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Letter #28 FRK11280.L85 080575304 09/19/96 KDF:as1 Miami Beach Redevelopment Agency 1700 Convention Center Drive Miami Beach, Florida 33139 As of september 20, 1996 Bankers Trust Company 280 Park Avenue New York, New York 10017 Attention: Jeffrey Baevsky, Vice President Re: Loews Miami Beach Hotel Dear Sirs: Pursuant to the provisions of that certain Hotel Development Agreement (as in effect on the date hereof, the "Development Aqreement") dated as of even date herewith by and between the Miami Beach Redevelopment Agency (the "Owner") and MB Redevelopment, Inc. (the "Developer"), the Owner has agreed to fund the cost of those portions of the Hotel described in Exhibit 6.1(0) of the Development Agreement. (All terms used in capitalized form herein and not defined herein are used herein with the meanings assigned to such terms in the Development Agreement.) In order to provide such funding, the Owner, pursuant to section 6.1 of the Development Agreement, has agreed to deposit $31,900,000 (the "Owner's Contribution") with Bankers Trust Company ("BTC") concurrently with the deposit by the Developer with BTe of the Funded Equity (as such term is defined in the Ground Lease) in the amount of $15,000,000 and of an additional $3,000,000 (collectively, the "Borrower's contribution"). BTC, to facilitate the construction of the Hotel, will administer the Owner's Account (as defined herein) as described herein. BTC and certain other institutions (collectively, and as the composition of such group may change from time to time, the "Lendinq Group") are providing a construction loan (the "Construction Loan") to the Developer to fund a portion of the cost of or relating to the construction of the Hotel. This letter agreement (as the same may be amended or otherwise modified from time to time, this "Aqreement") sets forth the terms and conditions under which BTC will receive, invest and disburse the Owner's Contribution. 1. Concurrently with the deposit of the Borrower's contribution with BTC, the Owner will deposit the Owner's contribution with BTC. BTC will, upon receipt, deposit and, pending disbursement, maintain the Owner's contribution (and any investment earnings thereon) in a separate segregated account (the "Owner's Account") and identify the same at all times while held by BTC as funds of the Owner. 2. Pending disbursement of the Owner's Contribution as provided herein, BTC will, but only if, as and when directed in writing by the Owner, invest the Owner's contribution in any of the following investments: (i) securities with maturities of one year or less from the date of acquisition thereof issued or fully guaranteed or insured as to payment of principal and interest by the united states of America or any agency thereof, and/or (ii) shares of the Institutional Treasury Money Fund (as described in a prospectus issued by The Trustees of BT Institutional Funds dated April 29, 1996, a copy of which has been received by the Owner). Such investments will be made in a manner so that the Owner's Contribution will be available at such times as the same are necessary to pay, together with the Borrower's contribution, costs of or relating to the construction of the Hotel. Upon the maturity of any investment of the Owner's Contribution, all repayments of principal so invested and investment earnings thereon will be deposited as received in the Owner's Account and may be invested as provided above. Any investment earnings on the Owner's contribution shall, for all purposes hereof, be treated as part of the Owner's contribution. 3. BTC may debit the Owner's Account for its reasonable and customary transaction fees associated with the purchase and/or sale of investments of the Owner's contribution (and any investment earnings thereon) made pursuant hereto. 4. Pursuant to the BTC Loan Documents, BTC is to disburse the Owner's contribution and the Borrower's contribution to pay costs of or relating to the construction of the Hotel. When making such a disbursement, BTC will, on a pro-rata basis, disburse the monies in the Owner's Account and the Borrower's contribution (i.e., 63.9% of each advance shall be funded from the Owner's Account and 36.1% of each advance shall be funded from the Borrower's Contribution). Any portion of the Owner's Contribution disbursed to or on FRK11280.L85 080575304 09/19/96 KDF:as1 2 FRK11280.L85 080575304 09/19/96 KDF:as1 behalf of the Developer in accordance with any such requisition of the Developer shall conclusively be deemed to have been funded in compliance with the Development Agreement. The Owner understands and agrees that the Owner's contribution and the Borrower's contribution are to be fully disbursed prior to any loans being made by the Lending Group pursuant to the BTC Loan Documents. BTC shall, in disbursing the Owner's contribution, use the same degree of care as it would use in disbursing construction loans made for its own account, and, in this regard, BTC may, without the Owner's consent, modify, vary or change the disbursement procedures to be set forth in the BTC Loan Documents if such modifications, variations or changes are consistent with the procedures BTC applies to the disbursement of construction loans held for its own account. 