operations was $15.6 million, $11.0 million and $7.0 million for the years
ended December 31, 1997, 1996 and 1995, respectively and $2.6 million and $2.0
million for the twelve weeks ended March 27, 1998 and March 28, 1997,
respectively. The increase is primarily due to improved Hotel operations.
Cash used in investing activities was $3.1 million, $2.8 million and $1.7
million in 1997, 1996 and 1995, respectively. The Partnership's cash investing
activities consist primarily of contributions to the property improvement fund
and capital expenditures for improvements to existing hotels. Contributions to
the property improvement fund amounted to $2,442,000, $2,258,000 and $2,104,000
for the years ended December 31, 1997, 1996 and 1995, respectively. Cash used
in investing activities for the twelve weeks ended March 27, 1998 and March 28,
1997 was $660,000 and $403,000, respectively. Contributions to the property
improvement fund were $617,000 and $523,000 for the twelve weeks ended March 27,
1998 and March 28, 1997.
Cash used in financing activities was $14.1 million, $8.5 million and $4.9
million in 1997, 1996 and 1995, respectively. The Partnership's cash financing
activities consist primarily of capital distributions to partners and payments
of the mortgage debt. The increase in cash used in financing activities in 1997
is primarily due to the increased principal amortization in 1997 as compared to
1996 and 1995 as required under the loan agreement. For the twelve weeks ended
March 27, 1998 and March 28, 1997, cash used in financing activities was $2.0
million and $1.4 million, respectively. The increase in cash used during the
first quarter of 1998 compared to the same period in the prior year is due to
increased principal amortization in 1998.
RESULTS OF OPERATIONS
Hotel revenues represent house profit of the Hotels since substantially all of
the operating decisions related to the generation of house profit of the Hotels
rest with MHSI. House profit reflects Hotel operating results and represents
gross Hotel sale less property level expenses, excluding depreciation and
amortization, base and incentive management fees, property taxes, equipment rent
and certain other costs which are disclosed separately in the Statement of
Operations.
REVPAR is a commonly used indicator of market performance for hotels which
represents the combination of daily room rate charged and the average daily
occupancy achieved. REVPAR does not include food and beverage or other
ancillary revenues generated by the property.
7
<PAGE>
TWELVE WEEKS ENDED MARCH 27, 1998 COMPARED TO TWELVE WEEKS ENDED MARCH 28, 1997:
Revenues. Revenues increased $1.4 million, or 25%, to $6.9 million for the
twelve weeks ended March 27, 1998 when compared to the same period in 1997,
primarily due to a 14% increase in REVPAR. The increase in REVPAR resulted from
a 13% increase in the combined average room rate to approximately $114 coupled
with a slight increase in the combined average occupancy to 76%.
Operating Costs and Expenses. Operating costs and expenses increased slightly
by $91,000 to $2.6 million in the first quarter of 1998. As a percentage of
Hotel revenues, Hotel operating costs and expenses represented 38% of revenues
for the first quarter of 1998 and 46% for the same period in 1997.
Operating Profit. As a result of the increased revenues, operating profit
increased $1.3 million to $4.3 million in the first twelve weeks of 1998 as
compared to the same period in 1997.
Interest Expense. Interest expense decreased $245,000 to $1.9 million in the
first quarter of 1998 from $2.2 million in the first quarter of 1997 primarily
due to principal amortization.
Net Income. Net income increased $1.6 million to $2.5 million for the first
twelve weeks in 1998 as compared to the same period in 1997 due to the items
discussed above.
1997 COMPARED TO 1996
Revenues. Revenues increased $4.3 million, or 19% in 1997 to $26.7 million in
1997 as a result of strong growth in REVPAR of 13%. Hotel sales increased $5.8
million, or 8%, to $75.3 million in 1997 also reflecting improvements in REVPAR
for the year. The increase in REVPAR was the result of an increase in combined
average room rates of 10% coupled with a 1.8 percentage point increase in
combined average occupancy.
Operating Costs and Expenses. Operating costs and expenses increased $1.0
million to $11.3 million in 1997 from $10.2 million in 1996. As a percentage of
Hotel revenues, Hotel operating costs and expenses represented 42% of revenues
for 1997 and 46% in 1996.
Operating Profit. As a result of the changes in revenues and operating costs
and expenses discussed above, operating profit increased $3.3 million to $15.4
million, or 58% of total revenues in 1997 from $12.1 million, or 54% of revenues
in 1996.
Interest Expense. Interest expense decreased $200,000 to $8.9 million in 1997
from $9.1 million in 1996 because of principal amortization.
Net Income. Net income increased $3.6 million to $7.0 million in 1997, due to
the items discussed above.
1996 COMPARED TO 1995
Revenues. Revenues increased $2.7 million, or 13%, to $22.4 million in 1996
from $19.7 million in 1995 as a result of strong growth in REVPAR of 6%. The
increase in REVPAR was primarily the result of a 8% increase in combined average
room rates offset by a 1.5 percentage point decrease in combined average
occupancy.
Operating Costs and Expenses. Operating costs and expenses increased $600,000
to $10.2 million, or 46% of Hotel revenues, in 1996 from $9.7 million, or 49% of
Hotel revenues, in 1995.
Operating Profit. Operating profit increased $2.1 million to $12.1 million, or
54% of Hotel revenues, in 1996 from $10.0 million, or 51% of Hotel revenues, in
1995 due to the changes in Hotel revenues and Hotel operating costs discussed
above.
8
<PAGE>
Interest Expense. Interest expense decreased $1.0 million to $9.1 million in
1996. This decrease can be attributed to a decline in interest rates, as well
as a lower outstanding principal balance due to principal amortization on the
Mortgage Debt.
Net Income. Net income increased to $3.4 million in 1996, from $393,000 in 1995
due to the items discussed above.
ITEM 3. PROPERTIES
The Partnership consists of six full-service hotels which are described below:
FAIRVIEW PARK HOTEL
LOCATION
The Fairview Park Hotel is located approximately nine miles west of downtown
Washington, D.C., on a parcel of approximately 5.2 acres of fee-owned land in
the 220-acre Fairview Park development in Fairfax County, Virginia. The Hotel
is located at the interchange of U.S. Highway 50 and the heavily traveled
Capital Beltway (I-495), which circles Washington, D.C. The Hotel is located
directly across the Capital Beltway from the world headquarters of Mobil
Corporation, is four miles south of Tysons Corner, Virginia, a major regional
commercial and retail center and is near several middle-income and upscale
residential areas. At 15 stories, the Hotel is the tallest building in the
Fairview Park development and is visible from the Capital Beltway.
DESCRIPTION
The Fairview Park Hotel opened in August 1989. The Hotel contains 395 guest
rooms, of which eight are suites, two are parlors and 30 are concierge-level
guest rooms offering special amenities, decor and services. The Hotel has
approximately 13,000 square feet of meeting and banquet space (including a
ballroom of 10,300 square feet) and six hospitality suites which are available
to accommodate meetings of small groups. The Hotel has a restaurant which seats
130 and one lounge which seats a total of 55, and offers an indoor/outdoor pool
and whirlpool, an exercise room, men and women's locker rooms with saunas; a
business center; a gift/sundry shop; and indoor/outdoor parking for 660 cars.
More than half of the Fairview Park development has been preserved as woodlands,
and the Hotel is located in a wooded area which offers a park-like setting
containing jogging and cycling trails that connect with adjacent communities.
The Hotel also is adjacent to a small retail shopping center which offers a food
court and shops.
GROUND LEASE
The Partnership leases the land on which the Fairview park Hotel parking garage
is located. The lease expires in 2085 and requires a nominal rental of $1 per
year.
COMPETITION
Four hotels--The Sheraton Tysons Corner, the Hilton McLean, the Tysons Corner
Marriott and the Ritz Carlton Tysons Corner--provide the primary competition for
the Fairview Park Hotel. A comparison of these hotels and the Fairview Park
Hotel is shown in the table below:
<TABLE>
<CAPTION>
Approximate
No. Of Year Meeting Space
Rooms Opened (sq. ft.)
------ ------ --------------
<S> <C> <C> <C>
FAIRVIEW PARK MARRIOTT...... 395 1989 13,000
Sheraton Tysons Corner...... 455 1986 26,000
Hilton McLean............... 457 1987 22,000
Tysons Corner Marriott...... 392 1981 13,600
Ritz Carlton Tysons Corner.. 232 1985 18,500
</TABLE>
9
<PAGE>
The Homewood Suites Hotel, a 109 room extended-stay hotel opened in February,
1998, and is located 4 miles from Fairview Park. In addition to the properties
described above, the Fairview Park Marriott faces secondary competition from
various other hotels. These other hotels, however, differ from the Hotel in
terms of size, room rates, facilities, amenities and services offered, market
orientation and/or location. No new primary competition is expected to open in
the Tysons Corner area.
DAYTON HOTEL
LOCATION
The Dayton Hotel is a full-service Marriott hotel located on 9.9 acres of fee-
owned land approximately 1.5 miles south of downtown Dayton, Ohio. The Hotel is
situated at the intersection of South Patterson Boulevard and River Park Drive,
which is approximately one-half mile east of I-75. The Hotel is visible from
the interstate and is adjacent to both the University of Dayton and the world
headquarters of NCR Corporation. Because of its recognized position in the
market, the Dayton Hotel serves the entire Dayton metropolitan areas, including
the Wright-Patterson Air force Base and the downtown convention center.
DESCRIPTION
The Dayton Hotel originally opened in January 1982 with 299 rooms and was
expanded to 399 rooms in August 1987. The Dayton Hotel contains 399 guest
rooms, of which nine are suites and 50 are concierge-level guest rooms offering
special amenities, decor and services. The Hotel has approximately 10,300
square feet of meeting and banquet space, including a 6,400 square foot ballroom
capable of accommodating up to 800 people for receptions and up to 580 people
for banquets. In addition, the Hotel contains a restaurant capable of seating
165 persons and a lounge capable of seating 112 persons. Other amenities
offered by the Hotel include an indoor/outdoor pool, a hydrotherapy pool, an
exercise room, a sauna, bicycle rentals, a gift/sundry shop and parking for 547
cars.
COMPETITION
The primary competition for the Hotel comes from three hotels in the Dayton
area: (i) the Crown Plaza; (ii) the Doubletree Hotel; and (iii) the Holiday Inn
Fairborn. A comparison of these hotels and the Dayton Hotel is shown below:
<TABLE>
<CAPTION>
Approximate
No. Of Year Meeting Space
Rooms Opened (sq. ft.)
------ ------ --------------
<S> <C> <C> <C>
DAYTON MARRIOTT....... 399 1982 10,300
Crown Plaza........... 284 1996 12,000
Doubletree Hotel...... 189 1988 8,000
Holiday Inn Fairborn.. 202 1987 8,000
</TABLE>
In addition to the properties described above, the Dayton Hotel faces secondary
competition from various other hotels. These other hotels, however, differ from
the Hotel in terms of size, room rates, facilities, amenities and services
offered, market orientation and/or location. No new primary competition is
expected to open in the Dayton area. However, the Residence Inn and Fairfield
Inn Troy opened in January 1998.
MARRIOTT AT RESEARCH TRIANGLE PARK HOTEL
LOCATION
The Marriott at Research Triangle Park Hotel is a full-service Marriott hotel
located in Durham, North Carolina, approximately 15 miles northwest of Raleigh
and approximately nine miles southeast of downtown Durham. The Hotel is located
on 10.3 acres of fee-owned land approximately 4.5 miles from the Raleigh-Durham
Airport and approximately one-half mile from Research Triangle park. The
primary demand generator for the Hotel is Research Triangle Park, a 6,700 acre
research park located in the triangle formed by Duke University, the University
of North Carolina and North Carolina State University. Research Triangle park
contains facilities occupied by over 50 corporations, institutions and
government agencies,
10
<PAGE>
all of which are engaged in research, development or science-oriented
production. The Hotel is approximately 12.5 miles from Duke University, 12
miles from the University of North Carolina and 13 miles from North Carolina
State University.
DESCRIPTION
The Hotel, which opened in April 1988, is designed principally to meet the needs
of business travelers visiting Research Triangle Park, but it also caters to the
group meeting and leisure traveler segments of the hotel market. The Hotel
offers 224 guest rooms of which four are suites or parlors and 50 are concierge-
level rooms offering special amenities, decor and services. The Hotel is a six-
story building and has approximately 4,000 square feet of meeting space,
including a 2,816 square foot ballroom. The Hotel also has a restaurant which
seats 75 persons, a lounge which seats 50 persons, an indoor pool, a
hydrotherapy pool, an exercise room, men and women's saunas, a gift/sundry shop,
a business center and parking for 351 cars.
COMPETITION
Four hotels--The Sheraton Imperial Hotel, the Holiday Inn-Research Triangle
Park, Doubletree Suites and the Radisson Governors Inn--provide the primary
competition for the Research Triangle Park Hotel. A comparison of these hotels
and the Research Triangle Park Hotel is shown in the following table:
<TABLE>
<CAPTION>
Approximate
No. Of Year Meeting Space
Rooms Opened (sq. ft.)
------ ------ --------------
<S> <C> <C> <C>
MARRIOTT AT RESEARCH
TRIANGLE PARK.......... 224 1988 4,000
Sheraton Imperial Hotel.. 340 1986 31,000
Holiday Inn-RTP.......... 250 1988 4,850
Doubletree Suites........ 203 1987 3,000
Radisson Governors Inn... 200 1972 7,000
</TABLE>
In addition to the properties described above, the Hotel faces secondary
competition from various other hotels. These other hotels, however, differ from
the Hotel in terms of size, room rates, facilities, amenities and services
offered, market orientation and/or location. An Embassy Suites and several mid-
priced hotels opened in the Research Triangle Park area in 1997. A three hotel
and multiple restaurant complex is under development and scheduled to open mid-
year 1998.
SOUTHFIELD HOTEL
LOCATION
The Southfield Hotel is located on 5.0 acres of fee-owned land in Southfield,
Michigan, a suburb of Detroit located approximately 15 miles northwest of
downtown Detroit, Michigan, a suburb of Detroit located approximately 15 miles
northwest of downtown Detroit. Southfield is a major commercial center.
According to the Southfield Chamber of Commerce, Southfield serves as
headquarters for three Fortune 500 companies, and 62 other Fortune 500 companies
have offices or other facilities there.
The Southfield Hotel is located along I-696 and Northwestern Highway, adjacent
to the First Center Office Park. Over one million square feet of office space
are located within one mile of the Southfield Hotel.
DESCRIPTION
The Southfield Hotel which opened in September 1989, contains 226 guest rooms,
of which four are suites and 39 are concierge-level rooms offering special
amenities, decor and services. The Southfield Hotel is a six-story building
containing approximately 4,000 square feet of meeting and banquet space,
including a 2,816 square foot ballroom. In addition, the Hotel contains a
restaurant with a seating capacity of 75, a lounge with seating capacity of 50,
an indoor pool and whirlpool, an exercise room, men and women's locker rooms
with saunas, a gift/sundry shop and parking for 280 cars.
11
<PAGE>
COMPETITION
Four hotels--the Radisson Plaza, the Doubletree, the Holiday Inn and the Hilton-
- -provide the primary competition for the Southfield Hotel. A comparison of
these hotels and the Southfield Hotel is shown in the following table:
<TABLE>
<CAPTION>
Approximate
No. Of Year Meeting Space
Rooms Opened (sq. ft.)
------ ------ --------------
<S> <C> <C> <C>
SOUTHFIELD MARRIOTT.. 226 1989 4,000
Westin............... 385 1987 11,000
Doubletree........... 239 1987 8,000
Holiday Inn.......... 417 1965 8,000
Hilton............... 197 1988 3,000
</TABLE>
In addition to the properties described above, the Hotel faces secondary
competition from various other hotels. These other hotels, however, differ from
the Hotel in terms of size, room rates, facilities, amenities and services
offered, market orientation and/or location. No new primary competition is
expected to open in the Southfield market in the near term.
DETROIT MARRIOTT LIVONIA HOTEL
LOCATION
The Detroit Marriott Livonia Hotel is located on 4.0 acres of fee-owned land
within Laurel Park Place, a 750,000 square foot upscale office and regional
shopping mall development in Livonia, Michigan, an affluent suburb of Detroit
located west of downtown in the rapidly expanding I-275 corridor. Laurel Park
Place is one of Livonia's three major shopping malls, containing over 60
specialty shops and restaurants, a ten-screen cinema, over 300,000 square feet
of office space, the largest Jacobsen's department store ever built and space
for another anchor department store. The Hotel, which opened in September 1989,
is located approximately 15 miles west of downtown Detroit and is designed
principally to accommodate the needs of business travelers visiting the
automobile manufacturing and other corporate facilities located in the area.
DESCRIPTION
The Hotel contains 224 guest rooms, of which four are suites and 39 are
concierge-level rooms offering special amenities, decor and services. The Hotel
is a six-story building and has approximately 5,000 square feet of meeting and
banquet space (including a ballroom of 3,168 square feet), a restaurant with a
seating capacity of 75, a lounge with a seating capacity of 50, an indoor pool
and whirlpool, an exercise room, men and women's locker rooms with saunas, a
gift/sundry shop and parking for 280 cars. The Hotel is adjacent to the Laurel
Park Place mall and has an entranceway that opens into the retail section of the
mall.
COMPETITION
Three hotels, the Novi Hilton, the Holiday Inn and the Embassy Suites, provide
the primary competition for the Detroit Marriott Livonia Hotel. A comparison of
these hotels and the Detroit Marriott Livonia Hotel is shown in the table below:
<TABLE>
<CAPTION>
Approximate
No. Of Year Meeting Space
Rooms Opened (sq. ft.)
------ ------ --------------
<S> <C> <C> <C>
DETROIT MARRIOTT
LIVONIA HOTEL.... 224 1989 3,965
Novi Hilton....... 237 1985 15,344
Holiday Inn....... 212 1988 11,000
Embassy Suites.... 137 1989 7,000
</TABLE>
12
<PAGE>
In addition to the properties described above, the Hotel faces secondary
competition from various other hotels. These other hotels, however, differ from
the Hotel in terms of size, room rates, facilities, amenities and services
offered, market orientation and/or location. No new primary competition is
expected to open in the Livonia area in the near term.
FULLERTON HOTEL
LOCATION
The Fullerton Hotel is located in Fullerton, California on a 4.7 acre leased
parcel of land located on the campus of California State University at
Fullerton. The Fullerton campus of California State University has
approximately 25,000 students, making it the seventh largest of the 20 campuses
in the California State University system. Fullerton is located in northern
Orange County, California's third largest center of high technology which
includes the communities of Fullerton, Placentia, Brea, La Habra, Yorba Linda
and Buena Park. The Fullerton Hotel is located at the interchange of State
Highway 57 and Nutwood Avenue, approximately 20 miles north of the John Wayne
International Airport and approximately eight miles north of Disneyland. The
Fullerton Hotel is designed principally to accommodate the needs of travelers
visiting the University and the many corporate facilities located in the area
and to cater to the needs of group meetings.
DESCRIPTION
The Hotel offers 224 guest rooms, of which three are suites and 39 are
concierge-level rooms offering special amenities, decor and services. The Hotel
is a six-story building and has approximately 4,617 square feet of meeting and
banquet space (including a 2,749 square foot ballroom), a restaurant which seats
68, a lounge which seats 44, an outdoor pool and whirlpool, an exercise room,
men and women's locker rooms with saunas, a gift/sundry shop and parking for 286
cars.
GROUND LEASE
The Partnership leases the land on which the Fullerton Hotel is located. The
initial term expires on 2019 with four successive 10-year renewals at the
Partnership's option. The lease provides for percentage rental equal to 4% of
gross room sales for each year. Pursuant to the terms of the ground lease, the
Partnership will be prohibited from making any structural or exterior
alterations to the Hotel which are inconsistent with the development project
plans without the written consent of the Ground Lessor and the Trustees of
California State University.
COMPETITION
Four hotels--the Embassy Suites Anaheim, the Holiday Inn-Fullerton, Chase Suites
and the Embassy Suites Fullerton, provide the primary competition for the
Fullerton Hotel. A comparison of these hotels and the Fullerton Hotel is shown
in the following table:
<TABLE>
<CAPTION>
Approximate
No. Of Year Meeting Space
Rooms Opened (sq. ft.)
------ ------ --------------
<S> <C> <C> <C>
FULLERTON MARRIOTT...... 224 1989 4,617
Embassy Suites Anaheim.. 224 1987 8,000
Holiday Inn Fullerton... 289 1973 9,200
Chase Suites............ 96 1995 2,700
Embassy Suites.......... 229 1987 9,000
</TABLE>
In addition to the properties described above, the Hotel faces secondary
competition from various other hotels. These other hotels, however, differ from
the Hotel in terms of size, room rates, facilities, amenities and services
offered, market orientation and/or location. The Days Inn Fullerton is
converting to Sheraton in the first quarter 1998.
13
<PAGE>
COMBINED OPERATING STATISTICS
The following table shows selected combined operating statistics for the Hotels:
<TABLE>
<CAPTION>
Quarter ended
March 27, March 28, Year Ended December 31,
1998 1997 1997 1996 1995
-------------- ---------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Combined average occupancy........ 75.6% 75.1% 76.4% 74.6% 76.1%
Combined average daily room rate.. $114.04 $101.07 $102.97 $93.33 $86.39
REVPAR............................ $ 86.21 $ 75.90 $ 78.67 $69.62 $65.74
</TABLE>
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of December 31, 1997, no person owned of record, or to the Partnership's
knowledge owned beneficially, more than 5% of the total number of limited
partnership Units.
The General Partner owns 4.18 Units as of December 31, 1996, which represent 1%
of the total Units. These Units were purchased by the General Partner on the
Closing Date of the public offering. See Item 11, "Description of Registrants
Securities to be Registered", regarding restrictions on the voting rights of
Units owned by the General Partner. There are no Units owned by the executive
officers and directors of the General Partner, as a group.
The Partnership is not aware of any arrangements which may, at a subsequent
date, result in a change in control of the Partnership, other than the
Consolidation described in Item 1.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
Marriott MDAH One Corporation, the General Partner, was incorporated in Delaware
in 1989 and is a wholly owned subsidiary of Host Marriott. The General Partner
was organized solely for the purpose of acting as general partner of Marriott
Diversified American Hotels, L.P.
The Partnership has no directors, officers or employees. The business policy
making functions of the Partnership are carried out through the directors and
executive officers of the General Partner, who are listed below:
<TABLE>
<CAPTION>
Age at
Name Current Position in Marriott MDAH One Corporation December 31, 1997
- ------------------------- ------------------------------------------------- -----------------
<S> <C> <C>
Bruce F. Stemerman President and Director 42
Robert E. Parsons, Jr. Director 42
Christopher G. Townsend Vice President, Secretary and Director 50
Patricia K. Brady Vice President and Chief Accounting Officer 36
Bruce D. Wardinski Treasurer 37
</TABLE>
BUSINESS EXPERIENCE
Bruce F. Stemerman joined Host Marriott in 1989 as Director, Partnership
Services. He was promoted to Vice President, Lodging Partnerships in 1994 and
to Senior Vice President, Asset Management in 1996. Prior to joining Host
Marriott, Mr. Stemerman spent ten years with Price Waterhouse. He also serves
as a director and an officer of numerous Host Marriott subsidiaries.
Robert E. Parsons joined Host Marriott's Corporate Financial Planning Staff in
1981, was made Director-Project Finance of Host Marriott's Treasury Department
in 1984, and in 1986 he was made Vice President-Project Finance of Host
Marriott's Treasury Department. He was made Assistant Treasurer of Host
Marriott in 1988. Mr. Parsons was named Senior Vice President and Treasurer of
Host Marriott in 1993. He was named Executive Vice President and Chief
Financial Officer of Host Marriott in October 1995. Mr. Parsons also serves as
a director and an officer of numerous Host Marriott subsidiaries.
14
<PAGE>
Christopher G. Townsend joined Host Marriott's Law Department in 1982 as a
Senior Attorney. In 1984, Mr. Townsend was made Assistant Secretary of Host
Marriott and in 1986 was made Assistant General Counsel. In 1993, he was made
Senior Vice President, Corporate Secretary and Deputy General Counsel of Host
Marriott. In January 1997, Mr. Townsend was named General Counsel of Host
Marriott. He also serves as a director and an officer of numerous Host Marriott
subsidiaries.
Patricia K. Brady joined Host Marriott in 1989 as Assistant Manager-Partnership
Services. She was promoted to Manager in 1990 and to Director-Asset Management
in June 1996. Ms. Brady also serves as an officer of numerous Host Marriott
subsidiaries.
Bruce D. Wardinski joined Host Marriott in 1987 as a Senior Financial Analyst of
Financial Planning & Analysis, and was named Manager in June 1988. He was
appointed Director, Financial Planning & Analysis in 1989, Director of Project
Finance in January 1990, Senior Director of Project Finance in June 1993, Vice
President, Project Finance in June 1994, and Senior Vice President of
International Development in October 1995. In June 1996, Mr. Wardinski was
named Senior Vice President and Treasurer of Host Marriott. He also serves as
an officer of numerous Host Marriott subsidiaries.
ITEM 6. EXECUTIVE COMPENSATION
The General Partner is required to devote to the Partnership such time as may be
necessary for the proper performance of its duties, but the officers and the
directors of the General Partner are not required to devote their full time to
Partnership matters. 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 of the General Partner or employee of Host Marriott does
devote time to the Partnership, the General Partner is entitled to reimbursement
for the cost of providing such services. Any such costs may include a charge
for overhead, but without a profit to the General Partner. For the fiscal years
ended December 31, 1997, 1996 and 1995, administrative expenses reimbursed by
the Partnership to the General Partner totaled $124,000, $109,000 and $68,000,
respectively.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As described below, the Partnership is a party to an ongoing agreement with MII
pursuant to which the Hotels are managed by MII.
Prior to October 8, 1993, MII was a wholly-owned subsidiary of Host Marriott,
which was then named Marriott Corporation. On October 8, 1993, Marriott
Corporation's operations were divided into two separate companies, Host Marriott
and MII. MII now conducts its management business as a separate publicly-traded
company and is not a parent or subsidiary of Host Marriott, although the two
corporations have various business and other relationships.
The Partnership entered into a Management Agreement on the Initial Closing Date
with MII to manage the Hotels for an initial 20-year term expiring December 31,
2009. During 1996, MII assigned all of its interest in the Management Agreement
to MHSI, a wholly-owned subsidiary of MII. MHSI has the option to renew the
Management Agreement on one or more of the Hotels for up to five successive 10-
year terms (four successive 10-year terms for the Fullerton Hotel). MHSI earns
a base management fee equal to 3% of gross sales.
In connection with the 1993 loan restructuring, the hotel management agreement
was modified. During the restructured loan term, no incentive management fees
will be accrued by the Partnership or be considered earned by the manager until
the entire mortgage principal balance, together with accrued interest, is paid
in full. No incentive management fees have been paid to MHSI since the
inception of the Partnership.
Pursuant to the terms of the Management Agreement, MHSI 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 Marriott full-service hotel
system. Chain Services include central training, advertising and promotion, a
national reservation 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
15
<PAGE>
MII or its subsidiaries. In addition, the Hotels also participate in Marriott's
Rewards Program ("MRP") which succeeded the Honored Guest Awards Program
("HGA"). The cost of this program is charged to all hotels in the Marriott
full-service hotel system based upon the MRP sales at each hotel. The total
amount of Chain Services and MRP costs charged to the Partnership was $3,874,000
for 1997, $3,497,000 for 1996 and $3,316,000 for 1995.
Pursuant to the terms of the Management Agreement, the Partnership is required
to provide MHSI with working capital and supplies to meet the operating needs of
the Hotels. MHSI 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 MHSI. Upon
termination of the hotel management agreement, the working capital and supplies
will be returned to the Partnership. The individual components of working
capital and supplies controlled by MHSI are not reflected in the Partnership's
balance sheet. A total of $4,500,000 was advanced to MHSI for working capital
and supplies of which $600,000 was returned to the Partnership during 1995 and
$50,000 was returned during 1996 and $41,000 was returned in 1997 leaving a
balance of $3,900,000, $3,850,000 and $3,809,000 as of December 31, 1995, 1996
and 1997, respectively, which is included in Due from Marriott Hotel Services,
Inc. in the accompanying balance sheet.
The following table sets forth the amount paid to MII and affiliates for the
quarters ended March 27, 1998 and March 28, 1997 and for the years ended
December 31, 1997, 1996 and 1995 (in thousands):
<TABLE>
<CAPTION>
December 31,
March 27, March 28, ----------------------------
1998 1997 1997 1996 1995
--------- --------- ------ ------------ ------
<S> <C> <C> <C> <C> <C>
Chain services and MRP costs.. $ 977 $ 230 $3,874 $3,497 $3,316
Base management fee........... 552 487 2,260 2,086 1,944
------ ----- ------ ------ ------
$1,529 $ 717 $6,134 $5,583 $5,260
====== ===== ====== ====== ======
</TABLE>
The following table sets forth the amount paid to the General Partner and
affiliates for the quarters ended March 27, 1998 and March 28, 1997 and for the
years ended December 31, 1997, 1996 and 1995 (in thousands):
<TABLE>
<CAPTION>
December 31,
March 27, March 28, --------------------------
1998 1997 1997 1996 1995
--------- --------- ----- ------------ -----
<S> <C> <C> <C> <C> <C>
Administrative expenses reimbursed.. $ 64 $ 4 $ 124 $ 109 $ 68
Payments on deferred purchase debt.. -- -- 62 82 681
Cash distributions.................. -- -- 21 28 27
----- ----- ----- ----- -----
$ 64 $ 4 $ 207 $ 219 $ 776
===== ===== ===== ===== =====
</TABLE>
The Management Agreement provides for the establishment of a property
improvement fund for each Hotel. Contributions to the property improvement fund
are equal to a percentage of gross Hotel sales. Contributions to the fund for
the Fairview Park, Southfield, Livonia and Fullerton Hotels were 3% for the
years 1995 through 1999 and 4% for the year 2000 and thereafter. The Dayton
Hotel will contribute 4% annually. Annual contributions at the Research
Triangle Park Hotel were 3% through 1997 and will be 4% in 1998 and thereafter.
Contributions to the property improvement fund amounted to $2,442,000,
$2,258,000, and $2,104,000 for the years ended December 31, 1997, 1996 and 1995,
respectively. Management believes these contributions are expected to be
adequate to cover expenditures.
ITEM 8. LEGAL PROCEEDINGS.
None.
ITEM 9. MARKET FOR AND DISTRIBUTIONS ON LIMITED PARTNERSHIP UNITS AND RELATED
SECURITY HOLDER MATTERS
There is currently no public market for the Units. Transfers of Units are
limited to the first day of a fiscal quarter, and are subject to approval by the
General Partner and certain other restrictions described in Item 11,
"Description of Registrant's
16
<PAGE>
Securities to be Registered." As of December 31, 1997, there were 468 holders
of record of the 414 limited partnership Units.
The ability of the Partnership to make cash distributions to the limited
partners is subject to limitations contained in the Partnership Agreement that
are described in Item 11, "Description of Registrant's Securities to be
Registered - Distributions and Allocations." In addition, the Partnership is
making payments to reserves established by the lender, as described in Item 1,
"Business - Debt Financing - Mortgage Debt," that limit the funds available for
cash distributions.
The Partnership made cash distributions to its partners in 1997 in the amount of
$1,381,828 as follows: $14,440 to the General Partner and $1,367,388 to the
limited partners ($3,303 per Unit).
The Partnership made cash distributions to its partners in 1996 in the amount of
$1,915,025 as follows: $19,132 to the General Partner and $1,895,893 to the
limited partners ($4,579 per Unit).
The Partnership made cash distributions to its partners in 1995 in the amount of
$1,873,604 as follows: $18,470 to the General Partner and $1,855,134 to the
limited partners ($4,481 per Unit).
Units held by non-affiliates of the Partnership for at least three years may be
sold without registration in accordance with the exemptions provided by Rule 144
under the Securities Act of 1933, as amended the (the "Act"). For a discussion
of the restrictions on assignment contained in the Partnership Agreement, see
Item 11, "Description of Registrant's Securities to be Registered."
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
There have been 19 sales of unregistered securities by the Partnership involving
17 Units within the past three years. On April 23, 1990, 414 limited
partnership interests (the "Units") were sold in a public offering. See Item 1,
"Business - Organization of the Partnership" for additional information
regarding the Partnership's sale of Units in 1990. As of December 31, 1997,
there were 468 limited partners. Since the inception of the Partnership, there
have been 19 sales by limited partners involving 18.5 Units.
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES
The 414 limited partnership interests include the 2.5 Units owned by the General
Partner, represent 99% of the interests in the Partnership. The General Partner
holds the remaining 1% interest.
DISTRIBUTIONS AND ALLOCATIONS
Partnership allocations and distributions are generally made as follows:
a. Cash available for distribution will generally be distributed (i) first, 1%
to the General Partner and 99% to the limited partners, until the partners
have received, with respect to such year, an amount equal to 10% of
contributed capital, as defined; (ii) second, remaining cash available for
distribution will be distributed as follows, depending on the amount of
cumulative distributions of net refinancing and/or sales proceeds ("Capital
Receipts") previously distributed:
(1) 1% to the General Partner and 99% to the limited partners, if the
partners have received aggregate cumulative distributions of Capital
Receipts of less than 50% of their original capital contributions; or
(2) 10% to the General Partner and 90% to the limited partners, if the
partners have received aggregate cumulative distributions of Capital
Receipts equal to or greater than 50% but less than 100% of their
original capital contributions; or
17
<PAGE>
(3) 20% to the General Partner and 80% to the limited partners, if the
partners have received aggregate cumulative distributions of Capital
Receipts equal to 100% or more of their original capital contributions.
b. Capital Receipts not retained by the Partnership will be distributed (i)
first, 1% to the General Partner and 99% to the limited partners until the
partners have received an amount equal to the unpaid portion of a cumulative
15% return on Net Invested Capital, defined as the excess of capital
contributions over cumulative distributions of Capital Receipts, plus
contributed capital, as defined; and (ii) thereafter, 20% to the General
Partner and 80% to the limited partners.
c. Proceeds from the sale of substantially all of the 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.
d. Net profits will generally be allocated to the partners in proportion to the
distributions of cash available for distribution.
e. Net losses will be allocated 75% to the General Partner and 25% to the
limited partners.
f. Deductions for interest on the Deferred Purchase Debt (see Note 6), which
cumulatively will not exceed $11,604 per Unit, will be allocated to those
limited partners owning the Units purchased on the installment basis.
g. Gain recognized by the Partnership will be allocated as follows: (i) first,
to all partners whose capital accounts have negative balances until such
balances are brought to zero; (ii) next, to all partners in amounts necessary
to bring their respective capital account balances to an amount equal to
their Net Invested Capital plus a cumulative 15% return on Net Invested
Capital; and (iii) thereafter, 20% to the General Partner and 80% to the
limited partners.
h. Losses will generally be allocated as follows: (i) first, to all partners
whose capital accounts have positive balances until such balances have been
eliminated; and (ii) thereafter, 100% to the General Partner.
For financial reporting purposes, profits and losses are allocated among the
partners based upon their stated interests in cash available for distribution.
Upon dissolution of the Partnership, the General Partner shall liquidate the
assets of the Partnership. The proceeds of such liquidation shall be applied
and distributed in the following order of priority: (i) to the payment of the
expenses of the liquidation (ii) to the payment of Partnership debt, and other
liabilities; (iii) to the payment of any loans or advances that may have been
made by any of the partners to the Partnership; and (iv) to the General Partner
and limited partners in proportion to the net balances in their respective
capital accounts.
AUTHORITY OF THE GENERAL PARTNER
Under the Partnership Agreement, the General Partner has broad management
discretion over the business of the Partnership and with regard to the operation
of the Inns. No limited partner may take any part in the conduct or control of
the Partnership's business. The authority of the General Partner is limited in
certain respects.
Without an amendment to the Partnership Agreement, which requires the unanimous
consent of all the limited partners, the General Partner does not have authority
to:
(i) do any act in contravention of the Partnership Agreement;
(ii) except as otherwise provided in the Partnership Agreement, do any act
which would make it impossible to carry on the ordinary business of the
Partnership;
(iii) confess a judgment in an amount 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 Partnership property for other than a Partnership
purpose;
18
<PAGE>
(v) admit a person as either a General Partner or a limited partner except as
otherwise provided in the Partnership Agreement;
(vi) perform any act that would subject any limited partner to liability as a
General Partner in any jurisdiction or to any other liability except as
provided in the Delaware Revised Uniform Limited Partnership Act (the
"Delaware Act") or the Partnership Agreement; or
(vii) list, recognize, or facilitate the trading of Units on any established
securities market, or create for the Units a secondary market or the
substantial equivalent thereof, or permit, recognize, or facilitate
trading of Units on any such market, or permit any of its affiliates to
take such action, if as a result thereof the Partnership would be taxed
for Federal income tax purposes as an association taxable as a
corporation.
Without an amendment to the Partnership Agreement, which requires the vote of
limited partners holding a majority of the Units, the General Partner does not
have authority on behalf of the Partnership to:
(i) have the Partnership acquire an interest in other hotel properties or
other partnerships;
(ii) sell or otherwise dispose of the Fairview Park Hotel, or any interest
therein or more than two of the other Hotels or any interest therein;
(iii) effect any amendment to any agreement, contract or arrangement with the
General Partner or any affiliate thereof which would reduce the
responsibility or duties or would increase the compensation payable to the
General Partner or any of its affiliates or which would otherwise
adversely affect the rights of the limited partners;
(iv) incur debt of the Partnership except as set forth in the Partnership
Agreement;
(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 Partnerships;
(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 Loan);
(ix) cause the Partnership to merge or consolidate with any other entity;
(x) cause the Partnership to borrow any funds from the General Partner or any
affiliate of the General Partner unless in accordance with the Partnership
Agreement;
(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.
RESTRICTIONS ON ASSIGNMENTS OF UNITS
A limited partner generally has the right to assign a Unit to another person or
entity, subject to certain conditions and restrictions. An assignment of a Unit
is subject to the following restrictions: (i) no assignment may be made other
than on the first day of a fiscal quarter of the Partnership; (ii) no assignment
may be made if, when added to all other prior assignments and transfers of
interests in the Partnership within the preceding 12 months, such assignment
would cause the Partnership, in
19
<PAGE>
the opinion of legal counsel, to be considered to have terminated for Federal
income tax purposes; (iii) the General Partner may prohibit any assignment that,
in the opinion of legal counsel, would require the filing of a registration
statement under the Securities Act of 1933 or otherwise would violate any
Federal or state securities laws or regulations (including investor suitability
standards) applicable to the Partnership or the Units; (iv) no assignment may be
made that would result in either the transfer or the transferee owning a
fraction of a Unit; (v) no assignment may be made if, in the opinion of legal
counsel, it would result in the Partnership being treated as an association
taxable as a corporation for Federal income tax purposes; (vi) no transfer may
be made if 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; (vii) no assignment may be made if, in the opinion
of legal counsel, it would preclude the Partnership from either obtaining or
retaining a liquor beverage license for any of the Hotels; (viii) no assignment
may be made unless the transferee agrees in writing that it will not, directly
or indirectly, create for the Units a secondary market (or the substantial
equivalent thereof) within the meaning of section 7704 of the Code or facilitate
the trading of the Units on such a market; and (ix) no assignment may be made to
nonresident aliens, foreign entities, or tax-exempt entities; and (x) no
assignment may be made to any person exempt from Federal income tax. The General
Partner is also authorized to impose any other restrictions on the transfer of
Units 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 are necessary or advisable to protect the Partnership from being
considered a publicly traded partnership within the meaning of the 1987 Revenue
Act.
The Partnership will not recognize for any purpose any assignment of any Units
unless (i) an instrument is executed making such assignment, signed by both the
assignor and the assignee, and a duly executed application for assignment and
admission as substituted limited partner is executed indicating the written
acceptance by the assignee of all the terms and provisions of the Partnership
Agreement, (ii) the General Partner has determined that such as assignment is
permitted under the Partnership Agreement. No assignee of a limited partner's
Units will be entitled to become a substituted limited partner unless: (i) the
General Partner gives consent, (ii) the transferring limited partner and the
assignee have executed instruments that the General Partner deems necessary to
effect such admission, (iii) the assignee has accepted, adopted, and approved in
writing all of the terms of the Partnership Agreement and executed a power of
attorney similar to the power of attorney granted in the Partnership Agreement,
and (iv) the assignee pays all reasonable expenses incurred in connection with
his admission as a substituted limited partner. As assignee only becomes a
substituted limited partner when the General Partner has reflected the admission
of such person as a limited partner in the books and records of the Partnership.
Any person who is the assignee of any of the Units of a limited partner, but who
does not become a substituted limited partner is entitled to all the rights of
an assignee of a limited partner interest under the Act, including the right to
receive distributions from the Partnership and the share of net profits, net
losses, gain, loss and recapture income attributable to the Units assigned to
the person, but shall not be deemed to be a holder of Units for any other
purpose under the Partnership Agreement.
AMENDMENTS
Amendments to the Partnership Agreement may be made by the General Partner with
the consent of the limited partners holding a majority of the outstanding Units
(excluding those Units held by the General Partner and certain of its
affiliates). No amendment to the Partnership Agreement may be made, however,
without the approval of all of the limited partners which would (i) convert a
limited partner's interest into a general partner's interest; (ii) adversely
affect the liability of a limited partner; (iii) alter the interest of a partner
in net profits, net losses, or gain or loss or distributions of cash available
for distribution or capital receipts 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; (v) permit the General Partner to take any
action otherwise prohibited by the Partnership Agreement; (vi) cause the
Partnership to be taxed for Federal income tax purposes as an association
taxable as a corporation; or (vii) reduce the percentage of Units required to
approve any amendment to the Partnership Agreement. The General Partner may make
an amendment to the Partnership Agreement, without the consent of the limited
partners, if such amendment is necessary solely to clarify the provisions of the
Partnership Agreement so long as such amendment does not adversely affect the
rights of the limited partners under the Partnership Agreement.
20
<PAGE>
MEETINGS AND VOTING
The limited partners cannot participate in the management or control of the
Partnership or its business. The Partnership Agreement, however, extends to the
limited partners the right under certain conditions to vote on or approve
certain Partnership matters. Any action that is required or permitted to be
taken by the limited partners may be taken either at a meeting of the limited
partners or without a meeting if approvals in writing setting forth the action
so taken are signed by limited partners owning not less than the minimum number
of Units that would be necessary to authorize or take such action at a meeting
at which all of the limited partners were present and voted. Meetings of the
limited partners may be called by the General Partner and shall be called by the
General Partner upon receipt of a request in writing signed by holders of 10% or
more of the Units held by the limited partners. Limited partners may vote
either in person or by proxy at meetings. Limited partners holding more than
50% of the total number of all outstanding Units constitute a quorum at a
meeting of the limited partners. Matters submitted to the limited partners for
determination will be determined by the affirmative vote of the limited partners
holding a majority of the outstanding Units (excluding those Units held by the
General Partner and certain of its affiliates), except that a unanimous vote of
the limited partners will be required for certain action referred to above.
The Partnership Agreement does not provide for annual meetings of the limited
partners and none have been held, nor does the General Partner anticipate
calling such meetings.
OTHER MATTERS
If at any time any agreement (including the Management Agreement) pursuant to
which operating management of any of the Hotels is vested in the General Partner
or an affiliate of the General Partner provides that the Partnership has a right
to terminate such agreement as a result of the failure of the operation of such
Hotel to attain economic objectives, as specifically defined, the limited
partners, without the consent of the General Partner, may, upon the affirmative
vote of the holders of a majority of the Units, take action to exercise the
right of the Partnership to terminate such agreements.
The limited partners may also, by a vote of the holders of a majority of the
Units, remove the General Partner (but only if a new general partner is elected)
if the General Partner has committed and not remedied any act of fraud, bad
faith, gross negligence or breach of fiduciary duties in carrying out its duties
as the General Partner. Notwithstanding the foregoing, however, such a removal
of the General Partner or the Manager, if exercised, would be an event of
default under the loan documentation evidencing the Mortgage Debt, and would
permit the lender or its assignee to accelerate the maturity of the loan. Thus,
the termination right could only be exercised with the consent of the lender or
its assignee.
The Partnership Agreement provides that limited partners will not be personally
liable for the losses of the Partnership beyond the amount committed by them to
the capital of the Partnership. In the event that the Partnership is unable
otherwise to meet its obligations, the limited partners might, under applicable
law, be obligated under some circumstances to return distributions previously
received by them, with interest, to the extent such distributions constituted a
return of the capital contributions at the time when creditors had valid claims
outstanding against the Partnership.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Except as specifically provided in the Delaware Act, the General Partner is
liable for the obligations of the Partnership in the same manner as a partner
would be liable in a partnership without limited partners to persons other than
the Partnership and the other partners. Generally speaking, any such partner is
fully liable for any and all of the debts or other obligations of the
partnership as and to the extent the partnership is either unable or fails to
meet such obligations. Thus, the assets of the General Partner may be reached
by creditors of the Partnership to satisfy obligations or other liabilities of
the Partnership, other than nonrecourse liabilities, to the extent the assets of
the Partnership are insufficient to satisfy such obligations or liabilities.
The Delaware Act provides that: "Subject to such standards and restrictions, if
any, as set forth in its partnership agreement, a limited partnership may, and
shall have the power to, indemnify and hold harmless any partner or other person
from and against any and all claims and demands whatsoever." The Partnership
Agreement provides that the General Partner and its affiliates who perform
services for the Partnership on behalf of the General Partner (within the scope
of its authority as the
21
<PAGE>
General Partner of the Partnership) will not be liable to the Partnership or the
limited partners for liabilities, costs and expenses incurred as a result of any
act or omission of the General Partner or such person provided (i) such acts or
omissions were determined by the General Partner or such person, in good faith,
to be in the best interest of the Partnership and such acts or omissions were
within the General Partner's authority; and (ii) the conduct of the General
Partner or such person did not constitute negligence, fraud, misconduct or
breach of fiduciary duty to the Partnership or any partner.
The Partnership Agreement also provides that the General Partner and such
persons will be indemnified out of Partnership assets against any loss,
liability or expense arising out of any act or omission determined by the
General Partner or such person, in good faith, to be in the best interest of the
Partnership and such act or omission within the General Partner's authority so
long as such conduct did not constitute negligence, misconduct, fraud or a
breach of a fiduciary duty. The Partnership, however, may indemnify the General
Partner or any other person for losses, costs and expenses incurred in
successfully defending or settling claims arising out of alleged securities laws
violations only if certain specific additional requirements are met. The
Partnership Agreement provides that any indemnification obligation shall be paid
solely out of the assets of the Partnership.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to partners and controlling persons of the registrant
pursuant to the foregoing provisions or otherwise, the registrant has been
advised that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid in the successful defense or any action, suit or proceeding) is asserted
against the registrant by such a person in connection with the securities
registered hereby, and if the Securities and Exchange Commission is still of the
same opinion, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
22
<PAGE>
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
INDEX PAGE
- ----- ----
<S> <C>
Report of Independent Public Accountants........................................................ 2
Statement of Operations for the Years Ended December 31, 1995, 1996 and 1997.................... 2
Balance Sheet as of December 31, 1996 and 1997.................................................. 2
Statement of Changes in Partners' Deficit for the Years Ended December 31, 1995, 1996 and 1997.. 2
Statement of Cash Flows for the Years Ended December 31, 1995, 1996 and 1997.................... 2
Notes to Financial Statements................................................................... 2
Condensed Statement of Operations for the Twelve Weeks Ended March 28, 1997 and March 27, 1998..
Condensed Balance Sheet as of December 31, 1997 and March 27, 1998.............................. 36
Condensed Statement of Cash Flows for the Twelve Weeks Ended March 28, 1997 and March 27, 1998.. 37
Notes to Condensed Financial Statements......................................................... 38
</TABLE>
23
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE PARTNERS OF MARRIOTT DIVERSIFIED AMERICAN HOTELS, L.P.:
We have audited the accompanying balance sheet of Marriott Diversified American
Hotels, L.P. (a Delaware limited partnership) as of December 31, 1997 and 1996,
and the related statements of operations, changes in partners' deficit and cash
flows for each of the three years in the period ended December 31, 1997. These
financial statements and the schedule referred to below are the responsibility
of the General Partner's management. Our responsibility is to express an
opinion on these financial statements and this 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 Diversified American
Hotels, L.P. as of December 31, 1997 and 1996, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1997 in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index at Item
15(a) is presented for purposes of complying with The Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the 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.
April 8, 1998
24
<PAGE>
STATEMENT OF OPERATIONS
MARRIOTT DIVERSIFIED AMERICAN HOTELS, L.P.
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- ---------
<S> <C> <C> <C>
REVENUES
Hotel Revenues (Note 3)................................... $26,699 $22,374 $ 19,715
------- ------- --------
OPERATING COSTS AND EXPENSES
Depreciation and amortization............................. 6,398 6,032 5,534
Base management fee due to Marriott Hotel Services, Inc... 2,260 2,086 1,944
Property taxes and other.................................. 2,608 2,131 2,198
------- ------- --------
11,266 10,249 9,676
------- ------- --------
OPERATING PROFIT........................................... 15,433 12,125 10,039
Interest expense.......................................... (8,944) (9,129) (10,093)
Interest income........................................... 497 422 447
------- ------- --------
NET INCOME................................................. $ 6,986 $ 3,418 $ 393
======= ======= ========
ALLOCATION OF NET INCOME
General Partner........................................... $ 70 $ 34 $ 4
Limited Partners.......................................... 6,916 3,384 389
------- ------- --------
$ 6,986 $ 3,418 $ 393
======= ======= ========
NET INCOME PER LIMITED PARTNER UNIT
(414 UNITS)............................................... $16,705 $ 8,174 $ 940
======= ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
25
<PAGE>
BALANCE SHEET
MARRIOTT DIVERSIFIED AMERICAN HOTELS, L.P.
DECEMBER 31, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996
-------- --------
ASSETS
<S> <C> <C>
Property and equipment, net..................................... $108,153 $111,278
Mortgage escrow................................................. 11,624 5,710
Due from Marriott Hotel Services, Inc........................... 3,714 4,571
Debt service reserve fund....................................... 3,000 3,000
Property improvement fund....................................... 1,667 1,781
Deferred financing costs, net................................... 536 816
Cash and cash equivalents....................................... 1,137 2,762
-------- --------
Total Assets................................................. $129,831 $129,918
======== ========
</TABLE>
LIABILITIES AND PARTNERS' DEFICIT
<TABLE>
<CAPTION>
LIABILITIES
<S> <C> <C>
Mortgage debt................................................. $122,014 $128,745
Debt service guarantee and related interest payable to
Host Marriott Corporation.................................... 19,762 18,600
Note payable and related interest due to the General Partner.. 2,804 2,615
Deferred purchase debt and related interest payable to
Host Marriott Corporation.................................... 676 675
Accounts payable and accrued expenses......................... 1,054 1,366
-------- --------
Total Liabilities............................................ 146,310 152,001
-------- --------
Partners' Deficit
General Partner
Capital contribution, net of offering costs of $15........... 403 403
Capital distributions........................................ (98) (84)
Cumulative net losses........................................ (419) (489)
-------- --------
(114) (170)
-------- --------
Limited Partners
Capital contributions, net of offering costs of $4,785....... 35,830 35,830
Investor notes receivable.................................... (966) (966)
Capital distributions........................................ (9,738) (8,370)
Cumulative net losses........................................ (41,491) (48,407)
-------- --------
(16,365) (21,913)
-------- --------
Total Partners' Deficit...................................... (16,479) (22,083)
-------- --------
$129,831 $129,918
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
26
<PAGE>
STATEMENT OF CHANGES IN PARTNERS' DEFICIT
MARRIOTT DIVERSIFIED AMERICAN HOTELS, L.P.
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
-------- --------- ---------
<S> <C> <C> <C>
Balance, December 31, 1994.. $(171) $(21,937) $(22,108)
Capital distributions..... (18) (1,855) (1,873)
Net income................ 4 389 393
----- -------- --------
Balance, December 31, 1995.. (185) (23,403) (23,588)
Capital distributions..... (19) (1,894) (1,913)
Net income................ 34 3,384 3,418
----- -------- --------
Balance, December 31, 1996.. (170) (21,913) (22,083)
Capital distributions..... (14) (1,368) (1,382)
Net income................ 70 6,916 6,986
----- -------- --------
Balance, December 31, 1997.. $(114) $(16,365) $(16,479)
===== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
27
<PAGE>
STATEMENT OF CASH FLOWS
MARRIOTT DIVERSIFIED AMERICAN HOTELS, L.P.
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
--------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income............................................................ $ 6,986 $ 3,418 $ 393
Noncash items:
Depreciation and amortization........................................ 6,398 6,032 5,534
Deferred interest.................................................... 1,414 1,375 1,414
Amortization of deferred financing costs as interest expense......... 280 279 278
Loss on retirement of property and equipment......................... 15 12 73
Changes in operating accounts:
Due to/from Marriott Hotel Services, Inc............................. 816 (730) (153)
Accounts payable and accrued expenses................................ (312) 55 104
Due to/from Host Marriott Corporation................................ -- 600 (653)
-------- ------- -------
Cash provided by operations.......................................... 15,597 11,041 6,990
-------- ------- -------
INVESTING ACTIVITIES
Additions to property and equipment................................... (3,288) (3,588) (2,895)
Change in property improvement fund, net.............................. 114 786 609
Return of working capital from Marriott Hotel Services, Inc........... 41 50 600
-------- ------- -------
Cash used in investing activities.................................... (3,133) (2,752) (1,686)
-------- ------- -------
FINANCING ACTIVITIES
Payment of mortgage debt.............................................. (6,731) (3,201) (2,698)
Mortgage escrow....................................................... (5,914) (3,341) (326)
Capital distributions to partners..................................... (1,382) (1,913) (1,873)
Repayment of deferred purchase debt due to Host Marriott Corporation.. (62) (82) --
Deferred financing costs.............................................. -- -- (1)
-------- ------- -------
Cash used in financing activities.................................... (14,089) (8,537) (4,898)
-------- ------- -------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS....................... (1,625) (248) 406
CASH AND CASH EQUIVALENTS at beginning of year......................... 2,762 3,010 2,604
-------- ------- -------
CASH AND CASH EQUIVALENTS at end of year............................... $ 1,137 $ 2,762 $ 3,010
======== ======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest:
Mortgage debt........................................................ $ 7,373 $ 7,491 $ 8,362
Deferred purchase debt due to Host Marriott Corporation.............. 62 10 81
-------- ------- -------
$ 7,435 $ 7,501 $ 8,443
======== ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
28
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Marriott Diversified American Hotels, L.P.
DECEMBER 31, 1997 AND 1996
NOTE 1. THE PARTNERSHIP
Description of the Partnership
Marriott Diversified American Hotels, L.P. (the "Partnership"), a Delaware
limited partnership, was formed on October 4, 1989 to acquire, own and operate
the following hotels (the "Hotels") which are managed as part of the Marriott
full-service hotel system by Marriott Hotel Services, Inc. ("MHSI"), a wholly-
owned subsidiary of Marriott International, Inc. ("MII"): (i) the 395-room
Fairview Park Marriott in Virginia; (ii) the 399-room Dayton Marriott in Ohio;
(iii) the 224-room Marriott at Research Triangle Park in North Carolina; (iv)
the 226-room Detroit Marriott Southfield in Michigan; (v) the 224-room Detroit
Marriott Livonia in Michigan; and (vi) the 224-room Fullerton Marriott in
California. The sole general partner of the Partnership, with a 1% interest, is
Marriott MDAH One Corporation (the "General Partner"), a wholly-owned subsidiary
of Host Marriott Corporation ("Host Marriott").
Partnership operations commenced on February 8, 1990 (the "Initial Closing
Date"). Between November 14, 1989 and the Initial Closing Date, 381 limited
partnership interests (the "Units") were sold pursuant to a private placement
offering. Between the Initial Closing Date and April 23, 1990 (the "Final
Closing Date"), the offering was completed with the sale of 33 additional Units.
The offering price per Unit was $100,000; $15,000 payable at subscription with
the balance due in three annual installments through June 20, 1992, or,
alternatively, $88,396 in cash at closing as full payment of the subscription
price. As of the Final Closing Date, 348.5 Units were purchased on the
installment basis, and 65.5 Units were paid in full. The limited partners'
obligation to make the installment payments is evidenced by promissory notes
(the "Investor Notes") payable to the Partnership and secured by the Units. The
General Partner contributed $418,182 in cash on the Initial Closing Date for its
1% general partnership interest.
On the Initial Closing Date, the Partnership executed a purchase agreement with
Host Marriott and certain of its affiliates to acquire the Hotels and the
Hotels' working capital and supplies for $157 million. Of the total purchase
price, $131.4 million was paid in cash from the proceeds of mortgage financing
and the initial installment on the sale of the Units with the remaining $25.6
million evidenced by a promissory note (the "Deferred Purchase Debt") payable to
Host Marriott.
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 will generally be distributed (i) first, 1%
to the General Partner and 99% to the limited partners, until the partners
have received, with respect to such year, an amount equal to 10% of
contributed capital, as defined; (ii) second, remaining cash available for
distribution will be distributed as follows, depending on the amount of
cumulative distributions of net refinancing and/or sales proceeds ("Capital
Receipts") previously distributed:
(1) 1% to the General Partner and 99% to the limited partners, if the
partners have received aggregate cumulative distributions of Capital
Receipts of less than 50% of their original capital contributions; or
(2) 10% to the General Partner and 90% to the limited partners, if the
partners have received aggregate cumulative distributions of Capital
Receipts equal to or greater than 50% but less than 100% of their
original capital contributions; or
(3) 20% to the General Partner and 80% to the limited partners, if the
partners have received aggregate cumulative distributions of Capital
Receipts equal to 100% or more of their original capital contributions.
29
<PAGE>
b. Capital Receipts not retained by the Partnership will be distributed (i)
first, 1% to the General Partner and 99% to the limited partners until the
partners have received an amount equal to the unpaid portion of a cumulative
15% return on Net Invested Capital, defined as the excess of capital
contributions over cumulative distributions of Capital Receipts, plus
contributed capital, as defined; and (ii) thereafter, 20% to the General
Partner and 80% to the limited partners.
c. Proceeds from the sale of substantially all of the 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.
d. Net profits will generally be allocated to the partners in proportion to the
distributions of cash available for distribution.
e. Net losses will be allocated 75% to the General Partner and 25% to the
limited partners.
f. Deductions for interest on the Deferred Purchase Debt (see Note 6), which
cumulatively will not exceed $11,604 per Unit, will be allocated to those
limited partners owning the Units purchased on the installment basis.
g. Gain recognized by the Partnership will be allocated as follows: (i) first,
to all partners whose capital accounts have negative balances until such
balances are brought to zero; (ii) next, to all partners in amounts necessary
to bring their respective capital account balances to an amount equal to
their Net Invested Capital plus a cumulative 15% return on Net Invested
Capital; and (iii) thereafter, 20% to the General Partner and 80% to the
limited partners.
h. Losses will generally be allocated as follows: (i) first, to all partners
whose capital accounts have positive balances until such balances have been
eliminated; and (ii) thereafter, 100% to the General Partner.
For financial reporting purposes, profits and losses are allocated among the
partners based upon their stated interests in cash available for distribution.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The Partnership's records are maintained on the accrual basis of accounting, and
its fiscal year coincides with the calendar year.
Restricted Cash
In connection with the June 30, 1993 refinancing of the mortgage debt, a debt
service reserve in the amount of $3.0 million was required to be held by the
lender. In addition, the loan agreement requires that to the extent that there
was cash available after payment of principal and interest on Note A and
interest on Note B, then such remaining cash was split 50% to the Partnership
and 50% to a mortgage escrow account (the "Mortgage Escrow"). The Mortgage
Escrow was applied annually 50% to the payment of additional principal on Note
A, and 50% to the principal on Note B, until the Partnership received a
cumulative amount equal to $7,352,000. The Partnership reached this cumulative
amount in September 1996. Thereafter, 100% of remaining cash flow is reserved
in the Mortgage Escrow and applied annually, 25% to Note A and 75% to Note B. At
December 31, 1997, the balance of the Mortgage Escrow was $11.6 million. This
amount will be applied toward principal amortization in 1998.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
30
<PAGE>
Revenues and Expenses
Revenues represent house profit of the Hotels since the Partnership has
delegated substantially all of the operating decisions related to the generation
of house profit from the Hotels to MHSI. 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 management fees, real and personal property taxes, ground and
equipment rent, insurance and certain other costs, which are disclosed in the
statement of operations (see Note 3).
On November 20, 1997, the Emerging Issues Task Force ("EITF") of the Financial
Accounting Standards Board reached a consensus on EITF 97-2, "Application of
FASB Statement No. 94 and APB Opinion No. 16 to Physician Practice Management
Entities and Certain Other Entities with Contractual Management Arrangements."
EITF 97-2 addresses the circumstances in which a management entity may include
the revenues and expenses of a managed entity in its financial statements.
The Partnership is assessing the impact of EITF 97-2 on its policy of excluding
the property-level revenues and operating expenses of its hotels from its
statements of operations.
Property and Equipment
Property and equipment is recorded at cost. Depreciation and amortization are
computed using the straight-line method over the estimated useful lives of the
assets as follows:
Land improvements 40 years
Buildings and improvements 40 years
Leasehold improvements 40 years
Furniture and equipment 4 to 10 years
All property and equipment is pledged as security for the mortgage debt
described in Note 6.
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 the property
is impaired, its basis is adjusted to fair market value.
Deferred Financing and Organization Costs
Deferred financing costs represent the costs incurred in connection with
obtaining the Mortgage Debt and are being amortized over the term thereof.
Organization costs incurred in the formation of the Partnership were amortized
on a straight-line basis over five years. Organization costs were fully
amortized and removed from the Partnership's accounts as of December 31, 1995.
As of December 31, 1997 and 1996, accumulated amortization of deferred financing
costs totaled $1,995,000 and $1,715,000, respectively.
Cash and Cash Equivalents
The Partnership considers all highly liquid investments with a maturity of less
than three months at date of purchase to be cash equivalents.
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 (loss) for financial
reporting purposes and the net income (loss) reported in the Partnership's tax
return. These differences are primarily due to the use, for income tax
purposes, of accelerated depreciation methods and shorter depreciable lives of
the assets. As a result of these differences, the excess of the tax basis in
net Partnership liabilities
31
<PAGE>
over the net liabilities reported in the accompanying financial statements is
$3,462,000 and $5,650,000 as of December 31, 1997 and 1996, respectively.
Statement of Financial Accounting Standards
In 1996, the Partnership adopted Statement of Financial Accounting Standards
("SFAS") No. 121 "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." Adoption of SFAS No. 121 did not have an
effect on the financial statements.
Reclassification
Certain prior year amounts have been reclassified to conform with the current
year presentation.
NOTE 3. REVENUES
Revenues consist of Hotel operating results for the three years ended December
31, (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
HOTEL SALES
Rooms........................... $48,427 $43,621 $40,201
Food and beverage............... 22,900 22,058 20,716
Other........................... 3,994 3,864 3,876
------- ------- -------
75,321 69,543 64,793
------- ------- -------
HOTEL EXPENSES
Departmental direct costs
Rooms......................... 12,063 11,333 10,638
Food and beverage............. 17,464 17,172 16,439
Other hotel operating expenses.. 19,095 18,664 18,001
------- ------- -------
48,622 47,169 45,078
------- ------- -------
REVENUES......................... $26,699 $22,374 $19,715
======= ======= =======
</TABLE>
NOTE 4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following as of December 31 (in
thousands):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Land and improvements.......... 14,265 $ 14,265
Buildings and improvements..... 95,477 94,368
Leasehold improvements......... 15,717 15,173
Furniture and equipment........ 29,255 27,832
-------- --------
154,714 151,638
Less accumulated depreciation.. (46,561) (40,360)
-------- --------
$108,153 $111,278
======== ========
</TABLE>
32
<PAGE>
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 (in thousands):
<TABLE>
<CAPTION>
As of December 31, 1997 As of December 31, 1996
----------------------- -----------------------
Estimated Estimated
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Mortgage debt........................................... $122,014 $113,300 $128,745 $117,231
Debt service guarantee and related interest
payable to Host Marriott Corporation................... $ 19,762 $ 17,600 $ 18,600 $ 7,800
Note payable and related interest due to
the General Partner.................................... $ 2,804 $ 800 $ 2,615 $ 743
Deferred purchase debt and related interest payable to
Host Marriott Corporation.............................. $ 676 $ 450 $ 675 $ 384
</TABLE>
The estimated fair value of mortgage debt obligations is based on the expected
future debt service payments discounted at estimated market rates. Notes and
other payables due to Host Marriott and affiliates are valued based on the
expected future payments from operating cash flow discounted at risk-adjusted
rates.
NOTE 6. DEBT
Mortgage Debt
On June 30, 1993, the General Partner completed a restructuring of the
Partnership's first mortgage (the "Mortgage Debt"). Pursuant to the terms of the
restructuring, the original Mortgage Debt of $128 million was divided into two
notes, Note A with a principal balance of $85 million and Note B with a
principal balance of $43 million, which mature on December 15, 1999. In
addition, interest rate swap termination costs of $9.3 million relating to the
original Mortgage Debt were established as Note C with a maturity date of
December 15, 2010. The Partnership paid $12.3 million to the lender which was
applied as follows: $7.6 million to the interest due through closing, $3.0
million to fund a new debt service reserve (the "Reserve"), $1.0 million as a
loan extension fee, and $.7 million to principal. The 1992 purchase price
adjustment made by Host Marriott to the Partnership was applied toward the
scheduled interest payment and to partially fund the Reserve. The remainder of
the payment was funded by a $2.0 million loan from the General Partner and from
the Partnership's operating cash account funds. The loan from the General
Partner bears interest at the prime lending rate plus 1% and matures on June 30,
2008.
Interest on Note A accrues at a floating rate, as elected by the Partnership,
equal to one percentage point over either one, two, three or six-month London
Interbank Offered Rate ("LIBOR"). Principal amortization of $600,000 was
required in 1993 escalating annually to $1 million in 1998. To the extent that
operating profit is not sufficient to fund required Note A interest and
principal, then necessary funds will be drawn from the Reserve. The weighted-
average effective interest rate on Note A was 6.7% and 6.2% for 1997 and 1996,
respectively. Interest on Note B accrues at LIBOR. To the extent that
operating profit is not sufficient to fund Note B interest in any fiscal year,
then Note B interest is limited to cash available after payment of Note A
principal and interest. Unpaid Note B interest for any fiscal year is forgiven.
The weighted-average effective interest rate on Note B was 5.7% and 5.5% for
1997 and 1996, respectively. In addition, to the extent that there was cash
available after payment of principal and interest on Note A and interest on Note
B, then such remaining cash was split 50% to the Partnership and 50% to the
Mortgage Escrow. The Mortgage Escrow was applied annually 50% to the payment of
additional principal on Note A and 50% to the principal on Note B, until the
Partnership received a cumulative amount equal to $7,352,000. The Partnership
reached this cumulative amount in September 1996. Thereafter, 100% of remaining
cash flow is reserved in the Mortgage Escrow and applied annually, 25% to Note A
and 75% to Note B. At December 31, 1997, the balance of the Mortgage Escrow was
$11.6 million and is included in the accompanying balance sheet. Note C bears
no interest and has no required principal amortization prior to its maturity.
33
<PAGE>
The Mortgage Debt is secured by first mortgages on each of the Hotels, the
Partnership's interest in the Fullerton Hotel ground lease, the land on which
the remaining Hotels are located, the Partnership's interest in the Fairview
Park Hotel parking garage lease, a security interest in all of the personal
property associated with each Hotel, a security interest in the Partnership's
rights under the management and purchase agreement and a security interest in
the Partnership's deposit accounts.
Scheduled amortization and maturities of the Mortgage Debt at December 31, 1997
are (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1998.............. $ 1,000
1999.............. 111,678
2000.............. 0
2001.............. 0
2002.............. 0
Thereafter........... 9,336
--------
$122,014
========
</TABLE>
As of December 31, 1993, Host Marriott's debt service guarantee on the original
Mortgage Debt totaling $13 million was fully exhausted. Advances under the
guarantee bear interest at the prime lending rate plus one-half percentage
point. For 1997 and 1996, the weighted-average effective interest rate was 8.9%
and 8.8%, respectively. These advances will be repaid from available cash flow
after payments of ground rent, Mortgage Debt Service, Partnership administrative
expenses in excess of Partnership interest income and retention by the
Partnership of an amount equal to 10% of the partners' contributed capital, as
defined. During 1997, no amounts were repaid to Host Marriott pursuant to the
debt service guarantees. In addition, the General Partner has provided a
foreclosure guarantee to the lender in the amount of $25 million. Pursuant to
the terms of the foreclosure guarantee, amounts would be payable only upon a
foreclosure on the Hotels and only to the extent that the gross proceeds from
the foreclosure sale were less than $25 million.
Deferred Purchase Debt
The Deferred Purchase Debt bears interest at 10% per annum and was due July 1,
1992. The note was required to be repaid from, and is secured by, the proceeds
of the Investor Notes which were due through June 20, 1992. Investor Notes
outstanding as of December 31, 1997 represent payments due from defaulters and
related interest payable under such notes. As a result of the Partnership's
failure to collect the Investor Notes in full, and subsequent failure to repay
the Deferred Purchase Debt in full, the Partnership is currently in default
under the terms of the Deferred Purchase Debt agreements. Host Marriott has the
right to perfect a security interest in the Units securing the defaulted
Investor Notes. However, Host Marriott agreed not to foreclose on its interest
in the Units prior to the earlier of the sale of the Hotels or January 1, 1998.
As of April 8, 1998, Host Marriott has not exercised its option to foreclose on
its interest in the Units. Total accrued interest on the Deferred Purchase Debt
at December 31, 1997 and 1996, was $47,000 and $42,000, respectively.
NOTE 7. MANAGEMENT AGREEMENT
The Partnership entered into a hotel management agreement on the Initial Closing
Date with MII to manage the Hotels for an initial 20-year term expiring December
31, 2009. During 1996, MII assigned all of its interest in the hotel management
agreement to MHSI, a wholly-owned subsidiary of MII. MHSI has the option to
renew the hotel management agreement on one or more of the Hotels for up to five
successive 10-year terms (four successive 10-year terms for the Fullerton
Hotel). MHSI earns a base management fee equal to 3% of gross sales.
In connection with the 1993 loan restructuring, the hotel management agreement
was modified. During the restructured loan term, no incentive management fees
will be accrued by the Partnership or be considered earned by the manager until
the entire mortgage principal balance, together with accrued interest, is paid
in full. No incentive management fees have been paid to MHSI since the
inception of the Partnership.
34
<PAGE>
Pursuant to the terms of the hotel management agreement, MHSI 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 Marriott full-
service hotel system. Chain Services include central training, advertising and
promotion, a national reservation 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 MII or its subsidiaries. In addition, the Hotels also participate in
Marriott's Rewards Program ("MRP") which succeeded the Marriott Honored Guest
Awards Program. The cost of this program is charged to all hotels in the
Marriott full-service hotel system based upon the MRP sales at each hotel. The
total amount of Chain Services and MRP costs charged to the Partnership was
$3,874,000 for 1997, $3,497,000 for 1996, $3,316,000 for 1995.
Pursuant to the terms of the hotel management agreement, the Partnership is
required to provide MHSI with working capital and supplies to meet the operating
needs of the Hotels. MHSI 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 MHSI.
Upon termination of the hotel management agreement, the working capital and
supplies will be returned to the Partnership. The individual components of
working capital and supplies controlled by MHSI are not reflected in the
Partnership's balance sheet. A total of $4,500,000 was advanced to MHSI for
working capital and supplies of which $600,000 was returned to the Partnership
during 1995, $50,000 was returned during 1996 and $41,000 was returned in 1997
leaving a balance of $3,900,000, $3,850,000 and $3,809,000 as of December 31,
1995, 1996 and 1997, respectively, which is included in Due from Marriott Hotel
Services, Inc. in the accompanying balance sheet. The supplies advanced to MHSI
are recorded at their estimated net realizable value. At December 31, 1997 and
1996, accumulated amortization related to the revaluation of these supplies
totaled $473,000.
The hotel management agreement provides for the establishment of a property
improvement fund for each Hotel. Contributions to the property improvement fund
are equal to a percentage of gross Hotel sales. Contributions to the fund for
the Fairview Park, Southfield, Livonia and Fullerton Hotels were 3% for the
years 1995 through 1999 and 4% for the year 2000 and thereafter. The Dayton
Hotel contributes 4% annually. Annual contributions at the Research Triangle
Park Hotel were 3% through 1997 and will be 4% in 1998 and thereafter.
Aggregate contributions to the property improvement fund amounted to $2,442,000,
$2,258,000 and $2,104,000 for the years ended December 31, 1997, 1996 and 1995,
respectively.
NOTE 8. GROUND LEASES
The Partnership leases the land on which the Fullerton Hotel is located. The
initial term expires in 2019 with four successive 10-year renewals at the
Partnership's option. The lease provides for percentage rental equal to 4% of
gross room sales for each year. Prior to October 1995, the lease provided for
percentage rent equal to 2% of gross room sales. Ground rent expense incurred
for this lease for the years ended December 31, 1997, 1996 and 1995 was
$199,000, $185,000 and $99,000, respectively. The Partnership also leases the
land on which the Fairview Park Hotel parking garage is located. The lease
expires in 2085 and requires a nominal rental of $1 per year.
35
<PAGE>
CONDENSED STATEMENT OF OPERATIONS
MARRIOTT DIVERSIFIED AMERICAN HOTELS, L.P.
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED
MARCH 27, MARCH 28,
1998 1997
---------- ----------
<S> <C> <C>
REVENUES
Hotel revenues (Note 4).................................... $ 6,877 $ 5,524
------- -------
OPERATING COSTS AND EXPENSES
Depreciation and amortization.............................. 1,381 1,428
Base management fees due to Marriott Hotel Services, Inc... 552 486
Property taxes and other................................... 682 610
------- -------
2,615 2,524
------- -------
OPERATING PROFIT............................................ 4,262 3,000
Interest expense........................................... (1,922) (2,167)
Interest income............................................ 144 30
------- -------
NET INCOME.................................................. $ 2,484 $ 863
======= =======
ALLOCATION OF NET INCOME
General Partner............................................ $ 25 $ 9
Limited Partners........................................... 2,459 854
------- -------
$ 2,484 $ 863
======= =======
NET INCOME PER LIMITED PARTNER UNIT
(414 Units)................................................ $ 5,940 $ 2,063
======= =======
</TABLE>
See Notes To Condensed Financial Statements.
36
<PAGE>
CONDENSED BALANCE SHEET
MARRIOTT DIVERSIFIED AMERICAN HOTELS, L.P.
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 27, DECEMBER 31,
1998 1997
--------- -----------
(UNAUDITED)
ASSETS
<S> <C> <C>
Property and equipment, net..................................... $107,233 $108,153
Mortgage escrow................................................. 13,417 11,624
Due from marriott hotel services, inc........................... 5,250 3,714
Debt service reserve fund....................................... 3,000 3,000
Property improvement fund....................................... 1,867 1,667
Deferred financing costs, net................................... 472 536
Cash and cash equivalents....................................... 1,099 1,137
-------- --------
Total Assets............................................... $132,338 $129,831
======== ========
</TABLE>
LIABILITIES AND PARTNERS' DEFICIT
<TABLE>
<CAPTION>
LIABILITIES
<S> <C> <C>
Mortgage debt................................................. $121,783 $122,014
Debt service guarantee and related interest payable to
Host Marriott Corporation.................................... 20,038 19,762
Note payable and related interest due to the General Partner.. 2,849 2,804
Deferred purchase debt and related interest payable to
Host Marriott Corporation.................................... 691 676
Accounts payable and accrued expenses......................... 972 1,054
-------- --------
Total Liabilities.......................................... 146,333 146,310
-------- --------
PARTNERS' DEFICIT
General partner
Capital contributions net of offering costs of $15........... 403 403
Capital distributions........................................ (98) (98)
Cumulative net losses........................................ (394) (419)
-------- --------
(89) (114)
-------- --------
Limited Partners
Capital contributions net of offering costs of $4,785........ 35,830 35,830
Interest notes receivable.................................... (966) (966)
Capital distributions........................................ (9,738) (9,738)
Cumulative net losses........................................ (39,032) (41,491)
-------- --------
(13,906) (16,365)
-------- --------
Total Partners' Deficit.................................... (13,995) (16,479)
-------- --------
$132,338 $129,831
======== ========
</TABLE>
See Notes to Condensed Financial Statements.
37
<PAGE>
CONDENSED STATEMENT OF CASH FLOWS
MARRIOTT DIVERSIFIED AMERICAN HOTELS, L.P.
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED
MARCH 27, MARCH 28,
1998 1997
------------------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income........................................ $ 2,484 $ 863
Noncash items..................................... 1,780 1,819
Change in operating accounts...................... (1,618) (655)
------- -------
Cash provided by operating activities......... 2,646 2,027
------- -------
INVESTING ACTIVITIES
Additions to property and equipment, net.......... (460) (1,120)
Change in property improvement fund............... (200) 717
------- -------
Cash used in investing activities............. (660) (403)
------- -------
FINANCING ACTIVITIES
Mortgage escrow................................... (1,793) (1,191)
Payment of mortgage debt.......................... (231) (223)
------- -------
Cash used in financing activities............. (2,024) (1,414)
------- -------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS... (38) 210
CASH AND CASH EQUIVALENTS at beginning of period... 1,137 2,762
------- -------
CASH AND CASH EQUIVALENTS at end of period......... $ 1,099 $ 2,972
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for mortgage interest................... $ 1,430 $ 1,858
======= =======
</TABLE>
See Notes To Condensed Financial Statements.
38
<PAGE>
MARRIOTT DIVERSIFIED AMERICAN HOTELS, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. The accompanying condensed financial statements have been prepared by
Marriott Diversified American Hotels, L.P. (the "Partnership") without audit.
Certain information and footnote disclosures normally included in financial
statements presented in accordance with generally accepted accounting
principles have been condensed or omitted from the accompanying statements.
The Partnership believes the disclosures made are adequate to make the
information presented not misleading. However, the condensed financial
statements should be read in conjunction with the Partnership's financial
statements and notes thereto for the fiscal year ended December 31, 1997 in
the Partnership's Form 10.
In the opinion of the Partnership, the accompanying condensed unaudited
financial statements reflect all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position of
the Partnership as of March 27, 1998, and the results of operations and cash
flows for the twelve weeks ended March 27, 1998 and March 28, 1997. Interim
results are not necessarily indicative of fiscal year performance because of
seasonal and short-term variations.
2. The Partnership owns and operates the Marriott Research Triangle Park,
Southfield Marriott, Detroit Marriott at Livonia, Fullerton Marriott,
Fairview Park Marriott and Dayton Marriott. The sole general partner of the
Partnership, with a 1% interest, is Marriott Corporation (the "General
Partner"), a wholly-owned subsidiary of Host Marriott Corporation ("Host
Marriott"). The remaining 99% interest in the Partnership is owned by the
limited partners.
3. For financial reporting purposes, net income of the Partnership is allocated
99% to the Limited Partners and 1% to the General Partner. Significant
differences exist between the net income for financial reporting purposes and
the net income reported for Federal income tax purposes. 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.
4. 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 Marriott Hotel
Services, Inc. (the "Manager"). House profit reflects hotel operating
results which flow to the Partnership as property owner and represents gross
hotel sales less property-level expenses, excluding depreciation and
amortization, base and incentive management fees, property taxes, ground
rent, insurance and other costs, which are disclosed separately in the
condensed statement of operations.
39
<PAGE>
Partnership revenues generated by the Hotels consist of (in thousands):
<TABLE>
<CAPTION>
Twelve Weeks Ended
March 27, March 28,
1998 1997
--------- ---------
<S> <C> <C>
HOTEL REVENUES
Rooms........................... $12,246 $10,781
Food and beverage............... 5,218 4,569
Other........................... 952 869
------- -------
18,416 16,219
------- -------
HOTEL EXPENSES
Departmental direct costs
Rooms.......................... 2,960 2,681
Food and beverage.............. 4,027 3,753
Other hotel operating expenses.. 4,552 4,261
------- -------
11,539 10,695
------- -------
HOTEL REVENUES.................... $ 6,877 $ 5,524
======= =======
</TABLE>
5. Certain reclassifications were made to the prior year financial statements to
conform to the 1998 presentation.
6. On November 20, 1997, the Emerging Issues Task Force ("EITF") of the
Financial Accounting Standards Board reached a consensus on EITF 97-2,
"Application of FASB Statement No. 94 and APB Opinion No. 16 to Physician
Practice Management Entities and Certain Other Entities with Contractual
Management Arrangements." EITF 97-2 addresses the circumstances in which a
management entity may include the revenues and expenses of a managed entity
in its financial statements.
The Partnership is assessing the impact of EITF 97-2 on its policy of
excluding the property-level revenues and operating expenses of its hotels
from its statements of operations.
7. On April 17, 1998, Host Marriott, parent company of the General Partner of
the Partnership, announced that its Board of Directors has authorized Host
Marriott to reorganize its business operations to qualify as a real estate
investment trust ("REIT") to become effective as of January 1, 1999.
As part of the REIT reorganization, Host Marriott has formed an operating
partnership (the "Operating Partnership"). The Operating Partnership is
proposing to acquire by merger (the "Mergers") eight limited partnerships
that own full-service hotels in which Host Marriott or its subsidiaries are
general partners, including the Partnership. As more fully described in the
registration statement filed with the Securities and Exchange Commission on
June 2, 1998, limited partners of those partnerships that participate in the
Mergers will receive either units or, at their election, unsecured notes
issued by the Operating Partnership in exchange for their partnership
interests in the Partnerships.
Consummation of the REIT reorganization is subject to significant
contingencies that are outside the control of Host Marriott, including final
Board approval, consent of shareholders, partners, bondholders, lenders, and
ground lessors of Host Marriott, its affiliates and other third parties.
Accordingly, there can be no assurance that the REIT reorganization will be
completed or that it will be effective as of January 1, 1999.
40
<PAGE>
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
ITEM 15. FINANCIAL STATEMENTS, SUPPLEMENTARY DATA AND EXHIBITS
(a) The financial statements filed as a part of this Form 10 are
listed in item 13 on Page 2.
Supplementary Financial Statement Schedule - Page
Marriott Diversified American Hotels, L.P. ----
III. Real Estate and Accumulated Depreciation 43-44
Schedules I through V inclusive, other than those listed above, are omitted
because of the absence of conditions under which they are required or because
the required information is included in the financial statements or notes
thereto.
Exhibit # Description
- --------- -----------
3.a. Amended and Restated Agreement of Limited Partnership of Marriott
Diversified American Hotels, L.P. dated February 7, 1990.
10.a. Amended and Restated Loan Agreement Between Marriott Diversified
American Hotels, L.P. and NationsBank of Georgia, National Association
dated June 30, 1993.
10.b. First Amendment of Amended and Restated Loan Agreement by dated
October 17, 1994 by and between NationsBank of Georgia, National
Association and Marriott Diversified American Hotels, L.P.
10.c. Cash Collateral Agreement dated as of June 30, 1993, by and between
Marriott Diversified American Hotels, L.P. and NationsBank of Georgia,
National Association.
10.d. First Amendment to Cash Collateral Agreement dated July 22, 1994 by
and between Marriott Diversified American Hotels, L.P. and NationsBank
of Georgia, National Association.
10.e. Reaffirmation of Foreclosure Guarantee dated as of June 30, 1993
executed and delivered by Marriott MDAH ONE CORPORATION in favor of
NationsBank of Georgia, National Association.
10.f. Amended and Restated Line of Credit and Reimbursement Agreement on
June 30, 1993 by and among Marriott Corporation, MDAH ONE CORPORATION
and Marriott Diversified American Hotels, L.P.
10.g. Series A Promissory Note dated December 15, 1992 between Marriott
Diversified American Hotels, L.P. and NationsBank of Georgia, National
Association.
10.h. Series B Promissory Note dated December 15, 1992 between Marriott
Diversified American Hotels, L.P. and NationsBank of Georgia, National
Association.
10.i. Series C Promissory Note dated December 15, 1992 between Marriott
Diversified American Hotels, L.P. and NationsBank of Georgia, National
Association.
10.j. Amended and Restated Management Agreement by and between Marriott
International, Inc. and Marriott Diversified American Hotels, L.P.
dated June 30, 1993.
41
<PAGE>
Exhibit # Description
- --------- -----------
10.k. Amended and Restated Assignment of Management Agreement made June 30,
1993 by and among Marriott Diversified American Hotels, L.P., Marriott
International Inc. and, NationsBank of Georgia, National Association.
10.l. First Amendment to Amended and Restated Assignment of Management
Agreement dated as of July 22, 1994 by and among Marriott Diversified
American Hotels, L.P. and Marriott International Inc. and NationsBank
of Georgia, National Association.
10.m. $2,000,000 Promissory Note dated June 30, 1993 by and between Marriott
Diversified American Hotels, L.P. and MDAH ONE CORPORATION.
10.n. $13,000,000 Promissory Note dated June 30, 1993 by and between
Marriott Diversified American Hotels, L.P. and MDAH ONE CORPORATION.
10.o. Assignment of Closing and Indemnity Agreement made on June 30, 1993 by
and among Marriott Diversified American Hotels, L.P., Marriott
Corporation and NationsBank of Georgia, National Association.
10.p. Subordination Agreement dated as of June 30, 1993 by and among
Marriott MDAH ONE CORPORATION, Marriott Diversified American Hotels,
L.P. and NationsBank of Georgia, National Association.
10.q. Subordination Agreement dated as of June 30, 1993 by and among
Marriott Corporation, Marriott Diversified American Hotels, L.P. and
NationsBank of Georgia, National Association.
10.r. Subordination Agreement dated as of June 30, 1993 by and among
Marriott International, Inc., Marriott Diversified American Hotels,
L.P. and NationsBank of Georgia, National Association.
27. Financial Data Schedule.
(b) Reports on Form 8-K. No reports on Form 8-K were filed during
1997.
42
<PAGE>
SCHEDULE III
Page 1 of 2
MARRIOTT DIVERSIFIED AMERICAN HOTELS, L.P.
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
Initial Costs
---------------------
Subsequent
Building and Costs
Description Encumbrances Land Improvements Capitalized
- --------------------------- ------------ ------- ------------ ------------
<S> <C> <C> <C> <C>
Research Triangle Park
Marriott $ 1,831 $ 11,352 $ 281
Morrisville,
North Carolina
Southfield Marriott 1,644 13,850 976
Southfield, Michigan
Livonia Marriott 1,663 13,334 1,036
Livonia, Michigan
Fullerton Marriott -- 13,609 647
Fullerton, California
Fairview Park Marriott 4,921 36,570 3,460
Falls Church, Virginia
Dayton Marriott 1,353 19,916 (984)
------- -------- ------
Dayton, Ohio
Total $122,014 $11,412 $108,631 $5,416
======== ======= ======== ======
</TABLE>
<TABLE>
<CAPTION>
Gross Amount at December 31,
1997
-------------------------------
Date of
Building and Accumulated Completion of Date Depreciation
Description Land Improvements Total Depreciation Construction Acquired Life
- --------------------------- ------- ------------ -------- ------------ ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Research Triangle Park $ 1,831 $ 11,633 $ 12,797 $ 2,556 1988 1990 40 years
Marriott
Morrisville, North Carolina
Southfield Marriott 1,644 14,826 16,310 3,258 1989 1990 40 years
Southfield, Michigan
Livonia Marriott 1,663 14,370 15,808 3,158 1989 1990 40 years
Livonia, Michigan
Fullerton Marriott -- 14,256 15,682 3,132 1989 1990 40 years
Fullerton, California
Fairview Park Marriott 4,921 40,030 44,036 8,796 1989 1990 40 years
Falls Church, Virginia
Dayton Marriott 1,353 18,932 20,826 4,160 1982 1990 40 years
------- -------- -------- -------
Dayton, Ohio
Total $11,412 $114,047 $125,459 $25,060
======= ======== ======== =======
</TABLE>
43
<PAGE>
SCHEDULE III
PAGE 2 OF 2
MARRIOTT DIVERSIFIED AMERICAN HOTELS, L.P.
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
Notes: 1995 1996 1997
- -------- -------- -------- --------
<S> <C> <C> <C>
(a) The changes in the total cost of land,
buildings and improvements for the
three years ended December 31, 1997
are as follows:
Balance at beginning of year.......... $121,240 $121,685 $123,806
Capital Expenditures............... 445 2,121 1,653
Dispositions....................... -- -- --
-------- -------- --------
Balance at end of year................ $121,685 $123,806 $125,459
======== ======== ========
<CAPTION>
(b) The changes in accumulated depreciation and amortization
for the three years ended December 31, 1997 were as follows:
<S> <C> <C> <C>
Balance at beginning of year.......... $ 14,981 $ 18,126 $ 21,507
Depreciation....................... 3,145 3,381 3,553
Disposition and other.............. -- -- --
-------- -------- --------
Balance at end of year................ $ 18,126 $ 21,507 $ 25,060
======== ======== ========
(c) The aggregate cost of land, buildings and
improvements for Federal income tax purposes
was approximately $125 million at December 31, 1997.
</TABLE>
44
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this Form 10 to be signed on its
behalf by the undersigned, thereunto duly authorized, on this 12th day of
June 1998.
MARRIOTT DIVERSIFIED AMERICAN HOTELS, L.P.
BY: Marriott MDAH One Corporation
General Partner
/s/ Patricia K. Brady
-------------------------------------------
Patricia K. Brady
Vice President and Chief Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
the capacities and on the date indicated above.
Signature Title
(Marriott MDAH One Corporation)
/s/ Bruce F. Stemerman President and Director
- --------------------------- (Principal Executive Officer)
Bruce F. Stemerman
/s/ Christopher G. Townsend Vice President, Secretary and Director
- ---------------------------
Christopher G. Townsend
/s/ Patricia K. Brady Vice President and Chief Accounting Officer
- ---------------------------
Patricia K. Brady
/s/ Bruce Wardinski Treasurer
- ---------------------------
Bruce Wardinski
45
<PAGE>
EXHIBIT 3.a
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF
MARRIOTT DIVERSIFIED AMERICAN HOTELS, L.P.
This Amended and Restated Agreement of Limited Partnership dated as of
February 7, 1990 is made and entered into by and among Marriott MDAH One
Corporation, a Delaware corporation, as general partner (the "General Partner"),
Christopher G. Townsend, as initial limited partner (the "Initial Limited
Partner"), and those Persons who become limited partners of this limited
partnership in accordance with the provisions hereof and are identified as such
in the books and records of the Partnership (the "Limited Partners").
Marriott Diversified American Hotels, L.P. (the "Partnership") was formed
pursuant to a Certificate of Limited Partnership dated as of October 4, 1989
filed with the Secretary of State of the State of Delaware on October 6, 1989.
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)(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 five weeks
when necessary to conform the accounting system to the calendar.
"Act" means the Delaware Revised Uniform Limited Partnership Act (6 Del C.
(S)(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-
1T(b)(4)(iv)(f) and 1.704-1T(b)(4)(iv)(h)(5) of the Treasury Regulations
(determined after taking into account any changes during such year in
Minimum Gain); and
(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" or "Affiliated Person" means, when used with reference to a
specified Person, (i) any Person that directly or indirectly through one or more
intermediary, 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 on trustee, or with respect to
D-1
<PAGE>
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.
"Agreement" means this 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 3.07.
"Capital Contribution" or "Capital Contributions" means, with respect to
any Partner, the total amount of money contributed to the Partnership (prior to
the deduction of any selling commissions or expenses) by such Partner; provided,
however, that (i) as and to the extent the Placement Agent retained by the
General Partner to assist in the private placement of the Units foregoes any
portion of its 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 elects to make a payment of $88,396 per Unit in cash ($81,396 per Unit
in cash if purchased by the General Partner, the Placement Agent, or qualified
officers, directors or employee, of Marriott or its Affiliates) upon execution
of the subscription documents as full payment of his Capital Contribution, the
Limited Partners purchasing any such Units 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.
For purposes of determining Net Invested Capital, Partners' 10% Preferred
Distribution and amounts described in Sections 4.06(ii) and 4~07A(ii) only,
Capital Contributions shall be deemed to be equal to the following amounts:
$6,272,727 from the date of the initial closing of the offering pursuant to the
Private Placement Memorandum through June 19, 1990 ($6,210,000 with respect to
the Limited Partners and $62,727 with respect to the General Partner);
$16,727,272 from June 20, 1990 through June 19, 1991 ($16,560,000 with respect
to the Limited Partners and $167,272 with respect to the General Partner);
$29,272,727 from June 20, 1991 through June 19, 1992 ($28,980,000 with respect
to the Limited Partners and $292,727 with respect to the General Partner) (each
of which amounts is determined assuming that all Units are purchased on the
installment basis, that all installments are paid on their due dates, and that
the General Partner's Capital Contribution is paid in installments on the same
dates and in the proportions as the installments of the Limited Partners'
Capital Contributions); and $41,818,182 thereafter (which amount represents
aggregate Capital Contributions of $100,000 per Unit by the Limited Partners and
$418,182 by the General Partner).
"Capital Priority Amount" means an amount equal to the sum of (i) the Net
Invested Capital of the Partners at the time of determination plus (ii) the
Partners' 15% Preferred Distribution at the time of determination.
"Capital Receipts" means Sale Proceeds and/or Refinancing Proceeds.
"Cash Available for Distribution" means, with respect to any fiscal
period, an amount equal to the cash revenues of the Partnership from all sources
(other than Capital Receipts) during such fiscal period (including amounts
received pursuant to the Purchase Price Adjustment mechanism and interest income
on Partnership working capital) plus such reserves as may be determined by the
D-2
<PAGE>
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,
operating expenses, ground rent, debt service, repayment of advances made by the
General Partner (or Marriott under the Debt Service Guarantee) 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 capital transactions, 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 (a) 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 (b) a prior
written approval required or permitted to be given pursuant to this Agreement or
the Act, as the context may require. Unless otherwise specified, "Consent of the
Limited Partners" shall mean consent of Limited Partners holding, in their
capacity as Limited Partners and not as assignees, a majority of the outstanding
Units; provided, however, if the General Partner or any Affiliate of the General
Partner (other than officers, directors or employees of the General Partner or
any of its Affiliates who own Units for their own accounts) owns any Units, then
in the case of each matter in which the General Partner or an Affiliate thereof
has an interest, such Units shall not be voted on any such matter presented to
the Limited Partners for a vote, except that in connection with a decision to
continue the business of the Partnership and to appoint one or more general
partners as provided in Section 6.05A, the General Partner agrees that it will
consent in writing to such action.
"Debt Service Guarantee" means the guarantee by Marriott in an amount not
exceeding $13 million of interest and principal due under the Permanent Loan if
the Partnership is unable to make such payments.
"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 10 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 the Defaulting Limited Partner of the General Partner's desire
to purchase all or a portion of a Defaulting Limited Partner's Interest.
"Deferred Purchase Debt" means the indebtedness of the Partnership to
Marriott and its Affiliates of up to $30.386 million to permit the Partnership
to pay a portion of the purchase price of the deferred portion of the Hotels
(other than the Hotel located in Dayton, Ohio), with interest accruing at the
lesser of 10% per annum or the maximum rate permitted by applicable law and with
D-3
<PAGE>
principal and accrued interest due on August 1, 1992, but required to be prepaid
our of the proceeds of the installments of the Capital Contributions to be paid
by the Limited Partners.
"Designated Person" means the General Partner.
"Fairview Park Hotel" means the Marriott full-service 394-room Fairview
Park Hotel located in Fairfax County, Virginia, the land on which the hotel is
located, and the lease relating to the land on which the Hotel's parking garage
is located.
"FF&E" means (i) furniture, fixtures, furnishings, vehicles, carpeting,
and equipment and (ii) routine repairs and maintenance undertaken subsequent to
the opening date of a Hotel or addition thereto, the cost of which would not be
expensed under generally accepted accounting principles.
"Fiscal Quarter" means, for the respective fiscal periods in any Fiscal
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
for Federal income tax purposes upon the sale or disposition of Partnership
property (plus any Section 267(d) Gain) (other than the routine sale or
disposition of used FF&E being replaced at a Hotel), as reduced by the costs of
such sale or disposition.
"General Partner" means Marriott MDAH One Corporation, a Delaware
corporation and wholly owned subsidiary of Host, 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 Section 6.01 or
10.02B.
"Ground Lease" means the lease between the Partnership, as tenant, and a
certain third party, as landlord, by which the Partnership will lease the land
on which the Hotel located in Fullerton, California is situated.
"Host" means Host International, Inc., a Delaware corporation and wholly
owned subsidiary of Marriott.
"Hotels" means the Marriott full-service hotel properties as described in
Schedule I to this Agreement and the land on which each of the Hotels is located
(or, in the case of the hotel located in Fullerton, California, the tenant's
interest in the Ground Lease).
"Initial Limited Partner" means Christopher G. Townsend.
"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 all the terms and
provisions of this Agreement.
"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.
D-4
<PAGE>
"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, or any Substituted Limited Partner.
"Loan Agreement" means the loan agreement to be entered into between the
Partnership, as borrower, and The Citizens and Southern National Bank, as
lender, to provide the Permanent Loan.
"Loss" or "Losses" means the loss or losses recognized by the Partnership
for Federal income tax purposes upon the sale or disposition of Partnership
property (other than the routine sale or disposition of used FF&E being replaced
at a Hotel) taking into account costs of such sale or disposition.
"Management Agreement" means the management agreement to be entered into
at the initial closing of the offering made pursuant to the Private Placement
Memorandum between the 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.
"Manager" means Marriott Hotels, Inc., a Delaware corporation and wholly
owned subsidiary of Marriott, as manager of the Hotels and any successor manager
that is an Affiliate of Marriott.
"Marriott" means Marriott Corporation, a Delaware corporation.
"Minimum Gain" means the amount determined by computing, with respect to
each 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 1.704-1T(b)(4)(iv)(c) of the Treasury Regulations.
"Net invested Capital" means Capital Contributions reduced by cumulative
distributions of Capital Receipts to the Partners pursuant to Sections 4.06(ii)
and 4.07A(ii).
"Net Profits" or "Net Losses" means, for any period, the net profits or
net losses of 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 nor in connection with the sale of a
Hotel and excluding Gains and Losses and items specially allocated under Section
4.10.
"Nonrecourse Debt" means any Partnership liability that is considered
nonrecourse for purposes of section 1.1001-2 of the Treasury Regulations
(without regard to whether such liability is a recourse liability under section
1.752-1T(d)(2) of the Treasury Regulations) and any Partnership liability for
which the creditor's right to repayment is limited to one or more assets of the
Partnership (within the meaning of section 1.752.1T(d)(3)(ii)(B)(4)(ii) of the
Treasury Regulations).
"Nonrecourse Liability" means any Nonrecourse Debt (or portion thereof)
for which no Partner bears (or is deemed to bear) the economic risk of loss
within the meaning of section 1.704-1T(b)(4)(iv)(k)(3) 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,
certified, or regular mail to such Person; provided, however, that any
communication containing such information sent to such Person and actually
received by such Person shall constitute Notification for all purposes of this
Agreement.
D-5
<PAGE>
"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 Nonrecourse Debt (or portion thereof)
for which a Partner bears (or is deemed to bear) the economic risk of loss
within the meaning of section 1.704-IT(b)(4)(iv)(k)(1) 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 one of
the Partners.
"Partners' 10% Preferred Distribution" means, with respect to each Fiscal
Year, an annual non-cumulative amount, payable to the Partners from
distributions from Cash Available for Distribution, equal to 10% of the average
daily outstanding Capital Contributions from time to time.
"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 average daily
outstanding Net Invested Capital over (b) the sum of (i) all previous
distributions made to the Partners pursuant to Sections 4.05(a)(i), 4.05(a)(ii),
4.06(i), and 4.07A(i) and (ii) 101.01% of all previous distributions made to the
Limited Partners pursuant to Sections 4.05(a)(iii) and 4~05(a)(iv).
"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.
"Permanent Loan" means the loan made to the Partnership pursuant to the
loan agreement to be entered into at the initial closing of the offering made
pursuant to the Private Placement Memorandum between the Partnership, as
borrower, and The Citizens and Southern National Bank as lender, pursuant to
which the lender will lend $128 million to finance a portion of the purchase
price of the Hotels.
"Person" means any individual, partnership, corporation, trust, or other
legal entity.
"Placement Agent" means Smith Barney, Harris Upham & Co. Incorporated.
"Prime Rate" means the base rate of interest announced from time to time
by Bankers Trust Company, New York, New York.
"Private Placement Memorandum" means the Partnership's confidential
private placement memorandum dated November 14, 1989, prepared for use in
connection with the offering to investors of 414 Units of limited partnership
interests in the Partnership.
"Purchase Agreement" means the purchase agreement to be entered Into at
the initial closing of the offering made pursuant to the Private Placement
Memorandum between the Partnership and Marriott and certain of its Affiliates
providing for the purchase by the Partnership of the Hotels, the assignment of
the Ground Lease relating to the Hotel located in Fullerton, California and the
sale or assignment of a leasehold interest In certain related materials and
personal property, including FF&E
"Purchase Price Adjustments" means any reductions of the aggregate
purchase price payable for the Hotels pursuant to the Purchase Agreement.
D-6
<PAGE>
"Refinancing Proceeds" means the net proceeds from any refinancing or
borrowing by the Partnership, the proceeds of which are applied to the repayment
of previously incurred Partnership obligations, 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 in its reasonable discretion, and (iii) all amounts then
payable therefrom pursuant to the Management Agreement.
"Sale Proceeds" means 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 in its
reasonable discretion, and (C) all amounts payable therefrom pursuant to the
Management Agreement, and adding any amounts contributed to the Partnership by
the General Partner pursuant to Section 3.04B. Sale Proceeds shall not include
the proceeds from the routine sale or other disposition of used FF&E not in
connection with the disposition of a Hotel.
"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 4.05 through 4.08.
"Treasury Regulations" means the income tax regulations promulgated by the
Department of the Treasury.
"Unit" means a unit of limited partnership interest represented by a
Capital Contribution of $100,000 (determined without reductions for purchase of
a Unit in circumstances where the Placement Agent foregoes all or a portion of
the fees and commissions payable to it and/or purchases where the full purchase
price is 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 have formed and do hereby continue
the Partnership formed as of October 6, 1989 pursuant to the provisions of the
Act.
