EXHIBIT 10.6
MODIFICATION OF LOAN AGREEMENT
AND OTHER LOAN DOCUMENTS
dated as of December 23, 1996,
by and between
DESERT SPRINGS MARRIOTT LIMITED PARTNERSHIP,
a Delaware limited partnership,
as Borrower,
and
GMAC COMMERCIAL MORTGAGE CORPORATION,
a California corporation,
as Lender.
Affected Premises
Marriott Desert Springs
Palm Desert, CA
MODIFICATION OF LOAN AGREEMENT AND OTHER LOAN DOCUMENTS (this
"Modification"), entered into as of December 23, 1996, by and between DESERT
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SPRINGS MARRIOTT LIMITED PARTNERSHIP, a Delaware limited partnership
("Borrower"), and GMAC COMMERCIAL MORTGAGE CORPORATION, a California corporation
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("Lender").
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WHEREAS, The First National Bank of Chicago; Credit Lyonnais, New York
Branch; Credit Lyonnais, Cayman Islands Branch; Societe Generale, Chicago
Branch; and Sumitomo Trust & Banking Co., Ltd., Los Angeles Agency
(collectively, "Existing Lenders") and Borrower entered into that certain Loan
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Agreement, dated as of July 26, 1989 ("Existing Loan Agreement"), evidencing
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indebtedness in the aggregate principal amount of $105 million in Series A loans
("Existing Series A Notes") and indebtedness in the aggregate principal amount
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of $66 million in Series B loans ("Existing Series B Notes") (and together with
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the Existing Series A Notes, the "Existing Notes");
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WHEREAS, Borrower's obligations under the Existing Notes and the
Existing Loan Agreement are secured by, among other things, that certain First
Fee and Leasehold Deed of Trust, Security Agreement and Assignment of Rents,
dated as of July 26, 1989 ("Existing Deed of Trust"), among the Borrower, as
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trustor, Commonwealth Land Title Company, as trustee, and The First National
Bank of Chicago, for itself and as Agent for the other Existing Lenders
("Existing Agent"), as beneficiary, recorded in the Official Records of
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Riverside County, California as Instrument No. 250481 on July 27, 1989, which
Existing Deed of Trust encumbers the Premises, as defined therein, and the
balance of the Mortgaged Property (as defined therein);
WHEREAS, as further security for the repayment by the Borrower of the
Existing Notes, Borrower and Existing Lender entered into certain other Loan
Documents, as that term is defined by the Existing Loan Agreement ("Existing
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Loan Documents"), including, without limitation, the Security Agreement, dated
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as of July 26, 1989 ("Existing Security Agreement"), between Borrower and
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Existing Agent, which Existing Security Agreement encumbers certain personal
property of Borrower, as more particularly described therein, and the
Environmental Indemnity Agreement, dated as of July 26, 1989 ("Existing Borrower
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Environmental Indemnity"), by Borrower to and for the benefit of the Existing
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Lenders;
WHEREAS, Borrower is the owner of the Mortgaged Property and has
requested that Lender purchase, and accept by endorsement and/or assignment, the
Existing Notes, the Existing Loan Agreement, the Existing Deed of Trust and the
other Existing Loan Documents;
WHEREAS, contemporaneously herewith, the Existing Lenders have
endorsed and delivered the Existing Notes to Lender, and have assigned to Lender
their respective rights in the Existing Loan Agreement, the Existing Deed of
Trust and the other Existing Loan Documents, thereby extending to Lender all of
the rights and privileges conferred upon the "Lenders" under the Existing Notes
and the other Existing Loan Documents;
WHEREAS, concurrently with the execution and delivery of this
Modification, (i) Borrower and Lender are consolidating, amending and restating
the Existing Notes for the purpose of changing the interest rate, prepayment,
maturity and certain other terms of the Existing Notes and setting forth their
agreements with respect to certain other matters and (ii) Borrower and Lender
are entering into that certain Modification of First Fee and Leasehold Deed of
Trust, Security Agreement and Assignment of Rents, dated of even date herewith
(the "Modification of Deed of Trust"), providing for, among other things, the
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modification of the Existing Deed of Trust and certain of the other Existing
Loan Documents, as more particularly set forth therein;
WHEREAS, concurrently with the execution and delivery of this
Modification by the Borrower, the respective Guarantors under each of the
Guaranties (as those terms are defined in the Existing Loan Agreement) are
executing and delivering to Lender instruments which will ratify, affirm and, in
certain respects, modify, each of the Guaranties for the benefit of Lender; and
WHEREAS, the parties hereto wish to amend and modify certain
provisions of the Existing Loan Agreement, and certain other Existing Loan
Documents as more particularly set forth below.
NOW, THEREFORE, in consideration of the terms and conditions contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
1. Capitalized terms used herein and not otherwise defined shall have the
meanings assigned to them in the Existing Loan Agreement. Capitalized terms
used in Sections added to the Existing Loan Agreement or modified by this
Modification and not otherwise defined in the Existing Loan Agreement shall
have the meanings assigned to them in this Modification.
2. Except as used in the recitals and any other provision where the context
clearly requires otherwise, from and after the date of the execution and
delivery hereof:
(a) All references to "Lender," "Lenders," or "Agent" in the Existing
Loan Agreement, the Existing Deed of Trust or any other Existing Loan
Document shall be deemed to refer to Lender and its permitted successors
and assigns (exclusive of any participant in Lender's interest in the
Loans).
(b) Any reference in an Existing Loan Document (including any such
reference in such document itself), or any provision or section thereof, to
an Existing Loan Document or any provision or section thereof shall be
deemed to refer to such Existing Loan Document, or provision or section, as
modified by any of the Modification Documents. As used herein,
"Modification Documents" shall mean, individually and collectively, this
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Modification, the Modification of Deed of Trust, and any other document or
instrument executed and delivered by Borrower to Lender contemporaneously
herewith. In illustration and not in limitation of the foregoing,
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references in the Existing Loan Documents, as well as in any Modification
Document, to:
(i) "Loan Agreement" shall be deemed to refer to the Loan
Agreement as modified by this Modification.
(ii) "Series A Notes", "Series B Notes" and "Notes" shall be
deemed to refer, respectively, to the Consolidated, Amended and
Restated Series A Note being delivered concurrently herewith in the
principal amount of $94,000,000.00, the Consolidated, Amended and
Restated Series B Note being delivered concurrently herewith in the
principal amount of $66,000,000.00, and both of such consolidated,
amended and restated Notes.
(iii) "Deed of Trust" shall be deemed to refer to the Existing
Deed of Trust as modified by the Modification of Deed of Trust.
(iv) "Security Agreement" shall be deemed to refer to the
Existing Security Agreement as modified by this Modification.
(c) The term "Loan Documents" shall mean the Loan Documents, as
modified by any Modification Documents, and the Modification Documents
themselves.
3. Except as may otherwise be specified below: (i) all Sections and Article
references in this Modification are to the Sections and Articles of the
Existing Loan Agreement, and (ii) each paragraph of this Modification shall
concern and refer to the Existing Loan Agreement.
4. Each of the following definitions is deleted:
Section Number Caption
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Section 1.8 Assessment Rate
Section 1.12 Base Eurodollar Rate
Section 1.13 Base Fixed CD Rate
Section 1.14 Base Fixed Treasury Rate
Section 1.16 Borrowing
Section 1.17 Borrowing Notice
Section 1.18 Break Amount
Section 1.19 Break Cost
Section 1.20 Break Date
Section 1.21 Break Rate
Section 1.24 CD Interest Period
Section 1.25 CD Reserve Requirement
Section 1.28 Corporate Base Rate
Section 1.30 Current Fixed Treasury Rate
Section 1.31 Current Value
Section 1.36 Discount Rate
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Section 1.38 Effective Date
Section 1.45 Eurodollar Borrowing
Section 1.46 Eurodollar Interest Period
Section 1.47 Eurodollar Rate
Section 1.48 Eurodollar Reserve Requirement
Section 1.55 Fixed CD Rate
Section 1.56 Fixed CD Rate Borrowing
Section 1.57 Fixed Rate
Section 1.58 Fixed Rate Borrowing
Section 1.59 Fixed Treasury Rate
Section 1.60 Fixed Treasury Borrowing Rate
Section 1.61 Floating Rate
Section 1.62 Floating Rate Borrowing
Section 1.76 Host
Section 1.98 Minimum Notice Period
Section 1.99 Net Equipment Rental Income
Section 1.106 Partners' Priority Return
Section 1.117 Quarterly Payment Date
Section 1.118 Rate Option
Section 1.121 Reserve Requirement
Section 1.122 Rollover
Section 1.128 Swap Spread
Section 1.130 Treasury Interest Rate Period
Section 1.131 Treasury Reserve Requirement
5. Each of the following definitions is deleted and replaced with the
definitions given such terms in the Notes:
Section Number Caption
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Section 1.22 Business Day
Section 1.79 Interest Period
Section 1.96 Maturity Date
Section 1.109 Person
Section 1.119 Regulation D
6. Sections 1.42 through 1.44 are deleted, subject to the representation and
warranty made by Borrower in Section 32.(d) of this Modification.
