Exhibit 10.7
FIRST AMENDMENT TO MANAGEMENT AGREEMENT
SAN ANTONIO RIVERCENTER MARRIOTT HOTEL
This Amendment ("Amendment") is effective as of the 23rd day of
September, 1996 ("Amendment Date") by MARRIOTT HOTEL PROPERTIES II LIMITED
PARTNERSHIP ("Owner"), a Delaware limited partnership, with a mailing address at
10400 Fernwood Road, Bethesda, Maryland 20817 and MARRIOTT HOTEL SERVICES, INC.
("Management Company") a Delaware corporation, with a mailing address at 10400
Fernwood Road, Bethesda, Maryland 20817.
WHEREAS, Owner, Marriott Hotels, Inc. (renamed Marriott International,
Inc.) and Marriott Corporation entered into that certain Management Agreement
("Management Agreement") executed as of March 20, 1989, which was assigned to
Management Company by that certain Assignment and Assumption of Agreements of
even date herewith, whereby Management Company has agreed to manage Owner's
hotel known as the San Antonio Rivercenter Marriott Hotel in San Antonio, Texas
("Hotel");
WHEREAS, Owner has entered into a Loan Agreement of even date herewith
with Nomura Asset Capital Corporation ("NACC") to refinance the Permanent Loan
on the Hotel; and
WHEREAS, the parties desire to modify the Management Agreement in
connection with such refinancing.
NOW, THEREFORE, the parties agree to amend the Management Agreement as
follows:
1. The first paragraph of the Management Agreement is amended to replace
"MARRIOTT CORPORATION" with "MARRIOTT INTERNATIONAL, INC."
2. Section 1.01, "Definition of Terms," is amended as follows:
a. The following definitions are added:
"Cash Management Procedures" shall mean the procedures set
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forth in the exhibit entitled "Cash Management Procedures",
which is an exhibit to that certain Modification,
Subordination and Non-Disturbance Agreement, Estoppel,
Assignment and Consent Among Manager, Owner, and NACC dated as
of the Amendment Date.
"Computer Lease" shall mean a lease or other agreement under
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which computer equipment located in the Hotel is leased to
Owner or to Manager, as agent for Owner (including the
license, if any, of operating software therefor).
"Debt Service Reserve Account" shall have the meaning ascribed
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to it in the Cash Management Procedures.
"Equipment Leases" shall mean all or any FF&E Leases,
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Telephone Leases, Computer Leases, TV System Leases and leases
of motor vehicles used primarily for transporting Hotel
guests.
"FF&E Lease" shall mean a lease of any FF&E located in the
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Hotel other than a TV System Lease, a Telephone Lease, a
Computer Lease, or a lease of a motor vehicle used primarily
for transporting Hotel guests.
"Manager Loans" shall have the meaning ascribed to it in
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Section 5.10 (which is added to this Management Agreement by
this Amendment).
"Servicer" shall have the meaning ascribed to it in the Cash
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Management Procedures.
"Telephone Lease" means any lease of the telephones and/or
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other telecommunication systems and equipment located in the
Hotel.
"TV System Lease" means a lease or other agreement under which
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equipment (excluding television sets) for the transmission
into Hotel rooms or televised programming is leased or
otherwise provided, regardless of whether such lease or other
agreement contains a right or option to purchase such
equipment.
b. The definition of "Permanent Loan," is amended in its entirety
to read as follows:
"Permanent Loan" shall mean the first mortgage indebtedness
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secured by the Hotel, the New Orleans Marriott Hotel, and the
San Ramon Marriott Hotel to be provided to Owner by NACC
pursuant to a Loan Agreement dated as of even date herewith,
secured by mortgages of even date herewith in an initial
amount not to exceed the principal amount of $222,500,000.00.
c. The definition of "Santa Clara Mortgage Debt" is amended in
its entirety to read as follows:
"Santa Clara Mortgage Debt" shall mean the first mortgage
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indebtedness secured by the Santa Clara Marriott Hotel to be
provided to the Santa Clara Hotel Limited Partnership by NACC
pursuant to a Loan Agreement dated as of even date herewith,
secured by mortgages of even date herewith in an initial
amount not to exceed the principal amount of $43,500,000.00.