Section 2.02. Name and Offices. The name of the Partnership is and shall
be Marriott Diversified American Hotels, L.P. The principal offices of the
Partnership shall be located at 10400 Fernwood Road, Bethesda, Maryland 20058 or
at such other place or places as the General Partner
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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 and manage the Hotels, either as full-service
Marriott hotels or otherwise, sell, lease, sublease, exchange, or otherwise
dispose of the Hotels, 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, 2089, 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 October 6, 1989, the
General Partner, in accordance with the Act, fled 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 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, 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 MDAH One Corporation, a Delaware corporation and wholly owned
subsidiary of Host, having its principal executive offices at 10400 Fernwood
Road, Bethesda, Maryland 20058, and any Person admitted as a substitute general
partner in accordance with Sections 6.01 or 10.02B.
Section 3.02. Initial Limited Partner. The Initial Limited Partner who is
hereby admitted as the initial limited partner of the Partnership is Christopher
G. Townsend, 10 Paramus Court, North Potomac, Maryland 20878. Upon admission to
the Partnership of the Original Limited Partners, the Initial Limited Partner
will withdraw from the Partnership and receive a return of his Capital
Contribution.
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.
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Section 3.04. Capital Contributions by General Partner.
A. The General Partner has made a Capital Contribution in the amount of
$418,182. 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 Sections 3.04B, 3.04C, or 8.02E.
B. In the event that the Partnership makes any tax payment on behalf of or
with respect to the General Partner, except to the extent (i) the Partnership
withholds such payment from a distribution which would otherwise be made to the
General Partner or (ii) the General Partner determines, in its reasonable
discretion, that such payment may be satisfied out of the available funds of the
Partnership which would, but for such payment, be distributed to the General
Partner, the General Partner shall contribute to the Partnership an amount equal
to such tax payment within 5 days of the date such payment is made.
C. The General Partner shall contribute to the Partnership an amount equal
to the lesser of (i) the excess of (A) Partnership administrative expenses for
Fiscal Years 1989 (if the closing of the private placement pursuant to the
Private Placement Memorandum occurs in 1989), 1990, 1991 and 1992 over (B)
interest paid to the Partnership on "Partnership working capital" (which, as
used herein, shall not include reserves established pursuant to the Management
Agreement to provide funds for FF&E replacements or "Working Capital" as that
term is used in the Management Agreement) for each such Fiscal Year or (ii)
$50,000 for each of 1989 and 1990, $52,500 for 1991, and $55,000 for 1992. An
estimate of the amount by which Partnership administrative expenses exceed
interest paid to the Partnership on Partnership working capital for the first
nine Accounting Periods for each Fiscal Year through December 31, 1992, shall be
made by October 1 of each such Fiscal Year, and the General Partner shall pay
such amount, if any, to the Partnership in cash on or before such date. (For
1989 and 1990, the first estimate would be based upon the actual number of
Accounting Periods ending prior to September 8, 1990). A determination of the
total amount by which Partnership administrative expenses exceed interest paid
to the Partnership on Partnership working capital for each such Fiscal Year
shall be made by March 15 of the succeeding Fiscal Year, and the General Partner
shall pay to the Partnership in cash on or before such date such amount reduced
by the amount of the payment, if any, made by the General Partner on October 1
of the prior Fiscal Year (or, if the amount paid by the General Partner on
October 1 exceeded the payment due for the prior Fiscal Year, such excess shall
be refunded by the Partnership to the General Partner by March 15 of the
succeeding Fiscal Year); provided however, that (i) the sum of the payments made
by the General Partner, if any, on October 1, 1990 and on March 15, 1991 shall
not exceed $50,000; (ii) the sum of the payments made, if any, on October 1,
1991 and March 15, 1992 shall not exceed $52,500; and (iii) the sum of the
payments made, if any, on October 1, 1992 and March 15, 1993 shall not exceed
$55,000.
Section 3.05. Capital Contributions by Limited Partners.
A. The Initial Limited Partner heretofore has made a Capital Contribution
in the amount of $100 in cash, which Capital Contribution shall be returned to
the Initial Limited Partner upon the admission of the Original Limited Partners,
and the Initial Limited Partner, as such, thereafter shall have no further
rights, claims, or interest as a Partner in and to the Partnership.
B. The Partnership intends to offer 414 Units for sale in a private
placement pursuant to the Private Placement Memorandum and will admit as
Original Limited Partners those Persons (i) who execute and file with the
Partnership the subscription documents specified in the Private Placement
Memorandum, together with such other documents as the General Partner may deem
necessary or desirable to effect such admission, (ii) whose subscriptions for
such Units are accepted by the General Partner (who may refuse to accept the
subscription of any Person or Persons for any reason
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whatsoever), and (iii) who pay 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 of the
Units subscribed for shall be (i) in cash $15,000 per Unit and an Investor Note
of such Limited Partner payable as set forth in Section 3.O5C or (ii) in cash in
the amount of $88,396 per Unit as full payment of the subscription price
($81,396 per Unit in cash if purchased by the General Partner, the Placement
Agent, or qualified officers, directors or employees of Marriott or its
Affiliates). No Partner shall be paid interest on any Capital Contribution. The
Partnership may pledge the aforesaid Investor Notes and its security interest
and related rights in the Units securing such Investor Notes to Marriott or its
Affiliates as security for payment of the Deferred Purchase Debt and may not
further pledge or assign such Investor Notes without the consent of Marriott.
C. The Original Limited Partners shall make Capital Contributions totaling
up to $41.4 million, for which each such Original Limited Partner shall
subscribe in Units of $100,000 each unless the General Partner and the Placement
Agent, in their sole discretion, shall accept subscriptions for one-half of a
Unit. For each Unit purchased, an Original Limited Partner shall make a Capital
Contribution by paying either (i) $88,396 per Unit in cash ($81,396 per Unit in
cash if purchased by the General Partner, the Placement Agent, or qualified
officers, directors or employees of Marriott or its Affiliates) 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
$15,000 payable upon execution of the subscription documents; (b) a second
installment in the amount of $25,000 payable on June 20, 1990; (c) a third
installment in the amount of $30,000 payable on June 20, 1991; and (d) a fourth
installment in the amount of $30,000 payable on June 20, 1992. Original Limited
Partners purchasing more or less than a full Unit shall be required to make
proportionate installments on the dates aforesaid. Original Limited Partners may
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, shall be 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 $85,000 for each Unit purchased
($42,500 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) may prepay in whole, or in part, all of the installments and (ii)
shall be 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 4.07 (which amounts shall 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 shall 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
pays $88,396 per Unit in cash ($81,396 per Unit in cash if purchased by the
General Partner, the Placement Agent, or qualified officers, directors or
employees of Marriott or Its Affiliates) at the time he delivers an executed
subscription agreement, then there shall be no obligation to deliver an investor
Note to the Partnership. That portion of such $88,396 payment, or $81,396
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 shall be applied by the Partnership at the
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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 hereby pledges 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 foregoing pledge,
each Original Limited Partner shall continue to be a Partner until such time as
he otherwise transfers his Interest in accordance with the terms of this
Agreement. 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 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 shall apply in the event a Limited Partner
fails 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 10 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 (except that in
connection with a proposal to continue the business of the Partnership and
to appoint one or more general partners as provided in Section 6.05A, such
Defaulting Limited Partner agrees to vote in favor of such action and
hereby grants an irrevocable proxy to any General Partner for such purpose)
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
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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) 30% 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. 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 also 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 4.11 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.
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(v) Notwithstanding the foregoing provisions of this Section 3.05F,
the obligations of the Defaulting Limited Partner under this Section 3.05
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. In the event that the Partnership makes any tax payment on behalf of or
with respect to a Limited Partner, except to the extent (i) the Partnership
withholds such payment from a distribution which would otherwise be made to the
Limited Partner or (ii) the General Partner determines, in its reasonable
discretion, that such payment may be satisfied out of the available funds of the
Partnership which would, but for such payment, be distributed to the Limited
Partner, the Limited Partner shall contribute to the Partnership an amount equal
to such tax payment. The Limited Partner shall make this contribution within 45
days after notice from the General Partner that the contribution must be made.
If the Limited Partner fails to pay such amount when due, the provisions of
Section 3.05F shall apply as if such payment were an installment payment that
was not paid when due.
Section 3.06. 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 8.02E
or in connection with an issuance of additional Units permitted under Section
3.06A.
Section 3.07. Partnership Capital.
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 $11,604 per Unit for any Limited
Partner making full payment of such Limited Partner's Capital Contribution
($18,604 for the General Partner, the Placement Agent, or qualified officers,
directors or employees of Marriott or any of its Affiliates) 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 3.07, 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
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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 3.08. 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 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. The General Partner, as a
third party and not as a Partner, guarantees 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"), shall
be equal to $775,000. In the event that the Initial Working Capital Reserve is
less than $775,000, the General Partner, as a third party and not as a Partner,
shall 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, shall be
entitled to receive as a payment from the Partnership any amount by which the
Initial Working Capital Reserve exceeds $775,000. 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
Agent), the admission of the Original Limited Partners, the purchase of the
Hotels (excluding interest payable on the Deferred Purchase Debt) and the
funding of the Permanent Loan. No payments pursuant to this Section 3.10 shall
be reflected in Capital Accounts or otherwise treated as payments to or from a
Partner in the Partnership.
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
Section 4.10, Net Profits with respect to each Fiscal Year will be allocated
among the Partners, pro rata, in proportion to the distributions of Cash
Available for Distribution to the Partners with respect to such Fiscal Year
(including distributions of Cash Available for Distribution made in a subsequent
Fiscal Year with respect to the immediately preceding Fiscal Year for which Net
Profits are being allocated); provided, however, that if Net Profits with
respect to a Fiscal Year exceed distributions of Cash Available for Distribution
with respect to such Fiscal Year, Net Profits with respect to such Fiscal Year
shall be allocated in accordance with the ratio in which Cash Available for
Distribution would have been distributed had an amount of cash equal to such Net
Profits been available for distribution.
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Section 4.02. Allocation of Net Losses. Subject to the provisions of
Section 4.10, 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 4.10, 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 4.07B) 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
the aggregate of their Capital Account balances to an amount equal to 99%
of 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% of
the 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 aggregate of the
balances in the Capital Accounts of the Limited Partners to the General
Partner's Capital Accounts 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 of
the balances in the Capital Accounts of the Limited Partners in excess of
99% of the Capital Priority Amount to (B) the balance in the General
Partner's Capital Account in excess of 1% of the Capital Priority Amount is
80 to 20.
B. Subject to the provisions of Section 4.10, 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 4.07B) 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 Accounts 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 100% to the
General Partner.
Section 4.04. Allocation Among Limited Partners of Net Profits, Gains, Net
Losses and Losses.
A. Except as may be provided in Sections 4.04B, 4.04C, 4.04D, or 4.10, any
Net Profits, Gains, Net Losses, or 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.
B. If, at the time any allocation is made pursuant to Section 4.03, the
balance in any Limited Partner's Capital Account when divided by the number of
Units owned by such Limited Partner ("Capital Account Balance per Unit") is
greater or lesser than the Capital Account Balance per Unit of any other Limited
Partner, then the Gain or Loss allocated to the Limited Partners pursuant to
Section 4.03 shall first be allocated among the Limited Partners in a manner
that will, to the extent possible, cause all the Limited Partners' Capital
Account Balances per Unit to be equal.
C. For purposes of Article Four, any Original Limited Partner admitted to
the Partnership subsequent to the initial closing of the offering pursuant to
the Private Placement Memorandum shall be considered to be admitted to the
Partnership on the first day of the Accounting Period in which the General
Partner accepts such Original Limited Partner as a Limited Partner and the books
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and records reflect such Original Limited Partner as so admitted. In any Fiscal
Year in which any Original Limited Partner is admitted to the Partnership
subsequent to such initial closing, then the allocation among the Limited
Partners of Net Profits, Gains, Net Losses, and Losses allocated to the Limited
Partners shall be determined as follows: (i) Net Profits and Net Losses shall be
attributed to each Accounting Period pro rata based on the number of Accounting
Periods in such Fiscal Year; (ii) Net Profits and Net Losses attributed to each
Accounting Period shall be allocated solely among the Limited Partners who were
considered admitted as of the first day of such Accounting Period, pro rata in
accordance with the number of Units owned by each such Limited Partner during
such Accounting Period; and (iii) any Gains or Losses shall be allocated among
the Limited Partners who were considered admitted as of the first day of an
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 during such Accounting Period.
D. 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 owned Units on the last day of the Fiscal Quarter
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.
Section 4.05. Distribution of Cash Available for Distribution.
A. Cash Available for Distribution with respect to each Fiscal Year shall
be distributed semiannually, not later than October 31st of each Fiscal Year and
April 15th of each succeeding Fiscal Year, as follows:
(i) first, until the Partners shall have received with respect to
such Fiscal Year an amount equal to the Partners' 10% Preferred
Distribution, 1% to the General Partner and 99% to the Limited Partners;
(ii) second, until the Partners have received cumulative distributions
of Capital Receipts pursuant to Sections 4.06(ii) and 4.07A(ii) equal to
$20,909,091 (of which the Limited Partners' portion would be equal to
$50,000 per Unit), 1% to the General Partner and 99% to the Limited
Partners;
(iii) third, until the Partners have received cumulative distributions
of Capital Receipts pursuant to Sections 4.06(ii) and 4.07A(ii) equal to
$41,818,182 (of which the Limited Partners' portion would be equal to
$100,000 per Unit), 10% to the General Partner and 90% to the Limited
Partners; and
(iv) thereafter, 20% to the General Partner and 80% to the Limited
Partners.
B. For purposes of Section 4.05A(i) above, distributions made within 105
days after the end of a Fiscal Year shall be considered made with respect to
such prior Fiscal Year.
C. 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 to such Fiscal Year as a result of the
first nine Accounting Periods of such Fiscal Year (for 1990, the actual number
of Accounting Periods ending prior to September 8) and shall reduce such amount
by such reserves as the General Partner reasonably determines are necessary to
provide for the ongoing operation of the Partnership. The amount of the
distribution to be made on or before April
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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.
D. The Partners' 10% Preferred Distribution for the Partnership's initial
year of operations will be pro-rated, based upon the number of days in the
Fiscal Year from the date of the closing of the private placement pursuant to
the Private Placement Memorandum. If such private placement pursuant to the
Private Placement Memorandum closes in 1989, the Partners' 10% Preferred
Distribution for 1990 shall be computed to include the number of days during
1989 from the date of the closing of such private placement.
Section 4.06. 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 soon as is
reasonably practicable after the transaction occurs as follows:
(i) first, until the Partners shall have received distributions
pursuant to this Section 4.06(i) of Refinancing Proceeds from such
refinancing or borrowing equal to the then outstanding Partners' 15%
Preferred Distribution, 1% to the General Partner and 99% to the Limited
Partners;
(ii) second, until the Partners shall have received cumulative
distributions of Capital Receipts pursuant to this Section 4.06(ii) and
Section 4.07A(ii) equal to the Partners' Capital Contributions, 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 4.07. 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 soon as is reasonably practicable
after the transaction occurs as follows:
(i) first, until the Partners shall have received distributions
pursuant to this Section 4.07A(i) of Sale Proceeds from such sale or other
disposition equal to the then outstanding Partners' 15% Preferred
Distribution, 1% to the General Partner and 99% to the Limited Partners;
(ii) second, until the Partners shall have received cumulative
distributions of Capital Receipts pursuant to this Section 4.07A(ii) and
Section 4.06(ii) equal to the Partners' Capital Contributions, 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 of all or
substantially all of the assets of the Partnership, or from a related series of
Hotel sales that, taken together, result in the sale of substantially all of the
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 4.08. Distribution Among Limited Partners of Cash Available for
Distribution, Refinancing Proceeds and Sale Proceeds. Cash Available for
Distribution distributable with respect to any Fiscal Quarter to the Limited
Partners pursuant to Section 4.05 shall be distributed to the Limited Partners
of record as of the end of such Fiscal Quarter, 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 4.06 or Section 4.07A shall be distributed
to the Limited Partners pro rata in accordance with the number of Units owned by
each such Limited Partner on the last 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),
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then the Partnership shall not recognize such assignment for the purpose of
distributing amounts pursuant to Sections 4.05, 4.06, and 4.07 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. For purposes of this Section 4.08, all Units sold to Original
Limited Partners shall be considered owned by such Original Limited Partners
from the initial closing of the offering pursuant to the Private Placement
Memorandum, without regard to whether such Units are actually purchased at that
time or at a later time.
Section 4.09. 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 shall
attempt to supply such Limited Partner with reasonably available information
that will permit such Limited Partner to make the required basis adjustment
calculation.
Section 4.10. 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
the greater of the following:
(i) the portion of such Partner's share of the net decrease in such
Minimum Gain during such year (as such share is determined pursuant to
section 1.704-1T(b)(4)(iv)(f) of the Treasury Regulations) that is
allocable to the disposition of Partnership property subject to one or more
Nonrecourse Liabilities (as such allocable portion is determined pursuant
so section 1.704-1T(b)(4)(iv)(e)(2) of the Treasury Regulations); or
(ii) such Partner's Adjusted Capital Account Deficit as the end of
such year (determined, for this purpose, before any allocation for such
year of any items of income, gain, loss, or deduction or items described in
section 705(a)(2)(B) of the Code).
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 1.704-1T(b)(4)(iv)(e) of the Treasury Regulations, and this Section
4.10A 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 attributable to such Partner Nonrecourse Debts shall be specially
allocated items of Partnership income and gain for such year (and, if necessary,
for subsequent years) to the extent of an amount equal to the greater of the
following:
(i) the portion of such Partner's share of the net decrease in such
Minimum Gain during such year that is allocable to the disposition of
Partnership property subject to one or more Partner Nonrecourse Debts (as
such allocable portion is determined pursuant to section
1.704-1T(b)(4)(iv)(h) of the Treasury Regulations); or
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(ii) such Partner's Adjusted Capital Account Deficit at the end of
such year (determined, for this purpose, before any allocation for such
year of any items of income, gain, loss or deduction or items described in
section 705(a)(2)(B) of the Code).
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 1.704-1T(b)(4)(iv)(h) of the Treasury Regulations, and this Section
4.10B 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)(ii)(d) and this Section 4.10C 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 shall be instead
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 1.752-1T(d)(3) 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 1.704-1T(b)(4)(iv)(h) of the
Treasury Regulations and this Section 4.10E shall be interpreted consistently
therewith.
F. If in any Fiscal Year items of Partnership loss or deduction are
specially allocated to a Partner pursuant to Section 4.10E, such 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 to the General Partner, the
Placement Agent, or qualified officers, directors or employees of Marriott or
its Affiliates) an amount up so $1,000 per Unit and to the Capital Account of
each Unit sold by the Placement Agent (other than Units sold to the General
Partner, the Placement Agent, or qualified officers, directors or employees of
Marriott or its Affiliates) an amount of up to $8,000 per Unit. Any other such
syndication expenses shall be allocated 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 4.10H with respect to any Unit since the formation of the
Partnership shall not exceed $11,604.
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I. "Recapture income," if any, realized by the Partnership pursuant to
section 1245 or section 1250 of the Code allocated to the Partners under
Sections 4.01, 4.02, or 4.03 shall be allocated, to the extent possible under
such Sections, 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.
J. 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
Agreement, or any other agreement between 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.
K. 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.
L. If the closing with respect to the private placement pursuant to the
Private Placement Memorandum occurs in 1989, any Net Losses and Net Profits for
the Fiscal Year of the Partnership ending on December 31, 1989 will be allocated
to the General Partner.
M. To the extent that the Partnership incurs administrative expenses for
any Fiscal Year through December 31, 1992, in an amount that would require a
Capital Contribution by the General Partner pursuant to Section 3.04C, the
General Partner shall be allocated for such Fiscal Year deductions attributable
to such administrative expenses equal to the amount of the Capital Contribution
made by the General Partner pursuant to Section 3.04C with respect to such
Fiscal Year.
Section 4.11. Operating Rules.
A. Solely for purposes of determining a Partner's proportionate share of
the "excess nonrecourse liabilities" of the Partnership within the meaning of
Section 1.752-1T(e)(3)(ii) of the Treasury Regulations, the General Partner's
interest in Partnership profits shall equal 20% and the
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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 with respect 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 order to allocate Gain or
Loss recognized from such sale or disposition pursuant to Section 4.03, 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 1.704-1T(b)(4)(iv)(f) and 1.704-1T(b)(4)(iv)(h)(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 Section 4.03B, 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).
ARTICLE FIVE
Rights, Powers, and Dunes or 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; provided, however, that any action of the Limited Partners
which for purposes of the Act would not constitute such participation or control
shall not be deemed such for purposes of this Agreement. 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.
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C. Except to the extent otherwise provided herein, the General Partner is
hereby authorized, without the Consent of the Limited Partners, to:
(i) execute any and all agreements (including the Purchase Agreement,
the Management Agreement, the Loan Agreement, and the Debt Service
Guarantee, 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 (including, without limitation, advances by Marriott under the Debt
Service Guarantee), which 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, (c) the Permanent Loan, (d) amounts
incurred for the purpose of making distributions 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 (including the costs of
such refinancing) from time to time (including, without limitation,
indebtedness from third parties to finance the payment of amounts payable
under the Management Agreement), 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
mortgage 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
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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; and
(vi) 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, (a) to 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 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 so 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.
D. Any Person dealing with the Partnership or the General Partner may rely
upon a certificate signed by the Secretary or any 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. Except as otherwise specifically set forth herein (including, without
limitation, Section 5.04) or in the Private Placement Memorandum, any
agreements, contracts and arrangements between the 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 or to sell or lease such goods or materials covered
thereby;
(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 and neither the General Partner nor any such Affiliate
may 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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F. In addition to any specific contracts or agreements described herein,
the Partnership may enter into any other contracts or agreements specifically
described in the Private Placement Memorandum (including the agency agreement
entered into with the Placement Agent in connection with the sale of the Units,
which agreement shall be deemed to satisfy all requirements of this Agreement)
without any further act, approval, or vote of the Limited Partners that are not
inconsistent with this Agreement.
Section 5.02. Restrictions on Authority of the General Partner.
A. Without the Consent of all of 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 interest 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
Placement Agent or any of its 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) crease 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, the Placement Agent or any of its 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 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 Hotels,
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 the Fairview Park Hotel, or any
interest therein, or more than two of the other Hotels, or any interest
therein, whether in one transaction or more than one transaction during the
term of the Partnership; provided, however, that if it is proposed that the
Partnership sell any Hotel or interest 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 have been 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 effected; (b) the Partnership shall obtain three appraisals of the fair
market value of the Hotel or Hotels to be sold, such appraisals to be
prepared by independent, nationally recognized appraisers
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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 parry); (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 which adversely affects
the rights of or benefits to the Limited Partners or, in the case of the
Purchase Agreement, the Debt Service Guarantee, and the Management
Agreement, 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 such other agreement, or which increases the
compensation payable to the General Partner or any of its Affiliates
hereunder or thereunder; provided, however, the foregoing shall not be
deemed to require the Consent of the Limited Partners for the General
Partner to cause the Partnership to enter into a new management agreement
with the Manager with respect to one or more of the Hotels on terms
substantially the same as those of the Management Agreement as contemplated
therein, in the event of the refinancing of fewer than all of the Hotels;
(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 13 Accounting Periods 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 Permanent Loan, the Deferred Purchase Debt, and
liabilities to Marriott and its Affiliates with respect to the Debt Service
Guarantee) 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 both the reasonably
anticipated tax consequences to the Limited Partners as a group and the
alternatives that the General Partner believes are reasonably available to
the Partnership, determines that such action is either in or not
detrimental to the best interests of the Limited Partners (and in making
such determination, the General Partner may rely upon an opinion of
independent counsel as to the tax consequences to the Limited Partners as a
group), 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;
(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;
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(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 being distributed to the Partners unless such
Refinancing Proceeds are distributed to the Partners in the same taxable
year in which the Partnership incurred such liability.
C. Any transaction between the Partnership and the General Partner or an
Affiliate that is effected with the requisite Consent of the Partners in
accordance with this Section 5.02 after disclosure to the Limited Partners of
all the material terms thereof shall be deemed to satisfy the requirements of
Section 5.01E.
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 to pay fees therefor in such amounts as the
General Partner determines to be fair and equitable) 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). The General Partner shall have fiduciary responsibility
for the safekeeping and use of the funds and assets of the Partnership, whether
or not in the possession and control of the General Partner, and the General
Partner shall not employ or permit any other Person to employ such funds or
assets except in accordance with the terms of this Agreement. Notwithstanding
the foregoing, however, the General Partner shall have no liability for any loss
sustained by the Partnership as a result of the bankruptcy, receivership,
insolvency, or other economic failure of any bank, savings and loan institution,
other depositary of funds or entity to or with which funds of the Partnership
have been deposited or invested pursuant to Section 9.03, so long as the General
Partner would not have liability under Section 5.06 in the selection of such
depositary or the maintenance of Partnership funds thereat.
B. The General Partner shall not (i) directly or through a subsidiary
engage in any business other than that of acting as general partner of the
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
entity 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. Host and the General Partner agree that so long as the General
Partner is the general partner of the Partnership, its parent company, Host,
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 Host unless the stock of the
General Partner is thereafter owned by Marriott or a wholly owned, direct or
indirect, subsidiary of Marriott. Marriott also shall pay to the Partnership,
upon demand, the amount of any losses incurred by the Partnership as a result of
the attachment by any creditor of Marriott or any of its Affiliates of any
Partnership funds held by or on behalf of the Manager pursuant to the Management
Agreement (including, without limitation, Hotel working capital and net revenues
from Hotel operations).
C. The General Partner shall devote to the 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.
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D. The General Partner shall have at the time of the admission of the
Original Limited Partners, and shall use its reasonable best efforts to maintain
at all times thereafter, a net worth at an amount equal to at least $4.2 million
in excess of its investment in the 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 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 and all 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.
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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 pursuant to the Private Placement Memorandum and shall obtain a
commitment from the Placement Agent to maintain the same record of information
required of the General Partner.
M. From time to time, the General Partner shall consider whether or not,
in the reasonable judgment of the General Partner, it would be in the best
interests of the Partnership to effectuate a sale or refinancing of all or a
portion of the Hotels, with all or part of the Capital Receipts from any such
sale or refinancing to be distributed to the Partners in accordance with Article
Four. If the General Partner determines that such a sale or refinancing would be
in the best interests of the Partnership, then the General Partner shall,
subject to Section 5.02B(ii) in the case of a sale and to the Management
Agreement and the Loan Agreement, use its reasonable best efforts to cause the
Partnership to effectuate such a sale or refinancing, in one or more
transactions, as it determines appropriate in its reasonable judgment.
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 the General Partner shall receive
such allocations and distributions 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 and its
Affiliates for the actual cost of goods and materials used for or by the
Partnership and obtained from unrelated third parties and for the actual cost of
providing any accounting, tax, and other administrative services required or
contemplated by this Agreement (excluding services required to be performed
under the Management Agreement) to the extent that such goods, materials, and
services are reasonably necessary to the prudent operation of the business of
the Partnership and the cost thereof is comparable to or less than the amount
the Partnership would have been required to pay to an unrelated third party. The
General Partner and its Affiliates may perform other services for the
Partnership in accordance with Section 5.01E.
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, even if competitive with the business of the
Partnership. Neither the Partnership nor any Partner shall have any right by
virtue of this Agreement or the relationship created hereby in or to such other
ventures or activities or to the income or proceeds derived therefrom, even if
competitive with the business of the Partnership. Neither the General Partner
nor any Affiliate of the General Partner shall be obligated to present any
particular opportunity (other than an opportunity that is within the scope of
the purpose of the Partnership specified in Section 2.03) 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. 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 8.02E.
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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 satisfaction
of the General Partner and to the extent permitted by law) from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, proceedings, costs, expenses, and disbursements of any
kind or nature whatsoever (including, without limitation, all costs and
expenses of defense, appeal, and settlement of any and all suits, actions,
or proceedings threatened or instituted against the General Partner or the
Partnership and all costs of investigations in connection therewith) which
may be imposed on, incurred by, or asserted 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 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 the
General Partner 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 and 8.02E and except as
may otherwise be provided as a matter of law or under the Permanent Loan.
However, except for advances made pursuant to the Debt Service Guarantee
(which advances will be repaid in accordance with such Guarantee), 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), and such advances and interest accrued thereon shall be
due and payable upon that date which is the fifteenth anniversary of the
date on which any such advances were made; provided, however, that any and
all such advances and interest accrued thereon governed by this Section
5.06C shall be paid (i) out of any Operating Profit (as defined in the
Management Agreement) with respect to such Fiscal Year as part of or
immediately after payment of Other Qualifying Debt Service (as defined in
the Management Agreement), and (ii) upon the liquidation or dissolution of
the Partnership or the distribution to the Partners of any Capital Receipts
from the sale of a Hotel immediately after payment of outstanding advances
and accrued interest under the Debt Service Guarantee and prior to any
distributions to the Partners pursuant to Section 4.07 in connection
therewith. Notwithstanding the foregoing, up to $2 million of any such
advances made during a Fiscal Year and any Debt Service Guarantee advances
during any Fiscal Year shall be repayable, to the extent funds are available
therefor, with interest out of Operating Profit with respect to such Fiscal
Year immediately prior to provision for payment of the Partners' 10%
Preferred Distribution. 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 to permit the Partnership to make a required debt service payment with
respect to the Permanent Loan (and any replacement financing therefor)
unless and to the extent
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such payment is in excess of the amount then available to the Partnership under
the Debt Service Guarantee. Any advance made pursuant to the preceding sentence
shall be repaid with the proceeds of an advance pursuant to the Debt Service
Guarantee 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 or 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
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 published positions of the Securities and Exchange
Commission, the Massachusetts Securities Division, the Pennsylvania Securities
Commission, and any other state securities commissions of states in which Units
were offered or sold 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 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.
F. In discharging its obligations under this Agreement, the General Partner
may obtain an opinion, appraisal, or examination by independent counsel,
appraiser, accountant, or other expert, if appropriate, and shall be entitled to
rely, to the extent reasonable, upon such opinion, appraisal, or examination for
matters within the expertise of the person or entity providing or rendering the
same.
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
Treasury 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:
(i) to enter into any settlement with the IRS with respect to any tax
audit or judicial review, and in the settlement agreement the Tax Matters
Partner may expressly state that such agreement shall bind all Partners
except that such settlement agreement shall not bind any Partner (i) 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
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defined in section 6231 of the Code) or a member of a "notice group" (as
defined in section 6223(b)(2));
(ii) in the event that a notice of a final administrative adjustment
at the Partnership level of any item required to be taken into account by a
Partner for tax purposes (a "final 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;
(iii) to intervene in any action brought by any other Partner for
judicial review of a final adjustment;
(iv) to file a request for an administrative adjustment with the IRS
at any time and, if any part of such request is not allowed by the IRS, to
file an appropriate pleading (petition or complaint) for judicial review
with respect to such request:
(v) to enter into an agreement with the IRS to extend the period for
assessing any tax which is attributable to any item required to be taken
into account by a Partner for tax purposes, or an item affected by such
item; and
(vi) to take any other action on behalf of the Partners or the
Partnership in connection with any tax audit or judicial review proceeding
to the extent permitted by applicable law or regulations.
E. Notwithstanding any other provision of this Agreement (but subject to
Sections 5.04, 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 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.
SECTION 5.08. Other Limitations. The following additional limitations shall
apply to the operation and management of the Partnership:
(i) except for such reserves as may be determined by the General
Partner, in its reasonable discretion, to be necessary to provide for the
foreseeable cash needs of the Partnership or for the maintenance, repair,
expansion, or restoration of the Hotels, no Capital Receipts shall be
reinvested in the Hotels or other Partnership assets unless sufficient
cash will be distributed to the Partners pursuant to Article Four to pay
any Federal or state income tax (assuming Partners are in a combined
Federal and state marginal income tax bracket of 35%) resulting from the
transaction giving rise to such Capital Receipts; and
(ii) the Partnership shall not make any loans or otherwise extend
credit to the General Partner or any of its Affiliates.
ARTICLE SIX
WITHDRAWAL AND REMOVAL OF GENERAL PARTNER
SECTION 6.01. Limitation on Voluntary Withdrawal. Except as provided in
Section 5.02B, the general Partner shall not have the right (but shall have the
power) to retire or withdraw voluntarily
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from the Partnership, and any withdrawal in violation hereof shall constitute a
breach of this Agreement and shall be subject to the provisions of Section 6.03.
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 partner
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 material adverse tax consequences to the
Partnership or the Limited Partners or cause a default on any Partnership
debt obligation;
(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, 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; and
(iii) following any such assignment, the Interest of the General
Partner in the Net Profits, Net Losses, Gains, Losses, Cash Available for
Distribution, Capital Receipts, and other allocations and distributions
shall be not less than 1% thereof.
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 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. Any withdrawal by the General Partner except in accordance
with Sections 5.02B(vii) and 6.01 shall constitute a breach of this Agreement.
If the General Partner withdraws in violation of this Agreement (a) 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, and (b) 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 and shall be reduced by 50% (which reduction
of the General Partner's interest is not a penalty). In addition, if the General
Partner withdraws from the Partnership in violation of this Agreement, the
General Partner's Interest shall be subject to purchase in the same manner as
the interest of a removed General Partner.
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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 of the Partnership shall become a limited partner
interest but without any voting or consensual ______ 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, with
respect to which the General Partner agrees that it will consent in writing to
such action) and its Interest shall be reduced by fifty percent (50%). 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.
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 there is no remaining or
substitute General Partner, in breach of the obligation set forth in the
preceding sentence, who agrees 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 there is no remaining or substitute General Partner, in breach of the
obligation set forth in the first sentence of Section 6.05A, who agrees 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,
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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 action 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
(which actions shall not be taken and such reconstitution shall not be effective
until 15 days following such vote), 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 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 Original Limited Partners, a Limited Partner shall have the
right to assign any Interest (which for purposes of this Agreement shall include
any form of assignment, transfer, alienation or hypothecation of any Interest),
subject to the following limitations:
A. No assignment of any Interest, either wholly or in part and whether
absolute or for collateral purposes, may be made other than on the first day of
a Fiscal Quarter (commencing on or after the first day of the first full Fiscal
Quarter of the Partnership).
B. No assignment of any Interest may be made if the assignment is pursuant
to a transaction constituting a "sale or exchange" (within the meaning of
section 708(b)(1)(B) of the Code) of the Interest and if the Interest sought to
be assigned, when added to the total of all other Interests assigned within a
period of 12 consecutive months prior thereto, would, in the opinion of legal
counsel for the Partnership, result in the Partnership being deemed to have been
terminated within the meaning of section 708 of the Code. The General Partner
shall give Notification to all Limited Partners in the event that sales or
exchanges should be suspended for such reason. Any suspended sales or exchanges
shall be made (in chronological order to the extent practicable) as of the first
day of an Accounting Period after the end of any such 12-month period, subject
to the provisions of this Article Seven.
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C. 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 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 the Original 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.
D. 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.
E. No transfer, assignment, or negotiation on any date of an Interest may
be made to any Person if (i) in the opinion of legal counsel for 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.
F. No assignment of any lnterest 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.
G. No assignment of any Interest may be made if, in the opinion of legal
counsel to the Partnership, it would result in the Partnership not being able to
obtain or continue in effect any license permitting the service or sale of
alcoholic beverages in a Hotel.
H. 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.
I. 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.
J. 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
then in effect 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
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for the purpose of settling or managing the estate and such power as the
decedent, incompetent, or bankrupt Limited Partner 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. The Partnership will not recognize for any purpose any assignment of any
Interest unless (i) there shall have been filed with the Partnership not less
than 15 days prior to the first day of the next Fiscal Quarter 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, inter alia, 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 standards), and (ii) the General
Partner has determined that such an assignment is permitted under this Article
Seven. Irrespective of whether or not any successor to a Limited Partner or a
purported 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 respective 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 subparagraph 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 (except that the cost of any
opinions of counsel referred to in this Article Seven shall be borne by the
Partnership).
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 Persons, if any, approved for admission to the Partnership
as Substituted Limited Partners since the last such action.
D. Limited Partners who shall have assigned all their interest in any
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
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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
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. In the event that Units are assigned in accordance with this Article
Seven and such assignment is recognized by the General Partner in accordance
with this Agreement but the assignee thereof is not admitted as a Substituted
Limited Partner, such Units shall be voted in any matter presented to the
Limited Partners for a vote in the same proportion as all Units held by Limited
Partners are voted.
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 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
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(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.
Dissolution of the Partnership shall be effective on the day on which the event
occurs giving rise to the 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. 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 8.02E, 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 Limited Partner.
Section 8.02. Liquidation.
A. Upon dissolution of the Partnership and the failure to reconstitute the
Partnership as provided in Section 6.6.05B, the General Partner (or if the
dissolution is caused by the occurrence of an event described in Section
8.01A(ii), (iii), or (iv), then a Person that may be 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;
(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 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
any assets of the Partnership except those necessary so satisfy the
Partnership's debts and obligations, provided that the liquidation shall be
carried out in conformity with the timing requirements of section 1.704-
1(b)(2)(ii)(b) of the Treasury Regulations.
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C. No assets of the Partnership shall be distributed in kind.
D. 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.
E. 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 8.02D 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, 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 to the extent of such positive balances or to
creditors. Such contribution by the General Partner is to be made to the
Partnership not later than the later of 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 or 90 days after the date of such dissolution
of liquidation.
Section 8.03. Constructive Termination. In the event that the Partnership
terminates by reason of section 708(b)(1)(B) of the Code, but no event of
dissolution has occurred under Section 8.01 of this Agreement, the assets of the
Partnership shall, for Federal income tax purposes only, be deemed to have been
distributed in kind to the Partners in the same manner as if the Partnership
were liquidated under Section 8.02 of this Agreement, and to have been
immediately contributed to a successor partnership (for Federal income tax
purposes) subject to this Agreement. The Capital Accounts of the Partners
thereupon shall be restated in accordance with section 1.704-1(b) of the
Treasury Regulations, and allocations of items of Partnership income, gain, loss
and deduction for book as well as tax purposes shall thereafter be made in
accordance with the terms of this Agreement, section 1.704-1(b) of the Treasury
Regulations, and section 704(c) of the Code, if applicable.
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, and in no event less 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 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 and any
appraisal reports obtained by 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
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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 on the accrual basis of accounting. 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 (which institutions shall not be the General Partner or
any of Its Affiliates), 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 (including the General Partner or any Affiliate of the General Partner).
Section 9.04. Reports. The General Partner shall deliver to each holder of
Units 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 (90 days after the end of the initial
Fiscal Year of the Partnership if the closing of the offering pursuant to the
Private Placement Memorandum occurs in 1989), such information as shall be
necessary for the preparation by such holder 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 holder and the allocation to such holder of the Net
Profits or Net Losses, as the case may be, and any Gain or Loss, as the case may
be, recognized by the Partnership 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, a statement of cash
flow, and a statement of changes in Partner's capital, prepared by the
General Partner on the accrual basis of accounting, 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 such Fiscal Year to the General Partner or any
Affiliate of the General Partner and the services performed for the
Partnership in connection therewith;
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(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 and 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 holder of Units 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); (iii) a statement of cash flow for such
Fiscal Quarter (which need not be audited); and (iv) 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 holders of the Units
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 may, in its sole and absolute discretion, make an
election under section 754 of the Code and shall make 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 the Original Limited Partners pursuant to the
initial closing of the offering pursuant to the Private Placement Memorandum,
(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 holders of Units
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
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%
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<PAGE>
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 a request, notification of 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 which is
reasonably convenient to the Partners and which is 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 10%
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 without a meeting.
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. The hour of the meeting shall be during normal business
hours. 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 Limited Partners holding a majority of the
outstanding Units shall constitute a quorum at all meetings of the Limited
Partners; provided, however, that if there be no such quorum, Limited Partners
holding a majority of the Units so present or so represented may adjourn the
meeting from time to time without further notice, until a quorum shall have been
obtained. No Notification of the time, place, or purpose of any meeting of
Limited Partners need be given to any Limited Partner who attends in person or
is represented by proxy (except when a Limited Partner attends a meeting for the
express purpose of 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, the General Partner
may fix, in advance, a date as the record date for any such determination of
Limited Partners. Such date shall be not more than 60 days nor less than 10 days
before any such 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 or the Limited Partner's
attorney-in-fact 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.
G. If any Consents of Limited Partners, with or without a meeting, are to
be requested, made or taken, any Units held by the General Partner or any of its
Affiliates (other than officers, directors
D-42
<PAGE>
or employees of the General Partner or any of its Affiliates who own Units for
their own account) shall not be voted on any such matter presented to the
Limited Partners for a vote, except that in connection with a decision to
continue the business of the Partnership and to appoint one or more general
partners as provided in Section 6.05A, the General Partner agrees that it will
consent in writing to such action.
Section 10.02. Special Voting Rights of Limited Partners.
A. If at any time any agreement (including the Management Agreement)
pursuant to which operating management of any property of the Partnership is
vested in the General Partner or an Affiliate of the General Partner provides
that the Partnership has a right to terminate such agreement as a result of the
failure of the operation 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 Consent of
the Limited Partners, take action to exercise the right of the Partnership to
terminate such agreement. If the 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 with the Consent of the Limited Partners to 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, or 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 such action for removal must also provide for
the appointment of a substitute General Partner by Consent of the Limited
Partners (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, shall 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
l0.02C, 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 l0.02C, 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; provided
further, that following such vote, no other actions shall be taken and the
removal and appointment shall not be effective until the expiration of the
15-day period described above;
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<PAGE>
(iv) elect a substitute General Partner to the extent provided in
Section 6.01 or reconstitute and continue the Partnership as provided in
Section 6.05B; or
(v) cause the Partnership to sell all or substantially all of the assets
of the Partnership.
C. For the purposes of Sections 6.05B and l0.02B(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 and affirmatively approved within 45
days by Consent of the Limited Partners, or (c) Consent of the Limited Partners
to any action pursuant to Sections 6.05B or l0.02B 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 l0.02B 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;
(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;
D-44
<PAGE>
(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 pledged Interest; and
(vi) any instrument, certificate, or document to implement the
provisions of Section 5.01C(vi).
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 such Limited Partner's Interest, the foregoing 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 Original Limited
Partner, 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 foregoing, each
Original 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 its interest in allocations and distributions, alter
the Interest of a Partner in Net Profits, Net Losses, Gain, 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,
bankruptcy 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.
D-45
<PAGE>
E. The General Partner may, without the Consent of the Limited Partners,
make any amendment to this Agreement (i) as is necessary solely 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(vi).
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.
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.
In Witness Whereof, the undersigned have executed this Agreement as of the
date first above written.
General Partner:
Marriott MDAH One Corporation
By: [SIGNATURE APPEARS HERE]
------------------------------------------
Its: VP
-----------------------------------------
Withdrawing Initial Limited Partner:
Christopher G. Townsend
/s/ Christopher G. Townsend
---------------------------------------------
D-46
<PAGE>
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 granted and
delivered to the General Partner
Marriott MDAH One Corporation, as
Attorney-In-Fact for all Limited Partners
By: [SIGNATURE APPEARS HERE]
------------------------------------------
Its: VP
-----------------------------------------
Solely for purposes of the obligations contained in Section 5.03B, the
undersigned have executed this Agreement as of the date first above written.
Marriott Corporation
By: /s/ Matthew J. Hart
------------------------------------------
Its: VP and Asst. Treasurer
-----------------------------------------
Host International, Inc.
By: /s/ Matthew J. Hart
------------------------------------------
Its: Vice President
-----------------------------------------
D-47
<PAGE>
Exhibit A
Amended and Restated
Agreement of Limited Partnership
$85,000 per Unit , 1989
Units
- -------
MARRIOTT DIVERSIFIED AMERICAN HOTELS, L.P.
LIMITED PARTNER NOTE
For Value Received, the undersigned promises to pay to the order of
Marriott Diversified American Hotels, L.P., a Delaware limited partnership (the
"Partnership"), at its offices at 10400 Fernwood Road, Bethesda, Maryland 20058,
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-Five Thousand Dollars
($85,000) per unit of limited partnership interest in the Partnership ("Unit")
for the number of Units set forth above, without interest, in the following
installments pet Unit at the following times:
Due Date Amount
-------- ------
June 20, 1990...... $25,000 per Unit for the number of Units set forth above
June 20, 1991...... $30,000 per Unit for the number of Units set forth above
June 20, 1992...... $30,000 per Unit for the number of Units set forth above
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 10th 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.
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.
D-48
<PAGE>
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.
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)
D-49
<PAGE>
EXHIBIT 10.a
AMENDED AND RESTATED LOAN AGREEMENT
BETWEEN
MARRIOTT DIVERSIFIED
AMERICAN HOTELS, L.P
AND
NATIONSBANK OF GEORGIA, NATIONAL ASSOCIATION
DATED
AS OF JUNE 30, 1993
<PAGE>
TABLE OF CONTENTS
PRELIMINARY STATEMENTS................................................... 1
1. DEFINITIONS.......................................................... 1
1.1 Terms Defined in Article 1...................................... 2
Accounting Period............................................. 2
Adjusted LIBOR................................................ 2
Adjusted Rate................................................. 2
Adjusted Rate Borrowing....................................... 2
Affiliate..................................................... 2
Agreement..................................................... 2
Annual Audited Reconciliation Date............................ 2
Annual Audited Statement...................................... 3
Annual Interim Reconciliation Date............................ 3
Annual Interim Reconciliation Statement....................... 3
Authorized Accounting Officer................................. 3
Authorized Representative..................................... 3
Base LIBOR.................................................... 3
Base Management Fee........................................... 3
Borrower...................................................... 3
Borrowing..................................................... 3
Borrowing Notice.............................................. 3
Business Day.................................................. 4
Cash Collateral Agreement..................................... 4
Closing Date.................................................. 4
Commission.................................................... 4
Concentration Account......................................... 4
Control....................................................... 4
Corporation................................................... 4
Debt Service Guaranty......................................... 4
Debt Service Reserve.......................................... 4
Deductions.................................................... 4
Default Rate.................................................. 6
Direct Access Agreement....................................... 6
Dollars....................................................... 6
Effective Borrowing Date...................................... 6
Event of Default.............................................. 6
Fairview Parking Garage Lease................................. 6
Fee Hotel..................................................... 7
FF&E.......................................................... 7
FF&E Lease.................................................... 7
Fiscal Quarter................................................ 7
Fiscal Year................................................... 7
Floating LIBOR................................................ 7
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<PAGE>
Foreclosure Guarantee......................................... 8
Fullerton, California Lease................................... 8
General Partner............................................... 8
Governmental Authority........................................ 8
GP Subordination Agreement.................................... 8
Gross Revenues................................................ 9
Ground Lease.................................................. 9
Ground Lessor................................................. 9
Hotel......................................................... 9
Hotel Property................................................ 9
Impositions................................................... 9
Incentive Management Fee...................................... 10
Increment..................................................... 10
Indebtedness.................................................. 10
Interest Deficiency........................................... 10
Interest Period............................................... 10
International................................................. 10
Land.......................................................... 10
Laws.......................................................... 10
Leased Hotel.................................................. 11
Lender........................................................ 11
Lending Installation.......................................... 11
LIBOR......................................................... 11
LIBOR Borrowing............................................... 11
LIBOR Interest Period......................................... 11
LIBOR Reserve Percentage...................................... 11
Lien.......................................................... 11
Line of Credit and Reimbursement Agreement.................... 12
Loan.......................................................... 12
Loan Documents................................................ 12
Loan Obligations.............................................. 12
Loan Party.................................................... 12
Management Agreement.......................................... 12
Management Agreement Assignment............................... 12
Manager....................................................... 12
Manager Subordination Agreement............................... 13
Marriott...................................................... 13
Marriott Affiliate............................................ 13
Marriott Subordination Agreement.............................. 13
Maturity Date................................................. 13
Memorandum.................................................... 13
Minimum Notice Period......................................... 13
Minimum Operating Profit Requirement.......................... 13
Mortgage...................................................... 13
Mortgage/Assignment Modification.............................. 14
-ii-
<PAGE>
Mortgaged Hotels.............................................. 14
Notes......................................................... 14
Operating Profit.............................................. 14
Operating Profit Available For Series B Note Interest......... 14
Pari Passu Distribution....................................... 14
Partially Leased Hotel........................................ 14
Partnership Documents......................................... 14
Payment Date.................................................. 14
Permitted Exceptions.......................................... 14
Person........................................................ 15
Prime Rate.................................................... 15
Prime Rate Adjustment......................................... 15
Prime Rate Borrowing.......................................... 15
Prior Documents............................................... 15
Prior Loan Agreement.......................................... 15
Prior Note.................................................... 15
Purchase Agreement............................................ 15
Purchase Agreement Assignment................................. 15
Quarterly Reconciliation Date................................. 15
Quarterly Reconciliation Statement............................ 15
Rate Option................................................... 16
Reconciliation Date........................................... 16
Regulation D.................................................. 16
Scheduled Amortization........................................ 16
Sellers....................................................... 16
Series A Note................................................. 16
Series B Note................................................. 16
Series C Note................................................. 16
Series B Note Interest........................................ 16
Specified Project............................................. 16
Specified Project Indebtedness................................ 16
Specified Project Profit...................................... 16
Stock......................................................... 17
Swap Agreement................................................ 17
Targeted Operating Profit..................................... 17
Telephone Lease............................................... 17
Title Insurer................................................. 17
TV System Lease............................................... 17
Variable Rate................................................. 17
Variable Rate Borrowing....................................... 17
1.2 Terms Defined in Other Provisions............................. 17
2. RESTRUCTURING OF EXISTING INDEBTEDNESS.............................. 17
2.1 Amount of Existing Indebtedness/Agreement to Restructure...... 17
2.2 Notes......................................................... 19
-iii-
<PAGE>
2.3 Payment of Principal........................................ 19
2.4 Application of Payments..................................... 20
2.5 Interest Rate............................................... 20
2.6 Default Interest............................................ 21
2.7 Notification of LIBOR....................................... 21
2.8 Interest Payments........................................... 22
2.9 Prepayment.................................................. 22
2.10 Lending Installations....................................... 22
2.11 Failure to Pay or Borrow on Certain Dates................... 23
2.12 Taxes....................................................... 23
2.13 Yield Protection............................................ 24
2.14 Certificates; Survival of Indemnity......................... 26
2.15 Telephonic Notices.......................................... 26
2.16 Method of Payment........................................... 26
2.17 General Provisions Concerning Loan.......................... 27
2.18 Restructuring Fees.......................................... 27
2.19 Change in Circumstances Affecting Variable Rate Borrowings.. 27
2.20 Limitation of Liability..................................... 28
3. CONDITIONS PRECEDENT.................................................. 30
3.1 Conditions Precedent to Effectiveness of Agreement.......... 30
4. REPRESENTATIONS AND WARRANTIES........................................ 34
4.1 The Borrower................................................ 35
4.2 Ownership by Marriott....................................... 35
4.3 Authorization and Execution................................. 35
4.4 Compliance with Other Instruments........................... 35
4.5 Consents.................................................... 35
4.6 Financial Statements........................................ 36
4.7 No Material Changes......................................... 36
4.8 Title to Properties......................................... 36
4.9 Leases...................................................... 36
4.10 Full Service Marriott Hotels................................ 37
4.11 Litigation.................................................. 37
4.12 Burdensome Provisions....................................... 37
4.13 Force Majeure............................................... 37
4.14 Tax Liability............................................... 37
4.15 Distributions............................................... 37
4.16 Regulation U, etc........................................... 38
4.17 Compliance with Law, Environmental Matters.................. 38
4.18 Permits and Licenses........................................ 38
4.19 No Notices.................................................. 38
4.20 Disclosure.................................................. 38
4.21 Equity Contributions........................................ 39
4.22 Compliance with Securities Laws............................. 39
-iv-
<PAGE>
4.23 Brokerage Fees.............................................. 39
4.24 Loan Proceeds............................................... 39
4.25 Completion and Operation of Hotels.......................... 39
4.26 Fixed Assets Supplies, Inventories and Working Capital...... 40
5. AFFIRMATIVE COVENANTS................................................. 40
5.1 Pay Principal and Interest, Perform and Swap Agreement...... 40
5.2 Maintenance of Borrower's Office............................ 40
5.3 Keep Books, Set Aside Reserves.............................. 40
5.4 Payment of Taxes, Conduct of Business Maintenance of
Security or the Loan........................................ 41
5.5 Insurance................................................... 41
5.6 Financial Statements and Reports............................ 42
5.7 Inspection.................................................. 44
5.8 Notice of Claims............................................ 44
5.9 Agreements.................................................. 44
5.10 Licenses.................................................... 44
5.11 Operations.................................................. 44
5.12 Accounts.................................................... 45
5.13 Restrictive Covenants....................................... 45
5.14 Easements................................................... 45
5.15 Environmental............................................... 45
5.16 Application of Loan Proceeds................................ 47
6. NEGATIVE COVENANTS.................................................... 47
6.1 Operating Profit Distribution Priorities.................... 47
6.2 Indebtedness................................................ 52
6.3 Liens....................................................... 53
6.4 Distribution................................................ 54
6.5 Sale and Leaseback.......................................... 54
6.6 Change in Partnership; Disposal of Property................. 54
6.7 Certain Transactions with Affiliated Persons................ 55
6.8 Amendments to Agreements.................................... 55
6.9 Maintenance of Present Business............................. 55
6.10 Leases...................................................... 55
6.11 FF&E Account................................................ 56
6.12 Partner Distributions....................................... 56
7. INSURANCE 56
7.1 Hazard Insurance............................................ 56
7.2 Other Insurance............................................. 57
7.3 Required Notices............................................ 57
7.4 Payment and Application..................................... 57
8. DEFAULTS AND REMEDIES................................................ 57
-v-
<PAGE>
8.1 Events of Default........................................... 60
8.2 Notice and Cure Rights...................................... 60
8.3 Suits for Enforcement....................................... 61
8.4 Remedies Cumulative......................................... 61
8.5 Reinstatement of Indebtedness with Respect to
Voidable Transfers.......................................... 61
9. CURE OF GROUND LEASE AND MANAGEMENT AGREEMENT........................ 62
9.1 Ground Lease Cure........................................... 62
9.2 Management Agreement Cure................................... 62
10. MISCELLANEOUS........................................................ 62
10.1 Notices and Addresses....................................... 62
10.2 Survival of Representations; Successors and Assigns......... 64
10.3 Effect of Delay; No Waivers................................. 64
10.4 Expenses.................................................... 64
10.5 Use of Accounting Terms..................................... 65
10.6 No Assignment by Borrower................................... 65
10.7 Books and Records........................................... 65
10.8 Proceedings................................................. 66
10.9 Time of the Essence......................................... 66
10.10 Counterparts................................................ 66
10.11 Construction................................................ 66
10.12 Jurisdiction................................................ 66
10.13 Description of Documents.................................... 67
10.14 Headings.................................................... 67
10.15 Indemnity................................................... 67
10.16 Confidentiality............................................. 67
10.17 Lender Assignment and Participation......................... 68
10.18 Validity.................................................... 68
10.19 Incorporation by Reference.................................. 68
10.20 Payment in Full............................................. 68
-vi-
<PAGE>
EXHIBITS AND SCHEDULES
----------------------
EXHIBITS
- --------
EXHIBIT A-I Form of Series A and Series B Promissory Note
EXHIBIT A-2 Form of Series C Promissory Note
EXHIBIT B Form of Mortgage/Assignment Modification
EXHIBIT C Form of Amended and Restated Management Agreement
EXHIBIT D Form of Amended and Restated Assignment of Management Agreement
EXHIBIT E Form of Cash Collateral Agreement
EXHIBIT F Form of Reaffirmation of Foreclosure Guarantee
EXHIBIT G Form of Amended and Restated Direct Access and Guaranty Agreement
EXHIBIT H Form of Amended and Restated Line of Credit and Reimbursement
Agreement
EXHIBIT I-1 Form of Subordination Agreement (Marriott)
EXHIBIT 1-2 Form of Subordination Agreement (Management Company)
EXHIBIT 1-3 Form of Subordination Agreement (General Partner)
EXHIBIT J Form of Opinion of Counsel to the Loan Parties
EXHIBIT K Form of Opinion of Local Counsel
SCHEDULES
SCHEDULE 1.1-A Description of Land
SCHEDULE 1.1-B Payment Dates
SCHEDULE 2.1(a) Existing Debt
SCHEDULE 2.1(e) Existing Events of Default
[SCHEDULE 3.1(c) List of Financing Statements and Recording Locations]
SCHEDULE 3.1(j) Application of Closing Date Funds
SCHEDULE 4.11 Litigation
SCHEDULE 4.17 Ohio Environmental Compliance Exceptions
SCHEDULE 4.18 Licenses, Permits and Approvals
SCHEDULE 6.10 FF&E Leases
-vii-
<PAGE>
AMENDED AND RESTATED LOAN AGREEMENT
THIS AMENDED AND RESTATED LOAN AGREEMENT, made and entered into as of this
30th day of June, 1993, by and between MARRIOTT DIVERSIFIED AMERICAN HOTELS,
L.P., a Delaware limited partnership (the "Borrower"), and NATIONSBANK OF
GEORGIA, NATIONAL ASSOCIATION, formerly known as The Citizens and Southern
National Bank, a national banking association chartered under the laws of the
United States of America (the "Lender");
PRELIMINARY STATEMENTS:
1. The Borrower is the owner of those certain six (6) full-service
Marriott hotels identified herein.
2. The Lender made a $128,000,000.00 loan secured by, among other things,
the aforesaid six (6) hotels;
3. Because the Borrower has failed to make certain interest payments owing
under and in connection with the loan, and for other reasons, certain events of
default have occurred and are continuing under the Prior Loan Agreement.
4. Marriott and the Lender entered into a Swap Agreement on November 1,
1989 as assigned to the Borrower on February 7, 1990, which was terminated upon
the occurrence of certain Events of Default and for which an early termination
fee is due.
5. The parties hereto desire to enter into this Agreement to amend and
restate the terms of the Prior Loan Agreement and the Prior Note executed in
connection therewith and for other purposes set forth herein.
NOW, THEREFORE, for and in consideration of the foregoing premises, TEN
AND NO/l00 DOLLARS ($10.00), and other good and valuable consideration, the
receipt, adequacy and sufficiency of which is hereby acknowledged by the parties
hereto, the Borrower and the Lender do hereby agree as follows:
ARTICLE l
DEFINITIONS
For all purposes of this Agreement (as hereinafter defined) and of the
other Loan Documents (as hereinafter defined), the following terms used in this
Agreement and in the other Loan Documents, to the extent not otherwise defined
therein, shall have the following respective meanings:
<PAGE>
1. Terms Defined in Article 1.
--------------------------
The term "Accounting Period" means, with respect to the Borrower, each
four (4) week accounting period having the same beginning and ending dates as
the General Partner's four (4) week accounting period, except that an Accounting
Period may occasionally contain five (5) weeks when necessary to conform the
accounting system to the calendar.
The term "Adjusted LIBOR" means, with respect to a LIBOR Borrowing and
the relevant LIBOR Interest Period, a simple per annum interest rate equal to
the sum of (a) the quotient of (i) the Base LIBOR applicable to that LIBOR
Interest Period divided by (ii) one minimum the LIBOR Reserve Percentage, if
any, stated as a decimal (to the extent incurred and actually paid by the Lender
or any participant with respect to the Loan), plus (b) the Increment.
The term "Adjusted Rate" means as of any date of calculation, the Prime
Rate minus the then applicable Price Rate Adjustment.
The term "Adjusted Rate Borrowing" means any portion of the Loan
accruing interest at the Adjusted Rate.
The term "Affiliate" means, when used with reference to a specified
Person, (i) any Person that directly or indirectly through one or more
intermediaries is in Control 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, and (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; provided, however, that no individual shall be deemed to be an
Affiliate of a Corporation solely by reason of such individual being an officer
or director of such Corporation.
The term "Agreement" means this Amended and Restated Loan Agreement,
including any and all Schedules and Exhibits attached hereto, as the same may be
amended, supplemented or otherwise modified from time to time, and the terms
"herein," "hereof," "hereunder" and like terms shall be taken as referring to
this Agreement in its entirety and shall not be limited to any particular
section or provision hereof.
The term "Annual Audited Reconciliation Date" means the date of delivery
of the Annual Audited Statement for each Fiscal Year.
<PAGE>
The term "Annual Audited Statement" means the annual financial
------------------------
statements to be prepared by the borrower and audited by the auditors, together
with the certificates of the auditors and the Borrowers, all as required to be
delivered pursuant to Section 5.6(b).
The term "Annual Interim Reconciliation Date" means the Payment Date
----------------------------------
next following the last Accounting Period of each Fiscal Year.
The term "Annual Interim Reconciliation Statement" means the statement
---------------------------------------
prepared on a consolidated basis for the Borrower by an Authorized Accounting
Officer and to be delivered by Borrower to Lender on each Annual Interim
Reconciliation Date in the form required by Section 6.1(c)(ii).
The term "Authorized Accounting Officer" means, with respect to the
-----------------------------
borrower, the chief accounting officer, or one of his or her duly authorized
representatives designated in a writing delivered to the Lender by the chief
accounting officer.
The term "Authorized Representative" means any representative of the
-------------------------
General Partner who, pursuant to written notice from the Borrower to the Lender,
is authorized by the Borrower to act in connection herewith.
The term "Base LIBOR" means, with respect to a LIBOR Borrowing for the
----------
relevant LIBOR Interest Period, the arithmetic average determined by the Lender
of the interest rates at which deposits in Dollars are offered in the London
interbank borrowing market as shown on the Reuters Screen LIBO Page at
approximately 11:00 a.m. (London time) two Business Days prior to the first day
of such LIBOR Interest Period, with a maturity approximately equal to such LIBOR
Interest Period and in an amount approximately equal to the amount of such LIBOR
Borrowing. The Base LIBOR shall be rounded, if necessary, to the nearest 1/100
of 1%. If the Lender ceases to use the Reuters Screen LIBO page for determining
interest rates based on eurodollar deposit rates, a comparable internationally
recognized interest rate reporting service shall be used to determine such
offered rates.
The term "Base Management Fee" means a fee payable to the Manager under
-------------------
the Management Agreement with respect to each Fiscal Year in an amount equal to
three percent(4%) of Gross Revenues for such Fiscal Year.
The term "Borrower" has the meaning provided therefor in the Preamble
--------
hereof.
The term "Borrowing" means a LIBOR Borrowing, an Adjusted Rate Borrowing
---------
or a Prime Rate Borrowing.
The term "Borrowing Notice" means an irrevocable written, telex or
telephone notice given by an Authorized Representative to and received by the
Lender specifying (a) the amount of a particular Borrowing, (b) the Effective
Borrowing Date for such
<PAGE>
Borrowing, and (c) in the case of a LIBOR Borrowing, the Interest Period
applicable to such Borrowing.
The term "Business Day" means a day on which the principal office of
------------
the Lender is open for the full transacting of its banking business and on which
banks and foreign exchange markets are open for the transaction of business
required for this Agreement in London, Atlanta, Charlotte and New York, as
relevant to the determination or action to be taken.
The term "Cash Collateral Agreement" means that certain Cash Collateral
-------------------------
Agreement dated as of even date herewith between the Borrower and the Lender, as
the same may be amended, supplemented or modified from time to time in
accordance with its terms.
The term "Closing Date" means June 30, 1993.
------------
The term "Commission" means the United States Securities and Exchange
----------
Commission.
The term "Concentration Account" shall have the meaning set forth in the
---------------------
Cash Collateral Agreement.
The terms "Control" or "Controlled" mean the power to direct or cause
------- ----------
the direction of the management and policies of a Person, either alone or in
conjunction with others and whether through the ownership of Stock, by contract
or otherwise.
The term "Corporation" shall include an association, joint stock
-----------
company, business trust or other similar organization (other than a
partnership).
The term "Debt Service Reserve" shall have the meaning set forth in the
--------------------
Cash Collateral Agreement.
The term "Debt Service Guaranty" means that certain Contract of Guaranty
---------------------
dated February 7, 1990 executed by Marriott in favor of the Lender.
The term "Deductions" means the following amounts incurred by Manager in
----------
operating the Mortgaged Hotels:
(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 (to the
extent neither required to
-4-
<PAGE>
be, nor actually funded out of, the FF&E Account) treated as Deductions under
Section 7.01 of the Management Agreement;
(c) Credit card and travel agent commissions;
(d) The cost of Inventories and Fixed Asset Supplies (both as
defined in the Management Agreement) consumed in the operation of the Hotels;
(e) Bad debt expense (or reasonable reserves) for uncollectible
accounts receivable as reasonably determined by the Manager.
(f) All reasonable costs and fees of independent accountants or
other third parties who perform services required or permitted under the
Management Agreement;
(g) The reasonable cost and expense of technical consultants and
operational experts, including Affiliates of the Manager, retained by the
Manager (or retained by the Borrower and approved by the Manager) for
specialized services in connection with non-routine Hotel work or other
specialized services not covered by the Base Management Fee;
(h) The Base Management Fee provided by Section 5.01 of the
Management Agreement;
(i) The Hotel's pro rata share of costs and expenses incurred by the
Manager in providing Chain Services (as defined in the Management Agreement);
(j) Insurance costs and expenses (including Hotel Retention (as
defined in the Management Agreement) or other deductibles) as provided in
Article XI of the Management Agreement;
(k) Any amount transferred into the FF&E Account as provided in
Section 7.02B of the Management Agreement;
(l) Taxes, if any, payable by or assessed against the Manager
related to the Management Agreement or to the Manager's operation of the Hotels
(exclusive of the Manager's income taxes) and all Impositions (as defined in the
Management Agreement);
(m) Rent payable under any telephone or equipment leases either
required to be funded nor actually funded out of the FF&E Account;
(n) Rent and all other amounts payable under each Ground Lease;
(o) With respect to a Specified Project, the aggregate amount of (i)
the costs associated therewith but in no event in excess of revenue generated
thereby and directly traceable thereto and (ii) debt service or lease payments
with respect to Specified Project
-5-
<PAGE>
Indebtedness incurred in connection with such Specified Project not to exceed
Specified Project Profit directly traceable thereto; and
(p) Such other costs and expenses as are specifically provided for as
Deductions in the Management Agreement; but Deductions shall in no event include
any of the following: (1) costs or expenses paid out of the FF&E Account, (2)
any amounts contributed, retained or paid pursuant to Section 7.02E of the
Management Agreement, (3) except to the extent permitted by clause (o) above,
any costs and expenses (or debt service) incurred in connection with Additional
Hotel Investments, Additional Hotel Investment Loans, Other Qualifying Debt, Net
Sales Proceeds or Net Refinancing Proceeds (as those terms are defined in the
Management Agreement), and (4) any costs or expenses related to any Specified
Project in excess of revenue generated thereby or any debt service with respect
to Specified Project Indebtedness in excess of Specified Project Profit related
thereto or any costs or expenses or debt service incurred in connection with any
other permitted Indebtedness required hereunder to be subordinated.
If the context indicates that Operating Profit is to be determined with
respect to less than all of the Mortgaged Hotels, then Deductions (as well as
Gross Revenues) shall, for the purposes of determination of Operating Profit, be
determined only with respect to those Mortgaged Hotels for which Operating
Profit is to be determined.
The term "Default Rate" means a fluctuating interest rate per annum
------------
equal to the lesser of (i) three percent (3%) over the otherwise applicable
interest rate on the Loan as provided in Article 2 of this Agreement, or (ii)
the highest interest rate permitted by applicable law; computed on the basis of
a 360 day year.
The term "Direct Access Agreement" means that certain Amended and
-----------------------
Restated Direct Access and Guaranty Agreement dated as of even date herewith
executed by Marriott in favor of the Lender, as the same may be amended,
supplemented or modified from time to time.
The term "Dollars" and the sign "$" mean lawful currency of the United
-------
States of America.
The term "Effective Borrowing Date" means any Business Day designated
------------------------
by the Borrower in a Borrowing Notice as the effective date of a Borrowing.
The term "Event of Default" has the meaning provided therefor in
----------------
Section 8.1 hereof.
The term "Fairview Parking Garage Lease" means that certain Ground
-----------------------------
Lease Agreement dated April 30, 1986, between Park West/Fairview Associates, as
lessor, and Essex House Condominium Corporation, as lessee, as evidenced by
Memorandum of Lease dated April 30, 1986, recorded in Deed Book 6365, Page 1225,
of the land records of Fairfax County, Virginia, as amended by instrument dated
February 5, 1990 (lessor's
- 6 -
<PAGE>
interest having been assigned to Eleven Fairview Associates and lessee's
interest having been assigned to the Borrower), as the same may be amended,
supplemented or modified, from time to time.
The term "Fee Hotel" means a Hotel located solely on Land in which the
---------
Borrower owns the entire fee simple interest.
The term "FF&E" means all furniture, fixtures and equipment now owned
----
or leased or hereafter acquired by purchase or lease in connection with the
operation of a Mortgaged Hotel.
The term "FF&E Lease" means a lease (other than a TV System Lease, a
----------
Telephone Lease or any lease entered into in connection with a Specified
Project) to the Borrower of any FF&E that is customarily leased in the hotel
industry or, at the time of determination, customarily leased in the full
service Marriott hotels managed by Marriott or Affiliates of Marriott.
The term "Fiscal Quarter" means, for the respective fiscal periods in
--------------
any Fiscal 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.
The term "Fiscal Year" means the calendar year. If Borrower's Fiscal
-----------
Year is changed in the future, appropriate adjustment to the Agreement's
reporting and accounting procedures shall be made; provided, however, that no
such change or adjustment shall alter in any material respect any determinations
of amounts determinable hereunder with reference to a Fiscal Year or any part
thereof.
The term "Floating LIBOR" means on any Business Day, the offered rate
--------------
in the London interbank market for deposits in United States Dollars of amounts
equal or comparable to the principal amount of a Floating LIBOR Borrowing
offered for a 90-day interest period, as shown on the Reuters Screen LIBO page
at approximately 10:00 a.m. (Charlotte, North Carolina time) on such Business
Day; provided, however, that (a) if more than one offered rate as described
above appears on the Reuters Screen LIBO page, the rate used to determine the
Floating LIBOR will be the consensus rate, if any, shown on such LIBO page, and
if no consensus rate is available, the rate used to determine the Floating LIBOR
will be the arithmetic average (rounded upward, if necessary, to the next higher
1/10 of 1%) of such offered rates, or (b) if no such offered rates appear, the
rate used will be the arithmetic average (rounded upward, if necessary, to the
next higher 1/10 of 1%) of rates quoted by the Lender at approximately 10:00
a.m. (Charlotte, North Carolina time) on such Business Day for deposits in
United States Dollars offered to leading European banks for a 90-day interest
period in an amount equal or comparable to the principal amount of such Floating
LIBOR Borrowing. If the Lender ceases to use the
- 7 -
<PAGE>
Reuters Screen LIBO page for determining interest rates based on eurodollar
deposit rates, a comparable internationally recognized interest rate reporting
service shall be used to determine such offered rates.
The term "Floating LIBOR Borrowing" means any portion of the Loan
------------------------
accruing interest at Floating LIBOR.
The term "Foreclosure Guarantee" means that certain Foreclosure
---------------------
Guarantee dated February 7, 1990 and executed by the General Partner in favor of
the Lender, as amended by that certain Reaffirmation of Foreclosure Guarantee
dated of even date herewith, as the same may be further amended, supplemented or
modified from time to time.
The term "Fullerton, California Lease" means collectively that certain
---------------------------
Sublease dated March 19, 1987, between The Redevelopment Agency of the City of
Fullerton, California, as lessor, and Marriott, as lessee, as evidenced by that
certain Memorandum of Sublease dated as of June 1, 1988. recorded as Instrument
No. 88-258511, in the Official Records of Orange County, California, as amended
by that certain First Amendment to Sublease dated as of May 27, 1987, recorded
as Instrument No. 90-012913, aforesaid records, as further amended by that
certain First Amendment to Sublease dated September 29, 1988, recorded as
Instrument No. 88-592237, aforesaid records, and as further amended by that
certain Third Amendment to Sublease, Memorandum of Sublease, First Amended
Lease, and Nondisturbance and Recognition Agreement dated as of January 31,
1990, recorded as Instrument No. 90-058920, aforesaid records (lessee's interest
having been assigned to the Borrower), together with that certain First Amended
Lease dated as of May 22, 1987, between The State of California, through the
Trustees of the California State University, as ground lessor, and The
Development Agency of the City of Fullerton, California, as ground lessee,
recorded as Instrument No. 88-258510, aforesaid records, as amended by that
certain Third Amendment to Sublease, Memorandum of Sublease, First Amended
Lease, and Nondisturbance and Recognition Agreement, dated as of January 31,
1990, recorded as Instrument No. 90-058920, aforesaid records (the "Underlying
Lease"), as the same may be amended, supplemented or modified from time to time.
The term "General Partner" means Marriott MDAH One Corporation, a
---------------
Delaware corporation, being the sole general partner of the Borrower.
The term "Governmental Authority" means any nation or government, any
----------------------
state or other political subdivision thereof, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of
government.
The term "GP Subordination Agreement" means that certain Subordination
--------------------------
Agreement dated as of even date herewith executed by the General Partner in
favor of the Lender, as the same may be amended, supplemented or modified from
time to time in accordance with its terms.
- 8 -
<PAGE>
The term "Gross Revenues" means all revenues and receipts of every kind
--------------
derived from operating the Mortgaged Hotels and all departments and parts
thereof (but not to include Purchase Price Adjustments as that term is defined
in the Purchase Agreement), including, but not limited to: income (from both
cash and credit transactions), before commissions and discounts for prompt or
cash payments, from rental of rooms, meeting rooms and space of every kind;
license, lease and concession fees and rentals (not including gross receipts of
any licensees, lessees and concessionaires); income from food and beverage and
catering sales; income from vending, facsimile and copy machines; revenue from
Specified Projects, wholesale and retail sales of merchandise (except as
otherwise provided in Section 7.02C of the Management Agreement with respect to
the sale of FF&E and except for wholesale sales of merchandise not generally
related to the business of the Mortgaged Hotels), service charges, and proceeds,
if any, from business interruption or other loss of income insurance; proceeds
of casualty insurance or condemnation proceeds disbursed to the Borrower to the
extent in excess of the cost of repair, restoration or replacement of the
Mortgaged Hotels or any portion thereof, any cash refunds, cash rebates, cash
discounts and credits of a similar nature, given, paid or returned to the
Borrower in the course of obtaining Gross Revenues or components thereof and any
amount paid to Borrower by Manager pursuant to the terms of Section 4.02B of the
Management Agreement, all determined in accordance with generally accepted
accounting principles; provided, however, that Gross Revenues shall not include
(i) gratuities to the Mortgaged Hotel employees; (ii) federal, state or
municipal excise, sales or use taxes or similar assessments or Impositions
collected directly from patrons or guests or included as part of the sales price
of any goods or services; (iii) Net Refinancing Proceeds or Net Sales Proceeds
(as both are defined in the Management Agreement) except as specifically set
forth above with respect to proceeds of casualty insurance or condemnation
proceeds disbursed to the Borrower to the extent in excess of the cost of
repair, restoration or replacement of the Mortgaged Hotels or any portion
thereof; (iv) proceeds from the sale of FF&E; (v) interest received or accrued
with respect to the funds in the FF&E Account or the other operating accounts of
the Hotels or the Debt Service Reserve or the Concentration Account; or (vi)
payments on the Investor Notes as that term is defined in the Memorandum.
If the context indicates that Operating Profit is to be determined with
respect to less than all of the Mortgaged Hotels, then Gross Revenues (as well
as Deductions) shall, for the purposes of such determination of Operating
Profit, be determined only with respect to those Mortgaged Hotels for which
Operating Profit is to be determined.
The term "Ground Lease" means individually and collectively the
------------
Fullerton, California Lease and the Fairview Parking Garage Lease
The term "Ground Lessor" means the landlord under a Ground Lease.
-------------
The term "Hotel" means one of the full-service hotels located on the
-----
Land and all other improvements on the Land and FF&E thereon.
- 9 -
<PAGE>
The term "Hotel Property" means a Hotel and the Land underlying it
--------------
(without regard to whether the Land is owned or leased by the Borrower) and all
easements and appurtenances thereunto belonging.
The term "Impositions" means all real estate and personal property
-----------
taxes, levies and assessments and similar charges imposed by any Governmental
Authority relating to each of the Mortgaged Hotels.
The term "Incentive Management Fee" means the Incentive Management Fee
------------------------
provided for in the Management Agreement but determined solely with respect to
the Mortgaged Hotels and as if the Mortgaged Hotels were the only hotels subject
to the Management Agreement.
The term "Increment" means with respect to the Series A Note, one
---------
percent (1.00%), and with respect to the Series B Note, zero.
The term "Indebtedness" with respect to any Person, means, without
------------
duplication, (i) obligations for money borrowed by such Person (it being
understood that this clause (i) shall not include any obligation owed to a trade
creditor incurred in the ordinary course of business); (ii) obligations secured
by any Lien existing on any property or other asset owned by such Person subject
to such Lien, whether or not the obligations secured thereby shall have been
assumed; (iii) such Person's capitalized lease obligations, purchase money
obligations and obligations under conditional sales or other title retention
agreements and FF&E Leases; (iv) such Person's guaranties and endorsements
(other than endorsements for collection in the ordinary course of business) of
another Person's (A) obligations for money borrowed, (B) obligations secured by
any Lien existing on any property or other asset owned by such other Person
subject to such Lien, whether or not the obligations secured thereby shall have
been assumed by such other Person and (C) capitalized lease obligations,
purchase money obligations and obligations under conditional sales or other
title retention agreements; and (v) such Person's other contingent liabilities
in respect of, or any obligations to purchase or otherwise acquire or service or
assume or become a surety for obligations of others.
The term "Interest Deficiency" means, for each Fiscal Year, the amount
-------------------
by which (a) the aggregate amount of Series B Note Interest accruing during each
Accounting Period of each Fiscal Year exceeds (b) the aggregate amount of Series
B Note Interest paid during those Accounting Periods.
The term "Interest Period" means a LIBOR Interest Period.
---------------
The term "International" means Marriott International, Inc., a Delaware
-------------
corporation.
- 10 -
<PAGE>
The term "Land" means the parcel of land on which a Hotel is located,
----
which parcel consists of approximately the acreage identified; and is located as
described, on Schedule 1.1-A hereto.
The term "Laws" means all present and future laws, ordinances, rules,
----
regulations and requirements of any Governmental Authority having or claiming
jurisdiction over any of, the Mortgaged Hotels or any part thereof, and all
orders, rules and regulations of any national or local board of fire
underwriters or other body exercising similar functions, which may be applicable
to any of the Mortgaged Hotels or any part thereof, or to the use of any of the
foregoing, whether or not any such law, ordinance, rule, regulation or
requirement shall necessitate structural changes or improvements or shall
interfere with the use or enjoyment of any of the foregoing, and shall also mean
and include all requirements of the policies of public liability, fire and all
other insurance at any time in force with respect to any of the foregoing.
The term "Leased Hotel" means a Hotel located solely on Land demised to
------------
the Borrower under a Ground Lease.
The term "Lender" has the meaning provided therefor in the Preamble
------
hereof and includes any holder of any interest in the Loan by assignment
permitted hereunder, but such term does not include a participant in the
Lender's interest in the Loan.
The term "Lending Installation" means any office or branch of the
--------------------
Lender.
The term "LIBOR" means, with respect to a LIBOR Borrowing and the
-----
relevant LIBOR Interest Period, a rate of interest per annum equal to the sum
of (a) the Base LIBOR applicable to that LIBOR Interest Period, plus (b) the
Increment.
The term "LIBOR Borrowing" means any portion of the Loan accruing
---------------
interest at Adjusted LIBOR.
The term "LIBOR Interest Period" means, a period of one, two, three or
---------------------
six months, to the extent LIBOR Borrowings of such or similar periods are
available to the Lender, commencing on the Effective Borrowing Date selected by
the Borrower in its Borrowing Notice. A month means a period starting on one day
in a calendar month and ending on the numerically corresponding day in the next
calendar month. If there is no such numerically corresponding day in the month
in which the LIBOR Interest Period ends, the LIBOR Interest Period shall end on
the last Business Day of such month. If any LIBOR Interest Period would
otherwise end on a day which is not a Business Day, such LIBOR Interest Period
shall end on the next succeeding Business Day, provided, however, that, if such
next succeeding Business Day falls in a new month, such LIBOR Interest Period
shall end on the immediately preceding Business Day. Any such LIBOR Interest
Period must end on or before the Maturity Date.
- 11 -
<PAGE>
The term "LIBOR Reserve Percentage" means the percentage incurred and
------------------------
actually paid with respect to the Loan from time to time under Regulation D as
the reserve requirement applicable with respect to Eurocurrency Liabilities (as
that term is defined in Regulation D) held by the Lender or any participant of
the Loan at any time, which reserve percentage shall not exceed the maximum
reserve amount permitted under Regulation D.
The term "Lien" means any charge, lien, mortgage, deed of trust, deed
----
to secure debt, pledge, hypothecation, collateral assignment, security interest
or other encumbrance of any nature whatsoever upon, of or in property or other
assets of a Person, whether absolute or conditional, voluntary or involuntary,
whether created pursuant to agreement, arising by force of statute, by judicial
proceedings or otherwise.
The term "Line of Credit and Reimbursement Agreement" means that
------------------------------------------
certain Amended and Restated Line of Credit and Reimbursement Agreement between
the Borrower, the General Partner and Marriott, dated as of even date herewith,
as the same may be further amended, supplemented or modified in accordance with
its terms and the terms hereof.
The term "Loan" means that certain Loan in the original principal
----
amount of $137,336,857 made to Borrower by the Lender, as evidenced by the
Notes.
The term "Loan Documents" means this Agreement, the Notes, the
--------------
Mortgages, the Foreclosure Guarantee, the Direct Access Agreement, the
Management Agreement Assignment, the Purchase Agreement Assignment, the Cash
Collateral Agreement, the Marriott Subordination Agreement, the Manager
Subordination Agreement, the GP Subordination Agreement and all other documents
or instruments heretofore, now or hereafter executed evidencing, securing or
guaranteeing or otherwise executed and delivered herewith or with any of the
foregoing or in connection with the payment of the Loan Obligations, including
any and all exhibits and schedules to any of the foregoing, as the same may be
amended, supplemented or modified from time to time.
The term "Loan Obligations" means the Loan, interest thereon or any
----------------
other obligation incurred or arising hereunder or under any other Loan Document.
The term "Loan Party" means each of the Borrower, the General Partner,
----------
the Manager and Marriott.
The term "Management Agreement" means that certain Amended and Restated
--------------------
Management Agreement dated as of even date herewith, by and between the Borrower
and the Manager, providing for the management of the Hotels by the Manager, as
the same may be amended, supplemented or modified from time to time in
accordance with its terms and the Management Agreement Assignment.
- 12 -
<PAGE>
The term "Management Agreement Assignment" means that certain Amended
-------------------------------
and Restated Assignment of Management Agreement dated of even date herewith
between the Borrower, the Lender and the Manager, pursuant to which the Borrower
assigns to the Lender all of its rights under the Management Agreement, as they
relate to the Mortgaged Hotels, as the same may be amended, supplemented or
modified from time to time.
The term "Manager" means International, or any permitted assignee
-------
thereof as provided in the Management Agreement and Section 7 of the Management
Agreement Assignment.
The term "Manager Subordination Agreement" means that certain
-------------------------------
Subordination Agreement dated as of even date herewith executed by the Manager
in favor of the Lender, as the same may be amended, supplemented or modified
from time to time in accordance with its terms.
The term "Marriott" means Marriott Corporation, a Delaware corporation.
--------
The term "Marriott Affiliate" has the meaning provided in the
------------------
Management Agreement.
The term "Marriott Subordination Agreement" means that certain
--------------------------------
Subordination Agreement dated as of even date herewith executed by Marriott in
favor of the Lender, as the same may be amended, supplemented or modified from
time to time in accordance with its terms.
The term "Maturity Date" means with respect to the Series A Note or the
-------------
Series B Note, December 15, 1999, and with respect to the Series C Note,
December 15, 2010, or in any case, any earlier date on which the Loan is
accelerated as provided herein or in the other Loan Documents.
The term "Memorandum" means the confidential private placement
----------
memorandum, dated November 14, 1989, issued in connection with the sale of
limited partnership interests in the Borrower.
The term "Minimum Notice Period" means receipt by the Lender of notice
---------------------
no later than (a) 11:00 a.m. (Charlotte, North Carolina time) on the Effective
Borrowing Date of a Prime Rate Borrowing, or (b) 11:00 a.m. (Charlotte, North
Carolina time), three Business Days prior to the Effective Borrowing Date of a
LIBOR Borrowing.
The term "Minimum Operating Profit Requirement" means, in any Fiscal
------------------------------------
Year, Operating Profit for such Fiscal Year in an amount, when added to funds
available in the Debt Service Reserve, sufficient to cover annual debt service
requirements due and owing on the Series A Note for such Fiscal Year.
- 13 -
<PAGE>
The term "Mortgage" means a mortgage or deed of trust, as the case may be, as
the same has been amended as of even date herewith and may be further amended,
supplemented or modified from time to time, securing the Loan and encumbering
(a) in the case of a Fee Hotel, the Hotel Property, (b) in the case of a leased
Hotel, the Hotel and the Borrower's leasehold estate in the Land, and (c) in the
case of a Partially Leased Hotel, the property interests referred to in item (a)
with respect to the portion of the Hotel located on Land owned by the Borrower
and the property interests referred to in item (b) with respect to the portion
of the Hotel that is located on the Land demised to the Borrower under a Ground
Lease.
The term "Mortgage/Assignment Modification" means with respect to each
--------------------------------
of the Mortgages dated February 7, 1990, respectively, and encumbering each of
the Mortgaged Hotels, respectively, the first modification of (a) each such
Mortgage and (b) each Assignment of Leases dated February 7, 1990, respectively,
with respect to each such Mortgaged Hotel, each such modification being dated of
even date herewith.
The term "Mortgaged Hotels" means all Hotels.
The term "Notes" means collectively, the Series A Note, the Series B
-----
Note and the Series C Note.
The term "Operating Profit" means for any Accounting Period, Fiscal
----------------
Quarter or Fiscal Year, the excess of Gross Revenues over Deductions for the
mortgaged Hotels, for such Accounting Period, Fiscal Quarter or Fiscal Year.
The term "Operating Profit Available For Series B Note Interest" means,
-----------------------------------------------------
for each Accounting Period, Fiscal Quarter and each Fiscal year, (a) Operating
Profit for such Accounting Period, Fiscal Quarter or Fiscal Year, as applicable,
minus (b) the sum of (i) interest due and payable on the Series A Note and
Scheduled Amortization of the Series A Note for the Accounting Period, Fiscal
Quarter or Fiscal Year, as applicable plus (ii) any amounts paid or to be paid
under the Third priority pursuant to Section 6.1(a)(i).
The term "Pari Passu Distribution" means a payment made pursuant to the
-----------------------
priority specified in clause Sixth of Section 6.1(a)(i).
The term "Partially Leased Hotel" means a Hotel located in part on Land
----------------------
in which the Borrower owns the entire fee simple interest and in part on Land
demised to the Borrower under a Ground Lease.
The term "Partnership Documents" means the Amended and Restated
---------------------
Agreement of Limited Partnership of Borrower dated as of February 7, 1990, and
all certificates filed or recorded in connection therewith, including without
limitation, those filed or recorded in the State of Delaware and all states in
which a Mortgaged Hotel is located, as the same may be amended, supplemented or
modified from time to time.
----------------
<PAGE>
The term "Payment Date" means the 25th day following the close of each
------------
Accounting Period, as specified on Schedule 1.1-B.
The term "Permitted Exceptions" means any of the following matters to
--------------------
which title to a Hotel Property is subject: (a) general real estate taxes and
assessments not yet due and payable, (b) public utility easements serving only
the Hotel Property and not unreasonably interfering with the use or operation of
the Hotel Property and not materially adversely affecting the value thereof; (c)
such title matters disclosed in Exhibit B attached to each Mortgage; and (d)
such other matters as the Lender may approve in writing.
The term "Person" shall include an individual, a partnership
------
(including, without limitation, the Borrower), a joint venture, a Corporation, a
trust, an estate, a bank, an unincorporated organization or association or a
Governmental Authority.
The term "Prime Rate" means that rate of interest announced by the
----------
Lender in Atlanta, Georgia, from time to time, as its Prime Rate. The Prime Rate
in effect as of the close of business each day shall be the effective Prime Rate
for that day. The Prime Rate is not necessarily the best or lowest rate of
interest charged by the Lender on commercial loans.
The term "Prime Rate Adjustment" means the amount, as calculated on
---------------------
each Payment Date in January and July of each calendar year, obtained for "x"
pursuant to the following calculation:
Prime Rate minus "x" = Floating LIBOR plus 1.00%
The term "Prime Rate Borrowing" means any portion of the Loan that
--------------------
bears interest at the Prime Rate.
The term "Prior Documents" means the Prior Loan Agreement, the Prior
---------------
Note, and the Swap Agreement.
The term "Prior Loan Agreement" means the Loan Agreement dated February
--------------------
7, 1990, as amended, between the Borrower and the Lender.
The term "Prior Note" means that certain Promissory Note dated February
----------
7, 1990 in the original principal amount of $128,000,000 made by the Borrower to
the order of the Lender.
The term "Purchase Agreement" means that certain agreement, dated as of
------------------
February 7, 1990, by and among the Sellers, as sellers, and the Borrower, as
purchaser, pursuant to which the Borrower purchased the Hotels.
The term "Purchase Agreement Assignment" means that certain Assignment
-----------------------------
of Purchase Agreement, dated as of February 7, 1990 among the Lender, the
Borrower and
- 15 -
<PAGE>
the Sellers, pursuant to which the Borrower assigned to the Lender certain of
its rights under the Purchase Agreement, as they relate to the Mortgaged Hotels
The term "Quarterly Reconciliation Date" means for each Fiscal Year,
-----------------------------
the date which is the Payment Date next following the end of the close of each
of the first three Fiscal Quarters of the Fiscal Year and with respect to the
fourth Fiscal Quarter of each Fiscal Year, the Annual Interim Reconciliation
Date.
The term "Quarterly Reconciliation Statement" means the statement
----------------------------------
prepared on a consolidated basis for the Borrower by an Authorized Accounting
Officer, and to be delivered by Borrower to Lender on each Quarterly
Reconciliation Date in the form required by Section 6.l(c)(i) hereof
The term "Rate Option" means Adjusted LIBOR or the Prime Rate.
-----------
The term "Reconciliation Date" means as to each Fiscal Quarter, a
-------------------
Quarterly Reconciliation Date and as to each Fiscal Year, the Annual Interim
Reconciliation Date and the Annual Audited Reconciliation Date.
The term "Regulation D" means Regulation D of the Board of Governors of
------------
the Federal Reserve System from time to time in effect and shall include any
successor or other regulation or official interpretation of said Board of
Governors relating to reserve requirements applicable to member banks of the
Federal Reserve System.
The term, "Scheduled Amortization" means the scheduled payments of
----------------------
principal of the Series A Note, as and when due and payable in accordance with
Section 2.3(a) hereof.
The term "Sellers" means, collectively, Marriott, Essex House
-------
Condominium Corporation, Host La Jolla, Inc. and Marriott-Dayton Community Urban
Redevelopment Corporation.
The term "Series A Note" means that certain Promissory Note designated
-------------
as a Series A Note of even date herewith made by the Borrower to the order of
the Lender, as the same may be amended, renewed, supplemented or modified from
time to time.
The term "Series B Note" means that certain Promissory Note designated
-------------
as a Series B Note of even date herewith made by the Borrower to the order of
the Lender, as the same may be amended, renewed, supplemented or modified from
time to time.
The term "Series C Note" means that certain Promissory Note designated
-------------
as a Series C Note of even date herewith made by the Borrower to the order of
the Lender, as the same may be amended, renewed, supplemented or modified from
time to time.
The term "Series B Note Interest" means the interest due and payable on
----------------------
the Series B Note in accordance with Section 2.8(c) hereof.
- 16 -
<PAGE>
The term "Specified Project" means the improvements or projects
-----------------
described in Section 6.2(c).
The term "Specified Project Indebtedness" means the Indebtedness
------------------------------
incurred for a Specified Project, as defined by Section 6.2(c).
The term "Specified Project Profit" means with respect to each
------------------------
Specified Project, the positive difference between (1) the revenues generated
and directly traceable to such Specified Project and (2) the costs and expenses
(other than in connection with Specified Project Indebtedness) related to such
Specified Project.
The term "Stock" shall include any and all shares, interests,
-----
participation or other equivalents (however designated) of stock in a
Corporation.
The term "Swap Agreement" means that certain Interest Rate Swap
--------------
Agreement dated November 1, 1989, between the Lender and Marriott (Marriott's
interest having been assigned to the Borrower by instrument dated February 7,
1990.
The term "Targeted Operating Profit" means for Fiscal Year 1997, an
-------------------------
annual Operating Profit of not less than $9,500,000 and for Fiscal Year 1998, an
annual Operating Profit of not less than $9,700,000, in both cases only as
certified by a certificate of an Authorized Accounting Officer delivered on the
Annual Interim Reconciliation Date and as certified by a certificate of the
outside auditor delivered on or before the Annual Audited Reconciliation Date.
The term "Telephone Lease" means a lease leasing to the Borrower the
---------------
telephones and/or other telecommunications systems and equipment located in a
Mortgaged Hotel.
The term "Title Insurer" means Commonwealth Land Title Insurance
-------------
Company, together with such other coinsurers or reinsurers or other title
insurer or insurers as may be approved by the Lender.
The term "TV System Lease" means a lease or other agreement under which
---------------
the Borrower rents or is otherwise provided, with or without the right or option
to purchase, equipment (excluding television sets) for the transmission into
Mortgaged Hotel rooms of televised programming.
The term "Variable Rate" means LIBOR, Floating LIBOR or Adjusted Rate,
-------------
as the case may be.
The term "Variable Rate Borrowing" means a LIBOR Borrowing, a Floating
-----------------------
LIBOR or an Adjusted Rate Borrowing, as the case may be.
- 17 -
<PAGE>
1.2 Terms Defined in Other Provisions. The following terms have the
---------------------------------
meanings therefor in the following sections of this Agreement:
Term Section
---- -------
Bank Regulatory 2.13(a)
Requirement
Effective Date 2.1(b)
Existing Debt 2.1(a)
FF&E Account 5.12
Financial Statements 4.6
Operating Profit Deficiency 6.1(b)
Yield Protection Amounts 2.13(a)
Yield Protection Notice 2.13(a)
ARTICLE 2
RESTRUCTURING OF EXISTING INDEBTEDNESS
2.1 Amount of Existing Indebtedness/Agreement to Restructure.
--------------------------------------------------------
(a) The Borrower and the Lender hereby acknowledge and agree that the
outstanding principal balance of and all accrued and unpaid interest on the
Prior Note and the early termination fee due under the Swap Agreement (such
principal balance and interest and fee collectively, the "Existing Debt") as of
the indicated dates are set forth in Schedule 2.1(a) attached hereto. Upon
satisfaction to the Lender in its sole discretion of the conditions precedent
set forth in Article 3, the Lender and the Borrower agree to restructure the
obligations owing to the Lender under and in connection with the Prior Documents
all on the terms set forth in this Agreement and the other Loan Documents.
(b) The Lender and the Borrower agree that upon satisfaction of all of
the conditions precedent set forth in Article 3 in the sole discretion of the
Lender, but effective as of December 15, 1992 (the "Effective Date"), this
Agreement and the other Loan Documents shall exclusively control and govern the
mutual rights and obligations of the parties hereto with respect to the Prior
Documents and the Prior Documents shall be superseded in all respects; provided,
however, that if for any reason, this Agreement or the Notes shall be
adjudicated by a court or other tribunal of competent jurisdiction in any
proceeding between the Lender and the Borrower or otherwise involving the
Borrower or
- 18 -
<PAGE>
the Hotels to be or to have become void or wholly unenforceable or ineffective,
the parties agree that the Prior Loan Agreement or Prior Note, as the case may
be, shall again control and govern the rights and obligations of the parties
thereto as if the parties had not entered into this Agreement, from the instant
this Agreement is so adjudicated and all amounts previously received under this
Agreement shall be applied to the payment obligations under the Prior Documents
and the waivers set forth in clause (e) of this Section 2.1 shall be rescinded
and of no force and effect.
(c) The parties hereto have entered into this Agreement and the other
Loan Documents solely to amend and restate and restructure the terms of, and
obligations owing under and in connection with, the Prior Documents. The parties
do not intend this Agreement nor the transactions contemplated hereby to be, and
this Agreement and the transactions contemplated hereby shall not be construed
to be, a novation of any of the obligations owing by the Borrower under or in
connection with any of the Prior Documents.
(d) Notwithstanding the failure of any of the conditions set forth in
Article 3 to be satisfied, the Borrower hereby forever releases and forever
discharges the Lender, any of its participants hereunder and each of their
respective predecessors, successors and assigns and all past and present of its
respective shareholders, directors, officers, agents, investors, affiliates,
subsidiaries, attorneys and accountants (collectively, the "Released Parties")
from any and all claims or causes of action the Borrower has or may have against
any or all of the Released Parties arising out of or in connection with any of
the Prior Documents or otherwise in connection with the Prior Loan prior to the
Closing Date. Furthermore, the Borrower hereby covenants and agrees not to
bring, commence, prosecute, maintain or cause or permit to be brought,
commenced, prosecuted or maintained, any suit or action, either in law or in
equity, in any court or before any other administrative or judicial authority
regarding any claims or causes of action the Borrower may have against any
Released Party arising out of or in connection with any of the Prior Documents
or otherwise in connection with the Prior Loan prior to the Closing Date.
(e) Upon satisfaction of all of the conditions precedent set forth in
Article 3 in the sole discretion of the Lender, but subject to the provisions of
clause (b) of this Section, the Lender and each participant of the Loan waives
all events of default under the Prior Documents identified in Schedule 2.1(e)
attached hereto, such waiver to be effective as of the Effective Date. The
Lender hereby represents to the Borrower that Lender is not aware of the
existence of any defaults or events of default under the Prior Documents other
than those which have been disclosed by the Borrower in Schedule 2.1(e).
2.2 Notes. To evidence the Loan, the Borrower shall deliver the Series
-----
A Note, the Series B Note and the Series C Note to the Lender.
2.3 Payment of Principal. (a) Until the Series A Note shall be paid in
--------------------
full, the Borrower shall repay on each Payment Date the outstanding principal
amount of the Series A Note, in an amount and during the periods set forth
below:
- 19 -
<PAGE>
January 1, 1993 through and including January 25, 1994 $46,154
January 26, 1994 through and including January 24, 1995 $53,846
January 25, 1995 through and including January 23, 1996 $61,539
January 24. 1996 through and including January 28, 1997 $69,231
January 29, 1997 through and including Maturity Date $76,923
The remaining principal amount of the Series A Note, together with interest
accrued thereon, and any other amounts due and owing to the Lender hereunder or
under the other Loan Documents (other than the Series C Note), shall be paid in
full, if not sooner paid by application of Pari Passu Distributions paid to the
Lender (subject to any subsequent adjustment pursuant to Section 6.1 hereof) or
otherwise, on the Maturity Date of the Series A Note.
(b) Until the Series B Note shall be paid in full, the Borrower shall
repay, subject to any subsequent adjustment pursuant to Section 6.1 hereof, on
each Quarterly Reconciliation Date the outstanding principal amount of the
Series B Note, from Pari Passu Distributions in an amount calculated pursuant to
Section 6.1 hereof. The remaining principal amount, if any, of the Series B
Note, together with interest accrued thereon to the extent not forgiven pursuant
to Section 6.1(a)(ii)(B), shall be paid in full, if not sooner paid, on the
Maturity Date of the Series B Note.
(c) The entire outstanding principal balance of the Series C Note shall
be paid in full, if not sooner paid, on the Maturity Date of the Series C Note.
2.4 Application of Payments.
-----------------------
(a) So long as no Event of Default shall have occurred and be
continuing, any amounts received by the Lender for which a priority of
application is not provided elsewhere in this Agreement or in the other Loan
Documents shall be applied as directed by the Borrower. If an Event of Default
has occurred and is continuing, any amounts received by the Lender for which a
priority of application is not provided in Section 6.1 or elsewhere in this
Agreement or in the other Loan Documents shall be applied to the Borrower's
obligations outstanding under the Loan Documents in such manner as directed by
the Lender.
(b) Anything in this Section 2.4 or elsewhere in this Agreement or any
other of the Loan Documents to the contrary notwithstanding, if, in the opinion
of counsel to the Lender, the application and allocation of payments and
proceeds in accordance with the request of the Borrower contravenes any
provision of applicable state or federal law or the direction of any court
having jurisdiction, then such application and allocation may instead
- 20 -
<PAGE>
be made in such order of priority as shall be required by such law or court
order as the Lender in its election shall determine.
2.5 Interest Rate.
-------------
Interest on the outstanding principal amount of the Series A Note and
Series B Note shall accrue at LIBOR or from the Effective Date until receipt of
written notice that the Adjusted Rate may be selected, Floating LIBOR, as
selected by the Borrower. Upon Borrower's receipt from the Lender of written
notice that the Adjusted Rate may be selected, the Borrower's ability to select
the Floating LIBOR shall cease, and interest on the outstanding principal amount
of the Series A Note and Series B Note shall accrue at LIBOR or the Adjusted
Rate, as selected by the Borrower. The Borrower shall select, with respect to a
LIBOR Borrowing, the Interest Period applicable to each Borrowing from time to
time by giving a Borrowing Notice to the Lender in not less than the Minimum
Notice Period. There shall be no more than two Borrowings outstanding at any
time and any Floating LIBOR Borrowing or Adjusted Rate Borrowing, as in effect,
shall be in an integral multiple of $100,000 and in a maximum amount of
$500,000. The unpaid principal amount of each Borrowing shall bear interest at
the applicable rate, computed in each case on the basis of a 360-day year for
the actual number of days elapsed, (i) in the case of a LIBOR Borrowing, from
and including the first day of the Interest Period therefor to, but not
including, the last day of such Interest Period; (ii) in the case of a Floating
Rate Borrowing, from and including the Effective Borrowing Date to, but not
including, the earlier of the first day of an Interest Period of a LIBOR
Borrowing into which such Floating LIBOR Borrowing is converted or until paid;
(iii) in the case of an Adjusted Rate Borrowing, from and including the
Effective Borrowing Date to, but not including, the earlier of the first day of
an Interest Period of a LIBOR Borrowing into which such Adjusted Rate Borrowing
is converted or the date the Adjusted Rate is adjusted pursuant to this Section
2.5 (which date for purposes hereof will be deemed to be a new Effective
Borrowing Date for such Borrowing) or until paid; and (iv) if Section 2.19(b)
shall be applicable, from and including the Effective Borrowing Date of such
Prime Rate Borrowing to, but not including, the first day of an Interest Period
of a LIBOR Borrowing into which such Prime Rate Borrowing is converted. Interest
on Adjusted Rate Borrowings shall be adjusted on the dates specified in the
definition of the term "Prime Rate Adjustment" in Section 1.1 hereof and the
Prime Rate Adjustment shall remain in effect until the next scheduled adjustment
is made. Interest on Prime Rate Borrowings shall change when and as the Prime
Rate changes. If the Borrower fails to give a Borrowing Notice in accordance
with the provisions hereof, then (a) if the Borrower shall not be entitled to
select a Variable Rate by virtue of the following sentence, the Borrowing shall
constitute a Prime Rate Borrowing, and (b) in the case of the rollover of a
LIBOR Borrowing for which the Interest Period is ending (but subject to the
following sentence), the rollover of such Borrowing shall be for the same
Interest Period, and principal amount as the Borrowing for which the Interest
Period has so ended but in no event shall an Interest Period extend beyond the
Maturity Date. The Borrower shall not be entitled to select (and shall not be
deemed, in accordance with the previous sentence, to have selected) a Variable
Rate if, on the Effective Borrowing Date thereof,
- 21 -
<PAGE>
there exists an Event of Default which has not been cured or waived in
accordance with the terms hereof.