5. BTC agrees that the Owner's contribution (and investment earnings thereon) (x) will not be used by BTC to offset, reduce or pay any obligations owed by the Developer or Loews Corporation to BTC, whether under the BTC Loan Documents or otherwise, and (y) shall only be disbursed for the purpose of paying costs of, or related to, the construction of the Rotet. 6. If the Owner determines that BTC is not in compliance with the provisions of this Agreement, the Owner shall immediately provide written notice to BTC of such determination. After its receipt of such notice, BTC shall promptly cure such default. During any default by BTC and for so long as BTC holds the Owner's contribution, the Owner's contribution on deposit in the Owner's Account may continue to be disbursed by BTC to or on behalf of the Developer as provided in this Agreement. 7. BTC shall endeavor to provide the Owner and the Developer with notice of any claims by any Person with respect to the Owner's Contribution. BTC shall have no responsibility for the genuineness, validity or value of any certificate, document or other item deposited with or delivered to it. BTC may rely on any notice, instruction, certificate, request or other instrument which it believes to be genuine and to have been signed or presented by a proper Person or Persons, and shall be fully protected in acting in accordance therewith. The Owner hereby waives any claim against BTC hereunder for consequential, special or punitive damages. In the event that BTC shall be uncertain as to its obligations or rights hereunder, or shall receive instructions from the Developer and/or the Owner and or any other Person claiming an interest in the Owner's contribution which, in its opinion, are in conflict with any 3 FRK11280.l85 080575304 09/19/96 KDF:as1 of the provisions of this Agreement or otherwise, BTC shall be entitled, at its option, to refrain from taking any action until it shall be directed otherwise by an order of a court of competent jurisdiction or by a written direction of Developer, Owner and, to the extent any other Person claims an interest in the Owner's contribution, such Person. 8. Notwithstanding anything herein to the contrary, BTC shall not incur any liability whatsoever in connection with its functions and obligations hereunder, except for its own gross negligence or willful misconduct. BTC shall be under no responsibility in respect of any of the monies or items deposited with it pursuant hereto other than to follow the express provisions of this Agreement. If BTC has complied with its obligation under this Agreement regarding the manner in which the Owner's contribution is to be invested, BTC shall not be liable if any loss results from the making or liquidation of any investment of the Owner's Contribution. 9. BTC's only obligations hereunder are those expressly set forth herein and no additional duties shall be inferred or implied. 10. In the event that BTC ceases, for any reason, to be the "Agent" under the BTC Loan Documents, then BTC shall (upon receiving the Owner's prior written consent, if required hereunder) assign this Agreement to the Person which succeeds to BTC's rights and obligations, as Agent, under the BTC Loan Documents and, upon the assumption of BTC's obligations hereunder by such successor, deliver the monies then in the Owner's Account to such Person, and upon BTC so delivering such funds and the assumption by such Person of BTC's obligations under this Agreement, BTC will be deemed to have been released from all of its obligations under this Agreement, except for its gross negligence or willful misconduct occurring prior to the date of such assignment. If the assignee is not an Institutional Lender (as such term is defined in the Ground Lease), then the consent of the Owner to such an assignment shall be required; if the assignee is an Institutional Lender, then the consent of the Owner to such an assignment shall not be required. If the assignee is not an Institutional Lender, then BTC shall furnish to the Owner such banking, financial and other information with respect to the proposed assignee as the Owner shall reasonably request. The Owner agrees not to unreasonably withhold, delay or condition such consent. 11. The parties hereto agree from time to time to execute and deliver all such instruments and to take all such action 4 FRK11280.L85 080575304 09/19/96 KDF:as1 for the purpose of further effectuating this Agreement and carrying out the terms of this Agreement as may reasonably be requested by the other party hereto. 12. This Agreement sets forth the entire understanding of the parties hereto with respect to the subject matter hereof. This Agreement may not be modified or amended except by an agreement in writing signed by the party to be charged thereby. This Agreement and the respective rights and obligations of the parties hereunder shall be governed by and construed and enforced in accordance with the internal laws of the state of Florida applicable to contracts made and to be performed entirely within said state, without reference to choice or conflict of laws principles, except that those provisions of this Agreement relating to BTC's holding and investment (but not disbursement) of the Owner's contribution shall be governed by and construed and enforced in accordance with the internal laws of the state of New York. This Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective successors and permitted assigns. In any action or proceeding relating to this Agreement, the parties mutually waive trial by jury. 13. If any of the provisions of this Agreement are held or determined to be void, invalid or unenforceable, in whole or in part, such holding or determination shall not impair or affect the validity and enforceability of the remaining provisions of this Agreement, which shall continue in full force and effect in accordance with its terms. 14. The Owner shall not (a) sell or otherwise dispose of, or grant any option with respect to, any of the Owner's contribution or (b) create or permit to exist any lien, security interest or other charge or encumbrance upon or with respect to any of the Owner's contribution. 15. a. Whenever it is provided in this Agreement that a notice, demand or other communication shall or may be given to, or served upon, either of the parties by the other, or whenever either of the parties desires to give or serve upon the other any notice, demand or other communication with respect hereto, each such notice, demand or other 5 communication (herein referred to as a "Notice") shall be in writing and shall be effective for any purpose only if given or served by (i) certified or registered u.s. Mail, postage prepaid, return receipt requested, (ii) personal delivery with a signed receipt or (iii) a recognized national courier service, addressed as follows (or to such other addresses as a party may direct by a Notice to the other party hereto; provided, however, that the number of parties to receive such Notice, together with copies thereof, shall not be increased) : if to BTC: Bankers Trust Company 280 Park Avenue New York, New York 10017 Attention: Jeffrey Baevsky with a copy to: if to Owner: Loeb & Loeb LLP 345 Park Avenue New York, New York 10154 Attention: Kenneth D. Freeman, Esq. Miami Beach Redevelopment Agency Executive Director 1700 Convention Center Drive Miami Beach, Florida 33139 with a copy to: Miami Beach Redevelopment Agency General Counsel 1700 Convention Center Drive Miami Beach, Florida 33139 and to: city of Miami Beach City Manager 1700 Convention Center Drive Miami Beach, Florida 33139 with a copy to: City of Miami Beach city Attorney 1700 Convention Center Drive Miami Beach, Florida 33139 FRK11280.L85 080575304 09/19/96 KDF:as1 6 FRK11280.L85 080575304 09/19/96 KDF:as1 and with a copy to: squire, Sanders & Dempsey Two Renaissance Square Phoenix, Arizona 85004 Attention: Richard F. Ross, Esq. Any such Notice may be given, in the manner provided in this Section, on either party's behalf by its attorneys designated by such party by notice hereunder. b. Any Notice by a party hereto shall, at the same time that such Notice is given, also be given to the Developer as follows: Prior to the Hotel opening Date: MB Redevelopment, Inc. 407 Lincoln Road suite 6-K Miami Beach, Florida 33139 Attention: Eric Nesse After the Hotel opening Date: MB Redevelopment, Inc. c/o Loews Miami Beach Hotel General Manager 1601 Collins Avenue Miami Beach, Florida 33139 with a copy to: Loews Hotels Holding corporation 667 Madison Avenue New York, New York 10021 Attention: Corporate Secretary and to: Hughes, Hubbard & Reed 201 S. Biscayne Boulevard, suite 2500 Miami, Florida 33131 Attention: William A. Weber, Esq. c. Every Notice shall be effective on the date actually received, as indicated on the receipt therefor or on the date delivery thereof is refused by the recipient thereof. 7 FRK11280.L85 080575304 09/19/96 KDF:as1 d. All references in this Agreement to the "date" of Notice shall mean the effective date, as provided in the preceding subsection (c). 16. In the event that the Owner's contribution is to be returned to the Owner prior to the maturity of any certificate of deposit or other investment and such return requires the pre-mature payment of such certificate of deposit or other investment, for the purpose of compliance with any applicable laws and regulations covering the premature payment of a certificate of deposit or other investment, such exercise shall be deemed to be a request by the Owner to withdraw or terminate the certificate or other investment prior to its maturity and the Owner hereby confirms that any applicable penalties in the event of any such premature withdrawal from or termination of the certificate or other investment shall apply under such circumstances and shall be payable, on demand, by the Owner; provided, however, that (x) if the return of the remaining Owner's contribution to Owner is as a result of BTC's breach of this Agreement, then the applicable penalties shall be payable, on demand, by BTC and not by Owner, and (y) whenever practicable, BTC shall effect such a return by a distribution in kind of the Owner's contribution then held by BTC and thereby avoid the need to impose any such applicable penalties. 17. This Agreement may be signed in counterparts, in which event all of such counterparts shall constitute a single original counterpart of this Agreement. 8 FRK11280.L75 080575304 09/18/96 KDF:as1 Please acknowledge your agreement to be bound by the above provisions of this Agreement by executing the enclosed copy and returning the same to the Owner. By: Bankers Trust Company hereby ees, as evidenced by the execution of its authorized officer below, to be bound by the provisions of this Agreement. Date: As of september~O, 1996. By: Name: Title: ILl J::> FORM APPROVED REDEVELOPMENT AGENCY GENERAL C~SEl , , ~ V!t lP-: By , Date. ~l ';/~/915 9