0000928385-01-502159.txt : 20011026
0000928385-01-502159.hdr.sgml : 20011026
ACCESSION NUMBER: 0000928385-01-502159
CONFORMED SUBMISSION TYPE: 10-Q
PUBLIC DOCUMENT COUNT: 5
CONFORMED PERIOD OF REPORT: 20010907
FILED AS OF DATE: 20011022
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: HOST MARRIOTT CORP/
CENTRAL INDEX KEY: 0001070750
STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798]
IRS NUMBER: 530085950
STATE OF INCORPORATION: MD
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-Q
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-14625
FILM NUMBER: 1763590
BUSINESS ADDRESS:
STREET 1: 10400 FERNWOOD ROAD DEPT 907
CITY: BETHESDA
STATE: MD
ZIP: 20817
BUSINESS PHONE: 3013809000
MAIL ADDRESS:
STREET 1: HOST MARRIOTT CORP
STREET 2: 10400 FERNWOOD ROAD DEPT 907 RM 507
CITY: BETHESDA
STATE: MD
ZIP: 20817-1109
FORMER COMPANY:
FORMER CONFORMED NAME: HMC MERGER CORP
DATE OF NAME CHANGE: 19980921
10-Q
1
d10q.txt
FORM 10-Q
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 7, 2001 Commission File No. 001-14625
HOST MARRIOTT CORPORATION
10400 Fernwood Road
Bethesda, Maryland 20817
(301) 380-9000
Maryland 53-0085950
-----------------------
(State of Incorporation) (I.R.S. Employer
----------------
Identification Number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
--- ---
Shares outstanding
Class at October 15, 2001
------------- -------------------
Common Stock, $0.01 par value 262,992,720
Purchase share rights for Series A Junior Participating Preferred Stock, $0.01 par value --
Class A Cumulative Redeemable Preferred Stock, $0.01 par value 4,160,000
Class B Cumulative Redeemable Preferred Stock, $0.01 par value 4,000,000
Class C Cumulative Redeemable Preferred Stock, $0.01 par value 5,980,000
================================================================================
INDEX
-----
Page No.
--------
Part I. FINANCIAL INFORMATION (Unaudited):
Condensed Consolidated Balance Sheets-
September 7, 2001 and December 31, 2000.......................... 3
Condensed Consolidated Statements of Operations-
Twelve Weeks and Thirty-six Weeks Ended
September 7, 2001 and September 8, 2000.......................... 4
Condensed Consolidated Statements of Cash Flows-
Thirty-six Weeks Ended September 7, 2001 and September 8, 2000... 7
Notes to Condensed Consolidated Financial Statements.............. 8
Management's Discussion and Analysis of Results of
Operations and Financial Condition............................... 15
Quantitative and Qualitative Disclosures about Market Risk........ 22
PART II. OTHER INFORMATION AND SIGNATURE................................... 23
-2-
HOST MARRIOTT CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)
September 7, December 31,
2001 2000
------ ------
(unaudited)
ASSETS
------
Property and equipment, net......................................................... $7,177 $7,110
Notes and other receivables (including amounts due from affiliates of
$9 million and $164 million, respectively)....................................... 56 211
Due from Manager.................................................................... 143 --
Rent receivable..................................................................... 6 65
Investments in affiliates........................................................... 147 128
Other assets........................................................................ 426 444
Restricted cash..................................................................... 124 125
Cash and cash equivalents........................................................... 182 313
------ ------
$8,261 $8,396
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Debt
Senior notes..................................................................... $2,782 $2,790
Mortgage debt.................................................................... 2,292 2,275
Other............................................................................ 317 257
------ ------
5,391 5,322
Accounts payable and accrued expenses............................................... 225 381
Other liabilities................................................................... 303 312
------ ------
Total liabilities............................................................ 5,919 6,015
------ ------
Minority interest................................................................... 219 485
Company-obligated mandatorily redeemable convertible preferred
securities of a subsidiary whose sole assets are the convertible
subordinated debentures due 2026 ("Convertible Preferred Securities")............ 475 475
Shareholders' equity
Cumulative redeemable preferred stock (liquidation preference $354 million),
50 million shares authorized; 14.2 million shares issued and outstanding......... 339 196
Common stock, 750 million shares authorized; 262.6 million shares and
221.3 million shares issued and outstanding, respectively........................ 3 2
Additional paid-in capital.......................................................... 2,059 1,824
Accumulated other comprehensive income (loss)....................................... 3 (1)
Retained deficit.................................................................... (756) (600)
------ ------
Total shareholders' equity................................................... 1,648 1,421
------ ------
$8,261 $8,396
====== ======
See Notes to Condensed Consolidated Statements
-3-
HOST MARRIOTT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Twelve Weeks Ended September 7, 2001 and September 8, 2000
(unaudited, in millions, except per share amounts)
2001 2000
------ ------
REVENUES
Hotel sales
Rooms............................................................................. $ 528 $ --
Food and beverage................................................................. 234 --
Other............................................................................. 67 --
------ ------
Total hotel sales.............................................................. 829 --
Rental income...................................................................... 19 227
------ ------
Total revenues................................................................. 848 227
------ ------
OPERATING COSTS AND EXPENSES
Hotel operating expenses
Rooms............................................................................. 133 --
Food and beverage................................................................. 188 --
Hotel departmental costs and deductions........................................... 229 --
Management fees and other......................................................... 37 --
Other property-level expenses..................................................... 66 66
Depreciation and amortization..................................................... 87 75
------ ------
Total hotel operating costs and expenses....................................... 740 141
Corporate expenses................................................................ 7 7
Other expenses.................................................................... 3 --
------ ------
OPERATING PROFIT.................................................................... 98 79
Minority interest (expense) benefit................................................ -- 4
Interest income.................................................................... 5 9
Interest expense................................................................... (104) (100)
Net gains on property transactions................................................. 3 1
Equity in earnings of affiliates................................................... (1) 2
Dividends on Convertible Preferred Securities...................................... (7) (8)
------ ------
LOSS BEFORE INCOME TAXES............................................................ (6) (13)
Provision for income taxes.......................................................... -- (4)
------ ------
LOSS BEFORE EXTRAORDINARY ITEM...................................................... (6) (17)
Extraordinary loss.................................................................. (1) --
------ ------
NET LOSS............................................................................ $ (7) $ (17)
====== ======
Less: Dividends on Preferred Stock................................................. (9) (5)
------ ------
NET LOSS AVAILABLE TO COMMON SHAREHOLDERS........................................... $ (16) $ (22)
====== ======
BASIC LOSS PER COMMON SHARE:
Loss before extraordinary item...................................................... $(0.06) $(0.10)
Extraordinary loss.................................................................. -- --
------ ------
BASIC LOSS PER COMMON SHARE......................................................... $(0.06) $(0.10)
====== ======
DILUTED LOSS PER COMMON SHARE
Loss before extraordinary item...................................................... $(0.06) $(0.10)
Extraordinary loss.................................................................. -- --
------ ------
DILUTED LOSS PER COMMON SHARE....................................................... $(0.06) $(0.10)
====== ======
See Notes to Condensed Consolidated Statements
-4-
HOST MARRIOTT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Thirty-six Weeks Ended September 7, 2001 and September 8, 2000
(unaudited, in millions, except per share amounts)
2001 2000
------ ------
REVENUES
Hotel sales
Rooms............................................................................. $1,638 $ --
Food and beverage................................................................. 782 --
Other............................................................................. 204 --
------ ------
Total hotel sales.............................................................. 2,624 --
Rental income...................................................................... 81 588
------ ------
Total revenues................................................................. 2,705 588
------ ------
OPERATING COSTS AND EXPENSES
Hotel operating expenses
Rooms............................................................................. 389 --
Food and beverage................................................................. 587 --
Hotel departmental costs and deductions........................................... 669 --
Management fees and other......................................................... 143 --
Other property-level expenses..................................................... 194 191
Depreciation and amortization..................................................... 266 224
------ ------
Total hotel operating costs and expenses....................................... 2,248 415
Corporate expenses................................................................ 24 27
Lease repurchase expense.......................................................... 5 --
Other expenses.................................................................... 11 9
------ ------
OPERATING PROFIT.................................................................... 417 137
Minority interest (expense) benefit................................................ (26) 26
Interest income.................................................................... 25 26
Interest expense................................................................... (311) (293)
Net gains on property transactions................................................. 4 4
Equity in earnings of affiliates................................................... 3 5
Dividends on Convertible Preferred Securities...................................... (22) (22)
------ ------
INCOME (LOSS) BEFORE INCOME TAXES................................................... 90 (117)
Provision for income taxes.......................................................... (15) (7)
------ ------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM............................................. 75 (124)
Extraordinary loss.................................................................. (1) (3)
------ ------
NET INCOME (LOSS)................................................................... $ 74 $ (127)
====== ======
Less: Dividends on Preferred Stock................................................. (23) (15)
Add: Gain on repurchase of Convertible Preferred Securities, net of income tax -- 4
expense of $1 million....................................................... ------ ------
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS.................................. $ 51 $ (138)
====== ======
See Notes to Condensed Consolidated Statements
-5-
HOST MARRIOTT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Thirty-six Weeks Ended September 7, 2001 and September 8, 2000
(unaudited, in millions, except per share amounts)
2001 2000
----- ------
BASIC EARNINGS (LOSS) PER COMMON SHARE:
Income (loss) before extraordinary items..................................... $0.21 $(0.61)
Extraordinary loss........................................................... -- (0.01)
----- ------
BASIC EARNINGS (LOSS) PER COMMON SHARE....................................... $0.21 $(0.62)
===== ======
DILUTED EARNINGS (LOSS) PER COMMON SHARE:
Income (loss) before extraordinary items..................................... $0.21 $(0.61)
Extraordinary loss........................................................... -- (0.01)
----- ------
DILUTED EARNINGS (LOSS) PER COMMON SHARE..................................... $0.21 $(0.62)
===== ======
See Condensed Consolidated Statements
-6-
HOST MARRIOTT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Thirty-six Weeks Ended September 7, 2001 and September 8, 2000
(unaudited, in millions)
2001 2000
-------- --------
OPERATING ACTIVITIES
Income (loss) before extraordinary item...................................... $ 75 $ (124)
Adjustments to reconcile to cash from operations:
Depreciation and amortization.............................................. 266 224
Income taxes............................................................... (20) (20)
Deferred contingent rental income.......................................... 18 366
Net gains on property transactions......................................... (4) (4)
Equity in earnings of affiliates........................................... (3) (5)
Purchase of Crestline leases............................................... (208) --
Changes in other operating accounts........................................ 82 21
Other...................................................................... (24) (60)
-------- --------
Cash provided by operations............................................. 182 398
-------- --------
INVESTING ACTIVITIES
Acquisitions................................................................. (63) (40)
Capital expenditures:
Capital expenditures for renewals and replacements......................... (148) (155)
New investment capital expenditures........................................ (38) (88)
Other investments.......................................................... (18) (28)
Note receivable collections, net............................................. 9 4
-------- --------
Cash used in investing activities....................................... (258) (307)
-------- --------
FINANCING ACTIVITIES
Issuances of debt, net....................................................... 275 292
Scheduled principal repayments............................................... (41) (27)
Debt prepayments............................................................. (226) (245)
Issuances of common stock.................................................... 3 3
Issuances of cumulative redeemable preferred stock, net...................... 144 --
Repurchases of common stock.................................................. -- (44)
Dividends.................................................................... (207) (154)
Repurchases of Convertible Preferred Securities.............................. -- (15)
Repurchases and redemptions of OP Units...................................... -- (3)
Other........................................................................ (3) 13
-------- --------
Cash used in financing activities....................................... (55) (180)
-------- --------
DECREASE IN CASH AND CASH EQUIVALENTS........................................ $ (131) $ (89)
======== ========
Supplemental schedule of noncash investing and financing activities:
During the thirty-six weeks ended September 7, 2001 and September 8, 2000,
respectively, approximately 41,551,000 shares and 449,000 shares of common stock
were issued upon the conversion of outside OP Units valued at $227.0 million and
$4.4 million, respectively.
See Notes to Condensed Consolidated Statements
-7-
HOST MARRIOTT CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Organization
Host Marriott Corporation ("Host REIT" or the "Company"), a Maryland
corporation operating through an umbrella partnership structure, is
primarily the owner of hotel properties. Host REIT operates as a self-
managed and self-administered real estate investment trust ("REIT") with
its operations conducted through an operating partnership, Host Marriott,
L.P. (the "Operating Partnership" or "Host LP"), and its subsidiaries. Host
REIT is the sole general partner of the Operating Partnership and as of
September 7, 2001, owns approximately 92% of the Operating Partnership.
The Work Incentives Improvement Act of 1999 ("REIT Modernization Act")
amended the tax laws to permit REITs, effective January 1, 2001, to lease
hotels to a subsidiary that qualifies as a taxable REIT subsidiary ("TRS").
Accordingly, a wholly owned subsidiary of Host LP, which has elected to be
treated as a TRS for federal income tax purposes, acquired certain
subsidiaries owning the leasehold interests with respect to 120 of the
Company's full-service hotels (the "Lessee Entities") from Crestline
Capital Corporation ("Crestline") and Wyndham International Inc.
("Wyndham"). As a result of the acquisitions, the Company's operating
results reflect property-level revenues and expenses rather than rental
income from lessees with respect to those 120 full-service properties from
the effective dates of the acquisitions.
2. Summary of Significant Accounting Policies
The accompanying unaudited condensed consolidated financial statements of
the Company and its subsidiaries have been prepared without audit. Certain
information and footnote disclosures normally included in financial
statements presented in accordance with accounting principles generally
accepted in the United States have been condensed or omitted. The Company
believes the disclosures made are adequate to make the information
presented not misleading. However, the unaudited condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's annual
report on Form 10-K for the fiscal year ended December 31, 2000.
In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments necessary to
present fairly the financial position of the Company as of September 7,
2001, the results of its operations for the twelve and thirty-six weeks
ended September 7, 2001, and September 8, 2000, and cash flows for the
thirty-six weeks ended September 7, 2001, and September 8, 2000. Interim
results are not necessarily indicative of fiscal year performance because
of the impact of seasonal and short-term variations.
Certain reclassifications were made to the prior year financial statements
to conform to the current presentation.
The Company consolidates entities in which it owns a controlling financial
interest (generally when it owns over 50% of the voting shares of another
company) and consolidates partnership investments when it owns a general
partnership interest unless minority shareholders or other partners
participate in or have the right to block management decisions.
Revenue from operations of the Company's hotels not leased to third parties
is recognized when the services are provided. As previously discussed, the
Company, through its wholly owned TRS, acquired the Lessee Entities, and as
a result, the Company no longer leases the properties to a third party, or
receives rental income with respect to those 120 properties. Therefore, the
Company's
-8-
HOST MARRIOTT CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
consolidated results of operations with respect to those 120 properties
reflect, from the effective dates of the transactions, property-level
revenues and expenses rather than rental income from lessees and are not
comparable to 2000 results.
Additionally, under the leases, the Company recorded the rental income due
as the greater of base rent or percentage rent, as defined. Percentage rent
received pursuant to the leases but not recognized until all contingencies
have been met is included on the balance sheet as deferred rent. Contingent
rental revenue of $3 million and $75 million, respectively, for the twelve
weeks ended September 7, 2001 and September 8, 2000, and $18 million and
$366 million, respectively, for the thirty-six weeks ended September 7,
2001 and September 8, 2000, have been deferred.
3. Earnings Per Share
Basic earnings per common share is computed by dividing net income
available to common shareholders by the weighted average number of shares
of common stock outstanding. Diluted earnings per share is computed by
dividing net income available to common shareholders as adjusted for
potentially dilutive securities, by the weighted average number of shares
of common stock outstanding plus other potentially dilutive securities.
Dilutive securities may include shares granted under comprehensive stock
plans and the Convertible Preferred Securities. Dilutive securities may
also include those common and preferred Operating Partnership Units ("OP
Units") issuable or outstanding that are held by minority partners which
are assumed to be converted. No effect is shown for securities if they are
anti-dilutive.
Twelve Weeks Ended
-------------------------------------------------------------------------
September 7, 2001 September 8, 2000
----------------------------------- -----------------------------------
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------------------------------- -----------------------------------
Net loss..................................... $ (7) 262.5 $ (.03) $ (17) 220.5 $ (.08)
Dividends on preferred stock................ (9) -- (.03) (5) -- (.02)
--------- --------- -------- --------- ---------- --------
Basic loss available to common
shareholders per share...................... (16) 262.5 (.06) (22) 220.5 (.10)
Assuming distribution of common shares
granted under the comprehensive stock
plan, less shares assumed purchased at
average market price....................... -- -- -- -- -- --
Assuming conversion of minority OP Units
outstanding................................ (2) 22.1 -- (5) 63.3 --
Assuming conversion of minority OP Units
issuable................................... -- -- -- -- .6 --
Assuming conversion of preferred OP Units... -- -- -- -- -- --
--------- --------- -------- --------- ---------- --------
Diluted loss per share....................... $ (18) 284.6 $ (.06) $ (27) 284.4 $ (.10)
========= ========= ======== ========= ========== ========
-9-
HOST MARRIOTT CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Thirty-six Weeks Ended
-------------------------------------------------------------------------
September 7, 2001 September 8, 2000
----------------------------------- -----------------------------------
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------------------------------- -----------------------------------
Net income (loss)............................ $ 74 244.3 $ .30 $ (127) 220.7 $ (.57)
Dividends on preferred stock................ (23) -- (.09) (15) -- (.07)
Gain on repurchase of Convertible
Preferred Securities....................... -- -- -- 4 -- .02
--------- --------- -------- --------- ---------- --------
Basic income (loss) available to common
shareholders per share...................... 51 244.3 .21 (138) 220.7 (.62)
Assuming distribution of common shares
granted under the comprehensive stock
plan, less shares assumed purchased at
average market price....................... -- 4.2 -- -- -- --
Assuming conversion of minority OP Units
outstanding................................ 8 39.8 -- (38) 63.5 --
Assuming conversion of preferred OP Units... -- -- -- -- .6 --
--------- --------- -------- --------- ---------- --------
Diluted income (loss) per share.............. $ 59 288.3 $ .21 $ (176) 284.8 $ (.62)
========= ========= ======== ========= ========= ========
4. OP Unit Conversions
On May 29, May 7 and February 7, 2001, Blackstone and affiliates
("Blackstone") converted 18.2 million, 10.0 million and 12.5 million OP
Units, respectively, to common shares and immediately sold them to an
underwriter for sale on the open market. These units were obtained in
connection with the purchase of the Blackstone luxury hotel portfolio in
1998. As a result of this transaction, Blackstone's ownership interest was
reduced to approximately 1% of the outstanding OP Units of the Operating
Partnership, and the Company increased its ownership in the Operating
Partnership to approximately 92% of the outstanding OP Units. The Company
received no proceeds as a result of these transactions.
5. Debt and Equity Issuances and Refinancing
During the first quarter of 2001, the Company borrowed $115 million under
the revolver portion of the bank credit facility to partially fund the
acquisition of the Crestline Lessee Entities and other general corporate
purposes and repaid the $115 million during the second quarter of 2001.
During the third quarter of 2001, the Company borrowed $60 million under
the revolver portion of the bank credit facility to fund the purchase of
minority interests in seven hotels. During the fourth quarter of 2001, the
Company borrowed an additional $250 million under the revolver portion of
the bank credit facility. As of October 19, 2001, $150 million is
outstanding under the term loan portion and $310 million is outstanding
under the revolver portion of the bank credit facility. The remaining
available capacity under the revolver is $315 million.
On August 30, 2001, a Canadian subsidiary of the Company entered into a
financing agreement pursuant to which it borrowed $96.6 million due August
2006 at a variable rate of LIBOR plus 275 basis points. The Calgary
Marriott, Toronto Airport Marriott, Toronto Marriott Eaton Centre, and
Toronto Delta Meadowvale hotels serve as collateral. The proceeds from this
financing were used to refinance existing indebtedness on these hotels as
well as to prepay the $88 million mortgage note on The Ritz-Carlton, Amelia
Island hotel.
Since the mortgage loan on these Canadian properties is denominated in U.S.
dollars and the
-10-
HOST MARRIOTT CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
functional currency of the Canadian subsidiary is the Canadian dollar, the
Company purchased derivative instruments for hedging of the foreign
currency investment. The subsidiary has entered into 60 separate currency
forward contracts to buy U.S. dollars at a fixed price. These forward
contracts hedge the currency exposure of converting Canadian dollars to
U.S. dollars on a monthly basis to cover debt service payments.
On March 27, 2001, we sold approximately 6.0 million shares of 10% Class C
preferred stock ("Class C Preferred Stock") with $0.01 par value for net
proceeds of $144 million. Holders of the Class C Preferred Stock are
entitled to receive cumulative cash dividends at a rate of 10% per annum of
the $25 per share liquidation preference. Dividends are payable quarterly
in arrears commencing April 15, 2001, on which date a pro rata dividend of
$0.03 per share was distributed. Beginning March 27, 2006, we have the
option to redeem the Class C Preferred Stock for $25 per share, plus
accrued and unpaid dividends to the date of redemption.
6. Acquisitions and Developments
Effective March 24, 2001, the Company purchased the 5% voting interests in
each of Rockledge Hotel Properties, Inc. ("Rockledge") and Fernwood Hotel
Assets, Inc. ("Fernwood") that were previously held by the Host Marriott
Statutory Employee/Charitable Trust for approximately $2 million. Prior to
this acquisition, the Company held a 95% non-voting interest in each
company and accounted for such investments under the equity method. As a
result of this acquisition, the Company holds 100% of the voting and non-
voting interests in Rockledge and Fernwood, and its consolidated results of
operations will reflect the revenues and expenses generated by the two
taxable corporations, and its consolidated balance sheets will include the
various assets. The assets consist of three additional full-service hotels:
the 672-room St. Louis Marriott Pavilion Downtown in St. Louis, Missouri,
and the 311-room JW Marriott Hotel Mexico City and the 600-room Mexico City
Airport Marriott Hotel, both located in Mexico City, Mexico. The Company's
acquisition, including certain joint venture interests, totaled
approximately $356 million in assets and $262 million in liabilities,
including $54 million of third party debt ($26 million of which matures in
2001).
On June 16, 2001, the Company consummated an agreement with Crestline
Capital Corporation for the acquisition of their lease agreement with
respect to San Diego Marriott Hotel and Marina (the "San Diego Hotel"). The
purchase price was $4.5 million, including legal and professional fees.
Under the terms of the transaction, a wholly owned TRS of the Company
acquired the lease by purchasing the lessee entity, effectively terminating
the lease for financial reporting purposes.
On June 28, 2001, the Company consummated an agreement to purchase
substantially all the minority limited partnership interests held by
Wyndham International, Inc. and affiliates ("Wyndham") with respect to
seven full-service hotels for $60 million. As part of this acquisition, the
leases were acquired from Wyndham with respect to the San Diego Marriott
Mission Valley, the Minneapolis Marriott Southwest, and the Albany Marriott
by a wholly owned TRS of the Company, effectively terminating the leases
for financial reporting purposes. For purposes of purchase accounting no
amounts were attributed to the leases themselves, as the leases had no
value. The entire purchase price was allocated to the minority limited
partner interests purchased.
-11-
HOST MARRIOTT CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
7. Dividends and Distributions Payable
On September 19, 2001, the Company announced that the Board of Directors
had declared quarterly cash dividends of $0.26 and $0.625 per share of
common stock and preferred stock, respectively. The third quarter dividends
were paid on October 12, 2001 to shareholders of record on September 28,
2001.
8. Geographic Information
As of September 7, 2001, the Company's foreign operations consisted of four
hotel properties located in Canada and two properties located in Mexico.
There were no intercompany sales between the properties and the Company.
The following table presents revenues for each of the geographical areas in
which the Company owns hotels. As a result of the acquisition of the
Crestline Lessee Entities, effective January 1, 2001 the Company's
consolidated results of operations for the twelve and thirty-six weeks
ended September 7, 2001 primarily represent property level revenues and
expenses, whereas the results for the twelve and thirty-six weeks ended
September 8, 2000 primarily represent rental income (in millions).
Twelve Weeks Ended Thirty-six Weeks Ended
--------------------------- ---------------------------
September 7, September 8, September 7, September 8,
2001 2000 2001 2000
------------ ------------ ------------ ------------
United States................. $ 823 $ 224 $ 2,633 $ 578
International................. 25 3 72 10
------------ ------------ ------------ ------------
Total......................... $ 848 $ 227 $ 2,705 $ 588
============ ============ ============ ============
9. Comprehensive Income
The Company's other comprehensive income consists of unrealized gains and
losses on foreign currency translation adjustments and the right to receive
cash from Host Marriott Services Corporation subsequent to the exercise of
the options held by certain former and current employees of Marriott
International, pursuant to the distribution agreement between the Company
and Host Marriott Services Corporation. For the twelve weeks ended
September 7, 2001, the comprehensive loss totaled $5 million. For the
thirty-six weeks ended September 7, 2001, comprehensive income totaled $78
million. The comprehensive loss was $19 million and $128 million for the
twelve and thirty-six weeks ended September 8, 2000, respectively. As of
September 7, 2001, the Company's accumulated other comprehensive income was
$3 million compared to a loss of $1 million at December 31, 2000.
10. Summarized Lease Pool Financial Statements
During 2000, almost all the properties of the Company and its subsidiaries
were leased to subsidiaries of Crestline. In conjunction with these leases,
Crestline and certain of its subsidiaries entered into limited guarantees
of the lease obligations of each lessee. The full-service hotel leases were
grouped into four lease pools, with Crestline's guarantee limited to the
greater of 10% of the aggregate rent payable for the preceding year or 10%
of the aggregate rent payable under all leases in the respective pool.
Additionally, the lessee's obligation under each lease agreement was
guaranteed by all other lessees in the respective lease pool. As a result,
the Company believed that the operating results of each full-service lease
pool may have been material to the Company's financial statements for the
year ended December 31, 2000.
-12-
HOST MARRIOTT CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Effective January 1, 2001, a wholly owned TRS of Host LP replaced Crestline
as the lessee with respect to 116 of the Company's full-service hotels, and
the third party credit concentration ceased to exist.
Financial information of Crestline may be found in its quarterly and annual
filings with the Securities and Exchange Commission. Further information
regarding these leases and Crestline's limited guarantees may be found in the
Company's annual report on Form 10-K for the fiscal year ended December 31,
2000. The results of operations and summarized balance sheet data of the
lease pools in which the Company's hotels were organized during 2000 are as
follows (in millions):
Twelve Weeks Ended September 8, 2000
------------------------------------
Pool 1 Pool 2 Pool 3 Pool 4 Combined
------------ ------------ ------------ ------------ --------------
Hotel Sales
Rooms...................................... $147 $156 $137 $141 $ 581
Food and beverage.......................... 60 66 57 69 252
Other...................................... 14 16 16 19 65
---- ---- ---- ---- ------
Total hotel sales..................... 221 238 210 229 898
Operating Costs and Expenses
Rooms...................................... 36 40 34 33 143
Food and beverage.......................... 49 54 45 54 202
Other...................................... 62 58 57 57 234
Management fees............................ 10 15 10 14 49
Lease expense.............................. 63 67 62 70 262
Corporate and Interest Expenses............ -- -- 1 -- 1
---- ---- ---- ---- ------
Total operating expenses.............. 220 234 209 228 891
---- ---- ---- ---- ------
Operating Profit................................ 1 4 1 1 7
Income taxes............................... (1) (2) -- -- (3)
---- ---- ---- ---- ------
Net Income............................ $ -- $ 2 $ 1 $ 1 $ 4
==== ==== ==== ==== ======
Thirty-six Weeks Ended September 8, 2000
----------------------------------------
Pool 1 Pool 2 Pool 3 Pool 4 Combined
----------- ----------- ----------- ----------- -------------
Hotel Sales
Rooms...................................... $428 $469 $409 $433 $1,739
Food and beverage.......................... 188 219 189 235 831
Other...................................... 44 46 59 60 209
---- ---- ---- ---- ------
Total hotel sales..................... 660 734 657 728 2,779
Operating Costs and Expenses
Rooms...................................... 102 116 96 96 410
Food and beverage.......................... 145 165 140 167 617
Other...................................... 173 167 166 170 676
Management fees............................ 32 50 32 52 166
Lease expense.............................. 200 224 214 237 875
Corporate and Interest Expenses............ 1 1 1 1 4
---- ---- ---- ---- ------
Total operating expenses.............. 653 723 649 723 2,748
---- ---- ---- ---- ------
Operating Profit................................ 7 11 8 5 31
Income taxes............................... (3) (5) (3) (2) (13)
---- ---- ---- ---- ------
Net Income............................ $ 4 $ 6 $ 5 $ 3 $ 18
==== ==== ==== ==== ======
As of December 31, 2000
-----------------------
Pool 1 Pool 2 Pool 3 Pool 4 Combined
----------- ----------- ----------- ----------- -------------
Assets.......................................... $37 $37 $40 $44 $158
Liabilities..................................... 37 37 40 42 156
Equity.......................................... -- -- -- 2 2
-13-
HOST MARRIOTT CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
11. Subsequent Events
As a result of the terrorist attacks on the New York World Trade Center
towers in New York on September 11, 2001, the New York Marriott World Trade
Center hotel was destroyed. The book value of the New York Marriott World
Trade Center hotel was approximately $129 million. The New York Marriott
Financial Center hotel also suffered damage from debris as well as from the
efforts of fire fighters who used the building to combat fires in the
surrounding area. The Company is in the process of repairing the damage to
the New York Marriott Financial Center (the "Financial Center") and expects
to have such repairs completed within several months. Public access to the
area surrounding the site, including the Financial Center hotel, has been
restricted, but should be restored shortly.