2.6 Default Interest. From and after the Maturity Date (whether by
----------------
acceleration or otherwise) or the date of the occurrence of an Event of Default
so long as the Series A Note or Series B Note is outstanding, the entire unpaid
principal amount of the Loan shall thereafter bear interest at the Default Rate
until such principal amount is paid in full or such Event of Default is
otherwise cured or waived. At any time after the Series A Note and Series B Note
have been paid in full and while the Series C Note remains outstanding, if any
amount is not paid when due under the Series C Note, the entire unpaid principal
amount of the Series C Note shall bear interest at the Default Rate from the due
date until such principal amount is paid in full or such Event of Default is
otherwise cured or waived. Default Interest, if any, shall be due and payable
upon demand.
2.7 Notification of LIBOR.
---------------------
(a) No later than 11:00 a.m. (Charlotte, North Carolina time) on the
Business Day following the Lender's receipt of a Borrowing Notice selecting a
LIBOR Borrowing given by the Borrower in accordance with the terms and
provisions hereof, the Lender, by written, telex or telephone notice, shall
advise the Borrower of the Adjusted LIBOR for such LIBOR Borrowing for the LIBOR
Interest Period selected in such Borrowing Notice. Such notice shall inform the
Borrower whether the Lender or any participants of the Loan are in a reserve
position with respect to the requested Borrowing.
2.8 Interest Payments.
-----------------
(a) Generally. Not later than two Business Days prior to a Payment
---------
Date, the Lender shall notify the Borrower in writing of the aggregate amount of
interest on the Loan to be paid on such Payment Date. Interest shall be payable
for the day a Borrowing is made but not for the day of any payment if payment is
made in accordance herewith and is received prior to the time, and at the place,
provided in Section 2.16 hereof Interest shall be payable in arrears for the
Accounting Period immediately preceding the applicable Payment Date.
(b) Series A Note. Interest on the principal amount of the Series A
-------------
Note shall be due and payable on each Payment Date and on the Maturity Date for
the Series A Note.
(c) Series B Note. Subject to Section 6.1, interest on the principal
-------------
amount of the Series B Note shall be due and payable on each Payment Date and on
the Maturity Date for the Series B Note.
(d) Series C Note. No interest, other than Default Interest, if any, on
-------------
the principal amount of the Series C Note shall accrue or be due and payable.
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<PAGE>
2.9 Prepayment. Upon not less than thirty (30) days prior written
----------
notice given by an Authorized Representative to the Lender, the Borrower may pay
all, or, from time to time any part, of the principal of the Loan at any time
outstanding by paying, in addition to the principal amount of such prepayment,
all interest accrued on the amount of such prepayment to the date thereof and
the amounts, if any, payable under the last sentence of this Section 2.9.
Prepayments shall be applied as set forth in Section 2.4. In addition, if a
Variable Rate Borrowing is prepaid, voluntarily by the Borrower or because of
acceleration of the Maturity Date pursuant to the Loan Documents, or for any
other reason, the Borrower shall reimburse the Lender, and any participants of
the Loan, for any loss incurred or to be incurred pursuant to Section 2.11
hereof.
2.10 Lending Installations. The Lender, and each participant of the
---------------------
Loan, may book each LIBOR Borrowing at any Lending Installation selected by it
from time to time and may change the Lending Installation from time to time. All
terms of this Agreement shall apply to any such Lending Installation. If, prior
to the date that the Lender, or any participant of the Loan, books a LIBOR
Borrowing at a particular Lending Installation, the Lender, or such participant,
has knowledge of any taxes provided for in Section 2.12 hereof or any sums
provided for in Section 2.13 that would be payable by the Borrower by reason of
the Lender's or such participant's booking such LIBOR Borrowing at such Lending
Installation that would not be payable by the Borrower or that would be reduced
if such LIBOR Borrowing were booked at an alternative Lending Installation at
which the Lender, or such participant, may lawfully book such LIBOR Borrowing
without otherwise incurring, in its reasonable judgment, material liabilities,
obligations or risks, then, notwithstanding the provisions of Section 2.12 and
2.13, the Borrower's obligations to the Lender, or such participant, under such
Sections with respect to such LIBOR Borrowing shall be limited to the amount
that the Borrower would have incurred under such Sections had the Lender, or
such participant, booked such LIBOR Borrowing at such alternative Lending
Installation.
2.11 Failure to Pay or Borrow on Certain Dates. If, whether by
-----------------------------------------
prepayment or by acceleration of the Maturity Date or otherwise, any payment, in
full or in part, of the principal amount of a LIBOR Borrowing occurs on a date
which is not the last day of the applicable Interest Period, the Borrower will
indemnify the Lender, and any affected participant of the Loan, for any losses
and costs incurred by it resulting therefrom, including, without limitation, any
loss in liquidating or employing deposits acquired to fund or maintain a LIBOR
Borrowing, as calculated as provided in Section 2.14 hereof.
2.12 Taxes.
-----
(a) In the event the Borrower shall be required by law to deduct and
withhold any taxes (as hereinafter defined) from amounts payable hereunder, the
Borrower shall be entitled to do so, provided it shall provide a statement
setting forth the amount of taxes withheld, the applicable rate and any other
information which may reasonably be requested for the purpose of assisting the
Lender from whom taxes were withheld to obtain any allowable credits or
deductions for the taxes so withheld in each jurisdiction in which it is
- 23 -
<PAGE>
subject to tax. However, the Borrower shall not withhold taxes from payments
required to be made to the Lender so long as the Lender is a corporation
organized under the laws of the United States or any state or territory thereof
or is permitted by law to file and keep in effect and has on file and in effect
with the Borrower such duly executed form(s) or statement(s) which may, from
time to time, be prescribed by law and which, pursuant to applicable provisions
of (i) an income tax treaty between the United States and the country of
residence of the Lender, (ii) the U.S. Internal Revenue Code of 1986, as
amended, or (iii) any applicable rules or regulations, permit the Borrower to
make such payments free of withholding. The term "taxes" shall mean any taxes,
-----
levies, imports, duties, fees, assessments or other charges of whatever nature,
now or hereafter imposed on the Lender by any jurisdiction or by any department,
agency, state or other political subdivision thereof or therein. Notwithstanding
the foregoing, the Borrower agrees to make to the Lender, if the Borrower has
withheld taxes pursuant to the foregoing, such payments as may be necessary to
insure that the Lender receives the full amount payable to it by the Borrower
under this Agreement unless the Lender fails to complete and deliver to the
Borrower as soon as reasonably practicable such form(s) or statement(s)
reasonably requested by the Borrower. All stamp, documentary and intangible
taxes shall be paid by the Borrower. If, notwithstanding the foregoing, the
Lender pays any such taxes, the Borrower will reimburse the Lender for the
amount paid if, as and to the extent such reimbursement is permitted by
applicable law. The Borrower will furnish to the Lender official tax receipts or
other evidence of payment of all such taxes.
(b) If the Borrower shall be required to make any payment to the
Lender under this Section 2.12 and if the Lender is able, in its reasonable
opinion, to claim any deduction, credit, offset, allowance, reduction in net tax
payable or similar tax benefit by reason of such payment, the Lender will
promptly reimburse the Borrower for the amount of such benefit. As and to the
extent that the Borrower may be able to mitigate or reduce the amount of any
such payments under the provisions of any treaty, law or other governmental
regulation, the Lender will render, at the expense of the Borrower, whatever
reasonable assistance may be required to effect such mitigation or reduced
payment.
2.13 Yield Protection.
----------------
(a) If, on or after February 7, 1990, any law or any governmental
rule, regulation, policy, or directive having the force of law, or any
interpretation thereof (collectively, "Bank Regulatory Requirement"), or
compliance by the Lender with such Bank Regulatory Requirement:
(i) imposes or increases or deems applicable with respect to
the making, funding or maintaining of any portion of the Loan hereunder
any reserve (including, without limitation, any increase in reserves
required under Regulation D during any period in which such reserves
are payable by the Borrower), assessment, insurance charge, special
deposit or similar requirement against assets of, deposits with or for
the account of, or credit extended by, the Lender or any applicable
Lending Installation; or
- 24 -
<PAGE>
(ii) imposes any other condition (excluding (A) taxes payable
by the Borrower under Section 2.12; (B) taxes imposed on or measured by
net income or alternative minimum taxable income or taxable assets in
lieu of income by the jurisdiction of incorporation or the jurisdiction
in which are located the principal executive offices of the Lender,
each taxing jurisdiction therein, and the United States; (C) taxes
imposed on the Lender pursuant to Section 884 of the Internal Revenue
Code of 1986; and (D) taxes imposed on the Lender to the extent the tax
would have been imposed if the Lender had not engaged in the
transaction contemplated by this Agreement), the result of which is to
increase the cost actually incurred by the Lender or any applicable
Lending Installation of making, funding or maintaining the Loan
hereunder or to reduce any amount actually received by the Lender or
any applicable Lending Installation in connection with the Loan
hereunder, or requires the Lender or any applicable Lending
Installation to make any payment calculated by reference to the amount
of the Loan hereunder held or interest received by it which payment is
actually made, by an amount reasonably deemed material by the Lender;
or
(iii) affects the amount of capital required or expected to be
maintained by the Lender, or any Corporation which controls the Lender,
with respect to the making, funding or maintaining of the Loan
hereunder and the Lender determines the amount of capital required is
increased by or based upon the existence of this Agreement (taking into
consideration the Lender's policies with respect to capital adequacy
immediately prior to the effective date of such Bank Regulatory
Requirement and the extent to which the Lender's capital was utilized
prior to such effective date);
then, in any of such events, the Borrower shall pay, without duplication, to the
Lender and, in the event the Lender is entitled to payment hereunder, to any
similarly affected participant of the Loan, that portion of such increased
expense actually incurred and paid or reduction in amount received
(collectively, "Yield Protection Amounts") which the Lender or such participant
reasonably determines is attributable to making, funding and maintaining its
interests in the Loan; provided, however, that no participant shall receive any
Yield Protection Amount for its portion of the Loan in excess of the Yield
Protection Amount which the Lender would have received on a portion of the Loan
identical in principal amount to that held by the participant. The Borrower
shall pay any Yield Protection Amount within thirty (30) days after the
effective date of a notice therefor (a "Yield Protection Notice") from Lender
describing in reasonable detail the Bank Regulatory Requirement as a result of
which such Yield Protection Amount is due and showing the aggregate amounts by
category of Yield Protection Amounts (1) currently payable for which payment is
then being first requested, and (2) not currently payable but if not contrary to
any law or policy of the Lender or such participant concerning such disclosure,
contemplated to be payable during the period of twenty-four (24) consecutive
months following the date of such notice, calculated on the assumption the Yield
Protection Amounts for which compensation is then being sought will continue to
be
- 25 -
<PAGE>
compensable under this Section 2.13(a) as then contemplated during such 24-month
period, provided that such estimates shall not be binding on the Lender or such
participant. The Borrower shall have no obligation to pay the Lender or such
participant any Yield Protection Amounts under clauses (i), (ii) or (iii) above
that accrue or shall have accrued prior to the effective date of the initial
Yield Protection Notice from the Lender with respect to such Bank Regulatory
Requirement.
(b) The Lender will use reasonable efforts, and will contractually
oblige participants of the Loan to use similar efforts, consistent with their
respective bank policies and procedures, in an attempt to minimize or eliminate
the obligation of the Borrower to pay any Yield Protection Amounts by booking
Borrowings in a different Lending Installation or taking other reasonable and
appropriate actions; provided, however, that neither the Lender nor any
participant of the Loan nor any Lending Installation will be obligated to suffer
or incur any economic, financial or regulatory costs, expenses or other
disadvantages whatsoever by reason of their obligation contained in this Section
2.13(b) except in the case of costs and expenses which are reimbursed by the
Borrower.
(c) The Lender represents that, to the best of its knowledge, its
retained share of the Loan does not, as of the date hereof, result in any Yield
Protection Amounts being due and owing as a result of such Borrowings, other
than recording, filing, intangible, mortgage, franchise and other taxes that are
or would be due and owing in the jurisdictions in which the collateral for the
Loan is located as a result of or in connection with the acceptance of such
collateral.
2.14 Certificates; Survival of Indemnity. A certificate of the Lender
-----------------------------------
as to the amount due under Sections 2.11, 2.12 or 2.13 hereof shall be
conclusively presumed to be correct in the absence of manifest error, and the
Borrower shall pay the Lender or such participant all amounts specified in such
certificate. The Lender shall provide the certificate, whether the amount
specified is due to it or to a participant of the Loan, and the Lender will, or
will cause such participant of the Loan to, on request, provide evidence to the
Borrower supporting such certificate. Determination of amounts payable under
such Sections in connection with a Variable Rate Borrowing shall be calculated
(to the extent that such calculation is applicable to the determination of the
amounts payable) and due and payable if and only if the Lender or such
participant funded its share of the actual or anticipated Variable Rate
Borrowing through the purchase of a deposit of the type, maturity and amount
corresponding to the deposit used in determining the LIBOR applicable to the
Variable Rate Borrowing. Unless otherwise provided herein, the amount specified
in the certificate shall be payable within thirty (30) days of demand by the
Lender, which demand shall include such certificate if such certificate was not
theretofore delivered to the Borrower. The obligations under Sections 2.11,
2.12 and 2.13 hereof shall survive re-payment of the Loan and termination of
this Agreement.
2.15 Telephonic Notices. The Lender is hereby authorized to effect
------------------
Borrowings based on telephonic Borrowing Notices made by any Person the Lender
in good faith
- 26 -
<PAGE>
believes to be an Authorized Representative acting on behalf of the Borrower. If
requested by the Lender, the Borrower agrees to confirm promptly any telephonic
Borrowing Notice in writing signed by an Authorized Representative. If the
written confirmation differs in any material respect from the action taken by
the Lender, the records of the Lender shall govern, absent manifest error.
2.16 Method of Payment.
-----------------
(a) The Borrower shall pay to the Lender, without setoff or
counterclaim or any deduction whatsoever, at its address specified below (or
such other address as the Lender may specify by written notice to the Borrower),
all amounts payable by the Borrower to the Lender and any participants of the
Loan under the Loan Documents, in immediately available funds, not later than
2:00 P.M. (local time at Charlotte, North Carolina or any other place of payment
specified by the Lender) on the date when due. Unless otherwise notified by the
Lender, the address of the Lender for the purpose of payments hereunder is:
NationsBank of Georgia, National Association
c/o AMRESCO-Institutional, Inc.
101 North Tryon Street, NCI-001-13-20
Charlotte, North Carolina 28255
Attention: Real Estate Loan Administration
ABA No. 053000196
Reference: Marriott Diversified American Hotels, L.P.
(b) The Borrower shall satisfy its obligation to make payments of
principal and interest by paying the Lender, when due, in the manner provided in
Section 2.16(a), one hundred percent (100%) of the principal and interest
payments due on the Loan, and it shall be the obligation of the Lender to
forward to any participant to which it has assigned or transferred any of its
interest in the Loan such participant's required share of any such principal or
interest payment.
2.17 General Provisions Concerning Loan. All interest shall be computed
----------------------------------
for the actual number of days elapsed on the basis of a 360-day year. Except as
otherwise provided in the definition of LIBOR Interest Period, if any payment of
principal of or interest on a Note becomes due and payable on a day which is not
a Business Day, the due date thereof shall be extended to the next succeeding
Business Day and, in the case of principal, interest thereon shall be payable at
the then applicable rate during such extension.
2.18 Restructuring Fees. On the Closing Date, the Borrower shall pay
------------------
to the Lender a fee for entering into this Agreement the sum of $1,000,000. Such
fee shall be fully earned when due and non-refundable when paid.
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<PAGE>
2.19 Change in Circumstances Affecting Variable Rate Borrowings.
----------------------------------------------------------
(a) If with respect to any Variable Rate Borrowing for any Interest
Period, the Lender determines in good faith that deposits in Dollars (in the
applicable amount) are not being offered to the Lender in the relevant market
for such Interest Period, the Lender shall forthwith give notice thereof to the
Borrower, whereupon until the Lender notifies the Borrower that the
circumstances giving rise to such situation no longer exist, the obligations of
the Lender to make such type of Variable Rate Borrowings shall be suspended.
(b) If any applicable law, rule or regulation, or any change therein,
or any interpretation or change in interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Lender with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency, shall make it unlawful or
impossible for the Lender to make, maintain or fund its Variable Rate
Borrowings, the Lender shall so notify the Borrower. Before giving any notice to
the Borrower pursuant to this Section, the Lender shall designate a different
Lending Installation if such designation will avoid the need for giving such
notice and will not, in the reasonable judgment of the Lender, be otherwise
materially disadvantageous to the Lender. Upon receipt of such notice,
notwithstanding anything contained in this Article 2, the Borrower shall repay
in full the then outstanding principal amount of each Variable Rate Borrowing so
affected, together with accrued interest thereon (provided, however, that such
repayment shall not constitute a prepayment for purposes of this Agreement), on
either (i) the last day of the then current Interest Period applicable to such
Variable Rate Borrowing so affected if the Lender may lawfully continue to
maintain and fund such LIBOR Borrowing to such day, or (ii) the date immediately
preceding the date on which the Lender may not lawfully continue to fund and
maintain such Variable Rate Borrowing. Concurrently with repaying each Variable
Rate Borrowing of the Lender, notwithstanding anything contained in this Article
2 hereof, the Borrower shall borrow a Prime Rate Borrowing from the Lender in
the amount of such Variable Rate Borrowing required to be prepaid and the Lender
shall make such Borrowing available in such amount.
(c) If notice has been given pursuant to this Section 2.19 suspending
the obligation of the Lender to make any type of Variable Rate Borrowing, or
requiring any Variable Rate Borrowing to be repaid or prepaid, then, unless and
until the Lender notifies the Borrower that the circumstances giving rise to
such repayment no longer apply, all Borrowings which would otherwise be made as
the type of Variable Rate Borrowings affected shall be made instead as a Prime
Rate Borrowing.
2.20 Limitation of Liability. Notwithstanding anything to the contrary
-----------------------
contained in this Agreement or in any of the other Loan Documents, the Lender
agrees to satisfy any judgment obtained against the Borrower by the exercise of
the rights of the Lender under the Loan Documents; no other property or assets
of the Borrower or any general partner or limited partner of the Borrower, nor
any Affiliate of the Borrower or of any general
- 28 -
<PAGE>
partner or limited partner of the Borrower, except pursuant to the Foreclosure
Guarantee or the Direct Access Agreement, shall be subject to levy, execution or
other enforcement procedures for the satisfaction of the payments required under
the Notes, the Mortgages or for the performance of any other covenants or
warranties contained herein or under the other Loan Documents. The Lender shall
not bring any action to obtain a deficiency judgment against the Borrower or the
general or limited partners of the Borrower, or any officers, directors,
employees or Affiliates thereof (provided, however, this shall in no way limit
the rights, powers and privileges of the Lender pursuant to the Foreclosure
Guarantee or the Direct Access Agreement). Nothing contained herein shall: (i)
constitute a waiver of any obligation evidenced by the Notes, the Loan
Documents, or secured by the Mortgages, or in any way be construed to release or
impair the liens and interests of the Mortgages, or the indebtedness evidenced
by the Notes, (ii) limit the right of the Lender to bring an action to
judicially foreclose the liens and interests of the Mortgages, or to confirm any
foreclosure or sale pursuant to any power of sale contained in the Mortgages. or
limit the right of the Lender to exercise its remedies under the other Loan
Documents, subject to the terms of this Section 2.20, or (iii) affect the right
of the Lender to bring any action under the Foreclosure Guarantee and the Direct
Access Agreement and satisfy any judgments obtained against any of the assets of
the guarantors pursuant to the terms and conditions of the Foreclosure Guarantee
and the Direct Access Agreement.
Notwithstanding the foregoing, the Borrower and any general partner of
the Borrower shall remain and be fully liable to the Lender for any loss or
damage suffered by the Lender as a result of:
(i) fraud or intentional damage or waste to any of the
Mortgaged Hotels, by the Borrower;
(ii) the Borrower's retention of rents, room revenues or other
income which constitutes collateral hereunder arising with respect to
the Mortgaged Hotels, which is collected by the Borrower after the
Lender has given notice to the Borrower that an Event of Default has
occurred (to the full extent of any such rents or other income retained
and collected by the Borrower in violation of the terms of the Loan
Documents);
(iii) failure to pay ad valorem taxes in violation of the
terms of the Mortgages;
(iv) any claims, liabilities, damages, costs and expenses
resulting from violation of any federal, state or local laws, rules,
regulations, or ordinances involving hazardous materials or substances
located on, in or under any of the Mortgaged Hotels;
(v) the Borrower's misapplication or misappropriation of any
proceeds received by the Borrower pursuant to any insurance policies or
condemnation proceeds or awards, in violation of the terms of the
Mortgages;
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<PAGE>
(vi) any sale, transfer or voluntary encumbrance of the
Mortgaged Hotels or any portion thereof or any interest therein, or the
FF&E, except as expressly permitted in Section 8. 1 of this Agreement or
as otherwise permitted herein or in the other Loan Documents, or with
the prior written consent of the Lender:
(vii) failure to maintain insurance in violation of the terms
of this Agreement or the Mortgages, and
(viii) failure of the Borrower to comply with Section 6.1(b)
hereof
Notwithstanding the foregoing, the Sellers shall remain fully liable
for the obligations, liabilities, representations, warranties and
indemnifications contained in the Purchase Agreement which survive the date
hereof as provided therein, and the Lender shall have recourse against the
Sellers to the extent assigned to the Lender in the Purchase Agreement
Assignment.
ARTICLE 3
CONDITIONS PRECEDENT
3.1 Conditions Precedent to Effectiveness of Agreement. The
--------------------------------------------------
effectiveness of this Agreement, including without limitation, the waivers
contained in Section 2.1(e), is subject to the satisfaction of the following
conditions precedent, as determined in the Lender's sole judgment:
(a) Authorization, Execution and Delivery of Documents. The following
--------------------------------------------------
documents shall have been duly authorized, executed and delivered by the
respective parties thereto, shall be in full force and effect on the Closing
Date without any event or condition having occurred or existing which
constitutes, or with the giving of notice or lapse of time or both would
constitute, a default thereunder or breach thereof or would give any party
thereto the right to terminate any thereof:
(i) this Agreement;
(ii) Series A Note, substantially in the form of Exhibit A
hereto;
(iii) Series B Note, substantially in the form of Exhibit A
hereto;
(iv) Series C Note, substantially in the form of Exhibit A
hereto;
(v) Mortgage/Assignment Modification, substantially in the
form of Exhibit B hereto, with respect to each Mortgage (with such
modifications as may be necessary to match the section references of
the various Mortgages, to convert to
- 30 -
<PAGE>
a mortgage and otherwise to meet the recording and other requirements
of the appropriate state) and evidence of the recordation thereof in
the appropriate records in each State in which a Hotel is located;
(vi) Acknowledgment executed by each of the participants
granting its consent under its participation agreement;
(vii) Management Agreement, substantially in the form of
Exhibit C hereto;
(viii) Management Agreement Assignment, substantially in the
form of Exhibit D hereto, and in recordable form for recordation in the
appropriate records in each State in which a Hotel is located;
(ix) Cash Collateral Agreement, substantially in the form of
Exhibit E hereto:
(x) Reaffirmation of Foreclosure Guarantee, substantially in
the form of Exhibit F hereto;
(xi) Direct Access Agreement, substantially in the form of
Exhibit G hereto;
(xii) Line of Credit and Reimbursement Agreement,
substantially in the form of Exhibit H hereto;
(xiii) Marriott Subordination Agreement, substantially in the
form of Exhibit I-1 hereto, from Marriott;
(xiv) Manager Subordination Agreement, substantially in the
form of Exhibit I-2 hereto, from the Manager;
(xv) GP Subordination Agreement, substantially in the form of
Exhibit 1-3 hereto from the General Partner;
(xvi) Assignment of that certain Closing and Indemnity
Agreement dated as of February 8, 1990 by and between Marriott and
Borrower; and
(xvii) A release executed by International with respect to any
accrued but unpaid Incentive Management Fees or Contingent Incentive
Management Fees (as each term is defined in the Management Agreement).
(b) Proceedings. All corporate and other proceedings taken or to be
-----------
taken in connection with the transactions contemplated hereby and all documents
incident thereto shall be satisfactory in substance and form to the Lender, and
the Lender shall have
- 31 -
<PAGE>
received all such counterpart originals or certified or other copies of such
documents as reasonably requested. In this connection, each Loan Party shall
deliver to the Lender:
(i) Certified copies (certified by the respective Secretary or
Assistant Secretary of each Loan Party that is a corporation and the general
partner of the Loan Party that is a partnership (each such Person shall be the
"Authenticating Person" with respect to such Loan Party)) of all corporate or
other necessary action taken by each Loan Party to authorize the execution,
delivery and performance of the Loan Documents to which it is a party;
(ii)(A) Certified copies certified by an Authenticating Person (I)
with respect to each Loan Party that is a corporation, the articles of
incorporation certified by an appropriate authority (acceptable to the Lender)
of the jurisdiction of its incorporation and by-laws of such Loan Party: and
(II) with respect to the Loan Party that is a partnership, the current
partnership agreement governing such Loan Party; (B) with respect to each Loan
Party, a certificate of existence or other good standing certificate issued by
the Secretary of State of the jurisdiction in which such Loan Party was formed,
its principal place of business and in each State in which a Hotel is located,
and (C) certificates of incumbency and specimen signatures signed by the
appropriate Authenticating Person with respect to each of the officers or other
Persons of each Loan Party who are authorized to execute and deliver the Loan
Documents to which such Loan Party is a party.
(c) Filings and Recordings. All Uniform Commercial Code financing
----------------------
statements and other documents or memoranda, if any, in respect thereof,
necessary or advisable, in the opinion of the Lender, shall have been duly filed
or recorded including without limitation those statements listed on Schedule
3.1(c) attached.
(d) Real Estate Documents. With respect to the Mortgages, all reports,
---------------------
searches, evaluations, agreements and such other documents as the Lender may
request shall have been delivered to the Lender in form and substance
satisfactory to the Lender including without limitation the following:
(i) Title update reports, endorsements and related documents
including without limitation, (A) title examination update and title
insurance endorsement commitment; (B) A copy of each title exception
revealed by the title examination update and the title insurance
endorsement and (C) Title insurance endorsements as reasonably requested
by Lender with respect to each of Lender's existing mortgagee title
insurance policies, including without limitation, a datedown endorsement
and endorsement with respect to increased principal amount of the Loan;
(ii) Estoppel certificates and estoppel agreements from
(A) the Ground Lessors with respect to the following: (I) the Fairview
Parking Garage Lease, (II) the Underlying Lease; and (III) the
Fullerton, California Lease and (B)
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<PAGE>
the co-beneficiaries with Borrower with respect to certain other
Permitted Encumbrances affecting each of the Mortgaged Hotels,
including, without limitation: (I) the Declaration of Easements, as
referenced in the Fairview Parking Garage Lease, (II) the Reciprocal
Easement Agreement, as referenced in the Fairview Parking Garage Lease,
(III) the Declaration of Protective Covenants for Vanguard Center
(Raleigh, North Carolina Hotel) and (IV) the Reciprocal Easement
Agreement (Livonia, Michigan Hotel);
(iii) A certificate of no change from the Borrower, in
form acceptable to the Title Insurer to remove the survey exception
from the endorsement;
(iv) Current schedules of Space Leases and Equipment
Leases (defined as to each Mortgaged Hotel, by each of the applicable
Assignment of Leases dated February 7, 1990, as amended by each
Mortgage/Assignment Modification);
(v) Amended Fixture Financing Statements in appropriate form to
meet the requirements of the applicable state with respect to each of
the Mortgages, executed by Borrower; and
(vi) Evidence of compliance with actions required by
Schedule A of the agreement described in item 3.1(a)(xv).
(e) Opinions of Counsel. The Lender shall receive a favorable opinion
-------------------
satisfactory to the Lender from each of the following:
(i) Hogan & Hartson, special counsel to the Loan Parties, and
Christopher G. Townsend, in-house counsel to the Loan Parties such
opinions collectively to cover the matters in form and substance set
forth in Exhibit J attached hereto;
(ii) Kennedy, Covington, Loudell & Hickman, local counsel to
the Loan Parties for the State of North Carolina, such opinion
substantially in the form of Exhibit K attached hereto;
(iii) Honigman, Miller, Schwartz and Cohn, local counsel to the
Loan Parties for the State of Michigan, such opinion substantially in
the form of Exhibit K attached hereto;
(iv) Jones, Day, Reavis & Pogue, local counsel to the Loan
Parties for the State of Ohio, such opinion substantially in the form of
Exhibit K attached hereto;
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<PAGE>
(v) Hogan & Hartson, local counsel to the Loan Parties for
the Commonwealth of Virginia, such opinion substantially in the form of
Exhibit K attached hereto; and
(vi) Washburn, Brisco & McCarthy, local counsel to the Loan
Parties for the State of California, such opinion substantially in the
form of Exhibit K attached hereto.
(f) Insurance. The Lender shall have received a certificate of insurance
---------
and, if requested, copies of each of the policies of insurance covering the
Hotels, together with loss payable clauses, which comply with the terms of the
relevant Loan Documents and a certificate of insurance setting forth compliance
with Section 7.2 hereof and a letter from the Manager describing in reasonable
detail its self-insurance program on behalf of the Borrower in effect on the
Closing Date and as permitted under Section 7.2 hereof
(g) Search Reports. The Lender shall have received favorable UCC, tax,
--------------
judgment and lien search reports with respect to the Borrower and any
appropriate Loan Party in all necessary or appropriate jurisdictions and under
all legal and appropriate trade names indicating that there are no prior Liens
other than Permitted Liens.
(h) Accounts. The Borrower shall establish the Concentration Account,
--------
the FF&E Account and the Debt Service Reserve at the Lender and shall deposit,
in immediately available funds $3,000,000 in the Debt Service Reserve and any
balance in the Borrower's accounts with Merrill Lynch (as identified in the Cash
Collateral Agreement) in the Concentration Account and any balance of the
existing hotel FF&E account into the FF&E Account.
(i) Restructuring Fee. The Borrower shall pay to the Lender in
-----------------
immediately available funds a restructuring fee equal to $1,000,000 in respect
of the transactions contemplated by this Agreement.
(j) Payments. The Borrower shall pay in immediately available funds
--------
$2,884,080 to the Lender as partial satisfaction of the early termination fee
due and payable under the Swap Agreement and the amount specified in Schedule
3.1(j) for application hereunder as set forth in such Schedule 3.1(j).
(k) Appraisal Fees. The Borrower shall pay in immediately available
--------------
funds $46,500 to NationsBank of Georgia, National Association for the
preparation of appraisals of the Mortgaged Hotels.
(l) Mortgage Recording Taxes and Fees. The Borrower shall pay to Lender
---------------------------------
in immediately available funds all mortgage recording taxes and fees in
connection with the filing and recording of the documents required herein.
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<PAGE>
(m) Termination of Debt Service Guaranty. The Lender shall acknowledge
------------------------------------
the termination of the Debt Service Guaranty and Marriott shall provide a
release in connection therewith
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Agreement and to
disburse the Loan, the Borrower represents and warrants to the Lender that:
4.1 The Borrower. The Borrower is a duly organized and validly
------------
existing limited partnership under the laws of the State of Delaware and has the
power and authority to own its properties and other assets and to transact the
business in which it is now engaged or proposes to engage and to transact such
business in the jurisdictions in which the Mortgaged Hotels are located. The
Borrower has entered into this Agreement for its partnership business purposes
The General Partner is the sole general partner of the Borrower.
4.2 Ownership by Marriott. The General Partner and the Manager are
---------------------
direct or indirect, wholly-owned subsidiaries of Marriott except with respect to
------
the Manager as otherwise permitted by Section 7 of the Management Agreement
Assignment
4.3 Authorization and Execution. The Borrower has the power and
---------------------------
authority to execute, deliver and carry out the terms and provisions of the Loan
Documents (other than the Foreclosure Guarantee and the Direct Access
Agreement), the Management Agreement, the Purchase Agreement, and to carry out
the terms of the Ground Leases. The execution, delivery and performance by the
Borrower of the Loan Documents (other than the Foreclosure Guarantee and the
Direct Access Agreement), the Management Agreement, the Purchase Agreement and
the performance of the Ground Leases and the borrowings hereunder have been duly
authorized by all requisite action by and on behalf of the partners of the
Borrower, and this Agreement and the other Loan Documents (other than the
Foreclosure Guarantee and the Direct Access Agreement), the Management
Agreement, the Purchase Agreement and the Ground Leases are valid and binding
obligations of the Borrower, enforceable in accordance with their respective
terms.
4.4 Compliance with Other Instruments. Except for defaults, conflicts
---------------------------------
and breaches that do not materially and adversely affect the Borrower's right,
authority and ability to perform its obligations under the Loan Documents or
materially impair the Lender's rights, remedies or security under the Loan
Documents, (a) after giving effect to Section 2.1(e), the Borrower is not in
default in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any evidence of Indebtedness of the
Borrower or contained in any instrument under or pursuant to which any such
evidence of Indebtedness has been issued or made and delivered or contained in
any FF&E Lease, Telephone Lease or TV System Lease; and (b) neither the
execution and
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<PAGE>
delivery of this Agreement, nor the consummation of the transactions herein
contemplated, nor compliance with the terms, conditions and provisions hereof
and of the other Loan Documents, nor the operation by the Borrower of the Hotels
conflicts or will conflict with or results or will result in a breach of any of
the terms, conditions or provisions of the Partnership Documents or of any
agreement or instrument to which the Borrower is a party or otherwise bound or
to which any of its properties or other assets is subject, or of any order or
decree of any court or governmental instrumentality, or of any arbitration
award, franchise or permit, or constitute a default thereunder or, except as
contemplated hereby, result in the creation or imposition of any Lien upon any
of the properties or other assets of the Borrower.
4.5 Consents. No consent, order, authorization or approval of, or
--------
exemption by, or registration, declaration or filing with any Person (including,
without limitation, any or all of the partners of the Borrower other than the
General Partner signing the Loan Documents on its behalf) and no waiver of any
right by any Person is required to authorize or permit, or is otherwise required
in connection with, the execution, delivery and performance by the Borrower of
this Agreement or the Notes or any of the other Loan Documents or in connection
with the validity and priority of any Liens granted thereunder (except for such
consents, orders, authorizations, approvals, registrations, declarations,
filings or exemptions as have been obtained or accomplished by the Borrower).
4.6 Financial Statements. The financial statements ("Financial
--------------------
Statements") of the Borrower furnished to the Lender from time to time shall
present fairly the financial position of the Borrower determined in accordance
with the method of accounting required herein with respect to such Financial
Statements. Except as disclosed by or reserved against in the Financial
Statements, the Borrower shall have no material contingent liabilities,
including material disputed or contingent liabilities for taxes, or any
unrealized or anticipated losses. In the case of each Borrowing under this
Agreement, the same representations and warranties as are set forth in this
Section 4.6 shall also be deemed to have been made in respect of the then most
recent Financial Statements furnished to the Lender, subject in the case of
interim Financial Statements to normal year-end audit adjustments.
4.7 No Material Changes. There has been no material adverse change in
-------------------
the business, properties or other assets or in the condition, financial or
otherwise, of the Borrower, or its assets and properties since December 31,
1992.
4.8 Title to Properties. The Borrower has and shall at all times have,
-------------------
with respect to all Mortgaged Hotels, good title to (a) the Hotel Property
(except, in the case of the Leased Hotels and any portion of any Partially
Leased Hotel that is the subject of a Ground Lease, the Land underlying the
Hotel) and (b) the leasehold estate under each Ground Lease, subject only to the
Permitted Exceptions, and good title to the related FF&E (or, in the case of
FF&E permitted to be leased to the Borrower hereunder, a good and valid
leasehold interest in such FF&E) and all other related properties and related
assets that serve as collateral for the Loan and are reflected in the then most
recent
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<PAGE>
Financial Statements, or acquired by the Borrower after such date (excepting,
however, related personal property sold or otherwise disposed of in the ordinary
course of business subsequent to such date), in each case free and clear of all
Liens except Liens securing the Loan or Liens otherwise permitted by this
Agreement (including, without limitation, Liens being contested by the Borrower
as permitted hereunder).
4.9 Leases. None of the collateral security for the Loan is held by
------
the Borrower as lessee under any lease or as conditional vendee under any
conditional sales contract or other title retention agreement, except as
otherwise disclosed in the Financial Statements and except for the Ground
Leases, the FF&E Leases, the TV System Leases and the Telephone Leases and any
other leases permitted in this Agreement or in any other Loan Document. The
Ground Leases are in full force and effect, have not been modified except as
permitted under this Agreement and the Borrower is not in default thereunder.
4.10 Full-Service Marriott Hotels. Pursuant to the Management
----------------------------
Agreement, the Borrower possesses rights adequate for the conduct of the
operation of the Mortgaged Hotels as Marriott full-service hotels in
substantially the same manner as other full-service Marriott hotels owned,
leased or managed by the Manager or a Marriott Affiliate in the United States.
4.11 Litigation. Except as expressly disclosed in Schedule 4.11
----------
attached hereto, there are no actions, suits, investigations or proceedings
(whether or not purportedly on behalf of the Borrower) pending or, to the
knowledge of the Borrower, threatened, and no judgment, order, writ, injunction,
decree, award, rule or regulation of any court, arbitrator or Governmental
Authority against or affecting the Borrower or the Hotels, or any other of the
assets or properties of the Borrower at law or in equity or before or by any
Governmental Authority or before any arbitrator of any kind, which involve the
possibility, in Borrower's reasonable judgment, of liability in excess of
$1,000,000.00 or of any material adverse effect on the business, operations,
prospects, properties or other assets or in the condition, financial or
otherwise, of the Borrower or the Mortgaged Hotels.
4.12 Burdensome Provisions. The Borrower is not a party to or
---------------------
otherwise bound by any agreement or instrument or subject to any other
restriction or any judgment, order, writ, injunction, decree, award, rule or
regulation which materially and adversely affects the business, operations,
prospects, properties or other assets, or the condition, financial or otherwise,
of the Borrower or the Mortgaged Hotels.
4.13 Force Majeure. None of the Mortgaged Hotels or other business,
-------------
properties or assets of the Borrower have been materially and adversely affected
in any way as the result of any fire or other casualty, strike, lockout or other
labor trouble, embargo, shortage, confiscation, condemnation, riot, civil
disturbance, activity of armed forces, or act of God since the date of the most
recent Financial Statements which shall have been delivered to the Lender.
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<PAGE>
4.14 Tax Liability. The Borrower has filed all tax returns which are
-------------
required to be filed and has paid all taxes (including interest and penalties),
if any, which have become due by the Borrower pursuant to such returns or
pursuant to any assessment or notice of tax claim or deficiency received by it,
except for claims contested in good faith by the Borrower with respect to which
adequate reserves have been set aside on the Borrower's books. All tax
liabilities were adequately provided for at the end of the most recent Fiscal
Year of the Borrower and are now so provided for on the books of the Borrower.
No material tax liability has been asserted by the Internal Revenue Service or
any other taxing authority for taxes (or interest or penalties thereon) in
excess of those already paid, except for claims contested in good faith by the
Borrower with respect to which adequate reserves have been set aside on the
Borrower's books.
4.15 Distributions. Except as reflected in the Financial Statements
-------------
furnished by the Borrower to the Lender, the Borrower has not applied any of its
funds as a distribution to its partners, or any of them.
4.16 Regulation U, etc. The Borrower does not own any margin stock as
-----------------
defined in Regulation U (12 CFR, Chapter II Part 207) of the Board of Governors
of the Federal Reserve System. None of the proceeds of the Loans will be used,
directly or indirectly, for the purpose of purchasing or carrying any margin
stock or for any other purpose which might constitute this transaction a purpose
credit within the meaning of such Regulation U. Neither the Borrower nor any
agent acting on its behalf has taken or will take any action which might cause
this Agreement or the Notes to violate Regulation U or any other regulation of
the Board of Governors of the Federal Reserve System.
4.17 Compliance with Law; Environmental Matters. The Mortgaged Hotels
------------------------------------------
are in compliance in all material respects with all Laws, and the Borrower and
all of the Borrower's other assets and properties relating to the Mortgaged
Hotels are in compliance, in all material respects, with all applicable
requirements of law and all applicable rules and regulations of each
Governmental Authority. Without limiting the generality of the foregoing, except
as set forth in the Phase I Environmental Site Assessment Reports prepared by
SCS Engineers in October, 1989 (true and complete copies of which have been
delivered to the Lender), to the best of the Borrower's knowledge, no hazardous
or toxic waste or substance or other hazardous, toxic or harmful materials of
any kind or nature have ever been stored on, present at or removed from any or
all of the Mortgaged Hotels, except for customary quantities of pesticides,
cleaning materials, fuels for power equipment and portable cooking equipment,
waste oils from heating, cooling and other equipment which may be periodically
removed from the Mortgaged Hotels, and other like items customarily used in the
course of cleaning, maintaining and operating the Mortgaged Hotels and stored in
compliance with applicable Laws. Except as specified in Schedule 4.17 hereof,
the Borrower has complied in every respect with the maintenance plan described
in Section 5.15 for the Hotel Property located in Dayton, Ohio.
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<PAGE>
4.18 Permits and Licenses. No proceedings are pending or, to the
--------------------
Borrower's knowledge, threatened with respect to the revocation or suspension of
any material permits, licenses and approvals issued with respect to the
Mortgaged Hotels and such permits, licenses and approvals shall not be altered
or amended, nor shall the Borrower make any attempt to alter or amend the same,
in any material and adverse respect, without the prior written consent of the
Lender. Schedule 4.18 is a true, correct and complete list of all material
permits, licenses and approvals issued or required with respect to the Mortgaged
Hotels and all such permits, licenses and approvals are in full force and
effect.
4.19 No Notices. No notice has been issued to the Borrower nor, to the
----------
Borrower's knowledge, threatened, by any Governmental Authority that any of the
Mortgaged Hotels violates or does not comply with any Laws in any material
respect.
4.20 Disclosure. To the best of Borrower's knowledge, neither this
----------
Agreement nor any document, certificate or Financial Statement furnished to the
Lender by or on behalf of the Borrower in connection herewith contains any
untrue statement of a material fact or, to the best of Borrower's knowledge,
omits to state any material fact necessary in order to make the statements
contained herein and therein not misleading. There is no fact known to the
Borrower which materially adversely affects the business, operations, prospects
or financial condition of the Borrower or the Mortgaged Hotels which has not
been set forth in this Agreement or the Memorandum or in other documents,
certificates and Financial Statements furnished to the Lender by or on behalf of
the Borrower in connection with the transactions contemplated hereby.
4.21 Equity Contributions. The limited partners of the Borrower have
--------------------
contributed in cash, as equity, $39,891,044. Not less than 412 limited partner
units have been purchased by other than Marriott or an Affiliate of Marriott.
The General Partner has contributed, as the sole general partner, $418,182.00 in
cash to the Borrower as its equity. These equity contributions have been applied
solely for the purposes described in the Memorandum.
4.22 Compliance with Securities Laws. The Borrower has been formed,
-------------------------------
and limited partnership interests in the Borrower have been offered for sale and
sold, in compliance in all material respects with all applicable federal and
state laws and regulations relating thereto, and the Borrower has made all
disclosures required by such laws and regulations and in accordance therewith.
4.23 Brokerage Fees. No brokerage fees or other similar fees or
--------------
commissions (except amounts payable to the Lender) are payable to anyone engaged
by the Borrower, Marriott or any Affiliate of the Borrower or Marriott in
connection with entering into this Agreement. The Borrower shall indemnify and
hold the Lender harmless against loss or damage suffered by Lender as a result
of any claim by any persons or entities employed or allegedly employed by or on
behalf of Marriott, an Affiliate thereof, or the Borrower for any brokerage or
other commissions alleged to be due as a result of the Loan.
- 39 -
<PAGE>
4.24 Loan Proceeds. The proceeds of the Loans have been used by the
-------------
Borrower solely for the purchase of the Hotels (including, without limitation,
the use of proceeds to effect the like-kind exchange of the Dayton, Ohio hotel),
payment of certain loan fees due under the Prior Documents and otherwise in
connection with the closing of the Prior Documents, and payment of the costs
associated with the closing of the transaction contemplated thereby.
4.25 Completion and Operation of Hotels. All Hotels have been fully
----------------------------------
completed. with all FF&E and amenities installed, constructed and in operation,
and are open to the public and operating, and all licenses and certificates
necessary for the operation of the Hotels (including all FF&E and amenities)
have been issued and are in full force and effect. As to each Hotel, (a) 100% of
the guest rooms are complete (with FF&E fully installed) and ready for
occupancy, excepting, however, such guest rooms (not to exceed 10% of the guest
rooms of any Hotel) as are closed for repairs and routine maintenance in the
normal course of the operations, (b) the kitchen and restaurant of each of the
Hotels are complete and are in use by and service to Hotel guests, and (c) the
Manager has commenced the performance of its obligations under the Management
Agreement with respect to the Hotels.
4.26 Fixed Asset Supplies, Inventories and Working Capital. All Fixed
-----------------------------------------------------
Asset Supplies, Inventories and Working Capital (as those terms are defined in
the Purchase Agreement), required to be delivered to the Borrower pursuant to
the Purchase Agreement have been so delivered. The Fixed Asset Supplies,
non-perishable Inventories and Working Capital are reasonable and sufficient in
quantity and type for the ongoing uninterrupted operation of each Hotel as a
fully-functioning Marriott full-service hotel.
The representations and warranties contained in Sections 4.1, 4.2, 4.3,
4.6, 4.8, 4.9, 4.10, 4.14, 4.16, and 4.21 are made on and as of the date hereof
and shall also be continuing throughout the term of the Loan.
ARTICLE 5
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that, from and after the date hereof
and as long as Loan Obligations incurred (other than the Series C Note) are
outstanding unless the Lender shall otherwise consent in a writing delivered to
the Borrower, the Borrower will:
5.1 Pay Principal and Interest. Punctually pay the principal and
--------------------------
interest to become due in respect to the Notes, all according to the terms
hereof
5.2 Maintenance of Borrower's Office. Maintain an office in Bethesda,
--------------------------------
Maryland (or such other place in the United States of America as the Borrower
may designate in writing to the Lender).
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<PAGE>
5.3 Keep Books; Set Aside Reserves. Keep proper books of record and
------------------------------
account in which true, correct and complete entries will be made of its
transactions in accordance with the accrual basis of accounting, including the
setting aside on its books from its earnings for each Fiscal Year, adequate
reserves for appreciation, and/or amortization of its properties during such
year, and all other proper reserves which should be set aside from such earnings
in connection with its business.
5.4 Payment of Taxes; Conduct of Business; Maintenance of Security
--------------------------------------------------------------
for the Loan.
- ------------
(a) Pay and discharge promptly all Impositions (including, without
limitation, all payroll withholdings), assessments and governmental charges or
levies, if any, imposed upon it or upon its income or profits or upon any of its
property, real, personal or mixed, that serves as collateral security for the
Loan, before the same shall become delinquent, as well as all claims for labor,
materials and supplies which, if unpaid, might by law become a Lien upon any of
its property that serves as collateral security for the Loan; provided, however,
that the Borrower shall not be required to pay any such tax, assessment, charge,
levy or claim or discharge any such Lien if (i) the validity thereof shall be
contested in good faith by appropriate proceedings, (ii) the Borrower promptly
notifies Lender of such proceedings, (iii) the collateral security for the Loan
is not subject to being taken during such contest, and (iv) the Borrower shall
have established such reserves, if any, as may be required in accordance with
generally accepted accounting principles with respect to the tax, assessment,
charge, levy or claim so contested;
(b) (i) Conduct continuously and operate actively its business at the
Mortgaged Hotels (subject to temporary cessation of, or other limitations on,
its activities due to strikes, lockouts, casualties, acts of God, war,
governmental regulation or control, or other causes beyond the reasonable
control of the Borrower, provided prompt written notice thereof is given to the
Lender and the Borrower promptly initiates reasonable action to mitigate such
matters to the extent possible); (ii) keep in full force and effect and
existence all rights, licenses, permits and franchises required for the use or
operation of the Mortgaged Hotels and comply, in all material respects, with all
Laws; and (iii) make all such reports and pay all such franchise and other taxes
and license fees (except to the extent contested as permitted in Section 5.4(a)
in this Agreement), and do all such other things as lawfully may be required, to
maintain all such rights, licenses, powers and franchises under the laws of any
applicable Governmental Authority; and
(c) Maintain and keep, or cause to be maintained and kept, its
properties that serve as collateral security for the Loans (including, without
limitation, all of the Mortgaged Hotels) in good repair, working order and
condition except as otherwise permitted in this Agreement, and from time to
time, make or cause to be made all needed repairs, renewals, replacements and
improvements so that the business carried on in connection therewith may be
properly and advantageously conducted at all times.
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<PAGE>
5.5 Insurance. Without limiting the provisions of Article 7 hereof,
---------
(a) keep all of its insurable properties and interests that serve as collateral
security for the Loan insured at all times with financially sound and
responsible insurance carriers satisfactory to the Lender against loss or damage
by fire and such other risks, casualties and contingencies as the Lender may
reasonably request; (b) maintain adequate insurance at all times with
financially sound and responsible insurance carriers satisfactory to the Lender
(except to the extent self insurance is permitted by Section 7.2 hereof) against
liability on account of damage or injury to persons and properties and under all
applicable workers' compensation laws; and (c) maintain adequate insurance
covering such other risks as the Lender may reasonably request from time to time
and as may then be customarily maintained in the hotel industry.
5.6 Financial Statements and Reports. Furnish to the Lender the
--------------------------------
following Financial Statements:
(a) As soon as practicable, and in any event within seventy-five (75)
days after the end of each Fiscal Quarter (other than the last Fiscal Quarter)
in each Fiscal Year, an unaudited balance sheet of the Borrower as at the end of
such Fiscal Quarter and unaudited statements of income, partners' capital and
cash flows of the Borrower for each such Fiscal Quarter and for that part of the
Fiscal Year then ended, all in reasonable detail and reasonably satisfactory in
scope to the Lender, setting forth in each case in comparative form the
corresponding figures for the corresponding period(s) of the preceding Fiscal
Year, which statements shall, as a whole, fairly present the financial position
of the Borrower as at the end of the periods involved and the results of the
operations of the Borrower for such periods, and which shall be certified by an
Authorized Accounting Officer as having been prepared under his or her
supervision in accordance with the accrual basis of accounting consistently
applied and consistent with the principles applied in the Financial Statements
for the preceding Fiscal Year, subject to normal year-end audit and adjustments,
and that he or she knows of no facts inconsistent with such statements;
(b) As soon as practicable, and in any event within one hundred
twenty (120) days after the end of each Fiscal Year, a balance sheet of the
Borrower as at the end of such Fiscal Year and statements of income, partners'
capital and cash flows of the Borrower for such Fiscal Year, setting forth in
each case in comparative form the corresponding figures for the preceding Fiscal
Year, prepared in accordance with the accrual basis of accounting consistently
applied and accompanied by (i) an audit report and opinion in respect of such
Financial Statements of Arthur Andersen & Co. or other independent certified
public accountants of recognized standing selected by the Borrower and
acceptable to the Lender, which report and opinion shall be unqualified as to
the scope of the audit and reasonably satisfactory to the Lender in all other
respects; and (ii) a certificate from such accountants to the effect that such
audit (including the audit of the annual calculations pursuant to Section 6.1)
disclosed no condition, event or act which constitutes an Event of Default (or
would constitute an Event of Default upon the giving of notice or passage of
time or both) or if any such condition, event or act exists,
- 42 -
<PAGE>
specifying the nature thereof and the period of existence; and (iii) a
certification of an Authorized Accounting Officer in respect of such Financial
Statements, to the same effect as provided in Section 5.6(a) excluding any
reference to year-end audit adjustments;
(c) Concurrently with the Financial Statements delivered pursuant to
Sections 5.6(a) and 5.6(b), a certificate of an Authorized Accounting Officer to
the effect that such officer has no knowledge of any condition, event or act
which constitutes an Event of Default (or would constitute an Event of Default
upon the giving of notice or passage of time or both), or if any such condition,
event or act exists, specifying the nature thereof, the period of its existence
and what action the Borrower proposes to take with respect thereto. The Borrower
further covenants that, forthwith upon any officer of the General Partner
obtaining knowledge of any Event of Default, it will deliver to the Lender a
statement of an executive officer of the General Partner, specifying the nature
thereof the period of existence thereof and what action the Borrower proposes to
take with respect thereto;
(d) Promptly upon request of the Lender, copies of any reports
submitted to the Borrower by its accountants in connection with any examination
of the Financial Statements of the Borrower made by such accountants, and copies
of any other communications received by the Borrower or the General Partner from
such accountants relative to any Financial Statements or audit or internal
controls and systems of the Borrower;
(e) No later than thirty (30) days subsequent to the beginning of
each Fiscal Year, an annual operating projection for the Mortgaged Hotels, on a
consolidated basis, for such Fiscal Year containing the information provided for
in the Management Agreement and including a projection of the average annual
occupancy and average annual room rate for each Mortgaged Hotel for such Fiscal
Year; the Borrower shall also promptly provide to the Lender copies of all
periodic and annual accounting reports made by the Manager pursuant to the
Management Agreement;
(f) No later than sixty (60) days after the end of each of the first
three Fiscal Quarters of the Borrower, an operating statement, on an individual
and consolidated basis, with respect to any or all of the Mortgaged Hotels for
such Fiscal Quarter, in the form customarily prepared by the Borrower;
(g) No later than seventy-five (75) days after the end of each Fiscal
Year an individual operating statement with respect to any or all of the
Mortgaged Hotels for such Fiscal Year, in the form customarily prepared for the
Borrower and certified by an authorized senior financial officer of the Manager
as having been prepared under his or her supervision in accordance with the
provisions hereof
(h) Promptly upon their becoming available, copies of all Financial
Statements, reports, notices and statements sent or made available generally by
the Borrower to its limited partners, and of all reports, registration
statements and prospectuses filed by the
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Borrower with any securities exchange or with the Commission, or any
governmental authority succeeding to any of its functions;
(i) Promptly following learning of the occurrence thereof notice of
any material adverse change in the business or in the condition, financial or
otherwise, of the Borrower;
(j) As and when required under Section 6. 1, each of the reports
specified in Section 6.1;
(k) On December 1 of each calendar year, a schedule setting forth the
Accounting Periods and confirming the Payment Dates for the ensuing Fiscal Year;
and
(l) Such other information as to the financial condition, operations,
business, properties and other assets of the Borrower, as the Lender, may from
time to time reasonably request.
5.7 Inspection. On not less than five (5) Business Days notice (or
----------
two Business Days if an Event of Default exists), permit the Lender or any of
its representatives to visit and inspect any of the Mortgaged Hotels, to examine
its books of account and records and to discuss the affairs, finances and
accounts of the Borrower with its representatives, at such reasonable times as
the Lender may reasonably request but no more often than once per Fiscal Year
unless there exists an Event of Default.
5.8 Notice of Claims. Promptly give written notice to the Lender of
----------------
(a) any action, proceeding or claim of which the Borrower may have notice, which
may be commenced or asserted against the Borrower in which the amount involved
is $1,000,000.00 or more and is not covered by insurance as to which the insurer
has not disclaimed liability, or which seeks injunctive or other equitable
remedy, and (b) any dispute which may exist between the Borrower and any Person,
which may materially affect the normal business operations of the Borrower or
any of its properties that serve as collateral security for the Loan, and (c)
all complaints, notices, actions and charges by any Governmental Authority
materially and adversely affecting any of the Mortgaged Hotels or the Borrower
or its business.
5.9 Agreements. Perform punctually and fully all of its obligations
----------
under the Management Agreement, the Purchase Agreement, the Ground Leases and
all other contracts and agreements relating to the acquisition, ownership or
operation of the Mortgaged Hotels.
5.10 Licenses. Maintain at all times all licenses and certificates
--------
(including, without limitation, liquor licenses) necessary for the operation of
each of the Mortgaged Hotels (including all of its amenities and all FF&E)
except, with respect to a Hotel, to the extent that the Borrower shall be
prohibited or prevented from maintaining any such licenses or certificates
solely as a result of a change in law, regulation or ordinance after
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<PAGE>
the date hereof applicable to such Hotel and generally applicable to similarly
situated hotels at the location of such Hotel.
5.11 Operations. Operate continuously each of the Mortgaged Hotels as
----------
a full-service Marriott hotel owned, leased or managed by Operator or a Marriott
Affiliate in the United States (subject to temporary cessation of, or other
limitations on, its activities due to strikes, lockouts, casualties, acts of
God, war, governmental regulation or control, or other causes beyond the
reasonable control of the Borrower, provided prompt written notice thereof is
given to the Lender and the Borrower promptly initiates reasonable action to
mitigate such matters to the extent possible) and not permanently abandon or
discontinue operations in any Mortgaged Hotel.
5.12 Accounts. (a) Establish and maintain for all of the Mortgaged
--------
Hotels, an escrow reserve account ("FF&E Account") at the Lender, as required by
the terms of the Management Agreement Assignment and as more fully described in
the Cash Collateral Agreement. The Borrower shall from time to time, in
accordance with Section 7.02B of the Management Agreement, contribute to the
FF&E Account the amounts required to be transferred thereto with respect to each
of the Mortgaged Hotels that are covered by the Management Agreement. The funds
in the FF&E Account shall be applied for only those purposes set forth in the
Management Agreement and no other. Nothing herein contained shall modify or
limit the Borrower's obligations with respect to the operation and maintenance
of the Mortgaged Hotels. On the Closing Date, the total balance of the FF&E
Account is $2,491,703.75 and such balance has been transferred to an account
with the Lender;
(b) Establish and maintain the Debt Service Reserve; and
(c) Establish and maintain the Concentration Account for the
Borrower with the Lender.
5.13 Restrictive Covenants. Comply with all covenants, conditions,
---------------------
easement agreements, restrictions and other agreements affecting the Mortgaged
Hotels unless (i) the Lender is insured or indemnified against loss, in a form
reasonably satisfactory to the Lender, for noncompliance or (ii) noncompliance
therewith would not materially impair the Borrower's ability to pay the Loan or
the Lender's rights, remedies, or the value of the collateral, described in the
Loan Documents.
5.14 Easements. Submit to the Lender for approval (which shall not be
---------
unreasonably withheld or delayed), prior to the execution thereof all proposed
easements (except for customary utility easements not benefiting other property
and not adversely affecting the value of the applicable Hotel Property or
interfering with the use and operation thereof) benefiting or burdening any
Mortgaged Hotel, accompanied by a survey, and surveyor's written descriptions,
showing the portion of the Hotel Property and any adjoining property affected by
said easements.
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<PAGE>
5.15 Environmental.
-------------
(a) Subject to the limitations set forth in Sections 5.15(b),
5.15(c) and 5.15(d), defend, indemnify and hold harmless the Lender and any
participant of the Loan and their respective predecessors, successors and
assigns (any of the foregoing, an "Indemnitee") from and against all
liabilities, losses, damages, claims, costs and expenses (including all
reasonable attorneys fees and court costs) arising or occurring by reason of, or
related to, any or all of the following: (i) the actions of or claims brought by
Governmental Authorities or other third parties relating to the storage on,
presence at and removal from all or any of the Mortgaged Hotels, and the
disposal of, any hazardous or toxic waste or substance or other hazardous, toxic
or harmful materials of any kind or nature under the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. (S)9601 et
--
seq., the Resource Conservation and Recovery Act, 42 U.S.C. (S)6903 et seq., and
- --- -- ---
all other federal, state and local laws, rules and regulations pertaining to
environmental protection and conservation; (ii) the taking of any action
(including without limitation any tests, studies or reports) reasonably
considered necessary or appropriate after consultation with the Borrower to
determine whether any one or more of the Mortgaged Hotels is in compliance with
all Laws governing or relating to the presence, storage, removal or disposal of
such wastes, substances or materials, which action an Indenmitee may perform, or
cause to be performed (l) with respect to any one or more of the Mortgaged
Hotels upon the occurrence of an Event of Default, or (2) with respect to any
Mortgaged Hotel upon the occurrence or discovery of a state of facts that causes
the Lender to reasonably believe that such Mortgaged Hotel may not be in
compliance with such Laws; (iii) the taking of any action reasonably considered
necessary or appropriate after consultation with the Borrower to cause the
Mortgaged Hotels to be in compliance with all Laws governing or relating to the
presence, storage, removal or disposal of such wastes, substances or materials;
(iv) any action reasonably considered necessary or appropriate after
consultation with the Borrower arising out of injury, death or damage to any
Person caused by or related to, or alleged to be caused by or related to, the
storage, presence, removal or disposal of any such wastes, substances or
materials from, on, at or about any or all of the Mortgaged Hotels; (v) any
action reasonably considered necessary or appropriate after consultation with
the Borrower arising out of the presence, use and operation of any underground
or above-ground storage tanks now or hereafter located on any Hotel Property;
and (vi) any action reasonably considered necessary or appropriate after
consultation with the Borrower arising out of the presence of asbestos, fly ash
and foundry sands on the Hotel Property located in Dayton, Ohio. A maintenance
plan for the aforesaid asbestos at the Dayton, Ohio Hotel shall be continuously
maintained by the Borrower until the asbestos has been removed. Defense of any
of the foregoing matters by the Borrower shall be conducted by the Borrower at
the Borrower's sole cost and expense, using attorneys reasonably satisfactory to
such Indemnitee.
(b) In the event that the Lender acquires title to a Mortgaged Hotel
by foreclosure, deed in lieu of foreclosure or otherwise, the obligations and
indemnification of the Borrower to an Indemnitee under this Section 5.15, as
they relate to such Mortgaged Hotel, shall terminate as of the date that is
eighteen (18) months after the date that the
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Lender acquires title to such Mortgaged Hotel, except for liabilities, losses,
damages, claims, costs and expenses referred to in Section 5.15(a) that have
been suffered or incurred by an Indemnitee as of said date or that an Indemnitee
reasonably believes may be suffered or incurred by such Indemnitee after said
date and of which the Lender has given the Borrower notice on or before said
date.
(c) The Borrower shall not have any obligations under this Section 5.15
with respect to hazardous or toxic wastes or substances or other hazardous,
toxic or harmful materials, of any kind or nature, that are first introduced to
a Mortgaged Hotel after the date that the Lender acquires title to such
Mortgaged Hotel.
(d) No Person shall have any rights under, or be considered a
beneficiary of, the provisions of this Section 5.15, other than an Indemnitee
Section 5.16 Application of Loan Proceeds. If at any time the Borrower
----------------------------
shall incur any Indebtedness to cure a termination under Section 4.02B of the
Management Agreement and as permitted under Section 6.2(h), all proceeds from
such Indebtedness shall be applied as a Pari Passu Distribution to the Lender
and the Borrower, as the case may be.
ARTICLE 6
NEGATIVE COVENANTS
The Borrower covenants and agrees that, from and after the date hereof
and as long as any Loan Obligations (other than the Series C Note) are
outstanding, unless the Lender shall otherwise consent in a writing delivered to
the Borrower, the Borrower will not:
6.1 Operating Profit Distribution Priorities. Until such time as the
----------------------------------------
Series A Note and Series B Note shall have been paid in full, distribute or
apply any Operating Profit for the period indicated except in accordance with
the priorities set forth in this Section 6.1.
(a) Priorities. (i) Payment Date. On each Payment Date, all
---------- ------------
distributions and applications of Operating Profit for the applicable Accounting
Period according to the following priorities:
First: Payment of interest due and payable on the Series A Note;
Second: Payment of Scheduled Amortization of the Series A Note;
Third: Payment to the Lender for deposit into the Debt Service
Reserve in an amount equal to the aggregate amount, if
any, of the draws during the current Fiscal Year from the
Debt Service Reserve
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<PAGE>
pursuant to the Sixth priority of Section 6.1(b) that
were not necessary or required after taking into account
any reconciliation under this Section 6.1;
Fourth: Payment of Series B Note Interest.
Fifth: Payment of Interest Deficiency (for any and all prior
Accounting Periods during the then current Fiscal Year);
Sixth: (A) Subject to clause (B) below, on a pari passu basis,
---- -----
as follows:
(1) 25%, to payment of the then outstanding principal
balance of the Series A Note, in inverse order of
maturity;
(2) 25%, to payment of the then outstanding principal
balance of the Series B Note; and
(3) 50%, to the Borrower, until such time as the
Borrower has received an aggregate amount equal to
$7,352,000.
(B) If at any time the Borrower has received an aggregate
amount equal to $7,352,000 in accordance with clause (A)
above of this clause Sixth, on a pari passu basis, as
---- -----
follows:
(1) 25%, to payment of the then outstanding principal
balance of the Series A Note, in inverse order of
maturity; and
(2) 75%, to payment of the then outstanding principal
balance of the Series B Note.
(ii) Exceptions. Notwithstanding the foregoing:
----------
(A) If at any time either the Series A Note or Series B Note
has been paid in full (the "Satisfied Note") and the
other such Note shall not have been paid in full (the
"Outstanding Note"), then until the Outstanding Note
shall have been paid in full, any amount to be
distributed pursuant to this Section 6.1 to the
Satisfied Note shall be applied to the Outstanding Note
in addition to any other amount that may be required to
be paid hereunder with respect to the Outstanding Note.
(B) Upon receipt of the Annual Audited Statement and after
taking into account any adjustment required under this
Section 6.1, any Interest Deficiency remaining unpaid as
of the end of any Fiscal
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<PAGE>
Year shall be deemed forgiven by the Lender as at the end of
such Fiscal Year.
(b) Operating Profit Deficiency. If on any Payment Date, Operating
---------------------------
Profit shall be less than the amount required to pay Scheduled Amortization of
the Series A Note and interest then due and payable on the Series A Note
("Operating Profit Deficiency"), the following amounts shall be paid by the
Borrower or the Lender, according to the following priorities, to be applied,
first, to the interest then due and payable on the Series A Note and, second, to
the Scheduled Amortization:
First: By the Borrower, all payments, if any, received (and
not repaid on any prior Payment Date) as a Pari Passu
Distribution during the then current Fiscal Year in an amount
not to exceed fifty percent (50%) of the Operating Profit
Deficiency;
Second: By the Lender, all payments, if any, received (and not
repaid on any prior Payment Date) as a Pari Passu Distribution
under clause (A) of the Sixth priority of Section 6.1(a)(i)
during the then current Fiscal Year in an amount not to exceed
fifty percent (50%) of the Operating Profit Deficiency;
Third: By the Lender, all payments, if any received (and not
repaid on any prior Payment Date) as a Pari Passu Distribution
under clause (B) of the Sixth priority of Section 6.1(a)(i)
during the then current Fiscal Year in an amount not to exceed
the Operating Profit Deficiency, if any;
Fourth: By the Lender, all payments, if any, received (and not
repaid on any prior Payment Date) as payment of Interest
Deficiency in an amount not to exceed the remaining Operating
Profit Deficiency, if any;
Fifth: By the Lender, all payments, if any, received (and not
repaid on any prior Payment Date) as payment of Series B Note
Interest in an amount not to exceed the remaining Operating
Profit Deficiency, if any; and
Sixth: By the Borrower, with funds withdrawn from the Debt
Service Reserve in accordance with the Cash Collateral
Agreement in an amount not to exceed the remaining Operating
Profit Deficiency, if any.
(c) Reports and Certifications.
---------------------------
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<PAGE>
(i) Without limiting the reporting requirements set forth in Section 5.6
hereof, on each Quarterly Reconciliation Date, the Borrower shall submit to
the Lender,
(x) a Quarterly Reconciliation Statement, which statement shall show,
in such reasonable detail as may be requested by the Lender, for the
Fiscal Quarter most recently ended for the Mortgaged Hotels, the
calculation of Gross Revenues (by category), Deductions (by category,
including the basis for, and the calculation of, Ground Rent and FF&E
contributions), Operating Profit, the payment calculations as applied
in Section 6.1(a), and all retentions, distributions and other
applications thereof, from the beginning of the current Fiscal Year to
the end of such Fiscal Quarter, with respect to the Mortgaged Hotels;
and
(y) the certificate of an Authorized Accounting Officer certifying the
Quarterly Reconciliation Statement as having been prepared under his
supervision in accordance with the provisions hereof.
(ii) Without limiting the requirements set forth in Section 5.6 hereof, on
the Annual Interim Reconciliation Date, the Borrower shall submit to the
Lender,
(x) an Annual Interim Reconciliation Statement for the Fiscal Year most
recently ended, which Annual Interim Reconciliation Statement shall be
controlling to the extent there shall exist a conflict with the
Quarterly Reconciliation Statements delivered during such Fiscal Year.
The Annual Interim Reconciliation Statement shall show for such Fiscal
Year each of the calculations set forth in a Quarterly Reconciliation
Statement, the amount and calculation of Minimum Operating Profit
Requirement and the amount, if any, of outstanding Interest Deficiency;
and
(y) the certificate of an Authorized Accounting Officer certifying the
Annual Interim Reconciliation Statement as having been prepared under
his supervision in accordance with the provisions hereof.
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<PAGE>
(d) Adjustments.
(i) Quarterly Adjustments. Any Interest Deficiency revealed by any
---------------------
Quarterly Reconciliation Statement shall, to the extent such Quarterly
Reconciliation Statement reveals Operating Profit Available For Series
B Note Interest in excess of the amount paid toward Series B Note
Interest on any Payment Date through such Fiscal Quarter, be remitted
by Borrower to Lender on the Quarterly Reconciliation Date, together
with the Quarterly Reconciliation Statement submitted by Borrower to
Lender for application in accordance with Section 6.1(a). Any Series B
Note Interest paid on a Payment Date in excess of the Operating Profit
Available For Series B Note Interest earned during the preceding Fiscal
Quarter as revealed by the Quarterly Reconciliation Statement shall be
paid by the Lender to the Borrower for application in accordance with
Section 6.1(a).
(ii) Annual Adjustments. Any Interest Deficiency revealed by any Annual
------------------
Interim Reconciliation Statement shall, to the extent such Annual
Interim Reconciliation Statement reveals Operating Profit Available For
Series B Note Interest in excess of the amount calculated and adjusted
as of the end of each Fiscal Quarter on each Quarterly Reconciliation
Date and distributed during the applicable Fiscal Year, be remitted by
Borrower to Lender on the Annual Interim Reconciliation Date, together
with the Annual Interim Reconciliation Statement submitted by Borrower
to Lender. Similarly, any Interest Deficiency revealed by the Annual
Audited Statement shall, to the extent such Annual Audited Statement
reveals Operating Profit Available For Series B Note Interest in excess
of the amount calculated and adjusted as of the Annual Interim
Reconciliation, be remitted by Borrower to Lender on the Annual Audited
Reconciliation Date.
To the extent that Operating Profit Available for Series B
Note Interest for the Fiscal Year is less than the total amount of
Series B Note Interest actually paid for the Fiscal Year (or payable
based on the fourth Quarterly Reconciliation Statement for the Fiscal
Year), then such excess payments together with any excess payments
applied to the Series A Note or Series B Note pursuant to the priority
set forth above shall be adjusted as appropriate so that the total
amount of Series B Note Interest actually paid for the Fiscal Year does
not exceed the cumulative Operating Profit Available For Series B Note
Interest for the Fiscal Year as set forth in the Annual Interim
Reconciliation Statement, and as confirmed or adjusted, as the case may
be, in accordance with the Annual
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<PAGE>
Audited Statement. In the event that adjustments are made
as aforesaid, any Pari Passu Distributions during those
Fiscal Quarters to Borrower or paid to principal of the
Series A Note and Series B Note, respectively with respect
to any Fiscal Quarter of such Fiscal Year shall be
refunded by Borrower to Lender or by Lender to Borrower,
as the case may be.
(e) General. Notwithstanding the foregoing, the provisions in
-------
this Section 6.1 shall not otherwise limit or otherwise affect the Borrower's
obligation to pay the Series A Note and interest thereon and the principal
amount of the Series B Note and of the Series C Note on their respective
Maturity Dates or any other Loan Obligations in accordance with the terms of the
Loan Documents and this Agreement.
6.2 Indebtedness. In any manner become or be liable, contingently
------------
or otherwise, in respect of, or permit or suffer to exist, any Indebtedness
(other than the Loan), except the following:
(a) Indebtedness in respect of taxes, assessments and governmental
charges or levies and claims for labor, materials and supplies, as and to the
extent permitted to remain unpaid and undischarged by Section 5.4(a);
(b) Indebtedness secured by Liens specifically permitted by
Section 6.3;
(c) Secured or unsecured Indebtedness, excluding Indebtedness to
the Lender with respect to the Loan, or obligations on leases which are not FF&E
Leases (which shall be valued, for purposes of the limitations set forth below,
in the amount of the value of the equipment so leased), in any event expressly
permitted by this Section 6.2, which Indebtedness or obligations on leases
(herein the "Specified Project Indebtedness") shall not exceed the aggregate
principal amount of $3,000,000.00 and shall be incurred only to make
improvements to or for identified projects at a Hotel or Hotels (each such
improvements or project not currently in place or conducted at any of the Hotels
being herein referred to as a "Specific Project") and for which prior to
incurring any such Indebtedness, the Borrower has provided financial projections
in form, substance and detail satisfactory to the Lender and certified by an
Authorized Accounting Officer as reasonable based on the assumptions stated
therein and best information available showing that such Specified Project will
provide sufficient revenues to pay all cost and expenses thereof and principal
and interest payments on such Specified Project Indebtedness when and as due;
provided, however, that, unless the debt service with respect to such Specified
Project Indebtedness qualifies as a deduction under clause (o) of the definition
of the term "Deduction", the payment of such Specified Project Indebtedness
shall be subordinated in full to the Loan Obligations (other than the Series C
Note) pursuant to a subordination agreement in form and substance satisfactory
to, and agreed to by, the Lender except that such subordination agreement may
provide that, so long as no Event of Default or event which with the passage of
time or giving of notice or both would be an Event of Default has occurred, the
principal of and interest on such Specified Project Indebtedness may, at
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<PAGE>
the election of the Borrower, be paid prior to payment in full of the Loan
Obligations (other than the Series C Note) solely with Pari Passu Distributions
to the Borrower;
(d) Indebtedness to Marriott arising under and evidenced by the Line of
Credit and Reimbursement Agreement so long as the payment of such Indebtedness
shall be subordinated in full to the Loan Obligations and is subject to the
Marriott Subordination Agreement providing, among other things, that no payment
whatsoever with respect to such Indebtedness may be made by the Borrower except
from Pari Passu Distributions to the Borrower; and
(e) the Deferred Purchase Debt (as that term is defined in the
Memorandum) so long as interest thereon shall not accrue at a rate greater than
ten percent (10%) per annum and such Deferred Purchase Debt and interest thereon
shall be subject to the Marriott Subordination Agreement providing, among other
things, that no payment whatsoever shall be made prior to the payment in full of
the Loan Obligations except with funds received under the Investor Notes;
(f) the Telephone Leases and TV System Leases and FF&E Leases to the
extent permitted under Section 6.10 and not considered Specified Project
Indebtedness;
(g) Indebtedness subject to a subordination agreement in form and
substance satisfactory to, and agreed to by, the Lender providing, among other
things, that no payment whatsoever with respect to such Indebtedness may be made
prior to payment in full of the Loan Obligations;
(h) Indebtedness to the Manager incurred by the Borrower solely to cure
either an Event of Default hereunder or a termination under Section 4.02A of the
Management Agreement so long as the payment of such Indebtedness shall be
subordinated in full to the Loan Obligations (other than the Series C Note) and
is subject to the Manager Subordination Agreement providing, among other things,
that no payment whatsoever with respect to such Indebtedness may be made by the
Borrower except from Pari Passu Distributions to the Borrower; and
(i) Indebtedness to the General Partner in an amount not to exceed
$2,000,000 evidenced by a promissory note so long as the payment of such
Indebtedness shall be subordinated in full to the Loan Obligations (other than
the Series C Note) and is subject to the GP Subordination Agreement providing,
among other things, that no payment whatsoever with respect to such Indebtedness
may be made by the Borrower, except from Pari Passu Distributions to the
Borrower.
6.3 Liens. Contract, create, assume, incur or suffer to be created,
-----
assumed or incurred or to exist any Lien (other than as permitted by Section
5.4(a)) upon, or pledge of, or subject to the prior payment of any Indebtedness
(other than the Loan), any property or other assets of the Borrower or any
interest therein whether owned at the date hereof or hereafter acquired, or
acquire or agree to acquire any property or other assets
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<PAGE>
subject to any Lien, or suffer to exist any Indebtedness of the Borrower or
(except as and to the extent permitted by Section 5.4(a)) any claims or demands
against the Borrower which, if unpaid, might (in the hands of the holder or
anyone who shall have guaranteed the same or who has any right or obligation to
purchase the same) by law or upon bankruptcy or insolvency or otherwise, be
given any priority whatsoever over its general creditors; excluding, however,
from the operation of this Section 6.3:
(a) Pledges or deposits to secure obligations under workers
compensation laws or similar legislation, including Liens of judgments
thereunder which are not currently dischargeable; deposits of cash or readily
marketable securities to secure public or statutory obligations of the Borrower;
materialmen's, mechanics', vendors' or other like Liens incurred in the ordinary
course of business with respect to obligations which are being contested in good
faith and as to which adequate reserves have been established or deposits of
cash or readily marketable securities required to obtain the release of such
Liens have been made; Liens created by or resulting from any legal proceedings
(including legal proceedings instituted by the Borrower) which are being
contested in good faith by appropriate proceedings, including appeals of
judgments as to which a stay of execution shall have been issued and adequate
reserves shall have been established; and zoning restrictions, easements,
licenses, restrictions on the use of real property or minor irregularities in
title thereto, which do not materially detract from the value or impair the use
of such property;
(b) Any Liens provided for herein securing payment of the Loan;
(c) Liens securing Indebtedness described in Sections 6.2 (c) or (f)
hereof;
(d) The pledge of the Investor Notes to secure the Deferred Purchase
Debt (as defined in the Memorandum)
(e) Liens on assets that do not constitute collateral for the Loan; and
(f) Permitted Exceptions.
6.4 Distribution. Make any distribution (other than from purchase price
------------
adjustments pursuant to the Purchase Agreement), by reduction of capital or
otherwise, to any of its partners, general or limited, if there shall then
exist, or if after giving effect thereto there would exist, any Event of Default
hereunder.
6.5 Sale and Leaseback. Enter into any arrangement, directly or
------------------
indirectly, with any Person whereby the Borrower shall sell or transfer any
property, whether owned on the date hereof or hereafter acquired, used or useful
in the business of the Borrower and then or thereafter rent or lease such
property or other property which the Borrower intends to use for substantially
the same purposes as the property so sold or transferred, except for FF&E Leases
(to the extent such leases are permitted in this Agreement) and except with
respect to hotels other than the Mortgaged Hotels.
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<PAGE>
6.6 Change in Partnership; Disposal of Property. (a) Wind up,
-------------------------------------------
liquidate or dissolve; (b) modify or amend the Partnership Documents (except for
amendments which reflect the sale of limited partnership interests, or the
admission or withdrawal of limited partners, or which would not materially
adversely affect the Lender); (c) sell, discount or otherwise dispose of (except
by collection), or agree to do any of the foregoing, any of its notes
receivable; contracts or accounts receivable, installment or conditional sales
agreements or any other evidences of indebtedness, except for (i) the pledge to
Marriott, or the sale, of notes made by the limited partners of Borrower as
provided in the Memorandum, and (ii) any of the foregoing actions taken with
respect to hotels other than the Mortgaged Hotels; or (d) sell, exchange, lease,
transfer, convey or otherwise dispose of(or agree to do any of the foregoing)
any of the Mortgaged Hotels, and any other property described in the Mortgages
except with respect to the Liens permitted under Section 6.3 hereof and except
as otherwise expressly permitted herein.
6.7 Certain Transactions with Affiliated Persons. Except as otherwise
--------------------------------------------
expressly permitted or contemplated herein, in the other Loan Documents, the
Management Agreement, the Purchase Agreement, or the Partnership Documents,
directly or indirectly, pay any funds to or for the account or benefit of, or
purchase, acquire or lease any property from, or sell, transfer or lease any
property to, or engage in any other transaction with, Marriott, the General
Partner, an Affiliate of the Borrower, an Affiliate of the General Partner or an
Affiliate of Marriott; provided, however, that, notwithstanding the foregoing,
the Borrower may reimburse the General Partner and its Affiliates for the actual
cost of goods and materials used for or by the Borrower and obtained from
unrelated third parties and for the actual cost of providing any accounting,
tax, and other administrative services required or contemplated by the
Partnership Documents (excluding services required to be performed under the
Management Agreement) to the extent that such goods, materials, and services are
reasonably necessary to the prudent operation of the Hotels and the cost thereof
is comparable to or less than the amount the Borrower would have been required
to pay to an unrelated third party.
6.8 Amendments to Agreements. Modify, amend, terminate or cancel the
------------------------
Management Agreement (except as permitted in the Management Agreement
Assignment), the Purchase Agreement (except as permitted in the Purchase
Agreement Assignment), the Ground Leases (except as permitted in the Mortgages)
or the Line of Credit and Reimbursement Agreement.
6.9 Maintenance of Present Business. Engage in, as its principal
-------------------------------
business, any business other than the ownership and operation of the Hotels and
other hotels.
6.10 Leases. Create, assume, incur or guarantee, or in any manner be
------
liable for or suffer to exist, any lease or license of real or personal property
where the Borrower is lessee or licensee, except (i) the Ground Leases, (ii)
other leases of any kind (including, without limitation, FF&E Leases) involving
payments of less than $15,000 per Fiscal Year per lease and in an aggregate
amount not greater than $200,000 per Fiscal Year, (iii) the
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TV System Leases and the Telephone Leases, (iv) leases and licenses as have been
specified on Schedule 6.10 hereof as in effect on the date hereof and without
giving effect to any extension, renewal or replacement thereof; and (v) rental
of guest rooms, banquet rooms, meeting rooms and restaurant facilities in the
ordinary course of business. All leases entered into by the Borrower subsequent
to February 7, 1990, as permitted by this Section 6 10. shall be subordinate and
inferior to the Mortgages.
6.11 FF&E Account. Cause or permit all or any portion of the funds on
------------
deposit in the FF&E Account to be used for any purpose other than as
described in Section 5. 12 hereof
6.12 Partner Distributions. Make any distribution to any of its
---------------------
partners of any payment received as a Pari Passu Distribution during any Fiscal
Year until after the Annual Audited Reconciliation Date for such Fiscal Year and
until after taking into account any adjustment required by Section 6. 1 hereof
ARTICLE 7
INSURANCE
7.1 Hazard Insurance. The Borrower shall furnish to the Lender
----------------
original insurance certificates, or the Lender may (but shall not be obligated
to) procure at the Borrower's expense, policies of fire insurance with extended
coverage and all risk endorsements and such other hazard insurance (including,
without limitation, building collapse and completed value builder's risk with
respect to any construction of improvements), covering the Mortgaged Hotels for
their replacement cost, as well as business interruption (covering loss for no
less than one year after occurrence), loss of rent and extra expense forms of
insurance as the Lender shall require (as respects the Hotel located in
Fullerton, California, earthquake insurance shall be carried to the extent such
insurance is maintained by the Manager, in its good faith business judgment,
under its blanket earthquake program for participating properties owned, leased,
or managed by the Manager or its affiliates in California). In the event any
Mortgaged Hotel is located in a zone identified by the Federal Emergency
Management Agency (FEMA) as a flood hazard area, flood insurance shall be
maintained in an amount not less than the maximum amount available under the
National Flood Insurance Program. The Lender shall hold any such insurance
certificates for the benefit of itself and for the benefit of any party to which
it has assigned or transferred any of its interest in the Loan. Such policies
(except flood and earthquake) shall be issued by companies having a then current
rating in the latest edition of Bests Insurance Reports of not less than "A"
(Policyholders Rating) and not less than "X" (Financial Size Category), shall be
in form and amounts reasonably satisfactory to the Lender and shall provide that
loss, if any, thereunder be payable to the Lender pursuant to a standard
mortgagee clause (without contribution) and a standard lender's loss payable
clause.
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7.2 Other Insurance. The Borrower shall also maintain, and will
---------------
provide the Lender with certified true copies of the insurance policies or
certificates of insurance evidencing, liability insurance, including bodily
injury and property damage, workers compensation insurance, employer's liability
insurance, excess umbrella liability insurance and such other insurance as the
Lender shall reasonably require. Such primary policies and coverage shall be
issued by companies having a then current rating in the latest edition of Bests
Insurance Reports of not less than "A-" (Policyholders Rating) and not less than
"VIII" (Financial Size Category), and shall be in form and substance, and in
amounts, reasonably satisfactory to the Lender. Such excess umbrella liability
policies shall be issued by financially sound carriers of recognized
responsibility and in amounts at least equal to amounts maintained by similarly
situated hotels. The liability policy shall indicate the Lender as an additional
insured. The Borrower may satisfy any of the insurance requirements contained in
this Section 7.2, other than those relating to excess umbrella liability
insurance, with any legally qualified self-insurance program of the Borrower,
the Manager or any of the Manager's Affiliates so long as the coverage afforded
thereunder (taking into consideration the financial condition of the provider of
such program) is as good as or better than that afforded by the self-insurance
program on behalf of the Borrower as in effect as of the date hereof.
7.3 Required Notices. All such policies or certificates shall contain
----------------
the agreement of the insurer to give not less than thirty (30) days (or, in the
case of nonpayment of premiums, ten (10) days) prior notice to the Lender of a
proposed policy cancellation or of a material change in the policy provisions.
7.4 Payment and Application. Insurance proceeds payable with respect
-----------------------
to damage to or destruction of a Mortgaged Hotel shall be applied in accordance
with the terms of the Mortgages.
ARTICLE 8
---------
DEFAULTS AND REMEDIES
8.1 Events of Default. So long as any Loan Obligations (other than the
-----------------
Series C Note) are outstanding, the occurrence of any of the following events
for any reason whatsoever, and whether such occurrence shall be voluntary or
involuntary or come about or be effected by operation of law or pursuant to or
in compliance with any judgment, decree or order of any court or any order, rule
or regulation of any governmental body or otherwise shall be a default under
this Agreement (each herein called an "Event of Default"):
(a) Any representation, warranty or written statement made herein or
in any other Loan Document, report, certificate, Financial Statement or other
instrument heretofore or hereafter delivered to the Lender by or on behalf of
the Borrower, the General Partner or Marriott in connection with this Agreement
or any Loan Document or any borrowing hereunder shall prove to be false or
misleading, or is breached, in any material respect when made or remade; or
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(b) Any default shall occur in any payment of principal or interest or
other payments due hereunder or under the Notes as and when the same shall
become due and payable whether at the due date thereof by acceleration or
otherwise; or
(c) Any default shall occur in the due observance or performance of
any covenant, agreement or condition contained in this Agreement or the other
Loan Documents; or
(d) The Borrower, Marriott (for so long as the Direct Access Agreement
is in effect), the Manager or the General Partner (i) shall suspend or
discontinue its business, call a meeting of its creditors for the purpose of
postponing or adjusting its liabilities or seeking an arrangement with its
creditors, make an assignment for the benefit of creditors or a composition with
creditors, be unable, or admit in writing its inability to pay its debts as they
mature or petition or apply to any tribunal for the appointment of any receiver,
custodian, liquidator or trustee of or for it or any substantial portion of its
assets, or take any action for the purpose of effecting any of the foregoing;
provided, however, that if any of the events occur and such event relates
exclusively (1) to property that does not serve as collateral security for the
Loan and/or to (2) liabilities of the Borrower, Marriott (for so long as the
Direct Access Agreement is in effect), the Manager or the General Partner that
do not relate to any of the collateral security for the Loan, then such event
shall not be an Event of Default, or (ii) shall file a petition in bankruptcy,
become insolvent (howsoever such insolvency may be evidenced), suffer an order
for relief to be entered against it under any bankruptcy law, commence any
proceeding relating to it under any bankruptcy, reorganization, arrangement,
readjustment of debt, receivership, dissolution or liquidation law or statute of
any jurisdiction, whether now or hereafter in effect, or there shall be
commenced against the Borrower, Marriott (for so long as the Direct Access
Agreement is in effect), the Manager or the General Partner any such proceeding
which shall remain undismissed for a period of thirty (30) days or more, or the
Borrower, Marriott (for so long as the Direct Access Agreement is in effect),
the Manager or the General Partner shall take any action for the purpose of
effecting any of the foregoing; or
(e) Any order, judgment or decree shall be entered in any proceeding
against the Borrower, Marriott (for so long as the Direct Access Agreement is in
effect), the Manager or the General Partner decreeing the dissolution or
split-up of the Borrower, Marriott (for so long as the Direct Access Agreement
is in effect), the Manager or the General Partner or the divestiture of any
asset of the Borrower (except for a hotel that is not a Mortgaged Hotel or other
assets unrelated to the Mortgaged Hotels), the Manager or the General Partner,
and such order, judgment or decree shall remain undischarged or unstayed for a
period in excess of sixty (60) days; provided, however, that the split-up, or
the divestiture of the assets, of Marriott shall not constitute an Event of
Default if, following such occurrence, Marriott continues to operate
substantially all of its full service hotel business in substantially the same
manner as prior to such occurrence; or
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(f) Final judgment for the payment of money in excess of $1,000,000.00
(except for a judgment that exclusively affects property that does not serve as
collateral security for the Loan and does not otherwise materially affect the
general creditworthiness of the Borrower) shall be rendered by a court of record
against the Borrower, the Manager or the General Partner and the Borrower, the
Manager or the General Partner shall not discharge the same or provide for its
discharge in accordance with its terms, or procure a stay of execution thereof
within thirty (30) days from the date of entry thereof and within such period of
thirty (30) days, or such longer period during which execution of such judgment
shall have been stayed, appeal therefrom and cause the execution thereof to be
stayed during such appeal; or
(g) If the General Partner shall cease to be the sole general partner
of the Borrower or if the General Partner or the Manager shall cease to be a
direct or indirect wholly-owned subsidiary of Marriott except with respect to
------
the Manager as permitted by Section 7 of the Management Agreement Assignment; or
(h) If a default shall occur and be continuing under either the
Foreclosure Guarantee or the Direct Access Agreement beyond any applicable cure
period prescribed therein; or
(i) If there shall occur and be continuing a material default in the
observance or performance by either party of its covenants, agreements or
obligations under the Management Agreement or the Purchase Agreement or by the
Borrower under a Ground Lease and such material default is not cured within any
applicable notice and/or grace period provided in such agreement or if either
party to any such agreement or Ground Lease shall, without the prior consent of
the Lender, terminate or seek to terminate any such agreement or Ground Lease,
except as otherwise provided in the Management Agreement or the Management
Agreement Assignment, in the Purchase Agreement or the Purchase Agreement
Assignment, or in any Ground Lease or the Mortgage relating thereto; or
(j) The Borrower sells, transfers, assigns, encumbers or otherwise
conveys its interest in any of the Mortgaged Hotels, the Ground Leases, the
FF&E, or any interest therein or portion thereof, including without limitation,
the execution of an installment sales contract, without the prior written
consent of the Lender, except the following are hereby expressly permitted:
(i) A release in connection with payment of the Loan, and all
other indebtedness evidenced or secured by the Loan
Documents, in full;
(ii) Execution of a standard purchase and sale contract, whereby
no interest in property vests in the contract vendee;
(iii) Sale, transfer or conveyance of the FF&E is permitted
without the prior written consent of the Lender so long as
the Borrower
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substitutes other FF&E of equal or better quality, grade
and value in which the Lender shall have a first priority
security interest; provided, however, (A) replacement and
substitution shall not be required with respect to FF&E to
the extent that a Mortgaged Hotel can continue to operate
in substantially the same manner and with substantially the
same quality of service and in accordance with the Loan
Documents, and (B) FF&E may be replaced by a FF&E Lease,
such lease being assigned to the Lender as security for the
indebtedness evidenced by the Loan Documents, and the value
of collateral therefor is not materially adversely
affected; and
(iv) encumbrances otherwise permitted in the Loan Documents; or
(k) If the certificate of an Authorized Accounting Officer delivered
on the Annual Interim Reconciliation Date states and the certificate of the
outside auditors delivered on or before the Annual Audited Reconciliation Date
confirms that, with respect to any Fiscal Year, the Minimum Operating Profit
Requirement for such Fiscal Year was not achieved; provided that with respect to
each of Fiscal Years 1998 and 1999, any such failure to achieve the Minimum
Operating Profit Requirement for either such Fiscal Year shall not be an Event
of Default so long as the Mortgaged Hotels shall have achieved the applicable
Targeted Operating Profit for the immediately preceding Fiscal Year and there
shall not otherwise have occurred an Event of Default under this Section 8.1; or
(l) If, in either Fiscal Year 1997 or Fiscal Year 1998 there shall be
a failure to achieve the applicable Targeted Operating Profit for such Fiscal
Year; or
(m) If the Borrower shall fail to make any repayment of Pari Passu
Distributions as and when required to be made by it under Section 6.1(b) hereof
8.2 Notice; Cure Rights; Acceleration. Notwithstanding anything to the
---------------------------------
contrary in this Agreement, the Notes or the other Loan Documents, the Lender
agrees that it will not accelerate the maturity of any indebtedness secured by
the Mortgages affecting the Mortgaged Hotels and will not exercise any of its
other rights and remedies hereunder or under the other Loan Documents (other
than to protect, preserve and maintain all collateral security described in the
Loan Documents) unless the Lender has first given written notice of an Event of
Default (including, without limitation, an Event of Default under Section
8.1(a)) to the Borrower, and unless the Borrower has failed to cure such Event
of Default within the times hereinafter permitted. If such Event of Default is a
monetary default (i.e., may be cured by the payment of a sum certain including,
without limitation, payments of interest under the Note and payments under the
Ground Leases), the Borrower shall have a period of five (5) days after receipt
of such written notice within which to cure such Event of Default. If such Event
of Default is not a monetary default, the Borrower shall have a period of thirty
(30) days after receipt of such written notice within which to cure such Event
of Default; provided, however, if such default is not curable within said 30-day
period, the Borrower shall have such additional period as is
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necessary to cure the Event of Default, provided the Borrower has commenced cure
within the 30-day period and diligently and in good faith pursues such cure. The
agreements set forth in this Section 8.2 shall not apply to any default of the
type described in subparagraphs (d), (e), (f), (j), (k), (l) and (m) of Section
8.1 of this Agreement. Subject to the provisions of this Section 8.2, upon the
occurrence of an Event of Default the Lender (i) may, by notice to the Borrower,
declare its obligation, if any, to make any payments to the Borrower as required
by Section 6.1(b) to be terminated, whereupon the same shall forthwith
terminate, and (ii) may, by notice to the Borrower, declare the Notes and any
other Loan Obligations to be forthwith due and payable, whereupon the Notes and
all such other Loan Obligations shall become and be forthwith due and payable,
without presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived by the Borrower; provided, however that if an Event
-------- -------
of Default under clause (d) of Section 8.1 above shall occur, (x) the
obligation, if any, of the Lender to make any payments as required by Section
6.1(b) shall automatically be terminated and (y) the Notes and all such other
Loan Obligations shall automatically become due and payable, without
presentment, demand, protest or any notice of any kind, all of which are hereby
expressly waived by the Borrower.
8.3 Suits for Enforcement. Subject to the provisions of Section 2.20
---------------------
hereof, in case any one or more of such Events of Default shall occur and be
continuing after the expiration of any applicable cure period provided in
Section 8.2 without cure, the Lender may proceed, to the extent permitted by
law, to protect and enforce its rights either by suit in equity or by action at
law, or both, whether for the specific performance of any covenant, condition or
agreement contained in this Agreement or the Notes or in aid of the exercise of
any power granted in this Agreement or the Notes, or proceed to enforce the
payment of the Notes or to enforce any other legal or equitable right of the
Lender.
8.4 Remedies Cumulative. Subject to the provisions of Section 2.20
-------------------
hereof, no right or remedy herein or in any other agreement or instrument
conferred upon the Lender, is intended to be exclusive of any other right or
remedy, and each and every such right or remedy shall be cumulative and shall be
in addition to every other right and remedy given hereunder or under any Loan
Document now or hereafter existing at law or in equity or by statute or
otherwise. Without limiting the generality of the foregoing, if the Notes or any
of the other obligations of the Borrower to the Lender shall not be paid when
due, whether at the stated maturity thereof, by acceleration or otherwise, the
Lender shall not be required to resort to any particular security, right or
remedy or to proceed in any particular order of priority, and subject to Section
2.20 hereof and to the notice and cure provisions of Section 8.2 hereof, the
Lender shall have the right at any time and from time to time, in any manner and
in any order, to enforce its security interests, Liens, rights and remedies, or
any of them, as the Lender deems appropriate in the circumstances and apply the
proceeds of its collateral to the obligations of the Borrower.
8.5. Reinstatement of Indebtedness With Respect to Voidable Transfers.
----------------------------------------------------------------
In the event an act of incurring Indebtedness, or any payment of money or
transfer of property, by or on behalf of the Borrower to the Lender or its
delegatee or agent under and
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pursuant to any of the Loan Documents subsequently shall be declared to be
"void" or "voidable" for any reason within the meaning of any existing or future
state or federal law relating to creditors' rights, including, but not limited
to, the law of fraudulent conveyances, preferences, any pertinent provision of
Title 11 of the U.S. Code, as amended, or otherwise (each such "void" or
"voidable" act, payment or transfer referred to hereinafter as a "Voidable
Transfer"), and the Lender, in turn, is required to restore, repay or return, in
whole or in part, the value the Lender or its delegatee or agent received in
connection with such Voidable Transfer, or the Lender voluntarily does so on the
advice of counsel, then the Borrower's Indebtedness to the Lender automatically
shall be revived, reinstated and restored in an amount equal to the value so
restored, repaid or returned to or for the benefit of the Borrower in connection
with such Voidable Transfer, plus any and all reasonable costs, expenses and
----
attorneys' fees incurred in connection with such restoration, repayment or
return, as though such Voidable Transfer never had been made
ARTICLE 9
CURE OF GROUND LEASE AND MANAGEMENT AGREEMENT
9.1 Ground Lease Cure. The Borrower hereby authorizes the Lender,
-----------------
after the Borrower's receipt of written notice thereof (but in no event later
than any cure period available to the Lender under the Ground Leases) to pay any
sums in any form or manner deemed expedient by the Lender to cure any breach or
violation under any Ground Lease and to rely on any representations and
statements of the Ground Lessor under any Ground Lease in regard to such breach
or violation. Any such sums may be expended by the Lender without inquiry into
the accuracy or validity of the allegation of breach or violation. Any amounts
so expended shall bear interest at the Default Rate and shall be added to and
become a part of the indebtedness secured by the Loan Documents and shall be
immediately due and payable to the Lender. Notwithstanding the foregoing, the
Lender shall have no obligation to cure any breach or violation under any Ground
Lease.
9.2 Management Agreement Cure. The Borrower hereby authorizes the
-------------------------
Lender, after the Borrower's receipt of written notice thereof (but in no event
later than any cure period available to the Lender under the Management
Agreement) to pay any sums in any form or manner deemed expedient by the Lender
to cure any breach or violation under the Management Agreement and to rely on
any representations and statements of the Manager in regard to such breach or
violation. Any such sums may be expended by the Lender without inquiry into the
accuracy or validity of the allegation of breach or violation. Any amounts so
expended shall bear interest at the Default Rate and shall be added to and
become a part of the indebtedness secured by the Loan Documents and shall be
immediately due and payable to the Lender. Notwithstanding the foregoing, the
Lender shall have no obligation to cure any breach or violation under the
Management Agreement.
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ARTICLE 10
MISCELLANEOUS
10.1 Notices and Addresses. Except as otherwise provided with respect
---------------------
to Borrowing Notices, all notices, demands or requests provided for or permitted
to be given pursuant to this Agreement shall be deemed to have been properly
given or served by personal delivery, by telecopy with telephone or telecopied
confirmation of receipt, or by depositing in the United States mail, postpaid
and registered or certified, return receipt requested, and addressed to the
addresses set forth below. All notices, demands and requests shall be effective
upon being personally delivered at the address specified herein, upon
confirmation of receipt by telecopy, or upon being deposited in the United
States mail. The time period for which a response to any notice, demand or
request must be given, if any, shall commence to run from the date of personal
delivery at the address specified herein, the date of receipt of telecopy
notice, or the date of receipt of the notice, demand, or request, by the
addressee thereof as disclosed by the return receipt. Rejection or other refusal
to accept or the inability to deliver because of changed address of which no
notice was given shall be deemed to be receipt of the notice, demand or request
sent. By giving at least ten (10) days written notice thereof, any party hereto
shall have the right from time to time and at any time during the term of this
Agreement to change its address or addressee and each shall have the right to
specify as its address any other address within the United States of America.