7. A new Section 1.72A is inserted as follows:
"1.72A. The term "GSMC Long-Term Financing Commitment" shall
have the meaning given such term in the Notes.
8. In Section 1.73, the following phrase is inserted after the phrase "General
Partner Guaranty": ", the MI Guaranty".
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9. In Section 1.77, the phrase "located from time to time" is deleted and
replaced with the following: ", structures, building, fixtures, golf
courses, landscaping and other appurtenances now or hereafter situate". The
reference to "Exhibit C" shall be deemed to refer to "New Exhibit C",
attached hereto. The phrase beginning with ", including" and ending with
"facilities" is hereby deleted.
10. In Section 1.81, the reference to "Exhibit D" shall be deemed to refer to
the "New Exhibit D", attached hereto.
11. Section 1.83 is deleted and replaced with the following new Section 1.35A:
"1.35A. The term "Default Rate" shall have the meaning given
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such term in the Notes."
All references to the "Legal Rate" in the Loan Documents are hereby
replaced with "Default Rate".
12. Section 1.84 is deleted, having been superseded by Section 2.(a) of this
Modification.
13. Sections 1.88 and 1.89 are deleted and replaced with the following:
"1.88. The term "Loan A" means the loan made by Lender to the
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Borrower in the principal amount of $94,000,000.00 and evidenced by
the Series A Note.
"1.89. The term "Loan B" means the loan made by Lender to the
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Borrower in the principal amount of $66,000,000.00 and evidenced by
the Series B Note."
14. In Section 1.91, in the 9th line thereof, the following phrase is inserted
after the word "foregoing,": "all as modified by the Modification
Documents".
15. Section 1.93 is deleted and replaced with the following new Section 1.76A:
"1.76A. The term "Host Marriott" means Host Marriott
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Corporation, a Delaware corporation (successor in interest to
Marriott Corporation), a Delaware corporation."
Except as otherwise specifically replaced, all references to "Marriott" in
the Existing Loan Agreement and other Existing Loan Documents shall be
deemed to refer to Host Marriott, as defined in this new Section 1.76A.
16. Except in the definition of "Marriott Guaranty" in Section 1.95, all
references to the Marriott Guaranty in the Existing Loan Agreement shall be
deemed to refer to the Marriott Guaranty and the MI Guaranty (hereinafter
defined). The parties hereto acknowledge that the Payment Obligations (as
defined in the Marriott Guaranty) provided for under Sections 3(a) and 4 of
each of the Marriott Guaranty and MI
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Guaranty have been terminated, and that the Performance Obligations (as
defined in the Marriott Guaranty) under Section 6 of each of the Marriott
Guaranty and MI Guaranty, and all other provisions thereof except as
hereinabove set forth, remain in full force and effect. Concurrently
herewith, each of Marriott and MI has entered into an Affirmation of
Guaranty, which sets forth, among other things, the termination of the
Payment Obligations and the continued effectiveness of the Performance
Obligations thereunder.
17. A new Section 1.95A is inserted as follows:
"1.95A. The term "MI Guaranty" shall mean that certain
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Guaranty, dated as of October 7, 1993, by Marriott International,
Inc., a Delaware corporation, as guarantor, to The First National
Bank of Chicago, acting for itself and as Agent for Credit Lyonnais
New York Branch; Credit Lyonnais Cayman Island Branch; Societe
Generale, Chicago Branch; and Sumitomo Trust & Banking Co., Ltd., Los
Angeles Agency."
18. Section 1.96 is deleted and replaced with the following:
"1.96. The term "Maturity Date" shall have the meaning given
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such term in the Notes."
19. Section 1.100 is deleted, having been superseded by Section 2.(b) of this
Modification.
20. In Section 1.101, the following is inserted at the end thereof: "as
amended March 31, 1994 and as the same may be hereafter amended or modified
from time to time".
21. Section 1.104 is deleted and replaced by the following:
"1.104. The term "Operating Tenant" means Marriott Hotel
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Services, Inc., a Delaware corporation and a wholly owned subsidiary
of Marriott International, Inc., a Delaware corporation, as successor
in interest to Desert Springs Hotel Services, the original holder of
the tenant's interest under the Operating Lease."
22. Section 1.108 is deleted and replaced with the following:
"1.108. The term "Permitted Exceptions" means those matters set
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forth as exceptions in the title policy being issued in favor of
Lender by Commonwealth Land Title Insurance Company (#3609714-5)
concurrently herewith, and such other matters not materially and
adversely affecting the Property as Lender may, in Lender's sole and
absolute discretion, approve in writing subsequent to the date of
full execution and delivery of the Modification Documents."
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23. The reference to "Marriott" in Sections 1.115 and 1.116 is deleted and
replaced with the following: "Marriott Corporation, a Delaware corporation
(n/k/a Host Marriott Corporation)".
24. Sections 1.124 and 1.125 are deleted, having been superseded by Section
2.(b)(i) of this Modification.
25. In Section 2.3, after the clause entitled "Second", the following phrase is
inserted:
"Within each of the foregoing clauses "First" and "Second", payments
received shall be first applied to the payment of interest, and then
to payment of principal. Lender shall have the continuing and
exclusive right to apply or reverse and reapply any and all payments
by Borrower to any portion of the obligations of Borrower hereunder,
except as expressly set forth above."
26. Sections 2.4 through 2.11 are deleted.
27. In Section 2.13(a):
(a) in subsection (i) thereof, the concluding phrase "(other than
reserves and assessments taken into account in determining the
interest rate applicable to any Fixed Rate Borrowing)" is deleted;
and
(b) in the 2nd line on page 41, the phrase "of twenty-four (24)
consecutive months following the date of such notice" is deleted and
replaced with the following: "from the date of such notice through
the Maturity Date", and the words "24 month" next appearing after
such phrase is also deleted.
28. In Section 2.14, (a) the reference to Section 2.11 in the second line and
the penultimate line thereof and (b) the 3rd sentence thereof (beginning
with the word "Determination") are deleted.
29. Sections 2.15, 2.16 and 2.17 are deleted.
30. In Section 2.21:
(a) In the 15th line thereof, the following is inserted after the word
"Marriott": "Marriott International, Inc.";
(b) In the 16th line thereof, the following is inserted after the words
"or the Environmental Indemnity of Marriott": "or the Environmental
Indemnity of Borrower";
(c) In the 20th line thereof, the following is inserted after the word
"Loans": "or for misapplication of any Gross Revenues, proceeds of
the Loan or other funds in contravention of the Loan Documents".
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(d) Clause (b) is deleted and replaced with the following:
"(b) for any room revenues, rents or other income from the Property,
or any income or proceeds from any other collateral, (i) received
after notice of default from the Lender or an Event of Default and
not applied to the fixed, operating and debt service expenses of the
Property, or (ii) collected more than one month in advance;" and
(e) With respect to the final sentence thereof, the following is added
thereto:
"(d) for waste with respect to the Property; (e) for any security
deposits of tenants or advance-booking deposits collected by or on
behalf of Borrower not turned over to Lender upon a transfer of the
Property by foreclosure or sale or deed in lieu thereof; and (f) for
damages relating to environmental matters."
31. The parties hereto acknowledge and agree that the conditions to closing set
forth in Article 3 were the conditions required to be satisfied for the
closing of the Existing Loan, and shall not be deemed to be conditions to
the closing of transaction contemplated by this Modification, which are
governed by Section 69 of this Modification.
32. Borrower hereby makes and confirms as of the Effective Date, each of the
representations and warranties set forth in Article 4 as well as in any
other Loan Document, except that in connection therewith, the phrases in
the introductory language to Article 4 and Section 4.26, "except as
disclosed in Exhibit U" and "except as disclosed in Exhibit V" (and similar
references elsewhere in the Loan Agreement) are deleted. Further, Borrower
hereby represents and warrants as to the matters set forth in Annex A
hereto (which is incorporated herein) and as follows:
(a) Borrower has repaid in full the Purchase Debt, evidenced by the
Purchase Note, and any interest thereon, and has fully performed any
and all obligations required to be performed in connection therewith.