Under our ground lease with the Port Authority of New York and New Jersey
(the "Port Authority") the Company is required to rebuild the New York World
Trade Center Marriott subject to the Port Authority rebuilding the foundation
of the hotel. As of this date, no determination has been made regarding the
timing and configuration of any reconstruction of the World Trade Center
Complex. The decision to rebuild the New York Marriott World Trade Center,
which involves the Company, our manager and numerous government authorities,
is in part dependent on when, how and if the entire World Trade Center
complex is rebuilt. The decision to rebuild may also affect the amount and
timing of insurance proceeds. However, the Company does not expect these
decisions to be made soon and expects any potential reconstruction to take a
number of years.
The Company has business interruption insurance on both hotels which the
Company expects will minimize the financial impact of the terrorist attacks.
The Company also has casualty insurance, which should cover the cost of
repairs to the New York Financial Center and replacement of the New York
Marriott World Trade Center.
Under EITF 01-10, the cost of the loss associated with the terrorist acts, if
any, would be reported as an unusual item in the fourth quarter. The recovery
of lost operations under business interruption insurance will also be
recorded as an unusual item.
-14-
HOST MARRIOTT CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Forward-looking Statements
Certain matters discussed herein are forward-looking statements. We have based
these forward-looking statements on our current expectations and projections
about future events. We identify forward-looking statements in this quarterly
report on Form 10-Q by using words or phrases such as "believe," "expect," "may
be," "intend," "predict," "project," "plan," "objective," "will be," "should,"
"estimate," or "anticipate," or the negative thereof or other variations thereof
or comparable terminology. All forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause our actual
transactions, results, performance or achievements to be materially different
from any future transactions, results, performance or achievements expressed or
implied by such forward-looking statements. Although we believe the expectations
reflected in such forward-looking statements are based upon reasonable
assumptions, we can give no assurance that we will attain these expectations or
that any deviations will not be material. Except as otherwise required by the
federal securities laws, we disclaim any obligations or undertaking to publicly
release any updates or revisions to any forward-looking statement contained in
this quarterly report on Form 10-Q to reflect any change in our expectations
with regard thereto or any change in events, conditions or circumstances on
which any such statement is based.
Recent Events, Liquidity and Capital Resources
On September 11, 2001, several aircraft were hijacked and destroyed in terrorist
attacks on the World Trade Center Towers in New York City and the Pentagon in
northern Virginia. As a result of the attacks and the collapse of the World
Trade Center Towers, the Company's New York Marriott World Trade Center hotel
was destroyed. In addition, we sustained considerable damage to a second
property, the New York Marriott Financial Center hotel. Subsequent to the
attacks, the Federal Aviation Administration closed United States airspace to
commercial traffic for several days. As described below, the aftermath of these
events, together with a slowing economy, has adversely affected our operations.
We have both casualty and business interruption insurance for our two affected
hotels through our manager, Marriott International, Inc. We have begun
restoring the New York Marriott Financial Center hotel to operating condition
and anticipate that it will reopen in the next several months. We are required
under our ground lease with The Port Authority of New York and New Jersey to
rebuild the World Trade Center hotel, and our insurance provides for rebuilding
of the asset at replacement cost. In addition, we are obligated to make
payments on behalf of the property, including ground rent and debt service. We
are also contingently liable for severance payments for employees of both hotels
as well as other operating liabilities. While we expect to receive business
interruption proceeds from the insurance to cover all or a substantial portion
of the costs at both hotels, we cannot currently determine the amount or timing
of those payments. In accordance with EITF 01-10, we will reflect the disaster
on the properties and the effect on operations of the hotels as unusual. We
believe that as a result of the timing of receipt of insurance proceeds it is
possible that we may record an unusual loss in the fourth quarter of this year
primarily related to a complete write-off of the World Trade Center hotel assets
and record unusual gains in future periods for repairs, replacement and business
interruption although no final determination has been made.
In the third quarter, which ended September 7, 2001, RevPAR for comparable
hotels showed a significant decline of over 11.9% over the prior year quarter
with hotel occupancy of 73.8% due in part to a slowing economy and the reduction
in business travel. During the 4-week period subsequent to the events of
September 11, 2001, our hotels recorded occupancy levels of 38% to 63% on a
weekly basis. During that period, we had a very high level of cancellations
primarily for events scheduled in the fourth quarter, which represented
approximately $70 million in future revenues, and primarily affecting our larger
convention hotels. While we do not believe that this period will be
representative of the remainder
-15-
HOST MARRIOTT CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
of the fourth quarter, we have been actively working with our managers to reduce
substantially the operating costs of our hotels. These initiatives include
reducing labor costs, streamlining staffing and service delivery, reducing hours
of operations at hotel restaurants and consolidating operations by closing
unused floors in hotels. In addition, based on our assessment of the current
operating environment and to conserve capital, we have reduced or suspended all
non-essential capital expenditure projects.
As a result of these initiatives and a gradual return of the economy to more
normal levels of business, we have begun to see modest improvements in occupancy
and room rate, though they remain below prior year levels. However, given our
estimates of lower operating levels in the fourth quarter, it is likely that our
fourth quarter results will be significantly lower than the prior year.
As described below, at the end of the third quarter, we had $210 million
outstanding under our credit facility, which allows us to borrow up to $775
million, consisting of a $150 million term loan and a $625 million revolver. On
September 18, 2001, we borrowed an additional $250 million under the revolver
portion of the credit facility, reducing the available capacity to $315 million.
The credit facility contains certain financial covenants related to, among other
things, maintaining certain levels of tangible net worth and certain ratios of
EBITDA to interest and fixed charges, total debt to EBITDA, unencumbered EBITDA
interest coverage and unencumbered EBITDA as a percentage of total EBITDA. We
are in compliance with all the covenants in our credit facility. We anticipate,
however, that if adverse operating conditions continue, we will not comply with
certain of the financial covenants for the twelve months ended December 31,
2001. We are currently in discussions with our banks to modify or waive these
covenants, and we believe that we will be successful in these efforts. We
believe that any waiver or modification may result in additional restrictions on
our ability to issue debt or equity, pay dividends to certain holders of our
capital stock, other than as required to maintain our status as a REIT, or to
sell assets and may require that we provide additional security.
We also have $2.8 billion of senior notes outstanding. The indenture under
which the senior notes were issued contains financial covenants restricting our
ability to incur indebtedness, grant liens on our assets, acquire or sell or
make investments in other entities, and make certain distributions to our equity
holders. We are in compliance with all the covenants in the indenture and
believe that we will remain in compliance through year-end. In the event that
we were not in compliance with any of the financial covenants set forth in the
indenture, we would be prohibited from declaring or paying a dividend on our
equity, other than distributions required to maintain our status as a REIT.
Our dividend policy generally has been to distribute to our shareholders the
amount necessary to maintain our status as a REIT, approximately 100% of taxable
income. On September 19, 2001 we announced that the Board of Directors had
declared cash dividends of $0.26 per common share and $0.625 per share of
Preferred Stock, which were paid on October 12, 2001 to shareholders of record
on September 28, 2001. As a result of the decline in operations, we believe that
we have already distributed the amount of taxable income necessary for 2001 to
qualify as a REIT and that our Board of Directors will likely suspend the fourth
quarter dividend to common shareholders.
Results of Operations
During 2000, our revenues primarily represented rental income from Crestline and
other third-party lessees. As a result of the previously discussed acquisition
of the Crestline and Wyndham lessees by our TRS, beginning in 2001, our
consolidated results of operations primarily reflect hotel-level revenues and
operating costs and expenses. Therefore, our results for 2001 are not
comparable to 2000 results.
-16-
HOST MARRIOTT CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
2001 Compared to 2000
Revenues. Revenues increased $621 million for the twelve weeks ended September
7, 2001 when compared to the twelve weeks ended September 8, 2000, and increased
$2,117 million for the thirty-six weeks ended September 7, 2001, when compared
to the thirty-six weeks ended September 8, 2000. As discussed above, our
revenues and operating profit are not comparable to 2000, due to the acquisition
of the Lessee Entities by our TRS.
The table below presents gross hotel sales for the twelve weeks ended and the
thirty-six weeks ended September 7, 2001 and September 8, 2000. For 2000, gross
hotel sales were used as the basis for calculating rental income. The data is
presented in order to facilitate an investor's understanding and comparative
analysis of the operations of our properties.
Twelve Weeks Ended Thirty-six Weeks Ended
------------------------------------ ------------------------------------
September 7, September 8, September 7, September 8,
2001 2000 2001 2000
---------------- ---------------- --------------- -----------------
(in millions) (in millions)
Hotel sales
Rooms........................... $ 596 $ 656 $1,906 $1,979
Food and beverage............... 240 258 830 862
Other........................... 72 71 226 224
----- ----- ------ ------
Total hotel sales............. $ 908 $ 985 $2,962 $3,065
===== ===== ====== ======
The $103 million decrease in hotel sales for the thirty-six weeks ended
September 7, 2001 reflects the decrease in REVPAR for our comparable properties
of 6.1% to $114.02, partially offset by incremental revenues provided by the
500-room expansion at Orlando Marriott, which was placed in service in June
2000, and the addition of three hotels as a result of the consolidation of
Rockledge and Fernwood as of March 24, 2001.
Comparable REVPAR for the third quarter of 2001 decreased by 11.9% to $103.45
compared to the same quarter in 2000 due to the recent slowdown in the economy.
The decrease is attributable to a decrease in occupancy of 5.9 percentage points
and a 5% decrease in room rates during the quarter. As a result of decreased
hotel sales, our hotel managers implemented cost cutting measures and revenue
enhancement programs at the property level during the second quarter in order to
stabilize house profit. These measures include increasing labor efficiency
particularly at the managerial level and in the food and beverage area at the
hotels, reducing discretionary expenses in rooms, food and beverage, and repairs
and maintenance and reducing energy consumption. These cost cutting measures
served to stabilize the profit margins during the second and third quarters,
however, due to continued declines in REVPAR during the third quarter, profit
margins decreased 2.3 and 1.7 percentage points for the third quarter and year-
to-date 2001, respectively.
Rental income decreased $208 million, or 92%, to $19 million for the third
quarter of 2001 versus the third quarter of 2000, reflecting the purchase of 116
of the Crestline lease entities by our wholly owned TRS effective January 1,
2001 and the purchase of four additional lessee entities (three of the lessee
entities were purchased from Wyndham, while the other was purchased from
Crestline) effective June 16, 2001. As discussed in Note 2 to the condensed
consolidated financial statements, percentage rental revenues from third-party
lessees of $18 million and $366 million for the thirty-six weeks ended September
7, 2001 and September 8, 2000, respectively, were deferred on the balance sheet
as deferred
-17-
HOST MARRIOTT CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
rent. For the third quarter of 2001 and 2000, $3 million and $75 million of
rental income was deferred. Percentage rent will be recognized as income only as
specified hotel sales thresholds are achieved.
Depreciation and Amortization. Depreciation and amortization increased $12
million or 16% for the third quarter of 2001 versus the third quarter of 2000
and increased $42 million, or 19% year-to-date, primarily reflecting an increase
in depreciable assets. The increase in depreciation expense reflects the
consolidation of three hotels and other equipment as a result of the purchase of
the voting interest in Rockledge and Fernwood as discussed in Note 6. The
transaction caused an increase in depreciable assets of $206 million. It is also
the result of $379 million in capital expenditures in 2000 and $204 million in
capital expenditures in the first three quarters of 2001.
Hotel Operating Costs and Expenses. As discussed above, 2001 hotel revenues and
operating costs are not comparable with 2000. During 2000, Crestline and
Wyndham, as lessees, paid specified direct property-level costs including
management fees, which reduced the net rent payment to us under the terms of the
leases. During 2001, these costs are borne by us and are included in our
condensed consolidated results of operations.
Corporate Expenses. Corporate expenses were flat for the third quarter of 2001
and decreased $3 million year-to-date from prior year levels.
Minority Interest Expense (Benefit). For the twelve weeks and thirty-six weeks
ended September 7, 2001 and September 8, 2000, respectively, we recognized
minority interest expense (benefit) of $0 million and $(4) million, and $26
million and $(26) million, respectively. The variance is due in part to the
decrease in the minority interest ownership from 22% in the third quarter of
2000 to 8% in the third quarter of 2001, and reflects the OP Unitholders' share
in our results of operations. Assuming the Blackstone OP Units had been
converted at January 1, 2001, the year-to-date minority interest expense would
have been $21 million, or a decrease of $5 million.
Interest Expense. Interest expense increased 4% to $104 million in the third
quarter of 2001 and increased 6% to $311 million year-to-date, primarily due to
the issuance in October of 2000 of $250 million of 91/4% Series F Senior Notes,
which was primarily used to fund the purchase of the Crestline lessee entities
and for general corporate purposes.
Net Income (Loss). Our net loss was $7 million for the third quarter of 2001
compared to $17 million for the third quarter of 2000. Our year-to-date income
was $74 million compared to a net loss of $127 million in for the same period in
2000. The increases in net income primarily reflect the acquisition of the
Crestline and Wyndham Lessee Entities effective January 1, 2001 and June 16,
2001, thereby eliminating amounts paid to Crestline and Wyndham as lessees for
120 of our properties and the effect of the reduction of the deferral of
contingent rent, which went from $75 million to $3 million for third quarter
2000 compared to third quarter 2001 and $366 million to $18 million year-to-date
2000 compared to year-to-date 2001.
Net Income (Loss) Available to Common Shareholders. The net loss available to
common shareholders was $16 million for the third quarter of 2001 and the net
income available to common shareholders was $51 million year-to-date, an
increase of $6 million and $189 million over the same periods in 2000,
respectively. The increase primarily reflects the previously discussed reduction
of the deferral of contingent rent. These results were partially offset by the
$4 million gain on the repurchase of the Convertible Preferred Securities
recorded during the first quarter of 2000 and an increase in dividends of
preferred stock due to the issuance of Class C preferred stock during second
quarter 2001.
-18-
HOST MARRIOTT CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FFO and EBITDA
---------------
We consider Comparative Funds From Operations ("Comparative FFO"), which
consists of Funds From Operations, as defined by the National Association of
Real Estate Investment Trusts, adjusted for significant non-recurring items
detailed in the chart below, and our consolidated earnings before interest
expense, income taxes, depreciation, amortization and other non-cash items
(including contingent rent) ("EBITDA") to be indicative measures of our
operating performance due to the significance of our long-lived assets.
Comparative FFO and EBITDA are also useful in measuring our ability to service
debt, fund capital expenditures and expand our business. Furthermore, management
believes that Comparative FFO and EBITDA are meaningful disclosures that will
help shareholders and the investment community to better understand our
financial performance, including comparing our performance to other real estate
investment trusts. However, Comparative FFO and EBITDA as presented may not be
comparable to amounts calculated by other companies. This information should not
be considered as an alternative to net income, operating profit, cash from
operations, or any other operating or liquidity performance measure prescribed
by accounting principles generally accepted in the United States. Cash
expenditures for various long-term assets, interest expense (for EBITDA purposes
only) and income taxes have been, and will be incurred which are not reflected
in the EBITDA and Comparative FFO presentations.
Comparative FFO available to common shareholders decreased $24 million, or 24%,
to $75 million for the third quarter of 2001 over the third quarter of 2000, and
decreased $2 million or 1%, to $322 million year-to-date. The following is a
reconciliation of the income (loss) from operations before extraordinary items
to Comparative FFO (in millions):
Twelve Weeks Ended Thirty-six Weeks Ended
----------------------------- -----------------------------
September 7, September 8, September 7, September 8,
2001 2000 2001 2000
------------ ------------ ------------ ------------
Funds from Operations
Income (loss) from operations before extraordinary
items................................................ $ (6) $ (17) $ 75 $ (124)
Depreciation and amortization.......................... 86 74 262 220
Other real estate activities........................... (1) (1) -- (2)
Partnership adjustments................................ 3 2 35 (26)
------------ ------------ ------------ ------------
Funds from operations of Host LP........................ 82 58 372 68
Effect on funds from operations of SAB 101............. 3 75 18 366
Effective impact of lease repurchase................... 5 -- 8 --
------------ ------------ ------------ ------------
Comparative funds from operations of Host LP............ 90 133 398 434
Dividends on preferred stock........................... (9) (5) (23) (15)
------------ ------------ ------------ ------------
Comparative funds from operations of Host LP
available to common unitholders........................ 81 128 375 419
Comparative funds from operations of minority partners
of Host LP........................................... (6) (29) (53) (95)
------------ ------------ ------------ ------------
Comparative funds from operations available to
common shareholders of Host REIT....................... $ 75 $ 99 $ 322 $ 324
============ ============ ============ ============
We are the sole general partner in the Operating Partnership and as of September
7, 2001 and September 8, 2000 held approximately 92% and 78%, respectively, of
the outstanding OP Units. The $6 million and $29 million, and $53 million and
$95 million, deducted for the twelve weeks and thirty-six weeks ended September
7, 2001 and September 8, 2000, respectively, represent the Comparative FFO
attributable to the interests in the Operating Partnership held by those
minority partners. OP Units owned by holders other than us are redeemable at the
option of the holder, generally commencing one year after the
-19-
HOST MARRIOTT CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
issuance of their OP Units. Upon redemption of an OP Unit, the holder would
receive from the Operating Partnership cash in an amount equal to the market
value of one share of our common stock, or at our option, a share of our common
stock.
EBITDA decreased $38 million, or 17%, to $185 million in the third quarter of
2001, and decreased $12 million, or 2%, to $697 million, year-to-date over the
comparable periods in 2000. Hotel EBITDA was $192 million and $157 million for
the third quarters of 2001 and 2000, which does not include deferred rental
income of $3 million and $75 million, respectively, and $718 million and $390
million year-to-date, which does not include deferred rental income of $18
million and $366 million, respectively. As previously discussed, 2001 Hotel
EBITDA primarily reflects the revenues and expenses generated by the hotels
whereas 2000 Hotel EBITDA primarily reflects rental income from lessees.
The following schedule presents our EBITDA as well as a reconciliation of EBITDA
to the income (loss) from operations before extraordinary items (in millions):
Twelve Weeks Ended Thirty-six Weeks Ended
------------------------------- -------------------------------
September 7, September 8, September 7, September 8,
2001 2000 2001 2000
------------- ------------- ------------- -------------
EBITDA
Hotels............................................... $ 192 $ 157 $ 718 $ 390
Office buildings and other investments............... 2 2 11 5
Interest income...................................... 5 9 25 26
Corporate and other expenses......................... (12) (7) (40) (38)
Effect on revenue of SAB 101......................... 3 75 18 366
------------- ------------- ------------- -------------
EBITDA of Host LP....................................... 190 236 732 749
Distributions to minority interest partners of Host
LP.................................................. (5) (13) (35) (40)
------------- ------------- ------------- -------------
EBITDA of Host REIT..................................... $ 185 $ 223 $ 697 $ 709
============= ============= ============= =============
Twelve Weeks Ended Thirty-six Weeks Ended
-------------------------------- ------------------------------
September 7, September 8, September 7, September 8,
2001 2000 2001 2000
------------- ------------- ------------- -------------
EBITDA of Host REIT..................................... $ 185 $ 223 $ 697 $ 709
Effect on revenue of SAB 101............................ (3) (75) (18) (366)
Interest expense........................................ (104) (100) (311) (293)
Dividends on Convertible Preferred Securities........... (7) (8) (22) (22)
Depreciation and amortization........................... (87) (75) (266) (224)
Minority interest (expense) benefit..................... -- 4 (26) 26
Income taxes............................................ -- (4) (15) (7)
Distributions to minority interest partners of Host LP.. 5 13 35 40
Lease repurchase expense................................ -- -- (5) --
Other non-cash charges, net............................. 5 5 6 13
------------- ------------- ------------- -------------
Income (loss) from operations before extraordinary
items............................................ $ (6) $ (17) $ 75 $ (124)
============= ============= ============= =============
Distributions to minority holders of OP Units were $5 million and $13 million,
respectively, for the twelve weeks ended September 7, 2001 and September 8,
2000, and $35 million and $40 million for the thirty-six weeks ended September
7, 2001 and September 8, 2000. These OP Units are convertible at any time at the
discretion of the holder. These OP Units would be converted into cash or our
common stock at our option.
Our interest coverage, defined as EBITDA divided by cash interest expense, was
2.3 times and 2.5 times for the 2001 and 2000 thirty-six week periods,
respectively, and 2.4 times for full year 2000. The ratio of
-20-
HOST MARRIOTT CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
earnings to fixed charges was 1.3 to 1.0 through the third quarter of 2001
versus a deficiency of earnings to fixed charges of $145 million through the
third quarter of 2000, which was primarily due to the deferral of contingent
rental revenue of $366 million. We reported a ratio of earnings to fixed charges
of 1.2 to 1.0 for the full year 2000.
Cash Flows and Financial Condition
We reported a decrease in cash and cash equivalents of $131 million during the
thirty-six weeks ended September 7, 2001 compared to a decrease of $89 million
during the thirty-six weeks ended September 8, 2000. Cash from operations was
$182 million through the third quarter of 2001 and $398 million through the
third quarter of 2000. The $216 million decrease in cash from operations
primarily relates to the cash used to purchase the Crestline Lessee Entities.
Excluding the lease purchases, operating cash flow from operations would have
been $390 million, or a decrease of 2% when compared to 2000.
Cash used in investing activities was $258 million and $307 million through the
third quarter of 2001 and 2000, respectively. Cash used in investing activities
through the third quarter includes capital expenditures and other investments of
$204 million and $271 million for 2001 and 2000, respectively, mostly related to
renewal and replacements on existing properties and new development projects.
Property and equipment balances include $118 million and $135 million for
construction in progress as of September 7, 2001 and December 31, 2000,
respectively. The balance as of September 7, 2001 primarily relates to the
development of the Ritz-Carlton, Naples Golf Resort and various other expansion
and development projects. On April 1, 2001, the 50,000 square foot world-class
spa at The Ritz-Carlton, Naples was placed in service at an approximate
development cost of $23 million.
Cash used in financing activities was $55 million through the third quarter of
2001 and $180 million through the third quarter of 2000. Cash from financing
activities through the third quarter of 2001 includes $275 million of debt
issuances and $144 million from the issuance of cumulative redeemable preferred
stock. Cash was used in financing activities primarily for the payment of $207
million in dividends and the repayment and prepayment of $267 million in debt.
During the first quarter of 2001, the Company borrowed $115 million under the
revolver portion of the bank credit facility (the "revolver") to partially fund
the acquisition of the Crestline Lessee Entities as well as for general
corporate purposes, which was fully repaid in the second quarter of 2001. During
the third quarter, we borrowed $60 million under the revolver to purchase
minority interests in various hotels from Wyndham. During the fourth quarter, we
borrowed an additional $250 million under the revolver. As of October 19, 2001,
$150 million and $310 million are outstanding under the term and revolving loan
portions of the bank credit facility, respectively, and the additional available
capacity under the revolver is $315 million.
On September 19, 2001, we announced that the Board of Directors had declared
cash dividends of $0.26 per common share and $0.625 per share of Preferred
Stock, which were paid on October 12, 2001 to shareholders of record on
September 28, 2001.
On March 27, 2001, we sold approximately 6.0 million shares of 10% Class C
preferred stock ("Class C Preferred Stock") with a par value of $0.01 for net
proceeds of $144 million. Holders of the Class C Preferred Stock are entitled to
receive cumulative cash dividends at a rate of 10% per annum of the $25 per
share liquidation preference. Dividends are payable quarterly in arrears
commencing April 15, 2001, on which date a pro rata dividend of $0.03 per share
was distributed. Beginning March 27, 2006, we have the option to redeem the
Class C Preferred Stock for $25.00 per share, plus accrued and unpaid dividends
to the date of redemption.
-21-
HOST MARRIOTT CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Effective January 1, 2001, each of Rockledge Hotel Properties, Inc. and Fernwood
Hotel Assets, Inc. (the "Non-Controlled Subsidiaries") elected to be a TRS and
in April 2001, the Operating Partnership acquired the voting interests in the
Non-Controlled Subsidiaries held by the Host Marriott Statutory
Employee/Charitable Trust for approximately $2 million, which is also permitted
as a result of the REIT Modernization Act. Subsequent to the acquisition, on a
consolidated basis our results of operations reflect the revenues and expenses
generated by the two taxable corporations, and our consolidated balance sheets
include the various assets, consisting of three additional full-service
properties, one located in St. Louis, Missouri, and two located in Mexico City,
Mexico, as well as certain joint venture interests, held by the two taxable
corporations, which were approximately $356 million of assets and $262 million
of liabilities, including $54 million of third party debt ($26 million of which
matures in 2001), respectively, as of March 23, 2001.
On February 7, 2001, May 7, 2001 and May 29, 2001, Blackstone and affiliates
("Blackstone") converted 12.5 million, 10.0 million and 18.2 million OP Units,
respectively, to common shares and immediately sold them to an underwriter for
sale on the open market. As a result of the transactions, Blackstone now owns
approximately 1% of the outstanding OP Units of the Operating Partnership and we
increased our ownership in the Operating Partnership to 92%. We received no
proceeds as a result of the transactions.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Our borrowings under the bank credit facility are sensitive to changes in
interest rates. The interest rate on this debt obligation, which was $150
million at both September 7, 2001 and December 31, 2000, is based on various
LIBOR terms plus 200 basis points. The weighted average interest rate for this
financial instrument is 5.9% for the thirty-six weeks ended September 7, 2001
and 9.0% for the year ended December 31, 2000. As discussed in Note 5 to the
condensed consolidated financial statements, the mortgage loan on the Ritz-
Carlton, Amelia Island hotel was prepaid in full on August 31, 2001.
On August 30, 2001, a Canadian subsidiary of the Company entered into a
financing agreement pursuant to which it borrowed $96.6 million at a variable
rate of LIBOR plus 275 basis points. In addition, the subsidiary entered into
currency forward contracts as discussed further in Note 5 to the condensed
consolidated financial statements. The weighted average interest rate for this
financial instrument is 6.4% for the thirty-six weeks ended September 7, 2001.
-22-
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in routine litigation and administrative proceedings
arising in the ordinary course of business, some of which are expected to be
covered by liability insurance and which collectively are not expected to have a
material adverse effect on the business, financial condition or results of
operations of the Company.
Item 6. Exhibits and Reports
(a) Exhibits
A complete listing of exhibits required is given in the Exhibit Index
that precedes the exhibits filed with this report.
(b) Reports on Form 8-K
Not applicable
-23-
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HOST MARRIOTT CORPORATION
October 22, 2001 /s/ Donald D. Olinger
---------------- ---------------------
Date Donald D. Olinger
Senior Vice President and
Corporate Controller
(Chief Accounting Officer)
-24-
Exhibit Index Description
------------- -----------
Exhibit 10.41 First Amendment to Amended and Restated Pledge and Security
Agreement dated as of March 1, 2001 and Amended and Restated
as of August 5, 1998, and amended and restated as of May 31,
2000.