For the purposes of this Agreement, the addresses of the parties are as follows:
Borrower:
Marriott Diversified American Hotels, L.P.
c/o Marriott MDAH One Corporation
General Partner
10400 Fernwood Road
Bethesda, Maryland 20058
Attention: Christopher G. Townsend
Secretary
Telephone: (301) 380-7574
Telecopier: (301) 380-3588
Lender:
NationsBank of Georgia, National Association
c/o AMRESCO-Institutional, Inc.
101 North Tryon Street, NC1-001-13-20
Charlotte, North Carolina 28255
Attention: Mark Cagley
Telephone: (704) 386-7449
Telecopier: (704) 386-1564
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10.2 Survival of Representations; Successors and Assigns. All
---------------------------------------------------
covenants, agreements, representations, warranties and indemnifications made
herein and in any certificate delivered pursuant hereto shall survive the
execution and delivery of this Agreement and the other Loan Documents, the
consummation of the transactions contemplated hereby and the execution and
delivery of the Notes, regardless of any investigation made by the Lender and of
the Lender's access to any information and shall continue as of the date made
(or remade as specifically provided in this Agreement) in full force and effect
so long as the Loan or any obligation created hereunder is outstanding and
unpaid, except for the covenants and indemnifications contained in Section 2.14,
Article V and Section 5.15 thereof (without regard to the payment in full of the
Series A Note and the Series B Note), Article VI, Section 10.4 and Section 10.15
which shall continue in full force and effect in accordance with the terms and
provisions thereof Whenever in this Agreement there is a reference to any of the
parties hereto, such reference shall be deemed to include the successors and
permitted assigns of such party, subject to the provisions hereof. All
covenants, agreements, representations, warranties and indemnifications by or on
behalf of the Borrower or Marriott or any other Person which are contained or
incorporated in this Agreement or any other Loan Document or any other document
referred to herein or executed or delivered in connection with the Loan shall
inure to the benefit of the successors and permitted assigns of the Lender and
any holders of the Notes or any interest therein. Except for the parties hereto
and their respective successors and permitted assigns, no other Person shall be
entitled to the benefits of this Agreement or to rely hereon. In this Agreement,
wherever the context so requires, the singular number includes the plural, and
vice versa.
10.3 Effect of Delay; No Waivers. No failure or delay on the part of
---------------------------
the Lender in exercising any right, power or privilege hereunder or under the
Notes, nor any course of dealing between the Borrower and the Lender, shall
operate as a waiver thereof, nor shall a single or partial exercise thereof
preclude any other or further exercise or the exercise of any other right, power
or privilege. Any disbursements under the Loan Documents made at a time when an
Event of Default exists shall not constitute a waiver of any right or remedy of
the Lender existing by reason of such Event of Default.
10.4 Expenses. Whether or not the transactions contemplated hereby
--------
shall be consummated, the Borrower agrees to pay, within thirty (30) days after
demand, and if not received within such 30-day period, the Lender may charge any
deposit account(s) of the Borrower therefor, all expenses incurred by the Lender
(but not any expenses of loan participants in the Loan) in connection with the
administration of this Agreement (including, without limitation, any
modifications of or waivers under this Agreement), the other Loan Documents, the
Loan, the enforcement, defense and preservation of the rights of the Lender
under or in connection with this Agreement, the Notes and the other Loan
Documents, and all reasonable attorneys fees and disbursements incurred by the
Lender which arise out of or are connected, directly or indirectly, to any
transaction contemplated by this Agreement, including, but not limited to, the
reasonable fees and disbursements of
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any legal counsel for the Lender, the reasonable fees of an appraiser or
appraisers to the extent provided below and the fees of surveyors, filing and
recording fees and taxes, mortgage taxes, documentary stamp taxes, intangible
taxes and insurance (including title insurance) premiums. Notwithstanding the
foregoing, the loan fees, as described in Section 2.18 of this Agreement, shall
not be paid unless the transactions contemplated hereby are consummated. The
Borrower shall pay the reasonable fees of an appraiser or appraisers selected by
the Lender in order to comply with regulatory obligations of the Lender, as it
shall so certify to the Borrower, for the preparation of an MAI appraisal for
each Mortgaged Hotel; provided, however, in no event shall the Borrower be
required to pay for more than $60,000 in the aggregate for such appraisals
during any calendar year. The provisions of this Section shall survive any
termination of this Agreement, whether by reason of bankruptcy of the Borrower
or otherwise.
10.5 Use of Accounting Terms. Except as otherwise provided herein,
-----------------------
accounting terms used in this Agreement shall be construed, calculations
hereunder shall be made, and financial data required hereunder shall be
prepared, both as to classification of items and as to amounts, in accordance
with generally accepted accounting principles in effect as of the date hereof
consistently applied. All statements relating to earnings and expenses shall set
forth separately or otherwise identify all extraordinary and non-recurring
items.
10.6 No Assignment by Borrower. The Borrower shall not assign this
-------------------------
Agreement or any of the moneys due or to become due hereunder or convey,
transfer, encumber (except as otherwise permitted herein or in any of the other
Loan Documents) or otherwise hypothecate any one or more of the Mortgaged Hotels
or any part thereof by operation of law or otherwise, without the prior written
consent of the Lender. Notwithstanding any breach by the Borrower of the
provisions of this Section 11.6, the Lender may, at its option, continue to make
advances under the Loan Documents to those who succeed to the Borrower's title;
and all sums so advanced by the Lender shall be deemed to be made pursuant to
this Agreement, and not to constitute a modification thereof, and shall be
secured by the Mortgages and by all other Loan Documents.
10.7 Books and Records. The Lender or any of its representatives shall
-----------------
have, upon not less than five (5) Business Days notice (two Business Days notice
if an Event of Default exists) and at reasonable times as the Lender may
reasonably request, but not more than once per Fiscal Year (except if an Event
of Default exists) the right to inspect all the books and records of the
Borrower relating to the operation of the Mortgaged Hotels and shall be
furnished with all information reasonably requested by it in connection
therewith.
10.8 Proceedings. All legal proceedings and all instruments and
-----------
agreements in connection with the transactions contemplated by this Agreement
shall be satisfactory in form, scope and substance to the Lender and its
counsel, and the Lender and such counsel shall have received all information and
copies of all documents which the Lender or its
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counsel may reasonably have requested in connection therewith, such documents
where appropriate to be certified by proper governmental authorities.
10.9 Time of the Essence. Time is hereby declared to be of the essence
-------------------
of this Agreement and the other Loan Documents.
10.10 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall constitute one and the same agreement.
10.11 Construction. This Agreement, the Notes and the other Loan
------------
Documents shall be governed by and construed and enforced in accordance with the
laws of the State of Georgia, except the Mortgages, the Uniform Commercial Code
Financing Statements and the Assignments of Leases may be governed by laws of
other jurisdictions to the extent specifically provided therein or as otherwise
required.
10.12. Jurisdiction. The Borrower hereby irrevocably consents and
------------
agrees that any legal action, suit, or proceeding arising out of or in any way
in connection with this Agreement may be instituted or brought in the courts of
the State of Georgia, in the County of Fulton, or the United States Courts for
the Northern District of Georgia, as the Lender may elect, and by execution and
delivery of this Agreement hereby irrevocably accepts and submits to generally
and unconditionally, the non-exclusive jurisdiction of any such court, and to
all proceedings in such courts. The Borrower hereby waives any objection that it
may now or hereafter have for the laying of venue in any of the aforesaid
courts. The parties also consent that service of process in any such action or
proceeding may be made upon any party by mailing a copy of the summons and the
complaint to such party, by registered or certified mail, return receipt
requested, at its address designated for notices under Section 10.1 of this
Agreement. Nothing in this Agreement or elsewhere shall affect the Lender's
right to serve process in any other manner permitted by law or limit the right
of the Lender to bring actions, suits or proceedings in the courts of any other
jurisdiction. In any action or proceeding relating to this Agreement or the
Notes or any of the other Loan Documents or any of the liens, security interests
or collateral security for the Loan or any of them, the parties mutually waive
trial by jury, and the Borrower waives (a) any claim for consequential or
special damages, and (b) the right to assert therein any setoff or deduction
whatsoever against any amount of the Loan Obligations
10.13 Description of Documents. The description or characterization of
------------------------
any Loan Document, or instrument contained in this Agreement or in any other
Loan Document is solely for the purpose of identification and such description
or characterization shall not be used for the purpose of, and shall not
otherwise affect, the construction or interpretation of any Loan Document or
other document or instrument so described or characterized. In the event of any
conflict between any such description or characterization and the terms of any
such Loan Document or other document or instrument, the terms of the latter
shall control.
- 66 -
<PAGE>
10.14 Headings. Article and Section headings and the description of
--------
Schedules and Exhibits are for convenience only and shall not affect the
interpretation or construction of this Agreement or the other Loan Documents.
10.15 Indemnity. Subject to Section 2.20 hereof, the Borrower agrees to
---------
indemnify and hold the Lender harmless for all injury, damage and liability to
the person or property of the parties hereto or to any other Person by reason of
the ownership or operation of the Hotels contemplated herein or by reason of the
consummation of the transactions contemplated hereby (except for matters arising
out of the gross negligence or willful misconduct of the Lender). The Borrower
shall undertake at its own expense, by counsel reasonably approved by the
Lender, the defense of the Lender in any lawsuit commenced as a result of
injury, damage or liability occurring by reason of the operation of the Hotels.
The provisions of this Section shall survive any termination of this Agreement,
whether by reason of bankruptcy of the Borrower or otherwise.
10.16 Confidentiality. Any information furnished to the Lender under
---------------
this Agreement shall be kept confidential by the Lender and not disclosed to
--------------------------
Persons other than the Lender or its agents, except (a) that such information
may be disclosed (i) to auditors and counsel for the Lender, (ii) to any
Governmental Authority to the extent such disclosure is required by law or
regulation, (iii) in connection with the enforcement of the Lender's rights
under the Loan Documents or any participation agreement in connection with the
Loan, (iv) if required by subpoena, court or regulatory order or otherwise by
law or regulation, (v) to any actual or prospective assignee or transferee of,
or participant in, all or any part of the Lender's interest in the Loan, and
such participants shall likewise be entitled to make such disclosures to the
extent permitted the Lender in this Section 10.16 and (vi) in connection with a
merger, consolidation or takeover involving the Lender or a participant in the
Loan, and (b) that the restrictions set forth in this Section 10.16 shall not
apply to any information that (i) is known to the Lender or a participant of the
Loan at the time it is furnished to them hereunder except if known solely from
information provided by the Borrower, Marriott, the General Partner or the
Manager, or (ii) is publicly available.
10.17 Lender Assignment and Participation.
-----------------------------------
(a) Without the prior written consent of the Borrower, the Lender shall
not assign or transfer any interest in the Loan, except (i) to a majority owned
Affiliate of the Lender, (ii) to grant participation interests in the Loan
except the Lender shall retain an interest in the Loan equal to at least
$25,000,000 of the original principal amount (which may be reduced pro-rata by
repayments of principal), (iii) to satisfy a requirement of any rule, law or
regulation, (iv) as a result of a consolidation, merger or takeover of the
Lender, or (v) a transfer or assignment to a landlord pursuant to provisions in
any of the Ground Leases (as may be modified by estoppel agreements executed in
connection with the Loan).
(b) All participation agreements entered into by the Lender with
respect to the Loan or any interest therein shall (i) limit the participant's
right to approve modifications
- 67 -
<PAGE>
of the Loan Documents after the date hereof to matters affecting (1) the
interest rate and the amount of the principal of the Notes, (2) any security for
the Loan as described in the Loan Documents, and (3) the payment terms in the
Loan Documents and the non-recourse provisions therein, and participant shall
have only ten (10) Business Days after the receipt, in writing, from the Lender
of such requested modification to respond, and if participant fails to respond,
such modification shall be deemed approved by participant, and (ii) incorporate
with respect to such participant the confidentiality provisions of Section
10.16.
(c) The Lender shall, after each participation is completed, provide
the Borrower with a list of all participants in the Loan and the amount of each
participation.
10.18 Validity. In the event that any of the covenants, agreements,
--------
terms or provisions contained in this Agreement or in any other Loan Document
shall be invalid, illegal or unenforceable in any respect, the validity of the
remaining covenants, agreements, terms or provisions contained herein or in any
other Loan Document (or the application of the covenant, agreement, term or
provision is held to be invalid, illegal or unenforceable, to Persons or
circumstances other than those in respect of which it is invalid, illegal or
unenforceable) shall be in, no way affected, prejudiced or disturbed thereby.
10.19 Incorporation by Reference. All the terms, covenants,
--------------------------
obligations and agreements contained in the Notes and the other Loan Documents
are hereby incorporated herein and made in part hereof to the same extent and
effect as if fully set forth herein.
10.20 Payment in Full. Upon payment in full of all indebtedness and
---------------
obligations evidenced by, or secured by, the Loan Documents, and performance
thereunder in accordance with their terms, the Lender shall promptly take, at
the expense of the Borrower, appropriate action to release, cancel or satisfy
the Loan Documents.
[Signatures on Following Page]
- 68 -
<PAGE>
IN WITNESS WHEREOF, the Borrower and the Lender have caused this
Agreement to be duly executed and sealed, as of the day and year first above
written.
MARRIOTT DIVERSIFIED AMERICAN
HOTELS, L.P., a Delaware limited
partnership
By: Marriott MDAH One Corporation,
a Delaware corporation, Sole
General Partner
By: /s/ Jeffrey P. Mayes
---------------------------------
Name: Jeffrey P. Mayes
-------------------------------
Title: Vice President
------------------------------
Attest: /s/ Christopher G. Townsend
------------------------------
Name: Christopher G. Townsend
--------------------------------
Title: Secretary
-------------------------------
[CORPORATE SEAL]
[SIGNATURES CONTINUED ON NEXT PAGE]
<PAGE>
[SIGNATURE PAGE TO AMENDED AND RESTATED LOAN AGREEMENT
DATED JUNE 30, 1993]
NATIONSBANK OF GEORGIA, NATIONAL
ASSOCIATION
By: AMRESCO-Institutional, Inc., a
Delaware corporation, its
authorized agent
By: /s/ Mark S. Cagley
--------------------------------------
Name: Mark S. Cagley
------------------------------------
Title: Authorized Representative
-----------------------------------
<PAGE>
Fairview, VA
SCHEDULE 1.1-A
EXHIBIT "A" - (LEGAL DESCRIPTION)
PARCEL I: (TAX MAP 049-4-01-0070)
DESCRIPTION OF PARCEL 12-A
PART OF THE PROPERTIES OF
PARK WEST/FAIRVIEW ASSOCIATES
AND ESSEX HOUSE CONDOMINIUM CORPORATION
PROVIDENCE DISTRICT, FAIRFAX COUNTY, VIRGINIA
BEGINNING at a point at the Southwesterly terminus of Fairview Park
Drive as recorded in Deed Book 6126 at page 959 among the land
records of Fairfax County, Virginia; thence with the Southerly line
of Fairview Park with a curve to the right whose radius is 50.00
feet (and whose chord is S 80 degrees 45' 18" E, 73.90 feet) an arc
distance of 83.16 feet to a point; thence continuing with the
Southerly R/W line of Fairview Park Drive and the Westerly R/W line
of an ingress-egress easement through the property of Park
West/Fairview Associates the following courses: with a curve to the
right whose radius is 465.00 feet (and whose chord is S 18 degrees
13' 22" E, 238.89 feet) an arc distance of 241.60 feet; S 03
degrees 20' 18" E, 270.95 feet; with a curve to the right whose
radius is 800.00 feet (and whose chord is S 02 degrees 18' 14" E,
28.89 feet) an arc distance of 28.89 feet and S 01 degrees 16' 10"
E, 83.89 feet to a point; thence departing from the ingress-egress
easement and running through the properties of Park West/Fairview
Associates and Essex Associates the following courses: S 89 degrees
32' 09" W, 178.01 feet; N 45 degrees 27' 51" W, 28.94 feet; S 89
degrees 32' 09" W, 27.39 feet; S 44 degrees 32' 09" W, 4.24 feet; S
89 degrees 32' 09" W, 4.00 feet; N 45 degrees 27' 51" W, 4.24 feet;
S 89 degrees 32' 09" W, 18.00 feet; N 45 degrees 27' 51" W, 6.96
feet; S 44 degrees 32' 09" W, 1.50 feet; N 45 degrees 27' 51" W,
2.00 feet; S 44 degrees 32' 09" W, 14.50 feet; N 45 degrees 27' 51"
W, 7.04 feet; S 89 degrees 32' 09" W, 23.47 feet; N 45 degrees 27'
51" W, 45.41 feet; S 89 degrees 32' 09" W, 29.68 feet; N 45 degrees
27' 51" W, 78.78 feet; N 00 degrees 27' 51" W, 85.00 feet and N 45
degrees 27' 51" W, 137.14 feet to a point on the Southeasterly R/W
line of an ingress-egress easement; thence with the Southeasterly
R/W line of the ingress-egress easement and continuing through the
property of Park West/Fairfax Associates the following courses:
with a curve to the right whose radius is 440.00 feet (and whose
chord is N 38 degrees 25' 58" E, 200.42 feet) an arc distance of
202.20 feet and N 51 degrees 35' 52" E, 288.05 feet to the point
of beginning, containing 5.15294 acres of land, more or less, and
being the same property conveyed to Essex House Condominium
Corporation, a Delaware corporation ("Essex House"), by Quitclaim
Deed, dated as of April 30, 1986, recorded April 30, 1986, in Deed
Book 6365, Page 1139, among the land records of Fairfax County,
Virginia, as adjusted by that certain Boundary Line Adjustment and
Deed of Exchange, dated May 10, 1988,
ALTA Loan Policy - 1970 - (Rev. 10/17/70 and l0/17/84)
<PAGE>
by and between Park West/Fairview Associates and Essex House,
recorded May 20, 1988, in Deed Book 7031, Page 1151, among said
land records, and being the same land shown on Sheet 1 of that
certain survey, prepared by Dewberry & Davis, dated November 13
1989 (last revised January 31, 1990) (the "Survey").
ALTA Loan Policy - 1970 - (Rev. 10/17/70 and 10/17/84)
<PAGE>
PARCEL II: (TAX MAP 059-2-01-0058)
The leasehold interest in and to the following described parcel, together with
any other rights of lessee in and to the following described parcel, (including
the option to purchase the following described parcel) , for a term of
ninety-nine (99) years, ending on April 30, 2085, pursuant to that certain
Ground Lease Agreement, dated as of April 30, 1986, by and between Park
West/Fairview Associates ("Park West") , as lessor, and Essex House Condominium
Corporation ("Essex House") , as lessee, as amended by that certain unrecorded
First Amendment to Ground Lease, effective as of May 10, 1988, and executed by
Park West and Essex House, and as further amended by that certain Amendment to
Ground Lease Agreement, Memorandum of Lease, Declaration of Easements, Covenants
and Related Agreements, Covenant and Restriction Agreement, and Supplemental
Declaration of Protective Covenants, Conditions and Restrictions, dated as of
February 5, 1990, by and among Eleven Fairview Associates, a Delaware joint
venture partnership ("Eleven Fairview"), Essex House, and Fairview Park Owners
Association, a Virginia non-stock not for profit corporation (the
"Association"), recorded February 14, 1990 in Deed Book 7529, Page 1581, among
the land records of Fairfax County, Virginia (the "Ground Lease Parcel
Amendment") , and as assigned to Marriott Diversified American Hotels, L.P.
("MDAHLP") pursuant to that certain Assignment and Assumption of Lease
Agreement, dated as of February 7, 1990, by and between Essex House, as
assignor, and Marriott Diversified American Hotels, L.P. ("MDAHLP"), as
assignee, recorded February 14, 1990, in Deed Book 7529, Page 1673, among said
land records. A memorandum of said Ground Lease Agreement was recorded April 30,
1986, in Deed Book 6365, Page 1225, among said land records, as amended by the
Ground Lease Parcel Amendment.
DESCRIPTION OF
A GROUND LEASE AREA THROUGH PARCEL 11-A
PART OF THE PROPERTY OF PARK WEST/FAIRVIEW ASSOCIATES
PROVIDENCE DISTRICT
FAIRFAX COUNTY, VIRGINIA
BEGINNING at a point on the Westerly line of an existing ingress/egress
easement as recorded in Deed Book 6133 at page 309 among the land records
of Fairfax County, Virginia (Fairview Park Drive) , said point being the
following courses: with a curve to the right whose radius is 465.00 feet,
an arc distance of 232.03 feet; S 03 deg. 20' 18" E, 270.95 feet; with a
curve to the right whose radius is 800.00 feet, and whose chord is S 02
deg. 18' 14" E, 28.88 feet, an arc distance of 28.89 feet and S 01 deg. 16'
10" E, 83.89 feet from a point on the Southerly line of Fairview Park Drive
as dedicated in Deed Book 6126 at page 959 among the said land records and
running thence through the property of Park West/Fairview Associates with
the lines of the said ingress/egress easement S 01 deg. 16' 10" E, 136.11
feet and with a curve to the right whose radius is 280.00 feet, and whose
chord is S 32 deg. 26' 54" W, 310.86 feet, an arc distance of 329.55 feet
to a point; thence departing the said ingress/egress easement and
continuing through the property of Park West/Fairview Associates (Parcel
11-A) the following courses: N 00 deg. 27' 51" W, 350.73 feet; S 89 deg.
32' 09" W, 20.78 feet; N 45 deg. 27' 51" W, 69.01 feet; S 89 deg. 32' 09"
W, 22.88 feet and N 00 deg. 27' 51" W,
ALTA Loan Policy - 1970 - (Rev. 10/17/70 and l0/17/84)
<PAGE>
22.25 feet to a point on the Southerly line of Parcel 12-A; thence
continuing with the Southerly lines of Parcel 12-A the following
courses: N 44 deg. 32' 09" E, 0.94 feet; S 45 deg. 27' 51" E, 6.96
feet; N 89 deg. 32' 09" E, 18.00 feet; S 45 deg. 27' 51" E, 4.24 feet;
N 89 deg. 32' 09" E, 4.00 feet; N 44 deg. 32' 09" E, 4.24 feet; N 89
deg. 32' 09" E, 27.39 feet; S 45 deg. 27' 51" E, 28.94 feet and N 89
deg. 32' 09" E, 178.01 feet to the point of beginning, containing
1.33755 acres of land, more or less, and being the same land described
as the "Ground Lease Area" and shown on Sheet 2 of the Survey.
ALTA Loan Policy - 1970 - (Rev. 10/17/70 and l0/17/84)
<PAGE>
PARCEL III
All of the easements and rights appurtenant to Parcel I and/or Parcel II and
created by:
(a) that certain Declaration of Protective Covenants, Conditions and
Restrictions of Fairview Park, Fairfax County, Virginia, dated
February 27, 1985, by Park West, recorded February 28, 1985, in Deed
Book 6104, page 910, among the land records of Fairfax County, as
amended by that certain Supplemental Declaration of Protective
Covenants, Conditions and Restrictions for Parcel 12, Fairview Park,
Fairfax County, Virginia, dated April 30, 1986, by the Park West,
recorded April 30, 1986, in Deed Book 6365, Page 1106, among said land
records (as amended by the Ground Lease Parcel Amendment), as further
amended by that certain Supplemental Declaration of Protective
Covenants, Conditions and Restrictions of Fairview Park, Fairfax
County, Virginia. With Respect to Certain Common Facilities, dated
April 30, 1986, by Park West, recorded April 30, 1986, in Deed Book
6365, Page 1229, among said land records, as further amended by that
certain First Amendment to Declaration of Protective Covenants,
Conditions and Restrictions of Fairview Park, Fairfax County,
Virginia, by and between Park West and the Association, recorded
January 22, 1988, in Deed Book 6943, Page 54, among said land records,
and as further amended by that certain Supplemental Declaration of
Protective Covenants, Conditions and Restrictions for Parcel 11,
Fairview Park, Fairfax County, Virginia, by Park West, recorded June
1, 1988, in Deed Book 7042, Page 1447, among said land records (the
Declaration of Protective Covenants, Conditions and Restrictions of
Fairview Park, as so amended, is hereinafter referred to as the
"Declaration"), including, without limitation, a non-exclusive right
and easement of enjoyment in and to the Common Facilities (as defined
in the Declaration), and rights of ingress and egress over Fairview
Park Drive as set forth in the Declaration;
(b) that certain Declaration of Easements, Covenants and Related
Agreements, dated as of April 30, 1986, by and among Park West, Essex
House, and the Association, recorded April 30, 1986, in Deed Book
6365, Page 1182, among the land records of Fairfax County, as amended
by that certain unrecorded First Amendment to Declaration of
Easements, Covenants and Related
ALTA Loan Policy - 1970 - (Rev. 10/17/70 and 10/17/84)
<PAGE>
Agreements, dated as of May 10, 1988, by and among Park West, Essex House, and
the Association, and as further amended by the Ground Lease Parcel Amendment
(the Declaration of Easements, Covenants and Related Agreements, as so amended,
is hereinafter referred to as the "Second Declaration"), including, without
limitation, a non-exclusive easement upon, over, under and across the
Office/Retail Site (as defined in the Second Declaration) for construction of
the Hotel (as defined in the Second Declaration) and the Hotel Garage (as
defined in the Second Declaration), as more particularly described in Section
3(b) of the Second Declaration; an easement to extend the foundation of the
Hotel and the Hotel Garage onto certain portions of the Office/Retail Site and
to maintain such extensions, as more particularly described in Section 5(a) of
the Second Declaration; a perpetual and reciprocal easement on, under and over
the Office/Retail Site, the Courtyard (as defined in the Second Declaration) and
the Walkway (as defined in the Second Declaration) for Minor Encroachments (as
defined in the Second Declaration) of the Hotel or the Leased Garage Site (as
defined in the Second Declaration) thereon, together with a perpetual and
reciprocal easement for the maintenance of such Minor Encroachments, as more
particularly described in Section 6 of the Second Declaration, and together with
a fee simple interest in such Minor Encroachments; a perpetual easement of
support for the Hotel, the Hotel Site (as defined in the Second Declaration),
the Leased Garage Site and the Hotel Garage by way of contribution from the
foundations, columns and other portions of the Office/Retail Garage and/or the
Office/Retail Facility, as more particularly described in Section 7 of the
Second Declaration; a perpetual, non-exclusive easement upon, over, under and
across the Office/Retail Site for the installation, maintenance, repair,
removal, relocation and replacement of utilities, as more particularly described
in Section 8 of the Second Declaration: a non-exclusive easement upon, over,
under and across the Courtyard for pedestrian ingress to and egress from the
insured parcels, for pedestrian access between the Hotel, the Office/Retail
Facility and the Walkway, and for the installation, maintenance, repair,
removal, relocation and replacement of utilities, as more particularly described
in Section 9 of the Second Declaration; a non-exclusive easement upon, over,
under and across the Walkway for
ALTA Loan Policy - 1970 - (Rev. 10/17/70 and 10/17/84)
<PAGE>
pedestrian ingress to and egress from the insured parcels, and for the
installation, maintenance, repair, removal, relocation and replacement
of utilities, as more particularly described in Section 10 of the
Second Declaration; and a perpetual easement for pedestrian access
between the Hotel, the Hotel Garage, and the Office/retail facility
over a portion of the Office/Retail Site, as more particularly
described in Section 13 of the Second Declaration.
(c) that certain Reciprocal Easement Agreement, dated as of May 10, 1988,
by and between Park West and Essex House, recorded May 20, 1988, in
Deed Book 7031, Page 1132, among the land records of Fairfax County
(the "REA"), including, without limitation, a non-exclusive easement
upon, over and across the roadway constructed or to be constructed by
Park West on a portion of the Office Site (as defined in the REA) for
access between the Loop Road (as defined in the REA) and the Parking
Facility (as defined in the REA); a non-exclusive easement for
pedestrian traffic across each floor of the Garage (as defined in the
REA); a non-exclusive easement for vehicular traffic across each floor
of the Garage; a non-exclusive easement for parking in areas
designated for parking in the Garage; and a non-exclusive right of
entry and easement over and across the Garage for all purposes
reasonably necessary for the performance of the REA and certain other
agreements; and
(d) that certain Joint Operating Agreement and Cross-Access Easement,
dated February 1, 1990, by and between Essex House, Eleven Fairview,
and Marriott Corporation, a Delaware corporation, recorded February
14, 1990, in Deed Book 7529, Page 1619, among the land records of
Fairfax County (the "JOA"), including, without limitation, non-
exclusive easements for pedestrian and vehicular traffic across each
floor of the EFA Garage (as defined in the JOA), and between the Essex
Garage (as defined in the JOA) and the public streets and alleys now
and hereafter abutting or located on any portion of the EFA Garage
Site (as defined in the JOA); for pedestrian traffic between the Essex
Garage and the public walkways, escalators, elevators, concourses,
plazas, malls and bridges now and hereafter abutting or located on any
portion of the Total Site (as defined in the JOA); for furnishing
connection, attachment to walls, and other points of access from the
Essex House Garage to the EFA Garage,
ALTA Loan Policy - 1970 - (Rev. 10/17/70 and 10/17/84)
<PAGE>
and for the encroachment, maintenance and repair of connecting
elements at the Connecting Points (as defined in the JOA), together
with a fee simple interest in and to such encroachments; for parking
of passenger cars, vans and small trucks; and for construction,
installation, operation, repair, reconstruction, maintenance and
removal of the Access System (as defined in the JOA).
The easements comprising Parcel III are irrevocable and the policy, when issued,
will affirmatively insure against any loss or damage resulting from the
termination of such easements other than as provided in the instruments giving
rise thereto or by abandonment or relinquishment by the named insured.
ALTA Loan Policy - 1970 - (Rev. 10/17/70 and 10/17/84)
<PAGE>
Livonia, MI
DESCRIPTION OF REAL ESTATE
PARCEL I
Land in the city of Livonia, County of Wayne, State of Michigan,
described as:
A parcel of land situated in the Southeast 1/4 of Section 7, Town 1 South, Range
9 East, City of Livonia, Wayne County, Michigan, more particularly described as
follows: Commencing at the Southeast corner of Section 7, Town 1 South, Range 9
East, City of Livonia, Wayne County, Michigan, and proceeding them South 89
degrees 58 minutes 00 seconds West 353.00 feet along the South line of said
Section 7, said line also being the centerline of Sable road 180 feet wide and
North 00 degrees 09 minutes 10 seconds East, 90.00 feet to a point on the North
line of Six Mile Road and South 89 degrees 58 minutes 00 seconds West 773.02
feet along said liner to a point on the Easterly line of Laurel Park Driver
North and proceeding along said line North 00 degrees 02 minutes 00 seconds West
70.00 feet abd 184.36 feet along the arc of a curve to the left having a radius
of 386.00 feet and passing through a central angle of 27 degrees 21 minutes 57
seconds with a long chord bearing North 13 degrees 42 minutes 58 seconds West
Easterly Right-of-Way line said Laurel Park Drive North 105.33 feet along the
arc of a curve to the left having a radius of 386.00 feet and passing through a
central angle of 15 degrees 12 minutes 58 seconds West 105.00 feet and North 85
degrees 12 minutes 03 seconds West 105.00 feet and North 40 degrees 02 minutes
00 seconds curve to the right having a radius 45.00 feet passing through a
central angle of 23 degrees 14 minutes 05 seconds with a long chord bearing
North 58 degrees 14 minutes 02 seconds East 10.07 feet to a point of compound
curvature; thence 46.23 feet along the arc of a curve to the right having a
radius of 134.00 feet and passing through a central angle of 19 degrees 05
minutes 02 seconds East, 46.00 feet to a point of reverse curvature; thence
61.30 feet along the arc of a curve to the left having a radius of 56.00 feet
passing through a central angle of 00 degrees 00 minutes 00 seconds with a long
chord bearing North 44 degrees 00 minutes 00 seconds east 35.56 feet; thence
North 44 degrees 02 minutes 00 seconds east 229.67 feet; thence south 00 degrees
02 minutes 00 seconds East 247.20 feet; thence south 00 degrees 02 minutes 00
seconds West 213.06 feet thence 31.71 feet along the arc of a curve to the right
having a radius of 60.00 feet
<PAGE>
and passing through a central angle of 80 degrees 16 minutes 44 seconds with a
long chord bearing South 78 degrees 36 minutes 22 seconds West, 31.34 feet to
the point of beginning and containing conveyed to Host La Jolla, inc., a
delaware corporation, pursuant to 16, 1987, in liber 23552, page 390, among the
land records of wayne survey, prepared by orchard, Hiltz& a, Inc., dated
december 7, 1989 ( last revised January 30,1990) (the "Survey").
PARCEL II
All of the easements created pursuant to that certain Reciprocal Easement
agreement, Laurel Park, Livonia, Michigan, between Newburgh/Six Mile Limited
Partnership (Newburgh"), and host La Jolla, Inc a delaware corporation
("host"), recorded December 16, 1987, in liber 23552, page 402, among the land
records of Wayne County, Michigan, as amended by that certain first amendment
to reciprocal Easement Agreement, Laurel Park, Livonia, Michigan, dated as of
December 20,1989, by and between 241, Register no.90-025568,Wayne County
Records, among the aforesaid land records (such Reciprocal Easement Agreement,
as so amended, is hereinafter referred to as the "REA"), including without
limitation, the following:
(a) A non-exclusive, irrevocable and perpetual access easement for pedestrian
and vehicular ingress and egress between Parcel I, the Parking Facility (as
defined in the REA) and Laurel Park Drive over the property described in
Exhibit G attached to the REA (the "Access Easement"); and
(b) A non-exclusive, irrevocable and perpetual easement for signage at the
entrance to the Host Improvements (as defined in the REA) from the Enclosed Mall
(as defined in the REA), and exclusive, irrevocable and perpetual easement for a
free-standing sign and utilities necessary for such sign on Six Mile road in the
area described in Exhibit I attached to the REA (the "Free-Standing Sign
Easement"); and
(c) A non-exclusive, irrevocable and perpetual easement appurtenant to Parcel I
to have the Host Improvemnents adjoin and open into the Enclosed Mall in the
Location shown on Exhibit F to the REA and as shown on the survey by the 60.33
feet call at the South 00 degrees 02 minutes 00 seconds East on the eastern
boundary of Parcel I; and
(d) A non-exclusive, irrevocable and perpetual easement appurtenant to Parcel I
over such portions of the Developments's Site )as defined in the REA) as are,
from time to time, in use as common roadways; and
(e) A non-exclusive, irrevocable and perpetual easement for the use of one
hundred (100) full size non-valet parking spaces on the "B" level (which is the
first level above the grade level) in the
<PAGE>
in the REA) as may be located on the a Site which service Parcel I.
The Access Easement and the Free-Standing Sign Easement are located as shown on
the Survey. The Access Easement is contiguous along its entire Eastern boundary
with the entire Western boundary of Parcel I,and there are no gaps, strips, or
a between them. The Access Easement is contiguous along its entire Southern
boundary with the gores between them. The easements comprising Parcel II are
irrevocable and this policy affirmatively insures against any loss or damage
resulting from the termination of such easements other than as provided in the
instruments giving rise thereto, or by abandonment or relinquishment by the
named insured.
<PAGE>
south side od the parking deck on the a Site, together with an
easement for vehicular and pedestrian use and access to and from such parking
spaced and Parcel I and, if the Developer deck after subsequent change or
destruction, an easement for the use of one hundred (100) full size non0valet
surface parking spaces on the south side of the parking area described in
Exhibit F to the REA; and
(f) A non-exclusive, irrevocable and perpetual easement appurtenant to Parcel I
across the surface of the Developer's Site for storm water flowage (except roof
water) from Parcel I to any catch basin or storm drain located in the
Developer's Site to the extent provided in the Master Utility Plan (as defined
in the REA); and
(g) Non-exclusive, irrevocable and perpetual underground easements for the
benefit of and appurtenant to Parcel I as may be necessary for the installation
and use of the Common Utility Facilities (as defined in the REA); gas, water,
storm and sanitary sewer pipes and lines and for the repair replacement,
maintenance and removal thereof; and
(h) A non-exclusive, irrevocable and perpetual easement appurtenant to Parcel I
for Common building Components (as defined in the REA); and
(i) A non-exclusive , irrevocable and perpetual easement for access, ingress
and egress on and over the immediate proximate area of the Developer's Site to
and from Parcel I to the extent reasonably necessary to perform work on the
interior and exterior of the Host Improvements; and
(j) A non-exclusive, irrevocable and perpetual easement over the Developer's
Site for minor encroachments of portions of the Host Improvements or any similar
causes, nut in no event to exceed four inches(4");and
(k) A non-exclusive, irrevocable and perpetual easement for improvements over
the area described in Exhibit F to the REA; and
(l) Non-exclusive, irrevocable and perpetual easement over such portions of the
Developer's Site not encumbered by bulidings as may be necessary to excerise
self-help remedies pursuant to the REA; and
(m) Upon termination or expiration of the REA, non-exclusive, irrevocable and
perpetual easements appurtenant to Parcel I to come over and across the portions
of the Developer's Site not encumbered by bulidings with equipment and
materials, and to make use thereof in such manner as may be reasonably necessary
to maintain and repair such part or parts of the Common Utility Facilities,
Common Building Components and Connector (as defined in the REA) as may be
located on the Developer's Site which service Parcel I.
The Access Easement and the Free-Standing Sign Easement are located as shown on
the Survey. The Access Easement is contiguous along its entire Eastern boundary
with the entire Western boundary of Parcel I,and there are no gaps, strips or
gores between them. The Access Easement is contiqous along its entire Southern
boundary with the gores between them. The easements comprising Parcel II are
irrevocable and this policy affirmatively insures against any loss or damage
resulting from the termination of such easements other than as provided in the
instruments giving rise thereto, or by abandonment or relinquishment by the
named insured.
<PAGE>
Southfield, MI
EXHIBIT "A"
SOUTHFIELD, MICHIGAN
--------------------
DESCRIPTION OF REAL ESTATE
PARCEL I
Land in the City of Southfield, County of Oakland, State of Michigan, described
as:
Land in the Northwest 1/4 of Section 21, Town 1 North, Range 10 East, City of
---------------------------
Southfield, Oakland County, Michigan is described as: Commencing at the West 1/4
- ----------
corner of Section 21, thence North 01 degrees 55 minutes 50 seconds West,
1623.11 feet along the West line of Section 21 and the centerline of Berg Road;
thence North 88 degrees 04 minutes 10 seconds East, 43.00 feet to a point on the
Southerly right of way line of I-696 Service Drive; thence along the said
Southerly right of way line of I-696 Service Drive and a curve concave to the
Southeast of radius 457.00 feet, a central angle of 72 degrees 22 minutes 33
seconds, an arc distance of 577.28 feet, whose chord bears North 34 degrees 15
minutes 28 seconds East, 539.66 feet; thence continuing along said Service Drive
North 70 degrees 26 minutes 45 seconds East, 45.78 feet to the point of
beginning; thence North 70 degrees 26 minutes 45 seconds East, 45.62 feet along
said Service Drive; thence along said Service Drive and a curve concave to the
South of radius 970.00 feet, a central angle of 28 degrees 16 minutes 12
seconds, an arc distance of 478.61 feet, whose chord bears North 84 degrees 34
minutes 51 seconds East, 473.77 feet; thence South 00 degrees 28 minutes 03
seconds East, 478.00 feet; thence South 89 degrees 31 minutes 57 seconds West,
259.00 feet; thence North 48 degrees 30 minutes 08 seconds West, 199.19 feet;
thence South 89 degrees 31 minutes 57 seconds West, 108.00 feet; thence North 00
degrees 28 minutes 03 seconds West, 289.00 feet to the point of beginning.
Being the same property conveyed to Marriott Corporation, a Delaware
corporation, by deed from FNMC/Berg Development Company Limited Partnership, a
Michigan limited partnership, dated September 8, 1987, recorded September 16,
1987, among the land records of Oakland County, Michigan, in Liber 10111, Page
255, and being the same land shown on that certain survey prepared by Orchard,
Hiltz & McCliment, Inc. dated December 19, 1989 (last revised January 30, 1990)
(the "Survey").
PARCEL II
Land in the City of Southfield, County of Oakland, State of Michigan, described
as:
A sixty foot (60') non-exclusive easement for ingress and egress to and from
Parcel I, pursuant to that certain Agreement, dated as of September 9, 1987, by
and between FNMC/Berg Development Company Limited Partnership, a Michigan
limited partnership, and Marriott Corporation, a Delaware corporation, recorded
September 16, 1987, in Tax I.D. # 24-21-100-134
<PAGE>
Liber 10111, Page 236, among the land records of Oakland County, Michigan (the
"Development Agreement"), being more particularly described as follows:
Commencing at the West 1/4 corner of Section 21, Town 1 North, Range 10 East,
City of Southfield, Oakland County, Michigan; thence North 01 degrees 55 minutes
50 seconds West 1623.11 feet along the West line of Section 21 and the
centerline of Berg Road; thence North 88 degrees 04 minutes 10 seconds East,
43.00 feet; thence along a curve concave to the Southeast of radius 457.00 feet,
a central angle of 72 degrees 22 minutes 33 seconds whose chord bears North 34
degrees 15 minutes 28 seconds East, 539.66 feet, an arc distance of 577.28 feet;
thence continuing along the Service Drive North 70 degrees 26 minutes 45 seconds
East 91.40 feet; thence along said Service Drive and a curve concave to the
South of radius 970.00 feet, a central angle of 28 degrees 16 minutes 12
seconds, whose chord bears North 84 degrees 34 minutes 51 seconds East 473.77
feet, an arc distance of 478.61 feet to the point of beginning; thence South 00
degrees 28 minutes 03 seconds East, 478.00 feet; thence North 89 degrees 31
minutes 57 seconds East, 60.00 feet; thence North 00 degrees 28 minutes 03
seconds West 467.68 feet to a point on the South line of the Service Drive;
thence along the South line of the Service Drive North 80 degrees 38 minutes 57
seconds West 50.13 feet; and on a curve concave to the South of radius 970.00
feet, a central angle of 00 degrees 38 minutes 05 seconds, whose chord bears
North 80 degrees 57 minutes 59 seconds West, 10.75 feet; an arc distance of
10.75 feet to the point of beginning.
Said easement is located as shown on the Survey.
PARCEL III
A six foot (6') landscape easement covering the westerly six feet (6') of Parcel
II, pursuant to the Development Agreement. Said easement is located as shown on
the Survey.
PARCEL IV
A sixteen foot (16') landscape easement, pursuant to the Development Agreement,
being more particularly described as follows:
Commencing at the West 1/4 corner of Section 21, Town 1 North, Range 10 East,
City of Southfield, Oakland County, Michigan, thence North 01
(Tax I.D. #24-21-100-134)
<PAGE>
degrees 55 minutes 50 seconds West, 1623.11 feet along the West line of Section
21 and the center line of Berg Road; thence North 88 degrees 04 minutes 10
seconds East, 43.00 feet to a point on the Southerly right-of-way I-696
Service Drive; thence along the Southerly right-of-way line of I-696 Service
Drive and a curve concave to the Southeast of radius 457.00 feet, a central
angle of 21 degrees 40 minutes 08 seconds, whose chord bears North 08 degrees 49
minutes 13 seconds East, 171.77 feet, an arc distance of 172.84 feet; thence
North 89 degrees 31 minutes 57 seconds East, 115.70 feet to the Point of
Beginning; thence continuing North 89 degrees 31 minutes 57 seconds East, 315.00
feet; thence South 48 degrees 30 minutes 08 seconds East, 199.19 feet; thence
North 89 degrees 31 minutes 57 seconds East, 265.00 feet; thence South 00
degrees 28 minutes 03 seconds East, 16.00 feet; thence South 89 degrees 31
minutes 57 seconds West, 271.14 feet; thence North 48 degrees 30 minutes 08
seconds West, 199.19 feet; thence South 89 degrees 31 minutes 57 seconds West,
308.86 feet; thence North 00 degrees 28 minutes 03 seconds West, 16.00 feet to
the Point of Beginning.
Said easement is located as shown on the Survey.
PARCEL V
Easements for utilities, pursuant to the Development Agreement.
(Tax I.D. #24-21-100-134)
<PAGE>
Fullerton, CA
EXHIBIT "A"
FULLERTON, CALIFORNIA PROPER
----------------------------
Legal Description
PARCEL 1: All that portion of the South half of Section 25, Townsite 3 South,
Range 10 West in the Rancho San Juan Cajon de Santa Ana, City of Fullerton,
County of Orange, State of California, as shown on a map recorded in Book 51 at
Page 7 of Miscellaneous Maps in the office of the County Recorder of said
County, more particularly described as follows:
Beginning at the intersection of a line parallel with and distant Northerly
100.00 feet measured at right angles to the Northerly right-of-way line of
Nutwood Avenue, said Northerly right-of-way line having a bearing of North
89 (degrees) 16' 13" West as same is shown on a map filed in Book 93 at Pages 3
and 4, Records of Surveys of said Orange County, and a line parallel with and
distant Westerly 60.00 feet measured at right angles to the Westerly line of
"ROUTE 57 FREEWAY", said Westerly line having a bearing of North 15 (degrees)
00' 53" East as same is shown on said map filed in Book 93 at Pages 3 and 4,
Records of Surveys; thence, along said line parallel with the Northerly right-
of-way line of Nutwood Avenue North 89 (degrees) 16' 13" West 385.00 feet;
thence, leaving last said line North 0 (degrees) 43' 47" East 26.06 feet;
thence, North 23 (degrees) 34' 08" East 138.50 feet; thence, at right angles to
last line North 66 (degrees) 25' 52" West 12.00 feet; thence at right angles to
last line North 23 (degrees) 34' 08" East 226.81 feet; thence, parallel with
said Northerly right-of-way line of Nutwood Avenue South 89 (degrees) 16' 13"
East 323.81 feet; thence, leaving said parallel line South 0 (degrees) 43' 47"
West 94.26 feet to a point in aforementioned line parallel with the Westerly
line of "ROUTE 57 FREEWAY"; thence along last said parallel line South 15
(degrees) 00' 53" West 281.84 feet to the POINT OF BEGINNING. Containing an area
of 3.116 Acres more or less, and being the same land shown on the survey
prepared by Wagner Pacific, Inc., dated November 16, 1989, last revised
January 29, 1990.
- -------
PARCEL 2: An exclusive easement for ingress, egress, parking and landscaping
purposes in and to that portion of said South half of Section 25, Townsite 3
South, Range 10 West in the Rancho San Juan Cajon de Santa Ana, City of
Fullerton, County of Orange, State of California, as shown on said map recorded
in Book 51 at Page 7 of Miscellaneous Maps in the office of the County Recorder
of said County, more particularly described as follows:
Beginning at the intersection of said Northerly right-of-way line of Nutwood
Avenue, said Northerly right-of-way line having a bearing of North 89 (degrees)
14' 13" West and said Westerly line of "ROUTE 57 FREEWAY" having a bearing of
North 15 (degrees) 00' 53" East; thence, along said Northerly right-of-way line
North 89 (degrees) 16' 13" West 390.45 feet; thence North 16 (degrees) 13' 59"
West 21.39 feet; thence North 44 (degrees) 16' 13" West 35.00 feet; thence,
North 0 (degrees) 43' 47" East 54.79 feet to the Southwesterly corner of said
Lease Area, containing an area of 3.116 Acres more or less; thence, along the
Southerly line of said Lease Area South 89 (degrees) 16' 13" East 385.00 feet;
thence, along the Easterly line of said Lease Area North 15 (degrees) 00' 53"
East 281.84 feet; thence, North 0 (degrees) 43' 47" East 94.26 feet to the
Northeast corner of said Lease Area; thence, along the Easterly prolongation of
the Northerly line of said Lease Area South 89 (degrees) 16' 13" East 73.15 feet
to its intersection with aforementioned Westerly line of "ROUTE 57 FREEWAY" as
same is shown on said map filed in Book 93 at Pages 3 and 4, Records of Survey
of said Orange County; thence, along last said Westerly line through the
following courses: South 9 (degrees) 22' 45" West, 125.79 feet to an angle point
and South 15 (degrees) 00' 53" West, 353.97 feet to the POINT OF BEGINNING, and
being the same land shown on the survey prepared by Wagner Pacific, Inc., dated
November 16, 1989, last revised January 29, 1990.
<PAGE>
Dayton, OH
DAYTON, OHIO PROPERTY
---------------------
Legal Description
LOCATED IN SECTION 2, TOWN 1, RANGE 7 M.R.S., CITY OF DAYTON, COUNTY OF
MONTGOMERY, STATE OF OHIO, AND BEING A TRACT OF LAND DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT DESCRIBED AS FOLLOWS:
BEGINNING AT THE INTERSECTION OF THE SOUTH LINE OF STEWART STREET WITH THE EAST
LINE OF PATTERSON BLVD., SAID PATTERSON BLVD. BEING ONE HUNDRED AND 00/100
(100.00) FEET WIDE; THENCE IN A SOUTHERLY DIRECTION WITH THE EAST LINE OF SAID
PATTERSON BLVD. ON A CURVE TO THE LEFT WITH A RADIUS OF TWO THOUSAND TWO HUNDRED
FORTY-ONE AND 83/100 (2,241.83) FEET FOR TWO HUNDRED EIGHTY-THREE AND 44/100
(283.44) FEET TO A POINT OF REVERSE CURVATURE; THENCE STILL WITH THE EAST LINE
OF SAID PATTERSON BLVD. IN A SOUTHERLY DIRECTION ON A CURVE TO THE RIGHT WITH A
RADIUS OF FOUR THOUSAND FIVE HUNDRED THIRTY-FOUR AND 20/100 (4,534.20) FEET FOR
FOUR HUNDRED FIVE AND 27/100 (405.27) FEET TO SAID POINT OF BEGINNING; THENCE
FROM SAID POINT OF BEGINNING IN A NORTHEASTERLY DIRECTION ON A CURVE TO THE
RIGHT WITH A RADIUS OF TWENTY AND 00/100 (20.00) FEET FOR THIRTY-ONE AND 20/100
(31.20) FEET (THE CHORD TO SAID CURVE BEARING, NORTH FIFTY-NINE DEGREES
THIRTY-TWO MINUTES TWELVE AND 5/10 SECONDS (59 DEG. 32' 12.5") EAST FOR
TWENTY-EIGHT AND 13/100 (28.13) FEET) TO A POINT IN THE SOUTH LINE OF RIVER PARK
DRIVE; THENCE WITH THE SOUTH LINE OF SAID RIVER PARK DRIVE ON A TANGENT BEARING,
SOUTH SEVENTY-FIVE DEGREES FORTY-SIX MINUTES FORTY SECONDS (75 DEG. 46' 40")
EAST FOR THREE HUNDRED THIRTY-FOUR AND 31/100 (334.31) FEET; THENCE STILL WITH
THE SOUTH LINE OF SAID RIVER PARK DRIVE IN AN EASTERLY DIRECTION ON A CURVE TO
THE LEFT WITH A RADIUS OF NINE HUNDRED EIGHTY-FOUR AND 93/100 (984.93) FEET FOR
THREE HUNDRED EIGHTY-SEVEN AND 67/100 (387.67) FEET (THE CHORD TO SAID CURVE
BEARING, SOUTH EIGHTY-SEVEN DEGREES THREE MINUTES THIRTEEN AND 5/10) SECONDS (87
DEG 03' 13.5") EAST FOR THREE HUNDRED EIGHTY-FIVE AND 18/100 (385.16) FEET);
THENCE STILL WITH THE SOUTH LINE OF SAID RIVER PARK DRIVE ON A TANGENT BEARING,
NORTH EIGHT-ONE DEGREES FORTY MINUTES THIRTEEN SECONDS (81 DEG. 40' 13") EAST
FOR TWENTY-NINE AND 00/100 (29.00) FEET; THENCE IN A SOUTHEASTERLY DIRECTION ON
A CURVE TO THE RIGHT WITH A RADIUS OF FIFTEEN AND 00/100 (15.00) FEET FOR
TWENTY-THREE and 56/100 (23.56) FEET (THE CHORD TO SAID CURVE BEARING, SOUTH
FIFTY-THREE DEGREES NINETEEN MINUTES FORTY-SEVEN SECONDS (53 DEG. 19' 47") EAST
FOR TWENTY-ONE AND 21/100 (21.21) FEET); THENCE ON A TANGENT TO SAID CURVE,
SOUTH EIGHT DEGREES NINETEEN MINUTES FORTY-SEVEN SECONDS (8 DEG. 19' 47") EAST
FOR THREE HUNDRED FORTY-TWO AND 90/100 (342.90) FEET; THENCE NORTH EIGHTY-TWO
DEGREES THIRTY-ONE MINUTES THIRTY SECONDS (82 DEG. 31' 30") WEST FOR ONE HUNDRED
FORTY AND 57/100 (140.57) FEET; THENCE SOUTH SEVENTY-TWO DEGREES NINETEEN
MINUTES THIRTY-FOUR SECONDS (72 DEG. 19' 34") WEST FOR EIGHT HUNDRED NINETY-TWO
AND 28/100 (892.28) FEET; THENCE NORTH SIXTY-SIX DEGREES TWENTY MINUTES NO
SECONDS (66 DEG. 20' 00") WEST FOR SEVENTY-FIVE AND 00/ 100 (75.00) FEET TO A
POINT IN THE EAST LINE OF SAID PATTERSON BLVD.; THENCE WITH THE EAST LINE OF
SAID PATTERSON BLVD. IN A NORTHERLY DIRECTION ON A CURVE TO THE LEFT WITH A
RADIUS OF FOUR THOUSAND FIVE HUNDRED THIRTY-FOUR AND 20/100 (4,534.20) FEET FOR
SIX HUNDRED NINETY-SEVEN AND 61/100 (697.61) FEET TO THE POINT OF BEGINNING (THE
CHORD TO SAID CURVE BEARING, NORTH NINETEEN DEGREES FIFTEEN MINUTES THIRTY-TWO
AND 5/10 SECONDS (19 DEG. 15' 32.5") EAST FOR SIX HUNDRED NINETY-SIX AND 92/100
(696.92) FEET), CONTAINING NINE AND 946/1000 (9.946) ACRES, MORE OR LESS, AND
BEING THE SAME LAND SHOWN ON THAT CERTAIN PLAT OF SURVEY PREPARED BY WOOLPERT
CONSULTANTS, DATED DECEMBER 13, 1989, LAST REVISED JANUARY 30, 1990.
<PAGE>
Durham County, NC
EXHIBIT "A"
RESEARCH TRIANGLE PARK, NORTH CAROLINA
--------------------------------------
Legal Description
BEGINNING at a new iron pipe, said iron pipe being set at the intersection
of the southerly line of the right-of-way of Guardian Drive and the easterly
line of the right-of-way of Miami Boulevard,
THENCE South 87 degrees 26 minutes 55 seconds East with the southerly line
of the right-of-way of Guardian Drive for a distance of 132.33 feet to a new
iron pipe set on the southerly line of the right-of-way of Guardian Drive,
THENCE still with the southerly line of the right-of-way of Guardian Drive
along a curve to the right having a radius of 452.93 feet and an arc length of
355.73 feet, being subtended by a chord of South 64 degrees 56 minutes 55
seconds East for a distance of 346.66 feet to a new iron pipe set on the
southwesterly line of the right-of-way of Guardian Drive,
THENCE with the southwesterly line of the right-of-way of Guardian Drive
along a curve to the right having a radius of 470.00 feet and an arc length of
427.27 feet, being subtended by a chord of South 16 degrees 24 minutes 19
seconds East for a distance of 412.71 feet to a new iron pipe set on the
southwesterly line of the right-of-way of Guardian Drive,
THENCE South 09 degrees 38 minutes 17 seconds West for a distance of 198.06
feet to an existing iron pipe found on the westerly line of the right-of-way of
Guardian Drive,
THENCE with the westerly line of the right-of-way of Guardian Drive along a
curve to the left having a radius of 550.01 feet and an arc length of 285.37
feet, being subtended by a chord of South 05 degrees 13 minutes 26 seconds East
for a distance of 282.18 feet to an existing iron pipe found on the westerly
line of the right-of-way of Guardian Drive,
THENCE South 69 degrees 54 minutes 54 seconds West for a distance of 131.54
feet leaving said right-of-way to an existing iron pipe found on the
northeasterly line of the right-of-way of Interstate 40 Access Ramp,
THENCE with the northeasterly line of the right-of-way of Interstate 40
Access Ramp along a curve to the left having a radius of 816.20 feet and an arc
length of 416.14 feet, being subtended by a chord of North 39 degrees 15 minutes
20 seconds West for a distance of 411.64 feet to an existing concrete monument
found on the northeasterly line of the right-of-way of Interstate 40 Access
Ramp,
<PAGE>
THENCE North 59 degrees 06 minutes 12 seconds West for a distance of 213.76
feet along the northeasterly line of the right-of-way of Interstate 40 Access
Ramp to an existing concrete monument found on the northeasterly line of the
right-of-way of Interstate 40 Access Ramp,
THENCE North 47 degrees 15 minutes 26 seconds West for a distance of 110.76
feet to an existing concrete monument found at the intersection of the
northeasterly line of the right-of-way of Interstate 40 Access Ramp and the
easterly line of the right-of-way of Miami Boulevard,
THENCE North 16 degrees 17 minutes 05 seconds East for a distance of 229.08
feet along the easterly line of the right-of-way of Miami Boulevard to an
existing concrete monument found on the easterly line of the right-of-way of
Miami Boulevard,
THENCE North 06 degrees 48 minutes 31 seconds East for a distance of 321.29
feet to an existing concrete monument found on the easterly line of the
right-of-way of Miami Boulevard,
THENCE North 17 degrees 56 minutes 07 seconds West for a distance of 28.83
feet to a new iron pipe set, the point and place of BEGINNING.
SAID property contains 10.3368 acres more or less, being the same land
shown on that certain plat of survey entitled "ALTA/ACSM Survey of Marriott
Hotel" dated November 28, 1989, last revised January 24, 1990, and prepared by
Garry C. VanPool, Registered Land Surveyor No. L-2986, and being the same
property conveyed by deed dated November 24, 1986, from Linpro Triangle Offices
I Limited to Marriott Corporation, recorded in Book 1348, Page 735, among the
land records of Durham County, North Carolina.
<PAGE>
SCHEDULE 1.1-B
PAYMENT DATES
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
01/26 01/25 01/24 01/23 01/28 01/27 01/26
02/23 02/22 02/21 02/20 02/25 02/24 02/23
03/23 03/22 03/21 03/19 03/25 03/24 03/23
04/20 04/19 04/18 04/16 04/22 04/21 04/20
05/18 05/17 05/16 05/14 05/20 05/19 05/18
06/15 06/14 06/13 06/11 06/17 06/16 06/15
07/13 07/12 07/11 07/09 07/15 07/14 07/13
08/10 08/09 08/08 08/06 08/12 08/11 08/10
09/07 09/06 09/05 09/03 09/09 09/08 09/07
10/05 10/04 10/03 10/01 10/07 10/06 10/05
11/02 11/01 10/31 10/29 11/04 11/03 11/02
11/30 11/29 11/28 11/26 12/02 12/01 11/30
12/28 12/27 12/26 12/24 12/30 12/29 12/15 (maturity)
</TABLE>
<PAGE>
SCHEDULE 2.1(a)
EXISTING DEBT
Outstanding Principal Balance
of the Prior Note: $128,000,000
Accrued and Unpaid Interest
on the Prior Note: 2,298,920
Early Termination Fee Due
Under the Swap Agreement 12,220,936
------------
TOTAL DEBT $142,519,856
<PAGE>
SCHEDULE 2.1(b)
EXISTING DEFAULTS OR EVENTS OF DEFAULT
--------------------------------------
1. The Borrower failed to pay, in full, all amounts due to
the Lender under the Prior Note on December 15, 1992.
2. The Borrower entered into certain equipment leases, each
of which involves payments which exceeded $10,000 in any given year, as
identified on Schedule 6.10 of the Loan Agreement.
3. In connection with the insurance requirements set forth in
Sections 4.5 and 6.2 of the Prior Loan Agreement, the Borrower believes that the
Lender was fully aware of the self-insurance program being employed by
International (then known as Marriott Hotels, Inc.) in satisfaction of such
insurance requirements. However, Sections 4.5 and 6.2 of the Prior Loan
Agreement did not accurately reflect such self-insurance program. Therefore, to
the extent that the requirements set forth in Sections 4.5 or 6.2 of the Prior
Loan Agreement may not have been complied with, there may be a potential
default.
<PAGE>
SCHEDULE 3.1(c)
---------------
List of Financing Statements and Recording Locations
State Jurisdiction No. of Filings
- ----- ------------ --------------
California Secretary of State 1
Orange County 1
Michigan Secretary of State 2
Wayne County 2
Oakland County 1
North Carolina Secretary of State 2*
Durham County 1
Ohio Secretary of State 1
Montgomery County 1
Virginia Secretary of State 1
Fairfax County 1
Maryland Secretary of State 2*
Montgomery County 2
Delaware Secretary of State 1
* One amendment and one new filing (all other filings are amendments to
existing financing statements)
- 1 -
<PAGE>
SCHEDULE 4.11
LITIGATION
----------
None.
<PAGE>
SCHEDULE 3.1(j)
---------------
<TABLE>
<CAPTION>
SERIES A NOTE PRINCIPAL & INTEREST PAYMENT DUE AT CLOSING
Period Dates Principal Bal # Days Interest Due *
------ ----- ------------- ------ --------------
<S> <C> <C> <C> <C>
1992 12/15 - 1/1 $85,000,000 18 $199,218.75
1 1/2 - 1/29 $85,000,000 28 $309,895.83
2 1/30 - 2/26 $85,000,000 28 $309,895 83
3 2/27 - 3/26 $85,000,000 28 $309,895.83
4 3/27 - 4/23 $85,000,000 28 $309,895.83
5 4/24 - 5/21 $85,000,000 28 $309,895 83
-----------
(amortization)
TOTAL DUE AT CLOSING $230,770** $1,748,697.90 $1,979,467.90
</TABLE>
* Interest due is based on the 12/15/92 to 6/15/93 LIBOR contract of 3.6875%
+ 1.00% (4.6875% total) based on a 360 day year (yield: 365/360 * 4.6875% =
4.7526%)LIBOR from 6/15/93 (30 days) = 3.25%.
** Reflects $46,154.00 per period Series A Note amortization for 5 accrual
periods.
<TABLE>
<CAPTION>
SERIES B NOTE INTEREST PAYMENT DUE AT CLOSING
Period Dates Principal Bal. # Days Interest Due ***
------ ----- -------------- ------ ----------------
<S> <C> <C> <C> <C>
end of 1992 12/15 - 1/1 $43,000,000 18 $79,281.25
1 1/2 - 1/29 $43,000,000 28 $123,326.39
2 1/30 - 2/26 $43,000,000 28 $123,326.39
3 2/27 - 3/26 $43,000,000 28 $123,326.39
-----------
Sub-total through 1st qtr reconciliation $449,260.42
4 3/27 - 4/23 $43,000,000 28 $123,326.39
5 4/24 - 5/21 $43,000,000 28 $123,326.39
-----------
$695,913.20
</TABLE>
*** Interest due is based on the 12/15/92 to 6/15/93 LIBOR contract of 3.6875%
based on a 360 day year. (yield: 3.6785% * 365/360 = 3.7387%)
<PAGE>
SCHEDULE 4.17
-------------
The baseboard mastic referred to on Page 4 of the October 20, 1989
report of Sowers & Associates regarding asbestos containing materials at the
Dayton Hotel (the "Report") has been removed. The insulation materials and pipe
sealer referred to on that page remain in place. The maintenance staff at the
Dayton Hotel reports that those materials continue to be in very good condition
and do not appear to be friable or likely to be friable. Those materials are
located above a suspended ceiling in non-public areas of the Hotel and are for
all practical purposes inaccessible to non-authorized personnel. As a result,
there is limited risk of exposure to the Hotel's guests, employees and
maintenance personnel. Because of the good condition of those materials and
their location, no maintenance needs regarding them have arisen. The Chief
Engineer and Assistant Chief Engineer are aware of the materials, and
maintenance personnel who are likely to be exposed to the materials are aware of
or are advised of the presence of the materials before being requested to
perform work in an area or in a manner that might reasonably be expected to
result in exposure. Engineering staff members have attended one or more seminars
on how to maintain the current condition of the materials. Because of the
extremely low risk of exposure, the Hotel management does not notify hotel
guests or non-maintenance personnel of the presence of the materials but does
notify maintenance personnel regarding proper cleaning and maintenance of them.
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 4.18
-------------
TYPE ISSUED BY TERM
---- --------- ----
<S> <C> <C>
Raleigh, North Carolina
- -----------------------
Beer & Wine Privilege License (Account #4453937) County of Durham 07/24/92 - 04/30/93
Beer and or Wine License (Account #127505) City of Durham 04/22/93 - 04/30/94
Hotels, Motels, Tourist Homes, Restaurants, General Business City of Durham 07/14/92 - 06/30/93
License (Sundries) (Account #027690)
Hotel Privilege License #132961 State of North Carolina 07/01/92 - 06/30/93
Cafe Privilege License #132962 State of North Carolina 07/01/92 - 06/30/93
Sell Mixed Beverage at Retail State of North Carolina Alcoholic Beverage expires 04/30/94
Control Commission
Permit to Sell at Retail Malt Beverage On and Off Premises State of North Carolina Alcoholic Beverage
Control Commission
Permit to Sell at Retail Fortified Wine On and Off Premises State of North Carolina Alcoholic Beverage
Control Commission
Permit to Sell at Retail Unfortified Wine On and Off Premises State of North Carolina Alcoholic Beverage
Control Commission
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TYPE ISSUED BY TERM
---- --------- ----
<S> <C> <C>
Retail Malt Beverage License #00121 (Account #32-01887) State of North Carolina Department of 05/01/93 - 04/30/94
Revenue
Retail Wine-On Premises License #00122 (Account #32- State of North Carolina Department of 05/01/93 - 04/30/94
01887) Revenue
Special Tax Stamp/Special Occupational Tax (Control Department of Treasury-Bureau of Alcohol, 07/01/92 - 06/30/93
#1992143-311-036) Tobacco and Firearms
Merchants Certificate of Registration No. 831248 State of North Carolina Department of Issued 06/06/88
Revenue
Approval for Certificate of Occupancy (Building Permit Durham County
#24492)
RDU Commercial Vehicle Permit #93040 Raleigh-Durham Airport Authority expires 03/31/94
RDU Commercial Vehicle Permit #93041 Raleigh-Durham Airport Authority expires 03/31/94
Radio Station License (File #9206061696) (Call Sign Federal Communications Commission 07/21/92 - 07/21/97
KB93259)
Health Department Permit #04032200023 [invoice] State of North Carolina Department of Issued 12/01/92
Environment, Health and Natural Resources
Health Department Permit #04032010193 [invoice] State of North Carolina Department of Issued 12/01/92
Environment, Health and Natural Resources
</TABLE>
- 2 -
<PAGE>
<TABLE>
<CAPTION>
TYPE ISSUED BY TERM
---- --------- ----
<S> <C> <C>
Dayton, Ohio
- ------------
Certificate of Occupancy Department of Economic Development, City 10/24/91
of Dayton
Certificate/Transient Occupancy Registration (Hotel-Motel Montgomery County Auditor 1993
Tax)
Liquor License (Permit #5565973) State of Ohio Department of Liquor Control 06/01/93 - 06/01/94
Swimming Pool Permit No. 39 Ohio Department of Health, State of Ohio 05/04/93 - 05/31/94
Spa Permit No. 40 Ohio Department of Health, State of Ohio 05/04/93 - 05/31/94
Cigarette Dealer's License #57-0210 State of Ohio Department of Taxation 05/05/93 - 05/23/94
Food Service Operation License (Parmizzanos) #001321 Ohio Department of Health 03/01/93 - 03/01/94
Food Service Operation License (Gambits) #001322 Ohio Department of Health 03/01/93 - 03/01/94
Food Service Operation License (Dayton Marriott Hotel Pool Ohio Department of Health 03/01/93 - 03/01/94
Kiosk) #001323
Health Department Permit #000006 Montgomery County Ohio General Health expires 07/01/94
District
</TABLE>
- 3 -
<PAGE>
<TABLE>
<CAPTION>
TYPE ISSUED BY TERM
---- --------- ----
<S> <C> <C>
Fire Marshal Permit #1823 State of Ohio Department of Commerce expires 12/31/93
Division of State Fire Marshal
Special Tax Stamp/Special Occupation Tax (Control Department of the Treasury - Bureau of 07/01/92 - 06/30/93
#1992143-050-047) Alcohol, Tobacco and Firearms
Vendor's License #57-157075 State of Ohio Department of Taxation 07/30/90
Fairview, Virginia
- ------------------
Swimming Pool/Health Spa Permit #08-429-0516 Fairfax County Department of Health Services 05/12/93 - 12/31/93
Fire Prevention Code Permit #052566 County of Fairfax, Fire and Rescue 11/30/92 - 11/30/93
Department, Fire Prevention Division
Elevator No. 1 Permit (16 Floors) County of Fairfax, Virginia Department of expires 08/31/93
Environmental Management, Division of
Inspection Services
Elevator No. 2 Permit (16 Floors) County of Fairfax, Virginia Department of expires 08/31/93
Environmental Management, Division of
Inspection Services
</TABLE>
- 4 -
<PAGE>
<TABLE>
<CAPTION>
TYPE ISSUED BY TERM
---- --------- ----
<S> <C> <C>
Elevator No. 3 Permit (16 Floors) County of Fairfax Virginia Department of expires 08/31/93
Environmental Management, Division of
Inspection Services
Elevator No 4 Permit (16 Floors) County of Fairfax, Virginia Department of expires 08/31/93
Environmental Management, Division of
Inspection Services
Elevator No. 5 Permit (16 Floors) County of Fairfax, Virginia Department of expires 08/31/93
Environmental Management, Division of
Inspection Services
Elevator No. 6 Permit (16 Floors) County of Fairfax, Virginia Department of expires 08/31/93
Environmental Management, Division of
Inspection Services
Elevator No. 7 Permit (3 Floors) County of Fairfax, Virginia Department of expires 08/31/93
Environmental Management, Division of
Inspection Services
Elevator No 8 Permit (5 Floors) County of Fairfax, Virginia Department of expires 08/31/93
Environmental Management, Division of
Inspection Services
Elevator No. 9 Permit (5 Floors) County of Fairfax, Virginia Department of expires 08/31/93
Environmental Management, Division of
Inspection Services
</TABLE>
- 5 -
<PAGE>
<TABLE>
<CAPTION>
TYPE ISSUED BY TERM
---- --------- ----
<S> <C> <C>
Fire Tube Boiler Permit #91421 Commonwealth of Virginia, Department of 02/04/93 - 02/04/95
Labor and Industry, Boiler Safety
Enforcement Division
Coil Water Heater Permit #91429 Commonwealth of Virginia, Department of 02/04/93 - 02/04/95
Labor and Industry, Boiler Safety
Enforcement Division
Coil Water Heater Permit #91426 Commonwealth of Virginia, Department of 03/12/93 - 03/12/95
Labor and Industry, Boiler Safety
Enforcement Division
Coil Water Heater Permit #91428 Commonwealth of Virginia, Department of 02/04/93 - 02/04/95
Labor and Industry, Boiler Safety
Enforcement Division
Coil Water Heater Permit #91425 Commonwealth of Virginia, Department of 02/04/93 - 02/04/95
Labor and Industry, Boiler Safety Enforcement
Division
Air Tank Permit #91427 Commonwealth of Virginia, Department of 02/04/93 - 02/04/95
Labor and Industry, Boiler Safety
Enforcement Division
Air Tank Permit #91424 Commonwealth of Virginia, Department of 02/04/93 - 02/04/95
Labor and Industry, Boiler Safety
Enforcement Division
</TABLE>
- 6 -
<PAGE>
<TABLE>
<CAPTION>
TYPE ISSUED BY TERM
---- --------- ----
<S> <C> <C>
Fire Tube Boiler Permit #91423 Commonwealth of Virginia, Department of 02/04/93 - 02/04/95
Labor and Industry, Boiler Safety
Enforcement Division
Fire Tube Boiler Permit #91422 Commonwealth of Virginia, Department of 02/04/93 - 02/04/95
Labor and Industry, Boiler Safety
Enforcement Division
Wine, Beer & Mixed Beverage Caterer, Caterers Commonwealth of Virginia Department of 12/01/92 - 11/30/93
Establishment #Z54069 Alcoholic Beverage Control
Business License (Hotel & Motel) #930318127 County of Fairfax, Office of Finance 01/01/93 - 12/31/93
Department
Business License (Retail Merchant) #930318126 County of Fairfax, Office of Finance 01/01/93 - 12/31/93
Department
Health Department Permit #TES 78 Commonwealth of Virginia Department of 01/01/93 - 12/31/93
Health
Non-Residential Use Permit #A-1907-89 Commonwealth of Virginia County of Fairfax 08/18/89
Office of Comprehensive Planning Zoning
Administration Division
Mixed Beverage Restaurant - Z2 Hotel Permit #Z5 1032 Commonwealth of Virginia Department of 03/01/93 - 02/28/94
Alcoholic Beverage Control
</TABLE>
- 7 -
<PAGE>
<TABLE>
<CAPTION>
TYPE ISSUED BY TERM
---- --------- ----
<S> <C> <C>
Fullerton, California
- ---------------------
Transient Occupany Registration Certificate #69 [City of Fullerton?] 10/02/89
Seller's Permit #SR OHB 30-698330 California State Board of Equalization
Business Registration Certificate (Account #550011) City of Fullerton 01/07/93 - 09/01/93
Alcoholic Beverage License On-Sale General Eating Place Department of Alcoholic Beverage Control 01/01/93 - 12/31/93
Permit #47-2545 11
Business Registration Certificate (Account #117001) City of Fullerton 11/18/92 - 10/01/93
Southfield, Michigan
- --------------------
Special Tax Stamp (Control #1992143-311-036) Department of Treasury-Bureau of Alcohol, 07/01/92 - 06/30/93
Tobacco and Firearms
Certificate of Boiler Inspection #767609 Michigan Department of Labor, Bureau of 10/01/91 - 10/30/93
Construction Codes Boiler Division
Certificate of Boiler Inspection #767610 Michigan Department of Labor, Bureau of 10/01/91 - 10/30/93
Construction Codes Boiler Division
</TABLE>
- 8 -
<PAGE>
<TABLE>
<CAPTION>
TYPE ISSUED BY TERM
---- --------- ----
<S> <C> <C>
Certificate of Boiler Inspection #767611 Michigan Department of Labor, Bureau of 10/01/91 - 10/30/93
Construction Codes Boiler Division
Public Swimming Pool Permit #63-7070-1-93 State of Michigan expires 12/31/93
Public Swimming Pool Permit #63-7070-2-93 State of Michigan expires 12/31/93
Health Department Permit #63-004728 State of Michigan expires 04/30/93
Business License #172 City of Southfield, Michigan 06/08/93 - 12/31/93
Annual Elevator Permit #375514 Bureau of Construction Codes Elevator expires 10/31/93
Division
Annual Elevator Permit #375515 Bureau of Construction Codes Elevator expires 10/31/93
Division
Liquor License #BH RES 39303-93 State of Michigan, Liquor Control 05/01/93 - 04/30/94
Commission
Liquor License #BH RES 39303-00 90 State of Michigan, Liquor Control
Commission
Additional Bar Permit #39303-01 Michigan Department of Commerce, Liquor 1992-1993
Control Commission
</TABLE>
- 9 -
<PAGE>
<TABLE>
<CAPTION>
TYPE ISSUED BY TERM
---- --------- ----
<S> <C> <C>
Additional Bar Permit #39303-02 Michigan Department of Commerce, Liquor 1992-1993
Control Commission
Additional Bar Permit #39303-03 Michigan Department of Commerce, Liquor 1992-1993
Control Commission
Additional Bar Permit #39303-04 Michigan Department of Commerce, Liquor 1992-1993
Control Commission
Additional Bar Permit #39303-05 Michigan Department of Commerce, Liquor 1992-1993
Control Commission
Livonia, Michigan
- -----------------
Liquor License #BH RES 39304-93 State of Michigan, Liquor Control 05/01/93 - 04/30/94
Commission
Restaurant Permit #92-3142 Office of the City Clerk, City of Livonia 03/17/93-11/30/93
Motel Permit #92-3250 Office of the City Clerk, City of Livonia 01/18/93 - 12/04/93
Health Department Permit #82-004549 State of Michigan expires 04/30/93
Certificate of Occupany #32642 City of Livonia, Department of Public Works, 09/22/89
Engineering/Inspection Division
</TABLE>
- 10 -
<PAGE>
<TABLE>
<CAPTION>
TYPE ISSUED BY TERM
---- --------- ----
<S> <C> <C>
Special Tax Stamp Permit (Control #1992143-311-036) Department of the Treasury-Bureau of 07/01/92 - 06/30/93
Alcohol, Tobacco and Firearms
Certificate of Boiler Inspection #793009 Michigan Department of Labor, Bureau of 05/22/92 - 05/22/94
Construction Codes Boiler Division
Live Entertainment License Fee American Society of Composers, Authors and 09/01/89 - 12/31/93
Publishers
Public Swimming Pool Permit #82-6065-2-93 State of Michigan expires 12/31/93
Public Swimming Pool Permit #82-6065-1-93 State of Michigan expires 12/31/93
Annual Elevator Permit #358082 Bureau of Construction Codes Elevator expires 12/31/92
Division
Annual Elevator Permit #358081 Bureau of Construction Codes Elevator expires 12/31/92
Division
</TABLE>
- 11 -
<PAGE>
SCHEDULE 6.10
FF&E LEASES
1. Dayton, Ohio: one (1) copier
-------------
lease commenced: 3/89
lease expires: 3/95
annual payment: $20,553
2. Fairview, Virginia: two (2) vans
------------------
lease commenced: 5/1/93
lease expires: 4/30/96
annual payment: $23,880
<PAGE>
EXHIBIT 10.b
FIRST AMENDMENT OF
------------------
AMENDED AND RESTATED LOAN AGREEMENT
-----------------------------------
THIS FIRST AMENDMENT to Amended and Restated Loan Agreement (the "First
Amendment") is made as of October 17, 1994 (the "Effective Date") by and between
NATIONSBANK OF GEORGIA, NATIONAL ASSOCIATION (the "Lender") and MARRIOTT
DIVERSIFIED AMERICAN HOTELS, L.P. a Delaware Limited Partnership (the
"Borrower")
WITNESSETH:
----------
WHEREAS, on June 30, 1993 Lender and Borrower entered into an Amended
and Restated Loan Agreement (the "Loan Agreement"); all terms having initial
capital letters used herein and not otherwise defined herein shall have the
meanings ascribed to those terms in the Loan Agreement; and
WHEREAS, the Loan Agreement sets forth certain priorities for
application of Operating Profit and Pari Passu Distributions; and
WHEREAS, Borrower and Lender have agreed to enter into this First
Amendment for the purpose of modifying the method for applying the Pari Passu
Distributions to, among other things, principal payments of the Series A Note
and Series B Note and for other purposes, all as more particularly set forth
herein;
NOW THEREFORE, for and in consideration of the premises and other good
and valuable considerations, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. AMENDMENTS
I. Section 1.1 (Definitions) is hereby modified and amended, to
include the following defined terms to have the following meanings,
which terms shall be deemed included in Section 1.1, effective as of
the Effective Date, where appropriate in alphabetical order as follows:
The term "Aggregate Adjusted Pari Passu Distribution
------------------------------------------
Amount" means for a given Fiscal Year, an amount equal to (a) the
------
sum of the Pari Passu Distributions received by Lender during
such Fiscal Year and deposited by Lender in the Pari Passu
Account for that Fiscal Year less (b) any amounts disbursed from
the Pari Passu Account as a result of adjustments requiring a
refund by Lender to Borrower of a Pari Passu Distribution made on
any Payment Date, Quarterly Reconciliation Date or the Annual
Reconciliation for that Fiscal Year in accordance with terms of
this Section 6.1.
<PAGE>
The term "Annual Adjustment Date" means either the Series A
----------------------
Note Application Date or Series B Note Application Date, as
applicable.
The term "Annual PPD Interest" means as to each Fiscal Year
-------------------
the sum of the Annual Series A Note PPD Interest and Annual
Series B Note PPD Interest.
The term "Annual Series A Note PPD Interest" means in
---------------------------------
connection with Pari Passu Distributions made in connection with
Clause (A) of the Sixth priority of Section 6.1 (a), the interest
which accrued during the applicable Fiscal Year on fifty percent
(50%) of the Aggregate Adjusted Pari Passu Distribution Amount
and in connection with Pari Passu Distributions made in
connection with Clause (B) of the Sixth priority of Section 6.1
(a), the interest which accrued during the applicable Fiscal Year
on twenty-five percent (25%) of the Aggregate Adjusted Pari Passu
Distribution Amount.
The term "Annual Series B Note PPD Interest" means in
---------------------------------
connection with Pari Passu Distributions made in connection with
Clause (A) of the Sixth priority of Section 6.1 (a), the interest
which accrued during the applicable Fiscal Year on fifty percent
(50%) of the Aggregate Adjusted Pari Passu Distribution Amount
and in connection with Pari Passu Distributions made in
connection with Clause (B) of the Sixth priority of Section 6.1
(a), the interest which accrued during the applicable Fiscal Year
on seventy-five percent (75%) of the Aggregate Adjusted Pari
Passu Distribution Amount.
The term "Series A Note Application Date" means as to each
------------------------------
immediately preceding Fiscal Year, the Annual Audited
Reconciliation Date unless the Borrowing with respect to the
Series A Note is a LIBOR Borrowing, then "Series A Note
-------------
Application Date" shall mean the last day of the Interest Period
----------------
of the LIBOR Borrowing in connection with the Series A Note in
which the Annual Audited Reconciliation Date occurs.
The term "Series A Note Pari Passu Adjustment Interest"
--------------------------------------------
means an amount equal to the positive difference between interest
actually paid on the Series A Note on each Payment Date during
the applicable Fiscal Year and the interest that should have been
paid on the Series A Note if the Aggregate Adjusted Pari Passu
Distribution Amount had been applied against the then outstanding
principal of the Series A Note on each Payment Date in the
amounts and at the times as required by Section 6.1(e) (i); such
amount being equal to the amount of interest overpaid on the
Series A Note on each Payment Date after making the appropriate
adjustments.
The term "Series B Note Application Date" means as to each
------------------------------
immediately preceding Fiscal Year, the Annual Audited
Reconciliation Date unless the Borrowing with respect to the
Series B Note is a LIBOR Borrowing, then "Series
------
- 2 -
<PAGE>
B Note Application Date" shall mean the last day of the Interest
-----------------------
Period of the LIBOR Borrowing in connection with the Series B
Note in which the Annual Audited Reconciliation Date occurs.
The term "Series B Note Pari Passu Adjustment Interest"
--------------------------------------------
means an amount equal to the positive difference between the
Series B Note Interest actually paid on each Payment Date during
the applicable Fiscal Year and the Series B Note Interest that
should have been paid on the Series B Note if the Aggregate
Adjusted Pari Passu Distribution Amount had been applied against
the then outstanding principal of the Series B Note on each
Payment Date in the amounts and at the times as required by
Section 6.1 (e) (i); such amount being equal to the amount of
Series B Note Interest overpaid on each Payment Date after making
the appropriate adjustments.
II. Section 6.1 of the Loan Agreement is hereby modified and amended,
effective as of the Effective Date, by deleting that Section in its
entirety and in lieu thereof substituting the following new Section
6.1:
6.1 Operating Profit Distribution Priorities. Until such
----------------------------------------
time as the Series A Note and Series B Note shall have been paid
in full, distribute or apply any Operating Profit for the period
indicated except in accordance with the priorities set forth in
this Section 6.1:
(a) Priorities. (i) Payment Date. On each Payment Date,
---------- ------------
all distributions and applications of Operating Profit for
the applicable Accounting Period according to the following
priorities:
First: Payment of interest due and payable on the Series A
Note;
Second: Payment of Scheduled Amortization of the Series A
Note;
Third: Payment to the Lender for deposit into the Debt
Service Reserve in an amount equal to the aggregate
amount, if any, of the draws during the current
Fiscal Year from the Debt Service Reserve pursuant
to the Sixth priority of Section 6.1(b) that were
not necessary or required after taking into account
any reconciliation under this Section 6.1;
Fourth: Payment of Series B Note Interest.
Fifth: Payment of Interest Deficiency (for any and all
prior Accounting Periods during the then current
Fiscal Year);
Sixth: (A) Subject to clause (B) below, on a pari passu
---- -----
basis, as follows:
- 3 -
<PAGE>
(1) 50%, to the Lender to be deposited in the
Pari Passu Account and disbursed with respect
to each Fiscal Year, in accordance with
Section 6.1 (e) below on the applicable
Annual Adjustment Date; and
(2) 50%, to the Borrower, until such time as
the Borrower has received an aggregate amount
equal to $7,352,000.
(B) If at any time the Borrower has received an
aggregate amount equal to $7,352,000 in accordance
with clause (A) above of this clause Sixth, 100% to
the Lender to be deposited in the Pari Passu
Account and disbursed with respect to each Fiscal
Year in accordance with Section 6.1(e) below on
the applicable Annual Adjustment Date.
(ii) Exceptions. Notwithstanding the foregoing:
----------
(A) If at any time either the Series A Note or
Series B Note has been paid in full (the
"Satisfied Note") and the other such Note
shall not have been paid in full (the
"Outstanding Note"), then until the
Outstanding Note shall have been paid in
full, any amount to be distributed pursuant
to this Section 6.1 to the Satisfied Note
shall be applied to the Outstanding Note in
addition to any other amount that may be
required to be paid hereunder with respect
to the Outstanding Note.
(B) Upon receipt of the Annual Audited Statement
and after taking into account any adjustment
required under this Section 6.1, any
Interest Deficiency remaining unpaid as of
the end of any Fiscal Year shall be deemed
forgiven by the Lender as at the end of such
Fiscal Year.
(b) Operating Profit Deficiency. If on any
---------------------------
Payment Date, Operating Profit shall be less than the
amount required to pay Scheduled Amortization of the Series
A Note and interest then due and payable on the Series A
Note ("Operating Profit Deficiency"), the following amounts
shall be paid by the Borrower or the Lender, according to
the following priorities, to be applied, first, to the
interest then due and payable on the Series A Note and,
second, to the Scheduled Amortization:
First: By the Borrower, all payments, if any,
received (and not repaid on any prior
Payment Date) as a Pari Passu
- 4 -
<PAGE>
Distribution during the then current Fiscal
Year in an amount not to exceed fifty
percent (50%) of the Operating Profit
Deficiency;
Second: By the Lender, all payments, if any,
received (and not repaid on any prior
Payment Date) and deposited into the Pari
Passu Account as a Pari Passu Distribution
under clause (A) of the Sixth priority of
Section 6.1(a)(i) during the then current
Fiscal Year in an amount not to exceed
fifty percent (50%) of the Operating Profit
Deficiency;
Third: By the Lender, all payments, if any
received (and not repaid on any prior
Payment Date) and deposited into the Pari
Passu Account as a Pari Passu Distribution
under clause (B) of the Sixth priority of
Section 6.1(a)(i) during the then current
Fiscal Year in an amount not to exceed the
Operating Profit Deficiency, if any;
Fourth: By the Lender, all payments, if any,
received (and not repaid on any prior
Payment Date) as payment of Interest
Deficiency in an amount not to exceed the
remaining Operating Profit Deficiency, if
any;
Fifth: By the Lender, all payments, if any,
received (and not repaid on any prior
Payment Date) as payment of Series B Note
Interest in an amount not to exceed the
remaining Operating Profit Deficiency, if
any; and
Sixth: By the Borrower, with finds withdrawn from
the Debt Service Reserve in accordance with
the Cash Collateral Agreement in an amount
not to exceed the remaining Operating
Profit Deficiency, if any.
(c) Reports and Certifications.
---------------------------
(i) Without limiting the reporting requirements set
forth in Section 5.6 hereof, on each Quarterly
Reconciliation Date, the Borrower shall submit to
the Lender,
(x) a Quarterly Reconciliation Statement,
which statement shall show, in such
reasonable detail as may be requested by the
Lender, for the Fiscal Quarter most recently
ended for the Mortgaged Hotels, the
calculation of Gross Revenues (by category),
Deductions (by category, including the basis
- 5 -
<PAGE>
for, and the calculation of, Ground Rent and
FF&E contributions), Operating Profit, the
payment calculations as applied in Section
6.1(a), and all retentions, distributions
and other applications thereof, from the
beginning of the current Fiscal Year to the
end of such Fiscal Quarter, with respect to
the Mortgaged Hotels; and
(y) the certificate of an Authorized
Accounting Officer certifying the Quarterly
Reconciliation Statement as having been
prepared under his supervision in accordance
with the provisions hereof
(ii) Without limiting the requirements set forth in
Section 5.6 hereof, on the Annual Interim
Reconciliation Date, the Borrower shall submit to
the Lender,
(x) an Annual Interim Reconciliation
Statement for the Fiscal Year most recently
ended, which Annual Interim Reconciliation
Statement shall be controlling to the extent
there shall exist a conflict with the
Quarterly Reconciliation Statements
delivered during such Fiscal Year. The
Annual Interim Reconciliation Statement
shall show for such Fiscal Year each of the
calculations set forth in a Quarterly
Reconciliation Statement, the amount and
calculation of Minimum Operating Profit
Requirement and the amount, if any, of
outstanding Interest Deficiency; and
(y) the certificate of an Authorized
Accounting Officer certifying the Annual
Interim Reconciliation Statement as having
been prepared under his supervision in
accordance with the provisions hereof.
(d) Adjustments.
-----------
(i) Quarterly Adjustments. Any Interest Deficiency
---------------------
revealed by any Quarterly Reconciliation Statement
shall, to the extent such Quarterly Reconciliation
Statement reveals Operating Profit Available For
Series B Note Interest in excess of the amount paid
toward Series B Note Interest on any Payment Date
through such Fiscal Quarter, be remitted by
Borrower to Lender on the Quarterly Reconciliation
Date, together with the Quarterly Reconciliation
Statement submitted by Borrower to Lender for
application in accordance with Section 6.1(a). Any
Series B Note Interest paid on a Payment Date in
excess of the Operating Profit Available For
- 6 -
<PAGE>
Series B Note Interest earned during the preceding
Fiscal Quarter as revealed by the Quarterly
Reconciliation Statement shall be paid by the
Lender to the Borrower for application in
accordance with Section 6.1(a).
(ii) Annual Adjustments. Any Interest Deficiency
------------------
revealed by any Annual Interim Reconciliation
Statement shall, to the extent such Annual Interim
Reconciliation Statement reveals Operating Profit
Available For Series B Note Interest in excess of
the amount calculated and adjusted as of the end of
each Fiscal Quarter on each Quarterly
Reconciliation Date and distributed during the
applicable Fiscal Year, be remitted by Borrower to
Lender on the Annual Interim Reconciliation Date,
together with the Annual Interim Reconciliation
Statement submitted by Borrower to Lender.
Similarly, any Interest Deficiency revealed by the
Annual Audited Statement shall, to the extent such
Annual Audited Statement reveals Operating Profit
Available For Series B Note Interest in excess of
the amount calculated and adjusted as of the Annual
Interim Reconciliation, be remitted by Borrower to
Lender on the Annual Audited Reconciliation Date.
To the extent that Operating Profit Available
for Series B Note Interest for the Fiscal Year is
less than the total amount of Series B Note
Interest actually paid for the Fiscal Year (or
payable based on the fourth Quarterly
Reconciliation Statement for the Fiscal Year), then
such excess payments together with any excess
payments applied to the Series A Note or Series B
Note pursuant to the priority set forth above shall
be adjusted as appropriate so that the total amount
of Series B Note Interest actually paid for the
Fiscal Year does not exceed the cumulative
Operating Profit Available For Series B Note
Interest for the Fiscal Year as set forth in the
Annual Interim Reconciliation Statement, and as
confirmed or adjusted, as the case may be, in
accordance with the Annual Audited Statement.
In the event that adjustments are required as
aforesaid, any Pari Passu Distributions during
those Fiscal Quarters to Borrower shall be refunded
by Borrower to Lender as appropriate to make such
adjustments and any Pari Passu Distributions made
during those Fiscal Quarters to Lender and
deposited in the Pari Passu Account and not
otherwise disbursed for an Interest Deficiency
during the Fiscal Year shall be refunded by Lender
to Borrower as appropriate to make such
adjustments.
- 7 -
<PAGE>
(e) Application of Pari Passu Distributions received by
---------------------------------------------------
Lender.
------
All Pari Passu Distributions made to Lender with
respect to Priority clause Sixth of Section 6.1(a)(i)
above shall be deposited in an interest bearing account
under the sole dominion and control of Lender (the "Pari
Passu Account") and subject to any prior disbursements
required by Section 6.1 (b) or 6.1 (d) shall be held
therein, and disbursed for application to the Series A
Note and Series B Note with respect to each Fiscal Year
only as follows:
(i) The Aggregate Adjusted Pari Passu
Distribution Amount shall be disbursed from the Pari
Passu Account and applied against the principal of each
of the Series A Note and Series B Note as follows:
(A) [1] as to the Series A Note on the Series
A Note Application Date in a total amount equal to
(x) if pursuant to Clause (A) of Section
6.1(a)(i), 50% of such Aggregate Adjusted Pari
Passu Distribution Amount and (y) if pursuant to
Clause (B) of Section 6.1(a)(i), 25% of such
Aggregate Adjusted Pari Passu Distribution Amount
(the amounts referred to in clauses (x) and (y) of
this Clause A[1], sometimes referred to as the
"Series A PPD Application Amount"); and
[2] the Series A PPD Application Amount
shall be applied against the then outstanding
principal of the Series A Note, in inverse order of
maturity for each Payment Date during the Fiscal
Year, effective as of such Payment Date in the same
order as the Pari Passu Distributions were
deposited into the Pari Passu Account and in an
amount equal to the principal amount of (x) if
pursuant to Clause (A) of Section 6.1(a)(i), 50%
of such Pari Passu Distribution actually deposited
into the Pari Passu Account for such Payment Date
and (y) if pursuant to Clause (B) of Section 6.
1(a)(i), 25% of such Pari Passu Distribution
actually deposited into the Pari Passu Account for
such Payment Date (the amounts referred to in
clauses (x) and (y) of this Clause (i), sometimes
referred to as the "Series A PPD Amount") provided
that if any adjustments were made to the Pari Passu
Account resulting in a disbursement from the Pari
Passu Account for an Operating Profit Deficiency or
refund to the Borrower, the Pari Passu Distribution
actually deposited on any Payment Date shall, for
purposes of determining the Series A PPD Amount, be
deemed to have been reduced by the amount of the
adjustment disbursed with respect to that Payment
Date; provided further that such adjustment amount
will be deemed to have been disbursed from the Pari
Passu Account
- 8 -
<PAGE>
from each of the Pari Passu Distributions deposited
immediately prior to the Payment Date for which the
adjustment is required (in reverse chronological
order) so that in determining the amount of the
Pari Passu Distribution actually deposited for each
Payment Date during a Fiscal Year to determine the
Series A PPD Amount, the last deposited Pari Passu
Distribution shall in each case be deemed to be the
first disbursed for any adjustment.
(B) [1] as to the Series B Note on the Series
B Note Application Date in a total amount equal to
(x) if pursuant to Clause (A) of Section
6.1(a)(i), 50% of such Aggregate Adjusted Pari
Passu Distribution Amount and (y) if pursuant to
Clause (B) of Section 6.1(a)(i), 75% of such
Aggregate Adjusted Pari Passu Distribution Amount
(the amounts referred to in clauses (x) and (y) of
this Clause B[1], sometimes referred to as the
"Series B PPD Application Amount"); and
[2] the Series B PPD Application Amount
shall be applied against the then outstanding
principal of the Series B Note, for each Payment
Date during the Fiscal Year, effective as of the
Quarterly Reconciliation Date for each of the
Payment Dates during the applicable Fiscal Quarter
for which a Pari Passu Distribution is made in the
same order as the Pari Passu Distributions were
deposited into the Pari Passu Account and in an
amount equal to the principal amount of (x) if
pursuant to Clause (A) of Section 6.1(a)(i), 50%
of such Pari Passu Distribution actually deposited
into the Pari Passu Account for the Payment Dates
in each Fiscal Quarter to which the Quarterly
Reconciliation Date corresponds and (y) if pursuant
to Clause (B) of Section 6.1(a)(i), 75% of such
Pari Passu Distribution actually deposited into the
Pari Passu Account for the Payment Dates in each
Fiscal Quarter to which the Quarterly
Reconciliation Date correspond (the amounts
referred to in clauses (x) and (y) of this Clause
(i) (B)[2], sometimes referred to as the "Series B
PPD Amount") provided that if any adjustments were
made to the Pari Passu Account resulting in a
disbursement from the Pari Passu Account for an
Operating Profit Deficiency or refund to the
Borrower, the Pari Passu Distribution actually
deposited on any Payment Date shall, for purposes
of determining the Series B PPD Amount, be deemed
to have been reduced by the amount of the
adjustment disbursed with respect to that Payment
Date; provided further that such adjustment amount
will be deemed to have been disbursed from the Pari
Passu Account from each of the Pari Passu
Distributions deposited immediately prior to the
Payment Date for which the
- 9 -
<PAGE>
adjustment is required (in reverse chronological
order) so that in determining the amount of the
Pari Passu Distribution actually deposited for each
Payment Date during a Fiscal Year to determine the
Series B PPD Amount, the last deposited Pari Passu
Distribution shall in each case be deemed to be the
first disbursed for any adjustment.
provided that with respect to the foregoing Clause
(i), the Series A Note Pari Passu Adjustment
Interest shall accumulate and be applied as a lump
sum credit against the interest on the Series A
Note due and payable on the first Payment Date
immediately following the Series A Note Application
Date (or on the Series A Note Application Date, if
the same is a Payment Date) and the Series B Note
Pari Passu Adjustment Interest shall accumulate and
be applied as a lump sum credit against the Series
B Note Interest due and payable on the first
Payment Date immediately following the Series B
Note Application Date (or on the Series B Note
Application Date, if the same is a Payment Date);
and
(ii) The Annual PPD Interest shall be disbursed
from the Pari Passu Account and applied as follows:
(x) the Annual Series A Note PPD Interest
shall be disbursed from the Pari Passu
Account and applied on, and effective as of,
each Series A Note Application Date as a
lump sum payment against the then
outstanding principal of the Series A Note,
in inverse order of maturity; and
(y) the Annual Series B Note PPD Interest
shall be disbursed from the Pari Passu
Account and applied on, and effective as of,
each Series B Note Application Date as a
lump sum payment against the principal of
the Series B Note,
(f) General. Notwithstanding the foregoing, the
-------
provisions in this Section 6.1 shall not otherwise limit
or otherwise affect the Borrowers obligation to pay the
Series A Note and interest thereon and the principal
amount of the Series B Note and of the Series C Note on
their respective Maturity Dates or any other Loan
Obligations in accordance with the terms of Loan
Documents and this Agreement.
- 10 -
<PAGE>
III. Section 2.5 of the Loan Agreement is hereby modified and
amended, effective as of the Effective Date, by deleting the fourth
sentence of that Section in its entirety and in lieu thereof,
substituting the following new sentence:
There shall be no more than two Borrowings outstanding at any
time, and if such Borrowing is a LIBOR Borrowing, any Floating
LIBOR Borrowing or Adjusted Rate Borrowing, as in effect,
shall not be in an amount greater than the aggregate amount of
principal scheduled to fall due on the Loan during the
Interest Period selected for such LIBOR Borrowing.
2. RATIFICATION. As modified and amended hereby, the Loan Agreement shall
------------
remain in full force and effect including, without limitation, the release
provisions, which are ratified, confirmed and reaffirmed and incorporated herein
as of the Effective Date and which release provisions shall specifically but
without limitation, include AMIRESCOInstitutional, Inc. as part of the Released
Parties (as defined therein). Without limiting the foregoing, Borrower and
Lender acknowledge and agree that the application of the Pari Passu
Distributions prior to the Effective Date which were distributed and applied
against the Series A Note and Series B Note in the manner summarized on the
attached Exhibit A is hereby approved and affirmed as being the proper
---------
distribution and application of those Pari Passu Distributions and no further
adjustments shall be required in connection therewith. In addition and without
limiting the foregoing, Borrower and Lender further acknowledge and agree that
all interest accrued on certain funds held by Lender which include the Pari
Passu Distributions and certain other funds received by Lender in connection
with the Loan for the period prior to the Effective Date (said total interest
amount being referred to as the "Accrued PPD Interest") shall be disbursed on
the first Payment Date after the Effective Date and applied as follows: (a) 50%
of the Accrued PPD Interest shall be applied against the principal of the Series
A Note, in inverse order of maturity and (b) 50% of the Accrued PPD Interest
shall be applied against the principal of the Series B Note.
3. NOVATION. Neither shall Lender intend this First Amendment to be, and this
--------
First Amendment shall not be construed to be, a novation of any of the
obligations owing by the Borrower under or in connection with the Loan
Agreement.
4. ENTIRE AGREEMENT. The Loan Agreement, as amended hereby, together with the
----------------
other Loan Documents, constitute the entire agreement and understanding among
the parties hereto and thereto and supersedes any and all prior agreements and
understandings, oral or written, relating to the subject matter hereof and
thereof.
5. BINDING AGREEMENT. This First Amendment shall be binding upon and inure to
-----------------
the benefit of the parties hereto and their respective successors and assigns
subject, however, to any restrictions on transfer and encumbrance as set forth
in the Loan Documents.
[SIGNATURES ON FOLLOWING PAGES]
-11-
<PAGE>
IN WITNESS WHEREOF, this First Amendment has been duly executed and
sealed by the parties the day and year first above written.
BORROWER:
MARRIOTT DIVERSIFIED AMERICAN
HOTELS, L.P., a Delaware limited
partnership
By: Marriott MDAH One Corporation,
a Delaware corporation,
its sole General Partner
By: /s/ C. G. Townsend
-------------------------------
Name: C. G. Townsend
--------------------------
Title: Vice President
-------------------------
Attest: /s/ Susan Wallace
-------------------------------
Name: Susan Wallace
--------------------------
Title:
-------------------------
LENDER:
------
NATIONSBANK OF GEORGIA,
NATIONAL ASSOCIATION
By: /s/ Matthew B. Walsh
-------------------------------
Name: Matthew B. Walsh
--------------------------
Title: Vice President
-------------------------
[CORPORATE SEAL]
- 12 -
<PAGE>
EXHIBIT A
The Series A Note Pari Passu Distribution to Lender in the amount of 703,535.80
was applied all to the principal balance of the Series A Note effective on April
28, 1994.