(b) As of the Effective Date, (i) to the best of Borrower's knowledge
after due investigation, there exists no breach or default, nor any
circumstance or condition which, with the giving of notice or passage
of time, or both, would constitute a breach or default, by the
Existing Agent or any other Existing Lender under the Existing Loan
Agreement or any of the other Existing Loan Documents, and (ii) the
entire amount of each of the Loans has been funded, and Lender has no
obligation to make any further advance of funds under the Loan
Agreement or any of the other Loan Documents.
(c) Borrower has performed and satisfied in full any and all obligations
of Borrower under the Purchase Agreement, and no further obligations
or liabilities of Borrower remain or shall accrue under the Purchase
Agreement. To the best of Borrower's knowledge after due
investigation, there exists no
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breach or default, nor any circumstance or condition which, with the
giving of notice or passage of time, or both, would constitute a
breach or default, by the holder of the Seller's interest under the
Purchase Agreement, and no further obligations or liabilities of the
Seller remain or shall accrue under the Purchase Agreement.
(d) Borrower no longer has any interest in the Equipment, the Equipment
Lease or the Equipment Purchase Agreement referred to in the Existing
Loan Agreement, and Borrower has fully performed any and all
obligations and liabilities to be performed by Borrower in connection
therewith. Accordingly, any and all references to the "Equipment",
the "Equipment Lease" or the "Equipment Purchase Agreement" in the
Loan Agreement, including Article 10, shall be deemed deleted.
(e) Borrower has paid in full the Arrangement Fee and the Loan Fee due
under Section 2.20 of the Existing Loan Agreement.
(f) There has been no material adverse change in the condition of the
Property since November 1, 1996, the date of the current appraisal.
33. Section 4.2 is deleted and replaced with the following:
"4.2 Ownership. The General Partner is a wholly-owned
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subsidiary of Host Marriott. The Golf Course B Owner and Operating
Tenant are, directly or indirectly, wholly-owned subsidiaries of
Marriott International, Inc."
34. In Sections 4.3, 4.4 and 4.5, the following phrase is inserted after
"the Loan Documents": "and the Modification Documents".
35. In Section 4.6, the introductory phrase "The financial statements
("Financial Statements")" is replaced with the following:
"The financial statements and such other information concerning the
financial condition of Borrower and/or the Property, including any of
the same furnished in connection with the execution and delivery of
the Modification Documents (collectively, "Financial Statements")".
36. In Section 4.6, the following is inserted after the word "and" in the
fourth line thereof: ", as to the financial statements,".
37. In Section 4.6, the final sentence thereof is deleted.
38. Without limiting the generality of Section 2.(a) of this Modification, in
Section 4.20, the term "Lenders" shall refer to the Lender named herein or
Goldman Sachs Mortgage Company.
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39. In Section 5.4(a), the concluding proviso is deleted and replaced with the
following:
"provided, however, that the Borrower shall not be required to pay
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any such tax, assessment, charge, levy or claim or discharge any such
lien if the validity thereof shall be contested in good faith by
appropriate proceedings and if the Borrower shall have established
with Lender such cash escrow (or shall have otherwise made such
provision for payment) as Lender, in its discretion, may require;
however, if the aggregate amount being contested in accordance with
this subsection 5.4(a), together with the aggregate amount being
contested in accordance with the terms of Section 6.3(a) hereof, is
not greater than $200,000, then the obligation to escrow such amounts
shall not apply;"
40. In Section 5.6(a), Borrower shall also provide a periodic "rent letter,"
certified by General Partner in the same manner as all other statements to
be provided by Borrower pursuant to Section 5.6(a), which shall contain,
among other things, the then-balance in the FF&E Reserve.
41. The following is added as new Section 5.6(1):
"(l) As soon as practicable, and in any event, within 30 days
after the end of each Accounting Period, statements with respect to
such Accounting Period and the 13 Accounting Periods immediately
preceding the delivery of such statement, of Gross Revenues; gross
expenses; net operating income; the ratio of net operating income to
current Debt Service; REVPAR; average occupancy; and average daily
room rate."
42. Section 5.11 is deleted and replaced with the following:
"5.11 Operations. Cause the Hotel to be operated continuously
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by Operating Tenant or Marriott International, Inc. or a wholly owned
(directly or indirectly) subsidiary thereof as a "Marriott" Hotel in
accordance with the standards established by Marriott International,
Inc. with respect to its full-service hotels and in accordance with
the Operating Lease (it being covenanted and acknowledged that any
amendment or termination of the Operating Lease shall require the
prior written consent of Lender)."
43. The following is added as new Section 5.16:
"5.16 Debt Service Liquidity Reserve Account.
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(a) Not later than January 3, 1997, Borrower shall establish
(pursuant to an agreement substantially in the form submitted to Borrower
by Lender on the date of the execution of the Modification) with Lender, or
if Lender is not a depository institution or if Lender shall otherwise
elect, a depository institution designated by Lender, as a separate
account, an account ("DSLR Account") to serve as a debt service liquidity
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reserve into which all Excess Cash Flow shall be deposited in
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accordance with Section 5.16(b) hereinbelow. The DSLR Account shall be in the
name of and under the sole dominion and control of Lender, subject only to
Lender's obligations hereunder to advance funds therefrom in accordance with
Section 5.16(c) hereinbelow, Borrower shall not have the authority or power to
make withdrawals from said DSLR Account, and Lender shall be and is hereby
irrevocably authorized to make withdrawals from said account in accordance with
the Loan Documents. Amounts in the DSLR Account shall be invested in such
investments as Borrower shall select and Lender shall approve (such approval not
to be unreasonably withheld, it being acknowledged that Lender shall have the
right to require investments that are substantially without risk of principal
loss and are appropriately liquid), provided that if a Potential Default or
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Event of Default shall have occurred, then Lender shall have the sole right and
discretion to select the investments. Any earnings on the DSLR Account shall be
retained therein and applied in the same manner as Borrower's deposits thereto.
The out-of-pocket costs reasonably incurred in establishing and maintaining the
DSLR Account shall be borne by Borrower and may be deducted from amounts then on
deposit therein.
(b) On the twenty-first day following the end of each Accounting Period,
after the payment of (or provision for) the interest payment due and payable
under the Notes on the Interest Payment Date (as defined in the Notes) occurring
immediately after the end of such Accounting Period, Borrower administrative
expenses approved by Lender, Borrower funded capital expenditures approved by
Lender and required Golf Course ground lease rental payments accruing during
such Accounting Period (all of such amounts, excluding the interest payment due
and payable under the Notes, constituting the "Permitted Additional
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Deductions"), Borrower shall deposit directly into the DSLR Account the excess
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of the Operating Profit for such Accounting Period over the sum of such interest
payment and Permitted Additional Deductions. For purposes of the foregoing
sentence, if Borrower prepays the Loans in accordance with and to the extent
permitted by Section 4(b)(ii) of the Notes, then the debt service payments on
the refinancing described in said Section 4(b)(ii) made by Host Marriott or an
affiliate thereof or Marriott International or an affiliate thereof in an amount
equal to the lesser of the actual debt service on such loan or the amount of
debt service which would otherwise have been payable on such prepaid principal
and interest under the Loans shall be included in "Permitted Additional
Deductions".
(c) The amounts deposited in the DSLR in respect of any Accounting
Period, together with all earnings and interest thereon, shall be retained
therein and following notice to Borrower, released only in accordance with the
following:
(i) If a periodic installment of Annual Rental payable by the
Operating Tenant under the Operating Lease for any Accounting Period shall
be insufficient to pay interest on the Loans due and payable on the
Interest Payment Date immediately following such periodic installment,
then funds shall be disbursed from the DSLR Account (and Lender is hereby
authorized, without any further writing or authorization required from
Borrower, to make disbursements from the DSLR Account) in the amount of
such insufficiency and to apply the same to the payment of such interest,
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provided that if any Event of Default or Potential Default shall exist, Lender
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shall have the right to apply monies in the DSLR Account in such order and to
such items as it may elect; provided that if there is no monetary Event of
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Default and no default by the Operating Tenant under the Operating Lease beyond
the expiration of any applicable notice and grace period, Lender shall disburse
to the Operating Tenant from the DSLR Account the amount owed to the Operating
Tenant for its incentive management fee, such disbursement to be made at the
same time, and on the same terms and conditions as would be applicable to the
Borrower's payment of such fee under the terms of Annex B and the Operating
Lease. The insufficiency of amounts in the DSLR Account shall not relieve
Borrower from its obligation to fulfill each of its covenants in the Loan
Documents.
