Exhibit 10.2
FINAL EXECUTED
LOAN AGREEMENT
between
SANTA CLARA MARRIOTT HOTEL LIMITED PARTNERSHIP
and
NOMURA ASSET CAPITAL CORPORATION
Dated as of September 23, 1996
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS....................................................................2
Section 1.1 Definitions.........................................2
ARTICLE II
PROVISIONS CONCERNING THE ACCOUNTS AND PLEDGED PROPERTY.......................18
Section 2.1 Cash Management Procedures.........................18
Section 2.2 Right to Contest...................................18
Section 2.3 Defeasance.........................................19
Section 2.4 Sale of the SC Property and all of the MHP
Properties.........................................23
Section 2.5 Change of Control..................................24
Section 2.6 Release after the Optional Prepayment Date.........24
ARTICLE III
PAYMENTS......................................................................26
Section 3.1 Payments on the SC Note............................26
Section 3.2 Interest Rate......................................26
Section 3.3 Payments without Deduction, etc....................26
Section 3.4 Periodic Payments..................................26
ARTICLE IV
DEFAULT; REMEDIES; ENFORCEMENT................................................27
Section 4.1A Events of Default..................................27
Section 4.1B Event of Default Cure..............................30
Section 4.2 Remedies...........................................31
Section 4.3 Remedies Cumulative; Delay or Omission Not a
Waiver.............................................32
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS.....................................32
Section 5.1 Representations and Warranties of SC...............32
Section 5.2 Affirmative Covenants..............................40
Section 5.3 Negative Covenants.................................45
Section 5.4 Further Assurances.................................48
Section 5.5 Representations, Warranties and Covenants of NACC..49
Section 5.6 Other..............................................49
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ARTICLE VI
SECURITIZATION................................................................51
Section 6.1 Securitization.....................................51
ARTICLE VII
PAYMENT OF FEES AND EXPENSES; INDEMNIFICATION.................................53
Section 7.1 Fees and Expenses..................................53
Section 7.2 Indemnification....................................54
ARTICLE VIII
IMMUNITY......................................................................56
Section 8.1 Partners, Employees and Agents of SC Immune from
Liability..........................................56
ARTICLE IX
MISCELLANEOUS PROVISIONS......................................................56
Section 9.1 Notices............................................56
Section 9.2 Benefit of Agreement...............................57
Section 9.3 Governing Law......................................58
Section 9.4 Counterparts.......................................58
Section 9.5 Table of Contents, Descriptive Headings............58
Section 9.6 Amendment or Waiver; Integration...................58
Section 9.7 Survival of Representations and Warranties;
Reliance...........................................58
Section 9.8 Returned Payments..................................59
Section 9.9 Jurisdiction and Service; Waiver of Jury Trial.....59
Section 9.10 Enforceability.....................................60
Section 9.11 Conflicting Terms..................................60
Section 9.12 Relationship of Parties............................60
Exhibit A - ADA Compliance Work and Deferred Maintenance
and Other Work
Exhibit B - Cash Management Procedures
Exhibit C - Environmental Remediation Work
Exhibit D - Permitted Investments
Exhibit E - Release Price
Exhibit F - Organizational Structure of SC
Exhibit G - Operating Budget
Exhibit H - Capital Budget
Exhibit I - Financial Statements
Exhibit J - Omitted
Schedule 1 - Disclosure Schedule
Schedule 2 - Ground Lease
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LOAN AGREEMENT, dated as of September 23, 1996, between Santa Clara
Marriott Hotel Limited Partnership, a Delaware limited partnership ("SC"), and
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Nomura Asset Capital Corporation ("NACC") (together with its assigns and
successors, the "Lender").
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W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, SC wishes to obtain a loan (the "SC Loan") from the Lender in
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the principal amount of Forty Three Million Five Hundred Thousand Dollars
($43,500,000) to, among other things, (i) satisfy all existing debt secured by
the SC Property (as hereinafter defined) and (ii) to the extent of any remaining
proceeds, (a) provide initial funding for reserves for deferred maintenance,
environmental remediation, compliance with the Americans With Disabilities Act
of 1990, replacement of furniture, fixtures and equipment and capital
improvements, (b) pay the costs of completing the transactions contemplated
hereby, (c) provide working capital to SC and (d) for such other purposes as SC
shall deem necessary or desirable, and the Lender is willing to make the SC Loan
on the terms and conditions hereinafter set forth;
WHEREAS, the SC Loan is to be evidenced by the SC Note (as hereinafter
defined) and secured by, inter alia, the SC Mortgage (as hereinafter de fined);
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WHEREAS, on the date hereof the Lender has made a loan (the "MHP Loan")
to Marriott Hotel Properties II Limited Partnership, a Delaware limited
partnership ("MHP"), evidenced by the MHP Notes (as hereinafter defined) and
secured by, inter alia, the MHP Mortgages (as hereinafter de fined); and
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WHEREAS, SC and the Lender intend that (a) the SC Property shall be
collateral for the SC Loan and that the SC Property (as hereinafter defined)
shall not be collateral for the MHP Loan and (b) an "Event of Default" under the
SC Loan shall be an "MHP Event of Default" under the MHP Loan and an "MHP Event
of Default" under the MHP Loan shall be an "Event of Default" under the SC Loan;
NOW, THEREFORE, in consideration of the above-mentioned premises and
the agreements, representations and warranties hereafter set forth, SC and the
Lender agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. For all purposes of this Agreement, except as
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otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Section have the meanings assigned to
them in this Section, and include the plural as well as the singular;
(b) the words "herein," "hereof," "hereto" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision;
(c) all references to any agreement or instrument shall be to that
agreement or instrument as in effect from time to time, including any
amendments, consolidations, replacements, restatements, modifications and
supplements thereto;
(d) all terms defined in this Section with reference to the Cash
Management Procedures shall continue in effect after the termination of such
Cash Management Procedures in accordance with the terms thereof;
(e) all references to "Section(s)" and "Exhibit(s)" shall mean the
Section(s) of and Exhibit(s) annexed to this Agreement unless expressly stated
to be Section(s) or Exhibit(s) of the Cash Management Procedures; and
(f) certain terms defined in this Section appear only in this Agreement
and not in the Cash Management Procedures.
"Accounting Period" means, initially, each accounting period of four
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consecutive weeks having the same beginning and ending dates as the Manager's
corresponding four week accounting periods, except that the last Accounting
Period in a Fiscal Year may be longer than four consecutive weeks when and to
the extent necessary to conform the accounting system to the calendar, or if the
accounting year on the basis of which the SC Property is operated is changed to
a calendar year or a conventional 365-day fiscal year, "Accounting Period" shall
mean each calendar month in such fiscal year.
"Accounting Quarter" means, initially, three (or, in the case of the
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last Accounting Quarter in any Fiscal Year, four) consecutive Accounting
Periods, ending on the last day of the third, sixth, ninth and last Accounting
Period in each Fiscal Year, or, if the accounting year on the basis of which the
SC Property is operated is changed to a calendar year or a conventional 365-day
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fiscal year, "Accounting Quarter" shall mean each of the fiscal quarters in such
fiscal year (i.e., there shall be four consecutive Accounting Quarters of three
months each).
"Action" means any action, suit, claim, arbitration, governmental
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investigation or other proceeding.
"ADA Compliance Work" means repairs, improvements and replacements to
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the SC Property to be made to comply with the Americans with Disabilities Act of
1990, as amended from time to time, in the amounts more particularly described
on Exhibit A annexed hereto.
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"Additional Capital Expenditures" has the meaning set forth in Section
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8.3 of the Cash Management Procedures.
"Adjusted Rate" means the rate determined on the Optional Prepayment
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Date and on each anniversary thereof as the greater of (xx) 10.22% and (yy) the
yield, calculated by linear interpolation (rounded to three decimal places), of
the yields of United States Treasury Constant Maturities with the terms (one
longer and one shorter) most nearly approximating those of U.S. Obligations
having maturities as close as possible to the tenth anniversary of the Optional
Prepayment Date, as determined by the Lender on the basis of Federal Reserve
Statistical Release H.15-Selected Interest Rates under the heading U.S.
Governmental Security/Treasury Constant Maturities, or other recognized source
of financial market information selected by the Lender in each case on the last
Business Day of the week immediately prior to the Optional Prepayment Date and
each subsequent anniversary thereof, as the case may be plus 3.52% per annum.
"Affiliate" means, with respect to any Person, any individual,
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corporation, partnership, limited liability company, trust or other entity of
whatever nature which controls, is controlled by or is under common control
with, such Person, including, without limitation, (a) any officer or director
of any of the foregoing and (b) any partner, member or shareholder that controls
any of the foregoing, and "control" shall mean ownership of more than
twenty-five percent (25%) of all of the voting stock of a corporation or more
than twenty-five percent (25%) of all of the legal and beneficial interests in
any other entity or the possession of the power, directly or indirectly, to
direct or cause the direction of the management and policy of a corporation or
other entity, whether through the ownership of voting securities, common
directors or officers, the contractual right to manage the business affairs of
such entity, or otherwise.
"Agreement" means this Loan Agreement.
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"Annual Plan" has the meaning set forth in Section 5.2(d)(vi).
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"Bankruptcy Custodian" has the meaning set forth in Section 4.1A(g)(A).
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"Base Rate" means 8.22% per annum.
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"Base Rate Interest" means interest on the SC Note at the Base Rate or
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the Default Rate, as applicable, then due and payable for the applicable Debt
Service Period.
"Best Knowledge" means with respect to any provision, knowledge of
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information obtained by SC or any officer or director of the General Partner.
"Business Day" means a day on which banks and foreign exchange markets
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are open for business in New York, New York.
"Capital Budget" has the meaning set forth in Section 5.2(d)(vi).
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"Capital Expenditure and FF&E Reserve Account" means the account
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established pursuant to Section 8.1 of the Cash Management Procedures.
"Capital and FF&E Expenditures" means the expenditures of amounts for
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the purpose of the Repairs and Equipment Reserve, as such term in defined in the
Management Agreement.
"Cash Collateral Account" means the account established and held by the
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Servicer pursuant to Section 4.1 of the Cash Management Procedures.
"Cash Management Procedures" means the provisions of Exhibit B.
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"Change of Control" means any transfer of (i) an equity interest in the
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General Partner, (ii) the General Partner's interest in SC or (iii) any interest
of a limited partner in SC such that as a result of such transfer and any other
transfers of limited partnership interests prior to the date of determination,
(A) Host Marriott, directly or indirectly, holds less than 50% of the limited
partnership interests in SC or (B) an entity other than HMH holds more than 49%
of such limited partnership interests.
"Closing Date" means the date of execution and delivery of this
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Agreement.
"Condemnation Proceeds" has the meaning set forth in the SC Mortgage.
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"CPI Percentage" means the percentage by which the "Consumer Price
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Index for All Urban Consumers (CPI-U); U.S. City Average, 1982-84 = 100, All
Items" (or appropriate substitute index if such
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index is no longer published) (the "CPI") for November of the preceding Fiscal
Year exceeds the CPI for August 1996.
"DCR" means Duff & Phelps Credit Rating Co.
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"Debt Service Coverage Ratio" means, as of any given date, the ratio of
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(i) Net Operating Income for the 13 full Accounting Periods for which financial
statements are required to be furnished to the Lender pursuant to Section
5.2(d)(ii) immediately preceding the date of calculation (or 12 Accounting
Periods in the case of a calendar year or 365 day Fiscal Year) to (ii) Debt
Service Expense in respect of the 13 full Accounting Periods next succeeding
such date (or 12 Accounting Periods in the case of a calendar year or 365 day
Fiscal Year).
"Debt Service Expense" means, in respect of any fiscal period, the
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aggregate amount of scheduled interest and principal payable on (i) the SC Note,
(ii) Subordinate Debt and (iii) Indebtedness covered by Purchase Money Security
Interests for such period. For the purpose of the calculation of Debt Service
Expense for any period subsequent to the Optional Prepayment Date, the amount
set forth in clause (i) above shall be computed based on the Monthly Debt
Service Payment.
"Debt Service Payment Date" means the 11th day of each calendar month
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or the next Business Day immediately thereafter.
"Debt Service Period" means the period from and including the eleventh
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(11th) day of the calendar month immediately preceding each Debt Service Payment
Date to and including the tenth (10th) day of the calendar month in which such
Debt Service Payment Date occurs.
"Debt Service Reserve Account" has the meaning set forth in Section 5.1
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of the Cash Management Procedures.
"Default Rate" means a rate per annum equal to the lesser of (aa) two
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percent (2%) above the Base Rate or Adjusted Rate, as applicable, and (bb) the
maximum rate allowed by law.
"Defeasance Collateral" has the meaning set forth in Section
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2.3(a)(iv)(A).
"Defeasance Debt Service Coverage Ratio" has the meaning set forth in
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Section 2.3(f).
"Defeasance Deposit" has the meaning set forth in Section 2.3(f).
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"Defeasance Security Agreement" has the meaning set forth in Section
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2.3(a)(iv)(A).
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"Deferred Maintenance and Other Work" means the repairs, improvements
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and replacements to the SC Property in the amounts more particularly described
on Exhibit A hereto.
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"Disclosure Schedule means the schedule annexed hereto as Schedule 1.
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"Eligible Account" means either (i) an account maintained with a
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federal or state chartered depository institution or trust company, (a) if the
funds therein are to be retained for more than 30 days, the long-term unsecured
debt obligations of which (or, in the case of a depository institution or trust
company that is the principal subsidiary of a holding company, the long-term
unsecured debt obligations of the holding company of which) are rated by each
Rating Agency in one of its two highest rating categories (or such other ratings
as will not result in the rating of any of the Securities being reduced below
their respective ratings on the date determination is to be made and as to which
the Rating Agencies may otherwise agree) at the time of the deposit therein, or
(b) if the funds therein are to be retained for less than 30 days, the
short-term unsecured debt obligations of such depository institution or trust
company (or, in the case of a depository institution or trust company that is
the principal subsidiary of a holding company, the long-term unsecured debt
obligations of the holding company of which), as the case may be, are rated not
lower than A-1+ by S&P or the equivalent rating of the other Rating Agencies, or
(ii) a segregated trust account maintained with the trust department of a
federal or state chartered depository institution or trust company acting in its
fiduciary capacity provided that such account is subject to fiduciary funds on
deposit regulations (or internal guidelines) substantially similar to 12 C.F.R.
ss.9.10(b), or (iii) after the Securitization, an account in any other insured
depository institution reasonably acceptable to the Servicer and the Trustee, so
long as prior to the establishment of an account in any such other depository
institution each of the Rating Agencies shall have delivered a Rating Comfort
Letter with respect thereto.
"Emergency Expenditures" means expenditures arising in the event of an
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emergency arising out of a fire or other casualty at a Hotel, or other events,
circumstances or conditions which give rise to safety or life threatening
situations, to the extent such expenditures are necessary to protect the safety
or welfare of guests and employees or to protect against further property damage
to the Hotel.
"Entities" has the meaning set forth in Section 6.1(b).
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"Environmental Indemnity Agreement" means the environmental indemnity
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agreement, dated the Closing Date, from SC to NACC.
"Environmental Remediation Work" means the actions taken with respect
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to the SC Property set forth on Exhibit C.
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"Equipment Leases" means, with respect to each SC Property, the leases
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of furniture, fixtures and equipment used in connection with the SC Property.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
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amended from time to time, and the rules and regulations promulgated
thereunder.
"ERISA Affiliate" means all members of a controlled group of
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corporations and all trades and businesses (whether or not incorporated) under
common control and all other entities which, together with SC, are treated as a
single employer under any or all of Sections 414(b), (c), (m) or (o) of the IRC.
"Event of Default" has the meaning set forth in Section 4.1A.
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"Expense Deposit" has the meaning set forth in Section 7.1(c).
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"Fiscal Year" means January 1 of each year through and including
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December 31 of such year except that, for purposes of calculating the Debt
Service Coverage Ratio or any other calculation requiring reference to Gross
Revenues, Net Operating Income or other amounts calculated with reference to the
Accounting Periods, "Fiscal Year" shall mean the fiscal year of the Manager, as
defined in the Management Agreement.
"GAAP" means generally accepted accounting principles in the United
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States of America (as such principles may change from time to time) applied on a
consistent basis (except for changes in application in which SC's independent
certified public accountants concur), both as to classification of items and
amounts.