The Series B Note Pari Passu Distribution to Lender in the amount of 703,535.81
was applied all to the principal balance of the Series B Note effective on April
25, 1994.
<PAGE>
EXHIBIT 10.c
CASH COLLATERAL AGREEMENT
THIS CASH COLLATERAL AGREEMENT dated as of June 30, 1993 by and between
MARRIOTT DIVERSIFIED AMERICAN HOTELS, L.P. (the "Borrower") and NATIONSBANK OF
GEORGIA, NATIONAL ASSOCIATION, formerly known as The Citizens and Southern
National Bank (the "Lender").
WHEREAS, the Borrower and the Lender entered into that certain Loan
Agreement dated as of February 7, 1990 (the "Existing Loan Agreement");
WHEREAS, the Borrower is in default of its obligations under the
Existing Loan Agreement and the Lender and the Borrower are to restructure such
obligations by amending and restating the Existing Loan Agreement pursuant to
the terms of that certain Amended and Restated Loan Agreement dated as of the
date hereof (as amended, restated, supplemented or otherwise modified from time
to time in accordance with the terms thereof, the "Loan Agreement");
WHEREAS, the Borrower and Marriott International, Inc., formerly known
as Marriott Hotels, Inc. (the "Manager"), entered into that certain Management
Agreement dated as of February 7, 1990 (the "Existing Management Agreement")
pursuant to which the Manager agreed to manage certain hotel properties owned by
the Borrower and which the Borrower assigned to the Lender pursuant to the terms
of that certain Assignment of Management Agreement dated February 7, 1990 (the
"Existing Assignment");
WHEREAS, under the terms of the Existing Management Agreement, the
Manager established deposit accounts (the "Existing FF&E Accounts") into which
has been deposited certain amounts of the Borrower's funds to cover the costs of
FF&E Replacements (as defined in the Existing Management Agreement);
WHEREAS, in connection with the Loan Agreement (a) the Borrower and the
Manager are to amend and restate the terms of the Management Agreement pursuant
to that certain Amended and Restated Management Agreement dated as of the date
hereof (as amended, restated, supplemented or otherwise modified from time to
time in accordance with the terms thereof, the "Management Agreement") and (b)
the Lender, the Borrower and the Manager are to amend and restate the terms of
the Existing Assignment pursuant to that certain Amended and Restated Assignment
of Management Agreement dated as of the date hereof (as amended, restated,
supplemented or otherwise modified from time to time in accordance with the
terms thereof, the "Assignment");
WHEREAS, under the terms of the Assignment and the Loan Agreement, the
Manager (a) is to establish the Concentration Account (as defined below) with
the Lender into which the balances of all of the Borrower's operating accounts
will periodically be transferred and (b) is to combine the Existing FF&E
Accounts into the FF&E Account (as defined below), a deposit account maintained
with the Lender;
1
<PAGE>
WHEREAS, under the terms of the Loan Agreement, the Borrower is to
establish a deposit account with the Lender called the "Debt Service Reserve";
WHEREAS, it is a condition to Lender's restructuring the Borrower's
obligations under the Existing Loan Agreement pursuant to the Loan Agreement
that the Borrower grant to the Lender a security interest in such Concentration
Account, such FF&E Account and such Debt Service Reserve on the terms and
conditions contained in this Cash Collateral Agreement;
NOW, THEREFORE, to induce the Lender to enter into the Loan Agreement,
and for other good and valuable consideration, the receipt and sufficiency of
which the Borrower hereby acknowledges, the Borrower hereby agrees as follows:
Section 1. Pledge. The Borrower hereby grants to the Lender a security
------
interest in, and pledges and assigns to the Lender, all of the Borrower's right,
title and interest in and to the following, whether now owned or hereafter
acquired and whether now existing or hereafter arising (the "Collateral"): (a)
(i) the Borrower's deposit account number 000311472 with the Lender (the
"Concentration Account"), (ii) the Borrower's deposit account number 000311456
with the Lender (the "FF&E Account") and (iii) the Borrower's deposit account
number 000311464 with the Lender (the "Debt Service Reserve"; each of the
Concentration Account, the FF&E Account and the Debt Service Reserve an
"Account" and collectively, the "Accounts"); (b) any and all certificates,
instruments and securities (whether certificated or not) from time to time
representing or evidencing any of the Accounts; (c) all Permitted Investments
(as hereinafter defined) and all notes, certificates of deposit, other
instruments and securities (whether certificated or not) from time to time
representing or evidencing the Permitted Investments; (d) all notes,
certificates of deposit, other instruments and securities (whether certificated
or not) from time to time hereafter delivered to or otherwise possessed or
controlled by the Lender for or on behalf of the Borrower in substitution for or
in addition to any or all of the Collateral; (e) all interest, dividends, cash,
earnings, profits, instruments and other property from time to time received,
receivable or otherwise distributed in respect of any or all of the Collateral
(collectively, "Earnings"), or in exchange therefor; and (f) to the extent not
covered by clauses (a) through (e) above, all proceeds of any of the foregoing
Collateral.
Section 2. Security. This Agreement secures the payment and performance
--------
of (a) all of the principal and interest owing on each of the Notes; (b) all of
the Borrower's other Loan Obligations, whether for principal, interest, fees,
expenses or otherwise; (c) all obligations of the Borrower now or hereafter
existing under this Agreement; (d) any and all extensions, renewals,
modifications, amendments or substitutions of the foregoing; and (e) all costs
and expenses, including without limitation, the Lender's reasonable attorneys'
fees, that are incurred by the Lender in the enforcement of any obligation of
the Borrower hereunder or under any other Loan Document (all such obligations
collectively, the "Obligations")
2
<PAGE>
Section 3. Investment. Subject to the other terms and conditions
----------
hereof, the Lender will, so long as no Event of Default shall have occurred and
be continuing, from time to time (a) invest funds on deposit in the Debt Service
Reserve, the FF&E Account and the Concentration Account and (b) invest and
reinvest Earnings, in each case, in the types of investments described on
Schedule I (collectively, "Permitted Investments"), as the Borrower may select
and notify to the Lender in writing; provided, however, funds on deposit in the
-------- -------
Debt Service Reserve, and all Earnings thereon, may only be invested in the
types of Permitted Investments described in paragraphs 1 through 3 on such
Schedule I. Notwithstanding the foregoing, the Lender shall only invest funds on
deposit in the Accounts and Earnings thereon in Permitted Investments in which
the Lender has a perfected security interest subject only to Liens acceptable to
the Lender in its sole discretion. Any Earnings which are not so invested or
reinvested in Permitted Investments shall be deposited and held by the Lender in
the Account to which such Earnings apply. Permitted Investments from time to
time purchased with funds from any Account shall, for purposes of this
Agreement, constitute part of the funds held in such Account in amounts equal to
the respective outstanding principal amounts of such Permitted Investments.
Section 4. Debt Service Reserve. On the Closing Date, the Borrower will
--------------------
deposit $3,000,000 in immediately available funds into the Debt Service Reserve.
Except for (a) Earnings on the Debt Service Reserve and (b) any amounts which
the Borrower is required to deposit in the Debt Service Reserve pursuant to
Section 6. 1(a)(i) of the Loan Agreement, no other funds shall be deposited into
the Debt Service Reserve and the Borrower shall not commingle funds on deposit
in the Debt Service Reserve with its other funds or funds of any other Person.
The Borrower shall use amounts on deposit in the Debt Service Reserve solely for
the purpose of satisfying its payment obligations under Section 6.1(b) of the
Loan Agreement. Accordingly, upon at least two Business Day's prior written
notice to the Lender, the Borrower may request that the Lender withdraw from the
Debt Service Reserve a specified amount of funds to be applied to such
obligations in accordance with Section 6.1(b) of the Loan Agreement. In the
event the Borrower fails to make any such request, then the Lender may, without
any notice to or consent from the Borrower, withdraw from the Debt Service
Reserve the appropriate amount to be withdrawn as provided in Section 6.1(b) of
the Loan Agreement. No funds may be withdrawn from the Debt Service Reserve
except (i) as contemplated by Section 6.1(b) of the Loan Agreement and (ii) the
Borrower may, from time to time so long as no Event of Default shall have
occurred and be continuing, withdraw Earnings on the Debt Service Reserve. Upon
indefeasible payment in full of the entire principal balance of the Series A
Note and the Series B Note, together with all accrued and unpaid interest
thereon, the Borrower may withdraw all amounts on deposit in the Debt Service
Reserve and terminate such Account.
Section 5. FF&E Account. On the Closing Date, the Borrower shall cause
------------
all FF&E Reserves (as defined in the Existing Management Agreement) to be
deposited into the FF&E Account. Except for Earnings on the FF&E Account, and
except as contemplated by the Management Agreement and the Assignment with
respect to the
3
<PAGE>
FF&E Account, no other funds shall be deposited into the FF&E Account and the
Borrower shall not commingle funds on deposit in the FF&E Account with its other
funds or funds of any other Person. The Borrower and the Manager agree that
funds on deposit in the FF&E Account (including Earnings thereon) may only be
used for the purpose of payment of the costs of FF&E Replacements (as defined in
the Management Agreement) as contemplated by Section 7.02 of the Management
Agreement and by the Assignment. Only the Manager shall have authority to
withdraw any funds on deposit in the FF&E Account.
Section 6. Concentration Account. On the Closing Date, the Borrower
---------------------
shall deposit into the Concentration Account the entire balance of funds held in
the Borrowers account (after liquidating all investments held therein)
maintained at Merrill Lynch under number 3206101 and shall close and terminate
such account. After the Closing Date, the Borrower shall, from time to time,
cause the balance of each of its operating accounts to be deposited into the
Concentration Account. The Borrower shall deposit, or shall cause the deposit
of, all funds generated by, or otherwise received in connection with, its
business operations into its operating accounts. The Borrower shall not
commingle any funds on deposit in any of its operating accounts with its other
funds or funds of any other Person. Except for Earnings on the Concentration
Account, no funds shall be deposited into the Concentration Account other than
funds derived from the Borrower's operations and funds from any Pari Passu
Distribution to the Borrower. The Borrower shall not commingle funds on deposit
in the Concentration Account with its other funds or funds of any other Person.
Section 7. Adverse Claims. If at any time the Lender determines that
--------------
any funds held in the Debt Service Reserve or the FF&E Account are subject to
any right or claim of any Person other than the Lender, the Borrower will,
forthwith upon demand by the Lender, pay to the Lender, as additional funds to
be deposited and held in such Account, an amount equal to the amount of funds in
such Account subject to such right or claim.
Section 8. Re-Establishment of FF&E Account. If the Lender or any
--------------------------------
affiliate of the Lender, shall acquire title to any Hotel by way of foreclosure,
deed in lieu of foreclosure or other similar remedy, the Lender agrees to
establish an account for such Hotel's FF&E Reserve (as defined in the Management
Agreement) and deposit therein the amount of the FF&E Account allocable to such
Hotel under Section 5(b) of the Assignment.
Section 9. Remedies. Subject to the provisions of Section 8 with
--------
respect to the FF&E Account, after the occurrence of an Event of Default, the
Lender may, at any time or from time to time, after selling, if necessary, any
Permitted Investments, apply funds then held in any of the Accounts to the
payment of any of the Obligations, in such order as the Lender may elect.
Notwithstanding the foregoing or any term of any Loan Document to the contrary,
after the occurrence of an Event of Default, the Lender may apply the balance of
funds on deposit in the Debt Service Reserve to the Borrower's obligations then
owing under the Series C Note. The Borrower agrees that, to the extent notice of
sale of
4
<PAGE>
any Permitted Investment shall be required by law, at least five Business Days'
notice to the Borrower of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable
notification. The Lender may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it will be so
adjourned. In addition to the rights and remedies afforded the Lender herein and
in the other Loan Documents, the Lender shall have all rights and remedies of a
secured party under the Uniform Commercial Code as enacted in the State of
Georgia, and otherwise available at law or in equity. In addition to the
foregoing and not by way of limitation of any such rights, the Lender is hereby
authorized by the Borrower, at any time or from time to time after the
occurrence of an Event of Default, without notice to the Borrower or to any
other Person, any such notice being hereby expressly waived, to set-off and to
appropriate and to apply any and all balances in the Accounts against and on
account of any of the Obligations, irrespective of whether or not the Lender
shall have declared the Loan or any of the other Obligations to be due and
payable, and although any such obligations shall be contingent or unmatured.
Section 10. Withdrawals. Upon and after the occurrence of an Event of
-----------
Default, no funds may be withdrawn by the Borrower or the Manager from any of
the Accounts.
Section 11. No Transfers or Liens. The Borrower shall not (a) sell or
---------------------
otherwise dispose of any interest in any of the Collateral or (b) create or
permit to exist any Lien upon or with respect to any of Collateral, except as
provided in or contemplated by this Agreement.
Section 12. Earnings Not Gross Revenues. Earnings on the Accounts shall
---------------------------
not constitute "Gross Revenues" as defined in, and for purposes of, the
Management Agreement or the Loan Agreement.
Section 13. Standard of Care. The Lender shall exercise reasonable care
----------------
in the custody and preservation of any funds held in any Account and shall be
deemed to have exercised such care if such funds are accorded treatment
substantially equivalent to that which the Lender accords its own property, it
being understood that the Lender shall not have any responsibility for taking
any necessary steps to preserve rights against any parties with respect to any
such funds.
Section 14. Amendments. Etc. No amendment or waiver of any provision of
----------
this Agreement nor consent to any departure by the Borrower herefrom shall in
any event be effective unless the same shall be in writing and signed by the
Lender and the Borrower, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
Section 15. Notices. Etc. All notices and other communications provided
------------
for hereunder shall be giving in accordance with, and subject to the terms of,
Section 11. 1 of the Loan Agreement.
5
<PAGE>
Section 16. No Waiver: Remedies. No failure on the part of the Lender to
-------------------
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
Section 17. Costs. Expenses and Taxes. The Borrower agrees to pay on
-------------------------
demand all reasonable costs and expenses of the Lender, including without
limitation the reasonable fees and out-of-pocket expenses of counsel for the
Lender, in connection with (a) the filing, recording, and administration of this
Agreement and any other documents which may be delivered in connection with this
Agreement; (b) the administration of, the custody or preservation of, or the
sale of, collection from, or other realization upon, any of the Collateral; (c)
the exercise or enforcement of any of the rights of the Lender hereunder or (d)
the failure by the Borrower to perform or observe any of the provisions hereof
In addition, the Borrower shall pay any and all stamp and other taxes and fees
payable or determined to be payable in connection with the execution, delivery,
filing and recording of this Agreement or any such other documents, and agrees
to save the Lender harmless from and against any and all liabilities with
respect to or resulting from any delay in paying or omission to pay such taxes
and fees.
Section 18. Further Assurances. The Borrower shall, at its sole cost
------------------
and expense, take all action that may be necessary or desirable in the
discretion of the Lender, so as at all times to maintain the validity,
perfection, enforceability and priority of the Lender's Lien in the Collateral,
or to enable the Lender to exercise or enforce its rights hereunder, including
without limitation, executing and delivering financing statements, pledges,
designations, hypothecation's, notices and assignments, in each case in form and
substance satisfactory to the Lender. The Lender is hereby authorized to execute
and file in all necessary and appropriate jurisdictions (as determined by the
Lender) one or more financing statements (or any other document or instrument
referred to in this Section) in the name of the Borrower and to sign the
Borrower's name thereto if the Borrower shall fail to deliver any such financing
statement (or such other document or instrument) to the Lender within two
Business Days of the Lender's request therefor.
Section 19. Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of Georgia.
Section 20. Binding Effect. This Agreement shall be binding upon and
--------------
inure to the benefit of the Borrower and the Lender, and their respective
successors and assigns.
Section 21. Severability. Any provision of this Agreement which is
------------
prohibited, unenforceable or not authorized in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or nonauthorization without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of such
provision in any other jurisdiction.
6
<PAGE>
Section 22. Termination. This Agreement shall terminate upon the
-----------
indefeasible payment in full of all of the principal owing under, together with
all accrued interest on, the Series A Note and the Series B Note and all other
Obligations, except for Obligations owing under the Series C Note.
Section 23. Headings. Section headings in this Agreement are included
--------
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
Section 24. Effective Date. This Agreement shall be deemed effective on
--------------
and as of the Effective Date.
Section 25. Defined Terms: References to Agreements. Capitalized terms
---------------------------------------
not otherwise defined herein are used herein with the respective definitions
given them in the Loan Agreement. Unless otherwise defined herein or in the Loan
Agreement, terms defined in Article 9 of the Uniform Commercial Code as enacted
in the State of Georgia are used herein as therein defined. References in this
Agreement to any document, instrument or agreement (a) shall include all
exhibits, schedules and other attachments thereto, (b) shall include all
documents, instruments or agreements issued or executed in replacement thereof;
and (c) shall mean such document, instrument or agreement, or replacement or
predecessor thereto, as amended, modified or supplemented from time to time and
in effect at any given time.
7
<PAGE>
IN WITNESS WHEREOF, the Borrower has caused this Cash Collateral
Agreement to be duly executed and delivered under seal as of the date first
above written.
MARRIOTT DIVERSIFIED
AMERICAN HOTELS, L.P.
By: Marriott MDAH One Corporation, its General
Partner
By: /s/ Jeffrey P. Mayer
---------------------------
Name: Jeffrey P. Mayer
----------------------
Title: Vice-President
---------------------
Agreed and Accepted
MARRIOTT INTERNATIONAL, INC
By: /s/ Raymond G. Murphy
----------------------------
Name: Raymond G. Murphy
-----------------------
Title: ASSISTANT TREASURER
----------------------
[Signatures Continued on Following Page]
<PAGE>
[Signature Page to Cash Collateral Agreement dated as of June 30. 1993]
Agreed and Accepted:
NATIONSBANK OF GEORGIA,
NATIONAL ASSOCIATION
By: AMRESCO-INSTITUTIONAL, INC.
a Delaware corporation, its
authorized agent
By: /s/ Mark S. Cagley
--------------------------------
Name: Mark S. Cagley
---------------------------
Title: Authorized Representative
<PAGE>
SCHEDULE I
Permitted Investments
---------------------
1. Direct obligations of the United States of America for the payment
of which the full faith and credit of the United States of America is pledged,
or obligations issued by a Person controlled or supervised by and acting as an
instrumentality of the United States of America, the payment of the principal
of, premium, if any, and interest on which is fully and unconditionally
guaranteed as full faith and credit obligations by the United States of America
(collectively, "Government Obligations");
2. Certificates of deposit issued by the Lender;
3. Commercial Paper rated Al by Standard & Poor's Corporation or P1 by
Moody's Investors Service, Inc. ("Commercial Paper");
4. Repurchase agreements of United States national or state banks
having capital reserves in excess of $500,000,000 having terms of one year or
less or any repurchase agreement that is collateralized to the extent of not
less than 100% of the principal amount thereby by Government Obligations
(collectively "Repos");
5. Any money market or mutual fund purchased on behalf of the Borrower
by the Lender or any of its Affiliates and comprised entirely of Government
Obligations, Commercial Paper or Repos;
6. Any other investment purchased on behalf of the Borrower by the
Lender or any of its Affiliates having similar investment quality as any of the
foregoing investments in the reasonable judgement of the Lender; and
7. Such other investments as are acceptable to the Lender.
- 10 -
<PAGE>
EXHIBIT 10.d
EXECUTION COPY
FIRST AMENDMENT TO
CASH COLLATERAL AGREEMENT
THIS FIRST AMENDMENT TO CASH COLLATERAL AGREEMENT dated as of July 22,
1994 by and between MARRIOTT DIVERSIFIED AMERICAN HOTELS, L.P. (the "Borrower")
and NATIONSBANK OF GEORGIA, NATIONAL ASSOCIATION, formerly known as The Citizens
and Southern National Bank (the "Lender").
WHEREAS, the Borrower and the Lender entered into that certain Amended
and Restated Loan Agreement dated as of June 30, 1993 (the "Loan Agreement");
WHEREAS, in connection with the Loan Agreement, the Borrower and the
Lender entered into that certain Cash Collateral Agreement dated as of June 30,
1993 (the "Cash Collateral Agreement"); and
WHEREAS, the Borrower and the Lender desire to amend the Cash
Collateral Agreement to modify the terms thereof relating to deposits into and
withdrawals from the FF&E Account to permit funding of the FF&E Account to be on
a net basis, and for other purposes.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
hereto do hereby agree as follows:
Section 1. Specific Amendments to Cash Collateral Agreement.
------------------------------------------------
(a) The Cash Collateral Agreement is amended by deleting Section 5
thereof in its entirety and substituting in lieu thereof the following:
"Section 5. FF&E Account. (a) On the Closing Date, the
------------
Borrower shall cause all FF&E Reserves (as defined in the Existing
Management Agreement) to be deposited into the FF&E Account. Except for
Earnings on the FF&E Account, and except as contemplated by the
Management Agreement and the Assignment with respect to the FF&E
Account, no other funds shall be deposited into the FF&E Account and
the Borrower shall not commingle funds on deposit in the FF&E Account
with its other funds or funds of any other Person. The Borrower and the
Manager agree that funds on deposit in the FF&E Account (including
Earnings thereon) may only be used for the purpose of payment of the
costs of FF&E Replacements (as defined in the Management Agreement) as
contemplated by Section 7.02 of the Management Agreement and by the
Assignment.
(b) Only the Lender shall have authority to withdraw any
funds on deposit in the FF&E Account. So long as no Event of Default
shall have occurred and be in
<PAGE>
existence, the Lender will disburse to the Manager funds on deposit in
-----------------------------------------------------------
the FF&E Account upon by the Lender of (i) a written request (an "FF&E
----------------------------------------------------------------------
Account Disbursement Request") in the form of Annex I attached hereto
----------------------------------------------------------------------
purportedly signed by (A) the manager or the controller of the Hotel
----------------------------------------------------------------------
thereby requesting a disbursement from the FF&E Account and (B) an
------------------------------------------------------------------
officer of the Manager designated by the Manager as being authorized to
-----------------------------------------------------------------------
sign an FF&E Account Disbursement Request pursuant to the most recent
---------------------------------------------------------------------
written notice (a "Manager Representative Authorization") to the Lender
-----------------------------------------------------------------------
in the form of Annex II attached hereto which notice identifies no more
-----------------------
than four such officers of the Manager and (ii) the written approval of
an authorized representative of the Lender designated by the Lender
pursuant to a written notice to the Manager in the form of Annex III
attached hereto as a signatory with respect to the FF&E Account. The
Lender shall make the amount of any such disbursement permitted
hereunder available to the Manager within three Business Days of
--------------------------
receipt by the Lender of the applicable FF&E Account Disbursement
Request. The Lender shall be entitled to rely entirely and conclusively
upon any and all information, statements and other matters set forth in
any FF&E Account Disbursement Request or Manager Representative
Authorization received by it.
(c) Provided the Lender acts in accordance with the
immediately preceding subsection (b), each of the Borrower and Manager
jointly and severally agrees to indemnify and hold the Lender harmless
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses, or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by
or asserted against the Lender in any way relating to or arising out of
withdrawals from the FF&E Account in the manner described in this
Section, or any action taken or omitted by the Lender in conformity
with this Section (including, without limitation, reasonable attorney's
fees). The effectiveness of this subsection (c) shall survive the
termination of this Agreement."
(b) The Cash Collateral Agreement is amended by adding as Annexes
I and II thereto, respectively, Annexes I and II attached hereto.
Section 2. Conditions Precedent. The effectiveness of this First
--------------------
Amendment is subject to the condition precedent that the Lender receive each of
the following, in form and substance satisfactory to the Lender.
(a) A First Amendment to Amended and Restated Assignment of
Management Agreement dated as of the date hereof duly executed and delivered by
the Borrower and the Manager;
(b) The initial Manager Representative Authorization duly
completed by the Manager;
(c) Evidence that all appropriate administrative actions necessary
to remove the current signatories to the FF&E Account have been taken, including
without limitation, modification or termination of current signature cards for
the FF&E Account; and
- 2 -
<PAGE>
(d) Such other documents, instruments and agreements as the Lender
may reasonably request.
Section 3. Representations.
---------------
(a) Authorization. The Borrower represents to the Lender that the
-------------
Borrower has the right and power, and has taken all necessary action to
authorize it, to execute and deliver this First Amendment and to perform the
Cash Collateral Agreement, as amended by this First Amendment, in accordance
with its terms. This First Amendment has been duly executed and delivered by the
duly authorized officers of the Borrower, and each of this First Amendment and
the Cash Collateral Agreement, as amended by this First Amendment, is a legal,
valid and binding obligation of the Borrower enforceable against the Borrower in
accordance with its terms.
(b) Compliance with Laws, etc. The Borrower represents to the Lender
-------------------------
that the execution and delivery of this First Amendment, and the performance of
the Cash Collateral Agreement, as amended by this First Amendment, in accordance
with its terms do not and will not, by the passage of time, the giving of notice
or otherwise: (i) require the prior approval of any Governmental Authority or
violate any provision of any constitution, statute, rule, regulation, ordinance
or order of any Governmental Authority or any decree of any court, tribunal or
arbitrator applicable to the Borrower; (ii) conflict with, result in a breach of
or constitute a default under the articles of incorporation or by-laws of the
Borrower, or any indenture, agreement or other instrument to which the Borrower
is a party or by which it or any of its properties may be bound; or (iii) result
in or require the creation or imposition of any Lien upon or with respect to any
property now owned or hereafter acquired by the Borrower other than in favor of
the Lender.
Section 4. References to the Cash Collateral Agreement. Each reference
-------------------------------------------
to the Cash Collateral Agreement in any of the Loan Documents shall be deemed to
be a reference to the Cash Collateral Agreement, as amended by this First
Amendment.
Section 5. Expenses. The Borrower shall reimburse the Lender upon
--------
demand for the costs and expenses (including attorneys' fees) incurred by the
Lender in the preparation, negotiation and execution of this First Amendment and
the other agreements and documents executed and delivered in connection herewith
in an amount not to exceed $2,000.
Section 6. Benefits. This First Amendment shall be binding upon and
--------
shall inure to the benefit of the parties hereto and their respective successors
and assigns.
Section 7. GOVERNING LAW. THIS FIRST AMENDMENT SHALL BE GOVERNED BY,
-------------
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA.
Section 8. Effect. This First Amendment shall be effective as of the
------
date hereof This First Amendment shall not be construed to constitute a waiver
of any Default or Event of Default occurring or in existence prior to the date
hereof. Except as expressly herein amended, the terms and conditions of the Cash
Collateral Agreement shall remain in full force and effect.
- 3 -
<PAGE>
Section 9. Counterparts. This First Amendment may be executed in any
------------
number of counterparts, each of which shall be deemed to be an original and
shall be binding upon all parties, their successors and assigns.
Section 10. Definitions. Capitalized terms not otherwise defined herein
-----------
are used herein with the respective definitions given them in the Loan
Agreement.
[Signatures on Following Page]
- 4 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment
to Cash Collateral Agreement to be executed under seal by their duly authorized
officers as of the date first above written.
MARRIOTT DIVERSIFIED AMERICAN
HOTELS, L.P.
By: Marriott MDAH One Corporation, its General
Partner
By /s/ C.G. Townsend
----------------------------------------
Name: C.G. Townsend
-----------------------------------
Title: Vice President
----------------------------------
NATIONSBANK OF GEORGIA, NATIONAL
ASSOCIATION
By: AMRESCO-INSTITUTIONAL, INC., a
Delaware corporation, its authorized
agent
By: /s/ James R. Bradley
---------------------------------------
Name: James R. Bradley
----------------------------------
Title: Authorized Representative
Agreed and Acknowledged:
MARRIOTT INTERNATIONAL, INC.
By /s/ Randall L. Frazier
-----------------------------------
Name: Randall L. Frazier
------------------------------
Title: Vice President
-----------------------------
- 5 -
<PAGE>
ANNEX I
FORM OF FF&E ACCOUNT DISBURSEMENT REQUEST
NationsBank of Georgia, National Association
c/o AMRESCO-Institutional, Inc.
101 North Tryon Street, NC1-001-13-20
Charlotte, North Carolina, 28255
Attention: __________________
Re: Cash Collateral Agreement dated as of June 30, 1993, as amended (the
"Cash Collateral Agreement") by and between Marriott Diversified
American Hotels, L.P. and NationsBank of Georgia, National
Association (the "Lender")
Ladies and Gentlemen:
The undersigned, the [manager][controller] of the Hotel located in
_____________________________, on behalf of the Manager hereby requests that the
Lender disburse $____________ from the FF&E Account to the Manager in accordance
with the payment instructions set forth below. The undersigned certifies that
the amount requested will be used by the Manager to ____________________________
Payment Instructions: _________________________________
_________________________________
Terms not otherwise defined herein are used herein with the respective
meanings given them in, or by reference in, the Cash Collateral Agreement.
Very truly yours,
-----------------------------------------
Name:
------------------------------------
Title: [Manager][Controller] of the
above Hotel.
Acknowledged and Approved: Acknowledged and Approved:
MARRIOTT INTERNATIONAL, INC NATIONSBANK OF GEORGIA,
NATIONAL ASSOCIATION
By: By: AMRESCO-INSTITUTIONAL, INC., a
--------------------------------- Delaware corporation, its authorized
Name: agent
----------------------------
Title:
---------------------------
By:
-----------------------------------
Name:
------------------------------
Title: Authorized Representative
<PAGE>
ANNEX II
FORM OF MANAGER REPRESENTATIVE AUTHORIZATION
NationsBank of Georgia, National Association
c/o AMRESCO-Institutional, Inc.
101 North Tryon Street, NC1-001-13-20
Charlotte, North Carolina, 28255
Attention: _____________________
Re: Cash Collateral Agreement dated as of June 30, 1993, as amended (the
"Cash Collateral Agreement") by and between Marriott Diversified
American Hotels, L.P. and NationsBank of Georgia, National
Association (the "Lender")
Ladies and Gentlemen:
The Manager hereby certifies to the Lender that the Manager has
designated the officers of the Manager listed below as the only Manager
Authorized Representatives authorized to acknowledge and approve an FF&E Account
Disbursement Request on behalf of Marriott International, Inc.. The Manager
hereby further certifies to the Lender that such officers currently hold the
respective titles set forth beside their names below and their signatures set
forth beside their respective titles are their genuine signatures.
Name Title Signature
---- ----- ---------
David S. Cannon Vice President /s/ David S. Cannon
----------------- ---------------- ---------------------
Bryan J. Flanagan Vice President /s/ Bryan J. Flanagan
----------------- ---------------- ---------------------
Paul A. Flynn Vice President /s/ Paul A. Flynn
----------------- ---------------- ---------------------
Terms not otherwise defined herein are used herein with the respective
meanings given them in, or by reference in, the Cash Collateral Agreement.
Very truly yours,
MARRIOTT INTERNATIONAL INC.
By /s/ Carol Bruff
---------------------------------------
Name: Carol Bruff
----------------------------------
Title: [Assistant] Secretary
<PAGE>
ANNEX III
FORM OF LENDER REPRESENTATIVE AUTHORIZATION
Marriott International, Inc.
10400 Fernwood Road
Bethesda, Maryland 20058
Attention: ____________________
Re: Cash Collateral Agreement dated as of June 30, 1993, as amended (the
"Cash Collateral Agreement") by and between Marriott Diversified
American Hotels, L.P. and NationsBank of Georgia, National
Association (the "Lender")
Ladies and Gentlemen:
The Lender hereby certifies to the Manager that the Lender has
designated the individuals listed below, in the order so listed, as the only
representatives of the Lender authorized to approve an FF&E Account Disbursement
Request on behalf of the Lender.
Name Title Signature
---- ----- ---------
James R. Bradley Principal /s/ James R. Bradley
----------------- ---------------- ---------------------
Michael E. Mooney Director /s/ Michael E. Mooney
----------------- ---------------- ---------------------
G. Mark Little Principal /s/ G. Mark Little
----------------- ---------------- ---------------------
Terms not otherwise defined herein are used herein with the respective
meanings given them in, or by reference in, the Cash Collateral Agreement.
Very truly yours,
NATIONSBANK OF GEORGIA, NATIONAL
ASSOCIATION
By: AMRESCO-INSTITUTIONAL, INC., a
Delaware corporation, its authorized
agent
By: /s/ James R. Bradley
----------------------------------
Name: James R. Bradley
-----------------------------
Title: Authorized Representative
<PAGE>
EXHIBIT 10.e
REAFFIRMATION OF FORECLOSURE GUARANTEE
THIS REAFFIRMATION OF FORECLOSURE GUARANTEE dated as of June 30, 1993,
executed and delivered by MARRIOTT MDAH ONE CORPORATION (the "Guarantor") in
favor of NATIONSBANK OF GEORGIA, NATIONAL ASSOCIATION, formerly known as The
Citizens and Southern National Bank (the "Lender").
WHEREAS, Marriott Diversified American Hotels, L.P. (the "Borrower")
and the Lender entered into that certain Loan Agreement dated as of February 7,
1990 (the "Existing Loan Agreement");
WHEREAS, in connection with the Existing Loan Agreement, the Guarantor
executed and delivered that certain Foreclosure Guarantee dated as of February
7, 1990 (the "Guaranty") in favor of the Lender, a copy of which is attached
hereto as Exhibit A, providing for the Guarantor's guaranty of collection of
certain indebtedness and obligations of the Borrower owing to the Lender;
WHEREAS, the Borrower is in default of its obligations under the
Existing Loan Agreement and the Lender and the Borrower are to restructure such
obligations by amending and restating the Existing Loan Agreement pursuant to
the terms of that certain Amended and Restated Loan Agreement dated as of the
date hereof (as amended, restated, supplemented or otherwise modified from time
to time in accordance with the terms thereof, the "Loan Agreement");
WHEREAS, the Guarantor has reviewed the Loan Agreement; and
WHEREAS, it is a condition to Lender's restructuring such obligations
pursuant to the Loan Agreement that the Guarantor execute and deliver this
Reaffirmation of Guaranty;
NOW, THEREFORE, to induce the Lender to enter into the Loan Agreement,
and for other good and valuable consideration, the receipt and sufficiency of
which the Guarantor hereby acknowledges, the Guarantor hereby agrees as follows:
Section 1. Amendment. The Guaranty is hereby amended by deleting the
---------
symbols and numbers "$128,000,000" from Section 3 thereof, and substituting in
its place the symbols and numbers "$137,336,857".
Section 2. Reaffirmation. The Guarantor hereby reaffirms its continuing
-------------
obligations to the Lender under the Guaranty, as amended hereby, and agrees that
neither the transactions contemplated by the Loan Agreement, nor any future
agreements or arrangements whatsoever by the Lender with the Borrower relating
to the Loan Agreement, any of the Loan Documents, or any collateral thereunder,
shall in any way
<PAGE>
affect the validity and enforceability of the Guaranty, as amended hereby, or
reduce, impair or discharge the obligations of the Guarantor thereunder.
Section 3. Subrogation. The Guarantor hereby forever waives and
-----------
releases any and all claims or causes of action the Guarantor may have against
the Borrower arising by reason of any payment by the Guarantor to the Lender
pursuant to the Guaranty, as amended hereby, whether such claim or cause of
action arises by way of any common-law right of subrogation, by way of any other
applicable law or statutes, or by way of any written or oral agreement between
the Guarantor and the Borrower. The foregoing waiver may not be revoked by the
Guarantor without the prior, written consent of the Lender.
Section 4. References. The Guarantor agrees that each reference to the
----------
Existing Loan Agreement in the Guaranty, as amended hereby, or any of the other
Loan Documents shall be deemed to be a reference to the Loan Agreement, and as
the Loan Agreement may from time to time be further amended, supplemented,
restated or otherwise modified in accordance with the terms thereof.
Section 5. Defined Terms. Terms not otherwise defined herein are used
-------------
herein as defined in the Loan Agreement.
Section 6. Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of Georgia.
Section 7. Effective Date. This Agreement shall be deemed effective on
--------------
and as of the Effective Date.
[Signature on Next Page]
- 2 -
<PAGE>
IN WITNESS WHEREOF, the Guarantor has executed and delivered this
Reaffirmation of Foreclosure Guarantee under seal as of the date first written
above.
MARRIOTT MDAH ONE CORPORATION
By: /s/ Jeffrey P. Mayer
----------------------------------
Name: Jeffrey P. Mayer
Title: Vice-President
<PAGE>
EXHIBIT A TO REAFFIRMATION OF FORECLOSURE GUARANTEE
WPPWRC/199/012990
FORECLOSURE GUARANTEE
---------------------
THIS GUARANTEE, made as of the 7th day of February, 1990, by MARRIOTT
MDAB ONE CORPORATION, a corporation organized under the laws of the State of
Delaware, having an office at 10400 Fernwood Road, Bethesda, Maryland 20058 (the
"Guarantor"), in favor of The Citizens and Southern National Bank, a national
banking institution having an office at 35 Broad Street, Atlanta, Georgia 30303
(the "Lender").
W I T N E S S E T H:
WHEREAS, MARRIOTT DIVERSIFIED AMERICAN HOTELS, L.P., a limited
partnership organized under the laws of the State of Delaware (the "Borrower"),
and the Lender have entered into a Loan Agreement of even date herewith (the
"Loan Agreement"), providing for the Lender to make a loan ("Loan") in the
principal amount of $128,000,000 evidenced by a promissory note (the "Note") of
even date herewith in said amount; and
WHEREAS, the Guarantor is the sole general partner of the Borrower; and
WHEREAS, the Guarantor desires that the Lender make the Loan, the
Guarantor expecting to derive benefits, directly or indirectly, from the
proceeds of the Loan;
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Guarantor does hereby represent, covenant, warrant and agree with the Lender as
follows:
1. Loan Documents. The Guarantor acknowledges that it is fully familiar
--------------
with the Loan Agreement, and all, other Loan Documents (as defined in the Loan
Agreement).
2. Defined Terms. Capitalized terms used herein without definition
-------------
which are defined in the Loan Agreement shall have the same meaning when used
herein as is given to such terms in the Loan Agreement.
3. Foreclosure Obligations. The Guarantor does hereby irrevocably and
-----------------------
unconditionally guaranty the collection by the Lender holding the Note of, and
does hereby agree to pay to the Lender immediately upon demand following a
foreclosure of all of the Mortgages or exercise of the power of sale thereunder,
the amount, if any, by which (i) the lesser of (a) $25,000,000 or (b) the
product of $25,000,000 multiplied by a fraction the numerator of which is the
then outstanding principal amount of
<PAGE>
the Loan and the denominator of which is $128,000,000 exceeds (ii) the total
amount received by the Lender with respect to the Loan upon foreclosure of the
Mortgages or exercise of the power of sale thereunder ("Foreclosure
Obligations").
4. Guarantee Absolute. This Guarantee is an absolute, unconditional,
------------------
present and continuing guarantee of collection. No setoff, counterclaim,
reduction or diminution of an obligation, or any defense of any kind or nature
(other than (a) performance by the Guarantor of the Foreclosure Obligations or
(b) receipt by the Lender of a total amount equal to or greater than $25,000,000
with respect to the Loan upon foreclosure of the Mortgages or exercise of the
power of sale thereunder) which the Guarantor has or may have with respect to a
claim under this Guarantee, shall be available hereunder to the Guarantor
against the Lender. Each and every default in any of the Foreclosure Obligations
shall give rise to a separate cause of action hereunder, and separate suits may
be brought hereunder against the Guarantor as each cause of action arises.
5. Time, Method and Place of Payment. All payments of the Guarantor
---------------------------------
under or by virtue of this Guarantee shall be made in lawful money of the United
States of America and in immediately available funds, to the Lender at its
offices as specified in the Loan Agreement, or at such other place or places as
the Lender may hereafter designate in writing. Any payments hereunder to be made
by Guarantor will be due and payable within ten (10) business days of notice
from the Lender stating the amount of the Foreclosure Obligations, as determined
in accordance with the provisions of Paragraph 3 hereof.
6. Waivers. Except as expressly provided herein to the contrary, the
-------
Guarantor does hereby waive notice of acceptance of this Guarantee, notice of
any liability to which it may apply, notice and proof of reliance by the Lender
upon this Guarantee, presentment and demand for payment, notice of dishonor,
protest and notice of protest or compliance with the terms and provisions of any
of the Loan Documents, or of non-performance or non-observance thereof. The
Guarantor hereby waives any and all legal requirements that the Lender institute
any action or proceeding at law or in equity against the Borrower or any other
Person with respect to the Loan Documents, or with respect to any security held
by the Lender other than the Mortgaged Hotels pursuant to the provisions of
Paragraph 3 hereof, as a condition precedent to bringing any action against the
Guarantor under this Guarantee. All remedies afforded to the Lender by reason of
this Guarantee are separate and cumulative, and the exercise of, or failure to
exercise, one remedy shall not be deemed to exclude the exercise of, or in any
way limit or prejudice, any other legal or equitable remedy or remedies
available to the Lender. The Lender shall not be required to resort to any
collateral through foreclosure or
- 2 -
<PAGE>
otherwise other than the Mortgaged Hotels pursuant to the provisions of
Paragraph 3 hereof, prior to the commencement of any action against the
Guarantor or against the Borrower or any other Person on or in respect of any of
the Foreclosure Obligations. The Guarantor agrees that the Lender shall not in
any foreclosure proceeding under any of the Mortgages, be required to seek or
obtain a deficiency judgment against the Borrower and that the obligations of
the Guarantor shall in no way be diminished or otherwise affected by the failure
to seek or obtain a deficiency judgment; and the Guarantor waives the right to
claim any credit for the fair market value of the property foreclosed or for a
deficiency judgment.
7. Guarantor's Consent Not Required. So far as the Guarantor is
--------------------------------
concerned, the Lender may at any time and from time to time without the consent
of, or notice to, the Guarantor, and without impairing or releasing any of the
Foreclosure Obligations of the Guarantor hereunder, upon or without any terms or
conditions and in whole or in part:
(a) change the manner, place or terms of, and/or change or extend
the time of payment of, or modify, renew or alter, any security for the
Loan, or any liability incurred directly or indirectly in respect
thereto, or any of the Loan Documents, or consent to any of the
foregoing, and this Guarantee shall apply to such security, liability
and Loan Documents as so changed, extended, modified, renewed or
altered, and each reference in this Guarantee to any or all of the
security, liability, or Loan Documents shall include such change
extensions, modification, renewal or alteration;
(b) sell, exchange, release, surrender, realize upon or otherwise
deal with any property, in any manner and in any order, at any time
pledged or mortgaged by anyone to secure, or howsoever securing, the
Loan, or any liabilities (including any of these hereunder) incurred
directly or indirectly in respect thereof or hereof, and/or offset
there against, or substitute or replace or surrender any of such
property or consent to any of the foregoing;
(c) exercise or refrain from exercising any rights against the
Guarantor or any other Person or otherwise act or refrain from acting;
and when making any demand hereunder against the Guarantor, the Lender
may, but shall be under no obligation to, make a similar demand on any
other Person directly or indirectly liable in respect of the
Foreclosure Obligations, and any failure by the Lender to make any such
demand or to collect any payments from or require any performance by
any other Person or any release of any other Person, shall not relieve
the Guarantor of its Foreclosure Obligations hereunder, and shall not
release,
- 3 -
<PAGE>
impair or affect the rights and remedies, expressed or implied, legal
or equitable, of the Lender against the Guarantor (for the purposes
hereof, "demand" shall include the commencement and continuance of any
legal proceedings);
(d) settle or compromise any of the Foreclosure Obligations, any
security therefor or any liability incurred directly or indirectly in
respect thereof or hereof, or subordinate the payment of all or any
part thereof to the payment of any liability (whether due or not) of
the obligor thereon to creditors of such obligor other than the Lender,
or consent to any of the foregoing;
(e) apply any sums by whomsoever paid or howsoever realized to
whatever obligations of the Borrower in respect of the Loan or the Loan
Documents as are then outstanding, as the Lender may deem appropriate,
regardless of what Foreclosure Obligations of the Guarantor then remain
unsatisfied, the order and method of such application to be in the
Lender's discretion, and should the same sums be insufficient to pay
fully the liabilities and Foreclosure Obligations of the Guarantor
hereunder, the Guarantor acknowledges that it shall remain liable for
any deficiency; and
(f) amend or otherwise modify, consent to or waive any breach of, or
any act, omission or default under, the Loan Documents, or any of them,
or consent to any of the foregoing.
8. No Impairment or Defense. No failure or claimed failure to make any
------------------------
advance to Borrower or to extend, modify or vary the obligations of the
Guarantor, nor any invalidity, irregularity or unenforceability of all or any
part of the Foreclosure Obligations or of any security therefor or of any of the
Loan Documents (including, without limitation, by reason of any insolvency or
bankruptcy of the Borrower or other primary obligor or any disaffirming of any
such obligation by or on behalf of the Borrower or other primary obligor), nor
any delay on the part of the Lender in exercising any of its rights, powers or
options hereunder or under any of the Loan Documents or a partial or single
exercise thereof, shall affect, impair or be a defense to this Guarantee, and
this Guarantee shall be construed as a continuing, absolute and unconditional
guarantee of collection without regard to the validity, regularity or
enforceability of the Foreclosure Obligations, or of any of the Loan Documents
or any other instrument, documents or rights of offset with respect thereto at
any time or from time to time held by the Lender and without regard to any
defense, offset or counterclaim which may at any time be available to or be
asserted by an primary obligor or any other Person against the Lender and which
constitutes, or might be construed to
- 4 -
<PAGE>
constitute, an equitable or legal discharge of the primary obligor or any other
Person for the Foreclosure Obligations, or any part thereof, whether in
bankruptcy proceedings or under any other circumstances.
9. Amendments; Governing Law. This Guarantee may not be waived,
-------------------------
modified or amended except by an agreement in writing signed by the Lender and
the Guarantor. The respective rights and obligations of the Guarantor and the
Lender shall be governed by and construed in accordance with the Laws of the
State of Georgia.
10. Successors and Assigns. This Guarantee shall be binding upon and
----------------------
shall inure to the benefit of, the parties hereto and their respective
successors and permitted assigns, including, without limiting the generality of
the foregoing, any permitted assignee of the Note. Except for the parties hereto
and their respective successors and permitted assigns, no other Person shall be
entitled to the benefits of this Agreement or to rely hereon.
11. Actions and Proceedings. Any action or proceeding in connection
-----------------------
with this Guarantee may be brought in a court of record of the State of Georgia,
or the United States District Court for the Northern District of Georgia, the
parties hereby consenting to the jurisdiction thereof, and service of process
may be made upon any party by mailing a copy of the summons and complaint to
such party, by registered or certified mail, at its address to be used for the
giving of notices under this Guarantee. In an action or proceeding relating to
this Guarantee, the parties mutually waive trial by jury.
12. Costs and Expenses. The Guarantor also agrees to pay all costs and
------------------
expenses, including reasonable attorneys' fees, actually incurred by the Lender
if any action or proceeding be commenced to enforce any of the obligations of
Guarantor hereunder.
13. Severability. If this Guarantee would be held or determined to be
------------
void, invalid or unenforceable by reason of the amount of the Guarantor's
liability under this Guarantee, then, notwithstanding any other provision of
this Guarantee to the contrary, the maximum amount of the liability of the
Guarantor under this Guarantee shall, without any further action by the
Guarantor, the Lender or any other Person, be automatically limited and reduced
to an amount which is valid and enforceable.
14. Notices and Addresses. All notices, demands or requests provided
---------------------
for or permitted to be given pursuant to this Guarantee shall be deemed to have
been properly given or served by personal delivery, by telecopy with telephone
or telecopied confirmation of receipt, or by depositing in the United States
mail, postpaid and registered or certified, return receipt
- 5 -
<PAGE>
requested, and addressed to the addresses set forth below. All notices, demands
and requests shall be effective upon being personally delivered at the address
specified herein, upon confirmation of receipt by telecopy, or upon being
deposited in the United States mail. The time period for which a response to any
notice, demand or request must be given, if any, shall commence to run from the
date of personal delivery at the address specified herein, the date of receipt
of telecopy notice, or the date of receipt of the notice, demand, or request, by
the addresses thereof as disclosed by the return receipt. Rejection or other
refusal to accept or the inability to deliver because of changed address of
which no notice was given shall be deemed to be receipt of the notice, demand or
request sent. By giving at least ten (10) days' written notice thereof, any
party hereto shall have the right from time to time and at any time during the
term of this Guarantee to change its address or addressee and each shall have
the right to specify as its address any other address within the United States
of America. For the purposes of this Guarantee, the addresses of the parties are
as follows:
Guarantor: Marriott MDAH One Corporation
10400 Fernwood Road
Bethesda, Maryland 20058
Attention: Assistant General Counsel,
Corporate Finance
Telecopier: (301) 380-3588
Lender: The Citizens and Southern National Bank
Sixth Floor
35 Broad Street
Atlanta, Georgia 30303
Attention: Ms. Teresa A. Radzinski
Telecopier: (404) 581-3398
15. Time of the Essence. Time is hereby declared to be of the essence
-------------------
of this Guarantee and any part hereof.
IN WITNESS WHEREOF, the Guarantor has duly executed and sealed this
Guarantee the day and year first above written.
MARRIOTT MDAH ONE CORPORATION
[SEAL] By: /s/ Carolyn A. Burris
-------------------------------------------
Carolyn A. Burris
Vice President
- 6 -
<PAGE>
EXHIBIT 10.f
THE RIGHTS AND REMEDIES OF MARRIOTT CORPORATION AND ITS SUCCESSORS AND ASSIGNS,
UNDER THIS AGREEMENT ARE SUBJECT TO THE TERMS AND CONDITIONS OF THAT CERTAIN
SUBORDINATION AGREEMENT DATED AS OF JUNE 30, 1993, AS AMENDED FROM TIME TO TIME,
BY AND AMONG MARRIOTT CORPORATION, NATIONSBANK OF GEORGIA, NATIONAL ASSOCIATION
AND MARRIOTT DIVERSIFIED AMERICAN HOTELS, L.P.
AMENDED AND RESTATED
LINE OF CREDIT AND REIMBURSEMENT AGREEMENT
THIS AMENDED AND RESTATED LINE OF CREDIT AND REIMBURSEMENT AGREEMENT
(this "Agreement") is made as of June 30, 1993 by and among MARRIOTT
CORPORATION, a Delaware corporation ("Marriott"), MARRIOTT MDAH ONE CORPORATION,
a Delaware corporation (the "General Partner"), and MARRIOTT DIVERSIFIED
AMERICAN HOTELS, L.P., a Delaware limited partnership (the "Partnership").
RECITALS:
WHEREAS, the Partnership amended the limited partnership agreement
under which it was organized, such amended and restated partnership agreement
being dated February 7, 1990 and being substantially in the form of Exhibit D to
that certain Confidential Private Placement Memorandum dated November 14, 1989
(the "Memorandum") (said partnership agreement as so amended to be referred to
hereafter as the "Partnership Agreement");
WHEREAS, the Partnership entered into that certain loan agreement dated
February 7, 1990 (the "Existing Loan Agreement") with The Citizens and Southern
National Bank, now known as NationsBank of Georgia, National Association (the
"Lender") pursuant to which the Lender made a loan to the Partnership in the
amount of $128,000,000 to provide first mortgage financing for the purchase of
six Marriott full-service hotels (the "Hotels");
WHEREAS, in order to induce the Lender to provide the financing under
the Loan Agreement, Marriott entered into a Contract of Guaranty dated February
7, 1990 (the "Debt Service Guaranty") pursuant to which Marriott agreed to
advance funds to or on behalf of the Partnership in an amount up to $13,000,000
at any one time to the extent necessary to enable the Partnership to pay
interest and/or principal on the loan provided pursuant to the Loan Agreement;
WHEREAS, pursuant to the Partnership Agreement and the provisions of a
Line of Credit and Reimbursement Agreement dated February 7, 1990 (the "Existing
Line of Credit and Reimbursement Agreement") among the parties hereto, the
General Partner or
<PAGE>
one or more affiliates of the General Partner or Marriott ("Affiliates") could
from time to time advance funds to the Partnership to meet liabilities or
obligations or to make distributions to the Partners;
WHEREAS, the Hotels are to be managed for the Partnership by Marriott
International, Inc., formerly known as Marriott Hotels, Inc., pursuant to an
Amended and Restated Management Agreement of even date herewith (as amended,
restated, supplemented or otherwise modified from time to time, the "Management
Agreement");
WHEREAS, the Existing Line of Credit and Reimbursement Agreement was
entered into for the purpose of evidencing the obligation of Marriott and the
General Partner to make the advances enumerated in Sections II.I and III.I.,
respectively, thereof and of the Partnership to repay advances thereunder,
together with interest thereon; and
WHEREAS, the mutual obligations under the Existing Line of Credit and
Reimbursement Agreement provided consideration for the entering into thereof and
the Debt Service Guaranty;
WHEREAS, the Partnership is in default of its obligations under the
Existing Loan Agreement and the Lender and the Partnership are to restructure
such obligations by amending and restating the Existing Loan Agreement pursuant
to the terms of that certain Amended and Restated Loan Agreement dated as of the
date hereof (as amended, restated, supplemented or otherwise modified from time
to time in accordance with the terms thereof, the "Loan Agreement");
WHEREAS, it is a condition to Lender's restructuring the Partnership's
obligations under the Existing Loan Agreement pursuant to the Loan Agreement
that the parties hereto amend and restate the terms of the Existing Line of
Credit and Reimbursement Agreement as provided herein;
NOW, THEREFORE, to induce the Lender to enter into the Loan Agreement,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree that the Existing Line
of Credit and Reimbursement Agreement is amended and restated as follows:
I. DEFINED TERMS
Terms used herein, unless otherwise defined, shall have the meaning
provided therefor in the Memorandum under the caption "Glossary of Certain
Terms" (as such terms shall have been modified by the actual agreements to which
they relate).
II. DEBT SERVICE GUARANTEE ADVANCES
1. Confirmation of Advances.
------------------------
-2-
<PAGE>
Marriott and the Partnership agree that Marriott has made advances
to or on behalf of the Partnership pursuant to the Debt Service Guaranty in the
aggregate amount of $13,000,000.
2. Repayment of Advances
---------------------
Any advances by Marriott to the Partnership under the Debt Service
Guaranty prior to the date hereof shall constitute indebtedness owing to
Marriott by the Partnership. Such indebtedness shall bear interest, compounded
annually, at the rate per annum equal to the lesser of (i) the prime rate of
interest announced from time to time by Bankers Trust Company, New York, New
York (the "Prime Rate") plus one-half percentage point or (ii) the highest
lawful rate under the laws of the State of Delaware. Unless sooner paid as
permitted by Section IV.1 of this Agreement, such indebtedness and any accrued
interest thereon shall mature and be due and payable in accordance with Section
II.3 of this Agreement. On the date hereof, the Partnership will execute and
deliver a promissory note to further evidence any indebtedness owing to Marriott
under this Section II.2. Such promissory note shall be substantially in the form
of Exhibit A hereto.
---------
3. Timing and Priority of Repayment of Advances
--------------------------------------------
Any advances by Marriott under the Debt Service Guaranty, including
any accrued interest thereon, shall be due and payable by the Partnership
fifteen (15) years from the date of such advance, or earlier solely out of Pari
Passu Distributions (as defined in the Loan Agreement) paid to the Partnership.
Notwithstanding anything to the contrary in this Agreement, the
Partnership shall not be required to make, and shall not make, any repayment or
prepayment of advances under the Debt Service Guaranty or accrued interest
thereon if and to the extent payment thereof would violate the Loan Agreement or
any other instrument relating to or securing the financing provided thereunder
or any refinancing thereof.
4. Security
--------
The Partnership shall not secure the payment of any indebtedness
under the Debt Service Guaranty or hereunder with any Lien (as defined in the
Loan Agreement).
-3-
<PAGE>
III. GENERAL PARTNER AND OTHER AFFILIATE ADVANCES
1. Obligation to Make Advances
---------------------------
Except as hereinafter provided, neither the General Partner
nor Marriott shall have any obligation to make any loans or advances to the
Partnership hereunder. On the date hereof, the General Partner will make a
single $2,000,000 advance to the Partnership.
2. Repayment of Advances
---------------------
The advance to the Partnership by the General Partner pursuant
to Section III.1 hereof shall constitute indebtedness owing to the General
Partner by the Partnership. Unless sooner paid as permitted by Section IV.1 of
this Agreement, such indebtedness and any accrued interest thereon shall mature
and be due and payable in accordance with Section III.3 of this Agreement. On
the date hereof, the Partnership will execute and deliver a promissory note to
further evidence such indebtedness owing to the General Partner under this
Section III.2. Such promissory note shall be substantially in the form of
Exhibit B hereto.
- ---------
3. Timing and Priority of Repayment of Advances
--------------------------------------------
The advance by the General Partner described in Section III.2
shall accrue interest, compounded annually, at a rate per annum equal to the
lesser of (i) one percentage point in excess of the Prime Rate or (ii) the
highest lawful rate under the laws of the State of Delaware. Such advance,
together with any accrued interest thereon, shall be due and payable upon that
date which is the fifteenth anniversary of the date on which such advance was
made; provided, however, that such advance may be paid earlier solely out of
Pari Passu Distributions (as defined in the Loan Agreement) paid to the
Partnership. Notwithstanding anything to the contrary in this Agreement, the
Partnership shall not be required to make, and shall not make, any repayment or
prepayment of the advance described in Section III.2 hereof or accrued interest
thereon if and to the extent payment thereof would violate the Loan Agreement or
any other instrument relating to or securing the financing provided thereunder
or any refinancing thereof.
-4-
<PAGE>
IV. MISCELLANEOUS PROVISIONS
1. Optional Prepayment
-------------------
Subject to the limitations imposed in this Agreement on
prepayment, the Partnership may at any time prepay any indebtedness owing
hereunder, in whole or in part, plus any accrued interest thereon at any time
without penalty or premium of any kind.
2. Exculpation
-----------
No Partner shall have any personal liability with respect to
the indebtedness owing to Marriott or the General Partner hereunder. Marriott
and the General Partner agree to look solely to the assets of the Partnership or
to any security provided by the Partnership as the sole source of repayment
hereunder.
3. Default
-------
In the event the Partnership is in default of any of its
obligations hereunder, unless such default is cured within thirty (30) days
after written notice thereof or within such longer period as may reasonably be
required to effect a cure in the case of a non-monetary default, or in the event
the Partnership defaults on its obligations under the Loan Agreement in
consequence of which the maturity of any indebtedness thereunder is accelerated,
Marriott and the General Partner shall, in any of such events, have the right to
accelerate the maturity of any indebtedness owing to it hereunder, and upon such
acceleration the indebtedness hereunder, together with accrued interest thereon,
shall be immediately due and payable.
4. Loan Agreement
--------------
For so long as the Loan Agreement remains in effect, this
Agreement shall not be amended, rescinded, or terminated without the consent of
the Lender.
5. Governing Law
-------------
This Agreement shall be governed by and construed under the
laws of the State of Delaware, without regard to principles of conflicts of laws
thereof which might refer such interpretations to the laws of another
jurisdiction.
-5-
<PAGE>
6. Subordination
-------------
Except as otherwise provided herein, payment of any
indebtedness owing to Marriott pursuant to this Agreement shall be subject and
subordinate to (i) all indebtedness and accrued interest thereon owing pursuant
to the Loan Agreement, (ii) payment of all Ground Rent and (iii) the priority
payments to the Partners described in Sections 4.05A, 4.06, and 4.07A of the
Partnership Agreement.
7. Effective Date.
--------------
The amendment and restatement of the Existing Line of Credit
and Reimbursement Agreement pursuant to the terms hereof shall be deemed
effective as of the Effective Date (as defined in the Loan Agreement).
[Signatures on Following Page]
- 6 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Line of Credit and Reimbursement Agreement as of the day and year set
forth above.
MARRIOTT CORPORATION
By: /s/ Matthew J. Hart
------------------------------------
Name: MATTHEW J. HART
-------------------------------
Title: SR. VICE PRESIDENT
------------------------------
MARRIOTT MDAH ONE CORPORATION
By: /s/ Jeffrey P. Mayer
------------------------------------
Name: JEFFREY P. MAYER
-------------------------------
Title: VICE - PRESIDENT
------------------------------
MARRIOTT DIVERSIFIED AMERICAN
HOTELS, L.P.
By: Marriott MDAH One Corporation,
its General Partner
By: /s/ Jeffrey P. Mayer
------------------------------
Name: JEFFREY P. MAYER
-------------------------
Title: VICE - PRESIDENT
------------------------
<PAGE>
Exhibit A
THE RIGHTS AND REMEDIES OF MARRIOTT CORPORATION AND ITS SUCCESSORS AND ASSIGNS,
UNDER THIS INSTRUMENT ARE SUBJECT TO THE TERMS AND CONDITIONS OF THAT CERTAIN
SUBORDINATION AGREEMENT DATED AS OF JUNE 30, 1993, AS AMENDED FROM TIME TO TIME,
BY AND AMONG MARRIOTT CORPORATION, NATIONSBANK OF GEORGIA, NATIONAL ASSOCIATION
AND MARRIOTT DIVERSIFIED AMERICAN HOTELS, L.P.
PROMISSORY NOTE
---------------
$13,000,000.00 June 30, 1993
For value received, MARRIOTT DIVERSIFIED AMERICAN HOTELS, L.P., a
Delaware limited partnership (the "Payor"), hereby promises to pay to the order
of MARRIOTT CORPORATION (the "Payee"), at such time or times as provided in the
Agreement hereinafter referred to, at the Payee's offices at 10400 Fernwood
Road, Bethesda, Maryland, in lawful money of the United States, the principal
amount of $13,000,000.00, and the Payor further promises to pay interest at said
office, in like money, from the date hereof on the principal amount owing
hereunder from time to time, at the borrowing rate and compounded as provided
for in Section II.2 of the Amended and Restated Line of Credit and Reimbursement
Agreement (the "Agreement") dated as of June 30, 1993, among the Payor, Marriott
MDAH One Corporation and the Payee. Interest and principal shall be payable at
the times stated in the Agreement, at maturity (whether by acceleration or
otherwise) and upon any prepayment hereof as provided in Section IV.1 of the
Agreement (to the extent thereof).
This Note is the Note referred to in the Agreement and is entitled to
the benefits thereof. No partner of the Payor shall have individual liability
with respect to the indebtedness owing to the Payee hereunder. Payee agrees to
look solely to the assets of the Payor as the source of repayment hereunder.
In case an event of default shall occur and be continuing under the
Agreement and not be cured within applicable grace periods, the principal of and
accrued interest on this Note may be declared to be due and payable in the
manner and with the effect provided in the Agreement, presentment, demand,
protest, or notice of any kind being expressly waived.
This Note evidences indebtedness incurred prior to the date hereof on
which interest in the amount of $1,824,345.00 as of the hereof has accrued and
remains owing.
- 8 -
<PAGE>
This Note and the rights and obligations of the Payor and the Payee
shall be construed in accordance with and governed by the laws of the State of
Delaware.
MARRIOTT DIVERSIFIED AMERICAN
HOTELS, L.P.
By: Marriott MDAH One Corporation,
its General Partner
By:
--------------------------------
Its:
-------------------------------
- 9 -
<PAGE>
Exhibit B
THE RIGHTS AND REMEDIES OF MARRIOTT MDAH ONE CORPORATION AND ITS SUCCESSORS AND
ASSIGNS, UNDER THIS INSTRUMENT ARE SUBJECT TO THE TERMS AND CONDITIONS OF THAT
CERTAIN SUBORDINATION AGREEMENT DATED AS OF JUNE 30, 1993, AS AMENDED FROM TIME
TO TIME, BY AND AMONG MARRIOTT MDAH ONE CORPORATION, NATIONSBANK OF GEORGIA,
NATIONAL ASSOCIATION AND MARRIOTT DIVERSIFIED AMERICAN HOTELS, L.P.
PROMISSORY NOTE
---------------
$2,000,000.00 June 30, 1993
For value received, MARRIOTT DIVERSIFIED AMERICAN HOTELS, L.P., a
Delaware limited partnership (the "Payor"), hereby promises to pay to the order
of MARRIOTT MDAH ONE CORPORATION (the "Payee"), at such time or times as
provided in the Agreement hereinafter referred to, at the Payee's offices at
10400 Fernwood Road, Bethesda, Maryland, in lawful money of the United States,
the principal amount of $2,000,000.00, and the Payor further promises to pay
interest at said office, in like money, from the date hereof on the principal
amount owing hereunder from time to time, at the borrowing rate and compounded
as provided for in Section III.3 of the Amended and Restated Line of Credit and
Reimbursement Agreement (the "Agreement") dated as of June 30, 1993 among the
Payor, Marriott Corporation and the Payee. Interest and principal shall be
payable at the times stated in the Agreement, at maturity (whether by
acceleration or otherwise) and upon any prepayment hereof as provided in Section
IV.1 of the Agreement (to the extent thereof).
This Note is the Note referred to in the Agreement and is entitled to
the benefits thereof. No partner of the Payor shall have individual liability
with respect to the indebtedness owing to the Payee hereunder. Payee agrees to
look solely to the assets of the Payor as the source of repayment hereunder.
In case an event of default shall occur and be continuing under the
Agreement and not be cured within applicable grace periods, the principal of and
accrued interest on this Note may be declared to be due and payable in the
manner and with the effect provided in the Agreement, presentment, demand,
protest, or notice of any kind being expressly waived.
<PAGE>
This Note and the rights and obligations of the Payor and the Payee
shall be construed in accordance with and governed by the laws of the State of
Delaware.
MARRIOTT DIVERSIFIED AMERICAN
HOTELS, L.P.
By: Marriott MDAH One Corporation,
its General Partner
By:
--------------------------------
Its:
-------------------------------
- 11 -
<PAGE>
EXHIBIT 10.g
SERIES A
PROMISSORY NOTE
$85,000,000.00 Delivered in Atlanta, Georgia
As of December 15, 1992
FOR VALUE RECEIVED, the undersigned, MARRIOTT DIVERSIFIED AMERICAN
HOTELS, L.P., a Delaware limited partnership (hereinafter called the "Maker"),
does hereby promise to pay to the order of NATIONSBANK OF GEORGIA, NATIONAL
ASSOCIATION, a national banking association chartered under the laws of the
United States of America (hereinafter together with any holder hereof called the
"Holder"), at the office of AMRESCO-Institutional, Inc., 101 North Tryon Street,
NC 1-001-13-20, Charlotte, North Carolina 28255, or at such other place as the
Holder may designate in writing, in lawful money of the United States of
America, the principal sum of Eighty-Five Million and No/100 Dollars
($85,000,000.00), together with interest thereon from this date, at the rate
hereinafter set forth, calculated on the basis of 360 days per year, the
principal sum and interest being payable as set forth below.
Section 1. Rate of Interest and Payments of Principal and Interest
-------------------------------------------------------
From and after the date hereof until the Maturity Date (as hereinafter
defined), interest shall be due and payable at the rates and times as provided
in Article 2 of that certain Amended and Restated Loan Agreement dated of even
date herewith between the Maker and the Holder (the "Loan Agreement"), which
document is incorporated in its entirety herein by reference thereto.
The entire outstanding principal balance of the indebtedness evidenced
by this Note together with all accrued and unpaid interest shall be due and
payable as set forth in the Loan Agreement and in any event on the earlier of
(said earlier date being hereinafter referred to as the "Maturity Date"): (i)
December 15, 1999, or (ii) acceleration of the indebtedness evidenced by this
Note as expressly hereinafter provided.
Section 2. Prepayment
----------
The indebtedness evidenced by this Note may be prepaid on the terms and
conditions provided in Article 2 in the Loan Agreement. Notwithstanding anything
in this Note to the contrary, an acceleration of the indebtedness evidenced
hereby shall be deemed a prepayment.
Section 3. General Provisions
------------------
In no event shall the amount of interest due or payable hereunder
exceed the maximum rate of interest allowed by applicable law, and in the event
any such payment is inadvertently paid by the Maker or inadvertently received by
the Holder, then such excess sum shall be returned to the Maker forthwith upon
the Holder having actual knowledge of
<PAGE>
the excess. It is the express intent hereof that the Maker not pay and the
Holder not receive, directly or indirectly in any manner whatsoever, interest in
excess of that which may be legally paid by the Maker under applicable law.
This Note is secured by, without limitation, six deeds of trust and
mortgages securing properties located in the States of California, Michigan,
Ohio, North Carolina and Virginia dated February 7, 1990 (as amended,
supplemented or modified as of even date herewith and from time to time,
hereinafter collectively called the "Mortgages") by the Maker in favor of the
Holder. The Holder shall have the optional right to declare the amount of the
total unpaid balance hereof to be due and forthwith payable in advance of the
due date of any installment, as fixed in the Loan Agreement, upon (a) the
failure of the Maker to pay, when due, any amount hereunder within five (5) days
after written notice thereof from the Holder to the Maker (in the manner
prescribed in the Loan Agreement), or (b) the occurrence of any other "Event of
Default," as that term is defined in the Loan Agreement, and with the giving of
written notice and the expiration of any applicable cure period to the extent
prescribed in the Loan Agreement without cure. From and after the Maturity Date
(whether by acceleration or otherwise), or the occurrence of an Event of
Default, the entire unpaid principal shall bear interest from and after the
Maturity Date or, if earlier, the date of the occurrence of such Event of
Default until paid in full or such Event of Default is cured or waived in
accordance with the Loan Agreement at the Default Rate (as defined in the Loan
Agreement), computed on the basis of 360 days per year. Forbearance to exercise
this option with respect to any failure or breach of the Maker shall not
constitute a waiver of the right as to any subsequent failure or breach.
Time is of the essence of this Note and, in case this Note is collected
by law or through an attorney at law, or under advice therefrom, the Maker
agrees to pay all costs of collection, including reasonable attorneys' fees
actually incurred.
The Maker hereby waives presentment, demand for payment, protest and
notice of non-payment, except as expressly provided in this Note.
The Maker acknowledges that this Note shall be governed by the laws of
the State of Georgia.
The Holder may not sell, assign or transfer the Note or any interest
herein except as provided in Section 10. 17 of the Loan Agreement
Notwithstanding anything to the contrary contained in this Note, or any
of the other Loan Documents (as that term is defined in the Loan Agreement), the
Holder agrees to satisfy any judgment obtained against the Maker by the exercise
of the rights of the Holder under the Loan Documents, no other property or
assets of the Maker or any general partner or limited partner of the Maker, nor
any Affiliate (as that term is defined in
- 2 -
<PAGE>
the Loan Agreement) of the Maker, or of any general partner or limited partner
of the Maker, except pursuant to (a) that certain Foreclosure Guarantee dated
February 7, 1990 (as amended, supplemented or modified from time to time, the
"Foreclosure Guarantee") executed by Marriott MIDAH One Corporation, a Delaware
corporation ("MIDAH One", and (b) that certain Amended and Restated Direct
Access and Guaranty Agreement dated of even date herewith (as amended,
supplemented or modified from time to time, the "Direct Access Agreement")
executed by Marriott Corporation, a Delaware corporation ("Marriott"; Marriott
and MIDAH One collectively called the "Guarantors") shall be subject to levy,
execution or other enforcement procedures for the satisfaction of the payments
required under this Note, the Mortgages or for the performance of any other
covenants or warranties contained herein or under the other Loan Documents. The
Holder shall not bring any action to obtain a deficiency judgment against the
Maker or the general or limited partners of the Maker, or any officers,
directors, employees or Affiliates thereof (provided, however, this shall in no
way limit the rights, powers and privileges of the Holder pursuant to the
Foreclosure Guarantee or the Direct Access Agreement). Nothing contained herein
shall: (i) constitute a waiver of any obligation evidenced by this Note, or the
Loan Documents, or secured by the Mortgages, or in any way be construed to
release or impair the liens and interests of the Mortgages, or the indebtedness
evidenced by this Note, (ii) limit the right of the Holder to bring an action to
judicially foreclose the liens and interests of the Mortgages, or to confirm any
foreclosure or sale pursuant to any power of sale contained in the Mortgages, or
limit the right of the Holder to exercise its remedies under the other Loan
Documents, subject to the terms of Section 2.20 of the Loan Agreement, or (iii)
affect the right of the Holder to bring any action against the Guarantors under
the Foreclosure Guarantee or the Direct Access Agreement and satisfy any
judgments obtained against any of the assets of the Guarantors pursuant to the
terms and conditions of the Foreclosure Guarantee or the Direct Access
Agreement.
Notwithstanding the foregoing, the Maker and any general partner of the
Maker shall remain and be fully liable to the Holder for any loss or damage
suffered by the Holder as a result of:
(i) fraud or intentional damage or waste to any of the
Mortgaged Hotels (as that term is defined in the Loan Agreement) by the
Maker;
(ii) the Maker's retention of rents. room revenues or other
income which constitutes collateral under the Loan Documents arising
with respect to the Mortgaged Hotels which is collected by the Maker
after the Holder has given notice to the Maker that an Event of Default
has occurred under the Mortgages or the other Loan Documents (to the
full extent of any such rents or other income retained and collected by
the Maker in violation of the terms of the Loan Documents);
- 3 -
<PAGE>
(iii) failure to pay ad valorem taxes in violation of the
terms of the Mortgages;
(iv) any claims, liabilities, damages, costs and expenses
resulting from a violation of any federal, state or local laws, rules,
regulations or ordinances involving hazardous materials or substances
located on, in or under any of the Mortgaged Hotels;
(v) the Maker's misapplication or misappropriation of any
proceeds received by the Maker pursuant to any insurance policies or
condemnation proceeds or awards, in violation of the terms of the
Mortgages;
(vi) any sale, transfer or voluntary encumbrance of the
Mortgaged Hotels or any portion thereof or any interest therein, or the
FF&E (as that term is defined in the Loan Agreement), except as
expressly permitted in Section 8.1 of the Loan Agreement or as
otherwise permitted in the Loan Agreement or the other Loan Documents,
or with the prior written consent of the Holder;
(vii) failure to maintain insurance as required by the Loan
Agreement and the Mortgages; and
(viii) failure of the Maker to comply with Section 6.1(b) of
the Loan Agreement.
Notwithstanding the foregoing, the Sellers (as hereinafter defined)
shall remain fully liable for the obligations, liabilities, representations.
warranties and indemnifications contained in that certain Purchase Agreement
dated as of even date herewith among Marriott, Essex House Condominium
Corporation, Host La Jolla, Inc. and Marriott-Dayton Community Urban
Redevelopment Corporation (collectively, the "Sellers") and the Maker, which
survive the date hereof, as provided therein, and the Holder shall have recourse
against the Sellers to the extent assigned to the Holder in that certain
Assignment of Purchase Agreement dated February 7, 1990 among the Sellers, the
Maker and the Holder.
[Signatures On Next Page.]
- 4 -
<PAGE>
IN WITNESS WHEREOF, the undersigned Maker has hereunto caused this
instrument to be duly executed and sealed as of the day and year first above
written.
MARRIOTT DIVERSIFIED AMERICAN
HOTELS, L.P, a Delaware limited
partnership
By: Marriott MIDAH One Corporation, a
Delaware corporation. Sole General
Partner
By: /s/ Jeffrey P. Mayer
-------------------------------
Name Jeffrey P. Mayer
------------------------------
Title: Vice President
----------------------------
Attest [SIGNATURE APPEARS HERE]
----------------------------
Name
------------------------------
Title SECRETARY
-----------------------------
[CORPORATE SEAL]
- 5 -
<PAGE>
EXHIBIT 10.h
SERIES B
PROMISSORY NOTE
$43,000,000.00 Delivered in Atlanta. Georgia
As of December 15, 1992
FOR VALUE RECEIVED, the undersigned, MARRIOTT DIVERSIFIED AMERICAN
HOTELS, L.P., a Delaware limited partnership (hereinafter called the "Maker"),
does hereby promise to pay to the order of NATIONSBANK OF GEORGIA, NATIONAL
ASSOCIATION, a national banking association chartered under the laws of the
United States of America (hereinafter together with any holder hereof called the
"Holder"), at the office of AMRESCO-Institutional, Inc., 101 North Tryon Street,
NC 1-001-13-20, Charlotte, North Carolina 28255, or at such other place as the
Holder may designate in writing, in lawful money of the United States of
America, the principal sum of Forty-Three Million and No/100 Dollars
($43,000,000.00), together with interest thereon from this date, at the rate
hereinafter set forth, calculated on the basis of 360 days per year, the
principal sum and interest being payable as set forth below.
Section 1. Rate of Interest and Payments of Principal and Interest
-------------------------------------------------------
From and after the date hereof until the Maturity Date (as hereinafter
defined), interest shall be due and payable at the rates and times as provided
in Article 2 of that certain Amended and Restated Loan Agreement dated of even
date herewith between the Maker and the Holder (the "Loan Agreement"), which
document is incorporated in its entirety herein by reference thereto.
The entire outstanding principal balance of the indebtedness evidenced
by this Note together with all accrued and unpaid interest shall be due and
payable as set forth in the Loan Agreement and in any event on the earlier of
(said earlier date being hereinafter referred to as the "Maturity Date"): (i)
December 15, 1999, or (ii) acceleration of the indebtedness evidenced by this
Note as expressly hereinafter provided.
Section 2. Prepayment
----------
The indebtedness evidenced by this Note may be prepaid on the terms and
conditions provided in Article 2 in the Loan Agreement. Notwithstanding anything
in this Note to the contrary, an acceleration of the indebtedness evidenced
hereby shall be deemed a prepayment.
Section 3. General Provisions
------------------
In no event shall the amount of interest due or payable hereunder
exceed the maximum rate of interest allowed by applicable law, and in the event
any such payment is inadvertently paid by the Maker or inadvertently received by
the Holder, then such excess sum shall be returned to the Maker forthwith upon
the Holder having actual knowledge of
<PAGE>
the excess. It is the express intent hereof that the Maker not pay and the
Holder not receive, directly or indirectly in any manner whatsoever, interest in
excess of that which may be legally paid by the Maker under applicable law.
This Note is secured by, without limitation, six deeds of trust and
mortgages securing properties located in the States of California. Michigan,
Ohio, North Carolina and Virginia dated February 7, 1990 (as amended,
supplemented or modified as of even date herewith and from time to time,
hereinafter collectively called the "Mortgages") by the Maker in favor of the
Holder. The Holder shall have the optional right to declare the amount of the
total unpaid balance hereof to be due and forthwith payable in advance of the
due date of any installment, as fixed in the Loan Agreement, upon (a) the
failure of the Maker to pay, when due, any amount hereunder within five (5) days
after written notice thereof from the Holder to the Maker (in the manner
prescribed in the Loan Agreement), or (b) the occurrence of any other "Event of
Default," as that term is defined in the Loan Agreement, and with the giving of
written notice and the expiration of any applicable cure period to the extent
prescribed in the Loan Agreement without cure. From and after the Maturity Date
(whether by acceleration or otherwise), or the occurrence of an Event of
Default, the entire unpaid principal shall bear interest from and after the
Maturity Date or, if earlier, the date of the occurrence of such Event of
Default until paid in full or such Event of Default is cured or waived in
accordance with the Loan Agreement at the Default Rate (as defined in the Loan
Agreement), computed on the basis of 360 days per year. Forbearance to exercise
this option with respect to any failure or breach of the Maker shall not
constitute a waiver of the right as to any subsequent failure or breach.
Time is of the essence of this Note and, in case this Note is collected
by law or through an attorney at law, or under advice therefrom, the Maker
agrees to pay all costs of collection, including reasonable attorneys' fees
actually incurred.
The Maker hereby waives presentment, demand for payment, protest and
notice of non-payment, except as expressly provided in this Note.
The Maker acknowledges that this Note shall be governed by the laws of
the State of Georgia.
The Holder may not sell, assign or transfer the Note or any interest
herein except as provided in Section 10.17 of the Loan Agreement.
Notwithstanding anything to the contrary contained in this Note, or any
of the other Loan Documents (as that term is defined in the Loan Agreement), the
Holder agrees to satisfy any judgment obtained against the Maker by the exercise
of the rights of the Holder under the Loan Documents: no other property or
assets of the Maker or anv general partner or limited partner of the Maker, nor
any Affiliate (as that term is defined in
- 2 -
<PAGE>
the Loan Agreement) of the Maker, or of any general partner or limited partner
of the Maker, except pursuant to (a) that certain Foreclosure Guarantee dated
February 7, 1990 (as amended, supplemented or modified from time to time, the
"Foreclosure Guarantee") executed by Marriott MDAH One Corporation, a Delaware
corporation ("MDAH One") and (b) that certain Amended and Restated Direct Access
and Guaranty Agreement dated of even date herewith (as amended, supplemented or
modified from time to time, the "Direct Access Agreement") executed by Marriott
Corporation, a Delaware corporation ("Marriott"; Marriott and MDAH One
collectively called the "Guarantors") shall be subject to levy, execution or
other enforcement procedures for the satisfaction of the payments required under
this Note, the Mortgages or for the performance of any other covenants or
warranties contained herein or under the other Loan Documents. The Holder shall
not bring any action to obtain a deficiency judgment against the Maker or the
general or limited partners of the Maker, or any officers, directors, employees
or Affiliates thereof (provided, however, this shall in no way limit the rights,
powers and privileges of the Holder pursuant to the Foreclosure Guarantee or the
Direct Access Agreement). Nothing contained herein shall: (i) constitute a
waiver of any obligation evidenced by this Note, or the Loan Documents, or
secured by the Mortgages, or in any way be construed to release or impair the
liens and interests of the Mortgages, or the indebtedness evidenced by this
Note, (ii) limit the right of the Holder to bring an action to judicially
foreclose the liens and interests of the Mortgages, or to confirm any
foreclosure or sale pursuant to any power of sale contained in the Mortgages, or
limit the right of the Holder to exercise its remedies under the other Loan
Documents, subject to the terms of Section 2.20 of the Loan Agreement, or (iii)
affect the right of the Holder to bring any action against the Guarantors under
the Foreclosure Guarantee or the Direct Access Agreement and satisfy any
judgments obtained against any of the assets of the Guarantors pursuant to the
terms and conditions of the Foreclosure Guarantee or the Direct Access
Agreement.
Notwithstanding the foregoing, the Maker and any general partner of the
Maker shall remain and be fully liable to the Holder for any loss or damage
suffered by the Holder as a result of:
(i) fraud or intentional damage or waste to any of the
Mortgaged Hotels (as that term is defined in the Loan Agreement) by the
Maker;
(ii) the Maker's retention of rents, room revenues or other
income which constitutes collateral under the Loan Documents arising
with respect to the Mortgaged Hotels which is collected by the Maker
after the Holder has given notice to the Maker that an Event of Default
has occurred under the Mortgages or the other Loan Documents (to the
full extent of any such rents or other income retained and collected by
the Maker in violation of the terms of the Loan Documents);
- 3 -
<PAGE>
(iii) failure to pay ad valorem taxes in violation of the
terms of the Mortgages;
(iv) any claims, liabilities, damages, costs and expenses
resulting from a violation of any federal, state or local laws, rules,
regulations or ordinances involving hazardous materials or substances
located on, in or under any of the Mortgaged Hotels;
(v) the Maker's misapplication or misappropriation of any
proceeds received by the Maker pursuant to any insurance policies or
condemnation proceeds or awards, in violation of the terms of the
Mortgages;
(vi) any sale, transfer or voluntary encumbrance of the
Mortgaged Hotels or any portion thereof or any interest therein, or the
FF&E (as that term is defined in the Loan Agreement), except as
expressly permitted in Section 8.1 of the Loan Agreement or as
otherwise permitted in the Loan Agreement or the other Loan Documents,
or with the prior written consent of the Holder;
(vii) failure to maintain insurance as required by the Loan
Agreement and the Mortgages; and
(viii) failure of the Maker to comply with Section 6.1(b) of
the Loan Agreement.
Notwithstanding the foregoing, the Sellers (as hereinafter defined)
shall remain fully liable for the obligations, liabilities, representations,
warranties and indemnifications contained in that certain Purchase Agreement
dated as of even date herewith among Marriott, Essex House Condominium
Corporation, Host La Jolla, Inc. and Marriott-Dayton Community Urban
Redevelopment Corporation (collectively, the "Sellers") and the Maker, which
survive the date hereof, as provided therein, and the Holder shall have recourse
against the Sellers to the extent assigned to the Holder in that certain
Assignment of Purchase Agreement dated February 7, 1990 among the Sellers, the
Maker and the Holder.
[Signatures On Next Page.]
- 4 -
<PAGE>
IN WITNESS WHEREOF, the undersigned Maker has hereunto caused this
instrument to be duly executed and sealed as of the day and year first above
written.
MARRIOTT DIVERSIFIED AMERICAN
HOTELS, L.P., a Delaware limited
partnership
By: Marriott MDAH One Corporation, a
Delaware corporation, Sole General
Partner
By: /s/ Jeffrey P. Mayer
---------------------------------
Name: Jeffrey P. Mayer
-------------------------------
Title: Vice President
------------------------------
Attest: [SIGNATURE APPEARS HERE]
-----------------------------
Name:
-------------------------------
Title: SECRETARY
------------------------------
[CORPORATE SEAL]
- 5 -
<PAGE>
EXHIBIT 10.i
SERIES C
PROMISSORY NOTE
$9,336,857.00 Delivered in Atlanta, Georgia
As of December 15, 1992
FOR VALUE RECEIVED, the undersigned, MARRIOTT DIVERSIFIED AMERICAN
HOTELS, L.P., a Delaware limited partnership (hereinafter called the "Maker"),
does hereby promise to pay to the order of NATIONSBANK OF GEORGIA, NATIONAL
ASSOCIATION, a national banking association chartered under the laws of the
United States of America (hereinafter together with any holder hereof called the
"Holder"), at the office of AMRESCO-Institutional, Inc., 101 North Tryon Street,
NC 1-001-13-20, Charlotte, North Carolina 28255, or at such other place as the
Holder may designate in writing, in lawful money of the United States of
America, the principal sum of Nine Million Three Hundred Thirty Six Thousand
Eight Hundred Fifty-Seven and No/100 Dollars ($9,336,857.00), the principal sum
and interest, if any, being payable as set forth below.
Section 1. Rate of Interest and Payments of Principal and Interest
-------------------------------------------------------
From and after the Maturity Date (as hereinafter defined), interest
shall be due and payable at the rates and times as provided in Article 2 of that
certain Amended and Restated Loan Agreement dated of even date herewith between
the Maker and the Holder (the "Loan Agreement"), which document is incorporated
in its entirety herein by reference thereto.
The entire outstanding principal balance of the indebtedness evidenced
by this Note together with all accrued and unpaid interest, if any, shall be due
and payable as set forth in the Loan Agreement and in any event on the earlier
of (said earlier date being hereinafter referred to as the "Maturity Date"): (i)
December 15, 2010, or (ii) acceleration of the indebtedness evidenced by this
Note as expressly hereinafter provided.
Section 2. Prepayment
----------
The indebtedness evidenced by this Note may be prepaid on the terms and
conditions provided in Article 2 in the Loan Agreement. Notwithstanding anything
in this Note to the contrary, an acceleration of the indebtedness evidenced
hereby shall be deemed a prepayment.
Section 3. General Provisions
------------------
In no event shall the amount of interest due or payable hereunder
exceed the maximum rate of interest allowed by applicable law, and in the event
any such payment is inadvertently paid by the Maker or inadvertently received by
the Holder, then such excess sum shall be returned to the Maker forthwith upon
the Holder having actual knowledge of
<PAGE>
the excess. It is the express intent hereof that the Maker not pay and the
Holder not receive, directly or indirectly in any manner whatsoever, interest in
excess of that which may be legally paid by the Maker under applicable law.
This Note is secured by, without limitation, six deeds of trust and
mortgages securing properties located in the States of California, Michigan,
Ohio, North Carolina and Virginia dated February 7, 1990 (as amended,
supplemented or modified as of even date herewith and from time to time.
hereinafter collectively called the "Mortgages") by the Maker in favor of the
Holder. The Holder shall have the optional right to declare the amount of the
total unpaid balance hereof to be due and forthwith payable in advance of the
Maturity Date upon (a) the failure of the Maker to pay, when due, any amount
hereunder within five (5) days after written notice thereof from the Holder to
the Maker (in the manner prescribed in the Loan Agreement), or (b) the
occurrence of any other "Event of Default," as that term is defined in the Loan
Agreement or if Section 4.1(b) of the Mortgages is applicable, as that term is
defined in the Mortgage, and with the giving of written notice and the
expiration of any applicable cure period to the extent prescribed in the Loan
Agreement without cure. From and after the Maturity Date (whether by
acceleration or otherwise), or so long as the Series A Note or the Series B Note
remains outstanding, the occurrence of an Event of Default, the entire unpaid
principal shall bear interest from and after the Maturity Date or, if earlier,
the date of the occurrence of such Event of Default until paid in full or such
Event of Default is cured or waived in accordance with the Loan Agreement at the
Default Rate (as defined in the Loan Agreement), computed on the basis of 360
days per year. Forbearance to exercise this option with respect to any failure
or breach of the Maker shall not constitute a waiver of the right as to any
subsequent failure or breach.
Time is of the essence of this Note and, in case this Note is collected
by law or through an attorney at law, or under advice therefrom, the Maker
agrees to pay all costs of collection, including reasonable attorneys' fees
actually incurred.
The Maker hereby waives presentment, demand for payment, protest and
notice of non-payment, except as expressly provided in this Note.
The Maker acknowledges that this Note shall be governed by the laws of
the State of Georgia.
The Holder may not sell, assign or transfer the Note or any interest
herein except as provided in Section 10.17 of the Loan Agreement.
Notwithstanding anything to the contrary contained in this Note, or any
of the other Loan Documents (as that term is defined in the Loan Agreement), the
Holder agrees to satisfy any judgment obtained against the Maker by the exercise
of the rights of the
-2-
<PAGE>
Holder under the Loan Documents; no other property or assets of the Maker or any
general partner or limited partner of the Maker, nor any Affiliate (as that term
is defined in the Loan Agreement) of the Maker, or of any general partner or
limited partner of the Maker, except pursuant to (a) that certain Foreclosure
Guarantee dated February 7, 1990 (as amended, supplemented or modified from time
to time, the "Foreclosure Guarantee") executed by Marriott MDAH One
Corporation, a Delaware corporation ("MDAH One", and (b) that certain Amended
and Restated Direct Access and Guaranty Agreement dated of even date herewith
(as amended, supplemented or modified from time to time, the "Direct Access
Agreement") executed by Marriott Corporation, a Delaware corporation
("Marriott"; Marriott and MDAH One collectively called the "Guarantors") shall
be subject to levy, execution or other enforcement procedures for the
satisfaction of the payments required under this Note, the Mortgages or for the
performance of any other covenants or warranties contained herein or under the
other Loan Documents. The Holder shall not bring any action to obtain a
deficiency judgment against the Maker or the general or limited partners of the
Maker, or any officers, directors, employees or Affiliates thereof (provided,
however, this shall in no way limit the rights, powers and privileges of the
Holder pursuant to the Foreclosure Guarantee or the Direct Access Agreement).
Nothing contained herein shall: (i) constitute a waiver of any obligation
evidenced by this Note, or the Loan Documents, or secured by the Mortgages, or
in any way be construed to release or impair the liens and interests of the
Mortgages, or the indebtedness evidenced by this Note, (ii) limit the right of
the Holder to bring an action to judicially foreclose the liens and interests of
the Mortgages, or to confirm any foreclosure or sale pursuant to any power of
sale contained in the Mortgages, or limit the right of the Holder to exercise
its remedies under the other Loan Documents, subject to the terms of Section
2.20 of the Loan Agreement, or (iii) affect the right of the Holder to bring any
action against the Guarantors under the Foreclosure Guarantee or the Direct
Access Agreement and satisfy any judgments obtained against any of the assets of
the Guarantors pursuant to the terms and conditions of the Foreclosure Guarantee
or the Direct Access Agreement.
Notwithstanding the foregoing, the Maker and any general partner of the
Maker shall remain and be fully liable to the Holder for any loss or damage
suffered by the Holder as a result of:
(i) fraud or intentional damage or waste to any of the
Mortgaged Hotels (as that term is defined in the Loan Agreement) by the
Maker;
(ii) the Maker's retention of rents, room revenues or other
income which constitutes collateral under the Loan Documents arising
with respect to the Mortgaged Hotels which is collected by the Maker
after the Holder has given notice to the Maker that an Event of Default
has occurred under the Mortgages or the other Loan Documents (to the
full extent of any such rents or other income
- 3 -
<PAGE>
retained and collected by the Maker in violation of the terms of the
Loan Documents);
(iii) failure to pay ad valorem taxes in violation of the
terms of the Mortgages;
(iv) any claims, liabilities, damages, costs and expenses
resulting from a violation of any federal, state or local laws, rules,
regulations or ordinances involving hazardous materials or substances
located on, in or under any of the Mortgaged Hotels;
(v) the Maker's misapplication or misappropriation of any
proceeds received by the Maker pursuant to any insurance policies or
condemnation proceeds or awards, in violation of the terms of the
Mortgages;
(vi) any sale, transfer or voluntary encumbrance of the
Mortgaged Hotels or any portion thereof or any interest therein, or the
FF&E (as that term is defined in the Loan Agreement), except as
expressly permitted in Section 8.1 of the Loan Agreement or as
otherwise permitted in the Loan Agreement or the other Loan Documents,
or with the prior written consent of the Holder;
(vii) failure to maintain insurance as required by the Loan
Agreement and the Mortgages; and
(viii) failure of the Maker to comply with Section 6.1(b) of
the Loan Agreement.
Notwithstanding the foregoing, the Sellers (as hereinafter defined)
shall remain fully liable for the obligations, liabilities, representations,
warranties and indemnifications contained in that certain Purchase Agreement
dated as of even date herewith among Marriott, Essex House Condominium
Corporation, Host La Jolla, Inc. and Marriott-Dayton Community Urban
Redevelopment Corporation (collectively, the "Sellers") and the Maker, which
survive the date hereof, as provided therein, and the Holder shall have recourse
against the Sellers to the extent assigned to the Holder in that certain
Assignment of Purchase Agreement dated February 7, 1990 among the Sellers, the
Maker and the Holder.
[Signatures On Next Page.]
- 4 -
<PAGE>
IN WITNESS WHEREOF, the undersigned Maker has hereunto caused this
instrument to be duly executed and sealed as of the day and year first above
written.
MARRIOTT DIVERSIFIED AMERICAN
HOTELS, L.P., a Delaware limited
partnership
By: Marriott MDAH One Corporation, a
Delaware corporation, Sole General
Partner
By: /s/ Jeffrey P. Mayer
---------------------------------
Name: JEFFREY P. MAYER
-------------------------------
Title: VICE PRESIDENT
------------------------------
Attest: [SIGNATURE APPEARS HERE]
-----------------------------
Name:
-------------------------------
Title: SECRETARY
------------------------------
[CORPORATE SEAL]
- 5 -
<PAGE>
EXHIBIT 10.j
AMENDED AND RESTATED MANAGEMENT AGREEMENT
-----------------------------------------
by and between
MARRIOTT INTERNATIONAL, INC.
----------------------------
as "Management Company"
and
MARRIOTT DIVERSIFIED AMERICAN HOTELS, L.P.
------------------------------------------
as "Owner"
Dated as of June 30, 1993
OWNER HAS ASSIGNED ALL OF ITS RIGHTS UNDER THIS AGREEMENT PURSUANT TO, AND THE
TERMS AND CONDITIONS OF THIS AGREEMENT ARE SUBJECT TO AND HAVE BEEN MODIFIED BY,
THAT CERTAIN AMENDED AND RESTATED ASSIGNMENT OF MANAGEMENT AGREEMENT DATED AS OF
JUNE 30, 1993 BY AND AMONG THE PARTIES HERETO AND NATIONSBANK OF GEORGIA,
NATIONAL ASSOCIATION.
<PAGE>
TABLE OF CONTENTS
-----------------
Article I - Definition of Terms
- -------------------------------
1.01 Definition of Terms...................................... 2
Article II - Appointment of Management Company
- ----------------------------------------------
2.01 Appointment.............................................. 15
2.02 Delegation of Authority.................................. 15
2.03 Licenses and Permits..................................... 16
2.04 Non-Discrimination....................................... 16
Article III - Ownership of the Hotels
- -------------------------------------
3.01 Ownership of Hotels...................................... 18
3.02 Compliance with Ground Lease............................. 18
Article IV - Term
- -----------------
4.01 Term..................................................... 20
4.02 Performance Termination.................................. 21
4.03 Actions to be Taken on Termination....................... 22
Article V - Compensation of Management Company
- ----------------------------------------------
5.01 Base Management Fee...................................... 24
5.02 Incentive Management Fee................................. 24
5.03 Payment of Incentive Management Fee and Contingent
Incentive Management Fees from Operating Profit.......... 24
5.04 Payment of Incentive Management Fee and Contingent
Incentive Management Fees from Capital Proceeds.......... 26
5.05 Accounting and Interim Payment........................... 27
Article VI - Working Capital and Fixed Asset Supplies
- -----------------------------------------------------
6.01 Working Capital and Inventories.......................... 29
6.02 Fixed Asset Supplies..................................... 29
i
<PAGE>
Article VII - Repairs, Maintenance and Replacements
- ---------------------------------------------------
7.01 Routine Repairs and Maintenance.......................... 30
7.02 FF&E Reserves............................................ 30
7.03 Building Alterations, Improvements, Renewals, and
Replacements............................................. 34
7.04 Liens.................................................... 36
7.05 Ownership of Replacements................................ 36
Article VIII - Bookkeeping and Bank Accounts
- --------------------------------------------
8.01 Books and Records........................................ 37
8.02 Accounts, Expenditures................................... 38
8.03 Annual Operating Projection.............................. 39
8.04 Operating Losses; Credit................................. 39
Article IX - Trademarks, Trade Names and Service Marks
- ------------------------------------------------------
9.01 Trademarks, Trade Names and Service Marks................ 41
9.02 Purchase of Inventories and Fixed Asset Supplies......... 42
9.03 Breach of Covenant....................................... 42
Article X - Possession and Use of the Hotels
- --------------------------------------------
10.01 Ground Lease............................................. 43
10.02 Management of the Hotels................................. 43
10.03 Chain Services........................................... 44
10.04 Owner's Right to Inspect................................. 45
Article XI - Insurance
- ----------------------
11.01 Property and Operational Insurance....................... 46
11.02 General Insurance Provisions............................. 47
11.03 Cost and Expense......................................... 48
11.04 Owner Provided Coverage.................................. 49
Article XII - Taxes
- --------------------
12.01 Real Estate and Personal Property Taxes.................. 50
Article XIII - Hotel Employees
- -------------------------------
13.01 Employees................................................ 51
ii
<PAGE>
Article XIV - Damage, Condemnation and Force Majeure
- ----------------------------------------------------
14.01 Damage and Repair........................................ 53
14.02 Condemnation............................................. 54
14.03 Force Majeure............................................ 54
Article XV - Defaults
- ---------------------
15.01 Events of Default........................................ 56
15.02 Remedies................................................. 57
Article XVI - Waiver, Partial Invalidity and Other Matters
- ----------------------------------------------------------
16.01 Waiver................................................... 60
16.02 Partial Invalidity....................................... 60
16.03 Estoppel Certificate..................................... 60
Article XVII - Assignment
- -------------------------
17.01 Assignment............................................... 61
17.02 Mortgages and Collateral Assignments..................... 62
Article XVIII - Sale of Hotel or Hotels
- ---------------------------------------
18.01 Right of First Negotiation or First Refusal.............. 63
18.02 Effect of Sale or Refinancing of a Hotel................. 64
Article XIX - Miscellaneous
- ---------------------------
19.01 Right to Make Agreement.................................. 67
19.02 Consents................................................. 67
19.03 Agency................................................... 67
19.04 Applicable Law........................................... 68
19.05 Recordation.............................................. 68
19.06 Headings................................................. 68
19.07 Notices.................................................. 68
19.08 Limited Liability........................................ 69
19.09 Entire Agreement......................................... 69
19.10 Binding Effect........................................... 70
19.11 Compliance with Loan Documents........................... 70
19.12 Effective Date........................................... 70
EXHIBIT A............................................................... 72
iii
<PAGE>
AMENDED AND RESTATED MANAGEMENT AGREEMENT
-----------------------------------------
This Amended and Restated Management Agreement ("Agreement") is executed as
of the 30th day of June, 1993, by MARRIOTT DIVERSIFIED AMERICAN HOTELS, L.P.
("Owner"), a Delaware limited partnership with a mailing address at 10400
Fernwood Road, Bethesda, Maryland 20058, and MARRIOTT INTERNATIONAL, INC.,
formerly known as Marriott Hotels, Inc. ("Management Company"), a Delaware
corporation, with a mailing address at 10400 Fernwood Road, Bethesda, Maryland
20058.
RECITALS:
A. Owner entered into an agreement (the "Purchase Agreement") to acquire
six (6) Marriott full-service hotel properties (collectively, the "Hotels" or
individually, a "Hotel," as more particularly described in Section 1.01 hereof)
which are being operated as Marriott full-service hotel properties. Pursuant to
the Purchase Agreement, Owner acquired fee title to five (5) parcels of real
property and a leasehold interest in another parcel of real property
(collectively, the "Sites" or individually, a "Site") described on Exhibit A
attached to this Agreement and incorporated herein. Each Site is improved with a
Marriott full-service hotel property. Each respective Site and the Hotel thereon
are collectively referred to as a "Hotel," as more particularly described in
Section 1.01 hereof.
B. Owner and Management Company entered into that certain Management
Agreement dated as of February 7, 1990 (the "Prior Management Agreement")
pursuant to which Management Company agreed to manage and operate the Hotels on
the terms and conditions set forth therein.
C. Owner and Management Company desire to amend and restate the Prior
Management Agreement to set forth the terms and conditions on which Owner
desires to have Management Company manage and operate the Hotels and Management
Company is
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willing to perform such services for the account of Owner on the terms and
conditions as so amended and restated.
D. Management Company has represented that it possesses the resources
necessary to fulfill its obligations under this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, and other good and valuable consideration, the receipt of
which is hereby acknowledged, the parties hereto agree that the Prior Management
Agreement is hereby amended and restated as follows:
ARTICLE I
DEFINITION OF TERMS
1.01 Definition of Terms
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The following terms when used in this Agreement shall have the meanings
indicated:
"Accounting Period" shall mean the four (4) week accounting periods having
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the same beginning and ending dates as Management Company's four (4) week
accounting periods, the first of which during any full Fiscal Year shall begin
on the first Saturday of the Fiscal Year and shall end on the fourth following
Friday. There shall be thirteen (13) consecutive four-week Accounting Periods in
each full Fiscal Year, except that the last Accounting Period in a Fiscal Year
may occasionally contain five (5) weeks when necessary to conform the accounting
system to the calendar.