2. Section 4.01, "Term," is amended as follows:
a. In the first sentence, "December 31, 2008" is replaced with
"December 31, 2018."
b. In the second sentence, "four (4) successive periods" is
replaced with "three (3) successive periods."
3. Section 5.03, "Payment of Incentive Management Fee and Deferred
Incentive Management Fee from Operating Profit," paragraph D, is
amended to add the following at the end thereof:
less the amount of any outstanding Manager Loans, which amount
shall be paid to Manager for repayment of such loans out of
the amount otherwise being retained by Owner pursuant to this
paragraph D.
4. Section 5.04, "Payment of Deferred Incentive Management Fee from Excess
Net Sale Proceeds," is amended by inserting the following at the end of
the first sentence:
; provided, however, that such amount retained by Owner shall
be less the amount of any outstanding Manager Loans, which
amount shall be paid by Owner to Manager out of the amount
otherwise being retained by Owner pursuant to this sentence.
5. Section 5.08 is amended by inserting "Manager Loans," before "Incentive
Management Fees" in the last sentence.
6. A new Section 5.10 is added as follows:
5.10 Manager Loans.
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Manager shall have the right, but not the obligation,
at any time and from time to time, to advance funds reasonably
needed for additional Working Capital, or to provide funds to
the Servicer for its use in making any payments or funding any
reserves, escrows or accounts provided for under the Cash
Management Procedures, or to make deposits into the Operating
Account for the above purposes. No Manager Loan shall be in an
amount which, when added to the outstanding balance of
previous such advances, would exceed the sum of (i) the
average amount of the Deductions for each Accounting Period
during the preceding full thirteen (13) Accounting Periods,
and (ii) an amount equal to the Hotel's pro rata share of one
Monthly Debt Service Payment then in effect (pro rata share
based on the proportion of the Hotel's Qualifying Mortgage
Debt to the amount of the Permanent Loan). Any such advances
shall be deemed a loan by Manager to Owner in such amount
(each, a "Manager Loan"), shall bear interest at one percent
(1%) above the Prime Rate, and shall be repayable by Owner out
of Operating Profit in the priority set forth
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in Section 5.03, and Net Sales Proceeds and Net Refinancing
Proceeds in the priority set forth in Section 5.04, and as
provided in Section 5.08, or out of other funds available to
Owner. Owner shall evidence any such loan by executing a
promissory note payable to Manager in the principal amount of
each such loan and bearing interest as aforesaid. Each such
note shall be payable upon the earlier of (i) ten (10) years
from the date of such advance (or as otherwise provided in the
Cash Management Procedures), or (ii) the sale of the Hotel;
and, during the term of this Agreement, shall be payable out
of Operating Profit, and Net Sales Proceeds, and as provided
in Section 5.08.
7. Section 7.01, "Working Capital and Inventories," is amended by deleting
the third sentence through the end of the provision, and replacing it
with the following:
Owner shall from time to time after the Amendment Date advance
within fifteen (15) days after receipt of Manager's written
request any additional funds necessary to maintain Working
Capital and Inventories at levels determined by Manager to be
necessary to satisfy the needs of the Hotel as its operations
may from time to time require. In the event Owner fails to
advance additional Working Capital within said fifteen (15)
day period, Manager may, in addition to any other rights or
remedies available to it at law or in equity: (i) retain the
required amounts from any portion of Operating Profit
otherwise to be retained by Owner (consistent with the Cash
Management Procedures, if applicable), (ii) make a Manager
Loan to Owner in accordance with Section 5.10, or (iii)
terminate this Agreement upon not less than thirty (30) days
written notice to Owner. With the exception of the outstanding
balance of all Working Capital advances made as Manager Loans,
Working Capital and Inventories advanced by Owner shall remain
the property of Owner throughout the term of this Agreement.
Upon Termination, Manager shall return to Owner any unused
Working Capital and Inventories except for Inventories
purchased by Manager pursuant to Section 10.02, and except for
the outstanding balance of all Working Capital advances by
Manager made as Manager Loans.