(ii) If there shall occur an Event of Default, then the amounts in the
DSLR Account shall not be made available to Borrower (or to the Operating
Tenant) and instead may be held, used and applied by Lender in its sole and
absolute discretion to the payment of any other amounts that may be due and
payable (or that may thereafter become due and payable) under the Loan; provided
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that if there is no monetary Event of Default and no default by the Operating
Tenant under the Operating Lease beyond the expiration of any applicable notice
and grace period, Lender shall disburse to the Operating Tenant from the DSLR
Account the amount owed to the Operating Tenant for its incentive management
fee, such disbursement to be made at the same time, and on the same terms and
conditions as would be applicable to the Borrower's payment of such fee under
the terms of Annex B and the Operating Lease.
(iii) If the Loan, together with all other amounts due under the Loan
Documents, shall be repaid in full, then the amounts in the DSLR Account shall
be paid as follows:
(A) first, to Borrower, for payment to a reserve account established
by the Operating Tenant, an amount calculated in accordance with Annex B
attached hereto (and Borrower shall be obligated to pay to the Operating
Tenant from such reserve account any amount owed to the Operating Tenant on
account of the Operating Tenant's incentive management fee in accordance with
Annex B and the Operating Lease);
(B) second, to the lender under the loan to be made under the GSMC
Long-Term Financing Commitment (or any replacement loan thereof), for the
deposit into the debt service liquidity reserve to be established in
accordance therewith, up to a maximum amount (the "Maximum DSLR Amount") equal
to six (6) months' principal and interest payments as would be required to be
paid under the GSMC Long-Term Financing Commitment for the Senior Note and six
(6) times the amount described in clause (vi) under "Application of Revenues -
- Prior to
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Year 12.5" thereof (all terms in this parenthetical as defined in
the GSMC Long-Term Financing Commitment); and
(C) third, the balance, if any, to Borrower.
(d) Borrower hereby pledges, assigns and grants a security interest
to Lender, as security for payment of all sums due in respect of the Loan
and the performance of all other terms, conditions and covenants of this
Agreement and any other Loan Document on Borrower's part to be paid and
performed, all of Borrower's right, title and interest in and to the DSLR
Account, together with the deposits therein, including all interest earned
thereon and investments held therein. Borrower shall not further pledge,
assign or grant any security interest in the DSLR Account, or permit any
lien, charge or encumbrance to attach thereto, or any levy to be made
thereon, or any UCC-1 Financing Statements to be filed with respect thereto
(except those naming Lender as the secured party).
(e) Under no circumstances shall the Operating Tenant or any
affiliate thereof have any right, title or interest of any sort, legal or
equitable, in or to the amounts in the DSLR Account. The foregoing,
however, shall not affect Lender's obligations to Borrower to disburse
funds in the DSLR account in accordance with the terms of this Section
5.16.
44. Section 6.1 is amended by deleting clauses "Third", "Fourth", "Fifth" and
"Sixth" and inserting the following therefor:
"Third: Deposit of amounts required under Section 5.16 to be
deposited into the DSLR Account and, to the extent applicable,
applied to the repayment of principal on the Loans."
The reference to clauses "Fourth", "Fifth" and "Sixth" in the final
paragraph of Section 6.1 are hereby deleted.
45. In Section 6.2(c), the following new clauses (iii) and (iv) shall be
inserted at the conclusion thereof:
"and; (iii) such Indebtedness, together with any other Indebtedness
described in Section 6.2(f), shall have been incurred in the ordinary
course of Borrower's business and the aggregate amount thereof shall
not exceed $2,000,000."
46. Sections 6.2(d), 6.2(e) and 6.2(f) are deleted, and the following new
Sections 6.2(d), 6.2(e) and 6.2(f) are hereby inserted:
"(d) Indebtedness described under Section 4(b)(ii) of each of
the Notes, provided that such Indebtedness satisfies the requirements
--------
of clauses (i), (ii), (iii) and (iv) of Section 6.2(c).
-13-
(e) Indebtedness represented by non-capital equipment leases
entered into in the ordinary course of Borrower's business, where the
required annual payments thereunder do not in the aggregate exceed
$1.1 million, of which no more than $600,000 annually in the
aggregate may come from sources other than the FF&E Reserves.
(f) Indebtedness incurred in the ordinary course of Borrower's
business, provided that the lender thereunder is Marriott
--------
International, Inc. or its wholly owned subsidiary and such
Indebtedness satisfies the requirements of clauses (i), (ii) and
(iii) of Section 6.2(c)."
Nothing herein or in the Loan Documents shall be construed as permitting
any of the Indebtedness described in Section 6.2 to be secured by any asset
or interest of Borrower, except to the extent, if at all, expressly
permitted under Section 6.3 of the Loan Agreement.
47. In Section 6.3(a):
(i) in line 8, the phrase "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" is
replaced with: "as to which deposits of cash or readily marketable
securities required to obtain the release of such liens have been
made with Lender or a court of competent jurisdiction", and
(ii) in line 15, the phrase "and adequate reserves shall have been
established" is deleted and replaced with "and adequate cash deposits
have been made with Lender; however, if the aggregate amount being
contested in accordance with this subsection 6.3(a), together with
the aggregate amount being contested in accordance with the terms of
Section 5.4(a) hereof, is not greater than $200,000, then the
obligation to make such cash deposits shall not apply;".
48. Sections 6.3(c), 6.3(d), 6.3(e) and 6.3(f) are deleted.
49. The following is hereby inserted at the end of Subsection 6.6(b):
"provided that the Partnership Documents may be amended to
reflect the purchase of some or all of the limited partnership
interests in Borrower by Host Marriott or a wholly owned (directly or
indirectly) subsidiary thereof, or in connection with the partial
take-out loan from Host Marriott or Marriott International or their
wholly owned subsidiaries, subject to the rights of the Lender
hereunder (as well as the rights of the Lender under the GSMC Long-
Term Financing Commitment)".
50. The following is hereby inserted at the end of Section 6.6:
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"or (e) permit or suffer the transfer, conveyance, encumbrance
or other disposition of any interest, direct or indirect, in the
Borrower, whether now owned or hereafter acquired, by Host Marriott
or any affiliate, other than to Host Marriott or a wholly-owned
(directly or indirectly) subsidiary thereof; provided, that the
Borrower may transfer the Property to a newly formed, bankruptcy
remote, special purpose entity (complying with all rating agency
requirements), wholly owned (directly or indirectly) by Borrower, on
the condition that such transferee expressly assume all of the
Borrower's obligations under the Notes and the other Loan Documents
pursuant to an instrument in form and substance reasonably
satisfactory to Lender, and at Lender's election, such transferee
shall agree to such modification of the Loan Documents as shall be
reasonably required by the Lender."
51. In Section 7.1, in the 15th line, "B+" is deleted and: replaced with "A".
52. In Section 7.2, the following is added to the end of the second sentence:
", but in no event less than the coverage in effect as of the date
hereof".
53. In Section 8.1(c), in the 5th line, "three (3) days" is deleted and
replaced with "two (2) Business Days".
54. In Section 8.1(i), the following is added to the conclusion thereof:
"the General Partner shall cease to be the sole general partner of
Borrower or any of its existing authority with respect to the
Borrower's business and affairs shall be diminished; or Borrower
shall permit or suffer the transfer, conveyance, encumbrance or other
disposition of any interest, direct or indirect, in the Borrower,
whether now or hereafter acquired, by Host Marriott or any affiliate,
other than to Host Marriott or a wholly-owned (directly or
indirectly) subsidiary thereof; or"..
55. In Section 8.1(j), in the second line, "either or both" is deleted and
replaced with "any".
56. In Section 8.1, page 92, the following is added to the conclusion of
clause (i), immediately prior to the word "or":
"provided upon the occurrence of an Event of Default described in
--------
Section 8.1(f) with respect to Borrower, the Notes and such other
notes shall be automatically due and payable, both as to principal
and interest;"
57. Section 8.4 is hereby deleted.
58. In Article 9, references to "FNBC" are hereby deleted and replaced with
"GMAC Commercial Mortgage Corporation."