Exhibit 10.42 Second Amendment and Waiver of Amended and Restated Credit
Agreement dated as of March 1, 2001, and amended and
restated as of August 5, 1998, and further amended and
restated May 31, 2000, and further amended and restated
October 27, 2000.
Exhibit 10.43 Amended and Restated Subsidiaries Guaranty dated as of
August 5, 1998 and amended and restated as of May 31, 2000.
Exhibit 10.44 Amended and Restated Pledge and Security Agreement dated as
of August 5, 1998 and amended and restated as of May 31,
2000.
EX-10.41
3
dex1041.txt
EXHIBIT 10.41
Exhibit 10.41
FIRST AMENDMENT
TO AMENDED AND RESTATED
PLEDGE AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED PLEDGE AND SECURITY
AGREEMENT (this "Amendment") dated as of March 1, 2001, among each of the
undersigned pledgors (each a "Pledgor") and BANKERS TRUST COMPANY, as Collateral
Agent (the "Pledgee"). Unless otherwise defined herein, all capitalized terms
used herein and defined in the Pledge Agreement (as defined below) are used
herein as so defined.
W I T N E S S E T H:
-------------------
WHEREAS, the Pledgors and the Pledgee are parties to an Amended and
Restated Pledge and Security Agreement, dated as of August 5, 1998, and amended
and restated as of May 31, 2000 (as amended, modified or supplemented through,
but not including, the date hereof, the "Pledge Agreement"); and
WHEREAS, the Pledgors have requested that the Pledgee amend certain
provisions of the Pledge Agreement and the Pledgee (with the consent of the
Required Banks in accordance with Section 20 of the Pledge Agreement) has agreed
to amend such provisions on the terms and conditions herein provided;
NOW, THEREFORE, subject to the terms and conditions set forth below,
it is agreed:
1. Section 15(a)(iv) of the Pledge Agreement is hereby amended to
delete the following phrase at the end thereof:
"in each case except those which have been obtained or made or as may
be required by laws affecting the offer and sale of securities
generally in connection with the exercise by the Pledgee of certain of
its remedies hereunder;"
and to insert the following phrase in the lieu thereof:
"in each case except (x) those which have been obtained or made, (y)
as may be required by laws affecting the offer and sale of securities
generally in connection with the exercise by the Pledgee of certain of
its remedies hereunder, or (z) as may be required to be obtained or
made in order to comply with the terms of or avoid defaults under any
contract of the Borrower or a Subsidiary of the Borrower otherwise
permitted under the Credit Agreement that imposes restrictions upon
the sale of, or foreclosure of liens upon, any Securities of a Look-
Through Subsidiary pledged hereunder in connection with the exercise
by the Pledgee of its remedies hereunder;".
2. Section 15(a)(v) of the Pledge Agreement is hereby amended to
delete the following phrase appearing at the end thereof:
"except as contemplated in this Agreement;"
and to insert the following phrase in lieu thereof:
"except (x) as contemplated in this Agreement and (y) for violations
and defaults that may arise under contracts of the Borrower or a
Subsidiary thereof otherwise permitted under the Credit Agreement as a
result of the sale of, or foreclosure of a lien upon, the Securities
of Look-Through Subsidiaries pledged hereunder to the extent that the
prior consent of other parties to such contracts have not been
obtained or other actions specified in such contracts have not been
taken in connection with any such sale or foreclosure;".
3. This Amendment shall become effective on the later of (x) the
date when the Pledgee and each of the Pledgors shall have signed a counterpart
hereof (whether the same or different counterparts) and shall have delivered
(including by way of facsimile transmission) the same to the Administrative
Agent at the Notice Office and (y) the "Amendment Effective Date" under that
certain Second Amendment and Waiver of Amended and Restated Credit Agreement of
even date herewith.
4. This Amendment is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Pledge
Agreement.
5. This Amendment may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete set of
counterparts shall be lodged with the Borrower and the Administrative Agent.
6. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK.
2
7. From and after the date that this Amendment becomes effective,
all references in the the Pledge Agreement to the Pledge Agreement shall be
deemed to be references to the Pledge Agreement as modified hereby.
3
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to execute and deliver this Amendment as of the date first above
written.
BANKERS TRUST COMPANY, as Collateral
Agent and Pledgee
By: /s/ Laura S. Burwick
---------------------------------------
Title: Principal
HOST MARRIOTT CORPORATION, as a Pledgor
By: /s/ W. Edward Walter
---------------------------------------
Title: Executive Vice President and
Treasurer
HOST MARRIOTT, L.P., as a Pledgor
By: Host Marriott Corporation,
its General Partner
By: /s/ W. Edward Walter
---------------------------------------
Title: Executive Vice President and
Treasurer
AIRPORT HOTELS LLC,
as a Pledgor
By: *
---------------------------------------
Name: W. Edward Walter
Title: Vice President
4
HOST OF HOUSTON 1979,
as a Pledgor
By: Airport Hotels LLC,
its General Partner
By: *
---------------------------------------
Name: W. Edward Walter
Title: Vice President
HOST OF HOUSTON, LTD.,
as a Pledgor
By: Airport Hotels LLC,
its General Partner
By: *
---------------------------------------
Name: W. Edward Walter
Title: Vice President
HOST OF BOSTON, LTD.,
as a Pledgor
By: Airport Hotels LLC,
its General Partner
By: *
---------------------------------------
Name: W. Edward Walter
Title: Vice President
CHESAPEAKE FINANCIAL SERVICES, LLC,
as a Pledgor
By: *
---------------------------------------
Name: W. Edward Walter
Title: Vice President
5
CITY CENTER INTERSTATE PARTNERSHIP LLC,
as a Pledgor
By: *
---------------------------------------
Name: W. Edward Walter
Title: Vice President
HMC RETIREMENT PROPERTIES L.P.,
as a Pledgor
By: Durbin LLC,
Its General Partner
By: *
---------------------------------------
Name: W. Edward Walter
Title: Vice President
HMH MARINA LLC,
as a Pledgor
By: *
---------------------------------------
Name: W. Edward Walter
Title: Vice President
FARRELL'S ICE CREAM PARLOUR RESTAURANTS LLC,
as a Pledgor
By: *
---------------------------------------
Name: W. Edward Walter
Title: Vice President
HMC ATLANTA LLC,
as a Pledgor
By: *
---------------------------------------
Name: W. Edward Walter
Title: Vice President
6
HMC BURLINGAME LLC,
as a Pledgor
By: *
---------------------------------------
Name: W. Edward Walter
Title: Vice President
HMC CALIFORNIA LEASING LLC,
as a Pledgor
By: *
---------------------------------------
Name: W. Edward Walter
Title: Vice President
HMC CAPTAL LLC,
as a Pledgor
By: *
---------------------------------------
Name: W. Edward Walter
Title: Vice President
HMC CAPITAL RESOURCES LLC,
as a Pledgor
By: *
---------------------------------------
Name: W. Edward Walter
Title: Vice President
HMC PARK RIDGE LLC,
as a Pledgor
By: *
---------------------------------------
Name: W. Edward Walter
Title: Vice President
7
HMC PARK RIDGE II LLC,
as a Pledgor
By: *
---------------------------------------
Name: W. Edward Walter
Title: Vice President
HMC PARK RIDGE LP,
as a Pledgor
By: HMC Park Ridge LLC,
its General Partner
By: *
---------------------------------------
Name: W. Edward Walter
Title: Vice President
HMC PARTNERSHIP HOLDINGS LLC,
as a Pledgor
By: *
---------------------------------------
Name: W. Edward Walter
Title: Vice President
HOST PARK RIDGE LLC,
as a Pledgor
By: *
---------------------------------------
Name: W. Edward Walter
Title: Vice President
HMC SUITES LLC,
as a Pledgor
By: *
---------------------------------------
Name: W. Edward Walter
Title: Vice President
8
HMC SUITES LIMITED PARTNERSHIP,
as a Pledgor
By: HMC Suites LLC,
its General Partner
By: *
---------------------------------------
Name: W. Edward Walter
Title: Vice President
PRM LLC,
as a Pledgor
By: *
---------------------------------------
Name: W. Edward Walter
Title: Vice President
WELLSFORD-PARK RIDGE HOST HOTEL LIMITED
PARTNERSHIP,
as a Pledgor
By: Host Park Ridge LLC,
its General Partner
By: *
---------------------------------------
Name: W. Edward Walter
Title: Vice President
YBG ASSOCIATES LLC,
as a Pledgor
By: *
---------------------------------------
Name: W. Edward Walter
Title: Vice President
HMC CHICAGO LLC,
as a Pledgor
By: *
---------------------------------------
Name: W. Edward Walter
Title: Vice President
9
HMC DESERT LLC,
as a Pledgor
By: *
---------------------------------------
Name: W. Edward Walter
Title: Vice President
HMC PALM DESERT LLC,
as a Pledgor
By: *
---------------------------------------
Name: W. Edward Walter
Title: Vice President
MDSM FINANCE LLC,
as a Pledgor
By: *
---------------------------------------
Name: W. Edward Walter
Title: Vice President
HMC DIVERSIFIED LLC,
as a Pledgor
By: *
---------------------------------------
Name: W. Edward Walter
Title: Vice President
HMC EAST SIDE II LLC,
as a Pledgor
By: *
---------------------------------------
Name: W. Edward Walter
Title: Vice President
10
HMC GATEWAY LLC,
as a Pledgor
By: *
---------------------------------------
Name: W. Edward Walter
Title: Vice President
HMC GRAND LLC,
as a Pledgor
By: *
---------------------------------------
Name: W. Edward Walter
Title: Vice President
HMC HANOVER LLC,
as a Pledgor
By: *
---------------------------------------
Name: W. Edward Walter
Title: Vice President
HMC HARTFORD LLC,
as a Pledgor
By: *
---------------------------------------
Name: W. Edward Walter
Title: Vice President
HMC HOTEL DEVELOPMENT LLC,
as a Pledgor
By: *
---------------------------------------
Name: W. Edward Walter
Title: Vice President
11
HMC HPP LLC,
as a Pledgor
By: *
---------------------------------------
Name: W. Edward Walter
Title: Vice President
HMC IHP HOLDING LLC,
as a Pledgor
By: *
---------------------------------------
Name: W. Edward Walter
Title: Vice President
HMC MANHATTAN BEACH LLC,
as a Pledgor
By: *
---------------------------------------
Name: W. Edward Walter
Title: Vice President
HMC MARKET STREET LLC,
as a Pledgor
By: *
---------------------------------------
Name: W. Edward Walter
Title: Vice President
NEW MARKET STREET LP,
as a Pledgor
By: HMC Market Street LLC,
its General Partner
By: *
---------------------------------------
Name: W. Edward Walter
Title: Vice President
12
HMC GEORGIA LLC,
as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
HMC MEXPARK LLC,
as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
HMC POLANCO LLC,
as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
HMC NGL LLC,
as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
HMC OLS I L.P.,
as a Pledgor
By: HMC OLS I LLC,
its General Partner
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
13
HMC OP BN LLC,
as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
HMC PACIFIC GATEWAY LLC,
as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
HMC PLP LLC,
as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
CHESAPEAKE HOTEL LIMITED PARTNERSHIP,
as a Pledgor
By: HMC PLP LLC,
its General Partner
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
HMC POTOMAC LLC,
as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
14
HMC PROPERTIES I LLC,
as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
HMC PROPERTIES II LLC,
as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
HMC RTZ LOAN I LLC,
as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
HMC RTZ II LLC,
as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
HMC SBM TWO LLC,
as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
15
HMC SEATTLE LLC,
as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
HMC SFO LLC,
as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
HMC SWISS HOLDINGS LLC,
as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
HMC WATERFORD LLC,
as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
HMH GENERAL PARTNER HOLDINGS LLC,
as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
16
HMH NORFOLK LLC,
as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
HMH NORFOLK L.P.,
as a Pledgor
By: HMH Norfolk LLC,
its General Partner
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
HMH PENTAGON LLC,
as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
HMH RESTAURANTS LLC,
as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
HMH RIVERS LLC,
as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
17
HMH RIVERS, L.P.,
as a Pledgor
By: HMH Rivers LLC,
its General Partner
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
HMH WTC LLC,
as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
HMP CAPITAL VENTURES LLC,
as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
HMP FINANCIAL SERVICES LLC,
as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
HOST LA JOLLA LLC,
as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
18
CITY CENTER HOTEL LIMITED PARTNERSHIP,
as a Pledgor
By: Host La Jolla LLC,
its General Partner
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
TIMES SQUARE LLC,
as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
IVY STREET LLC,
as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
MARKET STREET HOST LLC,
as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
MFR OF ILLINOIS LLC,
as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
19
MFR OF VERMONT LLC,
as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
MFR OF WISCONSIN LLC,
as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
PHILADELPHIA AIRPORT HOTEL LLC,
as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
PM FINANCIAL LLC,
as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
PM FINANCIAL LP,
as a Pledgor
By: PM Financial LLC,
its General Partner
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
20
HMC PROPERTY LEASING LLC,
as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
HMC HOST RESTAURANTS LLC,
as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
SANTA CLARA HMC LLC,
as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
S.D. HOTELS LLC,
as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
TIMES SQUARE GP LLC,
as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
21
DURBIN LLC, as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
HMC OLS I LLC, as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
HMC JWDC GP LLC, as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
HMC JWDC LLC, as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
HMC HT LLC, as a Pledgor
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
HMC OLS II, L.P., as a Pledgor
By: HMC OLS I LLC,
its General Partner
By: *
------------------------------------
Name: W. Edward Walter
Title: Vice President
22
* Executed below by W. Edward Walter as Vice
President of each of the above Pledgors
By: /s/ W. Edward Walter
------------------------------------
Title: Vice President
23
EX-10.42
4
dex1042.txt
EXHIBIT 10.42
Exhibit 10.42
SECOND AMENDMENT AND WAIVER
OF AMENDED AND RESTATED
CREDIT AGREEMENT
THIS SECOND AMENDMENT AND WAIVER OF AMENDED AND RESTATED CREDIT
AGREEMENT (this "Amendment") dated as of March 1, 2001, among HOST MARRIOTT
CORPORATION, a Maryland corporation ("Holdings"), HOST MARRIOTT, L.P., a
Delaware limited partnership (the "Borrower"), the lenders party to the Credit
Agreement referred to below (the "Banks"), and BANKERS TRUST COMPANY, as
Administrative Agent (the "Administrative Agent"). Unless otherwise defined
herein, all capitalized terms used herein and defined in the Credit Agreement
are used herein as so defined.
W I T N E S S E T H:
-------------------
WHEREAS, Holdings, the Borrower, the Banks and the Administrative
Agent are parties to an Amended and Restated Credit Agreement, dated as of June
19, 1997, and amended and restated as of August 5, 1998, further amended and
restated as of May 31, 2000, and further amended as of October 27, 2000 (as
amended, modified or supplemented through, but not including, the date hereof,
the "Credit Agreement");
WHEREAS, concurrently herewith, Holdings, the Borrower, the other
Pledgors named therein and Bankers Trust Company, as Collateral Agent, are
entering into a First Amendment to Pledge and Security Agreement in the form
attached hereto as Exhibit A (the "Pledge Agreement Amendment"); and
---------
WHEREAS, the Borrower has requested that the Banks amend or waive
certain provisions of the Credit Agreement and the Pledge and Security Agreement
and the Banks have agreed to amend or waive such provisions on the terms and
conditions provided herein and in the Pledge Agreement Amendment;
NOW, THEREFORE, subject to the terms and conditions set forth below,
it is agreed:
1. Section 7.16(a)(B) of the Credit Agreement is hereby amended to
delete clauses (i) and (ii) thereof and replace such clauses with the following:
"(i) with respect to clauses (I), (II) and (III) above, such
Subsidiary's only assets consist of $5,000 or less in cash;
(ii) with respect to clauses (I) and (II) above only, such
Subsidiary, or the direct or indirect parent company or general
partner
of such Subsidiary whose only significant asset (in each case) is the
equity ownership of such Subsidiary (or the direct or indirect parent
company of such Subsidiary), enters into (or is a party to) a material
contract pursuant to a transaction otherwise permitted under this
Agreement and the terms of which prohibit or restrict such Subsidiary
from executing a counterpart of the Subsidiaries Guaranty and/or the
Pledge and Security Agreement; or
(iii) with respect to clause (III) above only, such Subsidiary,
Holdings, the Borrower or any other Subsidiary of the Borrower, enters
into (or is a party to) a material contract pursuant to a transaction
otherwise permitted under this Agreement and the terms of which
prohibit or restrict the capital stock or other equity of such
Subsidiary from being pledged under the Pledge and Security Agreement
(as opposed to restricting or prohibiting the ability of the
Collateral Agent to exercise remedies with respect to such pledge)."
2. The Banks hereby waive any Default or Event of Default that has
arisen under the Credit Agreement solely as a result of any inaccuracy in the
representations and warranties set forth in Section 15(a)(iv) or Section
15(a)(v) of the Pledge and Security Agreement arising from the failure to
disclose consents required to be obtained or other actions to be taken in order
to comply with the terms of or avoid defaults under any contract of the Borrower
or a Subsidiary of the Borrower otherwise permitted under the Credit Agreement
that imposes restrictions upon the sale of, or foreclosure of liens upon, any
Securities (as defined in the Pledge and Security Agreement) of a Look-Through
Subsidiary pledged under the Pledge and Security Agreement in connection with
the exercise by the Pledgee (as defined in the Pledge and Security Agreement) of
its remedies thereunder.
3. The Banks hereby authorize the Collateral Agent to enter into the
Pledge Agreement Amendment.
4. In order to induce the Banks to enter into this Amendment and to
induce the Collateral Agent to enter into the Pledge Agreement Amendment, each
Credit Party hereto represents and warrants that (except with respect to any
matter described in Section 2 above) (a) the representations and warranties
contained in Section 6 of the Credit Agreement and in Section 15 of the Pledge
and Security Agreement are, and will be as of the Amendment Effective Date, true
and correct in all material respects, and (b) there exists, and will exist as of
the Amendment Effective Date, no Default or Event of Default.
5. This Amendment shall become effective on the date (the "Amendment
Effective Date") when Holdings, the Borrower and the Required Banks shall have
signed a counterpart hereof (whether the same or different
2
counterparts) and shall have delivered (including by way of facsimile
transmission) the same to the Administrative Agent at the Notice Office.
6. This Amendment is limited as specified and shall not constitute a
modification, acceptance or waiver of any provision of the Credit Agreement or
any other Credit Document except as specified above.
7. This Amendment may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete set of
counterparts shall be lodged with the Borrower and the Administrative Agent.
8. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK.
9. From and after the Amendment Effective Date, all references in
the Credit Agreement and in the other Credit Documents to the Credit Agreement
and the Pledge and Security Agreement shall be deemed to be references to the
Credit Agreement as modified hereby and by the Pledge Agreement Amendment.
[Remainder of Page Intentionally Blank]
3
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Amendment as of the date first
above written.
HOST MARRIOTT CORPORATION
By: /s/ W. Edward Walter
--------------------------------------
Title: Executive Vice President and
Treasurer
HOST MARRIOTT, L.P.
By: Host Marriott Corporation,
its General Partner
By: /s/ W. Edward Walter
--------------------------------------
Title: Executive Vice President and
Treasurer
4
BANKERS TRUST COMPANY,
Individually and as Administrative
Agent
By: /s/ Laura S. Burwick
----------------------------------
Title: Principal
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ Mary P. Daly
----------------------------------
Title: Vice President
THE BANK OF NOVA SCOTIA
By: /s/ Bruce G. Ferguson
----------------------------------
Title: Managing Director
BANK LEUMI USA
By: /s/ Charles C. D'Amico
----------------------------------
Title: Vice President
5
BANK OF HAWAII
By: /s/ Donna R. Parker
----------------------------------
Title: Vice President
FLEET NATIONAL BANK
By: /s/ Floyd P. Wiggins
----------------------------------
Title: Group Manager
ERSTE BANK DER OESTERREICHISCHEN
SPARKASSEN AG
By: /s/ Paul Judicke
----------------------------------
Title: Vice President, Erste Bank New York
Branch
By: /s/ John S. Runnion
----------------------------------
Title: Managing Director, Erste Bank New
York Branch
FIRST COMMERCIAL BANK, NEW YORK AGENCY
By:__________________________________
Name:
Title:
6
HELLER FINANCIAL, INC.
By: /s/ Wayne S. Gogolenski
----------------------------------
Title: Vice President
BANK OF AMERICA, N.A.
By: /s/ Lesa J. Butler
----------------------------------
Title: Principal
SOCIETE GENERALE, SOUTHWEST AGENCY
By: /s/ Thomas K. Day
----------------------------------
Title: Managing Director
THE BANK OF NEW YORK
By: /s/ David V. Fowler
----------------------------------
Title: Vice President
7
CREDIT SUISSE FIRST BOSTON
By: /s/ Bill O'Daly
----------------------------------
Title: Vice President
By: /s/ William S. Lutkins
----------------------------------
Title: Vice President
BANK ONE, N.A.
By: /s/ Dennis J. Redpath
----------------------------------
Title: First Vice President
THE INTERNATIONAL COMMERCIAL BANK OF
CHINA, NEW YORK AGENCY
By: /s/ Wen-Hui Wang
----------------------------------
Title: Assistant Vice President & Acting
Deputy General Manager
WELLS FARGO BANK, N.A.
By: /s/ James A. McCartney
----------------------------------
Title: Vice President
KZH CNC LLC
By: /s/ Susan Lee
----------------------------------
Title: Authorized Agent
8
WINGED FOOT FUNDING TRUST
By: /s/ Ann E. Morris
----------------------------------
Title: Authorized Agent
CHANG HWA COMMERCIAL BANK, LTD., NEW
YORK BRANCH
By: /s/ Wan-Tu Yeh
----------------------------------
Title: SVP and General Manager
CHINATRUST COMMERCIAL BANK
By: /s/ Jerry Li
----------------------------------
Title: General Manager/Branch
TAIPEI BANK
By:__________________________________
Name:
Title:
9
BANK OF SCOTLAND
By: /s/ Joseph Fratus
----------------------------------
Title: Vice President
IFA INCORPORATED
By: /s/ Joseph Fratus
----------------------------------
Title: Vice President
Bank of Scotland
as Administrative Agent for IFA, Inc.
10
EX-10.43
5
dex1043.txt
EXHIBIT 10.43
Exhibit 10.43
AMENDED AND RESTATED SUBSIDIARIES GUARANTY
------------------------------------------
AMENDED AND RESTATED SUBSIDIARIES GUARANTY, dated as of August 5, 1998
and amended and restated as of May 31, 2000 (as amended, modified or
supplemented from time to time, this "Guaranty"), made by each of the
undersigned guarantors (each, a "Guarantor" and, together with any other entity
that becomes a party hereto pursuant to Section 26 hereof, the "Guarantors").
Except as otherwise defined herein, capitalized terms used herein and defined in
the Credit Agreement (as defined below) shall be used herein as therein defined.
W I T N E S S E T H :
-------------------
WHEREAS, Host Marriott Corporation, a Delaware corporation
("Holdings"), Host Marriott, L.P., a Delaware limited partnership (the
"Borrower"), various lenders from time to time party thereto (the "Banks"), and
Bankers Trust Company, as Administrative Agent (together with any successor
administrative agent, the "Administrative Agent"), have entered into an Amended
and Restated Credit Agreement, dated as of June 19, 1997, and amended and
restated as of August 5, 1998, and further amended and restated as of May 31,
2000, providing for the making of Loans to the Borrower as contemplated therein
(as amended, modified or supplemented from time to time, the "Credit Agreement")
(the Banks, the Administrative Agent and the Collateral Agent are herein called
the "Bank Creditors");
WHEREAS, the Borrower may at any time and from time to time enter into
one or more Interest Rate Protection Agreements or Other Hedging Agreements with
one or more Banks or any affiliate thereof (each such Bank or affiliate, even if
the respective Bank subsequently ceases to be a Bank under the Credit Agreement
for any reason, together with such Bank's or affiliate's successors and assigns,
if any, collectively, the "Other Creditors," and together with the Bank
Creditors, are herein called the "Creditors");
WHEREAS, each Guarantor is a direct or an indirect Subsidiary of
Holdings or the Borrower;
WHEREAS, the Credit Agreement amends and restates the Original Credit
Agreement in its entirety;
WHEREAS, as part of the Original Credit Agreement, the Guarantors
entered into the Subsidiaries Guaranty, dated as of August 5, 1998 (the
"Original Subsidiaries Guaranty");
WHEREAS, this Guaranty amends and restates the Original Subsidiaries
Guaranty in its entirety;
WHEREAS, it is a condition to the making of Loans under the Credit
Agreement that each Guarantor shall have executed and delivered this Guaranty;
and
Page 2
WHEREAS, each Guarantor will obtain benefits from the incurrence of
Loans by the Borrower under the Credit Agreement and the entering into by the
Borrower of the Interest Rate Protection Agreements or Other Hedging Agreements
referred to above and, accordingly, desires to execute this Guaranty in order to
satisfy the conditions described in the preceding paragraph;
NOW, THEREFORE, in consideration of the foregoing and other benefits
accruing to each Guarantor, the receipt and sufficiency of which are hereby
acknowledged, each Guarantor hereby makes the following representations and
warranties to the Creditors and hereby covenants and agrees with each Creditor
as follows:
1. Each Guarantor, jointly and severally, absolutely, irrevocably
and unconditionally guarantees: (i) to the Bank Creditors the full and prompt
payment when due (whether at the stated maturity, by acceleration or otherwise)
of (x) the principal of and interest on the Notes issued by, and the Loans made
to, the Borrower under the Credit Agreement and (y) all other obligations
(including obligations which, but for the automatic stay under Section 362(a) of
the Bankruptcy Code, would become due) and liabilities owing by the Borrower to
the Bank Creditors under the Credit Agreement and each other Credit Document to
which the Borrower is a party (including, without limitation, indemnities, Fees
and interest thereon), whether now existing or hereafter incurred under, arising
out of or in connection with the Credit Agreement and each such other Credit
Document and the due performance and compliance by the Borrower with all of the
terms, conditions and agreements contained in the Credit Agreement and in each
such other Credit Document (all such principal, interest, liabilities and
obligations being herein collectively called the "Credit Agreement
Obligations"); and (ii) to each Other Creditor, the full and prompt payment when
due (whether at the stated maturity, by acceleration or otherwise) of all
obligations (including obligations which, but for the automatic stay under
Section 362(a) of the Bankruptcy Code, would become due) and liabilities owing
by the Borrower under any Interest Rate Protection Agreement or Other Hedging
Agreement, whether now in existence or hereafter arising, and the due
performance and compliance by the Borrower with all of the terms, conditions and
agreements contained in the Interest Rate Protection Agreements and Other
Hedging Agreements (all such obligations and liabilities being herein
collectively called the "Other Obligations" and, together with the Credit
Agreement Obligations, are herein collectively called the "Guaranteed
Obligations"). Each Guarantor understands, agrees and confirms that the
Creditors may enforce this Guaranty up to the full amount of the Guaranteed
Obligations against each Guarantor without proceeding against any other
Guarantor, against the Borrower, against any security for the Guaranteed
Obligations, or under any other guaranty covering all or a portion of the
Guaranteed Obligations.
2. Additionally, each Guarantor, jointly and severally, absolutely,
unconditionally and irrevocably, guarantees the payment of any and all
Guaranteed Obligations to the Creditors whether or not due or payable by the
Borrower upon the occurrence in respect of the Borrower of any of the events
specified in Section 9.05 of the Credit Agreement, and absolutely,
unconditionally and irrevocably, jointly and severally, promises to pay such
Guaranteed Obligations to the Creditors, or order, on demand, in lawful money of
the United States. This Guaranty shall constitute a guaranty of payment, and
not of collection.