"Additional Hotel Investments" shall mean any amounts expended by Owner,
----------------------------
after the purchase of the Hotels by Owner pursuant to the Purchase Agreement,
for the following purposes:
a) to fund the cost of any expansion or improvements, previously consented
to by Management Company, of any Hotel;
b) to fund the cost of any repairs or replacements under Section 14.01,
with respect to any Hotel, which are not covered by insurance proceeds under
Section 11.01 A;
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c) to fund under Section 7.03A2 the cost of any building alterations and
related expenses requested by Management Company; and,
d) to fund any reasonable business needs (not including amounts funded
under Section 7.02E) of Owner relating to the operation of one or more of the
Hotels, as requested by or otherwise approved by Management Company (which
approval shall not be unreasonably withheld.)
"Additional Hotel Investment Loan" shall mean (i) any indebtedness incurred
--------------------------------
by Owner to fund an Additional Hotel Investment or any refinancing thereof,
provided that the terms of any such loan are commercially reasonable, plus (ii)
expenses of up to one (1) percentage point of principal amount of any
refinancing thereof
"Agreement" shall have the meaning ascribed to it in the Preamble.
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"Annual Operating Projection" shall have the meaning ascribed to it in
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Section 8.03.
"Assignment" shall have the meaning given that term on the signature page
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hereof.
"Base Management Fee" shall mean the fee payable to Management Company as
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provided in Section 5.01.
"Building Estimate" shall have the meaning ascribed to it in Section 7.03A.
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"Capital Proceeds" shall mean Net Refinancing Proceeds and/or Net Sales
----------------
Proceeds.
"Cash Flow Available for Incentive Management Fee" shall have the meaning
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ascribed to it in Section 5.03G.
"Chain Services" shall have the meaning ascribed to it in Section 10.03.
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"Consumer Price Index Adjustment" shall mean an increase by 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 January of the Fiscal Year in question
exceeds the CPI for January 1990.
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"Contingent Incentive Management Fees" shall have the meaning ascribed to
------------------------------------
it in Article V hereof.
"Deductions" shall mean, for all Accounting Periods to date in each Fiscal
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Year, the total of the following Hotel-level expenses incurred by Management
Company in operating Hotels:
1. 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;
2. 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 (to the extent
neither required to be, nor actually funded out of, FF&E Reserves) treated as
Deductions under Section 7.01;
3. Credit card and travel agent commissions;
4. The cost of Inventories and Fixed Asset Supplies consumed in the
operation of the Hotels;
5. Bad debt expense (or reasonable reserves) for uncollectable accounts
receivable as reasonably determined by Management Company;
6. All reasonable costs and fees of independent accountants or other
third parties who perform services required or permitted hereunder;
7. The reasonable cost and expense of technical consultants and
operational experts, including Affiliates of Management Company, retained by
Management Company (or retained by Owner and approved by Management Company) for
specialized services in connection with non-routine Hotel work or other
specialized services not covered by the Base Management Fee;
8. The Base Management Fee provided by Section 5.01;
9. The Hotel's pro rata share of costs and expenses incurred by Management
Company in providing Chain Services;
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10. Insurance costs and expenses (including Hotel Retention or other
deductibles) as provided in Article XI;
11. Any amounts transferred into the FF&E Reserve as provided in Section
7.02B;
12. Taxes, if any, payable by or assessed against Management Company
related to this Agreement or to Management Company's operation of the Hotels
(exclusive of Management Company's income taxes) and all Impositions;
13. Rent payable under any telephone or equipment leases neither required
to be funded nor actually funded out of an FF&E Reserve;
14. Rent and other amounts payable under the parking garage lease with
respect to the Fairview Park Hotel and all Ground Rent; and
15. Such other costs and expenses as (a) are specifically provided for as
Deductions elsewhere in this Agreement or (b) are otherwise reasonably necessary
for the proper and efficient operation of the Hotels and which are customary and
usual costs and expenses of the other Marriott full-service hotels owned, leased
or managed by Management Company or another Marriott Affiliate in the United
States.
"Effective Date" shall mean February 8, 1990.
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"FF&E" shall mean furniture, furnishings, fixtures, vehicles, carpeting
----
and equipment (including communications and computer systems), but shall not
include Fixed Asset Supplies.
"FF&E Replacements" shall have the meaning ascribed to it in Section 7.02A.
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"FF&E Replacement Estimate" shall have the meaning ascribed to it in
-------------------------
Section 8.02D.
"FF&E Reserves" shall have the meaning ascribed to it in Section 7.02A.
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"Fiscal Year" shall mean Management Company's Fiscal Year which now
-----------
ends at midnight on the Friday closest to December 31 in each calendar year; the
new Fiscal Year begins on the Saturday immediately following said Friday. A
partial Fiscal Year between
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the end of the last full Fiscal Year and the Termination of this Agreement
shall, for purposes of this Agreement, constitute a separate Fiscal Year. If
Management Company's Fiscal Year is changed in the future, appropriate
adjustment to this Agreement's reporting and accounting procedures shall be
made; provided, however, that no such change or adjustment shall alter the term
of this Agreement or in any way reduce the applications of Operating Profit or
other payments due hereunder.
"Fixed Asset Supplies" shall mean supply items included within "Property
--------------------
and Equipment" under the Uniform System of Accounts, including, but not limited
to, linen, china, glassware, tableware, uniforms, and similar items, whether
used in connection with public space or rooms.
"Force Majeure" shall have the meaning ascribed to it in Section 14.03.
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"Gross Revenues" shall mean, for all Accounting Periods to date in each
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Fiscal Year, all revenues and receipts of every kind derived from operating the
Hotels and all departments and parts thereof (but not to include Purchase Price
Adjustments (as defined in the Purchase Agreement)), including, but not limited
to: income (from both cash and credit transactions), before commissions and
discounts for prompt or cash payments, from rental of rooms, meeting rooms and
space of every kind; license, lease and concession fees and rentals (not
including gross receipts of any licensees, lessees and concessionaires); income
from food and beverage, and catering sales; income from vending, facsimile and
copy machines; wholesale and retail sales of merchandise (except as otherwise
provided in Section 7.02C hereof with respect to the sale of FF&E and except for
wholesale sales of merchandise not generally related to the business of the
Hotels), service charges, and proceeds, if any, from business interruption or
other loss of income insurance, all determined in accordance with generally
accepted accounting principles; provided, however, that Gross Revenues shall not
include (i) gratuities to Hotel employees; (ii) federal, state or municipal
excise, sales or use taxes or similar assessments or Impositions collected
directly from patrons or guests or included as part of the sales price of any
goods
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or services; (iii) Net Refinancing Proceeds or Net Sales Proceeds; (iv) proceeds
from the sale of FF&E; (v) interest received or accrued with respect to the
funds in the FF&E reserves, the other operating accounts of the Hotels or any
accounts of Owner; or (vi) any cash refunds, cash rebates, cash discounts and
credits of a similar nature, given, paid or returned in the course of obtaining
Gross Revenues or components thereof
"Ground Lease" shall have the meaning ascribed to it in the definition of
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Ground Rent.
"Ground Rent" shall mean, for all Accounting Periods to date in each Fiscal
-----------
Year, the total rent and other amounts paid or accrued to the landlord by Owner
pursuant to that certain Sublease entered into between The Redevelopment Agency
of the City of Fullerton, California and Marriott dated as of March 19, 1987, as
amended by that certain First Amendment to Sublease dated as of May 27, 1987, as
assigned to Owner (the "Ground Lease"), for leasing of the land on which the
Fullerton Hotel is located, as amended, renewed or replaced from time to time.
"Hotel" or "Hotels" shall refer individually or collectively to the Hotel
----- ------
properties listed in Exhibit A hereto. The terms "Hotel" and/or "Hotels"
incorporate not only the Site or Sites but also all easement or other
appurtenant rights thereto, together with the buildings and all other
improvements now or hereafter constructed thereon, and all FF&E and Fixed Asset
Supplies installed or located therein.
"Hotel Retention" shall mean the amount of any loss or reserve under
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Management Company's, Marriott's or a Marriott Affiliate's blanket insurance or
self-insurance programs which is allocated to a hotel, not to exceed the higher
of (a) the maximum per occurrence limit reasonably established for similar
hotels participating in such programs, or (b) if applicable, the insurance
policy deductible on any loss which may fall within high hazard classifications
as mandated by the insurer (e.g., earthquake, flood, windstorm on coastal
properties). If the Hotel is not a participant under Management Company's,
Marriott's or a Marriott Affiliate's blanket insurance or self-insurance
programs, "Hotel
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Retention" shall mean the amount of any loss or reserve allocated to the Hotel,
not to exceed the insurance policy deductible.
"Hotel Term" shall have the meaning ascribed to it in Section 4.01.
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"Impositions" shall have the meaning ascribed to it in Section 12.01.
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"Incentive Management Fee" shall mean an annual amount which equals twenty
------------------------
percent (20%) of Operating Profit in any Fiscal Year. Payment of the Incentive
Management Fee to Management Company shall be subject to the provisions of
Article V hereof.
"Initial Term" shall have the meaning ascribed to it in Section 4.01.
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"Inventories" shall mean "Inventories" as defined in the Uniform System of
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Accounts, such as, but not limited to, provisions in storerooms, refrigerators,
pantries and kitchens; beverages in wine cellars and bars; other merchandise
intended for sale; fuel; mechanical supplies; stationery, and other expensed
supplies and similar items.
"Lender" shall mean NationsBank of Georgia, National Association, formerly
------
known as The Citizens and Southern National Bank, and any successor thereto.
"Loan Agreement" shall mean that certain agreement entered into between
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Owner and Lender regarding the Permanent Loan, as the same may be amended,
restated, supplemented or otherwise modified from time to time in accordance
with the terms thereof
"Management Company" shall have the meaning ascribed to it in the Preamble.
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"Marriott" shall mean Marriott Corporation, the corporate parent of
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Management Company.
"Marriott Affiliate" shall mean Marriott and any corporation of which
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Marriott, either directly or indirectly through one or more intermediary
corporations, owns over fifty percent (50%) of the voting stock or any
partnership wherein Marriott, either directly or indirectly, through one or more
intermediary corporations or other entities, owns or
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controls the general partnership interests and over fifty percent (50%) of the
voting and economic partnership interests of such partnership.
"Net Administrative Expenses" shall mean, with respect to any Fiscal
---------------------------
Year, an amount equal to the lesser of (i) the excess, if any, of (a) the
aggregate amount of payments for, or reserves created for payment for,
administrative expenses of Owner with respect to such Fiscal Year over (b) the
actual amount of interest income received by Owner on funds held by Owner for
working capital purposes (excluding interest on any funds held by Management
Company, such as the FF&E Reserve and Working Capital hereunder) with respect to
such Fiscal Year; or (ii) an amount equal to $50,000 for 1990 or, for each
Fiscal Year after 1990, an amount equal to $50,000 increased by the CPI.
"Net Refinancing Proceeds" shall mean the cumulative full amount
------------------------
disbursed (in one or more advances) under any loan or loans obtained by Owner
(other than Additional Hotel Investment Loans), from time to time, to the extent
and in the amount such disbursement or disbursements are not used for the
following purposes: (i) the simultaneous repayment of other indebtedness of
Owner, (ii) commercially reasonable transaction costs, and (iii) the payment of,
or creation of reserves in the reasonable discretion of Owner for, reasonable
and necessary expenditures of Owner, including (but not limited to) Owner's
administrative expenses (such amount not to exceed $50,000 for 1990 or, for each
Fiscal Year after 1990, such amount not to exceed $50,000 increased by the CPI)
and Working Capital needs related to the Hotels.
"Net Sales Proceeds" shall mean the cumulative net proceeds received by
------------------
Owner, from time to time, from any one or more of the following: (i) any Sale of
a Hotel; (ii) the condemnation, eminent domain taking, casualty or other
disposition of any of (or any portion of) the Hotels or the Sites; or (iii) the
liquidation of Owner's property interest in the Hotels in connection with a
dissolution of Owner. The phrase "net proceeds," as used in the foregoing
sentence, shall mean the gross proceeds received from any of the foregoing to
the extent and in the amount such gross proceeds are not used for the
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following purposes: (i) simultaneous repayment of any indebtedness secured by
the Hotel or Hotels being sold (or the pro rata portion (according to allocation
of the loan amount to such Hotel) of indebtedness secured by all of the Hotels)
and all other indebtedness required to be repaid therefrom; (ii) commercially
reasonable transaction costs and, in the case of a condemnation, eminent domain
taking or casualty, all costs of repairing, restoring, replacing, and
reconstructing a Hotel or any portion thereof; and (iii) the payment of, or
creation of reserves in the reasonable discretion of Owner for, Owner s
administrative expenses (such amount not to exceed $50,000 for 1990 or, for each
Fiscal Year after 1990, such amount not to exceed $50,000 increased by the CPI)
and Working Capital needs related to the remaining Hotels. The term "Net Sales
Proceeds" shall not include proceeds from disposition of FF&E described in
Section 7.02C hereof
"Operating Loss" shall mean, for all Accounting Periods to date in each
--------------
Fiscal Year, the excess, if any, of Deductions over Gross Revenues.
"Operating Profit" shall mean, for all Accounting Periods to date in
----------------
each Fiscal Year, the excess of Gross Revenues over Deductions and in no event
less than zero.
"Other Qualifying Debt" shall mean the sum of, without duplication, (i)
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Additional Hotel Investment Loans; (ii) indebtedness incurred to pay the
Incentive Management Fee or any Contingent Incentive Management Fees and (iii)
Replacement Debt with respect to each of the foregoing.
"Other Qualifying Debt Service" shall mean, for all Accounting Periods
-----------------------------
to date in each Fiscal Year, all interest and principal actually paid, accrued
or payable with respect to outstanding Other Qualifying Debt plus all fees
related thereto and all penalties related thereto and which are attributable to
acts or omissions of Management Company.
"Owner" shall mean Marriott Diversified American Hotels, L.P., and its
-----
successors and assigns.
"Owner's Contributed Capital" shall mean the sum of(a) the amount of
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equity capital allocated to the Hotels, which amount is equal to $41,818,182,
plus (b) the amount
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of Additional Hotel Investments (excluding those funded by an Additional Hotel
Investment Loan) from time to time with respect to the Hotels.
"Owner's Net Contributed Capital" shall mean the excess of(a) Owner's
-------------------------------
Contributed Capital, over (b) cumulative retentions by Owner from Net
Refinancing Proceeds and Net Sales Proceeds of the Owner's 15% Priority and
Capital Return pursuant to Section 5.04(2), excluding retentions necessary to
satisfy clause (a) of the definition of "Owner's 15% Priority and Capital
Return".
"Owner's 10% Priority Return" shall mean, for all Accounting Periods to
---------------------------
date in each Fiscal Year, an amount equal to an annual non-cumulative amount
retained by Owner out of Operating Profit, as set forth in Section 5.03C hereof;
equal to ten percent (10%) of the average daily balance outstanding of Owner's
Contributed Capital for such Fiscal Year, subject to reduction upon sale of a
Hotel and upon any Termination.
"Owner's 15% Priority and Capital Return" shall mean, for all
---------------------------------------
Accounting Periods to date in each Fiscal Year, an amount equal to (a) the
portion not yet retained by Owner from Operating Profit, Net Refinancing
Proceeds or Net Sales Proceeds of a fifteen percent (15%) per annum cumulative
non-compounded return on the average daily balance outstanding of Owner's Net
Contributed Capital plus (b) one hundred percent (100%) of Owner's Net
Contributed Capital.
"Partner" or "Partners" shall mean a partner or partners in Owner.
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"Partnership Agreement" shall mean the Amended and Restated Agreement
---------------------
of Limited Partnership of Owner dated February 7, 1990.
"Permanent Loan" shall mean the loan in the original principal amount
--------------
of One Hundred Twenty-Eight Million Dollars ($128,000,000) provided to Owner by
Lender to finance a portion of the purchase price of the Hotels pursuant to the
Purchase Agreement and to pay certain other amounts pursuant to the Loan
Agreement, such as Lender's fees, title insurance, and mortgage and transfer
taxes, as such loan may be restructured or otherwise modified from time to time.
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<PAGE>
"Prime Rate" shall mean the prime rate of interest announced from time
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to time by Bankers Trust Company, New York, New York.
"Purchase Agreement" shall have the meaning ascribed to it in the
------------------
Recitals.
"Qualifying Debt Service" shall mean Qualifying Mortgage Debt Service
-----------------------
and Other Qualifying Debt Service.
"Qualifying Mortgage Debt" shall mean the sum of; without duplication,
------------------------
(i) the Permanent Loan, and (ii) Replacement Debt with respect thereto.
"Qualifying Mortgage Debt Service" shall mean, for all Accounting
--------------------------------
Periods to date in each Fiscal Year, all interest and principal actually paid,
accrued or payable with respect to outstanding Qualifying Mortgage Debt plus all
fees related thereto and all penalties attributable to acts or omissions of
Management Company. In no event, however, shall "Qualifying Mortgage Debt
Service" include, with respect to any such indebtedness: (i) any balloon
payments; or (ii) voluntary prepayments on the Permanent Loan; or (iii) any
payments or repayments of the portion of the principal or interest of any
indebtedness which is incurred for the purpose of distributing the same to
Partners of Owner; or (iv) in the case of Replacement Debt relating to the
Permanent Loan, any amortization of net principal to the extent such
amortization exceeds that which would have been amortized if a 20-year level
16-payment amortization schedule had been used (using as the constant a rate
based on the actual fixed interest rate in the case of a fixed rate loan or a
rate based on 300 basis points over the yield on Treasury notes with maturities
comparable to the term of such loan in the case of a floating rate loan). The
term "balloon payments," as used in this Agreement, shall mean any repayments or
prepayments (whether voluntary or involuntary) of principal in any given Fiscal
Year (regardless of whether the borrower is permitted or obligated to make the
same) to the extent that any such repayments or prepayments exceed the principal
amount, if any, that would have been payable during such Fiscal Year if the
terms of such indebtedness had provided for level payments of
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principal and interest using a 20-year level payment amortization schedule
(using as the constant the rate determined in clause (iv) above).
"Renewal Terms " shall have the meaning ascribed to it in Section 4.01.
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"Replacement Debt" shall mean that portion of any indebtedness Owner
----------------
incurs on commercially reasonable terms (i) to refinance part or all of the
original principal amount of the Permanent Loan or part or all of the then
outstanding balance of Other Qualifying Debt, plus (ii) to finance the
reasonable transactions costs and loan origination fees of any refinancings in
clause (i) above but not in excess of 1% of the principal amount of such
refinancing.
"Sale of a Hotel" or "Sale of the Hotels" shall mean any sale,
--------------- ------------------
assignment, transfer or other disposition, for value or otherwise, voluntary or
involuntary, of the fee simple title (or leasehold interest, as the case may be)
to one or more of the Hotels.
"Seller" shall mean Marriott and each other "Seller" under the Purchase
------
Agreement.
"Site" or "Sites" shall refer individually or collectively to the
---- -----
parcels of land whose addresses are set forth on Exhibit A attached hereto and
incorporated herein, including the land under the Fairview Park Hotel parking
garage, if acquired by Owner.
"Termination" shall mean the expiration or sooner cessation of this
-----------
Agreement with respect to a specific Hotel or all the Hotels.
"Uniform System of Accounts" shall mean the Uniform System of Accounts
--------------------------
for Hotels, Eighth Revised Edition, 1986, as published by the Hotel Association
of New York City, Inc.
"Working Capital" shall mean funds which are reasonably necessary for
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the day-today operation of the Hotels' business, including, without limitation,
amounts sufficient for
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the maintenance of change and petty cash funds, operating bank accounts,
receivables, payrolls, prepaid expenses and funds required to maintain
Inventories, less accounts payable and accrued current liabilities.
END OF ARTICLE I
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ARTICLE II
APPOINTMENT OF MANAGEMENT COMPANY
---------------------------------
2.01 Appointment
-----------
Owner hereby appoints and employs Management Company as Owner's
exclusive agent to supervise, direct and control the management and operation of
the Hotels for the term provided in Article IV. Management Company accepts said
appointment and agrees to manage the Hotels as full-service Marriott hotels
during their respective Hotel Terms and in accordance with the terms and
conditions hereinafter set forth. The performance of all activities by
Management Company hereunder shall be for the account of Owner. Management
Company may not delegate its duties hereunder except to a Marriott Affiliate
which satisfies the requirements of Section 17.01A1 hereof. Management Company
represents and warrants that it possesses the resources necessary to fulfill its
obligations under this Agreement. Marriott covenants that it and/or Marriott
Affiliates will make available to Management Company any and all resources
possessed by Marriott and/or Marriott Affiliates, but not otherwise possessed by
Management Company, necessary for Management Company to fulfill its obligations
hereunder.
2.02 Delegation of Authority
-----------------------
The operations of the Hotels shall be under the exclusive supervision
and control of Management Company which, except as otherwise specifically
provided in this Agreement, shall be responsible for the proper and efficient
operation of the Hotels. Except as otherwise provided herein, Management Company
shall have discretion and control, free from interference, interruption or
disturbance, in all matters relating to management and operation of each Hotel,
including, without limitation, charges for rooms and commercial space, credit
policies, food and beverage services, employment policies, granting of
concessions or leasing of shops and agencies within the Hotels, receipt, holding
and disbursement of funds, maintenance of bank accounts, procurement of
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Inventories, supplies and services, promotion and publicity and, generally, all
activities necessary for operation of the Hotels.
2.03 Licenses and Permits
--------------------
A. Management Company warrants to Owner that, to the best of its
knowledge, there are no covenants or restrictions that would prohibit or limit
Management Company from operating each Hotel as a Marriott full-service hotel,
including cocktail lounges, restaurants and other facilities customarily a part
of or related to a Marriott full-service hotel. Upon request by Management
Company, Owner shall not unreasonably withhold the prompt signing, without
charge, of any application for licenses, permits or other instruments necessary
for operation of each Hotel as a Marriott full-service hotel.
B. Management Company shall have the option to terminate this Agreement
with respect to a given Hotel, at any time, upon one hundred twenty (120) days'
written notice to Owner, in the event of a withdrawal or revocation, by any
lawful governing body having jurisdiction thereof; of any material license or
permit that materially affects the operation of the Hotel provided: (i) such
withdrawal or revocation is not the fault of Management Company, but rather is
due to circumstances beyond Management Company's reasonable control; (ii) all
applicable appeals to higher governmental authorities regarding such withdrawal
or revocation have been exhausted; (iii) Management Company has made every good
faith, reasonable effort to obtain a substitute license or permit that would
allow for the continued operation of such Hotel as a Marriott full-service
hotel; and (iv) such revocation is not common with other full-service hotels in
the same market area.
2.04 Non-Discrimination
------------------
The parties recognize that Management Company, Marriott and Marriott
Affiliates either own or manage other hotels. Certain of these hotels, now or in
the future, may be located within the general geographical area of one or more
of the Hotels or otherwise may be competitive with one or more of the Hotels.
Management Company, Marriott and
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Marriott Affiliates shall ensure that no favoritism shall be accorded to such
other hotels owned or managed by Management Company, Marriott, or a Marriott
Affiliate on the basis of the ownership or management thereof and that, at all
times during the term of this Agreement, Management Company, Marriott and
Marriott Affiliates will operate the various hotels under its management,
including the Hotels, in a non-discriminatory manner.
END OF ARTICLE II
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<PAGE>
ARTICLE III
OWNERSHIP OF THE HOTELS
-----------------------
3.01 Ownership of Hotels
-------------------
A. Owner hereby covenants that it holds and will keep and maintain good
and marketable title to the respective fee or leasehold interests in each Hotel,
free and clear of any and all liens, encumbrances or other charges, except as
follows:
1. Easements or other encumbrances (other than those described
in subsections 2, 3 and 4 hereof) which do not adversely affect the operation of
any Hotel by Management Company, including, without limitation, any encumbrances
or other defects of title subject to which title was conveyed to Owner under the
terms of the Purchase Agreement;
2. Mortgages, deeds of trust or similar security instruments
which contain a provision reasonably acceptable to Management Company's counsel
that this Agreement will not be subject to forfeiture or Termination other than
in accordance with the terms hereof; notwithstanding a default under such
mortgage, deed of trust or security instrument; and which either (i) secure one
of the following: (x) any indebtedness on which all or a portion of the payments
constitute Qualifying Debt Service, or (y) debt incurred for distribution to the
Partners of Owner, or (ii) secure any amount due under the Loan Agreement.
3. Liens or taxes, assessments, levies or other public charges
not yet due or which are being contested in good faith;
4. Liens, encumbrances, or other charges resulting from
Management Company's acts; and
5. The terms and conditions of the Ground Lease.
B. Provided Management Company is not in monetary default under this
Agreement, Owner shall pay and discharge, on or before the due date, any and all
installments of principal and interest due and payable upon any mortgage, deed
of trust or
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like instrument described in this Section (including, without limitation, any
amounts owed under the Loan Agreement) and shall indemnify Management Company
from and against all claims, litigation and damages arising from the failure to
make such payments as and when required. Notwithstanding the foregoing, Owner
shall not be required to indemnify Management Company for lost profits if the
reason for failure to pay and discharge amounts due under any instrument
described in this section is due to insufficient Operating Profits to make such
payments.
3.02 Compliance with Ground Lease
----------------------------
A. Unless the contrary is otherwise permitted in this Agreement,
Management Company shall take such actions and refrain from taking such actions,
as shall be necessary for Owner to comply with the Ground Lease, and the Parking
Garage Lease applicable to the Fairview Park Hotel listed in Exhibit A hereto,
and shall make reasonable efforts to comply with other covenants, restrictions
and declarations affecting the Hotels.
END OF ARTICLE III
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<PAGE>
ARTICLE IV
TERM
----
4.01 Term
----
A. The term of this Agreement shall be from the Effective Date to the
expiration of the Hotel Term (as defined in subsection B below) for the last
Hotel to which this Agreement applies.
B. With respect to each Hotel, the "Hotel Term" shall consist of an
"Initial Term" and the "Renewal Term(s)". The "Initial Term" shall begin on the
Effective Date and shall continue until December 31, 2009. Each Hotel Term will
automatically be extended and renewed (on the same terms and conditions
contained herein, except as set forth in the final sentence of this Section
4.01B) for (i) each of four (4) successive periods of ten (10) Fiscal Years with
regard to the Fullerton Hotel and (ii) for each of five (5) successive periods
of ten (10) Fiscal Years with regard to the other five Hotels ("Renewal Terms"),
provided that an "event of default" by Management Company has not occurred under
Section 15.01 hereof (or, if such an "event of default" has occurred, that it is
being cured in accordance with the provisions of Section 15.01 or 15.02 hereof)
unless Management Company, at its option, elects to terminate this Agreement as
to any or all of the Hotels as set forth below. If Management Company elects to
exercise such option to terminate this Agreement, as to one or more of the
Hotels, on the expiration of the then current Hotel Term with respect to such
Hotel or Hotels, Management Company shall give Owner written notice to that
effect prior to the expiration of the then current Hotel Term with respect to
such Hotel or Hotels. If Management Company elects to exercise such option,
Management Company shall, unless sooner released by Owner, continue to manage
such Hotel or Hotels until the earliest of: (i) the sale of such Hotel or
Hotels, (ii) such time as Owner obtains a new manager therefor, or (iii)
eighteen (18) months from the date of notice from Management Company exercising
such option, but in all three cases not earlier than the expiration of the then
current term. In the event Management Company
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<PAGE>
elects to terminate as to one or more, but not all, of the Hotels, the
adjustments described in subsections B through F of Section 18.02 shall be made
to this Agreement.
4.02 Performance Termination
-----------------------
A. Subject to the provisions of Section 4.02B below, Owner shall have
the option to terminate this Agreement with respect to all of the Hotels if the
sum of the Operating Profit for all of the Hotels during any period consisting
of three (3) consecutive Fiscal Years during the term of this Agreement (not
including any period of time before the expiration of the 1992 Fiscal Year) does
not equal or exceed eight percent (8%) of the sum total for the same three (3)
Fiscal Years of (i) the original total cost ($169,818,182) of the Hotels, as
adjusted for any Termination, added once for each of such three (3) Fiscal
Years, plus (ii) the weighted average outstanding balance of Additional Hotel
Investments with respect to the Hotels, added once for each of such three (3)
Fiscal Years. Solely for purposes of the foregoing calculation, the term
"Operating Profit" shall include the aggregate amount of any payments pursuant
to Section 4.02B with respect to such Fiscal Years, with all such payments being
applied first to the earliest Fiscal Year for which Operating Profit did not
equal eight percent (8%) of such sum total for such Fiscal Year and then being
applied to each successive Fiscal Year until the full amount has been applied
(but no more than an amount equal to eight percent (8%) of such sum total for a
Fiscal Year shall be applied to such Fiscal Year). Such option to terminate
shall be exercised by serving written notice thereof on Management Company no
later than sixty (60) days after the receipt by Owner of the annual accounting
under Section 8.01 hereof for such third consecutive Fiscal Year. Such notice
shall state the basis on which Owner asserts the right of termination and shall
show all mathematical calculations constituting the basis therefor. If
Management Company does not elect to avoid termination pursuant to Section 4.02B
below, this Agreement shall terminate as of the end of the second full
Accounting Period following the date on which Management Company receives
Owner's written notice of its intent to terminate this Agreement. Owner's
failure to exercise its
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<PAGE>
right to terminate this Agreement pursuant to this Section 4.02A during any
given Fiscal Year shall not be deemed an estoppel or waiver of Owner's right to
terminate this Agreement as to subsequent Fiscal Years to which this Section may
apply.
B. Upon receipt of Owner's written notice of termination under
Section 4.02A, Management Company shall have the option, to be exercised within
sixty (60) days after receipt of said notice, to avoid such termination by
lending to Owner the amount of any deficiency described in Section 4.02A, and
upon paying such deficiency, Management Company shall be deemed to have
satisfied the test described in Section 4.02A for such three (3) year period. If
Management Company exercises such option, then the foregoing Owner's election to
terminate this Agreement under Section 4.02A shall be cancelled and be of no
force or effect, and this Agreement shall not terminate. Such cancellation,
however, shall not affect the right of Owner, as to subsequent Fiscal Years to
which this Section 4.02 applies, to again elect to terminate this Agreement
pursuant to the provisions of Section 4.02A (which subsequent election shall
again be subject to Management Company's rights under this Section 4.02B). If
Management Company does not exercise its option to make the loan permitted by
this Section 4.02B, then this Agreement shall be terminated as of the date set
forth in Section 4.02A.
4.03 Actions to be Taken on Termination
----------------------------------
Upon a Termination of this Agreement with respect to any one or more of
the Hotels, the following shall be applicable:
A. Management Company shall prepare a final accounting statement with
respect to such Hotel or Hotels, as more particularly described in Section 8.01
hereof, dated as of the date of Termination. Within thirty (30) days of the
receipt by Owner of such final accounting statement, the parties will make
whatever cash adjustments are necessary pursuant to such final statement. The
cost of preparing such final accounting statement shall be a Deduction, unless
the Termination occurs as a result of a default by either party, in which case
the defaulting party shall pay such cost.
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<PAGE>
B. Management Company shall release and transfer to Owner any of Owners
funds which are held or controlled by Management Company with respect to such
Hotel or Hotels.
C. Management Company shall make available to Owner such books, records
and other documents respecting such Hotel or Hotels (including those from prior
years, subject to Management Company's reasonable records retention policies) as
will be needed by Owner to prepare the accounting statements, in accordance with
the Uniform System of Accounts, for such Hotel or Hotels for the year in which
the Termination occurs and for any subsequent year.
D. Management Company shall (to the extent permitted by law) assign to
Owner or to the new manager all operating licenses and permits for such Hotel or
Hotels which have been issued in Management Company's name; provided that if
Management Company has expended any of its own funds in the acquisition of any
of such licenses or permits, Owner shall reimburse Management Company therefor
if it has not done so already.
E. Appropriate adjustments shall be made regarding the application of
this Agreement to any remaining Hotels, such as, but not limited to, those
adjustments described in Section 18.02. In the event of Termination for any
reason other than a sale of such Hotel or Hotels or as a result of an "event of
default" by Owner hereunder, the adjustments described in Section 18.02 shall be
made with respect to the remaining Hotels, and Owner shall be released from all
further obligations hereunder with respect to the terminated Hotel or Hotels.
F. Various other actions shall be taken, as described in this
Agreement, including, but not limited to, the actions described in Sections
6.01, 9.02, 11.03 and 13.01C.
G. Management Company shall peacefully vacate and surrender such Hotel
or Hotels to Owner and cooperate with Owner and the new manager after the
Termination
END OF ARTICLE IV
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<PAGE>
ARTICLE V
COMPENSATION OF MANAGEMENT COMPANY
----------------------------------
5.01 Base Management Fee
-------------------
A. In consideration of services to be performed during the term of this
Agreement, Management Company shall be paid an annual amount equal to three
percent (3%) of Gross Revenues (the "Base Management Fee") to cover the Hotels'
share of costs and expenses incurred by Management Company or its affiliated
companies for services which benefit all other Marriott full-service hotels
owned, leased or managed by Management Company or another Marriott Affiliate in
the United States, are performed by personnel not normally located at the Hotels
and are not Chain Services. Such services include executive supervision,
consulting, planning, policy making, corporate finance, risk planning and
insurance services, personnel and employee relations, in-house legal services,
legislative and governmental representation, trademark protection, research and
development, and the services of Management Company's technical, operational and
marketing experts making periodic inspection and consultation visits to the
Hotels but not the services of the personnel of the Architecture and
Construction Division of Marriott or its affiliates providing architectural,
technical or procurement services for the Hotel. Notwithstanding anything to the
contrary contained herein, any payments to third parties for services covered by
the Base Management Fee shall be borne by Management Company.
5.02 Incentive Management Fee
------------------------
In further consideration of the services to be performed during the
term of this Agreement, an Incentive Management Fee in an annual amount equal to
twenty percent (20%) of Operating Profit in each Fiscal Year shall be payable to
Management Company as provided in Sections 5.03 and 5.04.
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<PAGE>
5.03 Payment of Incentive Management Fee and Contingent Incentive
------------------------------------------------------------
Management Fees from Operating Profit
- -------------------------------------
The payment of the Incentive Management Fee with respect to each Fiscal
Year (and with respect to each Accounting Period thereof) shall be payable out
of Operating Profit in accordance with the following sequence of computations,
and no Incentive Management Fee shall be deemed earned or accrued until
sufficient Operating Profit is available for actual payment thereof:
A. First, Owner shall retain any Operating Profit (to the extent of
Operating Profit in that Fiscal Year) in amounts sufficient to pay the
Qualifying Mortgage Debt Service for such Fiscal Year (which shall be prorated
among the Accounting Periods within any given Fiscal Year).
B. Second, beginning January 1, 1993, Owner shall retain any remaining
Operating Profit in an amount sufficient to pay Net Administrative Expenses for
such Fiscal Year.
C. Third, Owner shall retain any remaining Operating Profit until Owner
has retained an amount equal to Owner's 10% Priority Return (which shall be
prorated among the Accounting Periods within any given Fiscal Year).
D. Fourth, Owner shall retain any remaining Operating Profit in amounts
sufficient to pay any remaining Other Qualifying Debt Service for such Fiscal
Year (which shall be prorated among the Accounting Periods within any given
Fiscal Year).
E. Fifth, Owner shall retain any and all such additional amounts as
Owner is required pursuant to the terms of the Permanent Loan to pay prior to
payment of Incentive Management Fees and Contingent Incentive Management Fees
hereunder.
F. Sixth, Owner shall retain fifty percent (50%) of any remaining
Operating Profit for such Fiscal Year (which shall be prorated among the
Accounting Periods within any given Fiscal Year).
- 25 -
<PAGE>
G. Seventh, Owner shall apply the remaining fifty percent (50%) of
Operating Profit for such Fiscal Year (or portion thereof) ("Cash Flow Available
for Incentive Management Fee") to pay Management Company the Incentive
Management Fee for the current Fiscal Year. In the event Cash Flow Available for
Incentive Management Fee is insufficient to pay the full Incentive Management
Fee for any Fiscal Year, such unpaid Incentive Management Fee shall be payable,
without adjustment for interest, as a "Contingent Incentive Management Fee"
pursuant to this Article V; provided, however, that the maximum amount of unpaid
Incentive Management Fees that can become Contingent Incentive Management Fees
during the period beginning on the Effective Date and ending on December 31,
1999 is Twelve Million Dollars ($12,000,000) on an aggregate, cumulative basis.
Following application pursuant to the above to pay the Incentive Management Fee
for the current year, Owner shall apply any remaining balance of Cash Flow
Available for Incentive Management Fee to pay Management Company any Contingent
Incentive Management Fees then owed to Management Company. Upon termination of
this Agreement with respect to a Hotel or Hotels due to a default of Management
Company, or if Management Company fails to renew the Hotel Term with respect to
such Hotel or Hotels, or if this Agreement is terminated pursuant to Section
4.02, Management Company shall not be permitted to receive payment of any
Contingent Incentive Management Fees with respect thereto.
H. Eighth, following application pursuant to paragraph G above, Owner
shall retain any remaining balance of Cash Flow Available for Incentive
Management Fee.
5.04 Payment of Incentive Management Fee and Contingent Incentive
------------------------------------------------------------
Management Fees from Capital Proceeds
- -------------------------------------
In the event that Owner, from time to time during the term of this
Agreement, realizes Capital Proceeds, then Owner shall apply such Capital
Proceeds (to the extent thereof) in the following order and amounts:
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<PAGE>
(1) First, Owner shall retain Capital Proceeds until Owner has
retained an amount equal to any unamortized balance under Section
7.02E3 hereof;
(2) Second, Owner shall retain any remaining balance of such Capital
Proceeds until Owner has retained from appropriate sources an amount
equal to Owner's 15% Priority and Capital Return.
(3) Third, Owner shall retain fifty percent (50%) of any remaining
balance of Capital Proceeds.
(4) Fourth, Owner shall apply up to a maximum of Six Million Dollars
($6,000,000) (on an aggregate, cumulative basis) of the remaining
fifty percent (50%) of Capital Proceeds to pay to Management Company
any Incentive Management Fees or Contingent Incentive Management Fees
then owed to Management Company.
(5) Fifth, Owner shall retain any remaining balance of Capital
Proceeds.
5.05 Accounting and Interim Payment
------------------------------
A. Within twenty (20) days after the close of each Accounting Period,
Management Company shall submit an interim accounting to Owner showing, in
reasonable detail, the amount (and calculation where appropriate) of Gross
Revenues, Deductions, FF&E Reserve contributions and expenditures, Operating
Profit and Cash Flow Allowable for Incentive Management Fee, and all retentions,
distributions and other applications thereof with respect to the Hotels.
Management Company shall transfer with each accounting any interim amounts due
Owner and shall retain any interim management fees due Management Company (as
described in this Article V). Each accounting will be prepared on a consolidated
and consolidating basis.
B. Calculations and payments of the Base Management Fee, the Incentive
Management Fee, the Contingent Incentive Management Fees and applications of
Operating Profit made with respect to each Accounting Period within a Fiscal
Year shall be accounted for cumulatively. Within seventy-five (75) days after
the end of each Fiscal
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<PAGE>
Year, Management Company shall submit an accounting, as more fully described in
Section 8.01, for such Fiscal Year to Owner, which accounting shall be
controlling over the interim accountings. Any adjustments required by the Fiscal
Year accounting shall be made by cash payments within five (5) business days of
the receipt by Owner of such final accounting. No adjustment shall be made for
any Operating Loss in a preceding or subsequent Fiscal Year.
C. Within twenty (20) days after the closing of a refinancing or a sale
of one or more of the Hotels, Owner will provide Management Company an
accounting showing Owner's 10% Priority Return and Owner's 15% Priority and
Capital Return, Net Sales Proceeds, and Net Refinancing Proceeds (as the case
may be).
D. Within twenty (20) days after the close of each Accounting Period,
Owner will provide Management Company an accounting showing Owner's 10% Priority
Return and Net Contributed Capital.
E. Notwithstanding anything to the contrary contained herein, Owner
shall not be required to make any payment to Management Company if and to the
extent payment thereof would violate Section 6.1 of the Loan Agreement, Section
2 of the Assignment or any similar provision of any other instrument relating to
or securing the financing provided thereunder or any refinancing thereof.
END OF ARTICLE V
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<PAGE>
ARTICLE VI
WORKING CAPITAL AND FIXED ASSET SUPPLIES
----------------------------------------
6.01 Working Capital and Inventories
-------------------------------
Owner shall from time to time promptly advance, upon request of
Management Company, any funds necessary to maintain Working Capital and
Inventories at levels reasonably determined by Management Company to be
necessary to satisfy the needs of each Hotel as its operation may from time to
time require. Funds so advanced for Working Capital shall be utilized by
Management Company on behalf of Owner for the purposes of this Agreement
pursuant to cash-management policies established for the other Marriott
full-service hotels owned, leased or managed by Management Company or another
Marriott Affiliate in the United States, but Owner shall be the beneficial owner
of all such funds throughout the term of this Agreement. Upon Termination with
respect to any Hotel or Hotels, Management Company shall return to Owner any
unused Working Capital (including Inventories), except for Inventories purchased
by Management Company pursuant to Section 9.02.
6.02 Fixed Asset Supplies
--------------------
Owner shall from time to time promptly advance, upon request of
Management Company, any funds necessary to maintain Fixed Asset Supplies at
levels reasonably determined by Management Company to be necessary to satisfy
the needs of each Hotel as its operation may from time to time require. Fixed
Asset Supplies shall remain the property of Owner throughout the term of this
Agreement except for Fixed Asset Supplies purchased by Management Company
pursuant to Section 9.02.
END OF ARTICLE VI
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<PAGE>
ARTICLE VII
REPAIRS, MAINTENANCE AND REPLACEMENTS
-------------------------------------
7.01 Routine Repairs and Maintenance
-------------------------------
Management Company shall maintain the Hotels in good repair and
condition and in conformity with applicable laws and regulations and shall make
or cause to be made such routine maintenance, repairs and minor alterations, the
cost of which can be expensed under generally accepted accounting principles, as
it, from time to time, deems reasonably necessary for such purposes. The cost of
such maintenance, repairs and alterations shall be paid from Gross Revenues and
shall be treated as a Deduction in determining Operating Profit. The cost of
non-routine repairs and maintenance, either to a Hotel building or its FF&E,
shall be paid for in the manner described in Sections 7.02 and 7.03.
7.02 FF&E Reserves
-------------
A. Management Company shall establish a separate escrow reserve account
for each Hotel ("FF&E Reserve") to cover the cost of the following ("FF&E
Replacements"):
1. Replacements and renewals related solely to the Hotels'
FF&E (including communication systems and computer systems); and
2. Certain routine repairs and maintenance to the Hotels'
buildings which are normally capitalized under generally accepted accounting
principles, such as exterior and interior repainting, resurfacing building
walls, floors, roofs and parking areas, buying or leasing replacement vehicles,
and replacing folding walls and the like, but which are not major repairs,
alterations, improvements, renewals or replacements to such building's structure
or to its mechanical, electrical, heating, ventilating, air conditioning,
plumbing or vertical transportation systems, the cost of which are paid by Owner
under Section 7.03 rather than from the FF&E Reserve. Subject to any reasonable
limitations required by the Permanent Loan or Replacement Debt with respect
thereto, the FF&E Reserve accounts shall be maintained in one or more banks,
money market or similar interest-bearing accounts designated by Owner and
approved by Management Company.
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<PAGE>
B. All expenditures of funds initially deposited into the Dayton Hotel
Reserve Account (together with any interest earned thereon) shall be subject to
Owner's approval (not to be unreasonably withheld), except that Management
Company may use such funds in 1993 or later in order to perform a major rooms
renovation. Subject to the provisions of subsection E below, (i) with respect to
each of the Fairview Park, Southfield, Livonia and Fullerton Hotels, during
Fiscal Years 1993 and 1994, Management Company shall transfer into the FF&E
Reserve an amount equal to three percent (3%) of Gross Revenues from such Hotels
for each such Fiscal Year; during Fiscal Years 1995, 1996, 1997, 1998 and 1999,
Management Company shall transfer into the FF&E Reserve an amount equal to four
percent (4%) of Gross Revenues from such Hotels for each such Fiscal Year; and
during Fiscal Year 2000 and each Fiscal Year thereafter, Management Company
shall transfer into the FF&E Reserve an amount equal to four percent (4%) of
Gross Revenues from such Hotels for each of such Fiscal Years; (ii) with respect
to the Dayton Hotel, Management Company shall transfer into the FF&E Reserve
with respect to such Hotel an annual amount equal to five percent (5%) of Gross
Revenues from such Hotel in each Fiscal Year; and (iii) with respect to the
Research Triangle Park Hotel, Management Company shall transfer into the FF&E
Reserve with respect to such Hotel, an annual amount equal to four percent (4%)
of Gross Revenues from such Hotel in Fiscal Years 1993, 1994, 1995, 1996 and
1997, and an annual amount equal to five percent (5%) of Gross Revenues from
such Hotel in Fiscal Year 1998 and each Fiscal Year thereafter. Transfers into
the FF&E Reserve shall be made at the time of each interim accounting described
in Section 5.05A. All amounts transferred into the FF&E Reserve as required
above shall be deducted from Gross Revenues in determining Operating Profit and
deposited in the special FF&E Reserve account described in Section 7.02A hereof.
C. Management Company shall from time to time make such FF&E
Replacements as it deems necessary, up to the balance in each FF&E Reserve. No
expenditures will be made in excess of said balance without the prior approval
of Owner. At the end of each
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<PAGE>
Fiscal Year, any amounts remaining in each FF&E Reserve shall be carried forward
to the next Fiscal Year. Proceeds from the sale of FF&E no longer necessary to
the operation of a Hotel shall be deposited in the FF&E Reserve with regard to
such Hotel. Each FF&E Reserve will be kept in an interest-bearing account, and
any interest which accrues thereon shall be retained in such FF&E Reserve.
Neither (i) proceeds from the disposition of FF&E, nor (ii) interest which
accrues on amounts held in the FF&E Reserves, shall (a) result in any reduction
in the required contributions to the FF&E Reserves set forth in subsection B
above, nor (b) be included in Gross Revenues.
D. Management Company shall prepare an estimate ("FF&E Replacement
Estimate") of the expenditures (and time schedule) necessary for FF&E
Replacements during the ensuing Fiscal Year and shall submit such FF&E
Replacement Estimate to Owner at the same time it submits the Annual Operating
Projection described in Section 8.03. Management Company will consider in good
faith suggestions made by Owner with respect to the FF&E Replacement Estimate
and make appropriate modifications thereto.
E. The percentage contributions for the FF&E Reserve described in
Section 7.02B are estimates based upon Management Company's and Marriott
Affiliates' prior experience. As each Hotel ages, these percentages either (i)
may not be sufficient to keep the FF&E Reserve at the levels necessary to make
the FF&E Replacements which are required to maintain such Hotels as Marriott
full-service hotels or (ii) may be in excess of those amounts necessary to
maintain such Hotels as Marriott full-service hotels. If Management Company
reasonably determines that the percentages contained in Section 7.02B are in
excess of the amounts sufficient to maintain the Hotels as Marriott full-service
hotels, then Management Company may reduce the percentages. Management Company
shall provide to Owner upon request from time to time a report, in reasonable
detail, supporting the amount in the FF&E Reserve with respect to the Hotels
and/or the percentages contained in Section 7.02B.
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<PAGE>
If the FF&E Replacement Estimate reasonably prepared in good faith by
Management Company exceeds the available funds in the FF&E Reserve or if
Management Company reasonably determines that the percentages contained in
Section 7.02B are insufficient to maintain the Hotels as Marriott full-service
hotels and Management Company requests Owner to increase the percentages, Owner
will:
1. Agree to increase the annual percentage in Section 7.02B to
provide the appropriate funds required, or
2. Arrange to obtain outside financing for the additional
funds required, in which event the principal and interest payments on such
financing shall constitute Deductions in determining Operating Profit, or
3. Provide the additional funds required, in which case such
amounts (plus interest at the Prime Rate plus one percent (1%) per annum) shall
be retained by Owner from Gross Revenues as if it were a repayment on an
interest bearing loan in equal installments over the period of the next
sixty-five (65) Accounting Periods. Such periodic amounts shall be treated as
Deductions.
A failure or refusal by Owner to agree to either 1, 2 or 3 above within
a sixty (60) day period after Management Company's request therefor shall
entitle Management Company, within sixty (60) days after such failure or
refusal, to notify Owner that it will terminate this Agreement, as to those
Hotels as to which agreement was not reached, as of a date nine (9) months after
the date of Management Company's notice of termination. If Owner subsequently
does either 1, 2 or 3 above within eight (8) months after Management Company
notifies Owner of its intention to terminate this Agreement, this Agreement
shall not be terminated and Management Company shall continue to manage the
Hotels in question. If Management Company does not so notify Owner, it shall
continue to manage the Hotels in question, as provided under this Agreement,
without the aforesaid increase in the percentage contribution to the FF&E
Reserve.
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<PAGE>
F. Upon Termination of this Agreement with respect to any one or more
of the Hotels, whether pursuant to 7.02E above or pursuant to other provisions
of this Agreement, the FF&E Reserve with respect to such Hotel or Hotels shall
be paid to Owner.
G. With the exception of any furniture or equipment leases which are in
effect on the Effective Date and with the exception of telephone equipment, if
Management Company elects to lease rather than purchase any FF&E which is
customarily purchased for the other Marriott full-service hotels owned, leased
or managed by Management Company or another Marriott Affiliate in the United
States with monies from an FF&E Reserve, the lease payments for such FF&E shall
be made from the FF&E Reserves.
7.03 Building Alterations, Improvements, Renewals, and Replacements
--------------------------------------------------------------
A. Management Company shall prepare an annual estimate of the expenses
for necessary major repairs, alterations, improvements, renewals and
replacements (which repairs, alterations, improvements, renewals and
replacements are not among those referred to in Section 7.02A2 and are not
expansions) to the structural, mechanical, electrical, heating, ventilating, air
conditioning, plumbing or vertical transportation elements of each Hotel
building ("Building Estimate") and shall submit such Building Estimate to Owner
for its approval at the same time the Annual Operating Projection is submitted.
The Building Estimate shall be prepared on a consolidated basis showing proposed
expenditures as to each Hotel. Management Company shall not make any
expenditures for such purposes until the Building Estimate is approved by Owner;
provided that if major repairs, alterations, improvements, renewals or
replacements to any Hotel are required by reason of any law, ordinance,
regulation or order of a competent government authority (after exhausting any
appeals) or are otherwise required for the continued safe and orderly operation
of such Hotel, Management Company shall immediately give Owner notice thereof
and shall be authorized (but not obligated) to take appropriate remedial action
without such approval if (i) the cost of such remedial action
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<PAGE>
does not exceed three percent (3%) of such Hotel's Gross Revenues for the
previous Fiscal Year; or (ii) failure to take such remedial action immediately
would result, in the reasonable opinion of Management Company, in a clear and
present danger to the health or safety of guests or employees of such Hotel; or
(iii) Owner does not disapprove Management Company's written request to take
such remedial action within five (5) business days after receipt of such
request. Owner shall bear the cost of all such alterations, improvements,
renewals or replacements by either:
1. Providing financing for the additional funds required, in which
event the principal and interest payments on such financing shall constitute
Additional Hotel Investment Loans and be included in Qualifying Debt Service, or
2. Providing the additional funds required, which amounts shall be
treated as Additional Hotel Investments hereunder.
B. If Owner does not approve the Building Estimate as to one or more or
all of the Hotels within sixty (60) days after it has been submitted, Management
Company may, within sixty (60) days after the end of said sixty (60) day period,
notify Owner that it will terminate this Agreement as to those Hotels as to
which agreement was not reached as of a date nine (9) months after the date of
Management Company's notice of termination. If Owner subsequently approves the
Building Estimate within eight (8) months after Management Company notifies
Owner of its intention to terminate this Agreement, this Agreement shall not be
terminated and Management Company shall continue to manage the Hotels in
question. If Management Company does not so notify Owner, it shall continue to
manage the Hotels in question, as provided under this Agreement, without making
any expenditures in the Building Estimate that were not approved. The provisions
of this subsection 7.03B shall not apply to requests from Management Company to
expand any Hotel.
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<PAGE>
7.04 Liens
-----
Management Company and Owner shall use their reasonable best efforts to prevent
any liens from being filed against any Hotel which arise from any maintenance,
repairs, alterations, improvements, renewals or replacements in or to such
Hotel. They shall cooperate fully in obtaining the release of any such liens,
and the cost thereof, if the lien was not occasioned by the fault of either
party, shall be treated the same as the cost of the matter to which it relates.
If the lien arises as a result of the fault of either party, then the party at
fault shall bear the cost of obtaining the lien release.
7.05 Ownership of Replacements
-------------------------
All repairs, alterations, improvements, renewals or replacements made
pursuant to Article VII, and all amounts kept in the FF&E Reserve, shall be the
property of Owner.
END OF ARTICLE VII
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<PAGE>
ARTICLE VIII
BOOKKEEPING AND BANK ACCOUNTS
-----------------------------
8.01 Books and Records
-----------------
Books of control and account shall be kept on the accrual basis and in
all material respects in accordance with the Uniform System of Accounts, with
the exceptions provided in this Agreement. Owner may at reasonable intervals
during Management Company's normal business hours examine such records. Within
seventy-five (75) days after the end of each Fiscal Year, Management Company
shall furnish Owner a statement in reasonable detail summarizing the operations
of the Hotels for such Fiscal Year and a certificate of Management Company's
chief accounting officer certifying that such year-end statement is true and
correct. The parties shall, within five (5) business days after the receipt of
such statement, make any adjustments, by cash payment, in the amounts paid or
retained for such Fiscal Year as are needed because of the final figures set
forth in such statement or send a notice of dispute setting forth the disputed
matters in reasonable detail. If Owner desires, at its own expense, to audit
such statement and supporting records, Owner shall begin such audit within
ninety (90) days following its receipt of such statement and shall complete such
audit within ninety (90) days thereafter. The cost of such audit shall not be
treated as a Deduction. If Owner does not make an audit, then such statement
shall be deemed to be conclusively accepted by Owner as being correct, and Owner
shall have no right thereafter, except in the event of fraud by Management
Company or as provided in Section 8.01B, to question or examine the same. If
any audit by Owner discloses an understatement of any amounts due Owner,
Management Company shall promptly pay Owner such amounts found to be due, plus
interest thereon (at the Prime Rate plus one percentage point (1%) per annum)
from the date such amounts should originally have been paid. If, however, the
audit discloses that Management Company has not received any amounts due it,
Owner shall pay Management Company such amounts, plus interest thereon (at the
Prime Rate plus one percentage point (1%) per
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annum) from the date such amounts should originally have been paid. Any dispute
concerning the correctness of an audit shall be settled by arbitration, in
accordance with the then current rules of the American Arbitration Association.
B. If Owner's audit discloses an error in the total payment of amounts
due Owner for any Fiscal Year so audited that is in excess of five percent (5%),
Management Company shall pay for the cost of Owner's audit. In addition, in such
event, Owner may audit the statements of Hotel operations and supporting records
at Management Company's expense for the three (3) preceding Fiscal Years. The
costs of such audits shall not be treated as a Deduction. Any error or dispute
with respect thereto shall be handled as set forth in Section 8.01A.
C. All statements shall be prepared on a consolidated basis and on an
individual Hotel basis.
8.02 Accounts Expenditures
---------------------
A. All funds derived from operation of the Hotels shall be deposited by
Management Company, in accordance with Management Company's cash management
procedures, in bank account(s) in a financial institution(s) designated by
Management Company and reasonably approved by Owner. Withdrawals from said
account(s) shall be made by representatives of Management Company whose
signatures have been authorized. Reasonable petty cash funds shall be maintained
at each Hotel.
B. All payments made by Management Company hereunder shall be made from
authorized bank accounts, petty cash funds, or from Working Capital provided
pursuant to Section 6.01. Management Company shall not be required to make any
advance or payment to or for the account of Owner except out of such funds, and
Management Company shall not be obligated to incur any liability or obligation
for Owner's account without assurances that necessary funds for the discharge
thereof will be provided by Owner. Debts and liabilities incurred by Management
Company as a result of its operation and management of the Hotels pursuant to
the terms hereof, whether
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asserted before or after the Termination of this Agreement, will be paid by
Owner to the extent funds are not available for that purpose from the operation
of the Hotels.
8.03 Annual Operating Projection
---------------------------
Management Company shall submit to Owner for its review fifteen (15)
days after the beginning of each Fiscal Year after the Effective Date an "Annual
Operating Projection." Such projection shall project, on a consolidated and
consolidating basis, the estimated average daily room rates, average
occupancies, Gross Revenues, room revenues, departmental profits, Ground Rent,
Deductions, and Operating Profit for the forthcoming Fiscal Year for the Hotels,
taking into account each Hotel's market area, and shall include such other
information, excluding proprietary information of Management Company and
Marriott Affiliates, as Owner reasonably may request. Management Company shall
use its reasonable best efforts to adhere to the Annual Operating Projection. It
is understood, however, that the Annual Operating Projection is an estimate only
and that unforeseen circumstances such as, but not limited to, the costs of
labor, material, services and supplies, casualty, operation of law, or economic
and market conditions may make adherence to the Annual Operating Projection
impracticable, and Management Company shall be entitled to depart therefrom due
to causes of the foregoing nature.
8.04 Operating Losses; Credit
------------------------
A. To the extent there is an Operating Loss for any Accounting Period,
additional funds in the amount of any such deficiency shall be provided by Owner
within twenty (20) days after Management Company has given written notice to
Owner of such Operating Loss. If Management Company elects not to so notify
Owner or if Owner does not so fund such deficiency on Management Company's
request (but, in such latter case, without affecting Management Company's other
remedies under this Agreement), Management Company shall have the right to
withhold an amount equal to such deficiency from future disbursements of funds
otherwise due to Owner.
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<PAGE>
B. In no event shall either party borrow money in the name of or
pledge the credit of the other.
END OF ARTICLE VIII
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<PAGE>
ARTICLE TX
TRADEMARKS, TRADE NAMES AND SERVICE MARKS
-----------------------------------------
9.01 Trademarks, Trade Names and Service Marks
-----------------------------------------
A. During the term of this Agreement, each Hotel shall be known as a
Marriott full-service hotel, with such additional identification as may be
necessary to provide local identification. The name "Marriott" when used alone
or in connection with another word or words and the Marriott trademarks, service
marks, trade names, symbols, logos and designs shall in all events remain the
exclusive property of Marriott, and nothing contained herein shall confer on
Owner the right to use the Marriott name, trademarks, service marks, trade
names, symbols, logos or designs otherwise than in strict accordance with the
terms of this Agreement. Except as provided in Section 9.02, upon Termination
with respect to a Hotel, any use of or right to use the Marriott name,
trademarks, service marks, trade names, symbols, logos or designs by Owner shall
cease forthwith with respect to such Hotel and Owner shall as soon as
practicable remove from the Hotel any signs or similar items which contain the
Marriott name, trademarks, service marks, trade names, symbols, logos or
designs. If Owner has not removed such signs or similar items promptly upon
Termination, Management Company shall have the right to remain at the Hotel as
long as is necessary for it to do so.
B. Included under the terms of this Section are all trademarks,
service marks, trade names, symbols, logos or designs used in conjunction with
the Hotels, whether or not the marks contain the "Marriott" name. The right to
use such trademarks, service marks, trade names, symbols, logos or designs
belongs exclusively to Marriott Affiliates or Management Company, and the use
thereof inures to the benefit of Marriott and/or Management Company whether or
not the same are registered and regardless of the source of the same.
C. Upon Termination of this Agreement with respect to a Hotel, if
there are any trademarks, service marks, trade names, symbols, logos or designs
which are unique
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to such Hotel, Management Company shall, to the extent it is capable, transfer
such name(s) to Owner, without charge other than any out-of-pocket expenses.
9.02 Purchase of Inventories and Fixed Asset Supplies
------------------------------------------------
A. Upon Termination of this Agreement, either in its entirety or
with respect to a given Hotel, Management Company shall have the option, to be
exercised within thirty (30) days after Termination, to purchase, at their then
book value, (and remove from the Hotel at its expense within a reasonable time
thereafter) any items of such Hotel's Inventories and Fixed Asset Supplies as
may be marked with the Marriott name or any Marriott trademark, trade name,
symbol, logo or design. In the event Management Company does not exercise such
option, Owner agrees that it will use any such items not so purchased
exclusively in connection with the Hotel until they are consumed.
B. During the term of this Agreement, for so long as Owner is known
as Marriott Diversified American Hotels, L.P. (or any other name containing the
word "Marriott"), Owner may use such name to the extent necessary on its legal
and business documents. Upon Termination of this Agreement as to all of the
Hotels, Owner shall promptly take all necessary steps so that its name no longer
contains the word "Marriott".
9.03 Breach of Covenant
------------------
Management Company and/or its affiliated companies shall be entitled,
in case of any breach of the covenants of Article IX by Owner or others claiming
through it, to injunctive relief and to any other right or remedy available at
law. Article IX shall survive Termination.
END OF ARTICLE IX
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ARTICLE X
POSSESSION AND USE OF THE HOTELS
--------------------------------
10.01 Ground Lease
------------
So long as Management Company is not wrongfully withholding any money
from Owner and so long as no other monetary event of default has occurred and is
continuing, Owner agrees to promptly pay and discharge (i) any and all rental
due and owing pursuant to the Ground Lease and the Fairview Park Hotel parking
garage lease and (ii) any payments and charges required to be paid thereunder
and, at its expense, to prosecute all appropriate actions, judicial or
otherwise, necessary to assure Management Company's operation of the Fairview
Park Hotel and the Fullerton Hotel subject to Ground Lease or the Fairview Park
parking garage lease as provided herein. If Owner fails to make a payment under
the Ground Lease beyond the due date, Management Company has the right, but not
the obligation, to pay such amount to the landlord, but such amount shall not be
treated as a loan or advance.
10.02 Management of the Hotels
------------------------
A. Management Company shall manage each Hotel under standards
comparable to those prevailing with respect to the other Marriott full-service
hotels owned, leased or managed by Management Company or another Marriott
Affiliate in the United States, including all activities in connection therewith
which are customary and usual to such an operation.
B. Unless specifically approved in writing by Owner in its sole and
absolute discretion, no gaming or gambling shall be permitted in the Hotels
other than occasional use thereof for such purposes on a not-for-profit basis
and in compliance with all applicable laws.
C. In connection with the Fairview Park Hotel, Management Company
shall abide by the Operating Covenant and the Use Covenant (as such terms are
defined in that
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certain Covenant and Restriction Agreement dated as of April 30, 1986 that is
applicable to such Hotel).
10.03 Chain Services
--------------
Management Company will, during the term of this Agreement, cause to be
furnished to each Hotel certain services ("Chain Services") which are furnished
generally on a central or regional basis to other Marriott full-service hotels
owned, leased or managed by Management Company or another Marriott Affiliate in
the United States and which benefit each hotel as a participant in such Marriott
full-service hotel system. Chain Services shall include: (i) development and
operation of computer systems; (ii) national sales office services; central
training services, manpower development and management personnel relocation;
central advertising and promotion (including direct and image media and
advertising administration); the Marriott National reservations system and the
Marriott computer payroll and accounting services; and (iii) such additional
central or regional services as may from time to time be furnished for the
benefit of all other Marriott full-service hotels owned, leased or managed by
Management Company or another Marriott Affiliate in the United States or in
substitution for services now performed at individual hotels which may be more
efficiently performed on a group basis. Chain Services do not include services
provided pursuant to the Base Management Fee. Costs and expenses incurred in the
providing of such services shall be allocated on a fair and equitable,
non-discriminatory basis among all Marriott full-service hotels owned, leased or
managed by Management Company and its affiliates in the United States receiving
the same. In lieu of the method of allocation set forth in this Section 10.03,
Management Company may, from time-to-time, modify, amend or change such method
if, in its reasonable judgment, to do so would result in a fairer and more
equitable allocation method.
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10.04 Owner's Right to Inspect
------------------------
Owner or its agents shall have access to any Hotel at any and all
reasonable times for the purpose of protecting the same against fire or other
casualty, prevention of damage to the Hotels, inspection, making repairs, or
showing such Hotels to prospective purchasers, tenants or mortgagees.
END OF ARTICLE X
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<PAGE>
ARTICLE XI
INSURANCE
11.01 Property and Operational Insurance
----------------------------------
Management Company shall, commencing with the Effective Date and
thereafter during the term of this Agreement, procure and maintain, using funds
deducted from Gross Revenues in determining Operating Profit, either with
insurance companies of recognized responsibility or by legally qualifying itself
as a self insurer in the state where the respective Hotel is located, a minimum
of the insurance identified below.
A. Property insurance on each Hotel building(s) and contents
against loss or damage by all perils covered by "all risk" (as such term is
commonly used in the insurance industry, excluding earthquake and flood)
coverage in an amount not less than one hundred percent (100%) of the
replacement cost thereof except that if such 100% replacement cost coverage is
not available on commercially reasonable terms and rates, then such insurance
shall be in an amount not less than ninety-five percent (95%) of the replacement
cost of the Hotel;
B. Should a Hotel be located in a zone identified by the Federal
Emergency Management Agency as a flood hazard area, flood insurance shall be
maintained in an amount not less than the maximum limit available under the
National Flood Insurance Program if required by the lender(s) holding a first
mortgage on said Hotel.
C. Insurance against loss or damage from explosion of boilers,
pressure vessels, pressure pipes and sprinklers, to the extent applicable to
each Hotel;
D. Business interruption insurance covering loss of profits and
necessary continuing expenses for interruptions caused by any occurrence covered
by the insurance referred to in Section 11.01A and C for Management Company's
established period (but not less than one (1) year after the occurrence) of a
type and in amounts as are generally established by Management Company at other
Marriott full-service hotels it or Marriott Affiliates own, lease or manage
under the Marriott name in the United States;
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E. General liability insurance against claims for personal injury,
death or property damage occurring on, in, or about any Hotel, and automobile
liability insurance on vehicles operated in conjunction with any Hotel, with a
combined single limit for each occurrence of not less than One Hundred Million
Dollars ($100,000,000);
F. Workers' compensation and employer's liability insurance as may
be required under applicable laws covering all of Management Company's employees
at the Hotel;
G. Fidelity bonds, with reasonable limits to be determined by
Management Company, covering its employees in job classifications normally
bonded in other Marriott full-service hotels it, or its Affiliates, own, lease
or manage under the Marriott name in the United States or as otherwise required
by law, and comprehensive crime insurance to the extent Management Company and
Owner mutually agree it is necessary for any Hotel; and
H. As respects the Fullerton Hotel, earthquake insurance shall be
carried to the extent such insurance is maintained by the Management Company, in
its good faith business judgment, under its blanket earthquake program for
participating properties owned, leased, or managed by the Management Company or
its Affiliates in California.
I. Such other insurance in amounts as Management Company in its
reasonable judgment deems advisable for protection against claims, liabilities
and losses arising out of or connected with the operation of any Hotel or as
reasonably required by Owner's lender(s) holding a first mortgage on any Hotel,
subject to Management Company's reasonable approval.
11.02 General Insurance Provisions
----------------------------
A. All insurance described in Section 11.01 may be obtained by
Management Company by endorsement or equivalent means under its, Marriott's, or
a Marriott Affiliate's blanket insurance policies, provided that such blanket
policies substantially fulfill the requirements specified herein.
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<PAGE>
B. Management Company may self insure or otherwise retain such
risks or portions thereof as it does with respect to other Marriott full-service
hotels it or Marriott Affiliates own, lease or manage under the Marriott name in
the United States.
C. All policies of insurance required under Section 11.01 shall be
carried in the name of Management Company. The policies required under Sections
11.01A, B, C, D and E shall include the Owner as an additional insured. Upon
notice by the Owner, Management Company shall also have the policies required
under Sections 11.01A, B, C, D and E include any mortgagee or lender of the
Hotels as mortgagee, loss-payee or additional insured. Subject to the rights of
any such Lender, any property losses thereunder shall be payable to the insured
parties as and to the extent their respective interests may appear. Any mortgage
on any Hotel shall contain provisions to the effect that, in the absence of a
default thereunder, proceeds of the insurance policies required to be carried
under Section 11.01A, B and C shall be available for repair and restoration of
the Hotel.
D. All policies and certificates of insurance provided for under
Article XI shall, to the extent obtainable, state that the insurance shall not
be cancelled or materially changed without at least thirty (30) days' prior
written notice to the policy holder and all certificate holders.
E. Management Company shall deliver to Owner certificates of
insurance with respect to all policies so procured, including existing,
additional and renewed policies, and, in the case of insurance policies about to
expire, shall deliver certificates with respect to the renewal thereof prior to
the respective dates of expiration.
11.03 Cost and Expense
----------------
Insurance premiums and any costs or expenses with respect to the
insurance or self-insurance required under this Article XI, including any Hotel
Retention, shall be treated as Deductions. Such premiums and costs shall be
allocated on an equitable basis to the Hotels participating under Management
Company's, Marriott's or a Marriott
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<PAGE>
Affiliate's blanket insurance or self-insurance programs. Any reserves, losses,
costs or expenses which are uninsured shall be treated as a cost of insurance
and shall be Deductions. Premiums on policies for more than one year shall be
charged pro rata against Gross Revenues as a Deduction over the period of the
policies. Upon Termination, either of this entire Agreement or with respect to a
given Hotel, an escrow fund in an amount reasonably acceptable to Management
Company and Owner shall be established from Gross Revenues (or, if Gross
Revenues are not sufficient, with funds provided by Owner) to cover the amount
of any Hotel Retention and all other costs which will eventually have to be paid
by Management Company with respect to pending or contingent claims, including
those which arise after Termination for causes arising during the term of this
Agreement.
11.04 Owner Provided Coverage
-----------------------
Notwithstanding anything to the contrary contained in this Article XI,
Owner may, at its option, with sixty (60) days advance written notice to
Management Company, procure the insurance coverages required under subsections
A, B, C, and D of Section 11.01 hereof, the premiums for which are to be treated
as a Deduction. However, if the costs of such insurance procured by Owner
exceeds the cost of Management Company's insurance by ten percent (10%) for
comparable coverages, all excess costs over such 10% threshold shall be the sole
responsibility of Owner and not be a Deduction in computing Operating Profit.
Should Owner exercise its option to provide such insurance, Owner hereby waives
its rights of recovery from Management Company, its affiliates, directors and
employees for loss or damage to the Hotel, and any resultant interruption of
business, to the extent covered by the insurance provided herein.
END OF ARTICLE XI
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ARTICLE XII
TAXES
-----
12.01 Real Estate and Personal Property Taxes
---------------------------------------
All real estate and personal property taxes, levies, assessments and
similar charges on or relating to each Hotel ("Impositions") during each Hotel
Term shall be paid by Management Company on behalf of Owner from Gross Revenues
before any fine, penalty, or interest is added thereto or lien placed upon the
Hotel or this Agreement, unless payment thereof is in good faith being contested
and enforcement thereof is stayed. Accruals of any such payments shall be a
Deduction in determining Operating Profit. Owner shall, within five (5) days of
receipt, furnish Management Company with copies of official tax bills and
assessments which it may receive with respect to any of the Hotels. Either Owner
or Management Company, with Owner's consent, not to be unreasonably withheld,
(in which case Owner agrees to sign the required applications and otherwise
cooperate with Management Company in expediting the matter) may initiate
proceedings to contest any Imposition, and all reasonable costs of any such
contest shall be paid from Gross Revenues and shall be a Deduction in
determining Operating Profit.
END OF ARTICLE XII
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ARTICLE XIII
HOTEL EMPLOYEES
---------------
13.01 Employees
---------
A. All personnel employed at each Hotel shall at all times be the
employees of Management Company, Marriott, or a Marriott Affiliate. Management
Company shall have absolute discretion to hire, promote, supervise, direct, move
and train all employees at the Hotels, to fix their compensation and, generally,
establish and maintain all policies relating to employment.
B. Management Company shall be permitted to provide free accommodations
and amenities to its employees and representatives living at or visiting each
Hotel in connection with its management or operation. No person shall otherwise
be given gratuitous accommodations or services without prior joint approval of
Owner and Management Company except in accordance with usual practices of the
hotel and travel industry.
C. At Termination with respect to a given Hotel, other than a
Termination (i) by reason of a default of Management Company hereunder, or (ii)
at Management Company's option (except as a result of a default by Owner),
provided that the expiration of a given Hotel Term under Section 4.01 shall not
be deemed "at Management Company's option" for purposes of this Section 13.01,
an escrow fund shall be established from Operating Profit to reimburse
Management Company for all costs and expenses incurred by Management Company
terminating its employees at the Hotel in accordance with its standard policies,
such as severance pay, unemployment compensation and other employee liability
costs arising out of the termination of employment of Management Company's
employees at such Hotel. Transfer costs shall not be included.
D. Neither Owner nor Management Company shall effect a Termination of
this Agreement without allowing sufficient time for Management Company to comply
with notice requirements of federal and state laws and regulations regarding the
closing of a
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business or termination of employees. Management Company shall comply with
notice requirements of federal and state laws and regulations regarding the
closing of a business or termination of employees.
END OF ARTICLE XIII
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ARTICLE XIV
DAMAGE, CONDEMNATION AND FORCE MAJEURE
--------------------------------------
14.01 Damage and Repair
-----------------
A. If, during the term hereof, any of the Hotels is damaged or
destroyed by fire, casualty or other cause, Owner shall, at its cost and expense
and with all reasonable diligence, repair or replace the damaged or destroyed
portion of such Hotel to the same condition as existed previously. To the extent
available, proceeds from the insurance described in Section 11.01 shall be
applied to such repairs or replacements. However, Owner shall not be obligated
to so repair or replace the damaged or destroyed portion of such Hotel if one or
more of the following is true: (i) the Hotel is so badly damaged or destroyed
that it cannot reasonably be repaired or replaced within one (1) year of the
date of the casualty or such later date as is covered by business interruption
insurance described under Article XI; (ii) the proceeds of insurance available
for such repair or replacement are less than ninety-five percent (95%) of the
estimated repair and replacement costs; or (iii) the uninsured loss is greater
than $50,000, the remainder of the Hotel Term with respect to such Hotel is less
than ten (10) years, and Management Company fails to agree to extend such Hotel
Term to a date which is at least ten (10) years after the estimated date of the
completion of such repair and/or replacement. If Owner elects not to repair or
replace said damaged portion of such hotel for one or more of the foregoing
reasons, it shall so notify Management Company by written notice within ninety
(90) days after the date of the casualty. If Owner does not so notify Management
Company, Owner shall promptly commence and complete the repairing, rebuilding or
replacement of the same so that the Hotel shall be substantially the same as it
was prior to such damage or destruction.
B. In the event damage or destruction to any Hotel from any cause
materially and adversely affects the operation of such Hotel and Owner notifies
Management Company pursuant to the provisions of Section 14.01A above that Owner
will not repair or replace such damage for one or more of the reasons set forth
in Section 14.01A, Management
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Company may, at its option, terminate this Agreement with respect to such Hotel
within sixty (60) days after such notice.
C. Subject to the provisions of Section 14.01B, if(i) damage to any
Hotel is in excess of the amount of insurance proceeds plus amounts made
available by Management Company or Marriott Affiliates, or (ii) the conditions
of Section 14.01A(i) or (iii) are met, Owner may terminate this Agreement with
respect to such Hotel upon sixty (60) days' written notice.
14.02 Condemnation
------------
A. In the event all or substantially all of any Hotel shall be taken in
any eminent domain, condemnation, compulsory acquisition, or similar proceeding
by any competent authority for any public or quasi-public use or purpose, or in
the event a portion of the Hotel shall be so taken, but the result is that it is
unreasonable to continue to operate such Hotel, this Agreement shall terminate
with respect to such Hotel. Owner and Management Company shall each have the
right to initiate such proceedings as they deem advisable to recover any damages
to which they may be entitled.
B. In the event a portion of any Hotel shall be taken by the events
described in Section 14.02A, or the entire Hotel is affected but on a temporary
basis, and the result is not to make it unreasonable to continue to operate such
Hotel, this Agreement shall not terminate. However, so much of any award for any
such partial taking or condemnation as shall be necessary to render such Hotel
equivalent to its condition prior to such event shall be used for such purpose.
Any balance of the condemnation award, to the extent resulting in Net Sales
Proceeds, shall be retained and applied pursuant to Section 5.04.
14.03 Force Majeure
-------------
A. If acts of God, acts of war, civil disturbance, governmental action,
strikes or other organized labor disputes, vendor delays or fires (collectively
herein referred to as "Force Majeure") shall make it impractical for either
Owner or Management Company to perform any of its respective obligations
hereunder, such obligation shall be suspended
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<PAGE>
until it is again possible for the affected party to perform it. In addition, if
such an event, in Management Company's or Owner's reasonable judgment, makes
continued operation of an Hotel impractical for more than a reasonably temporary
period, then management Company or Owner may terminate this Agreement as to such
Hotel on sixty (60) days written notice to the other.
B. The provisions of Section 14.03A shall not apply to the specific
provisions of this Agreement regarding (i) damage or destruction, (ii)
condemnation, and (iii) withdrawal or revocation of licenses or permits.
END OF ARTICLE XIV
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ARTICLE XV
DEFAULTS
--------
15.01 Events of Default
-----------------
The following shall constitute "events of default" to the extent
permitted by applicable law:
A. The failure of either party to make any payment required to be made
in accordance with the terms hereof within ten (10) days after written notice
that such payment has not been made, or
B. Unless Section 15.01A is applicable, the breach by either party of
any material representation, warranty or covenant contained in this Agreement,
or the default by either party in the performance of any covenants,
undertakings, obligations or conditions set forth in this Agreement, which
breach or default shall not have been cured within thirty (30) days after notice
of such breach or default; provided that an "event of default" shall not exist
with regard thereto if such breach or default (i) is not attributable to a
failure to pay any sums due under this Agreement and (ii) such breach or default
is curable (but not within such thirty (30) day period) and the defaulting party
commences the cure of said breach or default within said thirty (30) day period
and thereafter proceeds diligently and in good faith to complete such cure; or
C. If a court of competent jurisdiction has entered a final,
non-appealable judgment finding Management Company liable for fraud, gross
negligence or willful wanton misconduct in its dealings with Owner hereunder; or
D. If Management Company or Owner shall apply for or consent to the
appointment of a receiver, trustee or liquidator of all or a substantial part of
its assets or make a general assignment for the benefit of its creditors, or
file a voluntary petition in bankruptcy or a petition seeking reorganization,
composition, arrangement with creditors, liquidation or similar relief under any
present or future statute, law or regulation, or file any answer admitting the
material allegations of a petition filed against it in any such
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proceeding, or be adjudicated a bankrupt or insolvent, or take any act on
looking toward dissolution; or
E. If any final order, judgment or decree (that is, an order, judgment
or decree affirmed on appeal to a court of last resort or after the expiration
of any period to appeal) shall be entered without the application, approval or
consent of Management Company or Owner by any court of competent jurisdiction,
approving a petition seeking reorganization, composition, arrangement with
creditors, liquidation or similar relief under any present or future statute,
law or regulation with respect to Management Company or Owner, or appointing a
receiver, trustee or liquidator of all or a substantial part of Management
Company's or Owner's assets and such order, judgment or decree shall continue
unstayed and in effect for an aggregate of sixty (60) days (whether or not
consecutive).
15.02 Remedies
--------
A. If, at any time during the term of this Agreement, an "event of
default" (as defined in Section 15.01) shall occur, then the non-defaulting
party may, at its option, terminate this Agreement by giving notice to the other
party, specifying a date, not earlier than thirty (30) days after the receipt of
such notice, for Termination of this Agreement. If the default has not been
cured on or before the date specified in the aforesaid notice, this Agreement
shall terminate on such date.
B. The rights set forth in Section 15.02A shall not be in substitution
for, but shall be in addition to, any and all rights and remedies available to
the non-defaulting party by reason of applicable law.
END OF ARTICLE XV
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ARTICLE XVI
WAIVER, PARTIAL INVALIDITY AND OTHER MATTERS
--------------------------------------------
16.01 Waiver
------
The failure of either party to insist upon a strict performance of any
of the terms or provisions of this Agreement, or to exercise any option, right
or remedy herein contained, shall not be construed as a waiver or as a
relinquishment for the future of such term, provision, option, right or remedy,
but the same shall continue and remain in full force and effect. No waiver by
either party of any term or provision hereof shall be deemed to have been made
unless expressed in writing and signed by such party.
16.02 Partial Invalidity
------------------
If any portion of this Agreement shall be declared invalid by order,
decree or judgment of a court, this Agreement shall be construed as if such
portion had not been inserted herein except when such construction would operate
as an undue hardship on Management Company or Owner or constitute a substantial
deviation from the general intent and purpose of said parties as reflected in
this Agreement.
16.03 Estoppel Certificates
---------------------
Promptly after written request therefor from the other party (and in
any event within fifteen (15) days thereafter), each party shall deliver to the
other (and to all actual or potential lenders or transferees thereof as
requested by the other party) a certificate identifying this Agreement and all
amendments hereto, stating that this Agreement as so amended is in full force
and effect, stating the date to which all payments hereunder have been made and
the amount (if ascertainable) of all future payments required hereunder,
identifying any known defaults of the other hereunder, and covering such
additional matters as may be reasonably requested.
END OF ARTICLE XVI
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<PAGE>
ARTICLE XVII
ASSIGNMENT
----------
17.01 Assignment
----------
A. Neither party shall assign or transfer or permit the assignment or
transfer of this Agreement without the prior written consent of the other;
provided, however, that Management Company shall have the right, without such
consent, to (1) assign its interest in this Agreement to any Marriott Affiliate
(other than one which is a partner of Owner) which (i) either itself or with
resources made available by Marriott has comparable experience in managing
hotels and adequate capital and resources to conduct its business as Management
Company under this Agreement and (ii) agrees in writing to be bound by and
comply with the terms of this Agreement (such written agreement to be delivered
to Owner), and (2) lease shops or grant concessions at the Hotels so long as the
terms of any such leases or concessions do not exceed the term of this
Agreement. Nothing contained herein shall prevent (i) the conditional assignment
of this Agreement as security for any mortgage on the Hotels pursuant to Section
17.02; (ii) the transfer of this Agreement in connection with a merger or
consolidation or a sale of all or substantially all of the assets of Marriott;
or (iii) an assignment of this Agreement in connection with a permitted sale of
one or more of the Hotels pursuant to Section 18.01.
B. In the event either party consents to an assignment of this
Agreement by the other, no further assignment shall be made without the express
consent in writing of such party, unless such assignment may otherwise be made
without such consent pursuant to the terms of this Agreement. An assignment by
either Owner or Management Company of its interest in this Agreement shall not
relieve Owner or Management Company, as the case may be, from their respective
obligations under this Agreement, and shall inure to the benefit of, and be
binding upon, their respective successors, heirs, legal representatives, or
assigns.
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<PAGE>
17.02 Mortgages and Collateral Assignments
------------------------------------
Owner may from time to time (i) grant mortgages, deeds of trust or
similar security instruments encumbering the Hotels, and (ii) collaterally
assign its interest under this Agreement as additional security, provided that
all such mortgages, deeds of trust, other security instruments and collateral
assignments: (a) are granted or entered into in connection with indebtedness
that is described in Section 3.01A2 hereof, and (b) each contain a non-
disturbance provision in the form described in Section 3.01A2 hereof Provided
that all of the provisions of Section 3.01A2 are complied with, Management
Company agrees that (in connection with Owner obtaining such secured loans) it
will: (v) comply with any reasonable reporting requirements of the lender; (w)
provide the lender with notice of any default by Owner hereunder and thereafter
permit the lender to effect a cure thereof within a reasonable period; (x)
deliver to the lender, upon Owner's written request therefor, a statement that
this Agreement is in full force and effect and that there are no outstanding
defaults hereunder, or, if there are outstanding defaults, describing what they
are; (y) subordinate Management Company's interest in this Agreement to the
rights of the lender upon foreclosure of any such mortgage, deed of trust,
security agreement or like instrument, or upon the granting of a deed in lieu of
foreclosure (provided that such lender simultaneously agrees to a non-
disturbance provision in the form described in Section 3.01A2 hereof); and (z)
attorn to and recognize such lender or its assignee as being the "Owner" under
this Agreement upon a conveyance of title to a Hotel to such lender or its
assignee, whether such conveyance is the result of a foreclosure of said
mortgage, deed of trust, security agreement or like instrument, or is the result
of a deed in lieu of foreclosure.
END OF ARTICLE XVII
- 60 -
<PAGE>
ARTICLE XVIII
SALE OF HOTEL OR HOTELS
-----------------------
18.01 Right of First Negotiation or First Refusal.
-------------------------------------------
A. If Owner and Management Company are not affiliates and if Owner
desires to sell or lease one or more of the Hotels, thirty (30) days prior to
any solicitation of a third party or placing of a listing agreement, Owner shall
give Management Company written notice of its intent to sell or lease one or
more of the Hotels along with the general terms and conditions it will seek with
the sale or lease. Within thirty (30) days after receipt of such notice,
Management Company, Marriott or a Marriott Affiliate shall have the right to
negotiate a binding agreement for the purchase or lease of such Hotel(s) before
Owner places the listing agreement or solicits a third party for the sale or
lease of such Hotel(s). If Owner and Management Company in good faith cannot
reach such an agreement within such thirty (30) day period, Owner may solicit
bids by any fair and equitable process and Management Company and Marriott
Affiliates will be treated on equal terms with any other prospective purchaser
or lessee, provided that: (i) if Management Company has made a cash offer to
Owner to buy or lease such Hotel(s) which Owner has rejected and, within the
nine (9) months following the expiration of said thirty (30) day negotiating
period, Owner is willing to accept a third-party offer at a price equal to or
lower than that offered by Management Company (with any financing extended by
Owner to such third party being substantially on market terms and conditions),
then Owner must make that same offer available to Management Company; and (ii)
if Owner and a third party have not both executed a purchase and sale agreement
(or lease agreement) for such Hotel(s) within nine (9) months after the
expiration of said thirty (30) day negotiation period, Owner must again offer
Management Company the above-described thirty (30) day negotiating period, and
comply with the other provisions of this Section 18.01 A, before it can enter
into subsequent negotiations with third parties regarding the sale or lease of
such Hotel(s). If
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<PAGE>
Management Company or a Marriott Affiliate does not purchase or lease such
Hotel(s) pursuant to this Section 18.01A, then the provisions of Section 18.01C
shall apply.
B. If Owner receives an unsolicited bona fide written offer to purchase
or lease any one or more of the Hotels and desires to accept such offer, Owner
shall promptly give written notice thereof to Management Company stating the
name of the prospective purchaser or tenant, as the case may be, the price or
rental and the terms and conditions of such proposed sale or lease, together
with all other information reasonably requested by Management Company and
reasonably available to Owner. Within thirty (30) days after the date of receipt
of Owner's written notice, Management Company shall have the right to elect, by
written notice to Owner, to purchase or lease such Hotel or Hotels at the same
price or rental and upon the same terms and conditions as those set forth in the
written notice from Owner to Management Company or upon other terms acceptable
to Owner, in which event Owner and Management Company shall promptly enter into
a purchase agreement for such sale or lease and shall consummate the same within
one hundred fifty (150) days. If Management Company fails to exercise such right
during such thirty (30) day period, such failure shall be deemed conclusively to
be a decision not to purchase or lease such Hotel(s) and the provisions of
Section 18.01C shall apply. Any proposed sale or lease of which notice has been
given by Owner to Management Company hereunder must be consummated on
substantially the same terms within one hundred eighty (180) days following the
giving of such notice, unless Management Company has exercised its option under
this subsection 18.01B to purchase or lease the Hotels. Failing such
consummation, such notice, and any response thereto given by Management Company,
shall be null and void and all of the provisions of this Section 18.01B must
again be complied with before Owner shall have the right to consummate a sale or
lease of the Hotel upon the terms contained in said notice, or otherwise.
C. If Management Company or a Marriott Affiliate does not purchase or
lease such Hotel(s) pursuant to the provisions of Sections 18.01A or 18.01B
above and the
- 62 -
<PAGE>
Hotel or Hotels are sold or leased, then Management Company shall enter into a
new Management Agreement, with respect to such Hotel or Hotels, with such
purchaser or tenant, which new Management Agreement will be on all of the terms
and conditions of this Agreement except that in preparing such new Management
Agreement appropriate adjustments shall be made to all terms and provisions of
this Agreement which have been agreed to and/or computed on the assumption that
this Agreement will apply to all six (6) Hotels (and reciprocal adjustments
shall likewise be made to this Agreement itself, which will be applicable to the
Hotels not being sold under this Section 18.01, as set forth in Section 18.02
hereof); provided, however, that if Management Company in good faith reasonably
believes (and so states in writing to Owner) that any one or more of the
following is true: (i) that the proposed purchaser is a competitor in the
lodging business, of Management Company, Marriott or any Marriott Affiliate
(unless the proposed purchaser is solely a passive owner of competitive
properties in the lodging business); (ii) the proposed purchaser is known in the
community as being of bad moral character; or (iii) that the financial condition
and prospects of the proposed purchaser are not adequate to discharge the
obligations of Owner under this Agreement, Management Company shall have the
right to terminate this Agreement, by written notice to Owner, with respect to
such Hotel or Hotels, and Management Company shall not be required to enter into
such new management agreement with respect thereto. Such written notice of
termination must be given to Owner within thirty (30) days after Management
Company receives a written notice from Owner as to the identity of the
prospective purchaser or tenant. The effective date of such Termination shall
coincide with the date of the consummation of the proposed sale or lease. Such
Termination shall not be effective if such sale or lease is not consummated.
D. Any sale, assignment, transfer, or other disposition, for value or
otherwise, voluntary or involuntary, of the controlling interest in Owner (i.e.,
the possession directly or indirectly of the power to direct or cause the
direction of the management and policies
- 63 -
<PAGE>
of Owner, whether through the ownership of voting securities, or by contract or
otherwise) in a single transaction or series of related transactions (and, if
Owner is a limited partnership, which is combined with a transfer of the general
partnership interest(s) in connection therewith) shall be deemed a sale or lease
of the Hotels under Section 18.01 and shall be subject to the provisions
thereof.
E. If Owner intends to sell, lease or refinance any one or more of
the Hotels, Management Company agrees to cooperate in providing information to
facilitate such sale or refinancing.
18.02 Effect of Sale or Refinancing of a Hotel
----------------------------------------
Upon the consummation of the Sale of a Hotel or a refinancing of the
Permanent Loan (or any Replacement Debt with respect thereto) as to fewer than
all of the Hotels then subject to this Agreement, subject to the provisions of
Section 18.01, then:
A. This Agreement shall terminate with respect to such Hotel(s),
but not with respect to the remaining Hotels; as to each such Hotel, the actions
described in Section 4.03 shall be taken (except that, if Management Company is
entering into a new management agreement with the purchaser or tenant, as the
case may be, of such Hotel, then the action described in subsection G of Section
4.03 shall not be necessary);
B. Any sale or lease of all of the Hotels shall be conditioned on
the purchaser or tenant assuming the obligations of Owner under this Agreement
with respect to the Hotels being sold or leased, subject to the rights of
Management Company under the provisions of Section 18.01C by appropriate
instrument in form reasonably satisfactory to Management Company; and any sale
or lease of, or any refinancing of the Permanent Loan (or any Replacement Debt
with respect thereto) as to fewer than all of the Hotels then subject to this
Agreement shall be conditioned on the purchaser or tenant (or Owner in the case
of any such refinancing) entering into a new Management Agreement with respect
to such Hotel or Hotels in the form described in Section 18.01C. Upon such sale
or lease, an executed copy of such Assumption Agreement or new Management
Agreement shall be
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<PAGE>
delivered to Management Company, and Owner hereunder shall be released from all
further obligations hereunder with respect to the Hotels being sold or leased;
C. The FF&E Reserve maintained pursuant to Section 7.02 hereof for the
Hotel being so sold, leased or refinanced shall be transferred to the purchaser
of such Hotel;
D. Owner's 10% Priority Return (including Owner's Contributed
Capital), Owner's 15% Priority and Capital Return (including both Owner's Net
Contributed Capital and the 15% return component), the amount set forth in
Section 4.02A(i) and the $12,000,000 amount (as such amount may have been
reduced by prior applications of Cash Available for Incentive Management Fee
and/or Capital Receipts) described in the definition of Contingent Incentive
Management Fee and Section 5.03G shall be reduced in this Agreement by an amount
equal to the percentage calculated by dividing the amount of the Operating
Profit for the prior twenty-six (26) Accounting Periods for the Hotel or Hotels
being so sold, leased or refinanced by the total Operating Profit for the prior
twenty-six (26) Accounting Periods for all of the Hotels, and the amount of such
reduction shall be reflected in the new Management Agreement. The $6,000,000
amount (as the same may have been reduced by prior applications of Capital
Receipts) described in Section 5.04(4) shall not be affected in this Agreement,
but the limitation to be set forth in Section 5.04(4) of the new Management
Agreement shall be equal to $6,000,000 multiplied by a fraction, the numerator
of which is the Operating Profit for the prior twenty-six (26) Accounting
Periods for the Hotel or Hotels being so sold, leased or refinanced, and the
denominator is the total Operating Profit for the prior twenty-six (26)
Accounting Periods for all of the Hotels.
E. To the extent Contingent Incentive Management Fees are not
eliminated by the sale of one or more Hotels or by previous or current
refinancings, a portion of the remaining Contingent Incentive Management Fee
will be allocated to the Hotel being so sold, leased or refinanced. The portion
of the Contingent Incentive Management Fee
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<PAGE>
allocated to the Hotel being sold shall be calculated by multiplying (a) the
remaining unpaid Contingent Incentive Management Fees by (b) the percentage the
Operating Profit generated by the Hotel being so sold, leased or refinanced for
the prior twenty-six (26) Accounting Periods represents to the total Operating
Profit for all the Hotels for such prior twenty-six (26) Accounting Periods. The
purchaser or lessee of such Hotel(s) shall assume the obligation to pay the
Contingent Incentive Management Fee allocated to such Hotel(s) pursuant to the
terms of the Management Agreement;
F. Appropriate adjustments shall be made to those other terms and
provisions of this Agreement (e.g., Working Capital, insurance) which have been
agreed on, computed or established on the assumption that this Agreement will
apply to all six (6) of the Hotels. Such adjustments shall be calculated by
multiplying (a) the total amount of such other term or provision by (b) the
percentage the Operating Profit generated by the Hotel being so sold, leased or
refinanced for the prior twenty-six (26) Accounting Periods represents to the
total Operating Profit for all the Hotels for the prior twenty-six (26)
Accounting Periods;
G. Unless Management Company has elected not to enter into a new
management agreement with the purchaser or tenant, as the case may be, of such
Hotel, for one or more of the reasons set forth in subsections (i), (ii) and
(iii) of Section 18.01C hereof, Management Company and such purchaser or tenant
shall execute the new management agreement described in Section 18.01C.
H. In the case of any adjustments pursuant to this Section 18.02 which
are based on the prior twenty-six (26) Accounting Periods, such adjustments
shall be made based on the actual number of full Accounting Periods the Hotels
have been subject to this Agreement if the Hotels have been subject to this
Agreement for less than twenty-six full Accounting Periods.
END OF ARTICLE XVIII
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<PAGE>
ARTICLE XIX
MISCELLANEOUS
-------------
19.01 Right to Make Agreement
-----------------------
Each party warrants, with respect to itself, that neither the execution
of this Agreement nor the finalization of the transactions contemplated hereby
shall violate any provision of law or judgment, writ, injunction, order or
decree of any court or governmental authority having jurisdiction over it;
result in or constitute a breach or default under any indenture, contract, other
commitment or restriction to which it is a party or by which it is bound; or
require any consent, vote or approval which has not been taken, or at the time
of the transaction involved shall not have been given or taken. Each party
covenants that it has and will continue to have throughout the term of this
Agreement and any extensions thereof, the full right to enter into this
Agreement and perform its obligations hereunder.
19.02 Consents
--------
Wherever in this Agreement the consent or approval of Owner or
Management Company is required, such consent or approval shall not be
unreasonably withheld, shall be in writing and shall be executed by a duly
authorized officer or agent of the party granting such consent or approval. If
either Owner or Management Company fails to respond within thirty (30) days to a
request by the other party for a consent or approval, such consent or approval
shall be deemed to have been given (except as otherwise provided in this
Agreement).
19.03 Agency
------
The relationship of Owner and Management Company shall be that of
principal and agent, and nothing contained in this Agreement shall be construed
to create a partnership or joint venture between them or their successors in
interest. Management Company's agency established by this Agreement is coupled
with an interest and may not be terminated by Owner until the expiration of the
term of this Agreement, except as
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<PAGE>
provided in Section 4.02, Articles XIV or XV. Notwithstanding the agency
relationship created by this Agreement, nothing contained herein shall prohibit,
limit, or restrict (except as specifically set forth in Sections 2.04 hereof),
Management Company or any of its affiliates and subsidiaries from developing,
owning, operating, leasing, managing or franchising competing hotels or
restaurants or food services facilities in the market area where any one or more
of the Hotels are located.
19.04 Applicable Law
--------------
This Agreement shall be construed under and shall be governed by the
laws of the State of Maryland.
19.05 Recordation
-----------
The terms and provisions of this Agreement shall run with the land
designated as the Sites, and with Owner's interest therein, and shall be binding
upon all successors to such interest. At the request of either party, the
parties shall execute sufficient copies of an appropriate memorandum of this
Agreement in recordable form and cause the same to be recorded in the
jurisdiction where the Hotels are located.
19.06 Headings
--------
Headings of Articles and Sections are inserted only for convenience and
are in no way to be construed as a limitation on the scope of the particular
Articles or Sections to which they refer.
19.07 Notices
-------
Notices, statements and other communications to be given under the
terms of this Agreement shall be in writing and delivered by hand against
receipt or sent by certified or registered mail, postage prepaid, return receipt
requested:
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<PAGE>
To Owner:
---------
Marriott Diversified American Hotels, L.P.
c/o Marriott MDAH One Corporation
10400 Fernwood Road
Bethesda, Maryland 20058
Attn: Assistant General Counsel (Corporate Finance)
To Management Company:
----------------------
Marriott International, Inc.
10400 Fernwood Road
Bethesda, Maryland 20058
Attn: Associate General Counsel (Hotel Operation)
or at such other address as is from time to time designated by the party
receiving the notice. Any such notice which is properly mailed shall be deemed
to have been served as of five (5) days after said posting for purposes of
establishing that the sending party complied with the applicable time
limitations as set forth herein, but shall not be binding on one addressee until
actually received.
19.08 Limited Liability
-----------------
Management company agrees that no general or limited partner of Owner
shall have any personal liability hereunder in excess of such partner's
contribution obligations to the capital of Owner.
19.09 Entire Agreement
----------------
This Agreement, together with other writings signed by the parties
expressly stated to be supplemental hereto and together with any instruments to
be executed and delivered pursuant to this Agreement, constitutes the entire
agreement between the parties and supersedes all prior understandings and
writings, and may be changed only by a writing signed by the parties hereto.
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<PAGE>
19.10 Binding Effect.
---------------
This Agreement shall bind and inure to the benefit of all the
respective heirs, personal representatives, successors and permitted assigns of
the parties hereto.
19.11 Compliance with Loan Documents.
-------------------------------
Management Company shall take such actions and refrain from taking such
actions in operating and managing the Hotels under the provisions of this
Management Agreement, as shall be necessary for Owner to comply with its
obligations under the Loan Agreement and other loan documents executed by Owner
in connection with the Permanent Loan to the extent such loan documents have
been furnished to Management Company. Notwithstanding the above, Management
Company shall have no obligation to make any monetary payments under such loan
documents.
19.12 Effective Date.
---------------
The amendment and restatement of the Existing Management Agreement
pursuant to the terms hereof shall be deemed effective as of the Effective Date
(as defined in the Loan Agreement).
END OF ARTICLE XIX
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
OWNER
-----
MARRIOTT DIVERSIFIED AMERICAN
HOTELS, L.P.
a Delaware limited partnership ("Owner")
By: MARRIOTT MDAH ONE CORPORATION, a
Delaware Corporation, General Partner
By: /s/ Jeffrey P. Mayer
---------------------------------------
Vice President
MARRIOTT INTERNATIONAL,
INC., a Delaware Corporation
("Management Company")
By: /s/ Raymond G. Murphy
---------------------------------------
Vice President
MARRIOTT CORPORATION
(for purposes of Sections 2.01, 2.04,
9.01 and 9.02 only)
By: /s/ Matthew J. Hart
---------------------------------------
Sr. Vice President
OWNER HAS ASSIGNED ALL OF ITS RIGHTS UNDER THIS AGREEMENT PURSUANT TO, AND THE
TERMS AND CONDITIONS OF THIS AGREEMENT ARE SUBJECT TO AND HAVE BEEN MODIFIED BY,
THAT CERTAIN AMENDED AND RESTATED ASSIGNMENT OF MANAGEMENT AGREEMENT DATED AS OF
JUNE 30, 1993 (AS AMENDED, SUPPLEMENTED, RESTATED OR OTHERWISE MODIFIED FROM
TIME TO TIME, THE "ASSIGNMENT") BY AND AMONG THE PARTIES HERETO AND NATIONSBANK
OF GEORGIA, NATIONAL ASSOCIATION.