-15-
59. In Section 11.1, the notice addresses are hereby deleted and replaced with
the following:
Borrower:
Desert Springs Marriott Limited Partnership
10400 Fernwood Road
Bethesda, Maryland 20817
Attention: Law Department (#923)
with a copy to:
Desert Springs Marriott Limited Partnership
10400 Fernwood Road
Bethesda, Maryland 20817
Attention: Asset Management Department (#908)
Lenders:
GMAC Commercial Mortgage Corporation
650 Dresher Road
P.O. Box 1015
Horsham, Pennsylvania 19044
Attention: Executive Vice President, Loan Servicing
with a copy to:
GMAC Commercial Mortgage Corporation
650 Dresher Road
P.O. Box 1015
Horsham, Pennsylvania 19044
Attention: Chief Financial Officer
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Attention: Diane Citron
Goldman Sachs Mortgage Company
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Attention: Mr. Steven T. Mnuchin
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Goldman Sachs Mortgage Company
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Attention: Ms. Lisa Payne
60. In Section 11.5(c), the final sentence thereof is deleted.
61. Section 11.10 is deleted.
62. In Section 11.12(b), the concluding proviso is deleted.
-------
63. In Section 11.14(a), in the 8th line, the phrase "which designation shall
be subject to the Borrower's approval, not to be unreasonably withheld" is
deleted.
64. All references to "Illinois" in Section 11.18 of the Existing Loan
Agreement are hereby deleted and replaced with "New York". Such Section
11.18, as modified, shall be applicable to each of the Modification
Documents, with the exception of the Security Agreement and the recorded
modification documents making specific reference to the applicability of
the laws of the State of California (either in whole or in part).
65. In Section 11.23, the following phrase is inserted as new clause (a)(vi)
after the word "hereof," in clauses (a)(v): ", and (vi) to GMAC Commercial
Mortgage Corporation, Goldman Sachs Mortgage Company, and their respective
agents, accountants, attorneys, contractors, and consultants."
66. In addition to the modifications made to the Existing Loan Documents in
Section 2 of this Modification, or in any of the other Modification
Documents, the following Sections of this Modification shall be applied to
the appropriate Sections of the other Existing Loan Documents, where
necessary:
(a) Section 59 of this Modification shall be applied to the notice
provisions of other Existing Loan Documents, including, without
limitation, Section 10(f) of the Existing Security Agreement and
Section 9 of the Existing Borrower Environmental Indemnity.
(b) Section 64 of this Modification shall be applied to similar
provisions selecting applicable law or forum in other Existing Loan
Documents, including, without limitation, Section 10 of the Existing
Borrower Environmental Indemnity.
(c) Section 30 of this Modification shall apply to Section 10(h) of the
Existing Security Agreement, such that the provisions thereof shall
conform to the provisions of Section 2.21 of the Loan Agreement.
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(d) The Existing Security Agreement is hereby modified as follows:
(i) Any and all references to "Agent", "Lenders", "Secured Party"
or "Secured Parties" in the Existing Security Agreement shall
be deemed and construed to refer to Lender.
(ii) Without limitation on any other provision of the Security
Agreement (including, without limitation, Section 2(h) of the
Security Agreement), the continuing first priority security
interest created by Borrower in favor of Lender under the
Security Agreement shall encumber, and Borrower hereby
confirms its grant of a continuing first priority security
interest in and a lien upon, all of Borrower's right, title
and interest in, to and under the DSLR Account described in
Section 5.16 of the Loan Agreement (as incorporated therein by
Section 43 of the Modification of Loan Agreement), including,
without limitation, all of Borrower's right, title and
interest in, to and under any and all funds on deposit in the
DSLR Account from time to time, and any and all proceeds
thereof, and all of such right, title and interest of Borrower
shall comprise a portion of the Collateral (as defined under
the Security Agreement) for all purposes.
(iii) Without limitation on any other provision of this Modification
or the Security Agreement, for the purposes of confirming and
ratifying the provisions of Section 4(b) of the Security
Agreement, Borrower hereby confirms to Lender (i) that
Borrower shall keep the records concerning its Accounts (as
defined in the Existing Security Agreement) at the Property or
at Borrower's chief executive office and chief place of
business, which chief executive office and the chief place of
business of Borrower is at 10400 Fernwood Road, Bethesda,
Maryland 20817, and (ii) that Borrower shall not, without
giving Lender not less than thirty (30) days' prior written
notice thereof, change the place where the records concerning
such Accounts are kept or the location of its chief executive
office or its chief place of business.
(iv) Without limitation on any other provision of this Modification
or the Security Agreement, Borrower hereby remakes as of the
Effective Date each of the representations and warranties of
Borrower (as "Debtor") under the Existing Security Agreement,
and hereby ratifies and confirms each of its covenants and
obligations under the Security Agreement.
(v) Beginning in Section 10(g), line 3, the phrase "Illinois,
provided, however, that to the extent the Collateral is
-------- -------
located in the State of California (1) matters of title, and
(2) matters of creation, perfection and priority of the
security interest created by this
-18-
Agreement which are required to be governed by the laws of the
State of California shall be governed thereby and construed in
accordance therewith" is deleted and replaced with
"California".
(vi) In Section 5(b) of the Existing Security Agreement, the phrase
"the Illinois Uniform Commercial Code and" is hereby deleted.
(vii) In Section 5(b)(1) of the Existing Security Agreement, the
phrase "the Illinois Uniform Commercial Code," is hereby
deleted.
67. Upon the execution and delivery of this Modification, the Lender shall have
earned, and Borrower shall pay or cause to be paid to Lender, a fee
("Modification Fee") in the amount of $800,000.
----------------
68. In connection with the purchase and modification of the Existing Loans
contemplated in this Modification, Borrower will be responsible for, and
shall pay on demand, all expenses and costs incurred by Lender in
connection with the Loans, including fees and costs for income and expense
audits, travel, environmental and engineering consultants and reports,
credit reports, appraisals, reasonable attorneys' fees and expenses in
documenting and negotiating the Loan Documents and all certificates and
instruments related thereto, and due diligence, other out-of-pocket
expenses relating to credit and collateral evaluations and title insurance
premiums and charges, mortgage recording taxes and other filing fees and
escrow fees ("Lender Expenses"). Such Lender Expenses shall be paid by
---------------
Borrower to Lender in addition to the Modification Fee.
69. The following shall be additional conditions to Lender's obligations to be
satisfied by Borrower concurrently herewith, which Borrower hereby
covenants to satisfy:
(a) Borrower shall deliver to Lender audited financial statements of
Borrower for the prior three fiscal years certified by a "Big Six" or
other nationally recognized accounting firm acceptable to Lender, and
current results from operations certified by an Authorized Accounting
Officer of Borrower.
(b) Borrower shall have paid the Modification Fee and Lender Expenses.
(c) Borrower shall have executed and delivered the GSMC Long-Term
Financing Commitment (as defined in the Notes) and shall have paid
all fees due and owing thereunder.
(d) Borrower shall have provided Lender with the following items, each of
which must be acceptable to Lender in its sole discretion: (i)
engineering report (including building code and ADA compliance), (ii)
Phase I Environmental Report (and Phase II Environmental Report, if
recommended), (iii) MAI appraisal from an appraiser selected by
Lender, and (iv) reliance letters from such report and appraisal
providers, in each case, in form and substance satisfactory to
Lender.
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(e) Each of the conditions set forth in ANNEX C.
70. Failure to fund under the GSMC Long-Term Refinancing Commitment shall not
affect any of Lender's rights under the Notes, the Loan Agreement, the Deed
of Trust, or any of the other Loan Documents.
71. Borrower hereby acknowledges that the Lender named herein has purchased the
Existing Notes as an accommodation to Borrower and that the Lender named
herein (and its successors and assigns) shall under no circumstances have
any liability or obligation to the Borrower whatsoever as a result of or in
connection with any action or inaction taken or omitted by or on behalf of
any of the Existing Lenders or the Existing Agent under or in connection
with the Loan Documents.
72. All of the terms and provisions of the Existing Loan Documents (including,
without limitation, the Existing Security Agreement and the Existing
Borrower Environmental Indemnity), as modified and amended by the
Modification Documents, are hereby ratified and confirmed by Borrower as of
the date hereof to be in full force and effect in all respects. Borrower
hereby represents and warrants that as of the date of the execution and
delivery of this Modification: (i) other than the fact that the Existing
Notes have matured, there exists no default or events which, with the
giving of notice or passage of time, or both, would constitute a default
under the Notes, the Loan Agreement, the Deed of Trust or any other Loan
Document and (ii) Borrower has no offsets, defenses, counterclaims, setoffs
or similar rights with respect to its obligations of payment and
performance under the Notes, the Loan Agreement, the Deed of Trust or any
of the other Loan Documents. This Modification and the other Loan Documents
contain the entire agreement of the parties hereto and thereto in respect
of the transactions contemplated hereby and thereby, and all prior
agreements among or between such parties, whether oral or written, between
Borrower and Lender, in each case with respect to the subject matter
hereof, are superseded by the terms of this Modification and the other Loan
Documents.