Page 3
3. The liability of each Guarantor hereunder is exclusive and
independent of any security for or other guaranty of the indebtedness of the
Borrower, whether executed by such Guarantor, any other Guarantor, any other
guarantor or any other party, and the liability of each Guarantor hereunder
shall not be affected or impaired by any circumstance or occurrence whatsoever,
including, without limitation: (a) any direction as to application of payment
by the Borrower or by any other party, (b) any other continuing or other
guaranty, undertaking or maximum liability of a guarantor or of any other party
as to the indebtedness of the Borrower, (c) any payment on or in reduction of
any such other guaranty or undertaking except to the extent that any such
payment or reduction results in the actual permanent reduction of the Guaranteed
Obligations, (d) any dissolution, termination or change in personnel by the
Borrower, (e) any payment made to any Creditor on the indebtedness which any
Creditor repays the Borrower pursuant to court order in any bankruptcy,
reorganization, arrangement, moratorium or other debtor relief proceeding, and
each Guarantor waives any right to the deferral or modification of its
obligations hereunder by reason of any such proceeding, (f) any action or
inaction by the Creditors as contemplated in Section 6 hereof, or (g) any
invalidity, irregularity or unenforceability of all or part of the Guaranteed
Obligations or of any security therefor.
4. The obligations of each Guarantor hereunder are independent of
the obligations of any other Guarantor, any other guarantor or the Borrower, and
a separate action or actions may be brought and prosecuted against each
Guarantor whether or not action is brought against any other Guarantor, any
other guarantor or the Borrower and whether or not any other Guarantor, any
other guarantor or the Borrower be joined in any such action or actions. Each
Guarantor waives, to the fullest extent permitted by law, the benefit of any
statute of limitations affecting its liability hereunder or the enforcement
thereof. Any payment by the Borrower or other circumstance which operates to
toll any statute of limitations as to the Borrower shall operate to toll the
statute of limitations as to each Guarantor.
5. Each Guarantor hereby waives notice of acceptance of this
Guaranty and notice of any liability to which it may apply, and waives
promptness, diligence, presentment, demand of payment, protest, notice of
dishonor or nonpayment of any such liabilities, suit or taking of other action
by the Administrative Agent or any other Creditor against, and any other notice
to, any party liable thereon (including such Guarantor, any other guarantor or
the Borrower).
6. Any Creditor may at any time and from time to time without the
consent of, or notice to, any Guarantor, without incurring responsibility to
such Guarantor, and without impairing or releasing the obligations of such
Guarantor hereunder, upon or without any terms or conditions and in whole or in
part:
(a) change the manner, place or terms of payment of, and/or change or
extend the time of payment of, renew or alter, any of the Guaranteed Obligations
(including any increase or decrease in the rate of interest thereon), any
security therefor, or any liability incurred directly or indirectly in respect
thereof, and the guaranty herein made shall apply to the Guaranteed Obligations
as so changed, extended, renewed or altered;
(b) take and hold security for the payment of the Guaranteed
Obligations and sell, exchange, release, surrender, impair, realize upon or
otherwise deal with in any manner and in
Page 4
any order any property by whomsoever at any time pledged or mortgaged to secure,
or howsoever securing, the Guaranteed Obligations or any liabilities (including
any of those hereunder) incurred directly or indirectly in respect thereof or
hereof, and/or any offset thereagainst;
(h) act or fail to act in any manner referred to in this Guaranty
which may deprive such Guarantor of its right to subrogation against the
Borrower to recover full indemnity for any payments made pursuant to this
Guaranty; and/or
(i) take any other action which would, under otherwise applicable
principles of common law, give rise to a legal or equitable discharge of such
Guarantor from it liabilities under this Guaranty.
7. No invalidity, irregularity or unenforceability of all or any
part of the Guaranteed Obligations or of any security therefor shall affect,
impair or be a defense to this Guaranty, and this Guaranty shall be primary,
absolute, irrevocable and unconditional notwithstanding the occurrence of any
event or the existence of any other circumstances which might constitute a legal
or equitable discharge of a surety or guarantor except payment in full of the
Guaranteed Obligations.
8. This Guaranty is a continuing one and all liabilities to which it
applies or may apply under the terms hereof shall be conclusively presumed to
have been created in reliance hereon. No failure or delay on the part of any
Creditor in exercising any right, power or privilege hereunder shall operate as
a waiver thereof; nor shall any single or partial exercise of any right, power
or privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
expressly specified are cumulative and not exclusive of any rights or remedies
which any Creditor would otherwise have. No notice to or demand on any
Guarantor in any case shall entitle such Guarantor to any other or further
notice or demand in similar or other circumstances or constitute a waiver of the
rights of any Creditor to any other or further action in any circumstances
without notice or demand. It is not necessary for any Creditor to inquire into
the capacity or powers of the Borrower or the officers, directors, partners or
agents acting or purporting to act on its behalf, and any indebtedness made or
created in reliance upon the professed exercise of such powers shall be
guaranteed hereunder.
9. Any indebtedness of the Borrower now or hereafter held by any
Guarantor is hereby subordinated to the indebtedness of the Borrower to the
Creditors; and such indebtedness of the Borrower to any Guarantor, if the
Administrative Agent, after an Event of Default has occurred, so requests at a
time when any Guaranteed Obligations are outstanding, shall be collected,
enforced and received by such Guarantor as trustee for the Creditors and be paid
over to the Creditors on account of the indebtedness of the Borrower to the
Creditors, but without affecting or impairing in any manner the liability of
such Guarantor under the other provisions of this Guaranty. Prior to the
transfer by any Guarantor of any note or negotiable instrument evidencing any
indebtedness of the Borrower to such Guarantor, such Guarantor shall mark such
note or negotiable instrument with a legend that the same is subject to this
subordination. Without limiting the generality of the foregoing, each Guarantor
hereby agrees with the Creditors that it will not exercise any right of
subrogation which it may at any time otherwise have as a
Page 5
result of this Guaranty (whether contractual, under Section 509 of the
Bankruptcy Code or otherwise) until all Guaranteed Obligations have been paid in
full in cash (it being understood that each Guarantor is not waiving any right
of subrogation that it may otherwise have but is only waiving the exercise
thereof as provided above).
10. (a) Each Guarantor waives any right (except as shall be required
by applicable statute and cannot be waived) to require the Creditors to: (i)
proceed against the Borrower, any other Guarantor, any other guarantor of the
Guaranteed Obligations or any other party; (ii) proceed against or exhaust any
security held from the Borrower, any other Guarantor, any other guarantor of the
Guaranteed Obligations or any other party; or (iii) pursue any other remedy in
the Creditors' power whatsoever. Each Guarantor waives any defense based on or
arising out of any defense of the Borrower, such Guarantor, any other Guarantor,
any other guarantor of the Guaranteed Obligations or any other party other than
payment in full of the Guaranteed Obligations, including, without limitation,
any defense based on or arising out of the disability of the Borrower, such
Guarantor, any other Guarantor, any other guarantor of the Guaranteed
Obligations or any other party, or the unenforceability of the Guaranteed
Obligations or any part thereof from any cause, or the cessation from any cause
of the liability of the Borrower other than payment in full of the Guaranteed
Obligations. The Creditors may, at their election, foreclose on any security
held by the Administrative Agent, the Collateral Agent or the other Creditors by
one or more judicial or nonjudicial sales or exercise any other right or remedy
the Creditors may have against the Borrower or any other party, or any security,
without affecting or impairing in any way the liability of any Guarantor
hereunder except to the extent the Guaranteed Obligations have been paid in
full. Each Guarantor waives any defense arising out of any such election by the
Creditors, even though such election operates to impair or extinguish any right
of reimbursement or subrogation or other right or remedy of such Guarantor
against the Borrower or any other party or any security.
(b) Each Guarantor waives all presentments, demands for performance,
protests and notices, including, without limitation, notices of nonperformance,
notices of protest, notices of dishonor, notices of acceptance of this Guaranty,
and notices of the existence, creation or incurring of new or additional
indebtedness. Each Guarantor assumes all responsibility for being and keeping
itself informed of the Borrower's financial condition and assets, and of all
other circumstances bearing upon the risk of nonpayment of the Guaranteed
Obligations and the nature, scope and extent of the risks which such Guarantor
assumes and incurs hereunder, and agrees that the Creditors shall have no duty
to advise any Guarantor of information known to them regarding such
circumstances or risks.
11. In order to induce the Bank Creditors to enter into the Credit
Agreement and to make the Loans pursuant to the Credit Agreement, and to induce
the Other Creditors to enter into the Interest Rate Protection Agreements and
Other Hedging Agreements, each Guarantor represents, warrants and covenants
that:
(a) Status. Such Guarantor (i) is a duly organized and validly
------
existing corporation, partnership, trust or limited liability company, as the
case may be, in good standing (if applicable) under the laws of the jurisdiction
of its organization, (ii) has the corporate, partnership, trust or limited
liability company power and authority, as the case may be, to own or lease its
property and assets and to transact the business in which it is engaged and
presently
Page 6
proposes to engage and (iii) is duly qualified and is authorized to do business
and is in good standing in each jurisdiction where the conduct of its business
requires such qualification, except for failures to be so qualified which,
individually or in the aggregate, could not reasonably be expected to have a
material adverse effect on the business, operations, property, assets,
liabilities, condition (financial or otherwise) or prospects of such Guarantor.
(b) Power and Authority. Such Guarantor has the corporate,
-------------------
partnership, trust or limited liability company power and authority, as the case
may be, to execute, deliver and perform the terms and provisions of this
Guaranty and each other Credit Document to which it is a party and has taken all
necessary corporate, partnership, trust or limited liability company action, as
the case may be, to authorize the execution, delivery and performance by it of
each such Credit Document. Such Guarantor has duly executed and delivered this
Guaranty and each other Credit Document to which it is a party and each such
Credit Document constitutes the legal, valid and binding obligation of such
Guarantor enforceable in accordance with its terms, except to the extent that
the enforceability hereof and thereof may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other similar
laws affecting creditors' rights generally and by equitable principles
(regardless of whether enforcement is sought in equity or at law).
(c) No Violation. Neither the execution, delivery or performance by
------------
such Guarantor of this Guaranty or any other Credit Document to which it is a
party, nor compliance by it with the terms and provisions hereof and thereof (i)
will contravene any applicable provision of any law, statute, rule or
regulation, or any order, writ, injunction or decree of any court or
governmental instrumentality, (ii) will conflict or be inconsistent with or
result in any breach of, any of the terms, covenants, conditions or provisions
of, or constitute a default under, or result in the creation or imposition of
(or the obligation to create or impose) any Lien (except pursuant to the Pledge
and Security Agreement) upon any of the property or assets of such Guarantor or
any of its Subsidiaries pursuant to the terms of, any indenture, mortgage, deed
of trust, credit agreement or loan agreement or any other material agreement,
contract or instrument to which such Guarantor or any of its Subsidiaries is a
party or by which it or any of its property or assets is bound or to which it
may be subject or (iii) will violate any provision of the certificate of
incorporation, certificate of partnership, partnership agreement, limited
liability company agreement or by-laws of such Guarantor or any of its
Subsidiaries.
(d) Governmental Approvals. No order, consent, approval, license,
----------------------
authorization or validation of, or filing, recording or registration with
(except as have been obtained or made), or exemption by, any governmental or
public body or authority, or any subdivision thereof, is required to authorize,
or is required in connection with, (i) the execution, delivery and performance
of this Guaranty or any other Credit Document to which such Guarantor is a party
or (ii) the legality, validity, binding effect or enforceability of this
Guaranty or any other Credit Document to which such Guarantor is a party.
(e) Litigation. There are no actions, suits or proceedings pending
----------
or, to the best knowledge of such Guarantor, threatened (i) with respect to this
Guaranty or (ii) that could reasonably be expected to materially and adversely
affect the business, operations, property, assets, liabilities, condition
(financial or otherwise) or prospects of such Guarantor.
Page 7
12. Each Guarantor covenants and agrees that on and after the
Effective Date and until the Total Commitment and all Interest Rate Protection
Agreements and Other Hedging Agreements have terminated and when no Note remains
outstanding and all Guaranteed Obligations have been paid in full, such
Guarantor shall take, or will refrain from taking, as the case may be, all
actions that are necessary to be taken or not taken so that no violation of any
provision, covenant or agreement contained in Section 7 or 8 of the Credit
Agreement occurs, and so that no Default or Event of Default, is caused by the
actions of such Guarantor or any of its Subsidiaries.
13. The Guarantors hereby jointly and severally agree to pay all out-
of-pocket costs and expenses of each Creditor in connection with the enforcement
of this Guaranty (including reasonable legal fees and expenses) and the out-of-
pocket costs and expenses of the Administrative Agent in connection with any
amendment, waiver or consent relating hereto (including reasonable legal fees
and expenses).
14. This Guaranty shall be binding upon each Guarantor and its
successors and assigns and shall inure to the benefit of the Creditors and their
successors and assigns.
15. Neither this Guaranty nor any provision hereof may be changed,
waived, discharged or terminated except with the written consent of each
Guarantor directly affected thereby and with the written consent of (i) the
Required Banks, or, to the extent required by Section 12.12 of the Credit
Agreement, each of the Banks under the Credit Agreement, as the case may be, so
long as any Credit Agreement Obligations remain outstanding and (ii) in any
situation not covered by preceding clause (i), the holders of a majority of the
outstanding principal amount of the Other Obligations; provided, that any
--------
change, waiver, modification or variance affecting the rights and benefits of a
single Class (as defined below) of Creditors (and not all Creditors in a like or
similar manner) shall require the written consent of the Requisite Creditors (as
defined below) of such Class of Creditors (it being understood that the addition
or release of any Guarantor hereunder shall not constitute a change, waiver,
discharge or termination affecting any Guarantor other than the Guarantor so
added or released). For the purpose of this Guaranty, the term "Class" shall
mean each class of Creditors, i.e., whether (x) the Bank Creditors as holders of
----
the Credit Agreement Obligations or (y) the Other Creditors as the holders of
the Other Obligations. For the purpose of this Guaranty, the term "Requisite
Creditors" of any Class shall mean (x) with respect to the Credit Agreement
Obligations, the Required Banks, and (y) with respect to the Other Obligations,
the holders of at least a majority of all obligations outstanding from time to
time under the respective Interest Rate Protection Agreements or Other Hedging
Agreements.
16. Each Guarantor acknowledges that an executed (or conformed) copy
of each of the Credit Documents has been made available to such Guarantor and
such Guarantor is familiar with the contents thereof.
17. In addition to any rights now or hereafter granted under
applicable law (including, without limitation, Section 151 of the New York
Debtor and Creditor Law) and not by way of limitation of any such rights, upon
the occurrence and during the continuance of an Event of Default (such term to
mean and include any "Event of Default" as defined in the Credit Agreement or
any payment default under any Interest Rate Protection Agreement or Other
Page 8
Hedging Agreement continuing after any applicable grace period), each Creditor
is hereby authorized at any time or from time to time, without notice to any
Guarantor or to any other Person, any such notice being expressly waived, to set
off and to appropriate and apply any and all deposits (general or special) and
any other indebtedness at any time held or owing by such Creditor to or for the
credit or the account of such Guarantor, against and on account of the
obligations and liabilities of such Guarantor to such Creditor under this
Guaranty, irrespective of whether or not such Creditor shall have made any
demand hereunder and although said obligations, liabilities, deposits or claims,
or any of them, shall be contingent or unmatured.
18. All notices, requests, demands or other communications pursuant
hereto shall be deemed to have been duly given or made when delivered to the
Person to which such notice, request, demand or other communication is required
or permitted to be given or made under this Guaranty, addressed to such party at
(i) in the case of any Bank Creditor, as provided in the Credit Agreement, (ii)
in the case of any Guarantor, at 10400 Fernwood Road, Bethesda, Maryland 20817,
Attention: General Counsel, Dept. 923, Facsimile No. (301) 380-3588, and (iii)
in the case of any Other Creditor, at such address as such Other Creditor shall
have specified in writing to the Guarantors; or in any case at such other
address as any of the Persons listed above may hereafter notify the others in
writing.
19. If claim is ever made upon any Creditor for repayment or recovery
of any amount or amounts received in payment or on account of any of the
Guaranteed Obligations and any of the aforesaid payees repays all or part of
said amount by reason of (i) any judgment, decree or order of any court or
administrative body having jurisdiction over such payee or any of its property
or (ii) any settlement or compromise of any such claim effected by such payee
with any such claimant (including the Borrower), then and in such event each
Guarantor agrees that any such judgment, decree, order, settlement or compromise
shall be binding upon such Guarantor, notwithstanding any revocation hereof or
other instrument evidencing any liability of the Borrower, and such Guarantor
shall be and remain liable to the aforesaid payees hereunder for the amount so
repaid or recovered to the same extent as if such amount had never originally
been received by any such payee.
20. (A) This Guaranty shall be binding upon the successors and
assigns of each Guarantor (although no Guarantor may assign its rights and
obligations hereunder except in accordance with the provisions of the Credit
Agreement) and shall inure to the benefit of and be enforceable by the
Administrative Agent and the other Creditors and their respective successors and
assigns. THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE CREDITORS AND OF
THE UNDERSIGNED HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAW OF THE STATE OF NEW YORK. Any legal action or proceeding with respect
to this Guaranty or any other Credit Document to which any Guarantor is a party
may be brought in the courts of the State of New York or of the United States of
America for the Southern District of New York, in each case which are located in
the City of New York, and, by execution and delivery of this Guaranty, each
Guarantor hereby irrevocably accepts for itself and in respect of its property,
generally and unconditionally, the jurisdiction of the aforesaid courts. Each
Guarantor hereby further irrevocably waives any claim that any such courts lack
Page 9
jurisdiction over such Guarantor, and agrees not to plead or claim in any legal
action or proceeding with respect to this Guaranty or any other Credit Document
to which such Guarantor is a party brought in any of the aforesaid courts that
any such court lacks jurisdiction over such Guarantor. Each Guarantor further
irrevocably consents to the service of process out of any of the aforementioned
courts in any such action or proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, to each Guarantor at its address
set forth opposite its signature below, such service to become effective 30 days
after such mailing. Each Guarantor hereby irrevocably waives any objection to
such service of process and further irrevocably waives and agrees not to plead
or claim in any action or proceeding commenced hereunder or under any other
Credit Document to which such Guarantor is a party that service of process was
in any way invalid or ineffective. Nothing herein shall affect the right of any
of the Creditors to serve process in any other manner permitted by law or to
commence legal proceedings or otherwise proceed against each Guarantor in any
other jurisdiction.
(B) Each Guarantor hereby irrevocably waives any objection which it
may now or hereafter have to the laying of venue of any of the aforesaid actions
or proceedings arising out of or in connection with this Guaranty or any other
Credit Document to which such Guarantor is a party brought in the courts
referred to in clause (a) above and hereby further irrevocably waives and agrees
not to plead or claim in any such court that such action or proceeding brought
in any such court has been brought in an inconvenient forum.
(C) EACH GUARANTOR AND EACH CREDITOR (BY ITS ACCEPTANCE OF THE
BENEFITS OF THIS GUARANTY) HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO A TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS GUARANTY, THE OTHER CREDIT DOCUMENTS TO WHICH SUCH GUARANTOR IS A PARTY OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
21. In the event that all of the capital stock of one or more
Guarantors is sold or otherwise disposed of or liquidated in compliance with the
requirements of the Credit Agreement (or such sale or other disposition has been
approved in writing by the Required Banks (or, to the extent required by the
Credit Agreement, each of the Banks)) and the proceeds of such sale, disposition
or liquidation are applied in accordance with (and to the extent required by)
the provisions of the Credit Agreement, to the extent applicable, or in the
circumstances set forth in Section 7.16(a)(B) of the Credit Agreement with
respect to a Guarantor, in either case such Guarantor shall be released from
this Guaranty and this Guaranty shall, as to each such Guarantor or Guarantors,
terminate, and have no further force or effect (it being understood and agreed
that the sale or other disposition of one or more Persons that own, directly or
indirectly, all of the capital stock, partnership interests or limited liability
company interests of any Guarantor shall be deemed to be a sale of such
Guarantor for the purposes of this Section 21) and the Administrative Agent, at
the request and expense of the respective Guarantor, will promptly execute and
deliver to such Guarantor a proper instrument or instruments acknowledging such
release.
22. Each Guarantor hereby confirms that it is its intention that this
Guaranty not constitute a fraudulent transfer or conveyance for purposes of any
bankruptcy, insolvency or similar law, the Uniform Fraudulent Conveyance Act or
any similar Federal, state or foreign law. To effectuate the foregoing
intention, if enforcement of the liability of any Guarantor under this Guaranty
for the full amount of the Guaranteed Obligations would be an unlawful or
voidable transfer under any applicable fraudulent conveyance or fraudulent
transfer law or any comparable
Page 10
law, then the liability of such Guarantor hereunder shall be reduced to the
maximum amount for which such liability may then be enforced without giving rise
to an unlawful or voidable transfer under any such law.
23. To the extent that any Guarantor shall be required hereunder to
pay a portion of the Guaranteed Obligations which shall exceed the greater of
(i) the amount of the economic benefit actually received by such Guarantor from
the incurrence of the Loans under the Credit Agreement and the entering into of
Interest Rate Protection Agreements and Other Hedging Agreements and (ii) the
amount which such Guarantor would otherwise have paid if such Guarantor had paid
the aggregate amount of the Guaranteed Obligations (excluding the amount thereof
repaid by the Borrower and the other Guarantors) in the same proportion as such
Guarantor's net worth at the date enforcement hereunder is sought bears to the
aggregate net worth of all the Guarantors at the date enforcement hereunder is
sought (the "Contribution Percentage"), then such Guarantor shall have a right
of contribution against each other Guarantor who has made payments in respect of
the Guaranteed Obligations to and including the date enforcement hereunder is
sought in an aggregate amount less than such other Guarantor's Contribution
Percentage of the aggregate payments made to and including the date enforcement
hereunder is sought by all Guarantors in respect of the Guaranteed Obligations;
provided, that no Guarantor may take any action to enforce such right until the
--------
Guaranteed Obligations have been indefeasibly paid in full and the Total
Commitment has been terminated, it being expressly recognized and agreed by all
parties hereto that any Guarantor's right of contribution arising pursuant to
this Section 23 against any other Guarantor shall be expressly junior and
subordinate to such other Guarantor's obligations and liabilities in respect of
the Guaranteed Obligations and any other obligations owing under this Guaranty.
All parties hereto recognize and agree that, except for any right of
contribution arising pursuant to this Section 23, each Guarantor who makes any
payment in respect of the Guaranteed Obligations shall have no right of
contribution or subrogation against any other Guarantor in respect of such
payment. Each of the Guarantors recognizes and acknowledges that the rights to
contribution arising hereunder shall constitute an asset in favor of the party
entitled to such contribution. In this connection, each Guarantor has the right
to waive its contribution right against any Guarantor to the extent that after
giving effect to such waiver such Guarantor would remain solvent, in the
determination of the Required Banks.
24. This Guaranty may be executed in any number of counterparts and
by the different parties hereto on separate 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. A set of counterparts executed by all
the parties hereto shall be lodged with the Guarantors and the Administrative
Agent.
25. All payments made by any Guarantor hereunder will be made without
setoff, counterclaim or other defense.
26. It is understood and agreed that any Subsidiary of Holdings or
the Borrower that is required to execute a counterpart of this Guaranty pursuant
to the Credit Agreement shall automatically become a Guarantor hereunder by
executing a counterpart hereof and delivering the same to the Administrative
Agent.
27. Notwithstanding anything to the contrary contained in this
Guaranty, no Interest Rate Protection Agreement or Other Hedging Agreement shall
be entitled to the benefits of this Guaranty unless such Interest Rate
Protection Agreement or Other Hedging Agreement is reasonably related to the
Loans or such Interest Rate Protection Agreement or Other Hedging Agreement
provides that it is to be entitled to the benefits of this Guaranty or the
Pledge and Security Agreement.
* * *
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be
executed and delivered as of the date first above written.