<PAGE>
EXHIBIT A
---------
The Hotels
Fullerton Marriott Hotel
2701 East Nutwood Avenue
Fullerton, CA 92631
Livonia Marriott Hotel
17100 North Laurel Park Drive
Livonia, MI 48152
Southfield Marriott Hotel
27033 Northwestern Highway
Southfield, MI 48034
Marriott at Research Triangle Park
4700 Guardian Drive
Morrisville, NC 27560
Dayton Marriott
1414 S. Patterson Boulevard
Dayton, OH 45409
Fairview Park Marriott
3111 Fairview Park Drive
Falls Church, VA 22042
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<PAGE>
EXHIBIT 10.k
AMENDED AND RESTATED
ASSIGNMENT OF MANAGEMENT AGREEMENT
THIS AMENDED AND RESTATED ASSIGNMENT OF MANAGEMENT AGREEMENT (the
"Assignment"), made as of this 30th day of June, 1993 by and among MARRIOTT
DIVERSIFIED AMERICAN HOTELS, L. P., a Delaware limited partnership ("Owner"),
MARRIOTT INTERNATIONAL, INC., a Delaware corporation (formerly known as Marriott
Hotels, Inc.) ("Operator"), and, NATIONSBANK OF GEORGIA, NATIONAL ASSOCIATION, a
national banking association chartered under the laws of the United States of
America and formerly known as The Citizens and Southern National Bank
("Lender");
W I T N E S S E T H:
WHEREAS, on February 7, 1990, pursuant to that certain Loan Agreement
dated February 7, 1990 (the "Existing Loan Agreement") between Owner and Lender,
Lender made a loan (as modified from time to time, the "Loan") in the original
principal amount of One Hundred Twenty-Eight Million and No/100 Dollars
($128,000,000.00) to Owner, which Loan is secured by, among other things, that
certain (i) Deed of Trust, Assignment of Rents and Security Agreement from Owner
to Lender, dated February 7, 1990 and recorded as document #90-074-706 of the
Official Records of Orange County, California, as amended by First Modification
of Deed of Trust, Assignment of Rents and Security Agreement and Assignment of
Leases dated of even date herewith and to be recorded, (ii) Mortgage, Assignment
of Rents and Security Agreement from Owner to Lender, dated February 7, 1990 and
recorded in Liber 11260, page 17 of the Register of Deeds of Oakland County,
Michigan as amended by First Modification of Mortgage, Assignment of Rents and
Security Agreement and Assignment of Leases dated of even date herewith and to
be recorded, (iii) Mortgage, Assignment of Rents and Security Agreement from
Owner to Lender, dated February 7, 1990 and recorded in Liber 24534, page 575 of
the Register of Deeds of Wayne County, Michigan as amended by First Modification
of Mortgage, Assignment of Rents and Security Agreement and Assignment of Leases
dated of even date herewith and to be recorded, (iv) Deed of Trust, Assignment
of Rents and Security Agreement from Owner to Lender, dated February 7, 1990 and
recorded in Book 1575, page 186 of the Register of Deeds of Durham County, North
Carolina as amended by First Modification of Deed of Trust, Assignment of Rents
and Security Agreement and Assignment of Leases dated of even date herewith and
to be recorded, (v) Mortgage, Assignment of Rents and Security Agreement from
Owner to Lender, dated February 7, 1990 and recorded as document #0006593 in
the deed records of Montgomery County, Ohio as amended by First Modification of
Mortgage, Assignment of Rents and Security Agreement and Assignment of Leases
dated of even date herewith and to be recorded, and (vi) Deed of Trust,
Assignment of Rents and Security Agreement from Owner to Lender, dated February
7, 1990 and recorded in Book 7529, page 1702 of the land records of Fairfax
County, Virginia as amended by First Modification of Deed of Trust, Assignment
1
<PAGE>
of Rents and Security Agreement and Assignment of Leases dated of even date
herewith and to be recorded (the aforesaid Deeds of Trust, Assignments of Rents
and Security Agreements and Mortgages, Assignments of Rents and Security
Agreements, as further amended, restated, supplemented or otherwise modified
from time to time in accordance with the terms thereof, collectively referred to
as the "Security Documents"); and
WHEREAS, Owner has title to real property more particularly described
on Exhibit "A" attached hereto and incorporated herein by this reference, except
that the interest acquired with respect to the real property located in
California is a leasehold estate and a portion of the real property located in
Virginia is a leasehold estate (together with the improvements situated thereon
collectively referred to as the "Property"), upon which are located six (6)
Marriott full-service hotels and other improvements (collectively referred to as
the "Hotels"); and
WHEREAS, Owner and Operator entered into that certain Management
Agreement dated as of February 7, 1990 (the "Existing Management Agreement"), as
amended of even date herewith by that certain Amended and Restated Management
Agreement and as the same may be hereafter further amended from time to time in
accordance with the provisions of paragraph 10 hereof (the "Management
Agreement") providing, among other things, for the management and operation by
Operator of the Hotels for and on behalf of Owner pursuant to the terms and
conditions set forth therein; and
WHEREAS, Owner, Lender and Operator entered into that certain
Assignment of Management Agreement dated February 7, 1990 (the "Existing
Assignment"); and
WHEREAS, Owner is in default of its obligations under the Existing Loan
Agreement and Lender and Owner are to restructure such obligations by amending
and restating the Existing Loan Agreement pursuant to the terms of that certain
Amended and Restated Loan Agreement dated as of the date hereof (as amended,
restated, supplemented or otherwise modified from time to time in accordance
with the terms thereof, the "Loan Agreement"); and
WHEREAS, as a condition to Lender's restructuring such obligations
pursuant to the Loan Agreement, the parties hereto desire to amend and restate
the terms of the Existing Assignment;
NOW, THEREFORE, in consideration of the foregoing premises, to induce
Lender to enter into the Loan Agreement, the sum of Ten and No/100 Dollars
($10.00) and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto do hereby agree that the
Existing Assignment is amended and restated as follows:
2
<PAGE>
1. Assignment. As security for payment by Owner of all of its
----------
obligations under the Loan Agreement, the indebtedness evidenced and secured by
the Security Documents and all other documents, instruments and agreements now
or hereafter evidencing or securing the Loan (collectively referred to as the
"Loan Documents"), Owner hereby grants, transfers and assigns to Lender, its
successors and assigns, all of the right, title and interest of Owner in, to and
under the Management Agreement; provided, however, Owner may continue to
-------- -------
exercise its rights, powers and privileges thereunder so long as no event of
default under this Assignment has occurred and is continuing after expiration of
any applicable cure period. This Assignment is intended as a present and
absolute assignment and not merely as the passing of a security interest.
2. Consent to Assignment; Incentive Management Fee. Operator consents
-----------------------------------------------
to the assignment of the Management Agreement by Owner to Lender and certifies
that the assignment does not, in itself, constitute an event of default under
the Management Agreement or an event which would otherwise entitle Operator to
terminate the Management Agreement. Operator and Owner acknowledge and agree
that notwithstanding any terms of the Management Agreement to the contrary, no
Incentive Management Fee nor Contingent Incentive Management Fee shall hereafter
accrue or be deemed earned until the entire principal balance, together with all
accrued interest thereon, owing under the Series A Note and the Series B Note
(as defined in the Loan Agreement) shall have been indefeasibly paid in full.
With respect to the Hotels subject to the Management Agreement or any New
Management Agreement (as defined in Section 18.02 of Article XVIII set forth on
Schedule I attached hereto) under which Lender or any affiliate of Lender is
"Owner", Operator agrees unto Lender not to pay or accept an Incentive
Management Fee or Contingent Incentive Management Fee under Article V of the
Management Agreement or under any such New Management Agreement, and hereby
expressly waives any and all rights to accrue, earn or receive payment of any
such Incentive Management Fee or Contingent Incentive Management Fee under the
Management Agreement or any such New Management Agreement, prior to payment in
full of Series A Note and Series B Note (as defined in the Loan Agreement).
3. Attornment Non-Disturbance; Post-Foreclosure Provisions. If Lender
--------------------------------------------------------
(including, for purpose of this Section, any purchaser, assignee or other
transferee from Lender at or after a foreclosure sale) shall acquire title to
the Property (or any portion thereof) by reason of foreclosure under the Loan
Documents (the term "foreclosure" as used herein, to include any delivery of a
deed in lieu of foreclosure or other proceedings brought to enforce the rights
of the holder thereof), then, unless both Lender and Operator mutually agree to
terminate the Management Agreement or Operator is in default thereunder, after
notice and expiration without cure of any applicable cure period, Operator
agrees to observe, perform and otherwise continue to act pursuant to the terms
and provisions of the Management Agreement and in all respects to attorn to and
recognize Lender as the "Owner" thereunder for all purposes; provided, however,
-------- -------
notwithstanding any provision of the Management Agreement to the contrary, the
following terms shall govern the rights and obligations of Lender and Operator
following such foreclosure with respect to the matters described:
3
<PAGE>
(a) Lender shall not be bound by any provision of the
Management Agreement obligating Lender to assume and cure monetary and
other defaults by Owner which occurred prior to the date Lender took
title to the Property, nor shall Lender be bound by any reimbursement
obligations or liabilities of Owner or otherwise be liable for payment
of amounts which were deferred or advanced by Operator, or which may
have accrued prior to the date Lender took title to the Property,
including without limitation, any obligation for the payment of Base
Management Fees, Incentive Management Fees or Contingent Incentive
Management Fees, including interest thereon, which shall have accrued
but remain unpaid as of such date, or any other liabilities of Owner to
Operator whatsoever in connection with the operation and management of
the Hotels which shall have accrued prior to the date Lender acquired
title to the Property; provided, however, that this shall not limit
-------- -------
Operator in any manner from expending Gross Revenues in accordance with
the terms of the Management Agreement, except for FF&E Reserves as
provided in subparagraph 3(e) herein (or as otherwise provided herein).
Accordingly, Operator and Lender acknowledge, confirm, covenant and
agree that such defaults and outstanding obligations, amounts or
liabilities shall not be deemed an event of default under the
Management Agreement and Operator shall not be entitled to terminate
the Management Agreement with respect thereto.
(b) No Incentive Management Fee nor any Contingent Incentive
Management Fee shall at any time accrue or be earned under the
Management Agreement or any New Management Agreement under which Lender
(but not any of its purchasers, assignees or other transferees at or
after foreclosure) or any affiliate of Lender is "Owner".
(c) Lender shall not disturb Operator's rights under the
Management Agreement and shall continue to perform the obligations of
"Owner" thereunder accruing after the date Lender acquires title to the
Property (except as specifically set forth in this Assignment), however
Lender shall not be bound to continue as the "Owner" under the
Management Agreement, in the event of Lender's foreclosure of the
Property, or any portion thereof, if Operator is in default under the
Management Agreement and such default has not been cured within any
applicable cure period.
(d) Lender shall be liable only for obligations and liabilities
in connection with the operation and management of the Hotels, arising,
accruing or incurred with respect to and during the period, if any,
that Lender is the owner of the Property and not after any subsequent
conveyance of title, so long as such subsequent owner assumes such
obligations and liabilities accruing from and after the date of
conveyance (with respect to any or all of the Hotels so conveyed by
Lender). Lender shall not be personally liable for any default or
failure to comply with the terms of the Management Agreement, it being
understood and agreed that
4
<PAGE>
Operator shall look solely to the Property for satisfaction of any
claim against Lender, Operator may have under the Management Agreement.
(e) Lender shall not be required to provide funds for any
shortfalls of the Owner's contribution to the FF&E Reserve accounts
prior to foreclosure, or thereafter make contributions to the FF&E
Reserves except from Gross Revenues after payment of all Deductions and
other amounts payable under the Management Agreement.
All FF&E Reserve accounts maintained by Operator pursuant to
Section 7.02 of the Management Agreement shall be subject to the terms
and conditions contained in the Cash Collateral Agreement (as defined
in the Loan Agreement) and Owner hereby authorizes and consents
thereto.
(f) Owner and Operator agree that automatically upon the
acceleration of the Loan and the institution of foreclosure proceedings
with respect to the Property (or any portion thereof) and with no
further action by any party, the Management Agreement shall be deemed
modified and amended so as to delete Article XVIII of the Management
Agreement in its entirety and insert in lieu thereof a new Article
XVIII as set forth in Schedule I hereof (herein the "New Article
----------
XVIII").
(g) Operator acknowledges, confirms, covenants and agrees that
the calculation for performance termination set forth in Section 4.02
of the Management Agreement shall be based on the factors set forth
therein which factors shall take into account performance of the
Property prior to and after Lender's foreclosure of the Property, or
any portion thereof
(h) Operator shall use its best efforts, and shall take all
such actions as the Lender may reasonably request, to transfer to the
Lender all licenses, permits and other governmental authorizations
issued to Operator necessary for the operation of each Hotel as a
full-service Marriott hotel.
(i) If Lender (excluding, for the purposes of this subsection
(i), any purchaser, assignee or other transferee from Lender at or
after a foreclosure sale) shall succeed to Owner's title to all six
Hotels, and shall retain such title for an uninterrupted three-year
period after obtaining title to all six Hotels, then Lender shall pay
Operator a Base Management Fee equal to four percent (4%) of Gross
Revenues from the day immediately following the end of such three-year
period onward.
4. Termination. Notwithstanding any provisions of the Management
-----------
Agreement to the contrary, Operator acknowledges, confirms, covenants and agrees
that it has no right, of any kind or nature whatsoever, prior to foreclosure
under the Security
5
<PAGE>
Documents, to terminate the Management Agreement for default of Owner under the
Management Agreement provided that Lender (i) declares an event of default under
the Loan Documents for such default under the Management Agreement within a
reasonable time after such default under the Management Agreement is declared
(subject to any extension or delay as may be required by bankruptcy, other
action taken or instituted by or on behalf of Owner or any party other than
Lender to prevent foreclosure or may be required by notice provisions), and (ii)
commences a foreclosure proceeding within a reasonable time after the
declaration of default and diligently processes such foreclosure (subject to any
delay necessitated by bankruptcy or other action taken or instituted by or on
behalf of Owner or any other party other than Lender).
5. FF&E Account. Notwithstanding any provision of the Management
------------
Agreement to the contrary, including without limitation, any of the provisions
of Section 7.02 thereof, the following terms shall apply with respect to the
matters described:
(a) Operator shall maintain all of the Hotels' FF&E Reserves
in the FF&E Account (as defined in the Cash Collateral Agreement dated
as of the date hereof between Owner and Lender (as amended,
supplemented, restated or otherwise modified from time to time, the
"Cash Collateral Agreement")). Even though the FF&E Account is a single
account, Operator shall maintain books and records with respect to each
Hotel's FF&E Reserve as if it were held in a separate escrow reserve
account. Except for the purposes described below in the following
subsection (b), any reference in the Management Agreement to a Hotel's
particular FF&E Reserve shall be deemed to be a reference to the amount
of the FF&E Account allocable to such Hotel as provided in such books
and records. Owner and Operator shall not commingle funds on deposit in
the FF&E Account with any other funds of Owner, Operator or any other
person, and accordingly, neither Owner nor Operator shall deposit into
the FF&E Account any funds other than funds to be deposited therein
under Section 7.02 of the Management Agreement or funds which may be
deposited therein as provided in the Cash Collateral Agreement. Any
interest or other earnings on funds deposited into the FF&E Account
shall be retained in the FF&E Account. Only Operator shall have
authority to withdraw funds from the FF&E Account. If at any time under
the Management Agreement or any other Loan Document, any funds on
deposit in the FF&E Account are to be transferred to Owner (other than
transfers to Owner to cover the costs of FF&E Replacements for Hotels),
then, if no Event of Default shall be in existence, such funds shall
instead be delivered to the Lender to be held in trust for the benefit
of the Hotels, but if an Event of Default shall be in existence, such
funds shall instead be delivered to Lender for application to the Loan
Obligations unless the Lender is required to use such funds under
Section 8 of the Cash Collateral Agreement to establish the account
described therein. The Operator agrees that it will use the funds on
deposit in the FF&E Account only to cover the costs of FF&E
Replacements for Hotels and for no other purposes.
6
<PAGE>
(b) For purposes of this Assignment and the Management
Agreement, upon any sale, foreclosure or other transfer of any Hotel,
the amount of the FF&E Account allocable to such Hotel shall be equal
to (i) the balance of the FF&E Account allocable to such Hotel as of
the date hereof as set forth in Schedule II attached hereto plus (ii)
the amount of contributions to the FF&E Account made subsequent to the
date hereof pursuant to Section 7.02 of the Management Agreement, as
modified by Section 9 hereof minus (iii) the amount of expenditures
made from the FF&E Account subsequent to the date hereof for such
Hotel.
(c) Any funds on deposit in the FF&E Account may be used to
cover the cost of FF&E Replacements for any Hotel.
6. Certain Accounts. Notwithstanding any provision of the Management
----------------
Agreement to the contrary, including without limitation, any of the provisions
of Section 8.02 thereof, Operator shall establish all bank accounts to be
established by Operator under the Management Agreement and which are subject to
the provisions of the Cash Collateral Agreement in accordance with the Cash
Collateral Agreement.
7. Assignment of Management Agreement by Operator. Notwithstanding any
----------------------------------------------
provision of the Management Agreement to the contrary, including without
limitation any of the provisions of Section 17.01 thereof, Operator shall not
(a) assign any of its rights or obligations under the Management Agreement to
any Marriott Affiliate or (b) cease to be a wholly-owned subsidiary of Marriott
Corporation, in each case without the Lender's prior written consent. The Lender
will consent to Operator ceasing to be a wholly-owned subsidiary of Marriott
Corporation so long as (x) Operator shall be capitalized and shall otherwise be
in the financial condition substantially as described in the Proxy Statement
dated June 19, 1993 furnished to shareholders of Marriott in connection with the
annual meeting of Marriott's shareholders scheduled for July 23, 1993 after
ceasing to be a wholly-owned subsidiary of Marriott Corporation; (y) Operator
remains obligated under, and bound by the terms of, the Management Agreement,
this Assignment, and the Subordination Agreement delivered by Operator to Lender
under the Loan Agreement all on terms and conditions, and pursuant to
agreements, documents and instruments, satisfactory to the Lender in its sole
discretion and (z) Lender shall receive an opinion of legal counsel to Operator,
in form and substance satisfactory to Lender, (1) to the effect that the
Management Agreement, this Assignment and such Subordination Agreement remain
the legal, valid and binding obligations of Operator, enforceable against
Operator in accordance with their respective terms and (2) confirming such
opinions regarding Operator and stated in the opinion of counsel to Operator
delivered in connection with the closing of the Loan Agreement, as the Lender
may request. The opinion described in the immediately preceding clause (z) may
only be from in-house counsel with respect to those matters covered by such
counsel in the opinion delivered in connection with such closing.
8. Prohibition on Providing Certain Funds. Notwithstanding the
--------------------------------------
provisions of Sections 7.02E3, 7.03A1 and 7.03A2 of the Management Agreement,
Operator shall not
7
<PAGE>
require Owner to provide any funds for the purposes described in such Sections.
Accordingly, it shall not be an event of default under the Management Agreement,
and Operator shall not be entitled to terminate the Management Agreement, if
Owner fails to provide any amounts under such Sections; provided, however,
-------- -------
Operator may, subject to Section 17 hereof, terminate the Management Agreement
with respect to any given Hotel if Owner would have, but for this Section, been
obligated to provide funds to Operator under such Sections 7.03A1 or 7.03A2 to
pay for remedial actions (i) which if not taken would result, in the reasonable
opinion of Operator, in a clear and present danger to the health or safety of
guests or employees of such Hotel or (ii) which are required by reason of any
law, ordinance, regulation or order of a competent governmental authority (after
exhausting any appeals).
9. FF&E Reserve Amounts. Operator covenants and agrees for the benefit
--------------------
of Lender that Operator will not, without Lender's prior written consent, such
consent not to be unreasonably withheld, conditioned or delayed: (a) expend
funds on deposit from time to time in the FF&E Reserve other than for
expenditures described in Section 7.02A of the Management Agreement except as
otherwise permitted in Section 5 hereof, or (b) modify the amount of Gross
Revenues to be transferred to the FF&E Reserve for any Hotel. Lender hereby
agrees that notwithstanding the terms of Section 7.02B of the Management
Agreement, Operator may transfer into the FF&E Account the following: (i) with
respect to each of the Fairview Park, Southfield, Livonia and Fullerton Hotels,
during Fiscal Years 1993 and 1994, an amount equal to two percent (2%) of Gross
Revenues from such Hotels for each such Fiscal Year; during Fiscal Years 1995,
1996, 1997, 1998 and 1999, an amount equal to three percent (3%) of Gross
Revenues from such Hotels for each such Fiscal Year; and during Fiscal Year 2000
and each Fiscal Year thereafter, an amount equal to four percent (4%) of Gross
Revenues from such Hotels for each of such Fiscal Years; (ii) with respect to
the Dayton Hotel, an annual amount equal to four percent (4%) of Gross Revenues
from such Hotel in each Fiscal Year; and (iii) with respect to the Research
Triangle Park Hotel, an annual amount equal to three percent (3%) of Gross
Revenues from such Hotel in Fiscal Years 1993, 1994, 1995, 1996 and 1997, and an
annual amount equal to four percent (4%) of Gross Revenues from such Hotel in
Fiscal Year 1998 and each Fiscal Year thereafter.
10. Transfers of the Property. Notwithstanding Lender's acceptance of
-------------------------
this Assignment or anything to the contrary contained in the Management
Agreement, including, but not limited to, in Article XVII thereof, Owner and
Operator hereby acknowledge that Lender has not consented to any sale, transfer,
conveyance or encumbrancing of the Property, or any part thereof or interest
therein, except as may be expressly permitted in the Loan Documents. Owner and
Operator further acknowledge and agree that Lender's consent, if given, to any
subordinate financing contemplated in the Management Agreement shall not be
deemed or construed to be a waiver of any provision of the Loan Documents
relating to any other subordinate financing or transfers of the Property (or
both), and that each and every subordinate financing contemplated in the
Management Agreement must comply with the provisions of the Loan Documents
8
<PAGE>
relating to subordinate financing and, where applicable, transfers of the
Property. Owner and Operator agree that the Management Agreement shall not be
subordinate to any other financing obtained by Owner.
11. Certification of Owner and Operator. Owner and Operator further
-----------------------------------
certify and confirm to and for the benefit of Lender as follows:
(a) Attached hereto as Exhibit "B" and incorporated herein by
this reference is a true, correct and complete copy of the Memorandum
of Management Agreement entered into by Owner and Operator in
connection with the Management Agreement.
(b) The Management Agreement is valid, binding and enforceable
in accordance with its terms and is in full force and effect.
(c) There exists no material default or material breach under
the Management Agreement nor, to the best knowledge of Operator or
Owner, any facts or circumstances which, with notice or the passage of
time or both, would constitute a default or a material breach
thereunder.
(d) There are no offsets or other defenses as of the date
hereof to the payment of any sums due Owner pursuant to the terms of
the Existing Management Agreement as of the date hereof, and all
charges and all other sums due and payable thereunder, if any, have
been paid to date.
(e) All obligations owing by Owner under the Loan Agreement,
including without limitation, all obligations under each of the Notes
(as defined in the Loan Agreement), constitute Qualifying Mortgage
Debt, and the Loan (as defined in the Loan Agreement) is the Permanent
Loan.
12. Additional Deductions Under Management Agreement. Notwithstanding
------------------------------------------------
the definition of the term "Deduction" under the Management Agreement, the
deduction from Operating Profit described in clause (o) of the definition of the
term "Deduction" in the Loan Agreement shall also be permitted as a deduction
from Operating Profit under the Management Agreement; provided, however, the
-------- -------
costs and expenses described in clause (p)(4) of the definition of the term
"Deduction" in the Loan Agreement shall not be permitted as deductions from
Operating Profit under the Management Agreement.
13. Application of Insurance and Condemnation Proceeds. This Assignment
--------------------------------------------------
and the acceptance thereof by Lender shall not constitute or be construed as an
agreement on Lender's part to make insurance proceeds or condemnation awards
available for restoration of the Property other than in accordance with the
applicable provisions of the Loan Documents.
9
<PAGE>
14. Amendments to Management Agreement. Owner and Operator agree not to
----------------------------------
enter into any amendment to or modification of the Management Agreement without
the prior written consent of Lender, such consent not to be unreasonably
withheld, conditioned or delayed. Any amendment or modification thereto entered
into without Lender's prior written consent shall be null and void, and of no
force or effect.
15. Confirmation of Representations and Warranties. Owner and Operator
----------------------------------------------
each hereby agree that all of their respective warranties and representations
contained in the Management Agreement are also made for the benefit of, and may
be relied upon by, Lender.
16. Effect of this Instrument on Management Agreement. Owner is
-------------------------------------------------
executing this Assignment for the purposes of (i) assigning its right, title and
interest in the Management Agreement to Lender as set forth in this Assignment,
(ii) affirming to Lender its warranties and representations, as provided in
Paragraph 11 hereof, and (iii) acknowledging and consenting to the covenants and
agreements of Lender and Operator hereunder; accordingly, nothing contained
herein shall alter, modify or diminish the obligations, covenants and agreements
of Operator and Owner, one to the other, under the Management Agreement except
as expressly provided to the contrary herein.
17. Notice and Cure Rights. In the event there exists an alleged event
----------------------
of default or breach by Owner under the Management Agreement, prior to taking of
any action against Owner for the alleged default or breach, Operator shall give
Lender written notice of the alleged default or breach and give Lender thirty
(30) days (or such additional time as is reasonable) in which to cure the
alleged default or breach. Nothing contained herein shall be construed as an
obligation of Lender to cure such alleged default or breach. Lender shall be
entitled to rely upon the representations of Operator in regard to any such
alleged default or breach, without confirming the validity or accuracy thereof
Any amounts expended by Lender in curing any such alleged default or breach
shall be immediately due and payable by Owner to Lender, shall bear interest at
the Default Rate provided in the Loan Documents and shall be added to and become
a part of the indebtedness secured by the Loan Documents.
18. Notices. Operator hereby agrees to send to Lender copies of all
-------
notices of default under the Management Agreement or such other notices as may
materially and adversely affect Lender and its rights under the Management
Agreement as herein assigned, hereafter sent to Owner under the provisions of
the Management Agreement contemporaneously with sending such notices to Owner,
in the same manner as such notices are sent to Owner. Operator hereby further
agrees that, forthwith upon any senior officer of Operator obtaining knowledge
of any event of default hereunder, including without limitation an Event of
Default under the Loan Agreement, Operator will deliver to Lender a statement of
a senior officer of Operator specifying the nature thereof and the period of
existence thereof. Operator shall be under no duty to review any of the Loan
10
<PAGE>
Documents, or to review Owner's activities to determine compliance therewith,
except to the extent necessary to comply with the terms of Section 19.11 of the
Management Agreement. Owner hereby agrees to send to Lender copies of all
notices hereafter sent to Operator under the provisions of the Management
Agreement contemporaneously with sending such notices to Operator, in the same
manner as such notices are sent to Operator. All such notices sent to Lender
shall be sent to the following address (or at such other address as Lender may
designate to Owner and Operator in writing):
NationsBank of Georgia,
National Association
c/o AMRESCO Institutional, Inc.
101 North Tryon Street, NC1001-13-20
Charlotte, North Carolina 28255
Attn: Mark Cagley
19. Furnishing of Other Information. Owner hereby agrees to deliver to
-------------------------------
Lender the monthly reports described in Section 5.05, the FF&E Replacement
Estimates described in Section 7.02D, the financial statements described in
Section 8.01 and the annual projections described in Section 8.03 of the
Management Agreement, promptly following delivery of the same to Owner. Operator
agrees to furnish the same to Lender promptly on request, in the event Owner
shall fail to do so. Operator also agrees to assist Owner in preparing the
Quarterly Reconciliation Statements and the Annual Interim Reconciliation
Statements (as each such term is defined in the Loan Agreement) to be delivered
by Owner to Lender under the terms of the Loan Agreement. In the event of a
default (which has not been cured within the applicable cure period) under the
Loan Documents, Lender shall have the right to such other financial and
operational information as may be reasonably requested. Operator hereby
acknowledges Lender's right to such information and agrees to permit Lender
access to the Hotels and the books and records of Owner, which are in the
possession or control of Operator, to the extent set forth in the Loan
Documents.
20. Events of Default. It shall be an event of default hereunder if(i)
-----------------
either Owner or Operator shall fail to observe or perform any of their
respective obligations hereunder or (ii) if any warranty, representation or
certification herein made or confirmed to Lender shall prove to have been false
or misleading in any material respect when made. The occurrence of any Event of
Default by Owner under any of the Loan Documents shall constitute an event of
default hereunder. No remedies shall be exercised by Lender for the occurrence
of any event of default or default herein until written notice is given to Owner
and any applicable cure rights have expired without cure, to the extent provided
by the Loan Documents.
21. Reliance by Lender. Owner and Operator each acknowledge and
------------------
recognize that the covenants and certifications contained herein will be relied
upon by Lender in entering into the Loan Agreement.
11
<PAGE>
22. Governing Law. This Assignment shall be construed in accordance
-------------
with the laws of the State of Georgia, and such laws shall govern the
interpretation, construction and enforcement hereof. Wherever possible each
provision of this Assignment shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this
Assignment shall be prohibited by or invalid under such law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of
this Assignment.
23. Counterparts. This Assignment may be executed in counterparts, each
------------
of which shall constitute an original and all of which counterparts together
shall constitute one and the same agreement.
24. Definitions. Capitalized terms used herein and not otherwise
-----------
defined herein shall have the meanings attributed to such terms in the
Management Agreement.
25. Survival. This Assignment shall survive any foreclosure of the Loan
--------
Documents and any extinguishment of the indebtedness secured hereby or thereby
as a result of such foreclosure.
26. Successors and Assigns. This Assignment shall be binding upon, and
----------------------
inure to the benefit of, the parties hereto and their respective successors and
assigns.
27. Termination. Upon the payment in full of all indebtedness secured
-----------
by the Loan Documents, as evidenced by the recording or filing of an instrument
of satisfaction or full release of all of the Security Documents, this
Assignment shall become and be void and of no effect.
28. Limitation of Liability. Notwithstanding anything in this
-----------------------
Assignment to the contrary, all of Lender's rights and remedies for any default
by Owner hereunder are expressly limited by, and subject to, the provisions of
Section 2.20 of the Loan Agreement dated of even date herewith between Owner and
Lender entitled "Limitation of Liability." The foregoing shall in no manner
whatsoever limit the obligations or liabilities of Owner or Operator under the
Management Agreement.
29. Effective Date. The amendment and restatement of the Existing
--------------
Assignment pursuant to the terms hereof shall be deemed effective as of the
Effective Date (as defined in the Loan Agreement).
30. Inconsistent Terms. To the extent any term or condition contained
------------------
in the Management Agreement is inconsistent with any of the terms and conditions
contained in this Assignment, the terms and conditions of this Assignment shall
control.
12
<PAGE>
31. Legend. Owner and Operator agree to place on the Management
------
Agreement a legend, in form and substance satisfactory to Lender, regarding this
Assignment.
32. Recording. Owner and Operator agree that Lender may record a
---------
memorandum of this Assignment, in form and substance acceptable to the parties
hereto, in any jurisdiction which is necessary or desirable (in the sole
discretion of Lender) to perfect or protect Lender's rights and remedies
hereunder. Owner and Operator consent to the attachment to such memorandum of
Assignment of a Memorandum of Management Agreement in the form attached hereto,
and the recording thereof as a part of such memorandum of Assignment. Owner and
Operator agree to execute and deliver to Lender, at the sole cost and expense of
Owner, additional counterparts of such memorandum of Assignment in such form as
is necessary to record such memorandum of Assignment in any such jurisdiction
and to execute, deliver and record executed counterparts of the Memorandum of
Management Agreement in each jurisdiction in which Lender shall record a
counterpart of such memorandum of Assignment. Lender agrees not to record a copy
of the Management Agreement or this Agreement in any jurisdiction without the
prior consent of Owner and Operator.
[Signature on Following Page]
13
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their respective
authorized officers or general partners to execute this Assignment under seal as
of the day and year first above written.
OWNER:
MARRIOTT DIVERSIFIED
AMERICAN HOTELS, L.P., a
Delaware limited partnership
Signed, sealed and delivered in the By: Marriott MDAH One Corporation, a
presence of: Delaware corporation, Sole
General Partner
By: /s/ Jeffrey P. Mayer
- ------------------------------------- --------------------------------
Witness Name: Jeffrey P. Mayer
Printed Name: ---------------------------
------------------------ Title: Vice President
--------------------------
/s/ Bruce Stemerman Attest: /s/ Christopher G. Townsend
- ------------------------------------- ----------------------------
Witness Name: Christopher G. Townsend
Printed Name: Bruce Stemerman ---------------------------
------------------------ Title: Secretary
--------------------------
(CORPORATE SEAL)
OPERATOR:
Signed, sealed and delivered in the MARRIOTT INTERNATIONAL,
presence of: INC., a Delaware corporation
/s/ Bruce Stemerman By: /s/ Raymond G. Murphy
- ------------------------------------- -------------------------------------
Witness Name: Raymond G. Murphy
Printed Name: Bruce Stemerman --------------------------------
------------------------ Title: Assistant Treasurer
-------------------------------
/s/ Christopher G. Townsend
- ------------------------------------- (CORPORATE SEAL)
Witness
Printed Name: Christopher G. Townsend
-----------------------
[SIGNATURE PAGE TO ASSIGNMENT OF MANAGEMENT AGREEMENT
DATED JUNE 30, 1993]
LENDER:
NATIONSBANK OF GEORGIA,
NATIONAL ASSOCIATION
By: AMRESCO-Institutional, Inc., a
Delaware corporation, its
authorized agent
By: /s/ Mark S. Cagley
-------------------------------------
Name: Mark S. Cagley
--------------------------------
Title: Authorized Representative
-------------------------------
<PAGE>
TABLE OF SCHEDULES AND EXHIBITS
-------------------------------
Schedule I - Amended Article XVIII
Schedule II - FF&E Amounts by Property
Exhibit A - Legal Description
Exhibit B - Management Agreement
15
<PAGE>
SCHEDULE I
----------
TO AMENDED AND RESTATED ASSIGNMENT OF MANAGEMENT
------------------------------------------------
AGREEMENT
---------
SALE OF HOTEL OR HOTELS
-----------------------
18.01 Sale of Hotel or Hotels.
-----------------------
A. Owner (which, for purposes of this Section 18.01, shall
include Lender and any purchaser, assignee or other transferee obtaining a fee
simple interest or leasehold interest in any Hotel upon the Sale of such Hotel)
shall have the absolute right to sell or lease any or all of the Hotels, without
the prior consent of, or any prior notice to, Management Company except for the
notices specifically required in this Section. Owner agrees to notify Management
Company of (a) the initial placing by Owner of a listing agreement with respect
to the proposed sale or lease of any of the Hotels, promptly upon the placing
thereof and (b) the identity of each proposed purchaser or lessee of any one or
more of the Hotels at least thirty (30) days prior to the intended sale or
lease. If the Owner sells or leases one or more of the Hotels, then except as
provided in Section 18.02, neither Owner nor Management Company shall have the
right to terminate this Agreement with respect to such sale or lease; provided
that Management Company shall have the right to terminate this Agreement and
shall not be required to enter into a New Management Agreement (as that term is
defined in Section 18.02B) with respect to any sale of less than all of the
Hotels if Management Company notifies Owner in writing within thirty (30) days
after Management Company receives such notice of the identity of such proposed
purchaser or lessee that (a) Management Company in good faith reasonably
believes any one or more of the following is true: (i) that the proposed
purchaser or lessee is a competitor in the lodging business of Management
Company or any of its affiliates (unless the proposed purchaser is solely a
passive owner of competitive properties in the
16
<PAGE>
lodging business); (ii) that the proposed purchaser or lessee is known in the
community in which the affected Hotel is located as being of bad moral
character; or (iii) that the financial condition and prospects of the proposed
purchaser or lessee are not adequate to discharge the obligations of Owner under
this Agreement and (b) accordingly, Management Company is electing to terminate
as a result thereof. Failure of Management Company to provide written notice of
the exercise of the foregoing right of termination within the thirty (30) day
period provided shall constitute a waiver of such right. In the event Management
Company elects to terminate this Agreement by such written notice to Owner on or
prior to the expiration of such thirty (30) day period for any of the foregoing
reasons, the effective date of such termination shall coincide with the date of
the consummation of the proposed sale or lease. Such Termination shall not be
effective if such sale or lease is not consummated.
B. In the event that Owner enters into a binding sales agreement
or agreement to lease for one or more of the Hotels and provided Management
Company has not exercised its right to terminate this Agreement provided in
Section 18.01A, then upon the written request of Management Company, Owner
agrees to notify promptly the Management Company of the following with respect
to the proposed sale or lease: (i) the stated purchase price or rental terms, as
applicable; (ii) in the case of a sale, whether the proposed transaction is for
all cash or includes a financing contingency and if so, whether the same is, in
the reasonable judgment of Owner, at a market rate or a discounted rate and
(iii) the stated closing date.
C. If Owner intends to sell, lease or refinance any one or more
of the Hotels, Management Company shall cooperate with Owner in providing
information to facilitate such sale or refinancing.
17
<PAGE>
18.02 Effect of Sale of a Hotel
-------------------------
A. Sale of All of the Hotels. (1) Upon the Sale of all the Hotels to a
-------------------------
party (a "Third Party Owner") other than Lender, any assignee or participant of
Lender or any affiliate of Lender or any such assignee or participant (whether
such Sale occurs in a series of related or unrelated transactions or is to a
single or multiple purchasers or lessees), then as to all of the Non-Terminated
Hotels (as defined below), the Third-Party Owner, or Third-Party Owners, if
there is more than one Third Party Owner, collectively (but not individually),
shall have the right, upon sixty (60) days notice to the Management Company
delivered within sixty (60) days following the Sale of the last of such
Non-Terminated Hotels to a Third Party Owner, time being of the essence, to
terminate this Agreement and each of the then existing New Management Agreements
(with respect to any Hotel sold prior to the Sale of all six Hotels), if any, in
which event, as of the date which is the sixtieth (60th) day from the date of
that notice, no party shall thereafter have any further rights or obligation
under this Agreement or the applicable New Management Agreement except as
otherwise provided in Section 4.03.
(2) Notwithstanding the foregoing, in the event that there has been a
Sale to Third Party Owners, as described in Section 18.02A(1), of all of the
Hotels other than a Delayed Sale Hotel (as defined below), then, provided that
Lender shall have satisfied the conditions set forth in the last sentence of
this Section 18.02.A(2), the right to terminate described in Section 18.02.A(1)
may be exercised by the Third Party Owners of each Non-Terminated Hotel that is
not a Delayed Sale Hotel, within the 60 day period following the sale of the
last of such Non-Terminated Hotels to a Third-Party Owner, which election shall
be effective (a) as to the Non-Terminated Hotels that are not Delayed Sale
Hotels, at the end of the sixty (60) day period following the date of the notice
required by Section 18.02.A(1) and (b) as to each Delayed Sale Hotel, on the
date on which title to such
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<PAGE>
Delayed Sale Hotel is transferred to a Third Party Owner. For purposes hereof,
"Delayed Sale Hotel" or "Delayed Sale Hotels" means either or both of the
Fullerton Hotel and the Fairview Hotel to the extent Lender has been delayed or
precluded in acquiring title to such Hotel or foreclosing on such Hotel as a
result of the terms and conditions of (i) the purchase option (herein the
"Fullerton Option") applicable to the Fullerton Hotel (as contained in Section
6.04 of the Ground Lease, as amended) or (ii) the purchase option (herein the
"Fairview Option") applicable to the Fairview Hotel (as contained in paragraph 7
of that certain Covenant and Restriction Agreement dated as of April 30, 1986,
and recorded at Deed Book 6365, Page 1145 among the land records of Fairfax
County, Virginia, as amended), as applicable. It shall be a condition to the
effectiveness of this Section 18.02.A(2) only that Lender initiate foreclosure
proceedings on both the Fullerton Hotel and the Fairview Hotel concurrently with
or prior to initiating similar actions with respect to the other four Hotels and
thereafter use reasonable diligence to pursue such foreclosure to the extent
permitted under applicable law and use good faith reasonable efforts to comply
with the terms of the Fullerton Option and Fairview Option.
(3) Without limiting the foregoing, it is agreed that the Third Party
Owners shall have the right to terminate this Agreement in accordance with the
foregoing provision only if each Third Party Owner under any other New
Management Agreement of a Non-Terminated Hotel (which is still in effect and has
not been amended or modified other than as provided in Section 18.02B) also
elects to terminate such New Management Agreement in accordance with this
provision. Each New Management Agreement entered into as a result of a sale or
lease shall contain this provision with adjustments as appropriate. For purposes
of this provision, the term "Non-Terminated Hotels" shall mean those Hotels
(other than a Delayed Sale Hotel as to which Lender has not acquired title for
the reasons described in paragraph 2 above with respect to that Delayed Sale
Hotel)
19
<PAGE>
which, at the time that the last of the Hotels have been sold to a Third Party
Owner, are still the subject of this Agreement or any New Management Agreement.
B. Effect of Sale of Less than All of the Hotels. Subject to the
---------------------------------------------
terms of Section 18.01A, upon the consummation of the sale or lease of one or
more, but less than all of the Hotels, which are at the time of the sale or
lease still the subject of this Agreement, Management Company shall terminate
this Agreement as to such Hotel or Hotels which are the subject of the
consummated sale or lease and enter into a new management agreement (herein the
"New Management Agreement") with respect to such Hotel or Hotels, with the
purchaser or lessee thereof, which New Management Agreement will be on all of
the terms and conditions of this Agreement except that in preparing such new
Management Agreement appropriate adjustments shall be made to all terms and
provisions of this Agreement which have been agreed to and/or computed on the
assumption that this Agreement will apply to all six (6) Hotels (and reciprocal
adjustments shall likewise be made to this Agreement itself, which will be
applicable to the Hotels not being so sold or leased, as set forth in this
Section 18.02 below). All of the following shall be taken into account and
appropriately reflected in any New Management Agreement:
1. As to each Hotel which is sold or leased, the actions
described in Section 4.03 shall be taken (except that, if Management
Company is entering into a New Management Agreement with the purchaser
or lessee, as the case may be, of such Hotel, then the action described
in subsection G of Section 4.03 shall not be necessary);
2. Appropriate adjustments shall be made to those other terms
and provisions of this Agreement (e.g., Working Capital, insurance)
which have been agreed on, computed or established on the assumption
that this Agreement will apply to all six (6) of the Hotels. Such
adjustments shall be calculated by
20
<PAGE>
multiplying (a) the total amount of such other term or provision by (b)
the percentage the Operating Profit generated by the Hotel being so
sold, leased or refinanced for the prior twenty-six (26) Accounting
Periods represents to the total Operating Profit for all the Hotels for
the prior twenty-six (26) Accounting Periods; and
3. The FF&E Reserve maintained pursuant to Section 7.02 hereof
for the Hotel being so sold or leased shall be transferred to the
purchaser or lessee of such Hotel.
C. Release of Owner. In the event of a sale or lease of all of
----------------
the Hotels then subject to this Agreement upon which (i) the Owners do not elect
to terminate this Agreement as permitted by Section 18.02A and (ii) Management
Company does not terminate as provided in Section 18.0 1A, then upon receipt of
a fully executed copy of assumption agreement from the purchaser or lessee and
Management Company, Owner hereunder shall be released from all further
obligations hereunder with respect to the Hotels being sold. Similarly, upon the
sale or lease of less than all of the Hotels, in the event Management Company
does not terminate as provided in Section 18.01A, then upon execution of a New
Management Agreement by Management Company and the purchaser or lessee, Owner
hereunder shall be released from all further obligations hereunder with respect
to the Hotels being sold or leased.
21
<PAGE>
SCHEDULE II
TO AMENDED AND RESTATED ASSIGNMENT
OF MANAGEMENT AGREEMENT
FF&E Amounts by Property
June 30, 1993
Fairview Park $835,694.75
Dayton $353,837.53
Livonia $245,439.09
Southfield $211,793.04
Fullerton $213,158.16
Raleigh (Research Triangle Park) $631,781.18
TOTAL $2,491,703.75
-------------
22
<PAGE>
EXHIBIT "A" - (LEGAL DESCRIPTION)
PARCEL I: (TAX MAP 049-4-01-0070)
DESCRIPTION OF PARCEL 12-A
PART OF THE PROPERTIES OF
PARK WEST/FAIRVIEW ASSOCIATES
AND ESSEX HOUSE CONDOMINIUM CORPORATION
PROVIDENCE DISTRICT, FAIRFAX COUNTY, VIRGINIA
BEGINNING at a point at the Southwesterly terminus of Fairview Park
Drive as recorded in Deed Book 6126 at page 959 among the land
records of Fairfax County, Virginia; thence with the Southerly line
of Fairview Park with a curve to the right whose radius is 50.00
feet (and whose chord is S 80 degrees 45' 18" E, 73.90 feet) an arc
distance of 83.16 feet to a point; thence continuing with the
Southerly R/W line of Fairview Park Drive and the Westerly R/W line
of an ingress-egress easement through the property of Park
West/Fairview Associates the following courses: with a curve to the
right whose radius is 465.00 feet (and whose chord is S 18 degrees
13' 22" E, 238.89 feet) an arc distance of 241.60 feet; S 03 degrees
20' 18" E, 270.95 feet; with a curve to the right whose radius is
800.00 feet (and whose chord is S 02 degrees 18' 14" E, 28.89 feet)
an arc distance of 28.89 feet and S 01 degrees 16' 10" E, 83.89 feet
to a point; thence departing from the ingress-egress easement and
running through the properties of Park West/Fairview Associates and
Essex Associates the following courses: S 89 degrees 32' 09" W,
178.01 feet; N 45 degrees 27' 51" W, 28.94 feet; S 89 degrees 32'
09" W, 27.39 feet; S 44 degrees 32' 09" W, 4.24 feet; S 89 degrees
32' 09" W, 4.00 feet; N 45 degrees 27' 51" W, 4.24 feet; S 89
degrees 32' 09" W, 18.00 feet; N 45 degrees 27' 51" W, 6.96 feet; S
44 degrees 32' 09" W, 1.50 feet; N 45 degrees 27' 51" W, 2.00 feet;
S 44 degrees 32' 09" W, 14.50 feet; N 45 degrees 27' 51" W, 7.04
feet; S 89 degrees 32' 09" W, 23.47 feet; N 45 degrees 27' 51" W,
45.41 feet; S 89 degrees 32' 09" W, 29.68 feet; N 45 degrees 27' 51"
W, 78.78 feet; N 00 degrees 27' 51" W, 85.00 feet and N 45 degrees
27' 51" W, 137.14 feet to a point on the Southeasterly R/W line of
an ingress-egress easement; thence with the Southeasterly R/W line
of the ingress-egress easement and continuing through the property
of Park West/Fairfax Associates the following courses: with a curve
to the right whose radius is 440.00 feet (and whose chord is N 38
degrees 25' 58" E, 200.42 feet) an arc distance of 202.20 feet and N
51 degrees 35' 52" E, 288.05 feet to the point of beginning,
containing 5.15294 acres of land, more or less, and being the same
property conveyed to Essex House Condominium Corporation, a Delaware
corporation) "Essex Housse"), by Quitclaim Deed, dated as of April
30, 1986, recorded April 30, 1986, in Deed Book 6365, Page 1139,
among the land records of Fairfax County, Virginia, as adjusted by
that certain Boundary Line Adjustment and Deed of Exchange, dated
May 10, 1988,
ALTA Loan Policy - 1970 - (Rev. 10/17/70 and 10/17/84)
23
<PAGE>
by and between Park West/Fairview Associates and Essex House, recorded May 20,
1988, in Deed Book 7031, Page 1151, among said land records, and being the same
land shown on Sheet 1 of that certain survey, prepared by Dewberry & Davis,
dated November 13, 1989 (last revised January 31, 1990) (the "Survey").
<PAGE>
PARCEL II: (TAX MAP 059--2--01--0058)
The leasehold interest in and to the following described parcel, together with
any other rights of lessee in and to the following described parcel, (including
the option to purchase the following described parcel), for a term of
ninety--nine (99) years, ending on April 30, 2085, pursuant to that certain
Ground Lease Agreement, dated as of April 30, 1986, by and between Park
West/Fairview Associates ("Park West"), as lessor, and Essex House Condominium
Corporation ("Essex House"), as lessee, as amended by that certain unrecorded
First Amendment to Ground Lease, effective as of May 10, 1988, and executed by
Park West and Essex House, and as further amended by that certain Amendment to
Ground Lease Agreement, Memorandum of Lease, Declaration of Easements, Covenants
and Related Agreements, Covenant and Restriction Agreement, and Supplemental
Declaration of Protective Covenants, Conditions and Restrictions, dated as of
February 5, 1990, by and among Eleven Fairview Associates, a Delaware joint
venture partnership ("Eleven Fairview"), Essex House, and Fairview Park Owners
Association, a Virginia non-stock not for profit corporation (the
"Association"), recorded February 14, 1990 in Deed Book 7529, Page 1581, among
the land records of Fairfax County, Virginia (the "Ground Lease Parcel
Amendment"), and as assigned to Marriott Diversified American Hotels, L.P.
("MDAHLP") pursuant to that certain Assignment and Assumption of Lease
Agreement, dated as of February 7, 1990, by and between Essex House, as
assignor, and Marriott Diversified American Hotels, L.P. ("MDAHLP"), as
assignee, recorded February 14, 1990, in Deed Book 7529, Page 1673, among said
land records. A memorandum of said Ground Lease Agreement was recorded April 30,
1986, in Deed Book 6365, Page 1225, among said land records, as amended by the
Ground Lease Parcel Amendment.
DESCRIPTION OF
A GROUND LEASE AREA THROUGH PARCEL 11-A
PART OF THE PROPERTY OF PARK WEST/FAIRVIEW ASSOCIATES
PROVIDENCE DISTRICT
FAIRFAX COUNTY, VIRGINIA
BEGINNING at a point on the Westerly line of an existing ingress/egress
easement as recorded in Deed Book 6133 at page 309 among the land
records of Fairfax County, Virginia (Fairview Park Drive), said point
being the following courses: with a curve to the right whose radius is
465.00 feet, an arc distance of 232.03 feet; S 03 deg. 20' 18" E,
270.95 feet; with a curve to the right whose radius is 800.00 feet, and
whose chord is S 02 deg. 18' 14" E, 28.88 feet, an arc distance of 28.89
feet and S 01 deg. 16' 10" E, 83.89 feet from a point on the Southerly
line of Fairview Park Drive as dedicated in Deed Book 6126 at page 959
among the said land records and running thence through the property of
Park West/Fairview Associates with the lines of the said ingress/egress
easement S 01 deg. 16' 10" E, 136.11 feet and with a curve to the right
whose radius is 280.00 feet, and whose chord is S 32 deg. 26' 54" W,
310.86 feet, an arc distance of 329.55 feet to a point; thence departing
the said ingress/egress easement and continuing through the property of
Park West/Fairview Associates (Parcel 11-A) the following courses: N 00
deg. 27' 51" W, 350.73 feet; S 89 deg. 32' 09" W, 20.78 feet; N 45 deg.
27' 51" W, 69.01 feet; S 89 deg. 32' 09" W, 22.88 feet and N 00 deg. 27'
51" W,
<PAGE>
22.25 feet to a point on the Southerly line of Parcel 12-A; thence
continuing with the Southerly lines of Parcel 12-A the following
courses: N 44 deg. 32' 09" E, 0.94 feet; S 45 deg. 27' 51" E, 6.96 feet;
N 89 deg. 32' 09" E, 18.00 feet; S 45 deg. 27' 51" E, 4.24 feet; N 89
deg. 32' 09" E, 4.00 feet; N 44 deg. 32' 09" E, 4.24 feet; N 89 deg. 32'
09" E, 27.39 feet; S 45 deg. 27' 51" E, 28.94 feet and N 89 deg. 32' 09"
E, 178.01 feet to the point of beginning, containing 1.33755 acres of
land, more or less, and being the same land described as the "Ground
Lease Area" and shown on Sheet 2 of the Survey.
<PAGE>
PARCEL III
All of the easements and rights appurtenant to Parcel I and/or Parcel II
and created by:
(a) that certain Declaration of Protective Covenants, Conditions and
Restrictions of Fairview Park, Fairfax County, Virginia, dated
February 27, 1985 by Park West, recorded February 28, 1985, in
Deed Book 6104, Page 910, among the land records of Fairfax
County, as amended by that certain Supplemental Declaration of
Protective Covenants, Conditions and Restrictions for Parcel 12,
Fairview Park, Fairfax County, Virginia, dated April 30, 1986, by
Park West, recorded April 30, 1986, in Deed Book 6365, Page 1106,
among said land records (as amended by the Ground Lease Parcel
Amendment), as further amended by that certain Supplemental
Declaration of Protective Covenants, Conditions and Restrictions
of Fairview Park, Fairfax County, Virginia, With Respect to
Certain Common Facilities, dated April 30, 1986, by Park West,
recorded April 30, 1986, in Deed Book 6365, Page 1229 among said
land records, as further amended by that certain First Amendment
to Declaration of Protective Covenants, Conditions and
Restrictions of Fairview Park, Fairfax County, Virginia, by and
between Park West and the Association, recorded January 22, 1988,
in Deed Book 6943, Page 54, among said land records, and as
further amended by that certain Supplemental Declaration of
Protective Covenants, Conditions and Restrictions for Parcel 11,
Fairview Park, Fairfax County, Virginia, by Park West, recorded
June 1, 1988, in Deed Book 7042, Page 1447, among said land
records (the Declaration of Protective Covenants, Conditions and
Restrictions of Fairview Park, as so amended, is hereinafter
referred to as the "Declaration"), including, without limitation,
a non-exclusive right and easement of enjoyment in and to the
Common Facilities (as defined in the Declaration), and rights of
ingress and egress over Fairview Park Drive as set forth in the
Declaration;
(b) that certain Declaration of Easements, Covenants and Related
Agreements, dated as of April 30, 1986, by and among Park West,
Essex House, and the Association, recorded April 30, 1986, in
Deed Book 6365, Page 1182, among the land records of Fairfax
County, as amended by that certain unrecorded First Amendment to
Declaration of Easements, Covenants and Related
ALTA Loan Policy - 1970 - (Rev. 10/17/70 and 10/17/84)
<PAGE>
Agreements, dated as of May 10, 1988, by and among Park West, Essex House, and
the Association, and as further amended by the Ground Lease Parcel Amendment
(the Declaration of Easements, Covenants and Related Agreements, as so amended,
is hereinafter referred to as the "Second Declaration"), including without
limitation, a non-exclusive easement upon, over, under and across the
Office/Retail Site (as defined in the Second Declaration) for construction of
the Hotel (as defined in the Second Declaration) and the Hotel Garage (as
defined in the Second Declaration), as more particularly described in Section
3(b) of the Second Declaration; an easement to extend the foundation of the
Hotel and the Hotel Garage onto certain portions of the Office/Retail Site and
to maintain such extensions, as more particularly described in Section 5(a) of
the Second Declaration; a perpetual and reciprocal easement on, under and over
the Office/Retail Site, the Courtyard (as defined in the Second Declaration) and
the Walkway (as defined in the Second Declaration) for Minor Encroachments (as
defined in the Second Declaration) of the Hotel or the Lease Garage Site (as
defined in the Second Declaration) thereon, together with a perpetual and
reciprocal easement for the maintenance of such Minor Encroachments, as more
particularly described in Section 6 of the Second Declaration, and together with
a fee simple interest in such Minor Encroachments; a perpetual easement of
support for the Hotel, the Hotel Site (as defined in the Second Declaration),
the Lease Garage Site and the Hotel Garage by way of contribution from the
foundations, columns and other portions of the Office/Retail Garage and/or the
Office/Retail Facility, as more particularly described in Section 7 of the
Second Declaration; a perpetual, non-exclusive easement upon, over, under and
across the Office/Retail Site for the installation, maintenance, repair,
removal, relocation and replacement of utilities, as more particularly described
in Section 8 of the Second Declaration; a non-exclusive easement upon, over,
under and across the Courtyard for pedestrian ingress to and egress from the
insured parcels, for the pedestrian access between the Hotel, the Office/Retail
Facility and the Walkway, and for the installation, maintenance, repair,
removal, relocation and replacement of utilities, as more particularly described
in Section 9 of the Second Declaration; a non-exclusive easement upon, over,
under and across the Walkway for
ALTA Loan Policy - 1970 - (Rev. 10/17/70 and 10/17/84)
<PAGE>
pedestrian ingress to and egress from the insured parcels, and for
the installation, maintenance, repair, removal, relocation and
replacement of utilities, as more particularly described in
Section 10 of the Second Declaration; and a perpetual easement for
pedestrian access between the Hotel, the Hotel Garage, and the
Office/Retail Facility over a portion of the Office/Retail Site,
as more particularly described in Section 13 of the Second
Declaration;
(c) that certain Reciprocal Easement Agreement, dated as of May 10,
1988, by and between Park West and Essex House, recorded May 20,
1988, in Deed Book 7031, Page 1132, among the land records of
Fairfax County (the "REA"), including, without limitation, a non-
exclusive easement upon, over and across the roadway constructed
or to be constructed by Park West on a portion of the Office Site
(as defined in the REA) for access between the Loop Road (as
defined in the REA) and the Parking Facility (as defined in the
REA); a non-exclusive easement for pedestrian traffic across each
floor of the Garage (as defined in the REA); a non-exclusive
easement for vehicular traffic across each floor of the Garage; a
non-exclusive easement for parking in areas designated for parking
in the Garage; and a non-exclusive right of entry and easement
over and across the Garage for all purposes reasonably necessary
for the performance of the REA and certain other agreements; and
(d) that certain Joint Operating Agreement and Cross-Access Easement,
dated February 1, 1990, by and between Essex House, Eleven
Fairview, and Marriott Corporation, a Delaware corporation,
recorded February 14, 1990, in Deed Book 7529, Page 1619, among
the land records of Fairfax County (the "JOA"), including, without
limitation, non-exclusive easements for pedestrian and vehicular
traffic across each floor of the EFA Garage (as defined in the
JOA), and between the Essex Garage (as defined in the JOA) and the
public streets and alleys now and hereafter abutting or located on
any portion of the EFA Garage Site (as defined in the JOA); for
pedestrian traffic between the Essex Garage and the public
walkways, escalators, elevators, concourses, plazas, malls and
bridges now and hereafter abutting or located on any portion of
the Total Site (as defined in the JOA); for furnishing connection,
attachment to walls, and other points of access from the Essex
House Garage to the EFA Garage.
ALTA Loan Policy - 1970 - (Rev. 10/17/70 and 10/17/84)
<PAGE>
and for the encroachment, maintenance and repair of connecting elements
at the Connecting Points (as defined in the JOA), together with a fee
simple interest in and to such encroachments; for parking of passenger
cars, vans and small trucks; and for construction, installation,
operation, repair, reconstruction, maintenance and removal of the
Access System (as defined in the JOA).
The easements comprising Parcel III are irrevocable and the policy, when issued,
will affirmatively insure against any loss or damage resulting from the
termination of such easements other than as provided in the instruments giving
rise thereto or by abandonment or relinquishment by the named insured.
<PAGE>
DESCRIPTION OF REAL ESTATE
PARCEL I
Land in the City of Livonia, County of Wayne, State of Michigan, described as:
A parcel of land situated in the southeast 1/4 of Section 7, Town 1 South, Range
9 East, City of Livonia, Wayne County, Michigan, more particularly described as
follows: Commencing at the Southeast corner of Section 7, Town 1 South, Range 9
East, City of Livonia, Wayne County, Michigan, and proceeding thence South 89
degrees 58 minutes 00 seconds West 353.00 feet along the South line of said
Section 7, said line also being the center line of Six Mile Road 180 feet wide
and North 00 degrees 09 minutes 10 seconds East, 90.00 feet to a point on the
North line of Six Mile Road and South 89 degrees 58 minutes 00 seconds West
773.02 feet along said line to a point on the Easterly line of Laurel Park Drive
North and proceeding along said line North 00 degrees 02 minutes 00 seconds West
70.00 feet and 184.36 feet along the arc of a curve to the left having a radius
of 386.00 feet and passing through a central angle of 27 degrees 21 minutes 57
seconds with a long cord bearing North 13 degrees 42 minutes 58 seconds West
182.61 feet to Point of Beginning, and proceeding thence along the Easterly
Right-of-Way line of said Laurel Park Drive North 105.33 feet along the arc of a
curve to the left having a radius of 386.00 feet and passing through a central
angle of 15 degrees 38 minutes 03 seconds with a long cord bearing North 15
degrees 12 minutes 58 seconds West 105.00 feet and North 40 degrees 02 minutes
00 seconds West 146.94 feet; thence 10.14 feet along the arc of a non-tangential
curve to the right having a radius of 5.00 feet and passing through a central
angle of 23 degrees 14 minutes 05 seconds with a long chord bearing North 58
degrees 35 minutes 02 seconds East 10.07 feet to a point of compound curvature;
thence 46.23 feet along the arc of a curve to the right having a radius of
134.00 feet and passing through a central angle of 19 degrees 45 minutes 56
seconds with a long chord bearing North 80 degrees 05 minutes 02 seconds East,
46.00 feet to a point of reverse curvature; thence 61.80 feet along the arc of a
curve to the left having a radius of 56.00 feet passing through a central angle
of 63 degrees 14 minutes 03 seconds with a long chord bearing North 58 degrees
20 minutes 57 seconds East 58.72 feet; thence North 00 degrees 02 minutes 00
seconds West 372.36 feet; thence 39.27 feet along the arc of a curve to the
right having a radius of 25.00 feet and passing through a central angle of 00
degrees 00 minutes 00 seconds with a long chord bearing North 44 degrees 58
minutes 00 seconds East 35.36 feet; thence North 39 degrees 58 minutes 00
seconds East 257.94 feet; thence South 00 degrees 02 minutes 00 seconds East
229.67 feet; thence North 89 degrees 58 minutes 00 seconds East 45.75 feet;
thence South 00 degrees 02 minutes 00 seconds East 60.33 feet; thence South 00
degrees 02 minutes 00 seconds East 247.20 feet; thence South 64 degrees 28
minutes 00 seconds West 213.06 feet; thence 31.71 feet along the arc of a curve
to the right having a radius of 60.00 feet
<PAGE>
and passing through a central angle of _0 degrees 16 minutes 44 seconds with a
long chord bearing South 79 degrees 36 minutes 22 seconds West, 31.34 feet to
the point of beginning, and containing 4.041 acres of land, more or less, and
being the same property conveyed to Host La Jolla, Inc., a Delaware corporation,
pursuant to that certain Warranty Deed, dated December 15, 1987, recorded
December 16, 1987, in liber 23552, page 390, among the land records of Wayne
County, Michigan, and being the same property shown on that certain survey,
prepared by Orchard, Hiltz & McCliment, Inc., dated December 7, 1989 (last
revised January 30, 1990) (the "Survey").
PARCEL II
All of the easements created pursuant to that certain Reciprocal Easement
Agreement, Laurel Park, Livonia, Michigan, between Newburgh/Six Mile Limited
Partnership, a Michigan limited partnership ("Newburgh"), and Host La Jolla,
Inc., a Delaware corporation ("Host"), recorded December 16, 1987, in liber
23552, page 402, among the land records of Wayne County, Michigan, as amended by
that certain First Amendment to Reciprocal Easement Agreement, Laurel Park,
Livonia, Michigan, dated as of December 20, 1989, by and between Newburgh and
Host, recorded February 13, 1990 in liber 24532, page 241, Register No.
90-025568, Wayne County Records, among the aforesaid land records (such
Reciprocal Easement Agreement, as so amended, is hereinafter referred to as the
"REA"), including, without limitation the following:
(a) A non-exclusive, irrevocable and perpetual access easement for pedestrian
and vehicular ingress and ingress and egress between Parcel I, the Parking
Facility (as defined in the REA) and Laurel Park Drive over the property
described in Exhibit G attached to the REA (the "Access Easement"); and
(b) A non-exclusive, irrevocable and perpetual easement for signage at the
entrance to the Host Improvements (as defined in the REA) from the
Enclosed Mall (as defined in the REA), and an exclusive, irrevocable and
perpetual easement for a free-standing sign and utilities necessary for
such sign on Six Mile Road in the area described in Exhibit I attached to
the REA (the "Free-Standing Sign Easement"); and
(c) A non-exclusive, irrevocable and perpetual easement appurtenant to Parcel
I to have the Host Improvements adjoin and open into the Enclosed Mall in
the location shown on Exhibit F to the REA and as shown on the survey by
the 60.33 feet call at the South 00 degrees 02 minutes 00 seconds East on
the eastern boundary of Parcel I; and
(d) A non-exclusive, irrevocable and perpetual easement appurtenant to Parcel
I over such portions of the Developer's Site (as defined in the REA) as
are, from time to time, in use as common roadways; and
(e) A non-exclusive, irrevocable and perpetual easement for the use of one
hundred (100) full size non-valet parking spaces on the "B" level (which
is the first level above the grade level) in the
<PAGE>
south side of the parking deck on the Developer's Site, together with an
easement for vehicular and pedestrian use and access to and from such
parking spaces and Parcel I and, if the Developer (as defined in the REA)
elects not to reconstruct the parking deck after subsequent change or
destruction, an easement for the use of hundred (100) full size non-valet
surface parking spaces on the south side of the parking area described in
Exhibit F to the REA; and
(f) A non-exclusive, irrevocable and perpetual easement appurtenant to Parcel
I across the surface of the Developer's Site for storm water flowage
(except roof water) from Parcel I to any catch basin or storm drain
located on the Developer's Site to the extent provided in the Master
Utility Plan (as defined in the REA); and
(g) Non-exclusive, irrevocable and perpetual underground easements for the
benefit of and appurtenant to Parcel I as may be necessary for the
installation and use of the Common Utility Facilities (as defined in the
REA); gas, water, storm and sanitary sewer pipes and lines, fire
protection lines, telephone and electric power lines and for the repair,
replacement, maintenance and removal thereof; and
(h) A non-exclusive, irrevocable and perpetual easement appurtenant to Parcel
I for Common Building Components (as defined in the REA); and
(i) A non-exclusive, irrevocable and perpetual easement for access, ingress
and egress on and over the immediate proximate area of the Developer's
Site to and from Parcel I to the extent reasonably necessary to perform
work in the interior and exterior of the Host Improvements and for the
construction, maintenance, operation and repair of the Host Improvements;
and
(j) A non-exclusive, irrevocable and perpetual easement over the Developer's
Site for minor encroachments of portions of the Host Improvements due to
engineering errors, errors in original construction, reconstruction,
repairs, settlement or shifting of the Host Improvements or any similar
causes, but in no event to exceed four inches (4"); and
(k) A non-exclusive, irrevocable and perpetual easement for improvements over
the area described in Exhibit F to the REA; and
(l) A non-exclusive, irrevocable and perpetual easements over such portions
of the Developer's Site not encumbered by buildings as may be necessary
to exercise self-help remedies pursuant to the REA; and
(m) Upon termination or expiration of the REA, non-exclusive, irrevocable and
perpetual easements appurtenant to Parcel I to come over and across the
portions of the Developer's Site not encumbered by buildings with
equipment and materials, and to make use thereof in such manner as may be
reasonably necessary to maintain and repair such part or parts of the
Common Utility Facilities, Common Building Components and Connector (as
defined
<PAGE>
in the REA) as may be located on the Developer's Site which service
Parcel 1.
The Access Easement and the Free-Standing Sign Easement are located as shown on
the Survey. The Access Easement is contiguous along its entire Eastern boundary
with the entire Western boundary of Parcel I, and there are no gaps, strips or
gores between them. The Access Easement is contiguous along its entire Southern
boundary with the entire Northern boundary of Parcel I, and there are no gaps,
strips or gores between them. The easements comprising Parcel II are irrevocable
and this policy affirmatively insures against any loss or damage resulting from
the termination of such easements other than as provided in the instruments
giving rise thereto, or by abandonment or relinquishment by the named insured.
<PAGE>
EXHIBIT "A"
SOUTHFIELD, MICHIGAN
--------------------
DESCRIPTION OF REAL ESTATE
PARCEL I
Land in the City of Southfield, County of Oakland, State of Michigan, described
as:
Land in the Northwest 1/4 of Section 21, Town 1 North, Range 10 East, City of
---------------------------
Southfield, Oakland County, Michigan is described as: Commencing at the West 1/4
- ----------
corner of Section 21, thence North 01 degrees 55 minutes 50 seconds West,
1623.11 feet along the West line of Section 21 and the centerline of Berg Road;
thence North 88 degrees 04 minutes 10 seconds East, 43.00 feet to a point on the
Southerly right of way line of I-696 Service Drive; thence along the said
Southerly right of way line of I-696 Service Drive and a curve concave to the
Southeast of radius 457.00 feet, a central angle of 72 degrees 22 minutes 33
seconds, an arc distance of 577.28 feet, whose chord bears North 34 degrees 15
minutes 28 seconds East, 539.66 feet; thence continuing along said Service Drive
North 70 degrees 26 minutes 45 seconds East, 45.78 feet to the point of
beginning; thence North 70 degrees 26 minutes 45 seconds East, 45.62 feet along
said Service Drive; thence along said Service Drive and a curve concave to the
South of radius 970.00 feet, a central angle of 28 degrees 18 minutes 12
seconds, an arc distance of 478.61 feet, whose chord bears North 84 degrees 34
minutes 51 seconds East, 473.77 feet; thence South 00 degrees 28 minutes 03
seconds East, 478.00 feet; thence South 89 degrees 31 minutes 57 seconds West,
259.00 feet; thence North 48 degrees 30 minutes 08 seconds West, 199.19 feet;
thence South 89 degrees 31 minutes 57 seconds West, 108.00 feet; thence North 00
degrees 28 minutes 03 seconds West, 289.00 feet to the point of beginning.
Being the same property conveyed to Marriott Corporation, a Delaware
corporation, by deed from FNMC/Berg Development Company Limited Partnership, a
Michigan limited partnership, dated September 8, 1987, recorded September 16,
1987, among the land records of Oakland County, Michigan, in Liber 10111, Page
255, and being the same land shown on that certain survey prepared by Orchard,
Hiltz & McCliment, Inc. dated December 19, 1989 (last revised January 30, 1990)
(the "Survey").
PARCEL II
Land in the City of Southfield, County of Oakland, State of Michigan, described
as:
A sixty foot (60') non-exclusive easement for ingress and egress to and from
Parcel I, pursuant to that certain Agreement, dated as of September 9, 1987, by
and between FNMC/Berg Development Company Limited Partnership, a Michigan
limited partnership, and Marriott Corporation, a Delaware corporation, recorded
September 16, 1987, in Tax I.D. (# 24-21-100-134)
<PAGE>
Liber 10111, Page 236, among the land records of Oakland County, Michigan (the
"Development Agreement"), being more particularly described as follows:
Commencing at the West 1/4 corner of Section 21, Town I North, Range 10 East,
City of Southfield, Oakland County, Michigan; thence North 01 degrees 55 minutes
50 seconds West 1623.11 feet along the West line of Section 21 and the
centerline of Berg Road; thence North 88 degrees 04 minutes 10 seconds East,
43.00 feet; thence along a curve concave to the Southeast of radius 457.00 feet,
a central angle of 72 degrees 22 minutes 33 seconds whose chord bears North 34
degrees 15 minutes 28 seconds East, 539.66 feet, an arc distance of 577.28 feet;
thence continuing along the Service Drive North 70 degrees 26 minutes 45 seconds
East 91.40 feet; thence along said Service Drive and a curve concave to the
South of radius 970.00 feet, a central angle of 28 degrees 16 minutes 12
seconds, whose chord bears North 84 degrees 34 minutes 51 seconds East 473.77
feet, an arc distance of 478.61 feet to the point of beginning; thence South 00
degrees 28 minutes 03 seconds East, 478.00 feet; thence North 89 degrees 31
minutes 57 seconds East, 60.00 feet; thence North 00 degrees 28 minutes 03
seconds West 467.68 feet to a point on the South line of the Service Drive;
thence along the South line of the Service Drive North 80 degrees 38 minutes 57
seconds West 50.13 feet; and on a curve concave to the South of radius 970.00
feet, a central angle of 00 degrees 38 minutes 05 seconds, whose chord bears
North 80 degrees 57 minutes 59 seconds West, 10.75 feet; an arc distance of
10.75 feet to the point of beginning.
Said easement is located as shown on the Survey.
PARCEL III
A six foot (6') landscape easement covering the westerly six feet (6') of Parcel
II, pursuant to the Development Agreement. Said easement is located as shown on
the Survey.
PARCEL IV
A sixteen foot (16') landscape easement, pursuant to the Development Agreement,
being more particularly described as follows:
Commencing at the West 1/4 corner of Section 21, Town 1 North, Range 10 East,
City of Southfield, Oakland County, Michigan, thence North 01
(Tax I.D. # 24-21-100-134)
<PAGE>
degrees 55 minutes 50 seconds West, 1623.11 feet along the West line of Section
21 and the center line of Berg Road; thence North 88 degrees 04 minutes 10
seconds East, 43.00 feet to a point on the Southerly right-of-way I-696
Service Drive; thence along the Southerly right-of-way line of I-696 Service
Drive and a curve concave to the Southeast of radius 457.00 feet, a central
angle of 21 degrees 40 minutes 08 seconds, whose chord bears North 08 degrees 49
minutes 13 seconds East, 171.77 feet, an arc distance of 172.84 feet; thence
North 89 degrees 31 minutes 57 seconds East, 115.70 feet to the Point of
Beginning; thence continuing North 89 degrees 31 minutes 57 seconds East, 315.00
feet; thence South 48 degrees 30 minutes 08 seconds East, 199.19 feet; thence
North 89 degrees 31 minutes 57 seconds East, 265.00 feet; thence South 00
degrees 28 minutes 03 seconds East, 16.00 feet; thence South 89 degrees 31
minutes 57 seconds West, 271.14 feet; thence North 48 degrees 30 minutes 08
seconds West, 199.19 feet; thence South 89 degrees 31 minutes 57 seconds West,
308.86 feet; thence North 00 degrees 28 minutes 03 seconds West, 16.00 feet to
the Point of Beginning.
Said easement is located as shown on the Survey.
PARCEL V
Easements for utilities, pursuant to the Development Agreement.
(Tax I.D. # 24-21-100-134)
<PAGE>
DAYTON, OHIO PROPERTY
---------------------
Legal Description
LOCATED IN SECTION 2, TOWN 1, RANGE 7 M.R.S., CITY OF DAYTON, COUNTY OF
MONTGOMERY, STATE OF OHIO, AND BEING A TRACT OF LAND DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT DESCRIBED AS FOLLOWS: BEGINNING AT THE INTERSECTION OF THE
SOUTH LINE OF STEWART STREET WITH THE EAST LINE OF PATTERSON BLVD., SAID
PATTERSON BLVD. BEING ONE HUNDRED AND 00/100 (100.00) FEET WIDE; THENCE IN A
SOUTHERLY DIRECTION WITH THE EAST LINE OF SAID PATTERSON BLVD. ON A CURVE TO THE
LEFT WITH A RADIUS OF TWO THOUSAND TWO HUNDRED FORTY-ONE AND 83/100 (2,241.83)
FEET FOR TWO HUNDRED EIGHTY-THREE AND 44/100 (283.44) FEET TO A POINT OF REVERSE
CURVATURE; THENCE STILL WITH THE EAST LINE OF SAID PATTERSON BLVD. IN A
SOUTHERLY DIRECTION ON A CURVE TO THE RIGHT WITH A RADIUS OF FOUR THOUSAND FIVE
HUNDRED THIRTY-FOUR AND 20/100 (4,534.20) FEET FOR FOUR HUNDRED FIVE AND 27/100
(405.27) FEET TO SAID POINT OF BEGINNING; THENCE FROM SAID POINT OF BEGINNING IN
A NORTHEASTERLY DIRECTION ON A CURVE TO THE RIGHT WITH A RADIUS OF TWENTY AND
00/100 (20.00) FEET FOR THIRTY-ONE AND 20/100 (31.20) FEET (THE CHORD TO SAID
CURVE BEARING, NORTH FIFTY-NINE DEGREES THIRTY-TWO MINUTES TWELVE AND 5/10
SECONDS (59 DEG. 32' 12.5") EAST FOR TWENTY-EIGHT AND 13/100 (28.13) FEET) TO A
POINT IN THE SOUTH LINE OF RIVER PARK DRIVE; THENCE WITH THE SOUTH LINE OF SAID
RIVER PARK DRIVE ON A TANGENT BEARING, SOUTH SEVENTY-FIVE DEGREES FORTY-SIX
MINUTES FORTY SECONDS (75 DEG. 46' 40") EAST FOR THREE HUNDRED THIRTY-FOUR AND
31/100 (334.31) FEET; THENCE STILL WITH THE SOUTH LINE OF SAID RIVER PARK DRIVE
IN AN EASTERLY DIRECTION ON A CURVE TO THE LEFT WITH A RADIUS OF NINE HUNDRED
EIGHTY-FOUR AND 93/100 (984.93) FEET FOR THREE HUNDRED EIGHTY-SEVEN AND 67/100
(387.67) FEET (THE CHORD TO SAID CURVE BEARING, SOUTH EIGHTY-SEVEN DEGREES THREE
MINUTES THIRTEEN AND 5/10) SECONDS (87 DEG 03' 13.5") EAST FOR THREE HUNDRED
EIGHTY-FIVE AND 18/100 (385.18) FEET); THENCE STILL WITH THE SOUTH LINE OF SAID
RIVER PARK DRIVE ON A TANGENT BEARING, NORTH EIGHT-ONE DEGREES FORTY MINUTES
THIRTEEN SECONDS (81 DEG. 40' 13") EAST FOR TWENTY-NINE AND 00/100 (29.00) FEET;
THENCE IN A SOUTHEASTERLY DIRECTION ON A CURVE TO THE RIGHT WITH A RADIUS OF
FIFTEEN AND 00/100 (15.00) FEET FOR TWENTY-THREE and 56/100 (23.56) FEET (THE
CHORD TO SAID CURVE BEARING, SOUTH FIFTY-THREE DEGREES NINETEEN MINUTES
FORTY-SEVEN SECONDS (53 DEG. 19' 47") EAST FOR TWENTY-ONE AND 21/100 (21.21)
FEET); THENCE ON A TANGENT TO SAID CURVE, SOUTH EIGHT DEGREES NINETEEN MINUTES
FORTY-SEVEN SECONDS (8 DEG. 19' 47") EAST FOR THREE HUNDRED FORTY-TWO AND 90/100
(342.90) FEET; THENCE NORTH EIGHTY-TWO DEGREES THIRTY-ONE MINUTES THIRTY SECONDS
(82 DEG. 31' 30") WEST FOR ONE HUNDRED FORTY AND 57/100 (140.57) FEET; THENCE
SOUTH SEVENTY-TWO DEGREES NINETEEN MINUTES THIRTY-FOUR SECONDS (72 DEG. 19' 34")
WEST FOR EIGHT HUNDRED NINETY-TWO AND 28/100 (892.28) FEET; THENCE NORTH
SIXTY-SIX DEGREES TWENTY MINUTES NO SECONDS (66 DEG. 20' 00") WEST FOR
SEVENTY-FIVE AND 00/ 100 (75.00) FEET TO A POINT IN THE EAST LINE OF SAID
PATTERSON BLVD.; THENCE WITH THE EAST LINE OF SAID PATTERSON BLVD. IN A
NORTHERLY DIRECTION ON A CURVE TO THE LEFT WITH A RADIUS OF FOUR THOUSAND FIVE
HUNDRED THIRTY-FOUR AND 20/100 (4,534.20) FEET FOR SIX HUNDRED NINETY-SEVEN AND
61/100 (697.61) FEET TO THE POINT OF BEGINNING (THE CHORD TO SAID CURVE BEARING,
NORTH NINETEEN DEGREES FIFTEEN MINUTES THIRTY-TWO AND 5/10 SECONDS (19 DEG. 15'
32.5") EAST FOR SIX HUNDRED NINETY-SIX AND 92/100 (696.92) FEET), CONTAINING
NINE AND 946/1000 (9.946) ACRES, MORE OR LESS, AND BEING THE SAME LAND SHOWN ON
THAT CERTAIN PLAT OF SURVEY PREPARED BY WOOLPERT CONSULTANTS, DATED DECEMBER 13,
1989, LAST REVISED JANUARY 30, 1990.
<PAGE>
LIVONIA, MICHIGAN PROPERTY
--------------------------
DESCRIPTION OF REAL ESTATE
PARCEL I
Land in the City of Livonia, County of Wayne, State of Michigan, described as:
A parcel of land situated in the Southeast 1/4 of Section 7, Town 1 South, Range
9 East, City of Livonia, Wayne County, Michigan, more particularly described as
follows: Commencing at the Southeast corner of Section 7, Town 1 South, Range 9
East, City of Livonia, Wayne County, Michigan and proceeding thence South 89
degrees 58 minutes 00 seconds West 353.00 feet along the South line of said
Section 7, said line also being the centerline of Six Mile Road 180 feet wide
and North 00 degrees 09 minutes 10 seconds East, 90.00 feet to a point on the
North line of Six Mile Road and South 89 degrees 58 minutes 00 seconds West
773.02 feet along said line to a point on the Easterly line of Laurel Park Drive
North and proceeding along said line North 00 degrees 02 minutes 00 seconds West
70.00 feet and 184.36 feet along the arc of a curve to the left having a radius
of 386.00 feet and passing through a central angle of 27 degrees 21 minutes 57
seconds with a long chord bearing North 13 degrees 42 minutes 58 seconds West
182.61 feet to Point of Beginning, and proceeding thence along the Easterly
Right-of-Way line of said Laurel Park Drive North 105.33 feet along the arc of a
curve to the left having a radius of 386.00 feet and passing through a central
angle of 15 degrees 38 minutes 03 seconds with long chord bearing North 35
degrees 12 minutes 58 seconds West 105.00 feet and North 43 degrees 02 minutes
00 seconds West 146.94 feet; thence 10.14 feet along the arc of a non-tangential
curve to the right having a radius of 25.00 feet and passing through a central
angle of 23 degrees 14 minutes 05 seconds with a long chord bearing North 58
degrees 35 minutes 02 seconds East 10.07 feet to a point of compound curvature;
thence 46.23 feet along the arc of a curve to the right having a radius of
134.00 feet and passing through a central angle of 19 degrees 45 minutes 56
seconds with a long chord bearing North 80 degrees 05 minutes 02 seconds East,
46.00 feet to a point of reverse curvature; thence 61.80 feet along the arc of a
curve to the left having a radius of 56.00 feet passing through a central angle
of 63 degrees 14 minutes 03 seconds with a long chord bearing North 58 degrees
20 minutes 57 seconds East 58.72 feet; thence North 00 degrees 02 minutes 00
seconds West 372.36 feet; thence 39.27 feet along the arc of a curve to the
right having a radius of 25.00 feet and passing through a central angle of 90
degrees 00 minutes 00 seconds with a long chord bearing North 44 degrees 58
minutes 00 seconds East 35.36 feet; thence North 89 degrees 58 minutes 00
seconds East 257.94 feet; thence South 00 degrees 02 minutes 00 seconds East
229.67 feet; thence North 89 degrees 56 minutes 00 seconds East 45.75 feet;
thence South 00 degrees 02 minutes 00 seconds East 60.33 feet; thence South 89
degrees 58 minutes 00 seconds West 48.75 feet; thence South 00 degrees 02
minutes 00 seconds 247.20 feet; thence South 64 degrees 28 minutes 00 seconds
West 213.06 feet; thence 31.71 feet along the arc of a curve to the right having
a radius of 60.00 feet
<PAGE>
and passing through a central angle of 30 degrees 16 minutes 44 seconds with a
long chord bearing South 79 degrees 36 minutes 22 seconds West, 31.34 feet to
the point of beginning, and containing 4.041 acres of land, more or less, and
being the same property conveyed to Host La Jolla, Inc., a Delaware corporation,
pursuant to the certain Warranty Deed, dated December 15, 1987, recorded
December 16, 1987, in liber 23552, page 390, among the land records of Wayne
County, Michigan, and being the same property shown on that certain survey,
prepared by Orchard, Hiltz & McCliment, Inc., dated December 7, 1989 (last
revised January 30, 1990) (the Survey).
PARCEL II
All of the easements created pursuant to that certain Reciprocal Easement
Agreement, Laurel Park, Livonia, Michigan, between Newburgh/Six Mile Limited
Partnership, a Michigan limited partnership ("Newburgh") and Host La Jolla,
Inc., a Delaware corporation ("Host"), recorded December 16, 1987, in liber
23552, page 402, among the land records of Wayne County, Michigan, as amended by
that certain First Amendment to Reciprocal Easement Agreement, Laurel Park,
Livonia, Michigan, dated as of January, 1990, by and between Newburgh and Host,
recorded january, 1990, among the aforesaid land records (such Reciprocal
Easement Agreement, as so amended, is hereinafter referred to as the "REA"),
including without limitation, the following:
(a) A non-exclusive, irrevocable and perpetual access easement for pedestrian
and vehicular ingress and egress between Parcel I, the Parking Facility (as
defined in the REA) and Laurel Park Drive over the property described in
Exhibit G attached to the REA; and
(b) A non-exclusive, irrevocable and perpetual easement for signage at the
entrance to the Host Improvements (as defined in the REA) from the Enclosed
Mall (as defined in the REA), and an exclusive, irrevocable and perpetual
easement for a free-standing sign and utilities necessary for such sign on
Six Mile Road in the area described in Exhibit I attached to the REA; and
(c) A non-exclusive, irrevocable and perpetual easement appurtenant to Parcel I
to have the Host Improvements adjoin and open into the Enclosed Mall in the
location shown on Exhibit F to the REA and as shown on the survey by the
60.33 feet call at the South 00 degrees 02 minutes 00 seconds East on the
eastern boundary of Parcel I; and
(d) A non-exclusive, irrevocable and perpetual easement appurtenant to Parcel I
over such portions of the Developer's Site (as defined in the REA) as are,
from time to time, in use as common roadways; and
(e) A non-exclusive, irrevocable and perpetual easement for the use of one
hundred (100) full size non-valet parking spaces on the "B" level (which is
the first level above the grade level) in the south side of the parking
deck on the Developer's Site, together with the easement for vehicular and
pedestrian use and access to and from such parking spaces and Parcel I and,
if the Developer
Tax I.D. #028-99-0002-006
<PAGE>
(as defined in the REA) elects not to reconstruct the parking deck after
subsequent change or destruction, an easement for the use of one hundred
(100) full size non-valet surface parking spaces on the south side of the
parking area described in Exhibit F to the REA; and
(f) A non-exclusive, irrevocable and perpetual easement appurtenant to Parcel I
across the surface of the Developer's Site for storm water flowage (except
roof water) from Parcel I to any catch basin or storm drain located on the
Developer's Site to the extent provided in the Master Utility Plan (as
defined in the REA); and
(g) Non-exclusive, irrevocable and perpetual underground easements for the
benefit of and appurtenant to Parcel I as may be necessary for the
installation and use of the Common Utility Facilities (as defined in the
REA); gas, water, storm and sanitary sewer pipes and lines, fire protection
lines, telephone and electric power lines and for the repair, replacement,
maintenance and removal thereof; and
(h) A non-exclusive, irrevocable and perpetual easement appurtenant to Parcel I
for Common Building Components (as defined in the REA); and
(i) A non-exclusive, irrevocable and perpetual easement for access, ingress and
egress on and over the immediate proximate area of the Developer's Site to
and from Parcel I to the extent reasonably necessary to perform work on the
interior and exterior of the Host Improvements and for the construction,
maintenance, operation and repair of the Host Improvements; and
(j) A non-exclusive, irrevocable and perpetual easement over the Developer's
Site for minor encroachments of portions of the Host Improvements due to
engineering errors, errors in original construction, reconstruction,
repairs, settlement or shifting of the Host Improvements or any similar
causes, but in no event to exceed four inches (4"); and
(k) A non-exclusive, irrevocable and perpetual easement for improvements over
the area described in Exhibit F to the REA; and
(l) Non-exclusive, irrevocable and perpetual easements over such portions of
the Developer's Site not encumbered by buildings as may be necessary to
exercise self-help remedies pursuant to the REA; and
(m) Upon termination or expiration of the REA, non-exclusive, irrevocable and
perpetual easements appurtenant to Parcel I to come over and across the
portions of the Developer's Site not encumbered by buildings with equipment
and materials, and to make use thereof in such manner as may be reasonably
necessary to maintain and repair such part or parts of the Common Utility
Facilities, Common Building Components and Connector (as defined in the
REA) as may be located on the Developer's Site which service Parcel I.
Tax I.D. # 028-99-0002-006
<PAGE>
EXHIBIT "A"
FULLERTON, CALIFORNIA PROPER
----------------------------
Legal Description
PARCEL 1: All that portion of the South half of Section 25, Townsite 3 South,
Range 10 West in the Rancho San Juan Cajon de Santa Ana, City of Fullerton,
County of Orange, State of California, as shown on a map recorded in Book 51 at
Page 7 of Miscellaneous Maps in the office of the County Recorder of said
County, more particularly described as follows:
Beginning at the intersection of a line parallel with and distant Northerly
100.00 feet measured at right angles to the Northerly right-of-way line of
Nutwood Avenue, said Northerly right-of-way line having a bearing of North 89
(degrees) 16' 15" West as same is shown on a map filed in Book 93 at Pages 3 and
4, Records of Surveys of said Orange County, and a line parallel with and
distant Westerly 60.00 feet measured at right angles to the Westerly line of
"ROUTE 57 FREEWAY", said Westerly line having a bearing of North 15 (degrees)
00' 53" East of same is shown on said map filed in Book 93 at Pages 3 and 4,
Records of Surveys; thence, along said line parallel with the Northerly
right-of-way line of Nutwood Avenue North 89 (degrees) 16' 15" West 385.00 feet;
thence, leaving last said line North 0 (degrees) 43' 47" East 26.06 feet;
thence, North 23 (degrees) 34' 08" East 158.50 feet; thence, at right angles to
last line North 66 (degrees) 25' 52" West 12.00 feet; thence at right angles to
last line North 23 (degrees) 34' 08" East 226.81 feet; thence, parallel with
said Northerly right-of-way line of Nutwood Avenue South 89 (degrees) 16' 13"
East 323.81 feet; thence, leaving said parallel line South 0 (degrees) 43' 47"
West 94.26 feet to a point is aforementioned line parallel with the Westerly
line of "ROUTE 57 FREEWAY"; thence along last said parallel line South 15
(degrees) 00' 53" West 281.84 feet to the POINT OF BEGINNING. Containing an area
of 3.116 Acres more or less, and being the same land shown on the survey
prepared by Wagner Pacific, Inc., dated November 16, 1989, last revised January
29, 1990.
PARCEL 2: An exclusive easement for ingress, egress, parking and landscaping
purposes in and to that portion of said South half of Section 25, Townsite 3
South, Range 10 West in the Rancho San Juan Cajon de Santa Ana, City of
Fullerton, County of Orange, State of California, as shown on said map recorded
in Book 51 at Page 7 of Miscellaneous Maps in the office of the County Recorder
of said County, more particularly described as follows:
Beginning at the intersection of said Northerly right-of-way line of Nutwood
Avenue, said Northerly right-of-way line having a bearing of North 89 (degrees)
16' 13" West and said Westerly line of "ROUTE 57 FREEWAY" having a bearing of
North 15 (degrees) 00' 53" East; thence, along said Northerly right-of-way line
North 89 (degrees) 16' 13" West 390.45 feet; thence North 16 (degrees) 13' 59"
West 21.39 feet; thence North 44 (degrees) 16' 13" West 35.00 feet; thence,
North 0 (degrees) 43' 47" East 54.79 feet to the Southwesterly corner of said
Lease Area, containing an area of 3.116 Acres more or less; thence, along the
Southerly line of said Lease Area South 89 (degrees) 16' 13" East 385; thence,
along the Easterly line of said Lease Area North 15 (degrees) 00' 55" East
281.84 feet; thence, North 0 (degrees) 43' 47" East 94.26 feet to the Northeast
corner of said Lease Area; thence, along the Easterly prolongation of the
Northerly line of said Lease Area South 89 (degrees) 16' 13" East 73.15 feet to
its intersection with aforementioned Westerly line of "ROUTE 57 FREEWAY" as same
is shown on said map filed in Book 93 at Pages 3 and 4, Records of Survey of
said Orange County; thence, along last said Westerly line through the following
courses: South 9 (degrees) 22' 45" West, 125.79 feet to an angle point and South
15 (degrees) 00' 53" West, 353.97 feet to the POINT OF BEGINNING, and being the
same land shown on the survey prepared by Wagner Pacific, Inc., dated November
16, 1989, last revised January 29, 1990.
<PAGE>
EXHIBIT "A"
RESEARCH TRIANGLE PARK, NORTH CAROLINA
--------------------------------------
Legal Description
BEGINNING at a new iron pipe, said iron pipe being set at the intersection
of the southerly line of the right-of-way of Guardian Drive and the easterly
line of the right-of-way of Miami Boulevard,
THENCE South 87 degrees 26 minutes 55 seconds East with the southerly line
of the right-of-way of Guardian Drive for a distance of 132.33 feet to a new
iron pipe set on the southerly line of the right-of-way of Guardian Drive,
THENCE still with the southerly line of the right-of-way of Guardian Drive
along a curve to the right having a radius of 452.93 feet and an arc length of
355.73 feet, being subtended by a chord of South 64 degrees 56 minutes 55
seconds East for a distance of 346.66 feet to a new iron pipe set on the
southwesterly line of the right-of-way of Guardian Drive,
THENCE with the southwesterly line of the right-of-way of Guardian Drive
along a curve to the right having a radius of 470.00 feet and an arc length of
427.27 feet, being subtended by a chord of South 16 degrees 24 minutes 29
seconds East for a distance of 412.71 feet to a new iron pipe set on the
southwesterly line of the right-of-way of Guardian Drive,
THENCE South 09 degrees 38 minutes 17 seconds West for a distance of
198.06 feet to an existing iron pipe found on the westerly line of the
right-of-way of Guardian Drive,
THENCE with the westerly line of the right-of-way of Guardian Drive along
a curve to the left having a radius of 550.01 feet and an arc length of 285.37
feet, being subtended by a chord of South 05 degrees 13 minutes 26 seconds East
for a distance of 282.18 feet to an existing iron pipe found on the westerly
line of the right-of-way of Guardian Drive,
THENCE South 69 degrees 54 minutes 54 seconds West for a distance of
131.54 feet leaving said right-of-way to an existing iron pipe found on the
northeasterly line of the right-of-way of Interstate 40 Access Ramp,
THENCE with the northeasterly line of the right-of-way of Interstate 40
Access Ramp along a curve to the left having a radius of 816.20 feet and an arc
length of 416.14 feet, being subtended by a chord of North 39 degrees 15 minutes
20 seconds West for a distance of 411.64 feet to an existing concrete monument
found on the northeasterly line of the right-of-way of Interstate 40 Access
Ramp,
<PAGE>
THENCE North 59 degrees 06 minutes 12 seconds West for a distance of 213.76
feet along the northeasterly line of the right-of-way of Interstate 41 Access
Ramp to an existing concrete monument found on the northeasterly line of the
right-of-way of Interstate 40 Access Ramp,
THENCE North 47 degrees 15 minutes 26 seconds West for a distance of 110.76
feet to an existing concrete monument found at the intersection of the
northeasterly line of the right-of-way of Interstate 40 Access Ramp and the
easterly line of the right-of-way of Miami Boulevard,
THENCE North 16 degrees 17 minutes 05 seconds East for a distance of 229.08
feet along the easterly line of the right-of-way of Miami Boulevard to an
existing concrete monument found on the easterly line of the right-of-way of
Miami Boulevard,
THENCE North 06 degrees 48 minutes 31 seconds East for a distance of 321.29
feet to an existing concrete monument found on the easterly line of the
right-of-way of Miami Boulevard,
THENCE North 17 degrees 56 minutes 07 seconds West for a distance of 28.83
feet to a new iron pipe set, the point and place of BEGINNING.
SAID property contains 10.3368 acres more or less, being the same land
shown on that certain plat of survey entitled "ALTA/ACSM Survey of Marriott
Hotel" dated November 28, 1989, last revised January 24, 1990, and prepared by
Garry C. VanPool, Registered Land Surveyor No. L-2986, and being the same
property conveyed by deed dated November 24, 1986, from Linpro Triangle Offices
I Limited to Marriott Corporation, recorded in Book 1348, Page 735, among the
land records of Durham County, North Carolina.
<PAGE>
EXHIBIT A
FAIRFAX COUNTY, VIRGINIA PROPERTY
LEGAL DESCRIPTION
PARCEL I: (TAX MAP 049-4-01-0070)
DESCRIPTION OF PARCEL 12-A
PART OF THE PROPERTIES OF
PARK WEST/FAIRVIEW ASSOCIATES
AND ESSEX HOUSE CONDOMINIUM CORPORATION
PROVIDENCE DISTRICT, FAIRFAX COUNTY, VIRGINIA
BEGINNING at a point at the Southwesterly terminus of Fairview Park Drive as
recorded in Deed Book 6126 at page 959 among the land records of Fairfax County,
Virginia; thence with the Southerly line of Fairview Park with a curve to the
right whose radius is 50.00 feet (and whose chord is S 80 degrees 45' 18" E,
73.90 feet) an arc distance of 83.16 feet to a point; thence continuing with the
Southerly R/W line of Fairview Park Drive and the Westerly R/W line of an
ingress-egress easement through the property of Park West/Fairview Associates
the following courses: with a curve to the right whose radius is 465.00 feet
(and whose chord is S 18 degrees 13' 22' E; 238.89 feet) an arc distance of
241.60 feet; S 03 degrees 20' 18" E' 270.95 feet; with a curve to the right
whose radius is 800.00 feet (and whose chord is S 02 degrees 18' 14" E, 28.89
feet) an arc distance of 28.89 feet and S 01 degrees 16' 10" E, 83.89 feet to a
point; thence departing from the ingress-egress easement and running through the
properties of Park West/Fairview Associates and Essex Associates the following
courses: S 89 degrees 32' 09" W, 178.01 feet; N 45 degrees 27' 51" W, 28.94
feet; S 89 degrees 32' 09" W, 27.39 feet; S 44 degrees 32' 09" W, 4.24 feet; S
89 degrees 32' 09" W, 4.00 feet; N 45 degrees 27' 51" W, 4.24 feet; S 89 degrees
32' 09" W, 18.00 feet; N 45 degrees 27' 51" W' 6.96 feet; S 44 degrees 32' 09"
W, 1.50 feet; N 45 degrees 27' 51" W, 2.00 feet; S 44 degrees 32' 09" W, 14.50
feet; N 45 degrees 27' 51" 7.04 feet; S 89 degrees 32' 09" W, 23.47 feet; N 45
degrees 27' 51" W, 45.41 feet; S 89 degrees 32' 09" W, 29.68 feet; N 45 degrees
27' 51" W, 78.78 feet; N 00 degrees 27' 51" W, 85.00 feet and W 45 degrees 27'
51" W, 137.14 feet to a point on the Southeasterly R/W line of an ingress-egress
easement; thence with the Southeasterly R/W line of the ingress-egress easement;
thence with continuing through the property of Park West/Fairfax Associates the
following courses: with a curve to the right whose radius is 440.00 feet (and
whose chord is N 38 degrees 25' 58" E, 200.42 feet) an arc distance of 202.20
feet and N51 degrees 35' 52" E, 288.05 feet to the point of beginning,
containing 5.15294 acres of land, more or less, and being the same property
conveyed to Essex House Condominium Corporation, a Delaware corporation) "Essex
House"), by Quitclaim Deed, dated as of April 30, 1986, recorded April 30, 1986,
in Deed Book 6365, Page 1139, among the land records of Fairfax County,
Virginia, as adjusted by the central Boundary Line Adjustment and Deed of
Exchange, dated May 10, 1986, by and between Park West/Fairview Associates and
Essex House, recorded May 20, 1988, in Deed Book 7031, Page 1151, among said
land records, and being the same land on sheet 1 of that certain survey,
prepared by Dewberry & Davis, dated November 13, 1989, last revised January 31,
1990 the "Survey").
<PAGE>
PARCEL II: (TAX-MAP 059-2-01-0058)
The leasehold interest in and to the following described parcel, together with
any other rights of lessee in and to the following described parcel, (including
the option to purchase the following described parcel), for a term of ninety-
nine (99) years, ending on April 30, 2085, pursuant to that certain Ground Lease
Agreement, dated as of April 30, 1986, by and between Park West/Fairview
Associates ("Park West"), as lessor, and Essex House Condominium Corporation
("Essex House"), as lessee, as amended by that certain unrecorded First
Amendment to Ground Lease, effective as of May 10, 1988, and executed by Park
West and Essex House, and as further amended by that certain Amendment to
Ground Lease Agreement, Memorandum of Lease, Declaration of Easements, Covenants
and Related Agreements, Covenant and Restriction Agreement, and Supplemental
Declaration of Protective Covenants, Conditions and Restrictions, dated as of
February 5, 1990, by and among Eleven Fairview Associates, a Delaware joint
venture partnership ("Eleven Fairview"), Essex House, and Fairview Park Owners
Association, a Virginia non-stock not for profit corporation (the
"Association"), recorded January .., 1990 in Deed Book ..., Page ...., among the
land records of Fairfax County, Virginia (the "Ground Lease Parcel Amendment"),
and as assigned to Marriott Diversified American Hotels, L.P. ("MDAHLP")
pursuant to that certain Assignment and Assumption of Lease Agreement, dated as
of January .., 1990, by and between Essex House, as assignor, and Marriott
Diversified American Hotels, L.P. ("MDAHLP"), as assignee, recorded January ..,
1990, in Deed Book ...., Page ....., among said land records. A memorandum of
said Ground Lease Agreement was recorded April 30, 1986, in Deed Book 6365, Page
1225, among said land records, as amended by the Ground Lease Parcel Amendment.
DESCRIPTION OF
A GROUND LEASE AREA THROUGH PARCEL 11-A
PART OF THE PROPERTY OF PARK WEST/FAIRVIEW ASSOCIATES
PROVIDENCE DISTRICT
FAIRFAX COUNTY, VIRGINIA
BEGINNING at a point on the Westerly line of an existing ingress/egress
easement as recorded in Deed Book 6133 at page 309 among the land records
of Fairfax County, Virginia (Fairview Park Drive), said point being the
following courses: with a curve to the right whose radius is 465.00 feet,
an arc distance of 232.03 feet; S 03 deg. 20' 18" E, 270.95 feet; with a
curve to the right whose radius is 800.00 feet, and whose chord is S 02
deg. 18' 14" E, 28.88 feet, an arc distance of 28.89 feet and S 01 deg. 16'
10" E, 83.89 feet from a point on the Southerly line of Fairview Park Drive
as dedicated in Deed Book 6126 at page 959 among the said land records and
running thence through the property of Park West/Fairview Associates with
the lines of the said ingress/egress easement S 01 deg. 16' 10" E, 136.11
feet and with a curve to the right whose radius is 280.00 feet, and whose
chord is S 32 deg. 26' 54" W, 310.86 feet, an arc distance of 329.55 feet
to a point; thence departing the said ingress/egress easement and
continuing through the property of Park West/Fairview Associates (Parcel
11-A) the following courses: N 00 deg. 27' 51" W, 350.73 feet; S 89 deg.
32' 09" W, 20.78 feet; N 45 deg. 27' 51" W,
<PAGE>
69.01 feet S 89 deg. 32' 09" W, 22.88 feet and N 00 deg. 27' 51" W, 22.25
feet to a point on the Southerly line of Parcel 12-A; thence continuing
with the Southerly lines of Parcel 12-A the following courses: N 44 deg.
32' 09" E, 0.94 feet; S 45 deg. 27' 51" E, 6.96 feet; N 89 deg. 32' 09" E,
18.00 feet; S 45 deg. 27' 51" E, 4.24 feet; N 89 deg. 32' 09" E, 4.00
feet; N 44 deg. 32' 09" E, 4.24 feet; N 89 deg. 32' 09" E, 27.39 feet; S
45 deg. 27' 51" E, 28.94 feet and N 89 deg. 32' 09" E, 178.01 feet to the
point of beginning, containing 1.33755 acres of land, more or less, and
being the same land described as the "Ground Lease Area" and shown on Sheet
2 of the Survey.
<PAGE>
PARCEL III
All of the easements and rights appurtenant to Parcel I and/or Parcel II and
created by:
(a) that certain Declaration of Protective Covenants, Conditions and
Restrictions of Fairview Park, Fairfax County, Virginia, dated
February 27, 1985, by Park West, recorded February 28, 1985, in Deed
Book 6104, Page 910, among the land records of Fairfax County, as
amended by that certain Supplemental Declaration of Protective
Covenants, Conditions and Restrictions for Parcel 12, Fairview Park,
Fairfax County, Virginia, dated April 30, 1986, by Park West,
recorded April 30, 1986, in Deed Book 6365, Page 1106, among said
land records (as amended by the Ground Lease Parcel Amendment), as
further amended by that certain Supplemental Declaration of
Protective Covenants, Conditions and Restrictions of Fairview Park,
Fairfax County, Virginia, With Respect to Certain Common Facilities,
dated April 30, 1986, by Park West, recorded April 30, 1986, in Deed
Book 6365, Page 1229, among said land records, as further amended by
that certain First Amendment to Declaration of Protective Covenants,
Conditions and Restrictions at Fairview Park, Fairfax County,
Virginia, by and between Park West and the Association, recorded
January 22, 1988, in Deed Book 6943, Page 54, among said land
records, and as further amended by that certain Supplemental
Declaration of Protective Covenants, Conditions and Restrictions for
Parcel 11, Fairview Park, Fairfax County, Virginia, by Park West,
recorded June 1, 1988, in Deed Book 7042, Page 1447, among said land
records (the Declaration of Protective Covenants, Conditions and
Restrictions at Fairview Park, as so amended, is hereinafter referred
to as the "Declaration"), including, without limitation, a
non-exclusive right and easement of enjoyment in and to the Common
Facilities (as defined in the Declaration), and rights of ingress and
egress over Fairview Park Drive as set forth in the Declaration;
(b) that certain Declaration of Easements, Covenants and Related
Agreements, dated as of April 30, 1986, by and among Park West, Essex
Rouse, and the Association, recorded April 30, 1986, in Deed Book
6365, Page 1182, among the land records of Fairfax County, as amended
by that certain unrecorded First Amendment to Declaration of
Easements, Covenants and Related
<PAGE>
Agreements, dated as of May 10, 1988, by and among Park West, Essex
House, and the Association and as further amended by the Ground Lease
Parcel Amendment (the Declaration at Easements, Covenants and Related
Agreements, as so amended, is hereinafter referred to as the "Second
Declaration"), including, without limitation, a non-exclusive
easement upon, over, under and across the Office/Retail Site (as
defined in the Second Declaration) for construction of the Hotel (as
defined in the Second Declaration) and the Hotel Garage (as defined
in the Second Declaration), as more particularly described in Section
3(b) of the Second Declaration; an easement to extend the foundation
of the Hotel and the Hotel Garage onto certain portions of the
Office/Retail Site and to maintain such extensions, as more
Particularly described in Section 5(a) of the Second Declaration; a
perpetual and reciprocal easement on, under and over the
Office/Retail Site, the Courtyard (as defined in the Second
Declaration) and the Walkway (as defined in the Second Declaration)
for Minor Encroachments (as defined in the Second Declaration) of the
Hotel or the Leased Garage Site (as defined in the Second
Declaration) thereon, together with a perpetual and reciprocal
easement for the maintenance of such Minor Encroachments, as more
particularly described in Section 6 of the Second Declaration, and
together with a fee simple interest in such Minor a perpetual
easement of support for the Hotel, the Hotel Site (as defined in the
Second Declaration), the Leased Garage Site and the Hotel Garage by
way of contribution from the foundations, columns and other portions
of the Office/Retail Garage and/or the Office/Retail Facility, as
more particularly described in Section 7 of the Second Declaration; a
perpetual, non-exclusive easement upon, over, under and across the
Office/Retail Site for the installation, maintenance, repair,
removal, relocation and replacement of utilities, as more
particularly described in Section 8 of the Second Declaration; a non-
exclusive easement upon, over, under and across the Courtyard for
pedestrian ingress to and egress from the insured parcels, for
pedestrian access between the Hotel, the Office/Retail Facility and
the Walkway, and for the installation, maintenance, repair, removal,
relocation and replacement of utilities, as more particularly
described in Section 9 of the Second Declaration; a non-exclusive
easement upon, over, under and across the Walkway for
<PAGE>
pedestrian ingress to and egress from the insured parcels, and for
the installation, maintenance, repair, removal, relocation and
replacement of utilities, as more particularly described in Section
10 of the Second Declaration; and a perpetual easement for pedestrian
access between the Hotel, the Hotel Garage, and the Office/Retail
Facility over a portion of the Office/Retail Site, as more
Particularly described in Section 13 of the Second Declaration;
(c) that certain Reciprocal Easement Agreement, dated as of May 10, 1988,
by and between Park West and Essex House, recorded May 20, 1988, in
Deed Book 7031, Page 1132, among the land records of Fairfax County
(the "REA"), including, without limitation, a non-exclusive easement
upon, over and across the roadway constructed or to be constructed by
Park West on a portion of the Office Site (as defined in the REA) for
access between the Loop Road (as defined in the REA) and the Parking
Facility (as defined in the REA); a non-exclusive easement for
pedestrian traffic across each floor of the Garage (as defined in the
REA); a non-exclusive easement for vehicular traffic across each
floor of the Garage; a non-exclusive easement for parking in areas
designated for parking in the Garage; and a non-exclusive right of
entry and easement aver and across the Garage for all purposes
reasonably necessary for the performance of the REA and certain other
agreements; and
(d) that certain Joint Operating Agreement and Cross-Access Easement,
dated January __, 1990, by and between Essex House, Eleven Fairview,
and Marriott Corporation, a Delaware corporation, recorded January
__, 1990, in Deed Book ____, Page ____, among the land records of
Fairfax County (the "JOA"), including, without limitation, non-
exclusive easements for pedestrian and vehicular traffic across each
floor of the EFA Garage (as defined in the JOA), and between the
Essex Garage (as defined in the JOA) and the public streets and
alleys now and hereafter abutting or located on any portion of the
EFA Garage Site (as defined in the JOA); for pedestrian traffic
between the Essex Garage and the public walkways, escalators,
elevators, concourses, plazas, malls and bridges now and hereafter
abutting or located on any portion of the Total Site (as defined in
the JOA); for furnishing connection, attachment to walls, and other
points of access from the Essex House Garage to the EFA Garage,
<PAGE>
and for the encroachment, maintenance and repair of connecting
elements at the Connecting Points (as defined in the JOA), together
with a fee simple interest in and to such encroachments; for parking
of passenger cars, vans and small trucks; and for construction,
installation, operation, repair, reconstruction, maintenance and
removal of the Access System (as defined in the JOA).
<PAGE>
EXHIBIT B
MEMORANDUM OF MANAGEMENT AGREEMENT
----------------------------------
This is a memorandum of that certain unrecorded Amended and Restated
Management Agreement dated as of June 30, 1993 (the "Agreement") between
MARRIOTT DIVERSIFIED AMERICAN HOTELS, L.P. ("Owner"), a De1aware limited
partnership with a mailing address at 10400 Fernwood Road, Bethesda, Maryland
20058, and MARRIOTT INTERNATIONAL, INC., formerly known as Marriott Hotels, Inc.
("Management Company"), a Delaware corporation, with a mailing address at 10400
Fernwood Road, Bethesda, Maryland 20058 concerning six (6) hotel properties
including, without limitation, the premises described in Exhibit "A" attached
hereto and made a part hereof by reference. The term of the Agreement expires
December 31, 2009, unless sooner terminated or renewed as provided therein.
This memorandum is recorded merely as notice of the Agreement, and
reference is made thereto for the full terms and conditions thereof. Provisions
in this memorandum shall not be used in interpreting the Agreement provisions
and in the event of a conflict between this memorandum and the unrecorded
Agreement, the unrecorded Agreement shall control.
[SIGNATURES ON FOLLOWING PAGES]
<PAGE>
IN WITNESS WHEREOF, Owner and Management Company have caused this
Memorandum of Management Agreement to be executed under seal as of the 30th day
of June, 1993.
OWNER:
-----
MARRIOTT DIVERSIFIED AMERICAN
HOTELS, L.P., a De1aware limited
partnership (SEAL)
Signed, sealed and delivered By: Marriott MDAH One Corporation,
as to Owner in the presence of: a De1aware corporation, Sole
General Partner
- ---------------------------------- By:
Witness ------------------------------
Printed Name: Name:
--------------------- -------------------------
Title:
------------------------
- ----------------------------------
Witness Attest:
Printed Name: --------------------------
---------------------
--------------------------
Assistant Secretary
[CORPORATE SEAL]
MANAGEMENT COMPANY:
------------------
Signed, sealed and delivered as to MARRIOTT INTERNATIONAL, INC.
Management Company in the
presence of:
By:
- ---------------------------------- ------------------------------
Witness Name:
Printed Name: -------------------------
--------------------- Title:
------------------------
- ---------------------------------- (CORPORATE SEAL)
Witness
Printed Name:
---------------------
- 2 -
<PAGE>
EXHIBIT 10.l
EXECUTION COPY
FIRST AMENDMENT TO
AMENDED AND RESTATED
ASSIGNMENT OF MANAGEMENT AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED ASSIGNMENT OF MANAGEMENT
AGREEMENT dated as of July 22, 1994 by and among MARRIOTT DIVERSIFIED AMERICAN
HOTELS, L.P. ("Owner"), MARRIOTT INTERNATIONAL, INC., formerly known as Marriott
Hotels, Inc. ("Operator"), and NATIONSBANK OF GEORGIA, NATIONAL ASSOCIATION,
formerly known as The Citizens and Southern National Bank ("Lender").
WHEREAS, Owner and Lender entered into that certain Amended and
Restated Loan Agreement dated as of June 30, 1993 (the "Loan Agreement");
WHEREAS, in connection with the Loan Agreement, Owner and Operator
entered into that certain Amended and Restated Management Agreement dated as of
June 30, 1993 (the "Management Agreement");
WHEREAS, in connection with the Loan Agreement and the Management
Agreement, Owner, Operator and Lender entered into that certain Amended and
Restated Assignment of Management Agreement dated as of June 30, 1993 (the
"Assignment"); and
WHEREAS, Owner, Operator and Lender desire to amend the Assignment to
modify the terms thereof relating to deposits into and withdrawals from the FF&E
Account to permit funding of the FF&E Account to be on a net basis, and for
other purposes.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
hereto do hereby agree as follows:
Section 1. Specific Amendment to Assignment. The Assignment is amended
--------------------------------
by deleting Section 5 thereof in its entirety and substituting in lieu thereof
the following:
"5. FF&E Account. Notwithstanding any provision of the
------------
Management Agreement to the contrary, including without limitation, any
of the provisions of Section 7.02 thereof, the following terms shall
apply with respect to the matters described:
(a) Operator shall maintain all of the Hotels' FF&E
Reserves in the FF&E Account (as defined in the Cash Collateral
Agreement dated as of the date hereof between Owner and Lender
(as amended, supplemented, restated or otherwise modified from
time to time, the "Cash Collateral Agreement")). Even
<PAGE>
though the FF&E Account is a single account, Operator shall
maintain books and records with respect to each Hotel's FF&E
Reserve as if it were held in a separate escrow reserve
account. Except for the purposes described below in the
following subsection (b), any reference in the Management
Agreement to a Hotel's particular FF&E Reserve shall be deemed
to be a reference to the amount of the FF&E Account allocable
to such Hotel as provided in such books and records. Owner and
Operator shall not commingle funds on deposit in the FF&E
Account with any other funds of Owner, Operator or any other
person, and accordingly, neither Owner nor Operator shall
deposit into the FF&E Account any funds other than funds to be
deposited therein under Section 7.02 of the Management
Agreement or funds which may be deposited therein as provided
in the Cash Collateral Agreement. Any interest or other
earnings on funds deposited into the FF&E Account shall be
retained in the FF&E Account. Only Lender shall have authority
to withdraw funds from the FF&E Account. Operator may request
Lender to disburse funds on deposit in the FF&E Account in
accordance with Section 5 of the Cash Collateral Agreement.
The Lender shall make the amount of any such disbursement
permitted under the Cash Collateral Agreement available to
Operator within three Business Days of receipt by Lender of
the appropriate request. If at any time under the Management
Agreement or any other Loan Document, any funds on deposit in
the FF&E Account are to be transferred to Owner (other than
transfers to Owner to cover the costs of FF&E Replacements for
Hotels), then, if no Event of Default shall be in existence,
such funds shall instead be delivered to Lender to be held in
trust for the benefit of the Hotels, but if an Event of
Default shall be in existence, such funds shall instead be
delivered to Lender for application to the Loan Obligations
unless Lender is required to use such funds under Section 8 of
the Cash Collateral Agreement to establish the account
described therein. Operator agrees that it will use the funds
on deposit in the FF&E Account only to cover the costs of FF&E
Replacements for Hotels and for no other purposes.
(b) For purposes of this Assignment and the Management
Agreement, upon any sale, foreclosure or other transfer of any
Hotel, the amount of the FF&E Account allocable to such Hotel
shall be equal to (i) the balance of the FF&E Account
allocable to such Hotel as of the date hereof as set forth in
Schedule II attached hereto plus (ii) the amount of
contributions to the FF&E Account made subsequent to the date
hereof pursuant to Section 7.02 of the Management Agreement,
as modified by Section 9 hereof minus (iii) the amount of
expenditures made from the FF&E Account subsequent to the date
hereof for such Hotel.
(c) Any funds on deposit in the FF&E Account may be
used to cover the cost of FF&E Replacements for any Hotel.
(d) Operator shall state on each interim accounting
described in Section 5.05A of the Management Agreement (i) the
respective amounts required to be deposited by Operator into
the FF&E Account with respect to each Hotel for
- 2 -
<PAGE>
the preceding Accounting Period in accordance with Section 9
hereof or Section 7.02B of the Management Agreement, as
applicable; (ii) the amount expended on FF&E Replacements with
respect to each Hotel during such Accounting Period; and (iii)
if for such Accounting Period, the sum of the amounts
described in clause (i) exceeds the sum of the amounts
described in clause (ii), that Operator has deposited into the
FF&E Account the amount of such excess.
(e) Provided Lender acts in accordance with Section 5
of this Agreement, each of Owner and Operator jointly and
severally agrees to indemnify and hold Lender harmless. Each
of Owner and Operator jointly and severally agrees to
indemnify Lender from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses, or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted
against Lender in any way relating to or arising out of
withdrawals from the FF&E Account in the manner described in
this Section, or any action taken or omitted by Lender in
conformity with this Section (including, without limitation,
reasonable attorney's fees). The effectiveness of this
subsection (e) shall survive the termination of this
Agreement."
Section 2. Conditions Precedent. The effectiveness of this First
--------------------
Amendment is subject to the condition precedent that Lender receive each of the
following, in form and substance satisfactory to Lender.
(a) A First Amendment to Cash Collateral Agreement dated as of the
date hereof duly executed and delivered by Owner; and
(b) Such other documents, instruments and agreements as Lender may
reasonably request.
Section 3. Representations of Owner.
------------------------
(a) Authorization. Owner represents to Lender that Owner has the
-------------
right and power, and has taken all necessary action to authorize it, to execute
and deliver this First Amendment and to perform the Assignment, as amended by
this First Amendment, in accordance with its terms. This First Amendment has
been duly executed and delivered by the duly authorized officers of Owner, and
each of this First Amendment and the Assignment, as amended by this First
Amendment, is a legal, valid and binding obligation of Owner enforceable against
Owner in accordance with its terms.
(b) Compliance with Laws. etc. Owner represents to Lender that the
--------------------------
execution and delivery of this First Amendment, and the performance of the
Assignment, as amended by this First Amendment, in accordance with its terms do
not and will not, by the passage of time, the giving of notice or otherwise: (i)
require the prior approval of any Governmental Authority or violate any
provision of any constitution, statute, rule, regulation, ordinance or order of
any Governmental Authority or any decree of any court, tribunal or arbitrator
applicable to Owner;
- 3 -
<PAGE>
(ii) conflict with, result in a breach of or constitute a default under the
articles of incorporation or by-laws of Owner, or any indenture, agreement or
other instrument to which Owner is a party or by which it or any of its
properties may be bound; or (iii) result in or require the creation or
imposition of any Lien upon or with respect to any property now owned or
hereafter acquired by Owner other than in favor of Lender.
Section 4. Representations of Operator.
---------------------------
(a) Authorization. Operator represents to Lender that Operator has
-------------
the right and power, and has taken all necessary action to authorize it, to
execute and deliver this First Amendment and to perform the Assignment, as
amended by this First Amendment, in accordance with its terms. This First
Amendment has been duly executed and delivered by the duly authorized officers
of Operator, and each of this First Amendment and the Assignment, as amended by
this First Amendment, is a legal, valid and binding obligation of Operator
enforceable against Operator in accordance with its terms.
(b) Compliance with Laws. etc. Operator represents to Lender that
-------------------------
the execution and delivery of this First Amendment, and the performance of the
Assignment, as amended by this First Amendment, in accordance with its terms do
not and will not, by the passage of time, the giving of notice or otherwise: (i)
require the prior approval of any Governmental Authority or violate any
provision of any constitution, statute, rule, regulation, ordinance or order of
any Governmental Authority or any decree of any court, tribunal or arbitrator
applicable to Operator; (ii) conflict with, result in a breach of or constitute
a default under the articles of incorporation or by-laws of Operator, or any
indenture, agreement or other instrument to which Operator is a party or by
which it or any of its properties may be bound; or (iii) result in or require
the creation or imposition of any Lien upon or with respect to any property now
owned or hereafter acquired by Operator other than in favor of Lender.
Section 5. References to the Assignment. Each reference to the
----------------------------
Assignment in any of the Loan Documents shall be deemed to be a reference to the
Assignment, as amended by this First Amendment.
Section 6. Expenses. Owner shall reimburse Lender upon demand for the
--------
costs and expenses (including attorneys' fees) incurred by Lender in the
preparation, negotiation and execution of this First Amendment and the other
agreements and documents executed and delivered in connection herewith, in an
amount not to exceed $2,000.
Section 7. Benefits. This First Amendment shall be binding upon and
--------
shall inure to the benefit of the parties hereto and their respective successors
and assigns.
Section 8. GOVERNING LAW. THIS FIRST AMENDMENT SHALL BE GOVERNED BY,
-------------
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA.
- 4 -
<PAGE>
Section 9. Effect. This First Amendment shall be effective as of the
------
date hereof This First Amendment shall not be construed to constitute a waiver
of any Default or Event of Default occurring or in existence prior to the date
hereof Except as expressly herein amended, the terms and conditions of the
Assignment shall remain in full force and effect.
Section 10. Counterparts. This First Amendment may be executed in any
------------
number of counterparts, each of which shall be deemed to be an original and
shall be binding upon all parties, their successors and assigns.
Section 11. Definitions. Capitalized terms not otherwise defined herein
-----------
are used herein with the respective definitions given them in the Loan
Agreement.
[Signatures on Following Page]
- 5 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment
to Amended and Restated Assignment of Management Agreement to be executed under
seal by their duly authorized officers as of the date first above written.
MARRIOTT DIVERSIFIED AMERICAN
HOTELS, L.P.
By: Marriott MDAH One Corporation, its
General Partner
By: /s/ C. G. Townsend
------------------------------------
Name: C. G. TOWNSEND
-------------------------------
Title: VICE PRESIDENT
------------------------------
MARRIOTT INTERNATIONAL, INC.
By: /s/ Randall L. Frazier
---------------------------------------
Name: RANDALL L. FRAZIER
----------------------------------
Title: VICE PRESIDENT
---------------------------------
NATIONSBANK OF GEORGIA, NATIONAL
ASSOCIATION
By: AMRESCO-INSTITUTIONAL INC., a
Delaware corporation,
its authorized agent
By: /s/ James R. Bradley
------------------------------------
Name:--------------------------------
Title: Authorized Representative
<PAGE>
EXHIBIT 10.m
THE RIGHTS AND REMEDIES OF MARRIOTT MDAH ONE CORPORATION AND ITS SUCCESSORS AND
ASSIGNS, UNDER THIS INSTRUMENT ARE SUBJECT TO THE TERMS AND CONDITIONS OF THAT
CERTAIN SUBORDINATION AGREEMENT DATED AS OF JUNE 30, 1993, AS AMENDED FROM TIME
TO TIME, BY AND AMONG MARRIOTT MDAH ONE CORPORATION, NATIONSBANK OF GEORGIA,
NATIONAL ASSOCIATION AND MARRIOTT DIVERSIFIED AMERICAN HOTELS, L.P.
PROMISSORY NOTE
---------------
$2,000,000.00 June 30, 1993
For value received, MARRIOTT DIVERSIFIED AMERICAN HOTELS, L.P. a
Delaware limited partnership (the "Payor"), hereby promises to pay to the order
of MARRIOTT MDAH ONE CORPORATION (the "Payee"), at such time or times as
provided in the Agreement hereinafter referred to, at the Payee's offices at
10400 Fernwood Road, Bethesda, Maryland, in lawful money of the United States,
the principal amount of $2,000,000.00, and the Payor further promises to pay
interest at said office, in like money, from the date hereof on the principal
amount owing hereunder from time to time, at the borrowing rate and compounded
as provided for in Section III.3 of the Amended and Restated Line of Credit and
Reimbursement Agreement (the "Agreement") dated as of June 30, 1993 among the
Payor, Marriott Corporation and the Payee. Interest and principal shall be
payable at the times stated in the Agreement, at maturity (whether by
acceleration or otherwise) and upon any prepayment hereof as provided in Section
IV. 1 of the Agreement (to the extent thereof).
This Note is the Note referred to in the Agreement and is entitled to
the benefits thereof. No partner of the Payor shall have individual liability
with respect to the indebtedness owing to the Payee hereunder. Payee agrees to
look solely to the assets of the Payor as the source of repayment hereunder.
In case an event of default shall occur and be continuing under the
Agreement and not be cured within applicable grace periods, the principal of and
accrued interest on this Note may be declared to be due and payable in the
manner and with the effect provided in the Agreement, presentment, demand,
protest, or notice of any kind being expressly waived.
<PAGE>
This Note and the rights and obligations of the Payor and the Payee
shall be construed in accordance with and governed by the laws of the State of
Delaware.
MARRIOTT DIVERSIFIED AMERICAN
HOTELS, L.P.
By: Marriott MDAH One Corporation,
its General Partner
By: /s/ Jeffrey P. Mayer
-------------------------------------
Its: Vice President
------------------------------------
-2-
<PAGE>
EXHIBIT 10.n
THE RIGHTS AND REMEDIES OF MARRIOTT CORPORATION AND ITS SUCCESSORS AND ASSIGNS,
UNDER THIS INSTRUMENT ARE SUBJECT TO THE TERMS AND CONDITIONS OF THAT CERTAIN
SUBORDINATION AGREEMENT DATED AS OF JUNE 30, 1993, AS AMENDED FROM TIME TO TIME,
BY AND AMONG MARRIOTT CORPORATION, NATIONSBANK OF GEORGIA, NATIONAL ASSOCIATION
AND MARRIOTT DIVERSIFIED AMERICAN HOTELS, L.P.
PROMISSORY NOTE
---------------
$13,000,000.00 June 30, 1993
For value received, MARRIOTT DIVERSIFIED AMERICAN HOTELS, L.P., a
Delaware limited partnership (the "Payor"), hereby promises to pay to the order
of MARRIOTT CORPORATION (the "Payee"), at such time or times as provided in the
Agreement hereinafter referred to, at the Payee's offices at 10400 Fernwood
Road, Bethesda, Maryland, in lawful money of the United States, the principal
amount of $13,000,000.00, and the Payor further promises to pay interest at said
office, in like money, from the date hereof on the principal amount owing
hereunder from time to time, at the borrowing rate and compounded as provided
for in Section 11.2 of the Amended and Restated Line of Credit and Reimbursement
Agreement (the "Agreement") dated as of June 30, 1993, among the Payor, Marriott
MDAH One Corporation and the Payee. Interest and principal shall be payable at
the times stated in the Agreement, at maturity (whether by acceleration or
otherwise) and upon any prepayment hereof as provided in Section IV.1 of the
Agreement (to the extent thereof).
This Note is the Note referred to in the Agreement and is entitled to
the benefits thereof. No partner of the Payor shall have individual liability
with respect to the indebtedness owing to the Payee hereunder. Payee agrees to
look solely to the assets of the Payor as the source of repayment hereunder.
In case an event of default shall occur and be continuing under the
Agreement and not be cured within applicable grace periods, the principal of and
accrued interest on this Note may be declared to be due and payable in the
manner and with the effect provided in the Agreement, presentment, demand,
protest, or notice of any kind being expressly waived.
This Note evidences indebtedness incurred prior to the date hereof on
which interest in the amount of $1,824,345.00 as of the hereof has accrued and
remains owing
<PAGE>
This Note and the rights and obligations of the Payor and the Payee
shall be construed in accordance with and governed by the laws of the State of
Delaware.
MARRIOTT DIVERSIFIED AMERICAN
HOTELS, L.P.
By: Marriott MDAH One Corporation,
its General Partner
By: Jeffrey P. Mayer
-------------------------
Its: Vice President
-------------------------
- 2 -
<PAGE>
EXHIBIT 10.o
ASSIGNMENT OF CLOSING AND INDEMNITY AGREEMENT
---------------------------------------------
THIS ASSIGNMENT OF CLOSING AND INDEMNITY AGREEMENT (the
"Assignment"), made as of this 30th day of June, 1993, by and among MARRIOTT
DIVERSIFIED AMERICAN HOTELS, L.P., a Delaware limited partnership ("Owner"),
MARRIOTT CORPORATION, a Delaware corporation ("Marriott"), and NATIONSBANK OF
GEORGIA, NATIONAL ASSOCIATION, a national banking association chartered under
the laws of the United States of America and formerly known as The Citizens and
Southern National Bank ("Lender").
WITNESSETH:
----------
WHEREAS, on February 7, 1990, pursuant to that certain Loan
Agreement dated February 7, 1990 (the "Existing Loan Agreement") between Owner
and Lender, Lender made a loan (as modified from time to time, the "Loan") in
the original principal amount of One Hundred Twenty-Eight Million and No/100
Dollars ($128,000,000.00) to Owner, which Loan is secured by, among other
things, that certain (i) Deed of Trust, Assignment of Rents and Security
Agreement from Owner to Lender, dated February 7, 1990 and recorded as document
#90-074-706 of the Official Records of Orange County, California, as amended by
that certain First Modification of Deed of Trust, Assignment of Rents and
Security Agreement and Assignment of Leases dated of even date herewith and to
be recorded, (ii) Mortgage, Assignment of Rents and Security Agreement from
Owner to Lender, dated February 7, 1990 and recorded in Liber 11260, page 17 of
the Register of Deeds of Oakland County, Michigan, as amended by that certain
First Modification of Mortgage, Assignment of Rents and Security Agreement and
Assignment of Leases dated of even date herewith and to be recorded, (iii)
Mortgage, Assignment of Rents and Security Agreement from Owner to Lender, dated
February 7, 1990 and recorded in Liber 24534, page 575 of the Register of Deeds
of Wayne County, Michigan, as amended by that certain First Modification of
Mortgage, Assignment of Rents and Security Agreement and Assignment of Leases
dated of even date herewith and to be recorded, (iv) Deed of Trust, Assignment
of Rents and Security Agreement from Owner to Lender, dated February 7, 1990 and
recorded in Book 1575, page 186 of the Register of Deeds of Durham County, North
Carolina, as amended by that certain First Modification of Deed of Trust,
Assignment of Rents and Security Agreement and Assignment of Leases dated of
even date herewith and to be recorded, (v) Mortgage, Assignment of Rents and
Security Agreement from Owner to Lender, dated February 7, 1990 and recorded as
document #0006593 in the deed records of Montgomery County, Ohio, as amended by
that certain First Modification of Mortgage, Assignment of Rents and Security
Agreement and Assignment of Leases dated of even date herewith and to be
recorded, and (vi) Deed of Trust, Assignment of Rents and Security Agreement
from Owner to Lender, dated February 7, 1990 and recorded in Book 7529, page
1702 of the land records of
<PAGE>
Fairfax County, Virginia, as amended by that certain First Modification of Deed
of Trust, Assignment of Rents and Security Agreement and Assignment of Leases
dated of even date herewith and to be recorded (the aforesaid Deeds of Trust,
Assignments of Rents and Security Agreements and Mortgages, Assignments of Rents
and Security Agreements, as further amended, restated, supplemented or otherwise
modified from time to time in accordance with the terms thereof, collectively
referred to as the "Security Documents"); and
WHEREAS, Owner has title to real property more particularly
described on Exhibit "A" attached hereto and incorporated herein by this
reference, except that the interest acquired with respect to the real property
located in California is a leasehold estate and a portion of the real property
located in Virginia is a leasehold estate (together with the improvements
situated thereon, collectively referred to as the "Property"), upon which are
located six (6) Marriott full-service hotels and other improvements
(collectively referred to as the "Hotels"); and
WHEREAS, Owner and Marriott entered into that certain Closing
and Indemnity Agreement dated as of February 8, 1990 (the "Closing and Indemnity
Agreement") providing, among other things, certain covenants, assurances and
indemnities to Owner relating to the Property and the Hotels, as more fully set
forth therein; and
WHEREAS, Owner is in default of its obligations under the
Existing Loan Agreement and Lender and Owner desire to restructure such
obligations by amending and restating the Existing Loan Agreement pursuant to
the terms of that certain Amended and Restated Loan Agreement dated as of the
date hereof (as amended, restated, supplemented or otherwise modified from time
to time in accordance with the terms thereof, the "Loan Agreement"); and
WHEREAS, as a condition to Lender's restructuring such
obligations pursuant to the Loan Agreement, the parties hereto desire to enter
into an assignment of the Closing and Indemnity Agreement, all as hereinafter
provided;
NOW, THEREFORE, in consideration of the foregoing premises, to
induce Lender to enter into the Loan Agreement, the sum of Ten and No/100
Dollars ($10.00) and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto do hereby agree
as follows:
1. Assignment. As security for payment by Owner of all of its
----------
obligations under the Loan Agreement, the indebtedness evidenced and secured by
the Security Documents and all other documents, instruments and agreements now
or hereafter evidencing or securing the Loan (collectively referred to as the
"Loan Documents"), Owner hereby grants, transfers and assigns to Lender, its
successors and assigns, all of the right, title and interest of Owner in, to and
under the Closing
2
<PAGE>
and Indemnity Agreement; provided, however, Owner may continue to exercise its
-------- -------
rights, powers and privileges thereunder so long as no event of default under
this Assignment has occurred and is continuing after expiration of any
applicable cure period. This Assignment is intended as a present and absolute
assignment and not merely as the passing of a security interest.
2. Consent to Assignment. Marriott consents to the assignment
----------------------
of the Closing and Indemnity Agreement by Owner to Lender.
3. Termination. Marriott acknowledges, confirms, covenants and
-----------
agrees that it has no right, of any kind or nature whatsoever, to terminate the
Closing and Indemnity Agreement.
4. Certification of Owner and Marriott. Owner and Marriott
-----------------------------------
further certify and confirm to and for the benefit of Lender as follows:
(a) Attached hereto as Exhibit "B" and incorporated
herein by this reference is a true, correct and complete copy
of the Closing and Indemnity Agreement, and there have been no
amendments, modifications or supplementations thereto as of
the date hereof except as attached hereto.
(b) The Closing and Indemnity Agreement is valid, binding
and enforceable in accordance with its terms and is in full
force and effect.
(c) To the best knowledge of Owner and Marriott, the only
items identified on Schedule A to the Closing and Indemnity
Agreement which have not been performed, completed, or
otherwise resolved in a manner satisfactory to Owner as of the
date hereof are the following:
(i) Dayton Hotel: none
(ii) Fairview Park Hotel: 2 and 3
(iii) Research Triangle Park Hotel: none
(iv) Southfield Hotel: 1 and 2
(v) All Hotels: 1, to the extent that any
such licenses or permits can be issued
in the name of Owner and have not been
so issued.
5. Amendments to Agreement. Owner and Marriott agree not to
------------------------
enter into any amendment to or modification of the Closing and Indemnity
Agreement without the prior written consent of Lender, such consent not to be
unreasonably withheld, conditioned or delayed. Any amendment or modification
3
<PAGE>
thereto entered into without Lender's prior written consent shall be null and
void, and of no force or effect.
6. Effect of this Instrument on Closing and Indemnity
--------------------------------------------------
Agreement. Owner is executing this Assignment for the purposes of (i) assigning
- ---------
its right, title and interest in the Closing and Indemnity Agreement to Lender
as set forth in this Assignment, and (ii) acknowledging and consenting to the
covenants and agreements of Lender and Marriott hereunder; accordingly, nothing
contained herein shall alter, modify or diminish the obligations, covenants and
agreements of Marriott or Owner, one to the other, under the Closing and
Indemnity Agreement except as expressly provided to the contrary herein.
7. Events of Default. It shall be an event of default
-----------------
hereunder if (i) either Owner or Marriott shall fail to observe or perform any
of their respective obligations hereunder or (ii) if any warranty,
representation or certification herein made or confirmed to Lender shall prove
to have been false or misleading in any material respect when made. The
occurrence of any Event of Default by Owner under any of the Loan Documents
shall constitute an event of default hereunder. No remedies shall be exercised
by Lender for the occurrence of any event of default or default herein until
written notice is given to Owner and any applicable cure rights have expired
without cure, to the extent provided by the Loan Documents.
8. Reliance by Lender. Owner and Marriott each acknowledge
------------------
and recognize that the covenants and certifications contained herein will be
relied upon by Lender in entering into the Loan Agreement.
9. Governing Law. This Assignment shall be construed in
-------------
accordance with the laws of the State of Georgia, and such laws shall govern the
interpretation, construction and enforcement hereof. Wherever possible each
provision of this Assignment shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this
Assignment shall be prohibited by or invalid under such law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of
this Assignment.
10. Counterparts. This Assignment may be executed in
------------
counterparts, each of which shall constitute an original and all of which
counterparts together shall constitute one and the same agreement.
11. Survival. This Assignment shall survive any foreclosure of
--------
the Loan Documents and any extinguishment of the indebtedness secured hereby or
thereby as a result of such foreclosure.
4
<PAGE>
12. Successors and Assigns. This Assignment shall be binding
----------------------
upon, and inure to the benefit of, the parties hereto and their respective
successors and assigns.
13. Termination. Upon the payment in full of all indebtedness
-----------
secured by the Loan Documents, this Assignment shall become and be void and of
no effect.
14. Limitation of Liability. Notwithstanding anything in this
-----------------------
Assignment to the contrary, all of Lender's rights and remedies for any default
by Owner hereunder are expressly limited by, and subject to, the provisions of
Section 2.20 of the Loan Agreement dated of even date herewith between Owner and
Lender entitled "Limitation of Liability." The foregoing shall in no manner
whatsoever limit the obligations or liabilities of Marriott under the Closing
and Indemnity Agreement.
15. Inconsistent Terms. To the extent any term or condition
------------------
contained in the Closing and Indemnity Agreement is inconsistent with any of the
terms and conditions contained in this Assignment, the terms and conditions of
this Assignment shall control.
16. Lender's Acknowledgment. Lender hereby acknowledges and
-----------------------
agrees that it has received evidence satisfactory to it as to the performance or
completion of all of the items identified on Schedule A to the Closing and
Indemnity Agreement, or that all of such items have otherwise been resolved in a
manner satisfactory to it, except for such items identified in Section 4(c)(ii)
and 4(c)(iv) hereof.
17. Loan Agreement. This Assignment is being executed and
--------------
delivered pursuant to the Loan Agreement. All capitalized terms used herein,
unless otherwise herein defined, shall have the meanings ascribed to them in the
Loan Agreement.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their
respective authorized officers or general partners to execute this Assignment
under seal as of the day and year first above written.
MARRIOTT DIVERSIFIED AMERICAN
HOTELS, L.P., a Delaware limited
partnership
By: Marriott MIDAH One Corporation, a
Delaware corporation, Sole General
Partner
By: /s/ Jeffrey P. Mayer
------------------------------------
Name: Jeffrey P. Mayer
-------------------------------
Title: Vice President
------------------------------
[CORPORATE SEAL]
MARRIOTT CORPORATION, a Delaware
corporation
By: /s/ Matthew J. Hart
------------------------------------------
Name: Matthew J. Hart
-------------------------------------
Title: SR. VICE PRESIDENT
------------------------------------
[CORPORATE SEAL]
NATIONSBANK OF GEORGIA,
NATIONAL ASSOCIATION
By:
------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
6
<PAGE>
TABLE OF EXHIBITS
-----------------
Exhibit A - Legal Description
Exhibit B - Closing and Indemnity Agreement
7
<PAGE>
EXHIBIT 10.p
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT dated as of June 30, 1993 by and among
MARRIOTT INTERNATIONAL, INC., formerly known as Marriott Hotels, Inc. (the
"Creditor"), MARRIOTT DIVERSIFIED AMERICAN HOTELS, L.P. (the "Borrower") and
NATIONSBANK OF GEORGIA, NATIONAL ASSOCIATION (the "Lender").
WHEREAS, the Borrower and the Lender entered into a Loan Agreement
dated February 7, 1990 (the "Existing Loan Agreement"), pursuant to which the
Lender made a $ 128,000,000 loan to the Borrower;
WHEREAS, the Borrower is in default of its obligations under the
Existing Loan Agreement and the Lender and the Borrower are to restructure such
obligations by amending and restating the Existing Loan Agreement pursuant to
the terms of that certain Amended and Restated Loan Agreement dated as of the
date hereof (as amended, restated, supplemented or otherwise modified from time
to time in accordance with the terms thereof the "Loan Agreement");
WHEREAS, it is a condition to Lender's restructuring the Borrower's
obligations under the Existing Loan Agreement pursuant to the Loan Agreement
that the Borrower and the Creditor execute and deliver this Agreement;
NOW, THEREFORE, to induce the Lender to enter into the Loan Agreement,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
Section 1. Definitions. In addition to such other terms as are
-----------
elsewhere defined herein, as used in this Agreement the following terms shall
have the following meanings:
"Senior Debt" means any and all loans, advances, liabilities, debit
-----------
balances, covenants and duties at any time owed by the Borrower to the Lender,
together with all interest (including all interest accruing after the
commencement of any bankruptcy or similar proceeding in respect of the Borrower)
fees, charges, expenses and attorney's fees for which the Borrower is now or
hereafter becomes liable to pay to the Lender under any agreement or by law,
whether direct or indirect, absolute or contingent, secured or unsecured, due or
to become due, now existing or hereafter arising, including without limitation,
(a) the Loan, (b) all principal and interest owing under any Note and (c) any
and all other Loan Obligations.
"Subordinated Debt" means any and all loans, advances, liabilities,
-----------------
covenants and duties at any time owed by the Borrower to the Creditor (whether
or not permitted under the terms of the Loan Agreement), together with all
interest, fees, charges, expenses and attorney's fees for which the Borrower is
now or hereafter becomes liable to pay to the
<PAGE>
Creditor under any agreement or by law, whether direct or indirect, absolute or
contingent, secured or unsecured, due or to become due, now existing or
hereafter arising, including without limitation all liabilities of the Borrower
to the Creditor under the Management Agreement in respect of advances made by
the Creditor to the Borrower in accordance with the terms of the Management
Agreement, but excluding the obligation of the Borrower to pay the Base
Management Fee to the Creditor and all other fees, earnings, payments and
obligations owing by the Borrower to the Creditor under the Management Agreement
that are not in the nature of loans, advances or other types of indebtedness.
Terms not otherwise defined herein are used herein as defined in the
Loan Agreement.
Section 2. Subordination. Except as otherwise permitted in Section 4
-------------
below, the Borrower shall not pay, and the Creditor shall not accept, any
payment with respect to, or on account of, the Subordinated Debt until the full
and final payment of all of the Senior Debt. Without limiting the generality of
the foregoing, in the event of any distribution, division or application,
partial or complete, voluntary or involuntary, by operation of law or otherwise,
of all or any part of the assets of the Borrower or the proceeds thereof to the
creditors of the Borrower or upon any indebtedness of the Borrower, by reason of
the liquidation, dissolution or other winding up of the Borrower or the
Borrower's business, or in the event of any sale, receivership, insolvency or
bankruptcy proceeding, or assignment for the benefit of creditors, or any
proceeding by or against the Borrower for any relief under any bankruptcy or
insolvency law or laws relating to the relief of debtors, readjustment of
indebtedness, reorganization, compositions or extensions, then and in any such
event any payment or distribution of any kind or character, either in cash,
securities or other property, which shall be payable or deliverable upon or with
respect to any of the Subordinated Debt shall be paid or delivered directly to
the Lender for application to the Senior Debt (whether or not the same is then
due) until all of the Senior Debt has been fully paid and discharged. The
Creditor acknowledges that the Borrower granted to the Lender a Lien in
substantially all of the assets of the Borrower and that any claim of the
Creditor to any of the assets of the Borrower shall be, and is hereby made,
subordinate and subject to the Lien of the Lender, whether the Lien of the
Lender is perfected or not.
Section 3. Warranties and Representations of the Borrower and the
------------------------------------------------------
Creditor. The Borrower and the Creditor each hereby represents and warrants to
- --------
the Lender that: (a) it has not relied nor will it rely on any representation or
information of any nature made by or received from the Lender relative to the
Borrower in deciding to execute this Agreement; (b) no part of the Subordinated
Debt is currently evidenced by any instrument or writing except the Management
Agreement; (c) the Creditor is the lawful owner and holder of all of the
Subordinated Debt; (d) the Creditor has not assigned or transferred any of the
Subordinated Debt, or any interest therein, to any Person; (e) the Creditor has
not given any subordination in respect of the Subordinated Debt other than in
favor of the Lender; (f) as of the date hereof no Subordinated Debt is
outstanding; (g) no default is in
- 2 -
<PAGE>
existence with respect to the Subordinated Debt and (h) none of the Subordinated
Debt is secured by or entitled to the benefits of any Lien in any of the
Borrower's or any other Person's property or a guaranty of any Person.
Section 4. Permitted Payments on Subordinated Debt. Notwithstanding the
---------------------------------------
provisions of Section 2 and 5 hereof but subject to the other limitations of
this Agreement, including without limitation, those set forth in the rest of
this Section, the Borrower may make, and the Creditor may receive, payments
solely out of Pari Passu Distributions paid to the Borrower in respect of any
liability of the Borrower to the Creditor under the Management Agreement in
respect of advances made by the Creditor to the Borrower in accordance with the
terms of the Management Agreement and which advances were permitted under the
terms of the Loan Agreement, the Management Agreement Assignment and the other
Loan Documents. Notwithstanding the preceding sentence, the Borrower may not
make, and the Creditor may not receive, any payments in respect of any of the
Subordinated Debt upon the occurrence and during the continuance of an Event of
Default.
Section 5. Covenants. For so long as this Agreement is in effect: (a)
---------
the Borrower shall not, directly or indirectly, grant a Lien, or assign or
transfer any of its assets or properties, to the Creditor or any other Person to
secure or satisfy all or any part of the Subordinated Debt; (b) the Creditor
shall not demand, collect or accept from the Borrower or any other Person any
payment (except as permitted under Section 4 above) or collateral on account of
the Subordinated Debt or any part thereof nor shall the Creditor commence any
action or proceeding against the Borrower in any court or other tribunal, or
otherwise take any actions whatsoever, to recover or attempt to recover, all or
any part of the Subordinated Debt; (c) the Creditor shall not exchange, set off
or otherwise discharge any part of the Subordinated Debt; (d) the Creditor shall
not give any subordination in respect of the Subordinated Debt or transfer or
assign any of the Subordinated Debt to any Person other than the Lender; (e) the
Borrower will not issue any instrument, security or other writing evidencing any
part of the Subordinated Debt, and the Creditor will not receive any such
writing, except upon the prior written approval of the Lender or at the request
of and in the manner requested by the Lender; (f) the Borrower and the Creditor
will not amend, alter or otherwise modify any of the terms of any instrument,
agreement or document evidencing or relating to any of the Subordinated Debt,
without the prior written consent of the Lender; (g) the Creditor will not
commence or join with any other creditors of the Borrower in commencing any
bankruptcy, reorganization, receivership or insolvency proceeding against the
Borrower; (h) neither the Borrower nor the Creditor otherwise shall take or
permit any action prejudicial to or inconsistent with the Lender's priority
position over the Creditor that is created by this Agreement and (i) the
Creditor shall not take any Person's guaranty for any of the Subordinated Debt.
Section 6. Turnover of Prohibited Transfers. If any payment,
--------------------------------
distribution or security or the proceeds thereof is received by the Creditor on
account of or with respect
- 3 -
<PAGE>
to any of the Subordinated Debt which the Creditor was not entitled to receive
because of the terms of this Agreement, the Creditor shall forthwith deliver
same to the Lender in the form received (together with any endorsement or
assignment necessary to effect a transfer of all rights therein to the Lender)
for application to the Senior Debt, or at the Lender's option, the Creditor
shall pay to the Lender the amount thereof on demand. The Lender is irrevocably
authorized to supply any required endorsement or assignment which may have been
omitted. Until so delivered any such payment, distribution or security shall be
held by the Creditor in trust for the Lender and shall not be commingled with
other funds or property of the Creditor.
Section 7. Authority to Act for the Creditor. For so long as this
---------------------------------
Agreement remains in effect, the Lender shall have the right to act as the
Creditor's attorney-in-fact for the purposes specified herein and to take any
actions required by the Creditor hereunder and the Creditor hereby irrevocably
appoints the Lender as the Creditor's true and lawful attorney, with full power
of substitution, in the name of the Creditor or in the name of the Lender, for
the use and benefit of the Lender, without notice to the Creditor, to perform
the following acts, at the Lender's option, at any meeting of the creditors of
the Borrower or in connection with any case or proceeding, whether voluntary or
involuntary, for the distribution, division or application of the assets of the
Borrower or the proceeds thereof regardless of whether such case or proceeding
is for the liquidation, dissolution, winding up of the affairs, reorganization
or arrangement of the Borrower, or for the composition of the debts of the
Borrower, in bankruptcy or in connection with a receivership, or under an
assignment for the benefit of the creditors of the Borrower or otherwise: (a) to
enforce claims comprising the Subordinated Debt, either in its own name or in
the name of the Creditor, by proof of debt, proof of claim, suit or otherwise;
and (b) to collect any assets of the Borrower distributed, divided or applied by
way of dividend or payment, or any securities issued, on account of the
Subordinated Debt and to apply the same, or the proceeds of any realization upon
the same that the Lender in its discretion elects to effect, to the Senior Debt
until all of the Senior Debt (including, without limitation, all interest
accruing on the Senior Debt after commencement of any bankruptcy case) has been
paid in full. The Creditor further grants to the Lender an irrevocable proxy to
exercise any voting rights the Creditor may have with respect to the approval or
disapproval of a plan of reorganization of the Borrower proposed by any Person
or class of Persons in any bankruptcy or similar proceeding. In no event shall
the Lender be liable to the Creditor for any failure to prove the Subordinated
Debt, to exercise any right with respect thereto or to collect any sums payable
thereon.
Section 8. Waivers. The Borrower and the Creditor each hereby waives
-------
any defense based on the adequacy of a remedy at law which might be asserted as
a bar to the remedy of specific performance of this Agreement in any action
brought therefor by the Lender. To the fullest extent permitted by law, the
Borrower and the Creditor each hereby further waives: (a) presentment, demand,
protest, notice of protest, notice of default or dishonor, notice of payment or
nonpayment and any and all other notices and demands of any kind in connection
with all negotiable instruments evidencing all or any
- 4 -
<PAGE>
portion of the Senior Debt or the Subordinated Debt to which the Borrower or the
Creditor may be a party; (b) the right to require the Lender to marshal any
securities, or to enforce any Lien the Lender may now or hereafter have in any
collateral securing the Senior Debt or to pursue any claim it may have against
any guarantor of the Senior Debt, as a condition to the Lender's entitlement to
receive any payment on account of the Subordinated Debt; (c) notice of the
acceptance of this Agreement by the Lender; (d) notice of any loans made,
extensions granted or other action taken in reliance hereon; and (e) all other
demands and notices of every kind in connection with this Agreement, the Senior
Debt or the Subordinated Debt except for demands and notices expressly required
under this Agreement or under any instrument or document evidencing any of the
Senior Debt or the Subordinated Debt. The Lender may, at any time and from time
to time, without the consent of or notice to the Creditor and without incurring
any responsibility or liability to the Creditor and without impairing or
releasing the obligations of the Creditor hereunder: (i) change the manner,
place or terms of payment or change or extend the time of payment of or renew or
alter the Senior Debt or any portion thereof; (ii) sell, exchange, release or
otherwise deal with any collateral or any other property by whomsoever at any
time pledged or mortgaged to secure, or however securing, the Senior Debt or any
portion thereof; (iii) release any Person liable in any manner for the payment
or collection of the Senior Debt or any portion thereof; (iv) exercise or
refrain from exercising any rights against the Borrower and others; and (v)
apply any sums by whomsoever paid or however realized to the Senior Debt or any
portion thereof in any order as the Lender may determine.
Section 9. Subrogation. Provided that all of the Senior Debt has been
-----------
indefeasibly paid and discharged in full, the Creditor shall be subrogated to
the rights of the Lender to receive payments or distributions of cash, property
or securities payable or distributable on account of the Senior Debt, to the
extent of all payments and distributions paid over to or for the benefit of the
Lender pursuant to this Agreement.
Section 10. Statement of Account. The Borrower and the Creditor each
--------------------
agrees to render to the Lender from time to time upon the Lender's request
therefor a written statement of the Borrower's obligations to the Creditor. The
Borrower agrees to afford the Lender access to the books and records of the
Borrower in order that the Lender may make a full examination of the state of
accounts of the Borrower with the Creditor.
Section 11. Validity of Subordinated Debt. The provisions of this
-----------------------------
Agreement subordinating the Subordinated Debt are solely for the purpose of
defining the relative rights of the Lender and the Creditor and shall not
impair, as between the Creditor and the Borrower, the obligation of the
Borrower, which is unconditional and absolute, to pay the Subordinated Debt in
accordance with its terms except as payment thereof may be postponed in
accordance with this Agreement.
Section 12. Indulgences Not Waivers. Neither the failure nor any delay
-----------------------
on the part of the Lender to exercise any right, remedy, power or privilege
hereunder shall
- 5 -
<PAGE>
operate as a waiver thereof or give rise to an estoppel, nor be construed as an
agreement to modify the terms of this Agreement, nor shall any single or partial
exercise of any right, remedy, power or privilege with respect to any occurrence
be construed as a waiver of such right, remedy, power or privilege with respect
to any other occurrence. No waiver by a party hereunder shall be effective
unless it is in writing and signed by the party making such waiver, and then
only to the extent specifically stated in such writing.
Section 13. Duration. This Agreement shall constitute a continuing
--------
agreement of subordination, and shall remain in effect until all of the Senior
Debt has been indefeasibly paid and discharged in full and all instruments and
agreements at any time evidencing or securing the whole or any part of the
Senior Debt have been terminated. The Lender may, without notice to the
Creditor, extend or continue credit and make other financial accommodations to
or for the account of the Borrower in reliance upon this Agreement.
Section 14. Enforcement. At any time the Creditor fails to comply with
-----------
any provision of this Agreement that is applicable to the Creditor, the Lender
may demand specific performance of this Agreement, whether or not the Borrower
has complied with this Agreement, and may exercise any other remedy available at
law or equity. Without limiting the generality of the foregoing, if the
Creditor, in violation of this Agreement, shall institute or participate in any
action, suit or proceeding against the Borrower, the Borrower may interpose as a
defense or dilatory plea this Agreement and the Lender is irrevocably authorized
to intervene and to interpose such defense or plea in the Borrower's name.
Section 15. Lender's Duties Limited. The rights granted to the Lender
-----------------------
in this Agreement are solely for its protection and nothing herein contained
imposes on the Lender any duties with respect to any property either of the
Borrower or of the Creditor heretofore or hereafter received by the Lender
beyond reasonable care in the custody and preservation of such property while in
the Lender's possession. The Lender has no duty to preserve rights against prior
parties on any instrument or chattel paper received from the Borrower as
collateral security for the Senior Debt or any portion thereof
Section 16. Authority. The Borrower and the Creditor represent and
---------
warrant that they have authority to enter into this Agreement and that the
individual officers signing for each of the Borrower and the Creditor are
authorized and directed to do so.
Section 17. Adequate Assurances. Each of the Creditor and the Borrower
-------------------
agrees to execute any further documents or amendments and take such other
actions as may be reasonably necessary to effect the purposes of this Agreement
including the filing of any financing statements or other instruments in any
applicable public records, all as directed by the Lender. The Creditor agrees
that it shall cause to be added to each document evidencing the Subordinated
Debt the following legend:
- 6 -
<PAGE>
"The rights and remedies of Marriott International, Inc., and its
successors and assigns, under this instrument are subject to the terms
and conditions of that certain Subordination Agreement dated as of June
30, 1993, as amended from time to time, by and among Marriott
International, Inc., NationsBank of Georgia, National Association and
Marriott Diversified American Hotels, L.P."
Section 18. Jurisdiction. The Borrower and the Creditor each hereby
------------
irrevocably consents and agrees that any legal action, suit, or proceeding
arising out of or in any way in connection with this Agreement may be instituted
or brought in the courts of the State of Georgia, in the County of Fulton, or
the United States Courts for the Northern District of Georgia, as the Lender may
elect, and by execution and delivery of this Agreement hereby irrevocably
accepts and submits to generally and unconditionally, the non-exclusive
jurisdiction of any such court, and to all proceedings in such courts. The
Borrower and the Creditor each hereby waives any objection that it may now or
hereafter have for the laying of venue in any of the aforesaid courts. The
parties also consent that service of process in any such action or proceeding
may be made upon any party by mailing a copy of the summons and the complaint to
such party, by registered or certified mail, return receipt requested, at its
address designated for notices under Section 19 of this Agreement. Nothing in
this Agreement or elsewhere shall affect the Lender's right to serve process in
any other manner permitted by law or limit the right of the Lender to bring
actions, suits or proceedings in the courts of any other jurisdiction. In any
action or proceeding relating to this Agreement, the parties mutually waive
trial by jury, and the Borrower and the Creditor each waives (a) any claim for
consequential or special damages, and (b) the right to assert therein any setoff
against the amount of the Loan Obligations.
Section 19. Notices. All notices, demands and other communications
-------
required or permitted under this Agreement or by law shall be in writing and
shall be deemed to have been duly given, made and received when personally
delivered or on the second day after deposit in the United States mails, postage
prepaid, addressed as set forth below:
(a) If to the Lender: NationsBank of Georgia,
National Association
c/o AMRESCO Institutional, Inc.
101 North Tryon Street, NC-l00l-13-20
Charlotte, North Carolina 28255
Attention: Mark Cagley
(b) If to the Creditor: Marriott International, Inc.
Marriott Drive
Washington, D.C. 20058
Attention: Assistant General
Counsel Corporate Finance
- 7 -
<PAGE>
(c) If to the Borrower: Marriott Diversified American
Hotels, L P.
10400 Fernwood Road
Bethesda, Maryland 20058
Attention: Assistant General
Counsel Corporate Finance
Any addressee may alter the address to which communications are to be sent by
giving notice of such change of address in conformity with the provisions of
this Section for the giving of notice, provided such change shall not be
effective until actually received.
Section 20. Entire Agreement; Amendment. This Agreement constitutes and
---------------------------
expresses the entire understanding among the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and understandings,
inducements or conditions, whether express or implied, oral or written. Neither
this Agreement nor any portion or provision hereof may be changed, waived or
amended orally or in any manner other than by an agreement in writing signed by
the Lender, the Borrower and the Creditor.
Section 21. Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of the Lender, its successors and assigns, and shall be binding upon
both the Borrower and the Creditor and their respective heirs, executors,
successors and assigns.
Section 22. Defects Waived. This Agreement is effective notwithstanding
--------------
any defect in the validity or enforceability of any instrument or document at
any time evidencing or securing the whole or any part of the Senior Debt.
Section 23. Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of Georgia.
Section 24. Severability. The provisions of this Agreement are
------------
independent of and separable from each other. If any provision hereof shall for
any reason be held invalid or unenforceable, it is the intent of the parties
that such invalidity or unenforceability shall not affect the validity or
enforceability of any other provision hereof and that this Agreement shall be
construed as if such invalid or unenforceable provision had never been contained
herein.
Section 25. Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which shall constitute an original but which together
shall constitute one instrument
- 8 -
<PAGE>
[Signatures on Following Page]
- 9 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Subordination
Agreement to be signed, sealed and delivered as of the date first above written.
MARRIOTT INTERNATIONAL, INC.
By: /s/ Raymond G. Murphy
----------------------------------
Name: Raymond G. Murphy
-----------------------------
Title: ASSISTANT TREASURER
----------------------------
MARRIOTT DIVERSIFIED AMERICAN
HOTELS, L.P.
By: Marriott MDAH One Corporation,
its General Partner
By: /s/ Jeffrey P. Mayer
----------------------------
Name: Jeffrey P. Mayer
-----------------------
Title: Vice-President
----------------------
[Signatures Continued on Following Page.]
<PAGE>
[Signature Page to Subordination Agreement
dated as of June 30, 1993]
Accepted as of the date first
written above.
NATIONSBANK OF GEORGIA,
NATIONAL ASSOCIATION
By: AMRESCO-INSTITUTIONAL, INC.,
a Delaware corporation, its authorized agent
By: /s/ Mark S. Cagley
---------------------------------
Name: Mark S. Cagley
----------------------------
Title: Authorized Representative
<PAGE>
EXHIBIT 10.q
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT dated as of June 30, 1993 by and among
MARRIOTT MDAH ONE CORPORATION (the "Creditor"), MARRIOTT DIVERSIFIED AMERICAN
HOTELS, L.P. (the "Borrower") and NATIONSBANK OF GEORGIA, NATIONAL ASSOCIATION
(the "Lender").
WHEREAS, the Borrower and the Lender entered into a Loan Agreement
dated February 7. 1990 (the "Existing Loan Agreement"), pursuant to which the
Lender made a $128,000,000 loan to the Borrower,
WHEREAS, the Borrower is in default of its obligations under the
Existing Loan Agreement and the Lender and the Borrower are to restructure such
obligations by amending and restating the Existing Loan Agreement pursuant to
the terms of that certain Amended and Restated Loan Agreement dated as of the
date hereof (as amended, restated, supplemented or otherwise modified from time
to time in accordance with the terms thereof, the "Loan Agreement");
WHEREAS, it is a condition to Lender's restructuring the Borrower's
obligations under the Existing Loan Agreement pursuant to the Loan Agreement
that the Borrower and the Creditor execute and deliver this Agreement;
NOW, THEREFORE, to induce the Lender to enter into the Loan Agreement,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
Section 1. Definitions. In addition to such other terms as are
-----------
elsewhere defined herein, as used in this Agreement the following terms shall
have the following meanings:
"Senior Debt" means any and all loans, advances, liabilities, debit
-----------
balances, covenants and duties at any time owed by the Borrower to the Lender,
together with all interest (including all interest accruing after the
commencement of any bankruptcy or similar proceeding in respect of the Borrower)
fees, charges, expenses and attorney's fees for which the Borrower is now or
hereafter becomes liable to pay to the Lender under any agreement or by law,
whether direct or indirect, absolute or contingent, secured or unsecured, due or
to become due, now existing or hereafter arising, including without limitation,
(a) the Loan, (b) all principal and interest owing under any Note and (c) any
and all other Loan Obligations.
"Subordinated Debt" means any and all loans, advances, liabilities,
-----------------
covenants and duties at any time owed by the Borrower to the Creditor (whether
or not permitted under the terms of the Loan Agreement), together with all
interest, fees, charges, expenses and attorney's fees for which the Borrower is
now or hereafter becomes liable to pay to the Creditor under any agreement or by
law, whether direct or indirect, absolute or
<PAGE>
contingent, secured or unsecured, due or to become due, now existing or
hereafter arising, including without limitation, all liabilities of the Borrower
to the Creditor under the Line of Credit and Reimbursement Agreement and the
Subordinated Note.
"Subordinated Note" means that certain Promissory Note dated the date
-----------------
hereof executed and delivered by the Borrower to the Creditor and in the
original principal amount of $2,000,000.00, made to evidence the Borrower's
obligations to the Creditor under the Line of Credit and Reimbursement Agreement
as contemplated by Section III.1 thereof, as such promissory note may be
amended, supplement, restated or otherwise modified from time to time, and all
notes or other instruments given in replacement or substitution thereof.
Terms not otherwise defined herein are used herein as defined in the
Loan Agreement.
Section 2. Subordination. Except as otherwise permitted in Section 4
-------------
below, the Borrower shall not pay, and the Creditor shall not accept, any
payment with respect to, or on account of, the Subordinated Debt until the full
and final payment of all of the Senior Debt. Without limiting the generality of
the foregoing, in the event of any distribution, division or application,
partial or complete, voluntary or involuntary, by operation of law or otherwise,
of all or any part of the assets of the Borrower or the proceeds thereof to the
creditors of the Borrower or upon any indebtedness of the Borrower, by reason of
the liquidation, dissolution or other winding up of the Borrower or the
Borrower's business, or in the event of any sale, receivership, insolvency or
bankruptcy proceeding, or assignment for the benefit of creditors, or any
proceeding by or against the Borrower for any relief under any bankruptcy or
insolvency law or laws relating to the relief of debtors, readjustment of
indebtedness, reorganization, compositions or extensions, then and in any such
event any payment or distribution of any kind or character, either in cash,
securities or other property, which shall be payable or deliverable upon or with
respect to any of the Subordinated Debt shall be paid or delivered directly to
the Lender for application to the Senior Debt (whether or not the same is then
due) until all of the Senior Debt has been fully paid and discharged. The
Creditor acknowledges that the Borrower granted to the Lender a Lien in
substantially all of the assets of the Borrower and that any claim of the
Creditor to any of the assets of the Borrower shall be, and is hereby made,
subordinate and subject to the Lien of the Lender, whether the Lien of the
Lender is perfected or not.
Section 3. Warranties and Representations of the Borrower and the
------------------------------------------------------
Creditor. The Borrower and the Creditor each hereby represents and warrants to
- --------
the Lender that: (a) it has not relied nor will it rely on any representation or
information of any nature made by or received from the Lender relative to the
Borrower in deciding to execute this Agreement; (b) no part of the Subordinated
Debt is currently evidenced by any instrument or writing except the Line of
Credit and Reimbursement Agreement and the Subordinated Note; (c) the Creditor
is the lawful owner and holder of all of the Subordinated Debt; (d) the Creditor
has not assigned or transferred any of the Subordinated Debt, or any
-2-
<PAGE>
interest therein, to any Person; (e) the Creditor has not given any
subordination in respect of the Subordinated Debt other than in favor of the
Lender; (f) as of the date hereof, the aggregate principal amount, together with
accrued interest thereon, owing under the Subordinated Note is $2,000,000.00 and
there is no other amount of Subordinated Debt outstanding; (g) no default is in
existence with respect to the Subordinated Debt and (h) none of the Subordinated
Debt is secured by or entitled to the benefits of any Lien in any of the
Borrower's or any other Person's property or a guaranty of any Person.
Section 4. Permitted Payments on Subordinated Debt. Notwithstanding the
---------------------------------------
provisions of Section 2 and 5 hereof, but subject to the other limitations of
this Agreement, including without limitation, those set forth in the rest of
this Section, the Borrower may make, and the Creditor may receive, payments in
respect of the Borrower's obligations to the Creditor under the Line of Credit
and Reimbursement Agreement and any related Subordinated Note solely out of Pari
Passu Distributions paid to the Borrower. Notwithstanding the preceding
sentence, the Borrower may not make, and the Creditor may not receive, any
payments in respect of any of the Subordinated Debt upon the occurrence and
during the continuance of an Event of Default.
Section 5. Covenants. For so long as this Agreement is in effect: (a)
---------
the Borrower shall not, directly or indirectly, grant a Lien, or assign or
transfer any of its assets or properties, to the Creditor or any other Person to
secure or satisfy all or any part of the Subordinated Debt; (b) the Creditor
shall not demand, collect or accept from the Borrower or any other Person any
payment (except as permitted under Section 4 above) or collateral on account of
the Subordinated Debt or any part thereof, nor shall the Creditor commence any
action or proceeding against the Borrower in any court or other tribunal, or
otherwise take any actions whatsoever, to recover or attempt to recover, all or
any part of the Subordinated Debt; (c) the Creditor shall not exchange, set off
or otherwise discharge any part of the Subordinated Debt; (d) the Creditor shall
not give any subordination in respect of the Subordinated Debt or transfer or
assign any of the Subordinated Debt to any Person other than the Lender; (e) the
Borrower will not issue any instrument, security or other writing evidencing any
part of the Subordinated Debt, and the Creditor will not receive any such
writing, except upon the prior written approval of the Lender or at the request
of and in the manner requested by the Lender; (f) the Borrower and the Creditor
will not amend, alter or otherwise modify any of the terms of any instrument,
agreement or document evidencing or relating to any of the Subordinated Debt,
without the prior written consent of the Lender; (g) the Creditor will not
commence or join with any other creditors of the Borrower in commencing any
bankruptcy, reorganization, receivership or insolvency proceeding against the
Borrower; (h) neither the Borrower nor the Creditor otherwise shall take or
permit any action prejudicial to or inconsistent with the Lender's priority
position over the Creditor that is created by this Agreement and (i) the
Creditor shall not take any Person's guaranty for any of the Subordinated Debt.
-3-
<PAGE>
Section 6. Turnover of Prohibited Transfers. If any payment,
--------------------------------
distribution or security or the proceeds thereof is received by the Creditor on
account of or with respect to any of the Subordinated Debt which the Creditor
was not entitled to receive because of the terms of this Agreement, the Creditor
shall forthwith deliver same to the Lender in the form received (together with
any endorsement or assignment necessary to effect a transfer of all rights
therein to the Lender) for application to the Senior Debt, or at the Lender's
option, the Creditor shall pay to the Lender the amount thereof on demand. The
Lender is irrevocably authorized to supply any required endorsement or
assignment which may have been omitted. Until so delivered any such payment,
distribution or security shall be held by the Creditor in trust for the Lender
and shall not be commingled with other funds or property of the Creditor.
Section 7. Authority to Act for the Creditor. For so long as this
---------------------------------
Agreement remains in effect, the Lender shall have the right to act as the
Creditor's attorney-in-fact for the purposes specified herein and to take any
actions required by the Creditor hereunder and the Creditor hereby irrevocably
appoints the Lender as the Creditor's true and lawful attorney, with full power
of substitution, in the name of the Creditor or in the name of the Lender, for
the use and benefit of the Lender, without notice to the Creditor, to perform
the following acts, at the Lender's option, at any meeting of the creditors of
the Borrower or in connection with any case or proceeding, whether voluntary or
involuntary, for the distribution, division or application of the assets of the
Borrower or the proceeds thereof, regardless of whether such case or proceeding
is for the liquidation, dissolution, winding up of the affairs, reorganization
or arrangement of the Borrower, or for the composition of the debts of the
Borrower, in bankruptcy or in connection with a receivership, or under an
assignment for the benefit of the creditors of the Borrower or otherwise: (a) to
enforce claims comprising the Subordinated Debt, either in its own name or in
the name of the Creditor, by proof of debt, proof of claim, suit or otherwise;
and (b) to collect any assets of the Borrower distributed, divided or applied by
way of dividend or payment, or any securities issued, on account of the
Subordinated Debt and to apply the same, or the proceeds of any realization upon
the same that the Lender in its discretion elects to effect, to the Senior Debt
until all of the Senior Debt (including, without limitation, all interest
accruing on the Senior Debt after commencement of any bankruptcy case) has been
paid in full. The Creditor further grants to the Lender an irrevocable proxy to
exercise any voting rights the Creditor may have with respect to the approval or
disapproval of a plan of reorganization of the Borrower proposed by any Person
or class of Persons in any bankruptcy or similar proceeding. In no event shall
the Lender be liable to the Creditor for any failure to prove the Subordinated
Debt, to exercise any right with respect thereto or to collect any sums payable
thereon.
Section 8. Waivers. The Borrower and the Creditor each hereby waives
-------
any defense based on the adequacy of a remedy at law which might be asserted as
a bar to the remedy of specific performance of this Agreement in any action
brought therefor by the Lender. To the fullest extent permitted by law, the
Borrower and the Creditor each hereby further waives: (a) presentment, demand,
protest, notice of protest, notice of
- 4 -
<PAGE>
default or dishonor, notice of payment or nonpayment and any and all other
notices and demands of any kind in connection with all negotiable instruments
evidencing all or any portion of the Senior Debt or the Subordinated Debt to
which the Borrower or the Creditor may be a party; (b) the right to require the
Lender to marshal any securities, or to enforce any Lien the Lender may now or
hereafter have in any collateral securing the Senior Debt or to pursue any claim
it may have against any guarantor of the Senior Debt, as a condition to the
Lender's entitlement to receive any payment on account of the Subordinated Debt;
(c) notice of the acceptance of this Agreement by the Lender; (d) notice of any
loans made, extensions granted or other action taken in reliance hereon; and (e)
all other demands and notices of every kind in connection with this Agreement,
the Senior Debt or the Subordinated Debt except for demands and notices
expressly required under this Agreement or under any instrument or document
evidencing any of the Senior Debt or the Subordinated Debt. The Lender may, at
any time and from time to time, without the consent of or notice to the Creditor
and without incurring any responsibility or liability to the Creditor and
without impairing or releasing the obligations of the Creditor hereunder: (i)
change the manner, place or terms of payment or change or extend the time of
payment of or renew or alter the Senior Debt or any portion thereof, (ii) sell,
exchange, release or otherwise deal with any collateral or any other property by
whomsoever at any time pledged or mortgaged to secure, or however securing, the
Senior Debt or any portion thereof; (iii) release any Person liable in any
manner for the payment or collection of the Senior Debt or any portion thereof,
(iv) exercise or refrain from exercising any rights against the Borrower and
others; and (v) apply any sums by whomsoever paid or however realized to the
Senior Debt or any portion thereof in any order as the Lender may determine.
Section 9. Subrogation. Provided that all of the Senior Debt has been
-----------
indefeasibly paid and discharged in full, the Creditor shall be subrogated to
the rights of the Lender to receive payments or distributions of cash, property
or securities payable or distributable on account of the Senior Debt, to the
extent of all payments and distributions paid over to or for the benefit of the
Lender pursuant to this Agreement.
Section 10. Statement of Account. The Borrower and the Creditor each
--------------------
agrees to render to the Lender from time to time upon the Lender's request
therefor a written statement of the Borrower's obligations to the Creditor. The
Borrower agrees to afford the Lender access to the books and records of the
Borrower in order that the Lender may make a full examination of the state of
accounts of the Borrower with the Creditor.
Section 11. Validity of Subordinated Debt. The provisions of this
-----------------------------
Agreement subordinating the Subordinated Debt are solely for the purpose of
defining the relative rights of the Lender and the Creditor and shall not
impair, as between the Creditor and the Borrower, the obligation of the
Borrower, which is unconditional and absolute, to pay the Subordinated Debt in
accordance with its terms except as payment thereof may be postponed in
accordance with this Agreement.
- 5 -
<PAGE>
Section 12. Indulgences Not Waivers. Neither the failure nor any delay
-----------------------
on the part of the Lender to exercise any right, remedy, power or privilege
hereunder shall operate as a waiver thereof or give rise to an estoppel, nor be
construed as an agreement to modify the terms of this Agreement, nor shall any
single or partial exercise of any right, remedy, power or privilege with respect
to any occurrence be construed as a waiver of such right, remedy, power or
privilege with respect to any other occurrence. No waiver by a party hereunder
shall be effective unless it is in writing and signed by the party making such
waiver, and then only to the extent specifically stated in such writing.
Section 13. Duration. This Agreement shall constitute a continuing
--------
agreement of subordination, and shall remain in effect until all of the Senior
Debt has been indefeasibly paid and discharged in full and all instruments and
agreements at any time evidencing or securing the whole or any part of the
Senior Debt have been terminated. The Lender may, without notice to the
Creditor, extend or continue credit and make other financial accommodations to
or for the account of the Borrower in reliance upon this Agreement.
Section 14. Enforcement. At any time the Creditor fails to comply with
-----------
any provision of this Agreement that is applicable to the Creditor, the Lender
may demand specific performance of this Agreement, whether or not the Borrower
has complied with this Agreement, and may exercise any other remedy available at
law or equity. Without limiting the generality of the foregoing, if the
Creditor, in violation of this Agreement, shall institute or participate in any
action, suit or proceeding against the Borrower, the Borrower may interpose as a
defense or dilatory plea this Agreement and the Lender is irrevocably authorized
to intervene and to interpose such defense or plea in the Borrower's name.
Section 15. Lender's Duties Limited. The rights granted to the Lender
-----------------------
in this Agreement are solely for its protection and nothing herein contained
imposes on the Lender any duties with respect to any property either of the
Borrower or of the Creditor heretofore or hereafter received by the Lender
beyond reasonable care in the custody and preservation of such property while in
the Lender's possession. The Lender has no duty to preserve rights against prior
parties on any instrument or chattel paper received from the Borrower as
collateral security for the Senior Debt or any portion thereof.
Section 16. Authority. The Borrower and the Creditor represent and
---------
warrant that they have authority to enter into this Agreement and that the
individual officers signing for each of the Borrower and the Creditor are
authorized and directed to do so.
Section 17. Adequate Assurances. Each of the Creditor and the Borrower
-------------------
agrees to execute any further documents or amendments and take such other
actions as may be reasonably necessary to effect the purposes of this Agreement
including the filing of any financing statements or other instruments in any
applicable public records, all as directed by the Lender. The Creditor agrees
that it shall cause to be added to each document evidencing the Subordinated
Debt the following legend:
- 6 -
<PAGE>
"The rights and remedies of Marriott MDAH One Corporation, and its
successors and assigns, under this instrument are subject to the terms
and conditions of that certain Subordination Agreement dated as of June
30, 1993, as amended from time to time, by and among Marriott MDAH One
Corporation, NationsBank of Georgia, National Association and Marriott
Diversified American Hotels, L.P."
Section 18. Jurisdiction. The Borrower and the Creditor each hereby
------------
irrevocably consents and agrees that any legal action, suit, or proceeding
arising out of or in any way in connection with this Agreement may be instituted
or brought in the courts of the State of Georgia, in the County of Fulton, or
the United States Courts for the Northern District of Georgia, as the Lender may
elect, and by execution and delivery of this Agreement hereby irrevocably
accepts and submits to generally and unconditionally, the non-exclusive
jurisdiction of any such court, and to all proceedings in such courts. The
Borrower and the Creditor each hereby waives any objection that it may now or
hereafter have for the laying of venue in any of the aforesaid courts. The
parties also consent that service of process in any such action or proceeding
may be made upon any party by mailing a copy of the summons and the complaint to
such party, by registered or certified mail, return receipt requested, at its
address designated for notices under Section 19 of this Agreement. Nothing in
this Agreement or elsewhere shall affect the Lender's right to serve process in
any other manner permitted by law or limit the right of the Lender to bring
actions, suits or proceedings in the courts of any other jurisdiction. In any
action or proceeding relating to this Agreement, the parties mutually waive
trial by jury, and the Borrower and the Creditor each waives (a) any claim for
consequential or special damages, and (b) the right to assert therein any setoff
against the amount of the Loan Obligations.
Section 19. Notices. All notices, demands and other communications
-------
required or permitted under this Agreement or by law shall be in writing and
shall be deemed to have been duly given, made and received when personally
delivered or on the second day after deposit in the United States mails, postage
prepaid, addressed as set forth below:
(a) If to the Lender: NationsBank of Georgia,
National Association
c/o AMRESCO Institutional, Inc.
101 North Tryon Street, NC-1001-13-20
Charlotte, North Carolina 28255
Attention: Mark Cagley
(b) If to the Creditor: Marriott MDAH One Corporation
Marriott Drive
Washington, D.C. 20058
Attention: Assistant General
- 7 -
<PAGE>
Counsel Corporate Finance
(c) If to the Borrower: Marriott Diversified American
Hotels, L P.
10400 Fernwood Road
Bethesda, Maryland 20058
Attention: Assistant General
Counsel Corporate Finance
Any addressee may alter the address to which communications are to be sent by
giving notice of such change of address in conformity with the provisions of
this Section for the giving of notice, provided such change shall not be
effective until actually received.
Section 20. Entire Agreement; Amendment. This Agreement constitutes and
---------------------------
expresses the entire understanding among the parties hereto with respect to the
subject matter hereof, and supersedes all prior agreements and understandings,
inducements or conditions, whether express or implied, oral or written. Neither
this Agreement nor any portion or provision hereof may be changed, waived or
amended orally or in any manner other than by an agreement in writing signed by
the Lender, the Borrower and the Creditor.
Section 21. Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of the Lender, its successors and assigns, and shall be binding upon
both the Borrower and the Creditor and their respective heirs, executors,
successors and assigns.
Section 22. Defects Waived. This Agreement is effective notwithstanding
--------------
any defect in the validity or enforceability of any instrument or document at
any time evidencing or securing the whole or any part of the Senior Debt.
Section 23. Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of Georgia.
Section 24. Severability. The provisions of this Agreement are
------------
independent of and separable from each other. If any provision hereof shall for
any reason be held invalid or unenforceable, it is the intent of the parties
that such invalidity or unenforceability shall not affect the validity or
enforceability of any other provision hereof, and that this Agreement shall be
construed as if such invalid or unenforceable provision had never been contained
herein.
Section 25. Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which shall constitute an original but which together
shall constitute one instrument.
- 8 -
<PAGE>
[Signature on Following Page]
- 9 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Subordination
Agreement to be signed, sealed and delivered as of the date first above written.
MARRIOTT MDAH ONE
CORPORATION
By: /s/ Jeffrey P. Mayer
-----------------------------------
Name: Jeffrey P. Mayer
------------------------------
Title: Vice-President
-----------------------------
MARRIOTT DIVERSIFIED AMERICAN
HOTELS, L.P.
By: Marriott MDAH One Corporation,
its General Partner
By: /s/ Jeffrey P. Mayer
---------------------------
Name: Jeffrey P. Mayer
----------------------
Title: Vice-President
---------------------
[Signatures Continued on Following Page]
<PAGE>
[Signature Page to Subordination Agreement]
dated as of June 30, 1993]
Accepted as of the date first
written above.
NATIONSBANK OF GEORGIA,
NATIONAL ASSOCIATION
By: AMRESCO-INSTITUTIONAL, INC.,
a Delaware corporation, its authorized agent
By: /s/ Mark S. Cagley
--------------------------------
Name: Mark S. Cagley
---------------------------
Title: Authorized Reresentative
<PAGE>
EXHIBIT 10.r
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT dated as of June 30, 1993 by and among
MARRIOTT CORPORATION (the "Creditor"), MARRIOTT DIVERSIFIED AMERICAN HOTELS,
L.P. (the "Borrower") and NATIONSBANK OF GEORGIA, NATIONAL ASSOCIATION (the
"Lender").
WHEREAS, the Borrower and the Lender entered into a Loan Agreement
dated February 7, 1990 (the "Existing Loan Agreement"), pursuant to which the
Lender made a $128,000,000 loan to the Borrower;
WHEREAS, the Borrower is in default of its obligations under the
Existing Loan Agreement and the Lender and the Borrower are to restructure such
obligations by amending and restating the Existing Loan Agreement pursuant to
the terms of that certain Amended and Restated Loan Agreement dated as of the
date hereof (as amended, restated, supplemented or otherwise modified from time
to time in accordance with the terms thereof, the "Loan Agreement");
WHEREAS, it is a condition to Lender's restructuring the Borrower's
obligations under the Existing Loan Agreement pursuant to the Loan Agreement
that the Borrower and the Creditor execute and deliver this Agreement;
NOW, THEREFORE, to induce the Lender to enter into the Loan Agreement,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
Section 1. Definitions. In addition to such other terms as are elsewhere
-----------
defined herein, as used in this Agreement the following terms shall have the
following meanings:
"Senior Debt" means any and all loans, advances, liabilities, debit
-----------
balances, covenants and es at any time owed by the Borrower to the Lender,
together with all interest (including all interest accruing after the
commencement of any bankruptcy or similar proceeding in respect of the Borrower)
fees, charges, expenses and attorney's fees for which the Borrower is now or
hereafter becomes liable to pay to the Lender under any agreement or by law,
whether direct or indirect, absolute or contingent, secured or unsecured, due or
to become due, now existing or hereafter arising, including without limitation,
(a) the Loan, (b) all principal and interest owing under any Note and (c) any
and all other Loan Obligations.
"Subordinated Debt" means any and all loans, advances, liabilities,
-----------------
covenants and duties at any time owed by the Borrower to the Creditor (whether
or not permitted under the terms of the Loan Agreement), together with all
interest, fees, charges, expenses and attorney's fees for which the Borrower is
now or hereafter becomes liable to pay to the Creditor under any agreement or by
law, whether direct or indirect, absolute or
<PAGE>
contingent, secured or unsecured, due or to become due, now existing or
hereafter arising, including without limitation (a) all liabilities of the
Borrower to the Creditor under the Line of Credit and Reimbursement Agreement
and the Subordinated Note and (b) the Deferred Purchase Debt (as defined in the
Memorandum).
"Subordinated Note" means that certain Promissory Note dated the date
-----------------
hereof executed and delivered by the Borrower to the Creditor and in the
original principal amount of $13,000,000.00, made to evidence the Borrower's
obligations to the Creditor under the Line of Credit and Reimbursement Agreement
as contemplated by Section II.2 thereof, as such promissory note may be amended,
supplement, restated or otherwise modified from time to time, and all notes or
other instruments given in replacement or substitution thereof.
Terms not otherwise defined herein are used herein as defined in the
Loan Agreement.
Section 2. Subordination. Except as otherwise permitted in Section 4
-------------
below, the Borrower shall not pay, and the Creditor shall not accept, any
payment with respect to, or on account of, the Subordinated Debt until the full
and final payment of all of the Senior Debt. Without limiting the generality of
the foregoing, in the event of any distribution, division or application,
partial or complete, voluntary or involuntary, by operation of law or otherwise,
of all or any part of the assets of the Borrower or the proceeds thereof to the
creditors of the Borrower or upon any indebtedness of the Borrower, by reason of
the liquidation, dissolution or other winding up of the Borrower or the
Borrower's business, or in the event of any sale, receivership, insolvency or
bankruptcy proceeding, or assignment for the benefit of creditors, or any
proceeding by or against the Borrower for any relief under any bankruptcy or
insolvency law or laws relating to the relief of debtors, readjustment of
indebtedness, reorganization, compositions or extensions, then and in any such
event any payment or distribution of any kind or character, either in cash,
securities or other property, which shall be payable or deliverable upon or with
respect to any of the Subordinated Debt shall be paid or delivered directly to
the Lender for application to the Senior Debt (whether or not the same is then
due) until all of the Senior Debt has been fully paid and discharged. The
Creditor acknowledges that the Borrower granted to the Lender a Lien in
substantially all of the assets of the Borrower and that any claim of the
Creditor to any of the assets of the Borrower shall be, and is hereby made,
subordinate and subject to the Lien of the Lender in the manner hereinafter set
forth, whether the Lien of the Lender is perfected or not.
Section 3. Warranties and Representations of the Borrower and the
------------------------------------------------------
Creditor. The Borrower and the Creditor each hereby represents and warrants to
- --------
the Lender that: (a) it has not relied nor will it rely on any representation or
information of any nature made by or received from the Lender relative to the
Borrower in deciding to execute this Agreement; (b) no part of the Subordinated
Debt is currently evidenced by any instrument or writing except the Line of
Credit and Reimbursement Agreement, the Subordinated
-2-
<PAGE>
Note and that certain Promissory Note dated February 8, 1990 executed by the
Borrower, payable to the order of the Creditor and in the original principal
amount of $11,258,680.12 (the "Deferred Purchase Debt Note"); (c) the Creditor
is the lawful owner and holder of all of the Subordinated Debt; (d) the Creditor
has not assigned or transferred any of the Subordinated Debt, or any interest
therein, to any Person; (e) the Creditor has not given any subordination in
respect of the Subordinated Debt other than in favor of the Lender; (f) as of
the date hereof, the aggregate principal amount, together with accrued interest
thereon, owing under the Subordinated Note is $14,842,345.00, the aggregate
principal amount, together with accrued interest thereon, owing under the
Deferred Purchase Debt Note is $723,894.00 and there is no other amount of
Subordinated Debt outstanding; (g) after giving effect to the waiver set forth
below in Section 26, no default is in existence with respect to the Subordinated
Debt and (h) none of the Subordinated Debt is secured by or entitled to the
benefits of any Lien in any of the Borrower's or any other Person's property or
a guaranty of any Person except the Borrower granted a lien to Marriott in the
Investor Notes (as defined in the Memorandum) as security for the Deferred
Purchase Debt Note, which lien secures only the Deferred Purchase Debt Note.
Section 4. Permitted Payments on Subordinated Debt. Notwithstanding the
---------------------------------------
provisions of Section 2 and 5 hereof, but subject to the other limitations of
this Agreement, including without limitation, those set forth in the rest of
this Section, the Borrower may make, and the Creditor may receive, payments in
respect of (a) the Borrower's obligations to the Creditor under the Line of
Credit and Reimbursement Agreement and the Subordinated Note solely out of Pari
Passu Distributions paid to the Borrower and (b) the Deferred Purchase Debt (as
defined in the Memorandum) solely out of payments received by the Borrower on
the Investor Notes (as defined in the Memorandum). Notwithstanding the preceding
sentence, the Borrower may not make, and the Creditor may not receive, any
payments in respect of any of the Subordinated Debt upon the occurrence and
during the continuance of an Event of Default.
Section 5. Covenants. For so long as this Agreement is in effect: (a)
---------
the Borrower shall not, directly or indirectly, grant a Lien, or assign or
transfer any of its assets or properties, to the Creditor or any other Person to
secure or satisfy all or any part of the Subordinated Debt; (b) the Creditor
shall not demand, collect or accept from the Borrower or any other Person any
payment (except as permitted under Section 4 above) or collateral on account of
the Subordinated Debt or any part thereof, nor shall the Creditor commence any
action or proceeding against the Borrower in any court or other tribunal, or
otherwise take any actions whatsoever, to recover or attempt to recover, all or
any part of the Subordinated Debt; (c) the Creditor shall not exchange, set off
or otherwise discharge any part of the Subordinated Debt; (d) the Creditor shall
not give any subordination in respect of the Subordinated Debt or transfer or
assign any of the Subordinated Debt to any Person other than the Lender; (e) the
Borrower will not issue any instrument, security or other writing evidencing any
part of the Subordinated Debt, and the Creditor will not receive any such
writing, except upon the prior written approval of the Lender or at the request
of and in the manner requested by the Lender; (f) the
- 3 -
<PAGE>
Borrower and the Creditor will not amend, alter or otherwise modify any of the
terms of any instrument, agreement or document evidencing or relating to any of
the Subordinated Debt, without the prior written consent of the Lender; (g) the
Creditor will not commence or join with any other creditors of the Borrower in
commencing any bankruptcy, reorganization, receivership or insolvency proceeding
against the Borrower; (h) neither the Borrower nor the Creditor otherwise shall
take or permit any action prejudicial to or inconsistent with the Lender's
priority position over the Creditor that is created by this Agreement and (i)
the Creditor shall not take any Person's guaranty for any of the Subordinated
Debt.
Section 6. Turnover of Prohibited Transfers. If any payment,
--------------------------------
distribution or security or the proceeds thereof is received by the Creditor on
account of or with respect to any of the Subordinated Debt which the Creditor
was not entitled to receive because of the terms of this Agreement, the Creditor
shall forthwith deliver same to the Lender in the form received (together with
any endorsement or assignment necessary to effect a transfer of all rights
therein to the Lender) for application to the Senior Debt, or at the Lender's
option, the Creditor shall pay to the Lender the amount thereof on demand. The
Lender is irrevocably authorized to supply any required endorsement or
assignment which may have been omitted. Until so delivered any such payment,
distribution or security shall be held by the Creditor in trust for the Lender
and shall not be commingled with other funds or property of the Creditor.
Section 7. Authority to Act for the Creditor. For so long as this
---------------------------------
Agreement remains in effect, the Lender shall have the right to act as the
Creditor's attorney-in-fact for the purposes specified herein and to take any
actions required by the Creditor hereunder and the Creditor hereby irrevocably
appoints the Lender as the Creditor's true and lawful attorney, with full power
of substitution, in the name of the Creditor or in the name of the Lender, for
the use and benefit of the Lender, without notice to the Creditor, to perform
the following acts, at the Lender's option, at any meeting of the creditors of
the Borrower or in connection with any case or proceeding, whether voluntary or
involuntary, for the distribution, division or application of the assets of the
Borrower or the proceeds thereof, regardless of whether such case or proceeding
is for the liquidation, dissolution, winding up of the affairs, reorganization
or arrangement of the Borrower, or for the composition of the debts of the
Borrower, in bankruptcy or in connection with a receivership, or under an
assignment for the benefit of the creditors of the Borrower or otherwise: (a) to
enforce claims comprising the Subordinated Debt, either in its own name or in
the name of the Creditor, by proof of debt, proof of claim, suit or otherwise;
and (b) to collect any assets of the Borrower distributed, divided or applied by
way of dividend or payment, or any securities issued, on account of the
Subordinated Debt and to apply the same, or the proceeds of any realization upon
the same that the Lender in its discretion elects to effect, to the Senior Debt
until all of the Senior Debt (including, without limitation, all interest
accruing on the Senior Debt after commencement of any bankruptcy case) has been
paid in full. The Creditor further grants to the Lender an irrevocable proxy to
exercise any voting rights the Creditor may have with respect to the approval or
- 4 -
<PAGE>
disapproval of a plan of reorganization of the Borrower proposed by any Person
or class of Persons in any bankruptcy or similar proceeding. In no event shall
the Lender be liable to the Creditor for any failure to prove the Subordinated
Debt, to exercise any right with respect thereto or to collect any sums payable
thereon.
Section 8. Waivers. The Borrower and the Creditor each hereby waives
-------
any defense based on the adequacy of a remedy at law which might be asserted as
a bar to the remedy of specific performance of this Agreement in any action
brought therefor by the Lender. To the fullest extent permitted by law, the
Borrower and the Creditor each hereby further waives: (a) presentment, demand,
protest, notice of protest, notice of default or dishonor, notice of payment or
nonpayment and any and all other notices and demands of any kind in connection
with all negotiable instruments evidencing all or any portion of the Senior Debt
or the Subordinated Debt to which the Borrower or the Creditor may be a party;
(b) the right to require the Lender to marshal any securities, or to enforce any
Lien the Lender may now or hereafter have in any collateral securing the Senior
Debt or to pursue any claim it may have against any guarantor of the Senior
Debt, as a condition to the Lender's entitlement to receive any payment on
account of the Subordinated Debt; (c) notice of the acceptance of this Agreement
by the Lender; (d) notice of any loans made, extensions granted or other action
taken in reliance hereon; and (e) all other demands and notices of every kind in
connection with this Agreement, the Senior Debt or the Subordinated Debt except
for demands and notices expressly required under this Agreement or under any
instrument or document evidencing any of the Senior Debt or the Subordinated
Debt. The Lender may, at any time and from time to time, without the consent of
or notice to the Creditor and without incurring any responsibility or liability
to the Creditor and without impairing or releasing the obligations of the
Creditor hereunder: (i) change the manner, place or terms of payment or change
or extend the time of payment of or renew or alter the Senior Debt or any
portion thereof; (ii) sell, exchange, release or otherwise deal with any
collateral or any other property by whomsoever at any time pledged or mortgaged
to secure, or however securing, the Senior Debt or any portion thereof; (iii)
release any Person liable in any manner for the payment or collection of the
Senior Debt or any portion thereof; (iv) exercise or refrain from exercising any
rights against the Borrower and others; and (v) apply any sums by whomsoever
paid or however realized to the Senior Debt or any portion thereof in any order
as the Lender may determine.
Section 9. Subrogation. Provided that all of the Senior Debt has been
-----------
indefeasibly paid and discharged in full, the Creditor shall be subrogated to
the rights of the Lender to receive payments or distributions of cash, property
or securities payable or distributable on account of the Senior Debt, to the
extent of all payments and distributions paid over to or for the benefit of the
Lender pursuant to this Agreement.
Section 10. Statement of Account. The Borrower and the Creditor each
--------------------
agrees to render to the Lender from time to time upon the Lender's request
therefor a written statement of the Borrower's obligations to the Creditor. The
Borrower agrees to afford
- 5 -
<PAGE>
the Lender access to the books and records of the Borrower in order that the
Lender may make a full examination of the state of accounts of the Borrower with
the Creditor.
Section 11. Validity of Subordinated Debt. The provisions of this
-----------------------------
Agreement subordinating the Subordinated Debt are solely for the purpose of
defining the relative rights of the Lender and the Creditor and shall not
impair, as between the Creditor and the Borrower, the obligation of the
Borrower, which is unconditional and absolute, to pay the Subordinated Debt in
accordance with its terms except as payment thereof may be postponed in
accordance with this Agreement.
Section 12. Indulgences Not Waivers. Neither the failure nor any delay
-----------------------
on the part of the Lender to exercise any right, remedy, power or privilege
hereunder shall operate as a waiver thereof or give rise to an estoppel, nor be
construed as an agreement to modify the terms of this Agreement, nor shall any
single or partial exercise of any right, remedy, power or privilege with respect
to any occurrence be construed as a waiver of such right, remedy, power or
privilege with respect to any other occurrence. No waiver by a party hereunder
shall be effective unless it is in writing and signed by the party making such
waiver, and then only to the extent specifically stated in such writing.
Section 13. Duration. This Agreement shall constitute a continuing
--------
agreement of subordination, and shall remain in effect until all of the Senior
Debt has been indefeasibly paid and discharged in full and all instruments and
agreements at any time evidencing or securing the whole or any part of the
Senior Debt have been terminated. The Lender may, without notice to the
Creditor, extend or continue credit and make other financial accommodations to
or for the account of the Borrower in reliance upon this Agreement.
Section 14. Enforcement. At any time the Creditor fails to comply with
-----------
any provision of this Agreement that is applicable to the Creditor, the Lender
may demand specific performance of this Agreement, whether or not the Borrower
has complied with this Agreement, and may exercise any other remedy available at
law or equity. Without limiting the generality of the foregoing, if the
Creditor, in violation of this Agreement, shall institute or participate in any
action, suit or proceeding against the Borrower, the Borrower may interpose as a
defense or dilatory plea this Agreement and the Lender is irrevocably authorized
to intervene and to interpose such defense or plea in the Borrower's name.
Section 15. Lender's Duties Limited. The rights granted to the Lender
-----------------------
in this Agreement are solely for its protection and nothing herein contained
imposes on the Lender any duties with respect to any property either of the
Borrower or of the Creditor heretofore or hereafter received by the Lender
beyond reasonable care in the custody and preservation of such property while in
the Lender's possession. The Lender has no duty to preserve rights against prior
parties on any instrument or chattel paper received from the Borrower as
collateral security for the Senior Debt or any portion thereof.
- 6 -
<PAGE>
Section 16. Authority. The Borrower and the Creditor represent and
---------
warrant that they have authority to enter into this Agreement and that the
individual officers signing for each of the Borrower and the Creditor are
authorized and directed to do so.
Section 17. Adequate Assurances. Each of the Creditor and the Borrower
-------------------
agrees to execute any further documents or amendments and take such other
actions as may be reasonably necessary to effect the purposes of this Agreement
including the filing of any financing statements or other instruments in any
applicable public records, all as directed by the Lender. The Creditor agrees
that it shall cause to be added to each document evidencing the Subordinated
Debt the following legend:
"The rights and remedies of Marriott Corporation, and its successors and
assigns, under this instrument are subject to the terms and conditions
of that certain Subordination Agreement dated as of June 30, 1993, as
amended from time to time, by and among Marriott Corporation,
NationsBank of Georgia, National Association and Marriott Diversified
American Hotels, L.P."
Section 18. Jurisdiction. The Borrower and the Creditor each hereby
------------
irrevocably consents and agrees that any legal action, suit, or proceeding
arising out of or in any way in connection with this Agreement may be instituted
or brought in the courts of the State of Georgia, in the County of Fulton, or
the United States Courts for the Northern District of Georgia, as the Lender may
elect, and by execution and delivery of this Agreement hereby irrevocably
accepts and submits to generally and unconditionally, the non-exclusive
jurisdiction of any such court, and to all proceedings in such courts. The
Borrower and the Creditor each hereby waives any objection that it may now or
hereafter have for the laying of venue in any of the aforesaid courts. The
parties also consent that service of process in any such action or proceeding
may be made upon any party by mailing a copy of the summons and the complaint to
such party, by registered or certified mail, return receipt requested, at its
address designated for notices under Section 19 of this Agreement. Nothing in
this Agreement or elsewhere shall affect the Lender's right to serve process in
any other manner permitted by law or limit the right of the Lender to bring
actions, suits or proceedings in the courts of any other jurisdiction. In any
action or proceeding relating to this Agreement, the parties mutually waive
trial by jury, and the Borrower and the Creditor each waives (a) any claim for
consequential or special damages, and (b) the right to assert therein any setoff
against the amount of the Loan Obligations.
Section 19. Notices. All notices, demands and other communications
-------
required or permitted under this Agreement or by law shall be in writing and
shall be deemed to have been duly given, made and received when personally
delivered or on the second day after deposit in the United States mails, postage
prepaid, addressed as set forth below:
(a) If to the Lender: NationsBank of Georgia,
- 7 -
<PAGE>
National Association
c/o AMRESCO Institutional, Inc.
101 North Tryon Street, NC-l00l-13-20
Charlotte, North Carolina 28255
Attention Mark Cagley
(b) If to the Creditor: Marriott Corporation
Marriott Drive
Washington, D.C. 20058
Attention: Assistant General
Counsel Corporate Finance
(c) If to the Borrower: Marriott Diversified American
Hotels, L.P.
10400 Fernwood Road
Bethesda, Maryland 20058
Attention: Assistant General
Counsel Corporate Finance
Any addressee may alter the address to which communications are to be sent by
giving notice of such change of address in conformity with the provisions of
this Section for the giving of notice, provided such change shall not be
effective until actually received.
Section 20. Entire Agreement; Amendment. This Agreement constitutes and
---------------------------
expresses the entire understanding among the parties hereto with respect to the
subject matter hereof, and supersedes all prior agreements and understandings,
inducements or conditions, whether express or implied, oral or written. Neither
this Agreement nor any portion or provision hereof may be changed, waived or
amended orally or in any manner other than by an agreement in writing signed by
the Lender, the Borrower and the Creditor.
Section 21. Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of the Lender, its successors and assigns, and shall be binding upon
both the Borrower and the Creditor and their respective heirs, executors,
successors and assigns.
Section 22. Defects Waived. This Agreement is effective notwithstanding
--------------
any defect in the validity or enforceability of any instrument or document at
any time evidencing or securing the whole or any part of the Senior Debt.
Section 23. Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of Georgia.
Section 24. Severability. The provisions of this Agreement are
------------
independent of and separable from each other. If any provision hereof shall for
any reason be held invalid
-8-
<PAGE>
or unenforceable, it is the intent of the parties that such invalidity or
unenforceability shall not affect the validity or enforceability of any other
provision hereof, and that this Agreement shall be construed as if such invalid
or unenforceable provision had never been contained herein.
Section 25. Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which shall constitute an original but which together
shall constitute one instrument.
Section 26. Waiver of Deferred Purchase Debt Defaults. The Creditor
-----------------------------------------
hereby waives any and all defaults and events of default now existing under the
Deferred Purchase Debt Note and any documents, instrument or agreement relating
thereto, including without limitation, any such default or event of default
arising out of or in any way relating to the Borrower's failure to comply with
the terms thereof, any misrepresentation or breach of any representation or
warranty contained therein.
[Signatures on Following Page]
- 9 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Subordination
Agreement to be signed, sealed and delivered as of the date first above written.
MARRIOTT CORPORATION
By: /s/ Matthew J. Hart
--------------------------------------
Name: Matthew J. Hart
--------------------------------
Title: Senior Vice President
--------------------------------
MARRIOTT DIVERSIFIED AMERICAN
HOTELS, L.P.
By: Marriott MDAH One Corporation,
its General Partner
By: /s/ Jeffrey P. Mayer
-------------------------------
Name: Jeffrey P. Mayer
---------------------------
Title: Vice President
--------------------------
[Signatures Continued on Following Page.]
<PAGE>
[Signature Page to Subordination Agreement dated
as of June 30, 1993]
Accepted as of the date first
written above.
NATIONSBANK OF GEORGIA,
NATIONAL ASSOCIATION
By: AMRESCO-INSTITUTIONAL, INC.,
a Delaware corporation, its authorized agent
By: /s/ Mark S. Cagley
---------------------------------
Name: Mark S. Cagley
----------------------------
Title: Authorized Representative
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARRIOTT
DIVERSIFIED AMERICAN HOTELS, L.P. FORM 10 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 4,137
<SECURITIES> 0
<RECEIVABLES> 3,714
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 13,827
<PP&E> 154,714
<DEPRECIATION> (46,561)
<TOTAL-ASSETS> 129,831
<CURRENT-LIABILITIES> 1,054
<BONDS> 145,256
0
0
<COMMON> 0
<OTHER-SE> (16,479)
<TOTAL-LIABILITY-AND-EQUITY> 129,831
<SALES> 0
<TOTAL-REVENUES> 26,699
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 10,769
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,944
<INCOME-PRETAX> 6,986
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,986
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