"General Partner" means Marriott MHP Two Corporation, a Delaware
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corporation.
"Governmental Authority" means any court, agency, authority, board
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(including, without limitation, environmental protection, planning and zoning)
bureau, commission, department, office or instrumentality of any nature
whatsoever of any governmental or quasi-governmental unit of the United States
or the state, county or city where each SC Property is located or any political
subdivision of any of the foregoing, whether now or hereafter in existence, or
any officer or official thereof, having jurisdiction over SC or the General
Partner or any of the SC Property or any portion thereof.
"Grant" means to issue, grant, sell, remise, convey, assign, and/or
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transfer.
"Gross Revenues" means, for any period, all revenues and receipts of
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every kind derived from or otherwise relating to the SC Property and all
departments and parts thereof during such period,
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including, but not limited to: income (from both cash and credit transactions)
from rental of rooms, stores, offices, exhibit or sales space of every kind;
license, lease and concession fees and rentals (not including gross receipts of
licensees, lessees and concessionaires); income from vending machines; health
club membership fees; food and beverage sales; wholesale and retail sales of
merchandise, service charges, and proceeds, if any, from business interruption
or other loss of income insurance; excluding, however, (i) gratuities to
employees of the Hotels, (ii) federal, state or municipal use, sales or use
taxes or similar Impositions collected directly from patrons or guests or
included as part of the sales price of any goods or services; (but only to the
extent such gratuities and taxes are not included in Management Expenses), (iii)
net Condemnation Proceeds, (iv) receipts of Tenants (as defined in the SC
Mortgage), if any, not an Affiliate of SC (except to the extent paid to SC as
rent, percentage rents or otherwise), (v) sums and credits received in
settlement of claims for loss or damage to property, (vi) income from the sale
of furnishings, fixtures or equipment, (vii) Insurance Proceeds, (viii) charges
or payments collected from patrons or guests for telephone, telegraph or other
communication systems that are remitted to the provider thereof, (ix) proceeds
from the sale or refinancing of the SC Property and (x) any refunds, rebates,
discounts and credits of a similar nature, given, paid or returned in the course
of obtaining Gross Revenues or components thereof.
"Ground Lease" means the lease described in Schedule 2 hereto relating
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to the SC Property as the same may be amended, modified, supplemented or
replaced from time to time in compliance with the Transaction Documents.
"Ground Rent" means the rental payments payable under the Ground Lease.
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"Ground Rent Reserve Account" has the meaning set forth in Section 5.2
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of the Cash Management Procedures.
"HMH" means HMH Properties, Inc.
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"HMH SC Debt Service Advance" has the meaning attributable to such term
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in Section 4.3 of the Cash Management Procedures.
"Host Marriott" means Host Marriott Corporation, a Delaware
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corporation.
"Hotel" means the hotel and the hotel operations located at the SC
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Property.
"Hotel Expansion" has the meaning set forth in Section 5.6(c).
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"Impositions" has the meaning set forth in the SC Mortgage.
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"Indebtedness" means for any Person (a) obligations for borrowed money
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(including, without limitation, the SC Debt), (b) obligations under letters of
credit, (c) obligations relating to Purchase Money Security Interests, (d)
obligations, whether or not assumed, secured by Liens or payable out of the
proceeds or production from property now owned by such Person, (e) obligations
for trade credit or acceptances incurred in the ordinary course of business
which are 60 days past due, and (f) obligations of another Person of the type
set forth in clauses (a) through (e) above which such Person has guaranteed or
in respect of which such Person is liable, contingently or otherwise,
including, without limitation, by way of agreement to purchase property or
services, to provide funds to or other wise invest in such other Person, or
otherwise to assure a creditor of such other Person against loss.
"Indemnified Parties" shall have the meaning set forth in Section
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7.2(a).
"Independent Director" means a person who is not, and has not within
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the past five years been, (i) an officer, director, employee, partner,
stockholder or beneficial-interest holder of the General Partner or SC; (ii) an
officer, director, employee, partner, member, beneficial-interest holder or
stockholder of any Affiliate (as defined below) of the General Partner or SC;
(iii) a customer or supplier of SC or any Affiliate thereof (other than a hotel
guest or a customer or supplier that does not derive more than 10% of its
revenues from its activities with SC or any Affiliate thereof); or (iv) a
spouse, parent, sibling, or child of any person described in (i), (ii), or
(iii); provided, however, that a person shall not be deemed to be a director of
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an Affiliate solely by reason of such person being a director of a
single-purpose entity. For the purpose of this definition alone, "Affiliate"
means any person or entity other than the General Partner (i) which owns
beneficially, directly or indirectly, more than 10 percent of the outstanding
shares of the common stock of the General Partner or which is otherwise in
control of the General Partner, (ii) of which more than 10% of the outstanding
voting securities are owned beneficially, directly or indirectly, by any person
or entity described in clause (i) above, or (iii) which is controlled by, or
under common control with, any person or entity described in clause (i) above;
the terms "control" and "controlled by" shall have the meanings assigned to them
in Rule 405 under the Securities Act of 1933.
"Individual Material Adverse Effect" means a material adverse effect on
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the condition (financial or otherwise), business, prospects, assets,
liabilities, management, financial position or results of operations of the SC
Property.
"Initial Debt Service Coverage Ratio" means 1.7:1.
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"Insolvency Law" has the meaning set forth in Section
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4.1A(g)(A).
"Insurance Proceeds" has the meaning set forth in the SC Mortgage.
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"Insurance Requirements" means all terms of any insurance policy
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required by the SC Mortgage covering or applicable to the SC Property or any
part thereof and all requirements of the insurance carrier, all as more fully
described in the SC Mortgage.
"IRC" means the Internal Revenue Code of 1986, as amended from time to
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time, and the rules and regulations promulgated thereunder, or any successor
statute(s).
"Leases" means the respective written or unwritten agreements pursuant
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to which lessees, tenants or other third parties are occupying any portion of
the SC Property excluding, however, the letting of rooms and other facilities to
hotel guests in the ordinary course of business.
"Legal Requirements" has the meaning set forth in the SC Mortgage.
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"Lender" means Nomura Asset Capital Corporation and its assigns and
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successors.
"Lien" means any security interest, mortgage, pledge, lien, restriction
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on transferability, claim, charge, encumbrance, title retention agreement or
analogous instrument, in, of or on the SC Property.
"Local Account" has the meaning set forth in Section 7.3.2 of the Cash
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Management Procedures.
"Lockbox Account" has the meaning set forth in Section 7.2.2 of the
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Cash Management Procedures.
"Lockbox Event" has the meaning set forth in Section 7 of the Cash
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Management Procedures.
"Lockbox Period" has the meaning set forth in Section 7 of the Cash
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Management Procedures.
"Management Agreement" means the Management Agreement, operative as of
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March 21, 1989 by SC, the Manager (successor to the former Marriott Hotels,
Inc.) and Marriott Corporation with respect to the SC Property, as amended by an
amendment, dated the Closing Date, and by the Modification, Subordination and
Non-Disturbance Agreement, Estoppel, Assignment and Consent, dated as of the
Closing Date, among the Manager, SC and the Lender, and any other management
agreement entered into by SC as required or permitted herein.
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"Management Expenses" means (a) the cost of sales including salaries,
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wages (including accruals for year-end bonuses to key management employees),
fringe benefits, payroll taxes and other costs related to Hotel employees; (b)
departmental expenses, administrative and general expenses and the cost of hotel
marketing, advertising and business promotion expenses, heat, light and power,
and routine repairs, maintenance and minor alterations treated as Deductions
under Section 8.01 of the Management Agreement; (c) the cost of Inventories and
Fixed Asset Supplies (as such terms are defined in the Management Agreement)
consumed in the operation of the Hotel; (d) a reasonable reserve for
uncollectible accounts receivable as determined by the Manager; (e) all costs
and fees of independent accountants or other third parties who perform services
required or permitted hereunder; (f) the cost and expense of technical
consultants and operational experts, including Affiliates of the Manager, for
specialized services in connection with non-routine Hotel work; (g) the Base
Management Fee under Section 5.01 of the Management Agreement; (h) the Hotel's
pro rata share of costs and expenses incurred by the Manager in providing Chain
Services (as defined in the Management Agreement); (i) insurance costs and
expenses under Sections 12.02, 12.03 and 12.05 of the Management Agreement; (j)
any amounts transferred into the Repairs and Equipment Reserve under Section
8.02B of the Management Agreement; (k) taxes, if any, payable by or assessed
against the Manager related to the Management Agreement or to the Manager's
operation of the Hotel (exclusive of the Manager's income taxes) including any
Impositions; (l) rent payable under any telephone or equipment leases; and (m)
such other costs and expenses as are specifically provided for as Deductions in
the Management Agreement or are otherwise reasonable necessary for the proper
and efficient operation of the Hotel.
"Manager" means Marriott Hotel Services, Inc. or any property manager
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appointed as permitted herein.
"Manager's Account" has the meaning set forth in Section 1.1 of the
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Cash Management Procedures.
"Material Adverse Effect" means a material adverse effect on (a) SC's
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ability to enter into or fulfill its material obligations under the Transaction
Documents or to effect the transactions contemplated thereby or (b) a material
adverse effect on the condition (financial or other wise), business, prospects,
assets, liabilities, management, financial position or results of operations
of SC or the SC Property.
"Maturity Date" shall mean the earliest to occur of (1) October 11,
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2017 or (2) such date to which the maturity of the SC Debt may be accelerated
upon an Event of Default or as otherwise provided in any Transaction Document.
"MHP" means Marriott Hotel Properties II Limited Partnership.
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"MHP Cash Collateral Account" has the meaning attributed to "Cash
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Collateral Account" in the MHP Loan Agreement.
"MHP Cash Management Procedures" has the meaning attributed to "Cash
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Management Procedures" in the MHP Loan Agreement.
"MHP Debt" means the obligations of MHP under the MHP Transaction
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Documents, together with all interest thereon, and all other sums, including,
without limitation, fees, expenses, commissions, premiums and indemnities, which
may or shall become due under any of the MHP Transaction Documents, including
the costs and expenses of enforcing any provision thereof that may be
reimbursable thereunder.
"MHP Debt Service Expense" has the meaning attributed to "Debt Service
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Expense" in the MHP Loan Agreement.
"MHP Event of Default" has the meaning attributed to "Event of Default"
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in the MHP Loan Agreement.
"MHP Loan" means the loan evidenced by the MHP Notes.
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"MHP Loan Agreement" means the Loan Agreement, dated as of the date
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hereof, between MHP and the Lender.
"MHP Mortgage(s)" means, with regard to each MHP Property, the
---------------
mortgage, deed of trust or other security instrument creating a first mortgage
lien on such MHP Property, dated as of the Closing Date, from MHP to or for the
benefit of the Lender.
"MHP Net Operating Income" has the meaning attributed to "Net Operating
------------------------
Income" in the MHP Loan Agreement.
"MHP Notes" means those certain Secured Promissory Notes, dated the
---------
Closing Date, from MHP to the Lender in the principal amounts of $195,405,904
and $27,094,096, respectively.
"MHP Principal Payments" has the meaning attributed to "Principal
----------------------
Payments" in the MHP Loan Agreement.
"MHP Properties" has the meaning set forth in the MHP Loan Agreement.
--------------
"MHP Security Documents" has the meaning attributed to "Security
----------------------
Documents" in the MHP Loan Agreement.
"MHP Share" has the meaning set forth in Section 4.3(H) of the Cash
---------
Management Procedures.
"MHP Transaction Documents" has the meaning attributed to "Transaction
-------------------------
Documents" in the MHP Loan Agreement.
12
"MII" means Marriott International, Inc., a Delaware corporation.
---
"MII Cash Management Conditions" means the following conditions: (i)
------------------------------
the SC Property is managed by a manager under the Management Agreement and (ii)
the Manager is MII or a wholly owned, direct or indirect, subsidiary of MII.
"MII Debt" has the meaning set forth in Section 6 of the Cash
--------
Management Procedures.
"Monthly Debt Service Payment" has the meaning set forth in Section
----------------------------
4.3(B)(i) of the Cash Management Procedures, as modified by Section 12.6 of the
Cash Management Procedures.
"NACC" means Nomura Asset Capital Corporation.
----
"Net Operating Income" means, in respect of any fiscal period, Gross
--------------------
Revenues less the sum of, without duplication, (A) Management Expenses and (B)
any Ground Rent, Impositions or insurance premiums paid or reserved for payment
with respect to the SC Property.
"Non-Recourse" means, with respect to the SC Debt, that the SC Debt is
------------
limited in recourse solely to the Pledged Property and is not guaranteed
directly or indirectly by any Partner or the Manager and no Partner or the
Manager or any shareholder, member, director, officer, employee or agent of any
Partner or the Manager, either directly or indirectly, shall be personally
liable in any respect (except to the extent of their respective interests in the
Pledged Property) for (i) the payment of any SC Debt, (ii) the performance of
any covenant or obligation under any Transaction Document or (iii) monetary
damages for the breach of performance of any covenant or obligation contained in
any Transaction Document; provided, however, that in the event of any fraud,
-------- -------
material misrepresentation or misappropriation of funds under any Transaction
Document or under any Management Agreement, nothing herein or in such other
documents shall estop the Lender from prosecuting an Action against the party or
parties committing such fraud, misappropriation or material misrepresentation,
or the recipient or beneficiary of such fraud, material misrepresentation or
misappropriation, whether or not such party, recipient or beneficiary is SC or
a Partner or the Manager, to the extent of losses relating to or arising from
such fraud, material misrepresentation or misappropriation of funds under any
Transaction Document; provided, further, that SC's obligations in respect of the
-------- -------
Environmental Indemnity Agreement and the covenants, indemnities,
representations and warranties relating to environ mental matters contained in
any Transaction Document shall not be Non-Recourse to SC (but shall be Non-
Recourse to its Partners other than the General Partner). The foregoing
provisions shall not (a) prevent recourse to the Pledged Property or constitute
a waiver, re lease or discharge of any SC Debt, and the same shall continue
13
until paid or discharged, (b) limit the right of any Person, if required by
applicable law, to name SC or any successor or assign of SC as a party defendant
in any Action in the exercise of any remedy under any Transaction Document, so
long as no judgment seeking the performance of any act requiring the
expenditure of money shall be sought against SC or any such successor or assign
and so long as any monetary judgment seeking the expenditure of money is payable
only from the Pledged Property or (c) impair any right of the Lender to obtain a
deficiency judgement against SC or any such successor or assign in any Action
where necessary as a matter of law to preserve the rights and remedies of the
Lender against the Pledged Property, provided that such deficiency judgment may
only be enforced against the Pledged Property. Notwithstanding the foregoing,
under no circumstances shall the SC Debt be recourse to any limited partner of
SC in its capacity as such.
"NSI" has the meaning set forth in Section 7.1(a).
---
"Officer's Certificate" means a certificate signed by any officer of
---------------------
the General Partner who is authorized to act hereunder on behalf of SC.
"Operating Account" has the meaning set forth in Section 7.9 of the
-----------------
Cash Management Procedures.
"Operating Budget" has the meaning set forth in Section 5.2(d)(vi).
----------------
"Operating Profit" has the meaning set forth in the Management
----------------
Agreement.
"Operating Profit Payment Date" means the last Business Day of the
-----------------------------
third week in each Accounting Period.
"Operational Agreements" means the Management Agreement, the SC
----------------------
Property Agreements, the Equipment Leases, the Ground Lease, the Leases, if any,
and any assignments and assumption agreements or other agreement related
thereto.
"Optional Prepayment Date" means October 11, 2007.
------------------------
"Partners" means the limited partners of SC as constituted from time to
--------
time and the General Partner, in their capacities as such.
"Permits" means all permits, licenses, certificates, approvals,
-------
authorizations and other documents necessary for the construction, use,
operation or maintenance of the Hotel and the SC Property.
"Permitted Exceptions" has the meaning set forth in the SC
--------------------
14
Mortgage.
"Permitted Investments" has the meaning set forth in Exhibit D hereto.
--------------------- ---------
"Person" means any individual, corporation, partnership, limited
------
liability partnership, joint venture, association, limited liability company,
joint stock company, estate, trust, unincorporated organization or other
business entity or Governmental Authority.
"Plan(s)" means an employee benefit or other plan established or
-------
maintained by SC or any ERISA Affiliate or to which SC or any ERISA Affiliate
makes or is obligated to make contributions and which is covered by Title IV of
ERISA or Section 302 of ERISA or Section 412 of the IRC.