AIRPORT HOTELS LLC,
as a Guarantor
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
HOST OF HOUSTON 1979,
as a Guarantor
By: Airport Hotels LLC,
its General Partner
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
HOST OF HOUSTON, LTD.,
as a Guarantor
By: Airport Hotels LLC,
its General Partner
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
HOST OF BOSTON, LTD.,
as a Guarantor
By: Airport Hotels LLC,
its General Partner
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
CHESAPEAKE FINANCIAL SERVICES LLC,
as a Guarantor
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
CITY CENTER INTERSTATE PARTNERSHIP LLC,
as a Guarantor
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
HMC RETIREMENT PROPERTIES L.P.,
as a Guarantor
By: Durbin LLC,
its General Partner
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
HMH MARINA LLC,
as a Guarantor
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
FARRELL'S ICE CREAM PARLOUR RESTAURANTS LLC,
as a Guarantor
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
HMC ATLANTA LLC,
as a Guarantor
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
HMC BCR HOLDINGS LLC,
as a Guarantor
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
HMC BURLINGAME LLC,
as a Guarantor
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
HMC CALIFORNIA LEASING LLC,
as a Guarantor
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
HMC CAPITAL LLC,
as a Guarantor
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
HMC CAPITAL RESOURCES LLC,
as a Guarantor
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
HMC PARK RIDGE LLC,
as a Guarantor
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
HMC PARK RIDGE II LLC,
as a Guarantor
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
HMC PARK RIDGE LP,
as a Guarantor
By: HMC Park Ridge LLC,
as its General Partner
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
HMC PARTNERSHIP HOLDINGS LLC,
as a Guarantor
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
HOST PARK RIDGE LLC,
as a Guarantor
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
HMC SUITES LLC,
as a Guarantor
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
HMC SUITES LIMITED PARTNERSHIP,
as a Guarantor
By: HMC Suites LLC,
its General Partner
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
PRM LLC,
as a Guarantor
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
WELLSFORD-PARK RIDGE HOST HOTEL LIMITED
PARTNERSHIP,
as a Guarantor
By: Host Park Ridge LLC,
its General Partner
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
YBG ASSOCIATES LLC,
as a Guarantor
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
HMC CHICAGO LLC,
as a Guarantor
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
HMC DESERT LLC,
as a Guarantor
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
HMC PALM DESERT LLC,
as a Guarantor
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
MDSM FINANCE LLC,
as a Guarantor
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
HMC DIVERSIFIED LLC,
as a Guarantor
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
HMC EAST SIDE II LLC,
as a Guarantor
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
HMC GATEWAY LLC,
as a Guarantor
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
HMC GRAND LLC,
as a Guarantor
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
HMC HANOVER LLC,
as a Guarantor
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
HMC HARTFORD LLC,
as a Guarantor
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
HMC HOTEL DEVELOPMENT LLC,
as a Guarantor
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
HMC HPP LLC,
as a Guarantor
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
HMC IHP HOLDING LLC,
as a Guarantor
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
HMC MANHATTAN BEACH LLC,
as a Guarantor
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
HMC MARKET STREET LLC,
as a Guarantor
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
NEW MARKET STREET LP,
as a Guarantor
By: HMC Market Street LLC,
its General Partner
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
HMC GEORGIA LLC,
as a Guarantor
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
HMC MEXPARK LLC,
as a Guarantor
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
HMC POLANCO LLC,
as a Guarantor
By: /s/ W. Edward Walter
--------------------------------
Title: Treasurer
HMC NGL LLC,
as a Guarantor
By: /s/ W. Edward Walter
----------------------------------
Title: Treasurer
HMC OLS I L.P.,
as a Guarantor
By: HMC OLS I LLC,
its General Partner
By: /s/ W. Edward Walter
----------------------------------
Title: Treasurer
HMC OP BN LLC,
as a Guarantor
By: /s/ W. Edward Walter
----------------------------------
Title: Treasurer
HMC PACIFIC GATEWAY LLC,
as a Guarantor
By: /s/ W. Edward Walter
----------------------------------
Title: Treasurer
HMC PLP LLC,
as a Guarantor
By: /s/ W. Edward Walter
----------------------------------
Title: Treasurer
CHESAPEAKE HOTEL LIMITED PARTNERSHIP,
as a Guarantor
By: HMC PLP LLC,
its General Partner
By: /s/ W. Edward Walter
----------------------------------
Title: Treasurer
HMC POTOMAC LLC,
as a Guarantor
By: /s/ W. Edward Walter
----------------------------------
Title: Treasurer
HMC PROPERTIES I LLC,
as a Guarantor
By: /s/ W. Edward Walter
----------------------------------
Title: Treasurer
HMC PROPERTIES II LLC,
as a Guarantor
By: /s/ W. Edward Walter
----------------------------------
Title: Treasurer
HMC RTZ LOAN I LLC,
as a Guarantor
By: /s/ W. Edward Walter
----------------------------------
Title: Treasurer
HMC RTZ LOAN LIMITED PARTNERSHIP,
as a Guarantor
By: HMC RTZ Loan I LLC,
its General Partner
By: /s/ W. Edward Walter
----------------------------------
Title: Treasurer
HMC RTZ II LLC,
as a Guarantor
By: /s/ W. Edward Walter
----------------------------------
Title: Treasurer
HMC SBM TWO LLC,
as a Guarantor
By: /s/ W. Edward Walter
----------------------------------
Title: Treasurer
HMC SEATTLE LLC,
as a Guarantor
By: /s/ W. Edward Walter
----------------------------------
Title: Treasurer
HMC SFO LLC,
as a Guarantor
By: /s/ W. Edward Walter
----------------------------------
Title: Treasurer
HMC SWISS HOLDINGS LLC,
as a Guarantor
By: /s/ W. Edward Walter
----------------------------------
Title: Treasurer
HMC WATERFORD LLC,
as a Guarantor
By: /s/ W. Edward Walter
----------------------------------
Title: Treasurer
HMH GENERAL PARTNER HOLDINGS LLC,
as a Guarantor
By: /s/ W. Edward Walter
----------------------------------
Title: Treasurer
HMH NORFOLK LLC,
as a Guarantor
By: /s/ W. Edward Walter
----------------------------------
Title: Treasurer
HMH NORFOLK, L.P.,
as a Guarantor
By: HMH Norfolk LLC,
its General Partner
By: /s/ W. Edward Walter
----------------------------------
Title: Treasurer
HMH PENTAGON LLC,
as a Guarantor
By: /s/ W. Edward Walter
----------------------------------
Title: Treasurer
HMH RESTAURANTS LLC,
as a Guarantor
By: /s/ W. Edward Walter
----------------------------------
Title: Treasurer
HMH RIVERS LLC,
as a Guarantor
By: /s/ W. Edward Walter
----------------------------------
Title: Treasurer
HMH RIVERS, L.P.,
as a Guarantor
By: HMH Rivers LLC,
its General Partner
By: /s/ W. Edward Walter
----------------------------------
Title: Treasurer
HMH WTC LLC,
as a Guarantor
By: /s/ W. Edward Walter
----------------------------------
Title: Treasurer
HMP CAPITAL VENTURES LLC,
as a Guarantor
By: /s/ W. Edward Walter
----------------------------------
Title: Treasurer
HMP FINANCIAL SERVICES LLC,
as a Guarantor
By: /s/ W. Edward Walter
----------------------------------
Title: Treasurer
HOST LA JOLLA LLC,
as a Guarantor
By: /s/ W. Edward Walter
----------------------------------
Title: Treasurer
CITY CENTER HOTEL LIMITED
PARTNERSHIP,
as a Guarantor
By: Host La Jolla LLC,
its General Partner
By: /s/ W. Edward Walter
----------------------------------
Title: Treasurer
TIMES SQUARE LLC,
as a Guarantor
By: /s/ W. Edward Walter
----------------------------------
Title: Treasurer
IVY STREET LLC,
as a Guarantor
By: /s/ W. Edward Walter
----------------------------------
Title: Treasurer
MARKET STREET HOST LLC,
as a Guarantor
By: /s/ W. Edward Walter
----------------------------------
Title: Treasurer
MFR OF ILLINOIS LLC,
as a Guarantor
By: /s/ W. Edward Walter
----------------------------------
Title: Treasurer
MFR OF VERMONT LLC,
as a Guarantor
By: /s/ W. Edward Walter
----------------------------------
Title: Treasurer
MFR OF WISCONSIN LLC,
as a Guarantor
By: /s/ W. Edward Walter
----------------------------------
Title: Treasurer
PHILADELPHIA AIRPORT HOTEL LLC,
as a Guarantor
By: /s/ W. Edward Walter
----------------------------------
Title: Treasurer
PM FINANCIAL LLC,
as a Guarantor
By: /s/ W. Edward Walter
----------------------------------
Title: Treasurer
PM FINANCIAL LP,
as a Guarantor
By: PM Financial LLC,
its General Partner
By: /s/ W. Edward Walter
----------------------------------
Title: Treasurer
HMC PROPERTY LEASING LLC,
as a Guarantor
By: /s/ W. Edward Walter
----------------------------------
Title: Treasurer
HMC HOST RESTAURANTS LLC,
as a Guarantor
By: /s/ W. Edward Walter
----------------------------------
Title: Treasurer
SANTA CLARA HMC LLC,
as a Guarantor
By: /s/ W. Edward Walter
----------------------------------
Title: Treasurer
S.D. HOTELS LLC,
as a Guarantor
By: /s/ W. Edward Walter
----------------------------------
Title: Treasurer
TIMES SQUARE GP LLC,
as a Guarantor
By: /s/ W. Edward Walter
----------------------------------
Title: Treasurer
Accepted and Agreed to:
BANKERS TRUST COMPANY,
as Administrative Agent
By: /s/ Laura Burwick
-----------------------------
Title: Principal
EX-10.44
6
dex1044.txt
EXHIBIT 10.44
Exhibit 10.44
AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT
--------------------------------------------------
AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT, dated as of August 5,
1998 and amended and restated as of May 31, 2000 (as amended, modified or
supplemented from time to time, this "Agreement"), made by each of the
undersigned pledgors (each a "Pledgor", and together with any entity that
becomes a party hereto pursuant to Section 22 hereof, the "Pledgors"), in favor
of BANKERS TRUST COMPANY, as Collateral Agent, for the benefit of the Secured
Creditors (as defined below) (in such capacity, the "Pledgee"). Except as
otherwise defined herein, terms used herein and defined in the Credit Agreement
(as defined below) shall be used herein as therein defined.
W I T N E S S E T H :
-------------------
WHEREAS, Host Marriott Corporation ("Holdings"), Host Marriott, L.P.
(the "Borrower"), various lenders from time to time party thereto (the "Banks"),
and Bankers Trust Company, as the Administrative Agent (in such capacity and
together with any successor thereto, the "Administrative Agent" and, together
with the Pledgee and the Banks and their respective successors and assigns, and
together with any other lenders from time to time party to the Credit Agreement
hereinafter referred to, the "Bank Creditors"), have entered into an Amended and
Restated Credit Agreement, dated as of June 19, 1997, and amended and restated
as of August 5, 1998, and further amended and restated as of May 31, 2000,
providing for the making of Loans to the Borrower as contemplated therein (as
used herein, the term "Credit Agreement" means the Amended and Restated Credit
Agreement described above in this paragraph, as the same may be amended,
modified, extended, renewed, replaced, restated, supplemented or refinanced from
time to time, and including any agreement extending the maturity of, or
refinancing or restructuring (including, but not limited to, the inclusion of
additional borrowers or guarantors thereunder or any increase in the amount
borrowed) all or any portion of, the indebtedness under such agreement or any
successor agreement, whether or not with the same agent, trustee,
representative, lenders or holders; provided that, with respect to any agreement
providing for the refinancing or replacement of indebtedness under the Credit
Agreement, such agreement shall only be treated as, or as part of, the Credit
Agreement hereunder if (i) either (A) all obligations under the Credit Agreement
being refinanced or replaced shall be paid in full at the time of such
refinancing or replacement, and all commitments pursuant to the refinanced or
replaced Credit Agreement shall have terminated in accordance with their terms
or (B) the Required Banks shall have consented in writing to the refinancing or
replacement indebtedness being treated as indebtedness pursuant to the Credit
Agreement, and (ii) a notice to the effect that the refinancing or replacement
indebtedness shall be treated as issued under the Credit Agreement shall be
delivered by the Borrower to the Pledgee);
WHEREAS, the Credit Agreement amends and restates the Original Credit
Agreement in its entirety and the Credit Agreement remains entitled to the
benefits of this Agreement (without interruption) as contemplated by the first
proviso of the Original Pledge and Security Agreement (as defined below);
WHEREAS, as part of the Original Credit Agreement, the Pledgee and the
Pledgors entered into the Pledge and Security Agreement, dated as of August 5,
1998, as amended through, but not including, the date hereof (the "Original
Pledge and Security Agreement");
WHEREAS, as permitted by the Original Pledge and Security Agreement,
this Agreement amends and restates the Original Pledge and Security Agreement in
its entirety;
WHEREAS, the Borrower may from time to time be party to (or guaranty
the obligations of one or more of its Subsidiaries under) one or more Interest
Rate Protection Agreements and/or Other Hedging Agreements with a Bank Creditor
or an affiliate of a Bank Creditor (each such Bank Creditor or affiliate, even
if the respective Bank Creditor subsequently ceases to be a Bank under the
Credit Agreement for any reason, together with such Bank Creditor's or
affiliate's successors and assigns, collectively, the "Other Creditors");
WHEREAS, pursuant to the Subsidiaries Guaranty, each Subsidiary
Guarantor has jointly and severally guaranteed to the Bank Creditors and the
Other Creditors the payment when due of all obligations and liabilities of the
Borrower under or with respect to (x) the Credit Documents (as used herein, the
term "Credit Documents" shall have the meaning provided in the Credit Agreement
and shall include any documentation executed and delivered in connection with
any replacement or refinancing of the Credit Agreement) and (y) each Interest
Rate Protection Agreement and Other Hedging Agreement with one or more of the
Other Creditors;
WHEREAS, on the date hereof, there remain outstanding certain of the
Borrower's (i) 9 1/2% Senior Secured Notes due 2005, (ii) 8 7/8% Senior Notes
due 2007 and (iii) 9% Senior Notes due 2007 (collectively, the "HMH Notes")
(with the holders from time to time of such HMH Notes being herein called the
"HMH Noteholders") which were issued pursuant to each of the respective
indentures entered into by the Borrower (as successor to HMH Properties, Inc.),
the subsidiary guarantors named therein and Marine Midland Bank, as trustee in
connection with the HMH Notes (collectively, the "HMH Note Indentures");
WHEREAS, with respect to those HMH Notes that remain outstanding on
the date hereof, various of the Pledgors continue to guaranty the payment when
due of all of the obligations and liabilities of the Borrower under or with
respect to such HMH Notes and the HMH Note Indentures (with any such guarantees,
together with the HMH Notes and the HMH Note Indentures, being herein
collectively called "HMH Note Documents");
WHEREAS, prior to the date hereof, the Borrower has issued
$2,500,000,000 in aggregate principal amount of its (i) $500,000,000 7 7/8%
Series A Senior Notes due 2005, (ii) $1,200,000,000 7 7/8% Series B Senior Notes
due 2008, (iii) $500,000,000 8.45% Series C Senior Notes due 2008 and (iv)
$300,000,000 8 3/8% Series E Senior Notes due February 2006 (collectively, the
"Senior Notes") (with the holders from time to time of such Senior Notes being
herein called the "Senior Noteholders") pursuant to the Indenture, dated as of
August 5, 1998,
-2-
among the Borrower, the guarantors and subsidiary guarantors named therein and
Marine Midland Bank, as trustee, in connection with the Senior Notes (the
"Senior Note Indenture");
WHEREAS, various of the Pledgors have issued, or in the future may
enter into, guarantees of the payment when due of all of the obligations and
liabilities of the Borrower under or with respect to the Senior Notes and the
Senior Note Indenture (with any such guarantees, together with the Senior Notes
and Senior Note Indenture, being herein collectively called "Senior Note
Documents");
WHEREAS, the Borrower may in the future incur Additional Debt (as
hereinafter defined) as permitted under Section 8.04(vi) of the Credit Agreement
and Section 4.7 of the Senior Note Indenture that may be (in accordance with the
terms thereof and to the extent permitted pursuant to the Credit Agreement and
the Senior Note Indenture) (x) guaranteed by various of the Pledgors and (y) to
the extent that such Additional Debt constitutes senior obligations of the
Borrower which rank pari passu in right of payment with the Credit Document
Obligations (as defined below) and the Senior Note Obligations (as defined
below), secured hereunder on an equal and ratable basis with all of the
Obligations as hereinafter provided (with any holders of such Additional Debt
from time to time being herein collectively called "Additional Debtholders" and
with all documentation evidencing any such Additional Debt and any guarantees
thereof being herein called "Additional Debt Documents"). For purposes hereof,
the term "Additional Debt" shall mean Specified Senior Indebtedness issued by
the Borrower;
WHEREAS, it is a condition precedent to the amendment and restatement
of the Original Credit Agreement in the form of the Credit Agreement that each
Pledgor shall have executed and delivered to the Pledgee this Agreement;
WHEREAS, each Pledgor desires to execute this Agreement to satisfy the
conditions described in the immediately preceding paragraph;
NOW, THEREFORE, in consideration of the benefits accruing to each
Pledgor, the receipt and sufficiency of which are hereby acknowledged, each
Pledgor hereby makes the following representations and warranties to the Pledgee
and hereby covenants and agrees with the Pledgee as follows:
1. SECURITY FOR OBLIGATIONS. (a) Subject to the provisions of the
following clause (b) of this Section 1, this Agreement is made by each Pledgor
in favor of the Pledgee for the benefit of the Bank Creditors, the Other
Creditors, the HMH Noteholders, the Senior Noteholders, the Additional
Debtholders and any trustee, agent or other similar representative of any such
creditors or holders (collectively, together with the Pledgee, the "Secured
Creditors"), to secure on an equal and ratable basis:
(i) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations (including
obligations which, but for the automatic stay under Section 362(a) of the
Bankruptcy Code, would become due) and liabilities (including, without
limitation, indemnities, fees and interest thereon) of such Pledgor (as
obligor or guarantor, as the case may be) to the Bank Creditors, whether
now existing or hereafter incurred under, arising out of or in connection
with the Credit Agreement and all other Credit Documents to which it is at
any time a party (including,
-3-
without limitation, all such obligations and liabilities of such Pledgor
under the Credit Agreement (if a party thereto) and under any guaranty by
it of the obligations under the Credit Agreement) and the due performance
and compliance by such Pledgor with the terms of each such Credit Document
(all such obligations and liabilities under this clause (i) being herein
collectively called the "Credit Document Obligations");
(ii) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations (including
obligations which, but for the automatic stay under Section 362(a) of the
Bankruptcy Code, would become due) and liabilities of such Pledgor (as
obligor or guarantor, as the case may be) to the Other Creditors, whether
now existing or hereafter incurred under, arising out of or in connection
with any Interest Rate Protection Agreement or Other Hedging Agreement
(including, without limitation, all such obligations and liabilities of
such Pledgor under any guaranty by it of the obligations under any Interest
Rate Protection Agreement or Other Hedging Agreement) and the due
performance and compliance by such Pledgor with the terms of each such
Interest Rate Protection Agreement and Other Hedging Agreement (all such
obligations and liabilities under this clause (ii) being herein
collectively called the "Other Obligations");
(iii) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations (including
obligations which, but for the automatic stay under Section 362(a) of the
Bankruptcy Code, would become due) and liabilities (including, without
limitation, indemnities, fees and interest thereon) of such Pledgor (as
obligor or guarantor, as the case may be) to the HMH Noteholders, whether
now existing or hereafter incurred under, arising out of or in connection
with the HMH Notes and the other HMH Note Documents to which such Pledgor
is at any time a party (including, without limitation, all such obligations
and liabilities of such Pledgor under any guaranty with respect thereto)
and the due performance and compliance by such Pledgor with all of the
terms, conditions and agreements on its part contained in each such HMH
Note Document (all such obligations and liabilities under this clause (iii)
being herein collectively called the "HMH Note Obligations");
(iv) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations (including
obligations which, but for the automatic stay under Section 362(a) of the
Bankruptcy Code, would become due) and liabilities (including, without
limitation, indemnities, fees and interest thereon) of such Pledgor (as
obligor or guarantor, as the case may be) to the Senior Noteholders,
whether now existing or hereafter incurred under, arising out of or in
connection with the Senior Note Documents to which such Pledgor is at any
time a party (including, without limitation, all such obligations and
liabilities of such Pledgor under the Senior Note Indenture or any guaranty
by it of the obligations under the Senior Note Indenture) and the due
performance and compliance by such Pledgor with all of the terms,
conditions and agreements on its part contained in each such Senior Note
Document (all such obligations and liabilities under this clause (iv) being
herein collectively called the "Senior Note Obligations");
(v) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations (including
obligations which, but for the
-4-
automatic stay under Section 362(a) of the Bankruptcy Code, would become
due) and liabilities (including, without limitation, indemnities, fees and
interest thereon) of such Pledgor (as obligor or guarantor, as the case may
be) to the Additional Debtholders, whether now existing or hereafter
incurred under, arising out of or in connection with the Additional Debt
and the other Additional Debt Documents to which such Pledgor is at any
time a party (including, without limitation, all such obligations and
liabilities of such Pledgor under any guaranty with respect thereto) and
the due performance and compliance by such Pledgor with all of the terms,
conditions and agreements on its part contained in each such Additional
Debt Document (all such obligations and liabilities under this clause (v)
being herein collectively called the "Additional Debt Obligations");
(vi) any and all sums advanced by the Pledgee in order to preserve
the Collateral (as hereinafter defined) or preserve its security interest
in the Collateral;
(vii) in the event of any proceeding for the collection or
enforcement of any indebtedness, obligations, or liabilities referred to in
clauses (i) through (vi) above, after an Event of Default (such term, as
used in this Agreement, shall mean (a) any "Event of Default" at any time
under, and as defined in, any of the Credit Agreement, the HMH Note
Documents and the Senior Note Documents and, if the Additional Debt
Obligations are secured hereunder at such time, the Additional Debt
Documents, and (b) any payment default (after the expiration of any
applicable grace period) on any of the Obligations secured hereunder at
such time) shall have occurred and be continuing, the reasonable expenses
of retaking, holding, preparing for sale or lease, selling or otherwise
disposing or realizing on the Collateral, or of any exercise by the Pledgee
of its rights hereunder, together with reasonable attorneys' fees and court
costs; and
(viii) all amounts paid by any Secured Creditor as to which such
Secured Creditor has the right to reimbursement under Section 11 of this
Agreement;
all such obligations, liabilities, sums and expenses set forth in clauses (i)
through (viii) of this Section 1, subject to the provisions of following clause
(b), being herein collectively called the "Obligations," it being acknowledged
and agreed that the "Obligations" shall include extensions of credit of the type
described above, whether outstanding on the date of this Agreement or extended
from time to time after the date of this Agreement.
(b) Notwithstanding anything to the contrary contained above in this
Section 1 or elsewhere in this Agreement, obligations and liabilities which
would otherwise constitute Additional Debt Obligations as defined in clause (v)
of Section 1(a) of this Agreement shall not constitute Obligations for purposes
of (or be secured pursuant to) this Agreement unless the Borrower shall have
delivered to the Pledgee a written "Notice of Pledge Agreement Entitlement"
(each, a "Notice of Pledge Agreement Entitlement") with respect thereto at least
5 days (or such shorter number of days as may be reasonably acceptable to the
Pledgee) prior to the date of the incurrence of the respective Indebtedness, as
follows:
Such written notice from the Borrower (i) shall state that
it is a "Notice of Pledge Agreement Entitlement", (ii) shall
be delivered to the Pledgee, (iii) shall describe the new
Additional Debt Obligations (and shall describe the Pledgors
obligated, as obligors or guarantors, with respect thereto)
to be secured hereby, (iv) shall
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state that it is delivered pursuant to Section 1(b) of this
Pledge and Security Agreement, (v) shall reference the
aggregate principal amount of such new Indebtedness, and
(vi) shall state that the new Indebtedness and the
incurrence thereof does not violate, and may be incurred and
secured hereunder in accordance with, the applicable
provisions of Sections 8.01 and 8.04(vi) of the Credit
Agreement and, to the extent still in effect, Section 4.7 of
the Senior Note Indenture.
2. DEFINITION OF STOCK, LIMITED LIABILITY COMPANY INTERESTS,
PARTNERSHIP INTERESTS, SECURITIES, ETC. (a) As used herein: (i) the term
"Stock" shall mean (x) with respect to corporations incorporated under the laws
of the United States or any State or territory thereof (each a "Domestic
Corporation"), all of the issued and outstanding shares of capital stock of any
Domestic Corporation at any time owned by any Pledgor and (y) with respect to
corporations that are not Domestic Corporations (each a "Foreign Corporation"),
all of the issued and outstanding shares of capital stock of any Foreign
Corporation at any time owned by any Pledgor, provided that, (A) except as
provided in the last sentence of this Section 2(a) and except for Foreign
Subsidiaries that are Look-Through Subsidiaries, such Pledgor shall not be
required to pledge hereunder more than 65% of the total combined voting power of
all classes of capital stock entitled to vote for the directors of such Foreign
Corporation (herein called "Voting Stock") owned by such Pledgor of any Foreign
Corporation and (B) the Pledgor shall be required to pledge hereunder 100% of
the issued and outstanding shares of all capital stock which is not Voting Stock
(herein called "Non-Voting Stock") at any time owned by the Pledgor of any
Foreign Corporation; (ii) the term "Limited Liability Company Interest" shall
mean the entire limited liability company interests or membership interests at
any time owned by each Pledgor in any limited liability company (each such
limited liability company, a "Pledged Limited Liability Company"); (iii) the
term "Partnership Interest" shall mean the entire partnership interests (whether
general and/or limited partnership interests) at any time owned by each Pledgor
in any partnership (whether a general or limited partnership) (each such
partnership, a "Pledged Partnership"); and (iv) the term "Securities" shall mean
all of the Stock, Limited Liability Company Interests and Partnership Interests.
Notwithstanding anything to the contrary contained herein, the term "Securities"
shall only include, and each Pledgor only shall be required to pledge hereunder,
the equity interests of a Look-Through Subsidiary of the type described in
clause (i) or the definition thereof contained in the Credit Agreement.
Each Pledgor represents and warrants that on the date hereof (i) the
Stock held by such Pledgor consists of the number and type of shares of the
stock of the corporations as described in Annex A hereto; (ii) such Stock
constitutes that percentage of the issued and outstanding capital stock of the
issuing corporation as is set forth in Annex A hereto; (iii) the Limited
Liability Interests held by such Pledgor consist of the number and type of
interest of the issuing Pledged Limited Liability Company as described in Annex
B hereto; (iv) such Limited Liability Company Interests constitute that
percentage of the issued and outstanding equity interests of the respective
issuing Pledged Limited Liability Company as is set forth in Annex B hereto; and
(v) the Partnership Interests held by such Pledgor constitute that percentage of
the entire Partnership Interest of the respective Pledged Partnership as is set
forth in Annex C hereto for such Pledgor. In the circumstances and to the
extent provided in Section 7.15 of the Credit Agreement, the limitation set
forth in part (A) of the proviso to clause (i)(y) of this Section 2(a)
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and in Section 3.2 hereof shall no longer be applicable and such Pledgor shall
duly pledge and deliver to the Pledgee such of the Securities not theretofore
required to be pledged hereunder.
(b) All Stock at any time pledged or required to be pledged hereunder
is hereinafter called the "Pledged Stock," all Limited Liability Company
Interests at any time pledged or required to be pledged hereunder are
hereinafter called the "Pledged Limited Liability Company Interests," all
Partnership Interests at any time pledged or required to be pledged hereunder
are hereinafter called the "Pledged Partnership Interests," all of the Pledged
Stock, Pledged Limited Liability Interests and Pledged Partnership Interests
together are hereinafter called the "Pledged Securities," which together with
(i) all proceeds thereof, including any securities and moneys received and at
the time held by the Pledgee hereunder, (ii) the entries on the books of any
securities intermediary pertaining to the Pledged Stock, Pledged Limited
Liability Company Interests and Pledged Partnership Interests, (iii) all
dividends, cash, warrants, rights, instruments and other property or proceeds
from time to time received, receivable or otherwise distributed in respect of or
in exchange for any or all of the Pledged Stock, Pledged Limited Liability
Company Interests and Pledged Partnership Interests and (iv) all rights under
Sections 3.1(a)(iv) and (v) hereof are hereinafter called the "Collateral".
(c) Notwithstanding anything to the contrary contained in this
Agreement, no Pledgor shall be required to pledge hereunder the Securities of a
Person as, and to the extent, provided in Section 7.16(a)(B) of the Credit
Agreement.
(d) Notwithstanding anything to the contrary contained in this
Agreement, Holdings shall not be required to pledge any Collateral hereunder
except under the circumstances described in Section 12.18(b) of the Credit
Agreement and, in the event that such circumstances exist, Holdings will
promptly pledge all Collateral then owned by it (and thereafter acquired by it)
in the manner provided in this Agreement without regard to this Section 2(d).
3. PLEDGE OF SECURITIES, ETC.
3.1. Pledge. (a) To secure all Obligations of such Pledgor and for
------
the purposes set forth in Section 1 hereof, each Pledgor hereby: (i) grants to
the Pledgee, and reconfirms its grant to the Pledgee under the Original Pledge
Agreement of, a first priority security interest in all of the Collateral owned
by such Pledgor; (ii) pledges and deposits as security with the Pledgee the
certificated Securities owned by such Pledgor on the date hereof, and delivers
to the Pledgee all certificates or instruments therefor, if any, accompanied by
undated stock powers duly executed in blank by such Pledgor in the case of
Stock, or such other instruments of transfer as are reasonably acceptable to the
Pledgee; (iii) assigns, transfers, hypothecates, mortgages, charges and sets
over to the Pledgee all of such Pledgor's right, title and interest in and to
such Securities (and in and to all certificates or instruments evidencing such
Securities), to be held by the Pledgee, upon the terms and conditions set forth
in this Agreement; (iv) transfers and assigns to the Pledgee all of such
Pledgor's Limited Liability Company Interests (and delivers any certificates or
instruments evidencing such limited liability company or membership interests,
duly endorsed in blank) and all of such Pledgor's right, title and interest in
each limited liability company to which such interests relate, whether now
existing or hereafter acquired, including, without limitation:
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(A) all the capital thereof and its interest in all profits, losses,
Limited Liability Company Assets (as defined below) and other distributions
to which such Pledgor shall at any time be entitled in respect of such
Limited Liability Company Interests;
(B) all other payments due or to become due to such Pledgor in
respect of Limited Liability Company Interests, whether under any limited
liability company agreement or otherwise, whether as contractual
obligations, damages, insurance proceeds or otherwise;
(C) all of its claims, rights, powers, privileges, authority,
options, security interests, liens and remedies, if any, under any limited
liability company agreement or operating agreement, or at law or otherwise
in respect of such Limited Liability Company Interests (except any rights
as managing member of a limited liability company which is not a Wholly-
Owned Subsidiary, to the extent the applicable limited liability company
agreement or operating agreement prohibits a pledge of such rights);
(D) all present and future claims, if any, of such Pledgor against
any Pledged Limited Liability Company for moneys loaned or advanced, for
services rendered or otherwise;
(E) subject to Section 5 hereof, all of such Pledgor's rights under
any limited liability company agreement or operating agreement or at law to
exercise and enforce every right, power, remedy, authority, option and
privilege of such Pledgor relating to any Limited Liability Company
Interest (except any rights as managing member of a limited liability
company which is not a Wholly-Owned Subsidiary, to the extent the
applicable limited liability company agreement or operating agreement
prohibits a pledge of such rights), including any power to terminate,
cancel or modify any limited liability company agreement or operating
agreement, to execute any instruments and to take any and all other action
on behalf of and in the name of such Pledgor in respect of such Limited
Liability Company Interest and any Pledged Limited Liability Company, to
make determinations, to exercise any election (including, but not limited
to, election of remedies) or option or to give or receive any notice,
consent, amendment, waiver or approval, together with full power and
authority to demand, receive, enforce, collect or receipt for any of the
foregoing or for any Limited Liability Company Assets, to enforce or
execute any checks, or other instruments or orders, to file any claims and
to take any action in connection with any of the foregoing;
(F) all other property hereafter delivered in substitution for or in
addition to any of the foregoing, all certificates and instruments
representing or evidencing such other property and all cash, securities,
interest, dividends, rights and other property at any time and from time to
time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the foregoing; and
(G) to the extent not otherwise included, all proceeds of any or all
of the foregoing;
and (v) transfers and assigns to the Pledgee such Pledgor's Partnership
Interests (and delivers any certificates or instruments evidencing such
partnership interests, duly endorsed in blank) and all of such Pledgor's right,
title and interest in each Pledged Partnership including, without limitation:
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(A) all of the capital thereof and its interest in all profits,
losses, Partnership Assets (as defined below) and other distributions to
which such Pledgor shall at any time be entitled in respect of any such
Partnership Interests;
(B) all other payments due or to become due to such Pledgor in
respect of any such Partnership Interests, whether under any partnership
agreement or otherwise, whether as contractual obligations, damages,
insurance proceeds or otherwise;
(C) all of its claims, rights, powers, privileges, authority,
options, security interests, liens and remedies, if any, under any
partnership or other agreement or at law or otherwise in respect of any
such Partnership Interests (except any rights as general partner of a
limited partnership which is not a Wholly-Owned Subsidiary, to the extent
the applicable partnership agreement prohibits a pledge of such rights);
(D) all present and future claims, if any, of such Pledgor against
any Pledged Partnership for moneys loaned or advanced, for services
rendered or otherwise;
(E) subject to Section 5 hereof, all of such Pledgor's rights under
any partnership agreement or at law to exercise and enforce every right,
power, remedy, authority, option and privilege of such Pledgor relating to
any Partnership Interest (except any rights as general partner of a limited
partnership which is not a Wholly-Owned Subsidiary, to the extent the
applicable partnership agreement prohibits a pledge of such rights),
including any power, if any, to terminate, cancel or modify any general or
limited partnership agreement, to execute any instruments and to take any
and all other action on behalf of and in the name of such Pledgor in
respect of such Partnership Interest and any Pledged Partnership, to make
determinations, to exercise any election (including, but not limited to,
election of remedies) or option or to give or receive any notice, consent,
amendment, waiver or approval, together with full power and authority to
demand, receive, enforce, collect or receipt for any of the foregoing or
for any Partnership Assets, to enforce or execute any checks, or other
instruments or orders, to file any claims and to take any action in
connection with any of the foregoing;
(F) all other property hereafter delivered in substitution for or in
addition to any of the foregoing, all certificates and instruments
representing or evidencing such other property and all cash, securities,
interest, dividends, rights and other property at any time and from time to
time received, receivable or otherwise distributed in respect of or in
exchange for any or all thereof; and
(G) to the extent not otherwise included, all proceeds of any or all
of the foregoing.