73. All news releases, publicity or advertising by Borrower or Lender (or any
of their respective affiliates which they control) through any media
intended to reach the general public which refers to the Loan Documents or
the financing evidenced by the Loan Documents, to Borrower, Lender or
Goldman Sachs Mortgage Company (or any of their respective affiliates)
shall be subject to the prior written approval of Borrower, Lender or
Goldman Sachs Mortgage Company, as applicable.
74. This Modification shall in all respects be governed by, and be construed
and interpreted in accordance with, the laws of the State of New York.
75. This Modification may be executed and delivered in counterparts, and
counterparts executed and delivered by each of Lender and Borrower shall
together constitute one original.
76. No modification, amendment, extension, discharge, termination or waiver of
any provision of this Modification, or any Loan Document, nor consent to
any departure
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by Borrower therefrom, shall in any event be effective unless the same
shall be in a writing signed by the party against whom enforcement is
sought, and then such waiver or consent shall be effective only in the
specific instance, and for the purpose, for which given.
77. For the purpose of confirming the applicability of New York law, Borrower
hereby confirms its covenant to perform and comply with each of the
following sections of the Deed of Trust: 1.01 through 1.13, 1.15, 1.16
through 1.19, 2.07 and, to the extent that the same relate to any of the
foregoing sections, Section 3.01 through 3.07, 3.08 (other than subsections
(c) and (e)), 3.11, 3.12, 3.14 and 3.15. The foregoing shall not be deemed
to limit or modify any provisions of the Deed of Trust.
78. The parties acknowledge that certain provisions of the Existing Loan
Agreement and certain of the other Existing Loan Documents which have no
continuing relevance or effect remain in said Loan Documents following the
modification of said Existing Loan Documents by the Modification Documents
(such provisions, the "Historical Provisions"), to reflect directly in the
---------------------
Loan Documents the history of the Loans. The Historical Provisions include,
without limitation, Sections 1.4, 1.105, 1.112, 1.20, 1.80, 2.1(d) and
2.18, Article 3, Article 9, and Sections 11.5, 11.6, 11.8, 11.12, and
11.14 of the Existing Loan Agreement, and references to TWA and the
Equipment and the Equipment Lease in the Security Agreement. Borrower and
Lender hereby covenant and agree that notwithstanding the retention of the
Historical Provisions in the Loan Documents, the Historical Provisions
shall not be of any further force or effect, and without limitation on the
foregoing, none of the Historical Provisions, or their retention in the
Loan Documents, shall limit, expand or modify any of the obligations or
liabilities of Borrower, or the rights or remedies of Lender, under any of
the Loan Documents with regard to any such Historical Provisions.
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IN WITNESS WHEREOF, the parties hereto have each caused this
Modification to be duly executed as of the date and year first above written.
BORROWER:
DESERT SPRINGS MARRIOTT LIMITED
PARTNERSHIP, a Delaware limited
partnership
By: MARRIOTT DESERT SPRINGS
CORPORATION, a Delaware
corporation, its general partner
By: /s/ Patricia K. Brady
---------------------------------
Name: Patricia K. Brady
Title: Vice President
LENDER:
GMAC COMMERCIAL MORTGAGE
CORPORATION, a California corporation
By: /s/ Karen Nee
------------------------
Name: Karen Nee
Title: Executive Vice President
ANNEX A
REPRESENTATIONS AND WARRANTIES RE GROUND LEASE
With respect to the Leased Premises demised under the Golf Course
Lease, Borrower represents and warrants:
(i) the Golf Course Lease or a memorandum thereof has been duly
recorded; the lease permits the interest of the lessee thereunder to be
encumbered by the Deed of Trust and does not restrict the use of the
related property by the lessee, its successors or assigns in a manner that
would materially adversely affect the security provided by the Deed of
Trust; and a true and complete copy of the Golf Course Lease has been
delivered to Lender;
(ii) pursuant to the terms of the Golf Course Lease, the Golf Course
Lease may not be amended, modified, cancelled, supplemented or terminated
without the prior written consent of Lender, as Leasehold Mortgagee
provided that such Leasehold Mortgagee has provided the lessor a true and
correct copy of the modification and written notice specifying the name and
address of such Leasehold Mortgagee, and any such action without such
consent is of no force and effect;
(iii) the Golf Course Lease has an original term (or an original
term plus one or more optional renewal terms which have been exercised or
which may be exercised, and will under all circumstances be enforceable, by
a Leasehold Mortgagee) which extends not less than ten (10) years beyond
the Maturity Date; the base rental under the Golf Course Lease is $100,000
and shall be $100,000 for any renewal term which may be exercised;
(iv) the Golf Course Lease is not subject to any liens or
encumbrances superior to, or of equal priority with, the related Deed of
Trust (other than the related ground lessor's fee interest); there is no
deed of trust or Lien of record and to Borrower's knowledge there is no
deed of trust or Lien not recorded, in each case encumbering the related
ground lessor's fee interest (or if any such deed of trust or Lien exists,
it is subordinate to the Lien held by Lender under the Deed of Trust);
(v) the Golf Course Lease is assignable by a foreclosing Leasehold
Mortgagee without the consent of the lessor thereunder;
(vi) on the date hereof, the Golf Course Lease is in full force and
effect and no default has occurred under the Golf Course Lease nor, to the
best of Borrower's knowledge, is there any existing condition which, but
for the passage of time or the giving of notice, would result in a default
under the terms of the Golf Course Lease;
(vii) the Golf Course Lease requires the lessor thereunder to give
notice of any default by the lessee to the Leasehold Mortgagee; upon Lender
providing lessor with a true and correct copy of the Modification of Deed
of Trust and written notice
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specifying its name and address, Lender shall be recognized as a "Leasehold
Mortgagee" under the Golf Course Lease;
(viii) a Leasehold Mortgagee is permitted at least 30 days to cure
any default under the Golf Course Lease which is curable after the receipt
of notice of any such default before the lessor thereunder may terminate
the Golf Course Lease and such cure period shall be extended during such
time as Leasehold Mortgagee is actively pursuing an action for judicial or
nonjudicial foreclosure of the Tenant's interest in the premises or
Leasehold Mortgagee's prevented from exercising its rights and remedies
under the Loan Documents by reason of the bankruptcy of Tenant, an
injunction, court order or other similar prohibition provided that periodic
rent payments shall be paid in the case of any such default which is not
curable by such Leasehold Mortgagee, or in the event of the bankruptcy or
insolvency of the lessee under the Golf Course Lease, Leasehold Mortgagee
has the right, following termination of the existing Golf Course Lease or
rejection thereof by a bankruptcy trustee or similar party, to enter into a
new ground lease with the lessor on substantially the same terms and
conditions as the existing Golf Course Lease; and
(x) under the terms of the Golf Course Lease (together with the Deed
of Trust), any award from a condemnation will be applied (after payment to
the ground lessor of its proportionate share of the proceeds thereof) to
the payment of the Loans.
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ANNEX B
INCENTIVE PAYMENT
The "Incentive Payment" referred to in Section 5.16(c)(iii)(A) shall
be determined as follows for fiscal year 1997.
During the term of the Loans, Annual Rental under the Operating Lease
shall be deemed to equal $20.5 million. If actual Operating Profit (i.e. Annual
Rental) for fiscal year 1997 exceeds Debt Service, Operating Tenant shall be
entitled to an "Incentive Payment" (assuming a maximum amount of $2,000,000)
equal to a portion of such excess amount attributable to the term of the Loans,
pro-rated based upon the following cumulative percentages (limited to 100%)
applicable at the time the Loans (or a portion thereof) are paid or prepaid. If
the Loans (or a portion thereof) are paid or prepaid during a period, it will be
assumed for the purposes of calculating the Incentive Payment that such payment
or prepayment is made on the last day of such period. The Incentive Payment
shall be calculated as follows:
Period/End Date Percentage Cumulative Periodic Payment
Payment Balance
Amount
Period 1 (1/31/97) 9.9% 9.9% $198,000 $198,000
Period 2 (2/28/97) 16.8% 26.7% $336,000 $534,000
Period 3 (3/28/97) 21.0% 47.7% $420,000 $954,000
Period 4 (4/25/97) 17.0% 64.7% $340,000 $1,294,000
Period 5 (5/23/97) 12.7% 77.4% $254,000 $1,548,000
Period 6 (6/20/97) 5.7% 83.1% $114,000 $1,662,000
Period 7 (7/18/97) (1.7%) 81.4% ($34,000) $1,628,000
Period 8 (8/15/97) (4.2%) 77.2% ($84,000) $1,544,000
Period 9 (9/12/97) (4.3%) 72.9% ($86,000) $1,458,000
Period 10 (10/10/97) 7.3% 80.2% $146,000 $1,604,000
Period 11 (11/7/97) 8.7% 88.9% $174,000 $1,778,000
Period 12 (12/5/97) 8.1% 97.0% $162,000 $1,940,000
Period 13 (1/2/98) 3.0% 100% $60,000 $2,000,000
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In no event shall the Incentive Payment exceed $2,000,000. If
Operating Profit for the full 1997 fiscal year does not exceed Debt Service,
then no amounts shall be paid or owing to Operating Tenant from the amounts
contained in the DSLR Account.