"Pledge Agreement" means the Pledge Agreement, dated the Closing Date,
----------------
by and among SC, MHP and the Lender.
"Pledged Property" means the SC Property and the other collateral in
----------------
which a security interest is being granted pursuant to the Security Documents.
"Potential Event of Default" means an event which, with the giving of
--------------------------
any applicable notice and/or lapse of any applicable time period, would become
an Event of Default.
"Principal Payment" means the difference between the Monthly Debt
-----------------
Service Payment and the Base Rate Interest paid for the applicable Debt Service
Period.
"Purchase Money Security Interest" means purchase money mortgages or
--------------------------------
security interests, conditional sale arrangements and other similar security
interests on furniture, fixtures or equipment acquired by SC in the ordinary
course of business (and not inconsistent with customary industry practices),
with the proceeds of the indebtedness secured thereby; provided, however, that
-------- -------
(i) any Purchase Money Security Interest shall attach only to the furniture,
fixtures or equipment acquired in such transaction (and any proceeds, as defined
in the Uniform Commercial Code, thereof), and (ii) such indebtedness shall not
exceed the cost of such furniture, fixtures or equipment.
"Rating Agencies" means one or more of S&P, Fitch Investors Services
---------------
Inc., DCR and Moody's Investors Service, Inc. that are, at the time of
determination, selected by NACC to rate the Securities.
"Rating Comfort Letter" means a letter from each Rating Agency pursuant
---------------------
to which it confirms that the taking of the action referred to therein will not
result in a withdrawal, qualification or downgrade of the then existing ratings
of the Securities.
15
"Release Date" has the meaning set forth in Section 2.3(a)(i).
------------
"Release Price" means the amount set forth in Exhibit E.
------------- ---------
"REMIC" has the meaning set forth in Section 2.3(a).
-----
"S&P" means Standard & Poor's Rating Services.
---
"SC" means Santa Clara Marriott Hotel Limited Partnership.
--
"SC Debt" means the obligations of SC under the Transaction Documents,
-------
together with all interest thereon, and all other sums, including, without
limitation, fees, expenses, commissions, premiums and indemnities, which may or
shall become due under any of the Transactions on Documents, including the costs
and expenses of enforcing any provision thereof that may be reimbursable
thereunder.
"SC Loan" means the loan evidenced by the SC Note.
-------
"SC Mortgage" means the deed of trust creating a first mortgage lien on
-----------
the SC Property dated as of the Closing Date, from SC to or for the benefit of
the Lender.
"SC Note" means that certain Secured Promissory Note, dated the Closing
-------
Date, from MHP and SC to the Lender in the principal amount of $43,500,000.
"SC Property" means the leasehold estate owned by SC in the Marriott
-----------
hotel in Santa Clara, California, including all improvements thereon, fixtures
thereto, direct interests therein, and personal property related thereto or
included therein; provided, however, that the "SC Property" shall not include
any property owned by tenants, guests, licensees or concessionaires of or to the
SC Property.
"SC Property Agreements" means all material agreements, contracts and
----------------------
other documents not specifically referred to herein relating to the operation of
the Hotel other than agreements for services performed by third parties which
services are generally available from other third parties and which agreements
can be terminated on not more than 30 days' prior notice without payment of any
damages, fees, or penalty.
"Securities" has the meaning set forth in Section 6.1.
----------
"Securities Act" means the Securities Act of 1933, as amended from time
--------------
to time, and the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
"Securitization" has the meaning set forth in Section 6.1.
--------------
16
"Security Documents" means (a) the SC Mortgage, (b) the collateral
------------------
assignment of documents and property rights, dated as of the Closing Date, by SC
to the Lender, (c) the assignment of leases, rents and profits, dated as of the
Closing Date, by SC to the Lender given in connection with the SC Mortgage, (d)
the collateral account agreement, dated as of the Closing Date, between SC and
the Lender, (e) the Environmental Indemnity Agreement, (f) all Uniform
Commercial Code financing statements relating to the SC Debt, (g) the Other
Mortgages (as such term is defined in the SC Mortgage) and the related
assignments of leases, rents and profits and (h) any other documents securing
the SC Debt.
"Servicer" means any nationally recognized servicer of commercial
--------
mortgage loans selected by the Lender and acceptable to the Rating Agencies.
"Servicing Expenses" has the meaning set forth in Section 4.3(B)(i) of
------------------
the Cash Management Procedures.
"SNDA" means the Modification, Subordination and Non-Disturbance
----
Agreement, Estoppel, Assignment and Consent, dated as of the Closing Date, among
the Manager, SC and the Lender.
"Subordinate Debt" means Indebtedness incurred by SC after September
----------------
23, 1998 that is expressly subordinate in right of payment to the SC Debt
pursuant to the provisions of the SC Mortgage and with respect to which evidence
is provided satisfactory to the Lender that the pro forma Debt Service Coverage
--- -----
Ratio on its date of issuance is at least 2.25:1 and as to which the Rating
Agencies deliver a Rating Comfort Letter. For the purpose of calculating such
Debt Service Coverage Ratio, Debt Service Expense shall be the aggregate amount
of scheduled interest and principal payable on the proposed subordinate
indebtedness and any other Indebtedness secured by any assets of SC.
"Substantive Consolidation Opinion" has the meaning set forth in
---------------------------------
Section 6.1(b).
"Successor Entity" has the meaning set forth in Section 2.3(e).
----------------
"Third Party Payors" has the meaning set forth in Section 2.1 of the
------------------
Cash Management Procedures.
"Transaction Documents" means this Agreement, the Security Documents,
---------------------
the SC Note and all other documents executed and delivered by SC in favor of the
Lender in connection with the SC Loan, including, without limitation, all
agreements, instruments and documents pursuant to which the Pledged Property is
assigned, collaterally assigned and/or pledged to the Lender hereunder.
"Transition Period" has the meaning set forth in Section
-----------------
17
7.3 of the Cash Management Procedures.
"Trustee" means the trustee to which NACC assigns its interest in the
-------
Transaction Documents in connection with a Securitization.
"Uncontrollable Circumstances" means circumstances causing delay due to
----------------------------
acts of God, governmental restrictions (other than arising from SC's failure to
comply with applicable law), enemy acts, civil commotion or other causes beyond
the reasonable control of SC.
"United States" means the United States of America (including the
-------------
States and the District of Columbia), its territories, its possessions and other
areas subject to its jurisdiction.
"U.S. Obligations" has the meaning set forth in Section 2.3(f).
----------------
"Welfare Plan" means an employee welfare benefit plan, as defined in
------------
Section 3(1) of ERISA.
"Work" has the meaning set forth in Section 8.1 of the Cash Management
----
Procedures.
"Yield Maintenance Premium" shall mean an amount in cash that would be
-------------------------
necessary to purchase U.S. Obligations in an amount that would be sufficient,
together with U.S. Obligations that could be purchased with the principal of and
interest on the SC Note paid to the Lender upon an acceleration of the SC Note
pursuant to Section 4.2, to provide the payments due on or prior to, but as
close as possible to, all successive Debt Service Payment Dates after the
receipt of such amount in respect of (i) the remaining Monthly Debt Service
Payments that would be required under the SC Note through and including October
11, 2007 and (ii) a balloon payment of the outstanding principal balance of the
SC Note and accrued and unpaid interest as of such date as if such balloon
payment were then due and payable.
ARTICLE II
PROVISIONS CONCERNING THE ACCOUNTS AND PLEDGED PROPERTY
Section 2.1 Cash Management Procedures
--------------------------
The provisions of Exhibit B are incorporated herein by reference.
---------
Section 2.2 Right to Contest. To the extent consistent with the SC
----------------
Mortgage, SC at its expense may contest, by appropriate
18
Action conducted in good faith and with due diligence, the amount or validity or
application, in whole or in part, of any Imposition or Lien therefor or any
Legal Requirement or Insurance Requirement or the application of any instrument
of record affecting the Pledged Property or any part thereof or any claims or
judgments of mechanics, materialmen, suppliers or vendors or Liens therefor, and
may direct the Manager or the Servicer, as the case may be, to withhold payment
of the same pending such Action if permitted by law; provided, however, that (a)
-------- -------
in the case of any Impositions or Liens therefor or any claims or judgments of
mechanics, materialmen, suppliers or vendors or Liens therefor, such Action
shall suspend the enforcement thereof and the accrual of penalties thereon from
SC, the Manager, the Servicer and the Pledged Property, (b) neither the Pledged
Property nor any part thereof or interest therein could be in any danger of
being sold, forfeited or lost if SC pays the amount or satisfies the condition
being contested, and SC would have the opportunity to so pay or satisfy if SC
fails to prevail in the contest and (c) in the case of an Insurance Requirement,
the failure of SC to comply therewith shall not impair the validity of any
insurance required to be maintained by SC under the applicable SC Mortgage or
the right to full payment of any claims thereunder.
Section 2.3 Defeasance.
----------
(a) At any time after the date which is the earlier of (x) two years
after the "startup day," within the meaning of Section 860G(a)(9) of the IRC, of
a "real estate mortgage investment conduit," within the meaning of Section 860D
of the IRC (a "REMIC"), that holds the SC Note (if the SC Note has been
-----
transferred to a REMIC prior to September 23, 1998) and (y) September 23, 2000,
but prior in either case to the Optional Prepayment Date, SC may defease such
Lien to cause the release of the SC Property from such Lien by providing the
Lender with funds in an amount equal to the Defeasance Deposit upon the
satisfaction of the following conditions:
(i) not less than 30 days' notice to the Lender specifying a Debt
Service Payment Date (the "Release Date") on which the Defeasance Deposit is to
------------
be made;
(ii) the payment to the Lender of interest accrued and unpaid on
the principal balance of the SC Note and all other SC Debt due through and
including the Release Date;
(iii) the payment to the Lender of the Defeasance Deposit; and
(iv) the delivery to the Lender of:
(A) a security agreement (the "Defeasance Security
-------------------
19
Agreement"), in form and substance satisfactory to the
---------
Lender, creating a first priority perfected security
interest in favor of the Lender in the Defeasance Deposit
and the U.S. Obligations purchased with the Defeasance
Deposit in accordance with this subsection (a) (together,
the "Defeasance Collateral");
---------------------
(B) form of release of the SC Property (for execution by the
Lender) appropriate for the jurisdiction in which the SC
Property is located;
(C) an Officer's Certificate certifying that the requirements
set forth in subsections (a) (ii)-(iv) have been satisfied;
(D) an opinion of counsel for SC (which may be a "reasoned"
opinion), in form and substance satisfactory to the Lender,
that (i) the transfer of the Defeasance Collateral in
exchange for release of the SC Property will not constitute
an avoidable preference under Section 547 of the United
States Bankruptcy Code in the event of a filing of a
petition for relief under the United States Bankruptcy Code
for or against SC, (ii) the Defeasance Collateral has been
duly and validly transferred and assigned to the Trustee
for the benefit of the holders of the Securities, (iii) the
Trustee holds a first priority perfected security interest
in the Defeasance Collateral for the benefit of such
holders, (iv) such transfer will not result in a deemed
exchange of the Securities pursuant to Section 1001 of the
IRC, (v) such transfer will not, by itself, adversely
affect the status of the Securities as indebtedness for
federal income tax purposes and (vi) such transfer will not
adversely affect the status of the entity holding the SC
Debt as a REMIC (assuming for such purposes that such
entity otherwise qualifies as a REMIC and that the SC Note
was transferred to such REMIC not later than two years
prior to the Release Date);
(E) a certificate of a certified public accountant acceptable
to the Lender that the Defeasance Collateral complies with
the requirements set forth in subsection (b) below;
20
(F) such other certificates, documents or instruments as the
Lender may reasonably request;
(G) evidence satisfactory to the Lender that the Defeasance
Debt Service Coverage Ratio will be maintained for the
twelve full months commencing immediately after the Release
Date at the greater of (x) the Initial Debt Service
Coverage Ratio and (y) the ratio of the MHP Net Operating
Income for the thirteen (13) full Accounting Periods next
preceding the Release Date divided by the difference
between (i) the MHP Debt Service Expense for such period
and (ii) the payments received for such period from or with
respect to U.S. Obligations then held as security for the
MHP Notes; and
(H) If the defeasance is made after the Securitization, the
Rating Agencies deliver a Rating Comfort Letter.
(b) If, following the release of the SC Property, less than all of the
MHP Properties shall have been released, the Lender shall use the Defeasance
Deposit to purchase U.S. Obligations that provide payments on or prior to, but
as close as possible to, all successive Debt Service Payment Dates after the
Release Date that would be required with respect to an assumed promissory note
in a principal amount equal to the lesser of (A) 125% of the Release Price and
(B) the greater of (i) 100% of the outstanding principal amount of the SC Note
and interest accrued and unpaid thereon or (ii) the sale proceeds or other cash
distributable to MHP pursuant to Section 4.06 of the Amended and Restated
Agreement of Limited Partnership of SC (which Section, together with Section
7.03 thereof, SC shall not amend without the prior consent of the Lender). Such
assumed promissory note shall be in the same form (including with respect to
term and interest rate) as the SC Note but shall provide for a mandatory
prepayment thereof on the Optional Prepayment Date, including through the
application by the Servicer of U.S. Obligations pursuant to the provisions of
subsection (g) of this Section 2.3. In order to secure the release, in addition
to the U.S. Obligations referred to in the preceding sentence, SC may, at its
election, purchase U.S. Obligations for delivery to the Servicer that provide
additional payments of the type referred to herein in order to satisfy the
Defeasance Debt Service Coverage Ratio. If the SC Property is released pursuant
to this Section 2.3 as a result of a condemnation or casualty, the payments
provided for in this subsection (b) shall be equal to the greater of (A) the
Release Price and (B) the lesser of (x) 125% of the Release Price and (y) the
net Condemnation Proceeds or the net Insurance Proceeds received on
21
account of the SC Property. The Lender shall deliver such U.S. Obligations to
the Servicer for application pursuant to Sections 4.3(B) and 7.9.3(A) of the
Cash Management Procedures.
(c) If, as a result of the release of the SC Property, all of the MHP
Properties and the SC Property shall have been released, the Lender shall use
the Defeasance Deposit to purchase U.S. Obligations that provide, together with
any U.S. Obligations purchased in connection with any prior releases of the MHP
Properties, payments on or prior to, but as close as possible to, all successive
Debt Service Payment Dates after the Release Date that would be required with
respect to an assumed promissory note in a principal amount equal to the
outstanding principal balance of the SC Note and accrued and unpaid interest
thereon on the Release Date. Such assumed promissory note shall be in the same
form (including with respect to term and interest rate) as the SC Note but shall
provide for a mandatory prepayment thereof on the Optional Prepayment Date,
including through the application by the Servicer of U.S. Obligations pursuant
to the provisions of subsection (g) of this Section 2.3. The Lender shall
deliver such U.S. Obligations to the Servicer for application pursuant to
Sections 4.3(B) and 7.9.3(A) of the Cash Management Conditions.
(d) Upon compliance with the requirements of this Section 2.3, the SC
Property and each of the MHP Properties shall be released from the Lien of the
Security Documents; the U.S. Obligations shall constitute substitute collateral
which shall secure the SC Debt.
(e) If the SC Property has been released and the MHP Properties have
been released pursuant to the provisions of Section 2.3 of the MHP Loan
Agreement, SC may assign its obligations under the SC Note together with the
U.S. Obligations relating thereto to a successor entity (the "Successor Entity")
----------------
designated by NACC and thereupon be released fully from all obligations relating
to the SC Debt. In such event the opinion of counsel provided for in clause
(a)(iv)(D) of this Section 2.3 shall provide that upon such assignment, the
Defeasance Collateral will not be part of the estate of SC under Section 541 of
the United States Bankruptcy Code. NACC shall retain its obligation to designate
a Successor Entity notwithstanding the transfer of the SC Note unless such
obligation is specifically assumed by the transferee. In consideration for the
payment of $1,000 by SC, the Successor Entity shall assume SC's obligations
under the SC Note and the Defeasance Security Agreement, SC shall be relieved of
its obligations thereunder and the SC Debt shall not be deemed outstanding for
any purpose of this Agreement. If required by the applicable Rating Agencies, SC
shall also deliver or cause to be delivered a Substantive Consolidation Opinion
with respect to the Successor Entity in form and substance satisfactory to the
Lender and the applicable Rating Agencies.
22
(f) For purposes of this Section 2.3, "Defeasance Deposit" shall mean
------------------
an amount in cash necessary to purchase U.S. Obligations whose cash flows are in
an amount sufficient (i) to make the payments required under subsections (b) or
(c), as the case may be, plus any costs and expenses incurred or to be incurred
in making such purchase and (ii) to make the additional monthly payments
necessary to cause the Defeasance Debt Service Coverage Ratio to be satisfied;
"U.S. Obligations" shall mean obligations or securities not subject to
----------------
prepayment, call or early redemption which are direct obligations of, or
obligations fully guaranteed as to timely payment by, the United States of
America or any agency or instrumentality of the United States of America, the
obligations of which are backed by the full faith and credit of the United
States of America; and "Defeasance Debt Service Coverage Ratio" shall mean, in
--------------------------------------
respect of any fiscal period, the ratio of (i) the MHP Net Operating Income for
such period to (ii) the difference between (x) the MHP Debt Service Expense for
such period and (y) the payments to be received for such period from or with
respect to U.S. Obligations then held as security for the MHP Notes.
(g) If the payment of accrued and unpaid interest and principal of the
SC Note and any other SC Debt or of the MHP Notes and any other MHP Debt has not
been made in full by the Optional Prepayment Date, payments from or with respect
to U.S. Obligations then held by the Lender and such payments received by the
Lender thereafter shall be applied on the date such payment is received (i)
first, to payment of accrued and unpaid interest on the SC Note; (ii) second, to
prepayment of the Principal Payments of the SC Note, pro rata, in inverse order
--- ----
of maturity; (iii) third, to payment of accrued and unpaid interest on the MHP
Notes, pro rata; and (iv) fourth, to prepayment of the MHP Principal Payments,
--- ----
pro rata, in inverse order of maturity.
- --- ----
(h) Notwithstanding the provisions of subsection (a) of this Section
2.3 setting forth the time period during which the SC Property may be defeased,
SC may defease the Lien of the Security Documents to cause the release of the SC
Property for the purpose set forth in clause (e) of Section 4.1A prior to the
date set forth in such subsection (a) if it provides to the Lender an opinion in
form and substance, and from a firm, acceptable to the Lender, in the exercise
of its sole discretion, that such release will not adversely affect the status
of the entity holding the SC Debt as a REMIC (assuming for such purpose that
such entity otherwise qualifies as a REMIC).
(i) Upon the release of any MHP Property from the lien of any of the
MHP Security Documents pursuant to Section 2.3 of the MHP Loan Agreement, such
MHP Property shall simultaneously be released by the Lender from the Lien of the
Security Documents.
Section 2.4 Sale of the SC Property and all of the MHP
------------------------------------------
23
Properties. Provided that no Event of Default has occurred and is continuing,
- ----------
upon at least 60 days' notice to the Lender, SC has the right to sell the SC
Property and MHP has the right to sell the MHP Properties, as a group, subject
to the Security Documents and the MHP Security Documents, as the case may be, to
any Person so long as such Person is approved by NACC, and, after the
Securitization, by the Lender, such approval not to be unreasonably withheld,
and the Rating Agencies deliver a Rating Comfort Letter. It is understood that
the Rating Agencies may require, as a condition to such delivery, matters
equivalent to those contained in clauses (i) and (ii) of Section 2.5. Upon such
approval and delivery, the Lender shall deliver to SC for execution and delivery
such instruments as may be reasonably required to effect an assignment and
assumption of the SC Debt and a release of the obligations of SC under the
Transaction Documents, including, without limitation, a new SC Note as to which
the purchaser of the SC Property shall be the obligor, in an aggregate principal
amount equal to the then outstanding principal amount of the SC Note.
Section 2.5 Change of Control. There shall be no Change of Control;
-----------------
provided, however, that if no Event of Default has occurred and is continuing
- -------- -------
there can be a Change of Control if (i) SC submits to the Lender an opinion in
form and substance and from a firm satisfactory to the Lender, with respect to
the requested Change of Control, to the same effect as the Substantive
Consolidation Opinion, (ii) the organizational documents of the Person involved
in the requested Change of Control are approved by the Lender and (iii) after
the Securitization, the Rating Agencies deliver a Rating Comfort Letter.
Section 2.6 Release after the Optional Prepayment Date. On any Debt
------------------------------------------
Service Payment Date after the Optional Prepayment Date, upon the sale by SC of
the SC Property to any Person, SC may cause the release of the SC Property from
the Lien of the Security Documents upon the satisfaction of the following
conditions:
(a) not less than 30 days' notice to the Lender specifying a Debt
Service Payment Date on which the amount set forth in clause (c) below is to be
provided to the Servicer, which notice shall be accompanied by an Officer's
Certificate to the effect that no Potential Event of Default or Event of Default
has occurred and is continuing (or in the case of a Potential Event of Default
or Event of Default that shall be cured or avoided by the release of the
affected SC Property describing the nature of, and certifying that, such
Potential Default or Event of Default shall be cured by such release and that no
other Potential Event of Default or Event of Default has occurred and is
continuing and that such Release will comply with all applicable requirements of
this Section 2.6;
(b) the payment to the Lender of interest accrued and unpaid
24
on the principal balance of the SC Note and all other sums due under the
Transaction Documents, through and including such Debt Service Payment Date;
(c) the payment to the Lender, to be applied first, to prepayment of
the Principal Payments in inverse order of maturity and second, to prepayment of
the MHP Principal Payments in inverse order of maturity, pro rata, of an amount
--- ----
equal to the lesser of (A) 125% of the Release Price and (B) the greater of (i)
the Release Price and (ii) the sale proceeds or other cash distributable to MHP
pursuant to Section 4.06 of the Amended and Restated Agreement of Limited
Partnership of SC; provided, however, that (A) if the SC Property is released
-------- -------
pursuant to this Section 2.6 as a result of a condemnation or casualty (and SC
in accordance with the SC Mortgage determines in good faith that the SC Property
cannot be restored to substantially the condition that existed prior to the
condemnation or casualty), such payment shall be an amount equal to the greater
of (a) and (b), in which (a) is the Release Price and (b) is the lesser of (x)
125% of the Release Price and (y) the net Condemnation Proceeds or net Insurance
Proceeds received on account of the SC Property and (B) if SC sells the SC
Property, such amount shall be equal to the lesser of (x) 125% of the Release
Price and (y) the sum of the Release Price and the amount of the proceeds of
such sale distributable to MHP pursuant to Section 4.06(B) of the Amended and
Restated Agreement of Limited Partnership of SC;
(d) delivery to the Lender for execution of forms of release of the SC
Property from the Lien of the Security Documents appropriate for California;
(e) delivery to the Lender of evidence satisfactory to the Lender that
the ratio of (i) the MHP Net Operating Income for the 13 full Accounting Periods
immediately succeeding the release date to (ii) the difference between (y) the
MHP Debt Service Expense for such Accounting Periods and (z) the payments to be
received for such Accounting Periods from or with respect to U.S. Obligations
then held as security for the MHP Notes will be maintained for such Accounting
Periods at the greater of (x) the Initial Debt Service Coverage Ratio and (y)
the ratio of the MHP Net Operating Income for the thirteen full Accounting
Periods next preceding the release date divided by the difference between (i)
the MHP Debt Service Expense for such Accounting Periods and (ii) the payments
received for such Accounting Periods from or with respect to U.S. Obligations
then held as security for the MHP Notes; and
(f) Upon the release of any MHP Property from the lien of any of the
MHP Security Documents pursuant to Section 2.6 of the MHP Loan Agreement, such
MHP Property shall simultaneously be released by the Lender from the Lien of the
Security Documents.
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ARTICLE III
PAYMENTS
Section 3.1 Payments on the SC Note. All payments made on the SC Note
-----------------------
shall be made in the manner, and subject to the conditions, provided in this
Agreement and the SC Note. The SC Note shall not be prepayable except as
expressly provided for in this Section 3.1, Section 2.3 hereof, Section 2.6
hereof and Sections 4.4 and 7.10 of the Cash Management Procedures. In addition,
on the Optional Prepayment Date and each Debt Service Payment Date thereafter,
the SC Note may be prepaid, at the option of SC, in full or in part, without
penalty or premium.
Section 3.2 Interest Rate.
-------------
(a) Except as set forth in Sections 3.4(b) and 3.4(d), the SC Debt
shall bear interest for each Debt Service Period at the Base Rate.
(b) Calculations of interest shall be made on the basis of a 360-day
year and actual days elapsed during each Debt Service Period.
Section 3.3 Payments without Deduction, etc. All payments of the SC
-------------------------------
Debt to the Lender shall be absolute and unconditional, shall be paid strictly
in accordance with the terms of the Transaction Documents without being subject
to any claim, set-off, defense or other right which SC may have against the
Lender or any other Person, whether in connection with this Agreement, the trans
actions contemplated herein or any other circumstance or happening whatsoever.
SC shall make such payments to the Lender free and clear of, and without
deduction for, any and all present or future taxes, levies, imposts, deductions,
charges, penalties or withholdings, and any lia bili ties with respect thereto,
by whomever imposed, other than present or future taxes on the income of the
Lender or franchise taxes imposed on the Lender as a result of its conducting
business in specific jurisdictions. SC shall pay and indemnify and hold the
Lender harmless from and against any present or future claim for liability for
United States, state or local taxes or assessments on the ownership by the
Lender of the debt obligations of SC evidenced by the SC Note, the SC Mortgage
or on the principal, interest, fees or other amounts payable under any
Transaction Document or otherwise in respect of the SC Debt (other than income
or franchise taxes imposed on the Lender or its Affiliates by any jurisdiction).
The obligations of SC hereunder shall survive repayment of the SC Debt and
termination of the Transaction Documents.
Section 3.4 Periodic Payments.
-----------------
26
(a) On October 11, 1996, SC shall pay to the Lender interest on the SC
Note at the Base Rate for the period beginning on the date hereof and ending on
October 10, 1996. On each Debt Service Payment Date thereafter through and
including October 11, 1997, SC shall pay to the Lender interest on the SC Note
at the Base Rate then due and payable for each Debt Service Period.
(b) On each Debt Service Payment Date occurring after October 11, 1997,
SC shall pay $369,829.85 to the Lender. Such amount shall be applied (i) first,
to the payment of the Base Rate Interest on the SC Note, then due and payable
for the applicable Debt Service Period, and (ii) next, to the Principal Payment
of the SC Note, in the amount of the difference between the Monthly Debt Service
Payment and the Base Rate Interest paid pursuant to sub-clause (i) above.
Following the Maturity Date and while an Event of Default has occurred and is
continuing, the Monthly Debt Service Payment shall be increased to reflect
payment of interest at the Default Rate; provided, however, that for the
purposes of this sentence, an Event of Default shall be considered to have
occurred and be continuing until such Event of Default has been cured,
including, without limitation, pursuant to the provisions of Section 4.1B.
(c) If any Principal Payment or a portion thereof is prepaid on any
Debt Service Payment Date by the application by the Servicer of payments
received (i) from or with respect to U.S. Obligations held by the Servicer on
the Optional Prepayment Date as a result of a release of the SC Property from
the Lien of the Security Documents pursuant to Section 2.3, (ii) from the
release of the SC Property from the Lien of the Security Documents pursuant to
Section 2.6, or (iii) on and after the Optional Prepayment Date, pursuant to the
last sentence of Section 3.1 hereof, the Monthly Debt Service Payment payable on
each Debt Service Payment Date thereafter shall be reduced in an amount equal to
the percentage reduction in the principal amount payable under the SC Note
effected by such prepayment.
(d) Subsequent to the Optional Prepayment Date, on each Debt Service
Payment Date SC shall pay to the Lender the MHP Share for all Accounting Periods
ending during the Debt Service Period immediately preceding such Debt Service
Payment Date, which payment shall be applied to prepay the SC Note and the MHP
Notes, pro rata, in the manner contemplated by Section 4.4 and 7.10, as
applicable, of the MHP Cash Management Procedures.
ARTICLE IV
DEFAULT; REMEDIES; ENFORCEMENT
Section 4.1A Events of Default. Any of the following shall constitute a
-----------------
default under this Agreement (an "Event of Default"):
----------------
27
(a) failure by SC to pay on the due date any interest or principal due
and payable on the SC Note as set forth therein; or
(b) failure by SC to make any other payment due under any Transaction
Document within ten (10) days after demand therefor shall have been made; or
(c) any representation or warranty of SC contained in any Transaction
Document shall have been untrue or incorrect when made in any respect that may
have a Material Adverse Effect; provided, however, that for the purpose of this
clause (c) the words "To its Best Knowledge" shall be deleted, where used, from
the provisions of each representation and warranty contained in Section 5.1
(other than Sections 5.1(e), 5.1(f), 5.1(aa) and 5.1(an); or
(d) failure by SC to perform its covenants in Section 5.2(d), and such
failure continues unremedied for ten days after notice thereof by the Lender to
SC requiring the same to be remedied; or
(e)failure by SC to perform or observe any other of its (i) covenants
under any Transaction Document (other than the covenant contained in Section
5.3(n)) that has a Material Adverse Effect, or (ii) covenant contained in such
Section, and in each case such failure continues unremedied for 30 days after
notice thereof by the Lender to SC requiring the same to be remedied or such
shorter period as shall be provided in such Transaction Document; provided,
--------
however, that it shall not be an Event of Default if (a) such failure is curable
- -------
but is not reasonably capable of being cured within such 30-day period and SC
shall have commenced to cure such failure within such 30-day period and
thereafter shall diligently pursue such cure to completion, but in no event
later than 180 days after the date on which SC received such notice from the
Lender or (b) within thirty (30) days after its receipt of such notice from the
Lender, SC gives notice to the Lender of its intent to release the SC Property
from the Lien of the Security Documents pursuant to the provisions of Section
2.3 or 2.6 and, thereafter diligently pursues efforts to take such action and,
within 180 days after the date on which it received such notice from the Lender,
effects such release pursuant to the provisions of Section 2.3 or 2.6, as the
case may be; or
(f) an order (that has not been vacated or stayed within 60 days from
the entry thereof) is made for, or the Partners take any action with regard to,
the winding up of SC or the General Partner except a winding up for the purpose
of a merger, restructuring or contribution, the terms of which have previously
been consented to by the Lender; or
(g) (A) SC or the General Partner shall commence any Action (1) under
any existing or future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors (collectively,
"Insolvency Law") seeking to have
--------------
28
an order for relief entered with respect to it, or seeking to adjudicate it a
bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with respect
to it or its debts, or (2) seeking appointment of a receiver, trustee, custodian
or other similar official (each a "Bankruptcy Custodian") for it or for all or
--------------------
substantially all of its assets, or SC or the General Partner shall make a
general assignment for the benefit of its creditors; or (B) there shall be
commenced against SC or the General Partner any Action of a nature referred to
in clause (A) above which (1) results in the entry of any order for relief or
any such adjudication or appointment and (2) remains undismissed, undischarged
or unbonded for a period of 60 days; or (C) there shall be commenced against SC
or the General Partner any Action seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or substantially all of its
assets which results in the entry of an order for any such relief that shall not
have been vacated, discharged, stayed, satisfied or bonded pending appeal within
60 days from the entry thereof; or (D) SC or the General Partner shall generally
not, or shall be unable to, or shall admit in writing its inability to, pay its
debts as they become due; or
(h) Unless (a) SC, after obtaining any consents or waivers from the
ground lessor under the applicable Ground Lease, causes the SC Property to come
under management by another nationally recognized hotel operator acceptable to
the Lender, in the exercise of its reasonable discretion, (b) the SC Property is
operated as part of a comparable nationally recognized hotel system acceptable
to the Lender and (c) each of the Rating Agencies delivers to the Lender a
Rating Comfort Letter with respect thereto: (A) the Manager shall commence any
Action (y) under any Insolvency Law seeking to have an order for relief entered
with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts, or (z)
seeking appointment of a Bankruptcy Custodian for it or for all or substantially
all of its assets, or the Manager shall make a general assignment for the
benefit of its creditors; or (B) there shall be commenced against the Manager
any Action of a nature referred to in clause (A) above which (y) results in the
entry of any order for relief or any such adjudication or appointment and (z)
remains undismissed, undischarged or unbonded for a period of 60 days; or (C)
there shall be commenced against the Manager any Action seeking issuance of a
warrant of attachment, execution, distraint or similar process against all or
substantially all of its assets which results in the entry of an order for any
such relief that shall not have been vacated, discharged, stayed, satisfied or
bonded pending appeal within 60 days from the entry thereof; or (D) the Manager
shall generally not, or shall be unable to, or shall admit in writing its
inability to, pay its debts as they become due; or
29
(i) one or more judgments or decrees, not covered by insurance, in an
aggregate amount exceeding $1,000,000 in the case of SC and $2,000,000 in the
case of the General Partner, shall be entered against SC or the General Partner,
as the case may be, and such judgments or decrees shall not have been vacated,
discharged, stayed, satisfied or bonded pending appeal within 60 days from the
entry thereof;
(j) there is a Change of Control, unless permitted under Section 2.5;
(k) an MHP Event of Default occurs; or
(l) any representation or warranty of HMH, Marriott Proper ties, Inc.
or MHP II Acquisition Corp. shall have been untrue or incorrect on the date
hereof, or any breach by any of such entities of the covenants, in each case
relating to the "factual state ments," within the meaning of Paragraph 5 of
those certain certificates of Christopher Townsend and Bruce Wardinski, in each
case dated the date hereof, with respect to the substantive consol idation
opinion referred to therein; provided, however, that (i) for the purposes of
this clause (l) the phrase "to the best of his knowledge after due inquiry" set
forth in each such paragraph shall be deemed deleted and (ii)(A) in the case of
such representation or warranty, SC does not take such action as may be required
within 30 days after notice of the untruth or inaccuracy thereof by the Lender
to SC to "cure" such failure such that such representation or warranty would not
have been untrue or incorrect if such "cure" had been in effect on the date
hereof and (B) in the case of such breach, such breach continues unremedied for
30 days after notice thereof by the Lender to SC; provided, however, further
that if such breach is curable but is not reasonably capable of being cured
within such 30-day period and SC shall have commenced to cure such failure
within such 30-day period and thereafter shall diligently pursue such cure to
completion, but in no event later than 90 days after the date on which SC
received such notice from the Lender, such breach shall not be an Event of
Default.
Section 4.1B Event of Default Cure. None of the foregoing shall
---------------------
constitute an Event of Default if after the occurrence thereof and after the
expiration or waiver of the rights, if any, of ground lessor under the Ground
Lease to purchase the SC Note and SC Mortgage, SC tenders a cure for such Event
of Default or a plan to cure such Event of Default and the Lender accepts such
tender, such acceptance to contain such conditions as the Lender, in the
exercise of its sole discretion, may require. If SC tenders to the Lender all
sums, the non-payment of which constituted an Event of Default under clauses (a)
or (b) of Section 4.1A, and the Lender accepts such sums, such non-payment shall
not constitute an Event of Default. If the Lender does not accept any such
payment or tender by SC, the Event of Default shall be continuing. The Lender
30
shall be deemed to have accepted a tender of cash if the Lender does not return
such cash to SC within 10 Business Days of its receipt thereof. Except as
contemplated by the preceding sentence, if the Lender fails to respond to SC
within 30 days of its receipt of such tender, it shall be deemed to be rejected.
Section 4.2 Remedies. If an Event of Default shall have occurred and be
--------
continuing, the Lender shall have the right, in its sole discretion, by notice
to SC (with a copy to the Manager) (except upon the occurrence of an Event of
Default under clauses (f) or (g) of Section 4.1A, in which case all principal
and accrued interest thereon will be immediately due and payable on the SC Note
without any declaration or other act on the part of the Lender) to take one or
more of the following actions:
(a) To declare the principal of and all amounts accrued but unpaid
under the SC Note and the Transaction Documents, together with the Yield
Maintenance Premium if the Event of Default occurs and is continuing prior to
the Optional Prepayment Date, to be immediately due and payable, and such
amounts shall thereupon become immediately due and payable, without presentment,
demand, protest or notice of any kind, other than any notice specifically
required by this Section 4.2, all of which are hereby expressly waived by SC;
(b) Pursue such rights and remedies against SC, or otherwise, as are
provided under and pursuant to the SC Mortgage or any of the other Transaction
Documents and as may be available to the Lender at law or in equity, including,
without limitation, during such time as the Lender may be considering a tender
of a cure or a plan pursuant to Section 4.1B; provided, however, that the Lender
-------- -------
shall not initiate foreclosure proceedings unless five (5) Business Days' prior
notice of such intention is given SC and the tender of a cure or a plan therefor
shall not have been accepted by the Lender pursuant to the provisions of Section
4.1B before the end of such 5 Business Day period; and
(c) If the Event of Default involves SC's failure to pay any Imposition
or to comply with the Insurance Requirements, or to perform or observe any other
covenant, condition or term in any Transaction Document or in the Management
Agreement, the Lender may, at its option, without waiving or affecting any of
its rights or remedies hereunder, pay, perform or observe the same, and, in
connection therewith, the Lender shall be entitled to rely on any
representations and statements of the Manager under the Management Agreement in
regard to alleged breaches or violations thereof, and all payments made or costs
or expenses incurred by the Lender in connection therewith shall be repaid by SC
to the Lender within fifteen (15) days after demand therefor, and shall be added
to and become a part of the SC Debt. The Lender is hereby empowered to enter and
to authorize others to enter upon the SC Property for the
31
purpose of performing or observing any such defaulted covenant, condition or
term, without thereby becoming liable to SC or any Person in possession holding
under SC.
Section 4.3 Remedies Cumulative; Delay or Omission Not a Waiver. To the
---------------------------------------------------
extent permitted by law, every remedy given hereunder or in any other
Transaction Document to the Lender shall not be exclusive of any other remedy or
remedies, and every such remedy shall be cumulative and in addition to every
remedy provided by statute, law, equity or otherwise. The Lender may exercise
all or any of the powers, rights or remedies given to it hereunder or which may
be now or hereafter given by statute, law, equity or otherwise, in its absolute
discretion. No course of dealing between SC and the Lender or any delay or
omission of the Lender to exercise any power, right or remedy accruing upon any
Event of Default shall impair any power, right or remedy or shall be construed
to be a waiver of any such Event of Default or acquiescence therein, and every
power, right and remedy given by each Transaction Document to the Lender may, to
the extent permitted by law, be exercised from time to time and as often as may
be deemed expedient by the Lender.
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 5.1 Representations and Warranties of SC.
------------------------------------
SC represents and warrants to, and covenants with the Lender, that, as
of the Closing Date, except as set forth on the Disclosure Schedule:
(a) Exhibit F hereto sets forth SC's organizational structure, and its
---------
equity interests and holders thereof. SC is a limited partnership validly
existing and in good standing under the laws of the State of Delaware and is
qualified to do business in each jurisdiction where the nature of its business
or location of the SC Property requires it to be so qualified, including
California. The General Partner is a corporation validly existing and in good
standing under the laws of the State of Delaware and is qualified to do business
in each jurisdiction where the nature of its business or location of the SC
Property requires it to be so qualified. Neither the General Partner nor SC has
engaged in any business unrelated to the ownership of the SC Property and the
General Partner's partnership interest in MHP. Neither the General Partner nor
SC has assets other than those related to the SC Property and the General
Partner's partnership interests in MHP.
(b) SC has, and at relevant times has had, the requisite power and
authority to own its assets and conduct its business, to
32
execute and deliver each of the Transaction Documents and the Operational
Agreements to which it is a party and to carry out the transactions contemplated
thereby.
(c) SC's execution, delivery and performance of each of the Transaction
Documents and the Operational Agreements to which it is a party have been duly
and validly authorized by all necessary actions and proceedings on its part and
the part of the General Partner, and no further approvals or filings of any
kind, including, without limitation, any approval of or filing with any
Governmental Authority, are required as a condition thereof.
(d) Neither the execution and delivery of each of the Transaction
Documents and the Operational Agreements to which SC is a party, nor the
fulfillment of or compliance with the terms and conditions thereof:
(i) will conflict with or result in any breach or violation of any
law, rule or regulation issued by any Governmental Authority,
or any judgment or order applicable to SC or the General
Partner, or to which SC or the General Partner or the SC
Property are subject;
(ii) will conflict with or result in any breach or violation of, or
constitute a default under, any of the provisions of SC's
Amended and Restated Agreement of Limited Partnership, the
Restated Certificate of Incorporation of the General Partner,
or any agreement or instrument to which SC or the General
Partner is a party or to which SC or the General Partner or the
SC Property is subject; or
(iii) will result in or require the creation of any Lien on the SC
Property, except Permitted Exceptions.
(e) Each of the Transaction Documents and the Operational Agreements to
which SC is a party has been duly executed and delivered by SC and, to SC's Best
Knowledge, the other parties thereto and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with the terms thereof
subject to the effects of bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally and
general equitable principles (whether considered in a proceeding in equity or at
law). To SC's Best Knowledge, each of the Operational Agreements to which it is
not a party has been duly executed and delivered by the parties thereto.
(f) There is no Action pending to which either SC or the General
Partner is a party or to which the SC Property is subject,
33
directly or indirectly, and, to its Best Knowledge and, based on a certification
to SC by the Manager, the Manager is a party, no such Action is threatened or
contemplated by any Person, in each case, other than an Action that does not
involve an amount in controversy in excess of $25,000.
(g) It has not received notice of, and does not have any knowledge of,
any violations of any Legal Requirements affecting the SC Property or the
construction, development, use, operation, maintenance or management thereof,
except as set forth in the Exhibits and Schedules to this Agreement.
(h) Neither SC nor the General Partner has any subsidiaries, except
that the General Partner owns a 1% general partnership interest and five limited
partnership units in MHP.
(i) Except for the SC Debt, since March 20, 1989, SC has not incurred
any Indebtedness other than Purchase Money Security Interests.
(j) SC has no employees.
(k) The SC Property is subject to the Ground Lease. A true and complete
copy of the Ground Lease (including all amendments, agreements, side letters and
documents relating thereto) has been delivered to NACC. The Ground Lease is
unmodified and in full force and effect and there is no default by it thereunder
nor, to SC's Best Knowledge, by the lessor thereunder, and, to SC's Best
Knowledge, no event has occurred and is continuing which, with the passage of
time and/or the giving of notice, would constitute a default or event of default
under the Ground Lease.
(l) True and complete copies of the Operational Agreements relating to
the SC Property (including all amendments, agreements, side letters and all
other material documents relating thereto other than those effected in the
ordinary course of business and which individually or in the aggregate do not
have an Individual Material Adverse Effect) have been made available to the
Lender; each such agreement is unmodified and in full force and effect; to its
Best Knowledge, there is no default by any party thereunder and no event has
occurred and is continuing which, with the passage of time and/or the giving of
notice, would constitute a default or event of default by it thereunder in such
circumstances that such default or event of default might have an Individual
Material Adverse Effect. All neces sary consents to the transactions described
in the Transaction Documents required by such agreements have been obtained.
Since its inception, neither SC nor the General Partner has entered into any
agreements or obligations other than the Transaction Documents to which it is a
party and the Operational Agreements relating to the SC Property.
(m) All necessary governmental consents, if any, to the
34
transactions described in the Transaction Documents have been obtained.
(n) The Operating Budget annexed hereto as Exhibit G contains all
---------
anticipated operating expenses for the SC Property for the year ending December
31, 1996. The preliminary Capital Budget annexed hereto as Exhibit H contains
---------
all presently anticipated Capital and FF&E Expenditures for the SC Property for
the year ending December 31, 1997.
(o) All Permits material to the operations of the SC Property have been
obtained, are in full force and effect and are in SC's name or available for its
use.
(p) The SC Property has available to it adequate parking to comply with
all Legal Requirements and to permit its operation as a first class full service
hotel operated in compliance with Marriott standards and the Management
Agreement.
(q) SC is not subject to any United States or state income,
unincorporated business, capital, franchise or similar gross income or income
based taxes.
(r) (i) Neither SC nor any ERISA Affiliate maintains, sponsors,
contributes to or is obligated to contribute to, or during the
five (5) years ending on the date of the execution and delivery
of this Agreement, has maintained, sponsored, contributed to or
was obligated to contribute to, any Plan.
(ii) SC does not, and is not obligated to, maintain, sponsor or
contribute to any Welfare Plan.
(iii) SC's assets are not nor are they deemed "plan assets",
whether by operation of law or under regulations promulgated
under ERISA.
(s) SC has not entered into any Transaction Document with the actual
intent to hinder, delay, or defraud any creditor. SC has received reasonably
equivalent value in exchange for SC's obligations under the Transaction
Documents. The fair saleable value of SC's assets is and immediately after the
execution and delivery of the Transaction Documents will be greater than SC's
probable liabilities, including the maximum amount of SC's contingent
liabilities or SC's debts as such debts become absolute and matured. SC's assets
do not and immediately after the execution and delivery of the Transaction
Documents will not constitute unreasonably small capital to carry out SC's
business as conducted or as proposed to be conducted. SC does not intend to, and
does not believe that SC will, incur debts and liabilities (including, without
limitation, contingent liabilities and other commitments) beyond SC's ability to
pay such debts as they mature
35
(taking into account the timing and amounts to be payable on or in respect of
SC's obligations).
(t) SC has not sustained any loss or interference with its business
from fire, explosion, flood or other calamity, or from any labor dispute or
governmental action, order or decree, nor has there been any material adverse
change, nor any other development or event that, in each case, may have an
Individual Material Adverse Effect.
(u) The Security Documents, when duly executed and delivered, and (to
the extent required or contemplated) filed or recorded, will create a valid and
enforceable first priority perfected security interest in SC's right, title and
interest in and to the rights and properties described therein, as to which
perfection may be effected by such filing or recording, for the benefit of the
Lender, subject only to Permitted Exceptions.
(v) SC is not (1) an "investment company" or a company "controlled" by
an "investment company," within the meaning of the Investment Company Act of
1940, as amended, (2) a "holding company" or a "subsidiary company" of a
"holding company" or an "affiliate" of either a "holding company" or a
"subsidiary company" within the meaning of the Public Utility Holding Company
Act of 1935, as amended, nor (3) subject to any other federal or state law or
regulation which purports to restrict or regulate its ability to borrow money.
(w) There exists no Event of Default or Potential Event of Default.
(x) To SC's Best Knowledge, no representation or warranty made by it in
any Transaction Document, and no schedule, exhibit, certificate, written
statement, list, document or other material furnished or to be furnished to the
Lender pursuant to or in connection with any such Transaction Document or any of
the transactions contemplated thereby contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading.
(y) There is no offset, defense, counterclaim or right to rescission
with respect to the SC Note or the other Transaction Documents.
(z) All Ground Rent, taxes and governmental assessments currently due
and owing in respect of, and affecting, the SC Property, have been paid, or an
escrow of funds in an amount sufficient to cover such assessments has been
established with the Servicer or title insurance company.
(aa) There is no Action pending, or, to SC's Best Knowledge,
36
threatened, for the total or partial condemnation of any of the SC Property, and
except for ADA Compliance Work, Deferred Maintenance and Other Work, and
Environmental Remediation Work, the SC Property is in good repair and free and
clear of any damage that could affect materially and adversely the value of the
SC Property as security for the SC Note or the use for which the SC Property was
intended.
(ab) Insurance required to be maintained pursuant the Insurance
Requirements is in effect; and the SC Property and the use and operation thereof
constitute a legal use under applicable zoning regulations and comply in all
respects with all applicable Legal Requirements.
(ac) To SC's Best Knowledge, the amounts deposited in the Capital
Expenditure and FF&E Reserve Account for ADA Compliance Work, Deferred
Maintenance and Other Work, and Environmental Remediation Work are sufficient
for their intended purposes.
(ad) The SC Property is not listed in, or, to SC's Best Knowledge and,
based on a certification to it by the Manager, of the Manager, proposed for
listing in, the United States Environmental Protection Agency's National
Priorities List of sites or any other comparable list of sites maintained by any
state or local governmental agency.
(ae) The SC Property is not subject to any Lien or claim for Lien in
favor of any Governmental Authority or any other Person as a result of any
Hazardous Substance (as such term is defined in the Environmental Indemnity
Agreement) on, in or affecting the SC Property.
(af) The SC Property is not subject to any collective bargaining or
other union contracts.
(ag) Each of SC and the General Partner has (a) not sought or consented
to any dissolution, winding up, liquidation, consolidation, merger or sale of
all or substantially all of its assets, (b) not failed to correct any known
misunderstanding regarding its separate identity, (c) maintained its accounts,
books and records separate from those of any other Person (except that, for
accounting and reporting purposes, SC or the General Partner may be included in
the consolidated financial statements of Host Marriott in accordance with
generally accepted accounting principles), (d) maintained its books, records,
resolutions and agreements as official records, (e) not commingled its funds or
other assets with those of any other Person (except as specifically contemplated
by the Cash Management Procedures) and has held its assets in its own name, (f)
conducted its business in its name (except that the SC Property is operated
under the name "Marriott" and SC or the General Partner may have registered
"doing business" names in certain states), (g) maintained its financial
statements,
37
accounting records and other entity documents separate from those of any other
Person (except that, for accounting and reporting purposes, SC or the General
Partner may be included in the consolidated financial statements of Host
Marriott in accordance with generally accepted accounting principles), (h)
except as contemplated by that certain Interest Rate Lock Agreement, dated
August 1, 1996, with NACC, paid its own liabilities out of its own funds and
other assets, (i) observed all partnership and corporate formalities, as the
case may be, (j) not assumed or guaranteed or become obligated for the debts of
any other Person or held out its credit as being available to satisfy the
obligations of any other Person (other than as permitted by the Transaction
Documents), (k) not acquired obligations or securities of its partners or
shareholders, as the case may be (other than, with respect to the General
Partner, a note of its corporate parent, Marriott Properties, Inc.), (l)
allocated fairly and reasonably any and all overhead expenses and other common
expenses for facilities, goods or services provided jointly to multiple entities
and used separate stationery, invoices and checks from those of any other
Person, (m) not pledged any of its assets for the benefit of any other Person
other than the Lender (except for Purchase Money Security Interests or as
otherwise permitted by the Transaction Documents), (n) held and identified
itself as a separate and distinct entity under its own name and not as a
division or part of any other Person (i.e., an integral component of such other
Person, as distinguished from a separate entity), but the operations of SC and
the General Partner are consolidated with those of HMC and its affiliates as
described in clause (c) above, (o) not made any loans to any other Person (other
than, with respect to the General Partner, any HMH SC Debt Service Advances),
(p) not identified its partners or shareholders, as the case may be, or any of
its Affiliates as a division or part of it (i.e., an integral component of such
entity, as distinguished from a separate entity), (q) not entered into or become
a party to any transaction with its partners or shareholders, as the case may
be, or any of its Affiliates except in the ordinary course of its business and
on terms which are fair and are no less favorable to it than would be obtained
in a comparable arms' length transaction with an unrelated third party, (r) not
filed a bankruptcy or insolvency petition or otherwise instituted insolvency
proceedings with respect to itself or to any other entity in which it has a
direct or indirect legal or beneficial ownership interest (and with respect to
the General Partner, without affirmative vote of all of its directors, including
the Independent Director), (s) maintained adequate capital in light of its
contemplated business operations, (t) not engaged in any business activity other
than as stated in Section 2.03 of the Amended and Restated Agreement of Limited
Partnership of SC and Article THIRD of the Restated Certificate of Incorporation
of the General Partner, as the case may be, and (u) maintained an arms' length
relationship with partners, affiliates and any other party furnishing services
to it; provided, however, that (A) separate financial statements for the General
-------- -------
Partner have
38
not previously been produced on a regular basis, but the financial records of
the General Partner have been and will remain adequate to permit production of
such separate financial statements (including a balance sheet and statements of
income and changes in financial position) for past periods if it hereafter
becomes necessary to produce such financial statements, and separate financial
statements for the General partner will hereafter be prepared on a quarterly
basis; (B) because of the limited nature of the General Partner's operations it
has not previously maintained separate deposit accounts in its own name, but,
effective immediately, it will establish and maintain such accounts, consistent
with the representations, warranties and covenants contained in Sections 5.1(ag)
and 5.2(z) of the Loan Agreements and (C) certain transaction and overhead costs
incurred by HMC, SC and/or the General Partner may not heretofore have been
fully allocated among HMC, SC and/or the General Partner but such costs
hereafter will be fairly and reasonably allocated.
(ah) The Permitted Exceptions do not materially and adversely affect
(1) SC's ability to pay in full the principal and interest on the SC Note in a
timely manner or (2) the use of any of the SC Property for the use currently
being made thereof, the operation of the SC Property as currently being operated
or the value of the SC Property.
(ai) [Intentionally omitted]
(aj) To SC's Best Knowledge, it has no material contingent liabilities.
(ak) SC has no material financial obligation under any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which it is a party or by which it or the SC Property is bound, other than
obligations (i) incurred in the ordinary course of the operation of the SC
Property and (ii) under the Transaction Documents.
(al) SC has not borrowed or received debt financing that has not been
heretofore or contemporaneously herewith repaid in full, other than Purchase
Money Security Interests permitted by the provisions of this Agreement.
(am) To SC's Best Knowledge, none of its principals, or the General
Partner, or officer authorized to execute and deliver an Officer's Certificate,
has ever been indicted and/or convicted of a felony under any federal, state or
foreign laws.
(an) There are no pending or, to SC's Best Knowledge, proposed, special
or other assessments for public improvements or otherwise affecting the SC
Property, nor, to SC's Best Knowledge and, based on a certification to it by the
Manager, to the knowledge of the Manager, are there any contemplated
improvements
39
to the SC Property that may result in such special or other assessment.
(ao) All of the rooms at the Hotel are in service, except for rooms
that are temporarily out of service for routine maintenance and repair.
(ap) SC has or anticipates that it will have sufficient funds available
to it for implementing its reasonably anticipated Capital and FF&E Expenditures.
Section 5.2 Affirmative Covenants. So long as any of the SC Debt
---------------------
remains outstanding, SC shall:
(a) do all things necessary to keep in full force and effect its valid
existence as a limited partnership and to qualify to do business in each
jurisdiction in which such qualification is necessary to the conduct of SC's
business or to protect the validity and enforceability of the Transaction
Documents;
(b) do all things necessary to enable SC to comply with all applicable
legal, fiscal and accounting rules and regulations;
(c) keep proper books of account and records in which full, true and
correct entries in accordance with GAAP shall be made of all transactions in
relation to its business and activities; allow the Lender access to such books
of account and records at all reasonable times during normal business hours upon
reasonable notice; and permit the Lender to discuss its affairs, finances and
accounts with any of the management employees of the General Partner;
(d) furnish to the Lender:
(i) not later than 120 days after the end of each Fiscal Year,
audited financial statements (including SC's balance sheet,
income statement and statement of cash flows), prepared in
accordance with GAAP consistently applied, audited by a "Big
Six" accounting firm;
(ii) not later than 27 days after the end of each Accounting Period
(i) unaudited financial statements substantially in the form of
Exhibit I(1) attached hereto/1/, covering such Accounting
------------
Period and the annual amount for the period to date showing in
detail for the Hotel, among other things, a breakdown of sales
revenues and operating expenses and the calculation of house
profit,
- -------------------------
/1/ Format 90, Rent Letters and Rent Letter Detail.
40
average room and average occupancy rates, each of the
foregoing with a comparison to budget and prior year, (ii) an
unaudited profit and loss statement and escrow analysis on a
consolidated basis in the form of Exhibit I(2) attached hereto,
------------
and (iii) unaudited periodic and year-to-date reports detailing
for the SC Property the calculation of Operating Profit
substantially in the form of Exhibit I(3) attached hereto;
------------
(iii) not later than 60 days after the end of each Accounting
Quarter, quarterly and year-to-date unaudited financial
statements (including, without limitation, SC's balance sheets,
income statements, statements of cash flows and such other
quarterly financial information as is provided to the limited
partners of SC);
(iv) such other reports and other documents as shall be
replacements of the foregoing, which reports and other
documents shall not contain less detail than that provided for
in clauses (i), (ii) and (iii) above;
(v) together with the financial statements provided for in clauses
(ii) and (iii) above and not later than 27 days after the end
of each Fiscal Year, an Officer's Certificate of a senior
executive of the General Partner stating that such financial
statements fairly present the financial position and results of
operations of SC and stating whether or not the signer thereof
knows of any Event of Default;
(vi) on or before January 20 of each year commencing on January 20,
1997, an annual plan (the "Annual Plan") for such year for the
-----------
SC Property which annual Plan shall include a detailed
operating budget (an "Operating Budget") and a detailed capital
----------------
expenditure budget (a "Capital Budget"), reflecting the
--------------
Manager's best good faith estimate of its anticipated results
of operations, including revenues from all sources, all
operating expenses, management fees, Management Expenses, and
Capital and FF&E Expenditures. The Annual Plan shall contain
provisions for deposit into the Capital Expenditure and FF&E
Reserve Account of an aggregate amount equal to at least 4% or
5% of projected Gross Revenues for each year, the specific
percentage to be determined by the requirements for such
purpose of the Management Agreement relating to the SC
Property.
41
(vii) copies of all rent letters, rent letter detail, Format 90s and
other monthly reports prepared by the Manager relating to the
SC Property promptly upon receipt thereof; and
(viii) such other information and reports as shall be reasonably
requested by the Lender or the Rating Agencies.
(e) (i) if SC has the right under the Management Agreement to
approve any aspect of each Annual Operating Projection or the
Repairs and Equipment Estimate (as such terms are defined in
the Management Agreement) or any other budget, submit each of
the foregoing to the Lender for its approval;
(ii) submit to the Lender for its approval the Building Estimate
(as such term is defined in the Management Agreement); and
(iii) the Lender's review and approval of each of the foregoing
shall not be unreasonably withheld or delayed.
(f) take all reasonable actions necessary so that SC is not required to
register as an investment company under the Investment Company Act of 1940, as
amended;
(g) promptly inform the Lender in writing of the following:
(i) SC becoming aware of the commencement of any rule making or
disciplinary proceeding or the promulgation of any proposed or
final rule affecting SC or the SC Property (other than a rule
or proceeding which has general applicability to Persons
including SC and is not likely to have a Material Adverse
Effect);
(ii) SC becoming aware of the commencement of any Action by or
against SC or with respect to the SC Property before any
Governmental Authority or arbitration board, or the written
threat of any such Action;
(iii) the receipt of written notice from any Governmental Authority
that (1) SC is being placed under regulatory supervision, (2)
any Permit material to the conduct of its business is to be
suspended or revoked or (3) SC is to cease and desist any
practice, procedure or policy it employs in the conduct of its
business;
(iv) the receipt of written notice from the Manager that
42
SC has not complied with any of its obligations under the
Management Agreement or altering in any material respect the
rules, standards and requirements of the Manager thereunder;
and
(v) SC becoming aware of any facts or circumstances which with
the giving of notice or the lapse of time or both would give
rise to a default under the Ground Lease and all written
notices, from the ground lessor with respect to a default,
potential default or event of default under the Ground Lease.
(h) generally pay its debts as they become due;
(i) do or cause to be done all things necessary to establish, perfect,
maintain and continue the perfection and first priority (subject to Permitted
Exceptions) of the security interest of the Lender in the Pledged Property and
pay the costs and expenses of all filings and recordings and all searches
necessary to establish and determine the validity and the priority of such
security interest;
(j) subject to Section 2.2, pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, all taxes, assessments and
governmental charges levied or imposed upon SC or upon its income, profits or
property (including the SC Property);
(k) subject to Section 2.2, pay or cause to be paid all operating
expenses and all other costs and expenses associated with the operation and
maintenance of the SC Property in accordance with the Annual Operating
Projections, Repairs and Equipment Estimate, and Building Estimate in accordance
with the provisions of the Management Agreement;
(l) complete all items of Deferred Maintenance and Other Work, ADA
Compliance Work and Capital and FF&E Expenditures as set forth in the
preliminary Capital Budget for the year ended December 31, 1997, attached hereto
as Exhibit H (as such Capital Budget may be amended pursuant to the provisions
---------
of Section 5.2(d)(vi)), from funds deposited in the Capital Expenditure and FF&E
Reserve Account prior to the dates specified in Exhibit H and, to the extent
---------
necessary for such completion, from remaining cash flow;
(m) pay over to the Servicer for application pursuant to the SC
Mortgage, Insurance Proceeds and Condemnation Proceeds (except as otherwise
provided in the SC Mortgage);
(n) complete as promptly as possible all Deferred Maintenance and Other
Work, ADA Compliance Work, and Environmental Remediation Work (under the
supervision of a licensed architect or engineer, if the item of work requires
the expenditure of at least $100,000 or
43
if such supervision is required by Legal Requirements), and in a good and
workmanlike manner, using materials comparable in quality to the original
installation and all items of Capital and FF&E Expenditures as set forth in the
preliminary Capital Budget for the year ending December 31, 1997 attached hereto
as Exhibit H (as such Capital Budget may be amended pursuant to the provisions
---------
of Section 5.2(d)(vi)) and the then effective Annual Operating Projection,
Building Estimate, or Repairs and Equipment Estimate (as such terms are defined
in the Management Agreement) under the supervision of a licensed architect or
engineer or comparable professional, as appropriate, and in all events, complete
all such work as required under the Management Agreement and this Agreement and
any additional work that shall be necessary to maintain standards at least as
high as those standards that apply generally to first class full service hotels
in compliance with Marriott standards and the Management Agreement. Any work to
be completed in accordance with this provision shall be completed despite the
insufficiency, if any, of funds in the Capital Expenditure and FF&E Reserve
Account to complete such work;
(o) promptly on request, furnish to the Lender copies of all material
contracts, bills of sale, statements, receipted vouchers and agreements in SC's
possession or control under which SC claims title to any materials, fixtures or
articles of personal property used in construction at or operation of the SC
Property;
(p) cause the Manager to operate the SC Property as a hotel open for
business under the Management Agreement;
(q) promptly on request, from time to time, deliver to the Lender a
statement setting forth all of the accounts SC or the Manager maintains with
respect to the Hotel and the SC Property, the purposes of such accounts and the
balances thereof;
(r) maintain or cause to be maintained each of the Transaction
Documents and Operational Agreements relating to the SC Property to which it is
a party in full force and effect, and observe and perform or cause to be
observed or performed all of its obligations thereunder;
(s) maintain or cause to be maintained each of the liquor licenses and
all other Permits in connection with the Hotel in full force and effect (and
replace any thereof that may be cancelled or otherwise lapsed), and observe and
perform or cause to be observed or performed all of SC's obligations thereunder;
(t) comply with and cause the SC Property to be in compliance with all
Legal Requirements and all Insurance Requirements;
(u) give the Lender prompt notice upon the discovery, to SC's Best
Knowledge, of the occurrence of any Potential Event of Default or Event of
Default;
44
(v) give the Lender prompt notice of any Change of Control;
(w) ensure that the Manager pays all trade indebtedness within 60 days
of the date incurred except for such trade indebtedness that is subject to a
bona fide dispute;
- ---- ----
(x) ensure that the General Partner shall have an Independent Director
acceptable to the Lender at all times or, if the Independent Director has
resigned, shall not take any action which may not be taken pursuant to the
organizational documents of the General Partner without the consent of the
Independent Director;
(y) provide to the Lender not less than (10) days prior to the
execution thereof, a true and complete copy of any proposed amendment to SC's
Amended and Restated Agreement of Limited Partnership (other than amendments of
a ministerial nature that will not have any adverse impact on the Lender, the
value of the Pledged Property, the validity or priority of the Lender's security
interest therein, or any of the Lender's rights or remedies under the
Transaction Documents);
(z) ensure that the representations and warranties contained in Section
5.1(a) and 5.1(ag) remain true and accurate at all times;
(aa) shall operate the SC Property in accordance with the then
effective Annual Plan; provided, however, that SC may make Emergency
Expenditures not reflected in the then effective Annual Plan if it gives the
Lender prompt notice of any such Emergency Expenditures; and
(ab) comply with the terms and provisions of the Ground Lease.
Section 5.3 Negative Covenants. So long as any portion of the SC Debt
------------------
shall remain outstanding, except as expressly permitted in this Agreement, SC
shall not, without the prior consent of the Lender,
(a) purchase any real properties other than the SC Property, have any
assets or liabilities other than assets or liabilities derived from or related
to the SC Property, or engage in any business or undertake any activity other
than as permitted herein, including, without limitation, the operation, as a
lessee or otherwise, of any property other than the SC Property;
(b) have any interest in any Person;
(c) amend, supplement or otherwise modify its Amended and Restated
Agreement of Limited Partnership in any way that would cause a breach of the
covenants in this Agreement;
45
(d) Grant any of the Pledged Property other than as permitted in the
Transaction Documents and pursuant to the Permitted Exceptions; provided,
--------
however, that SC may sell or otherwise dispose of personalty or fixtures from
- -------
time to time constituting portions of the SC Property so long as such personalty
or fixtures are replaced by personalty or fixtures of equal or better quality to
those sold or otherwise disposed of and except for immaterial amounts of
personalty disposed of in the ordinary course of business and items that need
not be replaced to continue the then existing level of quality of operation;
(e) dissolve, liquidate, merge or consolidate with any Person (and SC
agrees that upon any dissolution, liquidation, merger or consolidation in breach
of this clause (e), the Pledged Property shall continue to be held under and
otherwise subject to the Lien of the Security Documents until the SC Debt is
paid in full);
(f) permit the validity or effectiveness of any of the Transaction
Documents or, unless replaced with other necessary agreements that do not have
an Individual Material Adverse Effect, any of the Operational Agreements to
which it is a party to be impaired or permit the Lien of the Security Documents
to be amended, hypothecated, subordinated, terminated or discharged or permit
any Liens to be created on or extend to or otherwise arise upon or burden the
Pledged Property or any part thereof or any interest therein or the proceeds
thereof (other than any Permitted Exceptions);
(g) take any action if such action is likely to interfere with the
enforcement of any rights of the Lender under the agreements or instruments
relating to any of the Pledged Property;
(h) incur any Indebtedness other than (a) the SC Debt, (b) Subordinate
Debt, (c) Indebtedness incurred in connection with the Hotel Expansion pursuant
to Section 5.6(c), (d) unsecured Indebtedness incurred (i) in connection with
capitalized equipment leases as expressly permitted by Section 8.02C of the
Management Agreement or (ii) to provide (a) working capital (including loans for
such purpose that may be made by the Manager and/or the General Partner), in an
aggregate amount, which when added to the outstanding balance of previous
indebtedness incurred and outstanding for such purpose, shall not exceed the
average amount of its Management Expenses for each Accounting Period during the
preceding full 13 Accounting Periods and (b) funds (including loans for such
purpose that may be made by the Manager and/or the General Partner) to the
Servicer where required to pay the Monthly Debt Service Payment and other
amounts permitted under the Cash Management Procedures; provided, however, that
-------- -------
in the case of indebtedness incurred pursuant to clause (ii) the payee of such
indebtedness shall agree not to assert any remedies with respect to the
non-payment thereof so long as the MHP Debt and the SC Debt is outstanding or
(e) Indebtedness covered by Purchase Money Security
46
Interests, in an aggregate amount not to exceed $817,669 outstanding at any
time;
(i) enter into any Equipment Lease other than solely with the supplier
of the furnishings, fixtures or equipment subject to such lease or sell any such
furnishings, fixtures, or equipment to any third party under a "Sale Leaseback"
arrangement;
(j) terminate, amend or modify any Operational Agreements to which it
is a party if the same would have an Individual Material Adverse Effect;
(k) (a) maintain, sponsor, contribute to or become obligated to
contribute to, or suffer or permit any ERISA Affiliate to maintain, sponsor,
contribute to or become obligated to contribute to, any Plan or any Welfare Plan
or (b) permit its assets to become "plan assets," whether by operation of law or
under regulations promulgated under ERISA;
(l) engage in any transactions with its Affiliates except, on terms at
least as favorable to it as those obtainable from unrelated third parties acting
in their own best interests and without duress and which, taken singly or in the
aggregate, would not reasonably be expected to have an Individual Material
Adverse Effect;
(m) (A) cancel, release, terminate or surrender the Management
Agreement or permit any cancellation, release, termination or surrender thereof
or (B) amend, modify or alter the terms of the Management Agreement in any
material respect; provided, however, that SC may cancel, release, terminate,
-------- -------
surrender, amend, modify or alter the Management Agreement in connection with
the replacement of the Manager if, before the date on which the Manager ceases
to be the Manager of the Hotel, (i) it causes such Hotel to come under
management by a nationally recognized hotel operator acceptable to the Lender,
in the exercise of its reasonable discretion, (ii) the Hotel continues to be
part of a comparable nationally recognized hotel system acceptable to the
Lender, and (iii) each of the Rating Agencies delivers to the Lender a Rating
Comfort Letter;
(n) Modify, amend or waive any terms or provisions of the Ground Lease
other than to cure any ambiguity or to effect any other ministerial change
therein; provided, however, that such action shall not adversely affect the
interests of the Lender;
(o) permit the ground lessor under the Ground Lease to make payments on
the SC Debt;
(p) permit the General Partner to amend its Restated Certificate of
Incorporation (other than amendments of a ministerial nature that will not have
an adverse impact on the
47
Lender, the value of the SC Property or its obligations under this Agreement or
the other Transaction Documents); or
(q) make any distributions of cash to its partners, except as expressly
contemplated by the Cash Management Procedures if in the reasonable judgment of
the General Partner such funds will be necessary for expenses to be borne by SC
pursuant to Section 8.03 of the Management Agreement or for expenses
contemplated by Section 8.02 of the Management Agreement for which funds are not
available in the Capital Expenditure and FF&E Reserve Account.
(r) take any action in furtherance of, or stating its consent to,
approval of, or acquiescence in, any of the acts set forth above.
Section 5.3A. So long as any portion of the MHP Debt and SC Debt shall
remain outstanding, the General Partner shall not (a) incur any Indebtedness
except in its capacity as the general partner of MHP and SC or withdraw as a
general partner of MHP or SC unless the remaining or substitute general partner
satisfies the single purpose entity criteria of the Rating Agencies and the
Rating Agencies have delivered a Rating Comfort Letter.
Section 5.4 Further Assurances. SC shall execute and deliver or cause
------------------
to be executed and delivered, all such additional instruments, and do, or cause
to be done, all such additional acts as (i) may be necessary or proper, to carry
out the purposes of this Agreement and to make subject to the Lien of the
Security Documents any property intended so to be subject, including, without
limitation, the delivery of such instruments and documents, including
confirmatory and corrective mortgages, financing statements and continuation
statements under the Uniform Commercial Code of each applicable jurisdiction,
and the delivery of such updated mortgagee's title insurance policies or
endorsements (or commitments therefor) in favor of the Lender as may be
reasonably required to confirm and/or secure continued coverage under the title
policies issued to the Lender in respect of the SC Property or the SC Mortgage,
including payment of all fees and title insurance premiums required to maintain
such continuity of title insurance coverage, (ii) may be necessary or proper to
transfer, in whole or in part, to any assignee of the Lender the estate, powers,
instruments and funds held in trust hereunder and to confirm the Security
Documents, or (iii) the Lender may reasonably request in connection with the SC
Loan; provided, however, that such instruments shall contain express
unconditional exculpations of the Partners and SC's officers, employees or
agents and any of their successors or assigns exculpating such Persons from any
liability arising under or by reason of their obligations, covenants,
representations, warranties and agreements contained in such instruments,
subject to the exceptions set forth in the definition
48
of Non-Recourse. If, in connection with the Securitization, SC is required to
furnish newly issued title policies with respect to the SC Property, the Lender
shall bear the cost thereof.
Section 5.5 Representations, Warranties and Covenants of NACC. NACC
-------------------------------------------------
represents and warrants to, and agrees with SC, that, as of the Closing Date:
(i) it has the power and authority to perform its obligations under this
Agreement and the other Transaction Documents, (ii) this Agreement and the other
Transaction Documents have been duly authorized, executed and delivered by NACC,
and constitute valid and legally binding instruments enforceable against NACC in
accordance with their respective terms, subject to the effects of bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally and general equitable principles (whether
considered in a proceeding in equity or at law), and (iii) it has such
knowledge, sophistication and experience in financial and business matters as to
be capable of evaluating the merits and risks of an investment in the SC Note,
is able to bear the economic risk of an investment in the SC Note and is an
"accredited investor" within the meaning of Section 2(15) of the Securities Act
and (iv) no part of the SC Loan shall be deemed "plan assets" within the meaning
of ERISA.
Section 5.6 Other.
-----
(a) Neither SC nor any Person acting on behalf of SC has dealt with any
broker or any other Person entitled to a fee or commission in connection with
the SC Loan and SC shall indemnify and hold NACC and its Affiliates harmless
from and against any claims or commissions, finder's fee and other payments, no
matter how described, and against any and all costs and expenses including,
without limitation, reasonable attorneys' fees relating to any such claim.
(b) Notwithstanding anything in the Management Agreement, SC, the
Lender, the Servicer and the Trustee may disclose information regarding such
agreements and the operation of the Hotels, and provide copies of such
agreements and any financial statements or reports delivered by the Manager
pursuant to such agreements or the requirements of Section 5.2(d) to holders of
the SC Loan or the Securities, and any counsel to or agents, officers,
employees, and representatives of any such holder, and may disclose and describe
the terms hereof and thereof in any offering memorandum, prospectus, or
registration statement or other filing required under applicable law, provided,
--------
however, that the Servicer, the Lender, and the Trustee shall implement
- -------
procedures that comply with the agreements contained in Section 14 of the SNDA.
(c) SC has informed the Lender of its desire to consider the
49
expansion of the Hotel ("Hotel Expansion"). SC may undertake the Hotel Expansion
upon delivery to the Lender of:
(i) an Officer's Certificate stating that the Hotel Expansion is
not likely to have a material adverse effect on (x) SC's ability to
enter into or fulfill its material obligations under the Transaction
Documents or to effect the transactions contemplated thereby or (y) the
condition (financial or otherwise), business, prospects, assets,
liabilities, management, financial position or results of operations of
the Hotel;
(ii) documentation reasonably satisfactory to the Lender that the
Hotel Expansion is not being financed by SC with secured or unsecured
indebtedness except to the extent permitted by the Transaction Documents
or specifically permitted in the Rating Comfort Letter delivered to the
Lender pursuant to clause (vi) below;
(iii) updated surveys and endorsements to the applicable title
policies indicating that the Hotel Expansion will be constructed
entirely within the boundaries of the SC Property, and will become part
of the SC Property encumbered by the lien of the applicable SC Mortgage
and the other Security Documents;
(iv) an Officer's Certificate stating that there will be no Change
in Control due to the Hotel Expansion or an updated Substantive
Consolidation Opinion if a Change in Control may occur from an issuance
or transfer of equity interests in SC related thereto;
(v) such insurance, construction bonds, completion guaranties and
other documentation and assurances that the Lender the may reasonably
require to protect the collateral and security interests granted therein
to the Lender under the Transaction Documents during the construction of
the Hotel Expansion; and
(vi) a Rating Comfort Letter with respect to the Hotel Expansion.
It is understood that the Hotel Expansion may include the elimination
of a portion of the existing guest rooms and the placing of a portion of the
guest rooms out of service during construction. While the Lender does not and
cannot commit at this time to provide any such financing, the Lender agrees to
use good faith efforts to assist SC in structuring the financing required for
the Hotel Expansion and in obtaining the Rating Comfort Letter required for the
Hotel Expansion. SC shall pay all costs and expenses incurred by the Lender in
connection with the Hotel Expansion.
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ARTICLE
SECURITIZATION
Section 6.1 Securitization. SC and the General Partner shall use
--------------
commercially reasonable best efforts to cooperate with NACC in its activities in
connection with the sale of the SC Loan as a whole loan or any securitization of
the SC Loan (the "Securitization"), including obtaining ratings by the Rating
--------------
Agencies. The Securitization will involve the issuance of rated single- or
multi-class securities secured by or evidencing ownership interests in the
Transaction Documents (the "Securities"). Such cooperation shall include,
----------
without limitation, the obligation to:
(a) maintain the ownership of the SC Property in an entity that permits
it to comply with its obligations under clauses (x) and (z) of Section 5.2;
(b) to the extent permitted under SC's Amended and Restated Agreement
of Limited Partnership without the consent of its limited partners, structure
and maintain its organizational, operational and financial affairs and the
affairs of the General Partner (collectively, the "Entities") to enable its
--------
counsel to render a reasoned opinion if requested by the Rating Agencies in form
and substance customary or required for rating the Securities (the "Substantive
-----------
Consolidation Opinion") that upon a petition for bankruptcy under the United
- ---------------------
States Bankruptcy Code, neither Host Marriott as a debtor in possession nor its
bankruptcy trustees nor creditors should cause a court to order the substantive
consolidation of SC's assets and liabilities or those of the General Partner
with those of Host Marriott, which counsel and which opinion shall be
satisfactory to NACC and the Rating Agencies;
(c) provide such financial and other information with respect to it and
the SC Property as may be requested by the Rating Agencies or as may be
reasonably requested by NACC, including, without limitation, audits or
agreed-upon procedures of operating cash flow and Net Operating Income,
occupancy statistics, and average rents and quarterly and annual financial
statements for the SC Property (reviewed and in the case of annual financial
statements audited) by a firm of certified public accountants acceptable to NACC
and the Rating Agencies to the extent customarily given in similar transactions;
(d) prepare and deliver such agreements and instruments relating to the
SC Note, the Securities, the SC Property and the Entities, including (A)
agreements to indemnify the Rating Agencies, NACC and any servicer or trustee,
to the extent customarily given in commercial mortgage-backed securities
transactions, and (B) amendments of any of the Transaction Documents that are
necessary to effect the Securitization, in form
51
and scope satisfactory to the Rating Agencies and reasonably satisfactory to
NACC;
(e) perform or permit to be performed such appraisals, surveys, site
inspections, market studies, current environmental reviews and reports (Phase
I's, including, without limitation, testing for asbestos, lead paint or radon
gas and Phase II's and other environmental investigations recommended by
environmental consultants), structural engineering reports (which shall include
an analysis of requirements for deferred maintenance and ongoing capital
expenditure and furniture, fixtures and equipment reserve requirements), reviews
of property, casualty, business interruption, earthquake, flood, liability and
title insurance and other due diligence items customarily requested by
nationally recognized underwriters in connection with the origination and
securitization of comparably sized commercial real estate loans or by the Rating
Agencies in connection with rating the SC Loan or the Securities; provided,
--------
however, NACC shall use its best efforts to limit the circumstances under which
- -------
SC or the General Partner will be required to duplicate its efforts or third
party costs in complying with its obligations under this clause (e);
(f) provide business plans and budgets relating to the SC Property as
may be requested by the Rating Agencies;
(g) cause its counsel to render opinions (which may be reasoned
opinions) with respect to the SC Property, the Entities, and the Transaction
Documents as to bankruptcy remoteness and other matters customary in
securitization transactions, which may be requested by the Rating Agencies in
form and substance customary or required for rating the Securities which counsel
and which opinion shall be satisfactory to the Rating Agencies and reasonably
satisfactory to NACC; provided, however, that if the Rating Agencies request
-------- -------
opinions subsequent to the Closing Date in connection with the Securitization
that are materially different from the opinions delivered on the Closing Date,
the Lender shall bear the fees and expenses incurred by counsel in rendering
such opinions;
(h) make such representations and warranties with respect to the SC
Property, the Entities, and the Transaction Documents as are customary in
securitization transactions and as may be requested by the Rating Agencies and
reasonably requested by NACC and consistent with the facts covered by such
representations and warranties as they exist on the date thereof, including the
representations and warranties made in the Transaction Documents;
(i) cooperate with the Lender in providing to the Rating Agencies such
information as is customarily provided in connection with annual reviews
conducted in commercial mortgage backed securities transactions similar to the
Securitization;
52
(j) cooperate with NACC in the preparation, at NACC's cost, of a
private placement memorandum, prospectus, prospectus supplement or other
disclosure document to be used by NSI or any of its Affiliates to privately
place or publicly distribute the SC Loan as a whole loan or the Securities in a
manner and to the extent that the same satisfy the requirements of the
Securities Act and applicable state securities laws; and
(k) subject to the provisions of Section 5.6(b), permit NACC to provide
to the Rating Agencies, potential investors in the Securities and others as may
be required to effect the Securitization or the sale of the SC Loan as a whole
loan, the information provided to NACC by SC and the Manager and their
respective Affiliates in connection with the transactions contemplated by this
Agreement.
Any and all due diligence materials (including without limitation
appraisals, engineering reports and environmental reports) shall be addressed to
and shall run to the benefit of NACC and its successors and assigns, the Rating
Agencies and SC, and shall, upon delivery, become the property of NACC, its
successors and assigns and SC.
ARTICLE VII
PAYMENT OF FEES AND EXPENSES; INDEMNIFICATION
Section 7.1 Fees and Expenses.
-----------------
(a) SC shall pay or reimburse NACC and after the Securitization, NACC
and the Lender (in each case, without duplication) , on demand, without set-off,
withholding or deduction, for the payment of all of the reasonable fees, costs
and expenses incurred by NACC in connection with the underwriting, negotiation,
documentation and closing of the SC Loan, including, without limitation, the
finder's fee due to Nomura Securities International, Inc. ("NSI") as provided
---
for in that certain Finder's Fee Agreement, dated July 10, 1996, between MHP, SC
and NSI, and the fees, costs and expenses of the following:
(i) title insurance, transfer taxes (if any), mortgage taxes and
recording fees;
(ii) counsel and local counsel to SC;
(iii) counsel and local counsel to NACC, which shall be reasonable;
(iv) due diligence activities of NACC including, without
limitation, auditors, lien searches, surveys, appraisals,
environmental reports, engineering
53
reports, insurance reviews and site inspections;
(v) bank charges relating to the operation of the Lockbox Account,
the Capital Expenditure and FF&E Reserve Account, the Tax and
Insurance Account, the Cash Collateral Account, the Debt
Service Reserve Account, the Ground Rent Reserve Account and
the Operating Account; and
(vi) initial and ongoing activity of any special servicer incurred
as a result of an Event of Default; and
(vii) the Rating Agencies (for the annual ratings reviews).
(b) The Lender shall pay the initial and regular ongoing fees of the
Servicer and the Trustee and, except as set forth in Section 7.1(a), the costs
of any Securitization.
(c) SC has provided $500,000 to NACC for deposit in an interest bearing
account(the "Expense Deposit") for the payment of the fees, costs and expenses
---------------
payable pursuant to (i) Section 7.1(a) of this Agreement and (ii) Section 7.1(a)
of the SC Loan Agreement. If any portion of the Expense Deposit remains after
payment of such fees, costs and expenses, NACC shall pay such portion to SC
within 30 days after the closing of the SC Loan. The establishment of the
Expense Deposit shall not limit SC's obligations to pay the fees, costs and
expenses described in Section 7.1(a).
Section 7.2 Indemnification.
---------------
(a) SC, for itself and all those claiming under or through SC, to the
fullest extent permitted by law, hereby releases and shall defend, hold harmless
and indemnify NACC and after the Securitization, NACC and the Lender, and its
respective directors, officers, agents and employees, (together, the
"Indemnified Parties") from and against any and all liabilities, claims, costs,
-------------------
charges, losses, expenses or damages of any kind or nature, including reasonable
attorneys' fees and disbursements, which may arise in connection with (i) the
performance or non-performance by SC of any of the Transaction Documents, or
SC's operation of the SC Property and (ii) any breach or failure by SC to comply
with any representation, warranty or covenant it makes in any document it
furnished in connection with the transactions contemplated by the Transaction
Documents, in each case, except to the extent caused by the willful acts or
omissions, the gross negligence or bad faith of any Indemnified Party. It is
understood that if SC performs its obligations set forth in the Transaction
Documents strictly in accordance with the terms and provisions thereof, the
provisions
54
of clause (i) of the foregoing sentence in so far as they relate to the
performance by SC of any of the Transaction Documents shall not be applicable.
SC shall appear in and defend any Action that might in any way in the good faith
judgment of the Lender affect the value of the SC Property, the priority of the
SC Mortgage or the rights and powers of the Lender. Any sums due under this
Section 7.2 shall be payable by SC within 10 days of demand therefor with
evidence of the amount due and, if not paid within such 10-day period, shall
bear interest from the date of demand to the date of payment at the Default
Rate. SC shall pay the cost of suit, cost of evidence of title and reasonable
attorneys' fees and disbursements in any Action brought by the Lender to
foreclose the SC Mortgage including trial and any appeal with respect to any
such Action.
(b) SC hereby indemnifies and holds NACC and its controlling persons
and Affiliates, including, without limitation, NSI, harmless against all costs,
expenses and damages incurred by NACC and its controlling persons and affiliates
(including, without limitation, all liabilities under all applicable federal and
state securities laws) as a direct result of any untrue statement of a material
fact contained in the offering documents used in connection with the
securitization based on information provided by SC or the Manager, which
describes SC, the Manager and the SC Property (and the management thereof) or
any aspect of the SC Loan or the parties directly involved therein, or as a
result of any untrue statement of a material fact in any of the financial
statements of SC or those of the Manager incorporated into such offering
documents or the failure to include in such financial statements or in such
offering documents any material fact relating to SC, the Manager or the SC
Property (and the management thereof) and any aspect of the SC Loan necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading; provided that SC shall have had an opportunity
to review, comment on and approve the relevant portions of such offering
documents. SC shall act reasonably and promptly in connection with its approval
of the relevant portions of the offering documents. SC shall not indemnify NACC
for any cost, expense or damage incurred as a result of the inclusion of any
erroneous or misleading information in such offering documents, or the omission
of material information from the offering documents, provided that SC or its
counsel shall have previously indicated to NACC or its counsel the erroneous or
misleading nature of such information or the omission of material information,
as the case may be. At the time of the use of such offering documents, NACC
shall execute and deliver to SC an instrument (in form and substance reasonably
satisfactory to SC) indemnifying and holding SC, the General Partner (and the
officers and directors thereof), and its agents and employees harmless against
all costs, expenses and damages (other than costs and expenses specifically
agreed by SC to be borne by it)
55
incurred by them (including, without limitation, all liabilities under all
applicable federal and state securities laws) caused by and directly relating to
the offering described in such Offering Documents; provided, however, that such
indemnification shall not apply if any such costs, expenses or damages arise out
of or are based upon an untrue statement of a material fact or an omission to
state a material fact in such offering documents or in the financial statements
for which SC is providing indemnification as provided above.
(c) The obligations of SC under this Section 7.2 shall survive
termination of this Agreement.
(d) The provisions of the sixth and seventh paragraphs of that certain
Commitment Letter, dated July 10, 1996 are incorporated herein by reference to
the extent such provisions impose indemnification obligations on SC and NACC
that are more burdensome than those contained in this Section 7.2.
ARTICLE VIII
IMMUNITY
Section 8.1 Partners, Employees and Agents of SC Immune from Liability.
----------------------------------------------------------
Notwithstanding anything to the contrary herein, including, without limitation,
Article Seven, the obligations under each Transaction Document shall be
Non-Recourse.
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 9.1 Notices. All notices, requests, demands, consents, reports
-------
or other communications, including, without limitation, a tender of a cure
pursuant to Section 4.1B, to or upon the respective parties hereto shall be in
writing and be deemed to have been duly given or made when received, addressed
to the party to which such notice, request, demand, consent, report or other
communication is being given at its address set forth below, or at such other
address as any of the parties hereto may hereafter notify the others by notice
given hereunder:
If to NACC:
Nomura Asset Capital Corporation
2 World Financial Center, Building B
New York, New York 10281
Attention: Daniel S. Abrams, Director
Telecopier: (212) 667-1022
56
With a copy to:
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
Attention: Robert I. Fisher, Esq.
Telecopier: (212) 940-8776
and:
Nomura Asset Capital Corporation
2 World Financial Center, Building B
New York, New York 10281
Attention: Sheryl McAfee
Telecopier: (212) 667-1206
If to SC:
Santa Clara Marriott Hotel Limited Partnership
c/o Host Marriott Corporation
10400 Fernwood Road
Bethesda, Maryland 20817
Attention: Law Department 923
Deputy General Counsel
Telecopier: (301) 380-6332
With a copy to:
Santa Clara Marriott Hotel Limited Partnership
c/o Host Marriott Corporation
10400 Fernwood Road
Bethesda, Maryland 20817
Attention: Asset Management Department 908
Telecopier: (301) 380-8260
Evidence of such receipt shall include personal delivery, electronic
confirmation (hard copy to be sent by regular mail) and the failure to accept a
communication sent by registered or certified U.S. mail, postage prepaid.
Section 9.2 Benefit of Agreement. This Agreement shall be binding upon,
--------------------
inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto; provided, however, that SC may assign or transfer
any of its rights or obligations hereunder without the consent of the Lender
which may be withheld in the sole discretion of the Lender. Except as expressly
provided otherwise in this Agreement, any such assignment or transfer shall not
release SC from any obligations or liabilities hereunder. The Lender's interests
under the Transaction Documents shall be freely assignable and transferrable in
whole or in part. No party other than the parties hereto and
57
their permitted assigns shall be deemed to have any benefits or obligations
under this Agreement.
Section 9.3 Governing Law. This Agreement and the rights and
-------------
obligations of the parties under the Transaction Documents (except for the SC
Mortgage and the assignment of leases, rents and profits, dated the Closing
Date, from SC to the Lender which shall be governed by the law of the
jurisdiction in which the SC Property is located) shall be governed by the
internal laws of the State of New York.
Section 9.4 Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which when so executed and delivered shall be an
original, but all of which shall together constitute one and the same
instrument.
Section 9.5 Table of Contents, Descriptive Headings. The Table of
---------------------------------------
Contents to this Agreement and the descriptive headings of the several Sections
and Articles of this Agreement are inserted for convenience only and shall not
in any way affect the meaning or construction of any provision of this
Agreement. In the preparation of the Transaction Documents indistinguishable
contributions were made by representatives of NACC and SC, and each of the
Lender and SC waives any and all rights, either at law or in equity, to have the
provisions of any Transaction Document interpreted in favor of one over the
other based on a claim that representatives of one or the other were the
principal draftsmen thereof.
Section 9.6 Amendment or Waiver; Integration. No provision of this
--------------------------------
Agreement may be amended, changed, waived, discharged or terminated orally, but
only by an instrument in writing signed by the party against whom enforcement of
the amendment, change, waiver, discharge or termination is sought. This
Agreement and the other Transaction Documents set forth the entire agreement and
understanding of the parties with respect to the subject matter hereof and
thereof, and supersede any and all prior agreements and understandings of the
parties hereto with respect to the subject matter hereof and thereof including,
without limitation, that certain Finder's Fee Agreement and Commitment Letter,
each of which is dated July 10, 1996 and is between SC, MHP and NACC or NSI,
which prior agreements and understandings are terminated in all respects.
Section 9.7 Survival of Representations and Warranties; Reliance. All
----------------------------------------------------
representations and warranties contained in this Agreement and the
indemnification provisions hereof shall survive
58
the execution and delivery of this Agreement and the making of the SC Loan and
shall be considered to have been relied upon by the Lender regardless of any
investigation made by or on behalf of it.
Section 9.8 Returned Payments. If after receipt of any payment of all
-----------------
or any part of the SC Debt, the Lender is for any reason compelled to surrender
such payment to any Person because such payment is determined to be void or
voidable as a preference, an impermissible set-off, a diversion of trust funds
or for any other reason, this Agreement shall continue in full force, and SC
shall be liable to, and shall indemnify and hold the Lender harmless for, the
amount of such payment surrendered until the Lender shall have been finally and
irrevocably paid in full. The provisions of the foregoing sentence shall be and
remain effective notwithstanding any contrary action which may have been taken
by the Lender in reliance upon such payment, and any such contrary action so
taken shall be without prejudice to the Lender's rights under this Agreement and
shall be deemed to have been conditioned upon such payment having become final
and irrevocable.
SECTION 9.9 JURISDICTION AND SERVICE; WAIVER OF JURY TRIAL. EACH OF THE
----------------------------------------------
GENERAL PARTNER AND SC HEREBY (I) IRREVOCABLY CONSENTS AND SUBMITS ITSELF AND
ACKNOWLEDGES AND RECOGNIZES THE JURISDICTION OF THE COURTS OF THE STATE OF NEW
YORK LOCATED IN NEW YORK COUNTY AND THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK FOR PURPOSES OF ANY ACTION ARISING OUT OF, UNDER,
OR IN CONNECTION WITH, RELATING TO, OR BASED UPON ANY TRANSACTION DOCUMENT OR
THE SUBJECT MATTER THEREOF, (II) AGREES THAT SUCH COURTS SHALL BE THE SOLE AND
EXCLUSIVE COURTS AND FORUMS FOR THE PURPOSE OF ANY SUCH ACTION AND (III) WAIVES
AND AGREES NOT TO ASSERT, AS A DEFENSE OR OTHERWISE, IN ANY SUCH ACTION, ANY
CLAIM THAT SUCH COURTS DO NOT HAVE JURISDICTION OVER IT OR THAT SUCH ACTION IS
BROUGHT IN AN INCONVENIENT FORUM; PROVIDED, HOWEVER, THAT NOTHING CONTAINED
HEREIN SHALL LIMIT, IN ANY MANNER, THE RIGHT OF NACC TO INSTITUTE OR TAKE ANY
ACTION IN ANY COURT IN ANY JURISDICTION FOR THE PURPOSE OF PROTECTING,
PRESERVING OR REALIZING UPON ANY COLLATERAL, IF ANY, SECURING THE SC DEBT OR
ENFORCING ANY JUDGMENT OBTAINED BY IT IN CONNECTION WITH ANY TRANSACTION
DOCUMENT OR THE SUBJECT MATTER THEREOF. EACH OF THE GENERAL PARTNER, SC AND NACC
HEREBY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION ARISING OUT OF, UNDER,
OR IN CONNECTION WITH, RELATING TO, OR BASED UPON ANY TRANSACTION DOCUMENT OR
THE SUBJECT MATTER THEREOF, AND AGREES THAT PROCESS IN ANY SUCH ACTION, IN
ADDITION TO ANY OTHER METHOD PERMITTED BY LAW, MAY BE SERVED UPON IT BY
REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO THE GENERAL
PARTNER OR SC OR NACC AT THE ADDRESS SET FORTH IN SECTION 9.1 OR AT SUCH OTHER
ADDRESS AS THE GENERAL PARTNER OR SC OR NACC MAY DESIGNATE BY NOTICE, AND SUCH
SERVICE SHALL BE DEEMED EFFECTIVE AS IF PERSONAL SERVICE HAD BEEN MADE UPON IT
WITHIN NEW YORK COUNTY.
59
Section 9.10 Enforceability. Any provision of this Agreement which is
--------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, SC hereby waives any provision of law which renders any
provision hereof prohibited or unenforceable in any respect.
Section 9.11 Conflicting Terms. In the event of any direct conflict
-----------------
between any provision of this Agreement and any provision of any other
Transaction Document, this Agreement shall govern; provided, however, that (a)
notwithstanding the foregoing, the remedies contained in the SC Mortgage and any
other Transaction Document shall govern in the event of any direct conflict with
any remedy contained in this Agreement, and (b) the parties intend that the
terms and provisions of each of the Transaction Documents be given full effect,
and, accordingly, the provisions of the other Transaction Documents, to the
fullest extent possible, shall be construed to be additional and supplementary
to, and not in conflict with or in derogation of, the provisions of this
Agreement.
Section 9.12 Relationship of Parties. The relationship of SC to the
-----------------------
Lender is strictly and solely that of borrower and lender and mortgagor and
mortgagee and nothing contained in any Transaction Document is intended to
create, or shall in any event or under any circumstance be construed as
creating, a partnership, joint venture, tenancy-in-common, joint tenancy or
other relationship of any nature whatsoever between SC and the Lender other than
as borrower and lender and mortgagor and mortgagee. SC acknowledges that (a)
NACC engages in the business of real estate financings and other real estate
transactions and investments which may be viewed as adverse to or competitive
with the business of SC or its Affiliates, (b) it is represented by competent
counsel and has consulted counsel before executing this Agreement and (c) it
shall rely solely on its own judgement and advisors in entering into the
transactions contemplated hereby without relying in any manner on any
statements, representations or recommendations of NACC or any Affiliate of NACC
except as set forth in Section 5.5.
(Signature page follows)
60
IN WITNESS WHEREOF, SC and NACC have caused this Agreement to be signed
and delivered, all as of the day and year first above written.
NOMURA ASSET CAPITAL CORPORATION
By: /s/ Daniel S. Abrams
----------------------------------
Name: Daniel S. Abrams
Title: Director
SANTA CLARA MARRIOTT HOTEL LIMITED
PARTNERSHIP
By: Marriott MHP Two Corporation,
General Partner
By: /s/ Douglas W. Henry
-----------------------------
Name: Douglas W. Henry
Title: Vice President
61