(b) As used herein, the term "Limited Liability Company Assets" shall
mean all assets, whether tangible or intangible and whether real, personal or
mixed (including, without limitation, all limited liability company capital and
interests in other limited liability companies), at any time owned by any
Pledged Limited Liability Company.
(c) As used herein, the term "Partnership Assets" shall mean all
assets, whether tangible or intangible and whether real, personal or mixed
(including, without limitation, all
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partnership capital and interests in other partnerships), at any time owned by
any Pledged Partnership.
3.2. Subsequently Acquired Securities. Subject to Section 2(c)
--------------------------------
hereof, if any Pledgor shall acquire (by purchase, stock dividend or otherwise)
any additional Securities at any time or from time to time after the date
hereof, such Securities shall automatically (and without any further action
being required to be taken) be subject to the pledge and security interests
created pursuant to Section 3.1(a) hereof and, furthermore, such Pledgor will
forthwith deliver and deposit such Securities (or any certificates or
instruments representing such Securities) as security with the Pledgee and
deliver to the Pledgee all certificates therefor or instruments thereof, if any,
accompanied by undated stock powers duly executed in blank in the case of
certificated Stock, Limited Liability Company Interests or Partnership Interests
or such other instruments of transfer as are reasonably acceptable to the
Pledgee, and will promptly thereafter deliver to the Pledgee a certificate
executed by any Authorized Officer of such Pledgor describing such Securities
and certifying that the same have been duly pledged with the Pledgee hereunder.
Subject to the last sentence of Section 2(a) hereof, any pledge of Voting Stock
of any Foreign Corporation shall be subject to the provisions of part (A) of the
proviso to clause (i)(y) of Section 2(a) hereof.
3.3. Uncertificated Securities. If any Securities (whether now owned
-------------------------
or hereafter acquired) are uncertificated securities, the respective Pledgor
shall promptly notify the Pledgee thereof, and shall promptly take all actions
required to perfect the security interest of the Pledgee under applicable law
(including, in any event, under Sections 8-106 and 9-115 of the New York UCC, if
applicable). Each Pledgor further agrees to take such actions as the Pledgee
deems reasonably necessary or desirable to effect the foregoing and to permit
the Pledgee to exercise any of its rights and remedies hereunder, and agrees to
provide an opinion of counsel reasonably satisfactory to the Pledgee with
respect to any such pledge of uncertificated Securities promptly upon request of
the Pledgee.
4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. The Pledgee shall
have the right to appoint one or more sub-agents for the purpose of retaining
physical possession of any Pledged Securities that are represented by
certificates, which may be held (in the discretion of the Pledgee) in the name
of such Pledgor, endorsed or assigned in blank or in favor of the Pledgee or any
nominee or nominees of the Pledgee or a sub-agent appointed by the Pledgee. The
Pledgee agrees to promptly notify the relevant Pledgor after the appointment of
any sub-agent; provided, however, that the failure to give such notice shall not
-------- -------
affect the validity of such appointment.
5. VOTING, ETC., WHILE NO EVENT OF DEFAULT. Unless and until an
Event of Default shall have occurred and be continuing, each Pledgor shall be
entitled to (i) exercise any and all voting and other consensual rights
pertaining to the Pledged Stock and to give all consents, waivers or
ratifications in respect thereof and (ii) exercise any and all voting, consent,
administration, management and other rights and remedies under (x) any limited
liability company agreement or operating agreement or otherwise with respect to
the Pledged Limited Liability Interests of such Pledgor and (y) any partnership
agreement or otherwise with respect to the Pledged Partnership Interests of such
Pledgor, in each case together with all other rights assigned pursuant to
Sections 3.1(a)(iv)(E) and 3.1(a)(v)(E) hereof; provided, that no vote shall be
--------
cast or any consent, waiver or ratification given or any other action taken
which would violate
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or be inconsistent with any of the terms of this Agreement or any other Secured
Debt Agreement (as hereinafter defined), or which would have the effect of
impairing the rights, priorities or remedies of the Pledgee or any other Secured
Creditor under this Agreement or any other Secured Debt Agreement. All such
rights of such Pledgor to vote and to give consents, waivers and ratification's
shall cease in case an Event of Default shall occur and be continuing, and
Section 7 hereof shall become applicable.
6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless an Event of Default
shall have occurred and be continuing and subject to the terms of the Secured
Debt Agreements, all cash dividends and other cash distributions payable in
respect of the Pledged Securities shall be paid to the respective Pledgor;
provided, that all cash dividends and other cash distributions payable in
--------
respect of any Pledged Security which represent in whole or in part an
extraordinary, liquidating or other distribution in return of capital shall be
paid to the Pledgee and retained by it as part of the Collateral (except as
otherwise permitted to be retained or distributed by such Pledgor pursuant to
the respective Secured Debt Agreements). The Pledgee shall also be entitled to
receive directly (with all necessary endorsements), and to retain as part of the
Collateral:
(i) all other or additional stock or other securities or property
(other than cash) paid or distributed by way of dividend or otherwise in
respect of the Pledged Stock, Pledged Limited Liability Company Interests
and Pledged Partnership Interests;
(ii) all other or additional stock or other securities or property
(including cash) paid or distributed in respect of the Pledged Stock,
Pledged Limited Liability Company Interests or Pledged Partnership
Interests by way of stock-split, spin-off, split-up, reclassification,
combination of shares or similar rearrangement or in connection with a
reduction of capital, capital surplus or paid-in surplus; and
(iii) except as provided in the Secured Debt Agreements, all other
or additional stock or other securities or property (including cash) which
may be paid in respect of the Collateral by reason of any consolidation,
merger, exchange of stock, conveyance of assets, partial or total
liquidation or similar corporate reorganization.
Nothing contained in this Section 6 shall limit or restrict in any way the
Pledgee's right to receive proceeds of the Collateral in any form in accordance
with Section 3 of this Agreement. All dividends, distributions or other
payments which are received by the Pledgor contrary to the provisions of this
Section 6 and Section 7 below shall be received in trust for the benefit of the
Pledgee, shall be segregated from other property or funds of the Pledgor and
shall be forthwith paid over to the Pledgee as Collateral in the same form as so
received (with any necessary endorsement).
7. REMEDIES IN CASE OF EVENT OF DEFAULT. In case an Event of Default
shall have occurred and be continuing, the Pledgee shall be entitled to exercise
all of its rights, powers and remedies (whether vested in it by this Agreement,
by any other Credit Document, by any HMH Note Document, by any Senior Note
Document or, to the extent then in effect and secured hereby, any Interest Rate
Protection Agreement or Other Hedging Agreement or any Additional Debt Document
(with all of the Documents listed above being herein collectively called the
"Secured Debt Agreements") or by law) for the protection and enforcement of its
rights in respect of the Collateral, and the Pledgee shall be entitled to
exercise all the rights and remedies of a secured party under the UCC and also
shall be entitled, without
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limitation, to exercise the following rights, which each Pledgor hereby agrees
to be commercially reasonable:
(i) to receive all amounts payable in respect of the Collateral
otherwise payable to such Pledgor under Section 6 hereof;
(ii) to transfer all or any part of the Pledged Securities into the
Pledgee's name or the name of its nominee or nominees;
(iii) to vote all or any part of the Pledged Stock, Pledged Limited
Liability Company Interests or Pledged Partnership Interests (whether or
not transferred into the name of the Pledgee) and give all consents,
waivers and ratifications in respect of the Collateral and otherwise act
with respect thereto as though it were the outright owner thereof; and
(iv) at any time or from time to time to sell, assign and deliver,
or grant options to purchase, all or any part of the Collateral, or any
interest therein, at any public or private sale, without demand of
performance, advertisement or notice of intention to sell or of the time or
place of sale or adjournment thereof or to redeem or otherwise (all of
which are hereby waived by each Pledgor), for cash, on credit or for other
property, for immediate or future delivery without any assumption of credit
risk, and for such price or prices and on such terms as the Pledgee in its
absolute discretion may determine; provided, that at least 10 Business
--------
Days' notice of the time and place of any such sale shall be given to such
Pledgor. Each Pledgor hereby waives and releases to the fullest extent
permitted by law any right or equity of redemption with respect to the
Collateral, whether before or after sale hereunder, and all rights, if any,
of marshalling the Collateral and any other security for the Obligations or
otherwise. At any such sale, unless prohibited by applicable law, the
Pledgee on behalf of the Secured Creditors may bid for and purchase all or
any part of the Collateral so sold free from any such right or equity of
redemption. Each purchaser at any such sale shall hold the property sold
absolutely free from any claim or right on the part of any Pledgor, and
each Pledgor hereby waives (to the extent permitted by law) all rights of
redemption, stay and/or appraisal which it now has or may at any time in
the future have under any rule of law or statute now existing or hereafter
enacted. The Pledgee may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was
so adjourned. Each Pledgor hereby waives any claims against the Pledgee
arising by reason of the fact that the price at which any Collateral may
have been sold at such a private sale was less than the price which might
have been obtained at a public sale, even if the Pledgee accepts the first
offer received and does not offer such Collateral to more than one offeree.
If the proceeds of any sale or other disposition of the Collateral are
insufficient to pay all the Obligations, the Pledgors shall be liable for
the deficiency and the fees of any attorneys employed by the Pledgee to
collect such deficiency. Neither the Pledgee nor any other Secured
Creditor shall be liable for failure to collect or realize upon any or all
of the Collateral or for any delay in so doing nor shall any of them be
under any obligation to take any action whatsoever with regard thereto.
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8. REMEDIES, ETC., CUMULATIVE. Each right, power and remedy of the
Pledgee provided for in this Agreement or in any other Secured Debt Agreement or
now or hereafter existing at law or in equity or by statute shall be cumulative
and concurrent and shall be in addition to every other such right, power or
remedy. The exercise or beginning of the exercise by the Pledgee or any other
Secured Creditor of any one or more of the rights, powers or remedies provided
for in this Agreement or in any other Secured Debt Agreement or now or hereafter
existing at law or in equity or by statute or otherwise shall not preclude the
simultaneous or later exercise by the Pledgee or any other Secured Creditor of
all such other rights, powers or remedies, and no failure or delay on the part
of the Pledgee or any other Secured Creditor to exercise any such right, power
or remedy shall operate as a waiver thereof. The Secured Creditors agree that
this Agreement may be enforced only by the Pledgee acting upon the instructions
of the Required Secured Creditors (as defined in Annex G hereto) and that no
other Secured Creditor shall have any right individually to seek to enforce or
to enforce this Agreement or to realize upon the security to be granted hereby,
it being understood and agreed that such rights and remedies may be exercised by
the Pledgee for the benefit of the Secured Creditors upon the terms of this
Agreement.
9. APPLICATION OF PROCEEDS. (a) All moneys collected by the Pledgee
upon any sale or other disposition of the Collateral of each Pledgor, together
with all other moneys received by the Pledgee hereunder, shall be applied as
follows:
(i) first, to the payment of all Obligations owing to the Pledgee
of the type provided in clauses (vi), (vii) and (viii) of the definition of
Obligations in Section 1 hereof;
(ii) second, to the extent proceeds remain after the application
pursuant to the preceding clause (i), an amount equal to the outstanding
Primary Obligations (as hereinafter defined) shall be paid to the Secured
Creditors as provided in Section 9(e) hereof, with each Secured Creditor
receiving an amount equal to its outstanding Primary Obligations of such
Pledgor or, if the proceeds are insufficient to pay in full all such
Primary Obligations, its Pro Rata Share (as hereinafter defined) of the
amount remaining to be distributed;
(iii) third, to the extent proceeds remain after the application
pursuant to the preceding clauses (i) and (ii), an amount equal to the
outstanding Secondary Obligations (as hereinafter defined) shall be paid to
the Secured Creditors as provided in Section 9(e) hereof, with each Secured
Creditor receiving an amount equal to its outstanding Secondary Obligations
of such Pledgor or, if the proceeds are insufficient to pay in full all
such Secondary Obligations, its Pro Rata Share of the amount remaining to
be distributed; and
(iv) fourth, to the extent proceeds remain after the application
pursuant to the preceding clauses (i) through (iii), inclusive, and
following the termination of this Agreement pursuant to Section 18 hereof,
to the relevant Pledgor or to whomever may be lawfully entitled to receive
such surplus.
(b) For purposes of this Agreement (x) "Pro Rata Share" shall mean,
when calculating a Secured Creditor's portion of any distribution or amount,
that amount (expressed as a percentage) equal to a fraction the numerator of
which is the then unpaid amount of such
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Secured Creditor's Primary Obligations or Secondary Obligations, as the case may
be, and the denominator of which is the then outstanding amount of all Primary
Obligations or Secondary Obligations, as the case may be, (y) "Primary
Obligations" shall mean (i) in the case of the Credit Document Obligations, all
Obligations arising out of or in connection with (including, without limitation,
as obligor or guarantor, as the case may be) the principal of, and interest on,
all Loans, all unreimbursed drawings or payments in respect of any letters of
credit (together with all interest accrued thereon), and the aggregate stated
amounts of all letters of credit issued under the Credit Agreement, and all
regularly accruing fees, (ii) in the case of the HMH Note Obligations, all
Obligations secured hereby arising out of or in connection with (including,
without limitation, as obligor or guarantor, as the case may be) the principal
of, and interest on, the HMH Notes, and all regularly accruing fees, (iii) in
the case of the Senior Note Obligations, all Obligations secured hereby arising
out of or in connection with (including, without limitation, as obligor or
guarantor, as the case may be) the principal of, and interest on, the Senior
Notes, and all regularly accruing fees, (iv) in the case of the Additional Debt
Obligations, all Obligations secured hereby arising out of or in connection with
(including, without limitation, as obligor or guarantor, as the case may be) the
principal of, and interest on, the Additional Debt, and all regularly accruing
fees, and (v) in the case of the Other Obligations, all Obligations arising out
of or in connection with (including, without limitation, as a direct obligor or
a guarantor, as the case may be) Interest Rate Protection Agreements or Other
Hedging Agreements secured hereby (other than indemnities, fees (including,
without limitation, attorneys' fees) and similar obligations and liabilities),
and (z) "Secondary Obligations" shall mean all Obligations of such Pledgor
secured hereby other than Primary Obligations.
(c) When payments to Secured Creditors are based upon their
respective Pro Rata Shares, the amounts received by such Secured Creditors
hereunder shall be deemed to be applied (for purposes of making determinations
under this Section 9 only) (i) first, to the Primary Obligations and (ii)
second, to the Secondary Obligations.
(d) If the Bank Creditors are to receive a distribution in accordance
with the procedures set forth above in this Section 9 on account of undrawn
amounts with respect to letters of credit issued under the Credit Agreement,
such amounts shall be paid to the Administrative Agent under the Credit
Agreement and held by it, for the equal and ratable benefit of the Bank
Creditors as such. If any amounts are held as cash security pursuant to the
immediately preceding sentence, then upon the termination of all outstanding
letters of credit, and after the application of all such cash security to the
repayment of all Obligations owing to the Bank Creditors after giving effect to
the termination of all such letters of credit, if there remains any excess cash,
such excess cash shall be returned by the Administrative Agent to the Pledgee
for distribution in accordance with Section 9(a) hereof.
(e) Except as set forth in Section 9(d) hereof, all payments required
to be made hereunder shall be made (i) if to the Bank Creditors, to the
Administrative Agent under the Credit Agreement for the account of the Bank
Creditors, and (ii) if to any other Secured Creditors (other than the Pledgee),
to the trustee, paying agent or other similar representative (each a
"Representative") for such Secured Creditors or, in the absence of such a
Representative, directly to the other Secured Creditors.
(f) For purposes of applying payments received in accordance with
this Section 9, the Pledgee shall be entitled to rely upon (i) the
Administrative Agent under the Credit
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Agreement and (ii) the Representative for any other Secured Creditors or, in the
absence of such a Representative, upon the respective Secured Creditors for a
determination (which the Administrative Agent, each Representative for any other
Secured Creditors and the Secured Creditors agree (or shall agree) to provide
upon request of the Pledgee) of the outstanding Primary Obligations and
Secondary Obligations owed to the Secured Creditors. Unless it has actual
knowledge (including by way of written notice from a Representative for any
Secured Creditor or directly from a Secured Creditor) to the contrary, the
Pledgee, in acting hereunder, shall be entitled to assume that no Interest Rate
Protection Agreements or Other Hedging Agreements are in existence.
(g) It is understood and agreed that each Pledgor shall remain liable
to the extent of any deficiency between the amount of the proceeds of the
Collateral pledged by it hereunder and the aggregate amount of the Obligations
of such Pledgor.
10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral by the
Pledgee hereunder (whether by virtue of the power of sale herein granted,
pursuant to judicial process or otherwise), the receipt of the Pledgee or the
officer making the sale shall be a sufficient discharge to the purchaser or
purchasers of the Collateral so sold, and such purchaser or purchasers shall not
be obligated to see to the application of any part of the purchase money paid
over to the Pledgee or such officer or be answerable in any way for the
misapplication or nonapplication thereof.
11. INDEMNITY. Each Pledgor jointly and severally agrees (i) to
indemnify and hold harmless the Pledgee in such capacity, each Representative of
a Secured Creditor in its capacity as such and each other Secured Creditor that
is an indemnitor under Section 6 of Annex G hereto from and against any and all
claims, demands, losses, judgments and liabilities of whatsoever kind or nature,
and (ii) to reimburse the Pledgee in such capacity, each Representative of a
Secured Creditor in its capacity as such and each other Secured Creditor that is
an indemnitor under Section 6 of Annex G hereto for all reasonable costs and
expenses, including reasonable attorneys' fees, in each case to the extent
growing out of or resulting from the exercise by the Pledgee of any right or
remedy granted to it hereunder except, with respect to clauses (i) and (ii)
above, to the extent arising from the Pledgee's or such other Secured Creditor's
gross negligence or willful misconduct. In no event shall the Pledgee be
liable, in the absence of gross negligence or willful misconduct on its part,
for any matter or thing in connection with this Agreement other than to account
for moneys actually received by it in accordance with the terms hereof. If and
to the extent that the obligations of the Pledgors under this Section 11 are
unenforceable for any reason, each Pledgor hereby agrees to make the maximum
contribution to the payment and satisfaction of such obligations which is
permissible under applicable law.
12. FURTHER ASSURANCES; POWER OF ATTORNEY. (a) Each Pledgor agrees
that it will join with the Pledgee in executing and, at such Pledgor's own
expense, file and refile under the applicable UCC or such other law such
financing statements, continuation statements and other documents in such
offices as the Pledgee may reasonably deem necessary or appropriate and wherever
required or permitted by law in order to perfect and preserve the Pledgee's
security interest in the Collateral and hereby authorizes the Pledgee to file
financing statements and amendments thereto relative to all or any part of the
Collateral without the signature of such Pledgor where permitted by law, and
agrees to do such further acts and things and to execute and deliver to the
Pledgee such additional conveyances, assignments, agreements and
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instruments as the Pledgee may reasonably deem necessary or advisable to carry
into effect the purposes of this Agreement or to further assure and confirm unto
the Pledgee its rights, powers and remedies hereunder.
(b) Each Pledgor hereby appoints the Pledgee such Pledgor's attorney-
in-fact, with full authority in the place and stead of such Pledgor and in the
name of such Pledgor or otherwise, to act from time to time after the occurrence
and during the continuance of an Event of Default in the Pledgee's reasonable
discretion to take any action and to execute any instrument which the Pledgee
may deem necessary or advisable to accomplish the purposes of this Section 12.
13. THE PLEDGEE AS AGENT. The Pledgee will hold in accordance with
this Agreement all items of the Collateral at any time received under this
Agreement. It is expressly understood and agreed that the obligations of the
Pledgee as holder of the Collateral and interests therein and with respect to
the disposition thereof, and otherwise under this Agreement, are only those
expressly set forth in this Agreement. The Pledgee shall act hereunder on the
terms and conditions set forth herein and in Annex G hereto, the terms of which
shall be deemed incorporated herein by reference as fully as if same were set
forth herein in their entirety.
14. TRANSFER BY PLEDGORS. No Pledgor will sell or otherwise dispose
of, grant any option with respect to, or mortgage, pledge or otherwise encumber
any of the Collateral or any interest therein (except in accordance with the
terms of this Agreement and as permitted by the terms of the Secured Debt
Agreements).
15. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PLEDGORS. (a) Each
Pledgor represents, warrants and covenants that:
(i) it is the legal, record and beneficial owner of, and has good
title to, all Pledged Securities purported to be owned by such Pledgor
(including as shown on Annexes A, B and C hereof), subject to no Lien,
except the Liens created by this Agreement;
(ii) it has full power, authority and legal right to pledge all the
Pledged Securities;
(iii) this Agreement has been duly authorized, executed and
delivered by such Pledgor and constitutes the legal, valid and binding
obligation of such Pledgor enforceable in accordance with its terms, except
to the extent that the enforceability hereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and by equitable principles
(regardless of whether enforcement is sought in equity or at law);
(iv) no consent of any other party (including, without limitation,
any stockholder or creditor of such Pledgor or any of its Subsidiaries and
any other partners or members of such Pledgor's partnerships or limited
liability companies) and no consent, license, permit, approval or
authorization of, exemption by, notice or report to, or registration,
filing (except any filings required under the UCC, which filings have been
made) or declaration with, any governmental authority is required to be
obtained by such Pledgor in connection with the execution, delivery or
performance of this Agreement, or in connection with the exercise of its
rights and remedies pursuant to this Agreement, in each case except those
which have been obtained or made or as may be required by laws
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affecting the offer and sale of securities generally in connection with the
exercise by the Pledgee of certain of its remedies hereunder;
(v) the execution, delivery and performance of this Agreement by
such Pledgor does not violate any provision of any applicable law or
regulation or of any order, judgment, writ, award or decree of any court,
arbitrator or governmental authority, domestic or foreign, or of the
certificate of incorporation or by-laws (or analogous organizational
documents) of such Pledgor or of any securities issued by such Pledgor or
any of its Subsidiaries, or of any mortgage, indenture, lease, deed of
trust, credit agreement or loan agreement, or any other material agreement,
contract or instrument to which such Pledgor or any of its Subsidiaries is
a party or which purports to be binding upon such Pledgor or any of its
Subsidiaries or upon any of their respective assets and will not result in
the creation or imposition (or the obligation to create or impose) of any
lien or encumbrance on any of the assets of such Pledgor or any of its
Subsidiaries except as contemplated by this Agreement;
(vi) all the shares of Stock have been duly and validly issued, are
fully paid and nonassessable and subject to no options to purchase or
similar rights;
(vii) the pledge, assignment and delivery (which delivery has been
made) to the Pledgee of the Pledged Stock creates a valid and perfected
first priority security interest in such Stock, subject to no prior lien or
encumbrance or to any agreement purporting to grant to any third party
(except the Secured Creditors) a lien or encumbrance on the property or
assets of such Pledgor which would include the Securities;
(viii) each Pledged Partnership Interest and each Pledged Limited
Liability Company Interest has been validly acquired and is fully paid for
(to the extent applicable) and is duly and validly pledged hereunder;
(ix) each partnership agreement and each limited liability company
or operating agreement is the legal, valid and binding obligation of the
applicable Pledgor, enforceable in accordance with its terms;
(x) no Pledgor is in default in the payment of any portion of any
mandatory capital contribution, if any, required to be made under any
general or limited partnership agreement or any limited liability company
or operating agreement to which such Pledgor is a party, and no Pledgor is
in violation of any other material provisions of any partnership agreement
or any limited liability company or operating agreement to which such
Pledgor is a party, or is otherwise in default or violation thereunder in
any material respect;
(xi) the pledge and assignment of the Pledged Partnership Interests
and/or Pledged Limited Liability Company Interests pursuant to this
Agreement, together with the relevant filings or recordings under the UCC
(or other steps described in any applicable version of the UCC) (which
filings, recordings or other steps have been made), create a valid
perfected and continuing first priority security interest in such
Partnership Interests and/or Limited Liability Company Interests and the
proceeds thereof, subject to no prior lien or encumbrance or to any
agreement purporting to grant to any third party
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(except the Secured Creditors) a lien or encumbrance on the property or
assets of such Pledgee or which would include the Securities;
(xii) there are no currently effective financing statements under
the UCC covering property which is now or hereafter may be included in the
Collateral and such Pledgor will not, without the prior written consent of
the Pledgee, execute and, until the Termination Date (as hereinafter
defined), there will not ever be on file in any public office any
enforceable financing statement or statements covering any or all of the
Collateral, except financing statements filed or to be filed in favor of
the Pledgee as secured party;
(xiii) each Pledgor shall give the Pledgee prompt notice of any
written claim it receives relating to the Collateral; and
(xiv) each Pledgor shall deliver to the Pledgee a copy of each other
demand, notice or document received by it which may adversely affect the
Pledgee's interest in the Collateral promptly upon, but in any event within
10 days after, such Pledgor's receipt thereof.
Each Pledgor covenants and agrees that it will defend the Pledgee's
right, title and security interest in and to the Collateral and the proceeds
thereof against the claims and demands of all persons whomsoever; and such
Pledgor covenants and agrees that it will have like title to and right to pledge
any other property at any time hereafter pledged to the Pledgee as Collateral
hereunder and will likewise defend the right thereto and security interest
therein of the Pledgee and the other Secured Creditors.
(b) Each Pledgor hereby further represents, warrants and covenants
that as of the date hereof, the chief executive office of such Pledgor is
located at the address indicated on Annex F hereto for such Pledgor. Such
Pledgor will not move its chief executive office except to such new location as
such Pledgor may establish in accordance with the last sentence of this Section
15(b). No Pledgor shall establish new locations for such offices until (i) it
shall have given to the Pledgee prior written notice of its intention to do so,
clearly describing such new location and providing such other information in
connection therewith as the Pledgee may reasonably request, (ii) it shall have
delivered to the Pledgee a written supplement to Annex F hereto in the form of
Annex H-1 hereto as provided in clause (c) below showing the new location of its
chief executive office and (iii) with respect to such new location, it shall
have taken all action, reasonably satisfactory to the Pledgee, to maintain all
security interest of the Pledgee in the Collateral intended to be granted hereby
at all times fully perfected and in full force and effect.