Example 1:
Assume: (a) Long-Term Refinancing closes at the end of period 5, 1997
(b) Operating Profit for fiscal year 1997 = $22,000,000
Then: Incentive Payment = $1,161,000 (77.4% of $1,500,000)
$339,000 applied in accordance with Section 5.16(c)(iii)(B) and
(C)
Example 2:
Assume: (a) Long-Term Refinancing closes at the end of period 9, 1997
(b) Operating Profit for fiscal year 1997 = $24,000,000
Then: Incentive Payment = $1,458,000 (72.9% of $2,000,000)
$0 applied in accordance with Section 5.16(c)(iii)(B) and (C)
Example 3:
Assume: (a) Long-Term Refinancing closes at the end of period 6, 1997
(b) Operating Profit for fiscal year 1997 = $22,500,000
Then: Incentive Payment = $1,662,000 (83.1% of $2,000,000)
$0 applied in accordance with Section 5.16(c)(iii)(B) and (C)
Example 4:
Assume: (a) Long-Term Refinancing closes at the end of period 11, 1997
(b) Operating Profit for fiscal year 1997 = $20,500,000 or less
Then: Incentive Payment = $0
$1,778,000 applied in accordance with Section 5.16(c)(iii)(B)
and (C)
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ANNEX C
1. Notes. The Notes shall have been duly executed and delivered by
-----
the Borrower to the Lender.
2. Collateral Security. In order to secure the payment of the Loans
-------------------
when due, whether by acceleration or otherwise, and all other Indebtedness of
the Borrower to the Lender arising hereunder or related hereto:
(a) The Borrower shall have duly executed and delivered to the Lender
the Modification of Deed of Trust.
(b) The Borrower shall have furnished the Affirmation of General
Partner Guaranty duly executed and delivered by the General Partner, the
Affirmation of Host Marriott Guaranty duly executed and delivered by Host
Marriott, and the Affirmation of Guaranty, duly executed and delivered by
Marriott International, Inc.
(c) The Borrower shall have furnished the Affirmation of
Subordination and Attornment Agreement, duly executed and delivered by Operating
Tenant and Borrower, affirming, among other things, the subordination of the
Operating Lease to the Deed of Trust.
(d) The Borrower shall have furnished the Affirmation and
Modification of Assignment of Golf Course Lease, duly executed and delivered by
Golf Course B Owner and Borrower.
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(e) The Borrower shall have furnished the Affirmation and
Modification of Subordination Agreement, duly executed and delivered by the
General Partner and Host Marriott.
(f) The Borrower shall furnish the Affirmation of Subordination
Agreement, duly executed and delivered by Marriott International.
(g) The Borrower shall have furnished to the Lender the Affirmation
of Environmental Indemnity Agreement of Host Marriott duly executed and
delivered by Host Marriott.
(h) The Borrower shall have duly executed and delivered such
financing statements as the Lender or its counsel shall require to further
evidence, confirm and perfect the security interests granted or to be granted in
the Deed of Trust, Security Agreement and the other documents provided for
herein.
(i) The Borrower shall have duly executed and delivered such other
and further agreements, documents and instruments as the Lender or its counsel
may reasonably request to further evidence, perfect and preserve any of the
collateral security for the Borrower's obligations provided for herein.
3. Operating Lease. The Borrower and the Operating Tenant shall have
---------------
delivered to the Lender a copy of the Operating Lease, and all amendments
thereto, certified by them to be a true, correct and complete copy thereof.
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4. Golf Course Lease. The Borrower and the Golf Course B Owner shall
-----------------
have delivered to the Lender a copy of the Golf Course Lease, and all amendments
thereto, certified by them to be a true, correct and complete copy thereof.
5. Partnership Documents. The Borrower shall have delivered to the
---------------------
Lender the following: (a) a copy of the agreement of limited partnership of
Borrower, and all amendments thereto, certified by the General Partner to be a
true, correct and complete copy thereof, and copies of certificates of limited
partnership of Borrower, filed or recorded in the appropriate offices in the
State of Delaware and the State of California, each currently certified by the
General Partner to be a true, correct and complete copy thereof (collectively,
"Partnership Documents"), and (b) such other evidence as the Lender shall
require that the Borrower is qualified (to the extent such qualification is
necessary or appropriate) in the State of Delaware and the State of California.
6. General Partner's Corporate Documents. The Borrower shall have
-------------------------------------
delivered to the Lender the following: (a) a current certificate of the
secretary or an assistant secretary of the General Partner, certifying as to (i)
resolutions of the Board of Directors of the General Partner authorizing the
execution, delivery and performance of the Loan Documents and all other
documents or instruments to be executed and delivered by the General Partner
(either individually or on behalf of the Borrower) pursuant to the provisions
thereof; (ii) the full force and effect of such resolutions on such date; and
(iii) the incumbency and signature of each of the officers of the General
Partner signing such documents; (b) the Articles of Incorporation of the General
Partner, currently certified by the Secretary of State of the State of Delaware;
(c) a current good-standing certificate of the General Partner issued
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by the Secretary of State of the State of Delaware; (d) a current good-standing
certificate (or other proof of qualification and good standing satisfactory to
the Lender) evidencing the General Partner's qualification and good standing as
a foreign corporation in the State of California; (e) the bylaws of the General
Partner, currently certified by the secretary or assistant secretary of the
General Partner as being in full force and effect without further amendment or
modification; and (f) such additional supporting documents relating to the
General Partner as the Lender may reasonably request.
7. Operating Tenant's Corporate Documents. The Borrower shall have
--------------------------------------
delivered to the Lender the following: (a) a current certificate of the
secretary or an assistant secretary of the Operating Tenant, certifying as to
(i) resolutions of the Board of Directors of the Operating Tenant authorizing
the execution, delivery and performance of the Loan Documents to which Operating
Tenant is a party and all other documents or instruments to be executed and
delivered by the Operating Tenant (either individually or on behalf of the
Borrower) pursuant to the provisions hereof; (ii) the full force and effect of
such resolutions on such date; and (iii) the incumbency and signature of each of
the officers of the Operating Tenant signing such documents; (b) the Articles of
Incorporation of the Operating Tenant, currently certified by the Secretary of
State of the State of Delaware; (c) a current good-standing certificate of the
Operating Tenant issued by the Secretary of State of the State of Delaware; (d)
a current good-standing certificate (or other proof of qualification and good
standing satisfactory to the Lender) evidencing the Operating Tenant's
qualification and good standing as a foreign corporation in the State of
California; (e) the bylaws of the Operating Tenant, currently certified by the
secretary or assistant secretary of the Operating Tenant as being in full force
and effect without further amendment or modification; and (f) such
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additional supporting documents relating to the Operating Tenant as the Lender
may reasonably request.
8. Host Marriott Corporate Documents. The Borrower shall have
---------------------------------
delivered to the Lender the following: (a) a current certificate of the
secretary or an assistant secretary of Host Marriott, certifying as to the
incumbency and signature of each of the officers of Host Marriott signing such
documents; (b) the Articles of Incorporation of Host Marriott, currently
certified by the Secretary of State of the State of Delaware; (c) a current
good-standing certificate of Host Marriott issued by the Secretary of State of
the State of Delaware; (d) the bylaws of Host Marriott, currently certified by
the secretary or assistant secretary of Host Marriott as being in full force and
effect without further amendment or modification; and (e) such additional
supporting documents relating to Host Marriott as the Lender may reasonably
request.