8. Section 8.02, "Repairs and Equipment Reserve," is amended as follows:
a. Paragraph B is amended by inserting the following immediately
before the last sentence:
Commencing with Fiscal Year 2003, Manager shall have
the right, but not the obligation, to increase the
amount it transfers into the Repairs and Equipment
Reserve to any amount greater than five percent (5%)
but not exceeding six percent (6%) of Gross Revenues
for such Fiscal Year and successive Fiscal Years
thereafter if, based upon a review of FF&E
Replacements requirements for the Hotel, such
increase is necessary in Manager's reasonable
judgement to fund future FF&E Replacements that
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would be necessary to maintain the Hotel as a first-
class Marriott full-service hotel.
b. Paragraph C is amended by inserting the following at the end
thereof:
Manager, in its reasonable discretion, and subject to
the exceptions stated below, shall decide whether to
purchase or lease any FF&E Replacements or motor
vehicles used in transporting Hotel guests. If
Manager enters into any lease of FF&E Replacements or
motor vehicles used in transporting Hotel guests, it
shall do so on Owner's behalf and as Owner's agent;
or, upon Manager's recommendation and request, Owner
shall directly enter into such leases.
Notwithstanding the foregoing, Manager shall not and
shall not require Owner to enter into any lease other
than: (i) Telephone Leases, (ii) Computer Leases,
(iii) TV System Leases, (iv) FF&E Leases, and (v)
leases of motor vehicles used in transporting Hotel
guests. With respect to FF&E Leases only, Manager
shall be required to obtain Owner's prior written
approval before entering into or requesting that
Owner enter into any FF&E Lease, if (a) the fair
market value of the FF&E with respect to all FF&E
Leases relating to the Hotel (including those being
entered into) would exceed at any time Nine Hundred
Thousand Dollars ($900,000) (as increased each Fiscal
Year after Fiscal Year 1996 by the CPI Percentage),
(b) the FF&E to be covered by such FF&E Lease is FF&E
that is not customarily leased in the hotel industry
in the United States, or (c) such FF&E Lease is on
payment terms (including the amounts and schedule of
payments) that would be materially more favorable to
the lessor thereof than payment terms customary in
the hotel industry in the United States for similar
leases. With respect to TV System Leases only,
Manager shall be required to obtain Owner's prior
written approval before entering into or requesting
the Owner enter into any TV System Lease, if (a) the
equipment to be covered by such TV System Lease is
not customarily leased in the hotel industry in the
United States or (b) such TV System Lease is on
payment terms (including the amounts and schedule of
payments) that would be materially more favorable to
the lessor thereof than payment terms customary in
the hotel industry in the United States for similar
leases. In cases described in the preceding two
sentences, Owner's approval shall not be unreasonably
withheld; provided, however, that the failure of any
Lender to approve such leasing proposal shall justify
Owner in withholding its approval. Payments under the
leases described in this paragraph shall be made from
the Repairs and Equipment Reserve.
c. Paragraph E is amended by inserting the following at the end
thereof:
If Owner agrees to obtain outside financing or
provide additional funding as
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described in Subsection 2 or 3 above but fails to
deposit such funds into the Repairs and Equipment
Reserve within sixty (60) days after such agreement,
then, in addition to any other remedies to which it
is entitled, Manager shall be entitled to (i) notify
Owner that it will terminate this Agreement as of a
date three (3) months after the date of Manager's
notice, or (ii) continue to manage the Hotel without
making such alterations, improvements, renewals, or
replacements.
9. Section 8.03, "Building Alterations, Improvements, Renewals, and
Replacements," paragraph B, is amended by inserting the following at
the end thereof:
If Owner approves the Building Estimate but fails to deliver
funds required by such Building Estimate within sixty (60)
days after such approval, then Manager may, at its option and
in addition to any other remedies available to it, (i) notify
Owner that it will terminate this Agreement as of a date three
(3) months after the date of Manager's notice, (ii) use funds
from the Repairs and Equipment Reserve to pay for the
expenditures in the approved Building Estimate, or (iii)
continue to manage the Hotel without making such alterations,
improvements, renewals or replacements.
11. Section 19.01, "Restriction on Sale or Lease," is amended by inserting
"Manager Loans," before "current Incentive Management Fees" in the last
sentence.
12. Section 20.04, "Confidentiality," is amended in its entirety to read as
follows:
20.04 Confidentiality
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The parties agree that matters set forth in and all
information, budgets and reports generated as a result of this
Agreement are strictly confidential and each party will make
every effort to ensure that the information is not disclosed
to any outside person or entities (including the press), other
than such parties' lenders, equity holders, bona fide
prospective investors or purchasers, and their respective
accountants, counsel and other consultants or advisors, and
other than the holders of any securities to be issued by Owner
or by any lender pursuant to a securitization of the notes
evidencing the obligation of Owner (so long as all such
information sent to such holders is marked with a
confidentiality notice that refers to the provisions of this
Section 20.04 and directs such holders to comply with the
provisions hereof reasonably acceptable to Manager), without
the written consent of the other party except as may be
reasonably necessary (i) to obtain licenses, permits and other
public approvals necessary for the refurbishment or operation
of the Hotel, (ii) in connection with Owner's financing of the
Hotel or any sale of the Hotel (subject to the limitations
above with respect to a securitization), (iii) in connection
with a sale of a controlling interest in Owner, Manager, or
Marriott, (iv) in connection with an audit or other
investigation conducted pursuant to this Agreement or the
Owner's or
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Manager's interest in the Hotel, (v) in connection with a
foreclosure sale on Owner's interest in the Hotel, or (vi) as
required by any law, rule, regulation or judicial process, or
by any regulatory or supervisory authority having jurisdiction
over the parties or their Affiliates.
13. A new Section 20.10 is added as follows:
20.10 Offerings
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No reference to Manager, Marriott, or to any Marriott
Affiliate will be made in any prospectus, private placement
memorandum, offering circular or offering documentation
related thereto (herein collectively referred to as the
"Prospectus"), issued by Owner or one of its affiliates or
lenders, which is designed to interest potential investors
(debt or equity) in Hotel, or securities secured by the Hotel,
unless Manager has previously received a copy of all such
references. However, regardless of whether Manager does or
does not so receive a copy of all such references, neither
Manager, Marriott, nor any Marriott Affiliate will be deemed
an issuer or obligor or guarantor in respect of any securities
described in the Prospectus, nor will it have any
responsibility for the Prospectus, and Owner will not issue or
approve any Prospectus that does not so state. Unless Manager
agrees in advance, the Prospectus will not include: (i) any
proprietary marks of Manager, Marriott, or any Marriott
Affiliate; or (ii) except as required by applicable securities
laws, the text of this Agreement. Owner shall be entitled,
however, to include in the Prospectus an accurate summary of
this Agreement. With respect to any offering not registered
under any federal or state securities law, if there are no
legal requirements pursuant to which such information must be
publicly disclosed, appropriate measures shall be taken to
ensure that entities or individuals receiving such Prospectus
shall acknowledge the confidentiality of such information.
Owner shall indemnify, defend and hold Manager, Marriott, and
all Marriott Affiliates (and their respective directors,
officers, shareholders, employees and agents) harmless from
and against all loss, costs, liability and damage (including
reasonable attorneys' fees and expenses, and the cost of
litigation related thereto) arising out of any Prospectus or
the offering described therein for which Owner or any of its
affiliates is an issuer or sponsor. Owner shall, prior to
distribution of any Prospectus by any of its lenders, use
commercially reasonable best efforts to obtain such an
indemnification for the benefit of Manager, Marriott, and all
Marriott Affiliates from such lender.
14. All other terms of the Management Agreement shall remain in full force
and effect.
15. Any term capitalized in this Amendment and not defined herein shall
have the meaning given to it in the Management Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed
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as of the date and year first written above.
WITNESS: OWNER:
MARRIOTT HOTEL PROPERTIES II
LIMITED PARTNERSHIP
("Owner")
By: MARRIOTT MHP TWO
CORPORATION,
a Delaware corporation,
General Partner
________________________ By________________________
Douglas W. Henry
Name: __________________ Vice President
WITNESS: MANAGER:
MARRIOTT HOTEL SERVICES, INC.
("Manager")
________________________ By____________________________
James L. Best
Name:___________________ Vice President
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