(c) Without in any way limiting Section 3.2 hereof, at any time and
from time to time that any Pledgor (x) determines that the information with
respect to it contained on Annex A, B, C and/or F, as the case may be, is
inaccurate or (y) acquires any additional Securities which have not already been
pledged hereunder and reflected on Annexes A through C, as appropriate, such
Pledgor shall deliver a supplement to this Agreement, substantially in the form
of Annex H-1 hereto (each a "Pledge and Security Agreement Supplement") adding
(or, in the case of any Securities released pursuant to Section 18 hereof,
deleting) such Securities to (from) Annexes A through C hereto, as appropriate.
The execution and delivery of any such supplement shall not require the consent
of any Pledgor hereunder. It is understood and agreed that the
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pledge and security interests granted hereunder shall apply to all Collateral as
provided in Section 3.1 hereof regardless of the failure of any Pledgor to
deliver, or any inaccurate information stated in, the Pledge and Security
Agreement Supplement as otherwise provided above.
(d) Each Pledgor hereby covenants and agrees that with respect to all
Partnership Interests or Limited Liability Company Interests, in each case
required to be pledged by it hereunder, such Pledgor will deliver to the
respective Pledged Partnerships or Pledged Limited Liability Companies, as the
case may be (with copies to the Pledgee) a notice (appropriately completed) in
the form of Annex D attached hereto (with such changes thereto as may be
acceptable to the Pledgee) and by this reference made a part hereof (each such
notice a "Partnership/LLC Notice") and such Pledgor will use its reasonable best
efforts to cause to be delivered to the Pledgee an acknowledgment in the form
set forth as Annex E attached hereto (with such changes thereto as may be
acceptable to the Pledgee) (each such acknowledgment, a "Pledge
Acknowledgment"), duly executed by the relevant Pledged Partnership and/or
Pledged Limited Liability Company, as the case may be, in each case within
forty-five days following the date of any pledge of any Pledged Partnership
Interests or Pledged Limited Liability Company Interests hereunder.
16. PLEDGORS' OBLIGATIONS ABSOLUTE, ETC. The obligations of each
Pledgor under this Agreement shall be absolute and unconditional and shall
remain in full force and effect without regard to, and shall not be released,
suspended, discharged, terminated or otherwise affected by, any circumstance or
occurrence whatsoever, including, without limitation: (i) any renewal,
extension, amendment or modification of or addition or supplement to or deletion
from any Secured Debt Agreement or any other instrument or agreement referred to
therein, or any assignment or transfer of any thereof; (ii) any waiver, consent,
extension, indulgence or other action or inaction under or in respect of any
such agreement or instrument or this Agreement; (iii) any furnishing of any
additional security to the Pledgee or its assignee or any acceptance thereof or
any release of any security by the Pledgee or its assignee; (iv) any limitation
on any party's liability or obligations under any such instrument or agreement
or any invalidity or unenforceability, in whole or in part, of any such
instrument or agreement or any term thereof; (v) any limitation on any other
Pledgor's liability or obligations under this Agreement or under any other
Secured Debt Agreement or any invalidity or unenforceability, in whole or in
part, of this Agreement or any other Secured Debt Agreement or any term thereof;
or (vi) any bankruptcy, insolvency, reorganization, composition, adjustment,
dissolution, liquidation or other like proceeding relating to such Pledgor or
any Subsidiary of such Pledgor, or any action taken with respect to this
Agreement by any trustee or receiver, or by any court, in any such proceeding,
whether or not such Pledgor shall have notice or knowledge of any of the
foregoing.
17. REGISTRATION, ETC. If at any time when the Pledgee shall
determine to exercise its right to sell all or any part of the Pledged
Securities pursuant to Section 7 hereof, such Pledged Securities or the part
thereof to be sold shall not, for any reason whatsoever, be effectively
registered under the Securities Act, as then in effect, the Pledgee may, in its
sole and absolute discretion, sell such Pledged Securities or part thereof by
private sale in such manner and under such circumstances as the Pledgee may deem
necessary or advisable in order that such sale may legally be effected without
such registration; provided, that at least 10 Business Days' notice of the time
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and place of any such sale shall be given to such Pledgor. Without limiting the
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generality of the foregoing, in any such event the Pledgee, in its sole and
absolute discretion: (i) may proceed to make such private sale notwithstanding
that a registration statement for the purpose of registering such Pledged
Securities or part thereof shall have been filed under such Securities Act; (ii)
may approach and negotiate with a single possible purchaser to effect such sale;
and (iii) may restrict such sale to a purchaser who will represent and agree
that such purchaser is purchasing for its own account, for investment, and not
with a view to the distribution or sale of such Pledged Securities or part
thereof. In the event of any such sale, the Pledgee shall incur no
responsibility or liability for selling all or any part of the Pledged
Securities at a price which the Pledgee, in its sole and absolute discretion,
may in good faith deem reasonable under the circumstances, notwithstanding the
possibility that a substantially higher price might be realized if the sale were
deferred until after registration as aforesaid.
18. TERMINATION, RELEASE. (a) After the Termination Date (as defined
below), this Agreement shall terminate (provided that all indemnities set forth
herein including, without limitation, in Section 11 hereof shall survive any
such termination) and the Pledgee, at the request and expense of the respective
Pledgor, will promptly execute and deliver to such Pledgor a proper instrument
or instruments acknowledging the satisfaction and termination of this Agreement,
and will duly assign, transfer and deliver to such Pledgor (without recourse and
without any representation or warranty) such of the Collateral as may be in the
possession of the Pledgee and as has not theretofore been sold or otherwise
applied or released pursuant to this Agreement. As used in this Agreement,
"Termination Date" shall mean the earlier of (i) the date upon which the Total
Commitment and all Interest Rate Protection Agreements and Other Hedging
Agreements have been terminated, no Note under the Credit Agreement is
outstanding and all other Credit Document Obligations (excluding normal
continuing indemnity obligations which survive in accordance with their terms,
so long as no amounts are then due and payable in respect thereof) have been
indefeasibly paid in full (provided the terms of the other Secured Debt
Agreements do not otherwise prohibit the termination hereof), and (ii) the date
upon which the Credit Documents are amended to release all Collateral subject to
this Agreement.
(b) In the event that any part of the Collateral is sold (other than
to any Credit Party) in connection with a sale permitted by the Secured Debt
Agreements or is otherwise released in accordance with the terms of Section
7.16(a)(B) of the Credit Agreement or at the direction of the Required Secured
Creditors (and, to the extent required by the Credit Agreement, all of the
Banks)), the Pledgee, at the request and expense of such Pledgor will promptly
execute and deliver to such Pledgor a proper instrument or instruments
acknowledging such release, and will duly assign, transfer and deliver to such
Pledgor (without recourse and without any representation or warranty) such of
the Collateral as is then being (or has been) so sold, distributed or released
and as may be in possession of the Pledgee and has not theretofore been released
pursuant to this Agreement. Any proceeds of Collateral sold as contemplated by
the immediately preceding sentence shall be applied in accordance with, and to
the extent required by, the requirements of the applicable Secured Debt
Agreements.
(c) At any time that a Pledgor desires that Collateral be released as
provided in the foregoing Section 18(a) or (b), it shall deliver to the Pledgee
a certificate signed by an Authorized Officer of such Pledgor stating that the
release of the respective Collateral is permitted pursuant to Section 18(a) or
(b), and the Pledgee shall be entitled (but not required) to conclusively rely
thereon.
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19. NOTICES, ETC. Except as otherwise specified herein, all notices,
requests, demands or other communications to or upon the respective parties
hereto shall be deemed to have been given or made when delivered to the party to
which such notice, request, demand or other communication is required or
permitted to be given or made under this Agreement, addressed as follows:
(a) if to any Pledgor, at:
10400 Fernwood Road
Bethesda, Maryland 20817
Attention: General Counsel,
Asset Management, Dept. 923
Facsimile No.: (301) 380-3588
(b) if to the Pledgee, at:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Laura S. Burwick
Telephone No.: (212) 250-2568
Telecopier No.: (212) 669-0743
(c) if to any Bank Creditor (other than the Pledgee), (x) to the
Administrative Agent, at the address of the Administrative Agent specified
in the Credit Agreement or (y) at such address as such Bank Creditor shall
have specified in the Credit Agreement;
(d) if to any other Secured Creditor, (x) to the Representative for
such Secured Creditor or (y) if there is no such Representative, at such
address as such Secured Creditor shall have specified in writing to each
Pledgor and the Pledgee;
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
20. WAIVER; AMENDMENT. None of the terms and conditions of this
Agreement may be changed, waived, modified or varied in any manner whatsoever
unless in writing duly signed by each Pledgor directly affected thereby (it
being understood that additional Pledgors may be added as parties hereto from
time to time in accordance with Section 22 hereof and Pledgors may be released
as parties hereto in accordance with Sections 18 and 21 hereof and that no
consent of any other Pledgor or of the Secured Creditors shall be required in
connection therewith) and the Pledgee (with the written consent of (x) the
Required Banks (or all the Banks if required by Section 12.12 of the Credit
Agreement) at all times prior to the time at which all Credit Document
Obligations have been paid in full and all commitments pursuant to the Credit
Agreement have terminated (with such date being herein called the "Credit
Document Obligations Termination Date") and (y) thereafter, the holders of at
least a majority of the outstanding Other Obligations; provided, that (with
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respect to preceding clauses (x) and (y)) the Borrower certifies that any such
change, waiver, modification or variance is otherwise permitted by the terms of
the respective Secured Debt Agreements or, if not so permitted, that the
requisite consents therefor have been obtained (it being understood that the
terms of the Additional Debt
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Documents as same relate to amending or modifying this Agreement shall be
substantially as set forth in the Senior Note Indenture). Notwithstanding
anything to the contrary contained above, it is understood and agreed that the
Required Banks may agree to modifications to this Agreement for the purpose,
among other things, of securing additional extensions of credit (including,
without limitation, pursuant to the Credit Agreement or any refinancing or
extension thereof), with such changes not being subject to the proviso to the
immediately preceding sentence. Furthermore, the proviso to the second preceding
sentence shall not apply to any release of Collateral effected in accordance
with the requirements of Section 18 of this Agreement, or any other release of
Collateral or termination of this Agreement so long as the Borrower certifies
that such actions will not violate the terms of any Secured Debt Agreement then
in effect.
21. RELEASE OF PLEDGORS. In the event that any Pledgor is permitted
to be released from this Agreement as, and to the extent, provided in Section
7.16(a)(B) of the Credit Agreement, such Pledgor (so long as such Pledgor is
not the Borrower) shall be released from this Agreement and this Agreement
shall, as to such Pledgor only, have no further force or effect.
22. ADDITIONAL PLEDGORS. Pursuant to Section 7.16 of the Credit
Agreement, certain Subsidiaries of Holdings or the Borrower may after the date
hereof be required to enter into this Agreement as a Pledgor. Upon execution
and delivery, after the date hereof, by the Pledgee and such Subsidiary of an
instrument in the form of Annex H-2, such Subsidiary shall become a Pledgor
hereunder with the same force and effect as if originally named as a Pledgor
hereunder. Each Subsidiary which is required to become a party to this
Agreement shall so execute and deliver a copy of Annex H-2 to the Pledgee and,
at such time, shall execute a Pledge and Security Agreement Supplement in the
form of Annex H-1 to this Agreement with respect to all Collateral of such
Pledgor required to be pledged hereunder, which Supplement shall be completed in
accordance with Annex H-1. The execution and delivery of any such instrument
shall not require the consent of any other Pledgor hereunder. Upon the
execution and delivery by the Pledgee and such Subsidiary of an instrument in
the form of Annex H-2 as provided above, it is understood and agreed that the
pledge and security interests hereunder shall apply to all Collateral of such
additional Pledgor as provided in Section 3.1 hereof regardless of any failure
of any additional Pledgor to deliver, or any inaccurate information stated in,
the Pledge and Security Agreement Supplement.
23. RECOURSE. This Agreement is made with full recourse to the
Pledgors and pursuant to and upon all representations, warranties, covenants and
agreements on the part of the Pledgors contained herein and otherwise in writing
in connection herewith.
24. PLEDGEE NOT BOUND. (a) Nothing herein shall be construed to make
the Pledgee or any other Secured Creditor liable as a member of any limited
liability company or a partner of any partnership and the Pledgee or any other
Secured Creditor by virtue of this Agreement or otherwise (except as referred to
in the following sentence) shall not have any of the duties, obligations or
liabilities of a member of any limited liability company or partner of any
partnership. The parties hereto expressly agree that, unless the Pledgee shall
become the absolute owner of the respective Pledged Limited Liability Company
Interest or Pledged Partnership Interest pursuant hereto, this Agreement shall
not be construed as creating a partnership or joint venture among the Pledgee,
any other Secured Creditor and/or any Pledgor.
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(b) Except as provided in the last sentence of paragraph (a) of this
Section 24, the Pledgee, by accepting this Agreement, did not intend to become a
member of any limited liability company or partner of any partnership or
otherwise be deemed to be a co-venturer with respect to any Pledgor or any
limited liability company or partnership either before or after an Event of
Default shall have occurred. The Pledgee shall have only those powers set forth
herein and shall assume none of the duties, obligations or liabilities of a
member of any limited liability company or partnership or any Pledgor.
(c) The Pledgee shall not be obligated to perform or discharge any
obligation of any Pledgor as a result of the collateral assignment hereby
effected.
(d) The acceptance by the Pledgee of this Agreement, with all the
rights, powers, privileges and authority so created, shall not at any time or in
any event obligate the Pledgee to appear in or defend any action or proceeding
relating to the Collateral to which it is not a party, or to take any action
hereunder or thereunder, or to expend any money or incur any expenses or perform
or discharge any obligation, duty or liability under the Collateral.
25. CONTINUING PLEDGORS. The rights and obligations of each Pledgor
(other than the respective released Pledgor in the case of following clause (y))
hereunder shall remain in full force and effect notwithstanding (x) the addition
of any new Pledgor as a party to this Agreement as contemplated by Section 22
hereof or otherwise and/or (y) the release of any Pledgor under this Agreement
as contemplated by Section 21 hereof or otherwise.
26. NO FRAUDULENT CONVEYANCE. Each Pledgor hereby confirms that it is
its intention that this Agreement not constitute a fraudulent transfer or
conveyance for purposes of any bankruptcy, insolvency or similar law, the
Uniform Fraudulent Conveyance Act or any similar Federal, state or foreign law.
To effectuate the foregoing intention, each Pledgor hereby irrevocably agrees
that its obligations and liabilities hereunder shall be limited to the maximum
amount as will, after giving effect to such maximum amount and all other
(contingent or otherwise) liabilities of such Pledgor that are relevant under
such laws, result in the obligations and liabilities of such Pledgor hereunder
in respect of such maximum amount not constituting a fraudulent transfer or
conveyance.
27. MISCELLANEOUS. This Agreement shall be binding upon the
successors and assigns of each Pledgor and shall inure to the benefit of and be
enforceable by the Pledgee and its successors and assigns; provided that no
Pledgor may assign any of its rights or obligations hereunder without the prior
written consent of the Pledgee (with the consent of the Required Banks and, if
required by Section 12.12 of the Credit Agreement, all Banks). THIS AGREEMENT
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF
THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS). The
headings in this Agreement are for purposes of reference only and shall not
limit or define the meaning hereof. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
shall constitute one instrument.
* * *
-23-
IN WITNESS WHEREOF, each Pledgor has caused this Agreement to be duly
executed and delivered by its duly authorized officer on the date first above
written.
HOST MARRIOTT CORPORATION,
as a Pledgor
By: /s/ C.G. Townsend
-------------------------------
Title: Senior VP
HOST MARRIOTT, L.P.,
as a Pledgor
By: Host Marriott Corporation,
its General Partner
By: /s/ C.G. Townsend
-------------------------------
Title: Senior VP
AIRPORT HOTELS LLC,
as a Pledgor
By: /s/ C.G. Townsend
-------------------------------
Title: Senior VP
HOST OF HOUSTON 1979,
as a Pledgor
By: Airport Hotels LLC,
its General Partner
By: /s/ C.G. Townsend
-------------------------------
Title: Senior VP
HOST OF HOUSTON, LTD.,
as a Pledgor
By: Airport Hotels LLC,
its General Partner
By: /s/ C.G. Townsend
-------------------------------
Title: Senior VP
HOST OF BOSTON, LTD.,
as a Pledgor
By: Airport Hotels LLC,
its General Partner
By: /s/ C.G. Townsend
-------------------------------
Title: Senior VP
CHESAPEAKE FINANCIAL SERVICES LLC,
as a Pledgor
By: /s/ C.G. Townsend
-------------------------------
Title: Senior VP
CITY CENTER INTERSTATE
PARTNERSHIP LLC,
as a Pledgor
By: /s/ C.G. Townsend
-------------------------------
Title: Senior VP
HMC RETIREMENT PROPERTIES L.P.,
as a Pledgor
By: Durbin LLC,
its General Partner
By: /s/ C.G. Townsend
-------------------------------
Title: Senior VP
HMH MARINA LLC,
as a Pledgor
By: /s/ C.G. Townsend
-------------------------------
Title: Senior VP
FARRELL'S ICE CREAM PARLOUR
RESTAURANTS LLC,
as a Pledgor
By: /s/ C.G. Townsend
-------------------------------
Title: Senior VP
HMC ATLANTA LLC,
as a Pledgor
By: /s/ C.G. Townsend
-------------------------------
Title: Senior VP
HMC BURLINGAME LLC,
as a Pledgor
By: /s/ C.G. Townsend
-------------------------------
Title: Senior VP
HMC CALIFORNIA LEASING LLC,
as a Pledgor
By: /s/ C.G. Townsend
-------------------------------
Title: Senior VP
HMC CAPITAL LLC,
as a Pledgor
By: /s/ C.G. Townsend
-------------------------------
Title: Senior VP
HMC CAPITAL RESOURCES LLC,
as a Pledgor
By: /s/ C.G. Townsend
-------------------------------
Title: Senior VP
HMC PARK RIDGE LLC,
as a Pledgor
By: /s/ C.G. Townsend
-------------------------------
Title: Senior VP
HMC PARK RIDGE II LLC,
as a Pledgor
By: /s/ C.G. Townsend
-------------------------------
Title: Senior VP
HMC PARK RIDGE LP,
as a Pledgor
By: HMC Park Ridge LLC,
its General Partner
By: /s/ C.G. Townsend
-------------------------------
Title: Senior VP
HMC PARTNERSHIP HOLDINGS LLC,
as a Pledgor
By: /s/ C.G. Townsend
-------------------------------
Title: Senior VP
HOST PARK RIDGE LLC,
as a Pledgor
By: /s/ C.G. Townsend
-------------------------------
Title: Senior VP
HMC SUITES LLC,
as a Pledgor
By: /s/ C.G. Townsend
-------------------------------
Title: Senior VP
HMC SUITES LIMITED PARTNERSHIP,
as a Pledgor
By: HMC Suites LLC,
its General Partner
By: /s/ C.G. Townsend
-------------------------------
Title: Senior VP
PRM LLC,
as a Pledgor
By: /s/ C.G. Townsend
-------------------------------
Title: Senior VP
WELLSFORD-PARK RIDGE HOST HOTEL
LIMITED PARTNERSHIP,
as a Pledgor
By: Host Park Ridge LLC,
its General Partner
By: /s/ C.G. Townsend
-------------------------------
Title: Senior VP
YBG ASSOCIATES LLC,
as a Pledgor
By: /s/ C.G. Townsend
-------------------------------
Title: Senior VP
HMC CHICAGO LLC,
as a Pledgor
By: /s/ C.G. Townsend
-------------------------------
Title: Senior VP
HMC DESERT LLC,
as a Pledgor
By: /s/ C.G. Townsend
-------------------------------
Title: Senior VP
HMC PALM DESERT LLC,
as a Pledgor
By: /s/ C.G. Townsend
-------------------------------
Title: Senior VP
MDSM FINANCE LLC,
as a Pledgor
By: /s/ C.G. Townsend
-------------------------------
Title: Senior VP
HMC DIVERSIFIED LLC,
as a Pledgor
By: /s/ C.G. Townsend
------------------------------
Title: Senior VP
HMC EAST SIDE II LLC,
as a Pledgor
By: /s/ C.G. Townsend
------------------------------
Title: Senior VP
HMC GATEWAY LLC,
as a Pledgor
By: /s/ C.G. Townsend
------------------------------
Title: Senior VP
HMC GRAND LLC,
as a Pledgor
By: /s/ C.G. Townsend
------------------------------
Title: Senior VP
HMC HANOVER LLC,
as a Pledgor
By: /s/ C.G. Townsend
------------------------------
Title: Senior VP
HMC HARTFORD LLC,
as a Pledgor
By: /s/ C.G. Townsend
------------------------------
Title: Senior VP
HMC HOTEL DEVELOPMENT LLC,
as a Pledgor
By: /s/ C.G. Townsend
------------------------------
Title: Senior VP
HMC HPP LLC,
as a Pledgor
By: /s/ C.G. Townsend
------------------------------
Title: Senior VP
HMC IHP HOLDING LLC,
as a Pledgor
By: /s/ C.G. Townsend
------------------------------
Title: Senior VP
HMC MANHATTAN BEACH LLC,
as a Pledgor
By: /s/ C.G. Townsend
------------------------------
Title: Senior VP
HMC MARKET STREET LLC,
as a Pledgor
By: /s/ C.G. Townsend
------------------------------
Title: Senior VP
NEW MARKET STREET LP,
as a Pledgor
By: HMC Market Street LLC,
its General Partner
By: /s/ C.G. Townsend
------------------------------
Title: Senior VP
HMC GEORGIA LLC,
as a Pledgor
By: /s/ C.G. Townsend
------------------------------
Title: Senior VP
HMC MEXPARK LLC,
as a Pledgor
By: /s/ C.G. Townsend
------------------------------
Title: Senior VP
HMC POLANCO LLC,
as a Pledgor
By: /s/ C.G. Townsend
------------------------------
Title: Senior VP
HMC NGL LLC,
as a Pledgor
By: /s/ C.G. Townsend
------------------------------
Title: Senior VP
HMC OLS I L.P.,
as a Pledgor
By: HMC OLS I LLC,
its General Partner
By: /s/ C.G. Townsend
------------------------------
Title: Senior VP
HMC OP BN LLC,
as a Pledgor
By: /s/ C.G. Townsend
------------------------------
Title: Senior VP
HMC PACIFIC GATEWAY LLC,
a Pledgor
By: /s/ C.G. Townsend
------------------------------
Title: Senior VP
HMC PLP LLC,
as a Pledgor
By: /s/ C.G. Townsend
------------------------------
Title: Senior VP
CHESAPEAKE HOTEL LIMITED
PARTNERSHIP,
as a Pledgor
By: HMC PLP LLC,
its General Partner
By: /s/ C.G. Townsend
------------------------------
Title: Senior VP
HMC POTOMAC LLC,
as a Pledgor
By: /s/ C.G. Townsend
--------------------
Title: Senior VP
HMC PROPERTIES I LLC,
as a Pledgor
By: /s/ C.G. Townsend
------------------------------
Title: Senior VP
HMC PROPERTIES II LLC,
as a Pledgor
By: /s/ C.G. Townsend
------------------------------
Title: Senior VP
HMC RTZ LOAN I LLC,
as a Pledgor
By: /s/ C.G. Townsend
------------------------------
Title: Senior VP
HMC RTZ II LLC,
as a Pledgor
By: /s/ C.G. Townsend
------------------------------
Title: Senior VP
HMC SBM TWO LLC,
as a Pledgor
By: /s/ C.G. Townsend
------------------------------
Title: Senior VP
HMC SEATTLE LLC,
as a Pledgor
By: /s/ C.G. Townsend
------------------------------
Title: Senior VP
HMC SFO LLC,
as a Pledgor
By: /s/ C.G. Townsend
------------------------------
Title: Senior VP
HMC SWISS HOLDINGS LLC,
as a Pledgor
By: /s/ C.G. Townsend
------------------------------
Title: Senior VP
HMC WATERFORD LLC,
as a Pledgor
By: /s/ C.G. Townsend
------------------------------
Title: Senior VP
HMH GENERAL PARTNER HOLDINGS LLC,
as a Pledgor
By: /s/ C.G. Townsend
------------------------------
Title: Senior VP
HMH NORFOLK LLC,
as a Pledgor
By: /s/ C.G. Townsend
------------------------------
Title: Senior VP
HMH NORFOLK, L.P.,
as a Pledgor
By: HMH Norfolk LLC,
its General Partner
By: /s/ C.G. Townsend
------------------------------
Title: Senior VP
HMH PENTAGON LLC,
as a Pledgor
By: /s/ C.G. Townsend
------------------------------
Title: Senior VP
HMH RESTAURANTS LLC,
as a Pledgor
By: /s/ C.G. Townsend
------------------------------
Title: Senior VP
HMH RIVERS LLC,
as a Pledgor
By: /s/ C.G. Townsend
------------------------------
Title: Senior VP
HMH RIVERS, L.P.,
as a Pledgor
By: HMH Rivers LLC,
its General Partner
By: /s/ C.G. Townsend
------------------------------
Title: Senior VP
HMH WTC LLC,
as a Pledgor
By: /s/ C.G. Townsend
------------------------------
Title: Senior VP
HMP CAPITAL VENTURES LLC,
as a Pledgor
By: /s/ C.G. Townsend
------------------------------
Title: Senior VP
HMP FINANCIAL SERVICES LLC,
as a Pledgor
By: /s/ C.G. Townsend
------------------------------
Title: Senior VP
HOST LA JOLLA LLC,
as a Pledgor
By: /s/ C.G. Townsend
------------------------------
Title: Senior VP
CITY CENTER HOTEL LIMITED
PARTNERSHIP,
as a Pledgor
By: Host La Jolla LLC,
its General Partner
By: /s/ C.G. Townsend
------------------------------
Title: Senior VP
TIMES SQUARE LLC,
as a Pledgor
By: /s/ C.G. Townsend
------------------------------
Title: Senior VP
IVY STREET LLC,
as a Pledgor
By: /s/ C.G. Townsend
-------------------------------------
Title: Senior VP
MARKET STREET HOST LLC,
as a Pledgor
By: /s/ C.G. Townsend
-------------------------------------
Title: Senior VP
MFR OF ILLINOIS LLC,
as a Pledgor
By: /s/ C.G. Townsend
-------------------------------------
Title: Senior VP
MFR OF VERMONT LLC,
as a Pledgor
By: /s/ C.G. Townsend
-------------------------------------
Title: Senior VP
MFR OF WISCONSIN LLC,
as a Pledgor
By: /s/ C.G. Townsend
-------------------------------------
Title: Senior VP
PHILADELPHIA AIRPORT HOTEL LLC,
as a Pledgor
By: /s/ C.G. Townsend
-------------------------------------
Title: Senior VP
PM FINANCIAL LLC,
as a Pledgor
By: /s/ C.G. Townsend
-------------------------------------
Title: Senior VP
PM FINANCIAL LP,
as a Pledgor
By: PM Financial LLC,
its General Partner
By: /s/ C.G. Townsend
-------------------------------------
Title: Senior VP
HMC PROPERTY LEASING LLC,
as a Pledgor
By: /s/ C.G. Townsend
-------------------------------------
Title: Senior VP
HMC HOST RESTAURANTS LLC,
as a Pledgor
By: /s/ C.G. Townsend
-------------------------------------
Title: Senior VP
SANTA CLARA HMC LLC,
as a Pledgor
By: /s/ C.G. Townsend
-------------------------------------
Title: Senior VP
S.D. HOTELS LLC,
as a Pledgor
By: /s/ C.G. Townsend
-------------------------------------
Title: Senior VP
TIMES SQUARE GP LLC,
as a Pledgor
By: /s/ C.G. Townsend
-------------------------------------
Title: Senior VP
Accepted and Agreed to:
BANKERS TRUST COMPANY,
as Collateral Agent and Pledgee
By: /s/ Laura Burwick
-------------------
Title: Principal
ANNEX A
to
PLEDGE AND SECURITY AGREEMENT
-----------------------------
LIST OF STOCK
-------------
ANNEX B
to
PLEDGE AND SECURITY AGREEMENT
-----------------------------
LIST OF LIMITED LIABILITY COMPANY INTERESTS
-------------------------------------------
ANNEX C
to
PLEDGE AND SECURITY AGREEMENT
-----------------------------
LIST OF PARTNERSHIP INTERESTS
-----------------------------
ANNEX D
to
PLEDGE AND SECURITY AGREEMENT
-----------------------------
FORM OF PARTNERSHIP/LLC NOTICE
------------------------------
[Letterhead of Pledgor]
________ __, ____
TO: [Name of Pledged Partnership/Limited Liability Company]
Notice is hereby given that pursuant to an Amended and Restated Pledge
and Security Agreement (a true and correct copy of which is attached hereto),
dated as of August 5, 1998, and amended and restated as of May 31, 2000 (as
amended, modified or supplemented from time to time in accordance with the terms
thereof, the "Pledge Agreement"), among [NAME OF PLEDGOR] (the "Pledgor"), the
other pledgors from time to time party thereto and Bankers Trust Company (the
"Pledgee"), as Collateral Agent on behalf of the Secured Creditors described
therein, the Pledgor has pledged and assigned to the Pledgee for the benefit of
the Secured Creditors, and granted to the Pledgee for the benefit of the Secured
Creditors, a continuing security interest in, all right, title and interest of
the Pledgor, whether now existing or hereafter arising or acquired, [as a
[limited] [general] partner in [NAME OF PLEDGED PARTNERSHIP] (the
"Partnership"), and in, to and under the [TITLE OF APPLICABLE PARTNERSHIP
AGREEMENT] (the "Partnership Agreement"),] [as a member in [NAME OF PLEDGED
LIMITED LIABILITY COMPANY] (the "LLC"), and into and under its Limited Liability
Company Agreement (the "Articles")] including, without limitation:
(i) the Pledgor's interest in all of the capital of the
Partnership/LLC and the Pledgor's interest in all profits, losses, (as
defined in the Pledge Agreement) and other distributions to which the
Pledgor shall at any time be entitled in respect of such
partnership/limited liability company interest;
(ii) all other payments due or to become due to the Pledgor in
respect of such partnership/limited liability company interest, whether
under the Partnership Agreement/Articles or otherwise, whether as
contractual obligations, damages, insurance proceeds or otherwise;
(iii) all of the Pledgor's claims, rights, powers, privileges,
authority, options, security interests, liens and remedies, if any, under
the Partnership Agreement/Articles or at law or otherwise in respect of
such partnership/limited liability company interest;
(iv) all present and future claims, if any, of the Pledgor against
the Partnership/LLC for moneys loaned or advanced, for services rendered or
otherwise;
(v) all of the Pledgor's rights under the Partnership
Agreement/Articles or at law to exercise and enforce every right, power,
remedy, authority, option and privilege of the Pledgor relating to the
partnership/limited liability company interest, including any power to
terminate, cancel or modify the Partnership Agreement/Articles, to execute
any
Annex D
Page 2
instruments and to take any and all other action on behalf of and in the
name of the Pledgor in respect of the partnership/limited liability company
interest and the Partnership/LLC, to make determinations, to exercise any
election (including, but not limited, election of remedies) or option or to
give or receive any notice, consent, amendment, waiver or approval,
together with full power and authority to demand, receive, enforce, collect
or receipt for any of the foregoing, to enforce or execute any checks, or
other instruments or orders, to file any claims and to take any action in
connection with any of the foregoing;
(vi) all other property hereafter delivered to the Pledgor in
substitution for or in addition to any of the foregoing, all certificates
and instruments representing or evidencing such other property and all
cash, securities, interest, dividends, distributions, rights and other
property at any time and from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of the
foregoing; and
(vii) to the extent not otherwise included, all proceeds of any or all
of the foregoing.