9. Golf Course B Owner's Corporate Documents. The Borrower shall
-----------------------------------------
have delivered to the Lender the following: (a) a current certificate of the
secretary or an assistant secretary of the Golf Course B Owner, certifying as
to (i) resolutions of the Board of Directors of the Golf Course B Owner
authorizing the execution, delivery and performance of the Golf Course Lease,
the Golf Course Lease Assignment and all other documents or instruments to be
executed and delivered by the Golf Course B Owner pursuant to the provisions
hereof; (ii) the full force and effect of such resolutions; and (iii) the
incumbency and signature of each of the officers of the Golf Course B Owner
signing such documents; (b) the Articles of Incorporation of the Golf Course B
Owner currently certified by the Secretary of State of the State of Delaware;
(c) a current good-standing certificate of the Golf Course B Owner
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issued by the Secretary of State of the State of Delaware; (d) a current good-
standing certificate (or other proof of qualification and good standing
satisfactory to the Lender) evidencing the Golf Course B Owner's qualification
and good standing as a foreign corporation in the State of California; (e) the
bylaws of the Golf Course B Owner, currently certified by the secretary or
assistant secretary of the Golf Course B Owner as being in full force and effect
without further amendment or modification; and (f) such additional supporting
documents relating to the Golf Course B Owner as the Lender may reasonably
request.
10. Marriott International, Inc. Corporate Documents. The Borrower
------------------------------------------------
shall have delivered to the Lender the following: (a) a current certificate of
the secretary or an assistant secretary of the Marriott International,
certifying as to the incumbency and signature of each of the officers of
Marriott International signing such documents; (b) the Articles of Incorporation
of Marriott International currently certified by the Secretary of State of the
State of Delaware; (c) a current good-standing certificate of Marriott
International issued by the Secretary of State of the State of Delaware; (d) the
bylaws of the Marriott International, currently certified by the secretary or
assistant secretary of the Marriott International as being in full force and
effect without further amendment or modification; and (e) such additional
supporting documents relating to Marriott International as the Lender may
reasonably request.
11. Costs. The Borrower shall have paid (a) the Modification Fee,
-----
all intangible taxes and other taxes on the Notes and other similar taxes and
fees, all recording and filing fees and expenses, and all mortgage and stamp
taxes and (b) all appraisal fees, survey fees and expenses, title insurance
premiums and expenses, reasonable fees and expenses of the Lender's counsel and
all other costs and expenses that the Borrower is
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obligated to pay hereunder (including any amounts owed to the Existing Lenders
or their counsel).
12. Financial Statements. The Borrower shall have furnished to the
--------------------
Lender copies of the most current available financial statements of the Borrower
certified by an Authorized Accounting Officer of the General Partner as having
been prepared in accordance with generally accepted accounting principles and
the most current quarterly Financial Statements of Host Marriott.
13. Opinion of Local Counsel. The Lender shall have received from
------------------------
Cox, Castle and Nicholson, local counsel for the Borrower and the Marriott
Entities, an opinion reasonably satisfactory to Lender addressed to the Lender
and dated as of the date of the execution and delivery hereof, covering such
matters incident to the transactions herein contemplated as the Lender may
reasonably request.
14. Opinion of Counsel to Host Marriott. The Lender shall have
-----------------------------------
received from Christopher Townsend, counsel for the Borrower, General Partner
and Host Marriott, an opinion reasonably satisfactory to Lender addressed to the
Lender and dated on or after the date hereof, covering such matters incident to
the transactions herein contemplated as the Lender may reasonably request.
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15. Opinion of Counsel to Marriott International. The Lender shall
--------------------------------------------
have received from counsel for Marriott International, Operating Tenant and Golf
Course B Owner, an opinion reasonably satisfactory to Lender addressed to the
Lender and dated on or after the date hereof, covering such matters incident to
the transactions herein contemplated as the Lender may reasonably request.
16. Certificate Of Occupancy. The Borrower shall have furnished to
------------------------
Lender copies of a certificate of occupancy and of all other certificates,
licenses and permits necessary or appropriate for the full and complete
operation of the Improvements, issued by the Governmental Authorities having
jurisdiction over such matters.
17. Recording. The Modification of Deed of Trust shall have been
---------
recorded in the appropriate recording office in the jurisdiction in which the
Property is located, and such financing statements and other documents provided
for hereinabove shall have been filed in the appropriate filing offices;
provided that such recordation may be effected after the execution and delivery
hereof if Borrower shall have made provision for such recordation in a manner
satisfactory to Lender.
18. Title Insurance. There shall have been issued by the Title
---------------
Insurer to the Lender a policy of title insurance, which policy shall be dated
and effective as of the date hereof. Such policy shall insure in favor of Lender
the Lien of the Deed of Trust with respect to the Property (including the
leasehold estate under the Golf Course Lease), subject only to such exceptions,
and otherwise in form and substance, satisfactory to the Lender and the Lender's
counsel. Without limitation of the foregoing, the title insurance policy, as so
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endorsed, shall contain the following endorsements: (a) a "long-form" (3.1)
zoning endorsement; (b) a "doing business" endorsement; (c) a usury endorsement
(specifically referring to the usury laws of California); (d) a "comprehensive"
or other similar endorsement insuring that there are no encroachments affecting
the Property and that the Property is in compliance with all covenants,
conditions and restrictions of record; (e) a variable rate endorsement; (f) a
location endorsement; (g) a contiguity endorsement; (h) a Subdivision Map Act
endorsement; and (i) such other endorsements as the Lender may reasonably
require.
19. UCC Searches. The Lender shall have received advice from the
------------
Title Insurer or other source satisfactory to the Lender to the effect that a
search of the applicable public records of the States of Maryland and California
discloses no conditional sales contracts, chattel mortgages, leases of
personalty, financing statements or title retention agreements filed and/or
recorded against or with respect to Borrower or the Property or in respect of
any other property interests covered, or to be covered, by the Liens referred to
hereinabove, except (a) those granted to the Lender pursuant to the Security
Documents, (b) matters that, in the judgment of the Lender, do not adversely
affect the Borrower, the Property or the Lenders and (c) as otherwise permitted
hereunder.
20. Survey. The Borrower shall have furnished to the Lender a
------
current survey or surveys of the Property (including Golf Course B) and all
other properties subject to an easement in favor thereof, by a registered
surveyor satisfactory to the Lender, in form and content satisfactory to the
Lender and the Title Insurer, and certified to said parties as having been
prepared in accordance with American Land Title Association land survey
standards, showing (a) the legal description, (b) boundaries, established
building setback lines,
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if any, and the location of the Improvements as being within the boundaries of
the Land and any established recorded or zoning setback lines, (c) no
encroachments by any structures on adjoining property over the Land, and (d) no
other state of facts which, in the judgment of the Lender or the Lender's
counsel, would render title to the Property unmarketable or diminish the value
of the Property in any material respect.
21. Evidence of Insurance. The Lender shall have received original
---------------------
insurance certificates, original policies of insurance or certified true copies
of insurance policies evidencing hazard, liability, worker's compensation, flood
and other insurance in form, amount and with such coverages as are required in
the Loan Documents, naming the Lender (and Goldman Sachs Mortgage Company) as
insured interests for liability insurance, and naming the Lender as mortgagee
and loss payee for other insurance as required in the Loan Documents. If the
Property is not in a 100-year flood plain zone, the Borrower shall have
furnished evidence thereof satisfactory to the Lender.
22. Compliance, Access, Utilities. The Borrower shall have
-----------------------------
established to the satisfaction of the Lender that: (a) all required zoning,
planning, environmental and building code approvals relating to the acquisition,
construction and operation of the Property have been obtained and that the
Property conforms to and is permitted by all Laws; (b)all utility services
necessary for the use and operation of the Property are available and in
operation; and (c) the Borrower or the Golf Course B Owner has also obtained all
appropriate rights and easements to insure the availability of ingress and
egress to the Property from public highways.
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23. Estoppel Certificate from Operating Tenant. The Borrower shall
------------------------------------------
have delivered to the Lender an estoppel certificate, in form and substance
satisfactory to the Lender, duly executed and delivered by the Operating Tenant.
24. Estoppel Certificate from Golf Course B Owner. The Borrower
---------------------------------------------
shall have delivered to the Lender an estoppel certificate, in form and
substance satisfactory to the Lender, duly executed and delivered by the Golf
Course B Owner.
25. Additional Documents. The Borrower shall have furnished to the
--------------------
Lender copies of such other documents relating to the transactions contemplated
herein as the Lender may reasonably request.
26. No Default. There shall exist no Event of Default and no
----------
Potential Default.
27. Representations and Warranties. All representations and
------------------------------
warranties contained herein or in the other Loan Documents shall be true and
correct in all material respects, with the same force and effect as if made on
and as of the date hereof.
The execution and delivery of the Notes shall constitute a
representation and warranty by the Borrower to the Lender that all of the
conditions to the Lender's acquisition and modification of the Loan that are
specified in this Annex and elsewhere in the Loan Documents have been satisfied
as of the date hereof.
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