Pursuant to the Pledge Agreement, the Partnership/LLC is hereby
authorized and directed to register the Pledgor's pledge to the Pledgee on
behalf of the Secured Creditors of the interest of the Pledgor on the
Partnership's/LLC's books.
The Pledgor hereby irrevocably agrees and authorizes and directs the
Partnership/LLC that instructions originated by the Pledgee on behalf of the
Secured Creditors with respect to the Pledgor's claims, rights, interests,
powers, remedies, authorities, options and privileges set forth above shall,
unless written notice to the contrary is given by the Pledgee to the
Partnership/LLC, be complied with by the Partnership/LLC, without further
consent by the Pledgor.
The Pledgor hereby requests the Partnership/LLC to indicate its
acceptance of this Notice and consent to and confirmation of its terms and
provisions by signing a copy hereof where indicated on the attached page and
returning the same to the Pledgee on behalf of the Secured Creditors.
[NAME OF PLEDGOR]
By:_______________________________________
Name:
Title:
ANNEX E
to
PLEDGE AND SECURITY AGREEMENT
-----------------------------
FORM OF ACKNOWLEDGMENT AND AGREEMENT
------------------------------------
[NAME OF PLEDGED PARTNERSHIP/LIMITED LIABILITY COMPANY] (the
"Partnership"/"LLC") hereby acknowledges receipt of a copy of the assignment by
[NAME OF PLEDGOR] ("Pledgor") of its interest under the [TITLE OF APPLICABLE
PARTNERSHIP AGREEMENT/ARTICLES OF ORGANIZATION] (the "Partnership
Agreement"/"Articles") pursuant to the terms of the Amended and Restated Pledge
and Security Agreement, dated as of August 5, 1998, and amended and restated as
of May 31, 2000 (as amended, modified or supplemented from time to time in
accordance with the terms thereof, the "Pledge Agreement"), among the Pledgor,
the other pledgors from time to time party thereto and Bankers Trust Company
(the "Pledgee"), as Collateral Agent on behalf of the Secured Creditors
described therein. The undersigned hereby further confirms the registration of
the Pledgor's pledge of its interest to the Pledgee on behalf of the Secured
Creditors on the Partnership's/LLC's books.
The Partnership/LLC hereby acknowledges the rights of and remedies
available to the Secured Creditors under the Pledge Agreement.
The Partnership/LLC hereby irrevocably agrees to comply with the
instructions originated by the Pledgee, on behalf of the Secured Creditors, of
the type referred to in the penultimate paragraph of the Partnership/LLC Notice
dated ___________ __, ____ signed by the Pledgor, without further consent by the
Pledgor. The undersigned further hereby irrevocably agrees, except upon the
prior written consent of the Pledgee, not to honor any such instructions given
by any other person or entity.
Dated: ___________ __, ____
[NAME OF PLEDGED PARTNERSHIP/LLC]
By:___________________________________________
Name:
Title:
ANNEX F
to
PLEDGE AND SECURITY AGREEMENT
-----------------------------
LIST OF CHIEF EXECUTIVE OFFICES
-------------------------------
ANNEX G
to
PLEDGE AND SECURITY AGREEMENT
-----------------------------
THE PLEDGEE
1. Appointment. The Secured Creditors, by their acceptance of the
-----------
benefits of the Pledge and Security Agreement to which this Annex G is attached
(the "Pledge Agreement") hereby irrevocably designate Bankers Trust Company (and
any successor Pledgee) to act as specified herein and therein. Unless otherwise
defined herein, all capitalized terms used herein (x) and defined in the Pledge
Agreement, are used herein as therein defined and (y) not defined in the Pledge
Agreement, are used herein as defined in the Credit Agreement referenced in the
Pledge Agreement. Each Secured Creditor hereby irrevocably authorizes, and each
holder of any Obligation by the acceptance of such Obligation and by the
acceptance of the benefits of the Pledge Agreement shall be deemed irrevocably
to authorize, the Pledgee to take such action on its behalf under the provisions
of the Pledge Agreement and any instruments and agreements referred to therein
and to exercise such powers and to perform such duties thereunder as are
specifically delegated to or required of the Pledge Agreement by the terms
thereof and such other powers as are reasonably incidental thereto. The Pledgee
may perform any of its duties hereunder or thereunder by or through its
authorized agents, sub-agents or employees.
2. Nature of Duties. (a) The Pledgee shall have no duties or
----------------
responsibilities except those expressly set forth herein or in the Pledge
Agreement. The duties of the Pledgee shall be mechanical and administrative in
nature; the Pledgee shall not have by reason of the Pledge Agreement or any
other Secured Debt Agreement a fiduciary relationship in respect of any Secured
Creditor; and nothing in the Pledge Agreement or any other Secured Debt
Agreement, expressed or implied, is intended to or shall be so construed as to
impose upon the Pledgee any obligations in respect of the Pledge Agreement
except as expressly set forth herein and therein.
(b) The Pledgee shall not be responsible for insuring the Collateral
or for the payment of taxes, charges or assessments or discharging of Liens upon
the Collateral or otherwise as to the maintenance of the Collateral.
(c) The Pledgee shall not be required to ascertain or inquire as to
the performance by any Pledgor of any of the covenants or agreements contained
in the Pledge Agreement or any other Secured Debt Agreement.
(d) The Pledgee shall be under no obligation or duty to take any
action under, or with respect to, the Pledge Agreement if taking such action (i)
would subject the Pledgee to a tax in any jurisdiction where it is not then
subject to a tax or (ii) would require the Pledgee to qualify to do business, or
obtain any license, in any jurisdiction where it is not then so qualified or
licensed or (iii) would subject the Pledgee to in personam jurisdiction in any
locations where it is not then so subject.
(e) Notwithstanding any other provision of this Annex G, neither the
Pledgee nor any of its officers, directors, employees, affiliates or agents
shall, in its individual capacity, be personally liable for any action taken or
omitted to be taken by it in accordance with, or pursuant
ANNEX G
to this Annex G or the Pledge Agreement except for its own gross negligence or
willful misconduct.
3. Lack of Reliance on the Pledgee. Independently and without
-------------------------------
reliance upon the Pledgee, each Secured Creditor, to the extent it deems
appropriate, has made and shall continue to make (i) its own independent
investigation of the financial condition and affairs of each Pledgor and its
Subsidiaries in connection with the making and the continuance of the
Obligations and the taking or not taking of any action in connection therewith,
and (ii) its own appraisal of the creditworthiness of each Pledgor and its
Subsidiaries, and the Pledgee shall have no duty or responsibility, either
initially or on a continuing basis, to provide any Secured Creditor with any
credit or other information with respect thereto, whether coming into its
possession before the extension of any Obligations or the purchase of any notes
or at any time or times thereafter. The Pledgee shall not be responsible in any
manner whatsoever to any Secured Creditor for the correctness of any recitals,
statements, information, representations or warranties herein or in any
document, certificate or other writing delivered in connection herewith or for
the execution, effectiveness, genuineness, validity, enforceability, perfection,
collectibility, priority or sufficiency of the Pledge Agreement or the security
interests granted hereunder or the financial condition of any Pledgor or any
Subsidiary of any Pledgor or be required to make any inquiry concerning either
the performance or observance of any of the terms, provisions or conditions of
the Pledge Agreement, or the financial condition of any Pledgor or any
Subsidiary of any Pledgor, or the existence or possible existence of any default
or Event of Default. The Pledgee makes no representations as to the value or
condition of the Collateral or any part thereof, or as to the title of any
Pledgor thereto or as to the security afforded by the Pledge Agreement.
4. Certain Rights of the Pledgee. (a) No Secured Creditor shall
-----------------------------
have the right to cause the Pledgee to take any action with respect to the
Collateral, with only the Required Secured Creditors having the right to direct
the Pledgee to take any such action. If the Pledgee shall request instructions
from the Required Secured Creditors, with respect to any act or action
(including failure to act) in connection with the Pledge Agreement, the Pledgee
shall be entitled to refrain from such act or taking such action unless and
until it shall have received instructions from the Required Secured Creditors
and to the extent requested, appropriate indemnification in respect of actions
to be taken, and the Pledgee shall not incur liability to any Person by reason
of so refraining. Without limiting the foregoing, no Secured Creditor shall
have any right of action whatsoever against the Pledgee as a result of the
Pledgee acting or refraining from acting hereunder in accordance with the
instructions of the Required Secured Creditors. As used herein, the term
"Required Secured Creditors" shall mean (i) at all times prior to the occurrence
of the Credit Document Obligations Termination Date (as defined in the Pledge
and Security Agreement), the holders of at least a majority of the then
outstanding Credit Document Obligations and HMH Note Obligations (acting
together as one class) and (ii) at all times after the Credit Document
Obligations Termination Date, the holders of at least a majority of the then
outstanding Obligations entitled to be secured hereby. Notwithstanding anything
to the contrary contained in clause (i) or (ii) of the immediately preceding
sentence, if at any time the principal of any Obligations secured hereby has
been accelerated, or the final maturity date with respect to any such principal
Obligations has occurred, and as a result thereof one or more payment Events
ANNEX G
of Default (where the aggregate principal amount of such Obligations accelerated
or not paid at final maturity equals or exceeds $50,000,000), which payment
Events of Default shall have continued in existence for at least 60 consecutive
days after the date of such acceleration or final maturity, and the Required
Secured Creditors (or the Representative thereof) at such time (determined
without regard to this sentence) have not directed the Pledgee to commence
enforcement proceedings pursuant to the Pledge Agreement, then so long as such
payment Event of Default is continuing the Secured Creditors (or the
Representative thereof) holding at least a majority of the outstanding
Obligations secured hereby subject to such payment Event of Default shall
constitute the Required Secured Creditors for purposes of causing the Pledgee to
commence enforcement proceedings pursuant to the Pledge Agreement, provided that
--------
in such event the Secured Creditors who would constitute the Required Secured
Creditors in the absence of this sentence shall have the right to direct the
manner and method of enforcement so long as such directions do not materially
delay or impair the taking of enforcement action.
(b) Notwithstanding anything to the contrary contained herein, the
Pledgee is authorized, but not obligated, (i) to take any action reasonably
required to perfect or continue the perfection of the liens on the Collateral
for the benefit of the Secured Creditors and (ii) when instructions from the
Required Secured Creditors have been requested by the Pledgee but have not yet
been received, to take any action which the Pledgee, in good faith, believes to
be reasonably required to promote and protect the interests of the Secured
Creditors in the Collateral; provided that once instructions have been received,
--------
the actions of the Pledgee shall be governed thereby and the Pledgee shall not
take any further action which would be contrary thereto.
(c) Notwithstanding anything to the contrary contained herein or in
the Pledge Agreement, the Pledgee shall not be required to take any action that
exposes or, in the good faith judgment of the Pledgee may expose, the Pledgee or
its officers, directors, agents or employees to personal liability, unless the
Pledgee shall be adequately indemnified as provided herein, or that is, or in
the good faith judgment of the Pledgee may be, contrary to the Pledge Agreement,
any Secured Debt Agreement or applicable law.
5. Reliance. The Pledgee shall be entitled to rely, and shall be
--------
fully protected in relying, upon, any note, writing, resolution, notice,
statement, certificate, telex, teletype or telescopes message, cablegram,
radiogram, order or other document or telephone message signed, sent or made by
the proper Person or entity, and, with respect to all legal matters pertaining
hereto or to the Pledge Agreement and its duties thereunder and hereunder, upon
advice of counsel selected by it.
6. Indemnification. To the extent the Pledgee is not reimbursed and
---------------
indemnified by the Pledgors under the Pledge Agreement, the Secured Creditors
(other than the HMH Noteholders, the Senior Noteholders and the Additional
Debtholders to the extent that the Additional Debt held by such Additional
Debtholders is in the form of notes or bonds registered under the Securities Act
or issued pursuant to Rule 144A thereunder) will reimburse and indemnify the
Pledgee, in proportion to their respective outstanding principal amounts
(including, for this purpose, any unpaid Primary Obligations in respect of
Interest Rate Protection Agreements or Other Hedging Agreements, as outstanding
principal) of Obligations, for and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments,
ANNEX G
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against the Pledgee in performing its
duties hereunder, or in any way relating to or arising out of its actions as
Pledgee in respect of the Pledge Agreement except for those resulting solely
from the Pledgee's own gross negligence or willful misconduct. The indemnities
set forth in this Section 6 shall survive the repayment of all Obligations, with
the respective indemnification at such time to be based upon the outstanding
principal amounts (determined as described above) of Obligations at the time of
the respective occurrence upon which the claim against the Pledgee is based or,
if same is not reasonably determinable, based upon the outstanding principal
amounts (determined as described above) of Obligations as in effect immediately
prior to the termination of the Pledge Agreement. The indemnities set forth in
this Section 6 are in addition to any indemnities provided by the Banks to the
Pledgee pursuant to the Credit Agreement, with the effect being that the Banks
shall be responsible for indemnifying the Pledgee to the extent the Pledgee does
not receive payments pursuant to this Section 6 from the Secured Creditors
(although in such event, and upon the payment in full of all such amounts owing
to the Pledgee by the Banks, the Banks shall be subrogated to the rights of the
Pledgee to receive payment from the Secured Creditors).
7. The Pledgee in its Individual Capacity. With respect to its
--------------------------------------
obligations as a lender under the Credit Agreement and any other Credit
Documents to which the Pledgee is a party, and to act as agent under one or more
of such Credit Documents, the Pledgee shall have the rights and powers specified
therein and herein for a "Bank", or the "Administrative Agent", as the case may
be, and may exercise the same rights and powers as though it were not performing
the duties specified herein; and the terms "Banks," "Required Banks," "holders
of Notes," or any similar terms shall, unless the context clearly otherwise
indicates, include the Pledgee in its individual capacity. The Pledgee and its
affiliates may accept deposits from, lend money to, and generally engage in any
kind of banking, investment banking, trust or other business with any Pledgor or
any Affiliate or Subsidiary of any Pledgor as if it were not performing the
duties specified herein or in the other Credit Documents, and may accept fees
and other consideration from the Pledgors for services in connection with the
Credit Agreement, the other Credit Documents and otherwise without having to
account for the same to the Secured Creditors.
8. Holders. The Pledgee may deem and treat the payee of any note as
-------
the owner thereof for all purposes hereof unless and until written notice of the
assignment, transfer or endorsement thereof, as the case may be, shall have been
filed with the Pledgee. Any request, authority or consent of any person or
entity who, at the time of making such request or giving such authority or
consent, is the holder of any note, shall be final and conclusive and binding on
any subsequent holder, transferee, assignee or endorsee, as the case may be, of
such note or of any note or notes issued in exchange therefor.
9. Resignation by the Pledgee. (a) The Pledgee may resign from the
--------------------------
performance of all of its functions and duties hereunder and under the Pledge
Agreement at any time by giving 15 Business Days' prior or written notice to the
Borrower, the Banks and Representatives for the other Secured Creditors or, if
there is no such Representative, directly to
ANNEX G
such Secured Creditors. Such resignation shall take effect upon the appointment
of a successor Pledgee pursuant to clause (b) or (c) below.
(b) If a successor Pledgee shall not have been appointed within said
15 Business Day period by the Required Secured Creditors, the Pledgee, with the
consent of the Borrower, which consent shall not be unreasonably withheld or
delayed, shall then appoint a successor Pledgee who shall serve as Pledgee
hereunder or thereunder until such time, if any, as the Required Secured
Creditors appoint a successor Pledgee as provided above.
(c) If no successor Pledgee has been appointed pursuant to clause (b)
above by the 20th Business Day after the date of such notice of resignation was
given by the Pledgee, as a result of a failure by the Borrower to consent to the
appointment of such a successor Pledgee, the Required Secured Creditors shall
then appoint a successor Pledgee who shall serve as Pledgee hereunder or
thereunder until such time, if any, as the Required Secured Creditors appoint a
successor Pledgee as provided above.
ANNEX H-1
to
PLEDGE AND SECURITY AGREEMENT
-----------------------------
FORM OF
PLEDGE AND SECURITY AGREEMENT SUPPLEMENT
PLEDGE AND SECURITY SUPPLEMENT, dated as of ______ (this "Supplement"),
made by __________, a ____________________________ (the "Pledgor"), in favor of
BANKERS TRUST COMPANY, as pledgee and as collateral agent (in such capacities,
the "Pledgee") for the Secured Creditors (such term and each other capitalized
term used but not defined having the meaning given in the Pledge and Security
Agreement referred to below).
1. Reference is hereby made to that certain Amended and Restated
Pledge and Security Agreement, dated as of August 5, 1998, and amended and
restated as of May 31, 2000 (as amended, supplemented or otherwise modified as
of the date hereof, the "Pledge Agreement"), made by the Pledgors party thereto
in favor of the Pledgee for the benefit of the Secured Creditors described
therein.
2. The Pledgor hereby confirms and reaffirms the security interest in
the Collateral granted to the Pledgee for the benefit of the Secured Creditors
under the Pledge Agreement, and, as additional collateral security for the
prompt and complete payment when due (whether at stated maturity, by
acceleration or otherwise) of the Obligations and in order to induce the Secured
Creditors to make loans and other extensions of credit constituting Obligations,
the Pledgor hereby delivers to the Pledgee, for the benefit of the Secured
Creditors, [(i) all of the issued and outstanding shares of capital stock listed
in Schedule I hereto, together with all stock certificates, options, or rights
of any nature whatsoever which may be issued or granted in respect of such stock
while the Pledge Agreement, as supplemented hereby, is in force (the "Additional
Pledged Stock"; as used in the Pledge Agreement as supplemented by this
Supplement, "Pledged Stock" shall be deemed to include the Additional Pledged
Stock)], [(ii) all limited liability company interests listed on Schedule II
hereto (the "Additional Pledged Limited Liability Company Interests" as used in
the Pledge Agreement as supplemented by this Supplement, "Pledged Limited
Liability Company Interests" shall be deemed to include the Additional Pledged
Limited Liability Company Interests)], [(iii) all partnership interests listed
on Schedule III hereto (the "Additional Pledged Partnership Interests"; as used
in the Pledge Agreement as supplemented by this Supplement, "Pledged Partnership
Interests" shall be deemed to include Additional Pledged Partnership
Interests)], and hereby grants to the Pledgee, for the benefit of the Secured
Creditors, a first priority security interest in the Additional Pledged Stock,
Additional Pledged Partnership Interests and/or Additional Pledged Limited
Liability Company Interests, as the case may be, and all proceeds thereof.
3. The Pledgor hereby represents and warrants that the representations
and warranties contained in Section 15 of the Pledge Agreement are true and
correct on the date of this Supplement [with references therein to the "Pledged
Stock" to include the Additional Pledged Stock,] [with references therein to the
"Pledged Partnership Interests" to include the Additional Pledged Partnership
Interests,] [with references therein to the "Pledged Limited Liability Company
Interests" to include the Additional Pledged Limited Liability Company
Interests,] and with references therein to the "Pledge Agreement" to mean the
Pledge Agreement as supplemented by this Supplement.
ANNEX H-1
4. The Pledgor hereby represents and warrants that, as of the date
hereof, the chief executive office of the Pledgor is located at the address
indicated on Schedule IV hereto.
5. This Supplement is supplemental to the Pledge Agreement, forms a
part thereof and is subject to the terms thereof and the Pledge Agreement is
hereby supplemented as provided herein. Without limiting the foregoing, Annex A
to the Pledge Agreement shall hereby be deemed to include each item listed on
Schedule I to this Supplement, Annex B to the Pledge Agreement shall hereby be
deemed to include each item listed on Schedule II to this Supplement, Annex C to
the Pledge Agreement shall hereby be deemed to include each term listed on
Schedule III to this Supplement and Annex F to the Pledge Agreement shall be
deemed to include the location listed on Schedule IV to this Supplement.
* * *
ANNEX H-1
IN WITNESS WHEREOF, the Pledgor and the Pledgee have caused this
Supplement to be duly executed and delivered on the date first set forth above.
[PLEDGOR]
By:_______________________
Name:
Title:
BANKERS TRUST COMPANY, as Pledgee
By:________________________
Name:
Title:
SCHEDULE I
to
PLEDGE AND SECURITY AGREEMENT SUPPLEMENT
----------------------------------------
PLEDGED STOCK
Pledgor Issuer Pledged Stock Ownership
------ ------ ------------- ---------
Interest
--------
SCHEDULE II
to
PLEDGE AND SECURITY AGREEMENT SUPPLEMENT
----------------------------------------
PLEDGED LIMITED LIABILITY COMPANY INTERESTS
-------------------------------------------
Pledged Limited Percentage Owned
--------------- ----------------
Liability Company
-----------------
Interests
---------
SCHEDULE III
to
PLEDGE AND SECURITY AGREEMENT SUPPLEMENT
----------------------------------------
PLEDGED PARTNERSHIP INTERESTS
-----------------------------
Pledged Partnership Percentage Owned Type of Partnership
------------------- ---------------- -------------------
SCHEDULE IV
to
PLEDGE AND SECURITY AGREEMENT SUPPLEMENT
----------------------------------------
CHIEF EXECUTIVE OFFICE
----------------------
ANNEX H-2
to
PLEDGE AND SECURITY AGREEMENT
-----------------------------
SUPPLEMENT NO. dated as of _______, to the Amended and Restated
Pledge and Security Agreement dated as of August 5, 1998, and as amended and
restated as of May 31, 2000 (the "Pledge Agreement"), among the Pledgors party
thereto (immediately before giving effect to this Supplement) and BANKERS TRUST
COMPANY as collateral agent and as pledgee (in such capacities, the "Pledgee")
for the Secured Creditors (such term and each other capitalized term used but
not defined having the meaning given it in the Pledge Agreement referred to
below).
A. The Pledgors have entered into the Pledge Agreement in order to
induce the Secured Creditors to make loans and other extensions of credit
constituting Obligations as defined in the Pledge Agreement. Pursuant to
Section 7.16 of the Credit Agreement, certain Subsidiaries of Holdings or the
Borrower are, after the date of the Pledge Agreement, required to enter into the
Pledge Agreement as a Pledgor. Section 22 of the Pledge Agreement provides that
additional Subsidiaries may become Pledgors under the Pledge Agreement by
execution and delivery of an instrument in the form of this Supplement. The
undersigned (the "New Pledgor") is a Subsidiary of Holdings and is executing
this Supplement in accordance with the requirements of the Credit Agreement
and/or the Pledge Agreement to become a Pledgor under the Pledge Agreement in
order to induce the Secured Creditors to extend, or maintain, Obligations.
Accordingly, the Pledgee and the New Pledgor agree as follows:
SECTION 1. The New Pledgor by its signature below becomes a Pledgor
under the Pledge Agreement with the same force and effect as if originally named
therein as a Pledgor and the New Pledgor hereby agrees to all the terms and
provisions of the Pledge Agreement applicable to it as a Pledgor thereunder.
Each reference to a "Pledgor" in the Pledge Agreement shall be deemed to include
the New Pledgor. The Pledge Agreement is hereby incorporated herein by
reference.
SECTION 2. The New Pledgor represents and warrants to the Secured
Creditors that this Supplement has been duly authorized, executed and delivered
by it and constitutes its legal, valid and binding obligation, enforceable
against it in accordance with its terms, subject to the effects of applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally and
equitable principles of general applicability.
SECTION 3. This Supplement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument. This Supplement shall
become effective when the Pledgee shall have received counterparts of this
Supplement that, when taken together, bear the signatures of the New Pledgor and
the Pledgee.
ANNEX H-2
Page 2
SECTION 4. Except as expressly supplemented hereby, the Pledge
Agreement shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect,
neither party hereto shall be required to comply with such provision for so long
as such provision is held to be invalid, illegal or unenforceable, but the
validity, legality and enforceability of the remaining provisions contained
herein and in the Pledge Agreement shall not in any way be affected or impaired.
The parties hereto shall endeavor in good-faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
SECTION 7. All communications and notices hereunder shall be in
writing and given as provided in the Pledge Agreement. All communications and
notices hereunder to the New Pledgor shall be given to it at the address set
forth under its signature, with a copy to the Borrower.
* * *
ANNEX H-2
Page 3
IN WITNESS WHEREOF, the New Pledgor and the Pledgee have duly executed
this Supplement to the Pledge Agreement as of the day and year first above
written.
[NAME OF NEW PLEDGOR]
By:_______________________
Name:
Title:
Address:
BANKERS TRUST COMPANY,
as Pledgee
By:_________________________
Name:
Title: